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ERISA Watch – Fifth Circuit Holds That Firestone Requires Deference to Administrator’s Factual Determinations Even under De Novo Review

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This week’s notable decision is Ariana M. v. Humana Health Plan of Texas, Inc., No. 16-20174, __F.3d__, 2017 WL 1423765 (5th Cir. Apr. 21, 2017), where the court affirmed a health plan’s denial of coverage for continued partial hospitalization for mental health treatment.  Notable is the court’s analysis of the standard of review.  The court explained that the plain text of Texas Insurance Code Section 1701.062(a) provides only that a discretionary clause cannot be written into an insurance policy; it does not mandate a standard of review.  In Pierre v. Connecticut General Life Insurance Co./Life Insurance Co. of North America, 932 F.2d 1552 (5th Cir. 1991), the Fifth Circuit interpreted Firestone to not require de novo review for factual determinations and instead found that an abuse of discretion standard of review is appropriate for reviewing a plan administrator’s factual determinations.  Relying on Pierre, the court found that Texas’s anti-discretionary clause does not change the fact that, with or without a discretionary clause, a district court rejects an administrator’s factual determinations in the course of a benefits review only upon the showing of an abuse of discretion.  Thus, the Texas law does not defeat Pierre deference.

Firestone held that a denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.  In my opinion, if a plan or policy is divested of discretionary authority, there is no basis in Firestone to afford deference to an administrator’s factual determinations.  But, no need to defer to me.  Read Firestone and let me know what you think!

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

Attorneys’ Fees

Second Circuit

Dwinnell v. Federal Express Long Term Disability Plan, et al., No. 3:14-CV-01439 (JAM), 2017 WL 1371254 (D. Conn. Apr. 14, 2017) (Judge Jeffrey Alker Meyer).  The court awarded $40,657.75 in attorney’s fees and $400 in costs in this matter where it previously determined that Aetna acted arbitrarily and capriciously by failing to conduct a vocational analysis, and instructed Defendants to reconsider Plaintiff’s claim after conducting a vocational review in compliance with Demirovic v. Bldg. Serv. 32 B-J Pension Fund, 467 F.3d 208 (2d Cir. 2006).

Breach of Fiduciary Duty

First Circuit

Barchock v. CVS Health Corp., No. CV 16-061-ML, 2017 WL 1382517 (D.R.I. Apr. 18, 2017) (Judge Mary M. Lisi).  Plaintiffs alleged that Defendants breached their fiduciary duties owed to them and the ESOP by imprudently investing too much of the Plan’s Stable Value Fund assets in ultra-short-term case management funds that provided low investment returns.  The court granted Defendants’ motion to dismiss for failure to state a claim since the Fund was invested in conformance with its stated objective and whether that strategy was prudent cannot be measured in hindsight.

Seventh Circuit

Limbach v. Weil Pump Co., Inc., No. 15-C-1531, 2017 WL 1379360 (E.D. Wis. Apr. 14, 2017) (Judge Lynn Adelman).  Plaintiff brought claims for breach of fiduciary duty against Defendant based on its failure to automatically furnish summary plan descriptions to plan participants.  The court determined that Section 1132(c)(1)(B) is not to compensate the plaintiff for any harm that may have been caused by the administrator’s breach of its fiduciary duty to automatically provide the plaintiff with other plan information.  The court rejected Plaintiff’s attempt to invoke equitable estoppel as a remedy.  Similarly, the court dismissed Plaintiff’s claim for disgorgement because Plaintiff has not alleged facts suggesting that Defendant gained any benefit by breaching its fiduciary duty to prepare and automatically furnish the summary plan description to plan participants.

