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Your ERISA Watch – District Court Equitably Tolls Limitations Period in ERISA Lawsuit for Disability Benefits Based on Mental Incompetence

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This week’s notable decision is a firm victory in Poisson v. Aetna Life Ins. Co., No. 8:20-cv-01030-JVS-DFM (C.D. Cal. Sept. 21, 2020). In 2011, claimant Jones suffered severe trauma to his head and face from a motorcycle accident. The trauma resulted in serious, permanent brain damage. Despite claimant returning to work—staying employed for almost three years—he was never able to resume the job responsibilities that he had prior to the accident. In March 2014, he was terminated and made a long-term disability claim.

Aetna denied the claim and Jones made several attempts to appeal, none of which were effective, perhaps because a psychological examination determined he “was not competent to manage funds on his own behalf and would require 24-hour care and supervision for the rest of his life.”

From 2015 to 2019, Poisson, Jones’ wife, attempted to resolve her husband’s benefit dispute with Aetna, but was unable to do so because she was not legally authorized to act on his behalf. Finding no success, in 2019, Poisson petitioned for a court order naming her as appointed conservator for Jones. Thereafter, a neurologist concluded it was medically probable that Jones had not been reliably competent to manage his legal and financial affairs since the time of the motorcycle accident.

In June 2020, Poisson filed a lawsuit seeking clarification of Jones’ rights under (a)(1)(B). In the alternative, she sought equitable relief under (a)(3) in the form of requiring Aetna to reopen its claim investigation and consider all relevant information. Aetna filed a 12(b)(6) motion to dismiss both causes of action, which the court denied.

Aetna argued the (a)(1)(B) claim was barred by a three-year limitations period in the Plan. Under Heimeshoff v. Hartford, the court found the Plan’s limitations period reasonable, and thus valid. Under the Plan’s terms, the limitations period would have ended on June 15, 2017—almost three years before suit was filed.

In response, Poisson argued the limitations period was equitably tolled because Jones was mentally incompetent for the entire relevant period, and therefore the limitations period could not have started until Poisson was named as legal conservator in August 2019.

Citing Heimeshoff, the court rejected Poisson’s tolling argument under California Civil Code § 352(a), and instead endeavored to decide whether Poisson had sufficiently alleged federal common law equitable tolling. Under federal law, the purpose of equitable tolling is to not bar a claim because a plaintiff was “excusably ignorant of the limitations period.”

Unsurprisingly, mental incompetence constitutes a ground for equitable tolling as it precludes a person from asserting their rights during the proper period. Noting Poisson’s allegations that medical professionals found Jones unable to manage his legal affairs since 2011, the court concluded Poisson had sufficiently alleged Jones suffered from severe mental incompetence that justified the application of equitable tolling.

The court made one other finding of significance on the (a)(1)(B) claim. It declined to attribute Poisson’s delay in finalizing her conservatorship against Jones. Noting the test was whether “the participant” diligently pursued judicial review, “[w]hat actions Poisson took prior to becoming appointed conservator for Jones in 2019 are irrelevant to determining whether equitable tolling should apply.” To hold otherwise would penalize Jones for Poisson’s actions even when she did not have the authority to act on his behalf.

The court also allowed the (a)(3) claim to remain because it was plead in the alternative. Noting that Varity Corp. v. Howe does not stand for the proposition that a plaintiff may only plead one cause of action to seek recovery for an ERISA violation, the court focused the issue as a prohibition on potentially duplicate recoveries. A plaintiff may seek the payment of benefits under (a)(1)(B), but if that fails, seek an equitable remedy under (a)(3).

Poisson is represented by Kantor & Kantor attorneys, Glenn Kantor, Anna Martin, and Sarah Demers.

This week’s notable decision was summarized by Brent Dorian Brehm, a partner at Kantor & Kantor, LLP. Due to Brent’s experience handling claims for disability benefits involving cognitive deficits, he knows that Mr. Jones’ severe incapacitating mental impairment is exceptional. Most individuals disabling cognitive impairment is more subtle. It is caused by an inability to focus due to chronic pain or difficulty with short term memory following chemotherapy (often called “chemo brain”). Establishing this brain fog is often a critical step in establishing the inability to work. Unfortunately, much like Mr. Jones, those suffering from these problems are often unaware of what they need to do to. Like Mr. Jones, finding an experienced attorney is a good first step.

