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ERISA Watch – Eleventh Circuit Holds That ERISA’s Six-Year Statute of Repose Is Waivable

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This week’s notable decision is Sec’y, U.S. Dep’t of Labor v. Preston, No. 17-10833, __F.3d__, 2017 WL 4545962 (11th Cir. Oct. 12, 2017), a colorful opinion penned by Circuit Judge Kevin Newsom.   On interlocutory appeal brought by the U.S. Department of Labor, the 11th Circuit considered whether a defendant is capable of expressly waiving the six-year statute of repose contained in ERISA Section 413(1), 29 U.S.C. § 1113(1)—or whether the protection provided by Section 1113(1) is so essential that it is inherently indefeasible and unwaivable.  “We won’t bury the lede. In response to the district court’s certified question, we answer yes—Section 1113(1)’s statute of repose is subject to express waiver.”  (In journalism, the lede refers to the introductory section of a news story that is intended to entice the reader to read the full story.)  In coming to this conclusion, the court explained that Section 1113(1) is not jurisdictional.  In other words, it is not a limitations period that is intended to curtail a reviewing court’s jurisdiction.

If you love to read about all things ERISA, there were plenty of other notable decisions from this past week.  Also, check out Truth or consequences (180 million of them), an article published by mediator Bob Blum in the Los Angeles & San Francisco Daily Journal on September 22, 2017.  It contains an excellent decision of the Osberg v. Foot Locker case from the 2nd Circuit Court of Appeals.

Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.

Attorneys’ Fees

Eighth Circuit

Thole v. U.S. Bank, Nat’l Ass’n, No. 16-1928, __F.3d__, 2017 WL 4544953 (8th Cir. Oct. 12, 2017) (Before SMITH, Chief Judge, COLLOTON and KELLY, Circuit Judges).  The court held that the district court did not abuse its discretion in denying the defined benefit pension plan participants’ motion for attorneys’ fees, where the participants failed to produce evidence that their lawsuit was a material contributing factor in Defendants’ making the contribution resulting in the Plan’s overfunded status and any relief that Plaintiffs sought in their complaint.

Breach of Fiduciary Duty

First Circuit

Tracey et al. v. Massachusetts Inst. of Tech. et al., No. CV 16-11620-NMG, 2017 WL 4478239 (D. Mass. Oct. 4, 2017) (Judge Nathaniel M. Gorton).  Plaintiffs, five employees of Massachusetts Institute of Technology who are participants in the MIT Supplemental 401(k) Plan, allege breaches of the ERISA duties of loyalty and prudence arising out of the Plan’s inclusion of retail class options instead of institutional class options in the funds provided by Fidelity.  The court overruled Plaintiffs’ objections to the Magistrate Judge’s Report and Recommendation (R&R) but sustained Defendants’ objections that the prohibited transaction claims under § 1106(a)(1)(D) should be dismissed and Plaintiffs’ duty-to-monitor claim pursuant to § 1106(a)(1)(D) should be dismissed.  The court accepted and adopted all other aspects of the R&R.

Second Circuit

Rosen v. Prudential Ret. Ins. & Annuity Co., No. 17-0239-CV, __F.App’x__, 2017 WL 4534782 (2d Cir. Oct. 11, 2017) (Dennis Jacobs, José A. Cabranes Richard C. Wesley, Circuit Judges).  The court affirmed the district court’s determination that Prudential did not engage in prohibited transactions or breach its fiduciary duties in violation of ERISA by receiving revenue-sharing payments from certain investment options.  The court held that Prudential is not a fiduciary in its role as directed trustee of the Trust assets.  Although Prudential possesses some discretionary authority over investments made in the Separate Accounts, and is a plan fiduciary with respect to those accounts, its receipt of consideration in the form of revenue-sharing payments is not a prohibited transaction or breach of the duties of prudence and loyalty.

Price v. Strianese, et al., No. 17-CV-652 (VEC), 2017 WL 4466614 (S.D.N.Y. Oct. 4, 2017) (Judge Valerie Caproni).  The court granted Defendants’ motion to dismiss Plaintiff’s breach of fiduciary duty claims alleging that Defendants knew or should have known that L-3’s share price was artificially inflated due to the accounting fraud and the material misstatements that resulted from the fraud, but they failed to take any action to protect the retirement savings plan participants from harm resulting from the imprudent investment in L-3 stock.  The court held that the Complaint fails to allege plausibly that Defendants knew or should have known that the L-3 stock fund was an imprudent investment during the putative class period and the Complaint fails to plead a duty of prudence claim.  Plaintiff’s proposed alternative courses of action do not satisfy Fifth Third’s requirement that the alternatives were legally viable or that Defendants could not have concluded that they would do more harm than good.

