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Your ERISA Watch – When Does Fraud Not Mean Fraud? Second Circuit Further Educates Us About Equitable Remedies

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When the United States Supreme Court decided CIGNA Corp. v. Amara, 563 U.S. 421 (2011), it educated us all by citing to doctrines of equity from cases and horn books written 200 years ago. This week, the Second Circuit’s decision in Sullivan-Mestecky v. Verizon Communications Inc., __F.3d__, 2020 WL 2820334 (2nd Cir. June 1, 2020), went back only 60 years to cite cases explaining that, in a court of equity, “fraud” does not mean what you were taught in law school. Fraud has a broader meaning in equity than at law. The intention to defraud or to misrepresent are not necessary. Rather, “fraud” in a court of equity properly includes all acts, omissions, and concealments which involve a breach of legal or equitable duty, trust, or confidence, “justly reposed, and are injurious to another.” You get this education for free. For Verizon, it might cost them $571,200 plus attorneys’ fees and costs. Why?

Kathleen Sullivan was employed by Verizon from 1970 to 1978. Her annual income: $18,600. Through her employment she received various benefits. In June 2011, Sullivan contacted Verizon Benefits Center, which at the time was administered by the Aon Hewitt Company. In response, Verizon sent Sullivan a letter that said she was eligible for life insurance option “1 x Pay.” The insurance was provided by Prudential. The worksheet stated the coverage amount was $679,700. Aon Hewitt had coded Sullivan’s annual income as her weekly income. It should have said $18,600. Sullivan called Verizon and enrolled in the “1 x Pay” option, designating the beneficiary as her daughter, Plaintiff Kristine Sullivan-Mestecky.

After enrolling, Sullivan received various mailings from Verizon, as plan administrator, confirming the existence and $679,700 coverage amount of the policy. Some of these mailings prompted Sullivan to call Verizon for more information. On these calls, Sullivan expressed her understanding, and even surprise, about the extent of the benefits. However, Verizon representatives at Aon Hewitt repeatedly confirmed the existence and coverage amount of the policy.

Under the belief she was the beneficiary of a generous life insurance policy, Plaintiff allowed her aging mother to live at her home rent-free, covered her mother’s living expenses, paid off her mother’s debts, and took an extended unpaid leave of absence from work to care for her mother. After Plaintiff’s mother died, she made a claim for $582,600 in death benefits—an amount that reflected a decrease in the benefit amount due to Sullivan’s age. In response, Prudential paid $11,380 for Sullivan’s funeral expenses and sent Plaintiff a check for $20.

Plaintiff challenged the benefit amount, was told of Aon Hewitt’s mistake, and no further benefits were paid. Plaintiff eventually filed suit against Verizon and Prudential under ERISA Section (a)(1)(B) and (a)(3). The Second Circuit upheld the district court’s dismissal under Rule 12(b)(6) of the (a)(1)(B) claims because Verizon and Prudential chose, in their discretion, to pay benefits under the plan’s terms rather than the worksheet and other documents. It also upheld the (a)(3) dismissal against Prudential because it had not fielded questions from Sullivan regarding the policy or repeatedly misrepresented its benefits. The dismissal of the (a)(3) claim against Verizon was reversed.

The Second Circuit explained that Plaintiff was appropriately seeking equitable relief in three forms: (1) estoppel, (2) surcharge, and (3) reformation. Its evaluation of estoppel was the most in depth and illuminating.

Promissory estoppel is an appropriate remedy when a promisor should reasonably expect a promise to induce action or inaction on the part of the promisee, the promise actually does induce action or inaction, and injustice can be avoided only by enforcement of the promise. Under Second Circuit authority, it can apply in ERISA cases, but only “under extraordinary circumstances.” This lessens the danger that commonplace communications from employer to employee will routinely be claimed to give rise to employees’ rights beyond those contained in formal plan documents. Thus, to make a claim for estoppel under (a)(3), a plaintiff must plausibly allege (1) a promise, (2) reliance on the promise, (3) injury caused by the reliance, (4) an injustice if the promise is not enforced, and (5) extraordinary circumstances.

The fifth element (not Leeloo) was where the district court went wrong. It held extraordinary circumstances arose only when the requisite promise was made for the purpose of inducing certain employee conduct. Essentially “conduct tantamount to fraud.” Citing to a 1964 Supreme Court case, the Second Circuit rejected this high standard, explaining that “fraud” in a court of equity was different from fraud at law. Rather, for an (a)(3) claim, “estoppel can be plausibly pled as an appropriate equitable remedy by an ERISA plaintiff alleging gross negligence in the absence of intentional inducement.”

