Bufkin et al v. The Prudential Insurance Company of America et al
Filing
14
ORDER granting in part and denying in part 7 Motion to Dismiss Signed by District Judge Henry T. Wingate on 9/8/2019 (nd)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
NORTHERN DIVISION
JOANNA M. BUFKIN and
MICHAEL S. MCDOWELL
PLAINTIFFS
V.
CAUSE NO. 3:18-cv-00318-HTW-LRA
THE PRUDENTIAL INSURANCE
COMPANY OF AMERICA and
JOHN DOES 1-10
DEFENDANTS
ORDER
BEFORE THIS COURT is a Motion to Dismiss [Docket no. 7] filed by Defendant The
Prudential Insurance Company of America (hereinafter referred to as “Prudential”). Prudential filed
its Motion to Dismiss under Rule 12(b)(6) 1 of the Federal Rules of Civil Procedure, requesting that
this Court dismiss Plaintiffs’ Complaint [Complaint, Docket no. 2, pp. 4-8] with prejudice. In support
of its Motion to Dismiss, Prudential alleges that Plaintiffs’ Complaint asserts only state law claims,
which are preempted here because, says Prudential, this action must be constructed under the
Employee Retirement Income Security Act of 1974 2 (“ERISA”), an enactment authorized by the
United States Congress. Accordingly, continues Prudential, the Complaint, sub judice, fails to state
any state law claims against Prudential upon which relief can be granted.
1
(b) How to Present Defenses. Every defense to a claim for relief in any pleading must be asserted in
the responsive pleading if one is required. But a party may assert the following defenses by motion: … 6)
failure to state a claim upon which relief can be granted;
Fed. R. Civ. P. 12
2
29 U.S.C.A §§ 1001 et seq.
Congress enacted ERISA in 1974 to establish a uniform system of federal regulation over employee benefit
plans and the persons who manage them. See generally § 9:17. The Application of ERISA to Group
Insurance Claims, Bad Faith Actions Liability & Damages § 9:17 (2d ed.)
1
Plaintiffs, Joanna M. Bufkin (“Bufkin”) and Michael S. McDowell (“McDowell”)
(hereinafter collectively referred to as “Plaintiffs”), in their Response to Prudential’s Motion to
Dismiss [Docket no. 9], contend otherwise and deny that their pleading triggers ERISA
jurisprudence. Plaintiffs further contend, as a precaution, that if this Court finds their Complaint to
be insufficient to survive a Rule 12(b)(6) analysis, this Court should grant Plaintiffs leave to amend
their assertions and causes of action.
For the reasons set forth below, this Court DENIES IN PART and GRANTS IN PART
Prudential’s Motion to Dismiss [Docket no. 7].
I.
PREAMBLE
The question presented herein is whether Plaintiffs’ state law claims for death benefits under
a life-insurance policy issued by Prudential are preempted by ERISA. Plaintiffs allege that their
claims are not preempted by ERISA because: (1) the policy of insurance at issue here is not an
“employee benefit plan” under ERISA; and (2) Plaintiffs’ have alleged state law claims against
Prudential based upon state laws which are “saved” from federal preemption.
II.
THE PARTIES
Bufkin is an adult resident citizen of Hinds County, Mississippi [Compl. ¶1]. Bufkin is a
named beneficiary under the life-insurance policy issued by Prudential, which is the subject of this
dispute.
McDowell is an adult resident citizen of Los Angeles County, California [Compl. ¶2].
McDowell, too, is also a named beneficiary under the life insurance policy at issue in this matter.
Prudential is a foreign corporation doing business in the State of Mississippi and organized
under the laws of the State of New Jersey with its principal address in Newark, New Jersey [Compl.
¶3].
2
Plaintiffs also name as Defendants, John Does 1-10 (“ John Doe Defendants”) as “persons or
entities affiliated with Defendant Prudential and/or have acted in concert with Prudential, whose
identities are currently unknown.” [Compl. ¶4]. This Court ignores the “presence” of the John Doe
Defendants on any jurisdictional question in this matter. Title 28 U.S.C. § 1441(b)(1) 3 explains: “[i]n
determining whether a civil action is removable on the basis of the jurisdiction under section 1332(a)
... the citizenship of defendants sued under fictitious names shall be disregarded.” Chapman v. Kroger
Ltd. Partn., 3:11-CV-688 HTW-LRA, 2012 WL 775812, at *2 (S.D. Miss. Mar. 7, 2012).
