You already know that in March 2015, the 6th Circuit issued an en banc decision rejecting disgorgement of profits claims. Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364, 372 (6th Cir. 2015)(en banc) (rejecting $3.8 million disgorgement claim against Life Insurance Company of North America  as “an impermissible duplicative recovery”).

But the reality is that plaintiffs in ERISA cases keep trying to assert breach of fiduciary duty/disgorgement claims.  We are seeing an influx of these claims being asserted in the Ninth Circuit.

Here’s a strategic early play in these cases:  move to dismiss the breach of fiduciary duty/disgorgement claim early on.

This recent case highlights the point.  Gluc v. Prudential Insurance Co., 2015 WL 6394522 (W. D. Ky. October 22, 2015)(PDF).

FACTS: Judith Gluc sought ERISA-governed long term disability benefits. Prudential paid long term disability benefits for two years, and then discontinued benefits. Gluc then brought suit  to recover benefits. She also alleged breach of fiduciary duty and sought disgorgement of “earnings Prudential accumulated as a result of its delay in paying her benefits.”

Gluc alleged a laundry list of purported acts which breached fiduciary duty. She claimed that Prudential’s claims process: (a) was designed to “systematically delay claim decisions”; (b) encouraged personnel to “automatically accept the opinions of Prudential’s paid medical reviewers”; (c) placed Prudential’s financial interests “ahead of its participants”; and, (d) improperly offset Social Security benefits.

TRIAL COURT HELD:  Rule 12(c) Motion to Dismiss Breach of Fiduciary Duty/Disgorgement Claim GRANTED.

  1. “[W]here Congress elsewhere provided adequate relief for a beneficiary’s injury, there will likely be no need for further equitable relief, in which case such relief would normally not be ‘appropriate.’” Op. at 4.
  2. “[I]f Section 1132 provides a remedy for Gluc’s alleged injury, her claims for equitable relief are not viable.”  Op. at 5.
  3. “Gluc alleges numerous flaws in Prudential’s claims process, but ultimately, the only injury she purports to have suffered is loss of benefits—an injury Section 1132(a)(1)(B) is designed to address.”  Op. at 5.
  4. “[T]he ‘accumulated earnings’ Gluc seeks in her disgorgement claim may be recovered through an award of prejudgment interest, which the Court has discretion to make.”  Op. at 5.
  5. As to Gluc’s “systemic flaws” allegations, “this is not a class action…[and] she does not allege facts to support a claim of plan-wide wrongdoing.  Rather the facts alleged indicate a problem with Prudential’s processing of a single claim.”  Op. at 5-6.

Moving to dismiss these claims early can help posture the claim for early, reasonable resolution.

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Photo of Mike Reilly Mike Reilly

Mike Reilly is a nationally recognized labor, employment and employee benefits attorney, named one of the “Top 100 Most Powerful Employment Attorneys in the Nation” for the past five consecutive years by Human Resource Executive®. He has decades of experience providing strategic employment advice, and has represented clients in more than 75 jury trials, arbitrations, bench trials and claims before the EEOC and Washington State Human Rights Commission.

Small and large employers retain Mike for his strategic advice and decades of experience in employment issues and litigation, business decisions and litigation avoidance. Mike provides advice in claims involving discrimination, retaliation, wrongful discharge, disability accommodation, ERISA and non-ERISA employee benefit claims, and wage/hour claims. He served as lead counsel in an employee raiding/trade secret case as reported in the Wall Street Journal, and defends employers in class action claims.

Mike’s remarks on employment issues have been quoted in NewsweekCorporate Legal TimesSeattle TimesEmployee Relations Law JournalPuget Sound Business JournalCFO.com, and other professional journals and management publications. Chambers USA’s Guide to America’s Leading Lawyers for Businessrates Mike in the top ranking (band one) for his work in labor and employment law, and has described him as “one of Seattle’s top-rate attorneys” who is “truly phenomenal [with] superb legal instincts” and “an amazingly assertive litigator.” His clients include Nordstrom, Seattle Seahawks, Home Depot, KeyBank, Starbucks, Fred Hutchinson Cancer Research Center, Red Robin and Seattle Chamber of Commerce, among others.