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J. Geils
Band Employee Benefit Plan v. Smith Barney Shearson, Inc., 1996 WL
60539 (1st Cir. 1996) -- Appellants brought this suit against Smith Barney
alleging fraud and breach of fiduciary duty under ERISA regarding certain
investment transactions made by Appellees in 1985 through 1987. The district
court ruled that appellant’s claims were time barred under ERISA's six year
statute of limitations and granted summary judgment to Smith Barney. The Court
of Appeals affirmed, holding that in order to toll the limitations period under
§ 1113's fraud and concealment exception, Appellant's must demonstrate that
"(1) defendants engaged in a course of conduct designed to conceal
evidence of their alleged wrong-doing and that (2) [the plaintiffs] were not on
actual or constructive notice of that evidence, despite [3] their exercise of
reasonable diligence." The court further held it is the Appellant's burden
under FRCP 9(b) to plead with particularity the facts giving rise to the
fraudulent concealment claim. Additionally, the court characterized the facts
that trigger discovery or constructive notice as "sufficient storm
warnings to alert a reasonable person to the possibility that there were either
misleading statements or significant omissions involved." In this case,
the multiple warnings should have triggered investigation by the Appellants,
and its lack of reasonable diligence would not toll the statute of limitations.
Ganton
Technologies, Inc. v. National Industrial Group Pension Plan, 76
F.3d 462 [19 EBC 2665] (2d Cir. 1996) --Download
in RTF
Ganton withdrew from a multiemployer plan and created its own pension plan for
its employees. It requested that NIGPP transfer NIGPP's liabilities relating to
pensions of Ganton's employees and that NIGPP concurrently transfer the portion
of NIGPP assets attributable to Ganton's past contributions, and NIGPP refused.
Ganton brought this action under ERISA §4234(a) [29 U.S.C. §1414]. The Second
Circuit held that §1414 does not require multiemployer plan trustees to
transfer assets and liabilities to plan participants or to another plan at
their request, rather it only requires trustees to transfer assets "in
connection with" liabilities should they agree, in their discretion, and
in accordance with their fiduciary duties, to transfer liabilities. Further,
the court rejected Ganton's breach of fiduciary duty claim. NIGPP's refusal to
consider the interest of the departing Ganton employees was not a breach of
fiduciary duty since the interests of the remaining employers covered under the
plan would be jeopardized, and NIGPP had a duty to consider the interest of all
beneficiaries.
Carroll
v. Local 144 Pension Fund, 1996 WL 56497 (2d Cir. 1996) -- Download
in RTF
Carroll brought this action to collect pension benefits under a multiemployer
pension plan. The plan denied her pension claim because she had not accumulated
a sufficient number of pension "credits" to be eligible for pension
benefits. Under the terms of the plan, a participant must earn 15 pension
credits and reach the age of 65 to qualify for pension benefits. Carroll
incurred a nine consecutive one year breaks in service, and consequently lost
the eight credits that she previously earned. Since the administrator denied
Carroll's pension claim according to the Plan rules, the Second Circuit held its
decision was not arbitrary and capricious.
Grabois
v. Jones, 77 F3d 574 [19 EBC 2916] (2d Cir. 1996) -- Download
in RTF
Two widows filed competing claims for employee's, Junior
Jones, death benefits. The plan filed an interpleader action in the district
court. Kay Jones argued on appeal that the existence of a previous, undissolved
marriage between Junior and Annie Marie Jones should not eliminate Kay's right
to some portion of Junior's death benefits since Kay married Junior in a formal
ceremony, believing in good faith that her marriage was legal, and her marriage
continued until Junior's death. Since this case would require resolution of New
York state law regarding the validity of the second marriage, the Second
Circuit certified the question to the Court of Appeals for the State of New
York.
