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Your ERISA Watch – Court Rules Collective Bargaining Agreement Provides Vested Lifetime Benefits

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Finally!  A win for employees on the promise to provide lifetime healthcare benefits.  This week’s notable decision is a reported decision out of the Northern District of Illinois, Stone v. Signode Indus. Grp., LLC, No. 17 C 5360, __F.Supp.3d__, 2019 WL 1146829 (N.D. Ill. Mar. 13, 2019).

In Stone, Plaintiffs, a labor union and two former employees, sought to enforce healthcare benefits under a collective bargaining agreement (“CBA”) which Defendant gave notice of termination in 2015.  The CBA contains the following provisions:

Any Pensioner or individual receiving a Surviving Spouse’s benefit who shall become covered by the Program established by the Agreement shall not have such coverage terminated or reduced (except as provided in this Program) so long as the individual remains retired from the Company or receives a Surviving Spouse’s benefit, notwithstanding the expiration of this Agreement, except as the Company and the Union may agree otherwise. [Section 6]

[This agreement] shall remain in effect until February 29, 2004, thereafter subject to the right of either party on [120] days written notice served on or after November 1, 2003 to terminate the [agreement]. [Section 7]

In this relatively short decision, the court found that “[t]he agreement does not provide for the right to terminate the benefits. The provision of lifetime benefits without provision for their termination constitutes vested benefits.”  Defendants’ contended that the language in Section 6 quoted above is condition by the phrase “except as the Company and the Union may agree otherwise,” which incorporates Section 7’s provision for termination of the agreement.  The court rejected this argument, finding that the termination of the agreement provision says nothing about the termination of benefits.  The language in the agreement provides lifetime benefits without reference to the agreement’s duration or termination.  The court granted Plaintiffs’ motion for summary judgment.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Attorneys’ Fees

Second Circuit

Empire State Carpenters Welfare, Annuity and Apprentice Training Funds v. Conway Construction of Ithaca, Inc., No. 07CV2259DRHSIL, 2019 WL 1199391 (E.D.N.Y. Mar. 14, 2019) (Judge Denis R. Hurley).  Following a remand from the Second Circuit, the court determined that Plaintiffs failed to establish by a preponderance of the evidence their claim against Defendant for unpaid fringe benefit contributions.  Defendant filed a motion seeking costs in the amount of $15,593.06 and attorneys’ fees in the amount of $205,014.  After weighing the Chambless factors, the court denied Defendant’s motion.

Third Circuit

Regional Employers Assurance Leagues Voluntary Employees Beneficiary Association Trust By Pennmont Benefit Services, Inc., Plan Administrator v. Castellano, No. 17-3753, __F.App’x__, 2019 WL 1178742 (3d Cir. Mar. 13, 2019) (Before: MCKEE, VANASKIE,* and RESTREPO, Circuit Judges).  The court found that the district court “did not abuse its discretion in denying prejudgment interest in light of the equity considerations and the unusual circumstances of this case.”  In the Perez v. Koresko case, the court found that the Trust had been misappropriated and depleted by Koresko entities.  In this case, Castellano, the first of the victims, received the full amount of benefits due and other Trust beneficiaries won’t be in the same position.  The “other Trust beneficiaries will bear the cost of every dollar that is given to Mrs. Castellano in prejudgment interest.”

Ninth Circuit

Trustees of The Operating Engineers Pension Trust, et al. v. Western Explosives Systems Company, No. 216CV02473GMNCWH, 2019 WL 1173344 (D. Nev. Mar. 11, 2019) (Judge Gloria M. Navarro).  The court found that the trustees who were successful in this action to collect unpaid contributions are entitled to attorney’s fees.  The court awarded fees in the amount of $70,936.00 and costs in the amount of $804.79 against Defendant.

Breach of Fiduciary Duty

Tenth Circuit

Villalobos v. Vision Graphics, Inc., No. 18-CV-0251-WJM-NRN, 2019 WL 1098971 (D. Colo. Mar. 8, 2019) (Judge William J. Martinez).  The court found the Section 502(a)(2) claim between co-fiduciaries to be adequately alleged because the payment of attorneys’ fees under Section 502(g) is conceivably a “loss” to the Plan depending on the source of the funds.  Whether or not the claim should be characterized as a federal common law right of indemnification or contribution, and whether that theory of relief exists, is better addressed on a fuller factual record.

