I am delighted to report that this week’s notable decision is one of our own, Demer v. IBM Corporation LTD Plan, No. 13-17196, __F.3d__, 2016 WL 4488006 (9th Cir. Aug. 26, 2016), a long term disability case in which I served as lead appellate counsel.
Demer was employed by IBM as a Lead Internal Auditor before symptoms related to severe multi-level degenerative disc disease and pain medications rendered him unable to do his job. MetLife paid long term disability (“LTD”) benefits for “own occupation” disability but then denied benefits at the “any occupation” disability transition. MetLife’s denial relied in large part on the opinion of an independent physician consultant (“IPC”), Dr. Elyssa Del Valle (internal medicine), who conducted only a paper review of Demer’s file. Demer appealed and MetLife denied the appeal in reliance on the pure paper review opinions of two different IPCs, Dr. Marcus Goldman (psychiatry), and Dr. Dennis S. Gordan (physical medicine and rehabilitation). MetLife accepted Dr. Gordan’s physical capacity assessment and did not place any limitations as a result of Demer’s use of pain medication.
Demer filed suit and in the course of the litigation conducted discovery which showed that in 2009 and 2010, Dr. Del Valle performed more than 250 reviews each year and earned more than $125,000 each year; for the same time period, Dr. Gordan performed between 200–300 reviews each year and earned more than $175,000 each year.
On summary judgment, the district court found in favor of MetLife after applying abuse of discretion review with no skepticism. The district court relied on the declarations from two MetLife employees, Gregory Hafner and Laura Sullivan, who describe the alleged affirmative steps taken by MetLife to reduce its structural conflict. Plaintiff objected to the court’s consideration of these declarations since the employees were not disclosed as a witness in MetLife’s Rule 26 initial disclosures. The court noted that “MetLife did not explain its failure to identify witnesses in its mandatory initial disclosures; on the other hand, Mr. Demer did not explain his failure to take a 30(b)(6) deposition on the structural conflict issue.” The court declined to resolve the issue because it found that even assuming that there is no residual structural conflict (i.e., because of affirmative steps taken by MetLife to insulate its claims department), some skepticism is warranted because of the financial conflict of the IPCs upon whom MetLife relied.
The court noted that it is Demer’s burden to produce evidence of a financial conflict sufficient to warrant a degree of skepticism. Once such evidence is produced, the burden then shifts to MetLife to produce evidence that there is no conflict. The court concluded that Demer satisfied his burden of production by offering evidence that the IPCs have earned a substantial amount of money from MetLife and have performed a substantial number of reviews for the company as well. “The magnitudes of these numbers, particularly when combined, raise a fair inference that there is a financial conflict which influenced the IPCs’ assessments, and thus such conflict should be considered as a factor in reviewing MetLife’s decision for abuse of discretion.” The court noted that MetLife could have maintained records of its reviewers’ findings on claims to show their neutrality in practice. Because it did not, MetLife missed an opportunity to negate any inference of a financial conflict of interest. The court found that the financial conflict warrants some weight under Ninth Circuit precedent in Abatie and Montour.
With respect to the merits of the claim, the court noted that implicit in each IPC’s opinion – and therefore MetLife’s decision – was a conclusion that Demer’s complaints of fatigue and difficulty concentrating were not credible. But, the IPCs had little basis for rejecting Demer’s credibility and they never explained specifically why they rejected Demer’s cognitive complaints. With respect to Demer’s physical complaints, the court found that Dr. Gordan’s assessment conflicted with other assessments in the record and the evidence indicated that Demer’s condition did not improve, and may have deteriorated, over time.
The Court remanded Demer’s claim back to MetLife for further consideration. On remand, MetLife may re-open the record to consider additional evidence regarding Demer’s mental limitations. The court explained that a retrospective evaluation may be difficult given the passage of time, but not necessarily impossible (analogizing to retrospective evaluations in the Social Security context).
