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Your ERISA Watch – Eighth Circuit Rules North Dakota Law Regulating Pharmacy Benefit Managers is Preempted by ERISA

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This week’s notable decision comes from the Eighth Circuit and concerns claims preempted by ERISA. In Pharm. Care Mgmt. Ass’n v. Tufte, No. 18-2926, __F.3d__,2020 WL 4554980 (8th Cir. Aug. 7, 2020), Plaintiff Pharmaceutical Care Management Association (“PCMA”) claimed that ERISA and Medicare Part D, which covers prescription medications, preempts two sections of North Dakota legislation regulating relationships between pharmacies, pharmacy benefit managers (“PBMs”), and other third parties that finance personal health services. PCMA is a national trade association that represents PBMs. PBMs are third-party health plan administrators that negotiate prescription drug prices with drug manufacturers and pharmacies, create networks of pharmacies to fill prescriptions for insured individuals, and process insurance claims when prescriptions are filled.

In 2017, North Dakota passed N.D. Century Code sections 19-02.1-16.1 and 19.02.1-16.2, which sought to define the rights of pharmacists in relation to PBMs and to regulate certain practices by PBMs. A PBM or third-party payer that violates any section of the legislation is guilty of a class B misdemeanor. After this legislation was enacted, PCMA sought a declaration of preemption and an injunction prohibiting the enforcement of the legislation.

After PCMA and the State of North Dakota cross-moved for summary judgment, the district court reviewed the case de novo and determined that only one provision in the legislation was preempted by Medicare Part D and entered judgment in favor of North Dakota on the remainder of Plaintiff’s claims, holding that none of the statutory provisions were preempted by ERISA.

Plaintiff appealed, and the Eighth Circuit ruled that the legislation was subject to ERISA preemption. The court explained that North Dakota legislation’s definitions of and references to “pharmacy benefits manager,” “third-party payer,” and “plan sponsor” meant the legislation’s provisions applied to plans subject to ERISA regulation. Because benefits affected by the statute were provided by ERISA-covered programs, the requirements imposed for the management and administration of these benefits necessarily affected ERISA plans. Thus, the existence of an ERISA plan is essential to the law’s operation because it could not be said that the law functioned irrespective of the existence of an ERISA plan. Accordingly, the North Dakota legislation is preempted because it relates to ERISA plans by regulating the conduct of PBMs administering or managing pharmacy benefits.

This week’s notable decision was prepared by Kantor & Kantor Attorney, Zoya Yarnykh. Zoya has worked for over a decade in the field of disability law and is passionate about helping her clients get disability benefits paid.

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

Attorneys’ Fees

Eighth Circuit

Magruder Construction Co., Inc. v. Gali., No. 4:18-CV-00286 JAR, 2020 WL 4535122 (E.D. Mo. Aug. 6, 2020) (Judge John Ross). Magruder Construction successfully sued Phillip Gali for breach of the terms of a settlement agreement. The settlement agreement allowed for the recovery of attorneys’ fees in the case of a breach. Magruder filed a motion for attorneys’ fees under Missouri state law as well as ERISA section 502(g)(1). The court, finding that attorneys’ fees are justified under the settlement agreement, declined to rule on the motion under ERISA. The court found the hourly rates requested by Magruder (between $300 and $445 per hour) to be reasonable, as Gali did not object to these rates. However, the court did cut Magruder’s hours by 33% from the 370 hours requested, finding that the “substantial effort expended by Magruder to establish its obligations under the Settlement Agreement could reasonably have been considerably less.”

Breach of Fiduciary Duty

Second Circuit

Amara et al. v. Cigna Corp. & Cigna Pension Plan, No. 3:01-CV-2361 (JBA), 2020 WL 4548135 (D. Conn. Aug. 6, 2020) (Judge Janet Bond Arterton). In this longstanding dispute alleging Cigna Corp. violated ERISA when it switched from a defined benefit pension plan to a cash balance plan, Plaintiffs moved for an “accounting by the Cigna Defendants” to both the class and the court “showing that the Cigna Defendants have fully satisfied the judgment entered against them.” The court denied the motion, agreeing with Defendants that a post-judgment accounting should not be ordered. The court previously accepted Cigna’s representations that it paid the Class Members.

