Basham v. Prudential Insurance Company of America
Filing
61
MEMORANDUM AND OPINION by Judge Charles R. Simpson, III on 11/19/12; For the reasons set forth herein, the court (1) will grant Plaintiffs Motion to File an Amended Complaint, and (2) will grant Defendants Motion for Judgment on the Pleadings. A separate order will be entered this date in accordance with this opinion.cc:counsel (DAK)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE
DENISE R. BASHAM
v.
PLAINTIFF
CIVIL ACTION NO. 3:11-CV-00464-CRS
PRUDENTIAL INSURANCE
COMPANY OF AMERICA
DEFENDANT
MEMORANDUM OPINION
This matter is before the court on several motions. Prudential Insurance Company of
America (“Defendant”) filed two motions, a Motion for Judgement on the Pleadings (DN 14)
and a Cross Motion for Summary Judgment (DN 32). Denise R. Basham (“Plaintiff”) also filed
two motions, a Motion to File an Amended Complaint (DN 19) and a Motion to Remand for a
Full and Fair Review (DN 27).
For the reasons set forth herein, the court (1) will grant Plaintiff’s Motion to File an
Amended Complaint, and (2) will grant Defendant’s Motion for Judgment on the Pleadings.
PROCEDURAL HISTORY
Plaintiff’s original Complaint sought payment and damages for Defendant’s alleged
breach of contract and breach of fiduciary duty regarding Plaintiff’s claims for short-term
disability (“STD”) and long-term disability (“LTD”) benefits, which the Plaintiff alleged were
both insured by the Defendant (DN 1).1 In response, the Defendant filed a Motion for Judgment
on the Pleadings alleging that, under ERISA, the Plaintiff’s STD benefits claims against the
1
Plaintiff’s claim regarding LTD benefits satisfies jurisdiction for this court because it is undisputed that the
LTD benefits are governed by the Employee Retirement Income Security Act, 29 U.S.C. § 1002 (1974).
Defendant are not viable. The Defendant contends that it merely acts as the third-party
administrator for the STD benefits at issue, not the insurer, and that the STD benefits claims are
preempted under the Employee Retirement Income Security Act of 1974 (“ERISA”) (DN 14-1).
The Plaintiff then filed a Motion to Amend the Complaint seeking to dismiss the two
claims that the Defendant disputed (DN 19-1). First, Plaintiff seeks to dismiss the STD benefit
claim as it is uncontested that Plaintiff’s former employer, Harrah’s Operating Company
(“Harrah’s”) funded the Plaintiff’s STD benefits through Harrah’s Welfare Benefit Plan (“plan”),
and that the Defendant did not fund the STD benefits plan. Second, Plaintiff seeks to dismiss the
breach of fiduciary duty claim, conceding that the remedy for denial of benefits allegedly due
under ERISA is a claim under ERISA section 1132(a)(1)(B) (DNs 19 and 23).
The court will address Plaintiff’s motion to amend (DN 19) and Defendant’s motion to
dismiss on the pleadings (DN 14). Because Plaintiff’s state common law claims fall under the
ERISA preemption clause, we need not address the parties’ additional claims.2
BACKGROUND
Plaintiff filed an action against the Defendant seeking STD and LTD benefit payments
allegedly due under an ERISA-governed employee benefit plan (DN 1). Plaintiff contends that
Harrah’s employed the Plaintiff, provided STD benefits to the Plaintiff as part of Harrah’s wage
benefit plan, and that Harrah’s both sponsored and self-funded the STD benefits plan, such that
the STD benefits claim is allegedly exempt from ERISA preemption (DN 19-2).
2
The court need not address the parties’ remaining claims because they become moot with this opinion. The
moot claims are (1) Plaintiff’s Motion to Remand for Full and Fair Review, which alleges that the Defendant did not
satisfy existing administrative remedies based on the theory that the Defendant never rendered a decision on LTD
benefits after terminating Plaintiff’s STD benefits (DN 27); and (2) Defendant’s Motion for Summary Judgment, which
alleges that the Plaintiff failed to exhaust administrative remedies within the applicable time limit, thus barring the
Plaintiff from seeking administrative remand (DN 32).
