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Your ERISA Watch – Plan Trustees May Be “Surcharged” to Remedy Breach of Trust Causing a Loss of Benefits Under Unrelated Plan

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This week’s notable decision, DeRogatis v. Bd. of Trustees of the Cent. Pension Fund of the Int’l Union of Operating Engineers, No. 14 Civ. 8863 (CM) (S.D.N.Y. June 13, 2019), follows a remand from the Second Circuit to decide whether ERISA “allows Plaintiff Emily DeRogatis to ‘surcharge’ the trustees of one ERISA plan for a breach of trust that caused her to lose benefits under another, related plan.”  Relying on the Supreme Court’s decision in Cigna Corp. v. Amara, 563 U.S. 421 (2011), the court answered in the affirmative.

Plaintiff Emily DeRogatis is the surviving spouse of Frank DeRogatis who died from terminal cancer.  After Frank’s diagnosis and before his death, an office administrator with the Welfare Fund of the International Union of Operating Engineers Local 15, 15A, 15C &15D, AFL-CIO (“Welfare Fund”) told Frank and Emily that if Frank retired before his death Emily would receive a Joint Annuity benefit under the Central Fund of the Internal Union of Operating Engineers and Participating Employers (“Pension Plan”) of almost $300 more each month than if he died while employed.  The Welfare Fund and Pension Plan have no formal affiliation beyond that they both serve Local 15 members.  The Welfare Fund will occasionally provide advice related to pension benefits under the Pension Plan.

Several months later when Emily was going to submit the retirement paperwork for Frank while he was hospitalized, a claims specialist with the Welfare Fund gave Emily false information that Frank would lose his health benefits if he retired before age 62.  For fear of losing medical coverage while he was hospitalized and dying, Emily did not submit an early retirement election that Frank had signed in order to maximize the benefits she would receive after his death.  Frank died two months later, and Emily tried to submit Frank’s signed paperwork after his death.  The Pension Plan determined that Emily was not eligible for augmented survivor’s benefits.

Emily sued both the Welfare Fund and the Pension Plan to obtain the augmented pension benefit she would have received if she submitted Frank’s early retirement election.  The district court granted summary judgment to Defendants.  On appeal to the Second Circuit, the court affirmed the grant of summary judgment to the Pension Plan since Emily was not entitled to the augmented benefit under the terms of the Plan.  But it found that there were genuine issues of material fact about the Welfare Fund’s potential liability and breach of fiduciary duty, including whether the trustees were acting as fiduciaries to Emily when a Welfare Fund employee provided the wrong advance, and if so, whether the trustees breached those fiduciary duties through a misleading SPD and wrong advice.  On remand, both parties moved for summary judgment and the court denied both motions.

The Welfare Fund argued that there is no equitable relief under ERISA Section 502(a)(3) that is available to Emily.  The court focused its discussion on the availability of equitable surcharge.  First, it analyzed Amara and its progeny to determine that a “surcharge” could be appropriate to recompense a beneficiary for a loss caused by the trustee’s breach, also known as “make whole” relief.  In order to obtain a surcharge remedy for misrepresentations by a plan fiduciary, a beneficiary must show actual harm and causation.  Here, Emily could show she relied to her detriment on representations made by a Welfare Fund employee.  “But for” the wrong information, she would have submitted the retirement paperwork and received more money each month following Frank’s death.  On these facts, the court determined that Emily may be entitled to a surcharge under either the detrimental reliance theory or the “but-for causation” theory.

The court considered and rejected the Welfare Fund’s arguments that Emily is not entitled to equitable relief.  First, it found that surcharge does not require traceability.  The court explained that the Welfare Fund confused restitution with surcharge which does not require unjust enrichment nor the loss of particular plan funds.  Amara extended the surcharge remedy to a breach of trust committed by a fiduciary encompassing any violation of fiduciary duty.  Second, the court found that nothing in the Trust Agreement prohibits the imposition of a surcharge on the Fund’s Trustees.  Here, the Trust Agreement authorizes the use of funds to indemnify its trustees.  The Supreme Court’s decision in US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013) does not call for a contrary result.  Lastly, the court rejected the argument that surcharge must be coupled with an injunction, calling this argument “weak sauce.”  There is no requirement that injunctive relief is necessary to seek a surcharge.

