This week’s notable decision is from the putative class action case, Moura v. Kaiser Foundation Health Plan, Inc., No. C 17-02475 JSW, 2018 WL 1569812 (N.D. Cal. Mar. 30, 2018), which challenges Kaiser’s alleged pattern and practice of denying treatment for eating disorders in violation of ERISA and the California and Federal Health Parity Acts. The court previously granted Kaiser’s motion to dismiss the original complaint on the basis that Moura failed to allege that he exhausted his administrative remedies for the denial of his claim for treatment of anorexia nervosa. Moura then filed a first amended complaint alleging only a claim pursuant to 29 U.S.C. Section 1132(a)(3) for breach of fiduciary duty against the plan administrators. Kaiser again moved to dismiss the complaint, arguing that the factual allegations of its conduct with respect to the provision of residential treatment for eating disorders is untrue. The court explained that at this procedural posture, it cannot adjudicate the merits of the factual dispute. Further, the court found that even absent factual support indicating Plaintiff’s exhaustion of remedies for a benefit claim, Plaintiff has alleged a claim for breach of fiduciary duty for which exhaustion allegations are not required. The court denied Kaiser’s motion to dismiss the breach of fiduciary duty claim.
Plaintiff Moura is represented by Lisa S. Kantor and David Oswalt of Kantor & Kantor LLP & Kathryn Marie Trepinski, Law Offices of Kathryn Trepinski.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Sepulveda-Rodriguez v. Metro. Life Ins. Co., No. 8:16CV507, 2018 WL 1640595 (D. Neb. Apr. 5, 2018) (Judge Joseph F. Bataillon). In this matter where the court found MetLife’s denial of supplemental life insurance coverage was not a reasonable interpretation of the terms of the Plan, and that MetLife and Ford, the plaintiff’s decedent’s employer, breached fiduciary duties Plaintiff, the court granted Plaintiff’s motion for attorneys’ fees. The court assessed fees and costs against both defendants, jointly and severally. “In the Eighth Circuit, the district court is without authority to apportion fees between the two defendants based on relative culpability.” The court awarded the full amount sought: fees in the amount of $27,045 and costs in the amount of $420.
Breach of Fiduciary Duty
Vellali v. Yale Univ., No. 3:16-CV-1345(AWT), __F.Supp.3d__, 2018 WL 1603113 (D. Conn. Mar. 30, 2018) (Alvin W. Thompson). The court granted in part and denied in part Defendants’ Motion to Dismiss. “The following claims are dismissed: in Count I, the claim for breach of the duty of loyalty; in Count III, the claim for breach of the duty of loyalty; in Count V, the claim for the breach of the duty of prudence based on offering too many investment options and failing to reduce fees on several TIAA–CREF investments, and the claim for breach of the duty of loyalty.”
Atlas Sanitation Co., Inc. v. Horowitz Law Group, LLC, et al., No. 17CV283DLIRLM, 2018 WL 1581973 (E.D.N.Y. Mar. 29, 2018) (Judge Dora L. Irizarry). The court declined Defendants’ motion to dismiss Plaintiffs’ lawsuit for legal malpractice against Defendants which asserts that “Defendants had a duty, as Plaintiffs’ attorneys, to advise Plaintiffs properly on their rights and obligations under ERISA and the MPPA, and that Defendants knew or should have known that Plaintiffs’ failure to make interim payments would result in a default and acceleration in their withdrawal liability, and that a failure to arbitrate waived all of Plaintiffs’ available defenses against the Funds.” Plaintiffs seek compensatory and punitive damages in the amount of no less than $500,000.
Fentress, et al, v. Exxon Mobil Corporation, et al, No. 4:16-CV-3484, 2018 WL 1561820 (S.D. Tex. Mar. 30, 2018) (Judge Keith P. Ellison). The court dismissed the amended class action complaint alleging that Defendants knew or should have known that Exxon’s stock had become artificially inflated in value due to fraud and misrepresentation, thus making Exxon stock an imprudent investment under ERISA and damaging the ESOP and those Plan participants who bought or held stock. Citing to Dudenhoeffer, the court found that plaintiffs have not alleged special circumstances affecting the reliability of the market price as an unbiased assessment of the Exxon stock price. The court found no reason to believe that risks posed by climate change were not incorporated into the Exxon stock price. “It may be inconsistent with ethical norms for a company to know that its business contributes to global harm and at the same time to expect to continue to profit from that business, but ERISA stock-drop claims do not provide a mechanism for relief from that inconsistency.”