Now, my two cents. This decision is generally good on the standard of review issue and IPCs’ (obvious) financial conflict, but I was disappointed that the panel did not directly address the issue as to whether ERISA benefit claims are exempt from Rule 26 disclosures. The district court considered the Hafner and Sullivan declarations because it took the position that ERISA cases are reviews of an administrative record exempt from initial disclosures. Although the panel did not explicitly say that the district court erred in this regard (declining to resolve the issue), it did say that MetLife failed to disclose the witnesses in its “mandatory initial disclosures,” strongly suggesting that they are “mandatory.” [Defense attorneys, please update your boilerplate discovery objections.] The Court faulted Plaintiff for not taking a 30(b)(6) deposition (Plaintiff was represented by a different attorney at this time) but MetLife also did not disclose that it would rely on any witnesses on the structural conflict issue. Since the court places the initial burden of proving conflict on the party claiming conflict (i.e., the disability claimant), discovery on the conflict of interest now must be done in order to meet this burden (unless the conflict is so flagrantly apparent from the record). Insurance companies wishing to dispel the notion of bias should be prepared to demonstrate that they use a truly neutral process to evaluate claims, for starters, by beginning to actually use a truly neutral process to evaluate claims…
Another troubling part of the district court’s decision was its use of Demer’s SSDI application denial to justify why MetLife’s claim denial was not an abuse of discretion, when MetLife itself never raised that as a reason during the administrative process. In a footnote, the panel said that the district court did not err by considering the SSA decision for purposes of evaluating MetLife’s conflict of interest since it did not consider it for purposes of ruling on the merits. However, this is really a distinction without a difference. MetLife encouraged Demer to apply for SSDI benefits and told him to expect a claim denial at first since most claims are approved at an ALJ hearing. Following MetLife’s orders, Demer applies for SSDI, only to have his predicted application denial used against him in litigation.
Lastly, a remand to MetLife to do over what it should have done six years ago is hardly a remedy for MetLife’s abuse of discretion. The evidence in the record supports Demer’s disability, and any lack of support is as a result of MetLife’s failings. Claimants who have to go without benefits during a lengthy claim and appeals process and litigation through the Court of Appeals should get benefits paid through judgment if a plan administrator abuses its discretion. There has to be a price to pay for abusing discretion that is not borne by the claimant.
I’m off my soapbox. Enjoy the rest of this past week’s cases!
Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.
- Following grant of summary judgment on all withdrawal liability claims against Defendants, pursuant to § 1132(g)(2), awarding professional fees of $454,144.00 and costs of $23,661.53. In this case, the hourly billing rates are $235 to $370 for junior and senior associates and $400 for directors. of Trustees v. Piedmont Lumber & Mill Co., No. 13-CV-03898-HSG, 2016 WL 4446993 (N.D. Cal. Aug. 24, 2016) (Judge Haywood S. Gilliam, Jr.).
Breach of Fiduciary Duty
- In suit brought on behalf of ERISA employee benefit plans against twelve banks and their affiliates for loses caused by Defendants’ breach of fiduciary duties and participation in prohibited transactions arising from their alleged manipulation of the foreign currency (“FX”) markets for over a decade, dismissing the Complaint against the Moving Defendants as parties in interest for failing to plead a colorable violation of ERISA § 406 by any Plan fiduciary. Allen v. Bank of Am. Corp., No. 15 CIV. 4285 (LGS), 2016 WL 4446373 (S.D.N.Y. Aug. 23, 2016) (Judge Lorna G. Schofield).
- Reversing and remanding the district court’s dismissal of Plaintiffs’ claims of breach of fiduciary duty and prohibited transactions with respect to an ESOP transaction, finding that Plaintiffs’ allegations support an inference that GreatBanc breached its fiduciary duty, either by failing to conduct an adequate inquiry into the proper valuation of the shares or by intentionally facilitating an improper transaction: “they alleged that the stock value dropped dramatically after the sale (implying that the sale price was inflated), that the loan came from the employer-seller rather than from an outside entity (indicating that outside funding was not available), and that the interest rate was uncommonly high (implying that the sale was risky, or that the shareholders executed the deal in order to siphon money from the Plan to themselves).” Allen v. Greatbanc Trust Co., No. 15-3569, __F.3d__, 2016 WL 4474730 (7th Cir. Aug. 25, 2016) (Before WOOD, Chief Judge, and FLAUM and WILLIAMS, Circuit Judges).
Disability Benefit Claims
- Unum abused its discretion in terminating Plaintiff’s long term disability benefits by relying solely on the Dictionary of Occupational Titles to substantially alter the description of Plaintiff’s job occupation, after UNUM already settled its definition of Plaintiff’s occupational requirements in an earlier review; two equivocal and apparently hurried record reviews of a six-minute surveillance video that at one point shows Plaintiff on his hands and knees does not constitute substantial evidence of Plaintiff’s capacity to frequently crawl on a sustained, full-time basis; and Unum may offset against LTD benefits “franchise fees” Plaintiff received from his wholly held corporation. Marcades v. UNUM Life Ins. Co. of Am., No. CV 15-1144, 2016 WL 4418807 (E.D. La. Aug. 18, 2016) (Judge Stanwood R. Duval, Jr.).
