Unfortunately, this week’s notable decision is a loss for California’s ban on discretionary clauses. In Bain v. United Healthcare Inc., No. 15-CV-03305-EMC, 2016 WL 4529495 (N.D. Cal. Aug. 30, 2016), a matter seeking reimbursement for healthcare expenses, the court held that California Insurance Code Section 10110.6 does not apply because the Plan is governed by New York law. Applying federal choice of law rules, the court found that the Plan’s choice of New York law was not “unreasonable or fundamentally unfair.” First, New York has a substantial relationship to the parties and there is a reasonable basis for New York’s law to be chosen. Second, New York established an enrollee’s right to an external appeal of a final adverse determination by a health care plan. Because New York preserves the independence of decision-makers while affording some protection to enrollees, it was not “fundamentally unfair” to select New York law to govern. Further, the court found that even if California law applied, Section 10110.6 does not apply to health insurance.
Bain is now a bane to claimants who reside in California and are covered by a group disability policy with an unfavorable choice of law provision. Notably, Bain is in conflict with another recent decision out of the same court in Hirschkron v. Principal Life Ins. Co., 141 F. Supp. 3d 1028, 1031 (N.D. Cal. 2015) (holding that the plain language of Section 10110.6 voids discretionary provisions even if the relevant policy, contract, certificate or agreement contains a choice of law provision that ultimately results in the substantive rights and obligations of the parties being governed by the laws of a state other than California). Similarly, in Snyder v. Unum Life Ins. Co. of Am., No. CV 13-07522 BRO RZX, 2014 WL 7734715 (C.D. Cal. Oct. 28, 2014), the court found that Section 10110.6 applies, regardless of the choice of law provision, because the statute reflects the legislature’s intent that all Californians benefit from the right to a fair review and applying the LTD Policy’s choice of law provision would subvert this right and undermine the legislature’s intent. Hopefully, Bain becomes an outlier decision on this issue.
There were many other cases reported this past week. Enjoy!
Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.
- In long term disability case, finding that a “remand simpliciter” is sufficient to constitute “some success on the merits” under Hardt and an endorsement from the Court on the merits of the claim is unnecessary; failure to successfully argue for a de novo standard of review does not justify a reduction in Plaintiff’s fee award; reducing time for hours where Plaintiff failed to provide sufficient contemporaneous documentation and awarding 71.24 hours at a rate of $275 an hour for a total of $19,591. Valentine v. Aetna Life Insurance Company, No. 14CV1752JFBGRB, 2016 WL 4544036 (E.D.N.Y. Aug. 31, 2016)
Breach of Fiduciary Duty
- Affirming judgment of the district court finding WPN and LaBow, named fiduciaries of two defined contribution plans sponsored for the employees of Severstal Wheeling, Inc., liable for breaches of their fiduciary duties arising under ERISA Section 3(21)(A)(ii); district court did not err in finding that they had been granted management control and authority – and thus were fiduciaries under Section 3(21)(A)(iii) of ERISA – regardless of whether they exercised the grant of discretionary authority. Severstal Wheeling, Inc. Retirement Committee v. WPN Corporation, No. 15-2725, __F.App’x__, 2016 WL 4533478 (2d Cir. Aug. 30, 2016) (Present: ROSEMARY S. POOLER, GERARD E. LYNCH, SUSAN L. CARNEY, Circuit Judges).
- Granting Plaintiffs’ motion seeking reconsideration of the court’s summary judgment ruling; finding that Linda Sunderlage was a fiduciary of the Professional Benefit Multiple Employer Welfare Benefit Plan & Trust within the meaning of 29 U.S.C. § 1002(21)(a) under the PBT Trust and 2002 and 2004 loans to Dufferin Capital were prohibited transactions under 29 U.S.C. § 1106. Mintjal v. Trust, No. 08-CV-5681, 2016 WL 4493424 (N.D. Ill. Aug. 26, 2016) (Judge Robert M. Dow, Jr.).
