Opinion
CV-01-N-1522-S
October 14, 2001
Order
This is an ERISA case. It is before the court on defendant Compass Bank's motion to dismiss counts one and three of the complaint based on ERISA preemption, and its motion to strike plaintiff's jury demand and demand for extracontractual damages.
I. Background.
Plaintiff was employed by defendant Compass Bank as an administrative assistant beginning October 21, 1991 until June 26, 1997. As a benefit of her employment, she was provided short-term and long-term disability through Canada Life Insurance Company. Due to a combination of fibromyalgia, chronic back and neck pain, chronic fatigue, loss of concentration, dysthymic disorder, mitral valve prolapse, and hyperglycemia, plaintiff became unable to continue her employment. Plaintiff's initial application for long-term benefits were denied by Canada Life on May 28, 1998. Upon appeal to the company, the initial denial was upheld. Based on a decision by the Social Security Administration that the plaintiff was in fact disabled, plaintiff again applied for long-term disability benefits with Canada Life. Not only was the request denied, Canada Life informed plaintiff that her disability occurred after the cancellation of the policy under which she sought benefits and that Canada Life did not receive initial proof that she was disabled within twelve months of the effective date of disability.
Plaintiff filed a three-count complaint in Jefferson County Circuit Court, alleging breach of contract, violation of ERISA, and bad faith. Defendants removed the action to this court. Defendant Compass Bank filed a motion to dismiss the portions of plaintiff's complaint alleging state law causes of action: breach of contract and bad faith. Compass Bank also moved this court to strike plaintiff's jury demand and claim for extracontractual damages. For the reasons stated herein, the motions will be granted.
II Standard.
A motion to dismiss tests the legal sufficiency of a claim. Brooks v. Blue Cross Blue Shield, 116 F.3d 1364, 1368 (11th Cir. 1997). The court may dismiss a claim only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Hughes v. Rowe, 449 U.S. 5, 10 (1980); Conley v. Gibson, 355 U.S. 41, 45-46 (1957). For the purpose of ruling on a 12(b)(6) motion to dismiss, the court will accept as true all well-pleaded factual allegations of the complaint. Moreover, it views them in a light most favorable to the non-moving party. See Hishon v. King Spalding, 467 U.S. 69, 73 (1984); Burch v. Apalachee Community Mental Health Servs., 840 F.2d 797, 798 (11th Cir. 1988) (en banc).
III. Discussion.
A. Motion to Dismiss Bad Faith Count.
Defendant argues that plaintiff's bad faith claim is preempted by ERISA. Plaintiff responds that recent Supreme Court precedent indicates that such is no longer the case. The court notes that there is significant disagreement within the district courts of this state over the issue of whether a cause of action for bad faith based on Alabama law is preempted by ERISA. Compare Hill v. Blue Cross Blue Shield of Ala., 117 F. Supp.2d 1209 (N.D. Ala. 2000) (Acker, J.) (Alabama bad faith claim is not preempted by ERISA); Gilbert v. Alta Health Life Ins. Co., 122 F. Supp.2d 1267 (N.D. Ala. 2000) (Johnson, J.) (same); Hird v. Bostrom Seating, Inc., 147 F. Supp.2d 1190 (N.D. Ala. 2001) (Buttram, J.) (same) with English v. Capital Risk Mg't, Inc., 2001 WL 910412 (M.D. Ala. 2001) (DeMent, J.) (ERISA preempts Alabama cause of action for bad faith); Harrelson v. Blue Cross Blue Shield of Ala., 150 F. Supp.2d 1290 (M.D. Ala. 2001) (Albritton, C.J.) (same); Hooper v. Albany International Corp., 149 F. Supp.2d 1315 (M.D. Ala. 2001) (Albritton, C.J.) (same); Salva v. Blue Cross Blue Shield of Ala., 2001 WL 1006774 (S.D. Ala. 2001) (Steele, Mag.) (same); Hardy v. Welch, 135 F. Supp.2d 1171 (M.D. Ala. 2000) (Thompson, J.) (same). With all due respect to those courts that have held otherwise, this court finds that Alabama's cause of action for bad faith is preempted by ERISA.
