HARP v. LIBERTY MUTUAL GROUP, INC. et al

Filing 56

MEMORANDUM OPINION AND RECOMMENDATION signed by MAG/JUDGE JOI ELIZABETH PEAKE on 9/30/2013. RECOMMENDED that Defendants' Motion to Dismiss [Doc. # 43 ] be granted to the extent that Plaintiff's Third, Fourth, Fifth, Sixth, and Seventh Cau ses of Action be dismissed and Plaintiff's request for a jury trial be stricken from the Complaint, but otherwise be denied, and that the substance of Plaintiff's claims to recover benefits under an ERISA Plan, enforce her rights under the terms of the Plan, and clarify her rights to future benefits under the terms of the Plan proceed under 29 U.S.C. § 1132(a)(1)(B). (Butler, Carol)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
JENNIFER HARP,
Plaintiff,
v.
LIBERTY MUTUAL GROUP, INC., LIBERTY
LIFE ASSURANCE COMPANY OF BOSTON,
and EAGLE PHYSICIANS & ASSOCIATES, P.A.,
Defendants.

)
)
)
)
)
)
)
)
)
)
)
)

1:12CV640

MEMORANDUM OPINION AND RECOMMENDATION OF
UNITED STATES MAGISTRATE JUDGE
This ERISA case is before the Court on Defendants’ Motion to Dismiss (Partial) [Doc.
#43]. The Court notes that resolution of the Motion to Dismiss primarily involves clarifying
the proper legal and statutory basis for Plaintiff’s claims in this case. For the reasons set out
below, the Court recommends that Defendants’ Motion be granted in part and denied in part,
and as set out below, the substance of Plaintiff’s claims to recover benefits under an ERISA
Plan, enforce her rights under the terms of the Plan, and clarify her rights to future benefits
under the terms of the Plan will proceed under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B).

I.

FACTS, CLAIMS, AND PROCEDURAL HISTORY
The following facts are taken from Plaintiff’s Complaint1 [Doc. #9, #20]. Plaintiff Harp

alleges that from approximately January 2001 through May 2005 she was employed by Eagle
Physicians & Associates, P.A. (“Defendant Eagle”) as a certified medical assistant. (Compl. at
2.) Defendant Eagle established a group disability insurance plan (“the Plan”) for its employees,
including Plaintiff Harp, which qualifies as an employee welfare benefit plan within the meaning
of the Employment Retirement Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq.
Plaintiff Harp refers to the other two Defendants collectively as “Defendant Liberty Mutual”
in her Complaint. They are Liberty Mutual Group, Inc. and Liberty Life Assurance Company
of Boston. Plaintiff alleges that “Defendant Liberty Mutual” “and/or Defendant Eagle” is the
designated Plan administrator and Plan sponsor. (Compl. at 2.) Plaintiff also alleges that both
Defendant Eagle and Defendant Liberty Mutual made the benefits determination at issue in this
action. (Id.)
Plaintiff Harp contends that she became totally disabled in May 2005 due to her physical
conditions of chronic neuropathic abdominal pain, adrenal insufficiency, and blindness in her
left eye. As a result of these conditions, Plaintiff applied for and was granted long-term disability
benefits pursuant to the Plan beginning in November 2005, and received them until May 2009.
(Id. at 3.) On May 27, 2009, Defendants terminated long-term disability benefits to Plaintiff
after finding that she was no longer disabled. (Id.) Plaintiff applied for and was awarded Social
1

Plaintiff’s First Amended Complaint [Doc. #20] supplements her original Complaint [Doc. #9] by
adding Exhibits G, H, and I. However, the First Amended Complaint simply incorporates by reference the
allegations in Plaintiff’s original Complaint.

