Since last Thursday, Westlaw hasn’t picked up any published appellate decisions, but it was still a busy week for ERISA in the district courts. This week’s notable decision is an unpublished decision out of the Ninth Circuit in Dimery v. Reliance Standard Life Ins. Co., 2015 WL 1044047 (9th Cir. Mar. 11, 2015). In Dimery, the court found that the insurer’s late decision on appeal did not cause Plaintiff any substantive harm justifying de novo review of the claim denial. We’re still waiting for the case where a Circuit court finds that a claimant’s late appeal submission should be accepted unless it causes the administrator substantive harm. But, we’re not holding our breath for that one…
Your reliable source for summaries of recent ERISA decisions
Below is Kantor & Kantor LLP’s summary of this past week’s notable ERISA decisions.
Violation of ERISA regulations, absent substantive harm, does not change the standard of review to de novo. In Dimery v. Reliance Standard Life Ins. Co., No. 12-17550, __Fed.Appx.___, 2015 WL 1044047 (9th Cir. Mar. 11, 2015), the court affirmed the district court’s grant of summary judgment in favor of Reliance on Plaintiff’s claim for long-term disability benefits. The applicable SPD and the ERISA regulations required Reliance to render a decision on Plaintiff’s administrative appeal within forty-five days, or to provide notice that additional time was required due to special circumstances before the initial forty-five day period expired. 29 C.F.R. § 2560.503-1(i)(1)(i), (i)(3)(i). Reliance notified Plaintiff that it was seeking an independent medical evaluation, but did not expressly state that it needed additional time beyond the forty-five day period to render a decision. Reliance denied benefits on the sixty-fourth day. Reliance argued on appeal that the SPD is not part of the plan under CIGNA Corp. v. Amara, 131 S.Ct. 1866, 1877-78 (2011), but because the parties proceeded in district court as though the SPD was part of the Plan without objection from Reliance, the court found that Reliance has waived this argument. The court rejected Plaintiff’s argument that her claim should have been reviewed de novo. First, the denial of Plaintiff’s benefits was not “necessarily the mechanical result” of a violation of the terms of the Plan, in that the Plan did not state that a particular result would ensue from a failure to adhere to the time limits for reviewing the denial of benefits. Second, ERISA procedural violations do not alter the standard of review unless the violations cause the beneficiary substantive harm. The court found that Plaintiff does not identify any substantive harm resulting from Reliance’s untimely decision. Thus, the district court properly reviewed the denial of Plaintiff’s benefits under an abuse of discretion standard.
Double-breasted claims dismissed but CBA circumvention theory claims survive. In Slack v. Int’l Union of Operating Engineers, No. C-13-5001 EMC, __F.Supp.3d____, 2015 WL 1188636 (N.D. Cal. Mar. 16, 2015), Plaintiffs, members of a local union in the International Union of Operating Engineers, filed their second amended complaint against the Trustees of three different trusts. The SAC accuses Defendants of breaching their fiduciary duties and engaging in prohibited transactions based on the following: (1) deciding that the Pension Fund should invest in the Longview Ultra Construction Loan Investment Fund, which resulted in a $50 million loss; (2) allowing employers who are signatories to collective bargaining agreements (“CBA”) to engage in improper double-breasted operations; and (3) allowing employers to write off millions in contributions owed to the Trusts without any legitimate basis. With respect to the double-breasted claims, the court found that Plaintiffs alleged enough to meet the single employer threshold, but not the alter ego test under Ninth Circuit law. The court dismissed with prejudice the claims based on the double-breasting theory. Under the CBA circumvention theory, Plaintiffs argued that the signatory employer should have been making contributions to the Trusts based on the work of nonunion employees because, though nonunion, the employees still performed covered work defined by the CBA. The court denied Defendants’ motion to dismiss the claims based on the circumvention theory because a reasonable inference can be made that if there is a covered operation, then there are employees doing covered work. The court denied dismissal of a claim based on improper write-offs, where all but approximately $40k of a $3-million dollar delinquency owed by one employer who was not insolvent was written off.
Select Slip Copy & Not Reported Decisions
In Carpenters Pension Trust Fund for N. California v. Walker, No. 12-CV-01447-WHO, 2015 WL 1050479 (N.D. Cal. Mar. 9, 2015) (Not Reported in F.Supp.3d), the court awarded attorneys’ fees and costs under 28 U.S.C. §§ 1132(g)(2) and 1451(b) to the Fund after it prevailed on two motions for summary judgment against Defendants. Although its motion for $250,080.00 in attorneys’ fees and $4,250.71 in litigation expenses was unopposed, the court reduced the fees sought by 10% because Plaintiff billed for six lawyers to handle a relatively uncomplicated matter, causing inevitable duplication. The court also reduced the costs because Plaintiff seeks some that are not allowed under ERISA. The court awarded $225,072.00 in fees and $418.50 in costs.
