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Your ERISA Watch – In Seventh Circuit, de novo ERISA Cases Are Reviewed Just Like a Breach of Contract Case

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This week’s notable decision is Dorris v. Unum Life Ins. Co. of Am., No. 19-1701, __F.3d__, 2020 WL 524726 (7th Cir. Feb. 3, 2020), in which the Seventh Circuit stridently announced, “[a]t least in this circuit, ERISA de novo review requires no review at all, but an independent decision.” It then made clear the plaintiff bears the burden of proving she is entitled to benefits, not that the plan administrator erred.

For Stephanie Dorris, the former president of Beans Plus, Inc., this failure to recognize her burden was determinative. Her disability provider, Unum, had paid benefits for over 12 years – the last ten of which were under the “any occupation” standard. Unum then terminated Dorris’ benefits claiming she was able to return to work at her own occupation. Dorris fought hard to prove that Unum’s explanation for its decision was wrong. She convinced the district court that it was, largely because the occupation demanded long hours and constant mental acuity – job duties that aggravated her Lyme disease symptoms.

However, when the district court pivoted to deciding whether Dorris was entitled to benefits under the plan’s “any occupation” standard, not the “own occupation” standard Unum had applied, it found barely any evidence in the administrative record going to that question. Because Dorris had failed to conduct discovery on the merits of her claim and failed to offer additional evidence to fill this gap in the record with new evidence (such as a vocational assessment), the district court entered judgment in Unum’s favor. The Seventh Circuit found no clear error in this process.

Remarkably, by the time the case reached the Seventh Circuit, Unum abandoned defending the reasons it gave for terminating benefits during the mandatory “full and fair” pre-litigation ERISA administrative review proceedings. The question then was what happens next. The plan definition of disability asked about Dorris’ capacity to work occupations other than as president. Neither party had seriously addressed this issue in the administrative proceedings or in the district court, so the record was silent on them. Who was impacted by that silence?

According to the Seventh Circuit, the answer was in the “misleading phrase” de novo review. The confusion was caused by the word review, because a district court does not perform a review of any kind; rather it makes an independent decision, “akin to a contract dispute.” Because of this, what happened before the plan administrator was irrelevant in a de novo review case. And while the district court can limit itself to deciding the case on the administrative record, it “should also freely allow the parties to introduce relevant extra-record evidence and seek appropriate discovery.”

Because the plaintiff has the burden of proof in a de novo case, she is the one who is obligated to prove she is entitled to benefits, and any gaps in the record cut against her claim. However, in litigation, “[s]he should be permitted to patch these gaps before the court reaches final judgment.”

On this last point, the Seventh Circuit recognized Courts of Appeals hold divergent views of how and when a district court can accept evidence outside of the administrative record in de novo review cases – including that some prohibit it entirely. It also recognized how this approach contrasted with claims subject to arbitrary and capricious review, where it is the administrator’s burden to provide an explanation for its decision consistent with the record and ERISA.

Given Dorris’ complete failure to provide vocational evidence satisfying the “any occupation” definition, during the administrative process or during litigation, the Seventh Circuit declined to consider how far a claimant’s burden goes on an “any occupation” standard or whether the burden would ever shift to the administrator to identify a job the plaintiff could perform. If non-vocational evidence showed that Dorris was “utterly immobile and incoherent,” the Seventh Circuit would have overlooked the vocational shortcomings. However, under the clear error standard, the Seventh Circuit was unwilling to overturn the district court decision, despite medical evidence that came “close enough to declaring complete disability, and the Social Security opinion [that] does declare it….”

The Seventh Circuit also rejected the argument that it was inconsistent for the district court to find that the administrative record provided an adequate basis for its decision and to then rule against her because the record was underdeveloped. It saw no inconsistency because Dorris never offered – and the court never rejected – relevant extra-record evidence. Dorris appeared to have believed that the lack of vocational evidence in the record favored her. She was wrong.

This week’s notable decision was written by Kantor & Kantor partner, Brent Dorian Brehm.

