This week’s notable decision is the district court opinion in Fitzwater, et al., v. Consol Energy, Inc., et al., No. 1:17-CV-03861, 2020 WL 6231207 (S.D.W. Va. Oct. 22, 2020), a case involving two key issues: (1) whether Plaintiffs, seven former employees of CONSOL Energy, Inc., were misled by ERISA plan fiduciaries about the nature and duration of their health benefits; and (2) whether Defendants discriminated against Plaintiffs based on health status-related factors in violation of ERISA. Specifically, Plaintiffs allege that Defendants made promises of lifetime medical insurance coverage to “non-union miners” and their beneficiaries, while Defendants dispute that any such representations were ever made. Defendants moved to dismiss all seven of Plaintiffs’ causes of action.
Under the first cause of action, Plaintiffs brought a claim for breach of fiduciary duty pursuant to 29 U.S.C. § 1104(a)(1)(A)(i) based on Defendants’ misrepresentations that Plaintiffs’ retiree benefits would vest for life once they reached the equated service date, as Plaintiffs alleged that Defendants fraudulently induced Plaintiffs into continuing their employment to their detriment as a result. The court noted that the evidence offered by Plaintiff in support of this fact, if believed, would establish a violation under this section. As such, the court denied Defendants’ motion to dismiss this cause of action.
Under the second cause of action, Plaintiffs sought equitable enforcement of the promise to provide lifetime health benefits. Plaintiffs argued that because a reasonable person would have understood Defendant’s representations to mean that the Plan included lifetime health benefits, and they did not pursue other health benefits at that time as a result of this representation, equity demands that Defendant be required to fulfill its promise. Defendant argued that oral representations cannot override the written plans, which expressly reserved the right to terminate Plaintiff’s coverage at any time. The court agreed, finding that Plaintiffs had not shown that a reasonable person would believe this Plan contained permanent health benefits, nor that Defendant “established or maintained” a separate, independent “Lifetime Plan” containing permanent health benefits.
Under the third cause of action, Plaintiffs alleged that Defendants improperly “establish[ed] rules for eligibility . . . to enroll under the terms of the plan based on” health-status related factors, including “claims experience,” when it submitted a pro-rata reimbursement payment to only the fifty most recently hired employees, and not to employees who had been enrolled earlier. Plaintiffs allege that Defendants knowingly drew this distinction and granted benefits to the retirees who had the least “claims experience.” The court held that Defendants made a bona fide classification based on the distinction between active and retired employees, and then offered a pro-rated version of the same benefits “only to those retirees to whom they have previously made the offer. Speculation by Plaintiffs or their experts that this decision was really based on claims experience does not create a genuine issue of material fact.” Accordingly, the court granted Defendants’ motion to dismiss this cause of action.
The remaining causes of action all addressed Defendants’ alleged failure to provide Plaintiffs with complete Summary Plan Descriptions of the “Lifetime Plan,” as well as failing to properly inform participants of the terms of that Plan in a timely manner. Defendants argued that maintaining these causes of action presupposed the existence of a “Lifetime Plan” which in fact did not exist. As the court agreed that Defendants had not established a separate “Lifetime Plan,” it held that all counts related to improperly notifying participants of the terms of such a (non-existent) plan must be dismissed.
The above notable decision was written by Kantor & Kantor attorney, Andrew Kantor.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Chavez v. Standard Insurance Company, No. 3:18-CV-2013-N, 2020 WL 6135701 (N.D. Tex. Oct. 19, 2020) (Judge David C. Godbey). After considerable pretrial skirmishing, the parties submitted this LTD case to the Court for trial de novo. The court found for the claimant and awarded $52,850.40 in benefits. It denied an award of future payments. Plaintiff’s counsel then moved for $168,326.95 in attorneys’ fees, plus conditional fees of $48,000 if Standard sought appellate review and did not prevail. Plaintiff’s attorney alleged he spent 413.8 hours in total on the case at a rate of $400 per hour. Standard objected to this billing as excessive, arguing that, among other things, 45% of this time was spent on unsuccessful motions practice. The court agreed. It noted that for what should have been a quick and efficient process on the administrative record, too much attorney time was spent on pretrial skirmishing, such as over 100 requests for production. Thus, the court determined that 413.8 hours was an unreasonable number of hours billed for this case. It did not state what was reasonable. It recognized that in the Fifth Circuit the court may increase or decrease the lodestar amount based on the amount involved in the action and the result obtained. Here, Chavez obtained an award of LTD benefits in the amount of $52,850.40. Chavez sought, but ultimately was denied, an award of future payments. While the Court did not minimize the work done in the case, the amount in dispute and the relief obtained were relatively low. In light of Chavez’s excessive motions practice, the court determined that the lodestar amount should be reduced by half. Accordingly, the court awarded Chavez the reduced lodestar amount of $84,163.48. It also awarded Chavez a conditional award of $48,000 if Standard’s appeal proved unsuccessful. This was based on an estimated 120 hours of attorney time required on appeal.
