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ERISA Watch – January 18, 2016

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Happy Martin Luther King, Jr. Day! In honor of one of our most celebrated activist and humanitarian in the Civil Rights Movement, I’m sharing my favorite quote from Dr. King: “I have decided to stick with love. Hate is too great a burden to bear.” May you start your day with an intent for loving-kindness towards yourself and towards your friends and foes alike.

On that note, I will exercise restraint in my commentary on this week’s notable decision: Halley v. Aetna Life Ins. Co., No. 13 C 6436, 2016 WL 164339 (N.D. Ill. Jan. 14, 2016). In Halley, the district court denied an award of attorneys’ fees to the prevailing long-term disability claimant because although Aetna’s decision was an abuse of discretion, its “subtle” flaws do not show that Aetna was out to harass the claimant or that Aetna lacked a good faith basis to deny coverage. In my view, and fortunately the prevailing view in the Ninth Circuit Court of Appeals, a court should ordinarily award fees to a prevailing plaintiff unless some special circumstance renders an award of fees unjust. This is because an ERISA plaintiff is limited in the available remedies for when an administrator wrongfully denies a claim for benefits. ERISA’s fee-shifting provision should be enforced in a manner that disincentivizes sloppy decision making. It loses that impact when courts require a plaintiff to show that the defendant was set out to harass him or her. In addition to Halley there were a number of other notable decisions. Read about them below!

Your reliable source for summaries of recent ERISA decisions

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

Eighth Circuit

District court did not abuse its discretion in denying the preliminary injunction, and pharmacies were not “beneficiaries” entitled to bring an ERISA action on their own behalf. Grasso Enterprises, LLC v. Express Scripts, Inc., No. 15-1578, __F.3d___, 2016 WL 104494 (8th Cir. Jan. 11, 2016) (Before LOKEN, BEAM, and SHEPHERD, Circuit Judges). Plaintiffs, compounding pharmacies that prepare and sell customized compound drugs made in accordance with doctors’ prescriptions, brought suit against Express Scripts, Inc. (“ESI”), a pharmacy benefits manager that contracts with health plan sponsors and administrators to administer the pharmacy benefits provided in their group health plans, for allegedly systematically denying payment of compound drug claims without adhering to the procedural requirements of ERISA’s “Claims Regulation,” 29 C.F.R. § 2560.503-1. Plaintiffs sought a preliminary injunction declaring that ESI must pay all claims for compound medications until it is in compliance with the Claims Regulation, but the district court denied the requested preliminary injunction on numerous grounds. Plaintiffs appealed and the Eighth Circuit affirmed the district court’s decision, concluding that Plaintiffs failed to meet the well-established standards for preliminary injunctive relief. The basis of injunctive relief in the federal courts has always been irreparable harm and inadequacy of legal remedies. Here, the court found that the plan beneficiaries have an adequate remedy at law, a suit under § 502(a)(1)(B) that will overturn the initial denial of a compound drug pharmacy benefit if that medication was in fact covered under the plan. As such, the court found that there is no need for injunctive relief under § 502(a)(3), or for equitable relief to enforce or clarify the beneficiary’s rights under the plan under § 502(a)(1)(B). The court reasoned that the grant of equitable relief declaring what procedures are needed to substantially comply with the Claims Regulation would disrupt efficient plan administration and in some cases would conflict with the ERISA policy that reviewing courts should review final decisions to deny claims for benefits, rather than the initial denials. The court also affirmed the district court’s decision that Pharmacies do not have standing under ERISA to assert harm to themselves because they are not ERISA beneficiaries and that Plaintiffs may only seek injunctive relief under § 502(a)(1)(B) or (a)(3) as assignees of ERISA plan beneficiaries.

Investment services provider did not owe any fiduciary duty to ensure reasonableness of fees associated with accounts in initial 401(k) investment menu. McCaffree Fin. Corp. v. Principal Life Ins. Co., No. 15-1007, __F.3d___, 2016 WL 98332 (8th Cir. Jan. 8, 2016) (Before RILEY, Chief Judge, BYE and GRUENDER, Circuit Judges). Plaintiff, the plan sponsor of a 401(k) plan, brought a class action against Defendant, an investment services provider, alleging that Defendant breached its fiduciary duties under ERISA and engaged in prohibited transactions by charging grossly excessive fees to participants in Plaintiff’s 401(k) plan. The district court granted Defendant’s motion to dismiss, with the Eighth Circuit affirmed. The court held that Defendant did not owe any fiduciary duty to ensure reasonableness of fees associated with accounts in the initial investment menu, and Plaintiff did not plead any connection between any fiduciary duty Defendant may have owed and excessive fees it allegedly charged.

