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Your ERISA Watch – Sixth Circuit Vacates Arbitrator’s Award of Enhanced Healthcare Coverage to Retirees

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This week’s notable decision is an unpublished decision from the Sixth Circuit Court of Appeals:  International Union, United Automobile, Aerospace And Agricultural Implement Workers of America (UAW), et al., v. TRW Automotive U.S. LLC, No. 18-1160, __F.App’x__, 2019 WL 1040636 (6th Cir. Mar. 5, 2019).

In International Union, TRW Automotive brought a combined appeal challenging an arbitral decision in favor of retired TRW employees and their union and challenging the district court’s denial of TRW’s motion to rule that attorney’s fees could not be awarded against it.

The arbitrator found that TRW breached its contractual duties under the 2002 CBA to provide retirees and their eligible dependents with lifetime medical plan coverage as they had as active employees at the time of their retirement.  In 2002, the retirees were covered under a Blue Cross/Blue Shield plan.  TRW changed the default health insurance carrier to Humana (offering enhanced benefits) in 2007 and then to HRAs in 2011.  The arbitrator found that TRW’s transfer of retirees’ healthcare benefits to Health Reimbursement Accounts (HRAs) in 2011 constituted a breach of the CBA since the retirees had a vested right to lifetime hospital-medical-surgical insurance coverage.  To remedy the breach of the CBA, the arbitrator ordered TRW to revert the retirees’ healthcare coverage back to the Humana coverage it started in 2007.

Starting first with the attorney’s fees appeal, the court found that it lacked jurisdiction because the district court’s order is not final under 28 U.S.C. § 1291.  The district court ruled that the plaintiff employees could seek attorney’s fees notwithstanding that the arbitral award lacked a specific ruling regarding ERISA.  The district court dismissed their motion for attorney’s fees without prejudice on the basis that it was prematurely filed – the ERISA claims hadn’t been decided.  The plaintiff employees filed a second motion for attorney’s fees, which is pending before the district court.  Because the district court declined to decide TRW’s liability to pay fees for its ERISA violation, appellate review of the order would be premature.

On the appeal seeking to partially vacate the arbitration award, the court does have appellate jurisdiction.  It found that the arbitrator did not construe or apply the 2002 CBA when he ordered TRW to restore the enhanced healthcare benefits that it offered from 2007-2012.  The arbitrator exceeded his authority by interpreting the retirees’ acceptance of the Humana plan as a modification of their prior agreement.  The arbitrator’s reasoning disregards the plain language of the CBA and relies on TRW’s decision to enhance healthcare benefits in 2007 as justification for ordering a more generous remedy than would have been required by the terms of the CBA.  The decision should have been based on the 2002 CBA and not on a subsequent agreement between the parties.  For these reasons, the court found that “the district court erred by affirming the arbitrator award, rather than vacating the remedy as an illegitimate procedural aberration.”

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

Attorneys’ Fees

Fifth Circuit

Boards of Trustees of The Texas Carpenters And Millwrights Health And Welfare Fund, et al. v. Refined General Contractors, LLC, No. 5:18-CV-00465-XR, 2019 WL 1004854 (W.D. Tex. Mar. 1, 2019) (Judge Xavier Rodriguez).  Following a grant of default judgment to Plaintiffs on their claims seeking contributions to employee benefit trusts, the court granted Plaintiffs’ motion for attorneys’ fees in part in the amount of $5,475.

Ninth Circuit

Herrman v. LifeMap Assurance Company, No. 3:17-CV-01336-MO, 2019 WL 1040970 (D. Or. Mar. 5, 2019) (Judge Michael W. Mosman).  In this case, where the court previously granted summary judgment to Plaintiff on her claim for long term disability benefits, the court denied awarding attorneys’ fees because it “was a close case” and both parties had credible evidence to support their position.

Breach of Fiduciary Duty

Ninth Circuit

Terraza v. Safeway Inc., et al., No. 16-CV-03994-JST, 2019 WL 1059688 (N.D. Cal. Mar. 6, 2019) (Judge Jon S. Tigar).  The court denied Defendants’ motion to exclude the expert report of Plaintiff’s expert witness, Roger Levy.  Levy’s opinion as to whether the Defendants’ actions, procedures, and process were consistent with the standards of care of a fiduciary acting exclusively for the purpose of providing benefits to participants and beneficiaries, is admissible.  Levy’s opinions regarding the reasonableness of recordkeeping fees are also not improper.

