Gates v. Morris et al
Filing
31
MEMORANDUM OPINION AND ORDER denying 17 MOTION by George E. Gates to Amend Complaint; granting defendants' 7 MOTION to Dismiss Complaint; and directing the plaintiff's ERISA claims dismissed without prejudice to allow him to pursue administrative remedies under the plan. Signed by Judge Joseph R. Goodwin on 3/29/2018. (cc: counsel of record; any unrepresented party) (taq)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
CHARLESTON DIVISION
GEORGE E. GATES,
Plaintiff,
v.
CIVIL ACTION NO. 2:17–cv–03392
RODNEY MORRIS, et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
Before the court is (1) the Motion to Dismiss the Complaint, filed by defendants Rodney
Morris (“Morris”), E. I. du Pont de Memours and Company (“DuPont”), The Chemours Company
(“Chemours”), and Aetna Life Insurance Company (“Aetna”) (collectively, “the defendants”) on
June 30, 2017 [ECF No. 7]; and (2) the Motion to Amend Complaint, filed by plaintiff George E.
Gates on August 8, 2017 [ECF No. 17]. Briefing is now complete and the motions are ripe for
adjudication. For the reasons stated below, the Motion to Amend Complaint is DENIED and the
Motion to Dismiss Complaint is GRANTED.
I.
Background
The plaintiff filed his complaint in the Kanawha County Circuit Court in West Virginia on
March 21, 2017 advancing seven different counts of relief. Compl. ¶¶ 14–61 [ECF No. 1-1]. Count
VII, in particular, states:
While plaintiff disputes the claims as set forth above, against Aetna
are covered by ERISA, to the extent the same are, plaintiff pleads
that Aetna violated the same and by its violation caused harm to
plaintiff which entitles plaintiff to benefits of the policy, costs, and
attorney’s fees, and whatever other relief may be available or the
Court deems available. Plaintiff acknowledges that if ERISA
applies, Plaintiff’s common law claims for bad faith are pre-empted.
Compl. ¶ 61.
The defendants removed this action on June 26, 2017. See Notice of Removal [ECF No.
1]. In their notice of removal and as a basis for federal subject-matter jurisdiction, the defendants
maintain that the plaintiff expressly pleads an Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. §§ 1001, et seq., claim in Count VII.
Thereafter, on June 30, 2017, the defendants moved to dismiss Counts I through VI on
several grounds, including failure to state a claim upon which relief may be granted, and Count
VII – the plaintiff’s explicit ERISA claim – for failure to exhaust his administrative remedies under
his ERISA plan prior to filing suit in federal court. The plaintiff did not contest the merits of the
motion to dismiss in response, but instead simply requested leave to amend his complaint. The
forthcoming proposed amended complaint, the plaintiff continued, would be consistent with his
desire to only “bring ‘ERISA type’ claims against named defendants and wrongful termination
claims against Defendants Moore, [DuPont], and [Chemours].” Pl.’s Combined Mot. & Mem. of
Law in Resp. to Defs.’ Mot. to Dismiss ¶ 2 [ECF No. 12].
On August 8, 2017, the plaintiff filed the Motion to Amend Complaint [ECF No. 17] and
attached the proposed amended complaint to his Supplemental Motion to Amend Complaint, filed
August 9, 2017 [ECF No. 18-1] (“Am. Compl.”). In seeking to amend his pleading under Rule
15(a), the plaintiff stated that he moves “only to ensure that his ERISA claims are protected while
dismissing claims of common law and statutory bad faith” and “to provide more detail concerning”
his West Virginia Human Rights Act (“WVHRA”) claims. Pl.’s Supp. Combined Mot. for Leave
to File Am. Compl. & Mem. of Law in Supp. of Pl.’s Mot. to Am. Compl. ¶ 7 [ECF No. 18].
2
The defendants now seek a court order denying the plaintiff’s request to amend the
complaint as futile, and the adjudication of their motion to dismiss. When, as here, both a motion
to amend the complaint and a motion to dismiss the complaint under Rule 12(b)(6) are pending, it
is generally improper to resolve the motion to dismiss before deciding the motion to amend. See
Talley v. Ocwen Loan Servicing, LLC, 673 F. App’x 329, 330 (4th Cir. 2017) (vacating dismissal
under Rule 12(b)(6) and remanding to the district court to “specifically address” the plaintiff’s
motion to amend the complaint).
II.