- In matter alleging that the value of the proposed class members’ retirement accounts would have been greater had Defendants chosen alternative funds and/or investment options with either higher returns or lower administrative and management fees, granting Defendants’ motion to dismiss the Complaint where the court found that the facts as pled do not raise a plausible inference that Defendants breached their fiduciary duties and/or duties of loyalty and prudence. White v. Chevron Corporation, et al., No. 16-CV-0793-PJH, 2016 WL 4502808 (N.D. Cal. Aug. 29, 2016) (Judge Phyllis J. Hamilton).
- Affirming the district court’s dismissal of the Plan’s complaint against Zenith (former third-party administrator) for failing to state a claim for breach of fiduciary duties or self-dealing under ERISA because Zenith was not a fiduciary of the plan (it’s activities were ministerial in nature), and, in any event, the claims were time-barred pursuant to the six-year statute of limitations in 29 U.S.C. § 1113(1). Carolinas Electrical Workers Retirement Plan, et al. v. Zenith American Solutions, Inc., No. 15-14046, __F.App’x__, 2016 WL 4547168 (11th Cir. Sept. 1, 2016) (Before MARCUS, MARTIN, and ANDERSON, Circuit Judges).
- In ESOP litigation, dismissing Plaintiff’s duty-of-prudence claim to the extent that the alleged breach is Defendants’ imprudent decision to hold Company Stock since the limitations period ran in early-to-mid 2012, well before Plaintiff filed her Complaint; dismissing Plaintiff’s duty-of-loyalty claim because of lack of factual allegations of what Defendants failed to disclose and what special circumstances warranted disclosure; denying Defendants’ motions to dismiss Plaintiff’s duty-of-prudence claim on the failure-to-investigate basis – Dudenhoeffer does not require that the alternative-action requirement apply to every potential prudence claim; denying dismissal of Plaintiff’s duty-to-monitor claim. Brannen v. First Citizens Bankshares Inc., No. 6:15-CV-30, 2016 WL 4499458 (S.D. Ga. Aug. 26, 2016) (Judge J. Randal Hall).
Disability Benefit Claims
- Finding that the Plan’s decision to terminate Plaintiff’s long term disability benefits was not arbitrary and capricious where “new medical evidence” supported a termination of benefits and Liberty Life had approved the LTD claim before it had received Plaintiff’s LTD application, supporting medical information, or neuropsychological evaluations; although records supported Plaintiff’s complaints of fatigue, the record lacked any valid or reliable evidence that neurocognitive or psychiatric symptoms are causing functional impairment. Swanberg v. PNC Fin. Servs. Grp., Inc., No. CV 2:15-544, 2016 WL 4493684 (W.D. Pa. Aug. 26, 2016) (Judge Joy Flowers Conti).
- Determining that Hartford did not abuse its discretion when it denied Plaintiff’s long term disability claim, where Hartford Life relied upon the opinions of three file reviewers and two of Plaintiff’s own doctors to conclude that the objective evidence in Plaintiff’s file did not support a finding of disability. Hartford’s determination that Plaintiff’s disability was pre-existing was not arbitrary and capricious where there is evidence in the administrative record that Plaintiff’s back condition and associated pain existed during the relevant time period. Wilson v. Hartford Life & Accident Ins. Co., No. 14-CV-14741, 2016 WL 4537832 (E.D. Mich. Aug. 31, 2016) (Judge Laurie J. Michelson).
- LINA’s denial of long term disability benefits was not an abuse of discretion. Although SSA found Plaintiff disabled, LINA was operating on more current and complete information than SSA because it had nearly nine months of additional information and the SSA standards are not binding on LINA. Under the Plan’s own terms, LINA had to consider whether Plaintiff could retrain into a new position, which it determined that he could based on his prior managerial experience. Kemper v. Life Ins. Co. of N. Am., No. CV 15-82-DLB-CJS, 2016 WL 4573911 (E.D. Ky. Aug. 31, 2016) (Judge David L. Bunning).
