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Your ERISA Watch – First Circuit Holds Denial of Accidental Death Benefits Due to Pre-existing Illnesses Was Not Abuse of Discretion

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This week’s notable decision is Arruda v. Zurich Am. Ins. Co., No. 19-1247, __F.3d__, 2020 WL 880548 (1st Cir. Feb. 24, 2020), where the First Circuit parted from its sister circuits in declining to adopt a “substantial factor” test to the application of an exclusion in a life insurance policy where abuse of discretion review applies.  In so doing, it reversed the district court’s entry of summary judgment to the beneficiary and directed entry of summary judgment to Zurich.

The case involves an unfortunate motor vehicle accident that resulted in the death of the insured, Joseph Arruda, who had named his wife, Plaintiff-Appellee Denise Arruda, as the beneficiary of any death benefits under his employer’s basic accident policy (“the Policy”) insured by Zurich.  On the day of his death, Mr. Arruda was driving down a four-lane road on his way to a work event when his car crossed all lanes of traffic, collided with another car, hit the curb, rolled over, and landed on its wheels on the opposite side of the road.  He was alive briefly following the accident but was pronounced dead at the scene.

The Policy pays benefits for a Covered Injury, defined as “an Injury directly caused by accidental means which is independent of all other causes.”  The Policy excludes any “Covered Loss if it is caused by, contributed to, or results from … illness or disease, regardless of how contracted, medical or surgical treatment of illness or disease; or complications following the surgical treatment of illness or disease …”

The autopsy report concluded the following:

CAUSE OF DEATH: Hypertensive Heart Disease.

Contributory Factors: Upper Cervical Spine Fracture due to Blunt Impact.

MANNER OF DEATH: Accident (Driver Involved in a Motor Vehicle Collision with Rollover)

Zurich denied payment of the death benefits based on the above-referenced exclusion because Mr. Arruda had a number of significant pre-existing health conditions which it believed caused or contributed to his death.  One of its reviewing doctors, however, did find that his injuries from the car accident also contributed to his death.  Ultimately, the appeals process became a battle of the experts.  On the one side, Zurich relied on the opinions of three independent doctors—Dr. William Angell, Dr. Michael Bell, and Dr. Mark Taff—who all basically concluded that medical conditions caused or likely caused Mr. Arruda’s death.  On the other side, Ms. Arruda’s expert, Dr. Elizabeth Laposata, relying on Mr. Arruda’s cardiac pacemaker/ICD defibrillator implant report (among other evidence), opined that Mr. Arruda died from accidental bodily injury, independent of all other causes.

The district court found that Zurich abused its discretion because Zurich’s finding that Mr. Arruda died of heart disease was contradicted by Drs. Taff and Laposata, and the other doctors’ claims were not supported except for the fact that Mr. Arruda had a history of heart disease.  The district court did not believe that the record supported Zurich’s alleged position that Mr. Arruda’s preexisting illness caused the accident, which then caused his death.

The First Circuit disagreed.  It found that Zurich’s decision was reasonable and supported by substantial evidence.  First, the record supports the claim that the car crash was caused, at least in part, or was contributed to by Mr. Arruda’s preexisting medical conditions.  Just because Dr. Laposata’s opinion differed does not mean that the decision was arbitrary.  Dr. Taff’s opinion that, to a reasonable degree of medical certainty Mr. Arruda’s illnesses contributed to his having the accident which resulted in his death, was a reasoned basis upon which Zurich could rely to support its decision.  The court further explained,

“Arruda offers no support for her contention that Dr. Taff needed to determine the precise mechanism or mechanisms by which Mr. Arruda’s pre-existing conditions contributed to Mr. Arruda’s car suddenly veering across multiple lanes of traffic and his fatal car accident. It is sufficient that Dr. Taff reached a firm conclusion to a reasonable degree of forensic medical certainty, which was self-evidently reasoned, that some manifestation(s) of Mr. Arruda’s pre-existing conditions caused him to have the accident that killed him. As is evident from the passages of Dr. Taff’s report excerpted above, Dr. Taff showed a strong familiarity with the facts of the case and drew reasoned conclusions by applying his medical expertise.”

