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ERISA Watch – July 31, 2014

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

Court Upholds Reliance Standard’s Denial of LTD Benefits

In Conway v. Reliance Standard Life Ins. Co., 13-11164, 2014 WL 3708533 (E.D. Mich. July 28, 2014), the plaintiff is a 27-year personal injury defense attorney. Roughly five years ago, he suddenly lost hearing in his left ear. Though the plaintiff returned to work three days later-and has continued to work as an attorney ever since-his hearing loss has required him to reduce the number of hours he works per week. Before losing his hearing, the plaintiff typically worked seventy hours per week; now he is only able to work fifty hours per week. Considering the plan provisions, and all of the evidence in the administrative record, the Court concluded that the plaintiff did not provide satisfactory proof of Total Disability. Though there was medical evidence showing that he experienced significant hearing loss, a loss of balance, and tinnitus, in the court’s view, the record did not show by objectively satisfactory evidence that these conditions rendered the plaintiff unable to perform any of the material duties of his occupation as an attorney.

No Breach of Fiduciary Duty for Failing to Inform of Retirement Package. In Soland v. George Washington Univ., — F.Supp.2d —-, 2014 WL 3686329 (D.D.C. July 25, 2014), the plaintiff is a former George Washington University (“GW”) professor who alleged that the university breached a fiduciary duty owed to him under ERISA by failing to inform him of a department-wide retirement plan that he claims was in the works while he was negotiating his retirement. The plaintiff contended that GW’s omission caused him to agree to a less-beneficial retirement package. The court found in favor of GW, finding that the retirement plan was in too nascent a stage to constitute material information when the plaintiff sought to retire and that the plaintiff did not offer evidence establishing that GW made a misstatement or failed to disclose necessary information.

Retaliation Claim Under ERISA Permitted. In Najmola v. Women’s Healthcare Grp. of PA, CIV.A. 13-6519, 2014 WL 3700260 (E.D. Pa. July 24, 2014), the plaintiff alleged that she utilized her ERISA protected short-term disability plan and that she worked as a medical assistant for several years, received favorable reviews, and was cleared by her doctor to return to work full-time. She also alleged that she was terminated shortly after she informed her employer that she was able to return to work. The plaintiff’s employment ended on the exact date that she was being released by her doctor to return to work. She also alleged that she received favorable performance evaluations up until her termination. Section 510 of ERISA prohibits employers from discharging or harassing their employees in order to keep them from obtaining employee benefits. In addition to protecting future benefits, Section 510 supports a claim where an employee alleges that he or she was terminated in retaliation for the past exercise of protected rights. The plaintiff must demonstrate that the defendant had the “specific intent” to violate Section 510. Defendants moved to dismiss the plaintiff’s ERISA claim. The Court found that these facts were sufficient to infer a causal connection and that the defendants had the intent to interfere with or retaliate against the plaintiff for utilizing ERISA protected benefits. As such, it denied the defendants’ motion.

Court Finds In Favor of Pensioner. In Schane v. Int’l Bhd. of Teamsters Union Local No. 710 Pension Fund Pension Plan, 13-3745, 2014 WL 3611613 (7th Cir. July 23, 2014), the 7th Circuit Court of Appeals reversed a district court finding in favor of a pension plan that denied an increased pension benefit payment to the plaintiff based on the date that it alleged he “retired” under the plan. The relevant plan provision reads in pertinent part:

Section 6.05: Retirement or Retires

(a) Before attainment of Normal Retirement Age, “Retirement” or “Retires” means cessation of being employed in Covered Employment or engaging in any of the following:

(i) employment with any Contributing Employer;

(ii) employment in the same or related business as any Contributing Employer;

(iii) self-employment in the same or related business as any Contributing Employer;

(iv) employment or self-employment in any business which is under the jurisdiction of the Union at the time of such Retirement; or

(v) employment or self-employment … in any position covered by a Teamster contract between that employer and any affiliate of the International Brotherhood of Teamsters….