- Finding that termination of LTD benefits was not arbitrary and capricious; Liberty Life was not responsible for obtaining medical records; whether Plaintiff would be able to find a job is not the standard for disability under the policy; Liberty Life did not totally ignore the available opinions of Plaintiff’s treating physicians and they appeared to have similar opinions about Plaintiff’s functional capacity; a file review, versus a physical examination, was sufficient in this case. Demeritt v. Liberty Life Assurance Co. of Boston, No. 1:15CV146, 2016 WL 4494398 (S.D. Ohio Aug. 26, 2016) (Judge Michael R. Barrett).
- In matter seeking LTD benefits where the claimant died during pendency of the action, granting Plaintiff’s motion under Rule 25(a) to substitute the claimant’s mother as the proper party; denying United of Omaha’s motion for summary judgment on the issue of timeliness of the lawsuit because the court cannot conclude as a matter of law that it was reasonably possible for Plaintiff to submit the LTD proof of loss form within 90 days. Chalfant v. United of Omaha Life Ins. Co., No. 15-CV-03577-HSG, 2016 WL 4539453 (N.D. Cal. Aug. 31, 2016) (Judge Haywood S. Gilliam).
- Dismissing employer, Honda, from lawsuit for short-term disability benefits since Honda did not play any role in administrating Plaintiff’s claim or otherwise controlling the short-term disability group plan. Dempsey v. Sedgewick Claims Mgmt. Servs., Inc., No. 4:16-CV-1003-VEH, 2016 WL 4530130 (N.D. Ala. Aug. 30, 2016) (Judge Virginia Emerson Hopkins).
- In long term disability case, where Liberty seeks protection of personnel documents or information regarding training provided to specific employees who were decisionmakers with respect to Plaintiff’s LTD claim and documents and information that contain confidential, proprietary and/or trade secrets, denying Liberty Life’s motion for entry of a protective order of confidentiality since Liberty failed in its motion to sufficiently demonstrate that the documents are confidential commercial information for which disclosure will cause a clearly defined and very serious injury and that there is good cause for entry of a protective order. Owens v. Liberty Life Assurance Co. of Boston, No. 415CV00071JHMHBB, 2016 WL 4523889 (W.D. Ky. Aug. 29, 2016) (Magistrate Judge H. Brent Brennenstuhl).
- Liberty is not entitled to reconsideration of the portion of the prior order granting discovery under Plaintiff’s interrogatory number 15 seeking information about the nature of Liberty Life’s relationship with medical opinion providers since Liberty was aware that it would have to review a significant number of files in order to respond to interrogatory number 15 when it advanced its initial opposition to Plaintiff’s motion for discovery. Owens v. Liberty Life Assurance Co. of Boston, No. 415CV00071JHMHBB, 2016 WL 4499098 (W.D. Ky. Aug. 26, 2016) (Magistrate Judge H. Brent Brennenstuhl).
Exhaustion of Administrative Remedies
- Concluding that MetLife received Plaintiff’s written request for review when MetLife received the Appeal Letter via facsimile on October 28, 2015, even though it did not receive the supporting documents on cd rom until November 4, 2015; finding no substantial compliance with ERISA’s deadlines where MetLife did not render a decision on Plaintiff’s appeal within 45 days of its receipt of Plaintiff’s appeal and it did not seek, in writing or otherwise, an extension of time to review Plaintiff’s appeal prior to the 45-day deadline. Perry v. Metro. Life Ins. Co., No. 4:16-CV-135 (CDL), 2016 WL 4536441 (M.D. Ga. Aug. 30, 2016) (Judge Clay D. Land).
