Justia U.S. 4th Circuit Court of Appeals Opinion SummariesArticles Posted in ERISA
Shupe v. Hartford Life & Accident Insurance Co.
In 2003, Shupe was an Executive Sous Chef for Hyatt when he began experiencing symptoms of osteomyelitis, an infection in his spinal cord. He was 37 years old. After rounds of antibiotics and surgery, he was unable to maintain his employment and left his position in July 2004 due to pain from chronic osteomyelitis, degenerative disc disease in the lumbar spine, and spinal stenosis that was so severe that he could not stand for an extended period of time. Hyatt’s long-term disability plan, a “qualified” plan under the Employee Retirement Income Security Act of 1974, paid Shupe disability benefit for 11 years. Hartford then terminated his benefits, finding that there were alternative occupations that Shupe could physically perform, was qualified for, and pay greater than 60% of his prior salary, so that he did not meet the plan’s definition of “disabled.”The district court rejected Shupe’s 29 U.S.C. 1132(a)(1)(B) suit on summary judgment. The Fourth Circuit reversed, in favor of Shupe. His post-termination evaluations, coupled with Shupe’s contemporaneous medical history, all uniformly conclude that Shupe was incapable of full-time sedentary employment. Hartford’s assessment was an “outlier.” View "Shupe v. Hartford Life & Accident Insurance Co." on Justia Law
Walsh v. Vinoskey
The Employee Retirement Income Security Act (ERISA) prohibits any fiduciary of an employee benefit plan from causing the plan to engage in transactions with a “party in interest” when that party receives more than fair market value, 29 U.S.C. 1106(a)(1)(A),(D). A fiduciary who violates this prohibition is liable for the plan's resulting losses In 1993, Vinoskey, who founded Sentry Equipment, established an employee stock ownership plan (ESOP). By 2004, the ESOP owned 48% of Sentry, with Vinoskey owning the remaining 52%. Vinoskey served as an ESOP trustee. Around 2010, Vinoskey wanted to sell his remaining shares to the ESOP. To avoid a conflict of interest, Sentry engaged Evolve Bank as the ESOP’s independent fiduciary to review the transaction. The ESOP purchased the Vinoskey stock for $20,706,000, including an interest-bearing promissory note. Four years later, Vinoskey, forgave $4,639,467 of the ESOP’s debt.The Secretary of Labor sued Evolve and Vinoskey under ERISA. The district court concluded that Evolve’s due diligence was “rushed and cursory” and found that the fair market value of Sentry’s stock was $278.50 per share, not $406 per share. The court found Vinoskey jointly and severally liable with Evolve for $6,502,500 in damages and did not reduce the award by the amount of debt that Vinoskey forgave. The Fourth Circuit affirmed with respect to Vinoskey’s liability but reversed the district court’s legal conclusion concerning the damages award. View "Walsh v. Vinoskey" on Justia Law
United States v. Frank
Frank embezzled $19 million from his former employer, NCI, and pleaded guilty to wire fraud, 18 U.S.C. 1343. The district court sentenced Frank to 78-months’ imprisonment and ordered Frank to pay restitution of $19,440,331. The government has recovered over $7 million and attempted to garnish Frank’s 401(k) retirement account under the Mandatory Victims Restitution Act (MVRA), filing an Application for Writ of Continuing Garnishment, 18 U.S.C. 3664(m)(1)(A)(i), naming Schwab as the garnishee. Schwab currently holds approximately $479,504 in Frank's 401(k) account, which is covered by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001. Frank argued that ERISA’s anti-alienation provision protects retirement plans against claims by third parties. The Fourth Circuit affirmed that the MVRA permits the seizure of Frank’s 401(k) retirement account, notwithstanding ERISA’s protections. When the government enforces a restitution order under the MVRA, it stands in the shoes of the defendant, acquiring whatever rights to 401(k) retirement funds he possesses; the government’s access to the funds in Frank’s 401(k) account may be limited by terms set out in Frank’s plan documents or by early withdrawal penalties to which Frank would be subject. The court remanded so that the district court may decide what present property right Frank has in his account. The court rejected an argument that the Consumer Credit Protection Act, 15 U.S.C. 1673(a), limits the government to taking 25 percent of the funds. View "United States v. Frank" on Justia Law
Peters v. Aetna Inc.
