In the wake of the Supreme Court’s decision in McCutchen v. US Airways, the Fifth Circuit reconsidered ACS Recovery Services v. Griffin, deeming “enbancworthy” the question of whether a plan administrator can recover paid medical expenses from a covered employee, his special needs trust and/or from his ex-wife (in case you are wondering, that’s the Court’s word, not ours). The Fifth Circuit held en banc that the plan administrator could recover the medical costs borne by the Plan from the Special Needs Trust, that the Trust was a proper ERISA defendant, and that the Plan held a pre-existing equitable lien on the proceeds of any tort recovery that the employee received, after the Plan paid his medical bills.
For more on the Fifth Circuit’s en banc reversal of its previous decision in ACS Recovery Services v. Griffin, please read the full blog entry.
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The U.S. Court of Appeals for the Seventh Circuit has recently decided a case challenging the amount of fees paid by 401(k) plan participants. Leimkuehler v. Am. United Life Ins. Co., _ F.3d _, 2013 WL 1591450 (7th Cir. 2013). This opinion is likely to have vast implications for that type of litigation specifically and the scope of fiduciary status generally. In recent years, a number of lawsuits have been brought accusing 401(k) plan service providers of improperly receiving “revenue sharing” payments from the expense ratios of the mutual funds in which the plan’s assets are invested. The Leimkuehler opinion addresses a threshold issue in such cases – whether financial service providers are fiduciaries under ERISA for purposes of negotiating or receiving revenue sharing payments.
To find out more about the Seventh Circuit's decision, continue reading.
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After multiple cases in which the United States Court of Appeals for the Seventh Circuit had expressed approval for the “Moench presumption,” without formally adopting the presumption, the Court recently took the final step. Indeed, the Seventh Circuit’s take on the presumption may be the hardest to overcome of any circuit. How so? Read on to find out.
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On April 22, 2013, the Supreme Court granted the petition for a writ of certiorari in CGI Technologies & Solutions v. Rose, et al., and then immediately vacated and remanded the Ninth Circuit’s judgment in light of US Airways, Inc. v. McCutchen, 569 U.S. ____ (2013).
The facts of this case are quite similar to McCutchen. However, unlike in McCutchen, the plan in CGI Technologies & Solutions v. Rose expressly disclaims the common-fund and make-whole doctrines. Thus, on remand under McCutchen, we expect that the Ninth Circuit will allow the express terms of the plan to govern and require Rose to reimburse the plan in full for medical expenses it incurred on her behalf.
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This advisory discusses the Supreme Court’s recent decision in US Airways v. McCutchen—a decision that can best be described as a half-victory for sponsors and administrators of ERISA-governed plans.
To access the full advisory, continue reading below.
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ERISA provides standing to bring an action for breach of fiduciary only to a plan’s participants, beneficiaries, and fiduciaries. However, the United States Court of Appeals for the Second Circuit recently held that an entity had standing to bring an action even though it had ceased being a fiduciary more than 20 years prior to the decision. What led the court to reach this result? Read on to find out.
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ERISA requires that “[e]very employee benefit plan . . . be established and maintained pursuant to a written instrument” that “specif[ies] the basis on which payments are made to and from the plan.” 29 U.S.C. §§ 1102(a)(1), (b)(4). ERISA then directs the plan administrator to discharge his duties “in accordance with the documents and instruments governing the plan.” Id. § 1104(a)(1)(D).
In Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009), the Supreme Court held that an ERISA plan administrator must distribute benefits to the beneficiary named in the plan, regardless of any state-law waiver purporting to divest that beneficiary of his right to the benefits. However, Kennedy explicitly left open the question of whether, once the benefits are distributed by the administrator, the decedent’s estate can enforce a waiver against the plan beneficiary. See id. at 299 n. 10 (“Nor do we express any view as to whether the Estate could have brought an action in state or federal court against [the plan beneficiary] to obtain the benefits after they were distributed.”). The Fourth Circuit recently addressed this question in the affirmative, following the Third Circuit’s holding in Estate of Kensinger v. URL Pharma, Inc., 674 F.3d 131 (3d Cir. 2012). See Andochick v. Byrd, No. 1:11–cv–739, 2013 WL 781978 (4th Cir. March 4, 2013).
