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ERISA Watch – March 29, 2016

Happy Tuesday! This past week the courts were busy deciding ERISA cases. Notably, the Second Circuit, in Rinehart v. Lehman Bros. Holdings Inc., held that beneficiaries of an Employee Stock Ownership Plan (ESOP) failed to state a claim for breach of fiduciary duty against the former director and other members of the benefit plan committee for continuing investment in risky Lehman Brothers stock. On a procedural issue, the Eighth Circuit, in Blue Cross Blue Shield of Minnesota v. Wells Fargo Bank, held that a party may waive its right to assert that a jury’s findings give rise to collateral estoppel where ERISA and non-ERISA claims are tried together. The Ninth Circuit, in Bos v. Bd. of Trustees, held that ERISA’s fee-shifting provision does not apply to a bankruptcy court nondischargeability action. There were also several other notable non-published Circuit Court of Appeals decisions, the most troubling of which is the Ninth Circuit’s decision in Upadhyay v. Aetna Life Ins. Co., where the court basically held that an insurance company may be required to accept a late-filed disability claim under California notice-prejudice law, but the claimant may be time-barred from filing suit under the disability plan’s contractual limitations period. This case is hopefully en route to en banc reconsideration. In the meantime, I am confident that disability insurers will continue to fairly review and pay late-filed claims.

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.

Second Circuit

Beneficiaries of ESOP failed to state a claim for breach of fiduciary duty for continued investment in Lehman Brothers Holding, Inc. stock. Rinehart v. Lehman Bros. Holdings Inc., No. 15-2229, __F.3d___, 2016 WL 1077009 (2d Cir. Mar. 18, 2016) (Before JACOBS, WESLEY, and LIVINGSTON, Circuit Judges). Plaintiffs-Appellants are beneficiaries of an employee stock ownership plan (ESOP) and brought a putative class action under ERISA against their employer’s former director and members of employer’s benefit plan committee, alleging breach of fiduciary duties. The district court dismissed the- action for failure to state a claim and Plaintiffs-Appellants appealed. Plaintiffs alleged that the Plan Committee Defendants knew or should have known, based on publicly available information, that investment in Lehman had become increasingly risky, and that failing to consider the wisdom of continuing to invest in Lehman during this period constituted a breach of fiduciary duty. The Second Circuit held that the beneficiaries failed to state a claim that the members breached their duty of prudence based on public information. Second, the members did not have a fiduciary duty under ERISA to investigate material, nonpublic information regarding the risks of Lehman. Plaintiffs’ complaint failed because it did not explain in a non-conclusory fashion how Plaintiffs’ hypothetical investigation would have uncovered the alleged inside information. Even with the Moench presumption, Plaintiffs must allege facts that, if proved, would show that an adequate investigation would have revealed to a reasonable fiduciary that the investment at issue was improvident. Lastly, the former corporate director did not have a fiduciary duty under ERISA to investigate material, nonpublic information regarding risks of Lehman. ERISA does not impose a duty on appointing fiduciaries to keep their appointees apprised of nonpublic information. The Second Circuit affirmed the district court and concluded that Plaintiffs have not adequately shown that the Plan Committee Defendants should be held liable for their actions in attempting to meet their fiduciary duties under ERISA while simultaneously offering an undiversified investment option for employees’ retirement savings.

