Law v. Aetna Life Insurance Company et al

Filing 39

ORDER denying 28 Motion to Dismiss for Lack of Jurisdiction; deferring ruling on 15 Motion to Dismiss; denying 23 Motion to Continue. As addressed in the attached written order, all parties have 10 days from the date of this Order to present argument, if any for severance and transfer of the claims against the United States to the Court of Federal Claims. Signed by Honorable David C. Bramlette, III on 7/12/2011 (nr)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
WESTERN DIVISION
SPENCER D. LAW

PLAINTIFF

VERSUS

CIVIL ACTION NO: 5:09-cv-116-DCB-JMR

AETNA LIFE INSURANCE COMPANY,
UNITED STATES OF AMERICA A/K/A
DEPARTMENT OF THE NAVY A/K/A
NAVAL INSTALLATIONS COMMAND,
and JOHN AND JANE DOES 1-10

DEFENDANTS

MEMORANDUM OPINION AND ORDER
This cause comes before the Court on Defendant the United
States’ Motion to Dismiss [docket entry no. 15] and Defendant Aetna
Life Insurance Company’s separate Motion to Dismiss [docket entry
no. 28].

Also before the Court is Plaintiff Spencer D. Law’s

Motion to Continue or For Leave to Amend [docket entry no. 23].
Having carefully considered said Motions, the Responses thereto,
applicable statutory and case law, and being otherwise fully
advised in the premises, this Court finds and orders as follows:
I.

FACTS AND PROCEDURAL HISTORY

The Plaintiff, Law, worked as an architect with the Bureau of
Naval Personnel.

The Bureau, known as BUPERS, established a

disability insurance plan (the “Plan”) for its employees.

BUPERS

then contracted with Defendant Aetna to administer the Plan,
including the authority to make determinations with respect to
benefit payments and to pay those benefits.

Law enrolled in the

Plan in 1996 and in 2007 made a claim for long term disability
benefits, following years of struggle with diabetes, Hashimoto’s

thyroiditis, and depression.

Law was denied benefits that same

year and timely appealed but the appeal was denied. Law then filed
the instant litigation in July 2009

[docket entry no. 1] which

initially named only Aetna and John Does 1-10 as Defendants and
asserted claims for negligence and gross negligence, breach of
contract, bad faith refusal to pay, and intentional infliction of
emotional distress.

The Complaint also sought punitive damages.

In June 2010, Law filed an Amended Complaint [docket entry no. 11]
in which he also named the United States as a Defendant.
The United States now moves to dismiss for lack of subject
matter jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) and for
failure to state a claim upon which relief can be granted under
Fed. R. Civ. P. 12(b)(6).

Aetna similarly moves to dismiss for

lack of subject matter jurisdiction under Fed. R. Civ. P. 12(b)(1).
Law has also moved to continue or for leave to amend in order to
defend against the United States’ Rule 12(b)(6) Motion. This Court
will first address the Motions to Dismiss for lack of subject
matter jurisdiction and, because those are dispositive as to the
claim against the United States, does not reach the United States’
Motion to Dismiss for Failure to State a

1

Claim.1

In its response to the United States’ Motion to Dismiss, Law
moved to continue the case to conduct limited discovery in order to
defend against the United States’ Motion under Rule 12(b)(6) and,
in the alternative, moved for leave to amend his complaint if the
Court found the 12(b)(6) Motion meritorious.
Because the
jurisdictional issue is dispositive of Law’s claims against the
United States in this Court, this Court does not reach the United
2

II.

STANDARD FOR MOTION TO DISMISS FOR LACK OF JURISDICTION

On a motion brought under Fed. R. Civ. P. 12(b)(1), which a
court must consider before any other challenge, see Moran v.
Kingdom of Saudi Arabia, 27 F.3d 169, 172 (5th Cir. 1994), a court
must dismiss a cause for lack of subject matter jurisdiction “when
the court lacks the statutory or constitutional power to adjudicate
the case.” Home Builders Ass'n of Miss. v. City of Madison, Miss.,
143 F.3d 1006, 1010 (5th Cir. 1998)(quoting Nowak v. Ironworkers
Local 6 Pension Fund, 81 F.3d 1182, 1187 (2d Cir. 1996)). Further,
the court applies the same familiar standard used in ruling on a
motion under Rule 12(b)(6).

