Happy New Year ERISA Watchers. For our first issue of 2023, we thought we’d take a moment to look back on the highs and lows of 2022 in the world of ERISA. In that spirit, we have compiled a somewhat subjective list of the best and worst decisions of the past year. We included only ERISA cases and not decisions that are sure to affect ERISA plans, such as the Supreme Court’s decision in Dobbs v. Jackson Women’s Health Organization, which certainly tops our list of worst decisions of 2022.
Here is our list of the Best ERISA Decisions of 2022:
- Hughes v. Northwestern University, No. 19-1401, 142 S. Ct. 737, 2022 WL 199351 (U.S. Jan. 24, 2022). This unanimous decision from the Supreme Court, authored by Justice Sotomayor, reversed the Seventh Circuit’s adoption of a categorical rule that imprudent options in a 403(b) plan’s investment line-up are “neutralized by prudent, lower-cost options.” The Court wisely recognized that “even in a defined-contribution plan where participants choose their investments, plan fiduciaries are required to conduct their own independent evaluation to determine which investments may be prudently included in the plan’s menu of options.”
- Collier v. Lincoln Life Assurance Co. of Bos., No. 21-55465, 53 F.4th 1180, 2022 WL 17087828 (9th Cir. Nov. 21, 2022) (Before Circuit Judges Paez and Watford, and District Judge Richard D. Bennett). The Ninth Circuit has repeatedly recognized that a plan administrator may not present “a new rationale to the district court that was not presented to the claimant as a specific reason for denying benefits during the administrative process.” In this decision, the court expanded on this precedent to hold that the “district court clearly errs by adopting a newly presented rationale when applying de novo review.” This Kantor & Kantor victory is sure to have a significant impact in ERISA benefit litigation in the coming year and beyond.
- Gragg v. UPS Pension Plan, No. 22-3379, __ F.4th __, 2022 WL 17729625 (6th Cir. Dec. 16, 2022) (Before Circuit Judges Batchelder, Griffin, and Kethledge). In this decision, the Sixth Circuit held that “[t]he limitations period for an ERISA claim ‘to recover benefits due’ under a plan does not expire before the alleged underpayment on which the claim is based.” Emphasizing that an ERISA benefit claim accrues “when the plaintiff discovers, or with due diligence should have discovered, the injury that is the basis of the action,” the court reasoned that, in an underpayment case, this injury does not occur until the plaintiff receives the first underpayment, and not when he is told that he will receive that amount.
- Boley v. Universal Health Servs., No. 21-2014, 36 F.4th 124, 2022 WL 1768984 (3d Cir. Jun. 1, 2022) (Before Circuit Judges Greenaway, Jr., Scirica, and Cowen). In this decision, the Third Circuit recognized sensible limits to the Supreme Court’s Article III standing decision, Thole v. U.S. Bank N.A., 140 S. Ct. 1615 (2020), in a case challenging excessive fees associated with some of the investment options in a defined contribution plan. The court concluded that Article III did not prevent plaintiffs from representing class members who were allegedly harmed by investments in other funds that were imprudent for the same reason as the funds in which the named plaintiffs were invested.
- Cloud v. The Bert Bell/Pete Rozelle NFL Player Ret. Plan, No. 3:20-CV-1277-S, 2022 WL 2237451 (N.D. Tex. Jun. 21, 2022) (Judge Karen Gren Scholer). The final case on the Best Decisions list is a district court decision that we believe (or at least hope) represents a change in direction for courts reviewing benefit denials under the National Football League’s disability plan. The court allowed the plaintiff, through discovery, to pull back the curtain “on the inner workings of Defendant The Bert Bell/Pete Rozelle NFL Player Retirement Plan.” This peek revealed alarming claim-handling practices, including the fact that the board in charge of deciding Cloud’s appeal made its decision at a ten-minute-long “pre-meeting” during which it (purportedly) reviewed 100 other appeals, with each appeal involving a file of “hundreds or thousands of pages of documents.” To the court, “[t]he Board’s review process, its interpretation and application of the Plan language, and overall factual context all suggest an intent to deny Plaintiff’s reclassification appeal regardless of the evidence,” leading the court to conclude that the board did not give Cloud a full and fair review of his claim for the highest level of disability benefits under the plan. Based on its own review of the evidence, the court concluded that he was entitled to those benefits.
