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ERISA Watch – December 20, 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

“Tangled Web” of ERISA Leaves Welfare Benefit Plan with no Option for Recovery

InCent. States, Se. & Sw. Areas Health & Welfare Fund v. Gerber Life Ins. Co., No. 13-4834-CV, __F.3d___, 2014 WL 5904900 (2d Cir. Nov. 14, 2014), Central States, Southeast and Southwest Areas Health and Welfare Fund, an ERISA employee welfare benefit plan that provides health insurance to participating Teamsters and their dependents, brought suit against Gerber Life Insurance Company for reimbursement of medical claims it paid but believed were the responsibility of Gerber based on Central States’ Coordination of Benefits provision. Gerber issued accident insurance policies that covered scholastic sports-related injuries for students insured by Central States as dependents of plan participants. The parties disputed which of the two policies afforded primary and which afforded secondary coverage for the injuries. The Central States policy’s Coordination of Benefits formula provided that if a covered person is insured by Central States indirectly as a dependent, but is insured directly by another policy, the Central States policy provides secondary coverage and the other policy provides primary coverage. The Gerber policy, on the other hand, purportedly provided coverage only in excess of whatever was paid by other medical insurance coverage. Although Central States considered its coverage to be secondary, it nevertheless paid the injured students’ claims as an accommodation to them and their families in order to avoid delays and undue administrative burdens to beneficiaries who undisputedly were entitled to have their claims covered by medical insurance. After it paid the claims, Central States sought reimbursement from Gerber but Gerber refused to pay, taking the position that its policies provided only excess, secondary coverage. Central States then brought this lawsuit to recover the amounts it had paid on the claims and alleged various claims for declaratory judgment and injunctive relief pursuant to federal common law and ERISA § 502(a)(3). Claims I and II sought to establish Gerber’s obligation to pay future and past claims. Claim III sought restitution, and Claim IV sought the imposition of an equitable lien and a constructive trust to secure reimbursement for the claims Central States had paid. The district court granted Gerber’s motion pursuant to Rule 12(b)(6) to dismiss the complaint on the grounds that Central States was actually seeking legal relief that was not available under § 502(a)(3) and that ERISA preempted the federal common law claims.

The 2nd Circuit Court of Appeals affirmed the district court’s dismissal of Central States’ claims. With respect to Claims I and II for declaratory and injunctive relief, the court found that these claims seek money damages which are foreclosed by Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002). Claim III, seeking restitution from Gerber of the funds paid out by Central States, and Claim IV, seeking to impose an equitable lien or constructive trust on those funds, are both purportedly brought under § 502(a)(3) and both fail for essentially the same reason: they seek legal relief. Great-Westheld that equitable restitution involves a claim seeking to recover money that could be traced to a particular fund held by a defendant. Although cases decided since Great-Westhave “somewhat loosened” the tracing requirement, the court found that it is still very much in force. The relief sought by Central States is not equitable because it does not assert title or right to possession of particular property, but simply asserts a claim against Gerber’s general assets. The court recognized that Plans in Central States’ position have no option to recover payments made for its participants’ convenience and that Plans may be forced to deny those claims. A beneficiary with coverage from two carriers would be forced into the position of bringing suit against both carriers, thereby incurring the costs and delays of protracted multi-party litigation. The court noted the paradoxical result that as an ERISA plan, Central States has fewer remedies than it would if it were a non-ERISA plan, and its beneficiary, through no fault of his own, is considerably worse off for having two policies that coincidentally had conflicting language than he would be if he had only one. The court hoped that the Supreme Court and Congress “will revisit this tangled web sooner rather than later.”