Boden v. St. Elizabeth Med. Ctr., Inc., No. CV 16-49-DLB-CJS, 2018 WL 1629866 (E.D. Ky. Apr. 4, 2018) (Judge David L. Bunning). The court determined that Plaintiffs have pled facts sufficient to establish standing to sue pursuant to ERISA § 502(a)(2) for alleged breach of fiduciary duties under ERISA § 409. In considering the Grand Trunk factors, the court decided to exercise its jurisdiction over Defendants’ Counterclaim and dismissed it because it is a mirror-image of Plaintiffs’ claim for declaratory relief and serves no useful purpose. The court explained that through their affirmative defense, and in opposition to Plaintiffs Amended Complaint, Defendants will be able to raise and fully litigate their argument that the Plan is not a church plan.
Moura v. Kaiser Foundation Health Plan, Inc., No. C 17-02475 JSW, 2018 WL 1569812 (N.D. Cal. Mar. 30, 2018) (Judge Jeffrey S. White). See notable decision summary above.
Carter v. Arkema, Inc., & Arkema Inc. Retirement Benefits Plan, No. 3:13-CV-1241-JHM, 2018 WL 1613787 (W.D. Ky. Apr. 3, 2018) (Judge Joseph H. McKinley, Jr.). In this lawsuit alleging that Defendants unlawfully deprived Plaintiffs of certain rights to pension benefits they had accrued as M&T Chemicals employees, the Court certified two subclasses pursuant to Fed. R. Civ. P. 23(c)(1)(B) as follows:
Subclass 1: All participants in the Arkema, Inc. Retirement Benefits Plan, at any time from January 1, 1988 to the present, who were employed by Arkema, Inc. or its predecessors at Arkema’s Carrollton, Kentucky plant, and whose initial service dates were adjusted to the first day of the month next following their attainment of 25 years of age.
Subclass 2: All participants in the Arkema, Inc. Retirement Benefits Plan, at any time from January 1, 1988 to the present, who were employed by Arkema, Inc. or its predecessors at Arkema’s Carrollton, Kentucky plant, and who are eligible (or may become eligible) for the Rule of 85 due to termination of employment after reaching the age of 55 and 30 years of service.
Disability Benefit Claims
Guest-Marcotte v. Life Ins. Co. of N. Am., No. 17-1233, __F.App’x__, 2018 WL 1578090 (6th Cir. Mar. 30, 2018) (BEFORE: NORRIS, ROGERS, and THAPAR, Circuit Judges). The court found that Plaintiff, with Ehlers-Danlos Syndrome Type III, suffers from an objectively verifiable disease which is medically known to cause chronic pain, which her doctors have repeatedly concluded to be disabling, and LINA’s refusal to conduct a physical examination of Plaintiff rendered its denial of short-term disability benefits arbitrary and capricious. The court also held that LINA lacks the incentive to deny benefits as claimed by Plaintiff and that the district court properly denied her discovery. The court reversed the judgment of the district court and remanded with instructions to the court to remand the claim to LINA for a full and fair review. The court also reversed the district court’s judgment with respect to the employer’s counterclaim for $7,000+ in benefits that it paid to her while her application was pending.
Gallupe v. Sedgwick Claims Mgmt. Servs. Inc., No. C17-1775-MJP, 2018 WL 1617686 (W.D. Wash. Apr. 4, 2018). Defendant Monsanto Company Employee Benefits Plans Committee moved to dismiss the lawsuit against it on the basis that it delegated its fiduciary responsibility to adjudicate disability claims and appeals to Sedgwick Claims Management Services. The court determined that the authenticity of the Plan documents is disputed, converted the Committee’s Rule 12(b)(6) motion to dismiss to a Rule 56 motion for summary judgment, and gave the parties the opportunity to conduct discovery.
Jennings v. Hartford Life and Accident Insurance Company, et al., No. 215CV00683RJSEJF, 2018 WL 1581264 (D. Utah Mar. 29, 2018) (Judge Robert J. Shelby). The court found that Hartford did not act arbitrarily and capriciously in denying Plaintiff’s short-term disability benefits claim because record supports the conclusion that Plaintiff’s spastic diplegia affected primarily her lower extremities, and did not preclude her from working in a sedentary position. Plaintiff could return to work with modifications such as a cane or walker to help her enter and leave the building, and to move around as needed at work. “Hartford’s decision need not be ‘the superlative one’ so long as it lies on the ‘continuum of reasonableness – even if on the low end.’ That standard is met here.”
Gates v. Morris, et al., No. 2:17-CV-03392, 2018 WL 1582470 (S.D.W. Va. Mar. 29, 2018) (Judge Joseph R. Goodwin). Plaintiff’s claim of “bad faith” that Aetna violated the implied covenant of good faith and fair dealing by failing to make a reasonable offer to him or process and administer his ERISA plan properly is preempted by ERISA.
