Your ERISA Watch – Taking Agency: Pension Trustees Responsible for Actions of Employees Who Were Instructed to Dissemble

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Your ERISA Watch – Taking Agency: Pension Trustees Responsible for Actions of Employees Who Were Instructed to Dissemble

Smarra v. Boilermaker-Blacksmith Nat’l Pension Tr., No. 2:20-cv-860, 2022 WL 377432 (W.D. Pa. Feb. 8, 2022) (Judge William S. Stickman IV).
 
Courts often conclude that plan fiduciaries are not responsible for the actions of employees or contractors who make mistakes, even when the consequences of such mistakes are devastating to plan participants. However, as this week’s notable decision makes clear, fiduciaries cannot hide behind a “ministerial exception” where their employees are not making mistakes but are instead acting on instruction to behave in an evasive and misleading manner when dealing with plan participants.
 
Plaintiff Sean Smarra filed suit against defendants Boilermaker-Blacksmith National Pension Trust and its Board of Trustees ("Boilermakers") for breach of fiduciary duty and wrongful denial of benefits after his disability benefit was slashed because of the timing of his application. According to the complaint, the reduction was due to a plan amendment that Boilermakers never disclosed to Mr. Smarra, and about which it provided him inaccurate and misleading information.
 
On cross-motions for summary judgment, the court ruled in favor of Mr. Smarra, finding Boilermakers had breached its fiduciary duties by providing Mr. Smarra with misleading and inaccurate information. Mr. Smarra was intentionally not informed by the pension representative specialist he spoke to that the plan had been recently amended and that, as a result, his benefits would be reduced by about 60% from the amount stated on his annual pension statements unless he submitted his disability pension application by August 14, 2017.
 
According to the court, “this was not an inadvertent omission,” and employees were “affirmatively instructed not to raise or discuss the upcoming changes with participants who contacted the Boilermaker Pension Trust and were further instructed that they were not to respond to questions on the subject.” To make matters worse, Mr. Smarra received contradictory instructions in the Summary Plan Description and the written Pension Application Instructions about what documents he needed to submit along with his application for a disability pension.
 
Based on his conversations with the pension representative and documents provided to him by the representative, Mr. Smarra concluded that he needed to wait until he received a Notice of Award from the Social Security Administration before he could submit his application. In fact, Boilermakers had a long-standing policy of permitting disability pension applicants to submit an application without a Notice of Award letter and allowing the participant to include the Notice of Award within 180 days after filing. All of this is to say that Mr. Smarra did not submit his application by the August 14th deadline.
 
The court was unmoved by Boilermakers' argument that the pension specialist representative was merely a “ministerial employee” who made a mistake. To the contrary, the representative employee was acting on instructions issued by Boilermakers' Director of Retirement Plans not to raise or discuss the changes with participants and not to respond to questions on the subject. Furthermore, according to the court, the pension representative was “clearly acting with apparent authority as an agent of Boilermakers…in a manner that would cause a reasonable person to believe she was giving advice on behalf of Boilermakers.”
 
Finding that the relevant plan documents “were far from clear,” the court held Boilermakers responsible for the omissions and misleading nature of the information that was provided to Mr. Smarra. These actions by an agent for Boilermakers, the court concluded, prevented Mr. Smarra from making an “adequately informed retirement decision.” 

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
 
Arbitration
 
Second Circuit
Ferguson v. Ruane Cuniff & Goldfarb Inc., No. 17-CV-6685 (ALC), 2022 WL 420763 (S.D.N.Y. Feb. 3, 2022) (Judge Andrew L. Carter, Jr.). Last year, Your ERISA Watch reported on several arbitration cases involving DST Systems in the Western District of Missouri in which the court ordered DST to pay arbitration awards entered against it to participants in DST’s 401(k) retirement plan. In this related case, the Southern District of New York has taken an entirely different approach. Here, a class has been certified and an injunction has been ordered by the court enjoining the arbitration claimants, and all class members, from, “instituting new actions or litigating in arbitration or other proceedings against the DST Defendants.” Nevertheless, the arbitration claimants moved to stay the preliminary injunction. The motion was denied by the court. The court expressed the view that granting the motion would be counter to the purposes of a class action specifically intended to eliminate parallel proceedings, inconsistent rulings, and duplicative litigation. Addressing the inherent conflict with the Western District of Missouri’s approach, the court wrote that it “does not intend to disrespect the Western District of Missouri’s authority and jurisdiction, however, the Second Circuit’s clear ruling on this issue compelled the court to issue the preliminary injunction order and compels the court to deny this stay.” As this is a class action, and a mandatory class has been certified, the court held that the claims of all class members should be resolved via this litigation. Although DST and its shifting positions has made quite a mess for both district courts, the Southern District of New York’s decision denying the motion to stay was certainly a logical one. As for the arbitration awards already entered against DST, the court decided that the status of those awards should be determined later at final judgment.
 
