ERISA Denial of Benefits Litigation: Avoiding Procedural and - - PowerPoint PPT Presentation

ERISA Denial of Benefits Litigation: Avoiding Procedural and Substantive Landmines

Navigating Exhaustion of Administrative Remedies, Discovery, Deference to Administrator's Decision, Statute of Limitations, and More

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TUESDAY, MAY 5, 2015

Presenting a live 90-minute webinar with interactive Q&A Byrne J. Decker , Partner, Pierce Atwood, Portland, Maine Medora A. Marisseau, Shareholder, Karr Tuttle Campbell, Seattle Nancy Pridgen, Partner, Monnolly Pridgen, Atlanta

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Medora Marisseau Karr Tuttle Campbell Seattle

ERISA DENIAL OF BENEFITS LITIGATION: AVOIDING PROCEDURAL AND SUBSTANTIVE LANDMINES

mmarisseau@karrtuttle.com

EXHAUSTION OF ADMINISTRATIVE REMEDIES FOR ERISA BENEFIT CLAIMS

Medora Marisseau Karr Tuttle Campbell Seattle

6

Rule: A claimant must first avail herself or himself of a plan’s own internal review procedures before bringing suit. See Heimeshoff v. Hartford Life & Acc. Ins. Co., 134

• S. Ct. 604, 610 (2013).
• Judge-made rule, not part of the ERISA statute.

THE EXHAUSTION RULE

7

Affirmative Defense. Generally considered an affirmative defense (subject to waiver), not jurisdictional. Vaught v. Scottsdale Healthcare Corp. Health Plan, 546 F.3d 620, 627 n.2 (9th Cir. 2008); Crowell v. Shell Oil Co., 541 F.3d 295, 308-09 (5th Cir. 2008); Paese v. Hartford Life & Accident Ins. Co., 449 F.3d 435, 445 (2d Cir. 2006); Metro. Life Ins. Co. v. Price, 501 F.3d 271, 279-80 (3d Cir. 2007).

WAIVER

8

What Is The “Plan”?

A. The SPD is generally not the plan. Cigna Corp. v. Amara, 131

• S. Ct. 1866, 1878 (2011);

B. Exhaustion requirement found only in SPD generally not enforceable, unless the SPD and Plan are “one and the same.” Eugene S. v. Horizon BCBS of N.J., 663 F.3d 1124 (10th Cir. 2011); C. A plan’s integration clause precludes the administrator from binding insureds to exhaustion requirements in extraneous

• documents. See Pritchard v. MetLife Ins. Co., 2015 U.S. App.

Lexis 6553 (9th Cir. 2015)(group policy and certificate constitute “entire contract”);

EXHAUSTION REQUIREMENT MUST BE BASED ON THE TERMS OF THE PLAN

9

What Is The “Plan”? (continued)

D. But, exhaustion requirement found in a denial review policy, which does not contradict, and is implicitly authorized by the plan, was enforceable. Holmes v.

• Colo. Coalition for the Homeless LTD Plan, 762 F.3d

1195 (10th 2014);

• E. However, denial letter cannot impose exhaustion

requirement because explicit incorporation of extraneous claims procedures is required. Montoya v. Reliance Std. Life Ins., 2015 U.S. Dist. Lexis 26044 (N.D. Cal. 2015).

EXHAUSTION REQUIREMENT MUST BE BASED ON THE TERMS OF THE PLAN

10

Examples:  Requiring exhaustion of ERISA claims appeals “before the claim may be submitted to arbitration” did not require exhaustion prior to filing lawsuit. Montoya v. Reliance Std. Life Ins., 2015 U.S. Dist. Lexis 26044 (C.D. Cal. 2015).  “Claimant may request a review of this determination” and “failure to request a review may constitute failure to exhaust” did not unambiguously require exhaustion. Id.  Following a decision on 1 st level review, “We will also advise you of your further appeal rights, if any,” unambiguously allowed the Plan to enforce 2d level review, when communicated to the insured. Holmes, supra.

EXHAUSTION REQUIREMENT MUST BE UNAMBIGUOUS

11

• A. Claims procedures cannot require claimant to

file more than two appeals of an adverse benefit decision before bringing a civil action;

• B. Plan cannot assert that a claimant has failed to

exhaust administrative remedies because the claimant did not pursue a voluntary level of appeal provided by the plan;

• C. Voluntary levels of appeal may be pursued only

after exhaustion of mandatory appeals. See 29 CFR § 2560.503-1(c)(2), (c)(3)(i), (iii).

EXHAUSTION REQUIREMENTS ARE LIMITED BY THE ERISA CLAIMS REGULATIONS

12

• A. ACA requirement of external review process does

not require exhaustion of external review. Bailey v. Chevron Corp. Omn. Health Plan, 2014 U.S. Dist Lexis 76782 (C.D. Cal. 2014);29 CFR §2590.715- 2719(b)(2)(i).

• B. Adverse benefit determination definition

expanded to include rescission, whether or not there is an effect on any particular benefit at the time, which is subject to ERISA claims

• regulations. 29 C.F.R. § 2590.715-

2719(b)(2)(ii)(A).

EXHAUSTION AND ACA CLAIMS REGULATIONS

13

A. Internal review procedures are not followed or full and fair review is denied, (29 USC §1133), unless substantial compliance is shown (e.g. violation is de minimus).

• Examples: Untimely denial of claim, providing different denial reasons in 1 st

and 2nd level review decisions, using same decision makers in initial and appeals decisions.

