Call For A FREE Case Evaluation 510.992.6130

Your ERISA Watch – Ninth Circuit Upholds Pension Plan’s Denial of Early Retirement Benefits for Participant’s Union Work

Posted By:

This week’s notable decision is O’Rourke v. N. California Elec. Workers Pension Plan, No. 17-17419, __F.3d__, 2019 WL 3850604 (9th Cir. Aug. 16, 2019), a case involving a dispute over the payment of early retirement benefits through a multiemployer ERISA plan.  The court was tasked with deciding whether Defendant abused its discretion by determining that Plaintiff’s work as an administrator for an electrical workers’ union falls within the Plan’s definition of “Prohibited Employment.”  The district court granted summary judgment in favor of the Plan’s board of trustees (“Board”), and for the reasons below, the Ninth Circuit affirmed the decision.

The Plan provides for an early retirement benefit for participants at age fifty-five if they have accumulated ten or more years of covered employment.  No benefits are paid for either normal pensions or early pensions for any month in which a participant works in “Prohibited Employment.”  For participants under the age sixty-five, the Plan defines “Prohibited Employment” as “the performance of services in any capacity in the Electrical Industry.”  “Electrical Industry” is defined as “all branches of the Electrical Trade in the United States.” The Plan does not define “Electrical Trade.”

Plaintiff began working as an electrician in 1979.  In 1999, he became business manager of the International Brotherhood of Electrical Workers (IBEW) Local 6 and served as a Plan trustee on the Board.  His work for IBEW did not include traditional electrical work such as wiring, repair, installation, and maintenance.  In 2010, the Board considered but never adopted a change in the Plan’s suspension of benefits rules to exempt work for unions from the definition of Prohibited Employment.

In anticipation of his fifty-fifth birthday, Plaintiff applied for an early retirement pension.  He met all the eligibility requirements aside from the suspension of benefits provision.  The Board denied his claim.  On appeal, Plaintiff took the position that he was entitled to benefits because his duties were “purely administrative” and did “not require, directly or indirectly, the use of the same skills employed by electricians in an electrical trade or craft.”  The Board disagreed.  It took the position that Plaintiff’s work came under its interpretation of “Trade,” and thus, within the Prohibited Employment definition.

It is undisputed that the Board’s decision is subject to abuse of discretion review.  The district court concluded that the Plan is ambiguous and both sides present plausible interpretations of Plan language.  Plaintiff argued that the following procedural irregularities should lead to a finding of an abuse of discretion:  “(1) emails and meeting minutes showing ‘political hostility’ and personal animus towards him; (2) shifting rationales for the denial; (3) the rejection of Plan Counsel’s 2014 opinion; and (4) the Board’s position reversal from the 2010 resolution.”  The Ninth Circuit explained that if it were to accept Plaintiff’s assertions that the Board acted as an adversary against him, it might accordingly hold that an abuse of discretion occurred where it otherwise might not.  The court rejected Plaintiff’s first two arguments and found that the last two actions weigh “only minimally” in favor of that an abuse of discretion occurred here.

The court considered whether the Board abused its discretion by interpreting “performance of services in any capacity in the Electrical Industry” to include working for IBEW in an administrative capacity for an electrical workers’ union.  The court determined that the Board’s interpretation does not clearly conflict with the Plan’s plain language, does not render any other Plan provision nugatory, and does not lack a rational nexus to the Plan’s purpose.  In sum, the Board’s interpretation is reasonable, and the court affirmed summary judgment in the Board’s favor.

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

Attorneys’ Fees

Sixth Circuit

Detroit Carpenters Fringe Benefit Funds v. Crawford Pile Driving, LLC, No. CV 18-10932, 2019 WL 3765338 (E.D. Mich. Aug. 8, 2019) (Judge Linda V. Parker).  In this dispute over delinquent fringe benefits, the court adopted the Magistrate Judge’s R&R recommending that Plaintiffs be awarded attorneys’ fees in the amount of $814.00 for 4.4 hours of legal work at an hourly rate of $185.00.

