Opinion
1:03-cv-01698 RLY-TAB.
August 3, 2004
ENTRY ON DEFENDANTS' MOTION TO DISMISS AND PLAINTIFFS' REQUEST FOR ORAL ARGUMENT
I. Introduction
Plaintiffs James McDonald ("Mr. McDonald") and Karen McDonald ("Mrs. McDonald") (collectively "the McDonalds") brought this action against Defendants Household International, Inc. ("Household") and United Healthcare Corporation ("United") (collectively "Defendants"), Mr. McDonald's employer and health plan administrator, respectively. Mr. McDonald alleges (1) negligence on the part of Household in its role in obtaining health insurance for Mr. McDonald; (2) negligence on the part of United in its role in processing Mr. McDonald's health care application; (3) breach of contract by Household for promising health insurance by a certain date; (4) breach of contract by United for accepting premiums and failing to cover Mr. McDonald under the plan; and (5) gross negligence, willful or wanton misconduct and/or intentional wrongs of both Household and United for the same acts described above. Complaint ¶¶ 15, 19, 26, 33, 38-39. In addition, Mrs. McDonald alleges loss of spousal services and consortium as a result of the negligence and breach of contract by both Household and United. Complaint ¶ 42. Both Plaintiffs seek damages as a result of Defendants' actions. This matter now comes before the court on Defendants' Motion to Dismiss for failure to state a claim upon which relief can be granted and the Plaintiffs' Request for Oral Argument on the Matter. After reviewing the motions, the parties' arguments, and the applicable law, the court finds that the Defendants' Motion to Dismiss should be granted and the Plaintiffs' Request for Oral Argument should be denied.
II. Discussion
When evaluating a motion to dismiss, the court must "treat all well-pleaded factual allegations as true, and . . . construe all inferences that reasonably may be drawn from those facts in a light most favorable to the nonmoving party." Indep. Distribs. Coop. USA v. Advanced Ins. Brokerage of Am., Inc., 264 F.Supp.2d 796, 800 (S.D. Ind. 2003). Household and United base their Motion to Dismiss the McDonalds' state common law claims on the preemptive power of the Employee Retirement Income Security Act ("ERISA"). Under ERISA, an "employee welfare benefit plan" covered by the statute is one which was, among other things, "established . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits." 29 U.S.C. § 1002(1). Neither party disputes that the insurance plan at issue is covered by ERISA.
There are two ways in which state common law causes of action may be preempted by ERISA. First, state common law claims may be superseded by ERISA § 514(a), 29 U.S.C. § 1144(a) ("§ 1144(a)"). When a claim is superseded by § 1144(a), it is preempted by ERISA because it impermissibly "relates to" a welfare benefit plan. Id. Second, state common law causes of action may be displaced by the civil enforcement provisions of ERISA § 502(a), 29 U.S.C. § 1132(a) ("§ 1132(a)"). See Metro. Life Ins. Co. v. Taylor, 481 U.S. 58 (1987). When a claim is displaced by § 1132(a), it is recharacterized as a claim arising under ERISA. Claims that fall under either of these categories, or both, will be dismissed. However, the court may grant the plaintiff leave to amend his complaint to request appropriate relief under ERISA.
Section 1144:
(a) Supersedure; effective date
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975.
Section 1132:
(a) Persons empowered to bring a civil action
A civil action may be brought —
(1) by a participant or beneficiary —
(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.
Defendants base this Motion to Dismiss on § 1144 and § 1132 preemption. Mr. McDonald contends that his state law claims are not superseded by § 1144(a) because his claims do not "relate to" an employee welfare benefit plan within the meaning of the statute or prevailing ERISA jurisprudence. Further, Mr. McDonald contends that his state law claims are not displaced by § 1132(a) because he was not a plan "participant" or "beneficiary" within the meaning of the statute, and, therefore, had no standing to bring a claim under ERISA's civil enforcement provision. Id. at 14. This court will begin its discussion by determining whether any of the McDonalds' claims are displaced by § 1132(a), followed by a determination as to whether any of the McDonalds' claims are superseded by § 1144(a).
A. Mr. McDonald's Claims in Counts II, IV, and V, with Regard to United, Are Displaced by § 1132(a); Mrs. McDonald's Claim in Count VI, with Regard to United, Is Not Affected by § 1132(a)
When determining whether a plaintiff's state law claims are displaced by § 1132(a), the Seventh Circuit has identified three relevant factors that must be considered. See Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1487 (7th Cir. 1996). These factors are: "(1) whether the `plaintiff [is] eligible to bring a claim under that section;' (2) whether the plaintiff's `cause of action falls within the scope of an ERISA provision that the plaintiff can enforce via § 502(a);'and (3) whether the plaintiff's `state law claim cannot be resolved without an interpretation of the contract governed by federal law.'" Id. (quoting Rice v. Panchal, 65 F.3d 637 (7th Cir. 1995). With these factors in mind, the court must now determine whether any of the McDonalds' claims are displaced by § 1132.
