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Degnan v. Publicker Industries, 83 F.3d 27 (1st Cir. 1996)-- Plaintiff sued in state
court for misrepresentation, alleging that Defendant induced him
into taking early retirement and then breached their promise to
pay him full retirement benefits. Defendant removed the case to
federal court. The Plaintiff never asked the district court for
permission to amend and the action was dismissed. The circuit
court stated that though normally that would be the end of the
matter, the appellate court did have the power, in the interest
of justice, to grant leave to amend. The court decided to invoked
the exception because two weeks before oral argument the Supreme
Court issued their opinion in Varity Corp. V. Howe. The court
cited the fact that ERISA is a remedial statute designed to
protect the interests of plan participants and beneficiaries and
remanded the case with directions to grant Plaintiff permission
to file an amended complaint.
Sullivan v. LTV Aerospace and Defense Co., 82 F.3d 1251 (2d Cir. 1996)-- Download in RTF-Plaintiffs are
former employees of LTV who were terminated in November of 1990
who brought suit for severance benefits. In 1987, LTV was
operating under Chapter 11 of the Bankruptcy Code. LTV instituted
a Key Employee Retention Plan (KERP) in order to attract and
retain employees. The KERP was to provide severance benefits to
employees terminated under certain circumstances. The plan was
unfunded. Under the terms of the plan, if an employee was
terminated as a result of downsizing, the employee would receive
a severance package of two years pay and certain health and
welfare benefits. Downsizing was defined as occurring if within
any consecutive six month period the number of employees is
reduced by more than twenty percent. The Plaintiffs were
terminated in November 1990 but the twenty percent threshold was
not reached until January 21, 1991. The Plaintiffs interpreted
the plan language as including members who are discharged during
the six month period culminating in the twenty percent downsizing
and brought this action. The district court allowed the case to
be tried to a jury which awarded Plaintiffs a total of
$960,116.93 plus interest. The district court adopted the jury
findings of fact in the event that the Second Circuit determined
there was no right to a jury trial. On appeal the circuit court
determined that, in cases where the plan administrator is shown
to have a conflict of interest, there was a two prong test for
determining if the administrator’s interpretation was
arbitrary and capricious: first, whether the determination by the
administrator is reasonable and second, whether the evidence
shows that the administrator was in fact influenced by the
conflict of interest. Therefore, based on the facts, the court
affirmed the district court’s denial of the Defendant’s
motion for summary judgment. However, regarding the district
court’s denial of Defendant’s motion to strike
Plaintiff’s jury demand, the court stated that the Second
Circuit now joins its sister circuits and decides that there is
no right to a jury trial in a suit brought to recover ERISA
benefits. Additionally, the court found that Plaintiff’s
jury instructions were improper and that the burden of proving
that the conflict of interest affected the administrator’s
decision rests with the Plaintiffs. Finally, the court found that
the proper standard in an ERISA suit is the “preponderance
of the evidence” standard. Therefore, the court remanded the
case to the district court to reconsider its findings following
the two factor test with the burden of proof falling on
Plaintiffs to prove their case by a preponderance of the
evidence.
Trans World Airlines, Inc. v. Sinicropi, 1996 U.S. App. LEXIS 11821 (2d Cir. 1996)--Download in RTF-Plaintiffs TWA
and certain members of the Retirement Board alleged that
Defendant Sinicropi and other members of the Board erred in
deciding certain pension claims. The district court held that
since the Board was interpreting a pension plan established by
agreement between TWA and the collective bargaining
representative of TWA's pilots, the proper standard of review was
that of the Railway Labor Act ("RLA"), rather than
ERISA. Using this standard, the district court granted summary
judgment for the defendants. Plaintiffs' appealed, contending
that ERISA applied. Defendants cross-appealed, contending that
although the Board's decision was not reviewable under ERISA
standards, the district court erred in refusing to award them
attorney's fees and costs under ERISA. The Second Circuit
rejected both challenges and affirmed the district court’s
decision.
Kowalski v. L & F Products, 82 F.3d 1283 (3d Cir. 1996) -- At issue is whether
Plaintiff has a cause of action under § 510 for retaliatory
termination notwithstanding the fact that she had received her
benefits prior to being terminated. Plaintiff, as a result of
surgery on her feet, was on short term disability.
Defendant’s human resource manager hired a private
investigator to determine whether Plaintiff was actually disabled
and entitled to the benefits she was receiving. The
investigator’s report stated that Plaintiff had been
cleaning professional offices during her medical leave of
absence. Relying on the report, Defendant fired Plaintiff.