The court also noted that a few other circuits have adopted a “substantial factor” test, that “a pre-existing infirmity or disease is not to be considered as a cause unless it substantially contributed to the disability or loss.” The court found that this test is in tension with First Circuit law on the abuse of discretion test.  An insurer does not abuse its discretion simply because there is medical evidence to the contrary.  And, the Supreme Court in Conkright v. Frommert, 559 U.S. 506, 130 S. Ct. 1640, 176 L. Ed. 2d 469 (2010), admonishes that ERISA was designed to create a system that is not so complex or expensive as to deter employers from offering ERISA plans in the first place.

Judge Lipez dissented.

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

Attorneys’ Fees

Sixth Circuit

Wilson v. DM Excavating, LLC, No. 2:18-CV-1779, 2020 WL 830400 (S.D. Ohio Feb. 20, 2020) (Magistrate Judge Chelsey M. Vascura). The court denied Plaintiffs’ Motion for Attorneys’ Fees and Costs on Unpaid Fringe Benefit Contributions without prejudice because their entitlement to attorneys’ fees could be affected by the outcome of Defendant’s appeal.  Plaintiffs may renew their motion following resolution by the appellate court. Insofar as Defendant’s motion to stay pending appeal, upon Defendant’s post of a $250,000 bond, the court will stay the execution of the summary judgment order pending resolution of DM’s appeal.

Breach of Fiduciary Duty

Ninth Circuit

Patrick R. Pizzella v. Reliance Trust Company, CV-19-03178-PHX-JJT, 2020 WL 805527 (D. Ariz. Feb. 18, 2020) (Judge John J. Tuchi). Defendants moved to dismiss this action brought by the acting Secretary of Labor alleging breach of fiduciary duty for the significant overpayment of stock purchased by the ESOP by millions of dollars. The Court focused on whether the claim of the duty to monitor requires “actual knowledge” or whether it falls under the “knew or should have known” standard. The court found it was not relevant on the motion to dismiss because Plaintiff has sufficiently alleged Defendants have actual knowledge. The plan sponsor defendant also moved to dismiss claiming it is not a necessary party to the litigation. The court declined to dismiss the plan sponsor at this stage because Plaintiff has alleged the indemnification provisions of the plan should be rendered void but that it is too early to decide the issue. The court denied the motion to dismiss in its entirety.

Class Actions

First Circuit

In Re Fidelity Erisa Fee Litigation, No. CV 19-10335-LTS, 2020 WL 759542 (D. Mass. Feb. 14, 2020) (Judge Leo T. Sorokin). A proposed class action filed by a T-Mobile USA Inc. employee who accused the manager of the company’s 401(k) plan, Fidelity, of operating a pay-to-play scheme in violation of ERISA was dismissed. The Court found that the worker could not show Fidelity was a fiduciary. Specifically, the Court observed that the relevant contracts between the plan and Fidelity did not name Fidelity Management & Research and its subsidiaries as fiduciaries with respect to the 401(k) plan.  The Court further held that Plaintiffs would be unable to allege that Fidelity exercised “any discretionary authority” over the management of the plan and had not been able to show that Fidelity gave investment advice “for a fee or other compensation.” Plaintiffs alternatively asked for a finding that Fidelity be liable that engaged in illegal behavior. The Court did not agree with this position because at least one of the defendants would have to qualify as a fiduciary for that argument to succeed.

Eleventh Circuit

Woznicki v. Raydon Corp. et al., 18-cv-2090, 2020 WL 857050 (M.D. Fla. Feb. 20, 2020) (Magistrate Judge Thomas B. Smith). The Magistrate Judge ruled that Stephanie Woznicki, an ex-Raydon employee, be allowed to lead a class action suit over a $60.5 million employee stock ownership plan (ESOP) transaction. The Magistrate also rejected arguments that Woznicki would not be an adequate representative for the purposes of class certification because of her “extreme personal animus.” Magistrate Judge Smith relied on a 1996 Ninth Circuit decision (Kayes v. Pacific Lumber Co.) to make the point that the “vengeance of an aggrieved person more often engenders the zealous prosecution essential to a class action than the over-zealous prosecution which may threaten to strangle a class action.” Woznicki’s failure to attend a mediation session was found to not disqualify her from being an adequate representative at this time. Perhaps, most importantly the commonality of the questions in the case and the typicality of Woznicki’s claims for certification purposes were not affected by the fact that sixty-four of the proposed class members allegedly waived their right to bring ERISA claims in general releases.

