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ERISA Watch – April 9, 2015

It’s baaack! ERISA Watch has returned from vacation and what better souvenir than this week’s notable decision: Barboza v. California Ass’n of Prof’l Firefighters, No. 11-15472, __F.3d___, 2015 WL 1529088 (9th Cir. Apr. 7, 2015). In Barboza, the Ninth Circuit held that ERISA’s requirement that “all assets of an employee benefit plan shall be held in trust by one or more trustees,” doesn’t require a document that is entitled “trust instrument,” uses the terms “trust” and “trustee,” and expressly states that the party is holding the assets “in trust.” Ironically, trust was missing in this case because the court found that a plan fiduciary engaged in a prohibited transaction by paying its own fees from Plan assets. Read more in this week’s ERISA Watch!

Your reliable source for summaries of recent ERISA decisions

Below is Roberts Disability Law, P.C.’s summary of this past week’s notable ERISA decisions.

First Circuit

Disability plan’s limited conditions provision applies where limited condition co-exists with non-limited condition. In Dutkewych v. Standard Ins. Co., No. 14-1450, __F.3d___, 2015 WL 1412590 (1st Cir. Mar. 30, 2015), the court upheld Defendant’s denial of LTD benefits based on the plan’s mental disorder limitation because, even though Plaintiff had been diagnosed with chronic Lyme disease, his mental disorders, regardless of their cause, contributed to his disability. Defendant interpreted the statement that “[p]ayment of LTD benefits [was] limited to 24 months during [a participant’s] entire lifetime for a Disability caused or contributed to by” mental disorders (as well as by another plan provision governing what would occur when a period of disability was extended by a new cause while LTD benefits were payable) to mean that the mental disability limitation continues to apply after two years if a physical non-limited condition co-exists with a limited condition. The court found that this was not an unreasonable interpretation of the plan terms. Lastly, the court found that Defendant was permitted to rely on the plan’s limited conditions provision because it relied on the provision throughout the internal appeals process, such that its analysis for purposes of litigation was not a mere post-hoc rationalization or new basis for the denial of benefits.

Second Circuit

Wage Parity Law is not preempted by ERISA. In Concerned Home Care Providers, Inc. v. Cuomo, No. 13-3790-CV, __F.3d___, 2015 WL 1381380 (2d Cir. Mar. 27, 2015), the court found that a provision of New York’s home care worker wage parity law, which required licensed home care services agencies (LHCSA) receiving state Medicaid reimbursement to adopt a minimum rate of total compensation for home health aides (HHA) in New York City and surrounding counties, was not preempted by ERISA. The calculation of the minimum rate of compensation referenced the rate from the largest collective bargaining agreement covering home care aides in New York City, which included several ERISA plans, where employers were free to select the manner in which they paid the minimum rate of total compensation. The ERISA plans established by the largest collective bargaining agreement had no more than a remote bearing on the operation of the wage parity law.

Ninth Circuit

“Hold in trust” requirement of §1103(a) does not require the creation of a document including express words of trust; fiduciary engaged in prohibited transaction by paying its own fees out of plan assets. In Barboza v. California Ass’n of Prof’l Firefighters, No. 11-15472, __F.3d___, 2015 WL 1529088 (9th Cir. Apr. 7, 2015), the court held that: 1) ERISA’s requirement that “all assets of an employee benefit plan shall be held in trust by one or more trustees,” under 29 U.S.C. § 1103(a), means that a person (legal or natural) must hold legal title to the assets of an employee benefit plan with the intent to deal with these assets solely for the benefit of the members of that plan, rejecting the argument that compliance with § 1103(a) requires a party to record its responsibilities with respect to the assets of an employee benefit plan in a document that is entitled “trust instrument,” uses the terms “trust” and “trustee,” and expressly states that the party is holding the assets “in trust;” 2) a fiduciary that paid its own fees from Plan assets engaged in a prohibited transaction under 29 U.S.C. § 1106(b)(1) and § 1108(c)(2)’s safe harbor for fiduciary compensation is not applicable in this context; and 3) the administrator was not required to provide a summary annual report to each Plan member annually under 29 C.F.R. § 2520.104b-10(a) because it is a totally unfunded welfare plan exempt from doing so under 29 C.F.R. § 2520.104b-10(g).

