Plaintiffs in ERISA employee benefit cases are frequently asserting breach of fiduciary duty claims, and then seeking broader discovery.

So, consider early motions to dismiss the breach of fiduciary duty claims.

One argument to use in seeking early dismissal of breach of fiduciary duty claims is the ministerial defense: That is because “[a] person who performs purely ministerial functions…for an employee benefit plan within a framework of policies, interpretations rules, practices and procedures made by other persons is not a fiduciary….” 29 C.F.R. Section 2509.75-8(D-2).

The recent case that highlights the point is Turner v. Volkswagen Group of America, Inc., 2017 WL 3037803 (S.D. West Virginia July 18, 2017)(“ERISA fiduciary status is conferred by the function performed—not the position of the entity performing the duty.”)

FACTS: Keith Turner sought ERISA-governed long term disability benefits, and after his death Karen Turner sued seeking ERISA-governed life and survivor benefits, and asserting a breach of fiduciary duty claim. Defendants moved to dismiss a number of claims, including the breach of fiduciary duty claim.

ISSUE: Whether the Court should GRANT Defendants’ Rule 12(c) motion to dismiss the breach of fiduciary duty claim.

HELD: Breach of Fiduciary Duty Claim Dismissed. (The Court ruled on other issues, including the fiduciary duty claim).

  1. “A person who performs purely ministerial functions…for an employee benefit plan within a framework of policies, interpretations rules, practices and procedures made by other persons is not a fiduciary because such person does not have discretionary authority or discretionary control respecting management of the plan, does not exercise any authority or control respecting management or disposition of the assets of the plan, and does not render investment advice with respect to any money or other property of the plan and has no authority or responsibility to do so.” (Emph. added). Op. at 16-17.
  2. “Plaintiff alleges that the defendants breached fiduciary duties by failing to advise her of her rights under the benefits plan, failing to advise Mr. Turner of his rights under the plan while he was alive, and sending the plaintiff and Mr. Turner erroneous statements that he continued to have life insurance under the plan. None of the conduct alleged by the plaintiff constitutes management or administration of the plan.” Op. at 17 (Emph. added).
  3. “[F]ailing to notify a claimant that he was no longer eligible for life insurance was a ministerial function.” Op. at 17.
  4. “Although the plaintiff argues that Volkswagen’s conduct constitutes a breach of fiduciary duty because it is both the payor and adjudicator of claims, ERISA fiduciary status is conferred by the function performed—not the position of the entity performing the duty.” Op. at 17-18 (Emph. added).
  5. “Here, the functions on which the plaintiff bases her breach of fiduciary duty claim are ministerial [and the breach of fiduciary duty claim is dismissed.]” Op. at 18.

You know that in typical ERISA disability benefit claims, the claim administrator first determines whether claimant’s disability prevents the claimant from performing claimant’s current, “own occupation.”

Then, after a period of time (52 weeks for example), the claims administrator assesses whether the claimant can perform “any occupation.” If the claimant can perform “any occupation,” then the disability benefits end.

So, what happens when a claimant’s physical restrictions render the claimant able to perform only part-time work?

Does the ability to perform only part-time work mean the claimant can perform “any occupation,” making the claimant ineligible for disability benefits? YES.

Here’s the case of Kott v. Agilent Technologies, Inc., 2017 WL 2903174 (N.D. Cal. July 7, 2017).

FACTS: Kott sought and was granted ERISA-governed disability benefits due to back and foot pain. Under the plan, after 270 days receiving disability benefits an assessment was made whether Kott could perform “any occupation.” An independent medical evaluation determined Kott could perform part-time work, up to 20 hours per week without accommodation, and could return to full-time work within six months with a work-station which accommodated her need to sit and stand.

ISSUE: Whether Kott’s ability to perform part-time work precludes entitlement to “any occupation” benefits.


  1. “[A] claimant capable of working 20 hours per week is not unable to work in ‘any occupation’ and thus not entitled to disability benefits beyond the ‘own occupation’ benefit.” Op. at 14 (Emph. Added).
  2. “While the Ninth Circuit has not finally decided the issue, most if not all other circuits are in accord.” Op. at 14.
  3. “[T]he Court need not reach the part-time work issue in this case because there is evidence in the record showing that Kott could return to full-time work as early as February 2016.” Op. at 15.

NOTE: Pay close attention to the definition of “disability” because many plans and policies include an income factor.

You already know that most ERISA plans allow the Plan to reduce or offset long term disability payments by amounts the disabled worker receives from workers compensation or Social Security.

