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ERISA Watch – Court Certifies Class Action Against Citigroup 401(k) Plan Fiduciaries For Alleged Violations of Self-Dealing and Imprudent Conduct

This week’s notable decision is a class certification decision in Leber v. The Citigroup 401(k) Plan Investment Committee, et al, No. 07-CV-9329 (SHS), __F.R.D.__, 2017 WL 5664850 (S.D.N.Y. Nov. 27, 2017).  In this case, the named plaintiffs allege self-dealing and imprudent fiduciary conduct related to the administration of Citigroup’s 401(k) Plan by persistently favoring certain investment options despite the fact that those options had higher management fees than comparable alternatives.  On Plaintiffs’ motion, the court certified the following class pursuant to Fed. R. Civ. P. 23(b)(1)(B):

All participants in the Citigroup 401(k) Plan who invested in any of the following funds from October 18, 2001 to December 1, 2005: Citi Institutional Liquid Reserves Fund, Smith Barney Government Securities Fund, Smith Barney Diversified Strategic Income Fund, Smith Barney Large Cap Growth Fund, Smith Barney Large Cap Value Fund, Smith Barney Small Cap Value Fund, Smith Barney International All Cap Growth Fund, Smith Barney Fundamental Value Fund, and the Salomon Brothers High Yield Bond Fund. Excluded from the class are Defendants, Defendants’ beneficiaries, and Defendants’ immediate families.

The court appointed Plaintiffs Marya J. Leber and Sara L. Kennedy to serve as class representatives, while it struck plaintiff Sherri M. Harris as a named plaintiff.  With respect to Harris, the court reversed its prior determination that American Pipe tolling applied to her claims and found that she was time-barred from raising any individual claims at the time of her entry into the case.  The court determined that Leber and Kennedy have standing to assert all of the claims brought in this case even though they did not invest in each of the Affiliated Funds at issue.

The court appointed J. Brian McTigue and James Moore of McTigue Law LLP and Gregory Y. Porter of Bailey & Glasser LLP as class counsel, and David M. Preminger of Keller Rohrback LLP as liaison counsel for the class.

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

Attorneys’ Fees

Ninth Circuit

Francisco Ponce De Leon v. International Longshoremen’s And Warehousemen’s Union-Pacific Maritime Association Welfare Plan, No. 16-55364, __F.App’x__, 2017 WL 5663185 (9th Cir. Nov. 27, 2017) (Before: NGUYEN and HURWITZ, Circuit Judges, and SEEBORG, District Judge).  Where Plaintiff voluntarily agreed to stay his litigation soon after filing his complaint and the Plan paid his claim upon resolution of the administrative claims process, the district court did not abuse its discretion in denying Plaintiff attorneys’ fees under ERISA Section 502(g)(1), 29 U.S.C. § 1132(g)(1).  Fee recovery under ERISA is not available for pre-litigation administrative activity.  See Cann v. Carpenters’ Pension Tr. Fund for N. Cal., 989 F.2d 313 (9th Cir. 1993).  While fees expended on administrative proceedings after a court-ordered remand may be recoverable, the district court in this case did not compel the parties to go to arbitration, but instead merely entered the parties’ stipulation to do so.  “Plaintiffs may not circumvent Cann by filing suit before exhausting administrative remedies, in order to get the benefit of fee recovery.”

Breach of Fiduciary Duty

Fourth Circuit

United States of America v. Nathan Cordon Williams, No. GJH-17-19, 2017 WL 5957734 (D. Md. Nov. 29, 2017) (Judge George J. Hazel).  The court granted in part and denied in part Defendant’s motion to dismiss the Government’s indictment under 18 U.S.C. § 664, which criminalizes theft or embezzlement from an employee benefit plan.  The court concluded that any conduct that occurred prior to January 18, 2012 falls outside of the statute of limitations and cannot form the basis of an offense of § 664.  With respect to the conduct that falls outside of the statute of limitations (roughly half of the alleged conduct), the court concluded that the Government may prosecute Defendant under the statute.

Class Actions

Second Circuit

Leber v. The Citigroup 401(k) Plan Investment Committee, et al, No. 07-CV-9329 (SHS), __F.R.D.__, 2017 WL 5664850 (S.D.N.Y. Nov. 27, 2017) (Judge Sidney H. Stein).  The court certified a class of Citigroup 401(k) Plan participants pursuant to Fed. R. Civ. P. 23(b)(1)(B).  The court appointed Plaintiffs Marya J. Leber and Sara L. Kennedy to serve as class representatives, while it struck plaintiff Sherri M. Harris as a named plaintiff; and it appointed J. Brian McTigue and James Moore of McTigue Law LLP and Gregory Y. Porter of Bailey & Glasser LLP as class counsel, and David M. Preminger of Keller Rohrback LLP as liaison counsel for the class.