After finding Verizon’s conduct satisfied the five elements for estoppel, the Second Circuit explained surcharge and reformation were also available. Surcharge provides relief in the form of monetary “compensation” for losses resulting from a trustee’s breach of duty. For ERISA, it depends on a fiduciary breach, specifically the failure to act with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in like capacity and familiar with such matters would use. Verizon’s consistent failure to provide complete and accurate information about Sullivan’s “status and options” in response to Sullivan’s questions was sufficient to support the equitable remedy of surcharge. In a footnote, the Second Circuit addressed the appropriate amount of equitable compensation, stating “we think it appropriate for a plaintiff to seek relief in the amount of the promised policy, not just in the amount of wrongly-accepted premiums….”

Finally, the Second Circuit found that equitable reformation was available. This is when a contract is reformed due to mutual mistake of both parties or where “one party is mistaken and the other commits fraud or engages in inequitable conduct.” Again, since this is equity, the standard for fraud is the broader “equitable fraud.” “As a result of Verizon’s fraudulent representations, Sullivan reasonably but mistakenly expected that Sullivan-Mestecky would receive the generous death benefits.” This would allow the district court to reform the terms of the plan sufficient to bind Verizon to its fraudulent reformation. “Reforming the plan to accord with Sullivan’s reasonable expectations is an appropriate equitable remedy.” This reformation can be specific to the plaintiff and need not reform the plan for all plan participants.

In closing, the Second Circuit batted away Verizon’s school-yard argument that it was not liable because Aon Hewitt, not Verizon itself, provided the misinformation. It explained that plan administrators may perform a fiduciary function through ministerial agents, such as Aon Hewitt, without converting those individual agents themselves into fiduciaries. Accordingly, when Verizon arranged for Aon Hewitt to communicate with Sullivan about her plan benefits, Verizon was performing a fiduciary function and was bound by its fiduciary duty to properly administer the plan. Aon Hewitt’s status as a ministerial agent does not prevent imputing its actions upon Verizon. “Verizon cannot hide behind Aon Hewitt’s actions to evade liability for the fiduciary breach that occurred here.”

This week’s notable decision was summarized by Brent Dorian Brehm, a partner at Kantor & Kantor LLP. Brent has litigated several (a)(3) claims based on surcharge and is excited for when the time comes to utilize equitable fraud to ensure an injustice is not done to his clients.

Finally, congratulations to ERISA Watcher, Peter Stris of Stris & Maher LLP, for his victory in this week’s notable decision.

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

Attorneys’ Fees

Fourth Circuit

Kinsinger v. SmartCore, LLC, No. 317CV00643FDWDCK, 2020 WL 2926476 (W.D.N.C. June 3, 2020) (Judge Frank D. Whitney). In this dispute concerning claims for unpaid wages and medical benefits under ERISA § 502(a)(1)(B), the court awarded Plaintiffs $334,407.00 in attorneys’ fees; $4,525.75 in costs; and $1,763.56 in prejudgment interest related to unpaid wages and $5,000.72 in prejudgment interest related to wrongful denial of medical benefits. The court found that Plaintiff’s rejection of Defendants’ January 2019 offer was not unreasonable, as Plaintiffs had a reasonable concern that Defendants’ request would further delay litigation because it required an extension of the MSJ briefing deadline. In addition, Plaintiffs continued to engage in settlement negotiations, so the fees incurred after January 2019 were proper. The court also reviewed the log entries related to legal research and found no specific grounds that would have warranted alteration because counsel spent years litigating the case which involved multiple complex legal issues. The entries also adequately specify the research conducted. The court did decline to award fees related to clerical tasks, which were non-reimbursable. Finally, as to fees related to drafting the complaints and subsequent amendments, the court awarded full fees related to drafting the original complaint, but reduced fees by 30% for drafting the FAC as it contained only eight additional paragraphs. However, Plaintiffs’ SAC was 40 paragraphs longer and no reduction was warranted. The court reduced fees by 10% as to the time billed in “blocks.” The court found that the rates of $400 per hour for partners and $250-$300 for associates were reasonable and were supported by affidavits from other attorneys.

Krysztofiak v. Bos. Mut. Life Ins. Co., No. CV DKC 19-0879, 2020 WL 2839100 (D. Md. June 1, 2020) (Judge Deborah K. Chasanow). Plaintiff sought attorneys’ fees which Defendants did not oppose, except for challenging the reasonableness of hours claimed. The court reduced the fees claimed in connection with Plaintiff’s motion for reconsideration ($6,300) by two-thirds because the motion was largely inconsistent with the court’s order, as the order only awarded benefits for the “own occupation” period. The court, however, declined to reduce fees further based on an unsupported argument by Defendant that it would have likely agreed to the requested fee were Plaintiff willing to negotiate it. The court awarded $33,080 in attorneys’ fees and reduced prejudgment interest from 6% to 3%, considering the latter to be more reasonable.

