Retired steelworkers and their families have something to be thankful for this week. And no, it’s not turkey. This week’s notable decision is Stone v. Signode Industrial Group LLC, No. 19-1601, __ F.3d __, 2019 WL 6139680 (7th Cir. Nov. 20, 2019), where the Seventh Circuit held that Signode Industrial Group LLC’s successors were obligated to continue to provide benefits to retirees even after the employer’s termination of the underlying collective bargaining agreement.
Defendant Signode was the sponsor of a health care benefit plan for retired steelworkers, the terms of which it had negotiated with a union. Defendant terminated the underlying benefits agreement and ceased paying benefits to the retirees and their families. Plaintiffs initiated a class action under both ERISA and the Labor-Management Relations Act contending that benefits under the plan were vested and thus could not be terminated. On cross-motions for summary judgment, the district court (Judge Thomas M. Durkin, N.D. Ill.) granted Plaintiffs’ motion and denied Defendants’ motion, holding that Defendant did not have the right to terminate benefits. The district court entered a permanent injunction against Defendants, who appealed.
The Seventh Circuit affirmed. The court noted that while ERISA does not require that welfare benefits be vested, such benefits may be vested if the contract providing the benefits contains vesting language. The court further found that the plan’s language “unambiguously provided retirees with vested lifetime health-care benefits.” Specifically, the plan stated that covered individuals “shall not have such coverage terminated or reduced (except as provided in this Program) … notwithstanding the expiration of this Agreement, except as the Company and the Union may agree otherwise” (emphasis added). This language “made clear that the promised health-care benefits vested, i.e., they would survive the termination of the underlying agreement.” Defendants contended that another plan provision constituted an exception to the vesting language, but the court rejected this argument, finding that the cited provision only applied to the underlying health insurance agreement, not to the plan’s overriding promise of continued coverage.
Finally, the court found that even if the plan was ambiguous regarding vesting, extrinsic evidence in the form of industry usage and the behavior of the parties showed that the benefits were intended to be vested. In doing so, the court relied on other agreements in the steel industry as interpreted by the Fourth and Eleventh Circuits, and on statements made by a benefits program administrator for Defendants who helped to negotiate the terms of the plan with the union.
This week’s notable decision summary was prepared by Kantor & Kantor attorney, Peter Sessions.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Cluck v. MetroCare Services – Austin, L.P., No. 19-50327, __ F. Appx. __, 2019 WL 6217823 (5th Cir. Nov. 20, 2019) (Before King, Graves, Willett). Plaintiff brought a suit for benefits under ERISA, among other claims. The district court granted partial summary judgment to Defendant on her ERISA claims and remanded the remaining claims to state court. Defendant then moved for an award of attorney’s fees under ERISA, which a magistrate judge granted. On review, the district court limited the award against Plaintiff only, and not against her attorneys. On appeal, Plaintiff argued that the award should be reversed because (1) Defendant was no longer in business, and (2) the district court did not consider her financial circumstances. The Fifth Circuit rejected these arguments and affirmed in a per curiam decision. In doing so, the court first found that in obtaining partial summary judgment Defendant had achieved “some success on the merits” under Hardt v. Reliance Standard Life Ins. Co. The court then cited Texas law which provides that terminated business entities continue to survive for the purpose of litigation, and further stated, “in the ERISA context, a district court ‘is not required’ to consider ‘the ability of the opposing parties to satisfy an award of attorneys’ fees.’”
