Scentsy, Inc. v. Blue Cross of Idaho Health Service, Inc.

Filing 20

MEMORANDUM DECISION AND ORDER RE MOTION TO COMPEL ARBITRATION, OR IN THE ALTERNATIVE PARTIALLY DISMISS AND STAY - Defendants Motion to Compel Arbitration, or in the Alternative to Partially Dismiss and Stay (Dkt. 8 ) is DENIED in part and GRANTED in part. The Court denies Defendants motion to compel arbitration. The Court grants Defendants motion to dismiss Plaintiffs claim for unjust enrichment. The Court denies the balance of Defendants motion to dismiss. Signed by Judge Amanda K Brailsford. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by (jd)

.
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

SCENTSY, INC.,

Case No. 1:23-cv-00552-AKB

Plaintiff,
v.
BLUE CROSS OF IDAHO HEALTH
SERVICE, INC.,

MEMORANDUM DECISION
AND ORDER RE MOTION TO
COMPEL ARBITRATION, OR IN
THE ALTERNATIVE PARTIALLY
DISMISS AND STAY

Defendant.
Pending before the Court is Defendant Blue Cross of Idaho Health Service, Inc.’s Motion
to Compel Arbitration, or in the Alternative to Partially Dismiss and Stay. (Dkt. 8). Having
reviewed the record and the parties’ submissions, the Court finds that the facts and legal argument
are adequately presented and that oral argument would not significantly aid its decision-making
process, and it decides the motion on the parties’ briefing. Dist. Idaho Loc. Civ. R. 7.1(d)(1)(B);
see also Fed. R. Civ. P. 78(b) (“By rule or order, the court may provide for submitting and
determining motions on briefs, without oral hearings.”). The Court denies Blue Cross’s motion to
compel arbitration and denies in part and grants in part its motion to dismiss.
I. BACKGROUND
Plaintiff Scentsy, Inc., alleges it is “the sponsor and a fiduciary of a self-insured and selffunded health care benefit plan called the Scentsy, Inc., Group Health Plan (“the Plan”).” (Dkt. 1
at ¶ 2). Blue Cross is the Plan’s administrator and its excess-loss insurer. (Id. at ¶ 7). Beginning in
2019, Blue Cross and Scentsy entered into two types of contracts governing their relationship:
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(1) administrative service agreements (“ASAs”) related to Blue Cross’s administrator role, and
(2) excess loss contracts related to Blue Cross’s role as the Plan’s insurer for losses in excess of
$200,000. (Id. at ¶¶ 10-11). In practice, Scentsy alleges these contracts provided that after a plan
participant received medical services, the service provider would bill Blue Cross; Blue Cross
would review, decide, and adjust the claim for coverage; and then, Blue Cross would debit the
Plan’s account to pay the claim, unless the amount of the claim exceeded $200,000. (Id. at ¶ 13).
In that event, Blue Cross would pay the amount exceeding $200,000. (Id.). Blue Cross’s obligation
to pay amounts exceeding $200,000, however, were limited to services rendered, billed, and paid
within a fixed fifteen-month period. (Id. at ¶ 14).
In February 2022, a Plan participant (hereafter “Participant”) “became seriously ill” and
“ultimately incurred millions of dollars’ worth of medical bills.” (Id. at ¶ 22). The Participant’s
first set of medical claims were for services provided between February 20, 2022, and March 21,
2022. (Id.). The amount billed on those claims exceeded $200,000, and Blue Cross paid that excess
amount. (Id.).
The Participant’s second set of medical claims were for services provided between
March 22, 2022, and April 20, 2022 (hereafter “uncovered claims”). (Id. at ¶ 23). Blue Cross did
not process these uncovered claims for payment, however, until October 2022. (Id.). As a result,
the uncovered claims were outside the fifteen-month fixed period for excess coverage, and Blue
Cross declined to pay them. (Id.). Meanwhile, if Blue Cross had processed the uncovered claims
earlier, it would have been required to cover the excess loss. (Id.).
During the timeframes when the Participant received medical services from February 20
until May 21, 2022, and when Blue Cross adjusted the Participant’s claims and uncovered claims,

