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ERISA Watch – December 24, 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.

First Circuit


In Guerra-Delgado v. Popular, Inc., No. 13-2065, __F.3d___, 2014 WL 7229222 (1st Cir. Dec. 18, 2014), when Plaintiff retired from Banco Popular de Puerto Rico (“BPPR”), BPPR undertook a final calculation of his pension, which yielded monthly payments substantially lower than earlier estimates had suggested. Plaintiff brought claims under 29 U.S.C. § 1132(a)(1), a theory of estoppel, and Puerto Rico contract law and the district court dismissed the ERISA and contract claims, holding that Plaintiff could not be awarded relief under the terms of BPPR’s retirement plan and that ERISA preempted the commonwealth law claims. The district court then granted summary judgment against Plaintiff on his estoppel claim, holding that estoppel could not apply where the terms of the benefits plan are unambiguous. The 1st Circuit Court of Appeals affirmed the district court, finding that 1) the written documents identified as “estimates” of Plaintiff’s pension benefits do not amend the Plan and the relief he seeks does not flow from the terms of the Plan so he cannot recover under § 502(a)(1); 2) Plaintiff’s commonwealth claims are based on the same facts as his ERISA claims, “relate to” the ERISA-regulated Plan, and are preempted by ERISA; and 3) an equitable estoppel claim is necessarily limited to statements that interpret the plan and cannot extend to statements that would modify the plan.

Second Circuit

REFORMATION OF A PENSION PLAN DUE TO COMPANY’S FRAUD PAIRED WITH PLAN PARTICIPANTS’ UNILATERAL MISTAKE IS A PROPER EQUITABLE REMEDY UNDER ERISA. Amara v. CIGNA Corp., No. 13-447-CV, __F.3d___, 2014 WL 7272283 (2d Cir. Dec. 23, 2014) involves a long-running dispute arising from certain misleading communications made by CIGNA Corporation (“CIGNA”) and the CIGNA Pension Plan to CIGNA’s employees regarding the terms of the CIGNA Pension Plan and, in particular, the effects of the 1998 conversion of CIGNA’s defined benefit plan (“Part A”) to a cash balance plan (“Part B”). The case was first brought in December 2001 by individual plan participants on behalf of themselves and others similarly situated and the district court granted Plaintiffs’ motion to certify the class. After trial, district court held, inter alia, that Defendants had failed to provide notice of a significant reduction in the rate of future benefit accrual under the Part B retirement plan in violation of ERISA § 204(h) and that Defendants failed adequately to disclose material modifications to the plan in violation of ERISA § 102. The district court ordered Defendants to provide the benefits accrued under Part A at the time of the conversion plus the benefits accrued thereafter under Part B, i.e. “A+B” benefits, and to issue new or corrected notices to all class members under ERISA § 502(a)(1)(B). The 2nd Circuit affirmed those decisions by summary order and both parties petitioned for certiorari. The Supreme Court vacated the 2nd Circuit’s judgment, and remanded the case, concluding that the relief afforded by the district court was not available under § 502(a)(1)(B). The Supreme Court instructed the district court to consider on remand whether Plaintiffs are entitled to equitable relief under § 502(a)(3). On remand, the district court denied a motion by Defendants to decertify the class and again ordered CIGNA to provide Plaintiffs with A+B benefits and new or corrected notices, this time ordering such relief under § 502(a)(3). On appeal to the 2nd Circuit, CIGNA argued that the district court erred in declining to decertify the class and in ordering equitable relief pursuant to § 502(a)(3). Plaintiffs argued that the court erred in limiting relief to A+B benefits, as opposed to affording them the benefits they would have received pursuant to Part A. The court concluded that the district court acted within the scope of its discretion in denying CIGNA’s motion to decertify the Plaintiff class. The court also concluded that the district court did not abuse its discretion in determining that the elements of reformation have been satisfied and that the plan should be reformed to adhere to representations made by the plan administrator. To establish that reformation was appropriate, Plaintiffs were required to show that Defendants committed fraud or similar inequitable conduct and that such fraud reasonably caused Plaintiffs to be mistaken about the terms of the pension plan. Finally, based on the particular facts of this case, the court held that the district court did not abuse its discretion in limiting relief to A+B benefits rather than ordering a return to the terms of CIGNA’s original retirement plan. Having concluded that the district court did not abuse its discretion in reforming the plan to grant the A+B remedy, the court declined to address whether relief would alternatively have been proper pursuant to different equitable remedies such as surcharge or estoppel.