Third Circuit

Statute of limitations for Claim for joint and survivor spouse annuity accrued from date when benefits were terminated and not from date when alleged falsified waiver was discovered. In Christian v. Honeywell Ret. Ben. Plan, No. 14-1084, __Fed.Appx.___, 2014 WL 5840424 (3d Cir. Nov. 12, 2014), the 3rd Circuit Court of Appeals affirmed the District Court’s dismissal of the Plaintiff’s complaint as time-barred on the face of the complaint. The issue was whether Plaintiff’s cause of action accrued in 2004, and is now time-barred, or whether the accrual date was tolled until 2012 when Plaintiff discovered the “Waiver of Joint and Surviving Spouse Annuity” (the “Waiver”). Plaintiff’s late husband worked for Honeywell and began receiving Plan benefits upon his retirement in January 1987. The Plan distributed the husband’s retirement benefits in the form of a single life annuity, in reliance on the Waiver. Plaintiff now asserts that she did not sign or consent to the Waiver. When her husband died in 2004, Plaintiff contacted the Plan Administrator, Hewitt Associates, LLC, who advised her that her husband’s retirement benefits would end. At no time, however, did the Plan’s representatives advise Plaintiff about the Waiver, or that absent such a waiver, she would be entitled to annuity benefits. Around June 2012, Plaintiff located a file containing a copy of the Waiver that had purportedly been signed by her on December 1, 1986. After she discovered the Waiver, Plaintiff contacted the Plan to contest the validity of the Waiver and submitted a formal claim for benefits pursuant to the Plan’s claim procedures. The Plan denied her initial claim and her appeal.

It was undisputed that Pennsylvania’s four-year statute of limitations applies. In the ERISA context, a non-fiduciary cause of action will generally accrue when a party’s claim for benefits has been formally denied. Under the “clear repudiation” rule, however, an event other than a denial can trigger the statute of limitations, as long as it is (1) a repudiation (2) that is clear and made known to the beneficiary. The court determined that Plaintiff’s claim for benefits accrued in July 2004 when the Plan benefits were discontinued. Here, Plaintiff spoke with the Plan’s representatives after her husband’s death and was informed that all benefits would be terminated. Thus, the termination of Plan benefits was clear and made known to Plaintiff.

Fourth Circuit

Termination of an early retirement pension supplement, Where the Plan explicitly incorporates future service into the calculation of an accrued benefit, is a violation of ERISA’s anti-cutback provision. Savani v. URS Prof’l Solutions, LLC, No. 13-2512, __Fed.Appx.___, 2014 WL 6117316 (4th Cir. Nov. 17, 2014) (unpublished) involved a class action brought pursuant to ERISA § 502(a)(1)(B) claiming that Washington Safety Management Solutions, LLC’s (“WSMS”) termination of an early retirement pension supplement violated ERISA’s anti-cutback provision. The 4th Circuit Court of Appeals held in the first appeal of this case that the “clear terms” of the WSMS Pension Plan include the early retirement pension supplement in the definition of “accrued benefit.” The facts relevant to this second appeal include the Plan’s benefits committee’s amendment to the Plan to eliminate § 4.12(a), which granted a $700 monthly benefit to Plan members electing to take early retirement on or after January 1, 2005. Later, the benefits committee further amended the Plan, effective December 31, 2005, which froze a Member’s Accrued Benefit as of the effective date and provided that no additional Credited Service will be awarded or earned under the Plan for any purpose. However, although the Plan is frozen as of December 31, 2005, an Employee continued to earn Eligibility Service in accordance with the terms of the Plan for purposes of determining eligibility for certain benefits and eligibility for a vested pension.

During the course of the district court proceedings, the court certified a subclass to include certain members of the main class who after December 31, 2005 have or may have become eligible for § 4.12(a) WSMS benefits as related to freeze of benefits as of December 31, 2005. The parties filed cross motions for summary judgment on the issue of whether the 2005 Amendment resulted in the lawful elimination of the § 4.12(a) benefit for Taylor (the subclass representative) and the members of the subclass. In considering the parties’ motions, the district court observed that the 2005 Amendment permitted Plan members to continue to earn Eligibility Service years in order to determine the members’ “eligibility for certain benefits and eligibility for a vested Pension.” In light of the unambiguous language of the 2005 Amendment, as well as this Circuit’s prior holding that the elimination of the § 4.12(a) supplement violated ERISA’s anti-cutback provision, the district court granted summary judgment in favor of Taylor and the subclass members and held that they are entitled to receive the supplement. On appeal, the WSMS argued that Taylor and the members of the subclass are not eligible for the § 4.12(a) benefit because they did not satisfy the requisite eligibility requirements for the benefit prior to the effective date of the 2005 Amendment. The WSMS argued in the alternative that the district court erred by failing to remand this matter to the Plan’s benefits committee.

