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Your ERISA Watch – Seventh Circuit Rules for Northwestern University in Retirement Plan Investment Dispute

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This week’s notable decision is one from a wave of ERISA lawsuits against universities over allegations of imprudent investments and excessive fees.  In Divane v. Northwestern Univ., No. 18-2569, __F.3d__, 2020 WL 1444966 (7th Cir. Mar. 25, 2020), the Seventh Circuit Court of Appeals upheld the dismissal of claims alleging that Northwestern breached its fiduciary duty as a prudent investor.

Plaintiffs, who are beneficiaries of the Northwestern University Retirement Plan and the Northwestern University Voluntary Savings Plan (“the Plans”), alleged that Northwestern, the Plans’ administrator and designated fiduciary, breached its duty to act as a prudent fiduciary and that they are entitled to relief under ERISA, 29 U.S.C. §§ 1132(a)(2) and 1109(a).  “In their amended complaint, plaintiffs specifically alleged that Northwestern failed to act as a prudent fiduciary when it included the Stock Account as a plan investment offering and allowed TIAA-CREF to serve as a recordkeeper for its funds (Count I); created a multi-entity recordkeeping arrangement (Count III); and provided investment options that were too numerous, too expensive, and underperforming (Count V). In Counts II, IV, and VI, plaintiffs claimed the above conduct also constituted prohibited transactions under ERISA. Id. § 1106.”  Divane, 2020 WL 1444966, at *5.

In upholding the district court’s dismissal, the Seventh Circuit made several key findings.

First, with respect to the claim that Northwestern breached its fiduciary duty by “allowing TIAA-CREF to mandate the inclusion of the CREF Stock Account” in the plans and by allowing TIAA to serve as recordkeeper for its funds, the court held that Northwestern did not breach its fiduciary duties when it included the TIAA stock account as an investment offering and allowed the TIAA to serve as recordkeeper.  The court explained that the TIAA-CREF Traditional Annuity—a fixed annuity contract that returns a guaranteed, contractually specified minimum interest rate—was an attractive offering in which many plan participants invested money.  To have that option, TIAA required the plans to offer additional TIAA products (including its stock account) and for it to serve as recordkeeper.  In exchange, the 2.5% surrender charge was removed from the Traditional Annuity funds.  The court found that this offering does not constitute an ERISA violation as no participant was required to invest in the other TIAA products.  It was prudent for Northwestern to accept these conditions from TIAA to ensure the Traditional Annuity remained an option.  “That plaintiffs prefer low-cost index funds to the Stock Account does not make its inclusion in the plans a fiduciary breach.”

Second, with respect to the claim that Northwestern breached its fiduciary duties by establishing a multi-entity recordkeeping arrangement that allowed recordkeeping fees to be paid through revenue sharing, the court held that Northwestern did not breach its fiduciary duties as a result of its failure to solicit competitive bids for fixed per-capita fee for recordkeeping.  In Loomis v. Exelon Corp., 658 F.3d 667 (7th Cir. 2011), this court rejected the argument that a flat-fee recordkeeping rate is always prudent.  And, in Hecker v. Deere & Co., 556 F.3d 575 (7th Cir. 2009), the court found that a revenue sharing arrangement that paid plan expenses did not constitute an ERISA violation.  It is not an ERISA violation for plan participants to pay recordkeeping costs through expense ratios.  “Northwestern was not required to search for a recordkeeper willing to take $35 per year per participant as plaintiffs would have liked.”

Third, with respect to the claim that Northwestern breached its fiduciary duties by providing investment options that were too numerous, too expensive, or underperforming, the court held that Northwestern did not breach its fiduciary duties as result of its decision to offer large number of investment options.  Even if the industry is trending in favor of low-cost index funds, Northwestern made these options available to plan participants, “eliminating any claim that plan participants were forced to stomach an unappetizing menu.”  Under Loomis and Hecker, plans may offer a wide range of investment options and fees without it constituting a breach of fiduciary duty.

Lastly, with respect to Plaintiffs’ “repackaged” imprudent fiduciary claims as prohibited transactions claims, the court held that the fiduciaries did not engage in prohibited transactions when allegedly unreasonable recordkeeping fees were collected from plan participants.  “Here, plaintiffs failed to plausibly allege the basic elements of their claim; namely, that any defendant benefited from the collected fees, that the fees were assets of the plans, or that any defendant knew or should have known that collecting routine fees may violate ERISA.”  Moreover, in Hecker, the court held that once fees are collected from a mutual fund’s assets and transferred to a recordkeeper, they become the recordkeeper’s assets and not the plan’s assets.

The court also found that the district court did not abuse its discretion by denying Plaintiffs leave to file a second amended complaint:  Plaintiffs unduly delayed bringing the claims and the four proposed counts failed to state claims for relief.  The court also found that following binding precedent, there is no right to a jury trial in this ERISA case, and affirmed the district court’s rejection of a jury trial.

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

Attorneys’ Fees

Sixth Circuit

Jammal v. Am. Family Ins. Grp., No. 1:13 CV 437, 2020 WL 1332202 (N.D. Ohio Mar. 23, 2020) (Judge Donald C. Nugent). Previously, judgment was entered for Defendants in this ERISA class-action based on Defendants’ unopposed motion for judgment. The court also ordered Plaintiffs to pay Defendants’ costs under ERISA’s dual fee and cost-shifting provision, 29 U.S.C. § 1132(g)(1). After judgment was entered, Plaintiff made a motion to modify the part of the judgment regarding costs. The court denied Plaintiffs’ motion because they had not brought forth any new information, had not brought up these arguments prior to judgment being entered, and had not pointed out any errors in the order. Defendants’ reasonable costs were taxed to Plaintiffs in the amount of $162,020.01.