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However, it is uncontested that the Defendant did not insure the STD benefits and only
acted as a third-party administrator for Harrah’s STD benefits plan by providing administrative
claims handling services (DN 14-1).3 It is also uncontested that through Harrah’s employee
benefits plan the Plaintiff was also eligible for LTD benefits governed by ERISA (DN 14). The
LTD benefits were sponsored by Harrah’s and the Defendant both administered and insured the
LTD benefits, unlike the STD benefits, which the Defendant merely administered (DN 18).
It is uncontested that the Plaintiff last worked for Harrah’s on or about April 5, 2010 (DN
31). Subsequently, Plaintiff submitted a claim to the Defendant, in its administrative capacity,
for STD benefits (DN 31). On April 16, 2010, the Defendant approved Plaintiff’s STD benefits
claim, which were to be effective April 21, 2010 through May 18, 2010. (DN 31). Although the
Plaintiff contends that she also submitted a LTD benefits claim along with her STD benefits
claim, the Plaintiff fails to show any proof of such a claim (DN 31).
After the Defendant initially approval Plaintiff’s STD benefits claim, the Defendant sent
the Plaintiff several letters regarding her STD benefits (DN 21). First, on May 14, 2010, when
Plaintiff’s STD benefits had been in effect for almost one month, the Defendant sent Plaintiff a
letter stating that the Plaintiff’s physician approved her to return to work on July 1, 2010 (DN
31). Accordingly, the Defendant extended the Plaintiff’s STD benefits through June 30,
2010—the day before she could return to work—and informed the Plaintiff that on that date the
Defendant would terminate the Plaintiff’s STD benefits claim (DN 31). In the same letter the
Defendant also provided information regarding Plaintiff’s right to appeal and thereby extend the
STD benefits termination date (DN 31).
3
The Defendant served as a third-party administrator for Harrah’s STD benefits pursuant to the Administrative
Services Agreement (“ASA”) between Harrah’s and the Defendant (DN 14-1).
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The second letter, sent June 24, 2010, and the third letter, sent July 6, 2010, requested
additional proof of Plaintiff’s condition and ongoing treatment in order for the Defendant to
extend the Plaintiff’s STD benefits (DN 31). These letters also reiterated that the Plaintiff’s STD
benefits were only approved through June 30, 2010 (DN 31).4
In the fourth letter, sent August 9, 2010—more than a month after Plaintiff’s STD
benefits were scheduled to terminate—the Defendant notified the Plaintiff that her STD benefits
were terminated because the Defendant received no response from the Plaintiff, her neurologist,
or her primary care physician regarding whether or not she had a continuing disability (DN 31).
The Defendant’s letter also explained: (1) that the Plaintiff could appeal the termination
decision; (2) that a successful appeal would render a claim for Plaintiff’s LTD benefits
automatically filed; and (3) that after the initial appeal for STD benefits, the Plaintiff could file
suit under ERISA to challenge the STD benefit termination as it related to her LTD benefits. The
termination letter specifically stated (DN 31):
If you [Plaintiff] choose to appeal our [STD benefit termination] decision and are
successful in this appeal, your LTD claim will be considered filed on the date that
is 45 days before the end of your LTD Elimination Period, provided you are
receiving STD benefits on that date, or, if later, on the date your STD benefits are
approved.5
In response, Plaintiff alleges that she filed a claim for LTD benefits with the Defendant at
some point before her STD benefits were terminated, but again we do not see any proof that she
4
Pursuant to Harrah’s STD benefit plan documents and Summary Plan Description, in order to extend STD
benefits a benefit participant must provide proof showing: (1) that the participant is under the regular care of a doctor;
(2) appropriate documentation of the disabling disorder; (3) and the extent of the disability, including restrictions and
limitations preventing the performance of his or her regular occupation. The STD plan booklet also states that “[the
Defendant] may request that you send satisfactory proof of a continuing disability, indicating that you are under the
regular care of a doctor . . . [which] must be received within 30 days of a request by [the Defendant].” (DN 31).
5
Defendant’s earlier letter to the Plaintiff, sent May 14, 2010, also explained Plaintiff’s right to appeal and how
the appeals process impacted the Plaintiff’s LTD benefits claim (DN 31, 6 n.4).
