This past week was a little slow in ERISAland thanks to the Labor Day holiday. Notably, the Third Circuit held that a plan participant’s assignment of the right to payment to a medical service provider is sufficient to confer standing to sue under ERISA. The Ninth Circuit set a standard for successor company withdrawal liability and denied a health plan reimbursement because it sought legal relief not available under ERISA Section 502(a)(3). Read about all this and more in this week’s ERISA Watch.
Below is Kantor & Kantor LLP summary of this past week’s notable ERISA decisions.
Assignment of the right to payment is sufficient to confer standing to sue for payment under ERISA § 502(a)(1). In N. Jersey Brain & Spine Ctr. v. Aetna, Inc., No. 14-2101, __F.3d___, 2015 WL 5295125 (3d Cir. Sept. 11, 2015), an action for unpaid insurance benefits, Plaintiff appealed an order dismissing its complaint for lack of standing under ERISA. The court held that as a matter of federal common law, explicit assignment of payment of insurance benefits to a healthcare provider, without direct reference to the right to file suit, is sufficient to give the provider standing to sue for those benefits under ERISA § 502(a), 29 U.S.C. § 1132(a). In coming to the same conclusion as its sister circuits, the court is guided by Congress’s intent that ERISA “protect … the interests of participants in employee benefit plans,” 29 U.S.C. § 1001(b), and its conviction that the assignment of ERISA claims to providers serves the interests of patients by increasing their access to care. The Third Circuit reversed and remanded this action for further proceedings.
Successor employer can be held liable for withdrawal liability if it took over the business with notice of liability and there is substantial continuity in the business operations. In Resilient Floor Covering Pension Trust Fund Bd. of Trustees v. Michael’s Floor Covering, Inc., No. 12-17675, __F.3d___, 2015 WL 5295091 (9th Cir. Sept. 11, 2015), the Ninth Circuit considered two related issues: (1) whether a successor employer, both generally and in the construction industry in particular, can be subject to withdrawal liability under the Multiemployer Pension Plan Amendments Act (“MPPAA”); and (2) if so, what factors are most relevant to determining whether a construction industry employer is a successor for purposes of imposing MPPAA withdrawal liability. The court concluded that a construction industry successor employer can be subject to MPPAA withdrawal liability, so long as the successor took over the business with notice of the liability. The court held that the most important factor in assessing whether an employer is a successor for purposes of imposing MPPAA withdrawal liability is whether there is substantial continuity in the business operations between the predecessor and the successor, as determined in large part by whether the new employer has taken over the economically critical bulk of the prior employer’s customer base. The district court held that Defendant was not liable as a successor employer after weighing continuity of the workforce as the most important factor and applying an incorrect test to determine whether there was continuity of the workforce. The Ninth Circuit reversed and remanded for further proceedings applying the correct standards.
ERISA preempts and does not authorize a health plan’s claim for reimbursement of medical expenses. In Oregon Teamster Employers Trust v. Hillsboro Garbage Disposal, Inc., No. 13-35555, __F.3d__, 2015 WL 5202383 (9th Cir. Sept. 8, 2015), a self-funded health plan brought suit against an employer and employees of a separate company, which had common ownership with the employer, asserting claims for breach of contract, restitution, and specific performance, arising out of the health plan’s payment of health care benefits on behalf of the separate company’s employees. In affirming the district court’s grant of summary judgment in Defendants’ favor, the Ninth Circuit held that: (1) ERISA preempted breach of contract claim because analysis of the terms of an ERISA plan is required to resolve claim; (2) claim seeking specific performance of reimbursement provision was not cognizable under ERISA’s equitable catchall provision because it seeks “legal relief”; (3) claim seeking restitution was not cognizable under ERISA’s equitable catchall provision because health plan did not show that benefits were paid as a result of “fraud or wrongdoing”; and (4) district court did not abuse its discretion in denying Plaintiff leave to file amended complaint.
Select Slip Copy & Not Reported Decisions
In withdrawal liability collection matter, the court found that the $265 blended rate used by Plaintiff is a reasonable rate for the work performed. Local 1245 Labor-Mgmt. Pension Fund v. Key Handling Sys., Inc., No. CIV.A. 14-6907 JLL, 2015 WL 5255261(D.N.J. Sept. 8, 2015).
