Fall 2014 | Employee Benefits Committee Newsletter

Circuit Round-up of Key Appellate ERISA Decisions from February-August 2014

By: Sean K. McMahan and Abbey M. Glenn, of Morgan, Lewis & Bockius LLP

First Circuit

Riley v. Metro. Life Ins. Co., 744 F.3d 241, 57 EB Cases 2153 (1st Cir. 2014) (accrual of statute of limitations)

The First Circuit held that a participant's claim for benefits accrued when he received his first benefit check even though he had not filed a formal appeal. Although a cause of action for benefits ordinarily accrues when a fiduciary denies benefits, the court held that a cause of action can accrue when, "after a claim for benefits is made and a specific sum is sought, the ERISA plan repudiates the claim or the sum sought, and that rejection is clear and made known to the beneficiary." Id. at 245. When plaintiff submitted his claim for benefits he argued that the administrator should use a higher salary to calculate the amount due than the salary the administrator applied. Id. at 244. And when plaintiff received his first disability benefit check in April, 2005, he refused to cash that check or any subsequent checks because the amount was less than he believed due, returning them all and calling the administrator to request that it stop sending him checks. Id. The court held that plaintiff's claim accrued when he received the first check which, while not a "complete repudiation" or "formal denial of all LTD benefits," was nonetheless a "clear repudiation" of plaintiff's assertion that he was entitled to more than the amount actually awarded. Id. at 245. In an issue of first impression in the First Circuit, the court rejected plaintiff's argument that the plan should be treated as an installment contract with a new accrual date starting a new limitations period for each underpayment. Id. at 246. This accrual theory was "inapplicable where the alleged wrong is based on an alleged one-time miscalculation of ERISA benefits or which the plaintiff is aware." Id.

Merit Const. Alliance v. City of Quincy, 2014 WL 3457605 (1st Cir. July 16, 2014) (preemption)

The First Circuit held that a city ordinance requiring contractors to establish apprentice training programs was preempted by ERISA. The issue before the court was whether the municipal law had a sufficient "connection with" apprenticeship ERISA welfare benefit plans to support preemption. Id. at *4. The court framed the "connection with" analysis as a continuum: on one end are state laws that merely exert an indirect economic influence on plans, which are not preempted, whereas on the other end of the spectrum are state statutes mandating employee benefits structures or administration, which are preempted. Id. Here, the city ordinance required all contractors to operate state-approved apprentice training programs, which imposed numerous conditions on the programs' terms and conditions, recordkeeping, and reporting. Id. Concluding that the law went "far beyond simply influencing" ERISA governed programs because it mandated the structure of the apprenticeship programs and specified how the structure must be administered, the court held that the municipal law was preempted. Id.

Second Circuit

Liberty Mut. Ins. Co. v. Donegan, 746 F.3d 497, 59 EB Cases 1855 (2d Cir. 2014) (preemption)

The Second Circuit reemphasized that ERISA preempts state laws that subject plans to conflicting state regulations regarding their primary operations. At issue was a Vermont statute requiring self-insured employee health plans to report claims data and "information relating to health care" that would be used to populate a state database. Id. at 500. The court acknowledged legislative history showing that ERISA preemption "was intended to eliminate the threat of a multiplicity of conflicting or inconsistent state laws, and to achieve broad preemptive effect in the areas of record-keeping, reporting, and disclosure" and set forth an overview of Supreme Court ERISA preemption jurisprudence. Id. at 503-08. The court distinguished state laws that have only an indirect economic effect on ERISA plans, which "lack sufficient connection with or reference to an ERISA plan to trigger ERISA preemption," from those that subject plans to inconsistent state obligations or tend to control or supersede central ERISA functions, which are preempted. Id. at 507. The court held that "reporting" is a "core ERISA function [that must be] shielded from potentially inconsistent and burdensome state regulation," and thus the Vermont statute's provisions governing plans' reporting requirements were preempted.  Id. at 508-10.

