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Your ERISA Watch – Seventh Circuit Holds that Death by Autoerotic Asphyxiation Is Excluded under AD&D Policy

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This week’s notable decision is Tran v. Minnesota Life Ins. Co., No. 18-1723, __F.3d__, 2019 WL 1894769 (7th Cir. Apr. 29, 2019).  The Seventh Circuit reversed the district court’s ruling finding that the insured’s death from autoerotic asphyxiation was an accidental death payable under his life insurance policy.  The Seventh Circuit held that a reasonable person would interpret the insured’s death from autoerotic asphyxiation to be death due to an “intentionally self-inflicted injury,” which is excluded from the life insurance policy.

If in addition to being unable to say “autoerotic asphyxiation” five times fast you also don’t know what it refers to, the Seventh Circuit noted its definition as “a sexual practice by which a person purposefully restricts blood flow to the brain to induce a feeling of euphoria. ‘Asphyxiophilia’ as defined in the DSM-5 is a subset of sexual masochism disorder, by which an ‘individual engages in the practice of achieving sexual arousal related to restriction of breathing.’” (citing to the 5th edition of the American Psychiatric Association, Diagnostic and Statistical Manual of Mental Disorders).

There is no dispute that the insured, found hanging in his basement by his widow, died due to autoerotic asphyxiation.  The issue is whether his death fell under the following exclusion in his accidental death riders:

In no event will we pay the accidental death or dismemberment benefit where an insured’s death or dismemberment results from or is caused directly by any of the following: … intentionally self-inflicted injury or any attempt at self-inflicted injury, whether sane or insane…

To answer this question, the court had to decide two issues:  (1) whether autoerotic asphyxiation is an “injury” and (2) whether that injury was “intentionally self-inflicted.”  The court answered both in the affirmative.

On the first issue, the court declined to follow the reasoning in Padfield v. AIG Life Ins. Co., 290 F.3d 1121 (9th Cir. 2002) and Critchlow v. First UNUM Life Ins. Co. of America, 378 F.3d 246 (2nd Cir. 2004) because they are grounded on a false premise that the act of strangling oneself is severable into distinct phases and distinct injuries.  Specifically, they found the cause of death to not be the partial strangulation but the total loss of oxygen for a sustained period.  Here, as in those cases, the insured placed a noose around his neck, stopped off a stool, and strangled himself.  The resulting hypoxia and his death all result of one intentionally inflicted injury.  Contrary to the Ninth Circuit’s reasoning in Padfield, the Seventh Circuit believes that an ordinary person would consider choking oneself by hanging from a noose to be an injury.  In addressing the dissent, the majority explained that the fact that his aim was sexual pleasure does not make partial strangulation less of an injury.

On the second issue, the court found that the injury was intentionally self-inflicted because the insured’s subjective intent was clear.  Whether the strangulation was done recreationally or with an intent to survive does not change the fact that the death was due to an intentionally self-inflicted harm.

The court concluded by clarifying that the opinion should not be read to establish a per se rule on coverage for autoerotic asphyxiation.

Judge Bauer penned a dissenting opinion.  He agreed with the district court that cerebral hypoxia was not an intentional injury and the death resulted from an unforeseen accident.  The majority, Judge Bauer explains, incorrectly separates the masturbation from the asphyxiation.  He compares it to the act of skydiving gone wrong.  The intention was to survive.  The jump out of the plan was an intentional act but the crash back to earth was not intended.

So now there appears to be a Circuit split on this issue.  Any guesses on whether the Supremes take it up?  Don’t hold your breath….especially if you’re in the Seventh Circuit.

Moving on to another provocative topic – attorneys’ fees!  I want to take a moment to highlight a fee decision Kantor & Kantor recently obtained in Dmuchowsky v. Sky Chefs, Inc., No. 18CV01559HSGDMR, 2019 WL 1934480 (N.D. Cal. May 1, 2019).  Dmuchowsky sued Sky Chefs seeking statutory penalties for refusing to hand over plan documents despite his repeated written requests.  They did not turn over the documents until after Dmuchowsky filed his lawsuit.  Sky Chefs litigated this matter all the way to oral argument on the parties’ motions for judgment.  At the hearing, the district judge stated on the record that he was going to award penalties and directed the parties to attempt to agree on an amount.  Thereafter, the parties settled the document penalties claim and reserved the issue of attorneys’ fees.  The district court referred the fees dispute to a Magistrate Judge for a report & recommendation.

