Opinion
CIVIL ACTION NO. 1:19-CV-01915-CAP
11-04-2020
Wendy YOUMANS, Plaintiff, v. PROSTHODONTICS ATLANTA LLC and Jay S. Smith, Defendants.
Kenneth Behrman, Law Office of Kenneth Behrman, Atlanta, GA, for Plaintiff. Gary Richard Kessler, Gary R. Kessler, PC, Atlanta, GA, for Defendants.
Kenneth Behrman, Law Office of Kenneth Behrman, Atlanta, GA, for Plaintiff.
Gary Richard Kessler, Gary R. Kessler, PC, Atlanta, GA, for Defendants.
ORDER
CHARLES A. PANNELL, JR., United States District Judge
The plaintiff brought this action pursuant to the Employee Retirement Income Security Act ("ERISA"). She alleges that the defendants breached several fiduciary duties owed to the plaintiff with regard to a long-term disability insurance policy, and seeks equitable relief under 29 U.S.C. § 1132(a)(3) (Count I), interest for all amounts that would have been payed under the policy (Count II), and attorney's fees and costs under 29 U.S.C. § 1132(g)(1) (Count III). Currently before the court are the plaintiff's motion for partial summary judgment [Doc. No. 23] and the defendants’ motion for summary judgment [Doc. No. 24].
29 U.S.C. § 1132 is also referred to as § 502 because when ERISA was codified as part of United States Code title 29 the section numbers assigned to the provisions of ERISA did not line up with the section numbering in the original act.
I. Summary judgment standard
Summary judgment is proper when no genuine issue as to any material fact is present, and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a). The moving party carries the initial burden of "informing the court of the basis for its motion and of identifying those materials that demonstrate the absence of a genuine issue of material fact." Rice-Lamar v. City of Fort Lauderdale , 232 F.3d 836, 840 (11th Cir. 2000) (citing Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ). A fact is "material" if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The moving party may also meet its burden by pointing out that there is an absence of evidence to support an element of the case on which the nonmoving party bears the burden of proof. Celotex , 477 U.S. at 325, 106 S.Ct. 2548.
"Only when that burden has been met does the burden shift to the non-moving party to demonstrate that there is indeed a material issue of fact that precludes summary judgment." Clark v. Coats & Clark, Inc. , 929 F.2d 604, 608 (11th Cir. 1991). The nonmoving party is then required "to go beyond the pleadings" and present competent evidence in the form of affidavits, depositions, admissions, and the like, designating "specific facts showing that there is a genuine issue for trial." Celotex , 477 U.S. at 324, 106 S.Ct. 2548. The court must view the evidence and factual inferences in the light most favorable to the nonmoving party. See United States v. Four Parcels of Real Prop. , 941 F.2d 1428, 1437 (11th Cir. 1991) (en banc). And, to the extent that material facts are genuinely in dispute, the court must resolve the disputes in the nonmovant's favor. See Vaughan v. Cox , 343 F.3d 1323, 1326 n.1 (11th Cir. 2003).
However, "the mere existence of a scintilla of evidence" supporting the nonmovant's case is insufficient to defeat a motion for summary judgment. Anderson , 477 U.S. at 252, 106 S.Ct. 2505. Additionally, "facts must be viewed in the light most favorable to the nonmoving party only if there is a ‘genuine’ dispute as to those facts." Scott v. Harris , 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). "When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment." Id. If the record does not blatantly contradict the nonmovant's version of events, the court must determine "whether a fair-minded jury could return a verdict for the plaintiff on the evidence presented." See Anderson , 477 U.S. at 252, 106 S.Ct. 2505 ; see also EPL Inc. v. USA Fed. Credit Union , 173 F.3d 1356, 1362 (11th Cir. 1999) ; Duke v. Cleland , 884 F. Supp. 511, 514 (N.D. Ga. 1995) (Freeman, J.). "If the record presents disputed issues of material fact, the Court may not decide them; rather, it must deny the motion and proceed to trial." FindWhat Inv. Grp. v. FindWhat.com , 658 F.3d 1282, 1307 (11th Cir. 2011) (citing Tullius v. Albright , 240 F.3d 1317, 1320 (11th Cir. 2001) ).
