Articles Tagged with Supreme Court

The Supreme Court agreed Monday, June 10, 2019, to resolve a conflict between the Ninth Circuit and the Sixth Circuit on when ERISA’s three-year statute of limitations begins to run.  The statute provides that a fiduciary breach claim may be brought within six years of a breach unless the plaintiff had “actual knowledge” of the breach, in which case a three-year statute of limitations applies. The Ninth Circuit found in Sulyma v. Intel Corporation Investment Policy Committee, 909 F.3d 1069 (9th Cir., 2018), that the actual knowledge requirement that triggers the running of the three-year statute of limitations does not begin until the participant actually knew about the breach, rather than when the participant can be charged with  implied knowledge based on distribution of plan documents or other notices. The Ninth Circuit recognized that its ruling about the actual acknowledgement requirement conflicts with the Sixth Circuit’s decision in Brown v. Owens Corning Investment Review Committee, 622 F.3d 564 (6th Cir. 2010).  The Brown case sets a much lower bar, holding that the statute begins to run once the participants are given instructions on how to access plan documents. The Brown court stated Congress did not intend “the actual knowledge requirement to excuse willful blindness.” The Ninth Circuit said that the Sixth Circuit standard is not good enough.

The Sulyma case stems from allegations the investment committee selected investments for participant accounts that were unduly risky and that Intel acted imprudently by either disregarding the risks or failing to investigate the risks. Specifically, it was alleged the funds were invested heavily in hedge funds and private equity. The Ninth Circuit determines when the three-year statute of limitations begins to run is performed using a two-prong approach. The Court first isolates and defines the alleged breach and then determines when the plaintiff had actual knowledge of the alleged breach. In a lengthy decision the Court analyzed what it means to have actual knowledge.

The Court reasoned that actual knowledge must be something more than simply knowledge of the underlying transaction, at least in cases where such knowledge does not obviously disclose the breach.  Furthermore, the Court concluded that the exact nature and quantum of knowledge required to trigger the limitations period will vary depending on the nature or the claim. Thus, although the Ninth Circuit acknowledged that participants had been given investment information in several different formats, because Sulyma testified and argued he did not know his retirement was so heavily invested in hedge funds or private equity the Court determined that whether plaintiff had actual knowledge was a question of fact and should not have been decided on summary judgment.

In recent years, UnitedHealth Group has ramped up its practice of recovering supposed overpayments to medical providers on claims of plan participants in one healthcare plan by offsetting these “overpayments” against (and therefore often totally disallowing) payments on the claims of participants in an unrelated plan.  Keep in mind that the participants in the plans normally are still on the hook for any medical bills that the United refuses to pay.  I like to refer to this practice of cross-plan offsetting as robbing Peter to pay Paul’s plan.  Or perhaps given the petition for certiorari filed last week by United in a case brought as a class action by Dr. Louis Peterson seeking to end this practice, I should say robbing Peterson (and his patients) to pay Paul.

In the Peterson case, the Eighth Circuit Court of Appeals issued a decision earlier this year agreeing with a trial court that this practice was not allowed under the terms of the governing plans, which expressly allowed such offsetting for provider claims based on patients within the same plan, but said nothing about cross-plan offsets.  Without deciding whether the practice necessarily violates ERISA, as the Department of Labor argued it does in a brief it filed as amicus curiae in the case, the Eighth Circuit noted that, at a minimum, the practice was “in some tension with the requirements of ERISA,” and “pushed the boundaries of what ERISA permits.”  Accordingly, the court concluded that, despite the broad grant of interpretive authority granted to United in the plans, its interpretation of the plan as allowing cross-plan offsets was unreasonable.

United has asked the Supreme Court to review (and reverse) the decision.  In its cert. petition, United asks the Court to resolve two issues (1) whether the Eighth Circuit incorrectly held that its interpretation was “necessarily unreasonable merely because the plan is silent on the matter”; and (2) whether a court is required by established ERISA case law to defer to “an otherwise reasonable plan construction that is lawful under ERISA but, in the court’s view, pushes ERISA’s boundaries.”

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