Eleventh Circuit

Shultz v. Aetna Life Insurance Company, No. 1:16CV94-MHT, 2019 WL 3801547 (M.D. Ala. Aug. 13, 2019) (Judge Myron H. Thompson).  Following a remand from the court to Aetna for a new determination of Plaintiff’s long-term disability claim, Plaintiff filed a motion for attorney’s fees and costs.  In the meantime, Aetna reinstated Plaintiff’s disability claim.  The court found that Plaintiff is entitled to attorneys’ fees.  In considering the five factors, the court found that: (1) Aetna’s failure to consider all relevant evidence before denying Plaintiff’s claim points to its culpability; (2) Aetna concedes that it has the financial resources to pay a fee award; (3) an award would deter future similar conduct by all plan administrators who make benefits decisions without considering the full administrative record; (4) the court’s decision has value in that it provides guidance to plan administrators in how they should make benefits decisions; and (5) the fact that Aetna found Plaintiff entitled to benefits clearly evidences that his position on the merits was correct.  The court applied a reasonable market rate for the state of Alabama, $350/hour, to the time spent by Plaintiff’s senior attorney, rather than the lower rate dictated by the Montgomery market.  This is due to “the difficulty of ERISA litigation” and Plaintiff’s evidence that just ten attorneys in Alabama are responsible for nearly 60% of the state’s ERISA cases.  For hours awarded, the court adopted Plaintiff’s proposed compromise of a 10% reduction and awarded fees for 535.1 of the 594.4 hours requested.  The court did not award costs for shipping, electronic research, and travel because Plaintiff did not establish that these expenses are typically billed to fee-paying clients.

Peer v. Liberty Life Assurance Company of Boston, No. 9:17-CV-80281, 2019 WL 3766886 (S.D. Fla. Aug. 9, 2019) (Judge Robin L. Rosenberg).  In this dispute over life insurance waiver of premium benefits, the court granted in part and denied in part Plaintiff’s and Defendant’s motions for attorney’s fees.  After Plaintiff filed the present lawsuit, Defendant retroactively reinstated the benefits and the court determined that the matter was moot.  Plaintiff challenged the court’s mootness determination in various subsequent filings, including to the Sixth Circuit, but ultimately did not prevail.  Defendant agreed that Plaintiff was entitled to attorney’s fees up and through the date that her claim became moot and the court awarded $7,050 in fees.  The court granted Defendant’s motion for attorney’s fees on the basis that Plaintiff had no legal basis to continue to litigate her claims.  The court awarded the fees against Plaintiff’s counsel, rather than against Plaintiff, for a total of over $36,000.

Breach of Fiduciary Duty

Second Circuit

Amara, et al. v. Cigna Corp., No. 3:01-CV-2361 (JBA), 2019 WL 3854300 (D. Conn. Aug. 16, 2019) (Judge Janet Rond Arterton).  The court granted in part and denied in part Plaintiffs’ Motion to Enforce Judgment.  The court agreed with Defendants’ determination regarding the year(s) to be used to determine the interest rate and mortality table for calculating the annuity value of the lump sum distribution for purposes of determining the offset.  The court directed Defendants to pay small benefit cashouts to participants who have not received their Part B cash balance accounts as promptly as possible.  The court declined to sanction Defendants for failing to make the payouts sooner.

Eighth Circuit

Acosta v. Reliance Tr. Company, No. 17-CV-4540 (SRN/ECW), 2019 WL 3766379 (D. Minn. Aug. 9, 2019) (Judge Susan Richard Nelson).  The DOL alleges that Defendants breached their fiduciary duties of loyalty and prudence to the ESOP in approving the sale of William Kuban’s 75% stake in Kurt Manufacturing stock to the ESOP at an unreasonably high selling price.  William Kuban is now deceased and represented by his surviving daughter, Gretchen Kuban Rode.  The court denied Kurt’s Board of Directors’ motion for judgment on the pleadings, finding that the DOL has plausibly alleged a breach of fiduciary duty claim and a prohibited transaction claim.  The court also found that the DOL may seek restoration of losses to the ESOP and repayment of fees and costs.  If the court later determines that the Directors didn’t act as a fiduciary to the ESOP but knowingly participated in a fiduciary breach by Reliance (the independent trustee), the Court would curtail the proposed remedies. The court did grant Rode’s third-party complaints by filed by Defendants seeking indemnification against her because there is no legal or equitable basis for indemnification.  The court analyzed and rejected each of Defendants’ theories, including: (1) “common-law indemnification,” (2) “equitable indemnification,” (3) “contractual indemnification,” (4) “promissory estoppel,” or (5) in the case of the Director Defendants, “ERISA co-fiduciary liability.”