Disability Benefit Claims

Third Circuit

Litvinuk-Roach v. Reliance Standard Life Ins. Co., No. CV 18-276, 2019 WL 1129435 (W.D. Pa. Mar. 12, 2019) (Judge Nora Barry Fischer).  The court determined that Plaintiff fully exhausted her administrative remedies despite her refusal to attend a scheduled IME.  The court found that Reliance’s final decision letter stating that Plaintiff has exhausted any administrative remedies available to her forecloses its argument that she did not exhaust.  The refusal to attend the IME was not the basis for the termination of her benefits.  The policy in this case also did not include language that benefits will be terminated upon failure to attend an IME.  The court found that Plaintiff did not demonstrate she was Totally Disabled.  A favorable SSA decision three years before the decision to terminate LTD benefits does not make the termination arbitrary and capricious.  The court also did not consider Plaintiff’s current medical history and treatment since those were not reviewed by Reliance when it made the decision.

Fourth Circuit

Mantica v. Unum Life Ins. Co. of Am., No. CV RDB-18-0632, 2019 WL 1129438 (D. Md. Mar. 12, 2019) (Judge Richard D. Bennett).  Applying Maryland Insurance Code Ann. § 12-211 to this case, the court found that Unum’s grant of discretionary authority is void and de novo review applies. This requires the court to make credibility determinations and findings of fact. The court denied the parties’ cross-motions for summary judgment and ordered the case to proceed to a bench trial on the Evidentiary Record with additional witness testimony, including Plaintiff, an expert selected by Plaintiff, one Unum corporate representative, and one expert that Unum selects to testify.

Fifth Circuit

Ward v. Aetna Life Ins. Co., No. 1:17CV331-LG-RHW, 2019 WL 1119965 (S.D. Miss. Mar. 11, 2019) (Judge Louis Guirola, Jr.).  The court previously granted summary judgment to Aetna on Plaintiff’s claims under Section 502(a)(1)(B) and Section 502(a)(3), finding that Plaintiff was not entitled to long term disability benefits because he did not provide evidence of good health upon enrolling in the long term disability plan after the initial 31 days of eligibility.  The court denied Plaintiff’s motion for a new trial under Rule 59(e) because Plaintiff has not demonstrated the need to correct a clear error of law or prevent manifest injustice.  The plan clearly requires applicants to provide evidence of good health.  Plaintiff also argued that the claim was denied on an inexcusable procedural error where the employer failed to provide Plaintiff with an evidence of good health form when he applied for coverage.  The court found that it was not unreasonable for Aetna to apply the undisputed facts to the clear plan language.  Further, where the insurer’s plan interpretation is legally correct, it is not necessary to discuss procedural unreasonableness or the effect of a conflict of interest.

Eighth Circuit

Presi v. Ascension Health Aliance, et al., No. 4:16CV01857JCH, 2019 WL 1200347 (E.D. Mo. Mar. 14, 2019) (Judge Jean C. Hamilton).  The court determined that Sedgwick did not abuse its discretion in denying Plaintiff’s claim for STD benefits and the denial of benefits based on the lack of objective evidence is reasonable.  The court upheld the denial of LTD benefits since Plaintiff did not complete the elimination period.

Ninth Circuit

Beach v. Liberty Life Assurance Company of Boston, No. 17-16492, 2019 WL 1224106 (9th Cir. Mar. 15, 2019) (Before: THOMAS, Chief Judge, PAEZ, Circuit Judge, and FEINERMAN,** District Judge).  In this dispute over “Any Occupation” disability benefits, the court affirmed the district court’s judgment in favor of Liberty Life.  “Ample evidence in the record supports the determination that Beach retained the ability to sustain employment, including the opinion of Beach’s treating physician that she was not disabled, Beach’s own self-reported ability to sit for five to six hours and stand for three hours, and multiple medical opinions stating that Beach could sustain at least part-time work.”  The court also found that Liberty Life did advance some new actual arguments, but these did not constitute a new reason for denial prohibited by Harlick v. Blue Shield of California, 686 F.3d 699 (9th Cir. 2012).

