Nardello v. Boehringer Ingelheim USA Corp. et al

Filing 23

MEMORANDUM. Signed by Judge James K. Bredar on 10/13/2016. (bmhs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
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JENNIFER NARDELLO,

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Plaintiff

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v.
BOEHRINGER INGELHEIM USA
CORP., et al.,
Defendants
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CIVIL NO. JKB-15-3792

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MEMORANDUM

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This case arises from Plaintiff Jennifer Nardello’s four-count complaint against her
employer, Boehringer Ingelheim Pharmaceuticals, Inc. (“BIPI”),1 and against the claims
administrator of its short-term disability program, Aetna Life Insurance Company (“Aetna”),
alleging wrongful denial of short- and long-term disability benefits. (Complaint, ECF No. 1.)
Previously, the Court dismissed without prejudice Counts I and II, which alleged violations of
the Americans with Disabilities Act, after the parties stipulated that those counts were subject to
an arbitration agreement between Plaintiff and BIPI. (Order Approving Joint Stipulation of
Dismissal, ECF No. 14.) Count III alleges that BIPI and Aetna wrongly denied Plaintiff benefits
to which she was entitled by BIPI’s short-term disability (“STD”) plan, and seeks redress under
the Employee Retirement Income Security Act of 1974 (“ERISA”) or, alternatively, under
contract law. (Complaint ¶ 89.) Count IV alleges that that BIPI and Aetna’s administration of
BIPI’s long-term disability (“LTD”) plan violates both Defendants’ fiduciary duties under
ERISA. (Id. at ¶ 93.)
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The parties agree that BIPI is Plaintiff’s employer and the proper party to this suit in spite of the fact that
Plaintiff initially filed her complaint against Boehringer Ingelheim USA Corp. (Joint Stipulation to Stay 1 n.1, ECF
No. 8.) The Clerk will be directed to amend the docket to reflect Defendant’s proper name.

Currently before the Court are Defendant Aetna’s motion to dismiss or, in the alternative,
motion for summary judgment (ECF No. 17) and Defendant BIPI’s motion to compel arbitration
and to stay or dismiss further litigation (ECF No. 16). Both motions have been fully briefed and
no hearing is necessary. See Local Rule 105.6 (D. Md. 2016). For the reasons detailed below,
the Court will grant Aetna’s motion in part as a motion to dismiss and grant it in part as a motion
for summary judgment. The Court will grant BIPI’s motion to compel arbitration, and will stay
the case.2
I.

Standard for Dismissal for Failure to State a Claim
A complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to

relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility exists “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. An inference of a mere
possibility of misconduct is not sufficient to support a plausible claim. Id. at 679. As the
Twombly opinion stated, “Factual allegations must be enough to raise a right to relief above the
speculative level.” 550 U.S. at 555. “A pleading that offers ‘labels and conclusions’ or ‘a
formulaic recitation of the elements of a cause of action will not do.’ . . . Nor does a complaint
suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556
U.S. at 678 (quoting Twombly, 550 U.S. at 555, 557). Although when considering a motion to
dismiss a court must accept as true all factual allegations in the complaint, this principle does not
apply to legal conclusions couched as factual allegations. Twombly, 550 U.S. at 555.
2

Pursuant to a joint stipulation, the Court previously stayed this case pending Plaintiff’s receipt of a right to
sue notice from the Equal Employment Opportunity Commission (“EEOC”). (ECF No. 9.) Plaintiff received that
document. (See Joint Stipulation to Extend Time, ECF No. 10.) The stay was effectively mooted, but was
inadvertently left in place on the docket. The Court lifts the stay nunc pro tunc to April 20, 2016, so as to rule on
the pending motions, and will again stay the case as a consequence of its current rulings.

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II.