III.
PROCEDURAL BACKGROUND
On April 17, 2018, Plaintiffs filed their Complaint against Prudential in the Circuit Court
for the First Judicial District of Hinds County, Mississippi, Cause No. 25CI1:18-cv-00218-JAW.
Plaintiffs’ State Complaint asserted claims against Prudential for: (1) breach of contract; (2)
breach of the implied covenant of good faith and fair dealing; (3) negligence; (4) gross
negligence; (5) bad faith and tortuous breach of contract; (6) misrepresentation; (7) promissory
estoppel; (8) equitable estoppel; and (9) vicarious liability [See generally Compl.].
3
Title 28 U.S.C. § 1441(a) states:
Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court
of which the district courts of the United States have original jurisdiction, may be removed by the defendant
or the defendants, to the district court of the United States for the district and division embracing the place
where such action is pending. For purposes of removal under this chapter, the citizenship of defendants sued
under ficticious names shall be disregarded.
3
On May 17, 2018, Prudential removed this lawsuit from the Circuit Court of Hinds
County, Mississippi, to this Court. This Court, said Prudential in its Notice of Removal [Docket
no. 1], has jurisdiction over this matter until Title 28 U.S.C. §§ 1332 4, 1441, and 1446 5
IV.
FACTS
As alleged beneficiaries of a life-insurance policy issued by Prudential, Plaintiffs brought
forth this action to recover death benefits, which Plaintiffs allege were wrongfully denied to them
by Prudential. Below is a summary of the pertinent events which led to this lawsuit.
Mrs. Joanne C. Mohrman (hereinafter referred to as “Mrs. Mohrman” was an employee of
Prudential until late 2001 and a participant in Prudential’s Employee Benefit Group Plan (hereinafter
referred to as “the Group Plan”), which provided Mrs. Mohrman life-insurance coverage with a death
benefit amount of $288,000 [Compl. ¶ 7; See generally Exhibits A-C]. The Group Plan was
maintained and administered by Prudential to provide its employees with inter alia, life insurance
[See generally Ex. A and Ex. B]. As the “Plan Sponsor” and “Plan Administrator”, Prudential issued
the group- insurance coverage, administered the Group Plan, and among other things, supplied claim
forms to employees, maintained claims records, processed claims, and determined benefits [Compl.
¶ 7; Exhibit A at pp. 29-30; Exhibit B at p. 36].
4
Title 28 U.S.C. § 1332 states:
(a) The district courts shall have original jurisdiction of all civil actions where the matter in
controversy exceeds the sum or value of $75,000, exclusive of interests and costs, and is between—
(1) Citizens of different States; …
5
Title 28 U.S.C. § 1446(b)(1) states:
The notice of removal of a civil action or proceeding shall be filed within 30 days after the receipt by
the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief
upon which such action or proceeding is based, or within 30 days after the service of summons upon the
defendant if such initial pleading has then been filed in court and is not required to be served on the defendant,
whichever period is shorter.
4
At the end of Mrs. Mohrman’s employment with Prudential, Prudential offered Mrs.
Mohrman the option to either continue coverage under the Group Plan as a “portable participant” or
to covert that coverage into an individual-life policy [Compl. ¶ 7; Exhibit D]. Prudential’s Group
Universal Life Insurance Option Election Form (“Option Form”) explained to Mrs. Mohrman that
“[she] may continue the same amount of coverage that was in force on the last day of [her] active
service.” [Compl. ¶ 7; Exhibit D]. at p. 2 ¶ 1]. The Option Form clarifies that “[p]ortable participants
are billed quarterly, and are subject to all rate changes that apply to the active participants.” Id.
Mrs Mohrman elected to continue her insurance coverage under the Group Plan after her
employment with Prudential had ended in 2001 [Compl. ¶ 7; Exhibit D] 6.
