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Your ERISA Watch – Eleventh Circuit Affirms Denial of Special Early Retirement Benefits to Factory Workers Following Sale of Employer by Parent Company

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In this week’s notable decision, Hill v. Employee Benefits Admin. Comm. of Mueller Grp. LLC, No. 18-14026, __F.3d__, 2020 WL 4931446 (11th Cir. Aug. 24, 2020), the Eleventh Circuit Court of Appeals affirmed the denial of Special Early Retirement (“SER”) benefits to Appellants, who are longstanding hourly workers at a pipe factory in Bessemer, Alabama.

Appellants claim they are entitled to SER benefits after Mueller Group, LLC, the former parent company of U.S. Pipe, which employed them, sold its interest in U.S. Pipe to USP Holdings. Upon the sale, Appellants kept their same jobs at the same plant; the Bessemer plant never shut down.

Upon meeting age and years of service requirements, to qualify for SER benefits, an employee must be a Participant in the pension plan whose Termination Date occurs prior to his Normal Retirement Age because he is (1) laid off and not recalled within 2 years, or (2) terminated by permanent plant shutdown. The pension plan defines Termination Date as “[t]he date of an Eligible Employee’s termination of employment with the Employer,” which was defined as “United States Pipe and Foundry Company or any successor thereto. The Employer is the Plan sponsor.” As the court noted, the pension plan does not define “Layoff,” “laid off,” or “permanent plant shutdown.”

In applying the first step of a six-step framework for evaluating the wrongful denial of benefits by an ERISA administrator, the district court found that Mueller’s decision to deny SER benefits was de novo wrong because of its perceived inconsistences in the reasoning of the Employee Benefits Administrative Committee of Mueller Group, LLC (“EBAC”) and Appeals Committee in their denial letters. After determining the administrator was vested with discretion (step two) and applying step three, the district court found that the EBAC’s interpretation of the plan documents was reasonable and upheld it on that basis.

The Eleventh Circuit found that the EBAC’s decision was correct under de novo review (step one) and there was no reason to reach step three, where the court would also conclude that the EBAC’s interpretation was a reasonable one.

Under step one, the court concluded that pursuant to the unambiguous terms of the plan, “the employees simply did not qualify for SER benefits. To qualify, the employees either had to be laid off or terminated by a permanent plant shutdown. These employees were neither laid off, because they kept their same jobs at the same plant, nor were they terminated by a permanent plant shutdown, because the Bessemer plant never shut down. Thus, the employees are not eligible for SER benefits, and EBAC’s denial of those benefits was the correct interpretation of the Mueller Plan.” The court rejected Appellants’ “metaphysical argument” that they were laid off because they lost their jobs with Mueller even though they kept their jobs at the Bessemer plant. The court reasoned that “[t]his is not how people ordinarily use the phrase ‘laid off.’ … No one would describe himself as having been laid off simply because the employer’s corporate nomenclature changed, especially when everything else remained the same.”

Additionally, there was no “permanent plan shutdown” when you apply the ordinary meaning to that term. Citing to Merriam-Webster Dictionary, the court noted that a “shutdown” is “the cessation or suspension of an operation or activity.” And a shutdown is “permanent” if it “continu[es] or endur[es] without fundamental or marked change.” Even if Appellants had been terminated by their employer, it would not have been on account of a permanent plant shutdown where the plant never shut down in the ordinary meaning of that term. “The undisputed record indicates that the sale of the plant from Mueller to USP resulted in no disruption to operations at the plant. On the Monday after the sale (which closed on a Sunday), the employees came to the same factory and did the same jobs they had done the previous Friday, and did what they had done for at least the past eighteen years.”

Regarding the alternative claim under 29 U.S.C. § 1132(a)(3) seeking payment of SER benefits, the court found that such claim is barred by Eleventh Circuit precedent holding that “plaintiffs cannot ‘plead and proceed’ in the alternative under 29 U.S.C. § 1132(a)(3) when their appropriate remedy is offered by § 1132(a)(1)(B).