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the parties had two, successive ASAs. The 2020 ASA was effective from May 1, 2020, through
April 30, 2022. (Dkt. 1-4 at p. 30) (showing effective dates of May 1, 2020, through April 30,
2021); (Dkt. 1-5 at p. 8) (showing amended effective dates of May 1, 2021, through April 30,
2022). Thereafter, the 2022 ASA was effective from May 1, 2022, through April 30, 2023. (Dkt. 82 at p. 34). Also, in effect during part of the relevant period was the 2021 Excess Loss Contract
governing Blue Cross’s obligation to insure excess losses. (Dkt. 1-2 at p. 2). It was effective from
May 1, 2021, through April 30, 2022, which spanned the entire period when the Participant
received medical services.
Importantly, these agreements provide different avenues for the parties to resolve their
disputes. The Excess Loss Contract provides that “any claim or lawsuit arising from or relating to
this Agreement shall be filed and maintained in a court of competent jurisdiction in Ada County,
Idaho.” (Id. at p. 7). Likewise, the 2020 ASA provides the parties will litigate their disputes in
court, stating that “any claim or lawsuit arising from or relating to this Agreement shall be filed
and maintained in a court of competent jurisdiction in Ada County, Idaho.” (Dkt. 1-4 at p. 11)
(Art. VI, ¶ A). Meanwhile, the 2022 ASA provides for arbitration in lieu of litigation, stating that
“either party shall have the right to commence arbitration if the [parties] have not been successful
in resolving their disputes” and that “all disputes shall be resolved by binding arbitration submitted
to JAMS under or in accordance with its then-prevailing Comprehensive Arbitration Rules.”
(Dkt. 8-2 at p. 17).
In September 2023, Scentsy initiated an arbitration proceeding under the parties’ 2019
ASA to challenge Blue Cross’s refusal to pay the Participant’s uncovered claims; when initiating
the arbitration, Scentsy mistakenly believed the 2019 ASA was the applicable ASA. (Dkt. 1-3 at

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p. 2; Dkt. 12 at p. 3). Blue Cross responded that the 2019 ASA was not the governing contract.
(Dkt. 8-1 at p. 6). This response prompted Scentsy to stay the arbitration and file this action against
Blue Cross. (Dkt. 1; Dkt. 8-1 at p. 6).
In this action, Scentsy alleges that Blue Cross is obligated to pay the Participant’s
uncovered claims and that Blue Cross engaged in a variety of conduct in its Plan administrator role
to avoid covering this excess loss. (Dkt. 1 at ¶¶ 22-35). Scentsy further alleges this conduct violated
the 2020 ASA and the 2021 Excess Loss Contract. (See, e.g., id. at ¶¶ 39, 78; Dkt. 1-2 at p. 7). In
its complaint, Scentsy alleges claims for breach of fiduciary duty, breach of contract, breach of
covenant of good faith and fair dealing, unjust enrichment, and insurance bad faith. (Dkt. 1 at
¶¶ 40-110).
In response, Blue Cross filed the pending motion to compel arbitration. (Dkt. 8). It asserts
the 2022 ASA governs the parties’ dispute and requires arbitration. (Id.). Alternatively, Blue Cross
moves to dismiss Scentsy’s claim under § 502(a)(3) of the Employee Retirement Income Security
Act of 1974 (“ERISA”), 29 U.S.C. §§ 1132(a)(3), and its state law claims.
II. LEGAL STANDARD
A.