Legal Standard
Rule 15(a) directs that leave to amend a pleading “shall be freely given when justice so
requires.” Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006). “This liberal rule gives effect to the
federal policy in favor of resolving cases on their merits instead of disposing of them on
technicalities.” Id. “Leave to amend a pleading should be denied only” in those rare occasions
“when the amendment would be prejudicial to the opposing party, there has been bad faith on the
part of the moving party, or the amendment would have been futile.” Id. An amendment is “futile”
if, for example, “the claim sought to be pleaded by amendment plainly would be subject to
a motion to dismiss under Fed. R. Civ. P. 12(b)(6).” Devil’s Advocate, LLC v. Zurich Am. Ins. Co.,
666 F. App’x 256, 267 (4th Cir. 2016).
A motion to dismiss filed under Rule 12(b)(6) tests the legal sufficiency of a complaint or
pleading. Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008). A pleading must contain a
“short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ.
P. 8(a)(2). It must therefore be specific enough to “give the defendant fair notice of what the . . .
claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)).
3
This standard “does not require ‘detailed factual allegations,’ but it demands more than an
unadorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (quoting Twombly, 550 U.S. at 555). 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.’” Id. (quoting Twombly, 550 U.S. at 570). To achieve facial plausibility, the plaintiff must
plead facts allowing the court to draw the reasonable inference that the defendant is liable, moving
the claim beyond the realm of mere possibility. Id. Mere “labels and conclusions” or “formulaic
recitation[s] of the elements of a cause of action” are insufficient. Twombly, 550 U.S. at 555.
III.
Discussion
A. Motion to Amend the Complaint
The plaintiff asserts three different counts in the proposed amended complaint: (I) Breach
of Contract; (II) Violation of the WVHRA; and (III) Claim for ERISA Benefits. The defendants
advance several reasons upon which the court should find the proposed amended complaint futile
and, all together, not actionable. One of their primary contentions concerns the purported failure
of the plaintiff to plead Counts I and II in a manner that achieves facial plausibility necessary to
pass muster under Twombly and Iqbal. As it relates to Count III, the defendants argue that the
plaintiff failed to exhaust his administrative remedies before bringing an ERISA claim in federal
court.
i. Proposed Count I – Breach of Implied Contract
According to the proposed amended complaint, defendants Du Pont and Chemours
previously employed the plaintiff. During his employment, Morris and Chemours purportedly
advised the plaintiff that “he needed to go get the medical treatment he needed, [and] that his job
would be waiting on him when he got back.” Am. Compl. ¶ 16(ii). But for this alleged promise,
4
the plaintiff states, he would not have taken leave from work to receive medical treatment. Id. ¶
17(iii). After returning from this leave and able to perform his duties as modified via an
“accommodation” he was offered prior to taking leave, the plaintiff alleges that the “Defendants”
reneged on that promise and informed him that his position had been terminated. Id.
Notably, the plaintiff does not allege who uttered these representations or their relationship
to any of the named defendants, when or how they were made, the nature of the alleged
accommodation, or any indicia of when these alleged events occurred. Moreover, aside from these
untethered accusations of misconduct, the remaining accusations are almost entirely conclusions
of law. The only permissible inference that remains, taking the facts alleged as true and
disregarding legal conclusions and unadorned accusations of wrongdoing, is that at some point in
time, the defendants’ conduct was inconsistent with the expectations of the plaintiff. Even if this
inference supported a finding of plausibility in the abstract, the proposed amended complaint still
lacks several significant and requisite facts necessary to establish this claim for breach of implied
contract, i.e., the creation of an implied contract, its terms, manner of acceptance, and
consideration. Instead, the plaintiff alleges only that the parties “entered into a valid implied
contract for employment, benefits, and retirement,” and that the undefined “Defendants” breached
that agreement. Id. ¶ 16(iii).
As a result, the proposed amended complaint does not provide either Morris or Chemours
fair notice of what the plaintiff’s breach of implied contract claim is or the grounds upon which it
rests. Count I of the proposed amended complaint thus could not survive a motion to dismiss.
Therefore, I FIND Count I of the proposed amended complaint futile.
ii. Proposed Count II – Violations of the WVHRA
As stated by the Supreme Court of West Virginia:
5
Under the WVHRA, it is unlawful “[f]or any employer to
discriminate against [a protected] individual with respect to . . .
tenure, terms, conditions or privileges of employment[.]” W. Va.
Code § 5–11–9(1) [1998]. The WVHRA protects individuals from
discrimination based upon, among other characteristics, “age,”
which is defined as “the age of forty or above[.]” W. Va. Code § 5–
11–3(k) [1998]. Discrimination means “to exclude from, or fail or
refuse to extend to, a person equal opportunities because of race,
religion, color, national origin, ancestry, sex, age, blindness,
disability or familial status[.]” W. Va. Code § 5–11–3(h) (emphasis
added).
Knotts v. Grafton City Hosp., 786 S.E.2d 188, 193 (W. Va. 2016).
