Happy Thursday! It’s always a great morning when I get to report on a plaintiff victory. This week’s notable decision is Severstal Wheeling, Inc. Ret. Comm. v. WPN Corp., No. 10CV954-LTS-GWG, __F.Supp.3d___, 2015 WL 4726860 (S.D.N.Y. Aug. 10, 2015), where the court, following a two-week bench trial, entered judgment in an amount exceeding $15 million dollars against breaching fiduciaries who failed to properly diversify assets of defined benefit pension plans. Congratulations are in order for the trial team at Cohen Milstein, with a special shot out to Joseph Barton and Matthew Smith. Enjoy this week’s case summaries!
Your reliable source for summaries of recent ERISA decisions
Below is Kantor & Kantor LLP summary of this past week’s notable ERISA decisions.
Plan fiduciaries breached their fiduciary duties to defined benefit plans resulting in a $15 million verdict against them. In Severstal Wheeling, Inc. Ret. Comm. v. WPN Corp., No. 10CV954-LTS-GWG, __F.Supp.3d___, 2015 WL 4726860 (S.D.N.Y. Aug. 10, 2015), the Severstal Retirement Committee along with various Severstal Plans brought this action against Defendants WPN Corporation and Ronald LaBow, who is WPN’s principal and sole executive officer, alleging that Defendants failed to prudently and loyally manage and diversify the Severstal Plans’ assets and advise the Plans’ fiduciaries, and that Defendants breached their contract with the Severstal Plans by failing to obtain fiduciary insurance covering claims for breach of fiduciary duty. Following a two-week bench trial, the court found that Defendants breached their fiduciary duties to the Severstal Plans in designating an undiversified portfolio for transfer and by failing to recommend and implement a diversified portfolio. The court further found that their breach caused the Severstal Plans to suffer a loss of $9.6 million. The court held Defendants liable for the disgorgement of the $110,438 in investment management fees paid to them during the relevant period due to their “near-total dereliction of their duties” under the Severstal Investment Management Agreement. In addition, the court awarded Plaintiffs prejudgment interest at the New York statutory rate of 9%. The court directed the Clerk to enter judgment against Defendants, jointly and severally, for damages and disgorgement in the total amount of $9,710,438, plus $5,305,889.74 as prejudgment interest for the period from July 16, 2009, to August 10, 2015, for a total judgment of $15,016,327.74.
The ACA’s contraceptive coverage mandate does not substantially burden religious exercise in violation of the RFRA. In Catholic Health Care Sys. v. Burwell, No. 14-427-CV, __F.3d___, 2015 WL 4665049(2d Cir. Aug. 7, 2015), the Second Circuit reversed the district court’s summary judgment decision concluding that regulations promulgated under the Patient Protection and Affordable Care Act that allow religious non-profit employers to opt out of providing contraceptive coverage themselves violate these religious employers’ rights under the Religious Freedom Restoration Act. The Second Circuit concluded that the challenged accommodation for religious objectors relieves, rather than imposes, any substantial burden on Plaintiffs’ religious exercise, and thus does not violate the Religious Freedom Restoration Act.
Suit for reimbursement against secondary insurer for medical claims paid on behalf of common insureds constitutes legal relief not available under ERISA. In Cent. States, Se. & Sw. Areas Health & Welfare Fund v. Student Assur. Servs., Inc., No. 14-2376, __F.3d___, 2015 WL 4716916 (8th Cir. Aug. 10, 2015), a dispute between two insurance companies regarding the primary responsibility to cover medical expenses incurred by their common insureds, the Eighth Circuit affirmed the district’s dismissal of the suit to enforce the terms of the Central States Plan because the complaint seeks legal, rather than equitable relief. After the insured students sustained athletic injuries, Central States paid the students’ medical expenses and sought reimbursement from Student Assurance in the amount of $137,204.88 in benefits. Student Assurance refused to pay and Central States sued for declaratory relief, restitution, and the imposition of an equitable lien and constructive trust to secure reimbursement for the benefits. Following the analysis of Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002) and its sister circuits, the court concluded that Central States’ claims for restitution and for an equitable lien or a constructive trust are legal rather than equitable claims, because the fund seeks compensation out of the general assets of the non-ERISA insurers, and does not assert the right to particular property in the possession of the insurers.
