RG Steel Wheeling, LLC v. The Health Plan of the Upper Ohio Valley Inc.
Filing
83
MEMORANDUM OPINION AND ORDER GRANTING IN PART AND DENYING IN PARTTHIRD-PARTY DEFENDANT VEBAS 72 MOTION TO DISMISS THE THIRD-PARTY COMPLAINT;GRANTING VEBAS MOTION, IN THE ALTERNATIVE,AS TO COUNT I, FOR A MORE DEFINITE STATEMENT; AND SCHEDULING STATU S AND SCHEDULING CONFERENCE. The Health Plan is DIRECTED to file a more definite statement as to Count I by 8/19/2014. Status and Scheduling Conference set for 8/18/2014 03:15 PM in Judge Stamp Chambers before Senior Judge Frederick P. Stamp Jr. Signed by Senior Judge Frederick P. Stamp, Jr on 8/5/14. (cc)
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA
RG STEEL WHEELING, LLC,
a Delaware limited liability
company, debtor-in-possession,
Plaintiff,
v.
Civil Action No. 5:13CV7
(STAMP)
THE HEALTH PLAN OF THE UPPER
OHIO VALLEY, INC., a West
Virginia corporation,
Defendant/Third-Party Plaintiff,
v.
WHEELING-PITTSBURGH STEEL CORPORATION
RETIREE BENEFITS PLAN TRUSTS a/k/a VEBA,
Third-Party Defendant.
MEMORANDUM OPINION AND ORDER
GRANTING IN PART AND DENYING IN PART
THIRD-PARTY DEFENDANT VEBA’S MOTION TO
DISMISS THE THIRD-PARTY COMPLAINT;
GRANTING VEBA’S MOTION, IN THE ALTERNATIVE,
AS TO COUNT I, FOR A MORE DEFINITE STATEMENT;
AND SCHEDULING STATUS AND SCHEDULING CONFERENCE
I.
Procedural History
The plaintiff, RG Steel Wheeling, LLC, (“RG Steel”) filed this
civil action in this Court alleging that The Health Plan of the
Upper Ohio Valley, Inc. (“The Health Plan”) had entered into a
contract, the Administrative Services Agreement, with RG Steel
which required The Health Plan to manage two medical benefit plans
for retirees: (1) those who were eligible before August 1, 2003,
tax-exempt Voluntary Employee Beneficiary Association beneficiaries
(“VEBA”), and (2) those who were not eligible before that date,
“non-VEBA beneficiaries.”
The complaint further asserts that The
Health Plan mismanaged the two retirement funds resulting in the
overpayment of $1,455,522.03 to VEBA’s trust account, causing a
loss of the same amount to RG Steel.
RG Steel alleges that this
loss occurred when RG Steel entered bankruptcy in May 2012, and
VEBA offset the payment that The Health Plan had negligently placed
in the wrong bank account.1
In response to the complaint, The Health Plan filed a motion
to dismiss which this Court granted in part and denied in part.2
The Health Plan thereafter filed a supplemental brief to the motion
to dismiss or, in the alternative, a second motion to dismiss under
Rule 12(b)(6). This Court then ordered that this filing be treated
as a second motion to dismiss and directed the parties to submit
further briefs on the issues raised in The Health Plan’s second
motion to dismiss, as well as potential set-off issues raised by
this Court during oral argument on the motion held on September 6,
2013.
See ECF No. 29.
1
As this Court has set forth a more detailed description of RG
Steel’s complaint in another order, it will be omitted here. See
ECF No. 31.
2
This Court heard oral argument on the motion to dismiss.
Rulings were made at the conclusion of that hearing. This Court
then entered a memorandum opinion and order confirming its
pronounced order denying in part and granting in part The Health
Plan’s motion to dismiss. A more complete background of The Health
Plan’s first motion to dismiss can be found at ECF No. 31, and is
omitted here.
2
After reviewing the parties’ pleadings and the relevant law,
this Court denied the second motion to dismiss finding that (1)
more discovery was required as there were numerous questions about
the existence of an underlying contract and whether or not there
was a single indivisible loss by RG Steel and (2) with the pending
issues in (1), this Court could not determine whether or not a setoff should be granted.
ECF No. 37.
After the second motion to dismiss was denied, The Health Plan
filed a motion for leave to file a third-party complaint against
VEBA.
RG Steel filed a response stating that it did not oppose the
motion, thus this Court granted that motion.
Further, this Court
vacated the scheduling order until VEBA had time to answer the
third-party complaint.