Motion to Compel Arbitration
The Federal Arbitration Act (FAA) controls the enforcement of arbitration clauses. Rent-

A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010). Section 2 of the FAA provides an
arbitration agreement “shall be valid, irrevocable, and enforceable, save upon such grounds as
exist at law or in equity for the revocation of any contract.” 9 U.S.C. § 2. Further, the FAA
enunciates a strong federal policy favoring arbitration and requires courts to “rigorously enforce

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agreements to arbitrate.” Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 221 (1985); accord
Epic Sys. Corp. v. Lewis, 584 U.S. 497, 505-06 (2018).
Where an arbitration clause exists within a contract, “there is a presumption of
arbitrability.” AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643,
650 (1986). “The court’s role under the [FAA] is therefore limited to determining (1) whether a
valid agreement to arbitrate exists and, if it does, (2) whether the agreement encompasses the
dispute at issue.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000);
accord Munro v. Univ. of S. California, 896 F.3d 1088, 1091 (9th Cir. 2018). “[T]he party resisting
arbitration bears the burden of proving that the claims at issue are unsuitable for arbitration.” Green
Tree Fin. Corp.-Alabama v. Randolph, 531 U.S. 79, 91 (2000).
A summary judgment standard applies to resolve a motion to compel arbitration. BurchLucich v. Lucich, No. 1:13-cv-00218-BLW, 2013 WL 5876317, at *4 (D. Idaho Oct. 31, 2013).
Under this standard, the Court treats the facts as it would when ruling on a motion for summary
judgment by construing all the facts and the reasonable inferences from those facts in a light most
favorable to the nonmoving party. Id.; see also Hutchins v. DirecTV Customer Serv., Inc., Case
No. 1:11-cv-422-REB, 2012 WL 1161424, at *4 (D. Idaho Apr. 6, 2012). (internal quotation marks
and citation omitted); see also Cox v. Ocean View Hotel Corp., 533 F.3d 1114, 1119 (9th Cir.
2008) (“[A] denial of a motion to compel arbitration has the same effect as a grant of partial
summary judgment denying arbitration.”).
B.

Rule 12(b)(6) Motion to Dismiss
Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a motion to dismiss for failure

to state a claim on which relief can be granted tests the legal sufficiency of a complaint. Navarro

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v. Block, 250 F.3d 729, 732 (9th Cir. 2001). In assessing dismissal of claims pursuant to
Rule 12(b)(6), the Court must “accept factual allegations in the complaint as true and construe the
pleadings in the light most favorable to the nonmoving party.” Manzarek v. St. Paul Fire & Marine
Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008); accord Mudpie, Inc. v. Travelers Cas. Ins. Co. of
Am., 15 F.4th 885, 889 (9th Cir. 2021).
Generally, a district court may not consider any materials beyond the complaint when
ruling on a Rule 12(b)(6) motion. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542,
1555 n.19 (9th Cir. 1989). If the court considers evidence outside the pleadings, it must convert a
Rule 12(b)(6) motion into a motion for summary judgment under Rule 56. “A court may, however,
consider certain materials—documents attached to the complaint, documents incorporated by
reference in the complaint, or matters of judicial notice—without converting the motion to dismiss
into a motion for summary judgment.” United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003).
III. ANALYSIS
A.

Motion to Compel Arbitration
The parties disagree whether Scentsy must arbitrate its dispute with Blue Cross. Scentsy

relies on the 2020 ASA and the 2021 Excess Loss Contract, neither of which provides for
arbitration, to argue it is not required to arbitrate but rather may litigate the dispute in federal court.
Meanwhile, Blue Cross relies on the 2022 ASA, which provides the parties shall arbitrate all
disputes. As Blue Cross states, “the singular critical inquiry is whether there is an agreement to
arbitrate.” (Dkt. 8-1 at p. 10).

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1.

