Ninth Circuit En Banc Expands ERISA liability

The Ninth Circuit issued an "en banc" opinion to set the law in the Circuit regarding who is a proper defendant in certain ERISA cases.

Laura Cyr worked for CTI as a  vice president.  CTI offered long term disability benefits through Reliance Insurance.  Reliance ultimately controlled whether benefits would be awarded, but it was not the "plan administrator" under ERISA.  Cyr sued CTI for unequal pay, resulting in a settlement and a retroactive adjustment to her salary.   She was on a "long term disability" at the time, and sought an increase to her benefits. Reliance allegeldy denied that application. So Cyr sued CTI as the plan administrator, CTI's Long Term Disability Plan, and Reliance under different sections of ERISA and the common law.

In the 9th Circuit, beneficiaries were limited to suing the plan and plan administrator for denial of benefits under ERISA plans.  But no more.  The en banc court overruled prior decisions to that effect.

We conclude, therefore, that potential liability under 29  U.S.C. § 1132(a)(1)(B) is not limited to a benefits plan or the  plan administrator. Reliance is a proper defendant in a lawsuit  brought by Cyr under that statute.

As a result, insurance companies will now be sued where they have a role in denying benefits independent of the plan administrator, which apparently was the case here.  It's unclear whether this decision will result in increased premiums and legal costs, not to mention conflicts of interest between insurers and employers. We shall see.

The case is Cyr v. Reliance Standard Life Ins. Co. et al. and the opinion is here.

U.S. Supreme Court on ERISA Remedies

Cigna Corporation changed its pension plan back in 1998. Janice Amara, on behalf of herself and 25,000 beneficiaries sued under ERISA, claiming CIGNA's changes violated the law.  In particular, the plaintiffs challenged the notice of changes CIGNA provided.

The district court agreed CIGNA's notice provisions were improper, particularly in a newsletter that, the court found, painted too-rosy of a picture of the impending changes and ordered monetary relief based on the conclusion that the disclosures caused "likely harm." 
On review, the Supreme Court decided the district court's reasoning was wrong, but that it reached a nearly correct result.  The Court discussed the available remedies under ERISA.

The Court held that district court have broad discretion to fashion remedies as "equitable" relief.  Without a lot of legal mumbo jumbo, equitable remedies normally are injunctions, but there are some that include money.  In the CIGNA case, the district court had held that only those plaintiffs who "relied" on the erroneous information to their detriment could recover money.  The Supreme Court disagreed, saying that not all "equitable" remedies required a showing of reliance. .

A key take-away for non-ERISA people is that the courts here found that a newsletter previewing potentially detrimental changes to the plan was incomplete and misleading. So, HR practitioners, beware of informal communications regarding changes to your ERISA covered benefit plans.

The opinion is Cigna Corp. v. Amara and the opinion is here.

DGV

U.S. Supreme Court Declines to Take Up San Francisco Healthcare Law

Back in 2008, the Ninth Circuit Court of Appeals held that San Francisco's Healthcare Security Ordinance was not preempted by ERISA. We posted on that here. Fast-forward (chuckle) to yesterday, when the U.S. Supreme Court refused the Golden Gate Restaurant Association's petition for review. So, looks like those pesky surcharges disclosed at the bottom of menus throughout San Francisco are here to stay.

DGV

U.S. Supreme Court on Attorney's Fees in ERISA cases

The Supreme Court unanimously held that a court may award attorneys fees in ERISA benefits denial cases to any party without proving it is a "prevailing" party:

a fees claimant must show "some degree of success on the merits" before a court may award attorney’s fees under §1132(g)(1), id., at 694. A claimant does not satisfy that requirement by achieving "trivial success on the merits" or a "purely procedural victor[y]," but does satisfy it if the court can fairly call the outcome of the litigation some success on the merits without conducting a "lengthy inquir[y] into the question whether a particular party’s success was ‘substantial’ or occurred on a ‘central issue.’"

The ERISA attorney's fees statute awards fees to "any" party in the district court's discretion. Courts had read into that statute the requirement that a litigant be deemed the "prevailing" party. Under case law, a "prevailing" party has to demonstrate certain characteristics, like monetary gain, etc. The Supreme Court held that as a matter of statutory construction, courts could not simply add a prevailing party requirement.

So, in ERISA benefits denial cases, it will be easier for litigants to claim attorney's fees, even if they simply win a remand by the district court to the insurance plan administrator, rather than total victory.

Justice Stevens concurred in most of the opinion and in the judgment. The decision otherwise was unanimous.

The case is Hardt v. Reliance Standard Life Insurance Co. and the opinion is here.

Ninth Circuit Upholds San Francisco's Health Care Ordinance

A panel of the Ninth Circuit upheld San Francisco's Healthcare Security Ordinance. The ordinance requires employers either to maintain a certain expenditure on health care for its employees or contribute the minimum to the city. The city operates a healthcare access plan, called Healthy San Francisco, funded by these taxes - er - contributions by the employers.

The Golden Gate Restaurant Association challenged SF's plan as preempted by ERISA.
Late in 2007, the district court held ERISA indeed preempted the ordinance. We posted on that here.

