Your ERISA Watch

Your ERISA Watch

There were many long decisions issued this week and quite a few are only marginally interesting. But, dear ERISA Watchers, we read and summarize them so you don’t have to.

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

Attorneys’ Fees

Eighth Circuit

Yates v. Symetra Life Ins. Co., No. 4:19-CV-154-RLW, 2022 WL 1618787 (E.D. Mo. May 23, 2022) (Judge Ronnie L. White). On January 3rd of this year, the court granted plaintiff Terri Yates’s motion to alter judgment, reversed its earlier opinion that she had failed to exhaust administrative remedies, and awarded her accidental death benefits concluding that her husband’s death from a heroin overdose was an unforeseen outcome his heroin use and not an intentional self-inflicted injury. Now Ms. Yates moves for attorneys’ fees and costs. The court concluded that Ms. Yates’s success on both the issue of exhaustion and the merits of her claim for benefits, as well as defendant Symetra’s ability to satisfy a fee award, the potential deterrent factor the award may serve, and the fact that the decision clarified a significant legal question – whether plan administrators can require beneficiaries from administratively appealing when the plan language doesn’t contain a provision requiring administrative appeal – weighed together to justify awarding attorneys’ fees. Plaintiff’s counsel requested the following hourly rates – David A. Osborne $325, Glenn R. Kantor $800, and Sally Mermelstein $700. Symetra argued that all three attorneys should be awarded $325 per hour. The court did not agree. First, the court addressed Mr. Kantor’s hourly rate. The court held that Mr. Kantor is a highly qualified ERISA practitioner with over 35 years’ experience. Your ERISA Watch even got a brief shout out in the decision, with the court describing our publication as “a weekly summary of all ERISA cases disseminated on Westlaw and Lexis” with “nearly 1,000 recipients, including defense lawyers, mediators, some past and present members of the Federal Judiciary, and their law clerks.” Applying the 2021 Real Rate Report as its chosen benchmark, the court awarded Mr. Kantor an hourly rate of $700 per hour. Turning to Ms. Mermelstein’s hourly rate, the court held that her experience and qualifications in the ERISA area warrant awarding her “the ERISA litigation partner rate for St. Louis attorneys shown in the 2021 Real Rate Report.” The court thus awarded Ms. Mermelstein $450 per hour. Mr. Kantor and Ms. Mermelstein were both awarded all of their requested hours – 12.1 hours for Mr. Kantor and 51.7 hours for Ms. Mermelstein. As for Mr. Osborne, the court granted him his hourly rate of $325, which even Symetra did not object to, and did not reduce his requested 78.9 hours. Accordingly, the court awarded a total of $54,058.50 in attorneys’ fees. However, the court denied plaintiff’s motion for $1,198.50 in costs, finding her request “fatally deficient because it is not accompanied by the required verification.”

Breach of Fiduciary Duty

Fifth Circuit

Grp. 1 Auto. Inc. v. Aetna Life Ins. Inc., No. 4:20-CV-01290, 2022 WL 1607841 (S.D. Tex. May 20, 2022) (Judge Charles Eskridge). Plaintiff Group 1 Automotive Inc. brought claims for breach of contract and breach of fiduciary duty against the former claims administrator of its health and welfare benefit plan, Aetna Life Insurance Co., in 2018 during arbitration between the parties. The arbitrator ruled that the breach of contract claim was untimely, and the breach of fiduciary duty claim was not arbitrable. Group 1 then brought this suit alleging Aetna breached its fiduciary duty. Group 1 moved for leave to amend its complaint to clarify its theories pertaining to fiduciary breaches regarding pharmaceutical fraud, waste, and abuse, and cross-plan offsetting practices in which Aetna allegedly used “cross-plan offsetting to recover overpayments it made using its own money for fully-insured plans before fully recovering overpayments it made on behalf of the Group 1 Plan.” Aetna for its part moved to dismiss. In this order, the court granted the motion for leave to amend and denied the motion to dismiss. The court found that there was no undue delay on Group 1’s part when requesting to amend, that it was not the result of bad faith, amendment would not prejudice Aetna, and the facts alleged by Group 1 were sufficient to state a claim that was plausible on its face. The court also expressed that “future amendment won’t likely be granted absented exceptional circumstances” and this too factored in favor of granting this first motion to amend.