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

Breach of Fiduciary Duty

Third Circuit

In re Allergan ERISA Litig., No. 18-2729, __F.3d__, 2020 WL 5583660 (3d Cir. Sept. 18, 2020) (Before: Jordan, Bibas, and Nygaard, Circuit Judges). The court affirmed the district court’s dismissal of this putative class action on behalf of ESOP participants who allege that Defendants breached certain ERISA fiduciary duties by taking no action when they knew the Company’s stock price was artificially inflated as a result of an illegal price-fixing conspiracy. The court found that the allegations “fail to support a plausible inference that the Company conspired with competitors to fix prices.” The court found that the district court did not abuse its discretion when it denied Plaintiffs leave to amend the complaint because their request did not include a proposed amended complaint and it lacked any description of or explanation about modifications they might make.

Ninth Circuit

AXIS Reinsurance Co. v. Northrop Grumman Corp., No. 19-55135, __ F.3d __, 2020 WL 5509743 (9th Cir. Sept. 14, 2020) (Before Circuit Judges Paez, Callahan, and Bumatay). This case involved a dispute between a corporation (Northrop) and its excess insurer (AXIS). Northrop was sued under ERISA in two different cases for alleged violations in its administration of its employee retirement benefit plans. Northrop paid substantial settlements in each case, and submitted claims to its insurers, which included AXIS. The settlements exhausted the coverage of the primary and secondary insurers, and AXIS was forced to cover the remainder. AXIS then sued Northrop, alleging that the first settlement was not properly covered by the primary insurance, and thus AXIS’ coverage should never have been incurred. On summary judgment the district court agreed, and Northrop appealed. The Ninth Circuit found that the issue on appeal—“when, if ever, may an excess insurer challenge an underlying insurer’s payment decision as outside the scope of coverage?”—was one of first impression. The court agreed with Northrop that excess insurers “generally may not avoid or reduce their own liability by contesting payments made at prior levels of insurance[.]” The court further noted that there were exceptions to this rule, such as if the “payments were motivated by fraud or bad faith” or the parties had contracted around this rule. However, because AXIS had not alleged fraud or bad faith, and had not negotiated a contractual provision giving it the right to challenge Northrop’s prior settlements, the court reversed and found that AXIS was required to pay Northrop’s claim.

Disability Benefit Claims

Ninth Circuit

Poisson v. Aetna Life Ins. Co., No. 8:20-cv-01030-JVS-DFM (C.D. Cal. Sept. 21, 2020) (Judge James V. Selna). See Notable Decision summary above.

Dimry v. Bert Bell/Pete Rozelle NFL Player Retirement Plan, No. 19-CV-05360-JSC, 2020 WL 5526607 (N.D. Cal. Sept. 15, 2020) (Magistrate Judge Jacqueline Scott Corley). Under a “full” abuse of discretion review, the court found the denial of disability benefits unreasonable. Three factors led to this outcome: (1) the claimant was excluded from the remand process—unable to respond to new evidence or provide additional evidence, (2) the denial was based on a lack of “objective evidence” that was not required to be submitted under the terms of the Plan, and (3) the denial failed to consider the claimant’s social security award—a failing of particular note because had the claimant received the award prior to filing for disability benefits, the Plan dictated that LTD benefits were automatically approved. The court determined the proper remedy was remand, but “expects” that the claimant “will be found disabled under the Plan.”

ERISA Preemption

Fifth Circuit

Ballard v. Lincoln Life Assurance Co. of Boston, No. 4:20-cv-2530, 2020 WL 5539874 (S.D. Texas, Sept. 15, 2020) (Judge Nancy F. Atlas). After the death of her husband, Plaintiff filed a claim under his accidental death and dismemberment policy. The policy was provided through a welfare benefit plan offered by his employer. Plaintiff brought claims for breach of contract and violations of the Texas Insurance Code after Defendant Lincoln Life denied the claim. Lincoln Life moved to dismiss the claims. Plaintiff filed a First Amended Complaint adding a cause of action under ERISA in addition to the state law claims. The insurer again moved to dismiss the state law claims. The court dismissed the state law claims, agreeing they were preempted under ERISA.

