Sunday, July 24, 2011

Ninth Circuit Allows Additional Defendants in ERISA cases

The Ninth Circuit recently heard a case of Laura Cyr v Reliance Standard Life Insurance Company, where it reconsidered its precedent on which parties may be sued as defendants in ERISA litigation.

Previously, the Ninth Circuit held that under the ERISA statute, only the benefit plan itself or the plan administrator was considered a proper defendant. In this recent court ruling, the Ninth Circuit overruled its prior decisions, stating that there is no such limitation in the statute, and that other entities may be sued.

In this case, Laura Cyr was the vice president of Channel Technologies, where she was terminated in October 2000. She filed a claim for long term disability benefits based on a back condition. The Reliance Standard Life Insurance Company approved the payment of benefits based on Cyr’s salary of $85,000 a year.

The following year, Cyr filed and settled a gender discrimination lawsuit against her employer, and as a result her salary was retroactively adjusted to $155,000 a year. Cyr then contacted Reliance to adjust the benefits package based on this new salary, which Reliance never did.

Ms. Cyr filed a lawsuit against 1) the Reliance insurance company, 2) the CTI Benefit Program (the “Plan”), and 3) her employer, CTI, as the plan administrator. Following precedent, the district court initially ruled in favor of Reliance, which claimed that since it was not the plan administrator, it was not a proper defendant.

However, after supplemental briefings, district court reversed itself, finding that Reliance was functioning as the plan administrator. The court granted Cyr’s summary motion judgment, with attorneys fees in the amount of $384,052, costs, and prejudgment interest.

Hearing the case en banc, the Ninth Circuit reviewed the controlling language in this action, 29 U.S.C. Section 1132(a)(1)(B):

A civil action may be brought by a participant or beneficiary … to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of this plan.

The court found that Cyr was authorized to bring a civil action under this provision, and that the statute does not limit which parties may be proper defendants in that action.

Due to this ruling, disabled workers may have more opportunities to recover everything they are entitled to under the law. Plaintiff’s attorneys will have the opportunity to go after defendants previously insulated from liability by the old precedent. As in this case, plans and plan administrators may have no actual authority to authorize benefits to the worker, and this ruling will allow attorneys to go after the logically responsible parties to enforce worker rights.

Learn more about how our San Francisco ERISA attorneys can help, contact Delfino Green & Green at 415-442-4646 or 866-545-7298 Toll Free.