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

Attorneys’ Fees

Second Circuit

Hughes v. Hartford Life and Accident Insurance Co., No. 3:17-CV-01561 (JAM), 2020 WL 563364 (D. Conn. Feb. 5, 2020) (Judge Jeffrey Alker Meyer).  The court previously remanded Plaintiff’s long-term disability benefit claim to Hartford after it found that Hartford denied her a full and fair review when it refused to give her the opportunity to respond to an expert report that it obtained while it was reviewing her appeal.  Plaintiff moved for attorneys’ fees, which the court awarded in the total amount of $105,762.25 and costs in the amount of $3,576.54.  The court found that the remand constituted some success on the merits justifying a fee award.  Even though Hartford did not act in bad faith, “it is enough if Hartford Life nonetheless acted culpably in the sense that it breached a legal duty to plaintiff.”  A balance of the factors weighs in favor of a fee award.  The court used rates reasonable for Connecticut attorneys of comparable experience to Plaintiff’s out-of-district attorneys and awarded $425 for the three partners who worked on this case.  The court did not award out-of-district travel time.  The court did award time spent by local counsel and a contract attorney who was retained to prepare summary judgment briefing, finding that the time was reasonable and not duplicative.  The court denied fees for time spent preparing a reply brief for the attorney’s fee application since Hartford did raise well-founded objections to Plaintiff’s counsel’s billing errors.

Eighth Circuit

Johnson Tr. of Operating Engineers Local #49 Health & Welfare Fund v. Charps Welding & Fabricating, Inc., No. 18-3007, __F.3d__, 2020 WL 597213 (8th Cir. Feb. 7, 2020) (Before Smith, Chief Judge, Gruender and Benton, Circuit Judges).  In this dispute over contributions to an employee benefit fund, the court affirmed the district court’s award of attorneys’ fees to the successful Defendants.  The court did reverse the award of expenses, finding that “the district court abused its discretion by awarding costs that were not taxable under 28 U.S.C. § 1920. Postage and delivery costs are not taxable. Taxing of expert fees is strictly limited. Some costs disputed by the Trustees are taxable under 28 U.S.C. § 1920. Discovery-related copying is taxable. Depositions are taxable when necessarily obtained for use in a case, even if not introduced at trial. Although parties may allocate costs by agreement, the Trustees do not provide evidence of an enforceable contract. Some expenses that the district court awarded as ‘costs’ might be awarded as attorney’s fees if they are separately billed under the prevailing practice in the local community. Litigation expenses may be included in attorney’s fees. Postage and delivery fees may be attorney’s fees if normally charged to clients. However, expert witness fees are generally not part of attorney’s fees.”  (internal citations omitted).

Cent. Valley Ag Coop. v. Leonard, No. 8:17CV379, 2020 WL 587022 (D. Neb. Feb. 6, 2020) (Judge Laurie Smith Camp).  This case involves various RICO and ERISA claims by a health plan sponsor against companies that provided consulting and administrative services to the health plan.  Following the court’s grant of “summary judgment against Central Valley, concluding that it failed to show Defendants acted contrary to the express terms of the Plan and supporting documents; that Defendants were not fiduciaries; and that Defendants did not breach any fiduciary duties,” the court granted Defendants’ motion for attorneys’ fees.  The court found that Central Valley knew or should have known that its ERISA claims lacked merit.  Central Valley can satisfy a fee award because it had more than $1 billion in annual revenue for each of the applicable Plan years and paid its own attorneys more than $1 million in attorneys’ fees in this litigation. The court found that partner rates ranging between $258 and $390 per hour and associate rates ranging between $220 and $260 per hour are reasonable in the Omaha community for attorneys of comparable experience. The court awarded a total of $1,490,000 in attorneys’ fees.

Worlitz v. Board of Trustees, District #9, I.A.M.A.W. Pension and Welfare Trust, et al., No. 4:18 CV 1974 CDP, 2020 WL 529309 (E.D. Mo. Feb. 3, 2020) (Judge Catherine D. Perry).  The court granted Defendants’ motion for attorneys’ fees in the amount of $10,323.50 against the unsuccessful Plaintiff.  The court explained:  “Plaintiff filed this lawsuit claiming entitlement medical and disability benefits despite repeatedly admitting his claim stemmed from an obviously non-compensable work-related injury. Plaintiff additionally requested future benefits under the Welfare Plan despite knowing that he had not been a covered employee for over a year before he filed suit. Plaintiff nonetheless persisted in the matter, forcing the Trust to expend its entirely participant-funded resources to defend against his legally and factually untenable claim. An award of attorney’s fees thus reflects the bad faith nature of plaintiff’s claim and the relative merits of defendants’ position; provides a benefit to the Trust’s beneficiaries in recouping its expended costs; and serves as a deterrent for others who would seek to bring similarly misguided claims under the Welfare Plan’s subrogation procedures.”