Ninth Circuit

Bain v. Oxford Health Ins. Inc., No. 15-CV-03305-EMC, 2020 WL 1332080 (N.D. Cal. Mar. 23, 2020) (Judge Edward M. Chen). The court granted Plaintiff’s motion for attorneys’ fees and nontaxable expenses. Previously, the court found UBH abused its discretion in denying Plaintiff’s claim for benefits and remanded the claim for further proceedings. Plaintiff originally retained one law firm but brought in Creitz & Serebin LLP “as an ERISA expert.” Plaintiff sought a total award of $173,943.75 against almost 300 hours of attorney/paralegal time. UBH did not contest the hourly rates, focusing objections on other fronts. (Though not stated in the opinion, Plaintiff requested and received a fee award based on $800/hour.)  The court rejected arguments that the relief sought duplicated relief the Plaintiff received as a member of a class action. It did so because the relief obtained in this suit was not yet available in the class action. The court also rejected UBH’s argument that the fees should be reduced by 80%, opting for a 10% reduction to account for UBH’s claims of excessive hours and staffing. The court awarded a total of $156,681.28 in fees and costs.

Hawaii Tapers’ Trust Funds, et al. v. Leite, Jr., No. CV 19-00334 ACK-WRP, 2020 WL 1445636 (D. Haw. Mar. 25, 2020) (Judge Alan C. Kay Sr.).  In this action seeking unpaid benefit contributions where the court granted Plaintiffs default judgment, the court denied Plaintiffs’ request for attorneys’ fees based on the lodestar method.  The CBA provides the following:  “If it is necessary to take legal action to enforce submittal of reports and payment of contributions and damages by an Employer, such Employer shall pay for all court costs, necessary audit fees, and reasonable attorney’s fees of 25% of the total amount of contributions and damages due.”  The court offered two reasons for denying the request.  First, Plaintiff’s Complaint sought attorneys’ fees at the 25% rate, not the lodestar rate.  Second, the court found no reason to depart from the contracted-for attorneys’ fees since doing so would be overly punitive and not warranted.  “The Court notes that its ruling is limited to the situation before it here, where attorneys seek to inflate fee awards contractually provided for, and it does not reach the issue of whether a downward departure from a predetermined fee award would be warranted by a lodestar calculation.”

Tenth Circuit

M.D. v. Anthem Health Plans of Kentucky, No. 217CV00675JNPCMR, 2020 WL 1369410 (D. Utah Mar. 23, 2020) (Magistrate Judge Cecilia M. Romero). Before the court is Plaintiffs’ Motion for Award of Attorney Fees relating to claims for payment of Aspiro Wilderness Treatment. Defendant Anthem Health Plans of Kentucky opposes the Motion challenging the reasonableness of the requested fee. Previously, the court granted summary judgment in favor of Plaintiffs, who then filed the motion seeking $25,323 in attorneys’ fees, representing 50% of fees because the court granted Defendant’s motion for summary judgment related to treatment by another provider. Defendant argued that the requested rate of $600 per hour for the partner and $195 per hour for the paralegal were too high; that time billed by the partner (52.8) and his associate (64.5) were excessive; and that the court should award 20% of the fees instead of 50%. The court found that Plaintiffs failed to meet their burden to show that the partner’s hourly rate was reasonable in the relevant market and was unpersuaded that the application of a national rate was appropriate in this case.  The court found that an hourly rate of $450 was more appropriate. The court also reduced the paralegal rate to $125 per hour for the same reasons. As to the time spent on the case, the court held that the number of hours expended was reasonable considering the number of treatment facilities and unique legal issues, and that the work by the associate was not duplicative. Accordingly, the court awarded $20,535 in fees, based on the reduced hourly rate while finding that the 50% reduction was appropriate.

Breach of Fiduciary Duty

Fourth Circuit

Damiano v. Institute For In Vitro Sciences, et al., No. 18-2382, __F.App’x__, 2020 WL 1490891 (4th Cir. Mar. 26, 2020) (Before Wilkinson, Quattlebaum, and Rushing, Circuit Judges).  The court affirmed the district court’s order dismissing Plaintiff’s breach of fiduciary duty claim, including the finding that she failed to show that her employer’s misrepresentation of her disability coverage harmed her.  The court explained: “Damiano failed to present specific facts demonstrating how she would have acted differently had IIVS not misrepresented the continuation of her disability insurance. As the district court correctly recognized, Damiano failed to state that she would have sought disability insurance from another provider had she learned that she did not have coverage under IIVS’ policies. And, while the employee in [Retirement Committee of DAK Americas LLC v. Brewer, 867 F.3d 471 (4th Cir. 2017)], who successfully created a genuine dispute of material fact included a sworn declaration to support his claim, Damiano offers nothing but a conclusory assertion that she would have negotiated a higher severance. Damiano did not negotiate her severance; IIVS offered it as a matter of good-will, and Damiano provided no evidence that IIVS would have considered offering her a higher severance had it realized she was not eligible for continuing disability coverage.”

Acosta v. WH Administrators, Inc., et al., No. RDB-18-1290, 2020 WL 1479580 (D. Md. Mar. 26, 2020) (Judge Richard D. Bennett). The Secretary of Labor filed a motion for summary judgment against Defendants requesting “monetary damages commensurate with unpaid claims, disgorgement of unjust profits, and a permanent injunction prohibiting Defendants from acting as ERISA service providers.”  The court determined that Defendants are functional fiduciaries of the WH Administrators, Inc. (“WHA”) Plans where WHA is the named fiduciary with discretionary authority to determine employer and participant eligibility, and Defendants Turner and Sheil had signatory authority over WHA bank accounts, they control WHA, and had direct involvement in individual claim determinations.  The court also determined that they breached their fiduciary duties by failing to properly fund plans, pay claims, and obtain stop-loss coverage; denied claims on improper grounds, engaged in prohibited transactions, and breached their duty of loyalty by accepting commissions from third parties.  For these breaches, Defendants must restore $26,845,911 to the Plans, must pay $1,804,693 related to their prohibited transactions, and disgorge $397,189 for accepting commissions from third parties. The court issued a permanent injunction against Defendants prohibiting them from acting as a fiduciary or service provider for any ERISA-governed employee benefit plan.

Seventh Circuit

Divane v. Nw. Univ., No. 18-2569, __F.3d__, 2020 WL 1444966 (7th Cir. Mar. 25, 2020) (Before Bauer, Manion, and Brennan, Circuit Judges). See Notable Decision summary above.