Tenth Circuit

Troudt, et al., v. Oracle Corporation, et al., No. 16-CV-00175-REB-SKC, 2019 WL 1006019 (D. Colo. Mar. 1, 2019) (Judge Robert E. Blackburn).  In this certified class action alleging violations of ERISA for recordkeeping fees and imprudent investments, the court granted Defendants’ motion for summary judgment in part.  The following claims remain for determination at trial:  “(1) the allegedly imprudent investment in the Artisan Fund (Count II); (2) the allegedly imprudent retention of the TCM Fund (Count II); (3) the alleged failure to monitor the breach of fiduciary duty in the retention of these two allegedly imprudent investments.”

Disability Benefit Claims

Third Circuit

Blackburn v. Life Insurance Company of North America, No. CV 17-11940 (JLL), 2019 WL 1035860 (D.N.J. Mar. 5, 2019) (Judge Jose L. Linares).  In this dispute over long term disability benefits based on fibromyalgia, degenerative disc disease, chronic pain, migraines, and depression, the court found that LINA did not abuse its discretion in denying benefits and granted it summary judgment.  The court found that LINA’s decision was based on substantial evidence where it “analyzed the medical opinions of Plaintiff’s treating physicians, credited said opinions with the weight it found appropriate and relied on said opinions along with the other evidence in the record.”

Sixth Circuit

Carty v. Metropolitan Life Insurance Company, et al., No. 3:15-CV-01186, 2019 WL 1058195 (M.D. Tenn. Mar. 5, 2019) (Judge Aleta A. Trauger).  MetLife was arbitrary and capricious in having no basis to assert that Plaintiff could make 50% of his salary.  MetLife also relied on statements by its IME doctor that do not support the broad conclusions that MetLife drew from it, mainly that the records did not support cognitive or psychiatric functional limitations.  As a remedy, the court “sees no reason to remand Carty’s case to MetLife a second time, to perform what would be a fundamentally non-medical analysis on an issue where MetLife itself admits the evidence already in the record is sufficiently complete to allow one to draw a conclusion. The court will order MetLife to restore Carty’s benefits and pay the past benefits to which he was entitled.”

Eighth Circuit

Moldovan v. Wells Fargo Company, et al., No. 4:18-CV-355 CAS, 2019 WL 1060032 (E.D. Mo. Mar. 6, 2019) (Judge Charles A. Shaw).  The court granted Defendants’ motion for summary judgment.  It found that “Liberty did not abuse its discretion in denying Plaintiff’s short-term disability benefits claim on the basis that she did not have a ‘medically certified health condition’ as that term is defined in the [Short Term Disability] Plan.”  Neither the Plan nor the case law required Liberty to obtain a vocational evaluation of Plaintiff’s job.

Ninth Circuit

Valdez v. AT&T Umbrella Benefit Plan No. 1, No. 16-CV-2613-BTM-BGS, 2019 WL 1017265 (S.D. Cal. Mar. 4, 2019) (Judge Barry Ted Moskowitz).  This is a dispute over short-term disability benefits.  Plaintiff conceded “because AT&T delegated decision-making authority to a third-party administrator, no conflict of interest exists and the correct standard of review is abuse of discretion.”  The court found that Sedgwick’s denial of STD benefits was an abuse of discretion because it “(1) unreasonably discounted Plaintiff’s subjective reports of pain; (2) erroneously concluded that Plaintiff’s symptoms had improved; and (3) failed to conduct its own examination or address the conflicting opinion of previous PA’s and treating physicians.”  The court remanded the STD claim for payment of benefits.  The court found that it is improper to decide Plaintiff’s claim for long term disability benefits before she has applied for them.  The court remanded the LTD claim to Sedgwick for determination.

Discovery

Ninth Circuit

Benis v. Reliance Standard Health Ins. Co., No. 18-CV-164-RAJ, 2019 WL 1056401 (W.D. Wash. Mar. 6, 2019) (Judge Richard A. Jones).  In this long term disability dispute, the court granted Plaintiff’s motion to compel, in part.  Reliance’s first medical reviewer was an unlicensed individual who posed as a doctor for the purposes of authoring the report upon which Reliance relied to deny Plaintiff’s eligibility for benefits.  “Ultimately, given the serious credibility issues associated with Defendant’s previous medical reviewer, the Court finds that additional discovery into the credibility of Defendant’s previous and current medical reviewers is necessary to conduct an adequate de novo review.”   The court declined to permit the depositions of all the new medical reviewers at this time given the limited discovery permitted in de novo ERISA actions.

