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Your ERISA Watch – Sixth Circuit Permits Ford Motor Company an Equitable Lien on Overpaid Retirement Benefits

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This week’s notable decision comes from the Sixth Circuit in Zirbel v. Ford Motor Company, ___F.3d___, 2020 WL 6704157 (6th Cir. 2020). Plaintiff Donna Zirbel received a $351,000 retirement-benefits payment from Ford Motor Company (“Ford”). But the payment was two sizes too big. When Ford learned of the mistake, it asked for the extra money back. Zirbel refused. She sued Ford, seeking a declaration that she could keep the money. Ford stood by its decision. The district court granted summary judgment to Ford, requiring Zirbel to return the $243,190 in overpayments. Plaintiff appealed and the Sixth Circuit affirmed.

The court decided that Ford permissibly required Plaintiff to return the money. The benefit plan in this case gave the overseeing committee discretionary authority, and its decision to request its money back was neither arbitrary nor capricious. The plan states: “In the event of an error that results in an overpayment of benefits to a Member,” “the amount of the overpayment shall be returned to the Retirement Fund, without limitation, except the Committee shall have discretionary authority to reduce any repayment amount from a Member.” Because of an “error,” Zirbel received an “overpayment of benefits” in the amount of $243,190. The plan’s text calls for repayment. The initial request for repayment indeed was required (“shall”) by the plan’s fiduciary duty to the other beneficiaries of the plan. While the plan permits Ford to reduce a repayment or waive it altogether on hardship grounds, Zirbel never applied for a waiver. And nothing requires Ford to provide a waiver on its own initiative. Decisions that respect a plan’s terms are not arbitrary or capricious.

The court noted that sometimes a wrongful possessor will argue that she no longer possesses the “particular funds” to which a lien once attached, preventing recovery in equity. The Supreme Court grappled with that problem in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 577 U.S. 136, 136 S.Ct. 651, 193 L.Ed.2d 556 (2016), which instructs the courts to follow the money. One possibility: The wrongful possessor spends the liened funds on “traceable items,” say, a car or a house or an investment fund. In that case, the lien attaches to the car or other item, preserving the plaintiff’s ability to recover in equity. Another possibility: A party “complete[ly] dissipat[es]” a fund by spending it on nontraceable items, like food, and the lien dissolves. Id. at 145, 136 S.Ct. 651. The plaintiff can still recover from the defendant’s general assets at law, just not in equity and just not under § 1132(a)(3)(B). But a possessor does not dissipate a fund by depositing the cash into an account containing the possessor’s other assets. Any “commingling” of wrongfully possessed funds and rightfully possessed funds permits a lien on the commingled account. This is what Zirbel did in this case. This commingling gave Ford an equitable lien against those accounts up to the overpayment. Because Zirbel does not argue that she dissipated the funds in those accounts into nontraceable items, that is all the court needed to know. Ford could recover through this equitable lien.

Plaintiff also cannot claim equitable estoppel, even though she asked Ford to recalculate the amount and it did not change the sum, because Ford has not made fraudulent representations.

This week’s notable decision summary was prepared by Kantor & Kantor, LLP Associate, Zoya Yarnykh. Zoya has worked for over a decade in the field of disability law and is passionate about helping her clients get disability benefits paid.

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

Breach of Fiduciary Duty

Third Circuit

Secretary of Labor v. Doyle, No. 05-CV-2264, 2020 WL 6689808 (D.N.J. Nov. 13, 2020) (J. Joseph H. Rodriguez). This case has a long history; it has been remanded from the Third Circuit twice. The government originally brought this action in 2005 alleging that several defendants had illegally diverted multi-employer benefit plan assets in violation of ERISA. In the most recent appeal, the Third Circuit upheld most of the district court’s findings that misconduct had occurred, but reversed and remanded as to one of the defendants, a trustee named Cynthia Holloway, for further fact-finding as to the state of her knowledge at the time she made certain decisions. On remand, the district court found that Holloway was aware the plan fund was underfunded and mismanaged, failed to conduct a meaningful investigation, did not provide for a replacement when she resigned, and continued to assist the fund after resigning as a trustee. As a result, she did not meet her legal obligations under ERISA as a fiduciary and was jointly and severally liable for losses to the plan during the time in question.