Class Actions

Second Circuit

Garthwait v. Eversource Energy Co., No. 3:20-CV-00902(JCH), 2022 WL 1657469 (D. Conn. May 25, 2022) (Judge Janet C. Hall). Plaintiffs are four former participants of the Eversource 401(k) plan, who bring this putative class action against the Eversource Board of Directors, Administrative Committee, Investment Management Committee, and individual named defendants for breaches of fiduciary duties, failure to monitor, and knowing breach of trust pursuant to section 502 of ERISA. They allege that defendants charged excessive administrative and recordkeeping fees and imprudently retained a suite of poorly performing actively managed funds. Plaintiffs challenged 14 of the 19 investment offerings the Plan offered. They moved to certify a class of all participants and beneficiaries of the Plan from June 30, 2014, to the present. As a preliminary matter, the court stated that as former participants of the Plan, plaintiffs do not have Article III standing to seek prospective injunctive relief. Nevertheless, the court recognized that this deficiency may be addressed if plaintiffs amend their complaint to add a named plaintiff who is a current Plan participant. Accordingly, the court granted plaintiffs to leave to move to amend if they wish to do so. The court then turned to certifying the class as to plaintiffs’ claims for retrospective relief. First the court evaluated the requirements for Rule 23(a). The court concluded that the proposed class of more than 11,000 members obviously satisfies the numerosity requirement. Next, the court was convinced that whether defendants breached their fiduciary duties by selecting and retaining underperforming investment options and by charging excessive fees was a question common to all class members. As for typicality, the court followed other courts in the Second Circuit and other Circuits that have found the typicality requirement satisfied in similar ERISA class actions as plaintiffs’ claims “arise from the same course of events and turn on the same legal issues as the claims of class members.” Finally, the court was satisfied the named plaintiffs and their counsel, Miller Shah and Capozzi Adler, were entirely qualified and adequate to represent the class. As all of the requirements of Rule 23(a) were satisfied the court turned to Rule 23(b). Here too plaintiffs encountered no difficulty in convincing the court that certification under Rule 23(b) is appropriate as the class members have a shared interest in the case being resolved in a single unified court decision. As such, the court granted the motion for class certification as to the claims for retrospective relief and granted plaintiffs 30 days to move to amend their complaint if they wish to certify a class that includes claims of prospective injunctive relief.

Third Circuit

Wolff v. Aetna Life Ins. Co., No. 4:19-CV-01596, 2022 WL 1672128 (M.D. Pa. May 25, 2022) (Judge Matthew W. Brann). Plaintiff Joanne Wolff commenced this putative class action against Aetna Life Insurance Company for violations of ERISA after the insurer sought personal injury reimbursement from Ms. Wolff of settlement proceeds she obtained in a successful civil suit against the at-fault party of her disabling car accident. Ms. Wolff’s plan did not contain a subrogation or reimbursement provision, instead Aetna used the plan’s “Other Income Benefits” provision to obtain reimbursement. Ms. Wolff asserts that person injury recoveries are not included in the plan’s definition of “Other Income Benefits.” In this motion, she sought to certify a class of individuals who were injured and received disability benefits from Aetna as a result of “an injury causing event and against whom defendant sought or recovered reimbursement of long-term disability benefits it had paid to” them in a manner similar to Ms. Wolff’s situation. The court evaluated the class in accordance with Federal Rule of Civil Procedure 23. The court stated that the 53 individuals identified by Ms. Wolff as having analogous situations to her own constituted a sufficiently numerous group. Next, the court identified the common question to all class members as being “whether funds paid out under Aetna’s long-term disability plans were properly reimbursable when the plans did not specifically include personal injury recoveries within their definition of ‘Other Income Benefits’ and where reimbursement was obtained for personal injury recoveries.” The answer to this question as well as the common application of ERISA satisfied the commonality and typicality requirements of Rule 23(a). Finally, the court was convinced that Ms. Wolff and her counsel, Charles Kannebecker, of Weinstein Schneider Kannebecker & Lokuta, were both qualified and adequate to represent the class. Examining the potential class under Rule 23(b), the court expressed that the predominant question is “whether Aetna omitted or misrepresented key facts about its ability to seek and obtain reimbursement” and this common issue of a potential concealment is more central to any individual issue of an insured’s reliance. Last, the court held that class certification would be superior to any other method of adjudication. The motion for class certification was thus granted.

