This week’s notable decision is Cottillion v. United Ref. Co., No. 13-4633, __F.3d___, 2015 WL 1219640 (3d Cir. Mar. 18, 2015), where the Third Circuit Court of Appeals held that ERISA and the anti-cutback rule forbids United from drafting actuarial reductions into its retirement plans, whether by amendment, “interpretation,” or otherwise. Although the court did not award all requested relief, on the whole, this decision is great for ERISA plan participants. Read more in this week’s ERISA Watch.
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.
Plan administrator’s interpretation of Plan resulting in actuarial reduction of benefits contrary to Plans’ text violates ERISA and anti-cutback rule. In Cottillion v. United Ref. Co., No. 13-4633, __F.3d___, 2015 WL 1219640 (3d Cir. Mar. 18, 2015), Plaintiff, on behalf of a class of other terminated vested participants (TVPs) (collectively “Employees”), brought suit against United for actuarially reducing benefits they received before normal retirement age of 65. They brought a claim for benefits under ERISA Section 502(a)(1)(B) and an anti-cutback claim under Section 204(g). As a preliminary matter, the court found that the Employees were properly excused from exhausting Plan remedies because exhaustion would have been futile. Here, United had a fixed policy denying benefits as evidenced by correspondence between the Plan Administrator and many of the TVPs.
The court found that the relevant plans unambiguously afforded TVPs retirement benefits with actuarial reduction. Specifically, no provision treats TVPs differently from people who retire directly from United, and no provision requires actuarial adjustment (reduction) for taking retirement benefits early. The court found that the Plan Administrator’s interpretation of the Plan improperly denied accrued benefits to the Employees. In 1988, United’s understanding of the Plans accorded with the plain reading of the Plans, but by 2005, United had reinterpreted the Plans and decided that they required actuarial adjustments to the amounts paid to TVPs who took early retirement. This resulted in the improper denial of TVPs’ accrued early retirement benefits and thus violated ERISA’s anti-cutback rule.
The court found that United waived its objection to the district court’s order to pay interest at 7.5% on the Employees’ damages, but because there is some evidence that the Plan provided 7.5% as a default rate, the district court’s order was not clearly erroneous. The court also found that the district court properly concluded that class members who had not yet elected to receive their benefits were entitled only to an option to start receiving properly computed benefits at the appropriate age under the Plan. If they were older than 59½ or 60, they were not entitled to receive damages in the amount of benefits they would have received had they elected to receive (properly computed) benefits as early as possible plus interest.
Select Slip Copy & Not Reported Decisions
In Broadbent v. Citigroup Long Term Disability Plan, No. CIV 13-4081-LLP, 2015 WL 1189565 (D.S.D. Mar. 16, 2015), the parties filed a joint stipulation under which the Plan agreed to pay Plaintiff past long term disability benefits and to reinstate her under the Plan subject to its terms and conditions. Thereafter, Plaintiff filed a motion seeking $31,441.03 in attorney’s fees and costs with a multiplier of 1.5 for a total of $46,954.40. The court found that Plaintiff’s suit served as a catalyst to cause the Plan to provide her with substantially all of the relief she sought in her complaint and this is sufficient “degree of success on the merits” to merit a fee award. Further, the majority of the Westerhaus factors favor an award of attorneys’ fees. The court found that Plaintiff’s attorney’s requested hourly rate of $250 per hour is reasonable given his experience, the prevailing market rate in South Dakota, and the lack of any objection from the Plan. The Court declined to reduce the 52.1 hours Plaintiff’s attorney spent reviewing the record and preparing for the mediation but it did reduce the time spent on the motion for attorneys’ fees by 50%. The court also reduced the hourly rate for legal assistants from $125 to $100 to be more in keeping with local rates. With respect to Plaintiff’s request for a multiplier, the court considered the attorney’s experience, that few lawyers in the geographic area take ERISA cases, and the risk of non-recovery. Because the case was not legally complex, however, the court awarded only a 1.25 enhancement and not 1.5 (with the enhancement only applying to the lawyer’s work and not his legal assistants or other attorneys in the firm). The court awarded a total of $37,581.75 in attorneys’ fees and costs.
