Kirby et al v. American United Life Insurance Company
MEMORANDUM OPINION. Signed by Judge Virginia Emerson Hopkins on 9/21/2016. (JLC)
2016 Sep-21 PM 01:58
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
JENNY OSBORN KIRBY et al.,
AMERICAN UNITED LIFE
) Case No.: 4:16-CV-776-VEH
INTRODUCTION AND PROCEDURAL HISTORY
This civil action was originally filed on April 5, 2016, in the Circuit Court of
Etowah County, Alabama, by the Plaintiffs, Jenny Osborn Kirby and Jacqueline Sue
Skelton, as the co-trustees of the Virginia B. Osborn Descendants Trust (the “Trust”).
(Doc. 1-1 at 7). The Plaintiffs sued the Defendant, American United Life Insurance
Company (“AUL”), and asserted state law claims for breach of contract, breach of
covenant of good faith and fair dealing, fraudulent inducement, unjust enrichment,
intentional false statement, and promissory estoppel arising out of a dispute over a life
insurance policy issued by AUL (the “Policy”). (Doc. 1-1 at 7).
On May 11, 2016, the Defendant removed the case to this Court alleging
Plaintiffs could have originally filed this action against AUL in this
Court pursuant to 29 U.S.C. § 1132 in that Plaintiffs seek, inter alia, to
recover benefits under the Policy provided pursuant to an employee
welfare benefits plan governed by [the Employee Retirement Income
Security Act of 1974, as amended, 29 U.S.C. § 1101, et seq.
(Doc. 1 at 3). Further, the Notice of Removal argued that the Plaintiff’s state law
claims were completely preempted by ERISA. (Doc. 1 at 3) (citing See Metropolitan
Life Ins. Co. v. Taylor, 481 U.S. 58 (1987); Engelhardt v. Paul Revere Life Ins. Co.,
139 F.3d 1346, 1353 (11th Cir. 1998); Aetna Health Inc. v. Davila, 542 U.S. 200
On June 30, 2016, the Plaintiffs filed an Amended Complaint which contains
three counts. (Doc. 10). In Count One, the Plaintiffs seek relief, under ERISA,
pursuant to 29 U.S.C. § 1132(a)(1)(B). In Count Two, the Plaintiffs seek relief, under
ERISA, pursuant to 29 U.S.C. § 1132(a)(3). Count Three seeks an award of attorneys’
fees pursuant to 29 U.S.C. § 1132(g)(1). The Plaintiffs have abandoned all state law
The case comes before the Court on AUL’s motion to dismiss, filed pursuant
to Rule 12(b)(6) of the Federal Rules of Civil Procedure, for failure to state a claim
upon which relief may be granted. (Doc. 14). For the reasons stated herein, the motion
will be GRANTED.
Generally, the Federal Rules of Civil Procedure require only that the complaint
provide “a short and plain statement of the claim showing that the pleader is entitled
to relief.” FED. R. CIV. P. 8(a). However, to survive a motion to dismiss brought under
Rule 12(b)(6), a complaint must “state a claim to relief that is plausible on its face.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007) (“Twombly”).
A claim has facial plausibility “when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly,
550 U.S. at 556) (“Iqbal”). That is, the complaint must include enough facts “to raise
a right to relief above the speculative level.” Twombly, 550 U.S. at 555 (citation and
footnote omitted). Pleadings that contain nothing more than “a formulaic recitation
of the elements of a cause of action” do not meet Rule 8 standards, nor do pleadings
suffice that are based merely upon “labels or conclusions” or “naked assertion[s]”
without supporting factual allegations. Id. at 555, 557 (citation omitted).
Once a claim has been stated adequately, however, “it may be supported by
showing any set of facts consistent with the allegations in the complaint.” Id. at 563
(citation omitted). Further, when ruling on a motion to dismiss, a court must “take the
factual allegations in the complaint as true and construe them in the light most
favorable to the plaintiff.” Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir.
2008) (citing Glover v. Liggett Group, Inc., 459 F.3d 1304, 1308 (11th Cir. 2006)).
ALLEGATIONS IN THE AMENDED COMPLAINT
Allegations in the Complaint
The following allegations appear in the Plaintiffs’ Amended Complaint:
In or around 1993, Mrs. Virginia B. Osborn (“Mrs.
Osborn”) began planning her estate. Due to the complexity of her estate,
Mrs. Osborn wanted to ensure it would be able to pay any future tax
Mrs. Osborn estimated her estate would need to pay
approximately $10,000,000 in future tax liabilities.
