Woolsey v. Aetna Life Ins. Co., No. 20-16885, __ Fed. Appx. __, 2022 WL 1598964 (9th Cir. May 20, 2022) (Before Circuit Judges Hawkins, Paez, and Watford).
In 2010, inHardt v. Reliance Standard Life Ins. Co., the Supreme Court ruled that ERISA claimants need not be “prevailing parties” in order to be eligible for an award of attorney’s fees. Instead, they only need to obtain “some success on the merits.” What does that mean? The Court explained that a claimant must achieve more than “trivial success” or a “purely procedural victory,” and that a trial court should not conduct a “lengthy inquiry into the question whether a particular party’s success was ‘substantial’ or occurred on a ‘central issue.’”
As you might imagine, this answer only raised more questions. The lower courts have been wrestling with the issue of how much success is “some success on the merits” ever since Hardt. One recurring scenario is when a trial court finds that the claims process was somehow defective and remands the case back to the claim administrator for further action. Is that sufficient “success on the merits” to qualify the claimant for a fee award?
The vast majority of federal courts have answered this question “yes,” but the Ninth Circuit had not squarely tackled the issue until now. In this case, plaintiff Michael Woolsey submitted a claim for long-term disability benefits, which defendant claim administrator Aetna Life Insurance Company denied. Mr. Woolsey filed suit under ERISA and the parties filed cross-motions for summary judgment. Mr. Woolsey also filed a motion to supplement the record with additional information supporting his disability, including evidence that he had been awarded Social Security disability benefits.
In ruling on the motions, the district court rejected some of Mr. Woolsey’s arguments. However, it agreed with Mr. Woolsey that Aetna’s review was deficient. Specifically, the district court determined that Aetna “(1) failed to assess the aggregate effect of Woolsey’s medical conditions; (2) gave dismissive treatment to reports from his treating specialists; (3) failed to address specific vocational requirements as required by the plan; (4) failed to inform Woolsey of a deficiency in the record and to consider those missing records; (5) failed to disclose independent reviewers’ reports; (6) failed to adequately explain what was necessary to correct the record; and (7) failed to adequately investigate his physicians’ reports.”
Because of these errors, the district court concluded that Mr. Woolsey did not get a “full and fair review” as required by ERISA, and ordered that the case be remanded to Aetna to correct these mistakes. The district court also granted Mr. Woolsey’s motion to supplement the record with his additional evidence.
Mr. Woolsey followed up with a motion for attorney’s fees. However, despite obtaining a remand and a fresh look at his claim, the district court denied his motion, ruling that its remand order did not constitute “some success on the merits” under Hardt. In doing so, the district court commented on its perceived weakness of Mr. Woolsey’s case. Mr. Woolsey appealed.
The Ninth Circuit reversed in a memorandum disposition. The court ruled that the district court erred in its application of the Hardt standard because it “failed to heed the Supreme Court’s admonition to avoid a ‘lengthy inquiry’ into ‘whether a particular party’s success was ‘substantial’ or occurred on a ‘central issue.’” The court noted that even though the remand obtained by the plaintiff in Hardt was accompanied by comments from the trial court regarding the strength of her case, Hardt “does not require a remand order to provide an assessment of the plaintiff’s ultimate eligibility for benefits.” Indeed, Hardt “makes clear that less favorable relief can also meet that standard.”
Furthermore, the Ninth Circuit clarified that Mr. Woolsey’s remand was not a “purely procedural victory,” as the district court had characterized it. Mr. Woolsey had succeeded in persuading the court that “the administrative process was significantly deficient,” and had “obtained a renewed opportunity to secure benefits.” For this reason, the district court’s discussion of Mr. Woolsey’s potential entitlement to benefits was premature: “because the record was not fully developed…the court was in no position to assess the merits of Woolsey’s claim for benefits.”
