Brown v. Emmitsburg Glass Company et al

Filing 49

MEMORANDUM OPINION. Signed by Magistrate Judge Timothy J. Sullivan on 7/1/13. (jnls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
ROSEMARIE BROWN,

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Plaintiff

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v.

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EMMITSBURG GLASS CO., et al.

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Defendants.

Civil No. TJS-12-2911

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MEMORANDUM OPINION
This Memorandum Opinion1 addresses Defendant Emmitsburg Glass Company’s
(“Emmitsburg”) Motion to Dismiss and/or for Summary Judgment (“Motion”) (ECF No. 35) and
Plaintiff Rosemarie Brown’s Response (ECF No. 42).

For the reasons stated herein,

Emmitsburg’s Motion to Dismiss and/or for Summary Judgment is DENIED. This
Memorandum Opinion disposes of ECF Nos. 35 and 42.
I.

BACKGROUND
A. Standard of Review
Emmitsburg has moved to dismiss for failure to state a claim under Fed. R. Civ. P.

12(b)(6), or in the alternative, for summary judgment under Fed. R. Civ. P. 56. When a court
considers matters outside the pleadings, a motion to dismiss under Rule 12(b)(6) must be treated
as a motion for summary judgment under Rule 56. See Fed. R. Civ. P. 12(d); Gadsby by Gadsby
v. Grasmick, 109 F.3d 940, 949 (4th Cir. 1997); Paukstis v. Kenwood Golf & Country Club, Inc.,
241 F. Supp. 2d 551, 556 (D. Md. 2003). Because both Emmitsburg and Plaintiff present matters
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On October 25, 2012, this case was referred to then-Chief Magistrate Judge Paul Grimm
for all proceedings, pursuant to 28 U.S.C. § 636(c) by consent of the parties. After Judge
Grimm’s elevation to United States District Judge, this case was reassigned to me.

outside the pleadings in the form of attached materials, the Court will consider these materials
and review the motion as one for summary judgment.
In reviewing the evidence related to a motion for summary judgment, the Court considers
the facts in the light most favorable to the non-moving party. Ricci v. DeStafano, 557 U.S. 557,
586 (2009); George & Co., LLC v. Imagination Entm’t Ltd., 575 F.3d 383, 391-98 (4th Cir.
2009); Dean v. Martinez, 336 F. Supp. 2d 477, 480 (D. Md. 2004). Summary judgment is proper
when “the pleadings, the discovery and disclosure materials on file, and any affidavits show that
there is no genuine issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(c); see Meson v. GATX Tech. Servs. Corp., 507 F.3d 803, 806
(4th Cir. 2007). The party moving for summary judgment bears the burden of demonstrating that
no genuine dispute exists as to material facts. Pulliam Inv. Co. v. Cameo Props., 810 F.2d 1282,
1286 (4th Cir. 1987). A material fact is one that “might affect the outcome of the suit under the
governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
B. Summary of the Case
The following facts are undisputed. Plaintiff’s son, Kenneth Clarke (“Mr. Clarke”),
worked for Emmitsburg and, through that employment, participated in a group life and disability
insurance policy issued to Emmitsburg by co-defendant Guardian Life Insurance Company of
America (“Guardian”). ECF No. 42-1 at 1. The life insurance policy (“the policy” or “the plan”)
was in the amount of $15,000.00, and Mr. Clarke designated Plaintiff as the beneficiary under
the policy. ECF No. 42-1 at 2. In early 2009, Mr. Clarke was diagnosed with cancer. Id. Within
months of that diagnosis, he was unable to work, and Guardian began paying disability benefits
to him in April 2009. ECF No. 42-1 at 2. On September 1, 2009, Emmitsburg terminated its
group life insurance policy with Guardian and transferred to another carrier. ECF No. 35-1 at 2.

