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Opinions – 3/28/13: 4th U.S. Circuit Court of Appeals

Civil Procedure

Preliminary injunction 

BOTTOM LINE: District court properly granted plaintiffs’ request for a preliminary injunction because plaintiffs were likely to succeed on the merits of their ADA and Rehabilitation Act claims, and district court did not abuse its discretion by concluding that the new eligibility standards placed them at a significant risk of institutionalization.

CASE: Pashby v. Delia, No. 11-2363 (filed March 5, 2013) (Judges Agee, Wynn & FLOYD). RecordFax No. 13-0305-60, 56 pages.

FACTS: In 2010, the North Carolina General Assembly voted to impose stricter eligibility requirements for in-home personal care services (PCS), an optional Medicaid program that assists disabled adults with daily tasks such as eating and bathing.

Thirteen North Carolina residents who lost access to in-home PCS due to the statutory change (“the PCS Recipients”) argued that the new PCS program violated the Social Security Act, the Americans with Disabilities Act (ADA), and the Rehabilitation Act. The PCS Recipients further contended that the standard termination letters they received did not fulfill the Fourteenth Amendment’s due process requirements.

The U.S. District Court granted the PCS Recipients’ motions for a preliminary injunction and class certification, concluding that the new eligibility standards placed them at a significant risk of institutionalization.

Acting Secretary of the North Carolina Department of Health and Human Services (DHHS) Albert Delia appealed to the 4th Circuit, which remanded.

LAW: According to the Department of Justice, the ADA and the decision in Olmstead v. L.C. ex rel. Zimring, 527 U.S. 581 (1999) “extend to persons at serious risk of institutionalization or segregation and are not limited to individuals currently in institutional or other segregated settings.” U.S. Dept. of Justice, Statement of the Department of Justice on the Integration Mandate of Title II of the ADA. The Tenth Circuit has held that “there is nothing in the plain language of the regulations that limits protection to persons who are currently institutionalized.” Fisher v. Okla. Health Care Auth., 335 F.3d 1175, 1181 (10th Cir.2003). Individuals who must enter institutions to obtain Medicaid services for which they qualify may be able to raise successful Title II and Rehabilitation Act claims because they face a risk of institutionalization.

The PCS Recipients satisfied the other three requirements for a preliminary injunction (irreparable harm, balance of hardships, and the public interest), so the appeals court agreed that one was warranted. The court remanded, however, because it concluded that the preliminary injunction issued by the district court failed to comply with Rule 65’s specificity requirement and directed the district court to describe the enjoined conduct in greater detail.

Constitutional Law

Anti-sodomy statutes 

BOTTOM LINE: Applying the Supreme Court decision in Lawrence v. Texas, Virginia’s anti-sodomy statute violated the Due Process Clause of the 14th Amendment; defendant’s conviction for criminal solicitation of a minor, which was based on predicate offense of violation of anti-sodomy statute, could not stand.

CASE: MacDonald v. Moose, No. 11-7427 (filed Mar. 12, 2013) (Judges KING & Diaz) (Judge Motz dissenting). RecordFax No. 13-0312-60, 30 pages.

FACTS: This case involved William MacDonald’s conviction of contributing to the delinquency of a minor and violating Virginia’s criminal solicitation statute. On September 23, 2004, MacDonald, then 47 years old, telephoned 17-year-old Amanda Johnson, and arranged to meet her that night at a Home Depot parking lot. When they met, MacDonald joined Johnson in her vehicle. Over the course of the evening, MacDonald asked Johnson to provide him oral sex and to have sexual intercourse with him. Johnson declined and later drove MacDonald back to the same parking lot.

Three months later, in December 2004, MacDonald filed a report with the police maintaining that Johnson had abducted and sexually assaulted him. When police interviewed Johnson, however, she gave a sharply conflicting account of what had occurred. MacDonald was subsequently arrested and prosecuted in state court on charges of contributing to the delinquency of a minor, in violation of Virginia Code §18.2-371 and the state criminal solicitation statute, §18.2-29.