Aetna had argued that Mr. Woolsey did not expressly seek a remand in his complaint and thus the district court’s order could not constitute “some success,” but the Ninth Circuit rejected this. “[T]he fact that Woolsey’s complaint did not expressly seek a remand is also of no consequence. Woolsey alleged the relevant ERISA violations and sought a remand in the alternative as part of his summary judgment motion.”
Finally, the Ninth Circuit attempted to limit the reach of its ruling, stating that it was only addressing the remand order in this particular case: “We do not, and need not, hold that any ‘remand order, without more’ is sufficient for an award of attorneys’ fees under ERISA.”
Nevertheless, most remand orders in ERISA benefits cases are similar to the order in this case in that they follow a finding of deficient review or procedural error, and provide for further action by the administrator, often supplemented by more evidence. As a result, despite the Ninth Circuit’s cautious language in this unpublished memorandum, its decision, practically speaking, will make it far more difficult for administrators to evade fee awards in future cases involving remands.
Plaintiff’s counsel was represented by ERISA Watch subscriber Scott Davis and ERISA Watch co-editor Peter Sessions.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Smith v. Golden Rule Ins. Co., No. 1:20-cv-02066-JMS-TAB, 2022 WL 1523327 (S.D. Ind. May 13, 2022) (Judge Jane Magnus-Stinson). Plaintiff Collyer Smith moved for class certification in this putative class action relating to denied substance-use disorder treatments by defendant Golden Rule Insurance Company. Mr. Smith asserted claims for breach of contract and violations of the Mental Health Parity and Addiction Equity Act in connection to denied intensive outpatient care facility and urinary analysis claims. The tragedy at the center of this suit, the death of Mr. Smith’s son from an overdose, was only briefly noted in the decision. Rather, the focus of the decision of the class certification motion was Article III standing. The court concluded that Mr. Smith lacked standing for both of his proposed classes (the intensive outpatient program class and the urine analysis class). The court agreed with Golden Rule that Mr. Smith’s claims for both the intensive outpatient treatment and the drug testing treatment failed to exceed his plan’s $16,000 deductible. Because Mr. Smith explicitly limited his claims in the case to those for urine analysis and intensive outpatient program costs, the court would not let him lump together the residential treatment costs he incurred, which totaling tens of thousands of dollars greatly exceeded the $16,000 deductible, to the $4,000 Mr. Smith paid in intensive outpatient treatments and the $1,560.30 he paid in drug testing. For this reason, the court stated that Mr. Smith lacked standing and that it, therefore, did not have subject-matter jurisdiction over his claims. Although the court dismissed the claims, because it did so without prejudice, it also took a moment to express other concerns it had with certifying the classes under Rule 23. The court was not convinced that Mr. Smith’s claims were common to the classes, nor that common issues of fact predominated over individualized ones. It was also not clear from the briefing, the court said, that Golden Rule obviously treated mental health and substance abuse claims differently when determining medical necessity than it did for other medical services. It, therefore, seems that other issues might preclude certification even if Mr. Smith is able to establish standing via amendment.
Bulas v. Unum Life Ins. Co. of Am., No. 2:22-cv-112, 2022 WL 1536360 (S.D. Ohio May 16, 2022) (Magistrate Judge Chelsey M. Vascura). Plaintiff Robert Bulas sued Unum Life Insurance Company of America to recover long-term disability benefits under ERISA Section 502(a)(1)(B). Mr. Bulas worked as a neuroradiologist who performed “both diagnostic imaging and interventional procedures.” Mr. Bulas developed an eye condition called binocular horizontal diplopia that prevented him from performing the duties of his job, which naturally rely on his eyesight. Unum initially approved Mr. Bulas’s long-term disability claim. The following year, however, Unum terminated the benefits deciding that Mr. Bulas’s diplopia only prevented him from performing any interventional procedures but that he could still perform certain diagnostic radiology and was thus not totally disabled as defined by the plan. Mr. Bulas here moved for discovery outside the administrative record, arguing that Unum’s conflict of interest should permit discovery. The court was not convinced that the “mere allegation of bias” warranted granting the motion. Additionally, the court stated that Mr. Bulas did not exhaust extrajudicial means of resolving the dispute before filing his discovery motion as required by the court’s Local Rules. The court also stated that Unum’s violation of Mr. Bulas’s due process by failing to allow him a chance to respond to its reviewing physician’s medical opinion at the appellate level did not warrant discovery. The court stated that no discovery was needed based on this ERISA violation because the facts relating to it are not in dispute as Unum admitted that it did not provide Mr. Bulas with any opportunity to respond to the medical opinions it relied on. For these reasons, Mr. Bulas’s discovery motion was denied.