Discovery

Tenth Circuit

Stroot v. Hartford Life and Accident Insurance Company, No. 18-CV-1274-JWB-TJJ, 2019 WL 1206985 (D. Kan. Mar. 14, 2019) (Magistrate Judge Teresa J. James).  The court found that the fiduciary exception to the attorney-client privilege applies to privileged documents generated in response to Plaintiff’s attorney’s administrative appeal letter and before a final decision was rendered on the appeal.  The court ordered Defendant to serve unredacted copies of those documents upon Plaintiff and include them in the Administrative Record in this case.

ERISA Preemption

Sixth Circuit

Novak v. Wolfe Paper Company, et al., No. 1:14 CV 2237, 2019 WL 1226847 (N.D. Ohio Mar. 15, 2019) (Magistrate Judge William H. Baughman).  The court granted Defendants’ motion for summary judgment and dismissed all claims with prejudice.  With respect to alleged benefits due under the profit-sharing plan, the court noted that Plaintiff needed to but did not “assert that: (1) there was a final decision of the plan administrator to deny him benefits and (2) that Novak exhausted his administrative remedies by appealing that decision to the fiduciary of the plan prior to commencing suit in a federal court.”

Tenth Circuit

Wallace v. Cooper, No. CV 18-768 SCY-KBM, 2019 WL 1208550 (D.N.M. Mar. 14, 2019) (Magistrate Judge Steven C. Yarbrough).  Plaintiff, the personal representative of decedent’s estate, sued Defendant, the decedent’s ex-wife, to recover funds payable to Defendant who had agreed as part of a divorce settlement that the funds would be the decedent’s sole property, but decedent did not remove her as a beneficiary.  The court found that Plaintiff’s claim is not completely preempted because she lacks standing to sue under ERISA.  Though Plaintiff’s claims may be in conflict with the terms of an ERISA plan, conflict preemption is not a sufficient basis for removal.  The court also found that the “Substantial-Federal-Issue Theory” does not apply to this case considering Plaintiff’s concession that she is not a beneficiary of the ERISA plan.

Ninth Circuit

Arizona State Bldg. & Constr. Trades Council v. Brnovich, No. CV-17-04446-PHX-ROS, 2019 WL 1130005 (D. Ariz. Mar. 12, 2019) (Judge Roslyn O. Silver).  Plaintiff alleges Arizona’s statutory provisions prohibiting political subdivisions of the state from requiring bidders for public contracts to enter into certain labor agreements or participate in apprenticeship programs are preempted by the National Labor Relations Act and ERISA.  The court found that Plaintiff lacks standing because it has not identified any concrete injury it has suffered or is about to suffer.  “Rather, Plaintiff’s injury appears to be that Plaintiff would like to ‘advocate for, propose, testify, and enter into negotiations with political subdivisions’ regarding PLAs and apprenticeship programs but the statutory changes prevent it from doing so.”  Plaintiff has failed to show how the statutory changes prevent Plaintiff from engaging in its lobbying efforts.  Plaintiff has one more opportunity to amend its complaint.

Medical Benefit Claims

Stone v. Signode Indus. Grp., LLC, No. 17 C 5360, __F.Supp.3d__, 2019 WL 1146829 (N.D. Ill. Mar. 13, 2019) (Judge Thomas M. Durkin).  See Notable Decision summary.

Pension Benefit Claims

Second Circuit

Jarosz v. American Axle & Manufacturing, Inc., No. 12-CV-39S, 2019 WL 1128535 (W.D.N.Y. Mar. 12, 2019) (Judge William M. Skretny).  Plaintiffs allege that Defendants violated ERISA by reducing their pension payments by the amount of certain workers’ compensation payments they received.  The court determined that under Halo, de novo review applies because the Plan’s failure to comply with 29 C.F.R. § 2560.503-1 (j)(1)-(4) was not inadvertent and harmless.  The court found that Plaintiffs are entitled to summary judgment and entitled to the full benefits without deduction for workers’ compensation payments.  Any ambiguity in plan language is construed in Plaintiffs’ favor though the plan language here is unambiguous.  Plaintiffs’ promissory estoppel claim fails because Plaintiffs have not shown that Plaintiff relied on an enforceable promise (here, a provision written in the 1994 MOU) and there are no extraordinary circumstances (i.e., intentional inducement for pain) or conduct amounting to fraud.  The court dismissed the claim seeking de novo review because that is not a separate cause of action.  The court also dismissed Plaintiff’s equitable relief claim under Section 502(a)(3) seeking a declaratory judgment of their rights under the Plan since that relief is encompassed by their Section 502(a)(1)(B) claim.  The court awarded prejudgment interest at the rate of 9% per annum.

