By Michael W. Stevens and Mark Casciari

Seyfarth synopsis: Arkansas has sought certiorari on the question of the ability of states under the ERISA preemption clause to regulate the rates charged by PBMs, and the Supreme Court has asked for the input of the Solicitor General on whether it should decide the issue..

In Rutledge v. Pharmaceutical Care Management Association, No. 18-540, the Supreme Court has again been asked to define the scope of ERISA preemption. Thirty-six states have passed legislation regulating the rates charged by PBMs. The issue is whether such state laws are preempted by ERISA.

PBMs are entities that manage prescription drug benefits. They operate by billing health plans for participant prescriptions and then reimbursing pharmacies on behalf of the plans.

In 2013, Arkansas enacting a law purporting to regulate PBMs, and amended the law in 2015. The statute created an appeals process through which pharmacies could challenge the reimbursement rates offered by PBMs. The stated goal of the law was to protect pharmacies against below-cost reimbursement. The law applied to both ERISA and non-ERISA health plans.

An Arkansas district court found the law preempted by ERISA and Medicare Part D. The Court of Appeals for the Eighth Circuit affirmed as to ERISA preemption, but reversed on Medicare Part D preemption.

The Eighth Circuit held that the Arkansas law included PBMs that cover ERISA plans, so the law “relate[d] to and has a connection with employee benefit plans,” and was therefore preempted. In its petition for certiorari, Arkansas argued that merely because the law included ERISA governed plans, in addition to non-ERISA plans, there should be no preemption: “If a law regulates a class of third-party administrators or claims processors whose customers merely include ERISA plans, it logically follows that the law does not act immediately and exclusively upon ERISA plans, and that the existence of ERISA plans is not essential to the law’s operation.” Pet. at 18 (emphasis in original).

The Circuits are split on whether ERISA preempts all regulation of PBMs (the D.C. and Eighth Circuits), or whether ERISA preempts no regulations of PBMs (the First Circuit). After Arkansas submitted its petition for certiorari, the Supreme Court has requested that the Solicitor General provide the position of the United States. The Solicitor General has not yet submitted his brief.

Stay tuned to this blog for further updates. If the Supreme Court grants certiorari in this case, it will likely affect the operation of PBMs, and further define the scope of ERISA preemption.

 

By: Mark Casciari

Synopsis: ERISA stock-drop litigation has diminished in recent years due to the Supreme Court’s Dudenhoeffer decision (and a rising stock market). Now, the Court will have another chance to weigh in on whether federal ERISA litigation in this space should breathe new signs of life.

There is a trend-line in recent Supreme Court decisions limiting federal court jurisdiction before a plaintiff ever enters the world of expansive and expensive discovery. This trend-line is a great assist to all federal court defendants, including ERISA defendants. Key decisions to note are Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Spokeo, Inc. v. Robbins, 136 S. Ct. 1540 (2016).   As to Twombly’s “plausibility” precondition to discovery, see generally here. As to Spokeo’s “concrete injury” precondition to discovery, see generally here.

The Supreme Court has just accepted certiorari in Jander v. Retirement Plans Committee of IBM, 910 F.3d 620 (2d Cr. 2018). In Jander, ESOP plan participants claimed that the ERISA plan fiduciaries knew but failed to disclose that IBM’s microelectronics division (and thus IBM’s stock) was overvalued. The district court found that the plaintiffs did not plausibly plead a violation of the ERISA fiduciary duty of prudence. The Court of Appeals for the Second Circuit reversed.

The Second Circuit ruled that the following allegations equated to plausibility: (i) the fiduciaries knew that IBM stock was artificially inflated by virtue of the impairment of a business unit and its associated accounting violations, (ii) the fiduciaries had the power to disclose the truth to SEC filing recipients and to plan participants, (iii) the failure to disclose long-term investment prospects was harmful because uncorrected fraud causes greater damages the longer the fraud continues, (iv) correcting the fraud would reduce the stock price only by the amount of the artificial inflation, and (v) the fiduciaries knew that disclosure of the truth was inevitable. The Second Circuit was not dissuaded by the fact that the district court dismissed a related securities fraud claim that the plaintiffs did not appeal.

