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Your ERISA Watch – District Court Permits Vast Conflict Discovery in Life Waiver of Premium Dispute Subject to De Novo Review

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There were no notable circuit court decisions this past week, so we have chosen to highlight two published district court decisions from matters involving disability claims. The first is favorable to plan participants and the second is not. Is it any surprise that the former is from within the Ninth Circuit?

The first caseJones v. Life Ins. Co. of N. Am., No. CV-19-04669-PHX-DLR, __ F. Supp. 3d __, 2020 WL 2126498 (D. Ariz. May 5, 2020). The almost Sisyphean topic of discovery in ERISA benefits cases added a new page when, on de novo review, the court required LINA “to respond to discovery that delves into the number of times it retained and the amount of money it paid to third-party vendors in disability and LWOP claims and medical reviewers utilized here, LINA-generated performance evaluations of the vendors and medical reviewers, the number of times they concluded that a claimant could perform work, LINA-generated performance evaluations for LINA employee Mary Faltaous, and any guidelines and manuals used by LINA in evaluating this claim, including the ‘DMS Expert Resource Professional conduct Statement’ and any guidelines and manuals.”

The court also allowed Plaintiff to supplement the record with a letter from his doctor responding to LINA doctors’ record reviews. All this in a case about life waiver of premium (LWOP) benefits on $228,000 in life insurance? How did this come to pass?

After approving Plaintiff’s LWOP claim for five years, and with “no change in Plaintiff’s medical condition,” LINA began a “‘spontaneous’” review of the LWOP claim. It found him not disabled and thus not entitled to continued LWOP benefit. Plaintiff appealed. LINA failed to respond within the regulatory deadline. Six months after the 180 days lapsed, Plaintiff filed suit. LINA then issued its denial “based entirely on ‘paper’ reviews form Drs. Kalp, Belcourt and Koh, all retained by long-time disability industry vendors, Genex, ECN, and MES Sollution [sic].” The court recognized the outcome of the case turned on the credibility of the experts. It had also previously ruled that, when presented with diametrically opposed expert reports, the credibility, bias, or prejudice of the experts becomes relevant. Simply paying an expert for their work was not probative of bias. “However, where an expert or the third-party vendor who supplies that expert has a long-standing relationship with or receives substantial compensation from a carrier or industry, and overwhelmingly renders opinions in their favor, such evidence might be important in accessing that expert’s bias and credibility.”

After noting LINA’s structural conflict and “history of self-dealing,” the court rejected the argument that credibility determinations could be made solely on the record. This was because “information about LINA’s history and relationships (or lack thereof) with the vendors and experts, relevant for accessing credibility, will not be found in the record.” Further, the court determined LINA did not carry a “garden-variety” structural conflict of interest. “LINA’s history [of self-dealing] and Plaintiff’s unchallenged representations about LINA’s relationships with its vendors and their experts raises a concern whether LINA’s structural incentive to minimize benefit payments distorts its obligation to fairly handle benefits claims resulting in its employment of vendors and experts who reliably do LINA’s bidding. This warrants discovery into LINA’s relationships with those vendors and the experts who rendered opinions upon which the determination to terminate Plaintiff’s LWOP benefit was based.”

After allowing this discovery, the court also rejected LINA’s argument that supplementation of the record with Plaintiff’s doctor’s letter was not necessary because it offered no new expert information other than to render criticisms of the claim decision. The court’s retort was remarkably simple: “If the letter adds nothing new, it might be cumulative, but not prejudicial. LINA is not harmed by [Plaintiff’s doctor’s] letter if it does nothing more than restate what is in the records.”

Finally, the court addressed proportionality. LINA took the “all in” approach, arguing that “the LWOP benefit, which pays the policy premium for $228,000 in life insurance, is practically valueless,” and thus discovery was not proportional. Again, the court’s retort was remarkably simple, noting the argument was “belied by the fact that [LINA] has denied the benefit and by the amount of resources it has invested to support that denial.” The court found the LWOP benefit was a valuable benefit and that Plaintiff’s qualification for that benefit was an important issue at stake in the action.