Standard for Summary Judgment
“The court shall grant summary judgment if the movant shows that there is no genuine

dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing predecessor to
current Rule 56(a)). The burden is on the moving party to demonstrate the absence of any
genuine dispute of material fact. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970). If
sufficient evidence exists for a reasonable jury to render a verdict in favor of the party opposing
the motion, then a genuine dispute of material fact is presented and summary judgment should be
denied. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). However, the “mere
existence of a scintilla of evidence in support of the [opposing party’s] position” is insufficient to
defeat a motion for summary judgment. Id. at 252. The facts themselves, and the inferences to
be drawn from the underlying facts, must be viewed in the light most favorable to the opposing
party, Scott v. Harris, 550 U.S. 372, 378 (2007); Iko v. Shreve, 535 F.3d 225, 230 (4th Cir.
2008), who may not rest upon the mere allegations or denials of his pleading but instead must, by
affidavit or other evidentiary showing, set out specific facts showing a genuine dispute for trial,
Fed. R. Civ. P. 56(c). Supporting and opposing affidavits are to be made on personal knowledge,
contain such facts as would be admissible in evidence, and show affirmatively the competence of
the affiant to testify to the matters stated in the affidavit. Id.
III. Allegations of the Complaint3
Plaintiff is employed by BIPI as a primary care sales representative. (Complaint ¶ 24.)
Plaintiff alleges that Aetna is the plan administrator of BIPI’s STD plan (Id. at ¶ 6.) Beginning
in March of 2015, Plaintiff began experiencing symptoms of severe gastro-intestinal discomfort,
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The facts are recited here as alleged by Plaintiff. See Ibarra v. United States, 120 F.3d 472, 474 (4th Cir.

1997).

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nausea, and dizziness, resulting in a significant amount of time in which she was unable to work.
(Id. at ¶¶ 25–30, 59.)

It took several months for doctors to diagnose these symptoms as

stemming from endometriosis, to perform surgery and other corrective treatments, and for
Plaintiff to recover sufficiently so as to resume a normal work schedule. (Id. at ¶¶ 27, 33, 53,
56.) In April of 2015, Plaintiff exhausted her paid leave and applied for BIPI’s STD plan. (Id. at
¶¶ 34–35.) Aetna, the plan’s claims administrator, denied this application on April 21 (Id. at ¶
38), Plaintiff appealed this decision on April 24 (Id. at ¶ 41), and her appeal was denied on June
5 (Id. at ¶ 50). Plaintiff was ultimately approved for STD coverage from June 19 through July 2
(Id. at ¶ 52), but was denied coverage from July 3 forward (Id. at ¶ 57). Plaintiff also alleges that
she was only paid for six of the thirteen days for which she was approved for STD coverage. (Id.
at ¶ 54.)
IV. Analysis
A. Aetna’s Motion to Dismiss / Motion for Summary Judgment
Plaintiff’s claims against Aetna include separate arguments and theories justifying the
payment of benefits, first, under the STD plan pursuant to ERISA and, second, pursuant to
contract law (Count III), as well as for benefits under the LTD plan pursuant to ERISA (Count
IV). (Complaint ¶¶ 82–93.) Aetna has moved to dismiss all of Plaintiff’s claims against it or,
alternatively, for summary judgment. (Aetna’s Mot. to Dismiss.) Accordingly, the Court will
address Aetna’s motion with respect to each of Plaintiff’s theories, in turn.
1. The Applicability of ERISA to the Short-Term Disability Plan
Plaintiff’s primary argument under Count III is based on the premise that the STD plan is
an “employee welfare benefit plan” as defined by ERISA and that the statute imposes a fiduciary
obligation on Aetna with respect to Plaintiff. (Complaint ¶¶ 82–89.) However, the STD plan
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properly falls under the “payroll practice” exception to ERISA, rendering Plaintiff’s arguments
fruitless.
Congress passed ERISA in 1974 in order to protect employees from mismanagement of
funds created by employers to support employee benefit programs. Massachusetts v. Morash,
490 U.S. 107, 112 (1989). ERISA defines an “employee welfare benefit plan” or “welfare plan”
to include any plan, fund, or program “established or maintained by an employer . . . for the
purpose of providing for its participants or their beneficiaries, through the purchase of insurance
or otherwise, . . . benefits in the event of sickness, accident, disability, death or unemployment,”
among other things. 29 U.S.C. § 1002(1).4 However, the Department of Labor has published a
regulation excluding what it calls “payroll practices” from consideration as employee welfare
benefit programs. 29 C.F.R. § 2510.3-1(b). It defines payroll practices to include, among other
things, programs involving “payment of an employee’s normal compensation, out of the
employer’s general assets, 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.” § 2510.3-1(b)(2) (emphasis added). This regulation has been consistently upheld in
the courts. See Stern v. Int'l Bus. Machines Corp., 326 F.3d 1367, 1372 (11th Cir. 2003) (noting
“[e]very decision to interpret the payroll practices regulation since Morash supports the
application of § 2510.3–1(b)” to program provided by employer in that case, in which employer
paid employee’s regular salary out of its general assets in event that employee became unable to
work due to sickness or accident).