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

Breach of Fiduciary Duty

Seventh Circuit

Godfrey, et.al. v. Greatbanc Trust Co., et. al., No. 18 C 7918, 2020 WL 4815906 (N.D. Ill. Aug. 19, 2020) (Judge Matthew F. Kelly). Participants of the McBride & Son ESOP alleged the plan’s trustee and sponsor violated their fiduciary duties in two prohibited transactions with the plan’s assets. Defendants moved to dismiss portions of the Second Amended Complaint which brought new allegations about newly discovered conduct. On the ERISA fiduciary breach claims, Plaintiffs allege “that by conducting the 2013 reorganization, making the subsequent distributions of MS Capital shares to corporate officers and paying excessive executive salaries, and executing the 2017 stock sale, the defendants violated fiduciary duties imposed by ERISA.” The court determined that the factual allegations support a plausible inference that the 2013 business reorganization involved fiduciaries’ exercise of control over Plan assets. Following the Ninth Circuit, the court also determined that a compensation decision by a corporate officer who is also a plan fiduciary raises a conflict of interest that triggers ERISA liability; when a plan’s assets include employer stock, ERISA fiduciary standards apply to a corporate officer’s “business decisions from which that individual could directly profit.” Plaintiffs’ fiduciary breach claim against GreatBanc is a plausible claim under ERISA section 404(a) where Plaintiffs allege that GreatBanc failed to monitor the Plan’s investments, report dilution of the Plan’s MS Capital equity to Plan participants, and appoint independent members to the board of MS Capital.

Class Actions

Seventh Circuit

King v. State Farm Mut. Auto. Ins. Co., Case No. 19-cv-1120-JES-TSH, 2020 WL 4784733 (C.D. Ill. Aug. 18, 2020) (Judge James E. Shadid). Bob King, a retired employee of State Farm Mutual brought a class action against State Farm and the State Farm Insurance Companies Health Reimbursement Arrangement Plan for United States Eligible Individuals (the “Plan”). King alleged that State Farm maintained an online portal which listed particular medical services that would be eligible for reimbursement, effective on or about January 1, 2019. King contracted for dental work, which the portal list indicated was a covered service under the Plan. Effective February 1, 2019 and without advance notice, State Farm changed the list of medical services posted on the online portal and refused to reimburse claims made for services listed as eligible for reimbursement under the previous portal listing. Here, King sought class certification of a class including himself and other members of the Plan who were similarly denied claims for this medical service. Notwithstanding State Farm’s opposition to King’s motion for class certification, the court held that the (1) ascertainability and numerosity requirements of Rule 23 had been met, (2) that the commonality requirement of Rule 23 was met because King’s claims and those of the putative class members all derived from a singular course of conduct by State Farm, (3) that King’s class definition was narrowly tailored and that King’s claims were typical of the claims of the class, and (4) that King would be an adequate class representative under Rule 23. As such, King’s class action, as defined, was certified by the court.

Disability Benefit Claims

Fifth Circuit

Bertucci v. Aetna Life Ins. Co., No. CV 19-10655, 2020 WL 4915723 (E.D. La. Aug. 21, 2020) (Judge Eldon E. Fallon). Plaintiff sued Aetna in response to the denial of her claim for Long Term Disability benefits. Plaintiff argued that she was entitled to benefits under either an abuse of discretion or de novo standard. Plaintiff argued that de novo was the proper standard because Aetna’s Plan documents failed to properly grant discretion. The court rejected this argument, finding that the language within the Plan documents was sufficient to grant discretionary authority to Aetna. Reviewing the case under an abuse of discretion standard, the court found that Aetna failed to substantially comply with ERISA claim regulations where it identified occupations it believed Plaintiff could perform, as Aetna identified occupations “which involve starting salaries well in excess of any amount Bertucci ever made, are not ‘reasonable occupations’ for a woman in her late fifties, who has been out of the workforce for seven years, who has no experience in similar roles, and who, most importantly, is incapable of maintaining a seated position for more than fifteen minutes at a time.” The court therefore held that Aetna failed to provide a full and fair review and remanded it back to Aetna for further consideration of the vocational question.

Discovery

Ninth Circuit

S.L., by & through his parents & guardians, J.L. & L.L. v. Premera Blue Cross, et al., No. C18-1308-RSL, 2020 WL 4747873 (W.D. Wash. Aug. 17, 2020) (Judge Robert S. Lasnik). In this dispute over a minor’s mental health treatment at Catalyst, a residential treatment center in Utah, under a plan self-insured by Amazon Corporate LLC and administered by Premera Blue Cross, the court granted Plaintiff’s motion to compel and denied Defendants’ motion to strike. “Plaintiff seeks discovery related to defendants’ adoption and utilization of the InterQual Criteria for claims processing.” The abuse of discretion standard of review applies here and “[t]he Court is not persuaded by defendants’ assertions that (1) no conflict of interest exists here, and (2) the discovery plaintiff seeks is irrelevant to any possible conflict of interest.” This is not a fishing expedition. Plaintiff has already shown evidence of irregularities in the claims handling procedure that resulted in the denial of benefits. The court found Defendants’ motion to strike a report from Dr. Louis J. Kraus for purposes of any future MSJs is premature at this time.

