It’s hard to believe there could ever be a dull moment in ERISAland but there weren’t any decisions this past week that were particularly exciting. That said, this week’s semi-notable decision (and mostly for the cartoon material) is In re Citigroup ERISA Litig., No. 11 CV 7672 JGK, __F.Supp.3d___, 2015 WL 4071893 (S.D.N.Y. July 6, 2015). The court found that the Supreme Court’s decision in Tibble v. Edison Int’l, 135 S.Ct. 1823 (2015) was not controlling law that warranted reconsideration of its previous decision to dismiss the plaintiffs’ breach of fiduciary claims based on the statute of limitations and the merits of the allegations. The court explained that Tibble is distinguishable from this case, which involves the allegation that defendants mismanaged the plaintiffs’ employee stock ownership plans by continuing to allow plaintiffs to invest in Citigroup stock at a time when it was falling drastically. Tibble involved allegations that the defendants acted imprudently by offering higher priced retail-class mutual funds as Plan investments when materially identical lower priced institutional-class mutual funds were available. If this has piqued your interest, read more in this week’s ERISA Watch!
Your reliable source for summaries of recent ERISA decisions
Below is Kantor & Kantor LLP summary of this past week’s notable ERISA decisions.
Individual fiduciary held liable for withheld fringe benefit contributions, prejudgment interest, and attorneys’ fees. In Bricklayers & Allied Craftworkers Local 2 v. Moulton Masonry & Const., LLC, No. 1:13-CV-201, __F.Supp.3d___, 2015 WL 4086305 (N.D.N.Y. July 7, 2015), following the Second Circuit’s affirmation of Moulton’s individual liability as a fiduciary, the court entered default judgment against him in the amount of $451,300.52 for withheld fringe benefit contributions. Plaintiffs sought prejudgment interest calculated at the highest rate of return on investments but the Court found that Plaintiffs did not provide any detailed information regarding their investments and the overall rate of return on them. The court awarded prejudgment interest on the unpaid contributions at the rates provided by the Trusts and CBA, which totaled $104,628.81. Finally, the court awarded attorneys’ fees and costs for being the prevailing party on the motion for default judgment and appeal. The court awarded a total of $31,598.43 in attorneys’ fees and costs to cover the expenses Plaintiffs incurred through the filing of their motion for default judgment and defending their judgment on appeal. The court entered judgment against Moulton in the amount of $587,527.76.
Tibble does not impact dismissal of breach of fiduciary claims related to ESOPs. In In re Citigroup ERISA Litig., No. 11 CV 7672 JGK, __F.Supp.3d___, 2015 WL 4071893 (S.D.N.Y. July 6, 2015), the court denied Plaintiffs’ motion for reconsideration of the court’s dismissal of their Third Consolidated Amended Complaint, alleging breach of fiduciary duties based on Defendants’ purported mismanagement of Plaintiffs’ employee stock ownership plans (“ESOPs”). Plaintiffs argued that the Supreme Court’s decision in Tibble v. Edison Int’l, 135 S.Ct. 1823 (2015) compels reconsideration of the court’s decision that Plaintiffs’ claims were time-barred and failed to show any special circumstances that would have made it imprudent for Defendants to rely on market valuations of Citigroup common stock. The court found that Tibble has little in common with this case since it did not concern ESOPs or the duties of fiduciaries faced with a drop in the price of company stock held by such plans. ERISA’s statute of limitations bars a claim after “the earlier of” (1) six years after “the date of the last action which constituted a part of the breach or violation …” or (2) “three years after the earliest date on which the plaintiff had actual knowledge of the breach of violation.” Tibble only addressed the six-year statute of limitations in § 1113(1) but this court dismissed Plaintiffs’ claims based on the three-year statute of limitations in § 1113(2) because Plaintiffs acquired actual knowledge of the alleged violations more than three years before they filed the Complaint. Lastly, Tibble‘s reaffirmation of ERISA’s reliance on trust law did not involve claims based on a drop in an employer’s stock price. Rather, Tibble concerned allegations of buying mutual funds at a retail price when they could have been obtained more cheaply at an institutional price. The court concluded that Plaintiffs have not shown any change in controlling law that warrants reconsideration of the court’s prior opinion.
