Call For A FREE Case Evaluation 510.992.6130

ERISA Watch – January 8, 2015

Posted By:

Your reliable source for summaries of recent ERISA decisions

This week’s notable decision is Bush v. Liberty Life Assurance Co. of Boston, No. 14-CV-01507-YGR, __F.Supp.3d___, 2015 WL 54418 (N.D. Cal. Jan. 2, 2015). This case arose from Liberty Life’s decision to offset (reduce) the long-term disability benefits it paid to a disabled veteran by the amount he receives in benefits from the Veterans Administration. The court held that ERISA Section 502(a)(3) claims pled in the alternative to a Section 502(a)(1)(B) claim for benefits are not duplicative nor subject to dismissal. The court also held that Plaintiff’s claim seeking disgorgement of profits against Liberty Life is available under Section 502(a)(3). Plaintiff is represented by Cohen Milstein Sellers & Toll and our firm. Read more below!

Eighth Circuit

Court Reverses Grant of Summary Judgment to Plaintiff on Denied disability Claim, Finding that Discretion Conferred only in an SPD is sufficient to invoke abuse-of-discretion review. In Johnson v. United of Omaha Life Ins. Co., No. 13-2645, __F.3d___, 2014 WL 7388133 (8th Cir. Dec. 30, 2014), the 8th Circuit Court of Appeals reversed the district court’s grant of summary judgment to Plaintiff on her claim for denied long-term disability benefits against United of Omaha Life Insurance Company (United). The district court found that de novo review was proper because the policy did not give discretion to United to construe the terms of the plan and there were significant procedural irregularities in the processing of Plaintiff’s claims for short-term and long-term disability. The 8th Circuit rejected both conclusions, finding that the abuse-of-discretion standard was proper for review of United’s denial of Plaintiff’s long-term disability claim. The court found that because a reasonable participant would have read the policy to have integrated the Summary Plan Description (“SPD”), the SPD containing a clause granting to United “the discretion and the final authority to construe and interpret the Policy,” including “the authority to decide all questions of eligibility,” was sufficient to grant discretionary authority to United. The district court found the procedural irregularities in this case to include “lost or misplaced medical records, fail[ure] to timely process the claims, fail[ure] to resubmit additional evidence to a physician for review, and generally [giving] Johnson and her counsel ‘the run-around.'” But, the court found that these alleged procedural irregularities would not have changed the outcome, nor do the alleged irregularities “trigger a total lack of faith in the integrity of the decision making process.” The court found that substantial evidence supported United’s decision, including, that: 1) despite receiving a diagnosis of fibromyalgia in 1999 and undergoing neck surgery in 2004, Plaintiff did not receive any medical treatment for these conditions from January 1, 2005, until February 26, 2009, the day she quit her job; 2) although Plaintiff’s treating physician diagnosed Plaintiff with anxiety and depression, Plaintiff concedes that depression is not the reason she resigned from her job; 3) Plaintiff’s treating physician’s opinion about Plaintiff’s limitations was reached without the benefit of objective medical testing; and 4) Plaintiff’s surgeon stated that he “overall” agreed with United doctor’s opinion. Lastly, the court vacated the district court’s grant of attorney’s fees to Plaintiff.

Ninth Circuit

Section 502(a)(3) Claims Pled in the Alternative to Section 502(a)(1)(B) claim Are permissible and disgorgement of profits remedy is available under Section 502(a)(3). In Bush v. Liberty Life Assurance Co. of Boston, No. 14-CV-01507-YGR, __F.Supp.3d___, 2015 WL 54418 (N.D. Cal. Jan. 2, 2015), Plaintiff brought a putative class action against Defendants Liberty Life Assurance Company of Boston and Hyundai Motor America based on Liberty Life’s decision to decrease the long-term disability benefits it paid to Plaintiff by the amount he received from the Department of Veterans Affairs (“VA”). Plaintiff was employed by Hyundai and participated in its long-term disability plan that is insured and administered by Liberty Life. Hyundai is the named plan administrator. The court characterized Plaintiff’s six claims as the following: (1) disability benefits under section 502(a)(1)(B), against Liberty Life; (2) equitable relief pursuant to sections 102 and 502(a)(3), against both defendants; (3) equitable relief and disgorgement pursuant to section 502(a)(3), against Liberty Life; (4) violations of sections 104 and 402 and monetary penalties under sections 502(a)(1)(A) and 502(c), against both defendants; (5) violation of section 503, against both defendants; and (6) declaratory and injunctive relief pursuant to section 502(a)(3), against Liberty Life. Liberty Life filed a motion to dismiss claims 2 through 5, and Hyundai joined in part in Liberty Life’s motion. The court granted in part and denied in part Defendants’ motion.

