Justia U.S. 7th Circuit Court of Appeals Opinion SummariesArticles Posted in ERISA
Divane v. Northwestern University
Under the Retirement Plan, participating Northwestern University employees can contribute a portion of their salary to their 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 amended complaint and rejection of the plaintiffs’ demand for a jury trial. Under the plans, no participant was required to invest in any particular product. Any participant could avoid the alleged problems with certain products--record-keeping fees and underperformance. Northwestern provided a wide range of investment options and provided prudent explanations for the challenged fiduciary decisions involving alleged losses. There was no ERISA violation with Northwestern’s record-keeping arrangement; the plaintiffs identified no alternative recordkeeper that would have accepted any fee lower than what was paid nor have they explained how a hypothetical lower-cost recordkeeper would perform at the level necessary to serve the best interests of the plans. View "Divane v. Northwestern University" on Justia Law
Posted in: ERISA
Dorris v. Unum Life Insurance Co. of America
Dorris, a company president, had Unum long-term disability insurance. Her endometriosis became disabling; Unum started paying her benefits in 2002. Later, Dorris was diagnosed with Lyme disease. By 2007, the Social Security Administration granted her disability benefits. To maintain Unum benefits after two years, an employee had to prove that she “cannot perform each of the material duties of any gainful occupation for which [she is] reasonably fitted” or that she is “[p]erforming at least one of the material duties" of any occupation and “[c]urrently earning at least 20% less" due to the disability. In 2015, Dorris told Unum that she was improving and had started golfing and volunteering. Dorris’s Lyme disease specialist indicated that Dorris still had major symptoms and could not work. Unum’s consulting physicians found no evidence of limitations that would preclude sedentary work nor of an active Lyme infection. Unum ended her benefits. In her Employee Retirement Income Security Act (29 U.S.C. 1132(a)(1)(B)) lawsuit, Dorris was denied permission to depose witnesses to clarify the administrative record. Dorris never sought further discovery; nor objected to the ruling. Unum rested on its physician’s conclusions that Dorris could perform the duties of a president. Dorris asserted, without evidence, that such jobs required “55–70 hours a week,” and focused on how little she did as a volunteer. The court limited its review to the administrative record and found that Dorris could not perform the duties of her regular occupation, but nonetheless ruled in Unum's favor, because Dorris's arguments based on the "20% less" option were conclusory. The Seventh Circuit affirmed. The plaintiff bears the burden of proving that she is entitled to benefits. The court did not abuse its discretion in denying Dorris the opportunity to supplement the record after judgment nor were its factual findings in error. View "Dorris v. Unum Life Insurance Co. of America" on Justia Law
Stone v. Signode Industrial Group LLC
Signode assumed an obligation to pay health-care benefits to a group of retired steelworkers and their families. Signode then exercised its right to terminate the underlying benefits agreement and also stopped providing the promised benefits to the retired steelworkers and their families, despite contractual language providing that benefits would not be “terminated … notwithstanding the expiration” of the underlying agreement. The retirees and the union filed suit under the Labor-Management Relations Act, 29 U.S.C. 185, and the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1132(a)(1)(B). The Seventh Circuit affirmed the district court’s entry of a permanent injunction, ordering Signode to reinstate the benefits. The agreement provided for vested benefits that would survive the agreement’s termination. While there is no longer a presumption in favor of lifetime vesting, the court applied ordinary contract law interpretation rules and concluded that the agreement unambiguously provided retirees with vested lifetime health-care benefits. Even if the agreement were ambiguous, industry usage and the behavior of the parties here provide enough evidence to support vesting such that resolution of any ambiguity in favor of the plaintiffs as a matter of law would still be correct. View "Stone v. Signode Industrial Group LLC" on Justia Law
Electrical Construction Industry Prefunding Credit Reimbursement Program v. Veterans Electric, LLC
The Union and the NECA Electrical Contractors Association entered into a collective bargaining agreement (CBA) providing health, welfare, and pension benefits for union workers. The Funds operate as trusts for these benefits. Employers, who are members of NECA, self-report the benefits they owe. Veterans Electric participated in NECA, assented to the CBA, and contributed to the Funds for its union employees. The Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132(g), governs benefit plans between labor unions and multiemployer associations. The Funds attempted to audit Veterans’ payroll records. Veterans only provided records for union employees, which accounted for about half of the total reported wages. The Funds requested payroll information for non-union employees. Veterans refused, contending that the records were outside the scope of a proper audit under the CBA. The Funds filed suit. During discovery, Veterans provided the additional payroll information. The district court granted Veterans summary judgment, limiting the scope of the trustees’ audit authority. The Seventh Circuit reversed. Under the CBA, the trustees’ authority to audit payroll records includes “all employees regardless of membership or non-membership in the Union.” In light of the ERISA fiduciary duties imposed on union trustees and the authority under the Trust Agreements, the Funds had the right to conduct random audits on employer payroll records. View "Electrical Construction Industry Prefunding Credit Reimbursement Program v. Veterans Electric, LLC" on Justia Law
Bauwens v. Revcon Technology Group, Inc.