The above notable decision summary was prepared by Kantor & Kantor partner, Brent Dorian Brehm.

The second case: Fenwick v. Hartford Life & Accident Ins. Co., No. 3:13-CV-1090-CHB, __F.Supp.3d__, 2020 WL 2115889 (W.D. Ky. May 4, 2020). This case revolves around Defendant Hartford Life & Accident Insurance Company’s decision to cease providing Plaintiff Rita Fenwick with long-term disability (“LTD”) benefits under an ERISA-governed plan. Hartford previously provided Plaintiff with LTD benefits, which were ceased upon Defendant’s determination that Plaintiff was not precluded from working in “any occupation.” The court concluded that the termination was proper under the terms of the plan.

By way of background, Plaintiff was employed by Target as a store leader and was insured under Hartford’s LTD policy. Target vested Defendant with “full discretion and authority to determine eligibility for benefits and to construe and interpret all terms and provisions of The Policy.” In 2005, Plaintiff submitted a claim to Principal Life Insurance Company, who administered Target’s self-insured welfare benefits plan at that time. Principal provisionally approved her claim through August 2007 under the “own occupation” standard of disability. After the initial 24-month period, it determined that there were other occupations that Plaintiff could perform. The claim was transferred to Hartford in April 2009.

After several terminations, appeals, and reinstatements, Hartford denied further benefits effective November 1, 2012 and Plaintiff filed suit.

The court analyzed this matter under the “arbitrary and capricious” standard of review because the plan expressly vested Hartford with discretionary authority. Plaintiff argued that Hartford Life did not exercise discretion because it had no employees and the plan did not permit delegation of discretion to Hartford Fire. The court disagreed, noting that for purposes of determining which entity was acting, courts consistently ignored the question of which entity formally employs agents and pays their salaries. Instead, the courts consider the letterheads on the correspondence with the claimant, whether the entity which exercised discretion acted exclusively through individuals, who were formally employed and paid by a corporate family member but who spent all of their time working on behalf of the entity with discretion, and evidence of an agency relationship between the entities. Taken together, the court concluded that Hartford exercised its discretion in Plaintiff’s case.

Furthermore, there was no evidence that a structural conflict adversely affected the outcome of an otherwise deliberate, principled reasoning process. Hartford obtained IMEs and examinations by third-party vendors throughout the process, and there is nothing in the record that suggested that these physicians were incentivized to find Plaintiff not disabled.

The court also disagreed that a third IME was required, given that Plaintiff has already had two IMEs. The court also quickly disposed of Plaintiff’s second argument, which focuses on her prescription regimen and the impact of narcotics on her functional abilities. None of the evidence Plaintiff cited indicated that any side effects she may have had from her medications were severe enough to cause functional impairment. As for the Employability Analysis Report, the court concluded that it was clear which data was examined, such as Department of Labor data and National OES Wage Statistics, and Defendant made a reasonable conclusion that Plaintiff could work in sedentary occupations.

Finally, Hartford’s decision was supported by substantial evidence. First, courts have no warrant to require administrators automatically accord special weight to the opinions of a claimant’s physician; nor may courts impose on plan administrators a discrete burden of explanation when they credit reliable evidence that conflicts with a treating physician’s evaluation. Consequently, it is not arbitrary and capricious for a plan administrator to accord more weight to one doctor’s opinion over another when deciding if a claimant is entitled to ERISA benefits, since when an administrator does so it is possible to offer a reasoned explanation, based upon the evidence, for the plan administrator’s decision. Here, the administrative record is replete with medical evidence on which Hartford Life based its decision to terminate Fenwick’s LTD benefits. Hartford Life relied upon the reports and opinions of several physicians. Even though it is not incumbent upon Hartford Life to provide an explanation of why it credited some of Fenwick’s treating and consulting physicians, Hartford Life’s explanation comports with the court’s read: the majority of medical opinions concluded that Fenwick could return to work with certain limitations. It was reasonable for Hartford Life to credit these sources, the majority of whom found that Fenwick could perform sedentary level work with the ability to change positions as needed. The administrative record contains more than enough relevant evidence that a “reasonable mind” would accept as sufficient to support Hartford Life’s conclusion.

