CHRISTOPHER C. CONNER, District Judge.
AND NOW, this 9th day of January, 2013, upon consideration of the Report and Recommendation of United States Magistrate Judge Mildred E. Methvin (Doc. 29), recommending (1) that defendant's motion to dismiss (Doc. 7) be granted on Count IV and denied on Count II, and (2) that plaintiff's motion for leave to
MILDRED E. METHVIN, United States Magistrate Judge.
Anna Mae Terry filed this ERISA action on February 10, 2012. (Doc. 1). She brings claims for life insurance benefits (Count I), breach of fiduciary duty (Count II), statutory penalties (Count III), and a state claim for life insurance benefits (Count IV). Named as defendant is Northrop Grumman Health Plan, a health and welfare benefit plan as defined by ERISA. This court has jurisdiction pursuant to 29 U.S.C. § 1132 and 28 U.S.C. § 1367.
Before the court are two motions: 1) Northrop's motion to dismiss Counts II and IV;
For purposes of the motion to dismiss, Terry's factual averments will be accepted as true. Terry makes the following allegations in her complaint:
Terry's husband, David Terry, was employed by Northrop, which sponsored the Northrop Grumman Health Plan as an employee benefit. Through the life insurance portion of the plan, David obtained both basic life insurance coverage of $50,000 and optional coverage of $60,000. (Doc. 1 ¶¶ 5-10). Plaintiff is the beneficiary of the policies. (Id. ¶ 16). The insurance plan also provides continuation of coverage through conversion or portability.
On September 1, 2010, David was informed that his basic life insurance would be effective from that date until June 30, 2011 and that the cost for the optional insurance was $424.80. (Id. ¶ 17). On October 18, 2010, David was informed he would be laid off from work, effective October 29, 2010. (Id. ¶ 18). Prior to his layoff and extending 31 days after coverage ended, David did not receive notice of his rights to convert or port his insurance. (Id. ¶ 19). David died on January 2, 2011 as the result of a heart attack. (Id. ¶ 21).
After Terry inquired about the life insurance benefits, Northrop sent the required notice of conversion/portability rights on February 23, 2011. (Id. ¶ 22). Northrop denied Terry's claim for life insurance benefits on February 22, 2011. Terry appealed on June 23, 2011. (Id. ¶¶ 23, 24). Northrop upheld the denial of benefits on September 12, 2011, asserting that David had never completed the necessary forms to convert or port his life insurance benefits. (Id. ¶ 25).
Terry requested copies of all relevant documents regarding her claim for life insurance on October 12, 2011, and she claims she had still not received the actual plan documents as of February, 2012. (Id. ¶¶ 26, 27). The present action followed.
Northrop asserts the following grounds for dismissal:
Rule 12(b)(6) of the Federal Rules of Civil Procedure provides for dismissal of claims that fail to assert a basis upon which relief can be granted. When considering a motion to dismiss, the court must "accept all [of plaintiff's] factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008) (citing Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n. 7 (3d Cir.2002)). See also Matrixx Initiatives, Inc. v. Siracusano, ___ U.S. ___, 131 S.Ct. 1309, 1322-23, 179 L.Ed.2d 398 (2011).
The complaint must set forth sufficient facts to "state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The question is not whether the plaintiff will ultimately prevail, but whether the "complaint [is] sufficient to cross the federal court's threshold." Skinner v. Switzer, ___ U.S. ___, 131 S.Ct. 1289, 1296, 179 L.Ed.2d 233 (2011) (citing Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002)).
Although Rule 8(a)(2) requires only a "short and plain statement of the claim showing that the pleader is entitled to relief," a plaintiff must do more than present "bald assertions" and "legal conclusions." In re Burlington Coat Factory Secs. Litig., 114 F.3d 1410, 1429-30 (3d Cir.1997).
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the "grounds" of his "entitle[ment] to relief" requires more than labels and conclusions, and a formulaic recitation of a cause of action's elements will not do. Factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true.
Twombly, 550 U.S. at 545, 127 S.Ct. 1955 (citations omitted). Plaintiffs must nudge their claims "across the line from conceivable to plausible." Id. at 570, 127 S.Ct. 1955. See also Phillips, 515 F.3d at 232.
A plaintiff "armed with nothing more than conclusions" is not entitled to discovery. Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009). Consequently, "where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged — but it has not `show[n]' — `that the pleader is entitled to relief,'" and the complaint should be dismissed. Id. (quoting Fed. R.Civ.P. 8(a)(2)) (alteration in original).
