Your ERISA Watch – Plan Participant States a Claim That She Was Sued for Seeking Plan Benefits

ERISA Watch

Williams v. Wright, No. CV BPG-21-2076, 2022 WL 2818949 (D. Md. July 19, 2022) (Magistrate Judge Beth P. Gesner).

This decision involves the third of three related lawsuits between certain members of the wealthy duPont family and their household employees regarding the employees’ entitlement to retirement benefits. To properly understand this suit under ERISA’s anti-retaliation provision, you have to go back to the first suit and its history, which actually begins in 1947.

In that year, Mary Chichester duPont created a trust to provide pension benefits for qualifying individuals employed by her grandchildren, including those employed by her granddaughter, Helena DuPont Wright. T. Kimberly Williams worked as Ms. Wright’s personal accountant and assistant for almost 18 years, and has sued under ERISA, alleging that she is entitled to benefits under the trust.

That suit was originally brought in the District of Maryland in 2016 by Ms. Wright and her cousin against the trustees, arguing that the trust is governed by ERISA and had not been administered properly. Ms. Williams was later added as a plaintiff, and the case was transferred to the District of Delaware.

Thus, at the beginning of the dispute, Ms. Wright and her employee, Ms. Williams, were on the same side. In 2018, however, the plaintiffs parted ways. Ms. Wright fired her original counsel and obtained new counsel. Ms. Williams also obtained new counsel and alleged that Ms. Wright actually intended to defeat her ERISA claims rather than vindicate them. On June 5, 2020, Ms. Williams’ new counsel met and conferred with the other parties to confirm that she would be filing a motion “seeking to realign Mrs. Wright as a defendant in that case with funding obligations to the Trust and to restate the case as a putative class action.”

On the very same day, Ms. Wright sued Ms. Williams and her prior attorneys in state court, alleging six counts under Maryland law. Among other things, Ms. Wright contended in this new action that “Ms. Williams, as her personal accountant, caused Mrs. Wright . . . to spend more than $800,000 in legal fees to fund the joint representation of the four plaintiffs in the ERISA lawsuit without Mrs. Wright’s knowledge or consent[.]”

Ms. Williams responded with this third action on August 16, 2021, contending that Ms. Wright filed her state court lawsuit in retaliation for Ms. Williams’ participation in the first lawsuit, in violation of Section 510 of ERISA. Ms. Williams sought declaratory, injunctive, and other equitable relief.

Ms. Wright moved to dismiss for failure to state a claim under ERISA. At the outset, she contended that Section 510 did not apply because her payment of legal fees was a “gratuitous employee benefit.” The court quickly swatted this argument away, however. The court stated that it was “inherently inconsistent” for Ms. Wright to argue on one hand that she “unwittingly” paid all legal fees in the ERISA lawsuit yet on the other hand argue that the fees were a “gratuitous employee benefit.”

Furthermore, the district court found that Ms. Williams had adequately pled a Section 510 violation. The court noted that her complaint was “expressly premised” on her participation in the underlying ERISA case, and that Ms. Wright’s state court action specifically complained about Ms. Williams being added as a plaintiff in that litigation. Indeed, the state court complaint argued that Ms. Williams sought a ruling in the initial lawsuit that the trust was governed by ERISA because she “knew she would benefit from such a result by obtaining pension benefits.” Thus, it was fair to conclude that the state law action was filed because of Ms. Williams’ attempt to vindicate her ERISA rights.

Moreover, the timing of Ms. Wright’s state law action was highly suspicious. She filed that action on the same day as the parties met and conferred about realigning the parties, thus leading to the plausible inference that Ms. Wright sought “to retaliate against plaintiff for her participation in the ERISA lawsuit, specifically because of plaintiff’s stated intention to file motions adverse to Mrs. Wright in the ERISA lawsuit.”

Ms. Wright had also threatened earlier in the initial litigation to file the state law complaint, but ostensibly had delayed it to see if the case would settle. This threat created the inference that the state law action was being used as leverage in order to convince Ms. Williams to compromise her ERISA rights on terms favorable to Ms. Wright.

As a result, the court denied Ms. Wright’s motion to dismiss in its entirety. While the facts of this case are somewhat idiosyncratic, the result is sensible. If it’s not retaliation under Section 510 of ERISA to sue your employee for seeking plan benefits, it’s not clear what is.

