No Statutory Penalties for Failure to Participate in Litigation Discovery

ERISA imposes a statutory penalty of $110 per day if a plan administrator fails to provide certain plan documents at the request of a plan participant.  See 29 U.S.C. § 1132(c)(1).  A court has held that a refusal to produce such documents in response to a litigation discovery request does not trigger the statutory penalties.  See Kujanek v. Houston Poly Bad I, Limited, No. 10-20664 (5th Cir. Sept. 27, 2011).

Dentist's Termination of Talkative Hygenist Deprived Her of Retirement Benefits In Violation of ERISA § 510

A talkative dental hygienist established that her termination was motivated by her employer's desire to avoid funding her retirement plan.  Her employer, a dentist, claimed that he fired the hygienist because he'd received numerous client complaints about her excessive talking.  The court said that even if the dentist had received these complaints, the evidence established that another reason for her termination was the dentist's desire to avoid funding her retirement fund to make up for losses to the fund in 2008.  Since ERISA § 510, requires an employee to show that a motivating factor in her termination was to avoid paying employee benefits, and not that it was the sole reason, the dental hygienist succeeded on her claims that her termination violated § 510.  See Virga v. Robert T. Harrison D.D.S., P.C., 2011 U.S. Dist. LEXIS 45422 (Apr. 27, 2011).

If An ERISA Breach of Fiduciary Duty Claim Seeks Individual Recovery (Not Recovery on Behalf of the Plan) Only Equitable Remedies May Be Available

ERISA, through §1132(a)(2), allows an individual to bring a claim for breach of fiduciary duty under 29 U.S.C § 1109.  Section 1109 is read to require that the individual sue in her representative capacity on behalf of the plan.  See 29 U.S.C. § 1132(a)(2).  If the claim of breach of fiduciary duty seeks relief for the individual and not the plan, it falls under § 1132(a)(3) and ERISA limits the individual's remedies to equitable relief.  See 29 U.S.C. § 1132(a)(3).  Thus an individual cannot obtain for herself monetary recovery for a claim of breach of fiduciary duty.  An exception would be if the equitable relief seeks money belonging to the individual that was wrongfully withheld or obtained by the fiduciary.  See Kenseth v. Dean Health Plan, Inc., 610 F.3d 452, 481-82 (7th Cir. 2010).

In contrast, if an individual makes a claim for benefits, she is entitled to monetary recovery under § 1132(a)(1)(B).




Dodd-Frank Registration Requirements for Appointed Governmental Pension Plan Board Members

Ice Miller LLP provides a good analysis of the temporary rules for when appointed/non-ex officio board members of governmental pension plans should register with the SEC and MSRB.  See

Death After Driving Drunk May Be "Accidental" Under Accidental Death Policy

If an accidental death insurance policy does not specifically exclude from the definition of "accident" death resulting from driving under the influence of drugs or alcohol, plan administrators may be subject to reversal in court if they deny coverage on that ground.  See Meek v. Zurich N. America Ins. Co., 704 F.2d 1069 (D. Colo. Mar. 8, 2010), and the cases cited therein for a discussion of the issue.

ERISA Did Not Preempt A Court's Evaluation of State Law Damages

ERISA preemption cases can be pretty technical and, frankly, quite boring.  This case deserves mention for the novel argument made by the employee in his lawsuit for damages.  His lawsuit claimed that his employer or someone with the plan misrepresented facts about one of two benefits plan he was to choose between.  The fundamental problem with the employee's lawsuit is that he picked the richer benefit plan and suffered no damages as a result of the misrepresentation.  

To get around this problem, he claimed that that ERISA preempted the court from evaluating whether he suffered any damages.  (As an aside, I don't understand his argument and the court's opinion does not provide any elaboration.)  The court rejected the preemption argument holding that the court's evaluation of damages in this case is not preempted by ERISA because it did not implicate the structure or administration of the plan, did not affect the type of benefits offered or impose rules for calculating benefits.  To review this case, see Carroll v. Los Alamos Nat'l Security, LLC et al., 2011 U.S. App. LEXIS 1267 (10th Cir. Jan. 19, 2011). 

Termination After Unsolicited Complaints About Benefit Plan Not Retaliation

Shortly after an employee complained about problems with an employer's benefit plan, she was terminated.  She sued claiming retaliation under ERISA Section 510.  The case was quickly dismissed because the court determined that unsolicited generalized complaints are not protected under ERISA's anti-retaliation statute, Section 510.  Instead, the information provided must have been given after someone approached the employee and she was asked to provide information. For anyone interested in reading this case, it is Edwards v. A.H. Cornell & Son, 610 F.3d 217 (3rd Cir. 2010).

