In Kopp v. Klein, No. 16-11590 (5th Cir. 2018), Randy Kopp, a former employee of Idearc, Inc., filed this action on behalf of himself and a putative class of participants in, and beneficiaries of, Idearc’s retirement benefits plan.  He asserted that the defendants breached their duties of loyalty and prudence as ERISA fiduciaries in managing the company’s stock fund, resulting in the depletion of millions of dollars of the retirement savings and anticipated retirement income of the plan participants. The district court dismissed Kopp’s complaint for the failure to state a claim.

Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) affirmed the district court’s decision.  The Court found that, in this ERISA action, the plaintiff had not plausibly alleged an alternative action that defendants would have taken if they had considered the possibility of a response to the rapidly increasing instability of the company.  Also, the employee’s allegations did not give rise to a plausible inference that defendants’ concern about the stock price was self-serving.  At most, the complaint alleged that defendants took steps to protect the value of the stock—a course of action that was equally consistent with protecting the retirement savings plan’s existing holdings of the company’s stock.

In Moore v. Apple Central, LLC, No. 17-1815 (8th Cir. 2018), the Eighth Circuit Court of Appeals (the “Court”) faced an interlocutory appeal of an order of the district court.  The order dismissed plaintiff Megan Moore’s (“Moore”) state law claims against defendant Apple Central, LLC (“Apple Central”), as being preempted by the remedial provisions of ERISA.  See Aetna Health Inc. v. Davila, 542 U.S. 2004.

Moore initially filed the action in Arkansas state court.  She asserted state law claims of breach of contract, negligence, breach of fiduciary duty, and promissory estoppel and sought actual and punitive damages.  These claims were based on the failure of the employer, as plan administrator, to procure $160,000 of voluntary life insurance coverage, after deducting amounts from the pay of Moore’s husband to obtain the coverage.  Apple Central removed the action, arguing the district court has federal question jurisdiction based on ERISA preemption, and diversity jurisdiction.  Moore then filed an Amended Complaint in the district court, asserting diversity jurisdiction over her state law claims.  After ruling that the state law claims are preempted, the district court held the motion to dismiss in abeyance, giving Moore an opportunity to file a Second Amended Complaint asserting claims under ERISA.  Moore filed that complaint, which is pending in district court. Thus, a decision reversing the district court’s preemption ruling, as Moore urges, will not deprive the district court of federal jurisdiction. But this interlocutory appeal will establish whether federal or state law governs the merits of Moore’s claims.

Reviewing the issue of ERISA preemption, the Court affirmed the district court’s order. It found that an ERISA plan was involved and ERISA preemption applies, saying that allowing state law claims to proceed against the plan administrator of an ERISA plan would affect relations between primary ERISA entities and impact the administration of the plan.

In Pharm. Care Mgmt. Ass’n v. Rutledge, Nos. 17-1609 and 17-1629 (8th Circ. 2018), in a dispute between a pharmacy trade association, Pharmaceutical Care Management Association (“PCMA”) and the State of Arkansas, PCMA appeals the district court’s ruling that an Arkansas state statute is not preempted by Medicare Part D, 42 U.S.C. § 1395w-26(b)(3), and the State of Arkansas appeals the district court’s ruling that the statute is preempted by ERISA, 29 U.S.C. § 1144(a).

Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) ruled that Act 900, Ark. Code Ann. § 17-92-507, which regulates the prices for drugs set by pharmacy benefit managers, is preempted by ERISA, 29 U.S.C.S. § 1144(a).  This statute makes implicit reference to ERISA, through regulation of pharmacy benefit managers who administer benefits for covered entities that are necessarily subject to ERISA regulation.  While there is generally a presumption against preemption, the state law both relates to and has a connection with employee benefit plans, so that the presumption ceases to apply and the law is preempted.  Further, the Court ruled that Act 900 is preempted by Medicare Part D under 42 U.S.C.S. § 1395w-26(b)(3).  The statute acts with respect to the Negotiated Prices Standard by regulating price of retail drugs and the appeals process does not make price contingent, and the statute also acts with respect to the Pharmacy Access Standard under 42 U.S.C.S. § 1395w-104(b)(1)(C) as it would interfere with convenient access to prescription drug availability.

