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An ERISA Potboiler for Your End of Summer Reading Pleasure


Batal-Sholler v. Batal, No. 2:21-cv-00376-NT, 2022 WL 3357492 (D. Me. Aug. 15, 2022) (Judge Nancy Torresen).

As a general rule, the purpose of Your ERISA Watch is to summarize decisions to keep our readers abreast of developments in ERISA cases across the country without them having to read the ins and outs of every last decision for themselves. As we have said here before, we do that work so you don’t have to. However, the particulars of this case are unusually engaging and read as though they were plot points straight from the hit HBO show “Succession.” This may just be that atypical case where we encourage you to go ahead and read the whole thing yourself. A summary simply cannot quite capture the power struggle, the wicked stepmother, the absentee father, the abusive workplace, or the secret backhanded deals, to their fullest.

In broad strokes the story goes as follows: plaintiff Nancy Batal-Sholler had worked for her father Ed’s insurance company, the “Agency,” since the 1980s. Beginning in the 1990s promises were made to Nancy that she would take over the company. In 2002, it looked like that change in ownership was about to happen, until Ed had an about-face and declined to retire and hand over the company. Meanwhile, Ed and his wife, defendant Marilyn Batal, Nancy’s stepmother, had Nancy misclassified as an independent contractor at the company to deprive her of overtime pay and from participating in the Agency’s ERISA retirement plan, which was administered by Ed and then later by Marilyn.

Nancy did not learn about the plan or her independent contractor status until 2017. When she did, her relationship with the family soured. After forcing the company’s hand and changing her classification to an employee, her father, stepmother, and the Agency transferred their real estate into a trust to shield assets from Nancy, and then went behind her back and sold the company to a third party, stealing Nancy’s client list. In 2018, Nancy sued her father in state court and received a judgment against him.

Almost immediately after this, Ed died, Marilyn liquidated the ERISA retirement plan and transferred the assets to the trust, and then as representative of Ed’s estate filed a motion to vacate the judgment in the state court case alleging Nancy had committed fraud. The state court vacated that order, and the trust and Marilyn sold their properties to shell companies.

In 2021 Nancy filed this suit against Marilyn, the Agency, the Trust, and the plan in federal court. In her complaint Nancy brought state law claims, RICO claims, and ERISA claims (which included a Section 510 claim, a claim for benefits, a breach of fiduciary duty claim, and a claim for equitable relief). Defendants moved to dismiss. The district court granted the motion in part and denied it in part.

The court granted the motion to dismiss the RICO claims, finding Nancy failed to allege a plausible pattern of racketeering activity. Additionally, the court granted the motion to dismiss Marilyn as a defendant in her capacity as representative of Ed’s estate but not in her individual capacity, which was more a matter of semantics than anything else. Furthermore, the court granted the plan’s motion to dismiss.

In all other respects, and with respect to all the ERISA claims, the motion to dismiss was denied. In particular, the court rejected defendants’ argument that Nancy lacked standing to sue as she was not a participant in the plan. The court stated that Nancy’s claims were rooted in the plausible idea that she would have been a plan participant but for defendants’ actions, which conferred her with standing. Finally, the court stated that the ERISA claims as currently pled were sufficient to withstand merits challenges at the motion to dismiss stage.

Although this case may not present the usual meaty ERISA issues we typically highlight in our case of the week, we rarely encounter a decision that is as much of a beach read as this case. Stay tuned for further installments in this fascinating potboiler.

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Attorneys’ Fees

Sixth Circuit

Perkins v. General Motors, No. 4:16-CV-14465-TGB-MKM, 2022 WL 3370769 (E.D. Mich. Aug. 16, 2022) (Judge Terrence G. Berg). On January 26, 2022, the court issued an opinion and order in this case granting in part and denying in part each party’s cross-motion for summary judgment. The court granted judgment to plaintiff (the estate of Charles Fraley) against GM for a COBRA violation and awarded statutory penalty damages in the amount of $1,300. Subsequently, the court ordered plaintiff to provide documentation for any damages sustained as a result of lack of health coverage during the relevant period and to move for attorney’s fees and costs. Plaintiff was late in responding to the court’s orders and in filing motions. Before the court were several of these tardy motions. Plaintiff moved for a new trial and to amend judgment, as well as for attorney’s fees and costs, an order of compliance, and to substitute a party. All the motions with the exception of the motion to substitute party (stemming from the representative of the estate’s death) were denied. Not only were the motions found to be untimely, but the court also denied them on their merits as well. To begin, the court concluded the motion to amend made no argument of mistake or fraud justifying relief under Rule 60 or any claim of error of law or manifest injustice that would justify relief under Rule 59(e). The court also declined to award further damages, as the estate was unable to prove that Charles Fraley incurred any medical expenses during the relevant time when he was without coverage. The motion for fees and costs was also found to be insufficiently detailed on the number of hours worked, the reasonableness of the requested hourly rate, and seemingly in all other respects. As this was only a partial victory, the motion was filed late, and the motion itself was threadbare, the court denied the motion. The case was thus closed.

