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ERISA Watch – February 19, 2015

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.

Ninth Circuit

District Court has subject matter jurisdiction over removed action completely preempted by ERISA.

In Filler v. Blue Cross of California, No. 13-55268, __Fed.Appx.___, 2015 WL 626770 (9th Cir. Feb. 13, 2015), the Ninth Circuit Court of Appeals considered whether the district court had subject matter jurisdiction over this removed action. The court affirmed the district court’s dismissal of Plaintiff’s complaint, finding that the state law claims for negligent entrustment, conversion, and interference with contractual relations are completely preempted by ERISA and that the district court’s jurisdiction was not defeated by Plaintiff’s alleged lack of federal standing. As an assignee of his patients’ ERISA benefits, Plaintiff had both Article III standing and statutory standing to sue, notwithstanding the anti-assignment clauses in the patients’ insurance contracts. Because this appeal challenged only the district court’s subject matter jurisdiction, the court expressed no opinion on the merits of the dismissed or remanded claims.

Insurer can rescind an ERISA policy based on a material misrepresentation about a participant’s employee status.

In Guardian Life Ins. Co. of Am. v. Gabrielian & Associates Ins. Servs., Inc., No. 13-55217, __Fed.Appx.___, 2015 WL 576831 (9th Cir. Feb. 12, 2015), the Ninth Circuit Court of Appeals found that the district court did not err in finding that Guardian Life had the right to rescind an ERISA policy based on material misrepresentation of a participant’s status as an employee. The participant failed to qualify as an ERISA employee under the Nationwide Mutual Insurance Co. v. Darden, 503 U.S. 318 (1992), factors, because the employer did not “control the manner and means by which” she worked: she worked in a separate physical location and appeared to control her work hours; the employer did not provide her with any tools or instrumentalities; they worked together for at most only four months; and the participant was paid only by commission. Because the participant was not an ERISA employee, the employer’s claim to the contrary constituted a material misrepresentation. Had Guardian Life known that the participant was not an “employee” for ERISA purposes, it likely would not have issued the policy in the first instance. Appellants argued for the first time on appeal that California law, not ERISA, should govern the policy at issue, but the court found this choice-of-law question waived since it was not timely raised in the district court.

D.C. Circuit

Fund did not abuse its discretion in denying claims of former spouse and awarding death benefits to beneficiaries designated by an emergency fiduciary. Fanning v. Bell, No. CV 13-1937 (CKK), __F.Supp.3d___, 2015 WL 572248 (D.D.C. Feb. 11, 2015) involves a Rule 22 interpleader action to resolve a dispute between Defendants over the proper beneficiaries entitled to a death benefit payable from Plaintiff. Plaintiff sought summary judgment that the Central Pension Fund did not abuse its discretion in awarding the death benefit to the decedent’s four grandchildren, who were designated as beneficiaries on the decedent’s behalf. In opposition, Defendant argued that she is entitled to benefits paid by the Central Pension Fund for two reasons: (1) she was still legally married to the decedent at the time of his death, and (2) she was named as a beneficiary of the decedent’s pension during their marriage and that designation was never validly changed. The court found that the Central Pension Fund did not abuse its discretion in rejecting both of these arguments. First, ten years prior to his death, a court in Kentucky entered an “Interlocutory Decree of Dissolution of Marriage.” Bell argued that the decree ended the marriage but did not address the marital assets, and as such, it was not final at the time of his death. However, the court found that Bell cited to no authority to support the conclusion that her divorce was not final at the time of death ten years later. Second, Bell was never affirmatively designated as the Beneficiary of the decedent’s pension and was only listed as the Beneficiary, per operation of the Plan, because she was his spouse. Upon their divorce, Bell was no longer a beneficiary, and she did not have a QDRO entitling her to a surviving spouse annuity. Lastly, the designation form naming the decedent’s four grandchildren was signed by an emergency fiduciary who had full and complete emergency guardianship including the ability to make medical and financial decisions and had the power to “execute instruments.” The court found that it was not unreasonable for the Fund to accept the terms of the emergency fiduciary Order on its face even though there was an ongoing criminal investigation related to the Beneficiary form since the court order appeared valid on its face and the Central Pension Fund was not aware of any actual criminal charges or any conviction resulting from the criminal investigation. Accordingly, the court granted Plaintiff’s Motion for Summary Judgment.