Exhaustion of Administrative Remedies
Gates v. Morris, et al., No. 2:17-CV-03392, 2018 WL 1582470 (S.D.W. Va. Mar. 29, 2018) (Judge Joseph R. Goodwin). The court denied Plaintiff’s motion to amend the complaint to allege an ERISA claim for benefits against Aetna because “the proposed complaint does not allege sufficient facts to permit a reasonable inference that the plaintiff took advantage of his plan’s internal procedures to challenge the alleged rejection of his rights to benefits under the plan, or that the alleged denial of benefits by the defendants did not comply with the procedural requirements of 29 C.F.R. § 2560.503-1(g).” Because there is insufficient factual evidence to support an inference that Plaintiff exhausted his administrative remedies prior to bringing this lawsuit, and having made no “clear and positive” showing of futility required to circumvent the exhaustion requirement, the court found that it would be futile to grant Plaintiff’s request to amend because he has failed to exhaust his ERISA plan’s remedies.
Adan v. Kaiser Found. Health Plan, Inc., No. 17-CV-01076-HSG, 2018 WL 1640166 (N.D. Cal. Apr. 5, 2018) (Judge Haywood S. Gilliam, Jr.). The court denied Plaintiff’s motion for leave to file a motion for reconsideration. The court rejected Plaintiff’s argument that because Plaintiff initiated the claims process when she requested treatment from individual doctors—and that because Defendant failed to provide written notice when those requests were denied by the doctors –she was not required to exhaust Defendant’s administrative process before bringing this ERISA action. Plaintiff has still failed to show that she completed the claims process for exhaustion purposes.
Life Insurance & AD&D Benefit Claims
Cason v. Anthem Life Insurance Company et al., No. 1:16-CV-1080, 2018 WL 1561866 (S.D. Ohio Mar. 31, 2018) (Judge Michael R. Barrett). Here, the employer continued to pay the life insurance premiums for its employee after he became permanently disabled in February 2006 and through his death in December 2013. When his wife filed a claim for the death benefit, Anthem Life denied the claim because it found the employee ineligible under the plan. Specifically, the employee did not meet the active employee requirement and failed to apply for a waiver of premium to continue the life insurance policy throughout the period of total disability. Plaintiff sued the employer and Anthem, and the employer filed a cross-claim against Anthem. The court dismissed Plaintiff’s claim against Anthem Life under 29 U.S.C. § 1132(c) for failing to provide a summary plan description since it is not the plan administrator. The court denied dismissal of the employer’s cross-claim against Anthem since the Sixth Circuit appears to have recognized a limited right of action under federal common law for equitable restitution of mistaken payments.
Frye v. Metropolitan Life Insurance Company & American Greetings Corporation, No. 3:17-CV-31-DPM, 2018 WL 1569485 (E.D. Ark. Mar. 30, 2018). Defendants didn’t abuse their discretion in denying Plaintiff’s claim for life insurance benefits on the life of her deceased son since the son died at the age of 24 and the Plan only covers dependents to the age of 23. But, the court found that Defendants breached their fiduciary duties to Plaintiff and she is entitled to make-whole relief under ERISA Section 502(a)(3) in the form of a surcharge against Defendants for the amount Plaintiff would have received had the plan’s coverage been in place when her son died. Plaintiff is also entitled to a reasonable attorney’s fee, costs, and interest.
Medical Benefit Claims
Amerine v. DSW, Inc., et al., No. 216CV05792ODWPJWX, 2018 WL 1626094 (C.D. Cal. Apr. 2, 2018) (Judge Otis D. Wright, II). The court determined that Defendants did not abuse their discretion in finding, after several levels of review, that Plaintiff’s cochlear implant was not “medically necessary” under the Plan. The court granted Defendants’ motion for judgment.
Atherley v. Unitedhealthcare of Florida, Inc., No. 2:17-CV-332-FTM-99CM, 2018 WL 1605837 (M.D. Fla. Apr. 3, 2018). The court determined that the arbitrary and capricious standard of review will apply to United’s denial of health insurance benefits. The fact that the Plan permits United to delegate some of its discretionary authority does not trigger de novo review and the law does not require that the administrator have “sole” or “full” discretion for the arbitrary and capricious standard to apply.
