Articles Posted in ERISA

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Business groups challenged the “Fiduciary Rule” promulgated by the Department of Labor (DOL) in April 2016. The Rule is a package of seven different rules that broadly reinterpret the term “investment advice fiduciary” and redefine exemptions to provisions concerning fiduciaries that appear in the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001, and the Internal Revenue Code, 26 U.S.C. 4975. The business groups alleged the Rule’s inconsistency with the governing statutes; DOL’s overreaching to regulate services and providers beyond its authority; DOL’s imposition of legally unauthorized contract terms to enforce the new regulations; First Amendment violations; and the Rule’s arbitrary and capricious treatment of variable and fixed indexed annuities. The Fifth CIrcuit vacated the district court’s rejection of all of those challenges. DOL’s interpretation of “investment advice fiduciary” relies too narrowly on a purely semantic construction of one isolated statutory provision and wrongly presupposes that the statutory provision is inherently ambiguous. Congress intended to incorporate the well-settled meaning’” of “fiduciary.” In addition, the Fiduciary Rule renders the second prong of ERISA’s fiduciary status definition in tension with its companion subsections. DOL therefore lacked statutory authority to promulgate the Rule with its overreaching definition of “investment advice fiduciary.” View "Chamber of Commerce of the USA v. United States Department of Labor" on Justia Law

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The Fifth Circuit granted en banc review of this case to reconsider Pierre v. Conn. Gen. Life Ins. Co., 932 F.2d 1552, 1562 (5th Cir. 1991), and to determine the default standard of review that applies when a beneficiary challenges a plan denial based on a factual determination of ineligibility. The court held that the Texas insurance code provision only renders discretionary clauses unenforceable, but does not attempt to prescribe the standard of review for federal courts deciding Employee Retirement Income Security Act (ERISA) cases. The court overruled Pierre and held that Firestone Tire & Rubber Co. v. Bruch's, 489 U.S. 101, 115 (1989), default de novo standard applied when the denial was based on a factual determination. The court held that Vega v. National Life Insurance Services, Inc., 188 F.3d 287 (5th Cir. 1999), will continue to provide the guiding principles on the scope of the record for future cases that apply de novo review to fact-based benefit denials. Therefore, the court vacated and remanded for the district court to apply the de novo standard of review. View "Ariana M. v. Humana Health Plan of Texas, Inc." on Justia Law

Posted in: ERISA

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The Fifth Circuit granted en banc review of this case to reconsider Pierre v. Conn. Gen. Life Ins. Co., 932 F.2d 1552, 1562 (5th Cir. 1991), and to determine the default standard of review that applies when a beneficiary challenges a plan denial based on a factual determination of ineligibility. The court held that the Texas insurance code provision only renders discretionary clauses unenforceable, but does not attempt to prescribe the standard of review for federal courts deciding Employee Retirement Income Security Act (ERISA) cases. The court overruled Pierre and held that Firestone Tire & Rubber Co. v. Bruch's, 489 U.S. 101, 115 (1989), default de novo standard applied when the denial was based on a factual determination. The court held that Vega v. National Life Insurance Services, Inc., 188 F.3d 287 (5th Cir. 1999), will continue to provide the guiding principles on the scope of the record for future cases that apply de novo review to fact-based benefit denials. Therefore, the court vacated and remanded for the district court to apply the de novo standard of review. View "Ariana M. v. Humana Health Plan of Texas, Inc." on Justia Law

Posted in: ERISA

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The Fifth Circuit affirmed the district court's dismissal of a putative class action alleging that the RadioShack board of directors and plan administrative committee breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. Plaintiffs alleged that defendants violated ERISA by allowing plan participants to invest in RadioShack stock despite the company's descent into bankruptcy. The court held that the complaint did not plausibly state any fiduciary claims with respect to the Plan and that plaintiffs did not have standing to bring claims regarding the Puerto Rico Plan. View "Singh v. RadioShack Corp." on Justia Law

Posted in: ERISA

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Cigna filed suit against Humble seeking overpayments and Humble counterclaimed under the Employee Retirement Income Security Act (ERISA) and Texas state common law. The district court concluded that Cigna's claims and defenses failed as a matter of law, and awarded Humble damages and penalties. The Fifth Circuit held that the district court failed to apply the required abuse of discretion analysis; other courts have upheld Cigna's interpretation of its insurance plans; and there was substantial evidence supporting Cigna's interpretation. Therefore, the court reversed the district court's judgment. The court also held that Cigna was not a named plan administrator and reversed the district court's award of ERISA penalties against Cigna. The court vacated in part the district court's dismissal of Cigna's claims against Humble and vacated the district court's award of attorneys' fees, remanding for further consideration. View "Connecticut General Life Insurance Co. v. Humble Surgical Hospital, LLC" on Justia Law

