ESTATE OF MILLIE ANN MCDANIELS v. LIBERTY MUTUAL GROUP INC.

Filing 10

MEMORANDUM OPINION. Signed by Judge Richard J. Leon on 8/31/2012. (kc )

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
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EST ATE OF MILLIE ANN
MCDANIELS,
Plaintiff,

) . Civil Case No. 12-202 (RJL)

v.
LIBERTY MUTUAL GROUP INC.,
Defendant.

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j(-MEMORANDUM OPINION
(August ll_, 2012) [Dkt. # 4]
Plaintiff, the Estate of Millie Ann McDaniels (the "Estate"), brings this action
against defendant Liberty Mutual Group, Inc. ("Liberty Mutual"}, seeking damages for
breach of fiduciary duty, breach of contract, breach of implied duty of good faith and fair
dealing, and negligence. See Compl. [Dkt. #II. Before the Court is defendant's motion
to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b )( 1) and
12(b )( 6). Upon consideration of the parties' pleadings, relevant law, and the entire record
herein, the Motion of Defendant Liberty Mutual Group Inc. to Dismiss Plaintiffs
Complaint ("Def.' s Mot.") [Dkt. #4] is GRANTED.

BACKGROUND
The Estate is seeking damages arising from defendant's alleged failure to timely
and accurately pay workers' compensation benefits. In 1983, Fletcher McDaniels, an
employee of John H. Hampshire, Inc., was exposed to asbestos in the course of his

employment. Compl.

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4. Thereafter, Mr. McDaniels applied for and was granted

workers' compensation benefits from Liberty Mutual, his employer's insurance carrier. 1
Compl.

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5; Statement ofP. & A. in Supp. ofDef.'s Mot. ("Def.'s Mem.") [Dkt. #4-1]

at 2-3. When Mr. McDaniels died in 1989, Millie Ann McDaniels "became entitled to
receive the benefits as the spouse and total depend[ e ]nt of Fletcher McDaniels. " 2 Compl.
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6. Mrs. McDaniels died in July 2010, but, before Liberty Mutual ceased making benefit

payments, 3 it discovered "that it owed additional benefits to [Mrs.] McDaniels due to an
incomplete payment of cost ofliving adjustments([] 'COLA')." De f.'s Mem. at 3; see

also Compl.
Compl.

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9. Defendant initially determined that it owed the Estate over $450,000,

9; however, upon recalculation, defendant reduced the amount to approximately

$150,000, id. ~ 12. Liberty Mutual petitioned the Superior Court for the District of
Columbia, Probate Division, for an order "declaring ... the amount owed to the
[E]state ... and specify[ing] the persons to be paid."

!d.~

13. On September 30, 2011,

1 "[T]he

District of Columbia Department of Employment Services ... determined
that Fletcher McDaniels was entitled to permanent disability compensation under D.C.
Code§ 32-1508 of the District of Columbia Workers' Compensation Act." Def.'s Mem.
at 2-3.
2

Mrs. McDaniels relied on these benefits as her sole source of income until her
death in July 2010. Compl. ~~ 7-8. The Estate now claims that "the benefits paid to Mrs.
McDaniels were not sufficient to cover her medical costs and basic living needs" between
2005 and her death in 2010. !d. ~ 8.
3

Although Mrs. McDaniels died in July 20 I 0, defendant continued to issue benefit
checks until December 2010, when it learned of Mrs. McDaniels' death. Def.'s Mem.
at 3 & n.5.

2

the Probate Division issued an order directing Liberty Mutual to pay $15 5,209.21 4 to the
co-administrator of the Estate, Def. 's Mem. at 4; Compl.
October 5, 2011, Def.'s Mem. at 4; see also Compl.

~~

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15, which defendant did on

20, 26, 32, 38 (listing the

outstanding amount as "$288,158.81, plus interest accruing since 1983").
On December 19, 2011, plaintiff filed this suit against Liberty Mutual in Superior
Court for the District of Columbia, challenging the amount owed and asserting four
causes of action arising from the alleged underpayment. See Com pl. Plaintiff claims that
defendant owed the Estate a total of$438,652.96, Compl.

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14, and thus, still owes the

Estate "$288,158.81, plus interest accruing since 1983," Compl.

~~

20, 26, 32, 38.

According to plaintiff, as a result of Liberty Mutual's underpayment of benefits,
defendant was negligent and breached its fiduciary duty, its contractual duty, and its
implied duty of good faith and fair dealing by failing "to make COLA payments in
accordance with District of Columbia law and/or regulation," Compl.

~~

19, 25, 31, 37,

causing "Mrs. McDaniels [to be] unable to meet her basic living needs" and ultimately
"caus[ing] or contribut[ing] to her untimely death in July 2010," Compl.