Plaintiffs’ Complaint alleges:
Joanne C. Morhman (Mrs. Mohrman) was the named insured of a universal life
insurance policy issued by Prudential [Compl. ¶7].
Mrs. Mohrman…applied for Prudential’s Electronic Funds Transfer (“EFT”)
payment method to ensure the payment of her insurance premiums [Compl. ¶8].
…Mrs. Mohrman received a notice from Prudential that her EFT application had
been processed and would be used to initiate an EFT deduction on her “next
payment” [Compl. ¶10].
Mrs. Mohrman reasonably relied on the notice and reasonably believed that the
premiums due under her policy would be paid by an EFT reduction [Compl. ¶10].
…Prudential…canceled her insurance policy for failure to pay the premium.
Prudential claimed premiums owed had not been paid by EFT deduction [Compl.
¶12].
At all times prior to her death, Mrs. Mohrman was willing and able to pay the policy
premiums and believed, in fact, that she had [Compl. ¶13].
Mrs. Mohrman died on April 18, 2015 [Compl. ¶14].
6
On the Option Form, Mrs. Mohrman placed a check in the box next to the following option:
“Continue Group Universal Life coverage as a portable participant. I understand I will be billed quarterly for
$374.40 for term coverage and an additional $3.00 for administrative fees.” [Compl. ¶ 7; Exhibit D. at p. 1].
5
Plaintiffs Joanna M. Bufkin and Michael S. McDowell are the named beneficiaries
under the policy and are entitled to the policy’s death benefits [Compl. ¶17] 7.
On April 30, 2015, the Administrator of Mrs. Mohrman’s estate sent a copy of the
Death Certificate for Mrs. Mohrman to Prudential requesting that the policy be paid
to the beneficiaries [Compl. ¶15].
Prudential denied payment of death benefits under the policy. The stated reason was
for nonpayment of premium [Compl. ¶16].
Prudential breached the universal life insurance contract by failing to pay death
benefits upon the death of Mrs. Mohrman and the presentment of the beneficiaries’
claim [Compl. ¶19].
Plaintiffs’ Complaint does not identify the exact amount of damages sought; rather, Plaintiffs’
Complaint demands, among other things:
Payment from Prudential for all contractual benefits afforded under the subject policy,
with interest at the rate provided in the policy on all amount due under the subject policy
[Compl. ¶42(a)]; and
Punitive and exemplary damages…sufficient to punish and deter and make an example
of Prudential to discourage other insurers and their agents from engaging in such
misconduct… [Compl. ¶42(e)].
V.
REMOVAL
Title 28 U.S.C. § 1441 8 allows removal of "any civil action brought in a State court of which
the district courts of the United States have original jurisdiction”. Under § 1332, Defendant’s basis
for removal here, the parties must be diverse in citizenship9, a condition for federal jurisdiction met
7
The Option Form instructed Mrs. Mohrman, “[s]hould you choose to continue your coverage please
complete the enclosed Beneficiary Designation/Change Form.”[Compl. ¶ 7; Exhibit D. at p. 1]. In the
designation form, Mrs. Mohmran listed Joanna M. Buflin as the primary individual beneficiary, and Michael
McDowell and Patrick McDowell as contingent beneficiaries [Compl. ¶ 7; Exhibit D. at p. 3].
8
See footnote 3.
9
“If the case involves more than one plaintiff and more than one defendant, the court must be certain
that all plaintiffs have a different citizenship from all defendants.” Getty Oil Corp. v. Ins. Co. of f. Am., 841
F.2d 1254, 1258 (5th Cir.1988) (citing B, Inc. v. Miller Brewing Co., 663 F.2d 545, 548–49 (5th Cir. Unit A
Dec.1981)). (citing Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 267, 2 L.Ed. 435 (1806)).
6
by Plaintiffs’ Complaint. Section 1332 also requires that the amount in controversy exceed the sum
of $75,000, exclusive of costs and interest. Plaintiffs, in their Complaint, seek to recover “all
contractual benefits afforded under the subject policy, with interest…” as well as punitive damages.
