Friedland v. Unum Group et al
Filing
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MEMORANDUM OPINION. Signed by Judge Sue L. Robinson on 6/19/2014. (nmfn)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
KAREN FRIEDLAND,
Plaintiff,
v.
UNUM GROUP and UNUM LIFE
INSURANCE COMPANY OF
AMERICA,
Defendants.
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Civ. No. 13-1417-SLR
John S. Spadaro, Esquire of John Sheehan Spadaro, LLC, Hockessin, Delaware.
Counsel for Plaintiff.
John D. Demmy, Esquire of Stevens & Lee, P.C., Wilmington, Delaware and E.
Thomas Henefer of Stevens & Lee, P.C., Reading, Pennsylvania. Counsel for
Defendants.
MEMORANDUM OPINION
Dated: June\C\, 2014
Wilmington, Delaware
R~~udge
I. INTRODUCTION
On August 14, 2013, plaintiff Karen Friedland ("plaintiff') filed a complaint against
Unum Group ("Unum") and its wholly owned subsidiary, Unum Life Insurance Company
of America ("Unum Life") (collectively "defendants"), to challenge Unum Life's denial of
her claim for ongoing disability benefits under a long-term disability plan that is
regulated by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§
1001-1461 ("ERISA"). (0.1. 1) Plaintiff asserts three causes of action: (1) claim for
benefits under ERISA§ 502(a)(1 )(B); (2) common law fraud; and (3) violation of the
Federal Racketeer Influenced and Corrupt Organizations Act (''RICO"), 18 U.S.C. §
1961 et. seq., particularly§§ 1962(c) and (d). (0.1. 1 at 111142-43,45-47, 48-51)
Plaintiff seeks payment of benefits past due and of future benefits to age 65 discounted
to present value, economic losses caused by her loss of her position at Gettysburg
College, treble damages under RICO, and attorney fees and costs. (/d. at 28, 1111 a-h)
Currently before the court is defendants' motion to dismiss pursuant to Federal
Rule of Civil Procedure 12(b)(6) alleging that: (1) plaintiff's ERISA claim is time barred
by the Delaware statute of limitations or, in the alternative, plaintiff cannot recover
future benefits under§ 1132(a)(1)(B); (2) plaintiff's common law fraud claim is
preempted by ERISA; and (3) plaintiff's RICO claim fails to state a claim for relief. (0.1.
7) This court has jurisdiction pursuant to 18 U.S.C. §§ 1331, 1332, and 1367(a).
II. BACKGROUND
Plaintiff is a Pennsylvania resident and former employee of The Johns Hopkins
University, where she was insured against disability pursuant to an employee benefit
plan issued by defendants and governed by ERISA. (D. I. 1 at~~ 1-3) In 1994, plaintiff
left her job at Johns Hopkins after she was hospitalized as a result of falling down a
flight of steps. (/d. at~ 10) Defendants agreed that plaintiff was totally disabled, and
paid her full disability benefits for about two years until 1996, when plaintiff notified
defendants that she would attempt to work part-time as an instructor in the theater
department at Carroll Community College. (/d.) Early into her part-time work,
defendants examined and tested plaintiff's capacity to work. (/d.
at~
12) On May 18,
1999, defendants concluded that plaintiff's restrictions and limitations were permanent,
as confirmed by an independent medical examination and functional capacity
evaluation. (/d.) Defendants concluded that plaintiff suffered from permanent partial
disability. (/d.)
In the spring of 2007, plaintiff notified defendants of her employment contract
with Gettysburg College for the 2007-2008 school year, whereby she would receive 7.5
hours per week of class time and $50,000 in salary for the school year. (/d. at ~13)
After acknowledging receipt of plaintiff's employment contract, defendants determined
that plaintiff was still eligible for benefits under her disability plan. (/d. at~ 14) On
January 15, 2010, defendants notified plaintiff that her condition had improved to the
point that she was able to work full time, and subsequently discontinued her benefits.
(/d.)
Plaintiff claims that the discontinuance of her benefits did not result from new
medical evidence, but instead from an illegal policy and scheme to reduce expensive
payouts, whereby defendants conducted their evaluation of plaintiff's entitlement to
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benefits through unethical and fraudulent insurance claim-processing standards. (ld. at
~
19) In exchange for substantial insurance premiums, plaintiff claims that she and
others similarly situated relied to their detriment upon the promises and contractual
obligations of honest claims handling set forth in the disability policies sold by
defendants. (ld. at ~ 20)
Ill. STANDARD OF REVIEW
A motion filed under Federal Rule of Civil Procedure 12(b)(6) tests the
sufficiency of a complaint's factual allegations. Bell At/. Corp. v. Twombly, 550 U.S.