Class Actions

Seventh Circuit

Campbell v. Whobrey, et al., 16 C 4631, 2020 WL 1330661 (N.D. Ill Mar. 22, 2020) (Judge Edmond E. Chang). The court granted Defendants’ motion for summary judgment of a class action case alleging the multiemployer pension plan refused a proposal from Kroger that would have secured pension benefits for the grocery store workers. The court held the fiduciaries considered the competing interests of the Kroger and non-Kroger participants in the plan and did not breach their fiduciary duties in ultimately deciding not to accept the Kroger proposal.

Disability Benefit Claims

Second Circuit

Hinchey v. First Unum Life Ins. Co., No. 17-CV-08034 (NSR), 2020 WL 1331898 (S.D.N.Y. Mar. 20, 2020) (Judge Nelson S. Roman). Applying the abuse of discretion standard, the court granted First Unum’s motion for summary judgment. The court held “substantial evidence”—defined as more than a scintilla but less than a preponderance—supported First Unum’s decision to terminate benefits. Specifically, the record revealed that several post-initial benefit approval medical tests indicated that Plaintiff’s health conditions had improved. The record also established that Plaintiff had reported to his physicians, on multiple occasions, that he was engaged in regular exercise, and generally did not complain during those visits about issues such as chest pain, palpitations, or shortness of breath. Finally, Plaintiff’s treating physician acknowledged that Plaintiff could perform sedentary work, although he did not agree that Plaintiff could perform the occupational demands of his job on a full-time basis. Given First Unum’s three paper reviewing physicians believed Plaintiff was capable of light work, the next more demanding level of work, the court found unavailing Plaintiff’s challenge premised on the weight of the medical evidence.

Mayer v. Ringler Associates Inc. and Affiliates Long Term Disability Plan & Hartford Life and Accident Insurance Company, No. 18 CV 2789 (VB), 2020 WL 1467374 (S.D.N.Y. Mar. 26, 2020) (Judge Vincent L. Briccetti).  Plaintiff sued Defendants for allegedly underpaying his long-term disability benefits and determining that his benefits are taxable.  The court found that Defendants’ determination was not arbitrary and capricious where: (1) it was reasonable for Hartford to rely on W-2s and earnings information provided by the Policyholder, rather than on information provided by Plaintiff, to calculate his gross monthly benefit; (2) it was reasonable for Hartford to disregard Plaintiff’s SEP-IRA contributions for calculating Plaintiff’s Pre-Disability Earnings since those contributions were made toward a 408(k) plan and not included within the Plan’s definition of Monthly Rate of Basic Earnings; and (3) it was reasonable for Hartford to determine Plaintiff’s benefit was fully taxable since the policyholder confirmed it paid Plaintiff’s premiums.

Fourth Circuit

Evans, M.D. v. Standard Insurance Company, No. 3:19CV00006, __F.Supp.3d__, 2020 WL 1466185 (W.D. Va. Mar. 26, 2020) (Judge Glen E. Conrad).  The court determined that Standard did not abuse its discretion in interpreting the Own Occupation provision applicable to Plaintiff’s long-term disability claim.  The policy states:  “[I]f your Own Occupation is medical doctor …, we will consider your Own Occupation to be the one general or sub-specialty in which you are board-certified to practice for which there is a specialty or sub-specialty recognized by the American Board of Medical Specialties [“ABMS”]… provided you have earned at least 60% of your gross professional service fee income in your specialty or sub-specialty during the 24 months immediately before you become Disabled. If the sub-specialty in you which are practicing is not recognized by the American Board of Medical Specialties … you will be considered practicing in the general specialty category.”  Standard reasonably applied this definition to conclude that Plaintiff’s Own Occupation is Diagnostic Radiology—the one general specialty in which he is certified by the American Board of Radiology. Plaintiff argues that his Own Occupation is Interventional Radiology, but he does not have a specialty or subspecialty certificate in that area of practice. It is not enough that he derived more than 60% of his income performing interventional procedures.  “In short, the court is satisfied that the operative language can be reasonably interpreted to require that a physician be board certified in a particular ABMS-recognized specialty or subspecialty in order for that specialty or subspecialty to qualify as the physician’s Own Occupation. This interpretation does not clearly conflict with the applicable Policy language or alter the terms of the Policy. To the contrary, the court believes that it is reasonably supported by the plain language of the Own Occupation Provision.”

Seventh Circuit

Feeney v. Unum Life Insurance Company of America, No. 18-1302, 2020 WL 1452099 (C.D. Ill. Mar. 25, 2020) (Judge Michael M. Mihm).  Under an arbitrary and capricious standard of review, the court found that Unum’s decision to terminate Plaintiff’s long-term disability benefits was supported by the claims record. Unum found Plaintiff disabled through the date of an IME and continued paying him under a reservation of rights while they evaluated his cognitive complaints.  The record shows that Plaintiff’s condition did improve after the IME.  A neuropsychological exam confirmed that Plaintiff did not have any cognitive deficits.  And, Unum consulted with five physicians, each of whom concluded that Plaintiff had the ability to perform his occupation.  Unum’s decision “was not downright unreasonable.”

Ninth Circuit

Monroe v. Metropolitan Life Ins. Co., No. 2:15cv02079, 2020 WL 1430005 (E.D. Cal Mar. 23, 2020) (District Judge Troy Nunley). Plaintiff filed suit against MetLife after it refused to pay her long-term disability claim. Under a de novo standard of review, the court found that despite MetLife’s determination, Plaintiff was disabled from her regular occupation as defined by her policy. The court found that the opinions of Plaintiff’s physicians were significantly more credible than MetLife’s independent peer review physician, as they had treated Plaintiff for a long period of time and observed her in-person. The fact that MetLife’s only medical reviewers never examined plaintiff in-person significantly undermined MetLife’s position in the court’s eyes. The court also admonished MetLife for ignoring Plaintiff’s subjective pain complaints, as binding Ninth Circuit precedent clearly establishes that failure to consider such subjective symptoms is an abuse of discretion, especially where a plaintiff has significant supporting evidence for those complaints.