Plan Status

Ninth Circuit

Jilka v. Unum Group, et al., No. 18-CV-02952-JD, 2019 WL 1221058 (N.D. Cal. Mar. 15, 2019) (Judge James Donato).  The court determined that Plaintiff’s individual disability policy is not governed by ERISA.  Without deciding definitively whether Plaintiff’s policy was an ERISA plan from 1989 to 1998, a time that the coverage was provided through her employer’s Salary Allotment Plan, the court found that it would have stopped being an ERISA plan in 1998 when the salary allotment plan ended, and Plaintiff began paying for the policy on her own.  The court found that her policy more closely resembled a “converted policy” that was no longer subject to ERISA.

Pleading Issues & Procedure

Fourth Circuit

Trustees of Sheet Metal Workers’ Local Union No. 5 & Iron Workers Employers Ass’n, Employee Pension Tr. v. R. Stoddard, LLC, No. GJH-17-3286, 2019 WL 1128518 (D. Md. Mar. 8, 2019) (Judge George J. Hazel).  “Though it is a close call, the Fourth Circuit’s strong policy in favor of deciding cases on the merits leads the Court to conclude that it will vacate the entry of default. However, the Court also concludes that lesser sanctions are warranted in this case. Defendant was provided notice, on multiple occasions, of the existence of this action. Plaintiffs expended 1.25 hours in the preparation and filing of the motion for an entry of default, incurring $458.75 in attorneys’ fees.  It is an appropriate lesser sanction to award attorneys’ fees when a party defaults.  Therefore, the Court will vacate the entry of default, pending Defendant’s payment of $458.75 in attorneys’ fees to Plaintiffs’ counsel.” (internal citations omitted).

Tenth Circuit

Zisumbo v. Convergys Corp., No. 1:14-CV-134, 2019 WL 1170766 (D. Utah Mar. 13, 2019) (Judge Robert J. Shelby).  The court granted Plaintiff’s motion for leave to amend her complaint to add a new ERISA claim based on newly discovered information concerning Defendant’s failure to inform her of her entitlement to and actual coverage by Aetna Health Insurance.  The court agreed with Plaintiff “that her three month delay—between when she learned of the new information warranting amendment (October 24, 2018) and when she moved to amend (January 25, 2019)—reflects adequate diligence because she used that time to process, research, and draft a motion conveying the legal significance of [Defendants’] admissions.”  The court denied without prejudice Defendant’s motion for spoliation sanctions and for summary judgment.

Provider Claims

Second Circuit

Aesthetic & Reconstructive Breast Ctr., LLC v. United HealthCare Grp., Inc., No. 3:18-CV-00608 (JAM), 2019 WL 1129440 (D. Conn. Mar. 12, 2019) (Judge Jeffrey Alker Meyer).  In this case, involving a dispute over payment of surgeries that Plaintiff alleges to have received pre-authorization from the insurance company, the court found that Plaintiff’s quasi-contract claims against UHG are preempted by ERISA § 514.  Though the court noted that “there is some room for a third-party medical provider to assert state law claims against an insurer when it has not been validly assigned its patient’s benefits.”  The court found that Plaintiff did adequately state a claim for promissory estoppel against UHG because it “plausibly alleges that it received an authorization from UHG, that this authorization was a promise to receive reasonable payment for its services, and that the Center then relied on the promise to its detriment.”

Theunissen, M.D., LLC v. United HealthCare Grp., Inc., No. 3:18-CV-00606 (JAM), 2019 WL 1126078 (D. Conn. Mar. 12, 2019) (Judge Jeffrey Alker Meyer).  Provider seeks payment by Defendants for surgeries it performed after receiving a written pre-authorization.  The court found that the pre-authorizations are not enforceable because the patient’s ERISA plan contains an anti-assignment provision.  Though the promissory estoppel claim under Connecticut law is not preempted by ERISA, there is no basis for a claim of promissory estoppel because the pre-authorization letters do not contain a clear and definite promise to pay benefits.  Motion to dismiss granted.

