Terhart v. Niagara Mohawk Power Corp. et al

Filing 34

DECISION AND ORDER GRANTING in part and DENYING in part Metropolitan Life Insurance Co.'s 25 Motion to Dismiss; GRANTING in part and DENYING in part National Grid USA Service Co., Inc. and Niagara Mohawk Power Corp.'s 28 Motion to Dismiss; INSTRUCTING the parties to confer with the Hon. H. Kenneth Schroeder, Jr. regarding reinstatement of the Case Management Order signed June 8, 2010. Signed by William M. Skretny, Chief Judge U.S.D.C. on 2/5/2012. (MEAL)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
WENDY D. TERHART, Individually and as Executrix
of the Estate of Charles D. Terhart,
Plaintiff,
v.

DECISION AND ORDER
09-CV-1045S

NIAGARA MOHAWK POWER CORP.,
NATIONAL GRID USA SERVICE Co., Inc.,
and METROPOLITAN LIFE INSURANCE Co.,
Defendants.

I. INTRODUCTION
Plaintiff, Wendy D. Terhart, individually and as executrix of the estate of her
deceased husband, Charles D. Terhart, contends that Defendants National Grid USA
Service Company, Inc. (“National Grid”),1 her husband’s former employer, and Metropolitan
Life Insurance Co. (“Met Life”) unlawfully withheld $86,000 in payments pursuant to her
husband’s life insurance policy (the “Policy” or “Plan”), which was governed by the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001, et seq.
Presently before this Court is each Defendants’ Motion to Dismiss. (Docket Nos. 25, 28.)
For the following reasons, the motions are granted in part and denied in part.

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Terhart also nam es Niagara Mohawk Power Corp. as a defendant. National Grid is the successor
in interest to Niagara Mohawk; thus for the sake of clarity and concision, this Court will refer to the two
defendants collectively as “National Grid.”

II. BACKGROUND
A.

Facts2
Before his retirement in April 2006, Charles Terhart was an employee at National

Grid for more than 35 years. (Amended Complaint, ¶ 14; Docket No. 22.) As part of his
compensation, Charles was entitled to a life insurance policy, which in this case was issued
by Met Life. (Id., ¶¶ 15, 18.) Charles was under the impression – allegedly reinforced by
both Defendants – that upon his death, his wife as the beneficiary, would be entitled to
$106,000 in benefits. (Id., ¶¶ 20, 21.) In fact, by letter dated November 16, 2007 bearing
the title “RE: Coverage Confirmation,” which was sent after his retirement but before his
death, Met Life informed Charles that he had $20,000 in basic life insurance coverage and
an additional $86,000 in optional life insurance coverage. (Id., ¶ 21; Exhibit “A” of Amended
Complaint.) But after Charles died on December 9, 2008, Met Life informed his wife,
Wendy, that she was only entitled to $20,000 in benefits. Wendy commenced this litigation
after repeated attempts, consistently rebuffed by Met Life, to secure the extra $86,000 and
copies of the insurance plan documents. (Amended Complaint, ¶ 25.)
B.

Procedural History
Plaintiff commenced this litigation on December 12, 2009 by filing a Complaint in

this Court. (Docket No. 1.) With this Court’s permission, Plaintiff filed her Amended
Complaint on August 16, 2010. (Docket No. 22.) Defendants separately moved to dismiss
the Amended Complaint in September and October of 2010 (Docket Nos. 25, 28) and as

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The facts described herein are taken from Plaintiff’s Am ended Com plaint. For the purposes of
resolving the m otions to dism iss, those facts m ust be accepted as true. See ATSI Com m c'ns, Inc. v. Shaar
Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).

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a result, the Honorable H. Kenneth Schroeder, Jr.’s Case Management Order, which, inter
alia, set a mediation schedule, was held in abeyance until the resolution of those motions
(Docket No. 27).
III. DISCUSSION
A.

