Everett v. Metro. Life Ins. Co., CIVIL ACTION NO. 3:16-CV-00074-GNS-DW

Decision Date15 May 2017
Docket NumberCIVIL ACTION NO. 3:16-CV-00074-GNS-DW
CourtUnited States District Courts. 6th Circuit. United States District Court of Western District of Kentucky

This matter comes before the Court on Plaintiff's Objection (DN 30) to Magistrate Judge Whalin's Memorandum Opinion & Order (DN 29), and Defendant's Motion for Leave to File Response to Plaintiff's Objection (DN 32). For the following reasons, Plaintiff's Objection (DN 30) is OVERRULED, and Defendant's Motion for Leave to File Response to Plaintiff's Objection (DN 32) is GRANTED.


The Magistrate Judge's Memorandum Opinion & Order sets forth in detail the relevant facts of this matter, which the Court incorporates herein without a recitation. (Mem. Op. & Order 1-3, DN 29). The decision denied Plaintiff's motion to amend the Complaint to assert claims under the Kentucky Unfair Claims Settlement Practices Act ("KUCSPA"), KRS 304.12-230. (Pl.'s Mot. Amend Compl. 2-3, DN 23).


This Court has "original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331.


Fed. R. Civ. P. 15(a)(2) provides that leave to amend pleading should be "freely given when justice so requires." Birchwood Conservancy v. Webb, 302 F.R.D. 422, 424 (E.D. Ky. 2013) (citing Fed. R. Civ. P. 15(a)(2)). In light of this liberal view, a motion to amend a pleading "should be denied if the amendment is brought in bad faith, for dilatory purposes, results in undue delay or prejudice to the opposing party, or would be futile." Colvin v. Caruso, 605 F.3d 282, 294 (6th Cir. 2010) (internal quotation marks omitted) (quoting Crawford v. Roane, 53 F.3d 750, 753 (6th Cir. 1995)).

A proposed amendment to a pleading is futile if the amendment "could not withstand a Rule 12(b)(6) motion to dismiss." Rose v. Hartford Underwriters Ins. Co., 203 F.3d 417, 420 (6th Cir. 2000) (citation omitted). In order to survive a motion to dismiss, the pleading "must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (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." Id. A court may deny a motion to amend based on futility where adding a state-law claim would be frivolous given that ERISA clearly preempts such claims. See Hollingshead v. Aetna Health Inc., 589 F. App'x 732, 737 (5th Cir. 2014) (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46-48 (1987)).


As noted above, the Magistrate Judge denied Everett's motion to amend the Complaint to add claims under the KUCSPA against Defendant Metropolitan Life Insurance Company ("MetLife"). (Mem. Op. & Order 10). The Magistrate Judge concluded that granting of the motion to amend would be futile because the KUCSPA claims are completely preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461. (Mem. Op. & Order 6-10).

When objections are made to rulings by a magistrate judge involving nondispositive matters,1 the district judge "must consider timely objections and modify or set aside any part of the order that is clearly erroneous or is contrary to law." Fed. R. Civ. P. 72(a). Everett has alleged that the Magistrate Judge: (1) erred when he found ERISA completely preempted his KUCSPA claim; (2) did not properly apply the Saving Clause of ERISA's express preemption provision, 29 U.S.C § 1144(b)(2)(A); and (3) improperly distinguished Harrison v. TEAMCARE-A Central States Health Plan, 187 F. Supp. 3d 812 (E.D. Ky. 2016), which Everett suggests is on point and supports his proposition. (Pl.'s Obj. 3). The Court will address each of the points asserted in Everett's objection in turn.

A. ERISA Preemption

Everett contends that Magistrate Judge Whalin erred in concluding that ERISA preempts his claims under Kentucky law. As the Magistrate Judge correctly noted, the Supreme Court set out the test for complete preemption under ERISA in Aetna Health Inc. v. Davila, 542 U.S. 200 (2004). In Davila, the Supreme Court stated:

[I]f an individual brings suit complaining of a denial of coverage for medical care, where the individual is entitled to such coverage only because of the terms of an ERISA-regulated employee benefit plan, and where no legal duty (state or federal) independent of ERISA or the plan terms is violated, then the suit falls within the scope of ERISA § 502(a)(1)(B). In other words, if an individual, at some point in time, could have brought his claim under ERISA § 502(a)(1)(B), and where there is no other independent legal duty that is implicated by a defendant's actions, then the individual's cause of action is completely pre-empted by ERISA § 502(a)(1)(B).

Id. at 210 (emphasis added). Put differently, a claim will be preempted if: (1) the plaintiff complains about the denial of benefits to which he is entitled "only because of the terms of an ERISA-regulated employee benefit plan"; and (2) the plaintiff does not allege the violation of any "legal duty (state or federal) independent of ERISA or the plan terms . . . ." Id. at 210.

