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ERISA Watch – July 2, 2015

This week’s notable decision is none other than King v. Burwell, No. 14-114, 2015 WL 2473448, at *6 (U.S. June 25, 2015), also known as the “SCOTUScare” decision thanks to Justice Scalia’s artfulness, where the U.S. Supreme Court held that the ACA provides tax credits in States that have a Federal Exchange rather than a State Exchange. The ACA provides that the amount of the tax credit depends in part on whether the taxpayer has enrolled in an insurance plan through “an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act.” Determining that this language is ambiguous and turning to the structure of the ACA, the majority found that not providing the tax credit would destabilize the individual insurance market in any State with a Federal Exchange and likely create the very “death spirals” that Congress designed the ACA to avoid. Love it or not, the ACA is here to stay.

Your reliable source for summaries of recent ERISA decisions

Below is Roberts Disability Law, P.C. summary of this past week’s notable ERISA decisions.

U.S. Supreme Court

Affordable Care Act tax credits are available in States that have a Federal Exchange. In King v. Burwell, No. 14-114, __S.Ct.___, 2015 WL 2473448 (U.S. June 25, 2015), Virginia residents who did not want to purchase comprehensive health insurance brought an action challenging the IRS final rule implementing the premium tax credit provision of the Patient Protection and Affordable Care Act (ACA). The rule authorized tax credits not only for purchases on state-established health insurance exchanges, but also purchases on exchanges established by federal government if States did not establish exchanges. Virginia has a Federal Exchange. Petitioners argued that Virginia’s Exchange does not qualify as “an Exchange established by the State under [42 U.S.C. § 18031],” so they should not receive any tax credits. Without the tax credits, the cost of buying insurance would be more than eight percent of their income, which would exempt them from the Act’s coverage requirement. The question presented was whether the Act’s tax credits are available in States that have a Federal Exchange. The Court held that the Supreme Court would not give Chevron deference to the IRS interpretation of the ACA, and the ACA authorized tax credits for health insurance purchased from federally-established exchanges.

The majority explained that Congress based the Affordable Care Act on three major reforms: first, the guaranteed issue and community rating requirements; second, a requirement that individuals maintain health insurance coverage or make a payment to the IRS; and third, the tax credits for individuals with household incomes between 100 percent and 400 percent of the federal poverty line. In a State that establishes its own Exchange, these three reforms work together to expand insurance coverage, minimize adverse selection and broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums. Under petitioners’ reading, without the tax credits, the coverage requirement would apply to significantly fewer individuals and only one of the Act’s three major reforms would apply in States with a Federal Exchange. The Court explained that this “could well push a State’s individual insurance market into a death spiral” and it “is implausible that Congress meant the Act to operate in this manner.”

Second Circuit

Company is not a “trade or business” for the purposes of the MPPAA where its mission was primarily personal and any profit it derived was incidental. In UFCW Local One Pension Fund v. Enivel Properties, LLC, No. 14-2487, __F.3d___, 2015 WL 3971221 (2d Cir. July 1, 2015), the Second Circuit affirmed the district court’s determination that Defendant was not a “trade or business” and that withdrawal liability did not attach. For an entity to be a “trade or business,” it must operate (1) for the primary purpose of income or profit, and (2) with continuity and regularity. The district court concluded that Enivel failed both prongs of the “trade or business” definition, because while the secondary purpose of Enivel was for income or profit, the primary purpose of Enivel was personal. A condo owned by Enivel was originally purchased as a residence for owners’ daughter and only after she moved away did Enivel lease the unit to offset the investment’s carrying costs. Similarly, other properties the company owned were personal investments and leased only to offset their carrying costs. The Second Circuit rejected the Fund’s argument that status as a separate juridical entity prohibited any conclusion that Enivel’s purpose is something other than the generation of income or profit. Even though Enivel had a “profit motive,” its efforts more accurately reflect the nature of its investments. In the alternative, the district court concluded that any income or profit activities engaged in by Enivel were not continuous and regular, but were interrupted and/or sporadic. The Second Circuit agreed and found that the time expended by the owners and any other individuals doing work for Enivel was negligible.