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

Attorneys’ Fees

Tenth Circuit

Manna v. Phillips 66 Company, No. 16-CV-500-TCK-FHM, 2019 WL 2435676 (N.D. Okla. June 11, 2019) (Judge Terence C. Kern).   Plaintiff filed a motion for attorneys’ fees after the court granted his motion for summary judgment reversing and remanding the Plan’s decision to deny his severance benefits.  Following the remand and the Plan’s denial of benefits, the court found that Plaintiff was not entitled to severance benefits.  Since Plaintiff “is not the prevailing party in its claim against the Plan” the court found that its decision renders Plaintiff’s motion for attorneys’ fees moot.

Paquin v. Prudential Ins. Co. of Am., No. 16-CV-02142-RBJ, 2019 WL 2422791 (D. Colo. June 10, 2019) (Judge R. Brooke Jackson). In this dispute over long term disability benefits where Plaintiff prevailed, the court awarded $51,580 in attorney’s fees incurred through July 26, 2018, the date of the summary judgment order and the original Final Judgment; $10,800 in attorney’s fees incurred in the preparation of the attorney’s fee application; $4,520 in attorney’s fees incurred in connection with efforts to settle the disputes concerning attorney’s fees, costs and interest; $33,364.75 in prejudgment interest; and $4,549.45 in post-judgment interest through June 6, 2019 (to continue and be calculated in the same manner from June 7, 2019 until the judgment is satisfied).  The court denied awarding $10,575 sought by Plaintiff as reimbursement for amounts paid to doctors during the administrative appeal phase.  The court also denied reimbursement for $6,750 paid to an attorney’s fees expert because “ERISA provides no explicit authorization for an award of expert witness fees.”  The court did allow payment for time spent on settlement efforts after Plaintiff initially filed his application for attorney’s fees, finding that the effort to settle the fee amount was incurred in the “action.”

Breach of Fiduciary Duty

Fifth Circuit

Jones v. Merchants & Farmers Bank of Holly Springs, Mississippi, et al., No. 3:18-CV-145-RP, 2019 WL 2425677 (N.D. Miss. June 10, 2019) (Magistrate Judge Roy Percy).  The court agreed with Defendants that the Supplemental Executive Retirement Plan (“SERP”) is an ERISA “top hat” plan exempt from the fiduciary duty requirements applicable to typical ERISA plans.  In coming to this conclusion, the court determined that the SERP plan is unfunded, its primary purpose is to provide deferred compensation, and the plan involves a select group of management or highly compensated employees.  Regarding the last factor, the average annual salary of the plan participants varied over the years from more than twice the annual salary of other full-time employees to over triple the average annual salary.  The percentage of the total workforce that could participate in the plan ranged from 17.86% to 5.56% at the time of Plaintiff’s retirement.  These factors weigh in Defendants’ favor.  The court found that it was not dispositive that Plaintiff did not earn the minimum amount to be considered a highly compensated employee by the IRS under 26 U.S.C. § 414(q)(1)(B).  The court dismissed Plaintiff’s breach of fiduciary duty claims as they pertain to the SERP plan.

Ninth Circuit

Nat Palaniappan v. Gilbert Hosp. LLC, No. CV-17-00517-PHX-JJT, 2019 WL 2451655 (D. Ariz. June 12, 2019) (Judge John J. Tuchi).  The court denied Plaintiff’s motion for reconsideration of the court’s previous finding that PFG was not acting in a fiduciary role when it undertook the specific actions purported to be a breach.  “Plaintiff has not provided any new argument that his Complaint sufficiently alleges that PFG acted in a fiduciary context during the adjudication of Defendant Gilbert’s bankruptcy plan. Nor does Plaintiff adequately allege that PFG exercised discretionary authority over Plaintiff’s enrollment in the 409A plan.”