Defendant’s human resource manager testified that it is
important to consider an employee’s version of event before
terminating the employee, however, he refused to consider
Plaintiff’s statements that she owned a cleaning service but
did not engage in providing cleaning serves herself during the
period of her disability. The district court granted
Defendant’s motion for summary judgment on the grounds that
(1)Plaintiff failed to show Defendant’s nondiscriminatory
reason for termination was pretextual and (2) Plaintiff failed to
offer evidence that Defendant’s intended to retaliate
against her for exercising her right to medical leave benefits.
On appeal, the circuit court found that, as a threshold matter,
the Plaintiff has a cause of action under § 510 even though she
received her ERISA-protected benefits prior to termination.
Smith v. Texas Children’s Hospital, 1996 U.S. App. LEXIS 11331 (5th Cir. 1996)--
Plaintiff, diagnosed with multiple sclerosis, claimed disability benefits. Plaintiff
filed in state court. Defendant removed. District Court remanded Plaintiff's fraudulent
inducement claims. Defendant appealed claiming that the Plaintiff's First Amended Complaint
did not restate a fraudulent-inducement claim, and, even if it
did, ERISA preempted the claim. Because of ambiguities
regarding Plaintiff's First Amended Complaint, as well as the
nature of Plaintiff's state-law claims, and considering the
possible relevance of the Supreme Court's recent decision in Varity Corp. v. Howe, 516 U.S. 489
(1996), the circuit court vacated the district
court's remand order and remanded the case to the district court. See
detailed analysis.
Central States, Southeast and Southwest Areas Pension
Fund v. Central Cartage Co., 1996
U.S. App. LEXIS 12330 (7th Cir. 1996)-- Plaintiff sued pursuant
to § 510, claiming Defendant failed to fulfill its contractual
obligation to pay employer contributions to the plaintiffs'
pension fund. A year after Plaintiff sued, Defendant moved to
compel Alternative Dispute Resolution (ADR). The district court
denied Defendant's motion and Defendant appealed, arguing that
the denial was an interlocutory judgment analogous to an
injunction. In support, Defendant claimed that it would be
subject to increased costs if the case was not sent to ADR. The
court said that a denial to order ADR was a procedural decision
and to find otherwise, there must be serious, irreparable
consequences, which was not found in the instant action. The
Seventh Circuit declined to follow the Fourth and Eighth
Circuits, stating that costs are not irreparable harm and an
order which imposes costs but does not affect the merits of the
case is not appropriate for an interlocutory appeal.
Independent Construction Equipment Builders Union v.
Hyster-Yale Materials Handlings, Inc., 1996 U.S. App. LEXIS 11414 (7th Cir. 1996)-- In 1988
the Union and Hyster entered into an agreement to resolve a labor
dispute. Under the terms of the agreement, members retiring on or
after January 1, 1989 receive $ 17.00 per month for each year of
membership service; members retiring on or after January 1, 1990
receive $ 17.50 per month for each year of membership service;
and members retiring on or after January 1, 1991 receive $ 18.00
per month for each year of membership service. Plaintiffs are all
former Hyster employees whose employment was terminated on
December 17, 1990 when Hyster sold and transferred ownership of
its assets to United Dominion Industries, Inc. Therefore,
according to the district court, on December 17, 1990, the
Plaintiffs ceased being employees of Hyster, ceased being active
members of the plan, and became "former employees."
Plaintiffs claim they did not retire until after 1/1/91 and are
entitled to the higher multiplier. The court ruled that because
the Plaintiffs were not active members, but former members, of
the plan when they retired, they were not entitled to the $18.00
multiplier. The Plan language in issues states, "plus $ .50
increase per year of service effective 10/1/90 for employees
retiring after 1/1/91." The circuit court stated that the
term "employee" was unambiguous and that the
plaintiffs, because they were terminated in December 1990, were
not employees of Hyster at the time they retired. Accordingly,
the Court affirmed the district court's ruling in favor of
Hyster.