- Affirming summary judgment in favor of the Plan and finding that Plaintiff had not furnished objective medical evidence establishing her disability from her chronic pain condition, where several of her treating physicians indicated that she could work and Dr. Philip Marion (alleged independent doctor retained through GENEX), concluded that no medical information supports Plaintiff’s inability to work. Saunders v. Procter & Gamble Health and Long Term Disability Benefit Plan, No. 16-3043, __F.App’x__, 2016 WL 4435643 (6th Cir. Aug. 23, 2016) (BEFORE: BATCHELDER and KETHLEDGE, Circuit Judges; LEVY, District Judge).
- Ordering Aetna to pay Plaintiff the long term disability benefits for which he is qualified under the Total Disability definition of the Plan, and finding that: (1) Aetna relied on file reviews which disregarded the extensive complaints of severe pain recognized by Plaintiff’s treating physicians; (2) Aetna’s physicians, Dr. Martin Mendelssohn, Dr. James Wallquist, and Dr. John P. Shallcross are all repeat players among ERISA benefit plan administrators, which is a factor weighing against Aetna; and (3) Aetna did not adequately explain why the SSA’s decision to award Plaintiff SSDI benefits should be distinguished. Mendez v. FedEx Express, No. 15-CV-12301, 2016 WL 4429598 (E.D. Mich. Aug. 22, 2016) (Judge Judith E. Levy).
- Following previous remand to the district court to award Plaintiff disability retirement benefits, affirming the district court’s decision in favor of the Plan Administrator, which found Plaintiff entitled to $0 after offsetting his previous Workers’ Compensation redemption against the disability retirement benefits owed him; rejecting Plaintiff’s claims that Means forfeited this offset defense by failing to plead it or brief it on summary judgment since Plaintiff had notice of the offset defense and ample opportunity to rebut it. Kennard v. Means Industries, Inc., No. 15-1872, __F.App’x__, 2016 WL 4410576 (6th Cir. Aug. 19, 2016) (BEFORE: MOORE and COOK, Circuit Judges; GWIN, District Judge).
- Liberty Life abused its discretion in terminating Plaintiff’s long term disability benefits for injuries she sustained after falling off of a horse, twice. After Liberty Life decided Plaintiff was entitled to benefits it hired Dr. Eddie Sassoon to review the same medical records and issue an opinion. Sassoon opined Plaintiff could sit up to eight hours in an eight-hour workday and Liberty Life adopted his opinion even though it conflicted with the decision reached by Liberty Life just a couple of weeks before. Dr. Sassoon did not explain his conclusion in light of Plaintiff’s doctor’s opinion that Plaintiff had “no ability to [return to work] given her marked pain.” Liberty Life failed to provide Plaintiff with a reasoned explanation for discounting her doctor’s conclusion, so its decision was arbitrary and capricious. Aberg v. Charter Commc’ns, Inc., No. 15-CV-571, 2016 WL 4444808 (E.D. Wis. Aug. 23, 2016) (Magistrate Judge William E. Duffin).
- Holding that MetLife abused its discretion in denying Plaintiff’s claim for long term disability benefits under the plan’s “any occupation” standard because it did not find that Plaintiff’s mental capacity was affected in any way by the medications he was taking for his physical pain, and improperly rejected the credibility of his complaints of fatigue and difficulty concentrating based on the opinions of two financially conflicted Independent Physician Consultants who did not examine him and did not explain why they rejected his credibility; remanding the case to the district court, with instructions to remand to MetLife to re-evaluate the merits of Plaintiff’s long term disability claim. Demer v. IBM Corp. LTD Plan; Metro. Life Ins. Co., No. 13-17196, __F.3d__, 2016 WL 4488006 (9th Cir. Aug. 26, 2016) (Before: Jay S. Bybee and Morgan Christen, Circuit Judges, and Edward M. Chen, District Judge).
- Affirming Mutual of Omaha’s decision to deny Plaintiff’s long term disability claim based on the plan’s pre-existing condition provision where Plaintiff’s physician’s statement listed the diagnosis as “sciatica” and “back pain/spasm,” and indicated that Plaintiff’s symptoms first appeared after a fall which occurred prior to the plan’s look-back period, the fall had resulted in later-discovered fractures to Plaintiff’s spine, Plaintiff sought treatment for back pain before, during, and after the look-back period, including having prescriptions for Tramadol, Hydrocodone, and Volatren filled. Horneland v. United of Omaha Life Ins. Co., No. 8:15-CV-1703-T-33TGW, 2016 WL 4441680, at (M.D. Fla. Aug. 23, 2016) (Judge Virginia M. Hernandez Covington).