Tenth Circuit

Wasser v. Deianni, No. 18-CV-1603-RBJ, 2019 WL 2471440 (D. Colo. June 13, 2019) (Judge R. Brooke Jackson).  The ITU, an independent labor organization, alleged that Defendants breached their fiduciary duties by adopting an amendment which stripped the ITU of its exclusive right to remove and replace union trustees.  The court agreed that a plan sponsor does not act as a fiduciary when it amends the terms of a single-employer ERISA benefit plan, but it denied Defendants’ motion to dismiss because it found that further factual development is necessary to determine if the adoption of the amendment violated the command in § 1104(a)(1)(D).  The court analogized this case to United Healthcare Workers-W. v. Borsos, No. C 09-00404 WHA, 2010 WL 1881469 (N.D. Cal. May 10, 2010), where the court found that an amendment, which changed the union’s right to appoint and remove union trustees, violated the limitations provision in the trust agreement.

Class Actions

Second Circuit

Beach v. JPMorgan Chase Bank, No. 17-CV-563 (JMF), 2019 WL 2428631 (S.D.N.Y. June 11, 2019) (Judge Jesse M. Furman).  In this matter where Plaintiffs allege that Defendants breached their duties of loyalty and prudence by including funds with excessive fees in the JPMorgan Chase 401(k) Savings Plan’s investment options, the court granted Plaintiff’s motion for class certification subject to modifications.  The court found that Defendants waived any right to compel arbitration by waiting for more than a year to raise arbitration as an issue and only doing so in briefing, not by motion.  Since Plaintiffs are not bound by the unenforceable arbitration agreements, they are not precluded from representing the proposed class.  The court also found that Plaintiffs have standing to represent participants who invested in funds that they did not because participants bringing derivative claims need not show individual harm to establish standing.  The class is defined as follows:

All persons, except Defendants and any other persons with responsibility for the Plan’s investment menu, who were participants in or beneficiaries of the Plan, at any time between January 25, 2011 and the present (the “Class Period”), and whose individual accounts were invested in one or more of the following funds: the Growth and Income Fund; the Mid Cap Value Fund; the Mid Cap Growth Fund; the Small Cap Core Fund, but only if the investment occurred before December 19, 2015; the Core Bond Fund, but only if the investment occurred before March 12, 2016; and any of the Target Date Funds, but only if the investment occurred before April 1, 2016.

The court appointed Kessler Topaz Meltzer & Check, LLP (“KTMC”), as class counsel.  The court granted the motion to seal excerpts from the 2016 Investment Policy Statement of the JPMorgan Chase 401(k) Savings Plan and minutes from the June 18, 2015 and September 22, 2015 Employee Plans Investment Committee meetings.

Disability Benefit Claims

Third Circuit

McBurrows v. Verizon, et al., No. 15-CV-6321, 2019 WL 2432088 (D.N.J. June 11, 2019) (Judge Kevin McNulty).  The court granted the Plan Committees’ motion for summary judgment on Plaintiff’s claim for long term disability, finding that they did not abuse their discretion in finding that Plaintiff did not have LTD coverage where he was not enrolled for LTD coverage at any time after 2006, he first attempted to enroll in 2013 when he was on short-term disability and never returned to full-time work for a period of 90 consecutive days, he did not provide evidence of insurability, and he did not pay any premiums for coverage.  Plaintiff did receive full short-term disability benefits but at one point they were suspended.  The court explained: “The main grievance appears to be that having his STD benefits suspended and then reinstated was an inconvenience to him when he was suffering from his medical ailments.  I agree that it is maddening and draining to deal with benefits bureaucracies when one is most vulnerable and ill. That systemic grievance, however, is not a basis for an ERISA claim like the one asserted here.”  (internal citation and quotation omitted).

Fifth Circuit

Smith v. United of Omaha Life Ins. Co., No. 18-60753, __F.App’x__, 2019 WL 2453176 (5th Cir. June 11, 2019) (Before STEWART, Chief Judge, and OWEN and OLDHAM, Circuit Judges).  United of Omaha denied Plaintiff long term disability benefits under its policy’s exclusion for pre-existing conditions, taking the position that Plaintiff was treated for pleural effusion during the look-back period and that was caused by her later diagnosed metastatic ovarian cancer.  The court affirmed the district court’s grant of summary judgment to Plaintiff.  “[T]he condition that caused her disability was not pleural effusion; it was metastatic ovarian cancer. This is the condition for which she must have had treatment, care, or services to trigger the pre-existing condition exclusion. Although it is undisputed that Smith’s pleural effusion was caused by the metastatic ovarian cancer, pleural effusion can be caused by any number of conditions, her symptoms were non-specific to metastatic ovarian cancer, and the medical records do not indicate that her medical providers believed the pleural effusion was likely caused by metastatic ovarian cancer. Thus, United could not reasonably have concluded that she received treatment ‘for’ metastatic ovarian cancer during the look-back period.”