Attorneys’ Fees
 
Ninth Circuit
Walsh v. Bowers, No. 18-00155 SOM-WRP, 2022 WL 355126 (D. Haw. Feb. 7, 2022) (Judge Susan Oki Mollway). This government-brought suit alleged that defendants Brian Bowers and Dexter Kubota had violated ERISA with the creation and sale of their Bowers and Kubota Consulting, Inc. ESOP, which according to the complaint had caused the ESOP to pay more for the company than its fair market value. Following a bench trial in the case, the court issued its final judgment determining that no ERISA violation had been established and ordering judgment be entered in favor of defendants. Defendants Bowers and Kubota, along with their company (Bowers and Dexter Kubota Consulting, Inc.) filed a motion for attorneys’ fees and costs. Magistrate Judge Porter issued a recommendation to grant in part and deny in part defendants’ bill of costs and award defendants $72,962.95 in taxable costs, and to deny defendants’ motion for attorneys’ fees and nontaxable costs. On de novo review of this ruling, the court reduced the Magistrate Judge’s recommended costs award to $41,810.46, and agreed with the recommendation to deny defendants’ motion for attorneys’ fees and nontaxable costs. First, the court concluded that, along with the individual defendants Bowers and Kubota, the company against which the government asserted no claim was nevertheless also a prevailing party in the case. Additionally, because defendants ultimately succeeded in obtaining judgment in their favor, the court properly exercised its discretion in awarding them the costs they incurred with respect to this suit. However, the court reduced the overall award of costs, finding some of the costs requested to have been incurred for ultimately unsuccessful arguments, or for unnecessary expenses. As for the requested attorneys’ fees and nontaxable costs, the court agreed with the Magistrate Judge’s recommendation to deny the motion as the government was substantially justified in bringing its suit, and did not proceed or act in bad faith.
 
Breach of Fiduciary Duty
 
Ninth Circuit
Lauderdale v. NFP Retirement, Inc., No. SACV 21-301 JVS (KESx), 2022 WL 422831 (C.D. Cal. Feb. 8, 2022) (Judge James V. Selna). Participants of the Wood Group U.S. Holdings, Inc. 401(K) multi-employer plan brought suit related to the investment portfolio and administrative fees of the plan for breach of fiduciary duties of prudence and loyalty, failure to monitor fiduciaries, and engaging in prohibited transactions. According to the complaint the plan offered imprudent underperforming funds, and higher-cost versions of investments that could have been negotiated for lower costs. Defendants NFP Retirement Inc., flexPATH Strategies, LLC, and Wood Group U.S. Holdings, Inc. and its 401(k) plan committee moved to dismiss for failure to state a claim. The motions were granted in part and denied in part. With regard to the first count for breach of fiduciary duties relating to investment in flexPATH Funds, the court granted NFP’s and Wood’s motions insofar as they relied upon co-fiduciary actions taken by flexPATH, but otherwise denied the motions. Next, the court mostly denied defendants’ motions with regard to the plaintiffs’ second count: breach of fiduciary duties pertaining to the higher cost investments. The only exception to this was NFP’s motion to dismiss, and its motion was granted for the second cause of action, “to the extent that it relies upon direct liability.” Plaintiffs’ third count, that defendants engaged in prohibited transactions, was dismissed against flexPATH and the Wood defendants with respect to the transactions involving the flexPATH collective investment trusts. The remainder of plaintiffs’ claims survived defendants’ motions to dismiss.
 
