Opinion
CIVIL ACTION NO. 08-11730-NG.
July 27, 2009
Byrne J. Decker, Pierce Atwood, Portland, ME, representing UNUM Life Insurance Company of America Defendant.
Samuel M. Furgang, Sugarman, Rogers, Barshak Cohen, P.C., Boston, MA, representing Perry Dean Rogers And Partners, Architects, Inc. Defendant.
Nikolas P. Kerest, Pierce Atwood LLP, Portland, ME, representing UNUM Life Insurance Company of America Defendant.
Gail P. Kingsley, Libby O'Brien Kingsley, LLC, Kennebunk, ME, representing Alice Hyde Rogers Plaintiff.
Gene R. Libby, Libby O'Brien Kingsley, LLC, Kennebunk, ME, representing Alice Hyde Rogers Plaintiff.
Victoria A. Sarfo-Kantanka, Libby O'Brien Kingsley, LLC, Kennebunk, ME, representing Alice Hyde Rogers Plaintiff.
REPORT AND RECOMMENDATION ON DEFENDANT'S MOTION TO DISMISS AND ON PLAINTIFF'S MOTION TO REMAND
I. INTRODUCTION
By this action, plaintiff Alice Hyde Rogers ("Rogers") is seeking to recover damages in the amount of death benefits that she claims she should have been entitled to under the terms of a group life insurance policy issued by defendant Unum Life Insurance Co. ("Unum") to Rogers' deceased husband's employer, defendant Perry Dean Rogers and Partners, Architects, Inc. ("PDR"). Rogers claims that the defendants' failure to timely notify Mr. Rogers of his right to convert his group life insurance policy to an individual policy, and their misrepresentations concerning the status of his coverage, resulted in the lapse of his coverage and prevented him from obtaining an alternative life insurance policy prior to his death.
Rogers originally filed her complaint in state court, and on October 10, 2008, the defendants removed the case to this court. On April 29, 2009, this court allowed Rogers' motion to voluntarily dismiss all of her claims against Unum with prejudice, thereby leaving PDR as the sole defendant in the case. As set forth in her Amended Complaint (Docket No. 8), Rogers is asserting claims against PDR for breach of contract/promissory estoppel (Count I), breach of fiduciary duty (Count II), breach of good faith and fair dealing (Count III), breach of good faith and due care (Count IV), negligence (Count V) and negligent misrepresentation (Count VI).
Presently before the court is PDR's motion to dismiss (Docket No. 11) by which PDR is seeking dismissal of all of Rogers' claims on the grounds that they are preempted by the Employee Retirement Income Security Act ("ERISA"). In support of its motion, PDR contends that the Unum group life insurance policy is an employee benefit plan that is regulated by ERISA. It further contends that Rogers' claims are preempted both because they "relate to" an ERISA plan and because they conflict with ERISA's exclusive scheme for the resolution of disputes involving benefits. The plaintiff does not dispute that the insurance policy at issue in this case constitutes an ERISA plan or that dismissal is appropriate if her claims are determined to be preempted. However, she disputes that ERISA preemption applies and that her claims arise under federal law.
In support of its motion, PDR incorporated by reference the arguments made by Unum in its motion to dismiss, which was filed before Rogers voluntarily dismissed Unum from the case. This court has agreed to consider Unum's arguments in connection with PDR's motion to dismiss.
Also before the court is the plaintiff's motion to remand the case to state court (Docket No. 12). By her motion, Rogers contends that her claims arise under state law, not ERISA. She further claims that because there is no basis to support this court's exercise of federal jurisdiction over this case, the matter must be remanded to the Massachusetts Superior Court. Thus, the question whether Rogers' claims are preempted by ERISA is dispositive of each of the pending motions.
For the reasons detailed below, this court finds that federal jurisdiction over this action is appropriate, and that Rogers' state law claims are preempted by ERISA. Accordingly, this court recommends to the District Judge to whom this case is assigned that PDR's motion to dismiss be ALLOWED and that Rogers' motion to remand be DENIED. However, because it is possible that Rogers may be able to state a claim against PDR that falls outside the scope of ERISA preemption, this court recommends that the dismissal be without prejudice.
II. STATEMENT OF FACTS
When ruling on a motion to dismiss, the court must accept as true all well-pleaded facts, and give the plaintiff the benefit of all reasonable inferences. See Cooperman v. Individual, Inc., 171 F.3d 43, 46 (1st Cir. 1999). "Ordinarily, of course, any consideration of documents not attached to the complaint, or not expressly incorporated therein, is forbidden, unless the proceeding is properly converted into one for summary judgment under Rule 56." Watterson v. Page, 987 F.2d 1, 3 (1st Cir. 1993). However, there is a narrow exception "for documents the authenticity of which are not disputed by the parties; for official public records; for documents central to plaintiffs' claim; or for documents sufficiently referred to in the complaint." Id. Applying this standard to the instant case, the relevant facts are as follows.
This court has not considered facts set forth in documents attached to the parties' briefs, except to the extent that such documents have been referred to in the Amended Complaint.
The Unum Life Insurance Policy
The plaintiff is the widow of Charles Rogers, an individual who was domiciled in Massachusetts. (Am. Compl. ¶ 2). Mr. Rogers was a Principal of defendant PDR, and remained employed at the company until July 31, 2007. (Id. ¶ 7). PDR is a Massachusetts corporation having a place of business in Boston. (Id. ¶ 3).
During the time when Mr. Rogers was employed at PDR, the company maintained a Group Life and Group Accidental Death and Dismemberment Insurance Policy ("Contract" or "Insurance Contract"), which was issued by Unum and became effective on September 15, 1985. (Id. ¶¶ 1, 18). Rogers claims that her husband was insured under the Insurance Contract, and that both Mr. Rogers and PDR intended that Mr. Rogers remain insured under the Insurance Contract as long as he was an employee of PDR. (Id. ¶¶ 1, 20).
