Tag: SCOTUS

Supreme Court Affirms Contractually Reduced Limitations Periods for Employee Retirement Income Security Act (ERISA) Benefit Claims Date

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A contractual limitations period in an ERISA disability benefits plan that required participants to bring suit within three years after “proof of loss is due” is enforceable, theU.S. Supreme Court has ruled unanimously. Heimeshoff v. Hartford Life & Accident Ins. Co. et al., 134 S.Ct. 604, 187 L. Ed. 2d 529 (2013).

Whether and under what circumstances an otherwise applicable statute of limitations can be contractually shortened where a claim for benefits is made under a plan subject to the Employee Retirement Income Security Act of 1974 has divided the courts of appeals for years. A participant in an employee benefit plan covered by ERISA may bring a civil action under §502(a)(1)(B) to recover benefits. Courts have generally required participants to exhaust the plan’s administrative remedies before filing these suits. ERISA, however, does not specify a statute of limitations for filing such a suit.

Heimeshoff is significant for three reasons. First, implicit in the Court’s decision is the recognition that “reasonable” contractual limitations periods are generally enforceable for ERISA claims. According to the Court, “in the absence of a controlling statute to the contrary, a provision in a contract may validly limit, between the parties, the time for bringing an action on such contract to a period less than that prescribed in the general statute of limitations, provided that the shorter period itself shall be a reasonable period” (quoting Order of United Commercial Travelers of America v. Wolfe, 331 U.S. 586, 608 (1947)).

Second, the decision also appears to assume, if not specifically hold, that contractual limitations periods for insured ERISA plans (at least where the limitations period is in the insurance policy) are subject to state laws that expressly prohibit contractual limitations periods shorter than a defined period (as opposed to state laws that merely set a default minimum statute of limitations that applies only in the absence of a contractual limitations period).

Finally, the decision overturns the law in certain circuits holding a contractual limitations period cannot begin to run until available administrative remedies have been exhausted. Heimeshoff should not have any application to claims of breach of fiduciary duty under ERISA; it is limited to ERISA benefits claim matters. It is certainly possible that the limitations Heimeshoff applies will have the effect of increasing ERISA fiduciary claims actions, although the federal courts are wary of benefits claim cases denominated as ERISA fiduciary breach matters.

The Court, referring to state insurance statutes, pointed out that “the vast majority of States require certain insurance policies to include 3-year limitations periods that run from the date proof of loss is due.” On the theory that federal law determines when an ERISA cause of action accrues, some circuits previously held the time for bringing the action does not begin to run until the administrative review process has been completed. In Heimeshoff, the Supreme Court held that such a hard and fast rule is inappropriate. Absent unreasonable limitations barring a participant’s ability to assert a claim, it said, the terms of the written plan are paramount and should be enforced. The new rule is more fact-specific. The contractual limitations period, including its commencement date as specified in the policy, should be enforced unless the claimant is left with an unreasonably short period to file suit after the administrative review process ends. The Court recognized that starting the limitations period at the point “proof of loss is due,” which necessarily is before the completion of the administrative review process, “will, in practice, shorten the contractual limitations period.” But the Court nevertheless held that such a requirement is enforceable, provided the claimant is left with a “reasonable” period of time to file suit.

The Court did not indicate what remaining period of time might be unreasonable. Because the plaintiff in Heimeshoff had about one year left to file a complaint following the completion of the review of her claim, 12 months presumably is not “too short” in the run of cases. Relying upon Heimeshoff, a federal District Court in New Jersey dismissed an ERISA benefits claim as untimely, finding a nine-month residual period for filing suit after exhaustion of administrative remedies provided the plaintiff with “ample opportunity to seek judicial review.” Barriero v. NJ BAC Health Fund, 2013 U.S. Dist. LEXIS 181277 at *12-*13 (D.N.J. Dec. 27, 2013).

In Heimeshoff, the Supreme Court recognized that the district courts retain the discretion to use appropriate traditional doctrines to free claimants from a contractual limitations provision “in the rare cases where internal review prevents participants from bringing §502(a)(1)(B) actions within the contractual period.” The Court observed, “[i]f the administrator’s conduct causes a participant to miss the deadline for judicial review, waiver or estoppel may prevent the administrator from invoking the limitations provision as a defense.” The Court also suggested that the doctrine of “equitable tolling” may apply “[t]o the extent the participant has diligently pursued both internal review and judicial review but was prevented from filing suit by extraordinary circumstances.” (Emphasis added.) These cases often include allegations of fraud and other extraordinary facts and are likely to define the limits of Heimeshoff.

