Retiree Rights:

  • In Maytag Corp. v. Intl. Union, United Automobile, Aerospace & Agricultural Implement Workers of America, No. 11-2931-cv, 687 F.3d 1076 (8th Cir. Aug.7, 2012), an employer sued a union and a class of retirees for a declaratory ruling that it could unilaterally modify retiree health care benefits provided under a collective bargaining agreement (CBA). The union and retirees brought a “mirror image” suit in another venue, which was ultimately dismissed in favor of the employer’s declaratory action. The district court rejected a challenge to the employer’s standing to sue, and after a trial, issued a declaratory judgment that the retirees had no vested right to lifetime health care benefits. In holding that the employer had standing to sue, the appeals court first noted the prevalence of retiree-rights litigation, and after observing that litigation over medical coverage was “inevitable,” the court found that the employer “reasonably concluded that the contractual dispute was real, substantial and existing.” On the vesting issue, the court focused attention on the parties’ 2004 CBA, since this was the sole agreement the retirees relied upon in their “mirror image” suit. The court emphasized that reservation-of-rights language in the 2004 Summary Plan Description (SPD), which the union actively participated in editing, established that the company did not intend for retiree medical benefits to vest. The court concluded that there must be an “affirmative indication of vesting in the plan documents to overcome an unambiguous reservation of rights.”
  • In Coriale v. Xerox Corp., No. 11-1724-cv, 2012 WL 3140418 (2d Cir. Aug.3, 2012), the Second Circuit affirmed, in a summary order, the dismissal of Xerox retirees’ claims that Xerox plan fiduciaries repeatedly promised lifetime health care benefits, then violated ERISA when Xerox stopped providing those benefits. The court ruled that that none of “the language contained in plan documents…can reasonably be interpreted to create a promise of vested lifetime benefits.” The court further observed that even if the plan documents contained such a promise, it would likely have been unenforceable in light of reservation-of-rights language in plan documents. Lastly, with respect to plaintiffs’ claim that the fiduciaries of the plans breached their duty of loyalty by knowingly deceiving participants with oral misrepresentations about lifetime benefits, the court concluded that the plaintiffs failed to allege sufficient facts to sustain claims that defendants misrepresented any material information regarding lifetime health care benefits.
  • In Moore v. Menasha Corp., No. 10 CV 2171, 2012 WL 3590858 (6th Cir. Aug. 22, 2012), the Sixth Circuit reversed a lower-court decision that had reached a mixed result in a retiree-medical benefits dispute, and remanded for entry of judgment in favor of plaintiffs on all claims. The defendant-employer (Menasha) provided health care benefits for retirees and their spouses pursuant to CBAs negotiated in the 1990s. After Menasha announced a plan for gradual premium increases in 2006, a class of retirees and spouses brought suit alleging that these changes breached the terms of the applicable CBAs. The lower court ruled in favor of the retirees, concluding that they were entitled to health care benefits, but ruled for Menasha with respect to spousal coverage. Each side appealed the adverse aspects of the lower court’s decision. The Sixth Circuit reversed, reasoning that the district court should have considered extrinsic evidence of the parties’ intent to resolve ambiguities in the CBAs and plan documents. After conducting its own review of the evidence, the Sixth Circuit found that the extrinsic evidence was “overwhelmingly” in plaintiffs’ favor, and that it showed an intent for retirees and their spouses to receive vested health care benefits. In reaching this conclusion, the court applied the so-called Yard-Man presumption (discussed in detail in our June 2012 issue), which in “close cases” favors lifetime vesting of benefits. Applying this presumption, the court found the inclusion of a reservation-of-rights clause in the plan’s SPD was not controlling because it contradicted the terms of the relevant CBAs.

Fiduciary Status:

  • In Guyan Int’l, Inc. v. Professional Benefits Adm’rs, Inc., Nos. 11-3126, 11-3640, --- F.3d ---, 2012 WL 2553281 (6th Cir. Aug. 20, 2012), several group-health plans brought ERISA claims against a claims administrator (“PBA”) for failing to pay medical providers for claims incurred by plan participants, instead using plan assets for its own purposes. Each plan had entered Benefit Management Service Agreements (“Agreements”) with PBA, which made PBA its claims administrator responsible for paying medical providers for claims incurred under the terms of plaintiffs’ plans. PBA appealed from a partial summary judgment in plaintiffs’ favor, arguing that it was not an ERISA fiduciary, because it lacked discretionary authority and because the Agreements disclaimed fiduciary status as to PBA. The Sixth Circuit held that PBA functioned as a fiduciary, even assuming it had no discretion, because PBA issued checks from plan accounts, selected deposit accounts for plan funds, determined when and how to disburse plan funds, and commingled plan assets with its own funds. The disclaimer language in the PBA Agreements did not alter the finding since, under prior Sixth Circuit decisions, contractual provisions cannot override a party’s functional status as an ERISA fiduciary. Characterizing the dispute as a “classic case of self-dealing,” the Sixth Circuit also affirmed the finding that PBA had breached its duties to the plans. Finally, although the court found plaintiffs’ contract claims were pre-empted, it rejected PBA’s arguments that the damages awarded below were not authorized under ERISA, because PBA had failed to raise the issue in the district court.

