Hayes v. Dearborn National Life Insurance Company

Filing 25

MEMORANDUM DECISION AND ORDER. IT IS HEREBY ORDERED as follows: (1) Defendants Motion to Dismiss (Dkt. 8 ) is GRANTED IN PART AND DENIED IN PART. Plaintiffs state-law claims are subject to dismissal; however, Plaintiff is granted 30 days from the d ate of this Order to amend her Complaint. (2) Plaintiffs Motion to Strike Affidavit of Jade C. Stacey in Support of Motion to Dismiss (Dkt. 17 ) is DENIED AS MOOT. (3) The parties shall meet, confer on how this matter should proceed, and submit a joint litigation plan within 45 days from the date of this Order. Signed by Judge Candy W. Dale. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (cjm)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

APRIL ADRIANNE HAYES,
Case No. 1:14-cv-00122-CWD
Plaintiff,
MEMORANDUM DECISION AND
ORDER

v.
DEARBORN NATIONAL LIFE
INSURANCE COMPANY,
Defendant.

Before the Court is Defendant Dearborn National Life Insurance Company’s
Motion to Dismiss Plaintiff April Hayes’s Complaint (Dkt. 8), as well as Hayes’s Motion
to Strike Affidavit of Jade C. Stacey in Support of Motion to Dismiss (Dkt. 17). The
Court heard oral argument on these matters during a hearing on June 23, 2014. Because
the Court did not consider the extra-pleading materials attached to Mr. Stacey’s affidavit,
the motion to strike is moot. Further, the Court will grant in part Dearborn’s motion to
dismiss for failure to state a claim because Hayes’s state-law causes of action are
preempted by the Employee Retirement Income Security Act (ERISA). 29 U.S.C. § 1001,
et seq. However, this action will not be dismissed in its entirety because the Court will
grant Hayes 30 days to amend her Complaint.

MEMORANDUM DECISION AND ORDER- 1

BACKGROUND
The Court draws the following facts from allegations in Hayes’s Complaint, (Dkt.
1-1), and assumes they are true for the purpose of deciding Dearborn’s motion to dismiss.
See, e.g., Skilstaf, Inc. v. CVS Caremark Corp., 669 F.3d 1005, 1014 (9th Cir. 2012).
April Hayes’s husband, James Hayes, received a Term Life Insurance Policy (the
Policy) issued by Dearborn as part of his benefit package when employed by the Life
Care Center of the Treasure Valley. Mr. Hayes did not name his wife as a beneficiary of
the Policy. Mr. Hayes passed away in July 2013. After reading about Mr. Hayes’s death
in the newspaper, April Hayes contacted Dearborn to request a proof of loss or death
claim form to make a life insurance claim. Dearborn refused to provide the form, so
Hayes obtained a form from the internet and submitted it to Dearborn, naming herself as
a beneficiary on the form. Contending that life insurance policy proceeds are community
property under Idaho law, Hayes repeatedly demanded payment of her community share
to the proceeds of the Policy. Dearborn denied her claims because she is not a named
beneficiary of the Policy.
Hayes filed an action in the Third Judicial District of the State of Idaho, pleading
state-law causes of action for breach of contract and breach of the covenant of good faith
and fair dealing. Hayes claims Dearborn breached a contract by failing to properly
evaluate her policy claim and pay her the amount justly due. Additionally, Hayes alleges
Dearborn breached the covenant of good faith and fair dealing by failing or refusing to
pay her the amount justly due under the Policy. (Dkt. 1-1.)
MEMORANDUM DECISION AND ORDER- 2

Although the Complaint presently contains no cause of action under ERISA,
Dearborn removed the case to federal court pursuant to 28 U.S.C. § 1331. Shortly after
removing the case, Dearborn filed a Rule 12(b)(6) motion to dismiss on the grounds that
Hayes’s claims are preempted by ERISA. Although Hayes first received notice that the
Policy was subject to ERISA when Dearborn removed the case to this Court, she
concedes “the Policy at issue in this case is an employer-issued group life insurance
Policy, governed by ERISA.” (Dkt. 16 at 6.) Hayes further acknowledges that “federal
preemption applies” and “the Policy at issue in this case must be administered according
to the ERISA plan, and plan documents.” (Id. at 6-7.)
Dearborn’s attorney, Jade Stacey, attached the following documents to his
affidavit in support of the motion to dismiss: Hayes’s Complaint filed in state court (Dkt.
8-3), the Policy issued by Dearborn to Mr. Hayes’s employer, Life Care Centers of
America, (Dkt. 8-4), the employer’s application for the policy (Dkt. 8-5), and Mr.
Hayes’s insurance enrollment form (Dkt. 8-6). In response, Hayes moved to strike
Stacey’s affidavit pursuant to Rule 56(c)(4), claiming it is not premised on personal
knowledge, does not set forth admissible facts, that Stacey could not competently testify
on the matters stated in it, and that the affidavit contained inadmissible hearsay evidence.
According to Hayes, if the affidavit is not stricken, Dearborn’s motion to dismiss
must be converted to a motion for summary judgment because Dearborn presented
matters outside the pleadings. Hayes further claims summary judgment should be denied
because Dearborn failed to provide the Court and Hayes with the governing ERISA plan
and to identify the fiduciary with authority to pay or otherwise administer the plan
MEMORANDUM DECISION AND ORDER- 3

