August 2013 Archives

August 29, 2013

Employment-Third Circuit Rules That Plaintiff's Discrimination and Retaliation Claims Under Title VII Do Not Survive Summary Judgment

In Verma v. University of Pennsylvania, No. 12-2799 (3rd Cir. 2013), the plaintiff, Sandhya Verma ("Verma"), appeals the district court's grant of summary judgment to her former employer, defendant University of Pennsylvania (the University"), on her discrimination and retaliation claims.

In this case, Verma is of Asian Indian origin. She was hired by the University in March 2004 to serve as an International Student Services Specialist in the University's International Student and Scholars Services ("ISSS") Department. Starting in 2006, and continuing through 2008, Verma had conflicts with every supervisor to whom she reported. Principally, conflicts arose when Verma refused to perform tasks assigned to her. These conflicts led to several negative performance evaluations, and culminated in Verma's termination in March 2008. Prior to her termination, earlier in March, 2008, Verma had filed a complaint alleging discrimination with the Pennsylvania Human Relations Commission (the "PHRC"). Subsequently, Verma brought this suit, alleging that she was terminated on account of her race and national origin, in violation of federal and state law (that is, a claim of discrimination), and that she was retaliated against for filing a claim of discrimination with the PHRC.

In analyzing the case, the Third Circuit Court of Appeals (the "Court") first dealt with the claim of discrimination, which falls under Title VII. The issue here, according to the Court, at this summary judgment stage, is the third step of the McDonnell Douglas analysis, namely, when the burden of production shifts back to the plaintiff to provide evidence from which a reasonable factfinder could infer that the employer's proffered justification for the termination was a pretext for discrimination. The Court concluded that Verma did not provide any such evidence.

As to the retaliation claim, which also falls under Title VII, again at this summary judgment stage, the Court said that the issue is whether the plaintiff can show a causal connection between her participation in the protected activity-here filing the claim with the PHRC- and the adverse employment action-the termination of her employment. The Court noted that the U.S. Supreme Court has recently clarified that, as to this showing, a plaintiff making a claim of retaliation under Title VII must establish that his or her protected activity was a but-for cause of the alleged adverse action by the employer. Here, the Court found that Verma did not make the required showing of the causal connection, despite the proximity in time between her filing the claim and her termination, since her negative performance predated the filing of the claim.

As such, the Court concluded that Verma's discrimination and retaliation claim do not survive summary judgment, and it affirmed the district court's decision.

August 28, 2013

Employment-Sixth Circuit Rules That An Employer May, Without Violating the FMLA, Enforce Its Procedure for Informing The Employer Of An Absence

In Srouder v. Dana Light Axle Manufacturing, LLC, No. 12-5835 (6th Cir. 2013), the plaintiff, Matt White ("White"), appeals from the district court's order granting summary judgment to White's former employer, defendant Dana Light Axle Manufacturing, LLC ("Dana").

In this case, during his employment with Dana, White had problems with his attendance and with obtaining proper medical certifications for various absences he claimed were protected under the Family Medical Leave Act ("FMLA"). Eventually, White developed a hernia that required surgery. Dana terminated White's employment for his failure to follow the call-in requirements of Dana's attendance policy. White sued Dana, alleging interference with his rights under the FMLA.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") said that the applicable regulation under the FMLA expressly permits an employer to enforce its "usual and customary notice and procedural requirements for requesting leave," 29 C.F.R. § 825.302(d), even if those requirements go beyond FMLA minimum notice requirements, unless there are unusual circumstances (and there were none here). White did not follow Dana's procedural requirements in connection with his absences, namely, he did not follow the call-in requirements. This allows Dana to terminate him without violating the FMLA. Therefore, the Court concluded that White's claim fails, and the Court affirmed the district court's grant of summary judgment for Dana.

August 27, 2013

ERISA-Eighth Circuit Rules That Plaintiffs' Claims Under ERISA To Prevent The Plan From Decreasing and Recouping Excess Benefit Payments Fail

In Pilger v. Sweeney, No. 12-2698 (8th Cir. 2013), the plaintiffs are 13 retired union plumbers who were members of the former Iowa Local 212 (the Plaintiffs"). The Plaintiffs receive retirement benefits from the Plumbers and Pipefitters National Pension Fund ("PPNPF"). The defendants are the PPNPF, the PPNPF's Board of Trustees, and the Board's Administrator (collectively, the "Defendants").

In 2009, the Defendants realized that, for a number of years, they had paid
the Plaintiffs excess retirement benefits. The Defendants reduced the Plaintiffs' monthly benefit payments to the correct amounts, and then began to recoup the previous overpayments through withholding. The Plaintiffs filed this lawsuit under ERISA to challenge the Defendants' actions. The district court granted the Defendants summary judgment. The Plaintiffs appeal.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") said that the Plaintiffs allege several ERISA claims. The first claim seeks to recover benefits, under 29 U.S.C. § 1132(a)(1)(B), based on higher contribution rates than the Defendants were using. The Court ruled that this claim is time-barred. ERISA does not contain its own statute of limitations for a § 1132(a)(1)(B) claim, and thus it borrows the limitations period of the most analogous state-law claim. In this case, that period is Iowa's 10-year statute of limitations for breach of contract. Here, the Defendants denied the Plaintiffs' appeal of the decision underlying the claim on July 14, 2000, and the Plaintiffs did not file the instant lawsuit until February 15, 2011, more than ten years later. Thus, the time-bar.