To ensure her estate could pay this estimated amount, Mrs.
Osborn’s employer, Osborn Transportation, Inc. entered into an
agreement with Plaintiffs which required it to fund a life insurance
policy (hereinafter “Split Dollar Plan”) for Plaintiffs’ benefit. The Split
Dollar Plan was to be operated and administered “in compliance with
10. On or about September 1, 1993, Mrs. Osborn completed
Defendant’s insurance policy application. The application contained the
following statement: “This is a funding vehicle for family trust funded
through split dollar from company. Company valued at 20
mill-requesting 10 mill policy.”
11. In response to the aforementioned insurance application,
AUL issued Policy #1617711350 (“Policy”) to the Trust on September
28, 1993. The Policy was comprised of two parts: (1) a $5,500,000.00
whole life policy and (2) a $4,500,000.00 term insurance policy.
Together, these policies totaled $10,000,000 in coverage. The Policy
designated the Trust as the sole beneficiary.
12. Upon receipt of both oral and written affirmations from
AUL, the plan’s fiduciary, that the Policy would, in fact, pay out at least
$10,000,000 upon Mrs. Osborn’s death, the Policy was purchased and
Osborn Transportation, Inc. began paying $318,348.00 in annual
13. For 22 years, from 1993 and until Mrs. Osborn’s death in
2015, Osborn Transportation, Inc. timely made annual premium
payments of $318,348.00—a total of $7,003,656.
14. During this time, Mrs. Osborn and/or her agents would
routinely contact AUL and/or its agents to confirm the payout of the
Policy would be at least $10,000,000—as originally promised.
15. For example, Greg Frith (“Frith”), an insurance agent and
friend of Mrs. Osborn, contacted AUL almost yearly on Mrs. Osborn’s
16. In each of his conversations with AUL, Mr. Frith would
verify that the Trust’s Policy payout would be $10,000,000. AUL always
confirmed the $10,000,000 payout, never once indicating otherwise to
Mrs. Osborn died on January 14, 2015.
18. On January 19, 2015, Plaintiffs notified AUL of Mrs.
Osborn’s death and initiated a claim under the Policy.
19. On July 22, 2015, AUL notified Plaintiffs that the Policy
would not pay out $10,000,000, but rather approximately $8,560,000.
AUL’s Policy payout was comprised of (1) $5,500,000 from the whole
life policy; (2) $1,573,748 from the one year term; (3) $67,475 pro rata
dividend; (4) $1,237,038 for paid up additions; and (5) $187,263
20. By Plaintiffs’ accounting and according to the insurance
policy, they are owed approximately $1,500,000.00 plus interest.
(Doc. 10 at 4-6, ¶¶7-20).
The Policy was issued on September 28, 1993. (Doc. 1-2 at 4). The “Whole
Life” portion of the Policy provided for payment of “$5.5 million” “to age 100” and
required the payment of an annual premium of “$318,340.00.” (Doc. 1-2 at 4). The
aforementioned $4.5 million in “Additional Term Insurance” provided by the Policy:
– had an express “Expiry Date” of September 28, 1995 (doc. 1-2 at 4);
– provided that it would have a “1st Year Benefit” of $4.5 million, and a “2nd
Year Benefit” of $4.5 million (doc. 1-2 at 4); and
– required no annual premium (doc. 1-2 at 4).
The Policy also expressly provided that the agreement for Additional Term Insurance
“will automatically terminate: (a) on the Date of Expiry of this agreement.” (Doc. 1-2
at 13). The “Amount of Insurance” listed on the Policy “Specifications” page was
“$5.5 million.” (Doc,. 1-2 at 4).
The Policy stated that AUL would determine “the share of divisible surplus of
this policy each year” to be credited as a dividend. (Doc. 1-2 at 7). To the extent a
The Court may consider the contents of the Policy without converting the motion to a
motion for summary judgment because the document is central to the Plaintiffs’ claims and is
“undisputed” in the sense that the authenticity of the document is not challenged. Day v. Taylor,
400 F.3d 1272, 1276 (11th Cir. 2005)
dividend was credited in any given year, it could then be applied pursuant to 1 of 8
options, chosen at the Owner’s direction. (Doc. 1-2 at 7-8). The Trust chose to have
the dividends applied pursuant to Dividend Option 8 in the Policy. Dividend Option
8. Additional Insurance. Any dividend payable at the end of the first
policy year is applied to purchase participating paid-up life insurance for
a level amount. Each year thereafter, the dividend is used to purchase a
combination of one year term insurance and paid-up additions in an
amount such that the one year term insurance plus all paid-up additions
equals the net specified amount. The net specified amount is the
specified amount shown on page 3 reduced by the face amount of any
paid-up additions previously surrendered.
