Luckett v. Sprint

Filing 24

MEMORANDUM OPINION AND ORDER signed by Senior Judge Thomas B. Russell on 5/8/17; granting in part and denying in part 16 Motion to Dismiss for Failure to State a Claim cc: Counsel(DJT)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
LOUISVILLE DIVISION
CIVIL ACTION 3:16-CV-00700-TBR
PATTY LUCKETT

PLAINTIFF

v.
SPRINT COMMUNICATIONS, INC.

DEFENDANT

Memorandum Opinion and Order
This matter is before the Court upon Defendant Sprint Communications,
Inc.’s motion to dismiss. [DN 16.]
and Sprint replied, [DN 23].

Plaintiff Patty Luckett responded, [DN 22],

Fully briefed, this matter is ripe for adjudication.

For the following reasons, Sprint’s motion [DN 16] is GRANTED IN PART and
DENIED IN PART.
I. Facts and Procedural History
Relevant to Sprint’s motion, the facts of this case are straightforward and
undisputed.

Patty Luckett was a full-time Sprint employee. [DN 1-1 at 5.]

During her employment, Luckett participated in Sprint’s short-term and long-term
disability benefits plans.

[Id.]

At some point, Sprint denied Luckett’s claim for

short-term disability benefits. [Id.]

Luckett filed suit, alleging Sprint’s denial

violated the Employee Retirement Income Security Act of 1974, as amended, 29
U.S.C. §§ 1001 et seq. (ERISA).

[Id. at 6.] Luckett also claims that Sprint’s denial

of short-term benefits functioned as a de facto denial of long-term benefits.
5-6.]

[Id. at

Sprint removed Luckett’s suit to this Court, see [DN 1], and then moved to
dismiss, [DN 16]. Sprint argues that Luckett’s short-term benefits claim must fail
because that plan was not an ERISA plan, and Luckett’s claim is therefore barred
by the release agreement she signed upon leaving her employment at Sprint. See
[DN 16-7 at 2-4.] Further, while Sprint acknowledges that Luckett’s long-term
benefits plan is subject to ERISA, it says Prudential Insurance Company of
America, not Sprint, is the claims administrator with responsibility and control over
Luckett’s claim for long-term disability.

Luckett responded, [DN 22], and Sprint

replied, [DN 23].
II. Standard of Review
A complaint must contain “a short and plain statement of the claim showing
that the pleader is entitled to relief.”

Fed. R. Civ. P. 8(a)(2).

In order to survive a

motion to dismiss under Rule 12(b)(6), a party must “plead enough factual matter to
raise a ‘plausible’ inference of wrongdoing.” 16630 Southfield Ltd. P’ship v.
Flagstar Bank, F.S.B., 727 F.3d 502, 504 (6th Cir. 2013) (quoting Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009)).

A claim becomes plausible “when the plaintiff pleads

factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)). Should the well-pleaded facts
support no “more than the mere possibility of misconduct,” then dismissal is
warranted. Id. at 679. The Court may grant a motion to dismiss “only if, after
drawing all reasonable inferences from the allegations in the complaint in favor of

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the plaintiff, the complaint still fails to allege a plausible theory of relief.”

Garceau

v. City of Flint, 572 F. App’x 369, 371 (6th Cir. 2014) (citing Iqbal, 556 U.S. at 67779).
III. Discussion
A. Short-Term Disability Plan
The parties agree that Luckett signed a release agreement wherein she
“agreed to . . . release and forever discharge Sprint . . . from any and all liability,
actions, and claims . . . arising out of [her] employment relationship with Sprint,”
[DN 16-7 at 2.]

including actions for breach of contract.1

In consideration for her

release of claims, Sprint paid Luckett 38 weeks’ salary, plus an additional
$1,000.00. [Id.]

However, the release carves out Luckett’s “claim[s] for benefits

under . . . the Separation Plan or any other Sprint employee benefit plans governed
by [ERISA].”

[Id.] Luckett does not currently dispute the validity of her release,

nor does she argue that if Sprint’s short-term disability plan falls outside ERISA,
her claim for short-term benefits could still proceed.

See generally [DN 22.]

Thus,

with respect to the instant motion, the dispositive issue on Luckett’s first claim is
whether Sprint’s short-term disability benefits plan is an ERISA plan.