Fifth Circuit

Ortiz v. Am. Airlines, Inc., No. 4:16-CV-151-A, 2020 WL 4504385 (N.D. Tex. Aug. 5, 2020) (Judge John McBryde). In this class-action lawsuit against the fiduciaries of the AMR Corporation 401(k) plan, Plaintiffs allege Defendants inclusion of the American Airlines Credit Union Demand Deposit Fund (“AA Credit Union Fund”) in the Plan was a breach of Defendants’ fiduciary duties. Defendants moved for summary judgment. The court determined that even though the AA Credit Union Fund was first included over 6 years ago, Plaintiffs’ claims are not time-barred by the six-year statute of limitations applicable to breach of fiduciary duty claims because their allegations centered not on Defendants’ initial inclusion of the AA Credit Union Fund which occurred more than six years ago, but instead on Defendants’ “ongoing and continuing fiduciary obligation” to monitor the investment options to ensure they remained prudent. Plaintiffs did not have Article III standing to purse a claim that Defendants breached their duties by not offering a stable value fund as an alternative capital preservation vehicle to the AA Credit Union Fund because no evidence was offered to show they would have chosen the alternative fund. The court granted Defendants’ motion for summary judgment because Plaintiffs had not demonstrated any loss to the plan. Plaintiffs alleged that the AA Credit Union Fund performed poorly but did not compare it to a benchmark for comparison. Plaintiffs also lost their co-fiduciary liability claim against American Airlines and the investment committee who chose options for the 401(k) plan because the court determined there was no underlying breach. All claims were dismissed with prejudice.

Sixth Circuit

Saginaw Chippewa Indian Tribe of Michigan, et al., v. Blue Cross Blue Shield of Michigan, No. 16-CV-10317, 2020 WL 4569558 (E.D. Mich. Aug. 7, 2020) (Judge Thomas L. Ludington). BCBSM filed a motion for summary judgment, arguing “that it did not owe Plaintiffs a fiduciary duty under ERISA to verify that Medicare-participating hospitals that were delivering services to Plaintiffs’ employees at [Medicare Like Rates (“MLR”)]. It contends that MLR is only available when services are sought out and paid for by a tribe’s Contract Health Service. Because BCBSM paid for the services for the employees from an entirely different source, not Plaintiffs’ Contract Health Services [(“CHS”)], the services were not eligible for MLR.” The court determined that MLR is only applicable for services funded by CHS and BCBSM was not authorized nor did it pay for services using CHS funds. Thus, MLR was not applicable to BCBSM’s payments to medical providers. Because BCBSM did not have a fiduciary duty under ERISA to pay Plaintiffs’ medical services at MLR, there is no breach of fiduciary duty, violation of the Health Care False Claims Act, or breach of a common law fiduciary duty. The court granted BCBSM’s motion for summary judgment.

Class Actions

DC Circuit

Abraha, et al. v. Colonial Parking, Inc., et al., Case No. 16-680, 2020 WL 4432250 (D.D.C. Jul. 31, 2020) (Judge Colleen Kollar-Kotelly). The court approved a preliminary class settlement agreement involving a group of 119 parking attendants who will share about $1.8 million from their employer, Colonial Parking Inc., and its benefits administrator, FCE Benefit Administrators Inc. The settled proposed class action alleges that the companies mismanaged Colonial’s employee health insurance plans. The Court approved a settlement proposal that requires Colonial and FCE to jointly pay $1.65 million in cash into a settlement fund. About $290,000 in surplus assets from the two health insurance plans will also be diverted into the fund, bringing the total settlement to a little less than $2 million. After administration costs are paid, the fund will contain about $1.8 million for distribution to the parking attendants.

Third Circuit

Huffman v. The Prudential Insurance Company of America, No. 2:10-CV-05135, 2020 WL 4530150 (E.D. Pa. Aug. 6, 2020) (Judge Joseph F. Leeson, Jr.). This case involves a $9 million settlement of a class action where Plaintiffs alleged “that Prudential’s default practice of distributing policy benefits, which involved opening a bank account upon which beneficiaries could draw checks—and which, crucially, allowed Prudential to retain and invest the benefits until drawn upon by beneficiaries—violated provisions of [ERISA] and state law.” The court granted Plaintiffs’ request to reissue five settlement checks and their motion for cy pres distribution for the remaining $26,241.48 to be distributed to the two cy pres beneficiaries Pennsylvania Legal Aid Network, Inc. and Justice in Aging. The court found that the two nonprofits are best positioned to utilize the unclaimed funds for purposes related to the class.