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The United States Court of Appeals for the Fourth Circuit recently held, over the objections of not only the putative class representatives but amicus briefs filed by the Department of Labor, the Pension Benefit Guaranty Corporation, and the AARP, that participants in a defined benefit pension plan lack standing to challenge the plan’s investments in mutual funds that were affiliated with the plan’s sponsor. Why did the plaintiffs lack standing? Read on to find out.
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On January 4, 2013, federal district court judge Denise Hood of the Eastern District of Michigan certified a class action in Pfeil v. State Street Bank & Trust Co. under Fed. R. Civ. P. 23(a), 23(b)(1)(B) and 23(b)(3). The certified class includes all participants or beneficiaries of the GM retirement plans who suffered losses to their investments in the GM stock fund during the class period of July 15, 2008 to April 24, 2009. This blog post provides a brief recap of the litigation and class certification in Pfeil.
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On December 3, 2012, the Supreme Court denied State Street’s petition for a writ of certiorari with regard to the Sixth Circuit’s decision in Pfeil v. State Street Bank & Trust Co., 671 F.3d 585 (6th Cir. 2012). Decided February 22, 2012, the Sixth Circuit held in Pfeil that the presumption of prudence for employer stock is evidentiary in nature and thus does not apply at the pleading stage. The Sixth Circuit’s rejection of the application of the presumption at the pleadings stage is unique among the Circuit Courts of Appeals.
Perhaps State Street is getting coal in its stocking because it abandoned the controversial presumption of prudence ruling in its cert petition and instead raised two more narrow issues.
For more on this case, please continue reading.
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Federal Rule of Civil Procedure 23(b)(2) authorizes class action treatment if the defendant “has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” But is it really possible for a defendant to “act” or “refuse to act” the same way with respect to a group that is so large and varied that it is broken into 10 separate and distinct subclasses? Judge Posner thinks so. Indeed, writing on behalf of a three-judge panel of the Seventh Circuit, Judge Posner recently affirmed certification under Rule 23(b)(2) of a class of more than 4,000 individuals who participated in an ERISA-governed pension plan over a span of 23 years, and comprising 10 distinct subclasses. See Johnson v. Meriter Health Services Employee Retirement Plan, --- F.3d ----, 2012 WL 6013457 (7th Cir. Dec. 4, 2012).
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The Supreme Court heard oral argument of US Airways, Inc. v. McCutchen on November 27, 2012. The topics considered during oral argument were far-reaching and show that this case is far from decided. However, while oral argument can shed some light on the Supreme Court’s current thoughts on McCutchen, the ERISA community will ultimately have to just sit back and wait to see whether the Supreme Court will resolve the question of whether “equitable defenses” can trump express plan language to limit a plan’s recovery under § 502(a)(3). If so, this case will have a far-reaching impact on related reimbursement and underlying tort litigation.
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The United States Court of Appeals for the Eighth Circuit recently reviewed a case in which the evidence suggested that the employer had mistakenly overpaid over a half-million dollars to multiemployer funds based upon a misunderstanding as to the scope of its collective bargaining agreement. In the process of reviewing that decision, the Court noted that ERISA specifically exempts mistaken overpayments from its anti-inurement provision and that its own precedent specifically granted employers a common law action for restitution of mistaken payments.
Nevertheless, the Eighth Circuit held that, under the circumstances of the case, equity did not justify a refund of the overpayment to the employer and affirmed summary judgment in favor of the funds. What led the Court to reach this decision? Read on to find out.
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Judge Martini of the United States District Court for the District of New Jersey recently dismissed a putative class action lawsuit against Horizon Healthcare Services. The plaintiffs (various chiropractors who regularly provide certain chiropractic treatments for plan participants) alleged that Horizon systematically and improperly denied reimbursement for certain types of chiropractic services. Horizon later claimed that it “bundled” reimbursement for the chiropractic services into a “global fee.”