Wurtz v. Rawlings Co., LLC, 2014 WL 3746801 (2d Cir. July 31, 2014) (preemption)

The Second Circuit held that ERISA did not preempt state law claims brought by plan participants seeking to enjoin insurers from obtaining reimbursement of medical benefit payments from plaintiffs' tort settlements. N.Y. Gen. Oblig. Law section 5-335 states that a personal injury settlement "does not include any compensation for the cost of health care services" or other losses that "are obligated to be paid or reimbursed by a benefit provider" and that benefit providers have no "right of subrogation or reimbursement against any such settling party." 2014 WL 3746801, at *1. The Second Circuit found that section 5-335 was "saved" from express preemption as a law that "regulates insurance" under ERISA section 514(b)(2). Id. at *5. First, the court held that statute was "specifically directed" at insurance even though it regulates not only insurers but also all other benefit providers, "including self-funded employer plans." Id. Second, section 5-335 substantially affects risk pooling because it requires insurers to bear the risk of medical expenses whether or not the insured settles or goes to trial. Id. Applying the two-pronged test articulated in Aetna Health Inc. v. Davila, 542 U.S. 200 (2004), the Second Circuit held ERISA did not completely preempt section 5-335. First, plaintiffs' claim that they were entitled to retain their tort settlements could not be construed as a colorable claim for benefits under section 502(a)(1)(B) but instead were based on section 5-335. 2014 WL 3746801, at *6. Second, the claims did not derive from the plaintiffs' plans but rather arose from an independent legal duty imposed by section 5-335. Id. at **6-8. 

Third Circuit

CardioNet, Inc. v. Cigna Health Corp., 751 F.3d 165, 58 EB Cases 1001 (3d Cir. 2014) (arbitration of benefit claims)

The Third Circuit held that derivative ERISA claims brought by providers of devices used to diagnose heart conditions were not subject to an arbitration clause in the parties' administrative services agreement. The plaintiffs brought ERISA claims as the assignees of plan participants who were denied reimbursement for the cost of services after Cigna announced that it would no longer cover the service. Id. at 170. The district court compelled arbitration, and on appeal, the Third Circuit examined whether the plaintiffs' claims fell within the scope of the arbitration clause, which required arbitrating disputes "regarding the performance or interpretation" of the agreement. Id. at 176. The court first found that the allegations underlying the plaintiffs' ERISA claims did not concern the "performance or interpretation" of the agreement because the agreement did not address Cigna's obligation to cover the service; rather, the plan governed such determinations. Id. at 177. Although the agreement required Cigna to reimburse providers for "covered services," that language did not create a "contractual duty" to provide specific services, and claims challenging the denial of services could only be brought as ERISA claims outside of the agreement. Id. Second, because plan participants had the right to pursue ERISA claims in court that right did not "dissipate" simply because the claims were brought by the assignee providers. Id. at 178. Instead, the right to litigate "travel[ed] with the claim," and the providers had standing to sue by assignment. Id. Thus, the Third Circuit vacated the order compelling arbitration. Id. at 179.

Fourth Circuit

Tatum v. RJR Pension Inv. Comm., 2014 WL 3805677 (4th Cir. Aug. 4, 2014) (breach of fiduciary duty claims)

The Fourth Circuit affirmed the district court's ruling that defendants breached their fiduciary duties by failing to properly investigate the propriety of liquidating two investment funds that held Nabisco company stock following the separation of Nabisco and R.J. Reynolds Tobacco Company. Following a bench trial, the district court found that a "working group" that made the decision to liquidate the funds met for no more than an hour and their decision "was made with virtually no discussion or analysis and was almost entirely based upon the assumptions of those present and not on research or investigation." Id. at *8. There was "no evidence that the [working group] ever considered an alternative [to divestment within six months]" or discussed "any other strategy to minimize a potential immediate loss to participants or any potential opportunity for gain." Id. Instead, the "driving consideration" was the "general risk of a single stock fund," as well as "the emphasis on the unconfirmed assumption that RJR would no longer be exempt from the ERISA diversification requirement because the funds would no longer be employer stocks." Id.However, the evidence showed that "no one researched the accuracy of that assumption, and it was later determined that nothing in the law or regulations required that the Nabisco Funds be removed from the Plan." Id.

Next the court affirmed the district court's decision that after the plaintiff established a breach of fiduciary duty and a loss to the plan, the defendant "assumed the burden (that is, the burden of production and persuasion) to show that the decision to remove the Nabisco stock from the plan was objectively prudent." Id. at *11. However, the court reversed and remanded for further consideration the district court's decision that the defendant carried this burden. The district court concluded that the evidence did not "compel a decision to maintain the Nabisco Funds in the Plan," and that a prudent investor "could have" concluded that it was prudent to liquidate the funds. Id. at *13. The Fourth Circuit explained that this "could have" test was incorrect; to carry its burden, a breaching fiduciary must prove by a preponderance of the evidence that "despite its imprudent decision-making process," the ultimate investment decision was "objectively prudent," meaning that "a hypothetical prudent fiduciary would have made the same decision anyway." Id. at *12 (emphasis added by court). Citing the Supreme Court's decision in Knight v. Comm'r, 552 U.S. 181, 187-88 (2008), the court noted that the distinction between "would" and "could" is "both real and legally significant," with "could" describing "what is merely possible, while "would" describes "what is probable." 2014 WL 3805677, at *13.

