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ERISA Watch – December 18, 2014

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.

Second Circuit


In Plastic Surgery Grp., P.C. v. United Healthcare Ins. Co. of New York, No. 14-CV-1798 JFB ARL, __F.Supp.3d___, 2014 WL 6980148 (E.D.N.Y. Dec. 11, 2014), Plaintiff is a medical practice specializing in plastic surgery. It brought suit against Defendants, alleging that they breached a contract to pay health insurance benefits assigned to it by its patients. In particular, on patient, Jane Doe, was insured by Defendants through a group health benefits plan sponsored and administered by her employer, American Airlines. United removed this action and then moved to dismiss and Plaintiff moved to remand the matter to state court. The court denied Plaintiff’s motion to remand because this matter is completely preempted by ERISA under the standard set forth in Aetna Health Inc. v. Davila, 542 U.S. 200, 209 (2004). The court found that although Plaintiff styled its causes of action under New York law, the allegations in the complaint make clear that Plaintiff asserts a right to be paid benefits under the Plan, which raises a colorable federal claim under ERISA. This case does not involve merely the amount of payment because the complaint and the Plan documents reveal that any shortfall in benefits is due to a dispute over the medical necessity of Jane Doe’s treatment, which could only be resolved by interpreting the Plan. Further, Plaintiff did not identify an independent legal obligation implicated by United’s failure to pay Plaintiff, which is essential to amount-of-payment claims. The court granted United’s motion to dismiss because it found that no claim lies against United, who is not named as the plan administrator. In the Second Circuit, a Section 502(a)(1)(B) may only be asserted against the plan itself, the plan administrator, and the plan trustees. Further, ERISA Sections 502(a)(3) and 503 do not provide alternative avenues of relief against United because Section 502(a)(1)(B) would provide adequate relief to Plaintiff if it sued the proper party. The court granted Plaintiff’s request to amend the complaint to include the proper party and dismissed all claims against United.

CLAIM CHALLENGING SUSPENSION OF PENSION BENEFITS REQUIRES EXHAUSTION OF ADMINISTRATIVE REMEDIES. In Diamond v. Local 807 LaborManagement Pension Fund, No. 14-0676-CV, __Fed.Appx.___, 2014 WL 6980483 (2d Cir. Dec. 11, 2014), the court affirmed the district court’s dismissal of Plaintiff’s complaint against the Fund and members of its Board of Trustees because Plaintiff did not exhaust his administrative remedies prior to filing suit. Defendants suspended Plaintiff’s pension benefits because he engaged in disqualifying employment as defined by the Plan. Plaintiff initially requested review of his benefit suspension by the Plan’s trustees but withdrew his request and filed suit in the district court alleging that Defendants (1) breached their fiduciary duties to Plan participants by failing to comply with their duties under ERISA; (2) improperly suspended his benefits; and (3) failed to produce certain documents. Plaintiff argued that he was not required to exhaust a statutory violation claim and that exhaustion would have been futile. The court rejected both arguments. In so doing, the court noted that the 2nd Circuit has not addressed the specific question whether exhaustion is required for statutory ERISA claims but the 3rd, 4th, 5th, 6th, 9th, and 10th Circuits have held that plaintiffs need not exhaust administrative remedies before bringing a legal action asserting a violation of the ERISA statute. Although the district court below agreed and joined the district courts in this Circuit that have expensed with the exhaustion requirement, the court found that Plaintiff did not allege a statutory ERISA claim, but rather, a breach of the terms of the Plan, not a statutory violation of ERISA. Therefore, it did not reach the issue of whether exhaustion is required for a statutory violation claim. The essence of Plaintiff’s cause of action is based on his theory that Defendants violated the express terms and conditions of the pension plan. Because Plaintiff was seeking only to receive benefits under the Plan that he contends were withheld in violation of the terms of the Plan, he was required to exhaust his administrative remedies. Because he failed to do so, the court found that his claim was properly dismissed. The court also found that the conclusory allegations of Plaintiff’s complaint fail to sufficiently allege futility.

DISTRICT COURT ERRED IN GRANTING SUMMARY JUDGMENT TO PENSION FUNDS ON ALTER EGO THEORY BECAUSE A REASONABLE FACTFINDER COULD FIND IN DEFENDANT’S FAVOR. Trustees of the New City Dist. Council of Carpenters Pension Fund v. Integrated Structures Corp., No. 13-4621-CV, 2014 WL 6980430 (2d Cir. Dec. 11, 2014) involved an arbitration award against Integrated and the Francis A. Lee Company (“FALC”) for unpaid contributions to the Funds, pursuant to a collective bargaining agreement with the Union. In the district court, Plaintiffs sought confirmation of an arbitration award against Integrated, and, in an amended complaint, additionally sought to hold Integrated liable for an arbitration award against FALC, which was confirmed in a default judgment. The district court entered judgment against Integrated in the amount of $159,687.88, arising out of the arbitration award against FALC, on the theory that Integrated is the alter ego of FALC. On appeal, Integrated argued that the district court erred in holding that it is the alter ego of FALC and therefore liable for the arbitration award against FALC. The “alter ego” inquiry depends on “the totality of the facts.” The analysis “focuses on commonality of (i) management, (ii) business purpose, (iii) operations, (iv) equipment, (v) customers, and (vi) supervision and ownership.” The district court found alter ego status on the basis of three primary factors: (1) commonalities between Integrated and FALC as parallel companies, (2) Integrated as the “disguised continuance” of FALC after FALC ceased operations, and (3) “anti-union animus” on the part of Francis Lee, the owner of Integrated and FALC. The court found that while the record certainly contained evidence of a substantial overlap in management and operations, there was also evidence that the two companies were separate, independent entities. The record was not so one-sided as to preclude a reasonable factfinder from holding in Integrated’s favor. By finding animus, the district court prematurely resolved an important issue of fact against the party opposing summary judgment. The court vacated the judgment of the district court to the extent it was based on the finding that Integrated was the alter ego of FALC and remanded for further proceedings.

