In Hansen v. Group Health Cooperative, No. 16-35684 (9th Cir. 2018), a panel for the Ninth Circuit Court of Appeals (the “Panel”) reversed the district court’s exercise of subject matter jurisdiction in dismissing state law claims brought by mental health providers against an insurance company, and remanded for the entirety of the dispute to be returned to the state court from which it had been removed.

The mental health providers filed a class action complaint in state court, alleging violation of the Washington Consumer Protection Act in defendant’s use of certain screening criteria for mental healthcare coverage.  Defendant removed the case to federal court on the ground that the providers had been assigned benefits by patients who were insured under health plans governed by ERISA, which, defendant asserted, therefore completely preempted the providers’ claims.  The district court dismissed in part, concluding that the providers’ claims were subject to conflict and express preemption to the extent that they concerned defendant’s business practices in administering ERISA plans.  The district court declined to exercise supplemental jurisdiction over the providers’ claims as to defendant’s administration of non-ERISA plans, and it remanded that part of the case to Washington state court.

The Panel held that the providers’ claims did not fall within the scope of, and so were not completely preempted by, ERISA section 502(a)(1)(B).  There was no dispute that the providers’ claim for wrongfully licensing allegedly biased mental health coverage guidelines was based on an independent duty to refrain from engaging in unfair and deceptive business practices.  The Panel held that there also was not complete preemption of a claim that defendant used its treatment guidelines to avoid complying with Washington’s Mental Health Parity Act, or of a claim that defendant unfairly competed in the marketplace by discouraging its patients from seeking treatment by rival practitioners.  The Panel concluded that all three of the providers’ claims for unfair and deceptive business practices were based on independent duties beyond those imposed by their patients’ ERISA plans.

In Pension Benefit Guaranty Corporation v. Findlay Industries, Inc., No. 17-3520 (6th Cir. 2018), the Pension Benefit Guaranty Corporation (“PBGC”) had sued to collect more than $30 million in underfunded pension liabilities from Findlay Industries following the shutdown of its operation in 2009, apparently a casualty of the worsening economy at the time.  When Findlay could not meet its obligations, PBGC looked to hold liable a trust started by Findlay’s founder, Philip D. Gardner (the “Gardner Trust”), treating it as a “trade or business” under common control by Findlay.  PBGC also asked the court to apply the federal-common-law doctrine of successor liability to hold Michael J. Gardner, Philip’s son, liable for some of Findlay’s debt.  Michael, a 45 percent shareholder of Findlay and its former-CEO, had purchased Findlay’s assets and started his own companies using the same land, hiring many of the same employees, and selling to Findlay’s largest customer. The district court refused to hold either the trust or Michael and his companies liable and dismissed the case.  PBGC appeals.

Upon reviewing the case, the Sixth Circuit Court of Appeals (the “Court”) concluded that the district court’s decision is flawed in two respects.  First, an entity like the Gardner Trust that leases property to an entity under common control like Findlay should be considered a “trade or business,” categorically.  This reading of the statute recognizes the differences between ERISA and the tax code, satisfies the purposes of ERISA, and brings this court in line with its sister circuits. Next, in this specific instance, successor liability is required to promote fundamental ERISA policies.  Refusing to apply successor liability would allow employers to fail to uphold promises made to employees and then engage in clever financial transactions to leave PBGC paying out millions in pension liabilities. Holding the employers responsible, on the other hand, is a commonsense answer that fulfills ERISA’s goals.

As such, the Court vacated the district court’s order of dismissal and remanded the case for further proceedings.

In Martone v. Robb, No. 17-50702 (5th Cir. 2018), Thomas Martone, a former Whole Foods employee, brought an action against certain Whole Foods executives who are named fiduciaries for the company’s 401(k) plan.  Martone alleges that these executives breached their fiduciary duties by allowing employees to continue to invest in Whole Foods stock while its value was artificially inflated due to a widespread overpricing scheme.  The district court dismissed the claims, finding that Martone failed to plausibly allege an alternative action that the fiduciaries could have taken that would have been consistent with the securities laws and that a prudent fiduciary in the same circumstances would not have viewed as more likely to harm the fund than to help it.

Upon reviewing the case, the Fifth Circuit Court of Appeals agreed with the district court’s finding and therefore affirmed the district court’s decision.