Multiemployer Plans:

  • In Janese v. Fay, No. 11-5369-cv, 12-80-cv, --- F.3d ---, 2012 WL 3642315 (2d Cir. Aug. 27, 2012), the Second Circuit held that trustees of a multiemployer plan do not act in a fiduciary capacity when they amend the terms of the plan. Plaintiffs, participants and beneficiaries of a multiemployer pension plan, brought a multi-count action against present and former trustees, asserting various breaches of fiduciary duty. Among their claims were several counts alleging that the trustees breached their fiduciary duties when they amended certain plan terms. As to these counts, the district court granted the trustees’ motion to dismiss on limitations grounds, but rejected their alternative contention that the trustees were not acting as ERISA fiduciaries when they enacted the challenged amendments. The Second Circuit affirmed, and in doing so, expressly observed that intervening Supreme Court precedent abrogated prior Second Circuit jurisprudence holding that the trustees’ amendment of a multiemployer plan was subject to ERISA’s fiduciary duties. The Second Circuit also vacated the district court’s dismissal of several counts arising out of fraudulent activity of a former plan manager. The court reasoned that issues of fact existed as to the time when plaintiffs knew, or should have known, about the plan manager’s wrongdoing. Accordingly, the court found dismissal on the pleadings improper, since it was unclear whether the six-year limitations period applicable to fraud-based claims applied. In discussing the application of the six-year limitations period for fraud, the court observed that the “particularity” requirement of Federal Rule of Civil Procedure 9(b) applied to allegations that a fiduciary breaches ERISA duties through fraudulent conduct.

Withdrawal Liability:

  • In Trustees of the Local 138 Pension Trust Fund v. F.W. Honerkamp Co., No. 11-1322-cv, --- F.3d ---, 2012 WL 3538267 (2d Cir. Aug. 17, 2012), the Second Circuit rejected a pension fund’s argument that the Pension Protection Act of 2006 (PPA) prohibits an employer from withdrawing from a critically underfunded multiemployer pension plan. Shortly before renegotiating their collective bargaining agreements (CBAs) with Honerkamp, the Fund announced it was in “critical” funding status and began developing a rehabilitation plan as required by the PPA. As part of its rehabilitation plan, the Fund proposed new schedules of reduced benefits and increased employer contributions, but determined it was nevertheless unlikely to emerge from critical status within ten years. After requesting an estimate of its withdrawal liability, Honerkamp negotiated new CBAs under which it would provide employees with a 401(k) retirement plan. When Honerkamp sought to withdraw from the Fund, the Trustees sued Honerkamp, arguing that the PPA prohibited withdrawal after the Fund entered critical status. The Fund also sought retroactive and prospective contributions from Honerkamp, as provided under the rehabilitation plan. In an issue of first impression, the Second Circuit held that the PPA does not block employer withdrawal from critically underfunded plans. Although the PPA does not explicitly address the issue, the court noted that there were several PPA provisions that altered withdrawal-liability calculations in situations involving critical-status plans. The court also observed that PPA amended portions of ERISA addressing withdrawal liability “without the slightest indication that it intended to abrogate” the employers’ right to withdraw, even where a plan is in critical status. Finally, the court noted that the Pension Benefit Guarantee Corporation had adopted regulations for calculating withdrawal liability from critical-status plans.

Employer Stock:

  • In Dudenhoefer v. Fifth Third Bancorp., No. 11-3012, 2012 WL 3826969 (6th Cir. Sept. 5, 2012), the Sixth Circuit reversed a district court decision granting defendants’ motion to dismiss a “stock drop” claim, citing prior rulings in that Circuit that had declined to apply the Moench presumption of prudence at the motion to dismiss stage. The complaint alleged, inter alia, that Fifth Third Bank had engaged in lending practices that were equivalent to participation in the subprime lending market, defendants were aware of the risks of such investments, Fifth Third stock declined 74% during the relevant period, and “business and accounting mismanagement ... coupled with inaccurate and misleading statements” by executives caused the stock price to be artificially inflated before it plummeted. In reversing the lower court’s dismissal , the court reaffirmed the court reaffirmed earlier decisions holding that: (i) a plan fiduciary’s decision to invest in employer securities should be reviewed for an abuse of discretion, i.e., a “fiduciary’s decision to remain invested in employer securities is resumed to be reasonable,” and (ii) a plaintiff may rebut the presumption of reasonableness “by showing that a prudent fiduciary acting under similar circumstances would have made a different investment decision.” The Court also noted that, unlike other Circuits, the Sixth Circuit had not adopted a requirement that the plaintiff necessarily demonstrate “dire circumstances,” to rebut the presumption, and on that basis distinguished other Circuits that had applied the presumption on a motion to dismiss.


