Justia ERISA Opinion Summaries

Articles Posted in US Court of Appeals for the Seventh Circuit
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The United States Court of Appeals for the Seventh Circuit heard an appeal from Bulk Transport Corp. against Teamsters Union No. 142 Pension Fund and its Trustees. The dispute originated from two collective-bargaining agreements between Bulk Transport and Teamsters Local 142, active from 2003 to 2006. The Union insisted that Bulk Transport apply one such agreement, the Steel Mill Addendum, to non-steel mill work (LISCO work), which Bulk Transport initially did, subsequently making pension contributions on behalf of the LISCO workers. However, when Bulk Transport lost the LISCO contract, they ceased these contributions, leading to the Pension Fund assessing a withdrawal liability of about $2 million under the Multiemployer Pension Plan Amendments Act (MPPAA).After arbitration, Bulk Transport paid but demanded a review of the decision. The district court agreed with the arbitrator's ruling that Bulk Transport had adopted the Addendum by conduct, and thus the Pension Fund was entitled to the withdrawal liability. The district court also denied Bulk Transport's request for a refund.The Seventh Circuit, however, reversed the district court's decision. It held that the written agreement, not the practice or conduct, should dictate the terms of pension contributions to multi-employer plans. The written agreement in this case did not cover the LISCO work, and the court rejected the argument that Bulk Transport's conduct altered the substantive terms of the agreement. The court held that the writings were conclusive and that employers and unions could not opt-out of the requirements orally or through their course of conduct. The court affirmed the district court's denial of attorney's fees for the Pension Fund and remanded the case with instructions to order the Pension Fund to repay the withdrawal liability it collected from Bulk Transport. View "Bulk Transport, Corp. v. Teamsters Union Local 142" on Justia Law

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Scanlon went on leave from his job as a Systems Administrator at McKesson. He requested accommodations to return to work; McKesson temporarily granted some, but not all, of them. Scanlon did not return to work but sought long-term disability insurance benefits under a McKesson group policy underwritten, insured, and administered by LINA. To meet the definition of “disabled” under the policy, an employee must be unable to perform the “material duties” of the employee’s regular occupation and earn 80% or more of the employee’s indexed earnings from working in the employee’s regular occupation. LINA denied Scanlon’s request and denied two administrative appeals after Scanlon supplied VA examination reports and letters and two residual functional capacity evaluations. LINA's medical examiners concluded that Scanlon was not entitled to benefitsIn a suit under ERISA, 29 U.S.C. 1132, the district court found that Scanlon, a veteran, suffered from myriad chronic orthopedic and sleep disorders that cause him pain and impact his daily life but found Scanlon ineligible for benefits, concluding Scanlon did not show that he cannot perform the material duties of his job. The Seventh Circuit vacated. The district court clearly erred when it failed to consider Scanlon’s inability to sit at his desk for eight hours a day as required by his occupation and his inability to perform the cognitive requirements of his job during regular work hours and in its treatment of certain medical records Scanlon provided. View "Scanlon v. Life Insurance Co. of North America" on Justia Law

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Eligibility for disability payments from the Fund turns on how many credits an ironworker has accumulated (a credit is equal to 1,000 hours of work on union jobs in a given year); those with more than five but fewer than 15 credits are entitled to disability benefits if “totally and permanently disabled as the result of an accident sustained while on the job and employed by a Contributing Employer.” Lane, with nine credits as a union ironworker, applied for disability benefits. Lane was approved for Social Security Disability Insurance. The Fund’s Administrator requested information to connect Lane’s disability to an on-the-job injury. Lane explained that he suffered on-the-job injuries to his shoulder and knee and sent medical records, none of which connected his disability to the cited May 2014 accident. Lane admitted that his SSA award was determined by a combination of factors, not just the 2014 accident. A letter from Lane’s physician referred to several work-related injuries without identifying the work-related events or whether those injuries were the sole basis for the SSA’s disability award.After review by the Medical Review Institute of America concluded that the records did not establish that the SSA disability related to the 2014 accident, the Fund’s Trustees affirmed the denial of Lane’s Claim. The Seventh Circuit affirmed summary judgment in favor of the Fund under the Employee Retirement Income Security Act, 29 U.S.C. 1002, characterizing the denial as “not downright unreasonable.” View "Lane v. Structural Iron Workers Local No. 1 Pension Trust Fund" on Justia Law