Disability Benefit Claims

Eleventh Circuit

Nunnelly v. Life Ins. Co. of N. Am., No. 21-12537, __ F. App’x __, 2022 WL 1640790 (11th Cir. May 24, 2022) (Before Circuit Judges Jordan, Branch, and Brasher). Plaintiff Terry Nunnelly sued Life Insurance Company of North America (“LINA”) seeking long-term disability benefits. The district court granted summary judgment in favor of LINA finding that the nature of Mr. Nunnelly’s disabling migraines and mental health disorders manifested in such a way that he was not continuously disabled throughout a 26-week elimination period, as required by the plan. Mr. Nunnelly appealed the decision to the Eleventh Circuit. The court of appeals agreed with the district court’s decision stating that “the lack of medical evidence of continuous disability lasting from January 18 through July 19, 2017, is fatal to Nunnelly’s claim.” The appeals court also held that the district court did not err by refusing to remand to LINA in light of Mr. Nunnelly’s award of Social Security Disability Insurance benefits because the Social Security Administration reached its decision over one year after LINA had upheld its denial. For these reasons, the Eleventh Circuit affirmed the lower court’s summary judgment decision.

ERISA Preemption

Third Circuit

Advanced Orthopedics & Sports Med. Inst. v. Oxford Health Ins., No. 21-17221 (FLW), 2022 WL 1718052 (D.N.J. May 27, 2022) (Judge Freda L. Wolfson). Plaintiff Advanced Orthopedics and Sports Medicine Institute, P.C. brought suit against Oxford Health Insurance Inc. asserting four state law causes of action: breach of implied contract, breach of warranty of good faith and fair dealing, promissory estoppel, and unjust enrichment, in connection with an alleged underpayment of $265,188.14 for a pre-approved surgery performed in 2016. The pre-authorization letter between the parties included a “Precertification Exception Disclaimer” which stated that “this approval does not guarantee payment” and that payment is based on “member enrollment and eligibility,” and the “terms, conditions, exclusions, and limitations of the member’s health benefit plan.” Oxford Health moved to dismiss the complaint. It argued that ERISA preempts all of Advanced Orthopedics’ claims. The court agreed. Given the terms of the pre-authorization letter, the court concluded that “the determination of Plaintiff’s eligibility for payment… rests not on the terms of an independent agreement, but on a plan-based obligation-i.e., the plan’s terms, conditions, exclusions, and limitations.” Therefore, the claims pleaded are “benefits due under an employee benefit plan” and therefore fall under ERISA’s preemption provisions. Accordingly, the court found the claims preempted and granted the motion to dismiss without prejudice.

Life Insurance & AD&D Benefit Claims

Fourth Circuit

Sun Life Assurance Co. of Can. v. Persinger, No. 2:22-cv-00204, 2022 WL 1696587 (S.D.W.V. May 26, 2022) (Judge Irene C. Berger). Plaintiff Sun Life Assurance Company of Canada moved for interpleader relief relating to life insurance benefits of decedent Billy Joe Persinger. Sun Life requested that the court permit it remit funeral expenses, deposit the remaining balance of the life insurance benefits to the court, and be dismissed from the case. The central issue of the case is the ongoing investigation into the suspected murder of Mr. Persinger. Under West Virginia law no individual involved in the killing of the decedent may receive estate property or insurance benefits. Neither of the named beneficiaries of Mr. Persinger’s plans, the two defendants in this case, are suspected of being involved with or connected to Mr. Persinger’s death. Nevertheless, Sun Life wanted to avoid making a benefit determination that might potentially expose it to liability, and thus asked the court to decide the proper beneficiaries and be excused from further proceedings. Given the circumstances of the case, the court agreed that this course of action would be the simplest path to resolution. The court therefore granted Sun Life’s motion and dismissed Sun Life from the case.

