There were a number of notable decisions this past week. At the Circuit level, the First Circuit determined that language contained in a Certificate did not unambiguously confer discretionary authority, the Ninth Circuit determined that the Washington ban on discretionary clauses did not apply to review of an AD&D claim, and the Eleventh Circuit determined that the accommodation for nonprofit organizations implementing the ACA’s contraceptive mandate does not violate the constitution.
Also noteworthy was the determination by two district courts that the claims administrators abused their discretion in denying disability benefits, but instead of awarding the benefits, the courts remanded the claims back to the insurers to decide again. In my view, remands following a finding that there was an abuse of discretion just reward administrators for bad behavior. To add salt to the wound, many courts will not award a successful plaintiff attorneys’ fees for achieving a remand. In another district court decision discussed below, a court determined that a remand satisfied the Hardt requirement for “some degree of success on the merits” but nonetheless found that an award of fees was not warranted. Read more in this week’s ERISA Watch!
Below is Roberts Disability Law summary of this past week’s notable ERISA decisions.
Power to “decide” claims is not sufficient to alter the standard of review from de novo. Stephanie C. v. Blue Cross Blue Shield of Massachusetts HMO Blue, Inc., No. 15-1531, __F.3d___, 2016 WL 629058 (1st Cir. Feb. 17, 2016) (Before LYNCH, SELYA and KAYATTA, Circuit Judges). In this case, the Plaintiff/Appellant challenged BCBS’s decision to partially deny her claim for benefits for the treatment of her minor son at a residential/educational mental healthcare facility. The district court held that BCBS had discretionary authority to make benefit determinations under the plan and it did not abuse that discretion in partially denying Plaintiff’s claim for benefits. The First Circuit found that Plaintiff received the full and fair internal review that 29 U.S.C. § 1133 prescribes, including that she received a sufficiently definite explanation of the reason for the denial of benefits and received a sufficient explanation of the internal appeal procedures. However, with respect to the standard of review, the First Circuit found that de novo review applies because language contained in the Certificate of Coverage did not unambiguously grant discretion to BCBS. It only provides that BCBS “decides which health care services and supplies that you receive (or you are planning to receive) are medically necessary and appropriate for coverage.” The court found that this language is not sufficiently clear to give notice to either a plan participant or covered beneficiary that the claims administrator enjoys discretion in interpreting and applying plan provisions. Further, the premium account agreement (the PAA), which defines the relationship between participating employers and BCBS, does contain an unambiguous grant of discretionary authority, but the court declined to find the PAA controlling where it was not ever disclosed to Plaintiff when coverage attached. Because the district court employed the wrong standard of review, the First Circuit vacated that portion of its judgment and remanded for reconsideration.
AD&D claim subject to abuse of discretion review; Washington ban on discretion does not apply. Osborn by & through Petit v. Metro. Life Ins. Co., No. 3:15-CV-00605-MO, __F.Supp.3d___, 2016 WL 589863 (D. Or. Feb. 11, 2016) (Judge Mosman). In this case, Plaintiff claims that MetLife wrongfully denied her claim for $1.25 million in accidental death and dismemberment (“AD & D”) benefits under the Providence Health & Services Welfare Benefit Plan (the Program). The parties filed motions for partial summary judgment on the standard of review. Plaintiff asserted three reasons why the standard of review should be de novo in this case: 1) the relevant plan documents do not contain the unambiguous grant of discretionary authority required to overcome the de novo presumption; 2) there is a conflict between the Certificate of Insurance and the Program and therefore the terms of the Certificate of Insurance, which does not contain an unambiguous grant of discretion, controls; and 3) any conveyance of discretionary authority is void under Washington law. The court rejected each of these arguments and held that MetLife’s denial of benefits will be reviewed for abuse of discretion. First, although the Program does not grant MetLife discretion to interpret the terms of the plan, it did grant MetLife discretion to determine eligibility for benefits. The court found that Firestone‘s use of the disjunctive “or” compels it to hold that either the discretion to determine eligibility for benefits or the discretion to interpret the terms of the plan are sufficient grants of discretionary authority. Second, although the Certificate of Insurance does not contain a discretionary clause (is silent as to this), it does not conflict with the provision in the Program granting MetLife discretion. Third, WAC 284-44-015 clearly prohibits discretionary clauses in the health care services context, but it does not ban discretionary clauses in all insurance related contracts. Further, WAC 284-96-012 applies to employee benefit plans (not just insurance policies), but the Program is a life insurance policy, not “disability insurance”. Although WAC 284-96-012 is not preempted by ERISA, it does not apply to the Program since its dominant purpose is to protect against the loss of life.
