Articles Posted in US Court of Appeals for the Seventh Circuit

by
Cehovic’s employer offered its employees an insurance benefit plan through ReliaStar. Cehovic had two ReliaStar policies: a basic policy with a death benefit of $263,000, and a supplemental policy with a death benefit of $788,000. Both listed his sister, Cehovic‐Dixneuf, as the sole and primary beneficiary. After Cehovic died, his ex‐wife claimed that she and the child she had with Cehovic were entitled to the death benefits from the supplemental policy. The district court granted summary judgment for Cehovic‐Dixneuf. The Seventh Circuit affirmed. The Employee Retirement Income Security Act (ERISA) requires administrators of employee benefit plans to comply with the documents that control the plans, 29 U.S.C. 1104(a)(1)(D). For life insurance policies, that means death benefits are paid to the beneficiary designated in the policy, notwithstanding equitable arguments or claims that others might assert. The supplemental policy is governed by ERISA even though Cehovic paid all of its premiums without any direct subsidy from the employer. Cehovic’s employer performed all administrative functions associated with the maintenance of the policy. The plan description made clear that the supplemental life insurance policy would remain part of the employer’s group policy, but could be converted to an individual policy in certain situations. Nothing in the record shows that Cehovic executed a conversion. View "Cehovic-Dixneuf v. Wong" on Justia Law

by
Linda worked for Children’s Hospital for 37 years, covered by its employer-funded Pension Plan. In 2015, Linda faced recurring cancer, and, at age 60, retired. The Plan describes a normal retirement pension, an early retirement pension, a deferred vested retirement pension, and a pre-retirement surviving-spouse death benefit. The surviving spouse benefit is available to a participant’s spouse when the participant dies “before the Participant’s annuity starting date.” No other benefit provides that it is available to beneficiaries if the participant dies before payments start. Early retirement pensions “commence with a payment due on the first day of the month next following” the date of termination and the election of benefits. A 10-year annuity is available and allows the participant to designate a beneficiary for the remainder of a 10-year period, but if the participant dies before distributions begin, the designated beneficiary will be a surviving spouse. Linda chose the early retirement pension, through a 10-year annuity. She designated her daughter, Kishunda, as her beneficiary. Linda retired on August 26. Her first pension payment was set to commence on September 1. She died on August 29. Kishunda was denied her mother’s pension and sued under the Employee Retirement Income Security Act, 29 U.S.C. 1132(a)(1)(B). The Seventh Circuit affirmed summary judgment, upholding the administrator’s interpretation of the Plan as not arbitrary; only spouses are entitled to benefits under the Plan when a participant dies before the start of her pension. View "Estate of Jones v. Children's Hospital and Health System, Inc. Pension Plan" on Justia Law

by
In 2012 Northern changed its defined-benefit pension plan under which retirement income depended on years worked, times an average of the employee’s five highest-earning consecutive years, times a constant (traditional formula). As amended, the plan multiplies the years worked and the high average compensation, by a formula that depends on the number of years worked after 2012 (PEP formula), reducing the pension-accrual rate. Northern provided people hired before 2002 a transitional benefit, treating them as if they were still under the traditional formula but deeming their salaries as increasing at 1.5% per year, without regard to the actual rate of change. Teufel sued, claiming that the amendment, even with the transitional benefit, violated the anti-cutback rule in the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001–1461, and, by harming older workers relative to younger ones, violated the Age Discrimination in Employment Act (ADEA), 29 U.S.C. 621–34. The Seventh Circuit affirmed dismissal of the suit. Nothing in the traditional formula guaranteed that any salary would increase in future years; ERISA protects entitlements that make up the “accrued benefit” but does not protect anyone’s hope that the future will improve on the past. Nor does the PEP formula violate the ADEA. Benefits depend on the number of years of credited service and salary, not on age. View "Teufel v. Northern Trust Co." on Justia Law