1. Mr. McDonald is eligible to bring a claim under § 1132(a)
Under § 1132(a), only participants or beneficiaries of a plan are entitled to bring an action for benefits. 29 U.S.C. § 1132(a). A participant is defined as "any employee or former employee of an employer . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan." 29 U.S.C. § 1002(7). A beneficiary is defined as "a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder." Id. at § 1002(8).
Here, the Complaint does not make clear whether Mr. McDonald is a current employee of Household or whether he left that employment at some time after his claims in this case arose. Because the court has no facts suggesting otherwise, it will assume for the purposes of this motion that Mr. McDonald remains employed by Household. Therefore, the fact that Mr. McDonald's insurance policy was not active does not have an effect on his standing under the meaning of the statute. In other words, he is a current employee who "may become eligible" to receive benefits and, therefore, has standing to bring a claim.
Even if the court determined that Mr. McDonald is no longer employed by Household, the Seventh Circuit has recognized the United States Supreme Court decision in Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 114 (1989), which stated that former employees "who have . . . a colorable claim to vested benefits" have standing to bring an ERISA claim. Kamler v. H/N Telecomm. Servs., Inc., 305 F.3d 672, 678 (7th Cir. 2002). The Kamler court also held that "the requirements for a colorable claim are not stringent; a plaintiff need have only a nonfrivolous claim for the benefit in question." Id.
Since the court must treat all of Mr. McDonald's factual allegations as true when determining the outcome of a Motion to Dismiss, Mr. McDonald's facts would establish a nonfrivolous claim to the benefits in question regarding Counts II, IV, and V as against United. Therefore, even if he were a former employee of Household, this court would still find that Mr. McDonald has standing to bring an ERISA claim.
However, with regard to Mrs. McDonald's claims for loss of consortium against United in Count VI, there is no allegation that Mrs. McDonald is a "beneficiary" to the plan under the meaning of the statute. Therefore, the court can not say with any certainty that Mrs. McDonald has standing to bring an ERISA claim, and the court will assume for the purposes of this Motion to Dismiss that she is not a beneficiary. As such, Mrs. McDonald's loss of consortium claim against United in Count VI is not displaced by § 1132(a).
2. Mr. McDonald's claims against United in Counts II, IV, and V fall within the scope of an ERISA provision that he can enforce via § 1132(a)
The United States Supreme Court has stated that § 1132(a) provides "the exclusive remedy for rights guaranteed under ERISA." Ingersoll-Rand v. McClendon, 498 U.S. 133, 144 (1990). As such, claims fall within the scope of § 1132(a) when "the claim is best recharacterized as a [§ 1132(a)(1)(B)] claim to recover benefits due under the terms of the plan." Jass, 88 F.3d at 1489. In Jass, the plaintiff brought a tort action against a registered nurse who, pursuant to her position, determined that certain procedures were not medically necessary and subsequently discharged the plaintiff from the hospital. Id. The Jass court construed the actions of the nurse as determinations of the benefits due under the plan within the meaning of ERISA, and therefore found the claim best recharacterized as a claim for the denial of benefits. Id.
Here, Mr. McDonald's claims against United in Counts II, IV, and V are best recharacterized as claims for the denial of benefits. In Count II, Mr. McDonald asserts a negligence claim against United. Complaint at 4. Mr. McDonald claims that United was negligent in "(1) failing to process [Mr. McDonald's] application for insurance within a reasonable time; and (2) failing to secure insurance for [Mr. McDonald] and provide coverage, specifically pharmaceutical benefit coverage, by the effective date of the policy." Complaint at 5. Just as the court in Jass construed a negligence claim for failing to provide medical procedures covered by the plaintiff's plan as, in effect, a claim for the denial of benefits, this court finds Mr. McDonald's negligence claim for the failure to process and provide insurance is best recharacterized as a claim for the denial of benefits due under the plan.
Further, in Count IV, Mr. McDonald asserts a breach of contract claim against United. Complaint at 7. Mr. McDonald alleges (1) that he had paid the premiums due under the plan; (2) that the plan provided prescription drug benefits; (3) that he was intended to be eligible for the benefits; (4) that he complied with the terms of the policy; and (5) that United refused to provide coverage for Mr. McDonald's medical expenses. Complaint at 7. All five of these allegations, treated in the light most favorable to Mr. McDonald, are on their face best recharacterized as claims for the denial of benefits.