According to the proposed amended complaint, defendants Du Pont, Morris, and Chemours
unlawfully terminated the plaintiff based upon his medical condition, age, or both. Am. Compl. ¶
22. The plaintiff further avers that he requested and received an accommodation prior to his leave,
that upon his return these same defendants failed to extend the same accommodation to him and
made harassing statements about his age and disability—specifically, that an individual allegedly
advised him that he should apply for social security disability and retire. Id. ¶¶ 28–33. In addition,
the plaintiff alleges that his replacement following his termination was substantially younger. Am.
Id. ¶ 22. The plaintiff claims he was denied pay, and will continue to be deprived of lost wages
and benefits as a result of the defendants improper conduct.
Again, the proposed amended complaint lacks sufficient facts that move it from the realm
of possibility into the realm of plausibility. The plaintiff does not attribute the alleged
recommendation that he apply for social security disability and retire to a particular individual, or
identify when these purportedly discriminatory statements were made. Rather, and without the
requisite particularity, the plaintiff merely states that the “Defendants” uttered these comments,
contends that at some point an accommodation was provided, infers that a promise to continue the
accommodation was made by someone, and, although he could perform all essential functions of
his job, he was nonetheless terminated. Absent, however, is any structural context of these alleged
6
events or facts in support of his claim that the persons or entities subject to the WVHRA failed to
discharge their obligations thereunder. The plaintiff does not allege any facts from which to infer
the scope of his job duties, the extent of his disability and its relation to the performance of his
duties, or the character of the alleged accommodation he once received. Failure to provide a
reasonable accommodation being necessary to establish a claim under the WVHRA, each
defendant in this case lacks sufficient knowledge not only to understand the grounds upon which
they are allegedly liable, but also to defend whether its actions were reasonable or unreasonable
under the circumstances. See Alley v. Charleston Area Med. Ctr., Inc., 602 S.E.2d 506, 514 (W.
Va. 2004) (“A person bringing a claim for breach of the duty to make reasonable accommodation
under the West Virginia Human Rights Act must prove,” inter alia, that “a reasonable
accommodation existed that met the plaintiff’s needs” and that “the employer failed to provide the
accommodation.”). Similarly, there are no concrete allegations pleaded sufficiently for the court
to find that the adverse employment decision was based upon an unlawful motivation.
Beyond these threadbare factual allegations, the only fact coming close to supporting this
claim is the plaintiff’s contention that a “substantially younger” employee replaced him. This
assertion alone, however, provides a cornerstone only to speculation and unreasonable inferences
that unlawful conduct had taken place. See Katyle v. Penn Nat’l Gaming, Inc., 637 F.3d 462, 466
(4th Cir. 2011) (“[W]e . . . owe no allegiance to ‘unwarranted inferences, unreasonable
conclusions, or arguments’ drawn from [well-pleaded] facts.” (quoting Monroe v. City of
Charlottesville, 579 F.3d 380, 385–86 (4th Cir. 2009)). Scenarios that are the products of
speculation—not factual allegations—however, do not make what is possible plausible.
As such, Count II of the proposed amended complaint could not otherwise withstand a
12(b)(6) motion. Therefore, I FIND the proposed amended complaint on this point futile.
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iii. Proposed Count III – Claim for ERISA Benefits
The plaintiff’s remaining proposed amended claim sets forth allegations against Aetna for
the recovery and return of certain benefits arising from an ERISA plan. According to the proposed
amended complaint, upon the creation of the insurance policy in question, Aetna knew or should
have known that the plan was being issued to cover the plaintiff’s “disability, health insurance,
and/or supplemental income or retirement income.” Am. Compl. ¶ 9. The plaintiff further alleges
that he was promised these benefits until his death and, for a number of years, Aetna covered his
claims—inferring, without expressly pleading, that up until a certain point in time, his claims were
being administered in a manner consistent with his understanding of the policy. Id. ¶ 10.
Thereafter, according to the proposed amended complaint, Aetna arbitrarily and illegally denied
the plaintiff the benefits of his plan. Id. ¶¶ 11–13, 37.
Identified by its policy number in the complaint, the parties agree in their pleadings that
the disputed plan is subject to ERISA. In opposing the plaintiff’s motion, the defendants argue that
the proposed amended complaint fails as a matter of law because the plaintiff failed to exhaust his
administrative remedies as required under ERISA prior to bringing this lawsuit. On this subject, I
stated previously:
Although ERISA does not contain an explicit exhaustion
requirement, courts have universally required exhaustion of benefit
plan remedies prior to bringing suit in federal court. See, e.g., Gayle
v. United Parcel Serv., Inc., 401 F.3d 222, 226 (4th Cir.
2005) (“An ERISA welfare benefit plan participant must both
pursue and exhaust plan remedies before gaining access to the
federal courts.” (citing Makar v. Health Care Corp. of Mid-Atl.