Eighth Circuit

Blue Cross Blue Shield of Minnesota as Adm’r Civ of the Blue Cross & Blue Shield of Minnesota Pension Equity Plan, et al., v. Wells Fargo Bank, N.A., No. CV 11-2529 (DWF/KMM), 2017 WL 1373253 (D. Minn. Apr. 13, 2017) (Judge Donovan W. Frank).  In this litigation involving allegations of Wells Fargo’s mishandling of certain investments during the Great Recession, the court granted Defendant’s motion to file a motion for reconsideration on the issue of the procedural effect of the jury verdict on the Non-ERISA Plaintiffs’ request for injunctive relief under the Deceptive Trade Practices Act.

Eleventh Circuit

Hugler v. Truss Sys., LLC, No. 3:15-CV-94-J-32JRK, 2017 WL 1365475 (M.D. Fla. Apr. 14, 2017) (Judge Timothy J. Corrigan).  Summary judgment in favor of the Acting Secretary is appropriate because the Plan in question is an ERISA Plan; Defendants were Plan fiduciaries who made unauthorized distributions from the Plan to the Company totaling $111,624.67, causing the Plan to engage in prohibited transactions.  As fiduciaries of the Plan, Defendants are liable for the losses to the Plan, including the lost earnings and interest.

Class Actions

Second Circuit

Barnes Group, Inc. v. International Union United Automobile Aerospace & Agricultural Implement Workers of America, et al., No. 3:16-CV-00559 (MPS), 2017 WL 1407638 (D. Conn. Apr. 19, 2017) (Judge Michael P. Shea).  The court granted the joint motion for class certification and certified a class for purposes of the claim seeking a declaratory judgment that the UAW and its affiliated Locals have authority to agree to the changes in retiree medical benefits of the Barnes 2 Retirees, including to agree to apply the changes in retiree medical coverage set forth in the 2016-2017 MOA.

Disability Benefit Claims

Fifth Circuit

Brooks v. Ryder System, Inc., No. 15-20634, __F.App’x__, 2017 WL 1406483 (5th Cir. Apr. 20, 2017) (Before KING, DENNIS, and COSTA, Circuit Judges).  The court affirmed the district court’s grant of summary judgment to Defendant on Plaintiff’s medical and wage replacement claims.  Defendant denied Plaintiff’s medical claim on the grounds that his thumb injury was excluded under the Plan because it was a degenerative non-covered injury and he failed to keep two scheduled medical appointments as required by the Plan, and the wage replacement claim on the ground that he received full pay from the date of the injury through the date of his termination, upon which time his benefits ceased under the Plan.

Sixth Circuit

Keskeny v. United of Omaha Life Ins. Co., No. 16-CV-11362, 2017 WL 1405019 (E.D. Mich. Apr. 20, 2017) (Judge Thomas L. Ludington).  The court overruled Plaintiff’s objections and adopted the report and recommendation in favor of United of Omaha on Plaintiff’s claim for long term disability benefits.  Plaintiff was diagnosed with multiple sclerosis, degenerative disc disease, obesity, hypertension, GERD, anxiety, COPD/asthma, sleep apnea, gastritis, and hair loss.  The court found that United of Omaha gave good reason for discounting Plaintiff’s doctors’ unsupported opinions in determining the extent of Plaintiff’s functional limitations. “Plaintiff has not identified any Sixth Circuit precedent or any Plan language requiring Defendant to conduct an independent medical examination instead of a file review here, where Plaintiff’s self-reported symptoms could have been verified by objective medical data.”

Seventh Circuit

Sumpter v. Metropolitan Life Insurance Company, No. 16-2012, __F.App’x__, 2017 WL 1379191 (7th Cir. Apr. 18, 2017) (Before DIANE P. WOOD, Chief Judge RICHARD A. POSNER, Circuit Judge FRANK H. EASTERBROOK, Circuit Judge).  Plaintiff alleged that he is entitled to an early-payout benefit from the 1992 GM disability plan because GM did not give him plan summaries showing that the benefit was eliminated.  The court found that §1132(a)(1)(B) does not authorize a court to “reform” a plan by reading into it a benefit not provided by the plan’s terms.  Plaintiff’s breach of fiduciary duty claims also fail because MetLife had no duty to distribute the updated plan documents.