Pursuant to the Insurance Contract, life insurance benefits were available to "Employees Only," including "Principals" and "All Other Employees" of PDR. (Contract at UASP10003). An "Employee" was defined to mean "a person in active employment with the employer." (Id. at UASP10008). To be considered a person in "active employment" under the Contract, the employee had to be working "for the employer on a permanent full-time basis" for at least 20 hours per week "at the employer's usual place of business; or . . . at a location to which the employer's business require[d] the employee to travel." (Id. at UASP10005, UASP10008). With certain limited exceptions that are not relevant here, an employee would cease to be insured "if he cease[d] active employment." (Id. at UASP10017). The policyholder, PDR, was responsible for providing Unum with information regarding employees whose insurance terminated under the terms of the Insurance Contract. (Id. at UASP10019).
The Contract is attached as Exhibit 1 to Unum's motion to dismiss (Docket No. 10).
The Insurance Contract also provided for life insurance conversion privileges by which an employee who became ineligible for benefits under the Contract could obtain coverage under a separate, individual policy. Specifically, the Insurance Contract provided in relevant part that Unum would agree to issue a personal life policy without evidence of insurability to "an employee if that employee's life insurance terminates or reduces because he . . . changes job status and so becomes ineligible. . . ." (Id. at UASP10012). However, such a policy would be issued "only if application is made within 31 days after the employee's insurance terminated or reduced" and only if the first premium was paid within that time. (Id. at UASP10013).
The Continued Employment Agreement
On August 31, 2005, Mr. Rogers and PDR entered into a retroactive Continued Employment Agreement ("Agreement"), effective as of August 1, 2004. (Am. Compl. ¶ 8; Agreement at UACL00060). Pursuant to the Agreement, the parties agreed that Mr. Rogers would reduce his time commitment as a partner of PDR, and that he would fully retire from the company at the end of the day on July 31, 2007. (Am. Compl. ¶ 9; Agreement at UACL00060). More specifically, the parties agreed that until his retirement, Mr. Rogers would remain an employee of PDR, but that he would "perform only such services and . . . commit only such time to the affairs of [PDR] as [Mr. Rogers] and [PDR] may mutually agree (with the understanding that there shall be no minimum amount of in-office time required of [Mr. Rogers] under this Agreement)." (Agreement at UACL00061). Additionally, Mr. Rogers agreed to resign as an officer and director of PDR, and the parties agreed that Mr. Rogers would have no further administrative or management responsibilities. (Id. at UACL00065). Mr. Rogers' declining health was a factor in the parties' decision to reduce his employment duties. (Am. Compl. ¶ 10).
A copy of the Continued Employment Agreement between Mr. Rogers and PDR is attached as Exhibit 2 to Unum's motion to dismiss.
Under the Agreement, PDR agreed to pay Mr. Rogers a salary up until the time of his retirement. (Id. ¶¶ 12, 13; Agreement at UACL00061-62). It also agreed to provide Mr. Rogers and the plaintiff with certain benefits. In particular, PDR agreed to make payments to Mr. Rogers' 401(k) Plan account, to maintain short term and long term disability insurance coverage for Mr. Rogers, and to provide certain health and dental insurance benefits to both Mr. Rogers and the plaintiff. (Agreement at UACL00062-65). PDR did not agree to maintain life insurance coverage for Mr. Rogers. (See id.). Nevertheless, PDR continued to pay premiums for Mr. Rogers under the Insurance Contract with Unum until Mr. Rogers' retirement on July 31, 2007. (Am. Compl. ¶ 19). Rogers claims that by doing so, PDR manifested an intention to maintain life insurance coverage for Mr. Rogers under the group policy throughout the remainder of his employment with PDR. (Id. ¶ 24).
PDR's Notification of Conversion Right
At some time prior to July 2007, Paul Belanger of PDR notified the plaintiff that Mr. Rogers would need to convert his group life insurance policy to an individual policy in order to maintain life insurance benefits after his retirement. (Id. ¶ 21). The plaintiff responded by e-mail to Mr. Belanger on July 16, 2007, asking him when Mr. Rogers would receive the paperwork necessary to complete the conversion. (Id. ¶ 22). According to Rogers, she completed the applicable paperwork and submitted it to Unum on Mr. Rogers' behalf, along with a check for the first premium payment, within the time frame that PDR stated was necessary to effectuate the conversion. (Id. ¶ 23).
Rogers and her husband believed that Mr. Rogers would remain insured under the Insurance Contract until his retirement on July 31, 2007, and that he would continue to be insured under an individual policy thereafter. (Id. ¶¶ 27-28). The plaintiff claims that their understanding was based on statements by PDR and Unum in which the defendants "reiterated that Mr. Rogers was insured under the Contract until that time" and on statements by the defendants regarding the deadline for submitting the conversion paperwork. (Id.). According to Rogers, based on e-mail correspondence that she had with PDR and Unum, the defendants also believed that Mr. Rogers was insured under the Insurance Contract until the date of his retirement. (Id. ¶ 26).
Unum's Denial of Benefits
Mr. Rogers died on August 13, 2007. (Id. ¶ 30). Although Mr. Rogers was retired and no longer an employee of PDR at that time, both the Rogers and PDR believed that his death had occurred within the grace period provided under state law, and that death benefits would be payable under the Insurance Contract. (Id. ¶ 29). Accordingly, PDR filed a claim on the plaintiff's behalf for life insurance benefits under the Contract with Unum. (Id. ¶ 30). However, Unum denied the claim. (Id. ¶ 31).
Unum initially provided various reasons for its denial, but ultimately stated that Mr. Rogers' coverage under the Insurance Contract had ended in August 2004, at the earliest, or in November 2005 at the latest. (Id. ¶ 31-32). According to Unum, its determination was based upon information which indicated that Mr. Rogers did not meet the minimum number of hours required by the Contract after August 1, 2004, and therefore, was no longer in "active employment" after that date. (Unum's Mot. to Dismiss (Docket No. 10) at 4). In light of Unum's conclusion, Rogers' 2007 application for an individual policy would have been submitted too late to satisfy the Contract's requirement that any application for conversion privileges be made "within 31 days after the employee's insurance terminated or reduced." (Contract at UASP10013).