Lynn v. CSX Transportation, Inc., 1996 U.S. App. LEXIS 11906 (7th Cir. 1996)-- At issue
is the question of whether a release from liability signed by an
employee in exchange for participation in an early retirement
program is void in light of the anti-alienation provision of
ERISA. Plaintiff was a participant in an early retirement plan
and signed a release, releasing Defendant from any and all claims
arising later. Years later, Plaintiff challenged the pension plan
calculation of his years of service in general, and particularly
its finding that his two years of military service would not be
counted. The district court refused to rule on Plaintiff's claim
regarding his two years of military service, holding that, as a
result of the release, this was a "contestable claim"
and granted summary judgment for Defendant. Relying on the plain
language of the plan documents, the Circuit Court affirmed the
district court's grant of summary judgment for the Defendant over
plan's basic calculation of Plaintiff's years of service.
However, the Court did review the military service clause. This
clause stated that a plan participant who left the company to
enter the armed forces would receive pension credit for the
period of military service if the participant returned to the
company within 90 days of discharge from the military. The court
stated that the provisions of the release were in direct conflict
with the anti-alienation provisions of ERISA (29 U.S.C. section
1056(d)(1)) which states that "each pension plan shall
provide that benefits provided under the plan may not be
alienated or assigned," and the coordinating section of the
Internal Revenue Code states that "[a] trust shall not
constitute a qualified trust under this section unless the plan
of which such trust is a part provides that benefits provided
under the plan may not be assigned or alienated." 26 U.S.C.
section 401(1)(13). The court stated that pension entitlements
are, without exception, subject to the anti-alienation provision
of ERISA. However, contested pension claims are outside the realm
of the provision. The court explained that a pension entitlement
arises under the terms of the pension plan itself while a
contested pension claim arises under a settlement agreement.
Finally, the court stated that a release may prevent a plan
participant from asserting claims based on a settlement
agreement, but may not bar claims based on pension entitlements.
The court found that because the Plaintiff was not represented by
lawyer and did not negotiate the agreement, instead signing a
standard form, he did not knowingly relinquish his claim.
Additionally, the Plaintiff was not asking the court to interpret
the language of the resignation agreement but the language of the
pension plan itself. Finally, the court remanded the case back to
the district court, stating that it may well be that Plaintiff
has no claim for his two years of military service, but it must
be the plan which dictates that result, not the release.
Rush v. Martin Petersen Co., Inc., 1996 U.S. App. LEXIS 11217 (7th Cir. 1996)-- Plaintiff
began working as an office manager for Defendant in 1962.
Plaintiff's duties included the preparation of monthly reports
listing all employees in the pension plan and the number of hours
they worked. Defendant contributed to the fund not only for union
employees but also on behalf of Plaintiff who was not union. In
1986, the pension fund informed Defendant that only union members
were eligible to participate in the plan; Defendant could choose
to either file an application for a classwide exception to the
plan's eligibility requirements, or request a refund of all
erroneous contributions to the fund. Defendant requested a refund
of the contributions made on behalf of Plaintiff since 1966. In
1972, Defendant established a profit-sharing plan for nonunion
employees and began to make contributions to the new plan on
Plaintiff's behalf. When Plaintiff retired in 1987, he received a
lump-sum payment of about $ 96,000 from the profit-sharing plan.
Plaintiff filed an action alleging breach of fiduciary duty based
on an alleged oral promise made in 1966. At trial, Plaintiff
presented evidence that someone had told him he would receive a
retirement benefit in the form of an annuity and this benefit was
somehow related to the pension plan, but the court found his
evidence contradictory. The court found that the benefit
Plaintiff received under the profit-sharing plan was a lump-sum
cash payment of $ 96,000, while the benefit to which he would
have been entitled under the union pension plan was a stream of
future payments with a present cash value of about $ 30,000. The
district court found that Plaintiff's claim for breach of
fiduciary duty was barred by ERISA's three year statute of
limitations. The circuit court affirmed, stating that the
statutory period begins to run, not when a violation or breach
occurs, but when the person harmed acquires "actual
knowledge" of the occurrence. Because Plaintiff was the
person who calculated the monthly payments to the fund, it would
have been difficult for Plaintiff to avoid knowing that
contributions were no longer being made on his behalf.