Seventh Circuit

Lacko v. United of Omaha Life Ins. Co., No. 18-2155, __F.3d__, 2019 WL 2439786 (7th Cir. June 12, 2019) (Before Bauer, Rovner, and St. Eve, Circuit Judges).  The court reversed the district court’s grant of summary judgment to United of Omaha, finding that its denial of Plaintiff’s claims for STD and LTD benefits was arbitrary and capricious.  On the standard of review, the court found that United’s selective presentation of the evidence increases the weight of United’s financial conflict of interest.  However, the conflict does not act as a “tiebreaker” because the court found that a remand is required even absent the conflict.  The court found that United did not adequately consider the SSA’s determination of disability.  Plaintiff’s job of Senior Manager for the Audit Department is seemingly skilled work and United failed to recognize and address the cognitive limitations set forth in the SSA decision.  Additionally, United used a DOT classification that was less accurate than the DOT classification used by the SSA, which United did not address.  United selectively characterized the record and discussed only the portions that would favor a determination that Plaintiff was not disabled and ignored or mischaracterized the portions that would supporting a finding of disability.  United failed to address Plaintiff’s combination of her impairments, including the impact of her medications, on her ability to work.  Even though Plaintiff had a degenerative condition years before she applied for disability, “a condition can exist for years, and only prevent a person from performing her job at a later point in time when the worsening condition proves unmanageable. The deterioration can be sufficient to constitute a change in conditions under the plain language.”  The court found that the appropriate remedy is a remand to United to reassess Plaintiff’s claim.

Ninth Circuit

Vaughn v. Hartford Life and Accident Insurance Company, No. 3:17-CV-1904-BR (D. Or. June 12, 2019) (Judge Anna J. Brown).  The court granted summary judgment to Plaintiff, a family-practice physician disabled by asthma, the effects of prednisone to treat the asthma, and juvenile onset diabetes mellitus.  The court noted that Rule 56 is not the appropriate standard in an ERISA action, but “merely the conduit to bring the legal question before the district court.”  On the standard of review, the parties disputed whether a 2011 Certificate in effect as of Plaintiff’s date of disability or a 2013 Certificate in effect as of the date her claim was terminated governs.  The court found the 2013 Certificate governs since that was the Plan in effect when Hartford terminated her benefits.  The court also found that the “ERISA Information” section of the SPD which grants Hartford discretionary authority is not part of the Plan and does not govern the standard of review.  The court found that the proper standard of review is de novo and declined to consider a late produced Policy and Trust Agreement.  The court concluded that the medical records, the independent reviews of her records, and the surveillance videos did not support Hartford’s decision to terminate Plaintiff’s LTD benefits.  With respect to the surveillance, Plaintiff was allegedly observed “performing activities such as yard work, hiking, pushing equipment around her yard, driving, and entering and exiting cars without any observable distress, hesitation, or impairment.”  The court found that the 77 minutes of video surveillance over four days failed to establish that Plaintiff was not disabled.  Plaintiff was not experiencing a “flare” of asthma symptoms on those days and her activities did not show she was more active than she acknowledged.