Breach of Fiduciary Duty
Fitzwater, et al., v. Consol Energy, Inc., et al., No. 1:17-CV-03861, 2020 WL 6231207 (S.D.W. Va. Oct. 22, 2020) (Senior Judge John T. Copenhaver). See https://www.kantorlaw.net/blog/2020/october/kantor-kantor-llp-achieves-another-victory-in-a-/
CORRECTION: Last week’s summary of DaVita, Inc. v. Marietta Mem’l Hosp. Employee Health Benefit Plan, No. 19-4039, __F.3d__, 2020 WL 6054607 (6th Cir. Oct. 14, 2020) (Circuit Judges Karen Nelson Moore, Eric L. Clay, Eric E. Murphy) inadvertently tracked the concurrence’s reasoning relating to Davita’s ERISA claims. Davita’s ERISA claims alleged that the Plan treated dialysis providers differently from other medical providers in violation of the Medicare Secondary Payer Act (MSPA). The concurrence would have upheld the trial court’s dismissal of plaintiffs’ ERISA claims on the grounds that the MSPA could not be used as a vehicle for plaintiffs to litigate whether a plan has allegedly violated another federal law. The majority opinion, which last week’s summary inadvertently omitted, however disagreed with the concurrence as it related to these ERISA claims. Here, the majority opinion carefully described that courts may first reform a plan’s terms per ERISA § 1132(a)(3) before proceeding to enforcing the reformed plan under ERISA § 1132(a)(1)(B) as a two-step process. The majority construed DaVita’s Count II ERISA claim as alleging that the as-written Plan was illegal, and that DaVita was seeking an equitable remedy so as not to ask the Court to enforce an allegedly illegal plan. The majority specifically addressed the concurrence’s view that it “d[id] not see” how DaVita could “fix this problem [an as-written Plan’s alleged violation of the MSPA]” by relying on § 1132(a)(3). The majority rationale was that any overlap between Davita’s private cause of action under the MSPA and its concurrent use of the MSPA to articulate an ERISA fiduciary breach claim was “expected” and “d[id] not undermine Davita’s concurrently stating sufficient facts that the Plan’s dialysis reimbursement provisions violate the Plan’s terms for reimbursing in network and other out of network services and do not bar DaVita’s seeking equitable relief to ‘redress such violations.’” The reasoning and rationale of the majority is a win for ERISA participants and beneficiaries because it provides a logic for articulating how an as-written plan’s purported violation of another federal law can potentially be articulated as ERISA fiduciary breach claim and how those violations can be currently brought under ERISA §§ 1132(a)(1)(B) and 1132(a)(3).
Disability Benefit Claims
Holden v. Unum Life Insurance Company of America, No. 1:19-CV-28-TAV-CHS, 2020 WL 6136223 (E.D. Tenn. Oct. 19, 2020) (Judge Thomas Varlan). The parties filed cross-motions for judgement regarding this dispute over the nonpayment of long-term disability benefits. Plaintiff objected to the Magistrate’s Report and Recommendation that judgement be granted for UNUM on the grounds that “the magistrate judge erroneously concluded that defendant reasonably interpreted the evidence as demonstrating plaintiff was only prevented from working at her unique workplace and that the magistrate judge failed to address several procedural irregularities in defendant’s decision making process.” The court found that all of Plaintiff’s objections unwarranted and/or immaterial and entered judgement for Defendant as recommended by the Magistrate.
