Cannon v. Aetna Life Insurance Company et al

Filing 32

Judge Denise J. Casper: ORDER entered. MEMORANDUM AND ORDER - The Court DENIES the Defendants' motion to dismiss and ALLOWS the Defendants' motion to stay the proceeding, D. 15. (Hourihan, Lisa)

UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
__________________________________________
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GREGORY CANNON,
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Plaintiff,
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v.
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Civ. Action No. 14-cv-12546
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AETNA LIFE INSURANCE COMPANY and )
PHARMERICA LONG TERM DISABILITY )
PLAN,
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Defendants.
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__________________________________________)
MEMORANDUM AND ORDER
CASPER, J.
I.

June 17, 2015

Introduction
Plaintiff Gregory Cannon (“Cannon”) brings this action against Aetna Life Insurance

Company (“Aetna”) and Pharmerica Long Term Disability Plan (the “Plan”) (collectively, the
“Defendants”) alleging the unlawful denial of benefits under the Employee Retirement Income
Security Act of 1974, 29 U.S.C. §§ 1001, et. seq. D. 1. The Defendants move to dismiss or, in
the alternative, to stay the case. D. 15. For the reasons stated below, the Court DENIES the
motion to dismiss and ALLOWS the motion to stay.
II.

Standard of Review
In considering a motion to dismiss for failure to state a claim upon which relief can be

granted pursuant to Fed. R. Civ. P. 12(b)(6), the Court will dismiss a pleading that fails to plead
“enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly,
550 U.S. 544, 570 (2007). To state a plausible claim, a claim need not contain detailed factual
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allegations, but it must recite facts sufficient to at least “raise a right to relief above the
speculative level . . . on the assumption that all the allegations in the complaint are true (even if
doubtful in fact).” Twombly, 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.’” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “Nor does a complaint suffice if
it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Id. (quoting Twombly,
550 U.S. at 557) (alteration in original). At bottom, a claim must contain sufficient factual
matter that, accepted as true, would allow the Court “to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Id. However, “[i]n determining whether a
[pleading] crosses the plausibility threshold, ‘the reviewing court [must] draw on its judicial
experience and common sense.’ . . . This context-specific inquiry does not demand ‘a high
degree of factual specificity.’” García-Catalán v. United States, 734 F.3d 100, 103 (1st Cir.
2013) (internal citations omitted).
III.

Factual Background
Unless otherwise indicated, the facts are as alleged in the complaint and taken as true for

the purpose of the pending motion. Cannon, formerly a pharmacist, stopped working on August
18, 2010 because he suffered from multiple ailments. D. 1 ¶ 18. He was insured under the Plan,
which was administered by Aetna. Id. ¶¶ 6, 10. Cannon received short term disability (“STD”)
benefits from Aetna from August 18, 2010 through October 3, 2010. Id. ¶ 19. Aetna terminated
Cannon’s STD benefits effective October 4, 2010, stating that Cannon was not “totally disabled”
as defined by the terms of the Plan. Id. ¶ 20.
On May 24, 2011, Cannon’s counsel requested that Aetna review Cannon’s eligibility for
long term disability (“LTD”) benefits and provided supporting documentation. Id. ¶ 24. Aetna

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did not respond. Id. ¶ 25. At some point after Cannon’s counsel sent a follow-up letter, counsel
received a voice mail from an Aetna employee stating that Aetna refused to review Cannon’s
claim. Id. ¶ 27. On July 27, 2011, counsel again wrote to Aetna, including additional medical
information and LTD application forms. Id. ¶ 28. Counsel submitted further information in
December 2011 and January 2012. Id. ¶¶ 30, 32. Aetna has not provided a written response to
Cannon’s request for LTD benefits. Id. ¶ 37.
IV.

Procedural History
Cannon initiated this action on June 17, 2014. D. 1. The Defendants have now moved to

dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). D. 15. The Court held a
hearing on the pending motion and took the matter under advisement. D. 28.
Cannon has a related matter pending before this Court. On March 21, 2012, Cannon sued
Aetna, the Plan and Pharmerica Temporary Disability Income Plan seeking to recover both LTD
and STD benefits. See Civ. Action No. 12-cv-10512-DJC, D. 1. On February 18, 2013, the
parties to that action stipulated to a dismissal without prejudice of Cannon’s claim for LTD
benefits. Id., D. 35. On September 17, 2013, the Court ordered that Cannon’s case be remanded
to Aetna “to allow the independent, reviewing physicians . . . to update their reports after the
record is supplemented with the additional medical records . . ., including records from Cannon’s
primary care physician.” Id., D. 52 at 24. Upon its supplemental review, Aetna upheld its
decision to deny STD benefits to Cannon. See id., D. 61. The defendants in the related matter
have moved for summary judgment, id., D. 86, and Cannon has responded with his own motion
for summary judgment, id., D. 88 (filed under seal). The Court will hold a hearing on both
pending summary judgment motions on July 15, 2015. Id., D. 95.