Eighth Circuit

Party may waive right to assert that jury’s findings give rise to collateral estoppel where ERISA and non-ERISA claims are tried together. Blue Cross Blue Shield of Minnesota v. Wells Fargo Bank, N.A., No. 14-3457, __F.3d__, 2016 WL 1104749 (8th Cir. Mar. 22, 2016) (Before RILEY, Chief Judge, SMITH and SHEPHERD, Circuit Judges). In this case, employee benefit plan administrators brought suit against the defendant bank that operated a securities lending program, alleging ERISA breach of fiduciary duty claims. Other plaintiffs brought state common law claims. Following a bench trial, the district court dismissed the ERISA claims, and the administrators appealed. They sought to reverse the district court’s judgment that it was bound by collateral estoppel and thus required to find against the ERISA Plaintiffs. As part of the trial plan, at the same time as the jury heard the non-ERISA claims, the court sat as the finder of fact for the ERISA fiduciary duty claims. Testimony that was specific to the ERISA Plaintiffs was not heard by the jury. The trial plan also provided that the court could hear the testimony for ERISA Plaintiffs at the conclusion of the jury trial so as not to interject the possibility of juror confusion and error. The ERISA and common-law plaintiffs’ claims were heard by the court and the jury at the same time and on the same evidence, and the parties agreed that Wells Fargo’s fiduciary duties were virtually identical for both ERISA and non-ERISA Plaintiffs, for purposes of this case. While the bench trial for the ERISA claims continued, the jury had returned a verdict that Metlife did not breach a fiduciary duty. The district court determined that it was bound by the jury’s verdict for purposes of the ERISA claims based on collateral estoppel. The district court found that waiver of collateral estoppel was not possible because the jury’s determination of a factual issue precluded the court from deciding that same factual issue in a different way. But, the Tenth Circuit case the district court relied on did not determine whether issue preclusion could be waived. Additionally, the ERISA Plaintiffs are separate from common-law plaintiffs. ERISA Plaintiffs bring equitable claims, and the trial plan stated that the judge would sit as finder of fact on ERISA Plaintiffs’ breach of fiduciary duty claims. Therefore, concerns which generally may require conformity between the findings of a judge and jury in a single plaintiff’s or single group of plaintiffs’ trial do not apply here to the same extent. The Eighth Circuit held that the adoption of a trial plan in which the administrators’ claims, in bench trial, would be heard simultaneously with other plaintiffs’ claims before a jury did not preclude the finding that the bank waived its right to assert that the jury’s findings gave rise to collateral estoppel. The Eighth Circuit vacated and remanded the matter to the district court to determine whether the parties waived the application of collateral estoppel.

Ninth Circuit

ERISA fee-shifting provision does not apply to nondischargeability action. Bos v. Bd. of Trustees, No. 13-15604, __F.3d__, 2016 WL 1161262 (9th Cir. Mar. 24, 2016) (Before DIARMUID F. O’SCANNLAIN and SANDRA S. IKUTA, Circuit Judges and LARRY A. BURNS,* District Judge). In an earlier opinion, the Ninth Circuit concluded that Bos was not a fiduciary under ERISA, and thus the Bankruptcy Code’s “fiduciary” exception to discharge could not be applied to him. Bos moved for attorneys’ fees under a fee-shifting provision under California law, California Civil Code § 1717 and, alternatively, under ERISA, 29 U.S.C. § 1132(g)(1). The Ninth Circuit rejected Bos’s fee petition. The court concluded that the action underlying Bos’s fee request-the nondischargeability proceeding that began in bankruptcy court-was not an action “on a contract” within the meaning of section 1717. Additionally, the court concluded that Bos’s attempt to invoke ERISA fails because the nondischargeability action was not an “action under” ERISA, and therefore § 1132(g)(1) does not make Bos eligible to recover fees. The court explained that § 1132(g)(1) makes a party eligible to recover fees if and only if the action that generated his fees meets the test for “arising under” jurisdiction incorporated into § 1132(e). In this case, there was no dispute that the Bankruptcy Code, not ERISA, grounds the Board’s cause of action since the Board’s adversary complaint neither cited ERISA nor alleged any violation of an ERISA plan; instead, the Board sought relief exclusively under the Bankruptcy Code. Furthermore, the nondischargeability claim in the Board’s adversary complaint did not necessarily depend upon resolution of any question under ERISA, let alone a “substantial” question. The Board could have won the relief it sought without any court ever needing to invoke ERISA. Although as the litigation unfolded, the meaning of an ERISA term came to assume a central role (i.e., whether Bos qualified as a “fiduciary” under the Bankruptcy Code, on the specific theory that Bos was a “fiduciary” under ERISA), the Board’s well-pleaded complaint did not require the court to construe an ERISA term. That it wound up doing so is not enough to make the nondischargeability proceeding an “action under” ERISA for jurisdictional purposes or for fee-shifting purposes.