Tenth Circuit

Watson v. Dell Technologies Inc., No. 19-CV-02667-RM-NYW, 2020 WL 6707840 (D. Colo. Nov. 16, 2020) (Judge Raymond P. Moore). This matter was before the court on the Recommendation of United States Magistrate Judge. Plaintiff’s husband separated from EMC in December 2015. He continued to receive group life insurance benefits. He had the option to continue those benefits beyond November 2016 via conversion. MetLife issued a letter dated November 29, 2016 explaining how to convert the life insurance policy, but Plaintiff’s husband never received it. That same day, Plaintiff’s husband emailed EMC inquiring about how to continue his life insurance benefits. The following day EMC stated he would receive a bill to continue paying for the benefits. The bill never arrived. Plaintiff’s complaint alleged four claims: (1) violation of 29 U.S.C. § 1132(a)(1)(B) (Claim One); (2) violation of 29 U.S.C. § 1132(a)(3)(B) (breach of fiduciary duty) (Claim Two); (3) promissory estoppel (Claim Three); and (4) breach of contract (Claim Four). Defendants moved to dismiss. In the Recommendation, the Magistrate Judge construed Plaintiff’s first claim under Section 1132(a)(1)(B) as, in effect, two claims. A claim based on Defendants’ alleged failure to provide Mr. Watson written notice of the option to convert, called Claim One A. And a claim based on Defendants allegedly providing misleading information to Mr. Watson when he attempted to convert his life insurance, called Claim One B. Claim Two alleged Defendants breached their fiduciary duty by supplying inaccurate information in Plan documents and by providing misleading communications and misrepresenting the Plan terms in response to Mr. Watson’s November 29, 2016 email. The court held Claim One A was dismissed as to all Defendants because neither the Plan nor ERISA required notice to Mr. Watson of his option to convert; Claim One B was dismissed as to all Defendants because a claim under Section 1332(a)(1)(B) must be based on the terms of the Plan. Here, Ms. Watson’s claim was based on the alleged improper response to Mr. Watson’s November 29, 2016 email inquiry; Claim Two was dismissed in part and allowed in part as follows – dismissed against ADP entirely because Ms. Watson has not plausibly pled ADP was a Plan fiduciary, dismissed against MetLife based on the Plan content allegations because it was not the Plan administrator and, therefore, not responsible for the Plan contents, and it was not required to provide written notice of the option to convert, dismissed against EMC based on the Plan contents allegations because no notice of right to convert was required in the summary plan description, allowed to go forward against MetLife and EMC based on the Plan misinformation allegations but only insofar as Ms. Watson seeks equitable remedies; and Claims Three and Four were both dismissed against all Defendants because they “relate to” an ERISA plan and, therefore, are expressly preempted by ERISA under 29 U.S.C. § 1144(a).

Class Actions

Seventh Circuit

Burke v. Boeing Co., Case No. 19 C 2203, 2020 WL 6681338 (N.D. Ill. Nov. 17, 2020) (Judge Virginia M. Kendall). The Court granted Boeing’s motion to dismiss plan participants’ second amended complaint with leave to amend. Plan participants alleged that Boeing unlawfully inflated its stock price by withholding nonpublic information regarding problems with its new 737 MAX airplanes’ Maneuvering Characteristics Augmentation System (MCAS). The complaint alleged that this nonpublic information would have revealed “severe safety issues” demonstrating that Boeing’s new 737 MAX airplanes unsafe to fly. The court held that (1) the plan participants named the incorrect fiduciaries in their complaint, (2) that Plaintiffs had failed to meet the Dudenhoeffer standard by not adequately pleading that a prudent fiduciary could not conclude that public disclosure of the issues pertaining to the 737 MAX airplanes would do more harm than good to the Plan, and (3) the plan participants failed to bear the burden of pleading that Defendants could have taken an alternative action, consistent with the securities laws, that a prudent fiduciary in similar circumstances could not have concluded that disclosure of this information pertaining to the 737 MAX airplanes would be more harmful than not.