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ever filed a LTD benefits claim (DNs 27 and 31). Plaintiff supports her contention by alleging:
(1) that she left the Defendant a voice message on June 9, 2010, inquiring about the status of her
alleged LTD benefit claim while her STD benefits were still in effect; and (2) that she emailed
the Defendant through its website the following day stating that she “sent in an application to
apply for Long Term Disability,” but received no reply (DN 27-1).
The Plaintiff further alleges that on October 6, 2010—almost four months after her first
LTD benefits inquiry, and subsequent to the Defendant’s termination of her STD benefits—the
Plaintiff called the Defendant once more regarding the status of her alleged LTD benefits claim
(DN 31). It is undisputed that the Defendant responded to this call and advised the Plaintiff that
her STD benefits were terminated because she failed to provide any additional proof of her
continuing treatment or disability (DN 31). Additionally, the Defendant explained the appeals
process available to the Plaintiff—that she had 180 days from receiving the Defendant’s August
9, 2010 termination letter to initiate an appeal for STD benefits (DN 31). The Defendant also
explained that appealing the STD benefit termination would lead to an automatic filing for LTD
benefits when the Plaintiff became eligible for LTD benefits, but that the Plaintiff would only
become eligible for LTD benefits after she had been out of work for 180 days (DN 31).
The Defendant explained the STD benefit appeals process and the 180-day STD benefit
elimination period several times: (1) over the phone in August 2010; (2) in the letters that the
Defendant repeatedly sent the Plaintiff requesting proof of her continuing disability; (3) in
Harrah’s STD and LTD benefits plan booklet-certificates; (4) in a Summary Plan Description
(“SPD”), which was attached to the STD and LTD benefit plan documents; and (5) in a second
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SPD that addressed various welfare benefits that Harrah’s sponsored, including the STD and
LTD benefits (DN 31).6
It is undisputed that Plaintiff did not appeal her STD benefit termination within the 180day window (DN 31). Thus, the Defendant contends that the Plaintiff abandoned the STD benefit
administrative review process and filed a Motion to Remand for Full and Fair Review as a means
to seek review outside of the window for appeal and to supplement the administrative record
well after the time for review had expired (DN 31).
Although several interrelated motions are at issue in this case, the court need only
address the Plaintiff’s Motion to File an Amended Complaint and the Defendant’s Motion for
Judgment on the Pleadings.
I
The court will grant Plaintiff’s Motion to Amend the Complaint. Under Rule 15 of the
Federal Rules of Civil Procedure, if a party fails to amend a pleading within 21 days after service
of a responsive pleading, that party may only amend by seeking leave of the court or by written
consent of the adverse party. Fed. R. Civ. P. 15(a)(2). “The court should freely give leave when
justice so requires.” Id. However, in deciding whether to allow a party to amend a complaint, the
court “should consider the delay in filing, the lack of notice to the opposing party, bad faith by
the moving party, repeated failure to cure deficiencies by previous amendments, undue prejudice
6
Under Harrah’s STD plan, the Defendant contends that if the Plaintiff had submitted proof that she was under
the regular care of a doctor within 30 days of the Defendant’s requests for such information, that the Plaintiff’s STD
disability benefits could have remained in effect from April 5, 2010, when she first applied for STD benefits, through
October 2, 2010, the end of the 180-day elimination period for STD benefits. At the end of the termination period, the
Plaintiff’s LTD claim would have been automatically filed, as the Plaintiff would have been out of work for the requisite
180 days, and the LTD benefit claim would also have been filed at a time when the Plaintiff was eligible for such
benefits (DN 31).
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to the opposing party, and futility of amendment” Perkins v. Am. Elec. Power Fuel Supply, 246
F.3d 593, 605 (6th Cir. 2001) (citing Gen. Elec. Co. v. Sargent & Lundy, 916 F.2d 1119, 1129
(6th Cir. 1990)).