Third Circuit

DISPUTE CONCERNING AGREEMENT TO PAY RETIREMENT BENEFITS IS PREEMPTED BY ERISA AND PLAINTIFF IS REQUIRED TO EXHAUST. Cooper v. Alliance Oral Surgery, LLC, No. 13-4479, __Fed.Appx.___, 2014 WL 6900590 (3d Cir. Dec. 9, 2014) involved allegations that the 3rd Circuit Court of Appeals described as a “textbook breach of contract claim.” Plaintiff alleged that: (i) pursuant to an employment agreement, Defendants were to enroll him in a retirement plan; (ii) Plaintiff did the work required of him under the agreement; and (iii) Defendants failed to properly enroll him. The district court held that Plaintiff’s state-law claims based on failure to enroll a beneficiary are preempted by ERISA because they “relate to” an employee benefit plan. The district court did not reach the merits of Plaintiff’s claim that Defendants’ conduct violated ERISA because it found that Plaintiff failed to exhaust his administrative appeals and that such failure was not excused on account of futility. The 3rd Circuit affirmed the district court, finding that it properly considered the five-factor test for futility from Harrow v. Prudential Ins. Co. of Am., 279 F.3d 244, 250 (3d Cir.2002). The court rejected Plaintiff’s argument that he was not required to exhaust a breach of fiduciary duty claim and explained that plaintiffs cannot circumvent the exhaustion requirement by artfully pleading benefit claims as breach of fiduciary duty claims. Lastly, the court rejected Plaintiff’s argument that the district court should not have granted summary judgment on the futility issue without allowing him an opportunity to take discovery since Plaintiff did not follow the requirements of Federal Rule of Civil Procedure 56(d)3 and no discovery was outstanding at the time of the district court’s grant of summary judgment. Accordingly, the court affirmed the district court’s grant of summary judgment for Defendants.

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Seventh Circuit

PENSION BENEFIT TO PARTICIPANT WHO WAS NOT VESTED WAS PROPERLY CALCULATED AND A PLAN MAY NOT BE HELD LIABLE FOR A SEPARATE EMPLOYER’S DISCRIMINATION AGAINST AN EMPLOYEE. In Walton v. Nat’l Integrated Grp. Pension Plan, No. 14-1819, __Fed.Appx.___, 2014 WL 7003789 (7th Cir. Dec. 12, 2014), the pro se Plaintiff disputed the amount of his monthly pension benefit from a multiemployer retirement plan. The district court found that the calculation was correct because Plaintiff had worked only briefly for a single employer that was contributing to the Plan and that he was not entitled to a lump-sum distribution. Plaintiff had earned one pension-benefit unit for his 14 months’ service and he did not work at the company long enough for his benefits to vest. But, when the employer withdrew from the Plan its share of the pension fund’s assets was greater than its outstanding obligations to vested employees and the surplus was committed to providing a pension benefit to employees who were not vested. Based on Plaintiff’s one benefit unit, he was entitled to $8.10 per month for life beginning at age 65. Plaintiff believed this amount was too small and challenged the benefit calculation. Unsatisfied with the Plan’s responses, Plaintiff requested that the Plan stop issuing payments and communicating with him. He brought suit alleging claims for breach of contract, discrimination, and “malfeasance” as arising under ERISA. The district court granted summary judgment for the defendants on the ERISA claims and then dismissed Plaintiff’s remaining state-law claims, including a claim of “harassment,” on the ground that ERISA preempts them. The court found that the plan documents explicitly provide that, if a withdrawing employer’s share of the pension-fund assets exceeds its liabilities to vested employees, the surplus will be used to provide pension benefits to employees who were not vested, the benefit level effective during Plaintiff’s employment was $8.10, and that each annuitant receives a monthly check equal to the benefit level times his or her total benefit units. Plaintiff asserted that the employer, who was not a party to the litigation, fired him for discriminatory reasons. The court noted that the Plan cannot be liable under ERISA for a separate employer’s discrimination against an employee.