Note: Ms. Williams is represented by your editor, Elizabeth Hopkins, among other counsel. The first case was recently tried in a bench trial in Delaware, and the parties are awaiting a decision.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Arbitration

Ninth Circuit

Bd. of Trs. of the IBEW Local No. 640 v. Cigna Health & Life Ins. Co., No. 21-16424, __ F. App’x __, 2022 WL 2805111 (9th Cir. Jul. 18, 2022) (Before Circuit Judges Wardlaw, Nguyen, and Owens). The Board of Trustees of the IBEW Local No. 640 and Arizona Chapter NECA Health and Welfare Trust Fund appealed the district court’s order dismissing its lawsuit against Cigna Health & Life Insurance Company and compelling arbitration between the parties. On appeal, the Ninth Circuit concluded that under the Federal Arbitration Act, “the district court’s role is limited to ‘determining whether a valid arbitration agreement exists, and if so, whether the agreement encompasses the dispute at issue.’” Concluding that the district court was correct that The Board would need to rely on the Administrative Services Only Agreement in its case, and that the arbitration provision within that agreement encompasses the parties’ dispute, the Ninth Circuit affirmed the decision of the lower court to compel arbitration.

Attorneys’ Fees

Fifth Circuit

Cloud v. The Bert Bell/Pete Rozelle NFL Player Ret. Plan, No. 3:20-CV-1277-S, 2022 WL 2805527 (N.D. Tex. Jul. 18, 2022) (Judge Karen Gren Scholer). On June 29, 2022, Your ERISA Watch summarized plaintiff Michael Cloud’s victory against The Bert Bell/Pete Rozelle NFL Player Retirement Plan and highlighted Cloud’s win and the revelations of the inner workings of the plan’s administration gleaned during discovery in that week’s notable decision. Our summary of the decision ended with instructions to our readers to “stay tuned” for more. Here, as promised, is more: this time the court’s award of attorneys’ fees and costs, as well as a highly unusual award of conditional appellate fees. “David took on Goliath and prevailed,” and for his successes David was compensated handsomely. To begin, the court stressed that Mr. Cloud “unquestionably succeeded on the merits on all counts,” and was “therefore entitled to an award of attorney’s fees.” First, the court used the lodestar method to calculate the fee award. Mr. Cloud requested a lodestar amount of $1,004,501.25. “based on 2,211 hours worked at hourly rates ranging between $300 and $520 for attorneys, and $125 for law clerks and paralegals.” Defendant argued in favor of a reduction of $104,242.50 for the time spent by plaintiff’s counsel on: (1) claims that were dismissed, (2) researching claims never asserted, (3) unsuccessful motions, (4) expert reports that it charactered as excluded by the court, (4) travel, and (5) discussion between Mr. Cloud and his counsel on an unspecified unrelated matter. The court rejected the first four of the five contested billing matters. The court stated that a plaintiff may recover fees for work on dismissed claims and unsuccessful motions when he or she ultimately succeeds “in the overall litigation.” The court also clarified that it had not “exclude” the expert reports. Additionally, the court did not agree to eliminating or reducing counsel’s travel time during which “counsel was conducting substantive legal work.” However, the court did reduce the requested lodestar amount by a meager $742.50 “for the 1.5-hour discussion between Plaintiff and his counsel,” on an unrelated matter. Thus, the court was left with a $1,013,658.75 lodestar. The court though, was not satisfied that this award properly compensated plaintiff’s counsel. Highlighting Mr. Cloud’s lead counsel’s exceptional performance at trial, the complexity of ERISA, the undesirability of bringing a case against defendant, the awards of fees in similar cases, and counsel’s success in obtaining vital discovery in this case, the court concluded that an upward enhancement of $200 per hour was warranted. The final lodestar awarded after this enhancement totaled $1,232,058.75. The court then went on to award the aforementioned conditional appellate attorneys’ fees. The court concluded that Mr. Cloud’s ultimate result in the case warranted awarding the total requested $250,000 in appellate fees for an appeal in the Fifth Circuit and $350,000 for an appeal in the Supreme Court. Accordingly, counsel was awarded a grand total of $1,832,058.75 in attorneys’ fees. The decision concluded with an award of costs. Mr. Cloud sought to recover $50,665.72 in costs. The court reduced this amount by $20,591, agreeing with defendant that costs of mediation, travel, postage and document delivery, video depositions, computerized legal research, and private process servers were not recoverable under 28 U.S.C. § 1920. Thus, the court awarded $30,074.72 in costs.

