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Your ERISA Watch –

No case of the week, but many interesting issues have popped up in this week’s decisions, so keep reading. Happy Spring.

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

Arbitration

Second Circuit

The Trs. of the N.Y. State Nurses Ass’n Pension Plan v. White Oak Glob. Advisors, No. 21-8330 (LAK), 2022 WL 815273 (S.D.N.Y. Mar. 17, 2022) (Judge Lewis A. Kaplan). In 2013, the Trustees of the New York State Nurses Association Pension Plan entered into a two year Investment Management Agreement with White Oak Global Advisors, LLC to supervise and manage the plan’s allocated investment of $80 million. After the two year contract was up, the plan’s Chief Investment Officer (“CIO”) recommended the plan renew its contract with White Oak for another two years. After the plan adopted this recommendation, the plan’s CIO left and became vice chairman of White Oak. Following this, the Trustees initiated an investigation into the plan’s former CIO and into White Oak, and found numerous instances of wrongdoing, self-dealing, breaches of fiduciary duties, and failures under the Investment Management Agreement. The plan then filed a demand for arbitration. The arbitrator concluded that White Oak, “engaged in ‘numerous’ prohibited ERISA transactions,” including failing to return plan assets and continuing to earn fees after termination of the Investment Management Agreement, granting itself indemnification rights, and by causing the plan to pay fees expressly prohibited by the agreement. The arbitrator ordered White Oak to pay disgorgement of assets/fees/profits, the Trustees’ attorney’s fees, and prejudgment interest of 9%. The Trustees moved to confirm the arbitration award, while White Oak moved to vacate the award. After clarifying a small bit of the wording pertaining to the requirement that White Oak to repay the plan fees incurred except for its management fees, the court otherwise confirmed the arbitration award finding no “material mistake” or “manifest disregard for the law” in it.

Disability Benefit Claims

First Circuit

MacNaughton v. Paul Revere Life Ins. Co., No. 4:19-40016-TSH, 2022 WL 780724 (D. Mass. Mar. 7, 2022) (Judge Timothy S. Hillman). In 2007, radiologist Mary MacNaughton, pregnant with twins, went into pre-term labor. Following the birth, Dr. MacNaughton experienced pre-eclampsia which resulted in severe visual impairments, particularly in Dr. MacNaughton’s left eye. As a diagnostic radiologist for whom the ability to visually exam x-ray imaging is essential, Dr. MacNaughton was left disabled. From 2007 until 2017, Dr. MacNaughton’s long-term disability plan insurers, Paul Revere Life Insurance Company and Unum Group, approved Dr. MacNaughton’s claim and paid the long-term disability benefits. However, after paying $1,200,441.91 in benefits and after Dr. MacNaughton’s treating ophthalmologist retired, Paul Revere conducted a review of Dr. MacNaughton’s condition. During that review, Paul Revere’s reviewing doctors opined that Dr. MacNaughton’s visual impairments were no longer disabling and that she could return to work. Accordingly, the benefits were terminated, and following an unsuccessful administrative appeal, Dr. MacNaughton commenced this suit to recover unpaid benefits. Parties filed cross-motions for summary judgment. Parties disagreed on the appropriate review standard. Defendants argued that abuse of discretion review should apply because the plan documents confer discretionary decision making ability to them. Dr. MacNaughton agreed that the language of the summary plan description and the plan application form grant the defendants discretionary authority, but argued that she was not given a copy of the document prior to this litigation. The court was not persuaded by this argument and reasoned that “the application was explicitly referenced in the Plan itself,” and the Dr. MacNaughton was, “on notice, through the Plan, that the SPD existed.” Accordingly, the court applied the deferential review standard. Despite, Dr. MacNaughton being unsuccessful in her arguments pertaining to the applicable review standard, the court was very much persuaded by Dr. MacNaughton’s arguments about not receiving a full and fair review. The court agreed with Dr. MacNaughton that defendants procedurally erred by failing to disclose the analysis of two of its reviewing doctors on appeal, even when requested by Dr. MacNaughton’s counsel, before rendering their final adverse determination. The court went on to say that this omission prejudiced Dr. MacNaughton, reasoning that she “makes clear in her summary judgment papers that she disagrees with Dr. Eisenberg’s opinion that she can work as a radiologist using only her right eye. Yet, because the defendants did not disclose Dr. Eisenberg’s analysis prior to rendering their final decision, the plaintiff was not able to rebut (the) analysis in the administrative record.” So finding, the court granted Dr. MacNaughton’s motion for summary judgment and denied defendant’s cross motion. Nevertheless, the court was not confident, given the incomplete medical record, whether defendants’ denial was an abuse of discretion. The court therefore remanded to the claims administrator, so that Dr. MacNaughton may be “afforded ‘the benefit of a full and fair review.’”

