Michelle’s 4-year-old son sat on her lap yesterday evening as she was putting this week’s blog together. He caught a peek of this photo and exclaimed “Hey! I want to get dollars!”
She explained to him that thanks to this week’s notable 6th Circuit en banc decision in Rochow v. Life Ins. Co. of N. Am., one cannot get dollars for breaches of fiduciary duty under Section 502(a)(3) based upon an arbitrary and capricious benefit claim denial remedial under Section 502(a)(1)(B).
Confused, he asked, “Wait, what?! So how am I supposed to get money?”
And that, my friends, is the question all ERISA plaintiffs across the country are asking themselves in light of Rochow.
Enjoy this past week’s cases!
Your reliable source for summaries of recent ERISA decisions
Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.
A Plaintiff is not entitled to recover under both ERISA § 502(a)(1)(B) and § 502(a)(3) for an arbitrary and capricious denial of benefits. In Rochow v. Life Ins. Co. of N. Am., No. 12-2074, __F.3d___, 2015 WL 925794 (6th Cir. Mar. 5, 2015) (en banc), the 6th Circuit Court of Appeals issued its long-awaited en banc opinion, deciding whether Plaintiff is entitled to recover under both ERISA § 502(a)(1)(B) and § 502(a)(3) for LINA’s arbitrary and capricious denial of long-term disability benefits. The 6th Circuit vacated the district court’s disgorgement award and remanded the case to the district court to determine whether prejudgment interest is appropriate. 9 judges joined the majority, 3 judges joined in a concurring opinion, 6 judges joined the dissent, and 1 judge joined in part and dissented in part.
The Majority: Rochow is made whole under § 502(a)(1)(B) through recovery of his disability benefits and attorney’s fees, and potential recovery of prejudgment interest. Allowing Rochow to recover disgorged profits under § 502(a)(3), in addition to his recovery under § 502(a)(1)(B), based on the claim that the wrongful denial of benefits also constituted a breach of fiduciary duty, would-absent a showing that the § 502(a)(1)(B) remedy is inadequate-result in an impermissible duplicative recovery, contrary to clear Supreme Court and Sixth Circuit precedent. Because Rochow was able to avail himself of an adequate remedy for LINA’s wrongful denial of benefits pursuant to § 502(a)(1)(B), he cannot obtain additional relief for that same injury under § 502(a)(3). However, Rochow’s request for prejudgment interest is a remedy that the district court could have granted, though not at an excessive rate.
The Concurrence: The district court’s disgorgement order cannot stand for purely procedural reasons. When the district court granted Rochow’s motion for equitable accounting and ordered LINA to disgorge profits, it violated the mandate rule because the Rochow I panel did not remand the case to the district court. Any “post-remand” litigation was contrary to the 6th Circuit’s mandate.
The Concurrence and Dissent: The majority and dissent part on whether Rochow’s fiduciary duty claim is merely a repackaging of his benefits-denial claim but this is a false dichotomy that imposes a requirement not found in ERISA. The governing inquiry under ERISA is whether other equitable relief is appropriate under the circumstances, and the extent to which the equitable disgorgement claim duplicates the benefits-denial claim is one factor to be considered in making that determination. Varity Corp. does not require a showing of a separate and distinct injury and the court should not preemptively disallow equitable remedies in particular circumstances where ERISA has not done so. Disgorgement as an equitable remedy in a denial-of-benefits case should be premised on a finding that the decision to deny benefits was not only arbitrary and capricious but also based on impermissible considerations that call for an equitable judicial response geared toward deterring similar decision making in the future.
The Dissent: The majority’s insistence that Rochow is not entitled to disgorgement of LINA’s profit under § 1132(a)(3) rests on the faulty premise that Rochow suffered the single injury of LINA’s arbitrary and capricious denial of benefits. LINA injured Rochow in two distinct ways: by arbitrarily and capriciously denying his disability benefits claim and by breaching its fiduciary duties to him. Equity has long recognized that a trustee or a fiduciary who gains a benefit by breaching his or her duty must return that benefit to the beneficiary. A proper interpretation of Varity Corp., the cases following it, and the Supreme Court’s decision in CIGNA Corp. v. Amara, demonstrate that a participant or beneficiary may recover under § 1132(a)(1)(B) for an arbitrary and capricious denial of plan benefits and may recover further equitable relief under § 1132(a)(3) to redress a breach of fiduciary duty. LINA’s delay in payment of benefits to Rochow constituted both an arbitrary and capricious denial of plan benefits under § 1132(a)(1)(B) and a breach of LINA’s fiduciary duties remediable under § 1132(a)(3). However, the dissent would return the case to the district court to recalculate the award to Rochow to correct several significant errors.
