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ERISA Watch – April 12, 2016

We are pleased to report this week’s notable decision from our neck of the woods: Kresich v. Metro. Life Ins. Co., No. 15-CV-05801-MEJ, 2016 WL 1298970 (N.D. Cal. Apr. 4, 2016). The court held that a claim for intentional infliction of emotional distress related to MetLife’s conduct during the processing of a disability claim is not preempted by ERISA. “If such claims were held to be preempted by ERISA, Plaintiff would be subject to such treatment with no available recourse, and a plan administrator could investigate a claim in all manner of tortious ways with impunity.” [insert confused look by disability insurers].

There were many other notable decisions this past week. Read about them below and stay tuned!

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.

Select Slip Copy & Not Reported Decisions

Breach of Fiduciary Duty

Second Circuit

Breach of fiduciary duty claims related to negotiation of life insurance premiums dismissed. Hannan v. The Hartford Financial Services, Inc., No. 3:15-CV-0395 (VLB), 2016 WL 1254195, at (D. Conn. Mar. 29, 2016) (Judge Vanessa L. Bryant). Plaintiffs, participants in the Family Dollar Stores Inc. Group Insurance Plan brought a purported class action against the Family Dollar Defendants and Hartford Financial Services, Inc. alleging ERISA breach of fiduciary duty, co-fiduciary liability, knowing participation in a breach of fiduciary duty against Hartford, prohibited transactions, and federal common law unjust enrichment based on the allegation that Defendants improperly negotiated a discount on the basic life insurance premium paid by Family Dollar; and that the Hartford offset some of this discount by increasing the supplemental life insurance premium charged to the Family Dollar employees who purchased supplemental coverage. Plaintiffs contend that this arrangement is an inappropriate “cross-subsidization and kickback scheme” that results in “overcharging” the employees who purchase supplemental coverage” with premiums that were “higher than called for” by “underwriting and actuarial pricing projections.” The court granted Defendants’ motion to dismiss because: (1) Hartford is not a fiduciary with respect to negotiation of Plan premiums; (2) even if Hartford could be liable for its role in negotiating the Plan and its basic and supplemental premium rate structure, the rate structure described in the Complaint is simply not a rate structure prohibited by ERISA; (3) Defendants did not violate fiduciary duties by omitting information that participants who purchased supplemental group life insurance coverage were being charged excessive premiums since plan administrators are under no obligation to disclose cost-containment mechanisms or financial incentives for cost savings; and (4) there was no misrepresentation here in the absence of allegations that certain statements about the Plan and premiums were false or misleading.

Fifth Circuit

Plaintiff’s claim is properly characterized as seeking equitable relief under § 502(a)(3) of ERISA but ERISA estoppel claim is foreclosed by the express terms of the Policy. Barnette v. Sun Life Assurance Company of Canada, et al., No. CV 4:15-3720, 2016 WL 1384688 (S.D. Tex. Apr. 7, 2016). Plaintiff brought a breach of fiduciary duty claim pursuant to § 502(a)(3), 29 U.S.C. § 1132(a)(3), alleging that Defendants mishandled Plaintiff’s late spouse’s request to port his life insurance and failed to inform him of his other options under the policy. Defendants moved to dismiss, which the court granted and denied in part. The court found that it is clear that Plaintiff’s request for monetary relief in the form of an equitable surcharge is consistent with a § 502(a)(3) claim and rejected Defendants’ contention that this theory of relief indicates that Plaintiff’s claim is effectively a § 502(a)(1)(B) claim. The court also found that Plaintiff’s request for reformation of the plan is a possible form of relief. But, the court determined that Plaintiff’s equitable estoppel claim fails because the Fifth Circuit has made clear that a party may not rely on an oral modification of a written plan’s terms.