Life Insurance & AD&D Benefit Claims
- Affirming dismissal of dispute over life insurance proceeds brought by decedent’s mother against decedent’s daughter, both of whom were named as co-beneficiaries, based on allegation that the designation was legally invalid. Mother failed to state a valid claim of forgery since Utah does not provide a private cause of action for this claim and she also did not adequately state how the daughter exerted undue influence on the decedent. Woolf v. Wiggington, No. 15-4142, __F.App’x__, 2016 WL 4576724 (10th Cir. Aug. 31, 2016) (Before LUCERO, MATHESON, and BACHARACH, Circuit Judges).
Medical Benefit Claims
- In lawsuit where Plaintiff alleges that Aetna engaged in a fraudulent scheme with Optum and other subcontractors, which were employed to process and administer health care claims, whereby insureds were caused to pay the subcontractors’ administrative fees because the Defendants misrepresented such fees as medical expenses, finding that Plaintiff has pleaded a concrete injury sufficient to establish standing to assert the claims in this case; to the extent that the Plaintiff attempts to assert any claims regarding Aetna’s actions with respect to any subcontractors other than Optum, the Plaintiff lacks standing to assert such claims; while recovery under 29 U.S.C. § 1132(a)(2) may benefit the Plaintiff’s plan, that does not preclude the Plaintiff from bringing a claim under that section; allegations that Aetna used plan assets in its own interest to pay the administrative fees that it owed to Optum (for both their benefit) clearly alleges prohibited transactions by Defendants. Sandra M. Peters v. Aetna, Inc., No. CV 1:15-CV-00109-MR, 2016 WL 4547151 (W.D.N.C. Aug. 31, 2016) (Judge Martin Reidinger).
- Dismissing Plaintiffs’ claims for injunctive relief and to clarify their rights to future benefits as moot since Blue Shield of California has amended its Harvoni policy (for treatment of Hepatitis C) and given notice to its insureds that they can resubmit claims for treatment; but denying dismissal of Plaintiffs’ claims for disgorgement of profits because Defendants have not conclusively shown that this is an impermissible legal remedy under Section 502 (a)(3). Homampour et al. v. Blue Shield Of California Life And Health Insurance Company, et al., No. 15-CV-05003-WHO, 2016 WL 4539480 (N.D. Cal. Aug. 31, 2016) (Judge William H. Orrick).
- Finding that a group health plan’s New York choice-of-law provision means its discretionary clause is not subject to California Insurance Code Section 10110.6, but even if California law applied, Section 10110.6 does not apply to health insurance. Bain v. United Healthcare Inc., No. 15-CV-03305-EMC, 2016 WL 4529495 (N.D. Cal. Aug. 30, 2016) (Judge Edward Chen).
Pension Benefit Claims
- Former spouse’s execution of a separate renunciation of benefits (waiver) did not alter the plan administrator’s obligation to distribute benefits to deceased participant’s former spouse in compliance with the plan documents based on rule articulated in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285 (2009); Plaintiff cannot circumvent the plan documents rule by repackaging his claim for wrongful denial of benefits under Section 502(a)(1) as claims for breaches of fiduciary duties under Section 502(a)(3), where Section 502(a)(3) does not permit claims seeking monetary damages from a plan administrator payable to the claimant. Irvins v. Metropolitan Museum of Art, No. 15-CV-5180 (RJS), 2016 WL 4508364 (S.D.N.Y. Aug. 26, 2016) (Judge Richard J. Sullivan).
- In lawsuit involving denied claim for Supplemental Executive Retirement Plan (“SERP”) benefits, denying Defendants’ motion to dismiss claims for relief for equitable estoppel, and reformation; finding a strong showing that Mechanics Bank cheated Plaintiff out of his SERP benefits by telling him the release would not affect his pension yet changed its position after he signed the release; holding that “appropriate equitable relief” under ERISA Section 502(a)(3) may extend to remedy inequitable conduct pertaining to a supposed waiver of plan rights; further holding that consistent with the uniform trend of decisions addressing Section 502(a)(3) in the context of a top-hat plan, that equitable remedies thereunder are available for a breach of the general good faith standard of contract law by the plan administrator. Buster v. Comp. Comm. of the Bd. of Directors of Mechanics Bank, No. C 16-01146 WHA, 2016 WL 4492577 (N.D. Cal. Aug. 26, 2016) (Judge William Alsup).