ERISA does not provide remedies, such as contribution, for a breaching fiduciary against its co-fiduciaries under § 1132(a). In Brown v. California Law Enforcement Ass’n, Long-Term Disability Plan, No. 14-CV-03559-JCS, __F.Supp.3d___, 2015 WL 890564 (N.D. Cal. Mar. 2, 2015), Plaintiff, who is medically retired from the Oakland Police Department, filed a putative class action against his long-term disability plan, the plan’s sponsor, and the plan’s administrator under ERISA for denied benefits and breach of fiduciary duty. Defendants are California Law Enforcement Association Group Long Term Disability Plan (“CLEA Plan”); California Law Enforcement Association (“CLEA”); and California Administration Insurance Services, Inc (“CAISI”). The CLEA Plan is offered by CLEA and administered by CAISI. Defendants filed a Third Party Complaint (TPC) against Brown’s employee organization, the Oakland Police Officers’ Association (“OPOA”), asserting a claim of equitable indemnity under 29 U.S.C. § 1132(a)(3). The TPC alleges that in the event that Defendants are held liable for breach of fiduciary duty, they should be indemnified by OPOA because Defendants tried to inform Brown of the risk of losing his benefits if he did not enroll in the CLEA Individual Plan after the termination of his CLEA Group Plan but OPOA misinformed Brown and prevented Defendants from giving the correct information.
The court found that Defendants’ TPC, which alleges breach of fiduciary duty must be dismissed because of the lack of allegations that OPOA had any responsibility, authority, or control over the CLEA Plan’s management, assets, or administration. Even if OPOA acted in a fiduciary role, Defendants have not stated a cognizable claim under § 1132(a)(3) because, as a general rule, ERISA does not provide remedies, such as contribution, for a breaching fiduciary against its co-fiduciaries under § 1132(a). Neither subsection (a)(2) or (a)(3) provides a remedy for injuries to a fiduciary because these subsections allow relief only for the plan and its beneficiaries. If Defendants failed to disclose the correct benefits information, they are responsible for the resulting injury to the plan and beneficiaries under ERISA even if a third party co-fiduciary also harmed the beneficiaries.
Select Slip Copy & Not Reported Decisions
Breach of Fiduciary Duty
In In re BP p.l.c. Sec. Litig., No. 10-MD-2185, 2015 WL 926199 (S.D. Tex. Mar. 4, 2015), the court modified its order granting leave to amend to certify the following question for immediate, interlocutory appeal under 28 U.S.C. § 1292(b):
What plausible factual allegations are required to meet the “more harm than good to the fund” pleading standard articulated by the Supreme Court in Fifth Third Bancorp v. Dudenhoeffer, 134 S.Ct. 2459, 2472-73 (2014).
However, the court declined the stay the proceedings pending the Fifth Circuit’s decision since this matter has been pending for over four years and Plaintiffs have been unable to move the litigation past the pleadings stage and into discovery.
In Payne v. Pentegra Ret. Servs., No. 1:14-CV-00309-TWP, 2015 WL 898467 (S.D. Ind. Mar. 3, 2015), Plaintiff filed suit against the Office of the Comptroller of the Currency (“OCC”) and Defendants Pentegra Retirement Services, Pentegra Defined Benefit Plan for Financial Institutions, and Plan Administrator of the Pentegra Defined Benefit Plan for Financial Institutions (collectively, “Pentegra”), asserting various claims for violations of ERISA based on these facts: (1) Waller, the Lead Expert for Compensation and Benefits at the OCC, represented to the Paynes that their benefits would not be significantly different whether Mr. Payne retired and that he should continue working for an additional 120 days; (2) relying on Waller’s representations, Mr. Payne did not retire and eventually died while still in service; and (3) because Mr. Payne died before he retired, the benefits payable to Mrs. Payne as Mr. Payne’s beneficiary are approximately $205,000.00 less than if Mr. Payne had retired before his death. The court dismissed the United States as a party because of sovereign immunity and ERISA does not provide an express waiver of sovereign immunity. The court also dismissed Plaintiff’s breach of fiduciary duty claim, finding that under ERISA, there is no individual relief for a breach of fiduciary duty under defined benefit plans.