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V.

Discussion
A.

Exhaustion of administrative remedies

The Defendants first argue that Cannon failed to exhaust his administrative remedies
because he did not pursue an administrative appeal. D. 16 at 7. Exhaustion of administrative
remedies is required before a plaintiff may assert an ERISA claim. Drinkwater v. Metro. Life
Ins. Co., 846 F.2d 821, 826 (1st Cir. 1988); Botelho v. Liberty Life Assur. Co. of Boston, No.
11-11801-GAO, 2012 WL 3929983, at * 1 (D. Mass. Sep. 10, 2012) (stating that “it is well
settled in this circuit that a plaintiff seeking to assert an ERISA claim to recover benefits must
first exhaust his administrative remedies”).
According to the facts alleged, however, Aetna did not provide notice in writing of the
denial of Cannon’s claim for LTD benefits. Such notice is required by the ERISA statute, which
states that a plan “shall . . . provide adequate notice in writing to any participant or beneficiary
whose claim for benefits under the plan has been denied, setting forth the specific reasons for
such denial, written in a manner calculated to be understood by the participant.” 29 U.S.C. §
1133(1). Moreover, the regulations promulgated pursuant to ERISA require a plan administrator
to notify a claimant of a denial of benefits “within a reasonable period of time, but not later than
90 days after receipt of the claim by the plan.” 29 C.F.R. § 2560.503-1(f)(1). The regulations
further require that “the plan administrator shall provide a claimant with written or electronic
notification of any adverse benefit determination,” such notice to include the reasons for the
denial, the plan provisions on which the decision was based, a description of any materials that
would allow the claimant to perfect the claim, and an explanation of the appeal process. Id. §
2560.503-1(g). “All of these notice provisions serve an obvious purpose: they seek to notify the
claimant of what he or she will need to do to effectively make out a benefits claim and to take an

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administrative appeal from a denial.” Bard v. Boston Shipping Ass’n., 471 F.3d 229, 239 (1st
Cir. 2006). Cannon alleges that Aetna never provided the statutorily required denial of his LTD
benefits application. D. 1 ¶ 37.
Although Aetna allegedly did not abide by ERISA’s notice requirements, the Court must
further inquire as to whether Cannon was prejudiced by the failure of notice. See Bard, 471 F.3d
at 241 (addressing whether claimant was prejudiced by failure of notice, but declining to decide
whether such a showing is always required). “ERISA’s notice requirements are not meant to
create a system of strict liability for formal notice failures.” Terry v. Bayer Corp., 145 F.3d 28,
39 (1st Cir. 1998). “[A]llowing a claim for relief because of inadequacy of formal notice without
any showing that a precisely correct form of notice would have made a difference would result in
benefit claims outcomes inconsistent with ERISA aims of providing secure funding of employee
benefit plans.” Id. (quoting Recupero v. New England Tel. & Tel. Co., 118 F.3d 820, 840 (1st
Cir. 1997)).

“Substantial compliance with the regulations is sufficient . . . .

[W]as the

beneficiary supplied with a statement of reasons that, under the circumstances of the case,
permitted a sufficiently clear understanding of the administrator’s position to permit effective
review[?]” Id. (quoting Donato v. Metro. Life Ins. Co., 19 F.3d 375, 382 (7th Cir. 1994),
overruled in part on other grounds by Diaz v. Prudential Ins. Co. of Am., 424 F.3d 635, 640 (7th
Cir. 2005) (internal quotation marks omitted)). Here, Cannon alleges that, not only did Aetna
not substantially comply with the regulations, it did not comply at all. As alleged, Cannon was
not afforded “a sufficiently clear understanding” of the reasons for the denial, and, therefore, he
was prejudiced by the alleged failure of notice. McCarthy v. Commerce Group, Inc., 831 F.
Supp. 2d 459, 484 (D. Mass. 2011) (concluding inadequate denial notice prejudiced claimant and

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prevented her from engaging in “meaningful dialogue called for by the regulations”) (internal
quotation marks omitted).
The Defendants also argue that Aetna’s denial of Cannon’s STD benefits was also a tacit
denial of Cannon’s LTD application and thus no formal notification of denial was required. D.
16 at 8-9. The Defendants, however, rely on a series of cases that appear inapposite because the
claimants received notices of adverse determinations with respect to LTD benefits, even if the
denials were based on a denial of STD benefits, or because LTD benefits were not at issue. See
Wright v. R.R. Donnelley & Sons Co. Group Benefits Plan, 402 F.3d 67, 72 (1st Cir. 2005)
(denial letters for STD and LTD benefits issued same day, with both denials due to plaintiff’s
lack of occupational limitations); Lewis v. Aetna Life Ins. Co., No. CV-11-J-1656-NE, 2012 WL
4815540, at * 2 (N.D. Ala. Oct. 10, 2012) (noting, without further discussion, that plaintiff was
ineligible for LTD benefits because she did not qualify for STD benefits); Ferry v. Prudential
Ins. Co. of Am., No. 2:10-cv-211-GZS, 2011 WL 4828816, at * 3 (D. Me. Oct. 10, 2011)
(defendant disallowed plaintiff’s LTD benefits claim because STD benefits terminated); Escobar
Galíndez v. Ortho Pharm., 328 F. Supp. 2d 213, 227, 229 (D.P.R. 2004) (denying summary
judgment where court could not determine plaintiff’s eligibility for LTD benefits and indicating
that an appeal of the denial of STD benefits might also encompass an appeal of the tacit denial of
LTD benefits where LTD benefits not allowed unless claimant received STD benefits for more
than 26 weeks, but also noting that plan provided that failure of notification should be considered
a denial).
The Defendants’ reliance on Smith v. Weekly Disability Income Ins. for Employees of
Friends of KEXP, No. C09-0937-JCC, 2010 WL 890068, at * 3 (W.D. Wash. Mar. 9, 2010), is
also misplaced. There the court invoked the futility exception to the requirement that the