Eighth Circuit

Beck v. Austin, No. 19-CV-1453 (PJS/ECW), 2020 WL 4476443 (D. Minn. Aug. 4, 2020) (J. Patrick J. Schiltz). Plaintiffs, employees of a hearing aid manufacturer, brought this class action against the manufacturer and various other defendants under ERISA, alleging mismanagement of the company’s employee stock ownership plan (ESOP). Executives of the company stole approximately $30 million from the company through various fraudulent schemes and were eventually criminally prosecuted. This fraud reduced the value of the company, which led to the ESOP becoming underfunded. The manufacturer later settled with the trustee of the ESOP. Defendants moved to dismiss Plaintiffs’ complaint, arguing that Plaintiffs’ claims had already been settled and released. Plaintiffs admitted that their claims fell within the scope of the release but argued that the release was ineffective with respect to the individual defendants named in the lawsuit under the collateral source rule. The court rejected this argument, calling it “plainly meritless.” Plaintiffs also argued that the release was invalid as a prohibited transaction under ERISA. The court ordered discovery on this issue. The court further granted Defendants’ motion to dismiss regarding certain executives’ alleged failure to sue, because the statute of limitations had not yet expired when they left the company, and there was no causation link between the failure to sue and the alleged losses. Finally, the court rejected Plaintiffs’ effort to reverse-pierce the corporate veil to hold the company liable for the founder/CEO’s alleged misconduct, finding that the company was legitimate and solvent, and the owner was capable of paying any judgment against him.

In re: EpiPen ERISA Litig., No. CV 17-1884 (PAM/HB), 2020 WL 4501925 (D. Minn. Aug. 5, 2020) (Judge Paul A. Magnuson). In this consolidated class action where Plaintiffs’ alleged that four pharmacy benefit managers (“PBMs”) violated their fiduciary duties in failing to ensure that individual EpiPen purchasers received the benefit of the rebates or discounts, the court denied Plaintiffs’ motion for class certification. It found that “Defendants’ fiduciary status is not susceptible of class-wide proof. Defendant PBMs managed pharmacy benefits for thousands of plans, each with its own specific provisions governing the PBMs’ behavior.” The percentage of the rebates and fees payable to each plan differ, and each plan’s control over its PBM’s rebate program varied widely. Even if Plaintiffs could establish Defendants’ fiduciary status by means of common proof, the alleged breaches of any fiduciary duties would not present a common issue or be subject to classwide proof. And Plaintiffs cannot establish their injuries on a classwide basis.

Eleventh Circuit

Stanton v. NCR Pension Plan, No. 1:17-CV-02309, 2020 WL 4578703 (N.D. Ga. Aug. 4, 2020) (J. Michael L. Brown). Plaintiff brought this class action under ERISA against NCR’s pension plan and other defendants, contending that his claim for pension benefits was denied because NCR miscalculated his years of service. Defendants moved to dismiss Plaintiff’s breach of fiduciary duty claims on standing grounds. The court granted the motion in part and denied it in part. The court found that because the pension plan was a defined benefit plan, and Plaintiff had failed to allege that the plan was underfunded or at significant risk, the company’s “derisking” actions (offering participants lump sum distributions of benefits) did not affect him sufficiently to grant standing. The court also found that Plaintiff could not obtain standing by suing on behalf of the plan because he had not been assigned a private right of action by the plan. (The court did not, but could have, cited to the Supreme Court’s recent decision in Thole v. U.S. Bank which arrived at similar conclusions.) However, the court did let Plaintiff proceed on his breach of fiduciary claim arising from the plan’s alleged failure to adequately inform him of his eligibility for benefits, as this created an actionable injury-in-fact. The court also ruled that this claim was not duplicative of his claim for benefits because it sought relief under a different theory. Finally, the court allowed Plaintiff to add three subclasses to his complaint.

Disability Benefit Claims

Second Circuit

Vellano v. The Standard Life Ins. Co. of New York, No. 1:18-CV-944, 2020 WL 4464605 (N.D.N.Y. Aug. 4, 2020) (Judge David N. Hurd). The only issue was how to calculate the claimant’s pre-disability earnings (PDE). The claimant owned an S-Corp and showed positive income on his W-2 and an even greater loss on his K-1. The plan said PDE was calculated by adding the amounts reported on the W-2 and K-1. Standard added the positive W-2 number to the negative K-1 number with the result being a negative. Thus, it paid the minimum benefit. Claimant called this “bunkum,” claiming the K-1 number should be marked as a zero, not a negative number as the plan only contemplates “income” and “net profit from business.” Noting it is “axiomatic that a positive and a negative integer can be ‘added’ together,” the court found Standard’s method to be straight forward, noting “there is certainly nothing arbitrary and capricious about it.” The result was a ruling upholding Standard’s methodology—which had the added benefit of preventing the owner of a business, knowing disability was impending, from paying themselves a massive W-2 income while allowing the business to suffer a loss, and thus manipulating the PDE calculation.