In Montoya v. Reliance Standard Life Ins. Co., No. 14-CV-02740-WHO, 2015 WL 884643 (N.D. Cal. Mar. 2, 2015) (Not Reported in F.Supp.3d), the court held that exhaustion should be excused because the plan at issue does not require exhaustion of administrative remedies prior to filing suit. For purposes of determining Defendant’s summary judgment motion, the court found that the insurance policy produced in the Administrative Record is the written plan document. Here, the policy implies that the only requirement a claimant must meet before filing suit is to wait at least 60 days after submitting written proof of loss but no longer than three years. The court found that the policy language does not require exhaustion and suggests that exhaustion is not required. However, the court found that it was appropriate for Reliance to require Plaintiff to attend Independent Medical Examinations during his administrative appeal. Although the Ninth Circuit has not yet addressed whether it is procedurally or substantively unfair to require IMEs during the administrative appeal stage, the court was persuaded by the out-of-circuit cases cited by Reliance that have directly addressed this issue in favor of requiring an IME during administrative appeal. The court ordered the parties to proceed with the physical IME that Plaintiff failed to attend.
In Schilling v. Epic Life Ins. Co., No. 13-CV-438-WMC, 2015 WL 856575 (W.D. Wis. Feb. 27, 2015), the court granted Defendant’s motion for summary judgment on Plaintiff’s complaint seeking to recover long-term disability insurance benefits. With respect to Plaintiff’s procedural challenges, the court found that Defendant provided adequate notice of the reasons for terminating benefits, where it denied Plaintiff’s claim because she could perform “light” duty work and then found on appeal that she could perform “sedentary” work. The determination that Plaintiff could perform light duty work necessarily subsumes a determination that she could perform even less strenuous sedentary work and Plaintiff was not prejudiced by any shift in reasoning. The court also found that Defendant was not required to identify in its initial denial letter what additional information Plaintiff could provide to perfect her claim because the notice requirement under 29 C.F.R. § 2560.503-1(f) only applies when more information is needed for a plan administrator to review the denial of a claim. Here, there remained no unresolved material factual questions so there was no need for Defendant to identify additional information Plaintiff could provide to perfect her claim. The court rejected Plaintiff’s substantive challenges, including that Defendant (A) failed to conduct a second vocational analysis as part of the appeal; (B) failed to adequately consider the SSA’s finding of disability; and (C) selectively reviewed the medical evidence submitted.
In Zavislak v. Google Inc. Welfare Benefit Plan, No. 14-CV-04802 NC, 2015 WL 909518 (N.D. Cal. Feb. 27, 2015) (Not Reported in F.Supp.3d), Plaintiff sought an order allowing him to conduct limited discovery aimed at uncovering the impact of an apparent conflict of interest on the part of the Google Inc. Welfare Benefit Plan administrator, where Google acts as both the Plan administrator and funding source for benefits. The Court found that Plaintiff made a sufficient showing of a possible conflict to justify discovery limited to whether and to what extent the Plan administrator, Google, participated in or influenced the formulation, adoption, or revision, of the rule that resulted in the denial of Plaintiff’s claim, where: 1) Plaintiff’s declaration submitted in support of his discovery request states that he had a telephone conversation with Anthem’s Account Executive for Google who revealed that the change in Plaintiff’s claims processing between 2013 and 2014 was due to a claims audit; 2) Plaintiff’s declaration summarizes a discussion with Google’s U.S. Health Plan Program Manager who stated that Google does randomly audit certain claims and he planned to seek reimbursement from Anthem for amounts that he believed were incorrectly paid on Plaintiff’s claims in 2013; and 3) an internal email exchange at Anthem discussing Plaintiff’s appeal of the denial of his claims noted that a decision favorable to Plaintiff was an “option [that] increases the likelihood that Google will have to pay claims under the member’s coverage under the wife’s plan” and asked Anthem’s Senior Associate General Counsel if she thinks that “because of that we’d need Google’s consent before offering up that second option.” The court approved the following discovery requests:
1. The agreement between Google and Anthem referenced in Dkt. No. 28 ¶ 10 (stating that “Anthem acted pursuant to a written agreement with Google”).
