Affordable Care Act:

In Florida v. United States Dep't of Health and Human Servs., 11-11021-cv, 2011 WL 3519178 (11th Cir. Aug. 12, 2011), the Eleventh Circuit affirmed in part and reversed in part the district court's ruling that the Affordable Care Act was unconstitutional. The district court had found that the Act's minimum coverage provision, which requires that all applicable individuals maintain minimum essential heath insurance coverage or pay a fine, was unconstitutional as it exceeded the parameters of Congress' authority under the Commerce Clause.  It also ruled that the entire Act was unconstitutional because it did not contain a severability clause, which would have saved at least the portions of the Act that were not deemed unconstitutional.  The Eleventh Circuit upheld the lower court's ruling with respect to the unconstitutionality of the minimum coverage provision, reasoning that for the federal government to require citizens to purchase health insurance coverage from private insurance companies for the entirety of their lives is to grant authority that "lacks cognizable limits" and "imperils our federalist structure."  However, the Eleventh Circuit overruled the district court's decision to invalidate the entire Act on the grounds that the Act lacked a severability clause.  The Circuit Court reasoned that courts in general should attempt to save acts of Congress by "severing any constitutionally infirm provisions while leaving the remainder intact" in an effort to avoid frustrating the will of the elected representatives of the citizens. 

In Baldwin v. Sebelius, 10-56374-cv, 2011 WL 3524287 (9th Cir. Aug. 12, 2011), the Ninth Circuit affirmed the district court's decision dismissing a lawsuit challenging the constitutionality of the Affordable Care Act's minimum coverage provisions on the ground that plaintiffs, a former California assemblyman and the Pacific Justice Institute, lacked constitutional standing.  Defendants, several federal agencies, argued that plaintiffs lacked standing because they failed to assert an "injury in fact." The Ninth Circuit held that the assemblyman failed to show an injury in fact because he did not allege that he currently was without qualifying health insurance, thus making him "non-compliant" when the Act would take effect. The court also ruled that the Institute did not have standing because the challenged provision does not apply to employers. 

In New Jersey Physicians, Inc. v. President of the U.S., 10-4600-cv, 2011 WL 3366340 (3d Cir. Aug. 3, 2011), the Third Circuit affirmed the district court's decision dismissing plaintiffs' challenge to the constitutionality of the minimum coverage provision of the Affordable Care Act on the grounds that plaintiffs lacked constitutional standing because they failed to establish an actual, future, or imminent "concrete and particularized injury." The Third Circuit concluded that plaintiffs – a doctor, his patient, and a nonprofit corporation – lacked standing because their complaint did not allege:  (i) "a 'realistic danger' that [they] would be harmed by the individual mandate;" or (ii) that they would be impacted by the employer responsibility provision, which requires large employers to offer full-time employees the opportunity to enroll in employer-sponsored insurance plans.  

Fees Litigation:

In Renfro v. Unisys Corp., 10-2447-cv, 2011 WL 3630121 (3d Cir. Aug. 19, 2011), the Third Circuit affirmed the district court's decision granting defendants' motion to dismiss plaintiffs' class action complaint alleging that Unisys and the 401(k) plan's directed trustee breached their fiduciary duties under ERISA by failing to adequately investigate the investment options offered under the plan and, more specifically, by offering as investment options retail mutual funds whose fees allegedly were excessive in comparison to the fees of other mutual funds.  The Third Circuit reasoned that the range of investment options offered by the plan, which included 73 investment choices, was reasonable because the options included a multitude of risk profiles, investment strategies, and associated fees. Additionally, the court ruled that the plan's directed trustee was not a fiduciary with respect to the selection of investment options under the plan pursuant to the applicable trust agreement. 

Cash Balance Plan Conversions:

In Tomlinson v. El Paso Corp., --- F.3d ----, 2011 WL 3506091 (10th Cir. Aug. 11, 2011), the Tenth Circuit affirmed the dismissal of a putative class action challenging El Paso's 1997 conversion of its traditional defined benefit plan to a cash balance plan under ERISA and the ADEA.  First, the court affirmed the lower court's finding that the new plan complied with the ADEA because the inputs were the same for all participants regardless of age, even though the result, or output, was that older workers were more likely to experience wear-away periods that tended to be longer in duration than that of younger workers.  Second, the court affirmed the ruling that the new plan complied with ERISA's anti-backloading provision by satisfying the "133 1/3 percent test."  In so ruling, the court determined that the test is properly applied by looking at the cash balance plan as if it had been in effect for all years, rather than comparing the accrued benefit under both the old and new plans.  Third, the court found that El Paso's participant communications regarding the plan's conversion provided adequate notice, for purposes of satisfying ERISA § 204(h) because they informed participants that (1) their benefits under the old plan, the minimum benefit, would be frozen and (2) they would receive the greater of the frozen minimum benefit or the new, more slowly-growing cash balance benefit.  Fourth, the court affirmed the lower court's finding that the SPD did not violate ERISA § 102 for failing to disclose wear-away, even though it and the other notices were "somewhat confusing," because there was no evidence the SPD was "deceitful" or failed to explain the "manner of conversion to cash balance accounts." In so ruling, the court held that "ERISA does not require notification of wear-away periods so long as employees are informed and forewarned of plan changes."  This case will be the topic of a feature article to appear in the October issue of the Newsletter

