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Your ERISA Watch – No Harm, No Foul: High Court Says Defined Benefit Pensioners Have No Standing to Sue Breaching Fiduciaries

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No harm, no foul, and no standing. That’s the essence of this week’s notable decision in Thole v. U. S. Bank N.A., No. 17-1712, __S.Ct.__, 2020 WL 2814294 (U.S. June 1, 2020), which the Supreme Court handed down on Monday. In a 5-4 decision in favor of U.S. Bank, the Court just made it more challenging for retirement plan participants to protect their defined benefit pension plan interests from imprudent management and self-dealing by plan fiduciaries. Below are the highlights from the decision.

Background: James Thole and Sherry Smith, who are retired participants in U.S. Bank’s defined benefit retirement plan, brought a putative class-action suit seeking repayment of approximately $750 million to the plan in losses that they claim the plan suffered due to U.S. Bank’s mismanagement and violation of ERISA’s duties of loyalty and prudence. They also sought injunctive relief including removal of the plan’s fiduciaries and attorney’s fees. Plaintiffs have been paid their full monthly pension benefits under the plan so the mismanagement did not impact their receipt of benefits.

The district court (D. Minn.) and the Eighth Circuit Court of Appeals rejected Plaintiffs’ claims on the basis that they lack statutory standing.

Majority: Justice Kavanaugh, delivered the majority opinion in which, Roberts, Thomas, Alito, and Gorsuch joined. In short, the “simple, commonsense reason” that Plaintiffs do not have a concrete stake in the lawsuit is because, win or lose, they will receive the exact same monthly benefits they are already entitled to receive. The Court rejected several arguments Plaintiffs asserted in support of standing.

First, it found that Plaintiffs do not possess an equitable or property interest in the plan such that injuries to the plan are injuries to its participants. Unlike participants in defined contribution plans, Plaintiffs’ benefits are not tied to the value of the plan assets. The employer is ultimately on the hook for any plan shortfalls. Thus, Plaintiffs cannot rely on a trust-law analogy to support Article III standing.

Second, Plaintiffs cannot assert standing as representatives of the Plan itself because they have not suffered an injury in fact. The plan’s claims here have not been legally or contractually assigned to Plaintiffs.

Third, though ERISA enables plan participants to sue for restoration of plan losses and other equitable relief, that does not automatically confer standing. A plaintiff must satisfy the injury-in-fact requirement to vindicate a right granted by statute.

Fourth, the Court explained that fiduciary misconduct is checked by a “regulatory phalanx,” including the Department of Labor’s ability to pursue fiduciary misconduct and the Pension Benefit Guaranty Corporation’s (PBGC) requirement to pay vested benefits of retirees. Thus, there is meaningful regulation of plan fiduciaries absent plan participants’ ability to sue for perceived fiduciary misconduct. [Editor’s note: To the extent the majority implies that the PBGC will always foot 100% of the benefit, that is not the case. The PBGC only pays up to a maximum amount, which changes annually. Pensioners do not always receive 100% of the benefit they would have gotten under their retirement plan. Once the PBGC becomes the trustee of a plan, the participants are subject to the statutory maximum benefit payable by the PBGC, which is the lower of their benefit as calculated under the plan or the statutory maximum benefit.]

Plaintiffs’ amici asserted that defined-benefit plan participants have standing to sue if the fiduciaries’ mismanagement substantially increased the risk that the plan and employer would be unable to pay future benefits. The Court did not address this head on, explaining that the plaintiffs did not assert that theory of standing in the Supreme Court and their complaint did not allege that level of mismanagement.

Concurrence: Justice Thomas wrote a concurring opinion, in which Justice Gorsuch joined. Justice Thomas explained that the analysis should be even simpler: The Court need only recognize that Plaintiffs do not have the private rights under ERISA or any contract to pursue the claims against U.S. Bank. Those rights belong to the plan.

Dissent: Justice Sotomayor wrote a dissenting opinion, in which Justices Ginsburg, Breyer, and Kagan joined. The dissent explained that the majority opinion “conflicts with common sense and longstanding precedent.” ERISA requires that retirement plan assets be held in trust and imposes stringent standards on fiduciaries who must act prudently and loyally for the best interest of the plan’s participants and beneficiaries. Plaintiffs have alleged a concrete injury to support their constitutional standing for several reasons.