Republic
Ins. Co. v. Masters, Mates & Pilots Pension Plan, 77 F3d 48 [19 EBC
2825] (2d Cir. 1996) -- -- Download
in RTF
Republic refused to contribute to the Master Plan's defense in an action brought by plan participants and beneficiaries against Masters Plan. In addition, Republic sought to rescind its policy with Master Plan claiming Master Plan provided false and misleading information inducing Republic to provide coverage. After a settlement agreement with co-insurers (Federal and Aetna) of Master Plan, Republic contributed 5.25 million to Master Plan's. Further, Republic was prohibited from recovering costs or expenditures from the Plan. Republic, however, was entitled to seek redistribution of costs and expenditures among the co-insurers. Republic pursued its rescission claim, however the co-insurers claimed Republic's claim was moot. Further, the co-insurers claimed that Republic waived any right to rescind the policies. The district court refused to rule on it for lack of case or controversy between the Plan and Republic. However, since Republic's allegation of fraud was unrebutted, the court treated it as proven for purposes of the inter-insurer dispute, thus it granted Republic's motion for summary judgment dismissing the claims of Federal and Aetna seeking Republic's contribution to the defense they had incurred. The court also rejected Federal's claim that its coverage was excess over Republic and therefore it was entitled to reimbursement by Republic. The court found that the policies of each co-insurer contained similar excess insurer provisions, with the result that each had equal status as primary insurers. The Second Circuit reversed the district court's holding that Republic's rescission claim against the Master Plan was not justiciable. It held that Republic's rescission claim was not moot since Republic has a practical interest in the rescission, despite the settlement agreement among the co-insurer. It determined that if Republic could prevail on its fraud and inducement claim, its policies were void from the start, therefore, it could seek reimbursement from the co-insurer for its contribution to the Plan's defense. In addition, since the time the district court declared Republic's claim as moot, one of the insured trustee brought a breach of contract claim against Republic. Therefore, the outcome of Republic's rescission claim bears significantly on the subsequent breach of contract claim. After determining Republic's claim was justiciable, the Second Circuit held that Republic is entitled to summary judgment on its rescission claim. Neither of the co-insurers offered substantial evidence to rebut Republic's fraud and inducement allegations, rather the co-insurers relied on procedural and equitable defenses, which the court held were meritless. Additionally, the court found that Republic did not waive its right to rescind since the settlement agreement between the co-insurer expressly provided that it "shall in no way be construed as a waiver ... of any claims, counterclaims, or defenses[.]" The court also rejected defendant's claim that Republic waived it right to rescind by failing to assert fraud in a timely manner. It found that Republic did not have sufficient information prior to amending its complaint, therefore it cannot be charged with constructive and actual knowledge of Master Plan's misrepresentations. Accordingly, the Second Circuit affirmed the district court's ruling that Federal is not entitled to recover contribution for defense costs from Republic.
Stiltner v.
Beretta U.S.A. Corporation, 74 F.3d 1473 [19 EBC 2568] (4th Cir.
1996)
Stiltner made a claim for long-term disability which Beretta
denied due to a pre-existing condition exclusion, which was not mentioned in
the SPD of the plan. First, the court agreed with Stiltner that the SPD would
govern if inconsistent with the plan, however, the court held that Stiltner
failed to demonstrate that he either relied upon or was prejudiced by
representations in the summary. Additionally, the court rejected Stiltner's
breach of employment contract claim to recover disability benefits. The court
held the claim was probably preempted by ERISA, but even it were not, no
reasonable fact finder could find that the parties intended for Beretta to pay
long-term disability benefits beyond those provided by the plan. For similar
reasons, the court also rejected Stiltner's intentional infliction of emotional
distress claim, and stated that if ERISA did not preempt this claim, Stiltner
failed to show Beretta's conduct was "extreme and outrageous."
Finally, the court disagreed with Stiltner's assertion that Beretta violated
ERISA §510 when it stopped paying Stiltner's health insurance benefits when he
brought suit for long- term disability benefits. The court found that Beretta
continued to pay Stiltner's health insurance premiums after he left employment
as a gratuity. ERISA §510 does not preclude an employer from revoking
gratuitous benefits to an employee.