The court rejected the WSMS’s argument that Taylor and the members of the subclass had a mere, unprotected expectation of receiving the § 4.12(a) benefit because they did not satisfy the age and service requirements prior to December 31, 2005. The court explained that the 2005 Amendment to the Plan at issue here explicitly incorporated future service into the calculation of an accrued benefit. Plan members would continue to earn Eligibility Service years to determine eligibility for certain benefits, including the § 4.12(a) benefit. The unambiguous terms of the Plan provide that Eligibility Service years determine whether a Member otherwise satisfies the requirements for a Pension under this Plan such that he becomes eligible for the § 4.12(a) supplement. The court again held that the unambiguous terms of the Plan clearly include the pension benefit at issue within the Plan’s definition of “accrued benefit,” and that WSMS may not lawfully eliminate the benefit. Because the benefits committee’s discretion is not implicated given the unambiguous language of the amendment, the court found that a remand to the committee was not required. The court affirmed the grant of summary judgment to the Plaintiffs-Appellees.

Unreported Decisions

Attorneys’ Fees

Chicago Reg’l Council of Carpenters Pension Fund v. Rink Sys., Inc., No. 13 C 4886, 2014 WL 5863156 (N.D. Ill. Nov. 12, 2014) (where Plaintiffs’ recovered $3,560.61 ($1,751.04 for unpaid contributions + $152.56 for interest + $350.21 for liquidated damages + $1,306.80 for audit fees), awarding $23,125.98 (116.7 attorney hours at $160.00/hour, 13.7 paralegal hours at 60.00/hour, and $3,631.98 in costs) as a reasonable fee for this case, which spanned a year, involved discovery, two motions to compel, and a summary judgment motion, and finding that the fact that the fees exceed the amount recovered does not warrant a reduction in this case).

Disability Benefit Claims

Doe v. Unum Life Ins. Co. of Am., No. CIV.A. 13-6900, 2014 WL 6454560 (E.D. Pa. Nov. 18, 2014) (where Unum did not reference any of Plaintiff’s “material and substantial duties,” or any duties related to Plaintiff’s Validation Engineer position, in its denial of LTD benefits and where none of Unum’s consulting doctors considered Plaintiff’s job duties in concluding she was not mentally disabled, finding that Unum’s denial of benefits was unreasonable and remanding to Unum to re-evaluate Plaintiff’s claim pursuant to the unambiguous Plan language since the evidence does not clearly establish that Plaintiff was limited from performing the material and substantial duties of a validation engineer as that position is performed in the national economy).

Jones v. Iron Workers Local 25 Pension Fund, No. 14-CV-10031, 2014 WL 6085294 (E.D. Mich. Nov. 13, 2014) (in suit involving denial of disability retirement benefits, where Plan denied benefits based on the fact that the effective date of the Social Security Administration’s disability determination, May 7, 2011, was not within three years of the last year in which Plaintiff completed a minimum of 870 hours as required by the Plan to be an Active Participant, granting Defendant’s motion for judgment on the administrative record and finding that Defendant’s decision was not arbitrary and capricious because: 1) the Defendants did not need to review the entire Social Security Disability award; 2) the Defendants did not need to consult a healthcare professional; 3) the Defendants properly explained that Plaintiff’s receipt of Worker’s Compensation did not make Plaintiff eligible for a disability benefit; 4) Defendants substantially complied with ERISA’s and the Plan’s notice requirements; and 5) the Defendants did not retroactively apply the break in service rule to Plaintiff).