Shaikh v. Aetna Life Insurance Company, No. 18-CV-04394-MMC, 2020 WL 1430496 (N.D. Cal. Mar. 24, 2020) (Judge Maxine M. Chesney). Plaintiff filed a motion for judgment seeking all long-term disability benefits owed through the date of judgment, pre-judgment interest, and a declaration that he is entitled to benefits on an on-going basis. Aetna argued that although Plaintiff reported subjective symptoms, the medical records reflected improvement during the 11 months while he was receiving LTD benefits. The court found that Aetna focused too much on the objective evidence, and disregarded Plaintiff’s complaints of severe pain which persisted over an extended period of time. The court awarded only the remainder of “own occupation” benefits up to 24 months.  The court remanded the matter to Aetna determine the amount of LTD benefits to which he is entitled under the “Own Occupation” provision of the Group Plan and to consider whether he is entitled to benefits under the “Any Occupation” provision of the Group Plan.


Eighth Circuit

Woodrome v. Ascension Health, No. 4:19-CV-02638 JCH, 2020 WL 1479149 (E.D. Mo. Mar. 26, 2020) (Judge Jean C. Hamilton).  The court granted in part and denied in part Plaintiff’s motion for discovery in this dispute involving the denial of disability benefits.  The court found that Plaintiff is entitled to the complete administrative record and should not have to engage in discovery to obtain a complete record as defined by the Regulations.  Defendant filed under seal the record which contains multiple unexplained redactions.  “Defendant has no authority to redact portions of the administrative record, to the extent that the redacted information falls within the definition of ‘relevant’ documents, records, or information as described in 29 C.F.R. § 2560.503-1(m)(8)(ii). Therefore, to the extent the administrative record is incomplete, Defendant must provide Plaintiff with the redacted materials needed to complete the record.”

Exhaustion of Administrative Remedies

Fifth Circuit

Shirley v. Fluor Corp., No. CV 19-00223-BAJ-RLB, 2020 WL 1442950 (M.D. La. Mar. 24, 2020) (Judge Brian A. Jackson). A former employee sought payment of long-term disability benefits under an ERISA-governed benefit plan. Defendants filed a motion to dismiss, contending that Plaintiff had failed to follow plan procedures in submitting his claim for benefits. The court granted Defendants’ motion, finding that the plan required approval of a short term disability claim before a long term disability claim could be considered, and that Plaintiff had not timely submitted his short term disability claim. Plaintiff attempted to argue that Texas’ notice-prejudice insurance rule allowed him to submit a late claim, but the court found that the short term disability plan was self-funded, not insured, and thus the notice-prejudice rule did not apply to excuse Plaintiff’s late claim. The court dismissed Plaintiff’s claims with prejudice for failure to exhaust administrative remedies.

Seventh Circuit

Nelson v. Board of Trustees of Rockford Pipe Trades Pension Fund, et al., 18-cv-50354, 2020 WL 1433817 (N.D. Ill. Mar. 24, 2020) (Judge Rebecca R. Pallmeyer). Plaintiff brought two claims against the Plan Administrator of his multiemployer benefit pension plan for the Trustees’ failure to credit him for hours worked outside the jurisdiction (“Claim One”); and, second, that the hours he worked in this jurisdiction were undercounted (“Claim Two”). The parties brought cross-motions for summary judgment whereby during the course of this briefing Plaintiff withdrew Claim One and as to Claim Two, the court held that Plaintiff had failed to make a requisite showing that he was entitled to be excused from his failure to timely file his appeal or exhaust his administrative remedies. The court rejected Plaintiff’s assertion of futility noting that he had availed himself of the internal review procedure regarding Claim One—that is, his claim seeking reciprocal pension credit for the time that he worked outside the Fund’s jurisdiction—and noted that the Board of Trustees had identified and corrected its own errors as to Claim One. As a result, it was merely Plaintiff’s untimeliness and not any futility as to Claim Two that prevented Plaintiff from exhausting his administrative remedies as to Claim Two.

Life Insurance & AD&D Benefit Claims

Second Circuit

Stets v. Securian Life Ins. Co., No. 1:17-CV-09366 (ALC), 2020 WL 1467395 (S.D.N.Y. Mar. 25, 2020) (Judge Andrew L. Carter, Jr.).  The court determined that it was not arbitrary and capricious for the decedent’s employer to permit beneficiary changes to decedent’s life insurance plans (made by his sister who had power of attorney as attorney-in-fact), despite the automatic restraining orders issued in the decedent’s divorce proceeding that state “[n]either party shall change the beneficiaries of any existing life insurance policies, and each party shall maintain the existing life insurance … in full force and effect.”  The court found that upon decedent’s death, the divorce proceeding abated, and enforcement of the automatic order is moot.

Fifth Circuit

Byerly v. Standard Insurance Company, No. 4:18-CV-00592, 2020 WL 1451543 (E.D. Tex. Mar. 25, 2020) (Judge Mazzant). Plaintiff sought AD&D benefits after an accident causing an injury to his left foot eventually led to an infection requiring a below the knee amputation.  Standard denied benefits because it determined that the amputation was not directly caused by an accident, rather it was related to Plaintiff’s diabetes, peripheral neuropathy, and peripheral arterial disease.  In ruling on the parties’ cross-motions for summary judgment, the court found in favor of Standard and held:  (1) where the group policy does not contain a choice-of-law provision, and applying federal common law choice of law principles, the balance of factors requires the application of Florida law, where the decision to enter into the contract was made; (2) the court need not determine whether a district judge sitting in the Fifth Circuit should apply the Eleventh Circuit’s standard of review because irrespective of which Circuit’s standard of review applies, the court comes to the same conclusion; (3) Plaintiff’s pre-existing diseases and conditions substantially contributed to his loss so he is not entitled to AD&D benefits under ERISA Section 502(a)(1)(B); and (4) Plaintiff may not proceed under both Section 502(a)(1)(B) and Section 502(a)(3), and even if he could, he failed to show that he is entitled to benefits so he cannot be entitled to disgorgement of benefits or profits.