Breach of Fiduciary Duty

Third Circuit

Goetz v. Voya Fin., Inc., No. CV 17-1289-CFC, 2020 WL 550892 (D. Del. Feb. 4, 2020) (Judge Colm F. Connolly). In this putative class action brought on behalf of participants in a defined contribution pension plan against a company providing recordkeeping services to the plan, the court granted in part and denied in part Defendant’s motion to dismiss.  The court granted the motion “insofar as it seeks dismissal of Goetz’s claim for breach of fiduciary duties for charging excessive fees, Goetz’s claim for breach of co-fiduciary duties for charging excessive fees, and Goetz’s party-in-interest claim.”  The court denied the motion “insofar as its seeks dismissal of Goetz’s claim for breach of fiduciary duties for providing ‘false and misleading’ Rule 404a-5 disclosures or dismissal of and Goetz’s claim for breach of co-fiduciary duties for providing ‘false and misleading’ Rule 404a-5 disclosures.”

Fourth Circuit

Technibilt Grp. Ins. Plan v. Blue Cross & Blue Shield of N. Carolina, No. 519CV00079KDBDCK, __F.Supp.3d__, 2020 WL 534951 (W.D.N.C. Feb. 3, 2020) (Judge Kenneth D. Bell).  Plaintiffs, a health plan and its sponsor, sued Defendant, a third party health insurance administrator, for breach of fiduciary duty related to its untimely payment of medical expenses incurred by a Plan participant’s dependent, which resulted in the Plan’s inability to claim the expenses under a reinsurance policy.  Defendant moved to dismiss on the basis that “the Plan is not a proper Plaintiff, Blue Cross is not an ERISA fiduciary with respect to the alleged wrongful conduct and the Complaint fails to sufficiently allege that Blue Cross breached its alleged fiduciary duties.”  The court denied Defendant’s motion to dismiss.  First, the court recognized that participants and beneficiaries of the Plan might be adversely impacted by substantial losses to a Plan caused by the inability of the Plan to assert claims against a Plan fiduciary.  At this early stage, the court will allow the Plan to continue as a Plaintiff “based on the more functional view of the Plan’s right to assert ERISA claims for the benefit of the Plan under the alleged facts.”  Second, the court found that Plaintiffs sufficiently alleged that Defendant Blue Cross is a functional fiduciary since Plaintiffs have plausibly alleged that Blue Cross exercised sufficient discretion and/or control over the timing of payment of claims.  Lastly, the court found that Plaintiffs sufficiently alleged a breach of fiduciary duty.  “Blue Cross responds that it has not breached any fiduciary duty because its final payment of the claim was well within its standard time for paying claims from the time of its formal receipt of the claim from the Host Blue. However, in the words of the ubiquitous commercial, ‘sometimes just ok is not ok.’ That is, whether or not Blue Cross’ failure to pay these extraordinary claims prior to the end of 2018 violated its fiduciary duty depends on a full consideration of all the facts and circumstances that will be developed in discovery.”

Sixth Circuit

Great American Fidelity Insurance Company v. Stout Risius Ross, Inc., et al., No. 19-CV-11294, 2020 WL 601784 (E.D. Mich. Feb. 7, 2020) (Judge Laurie J. Michelson).  In another lawsuit, Defendant Stout was sued by the Appvion ESOP which alleged that “Stout negligently or fraudulently appraised and overstated the value of the ESOP’s stock in Paperweight, which contributed to Appvion’s bankruptcy and the corresponding losses sustained by the ESOP and its participating employees.”  In a separate bankruptcy action, the co-trustees of the Appvion Trust sued Stout for its alleged flawed valuation of the stock which contributed to financial losses by the plaintiffs and that Stout received more money than it should have from the insolvent debtors.  Here, Plaintiff Great American sought a declaration that it has no duty to defend or indemnify Stout or its employees in the two lawsuits. The court found that Great American failed to meet its burden of establishing as a matter of law that it has no duty to defend Stout in two underlying actions and denied its motion for partial summary judgment.

Eighth Circuit

Rozo v. Principal Life Ins. Co., No. 18-3310, __F.3d__, 2020 WL 543378 (8th Cir. Feb. 3, 2020) (Before Smith, Chief Judge, Gruender and Benton, Circuit Judges).  In this class action, Plaintiff alleged that Defendant Principal Life Insurance Company, a service provider that operated a fund in which Plaintiff invested via his retirement plan, breached its fiduciary duty and engaged in prohibited transaction when it set a fixed rate of return, or Composite Crediting Rate (“CCR”). The Eighth Circuit reversed the district court’s grant of summary judgment in the service provider’s favor, holding that the service provider was a “fiduciary” under ERISA when it set a guaranteed rate of return.  The court applied the two-part test articulated in Teets v. Great-West Life & Annuity Ins. Co., 921 F.3d 1200 (10th Cir. 2019).  Under Teets, a service provider acts as a fiduciary: if (1) it “did not merely follow a specific contractual term set in an arm’s-length negotiation” and (2) it “took a unilateral action respecting plan management or assets without the plan or its participants having an opportunity to reject its decision.” Here, Principal’s setting of the CCR does not conform to a specific term of its contract with the employer plan because it sets the CCR with no specific contract terms controlling the rate.  Second, the plan sponsors do not have the unimpeded ability to reject the service provider’s actions or terminate the relationship because leaving the plan requires a plan sponsor to pay a 5% fee on the plan’s assets.  Because it found Principal to be a fiduciary when it sets the CCR, the court did not address Plaintiff’s argument regarding prohibited transaction.