Motion for judgment on the pleadings granted in part on issue of whether certification of pension fund as being in “critical” status was breach of fiduciary duty. Reyes v. Bakery & Confectionery Union & Indus. Int’l Pension Fund, No. 14-CV-05596-JST, __F.Supp.3d___, 2016 WL 1109308 (N.D. Cal. Mar. 22, 2016) (Judge Jon S. Tigar). This is a putative class action under ERISA and the Pension Protection Act of 2006 (“PPA”), challenging an amendment to the “Golden 80” and “Golden 90” adjustable benefits by the Bakery and Confectionary Union and Industry International Pension Fund (the “Pension Fund”), a multi-employer defined benefit pension plan. The Pension Fund’s first attempt to implement this amendment was invalidated by a district court in New York, which found that the amendment violated ERISA’s “anti-cutback rule.” On this second attempt, the Pension Fund argues that the amendment is valid under the PPA’s provisions regarding funds that have been certified as being in “critical” status. In their First Amended Complaint, Plaintiffs make four claims against Defendants: (1) Defendants improperly notified Plaintiffs of the amendment, (2) Defendants were unreasonable in their certification of the Pension Fund as being in a “critical status,” (3) Trustees breached their fiduciary duty by certifying the Pension Fund was in a “critical status” when they knew this to be untrue, and (4) Trustees breached their fiduciary duty because the amendment favors some participants over others. Defendants moved for Judgment on the Pleadings, which the court granted in part and denied in part. The court did not dismiss Count I because the amendment failed to follow the 30-day notice requirement set out by 29 U.S.C. § 1085(e)(8)(C). However, the court dismissed Counts II, III, and IV. The court dismissed Count II because Plaintiffs failed to plausibly allege with specificity that any part of the certification process was unreasonable or that it did not meet the requirements of section 1085(b), and while Plaintiffs have named only the Fund and the Fund’s Trustees as Defendants, the PPA assigns responsibility for the certification solely to the actuary, not to funds or their trustees. Because it may be possible for Plaintiffs to allege additional facts that suggest Defendants violated some kind of duty in relation to the certification of the Fund as critical, the court granted Plaintiffs leave to amend Count II. On Count III, the court similarly concluded that Plaintiffs failed to plausibly allege that the certification was unreasonable or otherwise invalid. On Count IV, the court found that the changes made by Defendants appear to be the types of changes contemplated and authorized by the statute.

Select Slip Copy & Not Reported Decisions

Attorneys’ Fees

Ninth Circuit

Attorneys’ fees may be awarded for work done following defendant’s acceptance of responsibility for paying disputed claim. Bryant v. Cigna Healthcare of California, Inc., No. 14-55251, __Fed.Appx.___, 2016 WL 1085701 (9th Cir. Mar. 21, 2016) (Before: FARRIS, CLIFTON, and BEA, Circuit Judges). Plaintiff-Appellant argued that the district court abused its discretion when it determined that she could not recover attorneys’ fees incurred after March 21, 2011, the date that CGLIC accepted responsibility for paying her claim. The district court based its decision on McElwaine v. U.S. West, Inc., 176 F.3d 1167, 1174 (9th Cir.1999), where this court held that an ERISA claimant “should recover fees only for work up until the time she learned conclusively that U.S. West would pay her claim in full.” However, in this case, the court distinguished McElwaine on the critical fact that once Plaintiff achieved certainty regarding her claim, demonstrating her entitlement to fees remained to be achieved by further litigation. Entitlement to attorneys’ fees is a critical issue in ERISA actions and Plaintiff’s entitlement to attorneys’ fees depended on establishing that CGLIC received a claim in 2007. Absent that, Plaintiff would not have been able to show that she achieved “some success on the merits” as required by Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 255 (2010). The court found that based on these circumstances, the district court abused its discretion when it denied attorneys’ fees corresponding to the work that was undertaken to ensure Plaintiff’s entitlement to those fees. The court found that the district court did not abuse its discretion when it refused to award attorneys’ fees that Plaintiff incurred pursuing the theory that CGLIC should have paid her directly since that work did not contribute to her success. The court also found that Plaintiff should only be awarded 120 hours for preparing the first appeal in this matter.