Disability Benefit Claims

Sixth Circuit

United of Omaha Life Insurance Company acted arbitrarily and capriciously in denying Lyme disease disability claim; remedy is remand for full and fair review. Myers v. Mutual of Omaha Life Insurance Company, No. 4:14CV2421, 2016 WL 1223278 (N.D. Ohio Mar. 29, 2016) (Judge Benita Y. Pearson). The court found that United of Omaha Life Insurance Company abused its discretion in denying Plaintiff’s claim for long term disability benefits, where Plaintiff suffers from chronic active Lyme disease. Dr. Joseph, Plaintiff’s treating doctor, informed Defendant that Plaintiff consistently reported Lyme disease symptoms that varied in severity by month yet were nonetheless being actively treated by him and resulted in workplace restrictions. Although United was not required to accept Dr. Joseph’s conclusions, it must explain why it chose to believe its non-treating physicians, Ms. Beumer-Anderson and Dr. Crossley. Although the court agreed with United that a plan administrator is permitted to choose between two competing views of disability and have that decision upheld under arbitrary and capricious review, the court’s review is not only the insurer’s conclusion, but also its reasoning. Here, the court took issue with United’s reasoning since it denied benefits based on a selective review of Dr. Joseph’s treatment notes, quoting language favorable to the non-disability assessment while inadequately explaining its basis for rejecting Dr. Joseph’s observations favorable to Plaintiff. Because the court found this “perversion of process” enough to justify remand, it did not find it necessary to also determine whether United’s decision was also borne of a conflict of interest. The court remanded the claim to the plan administrator to consider all the evidence of Lyme disease. Because United only selectively addressed portions of Dr. Joseph’s treatment notes, the court found it impossible to determine whether Plaintiff will ultimately be found to be disabled.

Eighth Circuit

Denial of long term disability benefits is not an abuse of discretion. Ganter v. Sun Life Assurance Company of Canada, et al., No. 1:14-CV-1064, 2016 WL 1268288 (W.D. Ark. Mar. 31, 2016). Plaintiff worked as a licensed practice nurse before claiming disability due to a fractured back, daily headaches, and pain, numbness, and tingling shooting down her neck and back. On abuse of discretion review of Sun Life’s decision to deny Plaintiff’s long term disability claim, the court found that Sun Life reasonably based its denial on the opinions of reviewing physicians Dr. Staci Ross (neuropsychologist), Dr. Steven Graham (neurologist), and Dr. Calvin Fuhrmann (internal and pulmonary medicine), along with the medical examination notes from Plaintiff’s treating physicians. The court explained that while the treating physicians’ opinions were that Plaintiff should remain off work, the objective evidence does not reflect that Plaintiff has any functional impairment. The court found the record unclear as to how Plaintiff’s pain affected her ability to work and her treating doctors did not offer a test or explanation showing that Plaintiff is functionally impaired from performing her job. In her appeal to Sun Life, Plaintiff included ten medical journal articles showing that there is no direct correlation between the level of abnormality on an MRI image and the level of pain and disability experienced by the patient, and that a physical examination of the patient, in addition to consideration of MRI images, is necessary for medical diagnosis. The court noted that the Eighth Circuit has held that no physical examination of a claimant is required and plan administrators have discretion to deny benefits based upon their acceptance of the opinions of reviewing physicians over the conflicting opinions of the claimant’s treating physicians unless the record does not support the denial. The court found that Plaintiff did not suffer from a disability as defined by the plan is reasonable and supported by substantial evidence.

Following plaintiff’s success on appeal on the issue of timeliness, district court finds in favor of Hartford on the merits of LTD claim. Mulholland v. Mastercard Worldwide, et al., No. 4:13-CV-01329-JCH, 2016 WL 1223456 (E.D. Mo. Mar. 29, 2016) (Judge Jean C. Hamilton). The district court previously determined that Plaintiff’s long term disability benefit claim was time-barred but the Eighth Circuit reversed and remanded for consideration of the merits. The court determined that Hartford’s decision to terminate Plaintiff’s benefits was supported by a reasonable explanation, including that two reviewing physicians both opined that Plaintiff presented no restrictions or limitations that would have prevented her from working. The physicians, Dr. Lowe (internal medicine) and Dr. Rummler (psychiatry) issued a peer review report identified the data and records they reviewed and relied upon in reaching their conclusions, and Plaintiff did not contest the accuracy of the data or records summarized therein. The court concluded that Hartford’s decision did not constitute an abuse of discretion and granted Defendants’ motion for summary judgment.