Select Slip Copy & Not Reported Decisions

Attorneys’ Fees

Attorneys’ fees denied to successful long-term disability claimant. Halley v. Aetna Life Ins. Co., No. 13 C 6436, 2016 WL 164339 (N.D. Ill. Jan. 14, 2016) (Judge John Robert Blakey). Although Plaintiff prevailed on her Rule 52 motion for judgment on her denied claim for long-term disability benefits, the court declined to award Plaintiff his attorney’s fees under 29 U.S.C. § 1132(g)(1) by applying the two tests in the Seventh Circuit for analyzing whether attorney’s fees should be awarded to a party in an ERISA case. See Kolbe Health & Welfare v. Medical College of Wisconsin, 657 F.3d 496 (7th Cir. 2011). The first test weighs five factors: (1) the losing party’s culpability or bad faith; (2) the losing party’s ability to satisfy an award of attorney’s fees; (3) whether an award of attorney’s fees would deter others under similar circumstances; (4) the amount of benefit conferred on members of the ERISA pension plan as a whole; and (5) the relative merits of the parties’ positions. The second test asks whether the losing party’s position was “substantially justified.” The court found that while framed differently, both tests essentially ask the same question: “was the losing party’s position substantially justified and taken in good faith, or was that party simply out to harass its opponent?” Although Defendant did not ultimately prevail, the court credited Defendant’s medical evidence that Plaintiff was theoretically capable of working and rejected Plaintiff’s response that he was not capable of working. The court had concluded that there were two tacit flaws in the vocational analysis of Plaintiff’s job but these subtle, yet significant, flaws do not show that Defendant was out to harass Plaintiff or that Defendant lacked a good faith basis to deny coverage. To the contrary, the court concluded that Plaintiff is, in fact, theoretically capable of working. Although this was not enough for Defendant to prevail, the court did not find that it warranted an award of attorneys’ fees.

Breach of Fiduciary Duty

Second Circuit

Breach of fiduciary duty claim related to the London Whale dismissed for failure to state a claim upon which relief can be granted. In re Jpmorgan Chase & Co. Erisa Litig., No. 12 CIV. 04027 (GBD), 2016 WL 110521 (S.D.N.Y. Jan. 8, 2016) (Judge George B. Daniels). Plaintiffs, a putative class of current and former employees of JPMorgan Chase & Co. who participated in the JPMorgan Chase 401(k) Savings Plan, brought this consolidated class action against Defendants JPMorgan Chase Bank, N.A. (“JPMC Bank”), JPMorgan Chase & Co. (“JPMorgan”), John Wilmot, and Douglas Braunstein (collectively, “Defendants”) for breaching their duty of prudence under ERISA. Specifically, Plaintiffs allege that JPMorgan concealed risk-escalating trades made by its Chief Investment Office (“CIO”), the unit responsible for managing the synthetic credit portfolio. A trader named Bruno Iksil (known as “the London Whale”), operated that portfolio, which lost over $6 billion. Plaintiffs assert that Defendants knew or should have known, based on inside information, that JPMorgan’s concealment of the CIO’s risk-escalating trades throughout the class period artificially inflated the price of JPMorgan stock. Defendants, as fiduciaries, therefore allegedly breached the duty of prudence under ERISA by continuing to offer Plan participants the option to invest in the Stock Fund during the class period and failing to publicly disclose the alleged misconduct. Defendants moved to dismiss Plaintiffs’ Fourth Amended Class Action Complaint for failure to state a claim upon which relief can be granted. The court granted the motion, finding that Plaintiffs did not plead sufficient facts to plausibly allege that JPMC Bank and JPMorgan are de facto fiduciaries. The court also found that Plaintiffs have not adequately pleaded an imprudence claim against any defendant. First, both of Plaintiffs’ proposed alternative actions would have required disclosure to the general public. Second, Plaintiffs failed to plausibly allege that a prudent fiduciary would not have viewed the public disclosure as more likely to harm than to help the fund.