(CareFirst), 872 F.2d 80, 82 (4th Cir. 1989))). The exhaustion
requirement is grounded in ERISA’s “text and structure as well as
the strong federal interest encouraging private resolution of ERISA
disputes.” Makar, 872 F.2d at 82. The exhaustion requirement,
however, is not absolute. Under 29 C.F.R. § 2560.503-1(l), one of
ERISA’s implementing regulations promulgated by the Department
of Labor (“DOL”),
8
[I]n the case of the failure of a plan to establish or
follow claims procedures consistent with the
requirements of this section, a claimant shall be
deemed to have exhausted the administrative
remedies available under the plan and shall be
entitled to pursue any available remedies under
section 502(a) of the Act on the basis that the plan
has failed to provide a reasonable claims procedure
that would yield a decision on the merits of the claim.
...
The Fourth Circuit counsels that remand is generally the correct
remedy in ERISA cases. Remand to the plan administrator furthers
ERISA’s statutory goal of giving plan administrators—not federal
courts—primary responsibility for claims processing “by enabl[ing]
plan fiduciaries to efficiently manage their funds; correct their
errors; interpret plan provisions; and assemble a factual record
which will assist a court in reviewing the fiduciaries’
actions.” Makar, 872 F.2d at 83 (citation omitted). Remand,
however, is not the appropriate remedy for every case. I determine,
consistent with the federal circuit courts that have considered 29
C.F.R. § 2560.503-1(l)’s “deemed exhausted” provision, that waiver
of ERISA’s exhaustion requirement is the appropriate remedy where
the plan failed to comply with procedures outlined in 29 C.F.R. §
2560.503-1 and the plan’s failure to comply “denied the [plan]
participant a reasonable review procedure.” Holmes v. Colo. Coal.
for Homeless Long Term Disability Plan, 762 F.3d 1195, 1213 (10th
Cir. 2014).
Turner v. Volkswagen Grp. of Am., Inc., No. 2:16-cv-06570, 2017 WL 3037803, at *3–4 (S.D. W.
Va. July 18, 2017).
Here, the proposed complaint does not allege sufficient facts to permit a reasonable
inference that the plaintiff took advantage of his plan’s internal procedures to challenge the alleged
rejection of his rights to benefits under the plan, or that the alleged denial of benefits by the
defendants did not comply with the procedural requirements of 29 C.F.R. § 2560.503-1(g). The
plaintiff also does not claim, nor is there any indication in the record that Aetna “denied the
[plaintiff] a reasonable review procedure,” beyond the plaintiff’s bald and unsupported assertion
that Aetna misrepresented the duration of his coverage and the scope of his rights under the plan.
9
As such, there is insufficient factual evidence to support an inference that the plaintiff exhausted
his administrative remedies prior to bringing this lawsuit.
Furthermore, having made no “‘clear and positive’ showing of futility required to
circumvent the exhaustion requirement,” the court would otherwise be compelled by “the strong
federal interest [of] encouraging private resolution of ERISA disputes” to dismiss the plaintiff’s
ERISA claims in order to afford him the opportunity to pursue the remedies under his employment
benefit plan. See Hickey v. Digital Equip. Corp., 43 F.3d 941, 945 (4th Cir. 1995); Makar, 872
F.2d at 82. Therefore, I FIND that it would be futile to grant the plaintiff’s request to amend these
claims because the plaintiff has failed to exhaust his ERISA plan’s remedies before availing
himself of federal court.
To summarize, each count comprising the proposed amended complaint could not survive
a motion to dismiss under Rule 12(b)(6). See Perkins v. United States, 55 F.3d 910, 917 (4th Cir.
1995). Because the proposed amended complaint is “clearly insufficient . . . on its face,” Johnson
v. Oroweat Foods Co., 785 F.2d 503, 510 (4th Cir. 1986), I find the plaintiff’s request for leave to
amend under Rule 15(a) futile and, as a result, the plaintiff’s Motion to Amend Complaint [ECF
No. 17] is DENIED.
B. Motion to Dismiss Complaint
Returning to the original complaint, the plaintiff advances seven different counts for relief:
(I) Breach of Contract; (II) Unfair Claims Practices Act and Insurance Regulations; (III) Common
Law Bad Faith; (IV) Reasonable Expectations; (V) Breach of Contract – Wrongful Termination;
(VI) Violation of the WVHRA; and (VII) ERISA.
Although the parties do not directly brief this issue, it is readily apparent to the court that
Counts I, V, and VI of the original complaint are analogous to the first two counts in the proposed
10
amended complaint. Moreover, the allegations comprising Counts I, V, and VI do not materially
differ in substance or form from those already found to have failed to achieve facial plausibility
pursuant to Twombly and Iqbal. Having already analyzed these claims under the appropriate
12(b)(6) standard, for purposes of judicial efficiency and on its own accord, the court DISMISSES
Counts I, V, and VI for failure to state a claim upon which relief may be granted. The plaintiff’s
ERISA claim, Count VII of the original complaint, likewise is analogous to its proposed
counterpart—Count III of the original complaint. For the same reasons articulated above, the court
also DISMISSES Count VII to allow the plaintiff to pursue his administrative remedies.
