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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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 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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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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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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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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Doug Hinson, the leader of Alston & Bird’s ERISA Litigation Practice Group, was recently named a 2013 “Lawyer of the Year,” by The Best Lawyers In America, one of the oldest and most respected peer-review publications in the legal profession. Mr. Hinson was one of eighteen Alston & Bird attorneys across a wide range of practices who were named a 2013 “Lawyer of the Year.” For more information regarding the “Lawyers of the Year,” click here.
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In a matter of first impression, the Ninth Circuit recently held that the attorney-client privilege does not apply to communications between an insurer and counsel before a claims decision is made. Creating a split with the Third Circuit, the Ninth Circuit held that the “fiduciary exception” to the attorney-client privilege should be extended to insurers that administer benefit plans governed by ERISA, and acting in a fiduciary capacity. See Stephan v. Unum Life Ins. Co. of Am., No. 10-16840l, --- F.3d ----, 2012 WL 3983767 (9th Cir. Sept. 12, 2012). This is a chilling decision for all practitioners who advise insurers of ERISA plans.
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On August 27, 2012, in Janese, et al. v. Fay, et al., the Second Circuit held that trustees of a multi-employer pension fund do not act as fiduciaries when they amend the pension plan. Although it may not be a controversial decision, this holding is still significant because it expressly overruled contrary Second Circuit authority, specifically Chambless v. Masters, Mates & Pilots Pension Plan, 772 F.2d 1032 (2d Cir. 1985) and Siskind v. Sperry Ret. Program, Unisys, 47 F.3d 498 (2d Cir. 1995).
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In an opinion covering two cases, the Sixth Circuit recently held that ERISA confers fiduciary status to any entity that controls plan assets. The cases are Guyan International Inc. v. Professional Benefits Administrators Inc., No. 11-3126, 2012 WL 3553281 (6th Cir. Aug. 20, 2012) and Pritchard Mining Co. Inc. v. Professional Benefits Administrators Inc., No. 11-3640 (6th Cir. Aug. 20, 2012).
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On August 7, 2012, the United States Court of Appeals for the Eighth Circuit upheld unilateral changes to retiree benefits by Whirlpool Corporation (“Whirlpool”) for former employees of Maytag Corporation (“Maytag”), which was acquired by Whirlpool in 2006.
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Jonathan Rose, a partner in the ERISA Litigation Group in the firm’s Washington, D.C. office, has been appointed chair of the American Bar Association’s (ABA) Joint Committee on Employee Benefits (JCEB). Rose was appointed during the ABA’s 2012 Annual Meeting in Chicago and will serve a one-year term.
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In a recent pension benefits misrepresentation decision, the Southern District of Ohio granted summary judgment for the defense on Plaintiff Virginia Stark’s claims for estoppel and breach of fiduciary duty. Stark v. Mars, Inc., et al., No. 2:10-cv-642, 2012 WL 2918410 (S.D. Ohio July 17, 2012).
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In a recent case, Griffin v. Flagstar Bancorp, Inc., No. 11–1497, 2012 WL 2989231 (6th Cir. July 23, 2012), the Sixth Circuit stuck with its position that the presumption of prudence does not apply at the pleadings stage, when it reversed an order dismissing a putative ERISA class action.
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