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Your ERISA Watch – In Life Insurance Dispute, the Eleventh Circuit Holds that a Party Who Is Not a Named Beneficiary May Not Sue the Plan for Any Benefits.

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This week’s notable decision is Metlife Life & Annuity Co. of Connecticut v. Akpele, No. 16-15677, __F.3d__, 2018 WL 1527147 (11th Cir. Mar. 29, 2018), an interpleader action brought by MetLife to determine the proper beneficiary to the proceeds of a life insurance policy purchased by Dr. Akpele to fund the AIE Surgical Practice Defined Benefit Plan that he had established as its sole member and trustee pursuant to ERISA.  The case involves a complicated procedural history, so I’ll just summarize the major issues the Eleventh Circuit decided as to the proper amount and beneficiary of the disputed proceeds.

First, Dr. Akepele’s widow and minor child (“the Akepeles”) contended MetLife should be required to pay the face value of the policy death benefit, $5,148,206, rather than the $635,562.25 it deposited into the district court’s registry.  To receive the full pension whole life policy death benefit of $5,148,206, Dr. Akpele was required to pay an annual premium of $204,383.78.  The evidence shows that Dr. Akpele did not pay the 2009 premium, but the policy remained in force and was reduced to its cash value of $516,108 under the non-forfeiture provision.  The evidence also demonstrates that Dr. Akpele intentionally ceased paying premiums to avoid overfunding the Plan and the attendant tax consequences under regulations promulgated by the Internal Revenue Service regarding the funding of defined benefit plans. See 26 U.S.C. § 415.  For these reasons, the court found that MetLife deposited the proper amount into the district court registry.

Second, on the issue of which defendant is entitled to receive the funds deposited by MetLife into the registry—the Akepeles or Herrera (the temporary administrator of the estate of Dr. Akpele)—the parties all conceded that the funds should be disbursed to the Plan trustee in the first instance.  The Plan trustee is supposed to distribute the money to the widow pursuant to the Plan documents and ERISA.  See 29 U.S.C. § 1055.  However, Herrera contended that the district court incorrectly denied her motions to enforce the settlement agreement reached between her and the Akepeles.  The court analyzed the Supreme Court’s decision in Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285, 129 S.Ct. 865, 172 L.Ed.2d 662 (2009).  Kennedy left unresolved the question of whether another avenue of recovery might be available to the estate against the ex-wife who received the life insurance proceeds.  Then, the Third Circuit decided Estate of Kensinger v. URL Pharma, Inc., 674 F.3d 131, 134 (3d Cir. 2012), which held that after the plan administrator distributed the funds to the ex-wife, the estate may attempt to recover the funds by suing the ex-wife to enforce the waiver.  The Eleventh Circuit in this case held that Kennedy mandates that a party who is not a named beneficiary of an ERISA plan may not sue the plan for any plan benefits.  However, a party may sue a plan beneficiary for those benefits, but only after the plan beneficiary has received the benefits (following Kensinger).  Thus, the district court properly denied Hererra’s renewed motion to enforce the settlement.

Lastly, on the issue of the attorneys’ fees the district court awarded to MetLife related to the Akepeles’ counterclaim, the Eleventh Circuit determined that since the amount of the fees has not been determined (MetLife’s petition for $81,347.17 in fees and $450.03 in costs is still pending before the district court), the Circuit court does not have jurisdiction over the Akpeles’ appeal challenging the award of fees.

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

Attorneys’ Fees

Ninth Circuit

Black, et al. v. Greater Bay Bancorp Executive Supplemental Compensation Benefits Plan, et al., No. 16-CV-00486-EDL, 2018 WL 1510084 (N.D. Cal. Mar. 27, 2018) (Magistrate Judge Elizabeth D. Laporte).  In this matter where the court previously granted Defendants’ summary judgment motion on Plaintiff’s claims for supplemental retirement benefits payments, the court denied Defendants’ motion for attorneys’ fees in the amount of $363,876.50.  The only factor that weighed in favor of attorneys’ fees was that Defendants resolved a significant legal question.  They established that a successor entity does not need to provide a summary plan document at the time it takes control of a predecessor and also does not need to take some other affirmative action to inform participants of an administrator’s interpretation of the Plan documents at that time.  Defendants also established that the Plan documents do not contain a promise to fund the face value of the life insurance policies in addition to funding the annuity itself, which provides further clarity for other participants about the benefits they are entitled to receive.