Appellate attorneys’ fees awardable even where circuit court is silent on fees; 14-day deadline set forth in FRCP 54(d) is inapplicable. In Buckley v. Slocum Dickson Med. Grp., PLLC, No. 6:10-CV-974, __F.Supp.3d___, 2015 WL 3990198 (N.D.N.Y. July 1, 2015), the could found that Plaintiff’s request for appellate attorneys’ fees was appropriate even though the Second Circuit (on the matter’s second appeal) was silent on whether Plaintiff was entitled to fees and even though Plaintiff did not submit his fee request in the 14-day timeframe set forth in FRCP 54(d). With respect to the latter, the court determined that FRCP 54(d) is not applicable to requests for appellate attorneys’ fees in ERISA cases because the statute itself does not set out any time limits for making a motion for appellate attorneys’ fees. A prevailing party must seek appellate attorneys’ fees within a reasonable period of time after the circuit’s entry of final judgment. Here, the Second Circuit entered final judgment on September 22, 2014 and Plaintiff filed his fee request on March 19, 2015 (a little under three months after the 90-day time limitation for a certiorari petition closed). The court found Plaintiff’s fee request to be timely.
The court denied Plaintiff’s request for fees associated with the work of a disbarred attorney but declined to deny Plaintiff’s fee request altogether. With respect to the reasonableness of the fee request, the court determined that Plaintiff’s request for an additional $97,695.25 in fees, based on a total of over 500 hours, would be incongruous with the prior award of $47,723 as well as a calculation of how much time could reasonably have been spent working on the appeal. The court found that the amount of time reasonably expended achieving the result on appeal was 106.5 hours. Applying an hourly rate of $225 (which the court previously determined was reasonable), the court awarded a total of $23,962.50 in fees.
Attorneys for Class are only entitled to statutory fee award and not entitled to a fee from the common fund. In Pierce v. Visteon Corp., No. 14-2542, __F.3d___, 2015 WL 3985985 (7th Cir. July 1, 2015), involving a certified class action, the Seventh Circuit held that attorneys of employees who prevailed against employer for COBRA notice violations were not entitled to a fee from the class’s common fund in addition to fee awarded under ERISA Section 502(g). For 741 former employees who received untimely notice, they each will receive $1,250. The district court ordered the employer to pay class counsel $302,780 as attorneys’ fees under Section 502(g), plus costs of about $11,000. The court found that there are three principal reasons that justify limiting the common-fund approach to cases outside the scope of a fee-shifting statute. First, the fee-shifting provision in ERISA is a statutory replacement for the common law, which was devised by courts as a matter of necessity when there was no other way to compensate lawyers for work that substantially benefited a class. Second, fee-shifting statutes are designed to ensure that the victims retain full compensation and the wrongdoer pays the lawyers. Third, Section (g)(1) provides for an award of a “reasonable” fee so if the attorney were to pocket substantially more than that, his compensation would by definition be unreasonably high.
Designation of TPA for coverage of emergency contraception does not violate ERISA. In Wheaton Coll. v. Burwell, No. 14-2396, __F.3d___, 2015 WL 3988356 (7th Cir. July 1, 2015), the Seventh Circuit held that the government did not violate ERISA by designating the third-party administrator for a Christian liberal arts college’s health plans to be the plan administrator for coverage of emergency contraception under the ACA after the college notified the government that it objected to providing certain forms of contraceptive methods approved by the FDA.
Death from Deep Vein Thrombosis developed after a long flight is not an “accident” under accidental death benefit policy. In Williams v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, No. 13-55719, __F.3d___, 2015 WL 4080909 (9th Cir. July 7, 2015), the Ninth Circuit affirmed the district court’s grant of summary judgment in favor of the life insurance company, where it denied accidental death benefits for the sudden death of Jack Williams as a result of Deep Vein Thrombosis (“DVT”) shortly after he completed roughly 28 hours of air travel in a five-day period. Defendant determined that Williams’ death did not result from an “accident” under the terms of the policy. The plan defines Injury as bodily injury: “(1) which is sustained as a direct result of an unintended, unanticipated accident that is external to the body … (2) which occurs under the circumstances described in a Hazard applicable to that person; and (3) which directly (independent of sickness, disease, mental incapacity, bodily infirmity or any other cause) causes a covered loss under a Benefit applicable to such Hazard.” The court concluded that no person of average intelligence and experience would find that Williams died “as a direct result of an unintended, unanticipated accident that is external to the body.”
