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ERISA Watch – Ninth Circuit Joins Sister Circuits In Limiting Scope Of ERISA Document Penalties.

This week’s notable decision is Lee v. ING Groep, N.V., No. 14-15848, __F.3d__ (9th Cir. July 25, 2016), where the Ninth Circuit Court of Appeals joined the First, Second, Third, Sixth, Seventh, Eighth, and Tenth Circuits, in finding that a failure to follow claims procedures imposed on benefits plans, as outlined in 29 U.S.C. § 1133 and 29 C.F.R. § 2560.503–1, cannot give rise to a penalty under 29 U.S.C. § 1132(c)(1).  In Lee, a case involving a denied long term disability benefit claim, the plaintiff brought suit against the plan administrator challenging the denial of his benefits and seeking statutory penalties for failing to timely produce requested documents.  Those documents included Plan documents as well as email communications.

The district court awarded a penalty in the amount of $27,475, finding that it was bound by the Ninth Circuit decision in Sgro v. Danone Waters of North America, Inc., 532 F.3d 940 (9th Cir. 2008), where the Court had affirmed an award of statutory penalties based on a failure to produce notes kept by claims personnel.  The Ninth Circuit explained that the relevant language in Sgro is non-binding dicta and penalties under 29 U.S.C. § 1132(c)(1) can only be assessed against “plan administrators” for failing to produce documents that they are required to produce as plan administrators.  Because 29 C.F.R. § 2560.503–1(h)(2)(iii) does not impose any requirements on plan administrators, it cannot form the basis for a penalty under 29 U.S.C. § 1132(c)(1).

The district court stated that its penalty of $25 per day for both failing to produce the Plan document and the claim-related emails would be the same even if it was only considering the failure to produce the Plan document, but the Ninth Circuit noted that the district court found the failure to produce the Plan document to be “inadvertent.”  As such, it vacated the penalty award and remanded to the district court to assess a penalty based solely on the failure to timely produce the Plan document.

Now that Sgro has officially been laid to rest, what real remedy does an aggrieved plan participant have when an administrator fails to comply with the ERISA regulations designed to protect the integrity of the claims and appeals process?

A remand for the administrator to do it all over again?  See Lafleur v. Louisiana Health Serv. & Indem. Co., 563 F.3d 148 (5th Cir. 2009) (remand to plan administrator for full and fair review was appropriate remedy for failure to comply with procedural requirements of ERISA).

 De novo review in only exceptional circumstances?  See Halo v. Yale Health Plan, Dir. of Benefits & Records Yale Univ., 819 F.3d 42 (2d Cir. 2016) (de novo review 2results from a plan’s failure to comply with DOL’s claims procedure regulation unless the plan had otherwise established procedures in full conformity with the regulation, and could show its failure to comply with the regulation in the processing of a particular claim was inadvertent and harmless).

 With remedies like that, who needs remedies?

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

Attorneys’ Fees

Fourth Circuit

  • In matter where Plaintiff sought benefits for both herself and her same-sex spouse, as a dependent spouse under Marshall County Coal Company’s employee benefit plan, denying attorneys’ fees related to the Resolution of Dispute (“ROD”) process found under the CBA (pursued after the lawsuit was filed) since ERISA attorneys’ fees are categorically unavailable for expenses incurred while exhausting administrative remedies. Riggle v. The Marshall County Coal Company, et al., No. 5:15CV169, 2016 WL 4014705 (N.D.W. Va. July 26, 2016) (Judge Frederick P. Stamp).

Ninth Circuit

  • In matter seeking more than half a million dollars in unpaid benefits due under the terms of a collective bargaining agreement, where the court previously declined to adopt an exception to the general rule announced by the Ninth Circuit in Cline v. Industrial Maintenance Engineering and Contracting Company that unpaid benefits are not plan assets, denying The Principals’ motion for attorney’s fees in excess of $130,000 after consideration of the Hummel factors. Unite Here Health, et al., v. Craig Gilbert, et al., No. 213CV00937JADGWF, 2016 WL 3965186 (D. Nev. July 22, 2016) (Judge Jennifer A. Dorsey).

Breach of Fiduciary Duty

Sixth Circuit

Disability Benefit Claims

First Circuit

Third Circuit

  • Dismissing breach of fiduciary duty claims against employer and Unum because the amended complaint does not demonstrate that the “appropriate equitable relief” available under § 1132(a)(3) is warranted since Plaintiff’s § 1132(a)(3) and § 1132(a)(1)(B) claims against AHL and Unum overlap factually, and seek the exact same remedy, however, Varity did not establish any bright line rule precluding § 1132(a)(3) and § 1132(a)(1)(B) claims from being asserted simultaneously; dismissing Plaintiff’s claims for declaratory judgment under § 1132(a) generally since Plaintiff is entitled to no further relief pursuant to his claim for declaratory judgment than he would be should he prevail on his claim for recovery of benefits. Boyles v. Am. Heritage Life Ins. Co., No. 3:15-CV-274, 2016 WL 4031295 (W.D. Pa. July 26, 2016) (Judge Kim R. Gibson).