Ninth Circuit

Jarillo v. Reliance Standard Life Ins. Co., No. 15CV2677-MMA (BLM), 2017 WL 1400006 (S.D. Cal. Apr. 19, 2017) (Judge Michael M. Anello).  On de novo review, the court determined that Plaintiff met her burden of demonstrating that she is “totally disabled” under the terms of the Plan, where her attending physician reports certifying her disability corroborate her pain complaints, a functional capacity evaluation found only four hours of daily work capacity, an IME relied upon an incomplete medical file and lasted for only ten minutes, and surveillance footage was insufficient to overcome Plaintiff’s showing by a preponderance of the evidence that she is disabled.  The court also took into consideration that Reliance paid benefits for nearly five years, well into the “any occupation” period of disability.  On the issue of the mental health limitation, the court did not decide whose burden it is to prove whether disability was subject to the mental disorder provision because it found that Plaintiff prevails regardless of which party bears the burden.  There was no diagnosis of a mental health condition and the record supports a finding that Plaintiff’s psychological issues arise from her back injury.  The court ordered retroactive payment of benefits and prejudgment interest.

Williams v. Standard Ins. Co., No. 115CV00416DADEPG, 2017 WL 1398819 (E.D. Cal. Apr. 19, 2017) (Judge Dale A. Drozd).  On the standard of review, the court found that the policy in effect on the date of the claim denial included a void and unenforceable discretionary clause and that de novo review of the decision was therefore appropriate.  On the merits of the claim, the court concluded that Standard Insurance was justified in denying Plaintiff’s long term disability benefits.

Exhaustion of Administrative Remedies

Sixth Circuit

Stacy v. Appalachian Reg’l Healthcare, Inc., No. CV 16-186-DLB, 2017 WL 1381660 (E.D. Ky. Apr. 17, 2017) (Judge David L. Bunning).  Plaintiff submitted her administrative appeal 452 days late.  The court held that Kentucky’s notice-prejudice rule requires insurers to prove prejudice when an insured belatedly files a claim, but there is no indication from Kentucky case law that the notice-prejudice rule should be extended to cover administrative appeal deadlines.  Thus, the notice-prejudice rule does not prevent Reliance from refusing to consider Plaintiff’s untimely appeal and does not excuse Plaintiff’s failure to exhaust her administrative remedies.  Plaintiff failed to satisfy the high burden for futility and the totality of the circumstances does not weigh in favor of equitably tolling the appeal period.  The court dismissed the claim with prejudice.

Ninth Circuit

Jantos v. Prudential Life Ins. Co. of Am., No. 2:15-CV-01530-RAJ, 2017 WL 1408151 (W.D. Wash. Apr. 20, 2017) (Judge Richard A. Jones).  Plaintiff’s lawsuit challenging the calculation of her long term disability benefit is dismissed (without prejudice) for failure to exhaust administrative remedies.  The court rejected Plaintiff’s argument that the approval letter, which did not give appeal rights as required by ERISA’s regulation, was not an “adverse benefit determination,” and she is excused from any exhaustion requirement.

Life Insurance & AD&D Benefit Claims

Ninth Circuit

Sugiyama v. Unum Life Ins. Co. of Am., No. 16-CV-05032-PJH, 2017 WL 1374650 (N.D. Cal. Apr. 17, 2017) (Judge Phyllis J. Hamilton).  ERISA regulation, 29 C.F.R. § 2560.503-1(f), is ambiguous as to whether an administrator’s deadline to make a decision runs from the date the employer received the claim for AD&D benefits or when Unum received the claim.  Assuming the former and that Unum’s written notice of an extension was seven days late, Plaintiff is deemed to have exhausted administrative remedies.  However, Plaintiff is not entitled to a limitation on the scope of the administrative record.  Unum’s procedural violation can be excused under the “substantial compliance” doctrine.  Substantive relief based on a procedural violation is appropriate only if there is substantive harm.  Even if there was substantive harm here, the court found that the equities favor considering the full record that Unum relied on to make its claim decision, including evidence after the 90-day deadline to make a decision.