Third Circuit

Matteo v. Reliance Standard Life Ins. Co., No. 18-11450 (ES) (MAH), 2022 WL 819600 (D.N.J. Mar. 17, 2022) (Judge Esther Salas). Plaintiff Ivana Matteo filed a benefits suit against Reliance Standard Life Insurance Company, which terminated long-term disability benefits ceased after twelve months pursuant to the plan’s one year limitation period for mental or nervous conditions. After she had exhausted her administrative appeals, Ms. Matteo commenced this suit in which she argued that she was totally disabled within the meaning of the plan and her disabling conditions were Lyme disease, chronic pain, chronic fatigue syndrome, fibromyalgia, and thyroid disease, and that her anxiety and depression should not exclude her from benefits eligibility. Parties filed cross motions for judgment. As the plan grants Reliance discretionary authority, the court reviewed the termination of benefits under the arbitrary and capricious standard. Examining the language of the mental or nervous disorders limitation, which “clearly states that benefits are not payable for disability ‘caused by or contributed to by mental or nervous disorders” the court held that the proper inquiry in the case was determining whether Ms. Matteo “remains totally disabled based on her physical limitations, or, in other words, if her physical symptoms render her disabled regardless of her mental condition.” The record, according to the court, supported finding that Ms. Matteo’s anxiety and depression contributed to her overall impairments, and the evidence did not support the finding that Ms. Matteo’s physical conditions on their own render her totally disabled. The court therefore concluded defendant’s denial of benefits was not arbitrary and capricious, and there was substantial evidence supporting the decision. Finally, the court held that defendant’s denial of benefits letter adequately notified Ms. Matteo of the specific reason for the denial and the information necessary to perfect the claim as required by ERISA Section 503(1). Satisfied that Ms. Matteo was given a full and fair review on appeal, and the denial was not an abuse of discretion, the court granted defendant’s motion for summary judgment and denied Ms. Matteo’s cross-motion.

ERISA Preemption

Fourth Circuit

Coppedge v. Blue Cross Blue Shield of S.C., No. 3:21-cv-00625-JMC, 2022 WL 820018 (D.S.C. Mar. 18, 2022) (Judge Julianna Michelle Childs). Plaintiff Timothy Coppedge filed suit in state court against Blue Cross Blue Shield of South Carolina for declaratory judgment, breach of contract, and bad faith failure to pay health insurance claims. Blue Cross removed the case on ERISA complete preemption grounds because Mr. Coppedge’s plan is an employee welfare benefit plan governed by ERISA. Mr. Coppedge stated that he is willing to proceed under ERISA if the court declares that the “Intoxication or Drug Use” exclusion that Blue Cross used to deny coverage of the medical expenses is illegal. The court concluded it did not need to conduct a “statutory construction evaluation of (the drug use exclusion’s) applicability to the Plan because Plaintiff’s claim for declaratory judgment is … subject to preemption under ERISA.” In fact, the court found that all of Mr. Coppedge’s claims were completely preempted because he has standing as a plan participant to pursue his claims under ERISA and the resolution of the claims naturally require interpretation of the plan “which indisputably qualifies as an ERISA-governed employee benefit plan.” Blue Cross’s motion in support of ERISA preemption was therefore granted.