The Court granted Horizon’s motion to dismiss, finding that the plaintiffs’ “vague references to a common practice and purported assignment” were not enough to satisfy the chiropractors’ burden to prove that they had standing to sue under ERISA. See Demaria v. Horizon Healthcare Services, Inc., No. 2:11–cv–7298 (WJM), 2012 WL 5472116, at *4 (D.N.J. Nov. 9, 2012).
Read the entire blog entry to find out why Judge Martini decided to not back the chiropractors in response to Horizon’s motion to dismiss.
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We all know that a fiduciary must act solely in the interests of the participants and beneficiaries of the plan at all times. This includes, for example, bringing a lawsuit against former fiduciaries or current co-fiduciaries for breaches of their fiduciary duty that caused harm to the plan. But, what happens when Fiduciary No. 1 brings a lawsuit against Fiduciary No. 2, and then Fiduciary No. 2 turns around and seeks contribution and indemnification from Fiduciary No. 1? There is no statutory right to contribution and indemnification under ERISA, but is this permitted under common law? The Supreme Court has not ruled on whether an ERISA fiduciary has the right to seek contribution and indemnity from a co-fiduciary, and several Circuits and district courts are split on this issue. However, a recent decision from the Middle District of Florida relied on trust principles to hold that the rights to contribution and indemnity from co-fiduciaries under ERISA are properly permitted pursuant to federal common law. See Guididas v. Community National Bank Corp., Case No. 8-11-cv-02545-JSM-TBM (M.D. Fla., Nov. 5, 2012).
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Both parties have filed their briefs on the merits in McCutchen, and oral argument is less than three weeks away. We are eagerly awaiting the Supreme Court’s input on whether plan provisions seeking full reimbursement under § 502(a)(3) can be subject to “equitable defenses.” While we wait, what can the parties’ briefs tell us about this contentious fight?
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On October 15, 2012, the Supreme Court denied the petition for writs of certiorari filed by plan participants in 401(k) plans sponsored by Citigroup and McGraw-Hill Companies, meaning that the high court chose not to weigh in on the Second Circuit’s adoption of the presumption of prudence regarding investment in employer stock, otherwise known as the Moench presumption. However, the Moench presumption may yet make its way to the Supreme Court, thanks to the Sixth Circuit’s minority holding that rejected the application of the presumption at the pleadings stage. Will the Supremes be more willing to take up this issue on a cert petition in Pfeil v. State Street Bank & Trust Co., 671 F.3d 585 (6th Cir. 2012)?
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Pat DiCarlo is an honored recipient of the Saint Thomas More Award, which is presented annually to one or more judges and lawyers, to recognize actions manifesting a commitment to justice and humanity, especially in difficult circumstances. Mr. DiCarlo and Lane Dennard were honored concurrently for their work with the Georgia Justice Project. Mr. DiCarlo and Mr. Dennard began providing pro bono representation to individuals who were unable to obtain employment, housing or governmental benefits due to a criminal history. Together with other volunteers, Mr. DiCarlo and Mr. Dennard gathered empirical research and co-authored a book on the ramifications of criminal arrests and convictions, entitled Consequences of Arrest and Conviction: Policy and Law in Georgia. They testified in front of the Georgia legislature and worked tirelessly to reform Georgia’s expungement statute. Now, the circumstances in which criminal arrest information can be removed from criminal histories has been expanded, easing the path to jobs and housing for countless Georgians.
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On October 1, 2012, the Supreme Court of the United States declined to review a decision of the United States Court of Appeals for the Sixth Circuit which upheld a provision of a collective bargaining agreement (“CBA”) requiring the union to indemnify the employer for withdrawal liability.
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In a recent anti-retaliation lawsuit, the Seventh Circuit decided as a matter of first impression that unsolicited, informal complaints constitute a protected “inquiry” under ERISA § 510. In doing so, the Seventh Circuit became the most recent circuit to join in a split on this issue, joining with the Fifth and Ninth Circuits, despite opposing opinions from the Second, Third and Fourth Circuits.
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