You already know that in March 2015, the 6th Circuit issued an en banc decision rejecting disgorgement of profits claims. Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364, 372 (6th Cir. 2015)(en banc) (rejecting $3.8 million disgorgement claim against Life Insurance Company of North America  as “an impermissible duplicative recovery”).

But the reality is that plaintiffs in ERISA cases keep trying to assert breach of fiduciary duty/disgorgement claims.  We are seeing an influx of these claims being asserted in the Ninth Circuit.

Here’s a strategic early play in these cases:  move to dismiss the breach of fiduciary duty/disgorgement claim early on.

This recent case highlights the point.  Gluc v. Prudential Insurance Co., 2015 WL 6394522 (W. D. Ky. October 22, 2015)(PDF).

FACTS: Judith Gluc sought ERISA-governed long term disability benefits. Prudential paid long term disability benefits for two years, and then discontinued benefits. Gluc then brought suit  to recover benefits. She also alleged breach of fiduciary duty and sought disgorgement of “earnings Prudential accumulated as a result of its delay in paying her benefits.”

Gluc alleged a laundry list of purported acts which breached fiduciary duty. She claimed that Prudential’s claims process: (a) was designed to “systematically delay claim decisions”; (b)encouraged personnel to “automatically accept the opinions of Prudential’s paid medical reviewers”; (c) placed Prudential’s financial interests “ahead of its participants”; and, (d)improperly offset Social Security benefits.

TRIAL COURT HELD:  Rule 12(c) Motion to Dismiss Breach of Fiduciary Duty/Disgorgement Claim GRANTED.

  1. “[W]here Congress elsewhere provided adequate relief for a beneficiary’s injury, there will likely be no need for further equitable relief, in which case such relief would normally not be ‘appropriate.’” Op. at 4.
  2. “[I]f Section 1132 provides a remedy for Gluc’s alleged injury, her claims for equitable relief are not viable.”  Op. at 5.
  3. “Gluc alleges numerous flaws in Prudential’s claims process, but ultimately, the only injury she purports to have suffered is loss of benefits—an injury Section 1132(a)(1)(B) is designed to address.”  Op. at 5.
  4. “[T]he ‘accumulated earnings’ Gluc seeks in her disgorgement claim may be recovered through an award of prejudgment interest, which the Court has discretion to make.”  Op. at 5.
  5. As to Gluc’s “systemic flaws” allegations, “this is not a class action…[and] she does not allege facts to support a claim of plan-wide wrongdoing.  Rather the facts alleged indicate a problem with Prudential’s processing of a single claim.”  Op. at 5-6.

Moving to dismiss these claims early can help posture the claim for early, reasonable resolution.