Articles Posted in U.S. 7th Circuit Court of Appeals

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In 1999 Brooks, an assembly-line operator for Prairie Packaging, was seriously injured on the job and lost his left hand, wrist, and forearm. He filed a workers’ compensation claim seeking recovery for permanent and total disability, which remains pending. Prairie treated Brooks as a disabled employee on a company-approved leave of absence, so that he continued to receive healthcare coverage. Pactiv acquired Prairie in 2007 and continued this arrangement. In 2010 Pactiv sent Brooks a letter instructing him to submit documents verifying his ability to return to work; failure to submit would mean termination of employment. Because his injury was totally disabling, Brooks did not submit verification and Pactiv fired him; he lost his healthcare coverage under the employee-benefits plan. Brooks sued Pactiv and Prairie under the Employee Retirement Income Security Act, 29 U.S.C. 1001–1461, for benefits due and breach of fiduciary duty and asserted an Illinois law claim for retaliatory discharge. The district court dismissed. The Seventh Circuit affirmed with respect to ERISA because Brooks did not allege that the employee-benefits plan promised him post-employment benefits. Pactiv acted as an employer, not as a fiduciary, in terminating Brooks’s employment and cancelling his health insurance. The court reinstated the state law claim. View "Brooks v. Pactiv Corp." on Justia Law

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Laskin worked for Jefco from 1966-1974 and participated in the company pension plan, accumulating a fully vested retirement account balance of $5,976.09. Soon after she left the company Laskin contacted Siegel, a trustee of the pension plan, and asked whether she could withdraw the funds to buy real estate. Siegel sent Laskin a letter explaining that her account would accrue interest at the passbook rate and that the plan had been amended in 1975, raising the retirement eligibility age from 55 to 65. Over the next 10 years, Laskin received statements, indicating that she was receiving from 5% to 5.5% interest on her balance. In 1988, a statement indicated that her balance was $12,602.86. The pension plan dissolved on December 31, 1991. In 2008, Laskin contacted Siegel’s son (who had purchased his father’s interest in Jefco) and was told that pension funds had been completely disbursed and that she did not receive a payout because she could not be located. The district court dismissed her claims as barred by the limitations period in the Employee Retirement Income Security Act, 29 U.S.C. 1113. The Seventh Circuit affirmed. View "Laskin v. Siegel" on Justia Law

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Laskin worked for Jefco from 1966-1974 and participated in the company pension plan, accumulating a fully vested retirement account balance of $5,976.09. Soon after she left the company Laskin contacted Siegel, a trustee of the pension plan, and asked whether she could withdraw the funds to buy real estate. Siegel sent Laskin a letter explaining that her account would accrue interest at the passbook rate and that the plan had been amended in 1975, raising the retirement eligibility age from 55 to 65. Over the next 10 years, Laskin received statements, indicating that she was receiving from 5% to 5.5% interest on her balance. In 1988, a statement indicated that her balance was $12,602.86. The pension plan dissolved on December 31, 1991. In 2008, Laskin contacted Siegel’s son (who had purchased his father’s interest in Jefco) and was told that pension funds had been completely disbursed and that she did not receive a payout because she could not be located. The district court dismissed her claims as barred by the limitations period in the Employee Retirement Income Security Act, 29 U.S.C. 1113. The Seventh Circuit affirmed. View "Laskin v. Siegel" on Justia Law

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Participants in a cash balance defined benefit pension plan filed a purported class action, alleging that the plan violated ERISA, 29 U.S.C. 1132(a)(1)(B), and seeking recovery of benefits denied the participants as a consequence of the violation. The district judge granted summary judgment in favor of sub‐class A, which challenged the projection rate used by the defendant, and subclass B, which challenged the defendant’s handling of the pre‐mortality retirement discount. A cash balance plan is a “notional” retirement account because individual accounts are not funded; every year the employer adds a specified percentage of the employee’s salary plus interest at a specified rate on the amount in each individual’s notional account. The challenged projection rate and discount rate relate to the entitlement of employees who leave before reaching retirement age. The Seventh Circuit reversed and remanded with respect to the statute of limitations for class members who took lump sum benefits more than six years before the suit was filed and also with respect to the adequacy of the class representatives, but otherwise affirmed. View "Ruppert v. Alliant Energy Cash Balance Pension Plan" on Justia Law