Breach of Fiduciary Duty

Eighth Circuit

Schultz v. Edward D. Jones & Co., L.P., No. 4:16-CV-01346 JAR, 2018 WL 1508906 (E.D. Mo. Mar. 27, 2018) (Judge John A. Ross).  The court denied Defendant’s motion to dismiss Plaintiff’s first amended complaint challenging the inclusion of certain funds in the profit sharing and 401(k) Plan and alleging that Defendants breached their fiduciary duties by failing to negotiate a more favorable fee arrangement with Mercer for administrative services.  The FAC plausibly alleges a breach of fiduciary duties and states a claim as to the Administrative Committee and the Investment Committee.

Class Actions

Sixth Circuit

Duggan v. Towne Properties Grp. Health Plan, No. 1:15CV623, 2018 WL 1521576 (S.D. Ohio Mar. 28, 2018) (Judge Michael R. Barrett).  In this putative class action alleging failure to provide plan documents and ERISA-compliant notice of adverse benefit determinations, the court determined that MedBen was not acting as an ERISA fiduciary when it allegedly failed to provide Plaintiff with an ERISA-compliant adverse benefit determination notice.  As such, the court denied Plaintiff’s motion for class certification as to MedBen, but granted class certification as to Towne Properties (plan administrator) and the Equitable Remedy Class.

Disability Benefit Claims

Third Circuit

Patchell v. Cigna Health and Life Insurance Company, & Life Insurance Company of America, No. 3:17-CV-161, 2018 WL 1524531 (W.D. Pa. Mar. 28, 2018) (Judge Kim R. Gibson).  The court dismissed Plaintiffs’ breach of fiduciary duty claim, finding that Defendants did not violate ERISA by:  (1) failing to reimburse Plaintiffs for attorney’s fees and costs incurred during the administrative appeals process; (2) failing to hold a Montanile tracing hearing before suspending Plaintiff’s benefits as a result of a dependent SSDI overpayment; and (3) offsetting Plaintiff’s LTD benefits by the disability benefits his dependents are eligible to receive.  The court also dismissed Ms. Patchell’s loss of consortium claim based on the allegation that because of the wrongful breach of fiduciary duties, that Mr. Patchell “has grown uncommunicative and exhibited a marked disinclination to express intimacies or libidinous joy with his wife.”  The court also dismissed Plaintiffs’ class action claims and disgorgement claim.

Fourth Circuit

Sutherland v. Sun Life Assurance Company of Canada, No. 17-1293, __F.App’x__, 2018 WL 1517162 (4th Cir. Mar. 28, 2018) (Before KING and AGEE, Circuit Judges, and SHEDD, Senior Circuit Judge).  The court affirmed the district court’s grant of summary judgment for Sun Life in this matter where Sun Life terminated Plaintiff’s partial disability benefit payments after several years.

Harrison v. Unitedhealth Group, et al, No. 2:16-CV-11406, 2018 WL 1528177 (S.D.W. Va. Mar. 28, 2018) (Judge Thomas E. Johnston).  The fact that Standard initially found Plaintiff was disabled and paid her long term disability benefits for over one year and seven months before terminating her claim after engaging in an independent review does not indicate bias.  Thus, the court reviews Standard’s decision for abuse of discretion.  “While it might be possible for a court analyzing the record de novo to disagree with the conclusion reached by Standard,” the court found that Standard did not abuse its discretion where it relied on two board certified physicians, who performed six medical reviews, considered the limited treating physician opinions, and relied on a vocational expert evaluation.

Moore v. Life Insurance Company of North America, No. 6:17-CV-00030, 2018 WL 1461502 (W.D. Va. Mar. 23, 2018) (Judge Norman K. Moon).  Abuse of discretion review applies to LINA’s decision to cease paying benefits since the court determined that the Appointment of Claim Fiduciary form is part of the ERISA Plan and that document grants LINA discretion.  The discretion was also described in the SPD.  As to the merits of the long term disability claim, substantial evidence supports LINA’s decision that Plaintiff’s condition did not prevent him from performing the duties of “any occupation” he was (or could have reasonably become) qualified for, and that Plaintiff’s disability was caused or contributed to by an anxiety or depressive disorder, which would not have entitled him to disability payments beyond 24 months.