Select Slip Copy & Not Reported Decisions
Breach of Fiduciary Duty
In Hoover v. Besler, No. CIV.A. 14-5786 MAS, 2015 WL 4027472 (D.N.J. June 30, 2015), Plaintiff alleged that, as a result of the sale of the improperly valued stock, she and other ESOP participants received less than the fair market value of certain stock held in their individual ESOP accounts. The complaint alleges no claims against the ESOP but joined the ESOP a party Defendant pursuant to Rule 19(a) “solely to assure that complete relief can be granted.” The ESOP sought to be dismissed from the action and the court dismissed the ESOP, finding that Plaintiff did not show that the ESOP is a necessary party under Rule 19.
Disability Benefit Claims
In Hastings v. Long Term Disability Plan for Go-Getters, Inc., No. RDB-13-0042, 2015 WL 3995721 (D. Md. June 30, 2015) (Not Reported in F.Supp.3d), the court denied Plaintiff’s motion to supplement the record of Plaintiff’s disability claim, finding that a four-year-old email in which one of Plaintiff’s former physicians admitted to having no recollection of a phone call about Plaintiff’s disability claims would enhance this court’s understanding of the case.
In Patton v. Nat’l Union Fire Ins. Co. of Pittsburgh, PA, No. 1:15-CV-43, 2015 WL 4068051 (S.D. Ohio July 2, 2015), a matter involving denial of accidental death benefits, the court granted Plaintiff’s request to conduct discovery on Defendants’ conflict of interest/bias, finding that Plaintiff made more than a “mere allegation” that a conflict of interest exists. Plaintiff alleged that Defendants’ lack of impartiality is demonstrated on the face of the administrative record because they failed to conduct a due diligence investigation. The court also found that Plaintiff is entitled to discovery because she alleged sufficient facts to maintain a due process violation by the plan administrator. Plaintiff alleged that the administrative record did not include all documents that were relevant to the claim.
In Bobak v. Blue Cross Blue Shield of Michigan, No. 14-14494, 2015 WL 3967925 (E.D. Mich. June 30, 2015), Plaintiff’s complaint alleged that Defendant induced him into an employment contract by misrepresenting aspects of an employee benefits plan and subsequently breaching an alleged agreement to provide Plaintiff with an additional five years of service under the employee benefits plan. The court found that based on these allegations, Plaintiff’s claims of fraud in the inducement and breach of contract are preempted by ERISA and his claims were properly removed. But, the court found that it does not have jurisdiction because the claims are non-justiciable based on a straightforward application of the mootness doctrine. Plaintiff sought to be credited with five years of service but because Plaintiff had already vested in his benefits, the additional five years would not affect any other aspect of his retirement benefits, such that there is nothing left for Plaintiff to win.
Life Insurance & AD&D Benefit Claims
In Shafer v. Metro. Life Ins. Co., No. 14-CV-00656-RM-KMT, 2015 WL 4055473, at *7 (D. Colo. July 2, 2015) (Not Reported in F.Supp.3d), the court found that the decedent had notice of the 2012 MetLife Policy’s Actively at Work requirement and MetLife did not arbitrarily and capriciously deny Plaintiff’s claim for benefits under the 2012 MetLife Policy in excess of $873,000 plus interest.
In Woerner v. Fram Grp. Operations, LLC, No. CIV.A. 12-6648 SRC, 2015 WL 3970199 (D.N.J. June 30, 2015), the court granted summary judgment to Defendant on Plaintiff’s claim for life insurance benefits. At the time that the decedent enrolled in the life insurance plan he was on sick-leave and not an “active” employee. The plan was also not formally established until after the decedent’s death. Neither the employee nor his wife was provided with the insurance plan document that set forth the eligibility criteria. Notwithstanding, the court found that it had to follow the governing ERISA plan documents that contain an active-service requirement even thought they were not disclosed to Plaintiff or her husband.
Medical Benefit Claims
In Bryson v. United Healthcare Ins. Co., No. 3:15-CV-00142-FDW, 2015 WL 4026009 (W.D.N.C. July 1, 2015), Plaintiff brought ERISA and non-ERISA claims against Defendants for their refusal to pay $82,419.24 in medical expenses incurred by Plaintiff during a time in which he was employed by Defendant Connextions and was the named insured under a health insurance policy with Defendant United Healthcare. The court declined to dismiss the non-ERISA claims because the Complaint contains sufficient factual material, which, if true, may support Plaintiffs’ claims that the Plan is not covered by ERISA. The court dismissed the ERISA breach of fiduciary duty claim because adequate relief is available for Plaintiffs’ injury through review of Plaintiff’s individual benefits claim under § 1132(a)(1)(B). The court also dismissed Plaintiff’s claim under § 1133 for denying him a full and fair review since this provision does not provide for a separate cause of action for a violation of administrative remedies.