Ninth Circuit

LHC Grp. v. Bayer Corp., No. 21-cv-03877-HSG, 2022 WL 774298 (N.D. Cal. Mar. 14, 2022) (Judge Haywood S. Gilliam, Jr.). Plaintiff LHC Group, Inc. administers an ERISA governed healthcare plan. LHC Group brought a case in state court on behalf of its plan members against the Bayer Corporation, Bayer HealthCare LLC, Bayer Essure Inc., and Bayer HealthCare Pharmaceuticals, Inc. bringing claims of negligence, strict products liability, concealment, intentional misrepresentation, negligent misrepresentation, breach of express warranty, quasi contract, and unjust enrichment relating to the manufacture and sale of a birth control product LHC alleges is defective. Bayer defendants removed the case to federal court citing ERISA preemption. LHC Group moved to remand. The court examined the case under the two prongs of the Davila test, and found that neither requirement was satisfied. Bayer argued that the first prong was met because LHC is a plan fiduciary seeking to enforce rights under the ERISA plan. The court disagreed with this characterization, because LHC’s state law claims are not claims for benefits under Section 502(a)(1)(B), but rather state law tort claims assigned to it to enforce on behalf of the members of the plan. The court concluded that LHC’s claims also failed the second prong of Davila, as the claims were “each based on duties independent of the ERISA plan.” Accordingly, as the claims brought by LHC didn’t meet either prong of the test, the court concluded that ERISA does not completely preempt the state-law claims and it does not have federal jurisdiction over the case. Therefore, the court granted the motion to remand to the state court.

Grey v. Forescout Tech., Inc., No. 5:21-cv-04555-EJD, 2022 WL 799078 (N.D. Cal. Mar. 16, 2022) (Judge Edward J. Davila). Plaintiff Holly Grey worked as the Senior Vice President of Finance for defendant Forescout Technologies, Inc. until fall of 2020 after the company was acquired by Advent International. Knowing a change of control of the company was coming in the future, Forescout Tech offered its management employees change of control severance benefits via an amendment to their employment offers in summer of 2017 that would be triggered under certain circumstances. Per the terms of the change of control agreement, if a change of ownership of Forescout occurred, Ms. Grey would be entitled to severance compensation and acceleration of her unvested awards if she was terminated without cause or left of her own choice for “good reason.” According to the complaint, the change of ownership resulted in a “material reduction in duties” for Ms. Grey, which, under the terms of the amendment, constituted a good reason to terminate employment and trigger the benefits under the change of control amendment. Ms. Grey provided written notice to the company and resigned. Forescout, however, refused to pay the severance or accelerate the vesting of the equity awards prompting, Ms. Grey to sue in state court to recover the benefits. Forescout removed the case to the federal district court. Ms. Grey moved to remand. The court decided that the change of control amendment was not an employee benefit plan within the meaning of ERISA. The court focused in on the fact that once the single payment was completed, the company would have no further responsibility and the amendment therefore doesn’t create a need for “an ongoing administrative program for processing claims and paying benefits.” Rather, the change of control amendment is best understood as an employment contract arrangement, governed by state law. For this reason, the court held the state law claims are not preempted, and granted the motion to remand.

Same Day Procedures, LLC v. United HealthCare Ins. Co., No. 21-00956, 2022 WL 807051 (N.D. Cal. Mar. 17, 2022) (Judge John Michael Vazquez). Plaintiff Same Day Procedures, LLC sued defendants Multiplan, Inc., a healthcare repricing company, and insurance company, United HealthCare Inc. for systematic underpayment of out-of-network medical services Same Day Procedures provided to United insureds. The complaint alleges that United orally pre-authorized treatment for dozens of patients at Same Day Procedures, and after the services were rendered and Same Day Procedures billed United the usual and customary rates United utilized Multiplan Inc. to pay only 20% of the billed charges. Same Day Procedures brought this action in the Superior Court of New Jersey alleging 11 state law causes of action. Defendants removed the case to federal court. Plaintiff moved to remand, and moved for fees and costs. The court agreed with Same Day Procedures that no independent legal duty supports its claims. Because the state law claims are not “derived from, or conditioned upon the terms of an ERISA plan, and nobody needs to interpret the plan to determine whether that duty exists,” the state law claims are not preempted by ERISA. For this reason, the court granted the motion to remand but denied the emotion for fees and costs. Because ERISA preemption is a complicated area of the law, the court was unwilling to say defendants were objectively unreasonable in seeking removal.