Ninth Circuit

Fogerty v. Aetna Life Insurance Company, Case 2:19-cv-03018-DSF-GJS (C.D. Cal. May 26, 2020) (Judge Dale S. Fischer). Following a settlement of Plaintiff’s long-term disability claim, in which Aetna agreed to “pay all past-due LTD benefits owed to Plaintiff and to pay future LTD benefits to Plaintiff upon her proof that they are due and owing,” Plaintiff moved to recover $168,847.50 in fees incurred by her attorneys. Aetna did not contest that Plaintiff satisfied the Hummell factors and is entitled to a fee award. The court found that since the parties settled, several of the Hummell factors are inapplicable or neutral. Weighing in support of a fee award is Aetna’s ability to pay and the relative merits of the parties’ positions. Regarding the hourly rate, the court found that attorney declarations from other plaintiff-side ERISA attorneys were entitled to relatively little weight and relied instead on the 2018 Real Rate Report. The court awarded Plaintiff’s lead counsel with 34 years of experience $750/hour and an associate with 14 years of experience a rate of $450/hour. With respect to the reasonableness of hours, the court reduced time spent on various tasks and motions but notably awarded fees for 45.45 hours spent on drafting a motion to augment the administrative record and 20.5 hours for drafting a mediation statement. the court found that counsel’s 23.3-hour review of the record, which is a pace of 1.3 minutes per page was on the high end but still appropriate. The court excluded a total of 18.9 hours spent by the partner and 13.3 hours spent by the associate. The court awarded Plaintiff $113,685 in lodestar attorneys’ fees.

Disability Benefit Claims

First Circuit

Willitts v. Life Ins. Co. of N. Am., No. 1:18-CV-11908-ADB, 2020 WL 2839091 (D. Mass. June 1, 2020) (Judge D.J. Burroughs). This is a dispute over short-term disability benefits. Plaintiff Willitts submitted a claim for short-term disability benefits based on anxiety and depression. Defendant LINA administers the short-term disability plan. Willitts’s counselor supported his disability and advised him to seek pharmacological treatment with his primary care doctor. The primary care doctor prescribed Willitts medication for his anxiety on September 13, 2016. A week later, Willitts reported he was feeling better. In a follow-up office visit on October 24, 2016, Willitts’s doctor noted he was doing well on the medication. Shortly after, LINA approved Willitts’s short-term disability claim through September 29, 2016. Willitts appealed, and LINA upheld its decision. Willitts sued LINA alleging various state law claims which were found to be preempted by ERISA, and a claim for benefits due under an ERISA plan. The court determined that LINA was a proper party to the lawsuit because it is the administrator of the plan. The court also found that LINA’s decision was not arbitrary or capricious because Willitts’s primary care doctor had documented that Willitts was feeling better and was not in distress. The court granted summary judgment for LINA on the state law and ERISA claims.

Fifth Circuit

McCook v. Unum Life Ins. Co. of Am., No. CV 17-7835, 2020 WL 2812853 (E.D. La. May 29, 2020) (Before District Judge Carl Barbier). Plaintiff filed suit when Unum denied her claim for long term disability benefits beyond the two-year limitation applied to disabilities resulting from mental health issues. Plaintiff argued that her condition was primarily physiological resulting from mold toxicity, and all her psychiatric symptoms stemmed from that physiological condition. Utilizing the de novo standard of review, the court found that Plaintiff had not met her burden of establishing that she was disabled from a physiological condition. It concluded that each piece of evidence provided by Plaintiff lacked support from the scientific community; namely, the SPECT examination relied upon was not a reliable method for examining toxic exposure. The court also acknowledged Plaintiff’s argument that no better evidence existed than the SPECT to confirm Plaintiff’s physiological status. While empathetic of the position, the court suggested the fact that proper testing does not exist does not mean UNUM is forced to acknowledge or accept “the best” testing method available when that method is not scientifically reliable.