In Prof’l Orthopedic Associates, PA v. CareFirst BlueCross BlueShield, No. CIV.A. 14-4486 MAS, 2015 WL 4025399 (D.N.J. June 30, 2015), a claim by a healthcare provider, a professional medical association, and an individual patient, to recover medical benefits under a health insurance plan, the court concluded that the anti-assignment provision in the benefit plan is valid and enforceable. Because the assignments upon which Plaintiffs rely are void, the provider and association are not beneficiaries under the Plan, and they lack standing to bring their claims. With respect to the individual’s claims, the court found no indication that, to the extent that Count I attempts to assert both a breach of fiduciary duty claim and section 502(a)(1)(B) claim for benefits, the fiduciary duty claim is distinct from the benefits claim. Because the fiduciary duty claim does not seek any additional relief otherwise not provided for by section 502(a)(1), the court found that it cannot stand.
Pension Benefit Claims
In Flick v. Chartwell Advisory Grp. Ltd., No. CIV.A. 14-06953, 2015 WL 4041969 (E.D. Pa. July 2, 2015), the court dismissed Plaintiff’s claim for the present value of the 401k matching payments that Defendant allegedly failed to make since his claim is premised exclusively on the terms of the Employee Handbook, which is not the plan or the summary plan description. The Employee Handbook’s language does not describe plan benefits that are enforceable under ERISA. The court also dismissed Plaintiff’s breach of fiduciary duty claim since Plaintiff did not show that the fiduciary’s breach of its duty was a proximate cause of Plaintiff’s injury. Thus, even if he was entitled to a 25% matching contribution for the first 6% he saved, he did not allege that he satisfied the precondition necessary to receive matching contributions. From his allegations, the court could not infer that Plaintiff was injured as a result of the alleged misrepresentations. Lastly, the court dismissed Plaintiff’s equitable estoppel claim because he did not allege any facts suggesting he was diligent and engaged in persistent questioning about the significant benefits at stake. Because of this, the court found that he did not plausibly allege the existence of extraordinary circumstances.
Pleading Issues & Procedure
In Makwana v. Express Scripts, Inc., No. CIV.A. 14-7096, 2015 WL 4078048 (D.N.J. July 6, 2015), the court denied Plaintiffs’ motion to remand to state court based on the argument at the court lacks subject matter jurisdiction on their breach of contract claim. The court found that in order to demonstrate that they were entitled to a severance package, Plaintiffs necessarily will have to prove a violation of a term in the Severance Plan which is governed by ERISA. The court rejected Plaintiffs’ argument that the loss of a severance package is merely an element of damages.
In Robinson v. Laneko Eng’g Co., No. CIV.A. 14-05036, 2015 WL 4000145 (E.D. Pa. July 1, 2015), the court determined that Plaintiff lacked statutory standing to sue for pension benefits purportedly owed to his father since he is neither a participant nor a beneficiary. As a result, the court lacks subject matter jurisdiction over Plaintiff’s claims and therefore has no authority to rule on Defendant’s arguments that go to the merits of those claims. The court dismissed the complaint for lack of subject matter jurisdiction.
In In re Aetna UCR Litig., No. CIV. 07-3541, 2015 WL 3970168 (D.N.J. June 30, 2015), a matter challenging the use of the Ingenix data to establish UCR rates, the court dismissed the ERISA claims brought by the only provider plaintiff Mullins since the court found that, to the extent that ownership of any rights to payment were validly transferred by his patients, those rights belong to Eastern Monmouth Physical Therapy LLC, who is not a party to this action. As a threshold matter, the only provider plaintiff in this action, Mullins, has no basis to pursue his claims under ERISA. While plaintiffs maintain that other providers will be joined or rejoined to this action, the Court will not engage in a hypothetical analysis regarding the extent to which they will have standing to pursue ERISA claims later on. The court found that because the only provider plaintiff has no basis to pursue his ERISA claims, the association plaintiffs therefore cannot satisfy the first element under Hunt v. Wash. State Apple Adver. Comm’n, 432 U.S. 333, 343 (1977). The court also found the association plaintiffs fail to allege that the claims asserted will not require the participation of individual provider members-provider plaintiffs are permitted to sue under ERISA only upon proof of a valid assignment of benefits. Such a finding is necessary to prove that the provider plaintiffs have standing, and therefore also is necessary to show that the association plaintiffs have standing to sue in a representative capacity on the providers’ behalf. Because the court found that the association plaintiffs fail to satisfy the Hunt test on both the first and third prongs, and they lack standing to pursue any claims in this action in a representative capacity.
