Employee Benefits

In ERISA action seeking reversal of defendants’ denial of plaintiff’s application for medical coverage for her disabled, adult son, Dist. Ct. did not err in finding that defendants’ denial was unreasonable since defendants based denial on document that was not in effect at time defendants claimed plaintiff should have sought instant enrollment. However, Dist. Ct. erred in granting portion of plaintiff’s motion for summary judgment seeking immediate enrollment of her son where question remained as to whether plaintiff’s son was eligible for coverage under applicable language of plan. Ct. also reversed Dist. Ct.’s imposition of statutory penalties regarding defendant’s delay in tendering copies of certain plan documents where defendants did not rely on said documents when denying plaintiff’s application. Ct. also remanded for reconsideration plaintiff’s request for attorney fees in light of fact that plaintiff was only partially successful in obtaining relief.

Record contained sufficient evidence to support Dist. Ct. judgment in favor of plaintiff-plan participant in ERISA action alleging that plaintiff incurred losses when defendants-retirement plan trustees breached their fiduciary duty in managing ERISA plan, where assets of plan were comprised of stock in plaintiff’s employer’s closely held corporation, and where said stock severely deprecated in value throughout time of plaintiff’s participation in said plan. While express duty to diversify did not apply to instant Eligible Individual Account Plan, defendants nevertheless breached their duty of prudence to plaintiff since: (1) prudent investor would not have remained 98% invested in said company stock; and (2) defendants were in position to know that core business model of said company was seriously undermined throughout relevant time period. Ct. further found that section 404(c), which renders fiduciaries non-liable for plan losses attributable to participant’s own investment decisions, did not apply. Ct., though, remanded matter for new damages calculation in order to account for gradual withdrawal of company stock, rather than total sale of said stock at any specific point in time.

Dist. Ct. erred in granting defendants-plan administrators’ motion for summary judgment in ERISA action alleging that defendants allowed instant 401(K) plan to incur excessive expenses in rems of investment drag and transactional drag that caused plaintiffs’ investments in two company stock funds to underperform by $83.7 million over seven year period. Record did not support Dist. Ct.’s finding that defendants made reasoned decisions regarding plaintiffs’ proposal to reduce investment and transactional drag. Dist. Ct. also erred in granting defendants’ motion for summary decision on plaintiffs’ claim that defendants awarded plan’s record-keeper extension on contract without seeking bids for said services from other potential record-keepers where Dist. Ct. improperly discounted opinion of plaintiffs’ expert, who stated that competitive bidding would have saved each plan participant $16 per year had competitive bidding been done. (Partial dissent filed.)

Dist. Ct. did not err in confirming arbitrator's finding that defendant-employer did not owe plaintiff-pension fund any withdrawal liability even though defendant ceased its operations by selling its company to third-party, which in turn resumed pension payments on behalf of employees in said company. Under 29 USC section 1384(a)(1), defendant is not responsible for withdrawal liability where, as here, purchaser began making required contributions to fund and posted bond. Moreover, arbitrator could properly find that instant sale of business was not part of overall plan to withdraw from business through incremental divestitures of business.

Dist. Ct. did not err in dismissing portion of plaintiff's ERISA action seeking damages associated with medical bills incurred by plaintiff while undergoing bypass surgery, where plaintiff alleged that defendant-benefit plan preauthorized said surgery but then notified plaintiff after his surgery that said surgery was not covered under medical plan. Plaintiff could not obtain legal relief in form of monetary damages under section 502(a)(1) of ERISA since plaintiff conceded that instant plan did not cover said surgery. However, plaintiff could seek certain forms of equitable relief, and Dist. Ct. erred in dismissing portion of complaint seeking declaratory and injunctive relief in terms with respect to defendant's alleged practice of delaying responses to preauthorization requests or misleading plan participants into believing that preauthorization constituted determination that claim will be paid.

Dist. Ct. did not err in granting plaintiff-pension fund's motion for summary judgment in ERISA action to collect unpaid contributions to fund plan even though defendant-employer had re-entered fund based upon oral agreement with president of union that defendant could withdraw from fund without incurring withdrawal liability upon expiration of collective bargaining agreement (CBA). Defendant was required to pay contribution beyond expiration of CBA and up to date of new CBA since oral agreement was not memorialized in prior CBA, which contained evergreen clause stating that all terms in CBA would remain in effect until new CBA was negotiated, and defendant had signed Participation Agreement requiring defendant to pay contributions to fund in accordance with terms of CBA. Moreover, LMRA and ERISA prevented Dist. Ct from giving force to oral understanding between union and defendant that contradicted prior written agreement.

Dist. Ct. did not err in granting defendant-plan's motion for summary judgment in ERISA action alleging that defendant improperly calculated amount of plaintiff's compensation used to determine benefit figure under instant Top Hat supplemental pension plan by failing to include stock-linked payments made to plaintiff. Language in plan contained clause excluding bonuses as part of compensation formula used to calculate benefit, and defendant did not act arbitrarily in finding that stock-linked payments were classified as bonuses since said payments were discretionary and were not made pursuant to any contract.

Record failed to contain sufficient evidence to support ALJ's denial of Social Security disability benefits based on claimant's mental limitations where record did not support ALJ finding that claimant could return to former job as school custodian. Moreover, Ct. found that record supported award for benefits where treating physician's assessment of claimant's limited mental residual functional capacity was supported by medical evidence, and where record contained no conflicting opinion that claimant's deficits in comprehension and short-term memory resulted in inability to perform light, unskilled work 20 to 30 percent of time.

Dist. Ct. did not err in granting defendants' motion for summary judgment in action under ERISA alleging that defendants (alleged fiduciaries of 401(k) plan offered by employer) breached said fiduciary duties by continuing to offer Motorola stock fund to plaintiffs-plan participants in spite of knowledge that Motorola engaged in bad business transaction that was unknown to general public. Plaintiffs also alleged that defendants misrepresented material information about said bad business transaction and failed to monitor committee members that administered plan. While plaintiffs could maintain instant class action, certain defendants could not be liable due to their lack of knowledge with respect to bad business transaction. Moreover, other defendants with said knowledge could rely on safe harbor provisions under section 404(c) of ERISA with respect to plaintiffs' allegations of failure to monitor and failure to disclose, where plaintiffs had freedom to select contents of their individual plans and had sufficient information about risks associated with selecting Motorola stock fund. However, while safe harbor provisions could not apply to allegations that defendants improperly included Motorola stock fund in available plan investments, record did not show that Motorola stock fund was so volatile (even with public knowledge of bad business transaction) so as to give notice to defendants that it should have pulled said stock fund from plan.