Charles W., et al. v. Regence BlueCross BlueShield of Oregon, No. 2:17-CV-00824-TC, 2019 WL 6220060 (D. Utah Nov. 21, 2019) (Judge Tena Campbell). After the court granted Plaintiffs’ motion for summary judgment due to the denial of certain insurance benefits (see Charles W. v. Regence BlueCross BlueShield of Oregon, Case No. 2:17-cv-00824-TC, 2019 WL 4736932 (D. Utah Sept. 27, 2019)), Plaintiffs requested 10% prejudgment interest on the benefits awarded, $400.00 in costs, and $70,498.00 in attorney’s fees. Defendant did not challenge the award of costs, but did challenge the requests for prejudgment interest and attorney’s fees. Defendant asserted that Utah Code § 15-1-1 which authorizes 10% interest did not apply to insurance contracts. The court disagreed and awarded 10% in interest because 1) section 15-1-1 was amended so it applied to all contracts; 2) even prior to the amendments, the section was incorporated into the Utah Ins. Code and as such applied to insurance contracts; and 3) it was more common in the district to apply the 10% interest rate. The court also awarded attorney’s fees to Plaintiffs because, even though the court agreed that Defendant did not act in bad faith, it was still culpable for wrongfully denying Plaintiffs’ claim, and furthermore, although the court reviewed the denial de novo, it also found that the decision was “entirely arbitrary” and warned that “the most logical explanation for Regence’s decision is simple impatience.” The court did reduce the hourly fee from $600 to $400 because in 2008, the court found $300 to be a reasonable rate for Plaintiffs’ attorney, and doubling that fee in 11 years was unreasonable. Defendant also pointed out a recent case that found $396 per hour to be reasonable. Defendant did not challenge the rates of the other attorney and the legal assistant on the case, or the number of hours expended, and the court awarded the reduced amount of $60,105.00.
Foust v. Lincoln Nat’l Life Ins. Co., No. 2:17-CV-01208-TC, 2019 WL 6223822 (D. Utah Nov. 21, 2019) (Judge Tena Campbell). After the court granted Plaintiff’s motion for summary judgment due to the denial of certain insurance benefits (see Foust v. Lincoln Nat’l Ins. Co., Case No. 2:17-cv-01208-TC, 2019 WL 4645416 (D. Utah Sept. 24, 2019)), Plaintiff requested 10% prejudgment interest on the benefits awarded, $400.00 in costs, and $117,647.00 in attorney’s fees. Lincoln did not challenge the rate of prejudgment interest or the award of costs. The sole disputed matter was the request for attorney’s fees. The court elected to award fees to Plaintiff, after finding that three of the five factors established by the Tenth Circuit weighed in favor of awarding fees. First, although Defendant did not act in bad faith, it was still culpable for wrongfully denying Plaintiff’s claim. Second, Defendant did not provide any evidence that it could not pay fees, but, because Plaintiff did not advance evidence that Defendant could, the court deemed this factor to be neutral. Third, the award was likely to provide some deterrent effect. The fourth factor weighed in favor of Defendant because the suit was not brought to favor all participants or beneficiaries, and did not resolve any unique legal issues. But the fifth factor favored Plaintiff because even though he did not prevail on every aspect of his claim, on the whole his position was more meritorious. The court did reduce the hourly fee from $600 to $400 because in 2008, the court found $300 to be a reasonable rate for Plaintiff’s attorney, and doubling that fee in 11 years was unreasonable. Defendant also pointed out a recent case that found $396 per hour to be reasonable. The court did not reduce the $290 per hour rate of the associate, but did reduce the rate of legal assistant from $140 to $125 per hour, with which Plaintiff agreed. The court also reduced the hours claimed for the work performed during the administrative process. In sum, the court awarded $59,665.50 in attorney’s fees.