In ruling upon Sprint’s motion to dismiss, the Court may consider both the plan documents and
Luckett’s release agreement. The plan documents may be considered part of the pleadings because
they are referenced in Luckett’s complaint and are central to her claims. Haviland v. Metro. Life
Ins. Co., 730 F.3d 563, 565 n.1 (6th Cir. 2013) (citing Weiner v. Klais & Co., 108 F.3d 86, 89 (6th Cir.
1997)). Similarly, the Court may consider Luckett’s release agreement because it “does not rebut,
challenge, or contradict anything in [her] complaint” – although, for the reasons explained below, the
release is not dispositive at this time. Carrethers v. Sec’y of the Army, No. 3:16-cv-00062-CRS, 2016
WL 4132497, at *3 (W.D. Ky. Aug. 3, 2016) (citing Song v. City of Elyria, Oh., 985 F.2d 840, 842 (6th
Cir. 1993)).

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Luckett argues that Sprint’s short-term plan is indeed governed by ERISA.
Citing Workers v. Yardman, 716 F.2d 1476, 1483 (6th Cir. 1983), Luckett says that
“[i]f an employer intends to supply benefits to an employee the benefits and plan
that governs them are subject to ERISA.”
too broad a brush.

[DN 22 at 3.]

But Luckett paints with

The Sprint plan itself does not explicitly state that it is an

ERISA plan, so the Court must first look to the statutory definition. ERISA
defines an “employee welfare benefit plan” as
any plan, fund, or program which was heretofore or is hereafter
established or maintained by an employer or by an employee
organization, or by both, to the extent that such plan, fund, or program
was established or is maintained for the purpose of providing for its
participants or their beneficiaries, through the purchase of insurance
or otherwise, (A) medical, surgical, or hospital care or benefits, or
benefits in the event of sickness, accident, disability, [or] death.
29 U.S.C. § 1002(1).
However, Department of Labor regulations remove from this definition
certain “payroll practices,” including “(1) [p]ayment of an employee's normal
compensation, (2) out of the employer's general assets, (3) on account of periods of
time during which the employee is physically or mentally unable to perform his or
her duties, or is otherwise absent for medical reasons (such as pregnancy, a physical
examination or psychiatric treatment).”

29 C.F.R. § 2510.3-1(b)(2) (subdivisions

added). Sprint argues that its short-term disability benefits plan falls under the
“payroll practices” exception, which the Supreme Court upheld in Massachusetts v.
Morash, 490 U.S. 107, 116-19 (1989).

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Other courts have held that short-term disability plans are in fact “payroll
practices” under 29 C.F.R. § 2510.3-1(b)(2), thus falling outside the scope of ERISA.
See, e.g., Foster v. Sedgwick Claims Management Services, Inc., 824 F.3d 721 (D.C.
Cir. 2016).

Indeed, Sprint cites to several plan provisions seeming to demonstrate

that its short-term benefits plan constitutes payment of the employee’s normal
compensation during periods of disability – the first and third elements of the
“payroll practices” exception. See [DN 16-5 at 6] (short-term benefits constitute
75% of employee’s earnings); Martin Marietta Energy Sys., Inc. v. Indus. Comm’n of
Ohio, 843 F. Supp. 1206, 1211 (S.D. Ohio 1994) (“normal compensation” may be less
than employee’s regular wage).

However, Sprint cites no plan provision supporting

its assertion that “the [short-term disability] plan is paid by [Sprint] out of its
general assets,” nor is the Court aware of the same.

[DN 23 at 6.]

And for

Sprint’s short-term plan to fall under the “payroll practices” exception and outside
ERISA, Sprint must necessarily show that short-term benefits are paid out of its
general assets.

Because the source of funds is not apparent from the face of

Sprint’s plan, dismissal of Luckett’s claim for short-term benefits is inappropriate at
this time.
B. Long-Term Disability Plan
Unlike the short-term plan, Sprint’s long-term disability plan explicitly states
that it is subject to ERISA. E.g., [DN 16-3 at 4.]

Nevertheless, Sprint argues that

Luckett’s claim for long-term benefits must be dismissed because Prudential, not
Sprint, is the claims administrator.

The Court agrees.

