Turner v. Allstate Insurance Company

Filing 121

MEMORANDUM OPINION AND ORDER directing: (1) the 92 preliminary injunction continues in force despite plf's failure to timely file the bonds; and (2) def Allstate Ins Co and all persons acting for its benefit or on its behalf are ENJOINED from discontinuing or cancelling the life insurance policies for the named plfs or otherwise interfering with the existence or enforceability of said policies; Because class certification has not been granted, and because Plaintiffs did not present eviden ce to support the motion for preliminary injunction as to the unnamed putative class plaintiffs, the injunction was issued and remains in force only as to the named Plaintiffs in the Klaas and Turner actions, as further set out in order. Signed by Chief Judge William Keith Watkins on 9/27/16. (djy, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
NORTHERN DIVISION
GARNET TURNER
)
individually and on behalf of all others )
similarly situated, et al.,
)
)
Plaintiffs,
)
)
v.
) CASE NO. 2:13-CV-685-WKW
) (WO)
ALLSTATE INSURANCE
)
COMPANY,
)
)
Defendant.
)
JOHN E. KLAAS
on behalf of himself and all others
similarly situated, et al.,
Plaintiffs,
v.
ALLSTATE INSURANCE
COMPANY,
Defendant.

)
)
)
)
)
)
) CASE NO. 2:15-CV-406-WKW
) (WO)
)
)
)
)

MEMORANDUM OPINION AND ORDER
Plaintiffs in these consolidated ERISA1 cases are former employees of
Allstate. Plaintiffs allege that Allstate provided employees with a benefit plan2 to

1

Employee Retirement Income Security of 1974 (“ERISA”), 29 U.S.C. §§ 1001 et seq.

2

It is undisputed that the life insurance plan is an employee welfare benefit plan under

ERISA.

provide them with permanent, paid-up retiree life insurance policies after
retirement. On or about July 2, 2013, Allstate notified participants that it would no
longer pay premiums on the retiree life insurance policies after December 31,
2015, and Plaintiffs filed suit. In an Order entered on December 29, 2015 (Doc. #
92), the court granted the following motions: the Turner Plaintiffs’ motion for a
preliminary injunction requiring Allstate to continue the life insurance benefits
after December 31, 2015 (Doc. # 74); the Klaas Plaintiffs’ motion to join the
motion for preliminary injunction (Doc. # 82); and Allstate’s motion to strike the
motion for preliminary injunction as to unnamed members of the putative classes
in both cases (Doc. # 89). The December 29, 2015 Order also required
that[,] on or before midnight, December 31, 2015, Plaintiffs shall
execute individually and file signature bonds in the amount of $5,000
each. The injunction will dissolve by operation of law as to any
Plaintiff not filing a bond by midnight, December 31, 2015. Because
the offices of the Court are closed December 31, 2015 and January 1,
2016, counsel for Plaintiffs shall email or fax to counsel for Defendant
a copy of the respective bonds and the injunction shall be effective as
to the bonded Plaintiffs.
(Doc. # 92 at 3.)
No bonds were filed with the court by midnight, December 31, 2015; on the
record, it appeared that the injunction had dissolved by operation of law, and the
court did not supplement the December 29, 2015 Order with a Memorandum
Opinion as it had intended. However, at an off-the-record status conference held
on September 14, 2016, Plaintiffs stated that they timely executed the bonds and
2

emailed or faxed them to Defendant’s counsel. All parties, including Allstate,
agreed that the preliminary injunction remained in force despite Plaintiffs’ failure
to timely file the bonds. Plaintiffs have since filed the bonds. (Doc. # 117; Doc. #
119.) Accordingly, and upon the parties’ agreement that the preliminary injunction
did not dissolve by operation of law, this Memorandum Opinion now issues on the
preliminary injunction motion (Doc. # 74) and in support of the Order entered on
December 29, 2015 (Doc. # 92).
I.

STANDARD OF REVIEW

A preliminary injunction is “an extraordinary remedy never awarded as of
right.” Winter v. Natural Res. Def. Council, 555 U.S. 7, 24 (2008) (citations
omitted). Such a remedy requires a “clear showing that the plaintiff is entitled to
such relief.” Id. at 22. The moving party must show that it has a substantial
likelihood of success on the merits, that it is likely to suffer irreparable injury
unless the injunction is issued, that the balance of equities tips in its favor, and that
an injunction is in the public interest. Id. at 20; see also Grizzle v. Kemp, 634 F.3d
1314, 1320 (11th Cir. 2011). Each of these four factors must be established
independently. See, e.g., Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir. 2000)
(stating that “‘[a] preliminary injunction is an extraordinary and drastic remedy not
to be granted unless the movant clearly established the “burden of persuasion” as

3

to each of the four prerequisites.’” (quoting McDonald’s Corp. v. Robertson, 147
F.3d 1301, 1306 (11th Cir. 1998)).
II.
A.

DISCUSSION

Likelihood of Success on the Merits: Breach of Fiduciary Duty to
Disclose the Terms of the Plan
ERISA exists “to protect . . . the interests of participants in employee benefit

plans and their beneficiaries[] by requiring the disclosure and reporting to
participants and beneficiaries of financial and other information with respect
thereto, by establishing standards of conduct, responsibility, and obligation for
fiduciaries of employee benefit plans, and by providing for appropriate remedies,
sanctions, and ready access to the Federal courts.” ERISA § 2(b), 29 U.S.C. §
1001(b). Section 502(a)(3) of ERISA provides:
A civil action may be brought . . . by a participant, beneficiary, or
fiduciary (A) to enjoin any act or practice which violates any
provision of this subchapter or the terms of the [employee welfare
benefit] plan, or (B) to obtain other appropriate equitable relief (i) to
redress such violations or (ii) to enforce any provisions of this
subchapter or the terms of the plan.
29 U.S.C. § 1132(a)(3).
Under § 502(a)(3), 3 a plan participant may have an equitable cause of action
for breach of fiduciary duty against an ERISA plan provider or administrator if the