Medical Benefit Claims

Fifth Circuit

Ariana M. v. Humana Health Plan of Texas, Inc., No. 16-20174, __F.3d__, 2017 WL 1423765 (5th Cir. Apr. 21, 2017) (Before PRADO, HIGGINSON, and COSTA, Circuit Judges).  In this matter where Plaintiff challenged the health plan’s denial of coverage for continued partial hospitalization for mental health treatment, the court affirmed the district court’s grant of summary judgment to the health plan.  The district court did not err by applying abuse of discretion, instead of a de novo standard, to assess the health plan’s factual determinations.  The Texas’s anti-discretionary clause does not change the fact that in the Fifth Circuit, with or without a discretionary clause, a district court rejects an administrator’s factual determinations in the course of a benefits review only upon the showing of an abuse of discretion.  On the merits, the court found that the health plan’s consideration of the Mihalik criteria (a privately licensed review criteria created by the Mihalik Group) was proper and Plaintiff’s continued partial hospitalization was not medically necessary.

Pension Benefit Claims

First Circuit

Tatupu v. Bert Bell/Peter Rozelle NFL Player Ret. Plan, No. CV 16-11131-DPW, __F.Supp.3d__, 2017 WL 1398645 (D. Mass. Apr. 18, 2017) (Judge Douglas Woodlock).  The court will review de novo the plan administrator’s decisions concerning whether a domestic relations order is a qualified domestic relations order (QDRO) under ERISA and the construction of that QDRO.  The court denied Defendant’s motion to dismiss and explained that if Plaintiff was granted rights to her former spouse’s pension under her divorce decree, a postmortem court order that complies with ERISA’s statutory requirements does not create new benefits not otherwise payable.  Because the court did not have the divorce decree, it could not decide whether Plaintiff had a pre-existing interest in the pension.

Pleading Issues & Procedure

Seventh Circuit

Reinwand v. National Electrical Benefit Fund, No. 16-3381, __F.App’x__, 2017 WL 1364979 (7th Cir. Apr. 14, 2017) (Before JOEL M. FLAUM, Circuit Judge ILANA DIAMOND ROVNER, Circuit Judge ANN CLAIRE WILLIAMS, Circuit Judge).  Plaintiff’s claim that the Plan’s decision to deny his claim for disability benefits violated his “constitutional rights,” as enforceable under 42 U.S.C. § 1983, is subject to dismissal since Defendants are not state actors.

Retiree Medical

Sixth Circuit

Int’l Union, United Auto., Aerospace & Agric. Implement Workers of Am. (UAW) v. Kelsey-Hayes Co., No. 15-2285, __F.3d__, 2017 WL 1404189 (6th Cir. Apr. 20, 2017) (Before: GILMAN, GIBBONS, and STRANCH, Circuit Judges).  The court affirmed the district court’s denial of Defendants’ motion for summary judgment and granted Plaintiff-retirees partial summary judgment, as well as a permanent injunction ordering Defendants to reinstate the retirees’ group-insurance plan.  The court modified the permanent injunction to exclude Northrop Grumman.

Cole v. Meritor, Inc., No. 06-2224, __F.3d__, 2017 WL 1404188 (6th Cir. Apr. 20, 2017) (Before: SUHRHEINRICH, GILMAN, and WHITE, Circuit Judges).  In 2008, the court decided that retired employees of Meritor, Inc. and Meritor’s predecessors have a vested right to lifetime healthcare benefits.  Meritor filed a timely petition to hear, which was held in abeyance for eight years.  In those years, the Supreme Court abrogated the Yard-Man line of cases in M & G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (2015), and the Sixth Circuit in Gallo v. Moen Inc., 813 F.3d 265 (6th Cir.), cert. denied, 137 S.Ct. 375 (2016), held that a series of CBAs materially indistinguishable from those involved here did not provide the retirees with lifetime healthcare benefits.  The court found that this case is now controlled by Tackett and Gallo so it granted Meritor’s petition to rehear, reversed the judgment of the district court, and remanded the case for any further proceedings that might be necessary.