Standard for Discovery in ERISA Cases With a Conflict of Interest

In Murphy v. Deloitte & Touche Group Ins. Plan, 2010 WL 3489673 (10th Cir. Sept. 8, 2010), the Tenth Circuit Court of Appeals discussed the scope of discovery permitted where there exists a dual role conflict of interest, meaning that the plan administrator or fiduciary also funds the ERISA plan. The court set forth the general rule  that claims under ERISA are limited to a review of the administrative record and discovery outside the administrative record generally is inappropriate.  The court held that an exception permitting “extra record discovery” may be permitted when there is a dual conflict of interest.

   In articulating the standard for applying the exception, the court court cautioned that neither party “should be allowed to use discovery to engage in unnecessarily broad discovery that slows the efficient resolution of an ERISA claim. In fact . . . discovery related to a conflict of interest may often prove inappropriate.” Id. at *8.  The plaintiff bears the burden of showing that a extra-record discovery is appropriate.

   The court articulated factors to be considered by the court that mitigate against board discovery: (1) ERISA "seeks to ensure a speedy, inexpensive, and efficient resolution of those claims” and while discovery may be necessary to allow a plaintiff to ascertain and argue the seriousness of the administrator’s conflict, the rules permitting discovery (Federal Rule of Civil Procedure 26(b)) is not “a license to engage in an unwieldy, burdensome, and speculative fishing expedition” and (2) “in determining whether a discovery request is overly costly or burdensome in light of its benefits, the district court will need to consider the necessity of discovery.” Id. at *9. The court provided examples when the burden and costs of discovery outweighs the benefits: (a) when the administrator's “financial interest is obvious” (b) when “the substantive evidence supporting a denial of a claims is so one-sided that the result would not change even giving full weight to the alleged conflict,” and (c) when a district court is able to evaluate the thoroughness of the administrator’s review based on the administrative records. Id.

Oral Representations Did Not Modify Written Terms of a Plan

In an unpublished opinion, Watson v. Consolidated Edison Co. of New York, Inc., 2010 WL 1564654 (2nd Cir. Apr. 20, 2010), the Second Circuit Court of Appeals held that claims related to an employer's and plan administrator's oral promises failed because the oral promises contradicted the plan's unambiguous terms.

The court stated that because ERISA requires a written employee benefit plan, oral promises are unenforceable under ERISA and cannot vary the terms of the plan. 

Watson was decided in the context of a claim for breach of fiduciary duty based on an ERISA fiduciary making oral statements that misrepresented the terms of the plan.  The court stated, based on Second Circuit case law, that a plan administrator has a fiduciary duty to not make material misrepresentations regarding the availability of future plan benefits.  If an ERISA fiduciary makes guarantees regarding future benefits that misrepresents present facts, the statements are material if they would induce a reasonable person to rely on them.  The court stated based on Second Circuit case law that the party alleging a breach of fiduciary duty must point to a written statement purporting to alter the terms of the plan.  When a party instead points to an oral statement that contradicts the unambiguous terms of the plan, the party does not have a claim for a breach of fiduciary duty because it was not reasonable for them to rely on an oral statement that contradicts the terms of the plan.


ERISA Preempts Utah Insurance Regulation Governing Discretionary Review Clauses

In Hancock v. Metropolitan Life Ins. Co., 590 F.3d 1141 (10th Cir. 2009), the Tenth Circuit Court of Appeals held that ERISA preempts a Utah regulation governing the format of clauses in insurance policies that give an employee benefit plan administrator discretion when interpreting the plan terms and awarding benefits. The Utah regulation imposed a ban on such "reservation-of-discretion clauses" in insurance policies with an exception for employee benefit plans governed by ERISA.  The regulation provided that ERISA employee benefit plans must contain certain language and be in at least 12 point bold font.  

The Tenth Circuit held that ERISA preempted the Utah regulation because it did not meet the second part of the Miller test for determining whether a state law regulates insurance.  See Kentucky Ass'n of Health Plans v. Miller, 538 U.S. 329, 342.  If both parts of the Miller test are met, the rule falls within ERISA's savings clause, 29 U.S.C. § 1142(b)(2)(A), exempting from ERISA preemption states laws relating to employee benefit plans that regulate insurance, banking or securities.  The second part of the Miller test requires a state law to substantially affect the risk pooling arrangement between the insurer and the insured in order for the state law to be found to regulate insurance.  The court in Hancock held that the Utah regulation did not substantially affect the risk pooling arrangement because it related more to the form, not the substance of the discretionary clause.  The Utah rule did not remove the option of insurer discretion and thus did not affect who gets the risk pool or prescribe conditions under which insurers must pay for assumed risks. As a result, the court held that the Utah rule was preempted by ERISA.  The Court noted that if the Utah rule had imposed a blanket prohibition on the use of discretion-granting clauses, this would be a different case.