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Because Mr. Clarke was disabled and receiving disability benefits from Guardian, he was
entitled to apply for an extension of group life insurance through Guardian. ECF No. 35-1 at 2.
Mr. Clarke never filed the necessary paperwork to extend his insurance policy. ECF No. 35-1 at
3. He died on April 12, 2010. ECF No. 42-1 at 4. When Plaintiff submitted a claim to Guardian
for the life insurance benefits, she was informed that there was no insurance policy in effect for
Mr. Clarke at the time of his death. Id.
Emmitsburg and Plaintiff dispute the following facts. Emmitsburg contends that
Guardian sent Mr. Clarke a letter, dated August 24, 2009, explaining his right to apply for an
extension of group life insurance without premium payment due to disability. ECF No. 35-1 at 56. The letter explained the procedure for doing so and included the necessary forms for
processing the extension. Id. Emmitsburg also contends that on August 27, 2009 it sent Mr.
Clarke a letter informing him that, effective September 1, 2009, Emmitsburg would be
transferring its group insurance policy, that he would not be covered under the new group plan
because of his existing disability claim with Guardian, and that he was able to keep his insurance
with Guardian if he completed the necessary forms. ECF No. 35-1 at 6. Emmitsburg contends
that it included Guardian’s August 24, 2009 letter with this letter, as well as additional copies of
the required forms. Because Mr. Clarke never completed these forms, his insurance terminated
on September 1, 2009. See ECF No. 35-2 at 2.
Plaintiff claims that Mr. Clarke never received these letters and that Emmitsburg
repeatedly assured her son that his coverage under the policy remained in effect. ECF No. 42-1 at
2. Plaintiff claims that Emmitsburg had a contractual obligation to ensure that Mr. Clarke’s
coverage under the policy continued, consistent with Emmitsburg’s assurances. ECF No. 42-1 at
8. Plaintiff also alleges that she and her son relied on Emmitsburg’s assurances to their

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detriment, as they would have taken the appropriate steps to continue Mr. Clarke’s coverage if
they had been aware that it was in jeopardy of being cancelled. Id. Emmitsburg claims that it
made no such assurances to Mr. Clarke or Plaintiff. ECF No. 35-2 at 2.
II.

DISCUSSION
Emmitsburg’s Motion argues that Plaintiff has failed to state a claim for breach of

contract and that, accordingly, Emmitsburg is entitled to judgment as a matter of law. Plaintiff
argues that a breach of contract has been established. In Emmitsburg’s Motion and Plaintiff’s
Response, the parties assume that state contract law governs this action. For the reasons set forth
below, however, the parties arguments about state contract law are immaterial to the resolution
of Emmitsburg’s Motion, because federal law governs this case.
This case, originally filed in the District Court of Maryland for Baltimore County, was
removed to this Court pursuant to 28 U.S.C § 1331 and 29 U.S.C. § 1132, as an action pursuant
to the Employee Retirement Income Security Act’s (“ERISA”) civil enforcement provision. See
ECF Nos. 1 & 15. While neither party has addressed the federal preemption of the original state
law claims in their Motion and Response, the doctrines of conflict preemption and complete
preemption are significant in the context of ERISA and particularly important in this case.
Section 514(a) of ERISA states that its provisions “shall supersede any and all State laws insofar
as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). The
Supreme Court and the Fourth Circuit have given the phrase “relate to” in § 514(a) its “broad
common-sense meaning.”

Custer v. Sweeney, 89 F.3d 1156, 1166 (4th Cir. 1996) (citing

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985)). In Shaw v. Delta Air
Lines, Inc., 463 U.S. 85, 96-97 (1983), the Supreme Court established that “[a] law ‘relates to’ an