Statute of Limitations

Second Circuit

Reches v. Morgan Stanley & Co. Inc., No. 16-3294-CV, __F.App’x__, 2017 WL 1379391 (2d Cir. Apr. 14, 2017) (PRESENT: PETER W. HALL, GERARD E. LYNCH, CHRISTOPHER F. DRONEY, Circuit Judges).  The court ruled that there was no error in any aspect of the district court’s dismissal of Plaintiff’s claims for pension and stock benefits on timeliness grounds:  (1) the district court correctly determined that Plaintiff’s claims accrued when he learned that he was being classified as a leased employee because that information constituted notice that Defendant had repudiated Plaintiff’s eligibility for employee benefits, including pension and stock benefit options; (2) the district court did not err in rejecting Plaintiff’s “special solicitude” equitable tolling theory since there was no “extraordinary circumstance;” and (3) although ordinarily not proper, the district court committed no error in dismissing sua sponte on limitations grounds.

D.C. Circuit

Untalasco v. Lockheed Martin Corp., No. 16-CV-0672 (KBJ), __F.Supp.3d__, 2017 WL 1383646 (D.D.C. Apr. 18, 2017) (Judge Ketanji Brown Jackson).  Plaintiff, filing pro se from the Philippines, challenged Lockheed’s decision to deny him payment of his deceased sister’s pension benefits.  The court granted Lockheed’s motion to dismiss because Plaintiff’s complaint is untimely (filed more than four years after the final denial letter and beyond the applicable three-year limitations provision), and because Plaintiff has not established any basis for the court to toll the limitations period.

Statutory Penalties

Seventh Circuit

Limbach v. Weil Pump Co., Inc., No. 15-C-1531, 2017 WL 1379360 (E.D. Wis. Apr. 14, 2017) (Judge Lynn Adelman).  On Plaintiff’s Section 502(c) claim, the court determined that the inability to obtain information is itself an injury in fact, and that Defendant’s failure to provide Plaintiff with a summary plan description within 30 days of her attorney’s specific request for that information caused Plaintiff a concrete injury.  But here, Plaintiff did not make a request for the SPD since her request at issue was not clear that she was seeking documents.

Eleventh Circuit

Laird v. Aetna Life Ins. Co., No. 1:16-CV-539-GMB, 2017 WL 1405161 (M.D. Ala. Apr. 19, 2017) (Magistrate Judge Gray M. Borden).  Statutory penalties may attach to a violation of § 1024(b)(4), but not to a violation of § 1024(b)(1), since Section 1132(c)(1)(B) unambiguously requires a “request for any information” for the statutory penalty to be appropriate.

Venue

First Circuit

Tatupu v. Bert Bell/Peter Rozelle NFL Player Ret. Plan, No. CV 16-11131-DPW, __F.Supp.3d__, 2017 WL 1398645 (D. Mass. Apr. 18, 2017) (Judge Douglas Woodlock).  In this matter involving a claim for pension benefits pursuant to a nunc pro tunc domestic relations order, Defendants claimed that venue in Massachusetts is improper.  Plaintiff resides in California and Defendant is headquartered in Maryland.  The connection to Massachusetts is that Plaintiff and her ex-spouse lived in and accrued the right to pension benefits within the District of Massachusetts.  The court held that Defendants failed to meet their burden of showing that any inconvenience of litigating in Massachusetts is sufficiently burdensome to justify disturbing Plaintiff’s choice of venue.

 

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