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Jackson Lewis P.C.

Supreme Court Will Rule on Whether Agency-Approved Beverage Label Can Be Challenged as ‘False Advertising’ in Federal Court

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On January 10, 2014, the U.S. Supreme Court agreed to hear an appeal by Pom Wonderful LLC against The Coca-Cola Company.  The Court will examine whether Pom can bring a federal Lanham Act false advertising claim against a Minute Maid juice product label that had been approved by the U.S. Food and Drug Administration (FDA).  (Pom Wonderful LLC v. The Coca-Cola Co., U.S. Supreme Court case no. 12-761).

At issue in the lawsuit is a Minute Maid label for “Pomegranate Blueberry Flavored Blend of 5 Juices.”  The label presents the words “Pomegranate Blueberry” in larger type than the remainder of the phrase.  Pom claimed that the label was misleading because the product contains 0.3 percent pomegranate juice and 0.2 percent blueberry juice.

A California federal trial court and the 9th Circuit federal appeals court in California both ruled that Pom could not bring a Lanham Act false advertising claim against the label, since it had been specifically examined and approved by the FDA.  Pom has argued that the decisions were contrary to established law in other U.S. courts, and that federal regulations establish a floor –but not a ceiling — on what an advertiser is required to do to avoid a claim that the advertising is false and misleading.  Coca-Cola has argued that product labeling that is specifically authorized by the Food, Drug and Cosmetic Act (FDCA) and approved by the FDA cannot be charged as false or misleading under another federal statute such as the Lanham Act.

Although the question before the Supreme Court is whether a private party can bring a Lanham Act claim challenging a product label regulated under the FDCA, the Supreme Court’s decision could potentially have significant implications for the alcohol beverage industry.  For example:

  • If the Supreme Court rules that a competitor cannot bring a Lanham Act claim against a label that has been approved by the FDA, a natural question is whether the same rule will apply with regard to alcohol beverage labels that have been reviewed and approved by the Alcohol and Tobacco Tax and Trade Bureau (TTB) (by its terms, the Federal Alcohol Administration Act does not preempt the Lanham Act); and
  • If a Lanham Act claim would be barred against labels approved by TTB, a question may arise about whether a Lanham Act claim would be barred on elements of the label that TTB does not specifically review as a matter of policy – such as contrast, size and placement of label elements.

The Supreme Court is expected to hear argument this spring and decide the case by June 2014.  Depending on the decision, alcohol beverage industry members could find they have additional insulation against a federal false advertising claim, but they may likewise be limited in bringing a federal false advertising lawsuit against a competitor’s label that has been approved by TTB.

Article by:

Robert W. Zelnick

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McDermott Will & Emery

Supreme Court Holds That State Attorney General Actions are Not “Mass Actions” Under Class Action Fairness Act (CAFA)

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On January 14, the Supreme Court of the United States held that lawsuits that are filed in the name of a State Attorney General but seek relief on behalf of a State’s citizens cannot be removed to federal court as “mass actions” under the Class Action Fairness Act (CAFA). See Mississippi ex rel. Hood v. AU Optronics Corp., No. 12-1036 (Jan. 14, 2014). Resolving a split between the Fifth Circuit on the one hand and the Fourth, Seventh and Ninth Circuits on the other, the ruling means that businesses will have to defend AG actions in state courts, and state courts will have to resolve whether such actions can proceed even though the consumers on whose behalf they are brought have agreed to settle their claims in a class action or, conversely, to pursue their own claims individually rather than collectively.

“Mass Actions”

CAFA gives federal courts original subject matter jurisdiction over certain “class actions” and “mass actions.” It defines a “class action” as “any civil action filed under rule 23 of the Federal Rules of Civil Procedure or similar State statute or rule of judicial procedure authorizing an action to be brought by 1 or more representative persons as a class action” and defines a “mass action” as “any civil action . . . in which the monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact, except that jurisdiction shall exist only over those plaintiffs whose claims in a mass action [exceed $75,000, exclusive of interest and costs].” 28 U.S.C. §§ 1332(d)(1)(B), (d)(11)(B)(i).[1] Excluded from the definition of “mass action” are (among other things) actions in which “all of the claims are asserted on behalf of the general public (and not on behalf of individual claimants or members of a purported class) pursuant to State statute specifically authorizing such action . . . .” Id.§ 1332(d)(11)(B)(ii)(III).