Fourth Circuit

McKinnon v. Duke University, No. 5:19-CV-205-FL, 2020 WL 4506096 (E.D.N.C. Aug. 5, 2020) (Judge Louise W. Flanagan). In this dispute over long-term disability benefits, the court granted Plaintiff’s motion for summary judgment. The court granted Defendant’s motion to strike DOT information that Plaintiff attached in support of her reply brief which showed that “Medical Record Technician” is “light work.” The court found that Defendant’s vocational assessment was supported by substantial evidence. Applying abuse of discretion review, the court found that Defendant’s decision was not supported by substantial evidence, where Plaintiff “presented several years’ worth of treatment notes documenting neck and back pain and showing failure of numerous direct interventions by health providers to reduce such pain; her treating physician’s repeated opinion that plaintiff was unable to maintain requisite productivity doing clerical work; two FCEs determining that plaintiff was functioning below a sedentary level based on a battery of various tests with discussion of those tests significance; MRIs showing significant abnormalities in plaintiff’s spine; letters from plaintiff’s treating physicians clarifying their statements where construed by consulting physicians at previous levels of consideration; a personal statement from plaintiff regarding her condition; plaintiff’s social security disability file; and a social security disability award from the Social Security Administration without need for evidentiary hearing before an ALJ.” The court discounted the opinion of peer reviewer, Dr. Howard Grattan, because his determination that Plaintiff is not restricted at all as to sitting is not supported by substantial evidence. Similarly, peer reviewer, Dr. Mauro Zappaterra’s medical opinion was not supported by substantial evidence where he makes contradictory statements and fails to carefully review the medical documentation.  Lastly, Liberty’s wholesale adoption of Dr. Neal McPhee’s analysis was not the productive of a principled, deliberate decision-making process. The court explained: “Liberty seized on McPhee’s opinion that plaintiff can stand occasionally and reasoned that a sit-to-stand workstation could accommodate her impairments. However, McPhee’s assessment that plaintiff can stand occasionally, which is defined as up to 1/3 of the workday, is not supported by substantial evidence for the reasons discussed above. McPhee also erroneously assumed that these two capacities could be stitched together to form one whole workday based on a sit-to-stand work accommodation. There is not substantial evidence in the record that prolonged periods of standing relieve the pain caused by plaintiff sitting for prolonged periods of time.”


First Circuit

Russo v. Valmet, Inc., No. 2:19-CV-00324-DBH, 2020 WL 4432364 (D. Me. July 31, 2020) (Magistrate Judge John C. Nivison). In this dispute, Plaintiff claims his employer and its defined benefit pension plan wrongfully denied him benefits and that he relied on his employer’s representations that he would be entitled to benefits when he accepted employment. The court granted Plaintiff’s request to conduct discovery, in part. The court found that focused discovery on the breach of fiduciary duty claim is warranted. “Plaintiff may request in discovery through interrogatory and/or a request for documents, communications between Plaintiff and any of Defendants’ employees or agents, prior to the start of Plaintiff’s employment with Valmet in 2000, regarding the benefits that would or would not be available to Plaintiff.” The court did not permit discovery regarding the employer’s corporate structure and history or comparator discovery since his claim does not involve discrimination nor inconsistent administration of the plan.

Ninth Circuit

Chacko v. AT&T Umbrella Benefit Plan No. 3, No. 2:19-cv-01837-JAM-DB (E.D. Cal. Aug. 11, 2020) (Magistrate Judge Deborah Barnes). In this dispute over long-term disability benefits from a self-funded plan, the court granted Plaintiff’s second motion to compel seeking discovery related to the Plan’s and Sedgwick’s (the Plan’s claims administrator) relationship to Network Medical Review Co., Ltd. (“NMR”), statistical information related to NMR’s peer reviews, and financial and statistical information related to peer reviewer, Dr. Howard Grattan. The discovery requests that the court granted are not stated in the opinion but may be found in the parties’ joint statement. The court denied Plaintiff’s request for sanctions, finding that the Plan’s objections to the discovery “were substantially justified.” Plaintiff is represented by Kantor & Kantor, LLP.

Tenth Circuit

Peter E. & Eric E. v. United Healthcare Services, et al., No. 217CV00435DBBDAO, 2020 WL 4437261 (D. Utah Aug. 3, 2020) (Magistrate Judge Daphne A. Oberg). The court granted Plaintiffs’ motion to conduct discovery on the Parity Act claim. The court found that the claim is distinct from the ERISA claim seeking payment of benefits for mental health and substance abuse treatment at Vista Treatment Center. The court also found that discovery is permissible and necessary under the Parity Act for Plaintiffs to show that the self-funded plan treats mental health and substance abuse claims differently than medical/surgical claims. Lastly, the court found that Defendants’ arguments directed at the relevance, scope, and proportionality of the proposed discovery to be premature at this time since these requests have not yet been served.