ALLEGATIONS OF IMPRUDENT MANAGEMENT OF PLAN ASSETS SUFFICIENTLY STATE A CLAIM. Gedek v. Perez, No. 12-CV-6051L, __F.Supp.3d___, 2014 WL 7174249 (W.D.N.Y. Dec. 17, 2014) involves a consolidated matter brought by participants and beneficiaries of the Savings and Investment Plan (“SIP”) of Eastman Kodak Company (“Kodak”) and the Eastman Kodak Stock Ownership Plan (“ESOP”) (collectively “the Plans”), against the administrators and fiduciaries of the Plans, alleging that Defendants have violated ERISA by failing to prudently manage the Plans’ assets when it continued to invest those assets in Kodak stock even after it became obvious that Kodak was headed for bankruptcy and that its stock was going to plummet in value. Defendants moved to dismiss the claims against them pursuant to Rule 12(b)(6). In denying the motions, the court determined that the question is not whether Defendants paid an artificially inflated price for Kodak stock, but whether they should have realized that Kodak stock represented such a poor long-term investment that they should have ceased to purchase, hold, or offer Kodak stock to plan participants. The court found that this is a very different fact pattern than the one presented in the U.S. Supreme Court’s decision in Fifth Third Bancorp v. Dudenhoeffer, — U.S. —-, 134 S.Ct. 2459 (2014). With respect to the Kodak Defendants, the court found that Plaintiffs do not contend that the price of Kodak stock was headed for a sudden, precipitous decline that Defendants should have seen coming. They allege that Kodak stock was on a long, steady, virtually unstoppable downhill slide, and that no prescience or inside knowledge was needed to realize that it would continue to do so. In the court’s view, this states a claim under ERISA, as to the ESOP. With respect to BNY Mellon, the court found that Plaintiffs have at least presented a plausible claim that Mellon should at some point have refused to follow the Kodak Defendants’ directions to continue investing in Kodak stock, or at least questioned the wisdom of the Kodak Defendants’ directive to maintain the status quo concerning the purchase of company securities. With respect to Plaintiffs’ claim for co-fiduciary liability, the Defendants both moved to dismiss this claim on the ground that Plaintiffs have failed to allege a breach in the first place, or that they have not alleged Defendants’ knowledge of the breach. For the reasons stated with respect to Plaintiffs’ other claims, the court found those arguments unpersuasive.

Eighth Circuit

STATE LAW CLAIMS PREEMPTED BY ERISA BUT POLICY LIMITATIONS PROVISION DID NOT TIME-BAR PLAINTIFF’S LAWSUIT FOR IMPROPER PROCESSING OF CLAIM FOR BENEFITS. InIbson v. United Healthcare Servs., Inc., No. 13-3153, __F.3d___, 2014 WL 7181226 (8th Cir. Dec. 18, 2014), Plaintiff and her family were insured by United Healthcare Services, Inc. (UHS) through a policy available to her to as a member of her law firm. Due to an error, UHS informed Plaintiff’s medical providers that Plaintiff and her family no longer had insurance coverage. UHS eventually paid the claims but Plaintiff filed suit against UHS raising state law claims of breach of contract, negligence, and bad faith, and seeking punitive damages. The district court found that Plaintiff’s claims were preempted by ERISA and barred by the policy’s three-year contractual limitations period. The 8th Circuit agreed with the district court that Plaintiff’s state law claims are preempted under ERISA, however it disagreed with the district court’s entry of summary judgment on the basis of the three-year contractual limitations period.

With respect to the preemption issue, the court found that the plan is an employee welfare benefit plan that does not meet all of the elements for exemption under the ERISA’s safe harbor provision because the law firm paid part of the premium costs for the employees of the firm. Plaintiff argued that her state law claims concern UHS’s improper cancellation of her insurance policy and are not related to ERISA or the terms of the policy but the court found that the focus of the dispute is the improper processing of claim benefits and the failure of UHS to pay eligible claims. Because Plaintiff’s proposed state law claims could have been brought under ERISA’s civil enforcement mechanism, her claims are completely preempted by 29 U.S.C. § 1132(a)(1)(B).

With respect to the contractual statute of limitations issue, the district court found that the following one of two policy limitations applied to Plaintiff’s lawsuit:

You cannot bring any legal action against us to recover reimbursement until 60 days after you have properly submitted a request for reimbursement as described in (Section 5: How to File a Claim). If you want to bring a legal action against us you must do so within three years from the expiration of the time period in which a request for reimbursement must be submitted or you lose any rights to bring such an action against us.

