Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.
In Gabriel v. Alaska Elec. Pension Fund, 12-35458, 2014 WL 2535469 (9th Cir. June 6, 2014), the 9th Circuit Court of Appeal affirmed a district court’s decision finding no “appropriate equitable relief” available to the plaintiff under ERISA § 502(a)(3); 29 U.S.C. § 1132(a)(3), where the defendant Pension Plan had mistakenly determined the plaintiff-plan participant had vested in his pension benefit and paid those benefits for three years before realizing its mistake. In coming to its decision, the 9th Circuit Court of Appeal explained that in an action under § 502(a)(3), a plaintiff must prove both (1) that there is a remediable wrong, i.e., that the plaintiff seeks relief to redress a violation of ERISA or the terms of a plan; and (2) that the relief sought is appropriate equitable relief. A claim may fail if the plaintiff cannot establish the second prong, that the remedy sought is appropriate equitable relief under § 1132(a)(3)(B), regardless whether a remediable wrong has been alleged.
The Court rejected “reformation” of the plan as appropriate equitable relief because there was no evidence of mistake or fraud. It also rejected the remedy of equitable estoppel, which holds the fiduciary to what it had promised and operates to place the person entitled to its benefit in the same position he would have been in had the representations been true. The 9th Circuit has consistently held that a party cannot maintain a federal equitable estoppel claim in the ERISA context when recovery on the claim would contradict written plan provisions. Additionally, an ERISA beneficiary seeking to recover benefits under an equitable estoppel theory must establish “extraordinary circumstances,” which the court found did not exist in this case. Lastly, the court rejected a surcharge remedy, which the majority found limited to when a breach of trust committed by a fiduciary resulted in a loss to the trust estate or allowed the fiduciary to profit at the expense of the trust (unjust enrichment). This decision creates a Circuit split with the 4th, 5th, and 7th Circuits, which have found a surcharge remedy available outside of these limited circumstances.
Denial of AD&D Benefits Upheld
In Parsons v. Metro. Life Ins. Co., 13-60895, 2014 WL 2547733 (5th Cir. June 6, 2014), the 5th Circuit Court of Appeal upheld MetLife’s denial of ERISA-governed accidental death and dismemberment benefits where the decedent was found unresponsive in his truck after having worked for around two hours outside in warm weather and the cause of death was listed as “cardiac arrest” with a possible contributing factor of “heat.” MetLife determined that his death was not covered by the policy, which only pays benefits in the event of a covered “accident.” The court agreed that in and of itself, cardiac arrest is not an “external incident,” so the death is covered only to the extent that the cardiac arrest was caused by something that constitutes an accident under the plan. The court found that the claims administrator did not abuse its discretion in finding no such accident because the court could not say that there is no “rational connection” between the facts presented and the administrator’s conclusion that the cardiac arrest was not caused exclusively by a heat-related accident where the decedent had other medical conditions which may have contributed to the cardiac arrest.
ERISA Attorneys’ Fees. In Fontaine v. Metro. Life Ins. Co., 12 C 8738, 2014 WL 2511091 (N.D. Ill. June 3, 2014), the district court granted the long term disability claimant’s motion to reconsider the court’s decision to deny attorneys’ fees because that denial relied on a misunderstanding of the substantial justification test as articulated by the 7th Circuit Court of Appeal in Production & Maintenance Employees’ Local 504, Laborers’ Int’l Union v. Roadmaster Corp., 954 F.2d 1397, 1404 (7th Cir.1992). In Roadmaster, the court explained that “[e]ven if not frivolous, a party’s position still may not be substantially justified; substantial justification means ‘more than merely not frivolous, but less than meritorious.’ “Id. (quoting Bittner v. Sadoff & Rudoy Indus., 728 F.2d 820, 830 (7th Cir.1984)). By denying attorneys’ fees because MetLife’s position was “not entirely frivolous,” the court applied a standard that was overly lenient to MetLife. However, under a correct application of the standard, the court should have awarded the participant attorneys’ fees. The district court agreed that, by equating a substantially justified position with a nonfrivolous position, the court misapplied the substantial justification test to this case. The district court found that its error constitutes a “misapplication” of controlling precedent, thus entitling the long term disability participant to reconsideration of the fees issue. Applying the five-factor test used by courts to determine whether ERISA attorneys’ fees should be awarded to a party who has achieved success on the merits, the district court found that the participant in this case was entitled to an award of attorneys’ fees.
* 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.