C Evans Consulting LLC v. Sortino Fin., No. GLR-21-2493, 2022 WL 1538624 (D. Md. May 16, 2022) (Judge George L. Russell, III). Plaintiffs Cecelia Evans Laray and her consulting firm, C Evans Consulting LLC, commenced this lawsuit against Sortino Financial, LLC, Cornerstone Accounting Solutions, Inc., Pentegra Retirement Services, National Life Insurance Company, Life Insurance Company of the Southwest, and several named individual defendants in Maryland state court for negligence, breach of fiduciary duty, declaratory judgment, and unjust enrichment in connection with a 412(e)(3) defined benefit plan that defendants recommended and sold to plaintiffs. According to the complaint, this type of retirement plan was “completely unsuitable and inappropriate” for C Evans Consulting, a growing company. Defendants provided Ms. Evans Laray and the firm with misleading information to entice her to sign up for this type of plan and allegedly profited greatly once the plan was enacted. Plaintiffs on the other hand suffered financially from the creation of the 412(e)(3) plan, the costs of which ballooned quickly, leading to problems with the IRS. Defendants removed the suit to the Federal District Court, arguing the state law causes of action were completely preempted by ERISA. Defendants then moved for dismissal. Plaintiffs moved to remand to state court. The court declined to address the motions to dismiss in this order and instead resolved only the motion to remand. Plaintiffs argued the case should be remanded for two reasons. First, they argued that not all defendants “properly consented to the request for removal.” The court disagreed, holding there was no lack of unanimous consent to removal. Plaintiffs also argued that their causes of action under state law did not establish federal question jurisdiction. Again, the court disagreed. The court stated that all three Sonoco elements – (1) plaintiffs have standing to sue under ERISA, (2) plaintiff’s claims fall within the scope of ERISA provisions, and (3) resolution of plaintiffs’ claims require interpretation of the plan – were satisfied here. Thus, the court agreed with defendants that the state law claims were completely preempted by ERISA, establishing federal jurisdiction. Accordingly, the motion to remand was denied.
Life Insurance & AD&D Benefit Claims
Tuttle v. Metro Life Ins. Co., No. 1:20-cv-13013, 2022 WL 1599229 (E.D. Mich. May 20, 2022) (Judge Paul D. Borman). Plaintiff Wendy Tuttle brought this lawsuit seeking life insurance benefits from her late husband’s plan, which were denied by defendant Metropolitan Life Insurance Company. On March 22, 2022, Magistrate Judge Morris issued a Report and Recommendation on Ms. Tuttle’s summary judgment motion and MetLife’s motion to affirm its administrative decision denying the benefits. The Magistrate recommended the court deny both motions. Both parties filed objections to the Magistrate’s report. The court first evaluated Ms. Tuttle’s objection to the finding that she failed to allege specific evidence of MetLife’s conflict of interest “other than to say Defendant had a financial interest in denying the claim.” The court overruled Ms. Tuttle’s objection on two grounds. First, the court stated that in her objection Ms. Tuttle reiterates the points she already brought before Magistrate Judge Morris. Second, the court found that Ms. Tuttle’s objection failed on the merits, because the mere existence of a structural conflict of interest, as Ms. Tuttle was alleging, is not on its own enough to show that a claims denial is arbitrary and capricious unless there is evidence directly tying the conflict of interest to the administrator’s denial. The court then turned to MetLife’s objection. MetLife objected to the Magistrate’s conclusion that he could not determine “whether (the denial) arose from a deliberate and principled reasoning process.” MetLife argued that no evidence existed that it had overlooked anything important when denying the claim or had in any other way erred in “appreciating the significance of evidence.” The court agreed with MetLife, finding that its decision was the result of deliberate, principled reasoning and rational in light of the plan’s provisions. Accordingly, the court sustained MetLife’s objection and granted MetLife’s motion to affirm the denial.
