The Ninth Circuit recently issued two decisions in Dorman v. Charles Schwab Corp.: the first overrules the decision in Amaro v. Continental Can. Co., 724 F.2d 747 (9th Cir. 1984) (Dorman, – F.3d –, No. 18-15281, 2019 WL 3926990 (9th Cir. Aug. 20, 2019) (slip op.) (“Dorman I”)); and the second concludes that an individual’s ERISA claim may be subject to the plan’s arbitration provision (Dorman, — F. App’x –, No. 18-15281, 2019 WL 3939644 (9th Cir. Aug. 20, 2019) (slip op.) (“Dorman II”)).

Dorman, a former Schwab employee, filed a putative class action under ERISA §502(a)(2) and (3), alleging that defendants violated ERISA and breached their fiduciary duties by including poorly performing Schwab-affiliated investment funds in the defined contribution 401(k) retirement plan to generate fees for Schwab. Dorman I, 2019 WL 3926990 at *1-*2.

In December 2014, the plan was amended to require that “[a]ny claim, dispute or breach arising out of or in any way related to the plan shall be settled by binding arbitration.” Id., 2019 WL 3926990 at *2.
Continue Reading Irreconcilable Differences: In Dorman v. Charles Schwab Corp., Ninth Circuit Overrules 35-Year-Old Authority; Concludes ERISA Claims Subject to Mandatory Arbitration.

In Hansen v. Group Health Cooperative, 2018 U.S. App. LEXIS 25033, (9th Cir. Sep. 4, 2018), two psychotherapists (“Providers”) sued Group Health Cooperative (“GHC”) in Washington state court, alleging GHC engaged in unfair and deceptive practices, in violation of Washington’s Consumer Protection Act.

The Providers claimed that GHC engaged in unfair and deceptive business practices by utilizing so-called Milliman Care Guidelines as its primary and exclusive criteria for authorizing mental health treatment. The problem with GHC’s use of these guidelines, according to the Providers, was that they:  (1) were intrinsically biased against mental healthcare, (2) were utilized to avoid paying for mental healthcare required by Washington’s Mental Health Parity Act, and (3) enabled GHC to unfairly compete by employing its own psychotherapists and discouraging patients from seeking treatment from rival practitioners.
Continue Reading ERISA Does Not Preempt Third Party Providers’ Unfair And Deceptive Business Practice Claims Against Health Insurer, Rules Ninth Circuit

In Munro v. University of Southern California, No. 17-55550, 2018 U.S. App. LEXIS 20522 (9th Cir. July 24, 2018), the U.S. Court of Appeals for the Ninth Circuit held that employees alleging an ERISA breach of fiduciary duty claim against their employer based on the employer’s administration of defined-contribution plans may not be compelled to arbitrate their collective claims under the terms of the arbitration clause in their employment contracts because their claims were brought on behalf of the plans and not on their own behalf.

The lawsuit was brought by nine current and former USC employees. The employees alleged that USC breached its fiduciary duty under ERISA in administering two defined-contribution plans – the USC Retirement Savings Program and the USC Tax-Deferred Annuity Plan (the “Plans”). The employees sought financial and equitable remedies to benefit the Plans and all affected participants and beneficiaries, including “a determination as to the method of calculating losses, removal of breaching fiduciaries, a full accounting of Plan losses, reformation of the Plans, and an order regarding appropriate future investments.”
Continue Reading Ninth Circuit Holds That Employees’ ERISA Breach of Fiduciary Duty Claim Against Their Employer is Not Subject to the Mandatory Arbitration Clause in Their Employment Contracts

In Eden Surgical Ctr. v. Cognizant Tech. Sols. Corp., No. 16-56422, 2018 U.S. App. LEXIS 10597 (9th Cir., Apr. 26, 2018), the U.S. Court of Appeals for the Ninth Circuit upheld the District Court’s Order dismissing the Complaint of an out-of-network healthcare provider attempting to pursue its patient’s rights under an ERISA plan based on an assignment of benefits. The defendant health plan’s claim administrator, Aetna, determined that benefits were not payable under the plan because the patient had not satisfied the plan’s deductible. Plaintiff brought this action on behalf of its patient challenging that benefit determination. The Ninth Circuit found that the plaintiff’s Complaint was properly dismissed by the district court because the patient’s health benefit plan did not permit assignments.
Continue Reading Ninth Circuit Rejects Arguments Challenging the Enforceability of an ERISA Plan Anti-Assignment Provision

