KHAN v. THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA et al
LETTER OPINION AND ORDER granting 4 Motion to Dismiss without prejudice; Plaintiff has 30 days to file an amended complaint. Signed by Judge John Michael Vazquez on 4/19/2016. (ld, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
JOHN MICHAEL VAZQUEZ
UNITED STATES DISTRICT
FRANK R. LAuTENBERG
POST OFFICE AND
2 FEDERAL SQuARE, ROOM
NEwARK, NJ 07102
April 19, 2016
LETTER OPINION AND ORDER
Umair A. Khan v. The Guardian Life Insurance Company of America
Civil Action No. 16-253
The Court has reviewed Defendant Guardian Life Insurance Company of America’s
(“Guardian” or “Defendant”) motion to dismiss the Complaint. D.E. 4. For the reasons stated
below, the Court grants Defendant’s motion. However, the dismissal is without prejudice, and
Plaintiffs may file an amended complaint within 30 days.
This case concerns the Defendant’s alleged failure to fully pay short-term disability
benefits to Plaintiff Umair A. Khan (“Plaintiff”). Plaintiff originally filed a complaint on
December 17, 2015, against Defendant in New Jersey Superior Court. D.E. 1, Ex. A. In his
Complaint, Plaintiff asserted six claims pursuant to New Jersey law: breach of contract, common
law fraud, two violations of the New Jersey Consumer Fraud Act (“NJCFA”), breach of the
implied covenant of good faith and fair dealing, and unjust enrichment. On January 14, 2016,
Defendant removed the matter to this Court. D.E. 1. Defendants now move to dismiss Plaintiffs
Complaint. D.E. 4. Defendant alleges that Plaintiffs state law claims are preempted by the
Employee Retirement Income Security Act (“ERISA”) and therefore should be dismissed.
Plaintiff contends that the two claims under the NJCFA are not preempted by ERISA because they
arise under an “independent legal duty” and are consistent with the policy reasons behind other
state laws (not asserted here) that are not preempted by ERISA, D.E. 6. Plaintiff does not put
forth any argument as to why the remaining causes of action are not preempted.
To withstand a motion to dismiss under Fed. R. Civ. P. 12(b)(6), a plaintiff must allege
“enough facts to state a claim of relief that is plausible on its face.” Bell All. Corp. v. Twombly,
550 U.S. 544, 570(2007). A complaint is plausible on its face when there is enough factual content
“that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A court must accept all factual
allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff.
Phillips v. Cty. of Allegheny, 515 F.3d 224. 231 (3d Cir, 2008). A court, however, is “not
compelled to accept unwarranted inferences, unsupported conclusions or legal conclusions
disguised as factual allegations.” Baraka v. McGreevey, 481 F.3d 187, 211 (3d Cir. 2007). If,
after viewing the allegations in the complaint most favorable to the plaintiff it appears that no relief
could be granted under any set of facts consistent with the allegations. a court may dismiss a
complaint for failure to state a claim, DeFazio v. Leading Edge Recovery Sols., No. 10-2945, 2010
WL 5146765, at *1 (D.N.J. December 13, 2010).
Plaintiff in this action seeks additional benefits under Guardian’s Short Term Disability
Insurance Plan (the “Plan”)’ offered through Plaintiff’s employer, DCH Paramus Honda. D.E. 1,
Ex. A. at 2. Plaintiff alleges that he enrolled in Option #4 under the Plan on January 1, 2015.
permitting him to collect $800.00 per week from Defendant upon the onset of a disability. He
further alleges that he became disabled on June 1, 2015 and to date has not been able to work due
to his injury. D.E. 1, Ex. A. Plaintiff claims that over twenty-seven weeks have passed since hi
declared date ofdisability, and to date Plaintiff has received $404.00 less per week than the amount
he is owed. Plaintiff now sues to recover the difference between the amount he alleges he is owed
and the amount he received.