2. All documents that relate to the rule(s) that was used by Anthem to deny Zavislak’s claims.
1. Describe in detail all communications between Google and Anthem relating to the rule(s) that was used by Anthem to deny Zavislak’s claims, including but not limited to any communications on the subject raised by Anthem’s Managing Associate General Counsel in his email to Anthem’s Senior Associate General Counsel at Dkt. No. 22-2 at 3.
2. Describe in detail all communications between Google and Anthem relating to Zavislak’s claims and/or appeals.
In Cardiovascular Specialty Care Ctr. of Baton Rouge, LLC v. United Healthcare of Louisiana, Inc., No. CIV.A. 14-235-BAJ, 2015 WL 952121 (M.D. La. Mar. 4, 2015), the court adopted the Magistrate Judge’s Report & Recommendation denying Plaintiff’s motion to remand this action, which alleges that United preauthorized it to treat the United Insureds for certain medical services, the United Insureds assigned their claims for reimbursement to Plaintiff, United informed Plaintiff that it would be reimbursed for those medical services, but United did not pay for these services, which totaled $1,553,612.33. Plaintiff alleged various state law violations. United removed this action alleging that this court has federal question jurisdiction pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(a) of ERISA. United requested the court to exercise supplemental jurisdiction pursuant to 28 U.S.C. § 1367 over any state law claims that are not completely preempted. The court found that Plaintiff’s breach of contract claim premised upon its assignment of rights pursuant to at least one ERISA plan is completely preempted. To the extent Plaintiff stated claims for negligent misrepresentation and detrimental reliance, and those claims are premised on obligations independent of the insurance policies, then the court will exercise supplemental jurisdiction over those claims.
In Corrigan v. Local 6, Bakery, Confectionary & Tobacco Workers, No. CIV.A. 14-1073, 2015 WL 921600 (E.D. Pa. Mar. 4, 2015), Plaintiff filed suit against Independence Blue Cross for breaching its contract and being negligent in failing to inform him of his right to continuing insurance coverage after the termination of his employment. The court granted Independence’s motion for summary judgment, finding that ERISA preempted the state law claims. The court found that even if Plaintiff’s claims were not preempted by ERISA, he presented no factual or legal support for his assertions that Independence had contractual and tort duties to notify Plaintiff of the discontinuation of his health care. The plan administrator was Hostess, which did in fact notify Plaintiff of the discontinuation of his insurance benefits.
In Aetna Life Ins. Co. v. Methodist Hospitals of Dallas, No. 3:14-CV-347-M, 2015 WL 918586 (N.D. Tex. Mar. 4, 2015), the court determined, in the narrow circumstances presented in this case, that ERISA does not preempt the Texas Prompt Payment Act’s mandatory payment deadlines, insofar as the deadlines apply to third-party administrators of self-funded health insurance plans. The court found that it has diversity jurisdiction to declare whether preemption is a valid federal defense to the Providers’ claims under state law. Finding that there are no indispensable parties absent in this litigation, the Court denied the Providers’ Motion to Dismiss under Rule 12(b)(7). Reaching the merits of the declaratory judgment action, the Court found that the Providers’ claims under the TPPA are not preempted by ERISA, and granted the Providers’ Cross-Motion for Summary Judgment.