B. Failure to follow the additional ACA internal claims and appeals processes (for non-grandfathered health plans), including full and fair review regulatory requirements and culturally and linguistically appropriate notice. 29 CFR 2590.715- 2719(b)(2)(ii)(F).

• Examples: Failure to notify claimant of right to present evidence/testimony as

part of claims process; failure to included denial code and its meaning, and standards used in decision; failure to provide, upon request, the dx and treatment codes and meanings, associated with an adverse decision.

WHEN ARE CLAIMS “DEEMED EXHAUSTED”?

14

C. Pursuit of administrative remedies would be futile.

• Claimant has burden of proof, but dispute in circuits whether futility

must be affirmatively pled. (Compare Byrd v. MacPapers, Inc., 961 F.2d 157 (11th Cir. 1992)(pleading exhaustion or futility is required) and Coats v. Kraft Foods, 12 F. Supp.2d 862 (N.D. Ill 1998)(granting dismissal based on allegations) with Almont Am. Sur. Ctr., LLC v. United Health Grp., 2015 U.S. Dist. Lexis 49954, *164 (dismissal due to failure to affirmatively plead exhaustion or futility improper).

• Evidentiary standard for showing futility (“clear and positive” indication

that it is certain the claim will be denied on appeal)

• Examples: identical claims consistently denied; claims by similarly -situated

claimants consistently denied; evidence of a fixed policy to deny such claims.

WHEN ARE CLAIMS “DEEMED EXHAUSTED”?

15

A. Split in circuits as to whether exhaustion applies to ERISA statutory violations or equitable claims, such as §1132(a)(3).

• Not apply: 3rd, 4th, 6th, 9th, and 10th Circuits: Zipf v. AT&T Co., 799 F.2d 889, 891-

92 (3d Cir. 1986); Smith v. Sydnor, 184 F.3d 356, 364-65 (4th Cir. 1999); Amaro v.

• Cont. Cas. Co., 724 F.2d 747, 749-50 (9th Cir. 1984); Held v. Manuf. Hanover

Leasing Co., 912 F.2d 1197 (10th Cir. 1990)

• Does apply: 7th & 11th Circuits: Lindemann v. Mobil Oil Corp., 79 F.3d 647, 649-50

(7th Cir. 1996)(can apply to statutory claims in the court’s discretion); Mason v.

• Cont. Group Ins., 763 F.2d 1219, 1227 (11th Cir. 1986)
• May apply if statutory claim is based on fiduciary’s interpretation of the plan: 2 nd

& 8th Circuits: Richards v. Fleet Boston Fin. Corp., 427 F. Supp.2d 150, 180 (D.

• Conn. 2006); Burds v. Union Pac. Corp., 223 F.3d 814 (8th Cir. 2000)(unpublished)

B. Is applicable to derivative claims under §1132(a)(2) C. Applies to assignees (providers) of participants and beneficiaries (§1132(a)(1)(B) parties).

WHICH ERISA CLAIMS AND PARTIES DOES EXHAUSTION APPLY TO?

16

STANDARD OF REVIEW

Medora Marisseau Karr Tuttle Campbell Seattle

17

An administrator’s decision will be upheld unless it abuses its discretion (or acts arbitrarily and capriciously).  A decision is not an abuse of discretion or arbitrary and capricious if:

It offers a reasonable explanation based on the evidence, or reasonable interpretation of plan terms, or is based on “substantial evidence.”

DEFERENTIAL REVIEW

18

“What Firestone requires is not ‘review’ of any kind; it is an independent decision rather than ‘review’ that Firestone contemplates.” Krolnik v. Prudential Ins. Co. of Am., 570 F.3d 841 (7th Cir. 2009)(emphasis in original)

DE NOVO REVIEW

19

• A. Does the plan document require deferential

review? (See prior section – “What is The Plan?”)

• B. Is the grant of deference unambiguous?
• C. For insured plans, does state insurance law

prohibit discretionary clauses? See Limitations

• n the Use of Discretionary Clauses: Summary
• f State Laws, AHIP (Aug. 2012)

DOES THE DEFERENTIAL STANDARD APPLY?

20

• D. Is the claims fiduciary operating under a

conflict of interest?

• E. Has the claims administrator committed an

“honest mistake” v. engaged in wholesale and flagrant procedural violations?

Conkright v. Frommert, 559 U.S. 506 (2010); Moyle v. Lib. Mut.

• R. Ben. Plan, 985 Fsupp 2d 1247 (S.D. Cal. 2013).

DOES THE DEFERENTIAL STANDARD APPLY?

21

• F. Is the claim “deemed denied” under a group

health plan due to plan’s failure to adhere to ACA internal claims and appeals processes? 29 CFR §2590.715-2719(b)(2)(F)(claim or appeal is “deemed denied without exercise

• f discretion by fiduciary”).

DOES THE DEFERENTIAL STANDARD APPLY?