If the dividend is not large enough to make the above purchase, the
entire dividend will be used to buy one year term insurance. If all
paid-up additions equal or exceed the net specified amount, the entire
dividend will be used to buy paid-up additions.
(Doc. 1-2 at 8) (bold font in original).
The Breach of Fiduciary Duties Claim in Count II Fails
Count II of the Amended Complaint asserts a claim, pursuant to 29 U.S.C. §
1132(a)(3), otherwise known as ERISA Section 502(a)(3), for breach of the fiduciary
duties set out in 29 U.S.C. §§ 1104. AUL contends that the Plaintiffs’ claim under
Section 502(a)(3) is inappropriate, given that the Plaintiffs have an adequate remedy
available: failure to pay benefits under ERISA Section 502(a)(1)(B), codified as 29
U.S.C. § 1132(a)(1)(B), as set out in Count I. The court agrees.
The Plaintiffs allege that the Federal Rules of Civil Procedure allow pleading
of these ERISA claims in the alternative. (Doc. 15 at 5-6) (citing FED. R. CIV. P.
8(d)). They are wrong. Section 502(a)(1)(B) of ERISA, codified as 29 U.S.C. §
1132(a)(1)(B), permits a civil action to be brought by a 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.” In comparison, Section 502(a)(3), codified as 29 U.S.C. § 1132(a)(3), permits
a civil action to be brought:
[B]y a participant, beneficiary, or fiduciary (A) to enjoin any act or
practice which violates any provision of [the] subchapter or the terms of
the plan, or (B) to obtain other appropriate equitable relief (i) to address
such violations or (ii) to enforce any provisions of this subchapter or the
terms of the plan.
29 U.S.C. § 1132(a)(3). In Varity Corp v. Howe, 516 U.S. 489, 116 S. Ct. 1065, 134
L. Ed. 2d 130 (1996), the Supreme Court made clear that an ERISA plaintiff could
not state a valid claim for equitable relief under Section 502(a)(3) when Section
502(a)(1) afforded the plaintiff an adequate remedy. Rather, Section 502(a)(3) is a
catch-all provision that “act[s] as a safety net, offering appropriate equitable relief for
injuries caused by violations that § 502 does not elsewhere remedy.” Id. at 512, 116
S. Ct. at 1065. Where Congress has elsewhere “provided adequate relief for a
beneficiary’s injury, there will likely be no need for further equitable relief, in which
case such relief would not be ‘appropriate.’” Id. at 515, 116 S. Ct. at 1079.
Eleventh Circuit cases applying Varity have explained that, if a plaintiff can
pursue benefits under the plan “pursuant to Section a(1), there is an adequate remedy
under the plan which bars a further remedy under Section a(3).” Ogden v. Blue Bell
Creameries U.S.A. Inc., 348 F.3d 1284, 1287 (11th Cir. 2003). An ERISA plaintiff
cannot state a valid claim for equitable relief under Section 502(a)(3) when Section
502(a)(1)(b) would afford an adequate remedy, even if the Section 502(a)(1)(B) claim
is later lost on the merits. Katz v. Comprehensive Plan of Group Ins., 197 F.3d 1084,
1089 (11th Cir. 1999) (“[T]he availability of an adequate remedy under the law for
Varity purposes does not mean, nor does it guarantee, an adjudication in one’s
The relevant question, as the Eleventh Circuit has concluded, is whether the
plaintiff has a cause of action “based on the same allegations” under the other
specific remedial provisions of ERISA. Jones v. Am. Gen. Life & Accident Ins. Co.,
370 F.3d 1065, 1073 (11th Cir. 2004) (emphasis added). The court must dismiss the
502(a)(3) claim if the allegations supporting that claim are “also sufficient to state a
cause of action under Section 502(a)(1)(B), regardless of the relief sought, and
irrespective of the [plaintiff’s] allegations supporting their other claims.” Id. at 10739
74. The facts that comprise the basis for the claim, rather than the type of relief
requested, control whether a plaintiff can proceed with a claim for equitable relief.
