Articles Posted in ERISA

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.

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.

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.