Ninth Circuit

Scalia v. Saakvitne, No. CV 18-00155 SOM-WRP, 2020 WL 2841884 (D. Haw. June 1, 2020) (J. Susan Oki Mollway). Two owners of a company created an employee stock ownership plan (ESOP) and sold their 100% ownership interest in the company to the ESOP. The Department of Labor sued them, the plan, and other parties under ERISA, alleging that the company was overvalued based on faulty data, which meant that the ESOP had paid the owners more than the company was worth, improperly benefiting them to the detriment of the ESOP. In discovery, Defendants sought to obtain from the government certain documents. The government withheld production pursuant to the deliberative process privilege, which allows it to protect documents that reveal the deliberative analysis preceding an agency decision. After an in camera review, the magistrate judge assigned to the case upheld this privilege, and Defendants appealed to the district court judge. The district court affirmed the magistrate judge’s ruling, finding it was not clearly erroneous. In doing so, the court noted that Defendants had conceded that the documents were covered by the privilege and ruled that their need for the withheld documents did not outweigh the government’s interest in nondisclosure. The court also found that some of the information Defendants sought, such as evidence regarding valuation and loss and when the government became aware of Defendants’ conduct, could be obtained through other discovery methods.

Tomlinson v. United Behavioral Health, No. 19-CV-06999-RS (JCS), 2020 WL 2850182 (N.D. Cal. June 2, 2020) (Judge Joseph C. Spero). Plaintiffs brought the case following denial of coverage for residential treatment by UBH on behalf of individuals whose requests for benefits were denied under UBH’s 2017 Guidelines after the class cut-off date in Wit and Alexander. The court was presented with a joint discovery letter addressing (1) whether an evidence provision in the plan that limits review to the administrative record precludes discovery of materials outside the administrative record and (2) whether discovery produced in Wit should be deemed produced in this action. The court found that UBH’s reliance on the evidence provision to avoid all discovery outside the administrative record improper. The court held that Plaintiff is entitled to discovery outside the administrative record that is otherwise relevant and proportional. The court declined to decide the second issue because the issue is not ripe. However, the court noted that the interests in judicial economy and avoidance of wasteful duplication are particularly salient here and UBH has not offered any reasons why modification of the protective order in Wit could not be achieved. The court found that the parties have not completed the process of meeting and conferring to determine the specific areas of disagreement.

ERISA Preemption

Fifth Circuit

Hernandez v. Unum Grp., No. 5:19-CV-037-H, 2020 WL 3001910 (N.D. Tex. June 4, 2020) (Judge James Wesley Hendrix). In this dispute over life insurance benefits, the court found that benefits were payable to the decedent’s ex-spouse, Sara, and not the decedent’s surviving parents. Though Sara was no longer his spouse at the time of death, she was the named beneficiary of the ERISA plan benefits.  The court, following Fifth Circuit precedent, found that ERISA preempts Texas Family Code § 9.301, which revokes spousal designations in life insurance policies following a divorce.

Eighth Circuit

Boilermaker-Blacksmith Nat’l Pension Tr. v. Elite Mech. & Welding, LLC, No. 5:20-CV-06021-SRB, 2020 WL 2843230 (W.D. Mo. June 1, 2020) (Judge Stephen Bough). Plaintiffs are employee benefit plans for various unions. Defendant is an employer with union employees covered by the plans. Plaintiffs did an audit and discovered uncertainty about whether all necessary contributions had been paid. Defendants claim the contributions being sought are for time periods after they discontinued membership with the union associated with Plaintiffs. Defendants counterclaim against Plaintiffs and the union for abuse of process, tortious interference of business, and intentional infliction of emotional distress – and extortion against the union. Plaintiffs moved to dismiss the counterclaims primarily because they are preempted by ERISA. Because the counterclaims all have to do with collecting contributions under ERISA, the Court agreed with Plaintiffs that the counterclaims relate to an ERISA benefit plan and were preempted. Motion to dismiss granted.

Life Insurance & AD&D Benefit Claims

Second Circuit

Sullivan-Mestecky v. Verizon Commc’ns Inc., No. 18-1591-CV, __F.3d__, 2020 WL 2820334 (2d Cir. June 1, 2020) (Before: Walker, Cabranes, and Hall, Circuit Judges). See Notable Decision summary above.

Fourth Circuit

Union Sec. Ins. Co. v. White, No. 5:19-CV-00104, 2020 WL 2893384 (S.D.W. Va. June 2, 2020) (Judge Frank W. Volk). The terms of the disputed life insurance policy states, “If you named more than 1 beneficiary, your amount of insurance will be divided among them equally, unless you specified otherwise.” On forms titled “Employee Application,” “Beneficiary Designation,” and “Voluntary Term Life Insurance Employee Application,” the decedent named each of the three siblings as primary beneficiaries to the proceeds. One sibling claimed entitlement to the proceeds as the primary beneficiary. The court declined to consider third-party statements of the decedent’s intent. “The policy is clear that the proceeds are to be divided equally if the applicant names multiple beneficiaries.” The court must enforce the plain language of the policy. The court also found that even if one of the sibling’s waiver to benefits was not induced fraudulently, “ERISA mandates that courts disregard common-law waivers and instead directs plan administrators to enforce the policy as written.”