Estate of
Altobelli v. International Business Machines Corporation, 1996 WL
84450 (4th Cir. 1996)
The court addressed whether a divorced spouse, who was the
designated beneficiary under her ex-husband's ERISA plan, effectively waived
her benefits via a marital settlement agreement that was incorporated into a
divorce decree. IBM sought to pay pension benefits to the ex-wife rather than
the deceased's estate, claiming the waiver is ineffective under ERISA's
anti-alienation clause. Also, the employer claimed that giving effect to the
waiver is inconsistent with the plan which directs payment to the designated
beneficiary. The court determined the purpose of the anti-alienation was to
protect against "the assignment or alienation of benefits by a
participant, not the waiver of a right to payment of benefits made by a
designated beneficiary. Thus, it held the anti-alienation clause does not apply
to a beneficiary's waiver. Further, the court determined that no additional
burdens will be imposed on IBM by enforcing the waiver.
Wells v.
United States Steel and Carnegie Pension Fund, 1996 WL 72117 (6th
Cir. 1996)
Under the pension plan, the Plan is allowed to set off
against the plaintiff's monthly pension any worker's compensation benefits that
plaintiff receive for which the U.S. Steel pays, "directly or
indirectly." U.S. Steel contributes to Kentucky's Special Fund, a state
program designed to spread the costs of worker's compensation in the coal
industry. After a remand to the district court to determine the correct amount
of the setoff, the Sixth Circuit heard the case again to decide (1) whether the
formula adopted by the district court was appropriate; (2) whether the district
court erred in awarding plaintiffs' attorneys fees; and (3) whether the
district court erred in awarding the parties prejudgment interest. Although the
Sixth Circuit agreed with the district court's refusal to adopt U.S. Steel's
formula, it disagreed with the lower court's decision to apply plaintiffs'
formula. Because of the complexity of the case and the considerable resources
already spent, the court stated an appropriate formula, and remanded the
calculation to the lower court. The court stated, "[a]n appropriate
contribution can be calculated by dividing U.S. Steel's contribution into the
Special Fund on behalf of a plaintiff during the award year by the total cost
of benefits to be paid a plaintiff out of the Special Fund" with a
modification allowed to remove administrative cots from the set-off
calculation. Further, the total amount of any benefit payment should be
multiplied by the contribution percentage to determine the proper monthly
setoff. As to the issue of attorneys' fees, the appellate court affirmed the
district court's grant of fees to plaintiffs. The court emphasized plaintiffs'
inability to pay their considerable attorneys' fees and their expectation of
fee shifting when they pursued the eight year litigation of this case. Finally,
the Sixth Circuit affirmed the district court's grant to plaintiffs of
prejudgment interest on benefits wrongfully withheld, but reversed the district
court's grant of prejudgment interest to U.S. Steel on amounts it overpaid
certain plaintiffs. It held, "[b]ecause the claim was arguably liquidated,
and because of the general ERISA policy favoring awards of prejudgment interest
to plaintiffs when a pension fund wrongfully withholds benefits, it would be
inappropriate to reverse the trial court's award of interest as an abuse of
discretion. U.S. Steel, however, was not entitled to prejudgment interest since
any overpayment was its own mistake and therefore, it is only entitled to a
restitutionary award.
Trustees of the
Chicago Truck Drivers, Helpers and Warehouse Workers Union (Independent)
Pension Fund v. Leaseway Transportation Corporation, 1996 WL 49244
(7th Cir. 1996)
The Fund appealed the district court's decision to relieve Leaseway from withdrawal liability from a multiemployer pension plan and grant of summary judgment for Leaseway's counterclaim for amounts previously paid to satisfy the Fund's withdrawal liability assessment. Under 29 U.S.C. §1385(b)(2)(A), a partial cessation of an employer's contribution occurs when it ceases to have an obligation to contribute under one or more but fewer than all collective agreements under which it is obligated to make contributions but continues to perform work in the jurisdiction of the collective bargaining agreement. The Seventh Circuit held that the five month gap in which Leaseway did not perform delivery services for a contributor to the plan was not a continuation of work. The Court refused to read into the statute the term "continue" is synonymous with "resume."