Class Actions

Fifth Circuit

Blackmon v. Zachary Holdings, Inc., No. SA-20-CV-00988-JKP, 2022 WL 2866411 (W.D. Tex. Jul. 21, 2022) (Magistrate Judge Elizabeth S. Chestney). In this Report and Recommendation, Magistrate Judge Chestney recommended that plaintiffs’ unopposed motion for final approval of class action settlement and award of attorneys’ fees, costs, and class representative incentive awards be granted, and judgment be entered by the District Court. Plaintiffs commenced this breach of fiduciary duty class action on behalf of themselves, the ZHI 401(k) Retirement Savings Plan, and all former and present plan participants. Following discovery in the case, and before filing the motion to certify the class action, the parties reached a settlement totaling $1,875,000.00. This amount was preliminarily approved as fair, reasonable, and adequate, and a fairness hearing was held. To help establish that the settlement agreement was appropriate and fair to the plan and class members, parties retained an independent fiduciary, Fiduciary Counselors, to review the proposed agreement. Fiduciary Counselors filed a report without objections supporting the court authorize the settlement. The Report began its analysis by reiterating that circumstances warranting certification in its previous preliminary approval of the settlement class and of Class Counsel, Miller Shah LLP and Capozzi Adler, P.C., have not changed. The Magistrate therefore stated that it once again finds the settlement class satisfies the requirements of Rule 23(a) and (b). With regard to the final approval of the settlement amount itself, the Report held that in its view the settlement was the product of an informed good-faith arm’s-length negotiation without fraud or collusion. The Report was also satisfied that the total amount of $1,875,000.00 recovered through settlement, which represented between approximately 14% and 23% of the estimated plan losses “exceeds many recoveries received in other class action cases.” Finally, the lack of any objections from settlement class members further strengthened the justification for final approval of the settlement amount. As for attorneys’ fees, costs, and incentive awards, plaintiffs requested Class Counsel be awarded $625,000 in fees (33.33% of the total settlement fund), costs of $43,372.06 be reimbursed, and each of the four class representatives be awarded $12,500. The Magistrate concluded all of these awards were acceptable and within the range of awards made by other district courts in the Fifth Circuit. Cross-checking the attorneys’ fees requested as a percentage of the recovery with Counsel’s lodestar which totaled $588,002.50, the Report held that the 33-1/3% award being just 1.06 times the lodestar further establishes the reasonableness of the requested attorneys’ fees. The expenses, which were made up of filing fees, mediation expenses, expert fees, copying, delivery, telecommunications charges, and computer-based research and database charges, all costs “associated with Class Counsel’s investigation, discovery, and mediation,” were also found to be reasonable and recoverable. Finally, the Report took no issue with the award of $12,500 to each of the named plaintiffs, wishing to compensate the representatives for their work done on behalf of the class.

Disability Benefit Claims

Second Circuit

Khesin v. Aetna Life Ins. Co., No. Civ. 3:20-CV-01361 (SALM), 2022 WL 2834631 (D. Conn. Jul. 20, 2022) (Judge Sarah A. L. Merriam). Plaintiff Daniel Khesin sued Aetna Life Insurance Company and Hartford Life and Accident Insurance Company after his claim for a waiver of the premium for life insurance benefits was denied. Following a bench trial in April 2022, the court in this order affirmed the denial of benefits and entered judgment in favor of defendants. The court reviewed the administrative record containing Mr. Khesin’s medical history and treatment of his disabling condition, Devic’s Disease (“a central nervous system disorder that primarily affects the eye nerves and the spinal cord,” resulting from “the body’s immune system reacting against its own cells in the central nervous system”). Defendants had denied the waiver of the premium for life insurance benefits on the grounds that its 5 reviewing physicians had determined that. because Mr. Khesin’s symptoms had been static rather than progressive, he could perform full-time sedentary work with restrictions. Given the plan’s discretionary clause, the court reviewed the denial of benefits under the arbitrary and capricious standard. The court agreed with defendants that substantial evidence supported the denial. The insurers were not, as Mr. Khesin argued, in the wrong for relying on the opinions of the hired reviewing physicians over the treating physicians, or for failing to order an independent medical examination or a vocational assessment. The court held that Mr. Khesin did not meet his burden of proofing that he was disabled under the terms of the life policy because “each of the five peer review physicians opined that plaintiff was capable of some work.” Accordingly, the court found that the denial of benefits was not arbitrary or capricious.

In a second decision issued this week in the same case, Khesin v. Aetna Life Ins. Co., No. 3:20CV01580(SALM), 2022 WL 2834681 (D. Conn. Jul. 20, 2022) (Judge Sarah A. L. Merriam), the court once again granted judgment in favor of Hartford Life and Accident Insurance Company, this time with regard to its denial of Mr. Khesin’s claim for long-term disability benefits. These benefits too were denied by the insurer for substantially the same reason: that “clinical evidence fails to support impairment that would preclude (Mr. Khesin) from performing any occupation.” Mr. Khesin argued that he was disabled under the terms of the plan, which was supported by the opinions of his treating physicians and his award of Social Security disability benefits. Hartford for its part argued that the denial was appropriate, supported by evidence within the medical records, and that it is not bound by the determination of the Social Security Administration or by the opinions of Mr. Khesin’s doctors when they conflicted with the opinions of its own medical reviewers. The court once again agreed with Hartford, and held that the denial of long-term disability benefits was not an abuse of discretion.