Disability Benefit Claims

Third Circuit

Ackaway v. Aetna Life Ins. Co., No. 16-3969, 2020 WL 774289 (3d Cir. Feb. 18, 2020) (Before: Ambro, Greenway, and Porter, Circuit Judges). Plaintiff appealed to contest the district court’s order granting summary judgement to Aetna based on Plaintiff’s claims under ERISA that Aetna’s denial was an abuse of discretion. The Third Circuit upheld the district court’s determination. While Plaintiff argued that Aetna could not have fully reviewed her claim because it issued its decision just 24 hours after receiving documents from her physician, the limited amount of information did not preclude a thorough review in that short amount of time. The court also concluded that it was not error for Aetna to rely on the opinions of its peer review physicians.  They communicated with Plaintiff’s physicians, “reviewed the entirety of Ackaway’s records” and concluded that Ackaway’s condition did not render her unable to perform her “essential occupation functions.”  Aetna’s reliance on that conclusion was not “without reason [nor] unsupported by substantial evidence. The court finally rejected Plaintiff’s argument that Aetna’s review failed to incorporate the side effects of medication, as several office notes from her providers do not reflect complaints of said side effects.

ERISA Preemption

First Circuit

Sokhos v. Steward Health Care Sys. LLC, No. 19-11455-RWZ, __F.Supp.3d__, 2020 WL 806618 (D. Mass. Feb. 18, 2020) (Judge Rya W. Zobel). Ms. Jo-Anne Anastasia worked for Defendant Steward. When her employment ended, Steward promised in writing that Ms. Anastasia would continue to be covered by the life insurance plan sponsored by Steward. Ms. Anastasia passed away, and Plaintiff Sokhos made a claim to Steward for the life insurance benefits. Steward refused, and Sokhos brought this lawsuit in state court based on breach of contract and violation of the Massachusetts Consumer Protection Act. Steward removed the case to federal court based on federal question jurisdiction because the life insurance plan was an ERISA plan. Stewart then brought a motion to dismiss the state law claims as being completely preempted by ERISA. The Court determined that because the life insurance plan was funded by the employer and was a benefit of being an employee at Steward, it was an employee benefit plan. In this case, Sokhos is asking for benefits due under an ERISA employee benefit plan. Therefore the Court agreed the state law claims were completely preempted by ERISA. Sokhos’s claims were dismissed without prejudice so he can restate his allegations as claims under ERISA.

Sixth Circuit

Southern Ohio Medical Center v. Mark Griffith & Countryside Rentals, Inc., d/b/a/ Rent 2 Own, No. 19-CV-261, 2020 WL 868572 (S.D. Ohio Feb. 21, 2020) (Magistrate Judge Karen L. Litkovitz). Plaintiff brought suit in state court to collect for medical services it provided to Defendant. Defendant removed the case to federal court claiming complete preemption by ERISA. Once the case was in federal court, Defendant moved to dismiss the complaint on the basis that the state law claims were completely preempted by ERISA. The court noted, “[p]ut simply, a defendant cannot remove an action on the basis that it states a claim under ERISA, and then move to dismiss on the basis that it is preempted by ERISA, the very statute which gave it life.” Following this dictum, the court followed the prevailing practice of granting Plaintiff leave to file an amended complaint recasting the state law claims in the language of ERISA.

Exhaustion of Administrative Remedies

Sixth Circuit

Haskett v. S. Benefit Administrators, Inc., No. 2:19-cv-02355-TLP-DKV, 2020 WL 836836 (W.D. Tenn. Feb. 20, 2020) (Judge Thomas L. Parker). Plaintiff sued thirteen Defendants pro se under ERISA. Three Defendants filed a motion to dismiss or, in the alternative, to hold the case in abeyance pending more administrative proceedings. Before filing suit, Plaintiff claimed benefits under a pension plan. He was informed he was not a participant in the Plan and thus had no right to appeal the decision denying his benefits. Despite this, Plaintiff followed the Plan’s appeal procedures by sending a letter that stated, in part, “please consider this letter to be my appeal.” When he received no response, he filed suit. Two months later, the plan administrator agreed to hear his appeal. Despite the allegation in his complaint that he had exhausted his administrative remedies, the court found he had not because the appeal had yet to be decided. The court then stayed the action and issued a remand because (1) there was no documentation to support the denial of benefits; (2) the administrator should have a chance to fully explain the grounds for the benefit determination, and (3) a remand would help further develop the factual record before premature judicial intervention.