Breach of Fiduciary Duty

Third Circuit

Grelis v. The Lincoln Nat’l Life Ins. Co., No. 15-5224, 2022 WL 3357449 (E.D. Pa. Aug. 12, 2022) (Judge Wendy Beetlestone). Kalan v. The Lincoln Nat’l Life Ins. Co., No. 14-5216, 2022 WL 3350358 (E.D. Pa. Aug. 12, 2022) (Judge Wendy Beetlestone). This week’s installment of the John Koresko fallout suits brings you two more decisions in cases brought against The Lincoln National Life Insurance Company in front of Judge Beetlestone. The court’s rulings in the two cases were identical. In the first suit, plaintiffs are Howard Grelis and Howard Grelis, M.D., Inc.; in the second, plaintiffs are Harvey and Deborah Kalan, and Harvey A. Kalan, M.D. Inc. Plaintiffs in both suits lost money in their life insurance policies through Mr. Koresko’s scheme, and both asserted claims against Lincoln under ERISA Sections 502(a)(2) and (3), as well as claims for RICO violations, and common law claims of fraud, breach of fiduciary duty, knowing participation in a breach of fiduciary duty, breach of the obligation of good faith, and negligence. Plaintiffs moved for summary judgment on their ERISA claims. Lincoln cross-moved for summary judgment on all of plaintiffs’ claims. First, the court addressed the ERISA claims, in which plaintiffs argued that Lincoln acted as a fiduciary when it issued a policy loan in 2009 and when it changed the owner of the policy in 2010. Lincoln argued that it should be granted summary judgment in its favor on the ERISA claims because the claims are untimely, the actions at issue were ministerial and therefore cannot give rise of fiduciary status, and the actions were not the proximate cause of injuries plaintiffs sustained. The court stated that it could not determine based on the parties’ current briefing whether the ERISA claims are time-barred, and therefore concluded Lincoln failed to meet its burden to prove the claims were untimely. The court also rejected Lincoln’s ministerial acts argument and held that regardless of the importance of a task, if Lincoln is found to have issued the loan or changed the policy ownership at the request of someone who did not have authority to take these acts, it will be deemed a fiduciary for its role in those actions. Finally, the court rejected Lincoln’s causation argument, holding the complaints as pled sufficiently illustrate their chains to connect Lincoln’s actions to the resulting injuries. Nevertheless, plaintiffs were not granted summary judgment on their Section 502(a)(2) claims as the court felt genuine issues of material fact preclude it from awarding summary judgment at this stage. As for the Section 502(a)(3) claims, the court awarded summary judgment in favor of Lincoln. The court stated that plaintiffs failed to include evidence to demonstrate that Lincoln knew of Koresko’s fiduciary breaches or explain what prohibited transaction Lincoln allegedly engaged in, and without these necessary elements their claim failed. As for the RICO claims, the court granted summary judgment in favor of Lincoln, concluding that plaintiffs’ claims were substantively deficient. Finally, Lincoln’s motion for judgment on the common law claims was denied because the court could not ascertain whether Pennsylvania or California law applies.

Mator v. Wesco Distribution, Inc., No. 2:21-CV-00403-MJH, 2022 WL 3566108 (W.D. Pa. Aug. 18, 2022) (Judge Marilyn J. Horan). Plaintiffs Robert and Nancy Mator on behalf of themselves and on a class-wide basis as participants of the Wesco Distribution Inc. Retirement Savings Plan asserted claims of breach of fiduciary duty of prudence and failure to monitor against Wesco Distribution Inc., the plan’s investment committee, and Doe defendants. Plaintiffs challenged defendants’ administration of the plan. They alleged that defendants breached their duties by offering retail rather than institutional share classes and through the excessive direct and indirect fees charged to participants for the plan’s recordkeeping services provided by Wells Fargo. For the third time, the court dismissed plaintiffs’ complaint. Plaintiffs attempted to address pleading deficiencies the court had previously pointed to, namely lack of specificity of the services provided and a lack of appropriate comparators or benchmarks for the challenged fees and investments. In plaintiffs’ view, their amended complaint “thoroughly sets forth factual allegations about the type, scope, and caliber of services provided to the Plan.” Plaintiffs are naturally at a disadvantage pre-discovery, and as the non-moving party the court is required to construe the complaint in their favor. Nevertheless, in the eyes of the court the complaint could not be seen as plausible, even under favorable and flattering candlelight. In quoting the Supreme Court’s Hughes decision, the court found the second amended complaint to be a “meritless goat.” Without more details, the court was simply unwilling to allow plaintiffs to engage “in a speculative fishing expedition without a plausible factual basis.” The complaint, the court felt, simply did not satisfy either the Twombly/Iqbal or the Sweda pleading standard. Thus, the claims were both dismissed, and further amendment, the court concluded, would be futile.