Lewellyan v. Red River Rehab LLC, No. 1:19-CV-01105, 2020 WL 5505609 (W.D. La. Sept. 10, 2020) (Judge David C. Joseph). In this dispute over short-term and long-term disability benefits, the court found that Plaintiff’s pendent state claims under Louisiana law, including bad faith breach of contract, breach of the implied covenant of good faith and fair dealing, negligence, and detrimental reliance, are preempted by ERISA and dismissed them with prejudice.

Rozier v. Prudential Ins. Co. of Am., No. 1:19-CV-00577, 2020 WL 5524280 (W.D. La. Sept. 14, 2020) (Judge Robert R. Summerhays). Plaintiff is a widow of John Rozier (“John”), who was insured under a group policy issued by Prudential through the American Institute of Certified Public Accountants Trust. The Trust offered John group life insurance benefits in the amount of $50,000.00. After Plaintiff notified Prudential of John’s death, she was told that she was not the beneficiary listed in the file, rather, it was John’s former business partner, Harrington. Plaintiff alleges that John never designated Harrington as a beneficiary of the policy. Alternatively, Plaintiff argues that John and Harrington made a “mutual mistake” in that they did not intend for Harrington to benefit more than 13 years after he withdrew from the partnership, and seeks declaratory judgment that she is the sole beneficiary. As Plaintiff asserts state law claims, those claims are completely preempted by ERISA. Therefore, all of Plaintiff’s state law claims are dismissed.

Medical Benefit Claims

Fifth Circuit

Johnson v. United Healthcare Ins. Co., et al., No. 4:18-CV-00591, 2020 WL 5554557 (E.D. Tex. Sept. 17, 2020) (Judge Amos L. Mazzant). The court reviewed the Magistrate Judge’s proposed findings of facts and recommendations that Defendant AMR’s motion to dismiss Plaintiff’s second amended complaint be denied. Plaintiff claims UHIC’s denial were done by a third party vendor, Defendant AMR. Plaintiff further claims that AMR used a reviewer who was impersonating a licensed physician and was actually a convicted felon without a medical license. AMR claims it is an independent review organization (“IRO”) and not a proper party to an ERISA action. The court held that the issue is not whether AMR is an IRO but rather whether it “exercised control over a plan’s benefit claims process.” Plaintiff claims AMR made the final claims decision. The Magistrate Judge’s Report also found it was a possibility that AMR did exercise control in this case. The court agreed that the Plan provides support for Plaintiff’s allegations because the Plan states that an appeal is available with a third party reviewer and all decisions by an appeal reviewer “are final, conclusive and binding.” For this reason, the court agrees that dismissal is improper at this stage.

Pension Benefit Claims

Second Circuit

Wisconsin Province of Soc’y of Jesus v. Cassem, No. 3:17-CV-01477 (VLB), 2020 WL 5518836 (D. Conn. Sept. 14, 2020) (Judge Vanessa Bryant). Defendants became entitled to retirement benefits upon the death of an employee of Plaintiff. Plaintiff alleged that the 2011 beneficiary designation naming Defendants was invalid due to incapacity or undue influence. Defendants moved for summary judgment arguing that Plaintiff cannot present enough evidence to show a genuine dispute regarding either cause of action. The court granted summary judgment for Defendant regarding the allegation of undue influence, finding that Plaintiffs presented no evidence that any individual had the opportunity to exert undue influence, a necessary element to support such an allegation. Conversely, the court found that Plaintiff had presented enough medical evidence to support a colorable claim for lack of capacity.

