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ERISA Watch – Seventh Circuit Validates ERISA Plan’s Forum Selection Clause

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To sue or not to sue, where is the venue?  The Seventh Circuit Court of Appeals says it is wherever the employee benefit plan says it is.  In In re Mathias, No. 16-3808, __F.3d__, 2017 WL 34431723 (7th Cir. Aug. 10, 2017), the court considered a mandamus petition which raised a question of first impression in the Circuit:  Does ERISA’s venue provision, 29 U.S.C. § 1132(e)(2), preclude enforcement of a forum-selection clause in an employee-benefits plan?”  The court joined the Sixth Circuit’s holding in Smith v. Aegon Cos. Pension Plan, 769 F.3d 922, 931–34 (6th Cir. 2014), cert. denied, No. 14-1168 (Jan. 11, 2016) and held that ERISA’s venue provision does not invalidate a forum-selection clause contained in plan documents.

But why?  The court explained under Section 1404(a), where the parties’ contract contains a valid forum-selection clause, it should be given controlling weight in all but the most exceptional cases.  Even though ERISA plans “are a special kind of contract,” they are nonetheless a contract.  The Supreme Court held long ago that contractual forum-selection clauses are presumptively valid even in the absence of arm’s-length bargaining.  Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 593–95, 111 S.Ct. 1522, 113 L.Ed.2d 622 (1991).  Nothing in Section 1132(e)(2), ERISA’s broad venue provision, expressly invalidates forum-selection clauses in employee-benefits plans.  The court rejected extending the Supreme Court’s opinion in Boyd v. Grand Trunk Western Railroad Co., 338 U.S. 263, 70 S.Ct. 26, 94 L.Ed. 55 (1949) to the case at hand.  Boyd invalidated a contractual forum-selection clause as inconsistent with the Federal Employers’ Liability Act.  The court declined to apply Boyd to modern forum-clause jurisprudence because it was decided in an era of marked judicial suspicion of contractual forum selection.  It also does not shed any light on the interpretation of ERISA’s venue provision.  A dissent was penned by Judge Kenneth Ripple.  In his view, ERISA gives plan participants the procedural protection of being able to select from the venues enumerated in the statute.

Looks like this issue is ripe for Supreme Court review.  IMHO, given the current makeup of the High Court, the road to justice will be anything but a carnival cruise for ERISA plan participants.

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

Breach of Fiduciary Duty

Fifth Circuit

Martone v. Robb, No. 1:15-CV-877 RP, 2017 WL 3326966 (W.D. Tex. Aug. 2, 2017) (Judge Robert Pitman).  Plaintiff filed an amended complaint in this action alleging breach of fiduciary duty with respect to employee investment in artificially inflated Company Stock Fund.  The court granted Defendants’ motion to dismiss and denied leave to amend.  Plaintiff alleged that the Class was a net buyer of the Company’s stock during the time in which he alleges it was artificially inflated and investment research supports his argument that Defendants “should have … concluded that more harm than good to the Plan could not possibly be done by continuing to let the artificial inflation [caused by the alleged overpricing scheme] go uncorrected.  Plaintiff also alleged that a third alternative action available to Defendants existed—directing a portion of the Fund into a low-cost hedging product.  The court found these allegations insufficient to meet the requirements outlined in Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014).

Eighth Circuit

Roe v. Arch Coal, Inc., No. 4:15-CV-910 (CEJ), 2017 WL 3333928 (E.D. Mo. Aug. 4, 2017) (Judge Carol E. Jackson).  “[T]he Court finds that plaintiffs have not sufficiently pleaded special circumstances as required by ERISA and Dudenhoeffer. Plaintiffs’ allegations of Arch Coal’s ‘serious deteriorating condition’ and ‘overwhelming debt’ are evidence of the company’s impending slide into bankruptcy but do not establish a special circumstance under Dudenhoeffer. Plaintiffs’ allegation that defendants’ failure to employ a reasoned decision making process in monitoring and evaluating Arch Coal stock also fails to establish a special circumstance under Dudenhoeffer.”  Plaintiffs’ mere allegation that the Arch Defendants owned Arch Coal stock and maintained options and stock awards is insufficient to state a claim of breach of the duty of loyalty.  “The plaintiffs’ allegations do not rise to the level of limited, extraordinary circumstances that would establish a duty of inquiry for the directed trustee because the Plan’s investment in the Fund was liquidated prior to the trigger for the duty of inquiry.”  Motion to dismiss granted.