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plaintiff exhaust her administrative remedies. Id. The court denied the defendant’s summary
judgment motion because the plaintiff’s LTD claim “would be doomed to fail” and denial of
STD benefits “can be seen to constitute a tacit denial of long-term benefits.” Id. Applying
Smith’s logic, while Aetna would be excused from formally denying Cannon’s claim, it is
difficult to see how dismissal here would be warranted solely on failure to exhaust grounds
where with no formal denial of the LTD claim, Cannon could not have reasonably exhausted his
administrative remedies. As discussed below, however, dismissal may be warranted on other
grounds. See Section C, infra.
B.

Findings in companion case

The Defendants next argue that, based on the Court’s findings in Cannon’s other
proceeding, he cannot meet the 180-day elimination period required to receive LTD benefits. D.
16 at 10-12. The Court’s ruling on the parties’ summary judgment motion in Cannon’s case
regarding STD benefits considered whether Aetna’s failure to conduct a vocational review
rendered the decision to deny benefits arbitrary and capricious. Civ. Action No. 12-cv-10512, D.
52 at 22-24. The Court concluded that “there was no need for a vocational review” because “the
record did not demonstrate that Cannon would be unable to perform any physical level of work;
therefore Cannon would be able to perform the material duties of his own occupation.” Id. at 24.
The Defendants argue that the Court’s conclusion shows that Cannon cannot establish that he
satisfies the Plan’s definition of disability, which requires him to demonstrate that he was unable
to perform the material duties of his occupation during the 180-day elimination period. Id. at 11.
The issue before the Court, however, was not Cannon’s eligibility for STD benefits; it
was whether Aetna’s termination of Cannon’s STD benefits was procedurally flawed by Aetna’s
failure to perform an adequate vocational review. Id. at 20. The Court concluded that, while the

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decision not to conduct a vocational review was not arbitrary and capricious, the Defendants also
were not entitled to summary judgment. Id. at 24. The Court remanded the case to allow Aetna
to review a supplemented record. Id. Cannon’s claim for STD benefits has yet to be resolved.
Whether Aetna’s termination of Cannon’s STD benefits was proper has not been adjudicated,
and, therefore, his eligibility for STD benefits, or lack thereof, cannot form the basis on which to
dismiss this present action for LTD benefits. Cf. Downey v. Aetna Life Ins. Co., No. 12-10144RWZ, 2013 WL 6147202, at * 2 (D. Mass. Nov. 22, 2013) (allowing summary judgment where
plaintiff had been denied LTD benefits and could not satisfy elimination period because
“[n]either Aetna or this court has found plaintiff disabled for any period of time”); Mack v.
Metro. Life Ins. Co., No. 8:08-cv-595-T-30EAJ, 2008 WL 2952887, at * 3 (M.D. Fla. July 30,
2008) (concluding plaintiff’s claim for LTD benefits was res judicata where the court had
“clearly ruled” that plaintiff was not entitled to STD benefits).
C.

Stay

The Defendants urge the Court to exercise its discretion to stay this proceeding until
Cannon’s suit pursuing STD benefits is resolved because its disposition may affect this case. D.
16 at 12-13. “The District Court has broad discretion to stay proceedings as an incident to its
power to control its own docket.” Clinton v. Jones, 520 U.S. 681, 706 (1997). The Court
agrees that it makes sense to stay this proceeding until summary judgment, scheduled to be
heard next month, has been resolved in the companion case. The parties will have the benefit of
the Court’s decision on Cannon’s STD benefits claim in deciding how to proceed with respect
to his claim for LTD benefits. The stay is particularly appropriate where there appears to be a
question as to whether Cannon is capable of satisfying the requirements for LTD benefits if he
cannot meet the prerequisites of STD benefits.

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VI.

Conclusion
For the foregoing reasons, the Court DENIES the Defendants’ motion to dismiss and

ALLOWS the Defendants’ motion to stay the proceeding, D. 15.
So Ordered.
/s/ Denise J. Casper
United States District Judge

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