Plan
makes
seven
In its third-party complaint, The Health
claims:
(1)
breach
of
contract,
(2)
misrepresentation, (3) fraud, (4) conversion, (5) negligence, (6)
unjust enrichment, and (7) breach of fiduciary duty.
All of these
claims arise out of The Health Plan’s overarching allegation that
VEBA failed to notify either RG Steel or The Health Plan of the
overpayments made to the VEBA account and incorrectly retained
those monies.
The VEBA beneficiaries answered by filing a motion
to dismiss, or in the alternative, as to Count I, for a more
definite statement.
The motion is now fully briefed.
3
II.
Facts
In its motion to dismiss, VEBA groups its arguments based on
the way this Court should dismiss the claims made by The Health
Plan.
VEBA’s first argument is that this Court lacks subject
matter jurisdiction over The Health Plan’s Counts IV through VII
because they are matters over which the bankruptcy court retained
jurisdiction.
VEBA contends that because the bankruptcy court has
expressly retained jurisdiction over the set-off agreement entered
into by RG Steel and VEBA, and because those claims listed are made
either derivatively or directly because of the set-off agreement,
this Court lacks jurisdiction to hear those claims.
VEBA next asserts that this Court should dismiss all of The
Health Plan’s claims, except for breach of contract, because they
are preempted by the Employee Retirement Income Security Act of
1974 (“ERISA”), 29 U.S.C. § 1001, et. seq. (2012).
VEBA states
that ERISA preempts any state law as it relates to an employee
benefit plan and that this provision has been broadly applied.
Thus,
a
state
law
claim
is
completely
duplicative of a claim under ERISA.
preempted
if
it
is
Accordingly, VEBA argues that
The Health Plan’s claim for conversion and negligence is preempted
because The Health Plan seeks, by way of remedy, that this Court
impose a constructive trust on the funds held by VEBA which is a
remedy prohibited by Section 403 of ERISA.
claims,
misrepresentation,
fraud,
4
As to the other four
negligence,
and
breach
of
fiduciary duty, those are preempted because they are duplicative of
ERISA’s scheme for remedying breaches of the management of plan
assets and thus can only be prosecuted as an ERISA breach of
fiduciary duty claim.
Additionally, VEBA argues that The Health Plan’s Counts IV
through VII are claims for contribution or indemnification which
are not cognizable claims under ERISA. Further, VEBA contends that
The Health Plan’s fraud and misrepresentation claims should be
dismissed for failing to be pled with particularity.
Finally, as
to the breach of contract claim, VEBA asserts that it lacks the
necessary factual allegations to support a viable cause of action.
In its opposing brief, The Health Plan first argues that
although the bankruptcy court retained jurisdiction over matters
relating to the set-off order, The Health Plan was not a party to
that order and the set-off order explicitly states that it does not
release claims of entities not a party to the set-off agreement.
Further, The Health Plan contends that because RG Steel is seeking
damages above and beyond the offset, interest, collections costs,
and court costs, The Health Plan has the right to seek relief from
VEBA.
The Health Plan next argues that its claims do not “relate to”
an employee benefit plan and thus are not preempted.
Plan
contends
that
Section
403
of
ERISA
only
The Health
covers
funds
contributed by the employer and in this case, the funds at issue
5
were collected by The Health Plan from RG Steel’s retired employees
and VEBA.
Further, The Health Plan argues that its claims are not
preempted because its allegations do not relate to the improper
processing of claims, a beneficiary’s violation of rights under
ERISA, or a claim for benefits.
The Health Plan also asserts that
each of the cases cited by VEBA in support of its arguments are
those which were brought by either plan participants or plans on
behalf of their participants.
Plan
argues
that
VEBA’s
For the same reasons, The Health
argument
as
to
The
Health
Plan’s
contribution or indemnification remedy claims are also invalid.
In
response
to
VEBA’s
argument
that
The
Health
Plan
insufficiently pled Counts IV through VII, The Health Plan asserts
that it has alleged sufficient facts to support its claims.
As to
the breach of contract claim, The Health Plan asserts that it has
sufficiently pled that claim by alleging that: (1) it entered into
a contract with VEBA in 2004, (2) VEBA paid The Health Plan for
administration of the monies, (3) VEBA breached its agreement with
The Health Plan by withholding alleged overpayments and failing to
notify The Health Plan, and (4) allegations (1)-(3) resulted in The
Health Plan sustaining monetary losses.
Finally, The Health Plan,
at the end of its response, requests leave to amend its third-party
complaint should the Court dismiss its claims.