2

Security Disability benefits based on the conditions listed above in July 2009. (Id.) Plaintiff
further alleges that Defendants required her to reimburse them over $50,000.00 in benefits that
she received under the Plan between November 2005 and June 2009, as a set-off for her receipt
of social security disability benefits. (Id.) Plaintiff claims that Defendants’ termination of her
disability benefits violates the terms of the Plan. She states that she has unsuccessfully appealed
the denial of her benefits under the Plan and has exhausted her administrative remedies. (Id.
at 4.) Plaintiff filed the present action in North Carolina state court and Defendants removed
the action to this Court.
Plaintiff’s Amended Complaint raises seven causes of action. Her First Cause of Action
is a claim for wrongful denial of long-term disability benefits pursuant to 29
U.S.C. § 1132(a)(1)(B). (Id. at 5-6.) Plaintiff does not state the statutory basis for her remaining
causes of action, and this has led to some confusion as to the exact nature of her claims. Her
Second Cause of Action contains allegations that Defendants are fiduciaries of the Plan and that
they willfully have failed to properly perform their fiduciary duties. (Id. at 6.) Plaintiff’s Third
Cause of Action contains allegations that the terms of the Plan constitute a valid contract and
that Defendants have breached the terms of the Plan by denying her long-term disability benefits
under the Plan. (Id. at 6-7.) In her Fourth Cause of Action, Plaintiff again alleges that
Defendants have breached their fiduciary duties, this time negligently, by terminating her
disability benefits. (Id. at 8.) Plaintiff claims in her Fifth Cause of Action that Defendants are
estopped from asserting that she is not disabled because she was declared to be disabled by the
Social Security Administration and because Defendants accepted the $50,000.00 from her social
3

security benefits award. (Id. at 8-9.) Plaintiff seeks to recover the $50,000.00 from the Plan in
her Sixth Cause of Action. (Id. at 9.) Finally, in her Seventh Cause of Action, Plaintiff raises
state and federal due process, equal protection, and contract clause claims. (Id. at 9-10.)
Defendants argue that Plaintiff’s Second, Third, Fourth, Fifth, Sixth and Seventh Causes
of Action should be dismissed to the extent that they raise state law claims. Defendants also
contend that to the extent that Plaintiff’s Second and Fourth Causes of Action allege breaches
of fiduciary duties, they should be dismissed because Plaintiff has adequate relief through 29
U.S.C. § 1132(a)(1)(B) in her First Cause of Action. Defendants contend that Plaintiff’s Fifth
and Sixth Causes of Action should be dismissed because a claim for judicial estoppel is not
recognized under ERISA. Finally, Defendants seek dismissal of Plaintiff’s Seventh Cause of
Action because it fails to state a claim for relief. Defendants do not seek dismissal of Plaintiff’s
First Cause of Action under ERISA § 1132(a)(1)(B), and agree that this case may proceed under
that section.
II.

DISCUSSION
A.

Standard

A plaintiff fails to state a claim on which relief may be granted under Federal Rule of
Civil Procedure 12(b)(6) when the complaint does not “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) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A
claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw

4

the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S.
at 678.
B.

ERISA Preemption of State Law Claims

Defendants’ first argument in support of dismissal is that Plaintiff’s Second, Third,
Fourth, Fifth, Sixth, and Seventh Causes of Action are preempted by ERISA. (Defs.’ Mem.
[Doc. # 44] at 4-11.) In support of this contention, Defendant notes that the employee benefit
plan at issue is one controlled by ERISA. Defendants next argue that because Plaintiff’s plan
is an ERISA plan, her state law claims are preempted by ERISA. Defendants construe Plaintiff’s
Second through Seventh causes of action as raising state law claims.
In response, Plaintiff agrees that the Plan is controlled by ERISA. (Pl.’s Mem. [Doc.
#49] at 2 n.2.) However, Plaintiff argues that she has not pled any state law claims in her
Second, Third, Fourth, Fifth, Sixth, and Seventh Causes of Action. (Id. at 8.) Although Plaintiff
has not pled those causes of action with clarity, and it is understandable why Defendants
construed those causes of action to raise state law claims, the Court accepts Plaintiff’s argument
that these causes of action arise under ERISA rather than state law. Therefore, these claims will
be construed as claims under ERISA, not under state law, and Defendants’ argument that
Plaintiff’s Second, Third, Fourth, Fifth, Sixth, and Seventh Causes of Action must be dismissed
based on ERISA preemption of state law claims, is moot.

5

C.

Claims Under 29 U.S.C. § 1132(a)(3)