ERISA Preemption

Fourth Circuit

Carolina Baptist Hosps., Inc. v. Dula, No. 520CV00034KDBDSC, 2020 WL 4462208 (W.D.N.C. Aug. 4, 2020) (Judge Kenneth D. Bell). The court considered a motion to remand to state court and review of the Magistrate Judge’s decision. The court agreed with the Magistrate Judge’s determination that the providers’ claims do not satisfy the requirements for complete preemption as articulated by the Fourth Circuit. The court also agreed that the providers’ claims do not create any other bases for federal question jurisdiction or subject matter jurisdiction. The court determined that the providers do not have standing to sue under ERISA section 502(a) as the Plan does not permit an assignment of rights. The court also considered the rare type of federal question jurisdiction referred to as “Grable-Gunn” jurisdiction which involves plaintiffs who have raised state-law causes of action but resolving them would require the court to decide embedded federal issues. The court found the providers’ claims necessarily raise ERISA issues requiring interpretation of federal law. However, the alleged federal issue is not substantial, not capable of resolution without “disrupting the federal-state balanced approved by Congress,” and the federal issue is not actually disputed, and therefore the providers do not meet the Grable-Gunn requirements for federal jurisdiction. The court directed remand of the matter to state court.

Select Specialty Hospital – Quad Cities, Inc. v. WH Administrators, Inc., No. CV PX-18-03586, 2020 WL 4569521 (D. Md. Aug. 7, 2020) (Judge Paula Xinis). Plaintiff is a long-term acute care hospital that provided critical care recovery services to a patient under an ERISA health plan that is administered by Defendant. Plaintiff submitted a claim for payment in the amount of $200,214.98 which Defendant did not pay. Plaintiff filed suit for breach of contract, promissory estoppel, and a bad faith denial of an insurance claim and then moved for default judgment when Defendant failed to enter an appearance or otherwise respond. The court found that the breach of contract claim is preempted by ERISA. Converting the claim to one under ERISA Section 502(a)(1)(B), the court found that Plaintiff is owed payment under the Plan and granted the motion for default as to Count I. The court found that the promissory estoppel claim is not preempted by ERISA. As to which state law applies, the court found that under Maryland’s choice-of-law rules governing contracts, Iowa law applies since the final act necessary to make Defendant’s promise to cover the cost of the patient’s treatment contractually binding, “seems to have taken place Iowa.” The court granted the motion as to liability on this count. The court denied the motion as to the bad faith claim since that is preempted by ERISA Section 502(a). In terms of damages, the court awarded the claim amount, pre-judgment interest using the interest rate prescribed under 28 U.S.C. § 1961 to run 30 days after Defendant’s receipt of the claim, post-judgment interest at the same rate, and attorneys’ fees and costs.

Seventh Circuit

Thorpe v. Indiana Electrical Workers Pension Trust Fund, I.B.E.W., No. 1:19-CV-2988 RLM-MPB, 2020 WL 4462634 (S.D. Ind. Aug. 4, 2020) (Judge Robert L. Miller, Jr.). Plaintiff brought an ERISA benefit claim and a common law estoppel claim against Defendant for recouping a pension overpayment Plaintiff received from the pension fund for over ten years due to the fund’s miscalculation. The court found that the claim is conflict preempted by ERISA and that the estoppel claim is not viable under the federal common law of ERISA. “The circuit court has declined to extend its ruling in [Black v. TIC Investment Corporation, 900 F.2d 112, 115 (7th Cir. 1990) (“estoppel principles generally apply to all legal actions”)] to claims against funded or multi-employer plans, noting that ‘allowing estoppel claims against funded, multi-employer plans may undermine the actuarial soundness of the plans.’” citing Pearson v. Voith Paper Rolls, Inc., 656 F.3d 504, 509 at n.2 (7th Cir. 2011) (collecting cases).

Eighth Circuit

Pharm. Care Mgmt. Ass’n v. Tufte, No. 18-2926, __F.3d__, 2020 WL 4554980 (8th Cir. Aug. 7, 2020) (before Smith, Gruender, and Benton, Circuit Judges). See Notable Decision summary above.

