What Is ERISA?

ERISA stands for Employment Retirement Income Security Act. In this video, Attorney Ethan Vessels, ERISA Attorney in Marietta, Ohio, explains some of the complexities and solutions with ERISA cases.

Here at Fields, Dehmlow & Vessels, we handle ERISA claims for employees and plan participants. The ERISA laws govern most employee benefit actions including health plan claims, long-term disability insurance claims, pensions, and even life insurance that is sponsored by employers, accidental death, and dismemberment insurance claims.

Significant U.S. Supreme Court ERISA Decision

Significant U.S. Supreme Court ERISA Decision

Our firm handles a significant number of ERISA claims for aggrieved employees and plan participants.  ERISA governs most employee benefit actions:  pensions, health plan claims, long-term disability insurance claims, and even employer-sponsored life insurance and accidental death and dismemberment insurance claims.

One of the aggravations of ERISA is the difficulty in making claims against the plan administrator for breaching his, her, or its fiduciary duties to the plan participants and beneficiaries.  Sometimes the people in charge of employee benefit plans do dishonest things, misrepresent important information to plan participants, make dumb investment decisions, or otherwise act inconsistently with their duty to further the interests of the plan participants.  This is a “breach of fiduciary duty.”  These breaches can literally cost employees hundreds of thousands, and sometimes millions of dollars in expected benefits.

ERISA (the Employee Retirement Income Security Act of 1974) has a provision allowing participants to sue for breaches of fiduciary duty  (29 USC 1132(a)(3)).  However, in the last twenty years, the U.S. Supreme Court has hampered the ability to obtain relief under this section.  Previously, the Court held that this part of the statute would only afford “equitable” relief.  Heretofore, this meant any type of relief other than getting the trial court to award a money judgment—which is a “legal remedy.”

All of this arcane discussion of “legal” versus “equitable” remedies was great reading for lawyers, but aggravating to clients. The net result in many cases was that the participant who had been wronged could prevail in proving the bad conduct but could not obtain an award of money.  A useless victory.

However, in May, the Supreme Court added a new “equitable” remedy against wrongdoing plan administrators and fiduciaries.  Per the Supreme Court, a trial court can now impose a “surcharge” as an equitable remedy to make a beneficiary or plan participant whole.  According to the Court, this is a legitimate “equitable remedy.”

I am no legal scholar.  But, to me, this looks much like an award of money to the participant—i.e., a money judgment.  Previously, this was not permitted.  In my mind, the Supreme Court took over twenty years to come to the obvious conclusion that there must be a remedy when a participant is harmed.  This usually will require money.  My only criticism is that the Court took decades and used convoluted legal reasoning to get to the right result, instead of simply holding that aggrieved participants should be entitled to a money judgment.

Regardless, at this point, it appears that fiduciary breach litigation is now on a stronger footing.  Aggrieved plan participants can now ostensibly ask for money and call it a “surcharge” for their harm.  This is a good thing.


Another Significant Award in Washington County

Another Significant Award in Washington County

I am pleased to announce that the court issued its decision on July 27, 2011, awarding $600,496.44 to the Washington County Board of Developmental Disabilities—not counting attorney’s fees yet to be awarded. Unlike my previous post, this was my trial.

I represented the Washington County Board of Developmental Disabilities regarding their employee health plan.  In 2006, the WCBDD switched to a partially-self-funded health plan for its employees.  Fully-insured health plans had started to become prohibitively expensive earlier in the decade. To save costs, the WCBDD designed a health plan in which it would pay its employee’s health claims.  The agency hired a third-party administrator, Employer Benefits Services of Ohio, to administer the plan.

In order to protect the agency, Employer Benefit Services of Ohio recommended a “stop loss” insurer so that WCBDD would be protected against large claims and protected if the employees aggregately made claims beyond a set threshold.   United Re AG was the “stop loss” insurer that Employer Benefit Services recommended.

Unfortunately, as it turned out, EBS recommended a bad “stop loss” insurer.  United Re turned out to be a sham.  It was not an insurance company at all.  It had no insurance rating or status anywhere in the U.S. or the world.   As it turns out, United Re was a scam, a Ponzi scheme that took employer health plan contributions.

By 2007, the WCBDD had paid $200,000 in health claim beyond its set “aggregate” threshold.  It made its claim with United Re.  It was never paid.

United Re did this to a number of other employers.  Sometimes the people at United Re would make up bogus reasons for denial.  Other times, they ignored the claims altogether, as they did with the WCBDD.

We sued EBS of Ohio for its negligence in recommending United Re.  They ended up declaring bankruptcy.

