Parmenter v. The Prudential Ins. Co. of Am., No. 22-1614, __ F. 4th __, 2024 WL 613959 (1st Cir. Feb. 14, 2024) (Before Circuit Judges Montecalvo and Thompson, and District Judge Silvia Carreño-Coll)

With a rapidly aging population in the United States, coupled with increasing numbers of people suffering from chronic and debilitating illness, long-term care is in the spotlight like never before. Because very few people can afford to pay for the cost of such care themselves, more and more employers are now offering long-term care insurance through ERISA plans as a benefit to their employees and their families. Given these trends, it should not be surprising that we are beginning to see an uptick in litigation about long-term care benefits, as this week’s case of the week exemplifies.

The case originated when Barbara Parmenter, an employee of Tufts University, sued Tufts and Prudential Insurance Company in a putative class action after Prudential twice raised its premium rates for her long-term care coverage. She alleges that she was informed during an in-person presentation she attended before enrolling that any increase in premiums would have to be approved by the Massachusetts Commissioner of Insurance before becoming effective, and the group contract covering the policy likewise made such increases “subject to” approval by the Commissioner. Ms. Parmenter further alleges, and neither Prudential nor Tufts disputes, that Prudential did not obtain approval from the Commissioner before raising her premiums (and those of others in the class). Nevertheless, Prudential asserts that it was not in fact possible to get approval from the Commissioner because, as it turns out, the Commissioner has never exercised its regulatory authority over group contracts and thus has not set up a rate approval mechanism with respect to policies issued under such contracts.

The district court agreed with the defendants that Ms. Parmenter had not plausibly stated a claim for breach of fiduciary duty because the court interpreted that group contract’s “subject to” language to only apply in the event that the Commissioner exercised its regulatory authority with respect to such contracts. The court of appeals in this decision disagreed that this was the only way to read the contractual language, concluding instead that the language was ambiguous and could not be resolved on the current record.

To get there, the court first addressed whether Prudential was a fiduciary with respect to raising the premiums. Noting that “[i]n the plan documents, Prudential held itself out to the plan participants as owing them a fiduciary duty of prudence,” the court rejected Prudential’s assertion that raising premiums rates was a business decision falling outside the ambit of any of its duties as an admitted plan fiduciary. On this basis, the court held that “at the very least Prudential owed Parmenter a fiduciary duty of prudence to manage the plan in accordance with the documents governing the plan…however it is ultimately interpreted.”

This brought the court to the crux of the issue: “the plausibility of the breach allegations against Prudential.” Applying federal common law principles of contract interpretation – which the court saw as incorporating common-sense principles and canons drawn from state law – the court concluded that the term “subject to” as used in the group contract was ambiguous. The court thus disagreed with both sides of the dispute, who each asserted that the phrase had a different plain and unambiguous meaning.

The court started with dictionary definitions of the phrase “subject to,” which varied from an absolute to a possibility, and thus could support both the plaintiff’s and the defendants’ proposed interpretations. Nor did consideration of the policy as a whole, which elsewhere simply stated that Prudential reserves the right to increase premiums, clear up the matter. Instead, these and other contract interpretation principles led the court “to conclude that ‘subject to’ is ‘reasonably susceptible of’ different interpretations,” and thus ambiguous.

The court of appeals then determined, as is usually the case with respect to contractual ambiguities, that it was not possible to resolve the ambiguity in the contract language on the pleadings, with only the contract before it. The court thus reversed the judgment as to Prudential and remanded for further proceedings.

Ms. Parmenter did not fare so well with respect to her ancillary claim for co-fiduciary breach under 29 U.S.C. § 1105(a) against Tufts. Ms. Parmenter based this claim on Tufts’ failure to prevent Prudential from raising premiums and its alleged failure to monitor Prudential. The court read the text of Section 1105(a) to “contemplate[] active steps in furtherance of the breach whereas Parmenter alleges Tufts stood by and did nothing.” Because the complaint does not allege that “Tufts knowingly participated in, concealed, enabled, or failed to intercede in any way to influence Prudential’s decision to increase the premium rates which affected Parmenter’s premium payments,” the court of appeals affirmed the district court’s judgment dismissing the complaint as to Tufts.         