Medical Benefit Claims

First Circuit

Weissman v. United Healthcare Ins. Co., et al., 19-cv-10580, 2020 WL 1446734 (D. Mass. Mar. 25, 2020) (Judge Allison D. Burroughs). A putative class of former patients, who were denied life-saving, quality-of-life maintaining proton therapy cancer treatment, brought a putative class action alleging that UnitedHealthcare and the lead putative class plaintiffs’ plan breached their fiduciary duties by wrongfully denying medically necessary proton therapy cancer treatment. Lead class plaintiff, Kate Weissman, and her family were able to come up with over $125,000 to privately pay for medically necessary proton therapy treatment to treat her cervical cancer diagnosis after UHC denied her treatment in 2016. Weissman brought this putative class to vindicate her rights under ERISA and for potentially countless others challenging UnitedHealthcare’s application of narrowly restrictive, flawed, out-of-date internal coverage guidelines to wrongfully deny claims for proton therapy. The court dismissed without prejudice Plaintiffs’ claim for breach of fiduciary duty holding that Plaintiffs will be able to properly recover under an ERISA claim for benefits. The court noted Plaintiffs complaint appears “to only seek relief under § 1132(a)(3) and makes no mention of § 1132(a)(1)(B) and therefore this should be brought under § 1132(a)(1)(B).” The key thrust of the court’s decision was to vindicate the fact that Weissman “may properly go forward insofar as it [the complaint] challenges UnitedHealthcare’s application of the Policy to Weissman’s request for coverage.” The court gave Plaintiffs 21 days to file an amended complaint.

Second Circuit

Henkel of Am. Inc. v. ReliaStar Life Ins. Co., No. 3:18-CV-00965-JAM, 2020 WL 1430008 (D. Conn. Mar. 24, 2020) (Judge Jeffrey Alker Meyer).  Before the court was Express Scripts’ (a third-party pharmacy benefits manager) motion to dismiss an ERISA breach of fiduciary duty claim and common law breach of fiduciary claim made by Henkel, who paid $50 million in prescription drug costs for two of its employee health plan participants who suffered from a rare medical condition.  The court granted Express Scripts’ motion as to both claims holding that Henkel’s sole reliance on conclusory factual allegations that an independent audit of allegedly wrongfully approved claims by another outside company was insufficient to allege a plausible claim for relief as to both claims. Additionally, the court held that Henkel’s common law claim for breach of fiduciary duty was preempted.

Tenth Circuit

Candace B. v. Blue Cross & Blue Shield of Rhode Island, No. 2:19-CV-00039, 2020 WL 1474919 (D. Utah Mar. 26, 2020) (Judge Robert J. Shelby).  The court granted in part Defendant Blue Cross and Blue Shield of Rhode Island (“BCBSRI”)’s motion to dismiss Plaintiff’s claim seeking redress under 29 U.S.C. § 1132(a)(3), for Defendant’s alleged violation of the Mental Health Parity and Addiction Equity Act in denying benefits for J.E.’s behavioral and substance abuse treatment at Evoke and Cascade.  The court found that Plaintiffs adequately plead that BCBSRI applied a treatment limitation to J.E.’s mental health and substance abuse claims in a way that was more restrictive than its application of treatment limitations to medical/surgical benefits but only with respect to treatment at Evoke, not with respect to treatment at Cascade.

Pension Benefit Claims

Third Circuit

Bd. of Trustees of Greater Pennsylvania Carpenters’ Med. Plan v. Schwartzmiller, No. CV 17-1442, 2020 WL 1332149 (W.D. Pa. Mar. 23, 2020) (Judge Nora Barry Fischer). In this case, the court was asked to determine whether William and Lisa Schwartzmiller entered a common law marriage for purposes of William’s employee benefits. The couple had a tumultuous relationship, plagued with William’s addictions to drugs and alcohol and his poor life decisions. In 1992, they were legally divorced. After getting sober, William won Lisa’s heart again. They lived together, had more children, wore wedding rings, and referred to each other as husband and wife. Years later, the relationship broke down, the couple separated but still communicated about finances and the children. William became disabled and filed for a disability pension. He said he was divorced on the application so he could get the larger single annuity. The claim was rejected, and he was forced to take a joint annuity. After receiving disability benefits for some time, William went to the Pension Fund office and presented the 1992 divorce decree. He asked that his designation for a joint annuity be changed to a single-life annuity, and that he be paid retroactive benefits. The Pension Fund rejected his request and pointed out that William had put Lisa on his medical insurance as his wife for years and now the legality of those benefits was in question. The court concluded that Lisa had met her burden of producing clear and convincing evidence that the couple formed a valid common-law remarriage in October of 1993.

Eleventh Circuit

Williamson v. Travelport, LP, Galileo & Worldspan U.S. Legacy Pension Plan, No. 18-10449, __F.3d__, 2020 WL 1482524 (11th Cir. Mar. 27, 2020) (Before Jordan, Grant, and Siler,* Circuit Judges).  In this putative class action asserting claims for improperly withheld pension benefits, document-disclosure penalties, and breach of fiduciary duties, the court affirmed dismissal of all claims under Rule 12(b)(6) except as to the claim for benefits, which the court remanded to the district court to review anew after Defendant certified and submitted the complete administrative record.  “Just as a plan administrator must have a complete record before rendering its decision, so too must a district court have a complete record before conducting its de novo review under the first step in the Blankenship analysis.”  Though Defendant argued that it effectively placed the pertinent portions of the record before the district court, Plaintiff does not stipulate to the record’s completeness and alleges that Defendant withheld documents from her.  “Moreover, a plan administrator does not get to determine which portions of the record the district court may see in conducting a de novo review. … Travelport of course may argue that certain documents are more relevant than others, or not relevant at all. But it cannot artificially limit the administrative record at the outset based on its own assessment of relevance. Once Travelport properly certifies the record, or the parties stipulate to a complete record, then the district court can entertain dispositive motions and review Travelport’s decision de novo under the first Blankenship step.”  Construing the facts in a light favorable to Plaintiff, she has sufficiently pled a claim under § 1132(a)(1)(B) for an improperly offset annuity.