The petition for certiorari accepted by the Supreme Court presents this issue: Can the Dudenhoeffer standard that a plaintiff must “plausibly allege[] that a prudent fiduciary in the defendant’s position could not have concluded that [an alternative action] would do more harm than good to the fund,” be satisfied by “generalized allegations that the harm of inevitable disclosure of an alleged fraud generally increases over time.”

Cutting through the legal niceties, the issue boils down to the level of detail required in a federal complaint to open the discovery door. Entering that door is of utmost significance to plaintiffs because discovery is so expensive to defendants, even after taking proportionality preconditions into account. Many large cases that find themselves stuck in discovery settle without any adjudication on the merits.

The forthcoming Jander decision will advise ERISA litigants whether the trend towards closing the discovery door will continue. A Court majority seems disinclined to loosen pleading standards in the hyper-partisan political culture now enveloping the country. Should the Court reverse the Second Circuit, moreover, ERISA plaintiffs may find it tougher to assert fiduciary breach claims in contexts other than the stock-drop context, in the absence of inculpatory information uncovered outside discovery.

 

By: Mark Casciari

Synopsis: A new Third Circuit decision has allowed an ERISA fee complaint to stand even though there were no specific allegations of fiduciary errors in the process of selecting investment options and fees. This development is yet another in the line of decisions that decide if the federal door to discovery will be opened or closed at the complaint stage of the litigation. Expect judges to differ and more such decisions to issue.

We recently reported, in a sister blog, on a Supreme Court decision affirming that a federal plaintiff needs to allege concrete allegations of injury, caused by a defendant, in order to trigger the onerous discovery weapons in the Federal Rules of Civil Procedure. See here.

ERISA lawsuits are not immune from this specificity precondition to discovery, and the expensive consequences if is satisfied.

A new decision from the Court of Appeals for the Third Circuit, Sweda v. University of Pennsylvania, 2019 U.S. App. LEXIS 13284 (May 2, 2019), shows the difference of opinion of judges when it comes to opening the discovery door.

In Sweda, a putative plaintiff class of 20,000 participants in an ERISA-regulated 403(b) defined contribution plan with assets in 2014 totaling $3.8 billion sued plan fiduciaries to recover on alleged overpayments of fees and underperformance of investment options. The class undoubtedly seeks tens of millions of dollars in damages.

The Sweda putative class presented the question whether the allegations of a breach of ERISA fiduciary duties were sufficiently specific and plausible. Two judges answered in the affirmative; one dissented.

The majority employed a “holistic” analysis that did not parse the complaint “piece by piece to determine whether each allegation, in isolation, is plausible.” The majority twice described the allegations as “numerous” — showing that lengthy complaints help plaintiffs pass through the discovery door. The majority also said that the complaint contained “circumstantial” evidence allegations of better performing benchmarks and allegations that the fiduciaries selected high fee retail mutual funds, as opposed to lower fee institutional funds, as investment options.

The majority ignored the lack of allegations of how the fiduciaries mismanaged the plan — there is no fiduciary breach if the fiduciary process is reasonable. To be sure, specific allegations of an illegal fiduciary process are hard to come by because ERISA fiduciary disclosure rules are limited, but that is the balance Congress struck in limiting fiduciary legal obligations in order to encourage the establishment of ERISA plans and not discourage individuals from serving as fiduciaries.

The dissent tracked recent Supreme Court decisions that require “concrete” and “plausible” allegations before allowing the discovery “pressure to settle,” regardless of the merits, to kick in. The dissent found the complaint insufficient, for example, because it lacked allegations of facts linking any of the named plaintiffs to any chosen investment option and shortcoming. The allegations of harm, the dissent reasoned, lacked the specificity (“concreteness”) needed before full discovery can commence.

Sweda shows that federal judges will continue to grapple with whether to find complaint allegations sufficiently specific to allow the case to proceed to discovery and a likely settlement. This is especially so when the complaint is lengthy and the plan assets are substantial. ERISA is no different than other federal statutes in this regard. The result in any one case likely depends on the level of concern a judge has about allowing litigation to devour resources and cause settlements as a result, without a trial on the merits of the federal claim.