Life Insurance & AD&D Benefit Claims

Ninth Circuit

Efimenko v. The Catalina Marketing Corp. Grp. Life Plan, No. 21-cv-01550-HSG, 2022 WL 799081 (N.D. Cal. Mar. 16, 2022) (Judge Haywood S. Gilliam, Jr.). Plaintiff Anna Efimenko filed this action after her husband, Nikita Toulinov died of a heart attack in 2020, and Ms. Efimenko was denied life insurance benefits. Mr. Toulinov worked for the Catalina Marketing Group. As an employee, Mr. Toulinov worked for the company remotely in Russia from 2018 until his death. However, Mr. Toulinov intended to return home to California to his wife and children and the company considered Mr. Toulinov a California employee and made payments to him in California. Neither his employer nor his insurer, Lincoln Life Insurance Company of Boston, ever informed him of any additional actions he would need to complete to preserve his life insurance eligibility during the time he was working abroad, and so Mr. Toulinov took no actions beyond making his regular payments to the Group Life Plan. However, after Mr. Toulinov’s death, Ms. Efimenko’s submitted claim was denied by Lincoln on the grounds that the plan did not cover employees working outside the U.S. without a letter on file from the employer documenting the employee’s “expat status.” Ms. Efimenko then commenced this suit bringing claims under ERISA Sections 502(a)(1)(B) and 502(a)(3), and state law claims for negligence, breach of contract, and equitable estoppel, plead in the alternative, if it is determined that Mr. Toulinov was not a participant of the ERISA plan at the time of his death because of the company’s failure to send the expat letter to the insurer. Defendant Catalina Marketing moved to dismiss. Catalina Marketing argued that the Section 502(a)(3) cause of action for equitable relief should be dismissed as duplicative of the Section 502(a)(1)(B) claim for benefits. The court agreed with this argument, holding that an injunction requiring defendants to pay benefits under the plan is duplicative of the claim for benefits, especially as “enforcing the terms of an ERISA plan is an express remedy under § 502(a)(1)(B).” The court therefore dismissed Ms. Efimenko’s Section 502(a)(3) claim. Catalina Marketing’s ERISA preemption argument though was less convincing to the court. Because Ms. Efimenko pled her state law claims in the alternative, and because discovery is required in the case to determine whether Mr. Toulinov was a participant in the ERISA plan at the time of his death, the court held the state law claims are allowed to proceed past the pleading stage. The motion to dismiss these claims was thus denied.

Medical Benefit Claims

Second Circuit

Curtis v. Aetna Life Ins. Co., No. 3:19-cv-01579, 2022 WL 788490 (D. Conn. Mar. 15, 2022) (Judge Michael P. Shea). Plaintiff Dennis E. Curtis filed this putative class action against Aetna Life Insurance Company alleging the insurer has violated ERISA by denying benefits to plan members based upon “definitions of ‘medically necessary’ contained in a series of internal Aetna Clinical Policy Bulletins that are not part of, or incorporated in, any of the ERISA plans and that modify and limit, to the plan members’ detriment, the plans’ definition of ‘medically necessary.’” Aetna moved to dismiss. In a somewhat unusual move, the court decided to take a fresh look at Mr. Curtis’s claim for benefits. Because the Yale Plan under which Mr. Curtis is covered does not grant discretionary authority to Aetna, the court reviewed the benefit application under de novo review and concluded that per the terms of the plan Mr. Curtis’s denial was correct, although for an entirely different reason than Aetna gave. The court concluded that Mr. Curtis’s allegations were insufficient to state a claim for benefits under ERISA Section 502(a)(1)(B) because the rehabilitative physical therapy Mr. Curtis sought coverage for was, per the plan language, an “eligible health service ‘only if it was expected to significantly improve or restore physical functions lost as a result of an acute illness, injury, or surgical procedure.’” According to the court, Mr. Curtis’s physical therapy did not fall under this significant improvement prerequisite and was therefore excluded under the Yale Plan, meaning his rehabilitative physical therapy treatments were not a covered benefit. Further, the court communicated that, “with regard to Aetna’s determination that Curtis’s physical therapy services were, for certain periods, covered as eligible health services under the Yale Plan, I owe no deference to that determination…in any event, Aetna cannot waive a coverage limitation by erroneously approving benefits that the Yale Plan does not cover. Moreover, the Yale Plan contains a provision preserving the plan’s right to recover benefit overpayments.” The court expressed that while Aetna may have erroneously relied on its Clinical Policy Bulletins to deny Mr. Curtis’s claim, it was nevertheless correct to deny the claim. The court thus granted Aetna’s motion and dismissed the case without ever addressing the central question of the inconsistency between the Clinical Policy Bulletins requirements and the Aetna governed plans themselves.