ERISA applies to “any employee benefit plan if it is established or maintained
employer engaged in commerce.” 29 U.S.C. § 1003(a). ERISA defines an employee welfare
benefit plan as follows:
[A]ny plan, fund or program which was heretofore or is hereafter
established or maintained by an employer or by an employee
‘In support of its Motion to Dismiss, Defendant appended a complete copy of the Guardian
booklet entitled “Your Group Insurance Plan Benefits.” D.E. 4, Ex. B. The complete booklet is
more appropriately entitled the Plan, as opposed to merely the section concerning short term
disability insurance. However, since the distinction does not change the Court’s analysis,
Plaintiff’s description of the Plan will be used. More importantly, the parties appear in
agreement that the Plan is the controlling document. As a result, the Court has considered the
Plan in the analysis of this matter. See Pension Benefit Guar. Corp. v. White Consol. Indus.,
Inc., 998 F.2d 1192, 1196 (3d Cir. 1993) (“[A] court may consider an undisputedly authentic
document that a defendant attaches as an exhibit to a motion to dismiss if the plaintiff’s claims
are based on the document.”).
DCH Paramus Honda is part of Lithia Motors, Inc., a nationwide automotive dealership
headquartered in Medford, Oregon. D,E. 1, Ex. A at 4.
Plaintiff indicates that he received a total of $1,000 per week in disability payments. Plaintiff’s
Complaint states that under the New Jersey Temporary Disability Benefits Law he is permitted
to recover $604.00 per week. He alleges that this amount is in addition to the $800.00 weekly
payment under the Plan, resulting is a weekly total of S 1,404.00. Therefore, Plaintiff claims that
the payments were $404.00 short of the total amount he was owed (the difference between
$1,404 and $1,000).
organization, or by both, to the extent that such plan, fund, or
program was established or is maintained for the purpose of
providing [certain benefits] for its participants or their beneficiaries,
through the purchase of insurance or otherwise.
The Third Circuit has held that a health care plan is a covered employee benefit plan if
“from the surrounding circumstances a reasonable person could ascertain the intended benefits, a
class of beneficiaries, the source of financing, and procedures for receiving benefits.” Smith v,
Harford Ins. Grp., 6 F. 3d 13 1, 136 (3d Cir. 199 1) (quoting Donovan v. Dillingham, 688 F.2d
1367, 1373 (11th Cir. 1982)). The facts stated in the Complaint establish, and neither party
contests, that the Plan is an ERISA-regulated plan.
ERISA contains a preemption clause, which provides that it “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) (emphasis added). The preemption clause has been interpreted broadly in light of the
legislative purpose in establishing ERISA as the exclusive means of obtaining a legal remedy
related to an employee benefit plan. See Estate ofJennings v. Delta Air Lines, Inc., 126 F. Supp.
3d 461, 467 (D.N.J. 2015). A state law “relates to” a benefit plan “if it has a connection with or
reference to such a plan.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47 (1987) (quoting Metro.
Life Ins. C’o. v. Massachusetts, 471 U.S. 724, 739 (1985)). Therefore, in a case where “if there
were no plan, there would have been no cause of action,” ERISA should preempt any state cause
of action. 1975 Salaried Ret. Plan for Eligible Emps. of Crucible, Inc. v. Nobers, 968 F.2d 401,
406 (3d Cir. 1992).
If a claim “relates to” a benefit plan, the claim is completely preempted when (1) the
plaintiff could have brought the action under § 502(a) of ERISA and (2) no independent legal duty
Pascack Valley Hosp. v. Local 464A UFCW Weifare
supports the plaintiffs claim.
Reimbursement Plan, 388 F.3d 393, 400 (3d Cir. 2004). A legal duty is “independent” if it “would
exist whether or not an ERISA plan existed.” Mann Gen. Hosp. v. Modesto & Empire Traction
Co., 581 F.3d 941, 950 (9th Cir. 2009). Therefore, if the substance of a claim is separate and
distinct from the ERISA plan at issue, there is an independent legal duty to bring that claim.
Here, Plaintiffs claims arising out of the purported failure by Guardian to pay in full his
disability benefits are preempted. First, the claims “relate to” the Plan because if there were no
Plan, there would be no alleged causes of action. The crux of Plaintiffs claim is whether benefits
were insufficiently awarded to him under the Plan. Determining whether the amount paid to
Plaintiff was sufficient would require the Court to review the details of the Plan. See Estate of
Jennings, 126 F. Supp. 3d at 468 (finding that a claim “relates to” a benefits plan when “the Court
will have to look at the terms of the Plan” to decide the cause of action). Here, each of Plaintiffs
claims relate to the Plan.
