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ERISA Watch – October 16, 2014

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Your reliable source for summaries of recent ERISA decisions

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

Fifth Circuit

Retirees Did Not Adequately Plead that Investment Guidelines Constitute an Instrument Under Which the Pension Plan Was Established or Operated

In a per curiam decision in Murphy v. Verizon Commc’ns, Inc., 13-11117, 2014 WL 5139239 (5th Cir. Oct. 14, 2014), the 5th Circuit Court of Appeals affirmed the district court’s grant of summary judgment in favor of the defendant pension plans. This suit arose from the November 2006 spin-off of Verizon Communications Inc.’s information services unit into a new corporation called Idearc, Inc., which subsequently evolved into SuperMedia, Inc. In 2009, several retirees whose pension benefits were transferred from Verizon pension plans to Idearc pension plans as part of the spin-off brought a class action suit against Verizon, the Idearc (and later the SuperMedia) pension plans, and the Verizon pension plans-asserting that defendants breached of their duties to the plan during the spin-off and failed to turn over certain documents and disclose certain information to the retirees.

The court determined that the retirees’ claims under ERISA Section 104(b)(4), 29 U.S.C. § 1024(b)(4), and ERISA Section 404(a)(1), 29 U.S.C. § 1104(a)(1), relating to defendants’ failure to produce certain documents, were properly dismissed under Rule 12(b)(6). The retirees contended that the documents they sought from defendants, including investment guidelines, fall under Section 104(b)(4)’s catch-all clause, i.e., that they constitute “other instruments under which the plan is established or operated.” Noting that this circuit has not directly addressed the scope of Section 104(b)(4)’s catch-all clause and the other circuits’ differing interpretations of the clause, the court agreed with the majority of the circuits which have construed Section 104(b)(4)’s catch-all provision narrowly so as to apply only to formal legal documents that govern a plan. As other courts have noted, such a construction is consistent with the plain meaning of the term “instrument,” i.e.,”[a] written legal document that defines rights, duties, entitlements, or liabilities, such as a statute, contract, will, promissory note, or share certificate.” Moreover, the other documents specifically listed in Section 104(b)(4)-plan descriptions, annual reports, terminal reports, bargaining agreements, trust agreements, and contracts-are all formal documents that either provide plan participants and beneficiaries with notice of their rights and obligations or are the foundational documents under which a plan is created and governed. The court declined to decide that investment guidelines could, under certain circumstances, constitute “other instruments” under Section 104(b)(4), but for this case the retirees’ conclusorily alleged in their first amended complaint that the investment guidelines are instruments under which the pension plan is established or operated, within the meaning of ERISA Section 104(b)(4), and the court is not bound to accept as true a legal conclusion couched as a factual allegation. The court explained that its holding is not inconsistent with that reached in Faircloth, 91 F.3d 648, in which the 4th Circuit determined that the investment policies at issue constituted “other instruments” under Section 104(b)(4). The court also rejected to apply Chevron deference to a Department of Labor (DOL) bulletin interpreting ERISA Section 404(a)(1)(D), which requires that “a fiduciary … discharge his duties with respect to a plan … in accordance with the documents and instruments governing the plan” since the agency was construing a different statute than the one at issue here. Because the retirees did not adequately plead that the investment guidelines were mandatory, the court found that the district court did not err in dismissing the Section 104(b)(4) claim.

With respect to the retirees’ challenge of the lower court’s conclusion that Section 404(a)(1) creates no additional disclosure obligations beyond those found in Section 104(b)(4), the court noted that this court’s precedent confirms that Section 404(a)(1)’s fiduciary duty may obligate at least responsive disclosure of relevant plan materials upon a specific request by a plan member. However, the court determined that the retirees’ claim for disclosure pursuant to Section 404(a)(1) is moot because they have already received all requested relief. In the Amended Complaint, the retirees sought statutory damages for an alleged violation of Section 104(b)(4). For its alleged breach of fiduciary duty under Section 404(a)(1), however, the retirees sought only equitable relief including injunctive relief ordering both Defendant Verizon EBC and Defendant Idearc EBC to disclose the information and produce the documents each has in its respective possession that is responsive to Plaintiffs’ request for information. Although statutory damages may be available for a Section 404(a)(1) claim, the retirees’ did not seek damages for this claim. Having sought only production of the requested documents as a remedy for its Section 404(a)(1) claim, and conceding that they have received the requested documents, the court found that the retirees have received all relief they sought for the alleged breach of fiduciary duty. Since the claim is moot, the court declined to resolve any tension in the case law regarding the extent of disclosure obligations under Section 404(a)(1).