Breach of Fiduciary Duty
Sloan v. Life Ins. Co. of N. Am., No. 18-3055, 2019 WL 6173410, (D. Md. Nov. 20, 2019) (Chief Magistrate Judge Beth Gesner). In this dispute over whether LINA and/or Employer PRA failed to provide conversation rights and thus benefits under a life insurance policy, Plaintiff filed for Leave to Amend to File a Second Amended complaint in order to supplement the benefit claim under 502(a)(1)(B) with a breach of fiduciary duty claim against PRA under §502(a)(3) for failing to provide conversion rights. PRA opposed the amendment as futile, stating that such a claim will not survive a motion to dismiss as it “impermissibly recasts an individual claim for benefits as a fiduciary breach.” However, the court found that this case was distinguishable from the Supreme Court and Fourth Circuit precedent forbidding such a practice because plaintiff alleged two distinct theories of recovery. “The first theory, brought under § 502(a)(1)(B), is that LINA wrongfully denied the benefits plaintiff was entitled to under the Plan. The second theory, plaintiff’s proposed claim under § 502(a)(3), is that PRA breached its fiduciary duty as the Plan administrator to provide Ms. Sloan with required information regarding her life insurance coverage.” Consequently, the court concluded that “it is clear plaintiff’s breach of fiduciary duty claim is not a ‘repackaging’ of plaintiff’s denial of benefits claim.”
Larson, et.al., v. Allina Health System et. al., No. 17CV03835SRNTNL, 2019 WL 6208648 (D. Minn. Nov. 21, 2019) (Judge Susan R. Nelson). In this dispute involving alleged violations of ERISA with respect to 403(b) and 401(k) Retirement Savings Plans, the court conditionally certified the class, approved the named Plaintiffs and class counsel (Kessler Topaz Meltzer & Check LLP, Bailey & Glasser LLP, Izard Kindall & Raabe LLP, and Nichols Kaster, PLLP), and preliminarily approved the proposed settlement agreement of the parties which involves a payment of $2,425,000 for the Class.
Disability Benefit Claims
Sexton v. Ohio Valley Electronic Corp., et al., No. 1:18-cv-00035, 2019 WL 6242968 (M.D. Tenn. Nov. 22, 2019) (Judge William L. Campbell, Jr.). The court reviewed and adopted a report and recommendation in which the Magistrate Judge concluded the decision to deny Plaintiff long-term disability benefits was not arbitrary and capricious. Following 28 U.S.C. § 636(b)(1) and a local rule, the court only reviewed portions of the report to which a specific objection was made. The court upheld the Magistrate Judge’s conclusion that a spinal fusion surgery, treatment provider findings, and a video of Plaintiff answering a series of questions at his attorney’s office did not constitute objective evidence. Plaintiff had argued that, if video surveillance of claimants by insurance carriers is considered as probative evidence, his video should be considered as objective evidence of his medical condition. In a footnote, the court noted the difference between nonconsensual video surveillance and an interview-style video was not at issue in this case. The court also rejected Plaintiff’s argument regarding the significance of the failure to order an in-person IME because the Administrator scheduled such an exam and Plaintiff canceled the exam. The court adopted the Administrator’s vocational findings because Plaintiff offered no countervailing evidence.
Wehner v. Standard Ins. Co., No. 2:18-CV-982, 2019 WL 6052639 (S.D. Ohio Nov. 15, 2019) (Judge Edmund Sargus Jr.). The court held that Defendant’s denial of Plaintiff’s claim for LTD benefits was not arbitrary and capricious. Plaintiff claimed totally disability from his own occupation due to back, legs, and spine pain, headaches resulting from a hypoxic event, ulcerative colitis, and side effects from narcotic pain medications. Plaintiff provided evidence including medical records, supporting doctors’ letters, and results of a functional capacity evaluation (FCE). Defendant’s denial relied on two independent medical evaluators’ file reviews and consideration of Plaintiff’s Facebook which showed that Plaintiff was able to go fishing and participate in home construction projects. The court determined it was not arbitrary and capricious for Defendant to rely on paper file reviews without in-person examinations because the file reviews provided sufficient explanations and relied on robust objective evidence such as MRIs and EMG. The court also found that Defendant’s reliance on Facebook activities was not arbitrary and capricious in this case because the Facebook posts documented numerous instances of activities that were inconsistent with Plaintiff’s reported pain, not just a single event, and Defendant had also relied on other objective evidence. The court found that the medical file reviewers had adequately explained their reasoning for disagreeing with the FCE. The court also noted that Plaintiff could not argue for partial disability benefits in litigation when Plaintiff had explicitly claimed total disability in the administrative process. The court thus denied Plaintiff’s motion for judgment on the administrative record. The court then considered and granted Plaintiff’s motion to dismiss its second count in which Plaintiff had alleged that Defendant terminated Plaintiff’s insurance coverage retroactively and without following proper claims procedures. The court rejected Defendant’s argument that it would suffer legal prejudice resulting from effort and expense in preparing for trial because this was an ERISA case limited to the administrative record without any discovery, so litigation expenses were not exorbitant. The court also rejected Defendant’s argument that Plaintiff excessively delayed seeking dismissal given that litigation had begun less than two years prior, and the court agreed that Plaintiff’s explanation that it had not yet exhausted administrative remedies for this second count was sufficient for requesting dismissal.
