ERISA Watch – June 4, 2015

Breaking News: Where the 180-day internal appeal deadline falls on a Saturday, neither that day nor Sunday count in the computation of the 180 days. Thanks to the Ninth Circuit in LeGras v. AETNA Life Ins. Co., No. 12-56541, __F.3d___, 2015 WL 3406182 (9th Cir. May 28, 2015), this rule is now adopted as part of ERISA’s federal common law. In this case, Aetna denied the plaintiff’s long term disability appeal for being untimely because it was due on a Saturday but not mailed until the following Monday. The district court dismissed Plaintiff’s lawsuit for failure to exhaust administrative remedies but the Ninth Circuit reversed.

The Ninth Circuit should have taken it farther. What’s good for the goose is good for the gander. When administrators are late in complying with deadlines mandated by ERISA’s regulations courts invoke a “substantial compliance” rule. (Indeed, Aetna benefited from such rule by the same district court in Mitchell v. Aetna Life Ins. Co., 359 F. Supp. 2d 880 (C.D. Cal. 2005)) Yet, claimants who are even one day late in mailing an appeal are completely stripped of their right to pursue a civil action. Last week we asked for comments about whether courts are right to preclude jury trials in ERISA cases. The overwhelming consensus, gathered from the pool of one respondent, is NO. There you have it folks.

“The basis for the denial of jury trials in ERISA is mistaken, as I argued in my recent law review article. The courts have totally screwed up the issue and it is high time to revisit it. [Stamps v. Michigan Teamsters Joint Council No. 43, 431 F. Supp. 745, 746 (E.D. Mich. 1977)] got it right years ago.” Mark D. DeBofsky, DeBofsky & Associates, P.C.

ERISA Watch – June 4, 2015

Second Circuit

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

SSA’s determination to review disability award every 3 years justifies denial of permanent-disability pension. In Ocampo v. Bldg. Serv. 32B-J Pension Fund, No. 14-0877, __F.3d___, 2015 WL 3448856 (2d Cir. June 1, 2015), the Second Circuit affirmed the district court’s grant of summary judgment dismissing the complaint on the ground that the plan at issue conferred on Defendants discretion to determine eligibility for benefits and that Defendants’ reliance on Social Security Administration (“SSA”) determinations, policies, and procedures was not arbitrary or capricious. Plaintiff was a pension plan participant seeking a pension on the basis of permanent disability. Defendants determined that her disability was not permanent on the sole basis that the SSA, in awarding her Social Security disability benefits, had stated that her eligibility for such benefits must be reviewed at least once every three years, rather than once every five years. 20 C.F.R. § 404.1590(d), which regulates the frequency of SSA reviews, provides that “if your disability is not considered permanent . . . we will review your continuing eligibility for disability benefits at least once every 3 years.” The court found that the Trustees’ denial of Plaintiff’s claim was subject to review under the arbitrary-and-capricious standard since the Plan conferred the Trustees discretionary authority. The court rejected Plaintiff’s contention that de novo review should apply because the real decision maker on her benefits application was the SSA and that the Trustees exercised no discretion but simply rubber-stamped SSA’s decisions.

Ninth Circuit

When the 180-day internal appeal deadline falls on a Saturday or Sunday, it is timely if mailed the following Monday. In LeGras v. AETNA Life Ins. Co., No. 12-56541, __F.3d___, 2015 WL 3406182 (9th Cir. May 28, 2015), the 180-day deadline for Plaintiff to file an internal appeal of the denial of his LTD claim fell on a Saturday. Plaintiff mailed his appeal the following Monday, but AETNA denied it as untimely, and the district court dismissed Plaintiff’s lawsuit for failure to exhaust administrative remedies. The Ninth Circuit reversed and held that because the last day of the appeal period fell on a Saturday, neither that day nor Sunday count in the computation of the 180 days. Since Plaintiff mailed his notice of appeal on Monday, it was timely. The court explained that this method of counting time is widely recognized and furthers the goals and purposes of ERISA. As such, the court adopted it as part of ERISA’s federal common law.