Accommodation for nonprofit organizations implementing the ACA’s contraceptive mandate does not violate the constitution. Eternal Word Television Network, Inc. v. Sec’y of U.S. Dep’t Health & Human Servs., No. 14-12696, __F.3d___, 2016 WL 659222 (11th Cir. Feb. 18, 2016) (Before TJOFLAT, JILL PRYOR and ANDERSON, Circuit Judges). The Eleventh Circuit determined that the regulations implementing what is known as the “contraceptive mandate” of the Affordable Care Act (“ACA”)-the requirement that employers provide health insurance coverage for preventive care (including contraception) to women -does not violate the Religious Freedom Restoration Act (“RFRA”), 42 U.S.C. § 2000bb, et seq. In these consolidated appeals, Plaintiffs claim that the regulations’ accommodation for nonprofit organizations substantially burdens their religious exercise in violation of RFRA by forcing them to take actions that cause their health plan administrators to provide contraceptive coverage and to maintain a health plan that serves as a conduit for contraceptive coverage. The court concluded that the regulations do not substantially burden their religious exercise and, alternatively, because (1) the government has compelling interests to justify the accommodation, and (2) the accommodation is the least restrictive means of furthering those interests. Additionally, the court determined that the accommodation is a neutral, generally applicable law that does not discriminate based on religious denomination in violation of the Establishment and Free Exercise Clauses. Lastly, the court determined that the regulations do not violate the Free Speech Clause because any speech restrictions that may flow from the accommodation are justified by a compelling governmental interest and are thus constitutional.
Complaint fails to state a plausible claim for relief under Dudenhoeffer. Coburn v. Evercore Trust Co., N.A., No. CV 15-49 (RBW), __F.Supp.3d___, 2016 WL 632180 (D.D.C. Feb. 17, 2016) (Judge Reggie B. Walton). This matter involves a putative class action which alleges that Defendant, in its capacity as the plan fiduciary of an ESOP, breached its duty of prudence by failing to prevent plan participants from purchasing or holding J.C. Penney Corporation stock in their retirement plans once it allegedly became clear that J.C. Penney’s transformation strategy was doomed to fail. Defendant moved to dismiss and the court granted its motion. The court found that the complaint’s exclusive reliance on public information as the basis for the allegation that Defendant should have known that continued investment in J.C. Penney stock was imprudent, is indistinguishable from the types of allegations that the Dudenhoeffer Court held are implausible as a general rule. The court also found that Plaintiff’s decision not to plead special circumstances is fatal to her claim that Defendant should have known, solely from public information, that continued investment in J.C. Penney stock was imprudent. Lastly, the court found that the Supreme Court’s decision in Tibble does nothing to alter its conclusion because that case did not involve claims based on a drop in an employer’s stock price.
Select Slip Copy & Not Reported Decisions
Attorneys’ fees not warranted where action was dismissed for lack of jurisdiction. Ret. Comm. v. Magasrevy, No. 5:14-CV-408-FL, 2016 WL 589687 (E.D.N.C. Feb. 10, 2016) (Judge Louise W. Flanagan). Defendant sought attorneys’ fees under ERISA after the court dismissed Plaintiff’s lawsuit on the basis that the court did not have personal jurisdiction over Defendant by virtue of the nationwide service of process provision. The court denied the fee motion. First, the court determined that Plaintiffs’ action did not arise under any provision of ERISA, and as a result the court lacked subject matter jurisdiction and personal jurisdiction over the instant matter. As such, Plaintiffs’ action was not an “action under this subchapter,” for purposes of ERISA’s attorney’s fee provision, 29 U.S.C. § 1132(g)(1). Second, a fees claimant must show some degree of success on the merits, and in this case the court did not determine the merits of Plaintiff’s claims or the merits of the underlying claims asserted by Defendant. Defendant’s successful motion to dismiss for lack of personal jurisdiction does not qualify as a “complete success on the merits” under Hardt.
