Articles Posted in ERISA

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From 1978-1997, Mathias worked for Caterpillar in York, Pennsylvania. In 1997 he experienced serious health issues; the Social Security Administration declared him disabled. Caterpillar covered his health insurance as an employee on long-term disability, billing him for his portion of the premium. In 2012 Mathias retired retroactively, effective October 2009. Caterpillar failed to change Mathias’s status and did not realize its mistake until 2013 when it notified Mathias that he owed $9,500 in past-due premiums, the difference between the rate for a long-term disabled employee and the rate for a retired employee. When Mathias did not pay, Caterpillar terminated his benefits. Mathias sued in the Eastern District of Pennsylvania. The plan documents require suit in the Central District of Illinois, so Caterpillar moved to transfer the case under 28 U.S.C. 1404(a). Mathias argued that the forum-selection clause was invalid in light of ERISA’s venue provision, 29 U.S.C. 1132(e)(2). The district court rejected that argument, relying primarily on Sixth Circuit precedent, holding that forum-selection clauses in ERISA plans are enforceable and not inconsistent with the text of ERISA’s venue provision. The case was transferred. Mathias petitioned for mandamus relief in the Seventh Circuit, which affirmed, holding that ERISA’s venue provision does not invalidate a forum-selection clause contained in plan documents. View "Mathias v. Mihm" on Justia Law

Posted in: Civil Procedure, ERISA

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Studer worked at Katherine Shaw Bethea Hospital, a not‐for‐profit Dixon, Illinois healthcare provider, as an occupational therapist. After she resigned, she filed a small‐claims state court complaint, alleging that the hospital violated the Illinois Wage Payment and Collection Act (IWPCA) by failing to pay her money that she had accrued under the hospital’s Paid Days Leave policy. The hospital removed the suit to federal court, claiming that Studer’s claim was preempted by the Employee Retirement Income Security Act (ERISA). The district court denied Studer’s motion to remand, holding that it had federal‐question jurisdiction because ERISA completely preempted the state‐law claim, and granted the hospital summary judgment, holding that Studer had failed to name the welfare benefit plan as a defendant, which ERISA requires in most instances. Instead of filing an amended complaint, Studer filed a Rule 59(e) motion to amend the judgment, again arguing that ERISA did not preempt her claim. The district court denied that motion. The Seventh Circuit affirmed, noting ERISA’s “expansive” preemptive power, 29 U.S.C. 1144(a). The hospital’s benefit plan was an employee welfare benefit plan under ERISA, in which Studer participated; ERISA section 502(a)(1)(B) empowered Studer to bring a federal court action “to recover benefits due.” Studer’s IWPCA claim was not “entirely independent of” ERISA. View "Studer v. Katherine Shaw Bethea Hospital" on Justia Law

Posted in: ERISA

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Seventh Circuit affirms award of permanent disability benefits for fibromyalgia. Kennedy was hired by Lilly in 1982 and became an executive director in Lilly’s human resources division, with a monthly salary of $25,011. In 2008, she quit work because of disabling symptoms of fibromyalgia. She was approved for monthly benefits of $18,972 under the company’s Extended Disability Benefits plan. Three and a half years later her benefits were terminated. Kennedy sued under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001. The Seventh Circuit affirmed summary judgment in favor of Kennedy, with an award of $537,843.81 in past benefits and prejudgment interest and reinstatement of benefits. The court characterized Lilly’s evidence as “a hodgepodge” and noted that Lilly did not indicate what kind of work Kennedy would be able to perform. Kennedy’s general internist testified that she is permanently disabled, basing this opinion on his diagnoses of her nonarticular rheumatism (musculoskeletal aches and pains not traceable to joints), fibromyalgia, sleep disorder, depression, irritable bowel syndrome, restless leg syndrome, and her symptoms of pain and fatigue. Her rheumatologist concurred. The court noted the company’s conflict of interest, being both the initial adjudicator of an employee’s benefits claim and the payor of those benefits. View "Kennedy v. Lilly Extended Disability Plan" on Justia Law