The court found that even if Hyundai, as Plaintiff alleges, delegated certain of its responsibilities as plan administrator-such as drafting the SPD-to Liberty Life, those activities are insufficient to subject Liberty Life to liability as a de facto plan administrator in light of the high bar for such a finding in the Ninth Circuit. As such, the court dismissed Count II against Liberty Life since the claim for equitable relief pursuant to section 502(a)(3) is premised on substantive violations of section 102 and related Department of Labor regulations that govern plan administrators. The court also dismissed Count IV against Liberty Life since the plan sponsor is the party responsible for providing an SPD pursuant to section 104 and drafting a written instrument compliant with section 402. However, the court declined to dismiss Count V against Liberty Life alleging violations of substantive requirements in section 503 regarding the notice and appeals process. The court noted that Liberty Life failed to put forward legal authority that establishes only plan administrators are responsible for complying with section 503.

Liberty Life (joined by Hyundai as to Count II) argued Counts II and III, seeking equitable relief pursuant to section 502(a)(3), must be dismissed as duplicative of Count I’s section 502(a)(1)(B) claim. Defendants also argued that Count V should be dismissed for failure to state a claim and because it is impermissibly duplicative of Count I. With respect to Count II seeking equitable relief under sections 102 and 502(a)(3), Plaintiff only seeks relief under Count II if Count I fails. Specifically, only if the terms of the plan are interpreted to permit the VA benefits offset, then Plaintiff seeks reformation under Count II to redress alleged miscommunication of the terms of the Plan in the SPD. The court found that Plaintiff is entitled to pursue these alternative theories, seeking alternative relief, at this early stage in the litigation. With respect to Count III seeking disgorgement of profits earned by Liberty Life on allegedly wrongfully withheld benefits, and injunctive relief requiring Liberty Life to administer the plan without a VA benefits offset, the court found that interest on wrongfully withheld profits can be recovered under 502(a)(3). Moreover, the injunctive relief sought under Count III is specifically limited in the complaint such that, if available at all, it cannot be duplicative of relief available under Count I. Accordingly, the court found that Count III states a claim for relief that is not merely duplicative of the relief available under Count I.

Lastly, with respect to Count V alleging violation of ERISA section 503, Defendants argued that Count V should be dismissed because: (1) an alleged breach of Department of Labor regulations does not support a claim under section 502(c) or a claim under section 503; (2) a request for claim documents cannot be relied on to seek statutory penalties for violation of the claim regulations set forth in 29 C.F.R. § 2560.503-1(h)(2)(iii); and (3) to the extent Plaintiff seeks a remedy of remand under Count V, this claim is duplicative of Count I and also does not seek substantive relief. As to Defendants’ first and second arguments, the court noted that Count V does not specifically seek section 502(c) penalties. The court noted that on the pleadings, Plaintiff is not required to identify specifically the forms of relief sought in connection with a cause of action. Also, Plaintiff is permitted to advance alternative theories at this early stage and Count V does so by alleging a specific violation of section 503. The court further noted that no double recovery will be permitted and declined to dismiss Count V at this time.