The Federal Rules of Civil Procedure provide for a liberal system of notice pleading. See
Fed. R. Civ. P. 8(a). The Rules “do not require a claimant to set out in detail the facts upon
which he bases his claim. To the contrary, all the Rules require is a ‘short and plain statement of
the claim’ that will give the defendant fair notice of what the plaintiff’s claim is and the ground
upon which it rests.” E.E.O.C. v. J.H. Routh Packaging Co., 246 F.3d 850, 851 (6th Cir. 2001)
(quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
Here, Plaintiff’s initial Complaint sought to recover STD and LTD benefit payments and
alleged: (1) breach of contract under 29 U.S.C. § 1132(a)(1)(B); (2) breach of fiduciary duty
under 29 U.S.C. § 1132(a)(3); (3) that attorneys’ fees and costs were warranted under 29 U.S.C.
§ 1132(g); as well as (4) entitlement to pre- and post- judgment interest (DN 1).
The Defendant responded and filed a Motion for Judgment on the Pleadings to dismiss
Plaintiff’s STD benefits claims (DN 14-1). The Defendant alleged: (1) that the STD benefits are
self-funded by Plaintiff’s former employer, Harrah’s, and not insured by the Defendant; thus the
Defendant cannot be liable for STD benefit payments allegedly due to the Plaintiff (DN 14-1);
and (2) that Plaintiff’s breach of fiduciary duty claim is not viable under 29 U.S.C. § 1132(a)(3)
because the remedy for failure to pay benefits due under an ERISA-governed plan requires a
claim under ERISA, 29 U.S.C. § 1132(a)(1)(B) (DN 14-1).
On January 13, 2012, with Defendant’s motion to dismiss on the pleadings pending,
Plaintiff filed a Motion to Amend the Complaint (DN 19-2). In the proposed Amended
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Complaint, Plaintiff again alleged a claim for LTD benefit payments from the Defendant, but
abandoned the contested claims for STD benefits payments and for the breach of fiduciary duty
(DN 23).
In the Plaintiff’s motion to amend, Plaintiff contends that her motion will resolve
Defendant’s pending Motion for Judgment on the Pleadings; that the Defendant requested the
Motion to Amend; and that the amendment will not prejudice the Defendant as the case is at an
“early stage.” (DN 19). Here, although the Defendant contends that it did not consent to
Plaintiff’s amendments (DN 21, 3), we agree that Plaintiff’s proposed Amended Complaint will
aid in resolving the Defendant’s pending motion, and that the motion to amend was neither filed
in bad faith nor prejudicial, as discovery has not commenced. See Perkins 246 F.3d at 605.
Therefore, the court will grant Plaintiff’s Motion to Amend the Complaint.
II
The court will also grant Defendant’s Motion for Judgment on the Pleadings. The
Defendant requested that the court defer ruling on this motion until the court ruled on Plaintiff’s
motion to amend (DN 21, 5). Accordingly, having addressed Plaintiff’s motion to amend, the
court now addresses the Defendant’s motion.
A.
The Defendant contends that the Plaintiff’s Amended Complaint did not abandon the two
claims to which the Defendant objected in its Motion for Judgment on the Pleadings (DN 23).
The Defendant contends, instead, that the Plaintiff merely pursues the same claims under
different legal theories in her Amended Complaint (DN 23).
-8-
Plaintiff’s Amended Complaint alleges: (1) a state law breach of contract claim to
recover STD benefits from the Defendant based on the theory that the STD benefits plan is a
payroll practice, which Plaintiff alleges exempts the claim from ERISA preemption; (2) a state
law claim for breach of the duty of good faith and fair dealing; and (3) a state law claim for
tortious interference with a contract (DN 19-2). Further, the Plaintiff contends that with the
Amended Complaint the Defendant’s motion to dismiss becomes moot because the complaint
removes both claims to which the Defendant objected (DN 18).
The Defendant counter-argues that Plaintiff’s Amended Complaint merely “re-wrapped”
the claim in the initial complaint for STD benefits allegedly due under ERISA as a state law
breach of contract claim, and “re-packaged” the ERISA-governed fiduciary breach claim as state
law claims for both breach of the duty of good faith and tortious interference with a contract (DN
23). The Defendant argues that Plaintiff’s state law claims are not viable because each state law
claim is preempted under ERISA (DN 23).