In Estate of Minko ex rel. Minko v. Heins, No. 14-CV-210-WMC, 2015 WL 856635 (W.D. Wis. Feb. 27, 2015), Plaintiff Estate filed a state court action against Defendants, where the deceased was employed as a lawyer with Defendants, was promised a $100,000 life insurance policy as a term of employment, but where Defendants had not procured a policy at the time of death. The complaint asserts the following causes of action: (1) breach of contract for “failure to obtain life insurance as promised and required as part of the compensation and consideration of David Minko’s employment;” (2) breach of fiduciary duty based on Defendants’ “failure to make effort and follow through to obtain the subject life insurance policy;” (3) unauthorized use and misappropriation of the name and good will of David Minko; and (4) injunctive relief enjoining the use of Minko’s name, likeness or good will. The court found that these claims are not ERISA preempted because the Estate could not bring a claim under Section 502(a)(1) and the claims do not turn on interpretation of plan terms. The fact that the complaint references the amount of the promised policy-$100,000-does not convert what are essentially state law contract and breach of fiduciary duty claims into one for benefits under the plan. As such, the court granted Plaintiff’s motion to remand.
Life Insurance & AD&D Benefit Claims
In Thomas v. CIGNA Grp. Ins., No. 09-CV-5029 SLT RML, 2015 WL 893534 (E.D.N.Y. Mar. 2, 2015), the court previously granted Plaintiff’s motion for summary judgment to the extent of remanding the matter for further factfinding and a new eligibility determination. Specifically, the Court directed that LINA investigate whether Countrywide furnished the SPD in accordance with the relevant regulations and whether the SPD placed participants in the Basic Life Insurance Plan on notice of certain “Waiver of Premium” provisions. After conducting its investigation, LINA determined that the decedent was appropriately informed of her Waiver of Premium rights under the life insurance plans, but failed to timely exercise those rights within the allowable timeframes. The court denied LINA’s motion for summary judgment, finding that the Administrative Record in this case does not contain evidence that the decedent was ever furnished with an SPD in accordance with the statutes and regulations; there is not enough information to ascertain whether the decedent was the sort of participant who could be furnished with an SPD through electronic means; there is no evidence concerning the decedent’s duties and whether access to Countrywide’s electronic information system was “an integral part” of the decedent’s duties; and the Administrative Record establishes that the SPDs were not furnished in accordance with the requirements of § 2520.104b-1(c)(1)(iii).
Pension Benefit Claims
In Pension Benefit Guar. Corp. v. Renco Grp., Inc., No. 13-CV-621 RJS, 2015 WL 997712 (S.D.N.Y. Mar. 6, 2015), the asserted a claim for ERISA reachback liability under 29 U.S.C. § 1369(a). Section 1369(a) assigns reachback liability to companies or persons who evade pension obligations by, inter alia, selling ownership interests in subsidiaries in order to reduce their ownership below 80%. The court determined that the inquiry relevant to determining whether Renco must face reachback liability here is whether a principal purpose of entering the Cerberus transaction was to evade liability by removing itself from RG Steel’s controlled group, through a reduction of its ownership of RG Steel below 80%. In denying the cross-motions for summary judgment, the court found that there are disputed issues of material fact precluding summary judgment in favor of either PBGC or Renco.
In Silvaggio v. Cement Masons Local 526 Pension Fund, No. 2:12CV1605, 2015 WL 877763 (W.D. Pa. Mar. 2, 2015), Plaintiff sought to recover the benefit of the 100% Joint and Survivor Annuity under Local 526’s Pension Plan, contending that the Fund denied her benefits by reducing her survivor benefit to 50% of her husband’s benefit after his death. The court granted the Fund’s motion for summary judgment, finding that the Fund did not have an affirmative duty to confirm that the selections Plaintiff’s husband made on the Application were in fact the selection she intended. Here, the 50% Option was checked on the Pension Application and the Plan documents require the Fund to select the 50% Option absent an election by the participant. Moreover, Domenic accepted the higher benefit paid under the 50% Option for almost twenty years without complaint.
Standard of Review
Jahn-Derian v. Metro. Life Ins. Co., No. CV 13-7221 FMO SHX, 2015 WL 900717 (C.D. Cal. Mar. 3, 2015) (Not Reported in F.Supp.3d), the court found that the de novo standard of review applies to Plaintiff’s ERISA claim because of California Insurance Code § 10110.6, even though the Kaiser LTD Plan documents grant discretionary authority to the plan administrator and fiduciaries.