Despite Unum's position, PDR assured Rogers that it would work with her and Unum to recover the benefits that PDR believed she was entitled to under the Insurance Contract. (Am. Compl. ¶ 33). Eventually, however, PDR assented to Unum's decision that coverage was unavailable. (Id. ¶ 34).
In addition to her contract-based claims, Rogers claims that PDR was obligated under Mass. Gen. Laws ch. 175, § 134A to notify Mr. Rogers of his right to convert to an individual life insurance policy within a certain period of time following the occurrence of a qualifying event that would end coverage under the group policy, but that it failed to do so. (Id. ¶¶ 35-37, 45). She also alleges that PDR's failure to provide Mr. Rogers with timely and appropriate notice of his conversion privilege resulted in Mr. Rogers' loss of coverage under the Contract and prevented him from obtaining another life insurance policy prior to his death. (Id. ¶¶ 37-38). According to Rogers, "[b]ecause of [PDR's] statements and actions, Mr. Rogers' life insurance coverage under the Contract lapsed, and [she] was denied benefits she would have been entitled to under the Contract." (Id. ¶ 39).
Mass. Gen. Laws ch. 175, § 134A provides: "If any individual insured under a group life insurance policy hereafter issued becomes entitled under the terms of such policy to convert to another type of life insurance within a specified time after the happening of an event, such certificate-holder shall be notified of such privilege and its duration within fifteen days after the happening of the event; provided, that if such notice be given more than fifteen days, but less than ninety days after the happening of such event, the time allowed for the exercise of such privilege of conversion shall be extended for fifteen days after the giving of such notice. If such notice be not given within ninety days after the happening of the event, the time allowed for the exercise of such conversion privilege shall expire at the end of such ninety days. Written notice by the employer given to the certificate-holder or mailed to the certificate-holder at his last known address, or written notice by the insurer mailed to the certificate-holder at the last address furnished to the insurer by the employer, shall be deemed full compliance with the provisions of this subdivision for the giving of notice."
Additional factual details relevant to the court's analysis are described below.
III. ANALYSIS
A. Applicable Standards of Review 1. Motions to Dismiss
Motions to dismiss under Rule 12(b)(6) test the sufficiency of the pleadings. Thus, when confronted with a motion to dismiss, the court accepts as true all wellpleaded facts and draws all reasonable inferences in favor of the plaintiff. Cooperman, 171 F.3d at 46. Dismissal is only appropriate if the complaint, so viewed, fails to allege a "plausible entitlement to relief."Rodriguez-Ortiz v. Caribe, 490 F.3d 92, 95 (1st Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559, 127 S. Ct. 1955, 1967, 167 L. Ed. 2d 929 (2007)).
"A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). This "plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Bell Atl. Corp., 550 U.S. at 557, 127 S. Ct. at 1966) (additional quotations omitted).
2. Removal and Remand of ERISA Cases
"Under the removal statute, 'any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant' to federal court." Aetna Health Inc. v. Davila, 542 U.S. 200, 207, 124 S. Ct. 2488, 2494, 159 L. Ed. 2d 312 (2004) (quoting 28 U.S.C. § 1441(a)). "One category of cases of which district courts have original jurisdiction is '[f]ederal question' cases: cases 'arising under the Constitution, laws, or treaties of the United States.'" Id. (quoting 28 U.S.C. § 1331).
"Ordinarily, determining whether a particular case arises under federal law turns on the "well-pleaded complaint" rule." Id. (quotations and citation omitted). Under that rule, removal is appropriate only if the plaintiff's statement of his own claim establishes the basis for federal jurisdiction. See id. "But there is an exception to this practice of focusing on the face of the complaint. Where a claim, though couched in the language of state law, implicates an area of federal law for which Congress intended a particularly powerful preemptive sweep, the cause is deemed federal no matter how pleaded. This exception to the well-pleaded complaint rule is called 'complete preemption.'"Danca v. Private Health Care Sys., Inc., 185 F.3d 1, 4 (1st Cir. 1999) (internal citation omitted). Causes of action that fall within the civil enforcement provisions of § 502(a) of ERISA are completely preempted. Id. See also Aetna Health Inc., 542 U.S. at 211, 124 S. Ct. at 2496. "For this to occur, the state law must be properly characterized as an 'alternative enforcement mechanism' of ERISA § 502(a) or of the terms of an ERISA plan."Danca, 185 F.3d at 5.
"[T]he detailed provisions of § 502(a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 107 S. Ct. 1549, 1556, 95 L. Ed. 2d 39 (1987) (additional citations omitted).
ERISA § 502(a)
"Congress enacted ERISA to 'protect . . . the interests of participants in employee benefit plans and their beneficiaries' by setting out substantive regulatory requirements for employee benefit plans and to 'provid[e] for appropriate remedies, sanctions, and ready access to the Federal courts.'" Aetna Health Inc., 542 U.S. at 208, 124 S. Ct. at 2495 (quoting 29 U.S.C. § 1001(b)). "The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans." Id. In order to accomplish these goals, the statute includes comprehensive civil enforcement provisions, which are set forth in Section 502(a), 29 U.S.C. § 1132(a). See id. at 208-09, 124 S. Ct. at 2495. Those provisions provide in relevant part that "[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." 29 U.S.C. § 1132(a)(1)(B). Thus, under Section 502(a),
[i]f a participant or beneficiary believes that benefits promised to him under the terms of the plan are not provided, he can bring suit seeking provision of those benefits. A participant or beneficiary can also bring suit generically to 'enforce his rights' under the plan, or to clarify any of his rights to future benefits.Aetna Health, Inc., 542 U.S. at 210, 124 S. Ct. at 2496.
