District Court Admits Error in ERISA Lawsuit Ruling

The U.S. District Court for the Middle District of Pennsylvania has ruled in an Employee Retirement Income Security Act (ERISA) lawsuit targeting WellSpan Good Samaritan Hospital, an acute care hospital in Lebanon, Pennsylvania.

The district court’s new decision comes after its previous move denying the hospital defendants’ motion for summary judgment to toss plaintiffs’ claims, which cover a variety of fiduciary breach allegations. Specifically, the district court’s new decision says it will fully reconsider its ruling to deny summary judgement on behalf of defendants, essentially because the court confused subtle elements of Third Circuit case law. 

This is a rare step in ERISA litigation and in the federal district courts in general. As explained in a helpful primer prepared by LexusNexus, the Federal Rules of Civil Procedure do not actually expressly allow motions for reconsideration, but district courts “generally treat them as being filed under Rule 59 or 60.”

“Still, reconsideration of a judgment is considered an extraordinary remedy which will be granted only sparingly,” the legal experts note. “Rule 60(b) allows for ‘relief from a final judgment, order, or proceeding’ in certain circumstances. Those circumstances include mistake, excusable neglect, newly discovered evidence, fraud by an opposing party, and ‘any other reason that justifies relief.’”

As laid out in the text of the decision, in sum, the plaintiff, Daria Kovarikova, alleged that defendants, through agents and co-fiduciaries, “misrepresented to her that her retirement benefit plan would not change or would only change to her advantage when defendants terminated the residency program of which she was a part.” Plaintiff claimed she relied on the misrepresentation and suspended her search for a new job under the mistaken belief that, in addition to receiving a retention bonus for remaining employed with defendants, her existing benefits would not change.

“Defendants ultimately filed a motion for summary judgment, which we denied,” the new decision states. “In the memorandum accompanying our order, we found that the representations plaintiff relied on were not material at the time because changes to the retirement plan were not yet being seriously considered. However, we found that defendants had a duty to correct plaintiff’s misunderstanding once the plan changes were being seriously considered. The defendants now seek reconsideration of our order. The motion has been fully briefed, and is ripe for our review.”

The text of the decision first weighs whether the motion for reconsideration should be barred due to the fact that the defendant filed the motion a full week beyond the deadline set by the court and rules of procedure. Weighing the principles of “excusable neglect,” the court sides with defendants and overlooks the timeliness question. The decision adds some context here by noting that pretrial deadlines “had been continued to accommodate medical treatment for plaintiff’s lead counsel.” Furthermore, the delay was “merely one week and has little to no impact on the judicial proceedings.” Finally, “as noted, the delay was due to a careless mistake, not to anything suggesting bad faith.”

Getting to the heart of the matter, the defendants argue that the court made clear errors of law in three ways: “First, that the alleged statements do not qualify as material misrepresentations and defendants had no duty to go back and correct plaintiff’s understanding; second, that plaintiff provided no evidence that she relied on the alleged statements; and third, that plaintiff provided no evidence that she suffered damages.”

On the first question, the court frankly admits it committed an error: “Defendants first argue that the alleged statements do not qualify as material misrepresentations and that they had no duty under ERISA to correct plaintiff’s understanding about whether her benefits would change. Defendants argue that the court misapplied Third Circuit precedent to create a duty that does not exist: specifically, the duty to go back and correct a statement about future benefits that, while not a material misrepresentation at the time, became misleading once a change in benefits took place. Defendants suggest that the court blended two lines of Third Circuit case law that are consistent but distinct. Upon careful reconsideration, we agree and concede that we erred.”

Offering additional detail, the decision points out that the Third Circuit has clarified that “while the two [relevant] lines of cases [i.e., Fischer II and Bixler] are consistent, they do not overlap.”

“Bixler applies to existing benefits, Fischer II applies to possible benefits,” the decision explains. “In conducting our analysis, we inadvertently omitted this subtle nuance and fashioned a duty that does not fit established Third Circuit precedent.”

Thus the court draws new conclusions about the facts of this case, leading to its decision to reconsider: “Plaintiff’s ERISA claim rested on the statements made to her before the plan changes were under serious consideration. Plaintiff has not alleged that she was given incomplete information about existing benefits. Indeed, the evidence clearly would not support such an allegation. By time the changes to the plan went into effect—that is, became her existing benefits—defendants had provided all employees with information about the change and established information sessions to fully explain the changes. Thus, the evidence does not support any contention that plaintiff was misinformed about existing benefits at any time. Plaintiff’s allegations, rather, focus on statements made about possible benefits. That requires a Fischer II analysis, which we already said could not be sustained by the evidence. Because the plan changes were not under serious consideration when the statements were made, they were not material misrepresentations. Without a material misrepresentation, plaintiff cannot sustain her ERISA claim.”

Important to note, this ruling does not settle the case outright, thought it does seem to indicate a motion for summary judgement in favor of defendants could be more likely this time around: “For the reasons stated above, we shall grant defendants’ Motion for Reconsideration. A separate order shall issue in accordance with this ruling.”