Ninth Circuit

Diaz v. Westco Chemicals, Inc., No. 2:20-cv-02070-ODW (AGRx), 2022 WL 3566817 (C.D. Cal. Aug. 19, 2022) (Judge Otis D. Wright, II). Plaintiffs Merry Russitti Diaz and Kater Perez brought a breach of fiduciary duty suit against Westco Chemicals, Inc. and its owners on behalf of a certified class for harm they suffered as defined benefit pension plan participants stemming from Westco’s mismanagement of the plan. The breaches and damages mainly stem from the plan’s previous third-party administrator and his failed attempt to freeze the plan in 2010. Because the proper steps were not taken to actually freeze the plan and because the then plan administrator had caused other operational flaws including failure to comply with IRC codes for its favorable tax status, Westco retained a new administrator and engaged a benefits law firm to help fix the problems. Westco eventually took steps to properly fund the plan and by September 2021, the plan’s Adjusted Funding Target Attainment Percentage was over 95%, and the plan is no longer at risk of defaulting on its obligations with the plan sufficiently funded to pay the present value of all participants’ accrued benefits. It should be noted, however, that the statement of facts outlined both in the decision and summarized above are Westco’s. That’s because the court began its decision by reprimanding plaintiffs’ Statement of Genuine Disputes for failing to address Westco’s assertions in their Statement of Uncontroverted Facts and Conclusions of Law, and thus in the court’s eye plaintiffs’ statement did not meet the requirements or instructions outlined in the Central District of California’s local rules. Having run through the story of the wrongdoing, the court turned to defendants’ motion for summary judgment. The court in this order concluded plaintiffs lack standing under the Supreme Court’s test in Thole. “To the extent any of Westco’s prior breaches and operational errors with respect to the Plan placed the Plan at any risk of default, those errors have been corrected such that they no longer pose any such risk. In short, Westco’s undisputed evidence demonstrated that the plan is not currently at risk of any sort of default.” Given the court’s conclusion that plaintiffs lack standing, summary judgment was granted to defendants. Finally, in addressing plaintiffs’ argument challenging the plan’s failure to provide meaningful benchmarks for their accrual rate (0.1%), the court stated that a plan’s failure to provide meaningful benchmarks results in a plan losing its tax-favored status but does not “provide a participant with a civil cause of action.” Even accepting plaintiffs’ argument that the plan language expressly requires “the employer must ensure that the benefit formula…provide(s) meaningful benefits within the meaning of Code Section 401(a)(26),” the court stated that the argument fails here because it is based on individual injuries, not plan-wide injuries which plaintiffs sought in their complaint. “At the risk of stating the obvious, the Plan’s failure to pay more money to Plaintiffs did not harm the Plan…it harmed Plaintiffs as individuals.” For this reason too the court found summary judgment in Westco’s favor to be appropriate.

Disability Benefit Claims

Fourth Circuit

Shaw v. United Mut. of Omaha Life Ins. Co. of Am., No. 21-1818, __ F. App’x __, 2022 WL 3369525 (4th Cir. Aug. 16, 2022) (Before Circuit Judges Gregory, Niemeyer, and Traxler). Appellant Paramount Shaw appealed the district court’s decision in which United Mutual of Omaha Life Insurance Company was granted judgment on the pleadings in this disability suit. The district court determined that under abuse of discretion review, United’s denial of the claim was reasonable given its request to Mr. Shaw for further medical documentation that was never provided. The policy expressly states that failure to provide supporting information upon request is grounds for invalidating a claim. On appeal the Fourth Circuit agreed with United’s decision and with the lower court. “The Policy’s requirement that the claimant prove his disability is appropriate.” Specifically, the Fourth Circuit stated that “plan administrators may not impose unreasonable requests for medical evidence,” but the scope of the request in this instance was not relevant given Mr. Shaw’s silence at the time and failure to “object to the requests and (to) assert any basis for his failure to respond.” Furthermore, given the lack of evidence from Mr. Shaw about a history of biased decisions, the Fourth Circuit was unconvinced that United’s conflict of interest factored into Mr. Shaw’s denial. For these reasons, the court affirmed.