Pension Benefit Claims

Fifth Circuit

Baton Rouge Sheet Metal Workers’ Local Union #21 Pension Fund v. Paul, No. 21-00152-BAJ-EWD, 2022 WL 1658240 (M.D. La. May 25, 2022) (Judge Brian A. Jackson). Plaintiff Baton Rouge Sheet Metal Workers’ Local Union #21 Pension Fund is an ERISA-governed multi-employer pension plan. The Plan sued defendant Ann E. Paul after it discovered that it had sent her 143 monthly payments to a bank account formerly belonging to widow Annabelle Elizabeth Gautreau. Ms. Gautreau, as the surviving spouse of a former union-member, was the proper beneficiary to the pension benefits. Ms. Gautreau, the plan learned, had died in April 2008. The Plan subpoenaed J.P. Morgan Chase and discovered that for nearly 12 years it had been mistakenly sending payments to defendant. On June 21, 2021, the Plan filed an Amended Complaint. Ms. Paul was served with the Amended Complaint, but never responded to it. With its complaint unanswered, the Plan filed a motion for default judgment against Ms. Paul for the $58,577.76 in payments it sent to her, as well as prejudgment interest and attorneys’ fees and costs. The court was satisfied that the procedural requirements for default judgment had been met. In addition, the court stated there were not issues of material fact, the grounds for default have been established, the court did not believe Ms. Paul’s failure to respond to be the result of a good faith mistake. As for the merits of the Plan’s claims, the court stated that because Ms. Paul never informed the Plan of Ms. Gautreau’s death and “obtained money to which she was not entitled under the Plan” the Plan plainly “established a reliable claim for relief.” Having so found, the court awarded the Plan damages of $58,577.76 and prejudgment interest in the amount of $35,509.000 in lost investment income. The court did not award attorneys’ fees and costs in this order, instead directing the Plan to file a separate motion for attorneys’ fees and costs pursuant to Federal Rule of Civil Procedure 54(d).

Tenth Circuit

Stamper v. Boilermaker-Blacksmith Nat’l Pension Tr., No. 19-CV-329-TCK-JFJ, 2022 WL 1691677 (N.D. Okla. May 26, 2022) (Judge Terence C. Kern). Plaintiff Pamela Stamper brought this Section 502(a)(1)(B) claim for pension benefits after the Boilermaker-Blacksmith National Pension Trust determined that following the death of her husband, Charles Brown, Ms. Stamper was not entitled to survivor benefits because she and her husband had converted the pension from a 50% husband-and-wife joint survivor annuity to a disability pension life annuity with 120-month guaranteed payment lifetime annuity and having already paid 123 monthly pension payments – including for two years before the conversion – Ms. Stamper was not entitled to any further payments. In essence, the Trust had applied Mr. Brown’s Annuity Starting Date from when he began receiving pension benefits, October 1, 2007, to the start date of the 120-month guarantee, despite the fact that the Trust had not finalized the conversion and changed the pension until August 2009. Accordingly, the issue before the court was whether under the terms of the plan, as well as under 26 U.S.C. § 417, it was reasonable for the Trust to retroactively apply Mr. Brown’s Annuity Starting Date as the starting date of the disability pension. Ms. Stamper argued that it was not. Under arbitrary and capricious review standard, the court concluded that while the plan language on the retroactive application of annuity starting dates was ambiguous, the Trust’s interpretation of the plan to apply October 1, 2007, as the “effective date” of the converted disability pension was reasonable. Ms. Stamper argued that the Trust’s use of October 1, 2007, was contrary to law as 26 U.S.C. § 417(a)(2) requires a waiver of husband-and-wife survivor annuity in “a manner calculated to be understood by the average participant,” but the way the 120 Payment Option was presented to her and her husband did not meet this standard and explain that “she was actually electing to receive less than 120 Payments from the election date going forward.” In the decision’s most pejorative passage, the court wrote that Ms. Stamper, “has cited no authority defining ‘manner calculated to be understood by the average participant’ – only that she apparently did not understand it.” The court concluded that the waiver was valid, and the Trust’s application of the retroactive effective date was not contrary to law. For these reasons, the court found that Ms. Stamper was not entitled to benefits and denied her claim.