Pottayil v. Thyssenkrupp Elevator Corp., No. 1:17-CV-4431-RWS, 2021 WL 4804361 (N.D. Ga. May 13, 2022) (Judge Richard W. Story). Plaintiffs are the widow and children of decedent Shihabudeen Pottayil, who commenced this ERISA action after they were denied $678,000 in supplemental life insurance benefits by Hartford Life and Accident Insurance Company. Last October, the court granted Hartford Life’s summary judgment motion holding that the denied supplemental life insurance benefits were not payable to the family because Mr. Pottayil failed to submit an evidence of insurability form, as required by the policy in order to increase his coverage. Plaintiffs moved for reconsideration of that order. They argued that the policy’s incontestability clause prohibits Hartford Life from asserting Mr. Pottayil’s failure to submit the evidence of insurability as a defense. Allowing Hartford to rely on the provision requiring insureds to provide evidence of insurability while at the same time ignoring the existence of the incontestability clause would, they argued, constitute manifest injustice. Plaintiffs, the court held, had case law on their side. The court concluded that the evidence of insurability provision “is distinguishable from restrictions and exclusions in the Policy because the provision dictated when coverage could begin, as opposed to limiting which risks the Policy covered.” Defenses of this kind based on failed conditions, the court concluded, go to the policy’s validity and thus are “barred by the incontestability clause,” under both ERISA and Georgia case law. Because Mr. Pottayil did not act fraudulently when signing up for supplemental coverage, paid his premiums, and reasonably relied on representations made by his employer that he had upgraded his coverage, Hartford may not now raise the lack of the evidence of insurability as a defense. For this reason, plaintiffs’ motion for reconsideration was granted, the order granting Hartford’s motion for judgment was vacated, and Hartford’s Rule 52(a) motion for judgment was denied. Plaintiffs, the court decided, are entitled to the $678,000 in benefits, representing a major turnaround in the case and a significant victory for the Pottayil family, who were represented on reconsideration by Brent Brehm and Glenn Kantor of Kantor & Kantor.
Pension Benefit Claims
Hamilton v. Schlumberger Tech. Corp. Pension Plan, No. 8:22-00733-HMH, 2022 WL 1540459 (D.S.C. May 16, 2022) (Judge Henry M. Herlong, Jr.). Plaintiff Denise Hamilton is the widow of Arthur Phil Hamilton. In this suit, Ms. Hamilton seeks survivor benefits under her late husband’s defined benefit retirement plan. These benefits were denied by the plan, which informed Ms. Hamilton that her husband had signed a form relinquishing her entitlement to surviving spouse benefits. Ms. Hamilton claims that she herself never consented to or signed any waiver form relinquishing her rights to these benefits. Originally, Ms. Hamilton commenced this action in South Carolina state court. It was removed to the federal district court, and Ms. Hamilton restated her claims as an ERISA claim for benefits. Defendants Schlumberger Technology Corporation and Schlumberger Technology Corporation Pension Plan moved to dismiss. The court first turned to the employer’s motion to dismiss pursuant to Rules 12(b)(4), 12(b)(5), and 12(b)(6). The court stated that Ms. Hamilton failed to properly serve Schlumberger Technology Corporation after removal of the case to the federal court under Rule 4 of the Federal Rules of Civil Procedure. The court thus granted the motion to dismiss on this basis. In addition to the improper service, the court further stated that Ms. Hamilton’s claim should be dismissed against Schlumberger Technology Corporation because it is not a proper party in this Section 502(a)(1)(B) case. The court felt differently when it came to the Plan’s motion to dismiss. The Plan argued that the claim for benefits should be dismissed because Ms. Hamilton failed to state a claim under ERISA, and the claim was barred by the Plan’s statute of limitations. First, the court stated that Ms. Hamilton alleged facts were sufficient to plead a valid claim for benefits under Section 502(a)(1)(B) of ERISA against the Plan. Next, the court refused to dismiss the claim as being time-barred because the denial letter the Plan sent to Ms. Hamilton did not inform her of her right to bring an action under Section 502(a) or provide her with the Plan’s contractual time limitation. Ms. Hamilton’s claim for benefits was therefore not dismissed. However, the court did strike Ms. Hamilton’s jury demand, holding ERISA does not provide the right for a jury trial. The court also dismissed Ms. Hamilton’s request for extra-contractual damages and punitive damages, which are not recoverable under ERISA.