Breach of Fiduciary Duty
In In re Fid. ERISA Float Litig., No. CIV.A. 13-10222-DJC, 2015 WL 1061497 (D. Mass. Mar. 11, 2015), Plaintiffs alleged that Fidelity violated its fiduciary duties by using float income for themselves to defray their own expenses and by giving float belonging to the purported class of retirement plans to other Fidelity clients. Plaintiffs further alleged that Fidelity engaged in prohibited transactions by dealing with the assets of a plan for its own interest or account. The court granted Fidelity’s motion to dismiss, finding that Plaintiffs have not plausibly alleged that float income is a Plan asset and, even if float were a Plan asset, Fidelity is not an ERISA fiduciary as to float.
Disability Benefit Claims
In James v. AT&T W. Disability Benefits Program, No. 12-CV-06318-WHO, 2015 WL 1190011 (N.D. Cal. Mar. 13, 2015) (Not Reported in F.Supp.3d), the court determined that Defendant properly withheld income tax from the check it paid to Plaintiff following entry of judgment in her favor. The court found that the Plan was entitled to withhold the income taxes at issue and that the judgment in this case has been fully satisfied.
In Cheney v. Standard Ins. Co., No. 13 C 4269, 2015 WL 1185053 (N.D. Ill. Mar. 13, 2015), the court ruled in favor of Plaintiff’s motion for entry of judgment requesting a determination of the appropriate calculation of Predisability Earnings. The court found it to be a reasonable expectation for an employee to believe she would remain “Actively At Work” while still employed, and prior to taking any official leave. There was no dispute that Plaintiff was returned to salaried status in January 2011 and tracked her billable hours throughout that year. There was no evidence supporting Defendants’ position that plaintiff stopped “performing with reasonable continuity the Material Duties of” her job suddenly on December 19, except that there was no billing logged after that date. The official change in Plaintiff’s work status was not until January, and she continued to receive her regular pay through the end of December 2011. If Plaintiff’s benefits were based on her 2010 earnings, it would not be reflective of Plaintiff’s long-time career at the law firm. A reasonable expectation would be that Plaintiff would be paid based on her regular compensation, not based on a year that was vastly different than other years. Because the court found the term “Active Work” is subject to reasonable alternative interpretations, and construing ambiguities in favor of Plaintiff, the court found that reading the policy in “an ordinary and popular sense” leads to the conclusion that Plaintiff ceased “Active Work” when her leave began in January. Therefore, her prior tax year upon which her disability benefits should be based is 2011.
In Breland v. Liberty Life Assur. Co. of Boston, No. 14-CV-10508, 2015 WL 1132948 (E.D. Mich. Mar. 12, 2015), Plaintiff brought suit against Liberty Life seeking reinstatement of his terminated claim for long-term disability benefits. As part of its answer, Liberty Life filed a counterclaim against Plaintiff seeking the return of overpaid LTD benefits pursuant to 29 U.S.C. § 1132(a)(3). The court found that: 1) Liberty Life’s reliance on its “independent reviewers” was not arbitrary and capricious; 2) Liberty Life adequately considered Plaintiff’s SSDI award because it expressly acknowledged that it considered the SSA’s ruling and claimed to have reviewed medical records that were not considered by the SSA in its determination process; 3) Liberty Life did not rely on a “stale” vocational report prepared 10 months before Liberty Life denied Plaintiff’s disability claim; and 4) Plaintiff did not point to any evidence showing that a conflict of interest affected the benefits decision. Lastly, the court granted summary judgment to Liberty Life on its overpayment counterclaim based on Plaintiff’s receipt of SSDI benefits.
In Karul v. S.C. Johnson & Son Long Term Disability Plan, No. 13-C-900, 2015 WL 1034150 (E.D. Wis. Mar. 10, 2015), the court granted Plaintiff’s motion for judgment in her favor, finding that Defendants’ decision to terminate her LTD benefits claim as of April 1, 2012 was arbitrary and capricious. A key issue is Plaintiff’s pain and its impact on her ability to lift or carry, sit, and work on a sustained basis. The court found that Defendants’ reliance on obesity-a condition that was relatively constant during the entire time of Plaintiff’s claimed disability-as a basis for subsequently finding her not disabled calls into question the purported reasonableness of the Defendants’ determination. The court also found that SSA’s determination of disability corroborates the conclusion that Plaintiff is disabled. Notably, the court found that Defendants use of Dr. Aubrey Swartz, an IME doctor with a history of bias against claimants, was of minimal significance. There was no evidence that the choice of Dr. Swartz was improper or that the doctor was biased in his review of Plaintiff’s claim. The court reinstated Plaintiff’s claim retroactively, with prejudgment interest at the prime rate compounded annually, and awarded attorneys’ fees and costs.