Breach of Fiduciary Duty:

In Faber v. Metropolitan Life Insurance Co., --- F.3d ---, No. 09-4901-cv, 2011 WL 3375530 (2d Cir. Aug. 5, 2011), the Second Circuit affirmed a district court's dismissal of  a putative class action alleging that MetLife, as a welfare plan claims administrator, did not breach its fiduciary duties under ERISA by profiting from life insurance benefits held in retained asset accounts, or "checkbook" accounts.  The court concluded that when MetLife established the retained asset accounts for life insurance proceeds in accordance with plan terms, it discharged its fiduciary obligations as a claims administrator and ceased being an ERISA fiduciary. Thus, MetLife was not acting as a fiduciary, and could not have breached its fiduciary duties, when holding, investing, and profiting from the funds backing the retained asset accounts.

Statute of Limitations:

In Withrow v. Bache Halsey Stuart Shield, Inc., Salary Protection Plan (Ltd), --- F.3d ---, No. 09-55024, 2011 WL 3672778 (9th Cir. Aug. 23, 2011), the Ninth Circuit held that a plan participant's claim that her benefits had been miscalculated in 1990 did not accrue until the claim was actually denied in 2004, even though she first inquired about the alleged miscalculation 14 years earlier. The court reasoned that, although the plan's insurer had communicated its position that the calculation was correct in 1990 when the plaintiff first inquired about it, the insurer's communications over a lengthy period never provided a "clear and convincing repudiation" of her claim.  As a result, the Ninth Circuit reversed the district court's ruling that the plaintiff's claim was time barred.

Out-of-Network Rate Litigation:

In In re WellPoint, Inc. Out-of-Network "UCR" Rates Litigation, MDL 09-2074 PSG (FFMx), 2011 WL 3555610 (C.D. Cal. Aug. 11, 2011), the district court allowed most of the claims to proceed in a suit by providers, subscribers, and medical associations alleging that the insurer did not properly reimburse them for out-of-network services because it relied on flawed data. The court first determined that WellPoint, as the insurer, was a proper defendant for a claim for benefits under ERISA Section 502(a)(1)(B), following the Ninth Circuit's recent ruling in Cyr v. Reliance Standard Life Insurance Co., 642 F.3d 1202 (9th Cir. 2011). The court also held that the provider plaintiffs, who had valid assignments from patients, had ERISA standing to bring a claim for benefits. Next, the court found that the plaintiffs' failure to exhaust administrative remedies was excusable because administrative appeals would have been futile. The court further determined that the plaintiffs could bring claims for breach of fiduciary duty under ERISA Section 502(a)(2) because the plaintiffs alleged plan-wide injury and harm to more than just the individuals who brought suit. The court dismissed the plaintiffs' claims against WellPoint under ERISA Section 1132(c), finding that those claims could only be brought against a plan administrator. The court also denied the motion to dismiss plaintiffs' Sherman Act and certain state law claims, and granted the motion to dismiss the RICO and certain other state law claims.

Inaccurate Pension Estimate:

In Pearson v. Vioth Paper Rolls, Inc., --- F.3d ----, 2011 WL 3773343 (7th Cir. Aug. 25, 2011), the Seventh Circuit affirmed the district court's decision that an erroneous estimate of a participant's pension benefits could not support an ERISA estoppel claim against the pension plan. The estimate was furnished to the participant in negotiating his severance package, and erroneously reflected an additional $450 per month if benefits were paid as an annuity due to the omission of an early retirement factor in the calculations. In so ruling, the Seventh Circuit held that, even if an ERISA estoppel claim was cognizable under these circumstances, the participant's claim would fail because he could not show (1) that the plan intentionally misrepresented his estimated benefits – particularly where the estimate correctly reflected his benefits if paid as a lump-sum, (2) detrimental reliance because plaintiff suffered no economic harm, or (3) extraordinary circumstances, which are required to establish an estoppel claim.

Class Certification:

In Pipefitters Local 636 Ins. Fund v. Blue Cross Blue Shield of Michigan, --- F.3d --- No. 09-2607, 2011 WL 3524325 (6th Cir. Aug. 12, 2011), the court on interlocutory appeal reversed class certification of a fund's claim challenging fees charged by Blue Cross, finding that the class failed to meet the requirements of Fed. R. Civ. P. 23(b)(1)(A) and 23(b)(3) because separate actions did not present the risk of inconsistent adjudications, and the putative class was not the superior method of adjudication for this matter. The court also concluded that the Fund could not represent a class of Blue Cross clients because individualized determinations regarding the contracts between Blue Cross and each client, as well as a determination of the actual services provided to each client, were required to reach a conclusion as to Blue Cross's fiduciary status when charging the disputed fee.

