Opinion
No. 3-03-CV-2535-BD.
July 19, 2004
MEMORANDUM OPINION AND ORDER
Defendant Reliance Standard Life Insurance Company has filed a motion for summary judgment in this civil action for breach of contract, fraud, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code and Texas Deceptive Trade Practices Act. For the reasons set forth herein, the motion is granted.
I.
Plaintiff Arthur Leroy Davis worked as an executive chef for the Petroleum Club of Midland, Inc. ("PCM") for approximately 12 years. (Plf. MSJ App. at 41, ¶ 3). Starting in April 1999, PCM provided plaintiff and its other full-time employees with long-term disability coverage under a policy issued by defendant. (Def. MSJ App. at 39, ¶ 8-9; Plf. First Am. Compl. at 2, ¶ 5). Plaintiff eventually became disabled due to complications resulting from congestive heart failure, hypertension, diabetes, pulmonary dysfunction, and other medical problems, which forced him to retire effective October 15, 2000. (Plf. First Am. Compl. at 2, ¶ 6). Thereafter, plaintiff filed a claim for long-term disability benefits under the policy. Defendant initially approved the claim and paid monthly benefits to plaintiff from January 15, 2001 until October 1, 2002, when a new adjuster determined that plaintiff was no longer disabled and abruptly terminated his benefits. ( Id. at 3, ¶ 7). Plaintiff appealed this decision to the insurance company. On August 19, 2003, defendant reversed its decision and notified plaintiff that he would receive a lump sum payment for all past due benefits and reinstatement of future monthly benefits. ( Id. at 3, ¶ 8). Despite this notice, plaintiff alleges that defendant has "failed to pay the claim in a timely manner consistent with Texas law." ( Id.).
It is not clear from the pleadings or the summary judgment evidence whether defendant has failed to make a lump sum payment to plaintiff of past due benefits, failed to reinstate his future benefits, or both.
On September 18, 2003, plaintiff sued defendant in Texas state court for breach of contract, fraud, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code and Texas Deceptive Trade Practices Act. In his petition, plaintiff alleges that his state law claims are not preempted under the Employee Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq., because PCM did not intend to establish and maintain an ERISA plan and the policy in question is governed solely by Texas law. (Def. Not. of Removal, Exh. A at 3, ¶ V). Notwithstanding this allegation, defendant removed the case to federal court on the basis of ERISA preemption and now seeks dismissal of plaintiff's state law claims by way of summary judgment. The motion has been fully briefed by the parties and is ripe for disposition.
II.
Summary judgment is proper when there is no genuine issue as to any material fact and the movant is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). A dispute is "genuine" if the issue could be resolved in favor of either party. Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986); Thurman v. Sears, Roebuck Co., 952 F.2d 128, 131 (5th Cir.), cert. denied, 113 S.Ct. 136 (1992). A fact is "material" if it might reasonably affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Matter of Gleasman, 933 F.2d 1277, 1281 (5th Cir. 1991).
ERISA preemption is an affirmative defense which musts be proved by the defendant at trial. Dueringer v. General American Life Insurance Co., 842 F.2d 127, 130 (5th Cir. 1988). When a party with the burden of proof seeks summary judgment on an affirmative defense, it must establish "beyond peradventure all of the essential elements of the . . . defense to warrant judgment in [its] favor." Chaplin v. NationsCredit Corp., 307 F.3d 368, 372 (5th Cir. 2002), quoting Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). The burden then shifts to the nonmovant to demonstrate the existence of a genuine issue of material fact. See Duckett v. City of Cedar Park, 950 F.2d 272, 276 (5th Cir. 1992). The parties may satisfy their respective burdens by tendering depositions, affidavits, and other competent evidence. Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir), cert. denied, 113 S.Ct. 82 (1992). All evidence must be viewed in the light most favorable to the party opposing the motion. Rosado v. Deters, 5 F.3d 119, 122 (5th Cir. 1993).
III.
ERISA is "a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans." Shaw v. Delta Air Lines, 463 U.S. 85, 90, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983); Rozzell v. Security Services, Inc., 38 F.3d 820, 821 (5th Cir. 1994). Section 514(a) of ERISA provides that "the provisions of this subchapter . . . shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan . . ." 29 U.S.C. § 1144(a). The Supreme Court has broadly interpreted this provision to prevent the remedies available under ERISA from being "supplemented or supplanted by varying state laws." Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 56, 107 S.Ct. 1549, 1558, 95 L.Ed.2d 39 (1987); see also Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1217 (5th Cir.), cert. denied, 113 S.Ct. 68 (1992). A state law "relates to" a benefit plan if it has "a connection with or reference to such a plan." Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 2389, 85 L.Ed.2d 728 (1985), quoting Shaw, 103 S.Ct. at 2900.