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Sherrod and Johnson were fiduciaries of a retirement plan that Sherrod had set up for herself and other employees of her medical practice. The Secretary of Labor brought this civil enforcement action alleging that both had breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001. The district court granted the Secretary summary judgment and entered a permanent injunction removing the defendants as fiduciaries.The Seventh Circuit affirmed. Both defendants breached their fiduciary duties of loyalty and prudence under ERISA. Hundreds of thousands of dollars of plan assets were used for Sherrod’s personal benefit but were accounted for as plan expenses or losses rather than as distributions of retirement benefits. The permanent injunction was within the scope of reasonable responses to the breaches. Even giving Sherrod the benefit of her assertions of good faith, since the district court imposed the injunction based on a summary judgment decision, good faith is not a defense for one breach of fiduciary duty, let alone repeated breaches. Many of Sherrod’s payments to herself from plan assets from 2012-2017 were also prohibited as self-dealing. “Given the gravity and frequency of defendants’ breaches of their fiduciary duties, they are fortunate that the relief against them has thus far been relatively modest.” View "Su v. Sherrod" on Justia Law

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Northrop laid off workers in 2012 and did not provide them all with severance benefits. Its Severance Plan provides that a laid-off employee regularly scheduled to work at least 20 hours a week will receive severance benefits if that employee “received a cover memo, signed by a Vice President of Human Resources.” The plaintiffs, who did not receive this “HR Memo,” filed suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001– 1461.The parties agreed to have a magistrate resolve the case, 28 U.S.C. 636(c). After the suit was certified as a class action, the district judge resumed control at Northrop's request, finding that the increased stakes constituted “good cause” for withdrawing the reference. The district court granted the defendants summary judgment, ruling that the Plan gives the HR Department discretion to choose who gets severance pay.The Seventh Circuit affirmed, first finding no abuse of discretion in the withdrawal of the reference order. The Plan makes the receipt of severance benefits contingent on the receipt of an HR Memo, which the class members did not get. Welfare-benefit plans under ERISA—unlike retirement plans—need not provide for vesting, and the terms of welfare-benefit plans are entirely in the control of the entities that establish them. When making design decisions, employers may act in their own interests and may include a discretionary component. Rights under ERISA are not subject to estoppel. The plan itself—not past practice—always controls. View "Carlson v. Northrop Grumman Severance Plan" on Justia Law

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Participating employees can contribute a portion of their salary to their Retirement Plan account and Northwestern makes a matching contribution. Employees participating in the Voluntary Savings Plan also contribute a portion of their salary, but Northwestern does not make a matching contribution. Both plans allow participants to choose the investments for their accounts from options assembled by the plans’ fiduciaries. Northwestern is the administrator and designated fiduciary of both plans. The plaintiffs sued Northwestern under the Employee Retirement Income Security Act, 29 U.S.C. 1001 (ERISA).The Seventh Circuit affirmed the dismissal of the suit in 2020. The Supreme Court rejected the Seventh Circuit's reliance on a “categorical rule” that providing some low-cost options eliminates concerns about other investment options being imprudent. On remand, the Seventh Circuit reinstated claims that Northwestern failed to monitor and incurred excessive recordkeeping fees and failed to swap out retail shares for cheaper but otherwise identical institutional shares. The court again affirmed the dismissal of other claims, including a claim that Northwestern retained duplicative funds. View "Divane v. Northwestern University" on Justia Law

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Department of Labor regulations required the administrator of an employee benefit plan to give a claimant, “upon request,” copies of “all documents, records, and other information” that the administrator considered in making an adverse benefit determination. In 2018, the regulations were amended to eliminate “upon request” and require an administrator to provide such information “sufficiently in advance” of an adverse determination “to give the claimant a reasonable opportunity to respond.”Zall, a dentist for 20 years, sought long-term disability benefits in 2013 after pain and numbness forced him to stop working. His insurer, Standard denied the claim. In 2014, after considering additional medical information and consulting an orthopedic surgeon, Standard approved Zall’s claim, including retroactive payments. Less than a year later, Standard began reviewing his case to see if his condition was subject to a 24-month benefit limit applicable to any disability “caused or contributed to by … carpal tunnel or repetitive motion syndrome” or “diseases or disorders of the cervical, thoracic, or lumbosacral back and its surrounding soft tissue.” Standard ultimately terminated Zall’s benefits.Zall filed suit under the Employee Retirement Income Security Act, 29 U.S.C. 1001, arguing that the decision was arbitrary and capricious and that Standard violated ERISA’s procedural requirements by failing to afford him “a full and fair review.” The district court granted Standard summary judgment. The Seventh Circuit reversed and remanded. The plain language shows that the amended regulation applies; Standard failed to comply. View "Zall v. Standard Insurance Co." on Justia Law