Sixth Circuit

Administrator May Require Objective Evidence of Disability Even Where the Plan Does Not Have an Objective Evidence Requirement. In Hunt v. Metro. Life Ins. Co., 13-1724, __Fed.Appx.___, 2014 WL 5137589 (6th Cir. Oct. 10, 2014), the 6th Circuit Court of Appeals affirmed MetLife’s denial of long-term disability benefits for the plaintiff who alleged disability as a result of fibromyalgia, adrenal fatigue, gait disturbance, lumbar spondylosis, dysomnia, and depression. Hunt’s primary argument, both in the district court and on appeal, is that it was arbitrary and capricious to require her to provide objective evidence of her disability. First, the terms of the insurance plan itself do not contain an objective evidence requirement; second, it is unreasonable to require “objective evidence” of diseases like fibromyalgia, which are susceptible only to clinical, not objective, diagnosis; and third, she lacked notice of the need to present objective evidence because MetLife’s denial letters did not clearly communicate this requirement. Hunt also contended that the physicians who reviewed her documents labored under a conflict of interest and improperly credited the results of its paper review over the opinions of her treating physicians. The court agreed with the district court that MetLife did not act arbitrarily or capriciously when it demanded objective evidence supporting Hunt’s claim because in this circuit, requiring a claimant to provide objective medical evidence of disability is not irrational or unreasonable, even when such a requirement does not appear among the plan terms. Second, it was also reasonable for MetLife to require objective evidence of functional limitations resulting from Hunt’s fibromyalgia-limitations that could have been chronicled by a functional capacity evaluation. With respect to MetLife’s use of paid reviewers, the court found that Hunt provided no evidence that the conflict influenced the paper reviewers’ decision in her case. Because the plaintiff did not argue that MetLife totally ignored her treating physician’s opinions, there was no error in MetLife’s decision to credit its own non-treating physician reviewers over Hunt’s treating doctors.

Claims for Enhanced Compensation Relate to ERISA-governed Pension Plan and Are Preempted by ERISA. In Smith v. Commonwealth Gen. Corp., 12-6284, __Fed.Appx.___, 2014 WL 5032357 (6th Cir. Oct. 9, 2014), the 6th Circuit Court of Appeals affirmed the district court’s denial of the plaintiff’s motion to remand his claims to state court and the district court’s dismissal of his claims related to a Voluntary Employee Retention and Retirement Program (“VERRP”). The plaintiff was an employee of Defendant Commonwealth General Corporation (“CGC”). When CGC agreed to merge with AEGON USA, Inc. (“AEGON”), CGC offered the plaintiff enhanced compensation if he remained with CGC until its merger with AEGON was completed. The VERRP provided that the plaintiff would retire on March 1, 2000 and he elected to receive $1,066.54 under the qualified plan, and $1,122.97 under the non-qualified plan, for a total of $2,189.51 per month. The AEGON Pension Plan (“Plan”) paid the plaintiff both a lump sum benefit and $2,189.51 per month. In August 2011, the Plan told him that they had been overpaying him by $1,122.97 per month (or the benefit categorized as “non-qualified” under the VERRP) for the previous eleven years. The Plan reduced, and then eliminated, the plaintiff’s entire monthly benefit payments, stating that it would make no further payments until it had recouped the overpayment or he repaid the Plan $153,283.25. The plaintiff exhausted the administrative remedies provided by the Plan by appealing to the AEGON Pension Committee, who denied the appeal. Thereafter, the plaintiff filed suit against CGC in Jefferson County Circuit Court asserting state-law claims for breach of contract, wage and hour state statutory violations, estoppel, and breach of the duty of good faith and fair dealing. CGC timely removed the action to the U.S. District Court for the Western District of Kentucky, the plaintiff moved to remand pursuant to 28 U.S.C. § 1447(c), and CGC moved to dismiss under Federal Rule of Civil Procedure 12(b)(6). In resolving the plaintiff’s appeal, the court noted that this case requires that it answer four questions.