Sixth Circuit

Chartkoff v. American Electric Power, et al., No. 2:16-CV-1186, 2018 WL 1512282 (S.D. Ohio Mar. 27, 2018) (Judge Edmund A. Sargus).  In this matter where Plaintiff claimed entitlement to long term disability benefits due to ASD and anxiety, the court granted Defendant’s motion for judgment on the administrative record.  The court found that it was not arbitrary and capricious for Defendant to reject the opinions of the treating providers, rely on file reviews or give a brief explanation for why it did not follow the Social Security Administration’s finding of disability.

Castor v. AT&T Umbrella Benefit Plan No. 3, No. 17-3400, __F.App’x__, 2018 WL 1470573 (6th Cir. Mar. 26, 2018) (Before: MOORE, THAPAR, and LARSEN, Circuit Judges).  The court affirmed the district court’s grant of judgment on the administrative record to AT&T.  It held that Sedgwick did not violate § 2560.503-1(h)(3) by consulting with the same doctor on appeal who also reviewed Plaintiff’s initial claim, especially where Sedgwick also had two other new doctors review Plaintiff’s claim on appeal.  The court also determined that the reviewing doctors adequately considered and addressed Plaintiff’s formal job description and that Sedgwick did not behave arbitrarily and capriciously by relying upon them.

Seventh Circuit

McGrath v. Liberty Life Assurance Company of Boston, No. 17-CV-03095, 2018 WL 1547103 (C.D. Ill. Mar. 29, 2018) (Judge Sue E. Myerscough).  In this case Plaintiff did not appeal his disability claim denial within 180 days.  After the deadline passed, his attorney contacted Liberty Life seeking a voluntary administrative review but the representative cold not guarantee the review requested.  Plaintiff then filed a lawsuit seeking payment of benefits.  The court determined that because Plaintiff has failed to exhaust his administrative remedies, his Complaint must be dismissed.  Plaintiff has an opportunity to plead additional facts relevant to the issue of whether he is excused from exhausting administrative remedies.

ERISA Preemption

First Circuit

Lavery v. Restoration Hardware, Inc., No. CV 17-10856, 2018 WL 1524398 (D. Mass. Mar. 28, 2018) (Judge Denise J. Casper).  Defendant filed a partial motion to dismiss on the basis that the complaint, which seeks damages based on the lost value of the benefit plans provided by Defendant, under two state law causes of action, is preempted by ERISA.  Bound by Hampers v. W.R. Grace & Co., Inc., 202 F.3d 44 (1st Cir. 2000), the court dismissed the complaint to the extent that it seeks damages related to Plaintiff’s non-participation in ERISA-covered plans due to alleged misclassification as an independent contractor.

Fourth Circuit

Lawrence v. Randolph Hospital, Inc., No. 1:17CV363, 2018 WL 1478039 (M.D.N.C. Mar. 26, 2018) (Judge N. Carlton Tilley, Jr.).  In this matter where Plaintiff alleges she was a full-time employee as of the date she was involved in a serious car accident, and that her employer’s benefits coordinator falsified documents to give the appearance she was put “on leave” just prior to the car accident in order to avoid paying medical and disability benefits, the court found that Plaintiff’s state law claims are preempted by ERISA.  This is because she has standing as a plan participant under both Plans and the purpose of her claims is to recover benefits under ERISA-governed plans.  The court granted Plaintiff leave to amend her complaint to allege ERISA claims.

Fifth Circuit

LaBouve v. Metso Minerals Indus., Inc., No. 4:17-CV-95-DMB-JMV, 2018 WL 1527838 (N.D. Miss. Mar. 28, 2018) (Judge Debra M. Brown).  On the issue of whether Plaintiff released his right to disability benefits under Defendant’s pension plan, the court determined that Plaintiff’s disability benefits arose out of the work-related injury that was settled in the Global Settlement Agreement and General Release, there was consideration paid to Plaintiff to release his disability benefits, and the burden shifts to Plaintiff to show the release is invalid.  The court found that his release of disability benefits was knowing and voluntary.