Third Circuit

§ 1132(a)(2) is an inappropriate vehicle for individual relief and claim for equitable estoppel fails. Lees v. Munich Reinsurance Am., Inc., No. CV142532MASTJB, 2016 WL 164611 (D.N.J. Jan. 13, 2016) (Judge Shipp). The court granted summary judgment in favor of Defendant on Count Two of the First Amended Complaint, where Plaintiff asserts that Defendant’s failure to contribute the $20,000 bonus to the Munich pension plan, due to Plaintiff for leaving Systems Management Specialists and returning to American Re-Insurance Company, violated §§ 1132(a)(2) and 1109 of ERISA. Plaintiff primarily seeks reformation of and/or contribution to the Munich Re pension plan. The court found that although styled as a claim under § 1132(a)(2) to restore the alleged $20,000 bonus contribution to the Munich pension plan, Count Two of Plaintiff’s First Amended Complaint truly seeks individual relief, Plaintiffs entitlement to pension credit for the period of October 28, 1996, through August 15, 1999. As such, this is not a claim brought on behalf of the Munich pension plan, and therefore, § 1132(a)(2) is an inappropriate vehicle for relief. Additionally, the court found that even if it were to construe Plaintiff’s First Amended Complaint to assert a claim for equitable estoppel pursuant to § 1132(a)(3), such claim would fail. Here, there is no showing of fraud, of repeated misrepresentations over time, and no suggestion that Plaintiff was particularly vulnerable. Instead, Plaintiff relied on a single statement by two human resource personnel and concluded that a notation in his employee profile regarding his hire date confirmed he would receive pension credit. The court found that these facts do not constitute extraordinary circumstances under Third Circuit precedent.

Disability Benefit Claims

Seventh Circuit

Court will vacate judgment which is a condition of parties’ private settlement on appeal. Lundsten v. Creative Community Living Services, Inc., et al., No. 13-C-108, 2016 WL 111431 (E.D. Wis. Jan. 11, 2016) (Judge Rudolph T. Randa). In a series of orders in this case, the court addressed the appropriate standard of review and held that the denial of LTD benefits was arbitrary and capricious. Both sides appealed, and while the appeal was pending, the parties entered a settlement agreement conditioned upon the court’s judgment being vacated. The court granted the parties’ joint motion for an indicative ruling that the court would grant their request to vacate the judgment as a condition of the settlement pursuant to Fed. R. Civ. P. 62.1. The court found that the public’s interest in preserving judicial resources favors vacatur. Regarding precedent, the court’s opinions will still be citable for persuasive weight.

Ninth Circuit

Denial of LTD claim beyond 24-month limitation for Mental Disorders is not an abuse of discretion. Nelson v. Standard Insurance Company, et al., No. 13CV188-WQH-MDD, 2016 WL 184400 (S.D. Cal. Jan. 13, 2016) (Judge Williams Q. Hayes). In this putative class action against Defendants related to Standard’s administration of the Countrywide Financial Corporation Group Long Term Disability Plan, the court granted summary judgment to Standard on Plaintiff’s individual claim for additional LTD benefits beyond the Plan’s 24-month limit for disabilities caused by a Mental Disorder. The court found that the determination that Plaintiff’s inability to work was caused or contributed by her major depressive disorder and that major depressive disorder was a Mental Disorder subject to the 24-month limit under the Policy was reasonable, well-supported by the record, and consistent with the express terms of the Policy. The court rejected Plaintiff’s contention that her disability was caused by sleep apnea and her depression was caused by her inability to work. The court found that Standard reasonably relied upon specific provisions of the policy, objective testing from Plaintiff’s treating physicians, medical records from treating physicians showing mild sleep apnea, and the opinions of two reviewers (Dr. Douglas T. Brown and Dr. William Herzberg) consistent with the medical records provided by Plaintiff. Further, no treating physician report in the record opined that Plaintiff’s sleep disorders were disabling.