22

Thank You

Medora A. Marisseau mmarisseau@karrtuttle.com Karr Tuttle Campbell Seattle, WA www.karrtuttle.com

23

Preemption, Removal and Discovery

ERISA DENIAL OF BENEFITS LITIGATION

STRAFFORD WEBINAR, MAY 5, 2015

Byrne J. Decker Pierce Atwood, LLP bdecker@pierceatwood.com

Preemption and Removal

“Removal based on federal question jurisdiction is governed by the well pleaded complaint rule: jurisdiction is established only if a federal question is presented on the face of the plaintiff's properly pleaded complaint.” Pet Quarters, Inc. v. Depository Trust and Clearing Corp., 559 F .3d 772, 779 (8th Cir. 2009). “There is an exception ... to the well-pleaded complaint rule. When a federal statute wholly displaces the state-law cause of action through complete preemption, the state claim can be

• removed. This is so because when the federal statute completely

pre-empts the state law cause of action, a claim which comes within the scope of that cause of action, even if pleaded in terms

• f state law, is in reality based on federal law. ERISA is one of

these statutes. Aetna Health, Inc. v. Davila, 542 U.S. 200, 207– 08, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004)

25

Preemption and Removal

Express Preemption:

ERISA § 514 (29 U.S.C. § 1144) provides that ERISA “supersedes any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...” - Not Removable.

Complete Preemption:

“[I]f an individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B), and where there is no other independent legal duty that is implicated by a defendant’s actions, then the individual’s cause of action is completely pre- empted by ERISA § 502(a)(1)(B).” See Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004) – Removable.

26

Preemption and Removal

Is the Plan governed by ERISA?

• Governmental Plans
• Church Plans
• Safe Harbor Plans

Look to contract file, public information Employer?

27

Preemption and Removal

Governmental Plans

• Brown v. Reliance Standard Life Ins. Co., No. 2:13-CV-

00261-RDP, 2014 WL 4681522, at *3 (N.D. Ala. Sept. 16, 2014) (holding the plan not governmental). Key facts: Hospital was created by an “arm of the state” (the University of Alabama), created under an enabling statute, the University Board appoints the majority of the Hospital Board, its administrators were not responsible to public

• fficials, the Hospital was financially autonomous, delivering

health-care was not a unique function of government, the State was not responsible for debts/obligations, the Hospital could be sued in its own name, it remits 25% of its income to the state but received no appropriations.

28

Preemption and Removal

Church Plans

• A plan established and maintained for its employees (or

their beneficiaries) by a church or by a convention or association of churches includes a plan maintained by an

• rganization, whether a civil law corporation or otherwise,

the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association

• f churches, if such organization is controlled by or

associated with a church or a convention or association of

• churches. 29 U.S.C. § 1002(33)(C)(i).

29

Preemption and Removal

Church Plans Compare Stapleton v. Advocate Health Network, 2014 WL 7525481 (N.D. Ill. Dec. 31, 2014(plan must be “established by” a church to come within exemption), with Chronister v. Baptist Health, 442 F.3d 648, 653–54 (8th Cir.2006) (suggesting that plan established by affiliated organization may qualify for exemption but holding that disability plan offered by hospital is not church plan based

• n employer's lack of association with or control by

church).

30

Preemption and Removal

Safe Harbor Plans

• ERISA’s safe harbor is intended to exempt from ERISA “those

arrangements in which employer involvement is completely absent.” Vazquez v. Paul Revere Life Ins. Co., 298 F. Supp.2d 727, 731 (E.D. Va. 2001). Thus, in order to obtain safe harbor protection, the employer’s “sole function . . . with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees. . . to collect premiums through payroll deductions . . . and to remit them to the insurer.”

31

Preemption and Removal

Facts to look for:

• Purchasing insurance and choosing insurer
• Determining eligibility
• Dictating provisions
• Contributing to premiums
• Distributing highlights forms/SPD’s
• Serving as Plan Administrator- filing 550’s
• Look to “bundle” voluntary coverage with basic coverage.

See Gross v. Sun Life Assur. Co., 734 F .3d 1, 8-9 (1st Cir. 2013).

32

Preemption and Removal

Recognize potential for conflict with Employer. See McMurtry v. Aetna Life Ins. Co., 273 Fed.

• Appx. 758 (10th Cir. Apr. 11, 2008).

33

Preemption and Removal

Once removed, move to dismiss preempted claims or are they “transmuted” into ERISA claims? Do you want to tee up disputes re potential exemptions? Court has obligation to ensure subject matter jurisdiction jurisdiction and can raise at any stage of the proceedings. Plead diversity in the alternative.

34

Conflict Discovery

Affirmatively offer conflict evidence? Timing?

Local rules/scheduling orders/Initial disclosures Denmark v. Liberty Life Assurance Co., 566 F.3d 1, 10 (1st

• Cir. 2009) (“plan administrators, aware of Glenn, can be

expected as a matter of course to document the procedures used to prevent or mitigate the effect of structural conflicts. . . Conflict-oriented discovery will be needed only to the extent that there are gaps in the administrative record.”). Potentially helpful both re discovery and merits

35

Conflict Discovery

Tee up at Rule 16 Conference or simply object to requests? Depends on jurisdiction. 7th and 9th Circuits most discovery friendly.

• Dennison v. MONY Life Retirement Income Security Plan for

Retirees, 710 F.3d 741, 747 (7th Cir.2013),(“discovery still is not permitted in the run-of-the-mill case in the Seventh Circuit, and the two-part test established in Semien remains instructive. . . plaintiff still must identify a specific conflict or instance of misconduct and make a prima facie showing that there is good cause to believe that limited discovery will reveal a procedural defect.” ).

36

Conflict Discovery

Requests to describe efforts made to mitigate the effects of structural conflict.

37

Conflict Discovery

Topics for conflict affidavit:

• Walling off/separate units
• Compensation structure (no payment for claim outcomes)
• duties to plan
• selection/compensation of medical reviewers/vendor

relationships

• required by DOL regulations
• do not make claim decisions
• vendors choose physicians
• no compensation for content

38

Conflict Discovery

Requests for claims statistics: Holmstrom v. Metro. Life Ins. Co., 615 F.3d 758 (7th

• Cir. 2010) (“Glenn did not invite a ‘batting average’

approach” to assessing structural conflict).