In Dowdy v. Metro. Life Ins. Co., 16-15824, 2018 U.S. App. Lexis 12648 (9th Cir. May 16, 2018), the Ninth Circuit ruled that an accident plan that covers “accidental injury that is the Direct and Sole Cause of a Covered Loss” really covers many losses that have causes other than the accidental injury. And the court held that an illness does not “contribute to” a loss unless it is a “substantial cause” of the loss. In so holding, the Court: relied on some Congressional policies underlying ERISA while ignoring others; and read language into a Plan that was not there.
Continue Reading Ninth Circuit “Interprets” Accident Plan; “Direct and Sole Cause” Doesn’t Mean What It Says

A recent decision by the Eighth  Circuit Court of Appeals, Jones v. Aetna Life Ins. Co., No. 16-1714, 2017 U.S. App. LEXIS 8112 (8th Cir. May 8, 2017), provides another signal that those of us defending against benefit claims increasingly may have to contend with simultaneous equitable claims for breach of fiduciary duty. Though the law is developing in this area (when is ERISA law not “developing”?), and likely will vary from circuit to circuit, you can expect more plaintiffs to add an equitable claim to a benefits complaint, and you can expect at least some courts to allow those claims to go forward. What strategies will prove most effective in responding to this latest tactic? While there are no definitive answers at this point, there are some ideas to consider.
Continue Reading It May Be Time to Start Thinking About Equitable Claims Again

The Ninth Circuit affirmed two district court judgments dismissing ERISA actions brought by health care providers in DB Healthcare v. Blue Cross Blue Shield of Arizona, No. 14-16518, and Advanced Women’s Health Center v. Anthem Blue Cross Life & Health Insurance Co., No. 14-16612. The health care providers’ argument was two-fold:  (1) health care providers were “beneficiaries” under Section 502(a) of ERISA, and thus could bring suit directly under ERISA; and (2) the plaintiffs in these cases could bring derivative claims under ERISA because the subscribers had assigned their claims under the plans to the plaintiffs. The Court denied both these claims.

Consistent with the Second, Third, Sixth, Seventh, and Eleventh Circuits, the Ninth Circuit held that medical providers were not “beneficiaries” under Section 502(a) of ERISA and therefore could not bring suit directly under ERISA. A “beneficiary” is defined as “a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder.” The Court noted that the term “benefit” referred to “the specific advantages provided to covered employees, as a consequence of their employment, for particular purposes connected to alleviating various life contingencies.” The right to payment for medical services was not a “benefit” under the plan. Therefore, health care providers are not ERISA “beneficiaries” and may not sue under ERISA to recover payments due for services rendered or to otherwise enforce the statute.
Continue Reading Ninth Circuit Denies Health Care Providers’ ERISA Claims

The Second Circuit Court of Appeals recently held that claim fiduciaries must strictly comply with ERISA claim regulations or lose the deferential standard of review, as we have discussed in previous posts: Second Circuit rejects “substantial compliance” rule, Insurer’s Failure to Establish “Special Circumstances” for Extension of Time to Decide LTD Appeal Warrants De Novo Review, and District of Connecticut Rules that Violations of Claims Procedure Regulations Result in Loss of Discretion.

While other courts have not applied the same strict level of scrutiny to the claims regulations as Halo and its progeny, the Ninth Circuit recently held that a procedural violation in the claims-handling process may warrant de novo review if it resulted in substantive harm to the claimant. In Smith v. Reliance Standard Life Ins. Co., Dkt. # No. 16-15319 (9th Cir., March 16, 2017), the Ninth Circuit Court of Appeals vacated a district court’s order in favor of the insurer on a plan participant’s claims for short- and long-term disability benefits, remanding the case back to the district court for further consideration.
Continue Reading Ninth Circuit Holds That Violation of DOL Claim Regulations Can Result in a Loss of Deference

Estate of Barton v. ADT Security Svcs. Pension Plan, — F.3d. –, 2016 WL 1612755 (9th Cir. Apr. 21, 2016), involved a plaintiff who worked for about 20 years (with a couple of interruptions) for ADT and affiliated entities. His employers went through several mergers and acquisitions during the period, and some (but perhaps not all) of them participated in the pension plan at issue.
Continue Reading Court shifts burden of proof to plan

Tibble v. Edison Int’l, — F.3d –, 2016 WL 1445220 (9th Cir. Apr. 13, 2016) (“Tibble II”), marks the Ninth Circuit’s second review of the case after its earlier decision was vacated by the Supreme Court. Tibble v. Edison Int’l, 135 S.Ct. 1823 (2015) (“Tibble I”). Tibble I concerns the commencement of the statute of limitations for breach of fiduciary duty under 29 U.S.C. § 1113, which provides that an action must be brought within six years of “the last action which constituted a part of the breach or violation.”
Continue Reading On Tibble remand, court finds plaintiffs forfeited continuing-duty-to-monitor argument