In WHD Opinion Letter FMLA2018-2-A, the U.S. Department of Labor (the “DOL”) concluded that organ-donation surgery can qualify as a “serious health condition” under the Family and Medical Leave Act of 1993 (the “FMLA”).  Here is what the DOL said.

BACKGROUND.  The FMLA entitles eligible employees of covered employers to unpaid, job-protected leave for specified family and medical reasons.  Eligible employees may take up to 12 workweeks of leave in a 12-month period for, among other things, a serious health condition that renders the employee unable to perform the functions of his or her job. 29 U.S.C. § 2612(a)(1)(D); 29 C.F.R. § 825.112(a)(4).

The FMLA defines “serious health condition” as an “illness, injury, impairment, or physical or mental condition that involves” either “inpatient care in a hospital, hospice, or residential medical care facility” or “continuing treatment by a health care provider.” 29 U.S.C. § 2611(11).  Implementing regulations define “inpatient care” as “an overnight stay in a hospital, hospice, or residential medical care facility, including any period of incapacity… or any subsequent treatment in connection with such inpatient care.” 29 C.F.R. § 825.114.  The regulations also specify that “continuing treatment” includes “incapacity and treatment,” “chronic conditions,” “permanent or long-term conditions,” and “conditions requiring multiple treatments.” 29 C.F.R. § 825.115.  For all conditions, “incapacity” means “inability to work, attend school or perform other regular daily activities due to the serious health condition, treatment therefore, or recovery therefrom,” and “treatment” includes “examinations to determine if a serious health condition exists and evaluations of the condition.” 29 C.F.R. § 825.113(b), (c).  An employee is incapacitated if he or she is “unable to work at all or is unable to perform any one of the essential functions of the employee’s position,” including when the employee “must be absent from work to receive medical treatment.” 29 C.F.R. §§ 825.113(b), .123(a).

The Internal Revenue Service (the “IRS”) has issued a Private Letter Ruling in which an employer proposes to amend its 401(k) plan in a manner which will help its employees accumulate moneys to pay off student loans.

In PLR 201833012 (dated August 17, 2018), the Internal Revenue Service (the “IRS”) was faced with the following proposed amendment to a 401(k) plan (the “Plan”).

An employer proposed to amend the Plan to offer a student loan benefit program (the “Program”).  Under the Program, the employer would make an employer nonelective contribution on behalf of an employee, conditioned on that employee making student loan repayments (the “SLR Nonelective Contribution”).  The Program is voluntary.  An employee must elect to enroll, and once enrolled, may opt out of enrollment on a prospective basis.

In Marshall v. Anderson Excavating & Wrecking Co., No. 17-1887 (8th Cir. 2018), the International Union of Operating Engineers, Local 571 (the “Union”) and trustees of the Contractors, Laborers, Teamsters, and Engineers (“CLT&E”) Health and Welfare Plan (the “Welfare Plan”) and Pension Plan (the “Pension Plan”) (collectively, “plaintiffs”) sued Anderson Excavating and Wrecking Co. (“Anderson Excavating”) under ERISA.  They requested that the district court order Anderson Excavating to pay the contributions it allegedly owes to the Welfare Plan and Pension Plan, along with interest, liquidated damages, and attorneys’ fees and costs.  The district court found Anderson Excavating liable to the plaintiffs for delinquent contributions under ERISA and entered judgment against it and in favor of the plaintiffs in the amount of $11,956.96 in unpaid contributions; $8,817.96 in prejudgment interest; $8,817.96 in liquidated damages; $38,331 in attorneys’ fees; and $516.50 in nontaxable costs.

On appeal, Anderson Excavating argues that the district court erred in determining (1) damages for unpaid contributions, (2) prejudgment interest, (3) liquidated damages, and (4) attorneys’ fees.

Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) concluded that the district court legally erred in applying the alter ego doctrine (deeming Andersen Excavating to be the employer that actually owed the contributions) to justify an award of unpaid contributions for an alleged employee’s work.  This error obtains because the plaintiffs never raised an alter ego theory in their complaint. Accordingly, the Court reversed the judgment of the district court and remanded the case for further proceedings consistent with its opinion.