ERISA Preemption

Third Circuit

Catoggio v. Sheet Metal Workers International Association, Local Union 25, et al., No. CV 2:18-17120 (JLL), 2019 WL 1055741 (D.N.J. Mar. 6, 2019) (Judge Jose L. Linares).  Plaintiff alleges that Defendants retaliated against and terminated him for reporting their unlawful practice of assigning union-required work to non-union employees and seeking workers’ compensation benefits after sustaining an injury.  He also alleges that Defendants discriminated against him when they terminated his apprenticeship in the Joint Apprenticeship and Training Committee of the Sheet Metal Worker’s Local Union based on his injury-related disability.  The court granted Plaintiff’s motion to remand his lawsuit to state court, finding that his claims brought under New Jersey law are not preempted by ERISA.  The fact that the Apprenticeship program is an ERISA-governed plan does not mean Plaintiff is seeking to recover benefits or enforce his rights under the Plan.  He is only seeking damages related to Defendants alleged discriminatory and retaliatory conduct.

Exhaustion of Administrative Remedies

Eight Circuit

Ausler v. Aetna Life Insurance Co., No. 4:18-CV-00315 JAR, 2019 WL 1015004 (E.D. Mo. Mar. 4, 2019) (Judge John A. Ross).  The court agreed with Aetna that Plaintiff’s denial-of-LTD-benefit claim is barred because she failed to exhaust the Plan’s internal claims process by not initiating an LTD claim.  The court rejected Plaintiff’s argument that she had no obligation to exhaust Aetna’s internal claims procedure for her LTD benefits claim because once her STD claim was denied.  The court noted that nothing in the Plan affirmatively states that LTD benefits are contingent on being approved for STD benefits.  Plaintiff’s complaint fails to state a facially plausible claim to relief.

Medical Benefit Claims

Ninth Circuit

Wit v. United Behavioral Health, No. 14-CV-02346-JCS, 2019 WL 1033730 (N.D. Cal. Mar. 5, 2019) (Magistrate Judge Joseph C. Spero).  In related class actions alleging that UBH “improperly denied benefits for treatment of mental health and substance use disorders because UBH’s Guidelines do not comply with the terms of their insurance plans and/or state law,” following a 10-day bench trial, the court found UBH liable for breach of fiduciary duty under ERISA Section 502(a)(3) and for benefits under Section 502(a)(1)(B).  The court issued a lengthy opinion detailing how UBH’s Guidelines are mostly inconsistent with generally accepted standards of care and how the Guideline development process placed too heavy an emphasis on crisis stabilization and insufficient emphasis on effective treatment of co-occurring and chronic conditions.

Eleventh Circuit

Alexandra H. v. Oxford Health Insurance, Inc., No. 18-11105, __F.App’x__, 2019 WL 1092625 (11th Cir. Mar. 8, 2019) (Before WILSON, JILL PRYOR, and SUTTON,* Circuit Judges).  The court affirmed the grant of summary judgment to Oxford on its decision that Plaintiff no longer needed partial hospitalization for anorexia after a few weeks of treatment.  The court found that the evidence showed that Plaintiff could safely transition to less intensive care and partial hospitalization was no longer “most appropriate.”  The court determined that Plaintiff’s progress was substantial enough that a step down in treatment was unlikely to cause a setback.  This was despite that Plaintiff had tried and always failed outpatient treatment and her doctor’s opinion that her history of premature treatment step-downs contributed to the chronic nature of her illness.

Pension Benefit Claims

Fifth Circuit

Iwobi v. Adm’r, Lyondellbasell Ret. Admin., No. 4:17-CV-02347, 2019 WL 1058244 (S.D. Tex. Mar. 6, 2019) (Judge Andrew S. Hanen).  In this suit by a pro se plaintiff, the court granted summary judgment to Defendants, finding that the Benefits Administrative Committee’s decision to not award back disability pension benefits for over a decade is completely supported by the evidence. During the period in dispute, Plaintiff was either not disabled, had not applied for benefits, or did not provide proof of disability.  When he finally applied for benefits in April 2016 and subsequently provided proof of disability, the Committee properly awarded him benefits backdated to the first of the month following his original application.

Sixth Circuit

Davis v. Boilermaker-Blacksmith Nat’l Pension Tr., No. 3:16-CV-2746, 2019 WL 1018697 (N.D. Ohio Mar. 4, 2019) (Judge Jeffrey J. Helmick).  The court granted summary judgment to the Pension Trust.  Plaintiff is the participant’s ex-wife who sought benefits as a beneficiary to the deceased’s pension.  Though they were divorced, they were living together and planned to get re-married the month after he passed away.  The Plan nullifies a spouse as a beneficiary as of the “date of dissolution” unless the participant redesignates the spouse after the dissolution.  The participant here did not re-designate his ex-wife following the divorce.  The court found that the plan administrator’s decision denying benefits was a reasonable interpretation of the Plan.  Specifically, it was reasonable for the claims administrator to interpret “dissolution” to include “divorce” even if these two terms are distinguishable under Ohio law.