Gibson v AHF, LLC., No. 19-37-DLB-HAI (E.D. Ky. Oct. 19, 2020) (Judge David L. Bunning). Plaintiff sued his employer AHF for age discrimination and breach of contract related to the employer’s severance plan. AHF argued that the breach of contract claim was preempted by ERISA. The court considered the facts that AHF’s duty to pay severance under the Plan arises from the termination of an employee, which “necessarily requires some ongoing administration.” Therefore, given that ongoing administration combined with the administrative discretion to determine whether an employee should be terminated and why, the court determined that the severance plan was subject to ERISA and preempted. Where AHF failed to notify Gibson of his ERISA rights under the plan, discretion was waived and de novo review applied. The court held that the plain language of the severance plan precluded benefits for Gibson because it did not provide benefits to those terminated for cause, and Gibson was terminated for cause.
St. Joseph Hosp. of Orange v. Newegg, Inc., Case No. SACV 20-1704 JVS (JDEx), 2020 WL 6149716 (C.D. Cal. Oct. 20, 2020) (Judge James V. Selna). This is a dispute arising from St. Jude’s Hospital treating fourteen patients covered by Newegg, a self-funded health plan, for a combined total of roughly $147,000 in which Newegg accepted responsibility for only about $20,000 of these billed charges. St. Jude’s asserted two causes of action against Newegg for (1) breach of implied-in-fact contract, and (2) quantum meruit. Newegg removed the case to federal court and now the court applied the two-prong Davila test to St. Jude’s motion to remand to state court. Although the court did find that the first prong of the Davila test had been met and these claims could have been brought under ERISA the Court held that the second prong of Davila was not met in that the court acknowledge the significant body of case law ruling that cases involving express or implied agreements to pay benefits were independent of the terms of the ERISA plans at issue. The court granted St. Jude’s motion to remand the case to state court.
Exhaustion of Administrative Remedies
White v. Anthem Life Ins. Co., No. 19-16954, 2020 WL 6158308, __ F. App’x __ (9th Cir. Oct. 21, 2020) (Before Circuit Judges Hawkins, N.R. Smith, and R. Nelson). Plaintiff brought this action against Anthem challenging its denial of her claim for long-term disability benefits. The district court granted summary judgment to Anthem on the ground that Plaintiff failed to properly exhaust her claim with Anthem before filing suit. Plaintiff appealed, and the Ninth Circuit affirmed. The court stated it was undisputed that the plan required Plaintiff to appeal an adverse benefit decision, that Ninth Circuit authority also required such an appeal, and that Plaintiff had failed to submit an appeal. Plaintiff argued that she had submitted a letter challenging an earlier decision by Anthem to suspend payment of benefits, but the court ruled that the earlier decision was not an appealable adverse determination, and even if it was, the letter was not an adequate appeal. The court also rejected Plaintiff’s argument that Anthem’s denial letter was defective, finding that it complied with ERISA regulations by adequately informing Plaintiff of the reasons for the denial and her right to appeal. Finally, the court did not address Plaintiff’s argument that her breach of fiduciary duty claim was not subject to an appeal exhaustion requirement because she had raised it for the first time on appeal.
Medical Benefit Claims
Siebert v. Central States Se. & Sw. Areas Health & Welfare Fund, No. 18 C 6681, 2020 WL 6158919 (N.D. Ill. Oct. 21, 2020) (J. Jorge Alonso). Plaintiff filed this suit seeking retiree health benefits under an ERISA-governed multi-employer employee benefit plan. The parties filed cross-motions for summary judgment; the court granted Defendant’s and denied Plaintiff’s. The court found that the arbitrary and capricious standard of review applied because the plan granted discretionary authority to the plan administrator. The court further found that the plan required Plaintiff’s employer to contribute a certain amount to the plan for Plaintiff to be eligible for benefits. Because Plaintiff took an unpaid leave of absence from his employer and began working for his union instead, his employer had not contributed the required amount and thus Plaintiff was not entitled to coverage. The court rejected “strained” arguments by Plaintiff that the plan should be interpreted otherwise and found it irrelevant that another person in a similar situation had been approved for benefits. Finally, the court ruled that the plan substantially complied with ERISA’s procedural rules because Plaintiff understood why his claim was denied, was able to present arguments in response to the plan and receive “effective review.”
