This week’s notable decision is Chesemore, et al. v. Fenkell, No. 14-3181, __F.3d__, 2016 WL 3924308 (7th Cir. July 21, 2016), a class action matter alleging ERISA breach of fiduciary duty claims in connection with the transfer of pension accounts from the Alliance Holdings, Inc. ESOP to the Trachte ESOP. The transaction resulted in the Trachte ESOP paying $45 million for 100% of Trachte’s stock and incurring $36 million in debt. Following a bench trial, the district court issued a comprehensive opinion finding the defendants liable. It subsequently crafted a remedial order making the class and a subclass whole, and then awarded attorney’s fees and approved settlements among some of the parties. Defendant David Fenkell appealed and challenged the remedial order, the award of attorney’s fees, and the settlements by his codefendants. Fenkell challenged the district court’s order requiring him to indemnify his co-fiduciaries. The Seventh Circuit affirmed the district court and held that the court had the authority to order Fenkell to indemnify the new Trachte ESOP trustees since that remedy is within the court’s equitable powers and is consistent with principles of trust law within which ERISA operates. Additionally, even though Fenkell was not a trustee or other named fiduciary of the new Trachte ESOP, he and Alliance were acting as functional fiduciaries with respect to the transactions at issue and could be ordered to indemnify the co-fiduciaries. Lastly, the court affirmed the district court’s restoration order, prejudgment interest award, attorneys’ fees and costs award, and contempt order. This matter was handled by our colleague Joseph Barton of Cohen Milstein and more information about the case may be found here: http://www.cohenmilstein.com/case-study/trachte-esop-litigation.
Select Slip Copy & Not Reported Decisions
- In unpaid contributions matter where the court ruled in Defendant’s favor on issue as to whether pension fund payments had to be paid for Local 628’s “personal holidays,” awarding Plaintiffs $8,452.50 in attorney’s fees ($21,217.50 was sought), $1,180.33 in costs, $995.67 in interest, and $619.77 in liquidated damages. Teamsters Health v. Courier-Post Co., No. 15-844 (JS), 2016 WL 3922634 (D.N.J. July 18, 2016) (Judge Joel Schneider).
Breach of Fiduciary Duty
- In matter where the district court found in favor of Trachte ESOP participants on breach of fiduciary duty claim related to transaction which resulted in ESOP paying $45 million for 100% of Trachte’s stock and incurring $36 million in debt, affirming the district court and holding that: (1) the district court had the authority to order fiduciary Fenkell to indemnify the new Trachte ESOP trustees since that remedy is within the court’s equitable powers and is consistent with principles of trust law within which ERISA operates; (2) Fenkell and Alliance were acting as functional fiduciaries; and (3) restoration order, prejudgment interest award, attorneys’ fees and costs award, and contempt order were proper. Chesemore, et al. v. Fenkell v. Alliance Holdings, Inc., et al., No. 14-3181, __F.3d__, 2016 WL 3924308 (7th Cir. July 21, 2016) (Before KANNE and SYKES, Circuit Judges, and ELLIS, District Judge).
- In action challenging T-Mobile’s adoption of a uniform policy excluding any coverage for Applied Behavior Analysis (“ABA”) therapy to treat Autism Spectrum Disorder, including any coverage that may be medically necessary, granting unopposed motion for class certification but denying preliminary approval of the settlement agreement. The proposed Settlement Agreement provides prospective relief following a “best practice” model for delivery of ABA therapy, as well as a settlement fund of $676,935.00 to address claims for reimbursement for any members who paid for ABA services out-of-pocket, attorneys’ fees, costs, claims administration costs, and an incentive award, but the court found that the Released Claims are phrased too broadly and appear to preclude class members from bringing any claims that the Named Plaintiff could bring, even if those claims are beyond the scope of the pertinent factual basis. The court recommends that the released claims relate only to T-Mobile’s denials of coverage for ABA therapy. The court also questioned $10,000 incentive award. D. v. T-Mobile USA, Inc. Employee Benefit Plan, et al., No. 2:15-CV-00180-RAJ, 2016 WL 3882919 (W.D. Wash. July 18, 2016) (Judge Richard A. Jones).