Legal Standard
Rule 12 (b)(6) allows dismissal of a complaint for “failure to state a claim upon which

relief can be granted.” Fed. R. Civ. P. 12 (b)(6). Federal pleading standards are generally
not stringent: Rule 8 requires only a short and plain statement of a claim. Fed. R. Civ. P.
8 (a)(2). But the plain statement must “possess enough heft to show that the pleader is
entitled to relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S. Ct. 1955, 1966, 167 L.
Ed. 2d 929 (2007).
When determining whether a complaint states a claim, the court must construe it
liberally, accept all factual allegations as true, and draw all reasonable inferences in the
plaintiff’s favor. ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).
Legal conclusions, however, are not afforded the same presumption of truthfulness. See
Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009) (“The
tenet that a court must accept as true all of the allegations contained in a complaint is
inapplicable to legal conclusions.”).
“To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 129 S.Ct.
at 1945 (quoting Twombly, 550 U.S. at 570). Labels, conclusions, or “a formulaic recitation
of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. Facial
plausibility exists when the facts alleged allow for a reasonable inference that the
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defendant is liable for the misconduct charged. Iqbal, 129 S. Ct. at 1949. The plausibility
standard is not, however, a probability requirement: the pleading must show, not merely
allege, that the pleader is entitled to relief. Id. at 1950; Fed. R. Civ. P. 8 (a)(2). Wellpleaded allegations must nudge the claim “across the line from conceivable to plausible.”
Twombly, 550 U.S. at 570.
Courts therefore use a two-pronged approach to examine the sufficiency of a
complaint, which includes “any documents that are either incorporated into the complaint
by reference or attached to the complaint as exhibits.” Blue Tree Hotels Inv. (Can.), Ltd.
v. Starwood Hotels & Resorts Worldwide, Inc., 369 F.3d 212, 217 (2d Cir. 2004). This
examination is context specific and requires that the court draw on its judicial experience
and common sense. Iqbal, 129 S. Ct. at 1950. First, statements that are not entitled to
the presumption of truth — such as conclusory allegations, labels, and legal conclusions
— are identified and stripped away. See id. Second, well-pleaded, non-conclusory factual
allegations are presumed true and examined to determine whether they “plausibly give rise
to an entitlement to relief.” Id. “Where the well-pleaded facts do not permit the court to
infer more than the mere possibility of misconduct,” the complaint fails to state a claim. Id.
B.

Met Life’s Motion to Dismiss
1.

Legal Claim

Because Met Life informed Charles by letter that he had $106,000 in coverage,
Wendy claims that it owes her this amount as the beneficiary of the Plan.
Met Life argues that it paid the correct amount of benefits pursuant to the Plan. It
notes that Charles did have the larger coverage when he was employed at National Grid,
but when he failed to “convert” the optional coverage within 91 days after the effective date
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of his retirement, as is outlined in the plan, the coverage was lost. The November 16, 2007
letter, it concedes, was simply an honest mistake. It further argues that any state law
claims must be dismissed because they are preempted by ERISA.
Initially, because the Plan documents are an integral part of, and incorporated by
reference in the Complaint, this Court can consider them on a motion to dismiss. See Roth
v. Jennings, 489 F.3d 499, 509 (2d Cir. 2007) (all documents attached, incorporated by
reference, and those upon which the complaint solely relies and which are integral to the
complaint are properly considered).
So considered, the Plan states unequivocally that Charles’ optional coverage – the
extra $86,000, which the November 16 letter indicated he had – expired upon his
retirement from National Grid. (See Plan, p. 36, attached as Exhibit “C” to the Affirmation
of Linda Joseph; Docket No. 25.) The Plan further states:
DATE YOUR INSURANCE ENDS
If Your life insurance ends . . . you have the option to buy an
individual policy of life insurance (“new policy”) from Us during
the Application Period in accordance with the conditions and
requirements of this section.
When You Will Have the Option to Convert
You will have the option to convert when . . . Your employment
ends.
Application Period
If You opt to convert Your Life Insurance Policy . . . we must
receive a completed conversion application form from You
within the Application Period . . . In no event will the Application
Period exceed 91 days from the date Your Life Insurance
ends.
Option Conditions
The option to convert is subject to . . . our receipt of Your
Written Application for the new policy; and the premium due for
such a policy.
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(Id.)3
Wendy does not allege that this policy is fraudulent in any way, that she or Charles
applied to convert the policy, or that they made a premium payment on the new policy.
Consequently, by the plain, undisputed terms of the Plan, any claim that she was legally
due extra benefits is without merit and her claims in this regard, including those for
declaratory judgment and breach of contract, are dismissed. To the extent that Wendy’s
claims for bad faith and breach of fiduciary duty are premised on the Defendants’ refusal
to pay the extra benefits, which by law they had no obligation to pay, those claims are also
dismissed. Further, Wendy’s claims, to the extent they are premised on state law, are
preempted by ERISA. See 29 U.S.C. § 1144(a) (preempting any state laws that “relate to”
a benefit plan); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107, S. Ct. 1549, 95 L. Ed.
2d 39 (1987) (finding state contract and bad faith claims preempted and affirming that state
law “relates to” a benefit plan if it has a connection with, or refers to such a plan).
2.