The Court, not an Arbitrator, Determines Which Contract Controls

The Supreme Court recently noted in Coinbase, Inc. v. Suski,144 S. Ct. 1186, 1190 (2024),
that it has “long held that disputes are subject to arbitration if, and only if, the parties actually
agreed to arbitrate those disputes.” In Coinbase, as in this case, “[t]he parties executed two
contracts,” one containing an arbitration provision and the other containing a forum selection
clause for state court. Id. Before the Court resolved which contract controlled, it concluded that “a
court needs to decide what the parties have agreed—i.e., which contract controls.” Id.
Initially, Blue Cross asserted inconsistent arguments regarding whether this Court or an
arbitrator should decide which contract controls in this case. For example, in its opening brief,
Blue Cross argued that “the parties disagree only as to which iteration of the yearly renewed [ASA]
applies, which is a question that is properly addressed and settled in the JAMS arbitration.” (Dkt. 81 at pp. 2-3; see also id at p. 3 n.2) (“[T]he threshold question of which contract applies is one for
the arbitrator to decide.”). At the same time, however, it argued “this Court [should] adhere to
long-standing precedent and enforce the [p]arties’ agreement to arbitrate.” (Id. at p. 3). Following
supplemental briefing after Coinbase issued, Blue Cross now agrees this Court should determine
which contract controls in this case, expressly acknowledging that “this Court can determine
whether the 2022 ASA supersedes any contrary provision in the earlier agreements.” (Dkt. 18 at
p. 2).
Determining which contract is controlling in this case requires an analysis of which
contract—the 2020 ASA or the 2022 ASA—governs the parties’ rights and obligations regarding
the Participant’s uncovered claims. Although Blue Cross urges the Court to conclude the parties
must arbitrate because Scentsy initiated an arbitration with JAMS based on its mistaken belief the

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2019 ASA was the applicable contract, both parties now agree the 2019 ASA does not govern the
parties’ dispute. Further, Blue Cross fails to cite any authority or even to identify a legal theory—
such as contractual amendment, waiver, or estoppel—that requires the Court to compel Scentsy to
arbitrate based on its initial mistaken belief the 2019 ASA governed the parties’ dispute. Absent a
legal theory and supporting authority that Scentsy’s mistake revokes or overrides the parties’
written agreements, the Court declines to conclude Scentsy’s mistaken initiation of an arbitration
under an inapplicable contract now requires arbitration.
2.

The 2020 ASA and the 2021 Excess Loss Contract Control

The crux of Scentsy’s complaint is that Blue Cross delayed adjusting and paying the
Participant’s uncovered claims to avoid paying an excess loss. Scentsy argues the controlling
contracts are the 2021 Excess Loss Contract and the 2020 ASA. Although Scentsy acknowledges
“much of the claim-processing time” for the uncovered claims occurred after the 2020 ASA
terminated, it argues the 2020 ASA provides “specific terms for what happens when services are
provided during its lifespan but the paperwork is not provided until after termination” under a
provision entitled “Run-out of Claims Services” (“run-out provision”) (Dkt. 12 at p. 7). This runout provision provides that:
If [the 2020 ASA] is terminated by mutual agreement[, Blue Cross] shall, for a
period of twelve (12) months after termination (“Run-out Period”), process
Benefits Claims under the [Plan] which are received by [Blue Cross] during the
Run-out Period but are for Covered Services rendered prior to the date of
termination. Except for the run-out of claims services expressly stated in this
paragraph, after termination of this Agreement all other obligations of [Blue Cross]
to the Plan Sponsor shall cease.
(Dkt. 1-4 at pp. 6-7). According to Scentsy, this run-out provision means “a claim will be governed
by the ASA in place at the date of the service, not when processed or paid.” (Dkt. 12 at p. 8). In