II. The plaintiff's motion for partial summary judgment [Doc. No. 23]
The plaintiff moves for summary judgment on several issues. She argues that there is no dispute of material fact that (1) ERISA applies to the long-term disability plan, (2) that the defendants are both fiduciaries with respect to the plan, (3) that the defendants breached their fiduciary duties by failing to provide notice that the plan was terminated, and (4) that the plaintiff is entitled to be made whole by the defendants.
A. Statement of facts
In November, 2002, Youmans was hired as a dental hygienist by the dental practice Priest & Smith, LLC. PSMF ¶ 1. As part of her employment benefit package with Priest & Smith, she was afforded long-term disability benefits insured and administered by Standard Insurance Company. PSMF ¶ 2. Priest & Smith was the plan sponsor and plan administrator of the long-term disability plan. PSMF ¶ 3. In 2007, Youmans was provided an employee office manual that indicated the following:
Citations that reference only paragraph numbers preceded by "PSMF" refer to the plaintiff's statements of material facts, [Doc. No. 23-13], or portions thereof, that are not disputed. Each of the proponent's facts will be deemed admitted unless the respondent properly disputes them. See LR 56.1B(2), (3), NDGa. Where a factual assertion or portion thereof is properly disputed, the court will cite to the paragraph appearing in the proponent's statement of material fact; will view the material evidence and factual inferences in the light most favorable to the non-moving party; and will, where appropriate, also cite directly to the evidence supporting the court's resulting factual recitation. The same applies to the defendants’ statement of additional facts ("DSAF") [Doc. No. 34] filed in response to the plaintiff's motion for summary judgment.
All full-time employees are provided with a long-term disability insurance policy that will pay a specified percentage (60%) of an employee's salary (without bonuses) in case of a prolonged absence due to illness or injury (longer than six months). Employees are encouraged to read our practice's long
term disability insurance policy for further details."
PSMF ¶ 4.
On July 1, 2010, Priest & Smith merged with Prosthodontics Atlanta LLC (hereinafter, "Prosthodontics") and Prosthodontics was declared to be the surviving company. PSMF ¶ 5. In 2013, Youmans was provided an employee manual by Prosthodontics which stated the following:
All full-time employees are provided with a long-term disability insurance policy that will pay a specified percentage (60%) of an employee's salary (without bonuses) in case of a prolonged absence due to illness or injury (longer than six months). Employees are encouraged to read our practice's long term disability insurance policy for further details.
PSMF ¶ 6. Smith, after he bought out Dr. Priest's interests in the dental practice in 2007, made all decisions regarding who should or who should not be on the disability plan. PSMF ¶ 7. Smith also managed the bills for Prosthodontics. PSMF ¶ 7. In 2010, Prosthodontics removed a number of employees from the disability policy who were no longer employed at the practice, leaving Smith and Youmans as the only individuals covered by the policy. DSAMF ¶ 10. No other employees were added to the policy after 2010. DSAF ¶ 11.
Smith forgot to pay the plan's premiums on behalf of Prosthodontics, causing the long-term disability plan to be terminated on May 1, 2013 for lack of payment. PSMF ¶ 8. On June 19, 2013, Standard Insurance Company sent a letter to Smith that the disability policy had been terminated as of April 30, 2013, but that it would be considered for reinstatement if he contacted the insurer. DSAF ¶ 13. Smith did not recall seeing the letter and as a result did not seek reinstatement. DSAF ¶ 14. In October 2017, Youmans realized that, because of ongoing back and neck issues, she was not going to be able to work in her occupation for much longer and asked Smith about the long-term disability plan. PSMF ¶ 9. It was at this point that Smith informed Youmans that her long-term disability insurance was cancelled. PSMF ¶ 10. At Youmans's request, Smith sought to have her disability insurance coverage reinstated but was unsuccessful. DSAF ¶ 18.