Below is a summary of this past week’s notable ERISA decisions by subject matter and jurisdiction.

Attorneys’ Fees

Tenth Circuit

Huff v. BP Corp. N. Am., No. 22-CV-00044-GKF-JFJ, 2024 WL 551886 (N.D. Okla. Feb. 12, 2024) (Judge Gregory Y. Frizzell). In this case, Ronald Huff, a former employee of BP Corporation of North America, repeatedly and, according to the court, erroneously, filed complaints and motions asserting state-law claims insisting that a group life insurance policy was not an ERISA-governed plan. After the Tenth Circuit affirmed the district court’s decision concluding that the policy was governed by ERISA and dismissing the complaint, BP sought an award of attorney’s fees against Mr. Huff under ERISA’s fee-shifting provision, 29 U.S.C. § 1132(g)(1), as well as an award against Mr. Huff’s attorney under 28 U.S.C. § 1927 for vexatious litigation. Despite the unusual circumstances of the case, the court refused to assess an attorney fee award against Mr. Huff under ERISA’s fee provision. Applying the Tenth Circuit’s five-factor test, the district court concluded that only the fifth factor, which looks to the relative merits of the parties’ positions, weighed in favor of a fee award because Mr. Huff repeatedly ignored court orders and consistently failed to assert an ERISA claim despite being given the opportunity to do so. With regard to the other four factors, the court held that: (1) there was no evidence that Mr. Huff asserted his claims in bad faith or to confuse or mislead the court; (2) Mr. Huff, as a retiree in his eighties, did not have the ability to satisfy an award; (3) an award would not serve a deterrent purpose because any fault with regard to the claims lay with Mr. Huff’s attorney; and (4) the fourth factor, which considers whether the plaintiff sought to benefit other plan participants, is only relevant when a plaintiff seeks a fee award. Thus, the court concluded that “although Mr. Huff’s claims lacked merit, on balance, the relevant factors weigh against imposing attorney’s fees against Mr. Huff under” ERISA’s fee provision. The court’s calculus was different, however, regarding a fee award against Mr. Huff’s attorney under 28 U.S.C. § 1927. In rather quaint language, this statutory provision allows a court to assess fees against an attorney who “so multiplies the proceedings in any case unreasonably and vexatiously.” The court concluded that Mr. Huff’s attorney did so by acting in an objectively unreasonable manner in continuing to press the state-law claims after being told by two different courts that ERISA governed the matter and preempted these claims. The court found that although the attorney did not act in bad faith, sanctioning the attorney under Section 1927 was warranted because he “continu[ed] to pursue claims after a reasonable attorney would realize they lacked merit.” The court therefore ordered BP to submit itemized bills so that the court could award “the excess costs incurred by BP as a result of the sanctionable conduct – that is, Mr. Martin’s response in opposition to BP’s January 31, 2022 motion to dismiss and the two motions to reconsider directed to ERISA’s applicability.”       