Disability Benefit Claims

Third Circuit

On de novo review of denial of long term disability benefits, court finds in favor of Unum Provident. McCann v. Unum Provident, et al., No. CV 11-3241 (MLC), 2016 WL 1161261 (D.N.J. Mar. 23, 2016) (Judge Mary L. Cooper). This case involved de novo review of Provident Life’s decision to deny long term disability benefits to a radiologist (with a sub-specialty in interventional radiology) claiming disability from obstructive sleep apnea, a mildly dilated ascending aortic root aneurysm (“aortic aneurysm”), hypertension, and obesity. The court granted summary judgment in Unum’s favor, finding that Provident Life terminated McCann’s Total Disability benefit payments, at least in part because McCann failed to provide objective evidence of job related restrictions and limitations. McCann’s own doctor disclaimed his view that McCann qualified for disability after his cardiac condition remained stable for nearly two years. With respect to Plaintiff’s occupational classification, the court agreed with Provident Life that the CPT codes during the three years preceding the onset of Plaintiff’s claim of total disability were representative of all of the work that Dr. McCann performed, and are therefore dispositive under the Policy. Although Dr. McCann was trained in interventional radiology, the diagnostic duties associated with his occupation accounted for 91% of the procedures he performed each week during the three-and-a-half-year period preceding his application for disability leave.

Competing affidavits as to applicable version of LTD policy creates genuine issue of material fact. Baker v. Sun Life & Health Ins. Co., No. 15-1525, __Fed.Appx.___, 2016 WL 1077738 (3d Cir. Mar. 18, 2016) (Before McKEE, Chief Judge, AMBRO, and SCIRICA, Circuit Judges). In this matter involving the denial of long term disability benefits, the record before the court included competing affidavits and two versions of a Sun Life policy, one with the grant of discretionary authority, and one without. The court found that this obviously creates a genuine issue of material fact as to whether the applicable policy contains the discretionary grant, and there is therefore a disputed issue about which standard of review to apply. When the district court addressed the question of which standard of review to apply, it considered Sun Life’s proffered affidavit over Plaintiff’s proffered affidavit but it did not provide a rationale for failing to consider Plaintiff’s affidavit. The district court incorrectly stated that “there is only one affidavit confirming the contents of the entire policy, which includes the grant of discretionary authority.” Although the district court mentioned in a footnote that it would also have upheld Sun Life’s denial of Plaintiff’s total disability claim under a de novo standard of review, the court found that the district court only analyzed Sun Life’s denial of benefits to determine if it was arbitrary and capricious. Moreover, the district court did not even attempt to address Plaintiff’s partial disability claims under a de novo standard of review. Because genuine issue of material fact exists with respect to the threshold issue of the contract provisions and the appropriate standard of review, the court did not address the merits of Plaintiff’s claims. The court vacated the decision of the district court, retained jurisdiction, and remanded the matter to the district court for further proceedings.