Sixth Circuit

Cain v. Metropolitan Life Ins. Co., et al., No. 1:17 CV 1410, 2018 WL 1535197 (N.D. Ohio Mar. 29, 2018) (Judge John R. Adams).  Plaintiff brought suit in Cuyahoga Common Pleas Court seeking a declaratory judgment pursuant to O.R.C. Chapter 2721 establishing his right to the proceeds of a life insurance policy.  Because the subject matter of the action is an ERISA-regulated employee welfare benefit plan, the court granted MetLife’s Rule 12(b)(6) motion to dismiss for failure to state a claim on the basis that ERISA preempts state law remedies for regulated plans.

Eleventh Circuit

Toscano v. Regions Financial Corporation, et al., No. 2:16-CV-1284-MHH, 2018 WL 1518348 (N.D. Ala. Mar. 28, 2018) (Judge Madeline Hughes Haikala).  The court held that ERISA preempts Plaintiff’s claims for COBRA coverage and 401K funds so it dismissed Plaintiff’s breach of contract claim to the extent it is premised on Defendant’s alleged failure to provide benefits accruing under ERISA employee benefits plans.  The court also held that Plaintiff may pursue his breach-of-contract claim for compensation under section 4(a)(1) of the SPA to the extent the compensation or benefits sought are not covered by ERISA.

Exhaustion of Administrative Remedies

Ninth Circuit

Elbling v. Crawford & Co., No. 16CV2951-L(KSC), 2018 WL 1536717 (S.D. Cal. Mar. 29, 2018) (Judge M. James Lorenz).  In this lawsuit seeking benefits under a deferred compensation plan, where the plan provides that, “Within 60 days after receiving a notice from the Committee that a claim has been denied, in whole or in part, a Claimant … may file with the Committee a written request for review of the denial of the claim,” and Plaintiff did not file a written request for review, the court denied Defendant’s motion to dismiss the action for failure to exhaust administrative remedies.  “The unqualified use of the word ‘may’ can reasonably lead one to read the provision as optional.”

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Humana Insurance Company of Kentucky v. O’Neal, No. 17-5811, __F.App’x__, 2018 WL 1474963 (6th Cir. Mar. 27, 2018) (Before: MERRITT and SUTTON, Circuit Judges; CLELAND, District Judge).  The court determined that Humana properly instituted an interpleader action below and it was not required to exhaust administrative remedies.  Humana did not breach its fiduciary duties to O’Neal in the way it handled the competing claims for the life insurance benefit.  The evidence supported the conclusion that the decedent did not name and did not wish to name O’Neal (his ex-girlfriend) as his continued beneficiary.  At the time of the decedent’s death, O’Neal had received a court-ordered permanent order of protection against him.  The life insurance benefits were properly awarded to the decedent’s estate.

Eleventh Circuit

Metlife Life & Annuity Co. of Connecticut v. Akpele, No. 16-15677, __F.3d__, 2018 WL 1527147 (11th Cir. Mar. 29, 2018) (Before ROSENBAUM and JILL PRYOR, Circuit Judges, and BARTLE,* District Judge).  See notable decision above.

Medical Benefit Claims

Sixth Circuit

International Union, United Automobile, Aerospace, And Agricultural Implement Workers of America (UAW) v. Honeywell International Inc., 11-CV-14036, 2018 WL 1535402 (E.D. Mich. Mar. 29, 2018) (Judge Denise Page Hood).  The Court concluded that Plaintiffs’ retirees have not been vested with lifetime health care benefits under the CBAs because they each included a durational clause terminating all provisions of the contract on a specific date.  “The Court also orders that Defendant: (1) is permanently enjoined from paying anything less than the full premium amount for health care coverage for retirees under the 2003, 2007, and 2011 CBAs and the Cleveland, Tennessee closing agreement; and (2) shall make whole those retirees for whom Defendant paid anything less than the full premium amount for health care coverage under the 2003, 2007, and 2011 CBAs or the Cleveland, Tennessee closing agreement.”