Plan Status

Sixth Circuit

Melvin v. Worthington Indus., No. 2:20-cv-3760, 2022 WL 1719673 (S.D. Ohio May 27, 2022) (Judge James L. Graham). Plaintiff Grover Melvin sued his employer, Worthington Industries, Inc. under Section 502(a)(1)(B) to recover short-term disability benefits under Worthington Industries’ disability benefits plan and to receive penalties for under Section 502(c) for Worthington’s failure to provide copies of the plan. The assigned Magistrate in the case ordered discovery on the issue of whether the plan is governed by ERISA. With that discovery now complete, the parties filed cross-motions for summary judgment. The court in this decision held that the payment of disability benefits was a payroll practice, and it therefore falls within one of ERISA’s safe harbor exceptions. “Defendant’s general assets are used to pay short-term disability benefits originally equal to the employee’s regular pay, then in the amount of 75% of the employee’s regular pay,” therefore, “benefits not in excess of regular pay constitutes normal compensation.” As the plan was found to be a payroll practice not covered by ERISA, the court granted defendant’s motion for summary judgment, denied Mr. Melvin’s summary judgment motion, and denied his request for leave to amend, holding amendment would be futile.

Pleading Issues & Procedure

Third Circuit

Hausknecht v. John Hancock Life Ins. Co. of N.Y., No. 17-3911, 2022 WL 1664362 (E.D. Pa. May 24, 2022) (Judge Wendy Beetlestone). Disbarred attorney John Koresko embezzled $40 million in assets from welfare benefit plans through an illegal scheme of operating an unlawful tax shelter “under the guise of a Section 419A(f)(6) plan.” “This lawsuit is one of many emanating” from Mr. Koresko’s actions. Here, plaintiffs are victims of these schemes who sued defendant John Hancock Life Insurance Company of New York for its part in aiding Mr. Koresko. They allege violations of ERISA and the Racketeer Influence and Corrupt Organizations Act (RICO). According to their complaint, John Hancock’s involvement “included issuing the insurance policies, permitting withdrawals or changes to the beneficiary or owner of the polices, and/or issuing loans against the policies’ cash values.” John Hancock, plaintiffs assert, knew that Mr. Koresko’s multi-employer arrangement was completely illegal. This case alone has gone on for more than five years, and the Department of Labor’s investigations into Mr. Koresko lasted 18. Here, the court weighed in or John Hancock’s Daubert motion to exclude the reports of plaintiffs’ experts. The motion was granted in part and denied in part. Plaintiffs’ first expert was a retired life insurance salesman. The court excluded the portions of his report which had to do with insurance company’s marketing practices, holding that his opinions on this topic amounted to “subjective belief or unsupported speculation.” The court also excluded the section of his report which spoke to Mr. Koresko’s reputation and his drug dependency problems, a subject that court stated was not appropriate for expert opinion testimony. Finally, the court granted the motion to exclude the summary portion of plaintiffs’ forensic account expert, which was a chronology of Mr. Koresko’s schemes, described by John Hancock as “color commentary,” and not admissible expert testimony. In all other respects, defendant’s motion was denied.

Ninth Circuit

K.K. v. Premera Blue Cross, No. C21-1611-JCC, 2022 WL 1719134 (W.D. Wash. May 27, 2022) (Judge John C. Coughenour). Plaintiff I.B, along with her mother, plaintiff K.K., sued their ERISA-governed plan, Columbia Banking System, Inc.’s Benefits Plan, and its administrator, Premera Blue Cross, after they denied over $100,000 in claims for mental health treatment I.B. received at a residential treatment center. Plaintiffs assert claims under the Mental Health Parity and Addiction Equity Act and ERISA Sections 502(a)(1)(B), and 502(a)(3). Defendants moved to dismiss plaintiffs’ Parity Act claims and moved to seal. First, the court denied the partial motion to dismiss. The court stated that plaintiffs adequately plead a Parity Act Violation, given that their complaint pleaded “at least five different specific Parity Act violations” mostly to do with “Premera’s use of the InterQual medical necessity criteria and requirement of acute symptoms for sub-acute mental health residential treatment, which Premera does not require for medical and surgical treatment at analogous facilities.” The decision quoted a 2018 decision from Utah, Melissa P. v. Aetna Life Ins. Co., 2018 WL 6788521, which said that requiring plaintiffs to plead more “would prevent any plaintiff from bringing a mental health parity claim based on disparate operation unless she had suffered the misfortune of having her admission to a skilled nursing facility for medical reasons approved and her admission to a residential treatment facility denied and thus would have had personal experience with both standards.” The court went on to concluded that the Parity Act Claims are not superfluous, and, under Ninth Circuit precedent, plaintiffs may seek relief under both Section 502(a)(1)(B) and (a)(3) as long as the remedy sought, as here, is not duplicative. Turning to the motion to seal, the court agreed that there was a compelling reason to seal the exhibit because it included sensitive and personal medical information protected by HIPPA, and confidentiality interests therefore outweighed any public interest in disclosure. Accordingly, defendants’ motion to seal was granted.