Finally, in Count V, Mr. McDonald asserts a claim against United for gross negligence. Complaint at 9. He incorporates all of the acts and omissions of United described above as constituting "gross negligence, willful or wanton misconduct, recklessness, and heedless disregard of consequences," and as a result Mr. McDonald has incurred medical expenses, among other things. Complaint at 9. Since all of Mr. McDonald's allegations regarding United's behavior described in Counts II and IV are in effect allegations of the denial of benefits, their presence as support for the gross negligence claim in Count V warrant the same interpretation. Therefore, Mr. McDonald's claims against United in Counts II, IV, and V fall within the scope of the civil enforcement provisions set out in § 1132(a).
3. Mr. McDonald's claims against United in Counts II, IV, and V can not be resolved without an interpretation of the contract governed by federal law
In Jass, the court stated that the negligence claim against the nurse for her failure to provide certain benefits due under the plan could not be resolved "without interpreting the benefits contract because that contract provided the benefits to which Jass was entitled." 88 F.3d at 1489-90. (citing Rice, 65 F.3d at 644 (where state law creates a quality standard by which performance of the contract is evaluated then that state law is completely preempted)). In other words, to decide whether or not the plaintiff could establish his claim, the court had to interpret the plan to see what benefits were owed the plaintiff. Since Mr. McDonald alleges that he was denied prescription benefit coverage and medical expenses as a result of United's negligence, gross negligence, and breach of contract, this court would have to interpret the plan to determine if Mr. McDonald was entitled to the benefits he claims to have been denied.
Thus, Mr. McDonald's claims against United in Counts II, IV, and V are displaced by § 1132(a), and must be dismissed in their current form. However, Mr. McDonald may refile his complaint in order to request appropriate relief pursuant to ERISA. See Jass, 88 F.3d at 1485. Mrs. McDonald's claim against United for loss of consortium in Count VI, as stated above, may not be dismissed under a § 1132(a) analysis, and, therefore, must be tested under a § 1144(a) analysis.
B. Mr. McDonald's Claims in Counts I, III, V, with Regard to Household Are Superseded by § 1144(a); Mrs. McDonald's Claim against United and Household in Count VI Is Superseded by § 1144(a)
As stated above, ERISA shall supersede any and all state laws that relate to an employee benefit plan. 29 U.S.C. § 1144(a). The United States Supreme Court has held that § 1144(a)'s preemption language requires the court to enforce § 1144(a) "when its `inquiry must be directed to the plan' or when a plaintiff's cause of action `conflicts directly with an ERISA cause of action.'" Dwyer v. Unum Life Ins. Co. of Am., 2003 WL 22844234, 4 (N.D. Ill. 2003) (citing Ingersoll-Rand, Co., 498 U.S. 133 (1990)). Further, the United States Supreme Court has held that a "state law may `relate to' an ERISA plan, and thus be preempted, even if such law is of general application and has only an indirect effect on the plan." Id. (citing Shaw v. Delta Airlines, Inc., 463 U.S. 85, 98-99 (1983)). In Dwyer, the court held that "[b]ecause the existence of [plaintiff's] policy is an important factor in establishing liability under Count III, and thus this court's inquiry would include reviewing the policy, this [common law fraud] claim `relates to' an ERISA plan." Id. at 5 (citing Ingersoll-Rand, Co., 498 U.S. at 139-40).
In Mr. McDonald's negligence claim against Household in Count I, he claims that Household was negligent in any or all of the following acts: "(1) Failing to procure insurance for Plaintiff within a reasonable period of time; (2) Failing to exercise good faith and due diligence in obtaining adequate insurance coverage for its employee, James McDonald; and (3) Failing to notify its employee, James McDonald of any problems or complications in its ability to procure insurance by the effective date." Complaint at p. 4. Mr. McDonald further complains that as a result of any of these acts he "suffered severe and permanent injuries." Id. Presumably, Mr. McDonald is referring to his inability to pay for prescription medicine which would have been covered by the plan. Moreover, Mr. McDonald asks to be compensated for medical expenses and lost wages caused by Household's alleged negligence. Id. Again, Mr. McDonald must be asserting that, had he been covered, he could not have incurred medical expenses or lost wages. Just as in Dwyer, this court would have to review the policy in order to determine what benefits were due Mr. McDonald in order to determine the extent of the damages he suffered as a result of Household's behavior. Therefore, Mr. McDonald's negligence claim against Household in Count I clearly `relates to' the ERISA plan in question and is superseded by § 1144(a).