Judge Wilkinson in dissent disagreed with the objective prudence standard articulated by the majority. Id. at *25. According to Judge Wilkinson, the "would have" standard results in liability for a prudent decision if it was not the most likely prudent decision, even though objective prudence does not "dictate one and only one investment decision" and there often is more than one prudent decision. Id.

Fifth Circuit

Central States, Se. & Sw. Areas Health & Welfare Fund v. Health Special Risk, Inc., 756 F.3d 356, 51 EB Cases 2841 (5th Cir. 2014) (equitable relief under section 502(a)(3))

The Fifth Circuit held that claims for reimbursement of medical costs the plaintiff fund characterized as equitable in fact sought monetary damages and constituted legal relief, which is unavailable under ERISA section 502(a)(3). The plaintiff fund brought suit against insurers seeking reimbursement of sums paid to medical care providers on behalf of insureds covered by both the plaintiff and defendants. Id. at 358. The fund argued that it sought equitable relief, including an equitable lien and declaratory judgment that defendants were liable for reimbursement. Id. at 360-61. The court rejected the fund's argument that the plan created the type of equitable lien that allowed recovery of money damages because its terms made the defendants the primary insurers for medical payments and granted the fund the right to seek reimbursement. Id. at 365. The fund failed to prove that an equitable lien was established because it could not trace its claim to a particular source, as required, but rather sought reimbursement for amounts paid from its own pocket. Id. at 366. The court further found that the fund's request for declaratory judgment was essentially a disguised demand for payment of "unpaid present and future covered medical expenses," which constituted legal relief not authorized by section 502(a)(3). Id. at 368. The Fifth Circuit confirmed that simply framing legal claims for monetary relief as equitable is insufficient and unavailing, and concluded that the fund's claims requested monetary damages and sought relief not typically available in equity.

Tolbert v. RBC Capital Mkts. Corp., 2014 WL 3408230, 58 EB Cases 2037 (5th Cir. July 14, 2014) (top hat plan)

The Fifth Circuit held that a deferred compensation plan expressly designed as a "top-hat" plan was an "employee pension benefit plan" governed by ERISA. The plan allowed the defendant's employees who received annual bonuses and made other income deferrals to defer a portion of their annual pay. Id. at *2. The plaintiffs forfeited some benefits under the plan when ending their employment and sued for breach of fiduciary duty, arguing that the plan was not a valid "top-hat" plan and the forfeiture violated ERISA. Id. at *1. In examining whether the plan constituted an "employee pension benefit plan," the question before the court was whether, "the plan (i) "provides retirement income to employees" or (ii) "results in a deferral of income by employees for periods extending to the termination of covered employment or beyond." Id. at *3. The court noted that the first prong "'patently refer[s] only to plans designed for the purpose of paying retirement income whether as a result of their express terms or surrounding circumstances.'" Id. Applying that prong, the Fifth Circuit found that the plan did not "provide retirement income" because it expressly provided that benefits would be paid while participants were still employed. Id. at *4. With regard to the second prong, the court stated that the relevant inquiry is "whether the plan 'results in a deferral of income by employees for periods extending to the termination of covered employment or beyond'" rather than whether the plan's "primary purpose" was to provide deferred retirement income. Id. The Fifth Circuit concluded that the plan's express terms resulted in a deferral of income by employees until retirement or periods beyond termination of employment. Id. at *6.

Sixth Circuit

Cultrona v. Nationwide Life Ins. Co., 748 F.3d 698, 57 EB Cases 2549 (6th Cir. 2014) (standard applicable when requesting plan documents)

The Sixth Circuit held that plan participants requesting documents from plan administrators are required to provide clear notice of the documents they seek, adopting the standard followed by the Second, Fifth, Seventh and Tenth circuits. The plaintiff sought benefits under an accidental-death policy, and upon denial of her claim, requested all documents supporting the benefits determination. Id. at 703. The defendant failed to timely provide a copy of the policy, and the district court awarded a statutory penalty for the failure. Id. at 706. In reviewing the decision, the Sixth Circuit adopted the "clear-notice" standard, which requires claimants requesting plan documents under ERISA section 104(b)(4) to provide "clear notice to the plan administrator of the information the desire." Id. at 707. The court concluded that this standard "strikes a reasonable balance between a claimant's right to timely receive plan-related documents upon request and the civil penalties facing plan administrators under section 1132(c) for excessive delay in providing those documents." Id.