~~

21, 27, 33,

39.
Liberty Mutual removed the action to this Court on February 8, 2012, Notice of
Removal [Dkt. #1], and filed a motion to dismiss on February 13, 2012, Def.'s Mot.
4

According to the Complaint, the court order directed payment of $150,494.15,
Compl. ~ 15, but the Probate Division order indicates that the amount was $155,209.21,
Ex. 1 to Def.'s Mot, Probate Division Order Granting Petition by Interested Party, [Dkt.
#4-2] at 5; see also Def.'s Mem. at 4. See Wei! v. Markowitz, 829 F.2d 166, 173 n.15
(D.C. Cir. 1987) ("We are free to take judicial notice of this related proceeding in another
court."); Dupree v. Jefferson, 666 F.2d 606,608 n.1 (D.C. Cir. 1981) (taking judicial
notice of "related proceedings in other courts").

3

Defendant argues that plaintiffs tort claims (Counts I, III, and IV) should be dismissed
for lack of subject matter jurisdiction because these claims arise out of Liberty Mutual's
failure to pay accurate workers' compensation benefits pursuant to § 32-1506 of the
District of Columbia Workers' Compensation Act (the "Act"), and therefore, the
Department of Employment Services ("DOES") has primary jurisdiction. See Def.'s
Mem. at 6-7. Defendant contends that plaintiffs breach of contract claim (Count II)
should be dismissed for failure to state a claim because no contractual relationship
existed between Mrs. McDaniels and Liberty Mutual. 5 !d. at 14. For the reasons that
follow, defendant's motion is GRANTED.

STANDARD OF REVIEW
To survive a motion to dismiss, a "complaint must contain sufficient factual
matter, accepted as true, to 'state a claim to relief that is plausible on its face."' Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (citation omitted). "[A] plaintiffs obligation to

. provide the grounds of his entitle[ ment] to relief requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do."

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (alteration in original) (citations
and quotation marks omitted). Furthermore, "the court need not accept inferences drawn

5

In the alternative, defendant contends that the complaint should be dismissed for
failure to state a claim because: ( 1) the exclusive remedy for plaintiffs tort claims is
limited to reimbursement and late fees under the Act, id. at 13-14; (2) plaintiff has failed
to exhaust its administrative remedies, id. at 6-7, 10; (3) plaintiffhas not demonstrated
proximate cause to support its negligence claim, id. at 15; (4) plaintiff is unable to prove
damages to support its breach of contract claim because the defendant already paid the
past-due COLA payments, id. at 14-15; and (5) the District of Columbia does not
recognize a cause of action for bad faith, id. at 17-18.

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by plaintiffl_] if such inferences are unsupported by the facts set out in the complaint."
Kowal v. MCI Commc'ns Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994). When facing a

Rule 12(b)(I) motion to dismiss, plaintiff bears the burden of demonstrating that
jurisdiction exists. Khadr v. United States, 529 F.3d 1112, 1115 (D.C. Cir. 2008). The
court may, however, consider "any documents either attached to or incorporated in the
complaint and matters of which [the court] may take judicial notice." EEOC v. St.
Francis Xavier Parochial Sch., 117 F.3d 621, 624 (D.C. Cir. 1997).
,.
ANALYSIS

The District of Columbia Workers' Compensation Act provides the exclusive
remedy for employees suffering from work-related injuries. 6 D.C. Code § 32-1504;
Estate of Underwood v. Nat 'l Credit Union Admin., 665 A.2d 621, 630 (D.C. 1995);
Garrett v. Wash. Air Compressor Co., 466 A.2d 462,463 (D.C. 1983). Thus, when

injuries clearly are covered by the Act or there is a "substantial question whether the
[Act] applies, the administrative agency charged with implementing the
statute[-here, the DOES-]given its special expertise, has primary jurisdiction."
Underwood, 665 A.2d at 631 (quoting Harrington v. Moss, 407 A.2d 658, 661 (D.C.

1979)) (internal quotation marks omitted). Plaintiff alleges injuries arising out of
The Erie doctrine requires federal courts sitting in diversity to apply state
substantive law. See Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938); Hall v. C & P Tel.
Co., 793 F.2d 1354, 1355 (D.C. Cir. 1986) (applying the D.C. Court of Appeals
interpretation of the D.C. Workers' Compensation Act, after finding the Act to be "local
law," and upholding the district court's dismissal for lack of subject matter jurisdiction);
see also U.S. Fidelity & Guar. Co. v. Lee Invs. LLC, 641 F.3d 1126, 1133 (9th Cir. 2011)
("[T]he California Workers' Compensation Act's exclusivity provisions are substantive
provisions which, under Erie, a district court sitting in diversity is bound to follow."
(citation and internal quotation marks omitted)).
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defendant's failure to make timely and complete benefit payments. Pl.'s Mem. in Opp'n
to Def. 's Mot. ("Pl.'s Opp'n") [Dkt. #7] at 1. Because the "Act provides a specific
remedy for" such claims, Garrett, 466 A.2d at 463, or at the very least, there is a
"substantial question whether the [Act] applies," Underwood, 665 A.2d at 631, both the
District of Columbia Court of Appeals and the U.S. Court of Appeals for the District of
Columbia Circuit have held-and plaintiff concedes-that plaintiffs are barred from
raising "tort[] claims against a workers' compensation insurer for failure to timely pay
benefits." Pl.'s Opp'n at 4 (citing Garrett, 466 A.2d 462 and Hall v. C & P Tel. Co., 793
F.2d 1354 (D.C. Cir. 1986), reh'gdenied, 809 F.2d 924 (D.C. Cir. 1987)). 7 Therefore,
the DOES has primary jurisdiction over plaintiffs claims for breach of fiduciary duty,
breach of implied duty of good faith and fair dealing, and negligence, 8 and, in accordance