In awarding most of the fees sought, a total of $105,795 in fees and $1,619.22 in costs for a total award of $107,414.22, the R&R made several notable findings.  The court found that the “catalyst theory” applies to fee recovery in ERISA cases.  Though there wasn’t a judicial determination on the merits, there’s no dispute that Sky Chefs provided Dmuchowsky the relief he sought only under pressure of litigation.  The court rejected Sky Chefs’ argument that attorneys’ fees aren’t warranted for litigating a penalty claim because they are discretionary.  The court noted that the ERISA fee statute does not distinguish between different types of relief and there’s no authority to support the argument.  The court found that the balance of the Hummell factors support a fee award.

Let this be a lesson for plan administrators to take plan requests seriously.  Though statutory penalties are discretionary and are not frequently awarded, there is no upside to refusing to comply with a plan participant’s request for plan information.

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

Attorneys’ Fees

Ninth Circuit

Dmuchowsky v. Sky Chefs, Inc., No. 18CV01559HSGDMR, 2019 WL 1934480 (N.D. Cal. May 1, 2019) (Magistrate Judge Donna M. Ryu).  See Notable Decision summary above.

Todd R., et al. v. Premera Blue Cross Blue Shield of Alaska, No. C17-1041JLR, 2019 WL 1923034 (W.D. Wash. Apr. 30, 2019) (Judge James Hobart).  In a prior opinion, the court, on de novo review, determined that the residential treatment in dispute was medically necessary.  The court granted Plaintiff’s motion for attorneys’ fees in part based on consideration of the Hummell factors.  The court found that the first factor, culpability, weighs in favor of an award because Premera failed to assess and adequately address undisputed medical evidence.  Premera does not dispute its ability to pay fees so the second factor weighs in favor of a fee award.  The court also found the deterrence factor to weigh in favor of fees – had Premera properly considered the evidence Plaintiffs may not have been required to take their claim through three levels of appeal.  The fourth factor does not weigh in favor of an award because Plaintiffs did not seek relief for any other Plan member and did not resolve a significant legal question.  Lastly, the court found the “relative merits” factor to be neutral since neither party fully addressed the issue of medical necessity based on the sixth provision of Premera’s Medical Policy.  The court awarded the full amount of fees requested – $50,437.50 – based on a $600/hour rate for Plaintiff’s lead attorney.  The court denied Plaintiffs’ request for a 6% prejudgment interest rate and awarded the rate provided in 28 U.S.C. § 1961.

Breach of Fiduciary Duty

Third Circuit

Sweda v. Univ. of Pennsylvania, No. 17-3244, __F.3d__, 2019 WL 1941310 (3d Cir. May 2, 2019) (Before: SHWARTZ, ROTH, and FISHER, Circuit Judges).  In this class action brought on behalf of participants in the University’s defined contribution plan alleging breach of fiduciary duty, prohibited transactions, and failure to monitor fiduciaries, the Third Circuit reversed the dismissal of Counts III and V.  Count III alleged that Penn “paid excessive administrative fees, failed to solicit bids from service providers, failed to monitor revenue sharing, failed to leverage the Plan’s size to obtain lower fees or rebates, and failed to comprehensively review Plan management.”  Count V alleged “that Penn breached its fiduciary duties by: paying unreasonable investment fees, including and retaining high-cost investment options with historically poor performance compared to available alternatives, and retaining multiple options in the same asset class and investment style.”  The court found that the participants had standing to assert breach of fiduciary duty claims and pled plausible breach of fiduciary duty claims.  The court affirmed the dismissal of the other claims, finding that the fiduciaries did not engage in prohibited transactions when they entered into a lock-in agreement with a financial services organization, when they caused the plan to pay administrative fees to the investment advisor that offered mutual funds, when they caused the plan to pay bookkeeping fees to a financial services organization; or when they caused the plan to pay investment fees to companies.