Baker v. Ohio Operating Engineers Pension Fund, No. 2:17-CV-316, 2019 WL 1002940 (S.D. Ohio Mar. 1, 2019) (Judge Algenon L. Marbley).   It was not an abuse of discretion for the Plan to deny payment of the decedent’s remaining single life annuity payments to his Estate where decedent did not name a beneficiary and had no surviving spouse, children, siblings, or parents.  In light of the Plan terms, it was not unreasonable for Defendants to deny the Estate benefits where the relevant plan term does not enumerate “the Participant’s Estate” among the beneficiaries and the decedent did not designate his Estate as his beneficiary.  The court granted Defendants’ motion for judgment as a matter of law.

In re Culane, No. 16-21427-DOB, 2019 WL 1005823 (Bankr. E.D. Mich. Feb. 28, 2019) (Bankruptcy Judge Daniel S. Opperman).  The court did not sustain Organ Procurement Agency of Michigan’s (“OPA”) objection to the debtor’s claimed exemption of her unpaid pension benefits from OPA, for which she had filed a lawsuit against OPA after filing a Chapter 7 petition without disclosing her ERISA claim.  The court explained that a debtor’s beneficial interest in an ERISA-qualified plan is excluded from the debtor’s estate.  It does not matter whether OPA ever created an account for her since Section 541(c)(2) does not require an “account.”

Ninth Circuit

Evans v. Boilermaker-Blacksmith National Pension Trust, et al., No. 216CV01043TLNKJN, 2019 WL 1004581 (E.D. Cal. Mar. 1, 2019) (Judge Troy L. Nunley).  The court determined that Defendants did not abuse their discretion by interpreting “totally and permanently disabled” in the Plan to mean disabled as of the Social Security Administration’s date of disability.  By using this date, Defendants determined that Plaintiff had not worked 120 hours in covered employment in the Plan credit year in which he became totally and permanently disabled and was not entitled to disability retirement benefits.  Summary judgment granted to Defendants.

Pleading Issues & Procedure

First Circuit

Tracy, et al. v. Massachusetts Institute of Technology, et al., No. CV 16-11620-NMG, 2019 WL 1005488 (D. Mass. Feb. 28, 2019) (Magistrate Judge Marianne B. Bowler).  The court granted Defendants’ motion to strike Plaintiffs’ demand for a jury trial for their breach of fiduciary duties and prohibited transactions claims.  The court determined that “claims under ERISA for recovery of benefits allegedly due and for breach of fiduciary duties are analogous not to legal actions for breach of contract but to actions by a beneficiary against a trustee under the law of trusts.  The court followed the great weight of authority holding that ERISA actions to remedy alleged violations of fiduciary duties are equitable in nature and there is no right to a jury trial under the Seventh Amendment.

Fourth Circuit

Kinsinger v. Good, No. 317CV00643FDWDCK, 2019 WL 1028017 (W.D.N.C. Mar. 4, 2019) (Judge Frank D. Whitney).  In this dispute alleging that Defendants had misappropriated employee health insurance contributions, refused to pay a valid claim under the health insurance policy, and failed to pay wages to Plaintiff, the court found good cause to set aside the entry of default against Defendant Crook and granted his motion to set aside the default.

Sixth Circuit

International Union, United Automobile, Aerospace And Agricultural Implement Workers of America (UAW), et al., v. TRW Automotive U.S. LLC, No. 18-1160, __F.App’x__, 2019 WL 1040636 (6th Cir. Mar. 5, 2019) (BEFORE: Siler, Moore, and Rogers, Circuit Judges).  See Notable Decision summary above.

Remedies

Ninth Circuit

Rodriguez v. The Prudential Insurance Company of America, No. 3:18-CV-5674-RBL, 2019 WL 1040406 (W.D. Wash. Mar. 5, 2019) (Judge Ronald B. Leighton).  Under Section 502(a)(3), Plaintiff sought an injunction barring Prudential from relying on medical reports it obtained to terminate her claim and deny her appeal and to pay her long term disability benefits.  The court dismissed Plaintiff’s Section 502(a)(3) claim because her request for an injunction ordering payment of long term disability benefits is fatally flawed and duplicative of her Section 502(a)(1)(B) claim.  Though Plaintiff alleges that Prudential has a long history of employing biased consultants, the remedy she requests is specific to her and would not benefit other members of the Plan, running afoul of Amalgamated Clothing & Textile Workers Union, AFL–CIO v. Murdock, 861 F.2d 1406 (9th Cir.1988) and Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985).