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The employers agreed that for the duration of two collective bargaining agreements (CBAs), they would make pension contributions on behalf of covered employees to the Pension Fund. Both CBAs contained “evergreen clauses” that extended them a year at a time until either party provided timely written notice expressing an “intention to terminate.” Both were to expire in January 2019. After the window for timely notice of intention to terminate on that date, the employers and the union signed new CBAs requiring pension contributions to a different fund beginning in February 2019. The employers notified the Fund that they were ceasing contributions, relying on letters the union sent in November 2018.The Seventh Circuit reversed the dismissal of the Fund’s lawsuit. Those letters did not express the union’s intent to terminate the existing CBAs, so as to satisfy the evergreen clause's termination procedure. The letters did not mention termination. They noted the date that the CBAs would expire and expressed a desire to meet to negotiate new agreements; neither of these points communicated an intent to terminate the existing agreements. In the context of an evergreen clause, expiration and termination are distinct concepts. A desire to negotiate a new contract is quite consistent with a desire to leave the existing agreement in place until a new deal is reached. The old agreements renewed under the evergreen clauses; the employers remained obligated to contribute to the Fund for one more year. View "Central States Southeast & Southwest Areas Pension Fund v. Zenith Logistics, Inc." on Justia Law

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Albert claimed that his former employer, a subsidiary of Oshkosh, violated the Employee Retirement Income Security Act, 29 U.S.C.1132(a)(2), by mismanaging its retirement plan. Albert alleged that the defendants breached their fiduciary duties by authorizing the Plan to pay unreasonably high fees for recordkeeping and administration, failing to adequately review the Plan’s investment portfolio to ensure that each investment option was prudent, and unreasonably maintaining investment advisors and consultants for the Plan despite the availability of similar service providers with lower costs or better performance histories.The district court dismissed the complaint. While Albert’s appeal was pending, the Supreme Court issued Hughes v. Northwestern University (2022), vacating Seventh Circuit precedent (Divane) and remanding. The district court had cited Divane repeatedly in its opinion, albeit not for the proposition that the Supreme Court rejected in Hughes. The Seventh Circuit affirmed the dismissal of all claims for failure to state a claim. The complaint is devoid of allegations as to the quality or type of services the comparator plans provided; the cheapest investment option is not necessarily the one a prudent fiduciary would select. Plaintiffs “must do more than recast allegations of purported breaches of fiduciary duty as disloyal acts.” View "Albert v. Oshkosh Corp." on Justia Law

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The NPWU previously represented the plaintiffs, Parsec employees, participating in the NPWU’s retirement multiemployer defined-contribution plans. A lawsuit brought by the Department of Labor settled, requiring the Severance Plan to pay back loans and approving the Plan’s administrators and its third-party accounting firm, Krol. Parsec employees later voted to decertify the NPWU and elect the Teamsters as their new bargaining representative. The Teamsters told Parsec employees that their retirement accounts would roll over to the Teamsters’ plan. NPWU stated that the retirement accounts would become inactive but remain under NPWU control. After the election, Parsec stopped contributing to the NPWU plan and began contributing to the Teamsters’ plan. Parsec employees’ accounts became inactive but remained under NPWU control. Plaintiffs alleged excessive expenses, undisclosed payments to NPWU officers and their relatives, and high salaries. Plaintiffs requested copies of documents, to which they were entitled under the Employee Retirement Income Security Act (ERISA). The Plans responded but did not provide certain documents, including a “summary plan description” for the 401(k) Plan, which did not exist. Plaintiffs sent several letters requesting that the Plans roll over their accounts to the Teamsters’ plan. The Plans refused.Plaintiffs filed a putative class action. The Seventh Circuit affirmed the dismissal of the suit. The Plans terms did not require rollover and the allegations failed to show that the trustees breached their fiduciary duties. View "Dean v. National Production Workers Union, Local 707" on Justia Law