Next, the Court said that the Plaintiffs' second claim also fails, but for a different reason. The Plaintiffs argue that the Defendants had no authority to either correct or recoup the benefit overpayments, because the PPNPF plan booklet did not grant them this authority. However, the Court found that a 2002 plan booklet contains broad language granting the Defendants discretion to take remedial action on behalf of the PPNPF. Therefore, the Court ruled that under the plan's terms, the Defendants were entitled to both correct and recoup the overpayments. Thus, the claim failure.

The Court then continued by saying that the Plaintiffs' next claim is for breach of fiduciary duty, under 29 U.S.C. § 1132(a)(2), on the grounds that the Defendants failed to apply to correct hour rate to determine past service, miscalculating
Plaintiffs' benefits, and then recouped the overpayments from Plaintiffs. However, the Court found that this is a claim for individual benefits, not benefits that will be paid to the plan as a whole, and such a clam may not be made under § 1132(a)(2). As such, the Court ruled that this claim fails.

The Court said that the Plaintiffs' final claim is for equitable estoppel, under 29 U.S.C. § 1132(a)(3)(B), on the grounds that the Defendants miscalculated and erroneously paid them excess benefits for up to seven years. The Court ruled that this claim fails because it mirrors the Plaintiffs'§ 1132(a)(1)(B) claim, and therefore the Plaintiffs may not bring a claim for the same remedy under § 1132(a)(3)(B).

Based on the above, since all of the Plaintiffs' claims fail, the Court affirmed the district court's grant of summary judgment to the Defendants.

August 26, 2013

ERISA-First Circuit Reverses District Court Decision Denying Claim For Long Term Disability Benefits

In Gross v. Sun Life Assurance Company of Canada, No. 12-1175 (1st Cir. 2013), the First Circuit Court of Appeals (the "Court") was faced with the question as to whether the "safe harbor" exception to the ERISA preemption applies to the long term disability insurance policy that covers plaintiff Diahann Gross ("Gross"). The district court found that it did not, and consequently held that Gross's state law claims were preempted. Furthermore, the district court concluded that her insurer was entitled to the highly deferential "arbitrary and capricious" review prescribed for certain ERISA benefits decisions. Using that standard, the district court upheld the insurer's denial of long term disability benefits to Gross.

In analyzing the case, the Court said that it agreed with the district court that the safe harbor exception is inapplicable, since Gross was covered by her employer's "ERISA plan", so that Gross's state law claims are preempted by ERISA. However, the Court held that the benefits denial by the insurer was subject to de novo review. Joining several other circuits, the Court concluded that language requiring proof of disability "satisfactory to us" is inadequate to confer the discretionary authority that would trigger deferential review. The Court further concluded that the administrative record was inadequate to allow a full and fair-assessment of Gross's entitlement to long term disability benefits. As such, the Court vacated the district court's judgment and remanded the case back to the district court, so that it could return the matter to the insurer for further development of the record.

August 23, 2013

Employment-Sixth Circuit Rules That Purportedly Volunteer Firefighters Are "Employees" For Purposes Of The FLSA And FMLA

In Mendel v. City of Gibraltar, No. 12-1231 (6th Cir. 2013), the issue arose as to whether purportedly volunteer firefighters, who receive a substantial hourly wage for responding to calls whenever they choose to do so, are "employees" or "volunteers" for purposes of the Fair Labor Standards Act ("FLSA") and Family Medical Leave Act ("FMLA"). As employees, they could bring suit under the FLSA and FMLA, and they are entitled to rights and protections under those acts, while as volunteers they could not and are not.

The facts are as follows. The volunteer firefighters of the City of Gibraltar (the "City") must complete training on their own time without compensation. While they are not required to respond to any emergency call, they are paid $15 per hour for the time they do spend responding to a call or maintaining equipment. They do not work set shifts or staff a fire station; they maintain other employment and have no consistent schedule working as volunteer firefighters. The firefighters generally receive a Form-1099 MISC from the City. They do not receive health insurance, sick or vacation time, social security benefits, or premium pay. The City does have an employment application for the firefighters, and it apparently keeps a personnel file for each firefighter. A volunteer firefighter may be promoted or discharged.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") said that these firefighters are suffered or permitted to work, and are paid substantial wages for performing work as permitted by the City. Further, the FLSA specifically exempts from the term "employee" an individual who, among other requirements, works for a public agency and receives no "compensation". Here, the firefighters receive substantial pay- the hourly rates they receive are similar to the hourly rates paid to full-time employed firefighters in some of the neighboring areas- and therefore they receive "compensation" within the meaning of the exemption, so that the exemption does not apply to them. Thus, the firefighters are employees for FLSA and FMLA purposes.