Ninth Circuit

Plan participant who terminated employment was no longer “Covered Person” entitled to claim disability benefits. Perez-Jones v. Liberty Life Ass’n Co. of Boston, No. 14-55455, __F.App’x___, 2016 WL 1320516 (9th Cir. Apr. 5, 2016) (Before: FARRIS, CLIFTON, and BEA, Circuit Judges). The Ninth Circuit affirmed the district court’s determination that Plaintiff waived her right to receive long term disability benefits by signing a severance agreement and accepting a severance package provided by her then-employer. However, the court found that the district court erred in finding that the waiver provision in the severance agreement covers Plaintiff’s claim. This is because the severance agreement waives only claims Plaintiff had “up until the day [she] sign[ed]” the severance agreement, not future claims. Plaintiff was back to work from disability at the time she signed the agreement and thus had no claim to further long term disability benefits and no ERISA claim to waive. The court affirmed the district court’s decision on the basis that Plaintiff is not a “participant” in the long-term-disability plan entitled to bring an ERISA claim. Plaintiff no longer worked for the long-term-disability plan’s sponsor at the time she sought long term disability benefits because she had already signed a severance agreement and terminated her employment. Thus, she was not a “Covered Person” under the terms of the plan entitled to claim benefits. The court found that the long term disability plan’s provision for “successive periods of disability” did not give Plaintiff a claim to vested benefits and that she is not a “participant” in the long term disability plan by virtue of her misunderstanding of the plan’s terms, even if Liberty Life or her then-employer misinformed her as to the effect of the severance agreement on her ability to claim long term disability benefits.


Sixth Circuit

Insurer’s inherent conflict supports request for discovery; pre-trial conference to address permissible scope of discovery. Card v. Principal Life Insurance Company, No. CV 5:15-139-KKC, 2016 WL 1298723 (E.D. Ky. Mar. 31, 2016) (Judge Karen K. Caldwell). In this dispute involving the denial of long term disability benefits and the parties’ discovery impasse, the court found that Principal Life’s inherent financial conflict of interest gives the court reason to be skeptical of Principal’s disability determination and entitles Plaintiff to some discovery on the conflict. Defendant challenged many of Plaintiff’s requests and interrogatories. Consistent with the recently amended Federal Rules of Civil Procedure, the court believed that a pretrial conference would provide the best forum for expediting disposition of this action and address the permissible scope of discovery. The court reminded the parties of their duty under the amended rules to secure the just, speedy, and inexpensive determination of every action.

ERISA Preemption

Ninth Circuit

IIED claim related to MetLife’s conduct during the processing of disability claim is not preempted by ERISA. Kresich v. Metro. Life Ins. Co., No. 15-CV-05801-MEJ, 2016 WL 1298970 (N.D. Cal. Apr. 4, 2016) (Magistrate Judge Maria-Elena James). Plaintiff asserted a claim for intentional infliction of emotional distress (“IIED”) arising from Defendant Metropolitan Life Insurance Company’s conduct during the processing of his claim for long term disability benefits. Specifically, Plaintiff alleged that MetLife ignored his correspondence, demanded time extensions, intimidated him into attending multiple IMEs and often delaying them, accused him of lying about and exaggerating his disability, and purposely misstated and misrepresented statements made by Plaintiff and his treating physicians. He further alleged that MetLife knew of his physical disabilities and weak emotional state, yet it prolonged review of his claim to force him to drop his disability claim, return to work in pain, and/or accept a smaller settlement than he is rightly entitled under the Plan. Defendant moved for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that Plaintiff’s Complaint is preempted under section 514(a) of ERISA. The court denied MetLife’s motion, finding that Plaintiff’s claim is not preempted by ERISA. First, the fact that the alleged conduct occurred in the course of administering an ERISA plan does not automatically result in preemption. No allegation in Plaintiff’s Complaint references whether or not his benefits were granted or denied and the lawsuit is not based on the processing of his claim. The court found that Plaintiff’s allegations of harassing and oppressive conduct are independent of the duties of administering an ERISA plan. “If such claims were held to be preempted by ERISA, Plaintiff would be subject to such treatment with no available recourse, and a plan administrator could investigate a claim in all manner of tortious ways with impunity.” The court further found that Plaintiff’s IIED claim appears to be only tangentially related to the administration of the Plan.