But it is trickier when you try to offset payments received from lump sum personal injury settlements. Some ERISA Plans have “presumed allocation for offset” provisions that help determine how much of a lump sum settlement can be offset.

But some state statutes “conclusively establish” how to allocate lump sum personal injury settlements, which complicates things.

Here’s the case of Arnone v. Aetna Life Insurance Company, 2017 WL 2675293 (2nd Cir. June 22, 2017)(New York state statute, governing lump sum personal injury settlements, prohibited offset of ERISA-governed long term disability benefits.)

FACTS. Arnone, an account executive for Konica, obtained ERISA-governed disability benefits after slipping and falling in a puddle. Aetna then properly reduced benefit payments by worker compensation and Social Security benefits received, lowering his monthly payment to $114 per month.

But then Arnone received an $850,000 lump sum personal injury settlement. The ERISA plan contains a “50% provision,” which states that when a lump sum personal injury settlement is not apportioned between pain and suffering, medical expenses or lost income, then “50% will be deemed to be for disability.”

Aetna determined this provision reduced its obligation by $275,550. Arnone argued however, that New York Statute 5-535 (which presumes that personal injury settlements do NOT include loss of earnings) precluded Aetna from offsetting 50% of the settlement amount. When suit was filed, Aetna also brought a $40,000 counterclaim for overpayment.

DISTRICT COURT HELD: Summary Judgment for Aetna. The New York statute did not apply; Connecticut law governed.

SECOND CIRCUIT HELD: REVERSED: New York Statute Determined Allocation of Lump Sum Settlement; Offset Prohibited

  1. New York Statute 5-535 establishes a “conclusive presumption” that personal injury settlements “do not include…loss of earnings…” Op. at 13. (Emphasis added.)
  2. Section 5-335 is saved from express ERISA preemption. Op. at 15.
  3. The Plan’s Choice-of-law provision, which states that the Plan will be “construed” in accordance with Connecticut law, “does not encompass the matter at issue in this case…. Section 5-335 is not a statute of contract construction or of contract interpretation….and does not modify how benefit plans are ‘construed.’ It provides a rule to which all contracts between an insurer and an insured must adhere.” Op. at 16.
  4. The Court concluded “Aetna erroneously overlooked the law’s provisions when it acted on its conclusion that 50 percent of the net proceeds from Arnone’s personal injury settlement were “for disability” such that Aetna was permitted to reduce Arnone’s disability benefits in offset.” Op. at 21.

An issue dogging claims administrators is:

What effect do choice-of-law provisions have on the standard of review of ERISA benefit decisions?

And, what happens when the plain language of the ERISA plan confers abuse of discretion standard of review, but state law renders such language unenforceable, requiring de novo review?

Here’s the case of Kalnajs v. Lilly Extended Disability Plan, 2017 WL 2589445 (W.D. Wisconsin June 14, 2017)(choice-of-law provision required abuse of discretion standard of review contained in ERISA plan language).

FACTS: For nearly a decade, Kalnajs, a pharmaceutical sales representative, received ERISA-governed long term disability benefits due to Lyme disease. Under the plan terms, benefits could be discontinued if there was evidence she was “engaging in an occupation for profit.” In 2014 the claims administrator learned Kalnajs worked as an “internationally acclaimed dog trainer,” giving over 28 “lively” seminars nationally and internationally. Following review of multiple doctor’s reports, it was determined Kalnajs could perform “work in a job she is trained for,” and disability benefits were terminated. The plan conferred discretion.


  1. The Court rejected Plaintiff’s argument that de novo review should apply because Indiana law disfavors discretionary review. The Court looked to the ERISA plan’s choice-of-law provision and concluded: “The flaw in Kalnajs’s argument is immediately apparent: ERISA preempts ‘any and all State Laws insofar as they may now or hereafter relate to any employee benefit plan.’ 29 U.S.C. 1144(a)….Section 6.03 of the Disability Plan relates to an employee benefit plan, so ERISA, not state law, applies regardless of any choice-of-law provision. And even if the choice of law provision were relevant, the Welfare Plan adopts Indiana law only to the extent that it is not preempted by ERISA.” Op. at 16.
  2. Episodic surveillance sufficient to establish she was “engaging in an occupation for profit.” Plaintiff claimed that the surveillance only showed “isolated episodes” of activity and does not show that Kalnajs could engage in activity on a sustained basis. But the Court held “[t]he surveillance shows [she] is engaging in an occupation for profit consistent with her education, training, and experience: she earns money working as a dog trainer.” This met the plan terms which supported terminating disability benefits. Op. at 20.