Select Slip Copy & Not Reported Decisions

Attorneys’ Fees

In Gesualdi v. Seacost Petroleum Products, Inc., No. 14-CV-1938 ADS SIL, 2015 WL 1469295 (E.D.N.Y. Mar. 30, 2015), a default action to collect unpaid liabilities and contributions, the court awarded attorneys’ fees but with a 40 percent reduction in Plaintiffs’ counsel’s billed hours, from 39.55 to 23.73. The court also awarded fees at the following rates: $300 per hour for a 1988 law graduate; $275 per hour for a 2011 law graduate; and $110 per hour for a paralegal with over ten years of litigation experience.

Disability Benefit Claims

In Chiodo v. Aetna Life Ins. Co., No. CIV.A. 14-02270, 2015 WL 1525049 (E.D. Pa. Apr. 6, 2015), the court held that the undisputed material facts show that Aetna’s decision to deny Plaintiff’s claim for long term disability benefits, based on multiple intracranial abscesses causing balance and memory problems, was supported by substantial evidence and not an abuse of discretion. Aetna was not required to give any special weight to Plaintiff’s treating doctors. Construing the evidence in the light most favorable to Plaintiff, Aetna was left with conflicting opinions, both based on reliable evidence, and it did not abuse its discretion by resolving the conflict in a way that was unfavorable to Plaintiff.

In Bechter v. Fed. Exp. Corp. Long Term Disability Plan, No. CIV.A. 13-7389, 2015 WL 1455807 (E.D. Pa. Mar. 31, 2015), the court upheld the Plan’s denial of LTD benefits, finding that the administrative record does not contain significant objective findings of impairments that would preclude Plaintiff from performing any compensable employment for a minimum of 25 hours per week. Although some of Plaintiff’s subjective complaints of pain can be substantiated by objective findings in the record, Defendants could reasonably find that those findings are insufficient to meet the definition of a Total Disability because there is nothing in the record linking them with Plaintiff’s inability to work. Even though Aetna did not submit Plaintiff for an IME or specifically address her doctor’s Total Disability Any Occupation physician report, the court’s overall assessment of Aetna’s conduct in this case was that it did not act in an arbitrary and capricious manner in denying benefits.

In Morrison v. PNC Fin. Servs. Grp., Inc., No. CIV.A. 13-804 JEI, 2015 WL 1471865 (D.N.J. Mar. 31, 2015), the court found that certain procedural irregularities reduced the deference afforded to Liberty Life’s determination of Plaintiff’s entitlement to disability benefits, including that Liberty Life (1) failed to adequately provide written notice of an adverse benefit determination as required by ERISA; (2) failed to consider the specific requirements of the claimant’s job; and (3) cherry-picked among its various consulting physicians’ medical reports for favorable findings. The court found that the combination of Liberty’s failure to give appropriate notice and its imposition of non-existent requirements rendered Liberty’s denial of Plaintiff’s claim arbitrary and capricious. Because Plaintiff sought a retroactive award of benefits and Liberty improperly denied Plaintiff long term disability benefits from the outset, the court remanded to Liberty to reevaluate whether Plaintiff is disabled.

In Zuke v. Am. Airlines, Inc. Long Term Disability Plan, No. 1:13CV403, 2015 WL 1475073 (S.D. Ohio Mar. 31, 2015), the court upheld Defendants’ decision to deny benefits under the “any occupation” standard of disability. The court rejected Plaintiff’s argument that the cancellation of benefits in the absence of evidence showing that her condition had improved was arbitrary and capricious where no explanation existed for the apparent discrepancy from earlier assessments. Here, the court found that Defendants set forth specific reasons for the change, which were due in part to a lack of objective data. Plaintiff also argued that the termination of benefits was arbitrary and capricious because MetLife failed to perform a physical exam of Plaintiff even though the Plan requires a participant to undergo a physical exam. However, the court found that the file review of her claim was adequate. Both reviewing doctors listed the records which were provided for their review. Additionally, although Plaintiff was found to be disabled by the Social Security Administration in 2001, the Sixth Circuit has explained that a Social Security finding is entitled to less weight when it occurred years before.