This notable decision summary was written by Kantor & Kantor associate, Zoya Yarnykh.

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

Attorneys’ Fees

Sixth Circuit

Bustetter v. Standard Ins. Co., No. CV 18-1-DLB-EBA, 2020 WL 2198972 (E.D. Ky. May 6, 2020) (Judge David L. Bunning). In a prior action, the court determined that Standard had abused its discretion by misapplying policy terms and ordered it to reopen the administrative appeal of Plaintiff’s case and decide the claim based on the proper policy definition. However, the court did not order benefits reinstated while the review was underway, nor was Plaintiff’s counsel allowed to file a separate motion for attorneys’ fees and costs. Plaintiff argued that “the proper course of action for ordering a remand upon a finding that a plan administrator acted arbitrarily and capriciously in a termination of benefits case is to reinstate benefits while the claimant waits for a full and fair review.” However, the court rejected this argument, finding no authority to justify such a rule. Instead, the court noted that benefits should be reinstated if there is clear evidence of disability or lack of contrary evidence, and courts have wide discretion to craft the appropriate remedy. As to Plaintiff’s request for leave to file a motion for fees, the court concluded that there was no justification to allow Plaintiff to file for fees at this stage; however the court would grant leave to file a motion for fees at the conclusion of litigation.

Class Actions

Second Circuit

Snitzer v. Bd. of Trustees of Am. Fed’n of Musicians & Employers’ Pension Fund, No. 17-CV-5361 (VEC), 2020 WL 2115330 (S.D.N.Y. May 4, 2020) (Judge Valerie Caproni). In this dispute seeking recovery for breach of fiduciary duties and other violations of ERISA related to investment decisions and processes Defendants used from 2010-2017, the court granted preliminary approval of the $26.85 million class action settlement, provisionally certified a settlement class, directed notice to the settlement class, and scheduled a fairness hearing. The Settlement Class includes: All Participants and Beneficiaries of the Plan from August 9, 2010 through the date of the Preliminary Approval Order, excluding Defendants and their Beneficiaries. Class counsel are attorneys from the firm and the firm of Chimicles Schwartz Kriner & Donaldson-Smith LLP.

Ninth Circuit

Atzin v. Anthem, Inc., No. 217CV06816ODWPLAX, 2020 WL 2198031 (C.D. Cal. May 6, 2020) (Judge Otis D. Wright II). Plaintiffs contend Defendant utilizes erroneous coverage guidelines to deny requests for microprocessor-controlled foot-ankle prostheses and moved for class certification. The court found Plaintiffs’ proposed class meets the requirements of Rule 23(a). The court found numerosity is met by either a three- or four-year statute of limitations period. The court found commonality is met because the harm suffered from Defendants’ application of the allegedly erroneous guideline is common to all the putative class members. The court found that typicality is met by the same facts that support commonality. The court found that adequacy is met because there is no conflict of interest and no doubt that the case will be prosecuted diligently. The court found that certification appropriate under Rule 23(b)(2) because Defendants have acted in a way that applies uniformly to the class and therefore does not reach Plaintiffs’ arguments under Rule 23(b)(1). The court found that there is no separate “ascertainability” requirement but if there were, the court would find it met here as Defendants have identified between 38 to 44 class members. The court granted Plaintiffs’ motion for class certification.

Disability Benefit Claims

Second Circuit

Catania v. First Unum Life Ins. Co., No. 5:19-CV-133 (MAD/TWD), 2020 WL 2129374 (N.D.N.Y. May 5, 2020) (Judge Mae A. D’Agostino). Plaintiff, an anesthesiologist, claimed Unum wrongfully denied his LTD benefits after two car accidents that led to significant back pain. Following surgery, the medical evidence showed Plaintiff had received significant reduction in his symptoms. However, he claimed an inability to perform the longer hours and on-call requirements of his occupation. Unum had multiple doctors review the file, had Plaintiff undergo an IME, and communicated with Plaintiff’s treatment providers to gain clarification on his functional capacity. After reviewing the evidence in the file on de novo review, the court granted summary judgment to Unum. It recognized subjective complaints of disabling conditions cannot be ignored but determined this was trumped by the requirement to provide objective evidence of a disability. “It was Plaintiff’s burden to proffer objective medical evidence to substantiate his subjective complaints – a burden Plaintiff failed to meet.”