First, Plaintiffs have an interest in their retirement plan’s financial integrity and by alleging a $750 million injury, they have established standing. Even though Plaintiffs’ monthly benefits are fixed, they have an equitable interest in their retirement plan’s assets. Traditional trust law supports Plaintiffs’ interest and the majority relies on inapposite case law.

Second, a breach of fiduciary duty is a cognizable injury regardless of whether the breach caused financial harm or increased a risk of nonpayment. “A beneficiary has a concrete interest in a fiduciary’s loyalty and prudence.” The dissent noted that injury to one’s wallet has never been a prerequisite for standing.

Third, the representational standing doctrine permits the participants to sue on the plan’s behalf. The dissent recognizes that the plan is a “legal fiction” as is the idea that breaching fiduciaries would sue themselves on behalf of the plan. “Does the Constitution compel a pension plan to let a fox guard the henhouse?”

Fourth, the dissent took issue with the majority’s suggestion that the only way participants can sue is if their benefits were not guaranteed in full by the PBGC. The purpose of ERISA and fiduciary duties is to prevent retirement-plan failure in the first place. There are “sobering truths about the PBGC,” including that it is a government program at “High Risk” for becoming insolvent.

In conclusion, “[t]he Constitution, the common law, and the Court’s cases confirm what common sense tells us: People may protect their pensions…Only by overruling, ignoring, or misstating centuries of law could the Court hold that the Constitution requires beneficiaries to watch idly as their supposed fiduciaries misappropriate their pension funds.”

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

Breach of Fiduciary Duty

First Circuit

Glynn v. Maine Oxy-Acetlyene Supply Co., No. 2:19-CV-00176-NT, 2020 WL 2770678 (D. Me. May 28, 2020) (Magistrate Judge John C. Nivison). In this lawsuit asserting claims in connection with the termination of an ESOP, the court granted Plaintiffs’ motion to amend the complaint to assert claims against two new defendants, Bryan Gentry and the Maine Oxy-Acetylene Employee Stock Ownership Plan. Regarding Gentry, Plaintiffs’ allegations that he discharged the contractors involved in plan administration and management, if proven, could establish Gentry as a fiduciary. Thus, the court cannot conclude that the amendment would be futile. With respect to the ESOP, to the extent Plaintiffs seek relief pursuant to 29 U.S.C. § 1132(a)(1)(B) the ESOP is a proper party to this action.

Supreme Court

Thole v. U. S. Bank N.A, No. 17-1712, __S.Ct.__, 2020 WL 2814294 (U.S. June 1, 2020) (Kavanaugh, J., delivered the opinion of the Court, in which Roberts, C. J., and Thomas, Alito, and Gorsuch, JJ., joined. Thomas, J., filed a concurring opinion, in which Gorsuch, J., joined. Sotomayor, J., filed a dissenting opinion, in which Ginsburg, Breyer, and Kagan, JJ., joined). See Notable Decision summary above.

Sixth Circuit

Vasu v. Combi Packaging Sys. LLC, No. 5:18-CV-1889, 2020 WL 2733756 (N.D. Ohio May 25, 2020) (Judge Sara Lioi). Plaintiff was the sole beneficiary of his father’s ERISA governed life insurance benefits. Those benefits were denied by American United Life Insurance Company (“AUL”) because Plaintiff’s father had not converted his life insurance after a waiver of premium claim was denied. The LWOP claim was denied because Plaintiff’s father was too old to qualify for the benefit when he left work due to disability. When AUL made that determination, it notified Plaintiff’s father of his right to convert. Plaintiff’s father did not take any action to pursue conversion. In a prior suit, Plaintiff had sued AUL under (a)(1)(B) for breach of contract. In that case, the court ruled the denial was proper. So, in the instant suit, Plaintiff sued the plan sponsor under (a)(1)(B). Combi moved for summary judgment. The court granted summary judgment because Combi was not a proper defendant under (a)(1)(B). It also denied Plaintiff’s (a)(3) claim because this legal theory was not made until after Combi had filed for summary judgment. However, the court also noted that Plaintiff had not established the “harm” needed for surcharge under (a)(3) because AUL had provided the conversion notice to Plaintiff’s father. The fact that Combi was responsible for providing the notice and had failed to do so was not sufficient unless Plaintiff could establish there was harm caused by the wrong entity providing the notice.