In its reply, VEBA first argues that it is clear that The
Health Plan’s claims derive from RG Steel’s claims regarding the
6
overpayment by The Health Plan and are not independent claims of
The Health Plan.
Further, VEBA contends that the claims are
related because The Health Plan seeks turnover of the overpayment
to
RG
Steel,
which
was
already
established
by
the
set-off
agreement. VEBA contends that The Health Plan has not provided any
authority for the proposition that a claim resolved by a bankruptcy
court can be maintained derivatively by another party in another
court and further has not attempted to distinguish the cases cited
by VEBA.
Finally, as to this argument, VEBA contends that because
RG Steel has released all of its claims against VEBA in the set-off
agreement and RG Steel’s rights and/or liabilities were affected by
the set-off agreement, The Health Plan’s claims would threaten the
finality of the settlement agreement.
Further, VEBA argues that Section 403 prohibits inurement of
any “assets of a plan,” not just an employer’s contributions.
Thus, employee contributions are also covered.
Additionally, the
claims made by The Health Plan go to the proper management and
record keeping of VEBA plan assets and thus are fiduciary functions
under ERISA.
VEBA asserts that the purpose of ERISA is to protect
participants, beneficiaries, and plans; thus, if The Health Plan is
awarded contribution from VEBA for its liability to RG Steel, that
award will reduce the VEBA plan’s assets and impair the ability to
pay future benefits.
Accordingly, VEBA argues that the relief
sought by The Health Plan is preempted by ERISA.
7
As to The Health Plan’s Counts IV through VII, VEBA again
raises its argument that The Health Plan has not sufficiently pled
those claims.
Finally, VEBA argues that The Health Plan’s request
to amend its complaint if this Court were to dismiss its claims is
inadequate under Federal Rule of Civil Procedure 15 and Local Rule
of Civil Procedure 15.01.
VEBA contends that because The Health
Plan has not filed a separate motion and also does not identify any
additional claims that are valid that could be asserted if it were
allowed to amend its complaint, The Health Plan’s request must be
denied.
Having reviewed the parties’ pleadings and the relevant law,
this Court finds that the third-party defendant VEBA’s motion to
dismiss should be granted as to Counts II through VII and denied as
to Count I.
However, VEBA’s alternative request, for a more
definite statement as to Count I, is granted.
Further, The Health
Plan’s request to amend its complaint, not made in a separate
motion, is denied.
III.
Discussion
VEBA has filed a motion to dismiss, or in the alternative for
a more definite statement as to Count I, which asserts several
arguments. This Court will first discuss VEBA’s motion to dismiss,
then VEBA’s motion for a more definite statement, and, lastly, The
Health Plan’s motion for leave to amend its third-party complaint
against VEBA.
8
A.
Motion to Dismiss
As stated previously, VEBA has broken down its motion to
dismiss based on how it believes this Court should dismiss the
separate claims asserted by The Health Plan. This Court will first
address VEBA’s jurisdictional argument, followed by its ERISA
preemption arguments, and, then, its alternative argument as to The
Health Plan’s breach of contract claim.
1.
Applicable Law
Rule 12(b)(6) of the Federal Rules of Civil Procedure allows
a defendant to raise the defense of “failure to state a claim upon
which
relief
can
be
granted”
as
a
motion
in
response
to
a
plaintiff’s complaint before filing a responsive pleading.
In assessing a motion to dismiss for failure to state a claim
under Rule 12(b)(6), a court must accept the factual allegations
contained in the complaint as true.
Advanced Health-Care Servs.,
Inc. v. Radford Cmty. Hosp., 910 F.2d 139, 143 (4th Cir. 1990).
Dismissal is appropriate only if “‘it appears to be a certainty
that the plaintiff would be entitled to no relief under any state
of facts which could be proven in support of its claim.’”
Id. at
143-44 (quoting Johnson v. Mueller, 415 F.2d 354, 355 (4th Cir.
1969)); see also Rogers v. Jefferson-Pilot Life Ins. Co., 883 F.2d
324, 325 (4th Cir. 1989).
A motion to dismiss for failure to state a claim under Rule
12(b)(6) should be granted only in very limited circumstances, as
9
the pleading requirements of Federal Rule of Civil Procedure
8(a)(2) only mandate “a short and plain statement of a claim
showing that the pleader is entitled to relief.”
Fed. R. Civ. P.
8(a)(2). Still, to survive a motion to dismiss, the complaint must
demonstrate the grounds to entitlement to relief with “more than
labels and conclusions . . . factual allegations must be enough to
raise a right to relief above the speculative level.”
Bell
Atlantic v. Twombly, 550 U.S. 544, 555 (2007); see also Ashcroft v.