Claim brought pursuant to Hawaii law concerning validity of health insurance plan lien is not preempted by ERISA. Rudel vs. Hawaii Management Alliance Association, No. 15-00539 JMS-BMK, 2016 WL 1271465 (D. Haw. Mar. 31, 2016) (Judge Barry M. Kurren). Defendant HMAA is the health insurance company that paid over $600,000 in medical expenses following Plaintiff’s catastrophic motor vehicle accident. Allstate Insurance offered to pay Plaintiff the policy limits of the driver’s insurance coverage in the amount of $1,500,000, which Plaintiff accepted. HMAA then placed a lien on Plaintiff’s settlement in the amount of $400,779.70 that it claimed it was entitled to be reimbursed. Plaintiff filed a Petition for Determination of Validity of Claim of Lien of Defendant HMAA in state court. The Petition was brought pursuant to Haw. Rev. Stat. § 431:13-103(a)(10) and § 663-10 and seeks a determination of the validity of HMAA’s claim of lien against the settlement. Defendant removed to federal court and Plaintiff moved to remand. The court found that Plaintiff does not seek to recover benefits from HMAA under the terms of his plan, nor is he attempting to enforce or clarify his rights under the terms of the plan. He also does not allege that HMAA violated ERISA, is not seeking to enjoin actions that violate ERISA, and does not seek equitable relief relating to violations of ERISA. Rather, the court found that he seeks protection from Hawaii state insurance law that limits the amount of a valid lien to the amount of the corresponding special damages recovered by the settlement. See Haw. Rev. Stat. § 663-10(a). Since Plaintiff’s claim could not have been brought under ERISA § 502(a)(1) or (3), the court found that it was not preempted and granted Plaintiff’s motion.

Life Insurance & AD&D Benefit Claims

Fifth Circuit

Life insurance proceeds, absent beneficiary designation, must be paid to lawful spouse rather than putative spouse. Myklebust v. McDermott, Inc., et al., No. 4:12-CV-3039, 2016 WL 1258411 (S.D. Tex. Mar. 31, 2016) (Judge Kenneth M. Hoyt). In this case the decedent had fraudulently attempted to obtain a legal divorce against his spouse and subsequently remarried. A judgment granting bill of review held the divorce void such that the first spouse remained the decedent’s legal spouse and the new spouse considered the putative spouse. The lawful spouse moved for summary judgment on the issue of entitlement to the decedent’s ERISA-governed life insurance benefits. The putative spouse argued that the Texas putative spouse doctrine holds that a putative wife is entitled to the same rights in the property acquired during the marital relationship as if she were a lawful wife. The court found that ERISA preempts any state law governing designation of a beneficiary. ERISA requires that an employee benefit plan shall specify the basis on which payments are made to and from the plan and that a plan fiduciary make payments to the beneficiary who is designated by a participant, or by the terms of an employee benefit plan. The court found that a plain reading of the documents at issue in this case, in the absence of a beneficiary designation, requires that the life insurance proceeds be paid to the lawful surviving spouse.

Sixth Circuit

Judgment of Divorce is a QDRO and life insurance benefits payable to former spouse. Metropolitan Life Ins. Co. v. Blevins, et al., No. 15-CV-11663-DT, 2016 WL 1242434 (E.D. Mich. Mar. 30, 2016) (Judge Denise Page Hood). MetLife filed an Interpleader action against Defendant Blevins (decedent’s spouse at time of death) and Defendant Leckemby (decedent’s former spouse) to determine the proper beneficiary of life insurance proceeds. The relevant facts are as follows: In 1977, the decedent designated Leckemby as a beneficiary to his life insurance proceeds provided by his employer, but they divorced in 1992. The Judgment of Divorce stated that Leckemby must be an irrevocable beneficiary on any life insurance policy until the youngest child reached the age of 19 ½. The Judgment of Divorce was amended in 1995 with no express language governing any life insurance policy, including anything that expressly revokes Leckemby’s beneficiary status. Blevins and the decedent were married in 2004 and the decedent died in 2014. The Plan administrator has no record that the 1977 beneficiary designating Leckemby was replaced at any time. The court found that the Judge of Divorce is a Qualified Domestics Relations Order (“QDRO”) even though it did not strictly comply with the technical requirements set forth in 29 U.S.C. Section 1056(d)(3). And, based on these facts, the court found that summary judgment must be entered in Leckemby’s favor.

