Articles Posted in ERISA

In Manuel v. Turner Industrial Group, L.L.C., 2018 U.S. App. LEXIS 27810 (5th Cir. 2018), Michael N. Manuel (“Manuel”) is a former employee of Turner Industries Group LLC (“Turner”).  During his employment, Manuel participated in a group employee short term and long term disability plan (the “Plan”) sponsored by Turner and insured by Prudential Insurance Company of America (“Prudential”).

The Plan provides the following.  Benefits are payable when Prudential determines that a participant is unable to work.  The Plan also provides that participants must submit proof of disability satisfactory to Prudential.  The summary plan description (“SPD”) adds that Prudential has the sole discretion to interpret the Plan.  The Plan does not cover a disability which is due to a pre-existing condition.  As to short term disability (“STD”) benefits, Prudential has the right to recover any overpayments due to any error Prudential makes in processing a claim.

Manuel alleges he became unable to work and claimed STD benefits under the Plan.  His STD claim was approved and paid.  Once he exhausted these benefits, he applied for long term disability (“LTD”).  His LTD claim was denied at every level of internal adjudication because Prudential concluded that Manuel’s claim was subject to the pre-existing condition exclusion.  Related to the denial, but before any suit was filed, Prudential determined that it had paid STD benefits in error and demanded repayment.

In Hennen v. Metropolitan Life insurance Company, No. 17-3080 (7th Cir. 2018), plaintiff-appellant Susan Hennen worked as a sales specialist for NCR Corporation from 2010 to May 2012, when she sought treatment for a back injury.  As an employee, Hennen was covered by long-term disability insurance under a group policy provided by defendant-appellee Metropolitan Life Insurance Company (“MetLife”).  When physical therapy and surgery failed to resolve her injury, Hennen applied for long-term disability benefits under the insurance plan.

Acting as plan administrator, MetLife agreed that Hennen was disabled and paid benefits for two years.  The plan has a two-year limit, however, for neuromusculoskeletal disorders.  That limit is subject to several exceptions, one of which applies to cases of radiculopathy.  After paying for two years, MetLife terminated Hennen’s benefits, finding that the two-year limit applied.  Hennen believes that she is entitled to continued benefits because she has radiculopathy. She sued under ERISA, arguing that MetLife’s determination that she did not have radiculopathy was arbitrary and capricious.  The district court granted summary judgment for MetLife, and Hennen appeals.

The Circuit Court of Appeals for the Seventh Circuit (the “Court”) reversed the district court’s decision and remanded the case back to the district court. The Court said that MetLife acted arbitrarily when it discounted the opinions of four doctors who diagnosed Hennen with radiculopathy in favor of the opinion of one physician who ultimately disagreed, but only while recommending additional testing that MetLife declined to pursue.

 

In Re: Derogatis, Docket Nos. 16-977-cv, 16-3549-cv (2nd Cir. 2018) has tandem cases, in which plaintiff-appellant Emily DeRogatis appeals the judgment of the district court awarding summary judgment to defendants-appellees, the trustees of two union-affiliated employee benefit plans, on her claims for relief asserted under ERISA.  The benefit plans at issue are the Pension Plan, which governed benefits payable to Emily as a surviving spouse after the death of her husband, Frank, and the Welfare Plan, which governed the DeRogatises’ entitlement to health benefits during and after Frank’s lifetime.  The conflict arises primarily because of certain oral miscommunications by Plan personnel to the DeRogatises before Frank’s death in 2011.

Upon reviewing the case, as to the Pension Plan, the Second Circuit Court of Appeals (the “Court”) concluded that the Pension Plan trustees correctly denied DeRogatis’s request for an augmented survivor benefit following her husband’s death.  It therefore affirmed the district court’s decision denying DeRogatis’s claim under ERISA § 502(a)(1)(B) against the Pension Plan for benefits due.  As to DeRogatis’s claim under ERISA § 502(a)(3) for breach of fiduciary duty, the District Court reasoned that a plan administrator cannot be held liable for unintentional misrepresentations made about the plan’s operation by its non-fiduciary, “ministerial” agent and on this basis denied the claim.  The Court rejected that ruling.  Nonetheless, it affirmed the judgment denying DeRogatis relief under this section because the Pension Plan’s summary plan description (“SPD”) adequately described the eligibility requirements for the benefits in question and thereby satisfied the trustees’ fiduciary duty to provide complete and accurate information to plan participants and beneficiaries.  Therefore, the summary judgment entered by the district court for the Pension Plan defendants is affirmed.

