Huynh v. Schwan’s Shared Services
Chinh Huynh v. Schwan’s Shared Services, LLC, as Plan Administrator and Sponsor of the Short-Term Disability Plan; Sedgwick Claims Management Services, LTD; and Prudential Insurance Company of America
- John Tunheim
- 0:25-cv-03988
- U.S. District Court · District of Minnesota
- 29
In Chinh Huynh v. Schwan's Shared Services, Judge Tunheim denied defendants' motion to dismiss ERISA claims for wrongful denial of short-term disability benefits, failure to provide plan documents, and breach of fiduciary duty.
Employees covered by employer-sponsored disability benefit plans who have had claims denied, particularly those whose employers or claims administrators cited different plan provisions in litigation than those cited in the final denial letter; plan participants who have been denied full copies of plan documents or third-party administrative agreements; and ERISA claimants considering whether to bring both a benefits claim and a breach of fiduciary duty claim as alternative theories.
What happened
In Chinh Huynh v. Schwan's Shared Services, LLC, Sedgwick Claims Management Services, Ltd., and Prudential Insurance Company of America, plaintiff Chinh Huynh sued his former employer and its benefits administrators under the Employee Retirement Income Security Act of 1974 (ERISA) after being denied short-term and long-term disability benefits. Huynh, who worked as Director of Enterprise Architecture at Schwan's, was terminated on October 12, 2022—the same day he identified as his disability onset date—after years of working with restrictions stemming from motor vehicle accidents. Schwan's and Sedgwick moved to dismiss three of the four counts against them, arguing Huynh was ineligible for benefits, that Sedgwick was not a proper defendant, that the plan documents were adequately disclosed, and that the breach of fiduciary duty claim was an improper duplicate of the benefits claim.
The court examined three main issues. On the benefits claim, the court found that while the plan's coverage termination provision might appear to bar Huynh's claim, Sedgwick's final denial letter relied on a different part of the plan documents—the general eligibility provisions—and defendants cannot now switch to a new legal rationale first raised in litigation. On the document disclosure claim, the court found that a third-party administrative agreement between Schwan's and Sedgwick plausibly qualifies as a contract or instrument under which the plan is operated, and that Schwan's own admission that it sent only the 'relevant portion' of another plan document was insufficient to justify dismissal. On the fiduciary duty claim, the court found that it was too early to determine whether Sedgwick acted in a purely administrative (non-fiduciary) role, and that ERISA permits plaintiffs to plead breach of fiduciary duty and wrongful denial of benefits as alternative theories of recovery.
Judge John R. Tunheim denied Schwan's and Sedgwick's motion to dismiss in its entirety as to Counts One, Two, and Four. The court noted that key factual questions—including which entity actually controlled the benefits decision and on what legal basis benefits were denied—remain unresolved and are better addressed after discovery. Prudential, the long-term disability insurer, is not a party to this motion and the case continues against all defendants.
The detailed version
- Huynh v. Schwan’s Shared Services · No. 0:25-cv-03988
- John Tunheim
- Aug. 14, 2026
Background
Plaintiff Chinh Huynh was employed by Schwan's Shared Services, LLC as Director of Enterprise Architecture from June 3, 2019 through October 12, 2022. He was involved in motor vehicle accidents in June 2018 and July 2020. Following the July 2020 accident, he was diagnosed with Persistent Postural-Perceptual Dizziness (PPPD), post-trauma vision changes, convergence insufficiency, headaches, and increased anxiety. He worked with restrictions and accommodations from September 2020 until his termination.
On September 29, 2022, a neuropsychologist at Mayo Clinic recommended Huynh take a leave of absence for up to six months. On the morning of October 12, 2022—before Huynh submitted a leave request—Schwan's terminated him for "unsatisfactory performance over a prolonged period of time."
Schwan's sponsored a self-insured short-term disability (STD) plan and served as plan administrator; Sedgwick Claims Management Services, Ltd. served as the claims administrator. Huynh had purchased a "buy-up benefit" expanding his STD coverage to 70% of weekly covered earnings, up to $2,000, for a maximum of 180 days. Prudential Insurance Company of America underwrote a separate long-term disability (LTD) plan.