Duley v. BB&T Corp. Pension Plan, No. 4:18-CV-10111-JLK, 2020 WL 1443569 (S.D. Fla. Mar. 23, 2020) (J. James Lawrence King). A former employee of BB&T Corporation sought payment of benefits under an ERISA-governed pension plan. After reviewing the parties’ cross-motions for summary judgment, the court denied BB&T’s motion and granted Plaintiff’s motion in part. The court found that before applying the Eleventh Circuit’s six-part test to determine if Plaintiff was entitled to benefits, it needed to be satisfied that BB&T had performed a “full and fair review” and that the record was complete. The court ruled that BB&T had not performed a full and fair review for two reasons. First, in denying Plaintiff’s claim, BB&T did not inform her specifically whether she was a plan participant or whether she had satisfied eligibility requirements. Instead, BB&T simply stated that it had not located any records listing her as having accrued benefits and speculated that she might already have been paid under a different plan. Second, BB&T performed an inadequate investigation of Plaintiff’s claim. It was undisputed that Plaintiff was a participant in a previous pension plan administered by a predecessor company, but BB&T made no effort to determine whether Plaintiff had elected an early payout or received a payout under that plan. The court therefore closed the action and remanded the case to BB&T to conduct a more thorough review of Plaintiff’s claim.

Pleading Issues & Procedure

Sixth Circuit

Verso Corporation, et al. v. United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL-CIO/CLC, et al., No. 3:19-CV-0006, 2020 WL 1482368 (S.D. Ohio Mar. 27, 2020) (Judge Walter H. Rice).  Plaintiffs Verso Corporation and its health and welfare plan filed a complaint seeking declaratory judgment that Verso’s elimination of the medical plan did not violate the LMRA and ERISA.  Defendants are six unions and 12 retirees.  Defendants moved to dismiss due to lack of standing.  The court determined that, “under ERISA, if an employer, such as Verso, is both a settlor and a plan administrator, its termination or amendment of a plan, as well as transferring retiree’s welfare benefits into a joint venture, are the actions of an employer and not those of a fiduciary. As such, Verso has not established that this Court has subject matter jurisdiction under § 1132(e)(1) to hear this claim.”  The court also found that Verso was not acting as a fiduciary under either § 1132 (a)(3) or (e)(1) to establish any statutory standing under 29 U.S.C. § 1132(e)(1).  The court determined that it does not have subject matter jurisdiction over the ERISA claim and granted Defendants’ motion to dismiss.

McKesson Corp. v. Diana Dillow, et al., No. 3:19-CV-164, 2020 WL 1469461 (S.D. Ohio Mar. 25, 2020) (Judge Thomas M. Rose).  In this dispute involving a health plan lien over proceeds from a third-party tort settlement, the court granted Defendants’ motion to strike this statement from the Complaint: “On February 13, 2019, Brannon offered to resolve the Plan’s $2,095,879.34 lien for $525,000.00.”  This is because settlement discussions are inadmissible to show fault under Fed.R.Evid. 408 and may be stricken from a complaint as immaterial and potentially prejudicial.

Eighth Circuit

Vigeant v. Meek, 18-3616, __F.3d__, 2020 WL 1429218 (8th Cir. Mar. 24, 2020) (Before Smith, Chief Judge, Loken and Grasz, Circuit Judges). The Eighth Circuit affirmed the district court’s dismissal of a purported class action which alleged the trustees of the Lifetouch, Inc. Employee Stock Ownership Plan breached their fiduciary duties by overvaluing the company stock when the company was declining and provided misleading information to the independent appraiser. The Department of Labor filed an amicus brief for Plaintiffs arguing the lower court applied an improper pleading standard, i.e. Rule 9(b), the fraud pleading standard. Plaintiffs argued Rule 9(b) did not apply because the allegations were failure to act on another’s fraud (claiming the new trustee failed to investigate the valuations of the stock determined under the prior trustees who served during the alleged time period). The Eighth Circuit affirmed on the basis Rule 9(b) applied to Plaintiffs’ claims the fiduciaries provided misleading information to the independent appraiser.

Ninth Circuit

Emergency Grp. of Arizona Prof’l Corp., et al., v. United Healthcare Inc., et al., No. CV-19-04687-PHX-MTL, 2020 WL 1451464 (D. Ariz. Mar. 25, 2020) (Judge Michael T. Liburdi). Plaintiffs are hospitals which brought an ERISA action to recover health benefits, claiming that Defendants’ payment of health benefits fell far below the usual and customary rate for out-of-network services. Plaintiffs brought a motion to remand and Defendants brought a motion to dismiss. Applying the Davila test to determine complete preemption, the court found that assignment of the patients’ claims to the provider were the only legal construct that connects United Healthcare to the plaintiffs and therefore ERISA establishes the exclusive remedies. The court also found that complete preemption exists because the provider’s claim depends on an ERISA plan between the insurer and the insured. Therefore, the court denied Plaintiffs’ motion to remand. The court granted Defendants’ motion to dismiss because all claims are preempted by ERISA. The court gave Plaintiffs the opportunity to file a second amended complaint pleading claims under ERISA.

Kalifano, Inc. v. Sierra Health and Life Ins. Co., No. 2:19-cv-00916-GMN-DJA, 2020 WL 1434281 (D. Nev. Mar. 24, 2020) (Judge Gloria M. Navarro). Plaintiff brought an ERISA action to recover health insurance premiums for its employee following Defendant’s retroactive cancellation of health coverage due to the employee moving outside of the United States which Defendant claims made the employee ineligible under the ERISA health plan. Defendant removed the case to federal court on the ground that Plaintiff’s claims are preempted by ERISA. Plaintiff brought a motion for remand. The court found that Plaintiff does not have standing to bring a claim in its capacity as an employer. The court recognized that some courts permit an employer to “stand in the shoes of an employee as a ‘participant’ through an assignment” or when the employer is a fiduciary. However, the complaint does not allege a “beneficiary” or “fiduciary” status for Plaintiff. The court granted Plaintiff’s motion for remand. Without subject matter jurisdiction, the court refrains from evaluating the merits of Defendant’s motion to dismiss.