The 8th Circuit found, and UBH conceded, that this limitation provision did not apply to Plaintiff’s claim because it applied only to claims made for out-of-network providers. The district court did not consider the policy’s other limitations provision. The court reversed the entry of summary judgment and remanded the matter to the district court for further proceedings.

Tenth Circuit

BECAUSE AN ADMINISTRATOR’S DECISION TO DENY BENEFITS NEED NOT BE THE MOST LOGICAL DECISION AVAILABLE, COURT AFFIRMS DENIAL OF SHORT-TERM DISABILITY BENEFIT CLAIM. In Menge v. AT&T, Inc., No. 14-1210, __Fed.Appx.___, 2014 WL 7172350 (10th Cir. Dec. 17, 2014), the pro se Plaintiff brought suit against Defendant for the denial of his short-term disability claim under AT&T’s Umbrella Benefit Plan No. 1. In deciding whether the decision to deny Plaintiff’s benefits was arbitrary and capricious, the court took into consideration the fact that AT&T both funds and administers the plan. But, the court found that such an inherent conflict of interest has little bearing in this case, given that (1) the Quality Review Unit relied on the medical opinions of independent physician advisors in upholding the denial of benefits, and (2) the QRU was operated by Sedgwick (a third-party administrator), rather than AT&T. The court determined that it cannot conclude that the independent physician advisors selectively reviewed Plaintiff’s medical records so as to render the denial of benefits arbitrary and capricious. The court explained that an administrator’s decision to deny benefits need not be the most logical decision available so long as the decision “falls somewhere on a continuum of reasonableness-even if on the low end”-the court cannot disturb it. The court found that because the QRU’s denial of Plaintiff’s short-term disability benefits was a reasonable decision, it must stand.

Unreported Decisions

Disability Benefit Claims

In Mozdzierz v. Aetna Life Ins. Co., No. CIV.A. 06-2652, 2014 WL 7177326 (E.D. Pa. Dec. 17, 2014), Plaintiff was a long term disability claimant who alleged that he is incapable of performing the sedentary duties of a computer programmer because of lower spine and leg pain. Aetna initially approved and paid benefits, but then terminated his claim after conducting a review. The court found that Aetna’s termination of Plaintiff’s LTD benefits was neither arbitrary nor capricious. The court explained that Plaintiff’s subjective complaints of pain do not constitute prima facie evidence of a total disability. Although debilitating pain may constitute a disability, the court found that the conflicting diagnoses offered by Plaintiff’s various treating physicians, the conflicting suggestion of disability by one doctor, the total lack of any suggestion of disability by the other physicians, and considering the surveillance video, the record here does not support a claim of disability based upon Plaintiff’s subjective complaints of pain. The surveillance showed Plaintiff performing strenuous activities in his yard, including raking, digging, and mending a fence. The video also depicted Plaintiff bending, kneeling, walking, and lifting without any problems. Although not dispositive of the question of whether or not he is capable of performing the sedentary occupation of computer programmer, the court found that the video does not support Plaintiff’s claims of total disability and of an inability to sit and drive longer than ten minutes.

ERISA Preemption

Kirkindoll v. Nat’l Credit Union Admin. Bd., No. 3:11-CV-1921-D, 2014 WL 7178005 (N.D. Tex. Dec. 17, 2014) involved a suit arising from the termination of an ERISA “top hat” plan and the repudiation by the conservator for an insured credit union of the contract that terminated the plan and purported to vest a plan participant with partial plan benefits. In 2010, Texans Credit Union (TCU) Board of Directors terminated the Plan after it determined there was no longer a need to continue the “executive retention” strategy intended by the Plan. In March 2011, TCU’s then-President and CEO proposed to Plaintiff that his interest in the Plan be partially vested in exchange for Plaintiff’s surrender and cancellation of any rights he had under the Plan. In a March 2011 Agreement, approved by unanimous consent by the Board and signed by Plaintiff, the Plan was terminated April 1, 2011 and Plaintiff was to receive $234,068.184 within 30 days. However, the National Credit Union Administration Board placed TCU into conservatorship and appointed itself as conservator. It then repudiated the March 2011 Agreement. The court found that Plaintiff could not have brought his state-law claims regarding the March 2011 Agreement under § 502(a)(1)(B) of ERISA. To satisfy the first prong of Davila, a claim must asserts rights to which the plaintiff is entitled “only because of the terms of an ERISA-regulated employee benefit plan.” The court found that Plaintiff’s state-law claims regarding the March 2011 Agreement does not seek to recover benefits due to him under the terms of an ERISA plan, to enforce his rights under the terms of an ERISA plan, or to clarify his rights to future benefits under the terms of an ERISA plan. Instead, he complains that, he was never paid the $234,068.18 within 30 days as promised. Plaintiff’s state-law claims regarding the March 2011 Agreement arise under that agreement, not under the Plan since Plaintiff cannot contend that he is owed the money under the terms of the Plan. The court also found that Plaintiff’s claims do not satisfy the second requirement of Davila because there is no other independent legal duty that is implicated by Defendants’ actions. Accordingly, the court held that Plaintiff’s state-law claims regarding the March 2011 Agreement are not completely preempted.

