Justia ERISA Opinion Summaries

The Commonwealth of Kentucky initiated a lawsuit against several pharmacy benefit managers (PBMs) and related entities, asserting that these firms contributed to the opioid crisis in Kentucky by conspiring with drug manufacturers to increase opioid supply. Kentucky alleged the PBMs negotiated with drug companies to give opioids preferred placement on formularies in exchange for rebates and fees, thus violating state consumer protection laws and creating a public nuisance. The PBMs served both federal and commercial clients, including federal workers under the Federal Employees Health Benefits Act, TRICARE members, and Veterans Health Administration beneficiaries.Following removal of the case to the United States District Court for the Eastern District of Kentucky by the PBMs under the federal officer removal statute (28 U.S.C. § 1442), Kentucky sought to remand the case to state court, arguing its complaint disclaimed liability for conduct undertaken at the direction of federal officers. The district court granted Kentucky’s motion to remand.The United States Court of Appeals for the Sixth Circuit reviewed the district court’s decision de novo. Relying on its prior decision in Ohio ex rel. Yost v. Ascent Health Services, LLC, and similar decisions from other circuits, the Sixth Circuit determined the PBMs acted under federal officers when administering federal health benefits and that Kentucky’s claims related to conduct performed under federal supervision. The court found the PBMs had raised colorable federal defenses, including immunity and preemption under federal statutes governing federal health plans, TRICARE, ERISA, and Medicare Part D. The court concluded that Kentucky’s complaint targeted indivisible conduct relating to federal duties, so the PBMs met the requirements for removal under § 1442. The Sixth Circuit reversed the district court’s remand order and remanded the case for further proceedings. View "Commw. of Ky. v. Express Scripts, Inc." on Justia Law

Consumers Concrete Corp. participated in a multiemployer pension plan administered by Central States Southeast and Southwest Areas Pension Fund. After making a partial withdrawal from the plan in 2017, Consumers fully withdrew in 2019, triggering statutory withdrawal liability for the complete withdrawal. The dispute focused on how to apply a credit for the prior partial withdrawal liability when determining the amount owed for the subsequent complete withdrawal. The parties agreed on the underlying figures for unfunded vested benefits and annual payments, but disagreed on whether the credit should be applied before or after the statutory cap limiting payments to twenty annual installments.Following Consumers’s challenge, an arbitrator adopted the Fund’s approach, applying the partial withdrawal credit at the second step of the statutory calculation process. Consumers appealed to the United States District Court for the Northern District of Illinois, Eastern Division. The district court consolidated the competing actions and vacated the arbitration award, siding with Consumers. It held that the credit should be applied after completing all four statutory steps, including the twenty-year payment limitation.The United States Court of Appeals for the Seventh Circuit reviewed the district court’s legal conclusions de novo. It determined that the statutory language and structure favored Consumers’s interpretation, concluding that the partial withdrawal liability credit must be applied after the four-step process outlined in 29 U.S.C. § 1381(b), rather than at step two. The court’s holding was that the credit for prior partial withdrawal liability under 29 U.S.C. § 1386(b)(1) should reduce the fully-adjusted withdrawal liability amount determined after the application of all steps, including the twenty-year cap. The Seventh Circuit affirmed the district court’s judgment. View "Consumers Concrete Corp. v Central States, SE and SW Areas Pension Fund" on Justia Law