  • In Trustees of the Carpenters’ Health & Welfare Trust Fund of St. Louis v. Darr, --- F.3d ----, Nos. 10–1682, 10–1793, 10–2579, 2012 WL 3573360 (7th Cir. Aug. 21, 2012), the Seventh Circuit vacated an injunction against a state court suit that sought attorneys’ fees from an ERISA plan, holding that state court proceedings may not be enjoined under ERISA unless they will “mak[e] it impossible for a fiduciary . . . to carry out its responsibilities.” One of the plan’s participants received medical and disability benefits, then recovered from a third-party and repaid the benefits to the plan. The participant’s attorney then sued the plan for partial payment of his fees under the “common fund doctrine,” contending the plan had a common interest because it was repaid from the participant’s recovery. The plan filed a separate suit to enjoined the attorney’s state court suit under ERISA Section 502(a)(3). The court granted the application, ruling that the plan’s payment of attorneys fees would violate ERISA and the plan’s terms. In vacating the injunction, the Seventh Circuit explained that the Anti-Injunction Act prevents federal courts from enjoining state court proceedings unless “expressly authorized by Act of Congress” (or other narrow exceptions apply). In ruling that the injunction was not expressly authorized, the court found the state-court suit would not make the fiduciaries’ duties impossible because it was “too far removed from the core federal interests represented by ERISA,” and the plan could present its ERISA-based defenses and seek damages for any fees it was ordered to pay in the state court suit.

Benefit Claims:

  • In Wade v. Aetna Life Ins. Co., 684 F.3d 1360 (8th Cir. 2012), the Eighth Circuit affirmed summary judgment in favor of the plan administrator, holding that Aetna did not abuse its discretion in terminating a participant’s long-term disability (LTD) benefits even though the participant received LTD benefits from the Social Security Administration (SSA). The court affirmed the lower court’s decision that Aetna’s decision was properly reviewed for an abuse of discretion, rejecting the participant’s contention that de novo review should apply due to alleged procedural irregularities that occurred after the benefits decision and did not affect Aetna’s determination. In holding that Aetna did not abuse its discretion by allegedly failing to consider the participant’s qualification for LTD benefits from the SSA, the court explained that an ERISA fiduciary is not bound by the SSA’s determination. The court ruled that substantial evidence supported Aetna’s decision, noting that: (1) Aetna’s determination occurred five years after the SSA’s; (2) Aetna reviewed new evidence, including an independent medical examination and video surveillance; and (3) the SSA would not necessarily have made the same determination based on the new evidence.
  • In Aschermann v. Aetna Life Ins. Co., --- F.3d ---, No. 12-1230, 2012 WL 3090291 (7th Cir. July 31, 2012), the court ruled that an agent of the entity entitled to Firestone deference was also owed deference, and that plaintiff received “full and fair” review of her administrative claim. Plaintiff argued for do novo review of her benefit claim because the plan explicitly bestowed discretionary authority only on the plan administrator and the insurer underwriting the benefits, and a third-party claims administrator actually denied the claim. The insurer had delegated its decision-making authority to the claims administrator via contract, but the plan was not amended to reflect this reality. The court rejected plaintiff’s argument that delegation of benefit eligibility decisions to a third-party broke the discretionary chain of authority. First, the court noted that ERISA does not prohibit sub-delegation; second, the claims administrator adopted all of the duties and responsibilities of the insurer; third, the delegation worked to decrease the potential for a conflict of interest because eligibility decisions were no longer made by the underwriter; and finally, the delegation to the claims administrator was akin to the insurer delegating to an in-house working group. The court also disposed of plaintiff’s notice claim because the plan’s written communications clearly noted the deficiencies in her claim.

Section 510 Claims:

  • In Berry v. Frank’s Auto Body Carstar, Inc., No. 11-4150, 2012 WL 3552505 (6th Cir. Aug. 20, 2012), the court affirmed the dismissal of plaintiff’s ERISA Section 510 and COBRA claims because he failed to supply sufficient evidence that his firing was pretextual. Plaintiff was terminated after he engaged in a profanity laced argument with another employee. Plaintiff claimed that his firing was a retaliatory act for seeking medical insurance for his son, who was diagnosed with quadriplegic cerebral palsy and required large quantities of medications and daily physical therapy. The court concluded that the company provided a legitimate, non-discriminatory reason for the firing, and that plaintiff failed to establish that the company’s reason was pretextual since there was no evidence that other employees engaged in acts of comparable seriousness but were nevertheless retained. The court also affirmed the dismissal of plaintiff’s COBRA claims, having found that the company was not required to provide notification where plaintiff was terminated by reason of his gross misconduct.