Third Circuit

Small, M.D., v. Anthem Blue Cross Blue Shield, No. CV 18-399 (JMV)(CLW), 2019 WL 1220322 (D.N.J. Mar. 15, 2019) (Judge John Michael Vazquez).  The court adopted the Magistrate Judge’s Report and Recommendation remanding Plaintiff’s lawsuit to state court.  The court found that Progressive Spine & Orthopaedics, LLC v. Anthem Blue Cross Blue Shield, 2017 WL 4011203 (D.N.J. Sept. 11, 2017) to support the conclusion that Plaintiff has sufficiently pled independent reliance on Defendant’s express pre-authorization.  This is separate and apart from any of Defendants’ obligations under the patient’s ERISA plan.

Retaliation Claims

Seventh Circuit

Papenfuss v. Butitta Bros. Auto., No. 16 C 50368, 2019 WL 1168107 (N.D. Ill. Mar. 13, 2019) (Judge Frederick J. Kapala).  “[T]hat defendant may have terminated plaintiff solely because of his disability is not pertinent to plaintiff’s burden to demonstrate a triable fact as to defendant’s specific intent to deprive him of his ERISA rights. The court finds insufficient evidence in the record that a juror could rely on in concluding that defendant had plaintiff’s ERISA rights in mind when it terminated him.”

Severance Benefit Claims

Ninth Circuit

Schuman, et al. v. Microchip Technology Incorporated, et al., No. 16-CV-05544-HSG, 2019 WL 1131417 (N.D. Cal. Mar. 12, 2019) (Judge Haywood S. Gilliam, Jr.).  In this putative class action alleging Defendants failed to honor the terms of an employee severance agreement, the court dismissed Defendants’ counterclaim under Section 502(a)(3) seeking an injunction forbidding Plaintiffs from dissipating the severance benefits they received.  The court found that there is no wrong to remedy.  Though Plaintiffs agreed to release Defendants from liability, “a release agreement is not the same as a covenant not to sue.”  The release does not contain any covenant not to sue so Plaintiffs have not violated the terms of the severance plan by suing Defendants.  Because, as a matter of law, Defendants cannot allege that Plaintiffs violated any plan provision, they have failed to state a claim upon which relief can be granted and their counterclaim is dismissed without leave to amend.

Statute of Limitations

Second Circuit

Savides v. United Healthcare Servs., Inc., No. 18 CIV. 4621 (LGS), 2019 WL 1173008 (S.D.N.Y. Mar. 13, 2019) (Judge Lorna G. Schofield).  In this dispute over the payment of hospice services rendered from January 2011 to March 2012, Defendant moved to dismiss based on timeliness under the terms of the applicable healthcare plan.  The court found that it cannot consider the Plan on this motion to dismiss since Plaintiff objects to the accuracy and authenticity of the Plan that Defendant proffers.  Without the Plan, Defendant has no basis to assert that this action is time-barred.

Fifth Circuit

Guenther, et al. v. BP Retirement Accumulation Plan, et al., No. 4:16-CV-00995, 2019 WL 1167847 (S.D. Tex. Mar. 13, 2019) (Judge Andrew S. Hanen).  The court found Plaintiffs’ claims alleging failure to provide a section 204(h) notice and SPD that were due at the very latest in the 1989-90 time period are barred by ERISA’s six-year statute of repose, 29 U.S.C. § 1113.  Even if Plaintiffs were not aware of the fact that these notices/SPD were required by law, that is not a defense.