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For something to be considered a “plan” under this definition, the employer’s obligation must necessitate
the implementation of an ongoing administrative program. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12, 16
(1987). Even if a “plan,” the distinguishing feature of most of the benefit plans subject to ERISA “is that they
accumulate over a period of time and are payable only upon the occurrence of a contingency outside of the control
of the employee.” Morash, 490 U.S. at 115–16.

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a. Motion to Dismiss
According to the facts alleged in the Complaint, BIPI is the sponsor and Aetna is the
administrator of the STD plan that promises benefits to BIPI employees who become disabled.
(Complaint ¶¶ 6–8.) On these facts, the plan would appear to fit within the broad outlines of an
employee welfare benefit plan under 29 U.S.C. § 1002(1). The Complaint further alleges that
Aetna wrongfully withheld benefits from Plaintiff. (Id. at ¶¶ 38, 50, 55.) Plaintiff has thus
presented a plausible claim for relief in her primary argument contained in Count III (the
argument based on ERISA). Aetna’s motion to dismiss is therefore denied as to this argument.
b. Motion for Summary Judgment
As an alternative to its motion to dismiss, Aetna has also moved for summary judgment.
(Aetna’s Mot. to Dismiss.)

The evidence presented by Aetna is sufficient to decide this

motion—it is uncontroverted and Plaintiff has not objected based on a need for further discovery
on the pertinent issues (see Pl.’s Opp’n to Aetna’s Mot. to Dismiss, ECF No. 19).
Aetna serves as a third-party claims administrator of the STD plan (not the plan sponsor),
making initial eligibility determinations, and deciding initial appeals. (Affidavit of Deborah
Comar ¶ 6, ECF No. 17-2.) BIPI has ultimate control over the operation of the STD plan,
making final determinations as to eligibility. (Id. at ¶¶ 7–8.) Importantly, BIPI funds all
payments under the program out of its general assets. (Id. at ¶ 8.)
The STD plan meets the criteria of a payroll practice in that payments under the program
are a substitute for the covered employee’s wages and are paid out of BIPI’s general assets.
Thus, the STD plan is not a welfare benefit program and is not covered under ERISA. While the
STD plan provides benefits like those covered under ERISA in that they become available in the
event of a contingency that is outside of the employee’s control, the STD plan does not involve

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benefits that accumulate over time. Furthermore, the STD plan does not give rise to the same
concern that motivated ERISA’s passage in that there is no earmarked fund that could be subject
to mismanagement.
There is no factual dispute as to how the STD plan functions, and it meets the definition
of a payroll practice as a matter of law. Accordingly, the STD plan is exempt from coverage
under ERISA, and the Court will grant summary judgment in favor of Aetna with respect to
Plaintiff’s ERISA theory in support of Count III.
2. Contractual Remedies Pertaining to the Short-Term Disability Plan
Anticipating the possibility that the Court would find the STD plan not to be covered
under ERISA, Plaintiff offers a claim for breach of contract as an alternative theory of recovery
under Count III.5 (Complaint Introduction, ¶¶ 7, 89.) This argument lacks merit with respect to
Aetna. In order to enter into a binding contract, two parties must be in privity, that is, they both
must consent to an agreement between them. Chernick v. Chernick, 610 A.2d 770, 774 (Md.
1992). Nowhere in her complaint has Plaintiff alleged that there was any agreement between
Aetna and her. (See Complaint ¶¶ 4, 6, 7, 82–89.) Therefore, as to this alternative argument
under Count III, the Court will grant Aetna’s motion to dismiss.
3. Plaintiff’s Complaint as to the Long-Term Disability Plan
In Count IV of the Complaint, Plaintiff alleges violations of ERISA as to the
administration of the LTD plan. (Complaint ¶¶ 90–93.) With respect to the applicability of
ERISA, the LTD plan is potentially subject to different analysis from that applicable to the STD

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In arguing for breach of contract, Plaintiff cites “MD. CODE § 22-701.” (Complaint ¶ 89.) Presumably,
Plaintiff is referring to Md. Code, Com. Law § 22-701, which deals with breach of contract. However, that title
applies only to computer information transactions, see Md. Code, Com. Law § 22-103, and is therefore not relevant
to the instant case. The Court’s analysis is instead based on a claim for breach of contract arising under Maryland
common law.