Eighth Circuit

GOOD FAITH AND PREJUDICE MAY BE CONSIDERED IN DETERMINING WHETHER TO AWARD STATUTORY PENALITIES FOR FAILING TO PROVIDE TIMELY COBRA NOTICE. In Cole v. Trinity Health Corp., No. 14-1408, __F.3d___, 2014 WL 7012371 (8th Cir. Dec. 15, 2014), the 8th Circuit Court of Appeals affirmed the district court’s denial of statutory damages pursuant to 29U.S.C. § 1132(c)(1) for failing to meet the COBRA notification requirement set forth in 29 U.S.C. §§ 1163(2), 1166(a)(4)(A), (c). Plaintiff Bonnie Cole was a Trinity Health employee and enrolled in her employer-sponsored group health plan with Blue Cross Blue Shield of Michigan (“Blue Cross”), for which Trinity Health served as plan administrator. She stopped working in June 2011 due to disability and began receiving disability payments. When Unum stopped paying Cole’s long term disability benefits in October 2011 (which it had been paying under a reservation of rights), Cole’s employment termination date became retroactive to June 2011 but due to an error her termination was not processed when Unum denied her benefits. Trinity Health eventually discovered its error and processed Cole’s termination in late April and early May 2012 and deemed her benefits retroactively terminated January 1, 2012. However, Trinity Health did not notify Cole that her and her family’s health care coverage had been terminated. The Coles did not learn of the coverage termination until June 2012 when a medical provider alerted them to their lack of coverage. Later that same month, Trinity Health sent Plaintiffs notice that their coverage was terminated effective January 1, 2012. The Coles obtained alternate health coverage retroactive to June 1, 2012 but had incurred $1,300 in denied claims.

In denying statutory damages, the district court reasoned the Coles were not entitled to actual damages because the amount of their unreimbursed medical bills from May 2012 was less than the COBRA premiums they would have had to pay to maintain medical insurance. The district court also reasoned the Coles were not entitled to statutory penalties because Trinity Health acted in good faith, the Coles were not harmed or prejudiced by Trinity Health’s tardy notice of their COBRA rights, and the Coles were provided continued medical coverage for approximately eleven months after Cole’s termination of employment. The court rejected each of the Plaintiffs’ arguments for how the district court made clearly erroneous findings of fact in determining that the amount of the Coles’ COBRA premiums would have exceeded their damages and in deciding not to award statutory penalties. The court also disagreed with the Coles contention that the 8th Circuit has repeatedly rejected a “prejudice and good faith” standard for awarding statutory penalties. The court explained that although relevant, a defendant’s good faith and the absence of harm do not preclude the imposition of a statutory penalty, a district court may consider prejudice and good faith. The district court found that Trinity Health acted in good faith and the Cole’s were not harmed or prejudiced by Trinity Health’s tardy notice of their COBRA rights. Accordingly, the court affirmed the grant of summary judgment to Trinity Health.

Ninth Circuit

SUPERSEDING OPINION EXPANDS SCOPE OF THE EQUITABLE MONETARY REMEDY OF SURCHARGE IN THE NINTH CIRCUIT. In Gabriel v. Alaska Elec. Pension Fund, No. 12-35458, __F.3d___, 2014 WL 7139686 (9th Cir. Dec. 16, 2014), the three-judge panel withdrew its June 6th opinion in this matter and issued a superseding opinion. Defendant, a pension plan, had mistakenly determined the Plaintiff had vested in his pension benefit and paid those benefits for three years before realizing its mistake and stopping the payments. Gabriel was not entitled to benefits under the terms of the plan because he did not have enough years of service to be vested in the plan. When Defendant threatened to seek reimbursement of the $81,033 in benefits it previously paid to Gabriel, he brought claims for recovery of benefits and clarification of rights to future benefits under 29 U.S.C. § 1132(a)(1)(B), and breach of the fiduciary duties set forth in 29 U.S.C. § 1104(a)(1)(A)-(B) and § 1109 under § 1132(a)(3). His complaint also alleged misrepresentation and estoppel based on written and oral representations under ERISA Section 502(a)(3). Plaintiff argued that he was entitled to equitable relief due to the fund’s breaches of fiduciary duty.

With respect to Plaintiff’s Section 1132(a)(1) claim, Plaintiff argued that Defendant waived the argument that he was not vested because the Fund did not raise his non-vested status until three years after the Fund first suspended his benefits for engaging in improper post-retirement work in the industry. The court rejected this argument and found that the Fund did not violate ERISA’s procedural requirements because it notified Plaintiff regarding his non-vested status while his administrative case was still pending. The Fund did not put a new rationale for denying benefits into a final decision in a manner that would insulate the denial from administrative review. The court also found that Gabriel failed to raise a genuine issue of material fact as to his entitlement to appropriate equitable relief in the form of equitable estoppel or reformation. The court explained that equitable remedies are not available where the claim would result in a payment of benefits that would be inconsistent with the written plan. But, because the district court made its ruling prior to Cigna Corp. v. Amara, and did not consider the availability of the surcharge remedy, the panel vacated the district court’s ruling that Gabriel is not entitled to any form of “appropriate equitable relief.” (A surcharge is a kind of equitable monetary remedy against a trustee which puts the beneficiary in the position he would have attained but for the trustee’s breach.) The panel remanded the case for the district court to reconsider the availability of surcharge, and, if available, whether Gabriel has adequately alleged a remediable wrong. In a concurring opinion, U.S. Circuit Judge Alex Kozinski wrote that he “seriously doubt[s]” that Gabriel will prevail on a surcharge claim consistent with the court’s opinion, where it determined that he cannot show that any reliance on the Plan’s representations was reasonable for purposes of his equitable estoppel claim.