Fourth Circuit

Brooks v. Hartford Life & Accident Ins. Co., No. 21-1401, __ F. App’x __, 2022 WL 2800813 (4th Cir. Jul. 18, 2022) (Before Circuit Judges Gregory, Harris, and Floyd). Plaintiff/appellant Andrew Brooks sued Hartford Life and Accident Insurance Company pursuant to Section 502(a)(1)(B) after the insurer denied his claim for continued long-term disability benefits. The district court awarded summary judgment to Hartford, determining that Hartford’s decision was not an abuse of discretion. Mr. Brooks appealed to the Fourth Circuit. The court of appeals agreed with the district court that Hartford’s decision was reasonable and supported by substantial evidence. Accordingly, the Fourth Circuit affirmed the lower court’s grant of summary judgment to Hartford.

Schkloven v. Hartford Life & Accident Ins. Co., No. ELH-21-0600, 2022 WL 2869266 (D. Md. Jul. 21, 2022) (Judge Ellen L. Hollander). Plaintiff David Schkloven brought this ERISA Section 502(a)(1)(B) suit against Hartford Life & Accident Insurance Company after his long-term disability benefits were terminated four months after he had undergone major back surgery. In response to Mr. Schkloven’s suit Hartford brought a breach of contract counterclaim against Mr. Schkloven for overpayment of benefits. Mr. Schkloven moved for summary judgment on his ERISA claim. Hartford cross-moved for judgment on the ERISA claim as well as for summary judgment on its counterclaim. Given that the plan grants Hartford with discretionary authority, the court applied abuse of discretion review to the benefit denial. To begin, the court held that there was “no basis to conclude that any conflict of interest played a role in Hartford’s decisionmaking process.” The court reached this conclusion because Hartford had reversed two previous decisions to cut-off Mr. Schkloven’s benefits, the first two-months after the surgery and the second three-months after the surgery, relying on the recommendations of two of its hired physicians. To the court, this was evidence that Hartford was actively reviewing Mr. Schkloven’s medical records and was engaging in a “fair and searching process.” Thus, the court went on to determining whether substantial evidence supported Hartford’s decision. Examining the administrative record, the court found that it supported Hartford’s finding that Mr. Schkloven’s condition had steadily improved by the date of the ultimate termination. For this reason, the court was persuaded that Hartford’s decision was supported by substantial evidence that Mr. Schkloven could perform the essential duties of his sedentary work. Summary judgment was therefore granted in favor of Hartford. Finally, the court addressed Hartford’s motion for judgment on its counterclaim. The court held that the breach of contract claim is preempted by ERISA Section 502(a)(3), but “even assuming that the relief sought is authorized by ERISA §502(a)(3), Hartford would not be entitled to summary judgment as to the Counterclaim. This is because Hartford has not presented evidence to demonstrate that it is entitled to recover overpayments from plaintiff.” In fact, the court held that Mr. Schkloven was not awarded Social Security disability benefits until months after Hartford had terminated his long-term disability benefits, meaning under the terms of the plan Hartford was not entitled to reimbursement of overpayments. In light of that, the court denied Hartford’s summary judgment motion on its counterclaim.

Fifth Circuit

Webber v. United of Omaha Life Ins. Co., No. H-21-2337, 2022 WL 2806455 (S.D. Tex. Jul. 18, 2022) (Judge Lynn N. Hughes). Plaintiff Lisa Webber commenced her suit against United of Omaha Life Insurance Company after her long-term disability benefits were terminated. The parties filed cross-motions for summary judgment. Applying abuse of discretion review, Omaha Life’s summary judgment motion prevailed. The court agreed with the insurer that Ms. Webber’s subjective complaints of pain and assertions of her work limitations were not reflected within the medical records nor were they consistent with the opinions given by five medicals experts on the record. The fact that Ms. Webber is receiving benefits through the Social Security disability program did not, in the end, serve to bolster her claim, as the court concluded that the ERISA plan has a different standard for qualifying for benefits than the Social Security Administration. Thus, the court agreed with Omaha Life that its decision to terminate benefits was supported by substantial evidence, and granted summary judgment in its favor.

Sixth Circuit

Marselle v. Unum Ins. Co. of Am., No. 3:19-cv-464-BJB, 2022 WL 2806726 (W.D. Ky. Jul. 17, 2022) (Judge Benjamin Beaton). Immunocompromised plaintiff Jonni Marselle moved for an award of summary judgment in this Section 502(a)(1)(B) suit challenging defendant Unum Insurance Company of America’s decision to deny her long-term disability benefits. The court reviewed Unum’s decision under arbitrary and capricious review as the plan grants Unum with discretionary authority. Though the court was “sympathetic to Marselle’s apparently serious symptoms and conditions,” it ultimately decided that Unum had “made a reasoned determination,” and denied Ms. Marselle’s summary judgment motion. According to the court, Unum’s medical reviewers did not ignore the medical opinions of Ms. Marselle’s treating doctors, rather they came to contrary and equally acceptable conclusions based on evidence within the medical record. The court also stated that Unum was within its rights to come to a decision denying benefits even without ordering a physical exam. Even Unum’s reliance on non-medical evidence in its decision making process, in this instance Ms. Marselle’s statements to her therapist that she was planning to use her disability benefits to move and to purchase a small house, was not concerning to the court, which concluded that Ms. Marselle’s “relocation plans didn’t play a major role in Unum’s final decision.” Finally, the court stated that it was “simply not true that reviewers ignored the infection risks posed by an office setting.” Indeed, the medical reviewer had noted that working in an office setting would pose a risk to Ms. Marselle, but not an “excessive” one, so long as Ms. Marselle could be given “recovery time” from any acute illnesses. For these reasons, Unum’s denial was upheld by the court.