"[A]ny state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted." Id., 542 U.S. at 209, 124 S. Ct. at 2495. Such causes of actions include, for example, state tort claims "that allege the improper processing of a claim for benefits under an ERISA-covered plan[.]" Danca, 185 F.3d at 5. They also include common law contract and tort claims brought "by a beneficiary to recover benefits from a covered plan[.]" Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 62-63, 107 S. Ct. 1542, 1546, 95 L. Ed. 2d 55 (1987). Thus, if Rogers' state law claims fall within the provisions of § 502(a), the case was properly removed to this court.
ERISA § 514
ERISA also contains an "express preemption" provision, § 514, which provides no basis for federal jurisdiction, but supports the dismissal of claims that have been properly removed. See Danca, 185 F.3d at 4-5 (distinguishing the types of preemption under ERISA). Specifically, Section 514(a) provides that, with certain limited exceptions, ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by the statute. 29 U.S.C. § 1144(a). "A law 'relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." N.Y. State Conference of Blue Cross Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656, 115 S. Ct. 1671, 1677, 131 L. Ed. 2d 695 (1995) ("Travelers") (quotations, alteration and citation omitted).
"The Supreme Court has identified two instances where a state cause of action relates to an employee benefit plan: where the cause of action requires 'the court's inquiry [to] be directed to the plan,' or where it conflicts directly with ERISA." Otero Carrasquillo v. Pharmacia Corp., 466 F.3d 13, 20 (1st Cir. 2006). Accordingly, "a state law cause of action is expressly preempted by ERISA where a plaintiff, in order to prevail, must prove the existence of, or specific terms of, an ERISA plan." McMahon v. Digital Equip. Corp., 162 F.3d 28, 38 (1st Cir. 1998). A state law cause of action is also preempted if it "create[s] a threat of conflicting and inconsistent state and local regulation of the administration of ERISA plans." Danca, 185 F.3d at 7. However, express "[p]re-emption [under Section 514(a)] does not occur . . . if the state law has only a tenuous, remote, or peripheral connection with covered plans, as is the case with many laws of general applicability." Travelers, 514 U.S. at 661, 115 S. Ct. at 1679-80 (quotations and citation omitted; alteration and punctuation in original). As detailed below, this court finds that preemption under both § 502(a) and § 514 apply in the instant case.
Remand
Finally, with respect to Rogers' motion to remand, "[w]here federal jurisdiction is lacking, a federal court may remand a matter . . . on a motion of either party. '[U]pon a motion to remand, the burden is upon the removing party to show that federal subject matter jurisdiction exists.'" Miara v. First Allmerica Fin. Life Ins. Co., 379 F. Supp. 2d 20, 26 (D. Mass. 2005) (quoting Giannetti v. Mahoney, 218 F. Supp. 2d 8, 10 (D. Mass. 2002)). "Generally, '[d]oubts about the propriety of removing an action should be resolved in favor of remand.'" Id. (quoting Giannetti, 218 F. Supp. 2d at 10).
B. Counts I-V: Claims for Breach of Contract, Breach of Fiduciary Duty, Breach of Good Faith and Fair Dealing, Breach of Good Faith and Due Care and Negligence
In Counts I-V, Rogers is asserting claims against PDR for breach of contract/promissory estoppel (Count I), breach of fiduciary duty (Count II), breach of good faith and fair dealing (Count III), breach of good faith and due care (Count IV) and negligence (Count V). Each of these claims is premised upon PDR's alleged failure to comply with promises it made under the Insurance Contract. Furthermore, by these claims, Rogers is seeking remedies under state law for PDR's breach of its obligations under the Contract. Rogers' does not seriously challenge the inescapable conclusion that each of these claims, which relate directly to actions allegedly required under the Insurance Contract, constitute an alternative means of enforcing and/or "relate to" an ERISA plan. Thus, removal to federal court was appropriate under § 502(a), and these state claims are preempted and must be dismissed.
Claims for Breach of Contract Obligations
In support of her breach of contract/promissory estoppel claim, Rogers alleges that PDR "breached the Contract" by failing to provide Mr. Rogers with timely notice of his right to convert, as required by Mass. Gen. Laws ch. 175, § 134A, and by failing to comply with Section VI, D of the Contract concerning the furnishing of information and access to records. (Am. Compl. ¶¶ 45-46). She also alleges that PDR breached the Insurance Contract, and failed to fulfill its promises that Mr. Rogers would remain insured under the Contract until his retirement, by "failing to pay Mrs. Rogers death benefits she would have been entitled to under the Contract." (Id. ¶¶ 47-48).
Similarly, Rogers alleges in support of her claims for breach of fiduciary duty, breach of good faith and fair dealing, and breach of good faith and due care that PDR failed to fulfill its obligations under the Insurance Contract, and that PDR's failure deprived her of death benefits under the Contract. (Id. ¶¶ 51, 57, 64). She further alleges that as a result of the defendant's breaches, she was "unable to act on her right to claim death benefits that . . . she would have been entitled to under her husband's life insurance policy." (Id. ¶¶ 59, 65; see also id. ¶ 52). By her claims, Rogers "seeks to recover damages in the amount of the death benefits that she would have been entitled to under the [Contract]." (Id. ¶ 1).
It is undisputed that the Contract is an ERISA regulated plan. (See Pl. Am. Resp. (Docket No. 17) at 2). Therefore, by her allegations in Counts I-IV, Rogers is seeking to hold PDR liable for breaching its obligations under an ERISA plan. Furthermore, the measure of damages Rogers is seeking is the amount she would have been entitled to under the ERISA plan. "[A]s a suit by a beneficiary to recover benefits from a covered plan, [Rogers' claims] fall [] directly under § 502(a)(1)(B) of ERISA[.]" Metro. Life Ins., 481 U.S. at 62-63, 107 S. Ct. at 1546. Such "an alternative mechanism" for obtaining ERISA plan benefits is subject to complete preemption. See Danca, 185 F.3d at 6.
