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Your ERISA Watch – Fifth Circuit Issues Significant Decision on ERISA Law and Practice

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Yesterday, the Fifth Circuit issued its decision in Manuel v. Turner Indus. Grp., L.L.C., No. 17-30835, __F.3d__, 2018 WL 4689974 (5th Cir. Oct. 1, 2018), which delves into “the labyrinthine complexities of ERISA law and practice.”  In so doing, the court makes a number of pronouncements regarding ERISA’s equitable remedies, the standard of review, interference claims, and discovery.  Below are my “Cliff’s Notes” of the decision.

The Relevant Facts

Plaintiff Michael Manuel worked for Turner Industries Group LLC and participated in its group short- and long term disability plans that are sponsored by Turner and insured and administered by Prudential Insurance Company of America.

The Plan states that benefits are payable when “Prudential determines that” a participant is unable to work and participants must submit proof of disability “satisfactory to Prudential.”  Only the Summary Plan Description (“SPD”) states that Prudential “has the sole discretion to interpret” the plan.

The Plan does not cover disabilities caused by a pre-existing condition.  With respect to short-term disability benefits, the Plan gives Prudential the right to recover any overpayments due to an error it makes in processing a claim.

Manuel alleges disability payable under the Plan.  Prudential paid short-term disability benefits but not long term disability benefits on the basis of the Plan’s pre-existing condition exclusion.  Prudential then requested that Manuel pay back the short-term disability benefits.

Manuel requested plan documents from Turner.  The company initially provided the SPD and a Group Insurance Certificate.  Upon Manuel’s further inquiry, Turner provided the Group Insurance Contract.

After exhausting his administrative remedies, Manuel sued Turner and Prudential for various violations under ERISA and state law.  Prudential counterclaimed for the overpaid short-term disability benefits.  The United States District Court for the Middle District of Louisiana, U.S. District Judge Shelly Deckert Dick, rejected all of Manuel’s claims and granted summary judgment to Prudential on the overpayment counterclaim.

The Appeal to the Fifth Circuit

Circuit Judge Edith Brown Clement wrote the opinion for the panel including Judges Jerry Smith and Gregg Costa.  The court reversed and remanded “the district court’s dismissal of Manuel’s claims for fiduciary breach and failure to provide documents as to Turner and his claim for plan benefits and discrimination as to Prudential.”  It also reversed and remanded “the district court’s grant of summary judgment to Prudential on its claim for reimbursement.”  The court affirmed “the dismissal of Manuel’s fiduciary breach and failure to provide document claims against Prudential” and “the application of the abuse of discretion standard to Manuel’s claims for plan benefits.”  The court instructed the “district court to consider anew any discovery requests related to Manuel’s surviving claims.”  Lastly, the court vacated the prejudgment interest award to Prudential.   In so doing, the court made the following notable determinations.

Breach of Fiduciary Duty

Manuel alleges that “(1) Prudential and Turner breached their fiduciary duties to him because they maintained a deficient document—the SPD—and (2) Prudential violated ERISA’s claims administration requirements by (a) asserting new grounds for denial of his LTD benefits at the last level of appeal and (b) failing to identify the independent medical reviewer who recommended denying Manuel’s claims on appeal.”

The district court erred by dismissing his ERISA § 502(a)(3) claims against Turner on the same basis it dismissed these claims against Prudential (that Prudential is not the plan administrator).

Manuel claims that an SPD was not provided to him within 90 days after he became a plan participant and that it did not comply “with the requirements of ERISA § 102 because it did not include the plan’s preexisting condition exclusion, reimbursement provision, delegation of interpretive discretion to Prudential, or the plan administrator’s name.”

The court determined that Manuel cannot maintain an action for fiduciary breach under ERISA § 502(a)(3) where the alleged injury creates a cause of action under ERISA § 502(a)(1)(B), but claims for injuries relating to SPD deficiencies are cognizable under ERISA § 502(a)(3) and not ERISA § 502(a)(1)(B).

Manuel was not able to prove additional facts necessary to support the equitable relief requested because the district court denied all related discovery requests as moot.

The court affirmed the district court’s dismissal of the SPD claims against Prudential because Prudential is not the plan administrator.  The court also affirmed the dismissal of Manuel’s other ERISA § 502(a)(3) claims against Prudential based on claim administration irregularities since those may be addressed under ERISA § 502(a)(1)(B).

Plan Benefits

On the standard of review, the court found that the Plan is ambiguous with respect to the delegation of discretionary authority to Prudential given the deep circuit split as to whether the Plan language constitutes an express delegation of discretion.  However, the SPD is clear.  Where the Plan language is ambiguous the court may look to the SPD.  The court concluded that discretion was delegated to Prudential under the Plan and affirmed the district court’s application of abuse of discretion review.

On the conflict of interest, the court determined that the district court “wholly ignored Prudential’s supposed conflict” and should have considered this factor appropriate weight.  “Had the district court considered the conflict, it might have permitted limited conflict discovery, and the court ultimately might have concluded that Prudential abused its discretion when it concluded that Manuel had a preexisting condition.”

The court reversed and remanded Manuel’s ERISA § 502(a)(1)(B) claim for further consideration in light of Prudential’s apparent conflict of interest.

Interference with Protected Rights

The district court dismissed Manuel’s ERISA § 510 claims against Prudential solely because Manuel was not an employee of Prudential.  Following the Fourth Circuit, the court concluded that ERISA § 510 claims may be maintained against non-employers.  It reversed and remanded for appropriate discovery and consideration of the claims.

Civil Penalties

Manuel sought penalties against Turner under ERISA § 502(c) because the company failed to deliver to him upon request the appropriate formal written and signed plan document.  The district court determined that Manuel received all of the documents to which he was entitled.  The court disagreed.  Turner produced documents that were different from the copies provided by Prudential as part of the “administrative record.”

The court explained that ERISA mandates more than the production of a valid SPD upon request for plan documents and “whether the amendment contained in the Prudential administrative record constitutes a formal legal document governing the plan is unclear.”  If the amendment is valid then it should have been produced by Turner.  While the district court may ultimately exercise discretion as to whether a penalty should be assessed, “that inquiry is distinct from the question of whether Turner violated a term of ERISA for which a penalty could be assessed.”  The court reversed and remanded the district court’s resolution of Manuel’s ERISA § 502(c) claim at the summary judgment stage.  If Manuel ultimately proves that a penalty could be assessed, the district court must freshly consider whether any such penalty is appropriate.”


“Manuel sought discovery related to his claims for breach of fiduciary duty, for plan benefits, for retaliation, and for failure to provide documents. After hastily disposing of all of his claims, the district court simply denied Manuel’s requests ‘as moot.’”  The court ordered the district court to consider appropriate and related discovery requests anew with respect to the surviving claims.

Overpayment Counterclaim

On Prudential’s overpayment claim, the district court relied entirely on Sereboff v. Mid Atlantic Medical Services, 547 U.S. 356 (2006) and ignored the more recent Montanile v. Board of Trustees, 136 S. Ct. 651, 659 (2016) decision.  In so doing, it erroneously “concluded that Montanile’s limitation of equitable recovery from a defendant’s general assets applies only to defendants who received funds from third parties (e.g., in settlement of claims) and not to defendants who received overpayments directly from the party seeking repayment.”

The equitable lien on mistakenly paid short-term disability benefits must be enforced against a specifically identified fund in the defendant’s possession.  The court reversed the district court’s decision to grant summary judgment to Prudential and remanded the case to determine whether Manuel kept his short-term disability benefits separate from his general assets or dissipated the entire [amount] on nontraceable assets.


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