Moyer v. Metro. Life Ins. Co., 2014 WL 3866073 (6th Cir. Aug. 7, 2014) (accrual of statute of limitations)

The Sixth Circuit held that an administrator's failure to include in the final claim denial letter notice of the plan's time limits for seeking judicial review barred application of that limitations period. After two years of payments, the administrator terminated plaintiff's disability benefits. Id. at *1. The administrator denied plaintiff's appeal of this decision and while the denial letter included notice of the right to seek judicial review it failed to include notice of the three-year contractual time limit for filing suit. Id. The summary plan description did not provide notice of either the right to judicial review or the applicable time limits for seeking review and the plan document, which contained the relevant limitations period, was only provided to participants upon request. Id. The Sixth Circuit agreed with the plaintiff's argument that the failure to provide notice of the time limit in the denial letter justified tolling of the contractual limitations period. Id. at *2. The court noted that 29 C.F.R. section 2560.503-1 requires that benefit denial letters include a "description of the plan's review procedures and the time limits applicable to such procedures, includinga statement of the claimant's right to bring a civil action . . . following an adverse benefit determination on review." Id. (emphasis added by court). According to the court, a "claimant's right to bring a civil action is expressly included as a part of those procedures for which applicable time limits must be provided." Id. The failure to include the applicable time limits meant that the administrator was not in "substantial compliance" with ERISA section 503 and was "inconsistent with ensuring a fair opportunity for review." Id. at *4.

Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Mich., 751 F.3d 740, 58 EB Cases 1201 (6th Cir. May 14, 2014) (fiduciary status)

The Sixth Circuit affirmed that defendant breached its fiduciary duty by falsely inflating hospital claims with hidden surcharges. Addressing whether the defendant third-party administrator was a fiduciary, the threshold issue in the case, the court explained that in the Sixth Circuit, entities exercising any authority or control over plan assets are fiduciaries under ERISA. Id. at 744 (emphasis in original). The defendant argued it was not a fiduciary by virtue of collecting administrative fees per its contract with the plaintiff. Id. The court noted that simply adhering to a contractual term does not give rise to fiduciary status, but a contract granting discretion in connection with the right to retain funds confers fiduciary status. Id. Here, the evidence showed that the defendant had discretion over the administrative fees charged to clients and discretionarily imposed the surcharges at various times and amounts on certain clients. Id. at 745. The defendant also argued that the fees were company assets rather than plan assets. Id. Although the fees were paid in part from health care contributions deducted from employees' paychecks, which the court found clearly constituted plan assets, the employer's contributions posed a thornier question. Id.  The court ultimately held that the employer portion also constituted plan assets because the SPD reflected the company's intent to place plan assets with the defendant in its capacity as third-party administrator, who held the funds "in trust" for the purpose of playing beneficiaries' claims and administrative costs. Id. at 746. Accordingly, the defendant functioned as an ERISA fiduciary. Id. at 747.

DiGeronimo Aggregates, LLC v. Zemla, 2014 WL 3953725 (6th Cir. Aug. 14, 2014) (multi-employer withdrawal liability)

The Sixth Circuit refused to recognize a federal common law claim for negligence in managing plan assets. In DiGeronimo, the plan trustees terminated a pension fund by initiating a mass withdrawal of substantially all of its contributing employers and sought to impose reallocation liability against certain employers that withdrew from the fund before the termination. Id. at *1. The companies filed suit, arguing that the trustee negligently managed plan assets and caused increased withdrawal liability. Id. The plaintiffs asked the court to recognize a negligence cause of action in connection with managing plan assets, but the Sixth Circuit found that such a claim would not meet any of the three exceptions to the courts' authority to create federal common law in the ERISA context: (1) when the statute is silent; (2) there is an "awkward gap in the statutory scheme"; or (3) federal common law is essential to promote ERISA policies. Id. at *3. First, the court found that ERISA was "not silent on who holds a claim against trustees for negligent management of plan assets: participants and beneficiaries do." Id. at *4. Second, the court determined there was no gap to close because "trustees' plan management duties flow to participants and beneficiaries," not contributing employers, which indicated that Congress did not intend to allow contributing employers to sue for negligence. Id. Finally, the court found that permitting employers to sue trustees for negligent management was not essential to the statute's policy of ensuring that workers receive the pensions promised to them. Id. at *5.