Class Actions
 
Seventh Circuit
Wachala v. Astellas U.S. LLC, No. 20-3882, 2022 WL 408108 (N.D. Ill. Feb. 10, 2022) (Judge Ronald A. Guzmán). Plan participants of the Astellas U.S. LLC retirement plan brought this putative class action fiduciary breach suit under ERISA Section 502(a)(2) against Astellas, the administrative committee of its retirement plan, its board of directors, and the plan’s investment manager, Aon Hewitt Investment Consulting Inc., alleging that defendants invested in and retained imprudent investments, engaged in prohibited transactions, and failed to properly monitor the plan. Plaintiffs claim these actions caused plan participants to lose millions of dollars in retirement savings. Plaintiffs moved for class certification, while Aon moved for leave to file materials under seal. Aon’s motion was granted in part and denied in part. Aon sought to file defendants’ memorandum under seal, several declarations of experts and attorneys, and eight exhibits. Aon argued these materials needed to be under seal because they either contained names and or other personal information of plaintiffs or putative class members, or because they contained proprietary investment strategies that need to be kept confidential from “clients, competitors, and third parties in the marketplace.” The court denied the motion with regard to documents containing names, social security numbers, and other personal identifying information. These documents were not put under seal, but Aon was instructed to redact or remove the name columns and social security numbers. However, the batch of five exhibits attached to the declaration of one of plaintiffs’ attorneys was put under seal as Aon was able to convince the court that these documents contain a great deal of extraneous information that is mostly irrelevant for litigation purposes but is sensitive to Aon’s business interests. Turning to plaintiffs’ motion for class certification, the court was satisfied that all of the requirements of Rule 23(a) and Rule 23(b) were met. Defendants’ argument that there were “intractable conflicts” among members that prevented plaintiffs from meeting the typicality and adequate representation requirements of Rule 23(a) was unpersuasive to the court. Typicality was satisfied thanks to defendants’ decision to replace the plan’s prior investment portfolio with the Aon Funds, and because of defendants’ alleged conduct in monitoring the Aon Funds once they had been implemented. These alleged violations of the duty of loyalty, according to the court, constituted a single class-wide breach, which satisfied the class certification requirements. Plaintiffs, the court wrote, have a “shared interest in establishing defendants’ liability.” Thus, a class action was appropriate.
 
Discovery
 
Sixth Circuit
Perrone v. Ford Motor Co. - UAW Ret. Bd. of Admin., No. 21-11647, 2022 WL 350718 (E.D. Mich. Feb. 4, 2022) (Judge Victoria A. Roberts). Plaintiff Antonia Perrone sued the Ford Motor Company - UAW Retirement Board of Administration (“the Board”) after her claim for surviving spouse pension benefits was denied. Ms. Perrone’s ex-husband, Antonio Perrone, had elected survivor's benefits for his pension to be paid to Ms. Perrone if he predeceased her. The survivor’s benefits election form stated that the benefit could be changed if the Perrones divorced, and a Qualified Domestic Relations Order didn’t prohibit the cancellation of the coverage. In 2006, after Mr. Perrone had retired, the Perrones divorced. In their judgment of divorce, the Perrones each agreed to terminate their rights to each other’s pension and annuity benefits. After the divorce, Mr. Perrone completed a “Cancellation of Surviving Spouse Benefits” form. The Board then recalculated the pension benefit to a single-life annuity. Then, in 2018, Mr. Perrone died. According to Ms. Perrone’s complaint, when her daughter contacted the Board to inquire about her mother’s survivor’s benefits, the Board informed the daughter that she was not entitled to survivor benefits because of the cancellation form. The Board provided Ms. Perrone with a copy of the form. In response, Ms. Perrone stated she had never seen or signed the Cancellation of Surviving Spouse Benefits form, and that it had not been notarized as required by the plan. After having said all of this to the Board, Ms. Perrone submitted a claim for benefits. When her claim was denied, the Board did not rely on the cancellation form. Instead, the claim was denied because of the judgment of divorce and the language in it which explicitly relinquished rights to pension benefits. Ms. Perrone internally appealed the adverse benefits determination, and once again the Board denied the claim, relying on the judgment of divorce. Before the court was Ms. Perrone’s procedural challenge to the administrative record and a request for discovery. Ms. Perrone argued that there was a lack of due process in the claims process as the Board changed its reasoning for denying the claim from initially relying on the cancellation form to later relying on the judgment of divorce. Ms. Perrone contended that this “bait-and-switch” violated her due process rights as it prevented her from responding to the Board’s changing rationale. The court found this argument unavailing, because in both the initial denial letter, and again in the denial letter of the appeal, the Board consistently relied on the judgement of divorce form as its rationale for denying the claim. Accordingly, the court concluded that Ms. Perrone had notice and the opportunity to challenge this reason for denial, meaning there was no procedural defect. The court noted that Ms. Perrone may have a valid argument that the Board’s reliance on the judgment of divorce to deny the claim was improper, but stated this issue would be addressed at the merits stage. However, without a procedural defect the court declined to consider evidence outside the administrative record and denied the discovery motion.
 