The Hood Case

Jim Hood, the Attorney General of Mississippi, filed a parens patriaeaction that alleged that the companies that manufacture and market liquid crystal display (LCD) panels had engaged in price-fixing that violated the Mississippi Consumer Protection Act and Mississippi Antitrust Act. Hood sought equitable and compensatory relief on behalf of both the State and its citizens. The defendants removed the action to federal court under CAFA and the Attorney General moved to remand. The district court remanded, finding that the suit was not a “mass action” because it fell within the definition’s “general public” exception. The Fifth Circuit reversed. Looking at each claim rather than the action as a whole, it reasoned that the real parties in interest were not only the State but also the individual citizens who had purchased LCD products, and as a result the “claims of 100 or more persons [we]re proposed to be tried jointly.” Id. § 1332(d)(11)(B)(i). Hood then petitioned for certiorari, which the Supreme Court granted.

The Supreme Court’s Decision

Yesterday, the Supreme Court unanimously reversed. Justice Sotomayor’s opinion is a primer on statutory construction:

Respondents argue that the [mass action] provision covers [AG actions] because “claims of 100 or more persons” refers to “thepersons to whom the claim belongs, i.e., the real parties in interest to the claims,” regardless of whether those persons are named or unnamed. We disagree.

To start, the statute says “100 or more persons,” not “100 or more named or unnamed real parties in interest.” Had Congress intended the latter, it easily could have drafted language to that effect. Indeed, when Congress wanted a numerosity requirement in CAFA to be satisfied by counting unnamed parties in interest in addition to named plaintiffs, it explicitly said so: CAFA provides that in order for a class action to be removable, “the number of members of all proposed plaintiff classes” must be 100 or greater, and it defines “class members” to mean “the persons (named or unnamed) who fall within the definition of the proposed or certified class.” Congress chose not to use the phrase “named or unnamed” in CAFA’s mass action provision, a decision we understand to be intentional.

More fundamentally, respondents’ interpretation cannot be reconciled with the fact that the “100 or more persons” referred to in the statute are not unspecified individuals who have no actual participation in the suit, but instead the very “plaintiffs” referred to later in the sentence—the parties who are proposing to join their claims in a single trial….[2]

The Court then rejected the argument that “plaintiffs” should be read as including both named and unnamed parties, finding that such a reading “stretches the meaning of ‘plaintiff’ beyond recognition” and would impose an “administrative nightmare” on the lower courts:

The term “plaintiff” is among the most commonly understood of legal terms of art: It means a “party who brings a civil suit in a court of law.” It certainly does not mean “anyone, named or unnamed, whom a suit may benefit,” as respondents suggest.

…

Yet if the term “plaintiffs” is stretched to include all unnamed individuals with an interest in the suit, then §1332(d)(11)(B)(i)’s requirement that “jurisdiction shall exist only over those plaintiffs whose claims [exceed $75,000]” becomes an administrative nightmare that Congress could not possibly have intended. How is a district court to identify the unnamed parties whose claims in a given case are for less than $75,000? Would the court in this case, for instance, have to hold an evidentiary hearing to determine the identity of each of the hundreds of thousands of unnamed Mississippi citizens who purchased one of respondents’ LCD products between 1996 and 2006 (the period alleged in the complaint)? Even if it could identify every such person, how would it ascertain the amount in controversy for each individual claim?

…

We think it unlikely that Congress intended that federal district courts engage in these unwieldy inquiries. By contrast, interpreting “plaintiffs” in accordance with its usual meaning—to refer to the actual named parties who bring an action—leads to a straightforward, easy to administer rule under which a court would examine whether the plaintiffs have pleaded in good faith the requisite amount. Our decision thus comports with the commonsense observation that “when judges must decide jurisdictional matters, simplicity is a virtue.”[3]

The decision means that the troubling trend of retaining private class action lawyers to file public AG actions in state courts can continue and could conceivably quicken. It also raises a number of interesting questions the Court did not address, for example whether AG actions are barred by agreements to settle class actions brought on behalf of the same consumers,[4] or affected by agreements to resolve claims in individual arbitration rather than representative litigation.[5]

[1]           The defendants did not ask the Court to hold that the case qualified as a “class action,” although they had raised that point below. See Opinion at 4 & n.2.