By Ronald Kramer, S. Bradley Perkins, and Michael W. Stevens

Seyfarth Synopsis: A provider that is not seeking benefits based upon an assignment of a patient’s claims under ERISA but instead is pursuing state law claims based solely on agreements and representations made directly by the insurer to the provider may survive attempts to remove the case on grounds of ERISA complete preemption.

Can an out-of-network health care provider bring state law claims in state court against an ERISA plan insurer and avoid removal of those claims to federal court pursuant to ERISA’s complete preemption? This issue is often litigated, and sometimes, such as in California Spine and Neurosurgery Institute v. Boston Scientific Corp., Case No. 18-CV-07610 (N.D. Cal. May 3, 2019), the answer is yes.

In Boston Scientific, an out-of-network provider brought breach of oral contract and promissory estoppel claims in state court against the insurer of an ERISA plan after the insurer refused to pay the $77,000 the provider had billed for surgical services. The provider claimed it had phoned the insurer prior to the surgery, and the carrier had offered “promises and information” that the insurer would pay. The insurer promptly removed to federal court on the grounds that the provider’s state law claims were completely preempted by ERISA § 502(a). The provider moved to remand, claiming there could be no preemption given it had no standing to bring an ERISA claim.

The Court applied the two-prong test set forth in Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004), wherein a state law cause of action is completed preempted if (1) the plaintiff at some point in time could have brought the claim under ERISA § 502(a)(1)(B), and (2) there is no other independent legal duty that is implicated by the defendant’s actions. While a claim for benefits under ERISA § 502(a)(1)(B) may only be brought “by a participant or beneficiary,” the Ninth Circuit permits assignees to bring ERISA claims.

The Court focused on the first prong of Davila. The provider argued that, since it was not a participant or beneficiary, it could not have brought a 502(a)(1)(B) claim. After examining whether there was an assignment-in-fact (which would permit the provider to bring an ERISA claim), and determining there was not, the Court agreed with the provider that it could not have brought an ERISA claim. Because Davila is a conjunctive test, the Court stated that it was declining to examine the second prong regarding an independent legal duty, and found complete preemption unavailable.

Notably, although the Court stated that it was not examining the second prong of Davila, it spent considerable time analyzing the provider’s allegations that it was “owed additional money based on an oral contract [which] is a different obligation than a payment to a medical provider required under a patient’s ERISA plan.” The Court relied on the Ninth Circuit’s decision in Marin Gen Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941 (9th Cir. 2009), a similar case involving a phone conversation between a provider and payor, to find complete preemption inapplicable and allowing the state law causes of action to proceed.

Boston Scientific is an important lesson that, while claims brought by providers as assignees of a patient’s rights under an ERISA plan generally are preempted, providers that bring state law claims based solely on their direct dealing with an insurer often can defeat attempts at removal to federal court based on complete ERISA preemption, especially where the provider disclaims an assignment. ERISA plan administrators and insurers would be well-advised to take care that any statements made to providers redundantly clarify that any payments would be subject to plan terms. Moreover, this case did not address conflict preemption under ERISA § 514(a), which provides insurers and health care plans with another avenue to defeat out-of-network providers’ claims. Stay tuned to this blog as future case law addressing the intricacies of ERISA preemption unfolds.

 

 

By: Meg Troy and Mark Casciari

Seyfarth Synopsis: There is a deep circuit split on who bears the burden of proving loss causation on ERISA breach of fiduciary duty claims. The Supreme Court has now invited the U.S. Solicitor General to submit the United States position on the issue in connection with a petition for a writ of certiorari from a First Circuit decision finding that the burden of proof shifts to the breaching fiduciary to disprove causation once a plaintiff proves loss.

Putnam Investments has filed a petition for a writ of certiorari that raises an important issue in the developing law on complex ERISA litigation. Putnam is asking the Supreme Court to decide whether plaintiff bears the burden of proof not only on breach of fiduciary duties and on loss, but also on causation. Courts of Appeal for the Fourth, Fifth and Eighth Circuits have held that an ERISA defendant bears the burden of proof on causation, while the Second, Sixth, Seventh, Ninth, Tenth, and Eleventh Circuits have held that the plaintiff bears the causation burden. Putman argues: “This case offers the perfect opportunity to resolve a deep divide.”