ERISA Preemption

Third Circuit

Negligence and/or breach of contract lawsuit related to processing of coverage is not preempted by ERISA. Fitzsimmons v. Aetna, Inc., No. CV 15-3297, 2016 WL 98123 (E.D. Pa. Jan. 7, 2016) (Judge R. Barclay Surrick). Plaintiffs are a married couple who had attempted to consolidate their healthcare by enrolling in the husband’s health plan. The wife allegedly informed her employer to remove her from its health plan, which is administered by Aetna. Plaintiffs filed suit after the husband’s health plan did not cover bills for the wife’s medical services related to the birth of their child. Plaintiffs filed suit against various defendants in state court alleging that Defendants violated a legal duty owed to them which resulted in losses in the form of unpaid medical bills, denial of coverage, bad credit, and related damages. One set of defendants removed the matter contending that the lawsuit was preempted by ERISA. Plaintiffs sought a remand, which the court granted. The court found that Plaintiffs’ claims are not preempted because they are not directly challenging coverage denials or seeking to clarify Plan benefits. Instead, they contend that payment should not have been made under the wife’s health plan because she had removed herself as a beneficiary. The court concluded that this is a negligence and/or third-party beneficiary breach of contract lawsuit that touches ERISA only insofar as Defendants allegedly caused Plaintiffs’ damages in the form of medical expenses when they failed to terminate the wife’s plan coverage. The court also found that not Aetna did not file a consent to remove or explicitly join in the Removal Petition so removal is improper.

Ninth Circuit

NIED and IIED claims are remanded to state court for federal court’s lack of subject matter jurisdiction. Ernsting v. Pacific Bell Telephone Company, et al., No. SACV1501682CJCKESX, 2016 WL 184417 (C.D. Cal. Jan. 15, 2016) (Judge Cormac J. Carney). Plaintiff brought NIED and IIED claims against Defendants for conduct which appears to be related to the administration of her disability claim. Plaintiff alleged that Defendants have “harass[ed]” and “threaten[ed]” her by, among other things, “keeping her under surveillance.” The court reiterated its previous decision that that Plaintiff’s NIED and IIED claims are not necessarily preempted. For purposes of this motion, the court found no reason for it to sort out which Defendants, exactly, those non-preempted claims are being asserted against, because that determination has no bearing on subject matter jurisdiction. Plaintiff represented to the court that she is seeking traditional tort recovery, not ERISA benefits under the guise of a state law cause of action. The court declined to “manage the pleadings,” and remanded the case to state court under 28 U.S.C. § 1447(c) for lack of subject matter jurisdiction.

Exhaustion of Administrative Remedies

Eleventh Circuit

Suit related to subrogation requirement in health plan is not subject to dismissal for failure to exhaust administrative remedies. Daily v. The Rawlings Company, LLC, et al., No. 2:15-CV-1138-VEH, 2016 WL 192071 (N.D. Ala. Jan. 15, 2016) (Judge Virginia Emerson Hopkins). Plaintiff brought this putative class against The Rawlings Company, LLC and Aetna Life Insurance Company (“Aetna”), alleging an Alabama state law claim for “Interference with Business/Contractual Relations” (Count One), against Rawlings alone, a violation of the Fair Debt Collection Practices Act (“FDCPA”), U.S.C. § 1601, et seq. (Count Two), and an Alabama state law claim for the “Unauthorized Practice of Law” (Count Three). All counts arise out of the settlement of Plaintiff’s personal injury claim against a third party, and the attempts by Rawlings and Aetna to enforce Aetna’s subrogation interest found in the health insurance policy Aetna administered through Plaintiff’s employer. Defendants moved to dismiss for failure to exhaust administrative remedies, arguing that “at the core” Plaintiff’s claims in the instant case are about what Defendants are or are not allowed to do under the Plan. The court disagreed. It found that the conduct at issue in this case is not “intertwined with the refusal to pay benefits,” and further, the exhaustion requirement defense is only available to Aetna, not Rawlings, who is not a party identified in the Plan and has no role in administering the Plan.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Denial of automobile accident insurance claim is reasonable where substantial evidence supported that the claim came under Plan exclusion. Garrison v. Union Sec. Ins. Co., No. 2:15-CV-01674, 2016 WL 153031 (S.D. Ohio Jan. 13, 2016) (Judge Algenon L. Marbley). In this matter involving benefits denied under an employer-sponsored group automobile accident insurance plan with USIC, the court granted Defendant’s Motion for Judgment on the Administrative Record. Under the terms of the Plan, benefits are not payable if the insured died as the direct result of an automobile accident injury while breaking any traffic laws of the jurisdiction in which the automobile was being operated. USIC denied Plaintiff’s claim for AA benefits because it found that the insured breaking a traffic law by driving left of center at the time of the accident. The court found that there was substantial evidence-specifically, in the Ohio State Highway Patrol (OSHP) Reconstruction Report-to support a finding that the insured was breaking an Ohio traffic law at the time of the accident, and because that evidence was not clearly contradicted (and in some respects is supported) by the traffic crash reconstruction reports, USIC’s denial of benefits was not arbitrary and capricious. Plaintiff had also alleged that USIC breached its fiduciary duty to the Garrisons because it: (1) failed to apply Ohio law; (2) ignored expert reports that contradicted the OSHP’s analysis; and (3) had a pecuniary conflict of interest by operating as both the decision-maker and payor of this claim. The court found that none of Plaintiff’s allegations of breach of fiduciary duty implicates a different injury than the injury she suffered from the wrongful denial of her benefits. The court found that because Plaintiff makes no argument that she has suffered two distinct injuries, her § 1132(a)(3) claim is duplicative of her § 1132(a)(1)(B) claim and fails under controlling precedent in Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364 (6th Cir. 2015) (en banc).