Disability Benefit Claims
- In matter where the reason for Plaintiff’s denial of a bonus and termination of employment was in dispute, finding that it was unreasonable for Unum to rely on perfunctory explanations offered by the employer in three telephone conversations to determine the basis of Plaintiff’s loss of income, and remanding to Unum to conduct a more thorough inquiry into the relationship between Plaintiff’s injury and his income loss. Host v. First Unum Life Ins. Co., No. CV 13-11578-GAO, 2016 WL 3814807 (D. Mass. July 13, 2016) (Judge O’Toole).
- Affirming district court’s dismissal of Plaintiff’s long-term disability claim, finding that Unum’s reliance on medical opinions from at least 11 doctors (5 said she could work and five others declined to opine because they were not actually treating her) and surveillance evidence showing Plaintiff driving, walking, smoking, using her cell phone, and doing other routine activities, all without assistance and showing no obvious symptoms of dizziness, tremors, or pain, was not an abuse of discretion. Crox v. UNUM Group Corp., No. 15-6006, __F.App’x__, 2016 WL 3924245 (6th Cir. July 21, 2016) (Before: BOGGS, SILER, and BATCHELDER, Circuit Judges).
- In matter where Plaintiff seeks both STD and LTD benefits for disability caused by chronic fatigue syndrome, Lyme disease, or an unspecified illness which causes extreme fatigue and inability to concentrate, denying both parties’ motions for judgment on the administrative record and remanding the claim to Unum to further develop the record; finding that, on de novo review, Plaintiff’s failure to meet his burden of proof is because Unum failed to ask him for additional testing; finding that Unum appears to conflate the issue of Plaintiff’s work ability with whether he has been properly diagnosed and the proper response would have been for Unum to inform Plaintiff of the necessary testing rather than simply denying his claim. Bunger v. Unum Life Ins. Co. of Am., No. 2:15-CV-01050-RAJ, 2016 WL 3912986 (W.D. Wash. July 20, 2016) (Judge Richard A. Jones).
- Granting summary judgment in favor of Defendants on Plaintiff’s long-term disability claim and finding that: (1) there is no conflict of interest where Aetna determines benefit eligibility but FedEx funds the Plan; (2) Aetna reasonably interpreted SSA’s findings that Plaintiff could walk 1 hour and sit 4 hours to mean that she could work at least five hours a day in a combination of sedentary and light physical settings; (3) Aetna considered a favorable compensation and pension review at the VA OPC but later records showed improvement in Plaintiff’s condition; and (4) Aetna reasonably relied on peer review reports by Drs. John-Paul Rue and Martin Mendelssohn. Mercado v. Fed. Express Corp., No. 15-21472-CIV, 2016 WL 3905719 (S.D. Fla. July 19, 2016) (Judge Marcia G. Cooke).
- In long-term disability benefit matter: (1) ordering that Defendant need not respond to any discovery requests that are expressly related to the previously dismissed disgorgement claim; (2) noting that Plaintiff’s instruction at the top of her discovery requests informing Defendant to contact counsel for any clarification before the expiration of the 30-day response deadline adds obligations beyond the scope of Rules 33 and 34 and any court orders; (3) denying motion to compel as to interrogatories seeking identifying information about each person involved in the LTD claim and appeal denial and Liberty Life’s performance review procedures for disability claim unit personnel; (4) granting motion to compel interrogatories seeking material factual basis for each affirmative defense stated in Liberty Life’s answer to the complaint, information in its possession regarding any incentive, bonus, or reward programs or systems for disability claims personnel, information regarding Defendant’s relationship with third party, CompPartners, and the specific reasons and documents supporting claim and appeal denial; (5) granting request for production of documents relating to Liberty Life’s training materials and manuals utilized by the LTD claims unit in processing Plaintiff’s claim, the long-term disability claims unit organizational structure, and the contracts, draft reports, final reports, authorization to affix a physician signature to a final report, dictated opinions, correspondence, emails, notes, diary entries, and statistical reports relating to third-party CompPartners; and (6) denying request for production of documents seeking compensation and performance reviews for LTD personnel. Scott-Warren v. Liberty Life Assurance Company of Boston, No. 3:14-CV-738-CRS-CHL, 2016 WL 3866617 (W.D. Ky. July 13, 2016) (Magistrate Judge Colin Lindsay).