Tenth Circuit

Doe v. Intermountain Healthcare, Inc. & Selecthealth, Inc., No. 2:18-CV-807-RJS-JCB, 2020 WL 4784760 (D. Utah Aug. 18, 2020) (Magistrate Judge Jared C. Bennett). Noting “[t]he proverb, ‘Two wrongs don’t make a right,’” the court declined to exercise its discretion under Fed. R. Civ. P. 37(a)(5) to award sanctions against Defendant for its boilerplate objections to Plaintiff’s discovery requests. “IHC’s objection that Plaintiff’s requests for discovery seek information ‘not reasonably calculated to lead to the discovery of admissible evidence’ is not an available objection given that the December 1, 2015 amendments to the Federal Rules of Civil Procedure struck that phrase from the rules.” However, “DUCivR 37-1(a)(3) clearly states that short form discovery motions are limited to 500 words. Plaintiff’s motion exceeds that limit by approximately 50%.” “This court has previously held that boilerplate objections to document requests are not substantially justified. On the other hand, when a party seeks to vindicate a violation of the rules, it cannot violate the rules itself because the court will reject the motion, which generates fees where, as here, a party responds to the improper motion. Given this situation, the court declines to impose fees.”

ERISA Preemption

Third Circuit

Wolff v. Aetna Life Ins. Co., No. 4:19-CV-01596, 2020 WL 4754253 (M.D. Pa. Aug. 17, 2020) (Judge Matthew W. Brann). This case arises from a dispute regarding the proper administration of an ERISA benefits plan. Wolff moves for reconsideration of dismissal of her state-law claims against Defendant The Rawlings Company LLC (“Rawlings”), as preempted by ERISA. The court denied Plaintiff’s motion because her state-law claims “relate” to her ERISA plan, and she cannot narrow the scope so tightly that the plan vanishes from view. The court also dismissed Rawlings because Wolff has not alleged facts sufficient to support an inference that Rawlings was subject to ERISA fiduciary duties. Wolff’s new allegation that Rawlings “exercised discretionary authority, control and/or responsibility for administration or management of the Plan and management or disposition of Plan assets within the meaning of ERISA” was a mere legal conclusion unsupported by underlying factual allegations.

Ninth Circuit

Blakney v. Prasad, No. 19-35654, __F.App’x__, 2020 WL 4917610 (9th Cir. Aug. 21, 2020) (Before Rawlinson, Murguia, and Nelson, Circuit Judges). This action relates to an ongoing medical malpractice lawsuit in Alaska state court, wherein Plaintiff alleged that Defendants provided negligent medical treatment to him. In its answer to the complaint, Defendant Galen Alaska Hospital, Inc. asserted as an affirmative defense that Plaintiff’s damages are limited under section 09.55.548(b) of the Alaska Statutes. In April 2018, Blakney filed an action in federal court seeking a declaratory judgment that the affirmative defense asserted in the state court action is preempted by ERISA. The district court dismissed that action, and this court affirmed because Plaintiff cannot establish that his state law medical malpractice claims are completely preempted. The court explained that a state-law cause of action is completely preempted if (1) an individual, at some point in time, could have brought the claim under ERISA § 502(a), and (2) where there is no other independent legal duty that is implicated by a defendant’s actions. For a state law cause of action to be preempted, both prongs of the test must be satisfied. Even if the first prong was satisfied, it is clear that the second prong is not, as the duties implicated in Blakney’s state law medical malpractice claims do not derive from ERISA. The tort duties at issue in the state law claims would exist regardless of whether an ERISA plan existed.

Exhaustion of Administrative Remedies

Eleventh Circuit

Smith v. The Hartford, No. 4:20-CV-00041-CLM, 2020 WL 4815143 (N.D. Ala. Aug. 19, 2020) (Judge Corey L. Maze). Plaintiff sued Hartford in response to it denying her claim for disability benefits. Hartford moved to dismiss based on Plaintiff’s failure to appeal this denial on a timely basis. Plaintiff responds that the court should excuse her failure and apply equitable tolling. She argued that she was not competent to understand the 180-day deadline, Hartford did not prominently state the deadline in the denial letter, and Hartford waived the deadline by speaking with Plaintiff and providing her with a copy of her claim file. The court, while “sympathetic” to her circumstances, found for Defendant. It ruled that none of the explanations offering by Plaintiff were sufficient to overcome the Eleventh Circuit’s “strict exhaustion requirement.”