The remaining counts – II, III, and IV – are each based in common or state law. In moving
to dismiss, the defendants argue that these remaining claims are preempted by ERISA, a federal
standard designed by Congress to establish a “uniform regulatory regime over employee benefit
plans” and “ensure that employee benefit plan regulation would be ‘exclusively a federal
concern.’” Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (quoting Alessi v. RaybestosManhattan, Inc., 451 U.S. 504, 523 (1981)).
Codified at 29 U.S.C. § 1132(a), Congress empowered a participant or beneficiary of an
ERISA plan to bring a civil action under federal law “to recover benefits due to him . . . enforce
his rights under . . . , or to clarify his rights to future benefits under the terms of the plan.” Id. “This
integrated enforcement mechanism . . . is a distinctive feature of ERISA, and essential to
accomplish Congress’ purpose of creating a comprehensive statute for the regulation of employee
benefit plans.” Prince v. Sears Holdings Corp., 848 F.3d 173, 177 (4th Cir. 2017) (quoting Davila,
542 U.S. at 208). To this end, and in furtherance of Congress’ mission “to subject employee benefit
plans to only one body of national, uniform law,” ERISA preempts certain state law claims. Metro.
11
Life Ins. Co. v. Pettit, 164 F.3d 857, 862 (4th Cir. 1998). The scope and applicability of ERISA
preemption, however, is subject to considerable debate.
The Fourth Circuit Court of Appeals described recently the “murky waters” of ERISA
preemption as “complex and contentious.” Greenbrier Hotel Corp. v. UNITE HERE HEALTH,
No. 16-2116, 2018 WL 272012, at *7 (4th Cir. Jan. 3, 2018); see also Penny/Ohlmann/Nieman,
Inc. v. Miami Valley Pension Corp., 399 F.3d 692, 697 (6th Cir. 2005) (“The United States
Supreme Court has dealt with the opaque language in ERISA’s § 514(a) approximately twenty
times over the last twenty-four years.” (quotations omitted)). The Greenbrier court clarified the
evolving standards between the related, but doctrinally distinct, jurisdictional doctrine of complete
preemption under ERISA § 502 and the substantive doctrine of conflict preemption under ERISA
§ 514. Greenbrier Hotel Corp., 2018 WL 272012, at *7–9. Where, as is the case here, the issue is
not jurisdictional, the court must apply the substantive doctrine of conflict preemption. See Marin
Gen. Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 945 (9th Cir.
2009) (“Complete preemption under [ERISA] § 502(a) is really a jurisdictional rather than
a preemption doctrine.” (citations omitted)).
“Section 514 . . . provides that ERISA ‘shall supersede any and all State laws insofar as
they may now or hereafter relate to any employee benefit plan’ covered by ERISA, so long as
those laws do not fall into a narrow category of exemptions.” Id. at *7 (emphasis added) (quoting
ERISA § 514). “In the 1980s,” the Greenbrier court noted, “a line of Supreme Court cases
construed § 514’s ‘relate to’ language in the broadest possible fashion.” Id. (stating that “the Court
interpreted ERISA’s scope of preemption as nearly all-encompassing, preempting nearly
everything that could be said to ‘relate to’ an ERISA plan under the ordinary meaning of the term”).
The Supreme Court began to retreat from this principle in N.Y. State Conf. of Blue Cross & Blue
12
Shield Plans v. Travelers, Ins. Co., 514 U.S. 645, 655–56 (1995). Id. at *8 (quoting Cal. Div. of
Labor Stds. Enf’t v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 335 (1997) (Scalia, J.,
concurring) (characterizing the previous interpretation of the “relate to” standard as “a project
doomed to failure, since, as many a curbstone philosopher has observed, everything is related to
everything else”)). According to Travelers and its progeny, a substantive preemption doctrine
analysis requires the court to determine whether the challenged state law is of the type Congress
intended to supersede under § 514—i.e., the court must analyze whether the state law conflicts
with the purposes of ERISA. Id. (citing De Buono v. NYSA-ILA Med. & Clinical Servs. Fund, 520
U.S. 806, 814 (1997)); see also Travelers, 514 U.S. at 655 (“[P]re-emption claims turn on
Congress’s intent.”).
ERISA’s self-identified primary policy objective is to “protect . . . the interests of
participants in employee benefit plans and their beneficiaries . . . by establishing standards of
conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing
for appropriate remedies, sanctions, and ready access to the Federal courts.” 29 U.S.C. § 1001(b).