Pension Benefit Claims
Muff v. Iron Workers’ Mid-America Pension and Supplemental Monthly Annuity Fund, No. 16 C 655, 2018 WL 1621023 (N.D. Ill. Apr. 4, 2018) (Judge Charles P. Kocoras). The court found that the Appeals Committee’s decision to pay the pension death benefits to the participant’s ex-girlfriend rather than to his nephew is not arbitrary and capricious, where the participant did not properly complete and submit the required cards to change the beneficiary. The court rejected Plaintiff’s substantial compliance argument. In this case, a witness alleged that the participant told her he was headed to the post office to mail the completed cards and that he texted her that night stating, he “[f]inally got that bitch out of [his] money.” However, Defendant did not receive the cards.
Wengert v. Rajendran, No. 16-4571, __F.3d__, 2018 WL 1597405 (8th Cir. Apr. 3, 2018) (Before BENTON, SHEPHERD, and KELLY, Circuit Judges). In this matter brought by the widow of a deceased plan participant against members of the ESOP’s administrative committee in order to recover the participant’s accrued benefit under plan, the court held that the committee did not abuse its discretion in determining that the participant’s transfer of funds from the plan to the trust occurred before his death. Here, the plan participant filed for divorce. He requested a lump-sum distribution of his accrued benefit to his trust on a Friday. The funds were wired the same day by the administrative committee. The plan participant died that Sunday and the trust received the funds on Monday.
Pleading Issues & Procedure
L&M Bus Corp. et al., v. Board Of Education Of The City School District Of The City Of New York d/b/a New York City Department Of Education, No. 18CV1902NGGSMG, 2018 WL 1640589 (E.D.N.Y. Apr. 5, 2018) (Judge Nicholas G. Garaufis). In this lawsuit brought by bus companies who contract with Defendant New York City Department of Education for school-bus routes in order to challenge the terms of a contract (they claim violate ERISA) that they must abide by in order to bid for transportation services for students with disabilities and their non-disabled peers, the court denied Plaintiff’s application for a temporary restraining order seeking to enjoin Defendant from moving forward with the bidding process until the alleged deformities in the contract are fixed.
Lagrone v. OMNOVA Sols., No. 1:16-CV-159-SA-DAS, 2018 WL 1570810 (N.D. Miss. Mar. 31, 2018) (Judge Sharion Aycock). The court granted Plaintiffs’ motion seeking to compel arbitration of their claims for Special Early Retirement benefits since the Plan language covers Plaintiff’s claims. The question of whether the parties have satisfied the conditions precedent to arbitration is an issue for the arbitrator to decide.
Metropolitan Life Insurance Company v. Gicana, et al., No. CV 16-08317-RSWL-RAO, 2018 WL 1634115 (C.D. Cal. Apr. 3, 2018) (Judge Ronald S.W. Lew). In this interpleader action brought by MetLife to resolve competing claims for funds from the AT&T Group Life Insurance Program, the court denied Maloney’s motion for judgment on the pleadings on her cross-claims against the other defendant-in-interpleader, Gicana. The court found that Gicana did not split her single cause of action between her probate petition and federal Crossclaims. “The state court action involves the validity of the trust amendments with respect to the ultimate distributions under the trust, while this Action concerns the validity of the beneficiary designations of certain ERISA plans.”
Severance Benefit Claims
Carlson v. Northrop Grumman Corporation, No. 13-CV-02635, 2018 WL 1586241 (N.D. Ill. Apr. 2, 2018) (Judge Andrea R. Wood). In this putative class action seeking the payment of severance plan benefits, the court concluded that “a logical reading of the ERISA Plan documents as a whole demonstrates that the Committee was granted discretionary authority” and it will apply an arbitrary and capricious standard of review to the denial of benefits claim. The court found that the discretionary authority conferred by the Northrop Grumman Service Plan adopted on December 15, 2011 applies to benefit determinations under the Northrop Grumman Service Plan adopted on January 27, 2012.
Statute of Limitations
Ford v. Premera Blue Cross, No. C17-1738 MJP, 2018 WL 1620984 (W.D. Wash. Apr. 4, 2018) (Judge Marsha J. Pechman). The court granted summary judgment to Defendant after finding that the Plan’s one-year limitation period is reasonable and enforceable under Heimeshoff.
White v. Chase, No. 4:15-CV-40013-TSH, 2018 WL 1570165 (D. Mass. Mar. 30, 2018) (Judge Timothy S. Hillman). Plaintiff’s second amended complaint alleged violation of ERISA § 204(h), 29 U.S.C. § 1054(h), because the Defendants implemented the “2007 Plan termination without notice.” The court found that the evidence demonstrates that the notice was mailed in March 2007 and Plaintiffs cannot meet their burden of showing that most of the employees did not receive the notice at that time. The court entered summary judgment for Defendants.
Your ERISA Watch authored by Michelle L. Roberts, Esq., Partner