Massey v. Riverside Univ. Health Sys. – Med. Ctr., et al., No. EDCV201436JGBSPX, 2020 WL 6135071 (C.D. Cal. Oct. 16, 2020) (Judge Jesus G. Bernal). Plaintiff, an individual insured, filed suit against the Plan and Anthem alleging one cause of action for declaratory relief arising from Anthem refusing to pay his medical bills. Plaintiff filed a motion to remand and Anthem filed a motion to dismiss. Plaintiff argued that his action is not preempted by ERISA because he seeks to enforce Anthem’s “oral contract” to pay for Plaintiff’s surgeries. The court found that Plaintiff could have brought his claims under ERISA and are therefore preempted. The court found that the state law claims arise out of Anthem’s denial of insurance coverage, rather than any independent obligation agreed to by Anthem. The court granted Anthem’s motion to dismiss because Plaintiff did not file a timely opposition.
Rachel S. v. Life and Health Benefits Plan of American Red Cross, No. 2:14-CV-778, 2020 WL 6204402 (D. Utah Oct. 22, 2020) (Judge Clark Waddoups). See Notable Decision summary above.
Jones v. Lewis, et al., No. 20-CV-00385-SI, 2020 WL 6149693 (N.D. Cal. Oct. 20, 2020) (Judge Susan Illston). Plaintiff filed suit alleging discrimination based on race, color, and gender/sex. Her ERISA claim was based on her allegation that Defendants have miscalculated her retirement benefits by not giving her credit for part-time hours and using an incorrect pension start date. Defendants assert that the A.C. Transit District Retirement Plan is not regulated by or subject to ERISA, and that as a Plan providing retirement benefits to public employees of a governmental District of the State of California, this Plan was regulated by Section 17 of Article XVI, of the California Constitution. Plaintiff’s opposition to Defendants’ motion to dismiss did not address her ERISA claim, therefore it was not clear whether she intended to pursue this claim. The court instructed that if Plaintiff amends the complaint and wishes to pursue an ERISA claim, the amended complaint shall specifically allege how Defendants have violated ERISA, including citing relevant portions of the statute. In the event Plaintiff pursues an ERISA claim and Defendants move to dismiss this claim, Defendants shall cite authority for the proposition that the AC Transit Retirement Plan is not subject to ERISA. The court granted Defendants’ motion with leave to amend.
Pleading Issues & Procedure
Metropolitan Life Insurance Co. v. Oliver, No. 20-cv-10479-IT, 2020 WL 6136364 (D. Mass Oct. 16, 2020) (Judge Indira Talwani). In this interpleader action the pro se defendants filed competing motions to transfer venue. The court noted that the threshold question is whether this action might have been brought in either the Northern District of New York or the Middle District of Florida. The court further noted the action was properly filed under both a statutory and rule interpleader. Under statutory interpleader, venue is appropriate in the Middle District of Florida and under rule interpleader, venue is appropriate in the Northern District of New York. As a result, the court evaluated the most appropriate venue. Although witnesses were present in both venues, the court determined that witnesses who would likely have the most relevant information resided in New York. The court determined that the case should be transferred to the Northern District of New York.
Wisconsin Province of The Society of Jesus, v. Audrey v. Cassem, et al., No. 3:17-cv-01477 (VLB), 2020 WL 6198485 (D. Conn Oct. 22, 2020) (Judge Vanessa L. Bryant). This interpleader action involves a dispute over the right to receive benefits under an ERISA-qualified employee benefit plan. Plaintiff asserted that the decedent was incompetent at the time he changed the beneficiary form. Defendant filed a summary judgment motion. The court noted that ERISA contains no express provision addressing competency and the federal common law controlled. The parties disagreed as to the applicable legal standard for determining whether an individual is competent. Defendant argued the testamentary capacity standard and Plaintiff argued the contractual capacity standard. In ruling on summary judgment, the court held that neither party identified the correct legal standard. Rather, the court found that Connecticut law would “generally apply a testamentary stand of capacity to an IRA beneficiary designation, but in doing so considers the complexity of the transaction.” The court granted Defendant’s summary judgment motion in part and denied it in part. Plaintiff filed a motion for reconsideration challenging the legal standard articulated by the court. The court denied Plaintiff’s motion for reconsideration. The court noted that Plaintiff did not cite to any binding authority overlooked by the court and that Plaintiff’s claim survived summary judgment, so the court did not need to consider Plaintiff’s motion further. The court further explained that Plaintiff mischaracterized its holding in that the court did not state that federal common law mirrors Connecticut’s testamentary capacity. The court did explain that testamentary capacity conflicts with ERISA principals as it fails to provide clear instructions and requires an administrator to evaluate circumstances beyond plan documents and records when making a determination.