39

Conflict Discovery

Requests for information re other claims: DOL Benefit Claims Procedure Regulation FAQ at D- 12 (other claims files need not be disclosed). Liston v. Unum Corp. Officer Severance Plan, 330 F.3d 19, 26 (1st Cir. 2003)(“expensive inquiry into ‘collateral issues’ . . . [that] would be only the predicate to further dispute about the significance of the information; and it probably would not be conclusive.”).

40

Conflict Discovery

Requests for reviewing physician statistics:

• Medical reviewers do not make claim

determinations;

• Actual determinations based on far more than

medical reviews;

• Medical reviews conducted only when

impairment in question;

• Explain vendor relationships

41

Conflict Discovery

Requests for claims handling guidelines:

• Relevant documents include documents that

“constitute a statement of policy or guidance with respect to the plan concerning the denied treatment option or benefit for the claimant’s diagnosis, without regard to whether such advice

• r statement was relied upon in making the

benefit determination.” 29 C.F.R. § 2560.503-1(m)(8)

42

Conflict Discovery

Requests for claims handling guidelines.

• Glista v. Unum Life Ins. Co. of America, 378

F.3d 113, 123-25 (1st Cir. 2004)(training materials and claims manual provisions with respect to pre-existing condition limitation discoverable because they “interpret. . . the language of the Plan and provid[e]. . . the standard for evaluation

• f

the facts presented.”)

• Generalized claims handling guidelines rarely

even mention “the plan.”

43

Conflict Discovery

Requests for performance evaluations.

• Personal, private, confidential
• publicly identified even if redacted
• difficult to recruit good people
• Explain compensation system
• not dependent on claim outcomes
• If ordered, explain shorthand, abbreviations,

acronyms and job duties.

44

Conflict Discovery

Avoid boilerplate Include case law Every claim is unique Why does the information “matter”?

45

Conflict Discovery

Maintaining Confidentiality of Discovery Materials Will plaintiff fight protective order? Use watermarks Be wary of attempts to share with “co-counsel”

• New affiliations and “of counsel”

relationships

46

Thank You

Byrne J. Decker Partner Pierce Atwood LLP Merrill’s Wharf 254 Commercial Street Portland, ME 04101-1110 (207) 791-1152 bdecker@pierceatwood.com

47

ERISA DENIAL OF BENEFITS LITIGATION

S T R A F F O R D W E B I N A R , M A Y 5 , 2 0 1 5

Limitations Periods, Prejudgment Interest, and Attorneys Fees Post-Hardt Nanc ncy B. Pridg dgen en

MONNOLLY PRIDGEN LLC

Atlanta, Georgia nancy@mplaw-llc.com

Nanc ncy B. Pridgen en MsP Law

Plan-Based Limitation Periods

 Enforced Nationwide if Reasonable



Heimeshoff v. Hartford Life & Acc. Ins. Co., 134 S.Ct. 604 (2013) (3 year contractual limitations period beginning at time proof of loss is due is enforceable as written; rejects argument that accrual only begins when administrative process is over; if unusual/unfair consequences would obtain, courts can apply equitable tolling/ waiver/estoppel doctrines, as needed).



Post-Heimeshoff: University of Wisconsin Hosp. and Clinics Authority v. Southwest Catholic Health Network Corp., 2015 WL 402739, 6 (W.D. Wisc. Jan. 28, 2015) (“[A] contractual limitation requiring an ERISA suit to be commenced within 180 days from a final review notice is reasonable and thus enforceable.”) (internal citations omitted); Russell

• v. Catholic Healthcare Partners Employee Long Term Disability Plan, 577 Fed. Appx. 390,

392 (6th Cir. 2014) (unpublished opinion) (six months found reasonable); Wilson v. Standard Ins. Co., 2014 WL 358722, at *6 (N.D. Ala. 2014) (holding that an 18-month period was reasonable); Tuminello v. Aetna Life Ins. Co., 2014 WL 572367, at *2 (S.D.N.Y. 2014) (nine months “is not an unreasonably short period of time.”). To date, no post- Heimeshoff opinion has invalidated a contractual limitations period on the grounds that it was unreasonably short. But see Nelson v. Standard Ins. Co., 2014 WL 4244048, at *5 (S.D.

• Cal. 2014) (noting re: a motion to dismiss, “Defendant cites no legal authority holding a

period of approximately 100 days . . . constitutes a reasonable period”).

Nanc ncy B. Pridgen en MsP Law

49

Plan-Based Limitation Periods

 Adverse Benefit Determinations Should Contain Limitations Period



See, e.g., Moyer v. Met. Life. Ins. Co., 762 F.3d 503, 506–07 (6th Cir.2014); Ortega Candelaria v. Orthobiologics LLC, 661 F.3d 675, 680 (1st Cir.2011) (“[The employer] was required by [29 C.F.R. § 2560.503–1(g)(1)(iv) ] to provide [the employee] with notice of his right to bring suit under ERISA, and the time frame for doing so, when it denied his request for benefits.”); McGowan v. New Orleans Empl'rs Int'l Longshoremen's Ass'n, 538 Fed.Appx. 495, 498 (5th Cir. 2013) (benefit termination letter substantially complied with 29 C.F.R. § 2560.503–1(g)(1)(iv) because it “mentioned McGowan's right to file suit under § 502(a) of ERISA, as well as the one-year time limit”); Spence v. Union Sec. Ins. Co., 2015 WL 1275308, *3 (D.