August 22, 2013

ERISA-Sixth Circuit Rules That Claim For Long-Term Disability Benefits Must Be Dismissed Because It was Not Timely Filed

In Engleson v. Unum Life Insurance Company of America, No. 12-4049 (6th Cir. 2013), the plaintiff, Jerry Engleson ("Engleson"), was appealing the district court's dismissal of his case, a claim under ERISA for long-term disability ("LTD") benefits, on the grounds that it was not timely filed.

In this case, Engleson had waited over eight years before seeking judicial review of his denied claim for LTD benefits. The terms of his disability plan, however, gave him a little more than three years to file such a suit. The Sixth Circuit Court of Appeals (the "Court") said that neither the law nor principles of equity allow the Court to excuse the tardiness of his suit. As a result, the Court affirmed the district court's dismissal of the case.

August 21, 2013

Employee Benefits-Reminder: Second SBCs Are Coming Due- There Are Changes And Instructions To Note

The requirement to provide a "Summary of Benefits and Coverage" or an "SBC" to group health care plan participants and beneficiaries was added to the law by the Affordable Care Act. In general, the insurer prepares the SBC for an insured plan, and the plan prepares the SBC when it is self-insured.

Timing For Providing The SBC. Assuming that the initial SBC has been furnished, an SBC, and an accompanying glossary, generally has to be provided to group health care plan participants and beneficiaries: (1) if renewal of coverage is required, no later than by the date on which written application materials for the renewal are provided, or (2) if renewal is automatic, no later than 30 days prior to the first day of the new plan year. Based on this requirement, it appears that the second round of SBCs are coming due.

Department Models. The government departments responsible for the SBCs-namely, the Departments of Labor, Health and Human Services ("HHS"), and the Treasury (the "Departments")- have provided model templates, instructions, and related materials that an insurer or plan may use to prepare an SBC. They also have provided a glossary. There has been some updating of these items that requires attention. This updating has been described in the DOL's FAQs about the Affordable Care Act Implementation Part XIV.

Specifically, an updated SBC template (and sample completed SBC) are now available at These documents are to be used for SBCs provided with respect to health care coverage beginning on or after January 1, 2014, and before January 1, 2015 (that is, generally, for the second SBC to be provided). The only change to the SBC template and sample completed SBC is the addition of statements of: (1) whether the plan provides minimum essential coverage (as defined under section 5000A(f) of the Internal Revenue Code) ("MEC") and (2) whether the plan meets the minimum value requirements (that is, whether the plan's share of the total allowed costs of benefits provided is not less than 60 percent of such costs) (the "MV Requirements").

How To Complete The Model Template. On page 4 of the SBC template (and illustrated on page 6 of the sample completed SBC), the insurer or plan should indicate in the designated space that the plan "does" or "does not" provide MEC and that the plan "does" or "does not" meet the MV Requirements.

Safe Harbor When Revised Model Cannot Be Used. If the insurer or plan is unable to use the revised model template (e.g., the plan is already in the process of preparing SBCs for 2014 and it would be an administrative burden to use the revised template), the initial template may be used, provided that the SBC is furnished along with a cover letter stating whether the plan does or does not provide MEC and meet the MV requirement under the Affordable Care Act. The DOL's language for these statements is as follows:

Does this Coverage Provide Minimum Essential Coverage?
The Affordable Care Act requires most people to have health care coverage that qualifies as "minimum essential coverage." This plan [does/does not] provide minimum essential coverage.

Does this Coverage Meet the Minimum Value Standard?
The Affordable Care Act establishes a minimum value standard of benefits of a health plan. The minimum value standard is 60% (actuarial value). This health coverage [does/does not] meet the minimum value standard for the benefits it provides.

What About The Prohibition On Annual And Lifetime Caps On Benefits? There is no change to the model template, et. al. relating to these caps. However, the DOL says that insurers and plans should continue to complete the SBC template consistent with the Instructions for Completing the SBC for the Important Questions chart that appears on page 1 of the SBC:

• In the Answers column, the insurer or plan should respond "No," where the template asks, "Is there an overall annual limit on what the plan pays?", as plans are generally prohibited from imposing annual limits on the dollar value of essential health benefits for plan years beginning on or after January 1, 2014.
• In the Why This Matters column, the insurer or plan must show the following language: "The chart starting on page 2 describes any limits on what the plan will pay for specific covered services, such as office visits."

Additionally, as applicable, the insurer or plan should continue to include information regarding annual or lifetime dollar limits on specific covered benefits as required in the chart starting on page 2 of the SBC (in the Limitations & Exceptions column), as described in the Instructions for Completing the SBC. If the insurer or plan wishes to modify the SBC template for calendar year 2014 to remove this information, they may remove the entire row in the Important Questions chart on page 1 of the SBC (with the question: "Is there an overall annual limit on what the plan pays?").

Are Additional Coverage Examples Required For The SBC? The DOL say No.

Any More Changes? No. Except as discussed above, the model templates, instructions, and related materials for the SBC are the same as for the initial SBC. Also, the glossary has not been changed. Any questions?