benefits. Dearborn claims courts may consider documents incorporated by reference in
the complaint without converting motions to dismiss into motions for summary judgment.
In the alternative, Dearborn argues summary judgment in Dearborn’s favor would be
appropriate because Hayes has not stated a claim under ERISA. Dearborn also argues the
Court need only consider Hayes’s Complaint to resolve the motion to dismiss.
Both parties expressly consented in writing to jurisdiction of the Magistrate Judge
for all purposes. (Dkt. 24.)
DISCUSSION
To survive a motion to dismiss under Rule 12(b)(6), the complaint must allege
“enough facts to state a claim to relief that is plausible on its face.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 554, 570 (2007). The Court must accept the complaint’s factual
allegations as true and draw all reasonable inferences in a light most favorable to the nonmoving party. Id. But the Court need not accept as true legal conclusions or conclusory
factual allegations. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). Dismissal is proper
“where there is … a lack of a cognizable legal theory.” Gray v. I.B.E.W. Local 332
Pension Trust, 498 F. App’x 831, 832 (9th Cir. 2012). Although the Court must convert a
Rule 12(b)(6) motion to dismiss into a Rule 56 motion for summary judgment if it
considers matters outside the pleadings, Fed. R. Civ. P. 12(d), the Court need not do so if
its legal conclusion does not depend on the extra-pleading materials. Keams v. Tempe
Technical Institute, Inc., 110 F.3d 44, 46 (9th Cir.1997).

MEMORANDUM DECISION AND ORDER- 4

1. Removal Jurisdiction
As a preliminary matter, the Court must determine whether it has subject matter
jurisdiction over this case. Under the “well-pleaded complaint” rule, a defendant “may
not generally remove a case to federal court unless the plaintiff’s complaint establishes
that the case ‘arises under’ federal law.” Aetna Health Inc. v. Davila, 542 U.S. 200, 207
(2004). However, an exception to the well-pleaded complaint rule allows a state-law
claim to be removed “[w]hen a federal statute wholly displaces the state-law cause of
action through complete pre-emption.” Id. at 207-208. For example, “the ERISA civil
enforcement mechanism is one of those provisions with such ‘extraordinary pre-emptive
power’ that it ‘converts an ordinary state common law complaint into one stating a
federal claim for purposes of the well-pleaded complaint rule.’” Id. at 209 (quoting
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65-66 (1987)). This exception applies
here because, as explained below, Hayes’s state-law claims are “causes of action within
the scope of the civil enforcement provisions of” ERISA. Id. at 66.
2.

ERISA Preemption
Congress enacted ERISA to provide for a “uniform regulatory scheme over

employee benefit plans.” Davila, 542 U.S. at 208. ERISA’s civil enforcement provision,
29 U.S.C. § 1132, creates an exclusive remedy for those asserting rights under an ERISAregulated employee benefits plan. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 (1987).
Among other claims, the civil enforcement provision authorizes “a participant or

MEMORANDUM DECISION AND ORDER- 5

beneficiary”1 to bring a civil action “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.” 29 U.S.C. § 1132(a)(1)(B). “If a . . . beneficiary
believes that benefits promised to him under the terms of the [ERISA-regulated] plan are
not provided, he can bring suit seeking provision of those benefits.” Davila, 542 U.S. at
210.
Congress intended this civil enforcement remedy to be the exclusive remedy for
denials of benefits under the terms of ERISA-regulated employee benefits plans. Id.
Consequently, any state law cause of action that “duplicates, supplements, or supplants”
the ERISA civil enforcement remedy is preempted. Id. “In other words, if an individual,
at some point in time, could have brought his claim under [29 U.S.C. § 1132](a)(1)(B),
and where there is no other independent legal duty that is implicated by a defendant's
actions, then the individual's cause of action is completely pre-empted by [§
1132](a)(1)(B).”Id.
Here, Hayes’s state-law claims allege that Dearborn failed to pay benefits
promised to her as a beneficiary of a group life insurance policy issued by Dearborn to
her deceased husband’s employer. Hayes admits “the Policy at issue in this case is an