Ninth Circuit

Monterey Peninsula Horticulture, Inc. v. Employee Benefit Mgmt. Servs., Inc., No. 20-CV-01660-NC, 2020 WL 2747846 (N.D. Cal. May 27, 2020) (Judge Nathanael Cousins). Plaintiff Monterey Peninsula Horticulture (“MPH”) entered into a contract with Defendant Employee Benefit Management System (“EBMS”). EBMS is a third-party benefit administrator and was hired to provide administrative services for MPH’s self-funded health plan. EBMS failed to fulfill its responsibilities under the parties’ bargain. MPH brought this action against EBSM for breach of fiduciary duty among other things. EBMS filed a motion to dismiss the breach of fiduciary duty claim because it was not a fiduciary. The Court disagreed and denied the motion. Although EBSM was not a named fiduciary in the plan, the court determined it was a functional fiduciary. A functional fiduciary is one who “exercises discretionary authority or discretionary control respecting management of a plan or exercises any authority or control over the disposition of its assets.”  29 U.S.C. § 1002(21)(A). EBMS issued checks from MPH’s account to pay approved claims, and any control over plan money is enough to make an entity a fiduciary.

Disability Benefit Claims

Second Circuit

Garrett v. Provident Life & Cas. Ins. Co., No. 11-CV-133 (RRM) (JO), 2020 WL 2734272 (E.D.N.Y. May 22, 2020) (Judge Roslynn R. Mauskopf). Plaintiff brings this action against Defendants challenging termination of her LTD benefits. In motions for summary judgment, Defendant argued that it correctly terminated benefits based on IMEs, surveillance footage, and peer reviews, among other evidence. Plaintiff argues that the IMEs were not objective and surveillance footage does not support a conclusion that she can do her job. The court denied the parties’ motions and cross-motion for summary judgment because issues of material fact existed as to credibility of opinions in the conflicting reports of Plaintiff’s treating physicians and those retained by Defendant. The credibility determinations can only by made when the court conducts a bench trial.

Third Circuit

Pesacov v. Unum Life Insurance Company of America, No. Cv 19-2789, 2020 WL 2793165 (E.D. Pa. May 29, 2020) (Judge Wendy Beetlestone). Plaintiff was diagnosed with a duodenal ulcer and required surgery and multiple blood transfusions. The blood loss in her brain resulted in cognitive issues, and hospitalization aggravated the pinched nerve in her neck. About a year later, her condition began to improve. Unum terminated LTD benefits based on peer reviews. It then denied Plaintiff’s appeal. The court analyzed this case under the de novo standard of review and granted Plaintiff’s motion for summary judgment. The court agreed with Defendant that Plaintiff’s ongoing GI issues did not preclude work. However, Plaintiff submitted evidence documenting her physical and cognitive limitations. Considering Plaintiff’s documented physical limitations and cognitive deficits—in particular, her inability to sit or stand for a full workday and her memory lapses—Plaintiff has proven by a preponderance of the evidence that she was disabled by physical and mental limitations. Plaintiff is not required to prove her disability beyond all doubt, or beyond a reasonable doubt. Those are not the standards that apply here. Rather, she is required to prove it is more likely than not that she was disabled.

Eighth Circuit

Crites v. Aetna Life Ins. Co., No. 4:19-CV-00098-KGB, 2020 WL 2616578 (E.D. Ark. May 21, 2020) (Judge Kristine G. Baker). Plaintiff filed suit to recover long term disability benefits denied by Defendant Aetna Life Insurance Company. Plaintiff presented two primary arguments as to why Defendant abused its discretion in failing to provide Plaintiff a full and fair hearing. First, she argues that Aetna abused its discretion by relying selectively on its own experts who never examined Plaintiff rather than her treating physicians. Second, she argues that Aetna wrongfully deprived her of the right to review and rebut the final reports issued by Aetna prior to the final denial. The Court rejected both arguments in finding for Aetna. It concluded that Plaintiff’s first argument was not persuasive because the medical evidence supported Aetna’s decision to rely on the final reports. It rejected Plaintiff’s second argument finding that pertinent regulations which require disclosure only applies to “adverse benefit determinations.” In the Eighth Circuit, only initial denials of benefits, and not appeal denials, constitutes an “adverse benefit determination.”