Basaldua v. Am. Fid. Assurance Co., No. 4:11-CV-664, 2014 WL 6068417 (E.D. Tex. Nov. 13, 2014) (granting summary judgment in favor of insurer on termination of long term disability benefit claim and finding that affidavit submitted by treating doctor after the final decision was rendered is inadmissible because it was never before the plan administrator and Plaintiff failed to provide any evidence of “regular care and attendance by a physician at least once a month” and did not “follow the medical treatment advice” of his physician).

Horne v. J.C. Penney Corp., No. 14CV2383, 2014 WL 6060434 (W.D. La. Nov. 12, 2014) (where Plaintiff sought to recover her terminated disability benefits under §1132(a)(1)(B) and brought claim for breach of fiduciary duty and corresponding prayer for an “equitable surcharge” pursuant to § 1132(a)(3), finding that Plaintiff is forbidden from bringing the breach of fiduciary duty claim under § 1132(a)(3) because the basis of the claim is simply the denial of benefits and Plaintiff has a remedy available for that under § 1132(a)(1)(B) and because the “equitable surcharge” Plaintiff seeks is not any different from her prayer for reinstatement and recovery of Plan benefits).


Ryan v. Cargill, Inc., No. 1:14CV01183, 2014 WL 5858332 (C.D. Ill. Nov. 12, 2014) (finding that Plaintiff did not allege specific facts of bias or misconduct warranting discovery into a structural conflict, with the exception that Plaintiff could seek discovery on Cargill’s assertion that “the Plan has been consistently administered to require termination after attainment of both the age and service requirements listed for a Disability Retirement Benefit” since it is an assertion made by Cargill without any evidence in the record to support it and, without discovery, Plaintiff has no means of testing the veracity of this statement).

In re Bank of New York Mellon Corp. Forex Transactions Litig., No. 11-CV-6969 LAK, 2014 WL 5810612 (S.D.N.Y. Nov. 10, 2014) (finding that a document containing a legal memorandum originally prepared for Bank of New York Mellon, aimed at securing compliance with the requirements of ERISA, which the Bank later forwarded to some third-party investment managers that were associated with the Bank’s pension plan, is protected by the common interest doctrine and the attorney-client privilege).

ERISA Preemption

S. Broward Hosp. Dist. v. Coventry Health & Life Ins. Co., No. 14-61157-CIV, 2014 WL 6387264 (S.D. Fla. Nov. 14, 2014) (in suit by health care provider against an HMO for allegedly engaging in systematic and ongoing breaches of an agreement between the parties for over five years, including inappropriate denial of claims, failure to pay timely filed claims, inappropriate retraction of claim payment, and inappropriate reduction of claim payment, finding that: 1) removal was timely because Defendants obtained notice of the potential argument for ERISA preemption at the time these claims were identified on a spreadsheet Plaintiff produced which disclosed the medical claims at issue; 2) Plaintiff’s complaint, at least in part, involves denials of benefits and other ERISA violations such that their breach of contract claim implicates ERISA; 3) Plaintiff has standing to sue under ERISA because determining any liability for breach of contract would require determining whether the claims in question involved a covered service and there was a valid assignment; and 4) at least part of the resolution of the right to payment hinges on interpretation of the ERISA plan-i.e., whether the retroactive denials complained of were for covered services, and not founded upon duty independent of ERISA).

K.A. v. St. Barnabas Medican Ctr., No. CIV. 2:14-6001 WJM, 2014 WL 5848956 (D.N.J. Nov. 12, 2014) (where Plaintiff brought claims against Sun Life for its alleged failure to provide her with a copy of the Long Term Disability Plan, and for intentional and negligent infliction of emotional distress arising out of Sun Life’s failure to provide a copy of the Plan, finding that all three Counts against Sun Life, which seek judgment “for damages compensatory and punitive together with interests and costs of suit,” are preempted by ERISA).