The dispute boiled down to whether cessation of covered employment is sufficient for retirement or merely one of two necessary requirements (the other being cessation of the enumerated activities in section 6.05(a)(i)-(v)). The district court reasoned that, because the definition of “retire” took the form cessation of X or Y, the trustees were free to interpret it disjunctively: that is, to treat cessation of X as a sufficient condition. The Court of Appeals found that the trustees never suggest why “cessation of being employed … or engaging” should be read disjunctively, rather than as a conjunctive prohibition that applies to both sides of the “or.” In these circumstances, there simply was no analysis or reasoning to which the Court could defer under the arbitrary and capricious standard. An ERISA plan must be read as a whole, considering separate provisions in light of one another and in the context of the entire agreement. The court agreed with the plaintiff that the trustees’ interpretation is untenable when viewed in the context of the rest of the plan, specifically with an accompanying plan provision that covers suspension of benefits. In the context of the entire agreement, the only sensible interpretation of section 6.05(a) is that a participant must cease both covered employment and the activities listed in section 6.05(a)(i)-(v) to be deemed “retired.” Given the plan administrator’s flimsy defense of its own interpretation and that it is clear cut that it would be unreasonable for the plan to deny the application for benefits on any ground, the Court of Appeals reversed the judgment of the district court rather than remanding the matter back to the plan administrator.

Court Upholds Aetna’s Denial of Disability Benefits. In Jensen v. Aetna Life Ins. Co., 13-2091, 2014 WL 3686092 (W.D. Tenn. July 23, 2014), the plaintiff was a FedEx worker who was disabled from performing his normal forty-hour workweek as a result of chronic migraines. From March 24, 2012, to October 12, 2012, the plaintiff missed a total of two hundred and two days of work due to migraine pain. The plaintiff informed FedEx that the intensity and frequency of the migraines is treatable only by opiate medication. However, FedEx policy prevents him from working while on that medication. The plaintiff participated in both the FedEx Short-Term Disability (“STD”) Plan and the FedEx Long-Term Disability (“LTD”) Plan through his employment and Aetna is the claims-paying Administrator of the Plans and makes eligibility determinations for the Plans. The plaintiff filed or STD benefits and could only be eligible for LTD benefits after he first exhausted his STD benefits. The disability plans require that any alleged disability be “substantiated by significant objective findings which are defined as signs which are noted on a test or medical exam and which are considered significant anatomical, physiological or psychological abnormalities which can be observed apart from the individual’s symptoms.” Aetna denied his claim for benefits and the plaintiff filed suit. The court granted Aetna’s motion for summary judgment, determining that the evidence the plaintiff submitted to Aetna was “subjective” in nature despite that the plaintiff’s treating doctors found that he was disabled.

Court Dismisses ERISA Breach of Fiduciary Duty Claim. In Donati v. Ford Motor Co. Gen. Ret. Plan, Ret. Comm., 13-14496, 2014 WL 3663966 (E.D. Mich. July 23, 2014), the plaintiff’s personal representative brought suit under 29 U.S.C. § 1132(a)(1)(B), alleging that the retirement plan administrators improperly excluded benefits owed under a QDRO in calculating a lump-sum payment. The plaintiff brought a second claim, under 29 U.S.C. § 1132(a)(3), alleging a breach of fiduciary duty arising from the defendant’s alleged misstatements of the amount of the plaintiff’s lump-sum benefits. The defendant moved for partial judgment on the pleadings as to Count II of the complaint for breach of fiduciary duty, asserting that the plaintiff’s claim failed as a matter of law because ERISA does not allow simultaneous claims under Section 1132(a)(1) (B) and (a)(3), in order to remedy the same injury. The plaintiff argued that she has not sought identical remedies because her allegation under § 1132(a)(3) “references matters entirely external to the Plan document, namely the misrepresentation to Plaintiff of the terms of the Plan and her benefits thereunder.” The court found that the plaintiff’s alleged violations of the ERISA plan at issue can be adequately remedied under § 1132(a)(1)(B), and thus, she may not seek relief for an alleged breach of fiduciary duty under § 1132(a) (3), which the court described as “a mere repackaging of her claim to recover benefits under § 1132(a)(1)(B).” The court granted defendant’s motion for partial judgment on the pleadings and dismissed the plaintiff’s claim for breach of fiduciary duty.