On October 14, 2022, Huynh filed an STD claim identifying October 12, 2022 as his disability date. Schwan's emailed Sedgwick on October 18, 2022, stating Huynh was ineligible because he had been terminated. Sedgwick issued an initial denial on October 19, 2022, stating Huynh became an "ineligible class of employee" on his "first day of absence" based on the General Eligibility Provisions of the Wrap Document (a general eligibility agreement incorporated into the STD Plan). After Huynh appealed with attorney letters, medical opinions, and records from six providers, Sedgwick upheld the denial on April 26, 2023, again citing the Wrap Document's General Eligibility Provisions. The denial letter advised Huynh he could file a second appeal. Huynh filed a second appeal on October 23, 2023 and requested the third-party administrative services agreement (TPA Agreement) between Schwan's and Sedgwick. Schwan's counsel refused to provide the TPA Agreement and later sent only a partial Wrap Document. On March 15, 2024, Schwan's outside counsel asserted Huynh had no right to a second-level appeal and that the denial was final.
Huynh filed this lawsuit on October 16, 2025 alleging four ERISA counts. Counts One, Two, and Four concern Schwan's and Sedgwick; Count Three concerns Prudential's denial of LTD benefits and was not at issue in this motion. Schwan's and Sedgwick moved to dismiss Counts One, Two, and Four under Federal Rule of Civil Procedure 12(b)(6) (failure to state a claim upon which relief can be granted).
Legal Standards
Rule 12(b)(6)
The court accepts all factual allegations in the complaint as true and views them in the light most favorable to the plaintiff. A complaint survives dismissal if it states a claim that is "plausible on its face"—meaning it pleads enough factual content to support a reasonable inference of liability. Legal conclusions dressed up as facts are not accepted as true.
ERISA Review Standard
ERISA (29 U.S.C. § 1132(a)(1)(B)) permits plan participants to sue to recover benefits, enforce their rights, or clarify future benefits. Courts review benefit denials de novo (without deference) unless the plan grants the administrator discretionary authority, in which case the more deferential "abuse of discretion" standard applies. Here, both the STD Plan Document and the Wrap Document contain discretionary clauses, so abuse of discretion review applies. Both parties agreed on this point.
Count One — Denial of Short-Term Disability Benefits
Defendants' arguments
(1) Huynh was ineligible under the plan's Coverage Termination provision; (2) Schwan's eligibility determination was reasonable as a matter of law; and (3) Sedgwick is not a proper defendant because it does not fund benefits.
Eligibility
The STD Plan's Coverage Termination provision states that coverage ends on "the date Your employment terminates" and that the Continuation of Coverage provision does not apply when employment ends due to termination. On its face, this would appear to bar Huynh's claim because he was terminated on the same day he claimed disability. The court noted this initial assessment but emphasized it is not a final determination.
However, the court found dismissal inappropriate because Sedgwick's final denial letter—the decision under review—did not rely on the Coverage Termination provision. It relied solely on the General Eligibility Provisions in the Wrap Document. Under Eighth Circuit precedent, courts review only the final claims decision, not the initial denial, to ensure a complete record. Defendants are now relying in litigation on a different provision than what they cited in the final denial. The Eighth Circuit has cautioned against allowing plan administrators to "sandbag" claimants with after-the-fact plan interpretations devised for litigation. Because defendants arguably abused their discretion by denying benefits on one basis and now arguing a different one, dismissal was denied.
Reasonableness under Finley factors
Courts in the Eighth Circuit evaluate the reasonableness of a benefit denial using factors from Finley v. Special Agents Mutual Benefit Association, including whether the interpretation is consistent with the plan's goals, whether it renders plan language meaningless, whether it conflicts with ERISA's requirements, whether it has been applied consistently, and whether it contradicts clear plan language. The court also noted that where an employer both funds the plan and evaluates claims, a conflict of interest must be weighed. The court found it premature to apply the Finley analysis because it remained unclear who the relevant decision-maker was and on what basis benefits were actually denied.
Sedgwick as a proper defendant
Under Eighth Circuit precedent, only the party that controls administration of the plan is a proper ERISA defendant for a benefits claim; a party with no ability to pay benefits is not a proper defendant. The court found ambiguity in the plan documents: both the STD Plan Document and Wrap Document delegated claims authority to the claims administrator (Sedgwick), but reserved eligibility determinations to Schwan's. Whether the Coverage Termination determination is an "eligibility" question (retained by Schwan's) or a "claims" question (delegated to Sedgwick) is unclear on the face of the documents. The factual record was also unclear, as Sedgwick issued the denial letters while Schwan's directed Sedgwick's decision by email. The court denied dismissal of Sedgwick from Count One as premature.
