- In Reese v. CNH Am. LLC, Nos. 11-1359, 11-1857, 11-1969, --- F.3d ---, 2012 WL 40009695 (6th Cir. Sept. 13, 2012), the Sixth Circuit for the second time reversed the decision of the district court and held that an employer could reasonably yet unilaterally alter lifetime healthcare benefits for retirees without engaging in collective bargaining. CNH Corporation (CNH) entered into successive collective bargaining agreements (CBAs) from 1974 to 2004 with the United Auto Workers (UAW), in which the parties agreed that retirees and their surviving spouses would receive free lifetime healthcare benefits. CNH filed a declaratory action seeking the right under ERISA and the Labor Management Relations Act (LMRA) to modify or terminate retiree health benefits for all UAW-represented employees who retired on or after July 1, 1994. In 2009, the Sixth Circuit held that eligibility for lifetime healthcare benefits "vested," but at the same time rejected the suggestion that the scope of this commitment meant that CNH could make no changes to the healthcare benefits provided to retirees since vesting in the context of healthcare benefits provides an evolving, not a fixed, benefit. Accordingly, the court concluded that CNH could make "reasonable" changes to the retirees' plan and remanded the case to the district court to determine whether CNH's proposed modifications were reasonable. On remand, the district court did not reach the reasonableness question, and instead found that CNH lacked the ability to modify any benefits. The Sixth Circuit found that the district court erred when it disregarded its holding that the company may make reasonable modifications to the retirees' healthcare benefits, and remanded the case again to the district court to determine whether the new plan provides benefits "reasonably commensurate" with the old plan, the changes are "reasonable in light of changes in health care," and the benefits are "roughly consistent with the kinds of benefits provided to current employees." In making this evaluation, the Sixth Circuit instructed the district court to consider evidence regarding: (1) the annual total out-of-pocket expenses under the old and new plans; (2) the average per-beneficiary cost to CNH under the old and new plans; (3) any premiums, deductibles, and co-payments under the old and new plans; (4) any difference in quality of care between the old and new plans; (5) any difference in the new and old plans available to current employees and retirees; and (6) how the new plan compares to those offered by companies similar to CNH with demographically similar employees. The dissent believed that the LMRA prohibits unilateral modification of the scope of health benefits without the consent of the pensioner.
- In Witmer v. Acument Global Tech., Inc., --- F.3d ---, No. 11–1793, 2012 WL 4053734 (6th Cir. Sept. 17, 2012), the Sixth Circuit affirmed a lower court's ruling that a collective bargaining agreement did not bestow retirees with the right to vested, lifetime health care benefits. Although the collective bargaining agreement contained a promise of "continuous health insurance," it also contained a reservation of rights clause. The court concluded that the broadly worded reservation of rights clause was incompatible with an intent to create vested, unchangeable benefits. Because the language of the plan was clear, the court declined plaintiffs' request to review extrinsic evidence in support of the retirees' claims.
Contractual and Statutory Limitations Periods
- In Heimeshoff v. Hartford Life & Accident Ins. Co., No. 12-651-cv, 2012 WL 4017133 (2d Cir. Sept. 13, 2012) (summary order), the Second Circuit affirmed the district court's ruling dismissing plaintiff's claim for long-term disability benefits on the grounds that the claim was barred by the plan's contractual three-year limitations period, which ran from the time that proof of loss was due under the plan. The court observed that the plan's limitations language was "unambiguous" and did "not offend the statute" by running the limitations period before the claim accrued.
