Court Opinion

ID: 9399327
Source: CourtListenerOpinion
Date Created: 2023-06-02 17:01:56.112406+00
Date Added: 2024-06-11T17:19:04.837569
License: Public Domain

NOT FOR PUBLICATION                           FILED
                    UNITED STATES COURT OF APPEALS                        JUN 2 2023
                                                                      MOLLY C. DWYER, CLERK
                                                                       U.S. COURT OF APPEALS
                           FOR THE NINTH CIRCUIT

IRINA MORRIS,                                   No.    21-56169

                Plaintiff-Appellant,            D.C. No.
                                                8:20-cv-00821-SB-GJS
 v.

AETNA LIFE INSURANCE COMPANY;                   MEMORANDUM*
DOES, 1 through 10, inclusive,

                Defendants-Appellees.

                   Appeal from the United States District Court
                       for the Central District of California
                 Stanley Blumenfeld, Jr., District Judge, Presiding

                    Argued and Submitted November 15, 2022
                              Pasadena, California

Before: WARDLAW and W. FLETCHER, Circuit Judges, and KORMAN,**
District Judge.

      Irina Morris appeals the district court’s judgment denying her claim that

Aetna Life Insurance Company (Aetna) breached its fiduciary duty under

§ 502(a)(3) of the Employment Retirement Income Security Act, 29 U.S.C.

      *
             This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
      **
             The Honorable Edward R. Korman, United States District Judge for
the Eastern District of New York, sitting by designation.
§§ 1001, et seq. (ERISA).1 Morris argues that the district court incorrectly

concluded that Bafford v. Northrop Grumman Corp., 994 F.3d 1020 (9th Cir.

2021) forecloses her fiduciary breach claim and that the court erred in its analysis

of her potential remedies.

      Following a bench trial, the district court’s conclusions of law—such as the

appropriate legal standard under ERISA—are reviewed de novo, and its findings of

fact are reviewed for clear error. Heavenly Hana LLC v. Hotel Union & Hotel

Indus. of Haw. Pension Plan, 891 F.3d 839, 844 (9th Cir. 2018). Exercising

jurisdiction under 28 U.S.C. § 1291, we reverse.

      The district court erred in concluding that Bafford forecloses Morris’s claim

for fiduciary breach. To bring a successful claim for breach of fiduciary duty

under ERISA, the plaintiff must establish “(1) the defendant was a fiduciary; []

(2) the defendant breached a fiduciary duty; and (3) the plaintiff suffered

damages.” Bafford, 994 F.3d at 1026 (citing 29 U.S.C. § 1109(a)). Moreover, “the

alleged wrong must occur in connection with the performance of a fiduciary

function to be cognizable as a breach of fiduciary duty.” Id. at 1028. Thus, the

“threshold question” in cases involving fiduciary breach is whether the fiduciary

“was performing a fiduciary function[] when taking the action subject to

1
  Although Morris filed a motion for reconsideration of the district court’s
judgment, she appeals only the judgment. In addition, she declined to appeal her
claim under ERISA § 502(a)(1)(B).

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complaint.” Pegram v. Herdrich, 530 U.S. 211, 226 (2000).

      In Bafford, we held that a third-party administrator “[c]alculating a benefit

within the framework of a policy set by another entity does not involve the

requisite discretion or control to constitute a fiduciary function.” 994 F.3d at 1028;

see also Livick v. Gillette Co., 524 F.3d 24, 29 (1st Cir. 2008); Lebahn v. Nat’l

Farmers Union Unif. Pension Plan, 828 F.3d 1180, 1185–86 (10th Cir. 2016). We

explained that the mailed, auto-generated statements the third-party administrator

sent to the Bafford plaintiffs were not discretionary acts comparable to other “well-

established fiduciary functions,” such as “issuing written plan materials like

summary plan descriptions” or providing “individualized consultations with

benefits counselors.” Bafford, 994 F.3d at 1028 (quoting In re DeRogatis, 904

F.3d 174, 192 (2d Cir. 2018)).