Alves v. Hewlett-Packard Enterprise Co., No. 18-55819, __F.App’x__, 2019 WL 6133800 (9th Cir. Nov. 19, 2019) (Before Smith, Miller, and Collins, Circuit Judges). Plaintiff, a former technology consultant, claimed an inability to perform his sedentary job due to congestive heart failure. The Plan Administrator, Sedgwick, terminated his short term disability benefits and denied his long term disability benefits. The court held the termination of STD benefits was not an abuse of discretion. However, it vacated the district court’s judgment regarding LTD benefits because Sedgwick abused its discretion in denying Plaintiff’s appeal on the ground that he failed to meet the one-week “waiting period” provided in the Plan, even though Plaintiff, who validly received STD benefits for several months, clearly met the requirement.
Benson v. Hartford Life & Accident Ins. Co., No. 18-14835, __F.App’x__, 2019 WL 6245753 (11th Cir. Nov. 22, 2019) (Before Jill Pryor, Grant and Anderson, Circuit Judges.) In this appeal, Plaintiff challenged the district court’s grant of summary judgment in favor of Hartford, which affirmed Hartford’s decision to deny Benson long-term disability benefits under a de novo standard of review. In affirming the district court’s decision, the Court of Appeals based its conclusion on 1) the substance of Plaintiff’s claim for both short-term and long-term disability benefits, 2) the contemporaneous treatment notes from Benson’s physicians, and 3) the ability of Benson to perform the essential duties of his job. Specifically, the court noted that his claims “paint[ed] a conflicting picture of his alleged disability,” as his initial justification for disability based on knee replacement surgery presented a stark contrast to the justification presented to the court of polymyalgia rheumatica (“PMR”). The court also noted that none of the medical records during the elimination period discuss disability; in fact, the only complaint noted from Plaintiff’s primary physician was increased fatigue and early-morning stiffness of only fifteen to twenty minutes. Other records shared similar deficiencies. Finally, the court noted that Plaintiff’s own physician said Plaintiff had limitations which, if compared to Plaintiff’s job description, still allowed him to perform his occupation on a full-time basis.
Robert L., Hillary L. & C.L. v. CIGNA Health & Life Ins. Co., No. 2:18-CV-976 RJS DBP, 2019 WL 6220062 (D. Utah Nov. 21, 2019) (Magistrate Judge Dustin Pead). CIGNA filed a motion with Magistrate Judge Dustin Pead seeking to forbid supplemental discovery about whether or not the health insurance policy in question in this case violates the Mental Health Parity and Addiction Equity Act (Parity Act) for unequal coverage of mental health benefits. CIGNA argued that because a motion for partial summary judgment on the Parity Act claims was currently before District Court Judge Robert Shelby, it should not have to answer the supplemental discovery. Magistrate Judge Pead found that the supplemental discovery was not a fishing expedition and would be critical to Plaintiffs’ case if the summary judgment motion was denied. Defendants’ motion to forbid answering the discovery requests was denied; instead, production of the requests was stayed pending a decision on Defendants’ motion for partial summary judgment.
