ERISA Watch – June 5, 2014

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

Denial of Long Term Disability Benefits Found Arbitrary and Capricious

In James v. AT&T W. Disability Benefits Program, 12-CV-06318-WHO, 2014 WL 2465081 (N.D. Cal. June 2, 2014) (Plaintiff’s attorney: Laurence Padway), the court found Sedgwick’s denial of long term disability benefits to be arbitrary and capricious, where: 1) the disability Plan and its reviewing physicians simply misstated or failed to consider crucial evidence in the record; 2) the Plan carved the claimant’s overall disability into discrete parts and did not consider the disability as a whole; 3) the Plan failed to consider subjective evidence of the claimant’s chronic pain in her favor where the claimant underwent numerous treatments and took much medication over several years; 4) the Plan denied the claim for LTD benefits because it argued that the claimant failed to provide any “objective medical evidence” of an inability to function in the workplace but nothing in the record, however, showed that it explained to the claimant what might constitute such objective evidence; and 5) the Plan failed to conduct an investigation where it did not conduct its own in-person medical evaluation and instead reviewed medical records only. The court declined to remand the claim determination back to the Plan and instead awarded the claimant with LTD benefits.

Similarly, in Connelly v. Reliance Standard Life Ins. Co., CIV.A. 13-5934, 2014 WL 2452217 (E.D. Pa. June 2, 2014) (Plaintiff’s attorney: Kirk L. Wolgemuth), the court found that Reliance Standard’s denial of long term disability benefits was arbitrary and capricious, where: 1) Reliance had a right to obtain an in-person medical evaluation but chose instead to obtain only a “paper review” of a claim that involved depression and anxiety; 2) the reviewing doctor unreasonably ignored complaints of panic attacks because they were not observed during a session with her physician or therapist; 3) Reliance chose to credit the unsupported opinion of its reviewing doctor over the claimant’s treating doctors; and 4) there was no new medical evidence showing the claimant’s condition had improved to justify a termination of benefits when Reliance previously found her disabled. Because Reliance’s decision to terminate benefits was the result of an arbitrary and capricious decision, the court found it appropriate to retroactively award benefits and return Connelly to the status quo she enjoyed before the termination of her benefits.

Statute of Limitations on Breach of Fiduciary Duty Claim. In Pizza v. Fin. Indus. Regulatory Auth., Inc., C-13-0688 MMC, 2014 WL 2450863 (N.D. Cal. May 30, 2014), the plaintiff alleged a breach of ERISA’s fiduciary duty claim against his former employer because he alleged that the employer gave him false information about his pension benefits. The plaintiff accepted an offer of employment in December 2005, was given the option to start work in December 2005 or January 2006, and chose to begin work in January 2006. He alleged that at the time he accepted the job offer, the employer told him that his rights under the pension plan would not be affected if he started work in January 2006. In July 2011, however, the plaintiff was advised that because he started work in 2006, he was not entitled to full pension benefits until he reached the age of 65, whereas if he had started in 2005, he would have been entitled to full pension benefits at age 62. The court analyzed the applicable statute of limitations which provides:

No action may be commenced under [ERISA] with respect to a fiduciary’s breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of-

(1) six years after (A) the date of the last action which constituted a part of the breach or violation, or (B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or

(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation;

except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.

29 U.S.C. § 1113. The court found that the date of the last action which constituted a part of the breach was January 3, 2006, the date on which the plaintiff first began to work for employer, having relied on the statements made to him in December 2005 that the date he started work would not affect his eligibility for full retirement benefits at age 62. As such, the claim for breach of fiduciary duty had to be filed no later than January 3, 2012, i.e., six years after January 3, 2006. The court also found that the earliest date on which plaintiff had actual knowledge of the breach was the date the plaintiff was advised that he was not entitled to full retirement benefits until he turned 65, which, Plaintiff asserts, was on or about July 7, 2011. Under the test set forth in § 1113(2), the plaintiff’s claim for breach of fiduciary duty had to be filed no later than July 7, 2014, i.e., three years after July 7, 2011. Given that January 3, 2012 is “the earlier of” said two deadlines, and given that the plaintiff filed his initial complaint on February 14, 2013, more than a year thereafter, his claim for breach of fiduciary duty is barred, in the absence of plaintiff raising a triable issue of fact with respect to an exception to the statute of limitations. The court found that the plaintiff failed to establish a triable issue regarding the statutory exception of “fraud or concealment.”