Pursuant to Rule 12(c) of the Federal Rules of Civil Procedure, “[a]fter the pleadings are
closed—but early enough not to delay trial—a party may move for judgment on the pleadings.”
The standard to be applied for a Rule 12(c) motion for judgment based on the pleadings is the
same as that for a Rule 12(b)(6) motion to dismiss based on the complaint. Poplar Creek Dev.
Co. v. Chesapeake Appalachia, LLC., 636 F.3d 235, 240 (6th Cir. 2011). The opposing party’s
pleadings must be taken as true and the motion “may be granted only if the moving party is
nevertheless clearly entitled to judgment.” Id. at 241.
Moreover, if the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has not shown the pleader is entitled to relief. Ashcroft
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v. Iqbal, 556 U.S. 662, 677-78 (2008). To withstand a Rule 12(b)(6) motion to dismiss for failure
to state a claim, it is not enough that the complaint contains “facts that are ‘merely consistent
with’ a defendant’s liability,” rather, a plaintiff must allege facts—not legal conclusions or bald
assertions—supporting a “plausible” claim for relief.” Id. at 687 (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 557 (1955)). A complaint that offers legal conclusions or a recitation of
the elements of a cause of action will not meet this pleading standard. See id. at 687.
“[C]onclusory allegations or legal conclusions masquerading as factual conclusions will not
suffice to prevent a motion to dismiss.” Mezibov v. Allen, 411 F.3d 712, 716 (6th Cir. 2005).
Courts must treat motions under 12(b)(6) and 12(c) that rely on evidence outside of the
pleadings as motions for summary judgment.7 However, there is an exception for documents that
a “defendant attaches to a motion to dismiss [which] are considered part of the pleadings if they
are referred to in the plaintiff’s complaint and are central to her claim.” Amini v. Oberlin Coll.,
259 F.3d 493, 502 (6th Cir. 2001) (quoting Venture Assoc. Corp. v. Zenith Data Sys. Corp., 987
F.2d 429, 431 (7th Cir. 1993)). Additionally, under Rule 10(c), “[a] copy of a written instrument
that is an exhibit to a pleading is part of the pleading for all purposes.” Fed. R. Civ. P. 10(c).
Here, the Defendant relies on evidence which we consider to be part of the pleadings. See
id.; see Amini, 259 F.3d at 502. The Plaintiff’s Amended Complaint references documents that
the Defendant attached to its motion to dismiss, including Harrah’s employee benefit plan, the
Administrative Services Agreement (“ASA”) between Harrah’s and the Defendant, the SPD that
accompanied both the STD and LTD plan documents, and Harrah’s master SPD which addresses
7
For the reasons stated herein, the court will not apply Rule 12(d) which states: “On a motion made under
12(c), if matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one
for summary judgment under Rule 56. All parties must be given a reasonable opportunity to present all the material that
is pertinent to the motion.” Fed. R. Civ. P. 12(d).
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a variety of employee welfare benefits, including the STD and LTD benefits (DNs 14-1 and 192). Therefore, these documents are part of the pleadings and the Defendant’s motion to dismiss
will be addressed as such, and not treated as a motion for summary judgment pursuant to Federal
Rule of Civil Procedure 12(d).
B.
The Defendant argues that the state law claims in Plaintiff’s Amended Complaint are
preempted by ERISA (DN 23). ERISA preempts state law claims which “relate to any employee
benefit plan.” 19 U.S.C. § 1144(a).8 The phrase “relate to” is “given its broad common-sense
meaning, such that a state law ‘relates to’ a benefit plan in the normal sense of the phrase, if it
has a connection with or reference to such a plan.” Metro. Life Ins Co. v. Massachusetts, 471
U.S. 724, 739 (1985) (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983)). ERISA
preempts state law claims regarding ERISA-regulated plans. Id. Thus, common law breach of
contract and tort claims “based on alleged improper processing of a benefit claim under an
employee benefit plan” against the insurance company that issues an employer’s group insurance
policy fall under ERISA’s preemption clause. See Pilot Life Ins. Co., v. Dedeaux, 481 U.S. 41,
41 (1987).9 The preemption provisions under ERISA have “an expansive sweep.” Id. at 47
(citing Metro. Life, 471 U.S. at 740 (1985)). ERISA’s preemption provisions were crafted by
Congress to provide a “uniform regulatory scheme” and to ensure that employee benefit
8
ERISA section 514(a) provides: “the provisions of this subchapter shall supercede any and all State laws
insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a).