Ninth Circuit

Atanuspour v. Reliance Standard Life Ins. Co., No. CV 21-6644 PA (AFMx), 2022 WL 2802323 (C.D. Cal. Jul. 15, 2022) (Judge Percy Anderson). Plaintiff Theodor Atanuspour sought to recover long-term disability benefits which were denied by defendant Reliance Standard Life Insurance Company. In its denial, Reliance determined that Mr. Atanuspour did not meet the plan’s definition of disability beyond the 90-day elimination period for either his mental or physical disorders. In this decision, the court reviewed de novo the parties’ cross-motions for summary judgment. After considering the parties’ briefing, arguments at trial, and its review of the administrative record, the court ultimately concluded that Mr. Atanuspour “failed to satisfy his burden to establish entitlement to LTD benefits.” The court agreed with Reliance that Mr. Atanuspour’s mental disorder did not render him unable to perform the duties of his job. The court went on to conclude that the medical records failed to reflect that Mr. Atanuspour’s lumbar condition rendered him disabled until towards the end of the elimination period and not, as the plan required, for the entire consecutive 90 days. Mr. Atanuspour’s self-reported pain on its own was insufficient for the court to find in his favor. Because the majority of the medical documentation “postdate the elimination period and are generally not retrospective,” the court found Mr. Atanuspour was not continuously disabled throughout the elimination period, and was therefore not entitled to benefits under the plan. Accordingly, summary judgment was granted in favor of Reliance Standard.

Discovery

Seventh Circuit

Ilelaboye v. Humana Wis. Health Org. Ins. Corp., No. 22-cv-108-jdp, 2022 WL 2901064 (W.D. Wis. Jul. 22, 2022) (Judge James D. Peterson). Plaintiff Olaoluwa O. Ilelaboye sued Humana Wisconsin Health Organization Corporation after the insurer denied coverage for emergency services claiming the costs exceeded Mr. Ilelaboye’s “maximum allowable fee” under the plan. In his complaint, Mr. Ilelaboye asserts that the plan’s maximum allowable fee limitation does not apply to emergency services. Before the court was Mr. Ilelaboye’s motion to conduct discovery pertaining to whether “Humana has policies and procedures to safeguard from biased coverage decisions that benefit Humana at Plan Participants’ expense’ and whether ‘Humana violated these procedures with respect to Mr. Ilelaboye’s claim.” As avid readers of Your ERISA Watch are aware though, discovery in ERISA cases is “rarely allowed,” and Mr. Ilelaboye’s discovery request was not one of those rare exceptions. As the court put it, the type of conflict of interest where an insurer both decides claims and pays benefits presents in almost all ERISA cases, and it therefore alone “isn’t enough to require discovery.” Because the court was unconvinced that Humana’s bias influenced its decision making, the court declined to allow Mr. Ilelaboye the opportunity to “go on a fishing expedition.” Nor was the court persuaded that Humana had relied on staff instead of physicians to decide whether Mr. Ilelaboye had received emergency medical services. Instead, the court believed Humana’s assertion that the services “weren’t billed to Humana as emergency services.” The court also stated that even accepting Mr. Ilelaboye’s allegation that Humana didn’t provide him with the documentation it relied on when deciding his claim, such an action is a basis for arguing that the decision was an abuse of discretion, not grounds for opening up discovery. For these reasons, the discovery request was denied.