Equitable Claim

The result reached above does not completely resolve Wendy’s claim – she also
alleges that she detrimentally relied on the November letter and therefore Met Life should
be bound by its terms. This is essentially an estoppel argument. As the Supreme Court
has noted, “[T]he party claiming the estoppel must have relied on its adversary's conduct
in such a manner as to change his position for the worse and [her] reliance must have
been reasonable in that the party claiming the estoppel did not know nor should it have
known that its adversary's conduct was misleading.” Heckler v. Cmty. Health Servs. of

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As indicated in the Plan, “Us” refers to Met Life and “You” refers to Charles Terhart.

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Crawford Cnty. Inc., 467 U.S. 51, 59, 104 S. Ct. 2218, 81 L. Ed. 2d 42 (1984) (considering
the doctrine of equitable estoppel).
Met Life argues that this claim is governed by ERISA law, under which the theory
of estoppel requires the proponent of the doctrine to demonstrate (or in this case allege)
that she was subject to “extraordinary circumstances.” See Paneccasio v. Unisource
Worldwide, Inc., 532 F.3d 101, 109 (2d Cir. 2008) (“Promissory or equitable estoppel is
available on ERISA claims only in ‘extraordinary circumstances.’”). Met Life goes on to note
that an allegation that an insurer acted with a deliberate intent to mislead may qualify as
an “extraordinary circumstance”. See Devlin v. Transp. Commc’ns Int’l Union, 173. F. 3d
94, 101-02 (2d Cir. 1999). But lacking such an allegation, argues Met Life, the claim should
be dismissed.
Wendy’s response is twofold. First she argues that the Second Circuit has not yet
defined the contours of the “extraordinary circumstances” prong, and therefore it would be
improper for this Court to rule as a matter of law that these facts do not meet that standard.
See id. (declining to elaborate on what constitutes “extraordinary circumstances,” but
finding the facts in that case, where the defendants possessed no intent to misled, did not
justify such a finding). Second, she argues that her estoppel claim is not governed by
ERISA.
Because this Court agrees with Wendy’s second proposition, it need not discuss her
first argument. Indeed, Met Life itself appears to concede, as it must, that post-employment
policy disputes are not governed by ERISA. See Arancio v. Prudential Ins. Co. of Am., 247
F. Supp. 2d 333 (S.D.N.Y. 2002) (finding that the insured had an independent relationship,
not governed by ERISA, with his insurer after he left his employer and converted his
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policy). That scenario, however, differs from claims arising from an employee's right to take
out a conversion policy in the first place, which the Second Circuit has conclusively
established is governed by ERISA. See Howard v. Gleason Corp., 901 F.2d 1154, 1158
(2d Cir. 1990). Neither party points to any precedent for the present situation: where there
is a dispute not about the right to take out a conversion policy, nor about the conversion
policy itself, but about a right sounding in equity that by implication concerns a conversion
policy.
Yet, despite the apparent novelty of this case, this Court has no trouble concluding
that ERISA should not preempt state law in this situation. In the end, this is a dispute about
a conversion policy. Met Life ‘s relationship with Charles, for the purposes of ERISA ended
on July 1, 2006, the date his application period expired. In November of 2007, well after
Charles retired and the application period expired, Met Life represented to him that he in
fact did have the optional, converted policy. This litigation is based on that letter, not the
ERISA governed plan, from which Wendy has already been paid insurance benefits.
Moreover, the rationale behind the principle that ERISA should govern a dispute