Youmans's last day of work with Prosthodontics was December 20, 2017. PSMF ¶ 11. Rather than returning to work on January 3, 2018, after the holidays, Youmans sent Smith a text message on January 3, 2018 stating that she would not be returning to work because of her back and neck issues and that she wanted to be paid for her upcoming absences based on her claim that she was entitled to be paid for her 2018 vacation and sick leave. DSAF ¶ 21. With her January 3, 2018 text, Youmans attached a Work Status Report from her physician, Dr. Frankel, with a diagnosis of spondylosis with radiculopathy, cervical region; other spondylosis with radiculopathy, lumbar region; and other spondylosis with radiculopathy, lumbosacral region; and stating: "Cervical spondylosis with radiculopathy, Intervertebral disc displacement (lumbar sacral region)." DSAF ¶ 22. In February 2018, Ms. Youmans's back was operated on by Dr. Frankel. DSAF ¶ 28.
Youmans filed a claim for long-term disability benefits with Standard Insurance Company, but her claim was denied. PSMF ¶ 13. She appealed this denial, and Standard Insurance Company made its final decision and denied the administrative appeal on April 24, 2019, indicating that the policy had been terminated in 2013 because the premiums were not paid. PSMF ¶ 13. Youmans worked 32 hours per week with a wage of $43.00/hour and her monthly earning amount was $5,962.67. PSMF ¶ 14. Standard's disability policy indicates, "If Standard fails to comply with the claim processing and payment provision describe above with respect to LTD Benefits, Standard will pay interest on accrued LTD Benefits at a rate of eighteen percent per annum." PSMF ¶ 15. It defines the term disability as follows:
Until LTD Benefits have been paid for 24 months, you are DISABLED if, as a result of Sickness, Accidental Bodily Injury or Pregnancy, you are either:
a. Unable to perform with reasonable continuity the material duties of your own occupation; or
b. Unable to earn more than 80% of your Indexed Predisability Earnings while working in your own occupation.
After LTD Benefits have been paid for 24 months, you are DISABLED if, as a result of Sickness, Accidental Bodily Injury, or Pregnancy, you are either:
a. Unable to perform with reasonable continuity the material duties of any gainful occupation for which you are reasonably fitted by education, training or experience, or
b. Unable to earn more than 80% of your Indexed Predisability earnings while working in your own or any other occupation.
DSAF ¶ 25.
B. Whether ERISA applies to the plaintiff's claims
The plaintiff first contends that is matter arises under ERISA, which preempts all state laws insofar as they relate to any employee benefit plan, because her suit relates to the employer sponsored long-term disability plan insured by the Standard Insurance Company. She contends that ERISA permits an employee to bring an action against an employer for breach of fiduciary duty, and receive past and future medical expenses, when the employer causes the insurance plan to lapse and fails to notify the employee. The defendants disagree that the plaintiff can assert her claims under ERISA for two reasons. First, they argue that the decision to terminate a non-vested benefit plan under § 402(b)(3) is not within the scope of ERISA, and is instead governed by the employee handbook, which states that the benefits set forth in the manual can be changed at any time. It also argues that the plaintiff's claims do not arise under ERISA because she was informed that she was no longer covered by the plan before she became disabled.
The defendants’ initial argument that the termination of the plan under § 402(b)(3) is not within the scope of ERISA is misplaced. This provision requires that every employee benefit plan shall "provide a procedure for amending such plan, and for identifying the persons who have authority to amend the plan." 29 U.S.C. § 1102. The plaintiff's claims do not arise under § 402(b)(3) because they do not pertain to the defendants’ decision to amend or terminate the plan; instead, the plaintiff complains about the failure to notify her of the plan's termination for over four years.