The district court's opinion lasted about a week. The Ninth Circuit stayed the district court's decision, foreshadowing its view that ERISA does not preempt the law. The Ninth Circuit panel decided the ordinance neither creates and ERISA plan nor "relates" to a plan. In its long opinion, the court rejected a series of arguments advanced by the Golden Gate Restaurant Association and a number of amici curiae, including the U.S. Department of Labor.
Unless or until the Supreme Court overrules this case, it will probably result in more local ordinances establishing mandatory health care systems. Employers will have to have different benefits coverage in different jurisdictions, pay the higher taxes, or increase coverage to the highest common denominator....

The case is Golden Gate Restaurant Association v. San Francisco, and the opinion is here.

U.S. Supreme Court Holds Plan Administrator Had Conflict of Interest

Under ERISA, employees have the right to challenge decisions under a covered plan in federal court. The court will review the plan administrator's decision under different standards, depending on the circumstances. In certain cases, the court defers to the administrator's decision unless the administrator "abused its discretion." In other situations, the court applies "de novo" review and does not defer to the plan administrator at all. To determine what standard of review to apply, the trial court considers a number of circumstances, one of which is whether the plan administrator had a "conflict of interest."

The Supreme Court considered whether a plan administrator has a conflict when it is responsible for deciding to approve claims AND is the entity responsible for funding benefits. In a 5-4 decision, the Court said that such plan administrators do have a conflict. Therefore, the district court must consider this situation as "a factor" in deciding the deference to give the administrator's decision.

The case is Metropolitan Life Ins. Co. v. Glenn and the opinion is here.

U.S. Supreme Court: ERISA Actions Against Fiduciaries

There is nothing like an ERISA case to stimulate debate and discussion at the water coolers of all employment lawyers' firms. OK, I'm kidding. I think. But from what I'm reading, this is an important ERISA case that may result in more claims.

The Supreme Court decided that individual members of a defined contribution plan may sue plan fiduciaries for misconduct that depletes the value of the individual account within the plan. The case is Larue v. DeWolff et al. and the opinion is here.

Ninth Circuit STAYS Injunction, Allowing SF Health Care Ordinance to Go Forward

Stay with me here.....

In late-December, the U.S. District Court enjoined San Francisco's Health Care Security Ordinance. That meant that it could not go into effect. Here is our post on the injunction.

The City appealed. Typically, the injunction remains in effect until the appeal is over.

But the City decided to ask the 9th Circuit Court of Appeals to stay the injunction pending resolution of the appeal. That is, the City wants to implement its law that the district court says is illegal.

No way, right? I mean if the stay issues, then the law goes into effect. That's not fair. If the law is later found preempted by the court of appeals, who is going to pay back all those employers who were subjected to an illegal law? (No one.) So, of course, the Ninth Circuit would not engage in an exercise of raw power and basically pre-decide an appeal to facilitate San Francisco's universal health care law, right?

Wrong. The Ninth Circuit just granted the stay based on an expedited motion and an argument on January 3. In granting the stay, the Court basically decided that the city is going to win on appeal. The panel could not have been much stronger in its language. Here is the opinion.

Here's a question the court did not tackle: What's the point of having an full appeal procedure when the court is willing to say, based on an appeal that took less than a week to file, argue, and decide, that there is a "strong likelihood" of reversal? Not much. So, if you ever want to see how well your appeal is going to fare before the Ninth Circuit, apply for a stay!

It seems that if the Golden Gate Restaurant Association intends on winning, it will have to convince the en banc court to decide this case, or the U.S. Supreme Court. In the meantime, the SF Health Care Security Ordinance is going to go into effect. That means we have to read and digest what it requires... which I will do in the future.

DGV

ERISA Preempts San Francisco Health Care Ordinance

The Golden Gate Restaurant Association took on San Francisco's attempt at universal health care - the Health Care Security Ordinance - and won. It turns out you CAN fight City Hall, particularly when City Hall decides to pass legislation that is clearly preempted by ERISA.

The San Francisco Health Care Security Ordinance was set to take effect January 1, 2008, and would have phased in based on employer size. Basically, employers had to spend a certain amount of money on health care or contribute to a San Francisco fund (read: another tax). But, unless the Ninth Circuit stays the district court's decision and allows the statute to take effect [which would be an insanely burdensome and expensive error if the law ultimately is deemed preempted] the SF ordinance is not going to take effect. Btw, the City is asking the Ninth Circuit to stay the district judge's order.

The district judge's opinion is here. (H/T Workplace Prof's blog for the link to the opinion).
You can learn about the ordinance and the ERISA preemption issues there. Here's the holding:

The Ordinance’s health care expenditure requirements are preempted because they have an impermissible connection with employee welfare benefit plans. By mandating employee health benefit structures and administration, those requirements interfere with preserving employer autonomy over whether and how
to provide employee health coverage, and ensuring uniform national regulation of such coverage. The Ordinance’s provisions also make unlawful reference to benefit plans because they refer to, are designed to act immediately upon, and
cannot operate successfully without the existence of employee welfare benefit plans.

:::temporary editorial breach of the fourth wall - "Speaking of tips: to my friends at that firm with initials that start with C. -- maybe for the New Year you can adopt the "hat tip" as your very own technique for acknowledging those of us who actually do the work!" ::::: [End the editorial narrowcast attack on lazy competitor].

Happy New Year everyone, even the folks at the C. firm!

Greg