In that respect, the court must limit

its inquiry to facts stated in the complaint and the documents
either attached to or incorporated in the complaint.

Lovelace v.

Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir. 1996).
Further, the court must accept as true all material allegations in
the complaint, as well as any reasonable inferences to be drawn
from them,

Kaiser Aluminum & Chem. Sales, Inc., v. Avondale

Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.1982), and must
review those facts in a light most favorable to the plaintiff.
Piotrowski v. City of Houston, 51 F.3d 512, 514 (5th Cir. 1995);
Garrett v. Commonwealth Mortgage Corp. of Am., 938 F.2d 591, 593
(5th Cir. 1991).

States’ Motion to Dismiss under Rule 12(b)(6) and thus denies Law’s
Motions.
3

III. ANALYSIS
A.

The United States’ Motion to Dismiss For Lack of Jurisdiction
The United States moves to dismiss under Rule 12(b)(1) for

lack of subject matter jurisdiction, arguing that it is immune from
suit in this Court pursuant to the Tucker Act.

Under the doctrine

of sovereign immunity, the United States is presumptively immune
from suit unless it consents to be sued. Trutman v. United States,
26 F.3d 592, 594 (5th Cir. 1994).

The Tucker Act waives that

immunity for a limited class of claims, including claims founded
upon an express or implied contract with the United States.
U.S.C. §§ 1346(a)(1), 1491(a)(1).

28

However, the districts courts

have jurisdiction of such claims (concurrent with the Court of
Federal Claims) only if claimed damages do not exceed $10,000. Id.
at

1346(a)(1).

Where

claimed

damages

are

above

$10,000,

jurisdiction lies exclusively in the Court of Federal Claims.
Id. at § 1491(a)(1); Amoco Prod. Co. v. Hodel, 815 F.2d 352, 358
(5th Cir. 1987).
Here,

the

Amended

Complaint

states

that

the

amount

in

controversy exceeds $75,000 and attaches a form claiming that Law’s
total damages are $1,862,315.78.

There is no question, therefore,

that Law’s claims exceed $10,000 and that his claim for breach of
contract against the United States (Count II) must be dismissed
because it lies within the exclusive jurisdiction of the Court of
Federal Claims.

28 U.S.C. § 1491 (a)(1).
4

The United States

further

argues,

however,

that

Law’s

remaining

claims,

though

nominally sounding in tort, arise out of the alleged breach of
contract and thus also properly fall within the Tucker Act.

E.g.,

Herder Truck Lines v. United States, 335 F.2d 261, 263 (5th Cir.
1964).

Law

does

not

respond

to

this

argument

and

instead,

cryptically states: “The Plaintiff does not argue that his claim
lies within the parameters discussed in the Defendant’s Brief in
their Sections IV(a)(2) through (4) [which address the Tucker
Act].”

Pl. Response [docket entry no. 24] at 2.

Law’s

remaining

claims

are

for

negligence

and

gross

negligence, bad faith refusal to pay, and intentional infliction of
emotional distress.2

In determining whether a claim is based on

tort or contract, the court is not bound by the plaintiff’s
characterizations in the complaint.

City Nat’l Bank v. United

States, 907 F.2d 536, 546 (5th Cir. 1990). Instead, the court must
examine the essence of the plaintiff’s claims to determine whether
they arise out of the failure to perform a contractual obligation.
Id. (affirming dismissal of a claim for gross negligence under the
Federal Tort Claims Act because it arose out of the government’s
failure to act in accordance with loan agreement).

2

Moreover, to

Law also asserts as Count V that he is entitled to punitive
damages, but a claim for punitive damages is derivative of other
claims and not a separate cause of action. See Sulzer Carbomedics,
Inc. v. Oregon Cardio-Devices, Inc., 257 F.3d 449, 461(5th Cir.
2001). Accordingly, this Court does not consider this “claim” in
its jurisdictional analysis.
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the extent that a plaintiff alleges a tortious breach of contract,
the claim nonetheless is a contract claim governed by the Tucker
Act.

Mega Constr. Co. v. United States, 29 Fed. Cl. 396, 478 (Fed.

