The opinion of the court was delivered by: Denise Cote, District Judge.
Plaintiffs Theresa Keir, Michelle Washington, Karen Gately, and Thomas Rocco (collectively, the "Plaintiffs") brought this action in November 2002 after their claims for disability insurance benefits were denied or terminated by defendants UnumProvident Corporation and six of its insuring subsidiaries (collectively, "Unum"). Plaintiffs assert claims against Unum and its former Chairman and Chief Executive Officer, J. Harold Chandler (collectively, the "Defendants"), under §§ 502(a)(3) and 510 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. On September 30, 2003, this action was transferred by the Judicial Panel on Multidistrict Litigation ("MDL Panel") to the United States District Court for the District of Tennessee. The action was remanded to this Court on April 8, 2010. The Plaintiffs have moved for partial summary judgment and the Defendants have cross-moved for summary judgment. For the following reasons, the Defendants' motion is granted.
BACKGROUND A. Plaintiffs' Claims
Each of the Plaintiffs made claims for disability insurance benefits under employee welfare benefit plans established by their employers and administered by Unum. Plaintiffs allege that their claims were wrongfully denied or terminated by Unum pursuant to a scheme involving the use of budgets and targets to meet expectations as to revenue and profits. Each Plaintiff's policy provides that the policy is governed by the law of New York, which is also the state in which all four Plaintiffs resided when they submitted their claims.
Plaintiffs filed this putative class action on November 4, 2002, alleging violations of ERISA and its implementing regulations. On November 18, 2002, Plaintiffs filed a first amended complaint (the "Amended Complaint"). The Amended Complaint asserted a claim for breach of fiduciary duty by all Defendants pursuant to ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), and a claim for interference with the attainment of benefits pursuant to ERISA § 510, 29 U.S.C. § 1140. The Amended Complaint principally alleged that the Defendants engaged in a scheme to use financial budgets and targets to terminate disability claims wrongfully in violation of ERISA.
The Plaintiffs sought the following injunctive and equitable relief: (1) an order that Defendants "cease engaging in the offending practices" delineated in the Amended Complaint and "institute new, national procedures that are in full compliance with ERISA"; and (2) an order that Defendants "reevaluate all of the denied, terminated, or suspended claims of Plaintiffs and the Class Members in full compliance with the new, appropriate procedures and render disability payments to all such persons, participants, or beneficiaries whose adverse claims decisions are reversed upon re-evaluation." In the alternative, the Plaintiffs requested that the Defendants be enjoined from serving as claim fiduciaries and the imposition of a constructive trust over trust assets controlled by Defendants.
On January 17, 2003, the Defendants moved to dismiss the Amended Complaint. The Defendants' motion rested principally on the contention that the Plaintiffs were, or should have been, seeking an award of benefits for their asserted disabilities, and were therefore required to bring this action under ERISA § 502(a)(1)(B), which permits any participant or beneficiary "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). Defendants' argument was rejected and their motion to dismiss was denied in an Opinion dated April 29, 2003. See Keir v. UnumProvident Corp., 02 Civ. 7871(DLC), 2003 WL 2004422 (S.D.N.Y. Apr. 29, 2003).
On September 30, 2003, the action was transferred by the MDL Panel to the United States District Court for the District of Tennessee for consolidation with six other lawsuits. In re UnumProvident Corp. ERISA Benefits Denial Actions, No. 03 Civ. 1000, MDL No. 03 Md. 1552 (E.D. Tenn.). A Consolidated Amended Complaint ("CAC") was filed on February 25, 2004, which asserted the same claim for breach of fiduciary duty under ERISA § 502(a)(3) as alleged in this action. The CAC did not advance a claim under ERISA § 510. The CAC sought the same injunctive and equitable relief as Plaintiffs seek in this action, except that the CAC requested that a third party, rather than the Defendants, re-evaluate previously denied claims. On April 9, 2004, the plaintiffs in the MDL proceeding moved for class certification.
B. The Regulatory Settlement Agreement
On November 18, 2004, while the MDL proceedings were ongoing, Unum entered into a Regulatory Settlement Agreement (the "RSA") with, as finally implemented, the United States Department of Labor ("DOL") and the insurance departments of 48 states, including New York. The Agreement, crafted by DOL and the state insurance departments of New York, Tennessee, Massachusetts, and Maine (the "Lead Regulators"), was reached after a multi-state examination of Unum's claim processes and procedures. The "Lead Regulators" were charged with oversight of Defendants' implementation of the RSA, which took effect on December 20, 2004.
The RSA required Unum to make changes to its corporate governance and management. Among other things, the RSA required Unum to add three new independent directors with insurance regulatory experience to its Board of Directors, one of whom had to be appointed to the Audit Committee. In addition, the Board of Directors had to create a Regulatory Compliance Committee ("RCC") and a Regulatory Compliance Unit ("RCU") to monitor Unum's claims handling practices. The RCU and RCC were charged with monitoring compliance both with the RSA and with market conduct laws and ERISA generally.
The RSA required Unum to create a new unit comprised of experienced claims handlers to reassess previously denied or terminated claims (the "Claims Reassessment Unit" or "CRU"). The RSA outlines the specific unit structure and operating procedures for the CRU. Under the RSA, the CRU had to conduct a de novo determination of all claims submitted to it, "gather any appropriate information not contained in the claims file" or provided by the claimant during the reassessment, and track and report its results. Under the RSA, Unum was required to offer tens of thousands of claimants whose claims had been denied or terminated an opportunity to have their claims re-reviewed under the new RSA procedures.*fn1
The RSA set forth new procedures for processing claims. Experienced claims handlers were to be engaged at the earliest stage of reviewing a claim. Unum was required to provide sufficient training to all personnel and to establish a separate compliance unit to ensure that required changes were implemented. The RSA required Unum to "[i]ncrease focus on policies and procedures relating to medical and related evidence," to provide "clear and express notice to claimants of the information to be collected by [Unum]," and to work with claimants to obtain any missing information. The RSA also required that a claim file include "all documents relating to a claim history and/or decision."
With respect to monitoring and testing, the management of each Defendant and the RCC were required to meet separately on a quarterly basis with the Lead Regulators, and if appropriate, DOL, to evaluate Unum's compliance with the RSA. Both DOL and the Lead Regulators had access to Unum's claim files at all times. The Lead Regulators were required to monitor the claims reassessment process and could conduct examinations of the CRU decisions at their discretion. The Lead Regulators were also required to "monitor compliance with the changes in claim procedures set forth" in the RSA and could "conduct examinations of claims in the manner and at such intervals as the Lead Regulators deem[ed] appropriate." Unum reported on a quarterly basis to the Lead Regulators regarding the progress of the claims reassessment process, the results of internal audits, and the rates of complaints and new litigation arising out of disability claims. In addition, the Lead Regulators performed periodic reviews of randomly selected claims files.
The RSA required Unum to pay a $15 million fine. The RSA also provided for a $100,000 per day fine in the event that Unum failed to implement the changes to its corporate governance, claims reassessment process, claims organization and procedures, or if Unum failed to conduct the required training within the time specified in the RSA. In addition, Unum was required to pay a fine of $145 million if "the Lead Regulators upon examination determine that claim reassessment decisions were made in a manner inconsistent with the procedures of the Claim Reassessment Unit" or if "the Lead ...