Ackderman v. Forts Benefits Ins. Co., C-3-00-277.

Citation254 F.Supp.2d 792
Decision Date08 January 2003
Docket NumberNo. C-3-00-277.,C-3-00-277.
PartiesJoyce ACKERMAN, et al., Plaintiffs, Herbert RICE, v. FORTIS BENEFITS INSURANCE COMPANY, Defendant.
CourtUnited States District Courts. 6th Circuit. United States District Courts. 6th Circuit. Southern District of Ohio

Mark Allan Anthony, Dulaney & Phillips, Dayton, OH, for Plaintiffs.

Michael Wesley Hawkins, Louise S Brock, Dinsmore & Shohl, Cincinnati, OH, Patrick W Michael, Angela Logan Edwards, Woodward Hobson & Fulton, Louisville, KY, for Defendant.

DECISION AND ENTRY SETTING FORTH FINDINGS OF FACT AND CONCLUSIONS OF LAW REGARDING THE QUESTION OF WHETHER THE LONG-TERM DISABILITY BENEFITS PLAN AT ISSUE IS GOVERNED BY ERISA; DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (DOC. # 8-2) SUSTAINED IN PART AND OVERRULED IN PART; PLAITIFF DIRECTED TO FILE, WITHIN 10 DAYS OF DATE, NOTICE OF WHETHER SHE INTENDS TO PROCEED WITH HER BREACH OF CONTRACT CAUSE OF ACTION, RE-CHARACTERIZED HEREIN AS ONE ARISING UNDER ERISA

RICE, Chief Judge.

Plaintiff Joyce Ackerman ("Ackerman"), along with her husband and son, filed the underlying civil action in the Montgomery County (Ohio) Common Pleas Court against Defendant Fortis Benefits Insurance Company ("Fortis"), alleging that Fortis wrongly denied her long-term disability benefits which she had sought on account of an alleged pregnancy-related disability. Fortis was her long-term disability insurer under a plan ("LTD plan") she had obtained while working for USAir Inc. ("USAir").1 She plead five counts in her Amended Complaint (attached to Doc. # 1): bad faith (First Cause of Action), breach of contract (Second Cause of Action), intentional infliction of emotional distress (Third Cause of Action), and loss of consortium (Fourth and Fifth Causes of action, raised by Ackerman's husband and son, respectively). Fortis removed the action to this Court pursuant to 28 U.S.C. § 1441 (removal jurisdiction), asserting that the Court has original jurisdiction of the action under 28 U.S.C. § 1331 (federal question jurisdiction) and § 1332 (diversity jurisdiction). (See Doc. #1.) The basis for Fortis's assertion of federal question jurisdiction lies in its belief that Ackerman's claims, stated in her Amended Complaint as ones arising exclusively under state law, are in fact completely preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. Thereafter, on the strength of its argument that Ackerman's claims are preempted, Fortis moved for judgment on the pleadings, or alternatively for summary judgment. (See Doc. # 8.)

While not challenging the Court's jurisdiction on diversity grounds, Ackerman did challenge Fortis's assertion that her action is one arising under ERISA. The Court thus noted that while it could take jurisdiction regardless of the ERISA issue, that issue is nonetheless determinative of the procedure to be followed in considering the merits of Ackerman's Amended Complaint, to wit: if her claims are properly considered under state law, a trial on the merits would be warranted should the Court find a genuine issue of material fact; if her claims are properly construed as ones arising under ERISA, then the Court's role would be limited to a review of the decision of the plan administrator, with reference only to those materials considered by said administrator. (See Doc. # 9 at 1-2);2 see also Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609, 613 (6th Cir. 1998)(Cole, J.); id. at 619 (Gilman, J.). Because of the existence of this issue, which has both procedural and substantive ramifications, the Court overruled Fortis's Motion for Judgment on the Pleadings (Doc. # 8-1), and directed the parties to conduct discovery on the issue of whether the LTD plan is one governed by ERISA, and to submit follow-up briefs on that issue. (See Doc. # 14.) Finding that the evidence gave rise to a genuine issue of fact even after the parties had briefed the issue, the Court scheduled an evidentiary hearing on the matter. (See Doc. # 19.)3

The Court held an evidentiary hearing on February 7, 2002, at which both parties called witnesses. The parties have since submitted post-hearing briefs on the matter (see Doc. # s 35, 38, & 39), and the Court conducted a post-hearing telephonic conference call on June 17, 2002, at which time the parties were afforded the opportunity to summarize their respective arguments. Fortis has maintained at all times that the LTD plan is one governed by ERISA, and that Ackerman's claims are preempted. Ackerman, to the contrary, has maintained that it is not so governed. Accordingly, she did not address the underlying question of preemption.