Select Slip Copy & Not Reported Decisions
In Savani v. URS Prof’l Solutions LLC, No. 1:06-CV-02805-JMC, 2015 WL 4644463 (D.S.C. Aug. 4, 2015), following a settlement of class claims involving ERISA’s anti-cutback rule, Class Counsel moved for payment of attorneys’ fees, costs, and an incentive payment from the judgment fund of $956,574.00. Defendants had already paid $60,000 to Class Counsel as part of a partial fee settlement agreement that the court approved. After analyzing the various factors, the court awarded attorneys’ fees in the amount of 39.57% of past benefits and interest paid for the Subclass which amounts to $378,516.33, plus reimbursement of costs and expenses of litigation in the amount of $12,924.15, and an incentive award in the amount of $15,000 to Subclass Representative Robert P. Taylor, Jr.
Disability Benefit Claims
In Musser v. Harleysville Life Ins. Co., No. 1:14-CV-2041, 2015 WL 4730091 (M.D. Pa. Aug. 10, 2015), Plaintiff filed a motion to determine the standard of review and supplementation of the record, wherein Plaintiff argued that the court should review the administrators’ denial of his long term disability benefits de novo and permit discovery beyond the administrative record. The court found that the denial of benefits will be reviewed de novo and that no further discovery is warranted under the facts of this case. The court found de novo review applicable because Defendant did not issue a determination on Plaintiff’s appeal and there is no analysis to which the court may defer. With respect to Plaintiff’s proposed discovery, the court found that any discovery relating to Defendants’ previous interpretations of the policy or why the claims representatives did or did not rely on certain information is not relevant to the court’s de novo review, as the court gives no “deference or presumption of correctness” to the administrator’s decisions.
In Guest-Marcotte v. Life Ins. Co. of N. Am., No. 15-CV-10738, 2015 WL 4644936 (E.D. Mich. Aug. 5, 2015), Plaintiff filed a lawsuit against the Life Insurance Company of North America to recover disability benefits and a Persons with Disabilities Civil Rights Act (“PWDCRA”) claim against the her employer, who terminated her employment after her claim for short-term disability benefits was denied. Defendants moved to dismiss the PWDCRA claim, asserting that, given Plaintiff’s repeated and unequivocal statements that she was completely disabled for the purpose of receiving long-term benefits, she is estopped from now claiming that she could perform the duties of her job. Because Plaintiff provided no explanation for the apparent inconsistency between her PWDCRA and ERISA claims, the court dismissed her PWDCRA claim.
In Dooley v. Matrix Absence Mgmt., Inc., No. 1:14CV2, 2015 WL 4644446 (N.D.W. Va. Aug. 4, 2015), involving a pro se plaintiff seeking short-term disability benefits, the court determined that Matrix has no conflict of interest because the employer, not Matrix, is responsible for paying benefits under the STD Plan. The court also found that Matrix did not abuse its discretion in denying Plaintiff’s claim for benefits where its reviewer, RN Vivienne Esty-Fenton, reviewed Plaintiff’s records and determined that “claimant’s psychiatric functional impairment of anxiety and depression cannot be supported as other than claimant and provider stating that claimant has anxiety, Generalized Anxiety Disorder … and a GAF score of 50, no other symptoms or observed objective information noted on review to substantiate claim.”
In Colaco v. Asic Advantage Simplified Employee Pension Plan, No. 5:13-CV-00972-PSG, 2015 WL 4734950 (N.D. Cal. Aug. 10, 2015), a matter seeking benefits under a SEP plan, Plaintiffs moved to compel production of documents authored or created by Microsemi’s attorney, Harley Bjelland, in relation to the SEP plan based on the fiduciary exception to the attorney-client privilege. Plaintiffs also moved to compel information relating to other former ASIC SEP plan participants. The court found that Plaintiffs failed to demonstrate that Bjelland acted as a fiduciary in the capacity of a claims administrator. First, Bjelland was not hired until after the plan terminated, which underscores Microsemi’s contention that it-not the plan, not the plan sponsor, not the plan trustee-hired Bjelland to provide legal advice about its legal liability to Plaintiffs, and nothing more. Second, the court found that there is no evidence that Bjelland’s functions involved the exercise of discretionary authority or control over the SEP plan. The court did find that information regarding other former ASIC SEP plan participants is relevant to this action and granted Plaintiffs’ motion to compel with respect to that information only. The court denied Plaintiffs’ motion for sanctions.