Tenth Circuit

Candace B. v. Blue Cross & Blue Shield of Rhode Island, No. 2:19-CV-00039, 2020 WL 1474919 (D. Utah Mar. 26, 2020) (Judge Robert J. Shelby).  In this dispute over mental health treatment benefits, the court permitted Plaintiffs to proceed under § 1132(a)(1)(B) and § 1132(a)(3) because “dismissal of Plaintiffs’ Parity Act claim as being duplicative of their denial of benefits claim would be inappropriate at this time. While [Lefler v. United Healthcare of Utah, Inc., 72 F. App’x 818 (10th Cir. 2003)] interpreted [Varity Corp. v. Howe, 516 U.S. 489 (1996)] to authorize dismissal of § 1132(a)(3) claims when adequate relief is afforded under § 1132(a)(1)(B), it simply is not clear that adequate relief exists under § 1132(a)(1)(B) for Plaintiffs’ Parity Act claim at this stage. As such, this court does not understand Lefler to mandate dismissal of Plaintiffs’ Parity Act claim. As Plaintiffs acknowledge, they are not entitled to a double recovery. Thus, if the court is able to determine at a later time Plaintiffs do have a cognizable claim and adequate relief available under § 1132(a)(1)(B), then dismissal or denial of the Parity Act claim may become appropriate. But at this stage, the court will allow Plaintiffs to proceed with both claims.”

Eleventh Circuit

Bryant v. Hasbro, Inc., No. 8:18-CV-1336-T-36CPT, 2020 WL 1332064 (M.D. Fla. Mar. 23, 2020) (Judge Charlene Edwards Honeywell). Plaintiff filed a Second Amended Complaint (“SAC”) that Defendant also moved to dismiss on the basis of a lack of personal jurisdiction. The court again found that Plaintiff had not established that this court had the authority to exercise personal jurisdiction over Defendant. As part of that Order, the court found that Plaintiff did not state a claim for relief against Defendant under ERISA, and could not benefit from the statute’s nationwide service of process provision. Accordingly, the court dismissed this action. Plaintiff moved for reconsideration of the dismissal. In the Motion for Reconsideration, Plaintiff reiterates allegations contained in the SAC and her response to Defendant’s Motion to Dismiss the SAC. Plaintiff further contends that access to discovery would provide documents that would enable her to clarify her claims. The court held that Plaintiff did not establish the requirements for reconsideration of a final order. Plaintiff did not identify an intervening change in controlling law, identify new evidence, show a clear error that must be corrected, or demonstrate that reconsideration is required to prevent manifest injustice. Plaintiff did no more than reargue matters already considered and ruled on by the court. The court declined to address the merits of Plaintiff’s claims under ERISA for a third time.

Provider Claims

Second Circuit

Long Island Neurosurgical Associates, P.C. v. Empire Blue Cross Blue Shield, et al., No. 18CV3963JMAAYS, 2020 WL 1452465 (E.D.N.Y. Mar. 25, 2020) (Judge Joan M. Azrack).  The court adopted the Magistrate Judge’s R&R recommending: “(1) the Amended Complaint be dismissed as to any claim that Plaintiff is entitled to full reimbursement; (2) a determination on the merits of whether the amount actually paid by Blue Cross violated the employee benefit insurance plan await judicial review of the administrative record upon a motion for summary judgment; and (3) Plaintiff be permitted to re-plead any independent claim it has against the Fund by filing a second amended complaint.”

Severance Benefit Claims

Fourth Circuit

Messer, et al. v. Bristol Compressors International, LLC, et al., No. 1:18CV00040, 2020 WL 1472217 (W.D. Va. Mar. 26, 2020) (Judge James P. Jones).  In this class action alleging violations of the WARN Act, Defendants contend that the severance plan contained in the Employee Handbook is not governed by ERISA.  The court found that the severance plan is a welfare benefit plan and that ERISA and its regulations control Defendants’ interpretation of the plan and their actions regarding the plan. Because it is a welfare plan it is not subject to ERISA’s vesting provisions.  The court found that the Board of Director’s resolution eliminating the severance plan took place before the company commenced terminations.  Therefore, Plaintiffs are not entitled to severance benefits.

Standard of Review

Second Circuit

Mayer v. Ringler Associates Inc. and Affiliates Long Term Disability Plan & Hartford Life and Accident Insurance Company, No. 18 CV 2789 (VB), 2020 WL 1467374 (S.D.N.Y. Mar. 26, 2020) (Judge Vincent L. Briccetti).  The court found that Cal. Ins. Code § 10110.6, which bans discretionary clauses in disability policies, does not apply to this long-term disability dispute because even though the Policyholder’s address is in California, Plaintiff is, and at all relevant times was, a resident of New York.  The court rejected Plaintiff’s arguments that Hartford’s alleged violations of ERISA’s claim-procedure regulations should result in de novo review.  The court found that the arbitrary and capricious standard of review governs its review of Hartford’s determination.

Ninth Circuit

Dallenbach v. Standard Insurance Co., No 2:18-cv-02024, 2020 WL 1430036 (D. Nev. Mar. 24, 2020) (Judge Gloria Navarro). Plaintiff Dallenbach filed suit against Standard for denying her claim for long-term disability benefits. The parties moved for discovery, but the court required briefing on the standard of review before it could properly determine the scope of allowable discovery. Defendant argued that the abuse of discretion standard should apply because the policy in effect at the time of her disability in 2015 contained a discretionary clause which, if valid, would mandate the proper standard be abuse of discretion. Plaintiff argued that Minnesota Statute 60A.42, passed in 2016, renders that discretionary clause unenforceable; as such, a de novo standard of review should apply. Magistrate Judge Ferenbach recommended that the court apply the abuse of discretion standard, as the statute applied to policies “issued or renewed on or after January 1, 2016.” Because Magistrate Ferenbach also concluded that the operative version of the policy was the 2015 version, the statute would not void the discretionary clause in this case. The district court confirmed the Magistrate Judge’s decision, finding that binding Ninth Circuit precedent clearly established that the proper policy is that in effect at time of disability rather than time of denial, and that this statute is not akin to a mere “procedural rule” which, under Minnesota law, can govern litigation instituted after the conduct giving rise to the suit.

