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ERISA Watch – Third Party Disability Administrator Did Not Breach Fiduciary Duties For Reporting Substance Abuse to Employer

This weeks’ notable decision is out of the Tenth Circuit Court of Appeals and involves a denial of ERISA short term disability benefits.  In Williams v. Fedex Corporate Services; Aetna Life Insurance Company, No. 16-4032, __F.3d__, 2017 WL 727134 (10th Cir. Feb. 24, 2017), Williams brought an ADA claim against his former employer, FedEx Corporate Services, for discriminating against him based on his actual and perceived disabilities, and by requiring his enrollment in the company’s substance abuse and drug testing program. He also brought an ERISA breach of fiduciary duty claim against Aetna Life Insurance Company, the administrator of FedEx’s short-term disability plan, for reporting to FedEx that Williams filed a disability claim for substance abuse.  Williams filed a disability claim for work-related stress and anxiety but also informed Aetna that withdrawal from Suboxone was also preventing him from returning to work.  Williams was prescribed Suboxone to replace OxyContin, a narcotic pain medication on which he developed a dependency.  Pursuant to FedEx’s Alcohol/Drug Free Workplace Policy (ADFWP), Aetna notified FedEx that Williams’s medical leave was due to an alcohol/drug related illness, which subjected him to return-to-duty testing.  Williams provided FedEx and Aetna with a letter stating that he had no current substance abuse/dependence diagnosis but Aetna determined that he had a “Chemical Dependency” and paid benefits for thirteen weeks on that basis.

Williams alleged that Aetna breached its fiduciary duty when it determined that he suffered from a Chemical Dependency and when it reported to FedEx that he had a substance abuse problem, and then failed to correct its report to FedEx that he had filed such a claim.  The Tenth Circuit Court of Appeals affirmed the district court’s award of summary judgment to Aetna on this claim.  First, the court determined that it was reasonable for Aetna to find that Williams suffered from a Chemical Dependency in the form of Suboxone withdrawal.  It had a duty under the ADFWP to report this to FedEx, so its compliance with the policy cannot constitute a breach of fiduciary duty.  Second, although the subsequent letter stated Williams did not have a substance abuse diagnosis, Aetna did not have this letter at the time it reported to FedEx.  It did have Williams own report and his records which repeatedly identify and describe his Suboxone withdrawal.  In light of all of this, Williams did not establish that Aetna failed to act with the care required by ERISA fiduciaries.

Speaking of ERISA fiduciaries that get away with a lot … On Saturday, Michelle Roberts was a guest speaker on Episode 10 of The Law Is My Ass podcast, hosted by fellow ERISA attorney Joseph Creitz and law student/comedian Sid Singh.  They discussed the protections and shortcomings of ERISA, right after the discussion about the Second Amendment and race-based recidivism and ineffective assistance of counsel.  This is a highly entertaining podcast to listen to during your commute.  Click here for Episode 10.

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

Attorneys’ Fees

Sixth Circuit

Carty v. Metro. Life Ins. Co., No. 3:15-CV-01186, 2017 WL 660680 (M.D. Tenn. Feb. 17, 2017).  Plaintiff is entitled to an award of attorneys’ fees following the court’s previous decision to remand Plaintiff’s long term disability claim to MetLife for reconsideration.  The court awarded a total of $42,186.50 in attorneys’ fees based on an hourly rate of $350 for the attorney’s time as a junior partner and $250 for his time as an associate.

Breach of Fiduciary Duty

Tenth Circuit

Troudt v. Oracle Corp., No. 116CV00175REBCBS, 2017 WL 663060 (D. Colo. Feb. 16, 2017) (Magistrate Judge Craig B. Shaffer).  In this case, Plaintiffs allege that Defendants breached their fiduciary duty by causing the 401(k) Plan to pay unreasonable administrative expenses and providing three investment options that consistently underperformed and did not justify their selection or retention in the Plan.  The court recommended that Defendants’ superseding motion to dismiss the complaint be denied since Plaintiffs met their pleading obligations and the claims are better resolved on a fuller factual record.