Unreported Decisions

Disability Benefit Claims

In Sliwa v. Allied Home Mortgage Capital Corp., No. 2:13-CV-01433-APG, 2015 WL 56044 (D. Nev. Jan. 5, 2015), Lincoln National Life Insurance Company denied Plaintiff’s long-term disability claim after determining her disability was within the policy’s pre-existing condition exclusion. After Plaintiff filed suit, Lincoln moved for judgment against Plaintiff under Fed.R.Civ.P. 52. However, the evidence Lincoln submitted in support of its motion was not offered or cited during the administrative process. Because the court is bound to the evidence cited in the administrative record, and because the parties are both amenable, the court remanded this case back to Lincoln to make its benefits determination based on the full record.

Pension Benefit Claims

Anderson v. Cemex, Inc., No. 2:12-CV-00136-TC, 2014 WL 7370117 (D. Utah Dec. 29, 2014), involved a pension case brought by thirty-three former employees of the Southwestern Portland Cement Company (Southwestern) who each claim that, under ERISA, they are entitled to benefits payable from Southwestern’s Salaried Employees’ Retirement Plan (the Southwestern Plan) for their years of employment from 1985 to 1989. Defendants denied Plaintiffs’ claims on the ground that the Southwestern Plan was replaced by a plan sponsored by Southwestern’s successor, Martin Marietta (later known as Lockheed Martin). Defendants contend that Southwestern transferred all liabilities for Plaintiffs’ pensions to Martin, along with assets to cover the pension obligations previously owed by the Southwestern Plan, and that they have no liability to pay the same benefits from the Southwestern Plan. With respect to the standard of review, the court rejected Plaintiffs’ argument that Defendants did not properly exercise discretion because the denial letter did not cite to a specific plan provision. The court found that Defendants substantially complied with the requirements for denials even if they did not provide the necessary citation to a Plan provision. Because the Plan grants the administrator with discretionary authority to make decisions, the arbitrary and capricious standard applies. But, because Defendants indisputably failed to give the statutorily required notice of the plan changes, Defendants abused their discretion by denying benefits in the face of this lack of notice, even under an arbitrary and capricious standard. The court recognized that Plaintiffs may potentially recover benefits under both the Southwestern Plan and the Martin Plan, but under ERISA, employers and/or plan administrators must give notice of plan changes.

Pleading Issues & Procedure

In Frank v. Citigroup Inc., No. 14CV745 BTM NLS, 2015 WL 65498 (S.D. Cal. Jan. 5, 2015), a suit alleging entitlement to retirement plan benefits, the court granted Defendants’ motion to dismiss where it found Plaintiff’s complaint as completely lacking in factual support. The Complaint does not specifically identify the Plan in question, does not identify Plaintiff’s employer or provisions of the Plan which entitle her to benefits, and fails to set forth facts regarding the numerous alleged ERISA violations. The Court granted Plaintiff leave to file an amended complaint remedying the deficiencies.

Provider Claims

Emergency Physicians of St. Clare’s v. United Health Care, No. CIV.A. 14-404 ES MAH, 2014 WL 7404563 (D.N.J. Dec. 29, 2014) involved a claim by a New Jersey corporation that provides emergency medical services against companies that, among other things, provide health care benefits and administrative services for beneficiaries of ERISA-governed plans. Plaintiff alleged that when it submitted claims to Defendants for medical services provided to members of the public, Defendants “surreptitiously” processed Plaintiff’s claims using a pediatric doctor’s tax identification number instead of Plaintiff’s tax identification number. As a result, Plaintiff alleges that it was fraudulently and improperly reimbursed at the negotiated pediatric rate, rather than the higher emergency medical services rate that should have been applied. Plaintiff filed its Complaint in state court alleging (1) breach of contract, (2) implied contract, (3) improper reimbursement, (4) consumer fraud, (5) breach of fair dealing, (6) negligence, (7) unjust enrichment, and (8) violation of the New Jersey Claims Settlement Practices Act. Defendant removed the action to federal court based on diversity and federal question jurisdiction. The court adopted the R&R issued by the magistrate judge and remanded the matter to state court. The court found that Plaintiff has not alleged a valid assignment for § 502(a) purposes. Plaintiff merely alleged that he was assigned “certain rights including but not limited to the right to submit medical bills.” Also, ERISA does not preempt claims over the amount of coverage provided, which includes disputes over reimbursement, as the Third Circuit clearly articulated in CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165 (3d Cir.2014). Because the Court found that Plaintiff could not have brought its claim under ERISA, it does not need to consider whether there is an independent legal duty that is implicated by Defendant’s actions.