3

In Count I of their amended complaint (Doc. # 44), the Turner Plaintiffs allege that
Allstate breached its fiduciary duty and the terms of the employee benefit plan when Allstate
cancelled the plan. In Count II of their amended complaint, the Turner Plaintiffs alternatively
allege that Allstate’s misrepresentations and failures to disclose the terms of the plan caused
4

plan provider or administrator fails to provide accurate information about the plan.
Jones v. Am. Gen. Life & Acc. Ins. Co., 370 F.3d 1065, 1072 (11th Cir. 2004).
Even if a benefit is not vested under the terms of the plan, a retiree may have an
equitable cause of action if the administrator terminates the benefit after engaging
in a systematic pattern of misrepresentation that causes the plan participants to
believe and rely on representations that the insurance benefit will not be changed
during their retirement. Id. at 1071-74.
It is undisputed that, as part of an employee welfare benefit plan provided by
Allstate, Allstate offered Plaintiffs a group life insurance plan4 during their
employment. It is also undisputed that Allstate reserved the right to modify,
amend, or terminate the plans at any time, although the parties dispute whether
Allstate reserved the right to modify, terminate, or amend paid-up retiree life

them to believe that their insurance benefit would not be changed during their retirement, and
they relied to their detriment on those misrepresentations. The Klaas Plaintiffs raise similar
claims. (Doc. # 62.) With respect to the motion for preliminary injunction, all parties have
focused their arguments regarding the likelihood of success on the merits on Plaintiffs’ claims
that Allstate breached a fiduciary duty by misrepresenting or concealing the terms of the plan.
Therefore, the discussion of the likelihood of Plaintiffs’ success on the merits will be focused
solely on Count II of the complaints. In granting the motion for preliminary injunction, the court
makes no findings as to the likelihood that Plaintiffs will prevail on their remaining claims.
Count II asserts an equitable claim under § 502(a)(3), not § 502(a)(1)(B). Cf. Jones, 370
F.3d at 1069 (“In addition to the remedies explicitly authorized in Section 502(a)(1)(B), which
are akin to common law breach of contract causes of action, this court has recognized a very
narrow common law doctrine under [§] 502(a)(1)(B) for equitable estoppel, which is available
where the plaintiff can show that (1) the relevant provisions of the plan at issue are ambiguous,
and (2) the plan provider or administrator has made representations to the plaintiff that constitute
an informal interpretation of the ambiguity.”).
4

The record is not clear that every employee received the same “plan” over the years, but
all plans presently in issue contain a life insurance retirement benefit.
5

insurance policies after those policies were issued.

Plaintiffs have presented

evidence that Allstate represented to them (1) that, upon retirement, their basic
group life insurance policies would terminate and they would receive retiree life
insurance policies, (2) that the retiree life insurance policies would provide a life
insurance benefit equal to some specified percentage of their previous coverage or
some specified multiple of their annual earnings, and (3) that the retiree life
insurance benefit would be permanent, “fully paid,” “paid up,” and in effect for the
rest of their lives “at no cost” without any further premiums due. (E.g., Doc. # 871 at ¶¶ 3-5; Doc. # 83-7 at ¶¶ 2-5; Doc. # 87-4 at ¶¶ 2-5; Doc. # 87-4 at 7; Doc. #
87-5 at ¶¶ 2-6; Doc. # 87-7 at ¶ 3; Doc. # 87-7 at 6; Docs. ## 79-3 through 79-5
(summary plan descriptions providing that basic group life insurance policies
would terminate upon retirement or upon the termination of the group life
insurance policy, but that, “in some instances” life insurance may continue beyond
that time if, for instance, the employee’s insurance terminated upon retirement and
the employee was eligible for “Retiree Life Insurance”).) See Jones, 370 F.3d at
1070 (“[W]e apply the doctrine of contra proferentem to resolve ambiguities in
ERISA-governed plans.”).
At the preliminary injunction hearing, Allstate did not contest the evidence
that the foregoing representations were made. (See, e.g., statements of Allstate’s
attorney at Doc. # 91 at 121-22 (“[W]hat I would say, Your Honor, is that the
6

insurance [sic] said it was paid up at the time of retirement.”); id. at 128 (“We told
these employees they were going to receive the life insurance for life. That was the
testimony today.”); id. at 117 (“Allstate used the words ‘paid up’ in certain
communications, Your Honor.”)).
Based on the evidence submitted by both parties, Plaintiffs have
demonstrated a substantial likelihood that the foregoing representations were made
to them. Further, based on (1) a review of all the evidence; (2) the commonly
understood meanings5 of terms such as “fully paid,” “no further premiums,”

5

For example, see Stowe Township v. Standard Life Insurance Co. of Indiana, 363 F.
Supp. 341, 343-44 (W.D. Pa. 1973):
“Ordinarily, by virtue of contract or statute, there is a provision upon default or
termination of a contract of life insurance, that the insured shall be entitled to
extended or paid-up insurance and a cash surrender value. In Couch on Insurance
2d [Volume 6, Page 354], Section 32:137 the following appears:
‘(P)aid-up insurance means that no more payments are required,
and consists of insurance for life in such an amount as the sum
available therefore, considered as a single and final premium, will
purchase. In other words, ‘paid-up insurance’ is insurance for the
life of the insured, upon which all the premiums have been paid.”
See also, e.g., Eisen v. Nicholson, 23 Vet. App. 502, 2007 WL 1599657 at *1 n.3 (2007)
(unpublished table memorandum decision) (“Paid-up insurance is insurance on which all
premiums have already been paid, with no further premiums due. See Columbian Nat’l Life Ins.
Co. v. Griffith, 73 F.2d 244, 246 (8th Cir. 1934) (observing that paid-up insurance ‘means
insurance which has been fully paid for’)”); Luke v. IKON Office Sols. Inc., No. CIV.002755(JRT/FLN), 2002 WL 1835645, at *6 (D. Minn. Aug. 1, 2002) (“In simplest terms, the plain
meaning of the term ‘paid up’ means just what it says-that the object in question, in this case, the
death benefit, is fully paid for. Webster’s Dictionary defines ‘paid up’ as something ‘that has
satisfied or indicated an implied financial obligation.’ Webster’s Third New International
Dictionary 1620 (1986). This definition is also wholly consistent with the Eighth Circuit’s
observation in [Griffith, 73 F.2d 244] that ‘in simple language . . . “paid up insurance” means
insurance which has been fully paid for.’ Id. at 246. Contrary to defendants’ insistence, the Court
finds other terms incorporating the phrase ‘paid up’ such as ‘paid up policy’ and ‘paid up
7