Gilbert v. Principal Life Ins. Co., No. TDC-21-0128, 2022 WL 3369537 (D. Md. Aug. 16, 2022) (Judge Theodore D. Chuang). Plaintiff Sharon Gilbert is a biostatistician who became disabled in 2018, suffering from headaches, fevers, chills, fatigue, chest pain, joint pain, numbness, and stomach problems. She was diagnosed with Lyme disease and received long-term antibiotic treatment from a physician specializing in this treatment. Ms. Gilbert received long-term disability benefits through her ERISA-governed plan administered by defendant Principal Life Insurance Company. After 24 months, Principal ended Ms. Gilbert’s benefits, asserting the plan’s 24-month limitation period for mental health disorders and what the plan defined as “special conditions” which included headaches of several kinds, chronic fatigue syndrome, fibromyalgia, and several musculoskeletal disorders. Having exhausted an administrative appeal, Ms. Gilbert brought this suit for benefits. Ms. Gilbert argued that the medical evidence supported her diagnosis of Lyme disease and proved that she qualifies for disability benefits under her plan’s requirements and is unable to perform the duties of her occupation. She also argued that her award of Social Security disability benefits for Lyme disease should weigh in her favor. The parties filed cross-motions for summary judgment. The court reviewed the denial under the de novo standard, and articulated that Ms. Gilbert had the burden to prove she is disabled under the plan. Physicians had mixed opinions about whether Ms. Gilbert had Lyme disease, and one diagnostic test for Lyme disease was inconclusive at best. Principal’s reviewers not only rejected Ms. Gilbert’s Lyme disease diagnosis, but also found her subjective symptoms to likely be psychosomatic. In arguing for judgment in its favor, Principal stated that the record contradicts a diagnosis of Lyme disease and Ms. Gilbert’s symptoms are instead caused by “somatic symptom disorder,” and thus Ms. Gilbert’s benefits were properly terminated after the policy’s 24-month limitation period for mental health and special conditions. The court in its review of the administrative record determined that the evidence in support of a diagnosis of Lyme disease was “exceedingly limited. Here eight different physicians offered opinions that reject or are inconsistent with the position that Gilbert’s symptoms and disability were attributable to Lyme disease…significantly, three treating physicians who were selected by Gilbert.” The Social Security Administration’s different conclusion did not alter the court’s opinion. Furthermore, the court agreed with Principal that “Gilbert’s symptoms and disability were caused at least in part by (somatic symptom disorder),” as well as by other conditions that fall within the plan’s definition of special conditions. Having reached this conclusion, the court agreed with Principal that Ms. Gilbert is no longer eligible for long-term disability benefits under her plan, and accordingly granted summary judgment against Gilbert in favor of Principal.

Discovery

Eighth Circuit

Radle v. Unum Life Ins. Co. of Am., No. 4:21-CV-01039-NAB, 2022 WL 3355730 (E.D. Mo. Aug. 15, 2022) (Magistrate Judge Nannette A. Baker). After plaintiff Michael Radle’s long-term disability benefits were terminated under his plan’s 24-month limitation for disabilities caused by mental illnesses, Mr. Radle sued Unum Life Insurance Company for wrongful denial of disability benefits under Section 502(a)(1)(B), and in the alternative for breach of fiduciary duty under Section 502(a)(2). Mr. Radle argues in his complaint that his disabling post-concussion syndrome is a physical diagnosis not subject to the plan’s limitation. Mr. Radle moved for discovery and argued that he is entitled to discovery on both his causes of action because discovery is necessary for breach of fiduciary duty claims, and procedural irregularities and Unum’s conflict of interest establish good cause for discovery beyond the administrative record on his claim for benefits. Mr. Radle sought the following discovery: (1) information regarding Unum’s claim handling instructions, procedures, and manuals; (2) deposition of the Unum claims reviewer who oversaw Mr. Radle’s claim; (3) written discovery identifying Unum’s reviewing physicians and vocational experts who weighed in on Mr. Radle’s claim; (4) depositions of those identified individuals; and (5) compensation guidelines for medical reviewers as well as information on how bonuses are awarded. In this order the court granted Mr. Radle’s discovery motion. The court agreed that discovery in this instance is warranted because Mr. Radle showed good cause, and this action “would benefit from consideration of facts likely outside the administrative record.”