United Steel, Paper & Forestry, Rubber, Mfg. Energy, Allied Indus. & Serv. Workers Int'l Union, AFL-CIO-CLC v. Kelsey-Hayes Co., 750 F.3d 546, 57 EB Cases 2745 (6th Cir. 2014) (retiree health benefits)

The Sixth Circuit upheld a decision that a company violated collective bargaining agreements ("CBAs") by unilaterally modifying retiree health benefits by switching from fully-paid group insurance coverage to health reimbursement accounts ("HRAs"). The plaintiffs retired under three CBAs, which all stated that the company "shall contribute the full premium or subscription charge" for retirees' health care coverage. Id. at 549. The company discontinued group health care coverage and instituted HRAs that functioned as a voucher system allowing the company to make a one-time contribution followed by contributing annual credits for each retiree, who would purchase his or her own insurance from various providers. Id. at 550. Through this system, retirees were responsible for any health care costs in excess of the company's contributions. Id. The Sixth Circuit reiterated that the inference articulated in UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), "was not a legal presumption that shifted the burden to the employer to disprove that benefits vested," but it "requires a nudge in favor of vesting" in close cases. Id. at 552. The court also clarified its recent decisions in Reese v. CNH Am. LLC, 574 F.3d 315 (6th Cir. 2009), and Reese v. CNH Am. LLC, 694 F.3d 681 (6th Cir. 2012), the most recent Sixth Circuit jurisprudence regarding vested retiree medical benefits, stating that the Reese cases followed Yard-Man in applying ordinary principles of contract interpretation and "ground[ed] its rationale in the language and conduct of the parties." Id. at 554. In applying these rules, the court concluded that the CBAs unambiguously "established a vested right to lifetime health care benefits" because in them the company promised the "continuance" of health care coverage that a retiree had at the time of retirement and for which the company would pay the full premium. Id. The court further found that the implementation of the HRAs breached the CBAs because the HRAs were "simply not what the parties bargained for in the first instance" because the retirees had fully-funded group insurance at the time they retired, which is different than health care vouchers that are "essentially cash," the HRAs shifted "significant risks" to the retirees, and the company refused to fund the HRAs after 2013. Id. at 555.

Seventh Circuit

Fish v. GreatBanc Trust Co., 749 F.3d 671 (7th Cir. 2014) (procedural prudence)

The Seventh Circuit reversed a decision that ERISA's statute of limitations barred claims for breaches of fiduciary duty related to a transaction that resulted in devalued company stock. ESOP plan participants sued, claiming that the defendant failed to engage in a prudent process to evaluate a proposed buy-out transaction in which the company borrowed money to buy all the company stock except the shares owned by the ESOP, which resulted in the company's bankruptcy and worthless company stock. Id. at 674. Although the defendant hired a financial advice firm to aid in evaluating the transaction, the court observed that "[a]n independent appraisal [by the financial advisor] is not a magic wand that fiduciaries may simply wave over a transaction to ensure that their responsibilities are fulfilled." Id. at 680. The defendant argued that the plaintiffs' claims were time-barred by ERISA's statute of limitations, which prohibits actions commenced more than three years after the earliest date on which the plaintiff had actual knowledge of the breach. Id. at 678. The court stated that whether the defendant properly analyzed and approved the transaction depended on its process for evaluating the fairness of the transaction, and a plaintiff "does not have actual knowledge of the procedural breach of fiduciary duties unless and until she has actual knowledge of the procedures used or not used by the fiduciary." Id. at 681. Acknowledging the importance of the procedural prudence requirement, the court noted that the district court "overlooked the procedural dimension of a fiduciary's duties under ERISA and the ability of a plaintiff to show she was harmed by a fiduciary's substantive decision precisely because the fiduciary violated ERISA by failing to comply with its procedural obligations." Id. at 681-82. The court found that the proxy materials provided to participants failed to disclose the processes used by the fiduciaries to conduct due diligence and analyze whether the buy-out transaction was fair. Id. at 682-83. Further, although a large number of participants left the company and cashed out of the ESOP, this exodus was insufficient to trigger the limitations period. Id. at 683-84. Therefore, the plaintiffs' claims were not time-barred. Id. at 689.