The criminal solicitation statute made it a felony for any person age 18 or older to command, entreat, or otherwise attempt to persuade another person under age eighteen to commit a felony other than murder (i.e., a predicate felony). The predicate felony for MacDonald’s criminal solicitation offense was Virginia’s “Crimes Against Nature” statute, which criminalized the act commonly known as sodomy. MacDonald was ultimately convicted of both offenses and was sentenced to prison.

Upon his release, MacDonald was placed on probation and compelled to register as a sex offender. In 2009, after failing to obtain relief on direct appeal and in state post-conviction proceedings, MacDonald filed a 28 U.S.C. §2254 petition in the federal district court, alleging that his criminal solicitation conviction, insofar as it was predicated on the anti-sodomy provision of §18.2-361(A), was unconstitutional. Specifically, MacDonald contended that the predicate anti-sodomy provision had been rendered invalid by the Supreme Court’s decision in Lawrence v. Texas, 539 U.S. 558 (2003), which struck down Texas’ anti-sodomy statute as facially violative of Fourteenth Amendment’s Due Process Clause. The district court rejected MacDonald’s claim and dismissed his §2254 petition.

McDonald appealed to the 4th Circuit, which reversed and remanded the case for issuance of a writ of habeas corpus.

LAW: The issue was whether §18.2-361(A) was unconstitutional either facially or as applied in MacDonald’s case, in light of the Supreme Court’s Lawrence decision. The appeal was circumscribed to an examination of the constitutionality of a single aspect of §18.2-361(A), which made it a felony for any person to “carnally know” another person “by the anus or mouth.”

MacDonald argued that this provision was plainly not intended to criminalize activity with minors 15 or older, and that the Virginia courts’ rewriting of the anti-sodomy provision was contrary to the intent of Virginia’s General Assembly, because the judicially rewritten statute was at odds with other Virginia criminal statutes regulating the sexual conduct of persons over the age of 18 with younger persons. Particularly, Virginia Code §18.2-370(A) prohibits any person over the age of 18 from proposing certain sexual conduct (including sodomy) to “any child under the age of 15 years.”

Thus, MacDonald contended, Virginia’s judicial rewriting of the anti-sodomy provision, rendering it applicable to the solicitation of sodomy from a minor under the age of 18, ran afoul of the age specification embedded in §18.2-370(A).

In Lawrence, the Supreme Court plainly held that statutes criminalizing private acts of consensual sodomy between adults are inconsistent with the protections of liberty assured by the Due Process Clause of the Fourteenth Amendment. Lawrence, 539 U.S. at 578. Although the Supreme Court implied in Lawrence that a state could, consistently with the Constitution, criminalize sodomy between an adult and a minor, the Virginia General Assembly has not, to date, enacted any statute specifically outlawing sodomy between an adult and an older minor. The anti-sodomy provision MacDonald was convicted of violating, §18.2-361(A), did not mention the word “minor,” nor did it even remotely suggest that it was intended to regulate sexual relations between adults and children.

In these circumstances, a judicial reformation of the anti-sodomy provision to criminalize MacDonald’s conduct in this case, and to do so in harmony with Lawrence, would require a drastic action contravening the Supreme Court’s decision in Ayotte v. Planned Parenthood of Northern New England, 546 U.S. 320 (2006). In Ayotte, the Court recognized the important principle that when confronting a constitutional flaw in a statute, a court must refrain from rewriting state law to conform it to constitutional requirements. Id. at 329-30. While a statute closely related to the anti-sodomy provision (e.g., the Virginia statute criminalizing incestuous sodomy involving both minors and adults) might well survive review under Lawrence, the anti-sodomy provision itself, which served as the basis for MacDonald’s criminal solicitation conviction, could not be squared with Lawrence without the sort of judicial intervention that the Supreme Court condemned in Ayotte.

For these reasons, the judgment of the district court was reversed and the case remanded for an award of habeas corpus relief.

DISSENT: In order for MacDonald to prevail on his federal habeas petition, it must be clear that Lawrence facially invalidated all sodomy statutes. See Harrington v. Richter, 131 S. Ct. 770, 786 (2011). Given the opaque language of Lawrence, however, the facial unconstitutionality of Virginia’s anti-sodomy provision was far from certain, as reasonable jurists could disagree as to whether Lawrence represented a facial or an as-applied invalidation of the Texas sodomy statute. The district court here remained faithful to that distinction, properly declining to issue the writ.