NOTE: Courts are not consistent on what effect choice-of-law provisions have on the standard of review. Many courts have determined, for example, that state law prohibitions of discretionary clauses fall within ERISA’s savings clause and are not preempted by ERISA.

-Make sure early in the case you assess the applicability of state insurance regulations;

-Review your choice-of-law provisions to determine what state law may apply;

-Attempt to seek application of federal common law on choice-of law issues;

-Be prepared to address policy issues implicated by application of the choice of law provision.

On June 5, 2017, the U.S. Supreme Court expanded the scope of ERISA’s church-plan exemption in the case of Advocate Health Care Network v. Stapleton, — S. Ct. –, 2017 WL 2407476 (2017).  The unanimous decision adopted a broad reading of the exemption to apply not only to plans originally established by churches, but also to plans maintained by certain church-affiliated organizations.

Statutory Background

As a general matter, ERISA requires private employers that offer pension plans to follow an array of rules intended to ensure solvency and protect plan participants.  So-called “church plans,” however, are exempt from ERISA’s requirements.  29 U.S.C. § 1003(b)(2).

When originally enacted, ERISA defined a “church plan” as a plan “established and maintained” for its employees by a church.  29 U.S.C. § 1002(33)(A).  In 1980, Congress amended the statute to modify the definition, explaining that: “A plan established and maintained for its employees … by a church … includes a plan maintained by an organization … the principal purpose … of which is the administration or funding of a plan … for the employees of a church …, if such organization is controlled by or associated with a church[.]”  29 U.S.C. § 1002(33)(C)(i).  These types of church-affiliated organizations are referred to as “principal-purpose organizations.”

Under this definition, it was commonly understood that a “church plan” need not have been maintained by a church, but rather could also be maintained by a principal-purpose organization.  However, the parties differed about whether a plan maintained by a principal-purpose organization still had to have been established by a church to qualify for the church-plan exemption.  The U.S. Courts of Appeals for the Third, Seventh, and Ninth Circuits ruled that a pension plan must be established by a church to qualify for the church-plan exemption.  See, e.g., Rollins v. Dignity Health, 830 F.3d 900, 906 (9th Cir. 2016).

The Decision in Stapleton

In Stapleton, the U.S. Supreme Court resolved this question by holding that ERISA’s church-plan exemption applies to pension plans maintained by church-affiliated organizations—even if they were not originally “established” by a church.

In a colorful opinion written by Justice Kagan, the Court deployed canons of statutory construction to find the “best reading” of the statute: “Because Congress deemed the category of plans ‘established and maintained by a church’ to ‘include’ plans ‘maintained by’ principal-purpose organizations, those plans—and all those plans—are exempt from ERISA’s requirements.”  The result is that “a plan maintained by a principal-purpose organization therefore qualifies as a ‘church plan,’ regardless of who established it.”

New Questions

Although Stapleton provides church-affiliated organizations with more freedom from ERISA’s requirements, the decision raises new questions:

  • What organizations are sufficiently church-affiliated to qualify as principal-purpose organizations for the exemption? Following Stapleton, the next wave of litigation will likely focus on what qualifies as an organization controlled by or associated with a church for purposes of the church-plan exemption.  Courts will be called on to flesh out what degree of church control or association is sufficient and what is simply too attenuated.  Such lawsuits may be directed against not only religiously-affiliated healthcare providers like those involved in Stapleton, but also charities and relief organizations, educational institutions, and a diverse array of other entities with religious connections.
  • Will plaintiffs pursue alternative state-law claims against church plan? Since Stapleton will block plaintiffs from pursuing ERISA claims against many organizations, plaintiffs may instead attempt to pursue claims under state law, such as breach of fiduciary duty claims.
  • Will Congress take action to narrow the church-plan exemption?  In her concurrence, Justice Sotomayor agreed with the result, but highlighted her concern that the decision to exempt plans neither established nor maintained by a church would have a broad effect that Congress might not have intended.  Of particular concern, she noted that the exemption would apply to some of the largest health-care providers in the country that compete in the secular market with companies that must bear the cost of comply with ERISA.  Although any legislative change is unlikely, Justice Sotomayor’s discussion of this “current reality” was clearly intended to prompt legislators into considering whether Congress should “take a different path.”

This just in…

Today the U.S. Supreme Court broadened the application of the Employee Retirement Income Security Act’s religious exemption provision.