Withdrawal Liability & Unpaid Benefit Contributions
Cent. States v. Complete Pers. Solutions, LLC, No. 13-CR-1091S, 2015 WL 1015440 (W.D.N.Y. Mar. 9, 2015) (granting Plaintiff’s motion for summary judgment in matter seeking to collect withdrawal liability against three companies considered a single employer for purposes of ERISA and the MPPAA and are jointly and severally liable).
In Pig Newton, Inc. v. Boards of Directors of Motion Picture Indus. Pension Plan, No. 13 CIV. 7312 KPF, 2015 WL 996394 (S.D.N.Y. Mar. 5, 2015), Plaintiff/Counter-Defendant commenced this action against Defendants/Counter-Plaintiffs under the Declaratory Judgment Act, 28 U.S.C. §§ 22012202, seeking a declaration that certain provisions of the Plans’ Trust Agreements are invalid and unenforceable. The Directors counterclaimed Plaintiff under ERISA, 29 U.S.C. §§ 1001-1191c, 1202-1242, 13011461, for delinquent contributions under terms of the Trust Agreements. The parties cross-moved for summary judgment and the court found that the disputed provisions are valid and enforceable, awarding summary judgment in Defendants’ favor.
In Trustees of Detroit Carpenters Fringe Benefit Funds v. Patrie Const. Co., No. 13-2484, __Fed.Appx.___, 2015 WL 873504 (6th Cir. Mar. 3, 2015), the 6th Circuit affirmed the district court’s Rule 12(b)(6) dismissal of all claims against two defendants because the Trustees’ complaint does not plausibly allege an alter-ego operation. However, because the complaint states viable claims against Patrie that do not depend on alter-ego status, the court reversed the district court’s dismissal of those claims and remanded them for further determination. Because the Trustees did not assert their claims in bad faith and did not unreasonably or vexatiously multiply the instant litigation, the court affirmed the district court’s denial of attorney fees and/or sanctions.
In Painters & Floorcoverers Joint Comm. v. Bello, No. 2:13-CV-00146-APG, 2015 WL 880587 (D. Nev. Mar. 2, 2015), the court found that there are genuine issues of material fact as to whether Walldesign owed contributions to the trusts and whether defendants are liable for all owed contributions. But, under the corporate officer liability provision, Bello will be liable for any contributions Walldesign is found to owe to the Employee Painters’ Trust. The court also found that Bello and Huntington breached their ERISA fiduciary duties to some of the trusts and will therefore be liable if contributions are owed to those trusts. Plaintiffs are not entitled to summary judgment against ACIC because they have not yet proved if, and to what extent, Walldesign owed contributions to the trusts.
In Teamsters Health & Welfare Fund of Philadelphia & Vicinity v. Rock Canyon, Inc., No. CIV.A. 14-04425 RMB/, 2015 WL 881694 (D.N.J. Mar. 2, 2015), the court granted Plaintiffs’ motion for default judgment in part and ordered that judgment be entered in favor of Plaintiffs and against Defendant in the amount of $14,231.63, representing $11,898.80 in unpaid benefit contributions, $229.03 in accrued interest, $1,590.00 in attorneys’ fees, and $513.80 in costs. The court gave Plaintiffs twenty days within which to submit documentation supporting their request for liquidated damages, as well as fees for paralegal services.
In Trustees of Pavers & Rd. Builders Dist. Council Welfare v. Cole Partners, Inc., No. 13-CV-07103 NGG RML, 2015 WL 861717 (E.D.N.Y. Feb. 27, 2015), the court adopted in full an R & R recommending that the court grant Plaintiffs’ motion for default judgment and direct the entry of judgment against Defendant in the following amounts: (a) $110,941.87 in unpaid contributions, plus interest at the rate of $30.40 per day from February 6, 2015, to the date final judgment is entered; (b) $20,191.96 in interest on unpaid contributions; (c) $22,188.39 in liquidated damages; (d) $1,144 in audit fees; (e) $3,204 in attorney’s fees; and (f) $536.50 in costs.
* 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.