Class Actions

Eighth Circuit

Larson v. Allina Health Sys., No. 17-CV-3835 (SRN/TNL), 2020 WL 583082, (D. Minn. Feb. 6, 2020) (Judge Susan Richard Nelson). Plaintiffs filed this class-action lawsuit against the fiduciaries of the Allina retirement plan for various breaches of their fiduciary duties. The parties reached a settlement agreement and the court granted Plaintiffs’ unopposed Motion for Preliminary Approval of Settlement. After Plaintiffs’ motion was granted, Shiyang Huang filed a motion to file an amicus brief in support of neither party. He explained in his motion that the brief would raise Article III standing concerns, Huang had a strong interest in the case because he was involved in a different retirement plan litigation matter, and because few objectors “could or would properly object” to the settlement. The court dismissed Huang’s motion because he was neither a party nor a class member, and his legal arguments were without merit. Because Huang’s involvement would not be “timely, useful, or otherwise helpful to the Court”, his motion was denied.

Disability Benefit Claims

Second Circuit

McCalla v. Liberty Life Assurance Co. of Bos., No. 18CV1971JMASIL, 2020 WL 587003 (E.D.N.Y. Feb. 6, 2020) (Judge Joan M. Azrack).  In email settlement negotiations, Plaintiff’s attorney wrote to Defendant’s attorney stating that Plaintiff “will accept $12,500.00. This is our best and final offer.”  Defendant’s attorney indicated that his client would accept the demand and waive its counterclaims in exchange for a release of all claims and agreement to the customary terms of a settlement agreement.  Plaintiff’s counsel responded with payment instructions and told Defendant’s attorney that he could inform the court of the settlement.  Weeks later, Plaintiff’s counsel informed Defendant’s attorney that Plaintiff intended to back out of the settlement, but Defendant took the position that it had entered into a binding settlement agreement reflected in their email exchanges. Plaintiff’s counsel argued it was not a binding settlement because the emails stated, “FOR SETTLEMENT PURPOSES ONLY WITHOUT PREJUDICE – NOT TO BE USED IN LITIGATION” and the parties informed the court the settlement had been reached only “in principle.”  At the conference, Plaintiff for the first time claimed that his attorney did not have authority to settle.  The court found that this claim was waived but also that it was not credible.  The court granted Defendant’s Motion for Settlement, finding that the parties agreed to settle this action for $12,500 to be paid by Defendant to Plaintiff which will release all claims and counterclaims in this consolidated action.

Fourth Circuit

Thomas v. Aetna Life Ins. Co., No. 1:19-CV-611, 2020 WL 520582 (E.D. Va. Jan. 31, 2020) (Judge Claude M. Hilton).  The court found that Aetna’s decision to deny Plaintiff’s long-term disability claim was supported by substantial evidence, where “both treating and independent medical professionals had concluded that Plaintiff was capable of working in her usual occupation. Further, examination records and objective tests confirmed that Plaintiff was not suffering from any condition that would limit her ability to work. . . .Additionally, this decision is supported by the conclusions of several independent, Board-certified reviewers.”  The court rejected Plaintiff’s argument that she was denied a full and fair review of her appeal because Aetna did not provide her with her claim file.  This is because Plaintiff delayed requesting her claim file until the end of the appeal review.