First, is the VERRP a “plan” covered by ERISA? The court answered this question affirmatively. The VERRP is part of the AEGON Pension Plan, and that plan is governed by ERISA. The plaintiff himself drafted the VERRP as an amendment to the CGC Retirement Plan, also an ERISA-governed plan. The CGC Retirement Plan then merged with the AEGON Pension Plan. The VERRP was not a separate severance agreement.

Second, does the plaintiff’s claim fall within the complete preemption exception for removal, either because it seeks to recover benefits due to the plaintiff under the plan or because it seeks to enforce his rights under the plan? The court determined that even if the VERRP was a separate severance agreement, ERISA still completely preempts the plaintiff’s claim following the two-part test set forth in Kolkowski v. Goodrich Corp., 448 F.3d 843 (6th Cir. 2006): 1) whether the employer has discretion over the distribution of benefits, and 2) whether there are on-going demands on an employer’s assets. The court determined that the benefit determinations involve analyzing each employee’s particular circumstances in light of the criteria set forth in the plan to determine the employee’s eligibility for and level of benefits. The court rejected the plaintiff’s contention that the VERRP does not impose an ongoing demand on CGC’s assets because its funds were distributed in a lump sum since the option to receive lump sum payments does not mean that no ongoing administrative burden exists. The plaintiff’s claims are also completely preempted because they relate to, and seek recovery under, the VERRP, an employee benefit plan.

Third, is CGC a proper defendant? An employer is the proper defendant to a severance plan only if that severance plan is not an employee benefits plan governed by ERISA or unless an employer is shown to control administration of a plan. The court determined that the VERRP is administered by the AEGON Pension Committee, which is appointed by AEGON’s Board. The AEGON Pension Plan states, “The term ‘Pension Committee’ shall mean the committee of individuals appointed by the Board to be responsible for the operations and administration of the Plan in accordance with the provisions of Section 9.” The Pension Committee has complete control over the VERRP’s claims procedure, including applications for payments and appeals of denials of claims. The Plan also states that “[t]he Pension Committee is the Named Fiduciary within the meaning of section 402(a) of ERISA for purposes of Plan administration.” That the AEGON Board chose the members of the Pension Committee does not mean that AEGON controls administration of the VERRP. The court held that the district court did not commit plain error by concluding that neither CGC nor AEGON administers the VERRP and CGC is not a proper defendant.

And fourth, did the district court err by refusing to permit Smith to amend his complaint? The plaintiff sought permission to amend his complaint to state ERISA causes of action against CGC, but the court determined that CGC was still the wrong defendant. As such, amendment would have been futile. Further, there is no indication from the record that the plaintiff sought leave to amend his complaint to replace CGC as a defendant with the AEGON Pension Committee. The district court dismissed the plaintiff’s complaint without prejudice, allowing him to re-file in federal court, which he did.