Here is our list of the Worst ERISA Decisions of 2022:
- Wit v. United Behavioral Health, No. 20-17363, __ F. App’x __, 2022 WL 850647 (9th Cir. Mar. 22, 2022) (Before Circuit Judges Christen and Forrest, and District Judge Michael M. Anello). In this eight-page unpublished memorandum decision, the Ninth Circuit swept away countless extensive rulings over seven years from the magistrate judge presiding over this case, including the judge’s lengthy decision finding that United Behavioral Health (UBH) engaged in “pervasive and long-standing violations of ERISA” by adopting and applying mental health and substance use disorder guidelines that were unreasonable and inconsistent with generally accepted standards of medical care. Applying an abuse of discretion standard, the Ninth Circuit concluded that UBH reasonably interpreted the plans as not requiring that benefits be paid for generally accepted standards of medical care. Whether the panel or the en banc court reconsiders this ruling remains to be seen.
- Klaas v. Allstate Ins. Co., No. 20-14104, 21 F.4th 759, 2021 WL 6124337 (11th Cir. Dec. 28, 2021) (Before Circuit Judges Pryor, Luck, and Brasher). In this decision from the Eleventh Circuit (which is technically a 2021 case, but we reported on it in 2022), the court, based on reservation of rights clauses in summary plan descriptions, held that plan participants had no right to life insurance benefits they were repeatedly promised by their employer, Allstate. The court also held that plaintiffs’ claims based on misrepresentations were untimely because the last misleading statements were made more than six years before they filed suit. The court’s reliance on summary plan descriptions, along with its failure to allow the introduction of extrinsic evidence on the meaning of the reservation of rights clauses, earn this decision a place on the Worst list. This placement is cemented by the fact that the court looked to the last date defendants made promises of lifetime benefits, rather than the date on which those promises were rescinded, in determining that plaintiffs’ fiduciary breach claim was untimely.
- Turner v. Allstate Ins. Co., No. 2:13-cv-685-RAH-KFP [WO], 2022 WL 17640165 (M.D. Ala. Dec. 13, 2022) (Judge R. Austin Huffaker, Jr.). On remand, the Allstate class action litigation again lands on the Worst list, this time based on the district court’s disregard of clear recusal rules. The plaintiffs argued that the district court judge who had ruled against them on summary judgment should have recused herself because she owned shares in the Allstate Corporation at the time she ruled in the company’s favor. A different district court judge ruled that there was no risk of injustice from the judge’s failure to recuse herself given the affirmance by the Eleventh Circuit, and further ruled that the failure to recuse “would not undermine the public’s confidence in the judicial process.” If this is correct, it is hard to understand the point of the court’s own mandatory recusal rules.
- Carfora v. Teachers Ins. Annuity Ass’n of Am., No. 21 CIVIL 8384 (KPF), 2022 WL 4538213 (S.D.N.Y. Sep. 28, 2022) (Judge Katherine Polk Failla). In this case, a district court in New York decided that the Teachers Insurance Annuity Association of America (TIAA), which administered a defined contribution pension plan in which the plaintiffs participated, was not acting as a fiduciary in soliciting plaintiffs to roll over their plan assets into TIAA’s proprietary “Portfolio Advisor Program.” This holding effectively allowed TIAA to escape liability for problematic sales tactics that allegedly included lying to plan participants to get them to invest in subpar investments.
Whether you agree with which list these decisions belong on, we hope you all agree that these were some of the most important ERISA decisions from the past year. Read on for summaries of last week’s ERISA-related rulings.
Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.