Plan Status

Fifth Circuit

Milam v. Blue Cross & Blue Shield of Ala., No. 3:22-CV-35-CWR-FKB, 2022 WL 766451 (S.D. Miss. Mar. 11, 2022) (Judge Carlton W. Reeves). Plaintiff Thomas M. Milam sued Blue Cross and Blue Shield of Alabama in state court for wrongfully delaying coverage for medical care for his son. According to the complaint, Blue Cross rejected all of Mr. Milam’s claims for his son’s treatment until he retained counsel who sent a demand letter to the insurer. After this, Blue Cross changed course and acknowledged the treatment was medically necessary and provided benefits retroactively for the care nearly a year later. During that period the son was essentially without health coverage for a “serious medical condition that was actually covered under the Policy.” Mr. Milam brought claims for breach of contract, negligence, and bad faith denial of insurance benefits and seeking compensatory and punitive damages. Blue Cross removed the case to federal court, asserting the plan is governed by ERISA and the state law claims are thus preempted. Now, Blue Cross has moved to dismiss and to strike jury demand. Mr. Milam opposes the motions and asserted his is not an ERISA plan, but an individual policy. Mr. Milam is a sole proprietor of his law firm and attested that there are no other employees. The court felt it could not at the present time decide the issue of the plan status, writing, “there is a great deal of new evidence attached to BCBS of AL’s rebuttal regarding Milam’s employment status (which) Milam has not had the chance to test or challenge under the ordinary briefing schedule.” Because of this, the court concluded that the issue of Mr. Milam’s employment should be resolved after the parties, guided by the Magistrate Judge, engage in discovery on the issue. Accordingly, Blue Cross’s motions were denied without prejudice as premature.

Pleading Issues & Procedure

Fourth Circuit

LifeBrite Hospital Grp. of Stokes, LLC v. Blue Cross & Blue Shield of N.C., No. 1:18CV293, 2022 WL 801646 (M.D.N.C. Mar. 16, 2022) (Judge William Lindsay Osteen Jr.). Plaintiff LifeBrite operates a hospital in a town of 189 residents in North Carolina. Although the hospital is a participating provider with defendant Blue Cross and Blue Shield of North Carolina, its laboratory, LifeBrite Labs, is not. Beginning in late 2017, Blue Cross began suspecting that LifeBrite was engaging in fraudulent billing practices after it noticed a stark increase in claims for urine drug testing, and placed LifeBrite on prepayment review. Blue Cross claimed that it paid $11 million to LifeBrite based on misrepresentations the healthcare provider made with regards to these lab tests. Because of this conflict between insurer and provider, LifeBrite sued Blue Cross for breach of contract and unjust enrichment. Blue Cross responded by filing ten counterclaims against LifeBrite for: (1) fraud, (2) negligent misrepresentation, (3) breach of contract, (4) breach of contract accompanied by fraudulent act, (5) tortious interference, (6) deceptive trade practices, (7) restitution under ERISA Section 502(a)(3), (8) declaratory and injunctive relief under ERISA Section 502(a)(3), (9) equitable liens, and (10) unjust enrichment. LifeBrite moved to dismiss the counterclaims. As relevant here, LifeBrite argued the ERISA claims should be dismissed because Blue Cross is not entitled to the remedies sought. The court denied the motion, reasoning that Blue Cross’s “action seeks equitable restitution” because it seeks to recover funds that are “specifically identifiable, belong in good conscience to (it), and are within the possession and control of (LifeBrite.)” This was especially true, the court reasoned, because Blue Cross “alleges a specific bank account in which the funds are alleged to be held.”