Breach of Fiduciary Duty

Second Circuit

Falberg v. The Goldman Sachs Grp., Inc., No. 22-2689-CV, __ F. App’x __, 2024 WL 619297 (2d Cir. Feb. 14, 2024) (Before Circuit Judges Lynch, Nardini, and Merriam). In Your ERISA Watch’s September 21, 2022 edition, our case of the week was the district court’s ruling in this matter. The plaintiffs, participants in Goldman Sachs’ 401(k) retirement plan, brought a putative class action alleging that Goldman and other defendants involved in managing the plan breached their fiduciary duties under ERISA by belatedly removing underperforming Goldman investment funds as plan investment options, failing to consider lower-cost alternatives, and failing to claim “fee rebates” that were allegedly available. The district court disagreed and granted defendants’ motion for summary judgment on all of plaintiffs’ claims. Plaintiffs appealed to the Second Circuit, who weighed in with this unpublished decision. First, the court agreed with the district court that defendants did not breach their fiduciary duty of loyalty. Plaintiffs “failed to introduce evidence that Defendants retained the Challenged Funds in the Plan for the purpose of advancing their interests; indeed, the evidence in the record suggests otherwise.” Defendants “employed a robust process to manage potential conflicts of interest,” “required [Committee] members to participate in fiduciary training sessions,” and “retained an investment consultant to act as an independent advisor and provide unbiased advice[.]” Plaintiffs contended that defendants removed the funds at issue too late, but the court ruled that “a fiduciary does not breach its duty of loyalty by choosing to retain an investment that, in the fiduciary’s reasonable assessment, may perform well in the long term despite short-term underperformance.” As for the duty of prudence, the court agreed with the district court that defendants’ decision not to adopt a formal investment policy statement, by itself, was insufficient to demonstrate a breach. Furthermore, the record showed that “the Committee followed a deliberative and rigorous process when selecting and monitoring investments.” The Committee’s independent advisor “continually monitored and evaluated the Plan’s investment options, and provided the Committee members with detailed information,” which they reviewed before attending meetings. Next, the Second Circuit rejected plaintiffs’ prohibited transactions claim involving the alleged failure to collect fee rebates. The court agreed with the district court that the Goldman plan “was treated no less favorably than other retirement plans” because it was subject to the same fee rebate eligibility requirements as other plans that used the plan’s recordkeeper. Finally, the court ruled that plaintiffs could not maintain their claim for breach of the duty to monitor because it hinged on their breach of fiduciary duty claim, which the court had already rejected. The Second Circuit thus affirmed the district court’s summary judgment ruling in defendants’ favor in all respects.

Disability Benefit Claims

Sixth Circuit

Smith v. Reliance Standard Ins. Co., No. 4:21-CV-128-RGJ, 2024 WL 647395 (W.D. Ky. Feb. 15, 2024) (Judge Rebecca Grady Jennings). Plaintiff Jessica Smith was a retail center manager for Old National Bank and a participant in Old National’s employee long-term disability benefit plan, insured by defendant Reliance Standard. She stopped working in 2020 due to symptoms from several medical conditions, including breast cancer treatment, chronic pain, and fibromyalgia, and applied to Reliance for benefits. Reliance approved Smith’s claim for a short period, but then terminated it, contending that Smith did not meet the plan definition of disability. Smith brought this action and the parties filed cross-motions for judgment. The court first addressed the standard of review. The plan gave Reliance discretionary authority to determine benefit eligibility, but the denial decision was made by Reliance’s sister company, Matrix Absence Management, Inc. Thus, because Reliance did not actually exercise its discretion, the court determined that the default de novo standard of review applied. Under this standard, the court agreed that the medical records “consistently demonstrated Smith was experiencing frequent, debilitating pain in multiple areas.” The court noted that Reliance had previously approved benefits but did not cite any information supporting its change of heart. Reliance complained that there was no objective evidence to support Smith’s claim, such as a functional capacity evaluation, but the court observed that the plan gave Reliance the right to request such an examination at any time, and noted that “pain is inherently subjective.” As a result, the court granted Smith’s motion for summary judgment and ordered Reliance to reinstate her benefits. The court also remanded Smith’s claim for waiver of life insurance premium benefits because Reliance had not made a decision on that benefit and the disability definition was different. Finally, the court denied Smith’s claim for prejudgment interest at the state law rate, ruling that interest should be awarded pursuant to 28 U.S.C. § 1961, and gave her leave to file a motion for attorney’s fees.