Sixth Circuit

Fenwick v. Hartford Life & Accident Ins. Co., No. 3:13-CV-1090-CHB, __F.Supp.3d__, 2020 WL 2115889 (W.D. Ky. May 4, 2020) (Judge Claria Horn Boom). See Notable Decision summary above.

Miller v. Aetna Life Ins. Co., No. 2:19-CV-500, 2020 WL 2112163 (S.D. Ohio May 4, 2020) (District Judge Algernon Marbley). Plaintiff filed suit against Aetna for denying her claim for Long Term Disability benefits. Plaintiff argued that she was unable to perform her job as a Lead software engineer due to a myriad of issues, including fibromyalgia and degenerative disc disease. Aetna ordered surveillance and performed paper reviews of plaintiff’s claim. On appeal, Aetna commissioned a single file review. The court noted that the peer review physician who performed this review disputed Plaintiff’s credibility, despite her own physicians nor the records providing justification for doing so. The court concluded that Aetna’s decision was arbitrary and capricious, finding that “Aetna’s decision in administering Ms. Miller’s disability claim suggests that this conflict of interest had a part in its decision, since it appears that Aetna started with the decision to deny benefits and then ‘worked backwards to fill in the blanks as to when and why.” While the court had a plethora of criticisms of Aetna’s conduct, it primarily concluded that it was an abuse of discretion to dismiss someone’s complaints of pain without examining that person, as such determinations are not appropriately made based on medical records alone. It also noted that Aetna disregarded the impact of medication and side effects, disregarded the material duties of Plaintiff’s own occupation, generated several post-hoc rationales to justify its denial, and selectively reviewed evidence to support its otherwise unsupportable determination.

Eleventh Circuit

Cofield v. The Hartford, No. 4:18-CV-00607-SGC, 2020 WL 2218935 (N.D. Ala. May 7, 2020) (Magistrate Judge Staci G. Cornelius). Plaintiff became disabled from working as a carpet manufacturer due to back and hip pain. Hartford approved Plaintiff’s LTD claim and paid monthly benefits to him under the “own occupation” definition of disability.  It denied his claim under the “any occupation” standard of disability. Months into the litigation, Plaintiff’s SSDI benefit claim was approved, creating an overpayment of LTD benefits. Plaintiff made a motion to remand for Hartford to consider the favorable SSDI decision. The court disagreed that Hartford was required to consider the SSDI decision because that information was not in front of Hartford when it decided Plaintiff’s claim. But the court found that even if Hartford were to reverse course based on the favorable SSDI decision, the amount of his SSDI benefits eclipsed his LTD benefit, and Plaintiff would only be entitled to a minimum monthly payment of $100. The amount of retroactive and future benefits payable to Plaintiff were less than the amount of LTD benefits overpaid to Plaintiff, meaning Plaintiff had nothing to recover. The court also considered the parties’ motions for summary judgment. It granted Hartford’s motion (and denied Plaintiff’s), finding that the denial was not an abuse of discretion. The court found that: (1) Hartford is not judicially estopped from denying his benefits because it offered to provide legal counsel for his SSDI application; (2) past court decisions finding that Hartford abused its discretion does not undermine the facts of this case or show how Hartford abused its discretion in reviewing Plaintiff’s claim; and (3) the SSDI decision does not militate against Hartford’s decision and it was not required to address the decision since it came out after Hartford decided Plaintiff’s appeal.