Sixth Circuit

Denial of LTD benefits not an abuse of discretion; miscalculation of benefits claim dismissed for failure to exhaust. Leppert v. Liberty Life Assurance Co. of Boston, No. 2:14-CV-1207, 2016 WL 1161957 (S.D. Ohio Mar. 24, 2016) (Judge James L. Graham). Plaintiff, in his late fifties, was employed by Triumph Aerospace Systems repairing aircraft windows before he became disabled from osteoarthritis and joint problems. He filed a claim for LTD disability benefits, which Liberty Life approved on the basis that he could not perform his own occupation. Plaintiff subsequently became eligible to receive SSDI benefits, but Liberty Life denied his LTD claim when the definition of disability changed to the inability to perform “any occupation.” The court concluded that Liberty did not act arbitrarily and capriciously in determining that Plaintiff was no longer entitled to disability benefits under the Policy. Specifically, Liberty Life relied on several expert medical opinions and the findings of a certified rehabilitation counselor. The court found that Liberty Life was not obligated to demonstrate that a suitable position at a particular wage existed in a given geographic area and was available for Plaintiff’s immediate hire. Liberty Life was also not bound by the Social Security Administration’s determination. Liberty Life stated in its appeal denial letter that it had considered the fact that Plaintiff had been awarded social security disability income, that this award was not determinative of Plaintiff’s entitlement to benefits under the Policy, and that Liberty had considered additional medical and vocational reviews, as well as more current medical records, that were not considered by the Social Security Administration. On Plaintiff’s second count alleging that Liberty Life miscalculated his benefits, the court dismissed it without prejudice for failure to exhaust administrative remedies.

Disability plan properly offset retirement benefits a claimant was eligible to receive but did not receive because he withdrew his application. Abbott v. Ford Motor Co. Salaried Disability Plan, No. 14-CV-11778, 2016 WL 1104464 (E.D. Mich. Mar. 22, 2016) (Judge Matthew F. Leitman). The court found in favor of Defendant on the issue of whether it properly reduced disability benefits by an amount that Plaintiff was eligible to receive in retirement benefits. The Plan provides that (1) disability benefits may be reduced by the amount of retirement benefits a participant is eligible to receive, and (2) it is presumed that a participant is eligible to receive retirement benefits unless he proves otherwise by applying for, and being denied, such benefits. Here, Plaintiff did not present to the Appeals Committee proof that he had applied for, and been denied, retirement benefits. Thus, the court found that the Appeals Committee had every right under the Plan to uphold (1) the presumption that Plaintiff was eligible for retirement benefits, and (2) the reduction to Plaintiff’s disability benefits by the amount of retirement benefits to which he was presumptively entitled. The court rejected Plaintiff’s argument that the Appeals Committee should have excused his withdrawal of his application for retirement benefits because he was suffering from a serious mental illness at the time of the withdrawal. First, Plaintiff never asked the Appeals Committee to excuse the withdrawal of his application for retirement benefits on the basis that he suffered from a mental illness. Second, the case law that Plaintiff relies upon is inapposite because each of the cases Plaintiff cited addressed whether a plaintiff’s failure to take an affirmative action by a specified deadline should be excused due to a mental illness. Here, Plaintiff, while represented by counsel, did timely file his application for retirement benefits but he later withdrew his application.

Ninth Circuit

Sedgwick unreasonably denied short-term disability claim; remand for further consideration. Elson vs. United Health Group Inc., et al., No. 214CV01554GMNNJK, 2016 WL 1169455 (D. Nev. Mar. 22, 2016) (Judge Gloria M. Navarro). On the contested issue of whether the governing disability plan document adequately conferred discretionary authority to the claims administrator, Sedgwick, the court found that incongruities made it such that the court cannot discern whether the Plan was ever amended during the relevant period, and if so, whether UnitedHealth followed the Plan’s amendment process. Nevertheless, the court found this issue immaterial to the analysis because Defendants unreasonably denied Plaintiff’s STD claim in at least four ways: (1) Sedgwick dismissed medical opinions from Plaintiff’s treating physicians without explanation; (2) Sedgwick demanded objective evidence of a condition for which there are no objective tests and ignored what objective evidence did exist; (3) Sedgwick failed to engage in a “meaningful dialogue” with Plaintiff regarding her claim; and (4) Sedgwick’s review did not adhere to the terms of the Plan, which required that Plaintiff not be able to perform the material aspects of her occupation with reasonable continuity. The court granted Plaintiff’s motion for judgment under FRCP 52 in part and remanded the claim to Sedgwick for further administrative review.