Ninth Circuit

Burris v. First Reliance Standard Life Ins. Co., 2:20-CV-00999-CDS-BNW, 2024 WL 551937 (D. Nev. Feb. 9, 2024) (Judge Cristina D. Silva). Plaintiff John Scott Burris, formerly an attorney and non-equity partner with Wilson Elser Moskowitz Edelman & Dicker LLP, filed this action against defendant First Reliance. He alleged that First Reliance unlawfully denied his claim for long-term disability benefits under Wilson Elser’s employee disability benefit plan. First Reliance filed a motion for judgment on the record, which the court decided in this order. The court first ruled that its standard review was deferential because the plan granted First Reliance discretionary authority to interpret the plan and determine benefit eligibility. Under this standard, the court ruled that Burris had not met his burden of proof. The court found that there was “nothing in the record indicating that he could no longer perform the material duties of his regular occupation as a result of his chronic fatigue syndrome diagnosis, other than his own subjective self-assessment and support letters from his wife and mother.” Furthermore, his doctor’s diagnosis was “entirely based on Burris’ self-reported symptoms.” Thus, First Reliance’s denial was not “illogical, implausible, or without support in inferences that may be drawn from the facts in the record.” The court further ruled that First Reliance had “engage[d] in meaningful dialogue” with Burris in its denial letter by outlining the eligibility requirements and providing a six-page explanation of how it had arrived at its determination. Because “the denial letter clearly informed Burris in plain language of the reason for the denial,” First Reliance “met its duty to engage in meaningful dialogue.” Thus, the court granted First Reliance’s motion for judgment, making this the unusual case where an attorney plaintiff was not able to prevail on a disability claim.

Tenth Circuit

Joseph K. v. Foley Indus. Emp. Benefit Plan – Plan No. 501, No. 2:23-CV-2054-EFM-ADM, 2024 WL 624005 (D. Kan. Feb. 14, 2024) (Judge Eric F. Melgren). Plaintiff Joseph K. was a network services manager for Foley Industries who was terminated on January 17, 2022. At the time Joseph was suffering from several medical issues, including ankylosing spondylitis, chronic iridocyclitis, arthropathic psoriasis, and memory issues. He submitted claims for short-term and long-term disability benefits to Prudential Insurance Company of America, the insurer of Foley’s employee disability benefit plan, informing Prudential that his medical conditions predated his termination and that he had been terminated because of them. However, Prudential denied both claims. Prudential contended that Joseph’s disability began on January 18, 2022, and he was not covered under the plan at that time because he had been terminated the previous day and did not have an “earnings loss” as required by the plan prior to that date. Joseph filed suit, alleging a number of causes of action, including under ERISA. The parties agreed to file cross-motions for summary judgment on Joseph’s ERISA claims, which were decided in this order. The court, to put it mildly, was not pleased with Prudential: “Defendants’ argument borders on the frivolous… Such an unreasonably narrow interpretation, resulting in a Catch 22 situation, is the epitome of arbitrary and capricious decision-making.” The court noted that similar arguments “advocating that employees cannot be eligible for benefits or considered disabled while working, have been soundly rejected by the circuits to have considered them.” The court further found that the plan “clearly contemplates situations where an employee loses his job because of a disability,” and that Prudential’s argument to the contrary was “legally indefensible.” Prudential argued in the alternative that the court should remand the case for a determination regarding whether Joseph met the plan definition of disability because Prudential had not yet decided that issue. The court rejected this as well, ruling that Prudential’s letters conceded that Joseph had a disability, and that because Prudential did not raise the disability definition as a rationale for denying Joseph’s claims, it would not be permitted to do so on remand. The court further determined that Joseph was entitled to attorney’s fees, costs, and prejudgment interest and directed him to file a motion regarding those issues.


Sixth Circuit

Dotson v. Metropolitan Life Ins. Co., No. CR 5:23-178-DCR, 2024 WL 532301 (E.D. Ky. Feb. 9, 2024) (Judge Danny C. Reeves). Plaintiff Gary Dotson filed this action challenging defendant MetLife’s denial of his claim for long-term disability benefits under a benefit plan sponsored by his employer, CTI Food Holdings, Co. Dotson served interrogatories and requests for production of documents on MetLife, but MetLife objected, contending that Dotson was not entitled to any discovery. Dotson filed a motion to compel, which the court decided in this order. The court acknowledged that “it is well established that plaintiffs in ERISA cases generally are not entitled to obtain discovery outside of the administrative record.” However, “limited discovery is available if a claimant makes a satisfactory allegation of a violation of due process or bias by the plan administrator.” The court noted that several decisions in the Eastern and Western Districts of Kentucky had “routinely permitted limited discovery” when an “inherent conflict of interest” was present, and that such a conflict “is, in and of itself, some evidence of bias.” It was undisputed that MetLife had a conflict in this case because “there is a per se conflict of interest when a plan administrator is responsible for both evaluating and paying benefits on a claim.” The court concluded by noting that there was “no practical way to determine the extent of the administrator’s conflict of interest without looking beyond the administrative record.” Thus, it allowed Dotson’s discovery to proceed and granted his motion to compel.