Exhaustion of Administrative Remedies
- Denying Prudential’s Motion to Dismiss Plaintiff’s lawsuit for long term disability benefits on the ground that Plaintiff failed to exhaust her administrative remedies before filing suit, where Prudential granted itself extensions of time that neither were requested by Plaintiff nor permitted under the applicable ERISA regulations. The 45-day deadline started when Plaintiff submitted her appeal and it did not matter that she continued to supplement her appeal with additional evidence. Prudential did not request a 45-day extension prior to the expiration of the initial 45-day deadline. Wiley v. Prudential Ins. Co. of Am., No. 16-CV-00391 (APM), __F.Supp.3d__, 2016 WL 4468155 (D.D.C. Aug. 24, 2016) (Judge Amit P. Mehta).
- In suit challenging Defendants’ refusal to pay for air-ambulance services, denying Defendants’ motion to dismiss on the basis of failure to exhaust administrative remedies, where Plaintiffs allege they administratively challenged the claim denial twice before filing suit, Defendant denied the appeals for being untimely, but then issued a decision on the merits after Plaintiffs already filed suit. Tolleson v. Kraft Foods Glob., Inc., No. 16-CV-2055, 2016 WL 4439951 (N.D. Ill. Aug. 23, 2016) (Judge Sharon Johnson Coleman).
Life Insurance & AD&D Benefit Claims
- Concluding that MetLife’s decision to deny Plaintiff $520,000 in supplemental life insurance proceeds based on a “suicide exclusion” was not arbitrary and capricious, where the insured submitted an incomplete insurance enrollment form more than two years prior to the date of suicide, but his enrollment did not take effect until a later date that was not more than two years from his date of suicide. Hansen v. Metropolitan Life Ins. Co., No. 3:15-CV-00880, 2016 WL 4417292 (M.D. Tenn. Aug. 19, 2016) (Magistrate Judge E. Clifton Knowles).
- In matter where the insured was on disability leave at the time he enrolled in life insurance plan that had an active service requirement, but passed away before receiving notice of such requirement, vacating the district court’s grant of summary judgment to Defendant and remanding for application of the correct standard as to the existence and terms of the life insurance plan at the time that Plaintiff’s benefits, if any, vested; district court applied the incorrect standard to determine that the disclosures and representations made to employees could not constitute an ERISA plan and the district court erred in then resorting to a document that was not even in Defendant’s possession until well after the insured’s death. Woerner v. Fram Group Operations, LLC, No. 15-2813, __F.App’x__, 2016 WL 4410066 (3d Cir. Aug. 19, 2016) (Before: CHAGARES, KRAUSE, SCIRICA, Circuit Judges).
- Pursuant to Rule 42(a), consolidating two Church Plan cases: Hodges v. Bon Secours Health System, Inc. et al., RDB-16-1079 and Miller v. Bon Secours Health System, Inc. et al., RDN-16-1150; appointing Cohen Milstein Sellers & Toll as sole lead interim class counsel. Hodges v. Bon Secours Health Sys., Inc., No. CV RDB-16-1079, 2016 WL 4447047 (D. Md. Aug. 24, 2016) (Judge Richard D. Bennett).
Pleading Issues & Procedure
- In suit brought by third party administrator against a former client, granting former client’s motion to realign (i.e., switching who is the plaintiff and defendant), where the court remanded the state law claims and cross-complaints and the only remaining claims are the federal ERISA cross-complaints. FCE Benefits Administrators, Inc. v. Training, Rehab. & Dev. Inst., Inc., No. 15-CV-01160-JST, 2016 WL 4426897 (N.D. Cal. Aug. 22, 2016) (Judge Jon S. Tigar).
- Jury’s determination of Plaintiff’s entitlement to front pay as a remedy for his state law claims foreclosed the district court from granting front pay on Plaintiff’s ERISA Section 510 claim. Teutscher v. Riverside Sheriffs’ Association, et al., No. 13-56411, __F.3d__, 2016 WL 4488008 (9th Cir. Aug. 26, 2016) (Before: Milan D. Smith, Jr., Paul J. Watford, and Michelle T. Friedland, Circuit Judges).