Discovery

Eighth Circuit

Scalia v. Reliance Trust Co., No. 17-CV-4540 (SRN/ECW), 2020 WL 2111368 (D. Minn. May 4, 2020) (Mag. J. Elizabeth Cowan Wright). The Department of Labor brought this suit under ERISA against a corporation and its agents for alleged breach of fiduciary duty in the purchase and sale of company stock under an employee stock ownership plan (ESOP). During discovery, the DOL issued a third-party subpoena to Thomas Hughes, the company’s “corporate ERISA counsel.” Hughes and the defendants objected on attorney-client privilege grounds. The DOL then brought a motion to compel. The court largely denied the DOL’s motion. The court noted that the courts have recognized a “fiduciary exception” to the attorney-client privilege when a trustee obtains legal advice related to the exercise of fiduciary duties. However, the court found that Hughes’ true client was the corporation, not the ESOP, and that Defendants were not trustees of the ESOP at the time Hughes gave his advice. The court further found after examining the documents at issue that the purpose of Hughes’ communications was not to help the company fulfill a fiduciary duty for the benefit of the ESOP. Thus, the fiduciary exception did not apply, and the documents fell within the privilege.

Ninth Circuit

Jones v. Life Ins. Co. of N. Am., No. CV-19-04669-PHX-DLR, __ F. Supp. 3d __, 2020 WL 2126498 (D. Ariz. May 5, 2020) (Judge Douglas L. Rayes). See Notable Decision summary above.

Tenth Circuit

Doe v. Intermountain Healthcare, Inc., No. 218CV00807RJSPMW, 2020 WL 2198374 (D. Utah May 6, 2020) (Judge Paul M. Warner). Plaintiff moved the court for permission to conduct limited discovery to determine whether Defendants withheld documents and whether penalties for withholding documents should be assessed. Plaintiff contends Defendants withheld documents pertaining to reimbursement methodologies and schedules for out-of-network benefits and the plan’s nonquantitative treatment limitations. The court found that limiting the definition of “operating documents” to formal plan documents seems overly restrictive and contrary to the purpose of ERISA. The court favored disclosure of information that helps Plaintiff understand her rights. The court granted Plaintiff’s motion to conduct discovery.

ERISA Preemption

Ninth Circuit

ERISA Industry Committee v. City of Seattle, No. C18-1188 TSZ, 2020 WL 2307481 (W.D. Wash. May 8, 2020) (J. Thomas S. Zilly). Plaintiff, a non-profit trade association, sued the City of Seattle, alleging that Seattle’s new ordinance requiring hotel and hotel-related businesses to make “healthcare expenditures” on behalf of covered employees is unenforceable because it is preempted by ERISA. In response, Seattle filed a motion to dismiss, arguing as a matter of law that ERISA does not preempt its ordinance. Relying heavily on a Ninth Circuit decision regarding a similar ordinance passed by San Francisco, which found no preemption, the court granted Seattle’s motion and dismissed the action. The court found that the ordinance’s “direct payment option,” in which employers could pay employees directly for healthcare-related expenses, did not constitute an ERISA benefit plan because the payments were similar to wages and the ordinance only imposed minimal record-keeping and administrative requirements on employers. The court further found that the ordinance did not impermissibly connect with or refer to an ERISA plan because payment of expenses through ERISA-governed plans was only one option under the ordinance. The ordinance was “fully functional” even in the absence of a single ERISA plan. Furthermore, the ordinance did not “bind, regulate, or dictate” the terms of an ERISA plan. The amount of the payments under the ordinance was not predicated on the amount of benefits payable under any ERISA plan; the amounts were calculated based on the employee’s status. Thus, the ordinance was not preempted by ERISA.