Sixth Circuit

Prudential Ins. Co. of Am. v. Delph, No. 6:18-CV-298-REW, 2020 WL 3002341 (E.D. Ky. June 4, 2020) (Judge Robert E. Wier). This lawsuit involves allegations of fraud by the life insurance beneficiary, Carta, who was the live-in girlfriend of the decedent, Brent, who died by apparent suicide. Carta’s parents allege that the beneficiary designation is invalid because it was made online by Carta and not by Brent. Carta claims that Brent instructed her to make the designation on his behalf. In response to the argument that Carta’s designation as beneficiary was per se invalid because it did not comply or substantially comply with the plan’s terms, the court found that there is sufficient circumstantial and direct evidence to create a fact question as to whether Carta acted with Brent’s authority, and if she did, their substantial compliance theory would fail. In response to the argument that under Kentucky law, Carta’s conduct constituted forgery and insurance fraud, rendering the beneficiary designation invalid, the court found that on summary judgment it cannot make credibility determinations. There are genuine factual issues underlying the forgery and fraud claims.

Medical Benefit Claims

Fifth Circuit

Gilmour, Bankruptcy Trustee, et al. v. Blue Cross and BlueShield of Alabama, et al., No. 4:19-cv-160, 2020 WL 2813197 (E.D. Tex. May 29, 2020) (Judge Sean D. Jordan). Victory Medical is a group of acute-care hospitals that provided healthcare services to thousands of patients, including many who were insured under plans issued or administered by BCBS. Prior to providing healthcare services, Victory Medical required all of its patients to sign various forms, including an assignment of any insurance benefits and causes of action available to the insured patient, including those against the patient’s insurer, in this case BCBS. Victory Medical alleged that it properly filed insurance-benefits claims with BCBS as an assignee of its patients’ benefits under their insurance plans. At issue are 1,896 insurance-benefits claims on BCBS for healthcare services provided by Victory Medical to approximately 1,500 of its BCBS-insured former patients. Victory Medical alleged that for $116,376,352.79 in billed healthcare services, BCBS reimbursed only $12,481,839.08, and now sought $43,162,553.66 in unpaid balances. Victory Medical asserted the following ERISA claims: recovery of insurance benefits, ERISA § 1132(a)(1)(B), denial of full and fair review of insurance claims, § 1133, breach of fiduciary duty, § 1104(a)(1), and failure to provide plan information, § 1132(c)(1). And it asserted the following state-law claims: breach of contract, breach of the duty of good faith and fair dealing, promissory estoppel, negligent misrepresentation, violation of the Texas Insurance Code, unjust enrichment, and money had and received. Victory Medical also sought attorneys’ fees under ERISA and Texas law. The Court granted BCBS’ motion to dismiss as to all claims, including all state law claims and denied leave to amend the complaint.

Seventh Circuit

Day v. Humana Insurance Company, et al., No. 19 C 3141, 2020 WL 2836761 (N.D. Ill. Jun. 1, 2020) (Judge Rebecca R. Pallmeyer). In a major victory for advocates of expanded private insurance coverage for proton beam radiation therapy (PBRT), the court dismissed Humana’s motion to dismiss this class action complaint led by a class representative, Brittany Day, a woman denied coverage for her brain cancer (astrocytoma) treatment by Humana. Humana denied Day’s claims for PBRT on the grounds that PBRT was experimental or investigational and, therefore, was not covered by her plan. Day had the therapy anyway at a cost of about $110,000 and then sued Humana and the plan for that cost. The court held that Day states a plausible claim that Humana acted arbitrarily and capriciously in denying coverage for PBRT by failing to address her treating physicians’ opinion that the therapy would deliver a higher dose of radiation than standard proton therapy while causing fewer side effects. The complaint alleges that Humana uses an internal medical coverage policy to “systemically” deny requests for coverage for PBRT. The court acknowledged that Humana has the discretionary authority to determine whether a participant is eligible for benefits but quoted Holmstrom v. Metro. Life Ins. Co., 615 F.3d 758 (7th Cir. 2010) for the proposition that, “[a]dministrators may not arbitrarily refuse to credit a claimant’s reliable evidence, including opinions of a treating physician.” Relying on Amara, the Court rejected Humana’s argument that Day’s ERISA § 502(a)(3) claim, which seeks an injunction that would require Humana to halt its purported practice of categorically denying coverage for PBRT for conditions not listed in the policy, was duplicative her (a)(1)(B) claim and therefore did not dismiss this claim for injunctive relief. The court also dismissed without prejudice Day’s request to certify her suit as a class action.