Wolin v. Smith Barney Inc., 1996 U.S. App. LEXIS 10866 (7th Cir. 1996)--
Plaintiff, as trustee, brought this action against the Defendant,
alleging breach of fiduciary duties. Plaintiff alleged that
Defendant had advised the trustees to make risky, illiquid
investments while assuring them that the investments were liquid
and safe. The district court found that Defendant was a fiduciary
because, as an investment advisor, it (1) rendered advice
pursuant to an agreement; (2) was paid for the advice; and (3)
had influence approaching control over the plan's investment
decisions. Therefore, Defendant had a duty not to mislead
Plaintiff. Evidence showed that the investment recommended by
Defendant clearly stated in simple, lucid, prominent, and
unmistakable language that the investments were risky and
illiquid. Consequently, Plaintiff, as trustee, had breached its
own fiduciary duty. ERISA's statute of limitations for suits
against fiduciaries does not begin to run at the time of injury,
but instead at the time that the prospective plaintiff acquires
actual knowledge of the breach of fiduciary obligation, which may
precede any injury. Because the circuit court found no fraudulent
concealment, the three-year statute of limitations applied, and
the circuit court affirmed the summary judgment for the Defendant
based on the statute of limitations.
Maune v. International Brotherhood of Electrical
Workers, Local #1, Health and Welfare Fund, 1996 U.S. App. LEXIS 11180 (8th Cir. 1996)--Record
contained ample support for ERISA fund's decision that surgery to remove silicon
breast implants was not medically necessary; court erred, however, in granting
fund's motion for attorneys' fees; claim was serious and legally debatable.
Southern Council of Industrial Workers v. Ford, 1996 U.S. App. LEXIS 11210 (8th Cir. 1996)--Defendant,
a beneficiary under the Southern Council plan, received $150,000
in a personal injury recovery. The plan contained a subrogation
clause. The plan claimed a subrogation right to $39,971.35 for
medical benefits paid by the plan. Prior to settlement, both
Plaintiff and her attorney had signed a subrogation agreement
with the plan. However, the plan only received $10,000 after the
money was released to Plaintiff. The plan brought a claim against
the Defendant and her attorney claiming, among other things, a
breach of fiduciary duty to the plan. The district court, finding
that neither the Defendant nor her attorney was a fiduciary, held
that the court lacked subject matter jurisdiction and dismissed
the action. The circuit court reversed, stating federal courts
have exclusive jurisdiction over civil actions brought by
fiduciaries for equitable relief to enforce, or redress
violations of, terms of ERISA plans. Because both Ford and her
attorney had signed the subrogation agreement and failed to
comply with a term of the plan, the court had subject matter
jurisdiction.
Wald v. Southwestern Bell Corp. Customcare Medical
Plan, 83 F.3d 1002 (8th Cir.
1996)-- Plaintiff was a participant in a self-insured employee
benefit plan sponsored by Southwestern Bell. The plan excluded
benefits for charges for actual or attempted impregnation or
fertilization. Plaintiff decided to undergo gamete
intra-fallopian transfer (GIFT) in an attempt to become pregnant.
In preparation for the GIFT procedure, Plaintiff received
medications called Lupron and Pergonal in January 1992 to
increase production of the egg follicles to be harvested during
the procedure. On February 5, Plaintiff underwent the GIFT
procedure. During surgery, excessive follicles on Plaintiff's
ovaries were discovered. Plaintiff's doctors aspirated the
follicles as part of the GIFT procedure. The Lupron and Pergonal
caused Plaintiff to develop ovarian hyperstimulation syndrome, a
serious medical condition, and she remained in the hospital until
February 20, 1992. Because of the condition she developed,
Plaintiff would have needed the procedure to aspirate the
follicles regardless of whether she underwent the complete GIFT
procedure. Plaintiff filed a claim for medical benefits to cover
the services. Defendant Prudential initially denied the claims
related to both the GIFT procedure and Plaintiff's subsequent
hospitalization, reasoning that the plan did not provide coverage
for actual or attempted impregnation or fertilization or for any
resulting complications. Upon reconsideration, however,
Prudential determined that because the ovarian hyperstimulation
was a direct consequence of the Pergonal, an eligible medication,
coverage would be provided for the hospitalization from February
6 through February 20. Prudential continued to deny coverage for
the hospital and physician charges incurred on February 5,
stating that those charges involved actual or attempted
impregnation or fertilization. After her administrative appeal
was denied, Plaintiff's doctor sent a letter to Prudential in
which he explained that the February 5 charges would have been
incurred to treat Wald's reaction to Pergonal, whether or not the
GIFT procedure was performed. Prudential reviewed the letter, but
did not change its decision. The district court denied
Plaintiff's motion to amend her complaint under 502(a)(2) and
502(a)(3) to allege breach of fiduciary duty and granted summary
judgment for the plan. The circuit court affirmed the denial of
Plaintiff's motion to amend. The court stated that no individual
cause of action existed under 502(a)(2). Also, because Plaintiff
is provided adequate relief by her right to bring a claim for
benefits under section 502(a)(1)(B), and she seeks no different
relief in her amended complaint, equitable relief would not be
appropriate in her case. The court rejected Plaintiff's assertion
that Defendant failed to use judgment in rendering its decision
or that its decision was arbitrary. Finally, the court concluded
that Defendant's decision to exclude benefits for the procedure
was reasonable and thus must be upheld.