544, 555 (2007); Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). A complaint
must contain "a short and plain statement of the claim showing that the pleader is
entitled to relief, in order to give the defendant fair notice of what the ... claim is and
the grounds upon which it rests." Twombly, 550 U.S. at 545 (internal quotation marks
omitted) (interpreting Fed. R. Civ. P. 8(a)). Consistent with the Supreme Court's rulings
in Twombly and Ashcroft v. Iqbal, 556 U.S. 662 (2009), the Third Circuit requires a twopart analysis when reviewing a Rule 12(b)(6) motion. Edwards v. A.H. Cornell & Son,
Inc., 610 F.3d 217,219 (3d Cir. 2010); Fowlerv. UPMC Shadyside, 578 F.3d 203,210
(3d Cir. 2009). First, a court should separate the factual and legal elements of a claim,
accepting the facts and disregarding the legal conclusions. Fowler, 578 F.3d. at 21011. Second, a court should determine whether the remaining well-pled facts sufficiently
show that the plaintiff "has a 'plausible claim for relief.'" /d. at 211 (quoting Iqbal, 556
U.S. at 679). As part of the analysis, a court must accept all well-pleaded factual
allegations in the complaint as true, and view them in the light most favorable to the
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plaintiff. See Erickson v. Pardus, 551 U.S. 89, 94 (2007); Christopher v. Harbury, 536
U.S. 403, 406 (2002); Phillips v. Cnty. of Allegheny, 515 F.3d 224, 231 (3d Cir. 2008).
In this regard, a court may consider the pleadings, public record, orders, exhibits
attached to the complaint, and documents incorporated into the complaint by reference.
Tellabs, Inc. v. Makar Issues & Rights, Ltd., 551 U.S. 308, 322 (2007); Oshiver v. Levin,
Fishbein, Sedran & Berman, 38 F.3d 1380, 1384-85 n.2 (3d Cir. 1994).
The court's determination is not whether the non-moving party "will ultimately
prevail" but whether that party is "entitled to offer evidence to support the claims."
United States ex ref. Wilkins v. United Health Grp., Inc., 659 F.3d 295, 302 (3d Cir.
2011 ). This "does not impose a probability requirement at the pleading stage," but
instead "simply calls for enough facts to raise a reasonable expectation that discovery
will reveal evidence of [the necessary element]." Phillips, 515 F.3d at 234 (quoting
Twombly, 550 U.S. at 556). The court's analysis is a context-specific task requiring the
court "to draw on its judicial experience and common sense." Iqbal, 556 U.S. at 66364.
IV. DISCUSSION
A. Statute of Limitations for ERISA Claims
Because ERISA does not contain a statute of limitations for recovery of benefits,
the court looks to the statute of limitations for the state law claim that is most analogous
to the claim for benefits under ERISA. See De/Costello v. lnt'/ Broth. of Teamsters, 462
U.S. 151, 158-160 (1983). Specifically, the court "borrows" the most analogous statute
of limitations from the forum state. Romero v. The Allstate Corp., 404 F.3d 212, 220
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(3d Cir. 2005); Syed v. Hercules, Inc., 214 F .3d 155, 159 (3d Cir. 2000). The Third
Circuit has held that the one-year statute of limitations found at 10 Del. C. § 8111 is
applicable to claims for recovery of benefits under an ERISA plan. 1 Syed, 214 F.3d at
159; see also Gregorovich v. E. I. duPont de Nemours, 602 F. Supp. 2d 511, 517 (D.
Del. 2009) (identifying 10 Del. C. § 8111 as the applicable statute of limitations on
claims for ERISA benefits filed in Delaware).
A non-fiduciary claim such as the one plaintiff filed under§ 1132(a)(1 )(B)
accrues when a claim for benefits has been denied. Miller v. Fortis Benefits Ins. Co.,
475 F.3d 516, 520 (3d Cir. 2007) (citations omitted); see 10 Del. C. § 8111. Plaintiff's
complaint was filed on August 14, 2013, more than one year from the decision to
terminate her disability benefits (January 15, 201 0), and more than one year from the
letter confirming the decision to terminate her disability benefits (September 17, 2010). 2
1
Contrary to plaintiffs argument, Klimowicz v. Unum Life Ins. Co. of America, 296
Fed. App'x 248 (3d Cir. 2008), does not apply to this case. /d. at 249-50. In Klimowicz,
the court applied the statute of limitations applicable to ERISA claims filed in New
Jersey. /d. at 50. For ERISA claims filed in Delaware, Syed is the applicable case law.
