Employee Benefits Law Blog : Colorado ERISA Lawyer & Attorney : Vicki Johnson : Davis Graham & Stubbs Law Firm : Serving Denver, Boulder, Colorado Springs, Fort Collins

In Te’O v. Morgan Stanley & Co., 2009 U.S. App. LEXIS 2770 (10^th Cir. Feb. 11, 2009), the Tenth Circuit Court of Appeals articulated the standard of review for a third-party administrator who, under the plan, has discretion to determine eligibility for benefits.  A decision to deny benefits is reviewed under the arbitrary and capricious standand.  Applying this standard, a court will consider only the arguments and evidence presented to the third-party administrator at the time the decision was made and whether substantial evidence supported that decision.  The decision does not need to be the only logical one or even the best decision.  It need only be sufficiently supported by facts within the third-party administrator's knowledge to counter a claim that the decision was arbitrary and capricious.  The decision will be upheld unless it is not grounded on any reasonable basis. 

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In order to obtain attorneys' fees in the Tenth Circuit Court of Appeals under ERISA, 29 U.S.C. § 1132(g), a claim must have substantial merit or be one of great public importance.  Te’O v. Morgan Stanley & Co., 2009 U.S. App. LEXIS 2770 (10^th Cir. Feb. 11, 2009).

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The United States Supreme Court held in Kennedy v. Plan Administrator for Dupont Savings & Investment Plan, No. 07-636 (Jan. 26, 2009), that the plan administrator correctly relied on the plan language to determine that the deceased plan participant's former spouse was entitled to the plan benefits even though the spouse disclaimed the right to the benefits in her divorce decree but did not have a QDRO.

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In Weber v. GE Group Life Assurance Co., 541 F.3d 1002 (10^th Cir. 2008), the Tenth Circuit reversed an insurer’s denial of life insurance benefits holding that it’s interpretation of the plan was arbitrary and capricious. In this case, a full-time employee signed up for life insurance and then was unable to work full time, dying approximately two weeks later.   The insurer denied life insurance benefits concluding that the deceased did not meet the definition of an “eligible employee” because she had not worked at least thirty-hours after signing up for benefits. The plan defined an eligible employee as, among other things, someone who regularly works at least 30 hours per week. Applying the sliding-scale arbitrary and capricious standard of review applicable where the insurer also is the plan administrator, the Court held that since the employee had regularly worked 40 hours prior to signing up for insurance, she met the requirements of regularly working 30 hours.

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In order to show that a person interfered with an individual's right to receive an employee benefit, the individual must show that the person had a "specific intent" to interfere with the receipt of those benefits.  Fitzgerald v. Action, Inc., 521 F.3d 867, 871 (8th Cir. 2008).  This showing may be made with direct or circumstantial evidence.

In the absence of direct evidence, a court will apply the McDonnell Douglas burden shifting analysis applied to Title VII and ADEA cases.

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Section 510 of ERISA, 29 U.S.C. § 1140, makes it unlawful for any person to discriminate against an plan participant or beneficiary, or in some cases, an employer for exercising rights provided by an employee benefit plan, certain sections of ERISA. or the Welfare and Pension Plans Disclosure Act.

The text states, in relevant part,

"It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, this subchapter, section
    1201 of this title, or the Welfare and Pension Plans Disclosure Act  [29 U.S.C. 301 et seq.], or for the purpose of interfering with the  attainment of any right to which such participant may become entitled under the plan, this subchapter, or the Welfare and Pension   Plans Disclosure Act. It shall be unlawful for any person to discharge, fine, suspend, expel, or discriminate against any person because he has given information or has testified or is about to testify in any inquiry or proceeding relating to this chapter or the    Welfare and Pension Plans Disclosure Act. In the case of a multiemployer plan, it shall be unlawful for the plan sponsor or any other person to discriminate against any contributing employer for exercising rights under this chapter or for giving information or testifying in any inquiry or proceeding relating to this chapter  before Congress."

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In Hahnemann University Hospital v. All Shore, Inc., 514 F.3d 300 (3rd. Cir. 2008), the court held that the provision permitting awards of attorneys' fees in an ERISA action, 29 U.S.C. § 1132(g)(1), restricts a court to awarding attorneys' fees incurred in formal judicial actions only, and not attorneys' fees incurred for the pre-litigation process.

The court's holding is consistent with that of five other circuit courts of appeals:  the 2nd, 4th, 6th, 8th, and 9th circuits.

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In Hahnemann University Hospital v. All Shore, Inc., 514 F.3d 300 (3rd. Cir. 2008), the court held that the provision permitting awards of attorneys' fees in an ERISA action, 29 U.S.C. § 1132(g)(1), restricts a court to awarding attorneys' fees incurred in formal judicial actions only, and not attorneys' fees incurred for the pre-litigation process.

The court's holding is consistent with that of five other circuit courts of appeals:  the 2nd, 4th, 6th, 8th, and 9th circuits.

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In a much anticipated decision, the United States Supreme Court held yesterday that an individual participating in a defined contribution plan, such as a 401(k), can sue under ERISA section 409(a) for individual damages caused by breach of fiduciary duty by the plan administrator, when such fiduciary breach impaired the value of the assets in the individual's account.  See LaRue v. DeWolff, Boberg & Assocs., Inc., No. 06-856 (S. Ct. Feb. 20. 2008).

In this case, the plaintiff claimed that the plan administrator failed to make requested changes to his investment choices, causing approximately $150,000 in losses.  Section 409(a) imposes fiduciary duties for management, administration, and investment of fund assets.  

Prior to this case, it was generally believed that under ERISA Section 502(a)(2) individuals could not sue for individual monetary relief for a breach of fiduciary duty, as compared to suing for equitable relief awarded to the plan.  The Supreme Court made held that in circumstances involving a defined contribution plan (such as a 401(k)), as compared to a defined benefit plan (such as a pension), individuals can sue in circumstances involving the statutory duties imposed by section 409(a).   

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