Remand to claims administrator satisfies Hardt’s “some degree of success on the merits.” Hilderbrand v. Nat’l Elec. Benefit Fund, No. 13-3170, 2016 WL 614352 (C.D. Ill. Feb. 16, 2016) (Judge Sue E. Myerscough). In the first ruling on summary judgment, the court found the NEBF violated ERISA by failing to give Hilderbrand a full and fair review of his claim for a disability pension benefit. The court granted summary judgment, in part, in favor of Hilderbrand and remanded the claim for benefits to the NEBF Trustees for a de novo benefits determination, thereby giving Hilderbrand another review of his claim for benefits. In a subsequent motion for summary judgment, the court found in favor of the NEBF Trustees. Hilderbrand filed a motion for attorneys’ fees for the success he achieved in obtaining a remand. The court found that Hilderbrand achieved some degree of success on the merits of his claim but that an award of attorneys’ fees is not appropriate under the facts of this case after applying the relevant five-factor test.
Breach of Fiduciary Duty
Fiduciary has shown by a preponderance of the evidence that a fiduciary acting with prudence would have divested funds at the same time and in the same manner. Tatum v. R.J. Reynolds Tobacco Co., No. 1:02CV00373, 2016 WL 660902 (M.D.N.C. Feb. 18, 2016) (Judge N. Carlton Tilley, Jr.). Plaintiff, individually and on behalf of all other persons similarly situated, brought this action alleging that Defendants R.J. Reynolds Tobacco Company and R.J. Reynolds Tobacco Holdings, Inc. (collectively “RJR”) breached their fiduciary duties in managing the R.J. Reynolds Tobacco Capital Investment Plan. The Plan was created for Nabisco employees following a spin-off of the tobacco business and included among several investment options, two company-related funds. Shares in the Nabisco Funds were frozen on the date of the spin-off and on January 31, 2000, the units of the Nabisco Funds held by participants who had not sold prior to that date were eliminated from the Plan. The Fourth Circuit determined that under the ERISA prudence standard, RJR breached its fiduciary duty of procedural prudence to investigate the investment decision to eliminate the Nabisco Funds from the Plan. On remand from the Fourth Circuit affirming in part, vacating in part, and reversing in part this court’s opinion after a bench trial on the issues, this court was instructed to review the evidence to determine whether RJR has met its burden of proving by a preponderance of the evidence that a prudent fiduciary would have made the same decision. The Fourth Circuit also directed the district court to include in its review of all of the relevant evidence the previously-excluded testimony of Thomas Lys, one of Tatum’s experts, and the timing of the divestment “as part of a totality-of-the-circumstances inquiry.” Upon review of all of the circumstances prevailing at the time, the court determined that RJR has shown by a preponderance of the evidence that a fiduciary acting with prudence would have divested the Nabisco Funds at the time and in the manner that RJR did.
LTD denial not supported by substantial evidence and remanded to Liberty for further proceedings. Tracia v. Liberty Life Assurance Co. of Boston, No. CV 13-13248-JGD, 2016 WL 552463 (D. Mass. Feb. 10, 2016) (Magistrate Judge Dein). Plaintiff, impaired by chronic regional pain syndrome and degenerative disc disease, among other medical conditions, sought disability benefits from defendant Liberty Life Assurance Company of Boston (“Liberty”). Liberty paid benefits for the first 12 months during the “Own Occupation” period, but then terminated benefits when the definition of disability changed to “unable to perform, with reasonable continuity, the Material and Substantial Duties of Any Occupation.” In ruling on the parties’ motions for summary judgment, the court found that Liberty deprived Plaintiff of a full and fair review of his claim and that its decision to deny his request for benefits was unreasonable, but that the matter must be remanded to Liberty for further administrative proceedings. The court found that it was well within Liberty’s discretion to require objective evidence showing that Plaintiff lacked the ability to engage in gainful work activity, but that Liberty never informed Plaintiff what evidence was required to make the necessary showing in light of his subjective symptoms, and it relied on the opinions of reviewing physicians who never examined Plaintiff or otherwise obtained objective evidence regarding the effect that Plaintiff’s pain had on his ability to engage in work-related functional activities. Under these circumstances, the court found that its decision to deny Plaintiff’s claim for LTD benefits was not supported by substantial evidence.