Since the Court ruled that the state statute in question is preempted by both ERISA and the Medicare Part D statutes, the Court affirmed the district court’s judgement in part, reverses it in part, and remands the case for entry of judgment for the plaintiff.

In Innova Hospital San Antonio, Limited Partnership v. BlueCross and Blue Shield of Georgia, Incorporated, No. 14-11300 (5th Cir. 2018), a hospital in San Antonio brought various claims against insurance companies and third-party plan administrators for violations of ERISA. The district court dismissed all of the hospital’s claims except for the claim for attorneys’ fees.

Upon reviewing the case, the Fifth Circuit Court of Appeals (the “Court”) held that the hospital sufficiently pleaded its claims for ERISA plan benefits and state-law breach of contract. The Court reversed the district court’s judgment dismissing these claims and remanded the case to the district court to consider these two claims, as well as the claim for attorneys’ fees. The Court affirmed the district court’s judgment dismissing the hospital’s ERISA claims under 29 U.S.C. § 1132(a)(3) (claims for equitable relief), as well as the district court’s judgment denying leave to amend the complaint out of time.

In Estate of Jones v. Children’s Hospital and Health System, Inc. Pension Plan, No. 17-3524 (7th Cir. 2018), three days into retirement and three days before the start of her pension, Linda Faye Jones died. The Administrative Committee, which oversees the Children’s Hospital and Health System, Inc. Pension Plan, denied the pension to Linda’s daughter and beneficiary, Kishunda Jones. The Committee reasoned that only spouses are entitled to benefits under the Plan when a participant dies before the start of her pension.

In this case, the plan provides that a surviving spouse benefit is available to a participant’s spouse when the participant dies “before the Participant’s annuity starting date.” No other benefit under the plan provides that it is available to beneficiaries if the participant dies before payments start. Upon reviewing the case, the Seventh Circuit Court of Appeals (the “Court”) held that the Administrative Committee’s decision was not arbitrary or capricious.  Accordingly, the Court affirmed the Administrative Committee’s decision to deny benefit to the participant’s daughter.

In Fletcher v. Honeywell Int’l, Inc., No. 17-3277 (6th Cir. 2018), the plaintiffs, on behalf of themselves and other similarly situated retirees, retirees’ surviving spouses, and eligible dependents, filed suit against defendant Honeywell International, Inc. to enforce their rights to retirement healthcare benefits under a series of Collective Bargaining Agreements (“CBAs”).  The district court held that the CBAs were ambiguous and relied on extrinsic evidence for its conclusion that the parties intended retiree healthcare benefits to vest for life.  The defendant appeals.

Upon reviewing the case, the Sixth Circuit Court of Appeals (the “Court”) ruled that, in a suit under the LMRA and ERISA to enforce their retirement healthcare benefits rights under a series of CBA’s, the retirees were not entitled to lifetime healthcare benefits because the CBAs’ general durational clauses, which provided that the CBAs would remain in effect only until specified dates, were unambiguous and applied to the retirees’ healthcare benefits.  Further, ruled the Court, consideration of extrinsic evidence was not warranted because the CBAs’ general durational clauses applied to the retirees’ healthcare benefits since there was no clear, affirmative language to the contrary, and the CBAs unambiguously did not provide for vested lifetime retiree healthcare benefits, even though the CBAs explicitly provided for lifetime healthcare benefits to retirees’ surviving spouses and dependents.

Based on these rulings, the Court overturned the district court’s holding.