1

For the purposes of the civil enforcement provision, “the term ‘beneficiary’ means a
person designated by a participant, or by the terms of an employee benefit plan, who is or may
become entitled to a benefit thereunder.” 29 U.S.C. § 1002(8). A “participant,” by contrast, is
“any employee or former employee of an employer, . . . who is or may become eligible to receive
a benefit of any type from an employee benefit plan which covers employees of such employer
or members of such organization, or whose beneficiaries may be eligible to receive any such
benefit.” Id. § 1002(7). Assuming but not deciding that the allegations in the Complaint are true,
April Hayes has standing as a “beneficiary” because she claims to be entitled to a benefit under
an employee benefit plan.
MEMORANDUM DECISION AND ORDER- 6

employer-issued group life insurance Policy[] governed by ERISA,” “federal preemption
applies to this case[,] and the Policy must be distributed pursuant to ERISA.” (Dkt. 16 at
6-7.) Moreover, Hayes does not allege that she is entitled to the death benefit proceeds
under some independent legal duty implicated by Dearborn’s actions. Indeed, Hayes
argues that a provision of the Policy, the so-called “conformity clause,” requires
Dearborn to observe Idaho’s community property laws and pay benefits to her even
though her husband did not name her as a beneficiary. These claims cannot be resolved
without interpretation of the ERISA-governed employee benefits plan at issue—the
entirety of which is not before the Court. 2 Therefore, both of Hayes’s state-law claims
fall within the scope of § 1132(a)(1)(B) and are preempted. See, e.g., Dedeaux, 481 U.S.
41 (holding state-law breach of contract claim preempted by ERISA).
3.

Leave to Amend
Under Rule 15(a)(2), the Court may grant leave to amend a complaint and should

freely do so “when justice so requires.” The underlying purpose of this rule is to
“facilitate decision on the merits, rather than on the pleadings or technicalities.” Nunes v.
Ashcroft, 375 F.3d 805, 808 (9th Cir. 2003). Accordingly, the rule “is to be applied with
extreme liberality.” Morongo Band of Mission Indians v. Rose, 893 F.2d 1074, 1079 (9th
Cir.1990).

2

Because the plan is not in the record, the Court cannot now determine whether the
conformity clause or any other provisions of the plan compels an award or denial of benefit to
Hayes. But it is notable that this Court recently held ERISA preempts Idaho’s community
property laws to the extent they conflict with administration of an ERISA-regulated plan
according to the plan documents. Orr v. Prudential Ins. Co. of America, No. 11-cv-647, 2012
WL 2122157 (D. Idaho June 12, 2012).
MEMORANDUM DECISION AND ORDER- 7

During the hearing on this matter, counsel for Hayes requested leave to amend,
and the Court will grant her leave to do so. Hayes did not fail to state a claim under
ERISA in bad faith. She first discovered the Policy was subject to ERISA when Dearborn
removed this case from state court. In addition, the plan is not before the Court, so the
record is insufficient to determine whether amendment would be futile. Indeed, at the
hearing, counsel for Hayes claimed Hayes could potentially state a claim under ERISA if
she had access to the plan. Hayes has not previously amended her Complaint, and
amendment at this early stage would not unduly delay the proceedings. Based on these
factors, the Court will grant Hayes 30 days to amend her Complaint.
CONCLUSION
The Court finds Hayes’s state-law causes of action are subject to dismissal
because, as plead, they are completely preempted by ERISA. Due to ERISA’s broad
preemptive scope, however, the Court has jurisdiction over Hayes’s claims to the extent
they can be amended into cognizable ERISA claims. Accordingly, the Court grants Hayes
30 days leave to amend her Complaint. In reaching this decision, the Court considered
only Hayes’s Complaint and the arguments of counsel stated in the briefing and at the
hearing. For that reason, Hayes’s motion to strike and her request that Dearborn’s motion
to dismiss be treated as a motion for summary judgment are moot.

MEMORANDUM DECISION AND ORDER- 8

ORDER
Based on the foregoing, the Court being otherwise fully advised in the premises,
IT IS HEREBY ORDERED as follows:
(1)

Defendant’s Motion to Dismiss (Dkt. 8.) is GRANTED IN PART AND

DENIED IN PART. Plaintiff’s state-law claims are subject to dismissal; however,
Plaintiff is granted 30 days from the date of this Order to amend her Complaint.
(2)

Plaintiff’s Motion to Strike Affidavit of Jade C. Stacey in Support of

Motion to Dismiss (Dkt. 17) is DENIED AS MOOT.
(3)

The parties shall meet, confer on how this matter should proceed, and

submit a joint litigation plan within 45 days from the date of this Order.
July 22, 2014

MEMORANDUM DECISION AND ORDER- 9