Cl. 1993) (“[T]he court has consistently interpreted the Tucker Act
to allow jurisdiction over claims which, although somewhat tortious
in

nature,

are

essentially

based

upon

the

violation

of

a

contractual obligation.”) (citing Chain Belt Co. v. United States,
127 Ct. Cl. 38, 115 (Ct. Cl. 1953)).

Relatedly, the Fifth Circuit

has consistently held that claims which are founded upon an alleged
failure to perform contractual obligations are not tort claims
where jurisdiction is governed by the Federal Tort Claims Act; this
is so even when the plaintiff alleges claims for torts such as
misrepresentation, negligence, or bad faith breach of contract.
Davis v. United States, 961 F.2d 53, 56 (5th Cir. 1991); City
Nat’l, 907 F.2d at 546; Blanchard v. St. Paul Fire and Marine Ins.
Co., 341 F.2d 351, 357-58 (5th Cir. 1965).
The Northern District of Mississippi case of Award v. United
States provides a helpful example of the application of this wellestablished precedent.

2001 WL 741638 (N.D. Miss. 2001).

There,

the plaintiff, a citizen of Switzerland and Lebanon with ties to
terrorist organizations, entered into the United States Marshals
Service Witness Security Program pursuant to a contract with the
United States to provide information useful to the United States in
defending against terrorism.

Id. at *1-2.

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As part of the

contract, the plaintiff was to be given citizenship and a United
States passport in exchange for placing his other identification
documents, including his Swiss/Lebanese passport, in safekeeping
with the Marshals Service. Id. After several years, the plaintiff
left the Witness Security Program and alleged that he was not given
a United States passport or permitted to leave the United States,
in contravention of his contract.

Id.

The plaintiff then filed suit in district court, asserting
jurisdiction under the Federal Tort Claims Act over claims for bad
faith

breach

of

contract,

false

imprisonment,

conspiracy,

intentional infliction of emotional distress, invasion of privacy,
negligence, trespass to chattels, and conversion.

Id. at *8.

The

district court nevertheless found that each of those claims arose
from and was inexplicably intertwined with the United States’
supposed breach of its contract with the plaintiff and was thus
governed by the Tucker Act, rather than the Federal Tort Claims
Act. For example, the plaintiff alleged false imprisonment in that
he was wrongfully detained in the United States.

Id. at *4.

The

district court held that the claim turned on his contractual
relationship with the United States because “his detention, if any,
was solely the result of the United States not fulfilling its
purported contractual obligation to provide him with United States
citizenship and a passport.”

Id.

Likewise, the plaintiff alleged

that the government’s behavior, in connection with the purported

7

breach of the witness security agreement, constituted intentional
infliction of emotional distress.

Id. at *5.

The district court

held that the claim sounded in contract because “the sine qua non
of the claim is the existence of the alleged contracts.”

Id.

Similarly, this court holds that Law’s remaining claims,
though nominally sounding in tort, arise out of the alleged breach
his disability insurance policy and thus are contract claims.

As

to Count I, for negligence and gross negligence, the Amended
Complaint alleges that “Defendants acted with negligence, gross
negligence, willful disregard and/or malice” when they “negligently
failed to pay Plaintiff the LTD [long term disability] Benefits to
which he was entitled.”

Am. Compl. [docket entry no. 11] at ¶ 33.

Whether Law was entitled to benefits will be determined by the
insurance policy and thus Count I sounds in contract, rather than
tort.

See United States v. Huff, 165 F.2d 720, 725 (5th Cir.

1948)(holding the Tucker Act provides jurisdiction for claims of
tortious breach of contract).

Similarly, Count III, for bad faith

refusal to pay, alleges that “Defendants acted with negligence,
gross negligence, willful disregard and/or malice in refusing to
pay the claim submitted by the Plaintiff.” Am. Compl. at ¶ 42.

As

with Count I, the success of this claim depends upon whether
Defendants did, in fact, breach the insurance policy in refusing to
provide benefits to Law, and thus this count likewise sounds in
contract.

8

Lastly, Count IV alleges intentional infliction of emotional
distress, in that Defendants “knew that its [sic] actions in
wrongfully and maliciously denying coverage to the Plaintiff placed
his [sic] under enormous financial and emotional stress, resulting
in further damage and personal injury.”