“permanent,” “for life,” and “paid up;” and (3) the fact that Allstate is an insurance
company that would be expected to understand those terms, Plaintiffs have
demonstrated a substantial likelihood that Allstate did intend to communicate that,
upon Plaintiffs’ retirement, their group life insurance policies would be converted
to permanent, fully paid-up retiree life insurance policies that would be in force for
the remainder of Plaintiffs’ lives with no further premiums to be paid.
In 2013, “Allstate changed its mind.”6 (Doc. # 91 at 128 (statement of
Allstate’s counsel at the preliminary injunction hearing).) In July 2013, Allstate
notified Plaintiffs that Allstate had been “fully paying [Plaintiffs’] premium” for
the life insurance since their retirement and that Allstate had “made the decision to
no longer pay the premium for [the] life insurance benefit,” effective December 31,
2015. (Doc. # 44 ¶ 64; Doc. # 62-4.) Plaintiffs were informed that they would be

insurance’ highly relevant in determining the meaning of paid up death benefit in this case. Both
phrases have been interpreted to mean insurance for which, at a certain point in time, no
additional premiums are owed.”); 5 Couch on Ins. § 77:36 (“It may be stipulated . . . that upon
default or termination of the original contract the insured shall be entitled to extended or paid-up
insurance, or some other such benefit as that portion of the premium paid, over and above the
amount actually earned during the period that the policy was active, will purchase. Extended
insurance means that, upon default or termination of the original contract, the policy will
continue in force for such period as the amount of unearned premium will cover; whereas paidup insurance means that no more payments are required, but the amount of the insurance is
reduced to an amount corresponding to the premiums paid.” (footnotes and citations omitted)); 5
Couch on Ins. § 77:36 n.3 (“A provision for paid-up insurance will not be construed to mean
paid-up temporary insurance for the full amount of the policy.” (citation omitted)).
6

Indeed, Allstate takes the position – as it must – that it could have “changed its mind”
the next day after hundreds of Allstate home office employees (the potential Klaas class) took
advantage of a generous special retirement opportunity (“SRO”) that Allstate offered them.
(Doc. # 91 at 114-15.)
8

allowed to purchase “conversion” life insurance policies from a new carrier at their
own expense.7 (Doc. # 44 ¶ 64; Doc. # 62-4.) The undisputed evidence, including
the July 2013 letter, establishes that Allstate did not provide Plaintiffs a fully paidup permanent life insurance policy upon retirement for which no future premiums
were due and which would be in force for the remainder of Plaintiffs’ lives.
Instead, despite its representations to the contrary, Allstate provided a policy that
was not “paid up” or “permanent,” that would not necessarily be in force for the
rest of Plaintiffs’ lives, and for which premium payments were regularly made by
Allstate so long as Allstate decided to keep the policy in force.
Allstate does not contest that the alleged representations were made, or that
Plaintiffs relied8 on those representations.

(See Doc. # 91 at 121-122, 125.)

Instead, Allstate contends that those representations were not misrepresentations
because at various times between 1990 and 2013, Allstate disclosed in written plan
documents that, although it intended to continue the retiree life insurance benefit
plan indefinitely, it reserved the right to change, amend, or terminate the plan or
the terms of the plan at any time. (Doc. # 79-1 ¶¶ 6-11.) As Allstate points out,

7

Premiums for the conversion life insurance increase with age and are subject to change
after 2018. (Doc. # 74-1; Doc. # 74-2 at 3.)
8

Plaintiffs submitted evidence that they relied to their detriment on representations that
Allstate provided permanent, fully paid, paid-up life insurance. At the preliminary injunction
hearing, Allstate did not contest that Plaintiffs relied on those representations. (Doc. # 91 at
125.) For purposes of the preliminary injunction, the fact of detrimental reliance is established
without dispute.
9

under Jones, language merely indicating that benefits will continue into retirement
(such as stating that an employee “will get to keep” insurance after retirement, that
“coverage will continue” after retirement, or that the employer has an “intention of
continuing [a plan] indefinitely”) is “not inconsistent” with an employer’s
reservation of the right to unilaterally modify or terminate an employee benefit
plan, and such language does not create vested, irrevocable rights under the terms
of the plan to benefits upon retirement. Jones, 370 F.3d at 1070-71. Where the
employer uses such language while reserving the right to change or terminate the
plan, the retiree does not have a cause of action for breach of the terms of the plan
under ERISA § 502(a)(1)(B).
Allstate’s reliance on Jones is misplaced for two reasons. First, Jones did
not involve representations promising “paid-up,” “permanent” life insurance upon
retirement.9 Logically, as Plaintiffs point out, a statement that an employer could,
at some point in the future, modify or terminate the plan or plan benefits would not
necessarily place a retiree on notice that he or she could lose (or be required to pay