On April 18, 2019, Putnam’s petition and related papers were distributed to the Justices. On April 22, the Court asked for the U.S. Solicitor General’s position on the petition. The invitation to the Solicitor General is a sign that certiorari might be granted, so this case is worth watching carefully.

The backdrop to the case is the claim by participants in Putnam’s 401(k) Plan that the Plan fiduciaries imprudently allowed 85% of Plan assets to be invested in proprietary mutual funds. It is worth noting that the fiduciaries also allowed participants to use a self-directed brokerage window. The class nonetheless alleged that the mutual fund fees were unreasonably high.

In June 2017, the District of Massachusetts ruled in favor of Putman, determining that plaintiffs failed to prove at trial that the fiduciaries acted imprudently, and put their and the company’s own interests ahead of the interests of plan participants.

On appeal, the First Circuit vacated the trial court’s judgment and opted to “align [itself] with the Fourth, Fifth, and Eighth Circuits and hold that once an ERISA plaintiff has shown a breach of fiduciary duty and loss to the plan, the burden shifts to the fiduciary to prove that such loss was not caused by its breach, that is, to prove that the resulting investment decision was objectively prudent.” The First Circuit remanded the case to the district court, explaining that, if loss is proven on remand, the burden shifts to the fiduciary to prove that the fiduciary decision was objectively prudent. See Brotherston v. Putnam Investments, LLC, No. 17-1711 (1st Cir. Oct. 15, 2018).

Burden of proof issues are key to the defense of any case, including of course complex ERISA cases. If the Supreme Court grants certiorari, the outcome of the case in that Court will have substantial impact on how ERISA litigation defendants organize and pursue their defense efforts and arguments. There is no question that ERISA fiduciaries would prefer not to have any burden of proof, other than as to true affirmative defenses.

By: Mark Casciari

Synopsis: A recent decision by the District Court from the Southern District of New York shows why it often makes sense to consider, on a privileged basis, the universe of potential defendants to a withdrawal liability assessment upon issuance of the assessment, even though many potential defendants did not receive notice of the assessment.

ERISA’s Multi-Employer Pension Plan Amendments Act (MPPAA), 29 U.S.C. § 1381 et seq. provides an arbitration mechanism for challenging withdrawal liability assessments. The MPPAA also provides that the “employer” is responsible for assessments, on a joint and several liability basis. MPPAA defines “employer” to include all members of the withdrawing entity’s “controlled group” at the time of the withdrawal trigger, and not just the entity that signs a collective bargaining agreement mandating contributions to the multi-employer pension fund. Defining the “controlled group” is complicated. See 29 U.S.C. § 1301(b) and implementing IRS regulations.

Not satisfied with the contours of the statutory definition, some courts have expanded it to include “successors,” as that term is defined by the courts. See https://www.erisa-employeebenefitslitigationblog.com/2015/08/06/is-an-asset-purchaser-liable-for-sellers-withdrawal-liability/

Matters get even more complicated by virtue of court decisions saying that notice to one member of a joint and several liability group as to a withdrawal liability assessment is notice to all in the group. See e.g. Trustees v. Central Transport, Inc., 888 F.2d 1161, 1163 (7th Cir.1989),

All this means that any business entity or individual who might be an employer as to a withdrawal liability assessment is at legal risk of joint and several liability.

That legal risk can require immediate attention. That is because receipt of notice of a withdrawal liability assessment triggers time deadlines for initiating arbitration to challenge the assessment or its amount. A failure to timely arbitrate usually equates to a bar to the challenge.

There often are good reasons to challenge assessments. The approximate 140 multi-employer funds in critical and declining status have, in recent years, issued withdrawal liability assessments that reach well into the millions of dollars. Many assessments expand the boundaries of MPPAA in new ways that maximize liability and thus open them to legal challenge.