Leventhal, et al. v. The MandMarblestone Group LLC, et al., No. 18-CV-2727, 2019 WL 1953247 (E.D. Pa. May 2, 2019) (Judge Mitchell S. Goldberg).  The court denied Defendants’ motion to dismiss the breach of fiduciary duty claims, finding that Plaintiffs have satisfactorily alleged Defendants are fiduciaries, that they breached their fiduciary duties, and that the breach caused loss to the 401(k) plan.  With respect to MMG, it was explicitly designated as the “named fiduciary for purposes of ERISA” in the Nationwide Agreement and was hired to “administer” the Plan, and received all of the withdrawal request forms for authorization.  Nationwide exercised authority or control respecting management or disposition of the Plan assets.  With respect to the alleged breach, “Plaintiffs have sufficiently pled the breach of a fiduciary duty by averring that MMG and Nationwide failed to act with the requisite prudence and diligence where they saw the ‘peculiar nature’ and high frequency of the withdrawal requests that were to be distributed to a new bank account, but failed to alert Plaintiffs or verify the requests.”  The Nationwide Agreement which declaims liability for breach of fiduciary duty is void against public policy.

Fourth Circuit

Deas v. Plan Administration Committee of HCA Health and Welfare Benefits Plan, No. 2:18-CV-3303-DCN, 2019 WL 1922915 (D.S.C. Apr. 30, 2019) (Judge David C. Norton).  Plaintiff sued the Plan Administration Committee of HCA Health and Welfare Benefits Plan (“the Committee”) for breach of fiduciary duty for failing to provide her with the evidence of insurability (EOI) form for enrollment into the long-term disability (LTD) plan, the lack of which caused Prudential to deny her LTD claim.  The court granted the Committee’s motion to dismiss.  The court found that Prudential, not the Committee, was the fiduciary for the LTD Program, and the issuance of an EOI form is a ministerial, non-fiduciary act.  However, the SPD states that “The [EOI] form will be mailed directly to you if evidence is required.”  The court found that this language could create an obligation for the Committee to provide her with an EOI form.  “Without expressing any opinion on whether Deas could sufficiently allege a breach of contract based on this purported obligation under the Plan, as this argument was not before the court, the court will permit Deas to amend her complaint to address this alleged failure to provide an EOI form pursuant to the terms of the Plan.”

Eleventh Circuit

Foundation Resolution Corp. v. Aon Hewitt Investment Consulting, Inc., No. 5:18-CV-458-OC-30PRL, 2019 WL 1937255 (M.D. Fla. Mar. 1, 2019), report and recommendation adopted, No. 5:18-CV-458-OC-30PRL, 2019 WL 1931918 (M.D. Fla. May 1, 2019).  The court overruled Defendants’ objections and adopted the report and recommendation.  The R&R found that Plaintiff FRC properly alleged its fiduciary status to bring the breach of fiduciary duty claim against Defendants.  The Plan reserves management and control of investments with FRC, and as a functional matter, FRC did control such activities through its control of the pension committee.  Plaintiffs also adequately allege that the Aon entities are fiduciaries “given Aon Investing’s explicit acknowledgment of its status as a fiduciary under Section 3(21) of ERISA in the [Master Consulting Agreement] and the allegations of Aon Investing’s and Aon Consulting’s actually offering investment advice with respect to the plan.”

Disability Benefit Claims

Fifth Circuit

Shanker v. United of Omaha Life Insurance Company, No. 18-20616, __F.App’x__, 2019 WL 1889698 (5th Cir. Apr. 26, 2019) (Before DAVIS, HAYNES, and GRAVES, Circuit Judges).  Shanker was President of Intracare Behavioral Health Foundation at the time he suffered a heart attack and underwent open-heart quadruple bypass surgery.  United of Omaha denied his claim for long-term disability benefits on the basis that he could perform his job as President at both the sedentary and light physical demand levels.  Plaintiff’s doctor only gave restrictions of no lifting more than twenty-five pounds, standing for more than 30 minutes, limited driving, and no exposure to fumes or hot or cold weather.  United of Omaha hired Dr. Philip Podrid to review Plaintiff’s records and he found that Plaintiff did not have any ongoing cardiac or neurological problems that would necessitate any limitations or restrictions.  The court affirmed the district court’s grant of summary judgment to United of Omaha.