The death benefit amount under the Policy is $288,000; an amount in excess of $75,000,
exclusive of costs and interest; therefore, the amount in controversy requirement is met here. Even
if the benefit amount under the policy was less than $75,000, the Fifth Circuit has recognized that
punitive damages may be included in determining the amount in controversy. St. Paul Reinsurance
Co. v. Greenberg, 134 F. 3d 1250, 1253 n. 7 (5th Cir. 1998)(internal citations and quotations omitted).
As stated above, Prudential asserts that Plaintiff’s claims against Prudential are preempted by
ERISA, an enactment authorized by the United States Congress. Under Title 28 U.S.C. § 1331 10,
Federal question jurisdiction lies where a dispute or cause of action “arises under” federal law, or
federal law “creates the cause of action” pursued in the lawsuit. Howery v. Allstate Ins. Co., 243 F.3d
912, 917 (5th Cir. 2001). The presence or absence of federal question jurisdiction is governed by the
'well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal
question is presented on the face of the plaintiff’s properly pleaded complaint." Caterpillar Inc. v.
Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987).
This Court notes that a defendant may not remove a civil action on the basis of a defense of
less-than complete federal preemption, even if the defense is anticipated in the Complaint, and even
if preemption is the only issue in the case. Caterpillar, 482 U.S. at 393, 107 S.Ct. at 2425. See also
Gully v. First Nat'l Bank, 299 U.S. 109, 111, 57 S.Ct. 96, 97, 81 L.Ed. 70 (1936). Complete
preemption by Congress, however, acts as an exception to the well-pleaded complaint. In order to
exercise federal question jurisdiction, the Court must find that Congress has "so completely
10
28 U.S.C. § 1331 states:
The district courts shall have original jurisdiction of all civil actions arising under the Constitution,
laws, or treaties of the United States.
7
pre-empted a particular area that any civil complaint raising this select group of claims is necessarily
federal in character." Metropolitan Life Ins. Co. v. Taylor, 107 S.Ct. 1542 (1987). This Court finds
that Plaintiffs’ claims present a federal question under ERISA, which falls within this category of
“complete preemption”; therefore, this Court also has subject matter jurisdiction under 28 U.S.C. §
1331.
VI.
DISCUSSION
A. Rule 12(b)(6) Motion to Dismiss Standard of Review
Under Rule 12(b)(6), a defendant may move to dismiss a complaint for “failure to state a
claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6). In order to survive such a motion,
“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). “This standard does not rise to the
level of a probability requirement, but it demands ‘more than a sheer possibility that a defendant has
acted unlawfully.’ ” Landers v. Quality Commc'ns, Inc., 771 F.3d 638, 641 (9th Cir. 2014), cert.
denied, 135 S. Ct. 1845 (2015) (quoting Iqbal, 566 U.S. at 678).
A plaintiff need not detail all factual allegations, but the complaint must provide “more than
labels and conclusions.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). While the court must
assume all facts alleged in a complaint are true and view them in a light most favorable to the
nonmoving party, it need not accept as true any legal conclusion set forth in the complaint. Iqbal,
556 U.S. at 678.
B. Application of ERISA
ERISA regulates the creation and administration of employee benefit plans. Pilot Life Ins.
Co. v. Dedeaux, 481 U.S. 41 (1987). The purpose of ERISA is to provide a uniform regulatory regime
over employee benefit plans. Employee Retirement Income Security Act of 1974, § 2 et seq., 29
U.S.C.A. § 1001 et seq. Aetna Health Inc. v. Davila, 542 U.S. 200 (2004).
8
The United States Supreme Court has held that “[t]he ‘pre-emption clause’ (§ 514(a) 11 of
[ERISA] provides that ERISA supersedes all state laws insofar as they “relate to any employee
benefit plan…” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 41 (1987). The Fifth Circuit has found
that state law claims are preempted when: (1) the state law claim addresses areas of exclusive federal
concern, and (2) the claim directly affects the relationship between traditional ERISA entities--the
employer, the plan and its fiduciaries, and the participants and beneficiaries. Memorial Hospital
System v. Northbrook Life Insurance Company 904 F.2d 236, 245 (5th Cir.1990) See also Cypress
Fairbanks Medical Center Inc. v. Pan-American Life Insurance Company, 110 F.3d 280, 283 (5th
Cir.), cert. denied, 522 U.S. 862, 118 S.Ct. 167, 139 L.Ed.2d 110 (1997); Foley v. Southwest Texas
HMO, Inc., 226 F.Supp.2d 886, 894 (E.D.Tex.2002).