Life Insurance & AD&D Benefit Claims

Ninth Circuit

Earle v. UNUM Life Ins. Co. of Am., et al., No. CV 19-2903-JFW(AFMX), 2020 WL 4434951 (C.D. Cal. July 23, 2020), judgment entered sub nom. Earle v. Unum Life Ins. Co. of Am., No. 219CV02903JFWAFMX, 2020 WL 4429574 (C.D. Cal. July 30, 2020) (Judge John F. Walter). Plaintiff claimed she lost sight in her right eye due to a macular hole. She claimed the hole was caused by the violent jerking of her head when she tripped and fell while walking up a flight of stairs. She made a claim for loss of sight under her AD&D plan and Unum denied the claim. Applying the abuse of discretion standard of review, the court upheld the denial because the medical records around the time of the fall did not indicate Plaintiff suffered any head trauma or whiplash injury—reporting only treatment for injuries to her left hand without any reported symptoms that could be attributed to a violent jerking of her head. Further, the court held that Plaintiff’s preexisting vitreomacular traction and post-fall surgery were substantial causes of the blindness and each were conspicuously excluded under the plan.

Seventh Circuit

Chamberlain v. Metropolitan Life Ins. Co., No. 18-CV-1902, 2020 WL 4436735 (E.D. Wis. Aug. 3, 2020) (Judge Lynn Adelman). Plaintiff sued challenging the denial of his claim for accidental death benefits. The parties have filed cross-motions for summary judgment. Plaintiff’s father died while scuba diving after ingesting salt water and losing consciousness thereafter, but the death certificate listed as cause of death as “cardiorespiratory arrest; Diabetes Mellitus type II”. Defendant denied the accidental death claim because the cause of death was not listed as accidental. The court granted Defendant’s motion for summary judgment because its decision had rational support. The only piece of evidence in the record that supported Plaintiff’s claim was the affidavit of his brother, and it must be weighed against the rest of the record. Furthermore, the affidavit is not as conclusive as Plaintiff represents. The brother maintained that he knows that decedent ran out of oxygen but also admits that he never saw his father give any type of warning that indicated he was running out of oxygen. Nor does the affidavit provide much detail of any attempts at resuscitation or rule out a plausible conclusion that decedent had a diabetic emergency while diving which, as Defendant points out, is an activity with risk of serious death or injury for those with diabetes.

Medical Benefit Claims

Ninth Circuit

Josef K., et al. v. California Physicians’ Service, et al., No. 18-CV-06385-YGR, 2020 WL 4539149 (N.D. Cal. Aug. 6, 2020) (Judge Yvonne Gonzalez Rogers). Plaintiff sought benefits for residential treatment against Blue Shield, TriNet, and Maximus. The court considered cross motions for judgment under an abuse of discretion standard. The court declined to extend the Wit decision to the Magellan Guidelines because the court does not have before it the kind of expert testimony or other evidence to decide that the Magellan Guidelines in the context of this plan are improper. The court could not conclude that Blue Shield’s physician did not adequately review all relevant materials. The court found that Blue Shield’s process “while sloppy at times, does not rise to the level of an abuse of discretion.” The court did not find based on the record that the patient had suicidal ideations rendering Blue Shield’s finding an abuse of discretion. The court found that Plaintiffs have not demonstrated that Blue Shield relied on erroneous findings of fact in determining residential treatment was not medically necessary. The court noted that the opinions of treating providers were not based on recent treatment and there is no evidence that Blue Shield refused to credit those opinions. The court concluded Blue Shield is entitled to judgment. The court found no evidence regarding TriNet’s role in relation to Plaintiffs’ claims and concluded TriNet is entitled to judgment. The court concluded that Plaintiffs have not established Maximus was a functional fiduciary and Maximus is entitled to judgment.

Pension Benefit Claims

First Circuit

Belknap v. Partners Healthcare System, Inc., et al., No. CV 19-11437-FDS, 2020 WL 4506162 (D. Mass. Aug. 5, 2020) (Judge Dennis Saylor, IV). Plaintiff filed a class action accusing his former employer of improperly calculating his and others’ early retirement benefits. Under ERISA, Defendant was required to provide benefits to Plaintiff and others which were “actuarily equivalent” to the benefit they would have received had he retired at 65, rather than retiring early. Plaintiff alleged that Defendant utilized factors which resulted in benefits which were not actuarily equivalent. Defendant moved to dismiss at the complaint stage. The Court dismissed the motion, finding that the proper definition of “Actuarial Equivalence” was a question of fact which could not be resolved on the record at the motion to dismiss stage.

Plan Status

Eighth Circuit

Hampton v. Standard Ins. Co., No. 19-3501, __F.App’x__, 2020 WL 4557654 (8th Cir. Aug. 7, 2020) (Before Loken, Benton, snd Shepherd, Circuit Judges). The court affirmed the grant of summary judgment against the pro se Plaintiff-Appellant on the basis that (1) ERISA does not apply to his claim due to the governmental plan exemption and (2) the breach-of-contract claim fails because Defendant acted in accordance with the contract by denying benefits after Plaintiff elected a refund of his plan contributions that ended his plan participation.