2
Contrary to plaintiff's contention that a second level of administrative appeal was
still being pursued as late as September 2012, defendants clearly denied plaintiff's
claim for appeal in 201 0. In an letter dated September 17, 201 0, defendants stated:
Unum denied your client's disability claim beyond January 15, 2010,
in a letter issued on the same date. The letter explained that the claim
evidence supported that your client had the residual functional capacity to
perform her regular occupation and she no longer met the policy definition
of disability.
Unum Life Insurance Company of America has completed the review of your
client's appeal. No further review is available and her appeal is now closed.
(D. I. 10, ex. A at 2, 9)
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(See D. I. 1 at 1J14; 0.1. 10, ex. A at 2) Plaintiff's ERISA claim, therefore, is time-barred
by the limitations statute. 3
B. Preemption of Fraud Claim by ERISA
The Supreme Court has explained, "[t]he purpose of ERISA is to provide a
uniform regulatory regime over employee benefit plans." Aetna Health, Inc. v. Davila,
542 U.S. 200, 208 (2004). Congress's intent in enacting ERISA was to promote the
interests of employees and their beneficiaries in employee benefit plans by "eliminating
the threat of conflicting or inconsistent State and local regulation of employee benefit
plans." Shawv. Delta AirLines, Inc., 463 U.S. 85,99 (1983) (quoting 120 Gong. Rec.
29933 (1974)). Section 514 of ERISA, the "express preemption" provision, reads in
pertinent part:
Except as provided in subsection (b) of this section, the provisions of this
subchapter and subchapter Ill of this chapter shall supercede any and all
State laws insofar as they may now or hereafter relate to any employee
benefit plan described in section 1003(a) of this title and not exempt under
section 1003(b) of this title.
29 U.S.C. § 1144(a) (emphasis added). The Supreme Court has emphasized that the
express preemption provisions of ERISA are "deliberately expansive," noting
Congress's emphasis on the "breadth and importance of the preemption provisions."
Pilot Life Ins. v. Dedeaux, 481 U.S. 41,45-46 (1987) (citing Shaw, 463 U.S. at 98; 120
Gong. Rec. 29197 (1974)); see also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133,
138-39 (1990). ERISA defines "State laws" as "all laws, decisions, rules, regulations,
or other State action having the effect of law, of any State." 29 U.S.C. § 1144(c)(1).
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The court does not need to address plaintiff's claim for future benefits, since her
ERISA claim is time-barred by the Delaware limitations statute.
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The Third Circuit has explained that a state-law claim "relates to" an ERISA plan if "the
existence of an ERISA plan was a crucial factor in establishing liability," and "the trial
court's inquiry would be directed to the plan." 1975 Salaried Retirement Plan for
Eligible Employees of Crucible, Inc. v. Nabers, 968 F .2d 401, 406 (3d Cir. 1992), cert.
denied, 506 U.S. 1086 (1993) (citing Ingersoll-Rand, 498 U.S. at 143-44).
According to plaintiff's complaint, defendants conducted their evaluation of
plaintiff's entitlement to benefits through unethical and fraudulent insurance claimprocessing standards. (See 0.1. 1 at 1J19) Plaintiff's fraud allegations, therefore, stem
from how defendants handled her ERISA-governed disability policy. (See id. at 1J20)
The existence of plaintiff's ERISA plan is crucial to establish her fraud claim. See 1975
Salaried Retirement Plan, 968 F.2d at 406; see, e.g., Berger v. Edgewater Steel Co.,
811 F.2d 911, 923 (3d Cir. 1990) (affirming that plaintiff's misrepresentation claims
were preempted by ERISA§ 514(a) because they related to an employee benefit plan).