Class Actions

Sixth Circuit

Underwood v. Carpenters Pension Trust Fund—Detroit & Vicinity, No. 13-CV-14464, 2017 WL 655622 (E.D. Mich. Feb. 17, 2017) (Judge Laurie J. Michelson).  In this action involving a plan amendment which reduced disability benefits for participants already receiving them, the court approved the class action settlement and class counsel’s motion for fees and incentive awards.  The settlement includes a lump sum payment to each class member of 95% of all back benefits owed less the class member’s share of fees, expenses, and incentive awards.  The court awarded class counsel 28% of the common fund, or $4,242,889.28 in attorneys’ fees and $37,607.12 in costs and expenses. The court awarded Class representative Underwood an incentive fee of $5,000.00, and class representative Lee an incentive fee of $2,500.00.

Disability Benefit Claims

Third Circuit

Bey v. Reliance Standard Life Ins. Co., No. CV 16-2326, 2017 WL 660866 (E.D. Pa. Feb. 17, 2017) (Judge Gene E.K. Pratter).  Reliance Standard did not abuse its discretion in terminating Plaintiff’s long term disability benefits claim, where it relied on a records review by an independent physician (who Plaintiff refused to see in person) and its in-house vocational consultant.

Eighth Circuit

Broderick v. Hartford Life & Accident Ins. Co., No. CV 15-4315 ADM/FLN, 2017 WL 652451 (D. Minn. Feb. 16, 2017) (Judge Ann D. Montgomery).  The court granted in part Plaintiff’s motion for summary judgment in his claim against Hartford.  The court agreed with Plaintiff that Hartford’s decision to uphold the denial of his long term disability benefits was an abuse of discretion, where it was based on two confusing and ambiguous pieces of evidence from Plaintiff’s treating doctor, who actually supported Plaintiff’s disability.

Tenth Circuit

Williams v. Fedex Corporate Services; Aetna Life Insurance Company, No. 16-4032, __F.3d__, 2017 WL 727134 (10th Cir. Feb. 24, 2017) (Before HOLMES, MATHESON, and McHUGH, Circuit Judges).  The court affirmed the district court’s grant of summary judgment to Aetna on Plaintiff’s claim that it breached its fiduciary duty owed to him by reporting to FedEx that he filed a disability claim for substance abuse on the basis of his withdrawal from legally prescribed Suboxone, and then failed to correct its report.  The court found that Plaintiff has not established that Aetna failed to act with the care required by ERISA fiduciaries.  FedEx’s Alcohol/Drug Free Workplace Policy required Aetna to notify FedEx when an employee seeks benefits for substance abuse, and substance abuse in the policy includes the use of prescription drugs.

ERISA Preemption

Third Circuit

Cohen v. Horizon Blue Cross Blue Shield of New Jersey, No. CV 15-4525, 2017 WL 685101 (D.N.J. Feb. 21, 2017) (Judge John Michael Vazquez).  Cohen is a medical provider who brought three claims against Defendant under a New Jersey Regulation and for unjust enrichment after non-payment of an emergency surgery he performed on a participant in a health insurance plan administered by Defendant.  Because it is impossible to determine the merits of Plaintiffs’ claim without first reviewing the terms of an ERISA plan, Plaintiffs’ claim is preempted by ERISA.  Also, the regulation does not create an independent legal duty.

Jersey Brain & Spine Ctr. v. Aetna Life Ins. Co., No. CV 16-1544 (WJM), 2017 WL 659012 (D.N.J. Feb. 17, 2017) (Magistrate Judge Mark Falk). Plaintiff is an out-of-network provider who provided medically necessary medical and surgical services to seven patients in plans administered by Aetna. The court granted Plaintiff’s motion to remand after determining that Plaintiff could not have brought its state law claims under § 502(a) and that the claims are predicated on an independent legal duty.

Sixth Circuit

Brosnan v. Prudential Ins. Co. of Am., No. CV 17-10364, 2017 WL 713793 (E.D. Mich. Feb. 21, 2017) (Judge Linda V. Parker).  ERISA completely preempts Plaintiffs’ state law breach of contract claim against Prudential for failing to pay dependent accidental death and dismemberment benefits.  Because the remaining claims in the complaint do not arise out of the same case or controversy as the ERISA claim, they are severed and remanded to state court.

Exhaustion of Administrative Remedies

Fifth Circuit

Murray v. Fid. Investments Institutional Operations, Co., No. CV 16-14373, 2017 WL 699828 (E.D. La. Feb. 22, 2017) (Judge Martin L.C. Feldman).  Plaintiff attempted to gain access to her ex-husband’s retirement accounts to determine what portion is owed to her as a result of the divorce.  She alleged that the accounts with Fidelity have been “hidden and/or withheld in a manner which is contrary to the ERISA statute,” and has caused her money damages, loss of benefits, mental and emotional distress, and compensatory and punitive damages.  The court granted Defendant’s motion to dismiss on the basis that Plaintiff failed to exhaust her administrative remedies and thus fails to state a claim for which relief can be granted.