Ninth Circuit

Tomlinson v. United Behavioral Health, No. 19-CV-06999-RS (JCS), 2020 WL 2850182 (N.D. Cal. June 2, 2020) (Judge Joseph C. Spero). See summary above under Discovery.

Tenth Circuit

Jacque v. Beacon Health Options, Inc., No. 2:18-CV-048-JNP-EJF, 2020 WL 2810451 (D. Utah May 29, 2020) (Judge Jill N. Parrish). Plaintiff seeks benefits for residential treatment. The parties filed cross motions for summary judgment. The court found that an abuse of discretion standard of review applied based on the plan language but serious procedural irregularities in BHO’s adverse benefits determination warrant de novo review for two reasons. BHO reviewers entirely failed to consider whether residential treatment was medically necessary to treat the patient’s substance use disorder. BHO’s reviews also failed to reveal the identity of medical reviewers, failed to consider information provided on appeal, and fell short of providing specific reasons to explain clinical judgment of the medical necessity determinations. The court found that BHO’s denial of benefits was arbitrary and capricious because BHO failed to make a medical necessity determination about the patient’s substance abuse, applied acute-level criteria inconsistent with the plan, offered conclusory statements rather than reasoned analysis, and lacked substantial evidence supporting its decisions. The court determined reversal and remand appropriate. The court declined to award prejudgment interest but agreed Plaintiffs’ counsel is entitled to attorney’s fees and costs.

Pension Benefit Claims

DC Circuit

Fisher v. Pension Benefit Guar. Corp., No. CV 14-1275 (RDM), 2020 WL 2838565 (D.D.C. May 31, 2020) (J. Randolph D. Moss). A participant in an ERISA-governed pension plan requested, after his company had declared bankruptcy but before plan control was transferred to the Pension Benefit Guaranty Corporation, that his pension be paid in a lump sum form. The plan denied his request, arguing that because control was being transferred to PBGC, it could only distribute funds as an annuity, not as a lump sum. PBGC upheld this decision, but the court remanded to PBGC for further review because PBGC’s decision had failed to address the applicability of certain regulations. On remand, PBGC applied those regulations and again denied the claim. The parties then filed cross-motions for summary judgment. The court granted PBGC’s motion and denied the participant’s, finding that PBGC regulations prohibiting the distribution of plan assets in anticipation of plan termination supported PBGC’s decision to deny the payment of benefits in a lump sum fashion. The court ruled that PBGC’s interpretation of its regulations was reasonable and consistent with ERISA’s purpose of preserving plan assets. The court further found that PBGC’s application of the regulations to the participant was not arbitrary or capricious.

Pleading Issues & Procedure

Second Circuit

First Reliance Standard Life Insurance Company v. Giorgio Armani Corporation, No. 19 CIV. 10494 (AKH), 2020 WL 3000385 (S.D.N.Y. June 4, 2020) (Judge Alvin K. Hellerstein). The court found that First Reliance’s lawsuit seeking equitable indemnity and contribution under ERISA is barred by the doctrine of res judicata because the Central District of California already dismissed, under Rule 12(b)(6), a suit identical to the instant action. First Reliance refiled in the Second Circuit because it asserts that unlike the Ninth Circuit, the Second Circuit recognizes ERISA claims for contribution and indemnity against a co-fiduciary. In the Second Circuit, when applying federal common law, a federal court’s Rule 12(b)(6) dismissal of a federal question case serves as a final judgment on the merits for claim preclusion purposes. Because all the elements of res judicata are satisfied, First Reliance cannot bring the identical case it already lost.

Fourth Circuit

Int’l Union, United Mine Workers of Am. v. CONSOL Energy, Inc., No. 1:16-CV-12506, 2020 WL 3001670 (S.D.W. Va. June 4, 2020) (Judge David A. Faber). This lawsuit involves several LMRA and ERISA claims.  The court granted in part and denied in part Defendants’ motion to dismiss and granted Plaintiffs’ motion to consolidate. The court found that the union does not have associational standing to bring § 502(a)(3) claims. “This conclusion is rooted in the fact that when ERISA explicitly authorized certain parties to bring § 502(a) claims, it did not include unions in that list.” The court also found that the Retiree-Plaintiffs do not possess standing to bring their ERISA claim because there is no concrete injury to plan benefits: “the injury alleged revolves solely around the falsity of CONSOL’s communications.”