"ERISA defines 'employee benefit plans' to include both 'employee pension benefit plans' and 'employee welfare benefit plans.'" McMahon, 162 F.3d at 36 (quoting 29 U.S.C. § 1002(3)). An "employee welfare benefit plan" is defined by ERISA as "any plan, fund, or program which . . . is . . . established or maintained by an employer . . . to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise . . . benefits in the event of sickness, accident, disability, [or] death. . . ." Id. (quoting 29 U.S.C. § 1002(1)).
Rogers' contention that her state law claims "are not based on the existence of an ERISA plan and therefore do not 'relate to' an ERISA plan is belied by the allegations of the Amended Complaint. (See Pl. Opp. Mem. (Docket No. 13) at 1).
This court also finds that Counts I-IV are expressly preempted under ERISA § 514(a). "It would be difficult to think of a state law that 'relates' more closely to an employee benefit plan than one that affords remedies for breach of obligations under that plan." Turner v. Fallon Cmty. Health Plan, Inc., 127 F.3d 196, 199 (1st Cir. 1997) (rejecting plaintiff's attempt to obtain "state remedies for what is in essence a plan administrator's refusal to pay allegedly promised benefits"). Additionally, in order to prevail on these claims, Rogers would need to establish the terms of the Insurance Contract and explain how PDR's conduct varied from those terms. The First Circuit has "consistently held that a cause of action 'relates to' an ERISA plan when a court must evaluate or interpret the terms of the ERISA-regulated plan to determine liability under the state law cause of action." Hampers, 202 F.3d at 52. Because each of the claims set forth in Counts I-IV of Rogers' Amended Complaint is preempted by ERISA §§ 502(a) and 514(a), this court recommends that those claims be dismissed.
Claim for Negligence
This court also finds that Rogers' negligence claim, set forth in Count V of the Amended Complaint, is preempted by ERISA § 514(a) because it "relates to" an ERISA plan. In support of this claim, Rogers alleges that PDR's failure to timely notify Mr. Rogers of his right to convert his coverage under the Contract, as required by Mass. Gen. Laws ch. 175, § 134A, and its failure to provide accurate information pursuant to Section VI, D of the Contract, caused Mr. Rogers' coverage to lapse and deprived the plaintiff of death benefits to which she was entitled under the Contract. (Am. Compl. ¶¶ 68-73). She also alleges that the lapse in coverage was due to PDR's negligence. (Id. ¶ 72). To the extent Rogers' claim is based upon PDR's alleged failure to provide accurate information pursuant to Section VI, D of the Contract, it is preempted. See Hampers, 202 F.3d at 52 (cause of action "relates to" an ERISA plan where court must evaluate or interpret its terms to determine liability). Moreover, for the reasons that follow, this court finds that Rogers' claim is preempted to the extent it is based upon PDR's alleged failure to provide notice pursuant to Mass. Gen. Laws ch. 175, § 134A.
Because this court finds that express preemption applies to Rogers' negligence claim, it is not necessary to determine whether that claim also falls within § 502(a) of ERISA.
Mass. Gen. Laws ch. 175, § 134A provides that where a group life insurance policy affords a certificate holder the right to convert to another type of policy upon the happening of an event, the individual must be notified of the conversion option within a specified time after the happening of the event triggering the right to convert. Notice must be given by either the insurer or the employer. See Mass. Gen. Laws ch. 175, § 134A. Thus, the statute regulates the notice that must be provided to employees regarding the existence and exercise of the conversion privilege provided by an employee benefit plan.
In Howard v. Gleason Corp., 901 F.2d 1154 (2d Cir. 1990), the Second Circuit held that a nearly identical New York statute, when applied to employers who provide group insurance containing a conversion privilege as part of an ERISA benefit plan, "relates to" the plan and is therefore preempted. As the court stated in relevant part:
ERISA also contains elaborate provisions setting forth the content and timing of notice of such plan information to be given to plan participants. 29 U.S.C. §§ 1022, 1024(b). A state law that purports to impose on an employer obligations of the same general type as those imposed by ERISA cannot be said to have only a "remote" or "tenuous" effect on the plan. The conversion option is a benefit of the Plan, and [the state statute] regulates the notice that must be provided to employe[es] concerning the existence and exercise of that option. The state's notice requirement directly affects a primary administrative function of the benefit plan. It requires employers to permanently track employees and the events that trigger the conversion option and then to send timely conversion notices.Howard, 901 F.2d at 1157-58. The court further reasoned that "without preemption, employers with multi-state operations would be faced with different notice obligations in different states. This is precisely the patchwork scheme of regulation among the several states that ERISA was designed to avoid, and that is inconsistent with . . . the goal of ERISA to provide uniform, national regulation of benefit plans." Id. at 1158 (internal quotations and citations omitted).
This court finds the reasoning of the Howard court persuasive. Because Mass. Gen. Laws ch. 175, § 134A, as applied under the circumstances alleged in this case, presents "the threat of conflicting and inconsistent regulation that would frustrate uniform national administration of ERISA plans," Rogers' claim that PDR was negligent because it violated the statute "relates to" an ERISA plan. See Danca, 185 F.3d at 7.
Rogers argues that her claims should nevertheless escape preemption under the savings clause of ERISA § 514 because Mass. Gen. Laws ch. 175, § 134A is a state law that regulates insurance. (Pl. Opp. Mem. (Docket No. 13) at 15-18). ERISA § 514 provides in relevant part that "nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance. . . ." 29 U.S.C. § 1144(b)(2)(A). This provision is known as the "savings clause" because if a law regulates insurance, it is "saved from pre-emption." Ky. Ass'n of Health Plans, Inc. v. Miller, 538 U.S. 329, 333, 123 S. Ct. 1471, 1474, 155 L. Ed. 2d 468 (2003). This court finds that the savings clause does not apply to the Massachusetts notice statute.
