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ERISA Watch – Sixth Circuit Declines to Adopt “Substantial Compliance” Test for Requirements of a Qualified Domestic Relations Order

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This week’s notable decision is Sun Life Assurance Co. of Canada v. Jackson, No. 17-3120, __F.3d__, 2017 WL 6347728 (6th Cir. Dec. 13, 2017), where the Sixth Circuit determined that a divorce decree suffices as a qualified domestic relations order (“QDRO”) that clearly specifies the decedent’s daughter as the life insurance beneficiary under ERISA, and it affirmed the district court’s order requiring Sun Life to pay the life insurance proceeds to her.

In this case, Bruce and Bridget Jackson married and had a daughter, Sierra Jackson, who was eleven years old when they divorced.  In their separation agreement, they agreed to maintain any employer-related life insurance policies for Sierra’s benefit until she turned 18 or graduated from high school.  Bruce had an employer-sponsored life insurance policy that listed his uncle as the sole beneficiary but he never changed the beneficiary of the policy to Sierra before his death.

Sun Life sought a declaratory judgment that it properly paid the life benefits to the decedent’s brother.  Sierra filed a counterclaim seeking a declaration that she was the lawful beneficiary and the district court entered judgment in her favor.  On appeal, the Sixth Circuit affirmed.

The standards of 29 U.S.C. § 1056(d)(3)(C) require that Jacksons’ divorce decree “clearly specifies” the required information of “(i) the name and the last known mailing address (if any) of the participant and the name and mailing address of each alternate payee covered by the order, (ii) the amount or percentage of the participant’s benefits to be paid by the plan to each such alternate payee, or the manner in which such amount or percentage is to be determined, (iii) the number of payments or period to which such order applies, and (iv) each plan to which such order applies.”  The court illustrated what is meant by “clearly specified.”

“While a ‘clearly specifies’ standard demands more than a ‘substantially complies’ standard, that does not mean it requires Simon Says rigidity or demands magic words. One may ‘clearly specify’ something by implication or inference so long as the meaning is definite. See Oxford English Dictionary 159 (2d ed. 1989) . . .

A few everyday examples illustrate the point. A cashier asks the grocery store customer: ‘paper or plastic?’ The customer could signal his preference for plastic bags by saying ‘plastic.’ But he could just as clearly specify his choice by saying ‘not paper.’

So too of a sports fan asked this question: Who is the greatest basketball player of all time: Michael Jordan or LeBron James? He might respond ‘LeBron James,’ which clearly specifies the answer. Or he might respond ‘Number 23,’ which does not clearly specify the answer. But if he responded ‘Number 23 of the Cleveland Cavaliers,’ no one would be confused. The sports fan did not state ‘LeBron James.’ But he did specify him. And clearly so.”

Although the Sixth Circuit declined to adopt a “substantially complies” test as urged by the Department of Labor, it did find that the divorce decree, and the incorporated separation agreement and parenting plan, satisfies the “clearly specifies” test and qualified as a QDRO.

The court also determined that Sun Life received sufficient notice of the QDRO to preserve Sierra’s claim for plan benefits.  Even though Sun Life was not notified of the QDRO until after Bruce’s death, Sierra’s attorney provided Sun Life with a copy of the order well before it issued the payment to the decedent’s brother.

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

Attorneys’ Fees

Ninth Circuit

Tom v. Hartford Life and Accident Insurance Company, No. C 16-01067 WHA, 2017 WL 6209306 (N.D. Cal. Dec. 8, 2017) (Judge William Alsup).  The court determined that Plaintiff achieved “some degree of success on the merits” sufficient to qualify for attorney’s fees under Hardt given that “she obtained the relief sought by her ERISA complaint with Hartford’s apparently litigation-driven decision to approve her claim for continuing benefits.”  The court also determined that the balance of the Hummell factors as a whole weigh slightly in favor of granting fees.  The court declined to award fees for time spent through the bench trial on the issue of ERISA preemption.  The court awarded 57.85 hours multiplied by an hourly rate of $650 (for attorney admitted to the CA Bar in 1976).  The court also awarded Plaintiff only one hour’s worth of additional fees for both the reply brief and the fee motion hearing, for a total award of $38,252.50.  The court denied reimbursement of costs accrued prior to the bench trial on ERISA preemption and only awarded $400 for the complaint filing fee, which Plaintiff would have incurred anyway if this action had originally been brought under ERISA.