Retiree Benefits:

In Dewhurst v. Cent. Alum. Co., --- F.3d ---, No. 10-1759, 2011 WL 3659310 (4th Cir. Aug. 22, 2011), the Fourth Circuit held that a preliminary injunction seeking "vested" health benefits was properly denied because the plaintiff retirees failed to prove a likelihood of success on the merits.  In so holding, the court rejected the retirees' argument that the Fourth Circuit had previously adopted the Sixth Circuit's decision in UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), such that an inference in favor of continued welfare benefits applies in retiree rights cases. The court rejected this interpretation of Yard-Man, concluding that the case, if adopted by the Fourth Circuit at all, merely requires application of ordinary principles of contract interpretation to retiree rights claims.  Because the collective bargaining agreement's language in this case limited the duration of the retirees' health benefits to the term of the agreement, the court concluded that the retirees had failed to make a clear showing that they were entitled to the extraordinary relief of a preliminary injunction.

In Sullivan v. CUNA Mut. Ins. Soc'y, --- F.3d ---, No. 10-1558, 2011 WL 3487414 (7th Cir. Aug. 10, 2011), plan retirees argued that defendant could not unilaterally alter a policy of allowing the value of unused sick days to pay for post-retirement health benefits because such action was akin to usurping plan assets.  Beginning in 1982, defendant allowed retirees to "pay" their portion of health care costs with unused sick time credits. The court ruled that the retirees misunderstood the nature of their sick-leave accounts, which were mere accounting liabilities and could not meet the definition of "plan assets." The court also noted that the retirees failed to sustain their heavy burden of proving entitlement to vested benefits, and improperly tried to flip the burden to defendant by arguing that the plan's reservation of rights clause did not appear in each and every participant communication, even though it did appear in every version of the plan.  Citing Cigna Corp. v. Amara, 131 S. Ct. 1866 (2011), the court noted the distinction between governing plan documents and other participant communications, such as benefit election forms, which are not designed to have "pages of caveats and reservations," and therefore rejected the retirees claims insofar as they were based on these collateral documents.  In dissent, Judge Hamilton asserted that the retirees' claims should not be dismissed because a viable promissory estoppel claim existed for those retirees who had been allowed to pay their portion of post-retirement health costs via unused sick leave for many years.

In Tackett v. M & G Polymers USA, LLC, No. 2:07-cv-126, 2011 WL 3438489 (S.D. Ohio Aug. 5, 2011), the court determined, following a bench trial, that certain sub-classes of retirees were entitled to lifetime contribution-free health benefits.  The court noted that welfare benefits only vest if the parties so intend. Citing UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), the court applied ordinary principles of contract interpretation to the collective bargaining agreements at issue, concluding that an ambiguity existed regarding the terms "full Company contribution." Relying on trial testimony, the terms of the plan tying health benefits to pension benefits, and the lack of evidence regarding the local union's adoption of the company's health care contribution cap letters, the court determined that the right to contribution-free health benefits vested for those class members retiring prior to August 2005. For post-2005 retirees, the court determined that the company successfully negotiated the right to impose health care contribution requirements on retirees, however harsh the result to the individual members of that sub-class.


On August 8th, 2011, the parties reached a tentative settlement in In re Nortel Networks Corp. "ERISA" Litigation, No. 03-MD-1537 (Aug. 8, 2011 M.D. Tenn.), and are seeking preliminary approval of a $21.5 million-dollar settlement for their ERISA claims relating to the Nortel Long-Term Investment Plan.  The plaintiffs alleged that the defendants breached their fiduciary duties by engaging in accounting practices that artificially inflated Nortel's stock price, causing participants in Nortel's Long-Term Investment Plan to lose significant amounts of their retirement savings. United States and Canadian bankruptcy courts also must approve the settlement.

In In re Tribune Co., et al., No. 08-13141 (Bankr. D. Del. Aug. 24, 2011), the court preliminarily approved a $32 million settlement involving Tribune's ESOP and the company's Chapter 11 bankruptcy, which allegedly rendered the ESOP's stock worthless just months after the ESOP was created to purchase $250 million of company stock in a leveraged buyout structured to benefit the company's owners. The settlement would compensate the approximately 3,000 ESOP participants with approximately $4.5 million from Tribune, $1 million from the ESOP trustee, and the remaining $26.4 million from the fiduciaries' insurers. The settlement would potentially resolve the DOL's investigation of the Tribune's ESOP, the DOL's objections in the bankruptcy proceedings, on behalf of the ESOP participants, to the Tribune's proposed reorganization plan, and its breach of fiduciary duty and prohibited transaction claims, based on the ESOP's stock purchase, pending against the Tribune, its CEO, and the ESOP's trustee in the Northern District of Illinois, where the settlement also was presented for approval.