July 19, 2019

Tenth Circuit: Denial of Benefits under ERISA Was Reasonable, Made in Good Faith, and Supported by Substantial Evidence

The Tenth Circuit Court of Appeals issued its opinion in Eugene S. v. Horizon Blue Cross Blue Shield of New Jersey on Tuesday, November 15, 2011.

The Tenth Circuit affirmed the district court’s decision. Petitioner sought coverage for his son’s residential treatment costs from his employer’s ERISA benefits insurer. Respondent’s delegated third-party plan administrator, Magellan, originally denied the claim and explained that Petitioner’s son qualified for intensive outpatient treatment, but not for residential treatment. Magellan affirmed its initial denial of residential treatment benefits through several appeals by both Petitioner and the residential treatment center. Having exhausted his administrative appeals, Petitioner filed this action challenging Respondent’s denial of benefits under ERISA. On appeal, Petitioner alleges 1) that the district court erred by denying his motion to strike and allowing the VSA into evidence, 2) that the district court erred in reviewing Respondent’s denials of benefits under an arbitrary and capricious, rather than a de novo, standard, and 3)  that Respondent improperly denied him benefits under the terms of his ERISA benefits plan.

The Court disagreed with all of Petitioner’s contentions. The Court refused to overturn the district court’s ruling because that court permissibly exercised its discretion and Respondent’s failure to disclose was harmless or justified. The Court also found that, to the extent it must independently assess the deference to which Magellan is entitled, Magellan was entitled to deferential review and that review should be under an arbitrary and capricious standard. And, under this standard, the administrator’s decision was reasonable, made in good faith, and supported by substantial evidence.

Tenth Circuit: Petitioner Established Issue of Material Fact Present in ADA Violation Claim; Summary Judgment Not Appropriate

The Tenth Circuit Court of Appeals issued its opinion in Carter v. Pathfinder Energy Services, Inc. on Thursday, November 3, 2011.

The Tenth Circuit affirmed in part and reversed in part the district court’s decision. Petitioner began working as a directional driller for Respondent employer in 2004. Two years later, after his declining health had caused a reduction in his workload, Respondent fired Petitioner for “’gross misconduct’ based primarily on an altercation that he had had with a coworker and his language and attitude during a conversation with his supervisor.” Petitioner then sued Respondent, alleging that his employer had violated his rights under the Americans with Disabilities Act (ADA) and the Employee Retirement Income Security Act (ERISA). He also alleged that Respondent had breached his implied-in-fact employment contract. The district court granted summary judgment in favor of Respondent on all three claims.

The Court agreed with the district court’s grant of summary judgment on all issues except for the alleged ADA violation. For the ADA claim, Petitioner “must show that, at the time he was fired, (1) he was a disabled person as defined by the ADA; (2) he was qualified, with or without reasonable accommodation, to perform the essential functions of his job; and (3) he was fired because of his disability.” The Court was convinced that Petitioner has established that a genuine dispute of material fact exists as to all three elements to allow the claim to survive a motion for summary judgment.

Tenth Circuit: ERISA Does Not Require Notification of Wear-Away Periods During Pension Transition So Long As Employees are Informed of Plan Changes

The Tenth Circuit Court of Appeals issued its opinion in Tomlinson vs. El Paso Corp. on Wednesday, August 10, 2011.

The Tenth Circuit affirmed the district court’s decision. The case is a putative class action in which Petitioners appeal the dismissal of their claims against Respondent and the El Paso Pension Plan brought under the Age Discrimination in Employment Act (ADEA) and the Employee Retirement Income Security Act (ERISA). Petitioners’ claims concern “wear-away periods” that occurred during Respondent’s transition to a new pension plan; they contend that the wear-away periods violate the ADEA’s prohibition on age discrimination and the anti-backloading and notice provisions of ERISA.

However, the Court disagreed and found that Respondent’s transition favored, rather than discriminated against, older employees. Also, the plan was frontloaded, rather than backloaded. The Court held that ERISA does not require notification of wear-away periods so long as employees are informed and forewarned of plan changes. Because Respondent provided sufficient notice and warning to Petitioners, the district court’s decision was upheld.

Colorado Court of Appeals: “Retirement Plan” Has a Usual and Ordinary Meaning and Is Not Limited to Plans Possessing Attributes of ERISA-Qualified or Tax-Qualified Plans

The Colorado Court of Appeals issued its opinion in Dillabaugh v. Ellerton on June 23, 2011.