Administrator’s communication following California Department of Insurance complaint rendered exhaustion of administrative remedies futile. Carey v. United of Omaha Life Ins. Co., No. 14-55483, __Fed.Appx.___, 2016 WL 1085703 (9th Cir. Mar. 21, 2016) (Before REINHARDT, MURGUIA, and OWENS, Circuit Judges). The Ninth Circuit held that Plaintiff was not required to exhaust his administrative remedies for the denial of his long term disability benefits because he qualifies for the futility exception to the exhaustion requirement. Under the futility doctrine, a claimant does not have to exhaust administrative remedies if doing so would be futile. Here, Plaintiff demonstrated that the exception applies by showing that a further request for review would have been futile. After United denied Plaintiff’s LTD benefits, he filed a complaint with the California Department of Insurance (DOI), stating that his benefits were improperly denied. The DOI then sent a letter to United, asking United to “reevaluate” Plaintiff’s claim for benefits and United responded in a letter to Plaintiff that it had “review[ed] all of the documentation in [Carey’s] file” and was “unable to approve [his] LTD claim.” In litigation, United disclaimed that it had conducted a substantive review, rather it’s letter simply summarized the history of United’s initial claim decision. The court found that the imprecision in United’s communications would have led a person in Plaintiff’s position to believe that United had reviewed the substance of his case and decided anew that he was not entitled to benefits. The court further found that the plain language of the communications indicated to Plaintiff that pursuing a further request for review-thinking that one had already occurred-would have been futile. Although United argued that Plaintiff cannot establish futility because its letter informed Carey that he could appeal the results of the review it conducted after receiving the DOI inquiry, the court found that the language did not suggest to the ordinary reader that the appeal would be conducted by an outside body or by a different body within United that might, on the basis of the same evidence that United had already twice rejected, find good cause to come to an opposite conclusion. The court concluded that the district court abused its discretion by holding that exhaustion would not have been futile and granting summary judgment in favor of United. The court did not address Plaintiff’s arguments regarding whether the DOI could act as his representative in the administrative appeals process.

ERISA Preemption

Second Circuit

Claims for common law damages related to life insurance conversion are preempted by ERISA. Varela v. Barnum Fin. Grp., No. 15-2876-CV, __Fed.Appx.___, 2016 WL 1105154 (2d Cir. Mar. 22, 2016) (DENNIS JACOBS, PETER W. HALL, Circuit Judges and JANE A. RESTANI, CIT Judge). The Second Circuit affirmed the district court’s dismissal of Plaintiff-Appellant’s claims for common law damages against Defendant based on purported oral misrepresentations concerning the process for converting a group life insurance policy. In this case, Plaintiff is the beneficiary of a life insurance policy that her now deceased spouse had failed to convert within a 31-day period. Shortly after the expiration of the time to convert, the spouse died of cancer. The court found that ERISA preempts Plaintiff’s claims since Plaintiff is a beneficiary of the ERISA Plan and her claims arise out of purported oral misrepresentations by MetLife d/b/a Barnum and a Barnum employee about the process for converting a group life insurance policy under the Plan. The alleged breach here concerns the Plan itself and not an agreement separate and independent from the Plan.

Ninth Circuit

Claim by healthcare provider against insurer is not completely preempted by ERISA. Healthcare Ally Mgmt. of California, LLC v. US Airways, Inc., No. CV 16-1411 PA (JCX), 2016 WL 1069944 (C.D. Cal. Mar. 17, 2016) (Judge Percy Anderson). Defendant US Airways Inc. filed a notice of removal based on its assertion that Plaintiff’s claims are subject to ERISA preemption. Defendant argued that any right to payment that La Peer, or Plaintiff as its assignee, may have for the services provided to the ERISA plan participant are dependent on the terms of that plan and any right to payment is derivative of the patient’s right as an ERISA plan participant to benefits under the plan. Further, it argued that any alleged promise of payment could only have been based on the plan’s terms. The court disagreed and relied on the Ninth Circuit decision in Marin General Hospital v. Modesto & Empire Traction Company, 581 F.3d 941 (9th Cir. 2009), which held that a provider’s claims are not completely preempted by ERISA where the provider is seeking payment based upon a separate agreement between it and the insurer. The court found that because Plaintiff has alleged only claims based on implied rights and an oral contract, but has not alleged rights specifically growing out of assignments of ERISA beneficiaries, the court cannot conclude that there is no other independent legal duty upon which Plaintiff’s claims are based. The court concluded that the notice of removal is inadequately pled, the court lacks subject matter jurisdiction, and the matter is remanded to Los Angeles County Superior Court.