Pension Plan’s Venue Provision Enforceable. Subsequently, in the same matter as the above, the 6th Circuit Court of Appeals issued its decision in Smith v. Aegon Companies Pension Plan, 13-5492, __F.3d___, 2014 WL 5125633 (6th Cir. Oct. 14, 2014), affirming the district court’s dismissal of the plaintiff’s claims without prejudice because of improper venue, enforcing the Pension Plan’s venue provision. In 2007, the AEGON Board of Directors amended the Plan to add a “venue provision.” The provision states: “Restriction on Venue. A participant or Beneficiary shall only bring an action in connection with the Plan in Federal District Court in Cedar Rapids, Iowa.” After the district court dismissed the Smith I complaint, he filed suit against the AEGON Companies Pension Plan in the U.S. District Court for the Western District of Kentucky. The district court dismissed the complaint without prejudice under Rule 12(b)(6) because of the Plan’s venue selection clause, and Smith appealed. The Secretary of Labor filed an amicus brief taking the position that venue selection clauses are incompatible with ERISA. The court declined to afford either Chevronor Skidmore deference to the Secretary’s “regulation by amicus” in this case. Because it concluded that the venue selection clause is enforceable and applies to Smith’s claims, the court did not opine whether 29 U.S.C. § 1132(e)(2) permits venue in the U.S. District Court for the Western District of Kentucky. Reviewing the enforceability of a forum selection clause de novo, the court found that the Plan amendment to add the venue selection clause was valid even thought it was added seven years after the plaintiff’s benefit claim commenced, noting that the Supreme Court has recognized the validity of forum selection clauses even when those clauses were not the product of an arms-length transaction (Carnival Cruise Lines v. Shute, 499 U.S. 585, 595 (1991) (enforcing a forum selection clause contained on the back of a cruise ticket)). The court rejected the plaintiff’s argument in the alternative that the Plan document under which he retired should control his case because the 6th Circuit follows the “clear repudiation rule,” under which a cause of action accrues and the plaintiff’s claims did not accrue until 2011-after the venue selection clause was added-when the AEGON Pension Plan informed him that it was reducing his payments. The court noted that a majority of courts that have considered this question have upheld the validity of venue selection clauses in ERISA-governed plans. Specifically, these courts reasoned that if Congress had wanted to prevent private parties from waiving ERISA’s venue provision, Congress could have specifically prohibited such action. The court rejected the argument that the venue provision inhibits ready access to federal courts since it provides for venue in a federal court. And other ERISA policies are furthered by venue selection clauses: limiting claims to one federal district encourages uniformity in the decisions interpreting that plan, which furthers ERISA’s goal of enabling employers to establish a uniform administrative scheme so that plans are not subject to different legal obligations in different States. The cost to employees of one plan’s being subject to the varying pronouncements of federal district courts around the country would also undermine ERISA’s goal of providing a low-cost administration of employee benefit plans. The court also found that AEGON’s venue selection clause does not conflict with ERISA’s venue provision and that the venue selection clause does not violate 29 U.S.C. § 1110(a), which states, “any provision in an agreement or instrument which purports to relieve a fiduciary from responsibility or liability for any responsibility, obligation, or duty under this part shall be void as against public policy.” Finally, the court found that the district court did not abuse its discretion in dismissing the case instead of transferring it.

Unreported Decisions

Attorneys’ Fees

Heimerl v. Tech Elec. of Minnesota, Inc., 12-CV-612 SRN/SER, 2014 WL 4988153 (D. Minn. Oct. 7, 2014) (in suit seeking to conduct an audit of Defendant’s payroll and employment records and to recover amounts due for any unpaid fringe benefit contributions owed, where Trustees for several fringe benefit plans initially sought $298,790.64 in damages, and received an award of $18,503.19, awarding only 10% of attorneys’ fees incurred ($8,140.88) for “limited success”).

Disability Benefit Claims

Arko v. Hartford Life & Accident Ins. Co., 13-CV-1044 YGR, 2014 WL 5140358 (N.D. Cal. Oct. 10, 2014) (in matter where there is no dispute that the plaintiff is presently disabled by multiple sclerosis, finding that the evidence of record does not support a finding that the plaintiff was disabled as of the alleged onset date and that Hartford’s denial of his long-term disability claim was not an abuse of discretion).

Constantino v. Aetna Life Ins. Co., SACV 12-0921-JGB ANX, 2014 WL 5023222 (C.D. Cal. Oct. 8, 2014) (finding that Aetna’s decision to terminate the plaintiff’s long-term disability benefits was not an abuse of discretion).

Jones v. WEA Ins. Corp., 13-CV-741-WMC, 2014 WL 4988384 (W.D. Wis. Oct. 7, 2014) (under the applicable deferential standard of review, finding that WEA’s decision to deny Plaintiff’s long-term disability benefits was based on a substantial review and, at worst, conflicting evidence; granting summary judgment in favor of WEA).


Kostecki v. Prudential Ins. Co. of Am., 4:14-CV-695 JCH, 2014 WL 5094004 (E.D. Mo. Oct. 10, 2014) (in matter involving life insurance plan benefits, granting Plaintiff’s motion to conduct discovery outside the administrative record where the Plaintiff brought two claims under § 1132(a)(3) and an equitable claim, which are in a category of ERISA-related claims that warrants discovery outside the administrative record and in accordance with the scope of Fed.R.Civ.P. 26(b)).