August 20, 2013

ERISA-DOL Provides Guidance As To When A Plan Is Maintained Pursuant To Collectively Bargained Agreements

In Advisory Opinion 2013-02A (the "Advisory Opinion"), the U.S. Department of Labor (the "DOL") provides guidance as to when a plan is considered to be maintained pursuant to collective bargaining agreements. The issue has considerable importance under ERISA. For instance, a plan cannot be a "multiemployer plan" under section 3(37) of ERISA unless it is so maintained. In the Advisory Opinion itself, the DOL had been asked to determine that certain documents involving participation in a plan by the local unions constitute "collective bargaining agreements" for purposes of making an election that the plan be treated as a multiemployer plan pursuant to ERISA section 3(37)(G)(i)(II).

The facts in the Advisory Opinion were as follows. The plan at issue was the Teamsters Joint Council No. 73 Pension Plan (the "Plan"). The Plan is a defined benefit pension plan that provides benefits for "officers, business agents, trustees, or clerical employees" of Local Unions affiliated with the Teamsters Joint Council No. 73 (the "Joint Council") or of the Joint Council. On or about August 17, 1971, the Joint Council executed a trust agreement with its Executive Board for the Executive Board members to become the trustees of the Plan. By a resolution adopted at the Joint Council Convention in August, 1971, the Local Unions approved the Plan. The Plan rules governing eligibility have been amended from time to time. The Local Union and Joint Council make contributions to the Plan as employers.

The Joint Council is a "labor organization" as defined by applicable federal law, exempt from federal taxation under section 501 of the Internal Revenue Code. The Local Unions are also exempt from federal taxation as "labor organizations". The Joint Council functions as the employee organization that represents the employees covered by the Plan for purposes of collective bargaining with their employers, the Local Unions. Several documents-such as the trust agreement and Board minutes- purportedly illustrate the existence of collectively bargained agreements between the Joint Council and the Local Unions to establish and maintain the Plan. These documents all focus on the existence of an obligation to make contributions to the Plan.

In analyzing the situation, the DOL said that it had not issued regulations interpreting the requirement "maintained pursuant to a collective bargaining agreement" for purposes of ERISA section 3(37). The DOL has defined, in its regulations, a similar phrase found in ERISA section 3(40)(A)(i). See 29 CFR 2510.3-40. The DOL further said that, based on the facts and regulations, it is unable to determine, in this case, whether the Plan should be treated as maintained pursuant to a collective bargaining agreement for purposes of ERISA 3(37)(G), since there is no evidence that the Plan was established or is maintained pursuant to an agreement resulting from a bona fide collective bargaining relationship. In the DOL's view, such a conclusion in this case would require evidence of actual collective bargaining between one or more employers and an employee organization that represents the employer(s)'s employees covered by such agreement with respect to grievances, disputes, or other matters involving employment terms and conditions other than coverage under, or contributions to, the Plan. The information presented indicates only the existence of agreements by the participating Local Unions (in their capacity as employers) to make contributions to the Plan. These documents do not establish an agreement between the Local Unions, as employers, and the Joint Council, as a chosen representative of the employees, for purposes of negotiating with respect to the Plan or any other terms or conditions of employment.

August 19, 2013

ERISA-Sixth Circuit Affirms Dismissal Of Claim By Employer Seeking Declaratory and Injunctive Relief To Prevent Collection Of Withdrawal Liability

In Findlay Truck Line, Inc. v. Central States, Southeast & Southwest Areas Pension Fund, Nos. 12-3450 and 12-3531 (6th Cir. 2013), the plaintiff, Findlay Truck Line, Inc. ("Findlay"), brought this action seeking relief from a withdrawal liability payment it allegedly owes to the defendant, Central States, Southeast & Southwest Areas Pension Fund ("the Fund").

In this case, Findlay was involved in a labor dispute, and as a result, ceased making contributions to a pension plan administered by the Fund. Shortly thereafter, the Fund demanded Findlay pay withdrawal liability in excess of $10 million. Findlay then filed a complaint in federal district court seeking declaratory and injunctive relief to prevent such payment. Findlay argued that the Fund's assessment of withdrawal liability was improper, since: (1) the withdrawal occurred as the result of a labor dispute, (2) Findlay should not be forced to arbitrate (part of the collection process for withdrawal liability) the dispute because the withdrawal was "union-mandated" and (3) despite ERISA's interim payment requirement, Findlay should not be forced to make interim payments (before the arbitrator rules on the case) because it would suffer irreparable harm if made to do so. The district court dismissed the case, holding that ERISA required the dispute to be arbitrated, and also issued an injunction enjoining the Fund from collecting withdrawal liability payments pending arbitration, as such payments would cause irreparable harm to Findlay. The Fund appeals the district court's injunction, and Findlay cross-appeals the district court's dismissal.

Upon reviewing the case, the Sixth Circuit Court of Appeals (the "Court") reversed the injunctive order, but affirmed the dismissal of the case, for the following reasons:

As to the injunction, the Court said that, under ERISA, the interim payment rule- under which an employer is required to pay withdrawal liability claimed by the plan up front, and dispute the liability later-has no exceptions, such as irreparable harm. Thus, the injunction has no basis in law.