Black v. Hartford Life Insurance Company, No. 3:17-CV-1785-HZ, 2019 WL 2422481 (D. Or. June 10, 2019) (Judge Marco A. Hernandez).  In this dispute over the termination of “Any Occupation” LTD benefits for Plaintiff with Atypical Parkinson’s Disease who Hartford had found disabled for over ten years, the court granted Plaintiff’s motion for summary judgment.  On the abuse of discretion standard of review, the court assigned little weight to Defendant’s structural conflict of interest, finding that when reviewing Hartford’s employees’ performance evaluations, the identified metrics to not implicate a need for a heightened degree of skepticism.  The court also determined that Plaintiff’s arguments regarding MES (third-party IME provider) and HUB’s (surveillance company) financial ties to Defendant are speculative and conclusory.  The court found that Plaintiff met his burden of proving ongoing disability and entitlement to benefits.  Since Hartford previously found Plaintiff to be disabled, its change in position requires rational explanation.  The court analyzed and rejected Hartford’s rationale that the totality of the medical records, the IME findings, surveillance, and other evidence showed that as of August 2016 Plaintiff’s condition had improved.  The court also found that Hartford failed to adequately consider the SSA decision finding Plaintiff’s disabled.  As the remedy, the court ordered an award of reinstatement of benefits, declining to give Hartford another “bite at the apple” when its claim determination fell short of fulfilling its fiduciary duty to Plaintiff.

Tenth Circuit

Coats v. Reliance Standard Life Insurance Company, No. 16-CV-233-TCK-JFJ, 2019 WL 2435677 (N.D. Okla. June 11, 2019) (Judge Terence C. Kern).  This case involves a dispute over the proper calculation of long term disability benefits and the policy’s definition of “regular work week” and “Covered Monthly Earnings.”  Reliance determined the regular work week by looking at the payroll records which document bi-weekly compensation and the time cards completed weekly.  Reliance used the total hours Plaintiff worked during the 12 weeks preceding the onset of disability and excluded vacation, overtime pay bonuses and any special compensation.  “Applying the doctrine of contra preferentum, the Court concludes that the term ‘regular work week’ should be construed to mean the number of hours regularly scheduled in a week—in this case, 24 hours—and the Plaintiff’s benefit should be calculated by multiplying her regularly scheduled number of hours by the hourly pay rate.”  In construing the definitions of “includable compensation,” “regular rate of pay,” and “base rate of pay,” the court concluded that the $5/hour night shift differential was part of Plaintiff’s “Covered Monthly Earnings.”  Applying de novo review, the court granted Plaintiff’s motion for judgment on the administrative record.

Eleventh Circuit

Lesser, IV v. Reliance Standard Life Insurance Company, No. 1:18-CV-824-TWT, __F.Supp.3d__, 2019 WL 2416926 (N.D. Ga. June 4, 2019) (Judge Thomas W. Thrash, Jr.).  In this dispute over long term disability benefits, Plaintiff moved for judgment on the administrative record and Reliance moved for summary judgment.  The court found that FRCP 52(a)(1) provides the appropriate legal vehicle for adjudicating this case.  The court granted Plaintiff’s motion and made the following notable findings:  (1) Plaintiff bears the initial burden of establishing his entitlement to benefits and not Reliance’s burden of proving that the reversal of a claim approval was justified by some substantial change in the claimant’s condition; (2) Reliance’s decision was de novo wrong where Plaintiff’s subjective symptoms were supported by objective medical evidence, including the results of a psychomotor vigilance test, wrist actigraphy study, and Functional Capacity Evaluation; (3) a neuropsychological evaluation has limited usefulness where Plaintiff’s capacities were measured against those of the general population, not against those of other software engineers; (4) the IME performed by Dr. David Whitcomb was unhelpful in answering the question of whether Plaintiff can work as a software engineer because he expressly disclaims any opinion as to whether Plaintiff can work in his previous occupation and his statement that Plaintiff can work from purely a physical standpoint does not address Plaintiff’s cognitive abilities; (5) notes in the record that Plaintiff was “doing ok” tells the court little about Plaintiff’s condition and does not suggest improvement; and (6) sleep apnea, narcolepsy, and hypersomnolence are not interchangeable medical conditions so Plaintiff’s well-controlled sleep apnea does not undermine his disability claim.  “[T]he Court concludes that the Defendant’s determination was arbitrary and capricious for three reasons: (1) the Defendant incorrectly applied Plan standards; (2) the Defendant arbitrarily weighed and selectively read medical records to support its decision; and (3) the Defendant arbitrarily ignored substantial, relevant evidence of disability supplied by the Plaintiff.”  The court agreed with Plaintiff that the appropriate remedy is an award of benefits through the date of judgment.  This is despite that there is no evidence in the record that Plaintiff continues to suffer a disability.