Subrogation/Reimbursement Claims

Sixth Circuit

Elkins v. Farm Bureau Gen. Ins. Co. of Michigan, No. 17-13717, 2019 WL 1207585 (E.D. Mich. Mar. 14, 2019) (Judge Arthur J. Tarnow).  Plaintiff sued her no-fault automobile insurance provider, who refused to pay her medical bills caused by an accident, and her ERISA medical coverage plan, who paid her medical bills and now seeks reimbursement.  The court found that the automobile insurance provider’s coverage is primary based on the coordination of benefits clause in the ERISA plan.  The court also found that the ERISA plan has no lien against Plaintiff because a lien can only be asserted against a discrete sum of money from an actual recovery.  The Plan cannot invoke a lien against a recovery that does not exist yet just to force Plaintiff to sue the no-fault auto insurer.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Upstate New York Engineers Health Fund v. John F. & John P. Wenzel Contractors, Inc., No. 517CV0570LEKDEP, 2019 WL 1208230 (N.D.N.Y. Mar. 14, 2019) (Judge Lawrence E. Kahn).  The court granted Plaintiffs’ motion in part and struck Defendants’ third and fifth affirmative defenses as to (1) Defendants’ past practice defense to Plaintiff’s ERISA section 515 claim; and (2) all of Defendants’ remaining equitable defenses insofar as asserted against the Union.

Gesualdi v. D. Gangi Contracting Corp., No. 18CV3773FBSJB, 2019 WL 1128356 (E.D.N.Y. Mar. 12, 2019) (Judge Frederic Block).  The court granted default judgment “of (1) $64,002.00 in ERISA withdrawal liability; (2) $1,511.25 in interest on the withdrawal liability for the period ranging from April 1, 2018 through July 25, 2018; (3) $12,800.40 in liquidated damages, (4) $4,097.00 in attorney’s fees; and (5) $440.00 in costs.”

UFCW Local One Health Care Fund & its Trustees et al., v. JJR II, Inc. d/b/a Great Am. 0804, No. 618CV1200GLSATB, 2019 WL 1115852 (N.D.N.Y. Mar. 11, 2019) (Judge Gary L. Sharpe).  The court granted Plaintiffs’ motion for default judgment, and ordered that the Health Fund is entitled to $3,251.93 in damages, $3,338.66 in attorney’s fees, and $18.23 in costs; and that the Pension Fund is entitled to $406,456.73 in damages, $14,654.84 in attorney’s fees, and $451.00 in costs.

Fourth Circuit

Trustees of Sheet Metal Workers’ Local Union No. 100 v. Lohmeier’s Sheet Metal, Inc.ter, No. GJH-17-2563, 2019 WL 1167825 (D. Md. Mar. 13, 2019) (Judge George J. Hazel).  The court granted Plaintiffs’ motion for default judgment “to recover amounts owed to the funds under the terms of a Collective Bargaining Agreement (“CBA”) and for injunctive relief to require Defendants to submit to an audit pursuant to the terms of the CBA.”

Sixth Circuit

Iron Workers District Council of Southern Ohio & Vicinity Benefit Trust, et al. v. Lundy Rebar Inc., et. al., No. 3:19-CV-00031, 2019 WL 1146370 (S.D. Ohio Mar. 12, 2019) (Judge Walter H. Rice).  The court found Defendants in violation of the Plaintiffs’ Amended and Restated Agreement and Declarations of Trust due to their failure to timely submit required fringe benefit contributions to the Funds.  The court ordered a monetary judgment in the amount of $46,955.65 representing all known unpaid fringe benefit contributions, interest, and liquidated damages found due and owing to Plaintiffs by Defendants.  The court also ordered payment of attorneys’ fees and other declaratory relief.

Seventh Circuit

Local 705 International Brotherhood of Teamsters Pension Fund v. Central Contractors Service, Inc., No. 17 C 1641, 2019 WL 1200672 (N.D. Ill. Mar. 14, 2019) (Judge Jorge Alonso).  The court granted Defendant’s motion for summary judgment in this suit seeking unpaid contributions due to Defendant’s subcontracting certain bargaining-unit work to an outside firm.

Ninth Circuit

Hawaii Annuity Tr. Fund for Operating Engineers v. Kauai Veterans Express Co., Ltd., No. CV 16-00615 JMS-RT, 2019 WL 1140173 (D. Haw. Mar. 12, 2019) (Judge J. Michael Seabright).  The court granted the Trustees’ motion for summary judgment.  “Kauai Veterans is ordered to submit to Trustees its reports and Trust Fund contributions for the period starting July 1, 2017, until the CBA expires or is legally terminated.”

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