McCulloch v. Bd. of Trustees of SEIU Employ. Pension Plan, No. 17 CIV. 3927 (PGG), 2020 WL 5549122 (S.D.N.Y. Sept. 16, 2020) (Judge Paul Gardephe). SEIU pension plan converted from a single-employer defined benefit plan to a multi-employer plan in 2008. At the same time, it amended the pension plan document to say that the Plan would continue to use the benefit limits set by the IRS for single-employer plans instead of multi-employer plans. McCulloch was a participant in two defined benefit pension plans: the SEIU pension plan and Local 32BJ pension plan. Plaintiff began receiving his pension benefit from SEIU in 1999. In 2014 he began receiving a pension benefit from the Local 32BJ pension plan. SEIU began reducing his SEIU pension based on the IRS limitations on benefits. 26 U.S.C. §415. The questions before the court on the parties’ cross-motions for summary judgment were whether the trustees’ interpretation of the plan language as requiring aggregation of benefits from multiple defined benefit sources was reasonable. The court dismissed Plaintiff’s motion and granted Defendants’ motion. The court found that the trustees had intended with the amendment that multiple pension benefits be aggregated for purposes of imposing the IRS benefit limit, even if the plan was not required to do so by law.

Fourth Circuit

Parsons v. Board of Trustees of the Boilermaker-Blacksmith Nat’l Pension Trust, No. 2:20-CV-00132, 2020 WL 5549603 (S.D. W.Va. Sept. 16, 2020) (Judge Irene C. Berger). Plaintiff brought this action under ERISA against her ex-husband’s pension plan, claiming that she was entitled to survivor benefits after he died. The plan denied her claim, contending that under the qualified domestic relations order (QDRO) resulting from her divorce, Plaintiff only qualified as a “beneficiary” under the plan and not a “surviving spouse,” and thus she was only entitled to limited benefits. On cross-motions for summary judgment, the court ruled in Plaintiff’s favor. The court found that even though the QDRO used the word “beneficiary” in describing plaintiff’s rights, the QDRO’s broad grant of “all retirement benefits” unambiguously indicated that Plaintiff was entitled to “all benefits available under the plan,” and not just the small amount ($6,000) argued by Defendant. The court further found that Defendant’s cramped reading of the plan was inconsistent with ERISA and would “lead to invalidating a portion of the statute,” and thus was untenable.

Plan Status

Fifth Circuit

McQuaig v. Provident Life & Accident Ins. Co., No. CV 20-23, 2020 WL 5545681 (E.D. La. Sept. 16, 2020) (Judge Martin Feldman). Plaintiff brought a motion for partial summary judgment on the issue of whether ERISA applied to his claim for disability benefits. Plaintiff asserted that his disability policy was an individual policy, that he paid the premiums, that no other employees were covered by the policy, and other facts supporting the policy not being an employer-sponsored benefit plan. Provident submitted affidavits asserting that the policy in question was a group policy. The court denied Plaintiff’s motion because fact issues exist about the nature of the policy that are best resolved at trial.

Pleading Issues & Procedure

Second Circuit

Moll v. Telesector Res. Grp., Inc., No. 04-CV-805S, 2020 WL 5593845 (W.D.N.Y. Sept. 18, 2020) (Judge William M. Skretny). Plaintiff sues for employment discrimination and Verizon Business counterclaims for Plaintiff taking disability benefits fraudulently while attending college and volunteering. Plaintiff moves to dismiss the counterclaim against her, arguing that ERISA 29 U.S.C. §§ 1001, et seq., precluded the counterclaim because Defendant, as an ERISA fiduciary, could only bring a claim for equitable relief and not for damages, 29 U.S.C. § 1132(a). Verizon argues that Plaintiff waived her ERISA preemption argument by raising it for the first time in her motion but not in her responding pleadings or subsequent papers. Plaintiff replied that she raised (generally) affirmative defenses denying subject matter jurisdiction and contending that Verizon failed to state a cause of action, contending that jurisdictional defenses are not waivable. Plaintiff argues that the counterclaims are governed by ERISA which preempts state law claims and that preemption is not an affirmative (hence waivable) defense. Here, Verizon’s counterclaims involve different rights, different interests, and different underlying facts. Plaintiff is claiming employment discrimination and harassment due to sex, while Verizon’s counterclaims stem from the period Plaintiff was on disability from her job. The only operative facts common to the claims and counterclaims are the employment relationship and Plaintiff’s claim that the discrimination led to her illness and eventual disability. The counterclaims are tangential to these claims and do not share a nucleus of operative facts for this court to have supplemental jurisdiction over them. Thus, Plaintiff’s motion for summary judgment on the counterclaims is granted.

