“Probate Exception” Bars Federal Jurisdiction over ERISA Dispute

The U.S. District Court for the Northern District of New York has ruled that the so-called “probate exception” to federal jurisdiction precludes federal courts from adjudicating cases implicating federal question jurisdiction, including cases arising under ERISA. In so doing, the N.D.N.Y. joins ranks with a small but growing number of federal district and circuit courts that recognize the “probate exception” as an absolute bar to federal jurisdiction over any in rem action in the custody of a state probate court.

The case, captioned In re Boisseau, 2017 U.S. Dist. LEXIS 11964 (N.D.N.Y. Jan. 30, 2017), came before the N.D.N.Y. by way of a notice of removal filed by Hanover HHR Employee Benefit Plan. The Plan sought removal of a “Petition to Extinguish Claim” that was filed by Brenda M. Boisseau, individually and as Executor of the Estate of Edward Boisseau in the Surrogate’s Court for the State of New York, Oswego County.

The decedent, Mr. Boisseau, was a beneficiary of the Plan who had prostate cancer. Upon Mr. Boisseau’s passing, his wife commenced a personal injury action against Mr. Boisseau’s treatment providers. That lawsuit was settled, at which time the Plan asserted a lien against the settlement fund for $299,975.73 in medical expenses it had paid on Mr. Boisseau’s behalf. Continue Reading

Does Presidential Memorandum Affect Disability Claim Regulations?

The DOL’s recent amendments to the disability claim regulations, 29 C.F.R. §  2560.503-1, became effective January 18, 2017, but the new provisions in that new regulation do not take effect until January 1, 2018 (for claims filed after that date).

The January 18, 2017 effective date was apparently intentional, as it was just before inauguration day.

On January 20, 2016, Reince Priebus issued a Presidential Memorandum advising the heads of all executive departments and agencies to, among other things, delay implementation of any regulation that had not taken effect prior to January 20, 2017. The purpose of the postponement is to  review “questions of fact, law, and policy” raised by the regulation.

Is the new regulation “saved” from the effect of this memorandum because it became effective on January 18, 2017? Or does the fact that the actual changes do not take effect until January 1, 2018 allow the new administration to conclude that it remains subject to review? Time will tell.

DOL Issues New Regulations for Plans Providing Disability Benefits

On December 19, 2016, the Department of Labor ended a year-long process to update the regulations governing claim procedures for disability plans, 29 C.F.R. §  2560.503-1. The text of the new regulations, and the DOL’s explanation of changes and the comment process, can be found here.

The DOL’s express goal in establishing these new regulations is to “strengthen[] the current rules primarily by adopting certain procedural protections and safeguards for disability benefit claims that are currently applicable to claims for group health benefits pursuant to the Affordable Care Act.” The DOL concluded that a stronger regulation was needed, in part, because “disability cases dominate the ERISA litigation landscape today[.]” Continue Reading

“Bare violation” of ERISA without concrete injury does not confer standing

Lee v. Verizon Commc’ns, Inc., — F.3d –, 2016 WL 4926159 (5th Cir. Sept. 15, 2016), held that a defined benefit pension plan participant does not have Article III standing to challenge the plan’s alleged violation of ERISA, in the absence of “concrete injury” to himself.

The case is a putative class action growing out of an amendment to Verizon’s pension plan that terminated it for retirees and replaced it with an annuity. One of the claims asserted fiduciary misconduct in violation of 29 U.S.C. § 1109(a), which requires a fiduciary to “make good … any losses to the plan” from a breach of duty. In an unreported 2015 decision, 623 Fed.Appx. 132 (5th Cir. 2015) (Lee 2015), the court had affirmed the dismissal of that claim for lack of standing. Lee 2015 had held that, though the plaintiff had statutory standing to assert a violation of ERISA by a plan fiduciary, he did not have Article III standing because “standing for defined-benefit plan participants requires imminent risk of default by the plan, such that the participant’s benefits are adversely affected,” and he had not alleged any likelihood of such injury.

The plaintiff petitioned for certiorari, and the Supreme Court granted the petition and vacated Lee 2015 and remanded it for reconsideration in light of Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016). Spokeo had addressed the question whether and when a statutory violation satisfied the concrete harm required for Article III standing.   Continue Reading

Extra-ERISA contractual obligation regarding pension plan is enforceable

Hunter v. Berkshire Hathaway, Inc., 829 F.3d 357, 358 (5th Cir. 2016), involved the interpretation of parties’ rights and obligations regarding a pension plan following a corporate acquisition. Its discussion of the extent to which an employer can obligate itself not to change a plan, even when benefits are not vested, is noteworthy. Continue Reading

Mutual fund redemptions payable to participants are not plan assets, and broker can retain interest earned while holding the cash

In re Fid. ERISA Float Litig., 829 F.3d 55 (1st Cir. 2016), held that Fidelity did not breach fiduciary duties to the plans at issue by allegedly earning interest on cash on its way to participants after a redemption had been made. The case involved a number of 401(k) plans that had hired Fidelity as trustee to act as intermediary between the plans, the participants and the mutual funds in which the participants’ funds were invested. In a nutshell, when a participant desired to make a withdrawal, the mutual fund would sell the shares and transfer the cash to Fidelity; Fidelity held the cash at least overnight in an account that allegedly earned interest for Fidelity; and it then distributed the cash to the participant. The plaintiffs, various participants and one plan administrator, sued on behalf of the plans. Continue Reading

Fifth Circuit provides guidance on when ERISA governs severance plans

In Gomez v. Ericsson, Inc., 828 F.3d 367, 369 (5th Cir. 2016), the central question was whether ERISA governed Ericsson’s Standard Severance Plan and Top Contributor Enhanced Severance Plan of 2010. The issue arose because, after plaintiff was laid off and signed a standard release, he wiped the hard drive on his company laptop before returning it. Ericsson asserted that the laptop had materials that did not exist elsewhere, and it denied plaintiff the benefits under the Plans. Plaintiff sued, and that brought up the question whether ERISA governed. Continue Reading

Internal quality assurance discussion about $100,000 error in plan interpretation not evidence of conflict

Running an employee benefit claims operation is a complex undertaking, which requires continual training and oversight. A robust quality assurance organization can play an important part in the overall management mix. Curran v. Aetna Life Ins. Co., 13-cv-289, 2016 WL 3843085 (S.D.N.Y. July 11, 2016), gives a concrete example of a quality assurance review catching a significant error that would have resulted in an incorrect six-figure payment, and documenting the correction of the problem in a responsible, non-biased way. I always think that an organization’s strength is best revealed by how it responds to a problem, so Aetna deserves a gold star for this case. Continue Reading

Second Circuit rejects “substantial compliance” rule

In Halo v. Yale Health Plan, 819 F.3d 42 (2d Cir. 2016), the Second Circuit made a significant change to the impact of ERISA claim regulations on subsequent litigation, rejecting the rule that it is sufficient for claim administrators to substantially comply with the regulations. Instead, the court held that, unless there is strict compliance with the regulations, courts will ordinarily conduct a de novo review of claim determinations, though it established a path for administrators to retain the arbitrary and capricious standard of review. Continue Reading

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