Select Slip Copy & Not Reported Decisions

Attorneys’ Fees

In IBEW Local Union No. 400 v. Lords Elec., Inc., No. CIV.A. 13-1785 MAS, 2015 WL 3452473 (D.N.J. May 29, 2015), the court found that Plaintiffs did not provide sufficient evidence to show that Defendant’s contributions were delinquent in violation of § 1145. Therefore, the court denied Plaintiffs’ motion for summary judgment for attorneys’ fees and costs because, at this juncture, the court cannot enter judgment in favor of Plaintiffs pursuant to § 1145, and a favorable judgment under § 1145 is a prerequisite to fees. The court also denied Defendant’s cross-motion because payment of alleged delinquent payments after the commencement of suit but prior to a judgment does not automatically deny a plaintiff the remedy of attorneys’ fees and costs under § 1132(g)(2). The court explained that if Plaintiffs can establish Defendant violated § 1145 at the time this litigation was commenced, an award of reasonable attorneys’ fees and costs is mandatory.

In Orrand v. Walters Excavating, No. 2:12-CV-389, 2015 WL 3409252 (S.D. Ohio May 27, 2015), an action to recover unpaid fringe benefit contributions, the court issued a report and recommendation granting Plaintiffs’ motion for an award of attorneys’ fees and costs against Defendant WEI in the amount of $29,424.75.

Breach of Fiduciary Duty

In Faltermeier v. Aetna Life Ins. Co., No. 15-CV-2255-JAR-TJJ, 2015 WL 3440479 (D. Kan. May 28, 2015) (Not Reported in F.Supp.3d), the court granted Plaintiff’s motion to amend his complaint to add a breach of fiduciary duty claim pursuant to ERISA § 502(a)(3), in addition to his § 502(a)(1)(B) claim for the denial of his long term disability benefit claim. Plaintiff alleged that Aetna issued its final denial of his claim for benefits without considering an independent medical examiner’s report that supports his disability. Plaintiff advised Aetna that he would be providing the report and provided the report one day before Aetna issued its final denial. The denial letter made no mention of the report. The court rejected Defendant’s argument that amending the complaint would be futile because Plaintiff’s breach of fiduciary duty claim is subject to dismissal. The court found that Plaintiff’s breach of fiduciary duty claim is not simply a repackaged claim for benefits. If the court determines that Defendant’s denial was not arbitrary and capricious based on the administrative record, then Plaintiff has a separate cause of action for breach of fiduciary duty arising out of Defendant’s exclusion of relevant medical evidence from the administrative record.

In Kaiser v. Wisconsin Energy Conservation Corp., No. 14-CV-762-WMC, 2015 WL 3397548 (W.D. Wis. May 26, 2015), the court granted Defendants’ motion to dismiss Plaintiff’s claim under 29 U.S.C. § 1132(a)(3), where Plaintiff also brought a claim pursuant to § 1132(a)(1)(B) in connection with a denial of long term disability benefits. Plaintiff contended that merely remanding for a claim brought pursuant to § 1132(a)(1)(B) would not “prohibit Defendants from repeating history by engaging in backward-looking reinterpretation of medical records to hide behind the pre-existing condition clause.” The court disagreed and explained that if the court agrees with Plaintiff that Defendants acted arbitrarily in applying the pre-existing condition clause, then on remand, Defendants will necessarily not be allowed to rely on that provision. As such, § 1132(a)(1)(B) provides “adequate relief” and there is no need for further equitable relief under § 1132(a)(3).

Class Actions

In DeMaria v. Horizon Healthcare Servs., Inc., No. 11-7298 WJM, 2015 WL 3460997 (D.N.J. June 1, 2015), Plaintiffs brought ERISA claims and state law claims on behalf of themselves and other chiropractors who were denied E/M and PT benefits under Horizon plans during the Class Period. Count I seeks the recovery of benefits due under ERISA-covered plans pursuant to ERISA § 502(a) (1)(B), and Count II seeks an order requiring Horizon to provide a “full and fair review” of denied benefit claims under ERISA § 502(a)(3) and 29 C.F.R. § 2560.503-1(h)(2). The court certified the proposed “ERISA Class” under Rule 23(b)(3) and Rule 23(b)(1)(B) defined as: All chiropractors who, during the Class Period, received payment from Horizon pursuant to an employer benefit plan covered by ERISA for CMT services, but were denied payment for E/M and/or PT services provided on the same date as the CMT service. Excluded from this Class are benefit claims submitted by Non-Participating providers under Horizon’s Multi-Plan Liaison (“MPL”) Program. This Class has two sub-classes: (1) chiropractors who were, at the time they rendered the services, participating providers; and (2) chiropractors who were, at the time they rendered the services, non-participating providers.