Under 29 U.S.C. § 1132(a)(1)(B) 12, ERISA grants standing to a “participant” to bring a civil
action to enforce his/her rights under the terms of a plan or to enforce the provisions of ERISA.
Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1220 (5th Cir. 1992). “The term “participant” means
any employee or former employee of an employer… who is or may become eligible to receive a
benefit of any type from an employee benefit plan which covers employees of such employer…or
whose beneficiaries may be eligible to receive any such benefit.” 29 U.S.C.A. § 1002(7) (West).
Mrs. Mohrman, although not employed by Prudential at the time of her death, qualifies as a “former
employee” for the purposes of ERISA application. Mrs. Mohrman elected to continue her insurance
11
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III
shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit
plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section
shall take effect on January 1, 1975. 29 U.S.C.A. § 1144(a) (West).
12
(a)A civil action may be brought-(1) by a participant or beneficiary….
(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the
plan, or to clarify his rights to future benefits under the terms of the plan; 29 U.S.C.A. §1332
(a)(1)(B)(West).
9
coverage under Prudential’s Group Plan as a “portable participant”, even though she had the
opportunity to convert this coverage to an individual policy; therefore, Mrs. Mohrman’s beneficiaries
remain eligible to enforce her status as a plan “participant”.
Whether Prudential’s Welfare Benefits Plan is governed by ERISA turns on whether
Prudential’s Group Plan constitutes an “employee benefits plan” within the meaning of ERISA. The
party asserting ERISA preemption bears the burden to establish the existence of a plan which would
invoke ERISA’s exclusive remedy provisions. Bank of Louisiana v. Aetna U.S. Healthcare Inc., 468
F.3d 237, 242 (5th Cir. 2006).
Title 29 U.S.C. § 1002(a) defines “employee benefit plans” as:
any plan . . . established or maintained by an employer . . . to the extent that such
plan . . . was established or is maintained for the purpose of providing for its
participants or their beneficiaries, through the purchase of insurance or otherwise,
. . . benefits in the event of . . . death . . . .
29 U.S.C. § 1002(1).
To determine whether a life-insurance plan meets the definition of an “employee benefit
plan”, courts in the Fifth Circuit apply a three-part test:
Whether a plan: (1) exists; (2) falls within the safe-harbor provision established by
the Department of Labor; and (3) satisfies the primary elements of an ERISA
“employee benefit plan”—establishment or maintenance by an employer intending
to benefit employees.
Meredith v. Time Ins. Co., 980 F.2d 352, 355 (5th Cir. 1993). “If any part of the inquiry is
answered in the negative, the submission is not an ERISA plan.” Id.
1. Does a plan exist?
Under the first prong of the three-part test, a court “must first satisfy itself that there is in fact
a plan at all.” Id. (quoting MD Physicians & Assocs. v. State Bd. of Ins., 957 F.2d 178, 183 (5th Cir.
1992)). To do so, courts “determine whether from the surrounding circumstances a reasonable person
could ascertain the intended benefits, beneficiaries, source of financing, and procedures for receiving
10
benefits.” Meredith, 980 F.2d at 355 (quoting Donovan v. Dilingham, 688 F.2d 1372, 1373 (11th
Cir.1982)). The offering of “a group policy or multiple policies covering a class of employees offers
substantial evidence that a plan, fund, or program, has been established” and exists. Donovan, 688
F.2d at 1373. Ultimately, under this approach, a plan exists where there are intended benefits, a class
of beneficiaries, a source of financing, and procedures for applying for and receiving benefits. See
Carmack v. Printpack, Inc., 2003 U.S. App. LEXIS 29007, at *13-14 (5th Cir. July 2, 2003).