Fifth Circuit

Burrell v. Metropolitan Life Ins. Co., No. 1:18-CV-174-RP, 2020 WL 532934 (W.D. Tex. Feb. 3, 2020) (Mag. J. Susan Hightower). Plaintiff was a billing analyst for Deloitte and a participant in Deloitte’s STD and LTD employee benefit plans. He stopped working in 2015 due to various ailments and submitted a claim for benefits to MetLife, the claims administrator for the plans. MetLife denied the claims, after which Plaintiff filed suit. The parties then filed cross-motions for summary judgment. The court found that the STD plan was a payroll practice falling within ERISA’s “safe harbor” provisions, and therefore not governed by ERISA. Specifically, employees were automatically enrolled at no cost in the plan, and the plan paid benefits out of its general assets. As a result, the magistrate recommended that Deloitte’s motion be granted with regard to Plaintiff’s ERISA claim for STD benefits, because ERISA did not apply. As for Plaintiff’s LTD claim, the court found that the abuse of discretion standard of review applied because the plan contained a grant of discretionary authority to MetLife. Plaintiff argued that Texas prohibits discretionary clauses in insurance policies, but the court found that the policy was issued in Connecticut and contained a choice of law provision stating that New York law applied. Neither of those states forbids discretionary clauses, and thus the abuse of discretion standard was appropriate. As to the merits of plaintiff’s LTD claim, the court found that his medical records “did not provide objective evidence how his symptoms prevented him from working.” Plaintiff contended that he suffered from chronic fatigue, but his physicians did not satisfactorily explain how his condition impaired his ability to work. Plaintiff had been released to part-time work by his physician with “no physical limitations,” and in fact had returned to part-time work. As a result, the magistrate recommended that MetLife’s summary judgment motion be granted, and that Plaintiff’s be denied.

Sixth Circuit

Geraci v. Hartford Life & Accident Ins. Co., No. 5:18CV2367, 2020 WL 511781 (N.D. Ohio Jan. 31, 2020) (Magistrate Judge George J. Limbert). Plaintiff’s LTD benefits were terminated by Defendant under the “any occupation” definition of disability. Defendant based its decision on medical records, an IME, a peer review, and an employability analysis. Plaintiff appealed and submitted additional medical records from her primary treating physician, including a medical source statement. Defendant upheld its prior determination that Plaintiff was not disabled from “any occupation.” The court granted Plaintiff’s motion for judgment in part, and denied Defendant’s motion. The case was remanded because the sitting limitation set forth in the Summary Detail Report and relied upon by Defendant in making its determination was different than that opined by the peer reviewer, with which Plaintiff’s primary treatment provider allegedly agreed. The court noted that the analysis of the distinction was required, and that due to this, Defendant’s decision was not supported by substantial evidence. Furthermore, the court expressed concern over Plaintiff’s pain tolerance and whether it was properly considered, as well as a lack of analysis of Plaintiff’s ability to perform sedentary work in light of her having to use a cane for ambulation. In remanding, the court instructed Defendant to closely review the opinions of Plaintiff’s treating physician.

Creed v. Hartford Life & Accident Ins. Co., No. 2:19-CV-1072, 2020 WL 553903 (S.D. Ohio Feb. 4, 2020) (Judge Sarah D. Morrison). Plaintiff’s LTD benefits were terminated by Defendant after being paid for approximately four years. Hartford relied on medical records, surveillance, an interview with Plaintiff, medical opinions, and an employability study. The video surveillance revealed that Plaintiff could perform activities that he said he could not during the interview with Defendant. Defendant did not tell him about the surveillance prior to the interview. One of Plaintiff’s doctors, after viewing the surveillance, indicated that he could do light and sedentary work. Another opined that Plaintiff lacked the capacity to perform even sedentary work on a full-time basis. This physician later stated that Plaintiff could “probably perform some type of work.” A peer reviewer stated that Plaintiff was capable of full-time work with some restrictions related to standing, walking, and lifting. The court applied the arbitrary and capricious standard of review, and granted Defendant’s motion for judgment. The court explained that the evidence supported a reasoned explanation for termination of benefits, including five physician opinions (three treating and two reviewing), and even his treating physicians opined that he could work, and Plaintiff did not identify any evidence that would contradict those opinions. With respect to surveillance, the court stated that while it was true that it did not prove he could do a 40-hour week, it did show Plaintiff performing activities he claimed he could not do. Finally, Plaintiff argued that the jobs identified by Hartford were too far from his home. The court did not find this argument persuasive, because the commute to a particular job site was not a consideration for determining disability.

Seventh Circuit

Dorris v. Unum Life Ins. Co. of Am., No. 19-1701, __F.3d __, 2020 WL 524726 (7th Cir. Feb. 3, 2020) (Before Hamilton, Scudder, and St. Eve, Circuit Judges).  See Notable Decision summary above.

ERISA Preemption

Fourth Circuit

Townes Telecommunications, Inc., et al. v. National Telecommunications Cooperative Association, et al., No. 1:19-CV-436, 2020 WL 603474 (E.D. Va. Feb. 7, 2020) (Judge T.S. Ellis, III).  Employers sued under Virginia Code § 8.01-184 seeking a declaration that Defendants’ imposition and calculation of withdrawal liability violates Virginia’s common law of contracts because the Plan’s terms that authorize and calculate withdrawal liability violate ERISA.  Defendants’ moved to dismiss, which the court granted.  It found that Plaintiffs’ Complaint must be dismissed for failure to state a claim because its state-law claims are preempted by ERISA and the creation of a federal common law cause of action would conflict with ERISA’s civil enforcement provisions and the Plan’s terms. The court dismissed the Complaint with prejudice because the state-law claims cannot be brought as federal claims.