Tenth Circuit

Ramos v. Banner Health, et al., Case No. 15-cv-2556 WJM-NRN, 2020 WL 6585849 (D. Colo. Nov. 10, 2020) (Judge William J. Martinez). This case arises out of claims involving alleged breaches of fiduciary duty against Banner Health and Jeffrey Slocum & Associates (“Slocum”). By way of background, the court denied class certification as to Slocum and granted Slocum’s motion for summary judgment as to all claims alleged against it, except for one.  Subsequently, plaintiffs and Slocum entered a settlement and submitted a Consent Motion for Class Certification and Preliminary Approval of Class Settlement. The court granted the motion and certified a class for purposes of settlement. The motions at issue in this decision are the parties’ Joint Motion for Approval of Settlement, Plaintiffs’ Motion for Approval of Attorney Fees and Class Representative Awards from the Slocum Settlement Fund. As to the settlement, the court applied the four factors to determine whether it was “fair, reasonable and adequate.” The court approved the settlement and granted the parties’ joint motion. As to the motion for attorney fees, the court determined that the one-third contingency fee was reasonable applying the “Johnson factors” and granted Plaintiffs’ motion. Finally, as to the incentive award, the court determined that $2,500 incentive payment for each plaintiff was reasonable given their participation and the overall recovery in this case and granted Plaintiffs’ motion. The court dismissed all claims as to Slocum with prejudice.

Disability Benefit Claims

Eighth Circuit

Gross v. Eaton Corp., No. 20-CV-377 (ECT/KMM), 2020 WL 6682499 (D. Minn. Nov. 12, 2020) (Judge Eric Tolstrud). In this dispute over long-term disability benefits, Defendant’s claims administrator denied Plaintiff’s claim because Plaintiff’s claimed disability was barred by the pre-existing condition limitation. Defendant concluded that Plaintiff’s knee pain was pre-existing because she sought care during the “lookback period” for that condition, which is undisputed. In finding for Defendant under an abuse of discretion standard, the court rejected Plaintiff’s argument that she was actually disabled from a knee condition called osteolysis which was distinct from the knee issues she experienced during the lookback period, finding Defendant’s rejection of this assertion not unreasonable, particularly when confirmed in the record by her own physician. It similarly rejected Plaintiff’s argument that Defendant’s determination was contradicted by its own physician, noting Defendant’s interpretation of the same to be reasonable as well.

Ninth Circuit

Driscoll v. MetLife Insurance, No. 15-CV-1162 JLS (LL), 2020 WL 6561365 (S.D. Cal. Nov. 6, 2020) (Judge Janis L. Sammartino). Plaintiff claimed long-term disability benefits based on the following conditions: dizziness, nausea, ringing in ear, ear pressure, fatigue, high blood pressure, palpitations, irritable bowel syndrome, difficulty recalling names and facts, and math difficulty. Under de novo review, the court found Plaintiff had failed to prove by a preponderance of the evidence these conditions, individually or as a whole, rendered him disabled under the terms of the Anheuser-Busch Inbev Inc. Plan. For example, Plaintiff described his dizziness as “the equivalent of having five beers and then standing up fast.” But the court concluded this failed to establish it was disabling. The court was sympathetic to Plaintiff’s nausea and other ailments, but Plaintiff has failed to show that nausea causing him to vomit several times a week prevented him from performing the material duties of his position.

Life Insurance & AD&D Benefit Claims

Eighth Circuit

Delker v. Mastercard International, Inc., et al., No. 4:19 CV 43 RWS, 2020 WL 6708522 (E.D. Mo. Nov. 16, 2020) (Judge Rodney Sippel). Plaintiff filed suit against his wife’s former employer when his claim for ERISA life insurance benefits was denied. He alleged that Defendant breached its fiduciary duty by making misrepresentations which led to the denial of benefits, as well as committed breach of contract and fraud in denying the life insurance claim. Specifically, Plaintiff alleged that Mastercard promised to pay premiums on his wife’s behalf, which it never did. The court granted Defendant’s motion to dismiss in full, finding that Defendant did not make misrepresentations which were sufficient to establish a violation of ERISA. Further, his state law allegations of breach of contract and fraud were preempted by ERISA.

