Opinion
Civil Action No. 00-2144-KHV.
July 28, 2000.
MEMORANDUM AND ORDER
Plaintiffs bring suit against Lumbermens Mutual Casualty Company, alleging a violation of 29 U.S.C. § 1132 (a)(1)(B) of the Employee Retirement Security Act of 1974 ("ERISA"). This matter comes before the Court on Defendant's Motion To Dismiss Plaintiffs' Second Amended Complaint (Doc. #11) filed May 26, 2000. Defendant argues that plaintiffs' complaint does not state a claim upon which relief can be granted under Fed.R.Civ.P. 12(b)(6). For reasons stated below, defendant's motion is overruled.
Factual Background
The following is a summary of the facts alleged in plaintiff'sSecond Amended Complaint (Doc. #9) filed May 12, 2000. On November 21, 1997, plaintiffs' son Matthew Lange was severely injured in a car accident. As a result, he suffered quadriplegia and lost all use of his hands and feet. At the time of the accident, plaintiff Trudy Lange was a direct participant in defendant's Voluntary Accident Plan ("the plan"), under which Matthew Lange was a beneficiary.
Plaintiffs made a benefits claim for the injuries to Matthew's hands and feet. Defendant denied the claim because Matthew's hands and feet had not been severed and his injuries were not covered by the plan. On June 14, 1998, plaintiffs requested a first level review of the denial. On August 5, 1998, defendant denied the claim on the same grounds as the initial denial. The plan provides a second-level review. Plaintiffs did not seek second-level review, however, because further appeal was futile in light of how defendant interpreted the plan.
Standard For 12(b)(6) Motion To Dismiss
In ruling on a motion to dismiss for failure to state a claim under Rule 12(b)(6) the Court must assume as true all well pleaded facts in plaintiffs' complaint and view them in a light most favorable to plaintiffs. See Zinermon v. Burch, 494 U.S. 113, 118 (1990); see also Swanson v. Bixler, 750 F.2d 810, 813 (10th Cir. 1984). The Court must make all reasonable inferences in favor of plaintiffs. See Zinermon, 494 U.S. at 118; see also Fed.R.Civ.P. 8(a); Lafoy v. HMO Colorado, 988 F.2d 97, 98 (10th Cir. 1993). The Court, however, need not accept as true those allegations that are conclusory in nature,i.e., those which state legal conclusions rather than factual assertions. See Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir. 1991).
The issue in reviewing the sufficiency of plaintiffs' complaint is not whether they will prevail, but whether they are entitled to offer evidence to support their claim. See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). The Court may not dismiss a cause of action for failure to state a claim unless it appears beyond a doubt that plaintiffs can prove no set of facts in support of their theory of recovery that would entitle them to relief. See Conley v. Gibson, 355 U.S. 41, 45-46 (1957); see also Jacobs, Visconsi Jacobs, Co. v. City of Lawrence, 927 F.2d 1111, 1115 (10th Cir. 1991). Although plaintiffs need not precisely state each element of their claim, they must plead minimal factual allegations on those material elements that must be proved. See Hall, 935 F.2d at 1110.
Analysis
Plaintiffs bring an ERISA claim under 29 U.S.C. § 1132 (a)(1)(B) to recover benefits allegedly due under defendant's plan. An implicit prerequisite to bringing an ERISA claim is the exhaustion of administrative remedies. See Gaylor v. John Hancock Mut. Life Ins. Co., 112 F.3d 460, 467 (10th Cir. 1997); Held v. Manufacturers Hanover Leasing Corp., 912 F.2d 1197, 1205-06 (10th Cir. 1990). "[D]istrict courts have eschewed exhaustion under two limited circumstances: first, when resort to administrative remedies would be futile; or, second, when the remedy provided is inadequate." McGraw v. Prudential Ins. Co. of Am., 137 F.3d 1253, 1263 (10th Cir. 1998) (citing Counts v. American General Life Acc. Ins. Co., 111 F.3d 105, 108 (11th Cir. 1997) and Communications Workers of Am. v. ATT, 40 F.3d 426, 432 (D.C. Cir. 1994)).
Defendant claims that plaintiffs failed to exhaust their administrative remedies by failing to request second-level review. Plaintiffs contend that second-level review is optional and that they therefore exhausted administrative remedies. Plaintiffs' argument is without merit because "[r]egardless of the plan's requirements, the law requires exhaustion of administrative remedies as a prerequisite to filing suit." Rando v. Standard Ins. Co., No. CIV.A. 96-1153, 1998 WL 227155, at *1 (D. Kan. May 1, 1998), aff'd, 182 F.3d 933, 1999 WL 317497 at *3 (10th Cir. 1999). Therefore, by not requesting a second-level review, plaintiffs failed to exhaust their administrative remedies.
In the alternative, plaintiffs contend that the exhaustion requirement is waived because they fall under the futility exception. Specifically, plaintiffs allege that they did not seek second-level review "because further appeal was futile in light of the manner in which the plan provisions were being interpreted by the Defendant." Second Amended Complaint (Doc. #9) filed May 12, 1999 at 2. Defendants contend that plaintiffs have only made bare allegations of futility and have not satisfied the narrow futility exception defined by the courts. See Communications Workers of Am. v. ATT, 40 F.3d 426, 432 (D.C. Cir. 1994) (citing Randolph-Sheppard Vendors of Am. v. Weinberger, 795 F.2d 90, 105 (D.C. Cir. 1986)). In their complaint, plaintiffs need only plead minimal factual allegations on those material elements that must be proved. See Hall, 935 F.2d at 110; Scheuer, 416 U.S. at 236 (in considering a Rule 12 (b)(6) motion, the issue is not whether plaintiffs will prevail, but whether they are entitled to offer evidence to support their claim). Plaintiffs' allegation of futility satisfies this minimal standard. Here, plaintiffs allege that further review would have been futile based on defendant's previous plan interpretation. Therefore, at this stage, plaintiffs' failure to exhaust the second-level administrative review does not preclude their ERISA claim. Accordingly, defendant's motion to dismiss is overruled.
In response to defendant's motion to dismiss, plaintiffs provided the affidavit of Trudy Lange which states that defendant's benefit administrator told her that she could file a second-level appeal but it would be denied. See affidavit of Trudy Lange ¶ 8, attached to Plaintiffs' Memorandum in Opposition To Defendant's Motion to Dismiss (Doc. #13) filed June 14, 2000. Defendant correctly argues that the Court should not consider the affidavit for purposes of defendant's Rule 12(b)(6) motion. Neither party has asked the Court to convert the motion into a motion for summary judgment under Fed. P. Civ. P. 56(c). Accordingly, the Court will disregard the affidavit.
IT IS THEREFORE ORDERED that Defendant's Motion To Dismiss Plaintiffs' Second Amended Complaint (Doc. #11) filed May 26, 2000 be and hereby is OVERRULED.