Unreported Decisions

Attorneys’ Fees

In Farr v. Rolls-Royce Corp., No. 1:13-CV-01266-JMS-DK, 2015 WL 540505 (S.D. Ind. Feb. 10, 2015), the court found that its conclusion that Rolls-Royce’s Incentive Program was not an ERISA plan was a decision on the merits of Plaintiff’s ERISA claim, rather than a decision regarding subject-matter jurisdiction, and Rolls-Royce can pursue fees under § 1132(g)(1). However, because Plaintiff’s position that the Incentive Program was an ERISA plan was substantially justified, Rolls-Royce is not entitled to attorneys’ fees.

Class Action

In K.M. v. Regence Blue Shield, No. C13-1214RAJ, 2015 WL 519932 (W.D. Wash. Feb. 9, 2015), Plaintiffs filed unopposed motions for certification of settlement subclasses and for preliminary approval of a settlement agreement that appears to fundamentally change the insurance landscape for all of defendants’ Washington insureds with developmental disabilities and autism. The court granted the motion for certification and but denied the motion for preliminary approval. If approved, the settlement agreement would resolve three cases: the instant action, K.M. v. Regence BlueShield, Case No. 13-1214-RAJ, another matter pending before this court, J.T., S.A. v. Regence BlueShield, Case No. 1290-RAJ, and a third action which is pending in state court, O.S.T. v. Regence BlueShield, Case No. 11-2-34187-9 SEA, King County Superior Court (J. Erlick). Although the court found that the global agreement appears to be fair and reasonable, the court declined to issue a ruling that impacts cases which are not pending before it. Additionally, Plaintiffs did not provide the court with any authority that suggests the court would have jurisdiction to bind parties to the agreement who are not parties to the actions pending before this court. Accordingly, the court directed Plaintiffs’ counsel to submit a revised motion for preliminary approval that separates the relief sought from this court from the relief sought in state court.

Disability Benefit Claims

In Kennedy v. Lilly Extended Disability Plan, No. 1:13-CV-1103-WTL-TAB, 2015 WL 631391 (S.D. Ind. Feb. 13, 2015), Plaintiff, who was diagnosed with fibromyalgia, received long term disability benefits under the Defendant Plan before her benefits were terminated by Anthem Life, the plan administrator. The court granted Plaintiff’s motion for summary judgment, finding that Anthem’s claim decision was an abuse of discretion. Specifically, the court found that the lack of objective evidence of Plaintiff’s functional limitations as a result of her subjective symptoms could have been fatal to her claim for benefits had Plaintiff been informed of the need to provide such evidence and been unable (or simply failed) to do so. But, Anthem did not inform her of the need to do so, as required by 29 C.F.R. § 2560.503-1(g)(iii), and it would be impossible for Plaintiff to go back in time and undergo testing to demonstrate what her functional capacity was as of December 1, 2012. The court determined that remanding “for further findings or explanations” would be a useless exercise because the court has reviewed the evidence of record and determined that it does not offer any affirmative support for terminating Plaintiff’s benefits. Accordingly, the court found that the appropriate remedy in this case is the reinstatement of benefits.