However, the conclusion that Plaintiff’s Second, Third, Fourth, Fifth, Sixth, and Seventh
Causes of Action should not be dismissed on preemption grounds does not end the matter.
Defendants argue in their motion that Plaintiff’s action is simply one for the wrongful denial of
benefits under ERISA and that “Plaintiff’s sole claim and potential remedy, if any, is pursuant
to a civil action for benefits due under 29 U.S.C. § 1132(a)(1)(B) of ERISA.” (Defs.’ Mem.
[Doc. #44] at 11.) In Response, Plaintiff clarifies that her Second Cause of Action, like the First
Cause of Action, arises under § 1132(a)(1)(B). (Mem. at 12 (“The second cause of action . . .
arises under § 1132(a)(1)(B).”)). The Court accepts this characterization, and Counts One and
Two will be construed as raising claims under 29 U.S.C. § 1132(a)(1)(B). Defendant has agreed
that this is the proper statutory section for Plaintiff’s claims in this case, and therefore the First
and Second claims will proceed under § 1132(a)(1)(B).2
With respect to the Third, Fourth, Fifth and Sixth Causes of Action, Plaintiff argues that
she “is also entitled to seek equitable relief under 29 U.S.C. § 1132(a)(3) in addition to legal relief
under 29 U.S.C. § 1132(a)(1)(B).” (Pl.’s Mem. [Doc. #49] at 6.) Defendant disagrees.
Therefore, the Court must consider whether Plaintiff may also seek relief under 29 U.S.C.
§ 1132(a)(3).

2

The Court notes that Plaintiff’s Second Cause of Action provides additional detail as to how Plaintiff
contends that Defendants have violated the terms of the Plan. The Court therefore will not recommend dismissal
of the Second Cause of Action as duplicative, and will instead simply note that all of the contentions may be
considered as part of Plaintiff’s claims under 29 U.S.C. § 1132(a)(1)(B).

6

Section § 1132(a)(1)(B), which is the basis for the First and Second claims in this case,
allows “a participant or beneficiary . . . 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. § 1132(a)(1)(B). Section 1132(a)(3), which is apparently
the basis for the Third, Fourth, Fifth, and Sixth claims in this case, provides that a participant,
beneficiary, or fiduciary may bring an action to “enjoin any act or practice which violates any
provision of this subchapter or the terms of the plan, or . . . to obtain other appropriate
equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter
or the terms of the plan.” 29 U.S.C. § 1132(a)(3). The Supreme Court and the Fourth Circuit
have consistently held that if “adequate relief is available for the plaintiff’s injury through review
of her individual benefits claim under § 1132(a)(1)(B), relief under § 1132(a)(3) will not lie.”
Korotynska v. Metropolitan Life Ins. Co., 474 F.3d 101, 102-03 (4th Cir. 2006) (citing Varity
Corp. v. Howe, 516 U.S. 489, 515 (1996)).
In this case, Plaintiff fails to explain why her alleged injury is not redressable under
§ 1132(a)(1)(B). She states that her claims under § 1132(a)(3) are: (1) for past and future
proceeds under the Plan, and (2) for restitution of the $50,000.00 that Defendants took from
her social security disability award. (Pl.’s Mem. [Doc. #49] at 11.) As for the first claim,
§ 1132(a)(1)(B) specifically allows for the recovery of benefits due and to clarify rights to future
benefits under the terms of the Plan. Plaintiff does not attempt to establish that this provision
will not afford her an adequate remedy. The $50,000.00 sought by Plaintiff represents the offset
for Social Security benefits under the terms of the Plan. To the extent that this offset was
7

somehow improper, Plaintiff offers no explanation why she could not recover this amount
under § 1132(a)(1)(B) by enforcing her rights under the terms of the Plan. Moreover, it appears
that Plaintiff’s primary contentions regarding the $50,000.00 are not a challenge to the propriety
of the offset under the terms of the Plan, but are instead a claim of estoppel, contending that
Defendants should be estopped from denying that she is disabled, based on the award of social
security benefits and/or the prior award of benefits under the Plan. Defendants note that these
contentions would not form the basis for judicial estoppel, but could be considered as part of
the evaluation of Plaintiff’s claim under § 1132(a)(1)(B). Thus, it appears that Plaintiff has an
adequate remedy under § 1132(a)(1)(B). To allow her to proceed with any claim under
§ 1132(a)(3) would be directly contrary to the statute as interpreted by the Supreme Court and
the Fourth Circuit. See Korotynska, 474 F.3d at 105 (noting “the danger that a beneficiary might
‘repackage his or her ‘denial of benefits’ claim as a claim for ‘breach of fiduciary duty” and
concluding that in Varity, the “Supreme Court intimated that equitable relief for breach of
fiduciary duty would not be available for denial of benefits claims appealable under §
1132(a)(1)(B),” since otherwise, “every wrongful denial of benefits could be characterized as a
breach of fiduciary duty”).
Rather than explain why § 1132(a)(1)(B) does not afford her adequate relief, Plaintiff
skips over that important first step of the analysis and relies upon cases addressing the types of
equitable relief available under § 1132(a)(3). However, those cases do not change the previouslyestablished requirement that relief may be granted under § 1132(a)(3) only if relief is not
available under § 1132(a)(1)(B). See, e.g., CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011)
8

