Carson v. American Quality Schools Corporation Thea Bowman Leadership Academy The et al
Filing
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ORDER AND OPINION: Court DENIES Omaha's request to dismiss the complaint under Rule 12(b)(6) re 3 Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6) and Motion to Strike Plaintiff's Jury Demand. Instead, the Court will construe the complaint has presenting claims arising under ERISA. Court GRANTS Omaha's request that Carson's jury demand be stricken. Signed by Chief Judge Philip P Simon on 4/28/2016. (tc)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
SHAWN CARSON, Individually and On
Behalf of the Estate of Doris Carson,
Plaintiff,
vs.
AMERICAN QUALITY SCHOOLS
CORPORATION THEA BOWMAN
LEADERSHIP ACADEMY, and UNITED
OF OMAHA LIFE INSURANCE COMPANY
Defendants.
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2:15cv348
ORDER AND OPINION
Currently pending before the me is Defendant’s Motion to Dismiss Pursuant to
Fed.R.Civ.P. 12(b)(6) and its Motion to Strike Plaintiff’s Jury Demand (DE 3). Plaintiff
Shawn Carson’s response is long past overdue. I previously ordered Carson to respond
(DE 5), and I warned him that if I did not receive a response by that time, I would rule
summarily on the motion, but then still heard nothing. Thereafter, there was some
confusion as to whether one of the defendants had been served. That was eventually
sorted out and that defendant answered — and did not join in the pending motion. So
now that all of our ducks are in a row, I will rule summarily on the motion, with the
hopes of getting this case back on track.
Background
Defendant United of Omaha Life Insurance Company (“Omaha”) requests that I
dismiss Carson’s complaint as preempted by ERISA. In essence, Carson claims that
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Omaha improperly denied his claim for his wife’s life insurance benefits after her death.
He originally filed this case in state court where he alleged one count of breach of
contract and one count of negligence against Omaha for improperly processing his
claim, and one count of breach of contract and one count of negligence against
Defendant American Quality Schools Corporation — his deceased wife’s employer —
for failing to properly submit his wife’s required forms. (As indicated above, American
Quality Schools has not joined this motion.) Omaha then removed the case to federal
court on the basis of both diversity jurisdiction and federal question jurisdiction. In
essence, Omaha asserts that ERISA governs these claims because they “relate to or arise
out of an employee welfare benefit plan.” (DE 1 at 2.) Omaha then moved to dismiss
the complaint on the basis that the claims are preempted by ERISA. (DE 3.)
Omaha is correct that Carson’s claims are wholly preempted by ERISA. The
Employee Retirement Income Security Act of 1974 is a federal statute that regulates, in
relevant part, employee benefits plans. It includes a broad preemption clause whereby
“[i]f a state law relates to employee benefits plans, it is pre-empted.” Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41, 44 (1987). In the context of litigation, that means if a party brings a
state law claim where the causes of action asserted relate to an employee benefit plan,
those claims will be preempted by federal law under ERISA. Id. at 47. ERISA also
contains a limited savings clause that exempts from preemption state laws that purport
to regulate insurance, but this clause is inapplicable to laws that “are firmly planted in
the general principles of [] tort and contract law.” Id. at 50. In other words, to be saved
from preemption, a state law must “not just have an impact on the insurance industry,
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but must be specifically directed toward that industry.” Id. at 49. Routine breach of
contract claims do not fall within the ambit of the savings clause. Vallone v. CNA
Financial Corp., 375 F.3d 623, 638 (7th Cir. 2004) (collecting cases). Thus, Carson’s claims
for breach of contract and negligence are preempted as they relate to the processing of
his claim for a life insurance proceeds offered to his wife as an employee benefit.