9
State common law claims are preempted by federal law for benefits under ERISA-regulated plans as long as
the state law cause of action does not regulate insurance under ERISA’s savings clause. See Pilot Life Ins. Co., 481 U.S.
41 (1987). Here, the Plaintiff’s claims do not regulate insurance. The Plaintiff asserts common law claims for breach of
contract, breach of the duty of good faith and fair dealing, and tortious interference with contract (DN 19-2). Therefore,
federal preemption analysis will apply and the court need not address ERISA’s savings clause.
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regulation remains “exclusively a federal concern.” Aetna v. Davila, 542 U.S. 200, 200 (2004)
(quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981)).
The remedies provided under ERISA are a fundamental part of the “careful balancing”
between ensuring that rights are enforced under an ERISA-governed benefit plan and
encouraging the use of such plans. Id. at 215. Any state law cause of action that “duplicates,
supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear
congressional intent to make the ERISA remedy exclusive and is therefore pre-empted.” Id. at
209 (quoting Dedeaux, 481 U.S. at 54)).10
Here, the focus of Plaintiff’s theory of liability is that the Defendant’s decision to
terminate Plaintiff’s STD benefits claim “was driven by its own financial interest as the insurer
and obligor for her long-term disability benefit.” (DN 1). The Defendant contends that the
Plaintiff retains this theory in her Amended Complaint and simply adds state law claims which
are preempted by ERISA because the claims “relate to” and duplicate the relief the Plaintiff
sought under ERISA in the initial Complaint (DN 23). In the Amended Complaint (DN 19-2),
the Plaintiff alleges:
Despite not being ultimately financially responsible for the short-term disability
wage benefit, [Defendant] had a distinct and significant financial interest. By
effectively terminating [Plaintiff’s] short-term disability wage benefits, [the
Defendant] sought to limit or to otherwise eliminate its financial exposure to
[Plaintiff’s] LTD claim - a benefit [Defendant] was responsible to pay as the insurer.
10
Unlike “complete preemption” under ERISA section 502, which creates federal removal jurisdiction, “conflict
preemption” under ERISA section 514 can be asserted to request dismissal of a state law action that seeks state law
remedies which are not permitted by federal law or remedies that exceed those allowed under federal law. See Metro.
Life Ins. v. Taylor, 481 U.S. 58, 63 (1987). Here, Plaintiff’s state law claims against the Defendant fall within the
parameters of conflict preemption under ERISA section 514 (DN 23).
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By terminating [Plaintiff’s] short-term disability wage benefits, [Defendant] actively
sought to benefit its own financial interest by avoiding liability for the LTD income
benefit - as opposed to acting as a disinterested third party administrator.
Here, it is undisputed that Plaintiff’s claim for LTD benefits is governed by ERISA (DNs
23 and 19-2). The question is whether Plaintiff’s state law claims regarding Defendant’s denial
of STD benefits “relate to” the ERISA-governed LTD benefit plan to preempt the state law
claims under ERISA.
The Supreme Court has held that “the question [of] whether a state action is pre-empted
by federal law is one of congressional intent. The purpose of Congress is the ultimate
touchstone.” Dedeaux, 481 U.S. at 45.11 Accordingly, the scope of preemption is not limited to
state laws which are specifically directed at or designed to affect benefit plans, or which conflict
with ERISA’s substantive provisions. District of Columbia v. Greater Wash. Bd. of Trade, 506
U.S. 125, 130 (1992) (citing Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139 (1990)).
Preemption applies even if the state law’s effect is only indirect. Id.
The Defendant argues that the Plaintiff’s claim for STD benefits “relates to” the ERISAgoverned LTD benefits. The Defendant contends that preemption is appropriate because the
Plaintiff alleges that the Defendant denied Plaintiff’s STD benefits in order to avoid liability for
ERISA-governed LTD benefits. See Metro. Life, 471 U.S. at 739. The Defendant relies on the
11
ERISA’s express preemption provisions are deliberately expansive: “The bill that became ERISA originally
contained a limited pre-emption clause, applicable only to state laws relating to the specific subjects covered by ERISA.