(considering the relief and remedies available to plaintiffs asserting a claim of breach of fiduciary
duty under § 1132(a)(3) where relief was not available under § 1132(a)(1)(B)); McCravy v.
Metropolitan Life Ins. Co., 690 F.3d 176 (4th Cir. 2012) (finding that the traditional equitable
remedies of surcharge and equitable estoppel were available under § 1132(a)(3) when no claim
could be raised under § 1132(a)(1)(B)); Griggs v. E.I. Dupont de Nemours & Co., 385 F.3d 440
(4th Cir. 2004) (holding that rescission was a form of equitable relief available under § 1132(a)(3)
for plaintiff who apparently had no remedy under § 1132(a)(1)(B) because his claim was not to
recover benefits due him under the plan); Cherochak v. Unum Life Ins. Co., 586 F. Supp. 2d 522
(D.S.C. 2008) (noting that the plaintiff’s request for a refund of premiums he paid did not fall
under § 1132(a)(1)(B), and therefore, the plaintiff’s claim under § 1132(a)(3) could proceed).
In the present case, because Plaintiff has an adequate remedy for the allegedly improper
denial of her benefits under § 1132(a)(1)(B), she may not proceed under § 1132(a)(3).
Accordingly, Plaintiff’s Third, Fourth, Fifth, and Sixth Causes of Action, which seek equitable
relief under 29 U.S.C. § 1132(a)(3), should be dismissed.3
D.

Plaintiff’s Seventh Cause of Action

Finally, Plaintiff raises federal and state constitutional claims in the Seventh Cause of
Action, specifically alleging due process and equal protection claims, as well as a Contract Clause

3

The Court notes, however, to the extent the contentions set out in those causes of action form part of
the basis for the claims under § 1132(a)(1)(B) in the First and Second Causes of Action, those matters may all be
considered by the Court as the case proceeds in determining Plaintiff”s claim “to recover benefits due to [her]
under the terms of [her] plan, to enforce [her] rights under the terms of the plan, or to clarify [her] rights to future
benefits under the terms of the plan” under § 1132(a)(1)(B).

9

claim. Plaintiff contends that “[t]o allow the Defendants to assert that they can rely on any
alleged discretionary language in [her disability insurance contract], makes the contract illusory,
and misrepresents the nature of the contractual relationship for providing benefits” and that
granting or denying benefits “upon some discretionary standard” violates the due process and
equal protection provisions of the federal and state constitutions, and “impairs the obligations
of contracts.” In the Motion to Dismiss, Defendants present 22 pages of argument and
authorities in support of their contention that Plaintiff’s constitutional claims should be
dismissed. (Defs.’ Mem. [Doc. #44] at 16-28.) Plaintiff responds in her memorandum with four
sentences in support of these claims, stating that she “seeks a good faith reversal on existing law
on due process, equal protection, and contract clause challenges to ERISA under the federal and
North Carolina Constitutions.” (Pl.’s Mem. [Doc. #49] at 7.) She fails to explain or give any
authority for such a reversal, however, and instead just asserts that ERISA is “fundamentally
unfair.”4 Under such circumstances, the Court concludes that Plaintiff has failed to show a facial
plausibility for her claims sufficient to survive Defendants’ Motion to Dismiss, as she has failed
to show any governmental action as part of her due process or equal protection claims, or any
legal basis for any of her constitutional claims. See Iqbal, 556 U.S. at 678; see also DeShaney
v. Winnebago Cnty. Dep’t of Soc. Servs., 489 U.S. 189, 196 (1989) (“Like its counterpart in the
Fifth Amendment, the Due Process Clause of the Fourteenth Amendment was intended to
prevent government ‘from abusing [its] power, or employing it as an instrument of oppression’

4

To the extent she has asserted any state law claims, Plaintiff also fails to address Defendant’s
preemption arguments as to the Seventh Cause of Action.