Pension Benefit Claims

Domestic relations order conferring interest in ERISA-qualified TIAA-CREF account is excluded from bankruptcy estate. In re Chilson, No. 1:15-CV-00020-MR, 2016 WL 1079149 (W.D.N.C. Mar. 18, 2016) (Judge Martin Reidinger). In this matter involving a Chapter 7 Petition, the Trustee argued that the Debtor has no ownership interest in her former spouse’s TIAA-CREF account and instead merely has a right to payment that is subject to turnover because no qualified domestic relations order (“QDRO”) was entered transferring ownership of the funds to the Debtor. The court found that is not disputed that the divorce decree constitutes a “domestic relations order” within the meaning of ERISA. A domestic relations order must create or recognize the existence of an alternate payee’s right to receive all or a portion of the benefits payable with respect to a participant under a plan. (29 U.S.C. § 1056(d)(3)(B)(i)). But, to qualify as a QDRO, the domestic relations order must comply with certain technical requirements, including setting forth: (1) the name and mailing address of both the participant and the alternate payees, (2) the amount or percentage of the participant’s benefits to be paid to each alternate payee, (3) the number of payments to which the order applies, and (4) the plan to which the order applies. (29 U.S.C. § 1056(d)(3)(C)). Although noncompliance with the technical shortcomings may preclude the plan administrator from paying such benefits, they have no effect on the validity of the domestic relations order which created the ownership interest in the account in the first place. In this case the Debtor and her former spouse entered into a separation agreement with the intent to give the Debtor an interest in the TIAA-CREF account as of the date of their divorce. The state court entered a domestic relations order incorporating the agreement and awarding the Debtor a portion of that account. The court concluded that even though there is no “qualified” domestic relations order, the Debtor obtained a legal and equitable ownership interest in the ERISA-qualified TIAA-CREF account as of the date of her divorce, and because it is ERISA-qualified, the Debtor’s interest in that account is, by its nature, excluded from the bankruptcy estate and thereby not subject to turnover. The court concluded that the Bankruptcy Court’s Order denying turnover was correct.

Pleading Issues & Procedure

Eighth Circuit

Plaintiff lacks statutory standing to assert ERISA claim for benefits or equitable relief. Hart v. Nationwide Mutual Ins. Co., No. 4:14 CV 1299 CDP, 2016 WL 1161594 (E.D. Mo. Mar. 23, 2016) (Judge Catherine D. Perry). In this case, Plaintiff received long term disability benefits from Nationwide until she reached age 65 and then sought pension benefits under the Nationwide Retirement Plan. She was initially given an estimate of pension benefits, but was then told that she was not eligible to receive them. She filed suit against Nationwide under ERISA seeking either unpaid benefits or equitable relief. The court granted summary judgment in Nationwide’s favor on the ground that Plaintiff was not a Plan participant and lacks standing to bring an ERISA action. Plaintiff’s job classification excluded her from the Plan such that she is not an employee in, or reasonably expected to be in, currently covered employment, or a former employee who has a reasonable expectation of returning to covered employment or who has a colorable claim to vested benefits. This case does not fit the narrow exception to the standing requirement in cases where but for the employer’s conduct alleged to be in violation of ERISA, the employee or former employee would be a plan participant. The court determined that any alleged misrepresentations to Plaintiff regarding her participation in the Plan through receipt of Plan documents and a pension packet do not change her undisputed job classification and corresponding exclusion from the Plan.