Sixth Circuit

Shah v. Metropolitan Life Insurance Company, et al., No. 2:16-CV-1124, 2017 WL 5712562 (S.D. Ohio Nov. 27, 2017) (Magistrate Judge Elizabeth A. Preston Deavers).  This dispute involves a non-ERISA individual disability income policy dispute.  Following, in camera review of seven documents previously withheld from production by Defendants, the court granted Plaintiff’s request to produce these documents.  A couple of the documents discussed whether or not ERISA applied to Dr. Shah’s disability claim.

ERISA Preemption

Third Circuit

Associated Builders And Contractors, Inc., New Jersey Chapter, et al., v. City Of Jersey City, New Jersey, No. CV145445SDWSCM, 2017 WL 5951582 (D.N.J. Nov. 29, 2017) (Judge Susan D. Wigenton).  The court clarified that its prior holding that the Ordinance (which imposes certain restrictions on developers of tax-abated projects), is void ab initio only pertains to tax-abated, private construction projects.  “However, taking into consideration Defendants’ concern that certain projects have already been completed, and that retroactive application of the June 15th ruling would upend completed projects and payments, this Court holds that the application of the June 15, 2017 Opinion and Order is not retroactive.”

Sixth Circuit

Morcus v. Medi-Copy Services, Inc., et al., No. CV 5: 17-229-DCR, 2017 WL 5760867 (E.D. Ky. Nov. 28, 2017) (Judge Danny C. Reeves).  In this case, Plaintiff brought a number of state law claims against Defendant, a health information exchange, on the basis that their actions prevented him from receiving group long term disability benefits from September 6, 2016 through March 14, 2017.  The court granted in part and denied in part Defendants’ motion for judgment on the pleadings or, in the alternative, for summary judgment.  The court granted summary judgment to Defendants with respect to Plaintiff’s claim for violation of the Kentucky Consumer Protection Act.  The court dismissed with prejudice Plaintiff’s claims for fraudulent misrepresentation, negligent misrepresentation, fraud by omission, interference with contractual relations, intentional and negligent emotional distress, and negligence per se for practice of medicine without a license in violation of Ky. Rev. Stat. § 311.560.  Although these claims are not preempted by ERISA, Plaintiff has not alleged facts showing that he is entitled to relief.  The claims for negligence and gross negligence; negligent hiring, training, supervision, and retention; and negligence per se for forgery in violation of 516.040 remain pending.

Exhaustion of Administrative Remedies

Tenth Circuit

Concilio v. Cigna Health And Life Insurance Company, No. 16-CV-01863-WJM-MJW, 2017 WL 5900345 (D. Colo. Nov. 30, 2017) (Magistrate Judge Michael J. Watanabe).  Dr. Cain did not appeal Cigna’s denial of his surgery authorization but the court determined that the merits of the denial are properly before the court since exhaustion would be futile.  “In short, there is no doubt that Cigna would have denied any appeal by Dr. Cain requesting a two-level lumbar fusion for degenerative disc disease because this procedure is not covered under the Plan.”  On the merits, the Magistrate Judge recommended that the complaint be dismissed, determining that Cigna’s conclusion that Plaintiff failed to exhaust lesser treatment options is not arbitrary and capricious.

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Hutson v. Reliance Standard Life Insurance Company, No. 1:16-CV-1252, 2017 WL 5803929 (W.D. Mich. Nov. 29, 2017) (Judge Gordon J. Quist).  The court granted Reliance Standard’s motion for judgment, upholding its determination to deny accidental death benefits on the basis that a myocardial infarction contributed to the motor vehicle accident ultimately resulting in the insured’s death.

Marzette v. The Lincoln National Life Insurance Company, No. 2:16-CV-02498-SHM, 2017 WL 5896241 (W.D. Tenn. Nov. 29, 2017) (Judge Samuel H. Mays, Jr.).  Plaintiff sought benefits under the group voluntary accidental death and dismemberment insurance plan for his alleged total hearing loss.  The court granted Lincoln National’s motion for judgment on the administrative record, finding that Lincoln National reasonably determined that Plaintiff’s hearing loss did not constitute permanent and total deafness.  Because of this determination, the court did not reach the question of whether it was reasonable for Defendant to conclude that Plaintiff’s hearing loss was caused by an accident.

Medical Benefit Claims

Ninth Circuit

B.R. & W.R. v. Beacon Health Options, No. 16-CV-04576-MEJ, 2017 WL 5665667 (N.D. Cal. Nov. 27, 2017) (Magistrate Judge Maria-Elena James).  The court granted SAG-AFTRA motion to dismiss the Third Amended Complaint with prejudice on the ground that it fails to state a claim under ERISA.  The court found again that Plaintiffs have not shown that the beneficiary’s multiple admittances to certain out-of-network residential treatment facilities were emergencies within the terms of the SPD.  Additionally, Plaintiffs failed to show that SAG-AFTRA violated either the MPHAEA or the California Parity Act.  Lastly, Plaintiffs’ allegation that SAG-AFTRA “fail[ed] to propose a qualified, safe and appropriate in-network provider with an available treatment bed,” is insufficient to show SAG-AFTRA breached its fiduciary obligations under ERISA.