about an employee’s right to convert his policy is inapplicable here. The court in Howard
reasoned that ERISA preempted New York State law because ERISA mandated certain
notice provisions in this regard whereas the state statute “set[] forth a different scheme for
providing notice of plan benefits.” Id. at 1158. Because of this conflict, the court held that
ERISA preempted state law. Here, there is no conflict. ERISA does not (nor could it)
address the question before this Court because the dispute does not concern an employee
benefit plan, but rather the existence of a converted plan. Therefore, Wendy’s estoppel
claim should be adjudicated under state law principles, not ERISA.
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Thus the question turns to whether her claim is sufficient under the non-ERISA
standard, where she is not required to allege “extraordinary circumstances.” To state such
a claim under New York law a plaintiff must allege (1) a clear and unambiguous promise;
(2) reasonable and foreseeable reliance by the party to whom the promise was made; and
(3) an injury to the party to whom the promise was made by reason of the reliance. Mendez
v. Bank of America Home Loans Servicing, LP, --- F. Supp. 2d ---, No. 11-CV-1516, 2012
WL 112506, at *13 (E.D.N.Y. Jan. 14, 2012) (citing Braun v. CMGI, Inc., 64 Fed. App’x
301, 304 (2d Cir. 2003)). Wendy, as executrix of Charles’ estate, has alleged that Met Life
made a promise on which Charles detrimentally relied. As such, Met Life’s motion is
denied.4
Met Life argues that Charles’ reliance was not reasonable because he had
constructive knowledge of the Plan and its clear terms requiring him to convert after
retirement. But it cites no authority from this Circuit for its proposition that Charles should
be charged with constructive knowledge. See, e.g., Scharff v. Raytheon Co. Short Term
Disability Plan, 581 F.3d 899, 908 (9th Cir. 2009). More importantly, the letter in question
was clearly sent in response to Charles’ inquiry regarding his coverage amounts. It stated,
“Dear Charles: we have received your request for confirmation of coverage.” It was entitled
“Coverage Confirmation.” This Court will not rule that, as a matter a law, it was
unreasonable for Charles to rely on a document from his insurance provider that was sent

4
The Am ended Com plaint attributes the reliance to “Plaintiff,” not Charles specifically. Met Life takes
issue with this, arguing that W endy, as “Plainitff” could not have relied on the letter because it was addressed
to Charles and it was his, not her, policy. But the executrix of an estate can bring an action on behalf of a
deceased, and this Court will consider “Plaintiff” in this context to m ean Charles. Under the liberal, notice
pleading standards of Fed. R. Civ. P. 8, this Court is satisfied that Met Life has suffered no prejudice by the
distinction it points out.

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specifically in response his request for confirmation of his insurance coverage.
3.

Failure to Provide Plan Information5

Wendy claims that despite her requests, Met Life failed to produce Plan documents
and provide her with Plan information and that such acts violated Met’s Life’s fiduciary duty.
ERISA requires that the plan administrator provide “a set of all currently operative,
governing plan documents.” Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 84, 115
S. Ct. 1223, 131 L. Ed. 2d 94 (1995). Indeed, the Second Circuit has held that failure to
respond to requests for information can result in a breach of fiduciary duty. Estate of
Becker v. Eastman Kodak Co.,120 F.3d 5, 10 (2d Cir. 1997) (“[W]e conclude that Kodak
breached its fiduciary duty to provide Becker with complete and accurate information about
her retirement options.”). Met Life concedes that it is a Plan fiduciary (see Met Life's
Memorandum of Law, p. 15; Docket No. 25), and Wendy has asserted that it refused to
provide her with pertinent information; she has thus adequately pled this claim.
D.