A woman participated in an employee pension plan governed by the Employee Retirement Income Security Act of 1974 (ERISA). After being diagnosed with cancer and while hospitalized, she initiated an online election to receive her accrued pension benefits as a lump sum and designated her sister as the beneficiary. She died three days later, before completing a required second step of confirming her election and beneficiary designation, according to the plan’s administrative process. After her death, her sister submitted a claim seeking the lump sum benefit.The plan administrator denied the claim, reasoning that the decedent had not finalized her election and beneficiary designation, and that “substantial compliance” with the plan’s requirements was not sufficient under ERISA. On administrative appeal, the committee upheld the denial for the same reasons. The sister then filed suit in the United States District Court for the Northern District of California, alleging entitlement to the benefits. The district court dismissed her complaint with prejudice, holding that the complaint did not plausibly allege that she was entitled to the benefits, even under a substantial compliance theory.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court held that the state law doctrine of substantial compliance is available under ERISA for benefit elections, just as it is for beneficiary designations, consistent with its previous decision in Becker v. Williams, 777 F.3d 1035 (9th Cir. 2015). The court clarified that the Supreme Court’s decision in Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009), did not eliminate the doctrine of substantial compliance. The Ninth Circuit concluded that the plaintiff’s complaint plausibly alleged substantial compliance with the plan’s requirements and reversed the district court’s dismissal, remanding for further proceedings. View "LIU V. KAISER PERMANENTE EMPLOYEES PENSION PLAN FOR THE PERMANENTE MEDICAL GROUP, INC." on Justia Law

A self-funded, multiemployer health and welfare fund that provides benefits nationwide challenged an Arkansas regulation, Rule 128, which applies to health plans operating in that state. The regulation has two main features: it authorizes the Arkansas Insurance Commissioner to require health plans to pay additional dispensing fees to pharmacies if existing payments are deemed not “fair and reasonable,” and it requires health plans to report certain compensation-related information. The fund, which covers participants in Arkansas, argued that the Employee Retirement Income Security Act of 1974 (ERISA) preempts both aspects of Rule 128 because they interfere with uniform plan administration and reporting requirements set by federal law.The United States District Court for the Northern District of Illinois, Eastern Division, heard the fund’s claims and granted the Insurance Commissioner’s motion to dismiss. The court held that the Dispensing Fee Requirement regulated only the cost of benefits and did not dictate substantive plan choices, relying on the Supreme Court’s decision in Rutledge v. Pharmaceutical Care Management Association. The court also found that the Reporting Requirement was merely incidental to enforcing cost regulation and did not constitute an impermissible intrusion into plan administration under ERISA, as discussed in Gobeille v. Liberty Mutual Insurance Company.On appeal, the United States Court of Appeals for the Seventh Circuit reviewed the district court’s dismissal de novo. The Seventh Circuit affirmed the dismissal, holding that ERISA does not preempt Rule 128’s Dispensing Fee Requirement because it is a permissible cost regulation and does not force plans to adopt a specific benefit structure. The court also concluded that the Reporting Requirement is incidental and necessary to enforce the cost regulation, and thus does not impermissibly intrude upon ERISA’s uniform reporting scheme. View "Central States SE & SW Areas Health & Welfare Fund v. McClain" on Justia Law

A company sponsored a health benefit plan for its employees, which was administered by another entity. An employee under this plan, referred to as Patient AA, sought medical treatment from several out-of-network providers. Before providing care, these providers contacted the plan administrator to confirm the reimbursement rate. The administrator’s employees orally stated that reimbursement would be at the usual, customary, and reasonable (UCR) rate, a standard commonly used in the industry. Relying on these assurances, the providers treated Patient AA. When they later sought payment, they were reimbursed at a much lower rate, calculated according to Medicare rates, not the promised UCR rate.The providers sued both the employer and the plan administrator, asserting state-law claims for negligent misrepresentation and promissory estoppel based on the oral statements about reimbursement. The action began in California state court but was removed to federal court and transferred to the United States District Court for the Eastern District of Michigan. The defendants moved to dismiss the complaint, arguing that the claims were preempted by the Employee Retirement Income Security Act of 1974 (ERISA). The district court agreed, applying the Sixth Circuit’s decision in Cromwell v. Equicor-Equitable HCA Corp., and dismissed the complaint with prejudice, finding that the claims “related to” the ERISA plan and were thus preempted. The district court also denied the providers’ post-judgment request for leave to amend their complaint.The United States Court of Appeals for the Sixth Circuit affirmed. The court held that, under its precedent in Cromwell, ERISA expressly preempts state-law negligent-misrepresentation and promissory-estoppel claims by third-party healthcare providers when those claims are based on oral assurances regarding the terms of coverage or reimbursement under an ERISA-governed plan. The district court’s dismissal with prejudice was upheld. View "Laurel Hill Mgmt. Servs., Inc v. La-Z-Boy Inc." on Justia Law