ERISA Preemption

Second Circuit

Nems, PLLC v. Harvard Pilgrim Health Care of Conn., Inc., No. 3:21-CV-01169 (SVN), 2022 WL 2834608 (D. Conn. Jul. 20, 2022) (Judge Sarala V. Nagala). Plaintiff NEMS PLLC is an out-of-network emergency medical provider that has commenced this suit against Harvard Pilgrim Health Care of Connecticut Inc. alleging violations of the Connecticut Unfair Insurance Practices Act, the Connecticut Unfair Trade Practices Act, and the Connecticut Surprise Billing Law. NEMS alleged that Harvard Pilgrim has in bad faith refused to pay for emergency medical services “without conducting a reasonable investigation based upon all available information,” and failed to pay even “claims in which liability has become reasonably clear.” Harvard Pilgrim moved to dismiss the complaint. In support of dismissal, Harvard Pilgrim raised four arguments: (1) ERISA preempts the claims; (2) the Surprise Billing Law doesn’t provide a private right of action to medical providers; (3) NEMS lacks standing to raise its claims; and (4) without any remaining substantive claims, the court must dismiss NEMS’s claim for declaratory judgment. Of all of these arguments, the court agreed only that the Connecticut Surprise Billing Law does not contain either an express or an implied private right of action to plaintiff. According to the court, the state legislature could have added language to the Surprise Billing Law authorizing a private right of action to providers especially given the fact that it chose to include this type of language in other insurance statutes. In the court’s view, this was strong evidence that the legislature didn’t intent to create a private right of action within the law, and that the lack of any express language was intentional. However, the court concluded that plaintiff’s claims under the Unfair Insurance Practices Act and the Unfair Trade Practices Act may proceed, as NEMS has suffered injuries from Harvard Pilgrim’s actions, conferring it with standing. To resolve whether the claims were preempted by ERISA, the court looked to its sister courts for guidance. Because other states have passed similar statutes to Connecticut’s Surprise Billing Law, the issue of whether these insurance-related statutes are preempted by ERISA has already come up elsewhere in the country. “Every court confronted with this question has determined that ERISA does not preempt a law requiring insurers to reimburse emergency room physicians at a specific, possibly greater rate.” Important to those courts and this one was the fact that the law applies equally to all insurance plans, those governed by ERISA and non-ERISA plans alike. Because the greatest impact the law may have on an ERISA plan is to slightly increase the costs, the court concluded that the law does not affect ERISA’s goal of uniformity or require interpretation of any plan language. Thus, ERISA the court held does not preempt the state laws at issue here. Finally, because plaintiff is left with remaining substantive claims, the court declined to dismiss the declaratory judgment cause of action. Therefore, as explained above, the motion to dismiss was granted in part and denied in part.

Ninth Circuit

Taber v. Cascade Designs Inc., No. 2:20-cv-01633-TL, 2022 WL 2872521 (W.D. Wash. Jul. 21, 2022) (Judge Tana Lin). Following her termination in 2019, plaintiff Alexandra Taber brought a state-law suit against her former employer Cascade Designs Inc (“CDI”), and members of its board. Ms. Taber alleged that while employed with CDI, the company failed to make a series of contributions to her Health Savings Account until after the contribution deadline had passed. In addition, Ms. Taber also asserted that when CDI fired her, she did not receive severance because she refused to sign CDI’s separation agreement. On top of that, Ms. Taber claimed CDI owed her unused days of paid time off, and that her employer never mailed her a COBRA election notice. Among other things, defendants moved for summary judgment on Ms. Taber’s health savings account, severance, COBRA claims. Defendants first argued that contributions to the health savings account are plan assets not wages, and that Ms. Taber’s state law claim is therefore preempted by ERISA. The court held that there was a genuine issue of material fact as to whether employer contributions to a voluntary health savings account falls within ERISA’s safe harbor provision or is covered under ERISA. The court also found a genuine dispute as to whether the employer contributions were vested benefits that Ms. Taber is guaranteed to receive, or whether they were contingent benefits. Accordingly, the court declined to grant defendants summary judgment on the health savings account claims, and these will proceed to trail. However, the court granted summary judgment in favor of defendants on the state law severance claims, concluding that the severance plan is governed by ERISA and that ERISA therefore preempts the state law claims with regard to severance benefits. The court also concluded that defendants fulfilled their COBRA notice requirements by mailing a COBRA election notice to Ms. Taber two days after she was fired. In addition to granting in part and denying in part defendants’ partial motion for summary judgment, the court also denied Ms. Taber’s procedural motions and motions for sanctions.