The universe of entities and individuals at risk was broadened even further by a recent ruling by Judge Seibel of the District Court for the Southern District of New York. In Trustees of the National Retirement Fund v. Fireservice Management LLC, et al., No. 17-CV-4003, an assessment issued and arbitration was not timely initiated. On preliminary motions, the Judge permitted a trial on a withdrawal liability default claim that a company alleged not to be party to a collective bargaining agreement mandating fund contributions nonetheless is jointly and severally liable on a controlled group basis, or on an alter ego, single employer or joint employer relationship basis. This occurred even though the company had different owners, filed separate tax returns, maintained separate bank accounts and kept separate financial records, and even though the court cited no evidence of an intent to avoid withdrawal liability.

So, any individual or entity that may be sued on a joint and several liability basis on a questionable withdrawal liability assessment should consider, on a privileged basis, timely compliance with the MPPAA arbitration rules. This careful consideration could make sense even if the individual or entity did not directly receive notice of the assessment.

By: Meg Troy and Ron Kramer

Seyfarth Synopsis: Over the last several years, the law governing disputes on lifetime retiree health benefits in the Sixth Circuit has had many twists and turns. A recent decision may put an end to this uncertainty, confirming that a CBA’s general durational clause applies to healthcare benefits unless the CBA contains clear, affirmative language indicating the contrary.

The Sixth Circuit’s approach to retiree health benefits has been in flux since 2015, when the Supreme Court rejected the Circuit’s use of what is known as the Yard-Man inference, which courts used to infer that negotiated retiree benefits were intended to continue for the retirees’ lives. You can read about the Court’s decision in M&G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (2015), here. Post-Tackett, the Sixth Circuit’s continued use of a watered-down version of the Yard-Man inference prompted the Supreme Court to again step in and affirm the court’s duty to use ordinary principles of contract law when weighing retiree healthcare benefit disputes. You can read about CNH Industrial N.V. v. Reese, 138 S.Ct. 761 (2018), here.

On February 15, 2019, in Zino v. Whirlpool Corp., No. 17-3851/3860, the Sixth Circuit followed this line of precedent (and other more recent decisions from the Sixth Circuit) and reversed a 2017 Northern District of Ohio decision finding certain CBAs vested plaintiffs with lifetime healthcare benefits. The Court found that the CBAs covering the retirees lacked clear, affirmative language that Whirlpool had an obligation to fund their health benefits after the expiration of the agreements’ general durational clause. Thus, Whirlpool was under no obligation to continue to offer those benefits past the general durational clause’s expiration.

In Zino, the plaintiffs worked for a Hoover Company plant in Canton, Ohio and retired between 1980 and 2007. Following a reduction in their benefits, the plaintiffs filed suit alleging the CBAs vested retiree health benefits at unalterable levels. The Sixth Circuit clearly laid out how Sixth Circuit courts in retiree benefit vesting cases must first address a threshold issue: “either a CBA says clearly and affirmatively — that is unambiguously — that its general durational clause doesn’t control the termination of healthcare benefits, or the clause controls.” If a CBA does unambiguously disconnect certain benefits from the agreement’s general durational clause, the agreement might well vest those benefits, even absent clear vesting language, or there may be ambiguity as to whether vesting might exist. To make the call, a court would need to examine any “clues” that “spring from the CBA.” Because the relevant CBAs in Zino did not unambiguously disconnect healthcare benefits from the general durational clauses, they did not vest lifetime healthcare benefits even though plaintiffs claimed CBA otherwise had “clues” that show an intention to vest benefits.

Judge Jane B. Stranch dissented, stating that the Sixth Circuit’s approach fails to give effect to the parties’ intentions, which is the goal of ordinary contract interpretation.

 

Seyfarth Synopsis: In an unpublished yet fascinating decision, the California Court of Appeal held that ERISA § 514 preempts state law causes of action premised on wrongful disclosure of protected private health information. Although not-binding as precedent, the decision is noteworthy to Plan sponsors and administrators because it demonstrates the expansive preclusive effect of federal law over state privacy and consumer protection statutes that impact ERISA benefit claims.

By Jonathan A. Braunstein and Michael W. Stevens

In an unpublished decision, the Fifth District of the California Court of Appeal held that ERISA Section 514 preempts state law causes of action for invasion of privacy and violations of unfair competition law arising from an underlying claim for ERISA plan benefits. See Weaver v. Healthcomp, Inc., No F075072, 2019 WL 151564.