Glavor v. Shearson Lehman Hutton, Inc., 1996 U.S. App.
LEXIS 11581 (9th Cir. 1996)-- Plaintiff was employed by Shearson
Lehman Brothers until he left work due to a disability after his
last day on March 31, 1988. Plaintiff filed a claim for LTD
benefits on April 29, 1988. However, Shearson had merged with
Hutton in the meantime, resulting in a change in the plan
benefits. Prior to March 31, 1988, a beneficiary could claim LTD
benefits until age 65. On May 19, 1988, Shearson adopted the new
plan, purporting to be effective retroactively to April 1, 1988,
under which payment of benefits for any mental, nervous, or
emotional condition was limited to a total of four years.
Plaintiff was informed in December that his claim had been
approved. Included in his notification was a form stating that
the limit for his benefits was the date of his 65th birthday.
After four years, Plaintiff’s LTD benefits were
discontinued. Plaintiff filed in state court and the action was
removed to federal court. Plaintiff filed for leave to amend his
complaint which the district court granted. Plaintiff’s
second leave to amend to add claims under 29 U.S.C. § 1132(a)(1)(B) was denied but the court granted his third leave to
amend to add claims under section1132(c) for failure to furnish
information to a plan beneficiary upon request. The circuit court
affirmed the district court’s denial of Plaintiff’s
second motion to amend, finding Plaintiff’s second motion to
amend futile because the documents Plaintiff submitted to prove
“coverage in force” did not establish a de factor plan
under ERISA. The court also found Plaintiff’s claims of
estoppel futile. Additionally, the court found that
Plaintiff’s section 1132(c) claims were barred by a three
year statute of limitations. The court stated that
Plaintiff’s cause of action accrued, at the latest, 30 days
after Defendant failed to respond to his request for information.
McClure v. Life Insurance Co. of North America, 1996 U.S. App. LEXIS 11801 (9th Cir. 1996)--Defendants
appeal from summary judgment in favor of the plaintiff based on
the district court's holding that the "process of
nature" rule was not preempted by ERISA; that state laws
apply; and that Nevada would adopt the "process of
nature" rule. The circuit court reversed the district
court's ruling, holding that ERISA preempted all claims.
Plaintiff was a firefighter who participated in a long term
disability plan. He attributed his disability to an accident in
November of 1988. However, prior to the accident, Plaintiff had
been seeing a neurosurgeon, complaining of back pain, though he
had never modified any of his job duties as a result of this
pain. After the accident, Plaintiff was not able to perform the
physical duties required by his job but continued to perform
light duties. In October 1989, he was forced to stop working, as
no light duty was available. Both parties stipulated that the
accident was the proximate cause of the eventual total
disability. The plan contained a clause stating that to be
considered disabled, the claimant must be unable to perform every
duty of his occupation. On appeal, Defendant argued that
Plaintiff was not disabled because there were some duties of his
occupation that he could still perform. The court found the word
"every" ambiguous. Relying on the rule that ambiguous
language is construed against the insurer and in favor of the
insured under ERISA, the court construed the term in favor of the
Plaintiff. Defendants also claimed that Plaintiff was barred from
recover because his preexisting back condition disqualified him
from recovering. The court first cited the Fourth Circuit test
requiring a two-pronged analysis, (1) whether there is a
pre-existing disease, pre-disposition, or susceptibility to
injury; and (2) whether this pre-existing condition,
pre-disposition, or susceptibility substantially contributed to
the disability or loss. The court then cited a California
district court case which allowed recovery when the limiting
clause was inconspicuous and the plaintiff could show that the
accident was the predominant, as opposed to remote, cause of the
injury. The court concluded that because neither party had
submitted to the court a copy of the policy containing the
clause, the court was unable to determine whether the Fourth
Circuit two-prong test should be applied or the district court's
"inconspicuous" test. Therefore, the court remanded the
case back to the district court for determination of whether the
limiting language was conspicuously displayed in the policy.