Life Insurance & AD&D Benefit Claims

Eighth Circuit

In re $139,000.00 in Interpleaded Funds, No. 5:16-CV-05092, 2017 WL 700148, at *1 (W.D. Ark. Feb. 22, 2017) (Judge Timothy L. Brooks).  The court deferred ruling on the pending motions seeking approval of a settlement reached in this case for $139,000.00 in interpleaded funds.  The court seeks to review the attorney fee agreement for the attorney of the minor children to make sure the agreed upon fee is reasonable.

Pension Benefit Claims

Eighth Circuit

Knowlton v. Anheuser–Busch Companies Pension Plan, No. 15-3538, __F.3d__, 2017 WL 694514 (8th Cir. Feb. 22, 2017) (Before RILEY, Chief Judge, MURPHY and SMITH, Circuit Judges).  Plaintiffs are former salaried employees of Busch Entertainment Corporation (“BEC”).  There was a change in control when InBev combined Anheuser-Busch Companies and Plaintiffs claimed they were involuntarily terminated from employment with the Controlled Group when InBev sold BEC.  The court affirmed the district court’s decision that the plaintiffs are entitled to an enhanced pension benefit because Anheuser–Busch cannot reasonably interpret a plan provision to require plan participants to have been “out of work after they involuntarily lose their employment within three years after a change in control,” nor can the plan administrator reasonably infer “an actual break in an individual’s employment” is required in order for the provision to apply.  The court did reverse the district court’s decision to not make individual calculations of enhanced benefits owed to class members.  The court remanded to the district court to calculate and award the benefits owed to Plaintiffs.

Plan Status

Third Circuit

Mance v. Quest Diagnostics Inc., No. CV 12-7361, 2017 WL 684711 (D.N.J. Feb. 21, 2017) (Judge John Michael Vazquez).  Quest’s “Voluntary Separation Agreement” does not constitute an informal ERISA severance plan.  Although there is an administrative scheme, a reasonable person cannot determine the class of intended beneficiaries, the intended benefits, or the process to request benefits under the alleged VSA benefit plan.

Woods v. Radiation Therapy Servs., Inc., No. 216CV897FTM29MRM, 2017 WL 727766 (M.D. Fla. Feb. 24, 2017) (Judge John E. Steele).  The court concluded that the agreement to pay $2 million severance and the COBRA premium payments provided for in the Employment Agreement satisfy Donovan’s definition of a “system of providing benefits pursuant to a written instrument” and thus constitute a “plan, fund or program.”  A reasonable person can deduce that the intended benefits are twenty-four monthly severance payments and up to twelve monthly COBRA premium payments; that the “class of beneficiaries” consists of Woods, the sole Employment Agreement participant; the source of the financing is 21st Century’s general corporate assets, since it is “the Company” which agrees to pay the benefit amounts; and ascertain the clear procedures for receiving the benefits.

Provider Claims

Second Circuit

Shuriz Hishmeh M.D. v. Empire Healthchoice HMO, Inc., No. 16-CV-2780(ADS)(ARL), 2017 WL 663543 (E.D.N.Y. Feb. 17, 2017) (Judge Arthur D. Spatt).  The health plans at issue in this case expressly bar the assignment of benefits depriving the provider of statutory standing, which is an essential element of a viable claim under ERISA.  But since the provider lacks standing to sue under ERISA, the court denied the motion to dismiss the state law claims on the ground that they are preempted by ERISA.

Statutory Penalties

Third Circuit

Bey v. Reliance Standard Life Ins. Co., No. CV 16-2326, 2017 WL 660866 (E.D. Pa. Feb. 17, 2017) (Judge Gene E.K. Pratter).  Reliance cannot be sued as a de facto plan administrator simply because it responded to Plaintiff’s attorney’s request for documents.  Plaintiff cannot seek statutory penalties on the basis of alleged violations of ERISA claims procedures.

* Please note that these are only case summaries of decisions 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 a knowledgeable ERISA attorney.  Case summaries authored by Michelle 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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