Crescent City Surgical Center v. United Healthcare of LA., Inc., No. CV 19-12586, 2019 WL 6112706 (E.D. La. Nov. 18, 2019) (Judge Mary Ann Vial Lemmon). Defendant had removed this matter to federal court claiming ERISA pre-emption, however the court granted Plaintiff’s motion to remand the matter to state court, determining that the claims did not arise under ERISA. Defendant argued that Plaintiff (a hospital) was suing in a derivative capacity on individual claims of patients and determination of coverage was an ERISA-based dispute. However, Plaintiff’s explicitly restricted its state court petition to state law claims based on an alleged breach of Defendant’s obligation to pay Plaintiff per their contract and explicitly disavowed bringing any ERISA-based derivative claims on behalf of patients. The court determined that the analysis should focus what claims Plaintiffs chose to assert, not claims it could have brought. The court determined that the claims based on a contract between a hospital and health insurer were not pre-empted by ERISA.
GVB, MD v. Aetna Health, Inc., 19-22357-Civ-Moreno, 2019 WL 6130825 (S.D. Fla. November 19, 2019) (Judge Federico A. Moreno). The court ruled in favor of Defendant, granting its motion to dismiss, holding that Plaintiff, Miami Back and Neck Specialists, did not plausibly allege breach of contract under Florida law. The court instead found that the claim sought payment for benefits under health insurance plans governed by ERISA and granted Defendant’s motion to dismiss on the basis of preemption.
Life Insurance & AD&D Benefit Claims
Festini-Steele v. ExxonMobil Corporation, No. 18-cv-01342, 2019 WL 6242809 (D. Col. Nov. 22, 2019) (Judge Raymond P. Moore). The court accepted and adopted the Magistrate Judge’s recommendation to deny Plaintiff’s request for judgment on the pleadings. The case involves the determination of whether a separation agreement contained sufficient information to meet the requirements of a QDRO. The court found the separation agreement did meet the requirements of a QDRO because it did not specify the amount of insurance or the name of the benefit plan under which the insurance was to be carried. The court noted the language of the order, and not the subjective intent of the parties, is controlling.
Medical Benefit Claims
Stone v. Signode Industrial Group LLC, No. 19-1601, __ F.3d __, 2019 WL 6139680 (7th Cir. Nov. 20, 2019) (Before Sykes, Hamilton, and Brennan, Circuit Judges). See Notable Decision summary.
Jacqueline A. v. Motion Picture Industry Health Plan, No. 18-56187, 2019 WL 6242668 (9th Cir. Nov. 21, 2019) (Before: Murguia and Hurwitz, Circuit Judges, and Zouhary, District Judge.) The court affirmed the district court’s determination that the Plan did not abuse its discretion when it denied several of Plaintiff’s mental health treatment claims. Optun always authorized treatment, just at a less intensive level of care sought by Plaintiff.
Pension Benefit Claims
Pension Benefit Guaranty Corporation v. 20 SE 3RD ST LLC, et al., No. 18-CV-81009, 2019 WL 6250804 (S.D. Fla. Nov. 22, 2019) (Judge Robin L. Rosenberg). The PBGC argued that ERISA imposes pension plan termination liability on the Defendant companies owned by Joseph Wortley on the day the Liberty Lighting pension plan (for which Wortley was an owner) was terminated in 2012. It is undisputed that the contributing sponsor of the pension plan in this case was historically Liberty Lighting Company, Inc. The court determined that Liberty Lighting was the contributing sponsor of the pension plan on the date of plan termination, and granted summary judgment to the PBGC on this basis. The court also found that Wortley’s personal bankruptcy did not destroy his stock in Liberty Lighting and that it was returned to him at the conclusion of his bankruptcy. Further, the court found that the “Controlled Group” defendants that were under common ownership with Wortley at the time of plan termination are liable for the pension plan termination.