Sixth Circuit

Southern Ohio Medical Center v. Griffith, et al., 19-cv-261, 2020 WL 581836, (S.D. Ohio Feb. 6, 2020) (Judge Susan J. Dlott adopting the Order/Recommendation of Magistrate Judge Karen L. Litkovitz).  The court denied Southern Ohio Medical Center’s (SOMC) objections to the Magistrate Judge’s Report and Recommendation that SOMC’s state law claims against Defendant Countryside Rentals (plan administrator of a self-funded plan) were completed preempted by ERISA and that removal of claims against Griffith (an ERISA participant who had agreed under contract to pay for uncovered claims), although not preempted, was completely appropriate under the court’s exercise of supplemental jurisdiction. SOMC had originally filed state law claims relating to unpaid medical services provided to Griffith in the amount of $153,656.49. Countryside removed the matter to federal court. The magistrate judge determined that based on the court’s exercise of supplemental jurisdiction over the claims brought against Countryside, a partial remand as to the claims against Griffith would be premature. Therefore, the court would not remand the claims against Griffith until such time as the motion to dismiss filed by both defendants was resolved by the court. This leaves open the door that the court may dismiss the state law claims against Griffith that would otherwise have been remanded to state court.

Ohio Med. Ctr. v. Linne, No. 1:19-CV-477, 2020 WL 553892 (S.D. Ohio Feb. 4, 2020) (Magistrate Judge Stephanie Bowman). Plaintiff brought this lawsuit against Jeffrey Linne and his employer, Bulk Transit, in state court seeking reimbursement for treatment provided to Linne. Linne had health insurance through a self-funded healthcare plan sponsored by Bulk Transit. At the time treatment was provided, Linne assigned all his benefits under the healthcare plan to Plaintiff. Plaintiff alleges Bulk Transit pre-approved the treatment it provided to Linne, but then refused to pay the claims Plaintiff submitted. Defendant Bulk Transit removed the case to federal court, claiming Plaintiff’s state-law based claims of breach of contract and unjust enrichment were completely pre-empted by ERISA. The Court determined that Plaintiff’s claim for reimbursement from Bulk Transit was essentially a claim for benefits due under ERISA and concluded the case had been properly removed to federal court under federal question jurisdiction.

Seventh Circuit

Unser v. Reliance Standard Life Insurance Company, No. 19-CV-409-WMC, 2020 WL 584755 (W.D. Wis. Feb. 6, 2020) (Judge William M. Conley).  Plaintiff brought state law and ERISA claims against Reliance related to its denial of accidental death benefits.  Defendant moved to dismiss on the basis that the decedent was insured through an employee welfare benefit plan governed by ERISA, which preempts state law claims.  Defendant attached to its motion “basic life” policies supporting its position.  The court declined to consider Defendant’s attached exhibits for purposes of deciding its motion to dismiss since Plaintiff’s complaint does not mention, refer to, or attach any insurance policy other than the “accidental death” policy. The complaint alleges that this “accidental death” policy was a stand-alone contract and relying on the four corners of the complaint, the court cannot find, as a matter of law, that Fairmount established and maintained the decedent’s “accidental death” policy. The court denied Defendant’s motion.

Life Insurance & AD&D Benefit Claims

Ninth Circuit

Estate of Maurice v. Life Ins. Co. of N. Am., No. 18-55944, 2020 WL 569925 (9th Cir. Feb. 5, 2020) (Before: Clifton and Lee, Circuit Judges, and Block, District Judge). In this dispute over AD&D benefits, the Ninth Circuit reversed the judgment and attorneys’ fee award in favor of Plaintiff and remanded with instructions to enter judgment to LINA.  Here, the court found that Plaintiff’s diabetes “substantially contributed” to the amputation, where his own expert explained that diabetes prevented the cuts on his feet from healing properly and exacerbated the risk of infection. The infections made it more difficult to fight the bacterial onslaught which spread to the bone and necessitated amputation.  The court distinguished its decision in Dowdy v. Metro. Life Ins. Co., 890 F.3d 802 (9th Cir. 2018) by finding that the effect of diabetes was more extensive and documented in this case.  The court also rejected “the argument that diabetes had to be the predominant cause of the amputation. It is an incorrect statement of federal common law. Our cases expressly note that where, as here, the policy language is conspicuous, a preexisting condition can bar coverage ‘even though the claimed injury was the predominant or proximate cause of the disability.’”  The court noted that California law is different but that it is preempted by ERISA.