Sixth Circuit

Fraley v. Gen. Motors, LLC, No. 4:16-CV-14465-TGB, 2020 WL 2836269 (E.D. Mich. June 1, 2020) (Judge Terrence G. Berg). Plaintiff was an engineer employed by Defendant General Motors, LLC (“GM”) until he developed a disability which prevented him from working. Plaintiff sought leave to file an Amended and Supplemental Complaint. Plaintiff also sought to supplement the Administrative Record, which the court allowed because, while Plaintiff’s original complaint did not explicitly allege a lack of due process or administrator bias, it did allege that GM repeatedly denied Plaintiff’s requests for documents related to his COBRA and other ERISA eligibility. This included “all communications” such as “electronic and paper correspondence,” “records of telephone calls made to and from GM Benefits & Services” and “all notations” made by GM representatives concerning these calls. Allegations in Plaintiff’s proposed amended complaint with respect to Counts 1 – 4 expand on these allegations by contending that the Plan Administrator failed to consider these communications when determining whether Fraley should be extended the requested ERISA benefits and that GM failed to give him proper notice that he would not receive COBRA coverage. The court declined Plaintiff’s proposed amendments for 1) failure to pay enhanced variable pay because he did not allege he was in “active service” and amendment would have been futile under the terms of the SPD; 2) violations of ERISA because he has not shown that he would have been entitled to relief; 3) interference with entitled disability benefits because Plaintiff did not allege or identify any adverse employment action; 4) ERISA interference for “systematic discrimination”  because Plaintiff has not identified any acts of interference; 5) breach of fiduciary duty because Plaintiff could already seek the same relief based on other claims; 6) COBRA violation, although some allegations would survive; 7) failure to provide requested documents, because the allegations are the same as in the original complaint. The court allowed amendment to include denial of life insurance benefits because of the allegation that the SPD failed to clearly explain how Plaintiff should seek life insurance coverage and the alleged discrepancies between the plan and the SPD.

Ninth Circuit

Amy F. v. California Physicians’ Serv., No. 19-CV-6078 YGR, 2020 WL 2850282 (N.D. Cal. June 2, 2020) (Judge Yvonne Gonzalez Rogers). In this dispute over health benefits, Blue Shield moved to dismiss the breach of fiduciary duty cause of action on the grounds that Plaintiff lacks Article III standing and fails to state a claim for relief under either 1132(a)(2) and (a)(3). The court granted the motion in part. It found that Plaintiff did not allege the basis for relief pursuant to section 1132(a)(2) because Plaintiff did not allege a class action or provide a basis permitting her to proceed in a representative capacity. The court granted leave to amend. The court found that Plaintiff sufficiently alleges a basis for appropriate equitable relief for breach of a fiduciary duty pursuant to section 1132(a)(3). The Ninth Circuit permits (a)(1)(B) and (a)(3) claims to proceed simultaneously and in the alternative if there is no double recovery.


Eleventh Circuit

Hering v. New Directions Behavioral Health, L.L.C., No. 619CV1727ORL37DCI, 2020 WL 2832497 (M.D. Fla. June 1, 2020) (Judge Roy B. Dalton Jr.). In this dispute seeking relief for denied coverage of residential treatment for anorexia nervosa, the court adopted the R&R dismissing Plaintiff’s claims for equitable relief under 29 U.S.C. § 1132(a)(3) and relief of surcharge. The court explained that where a plaintiff has an adequate remedy under § 1132(a)(1)(B), she cannot alternatively plead and proceed under § 1132(a)(3). Whether one has an adequate remedy under § 1132(a)(1)(B) does not depend on the success or failure of the claim, but whether the allegations are sufficient to state a claim. Absent a § 1132(a)(3) claim, surcharge is not an available remedy for the remaining claims.

Standard of Review

Sixth Circuit

Flores v. Unum Life Ins. Co. of Am., No. 19-11358, 2020 WL 2812762 (E.D. Mich. May 29, 2020) (Judge Stephanie Dawkins Davis). The parties disagreed over the proper standard of review in this ERISA LTD benefit action. Plaintiff argued that the discretionary clause within the Plan was barred by Michigan’s anti-discretion statute. Defendant argued that the statute did not apply as it only governs policies issued or delivered in Michigan, where the policy in dispute was delivered in Ohio according to its own language. Plaintiff additionally argued that Defendant had informed Michigan’s insurance commission that it would not enforce this discretionary clause, and because this case involves a Michigan resident who worked for a Michigan employer, the court should reject Unum’s argument. The court agreed with Defendant, finding that the policy was “issued and delivered” in the state of Ohio, and thus Michigan’s anti-discretionary statute did not apply. Applying the abuse of discretion standard, the court also found the Defendant’s benefits denial was not unreasonable and granted its Motion for Judgement on the Record.