Ninth Circuit

Gary v. Unum Life Insurance Company of America, No. 3:17-CV-01414-HZ, 2019 WL 1904679 (D. Or. Apr. 29, 2019) (Judge Marco A. Hernandez).  Plaintiff is a former attorney who alleged disability since November 2013 as a result of Ehlers-Danlos syndrome, Type III, and cervical spine issues.  She applied for disability benefits about three years after her date of disability.  Unum denied her claim at first but then after she appealed, it approved her claim through only April 6, 2015.  The court permitted Plaintiff to expand the Administrative Record to include medical evidence on or before January 22, 2018 (180 days from Unum’s final denial) in order to remedy Unum’s procedural violation of issuing a new reason for denial after Plaintiff submitted her appeal.  The court struck additional records Unum attempted to have the court consider, including Plaintiff’s twitter posts, because the court did not remand to Unum the issue of whether Plaintiff is disabled.  On the standard of review, the court found that Unum has taken steps to reduce the inherent bias in its structural conflict such that the conflict, standing alone, does not heighten the court’s scrutiny of its decision.  The court did consider Unum’s parsimonious claims-granting history, but since Unum provided evidence that it mitigated possible bias, the court did not give the parsimonious claims-granting history much weight.  The court also did not give much weight to Unum’s failure to get an in-person evaluation of Plaintiff since she filed her claim nearly three years after her alleged onset of disability which diminished the value of the IME.  Considering the various factors, the court found that the appropriate standard of review was abuse of discretion with “moderate scrutiny.”  On the merits of the claim, the court found that there was limited evidence of disability on or around April 6, 2015, the date Unum found Plaintiff no longer disabled.  The court concluded that Unum did not abuse its discretion: “Even if the court disagrees with the ultimate decision, deference must be given to the administrator unless it is clearly unreasonable. While there may be evidence supporting Plaintiff’s claim of disability, she fails to establish that she was disabled on or about April 6, 2015 and thereafter. To the extent the record suggests that Plaintiff is disabled at some point in 2016 or 2017, the Court finds that any such disability it is too attenuated from the established pre-April 6, 2015 period of disability to infer that her conditions continuously existed to the same extent in the months and years after April 6, 2015.”

Tenth Circuit

Carlile v. Reliance Standard Ins. Co., No. 2:17-CV-1049, 2019 WL 1897083 (D. Utah Apr. 29, 2019) (Judge Robert J. Shelby).  Plaintiff was given notice of termination (RIF) as of March 21, 2016 and received his final separation pay as of March 31, 2016.  His final separation agreement from the company has his separation date as June 20, 2016.  Reliance Standard denied his long-term disability claim because there were no payroll records showing he worked regular hours past March 21, 2016, and thus he was not an active, full-time employee with coverage as of June 7, 2016, the date of disability due to prostate cancer.  The company’s HR director informed Reliance that since Plaintiff was exempt his hours were not tracked and she provided expense reimbursements showing that Plaintiff had taken business trips through May 8, 2016.  The court determined that Plaintiff was an active, full-time employee at the time his disability arose.  The court applied contra proferentem to the plan terms since de novo review applies.  The court found the term “active” to be ambiguous.  “As such, the court construes the ambiguity against Reliance and in favor of the ‘reasonable expectations’ of Carlile.  As an insured, Carlile would reasonably expect to be covered while he continued to perform his job responsibilities for LRI, LRI considered him a full-time employee, and LRI continued paying premium payments to Reliance on his behalf.”  Further, evidence provided by LRI was that Plaintiff worked throughout the notice period and his last full-time active day worked was June 7, 2016.  The court found that remand is not appropriate because (1) Reliance admitted in its June 12 denial letter that Plaintiff was disabled as of June 9, 2016; and (2) Reliance did not raise the issue of his disability during the administrative process and it had ample opportunity to conduct a thorough investigation.  The court awarded judgment in favor of Plaintiff.