Iqbal, 556 U.S. 662, 663-666 (2009).
2.
Bankruptcy Court and Subject Matter Jurisdiction
VEBA
contends
that
this
Court
lacks
subject
matter
jurisdiction to hear The Health Plan’s claims in Counts IV through
VII because the United States Bankruptcy Court for the District of
Delaware has retained jurisdiction with respect to any matters that
may arise regarding the set-off agreement between VEBA and RG
Steel.3
VEBA argues that the claims raised by The Health Plan are
derivative of RG Steel’s claims and that the bankruptcy court thus
retains exclusive jurisdiction over those claims.
The Health Plan
asserts that the bankruptcy court does not have jurisdiction over
its claims because it was not a party to the set-off agreement and
the damages it has alleged go above the offset RG Steel received
from VEBA.
The Health Plan contends that its claims affect only
3
The set-off agreement was entered in In re WP Steel Venture,
LLC, No. 12-11661 (Bankr. Del.).
10
VEBA and The Health Plan, not RG Steel, and thus the claims
asserted
in
the
third-party
complaint
do
not
relate
to
the
bankruptcy court proceedings.
In
relevant
part,
28
U.S.C.
§
1334(b)
provides:
“[T]he
district courts shall have original but not exclusive jurisdiction
of all civil proceedings arising under Title 11, or arising in or
related to cases under Title 11.”
Thus, a district court only has
jurisdiction under § 1334(b) if the proceeding (1) arises under
Title 11; (2) is a proceeding arising in a case under Title 11; or
(3) is a proceeding related to a case under Title 11.
Wise v.
Travelers Indem. Co., 192 F. Supp. 2d 506, 513 (N.D. W. Va. 2002).
“An action is related to bankruptcy if the outcome could alter the
debtor’s rights, liabilities, options or freedom of action (either
positively or negatively) and which in any way impacts upon the
handling and administration of the bankrupt estate.”
A.H. Robins
Co., Inc. v. Piccinin, 788 F.2d 994, 1002 (4th Cir. 1986) (citation
omitted).
However, “related to” jurisdiction is not limitless.
Celotex Corp. v. Edwards, 514 U.S. 300, 308 (1995).
Accordingly,
“‘the mere fact that there may be common issues of fact between a
civil proceeding and a controversy involving the bankruptcy estate
does not bring the matter within the scope of section [1334(b)].’”
Wise, 192 F. Supp. 2d at 513.
This Court finds, at least as to Counts IV through VII, that
the claims by The Health Plan are related to the administration of
11
the bankruptcy estate of RG Steel as those claims fall within the
terms of the set-off agreement.
In Count IV, conversion, The
Health Plan states that “the conversion by VEBA proximately caused
Plaintiff’s alleged damages, VEBA has breached a duty owed to RG
Steel and is liable to RG Steel for all its alleged losses . . . .”
ECF No. 57 ¶ 35.
The Health Plan further references RG Steel’s
loss in other paragraphs under Count IV.
Id. at ¶ 31, 32, and 34.
In Count V, negligence, The Health Plan alleges that VEBA acted
negligently in failing to notify not only The Health Plan but also
in failing to notify RG Steel.
Id. at ¶ 40, 44.
Count VI, unjust
enrichment, further requests that this Court direct VEBA to satisfy
RG Steel of all alleged losses and requests that this Court imposes
a
constructive
trust
for
any
losses
RG
Steel
has
not
been
compensated for by virtue of the bankruptcy set-off agreement. Id.
at ¶ 50-51.
Lastly, Count VII, breach of fiduciary duty, alleges
that VEBA owed a duty to RG Steel to manage the trust account; that
VEBA breached that fiduciary duty to RG Steel; and that VEBA’s
actions caused the alleged losses by RG Steel.
Id. at ¶ 53-56.
The claims set forth above are those which derive from the
relationship not only between The Health Plan and VEBA, but also RG
Steel, The Health Plan, and VEBA collectively.
Specifically, the
claims arise from RG Steel’s claim that it is entitled to damages
in this action because it was not fully compensated by the set-off
agreement in the bankruptcy court for the alleged acts committed by
12
The Health Plan.
Without this claim, The Health Plan would not
have a basis for its indemnification claims against VEBA.
As this
Court has now found that those claims raised in Counts IV through
VII are related to the set-off agreement, this Court will now
determine whether the bankruptcy court retained jurisdiction over
the claims put forward in Counts IV through VII.