Meyer v. UnitedHealthcare Ins. Co., Case No. CV 18-173-M-DLC, 2020 WL 2112044 (D. Mont. May 4, 2020) (Judge Dana L. Christensen). On October 28, 2019, the court granted Meyer’s Motion for Reconsideration concluding that Meyer’s excusable neglect permitted him the opportunity to brief his ERISA preemption argument and allowed Defendants the chance to respond. The amount in dispute in this matter—$17.27—makes clear that this matter is being fought purely on principle. Here, Meyer was billed by Billings Clinic (an in-network provider) $17.27 above his $6,000 out-of-pocket maximum. Consequently, Meyer sued United bringing three state law claims under the Montana Unfair Trade Practice Act (MUPTA) for failing to pay his provider after he met his out-of-pocket obligations under the terms of his plan. United moved for judgment on the pleadings on the grounds that ERISA governs the applicable policies held by Meyer and that his state law claims were preempted by ERISA. At issue before the court was whether United’s 2017 mistaken communication to him that his policies were not governed by ERISA impacted conflict preemption analysis per the analysis conducted in Elliot v. Fortis Benefits Ins. Co., 337 F.3d 1138, 1144 (9th Cir. 2003). The court held that there was no daylight between the outcome in Elliot and here in that claims relating to insurers’ handling of billing claims, such as claims brought under MUPTA, provide Meyer’s sole ground for recovery (as opposed to a rule of decision such as a state rule like notice-prejudice) and is therefore inherently preempted by ERISA which governs these types of issues involving ERISA claims. The court found that United’s 2017 communication to him giving him wrong information about what law governed his claims was irrelevant to the preemption analysis.

Pension Benefit Claims

Fourth Circuit

United States v. Frank, No. 117CR114LMBMSN, 2020 WL 2205066 (E.D. Va. May 6, 2020) (Judge Leonie M. Brinkema). The United States brought an Application for Writ of Continuing Garnishment against Defendant’s 401(k) account for restitution of embezzling $19.4 million from his former employer. After the Magistrate Judge issued a recommendation, Defendant objected to findings and advanced several unpersuasive arguments including: 1) the 401(k) is protected by ERISA’s anti-alienation clause, 2) Defendant does not have unfettered access to his 401(k) account because he is not age 59 ½, the funds are exempt because they are not wages, salary or other income, and 3) the court should exercise its equitable power to permit him to keep a portion of his 401(k) funds to cover his tax bill and facilitate his re-entry to society upon completion of his sentence. The court found the Mandatory Victims Restitution Act overrides ERISA’s anti-alienation provisions. It further found nothing prevents Defendant from taking a lump sum distribution prior to age 59 ½ and the taxes and penalties are to disincentivize early distributions but do not prevent them. Finally, the court allowed Defendant to retain 10 percent of the account to offset taxes and early withdrawal penalty but denied his request to keep another 5 percent to assist him in returning to society because that would not be fair to the victim to whom restitution is owed.

Pleading Issues & Procedure

Sixth Circuit

Secretary of U.S. Dept. of Labor v. Kavalec, No. 1:19-CV-00968, 2020 WL 2119624 (N.D. Ohio May 4, 2020) (Judge Pamela Barker). Secretary of the Department of Labor brought this action against several individuals who were fiduciaries of the Fleet Owners Insurance Fund, accusing them of breaching their fiduciary duties in violation of ERISA. Defendants filed a motion asking to file a third-party complaint against Hudson Insurance. Defendants claimed they had fiduciary liability insurance with Hudson, and Hudson should be required to defend them in this case. The court granted Defendants motion and ordered them to file their third-party complaint against Hudson.

Secretary of U.S. Dept. of Labor v. Kavalec, No. 1:19-CV-00968, 2020 WL 2112053 (N.D. Ohio May 4, 2020) (Judge Pamela A. Barker). The DOL sued Robert Kavalec, et. al., alleging Defendants, as trustees of the multiemployer health and welfare plan (“Fund”), violated ERISA by paying themselves compensation from the Fund and other breaches of fiduciary duty including administering the Fund in violation of HIPAA and ACA. Defendants filed a third-party complaint against Medical Mutual Services (MMS), the Fund’s claims administrator, alleging MMS is responsible for the HIPAA and ACA violations under ERISA breach of fiduciary duty or breach of contract theories. MMS moved to dismiss arguing it is not a fiduciary and the breach of contract cannot be maintained under Fed. R. Civ. P. 14 because it is not derivative of the underlying complaint or, in the alternative, the breach of contract allegation fails to state a claim. The court found Defendants’ third-party complaint failed to allege facts sufficient to find MMS was acting in a fiduciary capacity when taking the actions alleged in the complaint. The court also found Defendants’ breach of contract claim fails because it does not identify any term of the TPA agreement that was breached; rather, Defendants merely alleged there were misrepresentations about the TPA agreement. The court dismissed the third-party complaint without prejudice.