Breach of Fiduciary Duty
Sellers v. Trustees of Boston College, No. CV 22-10912-WGY, __ F. Supp. 3rd __, 2022 WL 17968685 (D. Mass. Dec. 27, 2022) (Judge William G. Young). This is yet another in a long line of cases involving institutions of higher education and financial services advisors TIAA and Fidelity. Two former employees of Boston College (BC), Connie Sellers and Sean Cooper, brought this putative class action against the trustees of BC and its plan investment committee, alleging that they breached their fiduciary duties under ERISA in administering and monitoring BC’s two defined contribution 401(k) retirement plans, which were administered by TIAA and Fidelity. Defendants filed a motion to dismiss. Plaintiffs first argued that BC caused them to “incur unreasonable fees during the class period in the form of high recordkeeping expenses and excessive investment management fees.” Defendants argued that these claims were not supported by facts and were purely speculative, but the court noted the information asymmetry between the parties, and cited specific allegations by plaintiffs comparing BC’s plans to other plans, as well as BC’s failure to issue requests for proposals in order to reduce fees. Plaintiff further argued that defendants should have ceased investing with TIAA because of negative court decisions and regulatory investigations of TIAA, and because those funds underperformed a market index. The court found that plaintiffs’ evidence on these arguments was “certainly not overwhelming” and seemed swayed by defendants’ argument that plaintiffs needed more than a “single metric” to assess performance. Ultimately, however, the court ruled that “disputes over the appropriateness…of benchmarks…are inappropriate at the motion to dismiss stage,” and that plaintiff’s allegations were sufficient. For similar reasons, the court ruled that plaintiffs’ allegations against Fidelity, while “relatively thin,” passed muster. In doing so, the court noted that TIAA and Fidelity “make up a large percentage of the investment offerings in the two plans,” which “also weighs in favor of Plan Participants establishing a plausible breach of the duty of prudence.” As a result, although it was a close call, the court denied defendants’ motion in its entirety: “While each of Plan Participants’ allegations taken individually are likely insufficient to survive a motion to dismiss, the totality of the pleaded facts raise a plausible – not merely conceivable – inference that Boston College breached their fiduciary duties under ERISA.”
Roton v. Peveto Fin. Grp., LLC, No. 3:20-CV-3569-X, 2022 WL 17994020 (N.D. Tex. Dec. 29, 2022) (Judge Brantley Starr). Plaintiffs Robert Roton and Jacqueline Juarez were employees of Legacy Counseling Center, which offered an ERISA-governed 403(b) savings plan to its employees. Plaintiffs alleged that they “were never provided with any meaningful opportunity to participate” in the plan, which was only offered to high-level company officers. Plaintiffs brought two claims under ERISA, for plan benefits under 29 U.S.C. § 1132(a)(1)(B), and breach of fiduciary duty under 29 U.S.C. § 1132(a)(2), against Legacy and its financial advisor Peveto Financial Group. Before the court were several motions. First, the court denied Peveto’s motion for judgment on the pleadings regarding standing, because plaintiffs had standing to sue for breach of fiduciary duty under the Supreme Court’s decision in LaRue v. DeWolff, Boberg & Associates, Inc. However, it granted Peveto’s motion regarding plaintiffs’ request for “lost opportunity costs” in the form of “missed market gains,” finding that these constituted impermissible extracontractual damages under ERISA. Peveto also filed a motion for summary judgment, contending that it was not a fiduciary under ERISA and that even if it was, it did not breach any fiduciary duty. The court denied this motion, finding there were genuine disputes of material fact as to both claims. In so ruling, the court noted that Legacy and Peveto presented different evidence, and “it is difficult to know which party was initiating, administering, authorizing, and managing Legacy’s 403(b) accounts, and which party is now trying to shirk responsibility.” As for Legacy, it filed a motion for summary judgment, arguing that its plan was exempt from ERISA under Department of Labor “safe harbor” rules. The court agreed, deciding in Legacy’s favor on the central element of whether the employer offered a “reasonable choice” to its employees. Plaintiff argued that only one advisor (Peveto) and one product (American Funds) was offered, but the court found that multiple investment options were available from American Funds, and thus the safe harbor provision was satisfied. Thus, the court granted Legacy’s summary judgment motion. Finally, the court addressed Peveto’s motion to strike plaintiffs’ jury demand, and Peveto’s motions regarding expert testimony. The court agreed that plaintiffs were not entitled to a jury under ERISA because of the equitable nature of their claims, and excluded testimony from one of plaintiff’s experts, concluding that her report “impermissibly offers conclusions of law and opinions on ultimate legal issues, and that the rest of her report’s conclusions are factual, and thus are improper for an expert witness.” The court did, however, agree to consider the expert’s report “in the nature of an amicus brief and give her conclusions the weight they are due.”