Remedies

In Lyons v. Bd. of Regents of the Univ. of Wisconsin Sys., No. 14-CV-460, 2015 WL 59425 (E.D. Wis. Jan. 5, 2015), Plaintiff sought compensation from Defendants for medical bills he incurred for services provided by third parties. Plaintiff contended that when Defendants terminated his employment, they violated the Public Health Services Act (PHSA) as amended by the Consolidated Omnibus Reconciliation Act (COBRA) by failing to provide him notice of his right to continue coverage for up to 18 months. Noting that relief under COBRA is limited to “those categories of relief that were typically available in equity, such as injunctive remedies and equitable restitution,” the court found that Plaintiff seeks legal, rather than equitable relief. For restitution to lie in equity, the action generally must seek not to impose personal liability on the defendant, but to restore to the plaintiff particular funds or property in the defendant’s possession. Here, Plaintiff does not seek the return of any particular funds that Defendants received from him since there is no allegation that he ever paid anything to Defendants. Accordingly, the court granted Defendants’ motion for judgment on the pleadings.

Statute of Limitations

In Lawson v. Nokia Siemens Networks US LLC Severance Pay Plan, No. 4:14-CV-814-A, 2014 WL 7398946 (N.D. Tex. Dec. 29, 2014), the court granted Defendant’s motion to dismiss Plaintiff’s claim for severance benefits, finding that the action is barred by the one-year limitations period established by the Plan. Plaintiff mailed his request for severance benefits to the plan administrator on January 7, 2013 and the plan administrator denied Plaintiff’s claim by letter dated February 18, 2013. Plaintiff was given 60 days to appeal and the Plan subsequently granted Plaintiff an extension of time to May 9, 2013, to appeal the denial of benefits. Plaintiff appealed the denial by a letter that he sent to the plan administrator on May 9, 2013. The Plan provided that “an appeal is deemed denied if no decision has been given to the employee within sixty days of the appeal, but that the Plan Administrator may extend that period for an additional sixty days.” Sixty days from May 9, 2013 expired July 8, 2013 but by letter dated June 19, 2013, the plan administrator extended the July 8, 2013 deadline by granting plaintiff the option of submitting additional information to her for consideration by July 15, 2013, a date beyond the initial sixty-day period. Because of this extension and because the plan administrator did not subsequently issue a decision regarding Plaintiff’s appeal, the appeal was deemed denied on September 6, 2013, the 120th day after Plaintiff filed his appeal on May 9, 2013. Defendant maintained that, and the court agreed, Plaintiff’s appeal would have been deemed denied on July 8, 2013, had the plan administrator not given Plaintiff an extension to July 15, 2013, to submit additional information. Because of that extension, the deemed denial occurred on July 15, 2013, more than one year before the September 4, 2014 date when Plaintiff filed this action, and thus, it is untimely.

Statutory Damages & Notice Violations

In Anderson v. Cemex, Inc., No. 2:12-CV-00136-TC, 2014 WL 7370117, at *7-8 (D. Utah Dec. 29, 2014), Plaintiffs maintain they are entitled to recover civil penalties under 29 U.S.C. § 1132, because in 2011 they requested documents and information about their benefits under the Southwestern Plan and Defendants did not produce any documents or information. Defendants explained that they did not have the materials to provide to Plaintiffs. Instead, all information and records were transferred to Southwestern’s successor. Plaintiffs did not produce any evidence showing that Defendants had access to but simply refused to produce the documents and information. Because Defendants did not have what Plaintiffs requested, the court found that the failure to produce the documents and information does not warrant an award of civil penalties. In addition, Plaintiffs have not shown that they have suffered any harm or prejudice as a result of Defendants’ failure to produce the documents and information. In the absence of harm to Plaintiffs, the court declined to impose penalties.

* 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.

LATEST FROM OUR BLOG

Get The Help You Need Today