Breach of Fiduciary Duty
In Int’l Bhd. of Teamsters Union Local No. 710 Pension Fund v. Bank of New York Mellon Corp., No. 13 C 1844, 2015 WL 1234091 (N.D. Ill. Mar. 16, 2015) (Not Reported in F.Supp.3d), the court denied Defendant’ motion for judgment on the pleadings where Plaintiffs allege that, under the circumstances as they existed in the market at the time, no reasonably prudent securities lending fiduciary would have concluded that Lehman debt was a sufficiently safe investment for a securities lending client and no reasonably prudent securities lending fiduciary would have maintained the collateral investments in the Lehman Notes through Lehman’s bankruptcy filing. The court explained that the claim is not that Defendants were imprudent in failing to recognize that Lehman would file for bankruptcy and not pay out on the notes, but that it was imprudent to hold the Lehman debt, given the circumstances existing in the market and given Plaintiffs’ investment profile. As such, nothing in Fifth Third Bancorp v. Dudenhoeffer, 134 S. Ct. 2459 (2014), forecloses such claims.
Disability Benefit Claims
In Hammonds v. Aetna Life Ins. Co., No. 2:13-CV-310, 2015 WL 1299515 (S.D. Ohio Mar. 23, 2015), the court upheld Aetna’s denial of Plaintiff’s “any occupation” long term disability benefits, finding in part, that the Plan terms do not require Aetna to identify a particular position that a claimant might fill before it determines that the claimant is not disabled, or that such a position existed in a given geographic area. Because the Plan does not require the identification of a specific job currently available within Plaintiff’s geographical area, Aetna’s failure to do so does not render its decision arbitrary or capricious, where the court found that it obtained through proper sources a determination that Plaintiff could perform a broad range of sedentary jobs, and the specific jobs listed were merely illustrations of what plaintiff could perform.
In Hayes v. Reliance Standard Life Ins. Co., No. 3:14-CV-0714, 2015 WL 1296005 (M.D. Pa. Mar. 23, 2015), the court found Plaintiff’s negligence and detrimental reliance claims against JRG Advisors LLC, an insurance broker, to not be preempted by ERISA. Plaintiff alleged that JRG was careless and negligent as follows: failing to properly investigate the insurability of Plaintiff; failing to confirm the correct policy under which Plaintiff could be insured; failing to properly perform the underwriting process for Plaintiff’s application; failing to properly interpret Plaintiff’s employment status; failing to question Plaintiff’s employment status prior to accepting Plaintiff’s application for insurance; failing to gather sufficient information regarding Plaintiff’s employment status; and failing to perform an independent investigation of Plaintiff’s employment status and his insurability.
In Morjaria v. Harvard Vanguard Med. Associates, Inc., No. CIV.A. 14-10139-GAO, 2015 WL 1276827 (D. Mass. Mar. 20, 2015), Plaintiff had enrolled her husband in her ERISA-governed life insurance plan, paid premiums for his coverage, but was informed by her employer after her husband’s death that the husband was enrolled in error and she was not entitled to any benefits. Plaintiff’s complaint alleged an ERISA breach of fiduciary duty claim against the employer and state law claims in the alternative. The court found that Plaintiff is incorrect in assuming ERISA would not govern these claims if her husband were found not to be eligible under the Plan because Plaintiff, and not her husband, is the participant in the Plan and putative beneficiary of the life insurance policy. Plaintiff, and not her husband, has standing to bring a claim. The court found that the state law claims are only potentially viable if Plaintiff is understood to assert them as the Plan participant. Because the court’s inquiry must be directed to the plan to evaluate them, those claims are preempted.