Life Insurance & AD&D Benefit Claims

Sixth Circuit

Metropolitan Life Ins. Co. v. Mowery, No. 2:21-cv-168, 2022 WL 3369539 (S.D. Ohio Aug. 16, 2022) (Magistrate Judge Chelsey M. Vascura). MetLife commenced this interpleader action to determine the proper beneficiary for approximately $50,000 in life insurance benefits from the plan of the late Brian Ogershok. Before his death, Mr. Ogershok had designated defendant Patricia Mowery as his beneficiary, claiming that she was his domestic partner. However, Mr. Ogershok was still married to defendant Kimberly Ogershok, both at the time when he made his designation and at the time of his death. Mr. Ogershok had also named his two children as co-equal contingent beneficiaries. Ms. Ogershok was never designated as a beneficiary at the time of Mr. Ogershok’s death. However, in the end only Ms. Ogershok seemed to want the money. Ms. Mowery never appeared in the case and also failed to meet the plan’s definition of domestic partner. Additionally, the children signed waivers of their interest in favor of awarding the benefits to their mother. In this order the court granted Ms. Ogershok’s motion to enter judgment in her favor, finding that under these strange circumstances “payment of Plan benefits to Ms. Ogershok (is) appropriate.”

Ninth Circuit

Stolte v. Securian Life Ins. Co., No. 21-cv-07735-DMR, 2022 WL 3357839 (N.D. Cal. Aug. 15, 2022) (Magistrate Judge Donna M. Ryu). Plaintiff Shannon Stolte is the beneficiary of a life insurance plan of her late husband. Ms. Stolte sued Securian Life Insurance Company under Section 502(a)(1)(B) after her claim for the $710,000 life insurance benefits was denied. The story of the denial is a rather interesting one. It begins with her husband leaving his job at Allstate. Mr. Stolte resigned on Friday, January 22, 2021, and proceeded to work the rest of the day. The following Monday, January 25, 2021, Allstate sent Mr. Stolte a conversion notice which stated that Mr. Stolte’s voluntary separation date was Saturday, January 23, 2021. The notice also informed the family that the conversion window for changing the policy to an individual life insurance policy was 31 days. Our story unfortunately ends 32 days later, on February 24, 2021, the day Mr. Stolte died. This strange fairytale-like timing of Mr. Stolte’s death, coming one day past the window wherein he would have been entitled to a death benefit regardless of conversion, was of course the grounds for the denial. Reading the plan language simply and technically, Securian denied the claim, and on these same grounds moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). In granting the motion to dismiss, the court agreed with Securian’s reading of the plan and its eligibility requirements. “As of January 23, 2021, (Mr. Stolte) was no longer an employee and thus did not meet Element 1 of the Plan’s eligibility provision…he then had 31 days to convert his group policy to an individual policy, but he did not do so. He died more than 31 days after his eligibility for insurance coverage terminated. For these reasons, Plaintiff is not entitled to a death benefit. As harsh and unlucky as this result may be, no plausible reading of the FAC and the Plan documents can support a different result.” Accordingly, the denial was found to be correct, and Ms. Stolte’s Section 502(a)(1)(B) claim was determined to be illegally insufficient. As to amendment, the court rejected Ms. Stolte’s request to amend her Section 502 claim for benefits, as amendment would be futile, but granted Ms. Stolte’s request to state a Section 503 full and fair review claim should she wish to do so.

Pension Benefit Claims

Fifth Circuit

Pedersen v. Kinder Morgan Inc., No. 4:21-CV-03590, 2022 WL 3356414 (S.D. Tex. Aug. 12, 2022) (Judge Keith P. Ellison). A series of four corporate mergers resulted in changes to and diminished benefits under the Kinder Morgan Retirement Plan, which plan participants in this suit are challenging under ERISA on behalf of themselves and a putative class of other current and former employees and participants. Plaintiffs asserted claims under Section 502(a)(1)(B) and 502(a)(3). They allege (1) the changes to the plan violate ERISA’s anti-cutback provision, (2) the summary plan description failed to alert participants of the decreased benefits in a manner that participants could understand, (3) defendants’ interpretation of the plan was in breach of their fiduciary duties, and (4) the actuarial assumptions used violate ERISA Section 204(c)(3)’s requirements. Defendants moved for judgment on the pleadings. Defendants’ motion was granted in part and denied in part. First, the court addressed whether plaintiffs could assert claims under both Section 502(a)(1)(B) and Section 502(a)(3). The answer for the most part was yes, as only Section 502(a)(3) allows the court to amend the plan which plaintiffs allege is in violation of ERISA provisions. There was however a single claim plaintiffs asserted under Section 502(a)(3) that the court understood to be properly pled under Section 502(a)(1)(B) because it requires the court to interpret rather than amend the plan’s benefits calculation method. Therefore, the court granted defendants’ motion for judgment on the pleadings on this claim. Additionally, the court granted defendant Kinder Morgan Inc.’s motion for judgment on the pleadings for the Section 502(a)(1)(B) and the breach of fiduciary duty claims brought against it, as it did not have administrative control of the plan and did not exercise any discretionary authority or control with respect to the benefit denials. In all other respects, defendants’ motion for judgment on the pleadings was denied.