National Grid’s Motion to Dismiss
National Grid also does not dispute that it is a Plan fiduciary, but it argues that

requests for information must be in writing and that lacking such an allegation, the claim
should be dismissed. National Grid correctly notes that requests do have to be in writing
under § 104 of ERISA. See 29 U.S.C. § 1024(b)(4) (“The administrator shall, upon written
request of any participant or beneficiary . . .”) (emphasis added). But it points to no case
where a court required the plaintiff to plead this element. In other words, while a plaintiff
must show that she made written requests to succeed on a claim under § 104, National
5

Of course, this claim m ust relate to the underlying Plan that Charles had with Met Life. Because he
never converted this plan after his retirem ent, Met Life had no fiduciary duty to provide docum ents for a plan
that did not exist. This distinction applies to National Grid as well.

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Grid supplies no authority indicating that this fact must be pled. In fact, “the Federal Rules
of Civil Procedure do not require a plaintiff to detail in the complaint all of the facts upon
which a claim is based.” Mendez, 2012 WL 112506, at *5. Further, the Becker court,
considering a slightly different requirement, adopted the holdings of other circuit courts and
held that “ERISA fiduciaries must provide complete and accurate information in response
to beneficiaries' questions about plan terms and/or benefits.” 120 F.3d at 8. It added no
requirement that the request be in writing. Wendy has alleged that she sought Plan
information from Met Life and National Grid and was met with only refusals. This
sufficiently states a claim.6
However, none of the other allegations against National Grid can survive. Wendy’s
claims for breach of contract, declaratory judgment and bad faith are dismissed for the
same reasons as outlined above. Further, there is no allegation that National Grid played
any role with regard to the November 16 letter, which, to reiterate, was sent only after
Charles had retired from National Grid. Although Wendy does generally allege that
“Defendants” (possibly including National Grid) “told” him that he had $106,000 in
coverage, such a bare, factually deficient allegation does not “posses enough heft” to
entitle Wendy to relief. See Twombly, 127 S. Ct. at 1966. This lone accusation lacks the
factual foundation that could make it plausible. See Iqbal, 129 S. Ct at 1945. Therefore,
Wendy’s estoppel claim, proceeding against Met Life, must be dismissed as against
National Grid.

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This Court has also considered and found without m erit National Grid’s other argum ent that the
factors courts consider in applying 29 U.S.C. 1132(c) m ust be pled by the plaintiff. Its only cited authority in
this vein is Cam panella v. M ason Tenders' District Council Pension Plan, 299 F. Supp. 2d 274 (S.D.N.Y.
2004), which granted the defendant’s m otion for sum m ary judgm ent, not a m otion to dism iss.

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IV. CONCLUSION
For the reasons discussed above, Defendants’ motions are granted with respect to
all claims except those for promissory estoppel against Met Life and for breach of fiduciary
duty against Met Life and National Grid.
V. ORDERS
IT HEREBY IS ORDERED, that Metropolitan Life Insurance Co.’s Motion to Dismiss
(Docket No. 25) is GRANTED in part and DENIED in part.
FURTHER, that National Grid USA Service Co., Inc. and Niagara Mohawk Power
Corp.’s Motion to Dismiss (Docket No. 28) is GRANTED in part and DENIED in part.
FURTHER, that the parties are instructed to confer with the Hon. H. Kenneth
Schroeder, Jr. regarding reinstatement of the Case Management Order signed June 8,
2010.

Dated:

February 5, 2012
Buffalo, New York
/s/William M. Skretny
WILLIAM M. SKRETNY
Chief Judge
United States District Court

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