Class Actions

Second Circuit

Wood v. Prudential Ret. Ins. & Annuity Co., No. 3:15-CV-1785 (VLB), 2017 WL 3381007 (D. Conn. Aug. 4, 2017) (Judge Vanessa L. Bryant).  In this action alleging violations of ERISA Section 404 and 406, the court denied Plaintiff’s Motion for Class Certification of “all ERISA-covered employee benefit plans whose plan assets were invested in Prudential Retirement Insurance and Annuity Company’s Guaranteed Income Fund (“GIF”) and/or Principal Preservation Separate Account (“PPSA”) on or after December 3, 2009.”  The court explained that certification under Rule 23(b)(1) is inappropriate due to the proposed class of thousands of individual retirement plans with different guaranteed minimums, crediting rates, and fees.  Under Rule 23(b)(2), the court found that the proposed class is too diverse to permit resolution by indivisible injunction.  Under Rule 23(b)(2), the court cannot conclude that common interests predominate within the proposed class or that a class action is the superior method of adjudication.

Disability Benefit Claims

Ninth Circuit

Rappa v. Mutual of Omaha Insurance Company, No. 216CV02984KJMCKD, 2017 WL 3394111 (E.D. Cal. Aug. 8, 2017) (Judge Kimberly J. Mueller).  The court denied Defendant’s motion to dismiss Plaintiff’s ERISA Section 502(a)(3) claim as duplicative, because “allowing plaintiff’s two ERISA claims to proceed comports with Amara, with the liberal federal pleading standards, and with ERISA’s purpose to protect the interests of participants and beneficiaries.”  Plaintiff also plausibly alleges a breach of fiduciary duty claim:  “By effectively alleging defendant materially misstated the plan’s terms and then delayed plaintiff’s ultimate benefits determination for years, plaintiff has plausibly shown she was deprived of two ERISA-protected rights:  The right to timely benefits determinations and the right to a proper summation of the disability policy’s terms.”

Eleventh Circuit

Sanders v. Temenos USA, Inc., No. 16-CV-63040, 2017 WL 3336719 (S.D. Fla. Aug. 4, 2017) (Judge Beth Bloom).  In this matter where Plaintiff alleges that Defendant “interfered with Plaintiff’s long term disability insurance in violation of 29 U.S.C. § 1132(a)(1)(b) by failing to timely provide Sun Life carrier with accurate information as required,” the court dismissed Defendant because it is not the proper defendant.  Sun Life is the party that controls administration of Plaintiff’s disability insurance plan and the entity that made the decision on the long term disability claim.


Second Circuit

Gosselin v. Sheet Metal Workers’ Nat’l Pension Fund, No. CV164391ADSAKT, 2017 WL 3382070 (E.D.N.Y. Aug. 4, 2017) (Judge A. Kathleen Tomlinson).  In this dispute over the payment of pension benefits, the court concluded that Plaintiff did not make the specific factual allegations of conflict necessary to support discovery beyond the administrative record.  Plaintiff’s discovery motion denied.

Fifth Circuit

Oprex Surgery (Baytown), L.P. v. Sonic Automotive Employee Welfare Benefit Plan, No. 16-20734, __F.App’x__, 2017 WL 3442373 (5th Cir. Aug. 10, 2017).  In this lawsuit brought by a surgery center against a self-funded employee benefits plan, the district court dismissed the case on the grounds that Oprex “failed in its responsibility to support its case” and “evaded two direct orders about the underlying data and related algorithms or other techniques for calculating its prices.”  The court reversed and remanded, concluding that the district court’s dismissal sanction falls well outside the bounds of its broad discretion in adjudicating discovery matters.

ERISA Preemption

First Circuit

Quinones v. Sepulveda Perez, No. CV 16-2777 (GAG), __F.Supp.3d__, 2017 WL 3382160 (D.P.R. Aug. 7, 2017) (Judge Gustavo A. Gelpi).  In this dispute over life insurance benefit proceeds, the court found that ERISA preempts Plaintiffs’ breach of contract claim against Prudential; however, Plaintiffs’ claim against Sepulveda (based on the allegation that he obtained policy payment by fraudulent means) is not preempted by ERISA because Sepulveda is not an ERISA entity.

Seventh Circuit

Studer v. Katherine Shaw Bethea Hosp., No. 16-3728, __F.3d__, 2017 WL 3431649 (7th Cir. Aug. 10, 2017) (Before Wood, Chief Judge, and Posner and Kanne, Circuit Judges).  The court affirmed the district court’s determination that Plaintiff’s lawsuit alleging that the hospital violated certain provisions of the Illinois Wage Payment and Collection Act by failing to pay her money that she had accrued under the hospital’s Paid Days Leave policy is completely preempted by ERISA.