In Griffin v. Hartford Life & Accident Insurance Company, No. 17-1251 (4th Cir. 2018), Scott Griffin commenced an action under ERISA against Hartford Life and Accident Insurance Company (“Hartford Life”) as the administrator of his employer’s welfare benefit plan (the “Plan”), seeking a continuation of the long-term disability benefits that Hartford Life had terminated based on its conclusion that Griffin was no longer “disabled,” as that term is used in the Plan.

The district court granted summary judgment to Hartford Life, and Griffin filed this appeal, contending that the district court erred: (1) in reviewing the administrator’s decision for abuse of discretion, rather than de novo, and (2) in concluding that Griffin failed to provide evidence sufficient to support a conclusion that Hartford Life’s decision to terminate the long-term disability benefits was unreasonable.

Upon reviewing the case, the Fourth Circuit Court of Appeals (the “Court”) affirmed the district court’s summary judgment.  As to the standard for reviewing the administrator’s decision, the Court noted that the applicable documents gave discretion to Hartford Life, so that an abuse of discretion review of its decision is warranted.  It rejected the contention that a person other than Hartford Life made the decision to terminate Griffin’s benefits, since the decision makers were acting as agents of Hartford Life.  As to the reasonableness of Hartford Life’s decision, the Court said that it agreed with the district court that Hartford Life’s decision was reasonable and therefore did not amount to an abuse of discretion.  The record readily shows that Griffin received a fair and thorough consideration of his claim and that Hartford Life’s conclusion was reasonably supported by the available evidence.

In Zaeske v. Liberty Life Assur. Co., No. 17-2496 (8th Cir. 2018), an appeal arose from Liberty Life Assurance Company’s denial of Damon Zaeske’s application for long-term disability benefits under his employer’s welfare benefit plan.  After Zaeske sued Liberty Life under ERISA, the district court ordered Liberty Life to pay Zaeske benefits and attorney’s fees.  Liberty Life appeals.

Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) concluded that Liberty Life’s decision to deny the application was not an abuse of discretion.  Accordingly, the Court reversed the district court’s judgment.  In so ruling, the Court found that the opinions of two physicians were sufficiently reliable to provide a reasonable basis for Liberty Life’s denials of Zaeske’s claim.  While another interpretation of Zaeske’s medical records could support his eligibility for benefits, the assessments of those two physicians were not outside the range of reasonableness, and it was not an abuse of discretion for Liberty Life to rely on them. The court also vacated the award of attorney’s fees.


North Cypress Medical Center Operating Company v. Aetna Life Insurance Company, No. 16-20674 (5th Cir. 2018), involved the following situation.  Under Aetna’s insurance plans, patients are responsible for a portion of their bills.  Insurance companies cover the remainder.  But how much is Aetna obligated to pay for medical services provided to its members by an out-of-network hospital?

Houston medical services provider North Cypress Medical Center Operating Co., Ltd. and North Cypress Medical Center Operating Co. GP, LLC (collectively “NCMC”) alleged Aetna underpaid out-of-network providers like NCMC in violation of ERISA.  Aetna counterclaimed, alleging NCMC fraudulently and negligently misrepresented its billing practices by routinely waiving patient responsibilities yet billing Aetna for the total out-of-network cost.

The district court granted Aetna judgment as a matter of law on NCMC’s ERISA claims and granted NCMC judgment as a matter of law on Aetna’s fraud and negligent misrepresentation counterclaims.  Upon reviewing the case, the Fifth Circuit Court of Appeals affirmed the district court’s decision.

In Springer v. Cleveland Clinic Emple. Health Plan Total Care, No. 17-4181 (6th Cir. 2018), Jason Springer arranged air ambulance transportation for his son before his employee benefit plan (the “Plan”) could verify his membership and authorize the service.  Subsequently, the plan administrator denied Springer’s claim for coverage because he did not obtain the precertification required for nonemergency transportation.  The district court affirmed the denial and alternatively found that Springer did not suffer an injury to have Article III standing.

Upon reviewing the case, the Sixth Circuit Court of Appeals (the “Court”) said that Springer has standing to bring his claim.  The denial of plan benefits is a concrete injury for Article III standing.  However, the Court also said that it agrees with the district court that the plain language of the Plan required precertification.  Springer’s son’s transportation was not an emergency which could be used to sidestep the precertification process.  Accordingly, the Court affirmed the district courts’ decision.