Discovery

Eighth Circuit

Cent. Valley Ag Coop. v. Leonard, No. 8:17CV379, 2019 WL 1900987 (D. Neb. Apr. 29, 2019) (Magistrate Judge Cheryl R. Zwart).  Plaintiff Central Valley Ag Cooperative alleged that Defendants violated ERISA when they failed to adequately pay health claims submitted to the Central Valley Ag Cooperative Health Care Plan.  Plaintiff seeks damages including the recovery of attorneys’ fees paid to a law firm and fees it paid to its expert to negotiate and settle the claims against the Plan.  The court granted Defendant’s motion to compel production of unredacted invoices from the law firm because any privilege or work product protection afforded to the redacted portions of the billing statements was impliedly waived when Plaintiff chose to seek recovery of amounts it paid to the law firm.  The court denied Plaintiff’s motion to compel documents from Defendant The Benefit Group related to another lawsuit.  Plaintiff “cannot enforce the shared information terms of the multiple representation agreement, an agreement to which it was never a party—particularly terms that would purportedly waive the attorney-client and work product protection owed to other clients of the Fraser Stryker law firm.”

Ninth Circuit

Baird, et al. v. Blackrock Institutional Trust Company, N.A., et al., No. 17CV01892HSGKAW, 2019 WL 1897489 (N.D. Cal. Apr. 29, 2019) (Magistrate Judge Kandis A. Westmore).  In this dispute alleging breach of fiduciary duty and prohibited transactions, the court denied Defendants’ request for relief regarding Plaintiffs’ responses to Defendants’ RFAs and interrogatories.  The interrogatories include an improper definition that requires Plaintiffs to rely on a premise that is “in dispute between the parties, i.e., whether investment management fees include certain types of fees.”  The disputed RFAs seek an improper legal conclusion by asking whether the agreements entitle the collective trust investment funds to pay no investment fees.  The court also excused Plaintiffs’ responses to the other requests due to their lack of personal knowledge or vagueness of the request.

Exhaustion of Administrative Remedies

Eleventh Circuit

Allen v. Hartford Life & Accident Insurance Company, No. 2:18-CV-01134-AKK, 2019 WL 1921950 (N.D. Ala. Apr. 30, 2019) (Judge Abdul K. Kallon).   The court granted Hartford’s motion for summary judgment and dismissed Plaintiff’s lawsuit for failure to exhaust administrative remedies.  Hartford denied Plaintiff’s claim due to lack of response and lack of medical information.  This decision invited her to perfect the claim or to appeal.  Following that, Plaintiff’s attorney had several back and forth communications with Hartford about the outstanding medical information as well as Plaintiff’s intent to appeal.  Ultimately, Hartford decided it still did not have all the information that it required to decide the claim.  Plaintiff then filed suit.  The court found that Plaintiff’s submissions and communications did not constitute an appeal of the denial, thus, her claim was not deemed denied due to Hartford’s failure to make a timely decision.  The court found that remand of the LTD claim to Hartford is warranted so that Plaintiff could provide the outstanding medical information and allow Hartford to decide the merits of her LTD claim.  Or, Plaintiff could refuse to provide the information Hartford requested and allow it to make a decision, that if adverse, would give Plaintiff the right to file suit.

Life Insurance & AD&D Benefit Claims

Seventh Circuit

Tran v. Minnesota Life Ins. Co., No. 18-1723, __F.3d__, 2019 WL 1894769 (7th Cir. Apr. 29, 2019) (Before Bauer, Manion, and Brennan, Circuit Judges).  See Notable Decision summary above.

Eighth Circuit

Prudential Insurance Company of America v. House, et al., No. 6:17-03249-CV-RK, 2019 WL 1966135 (W.D. Mo. May 2, 2019) (Judge Roseann A. Ketchmark).  The court found that interpleader is available in this action involving two competing beneficiaries.  The court granted the insured’s daughter’s motion for summary judgment.  “Under federal common law, [the insured’s spouse] is disqualified from receiving the Death Benefit because the uncontroverted material facts demonstrate that [he] was convicted of murder in the first degree of the Insured.”  The court found that the daughter, as contingent beneficiary, is entitled to the Death Benefit.

Medical Benefit Claims

Third Circuit

K.S. v. Thales USA, Inc., & CareFirst Blue Cross Blue Shield, No. 317CV07489BRMLHG, 2019 WL 1895064 (D.N.J. Apr. 29, 2019) (Judge Brian R. Martinotti).  In this dispute over the payment of breast reconstructive surgery obtained through an out-of-network provider, the court granted Defendant’s motion to dismiss Plaintiff’s 29 U.S.C. § 1132(a)(1)(B) claim because Plaintiff does not tie her claim to any specific ERISA plan term.