Seventh Circuit

  • Vacating and remanding district court decision in favor of Plaintiff, finding that Plaintiff had not met the Plan’s “Active Work” requirements entitling her to long term disability coverage. Further, the district court did not nail down exactly when Plaintiff met the definition of disability and also misconstrued the definition.  The policy states that if one’s occupation requires a license, it is as broad as the scope of the license.  The issue was whether Plaintiff could find any work in the same specialty or another, or generally – as a lawyer.  The issue is not whether Plaintiff is capable of working as a litigation partner in a big law firmCheney v. Standard Insurance Company & Long Term Disability Insurance, No. 15-1794, __F.3d__, 2016 WL 4011171 (7th Cir. July 27, 2016) (Before WOOD, Chief Judge, and MANION and ROVNER, Circuit Judges).

Ninth Circuit

  • Holding that Reed and CAFS abused their discretion in denying Plaintiff’s LTD claim because they failed to provide Plaintiff with a meaningful opportunity to provide evidence that would satisfy their “as-yet-unexplained interpretation” of the term “Objective Medical Findings;” reversing the district court’s grant of summary judgment in favor of the Plan because it is unclear how the term “Objective Medical Findings” applies in the mental-health context and whether Plaintiff’s evidence meets the Plan’s definition of that term; remanding case to the district court to determine whether to take new evidence or remand this case to the Plan’s administrator for a new decision. Scoles v. Intel Corporation Long Term Disability Benefit Plan, an employee welfare benefit plan, No. 13-36167, __F.App’x__, 2016 WL 4056402 (9th Cir. July 29, 2016) (Before: PREGERSON, BEA, and OWENS, Circuit Judges).



Sixth Circuit

  • In matter involving denial of long term disability benefit, denying Principal’s motion to alter or amend the court’s minute order regarding Plaintiff’s discovery requests. With respect to statistical data involving third party vendors for peer review or independent medical evaluations, Principal objected that production of the records would require between 20,540-30,810 man hours reviewing individual claim files.  The court reiterated that compliance with these discovery requests is only expected to the extent that contractual relationships with vendors/reviewers grant Principal access to these third parties’ compilations of the requested dataCard v. Principal Life Ins. Co., No. CV 5:15-139-KKC, 2016 WL 3982806, (E.D. Ky. July 22, 2016) (Judge Karen K. Caldwell).

ERISA Preemption

Ninth Circuit

  • In matter involving challenge to health plan’s lien provision on tort settlement, denying motion for reconsideration of court’s denial of Plaintiff’s motion to remand, finding that: (1) Plaintiff was not entitled to reconsideration of its decision that the first and second prongs of Davila were met; (2) Plaintiff was not entitled to reconsideration of the court’s “observation” that Plaintiff was attempting to save her claim from ERISA preemption under the Savings Clause in ERISA § 514(b)(2)(A) by characterizing Haw. Rev. Stat. § 431:13-103(a)(10) as a state law regulating insurance; (3) Plaintiff is not entitled to reconsideration of the court’s determination that there is no private right of action under Haw. Rev. Stat. § 431:13-103(a)(10)(A)Noetzel v. Hawaii Med. Serv. Ass’n, No. CV 15-00310 SOM-KJM, 2016 WL 4033099 (D. Haw. July 27, 2016) (Judge Susan Oki Mollway).

Exhaustion of Administrative Remedies

First Circuit

Second Circuit

Life Insurance & AD&D Benefit Claims

Sixth Circuit


  • Denying life insurance beneficiary’s motion for judgment on the pleadings in light of plausibility that beneficiary may be disqualified for benefits and the court will need to resolve significant issues in the litigation, including: (a) whether ERISA applies to preempt Kentucky law; (b) if so, whether federal common law supplies an interstitial slayer’s rule; and (c) if not, whether Kentucky has a common law doctrine that could disqualify a beneficiary even absent a criminal convictionUnum Life Ins. Co. of Am. v. Lutes, No. 5:15-CV-319-REW, 2016 WL 3964268 (E.D. Ky. July 21, 2016) (Judge Robert E. Wier).

Medical Benefit Claims

Eighth Circuit

  • Granting summary judgment to Cigna with respect to claim for payment of two medical bills but remanding claim related to a bill for $5,376.00 from Unruh Chiropractic and Wellness Center because Cigna “ignor[ed] the claim entirely” and then blamed Plaintiff for failing to exhaust administrative remedies; dismissing employer/plan sponsor/Plan administrator from lawsuit because it does not control the administration of the plan and is not a proper party. Orellana v. Connecticut Gen. Life Ins. Co., No. 5:16-CV-05007, 2016 WL 3982534 (W.D. Ark. July 22, 2016) (Judge Timothy L. Brooks).