Fifth Circuit

Medarc, LLC v. Aetna Health, Inc., No. 3:20-CV-3646-N-BH, 2022 WL 743520 (N.D. Tex. Mar. 11, 2022) (Magistrate Judge Irma Carrillo Ramirez). MedArc, LLC brought this suit against Aetna Health Inc. to recover payments for medical services rendered to Aetna insureds. Aetna in turn asserted counterclaims against the provider for money had received, fraud, unjust enrichment, and quantum meruit, and exemplary damages. According to the counterclaim, MedArc is engaging in an inappropriate billing scheme and overbilling for services. Aetna has moved for leave to file amended counterclaim, and MedArc has moved to dismiss the counterclaims. According to the court, Aetna’s proposed amendment will provide “additional background of fraudulent conduct, including new details of the alleged fraudulent scheme.” As the court could not find a bad faith motive for the amendment, and the amended counterclaim seeks only to add to the original, the court concluded there was no “substantial reason” to deny to motion for leave to amend. Thus, the motion to leave to amend was granted and the motion to dismiss the counterclaims was denied as moot.

Ninth Circuit

Walsh v. Reliance Tr. Co., No. CV-19-03178-PHX-JJT, 2022 WL 768145 (D. Ariz. Mar. 14, 2022) (Judge John J. Tuchi). Secretary of Labor Martin J. Walsh filed this case against fiduciaries of the RVR Employee Stock Ownership Plan for breaching their fiduciary duties of loyalty and prudence by causing the plan to purchase RVR, Inc. stock for more than fair market value. Secretary Walsh moved to amend the complaint thanks to information gleaned through discovery, which revealed that the company position of one of the defendants was different than previously believed. Based on this information, the Secretary sought to amend to clarify the factual basis for certain claims in the complaint. In addition to the Secretary’s motion to amend, defendants moved to amend the answer. The court first addressed plaintiff’s motion to amend the complaint and concluded that the Secretary demonstrated good cause given the circumstances. Because the pertinent information was only available to plaintiff after conducting discovery, and the motion to amend was filed shortly thereafter, the court said it was, “understandable why Plaintiff did not amend the Complaint prior to the deadline set in the Scheduling Order.” In addition, the court agreed with the Secretary that the proposed amendment does not change the legal basis for the claims and therefore does not prejudice defendants who had notice the Secretary’s argument since the original complaint was filed. Finally, the court expressed that the proposed changes would not render the claim for relief futile. Accordingly, the court granted the Secretary leave to amend the complaint; and as the complaint is set to be amended, the court denied as moot defendants’ motion to amend the answer as defendants will have the opportunity to assert defenses when they answer the new operative complaint.

Eleventh Circuit

Worldwide Aircraft Services, Inc. v. Anthem Ins. Co., Inc., No. 8:21-cv-456-CEH-AAS, 2022 WL 797471 (M.D. Fla. Mar. 16, 2022) (Judge Charlene Edwards Honeywell). Plaintiff Worldwide Aircraft Services, Inc. d/b/a Jet ICU filed suit against Anthem Insurance Companies, Inc. after Anthem under-reimbursed the medical services provider hundreds of thousands of dollars for benefits of air ambulance emergency services it provided to Patient K.D. Two months after the case was filed, attorney-in-fact for patient K.D., Michael Brannigan, along with Worldwide Aircraft filed an amended complaint seeking unpaid benefits under ERISA. Anthem moved to dismiss for lack of standing, failure to allege personal jurisdiction, and failure to allege a claim for benefits under the ERISA plan. Plaintiffs argued that they have standing under ERISA because of a Power of Attorney, which they argued confers standing as to K.D. and Worldwide Aircraft. The court agreed that the Power of Attorney sufficiently provides Mr. Brannigan with standing as attorney-in-fact for K.D. However, because plaintiffs do not allege the existence of a written assignment of benefits for the medical provider, the court held Worldwide Aircraft does not have standing under ERISA. The court was not persuaded that the Power of Attorney cures this deficiency, nor that it grants Mr. Brannigan the authority to act as attorney-fact also for the provider. Therefore, the court dismissed Worldwide Aircraft’s ERISA claim. The court next addressed Anthem’s argument that the amended complaint fails to state a claim under ERISA by failing to cite plan provisions under which plaintiffs seek recovery. The court articulated that because it is granting plaintiffs leave to amend, “Plaintiffs will be given the opportunity to cure any deficiencies in their failure to identify a specific Plan provision under which benefits are claimed, particularly given the Court’s conclusion above that Jet ICU lacks standing.” The motion to dismiss was thus granted and plaintiffs were granted leave to amend.