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plan. However, even if the LTD plan is a welfare benefit plan under ERISA, the Complaint fails
to allege sufficient facts to demonstrate a plausible claim for relief as to Count IV.
Despite the fact that ERISA itself does not contain an exhaustion requirement, a claimant
nevertheless must exhaust all available administrative remedies afforded her under her
employer’s program prior to filing suit. Makar v. Health Care Corp. of Mid-Atl. (CareFirst),
872 F.2d 80, 82 (4th Cir. 1989).
BIPI’s LTD plan is available to employees who are awarded STD benefits and who
remain disabled after depleting those benefits. (Complaint ¶ 10.) Unlike the STD plan, the LTD
plan operates as an insurance policy in which Aetna makes all eligibility determinations and
makes all benefit payments. (Affidavit of Deborah Comar ¶ 9.) Count IV of the Complaint
alleges that because one must be offered (and exhaust) STD benefits before receiving LTD
benefits, the Defendants’ denial of the majority of Plaintiff’s STD claim was simultaneously a
breach of the Defendants’ fiduciary obligations under ERISA with respect to the LTD plan.
(Complaint ¶¶ 91–93.) However, the Complaint does not allege that Plaintiff applied for LTD
benefits or that she appealed any denial thereof.6 (See Complaint.) In failing to plead facts
sufficient to demonstrate exhaustion, Plaintiff has omitted a necessary element of a claim under
ERISA.7 Thus, regardless of whether the LTD plan is subject to ERISA, Count IV of the
Complaint cannot survive a motion to dismiss. Accordingly, Aetna’s motion will be granted
with respect to this count. Because this resolves Aetna’s role in the litigation, as to those claims
on which judgment has not already been entered in its favor, Aetna is otherwise dismissed from
the case.
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In fact, the record indicates that Plaintiff never filed an application for LTD benefits. (Affidavit of
Deborah Comar ¶ 9.)
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The futility of Plaintiff’s position with respect to Count IV is emphasized by her silence in response to
Aetna’s argument that she failed to exhaust her administrative remedies under the LTD plan. (See Mem. in Supp. of
Aetna’s Mot. to Dismiss 9 n.6, ECF No. 17-1; Opp’n to Aetna’s Mot. To Dismiss.)

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B. BIPI’s Motion to Compel Arbitration and to Dismiss or Stay Litigation with Respect to
Counts III and IV
1. The Scope of the Arbitration Agreement
For its part, BIPI argues that all disputes concerning the STD plan are subject to the
arbitration agreement into which it entered with Plaintiff. (Mem. in Supp. of BIPI’s Mot. to
Compel 8–13, ECF No. 16-1.) Plaintiff contends that the STD plan is governed by ERISA and is
therefore subject to an exception built into the arbitration agreement for such disputes. (Opp’n to
BIPI’s Mot. to Compel 5–12, ECF No. 18.) Furthermore, the parties disagree over whether or
not the determination of the arbitration agreement’s scope is itself a matter to be resolved
through arbitration. (Compare Mem. in Supp. of BIPI’s Mot. to Compel 13, with Opp’n to
BIPI’s Mot. to Compel 3–5.) The Court is persuaded that under this arbitration agreement, it is
the arbitrator’s responsibility to determine whether a dispute between the parties is subject to the
agreement, and the Court will therefore grant BIPI’s motion.
Congress has stipulated that contractual agreements to resolve conflicts through
arbitration are binding and enforceable on the parties to those contracts. Federal Arbitration Act,
9 U.S.C. § 2. In light of Congress’ clear intent, federal courts generally apply a presumption in
favor of honoring arbitration agreements. Peabody Holding Co., LLC v. United Mine Workers of
Am., Int'l Union, 665 F.3d 96, 102 (4th Cir. 2012). However, that presumption does not apply to
the question of whether or not an arbitrator may decide the scope of the arbitration agreement.
Id. It is generally up to trial courts to determine whether or not an issue is appropriate for
arbitration.