Tenth Circuit

Gen. Elec. Co. v. BoilerMaker-Blacksmith Nat’l Pension Tr., No. 19-2780-EFM-GEB, 2020 WL 2113209 (D. Kan. May 4, 2020) (Judge Eric F. Melgren). In this dispute where the Pension Trust seeks over $200 million in partial withdrawal liability from General Electric Company, the parties disagree over who should serve as arbitrator and sought court intervention. The court sided with the Fund. “The Court is not convinced that the parties’ underlying dispute is as simplistic as GE portrays it to be. There are potentially three complex MPPAA issues in dispute, and an arbitrator with experience in withdrawal liability and the overall MPPAA framework is more qualified to resolve them. Furthermore, the Court does not find the Fund’s candidates to be biased, whereas GE’s ex parte communications with its proposed candidates would cast a cloud of unfairness over the arbitration of the case.”

Provider Claims

Ninth Circuit

ABC Services Group, Inc. v. Health Net of California, Inc., et al., Case No. CV-19-00243-DOC-DFM, 2020 WL 2121372 (C.D. Cal. May 4, 2020) (Judge David O. Carter). Before the court was a consolidated motion to dismiss in a matter involving sixty-two consolidated cases brought by the creditor of a shuttered Southern California mental health and substance abuse rehabilitation center (ABC Services Group on behalf of Morningside Recovery). ABC Services’ claims against the moving defendants, Health Net and Centene entities and individuals, related to roughly $8.5 million in unpaid benefits for treatment rendered to the insurers’ members. ABC Services brought ERISA and state law claims, including that Health Net breached an implied contract with Morningside Recovery when it denied the claims, because it had agreed to pay when contacted by rehab center employees on the phone before the treatment was rendered. The court dismissed all but one claim with prejudice, holding that (1) ABC Services does not have ERISA standing as its relationship to the patients who originally assigned their rights to Morningside is the kind of “double-assignment structure” that does not afford standing, (2) ABC Services’ state law claims were found to be preempted by ERISA with no amendment to cure this pleading defect, (3) ABC Services’ claims for promissory estoppel, quantum meruit and open book account were held to be insufficient. The only claims that survived this motion without prejudice were ABC Services’ breach of contract claims under non-ERISA policies.

Venue

Fifth Circuit

Coleman v. Brozen, No. 4:19-CV-705, 2020 WL 2200220 (E.D. Tex. May 6, 2020) (J. Amos L. Mazzant). Plaintiffs, employees of RVNB Holdings, Inc., filed a class action in the Eastern District of Texas against fiduciaries of RVNB accusing them of selling shares of RVNB for less than market value in conjunction with the termination of an employee stock ownership plan (ESOP), thereby causing financial loss to Plaintiffs. The plan contained a forum selection clause requiring any legal action to be filed exclusively in the Northern District of Texas. Citing this clause, Defendants filed a motion to transfer venue from the Eastern District of Texas to the Northern District of Texas. The court granted Defendants’ motion. Plaintiffs did not dispute that the forum selection clause was mandatory, or that their action fell within the scope of the clause, so the court focused solely on whether the clause was valid and enforceable. The court found that RVNB was free to amend or terminate the plan at any time, and thus was permitted to include a forum selection clause in the plan without requesting permission from Plaintiffs. Relying on Sixth and Seventh Circuit precedent, the court further found that ERISA’s venue provision did not override the plan’s forum selection clause because ERISA’s provision states that actions “may be brought” in certain districts, not that they “must” be brought in those districts. The court further found that no public interest factors, such as court congestion, local interest, or conflict of law, weighed against transfer of the case.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Trustees Of The New York City District Council Of Carpenters Pension Fund, et al. v. Triangle Enterprise NYC, Inc., No. 20-CV-793, 2020 WL 2306484 (S.D.N.Y. May 8, 2020) (Judge Ronnie Abrams). The court confirmed the arbitration award and entered “judgment in the amount of $300,680.48, plus prejudgment interest calculated at a rate of 7.5% per annum from September 28, 2019 through the date of judgment in this action and postjudgment interest. In addition, Petitioners’ request for attorneys’ fees and costs in the amount of $1,764.50 and $70, respectively, is granted.”