Statutory Penalties

Fifth Circuit

Shirley v. Fluor Corp., No. CV 19-00223-BAJ-RLB, 2020 WL 1442950 (M.D. La. Mar. 24, 2020) (J. Brian A. Jackson). A former employee sought the imposition of statutory penalties against his former employer, Fluor, and Liberty Life Assurance Company of Boston, the claim administrator for Fluor’s ERISA-governed disability benefit plans. Plaintiff contended that he had requested plan documents from both defendants, and that they had failed to timely provide them. Defendants filed a motion to dismiss, which the court granted. The court found that Liberty Life was not a plan administrator as defined by ERISA, and thus penalties could not be imposed against it. The court further found that at the time Plaintiff requested plan documents, he was no longer an employee and did not have “a colorable claim for benefits” because his benefit claims were time-barred. As a result, he could not recover penalties from either defendant under ERISA and his claim was dismissed with prejudice.

Eleventh Circuit

Williamson v. Travelport, LP, Galileo & Worldspan U.S. Legacy Pension Plan, No. 18-10449, __F.3d__, 2020 WL 1482524 (11th Cir. Mar. 27, 2020) (Before Jordan, Grant, and Siler,* Circuit Judges).  Plaintiff alleged that Travelport is subject to document-disclosure penalties under § 1132(c) based on six written requests.  The court affirmed the dismissal of this claim because the documents she requested are not the types of documents enumerated in § 1024(b)(4).  These include claim-specific and employment history documents.  Travelport satisfied its obligation under this provision by providing Plaintiff with the then-current SPD and the governing plan.  The court also concluded that 29 U.S.C § 1059(a) (Recordkeeping and reporting requirements) does not create a private right of action, but instead subjects employers and administrators to regulatory fines.  In other words, § 1059(a) does not serve as a basis for penalties under § 1132(c).

Subrogation/Reimbursement Claims

Sixth Circuit

McKesson Corp. v. Diana Dillow, et al., No. 3:19-CV-164, 2020 WL 1469461 (S.D. Ohio Mar. 25, 2020) (Judge Thomas M. Rose).  In this dispute where a fiduciary of an ERISA plan brought suit under Section 502(a)(3) seeking equitable relief against a health plan participant and her attorneys, the court denied Defendants’ motion to dismiss.  The court first found that an attorney may be named as a defendant in a suit brought pursuant to Section 502(a)(3).  Plaintiff’s causes of action for an accounting and for unjust enrichment are properly pleaded equitable claims.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Division 1181 Amalgamated Transit Union-New York Employees Pension Fund v. Canal Escorts, Inc. et al., No. 14-CV-4575 (SMG), 2020 WL 1472439 (E.D.N.Y. Mar. 26, 2020) (Magistrate Judge Steven M. Gold).  The court granted Plaintiffs’ motion for summary judgment in its entirety. The Court found Defendants jointly and severally liable for $4,229,356.00 in withdrawal liability; $1,238,530.92 in accrued interest on the withdrawal liability, as of July 24, 2019, together with additional interest at the rate of 7.50% per annum on the accelerated withdrawal liability amount of $4,229,356 from July 24, 2019 until final judgment is entered; liquidated damages in an amount equal to the interest calculated on the withdrawal liability: and post-judgment interest pursuant to 28 U.S.C. § 1961 from the date final judgment is entered until the judgment is paid.

In re: G.A.F. Seelig, Inc., Debtor., No. 17-46968-ESS, 2020 WL 1486785 (Bankr. E.D.N.Y. Mar. 19, 2020) (Bankruptcy Judge Elizabeth S. Stong). “The threshold question presented by this motion is whether G.A.F.’s Chapter 11 bankruptcy case is a bad faith filing triggering the consequences of Bankruptcy Code Section 1112(b), including conversion or dismissal. This calls for the Court to consider whether bad faith can be established by an ERISA violation; and if so, whether the Pension Fund has shown that G.A.F. has engaged in a ‘transaction’ with the principal purpose to evade or avoid its withdrawal liability under ERISA.” The court determined that: (1) “the Pension Fund has not established that G.A.F.’s proposed sale of its business operations to Dairyland, or the reduction in the sale price from $2.125 million to $250,000, was undertaken by G.A.F. with the principal purpose of avoiding its withdrawal liability to the Pension Fund;” (2) the Pension Fund has not shown that G.A.F.’s prospective Chapter 11 plan has the principal purpose to evade or avoid its withdrawal liability under ERISA; and (3) the Pension Fund has not otherwise demonstrated cause for dismissal under Bankruptcy Code Section 1112(b).  The court denied the Pension Fund’s motion to dismiss.

Seventh Circuit

Building Trades United Pension Trust Fund v. Aztec Plumbing LLC, No. 19-CV-343-PP, 2020 WL 1492985 (E.D. Wis. Mar. 27, 2020) (Judge Pamela Pepper).  The court granted Plaintiffs’ amended motion for default judgment against defendant Aztec Plumbing, LLC in the amount of $180,310.01, with interest.

Ninth Circuit

Boards of Trustees of The Puget Sound Electrical Workers Healthcare Trust, et al. v. CEC Electrical Contracting LLC, et al., No. 18-CV-1166-RAJ, 2020 WL 1467323 (W.D. Wash. Mar. 26, 2020) (Judge Richard A. Jones).  The court determined that John W. Chase is a fiduciary under ERISA and is liable for $95,454.17 in vacation contributions that were withheld from CEC Electrical employees’ paychecks for the period February 2018 through August 2018 and never remitted to the Trust Funds. The court also found that he is liable for liquidated damages in the amount of $9,545.43 and $14,122.79 in interest. Default judgment entered against Chase.

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


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