Pension Benefit Claims

Sixth Circuit

  • Granting in part and denying in part government’s motion for an order directing payments from the defendant’s pension plan, finding that although section 3613 of the MVRA supersedes ERISA’s anti-alienation provision, this right does not always guarantee that the government will be able to cash out the defendant’s retirement plan unilaterally and Thyseen has not shown that participant has a current, unilateral right to his benefits under the pension plan. United States v. Ibianski, No. 07-20632, 2016 WL 3995939 (E.D. Mich. July 26, 2016) (Judge David M. Lawson).

Plan Status

Ninth Circuit

  • Affirming the district court’s partial summary judgment determination that Dignity Health’s pension plan did not qualify for ERISA’s church-plan exemption because it was not established by a church, or by a convention or association of churches. ERISA defines the term “church plan” as a plan that is established and maintained by a church.  The court need not defer to the view expressed by the IRS that a plan qualifies as a church plan if it is maintained by a principal-purpose organizationThe court’s decision does not conflict with the Establishment and Free Exercise ClausesRollins v. Dignity Health, No. 15-15351, __F.3d__, 2016 WL 3997259 (9th Cir. July 26, 2016) (Before:   Wallace Tashima and William A. Fletcher, Circuit Judges and Robert W. Gettleman, Senior District Judge).

Pleading Issues & Procedure

First Circuit

  • In matter where Plaintiffs assert that two violations of ERISA arise out of Defendants’ alleged underpayment of compensation under the FLSA, dismissing the ERISA claims where Plaintiffs failed to plead sufficient facts to allege a plausible cause of action under the FLSA, but even if they did, the complaint does not support a plausible claim under ERISA because Plaintiffs do not indicate who their employer is, what plan they participated in, the fiduciary for any such plan, or the terms of the pension plan. Hamilton v. Partners Healthcare Sys., Inc., No. CV 09-11461-DPW, __F.Supp.3d__, 2016 WL 3962810 (D. Mass. July 21, 2016) (Judge Douglas P. Woodlock).

Eleventh Circuit

  • In matter relating to a bankruptcy petition where Blue Cross filed a Motion to Withdraw Reference based on its position that ERISA must be “interpreted” for its subrogation claim, finding that withdrawal is not mandatory because no significant interpretation of a non-title 11 federal law is required. Victor, No. 2:15-MC-2198-VEH, 2016 WL 3997235 (N.D. Ala. July 26, 2016) (Judge Virginia Emerson Hopkins).


Eighth Circuit

Statutory Penalties

Ninth Circuit

  • Affirming the district court’s decision to impose a penalty on ING North America for its failure to timely produce the Plan Document after Plaintiff requested all documents relevant to Lee’s claim for long term disability benefits; joining the First, Second, Third, Sixth, Seventh, Eighth, and Tenth Circuits in holding that a failure to follow claims procedures imposed on benefits plans, such as outlined in 29 C.F.R. § 2560.503–1(h)(2)(iii) does not give rise to penalties under 29 U.S.C. § 1132(c)(1) and reversing district court’s assessment of the penalty against ING for not producing claim-related emails; Sgro v. Danone Waters of North America, Inc., 532 F.3d 940 (9th Cir. 2008) stating to the contrary is nonbinding dicta. Lee v. ING Groep, N.V., No. 14-15848, __F.3d__, 2016 WL 3974176 (9th Cir. July 25, 2016) (Before: Jerome Farris, Diarmuid F. O’Scannlain, and Morgan Christen, Circuit Judges).


Third Circuit

Seventh Circuit

  • In matter challenging the “Church Plan” status of OSF HealthCare System Plans, denying Defendants’ motion to transfer venue to the Central District of Illinois, where: (1) this case was filed six days before the related case of Bailey, et al. v. OSF HealthCare Sys., et al. (C.D. Ill) and the scope of the claims is not as expansive as this case and the plaintiffs were employed by different entities; (2) Plaintiffs were employed by St. Anthony Health Center, located in Alton, Illinois and 6,700 OSF Plan participants reside in this district; (3) the relevant documents are maintained in both districts so denial of the motion will have minimal impact on access to sources of proof; and (4) Defendants failed to meet their burden to show that judicial economy weighs in favor of transfer where the court agreed that the “speed to trial” statistics are over-inclusiveSmith v. OSF Healthcare Sys., No. 16-CV-0467-SMY-PMF, 2016 WL 3965957 (S.D. Ill. July 25, 2016) (Judge Staci M. Yandle).

Withdrawal Liability & Unpaid Contributions

Eighth Circuit

* 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.  If you have questions about how the developing law impacts your ERISA benefit claim, contact an experienced ERISA attorney.  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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