Seventh Circuit
Stone v. Signode Indus. Grp., No. 12-cv-05360, 2022 WL 393584 (N.D. Ill. Feb. 9, 2022) (Judge John F. Kness). Plaintiffs, a labor union and two former employees of Signode Industrial Group, LLC, brought this class action of retirees after Signode terminated healthcare benefits established under a collective bargaining agreement. The court previously granted plaintiffs an injunction that ordered defendants to reinstate plaintiffs’ healthcare benefits. Defendants appealed the decision. In a published decision, the Seventh Circuit affirmed the district court’s order. The district court was then left to determine the damages. Magistrate Judge Susan E. Cox, who was instructed by the court to supervise discovery, granted in part and denied in part plaintiffs’ motion to compel. Plaintiffs’ discovery motion was granted insofar as they moved to compel defendants to produce information regarding profits, saved expenditures, and gains made by ceasing healthcare coverage for plaintiffs, but was denied with regard to documents pertaining to “injunction compliance regarding the restoration of healthcare benefits.” Both parties objected to Magistrate Judge Cox’s ruling, with defendants arguing that Section 502(a)(3) does not permit the relief sought by plaintiffs and would represent a windfall rather than make-whole relief, and plaintiffs objecting to the order on the ground that the Magistrate’s order disregarded the court’s prior order requiring defendants to provide plaintiffs with reports detailing defendants’ efforts to comply with the injunction. The court disagreed with objections by both parties and affirmed Magistrate Judge Cox’s rulings. The court found defendants’ arguments were improperly raised in response to a discovery motion. The court also overruled plaintiffs’ objection to the order, deferring to Judge Cox’s decision not to allow plaintiffs to go fishing to explore whether defendants were complying with the court’s injunction order.
 
ERISA Preemption
 
Eighth Circuit
Foerster v. Watlow Elec. Mfg. Co., No. 2:21-cv-04229-MDH, 2022 WL 357505 (W.D. Mo. Feb. 7, 2022) (Judge Douglas Harpool). Plaintiff Michelle Foerster brought suit in state court against her former employer, Watlow Electric Manufacturing Company, for age discrimination under the Missouri Human Rights Act seeking to be compensated for the lost wages that resulted after she and several other employees in their 50s and 60s were fired by the company. Ms. Foerster worked for the company for over 37 years, and until her last year, when she was fired, had an “unblemished” work record and consistently received raises. However, shortly after meeting with a member of the company’s HR personnel to prepare for her retirement, Ms. Foerster was notified that her she was performing poorly and was put on a performance improvement plan and then terminated. Defendant Watlow Electric removed the case to federal district court citing ERISA preemption of Ms. Foerster’s state law claims. Ms. Foerster amended her complaint to remove all mention of any benefits or pensions from which federal question jurisdiction could arise and maintained that her original complaint and the amended complaint are solely asserted under Missouri state law. Ms. Foerster moved to remand. The court granted the motion to remand, ruling that defendant’s argument that ERISA is applicable because of references in Ms. Foerster’s complaint to inquiries into her pension to be unpersuasive. Rather, the court was satisfied that the complaint is not reliant on any ERISA-governed plan, and the relief Ms. Foerster seeks is not an ERISA benefit.
 