Unions set up a pension plan under the Employment Retirement Income Security Act, 29 U.S.C. 1001, with electrical contractors (Revcon) sharing ownership. Revcon withdrew from the plan in 2003. The Multiemployer Pension Plan Amendments Act, 29 U.S.C. 1381, requires employers who withdraw from underfunded pension plans to pay withdrawal liability. The trustees notified Revcon of $394,788 in withdrawal liability and demanded quarterly payments of $3,818. Revcon missed several payments. The trustees accelerated the outstanding liability (29 U.S.C. 1399(c)(5)) and filed suit. Revcon offered to cure its defaults and resume payments. The trustees agreed and voluntarily dismissed the suit under FED. R. CIV. P. 41(a). Revcon made some payments, then defaulted again. The trustees again sued. Revcon again promised to cure; the trustees again voluntarily dismissed. This cycle repeated in 2011, 2013, and 2015. In 2018, after another default, the trustees filed this case, which, unlike previous complaints, only the payments that Revcon had missed since the 2015 dismissal. Revcon argued claim preclusion because the previous complaints demanded the entire liability, which necessarily includes the defaulted payments at issue. The “two dismissal rule” of Rule 41(a)(1)(B) therefore barred any claims arising from that liability, and, because the trustees sought to collect the entire debt in 2008, the six-year limitations period had expired. The trustees countered that they revoked the 2008 acceleration with each dismissal and that the two dismissal rule did not apply because all parties consented to the previous dismissals. The Seventh Circuit found the case untimely, noting that the earlier complaints all stated the withdrawal liability was accelerated in 2008, contradicting an argument that acceleration had been revoked. The statute makes no mention of such a deceleration mechanism. View "Bauwens v. Revcon Technology Group, Inc." on Justia Law
Smith v. OSF Healthcare System
In 1880, the Sisters, a Roman Catholic organization, founded OSF, which provides healthcare to indigent patients. The Sisters maintain authority through OSF’s governing documents and canonical and civil guidelines pertaining to church property. OSF merged with another Catholic hospital with the permission of the Holy See. Both offered employee pension plans before the merger. The Plans, with 19,285 participants, are now closed to new participants. Smith, a former employee and OSF plan participant, sued, claiming that the plans are not eligible for the church plan exemption under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 because they are administered by Committees that are not “principal-purpose organizations” and that the exemption itself is unconstitutional. She alleged that OSF allowed the plans to become severely underfunded; failed to follow notice, disclosure, and managerial requirements; and breached its fiduciary duties. The district court granted the defendants summary judgment despite plaintiff’s Federal Rule of Civil Procedure 56(d) motion to postpone the decision so that she could complete further discovery. The Seventh Circuit vacated. The summary judgment motion was filed long before discovery was to close; plaintiff was pursuing discovery in a diligent, sensible, and sequenced manner; and the pending discovery was material to summary judgment issues. The court’s explanation for denying a postponement overlooked earlier case-management and scheduling decisions and took an unduly narrow view of relevant facts. View "Smith v. OSF Healthcare System" on Justia Law
Fessenden v. Reliance Standard Life Insurance Co.
Fessenden’s employment was terminated after he began receiving short-term disability benefits. He then applied for long‐term disability benefits through his former employer’s benefits plan. The plan administrator, Reliance, denied the claim. Fessenden submitted a request for review with additional evidence supporting his diagnosis of Chronic Fatigue Syndrome. When Reliance failed to issue a decision within the timeline mandated by regulations governing the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132, he filed suit. Eight days later, Reliance finally issued a decision, again denying Fessenden’s claim. The district court granted Reliance summary judgment. The Seventh Circuit vacated. If the decision had been timely, the court would have applied an arbitrary and capricious standard because the plan gave Reliance the discretion to administer it. When a plan administrator commits a procedural violation, however, it loses the benefit of deference and a de novo standard applies. The court rejected Reliance’s argument that it “substantially complied” with the deadline because it was only a little bit late. The “substantial compliance” exception does not apply to blown deadlines. An administrator may be able to “substantially comply” with other procedural requirements, but a deadline is a bright line. View "Fessenden v. Reliance Standard Life Insurance Co." on Justia Law
Lacko v. United of Omaha Life Insurance Co.