Criminal Procedure


BOTTOM LINE: Where defendant, convicted of intent to distribute crack cocaine and powder cocaine, moved to reduce his sentence based upon sentencing guidelines, which lowered sentences for certain crack cocaine offenses, the district did not err in reducing his sentence, as the district had not originally made any findings that rendered defendant ineligible for such reduction.

CASE: U.S. v. Mann, No 12-6590 (decided Mar. 4, 2013) (Judges MOTZ, King & Agee). RecordFax No. 13-0304-60, 9 pages.

FACTS: A jury convicted Robert Mann of one count of possession with intent to distribute cocaine base and one count of distribution of cocaine. The Government argued that the first count was based on three drug transactions, each involving three kilograms of crack cocaine, but the defense objected to these factual assertions. The district court held that at least 1.5 kilograms or more were involved in the possession with intent to distribute. Further, as to the second count, the district court that Mann possessed far in excess of the requisite amount of powder cocaine to be at a base offense level of 38.

When sentencing Mann, the court found the Government had met its burden to establish the drug amounts necessary to attribute Mann with a base offense level of 38. Under the then-applicable Sentencing Guidelines, a defendant responsible for 1.5 kilograms or more of crack cocaine was subject to a base offense level of 38, the highest quantity-based base offense level for the drug crimes in this case, no matter how much powder cocaine was at issue.

The district court sentenced Mann to 252 months imprisonment. In 2008, while Mann was serving his sentence, the Sentencing Commission retroactively lowered the penalties for crack cocaine offenses in Amendments 706 and 711 to the U.S. Sentencing Guidelines. U.S.S.G. app.C (2011). Those amendments raised the minimum crack cocaine quantity necessary to justify a base offense level of 38 from 1.5 to 4.5 kilograms. Mann moved to reduce his sentence under 18 U.S.C. §3582(c)(2).

On reconsideration, the district court concluded that it had made no finding at sentencing that Mann was responsible for 4.5 kilograms or more of crack cocaine. Concluding that Mann was thus eligible for a sentence reduction, the court resentenced Mann to 188 months imprisonment. The Government appealed to the 4th Circuit, which vacated the new sentence, holding that the district court lacked the authority to grant Mann’s motion for reconsideration

In 2011, the Sentencing Commission retroactively amended its Guidelines once more, further increasing the minimum crack cocaine quantity necessary to justify a base offense level of 38, this time to 8.4 kilograms. Mann again moved for a new sentence reduction. Finding that the record did not establish that Mann was responsible for at least 8.4 kilograms of crack cocaine, the district court granted the motion and reduced Mann’s sentence to 162 months imprisonment.

The Government again appealed to the 4th Circuit, which affirmed.

LAW: Evidence in the record suggested that Mann may have been responsible for substantially more than 1.5 kilograms — perhaps even more than 8.4 kilograms — of crack cocaine. When sentencing Mann, however, the district court made no finding that he was responsible for any specific amount above 1.5 kilograms of crack cocaine. The record of the sentencing hearing was unclear as to the drug amounts — or the forms of cocaine — for which the district court held Mann responsible. To the extent the record was unclear, however, the Court deferred to the sentencing judge’s reasonable understanding of the record — and particularly his interpretation of his own earlier findings. See, e.g., United States v. Legree, 205 F.3d 724, 729 (4th Cir. 2000).

Accordingly, the judgment of the district court was affirmed.


Waiver of benefits 

BOTTOM LINE: ERISA does not preempt a post-distribution suit against an ERISA plan beneficiary based on his waiver where appellant, the named beneficiary, had previously waived benefits from his deceased ex-wife’s retirement and life insurance plans in the marital settlement agreement.

CASE: Andochick v. Byrd, No. 12-1728 (decided March 4, 2013) (Judges MOTZ, King & Floyd). RecordFax No. 13-0304-61, 9 pages.