PLAN DID NOT ABUSE ITS DISCRETION IN DENYING LIFETIME SUPPLEMENTAL PENSION BENEFITS. In Viad Corp. Supplemental Pension Plan v. Nasi, No. 12-16892, 2014 WL 6984443 (9th Cir. Dec. 11, 2014), the 9th Circuit Court of Appeals affirmed the district court’s order granting the Plan’s motion for summary judgment and declaring that the Plan does not owe Plaintiff supplemental pension benefits. The court found that the Plan’s delay in reaching a timely resolution was not a flagrant procedural violation warranting de novo review, especially when much of the delay was due to Plaintiff’s untimeliness in producing documents and releasing records. The court found that the Plan did not abuse its discretion in determining that Plaintiff was not entitled to an unconditional guarantee of lifetime supplemental pension benefits because a condition precedent was never satisfied. Circuit Judge WATFORD, concurred, but offered an alternative ground for affirmance: Even if the Plan agreed to pay Plaintiff for the rest of his life, it no longer has that obligation because Plaintiff was significantly overpaid from 1996 to 2008 and already received the benefit of his bargain.

D.C. Circuit

DISTRICT COURT’S FAILURE TO COMPLY WITH FRCP 12 (d) AND FINDING THAT PLAINTIFF WAIVED HIS ERISA RIGHTS BY SIGNING A SEVERANCE AGREEMENT DID NOT CONSTITUTE REVERSIBLE ERROR. In Russell v. Harman Int’l Indus., Inc., No. 13-7095, 2014 WL 6996138 (D.C. Cir. Dec. 12, 2014), Plaintiff appealed the district court’s Rule 12(d) conversion of Defendants’ motion to dismiss as one for summary judgment in favor of Defendants. Plaintiff contended that the district court converted the motion without giving him a “reasonable opportunity” to present evidence. The D.C. Circuit did not reach that issue because, assuming that the district court violated Rule 12(d), it found the error would be harmless in this case. Plaintiff brought a class-action suit against Defendants and alleged that they made false and misleading statements to investment firms that caused an acquisition deal to fall through, which ultimately led to a decline in the value of stock in which Plaintiff’s company’s 401(k) plan invested. When he filed suit, Plaintiff no longer worked for his company, a defendant in this case, and signed a severance agreement in exchange for payments he was not otherwise entitled to receive that included the following release of liability:

Release of Known and Unknown Claims.

Employee … releases and forever discharges the Company, its affiliates, and all of their agents … of and from any Claim (as defined below) which have [sic] arisen on or before the date that this Agreement becomes effective…. The Claims released by this agreement include, but are not limited to, Claims arising out of, based upon, or relating to … the Employee Retirement Income Security Act….

Employee expressly acknowledges, agrees and recites that: (i) this Agreement is written in a manner he understands; … (iii) he has entered into and executed this Agreement knowingly and voluntarily; (v)[sic] he has read and understands this Agreement in its entirety; and (vi) he has not been forced to sign this Agreement by any employee or agent of the Company.

The company used the severance agreement’s release as the basis for a motion to dismiss under Rule 12(b)(6) and contended that Russell gave up his right to bring an ERISA action. To support this defense, Harman attached the severance agreement as an exhibit to the motion. The district court ordered supplemental briefing but did not expressly mention Rule 12(d) or the possibility of converting the company’s motion to dismiss into one for summary judgment. When the district court rendered its decision in May 2013, it for the first time expressly invoked Rule 12(d) and converted the motion to dismiss into one for summary judgment. In its decision, the district court determined, among other things, that Plaintiff had knowingly and voluntarily waived his ERISA rights by signing the severance agreement. The court found that the district court’s failure to comply with the procedural safeguards of Rule 12(d) did not constitute reversible error because it did not prejudice the parties. Here, Plaintiff suffered no prejudice because, even had he obtained his now-desired discovery, he could not demonstrate a “genuine issue of material fact” sufficient to prevail at summary judgment. The court assumed arguendo that an employee must knowingly and voluntarily consent to a waiver of ERISA liability. Considering a non-exhaustive list of factors developed by other circuits to determine whether, under the totality of the circumstances, an ERISA waiver is knowing and voluntary, the court found that Plaintiff never proffered any evidence to undermine the knowing-and-voluntary nature of his consent or identified a plausible line of inquiry for discovery that might lead to evidence creating a disputed issue of material fact. The court reiterated that its harmless-error analysis is confined to the unique circumstances of this case and does not propose that in every case in which a district court improperly goes beyond the pleadings in granting a motion to dismiss without affording the protections contemplated in Rule 12(d), a losing party will lose once more on appeal because of its inability to show what it would have produced had it been given the opportunity. However, this case is not one of those “general cases” where the opportunity for discovery might have produced precisely that which was lacking. For these reasons, the court affirmed the district court’s grant of summary judgment.

DISTRICT COURT’S AWARD TO TRUSTEES UNDER COAL ACT AND ERISA AGAINST EMPLOYER TO RECOVER DAMAGES WAS A FINAL APPEALABLE DECISION AND NOT BARRED BY LACHES. In Holland v. Bibeau Const. Co., No. 13-7093, __F.3d___, 2014 WL 7088168 (D.C. Cir. Dec. 16, 2014), trustees of a mine workers benefit plan brought this action against an employer, seeking to recover amounts paid to beneficiaries pursuant to Coal Industry Retiree Health Benefit Act (Coal Act) and ERISA. The district court granted the trustees’ motion for reconsideration from its partial grant of summary judgment and awarded the trustees’ damages for a certain period. The court left it to the parties to resolve damages that had accrued since that period and other future liabilities. On appeal, the court held that the district court’s decision was a final, appealable decision. The district court addressed the trustees’ requested remedies in detail and left for future resolution only the amount of damages that had accrued since the parties filed their last estimates. Given the mechanical nature of the remaining calculations, danger of repetitive judicial consideration of the same questions and danger that the remaining calculations would produce an appealable issue, was remote. The court also held that the defense of laches did not bar the trustees’ claims. In this case, there was a nine-year delay between the time the mine workers’ benefit plan enrolled the participant in the plan and notified the employer of its premium obligations. The Coal Act installment liability separately accrued with each missed monthly payment and the trustees’ claims for monetary damages, not equitable relief, were timely filed. Lastly, the court held that the district court was within its discretion in awarding interest for a period prior to the plan’s notice of the employer’s payment obligations and in awarding pre-notice liquidated damages.