Life Insurance & AD&D Benefit Claims
 
Second Circuit
Lines v. Hartford Fin. Servs. Grp., No. 3:21-CV-00029 (KAD), 2022 WL 408820 (D. Conn. Feb. 10, 2022) (Judge Kari A. Dooley). Plaintiff Thomas Lines brought suit to recover life insurance benefits for his son, decedent Mark Lines, who was employed by defendant Jordan’s Furniture Inc. and covered under its group life insurance plan insured by defendants Hartford Life and Accident Insurance Company and Aetna Life Insurance Company. Mr. Lines alleged in his complaint that his son attempted to convert his group life insurance policy into an individual policy after Jordan’s Furniture fired him but he was wrongfully prevented from making this change. After his termination, Mark Lines was given contradictory and inaccurate information concerning his ability to convert his life policy into an individual policy and was even told at one point by Jordan’s Furniture that the policy had been converted. In his lawsuit, Thomas Lines named as defendants Hartford Financial Services Group, Inc. and Aetna Inc., believing they were the insurers of the ERISA plan. These two defendants moved to dismiss, and Mr. Lines moved to amend his complaint to name the proper insurers as defendants in their place in addition to bringing additional claims. The court granted the motion to dismiss defendants Hartford Financial and Aetna Inc., and granted in part and denied in part Mr. Lines' motion to amend. The court denied the motion for leave to amend to add denial of benefits claims against Aetna Life Insurance Company and Hartford Life and Accident Insurance Company pursuant to Sections 502(a)(1)(B) and (a)(3). The court agreed with defendants that, because Mark Lines never converted his insurance policy, “there is no policy under which to recover benefits.” Therefore, Mr. Lines could not invoke Section 502(a)(1)(B) and Section 502(a)(3) to seek the life insurance benefits under the plan. However, the court was satisfied that the complaint plausibly alleged  co-fiduciary breach claims because the insurance companies knew that Jordan’s had provided Mark Lines with incorrect information and failed to act to remedy Jordan’s breach of its fiduciary duties.
 
Eighth Circuit
Metro. Life Ins. Co. v. Harris, No. 4:19-cv-02396-SNLJ, 2022 WL 355114 (E.D. Mo. Feb. 7, 2022) (Judge Stephen N. Limbaugh, Jr.). This interpleader action was filed by MetLife to determine the proper beneficiary or beneficiaries of decedent Joe Harris’ life insurance benefits. Defendants are Mr. Harris’ three sons Alvin Harris, Anthony Harris, and Joseph Harris, and Mr. Harris’ surviving spouse Neoma Harris. The most recent beneficiary designation named Mr. Harris’ first wife, Dorothy Harris, as sole beneficiary. However, Dorothy Harris is dead. After her death, Mr. Harris married Neoma. After the death of his father, Anthony submitted a claim for benefits, including an affidavit in which he stated that after his mother Dorothy’s death, Mr. Harris was survived only by his three sons. In the affidavit, Anthony attested that his father’s marriage to Neoma had ended in divorce. MetLife then paid one-third of the life insurance benefits to Anthony, and sent claims to Alvin and Joseph for the remaining two-thirds. However, Neoma filed her own claim for benefits and her own affidavit stating that she was in fact decedent’s surviving wife, as Mr. Harris had died before their divorce proceedings had been finalized and attaching as an exhibit the state court’s order dismissing the divorce proceedings due to the death of petitioner. To resolve these issues, MetLife brought this interpleader action. Neoma Harris then brought a counterclaim against MetLife for allegedly violating ERISA by paying one-third of the life insurance to Anthony and failing to investigate the validity of his affidavit. MetLife filed a motion for summary judgment against Neoma on her counterclaim. In addition, both Alvin and Neoma moved for summary judgment. While the case was ongoing, Neoma died. Her daughter, Brenda McCommack, was substituted for Neoma as a party. The court first granted MetLife’s motion for summary judgment, finding it had acted in good faith and was not required to act under any higher standard of proof before disbursing the proceeds to Anthony. Next, the court denied Alvin’s motion for summary judgment. The court disagreed with Alvin that the remaining proceeds should go to him and his brother Joseph now that Neoma has died, because her claim to the insurance proceeds, “was not extinguished when she died.” Finally, Neoma's daughter’s motion for summary judgment was granted as Neoma was the decedent’s surviving spouse at the time of Mr. Harris’ death and thus entitled to benefits.
 