Id.

Parties may nonetheless agree to have an arbitrator determine issues of

arbitrability, but such an agreement must “clearly and unmistakably provide that the arbitrator
shall determine what disputes the parties agreed to arbitrate.” Id.; see also Carson v. Giant

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Food, Inc., 175 F.3d 325, 330–31 (4th Cir. 1999) (“Those who wish to let an arbitrator decide
which issues are arbitrable need only state that ‘all disputes concerning the arbitrability of
particular disputes under this contract are hereby committed to arbitration,’ or words to that clear
effect.”).
BIPI claims, and Plaintiff does not dispute, that Plaintiff entered into an arbitration
agreement with BIPI. (See Opp’n to BIPI’s Mot. to Compel 5.) In pertinent part, this agreement
states “[e]xcept as otherwise expressly agreed upon, and except as otherwise provided by this
Arbitration Agreement, any dispute as to the arbitrability of a particular claim made pursuant to
this Arbitration Agreement shall be resolved in arbitration.” (Arbitration Agreement § A.11.t,
ECF No. 16-3.) This clause comports with the model language set by the Carson Court. See
175 F.3d at 330–31. Accordingly, whether the arbitration agreement covers the instant dispute is
a question for the arbitrator to resolve. The Court will therefore grant BIPI’s motion to compel
arbitration on the issue of whether the arbitration agreement covers all facets of the present
dispute.
It is worth noting that even if the scope and applicability of the arbitration agreement
were a question for judicial determination, the Court would conclude that disputes concerning
the STD plan fall within the agreement’s scope. The arbitration agreement explicitly carves out
an exception to its own applicability for claims arising under ERISA. (Arbitration Agreement
§ A.4.) Plaintiff’s primary argument is that the STD plan is covered under ERISA and is
therefore exempted from the arbitration agreement. (Opp’n to BIPI’s Mot. to Compel 12.)
However, the Court has already determined that the STD plan is not covered under ERISA. See
supra. As to Plaintiff’s alternative position for recovery under contract law (see Complaint 89),
the arbitration agreement applies on its face to claims for breach of contract. (Arbitration

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Agreement § A.2.) For these reasons, if it were appropriate for the Court to answer the question,
it would find that Plaintiff’s complaint concerning the STD program is appropriately governed
by the arbitration agreement.
2. Proper Disposition
The question remains as to the proper treatment of the case in light of the Court’s
conclusion that an arbitrator will resolve questions of arbitrability. BIPI invites the Court to
dismiss the case or, alternatively, to stay the litigation. (Mem. in Supp. of BIPI’s Mot. to
Compel 14.) Under the circumstances, a stay is appropriate.
When a court refers a case for arbitration subject to an arbitration agreement, it shall, on
application of one of the parties, stay the trial until the arbitration is resolved. 9 U.S.C. § 3.
Nonetheless, the court may dismiss the case when all issues presented in the lawsuit are subject
to arbitration. Choice Hotels Int’l, 252 F.3d 707, 709–10 (4th Cir. 2011).
As discussed above, the Court holds that the threshold question—whether the arbitration
agreement applies to all issues in the present dispute—must be resolved in arbitration. That
being the case, the Court declines to rule whether all of Plaintiff’s underlying claims against BIPI
are subject to arbitration, and dismissal would therefore be premature at this time. Instead, the
Court will stay the litigation pending arbitration.
V.

Conclusion
Treating Aetna’s motion as one to dismiss, the Court will grant it as to the contract cause

of action in Count III and all of Count IV. Treating it as a motion for summary judgment, the
Court will grant it as to the remainder of Count III. BIPI’s motion to compel arbitration will be
granted as to the question of whether any or all of the issues in dispute between it and Plaintiff

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are subject to the arbitration agreement, and the case will be stayed pending the arbitrator’s
resolution of that question.
A separate order shall issue.

DATED this 13th day of October, 2016.
BY THE COURT:

/s/
James K. Bredar
United States District Judge

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