The "plausible grounds" requirement "does not impose a probability requirement at the pleading stage; it simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence" supporting the plaintiff's claim for relief. Twombly, 550 U.S. at 556, 127 S.Ct. 1955. Determining plausibility is "a context-specific task that requires the reviewing court to draw on its judicial experience and common sense." Iqbal, 129 S.Ct. at 1950 (citing Twombly, 550 U.S. at 557-58, 127 S.Ct. 1955).
The Third Circuit has outlined a two-part analysis that courts should utilize when deciding a motion to dismiss for failure to state a claim. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009). First, the factual and legal elements of a claim should be separated. In other
Northrop contends that Count II of the complaint seeks the same relief as Count I — recovery of life insurance proceeds, plus costs, interest, and attorneys fees — and that Count II therefore should be dismissed.
Northrop also argues that the statutory provision cited in support of Count II, 29 U.S.C. § 1132(a)(3), authorizes only equitable relief, not recovery of benefits. Under this provision, a plan beneficiary may bring suit in federal court "to enjoin any act or practice which violates ... the terms of the plan" or "to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce ... the terms of the plan." 29 U.S.C. § 1132(a)(3)(A)-(B). Recovery under § 1132(a)(3) is limited to "those categories of relief that were typically available in equity," such as injunctive remedies and equitable restitution. Great-W. Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 210-16, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002); see also Thomas v. Town of Hammonton, 351 F.3d 108, 115 (3d Cir.2003). A plaintiff cannot obtain traditional forms of legal redress under § 1132(a)(3), including compensatory damages for breach of contract or fiduciary duty. See Knudson, 534 U.S. at 210, 122 S.Ct. 708 ("A claim for money due and owing under a contract is quintessentially an action at law." (citation omitted)); Mertens v. Hewitt Assocs., 508 U.S. 248, 256-58, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993) (holding that compensatory damages are not recoverable under ERISA); Santasania v. Union Travel Trades Benefit Funds of Cent. Pa., No. 3:01-CV-1442, 2003 WL 256778, at *3 (M.D.Pa. Feb. 4, 2003) ("[A] beneficiary's claim for insurance money she claimed she would have received if not for fiduciary's breach of duty was a claim for legal relief, which Knudson forecloses.").
In Varity v. Howe, 516 U.S. 489, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996), the Supreme Court held that a group of beneficiaries who were denied benefits under an ERISA plan could bring an individual action for breach of fiduciary duty under § 1132(a)(3)(B). Because the former employees could not proceed under § 1132(a)(1)(B) or § 1132(a)(2), the Court found that suit was proper under § 1132(a)(3)(B), which entitles beneficiaries to seek "other appropriate equitable relief" to redress violations of ERISA. The Court stated that § 1132(a)(3)(B) was a "`catchall' remedial section" that afforded litigants equitable relief for violations of ERISA when no other remedial section applied. Varity, 516 U.S. at 511, 116 S.Ct. 1065. However, the Court observed that "where Congress elsewhere provided adequate relief for a beneficiary's injury, there will likely be no need for further equitable relief, in which case such relief normally
The Courts of Appeal have split on the issue of whether a plaintiff may proceed with potentially-overlapping claims for both recovery of benefits and breach of fiduciary duty. Compare Katz v. Comprehensive Plan of Group Ins., 197 F.3d 1084, 1088 (11th Cir.1999) (affirming the district court's dismissal of the plaintiff's equitable claims because plaintiff had an available adequate remedy under the law, even though plaintiff did not prevail on the merits of the Section 502(a)(1)(B) claim); Tolson v. Avondale Indus., Inc., 141 F.3d 604, 610 (5th Cir.1998) (affirming the district court's holding that plaintiff was precluded from bringing a claim for equitable relief where an ERISA plaintiff had the right to sue for recovery of benefits pursuant to the plan.) with Devlin v. Empire Blue Cross & Blue Shield, 274 F.3d 76, 89 (2d Cir.2001) (holding that Varity did not preclude a plaintiff from bringing claims under both sections simultaneously.); Forsyth v. Humana, Inc., 114 F.3d 1467, 1475 (9th Cir.1997) (affirming the district court's grant of summary judgment for the defendants on the 1132(a)(3) claim where plaintiffs had already won a judgment for damages pursuant to 1132(a)(1)).