Medical Benefit Claims
 
Fourth Circuit
Alan J.R. v. Bank of Am. Grp. Benefits Program Aetna Life Ins. Co., No. 3:20-cv-00441-RJC-DSC, 2022 WL 413935 (W.D.N.C. Feb. 9, 2022) (Judge Robert J. Conrad, Jr.). Plaintiff Alan R. brought suit after the Bank of America Group Benefits Program improperly paid his daughter J.R.’s healthcare claim for residential treatment for her mental health disorders. The Plan, insured by Aetna Insurance Co. covers medically necessary services for mental health treatment including residential treatment. However, after paying for ten days of residential care, Aetna denied the payment of J.R.’s treatment concluding it was no longer medically necessary and J.R. could be treated at a lower level of care. This denial was reversed after Alan R. requested an external review by an independent review organization, which concluded that the treatment was medically necessary for five months from March to August 1, 2018. Accordingly, Aetna reprocessed the claims for payment for J.R.’s treatment at the residential treatment center and made “certain payments.” Alan R. alleged the claims were not processed and paid properly, and the rates of reimbursement were not consistent from month to month. Meanwhile, after August 1, 2018, J.R. continued to struggle with her mental health and moved from the treatment center to a related transitional living program. Aetna denied coverage of her stay at the transition center, despite J.R.’s treating physicians stating the transition was medically necessary. Once again, Alan R. requested an independent review of the denial. This time, however, the reviewer concluded that the treatment at the transition center was not medically necessary and that J.R. could be treated in a less restrictive setting. Based on this review, Aetna upheld its denial. Seeking benefits, Alan R. filed suit. asserting claims under Section 502(a)(1)(B), Section 502(a)(3), and a violation of the Mental Health Parity and Addiction Equity Act. The parties filed cross-motions for summary judgment, which the court granted in part and denied in part. The court first addressed the Section 502(a)(1)(B) claim. Under abuse of discretion review, the court concluded that Aetna abused its discretion by not making reasonable and principled decisions about how much to cover for the claims of the inpatient facility from month to month, and by paying different amounts, calculated differently, for the same services. Turning to the denial of coverage for the transitional living program, the court concluded Aetna abused its discretion by claiming, on the one hand, that the transition living was considered residential treatment for coverage purposes, but, on the other hand, arguing it was a stepped-down, less restrictive treatment facility. As J.R. required mental health treatment, the court concluded that the treatment at the transition living program, “a less restrictive treatment, was the type of treatment that was medically necessary for J.R.” Therefore, the court granted summary judgment to plaintiffs on their benefit denial claims and remanded the matter to Aetna to determine the allowed amount to be paid for J.R.’s time at both the inpatient treatment center and the transitional living program. Plaintiffs were also granted 14 days to file a motion for attorneys’ fees and costs. However, because the court considered plaintiffs’ Parity Act claim to be a repackaged claim for the denial of benefits, it granted summary judgment in favor of defendants on this claim.
 
Pleading Issues & Procedure
 
Fifth Circuit
Pierce v. Aveanna Healthcare, LLC, No. 1:21-cv-287-RP, 2022 WL 347614 (W.D. Tex. Feb. 4, 2022) (Magistrate Judge Susan Hightower). Plaintiff Deanna Pierce is a former Aveanna Healthcare, LLC in-home nurse. During her employment, Ms. Pierce worked taking care of an ill child in a home which she repeatedly complained to her employer was unsafe and volatile. Ms. Pierce made Aveanna aware of police calls and violence that occurred in the home. In an upsetting escalation of these problems, Ms. Pierce was “violently and sexually assaulted by the patient’s father for an extended period of time.” Immediately before the assault occurred, Ms. Pierce had texted her supervisor with pleas for help. As a direct result of the attack, Ms. Pierce alleges that she left her employment and has suffered “significant physical and mental injuries.” She brought suit after Aveanna terminated her healthcare benefits under its ERISA-governed plan. In her complaint, Ms. Pierce asserted claims of negligence, gross negligence and malice against Aveanna, and an ERISA Section 502(a)(1)(B) claim against the Plan for wrongful denial of benefits. Defendants moved to dismiss, arguing that Ms. Pierce failed to identify plan terms that were breached. Defendants also argued that the state law claims were preempted by ERISA and that Ms. Pierce failed to plead sufficient facts to allege negligence and gross negligence. The district court referred the motion to Magistrate Judge Hightower for a report and recommendation. First, the Magistrate concluded that Ms. Pierce had satisfied the Iqbal/Twombly pleading standards by alleging in her complaint that she is entitled to the cost of medical treatment under the plan and that the plan failed to pay in accordance with its terms. Next, the Magistrate found that ERISA did not preempt the state law negligence claims as those claims revolved around Aveanna failing to provide a safe work environment and therefore exist independently of ERISA or any ERISA-governed benefits plan. Finally, the Magistrate found the complaint asserted sufficient facts to state claims for negligence and gross negligence. Aveanna owed Ms. Pierce a duty to provide her with a safe workplace, which it failed to do according to the complaint, even after Ms. Pierce repeatedly informed Aveanna of the danger she faced. Accordingly, Magistrate Judge Hightower recommended that the district court deny defendants’ motion to dismiss.
 
