Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

A 1998 amendment to the plan effectively penalized lump-sum distributees by voiding their future interest credits, in violation of ERISA, 29 U.S.C. 1054(c)(3). Participants who had received lump sum distributions filed suit in 2007. The district court held that the claims accrued when the plaintiffs received their distributions and that some claims were barred by the six-year state limitations period. The court ordered recalculation of the distributions for the other plaintiffs using a modified version of a method proposed by defendants. The Seventh Circuit reversed in part. The distributions were the final step of a clear repudiation of the participantsâ entitlement to anything different and triggered the running of the limitations period; prior communications about the amendment were simply "hints." The plan fiduciaries were not entitled to deference with respect to the recalculation of benefits; the district court must determine how to calculate awards.

A $15,000 insurance policy covering the decedent named his brother as beneficiary. The brother was killed in the same accident that killed the decedent. Although the insurer received notice that the decedent's mother (estate administrator) had assigned the policy to pay for the funeral, the company obtained an order from the state court and paid the benefit to decedent's children, applying a "facility-of-payment" clause, which provided: "if the beneficiary he or she named is not alive at the Employeeâs death, the payment will be made at Our option, to any one or more of the following: Your spouse; Your children; Your parents; Your brothers and sisters; or Your estate." The assignee (finance company) filed suit. The federal district court entered judgment in favor of the insurer. The Seventh Circuit affirmed, exercising jurisdiction under the Employee Retirement Income Security Act, 29 U.S.C. 1132. Insurance companies have broad discretion under facility-of-payment clauses and the insurer's decision was not arbitrary. The court declined to award attorney fees.

The plaintiff stopped working in November, 2005, due to a variety of ailments, and filed a disability claim in August, 2007. The claim was denied in September. The plaintiff's appeal, received in April, 2008, 11 days after the stated 180-day deadline, was denied. She filed suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132. A magistrate upheld the denial. The Seventh Circuit affirmed. The plaintiff failed to exhaust administrative remedies. The plan has a clear deadline; the plaintiff was not denied meaningful access to review procedures and did not allege that pursuing administrative remedies would be futile. The court rejected a "substantial compliance" argument, noting that the plaintiff did not offer an explanation for the late filing. The Plan was not required to show prejudice as a result of the delay to justify rejecting the claim. Letters sent by the plaintiff could not reasonably be construed as notice of appeal. The Plan has procedures to minimize conflicts of interest and its refusal to consider the appeal was not arbitrary.

A recent retiree (employee) unsuccessfully tried to enroll her adult dependent child in the medical plan. The district court found the plan administrator's decision to be in violation of ERISA and imposed penalties. The Seventh Circuit vacated in part and remanded to allow the plan administrator to make a decision under the correct contract language. The denial was incorrectly based on a version of the plan in effect at the time of application, rather than that in effect when the employee's ability to comply with a condition precedent to enrollment expired, but the language of the earlier plan was ambiguous and the evidence of the employee's compliance was unclear. The court affirmed an award of a $3,780 for failure to timely comply with the employee's first request for documents, but reversed a penalty of $11,440 for a second request, calling for documents that were not essential to the claim. The court remanded an award of attorney fees, stating outcome was "some success on the merits" for the employee but that the plan's position was not without merit.

The plaintiff's investment in his former employer's ERISA plan (Employee Retirement Income Security Act) was primarily in the employer's stock. The employer went out of business. The plaintiff, unable to recover from the plan, filed suit against the fiduciaries and an insurer. The district court found breach of fiduciary duty, but held that the plaintiff lacked standing to sue the insurer. The Seventh Circuit plan affirmed in part and remanded for calculation of damages. The plaintiff established breach of fiduciary duty. Although the plan was exempt from ERISA's diversification requirement, a prudent investor would not have remained so heavily invested in the employer's stock as its fortunes fell. It is arguable that the plaintiff waived the claim by initially agreeing to investment in the stock and not requesting diversification, but the burden of proving that defense was on the fiduciaries. The plan's exchange of "worthless stock for a worthless loan" was a violation of ERISA, but resulted in no damages. Rejecting a claim of adverse domination, the court affirmed that the plaintiff lacked standing to sue the insurer.

Participants in a defined-contribution retirement plan filed a class action suit under the Employee Retirement Income Security Act (ERISA, 29 U.S.C. 1002(34)), alleging mismanagement and payment of excessive funds. The district court certified the class, but entered summary judgment in favor of the defendants. The Seventh Circuit reversed in part, first upholding denial of a motion to amend the complaint and the court's decision to strike expert testimony relating to matters not in the original complaint. The court remanded a count it characterized as alleging that prudent fiduciaries, armed with the information presented to fiduciaries between 2002 and 2004, would have at least decided between maintaining the status quo and making changes to the common stock funds to limit investment and transactional drag. There is a genuine issue of material fact as to whether defendants breached the prudent man standard of care by failing to make a reasoned decision under circumstances in which a prudent fiduciary would have done so. The court also remanded a claim that prudent fiduciaries would have solicited competitive bids for record-keeping services on a periodic basis. The court affirmed summary judgment on a claim relating to the trustee's compensation including interest income from "float."