Similarly, a trial court's inquiry into plaintiff's fraud claim would be necessarily directed
at plaintiff's ERISA plan and defendants' conduct surrounding the same. 1975 Salaried
Retirement Plan, 968 F.2d at 406. 4 Consequently, § 1144 preempts plaintiff's fraud
4
Piaintiff cites to Weiss v. First Unum Life Ins. Co., 482 F.3d 254 (3d Cir. 2007),
for the proposition that her fraud claim should not be preempted because it does not
conflict with her ERISA claim. (see 0.1. 14 at 14-17) Weiss did not address ERISA
preemption, but instead discussed whether a federal RICO claim conflicted with the
McCarran-Fegruson Act, which prohibits the use of federal law to "invalidate, impair, or
supercede" state insurance regulation. Weiss, 482 F.3d at 257-259. In fact, the court
noted that the state law claims at issue in the case were previously dismissed because
they were preempted by ERISA:
In light of ERISA, the state-law claims were dismissed, and eventually the
ERISA claims were also dismissed, leaving only the federal RICO claims.
We find ourselves resorting to state-law theories and claims as
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claim. 5
C. RICO Claims
1. Section 1962(c) Claim
Defendants assert that plaintiff has failed to establish a cause of action under§
1962(c) because she has not properly alleged a RICO "enterprise" that is separate from
the "persons" (Unum and Unum Life) she sued. (0.1. 8 at 9) Section 1962(c) reads in
pertinent part:
It shall be unlawful for any person employed by or associated with any
enterprise engaged in, or the activities of which affect, interstate or foreign
commerce, to conduct or participate, directly or indirectly, in the conduct
of such enterprise's affairs through a pattern of racketeering activity or
collection of unlawful debt.
18 U.S.C. § 1962(c). Title 18 defines "person" to include "any individual or entity
capable of holding a legal or beneficial interest in property." 18 U.S.C. § 1961 (3).
"Enterprise" is defined to include "any individual, partnership, corporation, association,
or other legal entity, and any union or group of individuals associated in fact although
not a legal entity." /d.§ 1961(4).
For purposes of§ 1962(c) claims, the defendant "person" and the RICO
"enterprise" must be separate and distinct. See Cedric Kushner Promotions, L TO v.
justification for the application of civil RICO, despite the fact that those
claims would be preempted by ERISA.
See id. at 261 n.5.
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The court need not address defendants' conflict preemption arguments under
the Supremacy Clause in U.S. Const. art. VI because the statutory preemption
provision in 29 U.S.C. § 1144 provides sufficient grounds to dismiss plaintiff's state law
fraud claim.
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King, 533 U.S. 158, 162 (2001) (agreeing with the government's reading of§ 1962(c) to
"require some distinctness between the RICO defendant and the RICO enterprise").
According to the Supreme Court in Cedric Kushner Promotions, a plaintiff must show
that the defendant "person" "conducted or participated in the conduct of the
'enterprise's affairs,' not just their own affairs." /d. at 163 (quoting Reeves v. Ernst &
Young, 507 U.S. 170, 185 (1993)) (emphasis in original). The Third Circuit has held
that "a corporation generally cannot be a defendant under§ 1962(c) for conducting an
"enterprise" consisting of its own subsidiaries or employees, or consisting of the
corporation itself in association with its subsidiaries or employees." Gasoline Sales,
Inc. v. Aero Oil Co., 39 F.3d 70, 73 (3d Cir. 1994) (citing Brittingham v. Mobil Corp., 943
F.2d 297 (3d Cir. 1991)). Accordingly, "a claim simply against one corporation as both
'person' and 'enterprise' is not sufficient." Jaguar Cars, Inc. v. Royal Oaks Motor Car
Co., 46 F.3d 258, 268 (3d Cir. 1995). "Instead, a viable§ 1962(c) action requires a
claim against defendant 'persons' acting through a distinct 'enterprise."' /d. (emphasis
added).
For the purposes of§ 1962(c), a corporation is not distinct from its subsidiaries,
relatives, agents, and affiliates. Dow Chemical Co. v. Exxon Corp., 30 F. Supp. 2d 673,
700 (D. Del. 1998). Plaintiff argues that the alleged RICO enterprise does not consist
merely of the defendants or those connected to the defendants, but instead includes
outside physicians, outside accountants, and outside vocational experts, which are not
defendants' employees, nor can they properly be regarded as defendants' agents under
Delaware agency law. (D. I. 14 at 18; D. I. 1 at 1J1J6, 49) However, the appropriate
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inquiry is not whether the participants of the alleged RICO "enterprise" can be properly
regarded as defendants' agents. Instead, the issue is whether defendants participated
in the conduct of a distinct RICO "enterprise," or merely conducted their own business
affairs. Cedric Kushner Promotions, 533 U.S. at 163; see also Metcalf v. Paine Webber
Inc., 886 F. Supp. 503,513-14 (W.O. Pa. 1995), aff'dwithoutop., 79 F.3d 1138 (3d Cir.