by
In 2009, ManWeb, an Indianapolis industrial construction company, paid $259,360 for the assets of Frieje, a smaller Indianapolis construction company specializing in cold‐storage facilities. Freije was a party to a collective bargaining agreement (CBA); ManWeb was non‐union. Freije contributed to a multi-employer pension fund and was required to pay withdrawal liability of $661,978 when it ceased operations (Employee Retirement Income Security Act (ERISA); Multiemployer Pension Plan Amendments Act (MPPAA), 29 U.S.C. 1381). ManWeb did not contribute to the Fund after its purchase of Freije nor did it challenge the assessment. The Fund sued Freije and added ManWeb as a defendant based on successor liability. The Seventh Circuit concluded that ManWeb had notice of Freije’s contingent withdrawal liability, which was included in the Asset Purchase Agreement. On remand, the district court again granted ManWeb summary judgment. The Seventh Circuit vacated. MPPAA successor liability can apply when the purchaser had notice of the liability and there is continuity of business operations. In the totality of relevant circumstances, ManWeb’s purchase and use of Freije’s intangible assets (name, goodwill, trademarks, supplier and customer data, trade secrets, telephone numbers and websites) and its retention of Freije’s principals to promote ManWeb to existing and potential customers as carrying on the Freije business, weigh more heavily in favor of successor liability than the district court recognized. View "Indiana Electrical Workers Pension Benefit Fund v. ManWeb Services, Inc." on Justia Law

by
In 2009, ManWeb, an Indianapolis industrial construction company, paid $259,360 for the assets of Frieje, a smaller Indianapolis construction company specializing in cold‐storage facilities. Freije was a party to a collective bargaining agreement (CBA); ManWeb was non‐union. Freije contributed to a multi-employer pension fund and was required to pay withdrawal liability of $661,978 when it ceased operations (Employee Retirement Income Security Act (ERISA); Multiemployer Pension Plan Amendments Act (MPPAA), 29 U.S.C. 1381). ManWeb did not contribute to the Fund after its purchase of Freije nor did it challenge the assessment. The Fund sued Freije and added ManWeb as a defendant based on successor liability. The Seventh Circuit concluded that ManWeb had notice of Freije’s contingent withdrawal liability, which was included in the Asset Purchase Agreement. On remand, the district court again granted ManWeb summary judgment. The Seventh Circuit vacated. MPPAA successor liability can apply when the purchaser had notice of the liability and there is continuity of business operations. In the totality of relevant circumstances, ManWeb’s purchase and use of Freije’s intangible assets (name, goodwill, trademarks, supplier and customer data, trade secrets, telephone numbers and websites) and its retention of Freije’s principals to promote ManWeb to existing and potential customers as carrying on the Freije business, weigh more heavily in favor of successor liability than the district court recognized. View "Indiana Electrical Workers Pension Benefit Fund v. ManWeb Services, Inc." on Justia Law

by
Dragus, who managed information technology for convention vendors, experienced severe neck pain for several years. He underwent a three-level cervical spine fusion, which failed to resolve his pain. Over the next two years, Dragus underwent physical therapy, steroid injections, and a surgical procedure that severs nerve roots in the spinal cord. Physicians also prescribed a pain medication, which caused memory impairment and hand tremors. Dragus went on short-term disability to participate in a full-time pain management program. Within two months of Dragus’s return to work, the pain returned, resulting in excessive absences. Dragus sought long-term disability benefits through a Reliance group policy and applied for Social Security Disability (SSDI) benefits. Reliance denied Dragus’ application, stating that reports by medical experts did not indicate a physical or mental condition at a level of severity that would make Dragus unable to perform the material duties of his regular occupation. Dragus requested reconsideration. Reliance obtained additional medical opinions and independent review by a psychiatrist and occupational medicine specialist. Dragus was allowed to correspond with the specialists. Reliance affirmed its denial. Dragus filed suit under ERISA, 29 U.S.C. 1132(a)(1)(B)). The court denied Dragus’s motions for discovery outside the claim file record and to supplement the claim record with a fully favorable SSDI decision and granted summary judgment in favor of Reliance. The Seventh Circuit affirmed. The policy grants Reliance discretionary review; Reliance’s decision was not arbitrary. View "Dragus v. Reliance Standard Life Insurance Co." on Justia Law

by
Dragus, who managed information technology for convention vendors, experienced severe neck pain for several years. He underwent a three-level cervical spine fusion, which failed to resolve his pain. Over the next two years, Dragus underwent physical therapy, steroid injections, and a surgical procedure that severs nerve roots in the spinal cord. Physicians also prescribed a pain medication, which caused memory impairment and hand tremors. Dragus went on short-term disability to participate in a full-time pain management program. Within two months of Dragus’s return to work, the pain returned, resulting in excessive absences. Dragus sought long-term disability benefits through a Reliance group policy and applied for Social Security Disability (SSDI) benefits. Reliance denied Dragus’ application, stating that reports by medical experts did not indicate a physical or mental condition at a level of severity that would make Dragus unable to perform the material duties of his regular occupation. Dragus requested reconsideration. Reliance obtained additional medical opinions and independent review by a psychiatrist and occupational medicine specialist. Dragus was allowed to correspond with the specialists. Reliance affirmed its denial. Dragus filed suit under ERISA, 29 U.S.C. 1132(a)(1)(B)). The court denied Dragus’s motions for discovery outside the claim file record and to supplement the claim record with a fully favorable SSDI decision and granted summary judgment in favor of Reliance. The Seventh Circuit affirmed. The policy grants Reliance discretionary review; Reliance’s decision was not arbitrary. View "Dragus v. Reliance Standard Life Insurance Co." on Justia Law