Plaintiff appealed the district court's grant of summary judgment in favor of Aetna, as well as the denial of her motion for class certification. In this case, Mars operated a self-funded health care plan and hired Aetna as a claims administrator of the plan pursuant to a Master Services Agreement (MSA). Aetna subsequently executed subcontracts with Optum for Optum to provide chiropractic and physical therapy services to the plan participants for more cost-effective prices. From 2013 to 2015, in addition to obtaining other non-Optum medical services, plaintiff received treatment from chiropractors and physical therapists provided by Optum under its contract with Aetna.In 2015, plaintiff filed suit against appellees, alleging violations of the Employee Retirement Income Security Act (ERISA), claiming that appellees breached their fiduciary duties to her and the plan based on Aetna's arrangement to have the plan and its participants pay Optum's administrative fee via the bundled rate. Plaintiff also alleged that appellees engaged in comparable violations in their dealings with similarly situated plans and their participants, requesting to represent two classes of such similarly situated plans and their participants.The Fourth Circuit held that plaintiff experienced no direct financial injury as a result of appellees' use of the bundled rate in the claims process. Therefore, the court affirmed the district court's judgment on plaintiff's personal claim for restitution under section 502(a)(1) and (3). However, because the court is unable to conduct appellate review of plaintiff's restitution claim on behalf of the plan under section 502(a)(2), the court vacated and remanded that claim to the district court for development of the record as necessary and resolution in the first instance under Donovan v. Bierwirth, 754 F.2d 1049 (2d Cir. 1985).In regard to plaintiff's claims for surcharge, disgorgement, and declaratory and injunctive relief, which do not require a showing of direct financial injury, the court is persuaded that she has produced sufficient evidence for a reasonable factfinder to conclude that Aetna was operating as a functional fiduciary under ERISA and breached its fiduciary duties. The court also concluded that there is sufficient evidence in the record upon which a reasonable factfinder could find that Optum was acting as a party in interest engaged in prohibited transactions, but not as a fiduciary. Accordingly, the court reversed the district court's judgment as to plaintiff's claims for surcharge, disgorgement, and declaratory and injunctive relief under section 502(a)(1) and (3), and for her claims on behalf of the plan for surcharge, disgorgement, and declaratory and injunctive relief under section 502(a)(2) and remanded those claims for further proceedings. Finally, the court held that the district court abused its discretion in denying plaintiff's motion for class certification when it failed to properly ascertain the full measure of available remedies. Accordingly, the court vacated and remanded the district court's order denying class certification for a full reevaluation under Federal Rule of Civil Procedure 23. View "Peters v. Aetna Inc." on Justia Law
Quatrone v. Gannett Company, Inc.
Plaintiffs, participants in the Gannett Co. 401(k) Savings Plan, filed suit alleging that defendants breached their fiduciary duties of prudence and diversification under the Employee Retirement Income Security Act (ERISA). Plaintiffs contend that defendants ignored an imprudent single-stock fund in the Plan for several years, resulting in millions of dollars in losses.The Fourth Circuit vacated the district court's dismissal of plaintiff's complaint for failure to state a claim, holding that plaintiffs plausibly alleged that a fiduciary breached a duty, causing a loss to the employee benefit plan. In this case, plaintiffs alleged that defendants breached their duty of prudence by allegedly failing to monitor the continuing prudence of holding a single-stock fund; because defendants did not monitor the merits of the fund, they did not uncover that it was an imprudent fund; defendants' failure to discover the imprudence led to the failure to divest the fund; and, when the price of the stock in the fund went down, the Plan suffered a loss. The court remanded for further proceedings. View "Quatrone v. Gannett Company, Inc." on Justia Law
Dawson-Murdock v. National Counseling Group, Inc.