Cent. States, Se. & Sw. Areas Pension Fund v. CLP Venture LLC, 2014 WL 3728166 (7th Cir. July 29, 2014) (withdrawal liability)

The Seventh Circuit held that companies that were majority-owned by one individual were under common control with the withdrawing employer and therefore jointly and severally liable for withdrawal liability. GEOBEO Inc. entered into a consent judgment requiring payment of $1.3 million in withdrawal liability to the fund, which later sought to hold another group of companies liable for the judgment, arguing that the companies were commonly owned by George Cibula, who purportedly held a majority interest in GEOBEO. Id. at *1. The court stated that 80 percent ownership constitutes a "controlling interest" for purposes of the Multiemployer Pension Plan Amendments Act of 1980. Id. at *2. Cibula owned 73 percent of GEOBEO's shares and held the right to vote the remaining 27 percent of shares and demand the release of those shares from escrow. Id. Although the defendants argued that Cibula only owned 73 percent of GEOBEO because he never exercised his right to demand transfer of the remaining shares, the court rejected this argument, concluding that "because Cibula gained the right to acquire the stock under the assignment, he is considered to own that stock for purposes of the MPPAA." Id. The fact that another party retained the right to reclaim these shares in the event of default did not alter the analysis because "we are concerned with who had voting power." Id. Further, the court found that the defendant companies qualified as "trades" or "businesses" rather than passive investments. Id. at *3-4. The court noted that the companies were all "formally registered business entities," meeting the two-prong test for engaging in activity for the primary purpose of income or profit with continuity and regularity because the companies paid over $250,000 in management fees for operating the businesses, claimed income deductions on tax returns, were issued employer identification numbers by the federal government, and contracted for legal, managerial, and accounting services. Id.

Eighth Circuit

Tussey v. ABB, Inc., 746 F.3d 327, 58 EB Cases 1085 (8th Cir. 2014) (breach of fiduciary duties re: investment options, revenue sharing, discretion to interpret plan, and float)

The Eighth Circuit affirmed in part, reversed in part and remanded for further consideration the district court's decision that plan fiduciaries and the plan service provider committed various breaches of fiduciary duty with respect to 401(k) plan fees and investments. First, the court held that when a plan grants an ERISA fiduciary discretion to interpret the terms of the plan, that interpretation is entitled to deference. Id. at 334-35. The Eighth Circuit rejected the plaintiffs' argument that courts only owe deference to benefit claim determinations and should review other determinations, such as those regarding plan investments, de novo. Id. Second, the court affirmed the district court's decision that plan fiduciaries breached their fiduciary duties by failing to monitor and control recordkeeping fees and by paying excessive revenue sharing from plan assets to the service provider to subsidize other corporate services. The district court found that the plan fiduciaries failed to (1) calculate the amount the plan was paying for recordkeeping through revenue sharing (2) determine whether the service provider's pricing was competitive (3) adequately leverage the plan's size to reduce fees and (4) prevent the subsidization of administration costs of corporate services with plan assets. Id. at 336. The Eighth Circuit concluded that these factual findings had "ample support" in the record and that the legal conclusion that the fiduciaries breached their duties was not in error. Third, the Eighth Circuit vacated and remanded for further consideration the district court's conclusion that the plan's fiduciary breached their fiduciary duties with respect to the decision to change investment options offered by the plan. The Eighth Circuit reasoned that the district court's opinion showed "clear signs of hindsight influence" and that the reasonableness of the fiduciaries' investment decisions should be analyzed based on what they knew at the time those decisions were made, not based on an investment's subsequent performance. Id. at 338. Moreover, it was "not manifest" the district court afforded any deference to the fiduciaries' determinations under the plan documents. The Eighth Circuit was "far from certain the district court would have arrived at the same conclusions" had it applied the required deferential standard of review in evaluating whether the fiduciaries, at the time they made their investment decisions, breached their fiduciary duties. Id.Finally, the Eighth Circuit held that Fidelity did not breach its fiduciary duties by retaining float income. The court agreed with the argument that, as a matter of "basic property rights," the plan investment options owned the float and bore the risk of loss with respect to the float accounts and were entitled to any benefits of ownership, including any float income.