Seventh Circuit

AD&D claim denial upheld where administrator reasonably determined that death did not result directly from an accident and independently of all other causes. Prather v. Sun Life Fin. Distributors, Inc., No. 14-3273, __F.Supp.3d___, 2016 WL 1242093 (C.D. Ill. Mar. 29, 2016) (Judge Richard Mills). This case involves a denied claim for accidental death and dismemberment benefits for Plaintiff’s deceased husband, who died from deep vein thrombosis and a pulmonary embolism, which Plaintiff alleges was the direct result of an accident-related injury and which Defendant contends developed subsequent to surgical repair of a ruptured Achilles tendon. The decedent ruptured his left Achilles tendon while playing basketball. Plaintiff experienced lower left extremity swelling and he was advised to keep his leg elevated until his surgery one week later. The surgery was without operative complications but decedent passed away three weeks later, minutes after a pulmonary embolism. The policy specifies that the “bodily injuries” must “result directly from an accident and independently of all other causes” and, further, that Sun Life “will not pay a benefit for any loss that is caused, either directly or indirectly, or contributed to by … Medical or surgical treatment.” Plaintiff admitted that the decedent died of a known complication of the surgical repair of his ruptured Achilles tendon and, in light of this admission, the court could not conclude that Sun Life’s decision to deny the claim was arbitrary and capricious. The court found that there is no evidence suggesting that Sun Life’s financial conflict of interest affected the denial of benefits. The court granted summary judgment in favor of Defendant.

Medical Benefit Claims

Third Circuit

Retiree health benefits are not vested. Grove v. Johnson Controls, Inc., et al., No. 1:12-CV-02622, 2016 WL 1271328 (M.D. Pa. Mar. 31, 2016) (Judge Sylvia H. Rambo). In this action brought pursuant to ERISA and the LMRA, Plaintiffs alleged that Defendants violated their rights to retiree health benefits. Following a lengthy analysis, the court concluded that the “clear and express” language requirement in Int’l Union United Aerospace and Agric. Implement Workers of Am., U.A.W. v. Skinner Engine Co., 188 F.3d 130 (3d Cir. 1999) remains binding law in the Third Circuit post-M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926, 933 (2015). After analyzing the various SPDs and Plan documents as to each Subclass, the court granted summary judgment to Defendant. With respect to Subclass A, Plaintiffs concede that no contract provision in the 1981 CBA clearly and expressly states that retiree benefits are vested and unalterable, and the court cannot conclude that the provision continuing medical benefits after retirement creates an ambiguity. With respect to Subclasses C, D, and E, the court found that the CBAs and Group Insurance Programs have explicit durational clauses providing the exact date and time when those documents ceased to be in effect, as well as additional language contemplating the termination of retiree health benefits. As such, the “until death” language does not constitute clear and express vesting language sufficient to overcome the durational provisions. As to Subclasses B and F, the court found that reservation of rights language is clear and unambiguous, and forecloses any notion of vesting. Further, any testimony regarding the Union’s alleged resistance to the inclusion of the language is irrelevant.

Pension Benefit Claims

Third Circuit

Former spouse has separate interest in 50% of decedent’s pension and a valid QDRO but administrator must determine whether separate interest was extinguished upon death. Einhorn v. McCafferty, et al., No. 5:14-CV-06924, 2016 WL 1273937 (E.D. Pa. Mar. 31, 2016) (Judge Joseph F. Leeson). In this case, a deceased Teamsters Pension Plan participant was married to his former spouse, Deborah, for 22 years. As part of their divorce proceedings they agreed that Deborah is “entitled to half of his work pension.” The participant subsequently married but then passed away after being married for less than a year. At the time of death, the participant had not yet reached the minimum age to begin receiving benefits. The surviving spouse, Susan, began receiving pre-retirement surviving spouse benefits, which she is entitled to for only sixty monthly payments due to the length of the marriage. On the question of Deborah’s entitlement to benefits, the court concluded that Deborah has an enforceable, separate interest in fifty percent of the decedent’s pension, and a valid QDRO under ERISA to enforce that interest, provided that the terms of the Plan did not extinguish that interest upon his death. If Deborah’s interest was extinguished, her only resort would be to seek to be treated as his surviving spouse so that she could collect the Plan’s qualified preretirement survivor annuity. But, the original divorce decree did not explicitly mention surviving spouse rights, which means it is not sufficient under ERISA to secure her those rights, and it cannot be amended now. The court found that Deborah lost her chance to be treated as the decedent’s surviving spouse and her ability to obtain any benefits from the pension depends upon whether her separate interest survived the death. The court determined that the Plan administrator must make that initial determination at first instance. However, the court found that Deborah cannot obtain an interest in the survivor annuity that Susan is currently receiving, which means that if Deborah’s separate interest was extinguished by the participant’s death, she is not entitled to any benefits.