Fourth Circuit

Roberts v. Life Insurance Company of North America, Case No. 1:19CV1012 LCB, 2020 WL 5518481 (M.D.N.C. Sept. 14, 2020) (Judge Loretta C. Biggs). This decision involved a motion to dismiss a lawsuit filed by a pro per plaintiff based on Rule 12(b)(1), lack of jurisdiction due to mootness, and 12(b)(6), failure to state a claim. Plaintiff had previously sued and settled his lawsuit against LINA while represented by counsel for the wrongful denial of disability benefits. In this subsequent lawsuit, Plaintiff alleged that LINA had incorrectly calculated his disability benefits and underpaid his claim. The court granted LINA’s motion to dismiss with prejudice as Plaintiff would not be able to cure the defects in his complaint.

Fifth Circuit

Lewellyan v. Red River Rehab LLC, No. 1:19-CV-01105, 2020 WL 5505609 (W.D. La. Sept. 10, 2020) (Judge David C. Joseph). In this dispute over short-term and long-term disability benefits, the court found that Plaintiff did meet the Rule 8 pleading requirements for her ERISA claims under Section 502(a)(1)(B) and 502(a)(3), however, the complaint contains numerous typos and names of persons unrelated to the action which were from a previously drafted pleading. The court authorized and encouraged Plaintiff to amend her complaint to correct these errors and clarify the subsections in Section 502(a) under which she seeks relief.

Ninth Circuit

In re United Int’l Health Net, Inc., No. 20-CV-425-WQH-AGS, 2020 WL 5535356 (S.D. Cal. Sept. 15, 2020) (Judge William Q. Hayes). The sole shareholder, chief executive officer, and chief financial officer of Defendant United International Health Net, Inc. (“UIHN”) is non-party Celia Gloria Diaz. Diaz filed for bankruptcy in the Southern District of California. Six weeks later she also filed bankruptcy on behalf of UIHN. The Trustees of the Teamsters Miscellaneous Security Trust Fund (“Trustees”) then filed claims in both the Diaz and UIHN bankruptcies. The Trustees initiated an adversary proceeding in the UIHN bankruptcy, and then filed a complaint in federal court against Diaz for breach of fiduciary duty, alleging misappropriation of funds. The Trustees then filed a motion to withdraw reference of the UIHN adversary proceeding, seeking to have it referred to the federal court. The Bankruptcy court referred the motion to the federal court. The court determined that, where the Trustees’ claims were non-core claims subject to district court review, where UIHN did not oppose the withdrawal of reference, and an almost identical case was already pending in the district court, the court determined that permissive withdrawal was appropriate.

Standard of Review

Ninth Circuit

Dimry v. Bert Bell/Pete Rozelle NFL Player Retirement Plan, No. 19-CV-05360-JSC, 2020 WL 5526607 (N.D. Cal. Sept. 15, 2020) (Magistrate Judge Jacqueline Scott Corley). Previously, the court determined the Plan was a multi-employer benefit trust fund maintained under the Taft-Hartley Act. The Plan gave full discretion to the administrators. Plaintiff argued for a heightened level of skepticism, maintaining there was still a conflict of interest given the Plan-retained physicians’ financial conflict of interest. The court reviewed earnings by the doctors for performing assessments and determined it raised a fair inference there was a financial conflict which influenced the physicians’ assessments. However, the court declined to impute this conflict against the Plan because the decision making board consisted equally of player representatives and NFL representatives. “Therefore, although given the frequency and amount of compensation the Plan-retained physicians had a financial interest in continuing to be retained by the Plan, it is difficult to discern why the physicians might infer that an opinion in favor of no disability would be more likely to lead to future retention.”