Windstream Corp. v. Da Gragnano, 757 F.3d 798, 58 EB Cases 1965 (8th Cir. 2014) (retiree medical benefit vesting)

The Eighth Circuit held that retiree medical benefits were not vested because neither the parties' agreement nor their conduct indicated intent to vest benefits. When the defendant company reduced its monthly premium contributions to retirees' medical benefits, the retirees argued that they had a right to health benefits guaranteed for life that could not be unilaterally modified. Id. at 803. The Eighth Circuit was not persuaded by the retirees' argument that the parties' agreement stating that the company "will" pay a portion of retiree's health insurance premiums promised that it would do so permanently. Id. at 804. The retirees also argued that the parties' bargaining history indicated their intent to vest the benefits because the company sought the union's consent to change the benefits, which showed that it understood consent was required before changing the benefits. Id. The court rejected that argument, concluding that the union's permission was unnecessary because retirees are not represented by the union as they are no longer actively employed or part of the bargaining unit. Id. Further, there was no evidence that the company represented to employees that it would provide lifetime benefits. Id. at 805.

Silva v. Metro. Life Ins. Co., 2014 WL 3896156 (8th Cir. Aug. 7, 2014) (equitable relief available under Section 502(a)(3))

The Eighth Circuit aligned itself with the Second, Fourth, Fifth, and Seventh circuits in holding that plaintiffs may pursue both ERISA sections 502(a)(1)(B) benefit claims and (a)(3) claims for equitable relief in the same suit. The plaintiff beneficiary sought to recover supplemental life insurance benefits pursuant to a policy the defendant provided to the plaintiff's son before his death, but the defendant denied the claim, arguing that the son never properly submitted evidence of insurability to enroll in the plan even though it deducted premiums from his paycheck. Id. at *1. The plaintiff filed a benefits claim under ERISA section 502(a)(1)(B), and subsequently moved to amend his complaint to add section 503(a)(3) claims, which the district court denied as futile because section 501(a)(1)(B) provided an adequate remedy. Id. at *4. In determining whether the section 502(a)(3) claim was futile, the Eighth Circuit examined the three equitable claims available under section 502(a)(3) after CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011). 2014 WL 3896156, at **7-10. The court joined the Second, Fourth, Fifth and Seventh circuits in ruling that after Amara section 502(a)(3) provides "make-whole" monetary relief in the form of equitable surcharge, reformation of the contract terms or equitable estoppel. Id. at *12. The court further ruled that a claim for equitable relief is not susceptible to a motion to dismiss simply because the plaintiff also asserts a section 502(a)(1)(B) claim for benefits, concluding that sections 502(a)(1) and 502(a)(3) claims are alternative pleadings for the same relief rather than providing for duplicate recoveries. Id. at *14. Consequently, the court reversed and remanded for consideration of the plaintiff's section 502(a)(3) claim. Id. at *15.

Ninth Circuit

Gabriel v. Alaska Elec. Pension Fund, 755 F.3d 647, 58 EB Cases 1633 (9th Cir. 2014) (equitable relief available under Section 502(a)(3))

The Ninth Circuit addressed the scope of remedies available to plaintiffs seeking "appropriate equitable relief" under ERISA § 502(a)(3), holding that pension benefits were not recoverable under this statutory provision. The defendant terminated pension payments to the plaintiff upon discovery that he failed to meet vesting requirements although it mistakenly informed him he was eligible and entitled to payment. Id. at 654. The plaintiff brought claims for breach of fiduciary duties under § 502(a)(3) seeking equitable relief. Id. The Ninth Circuit clarified that only three forms of traditional equitable relief are available under § 502(a)(3): equitable estoppel, reformation of the plan, and surcharge. Id. at 656-58. The court held that the plaintiff failed to establish equitable estoppel because the defendant's benefits calculation letter merely incorrectly calculated his benefits, but did not interpret the plan, which is required for estoppel. Id. at 663. The plaintiff was not entitled to equitable reformation to remedy the misleading information because the plaintiff sought to reform the plan's administrative records, which the court determined did not constitute part of the plan, and thus reformation of these records did not reflect the parties' true intent in entering the plan. Id. at 664. Finally, the court held that surcharge is limited to either disgorgement of profits a fiduciary made from a breach or compensation for loss the breach caused the trust estate. Id. at 665. Here, the plaintiff could not prove either because he did not argue that the fiduciaries were unjustly enriched by preventing him from receiving benefits under the plan, and the remedy of pension payments would deplete the trust rather than restore it. Id. The court soundly rejected the plaintiffs' argument that the remedy of surcharge is a vehicle for make-whole relief. Id.