Breach of Fiduciary Duty

Eighth Circuit

Tussey v. ABB Inc., No. 2:06-CV-04305-NKL, 2017 WL 6343803 (W.D. Mo. Dec. 12, 2017) (Judge Nanette K. Laughrey).  “After remand from the Eighth Circuit, this Court ordered each party to propose the proper method for calculating damages on Tussey’s mapping claim for the breach of the duty of loyalty. They were also instructed to identify additional evidence needed to supplement the trial record, if any. Having considered the parties’ proposals, the Court concludes that that the record will not be reopened for additional evidence and the proper method of calculating damages is to compare the performance of the Wellington Fund with the relevant Freedom Funds between 2001 and 2007.”

Eleventh Circuit

Atkins v. Greene County Hospital Board, & Elmore Patterson, No. 7:16-CV-00567-LSC, 2017 WL 6383183 (N.D. Ala. Dec. 14, 2017) (Judge L. Scott Coogler).  The court determined that because Plaintiff withdrew from the Retirement Systems of Alabama plan and has received her benefits in full, she is not at risk for harm in the future, and she does not have standing to pursue her breach of fiduciary duty claim under 29 U.S.C. § 1132.  Even if she does have standing, the fact that General County Hospital Board made late payments to the Retirement Systems of Alabama and used the money to pay GCHB’s general bills in the meantime, does not constitute an actionable breach of fiduciary duty.

Disability Benefit Claims

Fourth Circuit

Love v. Eaton Corporation Disability Plan For U.S. Employees, No. 5:16-CV-860-FL, 2017 WL 6373979 (E.D.N.C. Dec. 12, 2017) (Judge Louise W. Flanagan).  The court granted summary judgment to Plaintiff and held that the the long-term disability plan does not require a claimant to apply for and receive six months of short-term disability benefits before applying for long-term disability benefits.  The court remanded the case for Defendant to consider Plaintiff’s application for LTD benefits.

Fifth Circuit

Martinez v. Pilgrim’s Pride Corp., No. 3:16-CV-3043-D, 2017 WL 6372385 (N.D. Tex. Dec. 13, 2017) (Judge Sidney A. Fitzwater).  “Pilgrim’s Pride has established beyond peradventure that the Protection Agreement is an enforceable contract. It has also established beyond peradventure that it performed its obligations under the Protection Agreement by providing Martinez Premium Benefits, which included, inter alia, 67 full weeks and one partial week of wage replacement benefits at $418.88 per week; that filing this lawsuit constitutes a breach of the waiver and release provision included in the Protection Agreement; and that Pilgrim’s Pride has been damaged as a result.”  The court granted Pilgrim’s Pride’s motion for summary judgment on its breach of contract counterclaim.


Fourth Circuit

Reidy v. Unum Life Ins. Co. of Am., No. CV PX-16-2926, 2017 WL 6368659 (D. Md. Dec. 13, 2017) (Judge Paula Xinis).  In this dispute over long-term disability benefits, the court denied Plaintiff’s motion to compel Defendants’ responses to interrogatories and requests for production of documents on the doctors that reviewed Plaintiff’s claim, Dr. Kletti and Dr. Shipko.  The court determined that the administrative record is sufficient for the court to determine whether and the extent to which Unum’s conflict of interest improperly influenced Plaintiff’s benefits decision.

ERISA Preemption

Second Circuit

Neurological Surgery, P.C. v. Siemens Corporation, No. 17CV3477ADSAKT, 2017 WL 6397737 (E.D.N.Y. Dec. 12, 2017) (Judge Arthur D. Spatt).  In this lawsuit brought by a neurosurgery practice in the tristate area against the administrator of a self-funded employee benefit plan for reimbursement for services provided, the court determined that Plaintiffs’ state law claims are expressly preempted by ERISA since they relate to the Plan and seek to rectify an alleged wrongful denial of benefits.