Severance Benefit Claims

Second Circuit

Melendez v. New York Foundling, Inc., No. 17-CV-6162 (KMK), 2019 WL 1084776 (S.D.N.Y. Mar. 7, 2019) (Judge Kenneth M. Karas).  Assuming without deciding that the Severance Plan is covered by ERISA, the court found that Plaintiff’s allegations due not support a claim that the termination was a “Qualifying Event.”  A “Qualifying Event” is defined as “an Employee loses employment because of reorganization, elimination of a position, or department cutback.”  Here, Plaintiff alleges that he was “terminated” and that another employee “replaced” him.  The court dismissed the ERISA claim without prejudice.

Statute of Limitations

Eight Circuit

Ausler v. Aetna Life Insurance Co., No. 4:18-CV-00315 JAR, 2019 WL 1015004 (E.D. Mo. Mar. 4, 2019) (Judge John A. Ross).  The court concluded that the Plan’s 180-day deadline to file a lawsuit for disability benefits is enough time to investigate and file an ERISA lawsuit.  Because Plaintiff did not file her lawsuit for short-term disability benefits for nearly three years, her claim is time-barred.

Tenth Circuit

Troudt, et al., v. Oracle Corporation, et al., No. 16-CV-00175-REB-SKC, 2019 WL 1006019 (D. Colo. Mar. 1, 2019) (Judge Robert E. Blackburn).  Following certification of the matter as a class action and defining all three subclasses to commence on January 1, 2009 to see whether Plaintiffs could establish facts sufficient to toll limitations, the court determined that Plaintiffs have failed to do so and any claim based on conduct occurring before January 22, 2010 (six years before the Complaint filing), is time-barred.

Statutory Penalties

Ninth Circuit

Rodriguez v. The Prudential Insurance Company of America, No. 3:18-CV-5674-RBL, 2019 WL 1040406 (W.D. Wash. Mar. 5, 2019) (Judge Ronald B. Leighton).  Plaintiff brought a claim for statutory penalties under Section 1132(c) against Concur for failing to furnish documents relevant to Plaintiff’s claim for disability benefits.  The court found that “Concur is correct that the Complaint does not clearly allege a specific, written request for information consistent with § 1024(b)(4). However, this should be easily remedied through amendment. The Court also disagrees with Concur’s reading of Moran as holding that a plaintiff must have directed their request to the administrator. Moran’s holding addressed who can be sued under § 1132(c) and the statutory definition of ‘plan administrator.’  . . .  In contrast, neither § 1132(c)(1) nor § 1024(b)(4) explicitly state that the request must be ‘directed’ to the administrator.  Nonetheless, if Rodriguez did direct her request to Concur, she would be advised to allege as much in her amended complaint.”

Withdrawal Liability & Unpaid Contributions

Second Circuit

Bricklayers Ins. & Welfare Fund v. Bella Grp., LLC, No. 17CV4479DRHSIL, 2019 WL 1033794 (E.D.N.Y. Mar. 5, 2019) (Judge Denis R. Hurley).  The court awarded Plaintiffs damages in the amount of $14,266.69 against Defendant Bella, and $6,969.20 against Defendant Chwedczuk.  The court also granted Plaintiffs’ request for an injunction compelling Defendant Bella to submit to an audit.

Fourth Circuit

Penske Logistics LLC v. Freight Drivers & Helpers Local Union No. 557 Pension Fund, No. CV RDB-15-3277, 2019 WL 1081391 (D. Md. Mar. 7, 2019) (Judge Richard D. Bennett).  “Judgment shall be entered in favor of Penske Logistics LLC and Penske Truck Leasing Co., L.P., and against Freight Drivers and Helpers Local Union No. 557 Pension Fund and Joint Board of Trustees of the Freight Drivers and Helpers Local Union No. 557 Pension Fund, in the principal amount of $9,586,345.39, together with interest on those payments, calculated pursuant to the provisions of 29 C.F.R. §§ 4219.31(d) and 4219.32, together with $44,302.00 in reasonable attorneys’ fees incurred in connection with certain depositions during the Arbitration.”

Seventh Circuit

Trustees of The Chicago Regional Council of Carpenters Pension Fund, et al. v. American Mechanical, Inc., No. 16 C 9165, 2019 WL 1077145 (N.D. Ill. Mar. 7, 2019) (Judge Jorge L. Alonso).  The court granted Plaintiffs’ motion for summary judgment and granted Plaintiffs judgment in the amount of $53,225.63.

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