ERISA Watch – November 23, 2015

This week’s notable decision is Barboza v. California Association of Professional Firefighters, 2015 WL 7273215 (E.D. Cal. Nov. 17, 2015), a case in which our firm and Geoffrey White serve as co-counsel for the plaintiff, a disabled retired fire captain. In Barboza, following the case’s second remand from the Ninth Circuit Court of Appeals, the district court determined that the terms of the disability plan did not require Barboza to retire in a manner that would make him eligible to receive one year of disability payments under Cal. Labor Code Section 4850. Barboza could not receive Section 4850 benefits because he was retired by the City of Tracy due to his permanent disability. Nevertheless, the Plan reduced Barboza’s disability benefits by an amount of the phantom 4850 pay that he did not receive, arguing that he waived his right to 4850 pay by retiring.  In ruling for Barboza, the court found that certain “cooperation” provisions in the Plan could not be read to mandate a retirement consistent with a full year of 4850 pay. And plus, when the Plan decided Barboza’s administrative appeal, it did not cite a failure to cooperate or failure to comply. ERISA plan administrators cannot tack on new reasons for denial that they did not give during the administrative process and the court did not permit the Plan to do so here. Despite this recent victory, the battle for Barboza rages on. Defendants recently filed a notice of appeal and the case is now on its third trip to the Ninth Circuit, where we will make sure it gets extinguished for good.

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

Third Circuit

Preliminary injunction of County’s apprenticeship requirements denied where Plaintiff did not meet burden of establishing likelihood of success on preemption issue. Associated Builders & Contractors, Inc. v. New Castle Cty., No. CV 15-682-SLR, __F.Supp.3d___, 2015 WL 7257916 (D. Del. Nov. 17, 2015) (Judge Sue L. Robinson). Plaintiff Associated Builders and Contractors, Inc., Delaware Chapter (“ABC”), filed a complaint seeking to enjoin Defendant New Castle County (“NCC”) from enforcing the apprenticeship requirements of County Code§ 2.05.303.D.3.a (“the Code”) to its “Route 9 Library Project.” The Code requires that when the probable cost of a NCC construction contract is expected to exceed $100,000.00, construction contractors seeking to perform work on such publicly funded projects must meet certain requirements. ABC moved to enjoin the enforcement of certain apprenticeship requirements and associated regulations, arguing that they are preempted by ERISA. The court found that Plaintiff did not meet its burden to demonstrate its likelihood of success on the preemption issue, and specifically that (1) States have long regulated apprenticeship standards and training; (2) ERISA has nothing to say about the standards to be applied to apprenticeship training programs; and (3) what triggers ERISA’s potential application to such laws is not the existence of an apprenticeship training program, but the existence of a separate fund to support the training program and the related reporting, disclosure, and fiduciary responsibilities associated therewith. Here, the Code applies to ERISA and non-ERISA plans alike and has no directive related to the funding sources of any apprenticeship program. The court found that the irreparable harm factor favors defendants but that the balance of harm and public harm factors favor neither party.

Sixth Circuit

Supreme Court decision in Tackett does not change previous determination that surviving spouses of Caterpillar retirees are entitled to lifetime health benefits. Kerns v. Caterpillar Inc., No. 3: 06-CV-1113, __F.Supp.3d___, 2015 WL 7283142 (M.D. Tenn. Nov. 17, 2015) (Judge Aleta Trauger). The court in this matter previously decided that Caterpillar breached its contractual obligation to provide lifetime health benefits to surviving spouses of Caterpillar retirees at no cost. Following a series of motions and determinations, both parties filed motions for reconsideration which the court denied. Caterpillar moved the court to reconsider its prior rulings on the basis that, in M & G Polymers USA, LLC v. Tackett, 135 S.Ct. 926, 190 L.Ed.2d 809 (2015), the Supreme Court abrogated Int’l Union, United Auto., Aerospace, & Agr. Implement Workers of Am. (UAW) v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir.1983), upon which this court relied in its previous rulings. The court reiterated its previous conclusion that the various provisions of the contracts at issue in this case, when read together, demonstrate unambiguously the parties’ intention for the surviving spouses to have lifetime “no cost” health benefits. Even if there is ambiguity as to the parties’ intentions, the extrinsic evidence before the court overwhelmingly supports the court’s conclusion. The court found nothing in the Supreme Court’s Tackett decision changes its previous rulings in this matter. On Plaintiff’s motion to reconsider, the court found no basis for reconsideration of its conclusion that, pursuant to Reese v. CNH Am. LLC, 574 F.3d 315 (6th Cir. 2009) (standing for the proposition that, even if the retiree has a vested right to lifetime health benefits from his employer, unless there is some exceptional language that dictates that benefits can “never vary,” that retiree is entitled to lifetime benefits subject to reasonable changes), Caterpillar’s imposition of additional deductibles, co-insurance, and increased out-of-pocket costs were “reasonable” charges and, as such, permissible under ERISA and the LMRA.