In the Memorandum Opinion & Order, the Magistrate Judge concluded that both of the Davila requirements for complete preemption were present. "First, Everett's complaint is only based on the denial of benefits he is entitled to under an ERISA-regulated plan. Second, Everett does not claim any violation of a legal duty independent of those imposed by ERISA or the ERISA plan's terms." (Mem. Op. & Order 7). Because MetLife's duty and potential liability under state law arises from the rights and obligations established by the ERISA-governed plan, the Magistrate Judge concluded that Everett's KUCSPA claims are not independent from ERISA. (Mem. Op. & Order 8). The Magistrate Judge ultimately determined that Everett'sKUCSPA claims were completely preempted under 29 U.S.C. § 1132. (Mem. Op. & Order 6-10).

The basis of Everett's objection is that the second element of the Davila test is not satisfied. According to Everett, the Magistrate Judge "ignore[d] the basic fact that as an insurer in the state of Kentucky, Met Life is bound to Kentucky's insurance laws and regulations." (Pl.'s Obj. 9). Everett then goes on to list the "rights and obligations" that the KUCSPA imposes on an insurer who sells insurance in Kentucky. To summarize, Everett argues that because MetLife is subject to the rights and obligations of KUCSPA while doing insurance business in Kentucky, a legal right is created that is independent of ERISA, and thus, there is no preemption.

MetLife responds that Everett misunderstands when a legal duty is "independent" of an ERISA plan.

"'Whether a duty is 'independent' of an ERISA plan, for purposes of the Davila rule, does not depend merely on whether the duty nominally arises from a source other than the plan's terms.'" Rather, "[w]hat matters is whether [Defendant]'s duty and potential liability under state law derives 'from the particular rights and obligations established by the [ERISA] benefit plan[].'"

(Def.'s Resp. Pl.'s Obj. 2 (internal citations omitted) (citation omitted)). MetLife argues the violations of KUCSPA alleged by Everett arise from the particular rights and obligations established by the ERISA-governed policy, thus, KUCSPA claims are not independent of ERISA or the plan terms. (Def.'s Resp. Pl.'s Obj. 2-5).

The Court agrees with the Magistrate Judge and MetLife that even though KUCSPA does create rights and obligations which an insured doing business in Kentucky must follow, it does not mean that KUCSPA claims are independent from ERISA when the plaintiff's claims arise from a violation of the rights and duties under an ERISA-governed policy. A plethora of case law from the Western District of Kentucky supports this proposition. In the similar case ofHoward v. Prudential Insurance Company of America, No. 3:16-CV-00752-CRS, 2017 WL 1199759 (W.D. Ky. Mar. 30, 2017), this Court held that the plaintiff's KUCSPA claims that arose from an alleged wrongful denial of benefits of an ERISA regulated plan did "not seek to correct any violation of a legal duty that is independent of ERISA" and were completely preempted. Id. at *4. Similarly, in Milby v. Liberty Life Assurance Company of Boston, 102 F. Supp. 3d 922 (W.D. Ky. 2015), and again in Hagan v. Northwestern Mutual Life Insurance Company, No. 3:15-CV-00298-CRS, 2016 WL 427922 (W.D. Ky. Feb. 3, 2016), this Court found claims under KUCSPA were completely preempted because the claims, like Everett's here, were based on administration of benefits claims and the duties allegedly breached only existed because of the ERISA-regulated plan. Milby, 102 F. Supp. 3d at 934-35 (citation omitted); Hagan, No. 3:15-CV-00298-CRS, 2016 WL 427922, at *4. Additionally, in Hanshaw v. Life Insurance Company of North America, No. 3:14-CV-00216-JHM, 2014 WL 5439253 (W.D. Ky. Oct. 24, 2014), this Court held that a state law contract claim did not arise independently of ERISA because the rights and obligations under the contract were established by an ERISA-regulated policy. Hanshaw, 2014 WL 5439253, at *5-6.

As the Sixth Circuit has stated, a state law claim is independent of ERISA when the duty conferred was "not derived from, or conditioned upon, the terms of" the plan and there is no "need[ ] to interpret the plan to determine whether that duty exists." Gardner v. Heartland Indus. Partners, LP, 715 F.3d 609, 614 (6th Cir. 2013) (citing Davila, 542 U.S. at 210). In this case, Everett's KUCSPA claims are premised on the alleged wrongful denial of benefits promised under an ERISA benefit plan. (Pl.'s Mot. Amend 2-5, DN 23-1). Accordingly, there will clearly...

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