Provider Claims

Second Circuit

Shuriz Hishmeh, M.D., PLLC v. Empire Health Choice Assurance, Inc. d/b/a Empire Blue Cross Blue Shield, No. 19CV03144JMAARL, 2020 WL 4452112 (E.D.N.Y. Aug. 3, 2020) (Judge Joan M. Azrack). Plaintiff, an orthopedic surgeon, brought suit against a health plan’s insurer for not paying Plaintiff for out-of-network services it provided to the health plan’s beneficiary. The court found that Plaintiff does not satisfy the statutory definition of a “participant” or “beneficiary” so does not have standing to bring his claims. The patient could not assign her rights to Plaintiff because the plan at issue contains an unequivocal anti-assignment provision that bars any assignment without Defendant’s consent. Defendant did not waive the anti-assignment provision because the plan expressly provides that only the patient’s employer has the authority to waive the plan’s provisions. The court dismissed the complaint for lack of standing.

Third Circuit

Metro. Sugical Inst., LLC v. Cigna, Case No. 19-15827, 2020 WL 4432430 (D.N.J., Jul. 31, 2020) (Judge Michael A. Shipp). Metro Surgical, a same-day ambulatory surgery center, alleged that Cigna failed to provide or comply with a reasonable claims review procedure and wrongfully denied and underpaid reimbursement of “out-of-network” benefits on claims covering medical services rendered dating back to 2015. Metro Surgical specifically alleged that Cigna’s “current claims procedure is characterized by automatic, indiscriminate denial of claims, adverse benefit determinations lacking any or adequate explanation for the denial or reduction of Claims, failure to provide adequate notification and disclosures, untimely notifications, failure to provide information regarding the appeals procedure, and adverse benefit determinations based on demonstrably erroneous grounds.” Plaintiff sued Cigna alleging ERISA and New Jersey state law claims. On Cigna’s motion to dismiss, the court held that (1) Cigna’s motion to dismiss for failure to exhaust administrative remedies would be denied; (2) Metro Surgical adequately pleaded standing via valid assignment of benefits; (3) Metro Surigical’s benefit and fiduciary claims against Cigna were sufficiently plead and would not be dismissed; and (4) Metro Surgical’s state law claims are not preempted by ERISA.

Retaliation Claims

Fifth Circuit

Sherrod v. United Way Worldwide, No. 19-10376, __F.App’x__, 2020 WL 4381815 (5th Cir. July 30, 2020) (Chief Judge Owen, Southwick and Oldham as Circuit Judges). Sherrod was the former Vice President of Human Resources at United Way of Tarrant County (“UWTC”), a local branch of the United Way Worldwide (“UWW”). She reported various possible ERISA violations to the CEO of UWTC and was terminated. UWW refused to take any action on her behalf. She sued UWTC and UWW for interference with ERISA benefits under 29 U.S.C. § 1140. Her claims against UWW were dismissed by the trial court, and Sherrod appealed to the Fifth Circuit. The appellate court affirmed dismissal of the claims against UWW because UWW did not “discharge, fine, suspend, [or] expel” Sherrod – UWTC was the party that terminated Sherrod’s employment. UWW’s refusal to support Sherrod did not subject them to liability under ERISA.

Standard of Review

Ninth Circuit

Earle v. UNUM Life Ins. Co. of Am., et al., No. CV 19-2903-JFW(AFMX), 2020 WL 4434951 (C.D. Cal. July 23, 2020), judgment entered sub nom. Earle v. Unum Life Ins. Co. of Am., No. 219CV02903JFWAFMX, 2020 WL 4429574 (C.D. Cal. July 30, 2020) (Judge John F. Walter). The University of Southern California (“USC”) funded its AD&D plan via insurance issued by Unum. That insurance was provided by a master insurance policy issued by Unum to the Select Group Trust in 1988. The master policy was issued in Maine, where Unum is headquartered, and has a choice of law provision calling for Maine law. To participate in the trust, an employer must apply. Once the application is approved, an employer receives AD&D coverage under the master policy through the issuance of a summary of benefits bearing a unique identification number. The decision does not explain how this differs from applying for a policy and receiving a “new” policy. This trust-based master policy provides coverage to employers in thirty-nine states and Washington, DC, via “tens of thousands” of summaries of benefits and insures “hundreds of thousands of employees.” The master policy grants discretion to Unum. The court held the choice of law provision controlled because it was not “unreasonable or unfair” to enforce it. Thus, California’s ban on discretion (Cal. Ins. Code § 10110.6) did not invalidate the grant of discretion. The court failed to discuss whether California’s legislature granted Californians the right to a “fair review of claims denials” via passing Cal. Ins. Code § 10110.6. By extension, the court failed to distinguish the multiple cases citing this reasoning for rejecting choice of law provisions. The court did note that Maine also banned discretionary clauses, but the ban came into effect in 2019, after the facts of this case.

