Supreme Court May Have First ERISA-Free Term in Six Years

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

The U.S. Supreme Court returns next week with nary an ERISA case on its docket and only a handful of significant petitions to watch.

This is the second year in a row the justices have started their term with no Employee Retirement Income Security Act cases slated for oral argument. Last term, the court waited until December to grant review in Advocate Health Care Network v. Stapleton , the high-profile case involving ERISA’s exemption for church plans.

In the previous four terms, the court had at least one ERISA case on its docket when it returned from summer recess. Between 2012 and 2017, the court heard and decided eight ERISA cases on topics ranging from employer stock investments, retiree health benefits, pre-emption, and deadlines for challenging plan investments.

The last time the Supreme Court went a full year without hearing an ERISA case was the 2011-2012 term.

Although another ERISA-free term may be in the cards, a handful of pending petitions raise questions that could pique the justices’ interest.

Retirement Plan Petitions

One petition ERISA lawyers are likely to recognize by name is ABB Inc. v. Tussey, which asks whether changing a retirement plan’s investment lineup can constitute fiduciary breach when it causes a minimal increase in fees paid by participants.

This petition is the latest development in an 11-year legal battle over ABB’s decision to replace Vanguard funds with Fidelity funds in its 401(k) plan. In 2015, a district judge entered a $35 million judgment against ABB after a 16-day trial, but portions of that judgment have been vacated or otherwise called into question in the intervening years.

Another petition raising interesting ERISA questions is Convergex Grp. LLC v. Fletcher, which asks whether participants in defined benefit pension plans can claim “representational” standing based on injuries to the plan, or whether they must show an individual injury to have standing to sue.

In this case, a federal judge in New York declined to hold Convergex liable for overcharging a union pension fund by less than $1,600, because that amount paled in comparison with the plan’s $16 billion underfunding. The U.S. Court of Appeals for the Second Circuit disagreed, saying that the loss of plan assets was sufficient to give a plan participant standing to sue for fiduciary breach.

The Second Circuit’s Convergex ruling is noteworthy for creating a circuit split with the Fourth and Eighth circuits, which have denied standing to pension plan participants who couldn’t show that plan mismanagement threatened their ability to receive benefits.

The Convergex case also drew attention from the Labor Department, which filed an amicus brief in support of the plan participant. The DOL’s interest in this issue, along with a federal court circuit split, might make this case more attractive to the justices.

Welfare Plan Petitions

Two pending petitions involving disability benefit plans ask a somewhat unusual question: Can participants in ERISA-governed disability plans use the federal courts to challenge the independent medical reviewers who review their files and recommend that their claims for disability benefits be denied?

The Sixth Circuit has said no multiple times in the past year, rejecting lawsuits against third-party medical reviewers MCMC LLC and AllMed Healthcare Management Inc. Both cases were brought by Grabhorn Law Office in Louisville, Ky., which argued that the medical reviewers were practicing medicine without a proper Kentucky license when they recommended that specific disability claims be denied.

In both cases, the Sixth Circuit said the state law negligence claims against the medical reviewers were pre-empted by ERISA. The Sixth Circuit has issued other rulings to this effect in cases involving disability plans issued by Life Insurance Co. of North America and Lincoln National Life Insurance Co.

The petitions for Supreme Court review in Hackney v. AllMed Healthcare Mgmt. Inc. and Milby v. MCMC LLC ask whether ERISA poses a complete bar to federal courts exercising federal question jurisdiction over independent state law claims against third-party service providers who can’t be a proper defendant in a claim for ERISA benefits.

The court is expected to announce whether it will hear these cases relatively soon: the Tussey, Hackney, and Milby petitions were scheduled to be considered at the court’s Sept. 25 conference. The Convergex petition is scheduled for consideration on Oct. 6.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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