Unreported Decisions

Attorneys’ Fees

In Basham v. Prudential Ins. Co. of Am., No. CIV.A. 3:11-CV-00464, 2014 WL 7076363 (W.D. Ky. Dec. 15, 2014), the court followed the other courts within the Sixth Circuit that have found that a remand order constitutes “some success on the merits,” entitling a successful plan participant to an award of attorneys’ fees. Given that Prudential failed to respect its own “Disability Claims Instructions” that necessitated this litigation and the attendant fees in question, the court saw no reason to depart from these cases. The court considered the following five factors: (1) the degree of the opposing party’s culpability or bad faith; (2) the opposing party’s ability to satisfy an award of attorney’s fees; (3) the deterrent effect of an award on other persons under similar circumstances; (4) whether the party requesting fees sought to confer a common benefit on all participants and beneficiaries of an ERISA plan or resolve significant legal questions regarding ERISA; and (5) the relative merits of the parties’ positions. The court found that two factors weighed in favor of an award, one weighed against an award, and two were neutral. Based on this, the court determined that some award was appropriate. The court reduced Plaintiff counsel’s compensable hours from 138.10 to 128.00 and paralegal hours from 26.40 to 15.70. The court determined that an hourly rate of $350 is a fair and reasonable rate in the relevant community for similar work and experience.

Triumph Const. Corp. v. New York City Council of Carpenters Pension Fund, No. 12 CIV. 8297 KPF, 2014 WL 6879851 (S.D.N.Y. Dec. 8, 2014) involved a four-year long dispute stemming from Triumph’s refusal to allow the Funds to complete an audit. The court previously granted summary judgment to the Funds and the court found that the Funds were entitled to attorneys’ fee. This decision involved the application for work done by two attorneys and legal assistants in the period following the filing of the state court action. For a 1998 graduate from New York University School of Law who has practiced exclusively in the area of labor and employment benefits law since 2000, the court found that an hourly rate of $250.00 to $300.00 for work performed in connection with this action is reasonable. The funds sought payment for 231.4 hours of time billed by this attorney for work done from October 22, 2012, to July 8, 2014, which included the fee application. For a 2007 graduate of Rutgers University School of Law-Newark, who has also regularly represented multiemployer benefit plans in ERISA litigation, the court found that an hourly rate of $225.00 for work performed in connection with this action is reasonable. The funds sought payment for 8.8 hours of time billed by this attorney during the month of July 2014, only for work done on the fee application. Although the court found that the hourly rates are reasonable, the court declined to grant fees related to two settlement conferences, on the ground that such fees were not “reasonably expended.” The court also declined to grant fees associated with preparing and filing the fee application. Lastly, the court applied a 15% cut in the requested fees to “trim the fat.”

Breach of Fiduciary Duty

In Perez v. Sajovic, No. 14-CV-01922 NGG RML, 2014 WL 6983445 (E.D.N.Y. Dec. 10, 2014), the district court adopted the report and recommendation by the Magistrate Judge in matter where the named trustee and fiduciary of a 401(k) Profit Sharing Plan violated his fiduciary duty to the Plan when he: (1) refused to authorize at least two former employees’ requests for distribution of their eligible plan assets; (2) failed to file a Form 5500 with the Internal Revenue Service for the year 2012; (3) failed to provide the Plan’s Third Party Administrator with information necessary to calculate the employer matching funds due to each plan participant for the year 2012; (4) failed to respond to the Secretary’s subpoena or voluntary compliance letter from August 19, 2013; (5) unilaterally removed another trustee leaving himself with sole authority to approve distributions of plan assets; and (6) approved a $30,000 Plan loan to himself. The court granted Plaintiff’s request for a default judgment against Defendants and granted Plaintiff’s request that Sajovic be removed as a fiduciary and permanently enjoined from serving as a fiduciary or service provider to any ERISA-covered employee benefit plan.

Disability Benefit Claims

In Doe v. PricewaterhouseCoopers LLP, No. C 13-02710 JSW, 2014 WL 6986156 (N.D. Cal. Dec. 10, 2014), the court found that Life Insurance Company of North America (“LINA”) did not abuse its discretion in denying long term disability benefits to a former a global engagement partner at PricewaterhouseCoopers who is impaired by various mental health conditions. With respect to the standard of review, the court concluded that there is no evidence LINA’s conflict of interest impacted its benefits decision in this case. The court found significant that Doe placed no evidence before the Court indicating that LINA’s structural conflict of interest in any way impacted its decision to deny Doe’s benefits claim. On this record, the court concluded that LINA’s structural conflict of interest should be accorded little weight. Although LINA’s decision not to conduct an independent medical evaluation weighed slightly against LINA in the reasonableness analysis, the court was particularly persuaded by the following facts that LINA’s determination to withhold benefits was reasonable: 1) treatment records do not support Doe’s contention that he was disabled from the time he entered an addiction treatment facility through the present because the level of treatment Doe received is simply not consistent with a disabling mental condition; 2) with respect to Doe’s ADHD, Doe does not dispute that this issue has plagued him throughout his life and he was able to successfully work in his chosen occupation for many years; and 3) the record before LINA amply demonstrates that Doe has managed to perform, and even excel in life, despite his well-documented mental health issues.