There are two types of ERISA preemption with which courts are concerned: complete preemption (or superpreemption) and defensive preemption. Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1211 (11th Cir. 1999). "Superpreemption arises from Congress's creation of a comprehensive remedial scheme in 29 U.S.C. § 1132 for loss or denial of benefits." Id. Defensive preemption "originates in ERISA's express preemption provision, 29 U.S.C. § 1144(a)," which reads in pertinent part: "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 . . . ." 29 U.S.C. § 1144(a); Id.
A claim is completely preempted by ERISA "when the Plaintiff is seeking relief that is available under 29 U.S.C. § 1132(a)." Butero, 174 F.3d at 1212 (internal quotations omitted). Such relief is available if four requirements are met: there is a relevant ERISA plan, the plaintiff has standing to sue under that plan, the defendant is an ERISA entity, and the complaint seeks compensatory relief akin to that available under 29 U.S.C. § 1132. Id. None of these four requirements is seriously in dispute in the present case. There is a relevant ERISA plan, plaintiff is a beneficiary under that plan and thus is entitled to sue under it, defendant is an ERISA entity, and the complaint seeks compensatory relief available under § 1132(a). See id. at 1213 (bad faith claim seeks to recover damages available under § 1132(a)). Therefore, plaintiff's bad faith claim is completely preempted by ERISA.
Turning to defensive preemption, plaintiff argues that her bad faith claim is saved from preemption because it falls within an exception to ERISA's defensive preemption statute. This exception states that the laws of a state that regulate insurance are not defensively preempted by ERISA. See 29 U.S.C. § 1144(b)(2)(A). Plaintiff notes the recent Supreme Court opinion in UNUM Life Ins. Co. v. Ward, 526 U.S. 358 (1999), and points specifically to two recent Northern District of Alabama decisions that relied on Ward as authority for allowing bad faith actions within the ERISA context. These cases held that because the Alabama cause of action for bad faith is limited solely to the insurance industry, it is a law that regulates insurance and is therefore saved from preemption by ERISA. See Hill v. Blue Cross Blue Shield of Ala., 117 F. Supp.2d 1209 (N.D. Ala. 2000); Gilbert v. Alta Health Life Ins. Co., 122 F. Supp.2d 1267 (N.D. Ala. 2000).
Whatever the merits of this argument, however, it fails to note the effect of complete preemption under ERISA. Simply put, just because a claim is based on a state law that regulates insurance and is not defensively preempted does not mean that the claim is not completely preempted by ERISA. As Chief Judge Albritton of the Middle District of Alabama has noted, "the saving clause alone cannot save Plaintiff's claim from preemption because Plaintiff's bad faith claim is subject to complete preemption under the civil enforcement provision of ERISA." Hooper v. Albany International Corp., 149 F. Supp.2d 1315, 1322 (M.D. Ala. 2001). Even if the Supreme Court's opinion in Ward altered the analysis of defensive preemption under ERISA, the Court expressly refused to reach the issue of complete preemption. See Ward 526 U.S. at 376 n. 7. Thus, Eleventh Circuit precedent regarding complete preemption remains unchanged. Because plaintiff's bad faith claim is superpreempted, it is necessarily defensively preempeted. Butero, 174 F.3d at 1215. As a result, the claim is due to be dismissed.
Because the court finds that the plaintiff's bad faith claim is completely preempted, it does not reach the issue of whether Ward alters prior Eleventh Circuit precedent holding that the tort of bad faith is not saved by the savings clause.
B. Motion to Dismiss Breach of Contract Count.
For the reasons set forth above, the court also finds that plaintiff's breach of contract claim is completely preempted by ERISA and is therefore due to be dismissed. See Butero, 174 F.3d at 1213.
C. Motion to Strike Punitive and Extracontractual Damages.
Based on the reasoning set forth above, to the extent that the plaintiff seeks any damages or remedies not available under ERISA's remedial scheme, defendant's motion to strike these damages or remedies will be granted. See also Bishop v. Osburn Transp., Inc., 838 F.2d 430 [ 838 F.2d 1173] (11th Cir. 1988).
D. Motion to Strike Jury Demand.
Because the Eleventh Circuit has held that there is no right to a jury under ERISA, this motion will be granted. See Hunt v. Hawthorne Assoc., Inc., 119 F.3d 888, 907 (11th Cir. 1997).
IV. Conclusion.
Defendant's motion to dismiss plaintiff's bad faith count is GRANTED. Defendant's motion to dismiss plaintiff's breach of contract count is GRANTED. Defendant's motion to strike plaintiff's jury demand and extracontractual damages is GRANTED.