Eighth Circuit

Thole v. U.S. Bank, Nat’l Ass’n, No. 16-1928, __F.3d__, 2017 WL 4544953 (8th Cir. Oct. 12, 2017) (Before SMITH, Chief Judge, COLLOTON and KELLY, Circuit Judges).  The defined benefit pension plan participants lacked statutory standing to bring their breach of fiduciary duty claims with respect to the Plan’s investing strategy since the Plan was overfunded and there was no actual or imminent injury to the Plan or its participants.

Disability Benefit Claims

Sixth Circuit

Filthaut v. AT&T Midwest Disability Benefit Plan, No. 16-2707, __F.App’x__, 2017 WL 4511487 (6th Cir. Oct. 10, 2017) (BEFORE: ROGERS, COOK, and STRANCH, Circuit Judges).  The court reversed the district court’s grant of summary judgment in favor of Plaintiff on two of three claims she made for short-term disability benefits based on lumbar degenerative disc disease and spondylosis.  The court held that the Plan properly relied on the opinions of independent physician advisors and did not need to order its own physical examination of Plaintiff.  Judge Stranch dissented.

Osborn, Sr. v. Principal Life Ins. Co., No. 2:17-CV-329, 2017 WL 4517621 (S.D. Ohio Oct. 10, 2017) (Judge James L. Graham).  In this lawsuit seeking reinstatement of long term disability benefits, the court dismissed Plaintiff’s breach of fiduciary duty claim under § 1132(a)(3) since it is for the same injury as his § 1132(a)(1)(B) claim, and because Plaintiff may obtain the relief he seeks under § 1132(a)(1)(B), he cannot pursue a separate § 1132(a)(3) claim.  The court also granted Principal’s motion to strike Plaintiff’s request for relief to the extent that Plaintiff seeks an award of benefits “until future order from this court.”

Discovery

Eighth Circuit

Collins v. 3M Co., et al., No. CV 17-529(DSD/DTS), 2017 WL 4535921 (D. Minn. Oct. 11, 2017) (Judge David S. Doty).  Where Plaintiff argued that discovery is necessary to determine whether 3M’s relationship with Sedgwick constitutes a conflict of interest, the court held that the Magistrate Judge’s conclusion that an alleged conflict of interest did not justify discovery was not clearly erroneous or contrary to law.

Tenth Circuit

Baty v. Metropolitan Life Insurance Company, No. 17-1200-EFM-GEB, 2017 WL 4516825 (D. Kan. Oct. 10, 2017) (Magistrate Judge Gwynne E. Birzer).  In this action seeking long-term disability benefits, the court granted Plaintiff’s motion for discovery outside of the administrative record.  The court determined that Plaintiff has met her burden to show the propriety and relevance of some limited extra-record discovery.  Information in the record does not show how the Independent Physician Consultants’ methodologies or opinions are reviewed, whether they are provided any training, how they are paid, or other information indicating the relationship between Defendant and its IPCs.

ERISA Preemption

Ninth Circuit

Summit Estate, Inc. v. Cigna Healthcare of California, Inc., et al., No. 17-CV-03871-LHK, 2017 WL 4517111 (N.D. Cal. Oct. 10, 2017) (Judge Lucy H. Koh).  A residential substance abuse treatment facility brought various claims against an insurance company for failing to pay the usual, customary, and reasonable rate (“UCR”) that it agreed to pay.  The court held that Plaintiff’s claims for breach of express contract, breach of implied contract, and negligent failure to disclose are not preempted under § 1144(a).  The court also held that Defendants have adequately established that the joinder of Cigna Healthcare of California is fraudulent and removal is proper.

Eleventh Circuit

Hope Health & Wellness, Inc., v. Aetna Health, Inc., No. 9:17-CV-80673, 2017 WL 4553453 (S.D. Fla. Oct. 12, 2017) (Judge Robin L. Rosenberg).  “Without sufficient evidence to show assignment, the derivative standing doctrine does not apply and, therefore, there is not complete ERISA preemption. Removal on the basis of federal question jurisdiction, thus, is improper.”