Statute of Limitations
- Affirming district court’s grant of summary judgment in favor of Sun Life on grounds that Plaintiff’s long term disability claim is time-barred under the Plan’s contractual limitations period (although district court concluded that Sun Life had not abused its discretion in denying the LTD benefits application); Minnesota Statutes § 62A.04 does not apply to group insurance policies; Minnesota’s notice prejudice law does not apply to issue of whether the lawsuit was timely. Schmitz v. Sun Life Assurance Co. of Canada, No. 14-3701, __F.3d__, 2016 WL 4434566 (8th Cir. Aug. 22, 2016) (Before RILEY, Chief Judge, COLLOTON and KELLY, Circuit Judges).
- Entering judgment in favor of Unum on its counterclaim for overpaid long term disability benefits as a result of a personal injury settlement in the amount of $58,938.75. This includes a 7.5% reduction applied by the court for Plaintiff’s permanent physical scarring. Court found that Unum’s failure to review photographs of Plaintiff and determine whether any portion of the net settlement should be allocated to scarring was arbitrary and capricious. Sugalski v. Paul Revere Life Ins. Co., No. CV 14-40015-TSH, 2016 WL 4473412 (D. Mass. Aug. 24, 2016) (Judge Hillman).
- A plan fiduciary can sue under ERISA § 502(a)(3) to receive either (1) injunctive or declaratory judgment that participant’s counsel cannot recover attorney’s fees from the plan from monies the plan received pursuant to a subrogation and reimbursement clause that specifically exempts attorney’s fees, or (2) in the alternative, declaratory judgment that the participant indemnify the plan for any attorney’s fees participant’s counsel recovers from the plan. It is “equitable relief” when a plan administrator seeks an equitable lien against a fund already in its possession so as to prevent claims against the fund by non-parties to the Plan and it is “equitable relief” when a plan administrator seeks a declaration that a participant indemnify the Plan. Unitedhealth Grp. Inc. v. MacElree Harvey, Ltd., No. CV 16-1026, 2016 WL 4440358 (E.D. Pa. Aug. 23, 2016) (Judge Jones, II).
Withdrawal Liability & Unpaid Contributions
- Granting Defendant’s partial motion for summary judgment and finding that they were not required to pay contributions for revenue generated by foreign audio streams. Fed’n of Musicians v. Atl. Recording Corp., No. 1:15-CV-6267-GHW, 2016 WL 4481090 (S.D.N.Y. Aug. 23, 2016) (Judge Gregory H. Woods).
- Dismissing as moot the plaintiffs’ motion for the court’s entry of default judgment against the defendant, and granting plaintiffs’ supplemental motion for the court’s entry of default judgment against the defendant. Trustees of the Pipefitters & Plumbers Local 524 Pension & Annuity Plan v. Yannuzzi, Inc., No. CV 3:15-2085, 2016 WL 4479394 (M.D. Pa. Aug. 25, 2016) (Judge Malachy E. Mannion).
- Granting Plaintiff Stevens’ request to enforce the Arbitrator’s Award and denying Defendants’ request to vacate or modify the Arbitrator’s Award; ordering Defendants to refund Stevens’ interim withdrawal liability payments with interest from the date paid. Stevens Engineers & Constructors, Inc. v. Iron Workers Local 17 Pension Fund, No. 1:15 CV 1965, 2016 WL 4479486 (N.D. Ohio Aug. 25, 2016) (Judge Donald C. Nugent).
- Finding that Plaintiffs are entitled to a default judgment against Defendant A & W in the total amount of $12,262.26, consisting of audit amounts of $7,700.65 in contributions, supplemental dues, liquidated damages, and interest; $901.00 in accounting fees; and $3,660.61 in attorneys’ fees and costs. Greater St. Louis Construction Laborers Welfare Fund, et al. v. A & W Construction Company, Inc., No. 4:14CV1650RLW, 2016 WL 4411400 (E.D. Mo. Aug. 18, 2016) (Judge Ronnie L. White).
- Granting Plaintiffs’ motion requesting an entry of default judgment, monetary damages, attorney’s fees, and an injunction to conduct an audit of the company’s books and records to determine if there are any delinquent contributions. Boland v. Smith & Rogers Constr. Ltd., No. 15-CV-01386 (CRC), __F.Supp.3d__, 2016 WL 4435180 (D.D.C. Aug. 19, 2016) (Judge Christopher R. Cooper).
* 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.