Ms. Rose was a former employee of Harris Ranch Beef Company (Harris Ranch), and a participant in the Harris Farms Inc. Employee Health Care Plan (the plan), a self-insured ERISA employee health benefits plan for employees of Harris Farms and its related companies, including Harris Ranch. Harris Farms was the plan administrator and sponsor. HealthComp, Inc., was the plan’s third-party administrator; its services included case management.

In December 2011, Ms. Rose was diagnosed with liver failure; she needed a liver transplant and was placed the waiting list. Healthcomp assigned Rose a nurse case manager. Rose alleged the nurse case manager had Rose sign a form authorizing release of medical records, and the nurse case manager passed along to Rose’s employer medical information she received using the signed authorization. In December 2012, Harris Ranch terminated Rose’s employment, which Rose alleged occurred shortly after Harris Ranch received a report from the nurse case manager about Rose’s increased need for a liver transplant. Rose alleged defendant closed the nurse case management file after Rose’s termination but reopened it at Harris Ranch’s request after Rose filed a wrongful termination action against Harris Ranch. Defendant allegedly resumed accessing Rose’s medical records via the release and supplying her medical information to Harris Ranch.

The complaint alleged two causes of action: (1) invasion of privacy in violation of California Constitution, article I, section 1, and Civil Code section 56.20; and (2) unfair business practices in violation of California unfair competition law (Bus. & Prof. Code, § 17200 et seq.). Both causes of action were premised on defendants’ alleged improper disclosure or use of plaintiff’s personal health information. Defendants moved for summary judgment, asserting plaintiff’s two state law causes of action were preempted by ERISA section 514, 29 United States Code section 1144(a). Plaintiff opposed the motion. The trial court granted defendants’ motion and entered judgment in defendants’ favor. Plaintiff appealed.

The Court of Appeal affirmed. After engaging in an extensive analysis of ERISA preemption law, including the recent US Supreme Court decision in Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936 (2016), the Court of Appeal concluded that where “a plaintiff asserts state law claims based on alleged misconduct that was within the scope of the conduct regulated by ERISA, including the privacy protections required to be included in ERISA group health plans, invoking state law remedies for that alleged misconduct constitutes an impermissible attempt to enforce ERISA privacy rights by means of an alternative enforcement mechanism . . . the state law provisions have an impermissible connection with ERISA plans and are therefore preempted” (emphasis added).

The Court of Appeal found that regardless of“[w]hether the plan administrator is ‘managing’ the fiscal health of the plan or ‘administering’ claims, California privacy laws, if not preempted, would limit what private health information could be disseminated.” The Court concluded [Plaintiff’s] attempt to distinguish use of protected health information for administrative, as opposed to management, purposes does not change the analysis of the preemption issue.”

Though unpublished, Weaver is notable. Privacy issues and concerns are hot button topics. This case will certainly not be the last to present questions as to the scope of federal preemption of state privacy and consumer protection laws. Indeed, California just recently enacted its broad and comprehensive Consumer Privacy Act of 2018, which legislation will soon go into effect. It is only a matter of time before that new law confronts federal preemption head on. Stay tuned!

Seyfarth Synopsis: A recent case from the Western District of North Carolina contains a helpful example of how the standards applicable to an employee’s request for accommodation of a disability differ from those for determining whether the same employee is eligible for benefits under a short-term disability plan. At the same time, it demonstrates the importance of following a deliberate, principled claims handling process, even when the decision appears simple.

By: Tom Horan and Ron Kramer

In Cannon v. Charter Commc’ns Short Term Disability Plan, No. 3:18-CV-041-DCK, 2019 WL 235325 (W.D.N.C. Jan. 16, 2019), the Plaintiff sought benefits under his employer’s self-insured short-term disability plan (the “Plan”), claiming he was unable to work due to recurrent vertigo, sleep apnea, heart disease, insomnia, and other, related conditions. In support of his claim, he submitted documentation from his sole treating physician, which stated he was unable to perform the essential functions of his position, but identified his only restriction as an inability to “drive in traffic.” To be eligible for benefits under the Plan, Plaintiff needed to demonstrate that he was unable to perform the essential duties of his occupation.