Disability Benefit Claims

In Kelly v. Reliance Standard Life Ins. Co., No. CIV. 09-2478 KSH, 2015 WL 3448033 (D.N.J. May 28, 2015), the court granted Reliance’s motion to remand and denied Plaintiff’s cross-motion for civil contempt sanctions. Although Plaintiff claimed that he was disabled under the “any occupation” standard of disability, Reliance only issued a determination as to the “regular occupation” standard and the court previously ruled that Plaintiff was entitled to “regular occupation” benefits. The court explained that it could not award “any occupation” benefits where Reliance did not make a decision about Plaintiff’s entitlement to those benefits in the first instance. The court remanded Plaintiff’s claim to Reliance to exhaust administrative remedies.

In Stout v. Pathfinder Energy Servs., LLC, No. CIV.A. 14-02457, 2015 WL 3413328 (W.D. La. May 26, 2015), Plaintiff filed a lawsuit for the denial of his long term disability benefits two days prior to submitting an internal appeal to MetLife. MetLife reinstated Plaintiff’s LTD benefits after considering his appeal. The court denied as moot Plaintiff’s claim for reinstatement of LTD benefits and dismissed his claims for future benefits, breach of fiduciary duty, conflict of interest, attorney’s fees, and statutory penalties.

ERISA Preemption

In Calop Bus. Sys., Inc. v. City of Los Angeles, No. 13-56992, __Fed.Appx.___, 2015 WL 3463340 (9th Cir. June 2, 2015), the court found that the City of Los Angeles’s Living Wage Ordinance (“LWO”), which requires contractors who operate at the City’s airports to pay their employees $14.80 per hour, or $10.30 per hour if the contractor provides health benefits, was not preempted by ERISA. The court determined that: 1) the LWO does not have a “reference to” employee benefits plans merely because it takes into account what health benefits employers offer in calculating the cash wage that must be paid; 2) the LWO’s provision for collecting reports on employee compensation from employers does not create a “connection with” employee benefits plans because the provision imposes no obligations on plans themselves; and 3) the LWO does not give rise to a “connection with” benefits plans merely by creating economic incentives to offer certain kinds of benefits.

In Edwards v. Lockheed Martin Corp., No. 13-35591, __Fed.Appx.___, 2015 WL 3407241 (9th Cir. May 28, 2015), the Ninth Circuit found that Plaintiff’s state law claims related to the Lockheed Martin Corporation’s Voluntary Executive Separation Program (VESP) are preempted by ERISA, rejecting Plaintiff’s argument that VESP is not an employee benefit plan under ERISA, because ERISA is “not designed” to cover corporate programs that require a release of claims in exchange for payment, and because VESP eligibility determinations involve no discretion. The court found that under the plan Lockheed exercises significant discretion to determine an employee’s eligibility for the program.

In Coggins v. Keystone Foods, LLC, No. CIV.A. 15-480, 2015 WL 3400938 (E.D. Pa. May 27, 2015), Plaintiffs asserted that they do not seek any additional benefits from Keystone’s Healthcare Benefits Plan, but rather seek the additional out of pocket costs that they are allegedly entitled to have reimbursed under the Retirement Agreements. Plaintiffs’ theory is that the Healthcare Benefits Plan and Medical Reimbursement Plan provide benefits covered by ERISA, but the separate Retirement Agreements merely define Plaintiffs’ rights to continue receiving these benefits, rather than provide new benefits covered under ERISA. The court found that the Retirement Agreements are not “plans” that may be enforced under ERISA § 502(a)(1)(B), and therefore Plaintiffs’ claims are not completely preempted under Davila. The court granted Plaintiffs’ Motion to Remand.

Life Insurance & AD&D Benefit Claims

In Life Ins. Co. of N. Am. v. Sorilla, No. CV-14-01797-PHX-DGC, 2015 WL 3407468 (D. Ariz. May 27, 2015) (Not Reported in F.Supp.3d), the insured had completed a beneficiary designation form which contained a box for designating a beneficiary for the basic life insurance and a separate box for designating a beneficiary for the voluntary life insurance. The insured designated Sylvia Sorilla as the beneficiary of his basic life insurance, but left the beneficiary designation for the voluntary life insurance blank. Based on that form, LINA concluded that the insured had not designated a beneficiary for the voluntary life insurance and determined that the insured’s brother, Jose Matus, was entitled to the benefits according to the policy’s preference clause. The court found as a matter of law that LINA’s decision to award the benefits to Jose Matus was proper under the life-insurance policy.