In Adkins v. AT & T Umbrella Benefit Plan No. 1, No. 1-14-CV-082-LY, 2015 WL 632093 (W.D. Tex. Feb. 13, 2015), the court granted summary judgment to the Plan on Plaintiff’s claim for short-term disability benefits, where Plaintiff claim disability related to lupus/Sjögren’s syndrome and depression. The Plan relied on the file reviews of several physicians retained by Network Medical Review Co., Ltd. (“NMR”), an allegedly independent company that provides physician reviews for ERISA claims. The physicians retained by NMR are Dr. Neal J. Sherman, Dr. Dennis Payne, Dr. Charles Brock, Dr. Jose A. Perez, and Dr. Michael A. Rater. Plaintiff alleged these physicians failed to take into consideration her fatigue and chronic pain. The court determined that Sedgwick (the administrator) is not required to rely on subjective or self-reported evidence, and may require the production of objective evidence documented by a physician and based on medical examinations. But, even if the medical records had included objective medical evidence, such as mobility tests, and recent opinions regarding Plaintiff’s ability to perform her work, the NMR physicians and Sedgwick are not obligated to accord special deference to the opinions of treating physicians. The court found that Plaintiff failed to show Sedgwick’s weighing of the evidence in this case was an abuse of discretion.

In Weske v. Hartford Life & Accident Ins. Co., No. CIV.13-3554 DSD/JJK, 2015 WL 627932 (D. Minn. Feb. 12, 2015), the court concluded that Hartford abused its discretion in terminating Plaintiff’s long term disability benefits effective March 1, 2013 and ordered reinstatement of her benefits for the period of March 1, 2013 to November 21, 2013, the date consistent with her surgeon’s un-rebutted opinion that Plaintiff could not work for the six months following the Physical Capacities Evaluation Form. Based on the record, the court was unable to determine whether Plaintiff was disabled after November 21, 2013, and declined to consider that issue. In ruling on the parties’ motions, the court found that Hartford appropriately considered whether Plaintiff could work in a sedentary position in the general workplace, which involves sitting most of the time, occasional walking or standing for brief periods, and occasional lifting, even though her own job required more standing and walking. However, Hartford’s finding of no disability was not supported by substantial evidence, where Hartford failed to do the proper due diligence in assessing Plaintiff’s disability status before her surgery and Hartford’s reviewing physician did not consider the surgeon’s opinions which are crucial to the issue of Plaintiff’s disability status. The court was also troubled by the timing of Hartford’s decision to terminate benefits, which came on the eve of her scheduled surgery which would render Plaintiff disabled again for at least four weeks. “Hartford’s haste to terminate benefits just before the surgery evinces a desire to avoid coverage for the post-surgery period.” Accordingly, the court denied Hartford’s motion for summary judgment and granted in part Plaintiff’s motion for summary judgment.

In Davis v. Metro. Life Ins. Co., No. 1:13-CV-2741, 2015 WL 574616 (M.D. Pa. Feb. 11, 2015), Plaintiff brought suit against MetLife stating claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and bad faith under the Pennsylvania Unfair Insurance Practices Act (“UIPA”), and, alternatively, denial of benefits and breach of fiduciary duty under ERISA, in connection with MetLife’s termination of Plaintiff’s long term disability benefits. MetLife filed a motion seeking to set aside the default that the Clerk of Court entered against MetLife and Plaintiff’s motion for default judgment. The court granted MetLife’s motion, finding that Plaintiff will not be prejudiced if the court sets aside the default since a delay in receiving LTD benefits is indistinguishable from a “delay in realizing satisfaction on a claim” and not sufficient to constitute prejudice. Additionally, MetLife’s proposed defenses, including ERISA preemption of the state law claims, if proved, would constitute a complete defense to Plaintiff’s claims. The court found that they are sufficiently meritorious-in the present procedural context-and counsel in favor of setting aside the entry of default. The court also found that MetLife’s submissions evidence grossly negligent behavior but not an intentional or strategic decision to refrain from defending itself in this litigation. However, the court found that a monetary sanction is appropriate under the circumstances and ordered MetLife to compensate Plaintiff for the reasonable fees and costs incurred in obtaining the entry of default, moving for default judgment, replying to MetLife’s response to the court’s show cause order, and opposing MetLife’s motion to set aside the entry of default.