Fifth Circuit

Jones v. Merchants & Farmers Bank of Holly Springs, Mississippi, et al., No. 3:18-CV-145-RP, 2019 WL 2425675 (N.D. Miss. June 10, 2019) (Magistrate Judge Roy Percy).  In this dispute over SERP benefits, the court granted in part and denied in part Plaintiff’s motion to conduct discovery based on its finding of sufficient indicia of a conflict of interest in this case.  Specifically, Gregory Taylor’s dual role as co-administrator of the plan and as president and CEO of the bank creates a conflict of interest.  Defendants argued that Mr. Taylor is a plan participant who would benefit from a broad interpretation of the plan in favor of participants, but as Plaintiff pointed out, Mr. Taylor would not benefit personally from adopting an interpretation of the plan advanced by Plaintiff.  “[T]he court will allow discovery of information regarding the structure of Mr. Taylor’s compensation, such as his employment contract and any performance bonuses. The plaintiff may obtain copies of these documents and may depose Mr. Taylor regarding these matters as well. The plaintiff may also depose Mr. Taylor and his co-administrator Kathy Ritts regarding any steps to mitigate the potential conflict and any efforts by Mr. Taylor to unduly influence the claim determination.”

ERISA Preemption

Third Circuit

Hunter v. Cellco P’ship, Inc., No. CV 18-1431, 2019 WL 2433732 (E.D. Pa. June 11, 2019) (Judge Jeffrey L. Schmehl).  The court found that Plaintiff’s state-law claims seeking payment of severance benefits are preempted by ERISA.  Plaintiff was a participant in the Verizon Severance Plan but not eligible for benefits under the Plan because he was terminated “for cause.”  Plaintiff alleges that he is not seeking Plan benefits, but severance benefits pursuant “to the alternative arrangements that Defendant has offered to other senior managers, but did not offer to Plaintiff.”  The court found that the Plan was the only severance plan for employees, and even if it was not, Plaintiff has not identified any other severance plan or explained why that plan would not also be governed by ERISA.  The court granted Defendant’s motion to dismiss the portion of the Complaint seeking severance benefits with prejudice.

Exhaustion of Administrative Remedies

Fifth Circuit

Jones v. Merchants & Farmers Bank of Holly Springs, Mississippi, et al., No. 3:18-CV-145-RP, 2019 WL 2425677 (N.D. Miss. June 10, 2019) (Magistrate Judge Roy Percy).  Plaintiff filed a breach of fiduciary duty claim essentially seeking an interpretation from the court about the amount of death benefits her beneficiaries would receive under the Split Dollar Agreement.  The court determined that “because the resolution of this claim rests upon an interpretation and application of the ERISA-regulated plan rather than upon an interpretation and application of ERISA, the claim is actually one for benefits and is subject to the exhaustion of remedies requirement.”  The court found that this was a claim for benefits masked as a breach of fiduciary duty claim.  The court dismissed this claim for failure to exhaust administrative remedies.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Metropolitan Life Insurance Company v. McDonald, No. 2:17-CV-11912, 2019 WL 2419659 (E.D. Mich. June 10, 2019) (Judge Laurie J. Michelson).  The court found that the Divorce Agreement clearly specifies the five items in § 1056(d)(3)(C) to be a QDRO.  First, it lists the decedent’s full name and the address of the marital home that was in the process of being sold but where he could be reached as of the time of the divorce.  Second, it lists the ex-wife’s full name and the address of the marital home.  Though it does not provide the addresses of the three contingent beneficiaries, this is not in dispute.  Third, it lists the ex-wife as the sole, primary beneficiary of the life insurance policy.  Fourth, because it is a life insurance policy and the ex-wife is the sole, primary beneficiary, by clear implication it provides “the number of payments.”  Lastly, the Divorce Agreement refers to the decedent’s General Motors Corporation life insurance policy.  This is enough even though decedent had several life insurance policies.  The life insurance benefits are properly payable to the ex-wife and not the current wife who was named as the beneficiary.  The court rejected the current wife’s argument that Florida law prevents divorcing spouses from agreeing to maintain one spouse as the primary beneficiary of the other’s life-insurance policy.  The court declined to place a constructive trust over a portion of the proceeds to reimburse the current wife for payment of the decedent’s funeral expenses, especially where she received proceeds from his other life insurance policies.

