Articles Posted in ERISA

In Meiners v. Wells Fargo & Company, No. 17-2397 (8th Cir. 2018), John Meiners (“Meiners”) appeals from the district court’s order dismissing his Complaint for failure to state a claim.  Meiners claimed that his former employer, Wells Fargo & Company (“Wells Fargo”), and an assortment of Wells Fargo executives and entities (collectively, the “Wells Fargo Defendants”), breached their fiduciary duty under ERISA.  He alleged two breaches: (1) retaining Wells Fargo’s proprietary investment funds as options for Wells Fargo employees’ 401(k) retirement plan (the “Plan”), and (2) defaulting to these proprietary investment funds for Plan participants who did not elect other options.

In this case, during the relevant time period, the Plan allegedly offered more than two dozen investment options, twelve of which were Wells Fargo Dow Jones Target Date Funds (“Wells Fargo TDFs”). These Wells Fargo funds were allegedly more expensive (due to higher fees) than comparable Vanguard and Fidelity funds and also underperformed the Vanguard funds.  Meiners’s claimed that the Wells Fargo Defendants breached their fiduciary duties under ERISA when they failed to remove their inordinately expensive and underperforming funds from the Plan’s options.  Meiners further alleged that the breach occurred because the Wells Fargo Defendants were maximizing their own profits, selecting their funds as a default out of improper financial motives to generate fees and “seed” (provide financial support for) the underperforming funds.  The district court granted the Wells Fargo Defendant’s motion to dismiss the claim, and Meiners appealed.

Upon reviewing the case, the Eighth Circuit Court of Appeals (the “Court”) affirmed the district court’s dismissal.  In this case, the Court found that Meiners’s Complaint fails to state a plausible claim because it fails to allege any facts, accepted as true, to demonstrate that the Wells Fargo TDFs were an imprudent choice.  In particular, Meiners did not plead facts showing the Wells Fargo TDFs were underperforming funds.  His conclusory allegations of bad conduct do not save his Complaint from its deficient pleading regarding those funds.

In Munro v. University of Southern California, Docket No. 17-55550 (9th Cir. 2018), a panel for the Ninth Circuit Court of Appeals (the “Panel”) affirmed the district court’s denial of defendants’ motion to compel arbitration of collective claims for breach of fiduciary duty in the administration of two ERISA plans.

The plaintiffs, current and former employees of the University of Southern California, and participants in the two ERISA plans, were required to sign arbitration agreements as part of their employment contracts.  The Panel concluded that the dispute fell outside the scope of the arbitration agreements because the parties consented only to arbitrate claims brought on their own behalf, and the employees’ claims were brought on behalf of the ERISA plans.

In Cehovic-Dixneuf v. Wong, No. 17-1532 (7th Cir. 2018), the Seventh Circuit Court of Appeals (the “Court”) began the case by noting that ERISA requires administrators of employee benefit plans to comply with the documents that control the plans.  In the case of life insurance policies, that means death benefits are paid to the beneficiary designated in the policy, notwithstanding equitable arguments or claims that others might assert.

In this case, the deceased employee was Georges Cehovic, whose employer offered its employees an insurance benefit plan through ReliaStar Life Insurance Company.  Georges had two policies under the plan with ReliaStar: a basic life insurance policy with a death benefit of $263,000, and a supplemental life insurance policy with a death benefit of $788,000.  On both policies, Georges listed his sister, plaintiff Emma Cehovic-Dixneuf, as the sole and primary beneficiary.  After Georges died, his ex-wife, defendant Lisa Wong, claimed that she and the child she had with Georges were entitled to the death benefits from the supplemental policy.  However, noted the Court, any equitable arguments Wong might make can gain no traction, however, if the supplemental life insurance policy is covered by ERISA.

The district court granted summary judgment for plaintiff Cehovic-Dixneuf, finding that the supplemental life insurance policy is indeed covered by ERISA (so she gets the benefits as the designated beneficiary). The Court affirmed this decision.  It said that defendant Wong failed to offer evidence to the district court showing any genuine issue of any fact material to the case.  She did not present her evidentiary objections to Cehovic-Dixneuf’s evidence in the district court when she could and should have.

In Pearce v. Chrysler Group LLC Pension Plan, No. 17-1431 (6th Cir. 2018), Randy Pearce, a long-time employee of Chrysler Group LLC, was a participant in the Chrysler Group LLC Pension Plan (“Plan”).  Under the Plan’s terms, Pearce had earned an early retirement supplement, called “30-and-Out benefits.”  He relied on the Summary Plan Document (“SPD”), provided by Chrysler to Plan participants, which stated he did not need to be “actively employed at retirement” to remain eligible for these benefits.  But the SPD omitted an exclusionary clause contained in the Plan document itself, which said that an employee who was terminated was ineligible for the early retirement supplement.  After Pearce was terminated, he applied for his retirement benefits and was denied the 30-and-Out benefits.

After unsuccessfully appealing this denial administratively, Pearce brought suit under ERISAPearce seeks to hold the Plan to its representations in the SPD, notwithstanding the exclusionary provision in the Plan document, via the equitable remedies available under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3).

Upon reviewing the case, the Sixth Circuit Court of Appeals (the “Court”) reversed the district court’s grant of summary judgment to the Plan on Pearce’s request for reformation, affirmed summary judgment on Pearce’s request for equitable estoppel under which the provisions of the SPD would be applied, and remanded the case for further proceedings consistent with its opinion.

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 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.