Life Insurance & AD&D Benefit Claims

Hartford Life & Acc. Ins. Co. v. Rogers, No. 3:13-CV-101, 2014 WL 5847548 (D.N.D. Nov. 12, 2014) (in interpleader action brought by Hartford to determine the allegedly competing claims for the proceeds of an accidental death and dismemberment insurance policy, where insured’s husband, who was also the named beneficiary of the policy, pled guilty to murdering the insured, finding that ERISA does not preempt North Dakota’s slayer statute because awarding benefits to the husband is contrary to federal common law and congressional intent for ERISA and the benefits are payable to insured’s parents).

Medical Benefit Claims

William S. v. NASDAQ OMX Flexible Benefits Program, No. 2:13-CV-00125 DN, 2014 WL 5819561 (D. Utah Nov. 10, 2014) (where beneficiary received inpatient, residential treatment at Catalyst for a total of 183 days, the Plan provides that residential mental-health treatment is covered for a maximum of 60 days in a calendar year, and the same maximum benefit for residential substance-abuse treatment, finding that Cigna abused its discretion by issuing payment for only 60 days of residential mental-health treatment at Catalyst and not 60 days of residential substance-abuse treatment at Catalyst, as well, based on Cigna’s unreasonable position that it properly exercised its discretion and relied on a standard methodology of paying benefits for primary diagnoses, not secondary ones).

Pension Benefit Claims

Thomas v. Bostwick, No. 13-CV-02544-JCS, 2014 WL 6386806 (N.D. Cal. Nov. 14, 2014) (on Rule 59(e) motion for reconsideration of court’s previous order that Defendant breached his fiduciary duty by transferring Plaintiff’s share of the Plans to the Corporation in partial satisfaction of his judgment debt, finding that Defendant failed to demonstrate manifest errors of law or fact, or manifest injustice, and although “there may be a natural distaste for the result” in favor of Plaintiff despite his embezzlement, ERISA provides no basis to deny Plaintiff’s vested benefits on account of his misdeeds, and prohibits alienation of such benefits in satisfaction of his debts).

Lucas v. Verizon, No. CIV. 14-5617, 2014 WL 5848962 (D.N.J. Nov. 12, 2014) (where Plaintiff became aware, or should have become aware, that his pension benefits were reduced in August, 2003 and Plaintiff did not file his complaint until August, 2014, finding that this eleven-year gap is far outside the six-year statute of limitations period and he is prevented from bringing his claim).

Provider Claims

Aviation W. Charters, Inc. v. United Healthcare Ins. Co., No. CV-14-00338-PHX-NVW, 2014 WL 5814232 (D. Ariz. Nov. 10, 2014) (in claim by non-Network transportation provider against insurer of benefit plan, finding that even if the beneficiary did attempt to assign her benefits and rights under the Plan, the Plan does not permit assignment without consent, and United did not consent to an assignment, so any purported assignment without consent is invalid for purposes of giving Plaintiff a federal cause of action under ERISA; however, the court found that this does not foreclose any state law claim, such as one for unjust enrichment, for which the court declined to exercise supplemental jurisdiction).

IV Solutions, Inc. v. United Healthcare Servs., Inc., No. CV 12-4887-GAF MRWX, 2014 WL 5846805 (C.D. Cal. Nov. 12, 2014) (in dispute between medical provider that supplies specialty pharmaceutical products and related in-home infusion services and health care service business that administers ERISA plans, granting in part and denying in part United’s Motion in Limine No. 1 to Exclude Evidence Regarding The “Ingenix” Database, Database Actions, and Settlement, and holding that evidence regarding the basis for United’s determination of reimbursement amounts, including evidence regarding the Ingenix/PHCS database is admissible but evidence regarding the existence or substance of the New York litigation is excluded).

Withdrawal Liability & Unpaid Benefit Contributions

Trustees of Painting Indus. Ins. Fund v. Glass Fabricators, Inc., No. 1:14-CV-00313, 2014 WL 5878201 (N.D. Ohio Nov. 12, 2014) (in suit brought by Trustees of pension plans against Defendant for delinquent employer contributions to employee benefit funds, denying State Auto’s motion to intervene as liability insurance carrier for Defendant because its motion, brought just as dispositive motion practice was closing and two months before trial was scheduled to begin, was untimely).

* 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 Parkway, 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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