In Knox v. Prudential Ins. Co. of Am., No. 3:13-CV-00424-CRS, 2014 WL 7004067 (W.D. Ky. Dec. 10, 2014), the court overruled Plaintiff’s objections to the magistrate judge’s order denying discovery of certain underlying or collateral materials related to the medical review of a long term disability benefits claim. The court found that Plaintiff was not entitled to: 1) materials related to the qualifications of nonparty medical reviewers retained by MES and MLS; 2) draft reports, quality-control notes and edits, and computer screen prints, which MES and MLS considered strictly internal and did not disclose to Defendant along with their respective reports; and 3) status and outcome reports consisting of statistical data showing the number of claim files sent to reviewers and the number of resulting denials of status and outcome reports.

ERISA Preemption

In McFall v. Stacy & Witbeck, Inc., No. 14-CV-04150-JSC, 2014 WL 7004880 (N.D. Cal. Dec. 10, 2014), the court dismissed Plaintiff’s claims challenging the appraisal value of his shares under the terms of the parties’ Buy-Sell Agreement, because the plain language of the agreement does not support Plaintiff’s contract interpretation as a matter of law. Defendants argued that the Buy-Sell Agreement refers to Paragraph 6.2 of the ESOP Plan, and the ESOP Plan is an ERISA Plan, so the claims are preempted by ERISA. The court found that Plaintiff’s claims do not depend upon the existence of an ERISA plan nor require interpretation of an ERISA plan so they are not preempted by ERISA. First, the Buy-Sell Agreement does not refer to a valuation conducted by the ESOP trustee; instead, it recites the existence of the 1998 ESOP Plan. Second, the Buy-Sell Agreement does not depend on the existence of an ERISA plan. The Agreement’s valuation method incorporates the valuation method set forth in the 1998 Plan, but this Plan has been superseded and the plan which was in existence at the time of the valuation of Plaintiff’s shares does not contain a paragraph 6.2, and there is nothing in the Buy-Sell Agreement that prospectively adopts future versions of the 1998 ESOP Plan. Thus, the Buy-Sell Agreement does not relate to any ERISA plan currently in existence.

In Broyles v. Cantor Fitzgerald & Co., No. CIV.A. 10-854-JJB, 2014 WL 6886158 (M.D. La. Dec. 8, 2014), Plaintiffs collectively invested millions to acquire a membership interest in “pooled asset” hedge funds, which were supposed to each have individual investment strategies. These funds were created and controlled by Commonwealth. Plaintiffs allege that all the funds had essentially the same investment strategy of investing in collateralized debt obligations, which were created by Cantor Fitzgerald & Co. The action asserts that the managers of the funds breached their fiduciary duty to their shareholders by investing in the collateralized debt obligations and, as a result, received improper financial benefits from Cantor even though the investments harmed shareholder interests. With respect to the ERISA Claims against Stone & Youngberg for breach of fiduciary duty, the court found that Plaintiffs have sufficiently pled standing to raise ERISA claims based on their claim that more than 25% of the equity interests in the Offshore Funds were held by benefit plan investors as defined in ERISA § 3(42), 29 U.S.C. § 1002(42). Defendants argued that all state law security claims must be dismissed as preempted by ERISA. The Court concluded that the parties failed to sufficiently address this issue but that sufficient facts have been pled for the ERISA claims to survive the pleading stage.

Life Insurance & AD&D Benefit Claims

In Rainey v. Sun Life Assur. Co. of Canada, No. 3-13-0612, 2014 WL 7156517 (M.D. Tenn. Dec. 15, 2014), where the court previously held that Plaintiff’s wife paid for and expected to receive full benefits of $934,000 under the life and AD&D policies at issue and her employer breached its fiduciary duty which led to this action, the court awarded Plaintiff a surcharge in the amount of $784,000 (face value minus amount already paid) against Defendant.

Nwizu v. Lincoln Nat. Life Ins. Co., No. 5:14-CV-617-D, 2014 WL 6908115 (E.D.N.C. Dec. 8, 2014) involved a dispute for dependent life insurance benefits. Defendant filed a motion to dismiss and Plaintiff filed a motion for voluntary dismissal without prejudice. In her complaint, Plaintiff alleged that Lincoln National denied her claim for dependent life insurance benefits in May 2013 but Plaintiff did not allege that she pursued an administrative appeal of the denial. The 60-day time period within which plaintiff was required to pursue her administrative appeal has expired and failure to pursue an administrative appeal within the allowed time period may be a bar further action by this court on her claim for benefits. The court noted the possibility that Plaintiff could be granted equitable relief from the 60-day deadline by the plan administrator. Thus, the court granted plaintiff’s motion to dismiss the complaint without prejudice.