In Heavenly Hana LLC v. Hotel Union & Hotel Industry of Hawaii Pension Plan, No. 16-15481 (9th Cir. 2018), a panel for the Ninth Circuit Court of Appeals (the “Panel”) reversed the district court’s judgment, after a bench trial, in favor of the plaintiffs in an action under the Multiemployer Pension Plan Amendment Act.

The Panel held that the plaintiffs were required to assume the unpaid withdrawal liability of their predecessor to a multiemployer pension plan.  The Panel held that a constructive notice standard applied, and the plaintiffs were on constructive notice of potential withdrawal liability because a reasonable purchaser would have discovered their predecessor’s withdrawal liability.

In Dowdy v. Metropolitan Insurance Company, No. 16-15824 (9th Cir. 2018), a panel of the Ninth Circuit Court of Appeals (the “Panel”) reversed the district court’s judgment in favor of the defendant in an ERISA action challenging the denial of accidental dismemberment benefits under an employee welfare benefit plan subject to ERISA.

In this case, the plaintiff suffered a serious injury to his left leg as the result of an automobile accident, and his leg was eventually amputated below the knee. The defendant denied coverage because the plaintiff’s injury was complicated by his diabetes. The Panel held that the district court did not abuse its discretion in excluding evidence outside the administrative record, and any error on this issue was harmless because the external evidence did not support the plaintiff’s claim.

Under the ERISA plan, the plaintiff was entitled to coverage if his car accident was the “direct and sole cause” of the loss, and if amputation “was a direct result of the accidental injury, independent of other causes.” The Panel held that, even under the more demanding “substantial contribution” standard used when the applicable plan language is conspicuous, the plaintiff was entitled to recovery because the record did not support a finding that the preexisting condition of diabetes substantially contributed to his loss. The panel remanded the case to the district court for further proceedings.

In Gordon v. Cigna Corporation, No. 17-1188 (4th Cir. 2018), Steven Gordon worked for Oil Price Information Services, Inc. and paid premiums on life insurance policies, under a plan sponsored by the employer, that totaled $300,000 in coverage.  But when Steven Gordon died in January 2014, his insurer, The Life Insurance Company of North America (“LINA”), paid Steven’s wife and beneficiary, Kimberly Gordon, only $150,000. The reason, LINA claimed, was because Steven Gordon had only been approved for $150,000 in coverage—not for the full $300,000 in coverage he had been paying for. When Kimberly Gordon sued for the difference between the two amounts, the district court granted summary judgment in favor of the insurance company.

The district court found that the errors leading to Steven Gordon’s reduced coverage resulted from mistakes by his employer, which administered the life insurance plan, not the insurance company. Thus, the insurance company did not breach any fiduciary duty it may have had under ERISA, nor did it knowingly participate in a breach of trust by another fiduciary. The district court also found that discovery would not lead to any information that would change its conclusion, so the court granted summary judgment before either party conducted discovery. Kimberly Gordon, on behalf of Steven Gordon’s estate, now appeals the district court’s decision. Upon reviewing the case, the Fourth Circuit Court of Appeals affirmed the district court’s ruling.

(Following up on Blog post on May 22)

In Am. Orthopedic & Sports Med. v. Independence Blue Cross Blue Shield, 2018 U.S. App. LEXIS 12637 (3rd Circuit 2018), the Third Circuit Court of Appeals (the “Court”) held that an anti-assignment clause in an ERISA-governed health insurance plan was enforceable, since it was negotiated between the insurer and plan administrator.  As such, the district court properly held that a healthcare provider-to whom an assignment of a claim for benefits against the plan was purportedly made by the plan beneficiary/patient- lacked standing to bring suit against the plan for payment.  The Court felt that its ruling on the anti-assignment clause’s enforceability is in line with decisions from the First, Second, Fifth, Ninth, Tenth, Eleventh (cases cited therein).

In so ruling, the Court said that insurers did not waive their right to enforce the anti-assignment clause by accepting and processing a claim form, issuing a check to the plan beneficiary, and failing to raise the clause as an affirmative defense during the internal administrative appeals process.