FACTS: In February 2005, Scott Andochick and Erika Byrd married. During the marriage, Byrd participated in her employer’s Retirement (“401(k)”) Plan and the Life Insurance Plan naming Andochick as her primary beneficiary. In July 2006, Andochick and Byrd separated and entered into a marital settlement agreement. Andochick waived any interest in Byrd’s 401(k) Plan or life insurance plan.

In December 2008, Andochick and Byrd divorced and the judgment of divorce incorporated their marital settlement agreement. When Byrd died in April 2011, her parents qualified as administrators of her estate. Byrd had failed to name a new beneficiary of her ERISA plans. The ERISA plan administrators of Byrd’s 401(k) and life insurance plans determined that the proceeds of both plans should be paid to Andochick, because he remained the named beneficiary of the plans. Byrd’s parents appealed the administrators’ decisions. The administrator of the 401(k) plan affirmed its determination, but the administrator of the life insurance plan found that it was unable to make a determination and stated its intention to file an interpleader in the district court.

Andochick filed an action in the federal district court asking for a declaratory judgment that ERISA preempts the waiver provisions in the marital settlement agreement and Byrd’s parents therefore had no claim to the plan proceeds. Byrd’s sued Andochick in circuit court to find Andochick in contempt of the marital settlement agreement and judgment of divorce, and to order him to waive his rights to the 401(k) and life insurance proceeds. The circuit court found Andochick in contempt of the judgment of divorce and ordered him to take all actions necessary to renounce his interests in Byrd’s plan benefits. The circuit court declined to address what effect, if any, ERISA might have on the ultimate enforceability of Andochick’s waiver.

Byrd’s parents returned to district court, which had stayed its proceedings pending conclusion of the state court action, and moved to dismiss Andochick’s complaint. In response, Andochick moved for partial summary judgment. The district court granted the motion to dismiss as to standing and ERISA preemption and denied Andochick’s motion for summary judgment as moot. The district court directed the plan administrators to pay the ERISA funds to Andochick, and held that Andochick must then waive his right to these funds, distributing them instead to Byrd’s estate based upon the circuit court’s ruling.

Andochick appealed the ERISA claim to the 4th Circuit, which affirmed.

LAW: Andochick contended that ERISA must preempt waivers that were incorporated in the marital settlement agreement. Andochick relied on Kennedy v. Plan Administrator for DuPont Savings & Investment Plan, 555 U.S. 285 (2009), which held that an ERISA plan administrator must distribute benefits to the beneficiary named in the plan, regardless of any state-law waiver purporting to divest that beneficiary of his right to the benefits. Kennedy explicitly left open the question of whether, once the benefits are distributed by the administrator, the decedent’s estate can enforce a waiver against the plan beneficiary. ERISA has three important objectives: “[1] simple administration, [2] avoid[ing] double liability [for plan administrators], and [3] ensur[ing] that beneficiaries get what’s coming quickly, without the folderol essential under less-certain rules.” Id. at 301 (some alterations in original) (citation omitted).

Here, allowing post-distribution suits to enforce state-law waivers did nothing to interfere with any of these objectives. Kennedy merely dictates that the plan administrator distribute plan benefits to the named beneficiary. The plan administrator would have no role in any post-distribution proceedings and post-distribution suits do not expose the plan administrator to double liability — only the named beneficiary has any claim against the plan administrator.

ERISA does not preempt post-distribution suits against ERISA beneficiaries. The Court adopted the same view as every published appellate opinion to address the question. See Estate of Kensinger, 674 F.3d at 135-39; Appleton v. Alcorn, 728 S.E.2d at 552, aff’g708 S.E.2d at 392; Sweebe v. Sweebe, 712 N.W.2d 708, 714 (Mich. 2006).

Accordingly, the judgment of the district court was affirmed.

Labor & Employment

Notice of change in pension plan 

BOTTOM LINE: AT&T failed to adequately notify former employee of a material change to its pension plan that allowed her to collect full benefits earlier than she had originally understood, and, since the district court properly considered limited evidence outside of the administrative record but known to AT&T when it rendered plaintiff’s benefits determination, the court properly concluded that AT&T breached its statutory and fiduciary duties to plaintiff who was entitled to lost benefits.