Tenth Circuit

Rodriguez v. Zurich American Ins. Co. and the WPX Energy ERISA Welfare Benefit Plan, No. 18-CV-0666-CVE-JFJ, 2020 WL 569351(N.D. Okla. Feb. 5, 2020) (Judge Claire Eagan). Defendant Zurich denied Plaintiff’s claim for accidental death and dismemberment benefits under her husband’s policy that was sponsored by the husband’s employer. Plaintiff’s husband had a litany of serious health problems: liver and kidney failure, encephalopathy, cirrhosis, immunosuppression, cardiac issues including a myocardial infarction, diabetes mellitus, and obesity. Between 2013 and 2017, he was admitted to the hospital numerous times and treated by a variety of specialists. In December 2016, decedent fell and broke his leg hanging Christmas lights. While recovering from surgery to fix the fracture, the decedent developed an infection which led to the amputation of his leg. The amputation was not successful in stopping the infection from spreading and the decedent died in the hospital April 10, 2017. The decedent’s attending physician and Zurich’s medical evaluator both found the primary cause of death was sepsis, not the fall. Zurich denied Plaintiff’s claim for accidental death and dismemberment benefits for two reasons: the death was not a covered loss under the terms of the policy because the death was not caused by the accident, and because the policy excluded coverage for deaths contributed to by illness. The court agreed with Zurich that although decedent’s fall was an accident, his amputation and death were not a direct result of the fall. Therefore, decedent’s fall was not a covered loss, and Plaintiff was not entitled to benefits. Additionally, the policy excluded death’s caused by illness or disease. The court agreed with Zurich that sepsis was the decedent’s cause of death, and therefore this exclusion applied, and no benefits are payable to Plaintiff.

Medical Benefit Claims

Tenth Circuit

Laurel R. v. United Healthcare Ins. Co., No. 2:19-CV-00473-DB, 2020 WL 570257 (D. Utah Feb. 5, 2020) (Judge Dee Benson). Plaintiff was a participant in an ERISA-governed health benefit plan. Her son began having behavioral issues and was admitted for inpatient treatment at a mental health facility. United paid for one month of benefits but then terminated coverage, contending that the son’s treatment was no longer medically necessary. Plaintiff and her husband filed suit, alleging one claim for recovery of benefits under ERISA, and a second for violation of the federal Mental Health Parity and Addiction Equity Act (MHPAEA). Defendants filed a motion to dismiss, contending that Plaintiff’s MHPAEA claim was insufficient as pleaded, and that the parents were improper plaintiffs because they lacked standing. The court granted Defendants’ motion as to the MHPAEA claim, ruling that Plaintiffs’ allegations were conclusory and lacked adequate factual support. Specifically, the court found that Plaintiffs had not presented any facts to support their allegation that United evaluated their claim in a disparate fashion from the way it evaluated other claims for treatment at comparable skilled nursing and rehabilitation facilities. The court also granted Defendants’ motion to dismiss the father as a plaintiff, as the complaint did not plead that he was a participant or beneficiary under the plan. However, the court denied Defendants’ motion as to the mother because the complaint properly alleged that she was a participant in the plan at all relevant times.

Pension Benefit Claims

Eighth Circuit

In re: Brian A. Lerbakken Debtor Brian A. Lerbakken v. Sieloff & Assocs., P.A. Appellee Nat’l Consumer Bankr. Rights Center, No. 18-3415, __F.3d__2020 WL 597214 (8th Cir. Feb. 7, 2020) (Before Colloton, Wollman, and Benton, Circuit Judges).  The court determined that the debtor’s interests in his ex-wife’s IRA and 401(k) are not “retirement funds” under 11 U.S.C. § 522(b)(3)(C) and that the bankruptcy court and the Bankruptcy Appellate Panel correctly disallowed the exemptions from the bankruptcy estate.  When the debtor filed for bankruptcy “his interest in his ex-wife’s IRA was subject to a condition not performed—it had not been renamed, or transferred into an account under his name.” The court found that his conditional interest in his ex-wife’s IRA does not have the legal characteristics of ordinary retirement funds.