Subrogation/Reimbursement Claims

Eleventh Circuit

Publix Super Mkts. v. Figareau, et al., Case No. 19-cv-545-T-27AEP, 2020 WL 5513344 (M.D. Fla. Sep. 14, 2020) (Judge James D. Whittemore). This is an action by Publix under ERISA to obtain reimbursement of medical benefits paid by its employee group benefits plan on behalf of L.P., Defendant Paul’s dependent. It is undisputed that, consistent with its terms, the plan paid benefits on behalf of L.P. for treatment of an injury she suffered at birth caused by third parties. Paul and Defendant Figareau settled an underlying state court negligence action against the third parties and recovered settlement proceeds. Under the unambiguous terms of the plan, the settlement triggered an obligation to reimburse the plan for the benefits paid on behalf of L.P. Notwithstanding, Paul and Figareau refused to reimburse the plan, prompting this action. In defending against Publix’s claim for reimbursement, Defendants relied on preempted state law to relitigate the underlying state court negligence action and limit the plan’s right to reimbursement. However, under ERISA and in accordance with the plan’s terms, the defendants were obligated to reimburse the plan for the total amount of benefits paid on behalf of L.P. from the settlement proceeds, which was held in trust by Defendants’ counsel. In summary, the undisputed facts demonstrated that, consistent with the terms of the ERISA Plan, Publix was entitled to an equitable lien by agreement in the amount of $88,846.39.

Withdrawal Liability & Unpaid Contributions

Second Circuit

The Retirement Fund of Local 1482 Paint and Allied Products Manufacturers v. Northern Adhesives, Inc. A/K/A Northern Adhesives Co., Inc., No. 19CV05609MKBRER, 2020 WL 5587271 (E.D.N.Y. Sept. 17, 2020) (Judge Margo K. Brodie). “[T]he Court adopts the report and recommendation and grants Plaintiff’s motion in part. The Court orders Defendant to submit remittance reports to Plaintiff within thirty days of this Order and also orders Defendant to pay Plaintiff $6,610 in attorneys’ fees and $465 in costs. The Court defers ruling on Plaintiff’s motion for monetary damages until Plaintiff receives the relevant reports and calculates the amount owed by Defendant.”

Trustees of United Plant & Prod. Workers Local 175 Benefits Funds v. C.P. Perma Paving Constr., Inc., No. 15CV01171AMDSMG, 2020 WL 5517279 (E.D.N.Y. Sept. 14, 2020) (Judge Ann M. Donnelly). In this dispute over fringe benefit contributions, the court denied defendant Perma Paving’s second motion for summary judgment.

Seventh Circuit

Central States Southeast and Southwest Areas Pension Fund & Charles A. Whobrey, as Tr., v. Yarussi Construction, Inc., No. 19-CV-4170, 2020 WL 5593245 (N.D. Ill. Sept. 18, 2020) (Judge Sharon Johnson Coleman). The court determined that “it is too late for Yarussi to contest the withdrawal liability. Thus, the withdrawal liability of $781,043.91 is due and owing and the Pension Fund is entitled to judgment in its favor in this amount.”

Clarson, et al. v. Scorpio Excavating, Inc., et al., No. 19 C 5488, 2020 WL 5545694 (N.D. Ill. Sept. 16, 2020) (Magistrate Judge Beth W. Jantz). In this dispute seeking withdrawal liability, the court, on summary judgment, found that Defendants are each jointly and severally liable. The court ordered the parties to meet and confer regarding the amount due.

Laborers’ Pension Fund, et al. v. Dinatale Construction Inc., et al., No. 19-CV-7529, 2020 WL 5545706 (N.D. Ill. Sept. 16, 2020) (Judge Sharon Johnson Coleman). “Plaintiffs bring ERISA claims against the Company for failure to submit to an audit to determine employee benefit contributions and dues contributions compliance (Counts I and II), a claim against Ninetta pursuant to alter ego and/or single employer liability theories (Count III), and common-law fraud claims against Dinatale (Count IV) and Marsico (Count V). Marsico has moved to dismiss the fraud claim against her under Rule 12(b)(6).” The court concluded that plaintiffs’ allegations against Marsico do not explain her role in the alleged fraud with the requisite specificity to survive a motion to dismiss. The fraud claim against Marsico must be dismissed.”

Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys:  Brent Dorian Brehm, Sarah DemersElizabeth GreenAndrew Kantor, Anna Martin, Michelle RobertsTim Rozelle, Peter Sessions, Stacy Tucker, and Zoya Yarnykh.

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