Late Decided Long Term Disability Appeal Does Not Warrant De Novo Review. InLundsten v. Creative Community Living Services, Inc. Long Term Disability Plan, No. 13-C-108, 2014 WL 2440716 (E.D. Wis. May 30, 2014), the court determined that Aetna’s late decision on Lundsten’s appeal of her denied long term disability claim did not change the judicial standard of review from arbitrary and capricious to de novo. Lundsten lodged her appeal on December 16, 2011, and Aetna did not decide it until June 15, 2012-a span of 182 days. The defendants argued that the extra time was appropriately extended and tolled under ERISA’s regulations. The court determined that even if the defendants did not strictly comply with the applicable extension/tolling guidelines, it does not necessarily follow that Lundsten is entitled to de novo review in federal court. Instead, a technical violation can be excused if the administrator has been substantially compliant with the requirements of ERISA. In cases in which the substantial compliance doctrine applies, a plan administrator, notwithstanding his or her error, is given the benefit of deferential review of the administrator’s determination about a claim under the arbitrary and capricious standard (assuming that the plan document vests the administrator with discretion), rather than more stringent de novo review. The court determined that the substantial compliance doctrine applies to the deadline for an administrator to make a final determination of a denied benefits appeal and rejected giving deference to the Department of Labor’s interpretive guidance that a decision made in the absence of the mandated procedural protections should not be entitled to any judicial deference.

ERISA Preemption of State Law Claims. In Dupre v. State Farm Mut. Auto. Ins. Co., 2:14-CV-00715-HGB, 2014 WL 2441124 (E.D. La. May 30, 2014), the plaintiff brought a claim for long term disability benefits against her employer, State Farm, and also sought a penalty of double the amount of benefits owed or any other remedies other than the exclusive remedies available under ERISA. The court found that the long term disability policy was governed by ERISA because the policy was established by her employer for purposes of providing its participants benefits in the event of disability. As such, ERISA both preempts and governs plaintiff’s unpaid benefits claim. The court found that the penalty of double the amount of benefits owed must be dismissed with prejudice because they are not allowed under ERISA. The court also found that the plaintiff did not adequately plead exhaustion of her administrative remedies and dismissed the long term disability claim without prejudice.

Release of ERISA Claims Bars Long Term Disability Lawsuit. In Berardi v. Drexel Univ., CIV.A. 13-7488, 2014 WL 2199423 (E.D. Pa. May 27, 2014), the court dismissed the plaintiff’s long term disability claim where it found that a Confidential Separation Agreement and General Release between the parties barred the plaintiff’s lawsuit. The plaintiff was employed by defendant from October 2006 until July 11, 2011, when he was notified that his position as Project Task Coordinator would be eliminated. Previously, on September 15, 2010, plaintiff suffered a work-related injury. On August 12, 2011, the parties executed the Separation Agreement which terminated the employment relationship between them and documented the release, restriction, and reservation of certain rights of the parties. The Separation Agreement provides that Drexel agreed to pay plaintiff $19,261.00 and provide tuition remission to plaintiff’s son through June 15, 2012, and, in exchange, plaintiff agreed to release “any and all Claims” he then had or may have in the future, “arising out of or relating to any conduct, matter, event or omission existing or occurring before” plaintiff signed the Separation Agreement. The General Release expressly included, as among the released claims, “any claims under the Employee Retirement Income Security Act (“ERISA”)”. The parties agreed, however, that plaintiff’s release excluded “any open Worker’s Compensation claims, short-term and/or long term disability claims. ….” Almost eight months later, on April 10, 2012, plaintiff filed a claim for long term disability with The Hartford, Drexel’s third-party administrator. On July 17, 2012, plaintiff’s application was approved, noting that he was found disabled as of September 16, 2010. On August 4, 2012, the Social Security Administration rendered a decision finding Plaintiff totally and permanently disabled from any form of gainful employment.

The court found that plaintiff’s ERISA claim falls within the scope of the General Release and is, therefore, barred as a matter of law. The court rejected plaintiff’s argument that his ERISA claim is not barred by the General Release provision because it is “inextricably linked” to his “long term disability” claim which was expressly excluded from the General Release provisions and which arose after he signed the Separation Agreement. The court determined that both the claim and Hartford’s decision were based upon an event or occurrence, (i.e., Plaintiff’s September 15, 2010, work injury), that occurred before plaintiff signed the Separation Agreement.

* 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 Parkway, Ste. 105 Alameda, CA 94501; Tel: 510-230-2090.