Life Insurance & AD&D Benefit Claims

First Circuit

Arruda v. Zurich Am. Ins. Co., No. 19-1247, __F.3d__, 2020 WL 880548 (1st Cir. Feb. 24, 2020) (Before Lynch, Stahl, and Lipez, Circuit Judges).  See Notable Decision summary above.

Medical Benefit Claims

Second Circuit

Sagramsingh v. Welfare Fund of The International Union of Operating Engineers Local 15, 15A, 15C & 15D et al., No. 19-CV-4627 (BMC), 2020 WL 837371 (E.D.N.Y. Feb. 20, 2020) (Judge Brian M. Cogan). E.S. received insurance benefits under Plaintiff’s ERISA Plan. Due to lesions discovered around E.S.’s brain, surgery was recommended and Defendant authorized it. The only neurosurgeon qualified enough to perform the surgery was an out-of-network provider. Defendant paid $10,286 toward the bill, leaving Plaintiff to pay the $82,748 balance. Defendant argued it paid at 80% of the fee schedule for non-participating providers. Plaintiff alleged that he was never provided Plan documents or any fee schedule. The court held that these facts stated “some claim” for which relief could be granted, namely, a claim based on breach of fiduciary duty. The court further explained that: 1) a denial of benefits claim seemed inappropriate because Plaintiff did not point to an amount of money wrongfully denied him under a specific plan provision; 2) a claim for failure to establish or maintain reasonable claims procedure also missed the mark because civil penalties were not available to plan beneficiaries for a plan’s failure to comply with the claims procedure regulation; and 3) the claim for failure to establish a proper summary plan description also insufficiently captured the inadequacies of the plan alleged by Plaintiff. Plaintiff amended the complaint in accordance with the court’s recommendation, and Defendant moved to dismiss. The court held that Plaintiff’s amended complaint stated a viable claim for denial of benefits because it implicated the reasonableness of the plan’s fee schedule as objectively compared to the usual and customary fees for the same procedure. The court noted that an issue remained that Plaintiff labeled his claim as a breach of fiduciary duty instead of a denial of benefits at the court’s own suggestion; however, because Plaintiff’s factual allegations remained materially identical across his original and amended complaints, there was no need for him to further amend his pleadings merely to conform his claim to this decision.

Seventh Circuit

Board of Trustees of Indiana Laborers Welfare Fund v. Van Dalsen, No. 2:18-CV-00463-JPH-MJD, 2020 WL 786752 (S.D. Ind. Feb. 18, 2020) (Magistrate Judge Mark J. Dinsmore). The plaintiff was an ERISA-governed medical benefit plan. The defendant was a beneficiary under the Plan through her marriage to a participant in the plan. The defendant divorced her husband, but did not elect continuation coverage under the plan, and thus she lost her coverage. She then received medical treatment, which was billed to and paid by the Plan. The Plan requested that Defendant repay the cost of that treatment to the Plan, but she did not. The Plan sued and brought a motion for summary judgment. The court found that the Plan’s lawsuit was authorized under ERISA as an action for equitable relief. The court further found that the Plan’s reimbursement provisions applied to Plaintiff, and that she was required to repay the Plan for her uncovered medical treatment. However, the court denied the Plan’s request for attorney’s fees and prejudgment interest. The court found that Defendant had acted in good faith based on her desire to obtain additional information and documentation, and that the Plan delayed in providing that information. Thus, the court granted the Plan’s motion for summary judgment on the merits, but denied it as to its claims for fees and interest.

Tenth Circuit

Andy B. v. AvMed, Inc., No. 2:19-CV-00396-DB-PMW, 2020 WL 838041 (D. Utah Feb. 20, 2020) (Judge Dee Benson). The court considered defendant’s motion to dismiss Plaintiff’s complaint. Plaintiff alleged claims to recover mental health benefits and violation of federal mental health parity. Defendant’s motion claimed lack of personal jurisdiction, request to transfer venue, and failure to state a cause of action. The court found that Defendant has not adequately shown that the Utah forum will make litigation so gravely difficult and inconvenient as to amount to a depravation of its liberty. Likewise, the court declined to transfer venue because Defendant does not provide specific evidence establishing the inconvenience of the Utah forum. The court found Plaintiff sufficiently alleged his benefits claim. But, Plaintiff’s allegations are insufficient to state a claim under the Parity Act because the allegations lack factual support for its assertions that disparate treatment existed in the way Defendant evaluates claims for mental health versus claims for treatment at analogous medical or surgical facilities.