A reasonable person could ascertain sub judice the intended insurance benefits under
Prudential’s Group Plan, and a life insurance policy, which were death benefits.
Plaintiffs’
Complaint clearly asserts the Plaintiffs, Bufkin and McDowell, were the intended beneficiaries under
said plan, as designated by Mrs. Mohmran on Prudential’s Option Form 13. Plaintiffs further
acknowledge the existence of the plan by bringing forth this lawsuit to recover benefits allegedly
owed to them under the “Prudential Employee Benefit Group Plan” [See generally, Compl.]. The
source of financing herein was through premiums paid by the employer and/or employee and
submitted by employer to the insurer. To receive benefits, the claimant was required to apply for
same through forms provided by Prudential. This Court, therefore, finds that the Group Plan, the
policy at issue, is an “employee benefit plan”.
2. Is the plan excluded from ERISA coverage under the Safe Harbor Provision?
This Court’s finding that Prudential’s Group Plan is an “employee benefit plan” does not, on
its own, qualify the Group Plan as an ERISA plan. “[O]nce the Court determines that the program is
an ‘employee benefit plan,’ it must then look to Department of Labor regulations to determine if the
arrangement is one excluded from ERISA’s coverage.” Suggs v. Pan Am. Life Ins. Co., 847 F. Supp.
1324, 1331 (S.D. Miss. 1994)(internal citations omitted).
13
See footnote 8.
11
The United States Secretary of Labor created a regulatory safe-harbor provision, allowing an
employer to escape ERISA liability if it limited its involvement to prescribed activities. See 29 C.F.R.
§ 2510.3-1(j) (1990). See also ERISA, § 505, 29 U.S. C. A. § 1135 (West 1985)(authorizing the
Secretary to promulgate regulations interpreting ERISA). This safe-harbor provision promulgated
by the Department of Labor provides that a plan is not an ERISA “employee welfare benefit plan”
if:
(1) No contributions are made by an employer or employee organization;
(2) Participation in the program is completely voluntary for employees or
members;
(3) The sole functions of the employer or employee organization with
respect to the program are, without endorsing the program, to permit the
insurer to publicize the program to employees or members, to collect
premiums through payroll deductions or dues checkoffs; and
(4) The employer or employee organization receives no consideration in the
form of cash or otherwise in connection with the program, other than
reasonable compensation, excluding any profit, for administrative
services actually rendered in connection with payroll deductions or dues
checkoffs.
29 C.F.R. § 2510.3-1(j) (1988).
The plan must meet all four of the above criteria to be exempt from ERISA under this safe-harbor
provision. Meredith, 980 F.2d at 355. Importantly, the Department of Labor has made clear that, in
order for a plan to be one excluded from ERISA’s coverage, the employer’s role must be limited
and there must be an absence of employer involvement: “[The] requirement of employer neutrality
is the key to the rationale for not treating such a program as an employee benefit plan, namely, the
absence of employer involvement.” 40 F.R. 34525 (Aug. 15, 1975).
This Court, upon reviewing the factors set forth above, finds that Prudential’s Group Plan is
not one excluded from ERISA coverage by the Department of Labor’s safe-harbor provision.
Among other things, there is “no absence of employer involvement” in the case at bar. Id. The
12
Group Plan provides life insurance coverage issued, managed, and administered by Prudential, as
the “Plan Administrator” and “Plan Sponsor”, and “benefits [under the plan] are funded by a
combination of insurance, employer payments and trust funds.” [Compl. ¶ 7; Exhibit A at pp. 2930; Exhibit B at p. 36]. Prudential also maintains the right to terminate the Group Plan [Compl. ¶
7; Exhibit A at pp. 30-31]. This Court also notes that Prudential publishes literature detailing the
Group Plan under its own auspices, and that the literature itself advises participants that the Group
Plan is governed by ERISA [Compl. ¶ 7; Exhibit A at pp. 37-38; Exhibit B at pp. 40-41]. This
Court, therefore, finds that Prudential’s Group Life Insurance Plan is subject to ERISA coverage.