Pleading Issues & Procedure

Sixth Circuit

Carte v. American Elec. Power Serv. Corp., No. 2:21-cv-5651, 2022 WL 3447315 (S.D. Ohio Aug. 16, 2022) (Judge Michael H. Watson). In 2001, defendant American Electric Power Service Corporation converted its traditional defined benefit plan into a cash-balance plan. This transition created a wear-away period for the plan’s participants during which time the employees’ pension benefits stopped growing until their hypothetical account balance under the plan’s methodology equaled the value of the benefit they had previously earned under the old defined benefit plan. Plaintiffs are plan participants who have asserted claims against American Electric and the Plan as a putative class action. Plaintiffs asserted age discrimination claims under ERISA and the Age Discrimination in Employment Act, a violation of ERISA Section 204(b)(1) for backloading, claims for insufficient notice under ERISA Sections 204(h) and 102(a), a claim for breach of fiduciary duty under Section 404(a), and a claim for withholding documents under Section 502(c)(1)(B). Defendants moved to dismiss. The court in this order granted the motion and dismissed the claims without prejudice. First, plaintiffs voluntarily abandoned their claims for breach of fiduciary duty and withholding of documents. Next, the court examined the age discrimination claims. Under ERISA’s age discrimination provision, the plan would be in violation if an employee’s benefit accrual ceases, or the rate is reduced. The court expressed that under Sixth Circuit precedent “benefit accrual refers to the employer’s contribution to the plan, and therefore any difference in output as a result of time and compound interest does not violate” the provision. The court did not agree with plaintiffs that the wear-away period caused by the transition to the cash-balance plan alters this precedent or that their net benefit accrual was reduced or ceased in violation of Section 204(b)(1)(H)(i). In addition, the court found the allegations of age discrimination to be “short on specifics” and therefore unable to cross the threshold from possible to plausible. With regard to the backloading claim, the court agreed with defendants that the plan amendment means only the new plan formula (that of the cash-balance plan) is relevant to determining whether a backloading violation took place. In this case it meant the court would only consider the formula of the cash balance plan, “and considering only that plan, there is no violation.” Finally, the court concluded that the complaint’s allegations regarding insufficient notice were also unadorned and lacking in specificity.

Seventh Circuit

Dean v. Nat’l Prod. Workers Union Severance Tr. Plan, No. 21-1872, __ F. 4th __, 2022 WL  3355075 (7th Cir. Aug. 15, 2022) (Before Circuit Judges Manion and Jackson-Akiwumi). Participants in two multi-employer plans, the National Production Workers Union (“NPWU”) 401(k) Plan and the NPWU Severance Trust Plan, on behalf of themselves and putative class of similarly situated participants sued the plans, the plans’ board of trustees, and the plan administrator, James Meltreger, when defendants refused to have the plans rollover from NPWU to plaintiffs’ newly elected bargaining representative, the Teamsters. In their suit, plaintiffs sought the rollover of their accounts to the Teamsters’ plans and alleged defendants breached their fiduciary duties by not allowing rollover, by causing the plans to pay excessive administrative fees, and by failing to disclose conflicts the plans had caused by NPWU employees on their payroll who were paid high salaries and expenses and thus financially motivated to deny the rollover request. Plaintiffs also brought a claim against Meltreger for failing to provide information upon request that they were entitled to under Sections 102, 104, and 105 of ERISA, including a summary plan description for the 401(k) Plan, “which simply did not exist.” Plaintiffs’ action was dismissed in the district court for failure to state a claim. The district court held that the Plan terms did not require rollover, and the complaint failed to sufficiently allege claims of fiduciary breach. On appeal the Seventh Circuit affirmed in part, vacated in part, and remanded for further proceedings. The court of appeals began its discussion by evaluating plaintiffs’ demand for rollover of assets asserted under Sections 502(a)(1)(B) or as a claim for equitable relief under Section 502(a)(3). Agreeing with the district court, the Seventh Circuit concluded that neither provision provided an avenue for the relief requested by plaintiffs. The court held that plaintiffs could not state a claim to enforce their rights under the plan under Section 502(a)(1)(B) because the plan terms did not require rollover. Nor could plaintiffs state a claim under the catch-all provision Section 502(a)(3), because plaintiffs failed to allege any ERISA provision that the terms of the plan expressly violate. Next, the Seventh Circuit concluded that defendants’ failure to amend the plans to allow rollovers after the bargaining representative changed was not a breach of fiduciary duty. The Seventh Circuit also agreed that plaintiffs failed to state a claim against the board of trustees and the plans’ administrator under the severance plan by paying what plaintiffs believed were excessive administrative expenses and accounting fees. The appeals court’s agreement with the lower court ended here. Plaintiffs, the Seventh Circuit concluded, had indeed stated claims that (1) defendants breached their fiduciary duties as to the severance plan by giving a $20,000 raise each to one of the trustees and to Meltreger; (2) defendants failed to timely provide them with annual pension benefits statements for several years, and (3) Meltreger did not timely provide them with a summary plan description for the 401(k) Plan. Accordingly, the lower court’s dismissal of these claims was overturned, and the appeals court remanded to the district court for further proceedings.