Ninth Circuit

Disability Plan cannot offset against long term disability benefits Cal. Labor Code Section 4850 pay that the disabled firefighter did not actually receive; the Plan did not require the firefighter to retire in a manner to be eligible to receive Section 4850 pay; prejudgment interest awarded at 5% annum. Barboza v. California Ass’n of Prof’l Firefighters, No. 2:08-CV-0519-KJM-EFB, __F.Supp.3d___, 2015 WL 7273215 (E.D. Cal. Nov. 17, 2015) (Judge Kimberly J. Mueller). On remand from the Ninth Circuit Court of Appeals, the district court had to decide whether the California Association of Professional Firefighters Long Term Disability Plan (“CAPF Plan”) required Plaintiff Barboza to retire in a manner that would entitle him to a full year of Cal. Labor Code Section 4850 benefits. Section 4850 benefits provide up to one year of pay to disabled firefighters (among other professions) who have not been retired. The Plan offsets against long term disability benefits any Section 4850 pay received, or forfeited or waived. The Plan took a full year of the Section 4850 offset although Barboza did not receive a full year of 4850 pay because he was retired by the City of Tracy. The parties agreed the Ninth Circuit intended “Plan” to mean the written Plan instrument, that the CAPF Plan does not expressly dictate the manner in which a participant must retire from fire service in order to be eligible for long term disability benefits, and the CAPF Plan does not explicitly require a participant to retire in a manner that would entitle him to a full year of Section 4850 pay in order to be eligible for long term disability benefits. First, the court found that Defendants may not succeed now by arguing Barboza was eligible for Section 4850 pay and waived or forfeited that pay since this issue is precluded from reconsideration in light of the Ninth Circuit’s decision. (This court previously agreed and granted summary judgment in Defendants’ favor.) The court also disagreed that the Ninth Circuit’s order “left undisturbed” the court’s previous conclusion that Barboza was eligible for and waived 4850 pay, because if it had, it simply would have affirmed the district court’s decision. Second, the court found that certain provisions in the Plan requiring cooperation by Plan members do not require resolution in Defendant’s favor because Defendants did not rely on these sections to reach their decisions. Specifically, CAPF cited no failure to cooperate and described no bad faith, lack of cooperation, or failure to comply. ERISA does not allow an ERISA plan administrator to assert a reason for denial of benefits that it had not given during the administrative process. But even if the court were to reach the Plan’s new argument, the court could not find that Defendants acted within their discretion by interpreting those sections to mandate a retirement consistent with a full year of Section 4850 benefits in this case. Lastly, the court granted Plaintiff’s motion for prejudgment interest at 5% annum. Plaintiff submitted evidence that he paid interest rates of 4.92% to 9.10% on a home equity line of credit to cover his expenses while awaiting benefits payments.