Id. at 1073. See also, Pruitt v. Am. Gen. Life Ins., No. 4:14-CV-1162-TMP, 2015 WL
1524412, at *2 (N.D. Ala. Apr. 3, 2015) (Putnam, M.J.) (“alternative pleading is not
permitted [in ERISA]”); Till v. Lincoln Nat. Life Ins. Co., No. 2:14-CV-721-WKW,
2014 WL 6895285, at *5 (M.D. Ala. Dec. 5, 2014) (Watkins, J.) (rejecting alternative
In this case, the Plaintiffs’ Section 502(a)(1)(B) and Section 502(a)(3) claims
are supported by the same factual allegations. Therefore, they cannot bring their
claims based on Section 502(a)(3) because they have an adequate remedy available
elsewhere in ERISA’s statutory framework. See Ogden, 348 F.3d at 1288 (citing
Hembree v. Provident Life and Accident Ins. Co., 127 F. Supp. 2d 1265, 1274 (N.D.
Ga. 2000)). ERISA simply does not permit a plaintiff to pursue an equitable claim
when an adequate remedy to pay benefits exists. Accordingly, the Plaintiffs’ claim for
breach of fiduciary duty (Count II) is due to be dismissed.
The Failure To Pay Benefits Claim in Count I Fails
The Additional Term Insurance expired on September 28, 1995. Osborn died
on January 14, 2015. Accordingly, the Plaintiffs are not entitled to the $4.5 million
in term life insurance benefits under the Policy. Further, even if they were, the
Plaintiffs’ claim is barred by the six year statute of limitations. See, Wilson v.
Standard Ins. Co., No. 4:11-CV-02703-MHH, 2014 WL 358722, at *5 (N.D. Ala.
Jan. 31, 2014) (Haikala, J.), aff'd, 613 F. App'x 841 (11th Cir. 2015) (recognizing
application of Alabama’s six year statute of limitations to claim brought pursuant to
ERISA for policy benefits); Blue Cross & Blue Shield of Alabama v. Sanders, 138
F.3d 1347, 1357 (11th Cir. 1998) (“[A] fiduciary's action to enforce a reimbursement
provision pursuant to 29 U.S.C. § 1132(a)(3) is most closely analogous to a simple
contract action brought under Alabama law. Accordingly, we apply Alabama's
six-year statute of limitations for simple contract actions[.]”).
The Plaintiffs do not dispute that the Additional Term Insurance had expired
by the time of Osborn’s death, or that the six year statute of limitations applies.
Instead, they argue that “AUL made annual representations and promises to the
Trustees and their agents that the Policy payout would, in fact, be ten million dollars.”
(Doc. 15 at 2-3). The Plaintiffs argue that “[t]hese annual misrepresentations now
estop AUL from denying the Trustees the benefits they were promised and pleading
a statute of limitations defense.” (Doc. 15 at 3).
“Under ERISA, equitable estoppel applies only when ‘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.’” Griffin v. Habitat for Humanity Int'l, Inc.,
641 F. App'x 927, 932 (11th Cir. 2016) (quoting Jones v. Am. Gen. Life & Acc. Ins.
Co., 370 F.3d at 1069); Urscheler v. Adventist Health Sys. Sunbelt Healthcare Corp.,
No. 8:16-CV-224-T-27-TBM, 2016 WL 3702976, at *3 (M.D. Fla. July 7, 2016)
(Whittemore, J.) (same). The Plaintiffs have failed to allege or argue that any
provision of the Policy is ambiguous, or that anyone at AUL made representations to
them regarding an ambiguous provision.2 Further, at least as far as the expiration of
the Additional Term Insurance, the plan unambiguously states that it expired on
September 28, 1995. The doctrine of estoppel does not apply to save the Plaintiffs’
The Attorneys’ Fee Claim in Count III Fails
Under ERISA, the Court “in its discretion may allow a reasonable attorney's
fee and costs of action to either party.” 29 U.S.C.A. § 1132(g)(1). As the Plaintiffs’
other claims are without merit, no fee is due to the Plaintiffs. Count III will also be
The Plaintiffs argue only that AUL represented that the Policy payout would be
Further, this equitable estoppel claim fails because it is raised for the first time in
response to the motion to dismiss, and “plaintiffs cannot amend their complaint through a
response to a motion to dismiss.” Burgess v. Religious Tech. Ctr., Inc., 600 F. App'x 657, 665
(11th Cir. 2015) (citing Rosenberg v. Gould, 554 F.3d 962, 967 (11th Cir.2009)). However, the
Court has applied a merits analysis. That analysis shows that any amendment to add this claim
would be futile.
Based on the foregoing, the motion to dismiss will be GRANTED, and this
case will be DISMISSED with prejudice.
DONE and ORDERED this 21st day of September, 2016.
VIRGINIA EMERSON HOPKINS
United States District Judge
The Defendant has not asked to be awarded a fee.
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