Gordon v. Deloitte & Touche, LLP Group Long Term Disability Plan, 749 F.3d 746, 58 EB Cases 1065 (9th Cir. 2014) (accrual of statute of limitations)

The Ninth Circuit held that ERISA's statute of limitations is not reset by reconsideration of a benefit denial. In Gordon, the plaintiff's long term disability benefits were terminated as a result of a two year limitation in the plan, and the plaintiff did not timely appeal the administrative denial of her claim. Id. at 749. Subsequently, at the request of the California Department of Insurance, the administrator reevaluated its determination but ultimately upheld the denial. Id. at 750. The plaintiff then sued but the court concluded that her claims were barred by the statute of limitations. Id. at 751. The court reasoned that the plaintiff's claim accrued no later than the date that her administrative appeal right expired, and that the insurer's decision to reopen the claim did not alter the accrual date. Id.

Eleventh Circuit

Fuller v. SunTrust Banks, Inc., 744 F.3d 685, 57 EB Cases 2089 (11th Cir. 2014) (statute of limitations)

The Eleventh Circuit affirmed the dismissal of ERISA claims challenging the use of the defendant's affiliated mutual funds in a company stock plan. The plaintiff alleged that the defendant selected and retained proprietary mutual funds that underperformed and incurred excessive fees that benefitted the defendant rather than plan participants in violation of the defendant's fiduciary duty. Id. at 688. The court held that ERISA's six-year statute of limitations barred the plaintiff's claims because the benefits plan committee's selection of the proprietary funds occurred more than six years before the plaintiff filed suit. Id. at 700. In addition, the court found that the statute of limitations barred plaintiff's claim that the committee imprudently failed to remove the poor-performing funds because this claim was "identical to the allegations concerning the [fund] selection process" and, at its core, constituted "a challenge to the initial selection" of the funds. Id. at 701.

Finnerty v. Stiefel Labs., Inc., 756 F.3d 1310 (11th Cir. 2014) (blackout provisions)

The Eleventh Circuit affirmed a $1.5 million award to a former employee who owned shares of a vested employee stock bonus plan where the employer's nondisclosure caused the plaintiff to sell his stock at a low price just before the company merged with a pharmaceutical giant and the stock price soared. Although immaterial to the outcome, the court explained that ERISA's blackout provisions, which restrict the ability of plan administrators to impose "blackout" periods or impede plan participants' ability to obtain distributions for more than three consecutive business days, do not affect a company's obligation to honor a "put" option on shares that have been distributed. Id. at 1322. An employer may be obligated to honor a "put" even during a "blackout" period, and the court noted that the defendant was "wrong to suggest" that the plan's ability to impose a "blackout" was relevant to whether the defendant could lawfully refuse to repurchase the plaintiff's stock once he exercised his "put" option. Id.

District of Columbia Circuit

Clark v. Feder Semo & Bard, P.C., 739 F.3d 28, 57 EB Cases 1497 (D.C. Cir. 2014) (reliance on counsel in distributing benefits)

The D.C. Circuit joined the Fifth, Sixth, Eighth, and Ninth Circuits in holding that ERISA allows fiduciaries to rely on the advice of legal counsel in "appropriate circumstances." A plan participant alleged that plan administrators breached their fiduciary duties in connection with allocating benefits to participants at the plan's termination. Id. at 29. The court held that ERISA permits plan fiduciaries to rely on the advice of counsel when reasonably justified under the circumstances, which is judged at the time of the challenged decision. Id. at 31-32. Here, the defendants were justified in relying on counsel's advice regarding the benefit distributions because it was based on a reasonable investigation, accompanied by supporting documentation, and consistent with the fiduciaries' understanding of the plan's structure, none of which signaled a need for the fiduciaries to conduct their own investigation into the issue. Id. at 33.

Stephens v. Pension Ben. Guar. Corp., 755 F.3d 959, 58 EB Cases 1716 (D.C. Cir. 2014) (exhaustion of administrative remedies)

The D.C. Circuit joined the Third, Fourth, Fifth, Ninth and Tenth Circuits in holding that exhaustion of administrative remedies is not required by plaintiffs seeking to enforce statutory ERISA rights rather than contractual rights created by the terms of a plan. Although the Seventh and Eleventh Circuits hold that the exhaustion requirement applies even when plaintiffs assert statutory rights, the D.C. Circuit was persuaded by the Third Circuit's reasoning that exhaustion is not required when bringing claims for breach of fiduciary duty or other statutory claims because federal judges have "expertise in interpreting statutory terms" and "consistent application of the law is best achieved by encouraging a unitary judicial interpretation" of ERISA. Id. at 966. Thus, claimants are required to exhaust administrative remedies when asserting rights granted by a plan, which plan administrators have particular expertise in interpreting, but may resort to courts to interpret statutory terms. Id.