Worlitz v. Board of Trustees, District #9, et al., No. 4:18 CV 1974 CDP, 2019 WL 6170823 (E.D. Mo. Nov. 20, 2019) (Judge Catherine D. Perry). Plaintiff sustained an injury at work which was covered by workers’ compensation. While his claim was pending, he left employment with Seeger Toyota and went to work for a different employer who also was a participant in the Trust (a self-funded multiemployer welfare benefit plan). Plaintiff was terminated because his injury prevented him from working. Plaintiff then sought medical and disability benefits from the Trust, and requested subrogation and reimbursement for his negligence claim against a third party. The court granted Defendants’ motion for summary judgment, finding that 1) the subrogation and reimbursement provision specifically excluded work-related injuries, and 2) under the terms of the Trust, Plaintiff ceased to be a covered employee after he was terminated from his last job.
Pleading Issues & Procedure
Court of Federal Claims
Rodenbeck v. United States, No. 19-758C, 2019 WL 6002106 (Fed. Cl. Nov. 13, 2019) (Judge Lydia Kay Griggsby). Plaintiff, proceeding pro se, filed suit in the United States Court of Federal Claims against the United States and Greater Georgia Life Insurance Company seeking damages under ERISA based on the denial of his claim for long term disability benefits. The United States moved to dismiss on jurisdictional grounds. The court granted the motion, ruling first that the Court of Federal Claims does not have subject matter jurisdiction to consider claims against parties other than the United States, and thus Greater Georgia Life Insurance Party was not a proper party. Second, the court ruled that it also could not consider Plaintiff’s claims against the United States because ERISA claims fall within the exclusive jurisdiction of the federal district courts. As a result, the court dismissed the entire action.
Powell, et al. v. Ocwen Fin. Corp., et al., No. 18-cv-01951, 2019 WL 6210810 (S.D.N.Y. Nov. 21, 2019) (Mag. Judge Stewart D. Aaron). The court granted Plaintiff Trustees of The United Food & Commercial Workers Union & Employers Midwest Pension Fund’s (“UFCW Plan”) motion for leave to file a second amended complaint under FRCP Rule 15(a) and the factors—undue delay, bad faith, futility of amendment, or undue prejudice—articulated in Foman v. Davis, 371 U.S. 178 (1962). In March 2019, Defendants Ocwen Financial Corporation (“Ocwen”), et al.’s motion to dismiss Plaintiffs’ claims for breach of fiduciary duty and prohibited transactions was granted in part and denied in part with the motion to dismiss as two issues—(1) whether the underlying residential mortgages underlying two trusts in which Plaintiffs’ benefit plan were invested were “plan assets” and (2) whether Ocwen qualifies as a fiduciary of the UFCW Plan. The parties engaged in limited discovery as to these two issues as ordered by the Court when, in September 2019, Plaintiffs concluded that they owned two certificates in pooling and servicing agreement trusts and an indenture trust (“Additional Trusts”) for which Ocwen acted as a servicer for some or all of the securitized mortgages. Plaintiffs reached out to Defendants seeking to amend their complaint with these new allegations and Defendants opposed. The Court held that Plaintiffs had sufficiently acted without undue delay, dilatory motive, prejudice or futility with respect to the motion to amend the complaint because Plaintiffs’ belated discovery of the Additional Trusts was precipitated by the scattered, complex and difficult-to-obtain nature of the information Plaintiffs needed to acquire—mainly, the identity of servicers for mortgages held in other securitization trusts from public sources. The Court found no bad faith or dilatory motive in the above explanation and noted that there was limited prejudice to Defendants in the form of insubstantial increased discovery costs. The Court also found that the amendment would not be futile as a matter of law because no-action clauses, found in the Additional Trusts, were prior held as to other UFCW Plan trusts not to bar Plaintiffs’ claims.