Fuller v. Ulland,
1996 WL 71821 (8th Cir. 1996)
Fuller, Trustee for the International Assoc. of Entrepreneurs
of American Benefit Trust (the Trust) provides a plan of workers' compensation
insurance to employers in several states. Ulland, the Commissioner of Commerce
filed a state action seeking a cease and desist order requiring the Trust to
stop offering or selling its insurance program in Minnesota until it complied
with appropriate Minnesota licensure requirements. Fuller brought a concurrent
action in federal court seeking injunctive and declaratory relief under ERISA
to enjoin the Commissioner from inter alia, preventing the Trust from
conducting business in Minnesota or taking any action inconsistent with ERISA.
The parties dispute whether the Trust was an ERISA plan subject to federal
court jurisdiction. The district court dismissed Fuller's action and abstained
from hearing the case because of the importance of the pending state
proceeding, which it held would adequately determine whether ERISA preempted
the state action. The Eight Circuit affirmed the district court's abstention
since the state court was competent to decide the threshold issue of ERISA
status. It held that a stay was appropriate since if the state court found the
Trust was not an ERISA covered plan, the remaining federal claims will be moot.
However, the court recognizing the state court might conclude the Trust is an
ERISA plan, held the dismissal of Fuller's claim was improper since abstention
was available and more appropriate.
Prudential
Insurance Company of America v. Doe, 1996 WL 46931 (8th Cir. 1996)-
Controlling shareholder in law firm is a beneficiary for ERISA purposes and has
standing to maintain suit under ERISA.
Buttram v. Central States, Southeast and Southwest Areas Health and Welfare Fund, 1996 WL 65929 (8th Cir. 1996) -- Buttram sought reversal of the plan administrator's denial of reimbursement for home nursing care. The district court, applying an abuse of discretion standard of review, upheld the administrator's decision. Buttram appealed claiming a less deferential standard should be applied because of the case's procedural irregularities. In addition, Buttram claims the substantive decision denying benefits was an abuse of discretion. The Eight Circuit held that for a heightened review to apply, the beneficiary must show (1) that a serious procedural irregularity existed, which (2) caused a serious breach of the plan trustee's fiduciary duty to the plan beneficiary. It noted that procedural irregularities per se that will cause a court to employ a heightened standard of review. Rather, "those irregularities must have some connection to the substantive decision reach; i.e. they must cause the actual decision to be a breach of fiduciary duty." Although Buttram did not receive administrative review of his claim until after he brought suit and after the trustees moved for summary judgment, this was not an affirmative showing that the plan trustees violated their fiduciary obligations acting out of self-interest. Therefore, abuse of discretion is the proper standard for this case. Applying an abuse of discretion standard, the Eighth Circuit established five factors in determining reasonableness: (1) whether the interpretation is consistent with the goals of the plan, (2) whether the interpretation renders any plan language meaningless or inconsistent , (3) whether the interpretation conflicts with the requirements of the ERISA statute, (4) whether the administrators have interpreted the words at issue consistently, and (5) whether the interpretation is contrary to the clear language of the plan. The court held the administrator's decision was reasonable. The plan precluded reimbursement for nonmedical care. The beneficiary in this case was a quadriplegic, whose mother provided home nursing care. The record supported the administrator's conclusion that the mother's care was not medically related since it did not improve the beneficiary's condition. Furthermore, the court found that even it were medical care, the plan prohibited reimbursement for care given by a family member.
Inland
Empire Chapter of Associated General Contractors of America v. Dear,
1996 WL 73358 (9th Cir. 1996) -- Plaintiffs brought an action seeking
declaratory and injunctive relief against Washington and its Department of
Labor Industries. Washington's "Little Davis-Bacon Act" requiring
that workers on state public works construction projects must receive the
"prevailing rate." There is an exemption for state approved
apprenticeship programs. Plaintiff sought protection through the exemption, but
its applications were denied. Plaintiffs claim the state provisions denying the
exemption are preempted by ERISA. The court held "any law 'relates' to an
employee benefit plan, ... if it has a connection with or reference to such a
plan. Accordingly, Washington's apprenticeship scheme is preempted by ERISA.