Plaintiffs breach of contract, common law fraud, breach of implied covenant of good faith
fair dealing, and unjust enrichment claims are each preempted by ERISA. First, Plaintiff offers
no argument in his opposition as to why they are not preempted. Importantly, other courts in this
Circuit have found such claims to be preempted. See, e.g., Majka v. Prudential Ins. C’o. ofAm.,
171 F. Supp. 2d 410, 414 (D.N.J. 2001) (preempting state law breach of contract and breach of the
implied covenant of good faith and fair dealing); Pendleton v. Regent Nat ‘1 Bank, No. 97.4327,
1998 WL 23163, at *3 (E.D.P.A. Jan. 22, 1998) (preempting state law fraud and unjust enrichment
Plaintiff contends, however, that that with respect to his two NJCFA claims, there are two
distinct “independent legal duties.” Plaintiff alleges that Defendant both failed to disclose material
terms to its policyholder as well as engaged in “unconscionable commercial practice.” D.E. 6, at
7-8, The Court disagrees. These claims, in disputing the amount owed to a beneficiary under an
ERISA-governed plan, are precisely the types of claims that “[go] to the essence and function of
an ERISA plan,” and are accordingly preempted. Koliman v. Hewitt Assocs,, LL, 487 F.3d 139,
150 (3d Car 2007) Courts in this Circuit that have addressed consumer fraud claims in this context
have concluded that such claims are expressly preempted by ERISA. See e.g., Menkes v.
Prudential Ins. Co. ofAm., 762 F.3d 285, 294-96 (3d Cir. 2014) (holding that ERISA expressly
preempts plaintiffs’ claims for common law fraud, misrepresentation, and violation of the
NJCFA); Grimes v. Prudential Fin., Inc., No. 09-419, 2010 WL 2667424, at *17.48 (D.N.J. June
29, 2010) (finding plaintiff’s NJCFA claim preempted by ERISA). As a result, Plaintiff’s NJCFA
claims fall directly within the ambit of ERISA and are accordingly preempted.
Since Plaintiff’s claims are preempted, Defendant’s motion to dismiss is granted.
Defendant further urges the Court to dismiss with prejudice. A court must grant leave to amend a
complaint “absent evidence that amendment would be futile or inequitable.” Shane v. Fauver, 213
F.3d 113, 116-17 (3d Cir. 2000). An amended complaint would be futile if it “would fail to state
a claim upon which relief could be granted.” Id. at 115. In arguing that Plaintiff’s claims are
futile, Defendant asserts that it has fulfilled all of its obligations under the Plan. D.E. 4 at 16.
However, in doing so, Defendant engages in an interpretation of its rights and duties under the
Plan. In the Court’s view, such a decision as to the contractual obligations, implications, and
results of the Plan are better left to Plaintiff, in the first instance, to review and determine whether
Plaintiff believes that he has a plausible cause of action. As a result, the motion to dismiss is
granted without prejudice.
Plaintiff relies upon the New Jersey Unfair Claims Settlement Practices Act (“UCSPA”) and
the Insurance Fraud Prevention Act (“NJIFPA”). arguing that both statutes are intended to
protect consumers from “bad faith” claim denials and are therefore not preempted by ERISA.
D.E. 6 at 9. Neither statute is alleged here by the Plaintiff. Moreover, the only case cited by
Plaintiff in support of this “policy” argument is distinguishable. In Horizon Blue Cross Blue
Shield of New Jersey v. Transitions Recovery Program. 2011 WL 2413173 (D.N.J. June 10,
2011), the suit was brought by an insurer who sued its provider for fraudulent or negligent
misbilling. Thus, the case was not comparable to the present facts in which a plan beneficiary is
suing a plan administrator directly under the employee benefit plan.
To be clear, the Court is not ruling that Defendant’s interpretation is incorrect (or correct, for
that matter). Instead, the Court is permitting Plaintiff time to review the issue and thereafter file
The Court GRANTS WITHOUT PREJUDICE Defendant’s motion to dismiss. Plaintiff
has 30 days to tile an amended complaint.
JOHN MICHAEL VAØEZ
UNITED STATES DISTRICT JuDGE
an amended complaint if Plaintiff concludes that he can assert a plausible cause of action or
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