In Adele E. v. Anthem Blue Cross & Blue Shield, No. 2:15-CV-01-DBH, 2015 WL 4715753 (D. Me. Aug. 7, 2015), a matter challenging the denial of a medical benefit claim, Plaintiff sought to modify the record to add (i) benefit plan and related documents, (ii) documents regarding the denial of her second-level appeal, and (iii) information regarding medical reviewers. She also sought discovery regarding the first and third categories. The court granted, with modifications, Plaintiff’s request to supplement the record as to the benefit plan and related documents, grant, without objection, her request to supplement the record with materials pertaining to her second-level appeal, and grant her request to supplement the record with medical reviewer information only insofar as it implicates documents responsive to a proposed request for production of medical reviewers’ curriculum vitae, and otherwise denied it. With respect to Plaintiff’s proposed discovery, Plaintiff sought to serve 11 interrogatories and 9 requests for production of documents bearing generally on (i) the documents used to decide her claim and (ii) information on the physicians who reviewed it. The court granted Plaintiff’s request to propound RPDs related to information relevant to her claim for benefits. But, the court denied most of Plaintiff’s proposed discovery regarding the medical reviewers.
In Blake v. Union Camp Int’l Paper, No. 14-14275, __Fed.Appx.___, 2015 WL 4646763 (11th Cir. Aug. 6, 2015), a matter involving a denial of pension benefits, the Eleventh Circuit held that the district court did not abuse its discretion in denying Plaintiff’s motion to compel discovery. The court found that the district court properly limited discovery to the evidence that the ERISA plan administrator had before it in making its decision regarding Plaintiff’s benefits. Further, the court found that the district court did not make a clear error of judgment in denying the motion since Union Camp produced the entire administrative record and certified that the record included everything that had been compiled for the administrator’s review of Plaintiff’s claim. Because Plaintiff’s pension never vested because he worked for less than the requisite 10 years before he left his job at Union Camp, the additional documents he requested would not have changed the district court’s decision regarding his benefits claim, and denial of the motion could not have harmed his case.
In Rose v. HealthComp, Inc., No. 1:15-CV-00619-SAB, 2015 WL 4730173 (E.D. Cal. Aug. 10, 2015), the court found Plaintiff’s action asserting a state law privacy and unfair business practices causes of action are not preempted by ERISA and remanded the matter to state court. The court rejected Defendant’s allegations that Plaintiff’s claims are related to the ERISA plan because she alleges that medical information was disclosed in the performance of Defendant’s third party administrator duties under the self-insured health plan established by Harris Ranch.
In Kelsey-Seybold Med. Grp. PA v. Great-W. Healthcare of Texas, Inc., No. 14-20506, __Fed.Appx.___, 2015 WL 4720319 (5th Cir. Aug. 10, 2015), the Fifth Circuit reversed and remanded the decision of the district court denying Plaintiff’s motion to remand the case to state court, where Plaintiff filed suit against Defendant alleging that it had not paid the contractually required rate for medical services that it provided to members of Great West-affiliated healthcare plans. The Fifth Circuit found that although about 98% of Plaintiff’s claims are claims for ERISA plan benefits, that fact is irrelevant since the question is not whether Plaintiff’s claims relate to benefits under ERISA plans, but rather whether adjudication of those claims requires an interpretation of an ERISA plan. Defendant did not show that any of Plaintiff’s claims concern “the right to payment under the terms of the benefit plan,” as opposed to “the rate of payment as set out” in the parties’ contractual agreement.
In Skillin v. Rady Children’s Hosp., No. 14-CV-01057-BAS BLM, 2015 WL 4715018 (S.D. Cal. Aug. 7, 2015), the court found not preempted by ERISA Plaintiff’s representative action on behalf of himself and current or former employees of Rady alleging violations of California Labor Code sections 221 through 224 and 226. Here, Plaintiff alleges that Defendant withheld earned wages without proper authorization in violation of California law and failed to provide accurate itemized wage statements because of the improperly withheld wages, also in violation of California law. The court rejected Defendant’s argument that state laws that regulate deductions made from employee earnings are preempted by ERISA when the statutes are sought to be applied to deductions made to fund an ERISA plan. Rather, any duty or liability that Defendant has not to deduct an amount greater than the amount authorized does not exist only because of Defendant’s administration of an ERISA-regulated plan. The alleged duties or liabilities arise independently from state law.