In Quinlan v. Reliance Standard Life Ins. Co., No. CIV.A. 13-7052, 2015 WL 519430 (D.N.J. Feb. 9, 2015), the court found that Reliance Standard did not abuse its discretion in denying Plaintiff long term disability benefits where the court determined that Reliance Standard’s denial was based on an in-depth review of Plaintiff’s medical records, three physicians’ reports (including an independent medical examination), a functional capacity evaluation, and a national labor survey.


In Greater St. Louis Const. Laborers Welfare Fund v. Ability Bldg. & Restoration, LLC, No. 4:14-CV-63 RLW, 2015 WL 631012 (E.D. Mo. Feb. 12, 2015), the court set a hearing on the Fund’s motion for sanctions related to post-judgment discovery violations, including appearance at a deposition. At the hearing, the court instructed Defendant Ability Building & Restoration, LLC and its representative Ms. Mays-Adkins to show cause why civil contempt sanctions should not be imposed against them for failure to comply with this court’s Orders. Because incarceration is a possible civil contempt sanction, the court advised that Ms. Mays-Adkins has the right to representation by counsel and failure to appear for the hearing as ordered may subject Ms. Mays-Adkins to arrest by the United States Marshals Service. The court also ordered Ms. Mays-Adkins to bring with her to the hearing on March 4, 2015 all of the documents and records listed in Plaintiffs’ Notice of Deposition.

In Sun Life Assur. Co. of Canada v. Jackson, No. 3:14-CV-41, 2015 WL 566940 (S.D. Ohio Feb. 9, 2015), a matter brought by Sun Life to determine the proper beneficiary of a life insurance policy, the court found that the daughter of the decedent made a colorable procedural challenge that justifies granting her request for discovery outside of the administrative record. Here, the daughter pointed to several pieces of evidence that suggested that Sun Life was on notice of her claim months before it paid benefits to the other party, during the period that it processed his claim, and, at the same time, refused or ignored her attempts to make a claim. The Administrative Record does not address what steps, if any, Sun Life took to address the daughter’s claim and that information is relevant to her counterclaims. The court allowed the daughter to conduct limited discovery relevant to the allegations of procedural irregularities and bias raised by her counterclaims.

ERISA Preemption

In Nguyen v. Am. United Life Ins. Co., No. 1:14CV687, 2015 WL 540565 (M.D.N.C. Feb. 10, 2015), a dispute involving a conversion from a group policy to an individual life insurance plan within thirty-one days of termination of employment, the court found that the state law claims are preempted by ERISA.

Life Insurance & AD&D Benefit Claims

In Diener v. Renfrew Centers, Inc., No. CIV.A. 11-4404, 2015 WL 567339 (E.D. Pa. Feb. 10, 2015), a dispute involving a group term life insurance policy issued by the Life Insurance Company of North America (“LINA”), the court dismissed the breach of contract claim because Plaintiff did not meet his burden of establishing the elements of breach of contract. Plaintiff failed to demonstrate that the decedent had an active life insurance policy in effect at the time of her death. The court dismissed the breach of fiduciary duty claim against LINA, finding that it cannot be held liable for failing to disclose material facts to parties with whom it never communicated about the life insurance plan. The court also dismissed the breach of fiduciary duty claim against the employer because the record was devoid of evidence of any actual material misrepresentation or omission of material information by the employer that had a substantial likelihood of misleading a reasonable employee into making a harmful decision regarding benefits.