Termination of LTD benefits an abuse of discretion; remand to Aetna for further consideration. Bishop v. Aetna Life Ins. Co., No. 5:15-CV-104-KKC, 2016 WL 591765 (E.D. Ky. Feb. 12, 2016) (Judge Karen K. Caldwell). The court concluded that Aetna’s decision to terminate Plaintiff’s long term disability benefits at the “any occupation” definition of disability was an abuse of discretion and remanded the claim to Aetna for further consideration. Aetna’s denial letters did not accurately quote the LTD Plan definition of disability when explaining why it was not following the Social Security Administration’s finding of disability. The court found that the evidence strongly suggests that Aetna did not actually rely on the Plan language when terminating Plaintiff’s benefits, but manufactured the argument after-the-fact to shore up its decision for litigation. Although the court found that the “or may reasonably become” language in the LTD Plan definition is a plausible explanation for distinguishing Aetna’s determination from the SSA’s determination, the fact that the language was not included in the letter led the court to question whether Aetna’s decision was part of a principled reasoning process. Regardless, Aetna’s failure to fully notify Plaintiff of the grounds for its decision hampered his appeal of the termination of benefits. The court found that this deficiency does not make Aetna’s decision arbitrary and capricious in and of itself, but it is a factor that colors the remainder of the court’s analysis. The court found that Aetna’s reliance on the “potential” jobs identified in a vocational report was based on a mischaracterization such that its denial of benefits was not based on substantial evidence. Aetna cited four jobs as those that Plaintiff could do but the report had clearly indicated that Plaintiff would require additional training in tools and materials in order to perform those jobs. Aetna did not actually analyze whether it would be reasonable for Plaintiff to train in tools and materials. With respect to a paper review, the court found that the report itself showed no major flaws and the fact that it was not based on an in-person evaluation was not reason alone to discount it. However, the court found that Aetna’s failure to provide another vocational expert with all relevant information strongly suggested that Aetna wanted the vocational report to find that occupations were available for Plaintiff.
Procedural irregularity in communicating first-level appeal denial warrants remand to claims administrator. Messick v. McKesson Corp., No. 15-4019, __Fed.Appx.___, 2016 WL 624861 (10th Cir. Feb. 17, 2016) (Before TYMKOVICH, Chief Judge, KELLY and LUCERO, Circuit Judges). In this matter, Plaintiff filed suit for short-term disability benefits after LINA exceeded the maximum time for deciding his first-level appeal. However, LINA had timely denied the appeal but misaddressed the denial letter. After Plaintiff learned that the first-level appeal had been denied, he argued for de novo review, or in the alternative, a remand of his claim to LINA. The court determined that misaddressing the administrative appeal decision does not constitute a serious procedural error warranting de novo review, but that the appropriate remedy is a remand to LINA so that Plaintiff may pursue his second-level administrative appeal.
Several withheld attorney-client privileged communications must be produced as a result of the fiduciary exception to privilege. Sender v. Franklin Res. Inc, No. 11-CV-03828-EMC (SK), 2016 WL 641633 (N.D. Cal. Feb. 18, 2016) (Magistrate Judge Sallie Kim). In this matter, Plaintiff alleged that Defendant failed to issue stock to Plaintiff that he earned from his participation in Defendant’s ESOP. Plaintiff moved to compel production withheld on the grounds of attorney-client privilege. He sought documents generated before his final administrative appeal was denied on December 5, 2008. The court rejected the argument that there is a bright line rule that until an ERISA administrative benefit claim is finally denied, there can be no attorney-client privilege. Instead, the court found that it is not merely a question of timing in the claim process, but an evaluation of the content of the communication – whether the communication involves administration of the claim or the potential liability of the trustee. The court performed an in camera review of the documents at issue and ordered production of the following: an October 23, 2008 email from outside counsel to the company’s Benefits Program Manager, with copies to Senior Association General Counsel for Defendant and other outside counsel, because the communication was not “defensive in nature”; a January 29, 2008 email from outside counsel to the company’s Benefits Program Manager which involves issues of plan administration; a February 1, 2008 email from the company’s Benefits Program Manager to outside counsel involving plan administration; a February 29, 2008 email from outside counsel to the company’s Benefits Program Manager involving plan administration. The court denied the motion with respect to about 15 other communications.