"It is well established . . . that a state law must be 'specifically directed toward' the insurance industry in order to fall under ERISA's savings clause; laws of general application that have some bearing on insurers do not qualify." Id. at 334, 123 S. Ct. at 1475. However, "the notice requirement [of Mass. Gen. Laws ch. 175, § 134A] is not limited to entities within the insurance industry. It extends generally to all employers who are group policyholders." Howard, 901 F.2d at 1159. See also Ky. Ass'n of Health Plans, Inc., 538 U.S. at 341-42, 123 S. Ct. at 1479 (to fall within savings clause, state law "must be specifically directed toward entities engaged in insurance"). Moreover, "for a state law to be deemed a 'law . . . which regulates insurance' under § 1144(b)(2)(A), . . . the state law must substantially affect the risk pooling arrangement between the insurer and the insured." Id. The Massachusetts statute at issue in this case simply regulates the notice of rights granted by a group life insurance policy. Thus, it does not alter the risks for which the insurer and the insured contracted, and is not preserved by ERISA's savings clause. See Smith v. Jefferson Pilot Life Ins. Co., 14 F.3d 562, 569-70 (11th Cir. 1994) (statute requiring notice prior to cancellation of insurance policy does not affect the apportionment of risk among the parties to the contract). Accordingly, Rogers' claim that PDR was negligent because it violated the notice requirement of Mass. Gen. Laws ch. 175, § 134A falls within the reach of ERISA preemption.
In support of her argument that Mass. Gen. Laws ch. 175, § 134A falls within the scope of ERISA's savings clause, Rogers relies on what are known as the "McCarran-Ferguson factors" and on cases applying those factors. Under this test, a court considering whether a law "regulates insurance" would consider " first, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry." Ky. Ass'n of Health Plans, Inc., 538 U.S. at 333, 123 S. Ct. at 1474 (quoting Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S. Ct. 3002, 3009, 73 L. Ed. 2d 647 (1982)). However, the McCarran-Ferguson factors are no longer applicable. See id. at 341-42, 123 S. Ct. at 1479 ("Today we make a clean break from the McCarran-Ferguson factors"). Instead, in order to be deemed a "law . . . which regulates insurance" under 29 U.S.C. § 1144(b)(2)(A), a "state law must be specifically directed toward entities engaged in insurance" and "must substantially affect the risk pooling arrangement between the insurer and the insured." Id.
C. Count VI: Claim for Negligent Misrepresentation
In Count VI, Rogers asserts a claim for negligent misrepresentation. In support of her claim, Rogers alleges that PDR "made statements and took affirmative actions which manifested [its] intention that Mr. Rogers was insured under the Contract until his retirement[,]" that she and her husband relied upon those statements and actions, and that those statements and actions "led to the lapse of Mr. Rogers' life insurance coverage under the Contract." (Am. Compl. ¶¶ 76-78). She further alleges that as a result of PDR's conduct, Rogers "was unable to claim death benefits she would have been entitled to under the Contract." (Id. ¶ 79). The defendant contends that the misrepresentation claim "relates to" an ERISA plan because the existence of the Contract is inseparably connected to any determination of liability and "would necessarily form an integral part of the Court's analysis of Plaintiff's state law claims." (See Unum Mot. to Dismiss at 16-20). The plaintiff argues that her claim does not require the court to interpret or evaluate an ERISA plan because Mr. Rogers' coverage under the Contract lapsed, and any liability would arise from PDR's conduct in misleading the plaintiff and her husband into believing that Mr. Rogers had life insurance coverage when, in fact, he did not. (See Pl. Am. Resp. at 1-3). While there may be compelling reasons why ERISA preemption should not apply to misrepresentation claims in circumstances such as Rogers', this court finds that it is constrained to follow the controlling law of the First Circuit, and that such precedent leads to the conclusion that Rogers' claim relates to an ERISA plan and is therefore preempted.
PDR argues that Rogers' negligent misrepresentation claim is completely preempted under ERISA § 502. However, because this court finds that express preemption applies, it is not necessary at this time to determine whether the claim also falls within the scope of § 502.
"Courts have struggled over whether ERISA preempts claims of misrepresentation regarding the scope or existence of benefits, and there is ample, well-reasoned authority which would support either position." Carlo v. Reed Rolled Thread Die Co., 49 F.3d 790, 793 (1st Cir. 1995) (quotations and citation omitted). As described by the First Circuit, while the First Circuit concludes otherwise, courts that have found no preemption
have concluded that misrepresentation claims should not be preempted because, "simply put, the premise underlying [the cause of] action [is] that the plaintiff was deceived by the verbal statements made and the actions taken by his employer. That the subject of the deception concerned [employee] benefits is only incidental and not essential to the plaintiff's cause of action."Id. at 793-94 (quoting Greenblatt v. Budd Co., 666 F. Supp. 735, 742 (E.D. Pa. 1987)). Those courts also "have been troubled by the fact that ERISA preemption in these benefit misrepresentation suits often leaves plaintiffs remediless." Id. at 794.
One such case, Pace v. Signal Tech. Corp., 417 Mass. 154, 628 N.E.2d 20 (1994), has been cited by Rogers in her memorandum and involved similar facts to those alleged in the instant case. (See Pl. Opp. Mem. at 14). In Pace, the plaintiff claimed that at the time he was discharged from his employment, his employer told him that, if he accepted a six-month severance package payable over six months, rather than a lump sum payment, he would continue to be covered by insurance, including the company's long-term disability insurance, for those six months. Five months into the six-month payout, the plaintiff was diagnosed with a medical condition and filed a claim for long-term disability benefits. However, the insurer denied his claim because under the terms of the insurance plan, coverage was only available to employees who were actively employed. Pace, 417 Mass. at 155, 628 N.E.2d at 21. Pace brought misrepresentation claims against his employer based on its statements that the long-term disability insurance coverage would continue throughout the six-month payout period. The plaintiff argued that the employer knew or should have known that he was not covered because he was not actively employed, and he alleged that if the defendant had not made the misrepresentations, he would have taken steps to obtain insurance coverage elsewhere. Id.