Defendant denied the claim, after determining that Plaintiff’s only documented restriction—an inability to drive—did not impact his ability to perform the essential functions of his “sedentary” job, which consisted of reviewing orders from customers for accuracy, keying those orders into the billing system, and scheduling certain installation services. In making this determination, Defendant relied on reviews conducted by two different intendent, board certified specialists, and the fact that for several years before making his claim for benefits, Plaintiff had been accommodated for his medical conditions with an agreement allowing him to work from home. Accordingly, as driving—the sole activity from which he was restricted from performing—was not an essential function of his job, Plaintiff’s claim was denied. After exhausting his administrative remedies, Plaintiff filed suit, alleging he was wrongfully denied benefits under the Plan.

In granting the employer’s motion for summary judgment the Court credited the administrator for its deliberate, principled review process, and found no abuse of discretion in denying the claim. In doing so the Court apparently accepted that Plaintiff’s sole restriction—his inability to drive—was irrelevant, since it did not impact an essential job function.

More notable for employers, however, is Defendant’s underlying argument that the fact that Plaintiff could perform his job with a reasonable accommodation meant that Plaintiff was not eligible for STD benefits under the Plan, because it demonstrated that (while requiring accommodation) he was not incapable of performing the essential functions of his occupation. In short, this case demonstrates that the fact that an employee has a “disability” for which he receives an accommodation does not mean—depending on the applicable plan language—he is entitled to disability benefits.

By Mark Casciari and Kristine Argentine

Synopsis : Many parties to ERISA litigation and arbitration pay lip service to the burden of proof, put on their respective cases and leave it to the trier of fact to decide which side deserves the victory.   Burdens of proof have become increasingly important, however, as procedural and substantive issues become more complex, and judges often have less time to deal with the subtleties in ERISA litigation. Burdens of proof thus demand more attention.

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It is easy to glaze over a basic tenet of law that is getting more attention — Who has the burden of proof?

Emphasizing burdens of proof can mean the difference between winning or losing, and potentially millions of dollars in damages. Earlier this year, Putnam Investments LLC stated its intention to file a petition with the U.S. Supreme Court asking the high court to weigh in on who bears the burden of proving injury and whether retirement investment choices were prudent in ERISA fiduciary breach cases. (See Brotherston v. Putnam Investments, LLC, No. 17-1711 (1st Cir. Oct. 15, 2018)).   This is not the first time that the Supreme Court has been asked to take up this issue as there is a significant split among the circuits—certain circuit courts have said causation is an element of the cause of action, other circuits have said it is the plaintiff’s burden to prove that the harm was attributable to the fiduciary, and still other circuits have said that the burden shifts to the fiduciary to show that it did not cause the harm. This is but one example where the burden of proof can have a significant effect on the outcome of a case.

Also, as cases become more complex, and judges and arbitrators are asked to navigate through more evidence, weigh the credibility of witnesses testifying by deposition video and transcript, and parse through heightened attorney showmanship, burdens of proof are likely to get more attention. A U.S. District Court Judge recently admonished an attorney for glazing over the evidence necessary to meet his burden, stating “I am not co-plaintiff counsel . . . I’m [not] supposed to now go find evidence to supplement your record. That’s totally improper.” (See Law360, 12/4/18, 10:40 PM, https://www.law360.com/articles/1107974 ).

There is no denying that employee benefit claims can include emotional appeals, given the personal relationship aspect of employment and the financial consequences of an award of fewer benefits than expected. When faced with emotional appeals in the context of increasingly complicated laws and regulations, employers and fiduciaries should remember that they can make their case on a burden of proof procedural ground, i.e., “plaintiff should lose because, notwithstanding his emotional appeal, he has not met his burden of proof under the law.”

A judge or arbitrator overwhelmed by complexity may be more receptive than counsel thinks. No party should ask the trier of fact to define his or her case. It is a claimant’s job to present his or her case with specificity and within the confines of the substantive and procedural law.