Pension Benefit Claims

Fourth Circuit

Conner v. Associates Radiologists, Inc. et al., No. 2:19-cv-00329, 2020 WL 762858 (S.D. W. Va. Feb. 14, 2020) (Chief Judge Thomas E. Johnston). Defendants moved to dismiss this pension case which alleges violations of ERISA fiduciary duties and state law claims for negligence, common law breach of fiduciary duty, breach of contract, conversion and conspiracy. In short, Plaintiff alleges he retired in reliance on assurances he would receive his entire pension benefit as of the date of his retirement. However, shortly before his scheduled retirement date he was informed that due to a series of miscommunications with MassMutual going back several years the plan had been substantially underfunded. Plaintiff was informed he would get less than his full pension benefit. Plaintiff was also denied his final compensation, bonus and severance benefits which is alleged to have been diverted to fund the pension plan. The motion was granted in part and denied in part with the majority of the claims surviving. The Court engaged in a thorough analysis of the roles of each defendant in deciding fiduciary status and plausibility of the claims.

Fifth Circuit

In Re: Annalyn Nelson Whitt, Debtor., No. 19-03801-NPO, 2020 WL 833808 (Bankr. S.D. Miss. Feb. 19, 2020) (Bankruptcy Judge Neil P. Olack).  The court concluded that the Debtor’s continued voluntary 401(k) contributions within the limits of her 401(k) plan, which she accurately represented to the court, are permissible under the Bankruptcy Code and do not constitute bad faith.

Pleading Issues & Procedure

Second Circuit

Cotto, et. al., v. NYU Langone Hospitals, et. al. No. 19CV04089DLIST, 2020 WL 868580 (E.D.N.Y. Feb. 21, 2020) (District Judge Dora Irizarry). Plaintiff Allfred Cotto, after being injured in a car accident, filed suit against the individual who caused the accident, as well as ancillary suits against several of his insurance providers for not providing timely benefits in response to claims submitted as a result of that incident. Plaintiff alleged violation of various New York laws, breach of contract, unjust enrichment, and violations of ERISA. Defendants moved to dismiss on several grounds, including lack of subject matter jurisdiction. The court concluded that Plaintiffs have failed to satisfy their burden of establishing federal question jurisdiction via ERISA, outside of a conclusory allegation that ERISA was the governing law, Defendants failed to provide any facts in support of its argument. Indeed, the court noted that “[t]he instant Complaint is void of any factual allegations that make out an ERISA violation.” The court also concluded that Plaintiff could not establish diversity jurisdiction as all Defendants were based in New York. Finally, it rejected Plaintiff’s argument that because a related action involving a named Defendant (the Fund) and Plaintiffs, was sufficient to establish jurisdiction. Rather, the court held that while a matter may be “related”, relatedness alone does not establish subject matter jurisdiction.

Third Circuit

K.S. v. Thales USA, Inc., No. 317CV07489BRMLHG, 2020 WL 773166 (D.N.J. Feb. 18, 2020) (Judge Brian R. Martinotti). The court granted Defendant’s motion to dismiss Plaintiff’s complaint. Plaintiff filed her complaint seeking medical benefits for breast reconstruction surgery. Defendant claimed that Plaintiff failed to tie its demand for additional benefits to a term of the ERISA plan. The court agreed, finding that Plaintiff’s contention that the Plan provides for the reasonable and customary amount does not appear in the Plan. The court dismissed with prejudice because Plaintiff failed to cure the deficiencies of her first two complaints and further leave to amend would be futile.