Eleventh Circuit

Allen v. First Unum Life Ins. Co., No. 2:18-cv-00069-JES-MRM, 2022 WL 1642152 (M.D. Fla. May 24, 2022) (Judge John E. Steele). Plaintiff Dr. Marcus Allen sued First Unum Life Insurance Company, Provident Life and Casualty Insurance Company, and the Unum Group for long-term disability benefits in connection with five disability insurance policies – one of which is governed by ERISA. In February of this year, the court issued an order finding that the group policy was governed by ERISA and bifurcating the proceedings in this case. In response to that order Dr. Allen filed a Third Amended Complaint setting for his ERISA claim on March 2, 2022. Defendants filed their response on April 11, 2022 and moved for summary judgment on counts I and II of the Third Amended Complaint. Then on May 2, Dr. Allen filed a Fourth Amended Complaint in which he clarified the defendants’ roles in the administration of his claims “under the Group Policy” and eliminated “allegations not pertinent to ERISA.” Defendants moved to strike the Fourth Amended Complaint. Both parties moved for attorneys’ fees in connection to this motion. Defendants argued that “while the Court authorized the filing of the TAC, it did not contemplate any further amendments.” Dr. Allen countered that he filed the Fourth Amended Complaint within 21 days of service of defendants’ answer and that his filing was therefore timely pursuant to Federal Rule of Civil Procedure 15(a). The court agreed with Dr. Allen and declined to strike the Fourth Amended Complaint, especially given that it does not assert any new cause of action and there is no undue delay or prejudice to defendants. Accordingly, defendants’ motion was denied. The court also declined to award attorneys’ fees to either party at this time.

Provider Claims

Ninth Circuit

Prime Healthcare Servs. – Reno v. Hometown Health Providers Ins. Co., No. 3:21-cv-00226-MMD-CLB, 2022 WL 1692525 (D. Nev. May 26, 2022) (Judge Miranda M. Du). A healthcare provider, plaintiff Prime Healthcare Services – Reno, LLC, sued insurance provider Hometown Health Providers Insurance Company, Inc. for failing to pay and for underpaying claims for medical services that Prime Healthcare provided to insured patients, including for emergency services. Patients’ Hometown Health plans included both ERISA-governed and non ERISA health and welfare plans. Prime Healthcare’s complaint included an ERISA violation, for failure to comply with health benefit plans, as well as several state and common law causes of action including breach of contract, unjust enrichment, quantum meruit, and violations of Nevada emergency care and prompt payment laws. Hometown Health moved to dismiss arguing that (1) Prime Healthcare does not have standing to sue, (2) that it has failed to exhaust administrative remedies before bringing suit, (3) that ERISA preempts the state law claims, (4) and that under Rule 12(b)(6) the provider has failed to plausibly plead its claims. First, the court agreed with Prime Healthcare that the insurance company waived its right to enforce the anti-assignment provisions in its benefit plans, because it has known that Prime Healthcare was the patients’ assignee for many years, over the course of which it processed and paid the 80% of the claims at issue in this case that Prime Healthcare challenges as underpayments for failing to satisfy the plans’ “usual and customary” reimbursement rate. Next, Prime Healthcare’s suit for non-payment and underpayment of covered benefits was determined by the court to fall squarely within the scope of the assignment language. Finally, as a healthcare provider, Prime Healthcare’s alleged denial of payment and underpayment constitutes an injury-in-fact for the purposes of standing. Accordingly, the court found Prime Healthcare has standing to bring its suit. Turning to Hometown Health’s exhaustion argument, the court stressed that it is improper at the dismissal stage as it is an affirmative defense. The court likewise declined to address the issue of ERISA preemption, given the underdeveloped and incomplete record of the case at this stage, and the fact that the complaint includes claims for care provided to patients that were covered by both ERISA and non-ERISA plans. Finally, the court was satisfied that the complaint sufficiently pleaded its claims. For these reasons, the court denied the motion to dismiss on all grounds.