Am. Compl. at ¶ 44.

Again, if Defendants were within their rights under the insurance
contract in denying benefits to Law, this claim necessarily fails
and thus, it also sounds in contract.

Accordingly, because all of

Law’s claims against the United States sound in contract and they
are for more than $10,000, this Court has no jurisdiction under the
Tucker Act and jurisdiction lies exclusively with the Court of
Federal Claims.
B.

28 U.S.C. § 1491(a)(1); Amoco, 815 F.2d at 358.

Aetna’s Motion to Dismiss for Lack of Jurisdiction.
Aetna likewise moves to dismiss for lack of subject matter

jurisdiction in this Court, contending that it is entitled to
“derivative immunity.”

The cases Aetna cites in support of such

derivative immunity, however, arise exclusively under the Federal
Tort Claims Act and thus are inapposite given this Court’s holding
that all of Law’s claims arise out of the insurance contract. This
Court has not found any examples of derivative immunity for a
government contractor in cases where jurisdiction is governed by
the Tucker Act.
Though Aetna asserts that Law’s contract claims are within the
exclusive jurisdiction of the Court of Federal Claims pursuant to

9

the Tucker Act, the Tucker Act has no bearing on Law’s claims
against Aetna which are not claims against the United States.

28

U.S.C. § 1491(a)(1)(“The United States Court of Federal Claims
shall have jurisdiction to render judgment upon any claim against
the United States ...”)(emphasis added).

Indeed, the Court of

Federal Claims has no jurisdiction over Law’s claims against Aetna.
Bowling v. United States, 93 Fed. Cl. 551, (Fed. Cl. 2010)(holding
the Court of Federal Claims had no jurisdiction over claims against
Johns Mansville corporation because it is a private entity).
Accordingly, because the Tucker Act does not govern contract claims
against private entities, it is inapplicable to Law’s claims
against Aetna and its Motion to Dismiss for lack of subject matter
jurisdiction must be denied.
IV. DISPOSITION
Where a district court finds that it lacks jurisdiction, the
preferred procedure is to transfer the case to the proper court.
28 U.S.C. § 1631 (“Whenever a civil action is filed in a court ...
and that court finds that there is a want of jurisdiction, the
court shall, if it is in the interest of justice, transfer such
action ... to any other court in which the action or appeal could
have been brought at the time it was filed.”); Awad, 2001 WL 741638
at *8 (transferring claims governed by the Tucker Act from the
Northern District of Mississippi to the Court of Federal Claims).
In this instance, however, this entire matter cannot be transferred

10

to the Court of Federal Claims because, as discussed above, that
Court does not have jurisdiction over Law’s claims against Aetna.
While this Court could sever the claims against Aetna from the
claims against the United States and transfer only the latter,
doing so would leave two separate courts addressing related claims
at the same time and place Law in a distant venue without his
choosing.
Accordingly, this Court is inclined to dismiss

Law’s claims

against the United States (leaving only the claims against Aetna
pending in this Court), thereby allowing Law to determine whether
to refile his claims against the United States in the Court of
Federal Claims.

However, this Court will give Law ten (10) days

from the date of entry of this Memorandum Opinion to indicate to
the Court if he would prefer that his claims against the United
States be severed and transferred to the Court of Federal Claims.
To the extent that the United States or Aetna has a position on the
issue, they also have ten (10) days from the date of this order to
present such positions to the Court.

If the Court hears nothing,

the United States’ Motion to Dismiss will be granted.
For the foregoing reasons,
IT IS HEREBY ORDERED that a ruling on the United States’
Motion to Dismiss [docket entry no. 15] is HELD IN ABEYANCE.

All

parties shall have seven (7) days from the date of this Memorandum
Opinion to present argument, if any, for severance and transfer of
11

the claims against the United States to the Court of Federal
Claims;
IT IS FURTHER ORDERED that the Plaintiff Law’s Motion to
Continue or for Leave to Amend [docket entry no. 23] is DENIED;
IT IS FURTHER ORDERED that Defendant Aetna’s Motion to Dismiss
for Lack of Subject Matter Jurisdiction [docket entry no. 28] is
DENIED.
SO ORDERED, this the 12th day of July, 2011.

s/ David Bramlette
UNITED STATES DISTRICT JUDGE

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