3. Does the plan satisfy the primary elements of an ERISA plan?
Lastly, courts must determine whether the plan “satisfies the primary elements of an
ERISA ‘employee benefit plan’”—that is, whether “the plan was established or maintained by
[an] employer with a purpose of providing benefits set forth in 29 U.S.C. § 1002(1).” Suggs, 847
F. Supp. at 1332-1333.
Prudential, Mrs. Mohrman’s employer, “established or maintained” the Group Plan. To
meet this requirement, “the plan fund, or program requires some control, administration, or
responsibility on part of the employer.” Id. at 1333. As stated above, Prudential issued the groupinsurance coverage, administered the Group Plan, supplied claim forms to employees, maintained
claims records, processed claims, and determined benefits. “[T]hus the policy in question meets
the test for ‘established and maintained’ under applicable law.” Suggs, 847 F. Supp. At 1333.
This Court must also find that Prudential had an “intent to provide its employees with a
welfare benefit program through the purchase and maintenance of [the] group insurance policy.”
Memorial Hosp. System v. Northbrook Life Ins. Co., 904 F.2d at 241. This Court so finds. This
Group Plan, therefore, qualifies as an ERISA-controlled employee benefit plan.
13
C. ERISA and Plaintiffs’ State Law Claims
As noted above, ERISA’s preemption clause provides that ERISA shall “supersede any and
all state laws insofar as they may now or hereafter relate to any employment benefit plan.” Pilot Life,
supra.
A state law is “related to” an ERISA plan where, among other things, the remedy sought
“falls” within the scope of, or is in direct conflict with, ERISA’s civil enforcement provisions under
§ 502(a)….” McGown v. ManPower Intern, Inc., 363 F.3d 556, 559 (5th Cir. 2004). In other words,
if a plaintiff “could have brought her claim under ERISA, the cause of action is completely
preempted…” Id
In deciphering the term “relate to”, the Fifth Circuit has held that “…[s]ome state actions may
affect employee benefits plans in too tenuous, remote, or peripheral a manner to warrant a finding
that the law ‘relates to’ the plan.” Hook v. Morrison Milling Co., 38 F.3d 776, 781 (5th Cir. 1994).
The Fifth Circuit, thus applies a two-prong test to determine whether a state law is preempted by
ERISA, finding that a state law law is preempted if: (1) the claim addresses an area of exclusive
federal concern; and (2) “the claim directly affects the relationship among traditional ERISA entities,
(i.e. plan administrators/fiduciaries and plan participants/beneficiaries).”. Bank of Louisiana, 468
F.3d at 242.
Plaintiffs set forth a multitude of claims 14, which allegedly arise primarily out of a cause of
action for Prudential’s alleged bad-faith denial of insurance benefits. All of Plaintiffs’ claims “relate
to” Plaintiffs’ request for benefits under the Group Plan. This relief directly conflicts with 29 U.S.C.
14
(1) breach of contract; (2) breach of the implied covenant of good faith and fair dealing; (3)
negligence; (4) gross negligence; (5) bad faith and tortuous breach of contract; (6) misrepresentation; (7)
promissory estoppel; (8) equitable estoppel; and (9) vicarious liability.
14
§ 1132 (a)(1)(B) 15, which affords beneficiaries a federal cause of action to recover benefits due under
the terms of an insurance plan.
In support of their Claim for misrepresentation, Plaintiffs specifically allege that Mrs.
Mohrman submitted an EFT application to have premiums deducted from her bank account and that
she reasonably relied on the notice and reasonably believed that the premium due for the policy would
be paid by an EFT deduction. Plaintiffs further assert that Prudential misrepresented the date when
the EFT deductions would begin, causing Mrs. Mohrman to miss a payment and causing her coverage
to lapse [Docket no. 11 at p. 5]. Plaintiffs allege that even if Prudential’s Group Plan is an employee
benefit plan under ERISA, their state causes of action do not “relate to” the plan and are thus not
preempted by ERISA.