Floyd v. Metro. Life Ins. Co., 4:14CV00254 AGF, 2014 WL 5090022 (E.D. Mo. Oct. 9, 2014) (where MetLife administers but does not fund the long-term disability plan, denying Plaintiff’s motion for limited discovery seeking MetLife to produce documents which give guidance to MetLife on how to make decisions on disability claims when (i) the SSA has approved the beneficiary’s claim for disability, (ii) the beneficiary’s conditions meet the severity of an SSA listing, or (iii) the claim involves asthma or other pulmonary conditions, and any documents which give guidance to MetLife’s third-party medical experts on how to make decisions on disability claims involving asthma or other pulmonary conditions).

ERISA Preemption

Connecticut Gen. Life Ins. Co. v. Advanced Chiropractic Healthcare, CV 13-2784, 2014 WL 5100572 (E.D.N.Y. Oct. 10, 2014) (finding that action claiming fraud, unjust enrichment and money had and received against Defendants in connection with medical services it provided and billed to Plaintiff are not preempted by either § 514 or § 502(a), and denying Defendants’ motion to dismiss).

Life Insurance & AD&D Benefit Claims

Mraz v. Aetna Life Ins. Co., 3:12-CV-805, 2014 WL 5018862 (M.D. Pa. Oct. 7, 2014) (in matter involving denial of supplementary life insurance benefits, finding that procedural irregularities Plaintiff attributed to Aetna were mere clerical errors having no legal consequence and that Aetna’s reliance on the medical evidence of record was logical and appropriate).

Rainey v. Sun Life Assur. Co. of Canada, 3-13-0612, 2014 WL 4979335 (M.D. Tenn. Oct. 6, 2014) (finding in favor of the participant in § 502(a)(3) claim against employer, where employer allowed participant to enroll for AD&D insurance, confirmed that she had enrolled, accepted her payments for the greater coverage, and never took any steps to correct this erroneous enrollment such that she was not permitted to make informed decisions about that coverage and/or other options).

Medical Benefit Claims

Williams v. Aetna Life Ins. Co., 13-CV-241-KKC, 2014 WL 5063660 (E.D. Ky. Oct. 8, 2014) (finding that Aetna’s refusal to pay for Plaintiff’s intravenous immunoglobulin treatment for her selective immunodeficiency condition was arbitrary and capricious where Aetna changed its rationale for denying coverage from “experimental or investigational” to “failure to conduct a trial discontinuation of treatment” and Aetna did not meaningfully investigate claim).

Pleading Issues & Procedure

Weigandt v. Farm Bureau Gen. Ins. Co. of Michigan, 14-12078, 2014 WL 5092905 (E.D. Mich. Oct. 9, 2014) (denying motion to dismiss for want of subject matter jurisdiction in matter where Plaintiff, who was injured in a car crash, filed this lawsuit to establish which of two sources is responsible to pay her medical costs-her ERISA-governed employee benefit plan or her no-fault insurer-and to enjoin her benefit plan from seeking reimbursement from any recovery that does not compensate her for those medical expenses, rejecting Defendant’s argument that the Plaintiff seeks only “legal” relief unavailable under ERISA).

Williams v. Aetna Life Ins. Co., 13-CV-241-KKC, 2014 WL 5063660 (E.D. Ky. Oct. 8, 2014) (excusing any failure to fully exhaust the administrative process due to Aetna’s failure to provide notice of its denial directly to the Plaintiffs in violation of the procedural protections of section 1133 of ERISA and that exhaustion would be futile).

Subrogation/Reimbursement Claims

Smith v. Walmart Stores, Inc. Associates Health & Welfare Plan, 2:14-CV-00118-LJM, 2014 WL 5089295 (S.D. Ind. Oct. 9, 2014) (converting motion to dismiss for failure to exhaust administrative remedies into motion for summary judgment in favor of Plan on reimbursement claim, finding that the plaintiff was too late in notifying the Plan Administrator of his disability (which would have waived the reimbursement requirement) and relying on Heimeshoff to support the proposition that a plan can contract for a limitations period and the one-year deadline to inform the Plan Administrator of disability was not unreasonable).

* 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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