Sixth Circuit

Application of pension plan amendment violates anti-cutback rule. Carter v. Arkema, Inc. & Arkema Inc. Retirement Benefits Plan, No. 3:13CV-01241-JHM, 2016 WL 1274594 (W.D. Ky. Mar. 31, 2016) (Judge Joseph H. McKinley, Jr.). Plaintiffs allege that the Arkema Inc. Retirement Benefits Plan (“Arkema plan”), along with the other plans, have been subjected to unilateral changes imposed by the employer or the administrator, or both, which have reduced the participants’ credit years of service and deprived plan participants of vested rights in contravention of ERISA. Plaintiffs were former employees of M&T Chemicals before it was sold to Arkema’s corporate predecessor. Plaintiffs were participants in the M&T Chemicals pension plan and then became participants in the Arkema plan. The question before the court is whether Arkema’s use of the adjusted service date under its Primary Method of calculating Plaintiffs’ retirement pension benefits pursuant to the 1997 Plan Amendment deprived Plaintiffs of accrued benefits under the 1994 Plan and violated the anti-cutback rule. The court found that Plaintiffs have shown that their accrued benefits decreased because of the 1997 Plan Amendment as interpreted by Defendants. The court further found that the 1994 Plan clearly and unambiguously provides that a former participant under the M&T Chemical Pension Plan shall receive an Accrued Benefit under the Plan equal to the benefit to which a participant would be entitled under the 1994 Plan based on all of the participant’s service with the Company. But, Defendants application of the 1997 Amendment does not consider all of the participants’ service with the Company. The court found that Plaintiffs are entitled to accrued benefits equal to the benefits to which the Plaintiffs would be entitled to under the Arkema Plan based on all of the Plaintiffs’ service with M&T Chemicals and Arkema. Plaintiffs also alleged that the Arkema Plan, and any other plans in which the individual Plaintiffs were participating, revoked the 85-year rule, depriving Plaintiffs of the option of early retirement without penalty. The court found that the Rule of 85 applies only to the years of service before the amendment and granted in part Plaintiffs’ motion for partial summary judgment on the Rule 85 claim. However, the court found that two of the plaintiffs did not qualify for the plant closing early retirement benefit under the M&T Combined Plan. While they may “grow into” eligibility for an early retirement-type subsidy or benefits under the anti-cutback rule, these Plaintiffs did not satisfy all of the eligibility requirements of the pre-amendment early retirement benefit. The court also found that these Plaintiffs are not entitled to Arkema’s retirement medical coverage.

Plan Status

Eleventh Circuit

Plaintiff plausibly alleged that an Executive Plan is not a Top Hat Plan and he is entitled to vested retirement benefits. Magasrevy v. Retirement Committee, Plan Administrator of Executive Retirement Plan of Thermal Ceramics Latin America, No. 15-62143-CIV, 2016 WL 1321406 (S.D. Fla. Apr. 5, 2016). Counts II and II of Plaintiff’s complaint seek clarification that the Executive Plan is not a Top Hot Plan, and based on that finding, to recover vested retirement benefits under the Plan. ERISA exempts certain employee benefit plans-known as Top Hat Plans-from many of the law’s substantive provisions. A Top Hat Plan is a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. Defendants moved to dismiss these claims, arguing that the Executive Plan is a Top Hat Plan as a matter of law. The question is whether the Executive Plan is “unfunded” within the meaning of ERISA. Here, the Executive Plan provides that a Trustee “shall establish a trust Fund in connection with the Plan for the purpose of receiving the contributions and paying the benefits provided by the Plan.” Further, the Plan envisions that the “contributions” to the fund will be made by the companies “whose employees may be eligible for participation in the Plan.” In a letter to Plaintiff, the company stated that: “This [Executive] Plan is completely funded by the Company. You are not required to contribute to the Plan.” The Executive Plan describes its “Provision of Benefits” as follows:

All benefits under the Plan will be paid out of the Fund and any Member or other person having any claim under the Plan must look solely to the assets of the Fund for such benefits. No person shall have any right to, or interest in, any part of the assets of the Fund except as and to the extent provided from time to time under the Plan and the Trust Agreement. Under no circumstances shall any liability attach to any Participating Company, or any officer, shareholder, director or employee of any Participating Company for payment of any benefits or claims hereunder.

The court found that Plaintiff has plausibly alleged that the Executive Plan is not a Top Hat Plan and he is entitled to vested retirement benefits owed to him under the Plan.

Pleading Issues & Procedure

Seventh Circuit

ERISA Section 502(a)(3) claim dismissed as duplicative of ERISA Section 502(a)(1)(B) claim. Craft et al. v. Health Care Service Corporation, No. 14 C 5853, 2016 WL 1270433 (N.D. Ill. Mar. 31, 2016) (Judge Virginia M. Kendall). In their claim under ERISA Section 502(a)(1)(B), Plaintiffs seek money benefits owed and a declaratory judgment that blanket exclusions of coverage for residential treatment for mental illness are void under the Parity Act. The court found that Plaintiffs’ claim under ERISA Section 502(a)(3)-repackaged as a claim seeking an injunction requiring Defendants to reprocess all claims for RTC denied within the statute of limitations-seeks essentially the same relief and is based on the same underlying conduct. The court noted that the Seventh Circuit has yet to decide whether a claim for benefits under Section 502(a)(1)(B) bars a Section 502(a)(3) claim for equitable relief under Varity Corp. v. Howe, but it has recognized that “a majority of the circuits” have interpreted Varity to mean that “if relief is available to a plan participant under subsection (a)(1)(B), then that relief is un available under subsection (a)(3).” The court found that certain Plaintiffs’ claims for relief under subsection (a)(3) are dismissed as duplicative of the identical claims brought under subsection (a)(1)(B). The court found that the relief sought pursuant to the former section would be available under the latter, such that Plaintiffs would be fully compensated if they prevail under the latter section.

Tenth Circuit

Allegations of fraud depriving plaintiff of status as a plan participant or beneficiary does not create ERISA standing. Yarbary v. Martin, No. 15-3224, __F.App’x___, 2016 WL 1273027 (10th Cir. Apr. 1, 2016) (Before HOLMES, MATHESON, and PHILLIPS, Circuit Judges). Plaintiff appealed from the district court’s order dismissing his complaint for lack of subject-matter jurisdiction and from a separate order denying his motion for relief from judgment, wherein he sought declaratory and injunctive relief as well as punitive damages related to the beneficiary designation of a life insurance policy governed by ERISA. The Tenth Circuit affirmed. On the issue of subject-matter jurisdiction, the court found that it is beyond peradventure that Plaintiff was not a participant or a beneficiary of the decedent’s policy at the time he filed his complaint. Therefore, he lacked standing under ERISA. The court found that Plaintiff’s allegations of fraud in the change of his beneficiary status does not alter the standing calculus since ERISA standing may not be based on the notion that, but for the wrongful behavior, the plaintiff would have been a participant or beneficiary under the plan.