Claim for reimbursement under stop-loss policy is not preempted by ERISA. Candies Shipbuilders, LLC v. Westport Ins. Corp., No. CV 15-1798, 2016 WL 614694 (E.D. La. Feb. 16, 2016) (Judge Joseph C. Wilkinson). The court determined the question of whether ERISA preempts claims for damages, penalties and attorneys’ fees under Louisiana state law brought by an insured, plaintiff, Candies Shipbuilders, LLC, against its insurer, defendant Westport Insurance Corporation. In this case, Candies seeks reimbursement under a stop-loss policy of amounts that Candies paid to cover the medical expenses of a beneficiary under its self-insured employee benefit plan. The court determined that Plaintiff’s claims for damages, penalties and attorneys’ fees under La. Rev. Stat. § 22:1821 are not preempted by ERISA. First, Westport presented no evidence that Candies is suing Westport as a fiduciary under the Plan. Rather, Candies is suing as an insured for damages under the Policy. Second, Plaintiff’s claims arise out of Westport’s independent legal duty contained in the Policy. Lastly, the court determined that Westport did not carry its burden to show that Plaintiff’s state law claims under La. Rev. Stat. § 22:1821 “relate to” an employee benefit plan as required by Section 1144(a) for conflict preemption.
State law claims against peer reviewer company related to ERISA benefits claim is preempted. Milby v. MCMC LLC, No. 3:15-CV-00814-CRS, 2016 WL 552595 (W.D. Ky. Feb. 10, 2016) (Judge Charles R. Simpson III). Plaintiff asserted state law claims against MCMC LLC alleging it issued a medical opinion about her without a license to practice medicine in the Commonwealth as required under KRS § 311.560. MCMC rendered the medical opinion in reviewing Plaintiff’s claim for disability benefits provided under an ERISA-governed plan. Plaintiff alleges that the medical opinion led to the denial of her claim. MCMC removed the action to federal court and Plaintiff sought a remand and attorneys’ fees and costs. The court denied Plaintiff’s motion, finding that her lawsuit is preempted by ERISA. Specifically, the court found that in seeking damages related to a medical professional’s medical review for an ERISA plan benefit determination, a plaintiff must seek damages under ERISA. Otherwise, a state enforcement mechanism supplants Congress’ uniform enforcement system. In this case, Plaintiff already has a pending suit against the insurer for wrongful denial of benefits. Because Plaintiff’s suit against MCMC arises only because of her ERISA benefit claim review, Plaintiff does not allege a violation of any legal duty beyond the scope of the ERISA plan and the review of her benefit claim.
Unlawful deduction claim and related UCL claim not preempted by ERISA. Mendoza v. Aramark Servs., Inc., No. 15-CV-05142-JSC, 2016 WL 614713 (N.D. Cal. Feb. 16, 2016) (Judge Jacqueline Scott Corley). Plaintiff, individually and on behalf of all others similarly situated, sued his former employer, Defendant Aramark Services, Inc., in the Superior Court for the County of Alameda for various violations of California law. Aramark subsequently removed the action to this court alleging federal subject matter jurisdiction pursuant to ERISA complete preemption of Plaintiff’s first cause of action for illegally withholding, deducting, and diverting wages and Plaintiff’s sixth cause of action for violation of California’s Unfair Competition Law (“UCL”) in relation to the unlawful deduction claim. Defendant argued that Plaintiff could have brought his claims for unlawful deductions under Section 502(a): (1) under Section 702 through the enforcement mechanism provided in Section 502(a)(3); (2) under Section 404 through the enforcement mechanism provided in Section 502(a)(3); or (3) under Section 502(a)(1)(B). The court determined that Plaintiff could not have brought his claims under ERISA Section 502(a)(3) or Section 502(a)(1)(B). The court granted Plaintiff’s motion to remand.