Disability Benefit Claims

Third Circuit

Roden-Reynolds v. Metropolitan Life Insurance Company, No. 1:18-CV-0897, 2019 WL 3838116 (M.D. Pa. Aug. 15, 2019) (Judge Sylvia H. Rambo).  The court determined that Plaintiff’s disability due to “disc degeneration, cervical degeneration, lower back pain and lumbar post laminectomy syndrome,” was subject to a 24-month maximum benefit period for disabilities due to “Neuromuscular, Musculoskeletal or Soft Tissue Disorder.”  Plaintiff claimed disability due to radiculopathy, which is not limited under the policy.  The court determined that MetLife did not abuse its discretion in defining the plan’s requirement of “objective evidence” to require electrodiagnostic testing to confirm a radiculopathy.  Additionally, MetLife was within its discretion to rely on Dr. Dennis S. Gordan’s assessment that radiculitis was different from radiculopathy and that the sum of Plaintiff’s subjective symptoms did not compensate for the absence of objective electrodiagnostic evidence.

Fifth Circuit

Napodano v. Ericsson Inc. Short Term Disability Plan, No. 4:18-CV-302, 2019 WL 3825899 (E.D. Tex. Aug. 15, 2019) (Judge Amos L. Mazzant).  Plaintiff submitted his resignation from employment due to his medical issues and then sought long-term disability benefits from Defendant’s LTD carrier, Prudential.  Prudential advised that he must seek short-term disability benefits first and referred him to Sedgwick.  Sedgwick denied his STD benefits on the basis that he did not have coverage.  Coverage ends on the earliest of the following four dates:  1. The date the Plan terminates; 2. The date [the claimant] no longer meet[s] the definition of Eligible Employee; 3. The last day [the claimant is] in Active Employment; and 4. The date [the claimant is] no longer in Active Employment due to a Disability that is not covered under the Plan.  The court determined that Sedgwick properly denied his claim under No. 2 since he sought STD benefits after he advised Ericsson of his resignation.

Sixth Circuit

Smith v. Hartford Life and Accident Insurance Company, No. CV 5:19-061-DCR, 2019 WL 3849158 (E.D. Ky. Aug. 15, 2019) (Judge Danny C. Reeves).  In this second lawsuit filed by Plaintiff seeking to overturn a denial of long-term disability benefits, the court overruled her objections to the administrative record.  The court will permit the independent medical report and employability analysis report addendum that were created after Plaintiff submitted her appeal.  Hartford was not required to turn over these documents until it made a final decision.  The court also kept in surveillance of Plaintiff that Hartford relied on when it terminated her claim even though the footage was not sent to her until after she appealed.  This is because the initial denial letter identified the surveillance and detailed what was observed during surveillance.  The court found that it should also be included because Hartford relied on it in making the claims decision.