Ninth Circuit

Andrew C., et al. v. Oracle America Inc. Flexible Benefit Plan, et al., No. 17-CV-02072-YGR, 2019 WL 1931974 (N.D. Cal. May 1, 2019) (Judge Yvonne Gonzalez Rogers).  In this dispute over the payment of residential treatment, the court denied Plaintiffs’ administrative motion to remand the claim to the plan administrator or permission to conduct discovery.  The court found that the documents Plaintiffs complain are missing from the record are substantively included elsewhere in Defendants’ administrative record such that their omission does not undermine the integrity of the record.  Because the court found that Defendants did create a complete record in the first instance, Plaintiffs did have the opportunity to perfect their claim.  The court also noted that “ERISA defines the administrative record as all material that (i) the insurer relied upon in making the benefit determination; (ii) was submitted, considered, or generated in the course of making the benefit determination, regardless of whether the insurer relied upon the material in making the benefit determination; (iii) demonstrates compliance with the administrative processes and safeguards required by ERISA in making the benefit determination; and (iv) in the case of a group health plan like the one at issue here, constitutes a statement of policy or guidance with respect to the plan concerning the denied treatment option or benefit for the claimant’s diagnosis, regardless of whether the insurer relied upon the advice or statement in making the benefit determination. 29 C.F.R. § 2560.503-1(h)(2)(iii), (m)(8) and (b)(5); see also Montour v. Hartford Life & Acc. Ins. Co., 588 F.3d 623 (9th Cir. 2009).”

Pension Benefit Claims

Third Circuit

Tuorto v. Harenberg, et al., No. CV1812179MASLHG, 2019 WL 1924856 (D.N.J. Apr. 30, 2019) (Judge Michael A. Shipp).  In this case the deceased, Paul, and his wife, Joanne, entered into a Separation Agreement but never formally divorced.  Joanne had released her claim to his future pension rights.  Paul eventually began cohabitating with Karen, and they raised their children together until his death about 30 years later.  Paul made Karen the beneficiaries of his pension and savings plans with AWWC.  Joanne never signed the beneficiary form before a notary consenting to him naming another beneficiary as was required by the Plans.  After his death, the Plan paid Karen for some time before it stopped paying her and started paying Joanne.  Karen then sued AWWC and Joanne.  The court granted AWWC’s motion to dismiss Karen’s ERISA claims.  The court found that Karen failed to state a claim against AWWC because the Separation Agreement does not meet the requirement of a valid waiver under the terms of the Plans.  Even if it is a valid waiver, the Separation Agreement fails to identify that another beneficiary will receive the benefits of the Plans.  Further, the Separation Agreement does not meet the requirements of ERISA Section 1055(c)(2)(A), which provides that a plan participant may designate someone other than their spouse as the beneficiary of the plan if (i) the spouse consents in writing, and (ii) the spouse’s consent acknowledges the effect of such election and is witnessed by a plan representative or a notary public.

Seventh Circuit

Board of Trustees Construction Workers Pension Trust Fund – Lake County and Vicinity v. Perteet, No. 2:18-CV-90-JEM, 2019 WL 1897277 (N.D. Ind. Apr. 25, 2019) (Magistrate Judge John E. Martin).  In this case where the pension plan participant died pre-retirement and the only named beneficiary was his now ex-wife (spouse at the time of designation), the court found that she was his beneficiary in accordance with the Plan documents and requirements of ERISA.  As part of the divorce decree, the participant retained rights to his pension plan but there was no QDRO filed with the Board of Trustees for the Plan.  The Plan provides that “any beneficiary designation previously made by Participant shall be automatically revoked on the marriage or remarriage of a Participant.”  There is no revocation upon divorce.  The court noted that the participant’s adult son and his Estate could bring claims against the ex-wife in state court since the issue of her waiver of rights to the pension is not before the court.