Fourth Circuit

Summary judgment in favor of Fund in suit for withdrawal liability affirmed. In Trustees of the Plumbers & Pipefitters Nat. Pension Fund v. Plumbing Servs., Inc., No. 13-2403, __F.3d___, 2015 WL 3940851 (4th Cir. June 29, 2015), a matter involving withdrawal liability, the Fourth Circuit affirmed the district court’s decision in favor of the Fund, finding that: (1) the district court had personal and subject matter jurisdiction, (2) venue was proper in Virginia, and (3) PSI bound itself to make contributions to the Fund. The court had personal jurisdiction over Defendants because any action brought under ERISA may be brought in the district where the plan is administered and ERISA provides for nationwide service of process. Where a defendant has been validly served pursuant to a federal statute’s nationwide service of process provision, a district court has personal jurisdiction over the defendant so long as jurisdiction comports with the Fifth Amendment. Defendants did not demonstrate extreme inconvenience or unfairness. Defendants also made no argument as to why the interest of justice favors hearing the case in Alabama, where there would be no, or little, need for witnesses. The court has subject matter jurisdiction because federal district courts have jurisdiction to hear actions compelling an employer to pay withdrawal liability. Lastly, the court found that given the existence of a valid contract requiring PSI to contribute to the Fund, PSI is an employer under ERISA. Because PSI failed to timely demand arbitration, all the Fund had to prove to win summary judgment was that it gave PSI proper notice of the assessed withdrawal liability, which it did.

Tenth Circuit

Colo.Rev.Stat. § 13-54-102(1)(s)) does not apply to funds once paid out from a retirement plan. In In re Gordon, No. 14-1257, __F.3d___, 2015 WL 3916597 (10th Cir. June 26, 2015), the Gordons sought relief under Chapter 7 of the Bankruptcy Code. Their assets included a 401(k) retirement account with a $16,700 balance and a savings account holding $2,051, which was the balance remaining from a lump-sum distribution from the retirement account. These funds were not commingled with money from other sources. The Tenth Circuit affirmed the district court’s holding that the Colorado exemption for “[p]roperty … held in or payable from any pension or retirement plan or deferred compensation plan,” (Colo.Rev.Stat. § 13-54-102(1)(s)) does not apply to funds once paid out from a retirement plan.

Select Slip Copy & Not Reported Decisions

Attorneys’ Fees

In Angel Jet Servs., LLC v. Giant Eagle, Inc., No. 13-15956, __Fed.Appx.___, 2015 WL 3876292 (9th Cir. June 24, 2015), a matter involving a suit by an air ambulance company against a health insurance plan, the Ninth Circuit found that the district court clearly did not err in finding that Appellees achieved success on the merits, where Appellees prevailed on both the motion for remand and the motion for summary judgment. The district court awarded Appellees $398,464.80 in fees and $47,857 in costs. The court found that the district court did not err in finding that Appellant did not achieve success on the merits: Appellant received only $92,460 as a result of this action-over $60,000 less than Appellees originally offered in settlement and over $900,000 less than Appellant demanded.

Breach of Fiduciary Duty

In Johnson & Towers, Inc. v. Corporate Synergies Grp., LLC, No. CIV. 14-5528 NLH/KMW, 2015 WL 3889438 (D.N.J. June 23, 2015), Plaintiffs brought suit against their insurance brokers for failing to obtain stop-loss insurance that would pay for coverage of a widowed spouse of one of the company’s shareholders. The court found that Plaintiffs have statutory standing under ERISA Section 502(a)(2) to bring a claim as fiduciaries to recover losses to the Plan. The court also found that the diminution in the value of the Plan’s assets demonstrates that the Plan has suffered a concrete and particularized injury as a result of Defendants’ alleged failure to procure appropriate stop-loss insurance coverage. As such, the court found that Plaintiffs have demonstrated that they satisfy the “injury in fact” requirement for constitutional standing.

Disability Benefit Claims

In Arnone v. Aetna Life Ins. Co., No. 13-CV-5168 SJF, 2015 WL 3915607 (E.D.N.Y. June 25, 2015), the court denied Plaintiff’s claims seeking to recover LTD benefits. He alleged that he is entitled to reimbursement of the amount by which Defendant offset his LTD benefits with Workers’ Compensation benefits; his future LTD benefits should not be offset by his personal injury settlement award; and dependent Social Security benefits should not be considered in calculating his LTD benefits. The court granted Defendant’s counterclaim seeking reimbursement for overpayment of Plan LTD benefits in the sum of $40,125.28.


