Source: https://www.lifeanddisabilitylaw.com/erisa-watch-court-applies-strict-requirement-to-exhausting-administrative-remedies-take-this-letter-as-an-appeal-is-not-enough/
Timestamp: 2019-04-21 22:26:26+00:00

Document:
There were so many notable decisions this past week, that like a kid in the candy store, I had trouble picking just one. So, I’m highlighting two decisions, that no matter what side of the “v.” you’re on, one decision will tickle your taste buds and the other will leave a bad taste in your mouth.
The tasty: Doe v. Prudential Ins. Co. of Am., No. CV1504089ABFFMX, __F.Supp.3d__, 2017 WL 1156725 (C.D. Cal. Mar. 27, 2017). Not only does Doe win his long term disability claim on the basis that the presence of his physical based disability defeats Prudential’s application of the 24-month mental illness limitation to his claim, the court ordered Prudential to pay benefits for the maximum policy duration without subjecting Plaintiff to further claims procedures with respect to his claim for benefits under the Plan. Sweet! (And props to my colleague Jim Keenley of Bolt Keenley Kim LLP for getting this decision).
The popcorn flavored jelly bean: Decola v. Prudential Ins. Co. of Am., No. 3:16-CV-185-DJH-DW, 2017 WL 1147483 (W.D. Ky. Mar. 27, 2017). The court dismissed Plaintiff’s lawsuit for failing to exhaust the denial of her long term disability benefit claim even though prior to the 180-day deadline to appeal, Plaintiff’s attorney wrote to Prudential stating “we are appealing the decision” and further stating, “Again take this letter as an appeal, please allow time for the medical records to be obtained.” Because Plaintiff did not “complete” the appeal before the 180-day deadline, Plaintiff failed to exhaust administrative remedies. Yuck!
Wycihowski v. Clariant Medical Plan, et al., No. 1:15-CV-1233, 2017 WL 1154221 (W.D. Mich. Mar. 28, 2017) (Judge Ellen S. Carmody). In this declaratory action seeking a determination of priority of coverage between a health plan and no-fault insurer, the court found that the health plan was entitled to attorneys’ fees from Plaintiff and that Plaintiff was entitled to attorneys’ fees from the no-fault insurer. Plaintiff’s refusal to reimburse the health plan was a function of the insurer’s refusal to satisfy its contractual obligations.
Prather v. Sun Life & Health Ins. Co. (U.S.), No. 16-1861, __F.3d__, 2017 WL 1173697 (7th Cir. Mar. 30, 2017) (Before Wood, Chief Judge, and Posner and Williams, Circuit Judges). Following success at the 7th Circuit in winning Plaintiff’s claim for accidental death and dismemberment benefits, the court awarded Plaintiff attorneys’ fees of $30,380, approximately 81% of the amount requested.
Maryland Cas. Co. v. Dublin Eye Assocs., P.C., No. CV 315-81, 2017 WL 1102602 (S.D. Ga. Mar. 23, 2017) (Judge Lisa Godbey Wood). Defendant and two other parties filed suit against Massachusetts Mutual Life Insurance and the district court of the E.D. of Kentucky granted summary judgment in Mass. Life’s favor and awarded attorneys’ fees of $1,191,799. Plaintiff insured Defendant at the time of the attorneys’ fee. The question is whether the facts from the underlying lawsuit could be said to support an “obligation to pay damages for malicious prosecution” under the policy. The court found that there is no genuine issue of fact as to four of the five elements of malicious prosecution; there is an issue as to malice. The court denied both parties’ motions for summary judgment.
Hugler v. Byrnes, No. 1:15-CV-93 (FJS/DJS), 2017 WL 1167280 (N.D.N.Y. Mar. 28, 2017) (Judge Frederick J. Scullin, Jr.). The court found that Defendant violated his duty to diversify the assets of the profit sharing plan. It instructed the parties to provide supplemental briefing with regard to the proper calculation of damages.
Hugler v. Chimes D.C., Inc., No. CV RDB-15-3315, 2017 WL 1176031 (D. Md. Mar. 30, 2017) (Judge Richard D. Bennett). The court dismissed the BCG Defendants counterclaim alleging that the Secretary failed to provide certification of compliance in violation of 12 U.S.C. § 3403 because on its face, Section 3403(b) places a condition on the release of financial records by financial institutions, but does not prohibit Government action.
Graham v. Fearon, No. 1:16 CV 2366, 2017 WL 1113358 (N.D. Ohio Mar. 24, 2017) (Judge Patricia A. Gaughan). In this putative class action where Plaintiffs alleged breach of fiduciary duties with respect to an ESOP, the court granted Defendants’ motion to dismiss and found that even if Defendants were aware of fraudulent activity that inflated the value of Eaton’s stock, Plaintiffs have failed to plausibly allege that they could not have concluded that corrective disclosure would have done more harm than good. Additionally, the court found that Plaintiffs have not plausibly alleged that purchasing an unidentified hedging product would have been consistent with the securities laws or that a prudent fiduciary in Defendants’ circumstances would not have viewed making such a purchase as more likely to harm the fund than to help it.
Hugler v. Sherrod, No. 16 C 4825, 2017 WL 1134486 (N.D. Ill. Mar. 27, 2017) (Judge Milton I. Shadur). In this action by the Secretary of Labor to enjoin acts that violate Title I of ERISA and for breaches of fiduciary duty under Section 1109, the court denied Defendants’ motion to add an affirmative defense that challenges the Secretary’s allegations based on Defendant’s use of Plan funds to post bond in a court case and then improperly accounting for those funds. The court found the proposed defense to be untimely advanced.
Bell v. Pension Comm. of ATH Holding Co., LLC, No. 115CV02062TWPMPB, 2017 WL 1091248 (S.D. Ind. Mar. 23, 2017). The court denied Defendant’s motion to dismiss Count I of Plaintiff’s complaint asserting that Defendant breached their fiduciary duty by selecting and retaining Plan investment options with excessively high fees, where Defendant selected high-cost investment options where identical investment options are available at a lower-cost. The court also denied Defendant’s motion to dismiss Count II asserting failure to act with prudence under ERISA Section 1104 when failing to solicit bids and to monitor and control recordkeeping fees. The court did grant Defendant’s motion to dismiss Count III asserting a breach of fiduciary duty by providing and maintaining the Vanguard Prime Money Market Fund. It also granted in part the motion to dismiss Count IV asserting a breach of fiduciary monitoring duties. Lastly, the court denied the motion to dismiss the claim under 29 U.S.C. § 1024 for failure to supply plan information upon request.
Troudt v. Oracle Corp., No. 116CV00175REBCBS, 2017 WL 1100876 (D. Colo. Mar. 22, 2017) (Judge Robert E. Blackburn). The court adopted the Magistrate Judge’s recommendation to deny Defendants’ motion to dismiss. The court explained that it cannot adopt Defendants’ proposal to dismiss Count I of the complaint on the theory that the plan’s fee structure fell within a presumptively reasonable range of expense ratios or Count II on the theory that there was a breach of fiduciary duty in the selection of certain allegedly imprudent investments. On Count IV, Plaintiff does not have the burden to disprove that the compensation paid to Fidelity was unreasonable.
Santana-Díaz v. Metropolitan Life Ins. Co., No. CV 13-1628 (ADC), 2017 WL 1180489 (D.P.R. Mar. 29, 2017). The court found that MetLife acted reasonably and within its discretion under the Plan when it denied Santana long-term disability benefits and upheld that decision following his administrative appeal. Based on circuit precedent, MetLife’s independent medical examiner findings give MetLife the requisite substantial evidentiary grounds for a reasonable decision in its favor.
Arsdel v. Liberty Life Assurance Co. of Boston, No. CV 14-2579, 2017 WL 1177174 (E.D. Pa. Mar. 30, 2017) (Judge Edward G. Smith). In a lengthy decision, the court concluded that Liberty Life abused its discretion in denying long-term disability benefits in this case. Under Miller v. American Airlines, Inc., 632 F. 3d 837, 856-57 (3d Cir. 2011), the appropriate remedy in a case such as this one where benefits were improperly denied at the outset, is to remand the case to the plan administrator to reevaluate whether the plaintiff is entitled to LTD benefits under the plan.
Krash v. Reliance Standard Life Ins. Co., No. CV 3:16-0093, 2017 WL 1178046 (M.D. Pa. Mar. 30, 2017) (Judge Malachy E. Mannion). Applying abuse of discretion review to the termination of Plaintiff’s disability benefits, the court found that Reliance did not abuse its discretion. Because the record supports that Plaintiff suffers a contributing mental or nervous disorder, it was her burden to prove that she was totally disabled from any occupation solely due to a physical condition. The court found that she did not meet this burden.
Elliott v. United Of Omaha Life Insurance Company, No. 2:15-CV-137, 2017 WL 1190552 (W.D. Mich. Mar. 31, 2017) (Judge Gordon J. Quist). The court affirmed United of Omaha’s denial of Plaintiff’s claim for long term disability benefits based on the lack of support for disability between two potential periods of disability: The first began when Plaintiff fell and injured her left knee, and when her doctor returned her to work in November 2014. The second began some time in December 2014 when Plaintiff complained of pain in her right knee, which was treated with arthroscopic surgery.
Dragus v. Reliance Standard Life Ins. Co., No. 15 C 9135, 2017 WL 1163870 (N.D. Ill. Mar. 29, 2017) (Judge Marvin E. Aspen). Reliance’s initial determination was untimely in violation of 29 C.F.R. § 2560.503-1(f)(3) because it did not make a decision on Plaintiff’s long term disability claim within 45 days or request any deadline extension. Contrary to Reliance’s argument, Section 2560.503-1(i)(4) provides the period for making a benefit determination on appeal to be tolled, but says nothing of tolling the time period for initial determinations. However, because Plaintiff did not file suit immediately, and instead allowed Reliance to decide the claim and appeal, Plaintiff cannot take advantage of 29 C.F.R. § 560.503–1(l)(1) and de novo review. On abuse of discretion review, Reliance did not arbitrarily deny benefits where it relied on multiple and qualified independent reviewing doctors.
Doe v. Prudential Ins. Co. of Am., No. CV1504089ABFFMX, __F.Supp.3d__, 2017 WL 1156725 (C.D. Cal. Mar. 27, 2017) (Judge Andre Birotte Jr.). Plaintiff is disabled by depression and anxiety, HIV, and other physical conditions. Prudential paid benefits for 24 months and then terminated his benefits after applying a 24-month mental illness limitation to his claim. The court granted Plaintiff’s motion for judgment. Although the record contains evidence that could arguably support a determination either way, the court found that Plaintiff’s disability was not “due in whole or part to mental illness” and that Prudential should not have applied the mental illness limitation. The court ordered Prudential to pay benefits for the maximum policy duration without subjecting Plaintiff to further claims procedures with respect to his claim for benefits under the Plan.
Reynolds v. Metropolitan Life Insurance Co., No. 15-15710, 2017 WL 1164439 (9th Cir. Mar. 29, 2017) (Before: FERNANDEZ and WATFORD, Circuit Judges, and STATON,** District Judge). The court affirmed the district court’s determination that Plaintiffs’ state law claims for life insurance benefits are pre-empted by ERISA, where Plaintiffs claimed benefits under two life insurance policies, an ERISA-governed group life insurance policy (“ERISA Policy”), and an individual life insurance policy obtained through a right to conversion provided by the ERISA Policy. Because Defendant necessarily had to consider the “One Payment Only” provision in the ERISA Policy to decide whether to pay benefits under either policy, the converted policy relates to the ERISA Policy.
Lenhardt v. Sysco Corporation, No. CV 16-153-BLG-SPW, 2017 WL 1162168 (D. Mont. Mar. 28, 2017) (Judge Susan P. Watters). Sysco’s severance plan is an ERISA plan since the administrator must make ongoing discretionary decisions based on subject criteria. Because Plaintiff’s claims arise under ERISA, complete preemption exists. However, because of the arbitration provision, the arbitrator should determine the validity and enforceability of the non-compete agreement.
Landry’s, Inc. v. Sandoval, No. 2:15-CV-1160-GMN-PAL, 2017 WL 1181570 (D. Nev. Mar. 28, 2017) (Judge Gloria M. Navarro). The court found that Plaintiffs have properly alleged an ERISA preemption claim, where the challenged Minimum Wage Amendment and its Regulations literally reference ERISA and involve defining insurance coverage. In other words, Plaintiffs satisfactorily allege that state law impacts their uniform administration of health benefits under ERISA.
Lee Mem’l Health Sys. v. Blue Cross & Blue Shield of Florida, Inc., No. 216CV901FTM38MRM, 2017 WL 1174231 (M.D. Fla. Mar. 30, 2017) (Judge Sheri Polster Chappell). In this suit by a hospital against an insurer about insurance coverage, the court found the following claims preempted by ERISA: Count I, Declaratory Relief Under Florida Statutes, Chapter 86;Count II, Breach of Contract; Count V, Breach of Fiduciary Duty; Count VI, Unjust Enrichment; and Count VII, Breach of Implied Covenants of Good Faith and Fair Dealing Against BCBSF. The court found these counts not preempted by ERISA: Count III, Promissory/Equitable Estoppel; Count IV, Negligent Misrepresentation.
Mem’l Hermann Health Sys. v. Sw. LTC, Ltd. Employee Benefits Plan, No. 16-20477, __F.App’x__, 2017 WL 1162915 (5th Cir. Mar. 27, 2017) (Before JOLLY, SOUTHWICK, and HIGGINSON, Circuit Judges). In this suit by a medical provider against a health benefit plan seeking payment for medical bills incurred by a patient covered by the plan, the court affirmed the district court’s grant of summary judgment in favor of Defendant for Plaintiff’s failure to exhaust administrative remedies. Plaintiff failed to provide Defendant with proof of an authorization or assignment from the patient.
Decola v. Prudential Ins. Co. of Am., No. 3:16-CV-185-DJH-DW, 2017 WL 1147483 (W.D. Ky. Mar. 27, 2017) (Judge David J. Hale). The court dismissed Plaintiff’s lawsuit for failing to exhaust the denial of her long term disability benefit claim. Prior to the 180-day deadline to appeal, Plaintiff’s attorney wrote to Prudential stating “we are appealing the decision” and that the attorney would be sending in current medical records. He further stated, “Again take this letter as an appeal, please allow time for the medical records to be obtained.” The attorney wrote another letter stating that “I will continue to send the other records as I receive them.” Prior to the deadline to appeal, Plaintiff did not “complete” the appeal. As such, the court agreed with Prudential that Plaintiff failed to exhaust administrative remedies.
Perry v. Int’l Bhd. of Teamsters, No. 15-CV-1326 (TSC), __F.Supp.3d__, 2017 WL 1131876 (D.D.C. Mar. 24, 2017) (Judge Tanya S. Chutkan). In this lawsuit for lifetime retiree health benefits, the court noted that whether administrative exhaustion is required for ERISA section 510 claims, such that equitable tolling would be appropriate, has not been addressed by the D.C. Circuit, and other Circuits are split on the issue. Given the absence of direct precedent in this Circuit suggests that Plaintiff’s belief that exhaustion was required was not unreasonable, but given the circumstances the court declined to exercise equitable tolling and found the Complaint untimely.
Vasu v. American United Life Insurance Company, No. 5:16-CV-747, 2017 WL 1133955 (N.D. Ohio Mar. 27, 2017) (Judge Sara Lioi). AUL did not abuse its discretion in denying life insurance benefits for the insured who stopped working due to disability before his death. In order to be eligible for insurance under the Plan, an individual must be a full-time employee as defined by the Plan. There is no dispute that the insured ceased active employment on July 11, 2013, due to a disability. AUL considered but denied the insured’s life waiver of premium claim and the insured did not convert his life insurance benefits.
Timothy & Sharon Wiwel; v. IBM Medical And Dental Benefit Plans For Regular Full-Time And Part-Time Employees, No. 5:15-CV-504-FL, 2017 WL 1184066 (E.D.N.C. Mar. 29, 2017) (Judge Louise W. Flanagan). It was an abuse of discretion for the self-funded health plan to deny payment for Plaintiffs’ child’s residential treatment for self-cutting and suicidal ideation. But, the court rejects the recommendation of the M&R to reverse for an award of benefits and finds the proper remedy is remand for the limited purpose of allowing defendant an opportunity to clarify or reconsider its decision to deny Plaintiffs’ application for benefits.
Pearce v. Chrysler LLC Pension Plan, No. 10-14720, 2017 WL 1130087 (E.D. Mich. Mar. 27, 2017) (Judge Sean F. Cox). In this lawsuit for supplemental retirement benefits, and following a remand from the Sixth Circuit, the court overruled each of Plaintiff’s six objections to the R&R, which determined Plaintiff was not entitled to the equitable remedies authorized by Section 502(a)(3) because: (1) for the remedy of reformation, Plaintiff has not offered any evidence of an intent to deceive, which is required by Amara; (2) for the remedy of, Plaintiff is unable to establish the Pension Plan provisions that did not allow participants to determine their eligibility for benefits, or extraordinary circumstances; (3) for the remedy of surcharge, Plaintiff cannot show harm caused by any breach of fiduciary duty.
Ruiz v. Publix Super Markets, Inc., No. 8:17-CV-735-T-24 TGW, 2017 WL 1180095 (M.D. Fla. Mar. 30, 2017) (Judge Susan C. Bucklew). The issue in this case is whether a plan participant’s attempt to change the beneficiary of her ESOP and 401(k) Plan account prior to her death, which did not strictly comply with the SPDs’ directives for how to change beneficiaries, should be given effect. Following a lengthy analysis of the substantial compliance doctrine, the court found that the doctrine of substantial compliance did not survive the Supreme Court’s decision in Kennedy v. Plan Administrator for DuPont Savings and Investment Plan, 555 U.S. 285 (2009). Without the doctrine of substantial compliance, the last valid beneficiary designations in effect are the ones Defendant received back in October 2008 naming the counter-defendants.
Girardot v. The Chemours Company, No. CV 16-263-SLR, 2017 WL 1170904 (D. Del. Mar. 29, 2017) The court concluded that the Chemours Voluntary Separation Program is not an ERISA plan since the one-time, lump-sum payments distributed under the Program did not require the creation of a new administrative scheme, and the bonus payments were payable “per usual Company practices based on financial results” which, like the continuation of existing benefits for a limited duration, did not materially alter the existing administrative scheme.
Anderson v. The Fraternal Order Of Police-Legal Plan, Inc., No. 16-CV-302-JED-FHM, 2017 WL 1103171 (N.D. Okla. Mar. 24, 2017) (Judge John E. Dowdell). The self-funded legal plan that covers certain legal defense costs for members for the Fraternal Order of Police is an ERISA plan and Plaintiff’s state law claims related to the denial of payment of legal expenses is completely preempted by ERISA.
MHA, LLC v. Unitedhealth Grp., Inc., No. CV157825ESJAD, 2017 WL 1095036 (D.N.J. Mar. 23, 2017) (Judge Esther Salas). The court held that although MHA’s claims may or may not be arbitrable, that decision must be made, in the first instance, by the AAA panel. The arbitration clause in the Facility Participation Agreements shows that the parties clearly and unmistakably agreed to arbitrate the issue of arbitrability.
Orrand v. Hunt Constr. Grp., Inc., No. 16-3822, __F.3d__, 2017 WL 1173695 (6th Cir. Mar. 30, 2017) (GUY, J., delivered the opinion of the court in which GRIFFIN, J., joined. CLAY, J., delivered a separate dissenting opinion). The majority held that the NLRB’s § 10(k) award precludes a conflicting ERISA § 515 action. The court affirmed summary judgment in favor of Defendant.
Johnson v. Retirement Plan Of General Mills, Inc. and The Bakery, Confectionary, Tobacco And Grain Milers International Union (BCTGM), No. 416CV00151TWPTAB, 2017 WL 1165546 (S.D. Ind. Mar. 29, 2017) (Magistrate Judge Tim A. Baker). In exchange for over $20,000, Plaintiff signed a release agreement and agreed to arbitrate all disputes related to the claims in this action. The court found that the agreement at issue is enforceable and requires Plaintiff to arbitrate questions about the Plan’s right to enforce it and whether it governs her substantive claims. The court rejected the argument that the Plan is a separate legal entity, and is not GMI or its affiliate.
Exact Scis. Corp. v. Blue Cross & Blue Shield of N. Carolina, No. 1:16CV125, 2017 WL 1155807 (M.D.N.C. Mar. 27, 2017) (Judge N. Carlton Tilley, Jr.). In this lawsuit alleging failure to pay Exact for the performance of its proprietary colorectal cancer screening test on BCBS–NC Subscribers, the court found that Exact has plausibly alleged that it has derivative standing to pursue its ERISA claims against BCBS–NC. Even though Exact is not required to plead exhaustion; it has done so sufficiently and plausibly. The court dismissed Exact’s breach of fiduciary duties claims since the alleged injuries are redressable under § 502(a)(1)(B). Exact has plausibly alleged a denial of full and fair review of denied claims under § 503 of ERISA, 29 U.S.C. § 1133.
Zelhofer v. Metropolitan Life Insurance Company, No. 2:16-CV-00773 TLN AC, 2017 WL 1166134 (E.D. Cal. Mar. 29, 2017). Plaintiff’s disability benefits were terminated on March 22, 2012 and he was notified on October 11, 2012 that his appeal had been denied. A courtesy review of his appeal was completed on January 15, 2013. Plaintiff filed his complaint on March 7, 2016. The court found that the claim accrued on October 11, 2012 and it was timely under a four-year SOL that applies to claims for benefits under a written contractual policy in California. Under the contractual limitations period, Plaintiff’s claim is not time-barred. Although he became disabled no later than October 1, 2009 and the three year contractual limitations period ran from December 30, 2009, the absence of a limitations provision in an SPD defeats its enforceability. The plaintiff is pro se and the court declined his motion to be appointed counsel.
Wycihowski v. Clariant Medical Plan, et al., No. 1:15-CV-1233, 2017 WL 1154221 (W.D. Mich. Mar. 28, 2017) (Judge Ellen S. Carmody). Plaintiff must reimburse the health plan for the amounts it has expended for Plaintiff’s medical care arising from an auto accident which was the subject of a tort claim settlement, but no more than the amount Plaintiff received in the settlement. State Farm is obligated to reimburse Plaintiff for any amounts she is obligated to reimburse to the health plan for payment of medical bills.
Bailey v. OSF HealthCare Sys., No. 116CV01137SLDTSH, 2017 WL 1102739 (C.D. Ill. Mar. 23, 2017) (Judge Sara Darrow). In this church plan status litigation, the court denied the intervening Plaintiffs’ motion to transfer this matter to the Southern District. The court noted that an estimated 13,170 class members reside in the Central District, where OSF is one of the largest employers. The court found that it is desirable and in the public interest that the instant case be resolved in the Central District of Illinois and the Smith plaintiffs’ motion to transfer is neither convenient for parties and witnesses, nor in the interests of justice.

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