Pleading Issues & Procedure

In Kosloff v. Smith, No. 13-1466-JTM, 2015 WL 567042 (D. Kan. Feb. 11, 2015), a case brought by current fiduciaries of the Premier Hospice profit sharing 401(k) plan (“the Premier plan”) against former fiduciaries of the same for alleged violations of ERISA, the court denied Plaintiffs’ motion to amend the complaint. The court previously granted Defendants’ motion to dismiss all ERISA claims arising before December 20, 2007, because of Plaintiffs’ failure to sufficiently plead the fraud or concealment exception to the ERISA statute of repose. The proposed amended complaint alleges that the founder and former owner of Premier Hospice certified false Forms 5500 and transferred Premier plan funds to the SP Management profit sharing 401(k) plan, of which he was the sole trustee. Both allegations appear in the original complaint. The only substantive difference between the original complaint and the proposed amendment is that Plaintiffs now allege that the former owner was the sole participant in the Premier plan. Plaintiffs argued that such false certifications are active steps of concealment triggering the ERISA fraud or concealment exception. The court explained that it already considered and rejected this argument in ruling on Defendants’ first motion to dismiss. The court found that the proposed amendment otherwise sets forth materially identical allegations and would be subject to dismissal on the same grounds.

Provider Claims

In Pain Mgmt. Specialists v. Blue Shield of California Life & Health Ins. Co., No. CV 13-05417 DDP MRWX, 2015 WL 546025 (C.D. Cal. Feb. 9, 2015), Defendants moved to dismiss Plaintiff’s First Amended Complaint alleging causes of action for (1) wrongful denial of benefits under ERISA § 502(A)(1)(B) and (2) promissory estoppel. Plaintiffs’ ERISA claim is predicated upon an assignment of rights under plans that all contain non-assignability clauses. The Ninth Circuit has explicitly held that such provisions are enforceable and ERISA welfare plan payments are not assignable in the face of an express non-assignment clause in the plan. The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance. The court found that the FAC fails to sufficiently allege the first and third elements because Plaintiffs cannot plausibly allege that they, as non-preferred, out-of-network providers, were promised full for the services they rendered. Also, Plaintiffs cannot plausibly allege reasonable reliance on any promise of full payment where the plan specifically states that services provided by out-of-network providers may not be fully reimbursed. Even if Defendants made some oral representation contrary to that provision of the plan, Plaintiffs were on notice of Defendants’ position regarding full payment as early as August 2008. The court granted Defendants’ motion to dismiss with prejudice.

Withdrawal Liability & Unpaid Benefit Contributions

In Trustees of the Laborers’ Dist. Council & Contractors’ Pension Fund v. Massie, No. 2:14-CV-102, 2015 WL 631481 (S.D. Ohio Feb. 13, 2015), the court sustained Plaintiffs’ objection to the Magistrate Judge’s Report and Recommendation denying Plaintiffs’ motion for default judgment in this matter seeking withdrawal liability against an individual defendant. The court found after an evidentiary hearing that Plaintiffs have thoroughly demonstrated that Defendant operated a sole proprietorship leasing arrangement, and thus, he is individually liable for damages. Accordingly, the court issued default judgment.

In Greater St. Louis Const. Laborers Welfare Fund v. KSG Enterprises, LLC, No. 4:14-CV-873 CEJ, 2015 WL 631999 (E.D. Mo. Feb. 13, 2015), the court granted Plaintiffs’ motion for summary judgment, finding that defendant KSG was bound at all relevant times by a valid CBA and that it breached its obligations by failing to timely pay the required contributions. Defendant is liable to them for $81,067.24 in unpaid contributions, $16,213.57 in liquidated damages, and $3,328.94 in interest, for a total of $109,251.15. Defendant is also liable for $1,683.00, the cost for the payroll examination, attorneys’ fees in the amount of $6,122, and costs in the amount $454.90.

In Int’l Painters & Allied Trades Indus. Pension Fund v. Williamsport Mirror & Glass Co., No. WDQ-14-3134, 2015 WL 567304 (D. Md. Feb. 9, 2015), the magistrate judge recommended that the court grant Plaintiff’s Motion for Judgment by Default and award a total judgment of $101,083.40, constituting $70,215.90 in unpaid contributions, $7,117.99 in interest, $14,043.19 in liquidated damages, $3,550.67 in audit costs, and $6,155.65 in attorneys’ fees and litigation costs. The court also recommended injunctive relief requiring Defendant to submit monthly remittance reports and to produce all of its payroll books and financial records to allow a contribution compliance audit.

* 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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