Exhaustion of Administrative Remedies

Seventh Circuit

Meyer v. Grp. Long Term Disability Plan for Employees of Edward D. Jones & Co., L.P., No. 116CV01282JESJEH, 2017 WL 4518606 (C.D. Ill. Oct. 10, 2017) (Judge James E. Shadid).  The court denied Defendants’ motion to dismiss for failing to exhaust administrative remedies by not submitting an appeal within 180 days of the disability claim denial.  The court explained that viewing the Complaint in a light most favorable to the Plaintiff, she sufficiently alleged that her June 2, 2015 letter to Hartford constituted an appeal.  The letter stated, “Hi—Enclosed are my medical records and claim forms from two doctors. Please advise regarding my disability income asap. EDJ [Employer] still has me on part-time, irregular schedule [sic.] leave of absence. My rheumatologist only wants me to work 28 or less hours a week.”  Further, she he actually sent documentation requested by Hartford as necessary for a determination of her claim and she mailed the June 2 letter to the correct P.O. Box for the appeals department.

Life Insurance & AD&D Benefit Claims

Fourth Circuit

Smoak, III v. Cangialosi, et al., No. CV 2:17-1709-RMG, 2017 WL 4481159 (D.S.C. Oct. 6, 2017) (Judge Richard Mark Gergel).  The court denied ADP’s motion to dismiss the claim against it under 29 U.S.C. § 1132(a)(3) based on alleged misrepresentations that the insured would qualify for a $300,000 death benefit without any reduction due to her age, but where the ultimate death benefit payable by Aetna was only $60,000 due to the insured’s age.

Medical Benefit Claims

First Circuit

Doe v. Harvard Pilgrim Health Care, Inc., et al., No. CV 15-10672, 2017 WL 4540961 (D. Mass. Oct. 11, 2017) (Judge Denise J. Casper).  In this lawsuit seeking reversal of the partial denial of health insurance benefits for residential mental health treatment, the court granted summary judgement to Defendants.  “The fact that Jane continued to experience symptoms of her mental ailments does not mean she required continued residential treatment. The diminished intensity of her symptoms, coupled with Jane’s ability to administer her own medication successfully, come and go freely and report any issues as they arose suggests that continued residential treatment was no longer medically necessary.”

Tenth Circuit

Brian C. & Rhonda C. v. Valueoptions, & Conocophillips Medical and Dental Assistance Plan, No. 1:16CV93DAK, 2017 WL 4564737 (D. Utah Oct. 11, 2017) (Judge Dale A. Kimball).  The court granted summary judgment in favor of the Plan, finding that its decision to deny residential treatment benefits for care provided at Solstice Residential Treatment Center in Utah.  Specifically, the court found that Defendants reasonably determined that the patient could be treated effectively at a lower level of care.

Pension Benefit Claims

Third Circuit

Hansen v. International Painters and Allied Trades Industry Pension Plan, et al., No. CV 16-5028, 2017 WL 4539217 (E.D. Pa. Oct. 11, 2017) (Judge Robert F. Kelly, Sr.).  Because the Board of Trustees of the multiemployer pension plan both evaluates claims and the funds are paid out of the Plan, there is a conflict of interest pursuant to Glenn (declining to follow Anderson v. Suburban Teamsters of N. Ill. Pension Fund Bd. of Trustees, 588 F.3d 641, 648 (9th Cir. 2009)).  The court remanded this matter for the Board to take into account whether the employer was obligated to make contributions to the pension plan for the additional hours for workers’ compensation, unemployment compensation, and vacation time.

Fourth Circuit

Innes v. Barclays Bank PLC USA Staff Pension Plan Comm., No. 17-1196, __F.App’x__, 2017 WL 4461030 (4th Cir. Oct. 6, 2017) (Before TRAXLER, KING, and SHEDD, Circuit Judges).  In a per curiam opinion, the court affirmed the district court’s determination that Barclay’s did not abuse its discretion in denying Plaintiff’s claim for pension benefits.

Eleventh Circuit

Bauman v. Publix Super Markets, Inc., No. 17-11709, __F.App’x__, 2017 WL 4510322 (11th Cir. Oct. 10, 2017) (Before HULL, WILSON, and ANDERSON, Circuit Judges).  The court affirmed the district court’s grant of summary judgment to the ESOP Plan Administrator.  The court held that Publix’s Retirement Department did not have actual notice of Bauman’s incompetence and did not err in distributing his ESOP payment to him directly, rather than to his conservator.  The court explained that actual notice means that Publix’s Retirement Department became factually aware of Bauman’s incompetence.  It was not enough that the conservator informed the store where Bauman worked since the company has over 1,100 stores and the Retirement Department was not located in that store.