Pension Benefit Claims

Fourth Circuit

Despite alleged agreement by employer to vest participant in the pension plan, Plan Administrator reasonably denied benefits based on explicit Plan terms. Ritter v. IBM Corp. Pension Plan Adm’r, No. CV DKC 14-2126, 2016 WL 160264 (D. Md. Jan. 14, 2016) (Judge Deborah K. Chasanow). The court granted summary judgment in favor of IBM on Plaintiff’s claim for additional pension benefits. Plaintiff alleged that, as a condition of her agreeing to reemployment with IBM, the company agreed to vest her in their Employee Retirement Plan immediately upon her return to employment on February 1, 1994. According to Plaintiff, IBM accomplished this by changing her “service computation date” and changed her records to indicate that she had been working continuously at IBM for nine years since January 1985, rather than for a nine year period from 1966 to 1975. She further claimed that before she accepted a buyout in 1994, she was assured that her benefits were vested, and she had received a “vested rights estimate” that indicated she would receive $1,952.16 annually upon retirement (that utilized the aforementioned revised employment records per her agreement). When Plaintiff did not receive benefits based on her understanding of the agreement, she submitted a claim, which the Plan Administrator denied and upheld on administrative appeal. First the court found that Plaintiff’s lawsuit was timely because, applying Maryland’s three-year statute of limitations for breach of contract, the lawsuit was brought within three years of the final denial of her claim. The court rejected that the statute should start accruing when Plaintiff received notice that her benefits were less than she expected. With respect to the merits of the claim, the court found that the denial of benefits was reasonable because it is based on an explicit provision of the Plan that governs creditable years of service when there has been a break in service of more than five years. The court found that there is no evidence raising a concern that a potential conflict improperly influenced the decision and the Plan Administrator did not abuse its discretion.

Pleading Issues & Procedure

Third Circuit

Court has personal jurisdiction over defendant due to ERISA’s nationwide service of process. Rafferty v. Metro. Life Ins. Co., No. 15-CV-206 ERIE, 2016 WL 153225 (W.D. Pa. Jan. 13, 2016) (Judge Barbara Jacobs Rothstein). Here, life insurance proceeds are in dispute between the insured’s ex-wife and wife at time of death. In response to the lawsuit by the wife against MetLife and the ex-wife, the ex-wife moved to dismiss for lack of personal jurisdiction and/or under the Declaratory Judgment Act. She also moved to dismiss MetLife’s cross-claim for Interpleader. The court denied all motions. It found that although the ex-wife’s minimal contacts would not be sufficient to subject her to personal jurisdiction under Pennsylvania’s long-arm statute, this lawsuit was brought pursuant to ERISA, which provides for nationwide service of process. Because the ex-wife has sufficient contacts with the United States, the court may exercise personal jurisdiction over her. The court found that it would not be unfair or unjust to require her to litigate the ERISA claim in this district as she is represented by counsel and this is a declaratory action that should be able to be resolved without a trial. The court found that the factors it must consider in determining whether to exercise its jurisdiction under the Declaratory Judgment Act weigh in favor of exercising its jurisdiction under the Act. First, there is no pending related state court action. Second, the ex-wife failed to articulate a reason why this court should decline to exercise its jurisdiction under the Declaratory Judgment Act in favor of another district court. Lastly, the instant lawsuit was filed before the ex-wife filed her state court lawsuit in Missouri and under the first-to-file rule, the matter should proceed in this court.

