Opinion
Civil Action No. 03-2944.
April 14, 2004
MEMORANDUM
Presently before the Court is Defendant Hewitt Associates' ("Defendant") Motion to Dismiss Counts Two and Three of the Amended Complaint filed by Plaintiff Gerald E. Kollman ("Plaintiff"). For the reasons that follow, Defendant's Motion will be granted in part and denied in part.
I. Background
Plaintiff filed his original complaint in this case on March 5, 2003. On September 22, 2003, this Court issued a Memorandum and Order granting Defendant's Motion to Dismiss, filed June 26, 2003, and giving Plaintiff leave to file an amended complaint raising a claim under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. (2003). Kollman v. Hewitt Associates, 2003 U.S. Dist. LEXIS 18138 (E.D. Pa. September 2, 2003). Plaintiff subsequently filed his Amended Complaint on November 20, 2003. Defendant filed a Motion to Dismiss on December 8, 2003 and briefing on this motion was completed on January 27, 2004.
The facts of this case are laid out in detail in this Court's September 22, 2003 Memorandum and will only be summarized here. Plaintiff was previously an employee of the Rohm and Haas Company ("Rohm and Haas") and was a participant in the Rohm and Haas Health Group Benefits and Pension Plan ("Plan"). This Plan was administered by Defendant pursuant to a contract with Rohm and Haas. Among the services provided by Defendant were the creation and maintenance of an internet website ("Website") that allowed employees of Rohm and Haas to view calculations of their pension benefits under the Rohm and Haas Pension Plan.
On October 31, 2002, Plaintiff, in considering whether to accept an early retirement Separation Benefits Package ("SBP"), obtained a statement of his pension benefits calculation from the Website showing that Plaintiff would receive a lump sum payout of $522,043.30 ("Lump Sum Payout") if he chose to accept the Separation Benefits Package. Pursuant to a divorce settlement, Plaintiff is required to share a portion of the Lump Sum Payout on his pension with his ex-wife, an arrangement referred to in the Rohm and Haas Pension Plan as a Qualified Domestic Relations Order ("QDRO"). The benefits calculation Plaintiff received from the Website indicated that the Lump Sum Payout had already been adjusted for this QDRO, so that the Lump Sum Payout amount listed was the amount that Plaintiff would personally receive.
After receiving this benefits calculation from the Website, Plaintiff consulted with a financial planner regarding a retirement plan based on this calculation. Plaintiff subsequently verified this calculation, and the fact that it included the QDRO, on the Website and by telephone. Relying on the calculation of the Lump Sum Payout from the Website and the December 2002 phone conversation, Plaintiff elected to take the SBP and retire from Rohm and Haas as of December 31, 2002.
In January of 2003, Plaintiff, who had not yet received his pension papers, contacted Defendant by telephone and was told that his benefits calculation had been "revised" because the prior benefits calculation had not been properly adjusted for the QDRO. The revised benefits calculation showed that Plaintiff was entitled to a lump sum payout of $419,917.72, approximately $103,000 less than the calculation previously obtained. Plaintiff subsequently filed a series of internal appeals with Rohm and Haas, ultimately leading to the filing of this suit.
II. Legal Standard
When deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court may look only to the facts alleged in the complaint and its attachments. Jordan v. Fox, Rothschild, O'Brien Frankel, 20 F.3d 1251, 1261 (3d Cir. 1994). The court must accept as true all well pleaded allegations in the complaint and view them in the light most favorable to the plaintiff. Angelastro v. Prudential-Bache Sec., Inc., 764 F.2d 939, 944 (3d Cir. 1985). A Rule 12(b)(6) motion will be granted only when it is certain that no relief could be granted under any set of facts that could be proved by the plaintiff. Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir. 1988).
This Court has subject matter jurisdiction in this case, pursuant to 28 U.S.C. § 1331. Venue is proper as a substantial portion of the acts giving rise to the claims occurred in this judicial district.
III. Discussion
Defendant's Motion to Dismiss addresses only Counts Two and Three of the Amended Complaint. Count Two is a claim for professional malpractice and Count Three is an equitable estoppel claim.
A. Count Two: Professional Malpractice
The issue presented regarding Count Two is whether Plaintiff's state law professional malpractice claim is preempted by ERISA. There is no dispute that the Plan is one governed by ERISA. ERISA provides:
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 . . .
§ 514(a), 29 U.S.C. § 1144(a) (2004). In Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 1, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987), the Court interpreted the preemption provision broadly.
