Top ERISA Litigation From 2024

It was a busy year for the courts when it came to employee benefits. We saw litigation impacting a variety of issues, from administrative agency powers and plan forfeitures, to the enforceability of arbitration provisions in plan documents. As the end of year draws near and plan sponsors work to finalize benefits for 2025, now is a great time to catch up on a handful of the top ERISA cases and litigation trends from 2024 to ensure compliance and mitigate potential risk.

Administrative Agencies Face New Scrutiny Following Loper Bright Enterprises v. Raimondo[1]

In the Loper case, herring fishing companies sued the Secretary of Commerce and National Marine Fisheries Service (“NMFS”) alleging that the NMFS exceeded its rulemaking powers under the Magnuson-Stevens Fishery Conservation and Management Act (the “Act”) by requiring the fishing industry to foot the bill (estimated at $710 per day) to satisfy on‑board monitoring requirements under the Act. NMFS relied on the Act in claiming it created discretionary authority to require fishing vessels to cover the cost.  But there was no specific legislative authority to require fishing vessels to cover the cost.

Prior to the Loper case, courts followed the Chevron[2] doctrine, under which courts must defer to a federal agency’s permissible construction of a statute in the event a statute is silent or ambiguous. In Loper, the U.S. Supreme Court overruled Chevron, holding that courts must exercise independent judgment when reviewing whether an agency is exceeding its statutory authority and should not defer to an agency’s interpretation in the case where a statute is ambiguous.

Post-Loper, agency rulemaking will be subject to a much higher level of scrutiny in court. For example, health and welfare plans are subject to rulemaking by numerous agencies, including the U.S. Departments of Labor, Treasury, and Health and Human Services. Only time will tell as to the full extent of Loper’s impact on the benefits world, but we have already seen some litigation challenging agency rulemaking. In September, the Texas Attorney General filed a lawsuit against the U.S. Department of Health and Human Services challenging certain privacy rulings related to HIPAA as well as the 2024 Reproductive Privacy Rule that was issued shortly after the Dobbs v. Jackson Women’s Health Organization[3] case.

In the benefits world, we often rely heavily on regulatory guidance, particularly from the U.S. DOL and Internal Revenue Service.  Will the Loper case have a “chilling effect” on these agencies’ confidence to publish what is often much-needed – and appreciated – guidance?  Will this open the floodgates for litigation that could impact prior and future regulatory guidance related to benefit plans?  Time will tell…

Plaintiffs Aim to Smoke Out Tobacco Surcharges in Harrison Keesler v. Tractor Supply Company[4]

A class action complaint was filed against Tractor Supply for its failure to offer a “reasonable alternative standard” for tobacco users in its wellness program. Under Tractor Supply’s program, tobacco users paid a surcharge of $780 per year for coverage and had the option to complete a cessation program. A reasonable alternative standard must allow participants to avoid a surcharge, and while Tractor Supply’s program offered a cessation program, completion of such program did not result in the removal of the tobacco surcharge. Under ERISA’s anti-discrimination provisions, a medical plan cannot charge an extra premium or fee due to a health status related factor, including tobacco usage.

While no decision has been reached in this case, welfare benefit plan sponsors should pay close attention as similar complaints have been filed in courts this year, and the Department of Labor has also shown interest in pursuing audits and enforcement actions against plans with tobacco surcharges.

Courts Wrestle With Plan Forfeitures in Dimou v. Thermo Fisher Scientific Inc., et. al.[5] and Jason Sievert v. Knight-Swift Transportation Holdings, Inc.[6]

The plaintiff in Dimou alleged that defendants impermissibly used plan forfeiture benefits to reduce future employer contribution costs instead of using such funds to pay plan expenses. Judge Robinson granted Thermo Fisher’s motion to dismiss on several grounds, including that the Plan document gave the defendants discretion to choose between paying the reasonable expenses of the Plan or reducing contributions.

In contrast, in the Knight-Swift case, the Plan document provided that forfeiture amounts first be used to pay plan expenses before being used to reduce the Company’s matching contribution. No decision has been reached in the Knight-Swift case, but it would appear to follow that if the plaintiff’s allegations regarding the plan language are accurate, then the Company did violate the terms of the plan.

Dimou and Knight-Swift are two of many recent lawsuits dealing with plan forfeitures. Plan sponsors should take special care to ensure that forfeitures are being used according to plan terms.

Limiting Available Relief May Invalidate an Arbitration Provision According to the Second Circuit in Cedeno v. Sasson[7]

In Cedeno, the Second Circuit held that an arbitration provision that limits relief to the participant’s individual account and refuses relief that may benefit other participants or beneficiaries is unenforceable. The plaintiff sought plan-wide relief under § 502(a)(2) of ERISA and thus, the arbitration provision directly inhibited the plaintiff from seeking the type of remedy available under ERISA.

Plan administrators should review any mandatory arbitration provisions to ensure that language does not limit remedies available under ERISA, and if the language does limit remedies available in arbitration, that such language is severable from the rest of the arbitration provision.

Health Plan Fee Litigation is on the Rise, but Employers Won Big in Knudsen v. MetLife Grp., Inc.[8]

The Knudsen plaintiffs alleged that $65 million in rebates from drug manufacturers went to the plan administrator rather than the self-funded plan, which ultimately led to higher health care costs for participants. However, the complaint alleged only speculative injuries such as general increases of participant out-of-pocket costs due to the allocation of the rebates to the plan. The plaintiffs were unable to allege which costs increased and when, or by how much the costs increased. Accordingly, the Third Circuit ruled in favor of the employer, holding that the plaintiffs failed to allege a concrete injury that was caused by the ERISA violations, which is a requirement for Article III standing when bringing a claim before a federal court.

It is important to note that the Third Circuit declined to hold that there is no situation in which a plan participant can establish financial injury sufficient to satisfy Article III standing when it comes to self-funded health plans and potential mismanagement of assets, despite the participants receiving all benefits of which they were owed under the plan’s terms. That said, it is very likely that we will see future litigation testing the bounds of standing for self-funded health plans.