Lacko began working for BKD’s predecessor in 1999 and worked until September 2015, when she was Senior Manager in the Audit Department, with an annual salary of $93,250.04. She applied for benefits under the short term disability (STD) plan, claiming gastroparesis, diabetes, rheumatoid arthritis, congestive heart failure, breathing difficulties, anxiety, musculoskeletal impairments, and cognitive difficulties related to the medication needed to manage the other conditions. Although United approved her claims for STD benefits three times, it denied benefits in June 2016 for the period beyond November 22, 2015, concluding there was no change in Lacko’s medical condition when she stopped working or subsequently. United also denied her claim for long term disability benefits. Lacko sued under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001.. The district court granted United summary judgment. The Seventh Circuit reversed. United failed to adequately address a determination that Lacko was entitled to Social Security disability benefits and failed to recognize the significant distinction between her ability to perform unskilled work and the job of Senior Manager. The court noted that the Plan’s requirement of a “change” in a person’s physical or mental capacity in order to qualify for benefits does not by its terms preclude a degenerative condition from qualifying a claimant for benefits and noted United's conflict of interests, having issued the policies and serving as claims review fiduciary. View "Lacko v. United of Omaha Life Insurance Co." on Justia Law
Tran v. Minnesota Life Insurance Co.
Llenos hung a noose from a basement ceiling beam, stood on a stool with the noose around his neck, and stepped off. Llenos died as a result. When Tran came home, she found her husband’s body. Though his death was initially reported as suicide, the medical examiner concluded from sexual paraphernalia on Llenos’s body that he died performing autoerotic asphyxiation, a sexual practice by which a person purposefully restricts blood flow to the brain to induce a feeling of euphoria. Llenos was covered by basic and supplemental life insurance policies, providing $517,000 in coverage, and including Accidental Death & Dismemberment (AD&D) policy riders providing an additional $60,000 in coverage. Minnesota Life paid $517,000 but denied Tran’s claim for the additional $60,000 in AD&D coverage, concluding that Llenos’s death was not “accidental” and fell under an exclusion for intentionally self-inflicted injury. Tran filed suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132(a)(1)(B). The district court awarded Tran judgment, reasoning that the insurer had conceded the death was accidental. The Seventh Circuit reversed, finding that autoerotic asphyxiation was the ultimate and the proximate cause of Llenos’s death. Strangling oneself to cut off oxygen to one’s brain is an injury. When that injury kills, it is “an intentionally self-inflicted injury which resulted in death,” regardless of whether it was done recreationally or with an intent to survive. View "Tran v. Minnesota Life Insurance Co." on Justia Law
Trustees of the Suburban Teamsters of Northern Illinois Pension Fund v. E Co.
Pursuant to a collective bargaining agreement, T&W regularly contributed on behalf of its employees to the Suburban Teamsters of Northern Illinois Pension Fund. In 2014 T&W ceased operations and cut off its pension contributions, prompting the Fund to assess withdrawal liability of $640,900 under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1396. The Fund sought to collect payment by mailing a notice of the withdrawal liability to T&W and affiliated entities. Those efforts were ignored. The district court ordered T&W and several other individuals and entities under common control to pay the withdrawal liability. The defendants argued that their due process rights were violated when the Fund initiated collection by mailing notice to some but not all of them. The Seventh Circuit affirmed. Certain defendants forfeited all defenses to liability, including the defense that they were not members of a controlled group, by failing to arbitrate after receiving the Fund’s notice of withdrawal liability. Other defendants had no credible claim of surprise (at being a member of a controlled group) to sidestep ERISA’s arbitration requirement. Each defendant was a trade or business under common control with another party who received the notice and was liable under ERISA’s controlled group provision; each became jointly and severally liable for payment View "Trustees of the Suburban Teamsters of Northern Illinois Pension Fund v. E Co." on Justia Law
Posted in: ERISA