The exemption now applies to benefit plans maintained by church affiliates, regardless of whether an actual church established the plan. Advocate Health Care Network, Saint Peter’s Healthcare System and Dignity Health were before the U.S. Supreme Court seeking to overturn lower court rulings holding that the exemption applied only when actual churches established the benefit plan. The hospitals contended a 1980 amendment to ERISA clarified that church-affiliated organizations, not just churches, could maintain such a plan and still be exempt.

Justice Elena Kagan wrote the unanimous opinion.

The ruling provides hospitals with more freedom from ERISA’s plan requirements.

More analysis on the ruling will be provided in subsequent posts.

How do you respond to typical arguments by those seeking ERISA-governed disability benefits that the claim administrator:

         -“cherry-picked the record”;

         -ignored the social security disability determination;

         -improperly considered claimant’s vacation travel;

         -made inconsistent determinations?

Here’s the case of Chen v. CenturyLink, 2017 WL 219008 (D. Colo. May 18, 2017)(attached), with quick rebuttals to those arguments.

FACTS: Chen, an accounting analyst, sought ERISA-governed disability benefits for extreme fatigue following a kidney transplant. Standard Insurance, the claims administrator, determined Chen could perform a sedentary job and terminated benefits after 19 years. The plan vested discretion, and the court reviewed the claim denial under the abuse of discretion standard.

DISTRICT COURT HELD: Affirmed the Denial of Benefits.

  1. The Court rejected Plaintiff’s argument that Standard had made inconsistent prior decisions. “ERISA does not prevent a plan administrator from reversing course and finding a claimant no longer entitled to disability benefits…[so long as the changed decision] is supported by new medical or other information.” Op. at 12.
  2. The Court rejected Plaintiff’s argument that Standard had failed to consider the Social Security determination. “[A] plan administrator should not ignore a claimant’s eligibility for social security disability benefits….[But] the validity of a claim for benefits under an ERISA plan turns on the interpretation of the plan at issue, not on whether the claimant is eligible for social security benefits.” Plaintiff’s condition when Social Security determined eligibility in 1996 was significantly different from the benefit denial 20 years later. Op. at 14.
  3. The Court rejected Plaintiff’s argument that Standard “cherry-picked” the record. “[A] plan administrator is not required to ‘pore over the record’ picking out and addressing all evidence supporting payment or denial of a claim [but] …cannot shut her eyes to readily available evidence that suggests the claimant is entitled to benefits.” Op. at 15.
  4. It is OK to consider Claimant’s vacation travel to Europe, Hawaii in determining whether she is disabled. Plaintiff’s “inclination to travel [to Europe, Hawaii, Miami] was considered by medical experts in the context of her medical symptoms, particularly her persistent fatigue. Standard relied upon the medical opinions that Ms. Chen’s travel was inconsistent with her claims of debilitating fatigue.” Op. at 17.

Don’t forget that ….

judicial estoppel can require dismissal of a claimant’s suit for ERISA-governed long term disability (LTD) benefits if the claimant failed to list the “potential cause of action” in bankruptcy filings.

The key is to determine when the “potential cause of action” accrued. And a recent case says those claims “accrue” when the claimant receives the initial benefit denial letter.

Here’s the case of Byrd v. Wellpoint Flexible Benefit Plan and Anthem Life Insurance Co., 2017 WL 1633204 (E.D. Missouri May 2, 2017).

FACTS: Byrd worked for Anthem, and sued after her claim for ERISA-governed long term disability benefits was denied. Wellpoint and Anthem moved to dismiss the suit contending Byrd’s LTD claim had not been disclosed during her bankruptcy proceeding and was therefore barred by the equitable doctrine of judicial estoppel.

ISSUE: Whether Judicial Estoppel Barred Byrd’s LTD Claim Because She Failed to List the Potential Claim as an Asset in her Bankruptcy?

DISTRICT COURT HELD: No, because the LTD claim “accrued” after she filed for bankruptcy and therefore was a “post-petition asset.”


  1. When filing for bankruptcy, “all assets of the debtor, including potential causes of action, become assets of the bankruptcy estate.” Op. at 4.
  2. “[A] party ‘may be judicially estopped from asserting a cause of action not raised in a reorganization plan or otherwise mentioned in the debtor’s schedules or disclosure statements. A debtor’s failure to list a claim in the mandatory bankruptcy filings is tantamount to a representation that no such claim existed.’” Op. at 5.
  3. Plaintiff’s ERISA claim accrued when she received Anthem’s September 21, 2016 letter initially denying her application for LTD benefits. This took place more than three months after Byrd filed her bankruptcy petition, and two months after she filed her bankruptcy disclosures. Op. at 6.
  4. The Court denied the Motion to Dismiss, concluding the ERISA lawsuit “accrued” after her bankruptcy petition and was therefore a “post-petition asset of Plaintiff and not part of the [bankruptcy] estate.” Op at 7.