Pleading Issues & Procedure

Seventh Circuit

Alberth v. Southern Lakes Plumbing & Heating, Inc., et al., No. 19-CV-62, 2020 WL 533728 (E.D. Wis. Feb. 3, 2020). (Judge Nancy Joseph). Defendants brought a motion for sanctions and motion for withdrawal of the record against Plaintiff for filing unsealed, unredacted documents containing confidential information in violation of Federal Rules of Civil Procedure 5.2(a). The subject documents were filed by Plaintiff in support of his motion for summary judgment. Defendants filed their motion for sanctions 30 days after the subject documents were filed with the court. Plaintiff immediately filed motions to seal the documents which were granted. The court found Plaintiff’s counsel’s violation of Rule 5.2(a) was a genuine mistake rather than an act of bad faith. Defendants did not file a reply and therefore did not dispute that it was a mistake. The court advised Defendants that the court expects good faith attempts to resolve such matters without court intervention. The court denied Defendants’ motions because the error had already been rectified.

Eleventh Circuit

Gardi v. United Healthcare Services, Inc., et al., No. 19-80369-CIV, 2020 WL 509983 (S.D. Fla. Jan. 31, 2020). (Judge Kenneth A. Marra). Defendants filed motions to dismiss Plaintiff’s COBRA and ERISA claims and a motion to strike an affidavit attached to Plaintiff’s response to the motion to dismiss. The court granted the motion to strike based on the general rule that the court does not consider anything beyond the face of the complaint when analyzing a motion to dismiss. The court granted the motion to dismiss as to Count 1 alleging violations of Section 502(a)(1)(B) because the complaint does not allege that HCA is the Plan Administrator. The court found that Count 1 may proceed against United. The court granted the motion to dismiss as to Count 2 regarding requests for the SPD because as a claims administrator, United is not a proper defendant to an ERISA 502(c) claim. The court granted the motion to dismiss Count 3 alleging violations of Section 502(a)(3) against HCA because the complaint does not adequately allege that HCA is a named fiduciary. Although the court found that Count 3 was plausibly alleged against United, the court found that Count 3 is dismissed because Count 1 is a viable claim and offers an adequate remedy for ERISA violations. The court found that Count 4 state law claims for intentional infliction of emotional distress fail because the claim “is inextricably intertwined with the refusal to pay benefits and is therefore preempted by ERISA.” The court found that Count 5 claim for COBRA violations fails because Medicare was the primary payer. The court found that Count 6 failed to properly state a claim against either United or HCA. The court denied Plaintiff’s request for sanctions for defense counsel’s failure to properly meet and confer prior to filing the motion to strike because the court found that defense counsel complied with the local rule by making reasonable attempts to meet and confer.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Trustees of Plumbers Local Union No. 1 Welfare Fund v. Temperini Mech. Inc., No. 18CV2596AMDLB, 2020 WL 565410 (E.D.N.Y. Feb. 5, 2020) (Judge Ann M. Donnelly).  The district court adopted the R&R recommending that the court “(1) hold Whitestone liable for the $263,862.72 judgment that was previously entered against Temperini on July 24, 2014, (2) award the plaintiffs post-judgment interest on the judgment, calculated from July 24, 2014 to the date of payment at the statutory rate set forth in 28 U.S.C. § 1961, (3) award the plaintiffs attorneys’ fees in the amount of $13,284.15, and (4) award the plaintiffs $862.62 in costs. “

Seventh Circuit

Trustees of The Indiana State Council of Roofers Health and Welfare Fund, et al. v. Ed Rutherford Roofing, Inc., No. 4:18-CV-29-JVB-APR, 2020 WL 554047 (N.D. Ind. Feb. 3, 2020) (Judge Joseph S. Van Bokkelen).  The court granted Plaintiff’s Motion for Summary Judgment and awarded: (1) Delinquent contributions of $72,088.12 in favor of the Health Fund, $37,458.31 in favor of the Supplemental Pension, and $26,971.82 in favor of the NRIPP and Education Fund; (2) Accrued interested as of June 30, 2019, of $40,569.90 in favor of the Health Fund, $20,157.75 in favor of the Supplemental Pension, and $15,511.12 in favor of the NRIPP and Education Fund; (3) Liquidated damages of $14,417.62 in favor of the Health Fund, $6,746.45 in favor of the Supplemental Pension, and $5,394.36 in favor of the NRIPP and Education Fund; and (4) Attorney fees and costs.

Eighth Circuit

Johnson Tr. of Operating Engineers Local #49 Health & Welfare Fund v. Charps Welding & Fabricating, Inc., No. 18-3007, __F.3d__, 2020 WL 597213 (8th Cir. Feb. 7, 2020) (Before Smith, Chief Judge, Gruender and Benton, Circuit Judges). “The Trustees have not shown a genuine issue that the defendant companies formed a relationship of alter ego, joint venture, or joint enterprise. Further, the collective bargaining agreements do not require the defendants to contribute for the work of Charps’s affiliates. Therefore, the defendants do not owe contributions for the affiliates’ work.”

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

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