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employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference
to such a plan.”
ERISA does not preempt “only state laws specifically designed to affect employee
benefit plans” or “only state laws dealing with the subject matters covered by ERISA.” Id. at 98.
Rather, the scope of ERISA’s preemption is “deliberately expansive” and designed to make
regulation of employee benefit plans “exclusively a federal concern.” See Wilmington Shipping
Co. v. New England Life Ins. Co., 496 F.3d 326, 341 (4th Cir. 2007) (citing Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41, 46 (1987)).
In this case, Plaintiff, a plan beneficiary, seeks to establish an employer’s obligations
related to an employee benefit plan. Plaintiff’s state law claims conflict with ERISA’s exclusive
regulation of employee benefit plans, thereby falling within the scope of ERISA’s § 514 conflict
preemption. See 29 U.S.C. § 1144(a). That Plaintiff’s claims are preempted under § 514,
however, does not require the dismissal of the claims in this Court. See Thomas v. Hartford Life
& Accident Ins. Co., No. 1:03CV65-C, 2003 WL 22466198 (W.D.N.C. Sept. 3, 2003). The
doctrine of complete preemption provides for the “existence of a federal cause of action that
replaces the preempted state cause of action.” King v. Marriott Int’l., Inc., 337 F.3d 421, 425
(4th Cir. 2003). This occurs when “Congress intend[s] [that] a federal cause of action be the
exclusive cause of action for the type of claim brought by the plaintiff.” Id.; c.f. Custer v.
Sweeney, 89 F.3d 1156, 1167 (4th Cir.1996) (“Federalism concerns strongly counsel against
imputing to Congress an intent to displace a whole panoply of state law . . . absent some clearly
expressed direction.”) The complete preemption doctrine exists as a “narrow exception” to the
well-pleaded complaint rule, allowing a cause of action to arise under federal law despite
plaintiff’s well-pleaded complaint lacking issues of federal law. See Lontz v. Tharp, 413 F.3d

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435, 439-40 (4th Cir. 2005). Accordingly, where a plaintiff’s state claims are completely
preempted by federal law, “the plaintiff simply has brought a mislabeled federal claim,” King,
337 F.3d at 425, and the asserted state law claim should be treated as the appropriate federal
claim. Darcangelo v. Verizon Commc'ns, Inc., 292 F.3d 181, 187 (4th Cir. 2002).
The Supreme Court has made clear that it is “reluctant” to find complete preemption, as
complete preemption interferes with a plaintiff’s ability to plead under the law of their choosing.
See Metro. Life, 481 U.S. at 65. In fact, the Supreme Court has found complete preemption in
only three statutes, and ERISA is one of them. Lontz, 413 F.3d at 441 (stating that the Supreme
Court has found complete preemption with respect to the National Bank Act, ERISA § 502(a),
and the Labor Management Relations Act § 301).
ERISA’s § 502(a) civil enforcement provision, 29 U.S.C. § 1132, “completely preempts
state law claims that come within its scope and converts these state claims into federal claims.”
Darcangelo, 292 F.3d at 187. Thus, the essential question for this Court to decide is whether the
Plaintiff’s state law claims come within the scope of § 502(a) so as to be completely preempted.
See Sonoco Products Co. v. Physicians Health Plan, Inc., 338 F.3d 366, 371 (4th Cir. 2003).
The Fourth Circuit has recognized “three essential requirements for complete preemption: (1) the
plaintiff must have standing under § 502(a) to pursue its claim; (2) its claim must ‘[fall] within
the scope of an ERISA provision that [it] can enforce via § 502(a)’; and (3) the claim must not be
capable of resolution ‘without an interpretation of the contract governed by federal law,’ i.e., an
ERISA-governed employee benefit plan.” Sonoco Products Co., 338 F.3d at 372 (quoting Jass
v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1487 (7th Cir. 1996)).
With regard to the first requirement, Plaintiff has standing under § 502(a)(3) because she
is a beneficiary. See 29 U.S.C. § 1132(a)(3) (stating that “[a] civil action may be brought . . . by

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a participant or beneficiary” of a plan). The parties do not dispute that Mr. Clarke designated
Plaintiff as the beneficiary of benefits under the policy in the event of his death.