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“An employer who does not control or influence the decision to deny benefits
is not the fiduciary with respect to denial of benefit claims.” Moore v. Lafayette
Life Ins. Co., 458 F.3d 416, 438 (6th Cir. 2006) (citing Chiera v. John Hancock Mut.
Life Ins. Co., 3 F. App’x 384, 389 (6th Cir. 2001)).

Instead, “[w]hen an insurance

company administers claims for employee welfare benefit plans and has authority
to grant or deny claims, the insurance company is a ‘fiduciary’ for ERISA purposes.”
Id. (citing Libbey-Owens-Ford Co. v. Blue Cross & Blue Shield Mut. of Ohio, 982
F.2d 1031, 1035 (6th Cir. 1993)).

Stated otherwise, “[u]nless an employer is shown

to control administration of a plan, it is not a proper party defendant in an action
concerning benefits.” Ciaramitaro v. Unum Life Ins. Co. of Am., 521 F. App'x 430,
438-39 (6th Cir. 2013) (quoting Daniel v. Eaton Corp., 839 F.2d 263, 266 (6th Cir.
1988)).
Here, it is apparent from the face of Sprint’s long-term disability benefits
plan that Prudential is the proper party defendant.

Although Sprint is listed as

the “Plan Administrator,” the Summary Plan Description states that plan benefits
are provided by Prudential.

[DN 16-3 at 3.]

Further, Prudential “as Claims

Administrator has the sole discretion to interpret the terms of the Group Contract,
to make factual findings, and to determine eligibility for benefits.”

[Id.]

Other

plan provisions only serve to strengthen this conclusion. See, e.g., [DN 16-4 at 17]
(Prudential determines when covered employee is disabled); [id. at 20] (Prudential
will pay benefits after disability determination); [id. at 32] (Prudential will pay
survivor benefits). In her response to Sprint’s motion, Luckett fails to point to any

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contrary language in the long-term benefits plan.2

See Ctr. for Biological Diversity

v. Rural Utils. Serv., 2009 WL 3241607, at *3 (E.D. Ky. Oct. 2, 2009) (citing
Humphrey v. U.S. Att’y Gen.’s Ofc., 279 F. App'x 328, 331 (6th Cir. 2008)) (“When a
party fails to respond to a motion or argument therein, the Sixth Circuit has held
that the lack of response is grounds for the district court to assume opposition to the
motion is waived, and grant the motion.”)
The Sixth Circuit has repeatedly reached this same conclusion. For
example, in Moore, the court upheld the district court’s dismissal of the employer,
MTA, who was listed as the “plan administrator,” when the insurer, Lafayette, was
the “claims administrator” who “exercised full authority in adjudicating Plaintiff’s
claim for benefits.” Moore, 458 F.3d at 438.

In another case, Ciaramitaro, the

Sixth Circuit held that the plaintiff’s “conclusory assertions without any factual
support that [the employer] ‘instructed’ or ‘influenced’ [the insurer] to deny Plaintiff
her benefits are insufficient to survive a motion to dismiss.”

Ciaramitaro, 521 F.

App’x at 439 (footnote omitted) (citing Ctr. for Bio-Ethical Reform, Inc. v.
Napolitano, 648 F.3d 365, 369 (6th Cir. 2011)); see also Smith v. Com. Gen. Corp.,
589 F. App'x 738, 744–45 (6th Cir. 2014) (holding insurer, not employer, was the
plan fiduciary and therefore the proper defendant in plaintiff’s ERISA suit).

In

this case, even drawing all reasonable inferences in Luckett’s favor, her complaint
still fails to allege a plausible theory upon which she could recover long-term
disability benefits from Sprint, because Prudential controlled the administration of
In fact, one could argue that Luckett concedes that Prudential, not Sprint, is the proper party
defendant: “[T]he [long-term disability benefits plan] is administered and paid by Prudential
Insurance (a firm that is not a party to this action).” [DN 22 at 1.]
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that plan.

Luckett’s claim against Sprint for long-term disability benefits must be

dismissed.
VI. Conclusion
For the foregoing reasons, IT IS HEREBY ORDERED:
Defendant Sprint Communications, Inc.’s motion to dismiss [DN 16] is
GRANTED IN PART and DENIED IN PART.

Plaintiff Patty Luckett’s claim

against Sprint for long-term disability benefits is DISMISSED WITH PREJUDICE.
Luckett’s claim against Sprint for short-term disability benefits may proceed.

May 8, 2017

CC: Counsel of Record

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