by
Anka has a history of serious mental illness, including paranoid delusions, and has received mental health treatment. Anka killed her husband, Zeljko. The couple's child, M., was 13. The trial judge determined that the state established each element of first-degree murder beyond a reasonable doubt but that Anka established by clear and convincing evidence that she was insane at the time of the offense and found Anka not guilty by reason of insanity. Zeljko had worked as a union laborer and earned a vested pension; when a married participant dies before the benefit commences, the participant’s spouse receives a monthly annuity payable for the spouse’s life. Where the deceased does not have a surviving spouse, the individual’s minor child receives a monthly benefit until the child reaches age 21. After Zeljko’s death, both Anka and M. sought to recover Zeljko’s pension benefits. Neither the Fund’s documents nor the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001–1461, address whether a claimant who killed the participant can receive a benefit. The Illinois Probate Act’s “slayer statute,” provides that “[a] person who intentionally and unjustifiably causes the death of another shall not receive any property ... by reason of the death,” 755 ILCS 5/2‐6. The district court granted M.M. judgment on the pleadings. The Seventh Circuit affirmed. ERISA does not preempt the Illinois slayer statute, which bars even those found not guilty by reason of insanity from recovering from the deceased. View "Miscevic v. Estate of M.M." on Justia Law

by
Anka has a history of serious mental illness, including paranoid delusions, and has received mental health treatment. Anka killed her husband, Zeljko. The couple's child, M., was 13. The trial judge determined that the state established each element of first-degree murder beyond a reasonable doubt but that Anka established by clear and convincing evidence that she was insane at the time of the offense and found Anka not guilty by reason of insanity. Zeljko had worked as a union laborer and earned a vested pension; when a married participant dies before the benefit commences, the participant’s spouse receives a monthly annuity payable for the spouse’s life. Where the deceased does not have a surviving spouse, the individual’s minor child receives a monthly benefit until the child reaches age 21. After Zeljko’s death, both Anka and M. sought to recover Zeljko’s pension benefits. Neither the Fund’s documents nor the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001–1461, address whether a claimant who killed the participant can receive a benefit. The Illinois Probate Act’s “slayer statute,” provides that “[a] person who intentionally and unjustifiably causes the death of another shall not receive any property ... by reason of the death,” 755 ILCS 5/2‐6. The district court granted M.M. judgment on the pleadings. The Seventh Circuit affirmed. ERISA does not preempt the Illinois slayer statute, which bars even those found not guilty by reason of insanity from recovering from the deceased. View "Miscevic v. Estate of M.M." on Justia Law

by
Weis, a stonework firm, was required by a collective-bargaining agreement (CBA) to contribute to the Laborers’ Pension Fund for each hour worked by Union members. Weis complied for many years, then began using more skilled marble setters and finishers on its jobs, gradually stopped hiring Union members, ceased paying into the Fund, and terminated its CBA with the Union. The Fund, a multiemployer pension plan governed by ERISA and the Multiemployer Pension Plan Amendment Act, served notice that Weis owed more than $600,000 in withdrawal liability. Weis paid but challenged the assessment in arbitration, invoking 29 U.S.C. 1383(b): An employer in the building and construction industry is subject to withdrawal liability only if, after its contribution obligation ceases, it continues to perform work in the jurisdiction of the CBA of the type for which contributions were previously required. The Fund argued that the arbitrator misread the phrase “previously required” to mean “previously collected by the plan.” A district judge confirmed the award but denied Weis attorney’s fees. The Seventh Circuit affirmed. The Fund waived its statutory-interpretation argument by failing to raise it in arbitration and did not meaningfully challenge the arbitrator’s factual determinations. The judge did not abuse his discretion in denying Weis’s motion for attorney’s fees. View "Laborers' Pension Fund v. W.R. Weis Company, Inc." on Justia Law