The defendants’ second argument is that the plaintiff lacks standing to bring her claims under ERISA because she knew she was not covered by the insurance policy before she became disabled. For ERISA to apply to the plaintiff's claims: (1) there must be a relevant ERISA plan; (2) the plaintiff must have standing to sue under that plan; (3) the defendant must be an ERISA entity; and (4) the complaint must seek compensatory relief akin to that available under § 1132(a). Butero v. Royal Maccabees Life Ins. Co. , 174 F.3d 1207, 1212 (11th Cir. 1999). Elements one, three, and four are easily satisfied. The defendants argue that because plaintiff was informed that she was no longer covered by the disability plan before she became disabled, she was not a participant in the plan, and therefore lacks standing to bring this action. The court agrees. Only a plan "participant, beneficiary, or fiduciary" has standing to sue under § 502(a)(3). 29 U.S.C. § 1132(a)(3). However, courts have expanded the standing requirement, in certain instances, to individuals that were formerly, or believed they were currently, plan participants. In Willett v. Blue Cross & Blue Shield of Alabama the plaintiffs’ employer failed to pay the health care premiums, which caused the benefits to be retroactively cancelled. Willett v. Blue Cross & Blue Shield of Alabama , 953 F.2d 1335, 1338 (11th Cir. 1992). However, neither the employer nor the insurance company (which was the plan fiduciary) provided timely notice of cancellation to the plan participants. Id. The plaintiffs all incurred medical expenses during the approximately five months from when the policy was cancelled to when they received notice of cancellation, both before the policy was retroactively cancelled and after the policy was cancelled but before they were notified of the cancellation. Id. at 1338–39.
The plan document identifies it as an ERISA plan [Doc. Nos. 23 9; 24 12], and the defendants are ERISA entities. Morstein v. Nat'l Ins. Servs., Inc. , 93 F.3d 715, 722 (11th Cir. 1996) ("ERISA entities are the employer, the plan, the plan fiduciaries, and the beneficiaries under the plan."). Also, the plaintiff seeks equitable relief under § 1132(a)(3).
The Eleventh Circuit held, as an initial matter, "Providing notice of the discontinuation or suspension of coverage is a fiduciary responsibility; employees are entitled to prompt notice of the suspension of their plan coverage." Id. at 1340. It is this duty that the plaintiff seeks to enforce. The court then explained that an individual who is not contractually entitled to plan benefits—like the plaintiff here—is still a "participant" in the plan for purposes of bringing an ERISA claim if the individual (1) reasonably expects to be covered by the plan; and (2) is or becomes eligible to receive a plan benefit. Id. Because the plaintiff must satisfy both elements to have standing, her claim fails. The plaintiffs in Willett satisfied this test because they incurred medical expenses at a time when they reasonably believed they were covered by the plan—i.e., before they were untimely notified of the termination. Here, at the time the plaintiff reasonably expected to be covered by the plan—i.e., prior to being untimely notified of its cancellation in October 2017—she was not eligible to receive a benefit under the plan because she was not disabled. At the time she became eligible to receive benefits under the plan, be that on December 20, 2017 or at a later date, she could not have reasonably expected to be covered by the plan. Therefore, the plaintiff is not a participant and does not have standing to pursue her claims.
The date of when the plaintiff became disabled is in dispute, but neither party contends she was disabled in October 2017. The plaintiff claims she "could no longer work in her occupation as of December 20, 2017." PSMF ¶ 12. The defendants contend that, to the extent she is disabled, it occurred after her employment ended.
In Willett , the Eleventh Circuit was analyzing Blue Cross's liability for failing to cure the employer's breach of the failure to notify, as opposed to the employer's liability for that failure, which is the issue here. This distinction, however, has no bearing on the definition of a "participant" for standing purposes.
The court is aware of the harsh reality its ruling presents. Further, it is sympathetic to the plaintiff's assertion that, but for the defendants’ failure to notify her of the plan's termination, she would have secured an individual long-term disability plan in 2013 and that she could not procure disability insurance in 2017 because any similar policy would contain a pre-existing clause condition. However, it is unaware of any authority where a court has expanded standing to encompass the situation where the individual does not become eligible for benefits until after being notified of the plan's termination, and the parties do not provide any.
III. Conclusion
Because the plaintiff does not have standing to sue under the plan, the plaintiff's motion for partial summary judgment [Doc. No. 23] is DENIED. Furthermore, because she lacks standing her claims fail as a matter of law and the court must enter judgment in favor of the defendants. The plaintiff's claims are hereby DISMISSED. The Clerk is DIRECTED to terminate the defendants’ motion for summary judgment [Doc. No. 24] and close this case.
The court cannot affirmatively grant the defendants’ motion for summary judgment because it did not argue that the plaintiff lacks standing because she was aware that she was not covered by the policy at the time she became disabled. The standing argument was limited to the defendants’ response to the plaintiff's motion for partial summary judgment.
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SO ORDERED this 4th day of November, 2020.