- In Fallin v. Commonwealth Indus., Inc. Cash Balance Plan, --- F.3d ----, No. 09-5139, 2012 WL 3608517 (6th Cir. Aug. 23, 2012), the Sixth Circuit affirmed the dismissal of claims that a 1998 cash-balance conversion violated ERISA because it did not credit participants with the value of an early retirement subsidy provided by the old plan. Eight of the nine plaintiffs had received lump-sum distributions more than five years prior to pursuing administrative remedies under the plan. As to these plaintiffs, the court applied Kentucky's five-year statute of limitations for statutory claims with no limitations period of their own, and concluded the plaintiffs' claims accrued when they received lump-sum distributions that "unequivocally repudiated" any claim to additional benefits. The court vacated dismissal of a claim by a ninth participant (Corley), finding that it was equitably tolled while he exhausted his administrative remedies. On the merits of that participant's claims, the court held the plan fiduciary acted within its discretion (and consistent with Treasury regulations) in excluding the subsidy from the cash-balance calculations. However, the court vacated dismissal of Corley's anti-cutback claim, even though he had not satisfied the age requirement at the time of the conversion. Noting that Corley had satisfied the plan's service requirement prior to the amendment, the court found that entitlement to the subsidy had accrued, since the statute permits age requirements for such a subsidy to be met after the plan amendment. The court remanded for determinations whether Corley's benefits were actually reduced by the conversion, and whether the subsidy constituted "an early retirement benefit" that could not be reduced.
Employer Stock Drop Litigation
- In In re GlaxoSmithKline ERISA Litig., No. 11-2289-cv, 2012 WL 3798260 (2d Cir. Sept. 4, 2012) (summary order), the Second Circuit affirmed the district court's dismissal of plaintiffs' ERISA stock-drop action alleging that the fiduciaries of the plan breached their duties of prudence and loyalty by offering the company stock fund as an investment option under the plan. The district court ruled that because the plan did not afford the defendants any discretion with regard to offering the company stock fund as an option under the plan, there was no basis for a claim of breach of fiduciary duty, and accordingly, dismissed the complaint. The Second Circuit, in affirming the decision, stated that although In re Citigroup ERISA Litig., 662 F.3d 128 (2d Cir. 2011), makes clear that the law in the Second Circuit is "not quite that absolute," the complaint was properly dismissed because the plan terms strongly favored investment in employer stock and plaintiff failed to plead that the company faced a "dire situation that was objectively unforeseeable by the settler" and that could require fiduciaries to override plan terms. The Second Circuit also affirmed the district court's dismissal of plaintiff's negligent misrepresentations and omissions claims, finding that, even though SEC filings were incorporated into the summary plan description, the employer did not issue the SEC filings in its capacity as plan administrator.
Section 510 Claims
- In George v. Junior Achievement of Cent. Indiana, Inc., --- F.3d ---, No. 11–3291, 2012 WL 3984408 (7th Cir. Sept. 4, 2012), the court vacated dismissal of an employee's claim that his employer retaliated against him for making an informal complaint about his retirement account. After observing that a split in circuit authority had developed on this issue, the Seventh Circuit held that ERISA Section 510 applies to informal employee complaints, and is not limited to grievances or other formal action. The Seventh Circuit joined the Fifth and Ninth Circuits in applying Section 510 to informal employee complaints. In contrast, the Second, Third, and Fourth Circuits hold that a formal proceeding is a necessary prerequisite for Section 510 protection.
- In Tocker v. Kraft Foods N. Am. Inc. Ret. Plan, No. 11-2445-cv, 2012 WL 3711343 (2d Cir. Aug. 29, 2012) (summary order), the Second Circuit affirmed the district court's ruling that a benefits manager was performing a "ministerial function," and thus did not act as an ERISA fiduciary when sending plaintiff participant correspondence proposing a special arrangement under which plaintiff would receive a lump sum benefit through a workforce reduction program while continuing to obtain long-term disability benefits. In support of this finding, the court noted that the benefits manager investigated whether the plaintiff could participate in the workforce reduction program and continue to receive long-term disability benefits at the instruction of senior management and did not have the level of "discretionary authority" required to be considered a fiduciary under ERISA.