9

In Jones, there was no allegation of a written promise to provide permanent “paid-up”
insurance, and the court need not determine at this time how Jones would apply in the presence
of such language. In the context of a § 502(a)(1)(B) equitable or breach of contract claim, Jones
does not specifically address whether an express, written promise of permanent “lifetime ‘paid
up’” insurance could conflict with a reservation of the right to terminate that insurance, or at
least create an ambiguity in the plan that could be construed against the employer. Jones, 370
F.3d at 1070 (“‘To read this [plan] summary as saying that the plan can never be changed in such
a way as to mandate retiree contributions for continued medical coverage is to read into the
summary something its authors did not put there (a promise to provide lifetime ‘paid up’ medical
insurance), while reading out of the summary something that clearly was put there (an express
reservation of right to change the plan).’” (quoting Musto v. Amer. Gen. Corp., 861 F.2d 897,
906 (6th Cir. 1988) (emphasis added)).
10

for) a permanent retiree life insurance policy that had already been “fully paid up”
and provided at the date of retirement. Under the circumstances, the reservation of
rights would reasonably be understood to apply to other benefits under the plan
(such as employee group life insurance policies) or to the potential to modify or
terminate the retiree life insurance offered to existing employees, but not to retiree
life insurance that (according to Allstate’s representations) the retirees received
upon their retirement, fully paid up, with no further premiums due.
The second reason Jones is distinguishable is that the holding of Jones upon
which Allstate relies—that language promising that retirees can “keep” their
insurance after retirement does not create a vested right to benefits under the terms
of the plan—is limited to the context of a § 502(a)(1)(B) “breach of contract”
claim that an employer violated the terms of the plan. As Jones explains, a §
502(a)(1)(B) “breach of contract” claim that an employer violated the terms of a
plan is not the same as a § 502(a)(3) equitable claim that an employer failed to
provide accurate information about what the terms of the plan actually were. Even
if language promising permanent benefits does give rise to a § 502(a)(1)(B) claim
by creating a contractual obligation under the terms of the plan, a plaintiff may still
have an equitable cause of action under § 502(a)(3) if the plaintiff detrimentally
relied on the employer’s systematic misrepresentations that the insurance would

11

continue for life.10 Under Count II of Plaintiffs’ complaints (which form the basis
of the motion for preliminary injunction), Plaintiffs are not alleging a §
502(a)(1)(B) claim that Allstate violated the terms of the plan by terminating
Plaintiffs’ life insurance. Rather, under Count II, Plaintiffs assert a § 502(a)(3)
equitable claim that Allstate concealed and misrepresented the terms of the plan by
representing that the insurance was fully paid up upon retirement and would
continue “permanently” for the rest of Plaintiffs’ lives, and by failing to disclose
that some other kind of policy was provided instead. Jones, 370 F.3d at 1071.
Allstate argues that the record is devoid of evidence that it had any
subjective intention to misrepresent the terms of the policy when it represented
that, upon retirement, the policies would be fully paid, paid up for life, permanent,
etc.

At the preliminary injunction hearing, Allstate contended that any

representation that the policies were “paid-up” was simply meant to communicate
that Allstate was “paying the cost” of the life insurance premiums. (Doc. # 91 at
118.) However, as the court stated at the hearing, that is not what “paid up” is
generally understood to mean. As an insurer, Allstate knew or reasonably should

10

See Jones, 370 F.3d at 1071 (“For purposes of their [§] 502(a)(3) claim, the Appellants
plead in the alternative and assume that they cannot recover under [§] 502(a)(1)(B) because the
Plan is unambiguous and precludes vesting of their group life benefit. The Appellants allege that
[the fiduciaries] breached their fiduciary obligations, not by withholding a vested benefit, but by
engaging in a systematic pattern of misrepresentation that caused the Appellants to believe that
their insurance benefit would not be changed during their retirement.”).
12

have known that “paid up” means insurance for which all premiums have been
paid and no more premium payments are required. See supra note 5.
Allstate further argues that it did not make any fraudulent misrepresentations
because, at the time it represented that Plaintiffs would receive fully paid,
permanent, paid up policies, it in fact had the present intention to continue the
retiree life insurance policies indefinitely. However, Plaintiffs were led to believe
that, upon retirement, Allstate would provide fully paid, permanent, paid up
policies. Allstate did not provide fully paid, permanent, paid up policies. Instead,
Allstate provided and continued making premium payments on life insurance
policies that were not paid up and which could, therefore, be terminated in the
event that Allstate ceased paying premiums. Allstate did not disclose that what
was provided was not what was promised. Allstate may have had the subjective
intent to continue paying premiums on the policies it provided, but policies for
which continuing premium payments were due were not what Allstate had
represented to Plaintiffs that they would receive under the terms of the plan.
Therefore, if anything, the existence of fraudulent intent is further confirmed by
Allstate’s argument that, at the time it made the representation that it would
provide “paid-up” policies, it actually subjectively intended to provide and
indefinitely pay for policies that required regular payment of premiums to remain
in force (i.e., policies that were not “paid up”).
13

Accordingly, Plaintiffs have established a substantial likelihood that they
can succeed on the merits of their § 502(a)(3) claim.
B.

Likelihood of Success on the Merits: Statute of Limitations
Allstate argues that, even if representations that the retiree life insurance was

permanent, fully paid up, and would last for the life of the retiree were
misrepresentations, ERISA’s statute of repose bars recovery. ERISA provides:
No action may be commenced under this subchapter with respect to a
fiduciary’s breach of any responsibility, duty, or obligation under this
part, or with respect to a violation of this part, after the earlier of
(1) six years after (A) the date of the last action which
constituted a part of the breach or violation, or (B) in the
case of an omission the latest date on which the fiduciary
could have cured the breach or violation, or
(2) three years after the earliest date on which the
plaintiff had actual knowledge of the breach or violation;
except that in the case of fraud or concealment, such action may be
commenced not later than six years after the date of discovery of such
breach or violation.
29 U.S.C. § 1113.
By the plain terms of § 1113(1) and (2), the limitations period runs six years
from the last date of breach or failure to cure an omission, and this six-year
limitations period is shortened only if, within less than three years after the breach,
the plaintiff has actual knowledge of the breach. See Brock v. Nellis, 809 F.2d 753,
754 (11th Cir. 1987) (holding that “[t]he six-year time period” of § 1113(1)
14