In analyzing an ERISA preemption defense, the court must engage in a two-step inquiry. First, the court must decide whether the insurance policy at issue constitutes an ERISA plan. See McNeil v. Time Insurance Co., 205 F.3d 179, 189 (5th Cir. 2000), cert. denied, 121 S.Ct. 1189 (2001). Second, if there is such a plan, the court must determine whether ERISA preempts the state law claims asserted by plaintiff. Id. The court will address these issues in turn.
A.
ERISA defines an "employee welfare benefit plan" as "any plan, fund or program . . . established or maintained by an employer . . . for the purpose of providing for participants or their beneficiaries, through the purchase of insurance or otherwise, (A) . . . benefits in the event of sickness, accident or disability . . ." 29 U.S.C. § 1002(1). To determine whether a particular plan qualifies as an ERISA plan, the court must consider whether the plan (1) exists, (2) falls within the safe harbor exclusion established by the Department of Labor, and (3) is established or maintained by the employer for the purpose of benefitting the plan participants. See McNeil, 205 F.3d at 189, citing Meredith v. Time Insurance Co., 980 F.2d 352, 355 (5th Cir. 1993).
1.
The threshold inquiry is whether an ERISA plan exists. The Fifth Circuit has held that an ERISA plan exists if a reasonable person could ascertain from the surrounding circumstances "the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits." Memorial Hospital System v. Northbrook Life Insurance Co., 904 F.2d 236, 240 (5th Cir. 1990), citing Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir. 1982) (en banc). That test is easily met here. The long-term disability insurance policy issued by defendant provides "income replacement benefits for Total Disability from Sickness or Injury" to eligible full-time employees of PCM. ( See Def. MSJ App. at 1, 8). Such benefits are calculated as a percentage of the employee's monthly earnings. ( Id. at 6-7). PCM paid all premiums under the policy. ( Id. at 39, ¶ 7). The procedures for filing claims and receiving benefits are clearly set out in the policy and, in fact, were followed by plaintiff in this case. ( Id. at 13-14). Thus, a reasonable person could readily ascertain that plaintiff and other full-time employees of PCM were the intended beneficiaries of the insurance policy.
Plaintiff tacitly concedes that he meets the eligibility requirements of the policy.
In an attempt to refute the existence of an ERISA plan, plaintiff points out that defendant "does not identify the corpus from which benefits will be paid as required by ERISA." (Plf. MSJ Resp. at 8). However, in order to establish a "source of financing" for the policy, defendant need show only that PCM was responsible for paying the premiums. See Salameh v. Provident Life Accident Insurance Co., 23 F.Supp.2d 704, 710 (S.D. Tex. 1998) (giving weight to the fact that the employer was solely responsible for paying insurance premiums). The court therefore concludes as a matter of law that an ERISA plan exists.
2.
The Department of Labor has promulgated regulations exempting certain group or group-type insurance programs from ERISA. See 29 C.F.R. § 2510.3-1(j) (1999). Under these "safe harbor" regulations, an insurance policy is not subject to ERISA if: (1) no contributions are made by the employer; (2) participation in the program is completely voluntary for employees; (3) the employer's role is limited to collecting premiums and remitting them to the insurer; and (4) the employer receives no consideration in the form of cash or otherwise in connection with the program. Id.; see also Meredith, 980 F.2d at 355. A plan must meet all four criteria to be exempt. See id. Here, the uncontroverted summary judgment evidence establishes that PCM paid all premiums for coverage under the policy. (Def. MSJ App. at 39, ¶ 7). As a result, the group long-term disability policy does not fall within the "safe harbor" regulations.
Plaintiff maintains that a fact issue exists as to whether his participation in the plan was voluntary. Assuming arguendo that such is the case, that fact issue is not "material" for summary judgment purposes because PCM made contributions to the plan in the form of premium payments under the policy.
3.
