ERISA

Fifth Third Bancorp v. Dudenhoeffer

Issues: 

When a company maintains an employee stock ownership plan, do plan managers have discretion to decide whether to remain invested in employer stock based on long-term, rather than short-term, goals, or do the managers have to change investment tactics to minimize losses and maximize present value for the investors? 

John Dudenhoeffer and Alireza Partovipanah are former employees of Fifth Third Bancorp. As part of their benefits plan, they contributed to an employer stock ownership plan (“ESOP”). By participating in the plan, employees have an option to invest in Fifth Third stock as well as several other funds. In a two-year span, stock value for Fifth Third dropped dramatically. Dudenhoeffer and his fellow class members argue that Fifth Third made misleading disclosures regarding the health of the stock and that the trust managers failed to represent the best interests of the trustees by allowing employees to continue to invest in the company. Fifth Third argues that there is a strong presumption in favor of ESOP managers and their decisions to invest stocks based on long-term company goals. The decision in this case will affect the duties that employers owe to employees who invest in ESOPs and the protection afforded to employee-investors.

Questions as Framed for the Court by the Parties: 
  1. Whether the Sixth Circuit erred by holding that Respondents were not required to plausibly allege in their complaint that the fiduciaries of an employee stock ownership plan (“ESOP”) abused their discretion by remaining invested in employer stock, in order to overcome the presumption that their decision to invest in employer stock was reasonable, as required by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1101, et seq. (“ERISA”), and every other circuit to address the issue.
  2. The complaint in this case alleges a breach of the fiduciary duties of loyalty and prudence, in violation of ERISA § 404(a)(1), 29 U.S.C. §1104(a)(1), by the trustees of an employee pension benefit plan that invests in the stock of the employer. The question before the Court is whether those allegations are inadequate on their face unless they establish that the employer’s financial status is dire.

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Facts

John Dudenhoeffer and Alireza Partovipanah are former employees of Fifth Third Bank. See Dudenhoeffer v. Fifth Third Bancorp, 692 F.3d 410, 414 (6th Cir. 2012).

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Heimeshoff v. Hartford Life & Accident Insurance Co.

Issues: 

Does the statute of limitations for judicial review of an adverse determination on a disability benefits claim begin to accrue at the time specified by an insurance policy or when the claimant files an ERISA disability claim?

Julie Heimeshoff was a longtime Wal-Mart employee who became ill and applied for long-term disability benefits from the Hartford Life & Accident Insurance Company (“Hartford”). Hartford denied her claim and Heimeshoff sued under ERISA to challenge the insurance determination. The district court granted Hartford’s motion to dismiss because Heimeshoff had missed the filing deadline, and the Second Circuit affirmed. The Supreme Court will now consider when the statute of limitations starts to accrue for judicial review of an adverse determination on a disability benefits claim. Heimeshoff argues that a bright-line rule is necessary under federal law so that potential plaintiffs will be able to understand the filing deadline. Hartford contends that the statute of limitations on an ERISA disability claim should be determined by an insurance plan’s accrual provision unless the provision is unreasonable. The Supreme Court’s decision will impact the administration of long-term disability plans. A bright-line rule would lead to more compressed time periods in which claimants would be required to seek judicial review, while a reasonableness rule would lead to possible inefficiencies and inconsistencies in administration. The Court’s decision will impact insurance companies’ control over the statute of limitations on review of ERISA disability claims and the period during which disabled employees can seek relief through the courts.

Questions as Framed for the Court by the Parties: 

When should a statute of limitations accrue for judicial review of an ERISA disability adverse benefit determination?

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Facts

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U.S. Airways v. McCutchen (11-1285)

Following a serious car accident, James McCutchen received $66,866 to pay for his medical expenses from a benefit plan administered by his employer, US Airways. The Plan included a provision requiring beneficiaries to reimburse US Airways for claims “out of any monies recovered from a third party.” After receiving the Plan benefits, McCutchen hired counsel and sued third parties who were involved in accident, recovering a $10,000 settlement from one of the drivers involved in the accident and $100,000 in underinsured motorist coverage. US Airways subsequently sued McCutchen to recover the money they initially paid him by seeking “appropriate equitable relief” under ERISA Section 502(a)(3). US Airways maintains that the term “appropriate” in Section 502(a)(3) refers to the requirement that the type of “equitable relief” a plaintiff seeks be suitable under the circumstances to enforce the terms of the benefit plan and does not allow courts to use equity to rewrite contractual terms. McCutchen argues that courts have the authority to determine what constitutes “appropriate equitable relief” within the meaning of ERISA Section 502(a)(3) and, thus, are not required to enforce express plan terms. Supporters of the lower court’s decision argue that allowing courts to provide equitable relief would increase fairness and encourage beneficiaries to seek recovery from third parties. Opponents counter that affirming the lower court’s decision will increase ERISA litigation and threaten the financial viability of employee health benefit plans. 

Questions as Framed for the Court by the Parties: 

Whether the Third Circuit correctly held—in conflict with the Fifth, Seventh, Eighth, Eleventh, and D.C. Circuits—that ERISA Section 502(a)(3) authorizes courts to use equitable principles to rewrite contractual language and refuse to order participants to reimburse their plan for benefits paid, even where the plan’s terms give it an absolute right to full reimbursement. 

Issue

Does ERISA Section 502(a)(3) allow courts to apply equitable principles to refuse to order a participant to reimburse the plan for medical coverage where the contract provides the plan with an absolute right to full reimbursement?

Acknowledgments: 

The authors would like to thank Professor Emily Sherwin for her insights into this case.

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