Provider Claims

Second Circuit

Murphy Med. Assocs. v. Cigna Health & Life Ins. Co., No. 3:20cv1675(JBA), 2022 WL 743088 (D. Conn. Mar. 11, 2022) (Judge Janet Bond Arterton). The Murphy Medical Associates, LLC and other related health-providers sued Cigna Health and Life Insurance Company alleging violations of ERISA, the Families First Coronavirus Response Act (“FFCRA”), the CARES Act, and several state laws. The crux of the complaint is that the Murphy Practice responded to the need for COVID-19 testing and treatment and rather than reimburse the providers as it is obligated to do, Cigna has “made and continues to make voluminous frivolous and bad faith medical records and audit requests,” and has denied reimbursement for over 4,000 Cigna insureds. What’s more, Cigna, according to the complaint, has been making defamatory statements about the Murphy Practice to patients that were designed to sabotage the contracts the provider had with the insurer. Cigna moved to dismiss. First, the court dismissed the claims alleging violations of FFCRA and the Cares Act because the coronavirus legislation does not contain a private right of action and the court could not create one where it does not exist. Next, the court addressed the Murphy Practice’s count to reform ERISA plans which do not provide coverage for COVID-19 as required by the Coronavirus Legislation. The court dismissed this claim, holding plaintiffs do not have standing to seek equitable reformation of the plans because the legislation at issue doesn’t allow providers “to force wholesale reformation of ERISA benefit plans.” The next count, a claim for ERISA benefits under Section 502(a)(1)(B), was not dismissed because the Murphy Practice included the language of the assignment of benefit forms, thus sufficiently establishing derivative standing to sue for benefits. The court also articulated that Cigna’s argument about failure to exhaust administrative remedies failed as “Plaintiff encountered such massive, repeated, and automatic denials, it would be futile for it to administratively exhaust each individual claim with any expectation of successful result.” However, the Murphy Practice’s claim under Section 502(a)(3) for equitable relief for full and fair review was dismissed for lack of standing, and for being duplicative of the claim for benefits. Turning to the state law claims, the court concluded that only plaintiff’s tortious interference claim pertaining to Cigna’s alleged defamatory statements was not preempted by ERISA and could proceed. The court dismissed the remainder of the state law claims, finding that they relate directly to ERISA plans and were therefore preempted.

Statute of Limitations

Eleventh Circuit

Bakos v. Unum Life Ins. Co. of Am., No. CV 1:21-058, 2022 WL 791922 (S.D. Ga. Mar. 14, 2022) (Judge James Randal Hall). Plaintiff Angela Bakos is an employee of Christopherson Properties and a participant in its disability insurance plan issued by Unum Life Insurance Company of America. In 2014, Ms. Bakos was awarded disability benefits. One year later, the plan notified Ms. Bakos that she no longer met the plan’s definition of disability and terminated her benefits. Ms. Bakos appealed the decision. In June 2016, Unum upheld the appeal and informed Ms. Bakos of her right to bring a suit under ERISA Section 502(a)(1)(B). Ms. Bakos would not do so for another four years. During the period from 2016 until 2020, when she did eventually bring suit, Ms. Bakos was pursuing a claim for social security disability benefits. After two SSD hearings, Ms. Bakos was awarded benefits in early 2020. Ms. Bakos requested that Unum reopen her denied claim from 2016 in light of the award of benefits from the Social Security Administration. Unum declined to do so, noting her final adverse decision was issued years before. Finally, Ms. Bakos initiated her ERISA suit. Defendant Unum moved to dismiss the claims as untimely, referring to the plan’s year-three statute of limitations to challenge benefit denials in court. The court was satisfied that the three-year limitations period of the plan was “reasonable and enforceable.” Ms. Bakos argued that her suit should be timely under the principle of equitable tolling because Unum’s denial did not refence a 3 year statute of limitations period, she had no actual notice of this time limit, and that she was spending the intervening years pursing social security disability benefits as required by the plan. Unfortunately for Ms. Bakos, the court was not swayed by any of these arguments. The court found Ms. Bakos was not reasonably diligent in pursuing her suit in a timely manner or investigating the policy terms. As far as “actual notice,” the court stated such a requirement applies only to fiduciary breach claims not claims for benefits, and the lack of notice was therefore “immaterial.” Lastly, the court stated there was no reason why Ms. Bakos could not have pursued both her plan appeal and her SSD benefit application simultaneously, and her “failure to do so demonstrates a lack of diligence.” Finding equitable tolling not applicable, the court granted the motion to dismiss and entered judgment in favor of Unum.