7

Plaintiff acknowledges that, under Garrett and Hall, "[p]laintiffs claims are
barred by the exclusivity provision of the" Act, and, instead, argues that these cases
"were wrongly decided." Pl.'s Opp'n at 1, 4. Unfortunately for plaintiff, this Court is
bound by the Erie doctrine and principles of stare decisis to apply the rule of law
prescribed in these cases. See Erie, 304 U.S. 64; Brewster v. Comm 'r, 607 F.2d 1369,
1373 (D.C. Cir. 1979) (discussing principles of stare decisis); see also Def.'s Reply to
Pl.'s Opp'n ("Def.'s Reply") [Dkt. #8] at 2.
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The Court notes that the Act provides a specific remedy for untimely payments,
see D.C. Code § 32-1515(f) ("If any compensation ... is not paid [on time] ... , there
shall be added to such unpaid compensation an amount equal to 20% thereof, which shall
be paid at the same time as, but in addition to, such compensation .... "),which plaintiff
additionally seeks to recover through a breach of contract claim, see Compl. ~~ 22-27.
Although the Court has not been made aware of a case applying D.C. law that explicitly
holds a breach of contract claim barred by the Act's exclusivity provision, it is aware of
cases in another district that have found such a bar. See, e.g., Arthur v. Liberty Mut. Fire
Ins. Co., No. 05-cv-680, 2005 WL 3078842, at *2 (D. Colo. Nov. 16, 2005) ("Colorado
law makes clear that if covered by the Act, one may not seek damages based on the
theory of breach of contract for unpaid or late disability and medical benefits because the
Act's exclusivity provision provides the exclusive remedy." (citing McKelvy v. Liberty
Mut. Ins. Co., 983 P.2d 42, 43-44 (Colo. App. 1998))).
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with the law of the District of Columbia and this Circuit and by plaintiffs own
admission, defendant's motion to dismiss these claims for lack of subject matter
jurisdiction is GRANTED. 9
Finally, plaintiffs breach of contract cla~m must also be dismissed. To prevail on
a breach of contract claim, a plaintiff must establish "( 1) a valid contract between the
parties; (2) an obligation or duty arising out of the contract; (3) a breach of that duty; and
(4) damages caused by breach." Ts into las Realty Co. v. Mendez, 984 A.2d 181, 187
(D.C. 2009). "An insurance policy establishes a contractual relationship between the
company and its policy holder," Choharis v. State Farm Fire & Cas. Co., 961 A.2d 1080,
1087 (D.C. 2008), but, "[o]ne who is not a party to a contract nonetheless may sue to
enforce its provisions if the contracting parties intend the third party to benefit directly
thereunder," W. Union Tel. Co. v. Massman Constr. Co., 402 A.2d 1275, 1277 (D.C.
1979). Thus, because neither Mrs. McDaniels, her beneficiaries, or her husband were
ever a party to the contract at issue, nor was Mrs. McDaniels or her beneficiaries
third-party beneficiaries of the contract, 10 plaintifflacks standing to bring a breach of

9

Because the Court dismisses plaintiffs tort claims pursuant to Rule 12(b )(1) for
lack of subject matter jurisdiction, it need not address defendant's Rule 12(b)(6)
arguments as to these claims.
10

At most, plaintiff has alleged that Fletcher McDaniels was an intended
beneficiary of the insurance contract. See Compl. ~ 5 ("As the workers compensation
insurer ... Liberty Mutual became obligated ... to pay workers compensation benefits to
Fletcher McDaniels."), and PI. 's Opp'n at 10 ("Fletcher McDaniels was paid periodically
under the workers' compensation insurance contract between [Liberty Mutual and Mr.
McDaniels' employer] for injuries he sustained at work."), and Def. 's Mem. at 3 ("By
way of its obligations in the insurance policy, Liberty Mutual paid workers'
compensation benefits to Fletcher McDanielS~").
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contract claim. For these reasons, defendant's motion to dismiss plaintiffs claim for
breach of contract is GRANTED.
CONCLUSION

For all of the foregoing reasons, the Court GRANTS Motion of Defendant Liberty
Mutual Group Inc. to Dismiss Plaintiffs Complaint [Dkt. #4] and dismisses the action in
its entirety. An order consistent with this decision accompanies this Memorandum
Opinion.

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