Denial of initial placement of dental implants under medical benefit plan that excluded only restorative work to dental implants is an abuse of discretion. Dragu v. Motion Picture Indus. Health Plan for Active Participants, No. 14-CV-04268-RS, __F.Supp.3d___, 2015 WL 7274202 (N.D. Cal. Nov. 16, 2015) (Judge Richard Seeborg). The court ruled in favor of Plaintiff on her claim for dental implants that the defendant health plan denied as not being a covered medical benefit. Plaintiff mangled her jaw, mouth, teeth, and gums when she tumbled down a rocky creek while hiking. She sought medical treatment for her various injuries from an oral surgeon who recommended extracting the damaged teeth, inserting bone grafts where possible, implanting fixtures for implantation of abutments and crowns, and-lastly-installing abutments and crowns as replacements for the missing teeth. Plaintiff requested coverage for the medical procedures from her medical benefit plan, which initially denied coverage for dental implants, including the implantation of fixtures and placement of abutments and crowns, on the basis that “Dental services are not covered under the Plan.” After Plaintiff appealed this determination, the Appeals Committee paid her oral surgeon for the installation of fixtures at a reimbursement rate of 50%, which was the rate available to out-of-network providers under the terms of the 2013 plan. But, with respect to her claim for the placement of crowns and abutments, the Plan offered a different reason to deny the claim: “Dental implants may be covered in cases of trauma, ablative surgery or congenital anomalies. Prosthetic rehabilitation of dental implants including abutments and crowns are not covered under the medical benefit.” The court found that the Plan misinterpreted the plain language of the medical benefit plan when it denied Plaintiff coverage for the initial placement of abutments and crowns and reimbursed her doctor at the lower rate as required by the plain language of the medical benefit agreement. The court found persuasive Plaintiff’s argument that the 2013 SPDs, which apply here, do not, in fact, exclude from the medical benefit the initial placement of abutments and crowns. The 2013 SPDs exclude “[p]rosthetic rehabilitation of dental implants including abutments and crowns,” but are silent about the initial placement of abutments and crowns. The language of the plan plainly excludes coverage for restorative work to existing crowns and abutments, thus the Plan’s reliance on the exclusion of prosthetic rehabilitation of dental implants was illogical and an abuse of discretion.

Select Slip Copy & Not Reported Decisions

Breach of Fiduciary Duty

Fourth Circuit

Defendant is a fiduciary with respect to the making of employee contributions notwithstanding language in plan disclaiming responsibility. Longo v. Trojan Horse Ltd., No. 5:13-CV-418-BO, 2015 WL 7015841 (E.D.N.C. Nov. 12, 2015) (Judge Terrence W. Boyle). In breach of fiduciary duty claim against Ascensus Trust, the court decided the issue of whether it is a fiduciary with regard to the marking of employee contributions. Although Defendant appeared to have included language in the Plan to try to escape responsibility for ensuring Plan contributions were made, the Trust Agreement and Basic Plan Document expressly provide that Defendant is responsible for ensuring that Plan contributions were made. The court found that Defendant’s attempt to evade liability via the language in the Plan cannot take precedence over the discretion conferred upon Ascensus Trust to manage contributions by the documents themselves. The court rejected Defendant’s argument that it is not a fiduciary because of its role as a directed trustee.

Fifth Circuit

Disability insurer’s initial denial of short-term disability benefits based on determination that the claimant had no coverage as of date of disability is not misrepresentation constituting a breach of fiduciary duty. Browdy v. Hartford Life & Acc. Ins. Co., No. 15-30044, __Fed.Appx.___, 2015 WL 7252717 (5th Cir. Nov. 16, 2015) (STEWART, Chief Judge, and BARKSDALE and PRADO, Circuit Judges). The Fifth Circuit affirmed the district court’s determination that Hartford’s initial denial of short-term disability benefits based on its finding that Plaintiff had no coverage (which was later overturned on appeal) constitutes a misrepresentation and resulting breach of fiduciary duty. Plaintiff sought to prevent Hartford from taking as an offset pension benefits that she elected to receive prior to Hartford’s approval of benefits. She alleged that she only applied for her pension because her disability benefit claim was denied. In challenging the summary judgment awarded Hartford, Plaintiff contended the court erred by: articulating the breach-of-fiduciary-duty standard as one of bad faith; ruling she presented no facts in support of misrepresentation; and failing to consider Plaintiff’s evidence in a cumulative fashion. Hartford argued that Plaintiff’s claim is foreclosed because she impermissibly re-packaged her original § 502(a)(1)(B) claim as one under § 502(a)(3). The First Circuit explained that it need not reach Hartford’s contention because, even assuming, arguendo, Plaintiff’s claim may be considered under § 502(a)(3), summary judgment for Hartford was proper. The court found that because Plaintiff presented no evidence of misrepresentation constituting a breach of fiduciary duty, it need not reach her assertions concerning the court’s claimed improper application of a bad-faith standard.