Pleading Issues & Procedure

First Circuit

Massachusetts v. United States Dep’t of Health & Human Servs., No. 18-1514, __F.3d__, 2019 WL 1950427 (1st Cir. May 2, 2019) (Before Torruella, Lynch, and Thompson, Circuit Judges).  The court reversed and remanded the district court’s grant of summary judgment to Defendants in this matter brought by the Commonwealth of Massachusetts challenging interim final rules issued by the United States Department of Health and Human Services (HHS), the Department of Labor, and the Department of the Treasury, expanding the religious exemption to the contraceptive care mandate of the Affordable Care Act (ACA).  The court held that the Commonwealth’s substantive challenges to the interim rules were not rendered moot by promulgation of the final rules and that it demonstrated Article III standing for its substantive challenges.  The court also held that the Commonwealth’s procedural challenges to the rules were rendered moot by promulgation of the final rules.

Third Circuit

Kaplan v. Saint Peter’s Healthcare System, et al., No. CV132941MASTJB, 2019 WL 1923606 (D.N.J. Apr. 30, 2019) (Judge Michael A. Shipp).  The court found that Plaintiff has alleged sufficient injury in fact to support Article III standing, where Plaintiff alleges that the SPHS Plan is underfunded by $130 million and SPHS disputes that ERISA imposes any requirements on the Plan.  The court determined that ERISA’s coverage section excluding church plans from ERISA’s provisions, 29 U.S.C. § 1003(b)(2), is not jurisdictional in nature.  Plaintiff’s allegation that the SPHS Plan is a church plan is integral to the merits of their claim, not the Court’s subject matter jurisdiction.  Thus, the court has subject matter jurisdiction over Plaintiff’s ERISA claims.

Sixth Circuit

Jammal, et al., v. American Family Insurance Group, et al., No. 1:13 CV 437, 2019 WL 1923671 (N.D. Ohio Apr. 30, 2019) (Judge Donald C. Nugent).  The court stayed the case pending Plaintiffs’ petition for a writ of certiorari of the Sixth Circuit’s finding that the Plaintiff agents were independent contractors and not employees for purposes of ERISA.  A stay is justified “because this issue will be fully determinative of the case; because this Court recognizes that there are arguments and evidence to support both outcomes: and because a stay would not cause undue hardship to any party …”

Eighth Circuit

Hoot v. Hoot, No. 19-03068-CV-S-BP, 2019 WL 1896559 (W.D. Mo. Apr. 29, 2019).  The court denied the third-party plaintiff’s motion to remand this case to state court for the AT&T Pension Benefit Plan’s failure to remove this case within 30 days of being served.  The court found that the Plan was not served where service was made on an administrative assistant with Fidelity Services Center.  AT&T’s Associate Director for Litigation Support & Appeals (Benefits) submitted an affidavit stating that Neither Fidelity Service Center nor the assistant have ever been authorized to accept service of process for the Plan, neither is an officer, partner, or a managing or general agent for the Plan, and the SPD provides that service may be made upon it at two different addresses.

Provider Claims

Third Circuit

The Plastic Surgery Center, P.A. v. Cigna Health and Life Insurance Company, et al., No. CV 17-2055 (FLW), 2019 WL 1916205 (D.N.J. Apr. 30, 2019) (Judge Freda L. Wolfson).  The plaintiff provider, TPSC, sued to recover payment for plastic surgery services it provided to an employee of Sunrise Senior Living, who was a participant in Sunrise’s health benefit plan.  The court determined that TPSC’s breach of contract claim against Multiplan in the proposed Fourth Amended Complaint is futile because Multiplan is not an insurer and the TPSC-Multiplan Agreement does not provide Plaintiff a cause of action against Multiplan in this context.  Cigna is the payor of benefits.  The court also found that TPSC has not sufficiently alleged its third-party beneficiary status in order to bring a breach of the Cigna-Multiplan Agreement against Cigna.  The claims that remain in this case include a wrongful denial of benefits claim against Cigna, Sunrise, and the Plan, and a breach of contract claim against Cigna.

Fifth Circuit

Omega Hospital, LLC v. United Healthcare Services, Inc., No. CV 16-00560-JWD-EWD, 2019 WL 1917242 (M.D. La. Apr. 30, 2019) (Judge John W. deGravelles).  Omega moved the court to reconsider the dismissal of its claims on the basis that “(1) Omega inartfully plead the activity engaged in by United and the injury caused by United’s “recoupment scheme”; (2) the Court accepted United’s version of events which was contrary to Omega’s contentions; (3) the United States Supreme Court decision of Montanile v. Board of Trustees of Nat. Elevator Industry Health Plan, 136 S.Ct. 651, 193 L.Ed. 2d 556 (2016), vindicates Omega’s theory for recovery; and (4) the Court may have erred legally regarding the express assignment of the claim for breach of fiduciary duty.”  The court denied the motion to reconsider but granted Omega leave to amend the Complaint.  The court found the additional explanation of the “complex recoupment process” to be helpful and decided that it may have prematurely disposed of Omega’s case based on an undeveloped record that would have benefitted from some limited discovery.