The Third Circuit has not ruled on the issue, and district courts within the circuit are split. Some cases have held that a claim under § 1132(a)(3) may proceed, reasoning that "a plaintiff is only precluded from seeking equitable relief under § 1132(a)(3)(B) when a court determines that plaintiff will certainly receive or actually receives adequate relief for her injuries under § 1132(a)(1)(B) or some other ERISA section." Parente v. Bell Atlantic Pennsylvania, No. 99-5478, 2000 WL 419981 at *3 (E.D.Pa. April 18, 2000) (emphasis supplied). See also Trechak v. Seton Company Supplemental Executive Retirement Plan, No. 10-227, 2010 WL 5071273 (E.D.Pa. Nov. 24 2010) (allowing plaintiff to plead his claims under § 1132(a)(1)(B) and § 1132(a)(3) in the alternative, in the absence of guidance from the Third Circuit); Tannenbaum v. UNUM Life Ins. Co. of Am., No. 03-CV-1410, 2004 WL 1084658, at *4 (E.D.Pa. Feb. 27, 2004) (allowing plaintiff to pursue claims under § 1132(a)(3) and for recovery of benefits at dismissal stage because "[a]t this stage, we cannot know whether Plaintiff will be able to prove his entitlement to benefits under § 1132(a)(1)(B)").
Other district court cases have held that a claim under § 1132(a)(3)(B) is precluded if there is an alternative ground for recovery of disputed benefits. Miller v. Mellon Long Term Disability Plan, 721 F.Supp.2d 415, 423-24 (W.D.Pa.2010) (dismissing plaintiffs' claim for equitable relief under § 1132(a)(3) because it was essentially duplicative of the claim for money damages under section 1132(a)(1)(B)); Cohen v. Prudential Ins. Co., Civ. A. No. 08-5319, 2009 WL 2488911 (E.D.Pa. Aug. 12, 2009), reconsideration denied by 2010 WL 1257659 (E.D.Pa. Mar. 25, 2010) (dismissing claim for equitable relief under § 1132(a)(3) because the plaintiffs failed to demonstrate in their complaint or their response to the motion to dismiss why they did not have an adequate remedy under § 1132(a)(1)(B), or why a sought-after remedy was only available under § 1132(a)(3)).
In the present matter, Terry contends that relief under § 1132(a)(1)(B) may prove unsuccessful because her deceased husband did not convert his life insurance plan. However, she contends
Terry's likelihood of obtaining relief on Count I is uncertain and thus, absent controlling case law to the contrary, allowing her to pursue alternative theories of relief should not be foreclosed. Moreover, by allowing Terry to proceed on both claims in the alternative, Northrop may properly reassert the argument that the plaintiff cannot recover under both ERISA sections at the summary judgment stage when the propriety of the requested relief can be assessed in light of a fully developed factual record. Koert v. GE Grp. Life Assur. Co., No. 04-CV-5745, 2005 WL 1655888, at *3 (E.D.Pa. July 14, 2005) (denying motion to dismiss and allowing plaintiff to proceed on claims for wrongful denial of benefits and breach of fiduciary duty simultaneously).
Accordingly, it is recommended that the motion to dismiss be denied on Count II.
Northrop also seeks dismissal of Count IV, a state law claim for life insurance benefits pursuant to 40 P.S. § 532.7,
The ERISA preemption provision, § 1144(a) (also known as "Section 514(a)"), provides that ERISA "shall supersede any and all State laws insofar as they ... relate to any employee benefit plan" covered by the statute. 29 U.S.C. § 1144(a). This provision preempts both state common law and statutory causes of action. See Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 138, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990). "[T]he ERISA preemption provision was designed to eliminate the threat of conflicting or inconsistent State and local regulation of employee benefit plans." Kollman v. Hewitt Assocs., L.L.C., 487 F.3d 139, 149 (3d Cir.2007) (internal citations omitted).
In the Third Circuit, a distinction was initially drawn between claims directed at the quality of the benefits received, and those asserting that benefits have been erroneously withheld, with the latter, but not the former, held to be preempted by § 514(a). Dukes v. U.S. Healthcare, Inc., 57 F.3d 350 (3d Cir.1995). Subsequently, the Third Circuit held that claims over the quantum of benefits paid out under an ERISA-regulated insurance plan, even when couched in terms of a common law breach of contract claim, are completely preempted, Pryzbowski v. U.S. Healthcare, 245 F.3d 266 (3d Cir.2001), and that claims brought under Pennsylvania's bad faith statute were also preempted. Barber v. Unum Life Ins. Co. of America, 383 F.3d 134, 140 (3d Cir.2004).