An employee of Royal Caribbean participated in the company’s retirement plan and invested in a series of target date funds managed by Russell. She, on behalf of a class, alleged that Royal Caribbean, as plan sponsor and fiduciary under ERISA, breached its duty of prudence by selecting and retaining the Russell Target Date Funds (TDFs) instead of alternatives like those from Vanguard or American Funds. The complaint highlighted that the Russell TDFs underperformed their peers and benchmarks, charged higher fees, and had features—such as a particular glidepath and asset allocation—that allegedly made them a poor fit for plan participants. Internal communications from Russell and Royal Caribbean raised concerns about the performance and cost of the Russell TDFs.The United States District Court for the Southern District of Florida granted summary judgment to Royal Caribbean. It reasoned that, in order to prove the investment was objectively imprudent, the plaintiff was required to present “apples-to-apples” comparator evidence—showing the Russell TDFs were worse than another fund with the same investment strategy and risk profile. The district court found that the plaintiff’s comparators, such as the Vanguard and American Funds TDFs, were not proper because they differed in strategy and structure from the Russell funds.The United States Court of Appeals for the Eleventh Circuit reviewed the case. It held that an ERISA plaintiff is not always required to provide an “apples-to-apples” comparator to establish that an investment was objectively imprudent. The court explained that evidence of objective imprudence can be qualitative or quantitative, and the inquiry is context-specific, depending on all relevant facts and circumstances. The Eleventh Circuit reversed the district court’s grant of summary judgment and remanded the case for further proceedings. View "Johnson v. Russell Investments Trust Company" on Justia Law

An aluminum company had, through various collective bargaining agreements (CBAs), promised certain healthcare benefits to retirees, their spouses, and dependents. The agreements did not specify the duration of these benefits, but the company had been providing lifetime healthcare coverage to individuals who retired before June 1, 1993. In August 2020, the company announced it would transition these pre-1993 retirees to a new health reimbursement arrangement starting January 1, 2021, under which the company reserved the right to terminate benefits at any time. Over 3,000 affected individuals, including the widow of a former employee, challenged this change, alleging that it breached the CBAs and violated federal labor and benefits laws.The United States District Court for the Southern District of Indiana certified a class of affected retirees and their eligible spouses and dependents. After discovery, the court granted summary judgment as to liability in favor of the plaintiffs, relying on judicial estoppel. The court found that the company was barred from arguing that benefits were not vested for life because it had previously taken the opposite position in earlier litigation. As a result, the district court declared that class members were entitled to lifetime healthcare benefits and issued a permanent injunction requiring reinstatement of the prior plan and allowing claims for expenses incurred since January 1, 2021.The United States Court of Appeals for the Seventh Circuit reviewed the case and affirmed the district court’s certification of the class under Rule 23(b)(2), finding no abuse of discretion. However, it reversed the grant of summary judgment as to liability. The appellate court concluded that judicial estoppel did not apply because the company’s prior statements in earlier litigation were not clearly inconsistent with its current position. The case was remanded for further proceedings on the merits. View "Kaiser v Alcoa USA Corp." on Justia Law

A dispute arose concerning the payment rate for a surgical procedure performed at an out-of-network facility. The patient receiving the surgery was covered by an ERISA-governed health plan provided by the employer and administered by an insurance company. Prior to the surgery, the facility contacted the plan administrator to verify coverage and was told that the plan would reimburse at the usual, customary, and reasonable (“UCR”) rate, not the lower Medicare rate. Relying on this representation, the facility performed the surgery. However, the plan later paid only at the Medicare rate, far less than the full billed amount. The facility’s successor in interest, having obtained the rights to the claim, sought to recover the unpaid balance.The action was first brought in California state court, then removed to the United States District Court for the Central District of California. The plaintiff asserted both ERISA and state law claims. The district court dismissed the ERISA claim for lack of derivative standing, as the plaintiff was not properly assigned the right to sue under ERISA. The court also dismissed the state law claims for negligent misrepresentation and promissory estoppel, holding that these claims were preempted by ERISA because they related to an ERISA-covered plan.The United States Court of Appeals for the Ninth Circuit reviewed the case. It affirmed the district court’s dismissal of the promissory estoppel claim, holding that, under circuit precedent, such claims are preempted by ERISA. However, the Ninth Circuit reversed the dismissal of the negligent misrepresentation claim. The appellate court held that ERISA does not preempt a negligent misrepresentation claim by a provider’s successor in interest when the claim arises from representations made by the plan administrator during a pre-service verification call. The court concluded that such a claim does not sufficiently “relate to” an ERISA plan to trigger preemption, as it is not based on an ERISA-regulated relationship or enforceable under ERISA’s civil enforcement mechanism. The case was remanded for further proceedings on the negligent misrepresentation claim. View "HEALTHCARE ALLY MANAGEMENT OF CALIFORNIA, LLC V. WSP USA, INC." on Justia Law