Medical Benefit Claims

Seventh Circuit

Deiwert, Jr. v. Cigna Insurance, No. 118CV01933JRSDLP, 2019 WL 2422578 (S.D. Ind. June 10, 2019) (Judge James R. Sweeney II).  Plaintiff sued Cigna, the claims-paying administrator of the FedEx health plan, for failure to pay for one of his wife’s medical procedures.  The court granted Cigna’s unopposed motion for judgment on the pleadings.  The court found that Plaintiff’s claim fails because his state-law, breach-of-contract claim is preempted by ERISA; Plaintiff can only sue the Plan, not Cigna; and Plaintiff did not exhaust his administrative remedies.  The court dismissed the claims against Cigna with prejudice.

Pension Benefit Claims

Fifth Circuit

Jones v. Merchants & Farmers Bank of Holly Springs, Civil Action No. 3:18-CV-145-RP (N.D. Miss. Jun. 10, 2019) (Magistrate Judge Roy Percy).  This case concerns a dispute over SERP benefits.  The court denied Plaintiff’s request to include certain documents that are not contained in the administrative record filed by Defendants, including Plaintiff’s mediation brief and documents between counsel regarding the possible settlement of Plaintiff’s claims.  The court found that there is very little, if any, information bearing on the two main issues in this case that is not already contained in the documents comprising the administrative record.  “Of greater concern to the court, however, is the chilling effect that granting the plaintiff’s request would have on settlement negotiations in future ERISA disputes.”  There is no authority holding that settlement communications are part of the administrative record in ERISA litigation.

Sixth Circuit

Chaborek v. Ford Component Sales LLC, No. 2:18-CV-12763-TGB, 2019 WL 2410718 (E.D. Mich. June 7, 2019) (Judge Terrence G. Berg).  Former employee claimed entitlement to the cash bonus part of a profit-sharing plan.  The Plan provides that if employment is terminated for any reason other than Company-approved retirement, disability or death prior to the payment then a participant is not eligible for the award.  Here, Plaintiff was terminated as a “voluntary quit” when she did not return to work upon the expiration of her FMLA leave.  Nonetheless, Defendant sent Plaintiff a letter stating she could receive the award if she agreed to sign a waiver and release agreement releasing any claims related to her employment or termination.  She did not.  The court found that Defendant’s written notice of the denial of benefits violated 29 U.S.C. § 1133 because it did not state that Plaintiff was no longer eligible for the award due to her separation of employment nor did it give her an opportunity to appeal the determination.  However, a remand to the administrator to comply with the statutory provisions, which is ordinarily the remedy, would be futile because Defendant’s decision not to award Plaintiff a benefit under the Plan was consistent with the only plausible reading of the Plan terms.   The court found that Defendant did not act arbitrarily and capriciously when it denied Plaintiff’s benefit since she was not on Company-approved disability and was terminated prior to the payment of the award.  Lastly, the court found that ERISA preempts state law breach-of-contract remedies.

Tenth Circuit

In re: Indian Jewelers Supply Co., Inc., Debtor., No. 17-11874 T11, 2019 WL 2406936 (Bankr. D.N.M. June 6, 2019) (Judge David T. Thuma).  “Three former employees filed claims based on the debtor’s defunct [ESOP]. Debtor objected to the claims, arguing that the claimants were stockholders, not creditors, because the ESOP held debtor’s stock in trust for them. As a general matter, the Court agrees with the proposition that employees of a corporation with an ESOP are equity security holders to the extent of their vested ESOP interests. On the other hand, the Court finds and concludes that former employees of the corporation, who were or should have been ‘cashed out’ of their ESOP interest years before, are creditors rather than stockholders. As the three claims at issue fall in the latter category, the Court will overrule the objections.”