For the reasons which follow, the Court finds that the LTD plan at issue is one governed by ERISA. On the question of preemption, the Court finds that while Fortis is correct that several of Ackerman's state law claims are preempted in the traditional sense, such that they must be dismissed, her breach of contract claim is one properly construed as an action "completely preempted" by ERISA, such that it actually states a claim thereunder, notwithstanding the fact that it is stated in the Amended Complaint as a claim arising under the common law of Ohio. Nonetheless, what this means is that the Court's review of the "contract" claim, construed as a claim for LTD benefits, see 29 U.S.C. § 1132(a)(1)(B), is limited to a review of the materials actually considered by the plan administrator, and neither a summary judgment analysis nor a trial on the merits is appropriate. Accordingly, because the parties have not given this question any attention thus far, they must be afforded the opportunity to submit memoranda of law on the merits of Ackerman's claim, including arguments on the proper standard of review to be employed by this Court in reviewing the plan administrator's decision.

Herein, the Court will first address the threshold issue of whether the LTD plan is governed by ERISA. To that end, it will set forth its findings of fact related to the evidentiary hearing. It will then set forth an opinion of law discussing the merits of the competing opinions related to that threshold issue, and, following that, will set forth its conclusions of law stemming therefrom. Finally, in a separate analysis, it will discuss the merits of Fortis's underlying Motion for Summary Judgment (Doc. # 8-2), and conclude by directing parties toward procedures to be taken in furtherance of resolving Ackerman's underlying claim, alleging breach of contract.

I. The Substantive Character of the LTD Plan

On February 7, 2002, the Court held an evidentiary hearing to address the question of whether the LTD plan, under which Ackerman was an insured, is subject to the laws of ERISA. The Court will first set forth its findings of fact, followed by its opinion, and then its conclusions of law.

A. Findings of Fact4

1. Ackerman started working for USAir on April 24, 1989, as a reservation agent. She continued in that position until January of 1996. (Tr. at 224.)

2. In 1989, USAir applied for and entered into the group LTD plan at issue, underwritten by The Mutual Benefit Life Insurance Company ("Mutual Benefit"), the predecessor to Fortis.5 USAir was the master policy holder of this LTD plan. (Id, at 45 & Def.'s Ex. 5.)

3. In 1989, having recently merged with Piedmont Airlines ("Piedmont"), USAir submitted to Fortis (then Mutual Benefit) a request for proposal ("RFP"), explaining that it was seeking a provider of uniform long-term disability insurance benefits for its ground employees, similar in coverage to what the former Piedmont employees had had prior to their merger, and which those same employees retained in their employ with USAir. (Id, at 23-24.)

4. A long-term disability plan which had been offered to USAir employees through membership at the USAir Credit Union was being discontinued. (Dever Depo. (Tr. at PL's Ex. 10) at 14.)6

5. USAir specified that it desired a plan structure which included components somewhat atypical in the LTD plan industry, and Fortis indicated to USAir that it could provide such a plan. (Tr. at 26-27.)

6. USAir selected Fortis as its LTD carrier. In furtherance of settling upon the terms of the agreement, National Group Protection ("National"), USAir's insurance broker, contacted Fortis to arrange a meeting of the respective company representatives, to be held in Crystal City, Virginia. (Id. at 27.)

7. Subsequently, said meeting was held, and was attended by USAir representatives from Pittsburgh and its Piedmont division, then located in North Carolina. (Tr. at 37.)

8. Several details were discussed at the Crystal City meeting, including which employees would be eligible for coverage under the LTD plan, how enrollment would be handled, how the plan would be administered, and the specific benefits that would be offered. (Id. at 28-29, 41.)

9. With respect to enrollment, USAir indicated that it wanted Fortis to assemble informational packets for its eligible employees, hold on-site informational meetings, prepare an informational video for employees who worked at remote sites, and establish an enrollment hotline. The determination of eligibility was left to USAir, as was the LTD plan's administration. Regarding the determination of eligibility and plan administration, it was determined that it would be incumbent upon USAir first to determine which of its employees would be eligible, and then take responsibility for benefits calculations in conformity with the benefits specifications agreed upon. In addition, it would be USAir's duty to collect premiums from its employees and remit same to Fortis, and to keep its records current. Fortis was simply not equipped to administer a plan for an employer the size of USAir, and had never done so in the past. (Id. at 28-30, 71, 73-74, 129.)

10. USAir submitted a preliminary application to Fortis, dated June 21, 1989, signed by its Vice President of Labor Relations, Dwayne Andrews, in which it indicated that it...

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