Reviewing this statutorily defined purpose of ERISA, the Supreme Court determined that § 514’s
preemption provision reflects Congress’ intention to preempt state laws that can be said to have a
“connection with an ERISA plan.” See Coyne & Delany Co. v. Selman, 98 F.3d 1457, 1468 (4th
Cir. 1996). “Acknowledging that ‘connection with’ is scarcely more restrictive than ‘relate to,’”
the Supreme Court has identified at least three categories of state law claims that are said to have
a connection with an ERISA plan. Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 147 (2001).
These categories are:
First, Congress intended ERISA to preempt state laws that “mandate
[ ] employee benefit structures or their administration.” . . .
Second, Congress intended to preempt state laws that bind
employers or plan administrators to particular choices or preclude
13
uniform administrative practice, thereby functioning as a regulation
of an ERISA plan itself. . . .
Third, in keeping with the purpose of ERISA’s preemption clause,
Congress intended to preempt “state laws providing alternate
enforcement mechanisms” for employees to obtain ERISA plan
benefits.
Id. (quoting Travelers, 514 U.S. at 658). “The basic thrust of the pre-emption clause, then, was to
avoid a multiplicity of regulation in order to permit the nationally uniform administration of
employee benefit plans.” Travelers, 514 U.S. at 657.
In moving to dismiss, the defendants claim that Counts II, III, and IV appropriately fall
into the third category, arguing that the claims have an improper connection with an ERISA plan
because they are each grounded in state laws that provide an alternate enforcement mechanism to
obtain ERISA plan benefits.
i. Count II – West Virginia Unfair Trade Practices Act (“WVUTPA”)
The WVUTPA regulates trade practices in the insurance industry by defining and
prohibiting a number of unfair or deceptive business practices. See W. Va. Code § 33-11-1. The
plaintiff alleges Aetna violated the WVUTPA by engaging in conduct prohibited by § 33-11-4.
Specifically, the plaintiff alleges that Aetna ran afoul of the WVUTPA in the handling, processing,
and administration of his plan, and by misrepresenting the extent of his coverage under the plan.
“A state claim is an alternative enforcement mechanism for ERISA rights if the state
claim could be brought as an enforcement action under § 502.” Darcangelo v. Verizon Commc’ns,
Inc., 292 F.3d 181, 191 (4th Cir. 2002) (“[D]etermining whether [the plaintiff’s] claims are
expressly preempted as relating to an ERISA plan under § 514 turns on whether her claims are
alternative enforcement mechanisms to ERISA § 502”).
Congress intended ERISA’s civil-enforcement provision, 29 U.S.C. § 1132(a), “to be the
exclusive remedy for rights guaranteed under ERISA.” Ingersoll-Rand Co. v. McClendon, 498
14
U.S. 133, 144 (1990). Where “the existence of a pension plan is a critical element of a state-law
cause of action,” courts have understood that such claims trigger this express preemption statute
on grounds that it constitutes an alternative enforcement mechanism to ERISA. Trs. of AFTRA
Health Fund v. Biondi, 303 F.3d 765, 776 (7th Cir. 2002) (citing De Buono, 520 U.S. at 815).
Here, the plaintiff’s allegations are rather undeveloped and conclusory. As a result, the
nature of his claims are rather static and otherwise moored entirely to the existence and
interpretation of an ERISA plan. To the extent the allegations of wrongdoing are rationally related
to the proposed remedies, the WVUTPA claims can only be read reasonably to seek recovery of
“the plaintiff[’s] insurance benefits due pursuant to the policy.” Compl. ¶ 31. Accordingly, insofar
as the WVUTPA allegations concern the allegedly improper administration of the ERISA plan,
such claims can be characterized as “provid[ing] a separate vehicle” or an alternative means of
recovering the plan’s benefits, which can otherwise be pursued under § 1132(a)(1)(B). Davila, 542
U.S. at 217–18 (“The policy choices reflected in the inclusion of certain remedies and the exclusion
of others under the federal scheme would be completely undermined if ERISA-plan participants
and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA.”
(citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 57 (1987) (“[T]he common-sense understanding
of [ERISA § 514], the [state regulation under review], and, most importantly, the clear expression
of congressional intent that ERISA’s civil enforcement scheme be exclusive, we conclude that [the
plaintiff’s] state law suit asserting improper processing of a claim for benefits under an ERISAregulated plan is . . . pre-empted by § 514(a).”))).
In addition to impermissibly creating “‘an alternative enforcement scheme’ to ERISA’s
own” processing and administrative requirements, subjecting the administration of the plan to
scrutiny under the WVUTPA “would conflict with ERISA’s proscription against state law
15
‘mandat[ing] plan administration.’” Zipperer v. Raytheon Co., 493 F.3d 50, 54 (1st Cir. 2007)
(citing Travelers, 514 U.S. at 658–59); see also Sears Holdings Corp., 848 F.3d at 177 (stating
that ERISA’s “integrated enforcement mechanism . . . is . . . essential to accomplish Congress’
purpose of creating a comprehensive statute for the regulation of employee benefit plans.”).