In Mr. McDonald's breach of contract claim against Household in Count III, Mr. McDonald claims that (1) he should have been covered by the prescription benefits under the plan; (2) he complied with the terms and conditions of his employment and the terms of the plan; (3) Household failed to provide coverage for its employee; and (4) Household refused to cover the medical expenses sustained by Mr. McDonald. Complaint at p. 6. Again, as in Dwyer, this claim clearly `relates to' the plan. The Complaint in Dwyer stated that the "[d]efendants have refused to pay the full benefits due." 2003 WL 22844234 at 5. The court found that this statement was the same as seeking benefits under the policy. Here, Mr. McDonald makes essentially the same claim, specifically, that Household has refused to cover his medical expenses. Clearly, this court would have to review the policy to determine whether the damages sought by Mr. McDonald are due under the plan, and, therefore, his breach of contract claim against Household in Count III `relates to' the ERISA plan and is superseded by § 1144(a).
In Mr. McDonald's gross negligence claim against Household in Count V, he asserts that all the errors, acts, and omissions described above constitute gross negligence and resulted in his stroke via his inability to get prescription benefits, medical expenses, and lost wages. Again, this claim refers to the behavior described in the negligence and breach of contract claims, and, therefore, this court would have to review the policy to determine what benefits are due Mr. McDonald to determine the success of his claim. Thus, his gross negligence claim against Household in Count V `relates to' the ERISA plan and is superseded by § 1144(a).
Finally, Mrs. McDonald alleges the loss of consortium and spousal services as a direct and proximate result of Household's and United's negligence and breach of contract in Count VI. Complaint at pp. 9-10. Under Indiana law, a loss of consortium claim is derivative of the injured spouse's claim. Trail v. Boys and Girls Club of Northwest Ind., 2004 WL 1516831, 9 (Ind.App. 2004) (citing Durham ex rel. Estate of Wade v. U-Haul Intern., 745 N.E.2d 755, 764 (Ind. 2001)). Therefore, "if the spouse's cause of action fails, the loss of consortium claim falls with it." Id. Since Mrs. McDonald's claim in Count VI depends upon the success of the negligence, breach of contract, and gross negligence claims in Counts I, II, III, IV, and V, the loss of consortium claim in Count VI clearly "relates to" the plan within the meaning of § 1144(a). Presumably, Mrs. McDonald would not have to "gratuitously provide for the care and comfort of her husband" and would not have "lost the services and consortium of her spouse" if he would have been covered by the plan. Id. at p. 10. As a result, this court would have to interpret the plan itself, determining what benefits were and are due to Mr. McDonald, in order to evaluate the extent to which Mrs. McDonald has been and will be damaged by her loss of consortium and spousal services. In other words, the court would have to determine (1) the extent of Mrs. McDonald's total loss alleged in the claim; minus (2) the extent of the loss of which she would have been alleviated had Mr. McDonald been covered by the plan. Thus, Mrs. McDonald's claims against both Defendants in Count VI `relate to' the plan and are superseded by § 1144(a).
Because Counts II, IV, and V as to United are displaced by § 1132(a) and because Counts I, III, and V as to Household and Count VI as to both United and Household are superseded by § 1144(a), the court must dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), ("Rule 12(b)(6)"). However, the McDonalds may refile their Complaint requesting appropriate relief under ERISA.
C. Because the Court Has Addressed the Issues of ERISA's Effect on the
Plaintiff's Claim, There Is No Need for Oral Argument
Plaintiffs request that "each side be given twenty (20) minutes to present their arguments concerning whether Plaintiffs' claims are preempted by [ERISA]." Plaintiff's Request for Oral Argument at p. 1. Defendants respond by directing the court to the fact that both parties have fully briefed their arguments and that oral argument is not necessary. Response to Request for Oral Argument pp. 1-2. This court finds that the issues raised by the parties have been sufficiently presented to the court and the need for oral argument is now moot as the court has determined what effect ERISA has on the Plaintiffs' claims in this Entry.III. Conclusion
For the foregoing reasons, the court finds that the McDonalds have failed to state a claim upon which relief can be granted pursuant to Rule 12(b)(6). The McDonalds may refile their Complaint requesting appropriate relief pursuant to ERISA within 30 days of the date of this Entry. As such, Defendants' Motion to Dismiss shall be granted. Pursuant to this entry, the court finds that oral argument on the matter is unnecessary and Plaintiffs' request for oral argument is denied.
IT IS SO ORDERED.