The phrase "relate to" [is] given its broadest common-sense meaning, such that a state law "relate[s] to" a benefit plan "in the normal sense of the phrase, if it has a connection with or reference to such a plan."Pilot Life, 481 U.S. at 47 quoting Shaw v. Delta Air Lines, 463 U.S. 85, 97 (1983). The Third Circuit in Pryzbowski v. U.S. Healthcare, clarified the holding in Pilot Life, ruling that a decision regarding benefits "falls within the scope of the administrative responsibilities of the HMO or insurance company, and therefore `relates to' the employee benefit plan."Pryzbowski v. U.S. Healthcare, 245 F.3d 266, 278 (2001).
Defendant argues that Plaintiff's professional malpractice claim is preempted by ERISA because the facts alleged all relate to Defendant's administration of the Plan. Defendant points out that, in order to determine whether it committed malpractice, this Court would have to examine the terms of the Plan. Plaintiff responds that the harm complained of does not relate to the Plan because it is not a dispute regarding the calculation or processing of Plaintiff's benefits claim. Instead, Plaintiff is complaining that, before he even submitted his pension claim for processing, Defendant provided Plaintiff with inaccurate information regarding his future benefits, on which he relied in making his decision to retire from Rohm and Haas.
Plaintiff also argues that a state law malpractice claim against a nonfiduciary is not preempted by ERISA, based on the Third Circuit decision in Painters of Philadelphia District Council No. 21 v. Price Waterhouse, 879 F.2d 1146 (3d Cir. 1989). Plaintiff maintains that Defendant is a nonfiduciary here because it served as a professional retirement and financial plan consultant for Rohm and Haas. Defendant argues that Plaintiff's claim is one of a plan participant against a plan administrator, and thus the case cited by Plaintiff regarding nonfiduciaries is not applicable here.
This issue is very similar to the one discussed in this Court's September 22, 2003 Memorandum, where this Court found that Plaintiff's state law claims for negligent misrepresentation, negligence, promissory estoppel, and breach of contract were claims related to the Plan and thus preempted by ERISA. Kollman at *11-12. As in the prior opinion, the professional malpractice claim brought here is distinguishable from Painters. Here, Plaintiff is bringing a claim only against the administrator of the Plan. Admittedly, the administrator in this case, the Defendant, is a separate organization from Plaintiff's employer, and which contracted with Plaintiff's employer to provide administrative services for the plan. In Painters, the Plaintiff was attempting to sue the auditor of a plan and the determinative factor in the Court's conclusion that an auditor is not a fiduciary was that "an auditor has no authority to administer the day-to-day affairs of the Fund." Painters at 1150. Here, Defendant's role was to administer the day-to-day affairs of the Plan. Thus, Defendant is outside the definition of nonfiduciary provided by Painters.
As mentioned in this Court's prior opinion, although the Third Circuit has not directly addressed whether the fiduciary status of a defendant affects the preemption of state law claims, the circuits that have addressed this issue have found that state law claims are preempted regardless of whether the defendants are ERISA fiduciaries, so long as the state law claims relate to an ERISA claim. See Kollman at *2-3. As discussed above, Pilot Life instructs this Court to interpret "relates to" in a broad fashion. Here, it is clear that Plaintiff's malpractice claim relates to the Plan, as disposition of Plaintiff's malpractice claim would necessarily involve interpretation of the Plan, and Plaintiff would have no malpractice cause of action if there were no Plan. See DePace v. Matsushita Electric Corp., 257 F. Supp.2d 543, 569 (E.D.N.Y. 2003) (finding that state law claims regarding misrepresentation by employer of benefit plan to induce employee's retirement are preempted by ERISA). Plaintiff's malpractice charge is based on the allegation that Defendant erred in providing him with the amount of his Lump Sum Payout. In order to determine whether this error constituted malpractice, this Court would necessarily need to consult the Plan to determine such issues as whether the calculation was in error, whether the Plan includes provisions regarding the representations of Lump Sum Payout amounts made on the Website or by Defendant's customer service personnel, and whether the Plan includes provisions regarding representations of Lump Sum Payout amounts before claims for benefits are actually submitted. Thus, Plaintiff's professional malpractice claim does relate to the Plan, and Defendant's Motion to Dismiss Count Two will be granted.