Post-Judgment Collection— Employee Retirement Income Security Act (ERISA)—Exemptions From Attachment or Garnishment of a Retirement Plan.

In this post-judgment collection proceeding, plaintiff Gary Dillabaugh appealed the trial court’s order determining that an obligation of Sefton Resources, Inc. (Sefton) to defendant John Ellerton, Sefton’s Chief Executive Officer, was exempt from attachment or garnishment as property or funds payable from a retirement plan. The judgment was affirmed.

Dillabaugh obtained a judgment against Ellerton and attempted to garnish Sefton’s obligation to him. Sefton responded that it owed Ellerton a “future retirement obligation” totaling $839,832. Ellerton argued this was exempt from garnishment or attachment under CRS §13-54-102(1)(s) because it arose from a retirement plan. The exemption issue was briefed and the court ruled without a hearing that Sefton’s obligation to Ellerton was exempt as property held in or payable from a retirement plan.

On appeal, Dillabaugh argued that the trial court erred because a retirement plan must share the attributes of an ERISA-qualified plan or a tax-qualified plan, and Sefton’s obligation did not. The Court of Appeals disagreed with the narrow interpretation of the exemption, noting that the meaning of “retirement plan” under CRS §13-54-102(1)(s) has not been addressed by Colorado appellate courts. The Court found that “retirement plan” has a usual and ordinary meaning discernible by a court and is not limited to plans that possess attributes of ERISA-qualified or tax-qualified plans. The Court also held that the record supports the trial court’s conclusion that Sefton’s obligation to Ellerton was properly held in or payable from a retirement plan.

This summary is published here courtesy of The Colorado Lawyer. Other summaries for the Colorado Court of Appeals on June 23, 2011, can be found here.

Colorado Court of Appeals: Both State and Federal Courts Have Concurrent Jurisdiction to Adjudicate and Enforce ERISA Claims

The Colorado Court of Appeals issued its opinion in Strunk v. Goldberg on May 26, 2011.

Insurance—Bad Faith—Disability—Preemption—ERISA—Claim Preclusion—Jurisdiction—Ripeness.

In this insurance bad-faith insurance case, plaintiff Sherry M. Timm appealed the order of the trial court dismissing her complaint against defendant Prudential Insurance Company of America (Prudential). The order was affirmed in part and reversed in part, and the case was remanded for further proceedings.

Prudential denied Timm’s claim for disability benefits. After exhausting her administrative remedies, Timm filed a civil action in federal court. The federal court entered a declaratory judgment vacating Prudential’s decision and declaring Timm disabled. The federal court remanded the case to Prudential for a determination of benefits due under the plan. Timm later filed this action because Prudential failed to determine Timm’s entitlement of benefits. Prudential moved to dismiss this action pursuant to C.R.C.P. 12(b)(5), contending that Timm’s complaint failed to state a claim for which relief can be granted. The trial court agreed and dismissed the complaint. This appeal followed.

Timm contended that the trial court erred by determining that her claim for bad faith under CRS § 10-3-1116(1) is preempted by ERISA. Because § 10-3-1116(1) allows a double recovery of benefits, it supplements and conflicts with ERISA’s remedies and therefore is preempted. Accordingly, because ERISA preempts § 10-3-1116(1), the trial court did not err in dismissing Timm’s statutory bad-faith claim.

Timm also contended that the trial court erred by dismissing her ERISA claim for benefits under principles of claim preclusion. Claims that would or could have been based on Prudential’s conduct in the administrative process up to the date the federal court issued its declaratory judgment are precluded. However, Timm’s ERISA claim is not based on conduct occurring before the federal court’s declaratory judgment. Further, ERISA provides for concurrent jurisdiction of both state and federal courts to adjudicate and enforce ERISA claims. Accordingly, to the extent the trial court held that Timm may bring her ERISA claim only in federal court, it erred.

Timm further argued that the trial court erred by dismissing her claim for lack of ripeness. The complaint states that Timm “reasonably sought the payment of benefits” from Prudential after the federal court’s decision and that Prudential refused to decide the matter for more than twenty-one months. Because of the delay by Prudential, Timm asserts it would have been clearly useless for her either to have waited longer for a decision in the first instance from Prudential, or to have appealed through administrative channels to the appeals board of Prudential. Accordingly, Timm’s claim was ripe for judicial review and the trial court erred by dismissing Timm’s claim on that basis.

This summary is published here courtesy of The Colorado Lawyer. Other summaries by the Colorado Court of Appeals on May 26, 2011, can be found here.