September Brings 5 Appellate Benefits Arguments To Watch

By Kellie Mejdrich
Law360 (September 1, 2023, 7:22 PM EDT) —

In September, federal appeals courts have set oral arguments on several important employee benefits disputes from workers claiming violations of the Employee Retirement Income Security Act, and a D.C. Circuit panel will be asked to determine whether Rite Aid violated labor law when changing union retirees’ health benefits.

Here are five appellate argument sessions in September attorneys should be watching.

NFL To Ask 5th Circ. To Reverse Ex-Player’s Disability Win

A three-judge panel of the Fifth Circuit will weigh the extent to which benefits decisions by ERISA plans are subject to judicial review in a National Football League retirement plan’s appeal of a former running back’s trial court victory awarding him the highest level of disability benefits.

The panel set oral arguments for Sept. 7 in the Bert Bell/Pete Rozelle NFL Player Retirement Plan’s appeal seeking to reverse Michael Cloud’s trial court win from May 2022. In a scathing oral ruling, U.S. District Judge Karen Gren Scholer lambasted the NFL plan for violating ERISA by denying Cloud a full and fair review of a 2016 reclassification application.

The court awarded Cloud disability benefits from the highest tier — paying Cloud $265,000 annually, up from the $135,000 he was paid annually in the tier he was initially in, which Judge Scholer said Cloud was entitled to after suffering from numerous mental disorders linked to repetitive concussions. Judge Scholer also ordered the NFL plan to pay Cloud $1.23 million in attorney fees.

The NFL plan has argued on appeal that the court should have shown greater deference to ERISA plan administrators. The plan also argued on appeal that Cloud’s application was time-barred because his appeal was filed two days after an 180-day window claimants have to appeal after a decision by the plan’s board of trustees.

Cloud, in return, argues that the NFL retirement plan shouldn’t be extended deference on its decision because the plan mishandled his reclassification application in violation of ERISA. Cloud also argues his application was timely because the appeal was filed within 180 days of him actually receiving the decision via a FedEx package on his doorstep.

Charles Field, partner and chair of the financial services litigation practice at plaintiffs firm Sanford Heisler Sharp LLP, said he’s watching the outcome of the Fifth Circuit appeal. He was also critical of the NFL’s argument on appeal that Cloud missing a deadline by two days should have ended the case.

“You’ve got to be kidding,” Field said. “You’re going to deny this poor guy his benefits because he was two days late in getting his appeal in?”

Cloud, a running back who played seven seasons in the NFL with the Kansas City Chiefs, New York Giants and New England Patriots before retiring in 2006, first sued in 2020. Plan administrators denied his reclassification application in 2016, two years after the U.S. Social Security Administration determined he was totally and permanently disabled, according to his complaint.

The issue reaches the appeals court as disputes over the NFL’s handling of disability claims heats up, with a proposed class action alleging disabled players were unjustly denied benefits by two NFL plans lodged against the NFL in February.

The case is Cloud v. NFL Player Retirement Plan, case number 22-10710, in the U.S. Court of Appeals for the Fifth Circuit.

DC Circ. To Weigh Impasse Claims In Rite Aid Retirees’ Benefits Dispute

The D.C. Circuit will weigh an employer-side push to undo a National Labor Relations Board ruling that found a pharmacy chain violated the National Labor Relations Act by declaring union contract negotiations were at an impasse and modifying retirees’ health benefits without further bargaining.

A three-judge panel is set to hear oral argument on Sept. 8 in an appeal from Rite Aid and a cross-application for enforcement from the NLRB. The appellate court is being asked to review the NLRB’s December 2021 ruling, which affirmed an agency judge’s decision finding that the pharmacy chain violated labor law when changing retired workers’ health care benefits without their union’s consent.

The pharmacy chain has appealed the NLRB ruling and the NLRB has filed a cross-application for enforcement. The pharmacy chain has argued in briefing with the appellate court that circumstances forced its hand and contract negotiations reached an impasse, creating such a dire situation that it needed to act without devoting additional time to securing a United Food and Commercial Workers local’s approval.

The NLRB in turn has argued that Rite Aid was not at an impasse, and that the union had demonstrated a willingness to compromise that should have led the employer to bargain over the changes.

United Food and Commercial Workers Local 8-Golden State, which was the charging party before the NLRB and an intervenor respondent in the suit in support of the NLRB, also urged the D.C. Circuit to uphold the board’s win in a brief filed in February.

The appellate case is Thrifty Payless Inc. doing business as Rite Aid v. National Labor Relations Board, case numbers 22-1204 and 22-1241, in the U.S. Court of Appeals for the District of Columbia.

Challenge To SEC Stock Buyback Rules At 5th Circ.

A Fifth Circuit panel has set oral arguments for Sept. 20 to hear a group of business organizations’ plea to invalidate rules from the U.S. Securities and Exchange Commission approved in May requiring more disclosures on stock buybacks by public companies, which the groups say unconstitutionally compels speech without helping investors.

The U.S. Chamber of Commerce and two Texas-based business groups — Longview Chamber of Commerce and the Texas Association of Business — petitioned the Fifth Circuit for review on May 12, arguing that compelling speech about the buybacks violated the First Amendment. The U.S. Chamber and the two groups also argue that the SEC hasn’t properly justified the economic effects of the new rules, in violation of the Administrative Procedure Act.