Sixth Circuit
Sec’y of Labor v. Macy’s, Inc., No. 1:17-cv-541, 2022 WL 407238 (S.D. Ohio Feb. 10, 2022) (Judge Douglas R. Cole). The Secretary of Labor sued Macy’s Inc. and its welfare benefits plan along with third-party plan administrators, alleging ERISA violations with respect to the plan’s Tobacco Surcharge Wellness Program. Under the terms of the surcharge program, employees who use tobacco products are required to pay a monthly surcharge for their healthcare benefits. According to the Secretary’s complaint, Macy’s failed to include a reasonable alternative standard for employees who could not meet the primary requirements to avoid the surcharge. Last November, the court dismissed the fiduciary breach claims pertaining to the allegedly discriminatory wellness program but denied Macy’s motion to dismiss the claim that the plan violated ERISA’s statutory and regulatory requirements for wellness programs. The court concluded in that decision that, under applicable Supreme Court precedent, Macy’s had acted in a settlor capacity, rather than as a fiduciary when it created its wellness program, and therefore could not have breached fiduciary duties. The Secretary moved for reconsideration of the fiduciary breach claim. The court found the Secretary’s request for reconsideration to rely heavily on “rehashing arguments” that were previously made, and by presenting case law that existed at the time when the original brief was filed but that was not included in that briefing. Nor was the court persuaded that it had committed a “clear error” in its previous ruling. Accordingly, the motion for reconsideration was denied.
 
Ninth Circuit
Law Offices of Johnathan Stein v. Gabrielino-Tongva Tribe, No. 2:21-cv-05653-MCS-DFM, 2022 WL 382012 (C.D. Cal. Jan. 31, 2022) (Judge Mark C. Scarsi). In 2006, the Gabrielino-Tongva tribe filed a lawsuit in state court against attorney Johnathan Stein alleging he had committed identity theft and defrauded the tribe of more than $20 million. In 2019, the tribe was awarded a judgment of $27,411,067.23, along with a ruling that the defendants had committed extensive fraud against the tribe. Since the entry of judgment, the tribe claims that Stein has refused to comply with the order and instead has filed many frivolous suits against it, including this case in which Stein alleges an ERISA violation on the basis that certain plans are protected from the levies seeking to enforce the earlier judgment. The tribe moved to dismiss this case under the prior exclusive jurisdiction doctrine. The court found this argument persuasive because the state court first exercised jurisdiction and retains jurisdiction over the property at issue. Accordingly, the court decided to abstain from “exercising jurisdiction over the same property.” Therefore, the court granted the motion to dismiss.
 
Provider Claims
 
Fifth Circuit
Bond Pharm. v. Advanced Health Sys., No. 3:21-CV-123-KHJ-MTP, 2022 WL 370936 (S.D. Miss. Feb. 7, 2022) (Judge Kristi H. Johnson). Last October, Your ERISA Watch reported on an earlier decision in this case in which the court granted without prejudice defendants’ partial motion to dismiss for lack of derivative standing. Having amended its complaint, plaintiff Bond Pharmacy d/b/a Advanced Infusion Solutions reasserted its ERISA claims and included assignment of benefits forms its patients had signed. Advanced Infusion Solutions is a medical provider that serves patients who require in-home infusion therapy. According to its complaint, Blue Cross Blue Shield of Mississippi and Advanced Health Systems refused to pay for millions of dollars of treatment it provided to insureds. Once again, defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(1) for lack of derivative standing, and under Rule 12(b)(6) for failure to plausibly plead a violation of ERISA. Defendants argued that Advanced Infusion Solutions lacked standing because their plans include anti-assignment provisions which preclude patients from allowing providers to sue on their behalf. The court, upon examining the plain language of the anti-assignment provisions found they do not “encompass a prohibition against the right to sue,” rather they are “essentially a prohibition against the right for a provider to receive payment from the insurance company unless a member expressly permits it.” As the members in this case did just that, as proven by Advanced Infusion Solutions’ “Financial Responsibility/Assignment of Benefits” forms, the court held that plaintiff has standing to sue under ERISA. With regard to the Rule 12(b)(6) motion to dismiss, the court found Advanced Infusion Solutions’ allegations that defendants breached the terms of the ERISA plans by failing to process and pay for the claims submitted by the provider and by failing to make plan documents available plausibly pled a violation of ERISA under Section 502(a)(1)(B). Therefore, the court denied defendants’ motion to dismiss the ERISA claims.

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 ehopkins@kantorlaw.net.

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