Peter E. and Eric E. v. United Healthcare Services, Inc. et al, No. 2:17-CV-00435-DN, 2019 WL 6118422 (D. Utah Nov. 18, 2019) (Judge David Nuffer). The court denied defendants’ motion to dismiss plaintiffs’ second amended complaint in which plaintiffs allege violation of the Mental Health Parity and Addiction Equity Act (“Parity Act”). The court found plaintiffs sufficiently state a plausible claim for an “as-applied violation of the Parity Act.” The plaintiffs allege that UBH differentially evaluates the medical necessity of treatment at mental health facilities and the medical necessity of treatment at analogous medical/surgical facilities. The plaintiffs also allege the Plan differentially evaluates intermediate level treatment claims by applying generally accepted standards of medical practice to medical/surgical determinations while applying criteria deviating from generally accepted standards in mental health coverage determinations. Therefore, the court deemed that the plaintiffs have identified medical or surgical treatments that are analogous to the mental health or substance treatment plaintiff received and allege facts showing there is a disparity in limitation criteria.
Shah v. Chevron USA, Inc., No. 18-20817, __ F. Appx. __, 2019 WL 6271452 (5th Cir. Nov. 22, 2019) (Before Clement, Elrod, and Duncan, Circuit Judges). Plaintiff sued Chevron under 29 U.S.C. § 1140, which prohibits employers from terminating employees in order to prevent them from receiving benefits under ERISA-governed benefit plans. Chevron filed a motion for summary judgment, which was granted by the district court. Plaintiff appealed. On appeal, the Fifth Circuit affirmed. The court assumed that Plaintiff had presented an adequate prima facie case that discriminatory intent had been a factor in his discharge. The court also noted that the plaintiff had not contested the district court’s conclusion that Chevron had satisfied its burden of showing that his poor job performance was a legitimate, non-discriminatory reason for his termination. Thus, the only question before the court was whether there was “sufficient evidence to create a genuine factual dispute about whether Chevron’s proffered reason for firing [Plaintiff] is pretextual.” The court found that there was no such genuine dispute. Specifically, the court found that the person who fired Plaintiff was not aware of the timing of the benefits at issue, or the funding source of those benefits. The court also found that Plaintiff’s job performance was an issue prior to his supervisor’s awareness of the cost-reduction program that resulted in his termination. The court also rejected Plaintiff’s argument that discrimination was evident from the fact that his predecessor, who had also received negative reviews, was allowed to move to another position. The court noted that the nature of the job had changed to reflect a more demanding role and higher expectations, which Plaintiff had not met.
Standard of Review
Eric P. v. Directors Guild of Am., No. 19-CV-00361-WHO, __F.Supp.3d__, 2019 WL 6134925 (N.D. Cal. Nov. 19, 2019) (Judge William H. Orrick). The court denied Plaintiff’s motion seeking de novo review of the Defendant’s decision to deny coverage for residential mental health treatment. The court found the Plan documents expressly contemplate the transfer of full discretionary authority to the Benefits Committee. Although the Benefits Committee delayed determination of the appeal by three months, the court found that this was only a technical violation of ERISA and Plaintiff did not identify harm from the delay. The court concluded that an abuse of discretion standard applied because the grant of discretion to the Benefits Committee is clear and unambiguous and the delay in decision-making did not cause Plaintiff substantive harm. Thus, the court will utilize the abuse of discretion standard in this case.