Sixth Circuit

Breach of fiduciary duty claim relating to amendment eliminating COLA benefit is dismissed because same injury can be adequately remedied by a claim for benefits. Johnson v. AXA Equitable Long Term Disability Plan, No. 13-13067, 2015 WL 7075910 (E.D. Mich. Nov. 13, 2015) (Judge Arthur J. Tarnow). Plaintiff a claim for breach of fiduciary duty pursuant to 29 U.S.C. § 1132(a)(3), alleging that Defendants violated their fiduciary duties by failing to verify that the COLA-eliminating amendment followed plan procedures and by depriving participants of COLAs despite knowing that the amendment was invalid. Plaintiff sought a surcharge of the wrongfully withheld benefits and disgorgement of Defendants’ profits. Defendants argued that Plaintiff’s breach of fiduciary duty claim must be dismissed because it asserts the same injury as Plaintiff’s claim for benefits, which can be adequately remedied by the claim for benefits. The Court agreed. But, as noted below, the court dismissed the benefits claim as being time-barred.

Disability Benefit Claims

First Circuit

Aetna abused its discretion in terminating long term disability claim by relying on faulty medical reviews and failing to take into consideration impact of chronic medication usage. Young v. Aetna Life Insurance Company and Children’s Hospital Boston Group Long Term Disability Plan, No. 4:13-CV-40154-TSH, 2015 WL 7194812 (D. Mass. Nov. 16, 2015) (Judge Timothy S. Hillman). On abuse of discretion review, the court found that Aetna’s determination that Plaintiff can function in a fulltime capacity as a dispatcher, a hospital admitting clerk, or a medical social worker is simply not plausible, nor supported by the record. The court found this to be a case in which “the claims administrator failed to provide reasoned support for its conclusions and ignored credible evidence of disability, choosing instead to rely selectively on discrete findings, which appear reasonable when sewn together to form a termination letter, but are highly questionable when viewed in the context of the entire record.” Aetna’s decision was supported by the reports of Dr. Topper, Dr. McPhee, and Dr. Polanco, which the court criticized in detail. The court also found that Aetna abused its discretion by failing the address the impact of Plaintiff’s chronic medication usage on her ability to perform a fulltime sedentary occupation at the requisite wage rate. The court was convinced that Plaintiff was clearly entitled to benefits so declined to remand the case to the claims administrator for further evaluation. The court reinstated Plaintiff’s long term disability claim.

Seventh Circuit

Denial of disability pension benefits was not an abuse of discretion. Hilderbrand v. Nat’l Elec. Benefit Fund, No. 13-3170, 2015 WL 7274023 (C.D. Ill. Nov. 17, 2015) (Judge Sue E. Myerscough). The court granted the Fund’s motion for summary judgment, finding that its decision to deny Plaintiff’s disability pension benefits during a three-and-a-half-year period was not arbitrary and capricious. Of note, Plaintiff argued that the Fund had an obligation to conduct a good faith investigation of his functional ability to work and should have hired a vocational expert. The court noted that the Seventh Circuit has not expressed an opinion as to whether ERISA plan administrators as a rule must hire vocational experts or perform a transferrable skills analysis, however, seven other circuits have held, to varying degrees, that, even in the absence of specific plan language, benefit administrators cannot outright ignore vocational considerations. The court found that regardless, in this case, the Trustees took the vocational considerations into account, including by expressly considering Plaintiff’s vocational consultant’s report, the Social Security Administration decisions, and Plaintiff’s treating physicians’ medical reports. Plaintiff’s first Social Security decision contained evidence that a vocational expert concluded that jobs existed in the national economy for an individual with Plaintiff’s age, education, work experience, and residual functional capacity.