Second Circuit

Hughes v. Hartford Life & Accident Ins. Co., No. 3:19-CV-01611-JAM, 2020 WL 2615531 (D. Conn. May 22, 2020) (Magistrate Judge Thomas O. Farrish). Plaintiff issued discovery requests falling into four principal groups; seeking to explore (1) the completeness of Hartford’s administrative record; (2) Hartford’s conflict of interest; (3) alleged bias on the part of Hartford’s medical consultants; and (4) Hartford’s compliance with Department of Labor regulations governing employee benefit plans. Plaintiff also asked the court to order an in camera review of one document that Hartford excluded from the record under a claim of attorney-client privilege. The court recognized its review is ordinarily limited to the administrative record, but that rule leads to disputes like it had before it: the claimant argues it controls admissibility and not discoverability. The court determined a somewhat less stringent standard applied to obtaining discovery. It explained “an ERISA plaintiff can obtain extra-record discovery to the extent that she shows, through facts and not conclusory allegations, a ‘reasonable chance’ that the particular discovery request will yield a ‘good cause’ for expanding the record at summary judgment or trial.” Applying this standard to the first three groups of discovery requests, the court found that Plaintiff had (1) supported one of her requests directed to the completeness of the administrative record, but not the others; (2) had not supported her requests for discovery into Hartford’s conflict; and (3) had partially supported one of her requests directed to the alleged bias of Hartford’s medical consultants, but not the others. With respect to group (4)—the requests directed to Hartford’s compliance with DOL regulations—the court held that the regulations at 29 C.F.R. §§ 2560.503-1(j)(3) and (m)(8) command production of some, but not all, of the requested documents. The court also accepted Plaintiff’s principal argument about the allegedly privileged document falling into the “fiduciary exception” to attorney client privilege, and it ordered Hartford to produce documents for in camera review to determine if privilege attached.

ERISA Preemption

Third Circuit

Lugara v. Oticon, Inc., et al., Case No. CV1917951MASDEA, 2020 WL 2767564 (D.N.J. May 28, 2020) (Judge Michael A. Shipp). After nearly two decades working at Oticon and on the day he turned 64 years old, Lugara was terminated from his employment. Lugara brought this action in the Superior Court of New Jersey, alleging age discrimination in violation of the New Jersey Law Against Discrimination. N.J. Stat. Ann. §§ 10:5-1, et seq., and breach of contract for failing to provide him with a lump severance payment under a severance plan. Oticon timely removed the action to federal court pursuant to 28 U.S.C. § 1441(b) on the grounds that ERISA preempted Lugara’s breach-of-contract claim. Before the court was Lugara’s motion to remand the matter back to state court. The court denied Lugara’s motion to remand holding that: (1) Lugara could have brought his breach of contract claim under ERISA § 502 because the Oticon Plan, from which severance benefits were to be paid, was in fact an ERISA plan (Oticon demonstrated its intention to provide these severance payments on a regular and long-term basis pursuant to an ongoing administrative scheme); and (2) Lugara’s claim implicated no independent legal duty outside of the ERISA plan especially since the parties did not dispute that Lugara’s breach-of-contract claim is solely derived from or conditioned upon the terms of the ERISA plan.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Beazley v. Metropolitan Life Ins. Co., No. 19-30734, __ F. App’x __, 2020 WL 2766252 (5th Cir. May 27, 2020) (Before Stewart, Dennis, and Haynes, Circuit Judges). Plaintiffs in this case were survivors of a decedent who was a participant in an ERISA-governed employee life insurance benefit plan. The insurer of the plan, MetLife, denied their claim for benefits, and the district court upheld that denial. On appeal, the Fifth Circuit affirmed in a per curiam decision. The court found that although Plaintiffs had alleged that MetLife had a conflict of interest, they had not shown how that conflict had affected the claim decision. The court also found that MetLife was not dilatory in sending its notice of conversion or portability to the decedent and did not act unreasonably by not contacting a family friend about such options. Finally, the court held that the plan clearly stated the requirements for porting and converting coverage, and that the decedent did not comply with those requirements.