ERISA also requires that the plan be established or maintained by the employer for the purpose of benefitting the plan participants. 28 U.S.C. § 1002(1); see also McNeil, 205 F.3d at 189. Plaintiff argues that the mere existence of a group insurance policy is insufficient to prove that an ERISA plan was established. While this may be true, "the purchase of a policy or multiple policies covering a class of employees offers substantial evidence that a plan, fund, or program has been established." Memorial Hospital System, 904 F.2d at 242, quoting Donovan, 688 F.2d at 1373. The summary judgment evidence shows that PCM offered long-term disability insurance, as well as health insurance, to its full-time employees. This suggests that the disability policy was part of an "overall design of employee benefits" constituting an ERISA plan. Salameh, 23 F.Supp.2d at 710; see also Gonzales v. Prudential Insurance Co. of America, 901 F.2d 446, 452 (5th Cir. 1990) (disability plan funded through purchase of insurance may be categorized as "employee benefit plan").Plaintiff further contends that his employer did not actively administer the disability policy and failed to create formal plan documents or file annual reports. As previously discussed, PCM was solely responsible for paying monthly premiums under the policy. (Def. MSJ App. at 39, ¶ 7). This is sufficient to show that an ERISA plan was established and maintained for the purpose of benefitting plaintiff and other full-time employees of PCM. See McNeil, 205 F.3d at 189 (holding that employer established ERISA plan by filing an application, signing a contract, and paying initial premium under the policy); Memorial Hospital System, 904 F.2d at 242. Nor does the failure to file formal plan documents or annual reports, as contemplated by the ERISA statute, take the disability policy outside the scope of ERISA. "A formal document designated as `the Plan' is not required to establish that an ERISA plan exists; otherwise, employers could avoid federal regulations merely by failing to memorialize their employee benefit programs in a separate document so designated." Memorial Hospital System, 904 F.2d at 241.
Finally, plaintiff argues that PCM was not sufficiently involved in interstate commerce to implicate ERISA. The court disagrees. PCM, a Texas corporation, purchased the policy from defendant, an out-of state company headquartered in Illinois. This is a sufficient nexus to interstate commerce for ERISA purposes. McNeill, 205 F.3d at 191 (noting that the extent of involvement in interstate commerce is "not a matter of degree").
B.
Having determined that an ERISA plan exists, the court must decide whether ERISA preempts the state law claims asserted by plaintiff in this lawsuit. ERISA preempts a state law claim "if that claim addresses an area of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan, and if that claim affects the relationship between traditional ERISA entities." McNeil, 205 F.3d at 191, citing Dial v. NFL Player Supplemental Disability Plan, 174 F.3d 606, 611 (5th Cir. 1999); see also Memorial Hospital System, 904 F.2d at 245 (identifying the traditional ERISA entities as the employer, the plan and its fiduciaries, and the participants and beneficiaries). Plaintiff's claims for breach of contract, fraud, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code and Texas Deceptive Trade Practices Act implicate his right to receive benefits under the terms of a disability insurance policy established and maintained by his employer. Such claims also directly affect the relationship between plaintiff and defendant with respect to the obligations owed under the policy. Consequently, all these claims are preempted by ERISA. See, e.g. McNeil, 205 F. 3d at 191 (holding that state law claims for breach of contract, breach of the duty of good faith and fair dealing, and violations of Texas Insurance Code are preempted by ERISA); Wise v. Lucent Technologies Inc. Pension Plan, 102 F.Supp.2d 733 (S.D. Tex. 2000) (same as to claims for fraud and violations of Texas Deceptive Trade Practices Act and Texas Insurance Code); Salameh, 23 F.Supp.2d at 718 (same as to claim under Texas Insurance Code).
As alternative relief in the event summary judgment is granted in favor of defendant, plaintiff seeks leave to amend his complaint to sue PCM "for their many failures to comply with ERISA." (Plf. MSJ Resp. at 17). The court notes that the deadline for amending pleadings and joining additional parties expired more than five months ago on January 23, 2004. See REV. SCH. ORDER, 12/2/03 at 2, ¶¶ 4 5. Plaintiff has failed to allege, much less prove, good cause for extending this deadline. See FED.R.CIV. P. 16(b) (scheduling order shall not be modified except upon a showing of good cause); SW Enterprises, L.L.C. v. Southtrust Bank of Alabama, N.A., 315 F.3d 533, 536 (5th Cir. 2003) ("Only upon the movant's demonstration of good cause to modify the scheduling order will the more liberal standard of Rule 15(a) apply to the district court's decision to grant or deny leave [to amend].")
CONCLUSION
Defendant's motion for summary judgment is granted in its entirety. The court will dismiss all claims asserted by plaintiff by separate judgment issued today.SO ORDERED.