Life Insurance & AD&D Benefit Claims

In Brown v. Connecticut Gen. Life Ins. Co., No. C 13-5497 PJH, 2014 WL 7204936 (N.D. Cal. Dec. 17, 2014), Plaintiff brought a single cause of action under 29 U.S.C. § 1132(a)(1)(B), seeking a determination that she is entitled to reinstatement of the waiver of premium benefits under her employer’s group life insurance policy, an injunction mandating an award of waiver of premium benefits to Plaintiff for the maximum period under the Plan, reimbursement of premiums paid, and attorney’s fees and costs. The court denied Plaintiff’s Rule 52 Motion for Judgment and granted Defendant’s motion, finding that Plaintiff’s claim of Total Disability is based solely on her claims of depression and cognitive impairment and Plaintiff failed to satisfy her burden of proving that she continued to be disabled after September 19, 2012.

Pleading Issues & Procedure

McMillan v. Metro. Life Ins. Co., No. 7:14-CV-39-F, 2014 WL 7205227 (E.D.N.C. Dec. 17, 2014) involved a dispute where the pro se Plaintiff worked for General Electric from April 1, 1986, until July 2, 2003 and alleged that he was forced by Defendants to leave work and take short-term disability leave after being diagnosed with bilateral carpal tunnel syndrome and chronic left wrist pain. In his first suit, the district court dismissed the complaint based (1) on the untimeliness of the Equal Employment Opportunity Commission (“EEOC”) charge, and (2) on MetLife not constituting the Plaintiff’s “employer” under the ADA. Plaintiff moved for and was denied a new trial and appealed to the 4th Circuit Court of Appeals, which dismissed his appeal as untimely. Now, nearly three years later, Plaintiff brought suit again, but under ERISA. The GE Long Term Disability Plan has replaced the GE Disability Benefits Center as a defendant, but the parties and facts have otherwise remained the same. The court found that given the procedural and factual posture of this case in relation to McMillan I, the doctrine of res judicata bars the present suit. First, GE, as employer and plan sponsor, and MetLife, as plan administrator, were both named defendants in McMillan I. Those roles place them in privity of interest with the GE LTD Plan, and thus identity of parties exists for the purposes of res judicata. Second, Plaintiff’s causes of action in both lawsuits derive from this same nucleus of fact, and because Plaintiff could have brought his ERISA claim at the time he filed his complaint in McMillan I, the second element of res judicata is met. Lastly, becauseMcMillan I was not dismissed because of a lack of jurisdiction, improper venue, or failure to join a party, but because (1) the EEOC charge was not timely filed, and (2) the court found that MetLife was not Plaintiff’s “employer” for purposes of the ADA, the judgment was a final judgment on the merits.