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other words, Scentsy’s position is that the 2020 ASA applies to the uncovered claims for services
provided from March 22 through April 20, 2022—despite the 2020 ASA’s termination on
April 30, 2022 1—because the services underlying the uncovered claims occurred during the 2020
ASA’s pendency, and under the run-out provision, Blue Cross adjusted those claims within twelve
months.
Blue Cross counters that the 2022 ASA superseded the 2020 ASA because the 2022 ASA
contains an “Entire Agreement” clause. (Dkt. 8-1 at p. 4). This provision states that the 2022 ASA
“constitutes the complete and exclusive contract between the parties and supersedes any and all
prior and contemporaneous oral or written communications or proposals not expressly included
herein.” (Dkt. 8-2 at p. 28). Blue Cross asserts this clause “supersedes and nullifies” the run-out
provision in the 2020 ASA on which Scentsy relies. (Dkt. 16 at p. 7). As Blue Cross also notes,
however, the “Entire Agreement” clause “is a classic merger clause.”
Blue Cross correctly characterizes the clause as a merger clause, but it misconstrues a
merger clause’s purpose. A written contract containing a merger clause means the contract is
complete on its face. Howard v. Perry, 106 P.3d 465, 468 (Idaho 2005). The purpose of a merger
clause is to prevent a party from relying on oral evidence to dispute the contract’s terms. “If a
contract contains a merger clause, it is an integrated agreement for purposes of the parol evidence
rule,” and extrinsic evidence may not be used to determine whether a written and integrated
contract is based on terms other than those contained in the contract. AED, Inc. v. KDC Invs., LLC,

1

Although the 2020 ASA was originally effective from May 1, 2020, until April 30, 2021,
the parties amended it to be effective through April 30, 2022. (Dkt. 1-5 at p. 8).

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307 P.3d 176, 182 (Idaho 2013). Otherwise, “the parties [would be required] to list in the contract
everything upon which they had not agreed and hope that such list covers every possible prior and
contemporaneous agreement that could later be alleged.” Howard, 106 P.3d at 468; see also Read
v. Teton Springs Golf & Casting Club, LLC, No. CV 08-CV-00099, 2011 WL 1224073, at *8 (D.
Idaho Feb. 16, 2011), report and recommendation adopted, No. CV08-099-E-EJL-REB, 2011 WL
1223426 (D. Idaho Mar. 28, 2011).
The plain language of the 2022 ASA’s Entire Agreement clause supports the conclusion
that it is a classic merger clause. Notably, the express language of that clause provides the 2022
ASA “supersedes any and all prior and contemporaneous oral or written communications or
proposals.” (Dkt. 8-2 at p. 28) (emphasis added). This language does not, however, supersede the
parties’ prior agreements, and Blue Cross does not cite any authority in support of that proposition.
Blue Cross also argues the 2022 ASA controls because its “Dispute Resolution Process”
clause states “all disputes which may arise under or in connection with [the 2022 ASA], whether
arising before or after the expiration of the [2022 Agreement], shall be submitted to the alternate
resolution dispute process.” (Dkt. 8-2 at p. 17) (emphasis added). This clause’s plain language,
however, is limited to disputes arising under or in connection with the 2022 ASA. Whether the
parties’ dispute over the uncovered claims arises under or in connection with the 2022 ASA,
however, is precisely the question the Court must resolve. In other words, this clause begs the
question of whether that 2022 ASA governs the parties’ dispute about the uncovered claims. Those
claims either arose under or are made in connection with 2022 ASA, or alternatively, they arose
under or are made in connection with the 2020 ASA. The 2022 ASA’s “Dispute Resolution
Process” provision does not resolve that issue.

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For these reasons, the Court concludes the 2020 ASA governs the parties’ dispute regarding
which party is obligated to pay for the Participant’s uncovered claims for the medical services
provided between March 22 and April 20, 2022. Although Blue Cross reviewed and adjusted these
claims in October 2022—after the 2020 ASA’s termination on April 30, 2022—the 2020 ASA’s
run-out provision required Blue Cross to process the uncovered claims under the 2020 ASA.
Accordingly, the Court concludes the 2020 ASA controls the parties’ dispute, and that agreement
does not require the parties to arbitrate their dispute.
Moreover, Blue Cross does not challenge Scentsy’s allegations or arguments that the 2021
Excess Loss Contract applies to the uncovered claims. Like the 2020 ASA, the 2021 Excess Loss
Contract does not contain an arbitration provision. Rather, it provides “[a]ny claim or lawsuit
arising from or relating to this Agreement shall be filed and maintained in a court of competent
jurisdiction in Ada County, Idaho.” (Dkt. 1-2 at p. 7). This agreement provides more support for
the conclusion Scentsy is not required to arbitrate this dispute. Accordingly, the Court denies Blue
Cross’s motion to compel arbitration.
B.