• Or. Mar. 15,2015) (“Union Security did not provide adequate notice because the final adverse benefits

determination letter did not inform Spence of his right to bring a civil action or the time in which to do so. Accordingly, this Court will allow for equitable tolling of the contractual limitation period.”) (emphasis added); Kienestra v. Carpenters’ Health and Welfare Trust Fund of St. Louis, 2014 WL 562557, *5 (E.D. Mo.

• Feb. 13, 2014) (analyzing the ERISA claim regulation, 29 C.F.R. § 2560.503-1, the court said the denial letter

met the regulation’s requirements because “it specifically contained the applicable limitation time period within which to commence her suit for judicial review.”).Novick v. MetLife Ins. Co., 764 F.Supp.2d 653, 660– 64 (S.D.N.Y.2011) (concluding that 29 CFR § 2560.503–1(g) requires that the adverse benefit determination letter include the time limits for judicial review); Solien v. Raytheon Long Term Disability Plan, 2008 WL 2323915, at *8 (D. Ariz. June 2, 2008) (“[j]udicial review is an appeal procedure for an adverse benefit determination and is therefore a part of the claim procedures covered by these regulations, especially when the time limit for filing a judicial action is established contractually by the Plan”).



But see, e.g., Wilson v. Standard Ins. Co., 2014 WL 358722, *9 (N.D. Ala. Jan. 31, 2014) (29 C.F.R. § 2560.503-1 “does not require a claims administrator to include in its [denial letter] to a plan participant the deadline for filing a cause of action”); Freeman v. American Airlines, Inc. Long Term Disability Plan, 2014 WL 690207, *4 (C.D. Cal. Feb. 20, 2014) (“a plan administrator was not required to separately inform participants in final denial letters of time limits already contained in the SPD ....”) (citing Scharff v. Raytheon

• Co. Short Term Disability Plan, 581 F.3d 899, 908 (9th Cir. 2009)).

Nanc ncy B. Pridgen en MsP Law

50

Plan-Based Limitation Periods

 Enforce Plan’s Appeal Deadlines!

 Gayle v. United Parcel Serv., Inc., 401 F.3d 222, 226 (4th

Cir.2005) (“[I]nternal appeal limitations periods in ERISA plans are to be followed just as ordinary statutes

• f limitations. Failure to file a request for review within

[a plan’s] limitations period is one means by which a claimant may fail to exhaust her administrative remedies.”).

 Raise Early in Litigation [Rule 12(c)]

Nanc ncy B. Pridgen en MsP Law

51

Statute of Limitations Issues

 Benefits SoL = State Breach of Contract

 Schumacher v. AK Steel Corp. Retirement Accumulation Pension Plan, 711

F.3d 675, 682 (6th Cir. 2013) (pension claim (“whipsaw”); timely under most analogous state SoL); Raymond v. Barry Callebaut, U.S.A., LLC, 2013 WL 150232, *2 (3d Cir. Jan. 15, 2013); Kifafi v. Hilton Hotels Retirement Plan, 701 F.3d 718, 728 (D.C. Cir. 2012); Santaliz-Rios v. MetLife Ins. Co., 693 F.3d 57 (1st Cir. 2012); Serton v. Lockheed Martin Corp., 459 Fed. Appx. 463, 465 (5th Cir. 2012); Muto v. CBS Corp., 668 F.3d 53, 58 (2d Cir. 2012).

 Accrual Issues – exhaustion, discovery

• r earlier? Tolling? Forum State?

 Add-On Fiduciary Breach Claims

 29 U.S.C. § 1113 – three years (actual knowledge) or six years  Estoppel? Cigna v. Amara and its progeny

Nanc ncy B. Pridgen en MsP Law

52

Prejudgment Interest

 Inclusion of % as a plan term.  Rate used by the state in which the

federal litigation is pending.

 The federal post-judgment statute.  Constructed, compensatory rate.  Or, may pick and choose.

Nanc ncy B. Pridgen en MsP Law

53

Prejudgment Interest

 1st: Various. See, e.g., Enos v. Union Stone, Inc., 732 F.3d 45, 50 (1st Cir.

2013) (finding prejudgment interest not abuse of discretion when plan required it: “The district court did not abuse its broad discretion by selecting an interest rate set out in the parties' own agreement.”); Merrimon v. Unum Life Ins. Co., 2013 WL 4854367, *12 (D. Me. Sept. 11, 2013) (setting prejudgment interest at post-judgment rate under 28 U.S.C. § 1961) (opinion vacated on other grounds); Smith v. Jefferson Pilot Financial Ins. Co., 2010 WL 818788, *3 (D.