Posted in: ERISA, Insurance Law

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Babin, employed by Quality, developed carpal tunnel syndrome and had several surgeries. Three months after he returned to work, his employment ended. Babin participated in Quality’s employee benefit plan, which provided short- and long-term disability benefits, governed by the Employee Retirement Income Security Act (ERISA). Babin submitted a short-term disability benefits application to Standard, Quality’s insurer. In February 2013, Standard denied Babin’s claim because it had not received a necessary form from Quality. Babin alleges that he provided that form to Quality, which failed to complete it. In February 2014, Babin’s counsel asked Quality for disability plan documents. Babin claims that Quality did not send those documents before he filed suit, that he believed that the short-term plan provided six months of benefits, and, had he known that the plan only provides three months of benefits, he would have applied for long-term benefits; Quality’s failure to produce the documents caused him to miss the window for long-term benefits. Babin filed suit 20 months after requesting the documents, alleging failure to produce documents and failure to pay benefits. The parties settled the denial-of-benefits claim. The court held that Louisiana’s one-year prescriptive period for delictual claims applies to 29 U.S.C. 1132(c) claims, so Babin’s claim was time-barred. The Fifth Circuit affirmed, rejecting Babin’s argument that Louisiana’s 10-year prescriptive period for personal actions should govern his claim for failure to produce documents. View "Babin v. Quality Energy Services, Inc." on Justia Law

Posted in: Civil Procedure, ERISA

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The Fifth Circuit affirmed the district court's dismissal of plaintiff's claims, holding that the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132, preempted state law claims. The court held that, although the savings clause preserves a role for certain state laws that regulate insurance, state claims that provide a separate vehicle for seeking benefits from an ERISA plan remain preempted as such claims must be brought under ERISA's civil enforcement provision. The court explained that, otherwise, the exclusivity and uniformity of that federal remedy would be undermined. In this case, because plaintiff's claim for benefits must be brought under federal law, the district court correctly dismissed her state law claims seeking the same relief. Furthermore, the availability of that statutory remedy under section 502 of ERISA also defeated plaintiff's claim for equitable relief under federal law. View "Swenson v. United of Omaha Life Insurance Co." on Justia Law

Posted in: ERISA

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This appeal concerned objections to the settlement of class actions that arose in the wake of a financial crisis involving SRHS and its benefits pension fund. The Fifth Circuit held that the terms of the Settlement Agreement as they affect Plan participants should have been more thoroughly examined prior to the district court's approval; the district court improperly limited its consideration to the hospital's ability to pay while ignoring a transparent explanation of the settlement's consequences for the class members; and thus the court vacated and remanded for further consideration of the enumerated issues. View "Jones v. Singing River Health Services Foundation" on Justia Law

Posted in: ERISA

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After plaintiff settled a medical malpractice claim, the employee benefit plan organized under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001 et seq., sought reimbursement. The Fifth Circuit held that when the plan paid for plaintiff's medical expenses, its summary plan description (SPD) can function as both an SPD and a written instrument; the SPD sufficiently complied with section 1102(b) by giving sufficient information regarding how the plan is funded or how it can be amended; when an SPD is a plan's only plausible written instrument, courts assume that the SPD is the written instrument; an SPD that defers to a non-existent plan document can be enforced as the plan's governing text; and the equities favor defendants in this case. The court also concluded that there was no abuse of discretion in issuing the award of attorneys' fees and costs. Accordingly, the court affirmed the district court's grant of summary judgment and fees and costs to defendants. View "Rhea v. Alan Ritchey, Inc. Welfare Benefit Plan" on Justia Law

Posted in: ERISA

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After the BP Stock Fund lost significant value, the affected investors filed suit alleging that the plan fiduciaries breached their duties of prudence and loyalty by allowing the Plans to acquire and hold overvalued BP stock; breached their duty to provide adequate investment information to plan participants; and breached their duty to monitor those responsible for managing the BP Stock Fund. The district court held that the stockholders had failed to overcome the Moench v. Robertson presumption and dismissed their claims. The stockholders appealed, and while their appeal was pending in this court, the Supreme Court issued Fifth Third Bancorp v. Dudenhoeffer, holding that there was no such “presumption of prudence” under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq. On remand, the district court held that the stockholders had plausibly alleged that defendants had inside information; and the stockholders had plausibly alleged two alternative actions that defendants could have taken that met the Fifth Third standard: freezing, limiting, or restricting company stock purchases; and disclosing unfavorable information to the public. The district court granted the motion to amend with respect to pleading these alternative actions. It then certified defendants’ motion for interlocutory appeal. The court concluded, however, that the district court here erred when it altered the language of Fifth Third to reach its holding. Under the Supreme Court’s formulation, the plaintiff bears the significant burden of proposing an alternative course of action so clearly beneficial that a prudent fiduciary could not conclude that it would be more likely to harm the fund than to help it. In this case, the stockholders have failed to do so. Because the stockholders' amended complaint is insufficient and the district court erred in granting their motion to amend, the court reversed and remanded. View "Whitley v. BP, P.L.C." on Justia Law