Fifth Circuit

ESOP has standing to sue for breach of fiduciary duty. HC4, Inc. Employee Stock Ownership Plan v. HC4, Inc., et al., No. H-15-0872, 2016 WL 109880 (S.D. Tex. Jan. 11, 2016) (Judge Melinda Harmon). Defendant moved to dismiss the ESOP’s claim against it for breach of fiduciary duty, arguing that the ESOP does not have standing to sue because it is not a participant, beneficiary, or fiduciary. The court denied the motion and found that under Louisiana Bricklayers &Trowel Trades Pension Fund & Welfare Fund v. Alfred Miller General Masonry Contracting Co., 157 F.3d 404 (5th Cir. 1998) and ERISA § 515, the ESOP has standing to sue for diminishment of the stock plan’s assets over which it had authority and control to administer the investment of the Plan’s assets under the terms of the Plan. With respect to Defendant HC4’s motion to sever, to which the ESOP did not respond, the court granted the motion. The claims against HC4 included breach of fiduciary duty arising from an alleged failure to adequately investigate the financial situation of a company with which HC4 is merging but the claims against Defendant Travelers included breach of the insurance agreement and violations of the Insurance Code and the Deceptive Trade Practices Act arising from an alleged failure to pay a covered claim under an insurance policy. Although the court has only supplemental jurisdiction over the claims against Travelers, it found that remand was not permissible under the circumstances.

Ninth Circuit

Assignee’s claims are properly removed and the court has supplemental jurisdiction over state law claims. Hackert v. Cigna Health and Life Insurance Company, et al., No. 215CV1248KJMCKDPS, 2016 WL 121786 (E.D. Cal. Jan. 12, 2016). The court adopted the Magistrate Judge’s report and recommendation denying a medical provider’s motion to remand and motion to dismiss the insurance company’s counterclaims. The court just addressed the provider’s objections to the report and recommendation. The court found that removal was proper because Cigna carried its burden to show that the provider submitted claims as his patients’ assignee and would have standing to bring an ERISA action. The provider objected the Magistrate Judge tacitly and improperly lumped together (1) the claims Cigna argues were preempted by ERISA and (2) other claims involving a Health Maintenance Organization (HMO), for which he claims an independent California statutory remedy exists. The court assumed without deciding that the court would lack independent subject matter jurisdiction over these HMO-related claims, but because all the claims arise within the same factual circumstances, the court has supplemental jurisdiction over them. See 28 U.S.C. § 1367(a).

29 U.S.C. § 1132(a)(3) fiduciary misconduct claim is not clearly duplicative of § 1132(a)(1)(B) claim for wrongfully denied benefits. Mullin v. Scottsdale Healthcare Corp. Long Term Disability Plan, No. CV-15-01547-PHX-DLR, 2016 WL 107838 (D. Ariz. Jan. 11, 2016) (Judge Douglas L. Rayes). The court denied Omaha Life Insurance Company’s motion to dismiss Plaintiff’s breach of fiduciary duty claim under § 1132(a)(3), which she brought in connection with her claim for long-term disability benefits under § 1132(a)(1)(B). With respect to the § 1132(a)(3) claim, Plaintiff alleged that Omaha’s arbitrary and capricious claims handling generally constitutes a breach of fiduciary duty, because Omaha’s claims handling was discharged imprudently, it instructs and/or incentivizes certain employee(s) to terminate fully insured LTD claims and appeals based on bias, it wrongfully withheld Plaintiff’s benefits for its own profit, sought an independent medical examination on appeal and used the IME as a justification for tolling deadlines under ERISA, Omaha did not even attempt to complete a timely review within 45 days, Omaha acted with malice and in bad faith which constitutes a violation of its fiduciary duty. The court concluded that Plaintiff’s § 1132(a)(3) fiduciary misconduct claim is based on the same injury as her § 1132(a)(1)(B) claim for wrongfully denied benefits, but the equitable relief she seeks is distinct from past due benefits, and she alleges that the available legal remedies are inadequate to make her whole. Accordingly, the court permitted Plaintiff to pursue both claims, keeping in mind that she is not entitled to relief where ERISA elsewhere provides an adequate remedy. Specifically, Plaintiff must prove that Omaha engaged in fiduciary misconduct, that she is entitled to LTD benefits, those benefits, attorneys’ fees, and any appropriate prejudgment interest are inadequate to make her whole, and her requested equitable relief is appropriate. At this stage, the court found that Plaintiff adequately pled a § 1132(a)(3) fiduciary misconduct claim that is not clearly duplicative of her § 1132(a)(1)(B) claim for wrongfully denied benefits.