The set-off agreement which forms the basis of the contention
over jurisdiction of these claims, states the following: “[The
bankruptcy court] shall retain jurisdiction with respect to all
matters relating to the interpretation or implementation of the
Stipulation and this Order.”
ECF No. 73-1 at 2 ¶ 6.
However, the
set-off agreement further states that “[f]or the avoidance of
doubt, nothing in this Stipulation releases any claim of any Party
against any person or entity (including, but not limited to, a
service provider) that is not a Party hereto.”
Id. at 6-7 ¶ 5.
This
statement:
is
followed
by
another
jurisdictional
“The
Bankruptcy Court shall retain jurisdiction (and the Parties consent
to such retention of jurisdiction) with respect to any disputes
arising
from
or
related
to,
or
other
actions
to
interpret,
administer or enforce the terms and provision of this Stipulation.”
Id. at 7 ¶ 11.
The Health Plan contends that the bankruptcy court did not
retain jurisdiction over its claims against VEBA because the setoff agreement released any claim of an entity who was a not a party
13
to the agreement.
On the other hand, VEBA asserts that the
bankruptcy court retained jurisdiction over any dispute that may
involve the set-off agreement and that the set-off agreement’s
release should not be interpreted as defeating jurisdiction but
rather releasing a party from the specific agreement reached by
VEBA and RG Steel.
The Delaware bankruptcy court was the court of first instance
in regards to the set-off agreement.
The bankruptcy court had
exclusive jurisdiction over “core proceedings” involving the RG
Steel bankruptcy estate which included the set-off agreement.
Valley Historic Ltd. P’ship v. Bank of New York, 486 F.3d 831, 839
(4th Cir. 2007).
“Core proceedings include, but are not limited
to: ‘(A) matters concerning the administration of the estate; . . .
(E) orders to turn over the property of the estate; . . . (O) other
proceedings affecting the liquidation of the assets of the estate
or the adjustment of the debtor-creditor . . . relationship, except
personal injury tort or wrongful death claims.’”
Corp.,
190
F.3d
624,
§ 157(b)(2)(1993)).
630
(4th
Cir.
1999)
In re Apex Exp.
(citing
28
U.S.C.
As these core proceedings are within the
exclusive jurisdiction of the bankruptcy court, “a bankruptcy
court’s original core jurisdiction ‘continues’ in order for it to
enforce its order . . . .”
In re Birting Fisheries, Inc., 300 B.R.
489, 499 (2003) (citation omitted); see also Celotex Corp. v.
Edwards, 514 U.S. 300, 313 (1995) (“‘It is for the court of first
14
instance to determine the question of the validity of the law, and
until its decision is reversed for error by orderly review, either
by itself or by a higher court, its orders based on its decision
are to be respected.’”) (citation omitted).
Given the above, this Court finds that the bankruptcy court
maintained jurisdiction over the set-off agreement.
The claims
raised by The Health Plan would require this Court to review a
“dispute[]
arising
from
or
related
to,
or
other
actions
to
interpret, administer or enforce the terms and provision of [the
set-off agreement.”
This Court would be required to investigate
how the actions of VEBA affected RG Steel and The Health Plan and
then apply those findings to fashion a remedy which would likely
include the disbursement of funds that have already been applied by
the bankruptcy court through the set-off.
Thus, this Court would
be required to determine whether the set-off was correctly applied
to
the
bankruptcy
estate
and
would
therefore
disregard
the
bankruptcy court’s approval of the set-off between RG Steel and
VEBA.
Further, The Health Plan’s interpretation of the release
statement
in
the
set-off
agreement
is
incorrect.
The
interpretation of the release statement forwarded by The Health
Plan would nullify the jurisdictional statements within the same
agreement.
However, if both are read together, the statements
appear to allow an entity not a party to the agreement to (1) bring
15
a claim with the bankruptcy court so as to challenge the agreement
or attempt to attain a judgment regarding that agreement while (2)
allowing that same entity to not be required to abide by the terms
of the agreement as they bind RG Steel and VEBA.
To find otherwise
would be to undo the set-off agreement over which the bankruptcy
court clearly meant to maintain jurisdiction by inserting not only
one statement but two statements of jurisdiction.
Accordingly, based on the above, this Court finds that The
Health Plan’s claims in Counts IV through VII should be dismissed
as they are “related to” the set-off agreement and the bankruptcy
court retained jurisdiction over the set-off agreement.
3.
ERISA Preemption
VEBA has made a three-part ERISA preemption argument.
This
Court will only consider VEBA’s arguments as to Counts II and III
as Counts IV through VII have been found by this Court to be under
the jurisdiction of the Delaware bankruptcy court. VEBA asserts
that those claims are preempted because they are duplicative claims
of ERISA claims.