“reflects Congress’ determination to impress upon those vested with the control of
pension funds the importance of the trust they hold” and, thus, that “Congress
evidently did not desire that those who violate that trust could easily find refuge in
a time bar,” with only narrow exceptions).
The parties disagree as to which of the two periods (if either) set forth in §
1113(1) and (2) applies (i.e., whether the period expired six years from the date of
the breach or three years from the date of actual knowledge of the breach).11 They
also dispute whether the statute has run under either or both of those time periods.
However, the six- and three-year periods set forth in § 1113(1) and (2) apply
“except . . . in the case of fraud or concealment.” §1113 (emphasis added); Kurz v.
Phila. Elec. Co., 96 F.3d 1544, 1551 (3d Cir. 1996) (holding that § 1113 “creates a
general six year statute of limitations, shortened to three years in cases where the
plaintiff has actual knowledge, and potentially extended to six years from the date
of discovery in cases involving fraud or concealment”).
The Circuits are generally in agreement that the term “fraud or concealment”
in § 1113 applies in cases of fraudulent concealment. Thus, the limitations period
runs from the date of discovery of the fiduciary breach or ERISA violation in cases

11

In briefing the motion for preliminary injunction, both parties incorporate arguments
made in their briefs on the pending motion to dismiss. (Doc. # 63.) Accordingly, the court has
reviewed and considered the briefs on the motion to dismiss in reaching a resolution of this issue.
15

where the breach of fiduciary duty is itself a self-concealing act12 (i.e., an act
committed during the course of the breach that has the effect of concealing the
breach from the plaintiff) or if the fiduciary takes affirmative steps in addition to
the original breach to conceal the breach of fiduciary from the plaintiff. See
Caputo v. Pfizer, Inc., 267 F.3d 181, 188-89 (2d Cir. 2001).

Beyond that,

however, the Circuits are split on whether a case involving a claim of fraudulent
misrepresentation or fraudulent suppression is also a case of “fraud or
concealment” under § 1113. See Fulghum v. Embarq Corp., 785 F.3d 395, 414
(10th Cir. 2015); Caputo, 267 F.3d at 188-89; Larson v. Northrop Corp., 21 F.3d
1164, 1173 (D.C. Cir. 1994).
The majority of the Circuits (the First, Third, Seventh, Eighth, Ninth, and
D.C. Circuits) interpret the terms “fraud or concealment” as nothing more than
incorporation of the federal common law doctrine of “fraudulent concealment.”
See Fulghum, 785 F.3d at 414 (collecting cases).

Under this approach, an

equitable claim for breach of fiduciary duty by fraudulent misrepresentation or
fraudulent suppression is not sufficient to state a claim for “fraud or concealment”
unless the defendant also engaged in conduct beyond the breach of fiduciary duty
itself that had the effect of concealing the fraud from its victims. In re Unisys
Corp. Retiree Med. Benefit “ERISA’’ Litig., 242 F.3d 497, 503 (3d Cir. 2001), as

12

At this time, the court makes no finding as to whether Plaintiffs have established that
the breach of fiduciary duty at issue was a self-concealing act.
16

amended (Mar. 20, 2001) (“[I]f all that a plaintiff can show is that a counselor
represented to him that he had guaranteed lifetime health care benefits or failed to
give him accurate advice knowing that he believed he had such benefits, the fraud
or concealment clause is inapplicable. In such cases, [the fiduciary] cannot be said
to have taken affirmative steps, either as a part of the original breach of duty or
thereafter, to cover up its breach.”); see also Martin v. Consultants & Admins.,
Inc., 966 F.2d 1078, 1095 (7th Cir. 1992) (“[F]raud claims do not receive the
benefit of ERISA’s six-year statute of limitations simply because they are fraud
claims.”).
The Second and Tenth Circuits, however, have “decline[d] to follow [their]
sister circuits in fusing the phrase ‘fraud or concealment’ into the single term
‘fraudulent concealment.’” Caputo, 267 F.3d at 189; see also Fulghum, 785 F.3d at
414 (quoting Caputo at 189).13 Rather, the Second and Tenth Circuits hold that the

13

The Sixth Circuit has not decided the issue. Hi-Lex Controls, Inc. v. Blue Cross Blue
Shield of Mich., 751 F.3d 740, 748 (6th Cir. 2014). However, the Sixth Circuit has recently
indicated that it would consider the Second Circuit’s approach “persuasive.” Cataldo v. U.S.
Steel Corp., 676 F.3d 542, 550-51 (6th Cir. 2012) (“[W]hether a six-year limitations period
applies in instances where the claim is based upon fraud and there are no allegations of separate
conduct undertaken by the fiduciary to hide the fraud is an open question in this circuit.
Although some other circuits have concluded that it does not apply in such situations, . . . the
Second Circuit has provided a persuasive contrary interpretation. See [Caputo, 267 F.3d at 188–
90]. We need not takes sides on the split at this time, however, for even were we to conclude that
the exception applies in such situations, plaintiffs have failed to sufficiently plead fraud in this
case. . . . [W]e assume, but do not decide, that a claim of fiduciary fraud not involving separate
acts of concealment is subject to a six-year limitations period that begins to run when the
plaintiff discovered or with due diligence should have discovered the fraud.”); see also McGuire
v. Metro. Life Ins. Co., No. 12-10797, 2014 WL 3894363, at *22 (E.D. Mich. Aug. 8, 2014)
(applying Cataldo’s dicta regarding the Circuit split as guidance to hold that ERISA § 413’s
17

phrase “in the case of fraud or concealment” applies not only when the defendant
has acted to fraudulently conceal a fiduciary breach or ERISA violation, but also
when the plaintiff’s case is based on allegations of breach of fiduciary duty by
fraudulent misrepresentation or suppression of material facts. Fulghum, 785 F.3d
at 414; Caputo, 267 F.3d at 190.
The Eleventh Circuit has not taken a position on the issue.14 However, in
construing § 1113 in another context, the Eleventh Circuit has noted that,
“[a]lthough the legislative history of ERISA’s statute of limitations is scant,
nothing in its language or goals indicates that courts are to read into it anything
more than its plain meaning.” Brock, 809 F.2d at 755. As the Second and Tenth
Circuits have explained, the plain language of § 1113’s exception allowing for suit
within six years of discovery of a breach of fiduciary duty expressly applies in

fraud or concealment exception applies if the plaintiff demonstrates a breach of fiduciary duty by
making a knowing omission of a material fact even in the absence of subsequent acts of
concealment).
14