Pleading Issues & Procedure

Second Circuit

Brundage v. Pension Associates Retirement Planning, LLC, No. 18-CV-2473 (NSR), 2019 WL 2465146 (S.D.N.Y. June 13, 2019) (Judge Nelson S. Roman).  In this matter where the pro se plaintiffs allege that Morgan Stanley breached its fiduciary duty under ERISA and that Pension Associates violated ERISA by failing to provide documents, the court granted Defendant Morgan Stanley’s motion to compel arbitration and stay this proceeding.  The court found that Plaintiffs entered into a valid arbitration agreement with Morgan Stanley that was neither procedurally nor substantively unconscionable.

Seventh Circuit

Vega Asset Recovery, LLC v. Newedge USA, LLC, No. 17 C 1332, 2019 WL 2409602 (N.D. Ill. June 7, 2019) (Judge Jorge Alonso).  The court declined to vacate the arbitration award of FINRA on the grounds that the Panel ignored the law or, alternatively, did not rule on the ERISA and/or IRA claims.  The court found that the parties extensively addressed the ERISA and IRA claims throughout the arbitration proceedings and “an arbitrator is not obligated to discuss every issue, many arbitrations end with an award saying who won but without providing reasons.”

Ninth Circuit

Loftus, Jr., v. AT&T, Inc., No. 218CV2866TLNDBPS, 2019 WL 2410667 (E.D. Cal. June 7, 2019) (Judge Magistrate Judge Deborah Barnes).  The court ruled that the pro se plaintiff’s complaint must be dismissed for failure to allege enough facts to state a claim to relief that is plausible on its face. “[T]he only allegations found in plaintiff’s complaint read ‘Denial of retirement benefits of $2700 for 2018 plus $500 for breach of agreement and pain and suffering.’”  This does not give Defendant fair notice of the claims.  Plaintiff has leave to amend the complaint and must allege facts that state the elements of each claim plainly and succinctly.  Fed. R. Civ. P. 8(a)(2).

Severance Benefit Claims

Tenth Circuit

Manna v. Phillips 66 Company, No. 16-CV-500-TCK-FHM, 2019 WL 2435676 (N.D. Okla. June 11, 2019) (Judge Terence C. Kern).  “Under the express terms of the Plan, Plaintiff was entitled to benefits only if he had received written Notice of Layoff and had not been discharged for cause. Plaintiff met neither requirement. Accordingly, he was not entitled to severance benefits.”

Statutory Penalties

Fifth Circuit

Jones v. Merchants & Farmers Bank of Holly Springs, Mississippi, et al., No. 3:18-CV-145-RP, 2019 WL 2425677 (N.D. Miss. June 10, 2019) (Magistrate Judge Roy Percy).  Plaintiff alleged that Defendants violated ERISA by failing to provide her with copies of the Split Dollar Agreement documents, the 2001 SERP documents, and the 2012 restated SERP documents.  The court found that because Plaintiff did not allege that she made a written request for these documents, she is not entitled to penalties under 29 U.S.C. § 1024(b)(4).  The court rejected the argument that ERISA’s fiduciary duty provisions impose disclosure obligations above and beyond the specific obligations set forth in the disclosure provisions.

Withdrawal Liability & Unpaid Contributions

Fourth Circuit

Board of Trustees, Sheet Metal Workers’ National Pension Fund, et al., v. Aidronic Test & Balance, Inc., No. 1:19CV88, 2019 WL 2425670 (E.D. Va. June 10, 2019) (Judge T.S. Ellis, III).  “The Clerk of the Court is directed to enter Rule 58 judgment against defendant and in favor of plaintiffs in the amount of $22,293.75, which consists of $13,316.41 in delinquent contributions, $2,663.30 in liquidated damages, $708.37 in prejudgment interest, $134.91 in late fees, $4,796.59 in attorney’s fees, and $647.17 in attorney’s costs.”

Ninth Circuit

Lehman v. Nelson, No. 18-35321,__F.App’x__, 2019 WL 2451090 (9th Cir. June 12, 2019) (Before: KLEINFELD and FRIEDLAND, Circuit Judges, and EZRA,* District Judge).  The court affirmed the district court’s determination that Amendment 24 to the Pacific Coast Fund Pension Plan, which requires the transfer of all employer contributions received on behalf of travelers in the electrical construction industry who work in the jurisdictions of other local union pension funds, violates the plain language of section 5.04 in Article 5 of the Plan.


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