Provider Claims

Eighth Circuit

ERISA plans only prohibited assignment of right to benefits, not assignment of legal claims, but dismissal due to failure to exhaust. Podiatric OR of Midtown Manhattan, P.C. v. UnitedHealth Grp., Inc., United HealthCare Servs., Inc., et al., No. CV 15-3234(DSD/HB), 2016 WL 126362 (D. Minn. Jan. 11, 2016) (Judge David S. Doty). United adopted a policy of not paying for office-based surgery (OBS) facility fees” that it applied to Plaintiff as a non-participating out-of-network physician office with an OBS accreditation, but without a license to operate as an Ambulatory Surgery Center. Podiatric submitted claims on behalf of two patients who underwent surgeries at its OBS facility and United informed Podiatric facility fees would not be paid and provided instructions about how to appeal the decision. Podiatric filed a putative class action complaint, seeking benefits under 29 U.S.C. § 1132(a)(1)(B), and injunctive relief under § 1132(a)(1)(B) or, alternatively, § 1132(a)(3). United moved to dismiss, which the court granted. On the issue of standing, the court found that Plans contain non-assignment clauses which prohibit Podiatric from obtaining the rights to the insureds’ benefits. Further, even if waiver of a Plan provision could be asserted in an ERISA case, a point the court does not decide, United did nothing to evince an intent to waive the non-assignment clauses. However, the court agreed with Podiatric that the clauses prevent the assignment of benefits, but not the assignment of a cause of action. As such, the court found that Podiatric obtained valid assignments of the right to pursue a cause of action, and has standing to bring the instant claims. But because Podiatric did not exhaust administrative remedies and failed to establish that pursuing administrative remedies would be futile, the court granted the motion to dismiss without prejudice.

Retaliation Claims

First Circuit

The plaintiff alleged enough facts to state an ERISA interference claim. Rachael K. Brown v. HCA Health Servs. of New Hampshire, Inc., No. 15-CV-323-AJ, 2016 WL 141672 (D.N.H. Jan. 12, 2016) (Magistrate Judge Andrea K. Johnstone). The court denied the employer’s motion to dismiss Plaintiff’s ERISA interference claim. The court found that at this early stage, Plaintiff has alleged enough facts to state an ERISA interference claim. First, the complaint attaches two exhibits demonstrating that the plaintiff was a member of an ERISA plan. Second, the complaint alleges that she was qualified for her position based on multiple positive performance reviews. Lastly, the complaint alleges that circumstances that give rise to an inference of discrimination occurred when, just before she applied for FMLA leave, she was notified that her employment was terminated. Whether Plaintiff’s notice was proper or if there is any plausible basis that the employer intended to interfere with her ERISA benefits should be resolved on a properly developed summary judgment record, rather than at this early stage in the proceedings.