Moreover, allowing this claim for the return and retrieval of benefits arising from an ERISA plan
to proceed under West Virginia law would inexorably result in inconsistent state regulations, as
state courts “develop different substantive standards applicable to the same employer conduct,
requiring the tailoring of plans and employer conduct to the peculiarities of the law of each
jurisdiction.
Such
an
outcome
is
fundamentally
at
odds”
with ERISA’s goal
of
uniformity. Ingersoll-Rand Co., 498 U.S. at 142.
The plaintiff’s remaining WVUPTA allegations concern the purported misrepresentation
of coverage. Within this circuit, “when the false representations concern the existence or extent of
benefits under an employee benefit plan,” courts have consistently found the state law claims to
have a sufficient “connection with an ERISA plan.” Griggs v. E.I. DuPont de Nemours & Co., 237
F.3d 371, 378 (4th Cir. 2001). Nothing in the record suggests anything but a similar finding in this
case, particularly given the allegations’ direct and unequivocal nexus with the ERISA plan
described above. As a result, the WVUTPA claims asserted in Count II of the complaint fall into
each of the three categories established by the Supreme Court has having a “connection with an
ERISA plan.” Therefore, I FIND that ERISA preempts Count II.
ii. Count III – Bad Faith
According to the complaint, Aetna violated the implied covenant of good faith and fair
dealing by failing to make a reasonable offer to the plaintiff or process and administer his ERISA
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plan properly. The plaintiff further represents that Aetna denied the plaintiff the full benefits of the
plan intentionally, maliciously, and with a total disregard to his rights.
Under West Virginia law, the breach of “an implied covenant of good faith and fair dealing
does not provide a cause of action apart from a breach of contract claim.” Highmark W. Va., Inc.
v. Jamie, 655 S.E.2d 509, 514 (W. Va. 2007). Because such claims “sound in breach of contract.”
Gaddy Eng’g Co. v. Bowles Rice McDavid Graff & Love, LLP, 746 S.E.2d 568, 578 (W. Va. 2013),
and because state law traditionally occupies the field of general contract law, the defendants bear
the initial “burden of overcoming the presumption that Congress did not intend to supplant state
law.” Greenbrier Hotel Corp., 2018 WL 272012, at *9.
In the Greenbrier case, the Fourth Circuit found that an agreement between the sponsor of
an ERISA plan and a benefit fund governed by ERSIA “only tangentially relates to an ERISA
plan,” because it “d[id] not implicate other relationships regulated by ERISA or overlap with
ERISA’s remedial scheme, which contemplates only claims brought by plan participants,
beneficiaries, fiduciaries, and the Secretary of Labor—not plan sponsors.” Id. at *10 (citing ERISA
§§ 502(a)(2), 502(a)(3), 29 U.S.C. §§ 1132(a)(2), 1132(a)(3)). Other jurisdictions have applied a
similar approach to guide their preemption decisions. The Sixth Circuit, for example, “found that
a breach-of-contract claim was not preempted where the conduct at issue related to the
‘employment contract irrespective of the plan’ even though resolution of the claim affected the
plaintiff’s right to plan benefits.” Miami Valley Pension Corp., 399 F.3d at 698 (citing Marks v.
Newcourt Credit Grp., Inc., 342 F.3d 444, 453 (6th Cir.2003)).
However, the Sixth Circuit has also preempted state law breach of contract claims that
merely “attach new, state-law labels to the ERISA claims . . . for the apparent purpose of obtaining
remedies that Congress has chosen not to make available under ERISA.” Smith v. Provident Bank,
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170 F.3d 609, 615 (6th Cir. 1999) (quoting Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d
1272, 1276 (6th Cir. 1991) (“It is not the label placed on a state law claim that determines whether
it is preempted, but whether in essence such a claim is for the recovery of an ERISA plan
benefit.”)). Likewise, the Fourth Circuit has held that when a state law claim that “seeks to recover
benefits of a sort which are already provided by an ERISA plan, even though it seeks to recover
them not from the plan itself, but from the employer directly,” is preempted by § 514(a). Stiltner
v. Beretta U.S.A. Corp., 74 F.3d 1473, 1480 (4th Cir. 1996).
When a plaintiff brings an action to enforce a contract that relies upon the existence and
interpretation of an ERISA plan, and the requested relief means being paid under the terms of the
plan, it “is of necessity an alternative enforcement mechanism for ERISA § 502 and is therefore
‘relate[d] to’ an ERISA plan and preempted.” Darcangelo, 292 F.3d at 195; Zuniga v. Blue Cross
& Blue Shield of Mich., 52 F.3d 1395, 1402 (6th Cir. 1995) (citing McClendon, 498 U.S. at 140
(finding preemption where a “state cause of action makes specific reference to, and indeed is
premised on, the existence of a pension plan” that purports to provide a remedy for the violation
of a right expressly guaranteed by ERISA and exclusively enforced by § 502(a)). In such cases,
the aforementioned presumption is rebutted because to “allow[] the claim to go forward would
thwart the statutory objectives of ERISA.” See Biondi, 303 F.3d at 775 (“[T]he mere fact that
States have traditionally regulated common law [breach of contract] does not, in and of itself,
preclude [the plaintiff’s] claim from being preempted.”).