Medical Benefit Claims

Second Circuit

Fisher v. Aetna Life Ins. Co., Case No. 1:15-CV-283-GHW, 2020 WL 2792994 (S.D.N.Y. May 29, 2020) (Judge Gregory H. Woods). Fisher, the wife-beneficiary of William Dunnegan, a senior partner of the New York City-based law firm Dunnegan & Scileppi LLC (‘D&S’) was diagnosed with severe recurrent major depression, for which her doctor prescribed her the brand name prescription drug Effexor XR. For plan year 2014, Dunnegan worked with his firm’s health insurance broker to find new health insurance coverage for his employees and their dependent beneficiaries and came upon an Aetna Silver Plan. The Aetna plan Choose Generic provision, unbeknownst initially to Dunnegan, that required Fisher to try the generic version of Effexor XR before Aetna would reimburse for the brand-name version unless Fisher’s doctor certified that the brand-name drug was medically necessary—which he did not do. Fisher filled her prescriptions for brand-name Effexor XR for every month of 2014 and Aetna denied the corresponding claims. The court denied summary judgment on Fisher’s remaining claim for breach of the Group Policy holding that because Dunnegan nor Fisher properly sought a medical necessity waiver for Effexor HR, Aetna properly exercised its discretionary authority to interpret its policy in a manner that required Fisher to pay an ‘additional charge’ equal to the cost difference between the Effexor XR and venlafaxine (generic equivalent). In calculating Fisher’s benefit, Aetna applied the lesser of (1) Fisher’s copayment—fifty percent of the cost of Effexor XR—plus an ‘additional charge’ of the brand-generic cost differential and (2) the full cost of Effexor XR. Because the fifty percent copayment plus the cost differential was always higher than the brand cost, Aetna charged Fisher the brand price. The court held that he was a reasonable interpretation of the Choose Generic provision.

Tenth Circuit

Jacque v. Beacon Health Options, Inc., No. 2:18-CV-048-JNP-EJF, 2020 WL 2810451 (D. Utah May 29, 2020) (Judge Jill N. Parrish). The court considered cross-motions for summary judgment regarding a claim for residential treatment. The court found that the plan expressly gave BHO, the claims administrator, discretion to develop criteria and determine whether a claimant is entitled to benefits. However, the court found that serious procedural irregularities in BHO’s adverse benefit determination warrant de novo review for two reasons: (1) BHO reviewers failed to consider whether residential treatment was necessary to treat the patient’s substance abuse, and (2) procedural irregularities such as declining to reveal the identity of medical reviewers and failing to engage in “meaningful dialogue.” Regarding the procedural irregularities, the court found that “based on the dearth of analysis in BHO’s denial letters, the record shows no indication that BHO” provided a review that considers Plaintiff’s information submitted on appeal. The court found that BHO also failed to provide references to the medical records on which it based its medical necessity determination. The court found that it did not need to apply a de novo review because BHO’s determination fails even under an arbitrary and capricious standard of review. The court held that BHO’s decision was arbitrary and capricious because BHO failed to make a medical necessity determination about the patient’s substance abuse, BHO applied acute-level criteria that is inconsistent with the Plan defining residential treatment as subacute, BHO offered conclusory statements rather than reasoned analysis, and BHO’s decision was unreasonable because BHO lacked substantial evidence supporting its decision and ignored contrary evidence. The court declined to award prejudgment interest and determined that reversal and remand is appropriate. The court decided to award appropriate attorneys’ fees to plaintiffs.

Nancy S. v. Anthem Blue Cross & Blue Shield, No. 219CV00231JNPDAO, 2020 WL 2736023 (D. Utah May 26, 2020) (Judge Jill N. Parrish). Anthem brought a motion to dismiss a complaint seeking to dismiss Plaintiffs’ cause of action alleging Anthem violated the Mental Health Parity and Addiction Equity Act of 2008 (“Parity Act”). The court found that Plaintiffs identified a treatment limitation in that Anthem determined residential treatment was not medically necessary because the patient was not progressing in treatment after only 21 days of treatment. The court found Plaintiffs identified analogous covered medical/surgical treatment in skilled nursing and rehabilitation facilities. The court also found that Plaintiffs adequately alleged a treatment limitation disparity and are not required to point to specific criteria disparity with precision at the pleading stage. Therefore, the court denied Anthem’s motion to dismiss.