In Calabree v. Eaton Med. Plan for Retirees & Other Eligible Individuals, No. 13-CV-00828, 2015 WL 3903499 (E.D. Pa. June 25, 2015), a matter involving a denial of medical plan benefits, the court denied Plaintiff’s discovery requests aimed at determining whether the SPD is an operative plan document, including whether Defendant ever took formal corporate action to adopt the SPD. The court found that Defendant already provided the materials Plaintiffs require to determine if the SPD in fact provides an enforceable Plan term: the Wrap Plan and the SPD. The court did grant Plaintiff discovery into whether Defendant used inadequate or inappropriate information in denying Plaintiff’s claim and ordered Defendant to respond to an interrogatory seeking the identity of each Operative Agreement governing any health plan sponsored by Eaton Corporation under which Plaintiff was covered as a participant or beneficiary. The court had not yet determined which standard of review is applicable to Plaintiff’s claim.

Pension Benefit Claims

In Carter v. Gen. Motors Hourly-Rate Pension Plan, No. 1:14-CV-00564-JMS, 2015 WL 3867661 (S.D. Ind. June 23, 2015), prior to 2007, Plaintiffs were employees of Allison Transmission, a division of GM. They all qualified for either normal or early retirement from GM in 2007 but after GM sold GM-Allison to Clutch, Plaintiffs all continued employment with Clutch-Allison. Several years later they each requested to retire from GM and to begin receiving GM Plan benefits, but to continue their employment with Clutch-Allison. The Plan denied their request because of their employment with a “successor company.” Based on a de novo review of the administrative record, the court determined that Plaintiffs have not been wrongly denied benefits under the GM Plan. The court explained that the Plan’s successor provision refers to “a successor company,” not just “GM’s successor.” The Plan provides that a successor can arise “through divestiture.” Accordingly, under the plain terms of the GM Plan, Plaintiffs must terminate employment with Clutch-Allison, the successor company, in order to begin receiving benefits under the GM Plan.

Pleading Issues & Procedure

In Treadway v. Walgreen Co., No. 5:15-CV-04109, 2015 WL 3949484 (S.D.W. Va. June 29, 2015), Plaintiff asserted in her complaint that she “was retaliated against for blowing the whistle” and Defendants “violated the West Virginia Human Rights Act entitling the Plaintiff to attorney’s fees and costs . . .” The complaint does not include multiple counts for violations of separate statutes or alternative theories of recovery but included allegations regarding her FMLA leave and the denial of her short-term disability claim. The court found that these allegations were just “incidents” in which the Defendants allegedly retaliated against Plaintiff for providing testimony for a former manager, rather than separate claims for relief pursuant to the FMLA or ERISA. Because Plaintiff’s legal theory does not appear to require proof of violation of a federal statute as an element of her claim for relief, the court found that the complaint does not raise questions of federal law or otherwise support federal question jurisdiction. The court found that remand to state court is appropriate.

In Piscopo v. Pub. Serv. Elec. & Gas Co., No. CIV.A. 13-552 ES, 2015 WL 3938925 (D.N.J. June 25, 2015), the court dismissed Plaintiff’s ERISA claims with prejudice after giving him two opportunities to amend his complaint. The court found that Section 503 of ERISA does not confer a private right of action. As to Plaintiff’s Section 502(a) ERISA claim for pension and retirement benefits, Plaintiff did not allege any facts regarding the details of his pension benefit plan. With respect to Plaintiff’s document penalty claim, the court found that Plaintiff failed to plead facts sufficient to state a cause of action under section 502(c)(1) (B). Plaintiff did not allege anywhere that Defendant failed or refused to comply with the requests by not mailing the material within 30 days after such request. Additionally, the court found that Plaintiff did not allege sufficient facts demonstrating that Defendant was a plan administrator and hence subject to liability under section 502(c)(1)(B).

Statute of Limitations/Contractual Limitations

In Jevelekides v. Lincoln Nat. Corp., No. 3:14-CV-1517 LEK/DEP, 2015 WL 3849312 (N.D.N.Y. June 22, 2015), Plaintiff’s long term disability claim began in February 2007 and written proof of claim was due by November 2007. In October 2008, Lincoln informed Plaintiff that she had been overpaid LTD benefits because she and her dependent had been awarded monthly SSDI benefits beginning in March 2008. Plaintiffs filed suit in July 2014 challenging the SSDI offset. The court found that the suit was barred by the LTD policy’s contractual limitations provision which states that “[n]o legal action to recover any benefits may be brought until sixty days after the required written proof of claim has been given. No legal action may be brought more than three years after the date written proof of claim is required.” The court found that the limitations period required Plaintiffs to file suit by November 5, 2010 and her lawsuit is time-barred.

* 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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