Disability Benefit Claims
Abrams v. Unum Life Ins. Co. of America, No. C21-0980 TSZ, 2022 WL 17960616 (W.D. Wash. Dec. 27, 2022) (Judge Thomas S. Zilly). At the beginning of 2020, plaintiff William Abrams, an attorney with a long career as a partner at several large law firms, was earning a base salary of $525,000 and was planning on running in three major international marathons that year. However, in April, he began suffering from frequent fevers, severe fatigue, and mental fogginess, resulting in “a sharp decline in Plaintiff’s legal abilities.” In July, he stopped working and submitted a claim for long-term disability benefits to defendant Unum Life Insurance Company of America, the insurer of his firm’s ERISA-governed LTD employee benefit plan. Unum denied Mr. Abrams’ claim, and then, despite a 900-page submission involving the support of seven different doctors, Unum denied his appeal as well. Mr. Abrams filed suit, and the parties filed cross-motions for judgment, which were decided in this order. The court noted that the trial work performed by Mr. Abrams, with which the court was “intimately familiar,” requires “a high-level of cognitive work” and is “mentally and physically grueling.” The court concluded under de novo review that Mr. Abrams could no longer do that work, noting the “significant shift in his demeanor and abilities,” the fact that “Plaintiff’s doctors agree that he is sick” with either chronic fatigue syndrome (CFS) or long COVID, and “Neuropsychological testing revealed that Plaintiff was not malingering.” The court further observed that “Plaintiff has exhausted his savings account, sold his house, and drawn on retirement savings to afford daily life,” which he would not have done if he were able to work. Unum countered that Mr. Abrams’ doctors could not agree on a diagnosis and he did not satisfy the criteria for CFS, but the court noted that “[t]he accuracy of Plaintiff’s diagnoses is not, however, the question before the Court.” The only question was whether Mr. Abrams could return to work with his symptoms, which the court answered in the negative. As a result, the court granted Mr. Abrams’ motion for judgment regarding his claim for benefits. However, it denied Mr. Abrams’ motion regarding Unum’s bad faith, noting that “the evidence of disability is not overwhelming,” and finding that “multiple relevant pieces of evidence in this case support Defendant’s denial.”
Kilbourne v. Guardian Life Ins. Co., No. 2:22-CV-036-DBB-DBP, 2022 WL 17960482 (D. Utah Dec. 27, 2022) (Magistrate Judge Dustin B. Pead). Plaintiff Kameron Kilbourne filed this action against defendant Guardian Life Insurance Company, the insurer of his employer’s ERISA-governed employee long-term disability benefit plan. Mr. Kilbourne contended that he was disabled and entitled to benefits after suffering from three pulmonary embolisms and declining health while receiving multiple diagnoses. Guardian disagreed, denying his claim for LTD benefits at the outset, based largely on the report of its reviewing physician, Dr. Benjamin Kretzmann. Mr. Kilbourne sued, and then filed a motion for discovery, seeking depositions of Guardian’s medical consultants and employees. Mr. Kilbourne argued that (1) “several diagnoses listed by the physician reviewer are unsupported by the same medical records that Defendant ultimately relied upon in denying benefits,” (2) Dr. Kretzmann erroneously dated his report, (3) his second pulmonary embolism “was not listed in the physician’s report,” and (4) “the record indicates that Plaintiff received short-term disability benefits, yet then was denied LTD benefits under very similar standards.” Under these circumstances, the court agreed that “the totality of the unique circumstances leads the court to find that additional discovery is warranted.” Thus, the court granted Mr. Kilbourne’s motion in part, allowing him to take the deposition of Dr. Kretzmann, as well as a Rule 30(b)(6) deposition of a “witness for Defendant that can speak to the possible irregularities in the record and other relevant inquiries.”