The Massachusetts Supreme Judicial Court ("SJC") ruled that Pace's claims did not relate to ERISA and were not preempted. In doing so, the SJC was guided by the District Court's decision inCuoco v. NYNEX, Inc., 722 F. Supp. 884 (D. Mass. 1989), a case which involved similar facts and on which Rogers also relies in this case. The SJC noted that, as in Cuoco, Pace's claims did not arise from the deprivation of any rights under an ERISA plan, but from misrepresentations regarding the existence of coverage under the plan. See Pace, 417 Mass. at 158-59, 628 N.E.2d at 23. It also agreed with the Cuoco court's determination that "[w]hen the resolution of state law claims will neither determine whether any benefits are paid nor directly affect the administration of benefits under the plan, the claims do not relate to ERISA and accordingly are not preempted." Id. at 159, 628 N.E.2d at 23 (quoting Cuoco, 722 F. Supp. at 887) (additional quotations and citations omitted). The SJC determined that because Pace was not seeking benefits under a plan, and because any award against his employer would not directly affect the administration of benefits under the plan, his claims did not relate to ERISA and were not preempted. Id. at 159-60, 628 N.E.2d at 23.
Although Pace is compelling, and Rogers has made the same arguments here that the SJC found to be persuasive in that case,Pace is not controlling as precedent. This court is bound by the decisions of the First Circuit which, "while acknowledging Pace, has applied section 514 preemption more broadly."Giannetti, 218 F. Supp. 2d at 13. Specifically, in Carlo, the First Circuit considered Pace, along with other decisions in which courts found no preemption of misrepresentation claims. See Carlo, 49 F.3d at 793-94. While the Carlo court found the arguments against preemption in such cases to be "cogent," it nevertheless determined that ERISA preempted the plaintiffs' claims against an employer for negligent misrepresentation based upon the employer's representations regarding the employee's prospective benefits under an early retirement plan. Id. at 794.
In addition to Pace and Cuoco, the plaintiff relies on the Massachusetts case of Leyland v. Plymouth Brockton St. Ry. Co., 44 Mass. App. Ct. 427, 691 N.E.2d 599 (1998), and on the Indiana case of Paul Revere Life Ins. Co. v. Gardner, Ind. App., 438 N.E.2d 317 (1982). Neither of these cases is binding upon this court. Furthermore, the Paul Revere case did not involve ERISA preemption and is not relevant to the issues raised by the present motions.
Notably, the Carlo court determined that although the plaintiffs claimed to be seeking damages for a tort committed by Mr. Carlo's employer rather than benefits under a plan, their claims were preempted "because they [had] 'a connection with or reference to'" an employee benefit plan. Id. Specifically, the court determined:
If the Carlos were successful in their suit, the damages would consist in part of the extra pension benefits which Reed allegedly promised him. To compute these damages would require the court to refer to the [plan] as well as the misrepresentations allegedly made by [the defendant]. Thus, part of the damages to which the Carlos claim entitlement ultimately depends upon an analysis of the [plan]. To disregard this as a measurement of their damages would force the court to speculate on the amount of damages. Consequently, because the "court's inquiry must be directed to the plan," the Carlos' claims are preempted. . . .Id. (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 140, 111 S. Ct. 478, 483, 112 L. Ed. 2d 474 (1990)) (footnote omitted).
The First Circuit came to a similar conclusion in Vartarian v. Monsanto Co., 14 F.3d 697 (1st Cir. 1994). There, the court held that ERISA preemption applied to the plaintiff's claim against his former employer for misrepresentation based on the employer's misleading statements about the existence of an early retirement plan (the "1991 Plan") and the possibility of enhanced severance benefits under that plan. As the court determined:
In the present case, the existence of the 1991 Plan is inseparably connected to any determination of liability under state common law of misrepresentation. There is simply no cause of action if there is no plan. The alleged misrepresentations by [plaintiff's former employer] relate to the existence of the 1991 Plan and in order to prevail under a state common law claim for misrepresentation, Vartarian would undoubtedly have to plead, and the Court would have to find that the 1991 Plan exists. Thus, . . . Vartarian's claims "relate to" an ERISA plan and are expressly preempted by ERISA.Vartarian, 14 F.3d at 700.
Both Carlo and Vartarian were decided before the Supreme Court's decision in Travelers, 514 U.S. 645, 115 S. Ct. 1671, which narrowed the scope of section 514 preemption. In Travelers, the Supreme Court held that state statutes requiring hospitals to collect surcharges from patients covered by a commercial insurer, and from certain health maintenance organizations ("HMOs") based on their enrollments of Medicaid recipients, did not "relate to" ERISA plans even though the commercial insurance coverage was purchased by employee health care plans governed by ERISA, and the HMO membership fees were paid by an ERISA plan. See Travelers, 514 U.S. at 649, 115 S. Ct. at 1673-74. In its opinion, the Court noted that "[t]he governing text of ERISA [§ 514(a)] is clearly expansive." Id. at 655, 115 S. Ct. at 1677. However, it also recognized that "[i]f 'relate to' were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes preemption would never run its course, for really, universally, relations stop nowhere." Id. (internal quotations, citation and alteration omitted). Thus, the Supreme Court determined that in evaluating whether a state law "related to" an ERISA plan, it was necessary to "go beyond the unhelpful text and the frustrating difficulty of defining its key term, and look instead to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive." Id. at 656, 115 S. Ct. at 1677. After considering the disputed statutes in light of ERISA's objectives, the Court concluded that the surcharges at issue in the case did not relate to ERISA plans so as to trigger preemption because their indirect economic influence on such plans did not function as a regulation of an ERISA plan or preclude uniform administration of such plans, and nothing in ERISA indicated that Congress intended to displace general health care regulation. See id. at 659-62, 115 S. Ct. at 1679-80.