Pleading Issues & Procedure
Fredrich v. Lincoln Life & Annuity Co. of N.Y., No. 21-cv-5482 (JMA)(SIL), 2022 WL 1537162 (E.D.N.Y. May 13, 2022) (Magistrate Judge Steven I. Locke). Plaintiff Stephen Fredrich became disabled from his job working in the hospitality food services after he suffered a heart attack which resulted in heart failure. After his claim for long-term disability benefits was denied by defendant Lincoln Life & Annuity Company of New York, Mr. Fredrich sued under ERISA for benefits and for breaches of fiduciary duties. Lincoln Life sought to expand the administrative record to include information it obtained after the date Mr. Fredrich asserted was the official final denial of his benefits claim. Mr. Fredrich accordingly moved to preclude Lincoln Life from expanding the administrative record. The court granted the motion. First, the court agreed with Mr. Fredrich that October 1, 2021, which was 45 days after Lincoln Life received Mr. Fredrich’s secondary level appeal, functioned as a denial, closed the applicable administrative record, and functioned as an exhaustion of administrative remedies because Lincoln Life did not provide Mr. Fredrich with a final decision on the merits by that date nor request an extension of time identifying specifical circumstances that would warrant an extension to ERISA’s 45-day window. The court went on to conclude that Lincoln Life failed to establish good cause to justify the expansion of the administrative record and that allowing it to do so would “contravene ERISA’s stated purpose of ‘promoting the interest of employees and their beneficiaries’ by permitting plans to eternally prolong and delay review of claimants’ appeal review periods.” As the information that Lincoln sought to add to the administrative record was “offered precisely to attack the merits of plaintiff’s claims,” and there was no evidence that Mr. Fredrich acted in bad faith, the court granted Mr. Fredrich’s motion and precluded Lincoln Life from expanding the administrative record with any information it obtained after October 1, 2021.
Liberty Wellness Chiropractic v. Empire HealthChoice HMO Inc., No. 21 Civ. 02132 (LLS), 2022 WL 1523121 (S.D.N.Y. May 13, 2022) (Judge Louis L. Stanton). Plaintiff Liberty Wellness Chiropractic sued Empire Healthchoice HMO and Empire Healthchoice Assurance under ERISA and state law causes of action including breach of contract, tortious interference, and unjust enrichment, as well as a violation of a New York insurance law, based on Empire’s alleged practice of wrongfully denying claims. Empire moved to dismiss the ERISA claim as “time-barred by contractual statute of limitations in the health benefit plans, for lack of standing, for failure to exhaust the administrative remedies provided for in the plans, and for failure to identify the applicable plan provisions.” In its motion to dismiss, Empire attached what it said were health plans that “may govern” the claims. Liberty Wellness challenged the authenticity, accuracy, and relevance of the plans attached to Empire’s motion. Given that the motion to dismiss naturally relies on the interpretation of authentic plans relevant to the patients and claims at issue, the court denied the motion to dismiss as premature. The court ordered Liberty Wellness to amend its complaint identifying specific claims that were denied using a claims list and patient information. Once Liberty Wellness has done so, the court stated Empire may then re-submit its motion to dismiss including the accurate and uncontroverted ERISA plans.