Severance Benefit Claims

Third Circuit

Financially conflicted administrative committee’s decision to deny severance plan benefits constituted a reasonable interpretation of plan terms. Feeko v. Pfizer, Inc., No. 14-4752, __Fed.Appx.___, 2016 WL 66535 (3d Cir. Jan. 6, 2016) (Before AMBRO (dissenting), HARDIMAN and SLOVITER Circuit Judges). The majority affirmed the district court’s grant of judgment on the administrative record in favor of Pfizer on the Plaintiffs’ claim for severance benefits. Plaintiffs were employed by Wyeth, a pharmaceutical company, which had adopted the Special Transaction Severance Plan (“the Plan”) in anticipation of a corporate takeover bid by Pfizer, Inc. An employee was eligible to receive severance benefits under the Plan if “following a Change in Control, the Employee has either (i) experienced an Involuntary Termination of Employment or (ii) resigned for Good Reason.” Excluded from the definition of “Termination of Employment” was any change in employment constituting a “transfer of employment to any successor company of the Company or (any of its affiliates).” The Plan documents do not define the phrase “successor company of the Company.” Pfizer completed its purchase of Wyeth and assumed responsibility over the Plan as its sponsor. Pfizer transferred Plaintiffs employment to Benchmark, a separate company that provided credit services to Wyeth. The terms of employment remained the same except that Benchmark did not continue their “Rule of 70” benefits or contribute to their pension plans as Wyeth (and then Pfizer) had done. Plaintiffs applied for benefits under the Plan on the basis that Benchmark was not a successor company. The Committee that made the decision determined that Benchmark was a successor company insofar as Plaintiffs’ employment was concerned and denied benefits. Although the majority recognized that there were several inherent conflicts of interest because the Committee was comprised of senior-level Pfizer employees who had financial incentives to deny benefit claims and reduce company expenses, it found that the Committee’s interpretation of the Plan itself was reasonable. Judge Ambro dissented, finding that Benchmark may be the successor employer but it does not make Benchmark a successor company to Pfizer. Judge Ambro also believed that the Committee’s significant incentive to deny claims should have been given determinative effect here.

Statute of Limitations

Second Circuit

Life waiver of premium claim barred by contractual limitations period and no equitable tolling applies. Soares v. United of Omaha Life Insurance Company, No. 3:14CV968 (DJS), 2016 WL 158495 (D. Conn. Jan. 13, 2016) (Judge Dominic J. Squatrito). This matter involves a denial of a claim for waiver of premium benefits based on disability. The court granted United of Omaha’s motion for summary judgment. The court found that the lawsuit was time-barred under the limitations period set forth in the Plan and even if it were assumed that the limitations period was extended by virtue of the opportunity to submit additional information provided by United of Omaha in its initial denial of Plaintiffs’ claim for waiver of premium benefits, this action would still be untimely. The court rejected Plaintiff’s contention that the limitations period should not have begun until United of Omaha denied her appeal on June 2, 2011. The court found that this argument is contrary to the express language of the Plan, which may be enforced even if the administrative exhaustion requirement will, in practice, shorten the contractual limitations period. The court also rejected Plaintiff’s contention that the limitations period specified in the Plan should not be enforced because the notice she received of her rights with respect to an appeal of the denial of her claim failed to notify her of the time by which she needed to file a civil action. The court explained that even if it were to conclude that the ERISA regulations did require United of Omaha to include the time limit for bringing a civil action in its notice, the failure to do so in this instance would not entitle Plaintiff to a tolling of the three-year limitations period specified in the Plan. A complete copy of the Plan was sent to Plaintiff’s counsel at a time that she had, at a minimum, nearly a year left before the expiration of the three-year limitations period. The court concluded that Plaintiff’s action is time-barred by the three-year limitations period specified in the Plan.


Sixth Circuit

Long-term disability lawsuit transferred from W.D. Ky to W.D. Va, the district where Plaintiff resides. Coffey v. Hartford Life & Accident Insurance Company, No. 3:15-CV-378-TBR, 2016 WL 154128 (W.D. Ky. Jan. 11, 2016) (Judge Thomas B. Russell). The court granted the Hartford Life and Accident Insurance Company’s Motion to Transfer Venue to the United States District Court for the Western District of Virginia. In this lawsuit involving the denial of long-term disability benefits, Plaintiff resides in Virginia. The only connection to Kentucky is Plaintiff’s attorney’s location and that communications from Hartford had a return address to a Kentucky Post Office Box. Hartford submitted a declaration supporting its position that Plaintiff’s claim was processed and reviewed by its offices in Simsbury, Connecticut and Minneapolis, Minnesota. Considering all of the relevant factors, the court found that private and public considerations support transfer.

* 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. The cases reported above were handled by other law firms but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Kantor & Kantor LLP may be able to advise you so please contact us. Case summaries authored by Michelle L. Roberts, Partner, Kantor & Kantor LLP, 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel: 510-992-6130.

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