Steamfitters Union, et al., v. Direct Air, LLC, et al., No. CV 18-1611, 2020 WL 6131163 (E.D. Pa. Oct. 19, 2020) (Judge Savage). This is an action seeking collection of withdrawal liability, interests, and penalties against Defendants under ERISA, as amended by the MPPAA. “The Pension Fund moves for summary judgment on the grounds that the employer, General Contractors, failed to make the required payments, and that Reid Recycling and Reid Construction, as members of a controlled group with the employer at the time the Fund served the employer with notice of its withdrawal liability, are jointly liable.  Defendants do not dispute the liability of General Contractors. They submit, however, that summary judgment should be denied as Reid Recycling and Reid Construction because they were not parties to a collective bargaining agreement and were not members of a controlled group at the time General Contractors withdrew from the pension plan.” The court concluded that a Pennsylvania court cannot enter a charging order against members’ transferable interests in a New Jersey limited liability company absent jurisdiction over the company. Specifically, the court does not have authority under the Pennsylvania Uniform Limited Liability Company Act of 2016 to enter a charging order against the members’ transferable interests because the court does not have jurisdiction over the members.
Zander Grp. Holdings, Inc. v. Katz, Sapper & Miller LLP, No. 3:18-CV-00653, 2020 WL 6150043 (M.D. Tenn. Oct. 20, 2020) (Judge William Campbell). In a previous lawsuit regarding tax advice given by Defendants to Plaintiffs regarding an ESOP purchase stock, the parties entered into a settlement agreement where Plaintiffs released Defendants from “any and all present or future claims or obligations of any kind or nature in any way arising out of the Dispute, including without limitation all claims and obligations asserted in the Action, whether known or unknown, knowable or unknowable.” The current lawsuit centers around the ESOP valuation analysis provided to Plaintiffs by Defendants. Defendants argued the current claims were released in the first lawsuit. The court disagreed and denied Defendants’ motion for summary judgment, finding that the release language stating that all claims related to “the Dispute” were released limited the release to claims regarding the tax advice and did not bar the current claims regarding the ESOP valuation.
Monk v. Wal-Mart Inc., No. 20-CV-80-PP, 2020 WL 6119379 (E.D. Wis. Oct. 16, 2020) (Judge Pamela Pepper). The court granted Marten Transport, Ltd. Group Benefit Plan’s motion to intervene as a matter of right under Rule 24(a). The Plan is a self-insured employee welfare benefit plan that asserts a subrogation interest to enforce its reimbursement rights in the present lawsuit. The Plan’s interests are not adequately protected by the plaintiff, who is seeking to recover damages for his injuries. The court is satisfied that the Plan has met its burden to intervene as a matter of right.
Davis v. Minnesota Life Ins. Co., No. 1:19-CV-00453-DCN, 2020 WL 6163119 (D. Idaho Oct. 21, 2020) (Judge David C. Nye). Plaintiff’s married daughter died in a manner considered an accident under an AD&D Policy issued by Minnesota Life. Minnesota Life filed a 12(b)(6) motion asserting the Policy did not cover married children. However, the parties offered conflicting documents as constituting the Plan—including SPDs. The court was unable to determine which of the documents were the Plan and thus stated discovery was needed to resolve this issue. It also noted that the parties treated this as a motion for summary judgment and asked the court to affirmatively take a position on whether married children were covered under the Policy or not. Additionally, the parties asked the court to effectively determine what plaintiff knew, thought, or perceived about his coverage. At this stage, however, the court held it was unable to find in favor of Minnesota Life because of the need for discovery regarding the Plan and its inability to look past the pleadings. Accordingly, the motion to dismiss was denied.