Retaliation Claims

Eleventh Circuit

Burks v. Gardner, et al., No. 2:18-CV-01891-TMP, 2019 WL 1897276 (N.D. Ala. Apr. 29, 2019) (Magistrate Judge T. Michael Putnam).  Though it’s not clear what the pro se plaintiff’s theory is behind his ERISA claim, he alleged that the Board violated ERISA when they terminated him because he was not able to use his 61 days of sick leave and he was promised 75 days of pay and benefits that he never received.  The Board moved to dismiss on the basis of Eleventh Amendment immunity.  The court found that the “school boards are not an ‘arm of the State’ and are not entitled to Eleventh Amendment immunity from federal law claims, at least with respect to employment-related actions.”  The Board did not advance any other argument for dismissal of the ERISA claim, so the court denied the motion to dismiss the claim.   The court did dismiss the ERISA claim as asserted against Defendants in their individual capacities.

Statutory Penalties

Third Circuit

Med-X Global, LLC v. Worldwide Insurance Services, LLC, No. 17-CV-11742 (PGS), 2019 WL 1923046 (D.N.J. Apr. 30, 2019) (Judge Peter G. Sheridan).  Plaintiff alleges it sent letters to Defendant GeoBlue requesting the “entire administrative record” for every single patient and the patient’s claims that had been denied, underpaid, or had been delayed by non-decision. Plaintiff did not receive any administrative record and brought a claim styled as Petition to Compel Production of Administrative Records and Recovery of Administrative Penalty under ERISA, 29 U.S.C. § 1024(b), 29 U.S.C. § 1132(c)(1) and 29 C.F.R. § 2575.502c-1 against all Defendants.  The court dismissed this claim because Plaintiff failed to show that under ERISA it is a plan beneficiary or plan participant, or it was assigned the rights to the documents, and it failed to show that the Blue Defendants are plan administrators required to provide such documents to plan participants.

Subrogation/Reimbursement Claims

Third Circuit

Bd. of Trustees of Nat’l Elevator Indus. Health Benefit Plan v. Goodspeed, No. CV 17-05133, 2019 WL 1934475 (E.D. Pa. May 1, 2019) (Judge Eduardo C. Robreno).  The plaintiff health plan sued its participant for reimbursement of approximately $82,000 that it paid in treatment for injuries that the participant was later compensated for via a settlement of a medical malpractice claim he and his wife brought against his treating physician.  Defendant moved for summary judgment on the issue that the health plan failed to identify an appropriate fund to which it can attach an equitable lien.  The court denied the motion.  It found that Defendant’s $200,000 certificate of deposit and $62,000 van are traceable to the settlement fund.  They cannot be characterized as nontraceable items such as services, food, or travel.  The court rejected the argument that the deposit of the net proceeds into a joint account renders the fund dissipated.  In so doing, the court rejected the reasoning behind the holding in Carpenter Technology Corp. v. Weida, 300 F. Supp. 3d 663 (E.D. Pa. 2018), that the act of depositing a settlement fund into a joint checking account converts the fund into general assets against which an equitable lien cannot attach.  The remaining issue in this case is allocation of the settlement between the two claims brought by Defendant and his wife.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Central States, Southeast and Southwest Areas Pension Fund v. Norfolk Southern Railway Company, No. 16-CV-708, 2019 WL 1929718 (W.D.N.Y. May 1, 2019) (Judge Lawrence J. Vilardo).  “In sum, whether Norfolk Southern had an obligation to contribute to the Pension Fund under § 1381(a) “is a question of fact that cannot be decided on a motion to dismiss.” Fowler, 677 F. Supp. 2d at 681. For all the reasons stated above and for the reasons in the Report and Recommendation, the defendant’s motion to dismiss, Docket Item 10, is DENIED.”

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