- A Bonus Agreement, offered by employer Trend Personnel Services, Inc. to six key employees for whom it purchased life insurance policies and paid annual premiums, does not qualify it as an ERISA employee welfare benefit plan. Sarah Mozingo Martin v. Trend Personnel Services, No. 15-11263, __F.App’x__, 2016 WL 4547225 (5th Cir. Aug. 31, 2016) (Before STEWART, Chief Judge, and CLEMENT and HAYNES, Circuit Judges).
Pleading Issues & Procedure
- In ERISA and negligence suit brought by 401(k) Plan against its former trustee and other defendants, granting motion to dismiss because the Plan, by filing this suit, improperly split claims that it could and should have brought in a closely related case, Weir v. Elmhurst Lincoln-Mercury, Inc., No. 13 C 2694 (N.D. Ill. filed Apr. 10, 2013). Elmhurst Lincoln-Mercury, Inc. Employees 401(K) Profit Sharing Plan & Trust v. David G. Mears, Elmhurst Lincoln-Mercury, Inc., Universal Underwriters Insurance Company, & James F. Best, P.C., No. 16 C 2390, 2016 WL 4505171 (N.D. Ill. Aug. 29, 2016) (Judge Gary Feinerman).
- Finding that Plaintiff has adequately pled that he has standing to pursue this action as an assignee of the Participant’s rights and benefits under her ERISA plan even assuming that Plaintiff obtained the assignment of benefits from the Participant after the administrative appeals process concluded; Varity does not create a bright-line rule precluding the assertion of alternative claims under Sections 502(a)(1)(B) and 502(a)(3) at the motion to dismiss stage; dismissing claim alleging a failure to establish and maintain reasonable claims procedures under 29 C.F.R. § 2560.503-1, because this regulation does not create a private right of action. Rahul Shah, M.D. v. Horizon Blue Cross Blue Shield, No. 15-8590 (RMB/KMW), 2016 WL 4499551 (D.N.J. Aug. 25, 2016) (Judge Renee Marie Bumb).
- In suit by dermatologist against health plan for underpayment of surgeries, dismissing case under the doctrine of res judicata since the Northern District of Georgia has already dismissed the same exact case. A. GRIFFIN, M.D. v. SEVATEC, INC., No. 1:16-CV-630, 2016 WL 4527357 (E.D. Va. Aug. 29, 2016) (Judge Liam O’Grady).
Statute of Limitations
- In lawsuit by pro se plaintiff seeking pension and ESOP benefits denied him for being improperly classified, finding that these claims are time barred since Plaintiff did not bring this action until approximately 25 years after he was first classified as an independent contractor and 19 years after he was first classified as a leased employee. Reches v. Morgan Stanley and Company, No. 16CIV1663BMCSMG, 2016 WL 4530460 (E.D.N.Y. Aug. 29, 2016) (Judge Brian M. Cogan).
- One year statute of limitations did not accrue until Reliance issued its January 9, 2015 Other Income decision letter, which Reliance claimed was a “voluntary, extra-contractual review” of Plaintiff’s Rehabilitation benefits after it already issued an earlier final denial letter of Plaintiff’s challenge to Reliance’s interpretation of the Rehabilitation Provision; finding the lawsuit timely but summary judgment entered in favor of Reliance on the underlying benefit calculation dispute. Patrick v. Reliance Standard Life Ins. Co., No. CV 15-169-SLR-SRF, 2016 WL 4573877 (D. Del. Aug. 31, 2016) (Magistrate Judge Sherry R. Fallon).