In briefing the motion for preliminary injunction, both parties reference and
incorporate arguments they made in briefing the pending motion to dismiss. In its motion to
dismiss, Allstate argued that, in Lockhart v. Blue Cross Blue Shield of Tenn., 503 F. App’x. 926
(11th Cir. 2013), the Eleventh Circuit “agreed with the majority of Circuits” by interpreting the
final clause of § 1113 as incorporating the federal doctrine of fraudulent concealment. However,
Lockhart, which is not binding precedent, is not helpful here. The Lockhart court merely found
that a plaintiff’s argument that fraudulent concealment occurred was not substantiated by the
record. Lockhart did not contain any discussion of the Circuit split. The Lockhart decision
provides no analysis or holding regarding whether fraudulent concealment is the only situation in
which the final clause of § 1113 can apply. See Larson v. Northrop Corp., 21 F.3d 1164, 1173
(D.C. Cir. 1994) (“Where courts of appeals seem to differ is on the issue of whether [in addition
to incorporating the doctrine of fraudulent concealment] the term ‘fraud or concealment’ also
refers to the nature of a plaintiff’s underlying claim.” (citation and internal quotation marks
omitted)).
18

“case[s] of fraud or concealment,” rather than only in cases of fraudulent
concealment.

Fulghum, 785 F.3d at 415; Caputo, 267 F.3d at 189-90.

Accordingly, the following conclusions of the Second and Tenth Circuits are
persuasive:
the exception to the general six-year statute for “case[s] of fraud or
concealment” is applicable “when the alleged breach of fiduciary duty
involves a claim the defendant made ‘a false representation of a
matter of fact, whether by words or conduct, by false or misleading
allegations or by concealment of that which should have been
disclosed, which deceives and is intended to deceive another so that
he shall act upon it to his legal injury” or when the defendant conceals
the alleged breach of fiduciary duty. Caputo, 267 F.3d at 189–90.
Fulghum, 785 F.3d at 415 (footnote omitted).
In support of its argument that fraudulent concealment is the only situation
in which the final clause of § 1113 can apply, Allstate cites this court’s September
23, 2014 Memorandum Opinion and Order on a motion to dismiss an earlier
complaint by the Turner Plaintiffs. (Doc. # 43.) In that Order, the court found that
the mere factual allegation that Allstate breached a promise to provide permanent
life insurance was not sufficient to trigger the “fraud or concealment” limitations
period because the complaint contained no allegation that Allstate engaged in
active steps of concealment to hide the breach. However, the issue that is now
before the court – whether a claim alleging fraud or concealment is sufficient to
trigger the final clause of § 1113 – was not before the court at the time of its
September 23, 2014 Memorandum Opinion and Order. Rather, in the complaint at
19

issue at that time (Doc. # 19), the alleged breach of fiduciary duty was Allstate’s
broken promise to provide permanent life insurance and/or the failure to be
forthcoming about the reservation of rights. Other than (at most) an inference
based on the fact that a promise was made and later breached, there were no factual
allegations from which one could reasonably conclude that either the breach or the
failure to disclose the reservation of rights was itself fraudulent.15 (Doc. # 19 ¶¶
31-44.) Therefore, as explained in the September 23, 2014 Memorandum Opinion
and Order, the complaint would have to be amended to state a cause of action for
fraudulent concealment. The court’s conclusion that the “fraud or concealment”
requirement could be met by allegations that Allstate actively took steps to conceal
the breach of fiduciary duty was correct and does not conflict with the court’s
conclusions of law today.
The September 23, 2014 Memorandum Opinion and Order did not address
the possibility that “fraud or concealment” could also be stated by alleging that
representations were fraudulently made or that material information was
fraudulently concealed, but it did not forbid that possibility either. The omission of
any discussion of the issue can be attributed to the facts that (1) at the time,
Allstate did not disclose the existence of the Circuit split in the absence of

15

The Turner Plaintiffs did provide a conclusory statement that Allstate promised that
Plaintiffs would receive lifetime group life coverage when “Allstate knew it was not true.” (Doc.
# 19 at ¶ 43.) However, there were few if any specific factual allegations to support the
conclusion that Allstate made a “promise” knowing it would be breached.
20

applicable controlling Eleventh Circuit authority,16 but cited only those Circuits
that supported its position that the “fraud or concealment” exception required
allegations of fraudulent concealment (Doc. # 24 at 12-13); and (2) in their
response brief, the Turner Plaintiffs did not contend that the representations were
false at the time they were made. (Doc. # 27 at 5.) Thus, it does not appear that, in
2014, either party viewed the complaint as containing allegations that Allstate
breached its fiduciary duty by fraudulently misrepresentating or fraudulently
suppressing material facts. Furthermore, as Plaintiffs point out, in adopting the
Second Circuit’s approach, the Tenth Circuit has since reversed Fulghum v.
Embarq Corp., 938 F. Supp. 2d 1090, 1123 (D. Kan. 2013), which was one of the
cases Allstate relied upon at the time. (Doc. # 24 at 12.) Fulghum, 785 F.3d at
414.
In short, until today, this court has not had an occasion to consider whether,
under § 1113, “fraud or concealment” can be established by evidence that
representations were fraudulently made or that material information was
fraudulently concealed.