Medical Benefit Claims

Ninth Circuit

Stone v. UnitedHealthcare Ins. Co., No. 19-16227, __ F.3d __, 2020 WL 6556332 (9th Cir. Nov. 9, 2020) (Before Circuit Judges Wallace, Tashima, and Bade). Plaintiff brought this action on behalf of her daughter, a California teenager suffering from anorexia who received residential mental health treatment in Colorado, seeking benefits for that treatment under an ERISA-governed HMO plan. United denied the claim, asserting that the plan contained a limitation excluding coverage for out-of-state treatment. Plaintiff contended that United’s treatment network in California could not provide the medically necessary treatment her daughter required, and thus United should have covered her Colorado treatment regardless of the limitation, because mental health parity laws require insurers to cover medically necessary residential treatment. The district court sided with United, and Plaintiff appealed. The Ninth Circuit affirmed, finding that the plan’s out-of-state limitation applied equally to mental and physical illnesses, and thus did not violate parity laws. The court distinguished its prior decision interpreting California’s parity law, Harlick v. Blue Shield, on the ground that the plan in Harlick excluded coverage for all residential treatment whereas the plan in this case covered such treatment, and under equal conditions as required by the statute.

Pension Benefit Claims

Fifth Circuit

Chetlin v. Exxon Mobil Oil Corp., No. 4:19-CV-1986, 2020 WL 6562103 (S.D. Tex. Nov. 9, 2020) (Judge Andrew S. Hanen). In this case regarding a claim for benefits due under the terms of the plan, the Magistrate Judge in this case issued a Memorandum and Recommendation concluding that Defendant’s benefit determination was correct and its motion for summary judgment should be granted. Plaintiff objected to the Magistrate Judge’s Recommendation, claiming the conclusions were reached in error. The court overruled plaintiff’s objections. Plaintiff argued the correct benefit plan was not in the record, but the court said she should have developed the record more fully during the litigation process before summary judgment. Because Plaintiff could not point to any plan terms which would entitle her to benefits, the court granted Defendant’s summary judgment motion.

Severance Benefit Claims

Second Circuit

Soto v. Disney Severance Pay Plan, et al., No. 19-CV-4048 (AJN), 2020 WL 6564721 (S.D.N.Y. Nov. 9, 2020) (Judge Alison J. Nathan). Plaintiff brings this action for severance benefits under an ERISA plan. She alleges that she is entitled to severance benefits because Disney terminated her employment due to her disability. The Plan creates three requirements for eligibility: (1) the person must be an “Eligible Employee,” (2) the person must be “specifically informed in writing that [she is] a Participant,” and (3) the person’s “employment termination” must be “a Layoff.” This case focuses on the second requirement, which the court refers to as the notice requirement, and the third requirement, which the court refers to as the layoff requirement. Disney denied Soto’s claim for severance benefits for two reasons: 1) Disney had not informed her in writing that she was a Plan Participant, and thus Soto did not satisfy the notice requirement; and 2) the Plan Administrator concluded that her termination did not constitute a “Layoff” within the Plan’s meaning, and thus she did not satisfy the layoff requirement. Even drawing all inferences in her favor, Soto has averred in her complaint that she never received notice from Disney as to her being a Participant—and she therefore did not satisfy the notice requirement, and the court need not reach the layoff requirement argument. In sum, because Plaintiff has alleged in her own complaint that she did not satisfy one of the Plan’s requirements for benefits, her claims must be dismissed.

Sixth Circuit

Woellecke v. Ford Motor Co., No. 19-CV-12430, 2020 WL 6557981 (E.D. Mich. Nov. 9, 2020) (Judge Bernard Friedman). Plaintiffs are former employees of Ford Motor Company. They were involuntarily terminated as part of a wave of layoffs. They alleged they were denied ERISA bridging benefits to enable them to meet pension milestones. Plaintiffs signed an agreement as part of their termination, which agreed to arbitration in the event of disputes related to the termination. The court held that the arbitration agreement was enforceable and applied to questions of whether a subject was arbitrable as well as the merits of the claims.

Subrogation/Reimbursement Claims

Sixth Circuit

Zirbel v. Ford Motor Company, ___F.3d___, 2020 WL 6704157 (6th Cir. 2020) (Before Sutton, Thapar, and Readler, Circuit Judges). See Notable Decision summary above.