Pension Benefit Claims

In Ghorley v. Thomas & Betters Corp. Pension Plan for Bargaining Unit Employees, Part C, No. 1:13-CV-400, 2014 WL 7014732 (E.D. Tenn. Dec. 11, 2014), the district court accepted and adopted the Magistrate Judge’s report and recommendation granting Defendant’s Motion for Judgment on the Administrative Record on Plaintiff’s claim for a 100% joint and survivor annuity benefit. Plaintiff contended that because she and her late husband complied, or substantially complied, with all steps necessary to change his pension benefit election to the 100% joint and survivor annuity under the Plan, she is entitled to discovery to prove her position. The court found that any election decisions made during the period prior to Plaintiff’s husband’s death related to his disability pension benefits because he was not in the applicable 180-day period to make adjustments to the elections for any other form of pension benefit. The court also found that Plaintiff is not entitled to any form of disability pension because her late husband’s employment ended due to death, not disability, under the clear terms of the Plan and SPD. The court concluded that Defendant’s decision that Plaintiff is entitled to only the surviving spouse pension benefit payable as a 50% joint and survivor annuity is the result of a deliberate reasoning process supported by substantial evidence and is a rational decision in light of the provisions of the Plan. Thus, the decision was not arbitrary and capricious and must be affirmed.

Plan Status

In Abiola v. ESA Mgmt., LLC, No. 13-CV-03496-JCS, 2014 WL 7149114 (N.D. Cal. Dec. 12, 2014), the Plaintiff alleged that Defendant failed to comply with 29 C.F.R. § 2520.104b-2, which requires a “plan administrator of an employee benefit plan … [to] furnish a copy of the summary plan description and a statement of ERISA rights … to each participant covered under the plan … and each beneficiary receiving benefits under a pension plan” within 90 days after the employee becomes a participant in a plan covered by ERISA. The only evidence that was presented of any benefit plan in this case was the evidence submitted by Defendant that it offered two bonus plans while Plaintiff was employed. The court found that this undisputed evidence shows that the bonus plans were not established for the purpose of paying any of the types of benefits listed in 29 U.S.C. § 1002(1). Rather, the bonuses were paid to employees on account of the work they performed and did not pay any deferred compensation. Consequently, the court found, as a matter of law, that the bonus plans were neither employee welfare benefit plans nor employee pension benefit plans and therefore not covered by ERISA.

Pleading Issues & Procedure

In Premier Health Ctr., P.C. v. UnitedHealth Grp., No. CIV. 11-425 ES, 2014 WL 7073439 (D.N.J. Dec. 15, 2014), a matter arising out of the methods by which Defendant UnitedHealth Group recoups benefit overpayments from healthcare providers, Defendants filed a motion of reconsideration of the Court’s August 28, 2014 ruling granting certification to the ONET Repayment Demand Class, on the condition that Plaintiffs submit evidence that one or more of the named plaintiffs fit within the class definition. Defendants argued that this amounts to a clear error of law that merits reconsideration because conditional class certifications are forbidden in the Third Circuit. The court found that Defendants are correct. The 3rd Circuit has held that the trial court must make a definitive determination that the requirements of Rule 23 have been met before certifying a class. See Hohider v. United Parcel Service, Inc., 574 F.3d 169 (3d Cir. 2009). However, the error was rendered moot by one of the court’s previous ruling substituting the named plaintiff of the ONET Repayment Class and certifying the class without condition. Consequently, the court denied Defendants’ Motion for Reconsideration.

In Bussiculo v. Babcock Power, Inc., No. 13-CV-07192, 2014 WL 6908771 (D.N.J. Dec. 8, 2014), Defendant moved to dismiss Plaintiff’s amended complaint based on its contention that Plaintiff did not adequately plead equitable estoppel and breach of fiduciary duty under Section 502(a)(3) with respect to his pension benefit claim. Under the terms of the retirement plan at issue, Plaintiff was entitled to an unreduced early retirement benefit if he qualified for the “Rule of 85.” On multiple occasions over several years, human resources personnel confirmed that Plaintiff met the Rule of 85, and Plaintiff decided to receive benefits early based on those representations. However, at the time of his employment termination, Plaintiff had not actually met the Rule of 85. The court found that Plaintiff sufficiently plead that the human resources personnel are “fiduciaries,” where they were delegated actual authority by the plan administrator to advise employees about their plan benefits. Moreover, ERISA defines “fiduciary” in functional terms of control and authority over the plan so whether the human resources personnel named in the Amended Complaint qualify as fiduciaries by way of their function is a question of fact. The court found that the pleadings sufficiently articulate that various personnel of Defendant were fiduciaries in a functional capacity. The court also found that: 1) Plaintiff sufficiently plead detrimental reliance because he states he would have received almost $20,000 more per year if he had waited to retire until the age of 65 and had not relied on erroneous statements and information by Defendant; 2) Plaintiff sufficiently plead a misrepresentation by a fiduciary who acted negligently; and 3) Plaintiff adequately plead a claim for equitable estoppel as he states a claim for “extraordinary circumstances” where he was repeatedly misinformed over several years.