B. Count Three: Equitable Estoppel
Defendant also moves to dismiss Count Three, a claim for equitable estoppel. Defendant argues that Plaintiff is required to exhaust his administrative remedies before bringing this claim, and Plaintiff has not done so. Plaintiff argues that Count Three is a claim under § 502(a)(3) of ERISA and, thus, exhaustion is not required. Plaintiff also maintains that he has exhausted all of his administrative appeals.
Defendant, in its Motion to Dismiss, also argued that Plaintiff's equitable estoppel claim was a state law claim preempted by ERISA. As Plaintiff maintains and the discussion, below, concludes that this is properly an equitable estoppel claim under ERISA, Defendant's preemption argument is moot.
Plaintiff asserts that Count Three is a claim for equitable estoppel under § 502(a)(3) of ERISA, which provides:
A civil action may be brought —
. . .
(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (I) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan . . .
§ 502(a), 29 U.S.C. § 1132(a) (2004). To establish an equitable estoppel claim under ERISA, plaintiff must show that (1) defendant made a material misrepresentation, (2) plaintiff relied on that misrepresentation to his detriment and (3) "extraordinary circumstances" existed. Smith v. Hartford Ins. Group, 6 F.3d 131, 137 (3d Cir. 1993). Despite Defendant's assertion that Plaintiff is actually pleading a claim under § 502(a)(1)(B), Plaintiff has properly pled his claim under § 502(a)(3) by the standard of a motion to dismiss. Specifically, Plaintiff alleges in the Amended Complaint that Defendant misrepresented the amount of the Lump Sum Payout to Plaintiff, that Defendant knew or should have known that Plaintiff would rely upon the representations to retire, that Plaintiff reasonably relied on that representation to his detriment in deciding to retire, and that as a result Plaintiff has suffered damages in the amount of $102,125.58.
Defendant asserts that, because Plaintiff is requesting monetary damages, he cannot be requesting equitable relief within the definition of § 502(a)(3) and thus Plaintiff's claim must fall under § 502(a)(1)(B), the ERISA provision that allows for recovery of benefits due under a plan. This issue is not addressed by Plaintiff in the pleadings, and the Amended Complaint does not specify the type of relief Plaintiff is requesting. Rather under the heading "Equitable Estoppel," the Amended Complaint states "Plaintiff Gerald E. Kollman demands judgment in his favor and against Defendant Hewitt Associates, LLC in the amount of $102,125,58, plus interest, costs of suit and such other relief as the Court may deem appropriate." Although there is case law suggesting, consistent with the historical definition of equitable relief, that an equitable estoppel claim under ERISA cannot include relief in the form of compensatory or punitive damages, there is also the view of the equitable remedy that front pay in lieu of reinstatement of a retired employee is appropriate. See DePace v. Matsushita Electric Corp., 257 F. Supp.2d 543, 565-66 (E.D.N.Y. 2003) (Finding that compensatory and punitive damages are stricken from the complaint, but that equitable remedies of front pay and remedies are properly considered). There does not appear to be a Third Circuit holding on this point. As Plaintiff has properly pled a claim for equitable estoppel under ERISA, and monetary damages could be an appropriate alternative equitable remedy to reinstatement, Defendant's argument will not suffice to dismiss Plaintiff's claim at this time. Defendant may renew this argument later in this litigation.
When a plaintiff pleads an equitable estoppel claim under § 502(a)(3), there is no administrative exhaustion requirement.Zipf v. American Telephone Telegraph Co., 799 F.2d 889, 891 (3d Cir. 1986). See DePace v. Matsushita Electric Corp., 257 F. Supp.2d 543, 557-58 (E.D.N.Y. 2003) (finding no exhaustion requirement for claims alleging violations of ERISA itself, rather than terms of retirement plan). Thus, Plaintiff need not exhaust his administrative remedies before bringing this claim. Accordingly, Defendant's Motion to Dismiss Count Three will be denied.
The Court does note that, regardless of whether Plaintiff is required to exhaust his administrative remedies, Plaintiff does appear to have exhausted these remedies. See January 9, 2004 letter from Rohm Haas Benefits Administrative Committee ("This letter is intended to constitute a final claim denial . . . Mr. Kollman's administrative review remedies under the plan are now exhausted.").
IV. Conclusion
For the reasons discussed above, Defendant's Motion to Dismiss will be granted with respect to Count Two and denied with respect to Count Three. Defendant also requests that the Court award attorney fees because Plaintiff's Amended Complaint includes frivolous claims. As the Court does not find that Plaintiff's claims are frivolous, this request will be denied.
An appropriate order follows.