ERISA preempts all state law claims that “relate to any
employee benefit plan.”
29 U.S.C. § 1144(a).
A state law relates
to a benefit plan “even if the law is not specifically designed to
affect such plans, or the effect is only indirect.” Ingersoll-Rand
Co. v. McClendon, 498 U.S. 133, 139 (1990) (citation omitted). The
Department of Labor issued a regulation exempting certain benefit
16
plans from ERISA.
Custer v. Pan Am. Life Ins. Co., 12 F.3d 410,
417 (4th Cir. 1993).
ERISA
“those
This “safe harbor” exception exempts from
arrangements
completely absent.”
in
which
employer
involvement
is
Vazquez v. The Paul Revere Life Ins. Co., 289
F. Supp. 2d 727, 731 (E.D. Va. 2001); 29 C.F.R. § 2510.3-1(j).
VEBA, as a party seeking to use ERISA preemption as an affirmative
defense to The Health Plan’s state law claims, has the burden to
prove the facts necessary to establish ERISA preemption.
Great-
West Life & Annuity Ins. Co. v. Information Systems & Networks
Corp., 523 F.3d 266, 270 (4th Cir. 2008).
The plaintiff’s putative state causes of action are preempted
by ERISA.
Section 514(a) of ERISA provides that, with narrow
exceptions not applicable to this action, “the provisions of this
title . . . shall supersede any and all State laws insofar as they
may now or hereafter relate to any employee benefit plan.”
U.S.C. § 1144(a).
29
Claims that fall within the field defined by
§ 514(a) may be prosecuted as a federal action if they fall within
the
scope
of
§
502(a),
which
“authorizes
participants
or
beneficiaries to file civil actions to, among other things, recover
benefits,
enforce
rights
conferred
by
an
ERISA
plan,
remedy
breaches of fiduciary duty, clarify rights to benefits, and enjoin
violations of ERISA.”
Marks v. Watters, 322 F.3d 316, 323 (4th
Cir. 2003) (citing 29 U.S.C. § 1132(a)).
Thus, where a putative
state law claim relates to an employee benefit plan and falls
17
within the scope of § 502(a), such claim is preempted and becomes
an exclusively federal cause of action.
Id.
In other words, such
claims are subject to “complete preemption” and may be prosecuted
only under the statutory provisions of ERISA.
Id.
However, where
a putative state law claim relates to an employee benefit plan but
does not fall within the scope of § 502(a), the prosecution of such
claim is precluded by § 514(a).
Id.
That is, such claims are
subject to “simple preemption” and must be dismissed.
Id.
This Court has previously held that claims “which [are]
allege[d]
in
connection
with
the
administration
of
an
ERISA
retirement plan are completely preempted by ERISA because [those
types of] putative state law claims are related to an employee
benefit plan for purposes of § 514(a) of the statute and fall
within the scope of ERISA § 502(a).”
Marks Const. Co., Inc. v.
Huntington Nat’l Bank, 614 F. Supp. 2d 700, 706 (N.D. W. Va. 2009).
Further, in Marks, this Court held that “[a]lthough not pled as
ERISA causes of action, these allegations directly relate to an
ERISA plan and assert breaches of ERISA’s core fiduciary standards
of loyalty and care, in violation of §§ 502(a)(2) and (3).”
Id.
(citing ERISA §§ 409, 502(a)(2)-(3), 29 U.S.C. §§ 1009, 1132(a)(2)(3)).
Based
on
that
reasoning,
this
Court
found
that
the
underlying claims in Marks were completely preempted by ERISA and
the plaintiff was required to plead those claims as federal causes
of action.
Id.
18
Based on the analysis above, The Health Plan’s claims for
fraud
and
misrepresentation
are
claims
which
are
completely
preempted by ERISA and must be converted to federal causes of
action pursuant to ERISA.
In this action, The Health Plan’s fraud
and misrepresentation claims are related to the collection and
monitoring of the VEBA beneficiary trust account by VEBA.4
The
Health Plan references VEBA’s alleged acts of failure to notify of
payments to the benefit plan and failure to review monthly reports
furnished
to
the
benefit
plan.
These
functions
go
to
the
administration of the employee benefit plan.
As such, The Health Plan’s misrepresentation and fraud claims
must be pleaded pursuant to ERISA as federal causes of action
pursuant to Section 404 of ERISA.
4
The following provides examples:
•
Count II - Misrepresentation: “VEBA negligently
and/or intentionally represented or misrepresented
the amounts placed into its account by failing to
notify the Health Plan of the overpayments . . .