Davis v. Hartford Life & Accident Ins. Co., No. 3:14-CV-507-CHB, 2019 WL 3781437 (W.D. Ky. Aug. 12, 2019) (Judge Claria Horn Boom).  In this dispute over disability benefits, the court denied Plaintiff’s motion to strike the declarations of Adam Garcia (Senior Director for Group Insurance Claims) and Gail Gross (Clinical Practices Manager), which were attached to Hartford’s Motion for Summary Judgment.  The court rejected several of Plaintiff’s arguments.  Plaintiff argued that the declarants cannot be employees of Hartford Life, and thus made a material misrepresentation in that regard, because Hartford’s 30(b)(6) testified indirectly that it did not pay any employees.  The court determined that the individuals who were communicating with Plaintiff and who were ultimately responsible for his claim under the Plan were representing the interests and decisions of Hartford Life, even if the salaries are paid by Hartford Fire.  The court considered and rejected Plaintiff’s arguments that the declarations should be stricken because they are not in the administrative record, that they are sham affidavits, that they have no personal knowledge required by Rule 56(c)(4), or that they were not disclosed as required by Rules 26 and 37.

Ninth Circuit

Brown v. Life Ins. Co. of N. Am., No. CV-19-00025-TUC-JGZ, 2019 WL 3838983 (D. Ariz. Aug. 15, 2019) (Judge Jennifer G. Zipps).  The parties dispute whether the policy’s cost-of-living adjustment (COLA) applies to the net disability benefit or to the entire monthly gross disability benefit before application of offsets.  The policy states:  Each year the Insurance Company will increase an Employee’s Disability Benefit after he or she has been continuously Disabled for the COLA Benefit Waiting period.  The court concluded that based on the structure and wording of the relevant policy provisions there is no ambiguity and LINA has correctly applied the COLA to the net disability benefit.

Discovery

Seventh Circuit

Smith v. OSF HealthCare Sys., No. 18-3325, 2019 WL 3797985 (7th Cir. Aug. 13, 2019) (Before Wood, Chief Judge, and Easterbrook and Hamilton, Circuit Judges).  The dispute on appeal is whether the district court abused its discretion by granting Defendant’s motion for summary judgment without granting Plaintiff’s motion for further discovery under Federal Rule of Civil Procedure 56(d).  “District courts have considerable discretion in such case-management decisions, but that discretion is not unlimited. The record here shows, unfortunately, that the court’s denial of plaintiff’s Rule 56(d) motion was an abuse of that discretion. The summary judgment motion was filed long before discovery was to close; plaintiff was pursuing discovery in a diligent, sensible, and sequenced manner; and the pending discovery was material to the summary judgment issues. The district court’s explanation for denying a postponement overlooked the court’s earlier case-management and scheduling decisions and took an unduly narrow view of facts relevant to the case.”  The court vacated the grant of summary judgment and remanded for further proceedings.

Medical Benefit Claims

Ninth Circuit

Sanchez v. Verizon Commc’ns, Inc., No. 218CV01432GMNNJK, 2019 WL 3778057 (D. Nev. Aug. 12, 2019) (Judge Nancy J. Koppe).  The court denied the pro se plaintiff’s second amended complaint because he did not allege facts showing that his post-retirement medical benefits were vested and that he was entitled to the benefits.

Pension Benefit Claims

Seventh Circuit

Schnurer v. Lynn, No. 118CV01603JMSDML, 2019 WL 3804418 (S.D. Ind. Aug. 13, 2019) (Judge Jane Magnus-Stinson).  The court granted in part and denied in part Plaintiffs’ Motion to Enforce Settlement Agreement in light of Defendants’ default.  The court entered judgment in the amount of $1,100,000 against the breaching Defendants. Plaintiffs are also entitled to an accounting of their 401(k) plans pursuant to the settlement agreement.

Ninth Circuit

O’Rourke v. N. California Elec. Workers Pension Plan, No. 17-17419, __F.3d__, 2019 WL 3850604 (9th Cir. Aug. 16, 2019) (Before: Wallace, Siler,* and McKeown, Circuit Judges).  See Notable Decision summary.