Ninth Circuit

Smirk v. Trustees of Int’l Painters & Allied Trades Indus. Pension Plan, No. 219CV00650APGVCF, 2020 WL 6684979 (D. Nev. Nov. 12, 2020) (Judge Andrew P. Gordon). Plaintiff seeks to reverse a decision by the plan to recoup pension benefits paid to him. After 22 months of receiving benefits, Plaintiff was told his work disqualified him from pension benefits and he had to repay the benefits. Plaintiff alleges the plan’s retroactive decision was an abuse of discretion and the Trustees waived their rights to recoup the benefits. The Trustees allege that Plaintiff’s benefits were mistakenly approved. The court found the Trustees did not abuse their discretion in seeking to recoup the overpayment of pension benefits because they reasonably determined that Plaintiff never retired. The court relied on similar cases in which courts found no abuse of discretion where plan fiduciaries corrected an employee’s action. The court further held that waiver and estoppel do not apply because it would enlarge Plaintiff’s entitlement to benefits beyond what is permitted under the plan.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Rochester Laborers’ Welfare-S.U.B. Fund, et al., v. Akwesasne Construction, Inc., et al., No. 15-CV-6757-FPG, 2020 WL 6699523 (W.D.N.Y. Nov. 13, 2020) (Judge Frank P. Geraci, Jr.). The court granted in part and denied in part Plaintiffs’ supplemental motion for summary judgment. “Plaintiffs are entitled to $349,086.79 against Akwesasne in unpaid contributions, interest, and liquidated damages, and Cardinell is jointly and severally liable for a portion of those damages—namely, $89,223.17 in unpaid contributions and interest.”

Unite Here Retirement Fund & Trustees of The Unite Here Retirement Fund v. P.D. 33 Street Corp., et al., No. 19 CV 3855 (JGK), 2020 WL 6585850 (S.D.N.Y. Nov. 10, 2020) (Judge John G. Koeltl). “[T]he Court declines to adopt the Report and Recommendation of the Magistrate Judge with respect to the plaintiffs’ award of damages, attorney’s fees, and costs. The Clerk is directed to enter judgment in favor of the plaintiffs and against P.D. in the following amounts: (1) $1,123,010.01 in damages, consisting of withdrawal liability, liquidated damages, and interest; (2) $6,230 in attorney’s fees; and (3) $1,387 in costs, for a total of $1,130,627.01.”

Trustees of The Mason Tenders District Council Welfare Fund, Pension Fund, Annuity Fund, And Training Program Fund et al., v. A.J.S. Project Management, Inc., No. 19-CV-0711 (JGK), 2020 WL 6546212 (S.D.N.Y. Nov. 6, 2020) (Judge John G. Koeltl). “[T]he Petition to confirm the arbitration award is GRANTED and the underlying arbitration award is ordered confirmed. The Clerk is directed to enter Judgment confirming the Award, dated January 25, 2018, attached as Exhibit 1 to the Petition, and to enter Judgment in favor of the Petitioners and against the Respondent, awarding Petitioners $252,862.09, consisting of $160,004.34 of delinquent Fund contributions, $12,967.25 in dues and PAC contributions, $31,257.50 of ‘Current Interest,’ $31,257.50 of liquidated damages, plus interest for late payments, together with attorney’s fees and other costs.”

Fourth Circuit

Trustees of The Electrical Welfare Trust Fund, et al., v. America’s Best Service, Inc., No. GJH-19-2047, 2020 WL 6684874 (D. Md. Nov. 10, 2020) (Judge George J. Hazel). “Plaintiffs’ Motion for Summary Judgment is granted, in part, and denied, in part. Judgment is entered against Defendant in the total amount of $135,291.19, exclusive of attorneys’ fees and costs.”

Eighth Circuit

Greater St. Louis Construction Laborers Welfare Fund, et al. v. Terra-Scape Landscape Constructors, LLC, No. 4:18 CV 1282 RWS, 2020 WL 6680887 (E.D. Mo. Nov. 12, 2020) (Judge Rodney W. Sippel). In this case seeking fringe benefit contributions, the court granted Plaintiffs’ motion for summary judgment in the amount of $34,281.12.

D.C. Circuit

Iron Workers National Pension Plan, et al., v. Samuel Grossi & Sons, Inc., No. 20-CV-1204 (DLF), 2020 WL 6682678 (D.D.C. Nov. 12, 2020) (Judge Dabney L. Friedrich). In this dispute over delinquent contributions, the court granted Plaintiffs’ motion for partial default judgment.

Bricklayers & Trowel Trades International Pension Fund v. NY Big Apple Construction Corporation, No. 1:19-CV-03552 (TNM), 2020 WL 6683061 (D.D.C. Nov. 12, 2020) (Judge Trevor N. McFadden). In this dispute over delinquent contributions, the court granted Plaintiffs’ motion for default judgment.

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

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