10

. . . . Its purpose was to protect the people from the State, not to ensure that the State protected
them from each other.” (quoting Davidson v. Cannon, 474 U.S. 344, 348 (1986) (emphasis
added)); Nordlinger v. Hahn, 505 U.S. 1, 10 (1992) (“The Equal Protection Clause . . . simply
keeps governmental decisionmakers from treating differently persons who are in all relevant
respects alike.”); U.S. Trust Co. of New York v. New Jersey, 431 U.S. 1, 14 (1977) (noting that
the Contract Clause, which provides that “[n]o State shall . . . pass any . . . Law impairing the
Obligation of Contracts . . . .”, is a “limitation[] on state power”); Home Bldg. & Loan Ass’n
v. Blaisdell, 290 U.S. 398, 427 (1934) (discussing adoption of Contract Clause). Therefore,
Plaintiff’s Seventh Cause of Action should be dismissed.
E.

Allowable Damages

Defendants argue that to the extent Plaintiff seeks damages or other extra-contractual
monetary relief over and above the recovery of any ERISA plan benefits, such claims should be
stricken pursuant to Federal Rule of Civil Procedure 12(f). (Defs.’ Mem. [Doc. #44] at 29.) The
Court’s recommendation that all of Plaintiff’s claims be dismissed except those arising under 29
U.S.C. § 1132(a)(1)(B), if accepted, appears to resolve this issue. To the extent that it does not,
Defendants may renew their motion as to allowable damages later in the action.
F.

Trial by Jury

Defendants also argue that Plaintiff is not entitled to a trial by jury and request that
Plaintiff’s request for a jury trial be stricken from the Complaint. (Defs.’ Mem. [Doc. #44] at
30.) In the Fourth Circuit, Plaintiff does not have a right to a jury trial in “proceedings to
determine rights under employee benefit plans.” Berry v. Ciba-Geigy Corp., 761 F.2d 1003,
11

1007 (4th Cir. 1985); see Biggers v. Wittek Indus., 4 F.3d 291, 298 (4th Cir. 1993); Phelps v. C.T.
Enters., Inc., 394 F.3d 213, 222 (4th Cir. 2005) (no jury trial right attaches to actions under 29
U.S.C. § 1132(a)(1)(B)); Ellis v. Metropolitan Life Ins. Co., 919 F. Supp. 936 (E.D. Va. 1996);
Broadnax Mills v. Blue Cross and Blue Shield, 876 F. Supp. 809 (E.D. Va. 1995). Plaintiff has
not set out any basis for a right to a jury trial for her claims under § 1132(a)(1)(B). Therefore,
Plaintiff’s request for a jury trial should be denied.
G.

Proper Parties

Defendants also contend that neither Liberty Mutual nor Eagle Physicians is a proper
defendant in this ERISA benefits matter. (Defs.’ Mem. [Doc. #44] at 30-32.) This Court has
previously found that proper defendants in an action pursuant to 29 U.S.C. § 1132(a)(1)(B) are
the “pension plan itself . . . and any fiduciaries who control the administration of the pension
plan.” McRae v. Rogosin Converters, Inc., 301 F. Supp. 2d 471, 475 (M.D.N.C. 2004); see
Coleman v. Provident Life & Acc. Ins. Co., No. Civ. CCB-10-1959, 2011 WL 1980541 at 2 (D.
Md. May 20, 2011) (same). Plaintiff alleges in her Complaint that Defendant Eagle and
Defendant Liberty Mutual made benefits determinations and were responsible for administering
the Plan. (Compl. [Doc. #9] ¶¶ 10-11.) Defendants rely on correspondence and other
attachments to challenge this allegation. In response, Plaintiff asks for the opportunity to obtain
and present additional information on this issue. In the circumstances, this Court concludes that
consideration of these issues and the supporting documentation should be undertaken on a
motion for summary judgment rather than a motion to dismiss. Therefore, the Court
recommends that Defendants’ Motion to Dismiss as to Defendant Liberty Mutual and
12

Defendant Eagle Physicians be denied without prejudice to further consideration of this issue
on a motion for summary judgment.
III.

CONCLUSION
For the foregoing reasons, IT IS RECOMMENDED that Defendants’ Motion to

Dismiss [Doc. #43] be granted to the extent that Plaintiff’s Third, Fourth, Fifth, Sixth, and
Seventh Causes of Action be dismissed and Plaintiff’s request for a jury trial be stricken from
the Complaint, but otherwise be denied, and that the substance of Plaintiff’s claims to recover
benefits under an ERISA Plan, enforce her rights under the terms of the Plan, and clarify her
rights to future benefits under the terms of the Plan proceed under 29 U.S.C. § 1132(a)(1)(B).
This, the 30th day of September, 2013.

/s/ Joi Elizabeth Peake
United States Magistrate Judge

13