University Spine Center, on assignment of Michael H. v. Anthem Blue Cross of California, et. al., No. CV1912639KMJBC, 2020 WL 814181(D.N.J. Feb. 18, 2020) (Judge Kevin McNulty). Plaintiff is a surgery center that performed spine surgery on Michael H. The University Spine Center billed Anthem Blue Cross (“Anthem”) for the surgery, but Anthem paid the Spine Center a fraction of the amount billed. The Spine Center brought this lawsuit to recover the additional benefits due under the policy. Anthem brought this motion to dismiss. It pointed out that the Spine Center’s complaint had significant deficiencies. First, the complaint did not allege that Michael H. assigned Spine Center the right to pursue these benefits on his behalf. Therefore the Spine Center lacks standing to bring a lawsuit under ERISA. Second, the complaint does not allege that Anthem was the insurer of Michael H.’s health plan, that Anthem is responsible for paying benefits for Michael H., or even what health insurance plan Michael H. had. Third, the complaint did not contain enough factual allegations to support a claim for benefits due under ERISA. The complaint stated the amount the Spine Center billed and the amount Anthem paid, but did not cite a policy provision entitling the Spine Center to additional benefits. Plaintiff’s complaint was dismissed without prejudice, allowing Plaintiff a chance to amend the complaint.

Sixth Circuit

Baker v. Iron Workers’ Local 25 Vacation Pay Fund, No. 19-12963, 2020 WL 806123 (E.D. Mich. Feb. 18, 2020) (Judge Terrence G. Berg). This is an action by three of the six trustees of an ERISA-governed vacation benefit plan alleging that the defendant plan should be required to amend its 2018 tax forms. The other three trustees, who opposed amending the plan’s tax forms, filed a motion to intervene and to set aside the clerk’s default. The court granted the intervenors’ motion. The court found that the plan, which was in default because it had not filed an answer, could not realistically file an answer because it was controlled by the six trustees, which were split in half as to what the plan was required to do. Thus, the court ruled that the three intervenors were appropriate parties to the action, and that they should be allowed to file a motion to set aside the default.

Subrogation/Reimbursement Claims

Second Circuit

Callahan v. Mascarella, No. 19CV1388RJDCLP, 2020 WL 813502 (E.D.N.Y. Feb. 19, 2020) (Judge Raymond J. Dearie/Magistrate Judge Pollak). The court adopted the report and recommendation that default judgment be awarded against Defendant, a member of Local 15 and participant in the Local 15 Annuity Fund, who received a withdrawal of 100% of his Individual Account balance based on submitting a fraudulent affidavit stating that he had performed no work during the relevant 12-month period.  The court found that plan assets were paid to Defendant based on his false representations and that he must reimburse Plaintiffs $78,720.77.  The court also awarded Plaintiffs $2,850 in fees and $550 in costs.

Withdrawal Liability & Unpaid Contributions

Second Circuit

UFCW Local One Pension Fund, et al. v. L.K.R. Enterprises, Inc., No. 619CV0645LEKATB, 2020 WL 830613 (N.D.N.Y. Feb. 20, 2020) (Judge Lawrence E. Kahn).  In this dispute over unpaid contributions, the court granted Plaintiff’s motion for default judgment and ordered entry of judgment in favor of Plaintiffs in the sum of $26,874.41.

Trustees Of The New York City District Council Of Carpenters Pension Fund, Welfare Fund, Annuity Fund, And Apprenticeship, Journeyman Retraining, Educational And Industry Fund et al. v. Skyworx Contracting Inc., No. 19-CV-11638 (JPO), 2020 WL 764455 (S.D.N.Y. Feb. 14, 2020) (Judge J. Paul Oetken). In this case seeking delinquent contributions, the court confirmed the Arbitration Award and granted the application for attorney’s fees and costs. “The Clerk of Court is directed to enter judgment in favor of Petitioners in the amount of $11,245.38 plus statutory interest, as well as an additional amount of $2,133 in attorney’s fees and costs for the present petition.”

Fourth Circuit

Trustees of the National Automatic Sprinkler Industry Welfare Fund, et al. v. Craig M. Bingham, No. 8:19-CV-01406-PX, 2020 WL 815695 (D. Md. Feb. 19, 2020) (Judge Paula Xinis). The court granted Plaintiff’s default judgment and ordered Bingham to pay Plaintiffs $41,870.50 in unpaid contributions for the months of March through April of 2019.