San Francisco Culinary Bartenders and Service Employees Welfare Fund v. Lucin, 76 F.3d 295 (9th Cir. 1996) -- Lucin prevailed in an ERISA action brought by the Trust Fund, however, both the district court and the Court of Appeals denied Lucin's motion for attorneys fees. Subsequently, Lucin filed an action under California's wrongful attachment statute and again sought attorney's fees. The district court granted Lucin's attorneys fees in the wrongful attachment action and included in the award the fees and costs incurred by Lucin's in defending the ERISA action. It reasoned that in order to win the wrongful attachment action, the Lucin's necessarily had to prevail in the ERISA action. The Trust Fund's appeal claimed that where both the district and appellate court's deny fees under ERISA, a subsequent award pursuant to a state statute conflicts with ERISA and is preempted as a matter of law. The Ninth Circuit agreed with the Trust Fund. It held that "ERISA preempts an award of attorneys' fees for work done in an ERISA action when those fees are determined according to the standards of a state statute and the state standards differ from the standards applicable under ERISA." It stated five factors are to be considered in granting fees under ERISA: (1) the degree of opposing parties' culpability or bad faith; (2) the ability of opposing party to satisfy an award of fees; (3) whether an award of fees against the opposing parties would deter others from acting under similar situations; (4) whether the parties requesting fees sought to benefit all participants and beneficiaries of an ERISA plan or to resolve a significant legal question regarding ERISA; and (5) the relative merits of the parties. The statute does not use these factors, therefore the part of the award that is intended to grant fees for work performed in the underlying ERISA suit is preempted. The court was careful to note that ERISA is not implicated in a state law action that provides for attorneys fees. Thus, the part of the award that is attributable to the wrongful attachment action is separate from ERISA and an award of fees need not comply with ERISA standards.
Stewart v.
KHD Deutz of Am. Corp., 75 F.2d 1522 [15 L.R.R.M. (BNA) 2609] (11th
Cir. 1996) -- The Eleventh Circuit addressed (1) whether retirees are entitled
to a jury trial on their breach of collective bargaining claim under §301 of
the Labor Management Relations Act (LMRA); and (2) if so, whether the retirees
retain their right to a jury trial in a hybrid LMRA/ERISA action where the
amount of monetary relief sought under LMRA and ERISA are identical. Since the
LMRA does not provide a statutory right to jury trial, the Eleventh Circuit
reviewed this issue in light of the Seventh Amendment. A right to a jury trial
under the Seventh Amendment, a court must determine the claim and remedy is
legal in nature. Here, the court agreed with retirees that a claim under LMRA
§301 most resembles a breach of contract action, therefore the claim is
properly characterized as legal in nature. In addition, since the retirees
sought monetary compensatory damages, it is presumptively also legal in nature.
The court noted, however, that where a monetary damage is "incidental or
intertwined with injunctive relief," as is the case with monetary damages
under ERISA, it may be properly characterized as equitable. Nonetheless, the
court concluded that unlike ERISA, it has not interpreted LMRA §301 to be
equitable in nature. Furthermore, the court held that a hybrid LMRA/ERISA
action does not strip the plaintiff of the right to a jury trial. Relying on
the Supreme Court in Ross v. Bernhard, 396 U.S. 531 537, 90 S.Ct. 733, 738, 24
L.Ed.2d 729 (1970) for guidance, it determined the "Seventh Amendment
right to a jury trial is not abridged when equitable and legal issues are
joined in the same action."
Morstein
v. National Insurance Services, 1996 WL 39577 (11th Cir. 1996) -- Morstein, employer's president, filed an action in state court alleging
negligence, malfeasance, misrepresentations, and breach of contract. She
claimed defendant fraudulently induced her to purchase a health insurer policy
that did not cover pre-existing conditions. Defendant removed to the action to
federal court. The district court denied Morstein's motion to remand and
granted defendant summary judgment as to the state law claims. Rejecting
Morstein's claim that her state law actions are not related to the plan, the
Eleventh Circuit affirmed the district court's grant of summary judgment to
defendant.