Fifth Circuit

Blue Cross & Blue Shield of Mississippi, A Mutual Insurance Company v. Sharkey-Issaquena Community Hospital, et al., No. 3:17-CV-338-DPJ-FKB, 2017 WL 6375954 (S.D. Miss. Dec. 13, 2017) (Judge Daniel P. Jordan III).  Plaintiff’s state-law claims for breach of contract, fraud, civil conspiracy, negligent misrepresentation, and unjust enrichment are not conflict preempted by ERISA.  Blue Cross was not acting as a plan fiduciary with respect to the specific breaches it alleges and Defendants were not ERISA entities as to these alleged breaches.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Sun Life Assurance Co. of Canada v. Jackson, No. 17-3120, __F.3d__, 2017 WL 6347728 (6th Cir. Dec. 13, 2017) (Before: GILMAN, SUTTON, and STRANCH, Circuit Judges).  In this dispute involving life insurance benefits, Sun Life sought a declaratory judgment that it properly paid the life benefits to the decedent’s brother.  The decedent’s daughter filed a counterclaim seeking a declaration that she was the lawful beneficiary and the district court entered judgment in her favor.  On appeal, the Sixth Circuit affirmed, and held that the divorce decree and documents it incorporated qualified as qualified domestic relations order (QDRO), and Sun Life received sufficient notice of the QDRO to preserve the decedent’s daughter’s claim for plan benefits.

Wolf v. Causley Trucking, Inc., No. 17-1683, __F.App’x__, 2017 WL 6371262 (6th Cir. Dec. 13, 2017) (BEFORE: COLE, Chief Judge; McKEAGUE and STRANCH, Circuit Judges).  Decedent’s wife filed suit against Defendant for not paying her the promised full cash value of the life insurance policy it purchased on the decedent.  The court held that the district court correctly found that the agreement to pay the cash value of the life insurance policy qualifies as an ERISA-governed employee welfare benefit plan, ERISA preempted Plaintiff’s state-law claims, and the case was properly removed to the district court.  Defendant’s determination that the “cash value of the policy” refers to the surrender value on the date of death was a reasonable one and it was not arbitrary and capricious to award Plaintiff that amount.  The court also affirmed the district court’s dismissal of the breach of fiduciary duty claim premised on asset mismanagement (i.e., commingling the Plan assets with the company’s general assets).

Vest v. Resolute Forest Products Us, Inc., No. 1:17-CV-196, 2017 WL 6375964 (E.D. Tenn. Dec. 13, 2017) (Judge Thomas W. Phillips).  Plaintiff claimed that Resolute breached its fiduciary duty under ERISA by failing to provide her late husband with a notice of his conversion rights under a group life insurance policy when his employment ended.  The court granted Defendant’s motion to dismiss.  “After carefully considering the instant complaint and the authorities cited by both parties, the Court concludes that plaintiff has not alleged sufficient facts to place this case in the category with [Krohn v. Huron Mem’l Hosp., 173 F.3d 542 (6th Cir. 1999)]. Were the Court to conclude otherwise, it would be requiring ERISA administrators to provide such information any time a participant’s benefits terminated or were reduced. This could include employees who are fired, retire, or simply change from full-time to part-time status. While it would be beneficial for participants to receive such information, Congress has not enacted such a broad requirement on plan administrators and it is not for this Court to do so.”

Medical Benefit Claims

Third Circuit

Pennsylvania v. Trump, No. CV 17-4540, __F.Supp.3d__, 2017 WL 6398465 (E.D. Pa. Dec. 15, 2017) (Judge Wendy Beetlestone).  The court granted the Commonwealth of Pennsylvania’s request for a preliminary injunction to enjoin enforcement of two Interim Final Rules, referred to as the Moral Exemption Rule and the Religious Exemption Rule, modifying the Affordable Care Act.

Ninth Circuit

Cohorst v. Anthem Health Plans of Kentucky, Inc., No. CV 16-7925-JFW (SKX), 2017 WL 6343592 (C.D. Cal. Dec. 12, 2017) (Judge John F. Walter).  The court concluded that Anthem improperly denied Plaintiff’s claim for benefits for the artificial disc replacement (“ADR”) surgery using the Mobi-C device and entered judgment in favor of Plaintiff.  In coming to this conclusion, the court determined that:  (1) Anthem’s “Medical Policy” is part of the Plan; (2) the use of the Mobi-C in ADR surgery does not fall within the scope of the exclusion because the uncontroverted evidence presented clearly demonstrates that the Mobi-C could be legally marketed in the United States at the time of Plaintiff’s surgery and that the FDA had approved sales of the device; (3) an ADR surgery in a patient with a prior fusion falls within the scope of the Investigative/Experimental exclusion; (4) Anthem waived its right to deny Plaintiff’s claim under this exclusion because it initially approved her ADR surgery, albeit with a Pro Disc-C device.