When does the “church plan exemption” apply?

You already know that under the “church plan” exemption, Church plans do not have to comply with ERISA, including the requirements to fund a plan and pay Pension Benefit Guaranty Corporation premiums. (Congress amended ERISA in 1980 to state that “a plan established and maintained for its employees…by a church…includes a plan maintained by an organization…controlled by or associated with a church.”)

Currently, there are many lawsuits against religiously affiliated hospitals alleging they improperly asserted the “church plan” exemption. Plaintiffs claim that over 300,000 hospital workers face a $4 billion pension shortfall because these hospitals have improperly designated the plans as exempt.

Now Before the US Supreme Court: Three religiously affiliated hospitals seek reversal of lower court rulings concluding that their pension plans are not church plans because they were not established or maintained by a church.

On Monday the U.S. Supreme Court heard oral argument on the ability of religiously affiliated hospitals to apply the “church plan” exemption.

BNA’s Joe Lustig’s provides a helpful summary of the issues presented.

BNA’s Jo-el Meyer provides a nice analysis on Monday’s oral argument and issues presented.

My friend, Stephen Rosenburg, also provides some insightful analysis and early odds on the outcome of the Supreme Court decision.

And, if you follow the NCAA Final Four…. Go Zags…

You already know that courts typically award attorney fees in ERISA cases when the Plaintiff/claimant achieves “some success on the merits.”

But does a mere remand constitute “some success on the merits”?  Probably yes.

And how many Plaintiff’s attorney billed hours are reasonable for an ERISA case? Maybe 80-85 hours if there was a summary judgment motion.

Here’s the case of Standish v. Federal Express Corp. LTD Plan and Aetna Life Ins. Co., 2017 WL874689 (W.D.N.Y. March 6, 2017) that highlights the point.

FACTS: Standish, a former FedEx employee, sought and was denied ERISA-governed long term disability benefits. Standish filed suit and the District Court reversed the denial of benefits and remanded the case back to Aetna, the claims administrator, for reconsideration.

Standish then sought attorney fees, claiming the Court’s remand order was “some success on the merits.” Plaintiff’s counsel sought attorney fees based on 189.6 total hours: (141.4 partner hours at $350 per hour; 6.5 associate hours at $200 per hour; 41.7 paralegal hours at $115 per hour). For the summary judgment motion alone, Plaintiff’s attorney billed a total of 163.2 combined hours: (116.2 partner hours, 6.2 associate hours, 40.5 paralegal hours).


  1. By issuing an order for remand, the Court “finds that Plaintiff here achieved some degree of success by obtaining a remand order, which ‘inherent[ly]’ entails ‘two positive outcomes…(1) a finding that the administrative assessment of the claim was in some way deficient, and (2) the plaintiff’s renewed opportunity to obtain benefits or compensation.’” Op. at 4.
  2. As to the amount of fees to award, “[i]f a court finds that claimed hours are ‘excessive, redundant, or otherwise unnecessary,’ it should exclude those hours in calculating the fee award.” Op. at 5.
  3. The Court reduced the hourly rates and approved the following rates: lead attorney — $300; associate attorney $175; paralegal $90 per hour.
  4. What other District Courts have deemed a “reasonable” number of hours for summary judgment motions:

Laser Lite Elec. Inc. v. United Welf. Fund Welfare & Sec. Divisions, 2015 WL 459412 (E.D.N.Y. February 3, 2015)(“80.60 hours…is reasonable for a case that proceeded to summary judgment”);

Trustees of Local 531 Pension Fund v. Flexwrap Corp., 818 F.Supp.2d 585, 591 (E.D.N.Y. 2011)(“82 hours of work to litigate an ERISA case through summary judgment”);

      5.  The Court reduced the number of hours worked on this ERISA case.

  • For the summary judgment motion and related pleadings alone, Plaintiff’s attorney billed a total of 163.2 combined hours: (116.2 partner hours, 6.2 associate hours, 40.5 paralegal hours).
  • “The Court finds that this is excessive in light of what other district courts have found reasonable for litigating a case through summary judgment.” Op. at 6.
  • “’[T]asks like serving, filing, and docketing papers…are ‘normally subsumed into an attorney’s overhead expenses’ and ‘not generally considered recoverable.’”. Op. at 7.
  • The Court allowed only 85 hours for the lead attorney’s time spent on the summary judgment, and excluded time spent by the associate and paralegal as duplicative.” Op. at 7.