I should note at the outset that despite preemption, this case was properly
removed to federal court, so I have jurisdiction over this matter. Metropolitan Life
Insurance Co. v. Taylor, 481 U.S. 58, 67 (1987); see also Bartholet v. Reishauer A.G., 953 F.2d
1073, 1075 (7th Cir. 1992); Newpage WI System, Inc. v. United Steel, 651 F.3d 775, 778 (7th
Cir. 2011) (once state law regulating pension and welfare benefits plans has been
displaced, federal jurisdiction is appropriate).
With my jurisdiction secure, I will move on to the motion to dismiss. Although I
agree with Omaha that these claims are preempted by ERISA, I am not going to dismiss
the claims. Because I didn’t have the benefit of comprehensive briefing on this issue
since Carson elected not to respond, I’ve done quite a bit of digging around in the case
law myself and have uncovered something quite significant that Omaha neglected to
point out in their request: namely, that the Seventh Circuit finds that it is error for a
district court judge to dismiss a matter as being preempted under ERISA. This is true
even when that dismissal is without prejudice and with leave to amend to add ERISA
claims. Instead, the proper course of action is to allow the claims to stand in federal
court, but construe the state law claims as presenting ERISA claims. Bartholet v.
Reishauer A.G., 953 F.2d 1073, 1077-78 (7th Cir. 1992); McDonald v. Household Int’l, Inc.,
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425 F.3d 424, 425 (7th Cir. 2005). This is entirely sensible because it is fundamentally
unfair for a defendant to be allowed to seek dismissal for the exact same reasons he was
able to remove the case in the first place. It would also be an inefficient use of time. In
the words of the Seventh Circuit in Bartholet:
Bartholet's complaint notifies Reishauer of the basis of his claim: that in
1981 Reishauer promised to establish a pension plan that counted
Bartholet's years of service with COSA, and that the plan established in
1985 failed to do this. Reishauer argued, and the district court held, that
this allegation comes within ERISA. Removal depended on a conclusion
that the complaint, as filed, arose under federal law. What would be the
point of amending the complaint to make explicit what the district judge
has held is the only possible interpretation of the document?
Bartholet, 953 F.2d at 1078.
Indeed, as the Seventh Circuit further held, requiring plaintiffs to amend such claims
to bring them under ERISA would read a requirement into Rule 8 that plaintiffs plead law
as well as fact where no such requirement exists. Id. at 1077-78. This approach remains
unchanged even after Twombly and Iqbal. See Smith v. Medical Benefit Administrators Group,
Inc., 639 F.3d 277, 283 at nn. 2 (7th Cir. 2011) (post-Twombly and Iqbal, no need to plead legal
theories in ERISA-based claims); Whitaker v. Milwaukee County, WI, 772 F.3d 802, 808 (7th
Cir. 2014) (“plaintiffs are not required to plead legal theories, even in the new world of
pleading that is developing in the wake of the Supreme Court’s decisions in [Twombly] and
[Iqbal]. More recently, the Supreme Court has confirmed explicitly this principle.” (internal
citations omitted)). Thus, Omaha’s request to dismiss the complaint under Rule 12(b)(6)
will be DENIED. Instead, I will construe the complaint has presenting claims arising under
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ERISA.
But regarding Omaha’s request that I strike Carson’s jury demand, that request will
be GRANTED since jury trials are not available to ERISA claimants because ERISA’s relief
is equitable in nature. McDougall v. Pioneer Ranch Ltd. Partnership, 494 F.3d 571, 576 (7th
Cir. 2007) (jury trials not available in ERISA claims); Mathews v. Sears Pension Plan, 144 F.3d
461, 468 (7th Cir. 1998) (no need to remand case for jury trial in ERISA action where jury
trial is unavailable); Walker v. Life Ins. Co. of North Am., No. 08-C-6768, 2009 WL 561834, at
*2-3 (N.D.Ill. March 2, 2009) (noting same, citing Mathews, and granting motion to strike
jury demand in ERISA case).
SO ORDERED.
ENTERED: April 28, 2016
s/Philip P. Simon
PHILIP P. SIMON, CHIEF JUDGE
UNITED STATES DISTRICT COURT
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