• Mass. Mar. 5, 2010) (citing .Cottrill v. Sparrow, Johnson & Ursillo, Inc., 100

F.3d 220, 223 (1st Cir.1996)) (“Here, however, the state rate of 12% is too high, and the federal funds rate is too low, especially given the current historically low rates, as it represents a completely risk-free rate of return. A more equitable measure here is 6%, the rough average of the prime rate over the relevant period, which better reflects the value of the unpaid money over time, and thus better serves to make Smith whole and prevent unjust enrichment, compounded annually.”). Nanc ncy B. Pridgen en MsP Law

54

Prejudgment Interest

 2nd: Various. See, e.g., Rood v. New York State Teamsters Conference

Pension and Retirement Fund, ___ F.Supp.3d ___, 2014 WL 4114330, *10 (N.D.N.Y. Aug 20, 2014) (awarding NY statutory 9% rate); accord Levitian v. Sun Life & Health Ins. Co. (U.S.), 2013 WL 3829623, at *12 (S.D.N.Y. July 24, 2013), report and recommendation adopted 2013 WL 4399026 (S.D.N.Y. Aug. 15, 2013); Milgram v. Orthopedic Associates Defined Contribution Pension Plan, 666 F.3d 68, 79 (2d Cir. 2011) (“awarding accumulated earnings and interest under a contract theory” where plan specifically provided for it if QDRO found invalid after distribution made); Novella v. Westchester County, 661 F.3d 128, 150 (2d Cir. 2011) (“[T]he district court's determination that the proper interest rate is 7.5 percent—the Fund's assumed rate of return—was within its discretion … .”) (but vacating award because class de-certified); Trustees of Local 813 Ins. Trust Fund v. Freedom Demolition Inc., 2014 WL 5305983, *6 (E.D.N.Y. Oct. 15, 2014) (awarding prejudgment interest on unpaid contributions based on rate set forth in plan document). Nanc ncy B. Pridgen en MsP Law

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Prejudgment Interest

 3rd: Generally use 28 U.S.C. § 1961 or fashion another rate when the

equities so require. See National Sec. Systems, Inc. v. Iola, 700 F.3d 65, 102-03 (3d Cir. 2012) (“[T]he District Court imposed a modest prejudgment interest rate of 3.91% … borrowed … from the post-judgment interest rate set by 28 U.S.C. § 1961 and applied the average rate from the time the plaintiffs established the plans to the date of the order.”); see also Chaaban v. Criscito, 468 Fed. Appx. 156, 164 (3d Cir. 2012) (fiduciary charged with fraudulently removing money from investment account for own use) (“The use of the VFCP calculator [Voluntary Fiduciary Correction Program online calculator] was an appropriate way for the District Court to resolve the problem of calculating [prejudgment interest, noting other district courts faced with this problem have also used this calculator]); Secretary of Labor v. Doyle, 2014 WL 6747882, * 20 (D.N.J. Dec. 1, 2014) (“The restored losses to the Plan are subject to computation of prejudgment interest by the Secretary to the date of judgment in this case at the § 6621 IRS underpayment rate.”). Nanc ncy B. Pridgen en MsP Law

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Prejudgment Interest

 4th: Various. See West Virginia Carpenters Benefit Trust v. First Const.

Corp., 2014 WL 6390311, *3 (S.D.W.Va. Nov. 17, 2014) (using the “West Virginia Code § 55–6–31, which governs prejudgment interest on judgments and decrees, is 7%” rate for unpaid contributions); Special Agents Mut. Ben. Ass'n v. Cowger, 2014 WL 1048546, *4 (N.D.W.Va. Mar. 18, 2014 (awarding 14% interest, as set forth in one of the plan documents); West Virginia Laborers Pension Trust Fund v. Burkhammer, 2013 WL 3754822, *3 (S.D.W.Va. July 13, 2013) (using post-judgment rate set by 28 U.S.C. § 1961(a) for prejudgment interest); Feldman's Medical Center Pharmacy, Inc. v. CareFirst, Inc., 541 Fed. Appx. 322, 323 (4th Cir. 2013) (1.35% prejudgment interest; approving, describing “award of prejudgment interest in favor of Feldman's was ‘trivial’ since the court rejected Feldman's central theory for calculating the interest owed and ultimately awarded a much lower amount than Feldman’s sought”). Nanc ncy B. Pridgen en MsP Law

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Prejudgment Interest

 5th: Use the prejudgment rate of the state in which the federal

litigation is pending. See Chavarria v. Metropolitan Life Ins. Co., ___ F.Supp.3d ___, 2014 WL 6684925, *6-7 (E.D. La. Nov. 25, 2014) (“Because there is no federal statute governing the rate of pre-judgment interest in ERISA cases, courts ordinarily look to state law. In this case, the Court elects to award prejudgment interest … at the rate provided in Louisiana Revised Statute 13:4202. In this case, that rate is 4% [see https://www.lsba.org/Members/ JudicialInterestRate.aspx].”) (internal citations omitted); Perez v. Bruister, ___ F.Supp.3d ____, 2014 WL 5308404, *44 (S.D. Miss. 2014) (“[W]hen awarding prejudgment interest in an action brought under ERISA, it is appropriate for the district court to look to state law for guidance in determining the rate of interest. Under Mississippi law, a prejudgment interest rate of 8% per annum compounded annually has been held appropriate.”) (internal citations/quotations omitted). Nanc ncy B. Pridgen en MsP Law

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Prejudgment Interest

 6th: Use 28 U.S.C. §1961 rate, courts are but questioning its use.