As to the dismissal of the case, the Court said that the requirement to arbitrate disputed withdrawal liability has several exceptions, but they do not apply here. Thus, the district court properly dismissed the case, with the result that Findlay will be required to arbitrate if it wishes to contest the withdrawal liability.

August 16, 2013

Employment-DOL Provides Guidance On Status Of Same-Sex Spouse For FMLA Purposes

The U.S. Department of Labor (the "DOL") has provided post-DOMA (section 3) repeal guidance on the status of a same-sex spouse for FMLA purposes.

Specifically, the DOL has revised Fact Sheet #28F: Qualifying Reasons for Leave under the Family and Medical Leave Act. The revision changes the definition of the term "spouse", for FMLA purposes, to be as follows: Spouse means a husband or wife as defined or recognized under state law for purposes of marriage in the state where the employee resides, including "common law marriage" and same-sex marriage.

Under this revision, for purposes of identifying a spouse under the FMLA, the same-sex partner of an employee will be treated as a "spouse" , if the employee and partner are in a relationship recognized as a marriage by the state in which they reside. Thus, when the state of residence treats the relationship as being a marriage, the employee , if otherwise eligible for FMLA leave, could take the leave: (1) to care for his or her same-sex partner with a serious health condition, (2) to handle a qualifying exigency arising out of the fact that the same-sex partner is a military member on covered active duty or (3) to care for the same-sex partner, if the partner is a covered service member with a serious injury or illness .

The DOL has not yet revised the FMLA regulations to reflect the repeal of section 3 of DOMA. The regulations currently indicate that status of an individual as a spouse depends on the state of residence, similar to the revised definition in Fact Sheet 28F.

August 15, 2013

Employee Benefits-White House Discusses Effective Date Of ACA Out-Of-Pocket Limits

The White House Blog discusses the effective date of the limit on out-of-pocket expenditures for health plan participants, added to the law by the Affordable Care Act. With one exception, there is no delay in the 2014 effective date. Here is what the Blog says:

Landmark consumer protections, including limits on out-of pocket costs in health insurance plans, are taking effect next year, on time. Here are the facts:

Under the Affordable Care Act, for the first time, new historic consumer protections will stop the worst insurance company abuses, by making it illegal for companies to discriminate based on pre-existing health conditions, ending lifetime and annual dollar limits on what an insurance company will cover, and capping out-of pocket spending to protect Americans and their families.

For the first time, under the Affordable Care Act, consumers' out-of-pocket costs will be limited to no more than $6,350 per individual, and $12,700 per family, to help protect people with serious illness from financial ruin. Until now, consumers with insurance still faced unlimited out-of-pocket costs for medical care and prescription drugs - which could wreak financial havoc in the midst of a serious illness or health crisis .

In February, the Administration put out public guidance to implement this important consumer protection, on time. Here's how it will work for you and your family: If you are buying a plan on the new Health Insurance Marketplace, your out-of-pocket limit in 2014 for medical and drug costs combined will not exceed $6,350.

If you already have insurance through your employer, your out-of-pocket limit for major medical costs will also not exceed $6,350.

But the February guidance recognized that some employer plans use separate benefit administrators for their insurance coverage (for instance one for major medical coverage and another for drug coverage). Tech systems cannot communicate with one another yet, so the guidance allowed these existing plans to separately limit out of pocket spending on major medical expenses, and drug plans that currently have out-of-pocket limits. By 2015, Americans in these plans will have one, single maximum out-of-pocket limit of $6,350 for combined medical and drug costs, just like in the Marketplaces.

Consumers will have historic new protections that improve your coverage and help provide peace of mind so that if you do get sick, you can start focusing on getting better, instead of worrying about going bankrupt.

August 14, 2013

ERISA-Third Circuit Upholds Dismissal Of Plaintiff's Case On The Grounds That The Defendant Did Not Engage In A Fiduciary Act

In Edmonson v. Lincoln National Life Insurance Company, No. 12-1581 (3rd Cir. 2013), the plaintiff, Connie Edmonson ("Edmonson") ,was a beneficiary of a life insurance plan, established by her employer, which insured the life of her husband. When Edmonson's husband died, the defendant, Lincoln National Life Insurance Co. ("Lincoln"), chose to pay her benefits using a retained asset account, which allowed it to hold onto the benefits and invest them for its own profit until Edmonson affirmatively chose to withdraw them from the account. Edmonson brought this suit, claiming that Lincoln, by profiting under this arrangement, breached its fiduciary duty of loyalty under ERISA and sought disgorgement of the profit Lincoln earned by investing the benefits owed to her. The district court granted summary judgment in Lincoln's favor, concluding Lincoln was not acting in a fiduciary capacity when it took the foregoing actions. Edmonson appeals.

