18th Annual Workplace Class Action Report - 2022 Edition

Annual Workplace Class Action Litigation Report: 2022 Edition 355 material aspects. Defendant filed a motion to dismiss, which the Court denied. Defendant argued that the payment of severance to some employees did not create an ongoing obligation to pay severance to all terminated employees. Id . at 7. Defendant further contended that it only provided severance to some employees with respect to one reduction-in-force, and thus the facts demonstrated that it only paid severance in single, unique events, not on the basis of all terminations. The Court found that it was plausible on the face of the complaint that Plaintiffs alleged the existence of an ERISA plan. Defendant argued that even if an ERISA plan existed, Plaintiffs failed to allege that the plan applied to them specifically. Id . at 9. However, the Court found that this issue was a fact-intensive inquiry better suited for analysis at a later stage of the case. The Court reasoned that accepting Plaintiffs’ allegations as true, there was an ERISA plan containing severance benefits in place contained in written documents, communicated to employees, and applied to Plaintiffs because they were terminated in relation to restructuring. For these reasons, the Court denied Defendant’s motion to dismiss. Central Valley Ag Cooperative, et al. v. Leonard, 2021 U.S. App. LEXIS 2633 (8th Cir. Feb. 1, 2021). Plaintiff, a large agricultural cooperative that offered its employees the opportunity to participate in a self-funded healthcare plan, sued various Defendants who either marketed or administered those healthcare plans alleging that Defendants breached various fiduciary duties and engaged in various prohibited transactions in violation of the ERISA. Plaintiff’s class action against Defendants alleged that the individuals and companies that helped it identify, set up, and maintain an employee health plan took advantage of the plan either by overcharging it directly or allowing it to be overcharged. Plaintiff alleged that these entities’ incentive to do so arose from a system of kickbacks and commissions enriching them at Plaintiff’s expense. Specifically, Plaintiff took issue with the percentage that the claims services received of gross billed charges and alleged that a “kickback" from the claims service to the third-party administrator was unauthorized and improper. Id . at *4. Plaintiff took an expansive approach in stating its claims in terms of bringing a number of ERISA claims against Defendants and alleging multiple breaches of fiduciary duties and alleging Defendants engaged in a number of prohibited transactions. Plaintiff amended its complaint three times; each amendment provided new details or shifted its legal theories. The ERISA claims did not survive summary judgment, as the District Court granted summary judgment in favor of Defendants on all claims. In addition, the District Court awarded attorneys’ fees to Defendants. On Plaintiff’s appeal, the Eighth Circuit affirmed the District Court’s judgment. The Eighth Circuit determined that a series of contracts authorized all the payments received by Defendants for their work on the plan, so the payments were not improper. Further, the Eighth Circuit held that where the reviewer and other service providers were compensated based on savings achieved by the payments, the reviewer and service providers were not ERISA fiduciaries because they did not exercise control over the plan assets. Further, the Eight Circuit held that reviewer and service provider payments did not create a fiduciary relationship and the service providers and reviewer did not possess discretion over the amount of their compensation. Additionally, the Eighth Circuit held that the ERISA prohibited transaction claim failed because there was no fiduciary relationship. Finally, the Eighth Circuit agreed with the District Court that attorneys’ fees were warranted because the claims lacked merit. In sum, the Eighth Circuit affirmed the District Court’s grant of summary judgment in favor of Defendants. Howard Jarvis Taxpayers Association, et al. v. California Secure Choice Retirement Savings Program, 2021 U.S. App. LEXIS 13499 (9th Cir. May 6, 2021). Plaintiffs filed an action against Defendants, the CalSavers program and the Chairman of the CalSavers Board in his official capacity, alleging that the ERISA preempted CalSavers. CalSaver, a California law that created a state-managed individual retirement account (“IRA”) program for eligible employees of certain private employers that do not provide their employees with a tax-qualified retirement savings plan. Plaintiffs alleged that CalSavers should be enjoined under § 526 of the California Code of Civil Procedure as a waste of taxpayer funds. The District Court granted California’s motion to dismiss on the grounds that the ERISA did not preempt CalSavers. The District Court also declined to exercise supplemental jurisdiction over Plaintiffs’ state law claim. On Plaintiffs’ appeal, the Ninth Circuit affirmed the District Court’s judgment. The Ninth Circuit held that the ERISA did not preempt CalSaver because CalSavers was not an ERISA plan, since it was established and maintained by the State, and not employers. At the outset, the Ninth Circuit addressed a threshold question relating to whether Congress had already resolved this issue when it rejected a rule of the U.S. Department of Labor in 2016 that sought to exempt CalSavers from the ERISA under a safe harbor. The Ninth Circuit held that Congress’s repeal of that rule did not provide an answer to the preemption question. The Ninth Circuit opined that the most it could conclude from Congress’s repeal of