Dublin Eye Associates, P.C. et al v. Massachusetts Mutual Life Insurance Company et al
Filing
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MEMORANDUM OPINION & ORDER: (1) GRANTING Massachusetts Mutual's 19 MOTION to Dismiss state law claims; (2) GRANTING IN PART & DENYING IN PART pla's 22 MOTION for Leave to File Verified Amended Complaint; Dublin Eye shall be permitted t o file the vertified amended complaint but shall within 10 days file a second verified amended complaint consistent with the court's opinion, removing all claims for punitive damages under Count 1. Signed by Judge Jennifer B Coffman on 8/31/11.(KJR)cc: COR
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
CENTRAL DIVISION
LEXINGTON
CIVIL ACTION NO. 11-128-JBC
DUBLIN EYE ASSOCIATES, P.C., ET AL.,
V.
PLAINTIFFS,
MEMORANDUM OPINION AND ORDER
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, ET AL.,
DEFENDANTS.
***********
This matter is before the court upon Massachusetts Mutual Life Insurance
Company’s motion to dismiss state law claims (R. 19) and Dublin Eye Associates’
motion for leave to file a verified amended complaint (R. 22). The court, for the
reasons described below, will grant Mass Mutual’s motion and grant in part and
deny in part Dublin Eye’s motion.
Mass Mutual moved the court to dismiss Count I and Count III of Dublin
Eye’s complaint, asserting that Dublin Eye’s state law claims for fraud, unjust
enrichment, and punitive damages are pre-empted by the Employee Retirement
Income Security Act. Dublin Eye moved for leave to file a verified amended
complaint which omits the state law fraud and unjust enrichment claims, and
clarifies that Dublin Eye’s breach of fiduciary duty claim is intended to be made
under Section 404(a) of ERISA, 29 U.S.C. §§ 1104, 1105, 1106, and 1132. In its
proffered amended complaint, Dublin Eye also asserts additional causes of action
against each defendant under the Kentucky Insurance Code, 25 Ky. Rev. Stat.
Ann. § 304.1-010 et seq. and claims against additional defendants arising out of
the same events. Mass Mutual objected to the addition of claims under the
Kentucky Insurance code, asserting that those claims are also pre-empted by
ERISA, but did not otherwise object to the court granting Dublin Eye permission to
amend.
Mass Mutual and Dublin Eye agree that the state law claims asserted in
Count I and Count III of Dublin Eye’s original complaint for fraud and unjust
enrichment are pre-empted by ERISA. Furthermore, in its proposed amended
complaint, Dublin Eye has clarified its breach of fiduciary duty claim as arising
under ERISA rather than state law. The only remaining issue from Mass Mutual’s
motion is whether ERISA pre-empts state law punitive damages. Dublin Eye
neither argued nor explicitly conceded the issue of punitive damages; however, in
its proposed amended complaint, Dublin Eye omitted the paragraph stating it is
entitled to punitive damages for Mass Mutual’s alleged breach of fiduciary duties,
but included punitive damages in its prayer for judgment. As ERISA does not
provide for punitive damages to individuals or trustees as a remedy for breach of
fiduciary duty claims and pre-empts state law punitive damages claims for ERISA
violations, see ERISA § 409(a), 29 U.S.C. § 1132 (2006); Massachusetts Mutual
Life Ins. Co. v. Russell, 473 U.S. 134, 147 (1985), the court will dismiss Dublin
Eye’s claims for punitive damages stemming from alleged breach of fiduciary duty
under ERISA.
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ERISA does not pre-empt Dublin Eye’s claims under the Kentucky Insurance
Act. Though ERISA’s pre-emption provision is construed broadly, see Briscoe v.
Fine, 444 F.3d 478, 497 (6th Cir. 2006) (quoting Aetna Health, Inc. v. Davila, 542
U.S. 200, 208 (2004)), its savings clause exempts from pre-emption any state law
that regulates insurance, banking, or securities. See ERISA § 514(b)(2)(A), 29
U.S.C. § 1144(b)(2)(A); Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S.
329, 333 (2003). Dublin Eye has asserted claims under multiple sections of the
Kentucky Insurance Code, including but not limited to KRS §§ 304.14-080,
304.12, 304.14-090, and 304.14-230. Specifically, Dublin Eye claims that Mass
Mutual and the other defendants made material misstatements and omissions of
fact regarding the policies issued and premiums collected; fraudulently induced the
plan participants to apply for and pay for unauthorized policies; forged plan
signatures; falsely witnessed applications; lied to or concealed from plan
participants the extent and nature of their policies; failed to deliver the policies to
plan trustees or participants; allowed plan premiums to exceed allowable
percentages; and collected premiums for unauthorized policies.
To the extent these claims are valid under the Kentucky Insurance Code,
they are not pre-empted by ERISA because the statutes cited by Dublin Eye from
the Kentucky Insurance Code are specifically directed toward entities engaged in
insurance and substantially affect the risk-pooling arrangement between the insurer
and insured. See Miller at 342. Dublin Eye’s claims are made under laws that
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specifically regulate the insurance industry with regard to the creation and
performance of insurance policies, not “laws of general application that have some
bearing on insurers.” See Miller at 334; Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41,
50 (1987). Under this “common sense” inquiry, see UNUM Life Ins. of America v.
Ward, 526 U.S. 358 (1999), the cited provisions of the Kentucky Insurance Code
are specifically directed toward entities engaged in insurance. The provisions here
also substantially affect the risk-pooling arrangement between the insurer and
insured. They dictate the method by which consent to enter into an insurance
contract may be obtained, require an insured to be made aware of the terms of that
contract through actual receipt, and prohibit alteration of the terms of that
contract. In doing so, they regulate and protect the bargain struck between the
insurer and the insured. See Miller at 338-339. As the Miller court iterated, the
second prong of this test “requires only that the state law substantially affect the
risk pooling arrangement; it does not require that the state law actually spread
risk.” Id. at 339 n. 3. The provisions here dictate the conditions under which an
insurance contract may be deemed valid, id., and thereby affect the risk-pooling
arrangement. The claims in Count II of the amended complaint, to the extent they
are valid under Kentucky law, are not pre-empted by ERISA. As Mass Mutual has
not otherwise objected to Dublin Eye’s proffered amended complaint, the court will
grant Dublin Eye leave to amend. Accordingly,
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IT IS HEREBY ORDERED that the motion to dismiss state law claims (R. 19)
is GRANTED.
IT IS FURTHER ORDERED that the motion for leave to file a verified amended
complaint (R. 22) is GRANTED IN PART and DENIED IN PART. Dublin Eye shall be
permitted to file the verified amended complaint, but shall within 10 days of the
entry of this order file a second verified amended complaint consistent with the
court’s opinion, removing all claims for punitive damages under Count I.
Signed on August 31, 2011
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