[and/or] by failing to return the overpayment
amounts to the Health Plan . . . .”
•
Count III - Fraud: “VEBA knew it was receiving
overpayment amounts, apparently on a monthly basis,
over an eight (8) year period because it had all
its account information . . . [and was] receiving
monthly reports from the Health Plan which upon
review by the Trust caused the Trust to know that
it was receiving overpayments.”
ECF No. 57 at 5.
19
VEBA argues that these claims relate to an ERISA plan for
purposes of § 514(a) but do not fall within the scope of § 502(a)
and are therefore not actionable.
The Health Plan’s fraud and
misrepresentation claims relate to allegedly false representations
made by VEBA concerning the administration of the employee benefit
plan (concealing the overpayment made by The Health Plan).
Thus,
the state law fraud and misrepresentation claims arise out of the
same underlying facts as a breach of fiduciary duty claim, which is
a claim recognized by ERISA and thus those claims are duplicative,
and because there is no statutory counterpart under § 502(a) for a
fraud or misrepresentation claim, they must be dismissed.
Marks,
614 F. Supp. 2d at 707; see District 65 Retirement Trust v.
Prudential Securities, Inc., 925 F. Supp. 1551, 1562 (N.D. Ga.
1996).
B.
Accordingly, Counts II and III must be dismissed.
Breach of Contract Claim and Motion for a More Definite
Statement
VEBA contends that The Health Plan’s breach of contract claim
fails to allege sufficient facts to show an enforceable oral
contract existed because The Health Plan neither identified a
natural person who accepted an offer from The Health Plan nor did
The Health Plan state what terms of the contract were breached.
VEBA further requests, in the alternative, that if this Court does
not dismiss the breach of contract claim that this Court direct The
Health Plan to file a more definite statement.
20
The Health Plan
contends that it has alleged the elements necessary for a contract
claim in its third-party complaint.
1.
Motion to Dismiss
In order to satisfy the pleading requirements of Federal Rule
of Civil Procedure 8, the plaintiff must simply present a “short
and plain statement of the claim showing that the pleader is
entitled to relief.” Fed. R. Civ. P. 8(a)(2). As explained above,
this does not mandate that the plaintiff prove its claim at the
point of pleading, but only that it present sufficient facts to
convince the Court that its claim is “plausible.”
Twombly, 550
U.S. at 555.
The breach of contract claim asserted by The Health Plan is
similar to that made by RG Steel in its complaint.
Such a claim
was upheld by this Court because RG Steel had provided “sufficient
notice of the contract claim by way of the name of the contract and
the allegations as to what part(s) of that contract was breached.”
ECF No. 31.
Here, The Health Plan has designated the contract as
an oral contract entered into in 2004 which VEBA acknowledged in
its reply to the motion to dismiss.
Further, The Health Plan has
provided allegations as to The Health Plan’s performance of the
contract, how VEBA has breached the contract, and that The Health
Plan was damaged by that breach.
Thus, this Court finds that VEBA
has not shown that The Health Plan’s breach of contract claim did
21
not provide sufficient notice to VEBA or is so deficient as to
warrant dismissal.
2.
Motion for a More Definite Statement
On the other hand, VEBA has shown that a motion for a more
definite statement should be granted.
Pursuant to Rule 12(e) of
the Federal Rules of Civil Procedure, a motion for a more definite
statement
must
also
responsive pleading.
be
filed
before
the
defendant
files
a
Through such a motion, a party may request
that the Court direct the plaintiff to re-file his complaint, more
clearly pleading and defining his claims.
Such a motion should
only be granted when a pleading is “so vague or ambiguous that the
party cannot reasonably prepare a response.”
12(e).
Fed. R. Civ. P.
A Rule 12(e) motion has a higher standard than that of a
Rule 12(b)(6) motion in that a pleading which satisfies the liberal
pleading standards above described may be nonetheless appropriately
challenged as overly vague with a Rule 12(e) motion. See 5B Wright
& Miller Federal Practice and Procedure § 1356.
However, the standard set forth by the wording of Rule 12(e)
was not intended to require the plaintiff to state with any high
level of specificity the facts upon which the claims rely. Hodgson
v. Virginia Baptist Hosp., 482 F.2d 821, 823 (4th Cir. 1973).
In
fact, the drafters of the rules only intended to ensure that
sufficient facts would be pled which allowed the defendant to
reasonably form a response.
Id.
22
Thus, the rules specifically
restrict the motion for a more definite statement to pleadings
which are so highly vague and ambiguous that the opposing party
simply cannot be expected to form a meaningful response.