ERISA Preemption

Fifth Circuit

Smith v. The Lincoln Nat’l Life Ins. Co., No. 4:23-CV-01036-P, 2024 WL 583488 (N.D. Tex. Feb. 13, 2024) (Judge Mark T. Pittman). Plaintiff Danielle Smith brought this action against defendant Lincoln, alleging that Lincoln wrongfully denied her claim for accidental death benefits after her father passed away. Lincoln filed a motion to dismiss, contending that Smith’s state law claim for breach of contract is preempted by ERISA. Smith did not file a response. In this brief order, the court agreed with Lincoln: “Here, it is clear from Plaintiff’s Amended Complaint and from the insurance plan itself that the insurance plan in question is an ERISA plan…the only conduct at issue is Defendant’s denial of the plan…Plaintiff’s claim is thus preempted by ERISA.” The court also struck from Smith’s complaint her requests for compensatory damages and a jury trial, as neither is available under ERISA.

Medical Benefit Claims

Sixth Circuit

Churches v. Administration Sys. Research Corp., Int’l, No. CV 22-13041, 2024 WL 643139 (E.D. Mich. Feb. 15, 2024) (Magistrate Judge David R. Grand). Plaintiff Levi Churches crashed a Honda CRF 450R motorcycle on private property and sustained serious injuries. He submitted a claim for benefits under an employee medical benefit plan sponsored by his employer, The CSM Group, Inc. CSM denied his claim, citing an exclusion in the plan for accidents involving motorcycles. Churches brought this action and the parties filed cross-motions for summary judgment. In his briefing, Churches acknowledged the motorcycle exclusion but relied on an exception to the exclusion which stated, “A vehicle that is commonly recognized as an ‘off-road vehicle’ (ORV) or ‘all-terrain vehicle’ (ATV) shall not be deemed to be a Motorcycle, nor will the off-road operation of a Motorcycle cause it to be deemed instead an ORV or ATV.” The court first addressed the standard of review, and gave up the game by stating that the issue “is not critical…because CSM’s decision to deny benefits fails to pass muster even under the more deferential arbitrary and capricious standard.” The court criticized the plan for not even addressing the ORV exception in its denial letter, even though Churches had raised the issue in his appeal. Instead, CSM focused solely on whether the vehicle Churches was riding was a “motorcycle,” using a “flawed interpretation that the Motorcycle Definition trumps the ORV Exception.” The court further found that the Honda vehicle at issue was a motocross motorcycle designed for off-road riding, and thus was an ORV under the plan’s exception. The court thus overturned CSM’s decision, granted Churches’ motion, and awarded him benefits. The court also invited him to file a motion for attorney’s fees.

Ninth Circuit

Arnold v. United Healthcare Ins. Co., No. CV 23-3974 PA (AGRx), 2024 WL 549032 (C.D. Cal. Feb. 12, 2024) (Judge Percy Anderson). Plaintiff Linda Arnold brought suit after United Healthcare denied her claim for coverage under her health care plan for an endoscopy done in preparation for bariatric weight loss surgery and a hiatal hernia repair performed during the surgery. As many plans do, Ms. Arnold’s plan excluded bariatric surgery, so United denied her claims. As an initial matter, the court held that de novo review applied. But even under this ostensibly more plaintiff-friendly standard, based on the administrative claim record and trial briefs and arguments submitted by counsel, the district court held that “United’s decision to deny reimbursement for the endoscopy and the hiatal hernia repair was consistent with the terms of the Plan.” With respect to the endoscopy, the court agreed with United that Ms. Arnold failed to provide complete medical records to support this claim. With respect to the hernia repair surgery, the court noted that “both surgeons used the same incision point for the two procedures, suggesting that the surgeries were related, and that the hernia surgery was ‘incidental’ to the gastric sleeve procedure.” The court also noted that both the surgeon who performed the gastric sleeve procedure and the assistant surgeon who performed the hiatal hernia repair charged the same amount, “suggesting that the two surgeons ‘double billed’ for the hernia repair in an attempt to circumvent the policy exclusion.”