- Finding that Plaintiff is entitled to take a Rule 30(b)(6) deposition of Liberty Life’s designated representative(s) on the topics consistent with the court’s rulings as to Plaintiff’s written discovery requests (noted above); reminding parties that the general rule is that the deposition of a corporation by its agents and officers should be taken at the corporation’s principal place of business; denying request for sanctions for failure to appear at noticed deposition. Scott-Warren v. Liberty Life Assurance Company of Boston, No. 3:14-CV-738-CRS-CHL, 2016 WL 3876660 (W.D. Ky. July 13, 2016) (Magistrate Judge Colin Lindsay).
- In long-term disability benefit matter, granting Plaintiff’s motion seeking an order requiring Reliance Standard Life Insurance Company to provide Plaintiff the administrative record and claim file, but denying Plaintiff’s motion seeking an order requiring Reliance Standard to submit initial Rule 26(a) disclosures, and to permit Plaintiff “the full panoply of discovery provided for by the Federal Rules of Civil Procedure” since Plaintiff has not made a showing sufficient to meet the conflict of interest exception to discovery in ERISA cases. Dragus v. Reliance Standard Life Ins. Co., No. 15-C-09135, 2016 WL 3940106 (N.D. Ill. July 21, 2016) (Judge Marvin E. Aspen).
- Following grant of default judgment against Defendants for delinquent fringe benefit contributions, granting Plaintiffs’ motion to compel post-judgment discovery and ordering deposition of representative of judgment debtor pursuant to FRCP 69. Carpenters’ District Council Of St. Louis And Vicinity, et al., v. F.G. Lancia Custom Woodworking, LLC, et al., No. 4:06-CV-1673 CAS, 2016 WL 3903209 (E.D. Mo. July 19, 2016) (Judge Charles A. Shaw).
Medical Benefit Claims
- Granting summary judgment in favor of Plaintiff and finding that Defendant abused its discretion in denying payment for IVIG maintenance therapy for Plaintiff’s Myasthenia Gravis, where Defendant made a strategic decision to deny coverage for IVIG treatment on the basis of a global policy that disregards the medical circumstances of individual patients; granting Plaintiff’s motion for attorneys’ fees. Clauss v. Geisinger Health Plan, No. 3:14-CV-00889, 2016 WL 3940714 (M.D. Pa. July 21, 2016) (Judge Edwin Kosik).
- Granting Plaintiff’s motion for default judgment against plan participants for fraudulently obtained medical benefits under Teamsters health fund, where beneficiary and his spouse were “separated” but did not inform the fund of their status; reserving judgment on the issue of actual damages and interest where the Fund failed to submit any documentation supporting its request for $192,872.00 in fraudulently obtained medical benefits; and directing Plaintiff to file an affidavit supporting his request for an award of actual damages and interest. Einhorn v. Connor, No. 15-5910 (RBK/AMD), 2016 WL 3919660 (D.N.J. July 19, 2016) (Judge Kugler).
Pleading Issues & Procedure
- In long-term disability matter where Plaintiff seeks benefits under Section 502(a)(1)(B) and also alleges that Liberty Life committed various procedural infractions during the claims process, denying Liberty Life’s motion for partial dismissal of Plaintiff’s equitable relief claim under Section 502(a)(3). Though Plaintiff may not succeed on claims for both legal and equitable relief, he “may state as many separate claims or defenses as [he] has, regardless of consistency.” R. CIV. P. 8(d)(3). Peterson v. Liberty Life Assurance Company of Boston, No. 1:15-CV-00204-SA-DAS, 2016 WL 3849693 (N.D. Miss. July 13, 2016) (Judge Sharion Aycock).
- Granting summary judgment in favor of MetLife on Plaintiff’s ERISA Section 510 claim where Plaintiff failed to put forward any evidence that MetLife acted with the specific intent to interfere with his benefits when it terminated his employment, and even if he did, MetLife put forward a legitimate nondiscriminatory reason for Plaintiff’s termination, and Plaintiff did not put forward facts upon which a reasonable jury could find that MetLife was motivated by a desire to deprive him of his benefits. Ghorpade v. MetLife, Inc., No. 14-CV-4379 (JPO), 2016 WL 3951183 (S.D.N.Y. July 20, 2016) (Judge J. Paul Oetken).