Exhaustion of Administrative Remedies

Ninth Circuit

O’Gorman v. Hartford Life & Accident Ins. Co., No. 2:16-CV-01048-RAJ, 2017 WL 3424962 (W.D. Wash. Aug. 9, 2017).  In this long term disability case, Hartford argued that Plaintiff has failed to exhaust her administrative remedies by filing an appeal subsequent to receiving Hartford’s September 9, 2016 letter.  The court agreed with Plaintiff that she was not required to do so.  The Ninth Circuit has consistently applied a prudential exhaustion requirement requiring an ERISA plaintiff claiming denial of benefits to avail himself or herself of a plan’s own internal review procedures before bringing suit in federal court, but the Ninth Circuit has also held that a claimant need not exhaust when the plan does not require it.  Here, the Plan provides only that a participant “may appeal to [Hartford] for a full and fair review,” but it does not require that a participant do so.  The court determined that it cannot decide the question of disability on the current record so remanded the claim to Hartford to perform a thorough employability analysis.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Briggs v. National Union Fire Insurance Company of Pittsburgh, PA, et al., No. 1:16-CV-1197, 2017 WL 3392765 (W.D. Mich. Aug. 8, 2017) (Judge Gordon J. Quist).  In this lawsuit seeking payment of AD&D benefits, Defendants moved to dismiss Plaintiff’s amended complaint, which the court granted in part.  The Interpublic Plan, as the plan administrator, is a proper party defendant and will not be dismissed.  Plaintiff’s ERISA Section 1132(a)(3) claims will be dismissed because the court found that no reasonable employee would be misled by the representations made in the Benefits Guide.

Medical Benefit Claims

Tenth Circuit

Tracy O. v. Anthem Blue Cross Life & Health Ins. Co., No. 2:16-CV-422-DB, 2017 WL 3437672 (D. Utah Aug. 10, 2017) (Judge Dee Benson).  On the standard of review, the court found this language to be a clear delegation of discretionary authority sufficient to trigger the arbitrary and capricious standard of review:  “THE BENEFITS OF THIS PLAN ARE PROVIDED ONLY FOR THOSE SERVICES THAT WE DETERMINE TO BE MEDICALLY NECESSARY.”  The court found that the determination that S.O. did not meet the criteria for residential treatment under the Plan was not an abuse of discretion.

Pension Benefit Claims

Third Circuit

Mendenhall v. Out of Site Infrastructure, Inc., No. CV 14-4996, 2017 WL 3394735 (E.D. Pa. Aug. 7, 2017) (Judge Slomsky).  In matter of first impression in the Third Circuit, whether a Plaintiff can bring an ERISA Section 502(a)(2), 29 U.S.C. § 1132 claim without complying with Federal Rule Civil Procedure 23, the court determined that Plaintiff will not be permitted to proceed with a Section 502(a)(2) claim in his representative capacity.  “Plaintiff has failed to make any showing that he is the proper representative for the Plan. In addition, due to the limited funds available and the breadth of recovery sought, Plaintiff’s representative capacity claim creates serious issues of claim preclusion, proper fund disbursement, and improper adjudication of absentee party rights.”

Pleading Issues & Procedure

First Circuit

Brown v. Lilly Del Caribe, Inc., et al, No. 15-CV-1435 (JAG), 2017 WL 3446782 (D.P.R. Aug. 9, 2017) (Judge Jay A. Garcia-Gregory).  Sedgwick filed its motion for summary judgment on Plaintiff’s long term disability claim, but Plaintiff did not file an Opposition.  Instead, he filed a short response claiming that the motion was premature because it was before the discovery deadline.  The court explained that it was not premature because summary judgment is appropriate at any time until 30 days after the close of all discovery. The court granted Sedgwick’s motion as unopposed.

Third Circuit

Re: Regina v. Tullett Prebon Americas Corp., No. CV165077MASLHG, 2017 WL 3429348 (D.N.J. Aug. 8, 2017) (Judge Michael A. Shipp).  In this lawsuit seeking alleged unpaid retirement funds, the court found that the Amended Complaint fails to allege any provision, section, regulation, or title of ERISA that Defendant allegedly violated.  In the opposition brief, Plaintiff cited to ERISA Section 209(a)(1) (employer has an obligation to maintain records sufficient to determine the benefits due or which may become due to each of its employees), but Plaintiff may not supplement the Amended Complaint by providing new facts in his opposition brief.  Claim dismissed but Plaintiff may seek leave to amend.


Second Circuit

Acosta v. Daniel M. Byrnes &Fort Orange Capital Management, Inc. Profit Sharing Plan, No. 1:15-CV-93, 2017 WL 3437891 (N.D.N.Y. Aug. 10, 2017) (Judge Frederick J. Scullin, Jr.).  Following a March 2017 grant of summary judgment to Plaintiff, the court found and ordered Defendant liable to the Plan in the amount of $310,000 in restitution damages.