Here, the breach of contract claim is entirely dependent on the terms of the ERISA and
concerns parties directly contemplated by ERISA. C.f. Pension Plan for Emps. of Battenfeld
Grease & Oil Corp. v. Principal Mut. Life Ins. Co., 62 F. Supp. 2d 1055, 1060 (W.D.N.Y. 1999)
(“The breach of contract claim here is entirely independent of the ERISA pension plan . . . [and]
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can stand on its own.”); Arndt v. AON Hewitt Benefit Payment Servs., LLC, No. 15-C-750, 2015
WL 7313392, at *2 (E.D. Wis. Nov. 19, 2015) (holding that the breach of contract claims were not
preempted where the plaintiff “is not seeking benefits allegedly due under the plan in question” as
the complaint “goes to great pains to eschew any desire to collect funds he believes are owing”).
The rights of the plaintiff and the obligations allegedly breached by Aetna arise entirely from the
ERISA plan. In addition, the court cannot reasonably infer any theories or inferences from the
plaintiff’s rather vague and nebulous general allegations that could support a finding that the
breach of contract claims are only tangential to the ERISA plan. Therefore, the same concerns
regarding the lack of uniformity justifying preemption of the WVUTPA claims above, counsels in
favor of a finding that the breach of contract claims are also preempted. See Retail Indus. Leaders
Ass’n v. Fielder, 475 F.3d 180, 192–93 (4th Cir. 2007) (stating that “a state law has an
impermissible ‘connection with’ an ERISA plan if it directly regulates . . . some element of the
structure or administration of employers’ ERISA plans” (footnote omitted)). Furthermore,
underlying these allegations of bad faith is the plaintiff’s prayer to recover “the plaintiff insurance
benefits due pursuant to the policy” – a remedy readily available under ERISA. As a result, this
claim similarly constitutes an alternative method of enforcing rights under an ERISA plan.
The court also notes that the plaintiff’s claim that Aetna placed their interests above that of
their insured is distinct from a breach of contract theory and is instead fundamentally a breach of
fiduciary duty claim. This distinction, nonetheless, does not save this aspect of Count III from
preemption because, to the extent the plaintiff alleges breach of a fiduciary duty, such a claim
“relates to” ERISA in exactly the same manner as claims found to be preempted above. See
Wilmington Shipping Co. v. New England Life Ins. Co., 496 F.3d 326, 344 (4th Cir. 2007) (holding
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that “state-law claims [that] merely repackage [an] ERISA claim . . . are preempted by ERISA”).
Therefore, I FIND that ERISA preempts Count III.
iii. Count IV – Reasonable Expectations
Underlying Count IV of the complaint is the plaintiff’s allegation that Aetna, through
communications with the plaintiff, created a reasonable expectation of coverage that Aetna
willfully and maliciously disregarded. Compl. ¶¶ 41–44. Under West Virginia law, “the doctrine
of reasonable expectations is not a stand-alone cause of action but rather a rule of construction
applicable to insurance contracts.” State ex rel. Erie Ins. Prop. & Cas. Co. v. Beane, No. 15-0968,
2016 WL 3392560, at *2 n.2 (W. Va. June 13, 2016). Rather, the doctrine is a rule of construction,
utilized by courts seeking to clarify ambiguous policy provisions. Id. As such, I construe the
plaintiff’s reasonable expectations claim as an additional state-law claim for breach of contract
and, for the same reasons articulated above, FIND that ERISA preempts Count IV.
IV.
Conclusion
I FIND that the proposed amended complaint is futile because proposed Counts I and II
fail to establish facial plausibility, and proposed Count III would otherwise be dismissed for failure
to exhaust the requisite administrative remedies. I therefore DENY the plaintiff’s Motion to
Amend the Complaint. I further FIND that Counts I, V, and VI are dismissed for failure to state a
claim upon which relief may be granted, Counts II, III, and IV are substantively preempted by
ERISA, and that the plaintiff’s administrative remedies under ERISA (Count VII) have not been
exhausted. I therefore GRANT the defendants’ motion to dismiss, and ORDER the plaintiff’s
ERISA claims dismissed without prejudice to allow him to pursue administrative remedies under
the plan.
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The court DIRECTS the Clerk to send a copy of this Order to counsel of record and any
unrepresented party.
ENTER:
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March 29, 2018
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