In Bennett v. Unum Life Ins. Co. of Am., No. 3:13-CV-426, 2015 WL 1476669 (S.D. Ohio Mar. 31, 2015), the court upheld Unum’s denial of Plaintiff’s long term disability benefits. The court found that it was arguable that Plaintiff did submit evidence that could allow one to conclude, based upon his pain and the effect of pain medications, that he was disabled as of March 2012. But, even the evidence weighing in Plaintiff’s favor is equivocal. His doctors’ determinations of disability were interim decisions recommending further evaluation that Plaintiff did not pursue. The court found that there was substantial medical evidence to demonstrate that Plaintiff was not disabled with regard to performing his job as it is normally performed in the national economy.

In Godmar v. Hewlett Packard Co., No. 14-CV-12153, 2015 WL 1469559 (E.D. Mich. Mar. 30, 2015), the court found that Sedgwick’s initial decision was not arbitrary and capricious after: (1) Sedgwick provided reasons for reversing its course on its initial disability decision, and relied on objective evidence to determine that Plaintiff was not prevented from performing the functions of his usual occupation; and (2) Sedgwick provided Godmar with two opportunities to appeal his decision regarding the denial of benefits, and had three physicians consult with-and review multiple reports from-Godmar’s physicians.

Life Insurance & AD&D Benefit Claims

In Horton v. Life Ins. Co. of N. Am., No. CIV.A. ELH-14-3, 2015 WL 1469196 (D. Md. Mar. 30, 2015) (Not Reported in F.Supp.3d), the decedent was found dead in the Patapsco River on April 25, 2012, and his sailboat was found floating upside down. An autopsy revealed that he had a blood alcohol content of 0.13%. LINA denied accidental death benefits premised on an alcohol exclusion in the insurance policies. The court denied summary judgment to both parties, finding that due to the competing and reasonable narratives about what happened to the decedent, evaluating the persuasiveness of conflicting evidence in the Administrative Record is beyond the scope of the Court’s function under Rule 56. Additionally, the court declined to consider LINA’s post hoc alternative rationale offered for the first time on judicial review.

Medical Benefit Claims

In Stephanie C. v. Blue Cross, No. CIV.A. 13-13250-DJC, 2015 WL 1443012 (D. Mass. Mar. 29, 2015), the court determined that BCBS’s decision to deny residential treatment was supported by substantial evidence. The Plan clearly requires that: (1) treatment be furnished in the “least intensive” type of medical care setting that is appropriate; (2) no benefits will be provided for services “furnished along with [a] non-covered [service],”; and (3) coverage of acute residential treatment does not include residential “educational” programs or psychotherapy services provided along with such programs. The court found that there is substantial evidence in the administrative record to support BCBS’s conclusion that Gateway provided its mental health services in an educational setting. As such, denial of the Gateway residential treatment claims was rational even if only based on the fact that the Plan did not allow for benefits performed at educational facilities. The treatment was also not “medically necessary,” because the reviewing doctors each concluded independently that at the time the patient was admitted to Gateway he did not have acute symptoms or severe impairment and was not a chronic or persistent danger to himself or others.


In Sugalski v. The Paul Revere Life Ins. Co., No. CIV.A. 14-40015-TSH, 2015 WL 1443117 (D. Mass. Mar. 30, 2015), Plaintiff took the position that the money which she received from a jury verdict and settlement of her personal injury claim did not include any amount for lost income and therefore, Paul Revere was not entitled to recoup any amount for so-called “Loss of Time” under the Plan. Paul Revere argued that it interpreted the relevant plan provisions narrowly to include only loss of time awards, settlements involving liability insurance, or court actions related to the injury which resulted in the claimant’s disability. Here, Plaintiff did not apportion the settlement from her personal injury litigation to preclude portions of the settlement from being subject to the benefit offset. The court found that Paul Revere’s interpretation of the Plan was not arbitrary and capricious.

Pension Benefit Claims

In Paul v. Detroit Edison Co., No. 13-14256, 2015 WL 1469314 (E.D. Mich. Mar. 30, 2015), the court found that Plaintiff satisfied the requisite elements of equitable estoppel in an ERISA context and granted Plaintiff’s Motion for Summary Judgment. The court ordered that Defendants shall be estopped from reducing Plaintiff’s retirement benefits and shall return Plaintiff to “the same position he would have been in had the representations been true.” The court dismissed the Plan’s counterclaim seeking repayment of the excess lump sum paid to Plaintiff as a result of Defendants’ miscalculations.