In Searls v. Sandia Corp., No. 1:14CV578 JCC/TCB, 2014 WL 7157431 (E.D. Va. Dec. 15, 2014), Plaintiffs filed a second amended complaint alleging one claim for equitable relief under Section 502(a)(3)(B) related to Defendant’s refusal to credit Plaintiffs with time-of-service credit for purposes of future pension benefit calculations during an eight-year period they were inactive at Sandia because of a Special Leave of Absence (SLOA) to work for the Central Intelligence Agency. Pursuant to the equitable remedy of estoppel, Plaintiffs requested that the Court prevent Sandia from excluding their bargained-for time-in-service credit for the eight-year period of the SLOA. Specifically, Plaintiffs requested that the Court compel Sandia to (1) disgorge the full value of the benefit it received from Plaintiffs return to Sandia, (2) reimburse Plaintiffs for amounts expended in reliance on Sandia’s false promises, (3) compensate or restore pension payments improperly withheld, and (4) make no future reductions in pension payments on the basis of reinterpreting the Plan. Sandia moved to dismiss this matter again pursuant to Rule 12(b)(6), arguing that Plaintiffs’ claim for equitable relief under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3)(B), should be dismissed because relief under ERISA § 502(a)(3) is foreclosed because ERISA § 502(a)(1)(B) provides adequate relief, and, even if Plaintiffs state a claim under ERISA § 502(a)(3), it should nonetheless be dismissed because the relief Plaintiffs seek is not available in equity under that section of ERISA. The court rejected both arguments and explained that it cannot find that Plaintiffs’ enforcement mechanism lies solely in ERISA § 502(a)(1)(B), nor can it find that the remedies they seek are foreclosed under ERISA § 502(a)(3). The court found that the disgorgement and “make-whole relief” Plaintiffs seek is equity in its purest form. The court also found that Defendant’s second argument fails because Plaintiffs partially seek relief in the form of monetary compensation for a loss resulting from a fiduciary’s breach of duty, or to prevent the fiduciary’s unjust enrichment,” in addition to other equitable relief, including estoppel, which equity courts have always possessed the power to provide. Thus, the court found that Plaintiffs have sufficiently stated a proper claim for equitable relief under ERISA and denied Defendant’s motion to dismiss.

Withdrawal Liability & Unpaid Benefit Contributions

In Bd. of Trustees v. Charles B. Harding Constr., Inc., No. C-14-1140 EMC, 2014 WL 7206890, at (N.D. Cal. Dec. 18, 2014), the court granted the Trust Fund’s motion for default judgment in the amount of $81,208.95, attorneys’ fees in the amount of $12,102.50, and costs in the amount of $3,005.66. The court also granted the Trust Fund’s request for injunctive relief, and ordered Harding Construction to permit an auditor designated by the Board to enter upon its premises during business hours, and at a reasonable time or times, to examine and copy books, records, papers or reports of Harding Construction to determine whether it is making full and prompt payment of all sums required to be paid to the Trust Funds.

In New Jersey Carpenters Pension Fund v. Hous. Auth. & Urban Dev. Agency of the City of Atl. City, No. CIV.A. 12-2229 JBS/A, 2014 WL 7205331 (D.N.J. Dec. 17, 2014), the court addressed the issue as to whether Defendants constitute employers subject to withdrawal liability, as contemplated by the MPPAA, 29 U.S.C. § 1381, and whether, if so, an agreement existed by and between the parties sufficient to trigger Defendants’ liability for a withdrawal penalty associated with Atlantic City Improvement Corporation’s (ACIC) termination of Local 1578’s employment. The court granted in part the Fund’s motion for summary judgment and denied Defendants’ motion for summary judgment in its entirety, entering judgment for Plaintiff. The court explained that it need not engage in any protracted inquiry concerning whether the employers constitute alter egos, nor whether such entities remain under common control. Rather, as the signatory of, and true obligor under, a 1994 agreement, Atlantic City Housing Authority (ACHA) clearly falls within the ambit of a statutory employer for the purposes of withdrawal liability. The 1994 agreement provides for the payment by ACHA of “all” fringe benefits. Even affording Defendants all reasonable inferences, such provision connotes a clear obligation to make pension contributions, particularly when juxtaposed with Defendants’ admission that ACHA remitted such sums to the Fund for more than a decade and for as long as Local 1578 provided carpenters to ACIC for ACHA’s work.

In Trustees of Operating Engineers Pension Trust v. Peek Const. Co., No. 2:12-CV-333-JAD-CWH, 2014 WL 7176630 (D. Nev. Dec. 16, 2014), Plaintiffs-the trustees of various multi-employer, fringe-benefit trust funds-brought suit against Peek Construction Company and its principal to recover unpaid contributions and related interest, fees, and costs. A default was entered against the Company after its counsel withdrew and the Company failed to retain a new attorney to represent it. Plaintiffs moved for a $154,578.89 default judgment against the Company. The court noted that the Ninth Circuit disfavors default judgments against single parties in multi-defendant cases where liability is jointly and severally sought and claims against other parties remain pending. Because Plaintiffs seek to hold the Company and its principal jointly and severally liable for misappropriation of trust assets and breach of contract, and the claims against the principal-though now stayed due to bankruptcy-remain pending, the court denied the motion for default judgment against the Company without prejudice.

* 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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