In analyzing the case, the Third Circuit Court of Appeals (the "Court") concluded that Lincoln did not breach its fiduciary duties under ERISA when it chose to pay Edmonson with a retained asset account and then invested the retained assets for its own profit. The decision to pay Edmonson with the retained asset account did not breach Lincoln's duty of loyalty to her. And when Lincoln then invested the retained assets, those assets were not plan assets, so that it was not acting in a fiduciary capacity. As such, the Court affirmed the district court's summary judgment.

August 13, 2013

ERISA-Tenth Circuit Holds That The Inadequacy Of A 402(f) Notice Was Not Egregious, So Employees Could Not Recover Subsidies Lost In Plan Coversion

In Jensen v. Solvay Chemical, Inc., No. 11-8092 (10th Cir. 2013), the defendant, Solvay Chemical, Inc. ("Solvay"), converted its defined benefit pension plan into a so-called "cash balance" plan. This coversion eliminated certain popular early retirement subsidies. Employees brought this suit, seeking restoration of the lost early retirement benefits, based on an inadequate 204(h) notice that Solvay had provided about the conversion (the inadequacy arising from the notice's failure to, among other things, properly describe what early retirement subsidies already existed under the pre-existing defined benefit plan) .

In analyzing the case, the Tenth Circuit Court of Appeals (the "Circuit Court") noted that employees may recover amounts based on an inadequate 204(h) notice only if the inadequacy is "egregious". The Circuit Court said that there are two applicable definitions under § 204(h) . First, a notice's inadequacy will be "egregious" if the inadequacy was "within [the employer's] control" and was "intentional ". Second, the notice's inadequacy is "egregious" if the inadequacy was "within [the employer's] control" and the employer failed "to promptly provide the required notice or information after [it] discover[ed] an unintentional failure to meet the requirements of" § 204(h)".

The district court found that the notice's inadequacy was not egregious under either of these meanings. Far from intentionally failing to disclose information on early-retirement benefits, the district court found that "Solvay did its best to comply with" § 204(h). The district court further found that "the earliest time Solvay discovered its failure was after the filing of this case" and that the company "sought the advice of its ERISA counsel to ensure it remained compliant" as soon as it discovered the problem. Since it found that the notice's inadequacy was not egregious, the district court ruled that the employees could not recover the lost subsidies. The employees appeal. The Circuit Court concluded that the district court had not made a clear error, and as such, the Circuit Court affirmed the district court's ruling.

August 12, 2013

ERISA-Sixth Circuit Upholds Insurer's Denial of Long-Term Disability Benefits

In Frazier v. Life Insurance Company of North America, No. 12-6216 (6th Cir. 2013), the plaintiff, Kimberly Frazier ("Frazier"), had filed this lawsuit against Life Insurance Company of North America ("LINA") under ERISA to obtain long-term disability ("LTD") benefits. The district court granted judgment for LINA, reasoning that LINA had the discretionary authority to deny Frazier's claim, and that the denial of benefits was neither arbitrary nor capricious. Frazier appeals.

In this case, Frazier was a "sorter" for Publishers Printing Company, LLC ("Publishers"). In this position, she was covered by Publishers' employee benefit plan (the "Plan"), which provided disability benefits. In July 2009, she left her job at the age of 42 due to pain in her back that radiated down both legs. Frazier underwent an MRI of her lumbar spine in early July 2009, which revealed mild disc dislocation at the L4-5 level. Later that month, she visited her family physician, Dr. Brian Eklund, who ultimately issued an opinion, which he provided to LINA in 2010, that Frazier was unable to return to work at regular capacity.

After visiting Dr. Eklund in July 2009, Frazier began a course of physical therapy aimed at decreasing pain. Her discharge summary for this therapy indicates she had met all treatment goals. Following completion of physical therapy, Frazier began seeing another physician, Dr. Kyaw Htin, for an evaluation of her chronic pain. After prescribing a treatment plan consisting of lumbar epidural injections, Dr.Htin issued a discharge instruction permitting Frazier to return to work.

LINA was the named fiduciary under the Plan for deciding benefit claims, and any appeals of denied claims. Under the Plan, Frazier is considered disabled if she is unable to perform the material duties of her regular occupation. In January 2010, Frazier submitted a claim to LINA for LTD benefits due to lower back pain and radiation of pain down both legs. LINA denied the claim in February 2010 after reviewing the medical evidence described above and the job descriptions from Publishers and the U.S. Department of Labor. It concluded that the evidence did not show enough physical difficulties to entitle Frazier to the LTD benefits.

Frazier appealed LINA's initial decision in March 2010, and submitted as additional documentation a Functional Capacity Evaluation ("FCE") which indicated that Frazier "is currently functionally capable of meeting the lower demands for the Medium Physical Demand level on a 8 hour per day basis according to the U.S. Department of Labor Standards." LINA affirmed its decision to deny the claim in April 2010, concluding that Frazier's "current functional ability would allow [her] to perform the material duties of [her] regular occupation." This suit ensued.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") applied the arbitrary and capricious standard of review to LINA's decision to deny Frazier's claim for LTD benefits, since the plan document-here the Plan's insurance policy- granted LINA discretionary authority to review and decide benefit claims and appeals thereof. Under this standard, the Court found that LINA's decision was rational and the claim denial was reasonable, since LINA's decision was supported by the medical evidence, in view of the Plan's definition of disability. As such, the Court concluded that LINA's decision to deny the claim for LTD benefits must be upheld, and the Court affirmed the district court's judgment.