Pension Benefit Claims

Third Circuit

Leventhal v. MandMarblestone Grp. LLC, No. 18-CV-2727, 2020 WL 2745740 (E.D. Pa. May 27, 2020) (Judge Mitchell S. Goldberg). Jess Leventhal, Principal of Leventhal Sutton & Gornstein, Attorneys at Law, and a participant, trustee and fiduciary of the Plan, brought suit against MandMarblestone Group, LLC (“MMG”), the Plan’s consulting firm, and Nationwide, the Plan’s custodian, alleging cyber-fraud, i.e. fraudulent withdrawals from the law firm’s retirement plan. Plaintiffs filed motions to dismiss the MMG’s counterclaims, strike both Defendants’ affirmative defenses, and strike Nationwide’s third-party complaint. MMG’s counterclaim requested contribution and indemnity from Plaintiffs. Plaintiffs argued ERISA preempts such claims against co-fiduciaries. The court found MMG had sufficiently pled Nationwide and Plaintiffs are co-fiduciaries and denied the motion. The court however granted Plaintiffs’ motion to strike Defendants’ affirmative defenses that Plaintiffs are proportionately liable for the loss to the Plan. The court found Defendants cannot assert affirmative defenses that would serve to reduce their joint and several liability owed by ERISA fiduciaries for plan losses. Finally, the third-party complaint filed by Nationwide against persons located in Texas who allegedly withdrew funds from the Plan. With regard to the third claim for contribution and indemnification from the Texas defendants, Plaintiffs argued ERISA does not permit claims against non-fiduciaries. Nationwide countered Plaintiffs have no standing to assert challenges to the sufficiency of a complaint against the Texas defendants. The court held there was no viable claim under ERISA against the Texas defendants and granted Plaintiffs’ motion to strike the third-party complaint. The court likewise granted the motion to strike counts I and II for conspiracy to commit fraud and aiding and abetting fraud because the litigation between Nationwide and the Texas defendants would unduly complicate the action with questions of remedies available against non-fiduciaries.

Sixth Circuit

In re Davis, No. 19-3117, __F.3d__, 2020 WL 2831172 (6th Cir. June 1, 2020) (Before: Clay, Larsen, and Readler, Circuit Judges). The Sixth Circuit clarified a prior ruling about whether ongoing 401(k) contributions are considered “disposable income” for purposes of a Chapter 13 bankruptcy plan. The court engaged in a lengthy analysis of how to interpret statutes, ultimately concluding the canons of construction favored ruling in Davis’ favor. Interestingly, the district court believed it was bound by the Sixth Circuit’s prior ruling on this issue but seemed to think the ruling was wrong. The district court guided Davis on how to amend her petition so that it could issue a ruling and appeal the issue to the Sixth Circuit.

Pleading Issues & Procedure

Second Circuit

Galli v. PricewaterhouseCoopers LLP Notice/Severance Policy, No. 19 CIV. 7224 (LGS), 2020 WL 2792996 (S.D.N.Y. May 29, 2020) (J. Lorna G. Schofield). Plaintiff sued her ERISA-governed pension plan alleging that it had not provided her with the requisite notice period. The court denied Plaintiff’s motion to compel discovery outside the administrative record, after which the parties filed cross-motions for summary judgment. Plaintiff then filed a motion asking the court to defer ruling on the summary judgment motions based on a new Second Circuit decision regarding the reformation of ERISA plans. The court denied Plaintiff’s motion, and her motion for reconsideration. The court found that the Second Circuit decision did not address whether discovery outside the administrative record was permissible and did not change the law with regard to Plaintiff’s claims. Thus, the decision was not grounds for allowing further discovery, amending the complaint, or delaying ruling on the summary judgment motions.