[2]           Opinion at 5-6 (emphasis in original, citations omitted).

[3]           Id. at 7-10 (citations omitted).

[4]           Cf. New Mexico ex rel. King v. Capital One Bank (USA) N.A., 13-0513, 2013 WL 5944087, at *4-8 (D.N.M. Nov. 4, 2013) (finding that class action settlement barred AG action to the extent it sought compensatory relief).

[5]           Cf. Iskanian v. CLS Transp. Los Angeles, LLC, 206 Cal. App. 4th 949, 964 (2012) (finding that Concepcion requires enforcement of waiver of right to bring representative action under California’s Private Attorney General Act), review granted Sept. 19, 2012 (No. S204032).

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Supreme Court Will Review Limelight and Nautilus Re: Patent Infringement Litigation

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Continuing its heightened interest in IP law, on Friday the Supreme Court granted petitions for cert. to review Limelight Networks, Inc. v. Akami Technologies, Inc., U.S., No 12-786 and Nautilus, Inc. v. Biosig Instruments, Inc., U.S., 13-339. The other two grants were in a (c) and TM and so of less interest to this patent attorney.

In Limelight, the Fed. Cir. held that a defendant could be found liable for inducing infringement under 271(b) even if no one party performed the acts necessary to meet the requirement that there be direct infringement of 271(a). In the biotech/pharma space, this question becomes relevant when a testing lab measures the level of a biomarker but a specialist draws the diagnostic conclusion required by the claim.

I had not commented on the Nautilus decision in the past because the Fed. Cir. “rule” holding that a claim term violated 112(2) only if it was “insolubly ambiguous” was favorable to patentees (and, indirectly, to prosecutors). This “rule” has been challenged as essentially too lenient to said ambiguous patent claims – and the Court may consider if the presumption of validity of an issued patent lowers the bar of the statutory requirement of particular and distinct patent claiming.

I don’t think that the Fed. Cir. has erred in attempting to preserve the validity of an issued claim by reading it in view of the specification, even including “inherent parameters”, but the Supreme Court seldom takes up a Fed. Cir. decision to give them praise for preserving patentees’ shrinking bundle of rights.

Article by:

Warren Woessner

Of:

Schwegman, Lundberg & Woessner, P.A.

Supreme Court To Consider Employers’ Arguments Regarding Contraceptive Mandate

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The United States Supreme Court will revisit the Affordable Care Act (“ACA”)requirement that most employers provide contraceptive coverage in employee health insurance plans. On November 26, 2013, the Court accepted two cases which center on the issue, each of which resulted in a different outcome. The ACA currently provides an exemption to certain non-profit religious organizations, but there is no such exemption for private employers.

The Supreme Court will now consider whether private companies should be able to refuse to provide employees with contraception coverage under their health plans on the basis of religion. Further, the Supreme Court may consider whether for-profit corporations may validly claim protection under freedom of religion.

In Sebelius v. Hobby Lobby Stores, Inc.[1], the U.S. Court of Appeals for the 10th Circuit ruled that a requirement which forced Hobby Lobby to comply with the contraception coverage mandate violated the Religious Freedom Restoration Act, which protects religious freedom. Hobby Lobby is owned by David and Barbara Green, who have stated that they strive to run their company in accordance with their Christian beliefs. The Greens have no objection to preventive contraception, but only medication which may prevent human embryos from being implanted in the womb (i.e., “the morning-after pill”).

The 10th Circuit Appeals Court ruled in favor of Hobby Lobby based upon its  decision in a previous case, Citizens United v. Federal Election Commission[2], which held that corporations hold political speech rights akin to individuals. Taking this reasoning further, if a corporation can have political speech rights, then it should also have protection for its religious expression, according to the Court.

In Conestoga Wood Specialties v. Sebelius[3], the U.S. Court of Appeals for the 3rd Circuit viewed the issue differently. The Court upheld the contraception coverage mandate based upon what it perceived as a “total absence of case law” to support any argument that corporations are guaranteed religious protection.

According to the ACA, contraceptive coverage provided by employers’ group health insurance plans is “lawful and essential” to women’s health; however, certain businesses assert that their religious liberty is more important. Ultimately, the United States Supreme Court will cast the deciding vote.