Kramer v. Am. Electric Power Executive Severance Plan, No. 2:21-cv-5501, 2022 WL 1538638 (S.D. Ohio May 10, 2022) (Judge Sarah D. Morrison). Former executive employee, plaintiff Derek Kramer, filed suit against his ex-employer, American Electric Power Service Corporation, and the American Electric Power Executive Severance Plan. Mr. Kramer asserted two ERISA claims. Mr. Kramer asserted his first claim, a claim for benefits under Section 502(a)(1)(B), against the Plan. The second claim, asserted against American Electric Power, is a Section 510 retaliation claim, in which Mr. Kramer alleges that the company attempted to interfere with his attainment of severance benefits. Defendants moved to dismiss the retaliation claim and moved to strike Mr. Kramer’s jury demand. Mr. Kramer requested oral argument in response to the motion to strike. The court denied Mr. Kramer’s oral argument request. Addressing the motion to dismiss, the court stated that defendants’ argument that counts I and II were duplicative was not grounds for dismissal under Rule 12. Even if the two claims are duplicative, the court expressed that Mr. Kramer may plead the two counts in the alternative. Therefore, the court denied the motion to dismiss. As for the motion to strike the jury demand, the court agreed with defendants that controlling case law makes clear that there is no right to a jury trial in ERISA cases. Thus, the court granted the motion to strike the jury demand.
Open MRI & Imaging of RP Vestibular Diagnostics, P.A. v. Cigna Health & Life Ins. Co., No. Civ. 20-10345 (KM) (ESK), 2022 WL 1567797 (D.N.J. May 18, 2022) (Judge Kevin McNulty). Throughout the COVID-19 Pandemic, plaintiff Open MRI & Imaging of RP Vestibular Diagnostics, P.A. administered COVID-19 tests to patients as required by the Family First Act and the CARES Act. In this suit, Open MRI claims that invoices it submitted to defendant Cigna Health & Life Insurance Company for COVID-19 tests it gave to Cigna-insureds were not paid by the insurer in violation of ERISA. Previously, the court granted Cigna’s motion to dismiss, holding that Open MRI did not sufficiently demonstrate its standing to sue under ERISA. In its second amended complaint, Open MRI was able to cure its standing deficiencies by including valid assignment of benefits from Cigna-insureds. Accordingly, the court was satisfied that Open MRI can sue for benefits and this time refused to dismiss for lack of Article III standing. The decision then turned to its most interesting discussion; whether Congress when enacting the Family First Act and CARES Act had effectively modified the terms of ERISA plans to require them to provide COVID testing coverage, and if so, whether that could be the basis for suing even when the terms of the plans themselves are silent on the issue of COVID coverage. The court, through a very compelling discussion, answered in the affirmative writing, “Congress mandated that health insurance plans cover COVID-19 testing, raising it to the status of a benefit of those plans. Congress also allows insureds to sue for benefits due to them. It, therefore, stands to reason that an insured can sue under ERISA when an insurer denies coverage for COVID-19 testing. That is the best, most harmonious reading of these explicitly interrelated statutes.” Having drawn this conclusion, the court denied Cigna’s motion to dismiss the amended complaint.
Note from the Your ERISA Watch editors:
Your ERISA Watch is written and edited by Elizabeth Hopkins and Peter Sessions, with the assistance of Emily Hopkins. Each week our goal is to provide you with the benefit of the expertise of knowledgeable ERISA litigators who are on the frontline of benefit claim and fiduciary breach litigation. Although our firm represents plaintiffs, we strive to provide objective and balanced summaries, so they are informative for the widest possible audience.
We include recent cases that have been picked up by Westlaw or sent to us by one of our readers. If you have a decision you'd like to see included in Your ERISA Watch, please send it to Elizabeth Hopkins at firstname.lastname@example.org.
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