Plan Status

Ninth Circuit

Davidson, et al. v. Hewlett-Packard Company, et al., No. 5:16-CV-01928-EJD, 2019 WL 3842001 (N.D. Cal. Aug. 15, 2019) (Judge Edward J. Davila).  The court granted in part and denied in part Defendant’s motion to dismiss Plaintiffs’ Third Amended Complaint.  Mr. Johnson, who has Lou Gehrig’s disease, was a beneficiary of the company’s health plan.  The court determined that Defendant’s employee, who informed the pro se plaintiffs that the company would provide skilled care to Mr. Johnson, created an ERISA plan.  Here, Defendant promised to take care of Mr. Davidson, including that he could move into the skilled care facility that Plaintiffs had found, and that there would no longer be a 120-day review that could end in termination of his care.  The company also stated that they would have healthcare insurance for the remainder of Mr. Davidson’s life.  Based on these alleged facts, the court determined that the intended benefits, beneficiaries, and source of financing are readily identified in the TAC. Though the procedures for receiving benefits are not explicit that is not required to create an ERISA plan so long as a reasonable person could ascertain the procedure for obtaining benefits.  The court found that a reasonable person could conclude that Plaintiffs’ medical benefits claims were to be submitted to the company for payment.

Retaliation Claims

Fourth Circuit

Mathews, Jr. v. Johns Hopkins Health System, Corp., et al., No. 8:16-CV-04013-PX, 2019 WL 3804129 (D. Md. Aug. 13, 2019) (Judge Paula Xinis).  The court granted summary judgment to the employer on the terminated employee’s Section 510 claim because his sole contention is that his firing saved the company money.  Saving money does not demonstrate that the employer intended, even in part, to interfere with his pension rights.

Severance Benefit Claims

Fifth Circuit

Romo v. Waste Connections US, Inc., No. 3:18-CV-0570-D, 2019 WL 3769108 (N.D. Tex. Aug. 9, 2019) (Judge Sidney A. Fitzwater).  The court granted Defendants’ motion for summary judgment, finding that the Plan Administrator reasonably found that the evidence of Plaintiff’s “exceedingly poor work performance and willful failure to perform his duties” justified a “Just Cause” termination under the Severance Plan and he is not entitled to benefits.

Statute of Limitations

Third Circuit

Nicolas v. The Trustees of Princeton University, No. CV 17-3695, 2019 WL 3822161 (D.N.J. Aug. 15, 2019) (Judge Anne E. Thompson).  Defendant contends that the Court erred in allowing Plaintiff’s underperformance claim to proceed because it is time-barred by ERISA’s statute of limitations where Plaintiff allegedly had knowledge of the underperformance of the Plans more than three years before she filed suit.  The court determined that Defendant is not entitled to reconsideration.  It explained that, “the mailing of this disclosure, a sophisticated and nuanced fifteen-page document of average annual returns and benchmarks, alone, is insufficient to satisfy Defendant’s high burden for reconsideration. Not only does the record presented before the Court during summary-judgment briefing lack any evidence that Plaintiff reviewed and amply digested such information to comprehend that retention of the Accounts was imprudent, but it also lacks evidence that Plaintiff even received the disclosure. Mere access to such information is insufficient as access may only amount to constructive knowledge; Plaintiff must have actually ‘underst[oo]d that some claim exist[ed]’ at the time, ‘which could include [or require] necessary opinions of experts.’”

Sixth Circuit

Coutu v. Bridgestone Americas, Inc., No. 3:17-CV-01492, 2019 WL 3802097 (M.D. Tenn. Aug. 13, 2019) (Judge William L. Campbell, Jr.).  The court determined that Bridgestone clearly repudiated Plaintiff’s claim for benefits more than six years before he filed this case when the Executive Director of IR and Benefits, a fiduciary, communicated to Plaintiff by email that he was not enrolled in the pension plan in dispute.  Thus, Plaintiff’s claim for benefits under ERISA Section 502(a)(1)(B) is barred by the statute of limitations.  The court also found that Plaintiff’s breach of fiduciary duty claim, based on inaccurate information Bridgestone provided to him, is also time-barred because it was based on information he received more than three years before he filed his lawsuit.