CASE: Helton v. AT&T Inc., No 11-2153 (decided March 6, 2013) (Judges WYNN, Shedd & Keenan). RecordFax No. 13-0306-60, 27 pages.

FACTS: Francine Helton, at 50 years of age, was terminated from AT&T Inc. in May 1997. She did not have the required 20 years of service and was too young to begin receiving even a reduced pension. Helton did not request any information about the pension benefits at the time she left because she understood that she was not be eligible to receive benefits until she reached age 65. However, in 1997, AT&T introduced a Special Update to the plan which included a change to the “pay-based average period” used to calculate benefits, which allowed participants to elect their benefits at age 55 without any reduction for age. This took effect on August 1, 1997.

After first learning in 2009 that she was entitled to begin collecting her full pension benefits nearly eight years earlier, Helton contacted her pension plan seeking to recoup her lost benefits, which denied her claim. The plan’s denial of Helton’s claim was based on its finding from an April 28, 1997 letter and 1998 and 2004 Summary Plan Descriptions that were sent to Helton and contained information about the changes. Helton claimed she did not receive these documents.

A witness from Universal Mailing Services, which AT&T used for its mass mailings, testified that it verified addresses with the U.S. Postal Service and any that came back incorrect were returned to AT&T, which would then send the mailing service the corrected addresses. There was no testimony as to what happened when a person’s address was incorrect and AT&T did not correct the address. Evidence of large numbers of errors was offered. Further, the records showed that Helton’s question about not being eligible for benefits until age 65 was sent via e-mail to AT&T’s Pension Service Center, but there was no record of a response.

The district court found that AT&T unreasonably denied Helton’s claim and failed to adequately notify her of a material change to its pension plan that allowed her to collect full benefits earlier than she had originally understood. The district court granted Helton a monetary award, which reflected the benefits she would have received from November 2001, when she became eligible to collect her pension benefits, until September 2009, when she was informed of her eligibility.

AT&T appealed to the 4th Circuit, which affirmed.

LAW: On appeal, AT&T argued that while reviewing the plan’s decision to deny the benefits, a review performed under the deferential “abuse of discretion” standard, the district court erred in considering record evidence that was not part of the administrative record. Under ERISA, the district court is limited to the administrative record that was actually before the plan administrator.

The Court, however, noted that outside evidence may be admissible on deferential review, rather than embracing an absolute bar. In discussing what evidence may be considered, the Court has focused on whether evidence was known to the administrator when it rendered its decision, not whether it was part of the administrative record. “The reasonableness of the administrator’s decision must be based on the facts known to it at the time.” Sheppard & Enoch Pratt Hosp. v. Travelers Ins. Co., 32 F.3d 120, 125 (4th Cir. 1994).

This standard has often been misunderstood and outside evidence may be admissible. The Court will not consider extrinsic evidence only in cases in which a plaintiff seeking benefits sought to first introduce evidence in federal court that was unknown to the administrator. The proper standard is not what evidence already exists in the administrative record, but whether a plan administrator knew or should have known about certain evidence outside of the administrative record. This evidence may be considered on abuse-of-discretion review. If courts were rigidly limited to the administrative record, plan administrators would have the unchecked opportunity to pick and choose what evidence in their possession to include in the administrative record, thereby preventing any review of ERISA benefits determinations.

There are two categories in particular that plan administrators might be deemed to know, whether in or outside the administrative record. Relying upon the principles of agency, any knowledge obtained by corporate employees acting within the scope of their employment is imputed to the corporation. United States v. One Parcel of Land Located at 7326 Hwy. 45 N., Three Lakes, Oneida Cnty., Wisc., 965 F.2d 311, 316 (7th Cir. 1992). Further, because corporations are charged with knowledge of information known to their officers and because officers are charged with knowledge of information in corporate books and records, corporate entities also have constructive knowledge of the contents of their records. Albert Lea Foundry Co. v. Iowa Sav. Bank of Marshalltown, Iowa, 21 F.2d 515, 518 (8th Cir. 1927). Therefore, an ERISA plan administrator can be charged with knowledge of information acquired by its employees in the scope of their employment and the contents of is books and records.

Accordingly, the judgment of the district court was affirmed.