Third Circuit

Trustees Of The United Food And Commercial Workers Union And Participating Food Industry Employers Health And Welfare Fund v. Mt. Laurel Center For Rehabilitation And Health Care, No. 119CV15417NLHKMW, 2020 WL 2111027 (D.N.J. May 1, 2020) (Judge Noel L. Hillman). In this action seeking delinquent contributions, the court granted Plaintiff’s motion for entry of judgment by default and entered judgment for Plaintiff against Defendant in the amount of $305,600.36.

Fourth Circuit

Bd. of Trustees, Sheet Metal Workers’ Nat’l Pension Fund v. Burris Constr. Co., LLC, No. 119CV1499RDATCB, 2020 WL 2194025 (E.D. Va. May 6, 2020) (Judge Rossie D. Alston, Jr.). The court granted Plaintiff’s Motion for Default Judgment and ordered that judgment in the amount of $44,577.88 be entered against Defendant KBWB, plus additional interest from the date of judgment through the date of payment; that judgment be entered against Defendants in the amount of $64,626.95, consisting of Defendants’ exit contribution, accrued interest, and liquidated damages, to be paid jointly and severally by Burris and KBWB; and judgment be entered against Defendants for $6,235.22, consisting of Plaintiffs’ attorneys’ fees and costs incurred in pursuing this matter, to be paid jointly and severally by Burris and KBWB.

Seventh Circuit

Indiana Carpenters Pension Fund, et al. v. Hammond, et al., No. 118CV03176MPBRLY, 2020 WL 2113408 (S.D. Ind. May 4, 2020) (Magistrate Judge Matthew P. Brookman). “The question currently before the court is whether two individuals and two limited liability corporations are successors-in-interest for a previous limited liability company’s unpaid fund contributions and deductions, a portion of which has now become collectable via two unpaid judgments and the remainder in the form of an Audit Variance. The court granted summary judgment to Defendants on Counts I and II, which seeks to apply the successor liability theory to Jack Hammond and Brandy Daniels as individuals. “In sum, no case law has been cited, nor was found by this court, that applied successor liability to an individual where it would require the court to set aside or ignore an entities corporate form. Each individual’s personal liability either sounded in some other theory (i.e., alter ego) or was a result of an operation of law (i.e., due to a sole proprietorship or partnership’s liability).”

Eighth Circuit

Quick, et al. v. Rupert Construction Co., No. 8:19CV401, 2020 WL 2216779 (D. Neb. May 7, 2020) (Judge Laurie Smith Camp). The court granted Plaintiffs’ Motion for Default Judgment and entered judgment in favor of Plaintiffs in the amount of $50,605.15. RCC must also submit to an audit in connection with the unpaid contributions.

Tenth Circuit

Eighth District Electrical Pension Fund, et al. v. Green Energy Foundations, LLC, No. 19-CV-02861-CMA-SKC, 2020 WL 2128708 (D. Colo. May 5, 2020) (Judge Christine M. Arguello). The court granted Plaintiffs’ Motion for Default Judgment for a total judgment of $23,251.72 in damages, “consisting of: (1) principal contributions due for the months of February through July 2018 in the amount of $17,176.48; (2) interest in the amount of $2,652.43, in accordance with 29 U.S.C. § 1132(g)(2); (3) liquidated damages in the amount of $2,247.81, in accordance with 29 U.S.C. § 1132(g)(2); and (4) audit costs in the amount of $1,175.00, in accordance with the Trust Agreements and CBAs.”

Your ERISA Watch is made possible by the collaboration of the following Kantor & Kantor attorneys:  Brent Dorian Brehm, Sarah DemersElizabeth GreenAndrew Kantor, Susan Meter, Michelle RobertsTim Rozelle, Peter Sessions, and Zoya Yarnykh.

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