Subrogation/Reimbursement Claims

Eighth Circuit

Freiermuth v. St. Paul Elec. Workers Health Plan, No. 21-1971, 2022 WL 788876 (D. Minn. Mar. 15, 2022) (Judge David S. Doty). Plaintiff Mary Freiermuth was injured in a car accident in late 2020. Shortly thereafter, Ms. Freiermuth submitted a claim to the St. Paul Electrical Workers Health Plan her medical expenses that were not covered by her no-fault automobile insurance. The Plan informed Ms. Freiermuth that payment of the claims was conditioned on both her and her attorney signing a subrogation agreement to allow the plan to seek repayment of any recovery Ms. Freiermuth may receive from a third party responsible for the accident. Although Ms. Freiermuth signed the subrogation agreement, her attorney refused to do so, arguing that it was unethical and that requiring him to sign the agreement breached the plan’s fiduciary duty to Ms. Freiermuth. As a result of her counsel’s refusal to sign the document, the plan denied Ms. Freiermuth’s claim for benefits. Ms. Freiermuth did not appeal the denial, arguing it would have been futile to do so, and commenced this suit alleging the plan wrongfully denied her benefits and breached its fiduciary duty by not providing her with benefits she is entitled to under the plan. Defendants moved to dismiss arguing that Ms. Freiermuth failed to exhaust her administrative remedies. Defendants also moved to dismiss for failure to state a claim, arguing requiring an attorney to sign a subrogation agreement is legally permissible. The court agreed with defendants on both counts. The court was not persuaded that internally appealing the denial would have been futile. In addition, the very premise of Ms. Freiermuth’s complaint, the argument that requiring her counsel to sign a subrogation agreement is unethical and unenforceable, was rejected by the court. The court expressed that it found no inherent conflict “in requiring an attorney to sign an agreement effectively prohibiting double recovery by the claimant and allowing the plan to recover payments paid or owed to the claimant by third parties.” Therefore, the court granted defendants’ motion to dismiss with prejudice.

Venue

Ninth Circuit

Johnson v. Russell Inv. Tr. Co., No. 2:21-cv-00743-DGE, 2022 WL 782425 (W.D. Wash. Mar. 15, 2022) (Judge David G. Estudillo). Plaintiff Ann Johnson filed this putative class action on behalf of herself and all participants and beneficiaries of the Royal Caribbean Cruises, Ltd. Retirement Savings Plan. Ms. Johnson alleged defendants breached their fiduciary duties by offering and maintaining an investment lineup “consisting exclusively of poorly performing proprietary funds” affiliated with the defined contribution plan’s investment manager, Russell Investments Trust Company. Defendants moved to transfer venue from the Western District of Washington to the Southern District of Florida. Ms. Johnson opposed the motion to transfer, arguing that her venue choice should be given significant weight. Among all the factors the court weighed, only Ms. Johnson’s forum choice weighed against transfer. The court accorded this factor minimum weight given this is a proposed class action and because Ms. Johnson herself is a Florida resident. Royal Caribbean Cruises is also located and operated primarily in Florida. Other factors, including the location where the relevant agreements were negotiated and executed, familiarity with governing state law, the parties’ contacts with the forum, and the contacts relating to the case in the forum, all weighed in favor of transfer. The difference in cost to litigate between the venues, the availability of witnesses, the congestion of the venues, and the ease of access to sources of proof were all neutral factors as both Washington and Florida could be proper venues and the parties and witnesses are spread among both locations and others throughout the country. The court therefore decided that Royal Caribbean sufficiently showed transferring the case would be appropriate, convenient, and in the interest of justice. Thus, the court granted the motion and ordered the case be transferred.

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.

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

And don't forget to check out the ERISA Watch podcast, which tells the true stories behind the cases. The newest episode is a tribute to Karen Ferguson and a spotlight on the wonderful work being done by the Pension Rights Center. You can listen to the ERISA Watch podcast here.

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