In determining whether a state law regulates insurance, the Third Circuit has applied a two-part test propounded by the Supreme Court in Miller. First, the law must be specifically directed toward entities engaged in insurance, and secondly, the law must substantially affect the risk pooling arrangement between the insurer and the insured. Miller, 538 U.S. at 342, 123 S.Ct. 1471.
In the present case, Northrop cites a New Jersey statute similar to § 532.7 which addresses the requirement that a notice of conversion rights to be given to an individual. N.J.S.A. 17B:27-73.
Estate of Trovato v. Marcal Manufacturing LLC, No. 11-CV-181, 2011 WL 4550169, *4 (D.N.J. Sept. 29, 2011).
The Trovato case is persuasive and relevant, since it addressed a statute with wording nearly identical to the Pennsylvania statute at issue. Like the New Jersey statute, 40 P.S. § 532.7, is "related to" an employee benefit plan and is directed at notice requirements as they relate to a benefit plan. Id. If claims under § 532.7 were not preempted by ERISA, the potential would exist for inconsistent and conflicting results in the regulation of employee benefit plans. Id. Such a finding is in line with decisions by several other courts holding that state law claims (both statutory and common law) arising from an allegedly improper notice of an individual's right to convert a group life insurance policy to an individual policy are preempted by ERISA. See e.g. Howard v. Gleason Corp., 901 F.2d 1154 (2d Cir.1990); Campo v. Oxford Health Plans, No. 06-CV-4332, 2007 WL 1827220 (D.N.J. June 26, 2007); Noel v. Laclede Gas Co., 612 F.Supp.2d 1051 (E.D.Mo.2009); Rogers v. Rogers and Partners, No. 08-CV-11730, 2009 WL 5124652 (D.Mass. July 27, 2009); Strohmeyer v. Metropolitan Life Ins. Co., 365 F.Supp.2d 258 (D.Conn.2005).
There is no persuasive reason to hold that 40 P.S. § 532.7 is not preempted. Accordingly, it is recommended that the motion to dismiss Count IV be granted.
Rule 15 of the Federal Rules of Civil Procedure governs amendments and supplementation of pleadings. Fed.R.Civ.P. 15. Rule 15(a) authorizes a party to amend his pleading once as a matter of course within 21 days after serving it, or if the pleading is one to which a responsive pleading is required, 21 days after service of the responsive pleading, or 21 days after service of a dispositive motion under Rule 12, whichever is earlier. Fed.R.Civ.P. 15(a)(1)(A) and (B). "In all other cases, a party may amend its pleading only with the opposing party's written consent, or the court's leave." Fed.R.Civ.P. 15(a)(2).
The Rule clearly states that "[t]he court should freely give leave when justice so requires." Id. Nonetheless, the policy favoring liberal amendments is not "unbounded." Dole v. Arco Chem. Co., 921 F.2d 484, 487 (3d Cir.1990). The decision whether to grant or to deny a motion for leave to amend rests within the sound discretion of the district court. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); Waterfront Renaissance Assoc. v. Phila., 701 F.Supp.2d 633, 639 (E.D.Pa.2010). A district court may deny leave to amend a complaint where "it is apparent from the record that (1) the moving party has demonstrated undue delay, bad faith or dilatory motives, (2) the amendment would be futile, or (3) the amendment would prejudice the other party." Lake v. Arnold, 232 F.3d 360, 373 (3d Cir.2000) (citing Foman, 371 U.S. at 182, 83 S.Ct. 227).
Terry seeks leave to amend Count II to seek equitable relief, to wit., that the Plan be ordered to obtain a policy on behalf of Terry's deceased husband as if he had converted his policy. Terry contends that the amendment should be permitted inasmuch as there is no undue delay, bad faith
If the court agrees with the recommendation that Count II be allowed to proceed, the motion for leave to amend appears to be moot. It is also noted that the amendment proposed by Terry is questionable inasmuch as it seeks issuance of a life insurance policy to a deceased person. The undersigned therefore recommends that the motion for leave to amend be denied.
Based on the foregoing, it is respectfully recommended that Northrop's motion to dismiss (Doc. 7) be granted on Count IV and denied on Count II. It is also recommended that Terry's motion for leave to file an amended complaint (Doc. 12) be denied as moot.
Signed on December 3, 2012.
