• In Access Mediquip, L.L.C. v. UnitedHealthcare Insurance Co., — F.3d —, No. 10-20868, 2012 WL 4747260 (5th Cir. Oct. 5, 2012), the Fifth Circuit, en banc, held that ERISA does not preempt a third-party medical provider's state law claims based on a health plan insurer's misrepresentations of coverage. As reported in our September newsletter, Access alleged that it provided services in reliance on UnitedHealthcare's representations regarding how much, and under what conditions, UnitedHealthcare would pay Access for those services, and UnitedHealthcare breached its obligations and representations to Access by failing and refusing to pay and/or reimburse Access for such services. The district court held that Access's claims for negligent misrepresentation, promissory estoppel, and violations of the Texas Insurance Code based on UnitedHealthcare's misrepresentations were not preempted by ERISA Section 514. In so ruling, the district court distinguished between claims based on the extent of coverage and those based on the existence of coverage. On appeal, a three-judge panel rejected that distinction, and instead framed the dispositive issue as whether the state law claims are "dependent on, and derived from the rights of [the beneficiaries] to recover benefits under the terms of their ERISA plans." The panel held the claims were not preempted because the merits of Access's misrepresentation claims did not depend on whether its services were fully covered under the beneficiaries' plans; the state laws underlying Access's misrepresentation claims did not purport to regulate what benefits UnitedHealthcare provided to the beneficiaries of its ERISA plans, but rather what representations it makes to third parties about the extent to which it will pay for their services; and the state law claims concerned the relationship between the plan and third-party, non-ERISA entities who contact the plan administrator to inquire whether they can expect payment for services they are considering providing to an insured. On rehearing, the en banc panel agreed, and overruled three prior opinions to the extent they were inconsistent with its opinion.
  • In Loffredo v. Daimler AG, No. 11-1824, 2012 WL 4351358 (6th Cir. Sept. 25, 2012), the Sixth Circuit held that ERISA preempts state law claims for breach of fiduciary duty, promissory estoppel, and silent fraud brought by former Chrysler executives, but reinstated their age discrimination claim. Plaintiffs lost most of their benefits in their top-hat plan after Chrysler declared bankruptcy. Plaintiffs alleged the plan would have survived the bankruptcy if properly managed, and that its assets purchased annuities to replace the benefits of some younger, active executives in the plan. The Sixth Circuit affirmed the lower court's decision that ERISA preempted most of their claims, finding that plaintiffs': (1) breach of fiduciary claims were preempted, even against non-fiduciaries, because state law may not create an alternative to ERISA; (2) fraud claims, based on an alleged state law duty to disclose Chrysler's financial position, were preempted as conflicting with ERISA's reporting and disclosure provisions, and also failed because no such duty exists under state law; and (3) promissory estoppel claims were preempted as duplicative of, or an impermissible alternative to, ERISA — and failed because no broken promise was alleged.  Notably, the judges disagreed as to whether the state law claims were expressly preempted under ERISA Section 514 or completely preempted by way of Section 502. The court also held that amending the complaint to assert ERISA claims would be futile because plaintiffs did not allege they were entitled to benefits under the terms of the plan, or that defendants had particular funds that rightfully belonged to them. Finally, the court found that plaintiffs' age discrimination claim was not preempted because ERISA does not preempt other federal laws or state laws that enforce them.