- Denying motion to dismiss ERISA reimbursement claim brought under 29 U.S.C. Section 1132(a)(3); finding that the Health Plan’s reimbursement claim is not barred because the SPD is legally binding, where it states that it serves as a “written plan document and summary plan description;” and the Plan stated a claim for reimbursement under the SPD even though Defendant did not execute an “optional” separate agreement to reimburse. CHS/Community Health Systems, Inc. v. Ledford, No. 3:16-CV-00387, 2016 WL 4506094 (M.D. Tenn. Aug. 29, 2016) (Judge Sharp).
- In matter challenging the termination of benefits, enforcing the Retiree Group Insurance Plan’s forum selection clause and transferring this matter, pursuant to 28 U.S.C. § 1404(a), to the Central District of Illinois; deficiency of notice cannot be a basis for finding the forum selection clause unenforceable; Plaintiff’s physical and financial constraints represent private factors the court may not consider when ruling on a motion to transfer pursuant to a valid forum selection clause. Mathias v. Caterpillar, Inc., No. CV 16-1846, 2016 WL 4502350 (E.D. Pa. Aug. 29, 2016) (Judge Eduardo C. Robreno).
- In matter involving retirement benefit claim, denying Defendants’ Motion to Dismiss or Transfer Venue to the Northern District of Illinois where the alleged breaches took place in the Northern District of Indiana: Plaintiff resides in the Northern District of Indiana, it is the district in which the Plaintiff expected to receive benefits, and Plaintiff alleges that Defendants failed to pay her benefits and provide her notices of the “cessation of future retirement benefit accruals as required by ERISA § 204(h).” Macdonald v. Associates for Restorative Dentistry Ltd. Pension Plan, No. 2:16-CV-168-TLS, 2016 WL 4506872 (N.D. Ind. Aug. 29, 2016) (Judge Theresa L. Springmann).
Withdrawal Liability & Unpaid Contributions
- Dismissing with prejudice the trustees’ claim that they are entitled to a judgment at this time for the full amount of the accelerated withdrawal liability since a pension fund cannot immediately get the full amount of an employer’s withdrawal liability after deciding to accelerate only part of it. Bauwens v. Dunning Elec. Servs., Inc., No. 16 C 4548, 2016 WL 4530330 (N.D. Ill. Aug. 30, 2016) (Judge Matthew F. Kennelly).
- Declining Plaintiffs’ request to enter default judgment against Defendants because the evidence offered is not sufficient to support the requested judgment, but Plaintiffs have an opportunity to cure the deficiencies in their evidence. Louis – Kansas City Carpenters Regional Council, et al., v. ILMO Contracting, LLC, et al., No. 4:16 CV 751 CDP, 2016 WL 4537921 (E.D. Mo. Aug. 30, 2016) (Judge Catherine D. Perry).
- Plaintiffs are entitled to liquidated damages equal to 12% of the amount of the delinquent contributions for January through April 2016, interest at the rate of twelve percent (12%) per annum for the delinquent contributions, attorneys’ fees, and costs from Barry Civil. Locals 302 And 612 Of The International Union Of Operating Engineers Construction Industry Health And Security Fund, et al. v. Barry Civil Construction, Inc., No. C16-0404-JPD, 2016 WL 4528462 (W.D. Wash. Aug. 29, 2016) (Magistrate Judge James P. Donohue).
- Granting the Pension Fund’s motion to strike Defendants’ affirmative defenses and the Pension Fund’s motion for judgment on the pleadings; finding that Defendants are jointly and severally liable to Plaintiff for unpaid contributions, interest on the unpaid contributions, and reasonable attorneys’ fees and costs of the action under 29 U.S.C. § 1132(g) (2). Rice v. Muns Grp., Inc., No. 1:15-CV-200, 2016 WL 4499457 (S.D. Ga. Aug. 26, 2016) (Judge J. Randal Hall).
* 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 an experienced 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.