This court finds that there is nothing in Travelers that undermines the First Circuit's decisions in Carlo and Vartarian or suggests that they would be decided differently today. In each of those cases, the court's conclusion hinged upon the fact that the resolution of the plaintiff's misrepresentation claims necessitated an analysis of or reference to an ERISA regulated plan. Therefore, unlike the indirect economic impact that the statutory surcharges had on the ERISA plans involved inTravelers, the claims at issue in Carlo and Vartarian were closely connected with ERISA regulated employee benefit plans.
Moreover, "both Carlo and Vartarian concerned claims against employers acting in their ERISA fiduciary capacities." Giannetti, 218 F. Supp. 2d at 13-14. Since Travelers was decided, courts which have considered whether state law claims "relate to" an ERISA plan have been careful to distinguish between claims against ERISA entities such as employers acting in their fiduciary capacities and claims against third parties acting in their individual capacities. See, e.g., Hampers, 202 F.3d at 53 (fact that conduct at issue in the state law claim resulted from a decision made by former employer in its capacity as an ERISA employer with responsibility over administration of ERISA regulated plan was one factor supporting court's conclusion that claim was preempted); Miara, 379 F. Supp. 2d at 47, 58 (distinguishing plaintiff's state law claims against insurance agency and its agent from similar claims against employers, underwriters, fiduciaries or plan administrators in connection with determination that claims did not relate to ERISA plan);Giannetti, 218 F. Supp. 2d at 13 (in contrast to Carlo andVartarian, "Defendants are neither the employer, the plan administrator nor the insurance underwriter" but an independent insurance agent and his agency). In the instant case, however, suit is being brought against the employer arising out of its alleged failure to satisfy its fiduciary obligation to know who qualifies for coverage and to give notice of a participant's conversion rights. In short, it is a suit against an employer while acting in its fiduciary capacity. Consequently, Carlo andVartarian are controlling here, and Rogers' claims are preempted.
Finally, although she is seeking to recover the amount of benefits she would have been entitled to under the Insurance Contract (Am. Com. ¶ 1), the plaintiff argues that "[a]ny damages award would not need to be based on an interpretation of the Contract but would be based on the face value of the policy at the time the coverage under the Contract lapsed, a connection that is too tenuous and remote to merit ERISA preemption in this case." (Pl. Am. Resp. at 5). Courts have determined that state law claims are not related to an ERISA plan where the calculation of any damages would not require an analysis of the plan. See Miara, 379 F. Supp. 2d at 57-58 (given defendants' written confirmations of promised benefits, "any reference to the plan to calculate damages, if such reference even need be made, would be remote and incidental"); see also Leyland v. Plymouth Brockton St. Ry. Co., 44 Mass. App. Ct. 427, 430-31, 691 N.E.2d 599, 601 (1998) (no preemption where there was no question that any damages award would be measured by the face amount of the policy). However, this is not such a case. As demonstrated by the terms of the Insurance Contract, the amount of benefits payable under the policy would have varied depending upon the circumstances of the individual insured. For example, the Contract provides for different amounts of coverage depending upon whether the individual was a "Principal" or an "employee" of PDR, whether the individual had provided evidence of insurability satisfactory to Unum, and whether the individual was 70 years old or more. (See Contract at UASP10003). Consequently, any determination as to the death benefits that Rogers would have been entitled to under the Contract at the time of her husband's death would depend upon an analysis of the Insurance Contract. Under the law of this circuit, "ERISA preempts state law causes of action for damages where the damages must be calculated using the terms of an ERISA plan." Hampers, 202 F.3d at 52.
Because this court finds that Rogers' claims, as plead in her Amended Complaint, are preempted by ERISA, this court recommends that all of Rogers' claims be dismissed and that her motion to remand be denied. Nevertheless, to the extent Rogers is able to allege that PDR promised or otherwise represented that it would continue to maintain life insurance coverage for Mr. Rogers throughout his employment unrelated to the specific Contract, it may be possible for Rogers to allege a state law claim against PDR that is unrelated to an ERISA plan. For this reason, but without commenting on the merits of any such claim, this court recommends that the dismissal of this matter be without prejudice.
IV. CONCLUSION
For all of the reasons detailed above, this court finds that each of Rogers' claims is preempted by ERISA. Accordingly, this court recommends to the District Judge to whom this case is assigned that PDR's motion to dismiss be ALLOWED and that Rogers' motion to remand be DENIED. However, because it is possible that Rogers may be able to state a claim against PDR that falls outside the scope of ERISA preemption, this court recommends that the dismissal be without prejudice.
The parties are hereby advised that under the provisions of Fed.R.Civ.P. 72 any party who objects to these proposed findings and recommendations must file a written objection thereto with the Clerk of this Court within 10 days of the party's receipt of this Report and Recommendation. The written objections must specifically identify the portion of the proposed findings, recommendations or report to which objection is made and the basis for such objections. The parties are further advised that the United States Court of Appeals for this Circuit has repeatedly indicated that failure to comply with this Rule shall preclude further appellate review. See Keating v. Sec'y of Health Human Servs., 848 F.2d 271, 275 (1st Cir. 1988); United States v. Valencia-Copete, 792 F.2d 4, 6 (1st Cir. 1986); Park Motor Mart, Inc. v. Ford Motor Co., 616 F.2d 603, 604-05 (1st Cir. 1980); United States v. Vega, 678 F.2d 376, 378-79 (1st Cir. 1982); Scott v. Schweiker, 702 F.2d 13, 14 (1st Cir. 1983); see also Thomas v. Arn, 474 U.S. 140, 153-54, 106 S. Ct. 466, 474, 88 L. Ed. 2d 435 (1985). Accord Phinney v. Wentworth Douglas Hosp., 199 F.3d 1, 3-4 (1st Cir. 1999); Henley Drilling Co. v. McGee, 36 F.3d 143, 150-51 (1st Cir. 1994); Santiago v. Canon U.S.A., Inc., 138 F.3d 1, 4 (1st Cir. 1998).