Henry Ford Hosp. v. Oakland Truck & Equip. Sales, Inc., No. 21-12352, 2022 WL 18028252 (E.D. Mich. Dec. 30, 2022) (Judge David M. Lawson). Plaintiff Henry Ford Hospital provided medical care to Monica Chaney on two occasions, once in 2017 and again in 2019. Ms. Chaney was insured through an ERISA-governed employee health care plan sponsored by defendant Oakland Truck & Equipment Sales. The hospital contended it was underpaid for its services and brought this action against Ms. Chaney, Oakland Truck, and the third-party claim administrator of the health plan, ClaimChoice LLC. Defendants, who were jointly represented, filed a motion for summary judgment, which was decided in this order. Defendants first contended that the hospital’s claims relating to the 2017 treatment were time-barred either under ERISA’s three-year statute of limitations found in 29 U.S.C. § 1113(2), or under the plan’s contractual one-year limitation period. The court rejected both arguments. First, the court noted that § 1113(2) does not apply because that limitation only applies to breach of fiduciary duty claims, which were not present here. Second, the one-year contractual period also did not apply because under the plan that period only begins running after a claim is denied, and in this case the hospital was repeatedly told the claim was “approved,” “processed,” and “awaiting release of funds.” Thus, the hospital’s claim was timely under ERISA’s six-year statute of limitations on claims for plan benefits (as borrowed from Michigan law). The court also rejected defendants’ argument that it was entitled to summary judgment on the issue of whether the hospital obtained preauthorization for the 2017 treatment because the hospital presented documentation suggesting that it had received such authorization from a case manager. As for the 2019 claims, the hospital admitted that its only recourse was against Ms. Chaney because she refused to sign an assignment of rights. Under Michigan breach of contract law, the court ruled that the hospital had a colorable claim against Ms. Chaney and thus denied her motion for summary judgment. (However, the court did find it “curious” that she had refused to assign her rights regarding the 2019 treatment and wondered if there was a conflict of interest regarding defendants’ joint representation, because Ms. Chaney arguably had a claim against the other defendants for that treatment.)
Trauernicht v. Genworth Financial Inc., No. 3:22-CV-532, 2022 WL 18027618 (E.D. Va. Dec. 30, 2022) (Judge Robert E. Payne). Plaintiffs Peter Trauernicht and Zachary Wright brought this putative class action against Genworth Financial, contending that Genworth breached its fiduciary duty under ERISA by “selecting, retaining, and otherwise ratifying poorly-performing investments for participants of the Genworth Financial Inc. Retirement and Savings Plan.” At the pretrial conference, the court noted that another judge in the Eastern District of Virginia (albeit in the Alexandria division, not the Richmond division where this case is pending) was already presiding over two cases involving related issues. The court requested position papers regarding venue transfer from the parties. Plaintiffs argued in favor of transfer, while defendants argued against, relying on a forum selection clause in the plan which provided that “[a]ny action in connection with the Plan…may only be brought in Federal District Court for the Eastern District of Virginia, located in Richmond, Virginia.” The court found that there was “nothing to suggest that the forum-selection clause is invalid or unreasonable,” and thus the Court “will abide by the clear language of the clause and, therefore, declines to transfer the case to the Alexandria Division.”