Plan Status

Sixth Circuit

Duncan v. Unum Life Ins. Co. of Am., No. 3:20-0600, 2022 WL 2812659 (M.D. Tenn. Jul. 18, 2022) (Magistrate Judge Barbara D. Holmes). Plaintiff Mitchell Duncan, an employee of Cellular Sales of Knoxville, Inc., enrolled in voluntary group short-term and long-term disability policies in 2014. The following year, Mr. Duncan applied to increase his long-term disability coverage. To do so, he needed to fill out an evidence of insurability form. Within that form Mr. Duncan attested that he had not “received medical advice or sought treatment for epilepsy, nervous, emotional or mental disorder.” Three years later, Mr. Duncan stopped working for Cellular Sales and filed a claim for long-term disability benefits because of seizures he began experiencing. Defendant Unum Life Insurance Company approved Mr. Duncan’s application, but paid the long-term disability benefits at the lower amount, and would not honor the increased coverage, because it had discovered that Mr. Duncan had been diagnosed with a seizure disorder and bipolar disorder prior to his application. Therefore, Unum determined that Mr. Duncan had made material misrepresentations which precluded him from receiving the increased monthly payments. Unum then discontinued payments altogether in 2020 based on the policies 24-month limitation for disabilities due to mental illness. After an unsuccessful administrative appeal, Mr. Duncan sued Unum in state court. Unum removed the case to the Middle District of Tennessee, arguing that the policy is an ERISA-governed plan and Mr. Duncan’s state law claims were preempted by ERISA. Before the court was Unum’s motion to strike Mr. Duncan’s jury demand. In order to decide whether to strike the jury demand, the court addressed the issue of whether the policy is indeed governed by ERISA, as Unum argued, or whether it falls within ERISA’s safe harbor provision, as Mr. Duncan argued. Unum stressed that the long-term disability policy is not severable from the other policies which were included in the group benefits plan, making the entire plan, including the voluntary policies, subject to ERISA preemption. Mr. Duncan countered that the group plan consisted of four distinct insurance policies, and treating the long-term disability policy as a single plan to which his employer did not contribute would not create any conflict if the policy were governed under state law. Ultimately, the court concluded that Unum had stronger arguments. The court was convinced that Cellular Sales had endorsed and contributed to the plan, and that the four policies comprise of a single group benefits plan that should be subject to ERISA in order to ensure uniformity. Having concluded that the long-term disability policy is governed by ERISA, the court granted Unum’s motion to strike Mr. Duncan’s jury demand.

Pleading Issues & Procedure

Sixth Circuit

Aaron v. Aetna, No. 1:18-cv-631, 2022 WL 2834767 (S.D. Ohio Jul. 19, 2022) (Judge Douglas R. Cole). Plaintiffs are over 400 individuals who allege that they received “medically unnecessary spinal surgeries” performed by a Dr. Abubakar Atiq Durrani. There are not only 400 plaintiffs in this case, but also over 60 defendants including dozens of insurance companies and benefits plan administrators who “played some role in approving one or more of the spinal surgeries at issue.” In essence, plaintiffs’ complaint alleges that defendants committed torts and violated ERISA, and asks the court to issue judgment saying defendants cannot enforce medical liens against their assets for the medically unnecessary surgeries. The court, however, found that this case “really consists of over 400 separate lawsuits crammed together into one.” Plaintiffs therefore failed to satisfy the requirements for permissive joinder. The solution, the court held, was to sever all claims other than those of one plaintiff, Frieda Aaron. The court dismissed the severed claims without prejudice so that the plaintiff may re-file separate cases.

Sigetich v. The Kroger Co., No. 1:21-cv-697, 2022 WL 2900766 (S.D. Ohio Jul. 22, 2022) (Magistrate Judge Stephanie K. Bowman). Plaintiff Lisa Sigetich brings this putative class action and behalf of more than 90,000 plan participants, asserting that The Kroger Company breached its fiduciary duties of loyalty and prudence with regards to its process for administering its retirement plan. Defendants moved to dismiss the complaint for lack of jurisdiction and for failure to state a claim. In addition, The Chamber of Commerce of the United States of America moved for leave to file a brief as amicus curiae in support of defendants’ motion to dismiss. After defendants had filed their motion to dismiss, Ms. Sigetich filed an amended complaint. In light of the filing of the amended complaint, which the court characterized as “not substantially identical” to the original complaint, defendants’ motion to dismiss was denied as moot. The court also dismissed as moot the Chamber of Commerce’s first motion for leave to file its amicus brief. However, the Chamber of Commerce’s second motion for leave to file an amicus brief, filed after MS. Sigetich had filed her amended complaint, was granted by the court. The court was persuaded that the Chamber of Commerce’s “experience with both retirement plan management and ERISA litigation,” means that “the Chamber can offer a valuable perspective on the issues presented in this matter. . . and provide context for how to evaluate these types of allegations in light of the pleading standard set forth by the Supreme Court in Twombly and Iqbal.”

Seventh Circuit

Hensiek v. Bd. of Directors of Casino Queen Holding Co., No. 20-cv-377-DWD, 2022 WL 2791174 (S.D. Ill. Jul. 15, 2022) (Judge David W. Dugan). In this putative class action pertaining to alleged fiduciary breaches and ERISA violations related to the Casino Queen Employee Stock Ownership Plan, the court adjudicated several procedural motions. First, the court examined Defendants’ request that the court split the case into Phase I, in which the parties would try all aspects of all claims “except the narrow issue of whether equitable relief is available against nonfiduciary defendants alleged to have knowingly participated in a nonexempt transaction," and Phase II, which would focus on “whether and to what extent any equitable remedies are available against them” assuming knowing participant was established. The court stated that it was open to bifurcating the case as proposed, but was reluctant to bifurcate discovery because the potential harms of doing so likely outweigh any potential prejudice to defendants. However, the court determined that for now resolution of the issue of bifurcation and the motion to amend the scheduling order are both premature. Thus, the court denied defendants’ motions without prejudice, and granted parties leave to seek bifurcation of the issue of equitable relief after the pleading stage motions of the new defendants have been ruled on. Plaintiffs’ motion to compel was also denied without prejudice, with the court directing the parties to meet and confer to discuss their discovery disputes in the hopes of resolving them without the need for court orders. Finally, plaintiffs’ extension motion to serve the new defendants was granted.