Rule 12(b)(6) Motion to Dismiss
Blue Cross moves to dismiss certain claims under Rule 12(b)(6). (Dkt. 8-1 at p. 11).

Specifically, Blue Cross argues that Scentsy cannot assert breach of fiduciary duty under both
§ 1132(a)(2) and § 1132(a)(3) of ERISA; ERISA preempts Scentsy’s state law claims; and
Scentsy’s unjust enrichment claim fails as a matter of law. (Dkt. 8-1 at pp. 11-13). In response,
Scentsy broadly argues Rule 8 of the Federal Rules of Civil Procedure permits Scentsy to plead in
the alternative. (Dkt. 12 at pp. 15-17).
1.

Simultaneous Claims Under § 1132(a)(2) and § 1132(a)(3)

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Blue Cross moves to dismiss Scentsy’s equitable claim under § 1132(a)(3).
Section 1132(a)(3) provides a fiduciary may bring a civil action for injunctive or “other
appropriate equitable relief.” 29 U.S.C. § 1132(a)(3). Meanwhile, § 1132(a)(2) provides a
fiduciary may bring a civil action “for appropriate relief under [§] 1109.” 29 U.S.C. § 1132(a)(2).
In turn, § 1109 provides for liability for a breach of fiduciary duty and contemplates money
damages. 29 U.S.C. §§ 1109, 1132(a)(2).
Relying on § 1332(a)(2), Scentsy alleges Blue Cross breached its fiduciary duty in
numerous ways and requests money damages. (Dkt. 1 at ¶¶ 59-60). Alternatively, Scentsy alleges
these exact same fiduciary duty breaches under § 1132(a)(3), alleges Blue Cross “should either
pay damages or hold the funds it took in violation of its fiduciary duty in constructive trust for
Scentsy and/or the Plan,” and otherwise requests “appropriate equitable relief.” (Id. at ¶¶ 71, 72,
74) (emphasis added).
Blue Cross argues Scentsy cannot maintain this latter equitable claim under § 1132(a)(3)
where an adequate remedy is available under a different ERISA provision. (Dkt. 8-1 at p. 11). In
support, it relies on Wise v. Verizon Commc’ns, Inc., 600 F.3d 1180 (9th Cir. 2010). In that case,
the plan participant sought an award of benefits and removal of the fiduciary under both
§ 1132(a)(2) and § 1132(a)(3). The Ninth Circuit noted § 1132(a)(3) “is a ‘catchall’ or ‘safety net’
designed to offer appropriate equitable relief for injuries caused by violations that § 1132 does not
elsewhere adequately remedy.” Wise, 600 F.3d at 1190 (brackets and quotation marks omitted).
Because § 1132(a)(2) provided both for the removal of the fiduciary and for an award of benefits,
the Ninth Circuit affirmed the district court’s dismissal of the participant’s § 1132(a)(3) because