D.T., K.T. & W.T. v. NECA/IBEW Family Medical Care Plan, et al., No. 17-CV-00004-RAJ, 2017 WL 5756870 (W.D. Wash. Nov. 27, 2017) (Judge Richard A. Jones).  Defendants sought dismissal of Plaintiff’s Complaint under Rule 12(b)(6) on the basis that the Policy legitimately excludes coverage for any developmental mental health conditions, and therefore there is no Federal Parity Act violation for its refusal to cover NDT or ABA therapy benefits.  The court denied Defendants’ motion.  “The Policy’s mental health definition is so broad that it may encompass ASD. If this is the case—the Complaint states as much—and if the Policy covers certain benefits for beneficiaries diagnosed with ASD but refuses to cover ABA therapy, then this may be a violation of the Federal Parity Act.”  The court also found that Plaintiff sufficiently pled a claim for breach of fiduciary duties and may also simultaneously plead his ERISA Section 502(a)(1)(B) and (a)(3) claims.

Pleading Issues & Procedure

Third Circuit

McCarrin v. Pollera, et al., No. 17-CV-1691, 2017 WL 5902894 (E.D. Pa. Nov. 30, 2017) (Magistrate Judge Lynne A. Sitarski).  The court denied Plaintiff’s motion to strike Defendants’ three affirmative defenses:  (1) Plaintiff failed to state a claim for which relief can be granted under ERISA or other applicable law; (2) Plaintiff failed to exhaust all available administrative remedies; and (3) Plaintiff lacked standing because he was not a participant in the Fund’s Plan during the relevant time periods.  The court concluded that Plaintiff was put on fair notice as to the nature of the defenses.

Eighth Circuit

Schwartz v. Bogen, No. CV 17-3329 (MJD/TNL), 2017 WL 5891735 (D. Minn. Nov. 28, 2017) (Judge Michael J. Davis).  “The Court holds that res judicata applies and this Complaint must be dismissed. First, the New Jersey state court’s judgment is valid, final, and on the merits. Schwartz does not dispute that he failed to appeal the judgment. Nor does he dispute that the New Jersey court squarely determined that Bogen was, and continues to be, entitled to a portion of his pension. The New Jersey court further heard and rejected Schwartz’s argument that the Final Judgment of Divorce was not a QDRO. Second, the parties to the New Jersey action and this action are identical: Schwartz and Bogen. Third, the claims in the federal case grew out of the same transaction or occurrence as the claims in the New Jersey case: namely, Schwartz’s demand for repayment of the pension-sharing payments and assertion that he is not required to continue payments going forward. The issues of whether the Final Judgment of Divorce entitled Bogen to an equitable distribution of the Pension Plan and whether ERISA barred such equitable distribution were explicitly argued to the New Jersey court and decided by the New Jersey court. Deciding these issues was essential to the New Jersey court’s judgment. Thus, res judicata applies.”

Retaliation Claims

Sixth Circuit

Stearman v. Ferro Coals, Inc., et al., No. 3:15-CV-31-DJH-DW, 2017 WL 5798781 (W.D. Ky. Nov. 28, 2017) (Judge David J. Hale).  The court granted summary judgment to Defendant on Plaintiff’s ERISA Section 510 claim.  The court determined that Plaintiff has not pointed to any evidence showing Defendant’s intent to violate ERISA.  Although Plaintiff argues that he was terminated after using his Medicare benefits extensively, he points only to evidence showing that he took medical leave in the past.  Plaintiff also pointed to evidence showing that he had the highest monthly insurance premium of any employee in 2013 but the undisputed facts also show that after Plaintiff became eligible for Medicare, Defendant reimbursed him for the $105 premium each month, which was substantially less than what Defendant was paying for its other employees in 2014 when Plaintiff was terminated.


Eighth Circuit

Schwartz v. Bogen, No. CV 17-3329 (MJD/TNL), 2017 WL 5891735 (D. Minn. Nov. 28, 2017) (Judge Michael J. Davis).  “Under ERISA, venue is proper in any state in which a defendant may be found, and a defendant may be found in any state that has personal jurisdiction over that defendant. Here, Minnesota has personal jurisdiction over Bogen. The monetary payments at issue were sent to Minnesota, at Bogen’s request, while she resided in Minnesota from 1989 to at least 2016, and she deposited the checks in a Minnesota bank account. Also, while Bogen now claims to no longer live in Minnesota, she does not dispute that she did live here for a substantial period of time and still owns her residence in Minnesota. Thus, personal jurisdiction over Bogen is proper, and, by extension, venue in Minnesota is proper.


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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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