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Plaintiffs claim that Lockheed breached its fiduciary duty to its retirement savings plan, under the Employee Retirement Income Security Act, 29 U.S.C. 1132(a)(2). The Plan is a defined-contribution plan, (401(k)); employees direct part of their earnings to a tax-deferred savings account. Participants may allocate funds as they choose. Among the investment options Lockheed offered was a “stable-value fund” (SVF). SVFs typically invest in a mix of short- and intermediate-term securities, such as Treasury securities, corporate bonds, and mortgage-backed securities. Holding longer-term instruments, SVFs generally outperform money market funds. For stability, SVFs are provided through “wrap” contracts with banks or insurance companies that guarantee the fund’s principal and shield it from interest-rate volatility. Plaintiffs allege that the Lockheed SVF was heavily invested in short-term money market investments, with a low rate of return that did “not beat inflation by a sufficient margin to provide a meaningful retirement asset.” The district court granted Lockheed summary judgment with respect to some claims. The SVF claim survived. The district court initially certified two classes under FRCP 23(b)(1)(A). On remand, the court declined to certify further narrowed classes. The Seventh Circuit reversed, reasoning that the plaintiffs carefully limited the class to plan participants who invested in the SVF during the class period and employed reasonable means to exclude from the class persons who did not experience injury. View "Abbott v. Lockheed Martin Corp." on Justia Law

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Reynolds acquired Pactiv in 2010 under an agreement that calls for severance pay to any non‐union employee terminated without cause, within a year, as a result of the acquisition. Pactiv established a severance‐pay plan with implementing terms, including a requirement that the departing worker execute a separation agreement in a form acceptable to the company, releasing all other claims against Pactiv. Within a year, Pactiv directed Rupert to relocate. He declined. Pactiv acknowledged entitlement to severance pay and sent him an agreement, which required that Rupert promise, for the next year, not to work for competitors in research and development, solicit sales of competing goods and services, or try to hire Pactiv employees. He had not previously been subject to a restrictive covenant and declined to sign. Pactiv withheld severance benefits. The district court held that Rupert was entitled to benefits because the formal plan, governed by ERISA, lacks any language conditioning benefits on signing a restrictive covenant; material terms must be in writing, 29 U.S.C.1102(a)(1). The Seventh Circuit vacated, noting that Rupert did not ask for benefits under Pactiv’s plan, but asked for benefits under the acquisition agreement, repeatedly asserting that the plan is irrelevant to his claim. The court remanded for consideration under that agreement. View "Pactiv Corp. v. Rupert" on Justia Law

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Plaintiffs, insured under employer health plans, filed a proposed class action alleging that health-insurance companies violated Wisconsin law by requiring copayments for chiropractic care. The insurance code prohibits insurers from excluding coverage for chiropractic services if their policies cover the diagnosis and treatment of the same condition by a physician or osteopath. The policies at issue provide chiropractic coverage, although, like other services, it is subject to copayment requirements. The complaint cited provisions of the Employee Retirement Income Security Act for recovery of benefits due, 29 U.S.C. 1132(a)(1)(B) & 502(a)(3), and for breach of fiduciary duty, sections 1132(a)(3), 1104. The district court dismissed. The Seventh Circuit affirmed. Nothing in ERISA categorically precludes a benefits claim against an insurance company. The complaint alleges that the insurers decide all claims questions and owe the benefits; on these allegations the insurers are proper defendants on the 1132(a)(1)(B) claim. The complaint nonetheless fails to state a claim for breach of fiduciary duty; setting policy terms, including copayments, determines the content of the policy, and decisions about the content of a plan are not themselves fiduciary acts. View "Larson v. United Healthcare Ins. Co." on Justia Law