Now that the issue is squarely presented, the court

16

Allstate did cite Kurz v. Philadelphia Electric Co., 96 F.3d 1544, 1552 (3d Cir. 1996)
for the proposition that, “[w]ith rare exceptions, the courts of appeals have interpreted the final
clause of [§ 1113] as incorporating the federal doctrine of fraudulent concealment.” (Doc. # 24
at 12.) Allstate also cites Kurz for the fact that Kurz “collect[ed] cases and not[ed] five other
circuits’ application of tolling only in the case of fraudulent concealment.” (Doc. # 24 at 12.)
The Circuits are in agreement that § 1113 applies when the federal doctrine of fraudulent
concealment is implicated. Although a reading of Kurz reveals the relevant Circuit split,
Allstate’s brief citation to Kurz does not disclose the unresolved Circuit split as to whether
tolling exists “only” in the case of fraudulent concealment.
21

concludes that it can be. Nothing in the court’s previous orders precludes that
conclusion.
Plaintiffs have demonstrated a substantial likelihood of success of proving
that Allstate fraudulently misrepresented that the life insurance policies would be
fully paid permanent policies for life while failing to disclose the material fact that
the life insurance policies that were provided were not what were promised.
Based on the evidence presented at this time, the earliest date on which Plaintiffs
were notified that Allstate had not provided permanent, fully paid-up policies was
in July 2013,17 when Allstate informed them not only that Allstate had been “fully
paying [Plaintiffs’] premium” for the life insurance since their retirement, but that
Allstate had “made the decision to no longer pay the premium for [the] life
insurance benefit,” effective December 31, 2015. (Doc. # 44 ¶ 64; Doc. # 62-4.)
Accordingly, both the Turner and Klaas actions were timely filed within six years
of that date.
Therefore, Plaintiffs have demonstrated a substantial likelihood that their
claim is not barred by § 1113.

17

Plaintiffs have established a substantial likelihood that they had been led to believe that
the retiree life insurance policies had already been fully paid up by Allstate when they retired.
Therefore, as explained in Section II.A., on the pleadings and evidence presently before the
court, Allstate’s stated reservation of the right to modify or terminate the benefit plan at any time
was not sufficient to alert Plaintiffs that they could be required to pay continuing premiums on
the retiree life insurance policies or that they could lose the policies if Allstate terminated the
plan.
22

C.

Irreparable Harm to the Plaintiffs, Relative Harm, and Balancing
Equities
An injury is irreparable if it cannot later be undone through monetary

remedies or if the damages required to undo the injury would be difficult or
impossible to calculate. Scott v. Roberts, 612 F.3d 1279, 1295 (11th Cir. 2010).
On the evidence presented, it cannot reasonably be disputed that, if the preliminary
injunction had not been granted, Plaintiffs would have irrevocably lost their current
Allstate-provided retiree life insurance policies on December 31, 2015.18 (Doc. #
62-4; Doc. # 79-1 at ¶¶ 4, 15; Doc. # 74-2 at 2.) Had that coverage ended under
the Allstate retiree group term life insurance policies, Plaintiffs would have been
without the protection of the life insurance. They would have faced the risk that, in
the event of their deaths, their families would be without life insurance benefits
when faced with the hardships and financial costs involved in losing a loved one.
A primary purpose of life insurance is to avoid that very risk. Allstate argues that,
if one of the Plaintiffs does die during the course of litigation, and if Plaintiffs
ultimately prevail, the benefit will ultimately be paid. However, the fact that a

18

Allstate argues that its “decision to terminate the retiree life insurance benefit does not
mean that plaintiffs will lose their life insurance coverage. It means only that Allstate will no
longer pay for it.” (Doc. # 79 at 24.) This argument is disingenuous. Although Allstate has
arranged that the amount of group life insurance coverage previously provided can be “ported” to
a new carrier at Plaintiffs’ expense and at their election, the retiree group life insurance coverage
provided by Allstate would have ended on December 31, 2015. (Doc. # 62-4; Doc. # 79-1 at ¶¶
15-17; Doc. # 74-2 at 2 (a letter from the carrier from whom Allstate negotiated group rates for
conversion coverage stating: “ALLSTATE RETIREE GROUP TERM LIFE INSURANCE
COVERAGE ENDS DECEMBER 31, 2015”).)
23

benefit would eventually be paid would not undo the interim risk and hardship that
continuing the life insurance policies would have prevented, especially when it
may take a number of years to litigate the case, and when many Plaintiffs are
elderly.
Allstate argues that the risk of irreparable harm is “speculative” because it is
contingent on Plaintiffs dying before judgment is entered. Allstate cites Davis v.
Pension Benefit Guarantee Corp., 571 F.3d 1288, 1295 (D.C. Cir. 2009), for the
proposition that the possibility a plaintiff might die before entry of a judgment does
not convert mere economic injury into irreparable harm.

In Davis, the plaintiffs

sought a preliminary injunction to ensure that they would be paid pension benefits
to which they believed they were entitled. Thus, the risk was purely economic and
any shortage in premium payments during the course of litigation could be
corrected by a money judgment. The Davis plaintiffs’ only basis for arguing
irreparable injury was that they “[we]re old and may not live to see final
judgment.” Davis, 571 F.3d at 1295. In this case, however, Plaintiffs are not
arguing that a preliminary injunction should issue because they are elderly and
may not live to reap the benefits of a final judgment awarding life insurance
benefits to their beneficiaries. By definition, it is an existential impossibility to
live long enough to see one’s beneficiaries receive the benefits of one’s own life
insurance policy.