In Montoya v. Reliance Standard Life Ins. Co., No. 14-CV-02740-WHO, 2015 WL 1056560 (N.D. Cal. Mar. 10, 2015) (Not Reported in F.Supp.3d), the court found that Plaintiff has not shown that he is entitled to review IME reports prior to Reliance issuing a final decision on his appeal. The court previously required Plaintiff to submit to a physical IME, which Reliance had requested after Plaintiff submitted his appeal. Plaintiff had already undergone a psychiatric IME prior to filing suit. The court noted, however, that if Reliance uses one or both of the IME reports to insert a new reason for denying Plaintiff’s claim, and refuses to provide copies of those IME reports before finally denying Plaintiff’s claim, then Plaintiff may re-raise his procedural violation argument in conjunction with an appeal of the denial of benefits.
In Suarez v. Provident Life & Cas. Ins. Co., No. CIV. NO. 2:13-2445, 2015 WL 1021288 (D.N.J. Mar. 9, 2015), Plaintiff pled four causes of action in connection with the termination of his long-term disability benefits: (1) violation of ERISA; (2) breach of contract and breach of implied covenant of good faith and fair dealing; (3) fraud; and (4) RICO conspiracy. Provident moved to dismiss the second and third causes of action under Federal Rule of Civil Procedure 12(b)(6). One question is whether the LTD policy at issue is a group policy that was converted to an individual plan or an ERISA plan that was just “continued.” The court denied Provident’s motion, finding that whether Plaintiff’s insurance policy qualifies as an ERISA plan will likely involve a detailed factual inquiry that is more appropriately undertaken at the summary judgment stage. If Plaintiff’s policy is an ERISA plan, the two state-law claims are preempted; if it is not an ERISA plan, the ERISA claim is invalid but the state law claims are not preempted.
In Dana v. W. States Insulators & Allied Workers Pension Plan, No. C14-0336 RSM, 2015 WL 1037689 (W.D. Wash. Mar. 9, 2015), Plaintiff alleged that Defendant must pay retroactive disability pension benefits back to April 1, 2004, which is what he contends is the earliest date upon which Social Security Disability Insurance (“SSDI”) benefits became payable to him. Defendant contended that it is only required to pay benefits back to January 2009, which it has already done, because that is the date Plaintiff began receiving SSDI benefits. The Plan provides that benefits shall commence on the date that Social Security disability benefits first become payable. While the Trustees’ interpretation of the word “payable” may not be the only interpretation of that word, the court could not say that the interpretation went against the plain meaning of the Plan Document or that it was illogical, implausible or without support from inferences that may be made from the facts in this record. The court granted Defendant’s motion for summary judgment.
In Cummings v. Teachers Ins. & Annuity Ass’n of Am.-Coll. Ret. & Equities Fund, No. 1:12-CV-93, 2015 WL 1137760 (D. Vt. Mar. 13, 2015) (Not Reported in F.Supp.3d), Defendants moved to dismiss Counts IV and V of Plaintiff’s second amended complaint alleging common law breach of the fiduciary duties of care and loyalty in connection with Defendants handling of her TIAA-CREF retirement account. The court found that Counts IV and V allege claims under common law for breach of the fiduciary duties of care and loyalty based on the same factual allegations as her ERISA claims. Therefore, the court dismissed these claims, finding they are preempted by ERISA.
In Coppe v. Sac & Fox Casino Healthcare Plan, No. 14-2598-RDR, 2015 WL 1137733 (D. Kan. Mar. 13, 2015) (Not Reported in F.Supp.3d), Defendants filed a motion to dismiss or stay for failure to exhaust tribal remedies. They requested that the court rule as a matter of comity that before bringing a claim in this court, Plaintiff must bring an ERISA action for recovery of insurance benefits under the casino’s nongovernmental plan in tribal court. The court assumed for purposes of this order that Plaintiff is not a member of the Sac & Fox Tribe and that the Plan is not a “governmental plan” as defined in ERISA. The court found that tribal courts do not have jurisdiction over ERISA actions and that the government’s preemptive action under ERISA dictates that exhaustion in tribal court should not be required as a matter of comity. The court held that Congress preempted the tribe’s adjudicatory authority over ERISA claims and, therefore, exhaustion of tribal remedies is not required.