Provider Claims

Third Circuit

Gotham City Orthopedics, LLC v. United Healthcare Ins. Co., No. 2:21-cv-09056 (BRM) (ESK), 2022 WL 3500416 (D.N.J. Aug. 18, 2022) (Judge Brian R. Martinotti). Plaintiffs Gotham City Orthopedics, LLC and Dr. Sean Lager, M.D. have sued United Healthcare Insurance Company and related entities under ERISA, asserting claims for benefits, a breach of fiduciary duty claim, and a claim for failure to provide plan documents, as well as claims under state law in an attempt to recoup $2.8 million in unpaid out-of-network medical services they provided to United insureds. Plaintiffs brought this lawsuit on behalf of 31 patients under 32 healthcare plans, 27 of which are ERISA-governed healthcare plans with 21 of those ERISA-governed plans containing benefit anti-assignment provisions. Defendants moved to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). They argued that dismissal is warranted for several reasons. First, they argued that the anti-assignment provisions are valid and not waived, and thus preclude plaintiffs from claiming derivative standing for those plans. The court agreed and concluded that plaintiffs lack standing for the 21 ERISA plans containing the prohibitions on assignments of benefits. United’s motion as it pertained to these plans was accordingly granted. However, United’s merits arguments in favor of dismissing the claims for benefits and the fiduciary breach claim for the remaining 11 ERISA plans were not persuasive to the court. The court found the complaint sufficiently “met the low plausibility threshold” and appropriately outlines how “United improperly denied or underpaid claims submitted by Plaintiffs for certain medically necessary services that should have been covered under the Plans.” The complaint, the court went on to state, also adequately alleges a uniform practice of wrongfully denying medically necessary claims on “unsupported and erroneous” bases which can reasonably lead the court to conclude that United breached its fiduciary duties. However, the court did dismiss the claim for failure to provide documents with prejudice because United was not the plan administrator for any of the plans; instead, it is listed as the “claims administrator.” Finally, the court concluded that plaintiffs may not bring claims for the non-ERISA plans which also include anti-assignment provisions, and thus dismissed the claims related to these claims as well. Having reached this conclusion, the court stated that it “need not reach the arguments concerning whether the non-ERISA claims are preempted or whether they sufficiently state a claim.” For these reasons, the motion to dismiss was granted in part and denied in part.

Retaliation Claims

Fifth Circuit

Dials v. Phillips 66 Co., No. 21-1660, 2022 WL 3368042 (E.D. La. Aug. 16, 2022) (Judge Barry W. Ashe). Plaintiff Keith Dials brought a retaliation and discrimination suit against his former employer, Phillips 66 Company, after he was fired on what he claims were pretextual grounds following complaints he filed with the company’s HR department for discriminatory conduct that went uninvestigated. Mr. Dials is 56 years old and worked as an industrial maintenance professional for over three decades. He was replaced at the company by a man nearly 20 years younger than him who had no prior maintenance experience. Mr. Dials alleges that in just two years’ time nearly two dozen employees over the age of 40 were terminated at the company. After filing his suit, Mr. Dials requested leave to amend his complaint to assert a claim under Section 510 of ERISA. The Magistrate Judge in the case granted Mr. Dials’ motion. Phillips 66 requested the court review and reverse the Magistrate’s decision insofar as it granted Mr. Dials leave to add a claim under ERISA Section 510. Phillips 66 argued that the proposed Section 510 claim is time-barred under Fifth Circuit precedent which holds that a Section 510 claim is an assertion that an employee was subject to employment discrimination, and analogous state-law limitations periods for wrongful termination or retaliation therefore apply, which under Louisiana’s Civil Code is limited to a one-year prescriptive period. The court was persuaded by this argument. As the prescriptive period runs from the day the injury is sustained, and Mr. Dials filed his suit more than one year after his termination, the court found that his amendment to add the Section 510 claim was futile because the claim was untimely, and that the Magistrate Judge therefore erred in permitting Mr. Dials to add this claim. Accordingly, defendant’s motion was granted, and the court reversed the Magistrate’s decision.