Ninth Circuit

Insurer’s decision to pro rate a bonus over twelve months even though the bonus covered only a six-month period is not an abuse of discretion. Powell v. Hartford Life & Acc. Ins. Co., No. 13-16529, __Fed.Appx.___, 2015 WL 7074859 (9th Cir. Nov. 13, 2015) (Before WALLACE, BLACK*, and CLIFTON, Circuit Judges. WALLACE dissenting). Plaintiff appealed the district court’s grant of summary judgment to The Hartford Life and Accident Insurance Company on Plaintiff’s claim that Hartford abused its discretion in calculating his Monthly Rate of Benefits under his employer’s ERISA Plan by improperly pro rating his “MBO/Key Contributor Bonus.” Specifically, Plaintiff argued that the Bonus, which was awarded for work that he completed between January 1, 1995 and June 30, 1995, should be pro-rated over six months, the period to which it relates, and not over twelve months, which is what Hartford did. The court found that nothing in the Plan states exactly how to pro rate a bonus to get a proper “rate in effect,” and the Plan itself does not define that term. Hartford applied a policy to pro rate any bonuses earned in the year preceding a disability over twelve months, which is consistent with how the plan deals with other variable income sources, like commissions. The court found this method to be a logical interpretation of ambiguous language with regard to non-commissioned employees. The majority affirmed the district court. Judge Wallace dissented and found that Hartford’s blanket application of a one-size-fits-all rule that all compensation will be averaged over twelve months in calculating disability benefits contradicts the plain language of the plan and is an abuse of its discretion.

ERISA Preemption

Fifth Circuit

Promissory estoppel claim preempted by ERISA. Kennedy Krieger Institute, Inc. v. Brundage Management Company, Inc., et al., No. 5:15-CV-162-DAE, 2015 WL 7301185 (W.D. Tex. Nov. 18, 2015) (Judge David Alan Ezra). The court found that Plaintiffs’ promissory estoppel claim against Defendants for medical services provided to John Doe (participant’s minor son) after the first seven days of care is preempted by ERISA. Specifically, whether Plaintiff’s inpatient services “continued to be medically necessary” necessarily depends on whether they were medically necessary in the first place and requires reference to the Plan’s definition of medically necessary. The court dismissed without prejudice Plaintiffs’ promissory estoppel claim to the extent it seeks to recover for services provided beyond the first seven days of care.

Seventh Circuit

Negligent misrepresentation claim preempted by ERISA. Arndt v. AON Hewitt Benefit Payment Services, LLC, et al., No. 15-C-750, 2015 WL 7313392 (E.D. Wis. Nov. 19, 2015) (Judge William C. Griesbach). Plaintiff alleged that the Defendants had misrepresented the pension benefits he would receive upon his retirement and he relied on that misinformation, to his detriment, when he decided to retire from his job. Plaintiff further asserts that had he known what his actual benefit would have been, he would have kept working and he lost wages he would have earned had he kept working. The court dismissed Plaintiff’s claim with prejudice, finding that it satisfied the elements of conflict preemption.

Exhaustion of Administrative Remedies

Seventh Circuit

Inference that the exhaustion requirement is excused where participant sent multiple requests and inquiries about his pension benefit and did not receive any response. Lange v. The University of Chicago & the University of Chicago Retirement Income Plan for Employees, No. 15 C 7303, 2015 WL 7293588 (N.D. Ill. Nov. 19, 2015) (Judge Jorge Alonso). Plaintiff filed suit seeking a determination of entitlement to pension benefits that included pre-2009 service where he worked part-time for approximately 1,000 hours a year. Plaintiff alleged that before he retired he asked the Benefits Office for an estimate of his monthly pension benefit and was told that he was only eligible to recover benefits starting from his full-time employment in November 2009. Plaintiff then asked a Benefits Analyst, to include all of his years of employment in his pension calculation and sent numerous emails to the Benefits Analyst and the Benefits Department, but never received a determination of his benefits eligibility, or an explanation for the denial of the benefits he accrued during his 40 years of employment with the University. As of August of 2015, when this suit was filed, Plaintiff had yet to receive an explanation from Defendant as to why his pension benefits do not include his pre-2009 service. Defendant moved to dismiss for failure to exhaust. The court found that because Plaintiff’s complaint supports the inference that the exhaustion requirement is excused, his purported failure to exhaust is not a basis for dismissing this suit.