In Univ. of Wisconsin Hosp. & Clinic Auth. v. Aetna Life Ins. Co., No. 14-CV-882-BBC, 2015 WL 1065559 (W.D. Wis. Mar. 11, 2015), the court found that Plaintiff’s action, seeking to recover payment for procedure performed on a patient who is a participant in an ERISA-governed health plan, is preempted by ERISA. The court dismissed the complaint but gave Plaintiff an opportunity to amend its complaint to plead claims under ERISA.
Pleading Issues & Procedure
In Barbarino v. Aetna Life Ins. Co., No. 5:14-CV-03601-EJD, 2015 WL 1205316 (N.D. Cal. Mar. 16, 2015) (Not Reported in F.Supp.3d), Plaintiff alleged claims under both Section 502(a)(1)(B) and 502(a)(3) in connection with the denial of her short and long-term disability claims. Defendants moved to dismiss the second claim, arguing that they cannot be brought concurrently. The court agreed with Plaintiff that her allegations under each claim are separate and distinct. Under her first claim, Plaintiff’s allegations focus on the denial of her claim for benefits and requests payment of past benefits due to her. Under her second claim, Plaintiff’s allegations focus on Defendants’ alleged failure to provide an adequate process to evaluate claims, and consequently requests injunctive relief that includes enjoining Defendants from continuing with its alleged inadequate process and removing Aetna as administrator. Therefore, to the extent that Defendants sole challenge to Plaintiff’s second claim is that Plaintiff cannot pursue both claims concurrently, the court denied Defendants’ Motion to Dismiss.
In Gidley v. Reinhart Foodservice, L.L.C., No. 4:14-CV-0800, 2015 WL 1136447 (M.D. Pa. Mar. 12, 2015), Plaintiff became disabled and started receiving long-term disability benefits under his employer’s plan, which had been insured by MetLife. After he began receiving disability benefits, he learned that Defendants had cancelled the MetLife policy just before his disabling injury and replaced it with a new policy from Reliance Standard, which unlike the MetLife policy, did not provide an Index Adjustment over time. In his First Amended Complaint, Plaintiff alleged that the plan amendment replacing the MetLife policy with the Reliance policy was never disclosed to him by Defendants and the nondisclosure constitutes a breach of fiduciary duty. He also asserted a claim for equitable estoppel on the grounds that the statement of benefits contained material misrepresentations on which he detrimentally relied and that Defendants actively concealed the amendment which was a material change to his policy. His third cause of action seeks benefits due under the MetLife policy; specifically, Defendants owe him the money he would have received under the MetLife policy. Plaintiff also requested that the court strike the plan amendment as it pertains to him because of Defendants’ active concealment of material facts upon which he detrimentally relied. The court dismissed the breach of fiduciary duty claim with prejudice because Plaintiff requests only monetary relief which is not equitable in nature. The claim seeking benefits due under the plan was dismissed without prejudice with leave to amend to certify exhaustion of his administrative remedies. The court denied dismissal of Plaintiff’s equitable estoppel claim and request to strike the plan amendment as to Plaintiff.
In Lees v. Munich Reinsurance Am., Inc., No. CIV.A. 14-2532 MAS, 2015 WL 1021299 (D.N.J. Mar. 9, 2015), Plaintiff alleged that Defendant made misrepresentations to him regarding his entitlement to certain pension credits and benefits. In ruling on Defendant’s motion to dismiss Plaintiff’s nine separate causes of action, the court found that Plaintiff’s Section 502(a)(1)(B) claim is comprised largely of legal conclusions and conclusory statements. Because Plaintiff’s Complaint does not contain sufficient factual matter, if accepted as true, would state a claim to relief that is plausible on its face under § 1132(a)(1)(B), dismissal of this count is warranted. The court declined to dismiss Plaintiff’s breach of fiduciary duty claim based upon oral misrepresentations since Plaintiff alleged sufficient facts to support this claim and discovery into his employee file may reveal additional written materials to support his claim. With respect to Counts Four (promissory estoppel), Five (equitable fraud), Six (disgorgement), Seven (unjust enrichment/quantum meruit), and Nine (unclean hands/bad faith) of Plaintiff’s Complaint, the court found that he seeks the same relief:
[R]eformation of the Munich pension plan to allow Plaintiff credit for the period of October 28, 1996 through August 15, 1999 when Plaintiff was on the payroll of SMS, disgorgement of the forsaken sign-on bonuses of Plaintiff, Rossmango and others similarly situate [sic] offered in 1999 plus interest and/or profit of same to be deposited with the Munich pension plan, liquidated damages together with interest, costs of suit, attorney’s fees, and such other relief that this Court deems just, equitable and appropriate under the circumstances of this case.
