On July 16, 2024, the Honorable Michael W. Fitzgerald denied American International Group, Inc.’s (“AIG”) motion to dismiss the lawsuit of McKennon Law Group, PC’s client, Silvana Olsen, which sought the higher pension benefit amount that Ms. Olsen was promised over many years. The court denied AIG’s motion to dismiss Ms. Olsen’s claims on the ground that he had not exhausted the pension plan’s claims procedure on her benefit claim and that her breach of fiduciary duty claim was not subject to that exhaustion requirement nor impermissibly duplicative of her claim for benefits.

In 1993 Ms. Olsen began working for a company that was later acquired by AIG in 1999. At the time of acquisition AIG informed Ms. Olsen and her coworkers that their prior years of service would be counted as credited service for purposes of AIG’s pension benefit plan. This was done to encourage Ms. Olsen and others to continue their employment with AIG. Ms. Olsen was sent periodic statements from AIG over several years which estimated her future monthly pension benefit based on a credited service date beginning in 1993.

In April 2023 Ms. Olsen submitted a claim for her pension. She was then informed by AIG’s Benefits Service Center (“Service Center”) that it had miscalculated her benefits because her credited service date under the AIG pension plan began in 2003, not 1993, which resulted in a significantly reduced monthly benefit. Ms. Olsen had several telephone calls with the Service Center in which she explained that she was owed the higher benefit amount. The Service Center maintained that under the pension plan she was owed a lower benefit, but she was invited to submit an appeal letter to AIG. Ms. Olsen did so in October 2023 and was informed by AIG in December 2023 that it had denied her appeal.

On behalf of Ms. Olsen, we filed suit in the U.S. District Court for the Central District of California. She brought two claims under the Employee Retirement Income Security Act of 1974 (“ERISA”). Her first claim was for the higher benefit amount and the second was for AIG’s breach of its fiduciary duties under ERISA.

AIG filed a motion to dismiss both claims. First, AIG argued that Ms. Olsen failed to exhaust the pension plan’s internal claims process before filing her lawsuit. AIG argued that the Service Center was not the plan administrator, that Ms. Olsen did not submit a “claim” for benefits until October 2023 and that the December 2023 letter from AIG was an initial denial from which she should have appealed. We argued that the Service Center was a functional fiduciary acting on behalf of the plan administrator, that Ms. Olsen was told that her claim for the higher benefit amount was denied, that she was invited to appeal that decision which she did in October 2023 and that AIG’s December 2023 letter was a final denial.

Judge Fitzgerald recognized that exhaustion of internal claims procedures prior to filing suit is generally required under Ninth Circuit law. However, he held that dismissal was not warranted at this stage of the litigation because the parties disputed whether Ms. Olsen properly exhausted her claim for benefits.

AIG also argued that the claim for breach of fiduciary duty should be dismissed because it was also subject to the pension plan’s claims procedures and was not exhausted. We argued that AIG’s position was in direct opposition to established Ninth Circuit law which has consistently held that a claim for breach of fiduciary duty under ERISA is not subject to a plan’s exhaustion requirement. We cited Chuck v. Hewlett Packard Co., 455 F.3d 1026, 1035 (9th Cir. 2006), among other cases, which held that “exhaustion of internal dispute procedures is not required where the issue is whether a violation of the terms or provisions of the [ERISA] statute has occurred.” Judge Fitzgerald agreed stating “Plaintiff has the better argument” and regardless of the pension plan’s procedures, “the Ninth Circuit has held that exhaustion is not required for statutory breach of fiduciary duty claims.”

AIG next argued that the breach of fiduciary duty claim should be dismissed because it was “impermissibly duplicative of her claim for benefits” in that the remedies under both claims flowed from the same act, the denial of the higher benefit amount. We argued that the holding in Moyle v. Liberty Mutual Retirement Benefit Plan, 823 F.3d 948 (9th Cir. 2016) was controlling. In Moyle the plaintiff brought a similar claim regarding past service credits under a pension plan as well as a claim for breach of fiduciary duty. The Ninth Circuit applied the U.S. Supreme Court’s holding in CIGNA Corp. v. Amara, 563 U.S. 421 (2016) and held that a plaintiff could seek relief under both claims as long as the plaintiff did not receive a double recovery. Judge Fitzgerald again agreed with our argument.

Lastly, AIG argued that Ms. Olsen “disguise[d] her claim for benefits as a fiduciary claim by making several conclusory and unsupported allegations.” We argued that the fiduciary duty claim was based not on the denial of the higher benefit amount, but on AIG’s misrepresentations that were reaffirmed to Ms. Olsen over the course of several years. Judge Fitzgerald agreed and concluded that those allegations were sufficient to state a claim for breach of fiduciary duty.
Judge Fitzgerald’s order denying AIG’s motion to dismiss is significant because it reaffirms the Ninth Circuit’s prior holdings that a claim for breach of fiduciary duty under ERISA is not subject to a pension plan’s internal claims procedures, and that a plaintiff may bring both a claim for benefits and a claim for breach of fiduciary duty under ERISA so long as she does not receive a double recovery.