Life Insurance & AD&D Benefit Claims

Eighth Circuit

Brackett v. Federal Ins. Co., No. 1:19-CV-98-DPM, 2020 WL 4927492 (E.D. Ark. Aug. 21, 2020) (Judge D.P. Marshall Jr.). Plaintiff’s husband died in a car crash. He was driving alone at 1:30 a.m. on a Saturday morning, on a straight highway, with dry roads, and some fog. He was driving too fast and had a blood alcohol level 2.5 times Arkansas’ legal limit. Plaintiff made a claim for accidental death benefits under an ERISA AD&D Plan. Defendant denied the claim based on an exclusion for accidents caused by or resulting from being intoxicated while operating a motorized vehicle. Intoxication was defined by the laws of the jurisdiction where the accident occurred. The court held that Arkansas Rule 101 did not eliminate the Plan’s discretionary provision because it applied to STD and LTD policies, not AD&D policies. Thus, under the abuse of discretion standard, the court held “the blood-alcohol issue is not a close call” and upheld the denial of benefits.

Medical Benefit Claims

Third Circuit

Emami v. Empire Healthchoice Assurance, Inc., No. CV18679JMVCLW, 2020 WL 4745817 (D.N.J. Aug. 17, 2020) (Judge John Michael Vazquez). Plaintiff seeks medical benefits from Defendant. Defendant filed a motion to dismiss claiming Plaintiff failed to state a claim, the dates of service are time-barred, and Plaintiff failed to exhaust administrative remedies. The court dismissed Plaintiff’s benefit claim based on insufficient allegations as Plaintiff does not cite Plan provisions and failed to follow procedures prescribed by the Plan to obtain copies of fee schedule/rate. The court denied the motion to dismiss based on statute of limitations because Defendant failed to address why the relate back doctrine does not apply. The court granted the motion as to the exhaustion of remedies noting that Plaintiff failed to address Defendant’s arguments despite two prior attempts to amend. The court granted the motion to dismiss and dismissed Plaintiff’s claims with prejudice.

Tenth Circuit

D. and S.D. v. United Healthcare Insurance Company, et al., No. 219CV00590DBBJCB, 2020 WL 4747765 (D. Utah Aug. 17, 2020) (Judge David Barlow). Plaintiff seeks benefits for mental health treatment. Defendant moved to dismiss Plaintiff’s Parity Act claim. The court found the Parity Act claim is not based on the terms of the benefit plan. The court found that the complaint contains only conclusory statements while providing no factual allegations about the disparate treatment actually happening to Plaintiff. The court granted the motion and granted leave to amend the complaint.

Pension Benefit Claims

Second Circuit

Cannady v. Bd. of Trustees of Boilermaker-Blacksmith Nat’l Pension Tr., No. 519CV714FJSTWD, 2020 WL 4748055 (N.D.N.Y. Aug. 17, 2020) (Judge Frederick J. Scullin). Plaintiff is a participant in Defendant’s ERISA pension plan. He contacted Defendant to make a disability pension claim and was given misinformation about the date his benefits would start. Defendant corrected the mistake and Plaintiff’s pension benefits started two months later than he was originally told it would. The court granted Defendant’s summary judgment motion, finding Plaintiff was being paid in accordance with the terms of the plan and Defendant’s denial of Plaintiff’s request to honor the incorrect pension start date was not incorrect. Defendant’s motion was also granted in regard to Plaintiff’s breach of fiduciary duty claim because there was no separate breach of fiduciary duty because Plaintiff’s claims were adequately addressed with the more specific claim for benefits due.

Eleventh Circuit

Hill v. Employee Benefits Admin. Comm. of Mueller Grp. LLC, No. 18-14026, __F.3d__, 2020 WL 4931446 (11th Cir. Aug. 24, 2020) (Before Branch and Marcus, Circuit Judges, and Huck,* District Judge). See Notable Decision summary above.

Fifth Circuit

Sarabian v. Halliburton Logging Services, No. 4:19-CV-954-A, 2020 WL 4905064 (N.D. Tex. Aug. 19, 2020) (Judge John McBryde). Plaintiff sued Halliburton Energy Services, Inc. (incorrectly identified in the complaint) to recover the money he claimed Defendant owed him under a pension plan via a contribution matching program. The court granted summary judgment in Halliburton’s favor because Plaintiff failed to try to meet his burden to establish that a plan existed or that Halliburton had control over it. After reviewing the facts (or lack thereof), the court summarized its position with the blunt statement, “There is simply no evidence of any relationship between the two that would give rise to such a claim.”