Breach of Fiduciary Duty
Plaintiff brought claims against Defendants based on Defendants’ promise that the Plan would count, for pension calculation purposes, Plaintiff’s years of service at the Joliette plant before he transferred to Bridgestone. The court granted Plaintiff’s motion with respect to his claims for equitable estoppel, breach of fiduciary duty, and violation of ERISA’s “anti-cutback” provision. The court denied Plaintiff’s motion on the claims for contract reformation and the claims brought under North Carolina state law. Deschamps v. Bridgestone Americas, Inc. Salaried Employees Ret. Plan, No. 3:12-CV-86, 2015 WL 5254338 (M.D. Tenn. Sept. 9, 2015).
In class action suit alleging that defendants violated the parties’ collective bargaining agreement by reducing health benefits of employees who retired before August 1, 2006, the court concluded that Plaintiffs’ claim challenging the 2010 changes to retiree benefits is not barred by the statute of limitations. The court denied the parties’ Daubert challenges to the other side’s experts. The court found that summary judgment is not appropriate, and Plaintiffs are entitled to a trial on the issue of whether the 2010 and subsequent changes are reasonably commensurate with the pre-2006 benefits. Plaintiffs will first need to succeed in proving that the parties intended for the benefits to vest, using extrinsic evidence, before it is entitled to reasonably commensurate benefits. Merrill v. Briggs & Stratton Corp., No. 10-CV-700, 2015 WL 5172943 (E.D. Wis. Sept. 2, 2015).
Disability Benefit Claims
Life Insurance Company of North America denied Plaintiff’s claim for long term disability benefits, determining that he was not disabled throughout his mandatory benefits waiting period (“Elimination Period”). Plaintiff is a former forklift operator impaired by degenerative disc disease of the cervical and lumbar spine. The court ruled in favor of LINA, finding that its decision was not arbitrary and capricious. LINA relied in part on an independent peer reviewer Dr. Kenneth Palmer (orthopedic surgeon) and two in-house registered nurses. Ling v. Life Ins. Co. of N. Am., No. 3:13-CV-0839, 2015 WL 5254360 (M.D. Tenn. Sept. 9, 2015).
Plaintiff alleged disability from Ehlers Danlos Syndrome. The court granted Liberty Life’s motion for summary judgment on Plaintiff’s claim for disability benefits under the “any occupation” standard of disability, rejecting Plaintiff’s argument that policy’s offset for Social Security benefits caused a conflict of interest. Peer reviewers involved include MES Peer Review Services, Dr. Terence McAlarney (Neurology), Dr. Simeon A. Boyadjiev (Genetics). Moore v. Liberty Life Assur. Co. of Boston, No. 6:14-CV-00043, 2015 WL 5227954 (W.D. Va. Sept. 8, 2015).
Plaintiff claimed that MetLife erroneously recovered overpayments made to him, in breach of a purported settlement reached by the parties. The court granted summary judgment to MetLife and dismissed the complaint in its entirety. First, to the extent that Plaintiff’s Complaint is premised on characterizing March 2008 correspondence between the parties as a “contract/settlement,” such claim is preempted by ERISA. Second, even applying the disability policy’s three-year contractual limitations period generously to Plaintiff, his claim is time-barred. Smith v. Metro. Life Ins. Co., No. CIV.A. 14-2288 ES, 2015 WL 5177633 (D.N.J. Sept. 3, 2015).
In lawsuit seeking to recover from Defendant funds that Defendant contributed to a deferred compensation plan for Plaintiff’s benefit, the court granted Plaintiff’s Motion for Attachment and Attachment on Trustee Process in the amount of $192,859 .89. The court noted a potential issue is whether attachment proceedings are proper given ERISA preemption principles. However, the Supreme Court, in Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, 834 (1988), held that “state-law methods for collecting money judgments must, as a general matter, remain undisturbed by ERISA; otherwise, there would be no way to enforce such a judgment won against an ERISA plan.” Siefken v. Grp. Home Found. Inc., No. 1:15-CV-00209-GZS, 2015 WL 5178067 (D. Me. Sept. 4, 2015).
Life Insurance & AD&D Benefit Claims
In dispute between deceased insured’s wife and ex-wife (who was designated beneficiary of deceased’s life insurance policy), the court granted Defendant’s motion to dismiss, finding that the ex-wife is the proper beneficiary of the insurance policy. Bostic v. Bostic, No. CIV.A. 6:14-2130-BHH, 2015 WL 5178163 (D.S.C. Sept. 3, 2015).