Provider Claims

In Superior Healthcare, L.L.C. v. Louisiana Health Serv. & Indem. Co., No. 14-163-JJB-RLB, 2014 WL 7011805 (M.D. La. Dec. 11, 2014), Plaintiffs claimed to be ERISA beneficiaries and assignees of ERISA beneficiaries of each benefits plan at issue. Plaintiffs seek to have Defendants permanently barred from handling ERISA-governed claims or trust funds and to have BCBS repay all monies taken or confiscated by way of offsetting or recoupment. In ruling on Defendants’ motion to dismiss all claims, the court found that Plaintiffs pled sufficient facts to establish the existence of an ERISA plan. Additionally, the court found that Plaintiffs sufficiently pled that Cowart and Guy acted as ERISA-fiduciaries and could plausibly have breached such duties. Plaintiffs asserted that the demanding of over $700,000 in letters is not merely ministerial acts, but instead support the claim that Cowart and Guy were acting as ERISA-fiduciaries according to the statutory definition and had discretionary authority over the management of the plan, gave advice for a fee with regard to the plan, or had discretion in the administration. The Court agreed and found sufficient factual support for the Court to reasonably infer that Cowart and Guy acted as ERISA-fiduciaries. However, Plaintiffs did not bear their burden in alleging sufficient factual support to find O’Brien, an attorney, acted as an ERISA-fiduciary. Plaintiffs claimed that O’Brien intentionally refused to comply with all of the applicable claims procedures and that numerous items of correspondence were sent to O’Brien from Plaintiffs. Therefore, the court denied the Motion to Dismiss insofar as it moved to dismiss ERISA claims asserted against Cowart and Guy, but granted insofar as it moved to dismiss ERISA claims asserted against O’Brien.

Retaliation Claims

In Trujillo v. Am. Bar Association, No. 13 CV 8541, 2014 WL 7146214 (N.D. Ill. Dec. 15, 2014), Plaintiff, pro se, contended that he was wrongfully demoted and discharged by Defendant the American Bar Association (“ABA”) after he reported wrongful conduct relating to a pension plan sponsored by the ABA. Plaintiff brought two claims relating to his eventual termination from the ABA’s Human Resources Department, including a claim for unlawful retaliation and termination under 29 U.S.C. § 1140, pursuant to the civil enforcement provision contained in 29 U.S.C. § 1132(a)(3). In granting Defendants’ motion to dismiss, the court found that Plaintiff’s attempts to characterize the $800,000 that he seeks as “equitable” monetary relief is actually a legal remedy of money damages-a remedy that is unavailable to him under § 1132(a)(3). Because Plaintiff does not seek “appropriate equitable relief” under § 1132(a)(3), the court found that his claim must be dismissed.

Statute of Limitations

In Mulholland v. MasterCard Worldwide, No. 4:13CV1329 JCH, 2014 WL 6977805, at *2-3 (E.D. Mo. Dec. 9, 2014), the Hartford policy contains the following contractual limitations provision: “[n]o legal action of any kind may be filed against [Hartford]: ….2) more than three years after proof of Disability must be filed, unless the law in the state where [Plaintiff] live[s] allows a longer period of time.” The court found that in accordance with the Supreme Court’s decision in Heimeshoff, the court must apply this limitations period if it is reasonable and there is no controlling statute to the contrary. The court found that Mo.Rev.Stat. § 516.110(1) (a statute sets a ten-year limitations period for an action upon any writing whether sealed or unsealed, for the payment of money or property) is not a controlling statute to the contrary. The parties suggested three different trigger dates under this standard. Defendants proposed first that the limitations period began to run on November 21, 2007, which is the date Hartford provided to Plaintiff as the date on which her proof of disability was due. In the alternative, Defendants suggested the limitations period began to run on February 13, 2008, which was the final date Hartford considered the evidence on which it based its termination decision. Plaintiff contended the limitations period began to run on August 19, 2008, the date Hartford made its decision on Mulholland’s appeal. The court found that there is no need to decide which of these dates is the trigger date under the Hartford policy because even if the limitations period began to run on August 19, 2008, it would have expired on August 19, 2011, and the complaint was not filed until nearly two years after that date. The court found Plaintiff’s Complaint time barred under the Hartford Policy’s applicable three-year limitations period.


In Mroch v. Sedgwick Claims Mgmt. Servs., Inc., No. 14-CV-4087, 2014 WL 7005003 (N.D. Ill. Dec. 10, 2014), the court enforced a long term disability plan’s forum-selection clause which required the Plaintiff to file suit in the U.S. District Court for the Eastern District of Missouri. The court noted that the vast majority of courts have found similar forum-selection clauses valid. And, ERISA’s venue provision is permissive and not mandatory. The court found that in this case, the public-interest factors do not provide extraordinary circumstances weighing against transfer. As such, the court granted Defendants’ Motion to Transfer the case pursuant to 28 U.S.C. § 1404(a).

Withdrawal Liability & Unpaid Benefit Contributions

In Trustees of the Laborers’ Dist. Counsil & Contractors’ Pension Fund v. Massie, No. 2:14-CV-102, 2014 WL 6909463 (S.D. Ohio Dec. 8, 2014), Plaintiffs alleged that Defendant, an individual, owned one hundred percent of the outstanding shares of a company that executed a collective bargaining agreement that required another entity to submit contributions to the pension fund administered by Plaintiffs. Plaintiffs further asserted that the entity withdrew from the pension plan and thereby incurred withdrawal liability. Defendant failed to appear in the action so Plaintiffs filed a motion for default judgment. The court denied default judgment to Plaintiffs, because although Defendant can be held individually liable as a sole proprietor, Plaintiffs did not present any evidence that Defendant actually acted as a landlord and collected rent from the companies. Applying FRCP 55(b) (2), which permits a court to conduct hearings in certain circumstances, the court calendared an evidentiary hearing to determine whether Defendant actually operated as a sole proprietor.

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* 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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