- In Treasurer, Trustees of Drury Indus., Inc. Health Care Plan and Trust v. Goding, --- F.3d ---, No. 11–2885, 2012 WL 3870585 (8th Cir. Sept. 7, 2012), the Eighth Circuit affirmed a decision dismissing a plan's subrogation claim under ERISA Section 502(a)(3) against a law firm that represented a participant in obtaining a tort recovery following an injury that resulted in the payment of plan benefits for his medical expenses. The Plan sought to enforce its subrogation clause against the law firm because the participant entered into bankruptcy. The court ruled that there was no cognizable ERISA Section 502(a)(3) claim against the law firm because the firm was not in possession of funds belonging to the plan. In so ruling, the court rejected the argument that the firm's mere acknowledgement of the subrogation clause was sufficient to support an equitable claim. The court also upheld the finding that the successful defendant was entitled to attorney's fees.
Fiduciary Exception to Attorney-Client Privilege
- In an issue of first impression, the Ninth Circuit in Stephan v. Unum Life Ins. Co. of Am., No. 10-16840, --- F.3d ---, 2012 WL 3983767 (9th Cir. Sept. 12, 2012), held that the fiduciary exception to attorney-client privilege applied to an insurance company that served as both an ERISA fiduciary and a plan sponsor. The ruling arose in connection with a review of a district court determination that Unum Life Insurance Company (Unum) did not abuse its discretion in denying plaintiff's claim for additional long-term disability benefits. In an effort to demonstrate that Unum operated under a conflict of interest, plaintiff sought to discover a series of documents created by Unum's in-house counsel at the request of Unum's claims analysts. The documents were created after Unum approved plaintiff's claim for long-term disability benefit, but while plaintiff's appeal for additional benefits was pending. The court concluded that some of the documents sought by plaintiff were subject to the fiduciary exception, even though they were created after the initial benefit determination was made, because they dealt with plan administration and did not address potential civil or criminal liability. Specifically, the court found that the documents (1) were prepared to advise Unum claims analysts as to how the insurance policy under which plaintiff was covered ought to be interpreted and whether plaintiff's bonus ought to be considered monthly earnings within the meaning of the plan, and therefore, constituted advice relating to plan interpretation, and (2) were communicated to the analysts before any final determination on plaintiff's claim had been made.
- In Central Pension Fund of the International Union of Operating Engineers & Participating Employers v. Haluch Gravel Co., No. 11-1944, --- F.3d ----, No. 11-1944, 2012 WL 3984621 (1st Cir. Sept. 12, 2012), the First Circuit vacated an award of delinquent contributions against an employer that failed to maintain accurate payroll records and report all covered work to the plan. Joining several other circuits, the court adopted a burden-shifting framework under which the court applies a rebuttable presumption that the employer owes contributions for "all hours worked . . . in which [employees] were shown to have performed some covered work," except where the employer shows the work was not covered. Applying this framework, the court observed that the evidence showed that 75% of one employee's work was covered in a given year. Accordingly, the employer was presumptively liable for the same proportion (75%) of hours worked by a replacement employee performing the same covered work. The court also ordered recalculation of attorneys' fees based upon the total amount of contributions for which the employer was liable.
- In Chicago Truck Drivers, Helpers & Warehouse Workers Union (Independent) Pension Fund v. CPC Logistics, Inc., --- F.3d ----, No. 11-3034, 2012 WL 3554446 (7th Cir. Aug. 20, 2012), the Seventh Circuit sustained an arbitrator's ruling that a plan miscalculated an employer's withdrawal liability. The court found the calculation was not based on the "actuary's best estimate," as required by ERISA, because the plan directed the actuary to use a higher interest rate used for minimum funding requirements rather than the "blended" rate endorsed by the actuary as the appropriate rate for calculating withdrawal liability. After lamenting the "hideous complexities" in the parties' briefs, Judge Posner implored lawyers to "write other than in jargon," noting judges are not knowledgeable about every specialized area of the law, including ERISA, "a highly specialized field that judges encounter only intermittently."