Mejia v. United Healthcare Ins. Co., No. 2:23-CV-02032-SVW-E, 2024 WL 637261 (C.D. Cal. Feb. 14, 2024) (Judge Stephen V. Wilson). Plaintiff Oscar Mejia brought this action in California state court against defendant United, the insurer of his employer’s health benefit plan, alleging that United underpaid for his out-of-network surgery. Mr. Mejia’s primary argument was that “United failed to fulfill its obligation under the plan to either ‘engage in a negotiation or at least attempt a negotiation to reduce the amount Mr. Mejia is responsible for paying Medical Providers.’” United removed the case to federal court based on ERISA preemption and the parties filed cross-motions for judgment. The court noted that Mr. Mejia’s claim was unusual because he was not arguing that United miscalculated his benefits under the terms of the plan, that it miscategorized the treatment he received, or that it did not apply negotiated rates. Instead, he argued that ERISA required United, as a fiduciary, “to at least attempt a negotiation of Medical Providers’ bills for services provided by Medical Providers to Mr. Mejia[.]” Because the plan provided United with discretionary authority to determine benefits, the court employed the abuse of discretion standard of review. Under this standard, the court ruled that United had acted reasonably. The court agreed with United that it had followed the plan, which requires it to use negotiated rates if they exist, and if not, to use Medicare rates. The court observed that “there is no obligation for United to negotiate with out-of-network providers under the terms of the plan,” and that Mejia’s argument to the contrary “overstretches United’s obligation as a fiduciary… [A]s a fiduciary, United must enforce the language of the plan with the fair-mindedness of the fiduciary of a trust; United is not required (nor would it be permitted) to rewrite the plan language to secure Plaintiff a better outcome.” The court thus granted United’s motion for judgment and denied Mejia’s. The court also denied Mejia’s motion for leave to conduct limited discovery.

Tenth Circuit

K.Z. v. United Healthcare Ins. Co., No. 2:21-CV-00206-DBB, 2024 WL 664801 (D. Utah Feb. 16, 2024) (Judge David Barlow). Plaintiff K.Z. is a participant in an ERISA-governed medical benefit plan whose son, E.Z., received behavioral health treatment at a residential treatment facility. Defendant United approved benefits for some of E.Z.’s treatment, but ultimately denied further coverage on the ground that his treatment was no longer medically necessary. Plaintiffs brought this action and the parties filed cross-motions for summary judgment. The court first determined that the appropriate standard of review was deferential because the plan gave United discretionary authority to determine benefit eligibility. However, United failed to meet this standard. The court determined that United failed to engage with the recommendations of E.Z.’s providers and the facts that could have confirmed his coverage, including alarming episodes of violence, suicidality, and inappropriate sexual behavior. United’s reviewers also “failed to explain how they arrived at [their] conclusions and how each conclusion applied to their guidelines.” The court thus overturned United’s decisions. The court then reviewed the four time periods of treatment at issue, and determined that benefits should be paid for two of those periods because the record “clearly showed” that plaintiffs were entitled to benefits. For the third time period, the court remanded to United for further review because the record was inconclusive and United had failed to make adequate factual findings. For the fourth time period, the court determined there was an incomplete record due to United’s confusing correspondence, so it remanded to United for this period as well.

Pension Benefit Claims

First Circuit

Bowers v. Russell, No. 22-10457, 2024 WL 637442 (D. Mass. Feb. 15, 2024) (Judge Patti B. Saris). This suit brought by participants in an employee stock ownership plan (“ESOP”) alleges that plan fiduciaries committed numerous prohibited transaction and fiduciary breaches when shares of the company that had not yet been allocated to the ESOP reverted to the company after the founder died, and the ESOP was later terminated. The factual background is complicated and involves maneuvering by the heirs and spouse of the deceased founder and a succession at the company worthy of the television show of the same name. Suffice it to say that plaintiffs alleged that the unallocated shares of the company were deliberately and significantly undervalued at the time of the termination and that the company owners therefore got a windfall at the expense of the participants. The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(1), arguing that “Plaintiffs lack standing because they only had an interest in the allocated shares,” and that they failed to plead sufficient facts to show that the unallocated shares were undervalued. The court disagreed. Because the plan stated that the unallocated shares were to be used upon termination to repay the note that secured the ESOP and that “any amount remaining after the ESOP Note ha[d] been paid in full [would] be allocated to the participants of the Plan,” plaintiffs “had an interest in the value of the unallocated shares less the remaining debt owed by the ESOP to the Company.” Nor was the court convinced that dismissal was warranted based on waivers and releases signed by the plaintiffs. The court noted that waiver and release is an affirmative defense on which the defendants bear the burden of proof, and plaintiffs plausibly asserted that the waivers were not signed knowingly and voluntarily. Next, rejecting defendants’ argument that the prohibited transaction claims were precluded on the basis of ERISA’s three-year statute of limitations, the court concluded that the complaint plausibly alleges that plaintiffs lacked actual knowledge of the prohibited transaction more than three years prior to filing suit. Finally, the court concluded that the complaint plausibly alleges that the Board defendants committed fiduciary breaches both in orchestrating the prohibited transaction and in failing to monitor the conduct of the trust company which the Board appointed.

Eighth Circuit

Hankins v. Crain Auto. Holdings, LLC, No. 4:23-CV-01040-BSM, 2024 WL 664815 (E.D. Ark. Feb. 16, 2024) (Judge Brian S. Miller). Plaintiff Barton Hankins is the former Chief Operating Officer of Crain Automotive Holdings and a participant in Crain’s deferred compensation benefit plan. He resigned in January of 2023 and requested that Crain pay him the vested portion of his benefit under the plan, which totaled a whopping $4,977,209.02. Crain refused to pay, contending that the plan was “unenforceable because it contemplates separately signed employment and confidentiality agreements that were never entered,” and further arguing that Hankins had defrauded Crain. In this brief order the court rejected both arguments. The court ruled that the two agreements Crain cited were not necessary in order for the plan to be enforced; Hankins’ separation from service triggered the payment regardless of the existence of any other agreements. The court noted that Crain failed to procure these agreements for four years after Hankins joined the plan, and only raised the issue when Crain resigned, thus indicating that “Crain is simply looking for a way to avoid its obligation to Hankins.” As for Crain’s fraud accusations, the court deemed them “unsubstantiated” because “Crain has failed to disclose the facts and documents upon which these allegations rest.” The court thus ruled that Crain’s decision was an abuse of discretion and ordered it to pay Hankins the requested benefits plus prejudgment interest.

Pleading Issues & Procedure

Ninth Circuit

LeBarron v. Interstate Grp., LLC, No. 22-16332, __ F. App’x __, 2024 WL 575223 (9th Cir. Feb. 13, 2024) (Before Circuit Judges Rawlinson and Owens and District Judge Dean D. Pregerson). Plaintiff Russell LeBarron brought this action against his employer, alleging violation of the ADA and unlawful retaliation under ERISA Section 510, among other claims. Defendant Interstate counterclaimed against LeBarron for conversion and civil theft, and filed a motion to dismiss LeBarron’s claims. The district court granted Interstate’s motion (as chronicled in Your ERISA Watch’s April 7, 2021 edition), after which Interstate made an offer of judgment to LeBarron in the amount of $10,000 pursuant to Federal Rule of Civil Procedure 68. LeBarron accepted and the district court entered judgment against Interstate in that amount, plus costs. However, LeBarron was not satisfied. He then appealed the district court’s dismissal of his ERISA claim to the Ninth Circuit. In this brief memorandum disposition, the appellate court rebuffed LeBarron, ruling that it had no jurisdiction to hear his appeal: “Here, the Rule 68 offer did not carve out Appellant’s ERISA claim, nor did Appellant’s Notice of Acceptance of that offer reserve any right to appeal. Accordingly, any interlocutory order regarding the ERISA claim merged into the final judgment, to which Appellant consented. Having so consented, Appellant has waived any right to bring the instant appeal, and we lack jurisdiction to hear it.”

Provider Claims

Second Circuit

Bianco v. ADP TotalSource, Inc., No. 23-CV-01054 (HG), 2024 WL 524378 (E.D.N.Y. Feb. 9, 2024) (Judge Hector Gonzalez). This suit involves approximately $160,000 in unreimbursed medical expenses for the cost of emergency brain surgery performed on Michael Bianco, a plan participant, by Dr. Miguel Litao. However, as the court notes, Mr. Bianco did not file suit. Instead, Dr. Farkas, the owner of the medical practice where Dr. Litao works, brought suit for plan benefits after the plan paid only $28,217.58 on a $190,000 claim. Dr. Farkas claimed he was Mr. Bianco’s attorney-in-fact pursuant to a power of attorney, despite the fact that the governing plan contained an anti-assignment clause. Under a line of cases in the Second Circuit, the court noted that “a physician who seeks to stand in the shoes of a patient of his practice is not a participant nor a beneficiary under the patient’s plan, and therefore has no cause of action under ERISA Section 502(a)(1)(B).” The court concluded that the reasoning of these cases was fully applicable in the circumstances presented. Therefore, the court held that because Dr. Farkas was using a power of attorney “to circumvent the plan’s unambiguous anti-assignment provision,” he lacked standing to bring suit for benefits. The court therefore granted defendants’ motion to dismiss.

Statute of Limitations

Second Circuit

Perlman v. General Elec., No. 22 CIV. 9823 (PAE), 2024 WL 664968  (S.D.N.Y. Feb. 16, 2024) (Judge Paul A. Engelmayer). Plaintiff Carol Perlman, a former employee of defendant GE, sued GE under New York state law and ERISA for wrongfully denying her claim for pension benefits and failing to produce documents regarding those benefits. The court granted GE’s first motion to dismiss and gave Perlman leave to amend. After she filed her amended complaint, GE moved to dismiss again. In this order the court granted GE’s motion and dismissed the case with prejudice. The court reiterated its ruling from the first motion that Perlman’s claim for benefits accrued in 2003-2004, when she was terminated by GE, and thus her suit was time-barred. Furthermore, Perlman’s amended allegations did not show that she was entitled to equitable tolling because GE did not make any misrepresentations to her about her benefits and her “inaction for well more than a decade is the antithesis of reasonable diligence.” As for Perlman’s statutory penalty claim, the court ruled that because Perlman did not personally request the documents (she alleged that a former colleague had done so), and because the documents at issue – her personnel file – were not covered by the statute, her claim lacked merit.


Ninth Circuit

Plan Adm’r of the Chevron Corp. Ret. Restoration Plan v. Minvielle, No. 20-CV-07063-TSH, 2024 WL 536277 (N.D. Cal. Feb. 9, 2024) (Magistrate Judge Thomas S. Hixson). Chevron initiated this interpleader action in the Northern District of California in order to determine the proper beneficiary under two Chevron employee benefit plans for one of its deceased employees. On one side are Anne Minvielle, the decedent’s sister, and her husband, who live in Louisiana. On the other is Martin Byrnes, who lives in France and contends that he is the surviving spouse of the decedent. The Minvielles filed a motion to transfer venue to the Western District of Louisiana, which was opposed by Byrnes. In this order, the court discussed the various factors involved. It noted that “neither party has any affiliation with California,” which “slightly favors transfer.” The convenience of witnesses (“often the most important factor”), however, weighed against transfer because Byrnes had identified ten witnesses in California. Furthermore, Chevron is headquartered in California, and even though it had been dismissed, “it may still be required to produce documentary evidence and provide testimony.” As for ease of access to evidence, the court noted that “relevant evidence is likely found in at least this District, London, and Louisiana,” and thus, this factor was neutral. Finally, the court noted that Byrnes had filed another action pending before it regarding the Chevron plans, and that the litigation had been pending for some time because of a stay related to the probate case in Louisiana. As a result, the court was more familiar with, and better situated to handle, the case than a new judge in Louisiana. The court conceded that granting the Minvielles’ motion would be more convenient for them, but “the possible inconvenience the Minvielles may suffer by continuing to litigate this case in California is not sufficiently strong to overcome the interests of justice that weigh against transferring this case.”