Pension Benefit Claims

Seventh Circuit

Smith v. Iron Workers District Council of Southern Ohio & Vicinity Pension Trust & Garland Smith, No. 1:17-CV-368-TLS-PRC, 2018 WL 1466290 (N.D. Ind. Mar. 26, 2018) (Magistrate Judge Paul R. Cherry).  The court granted Plaintiff leave to amend her complaint to add a claim for benefits under Section 502(a)(1)(B) and for conversion under Indiana state law.  The court denied Plaintiff leave to amend her complaint to add a claim for equitable relief under Section 502(a)(3) since the relief she seeks—a Court order requiring the Fund to accept the Domestic Relations Order, to release the withheld money, and to pay Smith’s attorney fees and costs—is available under subsection (a)(1)(B) so the claim brought under subsection (a)(3) is futile.  Plaintiff also fails to state a claim upon which relief can be granted under ERISA Section 502(a)(2) since she does not allege mismanagement of the Fund or any other plan injury.  The court determined that there is no undue prejudice to the Fund in allowing the amendment to add the non-futile claims and there was no bad faith.

Ninth Circuit

Elbling v. Crawford & Co., No. 16CV2951-L(KSC), 2018 WL 1536717 (S.D. Cal. Mar. 29, 2018) (Judge M. James Lorenz).  Plaintiff claims that Defendant violated ERISA by denying his vested long-term incentive credits as forfeited under the deferred compensation plan non-compete provision.  The court agreed with Defendant that the minimum vesting standards of § 1053(a) do not apply to the DCP.  Plaintiff’s state law claims challenging the enforceability of the non-compete provision are preempted by ERISA.

Provider Claims

Third Circuit

Shah, MD v. Horizon Blue Cross Blue Shield of New Jersey, No. 117CV00632NLHAMD, 2018 WL 1509087 (D.N.J. Mar. 27, 2018) (Judge Noel L. Hillman).  In this case where the plan paid the provider less than $10,000 for what he valued to be a $217,000 elective spinal surgery, the court granted Defendant’s motion for summary judgment on all of the provider’s claims, finding that Defendant did not act arbitrarily and capriciously when it reimbursed Plaintiff according to its plan terms regarding payment to out-of-network providers.

Shah v. Horizon Blue Cross Blue Shield & Blue Advantage Administrators of Arkansas, No. 116CV2528NLHKMW, 2018 WL 1509083 (D.N.J. Mar. 27, 2018) (Judge Noel L. Hillman).  The court found that the 2015 assignment from Joanne G. to Plaintiff is void because she previously assigned the rights to her benefits under the health plan to another entity and individuals in 2013.  Because of the valid assignment in 2013, the patient had no rights left to attempt to assign to Plaintiff.

Fifth Circuit

Center for Endoscopic Spine Surgery, LLC v. Whatabrands, LLC, et al., No. CV H-17-212, 2018 WL 1535201 (S.D. Tex. Mar. 29, 2018) (Judge Gray H. Miller).  The court determined that Cigna paid more than required under the Plan to the out-of-network provider for ambulatory surgery center services.  For this reason, the court granted Cigna’s motion for summary judgment on Plaintiff’s Section 502(a)(1)(B) claim, breach of fiduciary duty claim, failure to provide a full and fair review claim, negligent misrepresentation claim, and statutory penalties claim.

Advanced Physicians S.C. v. Connecticut Gen. Life Ins. Co., No. 3:16-CV-2355-G, 2018 WL 1509120 (N.D. Tex. Mar. 27, 2018) (Judge A. Joe Fish).  The court denied Defendants’ motion to dismiss the provider’s Fourth Amended Complaint alleging that Defendants violated the terms of the Plan by failing to pay Plaintiff for covered medical expenses at the 70% reimbursement called for in the Plan.  The court found that the Amended Complaint contains enough facts to “nudge” their § 1132(a)(1)(B) claims “across the line from conceivable to plausible.”

Eleventh Circuit

Living Tree Laboratories, LLC v. United Healthcare Services, Inc., et al., No. 16-CV-24680, 2018 WL 1536609 (S.D. Fla. Mar. 29, 2018) (Judge Darrin P. Gayles).  The court dismissed the Amended Complaint without prejudice because the court determined that it lacks sufficient detail about the plans alleged to cover Living Tree’s patients and the corresponding claims for reimbursement.  Living Tree groups dozens of patients and thousands of claims without linking each patient to a specific insurance plan.  As a result, the court cannot reasonably infer that United is liable for the wrongdoing alleged by Plaintiff.