The Fifth Circuit has proven friendly to these kinds of regulatory challenges in recent years, having ruled the Consumer Financial Protection Bureau’s independent funding structure was unconstitutional in October 2022 and declaring that the U.S. Securities and Exchange Commission’s in-house courts were unconstitutional in May 2022.

Field, with Sanford Heisler, said he’s keeping an eye on the Fifth Circuit appeal, given the potentially significant administrative burden companies face under the new rule.

“They have a duty to disclose if they’re relying on insider information to buy back the stock. But if they’re not relying on insider information, then why are they making them disclose it?” Field asked.

He also questioned the regulator’s justifications for the additional regulations.

“When there are abuses, the SEC is supposed to act and promulgate rules that protect the investing public. The issue here is that based on their own staff report, there doesn’t appear to be any abuses,” Field said.

The case is Chamber of Commerce of the United States of America, Longview Chamber of Commerce and the Texas Association of Business v. Securities and Exchange Commission, case number 23-60255, in the U.S. Court of Appeals for the Fifth Circuit.

En Banc 4th Circ. To Tackle Trans Health Cases

The en banc Fourth Circuit on Sept. 21 will be asked to rule on the legality of categorical exclusions for gender-affirming care in government health plans in North Carolina and West Virginia, which transgender individuals subject to the bans argue violate constitutional and civil rights protections guaranteeing them access to health care.

The Sixth Circuit appeal is one of several similar disputes over bans on access to transgender care that’s quickly making its way to the U.S. Supreme Court. In addition to the Sixth Circuit fight over categorical exclusions in a plan, the Fourth Circuit on Friday weighed bans on access to gender-affirming care for minors in Kentucky and Tennessee. And in August, an Eleventh Circuit panel invalidated a lower court’s injunction against a ban on minors’ access to gender-affirming care in Alabama, sending the civil rights lawsuit over Alabama’s recently enacted ban back to district court.

Xavier Baker, principal at Groom Law Group, said he’s watching the Fourth Circuit appeal alongside other similar appeals nationwide, with the U.S. Supreme Court likely to intervene eventually on the issue.

Baker said the multiple appeals together are “bringing to a head this fundamental question about discrimination on the basis of sex, especially as applied to gender-affirming care.”

The appellate court’ decision to rehear the appeals en banc comes after two separate three-judge panels appeared to diverge on how to weigh the merits of these cases at oral arguments earlier this year.

A three-judge panel in January seemed open to upholding a North Carolina federal court’s decision from June 2022 finding a ban on gender dysphoria and gender transition related treatments was unconstitutional. But another three-judge panel of the circuit court in March indicated they were ready to rule the other way, appearing highly skeptical of a West Virginia federal court’s ruling that a blanket exclusion for what West Virginia’s Medicaid program labeled as “transsexual surgery” in program documents was unconstitutionally discriminatory.

Anne Tyler Hall, managing partner at Hall Benefits Law, said she’s keeping an eye on the appeal particularly because she’s been fielded questions from clients on exclusions related to gender-affirming care, with employers struggling to comply with “a hodgepodge of federal and state law.”

“A lot of employers are trying to figure out what to do, and what to cover, and what is their risk exposure?” Hall said.

The cases are Kadel v. Folwell, case number 22-1721, and Fain et al. v. Crouch et al., case number 22-1927, in the U.S. Court of Appeals for the Fourth Circuit.

JPMorgan Retirees’ ‘Wear-Away’ Suit At 2nd Circ.

The Second Circuit will hear a retired JPMorgan Chase workers’ plea to revive a federal benefits lawsuit alleging the banking giant failed to properly notify employees that their benefit accruals had been frozen, in a suit that highlights the litigation risks involved with legacy pension benefits and conversions.

A three-judge panel has set oral arguments for Sept. 28 in the appeal from Joseph Pessin, who started working for J.P. Morgan & Co. in 1987, and seeks to revive his proposed ERISA class action alleging workers were improperly notified about the changes.

Pessin appeals U.S. District Judge Denise Cote’s December 2022 order granting the bank’s motion to dismiss. Pessin argues Judge Cote erred in dismissing his suit alleging the company misled Morgan Plan participants by giving them inadequate notice when they hit a “wear-away” period during which benefits were frozen after the company shifted to a cash balance benefit plan.

JPMorgan has argued on appeal that it gave proper notice about the pension benefit changes, and that ERISA didn’t require the kind of personalized information that Pessin was arguing he should have been provided.

Hall, with Hall Benefits Law, said she’s closely watching the outcome of the Second Circuit appeal, even though these types of disputes are less frequent now that employers have pivoted to 401(k) plans. But she noted how circuit courts in recent years have revived lawsuits from workers alleging
poor disclosure about pension benefits.

“What we’ve seen in the litigation landscape is it is incumbent upon the plan sponsor to clearly communicate that benefit. That is a fundamental, seminal, ERISA requirement,” Hall said, predicting JPMorgan could face an “uphill battle” defending its lower court win on appeal.

“The circuit courts have said — ‘It’s too bad, employer, that you didn’t communicate this, but we’re going to take the documentation and the communication that’s most favorable to the participant,'” Hall said.

The case is Joseph Pessin v. JPMorgan Chase U.S. Benefits Executive et al., case number 23-25, in the U.S. Court of Appeals for the Second Circuit.

–Editing by Amy Rowe and Nick Petruncio.

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