Seventh Circuit

Central States, Se. & Sw. Areas Pension Fund, v. IVM, Inc., No.17 CV 1770, No. 18 CV 3168, 2020 WL 777266 (N.D. Ill. Feb. 18, 2020) (Judge Robert W. Gettleman).  Plaintiff (“the Fund”) sued defendant (“IVM”) for contributions owed to a welfare fund. IVM counterclaimed, seeking a refund for excess contributions. The Fund also sued IVM—and one of its two employees, Mark Haight for withdrawing from a multiemployer pension plan. IVM entered into a collective bargaining agreement (“CBA”) with a union under which IVM promised to pay into the Fund for covered employees. IVM and the union also entered into a participation agreement. Under these agreements, drivers were covered while managers and supervisors were not. This dispute arose when IVM stopped making contributions and then later sought to end its participation in the fund. Shortly thereafter, IVM requested a refund of contributions, which the Fund’s Board of Trustees refused to refund. IVM argues that it never had to pay because: (1) the participation agreement was based on a pre-hire agreement, not on a CBA; and (2) under the agreements, Mark Haight was not a covered employee. The court held that whether the CBA was a pre-hire agreement is irrelevant because section 515 was added to ERISA in order to prevent employers from ignoring pre-hire agreements and refusing to make contributions. As to the second argument, the court found that the question whether Mark Haight was a “driver” and whether he was employed in a managerial or supervisor capacity both involved genuinely disputed facts that cannot be resolved on summary judgment. Regarding IVM’s claim for a refund for excess contributions, the board denied the request because it concluded that IVM “ha[d] not identified a mistake that le[d] to the contribution payments.” The court found that because the board’s decision was not arbitrary or capricious, the Fund is entitled to summary judgment on IVM refund counterclaim.

Eighth Circuit

Raines v. Phoenix Corp., No. 19-cv-2552 (WMW/KMM), 2020 WL 814189 (D. Minn. Feb. 19, 2020) (Judge Wilhelmina M. Wright). In this case, Plaintiffs sought and the Court granted Plaintiffs’ motion for entry of default order and an injunction ordering Defendants to produce all necessary business records from January 2019 through the present in order for Plaintiffs to establish their damages by a preponderance of the evidence.  Plaintiff s and Defendants are parties to a Collective Bargaining Agreement that requires Defendants to make monthly fringe benefit contributions to welfare funds on behalf of all employees covered by the CBA and also requires Defendants to make employment and payroll records available for examination and audit by Plaintiffs. Plaintiffs conducted an audit and discovered Defendants did not remit fringe benefit contribution payments for a period owed. Prior to filing the complaint, Plaintiffs requested that Defendants produce a complete set of all employment and payroll records for the period of January 2019 through September 2019 for a compliance audit. Defendants have not produced the documents. The Court granted Plaintiffs’ motion for entry of default, thus, Defendants owe delinquent contributions and liquidated damages. Plaintiffs argue they cannot quantify the amounts owed unless the Court orders Defendants to specifically perform the obligation to produce records and permit the audit. The Court held ERISA expressly permits injunctive relief as to any act or practice violating the terms of ERISA or a plan governed by it and that the injunctive relief sought here is consistent with ERISA. Accordingly, the court held that Plaintiffs are entitled to all documents necessary to determine Defendants’ compliance with the CBA, along with any other relevant information pertaining to the administration of the funds.

Bricklayers & Allied Craftworkers Serv. Corp. v. Archithority United L.L.C., No. 19-CV-2588 (MJD/ECW), 2020 WL 831862 (D. Minn. Feb. 20, 2020) (Judge Michael J. Davis).  In this dispute over fringe benefit contributions, the court granted Plaintiff’s motion for entry of default judgment.  Defendants must provide Plaintiff’s Third Party Administrator all necessary employment and payroll records for a fringe benefit audit, and to cooperate fully with the fringe benefit audit. “Defendant Archithority is ordered to post with Plaintiff’s Third-Party Administrator a $50,000.00 or $100,000.00 surety bond, depending on the number of collectively bargained employees Archithority employs.”  Defendant must also pay the unpaid fringe benefit contributions determined to be owed as a result of the fringe benefit audit; interest at the rate of 8% as provided in the plan; the greater of liquidated damages of 10% of the fringe benefit contributions owing a provided in the plan or interest on the fringe benefit contributions owing at 8% as provided in the plan; and Plaintiff’s reasonable attorney fees and costs and disbursements incurred in this action, including the cost of conducting the fringe benefit audit. Plaintiff is awarded its attorney’s fees and costs incurred to date in the total amount of $14,404.10.

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

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