In Marshburn v. Unum Life Ins. Co. of Am., No. 214CV00242CASPJWX, 2015 WL 4720397 (C.D. Cal. Aug. 6, 2015), Unum argued that Plaintiff’s state law claims relating to the denial of her disability benefits are preempted by ERISA based on its affirmative defense that Plaintiff was not eligible for the Conversion Policy that forms the basis of her state law claims. Specifically, Unum argued that Plaintiff was disabled at the time she could convert her coverage. The court applied contra proferentum to conclude that the LTD definition of disability applies to the court’s analysis of whether Plaintiff was disabled at the time of conversion. Following a bench trial on Unum’s affirmative defense, the court found that Plaintiff received her full salary through the end of her employment with Cedars-Sinai, therefore, she never suffered a “20% or more loss in [her] indexed monthly earnings,” so as to meet the definition of “disabled” for purposes of long term disability benefits. As such, her conversion policy was not improperly issued, and ERISA does not preempt her state law claims.
In Associated Builders & Contractors, Inc. v. City of Jersey City, No. 2:14-CV-05445-SDW, 2015 WL 4640600 (D.N.J. Aug. 3, 2015), Jersey City Ordinance 14.052 requires all contractors to enter into a “Project Labor Agreement” (“PLA”), which is defined as “a contract between a labor organization and a developer” that contains various requirements, including training for apprentices. Plaintiffs alleged that the PLA’s apprenticeship requirement is preempted by ERISA, which pertains to employee welfare benefit plans that include “apprenticeship or other training programs.” The court found that ERISA preemption claims are subject to the same market participant exemption present in the NLRA preemption analysis. Since the court found that the PLA containing the apprenticeship requirement is protected from NLRA preemption due to the market participant exemption, it follows that ERISA does not pre-empt the apprenticeship requirement for the same reason. Therefore, the court dismissed this count of Plaintiffs’ Complaint.
In Prudential Ins. Co. of Am. v. Davidson, No. 1:14-CV-1879-WSD, 2015 WL 4734746 (N.D. Ga. Aug. 10, 2015), the court granted Prudential’s motion requesting the court to enter an order directing it to deposit the sum of a life insurance benefit with the Clerk of Court where the beneficiary (and spouse of decedent) is being investigated for murdering the decedent. The spouse’s right to the death benefits is forfeited under Georgia Law if it is shown that she murdered or conspired to murder her husband and benefits would be paid to the surviving children in equal shares.
Life Insurance & AD&D Benefit Claims
In Singletary v. Prudential Ins. Co. of Am., No. CIV.A. 14-2648, 2015 WL 4661774 (E.D. La. Aug. 5, 2015), applying the plain words of an exclusion in a dependent life insurance benefit policy, the court found that Prudential’s determination that the decedent was not a qualified dependent because he was on “active duty” as a member of the United States Army at the time of his death was supported by evidence in the administrative record and falls on a continuum of reasonableness. The decedent died as a result of injuries sustained in a motor vehicle collision. He was a member of the United States Army, but he was stationed stateside and was off-duty at the time of his death. The “off duty” notation on the Report of Casualty was merely an internal code for the Army’s administration area regarding the decedent’s location at the time of his death and did not change the fact that he was on “active duty”.
Pleading Issues & Procedure
In Robison v. Reliance Standard Life Ins. Co., No. CIV-14-1262-D, 2015 WL 4647213 (W.D. Okla. Aug. 4, 2015), Plaintiff filed an action in state court for short-term disability benefits (which Plaintiff contends is not paid pursuant to an ERISA plan) and long term disability benefits (subject to ERISA). On the same day that Defendant removed the action to federal court, the state court granted default judgment against Defendant on both claims but reserved its ruling as to the amount of damages for the LTD claim. The court denied Plaintiff’s motion to remand the first cause of action and granted Defendant’s motion to set aside the default judgment. The court explained that a federal court may reconsider a default judgment entered by the state court prior to the removal, if the removal notice has been filed within the time period specified in the removal statute. The court found that Defendant diligently attempted to obtain counsel and once counsel was retained, Plaintiff’s counsel was promptly notified within two days of the date on which Defendant’s answer was otherwise due. Second, the court found that Defendant identified potentially meritorious defenses to Plaintiff’s claims, including ERISA preemption; failure to submit a satisfactory proof of disability; untimely submission of proof of loss; and failure to file suit within the contractual limitations period. Lastly, the court found that Plaintiff will not be prejudiced by the setting aside of the default judgment.