August 8, 2013

Employment-Second Circuit Rules That Company Chairman, President and CEO Is An "Employer" For FLSA Purposes

In Irizarry v. Catsimatidis, Docket No. 11-4035-cv (2nd Cir. 2013), the question arose as to whether John Catsimatidis, the chairman, president and CEO of Gristede's Foods, Inc. ("Catsimatidis"), was an "employer" for purposes of the Fair Labor Standards Act (the "FLSA"). If so, he could be held personally liable for damages for violations of the FLSA. The district court granted partial summary judgment for the plaintiffs on the issue, establishing that Catsimatidis was an employer and would be held jointly and severally liable for damages under the FLSA along with the corporate defendants. Catsimatidis appeals.

In analyzing the case, the Second Circuit Court of Appeals (the "Court") said that the determination of whether Catsimatidis is an "employer" for FLSA purposes depends on the economic realities and the totality of the circumstances The Court concluded that Catsimatidis' actions and responsibilities -- particularly as demonstrated by his active exercise of overall control over the company, his ultimate responsibility for the plaintiffs' (company employees) wages, his supervision of managerial employees, and his actions in individual stores -- demonstrate that he was an "employer" for purposes of the FLSA. As such, the Court affirmed the district court's grant of partial summary judgment in the plaintiffs' favor.

August 7, 2013

Employment-Eleventh Circuit Rules That Plaintiffs Are Employees For FLSA Purposes

In Scantland v. Jeffrey Knight, Inc., No. 12-12614 (11th Cir. 2013), the plaintiffs were appealing the district court's summary judgment against them. The district court held that the plaintiffs are independent contractors, instead of employees, and thus are not entitled to overtime and minimum wage protections under the Fair Labor Standards Act (the "FLSA").

In analyzing the case, the Eleventh Circuit Court of Appeals (the "Court") concluded that, viewing the facts most favorably towards the plaintiffs and with all justifiable inferences drawn in their favor, the plaintiffs were employees under the FLSA.

In so concluding, the Court tested the plaintiffs' status as employee or independent contractor using the "economic reality" test. This test requires the examination of a number of factors, such as the alleged employer's control over the work, the opportunity for profit or loss by the individual in question, the individual's investment in equipment and special skills, and the individual's permanency, duration and integration at work; the overall factor is the economic dependence of the individual in question, that is, whether he works for the alleged employer or is in business for himself. The Court found that the factors in this case pointed to the plaintiffs' status as employees. As such, the Court overturned the district court's decision, and remanded the case back to the district court for further proceedings.

August 6, 2013

ERISA-Second Circuit Upholds Dismissal Of Plaintiffs' Claim Of Fiduciary Breach In Management Of ESOP

In In Re: Lehman Bros. ERISA Litig., Docket No. 11-4232-cv (2nd Cir. 2013), the plaintiffs claimed (among other things) that the defendants, who were members of Lehman's Employee Benefit Plans Committee, breached their fiduciary duty to prudently manage the company's employee stock ownership plan ("ESOP") by failing to "eliminate or curtail" plaintiffs' investment in Lehman stock. The district court dismissed the plaintiffs' claim, and the plaintiffs appeal.

In analyzing the case, the Second Circuit Court of Appeals (the "Court") ruled that the plaintiffs had not rebutted the Moench presumption (a presumption that ESOP fiduciaries act prudently when retaining the investment in company stock) because they failed to allege facts sufficient to show that the defendants knew or should have known that Lehman was in a "dire situation," based on public information. As such, the Court affirmed the district court's dismissal of the case.

August 5, 2013

ERISA-Seventh Circuit Rules That, While ERISA Claims May Be Filed Against An Insurer, The ERISA Claims In This Case Fail

In Larson v. United Healthcare Insurance Company, No. 12-1256 (7th Cir. 2013), The plaintiffs in a proposed class action allege that six major health-insurance companies are violating Wisconsin law by requiring copayments for chiropractic care. Since the plaintiffs are insured through employer-based health plans, the complaint seeks relief under two provisions of ERISA: § 502(a)(1)(B), for recovery of benefits due, and § 502(a)(3), for breach of fiduciary duty. The district court dismissed the complaint, holding that insurance companies are not proper defendants on an ERISA claim for benefits and the practice of requiring chiropractic copays is not a fiduciary act.

In analyzing the case, the Seventh Circuit Court of Appeals (the "Court") said that it affirms the district court's decision, but on somewhat different reasoning. It explained that many cases say that an ERISA claim to recover benefits due under an employee-benefits plan normally should be brought against the plan. That is the general rule, but nothing in ERISA categorically precludes a benefits claim against an insurance company. Here, the complaint alleges that the insurers decide all claims questions and owe the benefits; on these allegations the insurers are proper defendants on the § 1132(a)(1)(B) claim. However, the Court continued, the complaint fails to state a claim for breach of fiduciary duty. Setting policy terms, including copayment requirements, determines the content of the policy, and decisions about the content of a plan are not themselves fiduciary acts. Thus, the Court concluded that there is no breach of fiduciary duty in this case.