1996) (stating that in order "to satisfy the enterprise requirement, a complaint must
include an allegation that the enterprise included some person or entity operating
outside of the ... defendants' normal scope of business").
In Shields v. Unum Provident Corporation, 415 Fed. App'x 686 (6th Cir. 2011 ),
the Sixth Circuit rejected the plaintiff's allegations that the defendant insurance
company's "subsidiaries, affiliates, wholly owned companies, customers, policy holders,
claimants, independent contractors, and governmental and nongovernmental
regulators" were "an enterprise distinct from [the defendant corporation] for RICO
purposes." /d. at 691. District courts within the Third Circuit agree that a RICO
enterprise cannot be created through allegations that an insurer, its affiliated corporate
entities, employees, and agents combined to wrongly deny insurance claims. See
Assoc. of N.J. Chiropractors v. Aetna, Inc., Civ. No. 09-3761, 2011 WL 2489954, at *6
(D. N.J. June 20, 2011) (rejecting plaintiffs' allegations that a health insurer, its
subsidiaries, and several outside vendors acted as a RICO "enterprise" by improperly
seeking recovery of medical claim payments from chiropractors); McBride v. Hartford
Life and Ace. Ins. Co., Civ. No. 05-6172, 2006 WL 279113, at *3 (E.D. Pa. 2006)
(dismissing plaintiff's RICO claim against the defendant disability benefits provider). As
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a provider of disability benefits, Unum Life's claims processing relationships with
outside independent medical examiners and outside functional capacity consultants are
necessarily a part of its own business affairs.
The Supreme Court has recognized that a corporation's owner could be sued as
a RICO "person" acting through the corporation as the "enterprise." Cedric Kushner
Promotions, 533 U.S. at 163. However, the Court distinguished this scenario from the
type of claim where a corporation is alleged to be a RICO person based on an alleged
association with its own employees. /d. at 163-164 (citing Riverwoods Chappaqua
Corp. v. Marine Midland Bank N.A., 30 F.3d 339 (2d Cir. 1994)). In this case, plaintiff
has asserted the latter type of claim, alleging that defendants acted through their
employees and outside vendors to implement the "RICO Plan" as a means of
improperly processing benefits claims. (See D.l. 1 at~~ 6, 21, 24-40, 49, 51) Such a
claim is not sufficient to establish that defendants "conducted or participated in the
conduct of the 'enterprise's affairs,' not just their own affairs." Cedric Kushner
Promotions, 533 U.S. at 162 (emphasis in original). Plaintiff has not plausibly plead
facts to imply the existence of an enterprise within the requirements of§ 1962(c). See
In reInsurance Brokerage Antitrust Litigation, 618 F.3d 300, 369-70 (3d Cir. 201 0)
(applying Iqbal and Twombly pleading standards to allegations of a RICO enterprise).
Plaintiff's § 1962(c) claim, therefore, is dismissed.
2. Section 1962(d) Claim
Section 1962(d) provides that "[i]t shall be unlawful for any person to conspire to
violate any of the provisions of subsection (a), (b), or (c) of this section." Since§
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1962(d) prohibits conspiring to violate§ 1962(a), (b), and (c), the viability of plaintiff's §
1962(d) claim depends on the legal sufficiency of its§ 1962(c) claim. See Jaguar Cars,
46 F.3d at 262. The court has already determined that plaintiff's § 1962(c) claim is
legally insufficient. Accordingly, plaintiff's claim for conspiracy under§ 1962(d) is
dismissed. In reInsurance Brokerage, 618 F.3d at 373 ("a§ 1962(d) claim must be
dismissed if the complaint does not adequately allege 'an endeavor which, if completed,
would satisfy all of the elements of a substantive [RICO] offense.") (citation omitted).
V.
CONCLUSION
For the reasons stated above, the court finds that: (1) plaintiff's ERISA claim is
time-barred by the limitations statute; (2) plaintiff's fraud claim is preempted by ERISA;
and (3) plaintiff's complaint fails to state a cause of action against defendants Unum
and Unum Life under RICO. Therefore, defendants' motion to dismiss is granted with
respect to all claims.
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