Davita Inc. v. St. Joseph’s/Candler Health Systems, Inc., No. CV417-131, 2018 WL 1513317 (S.D. Ga. Mar. 27, 2018) (Judge William T. Moore, Jr.).  “In this case, it is clear that Plaintiff has carefully crafted its complaint to allege only a state law claim based on Defendant’s purported breach of the agreement to provide medical services to Defendant’s insureds. At no point in the complaint does Plaintiff either mention ERISA or base any allegation on a claim that an insured may have against Defendant. Therefore, Plaintiff has not implicated any written assignment, which becomes completely irrelevant to the determination of whether Plaintiff’s claim is preempted by ERISA. Because this Court lacks jurisdiction over Plaintiff’s claim, the Court must grant Plaintiff’s request that this case be remanded to the State Court of Chatham County.”

Severance Benefit Claims

First Circuit

Hernandez v. Lexis Nexis De Puerto Rico, Inc., No. CV 17-1718CCC, 2018 WL 1468561 (D.P.R. Mar. 23, 2018) (Judge Carmen Consuelo Cerezo).  The court dismissed the pro se plaintiff’s complaint averring workplace retaliation under Puerto Rico Act 115 and wrongful termination under Puerto Rico Act 80 since he executed a release agreement that was part of Defendant’s Reed Elsevier US Severance Plan and those claims are barred by that agreement.

Statutory Penalties

Second Circuit

Gardner v. Verizon Communications Inc., No. 16CV814RRMRML, 2018 WL 1513636 (E.D.N.Y. Mar. 26, 2018) (Judge Roslynn R. Mauskopf).  The court denied Plaintiff leave to amend to add a claim for penalties under section 1132(c) on the basis that she made an oral request for life insurance documents upon calling the Verizon Benefits Center and informing them of the death of her daughter.  Plaintiff did not make a written request for plan documents and Verizon indicated that the transcript of the call demonstrates that she never even made an oral request.

Eighth Circuit

Dunivin v. Life Insurance Company of North America & Cloud Peak Energy Resources, LLC, No. 4:17CV1530 HEA, 2018 WL 1455861 (E.D. Mo. Mar. 23, 2018) (Judge Henry E. Autrey).  The court dismissed Plaintiff’s claim for § 1132(c)(1)(B) penalties against Life Insurance Company of North America d/b/a Cigna because Cloud Peak, not Cigna, is specifically designated as the sole plan administrator in the Plan document, and it is the sole plan administrator under ERISA.

Gaskill v. Life Insurance Company of North America, d/b/a Cigna Insurance Group & Southeast Missouri Hospital, No. 4:17CV1526 HEA, 2018 WL 1455863 (E.D. Mo. Mar. 23, 2018) (Judge Henry E. Autrey).  The court dismissed Plaintiff’s claim § 1132(c)(1)(B) penalties against Cigna because Southeast Missouri Hospital, not Cigna, is specifically designated as the sole plan administrator in the Plan document, and it is the sole plan administrator under ERISA.


Fourth Circuit

Holland v. CONSOL Energy Inc., No. 2:17-CV-02091, 2018 WL 1512375 (S.D.W. Va. Mar. 26, 2018) (Judge Thomas E. Johnston).  In this dispute regarding the way in which CONSOL implements and administers its Section 9711 Coal Industry Retiree Health Benefit Act Plan with respect to certain eligible beneficiaries, the court denied CONSOL’s Motion to Dismiss under Rule 12(b)(3) for improper venue, finding that Plaintiffs have made sufficient allegations showing that venue is proper in this district under Section 4301 of ERISA.  Specifically, “Plaintiffs provide sufficient allegations supporting a finding that CONSOL still ‘does business’ in West Virginia and continues to maintain contacts with this District through its authorized and apparently extensive corporate activities.”  § 1451(d) does not require that the business conducted by a defendant in the forum district be related to the case’s underlying dispute.


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