Third Circuit

Estate of Lutz v. Lutz, No. CV 16-1461, 2017 WL 3390251 (E.D. Pa. Aug. 4, 2017) (Judge Gerald J. Pappert).  The Estate alleged that Sandra committed fraud by claiming the death benefit of Richard’s life insurance policy and sought damages under 18 U.S.C. § 1027.  Because ERISA contains an exclusive civil remedy, the Court will not read 18 U.S.C. § 1027 as creating another, alternative civil remedy in ERISA cases.

Eighth Circuit

Dakotas & W. Minnesota Elec. Indus. Health & Welfare Fund by Stainbrook & Christian v. First Agency, Inc., No. 16-1846, __F.3d__, 2017 WL 3297339 (8th Cir. Aug. 3, 2017) (Before LOKEN, COLLOTON, and KELLY, Circuit Judges).  The district court granted summary judgment and attorneys’ fees to the employee welfare benefit plan that brought a declaratory judgment action against an insurer that issued a blanket policy covering accidental injuries sustained by college’s student athletes, seeking an order enforcing the plan’s coordination of benefits provision by declaring that policy provided primary coverage of claim for medical expenses already incurred by student athlete, who was covered by policy and was a beneficiary of the plan.  The Court of Appeals held that, as matter of apparent first impression, the request for declaratory judgment enforcing the plan’s coordination of benefits provision was a claim for equitable relief, and thus the plan could maintain action under ERISA provision authorizing appropriate equitable relief; the policy provided primary coverage of the claim; and the district court abused its discretion in awarding attorneys’ fees to the plan since the insurer’s position that ERISA should not govern this dispute was not obviously wrong, it was virtually untested.

Ninth Circuit

Estate of Jo Ann Feikes, et al. v. Cardiovascular Surgery Associates Profit Sharing Plan, Trust, et al., No. 2:04-CV-1724-LDG-GWF, 2017 WL 3396510 (D. Nev. Aug. 4, 2017) (Judge Lloyd D. George).  The court granted Plaintiff prejudgment interest in order to place her in the same position she would have been in had Defendants timely paid the five percent interest payment for distributions for the years 1998, 1999, and 2000.   “The plaintiff is entitled to prejudgment and postjudgment interest at the average 52-week Treasury bill rate, per 28 U.S.C. § 1961, to correct the original lapse in timely payment of the five percent interest from the time of the original distribution to the time that plaintiff was paid the five percent interest.”

Robertson v. Standard Insurance Company, No. 3:14-CV-01572-HZ, 2017 WL 3319114 (D. Or. Aug. 3, 2017) (Judge Marco A. Hernandez).  The court granted summary judgment in favor of Standard Insurance Company on Plaintiff’s equitable relief claim.  Following a remand from the court after it found in favor of Plaintiff on Own Occupation disability and instructed Standard to decide “Any Occupation” disability; Standard did not timely decide the claim and Plaintiff moved to reopen the case.  Thereafter, Standard approved Plaintiff’s disability claim under the “Any Occupation” standard.  However, Plaintiff continued to seek relief for breach of fiduciary duty under 29 U.S.C. § 1132(a)(3).  Because Standard approved her long-term disability claim and paid prejudgment interest and attorneys’ fees and costs, any further equitable relief under 29 U.S.C. § 1132(a)(3) is not permissible.

Statute of Limitations

Eleventh Circuit

Webb v. Liberty Life Assurance Co. of Boston, No. 1:15-CV-2508-TWT, 2017 WL 3335755 (N.D. Ga. Aug. 4, 2017) (Judge Thomas W. Thrash, Jr.).  Following remand from the Eleventh Circuit for the limited purpose of deciding whether Plaintiff reasonably relied on a typo in a letter from Liberty Life, leading to her delay in filing her claim for life insurance and accidental death insurance benefits, the court found that she did not.  The letter stated that the appeals process was exhausted but also that further review would be conducted.  The court found that a reasonable person would have sought clarification.  Plaintiff had nearly six months following the letter to file her lawsuit but she did not follow up with Liberty Life until over ten months had passed.  Summary judgment granted to Liberty Life.


Seventh Circuit

In re Mathias, No. 16-3808, __F.3d__, 2017 WL 34431723 (7th Cir. Aug. 10, 2017) (Before Bauer, Ripple, and Sykes, Circuit Judges).  “This mandamus petition raises a question of first impression in this circuit:  Does ERISA’s venue provision, 29 U.S.C. § 1132(e)(2), preclude enforcement of a forum-selection clause in an employee-benefits plan?”  The court joined the Sixth Circuit’s holding in Smith v. Aegon Cos. Pension Plan, 769 F.3d 922, 931–34 (6th Cir. 2014), cert. denied, No. 14-1168 (Jan. 11, 2016) and held that ERISA’s venue provision does not invalidate a forum-selection clause contained in plan documents.


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