Provider Claims

In Alma Products I, Inc. v. Blue Cross & Blue Shield of Michigan, No. 14-CV-13066, 2015 WL 1498881 (E.D. Mich. Mar. 31, 2015), Plaintiffs Alma Products I and Alma Products I Medical Insurance Plan (“Alma Products”) claim that Defendant Blue Cross & Blue Shield of Michigan (BCBSM) inflated the amounts it reported hospitals charged for claims. BCBSM allegedly kept the difference between what it was actually paying to hospitals and the amounts it reported it was paying in violation of its third-party administrator (TPA) agreements and in breach of its fiduciary duty under ERISA. This case was stayed while BCBSM appealed the judgment entered against it in another case, Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Michigan, and the Sixth Circuit affirmed the judgment against BCBSM. BCBSM then moved to dismiss this case in its entirety, asserting that the statute of limitations had already expired on all of Alma Products’ claims and Alma Products filed a motion for partial summary judgment. The court found that it would be premature to determine whether Alma Products’ claims are barred by the statute of limitations, but granted BCBSM’s motion to dismiss in part because ERISA preempts the state-law claims. Alma Products asserted that it is entitled to summary judgment on its claim for breach of fiduciary duty as to the disputed fees and on their claim for self-dealing as to those same fees based on the controlling decision in Hi-Lex. The court found that there is an issue of fact concerning whether Alma Products’ claims are timely and denied their motion for partial summary judgment.

Subrogation Claims

In Cont’l Ins. Co. v. Dawson, No. 3:13-CV-4150-M, 2015 WL 1443122 (N.D. Tex. Mar. 31, 2015), Continental filed suit against Dawson alleging claims under ERISA as a derivative fiduciary of the Plan, seeking to enforce Aetna’s subrogation and reimbursement rights under the Plan by bringing a claim under § 502 of ERISA, declaratory relief that Continental had an equitable lien on Dawson’s recovery from a personal injury settlement, and a permanent injunction prohibiting Dawson from retaining any recovery from the settlement without reimbursing Continental for the amounts assigned to it by Aetna. The court held that Continental’s ERISA claim and breach of contract claim are barred as a matter of law.

In Rhea v. Alan Ritchey, Inc., No. 4:13-CV-00506, 2015 WL 1456210 (E.D. Tex. Mar. 30, 2015) (Not Reported in F.Supp.3d), the court found that a document titled “Summary Plan Description” was the “plan document” that contained an enforceable reimbursement provision. The court distinguished Amara since in this case there is only an SPD and no alternative document. “Plaintiff cannot both obtain the benefit of a plan as a covered person and not also comply with her obligations under it as a covered person. Such would be a windfall that is not contemplated or warranted under ERISA.”

Withdrawal Liability & Unpaid Benefit Contributions

In Bunn Enterprises, Inc. v. Ohio Operating Engineers Fringe Ben. Programs, No. 14-3255, __Fed.Appx.___, 2015 WL 1447119 (6th Cir. Apr. 1, 2015), the court affirmed the district court’s holding that Bunn Enterprises, Inc. is responsible for contributions to a benefits fund for all hours worked by its employees, and not only for hours its employees performed “covered” work under the terms of a collective bargaining agreement.

* Please note that these are only case summaries of decisions as they are reported and do not constitute legal advice. These summaries are not updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The cases reported above were handled by other law firms but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Roberts Disability Law, P.C. may be able to advise you so please contact us. Case summaries authored by Michelle L. Roberts, Partner, Roberts Disability Law, P.C., 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel: 510-230-2090.


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*Please note that this blog is a summary of a reported legal decision and does not constitute legal advice. This blog has not been updated to note any subsequent change in status, including whether a decision is reconsidered or vacated. The case above was handled by other law firms, but if you have questions about how the developing law impacts your ERISA benefit claim, the attorneys at Roberts Disability Law, P.C. may be able to advise you so please contact us.

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