Court Finds Dignity Health is Not Exempt from ERISA. In Rollins v. Dignity Health, 13-CV-01450-TEH, 2014 WL 3613096 (N.D. Cal. July 22, 2014), the court considered whether Dignity’s Plan is exempt from ERISA. The plaintiff argued that there is no genuine dispute of material fact that the Plan was established by Dignity’s predecessor, Catholic Healthcare West (“CHW”), that CHW was not a church, and that therefore the Plan is not an exempt church plan under the statute. Dignity opposed Rollins’s motion and argued that there is a genuine dispute of material fact because at the time the Plan was established in 1989, CHW was controlled by various religious women’s orders known as the “Sponsoring Congregations,” which would be considered churches for purposes of the statute. Dignity argued that the Sponsoring Congregations established the Plan jointly with CHW, and alternatively that by way of the Sponsoring Congregations’ control over CHW, the Sponsoring Congregations indirectly established the Plan. Therefore, the Plan was “established by a church” for purposes of the ERISA statute and is an exempt church plan. The court determined that it would not depart from its earlier ruling, that pursuant to the ERISA statute, mere association with a church does not give an entity the authority to establish a church plan. Under the court’s reading of the statute, a church plan may only be established by a church. There is no genuine dispute of material fact that CHW established the Plan here, and that CHW is not a church. The court granted summary judgment to the plaintiff on her claim for declaratory relief that the plan established by CHW-the Dignity Plan at issue here-is not a church plan as defined by ERISA, and is therefore not exempt from ERISA.

Court Upholds LINA’s Claim Denial Despite Its Repeated Mistakes. In Neubert v. Life Ins. Co. of N. Am., 5:13-CV-643, 2014 WL 3593693 (N.D. Ohio July 21, 2014), the court granted LINA’s motion for judgment on the administrative record. LINA denied plaintiff’s claim for disability benefits where the plaintiff had suffered two strokes and became disabled by permanent stroke damage, including stress, anxiety, an inability to concentrate or multitask, memory problems, fine motor difficulty, pain, fatigue and lack of stamina, and sensitivity to noise. LINA determined that the plaintiff was disabled by an anxiety disorder for which benefits had been paid through the 24-month limitation contained in the policy under the Mental Illness, Alcoholism and Drug Abuse Limitation. The court found that “LINA’s ‘full and fair review’ was less than perfect. It repeated past mistakes, ignored portions of the Court’s previous opinion, and appeared to have specifically ordered a selective file review on remand. Yet, constrained by the arbitrary and capricious standard of review as laid out by the Sixth Circuit, the Court cannot say that LINA’s ultimate decision denying benefits rose to the level of arbitrary and capricious.”

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Court Permits Discovery into Aetna’s Conflict of Interest. In Kasko v. Aetna Life Ins. Co., CIV.A. 5: 13-243-DCR, 2014 WL 3586085 (E.D. Ky. July 21, 2014), the court partially granted plaintiff’s motion for discovery into Aetna’s alleged conflict of interest as the administrator and insurer of the plaintiff’s long-term disability policy. The court found that the plaintiff made a sufficient showing of potential bias to permit further discovery. More specifically, she offered proof that approximately 85% to 90% of the claims that Aetna’s reviewing doctor, Dr. Elana Mendelssohn, has reviewed have been recommended “not disabled.” Further, Dr. Mendelssohn has been criticized by other courts for the content and frequency of reviews she makes for Aetna. The court found this additional information was sufficient to justify discovery outside the administrative record. The court permitted discovery into the compensation and opinions of doctors and vendors for the insurance company.

* 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 Parkway, Ste. 105 Alameda, CA 94501; Tel: 510-992-6130.

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