Pleading Issues & Procedure

Sixth Circuit

Nixon v. Anthem, Inc., No. 3:19-CV-00076-GFVT, 2020 WL 4910290 (E.D. Ky. Aug. 18, 2020) (Judge Gregory F. Van Tatenhove). Plaintiffs brought this class action against Anthem under ERISA, contending that Anthem failed to cover their sacroiliac joint fusion procedures because it erroneously determined under its medical policy that the procedures were investigational and not medically necessary. Anthem brought a motion to dismiss for failure to join necessary parties and failure to state a claim. The court found that Plaintiffs’ employers and benefit plans were not necessary parties because they played no role in claim determinations. However, the court found that certain claim administrators not named as defendants were necessary parties because they were involved in the claim denials, and granted Anthem’s motion in that regard, allowing Plaintiffs leave to amend their complaint to add them. The court also denied Anthem’s motion for failure to state a claim. Although Anthem contended that it had no contractual relationship with the benefit plans at issue, and thus was an improper party, the court found that it had discretionary authority over the outcome of the claims because it formulated the medical policy used to deny those claims. The court further ruled that Plaintiffs’ claim for equitable relief should not be dismissed because it was not duplicative of their claim for benefits, and in any event dismissal was premature at this early stage of litigation.

Love v. Talbert House, No. 19-CV-448, 2020 WL 4784664 (S.D. Ohio Aug. 18, 2020) (Mag. J. Karen L. Litkovitz). Plaintiff filed this action against her employer and its retirement plan administrator under ERISA, alleging that they misrepresented and omitted information about her eligibility under the plan. Defendants filed motions to dismiss. The court granted the administrator’s motion, finding that the administrator only made one representation to Plaintiff (which essentially referred her back to her employer), and that this representation was not material or misleading. However, the court denied the employer’s motion in its entirety. The court found that Plaintiff had satisfactorily exhausted her administrative appeals because the plan did not have a formal claim procedure, and she had extensively communicated with the employer’s HR department. The court also rejected the employer’s argument that Plaintiff’s breach of fiduciary duty claim was a repackaging of her claim for benefits because she claimed additional damages in the form of lost investment and tax benefits arising from the employer’s breach. The court further found that Plaintiff had properly alleged her breach of fiduciary duty claim because she had pleaded that her employer gave her false information and failed to respond to her inquiries. Finally, the court rejected the employer’s argument that Plaintiff’s interference claim should be dismissed. Plaintiff had alleged that she was terminated shortly before her employment status was about to change, an event that would have entitled her to greater benefits, which was sufficient to support an interference claim.

Provider Claims

Second Circuit

Michael E. Jones, M.D., P.C. v. UnitedHealth Grp., Case No. 19-cv-7972 (VEC), 2020 WL 4895675 (S.D.N.Y. Aug. 19, 2020) (Judge Valerie Caproni). Plaintiff Michael E. Jones, M.D., P.C., d/b/a Lexington Plastic Surgeons, LLC, alleged that UnitedHealth Group purposely denied or delayed payment of Plaintiff’s claims for reimbursement because of Plaintiff’s status as an out-of-network medical provider. Jones alleged that this disparate treatment of out-of-network providers violated ERISA, federal antitrust laws, and related state laws. The Court concluded on United’s motion to dismiss that Jones’ complaint consisted largely of factually unsupported and conclusory labels and granted United’s motion to dismiss for failure to state a claim while giving Jones leave to amend. Specifically, as to Jones’ ERISA-related claims, the Court found that Jones had failed to specifically allege plan terms that United may have violated or any plan provision which created an obligation of United to treat out-of-network providers in a certain manner. Moreover, Jones failed to allege that he had direct, representative standing as a provider with a valid assignment of benefits to make fiduciary breach claims against United on behalf of his patients.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Trustees for The Mason Tenders District Council Welfare Fund, Pension Fund, Annuity Fund, And Training Program Fund, et al. v. Universal Preservation Group, No. 20 CIV. 626 (PAE), 2020 WL 4883869 (S.D.N.Y. Aug. 18, 2020) (Judge Paul A. Engelmayer). The court confirmed the Arbitration Award in favor of petitioners and issued judgment in the amount of $201,895.00, plus post-judgment interest pursuant to 28 U.S.C. § 1961(a).

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

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