Pension Benefit Claims

Ninth Circuit

Pensioners who elected a lump sum pension benefit at first retirement are not entitled to additive benefits at second retirement. Barnes v. AT&T Pension Ben. Plan-Nonbargained Program, No. 13-16005, __Fed.Appx.___, 2015 WL 7074850 (9th Cir. Nov. 13, 2015) (WALLACE, SILVERMAN, and CHRISTEN, Circuit Judges). The Ninth Circuit in a cursory opinion affirmed the district court’s grant of summary judgment in favor of the pension plan on Plaintiff’s and the Class’s claim that they were entitled to restore, upon bridging and second retirement, a discount applied to their pension when they first retired. The court found that the procedural irregularities and failure to exercise discretion alleged by Plaintiff did not change the standard of review to de novo. The Plan determined that lump sum payees like Plaintiff were eligible to receive only cash balance benefits upon their second retirement pursuant to Section 3.4(a) of the Plan. These payees were not “eligible to receive” a monthly pension at first termination because of their lump sum election and thus not eligible for greater benefits under Section 3.4(d)(3) which applies to participants who elected to receive an annuity. The court found this to be a reasonable interpretation of the relevant plan provisions.

Pleading Issues & Procedure

Fourth Circuit

Service of original complaint satisfies § 1132(h) notwithstanding failure to serve amended complaint. Longo v. Trojan Horse Ltd., No. 5:13-CV-418-BO, 2015 WL 7015841 (E.D.N.C. Nov. 12, 2015) (Judge Terrence W. Boyle). In an action alleging that Defendants failed to make contributions to a defined contributions plan, or 401(k) plan, Defendant Ascensus Trust moved to dismiss on the basis that the court lacked subject matter jurisdiction because the Secretaries of Labor and Treasury were not served with the amended complaint by certified mail as required by 29 U.S.C. § 1132(h). However, the court found that they were served with the original complaint and Section 1132(h) requires only that a “copy of the complaint” be served. Here, the Secretaries were served with the original complaint, which named the company now known as Ascensus Trust as a party and raised identical claims against it as are listed in the amended complaint. While service of an amended pleading that first asserts claims available to both plan participants and the Secretaries may be required, the court found that the notice requirement and purposes of § 1132(h) clearly were satisfied by service of the original complaint. The court denied Defendant’s motion to dismiss for lack of subject matter jurisdiction pursuant to FRCP 12(b)(1).

Ninth Circuit

Motions to dismiss denied where challenges are affirmative defenses that are not clear on the face of the complaint. Lifecare Mgmt. Servs., LLC v. Zenith Am. Sols., Inc., No. 3:15-CV-0307-RCJ-VPC, 2015 WL 7185459 (D. Nev. Nov. 13, 2015) (Judge Robert C. Jones). This case involves a hospital’s claim under ERISA that a trust fund and its third-party administrators improperly denied the hospital benefits under the trust fund’s welfare benefit plan. Defendants filed two motions to dismiss, which the court denied. In Count I-Claim for Benefits, Defendants made three arguments for dismissal: (1) Zenith and BeneSys are not liable as third-party administrators; (2) Plaintiff’s Complaint was untimely; and (3) Plaintiff failed to state a sufficient claim regarding benefits coverage. The court rejected all three arguments. Whether the TPAs are proper defendants is an affirmative defense and the court must wait to determine this issue at the summary judgment stage unless the elements of the defense appear on the face of the Complaint, which they do not. The court also found that the Complaint does not clearly show Plaintiff’s filing was untimely. The Plan’s terms require a beneficiary to file a lawsuit within ninety days of completing the appeals process; however, the Complaint does not show whether the appeals process was ever completed. Plaintiff stated it filed a formal written appeal on May 13, 2013, and that on October 31, 2013 Zenith informed Plaintiff that “the Board of Trustees was upholding the processing decision,” but Plaintiff alleged that it never received written notice of the denial of its appeal, including the specific reasons for denying it, as required by the Plan’s summary. The court found that the Complaint does not show whether the appeals process was completed and, thus, when, or if, the limitations period began. Because the affirmative defense is not clear on the face of the Complaint, the court deferred this argument to the summary judgment stage. Lastly, the court found that Plaintiff sufficiently pled a claim for benefits. Regarding Count II-Failure to Supply Requested Plan Information, the court found that the timeliness analysis applies here as well. Regarding Defendant’s standing challenge, the court also found that it is an affirmative defense and the defense is not clear on the face of the Complaint.