The court found that Plaintiff is requesting compensatory damages merely framed as “equitable relief” which is not available under § 1132(a) (3). Additionally, Plaintiff may not seek the same relief under § 1132(a)(3) that he is seeking under § 1132(a)(2). As such, the court dismissed these counts with prejudice.
In Cadiovascular Specialty Ctr. of Baton Rouge, LLC v. United Health Care of Louisiana, Inc., No. CIV.A. 14-00235-BAJ, 2015 WL 1033763 (M.D. La. Mar. 9, 2015), Plaintiff alleged that it provided certain medical services to United insureds and that United informed Plaintiff that it would be reimbursed for those medical services. The court found that Plaintiff’s state law claims are preempted by ERISA and should be dismissed. The court granted Plaintiff leave to amend to add any claims under ERISA, noting that the Fifth Circuit has held that a district court’s dismissal of a case involving only state claims preempted by ERISA without first allowing the plaintiff to amend his complaint to add ERISA claims constitutes an abuse of discretion.
Standard of Review
In Breland v. Liberty Life Assur. Co. of Boston, No. 14-CV-10508, 2015 WL 1132948 (E.D. Mich. Mar. 12, 2015), the court found that Liberty Life’s action in sending the policy to Plaintiff’s counsel did not meet the definition of delivering the insurance policy to a person in the State of Michigan and, thus, Michigan’s anti-discretionary clause regulation does not void the policy’s discretionary clause. The court determined that the appropriate standard of review is “arbitrary and capricious.”
In Pate v. Winn-Dixie Stores, Inc., No. CV213-166, 2015 WL 1097394 (S.D. Ga. Mar. 11, 2015), the court invoked its power under FRCP 16 and its “inherent power” to order a non-party health Plan representative to attend a settlement conference in a personal injury matter, in which the Plan had asserted a subrogation lien. The parties had reached a “tentative settlement” which depended on the Plan compromising its lien. The Plan refused to compromise so Plaintiff, joined by Defendant, filed a motion seeking its attendance at a further settlement conference. The court found that an order directed at the Plan is necessary for the court to perform its function of facilitating productive settlement discussions under Rule 16.
In Hilbert v. Lincoln Nat. Life Ins. Co., No. 3:14-CV-565-JGH, 2015 WL 1034058 (W.D. Ky. Mar. 9, 2015), the court granted Lincoln’s motion to transfer this case to a more convenient forum – the Middle District of Pennsylvania – where the action might have been brought under 28 U.S.C. § 1404(a). Here, this Court is 600 miles away from Plaintiff’s home, which is located within the Middle District of Pennsylvania. One of the divisional courthouses in that district is only four miles away from her home. Plaintiff’s former employer established and administered her benefits plan and it is also located in the Middle District of Pennsylvania. All of Plaintiff’s medical information and all of her treating physicians are located in the Middle District of Pennsylvania. Defendant’s principal place of business is in the Eastern District of Pennsylvania. The only connection to this court is that Plaintiff’s counsel resides and practices law within the Western District of Kentucky.
Withdrawal Liability & Unpaid Benefit Contributions
Trustees of Empire State Carpenters Annuity, Apprenticeship, Labor-Mgmt. Cooperation, Pension & Welfare Funds v. C. Downing Enterprises LLC, No. 14-CV-323 ADS AKT, 2015 WL 1042481 (E.D.N.Y. Mar. 10, 2015) (confirming arbitration award rendered in conjunction with a CBA and awarding Plaintiff the following damages: (i) $8,854.21 for unpaid contributions; (ii) $589.68 in interest; (iii) $1,770.84 in liquidated damages; (iv) $750.00 in attorneys’ fees pursuant to the arbitration award; (v) $1,215.00 in attorneys’ fees incurred in connection with this confirmation proceeding; and (vi) $1,217.50 in arbitrator’s fees, costs and disbursements).
Flanagan v. Marco Martelli Associates, Inc., No. 13-CV-6023 ADS AKT, 2015 WL 1042279 (E.D.N.Y. Mar. 9, 2015) (granting Plaintiff default judgment and awarding the following damages: (i) $23,955.75 for unpaid contributions; (ii) pre-judgment interest on unpaid contributions through May 31, 2014 in an amount to be determined by the Clerk’s Office; (iii) liquidated damages in the same amount as the pre-judgment interest calculated by the Clerk’s Office; (iv) $1,608.31 in attorneys’ fees; and (v) $555.00 in costs and disbursements).
* 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.