The plaintiff, a former employee of a company participating in a deferred profit-sharing plan, sought to liquidate his 401(k) account in anticipation of a post-election stock market increase. He requested that the plan’s record keeper, Fidelity, complete the liquidation rapidly and in a manner advantageous for tax purposes. The plaintiff claimed that Fidelity’s communications led him to believe he would have quicker access to his funds than ultimately occurred, resulting in a missed investment opportunity. Additionally, he alleged that the plan administrator, Altria, failed to provide him with a copy of the administrative services agreement (ASA) between Altria and Fidelity, which he requested under ERISA.After the plaintiff’s formal complaint was denied by the plan administrator, he appealed to the plan’s management committee, which upheld the denial. He then filed suit in the United States District Court for the Eastern District of Virginia, raising claims for denial of benefits, breach of fiduciary duty, and failure to provide plan documents. The district court granted summary judgment to the defendants on all remaining claims, finding that the plan administrator’s denial was reasonable, that Fidelity was not acting as a fiduciary or had not breached any fiduciary duties, and that the ASA was not a document required to be disclosed under ERISA.The United States Court of Appeals for the Fourth Circuit reviewed the case. The appellate court affirmed the district court’s rulings on the denial of benefits and breach of fiduciary duty claims, concluding that the plan administrator’s decision was reasonable and that Fidelity was not a fiduciary in this context or had not breached any such duty. However, the Fourth Circuit reversed the district court’s decision regarding the ASA, holding that it was a document under which the plan was operated and remanded for consideration of statutory penalties. The court affirmed the award of attorney’s fees to the defendants. View "Kelly v. Altria Client Services, LLC" on Justia Law

A former employee brought suit against her previous employer and associated fiduciaries, alleging that they mismanaged the employer's retirement savings plan, which is a defined contribution plan governed by the Employee Retirement Income Security Act of 1974 (ERISA). She claimed that the fiduciaries retained underperforming investment options in the plan’s menu to generate transaction fees, in violation of their duties of prudence and loyalty, and sought plan-wide monetary and equitable relief on behalf of the plan.Previously, the United States District Court for the Central District of California reviewed the case. The defendants moved to compel arbitration, relying on provisions in the plan requiring arbitration of disputes and waiving participants’ rights to bring claims on a “class, collective, or representative basis.” The plaintiff argued that this waiver impermissibly precluded her from enforcing statutory rights under ERISA, which allow participants to sue on behalf of the plan for plan-wide relief. The district court denied the motion to compel arbitration, finding the waiver unenforceable under the effective-vindication doctrine and holding that the waiver provision was expressly non-severable, thus requiring the claims to proceed in court.On appeal, the United States Court of Appeals for the Ninth Circuit affirmed the district court’s denial of the motion to compel arbitration. The Ninth Circuit held that the plan’s waiver provision was unenforceable because it prevented the plaintiff from asserting her right under ERISA to bring representative claims for plan-wide relief—a right that ERISA expressly provides. The court further held that, under the plan’s own terms, once the waiver was found unenforceable, any representative claim must be adjudicated in court, not arbitration. Thus, the plaintiff’s breach-of-fiduciary-duty claims would proceed before the district court. View "POVER V. THE CAPITAL GROUP COMPANIES, INC." on Justia Law