August 2, 2013

ERISA-Eighth Circuit Upholds Ruling That Antenuptial Agreement Did Not Waive Former Spouse's Rights To Death Benefits Under A 401(k) Plan

In MidAmerican Pension and Employee Benefits Plans Administrative Committee v. Michael G. Cox, Sr., No. 12-3563 (8th Cir. 2013), the defendants were appealing from the district court's grant of summary judgment against them. They argue that the district court erred in concluding that the antenuptial agreement between their son, Michael G. Cox, II ("Michael"), and his then-wife, Kathy L. Cox ("Kathy"), was ineffective to waive Kathy's right to the funds in Michael's 401(k) plan.

In this case, Michael and Kathy twice married and divorced between 1997 and 2004. On September 23, 2004, while unmarried, Michael designated his parents-the defendants here- as beneficiaries under his employer's 401(k) plan (the "Plan"). Thereafter, Michael and Kathy decided to marry a third time. They executed an antenuptial agreement on February 19, 2010, before marrying on March 6, 2010. They reexecuted the same antenuptial agreement on March 26, 2010. The applicable part of the agreement stated that Kathy waives any rights she may have to Michael's separate property, including benefits from any retirement plan. Michael filed a Petition for Dissolution of Marriage on May 4, 2011, but died on May 21, 2011 before the divorce was finalized. After Michael's death, his parents and Kathy disputed who was to receive the funds in the Plan as a death benefit. Eventually, the dispute wound up in court.

In analyzing the case, the Eighth Circuit Court of Appeals (the "Court") stated that ERISA governs the distribution of the Plan's funds. The relevant statutory provision, § 1055 of ERISA, provides that a qualified preretirement survivor annuity (a "QPSA") shall be provided to the surviving spouse of a vested plan participant who dies before the annuity starting date, unless the participant waived the QPSA. The question: did Michael validly waive the QPSA and appoint his parents as the beneficiaries of the funds? For Michael's waiver to be valid, Kathy herself must have waived her rights to the QPSA in accordance with § 1055. Here, the Court concluded that Kathy did not provide any such waiver, since any waiver found in the antenuptial agreement failed to include an acknowlegment of the effect of the waiver, contrary to the requirements of § 1055 . As such, the Court ruled that Kathy was entitled to the Plan's funds as the surviving spouse, and it affirmed the district court's decision.

August 1, 2013

ERISA-Sixth Circuit Rules That Blue Cross And Blue Shield Violated Its Fiduciary Duties Under ERISA By Charging A Fee To The Plan To Provide Funds To Meet Blue Cross's Own Monetary Obligation To The State

In Pipefitters Local 636 Insurance Fund v. Blue Cross and Blue Shield of Michigan, No. 12-2265 (6th Cir. 2013), the plaintiff was the Pipefitters Local 636 Insurance Fund (the "Fund"), a multiemployer self-funded benefits plan. The Fund alleged that the defendant, Blue Cross and Blue Shield of Michigan ("BCBSM"), violated its fiduciary duties to the Fund under ERISA, by discretionarily setting and billing the Fund for a fee (the "Fee") to cover its own monetary obligations to the state. The district court granted summary judgment to the Fund, and BCBSM appeals.

In this case, the Fund had entered into an administrative services agreement with BCBSM, under which BCBS would perform enumerated services for the Fund, such as automated claims processing, financial management and reporting, services for participant inquiries and/or communications, and maintenance of all necessary records. The agreement expressly states that BCBSM is not the Plan Administrator, Plan Sponsor, or a named fiduciary for purposes of ERISA and its obligations shall be limited to the processing and payment of enrollees' claims. In connection with the services agreement, BCBSM charged the Fee to the Fund, to cover BCBSM's own Medigap obligation to the state of Michigan. Eventually, the Fund sued BCBSM over the Fee, alleging that that BCBSM breached its fiduciary duty under ERISA by discretionarily imposing and failing to disclose the Fee, the imposition of which violated state law.

In analyzing the case, the Sixth Circuit Court of Appeals (the "Court") had to first determine whether BCBSM was a fiduciary under ERISA with respect to the Fund. The Court concluded that BCBS was such an ERISA fiduciary. It charged the Fee to the Fund when and in the amount it determined, thus demonstrating that BCBSM exercises authority or control over disposition of the Fund's assets, satisfying one way in which a person becomes an ERISA fiduciary. Next, the Court had to determine whether, in charging the Fee to the Fund, BCBSM breached its fiduciary duties to the Fund. Here the Court concluded that, by discretionarily imposing the Fee to obtain funds to meet its own Medigap obligation to the state, BCBSM breached the ERISA proscription against fiduciary self-dealing, and thus breached an ERISA fiduciary duty to the Fund. As such, the Court affirmed the district court's decision.