Posted in: ERISA, Insurance Law

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Prather, age 31, tore his Achilles tendon. His surgery to repair the injury was uneventful. He returned to work. Four days later he collapsed, went into cardiopulmonary arrest, and died as a result of a blood clot in the injured leg that had traveled to a lung. Prather’s widow applied for benefits under his Sun Life group insurance policy (29 U.S.C. 1132(a)(1)), which limited coverage to “bodily injuries ... that result directly from an accident and independently of all other causes.” Sun Life refused to pay. The Seventh Circuit ruled in favor of Prather’s widow, noting that deep vein thrombosis and pulmonary embolism are risks of surgery, but that even with conservative treatment, such as immobilization of the affected limb, the insured had an enhanced risk of a blood clot. The forensic pathologist who conducted a post-mortem examination of Prather did not attribute his death to the surgery. Prather’s widow then sought attorneys’ fees of $37,170 under ERISA, 29 U.S.C. 1132(g)(1). The Seventh Circuit awarded $30,380, stating that there is no doubt of Sun Life’s culpability or of its ability to pay without jeopardizing its existence; the award of attorneys’ fees is likely to give other insurance companies in comparable cases pause; and a comparison of the relative merits of the contending parties clearly favors the plaintiff. View "Prather v. Sun Life Financial Insurance Co." on Justia Law

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Pension funds regulated by the Multiemployer Pension Plan Amendments Act, part of the Employee Retirement Income Security Act (ERISA), sued to collect shortfalls in contributions for 2003-2008 from System Parking, under four collective bargaining agreements with the union. The Seventh Circuit affirmed a judgment of $2,000,000, after concluding that it had authority to change the name on the judgment. The funds’ complaint and the judgment named, as defendant, the “L&R Group of Companies,” which is not a recognized business entity, organization, partnership, or trust; Fed. R. Civ. P. 17(a) states that suits must be conducted in the name of the real parties in interest. Rule 17(b) says that only persons or entities with the capacity to sue or be sued may be litigants. A “description” is not a juridical entity. System Parking’s assets were acquired by an entity not named in the complaint or served with process, so a motion to dismiss would have been granted, had the parties or the court been “paying attention.” With respect to the merits, the court upheld a finding that the employer’s audit was unreliable, having been prepared in-house, by a person without relevant experience, rather than by an independent accounting firm and being based on “murky” assumptions. View "Teamsters Local Union No. 727 v. L&R Group of Companies" on Justia Law

Posted in: Civil Procedure, ERISA

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Central States is a self-funded Employee Retirement Income Security Act (ERISA) plan that provides health coverage to participating Teamsters and their dependents. The plan’s trustee sought a declaratory judgment concerning student athletes who had medical coverage under both the Central States plan and independent insurers’ policies. The trustee alleged that the plan paid the beneficiaries’ medical bills in full (about $343,000) and the insurers owe reimbursement. The plan and the insurers’ policies have competing coordination-of-benefits clauses, and each side claims that its respective provision makes the other primarily liable for the beneficiaries’ medical expenses (29 U.S.C. 1132(a)(3)). The Seventh Circuit affirmed dismissal of the case. ERISA section 502(a)(3) does not authorize suits of this type because the relief sought is legal, not equitable. View "Central States, Southeast & Southwest Areas Health & Welfare Fund v. American International Group, Inc." on Justia Law

Posted in: Civil Procedure, ERISA

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GreatBanc, the fiduciary for Personal-Touch home-health-care employee stock ownership plan, facilitated a transaction in which the Plan purchased shares in the company from the company’s owners with a loan from the company itself. It is not clear whether GreatBanc obtained independent advice or a valuation. GreatBanc had been appointed as trustee by the owners. The value of the shares fell until they were worth much less than the Plan paid, leaving the Plan with no valuable assets and heavily indebted to the company’s principal shareholders. The Plan’s participants were liable for interest payments on the loan. Employees filed suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132. The district court dismissed. The Seventh Circuit reversed. The plaintiffs plausibly alleged both a prohibited transaction and a breach of fiduciary duty. View "Allen v. Greatbanc Trust Co." on Justia Law