Medical Benefit Claims

In Lisa O. v. Blue Cross of Idaho Health Serv. Inc., No. 1:12-CV-00285-EJL, 2015 WL 3439847 (D. Idaho May 28, 2015) (Not Reported in F.Supp.3d), the court found that Defendants’ conclusion that a patient’s treatment was for correction of behavioral modification, and not behavioral abnormality, was reasonable given the nature of the conditions and the types of treatments provided. As such, the treatment came under an exclusion in the plan. The therapy and programing the patient participated in were geared towards modifying her behaviors arising from her anorexia, depression, self-harming, and self-harm/violent conduct. The court found that it was reasonable to conclude that those treatments were not for the purpose of addressing a mental disorder or illness as much as they were to correct behavior. The court concluded that Defendants did not abuse their discretion in denying the claim based on the exclusion and granted Defendants’ Motion for Summary Judgment.

Pension Benefit Claims

In Leicht v. Sw. Carpenters Pension Plan, No. 13-55715, __Fed.Appx.___, 2015 WL 3452079 (9th Cir. June 1, 2015), the court reversed the district court’s ruling, finding that the Plan abused its discretion when it arbitrarily interpreted the term “building inspector” to mean only publicly-employed building inspectors without any rational justification and suspended Plaintiff’s benefits on this basis.

Pleading Issues & Procedure

In Greenbaum v. Sedgwick Claims Mgmt. Servs., Inc., No. 5:15-CV-127 RP, 2015 WL 3457660, at (W.D. Tex. May 29, 2015), Plaintiff brought suit against the HCA Health and Welfare Benefits Plan and its claims administrator, Sedgwick Claims Management Services, Inc., for the denial of her short-term disability claim. The Plan moved to dismiss it from the action, arguing that it is not a proper defendant because the Plan has no discretion or authority to adjudicate the disputed claim and is not liable for the payment thereof. The court denied the Plan’s motion, finding that the express language of ERISA’s remedial provision provides that an employee benefit plan is a proper defendant under the statute.

In Mora v. Albertson’s, L.L.C., No. EP-15-CV-00071-FM, 2015 WL 3447963 (W.D. Tex. May 28, 2015), the court found that Plaintiff failed to adequately plead a claim for denial of benefits, where the complaint alleges specific benefits she was denied, but fails to indicate how she was entitled to those benefits under the Plan’s terms. The court declined to dismiss Plaintiff’s ERISA estoppel claim, finding that it is not duplicative of her section 1132(a)(1)(B) claim since the estoppel claim is based on “material misrepresentations” and do not depend on an entitlement under the Plan’s terms. The court dismissed without prejudice Plaintiff’s request for extracontractual and punitive damages for her ERISA estoppel claim. The court acknowledged that there does not appear to be Supreme Court or Fifth Circuit authority directly addressing this issue. Plaintiff will be allowed to replead such damages and demonstrate they are available for her ERISA estoppel claim.

Release of Claims

In Lisa O. v. Blue Cross of Idaho Health Serv. Inc., No. 1:12-CV-00285-EJL, 2015 WL 3439847 (D. Idaho May 28, 2015) (Not Reported in F.Supp.3d), Plaintiff sought reimbursement for expenses she incurred for her minor daughter’s attendance at two boarding schools under a health benefits plan provided by her then employer. Plaintiff had signed a release agreement with her employer, which stated the following carve out, “This General Release of Claims, however, does not affect any vested rights I might have for benefits under any group medical insurance, disability, workers’ compensation, unemployment compensation, or retirement program.” The court agreed with the Magistrate Judge’s conclusion that the “vested rights” language of the Release is ambiguous and there are disputed facts which preclude entry of summary judgment for either side on this question. Specifically, it was ambiguous whether the claims had “vested” at the time the expenses were incurred – before the Release was signed – and there was excluded from the Release’s waiver. The court could not ascertain whether the claims sought to be recovered in this case are “vested” as defined and/or intended in the Release and whether Plaintiffs knowingly and voluntarily waived those claims as a matter of law.

Standard of Review

Dix v. Blue Cross & Blue Shield Ass’n Long Term Disability Program, No. 14-31200, __Fed.Appx.___, 2015 WL 3429134 (5th Cir. May 29, 2015), the court found that there was no conflict of interest where Plaintiff’s employer, BCBSL, paid into a trust which in turn funded the payment of benefits under the Blue Cross and Blue Shield Association Long Term Disability Program. The Blue Cross and Blue Shield Association (“the Association”) is an Illinois not-for-profit corporation which provides fiduciary administrative services to BCBSL and other Blue Cross and Blue Shield Organizations through its National Employees Benefits Committee (“NEBC”) and National Employees Benefits Administration (“NEBA”). NEBA and NEBC administer the Program at issue in this case. The Association determined eligibility for benefits through NEBA and NEBC. Although the district court found that “BCBS’s Board of Directors comprised the committee charged with administering the disability plan,” the record shows that it was the Association’s board of directors which comprised the eligibility committee, not the board of directors of the Program or of BCBSL. The court found that these facts show that a structural conflict of interest did not exist because the Association, through NEBA and NEBC, made benefits eligibility decisions, while the Program paid benefits claims, and BCBSL had no financial interest in individual disability determinations.