The Court in Lee v. E.I. Du Pont de Nemours & Company held that Plaintiffs’ claims “related
to” an ERISA plan when the plaintiffs’ were seeking, among other things, “benefits to which they
would have become entitled but for a misrepresentation by their employer...” Lee v. E.I. DuPont de
Nemours and Co., 894 F.2d 755 at 757 (5th Cir. 1990). See also Ford Motor Co., 869 F.2d 889 (5th
Cir. 1989)(holding that misrepresentation claims are preempted by ERISA).
This Court similarly finds that Plaintiffs’ claim of misrepresentation is preempted by ERISA
because it is “related to” an ERISA plan. Plaintiffs bring forth this cause of action to receive death
benefits allegedly owed to them under an ERISA plan, as determined herein. Plaintiffs’ causes of
action also directly affect the relations among principal ERISA entities: the employer, Prudential; the
plan, Prudential’s Group Life Insurance Plan; and the Plaintiff beneficiaries.
The rest of Plaintiffs’ claims are similarly subject to preemption under ERISA as they arise
out of an alleged bad faith cause of action and “relate to” the alleged wrongful denial of benefits
15
See footnote 13.
15
under Prudential’s Group Plan. E.g. Sanford v. TIAA-CREF Individuals & Institutional Servs., LLC,
2012 U.S. Dist. LEXIS 23600 (S.D. Miss. Feb. 24, 2012)(breach of the covenant of good faith and
fair dealing); Schultz v. Progressive Health, Life, & Disability Benefits Plan, 380 F. Supp 2d 785 n.
3 (S.D. Miss. 2005)(bad faith); Saldana v. Aetna U.S. Healthcare, 233 F. Supp. 2d 812, 817 (S.D.
Miss. 2002)(negligence); Ramsey v. Colonial Life Ins. Co. of Am., 843 F. Supp. 1103 (S.D. Miss.
1992)(bad faith); Martin v. Prudential Ins. Co., 776 F. Supp. 1172 (S.D. Miss. 1991)(estopped and
tortious breach of contract).
D. Grant of Leave to Amend Complaint
A district court should ‘freely give leave’ to amend a complaint ‘when justice so requires.’”
U.S. ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 270 (5th Cir. 2010) (quoting Fed. R. Civ.
P. 15(a)(2)). Plaintiffs’ request for leave to amend is not made for undue delay, in bad faith, with
dilatory motive, or guaranteed to be futile; nor has Prudential indicated that it would be prejudiced
by the filing of an amended complaint. Id. Plaintiffs are therefore granted leave to amend their
Complaint to state a possible claim under ERISA. See also Hall v. NewMarket Corp., 747 F. Supp.
2d 711 (S.D. Miss. 2010)(Plaintiff whose state law claims for equitable estoppel, promissory
estoppel, negligent misrepresentation, and negligent infliction of emotional distress were found to be
ERISA-preempted was to be given an opportunity to seek leave to amend her complaint to state a
claim for relief under ERISA).
VII.
CONCLUSION
For the reasons set forth above, the Court agrees with Prudential and finds that Plaintiffs’
state law claims against Prudential are preempted by ERISA. This Court, however, denies
Prudential’s request for dismissal of Plaintiff’s Complaint with prejudice and, instead, grants
Plaintiffs leave to amend their Complaint to include an appropriate claim for benefits under this
ERISA plan.
16
IT IS, THEREFORE, ORDERED that Defendant The Prudential Insurance Company
of America, Inc.’s Motion to Dismiss [Docket No. 9] is DENIED IN PART and GRANTED IN
PART. This Court GRANTS The Prudential Insurance Company of America, Inc.’s motion
to dismiss Plaintiffs’ state law claims, since the Plaintiffs’ state law claims are preempted by
ERISA.
IT IS FURTHER ORDERED that Defendant The Prudential Insurance Company of
America, Inc.’s motion for dismissal of Plaintiffs’ state law claims with prejudice is DENIED.
IT IS FURTHER ORDERED that Plaintiffs Joanna M. Bufkin and Michael S.
McDowell may file an Amended Complaint within thirty (30) days of the date of this Order.
SO ORDERED THIS THE 8th DAY OF September, 2019.
/s/HENRY T. WINGATE
UNITED STATES DISTRICT JUDGE
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