Statute of Limitations

Fourth Circuit

Contractual limitations period commenced when the insurer closed the disability claim for failure to provide sufficient proof of ongoing disability. Schulte v. Boston Mutual Life Insurance Company, No. JKB-14-419, 2015 WL 7273148 (D. Md. Nov. 18, 2015) (Judge James K. Bredar). The court found that Plaintiff did not carry her burden of establishing eligibility for long term disability benefits, but regardless, her claim is time-barred by the Plan’s contractual limitations period. The LTD Policy provides that a claimant “cannot start any legal action…more than 3 years after the time proof of claim is required.” The court found that the limitations period would have commenced no later than April 19, 2010, when Defendant closed Plaintiff’s claim for failure to provide sufficient proof of ongoing disability. As such, Plaintiff should have filed her Complaint on or before April 19, 2013; instead, she filed it on February 11, 2014, almost a year out of time. Here, Defendant’s did not raise the limitations defense in its Answer as required by Rule 8(c) of the Federal Rules of Civil Procedure. However, the court explained that there is ample authority in this Circuit for the proposition that absent unfair surprise or prejudice to the plaintiff, a defendant’s affirmative defense is not waived when it is first raised in a pre-trial dispositive motion. The court found that Plaintiff has made no showing that she was prejudiced by the inclusion of the affirmative defense in Defendant’s Motion.

Sixth Circuit

Claim for COLA benefits based on alleged unlawful plan amendment is time-barred. Johnson v. AXA Equitable Long Term Disability Plan, No. 13-13067, 2015 WL 7075910 (E.D. Mich. Nov. 13, 2015) (Judge Arthur J. Tarnow). Plaintiff brought a claim to recover withheld COLA benefits under 29 U.S.C. § 1132(a)(1)(B), arguing that an amendment that purported to eliminate his entitlement to COLAs was procedurally deficient and therefore invalid. The court found the claim time-barred since, in connection with Plaintiff’s bankruptcy proceedings in 1995, Defendants sent Plaintiff’s attorney an unamended copy of the disability plan which would have alerted Plaintiff to the alleged deficiencies in the COLA-eliminating amendment soon after receiving the letter. Plaintiff did not file this lawsuit until well after the six-year statute of limitations expired. The court found that there was no fraudulent concealment to toll the statute of limitations.

Subrogation/Reimbursement Claims

Seventh Circuit

Suit seeking to enjoin attorney from prosecuting state court action for payment of attorneys’ fees based on common fund doctrine is prohibited by the Anti-Injunction Act. International Union of Operating Engineers Local 399 Health and Welfare Fund v. Walsh, Knippen, Pollock & Cetina, Chartered, No. 15 C 7143, 2015 WL 7077334 (N.D. Ill. Nov. 13, 2015) (Judge Robert W. Gettleman). Defendant Walsh represented an ERISA plan participant in an action against a third-party that caused an accident and her injuries. Walsh obtained the settlement in that lawsuit plus an additional settlement in an underinsured motorist claim, totaling $248,035.40. Walsh then paid the Fund $176,881.10 in full reimbursement of the amounts owed by the participant under the plan and reimbursement agreement but then sued the Fund in state court under the common fund doctrine, seeking $58,960.37 (one-third of $176,881.10) in attorney’s fees for its legal services in creating the settlement fund from which the Fund’s claim for reimbursement was satisfied. After attempting unsuccessfully to remove the matter to federal court on the basis of complete preemption, the Fund filed suit seeking an order enjoining Walsh from prosecuting the state court action which would invalidate or reduce an alleged equitable lien created by the plan terms. The court found that the Fund failed to explain how the terms of a repayment agreement signed by the participant can justify an injunction against Walsh, which is not a party to the plan or that agreement. The Supreme Court’s decision in U.S. Airways v. McCutchen, 133 S. Ct. 1537 (2013) holds only that parties to a plan agreement can be held to the specific terms of that agreement without regard to equitable defenses, even in a suit for equitable lien brought under § 502(a)(3). The court found that McCutchen has no impact Trustees of the Carpenters’ Health and WelfareTrust Fund of St. Louis v. Darr, 694 F.3d 803, 807 (7th Cir. 2012), which held that a suit brought under § 502(a)(3) against a non-party to a plan seeking to enjoin that non-party from proceeding against a fund in state court is prohibited by the Anti-Injunction Act. Because Darr remains good law, the court granted Walsh’s motion to dismiss.

* 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.