As a

beneficiary, Plaintiff has standing under ERISA to bring this action, satisfying the first
requirement for the Court to find complete preemption.
Plaintiff’s claims meet the second requirement, as well. On the whole, Plaintiff seeks to
recover death benefits from the employee benefit plan for which she was a beneficiary. See 29
U.S.C. § 1132(a)(1)(B) (providing that a civil enforcement action under ERISA may be brought
to recover benefits due under the terms of a plan); Moon v. BMX Technologies, Inc., 498 Fed.
Appx. 268 (4th Cir. 2012) (determining that a beneficiary’s claims against employer after insurer
denied death benefits amounted to an attempt to recover the benefits owed to her under the terms
of the plan). Additionally, Plaintiff’s allegations of Emmitsburg’s breach of its fiduciary duties
fall within the scope of ERISA’s civil enforcement provisions. See Griggs v. E.I. DuPont de
Nemours & Co., 237 F.3d 371 (4th Cir. 2001).
The facts alleged here are similar to those at issue in Griggs. Id. In Griggs, an employee
lost plan benefits as the result to an employer’s false representations and failure to provide
appropriate information regarding the potential loss of these benefits. Id. at 379. The Fourth
Circuit held that the employer, in providing the employee with information about the plan, had
certain fiduciary duties under ERISA. Id. The court stated that the employer had the duty to
refrain from “misinform[ing] employees through material misrepresentations,” as well as the
duty to “communicate to the beneficiary material facts affecting the interest of the beneficiary
which he knows the beneficiary does not know and which the beneficiary needs to know for his
protection.” Id. at 380. Plaintiff’s allegations in this case are remarkably similar. While the
parties have not briefed the role of Emmitsburg as a fiduciary, it is well settled that a fiduciary

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duty attaches where an employer “wear[s] two hats” by acting as both an employer and a plan
administrator. See id. at 379 (citing Barnes v. Lacy 927 F.2d 539, 544 (11th Cir. 1991) and
Great Lakes Steel v. Deggendorf, 716 F.2d 1101 (6th Cir. 1983). Here, Plaintiff alleges that
Emmitsburg assured her son that his insurance coverage would remain in effect and that he need
take no action. (ECF Nos. 2 & 42 at 3). This advice constitutes a material misrepresentation,
and, whether it was made negligently or otherwise, would amount to a breach of Emmitsburg’s
fiduciary duty to Plaintiff, Mr. Clarke’s beneficiary. Because Plaintiff’s claims fall within the
scope of an ERISA provision that can be enforced under § 502(a), Plaintiff meets the second
requirement for a finding of complete preemption.
Finally, the resolution of Plaintiff’s claims will require interpretation of an ERISAgoverned employee benefit plan. Here, the determination of whether Plaintiff is entitled to
benefits under the terms of the plan will require, at a minimum, an interpretation of the plan at
issue in this case. See Moon, 498 Fed. Appx. at 274 (holding that a party’s claim for benefits fell
within the scope of ERISA’s civil enforcement provision, § 502(a), because the party sought,
essentially, to “recover benefits allegedly owed to her based on the disputed coverage
documents”). Resolution of this case would be impossible without interpreting the plan, as the
plan dictates, among other things, the obligations of its participants and the rights of its
beneficiaries.
As all three requirements for complete preemption are met here, the Court finds that
Plaintiff’s claims are completely preempted under ERISA. The Court will treat Plaintiff’s claims
as ERISA claims: a claim for the recovery of benefits due under the plan and a claim for benefits
lost as a result of Emmitsburg’s breach of its fiduciary duties.

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Despite the absence of arguments in Emmitsburg’s Motion and Plaintiff’s Response, the
Court is satisfied that summary judgment should be denied. At bottom, there are a number of
material facts in dispute between Plaintiff and Emmitsburg.

For example, and of primary

importance to the resolution of this motion, disputes exist over whether Emmitsburg informed
Mr. Clarke that his insurance coverage would terminate if he did not take certain steps by
applying for an extension of coverage and over whether Emmitsburg assured Mr. Clarke that his
insurance coverage would continue without any action necessary on his part. These genuine
factual disputes alone are sufficient to warrant the denial of Emmitsburg’s Motion for Summary
Judgment.
In addition, putting aside the genuine disputes of material facts that exist, Emmitsburg
has failed to show that it is “entitled to judgment as a matter of law.” Fed. R. Civ. P. 56. In its
Motion, Emmitsburg argues that under Maryland contract law, it cannot be held liable under the
insurance policy at issue because it was not a party to the contract. ECF No. 35-1 at 5.
Maryland contract law, however, no longer applies to this action because of ERISA’s complete
preemption. Because Emmitsburg has failed to show that it is entitled to judgment as a matter of
law, its Motion must be denied.
III.

CONCLUSION
For the reasons stated above, the Emmitsburg Glass Company’s Motion for Summary

Judgment is DENIED. A separate Order shall follow.
SO ORDERED.

Date: July 1, 2013

/s/
Timothy J. Sullivan
United States Magistrate Judge

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