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all the relief the participant requested “under the equitable catchall was duplicative relief of [the]
relief she sought under other sections of [§ 1132].” Id.
In response to Blue Cross’s challenge to Scentsy’s § 1132(a)(3) claim, Scentsy relies on
Rule 8 and argues it may plead claims in the alternative. See Fed. R. Civ. P. 8(d) (“A party may
set out 2 or more statements of a claim or defense alternatively or hypothetically, either in a single
count or defense or in separate ones.”). What is entirely unclear from the parties’ briefing,
however, is whether the request in Scentsy’s § 1132(a)(3) claim for a constructive trust is
duplicative of relief under § 1132(a)(2); why a constructive trust is necessary in lieu of monetary
damages; and whether a constructive trust is an available equitable remedy under § 1132(a)(3).
Because the parties have not adequately addressed these issues, the Court will allow Scentsy to
proceed with its § 1132(a)(3) claim for equitable relief at this stage. Regardless, however, Scentsy
is not entitled to a remedy under both sections if a remedy under § 1132(a)(2) is adequate. See
Castillo v. Metro. Life Ins. Co., 970 F.3d 1224, 1229 (9th Cir. 2020) (noting relief is not available
under § 1132(a)(3) where Congress elsewhere provided adequate relief).
2.

ERISA Preemption of State and Common Law Claims

Blue Cross also moves to dismiss Scentsy’s state law claims for breach of contract, breach
of the covenant of good faith and fair dealing, breach of fiduciary duty, and insurance bad faith; it
argues ERISA preempts these claims. (Dkt. 8-1 at pp. 11-13). ERISA’s preemption provision is
“deliberately expansive” and “designed to ‘establish [employee benefit] plan regulation as
exclusively a federal concern.’” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45-46 (1987) (quoting
Alessi v. Raybesor-Manhattan, Inc., 451 U.S. 504, 523 (1981)). Indeed, ERISA’s provisions
“supersede any and all State laws insofar as they . . . relate to any employee benefit plan.” 29

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U.S.C. § 1144(a). “Congress used the words ‘relate to’ in § [1144(a)] in their broad sense.” Shaw
v. Delta Air Lines, Inc., 463 U.S. 85, 98 (1983). Under § 1144(a)’s “relate to” clause, ERISA
preempts state and common law causes of action in two categories: those that have a “connection
with” an ERISA-governed benefit plan, and those that have a “reference to” an ERISA-governed
benefit plan. Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 319-20 (2016) (state law); Pilot Life,
481 U.S. at 47 (common law).
Despite that ERISA ordinarily preempts all state law claims, Scentsy again argues that it
may plead state law claims under Rule 8 as an alternative to its ERISA claims. (Dkt. 12 at pp. 1517). See Fed. R. Civ. P. 8(d) (“A party may set out 2 or more statements of a claim or defense
alternatively or hypothetically, either in a single count or defense or in separate ones.”). Scentsy
contends “a handful of issues” impact whether Scentsy’s claims as a Plan sponsor arise under
ERISA or under state law. (Dkt. 12 at p. 16). Specifically, it anticipates Blue Cross will eventually
challenge ERISA’s application to this dispute by asserting, for example, that Blue Cross is not a
“named fiduciary” or “a functional fiduciary,” that the 2020 ASA is not a plan document, and that
the 2021 Excess Loss Contract is not a plan document. (Id.).
Based on these arguments, Scentsy contends Rule 8 authorizes it to plead state law claims
in the alternative, and it cites numerous cases in support. See, e.g., Efimenko v. Catalina Mktg.
Corp. Grp. Life Plan, No. 21-cv-01550-HSG, 2022 WL 799081, *5 (N.D. Cal. Mar. 16, 2022)
(“Courts have permitted alternatively-pled claims to proceed at the motion to dismiss stage even
in the context of ERISA, finding that Rule 8 protects plaintiffs from being ‘forced to hazard a
guess’ between alternative theories before discovery . . . .”); Delano v. Unified Grocers, No. 2:19cv-00225-TLN-DB, 2020 WL 903197, *4 (E.D. Cal. Feb. 25, 2020) (“[T]here has been no