      Here, Aetna’s actions as Morris’s named fiduciary lie well within the

category of “well-established fiduciary functions.” Id. Aetna provided Morris

with “individualized consultations with benefits counselors.” Id. In contrast to

Bafford’s use of an online mechanism to calculate benefits, id. at 1025, Aetna

ability specialists, team leaders, and customer service representatives consulted

with Morris by phone about her benefit amount numerous times; Aetna’s Long

Term Disability Benefit Manager sent letters Aetna knew Morris would share with

lenders as proof of her benefits; and Aetna communicated with Morris’s financial

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institutions to verify her benefit amount. “[C]onveying information about the

likely future of plan benefits” through benefits counselors amounts to a fiduciary

act. Varity Corp v. Howe, 516 U.S. 489, 502 (1996); see also Bafford, 994 F.3d at

1027–28 (citing with approval Sullivan-Mestecky v. Verizon Comms. Inc., 961 F.3d

91, 104 (2d Cir. 2020)); Mathews v. Chevron Corp., 362 F.3d 1172, 1179 (9th Cir.

2004).

      In addition, Aetna exercised discretion when it gathered her earnings

information, and interpreted the Plan’s terms to determine which benefits and

deductions applied. See Aetna Health Inc. v. Davila, 542 U.S. 200, 220 (2004)

(explaining that ERISA “strongly suggests that the ultimate decisionmaker in a

plan regarding an award of benefits must be a fiduciary and must be acting as a

fiduciary when determining a participant’s or beneficiary’s claim”). And it

exercised discretion when it decided—despite having knowledge that Morris had

relied on the stated benefit amount to make important financial decisions—to

immediately and aggressively collect the overpayment amount after nine years had

passed, going as far as to entirely suspend Morris’s benefits. “Any control over

disposition of plan money makes the person who has the control a fiduciary.” IT

Corp. v. Gen. Am. Life Ins. Co., 107 F.3d 1415, 1421 (9th Cir. 1997) (internal

quotation marks omitted). Although the terms of the Plan permit Aetna to collect

any overpayment amount, Aetna was not required to recoup the overpayment at all,

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much less in the manner it did that put Morris in dire financial straits.

      Aetna argues that the “action subject to complaint,” Pegram, 530 U.S. at

226, was the miscalculation, which is not a fiduciary function under Bafford. See

Bafford, 994 F.3d at 1028 (“[E]ven if Hewitt were a functional fiduciary with

respect to some of its actions, it would not have been acting as a fiduciary when

performing calculations according to the Plan formula.”). But this misreads

Bafford’s holding. Even assuming Aetna’s initial mathematical calculation is not

discretionary, its subsequent actions—which were central to Morris’s injury—

were. In fact, Morris specifically called Aetna to confirm her benefit amount

because she “d[idn’t] want to owe [Aetna] anything if an error was made.” She

then communicated with Aetna for nearly a month to determine whether it had

applied the correct offset amount, after which a Senior LTD Claim Analyst sent

her a letter confirming the $4,113.17 figure.

      Had any Aetna representative taken any step to actually verify the validity of

the benefits amount it repeatedly communicated, Aetna could have avoided any

overpayment, much less the catastrophic amount that resulted. Instead, Aetna

repeatedly affirmed the erroneous benefit amount directly to Morris and her

lenders for almost a decade, permitting Morris to take out mortgages, obtain

mortgage refinancing, negotiate a divorce settlement, and pay taxes, all on the

basis that she was entitled to a higher income. Much more than “a clerical

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employee typ[ing] an erroneous code onto a computer screen,” IT Corp., 107 F.3d

at 1420, the extent of Aetna’s involvement in Morris’s financial life distinguishes

her case from the ministerial calculation error addressed in Bafford. Accordingly,

Aetna was performing a fiduciary function in its communications with and

representations to Morris.2

      REVERSED and REMANDED.

2
  We remand for consideration of whether Aetna breached its fiduciary duty to
Morris, given that Aetna performed a fiduciary function. See Planned Parenthood
of Greater Wash. & N. Idaho v. U.S. Dep’t of Health & Human Servs., 946 F.3d
1100, 1110 (9th Cir. 2020) (“In general, an appellate court does not decide issues
that the trial court did not decide.”). And because that issue remains unresolved,
we do not reach the question whether the district court erred when it found that she
was not entitled to estoppel or waiver, or when it failed to adjudicate her surcharge
and reformation claims.

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