This civil interpleader action called on the court to determine whether a widow murdered her husband without justification such that she is disqualified from receiving his life insurance proceeds. The court denied the decedent’s son’s motion for summary judgment. Although the father’s death was ruled a homicide and that Mr. and Ms. Scott were the only two people in the house at the time of the homicide, this alone is insufficient for the court to enter judgment as a matter of law that Ms. Scott intentionally and without justification killed Mr. Scott. Further, there is no final judgment that Ms. Scott is criminally responsible for her husband’s death. Metro. Life Ins. Co. v. Scott, No. CIV.A. 15-362, 2015 WL 5165556 (E.D. La. Sept. 2, 2015).
Medical Benefit Claims
The Ninth Circuit affirmed the district court’s decision that Blue Cross did not abuse its discretion in interpreting the Plan as excluding coverage for treatment that it deemed “Experimental/Investigational.” The treatment was provided as part of a phase three clinical trial. Robertson v. Blue Cross, No. 15-35304, __Fed.Appx.___ 2015 WL 5239572 (9th Cir. Sept. 9, 2015).
ERISA Section 510 claim brought by New York City schoolteacher dismissed because teachers’ pension and retirement plan benefits are exempt from ERISA. Smith v. City of New York, No. 14 CIV. 2690 NRB, 2015 WL 5231366(S. D.N.Y. Sept. 8, 2015)
Severance Benefit Claims
The Fifth Circuit reversed and remanded the district court’s grant of summary judgment to Defendant, finding that the plan administrator’s denial of post-termination severance benefits was not supported by substantial evidence. The record did not contain any personnel records or contemporaneous employment documents showing that Plaintiff actually was fired for a “Group I violation” or for making improper expenditures. “We are aware of no case, and Johnson & Johnson does not provide one, holding that a single, cursory, post-termination letter-one that fails to detail the alleged violation or cite to contemporaneous accounts of the violation-constitutes substantial evidence.” Napoli v. Johnson & Johnson, Inc., No. 14-31000, __Fed.Appx.___, 2015 WL 5203002 (5th Cir. Sept. 8, 2015).
The court granted Defendants’ Motion for Summary Judgment on Plaintiff’s ERISA penalty claim. The court found that failure to produce the “claims file” does not support imposition of a penalty. The court explained that the claims file is not covered by the ERISA disclosure statute. The regulations implementing 29 U.S.C. Section 1029(c) are found at 29 C.F.R. Section 2520.101-1 et seq. However, the regulation cited by Plaintiffs is 29 C.F.R. Section 2560.503, which implements 29 U.S.C. Sections 1133 and 1135, and relates to claims procedures. Although claims administrators must provide those appealing adverse claims determinations with claims information, the failure to do so does not fall under the ERISA penalty statute. The court also found that Plaintiff’s counsel sent the request for information to the address for appeals of an unfavorable claim decision, but not to the designated plan administrator. Boyd v. Sysco Corp., No. 4:13-CV-00599-RBH, 2015 WL 5178151 (D.S.C. Sept. 3, 2015).
Withdrawal Liability & Unpaid Benefit Contributions
The court adopted the report and recommendation granting Plaintiff’s default judgment in the amount of $217,587.23 for unpaid trust fund contributions, liquidated damages, interest, and attorneys’ fees and costs. The court denied Defendant’s motion to set aside the default judgment. Bd. of Trustees for the Laborers Health & Welfare Trust Fund for N. California v. Michael Heavey Constr., Inc., No. C 15-00411 WHA, 2015 WL 5241759 (N.D. Cal. Sept. 8, 2015).
Plaintiff sought a declaration that the amount of its withdrawal liability is $913,970, which is the figure cited in the April 2014 withdrawal liability estimate. Plaintiff also initiated arbitration with the American Arbitration Association regarding the withdrawal liability assessment. Defendant filed a Motion to Dismiss, which the court granted because although it has jurisdiction over the present dispute, Plaintiff failed to state a claim upon which relief can be granted. Equitable Estoppel is not a cause of action but a judicial doctrine that bars assertion of a claim or defense. Elbeco Inc. v. Nat’l Ret. Fund, No. 5:15-CV-00318-JFL, 2015 WL 5168473 (E.D. Pa. Sept. 2, 2015).
* 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.