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After accumulating a fortune in the technology business, Patel became a hedge fund manager. He formed a fund, and Sitara to serve as the fund’s investment adviser, and named himself managing director of Sitara. His acquaintances purchased interests in the fund. After initial success, Patel invested $6.8 million, nearly all of the fund’s assets, in Freddie Mac common stock in 2008, after the beginning of the subprime mortgage crisis. The fund incurred devastating losses. Owners of limited partnership interests sued Patel and Sitara, claiming federal and state securities fraud, fraudulent misrepresentation, and fraudulent inducement. Their second amended complaint asserted only failure to register securities in violation of federal law, failure to register as an investment advisor under Illinois law, and breach of fiduciary duty under ERISA, 29 U.S.C. 1109(a). Plaintiffs sought to file a third amended complaint, based upon purported misrepresentations discovered while deposing Patel: an offering memorandum statement that Patel “intends to contribute no less than one hundred thousand dollars” and Patel’s oral statement that he was investing some of the $18 million from the sale of a former business at the inception of the fund. Patel did not invest any proceeds from the sale of his company at the inception. The district court denied the motion. The Seventh Circuit affirmed. The new claims suffered from deficiencies that rendered the proposed amendment futile. View "Shailja Gandhi Revocable Trust v. Sitara Capital Mgmt., LLC" on Justia Law

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Union members, working at Navistar’s Indianapolis engine-manufacturing plant, were represented by a union and were subject to a collective-bargaining agreement. They claim that on unidentified dates they were laid off, ostensibly for lack of work, but that Navistar actually subcontracted their work to nonunion plants in violation of the CBA and that Navistar failed to recall them as work became available. They claim to have filed hundreds of grievances that were diverted or stalled. In 2009, Navistar closed the Indianapolis plant. The union members sued. When union members sue their employer for breach of contract under the Labor Management Relations Act, 28 U.S.C. 185, they must also claim breach of their union’s duty of fair representation. The district court dismissed, finding that the plaintiffs had failed to adequately plead the prerequisite union breach of fair representation. A separate interference-with-benefits claim under the Employment Retirement Income Security Act, 29 U.S.C. 1001, was resolved by summary judgment in favor of Navistar. The 29 remaining plaintiffs appealed only the LMRA claim. The Seventh Circuit affirmed, stating that all of the allegations concerning the duty of fair representation were conclusory, so that the complaint lacked the required factual content. View "Yeftich v. Navistar, Inc." on Justia Law

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In 1987, Kenseth underwent surgical gastric banding, covered by her insurer. About 18 years later Dr. Huepenbecker, advised another operation for severe acid reflux and other problems resulting from the first surgery. Her employer provided insurance through Dean, a physician-owned integrated healthcare system, specifically excluding coverage for “surgical treatment or hospitalization for the treatment of morbid obesity” and services related to a non-covered benefit or service. Plan literature refers coverage questions to the customer service department. Huepenbecker worked at a Dean-owned clinic, scheduled surgery at a Dean-affiliated hospital, and instructed Kenseth to call her insurer. Kenseth spoke with a customer service representative, who stated that Dean would cover the procedure. After the surgery, Dean declined coverage. Kenseth was readmitted for complications. Dean denied coverage for the second hospitalization. Kenseth pursued internal appeals to obtain payment of the $77,974 bill before filing suit under ERISA, 29 U.S.C. 1001, and Wisconsin law. The district court granted Dean summary judgment. The Seventh Circuit affirmed as to estoppel and pre-existing condition claims, but remanded concerning breach of fiduciary duty. After the district court again entered summary judgment for Dean, the Supreme Court decided Cigna v. Amara, clarifying relief available for a breach of fiduciary duty in an ERISA action. The Seventh Circuit remanded, stating that Kenseth has a viable claim for equitable relief. View "Kenseth v. Dean Health Plan, Inc." on Justia Law