Severance Benefit Claims

Third Circuit

LTD claimant not eligible for severance; late decision on appeal does not change standard of review to de novo where Plan confers discretion. Becknell v. Severance Pay Plan of Johnson & Johnson & U.S. Affiliated Companies, No. 15-2660, __Fed.Appx.__, 2016 WL 1085527 (3d Cir. Mar. 21, 2016) (Before CHAGARES, RESTREPO and VAN ANTWERPEN, Circuit Judges). Plaintiff-Appellant appealed the final decision of the district court in favor of Appellee Severance Pay Plan of Johnson & Johnson and Affiliated U.S. Companies (“J & J”). More than three years after exhausting his long term disability benefits, Plaintiff sent a letter to J & J requesting an application for severance benefits. Manager of Global Benefits for J & J responded to Plaintiff’s request in a February 4, 2013 letter which indicated that Becknell did not qualify for severance benefits because his termination did not result from one of the “Severance Events” enumerated in the Severance Pay Plan. Moreover, the letter explained that Plaintiff ceased to be eligible for benefits on April 15, 2008 when he began receiving long term disability benefits because he was unable to work, with or without reasonable accommodation. After exhausting administrative remedies, Plaintiff filed suit and J & J moved to dismiss on the basis that Plaintiff did not file his claim for severance benefits within 180 days as required by the Plan. The district court found that a reason for denial not raised by J&J in its denial letters could not be asserted as a defense in the litigation. Appellee’s challenged that determination but the Third Circuit did not explicitly address it. The court found that abuse of discretion review applies even though J & J did not render a timely decision on Plaintiff’s appeal. Contrary to Plaintiff’s argument that de novo applies because J & J did not exercise discretion, the court found that J & J did exercise discretion because it decided Plaintiff’s initial claim and its late decision is only one factor for the court to consider in whether the administrator abused its discretion. A late decision on appeal, however, cannot strip an administrator of deference. The court found that under the terms of the Plan, Plaintiff was not eligible for severance benefits since he was LTD-eligible and did not meet one of the Plan’s “Severance Events.”

Statute of Limitations

Ninth Circuit

Lawsuit for long term disability benefits is time-barred based on Plan’s contractual limitations period where the claimant did not file a claim until after the limitations period had run. Upadhyay v. Aetna Life Ins. Co., No. 14-15420, __Fed.Appx.___, 2016 WL 1128183 (9th Cir. Mar. 23, 2016) (Before McKEOWN, TALLMAN, and M. SMITH, Circuit Judges). In this long term disability matter, the Ninth Circuit held the district court properly granted Aetna summary judgment on the ground that Plaintiff’s action was untimely under the disability plan provisions, which provide that “No legal action can be brought to recover under any benefit after 3 years from the deadline for filing claims.” Plaintiff was required to file a claim for benefits by July 1, 2007; and the three-year contractual limitations period ended on July 1, 2010. However, Plaintiff did not file her claim for benefits until December 13, 2010, and she did not file a lawsuit until March 4, 2013. Therefore, the court determined that Plaintiff’s ERISA action is untimely under the provisions of the Plan. The court further held that Aetna did not waive its contractual limitations defense despite failing to inform Plaintiff, in its denial letters, of the Plan’s contractual limitations period for filing suit under ERISA. The court explained that under California law, an insurance company cannot waive a contractual limitations defense when the limitations period has already run. Even if Aetna could waive the contractual limitations period, Plaintiff did not show “an element of detrimental reliance or some misconduct” on the part of Aetna. The court rejected Plaintiff’s argument that Aetna’s contractual limitations defense fails because the defense is “an impermissible attempt to circumvent” California’s notice-prejudice rule. This is because Aetna does not have to show prejudice in order to prevail on a limitations defense challenging the timing of the ERISA action itself. Lastly, the court found that the district court was correct in denying Plaintiff’s motion for reconsideration where Plaintiff raised the argument that her suit was timely under the Supreme Court’s decision in Heimeshoff and § 10350.7 of the California Insurance Code because this argument was not raised in Plaintiff’s summary judgment opposition brief but could have been raised since the legal principle annunciated in Heimeshoff-that a controlling statute could supplant a plan’s contractual limitations period-was already law in the Ninth Circuit at the time Plaintiff filed her opposition brief.

* 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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