We also sued United Re.  They consented to a judgment.  Of course, no money there.

We also sued Hugh Scott, a lawyer from Texas.  He was the President of United Re and also its chief counsel.  More importantly, we asserted that he was also United Re’s sole shareholder.  We asked the Court to hold Hugh Scott personally responsible.

A little history on Mr. Scott.  In the 1990’s, he was involved in another scam involving yogurt franchises.  A group of investors sued, apparently claiming to be bilked out of millions.  A jury found Hugh Scott to be liable.  He declared bankruptcy, yet still had a $1.5 million judgment, which apparently has never been paid.

Judge Ed Lane, of the Washington County Court of Common Pleas, also believed that Hugh Scott had perpetrated a fraud against the Washington County Board of Developmental Disabilities.  Per Judge Lane, “Hugh Scott was an active participant in the United Re fraud.”  Further, per Judge Lane, “Employer contributions were used to fund ongoing claims, and to line the pockets of Hugh Scott, in a casebook Ponzi scheme.”

The court awarded $200,496.44 in compensatory damages—damages to compensate the agency for its expected insurance benefit.  The court also awarded $400,000 in punitive damages.  These damages have been assessed against Hugh Scott personally.  He now owes  over $600,000.

The court also ordered Hugh Scott to pay the attorney’s fees incurred by the WCBDD.  The amount of these fees will be determined at a later hearing.

Justice was done, in our opinion.  Of course, there is no guarantee that we will be able to collect this award.  But, we will do all that we can to enforce the judgment.


Significant Verdict in Washington County

Significant Verdict in Washington County

Although not my case, I had the privilege of watching portions of the trial of McLaughlin v. American Electric Power in June, here in Marietta. The case reinforces why our civil justice system and juries are so important.

In 2007, there was a fatal explosion at the Muskingum River power plant north of Beverly, Ohio.  Ohio Power (a division of American Electric Power) operated the plant. One man died, and several more were seriously injured. The explosion was caused by escaping hydrogen.  As I learned during the trial, the turbines at power plants must be cooled, just like our car engines.  Hydrogen cooling is the preferred method. This requires storing large quantities of hydrogen at the facility

Of course, hydrogen can be dangerous—remember the Hindenberg. If it escapes and mixes with the outside air, it can explode. In the case of the Muskingum River plant, Ohio Power had an antiquated hydrogen storage system. The old vent pipes were made of copper (should not be). The vent pipes also multiple bends and turns. (Should not be—the vent pipes are supposed to move any excess gas up and into the atmosphere.)

Worse yet, the entire hydrogen storage system was kept underneath large “shed” roof directly next to portions of the plant where workers would be. This is extremely dangerous. It allows the hydrogen to pool underneath the roof instead of escaping into the sky. It is much the same as when the closed lid of your gas grill can allow propane to pool and then explode when you first start the grill.

The most egregious fact of the case was that Ohio Power knew of these dangers. In fact, the plaintiff’s lawyers obtained documents showing that Ohio Power had been warned very specifically that it needed to fix its hydrogen storage system—over a year before the explosion.  They didn’t.  Apparently, they did not want to spend the money. Even more amazing was that there had been other hydrogen explosions, caused by the same problems, at other Ohio Power plants during the few years before the Muskingum River plant explosion.

Normally, a worker cannot sue his or her employer for workplace injuries, even if the employer was negligent. Workers compensation benefits pay the bills.  But, in Ohio, an employee can sue if the employer is shown to have a “deliberate intent” to injure. Removal of safety guards is the typical example.

In this case, Mr. McLaughlin’s lawyers successfully persuaded the jury that Ohio Power’s complete indifference to its worker’s safety amounted to a “deliberate intent” to injure.

The jury awarded Mr. McLaughlin nearly $1.7 million.  Then, two days later, the jury also awarded punitive damages in the amount of $4 million.  (This was equivalent to four days of profit at the Muskingum River plant.) The media loves to print stories of “frivolous” lawsuits. However, there is often not much coverage when a jury rightfully punishes a person or company with exemplary (punitive) damages for malicious or callous conduct.

Indeed, before this case, Ohio Power only repaired its hydrogen storage systems after explosions. Perhaps now, because of a Washington County jury, Ohio Power will fix dangerous problems before people are injured or killed.
-Ethan Vessels

Why the contingent fee?

Why the contingent fee?

Why the contingent fee? A contingent fee is a lawyers fee that is dependent on the outcome of the case. Often, the fee is calculated as a percentage of the recovery. Read more