In Cole v. Permanente Med. Grp., Inc., No. 13-15952, __Fed.Appx.___, 2015 WL 3982534 (9th Cir. July 1, 2015), the Ninth Circuit affirmed the district court’s grant of summary judgment in favor of Defendant on Plaintiff’s Section 510 claim. The court found that Plaintiff was terminated because she knowingly violated Permanente’s confidentiality policy by accessing her then-husband’s medical records 12 times and another person’s records more than once. Plaintiff did not present any evidence that showed Defendant’s articulated motive for terminating her was pretext for a discriminatory motive or that the person who made the decision to terminate her employment was aware that the termination would reduce Plaintiff’s pension benefits or disqualify Plaintiff from any benefits.
In CSC Employee Benefits Fiduciary Comm. v. Avera, No. 5:15-CV-4-BO, 2015 WL 4041333 (E.D.N.C. July 1, 2015), the fiduciary of a health and welfare plan brought suit against a plan participant and her personal injury attorneys seeking reimbursement from sums recovered from a third party for medical benefits paid for the treatment of injuries caused by the third party. The court granted the Attorneys’ motion to dismiss the ERISA claims against them, finding that neither the law firm nor the attorney were signatories to the Plan, otherwise agreed to disburse funds in accordance with the Plan, or wrongfully enabled the beneficiary to avoid Plaintiff’s claim.
In David Frye Tr. v. Indiana Concrete Sawing & Drilling, Inc., No. 1:15-CV-00137-JMS, 2015 WL 4041540 (S.D. Ind. July 1, 2015), a matter seeking unpaid contributions to a pension fund, Defendant sought to change venue to the Northern District of Indiana, which the court denied. The parties agreed that this action could have been brought in either the Northern or Southern District of Indiana. The court determined that overriding Plaintiff’s chosen forum would not promote the interests of justice and the convenience of the parties and witnesses.
Withdrawal Liability & Unpaid Benefit Contributions
In Food Employers Labor Relations Ass’n v. Great Atl. & Pac. Tea Co., No. 14-3349-BK, __Fed.Appx.___, 2015 WL 4038579 (2d Cir. July 2, 2015), the Second Circuit affirmed the bankruptcy court’s denial of Plaintiff’s motion for allowance of an administrative expense claim arising out of Defendant’s withdrawal from participation in the FELRA pension plan.
In Sullivan v. United Const. Field, Inc., No. 12-CV-682 ENV VVP, 2015 WL 4040417 (E.D.N.Y. June 30, 2015), Plaintiffs’ filed an objection to the Magistrate Judge’s Report and Recommendation that defendant Mian not be held individually liable as a fiduciary for unpaid contributions. The district court found that Mian is also individually liable as a fiduciary for unpaid employer contributions to the funds under ERISA. According to the well-pleaded allegations in the complaint, which are accepted as true, Mian is an officer of United and a party and signatory to the 2008 CBA with the union; he had control over report submissions and payment of contributions to the funds; he wrote checks on United’s behalf and managed the disposition of United’s assets; and was responsible for diverting the assets at issue away from the benefit funds and, instead, made payments to other entities and individuals.
In Bd. of Trustees, Sheet Metal Workers’ Nat. Pension Fund v. Caddo Sheet Metal, LLC, No. 1:14-CV-858, 2015 WL 4032037 (E.D. Va. June 30, 2015), the court determined that Defendant’s obligation to pay the exit contribution did not survive the expiration of the CBA.
In Carpenters’ Dist. Council of Greater St. Louis & Vicinity v. Neier Servs. Co., No. 4:13-CV-1603 CAS, 2015 WL 3971070 (E.D. Mo. June 30, 2015), the court denied Plaintiffs’ motion seeking to collect a judgment against Neier Services Company’s alleged alter ego, Pro Services Contractors, Inc., finding that Plaintiffs did not show that Pro Services Contractors, Inc. is the alter ego of defendant Neier Services Company, Inc.
* 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.