Ninth Circuit

Ryan S. v. UnitedHealth Grp., No. SACV 19-1363 (KESx), 2022 WL 2813110 (C.D. Cal. Jul. 14, 2022) (Judge James V. Selna). Plaintiff Ryan S. sued UnitedHealth Group, Inc. and related entities on behalf of himself and a proposed class of similarly situated insureds challenging United’s systematic practice of denying coverage for mental health and substance use disorder treatments pursuant to ERISA Section 502(a)(3). Plaintiff alleged that United breached its fiduciary duties, violated plan terms, and violated the Mental Health Parity and Addiction Equity Act. On December 3, 2020, the court dismissed plaintiff’s third amended complaint for lack of Article III standing with prejudice. Plaintiff appealed the dismissal to the Ninth Circuit. On appeal, the Ninth Circuit reversed in part and affirmed in part the district court’s decision. The Ninth Circuit concluded that plaintiff had Article III standing to challenge United’s practices related to auxiliary treatments, outpatient treatment coverage, and clinical laboratory services, and that the claims related to these practices may therefore proceed. Following remand, United again moved to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that plaintiff failed to state claims. In this order, the court granted United’s renewed motion to dismiss with prejudice. First, the court was unwilling to dismiss the complaint for failure to allege proximate causation. The court rejected United’s argument that plaintiff’s injuries were not caused by the challenged practices. Moving on, the court addressed whether plaintiff stated a claim for a violation of the Parity Act. The court concluded that the claim for a violation of the Parity Act was overly broad and conclusory writing: “other than the fact that some of his claims were denied, there are no factual allegations to support the allegation that this was part of a larger practice on the part of the Defendants.” Important to the court was the fact that some of plaintiff’s claims were paid by United. The court was also unconvinced that there were sufficient analogous medical treatments that were categorically treated differently than the challenged mental health claims. Thus, the court dismissed the Parity Act claim. Next, the court agreed with United that plaintiff failed to state a claim for breach of fiduciary duty, because, according to the court, the complaint was overly conclusory with regard to the allegations that United engaged in discretionary conduct when denying the claims. Therefore, the court found that plaintiff failed to allege his injuries resulted from a breach of any fiduciary duty. The decision ended with the court holding plaintiff failed to state a claim for violation of any plan term. Plaintiff, the court stated failed to “cite any Plan language to support his contention that he is eligible for these benefits or that they were wrongfully denied.” In addition to dismissing the complaint for failure to state a claim under Section 502(a)(3), the court also decided the complaint should be dismissed without leave to amend. Further amendment, the court found, would be futile.

Retaliation Claims

Fourth Circuit

Minton v. Little River Elec. Coop., No. 8:22-cv-00161-DCC, 2022 WL 2819627 (D.S.C. Jul. 19, 2022) (Judge Donald C. Coggins, Jr.). 61-year-old plaintiff Jill Minton sued her former employer, Little River Electric Cooperative, Inc., under ERISA Section 510 and for a violation of the South Carolina Payment of Wages Act. She alleged that Little River terminated her employment only 15 months before she was eligible for retirement healthcare benefits, and that wages she had earned in for the form of accrued sick leave and vacation were unpaid by defendant. According to Ms. Minton’s complaint, defendant’s reason for firing her was to “prevent her from reaching retirement age and benefitting from continued participation in Defendant’s group health insurance plan during retirement,” therefore skirting its financial obligations to her upon retirement. Defendant countered by attesting that its true reason for firing Ms. Minton was “her conduct in bypassing management and communicating with members of Defendant’s Board of Directors.” Defendant moved to dismiss for failure to state the claim. The court denied the motion, holding Ms. Minton’s complaint, taken as true, plausibly alleges claims for violations of ERISA and the state wage law.

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 Payson. 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.

If you have any colleagues who might want to receive this free newsletter, they can subscribe here.

Categories: 
Related Posts
  • New ERISA Watch Blog Announcement Read More
  • Your ERISA Watch – Eleventh Circuit Holds That De Novo Review Requires Courts to Consider All Relevant Evidence, Regardless of Whether It Was Submitted to a Claim Administrator Read More
  • Your ERISA Watch – Sorry ABBA, No Winner Takes It All In These Two Cases of the Week Read More
/