Posted in: ERISA

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Rabinak worked full‐time as a business representative for the Chicago Regional Council of Carpenters and, incidental to that position, served on the Council’s Executive Board. He received quarterly payments of $2,500 for his service on the Board, paid by checks separate from those for Rabinak’s weekly salary. When he retired, Rabinak qualified for a pension from the United Brotherhood of Carpenters Pension Fund, governed by ERISA. The compensation amount upon which the Fund calculated his annual retirement benefit did not include the $10,000 he had received each year from the Council. The Fund’s appeals committee denied an appeal. The Seventh Circuit affirmed. The plan’s definition of compensation includes only “salary,” and the $2,500 quarterly payments for Board service were paid separately from Rabinak’s weekly salary payments and coded differently as well. The conclusion that the payments at issue were not salary payments under his particular plan was not arbitrary and capricious. View "Rabinak v. United Bhd. of Carpenters Pension Fund" on Justia Law

Posted in: Contracts, ERISA

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In 1991 Cheney began working as an attorney at Kirkland. She became a partner in 1997. She suffered from a spinal disease that led her to seek ergonomic accommodations in 1994 and ultimately resulted in a three‐level anterior cervical discectomy and fusion and removal of her C5 vertebra. After making various accommodations, the firm approved a leave, from January 3, until July of 2012. Her last day of work was December 19, 2011. On April 17, 2012, Cheney's neurosurgeon advised her to complete a 12‐week intensive physical therapy program and receive cervical epidural injection therapy. After the program failed to improve Cheney’s condition, the neurosurgeon recommended cervical spinal fusion surgery, which Cheney received on August 27. Cheney submitted her claim for long‐term disability benefits on July 17, before the surgery. Kirkland’s insurer denied her claim, stating that her coverage had ended in March because she was able, through March, to perform her job. Cheney sued under the Employee Retirement Income Security Act, 29 U.S.C. 1132. The court found in favor of Cheney. The Seventh Circuit vacated, finding that the district court made unsupported factual findings and misinterpreted the governing documents relating to whether Cheney’s situation fell within allowable absences from “active work.” View "Cheney v. Standard Ins. Co." on Justia Law

Posted in: ERISA, Insurance Law

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Trachte, a Wisconsin manufacturer, established an employee stock ownership plan (ESOP) in the mid-1980s. In the late 1990s, Fenkell and his company, Alliance, began buying ESOP-owned, closely-held companies with limited marketability. Typically, Fenkell would merge the acquired company's ESOP into Alliance’s ESOP, hold the company for a few years with its management in place, and then spin it off at a profit. Alliance acquired Trachte in 2002 for $24 million and folded its ESOP into Alliance’s ESOP. Trachte’s profits, however, were flat and its growth stalled, so Fenkell arranged a complicated leveraged buyout involving creation of a new Trachte ESOP managed by trustees beholden to Fenkell. The accounts in the Alliance ESOP were spun off to the new Trachte ESOP, which used the employees’ accounts as collateral to purchase Trachte’s equity back from Alliance, Trachte and its new ESOP paid $45 million for Trachte’s stock and incurred $36 million in debt. The purchase price was inflated; the debt load was unsustainable. By the end of 2008, Trachte’s stock was worthless. The employee participants in the new ESOP sued Alliance, Fenkell, and trustees, alleging breach of fiduciary duty in violation of the Employee Retirement Income Security Act. The district court found the defendants liable, crafted a remedial order to make the class whole, awarded attorney’s fees, and approved settlements among some of the parties. Fenkell conceded liability. The Seventh Circuit​ affirmed the order requiring him to indemnify his cofiduciaries. View "Chesemore v. Fenkell" on Justia Law

Posted in: ERISA, Securities Law