The breach of contract claim is vague.
The specific terms of
the contract are not ascertainable from the third-party complaint
and other specifics regarding the oral contract are not provided.
As such, the Court directs The Health Plan to file a more definite
statement as to Count I, breach of contract.
Specifically, The
Health Plan should set forth:
1.
The date (not just the year) on which the alleged oral
contract was entered into;
2.
The identities of the VEBA and The Health Plan agents who
made the offer and acceptance of the contract;
3.
The terms of the oral contract; and
4.
The specific provision of the oral contract that VEBA
allegedly breached.
C.
Motion to Amend
Federal
Rule
of
Civil
Procedure
15(a)(1)(A)
states,
in
pertinent part, that “[a] party may amend its pleading once as a
matter of course . . . before being served with a responsive
pleading.”
If a party seeks to amend its pleadings in all other
cases, it may only do so “with the opposing party’s written consent
or the court’s leave.
justice so requires.”
The court should freely give leave when
Fed. R. Civ. P. 15(a)(2).
23
Further, Rule
15(a) grants the district court broad discretion concerning motions
to amend pleadings, and leave should be granted absent some reason
“such as . . . futility of the amendment.”
Foman v. Davis, 371
U.S. 178, 182 (1962).
However, the Fourth Circuit has held that where a party has
not filed a motion for leave to amend nor provided the district
court with a proposed amended complaint, and instead embeds the
request in its response to a motion to dismiss, the request does
not qualify as a motion for leave to amend.
Cozzarelli v. Inspire
Pharm. Inc., 549 F.3d 618, 630-31 (4th Cir. 2008) (citing Fed. R.
Civ. P. 7(b), 15(a); United States ex rel. Williams v. Martin–Baker
Aircraft Co., 389 F.3d 1251, 1259 (D.C. Cir. 2004)).
The Health
Plan has done what the Fourth Circuit described in Cozzarelli. The
Health Plan has not filed a separate motion for leave to amend, has
not provided this Court with a proposed amended complaint, and has
only stated that such an amendment would not be futile without
further support for its motion.
ECF No. 78 at 18.
Thus, this
Court is unaware of what support The Health Plan has for the
granting of such a motion.
As such, this Court denies The Health
Plan’s request for leave to amend as it has not been properly made
and further lacks support for why such an amendment would not be
futile.
24
IV.
Conclusion
For the reasons stated above, the third-party defendant VEBA’s
motion to dismiss the third-party complaint is GRANTED IN PART as
to Counts II through VII and DENIED IN PART as to Count I.
As
such, the third-party complaint is dismissed except for Count I.
Further, VEBA’s motion, in the alternative, for a more definite
statement as to Count I is GRANTED.
Accordingly, The Health Plan
is DIRECTED to file a more definite statement as to Count I in
accordance with the Federal Rules of Civil Procedure and this
Court’s Local Rules by August 19, 2014.
Finally, this Court had previously vacated the scheduling
order in this action pending an appearance by the third-party
defendant, VEBA.
ECF No. 56.
This Court has not yet entered a new
scheduling order as VEBA’s motion to dismiss was pending.
motion
has
beneficial
now
been
to
hold
decided,
a
this
status
Court
and
feels
scheduling
it
As that
would
be
conference.
Accordingly, it is ORDERED that the parties appear by counsel on
August 18, 2014 at 3:15 p.m. in the chambers of Judge Frederick P.
Stamp, Jr., Federal Building, 1125 Chapline Street, Wheeling, West
Virginia 26003.
The Court will permit those out-of-town attorneys having their
offices further than forty (40) miles from the point of holding
court to participate in the conference by telephone.
However, any
such attorney shall advise the Court as soon as possible prior to
25
the conference of his or her intention to participate by telephone
and shall (1) inform all counsel of his or her appearance by
telephone; (2) confer with other out-of-town attorneys to determine
if they wish to appear by telephone; (3) advise the Court of the
name of the attorney who will initiate the conference call and all
such attorneys appearing by telephone; and (4) initiate a timely
conference telephone call with such attorneys to the Court at
304/233-1120 at the time of the scheduled conference. If the
attorneys cannot reach agreement as to the initiator of the call,
the Court will make that determination.
IT IS SO ORDERED.
The Clerk is DIRECTED to transmit a copy of this memorandum
opinion and order to counsel of record herein.
DATED:
August 5, 2014
/s/ Frederick P. Stamp, Jr.
FREDERICK P. STAMP, JR.
UNITED STATES DISTRICT JUDGE
26
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