In Int’l Franchise Ass’n, Inc. v. City of Seattle, No. C14-848 RAJ, 2015 WL 1221490 (W.D. Wash. Mar. 17, 2015), Plaintiffs contended that certain health plan-related provisions of Seattle’s Ordinance Number 124490 (“the Ordinance”), which establishes a $15 minimum hourly wage, are preempted by ERISA. These provisions allow large employers (those with more than 500 employees), who offer their employees health plans classified as “silver” or “gold” under the federal Affordable Care Act, the opportunity to take advantage of an alternative, more favorable, wage schedule. The court determined that the Ordinance does not require any employer to provide any ERISA plan; it does not dictate the contents or any administrative requirements for such a plan; it does not have any direct impact on any ERISA plan; and it does not impose reporting, disclosure, funding, or vesting requirements on any ERISA plan. The court also determined that the Ordinance does not have any effect upon ERISA plans. It does not require any employer to provide benefits through ERISA plans nor does it dictate the contents of any such plan. The Ordinance merely allows large employers to take advantage of an alternative four-year phase-in schedule if they happen to provide certain benefits to their employees. Thus, ERISA plans are not required or “essential” to the laws’ operation. Accordingly, the court found that the Ordinance does not have an impermissible “connection with” or “reference to” ERISA.
In Hammonds v. Aetna Life Ins. Co., No. 2:13-CV-310, 2015 WL 1299515 (S.D. Ohio Mar. 23, 2015), the court concluded that Defendants waived the 180-day time limitation for Plaintiff to submit an appeal and implicitly granted a requested 30-day extension by considering the appeal on its merits. Even assuming that the untimely exhaustion argument has not been waived, Plaintiff effectively exhausted her administrative remedies because Aetna addressed her appeal on the merits, and Aetna has presented an administrative record adequate for review by the court, thus satisfying the purposes underlying the exhaustion requirement. The court denied Defendants’ request for judgment based on the alleged untimeliness of Plaintiff’s appeal.
In Hayes v. Reliance Standard Life Ins. Co., No. CIV.A. 3:14-0714, 2015 WL 1219277 (M.D. Pa. Mar. 17, 2015), Plaintiff is a self-employed, independent general contractor with no employees who is a member of the Pennsylvania Builders Association (PBA). The PBA established and sponsored a disability plan and offered its members the opportunity to apply for short and long term disability insurance and life insurance through an advertisement it sent to its members. Plaintiff applied for benefits and he was issued STD, LTD, and life insurance policies, for which he timely paid premiums. When Plaintiff became disabled, Reliance denied his claim because he was not an employee of the PBA and did not submit proof that he was a PBA member. Plaintiff brought suit for breach of contract, bad faith, and negligence in state court. Defendants removed arguing that the policies in question are covered by ERISA. After a lengthy analysis, the court determined that the PBA is an employee organization under ERISA because it has a “bona fide” organizational relationship among its members and is not simply an association for the purpose of qualifying for benefits. As such, the court found that Plaintiff’s state law claims are preempted by ERISA and denied Plaintiff’s motion to remand. The court also found that the PBA members Plan is outside of ERISA’s safe harbor protection and that Plaintiff’s complaint must be dismissed for his failure to exhaust.
In Green v. Baltimore City Bd. of Sch. Comm’rs, No. CIV.A. WMN-14-3132, 2015 WL 1258414 (D. Md. Mar. 17, 2015)(Not Reported in F.Supp.3d), the court granted Plaintiffs’ motion to withdraw the Court’s Memorandum Opinion and Order granting summary judgment in their favor based on the fact that the parties had operated under the misapprehension that ERISA, as amended by COBRA, governed Defendant Baltimore City Board of School Commissioners’ administration of its health insurance plan. However, the governmental plan exception to ERISA applies to the health insurance plan.