Promissory estoppel claim for pension benefits is preempted by ERISA. Yaralian v. Fastovsky, No. CV 15-8989-GHK (EX), 2016 WL 552675 (C.D. Cal. Feb. 10, 2016) (Judge George H. King). Plaintiff brought a number of state law causes of action against his former employer’s named partner related to the failure to pay Plaintiff his full accrued benefit from the firm’s defined benefit pension plan. Defendant removed the action arguing that Plaintiff’s promissory estoppel claim is completely preempted by ERISA. Plaintiff filed a motion to remand as well as a first amended complaint which included expanded allegations with respect to the promissory estoppel claim. The court denied Plaintiff’s motion, finding that both prongs of the Davila test are satisfied. First, Plaintiff could have brought his claim under ERISA § 502(a)(1)(B) because, in essence, his claim is nothing but a request for accrued benefits under an ERISA plan. Second, Plaintiff’s claim is not independent of ERISA because the claim merely duplicates the claim he could have brought under ERISA and derives from defined benefit plan benefits allegedly withheld from him. The fact that the Plan no longer exists does not appear to prevent a suit under ERISA. The court dismissed the promissory estoppel claim as completely preempted, but granted Plaintiff leave to replead this claim to assert an appropriate claim under ERISA.
Medical Benefit Claims
Plan language did not confer discretionary authority; substance abuse/mental health treatment claim remanded due to procedural violations. Hatfield v. Blue Cross & Blue Shield of Massachusetts, Inc., No. CV 14-10445-DPW, 2016 WL 552464 (D. Mass. Feb. 10, 2016) (Judge Douglas P. Woodlock). Plaintiff brought suit against Defendant for denying health insurance benefits for residential substance abuse and mental health treatment on the basis that the treatment did not meet the medical necessity criteria required for coverage of an inpatient chemical dependency rehabilitation stay in the areas of potential safety risk and relationships. First, the court determined that the following language was not sufficient to overcome the default of de novo review: “Blue Cross and Blue Shield decides which covered services are medically necessary and appropriate for you.” The court found that Plaintiff has been denied the procedural protections guaranteed to him by ERISA that would allow him effectively to press his case for coverage. This included Defendant’s failure to give Plaintiff adequate notice of the reasons for denial and failure to gather and request sufficient information. The court found that some prejudice-enough to warrant a remand-resulted from the procedural defects of Blue Cross’s denials. The court remanded the claim to Blue Cross in order to allow for all relevant issues to be raised and all relevant information to be entered into the record, but did not make any substantive determination about Plaintiff’s coverage. The court stated that it would consider an award of reasonable attorneys’ fees in connection with Plaintiff’s partial success on the merits in this litigation.
Pension Benefit Claims
Pension plan amendment does not violate ERISA Section 204(g). Morrone v. The Pension Fund of Local No. 1, I.A.T.S.E., No. 14 CIV. 8197 (PAC), 2016 WL 554844 (S.D.N.Y. Feb. 10, 2016) (Judge Paul A. Crotty). Plaintiff, a participant in the pension plan of The Pension Fund of Local No. 1, I.A.T.S.E. (the “Plan”), brought suit against Defendant alleging that subjecting him to a parity rule is an impermissible reduction of accrued benefits. Here, Plaintiff accrued pension credits under the Plan from 1970 to 1996; went on a hiatus from 1997 to 2011; and resumed accruing credits from 2012 to 2014. The Plan’s Board of Trustees found that he is subject to the Plan’s current parity rule for calculation of pension accrual rates rather than the prior five-year rule, which was added to the Plan by amendment in 1994 and removed in 1999. Plaintiff argued that this violates ERISA Section 204(g). Section 204(g), commonly referred to as the anti-cutback rule, provides that the accrued benefits of a participant under a plan may not be decreased by an amendment of the plan. Further, the rule also provides that a plan amendment which has the effect of eliminating or reducing a retirement-type subsidy with respect to benefits attributable to service before the amendment shall be treated as reducing accrued benefits. The court granted summary judgment in favor of the Plan. It found that the 1999 amendment affected benefits attributable to service after the 1999 amendment and the amendment did not decrease an accrued benefit because it only modified the conditions under which Plaintiff could accrue additional benefits in the future.
Nunc pro tunc order granting right to ex-spouse’s pension is an enforceable domestic relations order. Patterson v. Chrysler Grp., LLC, No. 15-10563, 2016 WL 627886 (E.D. Mich. Feb. 17, 2016) (Judge Arthur J. Tarnow). Plaintiff was once married to an employee of Defendant FCA US LLC (Chrysler), which is the sponsor of Defendant FCA US LLC-UAW Pension Plan, an ERISA plan under which Plaintiff’s ex-husband accumulated benefits. A 1993 divorce judgment awarded her half of her ex-husband’s pension benefits accumulated under the plan during their marriage. Defendants twice denied Plaintiff’s claim for benefits under the divorce judgment. Plaintiff hired new counsel who obtained a new order recognizing her right to benefits awarded in the divorce judgment and purporting, under the nunc pro tunc doctrine, to date back to September 1993. However, Defendants continued to deny Plaintiff’s claim. The court granted summary judgment in favor of Plaintiff and awarded the benefits provided to her under the terms of the Nunc Pro Tunc Order. The court found that Plaintiff’s claim was not time-barred because it was filed within one year of the Nunc Pro Tunc Order. On the merits, the court determined that the Nunc Pro Tunc Order is qualified only if it is considered to date back to the 1993 divorce judgment. If so, then at the time the plan started paying the benefits to the ex-husband, it was already required to pay some of them to Plaintiff instead. Paying that share now is not an increase in benefits as contemplated by 29 U.S.C. § 1056(d)(3)(D)(ii). Further, the order would predate the “benefit commencement date,” and therefore could not violate the plan’s prohibition on a change in the form of benefits after the benefit commencement date.
Pleading Issues & Procedure
Union with appointing authority has standing as a fiduciary to bring an ERISA claim. Stockwell v. Hamilton, No. CV 15-11609, 2016 WL 612757 (E.D. Mich. Feb. 16, 2016) (Judge Linda V. Parker). The court held that an entity with authority to appoint and replace trustees has standing as a fiduciary to bring an ERISA claim as one method of fulfilling the duty to take action upon discovery that an appointed fiduciary failed to perform properly. In other words, the court held that if an entity is a fiduciary when named as a defendant for failing to fulfill its duties to monitor appointed trustees and to take action upon discovery that an appointed trustee is not performing properly, the same entity is a fiduciary to the extent it is bringing an ERISA claim alleging improper performance by an appointed trustee. The court concluded that the Union has ERISA standing to bring breach of fiduciary duty claims under ERISA Sections 404 and 406.
LTD claim transferred to forum where Plaintiff resides. Perry v. Hartford Life & Accident Ins. Co., No. 3:14-CV-00737-CRS, 2016 WL 552594 (W.D. Ky. Feb. 10, 2016) (Judge Charles R. Simpson III). The court granted Defendant’s motion to transfer this long term disability matter to the Western District of Tennessee. Plaintiff resides within the Western District of Tennessee and her treating physicians are located in Tennessee. Plaintiff’s employer, which entered into the ERISA plan, is headquartered in Kansas, although Plaintiff worked in Lexington, Tennessee. The only alleged factual connection to Kentucky is that Defendant uses a third party vendor to manage a mail drop facility in the Commonwealth. However, Defendant has no employees at this facility. The only other connection to the Commonwealth is that Plaintiff’s attorney resides there, but the court found that this is insufficient to make Kentucky the more convenient forum. Because Plaintiff does reside in the Western District of Tennessee and relevant events underlying the claim occurred in that district, the court transferred this action there.
Statute of Limitations
Constructive knowledge is inadequate to impose three-year statute of limitations under 29 U.S.C. § 1113. Stockwell v. Hamilton, No. CV 15-11609, 2016 WL 612757 (E.D. Mich. Feb. 16, 2016) (Judge Linda V. Parker). Plaintiff Douglas Stockwell is a Trustee and participant in the ERISA-regulated Union Pension Fund (“Pension Fund”), and he is also the Union’s Business Manager and Chief Financial Officer. The other plaintiff is the International Union of Operating Engineers Local 324 (“Union”). In their Complaint, Plaintiffs allege that Defendants breached their fiduciary duties while acting as officers and employees of the Union and the Pension Fund, in violation of Sections 404 and 406 of ERISA, 29 U.S.C. §§ 1104, 1106. Defendants moved to dismiss on the basis that the claims are time-barred. The court declined to construe the “actual knowledge” requirement of 29 U.S.C. § 1113 to include constructive knowledge, where Plaintiffs did not have actual knowledge of the wrongful conduct but the Pension Fund Trustees and counsel for the Board of Trustees and Pension Fund had actual knowledge. The court explained that the plain language of the statute clearly reflects that Congress did not intend the limitations period to run from the actual knowledge of anyone other than the person bringing suit. The court held that actual knowledge of Plaintiffs is relevant to determine when ERISA’s statute of limitations begins to run and the lawsuit is not time-barred.
Statutory Damages & Notice Violations
Medical provider with valid assignment adequately alleged claim for document penalties. Prof’l Orthopedic Associates v. Qualcare, Inc., No. CV137523KMJBC, 2016 WL 642378 (D.N.J. Feb. 16, 2016) (Judge McNulty). Plaintiff, a doctor with a valid assignment from his patient, brought a claim for penalties under 29 U.S.C. § 1132(c)(1) against Defendant for failing to produce documents relating to the insurance claims review process. The court declined to dismiss this claim. Here, it is alleged that Plaintiff made the request for documents, not the actual plan participant, Patient A.L. However, under the terms of the Assignment, Patient A.L. authorized the release of “any and all plan documents, insurance policy and/or settlement information upon written request from the provider”, the plaintiff. The complaint alleges that Plaintiff sought the documents from both Qualcare and Meridian, as plan administrator, and no documents were provided in response to the request. The court determined that no more is required to state the elements of a 502(c) claim.
Motion to transfer venue denied where private and public considerations weigh against transfer. Daie v. Intel Corp., No. C 15-05255 WHA, 2016 WL 641646 (N.D. Cal. Feb. 18, 2016) (Judge William Alsup). In this lawsuit for long term disability benefits, Defendants moved to transfer venue to the District of Arizona or, in the alternative, to the San Jose division. Plaintiff is a resident of Fountain Hills, Arizona. Defendant Intel Corporation Long Term Disability Plan is funded by Plaintiff’s former employer, defendant Intel Corporation, a Delaware corporation with its headquarters in Santa Clara, California. Intel delegated responsibility for the initial adjudication of claims and first-level appeals to defendant Reed Group, Ltd., a Colorado corporation with its headquarters in Colorado. Intel delegated responsibility for final appeals to Claim Appeal Fiduciary Services, Inc., a Colorado corporation with offices in Colorado and Georgia. Considering 29 U.S.C. Section 1132(e)(2) and 28 U.S.C. Section 1404(a), the court denied the motion. The parties agreed that the action could have been brought in the District of Arizona, inasmuch as Plaintiff resided in Arizona when the alleged breach occurred, and he would have received his long-term benefits there, but the convenience of the parties and witnesses and the interest of justice do not counsel towards transfer. With respect to the private convenience and fairness factors, claims for the recovery of benefits are generally tried solely on the administrative record and Plaintiff’s counsel explicitly stated that there would be no discovery or live testimony, and counsel for Defendants agreed. Reed and CAFS do not have a presence in either district and both companies adjudicated claims for all of Intel, which included a significant number of personnel based in California, so Reed and CAFS should have been prepared to litigate in California. And practically, transferring the case would cause unnecessary administrative delays and would require both sides to retain new counsel or impose travel expenses for existing counsel. With respect to public-interest factors, the court determined that court congestion is a neutral factor. As of June 2015, the District of Arizona had 416 pending cases per active judge while this district had 459 per active judge. Additionally, the median time from filing to disposition for civil actions in both districts was 7.8 months. Moreover, this court is already familiar with this matter, having ruled on an earlier remand motion and still-pending separate action (now proceeding in state court). If that action later becomes removable, then it would land in this court again and could be related, so both cases could be assigned to the same judge. The court found that this consideration also answers the alternative request for transfer to the San Jose division.
* 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 may be able to advise you so please contact us. Case summaries authored by Michelle L. Roberts, Partner, Roberts Disability Law, 1050 Marina Village Pkwy., Ste. 105, Alameda, CA 94501; Tel: 510-230-2090.
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