Trustees of N.Y.C. City Dist. Council of Carpenters Pension Fund, Welfare Fund, v. Showtime on the Piers, LLC, No. 19-CV-7755 (VEC), 2020 WL 2749572 (S.D.N.Y. May 26, 2020) (Judge Valerie Caproni). Plaintiffs are multi-employer plans (the “Funds”) suing Defendant Showtime who is an employer accused of not paying required contributions for employees. Defendant brought this motion to dismiss on the basis that the parties did not enter into an agreement, and that the ERISA claims are time-barred. The court determined that the Funds had adequately alleged that Showtime was bound by the terms of the collective bargaining agreement through oral representations and conduct. The judge reasoned that ERISA does not require an employer to sign a collective bargaining agreement to be bound by it. The court agreed however that the Funds’ breach of fiduciary duty claims were time-barred. The Funds knew about the delinquent dues, which brings the claim under the purview of the three-year statute of limitations based on the actor having “actual knowledge” of the breach. The court did allow Plaintiffs one lifeline – leave to amend their complaint to include breaches of fiduciary duty that are new acts as opposed to reaffirmations of old bad acts, and the new breach being pled must inflict new and accumulating harm on Plaintiffs.

Sixth Circuit

American 1 Credit Union v. Pucket, No. 19-11943, 2020 WL 2836308 (E.D. Mich. May 31, 2020) (Judge Denise Page Hood). In this case, Plaintiff filed a motion to dismiss Defendant’s counter-complaint and Defendant moved to dismiss Plaintiff’s complaint. Plaintiff, a corporation, made certain promised to Defendant, one of its executives, of executive compensation benefits and a retirement present of his company car but the Board of Directors never met to formally approve the promises. At his retirement, Defendant did in fact receive the car. Plaintiff then demanded its return. Defendant moved to dismiss Plaintiff’s claim for breach of contract and declaratory relief as preempted by ERISA because the promises made were pursuant to executive compensation agreements governed by ERISA. The court agreed and dismissed the claims as preempted. Regarding Plaintiff’s conversion allegation related to Defendant keeping the car after it was requested to be returned, the court found Plaintiff pled facts sufficient to withstand dismissal.  The court also found Plaintiff sufficiently alleged breach of fiduciary duties against Defendant for actions while CEO of the company. Regarding Plaintiff’s motion to dismiss Defendant’s counter-complaint which brought claims for the compensatory retirement promise of $200,000 per year under the Supplemental Retirement Plan. The court dismissed the claim explaining that although some board members verbally agreed to the terms of the SERP benefits, all of the Board of directors were required to approve, which did not occur. Defendant’s counter-complaint also brought a claim to reform the 2007 SERP due to a scrivener’s error. The court found this claim time-barred since the claim accrued when Defendant executed the 2007 SERP on December 26, 2007.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Trustees Of The New York City District Council Of Carpenters Pension Fund, Welfare Fund, Annuity Fund, & Apprenticeship, Journeyman Retraining, Educational And Industry Fund v. Statewide Restoration Of New York, Inc., No. 19 CIV. 11887 (PAE), 2020 WL 2787655 (S.D.N.Y. May 29, 2020) (Judge Paul A. Engelmayer). The court confirmed the Award in favor of petitioners and issued judgment in the amount of $91,069.93, plus post-judgment interest pursuant to 28 U.S.C. § 1961(a).

D.C. Circuit

United Mine Workers of America 1974 Pension Plan, et al. v. Energy West Mining Company, No. 1:18-CV-01905 (CJN), 2020 WL 2615536 (D.D.C. May 22, 2020) (Judge Carl J. Nichols). The court granted the Plan’s motion for summary judgment, finding that the arbitrator’s award should not be disturbed. “Energy West has not demonstrated that [William Ruschau’s, the Plan’s enrolled actuary] actuarial assumptions and methods were unreasonable under ERISA’s provisions governing the calculation of Energy West’s withdrawal liability from the 1974 Pension Plan. Energy West’s own expert admitted as much. And because there were no allegations that the Plan’s trustees exerted improper influence on the actuary, the evidence supports Irvings’s finding that the calculation was the actuary’s best estimate of the Plan’s experience and performance. Finally, Arbitrator Irvings correctly found that Energy West in ineligible for a statutory cap on the number of installment payments it owes to satisfy its liability.”

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


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