Subrogation/Reimbursement Claims

In Admin. Comm. of Dillard’s, Inc. Grp. Health, Dental, & Vision Plan v. Sarrough, No. 1:14-CV-01165, 2015 WL 3466568 (N.D. Ohio June 1, 2015), the Plan sought a constructive trust and equitable lien over a wrongful death settlement awarded to Defendants. The Plan paid $260,370.63 of the decedent’s medical expenses. Defendants won $300,000 in wrongful death settlements associated with the death and the Plan made a claim to these settlement proceeds to recoup the medical costs it incurred. The Probate Court ordered that the entire $300,000 settlement should be allocated to a wrongful death claim; 40% of the settlement was for attorneys’ fees, with the remainder split equally between the decedent’s four children. None went to the Plan despite its intervention. The court found that the elements of res judicata are met here since the Probate Court issued a valid, final decision on the merits regarding the allocation of settlement funds; the parties in this case are the same as those in the probate proceedings; and the claims in this action were litigated in Probate Court. The ERISA plan only entitles Dillard’s to “recoveries and funds paid by a Third Party to a Covered Person relative to the injury or sickness….” The Probate Court reviewed the facts and concluded that the settlement was a recovery paid to the decedent’s children, not to the decedent herself. As such, the plain terms of the plan place such a recovery outside of Dillard’s reach.

Venue

In Carpenters Combined Funds, Inc., ex rel. Klein v. Kelly Sys., Inc., No. CIV.A. 14-1681, 2015 WL 3457872 (W.D. Pa. May 29, 2015), the court transferred this matter, an action seeking to enforce the collective bargaining obligations of non-parties, to the United States District Court for the Middle District of Pennsylvania. Defendants declared that all of the potential evidence in this case is located at their Harrisburg offices and any potential testimony concerning those records and/or their business practices would necessarily come from employees located in that region. Further, any evidence from contracting jobs for third parties performed by those entities would also be related to construction sites in the Middle and Eastern Districts of Pennsylvania because that is where those companies do business. The court found that the Jumara factors determinative of whether to grant a motion to transfer venue under Section 1404(a) supported a transfer of venue. The court declined to enforce a forum selection provision in Trust documents that Plaintiff failed to demonstrate were incorporated into the CBAs.

Withdrawal Liability & Unpaid Benefit Contributions

In Sheet Metal Workers’ Nat. Pension Fund v. Coverex Corporate Risk Solutions, No. 09-CV-0121 SJF ARL, 2015 WL 3444896 (E.D.N.Y. May 28, 2015), the court awarded Plaintiffs (1) unpaid contributions for the period from July 1, 2008 through August 31, 2008 in the total amount of $35,160.71; (2) interest thereon in the total amount of $22,966.89; (3) liquidated damages for the period from July 1, 2008 through August 31, 2008 in the total amount of $7,032.05; (4) attorney’s fees in the total amount of $41,130.00; and (5) costs in the total amount of $1920.79, for a total award of $108,210.44.

In Bd. of Trustees of the Nat. Roofing Indus. Pension Fund v. A.W. Farrell & Son, Inc., No. 2:13-CV-825 JCM VCF, 2015 WL 3422722 (D. Nev. May 28, 2015), Plaintiff made the following claims and request for relief: (1) AWF failed to comply with Plaintiff’s request to audit AWF’s records in order to ascertain whether payments were promptly and correctly made to the employee benefit plan trust funds for Local 162; (2) this failure violated provisions of the CBAs governing the employee benefit plans, thus constituting a breach of contract; and (3) accordingly, the court should grant an injunction ordering AWF to submit to an audit, pay any necessary contributions, and pay any associated damages. The court denied AWF’s motion for partial summary judgment as to the periods prior to June 27, 2007, and after July 31, 2012; granted AWF’s motion to submit supplemental briefing, and denied its motion for partial summary judgment regarding the 2010-2012 CBA.

* 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.