In Krause v. Eihab Human Servs., Inc., No. 10 CV 898 RJD SMG, 2015 WL 4645210 (E.D.N.Y. Aug. 4, 2015), the court granted Defendants summary judgment on Plaintiffs’ ERISA § 510 claim because it found that Plaintiffs provided no evidence that Defendants terminated them for the purpose of interfering with their health or dental insurance coverage, and even if the Plaintiffs did lose health or dental insurance coverage as a result of their termination, there is no cause of action for this “mere consequence” of Plaintiffs’ termination.
Statute of Limitations
In Caldwell v. Standard Ins. Co., No. 2:14-CV-25242, 2015 WL 4727378 (S.D.W. Va. Aug. 10, 2015), Standard moved to dismiss Plaintiff’s complaint seeking long term disability benefits, arguing that the action was filed outside the three-year contractual limitation period set forth in the policy and is therefore time-barred. Plaintiff argued that her complaint was timely filed, or, in the alternative, that the policy’s limitation period is rendered unenforceable by W. Va.Code § 33-6-14. Upon analyzing the U.S. Supreme Court decision in Heimeshoff, the court determined that § 33-6-14 is a “controlling statute to the contrary” of the plan’s limitation period. The court concluded that the legal cause of action accrued, at the earliest, on September 23, 2013, the date of Standard’s letter announcing the denial of her first internal appeal. Further, the Virginia Code voids any contractual provision that limits the period in which a plaintiff can bring suit to less than two years from the date the cause of action accrues. Thus, in this case, any contractual limitation that prohibits the filing of a civil action before September 23, 2015 is unenforceable. By every calculation, the limitation period contained in the policy expires well before that date and is unenforceable. The court denied Defendant’s motion and held that Plaintiff’s complaint is not time-barred.
In Plotnick v. Computer Sciences Corp. Deferred Comp. Plan For Key Executives, No. 14-CV-303 KM, 2015 WL 4716116 (D.N.J. Aug. 7, 2015), Plaintiff filed a putative class action lawsuit alleging that CSC violated ERISA by retroactively applying an amendment to the benefits plan in which he participates. Defendants moved to transfer venue to the Eastern District of Virginia, which the court granted. Plaintiff maintains residences in Jacksonville, Alabama, and Atlantic City, New Jersey. Defendant is headquartered in Falls Church, Virginia. The court found that Defendant had made the requisite showing under 28 U.S.C. § 1404(a) in support of the transfer. First, this action could have been brought in the Eastern District of Virginia since the benefits plan that is the subject of this litigation was administered from CSC’s headquarters in Falls Church, Virginia, which lies in that district. Second, the private factors weigh in favor of transfer since Plaintiff moved his permanent residence to Alabama in August 2009 and his diminished presence in New Jersey weighs in favor of transfer. Finally, the public factors announced in Jumara do not cut against transfer since there are practical considerations which could make the litigation easier and more expeditious, or less expensive if the matter is transferred to the Eastern District of Virginia. The court found the remaining factors to be neutral.
Withdrawal Liability & Unpaid Benefit Contributions
In Bd. of Trustees of the Laborers Health & Welfare Trust Fund for Northern California v. Contractors Chem., Inc., No. 14-CV-04159-JD, 2015 WL 4692440 (N.D. Cal. Aug. 6, 2015), the Court granted plaintiff’s motion for default judgment against Contractors Chemical in the amount of $11,520.80 for unpaid contributions, $19,154.58 for interest and liquidated damages, and $9,782.16 for attorneys’ fees and costs.
In Bd. of Trustees v. Midatlantic Site Servs., LLC, No. 1:14CV1281, 2015 WL 4634417 (E.D. Va. Aug. 3, 2015), the court ordered a default judgment be entered against Defendant Midatlantic Site Services, LLC in favor of Plaintiffs in the total amount of $6,790.01, which includes attorneys’ fees in the amount of $5,794.95 and $628.00 in costs. The court also ordered Defendants to submit to an audit of its wage, payroll, personnel records and project records for all periods for which the Defendant is obligated to contribute to the Plaintiffs. The court enjoined Defendant to submit complete and accurate remittance reports containing information such as: (1) all employees for whom contributions are due; (2) the hours worked by employees; (3) the hours for which employees were paid; (4) the gross earnings of employees; and (5) the contributions due to the Plaintiffs.
* Please note that these are only case summaries of decisions as they are reported and do not constitute legal advice. These summaries are not updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The cases reported above were handled by other law firms but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Kantor & Kantor LLP may be able to advise you so please contact us. Case summaries authored by Michelle L. Roberts, Partner, Kantor & Kantor LLP, 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel: 510-992-6130.