Pension Benefit Claims

Ninth Circuit

United States of America v. Renfrow, No. C17-1305 TSZ, 2017 WL 6389303 (W.D. Wash. Dec. 14, 2017) (Judge Thomas S. Zilly).  In this case Defendant pleaded guilty to aiding and abetting investment advisor fraud and was sentenced to two years imprisonment and ordered to pay restitution in the amount of $4,183,500.  The court denied Defendant’s motions to modify the Writs of Continuing Garnishment.  The Ninth Circuit has interpreted the Mandatory Victims Restitution Act of 1996 to allow the Government to reach retirement plan benefits despite the anti-alienation provision of ERISA.  The Government has the right to step into the defendant’s shoes and cannot cash out a retirement plan when the defendant would be prohibited by ERISA or the terms of the plan from doing so.  Here, there is no evidence to suggest that Defendant could not immediately withdraw the entire amount from her retirement accounts.

Pleading Issues & Procedure

Third Circuit

Minerley v. Aetna, Inc., No. 113CV1377NLHKMW, 2017 WL 6342149 (D.N.J. Dec. 11, 2017) (Judge Noel L. Hillman).  The court denied Plaintiff’s request for jury trial, finding that section 404(a)(1)(A) does not provide an entitlement to a jury trial, as Plaintiff claims relief through section 502(a)(3) and the Third Circuit has determined that section 502(a)(3) does not provide the right to a jury trial.  See Cox v. Keystone Carbon Co., 861 F.2d 390, 393 (3d Cir. 1988)However, the court determined that this is an appropriate case for an advisory jury pursuant to Federal Rule of Civil Procedure 39(c).

Provider Claims

Third Circuit

Univ. Spine Ctr. v. Horizon Blue Cross Blue Shield of New Jersey, No. CV 17-193 (JLL), 2017 WL 6372238 (D.N.J. Dec. 12, 2017) (Judge Jose L. Linares).  The court granted summary judgment to Defendant.  It found that the anti-assignment provision to be clear and unambiguous. The clause indisputably states that Patient “may not assign his or her right to take legal action under the Policy to such provider.”  Thus, the patient cannot assign his right to bring suit to Plaintiff.  The court concluded that the anti-assignment clause is valid and bars Plaintiff’s claims.

Retaliation Claims

Eleventh Circuit

Atkins v. Greene County Hospital Board, & Elmore Patterson, No. 7:16-CV-00567-LSC, 2017 WL 6383183 (N.D. Ala. Dec. 14, 2017) (Judge L. Scott Coogler).  Plaintiff asserts that her termination was in retaliation for her raising concerns about the Retirement Systems of Alabama payments at the Greene County Hospital Board meeting, whereas Defendants assert that the reasons for the termination was her violation of the newly implemented “no call/no show” policy.  The court determined that Plaintiff’s voicing of her complaint at an open floor meeting was not protected conduct under ERISA.  She did not show that she was terminated under circumstances that give rise to an inference of discrimination or that Defendants’ reason was mere pretext.

Statute of Limitations

Fifth Circuit

Babin v. Quality Energy Servs., Inc., No. 17-30059, __F.3d__, 2017 WL 6374738 (5th Cir. Dec. 14, 2017) (Before KING, DENNIS, and COSTA, Circuit Judges).  This action involves a denial of short-term disability benefits and the failure to produce plan documents.  The district court granted summary judgment to the employer, which Plaintiff appealed.  The court held that Plaintiff’s claim alleging failure to provide him with plan documents was a delictual claim subject to the one-year prescriptive period under Louisiana law.  The court declined to consider Plaintiff’s newly raised argument that the prescriptive period for his claim alleging failure to provide him with plan documents should be tolled.

Subrogation/Reimbursement Claims

Tenth Circuit

Anderson, et al. v. University of Utah, No. 2:17-CV-950 TS, 2017 WL 6403103 (D. Utah Dec. 14, 2017) (Judge Ted Stewart).  In this action brought by the trustees of a welfare plan seeking a declaration concerning the Utah Hospital Lien Statute and Plaintiffs’ subrogation rights under the Trust Agreement, the court granted the injured plan participant’s motion for permissive intervention.



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