See Hi-Lex Controls, Inc. v. Blue Cross Blue Shield of Mich., 751 F.3d 740, 751- 52 (6th Cir. 2014) (“In this case, however, the district court did not use a single rate in calculating the prejudgment interest. Instead, the court utilized a blended rate for each of the 17 years during which the Disputed Fees were charged—a range from 6.13% to 0.14%. … Because the district court avoided a mechanical application of § 1961, it did not abuse its discretion in calculating the prejudgment interest award.”); Schumacher v. AK Steel Corp. Retirement Accumulation Pension Plan, 711 F.3d 675, 686 (6th Cir. 2013) (disapproving federal statutory post-judgment rate as too low to compensate plaintiff for loss

• f money, when CPI was 2.75% at same time, remanding for reconsideration);

Harris v. A.D. Vallett & Co., 2014 WL 1280490, *4 (M.D. Tenn. Mar. 27, 2014) (approving IRS underpayment rate from 26 U.S.C. § 6621(a)(2) for funds defendant removed from plan); Helfman v. GE Group Life Assur. Co., 2012 WL 5389842, *4 (E.D. Mich. Nov. 5, 2012) (“Interest is to be calculated pursuant to 28 U.S.C. § 1961, from the date Plaintiff was entitled to the benefits on October 1, 2005, until it was paid on August 23, 2011.”). Nanc ncy B. Pridgen en MsP Law

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Prejudgment Interest

 7th: Use the prime rate. See Curtis v. Hartford Life & Acc. Ins. Co., 2014 WL

4185233, *22 (N.D. Ill. Aug. 20, 2014) (rejecting plaintiff’s argument for Illinois’ 9% prejudgment interest rate, following Gorenstein, applying prime rate of 3.25%, gleaned from http://www.bankrate.com/rates/interest-rates/wall-street-prime- rate.aspx (citing Gorenstein Enters., Inc. v. Quality Care USA, Inc., 874 F.2d 431, 437 (7th Cir. 1989) (suggesting “the prime rate” is appropriate for fixing prejudgment rate “where there is no statutory interest rate” but “cautioning … against the danger of setting [it] too low”)).

 8th: Generally use 28 U.S.C. § 1961, but have leeway to use other

calculation methods. See Werb v. ReliaStar Life Ins. Co., 2014 WL 2881468, *12 (D. Minn. June 25, 2014) (“The Court therefore awards prejudgment interest to be calculated under 28 U.S.C. § 1961.” (citing Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1331 (8th Cir. 1995) (prejudgment interest on ERISA claims is calculated under § 1961)); Johnson v. United of Omaha Life Ins. Co., 2013 WL 3400095, *2 (D.

• Neb. July 5, 2013) (applying federal post-judgment statutory rate); McClelland v.

Life Ins. Co. of North America, 679 F.3d 755, 762 (8th Cir. 2012) ($26,384.11 in prejudgment interest on $250,000 AD&D claim was affirmed). Sheehan v. Guardian Life Ins. Co., 372 F.3d 962, 969 (8th Cir. 2004) (using 28 U.S.C. § 1961(a) post-judgment amount for prejudgment interest awards).

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Prejudgment Interest



9th: Various. See Grosz–Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154, 1164 (9th Cir. 2001) (“The interest rate prescribed for post-judgment interest under 28 USC § 1961 is appropriate for fixing the rate of pre-judgment interest unless the trial judge finds, on substantial evidence, that the equities of that particular case require a different rate.”); James v. Group Life and Health Benefits Plan for Employees of Participating AMR Corp. Subsidiaries, 2014 WL 4684885, *4 (D. Or. Sept. 19, 2014) (“this court declines to impose the historically low rate under 28 USC § 1961 or Oregon's statutory rate of 9% and instead awards an interest rate

• f 5% [the prime rate]”); Sullivan v. Prudential Ins. Co., 2014 WL 3529974, 36 (E.D.Cal. July

15, 2014) (federal post-judgment rate applied); Oster v. Standard Ins. Co., 768 F Supp2d 1026, 1039-40 (N.D. Cal. 2011) (declining to award prejudgment interest at 10% rate set by the California Ins. Code or at low .3% U.S. Treasury Rate, and instead awarding 5% rate); Lested v. Alaris Med. Sys., Inc., 2010 WL 1416544, at *2 (S.D. Cal. Apr. 8, 2010) (awarding prejudgment interest rate of 5% as “a reasonable approximation of the time value of the money improperly withheld”); Blankenship v. Liberty Life Assur. Co. of Boston, 486 F.3d 620 (9th Cir. 2007) (district court made factual findings about appropriate rate of return on money, and awarded prejudgment interest in that rate). But see Gilson v. Macy’s Inc. Long Term Disability Plan, et al., 2014 U.S. Dist. LEXIS 2762 (N.D. Cal. Jan. 9, 2014) (court found that California Ins. Code Section 10111.2 (setting prejudgment interest at 10% per year) is preempted, and not saved from ERISA preemption by the savings clause, because it is not “ ‘specifically directed toward the [insurance industry]’ ”) (citing/quoting Pilot Life v. Dedeaux, 481 U.S. 41, 50 (1987)).

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Prejudgment Interest

 10th: Use the prejudgment rate of the forum state. See Garrett v.

Principal Life Ins. Co., 557 Fed. Appx. 734, 738 (10th Cir. 2014) (medical benefits denied) (“The district court awarded Mr. Garrett prejudgment interest and tied this award to the rate specified by Oklahoma law (15% per annum). In particular, it found ‘that the rate of 15% per year would adequately, but not excessively, compensate [Mr. Garrett] for the lost use of the money ... [and] that this 15% rate is in no way meant to punish [Principal] for any wrongdoing.’ ”); Reiling v. Sun Life Assur. Co. of Canada, 2014 WL 6895951, *9 (D. Kan.

• Dec. 5, 2014) (“[T]he Court orders an award of prejudgment interest at the

[Kansas state] statutory rate of 10% running from July 23, 2012, the date Plaintiff filed its claim for benefits.”); Lynn R. v. ValueOptions, 2014 WL 6832903, *3 (D. Utah Dec. 3, 2014) (prejudgment interest at 10% per annum, Utah’s state rate). Nanc ncy B. Pridgen en MsP Law

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Prejudgment Interest

 11th: Use the prejudgment rate of the forum state. See Williams v.