Count Two — Failure to Provide Plan Documents
ERISA Section 104(b)(4) (29 U.S.C. § 1024(b)(4)) requires plan administrators to provide, upon written request, copies of contracts and "other instruments under which the plan is established or operated." Failure to comply within 30 days can result in penalties of up to $110 per day. The Eighth Circuit construes "other instruments" narrowly to mean formal documents that govern the plan, not merely any document relating to the plan.
TPA Agreement
Huynh alleged Schwan's refused to provide the TPA Agreement between Schwan's and Sedgwick. The Eighth Circuit has not ruled on whether a third-party administrative services agreement qualifies under Section 104(b)(4). The court found persuasive decisions from the Tenth Circuit (M.S. v. Premera Blue Cross) and Seventh Circuit (Mondry v. American Family Mutual Insurance Co.) holding that administrative services agreements that govern the relationship between plan and claims administrators fall within the disclosure obligation. Because the TPA Agreement has not been produced and the court found the legal theory plausible, dismissal was denied.
Wrap Document
Huynh alleged he received only an incomplete Wrap Document. Schwan's effectively conceded the point by acknowledging it sent only the "relevant portion" of the document. The court noted Schwan's cited no legal authority permitting selective production. Dismissal was denied.
Count Four — Breach of Fiduciary Duty
Huynh sought equitable relief under 29 U.S.C. § 1132(a)(3) — specifically a "surcharge" (a monetary remedy for harm caused by a fiduciary's breach) — against Schwan's and Sedgwick. He alleged Schwan's breached its duty of loyalty by interfering with his STD claim and misrepresenting his medical condition to Sedgwick, and that Sedgwick breached its duty of loyalty by acting in Schwan's interest rather than Huynh's.
To state an ERISA breach of fiduciary duty claim, a plaintiff must allege: (1) the defendant is a plan fiduciary; (2) the defendant breached a fiduciary duty; and (3) the breach caused harm.
Sedgwick's fiduciary status
ERISA defines a fiduciary as a person who exercises discretionary authority or control over plan management or assets, or who has discretionary authority in plan administration. Entities performing purely ministerial functions (such as routine claims processing) are not fiduciaries under Department of Labor guidance. The court found it could not yet determine whether Sedgwick exercised discretionary authority or acted purely ministerially, for the same reasons discussed under Count One. The court noted that if discovery shows Sedgwick acted only ministerially, summary judgment on fiduciary status would be likely. But dismissal at this stage was premature.
Breach of fiduciary duty — merits
The fiduciary duty of loyalty requires acting "solely in the interest of the participants and beneficiaries." The Eighth Circuit applies a two-step framework: first, assess whether the parties' interests conflict; if so, closely scrutinize the defendant's mindset (a subjective inquiry). A fiduciary's motivation is generally a question of fact. The court found that the complaint, read as a whole, plausibly alleged that Schwan's influenced Sedgwick's decision-making through written communications; that defendants failed to produce plan documents; that Sedgwick's denial letter advised Huynh he could file a second-level appeal, only for him to later learn no such appeal was available; and that defendants failed to provide the specific plan provisions underlying the denial. These allegations collectively state a plausible breach of fiduciary duty claim.
Duplicative claim
Defendants argued Count Four (equitable relief under § 1132(a)(3)) must be dismissed as duplicative of Count One (benefits due under § 1132(a)(1)(B)). The court rejected this argument. Under Supreme Court precedent (CIGNA Corp. v. Amara) and Eighth Circuit decisions (Jones v. Aetna Life Insurance Co.; Silva v. Metropolitan Life Insurance Co.), a plaintiff may plead both theories as alternatives even if duplicate recovery is ultimately unavailable. For claims under §§ 1132(a)(1)(B) and 1132(a)(3) to both survive a motion to dismiss, they must be predicated on separate theories of liability — a requirement the court found met here. The court stated that duplicative recovery issues are better resolved at the summary judgment stage.
Disposition
The court denied Schwan's and Sedgwick's motion to dismiss in its entirety. Counts One, Two, and Four remain pending against Schwan's and Sedgwick. Count Three against Prudential was not addressed in this motion; Prudential had previously answered the complaint. The case proceeds to discovery.
Read the full 29-page opinion on CourtListener, the free public archive maintained by the Free Law Project.