[1] Sebelius v. Hobby Lobby Stores, Inc., 723 F.3d 1114 (10th Cir. 2013).

[2] Citizens United v. Federal Election Commission, 558 U.S. 310 (2010).

[3] Conestoga Woods Specialties v. Sebelius, 724 F.3d 377 (3d Cir. 2013).

 

Article by:

Brittany Blackburn Koch

Of:

McBrayer, McGinnis, Leslie and Kirkland, PLLC

 

Supreme Court Declines Review of Intern Compensability Issue

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While the compensability of time spent in internship programs continues to be an hotly contested litigation issue, the United States Supreme Court has declined an opportunity to provide clarity in this area, denying certiorari to a Florida medical billing intern whose claim was rejected last year by the Eleventh Circuit.  Kaplan v. Code Blue Billing & Coding, Inc., 2013 U.S. LEXIS 8046 (U.S. 2013).

Perhaps multiple requests for high court review of an appellate decision will be necessary before the Supreme Court addresses the status of interns under the FLSA, as was required before the Court accepted review of the exempt status of pharmaceutical sales representatives.

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Noel P. Tripp

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Jackson Lewis P.C.

Supreme Court to Consider Case on Patent Eligibility of Computer-Implemented Inventions

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On December 6, 2013, the Supreme Court agreed to consider Alice Corp. v. CLS Bank International, a case concerning the patent eligibility of computer-implemented inventions. The Court will review a split decision issued by the en banc Federal Circuit in May 2013. In that decision, seven of 10 judges concluded Alice Corporation’s claims to computer-based methods for minimizing settlement risk in financial transactions, as well as claims to computer-readable media containing program code for performing such methods, constituted patent-ineligible subject matter under § 101. The judges split evenly, however, regarding the patent eligibility of Alice’s remaining claims to computerized systems for performing such transactions. Given the stark differences of opinion expressed by members of the Federal Circuit, it was widely predicted that the Supreme Court would step in to settle the dispute. The Court’s decision could have significant implications for the computer hardware and software industries, as well as for patent eligibility standards in general.

The Supreme Court is expected to hear arguments in early 2014, and a decision is expected by the end of the term in June 2014. The case number is 13-298.

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Michael Best & Friedrich LLP

 

It's Official—The Supreme Court Announces That It Will Review The Contraceptive Mandate

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On Nov. 26, 2013, U.S. Supreme Court announced that it will review two cases in which for-profit employers challenged the application of the contraceptive mandate under the Patient Protection and Affordable Care Act. The cases are Sebelius v. Hobby Lobby Stores and Conestoga Wood Specialites Corp. v. Sebelius.

Both employers say that their religious beliefs bar them from providing employees with drugs or other items that they consider abortifacients. These employers argue that the Free Exercise Clause of the First Amendment and the Religious Freedom Restoration Act protects their religious beliefs and therefore bars the application of the contraceptive mandate. In contrast, the government argues that for-profit corporations cannot exercise religion and therefore have no protection from the mandate.

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At present, the federal courts of appeal are deeply divided on this issue. Three circuits—the Seventh, Tenth, and D.C. Circuits—have upheld challenges to the mandate, while two circuits—the Third and the Sixth—have rejected these challenges. The most recent decision came from the Seventh Circuit in Korte v. Sebelius, Case No. 12-3841, and Grote v. Sebelius, Case No. 13-1077.  The court’s ruling, issued Nov. 8, 2013, held that the Religious Freedom Restoration Act barred the application of the mandate to closely held, for-profit corporations when the mandate substantially burdened the religious-exercise rights of the business owners and their companies.

The Supreme Court will likely hear oral argument in the consolidated Hobby Lobby andConestoga case in March 2014. The decision is expected to decide whether—and to what extent—for-profit corporations have a right to exercise religion. Many commentators see parallels between this case and the Citizens United case in which the Court held that corporations had a First Amendment right to make certain political expenditures. If the Court finds that corporations also have religious rights, it could have significant impact on the application of other laws—including the Title VII, the ADA, the FMLA, etc. For example, could a religious employer object to providing FMLA leave for an employee to care for a same-sex spouse, even in a state that recognizes same-sex unions? Keep an eye on this case—it could have far-reaching consequences.

Article by:

Mark D. Scudder

Of:

Barnes & Thornburg LLP