Pleading Issues & Procedure
In Andrews v. U.S. Sec. Holdings Inc., No. 2:14-CV-03207-ODW, 2015 WL 1238890 (C.D. Cal. Mar. 17, 2015) (Not Reported in F.Supp.3d), the court declined Plaintiff’s motion to remand to state court where at the time the Complaint was filed, Plaintiff asserted claims that were preempted by ERISA. Plaintiff’s Complaint, among other things, seeks medical benefits under Defendants’ employee welfare benefits plan. Defendant removed the case under federal question jurisdiction and Plaintiff did not seek remand for eleven months. Plaintiff conceded that the claims raising a federal question are meritless but the court found that a subsequent realization that those claims are meritless does not render the removal improper. Furthermore, a plaintiff may not compel remand by amending a complaint to eliminate the federal question upon which removal was based. The court also denied Plaintiff’s alternative request for voluntary dismissal.
Statute of Limitations
In Morjaria v. Harvard Vanguard Med. Associates, Inc., No. CIV.A. 14-10139-GAO, 2015 WL 1276827 (D. Mass. Mar. 20, 2015), the court found that Plaintiff’s ERISA claim for breach of fiduciary duty was timely, where Plaintiff filed a complaint that she did not serve, but served an amended complaint within the 120-day deadline for service, and the statute of limitations ran in the interim. The court found that the amended complaint was valid despite that the initial complaint was never served and that it relates back to the date of the original filing. Thus, the amended complaint is not barred by the statute of limitations.
In Goodes v. Pac. Gas & Elec. Co., No. 13-16027, __Fed.Appx.___, 2015 WL 1189961 (9th Cir. Mar. 17, 2015), the court found Plaintiffs’ claim for long term disability benefits and for breach of fiduciary duty based on the miscalculation of those benefits to be time-barred since they had “reason to know” about the final benefit determination as early as February of 1993 and, at the very latest, as of December of 1998. Specifically, on February 8, 1993, PG & E’s benefits representative, sent Plaintiff a letter which stated the final benefit amount that he would receive under the plan and informed him of when his benefits payments would end. Another PG & E representative sent Plaintiff’s union representative another letter on December 17, 1998, detailing Plaintiff’s benefit amount and duration. Plaintiffs had until December 17, 2002 to file a timely claim based on lost benefits, and until December 17, 2001 to file a timely complaint based on a breach of fiduciary duty. However, they did not bring the present action until April 4, 2012, which was about a decade too late.
Withdrawal Liability & Unpaid Benefit Contributions
Gesualdi v. Bestech Transp., LLC, No. 14-CV-1110 JS ARL, 2015 WL 1248560 (E.D.N.Y. Mar. 18, 2015) (granting default judgment and awarding Plaintiffs $39,381.74 in damages, attorneys’ fees, and costs as follows: (1) $23,873.000 in withdrawal liability; (2) $5,896.39 in interest through June 17, 2014, plus additional interest at a daily rate of $11.77 per day from that date through the date judgment is entered; (3) $5,896.39 in liquidated damages; (3) $3,175.50 in attorneys’ fees; and (4) $540.46 in costs).
Gesualdi v. Blue Jay Estates Dev. Corp., No. 13-CV-6171 ADS AKT, 2015 WL 1247079 (E.D.N.Y. Mar. 18, 2015) (directing that (1) default judgment be entered against the Defendant; (2) the Plaintiffs be awarded $1,179.77 in unpaid contributions; (3) the Plaintiffs be awarded $83,555.35 in estimated contributions stemming from the failure to remit contributions and submit remittance reports for certain weeks; (4) the Plaintiffs be awarded $16,040.70 in interest and that the Clerk’s Office be directed to calculate the additional interest due to the Plaintiffs based on the per diem amount of $41.79, running from March 29, 2014 through the entry of judgment; (5) the Plaintiffs be awarded $19,141.18 in liquidated damages and that the Clerk’s Office be directed to calculate the additional liquidated damages due to the Plaintiffs based on the per diem amount of $8.82, running from March 29, 2014 through the entry of judgment; (6) the Plaintiffs be awarded $956.77 in audit fees; (7) the Plaintiffs be awarded $8,362.50 in attorneys’ fees for litigating this action; and (8) the Plaintiffs be awarded $492.60 in costs incurred).
* 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.
LEAVE YOUR MESSAGE
We know how to get your insurance claim paid. Call today at: