Source: http://bbgllp.com/2016/06/
Timestamp: 2017-06-28 19:10:03
Document Index: 750064449

Matched Legal Cases: ['§ 1132', '§ 502', '§ 4', '§ 1144', '§ 9410', '§ 10', '§ 1144']

Archives for June 2016 | Law Offices of Daniel Green
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Age Discrimination in Sports (and I Don’t Mean on the Field)	As an age discrimination attorney, I am amazed by the San Francisco 49ers.
Turns out experience and high quality work may not be enough to keep your job if you’re with the San Francisco 49ers. I’m not talking about on the field; I’m talking about everyone else who helps the NFL team take the field.
In a recent age discrimination suit filed by the team’s longtime on-the-field announcer, Bob Sarlatte, he claimed that he and several other members of the team’s staff lost their jobs because they were too old. Sarlatte’s suit was recently filed in federal court in San Jose.
Sarlatte was 66 when he was told the team was “going in a new direction.” That’s the same thing that Anthony Lozano, 56, the team’s facilities manager, and Keith Yanagi, 59, its director of video operations were told when they found out they would be losing their jobs Sarlatte’s suit claims that’s 49er-speak for “you’re just too old.”
The age discrimination suit claims that the 49ers “engaged in a pattern and practice of eliminating its older workers, while attempting to rebrand the team as a younger, technology-driven organization.” This was seen as part of their rebranding after their move to Levi’s Stadium in Santa Clara for the 2014-15 season.
The suit quotes 49ers CEO Jed York, saying that he preferred to hire mostly younger workers from Silicon Valley technology companies because “they did a lot of cool things before they turned 40 years old, and they don’t want to go play golf six days a week.”
The suit is similar to an age-discrimination case filed against the 49ers last year, by the same lawyers on behalf of Lozano and Yanagi. The 49ers denied that they engaged in age discrimination against these two men, but did reach a confidential settlement to settle their lawsuits. In that suit, the lawyers quoted York as saying, “Let’s go with the younger one” when he was deciding between two qualified candidates for another job in 2010.
It is also significant that when Rob Alberino, the 49ers’ vice president for broadcasting, called to tell Sarlatte that he was losing his job he said the job of field announcer was being eliminated several times. Soon after that, according to Sarlatte, the job was filled by a younger broadcasting employee, Bob Sargent.
Posted in Daniel Green, Employee Law, Services June 21, 2016
Posted in Foreclosure Defense, Services June 16, 2016
Posted in Daniel Green, Employee Law, Services June 14, 2016
Advisor from a Minority Shareholder Attorney: Protect Yourself Going In	As a minority shareholder attorney, I’m often asked for advice on protecting the position of a minority shareholder. Since a minority shareholder owns less than half of a company, they don’t have the voting strength if a dispute arises over the sale or distribution of assets. As minority shareholders, their interests can easily be overlooked.
Posted in Investor Disputes, Services June 9, 2016
Posted in Daniel Green, Employee Law, Services June 7, 2016
Posted in Foreclosure Defense, Services June 6, 2016
Another SCOTUS subrogation decision, and another deep dive into equity treatises	There is a lot about ERISA litigation that is hard to understand, but perhaps the most opaque issue is subrogation, which is the law governing when and how plans can recover benefits from participants. It seems that the Supreme Court is constantly changing the rules (while denying that it’s changing the rules), based on its interpretation of old treatises written about procedure in courts that don’t exist anymore.
Many benefit plans contain some form of reimbursement provision. Most commonly, these subrogation disputes arise where a participant is injured in an accident, receives medical care paid for by his health plan, and then sues the person who caused the accident and wins or settles. In that situation, the plan will demand that the participant to pay back some or all of the money that the plan had paid for health care arising from the accident.
The starting point for looking at subrogation claims is, of course, the language of ERISA. 29 U.S.C. § 1132 specifies who can sue whom for what, and section 1132(a)(3) states, in pertinent part, that a civil action may be brought by a fiduciary “to obtain other appropriate equitable relief …(ii) to enforce … the terms of the plan[.]” The Supreme Court held in Mertens v. Hewitt Associates, 508 U.S. 248 (1993), that “appropriate equitable relief” meant “those categories of relief that were typically available in a court of equity,” before courts of equity and courts of law were merged. Because that merger occurred (at the federal level at least) in 1938, it is highly doubtful that any currently practicing lawyers also practiced in the pre-merger days.
Mertens did not involve subrogation. The first case to address how ERISA’s limitation on equitable remedies applied to a subrogation claim was Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (2002). The plan paid $400,000 for Knudson’s medical expenses after an accident; when she settled a lawsuit against the driver, most of the money went into a “special needs trust” to pay for her medical care, and only $13,000 was set aside to reimburse the plan. The plan sued to enforce the reimbursement provision, but the Supreme Court held that the plan’s claim against Knudson was a legal claim, not an equitable claim (and thus not available under 1132(a)(3)), because the money in the special needs trust was never paid to Knudson. In particular, though the plan’s claim was for “restitution,” which is universally considered an equitable claim, there were different flavors of restitution recognized “in the days of the divided bench.” Truly “equitable” restitution was only available “where money or property identified as belonging in good conscience to the plaintiff could clearly be traced to particular funds or property in the defendant’s possession.” Because Knudson never had the money in question, the plan’s restitution claim was for “legal restitution,” not “equitable restitution,” and therefore the plan did not seek “appropriate equitable relief” under ERISA.
Four years later came Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356 (2006). Sereboff seemed remarkably similar to Knudson: the only apparent difference was that there was no special needs trust, and the settlement proceeds were paid directly to Sereboff, and were being preserved “in an investment account” until the litigation was resolved. But that difference, held the Court, was critical: “That impediment to characterizing the relief in Knudson as equitable is not present here. … Mid Atlantic sought ‘specifically identifiable’ funds that were ‘within the possession and control of the Sereboffs’—that portion of the tort settlement due Mid Atlantic under the terms of the ERISA plan, set aside and ‘preserved [in the Sereboffs’] investment accounts.’” The Court found that this claim was equitable under “law from the days of the divided bench” because it sought to enforce an “equitable lien by agreement.”
Sereboff set up a nomenclature for future subrogation cases. Mid-Atlantic was seeking judgment against “a particular fund distinct from the Sereboff’s general assets” that the plan specifically identified, namely, “all recoveries from a third party (whether by lawsuit, settlement, or otherwise).” The Court did not suggest that the “particular fund” needed to be physically segregated from a participant’s other assets for the equitable lien to attach. The plan specified “a particular share of that fund to which Mid Atlantic was entitled – ‘that portion of the total recovery which is due Mid Atlantic for benefits paid.’” Mid-Atlantic could assert an equitable claim “to follow a portion of the recovery into the Sereboff’s hands as soon as the settlement fund was identified, and impose on that portion a constructive trust or equitable lien [quotation marks and brackets omitted].”
The next big subrogation case was US Airways, Inc. v. McCutchen, 133 S. Ct. 1537 (2013). Though it primarily concerned defenses the participant could assert to a valid equitable subrogation claim, there are some factors about possession of funds that are interesting in hindsight. The Plan paid $66,686 in medical expenses for McCutchen’s accident. In subsequent lawsuits, McCutchen recovered a total of $110,000, from which his attorneys deducted $44,000 in fees, leaving $66,000. The attorneys placed $41,500 in escrow pending resolution of the plan’s subrogation dispute, and paid the balance to McCutchen. The plan sought $68,686, which was more than the combined amount placed in escrow and paid to McCutchen. Both the district court and the Third Circuit held that the plan was entitled to subrogation, but differed on the amount. The district court awarded the plan the full $66,686 – more than McCutchen received – and the Third Circuit held that the district court should consider what amount the plan should contribute toward McCutchen’s legal fees.
The Supreme Court began by seeming to gloss over the fact that McCutchen did not technically possess the money his lawyers held in trust, stating that, in Sereboff, “we allowed a health-plan administrator to bring a suit just like this one under § 502(a)(3).” And the Court went on to state that the plan in Sereboff was seeking specifically identifiable funds “within the Sereboff’s control [emphasis added]” though the Sereboffs had actual possession of their money. This certainly suggested that possession of funds was a fluid concept, but is leaves open the question where to draw the line between money held in an attorney trust account and money held in a special needs trust. Ultimately, the Court rejected some equitable defenses that McCutchen wanted to assert to reduce the amount of money payable to the plan, but upheld others. Though it raised some questions, to the extent those questions were around the edges, McCutchen seemed to be evidence of stability and maturity in the law of ERISA subrogation.
Then along came Montanile. In Montanile v. Bd. of Trustees of Nat. Elevator Indus. Health Benefit Plan, 136 S. Ct. 651 (2016), the Supreme Court threw what seemed to be another curve-ball, fundamentally changing what many practitioners thought was the subrogation landscape, while asserting that nothing had changed.
The basic facts in Montanile are all too familiar. Montanile was injured in an accident, resulting in $120,000 in medical bills for which the plan paid. He sued the driver who caused the accident and recovered $500,000, from which his lawyers deducted $260,000 in fees; the lawyers held “most of” the rest in trust while it negotiated the Board’s subrogation claim. Here’s where things get somewhat strange. Montanile’s lawyers and the Board could not reach agreement, and Montanile’s lawyers told the Board that they would distribute the money they were holding to Montanile unless the Board objected. The Board did not object, the lawyers did what they said they would do. The Board and the lawyers negotiated for another six months, during which time Montanile spent “almost all” of the money. After the Board sued, the district court held that, even though Montanile had spent the money, the Board was entitled to restitution from Montanile’s general assets. The Eleventh Circuit affirmed, explaining (as the Supreme Court described it): “a plan can always enforce an equitable lien once the lien attaches, and that dissipation of the specific fund to which the lien attached cannot destroy the underlying reimbursement obligation. The court therefore held that the plan can recover out of a participant’s general assets when the participant dissipates the specifically identified fund.”
This would seem to be completely consistent with Sereboff and McCutchen, which apparently held that what is important is that the participant has possession or control of the money at some point; as soon as that happens, the equitable lien attaches. The plan is not then obligated to confine its recovery to the specific money that the participant received.
It was not to be so easy. The Supreme Court held that “the basis for the Board’s claim is equitable. But our cases do not resolve whether the remedy the Board now seeks – enforcement of an equitable lien by agreement against the defendant’s general assets – is equitable in nature.”
The Board had an equitable lien by agreement that attached to Montanile’s settlement fund when he obtained title to that fund. And the nature of the Board’s underlying remedy would have been equitable had it immediately sued to enforce the lien against the settlement fund then in Montanile’s possession. That does not resolve this case, however. Our prior cases do not address whether a plan is still seeking an equitable remedy when the defendant, who once possessed the settlement fund, has dissipated it all, and the plan then seeks to recover out of the defendant’s general assets.
In order to answer the question, the Court turned, as it had in all of these cases, to “standard equity treatises.”
[T]hose treatises make clear that a plaintiff could ordinarily enforce an equitable lien only against specifically identified funds that remain in the defendant’s possession or against traceable items that the defendant purchased with the funds (e.g., identifiable property like a car). A defendant’s expenditure of the entire identifiable fund on nontraceable items (like food or travel) destroys an equitable lien. The plaintiff then may have a personal claim against the defendant’s general assets—but recovering out of those assets is a legal remedy, not an equitable one.
The Board argued that the Court had rejected precisely this kind of tracing requirement in Sereboff. But the Court disagreed, explaining that Sereboff held that the plan, when enforcing an equitable lien by agreement, is not required to trace the plan’s money in the participant’s possession – in other words, it does not have to sue to recover the exact money that it previously paid to the participant (or the items he bought with that money). The Court explained:
The Board misreads Sereboff, which left untouched the rule that all types of equitable liens must be enforced against a specifically identified fund in the defendant’s possession. See 1 Dobbs § 4.3(3), at 601, 603. The question we faced in Sereboff was whether plaintiffs seeking an equitable lien by agreement must “identify an asset they originally possessed, which was improperly acquired and converted into property the defendant held.” 547 U.S., at 365, 126 S.Ct. 1869. We observed that such a requirement, although characteristic of restitutionary relief, does not “appl[y] to equitable liens by agreement or assignment.” Ibid. (discussing Barnes v. Alexander, 232 U.S. 117, 34 S.Ct. 276, 58 L.Ed. 530 (1914)). That is because the basic premise of an equitable lien by agreement is that, rather than physically taking the plaintiff’s property, the defendant constructively possesses a fund to which the plaintiff is entitled. But the plaintiff must still identify a specific fund in the defendant’s possession to enforce the lien. See id., at 123, 34 S.Ct. 276 (“Having a lien upon the fund, as soon as it was identified they could follow it into the hands of the appellant”).
The Court also rejected arguments that various other doctrines of “historical equity practice,” including something called the “swollen assets doctrine,” provided relief to the Board.
Putting Knudson, Sereboff and Montanile together, there are at least three elements to a successful claim for reimbursement by an ERISA plan: (i) the plan must contain language giving the plan rights to a specifically identifiable fund; (ii) that specific fund must come into the participant’s possession or control at some point in time; (iii) the fund, or identifiable items purchased with the fund, must remain in the participant’s possession or control when the plan sues.
To be sure, a big lesson of Montanile is that a plan seeking to exercise subrogation rights must proceed diligently. This was always true, but now there is more reason for a plan not to sit on its rights.
Posted in Press Releases June 6, 2016
Shoes are starting to drop in church plan litigation	The Connecticut Law Tribune reported on Friday that St. Francis Hospital & Medical Center settled a class action lawsuit alleging that its pension plan failed to comply with ERISA because it improperly contended it was exempt as a church plan.
The suit alleged that the plan was underfunded by $140 million. The parties reportedly agreed to settle for $107 million, payable over 10 years.
Certainly the settlement discussions involved consideration of Kaplan v. Saint Peter’s Healthcare Sys., 810 F.3d 175, 177 (3d Cir. 2015), and Stapleton v. Advocate Health Care Network, 817 F.3d 517 (7th Cir. Mar. 17, 2016), both of which drastically narrowed the church-plan exemption.
Posted in Press Releases June 2, 2016
ERISA preempts state-required “all payer claim databases” (APCD)	About twenty states, including Vermont, have passed laws requiring all entities that provide health care services to report information to a state agency; these are called “all payer claims databases” or APCDs. Though they may have many purposes, they all generally are intended to enforce a universal and consistent (within the particular state, at least) submission of data that permits study, evaluation, manipulation and dissemination of the data, with an aim of improving health care outcomes and reducing costs. Of course, each state that establishes an APCD likely will have its own requirements, scope and format, which likely will differ in some respects from other states’ APCDs. And because a primary intent of ERISA was to avoid such patchwork, state-by-state regulation of employee benefit plans, a conflict was inevitable.
That conflict came to a head in Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936 (2016), and the Supreme Court held that ERISA won, by preempting Vermont’s APCD law.
Vermont’s APCD law requires health insurers, health care providers, health care facilities, and governmental agencies to report any “information relating to health care costs, prices, quality, utilization, or resources required” by the state agency, including data relating to health insurance claims and enrollment. Vermont expressly defined “health insurer” to include a “self-insured … health care benefit plan” and a “third party administrator” of such a plan. Under implementing regulations, “health insurers must report data about the health care services provided to Vermonters regardless of whether they are treated in Vermont or out-of-state and about non-Vermonters who are treated in Vermont.” Health insurers and other covered entities must register with the state and must submit data as frequently as monthly.
Liberty Mutual maintains a self-insured health plan providing benefits to over 80,000 present and former employees and family members nationwide. The plan uses Blue Cross Blue Shield of Massachusetts (Blue Cross) as a third party administrator. The Liberty Mutual Plan covers too few Vermont residents to mandate reporting in the state, but Blue Cross serves several thousand Vermont residents, so it must report.
In 2011, Vermont subpoenaed Blue Cross, demanding that it provide documents on members and claims. Liberty Mutual instructed Blue Cross not to comply, concerned that disclosing confidential information about participants would violate its fiduciary duties under the Plan. Liberty Mutual sued, arguing that ERISA preempts the Vermont APCD law.
The Supreme Court started with ERISA’s deceptively simple, and broad, preemption language: ERISA pre-empts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). The Court noted that it had previously held that, because almost anything can “relate to” almost anything else, it has recognized two categories of preemption:
First, ERISA pre-empts a state law if it has a “‘reference to’” ERISA plans. Ibid. To be more precise, “[w]here a State’s law acts immediately and exclusively upon ERISA plans … or where the existence of ERISA plans is essential to the law’s operation …, that ‘reference’ will result in pre-emption.” Dillingham, supra, at 325, 117 S.Ct. 832. Second, ERISA pre-empts a state law that has an impermissible “connection with” ERISA plans, meaning a state law that “governs … a central matter of plan administration” or “interferes with nationally uniform plan administration.” Egelhoff v. Egelhoff, 532 U.S. 141, 148, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001). A state law also might have an impermissible connection with ERISA plans if “acute, albeit indirect, economic effects” of the state law “force an ERISA plan to adopt a certain scheme of substantive coverage or effectively restrict its choice of insurers.” Travelers, supra, at 668, 115 S.Ct. 1671.
Liberty Mutual argued that Vermont’s law fell into the second category of preemption, and the Court agreed.
The Court explained that ERISA was designed “to make the benefits promised by an employer more secure by mandating certain oversight systems and other standard procedures. … These systems and procedures are intended to be uniform.” It noted that ERISA has extensive reporting, disclosure and recordkeeping requirements for welfare benefit plans like the Liberty Mutual Plan, and that the Secretary of Labor has the authority to modify and implement new reporting and disclosure requirements nationwide. The Secretary also can use all of this data for statistical and research purposes, and it can publish the data and results as he deems appropriate. ERISA also provides that violation of the reporting, disclosure and recordkeeping requirements can result in civil or criminal liability.
The Court summed up ERISA’s scheme: “As all this makes plain, reporting, disclosure, and recordkeeping are central to, and an essential part of, the uniform system of plan administration contemplated by ERISA. The Court, in fact, has noted often that these requirements are integral aspects of ERISA.”
With that explanation, the finding of preemption is inevitable:
Vermont’s reporting regime, which compels plans to report detailed information about claims and plan members, both intrudes upon “a central matter of plan administration” and “interferes with nationally uniform plan administration.” Egelhoff, 532 U.S., at 148, 121 S.Ct. 1322. The State’s law and regulation govern plan reporting, disclosure, and—by necessary implication—recordkeeping. These matters are fundamental components of ERISA’s regulation of plan administration. Differing, or even parallel, regulations from multiple jurisdictions could create wasteful administrative costs and threaten to subject plans to wide-ranging liability. See, e.g., 18 V.S.A. § 9410(g) (supplying penalties for violation of Vermont’s reporting rules); CVR § 10 (same). Pre-emption is necessary to prevent the States from imposing novel, inconsistent, and burdensome reporting requirements on plans.
The Court also rejected Vermont’s argument that Liberty Mutual needed to show that it suffered economic harm due to the reporting requirement in order to establish preemption: “A plan need not wait to bring a pre-emption claim until confronted with numerous inconsistent obligations and encumbered with any ensuing costs.”
The 6-2 majority opinion was written by Justice Kennedy, and joined by Roberts, Thomas, Breyer, Alito and Kagan There are concurring and dissenting opinions worth noting.
Justice Thomas wrote a concurring opinion “because I have come to doubt whether [29 U.S.C.] § 1144 [the ERISA preemption provision] is a valid exercise of congressional power and whether our approach to ERISA pre-emption is consistent with our broader pre-emption jurisprudence. He essentially argued that the Court should overrule prior precedent, interpret section 1144 as written, and conclude that it is unconstitutionally overbroad as written.
Justice Breyer also concurred to emphasize the serious administrative problems that would be created if plans like Liberty Mutual’s were required to comply with 50 potentially conflicting reporting requirements. He also noted that Vermont and other states can request the Secretary of Labor to require the type of reporting they want in order to populate their APCDs.
Justice Ginsberg, joined by Justice Sotomayor, dissented, explaining: “I would hold that Vermont’s effort to track health care services provided to its residents and the cost of those services does not impermissibly intrude on ERISA’s dominion over employee benefit plans.” In a nutshell, Justice Ginsberg concluded that not all “reporting” or “recordkeeping” is the same, and that the information that Vermont sought (claims data) was fundamentally different than the data that ERISA plans reported to the Department of Labor (solvency and actuarial data).
Shareholder Dispute Lawsuit by SeaWorld Shareholders Dismissed	A federal judge recently dismissed a stockholder lawsuit filed against SeaWorld Entertainment Inc. In the suit a group of investors claimed the company misled them about the effect of the documentary “Blackfish” on the theme park attendance and revenue.
Posted in Investor Disputes, Services Topics	Contract Disputes