Rather, Plaintiffs are seeking to avert the risk to their
24

beneficiaries that their life insurance policies will not be in force when they die
because Allstate has decided not to pay the premium.
Allstate argues that Plaintiffs have not demonstrated an irreparable injury
because they have not presented evidence showing that some Plaintiffs cannot
afford to avert the risk of irreparable harm by purchasing policies at their own
expense. Allstate’s argument that Plaintiffs should bear the financial burden of
averting the irreparable harm during the course of litigation does not negate the
likelihood of irreparable harm; rather, Allstate’s argument is more properly
analyzed in terms of the balancing of equities and the relative harms to the parties
if the injunction issues.
After December 31, 2015, had the preliminary injunction not been issued,
Plaintiffs who wished to continue the amount of life insurance coverage that those
policies provided would have had to either purchase conversion coverage from a
third-party insurer at a group rate that Allstate negotiated or purchase insurance of
their own choosing from another insurer. (Doc. # 62-4; Doc. # 79-1 at ¶¶ 15-16.)
Allstate argues that the harm to Plaintiffs of paying the premium is minimal
because, depending on the age of each Plaintiff and the amount of coverage
provided, the premiums for the conversion policy currently range from
approximately $22.00 to $864.00 per month. (Doc. # 74 at 4-5; Doc. # 79-1 at ¶¶
19-22; see also Doc. # 91 at 20, 78, 86, 95). At least as to Plaintiffs who would
25

pay $94.00 per month or less, Allstate contends that Plaintiffs have not shown that
the burden of paying for the insurance is sufficient to cause them any harm. (Doc.
# 91 at 110; Doc. # 79 at 25.) However, even at $22.00 to $94.00 per month,
Plaintiffs would be required to pay $264 to $1128 per year.19 As Plaintiffs point
out, if paying this amount of money over the course of the litigation is insignificant
and affordable to Plaintiff retirees, it is even more insignificant and affordable to
Allstate. (Doc. # 87 at 2-3.)
However, Allstate does bear some risk that it cannot recoup the premiums in
the event that it prevails in this case.

Allstate estimated that the cost of

maintaining the life insurance policies for all of the named Plaintiffs would be
approximately $30,000 per year. (Doc. # 91 at 112.) As the court explained at the
hearing, any injury to Allstate in the form of making nonrefundable premium
payments will be offset by requiring Plaintiffs to post a bond. Therefore, after

19

Cf. Schalk v. Teledyne, Inc., 751 F. Supp. 1261, 1268 (W.D. Mich. 1990) aff’d, 948
F.2d 1290 (6th Cir. 1991) (“Under the current plan, these retirees are required to pay their own
premiums if they wish to continue their coverage. Defendants’ counsel stated at oral argument
that these premiums ranged from approximately $15.00 to $18.00 per month. This means that
these plaintiffs are currently required to pay an additional $180 to $216 per year. This is not a
small amount of money to persons living on a fixed income. The loss of this insurance also
means that these retirees have to face the choice of perhaps going without a basic necessity in
order to assure that money is available for loved ones after their death, or possibly to pay their
funeral expenses. . . . [T]he loss of this benefit until age 65, and the accompanying peace of
mind, cannot be compensated for by money damages after the fact. Despite defendants’
arguments to the contrary, I am convinced that plaintiffs have shown the presence of irreparable
harm as regards loss of health benefits and life and accidental death and dismemberment
benefits.”).
26

careful consideration, the court has found that a signature bond in the amount of
$5,000 from each of the named Plaintiffs is appropriate.
The court is satisfied that Plaintiffs have demonstrated a likelihood that
irreparable harm will result if their Allstate-provided retiree group life insurance
policies are allowed to lapse during the course of this litigation. Further, the court
is satisfied that the relative harms to the parties and the balancing of equities favor
issuance of the injunction.
D.

Whether Public Policy Favors Issuance of the Injunction
One of the principal purposes of ERISA is to protect the interests of plan

participants and beneficiaries by establishing standards of responsibility for
fiduciaries and requiring the disclosure of information relating to the plan. See
Jones, 370 F.3d at 1071 (citing 29 U.S.C. § 1001(b)). The responsibilities that
attach to fiduciary status are among “‘the highest known to law.’” Id. (quoting
ITPE Pension Fund v. Hall, 334 F.3d 1011, 1013 (11th Cir. 2003)). Congress has
specifically declared that employee benefit plans “are affected with a national
public interest” and “that[,] owing to the lack of employee information and
adequate safeguards concerning their operation, it is desirable . . . to provide for
the general welfare and the free flow of commerce, that disclosure be made and
safeguards be provided with respect to the establishment, operation, and
administration of such plans.” 29 U.S.C. § 1001(a).
27

In light of Plaintiffs’

demonstration of a substantial likelihood that Allstate promised to provide
permanent, “paid-up” life insurance policies and did not, only to later to cancel the
life insurance policies that it did provide, the court finds that Plaintiffs have
demonstrated that issuing the injunction would be in the public interest.
Allstate argues that the public interest factor weighs in its favor because the
ability to modify, change, and terminate plans provides employers with the
flexibility needed to offer the plans in the first place. However, the preliminary
injunction will not undermine the public’s interest in allowing employers that
flexibility if they choose to exercise it within the requirements of their fiduciary
duties. Allstate was not required to promise permanent, paid-up life insurance
policies. In light of the evidence that it did, any intrusion on Allstate’s flexibility
to terminate the policies was its own doing, and the appeal to public policy is
unavailing.
III.

CONCLUSION

Accordingly, it is ORDERED:
1.

The preliminary injunction (Doc. # 92) continues in force despite Plaintiffs’

failure to timely file the bonds; and
2.

Defendant Allstate Insurance Company and all persons acting for its benefit

or on its behalf are ENJOINED from discontinuing or cancelling the life insurance
policies for the named Plaintiffs or otherwise interfering with the existence or
28

enforceability of said policies.
Because class certification has not been granted, and because Plaintiffs did
not present evidence to support the motion for preliminary injunction as to the
unnamed putative class plaintiffs, the injunction was issued and remains in force
only as to the named Plaintiffs in the Klaas and Turner actions.
DONE this 27th day of September, 2016.
/s/ W. Keith Watkins
CHIEF UNITED STATES DISTRICT JUDGE

29