Am. Coll. Of Emergency Physicians, et al. v. Blue Cross Blue Shield of Georgia, Case No. 20-11511, __F.App’x__, 2020 WL 6165852 (11th Cir. Oct. 22, 2020) (Circuit Judges Beverly B. Martin, Britt C. Grant, Robert J. Luck). The Medical Association of Georgia (MAG) and American College of Emergency Physicians (ACEP) alleged that BCBS Georgia violated the prudent layperson standard when it implemented a new emergency department visit review process (the “ED review”) that cautioned insureds that they should only go to the emergency room for emergencies, otherwise their insurance would not cover their emergency room visits. BCBS Georgia’s ED review process led to retrospective denials of payments to healthcare providers by reclassifying certain emergency department visits as “non-emergent.” MAG and ACEP’s complaint alleged that the ED review process violated the prudent layperson standard and sought declaratory and injunctive relief for violations of the ACA and ERISA. The district court granted BCBS Georgia’s motion and dismissed the complaint finding the pleadings insufficient because, in part, the court relied upon BCBS Georgia’s claims that their ED review process did not violate the prudent layperson standard. The district court found that the members of ACEP and MAG lacked standing. The Eleventh Circuit panel reversed the trial court’s order holding that (1) MAG and ACEP’s complaint should not have been dismissed for failure to state a claim on the conclusory statements given by BCBS Georgia as to its compliance with the prudent layperson standard and (2) found that MAG and ACEP did have associational standing to bring these claims against BCBS Georgia.
Bd. of Trs. of The Laborers Health & Welfare Plan for N. Cal. v. Galvez, et al., No. 18-CV-07423-HSG, 2020 WL 6135988 (N.D. Cal. Oct. 19, 2020) (Judge Haywood S. Gilliam, Jr.). Pending before the court is Plaintiff’s amended motion for default judgment against Defendant. Plaintiff filed this action to recoup medical benefits it paid on behalf of Plaintiff’s spouse after divorce, which made her ineligible for further benefits under the Plan. After analyzing the six Eitel v. McCool, 782 F.2d 1470 (9th Cir. 1986) factors (possibility of prejudice, merits of Plaintiff’s substantive claim, sufficiency of the complaint, damages in relation to conduct, possibility of dispute concerning material facts, and default due to excusable neglect), the court granted Plaintiff’s motion. The court found that Plaintiff was prejudiced absent entry of default judgment because Plaintiff will have no recourse to recover the property and apply its proceeds to the outstanding judgment; that Plaintiff stated a claim upon which it could recover damages; that the amount claimed directly reflected the loss caused by Defendant’s actions; there was no dispute as to when Plaintiff and his spouse were divorced and that he did not notify Plaintiff until eight years later; and finally, that Defendant was properly and timely served with the complaint. Accordingly, the court held that Plaintiff was entitled to $41,731.19 in damages, and $6,681.92 in attorneys’ fees and costs.
Withdrawal Liability & Unpaid Contributions
Teamsters Local 469 Pension Fund and The Board of Trustees Thereof v. J.H Reid General Contractors, et al., No. CV1506185KMJBC, 2020 WL 6129590 (D.N.J. Oct. 16, 2020) (Judge Kevin McNulty). The court granted summary judgment as to the withdrawal liability of General Contractors, which is not contested, but denied summary judgment to the extent the Pension Fund’s motion seeks to hold Reid Recycling and Reid Construction liable for withdrawal liability payments.
Board of Trustees of The Automotive Machinists Pension Trust v. Ross Island Sand and Gravel Company, No. C19-2088 RSM, 2020 WL 6132203 (W.D. Wash. Oct. 19, 2020) (Judge Ricardo S. Martinez). The court granted Plaintiff’s Motion for Default Judgment. “The Clerk shall enter judgment in favor of the Board of Trustees of the Automotive Machinists Pension Trust and against Ross Island Sand and Gravel Company in the amount of $29,057.82.”
Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys: Brent Dorian Brehm, Sarah Demers, Elizabeth Green, Andrew Kantor, Anna Martin, Michelle Roberts, Tim Rozelle, Peter Sessions, Stacy Tucker, and Zoya Yarnykh.