Retaliation Claims

Second Circuit

Joffe v. King & Spalding LLP, No. 17 CIVIL 3392 (VEC), 2022 WL 1689658 (S.D.N.Y. May 26, 2022) (Judge Valerie Caproni). Attorney David A. Joffe was fired from his firm King & Spalding on December 14, 2016, just two weeks before the contribution to his 401(k) account was due to vest on January 1, 2017. Mr. Joffe sued his former employer claiming that King & Spalding had unlawfully retaliated against him for being a whistle blower and reporting “unethical conduct by partners of the firm.” He brought two claims, a breach of contract claim premised on the alleged retaliatory firming, and an ERISA Section 510 retaliation claim relating to King & Spalding’s alleged interference with the vesting of its contribution to Mr. Joffe’s 401(k). There was an eight-day jury trial in the case to decide the breach of contract claim. Unfortunately for Mr. Joffe, the jury found that Mr. Joffe had not proven that claim. In this decision, the judge decided the ERISA claim. Here too, success for Mr. Joffe proved elusive. Although the court stated that Mr. Joffe had proven a prima facie retaliation case given the close proximity between the termination date and the date when the 401(k) account was due to vest, the court was persuaded that the firm’s stated reasons for firing Mr. Joffe, namely that he had failed to submit a business practice plan for three years in row, demonstrating a failure to “participate meaningfully in his own career development.” This coupled with the lack of “even a scintilla of evidence that anyone at (the firm) ever considered the pension contribution as part of the severance negotiations” meant that Mr. Joffe had failed to prove that interfering with his ERISA-protected rights was a motivating factor in his firing. Thus, the court found in favor of King & Spalding on the ERISA claim.

Subrogation/Reimbursement Claims

Sixth Circuit

Zahuranec v. Cigna Healthcare, Inc., No. 21-3695, __ F. App’x __, 2022 WL 1619493 (6th Cir. May 23, 2022) (Before Circuit Judges Siler, Bush, and Murphy). In this highly unusual ERISA case, plaintiff Lisa Zahuranec was not challenging a denial of benefits but instead challenged the healthcare plan’s approval of a medical procedure, specifically bariatric surgery. Under the terms of the plan, bariatric surgery is covered if it meets the plan’s definition of “medically necessary,” which in this instance requires certain criteria to be met including prior participation in a weight management program, a BMI of 40 or higher, or a significant obesity-related co-morbidity. Despite not having a BMI of 40 or any co-morbidity, Ms. Zahuranec’s bariatric surgery was approved by Cigna, and she underwent the procedure. It did not go well. Ms. Zahuranec suffered “severe complications” which she claims was the result of not being medically qualified for the procedure. Accordingly, she filed a medical malpractice suit against the physicians who performed the surgery. That suit settled. Cigna then informed Ms. Zahuranec of her policy’s subrogation and reimbursement provision and demanded reimbursement for the cost of the surgery. In response to this, Ms. Zahuranec sued Cigna, her employer, and Cigna’s reviewing physicians in state court for breach of contract, breach of fiduciary duty, and equitable estoppel. Cigna removed the case to the federal district court and argued that the claims were preempted by ERISA. The court agreed, and Ms. Zahuranec restated her claims as ERISA claims. She argued that Cigna and the other defendants breached the policy and their fiduciary duties by wrongly approving the procedure and the plan is therefore not entitled to reimbursement. Defendants moved to dismiss. The court granted the motion. Ms. Zahuranec appealed to the Sixth Circuit. The appeals court weighed the issue of whether the plan paid and provided Ms. Zahuranec with “benefits” and whether Ms. Zahuranec “incurred a Covered Expense.” In essence, Ms. Zahuranec’s novel argument was that Cigna has to prove that the plan properly granted coverage for the surgery before it can be reimbursed for the expense, and if, as she argued, the surgery was not medically necessary, the plan cannot enforce the subrogation provision. The court was not persuaded and considered this argument to be a “fundamental misunderstanding” of the claims. As the Sixth Circuit put it the question is not “whether CIGNA erred or somehow abused its discretion” by determining the surgery was medically necessary, “but whether the policy limits the plan’s right to be reimbursed based on that determination.” Their answer - the “policy unambiguously does not.” Accordingly, the Sixth Circuit affirmed the lower court’s decision.

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 benefits 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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