As to the Welfare Fund, DeRogatis asserts an ERISA § 502(a)(3) claim for breach of fiduciary duty against the trustees of the Welfare Fund.  The district court granted summary judgment for defendants on this claim on the same “ministerial employee” ground as described above.  Again, the Court rejected that analysis.  It disagreed, too, with the district court’s conclusion that the Welfare Plan SPD explained clearly its participants’ options to receive post-retirement health benefits. Given the evidence that Welfare Fund agents misstated material aspects of those same benefits when communicating with the DeRogatises, the Court identifies an open question of material fact concerning whether the Welfare Plan trustees breached their fiduciary duty to provide plan participants with complete and accurate information about their benefits.  Therefore, the Court vacated the judgment entered in favor of the Welfare Plan defendants, and remanded that part of the case back to the district court.

In Doe v. Harvard Pilgrim Health Care, Inc., No. 17-2078 (1st Cir. 2018), Jane Doe’s insurer, Harvard Pilgrim Health Care (“HPHC”), deemed part of the time Doe spent at a mental health residential treatment facility not medically necessary under the health care benefits plan established by the employer of Doe’s parent. HPHC therefore denied coverage for that portion of the treatment.  After several unsuccessful administrative appeals, Doe sued HPHC in federal court under ERISA.

On de novo review, the district court agreed with HPHC’s determination that continued residential treatment was not medically necessary for Doe.  However, upon review by the First Circuit Court of Appeals (the “Court”), the Court concluded that the administrative record upon which the district court based its finding should have been supplemented.  As a result, the Court reversed in part, vacated in part, and remanded for further proceedings.

In Board of Trustees of the Glazing Health and Welfare Trust v. Chambers, No. 16-15588 (9th Cir. 2018), vacating the district court’s summary judgment in favor of the plaintiffs, a panel of the Ninth Circuit Court of Appeals (the “Panel”) held that Nevada Senate Bill 223 was a legitimate exercise of Nevada’s traditional state authority and was not preempted by ERISA.

Nevada law holds general contractors vicariously liable for the labor debts owed by subcontractors to subcontractors’ employees on construction projects.  SB 223 limited the damages that can be collected from general contractors and imposed notification requirements on contractors and welfare benefit plans regulated under ERISA before an action could be brought under Nevada law against general contractors.  Plaintiffs, ERISA trusts that managed ERISA plans, claimed that SB 223 was preempted by ERISA because it impermissibly “related to” ERISA plans.

The Panel concluded that the appeal was not moot following the Nevada legislature’s repeal of SB 223 and enactment of SB 338, a replacement that repeats some of the challenged aspects of SB 223.  The Panel held that legislative change in response to an adverse judicial ruling is generally the type of “voluntary cessation” that defeats mootness on appeal.  The Panel concluded that Nevada did not rebut a presumption that its appeal was not moot because it did not demonstrate that the legislature would certainly not reenact the challenged provisions of SB 223.

In Doe v. Harvard Pilgrim Health Care, Inc., No. 17-2078 (1st Cir. 2018), Jane Doe’s insurer, Harvard Pilgrim Health Care (“HPHC”), deemed part of the time Doe spent at a mental health residential treatment facility not medically necessary under the health care benefits plan established by the employer of Doe’s parent. HPHC therefore denied coverage for that portion of the treatment.  After several unsuccessful administrative appeals, Doe sued HPHC in federal court under ERISA.

 

On de novo review, the district court agreed with HPHC’s determination that continued residential treatment was not medically necessary for Doe.  However, upon review by the First Circuit Court of Appeals (the “Court”), the Court concluded that the administrative record upon which the district court based its finding should have been supplemented.  As a result, the Court reversed in part, vacated in part, and remanded for further proceedings.

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 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.