Withdrawal Liability & Unpaid Contributions

Second Circuit

Trustees of Sheet Metal Workers’ Local Union No. 28 Funds & Plans v. Air Wise Heating & Cooling, Inc., No. 18CIV11569JGKGWG, 2020 WL 2846693 (S.D.N.Y. June 2, 2020) (Magistrate Judge Gabriel W. Gorenstein). On Plaintiffs’ application for default judgment, the court issued a R&R finding that Plaintiffs should be awarded a judgment against Air Wise in the total amount of $105,202.21 in fringe benefit contributions plus prejudgment interest at the rate of $34.95 per day from December 13, 2016, until the date judgment is entered.

Third Circuit

The Board of Trustees of The CWA/ITU Negotiated Pension Plan v. American Plus Printers, Inc., No. CV1912794MASDEA, 2020 WL 2794342 (D.N.J. May 29, 2020) (Judge Michael A. Shipp). The court awarded “Plaintiff $138,240.00 for unpaid withdrawal liability damages; $33,181.36 in interest damages; $27,648.00 in liquidated damages; and $7,511.90 in attorneys’ fees and costs, for a total award of $206,581.26.”

Fifth Circuit

United Ass’n Local 198 Pension Fund v. Stevens Plumbing & Piping, LLC, No. CV 19-403-SDD-SDJ, 2020 WL 2838542 (M.D. La. June 1, 2020) (Judge Shelly D. Dick). In this dispute seeking delinquent contributions, the court granted Plaintiffs’ motion for default judgment and awarded damages totaling $89,265.26.

Sixth Circuit

Pipe Fitters Local Union No. 120 Insurance Fund, et al. v. Coleman Spohn Corporation, No. 1:19CV2919, 2020 WL 2812720 (N.D. Ohio May 28, 2020) (Judge Christopher A. Boyko). In this lawsuit seeking delinquent contributions, the court set aside the entry of default judgment, finding that Defendant has put forward a meritorious defense and Plaintiffs will not suffer undue prejudice.

Seventh Circuit

Bldg. Trades United Pension Tr. Fund v. Kuehne Co. Inc., No. 19-CV-1054-PP, 2020 WL 2840100 (E.D. Wis. June 1, 2020) (Judge Pamela Pepper). The court granted Plaintiffs’ motion for default judgment and found that Defendant owes Plaintiffs $27,506.93 for unpaid contributions, $5,784.96 for liquidated damages and $3,095.55 for interest. The court awarded attorneys’ fees of $378 and costs of $450.

Iron Workers Local No. 8 Welfare Fund v. Coxsee Builders LLC, No. 19-CV-1286-PP, 2020 WL 2840127 (E.D. Wis. June 1, 2020) (Judge Pamela Pepper). The court granted Plaintiffs’ motion for default judgment and found that Defendant owes Plaintiffs $15,115.54 for liquidated damages and $8,210.40 for interest. The court approved an award of $3,318 for attorney’s fees and $476.45 for costs.

Wisconsin Pipe Trades Health Fund v. Trinity Piping, LLC, No. 19-CV-88-PP, 2020 WL 2840173 (E.D. Wis. June 1, 2020) (Judge Pamela Pepper). The court found that Plaintiffs have not met their burden under Rule 55(b)(2) to provide support for the judgment award requested and denied without prejudice Plaintiffs’ motions for default judgment.

Eighth Circuit

Nesse, et al. v. Green Nature-Cycle, LLC, No. 18-CV-636 (ECT/HB), 2020 WL 2848193 (D. Minn. June 2, 2020) (Judge Eric C. Tostrud). The court granted Plaintiffs’ Motion for an Award of Interest, Attorneys’ Fees and Costs. The court awarded Plaintiffs $23,489.21 in unpaid contributions found due and owing from March 2017 to the present pursuant to 29 U.S.C. § 1132(g)(2)(A) and the February 13, 2020 Order; $2,753.33 in interest on the unpaid contributions pursuant to 29 U.S.C. § 1132(g)(2)(B) and 26 U.S.C. § 6621; $2,753.33 pursuant to 29 U.S.C. § 1132(g)(2)(C); $66,085 in attorneys’ fees pursuant to 29 U.S.C. § 1132(g)(2)(D); and $3,932 in costs pursuant to 29 U.S.C. § 1132(g)(2)(D).

Ninth Circuit

Bd. of Trustees, I.B.E.W. Local 332 Pension Plan Part A v. Delucchi Elec., Inc., No. 5:19-CV-06456-EJD, 2020 WL 2838801 (N.D. Cal. June 1, 2020) (Judge Edward J. Davila). The court granted Plaintiff’s Motion for Default Judgment and awarded damages in the amount of $90,594.20, liquidated damages in the amount of $9,059.42, and interest in the amount of $8,398.88.

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


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