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determination as to whether ERISA applies . . . [so] it would be against the spirit of the Federal
Rules to force Plaintiff to run a risk which [Rule 8(d)(2)] is designed to alleviate.”); ILWU-PMA
Welfare Plan v. Connecticut Gen. Life Ins., No. C 15-02965 WHA, 2015 WL 9300519, *8 (N.D.
Cal. Dec. 22, 2015) (“It is premature to require plaintiffs to commit to a theory of liability at this
early stage, without the benefit of discovery. It would be better to resolve the [ERISA] preemption
question with a fully developed evidentiary record.”); Coleman v. Standard Life Ins., 288 F. Supp.
2d 1116, 1120 (E.D. Cal. 2003) (“In the ERISA context, in particular, there will often be good
reason for alternatively pleading state and federal claims. . . . ERISA preemption often presents
the sort of situation for which Rule 8’s alternative pleading provision is designed emphasis
original).
Blue Cross, however, neither addresses Scentsy’s right to alternatively plead state law
claims under Rule 8 nor disputes it will raise the defenses Scentsy anticipates. Rather, Blue Cross
simply states that “while [Scentsy] alludes to possible defense [Blue Cross] might raise, these
arguments do not amount to the unique circumstances that might warrant delaying a proper
adjudication of Blue Cross’s motion.” (Dkt. 16 at p. 9). Because Blue Cross does not address
Scentsy’s argument that Rule 8 permits it to plead state law claims as an alternative to its ERISA
claims, the Court denies Blue Cross’s motion to dismiss Scentsy’s state law claims, except for
Scentsy’s unjust enrichment claim.
3.

Unjust Enrichment

Blue Cross moves to dismiss Scentsy’s claim for unjust enrichment “because the subject
matter in dispute is governed by a written agreement,” which forecloses a claim for unjust
enrichment. (Dkt. 8-1 at p. 13). Generally, a claim for unjust enrichment is impermissible where

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an enforceable contract exists between the parties and covers the same subject matter. Vanderford
Co. v. Knudson, 165 P.3d 261, 272 (Idaho 2007); Thomas v. Thomas, 249 P.3d 829, 836 (Idaho
2011). In other words, “restitutionary remedies are subordinate to contractual remedies.” Asher v.
McMillan, 503 P.3d 172, 178 (Idaho 2021).
Scentsy argues its unjust enrichment claim should be permitted to proceed as an alternative
to its breach of contract claim at this stage of litigation. (Dkt. 12 at p. 17). In so arguing, Scentsy
relies upon MWI Veterinary Supply Co. v. Wotton, No. 1:12-CV-00055-BLW, 2012 WL 2576205,
at *9 (D. Idaho July 3, 2012). In MWI Veterinary Supply Co., the court allowed claims for unjust
enrichment and breach of contract to proceed where the moving party had not admitted the
contracts were enforceable. 2012 WL 2576205, at *9. The court noted that “under these
circumstances,” unjust enrichment may be pled as an alternative theory of relief. Id.
In contrast, however, Blue Cross acknowledges a written contract governs the parties’
dispute in this case. (Dkt. 8-1 at p. 13; Dkt. 16 at p. 10). Although Blue Cross and Scentsy disagree
which contract applies, Blue Cross does not argue the applicable contract is unenforceable. Rather,
Blue Cross asserts “the subject matter in dispute is governed by a written agreement.” (Dkt. 8-1 at
p. 13). Accordingly, the Court dismisses Scentsy’s unjust enrichment claim. See Big Sky W. Bank
v. Jensen Fam. Inv. Co., LLC, No. 4:12-CV-00617-BLW, 2013 WL 4046309, at *6 (D. Idaho
Aug. 7, 2013).
IV. ORDER
IT IS HEREBY ORDERED:
1.

Defendant’s Motion to Compel Arbitration, or in the Alternative to Partially

Dismiss and Stay (Dkt. 8) is DENIED in part and GRANTED in part. The Court denies

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Defendant’s motion to compel arbitration. The Court grants Defendant’s motion to dismiss
Plaintiff’s claim for unjust enrichment. The Court denies the balance of Defendant’s motion to
dismiss.

August 28, 2024

MEMORANDUM DECISION AND ORDER RE MOTION
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OR IN THE