The Fourth Circuit vacated the district court's dismissal of plaintiff's action against NCG, which alleged two claims under the Employee Retirement Income Security Act of 1974 (ERISA). Plaintiff alleged that NCG breached its fiduciary duties in the administration of a group life insurance plan in which plaintiff's late husband had enrolled and for which NCG was the "named fiduciary."The court held that the complaint sufficiently alleged NCG's fiduciary status in relation to plaintiff's ERISA claims. In this case, the complaint showed that NCG acted as a function fiduciary when it failed to inform or misinformed plaintiff's husband about the continued eligibility under the plan, and NCG neglected to notify her husband that he had the option to convert or port his life insurance coverage. Furthermore, NCG breached the fiduciary duty that it owed to plaintiff as a beneficiary when Vice President Baham advised her not to appeal Unum Life's denial of her benefits claim. Accordingly, the court remanded for further proceedings. View "Dawson-Murdock v. National Counseling Group, Inc." on Justia Law
Board of Trustees v. Four-C-Aire, Inc.
The Fund filed suit claiming a delinquent exit from Four-C, a former participating employer, under section 515 of the Employee Retirement Income Security Act of 1974. The Fourth Circuit reversed the district court's grant of Four-C's motion to dismiss, holding that the Fund's governing agreements and Four-C's collective bargaining agreement (CBA) required participating employers to pay an exit contribution when they no longer have a duty to contribute to the Fund due to the expiration of the underlying CBA, and therefore the complaint alleged a viable claim. Accordingly, the court vacated the judgment as to the exit contribution claim and remanded for further proceedings. View "Board of Trustees v. Four-C-Aire, Inc." on Justia Law
Griffin v. Hartford Life & Accident Insurance Co.
The Fourth Circuit affirmed the district court's grant of summary judgment to Hartford Life in an action brought under the Employee Retirement Income Security Act (ERISA). Plaintiff filed suit seeking a continuation of the long-term disability benefits that Hartford Life had terminated based on its conclusion that plaintiff was no longer "disabled," as that term was used in the plan. The court affirmed the district court's conclusion that Hartford Life, not Hartford Fire, determined that plaintiff was no longer eligible for long-term disability benefits, and Hartford Life's decision to terminate his long-term disability benefits was not an unreasonable exercise of discretion. In this case, the record demonstrated that plaintiff received a fair and thorough consideration of his claim and Hartford Life's conclusion was reasonably supported by the available evidence where, among other things, video surveillance evidence showed plaintiff walking at a quick pace and moving without observable bracing or support. View "Griffin v. Hartford Life & Accident Insurance Co." on Justia Law
Gordon v. Cigna Corp.
The Fourth Circuit affirmed the district court's grant of summary judgment for the insurance company that insured Steven Gordon. After Steven died, his wife filed suit seeking the full coverage amount for the insurance policy he had been paying for through his company. The court held that no reasonable jury could find that either of the CIGNA Defendants had a fiduciary duty toward the Gordons with respect to soliciting supporting materials for coverage beyond the guaranteed issue amount or notifying new employees that they had not completed the evidence of insurability requirement; even assuming without deciding, that the cause of action for breach of trust by a fiduciary under the Employee Retirement Income Security Act (ERISA) was cognizable, her claim would fail because there was no evidence that the CIGNA Defendants knowingly participated in any breach; and the district court did not err by granting summary judgment before allowing plaintiff to conduct discovery. View "Gordon v. Cigna Corp." on Justia Law
Bakery and Confectionary Union v. Just Born II, Inc.
The Fourth Circuit affirmed the district court's judgment requiring Just Born, a candy manufacturer, to pay delinquent contributions into the Bakery and Confectionary Union and Industry International Pension Fund, as well as interest, statutory damages, and attorneys' fees. Under a plain-language application of the Provision to the facts of this case, the court held that Just Born was liable to the Pension Fund for continued contributions for all employees hired after the declaration of an impasse, pending the execution of a new collective bargaining agreement (CBA) in compliance with section 1085 of the Employee Retirement Income Security Act (ERISA), the invocation of the withdrawal provisions, or some other statutorily required act. Accordingly, the Pension Fund was entitled to judgment on the pleadings so long as Just Born did not present a cognizable affirmative defense. The court agreed with the district court's reasoning that the Rule 9(b) standard applied to Just Born's affirmative defenses and that Just Born's allegations did not satisfy this standard. Therefore, the district court did not err in concluding that Just Born did not plead its affirmative defenses with sufficient particularity to withstand the Pension Fund's motion for judgment on the pleadings. View "Bakery and Confectionary Union v. Just Born II, Inc." on Justia Law