July 2022 ERISA Litigation Update:

Given the continuing wave of ERISA litigation, this article has become a mainstay of The Speed Reader. A sample of recent cases is provided below. 

The most common type of ERISA case for approximately the past sixteen years has involved retirement plan participants’ allegations that plan fiduciaries caused participants to pay excessive recordkeeping and investment fees and included one or more poorly-performing investment options in the plan. Recent cases in this category include the following:

• Fleming v. Kellogg Company (complaint filed on June 28, 2022 in the U.S. District Court for the Western District of Michigan)
• Smith v. CommonSpirit Health (case dismissed on June 21, 2022 by the U.S. Court of Appeals for the Sixth Circuit)
• Riley v. Olin Corporation (case dismissed on June 21, 2022 by the U.S. District Court for the Eastern District of Missouri)

Other types of recent ERISA cases are as follows:

Gimeno v. NCHMD, Inc. (decided on June 28, 2022 by the U.S. Court of Appeals for the Eleventh Circuit):  The plaintiff’s spouse (the “Spouse”) worked for the defendant. As part of the Spouse’s hiring process, the defendant’s human resources staff helped him complete enrollment paperwork for life insurance benefits under an ERISA plan. The plaintiff was the primary beneficiary under the plan. The Spouse elected to pay for $350,000 in supplemental life insurance coverage on top of $150,000 in employer-paid coverage. To receive that supplemental coverage, the Spouse had to submit an evidence of insurability form. The Spouse did not receive the form with his enrollment paperwork, however, and the defendant’s human resources staff did not notify him that the form was necessary or missing. As a result, he never submitted the form to the insurance company.

Nonetheless, for several years the defendant deducted premiums corresponding to $500,000 in life insurance coverage from the Spouse’s paychecks. The defendant also provided him with a benefits summary stating that he had $500,000 in coverage. After the Spouse died, the plaintiff  filed a claim for benefits with the plan’s insurance company. The insurance company partially denied the claim by refusing to pay any supplemental benefits because it had never received the required form. The plaintiff then filed this lawsuit.

The court framed the issue as follows: does Section 502(a)(3) of ERISA create a cause of action for an ERISA beneficiary to recover monetary benefits lost due to a fiduciary’s breach of fiduciary duty during the plan enrollment process?  The court answered in the affirmative. The court began its analysis by citing that ERISA section’s applicable language, which authorizes a beneficiary of an employee benefit plan to sue for “appropriate equitable relief” for ERISA violations.

Although the court noted that “equitable relief” typically has not included monetary relief, certain kinds of monetary relief were available in equity courts. Based on that historical fact and on decisions by other courts over the past several years, the court ruled that the case will move forward. If the plaintiff can prove that a fiduciary breach caused her to lose benefits, she will be allowed to recover money equal to the insurance benefits that were lost as a result of the breach.

Cloud v. The Bert Bell/Pete Rozelle NFL Player Retirement Plan (decided on June 21, 2022 by the U.S. District Court for the Northern District of Texas ):  The court’s opinion began with the following fiery language:

• “The curtain has been pulled back as to the inner workings of Defendant The Bert Bell/Pete Rozelle NFL Player Retirement Plan. And what lies behind it is far from pretty with respect to how it handles disability benefit claims sought by former players, such as [plaintiff] Michael Cloud.”
• “Like many other former players suffering from the effects of head trauma, Plaintiff was forced to navigate a byzantine process in order to attempt to obtain those benefits, only to be met with denial. What has become clear over the course of this litigation is that Plaintiffs claim for disability benefits was wrongfully and arbitrarily denied in a process that lacked the procedural safeguards both promised by the benefits plan and required by law.”
  
  

The case involves disability benefits sought by the plaintiff under the defendant’s ERISA plan. The plaintiff is currently receiving “Inactive A” disability benefits under the plan as a result of serious football-related injuries, but he asserts that he should be reclassified to the “Active Football” total and permanent disability benefits category. (That category provides  the highest available form of disability benefits under the plan.) Specifically at issue is the defendant’s decision to deny the plaintiff’s request for reclassification to “Active Football” benefits.

The court ruled that the defendant failed to provide the plaintiff a full and fair review and abused its discretion when it denied the plaintiff’s request; therefore, the plaintiff is entitled to an award of “Active Football” total and permanent disability benefits, appropriate interest, and his attorneys’ fees and court costs. As support for that conclusion, the court noted that the defendant violated ERISA’s claims and appeals provisions in that the defendant failed to provide the plaintiff a full and fair review of his appeal for reclassification to “Active Football” status. Specifically, the defendant:

• Did not clearly identify the specific reasons for denying the plaintiff’s appeal;
• Did not consider all documents and records submitted with the plaintiff’s claim;
• Afforded undue deference to the plan’s committee; and
• Did not consult with an appropriate health care professional, despite basing its determination on a medical judgment.