Benefits Litigation

  • In American Dental Ass'n v. WellPoint Health Networks, No. 11-11208, 2012 WL 5233562 (11th Cir. Oct. 23, 2012), the Eleventh Circuit affirmed the district court's decision to grant summary judgment in favor of an insurance company where an out-of-network service provider failed to exhaust administrative remedies challenging a partial benefit denial prior to filing a class action lawsuit. After the insurer (WellPoint) made only partial reimbursement for an out-of-network service charge, the provider sent WellPoint a letter requesting "documentation of the data" used to calculate WellPoint's usual, customary and reasonable rates. WellPoint provided the basis for its calculations, and instructed the provider to contact its customer service department with any further questions. The provider then joined with the American Dental Association to bring a class action challenging WellPoint's method for determining customary reimbursement rates. The district court entered judgment on a magistrate judge's recommendation, finding the provider had not exhausted his administrative remedies. The Eleventh Circuit affirmed, noting that the provider's letter did not convey any demand for review or affirmative challenge to WellPoint's decision, and thus did not trigger the administrative review process. The court also rejected the provider's contention that any appeal would have been futile, noting that the provider's failure to seek review left the court to speculate as to what WellPoint would have conducted a thorough and adequate review.
  • In Advanced Rehabilitation, LLC v. UnitedHealth Group, Inc., No. 11-4269, 2012 WL 4354782 (3d Cir. Sept. 25, 2012) (unpublished), the court affirmed dismissal of plaintiff's first amended complaint for failure to state a viable cause of action. Plaintiffs, out-of-network health care providers, filed suit seeking reimbursement for providing a medical procedure called manipulation under anesthesia (MUA). Plaintiffs alleged that defendant routinely denied payment for MUA because this procedure was considered "experimental" and not "medically necessary." The court ruled that plaintiffs failed to satisfy Twombly's pleading standards because defendant had discretionary authority to make benefit determinations, and plaintiffs offered merely "naked assertions" that MUA was a benefit covered under the plans at issue. The court also found that plaintiff's claim that defendant had a company-wide policy of routinely denying claims without regard to the merits of individual claims fell short of plausibility because if MUA procedures were either "experimental" or not "medically necessary," then the routine denial of payment for MUA may have been proper under the terms of the plans.
  • In A.J. v. UNUM, No. 11-3578-cv, 2012 WL 5055132 (8th Cir. Oct. 19, 2012) (per curiam), the Eight Circuit affirmed a ruling holding that children of the insured decedent lacked standing to recover proceeds from an accidental death policy. The insurer (Unum) denied the estate's claim on the ground that the decedent had engaged in unlawful conduct that contributed to his own death.  The administrator of the decedent's estate failed to appeal this denial. Decedent's children brought suit as putative beneficiaries, arguing that they "may become entitled to benefits" (and thus fall within ERISA's definition of a beneficiary) because the Unum plan gave Unum the right to pay family members, instead of the estate, where no beneficiaries were named. The district court rejected this argument and the Eight Circuit agreed, reasoning that there was no colorable claim to benefits because the estate elected not to appeal the denial of benefits, in order to preserve estate assets. Accordingly, there was no timely claim for benefits outstanding, and thus no potential entitlement to benefits.

Section 510 Claims

  • In Shrable v. Eaton Corp., No. 12-1404, — F.3d —, 2012 WL 4511621 (8th Cir. Oct. 3, 2012), the Eighth Circuit affirmed dismissal of a Section 510 claim, rejecting plaintiff's assertions that his complaints about retirement programs led to his termination. After plaintiff had received multiple reprimands and been placed on a performance improvement plan, the employer (Eaton) terminated plaintiff's employment in July 2009. Plaintiff brought suit, claiming Eaton fired him for criticizing changes to Eaton's 401(k) plan in a January 2009 meeting. Emphasizing Eaton's showing that the changes were not formalized and announced to participants until February 2009 – a month after plaintiff claims to have made his comments – the court found plaintiff had not established any protected activity. In doing so, the Eighth Circuit declined to decide whether informal complaints warrant Section 510 protection, an issue which has split other circuit decisions reaching the issue. In addition, the court found that plaintiff had not shown any causal connection between his January 2009 comments and his termination in July 2009, and expressed doubt "whether a plaintiff may establish a prima facie case of retaliation when termination occurs six months after the protected activity." Applying a virtually identical rationale, the court also dismissed retaliation claims under the Fair Labor Standards Act.

Attorneys' Fees

  • In Cross v. Quality Management Group, LLC, No. 11-15146, 2012 WL 4465227 (11th Cir. Sept. 27, 2012) (unpublished), the court affirmed the lower court's ruling that neither party was entitled to attorneys' fees following settlement of a benefit claim. Plaintiff filed suit seeking entitlement to 100% of her retirement benefits after the plan maintained that she was only 60% vested. The parties reached an agreement that plaintiff would receive 75% of her benefits. Following settlement, both sides moved for fees under ERISA Section 502(g). The district court applied Hardt v. Reliance Std. Life Ins. Co., 130 S. Ct. 2149 (2010) to determine whether plaintiff achieved "some success on the merits," and then analyzed the fee claims in light of the Eleventh Circuit's pre-Hardt five-factor test. Plaintiff argued that the district court applied an improper legal standard in denying her fees by using the five-factor test and clearly erred in finding that the defendants did not litigate in bad faith and in assessing the participant's claims. The defendants argued that the district court abused its discretion in how it assessed the five-factor test to deny them fees. The Eleventh Circuit rejected plaintiff's argument that the district court committed clear error when applying the five-factor testl, finding that the Supreme Court held that once a court concludes that a party achieved "some success on the merits," a court may consider the five-factor test developed prior to Hardt in determining whether an award of fees and costs is appropriate. The Eleventh Circuit also found that there was not sufficient proof of deliberate wrongdoing to show that the district court clearly erred.


  • In Holling-Fry v. Coventry Health Care of Kansas Inc., No. 07-cv-00092 (DGK) (W.D. Mo. Oct.12, 2012), the court granted final approval of a $2.67 million settlement resolving a class action lawsuit brought against Coventry Health Care. Plaintiffs alleged that Coventry violated Missouri law by charging copayments exceeding the statutory limit of 50% of the covered charge. In addition to the settlement payment, the company will pay $500,000 in attorneys' fees and a $7,500 class representative award.