Venue

Sixth Circuit

Amos v. Aetna Life Insurance Company, No. 2:19-CV-202, 2019 WL 3773770 (S.D. Ohio Aug. 12, 2019) (Magistrate Judge Chelsey M. Vascura).  In this dispute over long-term disability benefits, the court denied Aetna’s motion to transfer venue from the Southern District of Ohio to the Southern District of West Virginia.  There is no dispute that venue is proper in either forum.  Analysis of the § 1404(a) convenience and justice factors do not weigh in favor of transfer.  Plaintiff received treatment by providers located in both Ohio and West Virginia.  The case will likely be decided on the Administrative Record, and if not, witness travel would not be an undue burden.  Aetna cannot rely on its self-serving argument that it is better for the disabled plaintiff to litigate in his home forum since he chose to file in this district and that was his choice to make.  Aetna has not shown that the case will be more financially burdensome to litigate in this district nor has it shown that it will be more expedient to litigate in West Virginia.  There is also no local expertise or particular interest in having this case decided in West Virginia.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Trustees for The Mason Tenders District Council Welfare Fund, Pension Fund, Annuity Fund, And Training Program Fund v. Earth Construction, Corp., No. 18 CIV. 9757 (PAE), 2019 WL 3852477 (S.D.N.Y. Aug. 16, 2019) (Judge Paul A. Engelmayer).  The Court confirmed the Award in favor of petitioners and issues judgment in the amount of $81,635.83 plus post-judgment interest pursuant to 28 U.S.C. § 1961(a).

Seventh Circuit

Bauwens v. Revcon Tech. Grp., Inc., No. 18-3306, __F.3d__, 2019 WL 3797983 (7th Cir. Aug. 13, 2019) (Before Manion, Sykes, and Brennan, Circuit Judges).  The court determined that the trustees cannot decelerate Revcon’s withdrawal liability because there is no “general principle” that any accelerated debt can be decelerated nor is there a statute authorizing deceleration of accelerated withdrawal liability under the MPPAA.  Without deceleration, the trustees’ claim is time-barred.

Eighth Circuit

Bigham et al., v. Don Haught, Inc., No. 18-CV-1752 (WMW/TNL), 2019 WL 3852783 (D. Minn. Aug. 16, 2019) (Judge Wilhelmina M. Wright).  The court granted Plaintiffs’ motion for entry of default judgment and request for $16,143.25 in unpaid contributions, liquidated damages, and attorneys’ fees and costs.

Painters District Counsel No. 58, et al., v. Platinum Enterprises, LLC, et al., No. 4:16CV1218 RLW, 2019 WL 3842577 (E.D. Mo. Aug. 15, 2019) (Judge Ronnie L. White).  The court denied Defendant’s Motion to Allow Pro Se Representation of Platinum Enterprises, LLC, Motion to Void Judgment and to Dismiss for Insufficient Service of Process, Motion for Writ of Error Coram Nobis, and Motion for Discovery and to Compel Discovery.  The court also denied Plaintiffs’ Motion to Compel the deposition of Defendants and Motion for Default Judgment against Garnishee Nu You Contracting & Remodeling Services, LLC.

Schrunk v. J & T Servs., LLC, No. 19CV01137SRNDTS, 2019 WL 3812755 (D. Minn. Aug. 14, 2019) (Judge Susan Richard Nelson).  The court granted Plaintiff default judgment against Defendant in the amount of $202,323.51 for unpaid contributions and liquidated damages for the Audit Period and $1,474.60 for the Funds’ reasonable attorneys’ fees and costs incurred in pursuing the delinquent contributions.

Local 513 Int’l Union of Operating Engineers, AFL-CIO v. Concrete Coring Co. of St. Louis, No. 4:18-CV-01085-NCC, 2019 WL 3803482 (E.D. Mo. Aug. 13, 2019) (Magistrate Judge Noelle C. Collins).  The court granted Plaintiffs’ motion for summary judgment in part.  The court dismissed Defendants Howard H. Hall and Tina Newell from the action.  The court awarded Plaintiffs outstanding contributions in the amount of $46,384.33, liquidated damages in the amount of $51,444.33, interest in the amount of $9,276.87, attorneys’ fees in the amount of $10,263.88, and court costs in the amount of $464.36, for a total of $117,833.77.

Get The Help You Need Today