Withdrawal Liability & Unpaid Contributions
United Food & Commercial Workers Unions & Participating Employers Pension Fund v. Supervalu Inc., No. CV DKC 22-0295, 2022 WL 17978273 (D. Md. Dec. 28, 2022) (Judge Deborah K. Chasanow). This case involves a dispute between a union multiemployer pension benefit plan and one of its contributing employers, Supervalu. The fund was certified to be in “critical status” in 2010. Since then, the fund has periodically reevaluated its financial projections and created updated rehabilitation plans, which have involved higher contribution rates from employers like Supervalu. In 2020, one day before the 2017 collective bargaining agreements were set to expire, Supervalu and the union signed an extension. In 2022, the plan sued Supervalu, contending that it was not contributing at the correct rate. Shortly after filing suit, the parties completed negotiation of new CBAs which included retroactive changes to the 2017 CBAs and new provisions that were not included in the 2017 CBAs. The parties filed cross-motions for summary judgment, raising the threshold issue of “whether—and when—the 2017 CBAs ‘expired.’” The fund argued that the 2017 CBAs expired in 2020, and thus Supervalu should have paid higher rates based on the schedule the fund was allowed to unilaterally choose after that date. Supervalu contended that the 2017 CBAs never actually expired and thus its obligation to adopt the fund’s updated contribution schedules “has not yet been triggered.” The court agreed with the fund, noting that the 2017 CBA contained a 2020 expiration date, and that the 2022 negotiations included backdating of the new CBAs to match the expiration of the old CBAs in 2020. “Thus, because the bargaining agreements signed earlier this year retroactively became ‘the governing CBA[s]’ in July 2020, the 2017 CBAs have ‘long since expired.’” Supervalu argued that the new CBAs were not really new, but simply agreements to continue the 2017 CBAs past their original expiration date. The court rejected this argument, however, finding that the language in the agreements and the conduct of the parties demonstrated that the 2022 CBAs “were new bargaining agreements, not extensions of the old CBAs.” As a result, the court granted the fund’s summary judgment motion, and denied Supervalu’s.
Central States, Se. & Sw. Areas Pension Fund v. Transervice Logistics, Inc., No. 20-3437, __ F.4th __, 2022 WL 17843034 (7th Cir. Dec. 22, 2022) (Before Circuit Judges Sykes, Hamilton, and Brennan). This published opinion involves collective bargaining agreements between a union and two employers involving contributions to the union’s ERISA-governed multiemployer pension benefit plan. The CBAs were both set to expire on January 31, 2019, and both contained “so-called ‘evergreen clauses’ that extended them a year at a time until either party provided timely written notice expressing an ‘intention to terminate’ the agreements.” In November of 2018, the union sent letters to the employers noting that the CBAs would expire soon and expressing a desire to negotiate new agreements. The parties eventually completed those negotiations, which required payment to a new fund beginning on February 1, 2019. On January 30, 2019, the employers informed the union that they would stop providing pension contributions to the old fund, after which plaintiff brought this action. Plaintiff contended that the evergreen clauses extended the CBAs for an additional year, requiring the employers to maintain contributions to the old fund through January 31, 2020. The district court rejected this argument and ruled for the employers, finding that the November 2018 negotiation letters “constituted an unequivocal expression of the intent to terminate the current contract.” The Seventh Circuit disagreed and reversed. Citing its own precedent and cases from other circuits, it stated that evergreen clauses must be “strictly interpreted” according to their terms. Here, the evergreen clauses in the CBAs provided that the CBAs would continue in force until one party provided the other with “timely ‘written notice’ expressing an ‘intention to terminate.’” The “obvious import” of the November 2018 letters was that “the union hoped to negotiate new agreements with the employers.” However, “the letters said nothing about terminating the existing agreements regardless of whether or not new agreements were reached.” The employers cited statements by the union regarding negotiation of a “new” contract, and the “termination date” of the CBAs, as evidence that the CBAs were no longer valid. However, the Seventh Circuit ruled that these comments did not satisfy its strict interpretive standard. The court also stated that at the time of the letters, there was no guarantee that new CBAs could be successfully negotiated, and thus it fulfilled the purpose of ERISA to leave the CBAs in place, protecting beneficiaries, until there was an “express intent” to terminate, which never occurred. The court admitted that its decision might seem inequitable, as it required the employers to contribute to two different funds for the same hours worked by the same employees. However, the court observed that equitable defenses are not permitted under Section 515 of ERISA, and “for good reasons,” because “enforcing these contracts as written both complies with the terms of the statute and protects third-party beneficiary plans and workers.”