Severance Benefit Claims

Ninth Circuit

Raphaely v. Gartner Inc., No. 20-cv-06166-DMR, 2022 WL 3445942 (N.D. Cal. Aug. 17, 2022) (Magistrate Judge Donna M. Ryu). Plaintiff Dorth Raphaely was terminated after about 10 months working for defendant Gartner, Inc as the company Group Vice President for Content Strategy. Mr. Raphaely sued Gartner as well as its ERISA severance plan and the plan’s committee. Mr. Raphaely was denied severance benefits under the plan because defendants determined that Mr. Raphaely was terminated for poor performance rendering him ineligible for benefits under the plan. In support of its position, Gartner pointed to an employee survey in which employees at the company stressed their dissatisfaction with Mr. Raphaely’s job performance. The court described the results of the survey as follows: “the comments about Raphaely are uniformly negative and he is the only individual who is repeatedly criticized by name.” In his suit, Mr. Raphaely asserted two causes of action: a claim for benefits and a claim for breach of fiduciary duty. The parties each moved for summary judgment. In this order the court granted summary judgment in favor of defendants on both counts. To begin, the court stated that the appropriate review standard for the Section 502(a)(1)(B) claim was abuse of discretion given that the plan unambiguously confers discretionary authority to defendants. Although the parties agreed that a conflict of interest exists, the court weighed the conflict only minimally as Mr. Raphaely was unable to support a higher level of skepticism without evidence of malice or a history of improper denials. Additionally, the court was satisfied that defendants were able to prove that Mr. Raphaely was terminated for performance issues, and therefore concluded the denial was entirely reasonable. As for the breach of fiduciary duty claim, the court concluded that there was no evidence within Mr. Raphaely’s complaint to support the alleged breach and no genuine issue of material fact precluded awarding summary judgment in favor of defendants.

Withdrawal Liability & Unpaid Contributions

Second Circuit

N.Y. State Nurses Ass’n Benefits Fund v. The Nyack Hosp., No. 20-378, __ F. 4th __, 2022 WL 3569296 (2d Cir. Aug. 19, 2022) (Before Circuit Judges Carney and Nardini, and District Judge Liman). The parties cross-appealed the district court’s order granting in part and denying part each of their positions about the scope of an audit that plaintiff The New York State Nurses Association Benefit Fund sought of defendant Nyack Hospital’s payroll and wage records. On appeal the Fund argued that the scope of the order, in which the court concluded that the Fund had the authority to inspect only the payroll records for all hospital employees identified as nurses but not the records of the other employees, was too narrow. Arguing the opposite, Nyack Hospital argued the decision’s interpretations of the scope of the audit authority was overly broad. The Second Circuit in this order agreed with the Fund, and thus reversed in part the district court’s decision to the extent it granted summary judgment in favor of Nyack Hospital. “We hold that the audit sought by the Fund was authorized by the Trust Agreement, and that the Hospital did not present evidence that the audit constituted a breach of the Fund’s fiduciary duty under ERISA. Accordingly, the audit was within the scope of the Fund trustees’ authority under the Supreme Court’s decision in Central States, Southeast and Southwest Areas Pension Fund v. Central Transport, Inc., 472 U.S. 559 (1985).” In Central States, the court concluded that an audit power that gives trustees the ability to inspect the pertinent records of each employer for all their employees was “entirely reasonable in light of ERISA’s policies.” The court of appeals here applied this precedent, and thus concluded that the Fund is entitled to audit the records of all employees, regardless of whether Nyack Hospital identified them as members of the collective bargaining unit, so that the Fund may determine for itself whether they should have been classified as beneficiaries of the plan. This was especially true, the Second Circuit held, because Nyack Hospital “agreed to give the Trustees broad authority to interpret their audit authority,” under the terms of the Trust Agreement. This broad ability to require participating employers “to submit to contractually permitted audits,” the court stated, also went for employees beyond those classified as nurses, and the lower court’s decision in this regard was therefore found to be in error and accordingly reversed. Circuit Judge Carney dissented in part with the majority’s opinion. To Judge Carney, her colleagues’ interpretation of the audit authority was in fact too broad. She pointed to the demand’s inclusion of the Hospital’s executive team and its engineering staff “who were not even arguably covered by the CBA, nor remotely eligible to participant in the benefits plan,” and found inclusion of these individuals to be unreasonable. Although Judge Carney joined the majority in concluding the district court correctly “denied the Hospital’s motion to limit the audit records of NYSNA members who had enrolled in the Plan,” diverging from the majority, she expressed that she would “rule that the district court did not abuse its discretion or otherwise err when it entered an order restricting the audit to review of the records of the registered professional nurses employed by the Hospital.” Accordingly, in resolving the parties’ squabble over the scope of the audit power, Judge Carney concluded that district court’s decision was just right.



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