United of Omaha Life Ins. Co., 2013 WL 5519525 (N.D. Ala. Sept. 30, 2013) (awarding prejudgment interest at 6%, current Alabama statutory rate); Fornell

• v. Morgan Keegan & Co., Inc., 2013 WL 656457 (M.D. Fla. Feb. 20, 2013)

(awarding prejudgment interest at 4.75%, current Florida statutory rate); see also Smith v. American Int’l Life Assurance Co., 50 F.3d 956, 958 (11th Cir. 1995) (affirming award of prejudgment interest based on Georgia’s post- judgment interest rate of 12%); Nightingale v. Blue Cross/Blue Shield of Ala., 41 F.3d 1476, 1484 (11th Cir. 1995 (affirming award of prejudgment interest at 18% [the then-current Alabama statutory rate which required insurer to pay 18% if claim denied for invalid reason(s)]). Nanc ncy B. Pridgen en MsP Law

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Attorneys Fees Post-Hardt

 Statutory Basis for Fees

ERISA § 502(g)(1): in an action “by a

participant, beneficiary or fiduciary, the court in its discretion may allow reasonable attorneys fees and costs to either party”

 Hardt v. Reliance Standard Life Ins.

Co., 560 U.S. 3 (2009) (“prevailing party” not required, just “some degree of success on the merits”)

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Attorneys Fees Post-Hardt

 Multi-Factor Tests Still Alive? ~yes~

 Huss v. IBM Medical & Dental Plan, 418 Fed. Appx. 498

(7th Cir. 2011) (holding that even after Hardt, application

• f its traditional twin tests was still relevant to inform

that court’s analysis regarding whether an award of fees is appropriate); Toussaint v. JJ Weiser, Inc., 648 F.3d 108, 110 (2d Cir. 2011) (“A court may apply—but is not required to apply—the [five-factor test] in “channeling [its] discretion when awarding fees” under § 1132(g)(1).”).

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Attorneys Fees Post-Hardt

 Multi-Factor Tests Still Alive? ~yes~

 See generally McKay v. Reliance Std. Life Ins. Co., 428

• Fed. Appx. 537 (6th Cir. 2011); Williams v. Metro. Life
• Ins. Co., 609 F.3d 622 (4th Cir. 2010) but see Rinaldi v.

CCX, Inc., 388 Fed. Appx. 290 (4th Cir. 2010) (success but no fees); Simonia v. Glendale Nissan-Infinity Disability Plan, 608 F.3d 1118 (9th Cir. 2010); Gastronomical Workers’ Union Local 610 v. Dorado Beach Hotel Corp., 617 F.3d 54 (1st Cir. 2010).

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Attorneys Fees Post-Hardt

Generally, Five Factors Are:

 1. Losing party’s bad faith or culpability.  2. Ability of the losing party to pay fees.  3. Deterrent effect of an award for fees.  4. Whether the claimant sought to confer a

common benefits on all participants and beneficiaries in a plan or resolve a significant legal issue.

 5. Relative merits of the parties’ positions.

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Attorneys Fees Post-Hardt

 Remand Cases Post-Hardt

 1st - McCarthy v. Commerce Group, Inc., 831

F.Supp.2d 459 (D.Mass. 2011) (remand only on claim for denial of top hat benefits equaled some degree of success on the merits).

 2nd- Barrett v. Hartford Life and Acc. Ins. Co., 2012

WL 6929143 (S.D.N.Y. Nov. 9, 2012) (remand only; plaintiff received only 40% of her fees).

 3rd - Haisley v. Sedgwick Claims Management

Services, Inc., 2011 WL 4565494 (W.D.Pa. Sept. 29, 2011) (court awarded 2 years of benefits and remanded for evaluation beyond 2 years).

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Attorneys Fees Post-Hardt

Remand Cases Post-Hardt

 4th - Scott v. PNC Bank Corp. & Affiliates Long

Term Disability Plan, 2011 WL 2601569 (D.Md. 2011) (R&R; full discussion; failed 5-factor test).

 5th - Tesch v. Prudential Ins. Co., 829 F.Supp.2d

483 (W.D.La. 2011).

 6th - McKay v. Reliance Std. Life Ins. Co., 428

• Fed. Appx. 537 (6th Cir. 2011) (claimant lost after

remand, but was still awarded fees).

 7th - Young v. Verizon's Bell Atl. Cash Balance

Plan, 748 F.Supp.2d 903 (N.D.Ill.2010).

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Attorneys Fees Post-Hardt

Remand Cases Post-Hardt

 8th - Greenwald v. Liberty Life Assur. Co. of

Boston, 2013 WL 3716416 (D.Neb. 2013).

 9th - Langston v. North Am. Asset Dev. Corp.

Group Disability Plan, 2010 WL 330085 (N.D.

• Cal. Jan 20, 2010).

 10th - Adair v. El Pueblo Boys & Girls Ranch, Inc.

LTD Plan, 2013 WL 4775927 (D.Colo. 2013).

 11th - Olds v. Ret. Plan of Int'l Paper Co., Inc.,

2011 WL 2160264 (S.D.Ala. 2011).

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Thank You

Nanc ncy B. Pridgen en MsP Law

Na Nancy cy B. Pr Pridgen dgen

MONNOLLY PRIDGEN LLC

Atlanta, Georgia nancy@mplaw-llc.com

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