Withdrawal Liability & Unpaid Contributions
Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Indus. Pension Fund, et al., No. 16-1376, __F.3d__, 2019 WL 6243370 (1st Cir. Nov. 22, 2019) (Before Lynch, Stahl, and Lipez, Circuit Judges). The issue on appeal is whether two private equity funds, Sun Capital Partners III, LP (“Sun Fund III”) and Sun Capital Partners IV, LP (“Sun Fund IV”), are liable for $4,516,539 in pension fund withdrawal liability owed by a brass manufacturing company which was owned by the two Sun Funds when that company went bankrupt. Liability is governed by the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”) and turns on whether the two Funds had created, despite their corporate structure an implied partnership-in-fact which constituted a control group. The district court held that there was an implied partnership-in-fact which constituted a control group. After a long recitation of the corporate structures of the Funds and their respective relationships to the defunct brass manufacturing company, the Court applied the multifactored partnership test in Luna v. Commissioner, 42 T.C. 1067 (1964), to determine if the Funds had created an implied partnership-in-fact thus creating withdrawal liability extending to the Funds. After addressing the specific Luna factors that the district court looked at, Circuit Judge Lynch highlighted all of the Luna factors that counseled against recognizing a partnership-in-fact: (1) the Funds expressly disclaimed any sort of partnership between the Funds; (2) most of the persons or entities who were limited partners in one fund were not limited partners in the other fund; (3) the Funds did not operate in parallel; (4) the Funds’ creation of an LLC with which to acquire the manufacturing company showed an intent not to form a partnership; and (5) the Funds organized themselves as limited liability business organization under state law. The Court concluded that the Luna factors when applied here pointed away from finding common control. The Court felt comfortable reaching this conclusion in not finding liability for these private investment Funds because with congressional intent or PBGC guidance the imposition of withdrawal liability on private investors may negatively impact ERISA and the MPPAA’s principal aims—to ensure the viability of existing pension funds and to encourage the private sector to invest in struggling companies with pension plans.
Goodwin v. Hawker Dayton Corporation, et al., No. 19CIV4284LGSGWG, 2019 WL 6223955 (S.D.N.Y. Nov. 22, 2019) (Magistrate Judge Gabriel W. Gorenstein). In this report and recommendation, the court found that Plaintiff should be awarded $247,339 in withdrawal liability, $14,681 in attorneys’ fees and costs, and interest at a rate of $162.63 per day accruing from March 1, 2018, to the date judgment is entered.
Electrical Construction Industry Prefunding Credit Reimbursement Plan, et al. v. Coates Electric, LLC, No. 19-CV-647-PP, 2019 WL 6069283 (E.D. Wis. Nov. 15, 2019) (Judge Pamela Pepper). In this lawsuit seeking unpaid contributions, the court granted Plaintiffs’ motion for default judgment and awarded a total of $583,027.67 in unpaid contributions, liquidated damages, and attorney’s fees and costs.
Teamsters Local Union No. 727 Pension Fund v. Capital Parking, LLC, No. 19 C 873, 2019 WL 6210955 (N.D. Ill Nov. 21, 2019) (Judge Gary Feinerman). Defendants, sued in their individual capacity for unpaid required contributions, moved to dismiss the lawsuit. The complaint alleges the individuals were owners of several companies that make up a valet parking enterprise and failed to follow corporate formalities. The court found the complaint alleges sufficient facts to state a claim and denied the motion to dismiss.
Operating Engineers Local No. 101, Pension Fund, et al. v. McClan Construction, LLC, No. 4:19-CV-467-DGK, 2019 WL 6138423 (W.D. Mo. Nov. 19, 2019) (Judge Greg Kays). The court granted Plaintiffs’ motion for default judgment and found in favor of Plaintiffs as to liability. “For the period from January 2015 to June 2018, Defendant is liable in the amount of $54,595.62, which includes $17,182.60 for the balance of the settlement agreement, $34,893.77 in unpaid delinquent contributions, and $2,519.25 in fees and costs.”
Operating Engineers Health and Welfare Trust Fund for Northern California, et al. v. JS Taylor Construction, Inc., et al., No. 17-CV-00896-EMC, 2019 WL 6117478 (N.D. Cal. Nov. 18, 2019) (Judge Edward M. Chen). The court denied Defendants’ motion for summary judgment and awarded $16,785.06 in liquidated damages associated with contributions that were late but paid prior to the filing of this lawsuit; $39,298.313 in liquidated damages associated with contributions that were unpaid at the time the lawsuit was filed; $65,075.74 in liquidated damages associated with contributions that came due but were unpaid after the lawsuit was filed; and $36,548.84 in unpaid contributions from the months of September, October, and November 2018. The court also granted Plaintiffs’ motion as it pertained to the interest accrued by Defendants on their unpaid contributions and the court will issue a further order as to the amount of interest awarded.
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