The Conference Committee rejected those provisions in favor of the present language, and indicated that section's preemptive scope was as broad as its language.” Dedeaux, 481 U.S. at 46 (quoting H.R. Conf. Rep. No. 93-1280, p. 383
(1974)).
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“expansive sweep” of ERISA’s preemption provision which, under Metropolitan Life, broadly
defines “related to” preemption as having a “connection with or reference to” an ERISAgoverned employee benefit plan. Id. at 740.
The Defendant contends that although Plaintiff’s state law claims do not necessarily
affect the ERISA plan directly, they “relate to” the ERISA-governed LTD benefit plan. The
Plaintiff’s proposed remedies and theory of liability tie the Defendant’s alleged motivation to
deny STD benefits to its alleged desire to avoid liability for the ERISA-governed LTD benefits
(DN 41). In other words, the Defendant argues that the Plaintiff’s allegations regarding the
Defendant’s motivation to terminate the Plaintiff’s STD benefits “relate to” to the ERISAgoverned benefit plan at issue (DN 41-1).
Here, Plaintiff’s state law claims against the Defendant include: (1) breach of contract for
terminating Plaintiff’s STD benefits under two contracts—first, the employee benefits contract
between the Harrah’s and the Plaintiff, in which the Defendant is allegedly included based on its
administrative role, and second, the ASA between Harrah’s and the Defendant; (2) breach of the
duty of good faith and fair dealing against the Defendant for allegedly failing to administer
Plaintiff’s STD benefits claim fairly and in good faith; and (3) tortious interference with a
contract, alleging that the Defendant induced Harrah’s to breach its employee benefits contract
with the Plaintiff when the Defendant allegedly failed to provide an unbiased review of
Plaintiff’s STD benefits claim (DN 19-2).
The thrust of Plaintiff's Amended Complaint concerns the denial of benefits that were
allegedly due to the Plaintiff under the employee benefits plan (DN 19-2). Even under Plaintiff’s
characterization of her claims, her claims stem from the alleged improper evaluation and denial
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of a claim for benefits under an employee benefit plan, and therefore relate to an ERISA plan
under § 514(a). Dedeaux, 481 U.S. at 43; See Garren v. John Hancock Mut. Life Ins. Co., 114
F.3d 186, 187 (11th Cir.1997) (noting that a state law claim relates to an ERISA plan for
purposes of preemption “whenever the alleged conduct at issue is intertwined with the refusal to
pay benefits” or “where the state law claim brought against a non-ERISA entity affects the
relationship between the ERISA entities.”).
Here, Plaintiff’s state law claims “relate to” the ERISA-governed LTD benefit plan. First,
Plaintiff’s breach of contract claim for the Defendant’s termination of Plaintiff’s STD benefits
“relates to” the ERISA-governed LTD plan because the claim both has a connection with and
reference to an ERISA-governed employee benefit plan. See Metro. Life, 471 U.S. at 740.
Second, the breach of the duty of good faith and fair dealing claim regarding the Defendant’s
role as the claims administrator is preempted because the Supreme Court has held that ERISA’s
specific breach of fiduciary duty provision presumes that other remedies were deliberately
omitted from the statute. Dedeaux, 481 U.S. at 53-54 (noting that “Congress [] enacted a
comprehensive legislative scheme . . . of integrated procedures for [ERISA] enforcement.”).
Third, Plaintiff’s tortious interference with a contract claim regarding the Defendant’s alleged
improper denial of a claim under an employee benefit plan and failure to provide an unbiased
review of Plaintiff’s STD benefit claim relates to an ERISA plan under § 514(a) because it is
based on the refusal to pay benefits under the policy and is intertwined with the refusal to pay
benefits. Dedeaux, 481 U.S. at 43; See Garren, 114 F.3d at 187. Therefore, the Plaintiff’s state
law claims are preempted by ERISA.
A separate order will be entered this date in accordance with this opinion.
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November 19, 2012
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