Statute of Limitations

Sixth Circuit

Schaf v. Fed. Express Corp., No. CV 19-11695, 2020 WL 4474081 (E.D. Mich. Aug. 4, 2020) (Judge Linda V. Parker). Plaintiff filed this lawsuit on June 7, 2019, challenging Defendant’s decision to deny him LTD benefits. Plaintiff received LTD for 24 months under the “own occupation” standard of disability. Thereafter, Aetna terminated his benefits and upheld its decision on appeal on June 3, 2016. In the denial, Plaintiff was informed that he had three years to file an action in court. Plaintiff argued that the statute of limitations defense was waived because Defendant failed to raise it in its initial Answer to the Complaint, and while Defendant attempted to correct its omission in an Amended Answer, that pleading was not filed in accordance with the Federal Rules of Civil Procedure. The court granted Defendant’s motion for summary judgment, explaining that it was well established that failure to raise an affirmative defense by responsive pleading did not always result in waiver, and that a district court may, in its discretion, allow a defendant to raise an affirmative defense for the first time in a motion for summary judgment if doing so does not result in surprise or prejudice to the plaintiff. In this case, Plaintiff could not have claimed surprise by Defendant’s assertion of the statute of limitations because he was aware Defendant raised the defense in its Amended Answer, even if it were procedurally improper. The “mailbox” argument was also unavailing because the Plan terms spoke to when an appeal decision was made, not to when it was received. In this case, Aetna’s denial letter specifically and plainly informed Plaintiff of his right to bring a civil action challenging the decision and the time limit for doing so. As such, the court concluded that the contractual three-year limitations period was enforceable and that Plaintiff’s complaint, filed four days too late, was time-barred.

Withdrawal Liability & Unpaid Contributions

Third Circuit

Trustees of UFCW Local 152 Health & Welfare Fund v. Liberty Food Store, Inc., No. CV1917559MASZNQ, 2020 WL 4501923 (D.N.J. Aug. 5, 2020) (Judge Michael A. Shipp). Plaintiffs entered into settlement agreements with Defendant related to delinquent contributions after Defendant filed for Chapter 11 bankruptcy protection. When Defendant defaulted on the payments, Plaintiffs filed an “Amended Complaint seeking (1) judgment against Defendant for breaching the Settlement Agreements; (2) an order requiring Defendant to remit $21,212.32 to Plaintiffs, which represents the outstanding balance owed; and (3) an order requiring Defendant to pay Plaintiffs’ fees and costs.” The court denied Plaintiffs’ motion for default judgment and ordered them to show cause as to why the case should not be transferred to bankruptcy court pursuant to the terms of the settlement agreements and the court’s rules.

Sixth Circuit

Carpenters Pension Trust Fund – Detroit And Vicinity et al. v. Brunt Associates, Inc. et al., No. 16-CV-13928, 2020 WL 4499888 (E.D. Mich. Aug. 5, 2020) (Judge Matthew F. Leitman). The court concluded “that BAI did receive the May 24 Notice on or about May 25, 2016. And BAI thereafter failed (1) to timely ask the Fund to review the matters raised in the May 24 Notice and/or (2) to timely demand arbitration. Therefore, BAI is obligated to pay the full amount of the assessed withdrawal liability to the Fund – unless BAI prevails on its counterclaims.”

Seventh Circuit

Plumbers’ Pension Fund, Local 130, U.A., et al. v. Republic Piping Systems, Inc., No. 20-CV-774, 2020 WL 4437846 (N.D. Ill. Aug. 3, 2020) (Judge Joan B. Gottschall). The court determined that the complaint states a plausible claim for imposing successor liability under ERISA and denied Republic’s motion to dismiss. The court noted that common law successor liability rules do not apply to the ERISA claims here. “Under the totality of the circumstances approach exemplified in [Sullivan v. Running Waters Irrigation, Inc., 739 F.3d 354 (7th Cir. 2014)], the well-pleaded facts listed above state a plausible ERISA claim for imposing successor liability upon Republic even though plaintiffs do not allege that Republic purchased any of U.S. Plumbing’s assets.”

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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