Statute of Limitations
- Granting Defendants’ motion for summary judgment and finding time-barred Plaintiffs’ breach of fiduciary duty claim related to Defendants’ decision to invest $100 million of pension fund assets in an investment fund known as the Longview or Ultra Fund, where the court found that the “true” breach was Defendants’ decision to approve, without exercising the requisite due diligence of a prudent investigation, the Longview investment and relationship with Amalgamated Bank in the first place, which was consummated at the latest on October 22, 2007, when the Investment Management Agreement with Amalgamated Bank was signed; six-year statute of limitations does not run from last “capital call,” which occurred in February 2009. Slack v. Burns, No. 13-CV-05001-EMC, 2016 WL 3916292 (N.D. Cal. July 20, 2016) (Judge Edward M. Chen).
- In matter where no-fault auto insurer brought an action under federal common law and, in the alternative, under ERISA § 502(a) against an ERISA health plan administrator seeking a declaration of coverage and reimbursement or recoupment from the plan administrator for the cost of a plan participant’s medical care, affirming the district court’s dismissal of Farm Bureau’s claim because it has no standing to bring a claim under federal common law or ERISA § 502(a). Farm Bureau General Insurance Company of Michigan v. Blue Cross Blue Shield of Michigan, No. 15-2323, __F.App’x__, 2016 WL 3924243 (6th Cir. July 21, 2016) (Before: COOK and KETHLEDGE, Circuit Judges; SARGUS, Chief District Judge).
Withdrawal Liability & Unpaid Contributions
- Granting Fund’s motion to dismiss Plaintiff’s first amended complaint because Plaintiff failed to allege facts to support its claim that the Fund had a duty under the federal common law of pension plans to disclose to Plaintiff the change in interest rate assumptions, thus Plaintiff failed to state a claim for fraud by omission or negligent misrepresentation by omission. Elbeco Inc. v. Nat’l Ret. Fund, No. 5:15-CV-00318, 2016 WL 3902933 (E.D. Pa. July 19, 2016) (Judge Joseph F. Leeson).
- Granting Plaintiff’s motion for summary judgment requiring Defendants Central Machine Works, Inc. and Soway, LLC, jointly and severally, to pay the full amount of the employer withdrawal liability assessed by Plaintiff in accordance with the relevant ERISA provisions, and granting Defendants Paul and Sylvia Sowa’s motion for summary judgment with regard to any personal liability for the withdrawal liability in accordance with Plaintiff’s statement that it does not hold the individuals personally liable for that assessment. of Trustees of the W. Metal Indus. Pension Fund v. Cent. Mach. Works, Inc., No. C14-00802 RAJ, 2016 WL 3906894 (W.D. Wash. July 19, 2016) (Judge Richard A. Jones).
- Adopting in part Magistrate Judge’s Findings and Recommendation as follows: (1) modifying one statement to read, “The Audit revealed Gulf Coast may owe Plaintiffs amounts up to $876,177.41 in contributions, $354,761.21 in dues, $160,925.90 in liquidated damages, and $465,859.45 in interest;” (2) granting Gulf Coast’s motion to compel arbitration of the amounts due under the Agreement based on the March 2015 audit and Gulf Coast’s liability for amounts accruing after the March 2015 audit; (3) remanding matter to Arbitrator William P. Hobgood; (4) dismissing the Union’s claim under the LMRA without prejudice, and staying the Trusts’ ERISA claims; (5) denying Gulf Coast’s motion to dismiss the Trusts’ claim for liquidated damages and the alternative motion to transfer this action to the Middle District of Florida with leave to refile. Regional Local Union No. 846, et al. v. Gulf Coast Rebar, Inc., a Florida Corp., f/k/a Gulf Coast Placers, Inc., a Florida Corp., No. 3:11-CV-658-AC, 2016 WL 3765707 (D. Or. July 13, 2016) (Judge Michael H. Simon).
* 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. If you have questions about how the developing law impacts your ERISA benefit claim, contact a reputable ERISA attorney. Case summaries authored by Michelle L. Roberts, Partner, Kantor & Kantor LLP, 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel: 510-992-6130.