Pleading Issues & Procedure

Eleventh Circuit

Perera v. Metropolitan Life Insurance Company, No. 3:17-CV-195-J-39MCR, 2017 WL 4541569 (M.D. Fla. Oct. 11, 2017).  In this matter seeking accidental death benefits, the court granted MetLife’s motion to strike Plaintiff’s demand for a jury trial.  Since the claims brought under ERISA are equitable in nature, there is no right to a jury trial.  The court rejected Plaintiffs’ argument that their claims under section 502(a)(1)(B) of ERISA are tantamount to a breach of contract claim, and, therefore, are legal in nature.

Presser v. Union Sec. Ins. Co., No. 17-CV-61184, 2017 WL 4476333 (S.D. Fla. Oct. 6, 2017) (Judge Beth Bloom).  In this dispute over the payment of life insurance benefits, the court determined that the third-party defendant from Minnesota has sufficient contacts with the United States as a whole and this is sufficient for personal jurisdiction given that 29 U.S.C. § 1132(e)(2), ERISA’s service of process provision, provides for nationwide service of process.  Further, he has not demonstrated any constitutionally significant inconvenience that would result from the court’s exercise of jurisdiction over him.  The court also determined that venue is appropriate since the complaint alleges that but for the alleged misconduct, Union Security would have paid the death benefit to Plaintiff in the Southern District of Florida where he resides.  The court denied the third-party defendant’s motion to transfer venue to Minnesota.

Statute of Limitations

Ninth Circuit

Hughes v. United Of Omaha Life Insurance Company, No. 117CV00779DADSAB, 2017 WL 4517801 (E.D. Cal. Oct. 10, 2017) (Judge Dale A. Drozd).  The court determined that Plaintiff’s claim for disability benefits is not barred under the Plan’s contractual limitations provision.  The court analyzed but did not definitively construe the phrase “the period for which the insurer is liable” in Cal. Ins. Code § 10350.7 since the first amended complaint supports an inference that Plaintiff suffers from a disability that continues to the present day.  “Thus, plaintiff’s ERISA claim is not time-barred because either (1) under the majority view, proof of loss has not become due; or (2) under the minority view, plaintiff may recover monthly benefits for which proof of loss was due within three years prior to commencement of this action.”

Eleventh Circuit

Sec’y, U.S. Dep’t of Labor v. Preston, No. 17-10833, __F.3d__, 2017 WL 4545962 (11th Cir. Oct. 12, 2017) (Before WILSON and NEWSOM, Circuit Judges, and MORENO, District Judge).  The court held that ERISA’s limitation-of-actions provision, 29 U.S.C. § 1113(1), is a statute of repose, is not jurisdictional, and is subject to express waiver.

Statutory Penalties

Third Circuit

Hansen v. International Painters and Allied Trades Industry Pension Plan, et al., No. CV 16-5028, 2017 WL 4539217 (E.D. Pa. Oct. 11, 2017) (Judge Robert F. Kelly, Sr.).  Although there was clearly a withholding of the IUPAT Pension Plan document, the court found that the Defendants are not subject to a document penalty under ERISA because Plaintiff never made a follow-up request for the Pension Plan, despite realizing that the document had not been provided, there is no evidence of bad faith or intentional conduct on the part of Defendants, nor did Plaintiff suffer any prejudice as a result of not having the IUPAT Pension Plan before his administrative appeal deadline passed.

Subrogation/Reimbursement Claims

Sixth Circuit

Hagan v. Nw. Mut. Life Ins. Co., No. 3:15-CV-00298-CRS, 2017 WL 4542775 (W.D. Ky. Oct. 11, 2017) (Judge Charles R. Simpson III).  The language under the Policy and the Reimbursement Agreement effectively create a constructive trust or equitable lien on the overpayment of benefits to Plaintiff due to his Work Earnings. The Plan seeks to recover the specific fund of the overpayments, which is a fund distinct from Plaintiff’s general assets.  The court found that an equitable lien has attached to the fund of overpayments in Plaintiff’s possession in the amount of $24,800.08 and Northwestern is entitled to the amount remaining in Plaintiff’s possession.

 

 

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