Provider Claims

Second Circuit

Plaintiff chiropractors’ ERISA claims against claims administrator dismissed for lack of standing due to valid anti-assignment provisions. Merrick v. UnitedHealth Grp. Inc., No. 14 CIV. 8071 (ER), 2016 WL 1229616 (S.D.N.Y. Mar. 25, 2016) (Judge Ramos). In this putative class action brought by four chiropractors for purported violations of the ERISA claims regulation, United moved to dismiss three of the four Plaintiffs on the basis that they lack standing. Here, the relevant ERISA-governed healthcare plans contain anti-assignment provisions. The court found that the three Plaintiffs do not have statutory standing to bring an ERISA Section 502(a) claim simply because they have a right to payment under the plan. The court noted that the Second Circuit has not yet spoken on the effect of assignments made in violation of anti-assignment provisions in ERISA plans but other Circuit Courts have concluded that where an ERISA-governed plan contains an unambiguous anti-assignment provision, assignments under that plan are invalid. Further district courts in the Second Circuit have followed this reasoning and, applying federal common law, have found that where plan language unambiguously prohibits assignment, an attempted assignment will be ineffectual and a healthcare provider who has attempted to obtain an assignment in contravention of a plan’s terms is not entitled to recover under ERISA. Lastly, United did not waive the anti-assignment provision by providing direct payment to Plaintiffs. Nor did it waive the provision by failing to reference it in its communications with Plaintiffs. United requested documentation to support its previous payments and ultimately recouped payments from Plaintiffs for their failure to comply, but the court found that nothing about these requests suggest that Plaintiffs were being treated as assignees of their patients’ benefits rather than as providers United has the discretion to pay directly. The court granted United’s motion to dismiss with prejudice since United did not waive, nor is estopped from relying on the anti-assignment provision, which is valid and enforceable.

Retaliation Claims

Eleventh Circuit

Plaintiff adequately pled Section 510 claim that he was terminated to interfere with his right to future retirement benefits. Magasrevy v. Retirement Committee, Plan Administrator of Executive Retirement Plan of Thermal Ceramics Latin America, No. 15-62143-CIV, 2016 WL 1321406 (S.D. Fla. Apr. 5, 2016). Here, Plaintiff claimed that Defendant TCI interfered with his potential rights under the Executive Plan by terminating his employment to prevent him from obtaining early or normal retirement benefits. Defendant TCI moved to dismiss on the basis that Plaintiff has not pleaded facts showing that Defendants terminated him to avoid paying benefits, including that Plaintiff has not demonstrated “close temporal proximity” between his termination date and his eligibility for retirement benefits. The court found that aside from the timing of his discharge, Plaintiff has pleaded more than enough facts to state a plausible claim under § 510. He alleged that, on multiple occasions, TCI management expressed concerns about having to pay Executive Plan benefits. He also alleged that in 2006, TCI’s Director of Compensation and Benefits said that something had to be done about the Executive Plan before the “first executive reaches age 65 and claims his non-existent pension!” In the year before TCI discharged Plaintiff-without cause and despite his strong job performance-his supervisor asked him to provide a detailed analysis of the value of his early and normal retirement benefits under the Executive Plan, and to provide an explanation of his understanding regarding the Company’s obligation with regard to such benefits.. The court found that these and other facts plausibly allege that TCI had the specific intent to interfere with Plaintiff’s ERISA rights.

Statute of Limitations

Tenth Circuit

Claims challenging changes to retiree prescription drug benefits are time-barred. International Brotherhood of Electrical Workers, Local #111, et al. v. Public Service Company of Colorado & Xcel Energy Inc., et al., No. 12-CV-01694-PAB-MEH, 2016 WL 1258544 (D. Colo. Mar. 31, 2016) (Philip A. Brimmer). This putative class action challenges Defendants’ changes to retirees’ prescription drug benefits, including a “Members Pay the Difference” (“MPD”) program. Defendants argued that Plaintiffs’ “new claims” as they relate to allegations concerning MPD are barred by the applicable statute of limitations because the MPD was implemented in January 2006. The court found that the claims related to MPD’s policy on “dispense as written” prescriptions accrued in February 2013, when Defendants informed Plaintiffs for the first time that MPD operates in a manner inconsistent with Defendants’ representation in connection with the Vandeventer Grievance (a March 2010 grievance addressing the description of MPD in a document received by an employee in anticipation of his own retirement). The court further found that because MPD was implemented on January 1, 2006, any claim that is not based on the alleged February 2013 discovery concerning MPD’s implementation was time-barred as of January 1, 2009. Thus, the court determined that the Class Representatives’ ERISA claim will be dismissed to the extent that plaintiffs allege that MPD itself violates the Plan even if retirees are not required to pay more for “dispense as written” prescriptions.

* 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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