Krooth & Altman v. North American Life Assur. Co.

• Decision Date: 22 February 2001
• Docket Number: Civil Action No. 98-1399 SSH.
• Citation: 134 F.Supp.2d 96
• Court: U.S. District Court — District of Columbia
• Parties: KROOTH & ALTMAN, et al., Plaintiffs, v. NORTH AMERICAN LIFE ASSURANCE COMPANY, et al., Defendants.

134 F.Supp.2d 96

KROOTH & ALTMAN, et al., Plaintiffs, v. NORTH AMERICAN LIFE ASSURANCE COMPANY, et al., Defendants.

Civil Action No. 98-1399 SSH.

United States District Court, District of Columbia.

February 22, 2001.

Kevin T. Blaine, Emmet T. Flood, Williams & Connolly, Washington, DC, for plaintiffs Krooth & Altman, David A. Barsky, Patrick J. Clancy, Daniel Randolph Cole, Jr., William J. Delaney, E. Joseph Knoll, Donald F. Libretta, Michael E. Mazer, James F. Perna, Harrison C. Smith, William S. Tennant.

Robert A. Altman, Washington, DC, for plaintiffs Victor A. Altman, Susan R. Altman, Janet Spragens.

Wayne A. Schrader, Gibson Dunn & Crutcher, Washington, DC, for defendants North American Life Assurance Co., Manufacturers Life Insurance Co.

Cynthia T. Andreason, LeBoeuf Lamb Greene & Macrae, Washington, DC, for defendants Canada Life Assurance Company, Canada Life Insurance Company of America.

OPINION AND ORDER

STANLEY S. HARRIS, District Judge.

Before the Court are defendants Canada Life Assurance Company's and Canada Life Assurance Company of America's (collectively "Canada Life") motion to dismiss, plaintiffs' opposition, and defendants' reply thereto.¹ Also before the Court are plaintiffs' Motion To Compel Discovery from the Canada Life Defendants, Canada Life's opposition, and plaintiffs' reply thereto. The Court denies plaintiffs' motion to compel discovery, in light of defendants' reasonable interpretation of the Court's order deferring issuance of a scheduling order until disposition of the pending Motion To Dismiss. Upon consideration of the motion to dismiss, the Court grants the motion to dismiss, but also grants leave for plaintiffs to amend their complaint. Although findings of fact and conclusions of law are unnecessary on decisions of motions under Rule 12 or 56, see Fed.R.Civ.P. 52(a); Summers v. Department of Justice, 140 F.3d 1077, 1079-80 (D.C.Cir.1998), the Court nonetheless sets forth its reasoning.

I. Background

Plaintiff Krooth & Altman is a law partnership based in the District of Columbia; the individual plaintiffs are partners in that law firm. On January 27, 1976, Krooth & Altman entered into a group insurance contract with defendant North American Life Assurance Company ("North American Life") to provide term life insurance, total disability benefits, and accidental death and dismemberment insurance. Effective January 1, 1996, North American Life and defendant Manufacturers Life Insurance Company ("Manulife") merged, with Manulife continuing as the surviving company. Prior to the merger with Manulife, North American Life agreed to transfer its group life insurance business to Canada Life.

Krooth & Altman's policy with North American Life provided that the policy would be renewed automatically upon payment of the premium, and coverage was provided to all even when they retired. In December 1995, North American Life informed Krooth & Altman that it had recently merged with Manulife and that its group policy would terminate on January 31, 1996, but that Canada Life would provide plaintiffs with an offer to continue the insurance. Plaintiffs allege that Canada Life made a series of written and oral representations that the Canada Life policy would offer the same coverage as had the North American Life policy. Relying on those representations, plaintiffs agreed to termination of their coverage under the North American Life policy on January 31, 1996. Plaintiffs allege that sometime after February 1, 1996, they received the Canada Life policy for the first time, but discovered that, in contrast to the North American Life policy, the policy allowed Canada Life to cancel the policy for any reason, and it did not cover employees after they retired. Plaintiffs brought this suit alleging seven counts against all defendants, and an eighth count against just Canada Life: (1) breach of contract, (2) breach of the obligation of good faith and fair dealing, (3) promissory estoppel, (4) equitable estoppel, (5) fraudulent inducement and misrepresentation, (6) negligent misrepresentation, (7) unlawful trade practice, and (8) tortious interference with contract. Plaintiff seeks $1.2 million in compensatory damages, $3.6 million in treble damages, punitive damages of $3.6 million, and reasonable attorneys' fees.

Canada Life moves to dismiss the complaint, contending that the claims are preempted by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., and fail to state a claim under ERISA; alternatively, if the Court determines that the claims are not preempted by ERISA, Canada Life contends that the complaint fails to state a claim under state law.

II. Legal Standard

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure should not be granted "unless plaintiffs can prove no set of facts in support of their claim which would entitle them to relief." Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994); accord Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). The complaint is construed liberally in plaintiffs' favor, and plaintiffs are given the benefit of all inferences that may be derived from the facts alleged. See EEOC v. St. Francis Xavier Parochial Sch., 117 F.3d 621, 624-25 (D.C.Cir.1997); Tele-Communications of Key West, Inc. v. United States, 757 F.2d 1330, 1334-35 (D.C.Cir.1985). "However, the court need not accept inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint. Nor must the court accept legal conclusions cast in the form of factual allegations." Kowal, 16 F.3d at 1276.

III. Analysis

As a threshold matter, the Court determines that it need not deny the motion to dismiss or convert the motion to dismiss to a summary judgment motion simply because it refers to materials outside the pleadings; the materials are attached to the motion to dismiss, are referred to in the complaint, and are central to plaintiffs' claims. See e.g., Sharpe v. National Football League Players Ass'n, 941 F.Supp. 8, 10 n. 1 (D.D.C.1996); Venture Associates v. Zenith Data Systems, 987 F.2d 429, 431 (7th Cir.1993); Pension Benefit Guar. Corp. v. White Consolidated Industries, Inc., 998 F.2d 1192 (3d Cir. 1993).²

A. ERISA preemption

1. ERISA plan

The Court must first determine that some ERISA plan exists. Plaintiffs contend that the motion to dismiss is premature because further discovery is needed as to whether an "ERISA plan" existed. The Court concludes that the motion to dismiss is not premature. While the complaint does not allege the existence of an ERISA plan, nor is the Court aware of what the full contours of the ERISA plan would be, the complaint does present evidence of an "employee welfare benefit plan" that would be covered by ERISA, by virtue of the North American Life and Canada Life insurance policies. See Psychiatric Institute of Washington, D.C. v. Connecticut Gen. Life Ins. Co., 780 F.Supp. 24, 27 (D.D.C.1992). At a minimum, the North American Life and Canada Life insurance policies qualify as an "employee welfare benefit plan," as defined in 29 U.S.C.A. § 1002(1)(A) ("any plan, fund, or program which was ... 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, (1) ... benefits in the event of sickness, accident, disability, death....").

2. Plaintiffs' status as "employers"

Plaintiffs assert that ERISA does not preempt their claims because, as partners of the law firm and therefore the "employers," they are not covered by ERISA and would not have standing. The Court recognizes that the purpose of enacting ERISA was not to protect employers, and that a regulation relating to ERISA states that "[a] partner in a partnership and his or her spouse shall not be deemed to be employees with respect to the partnership." 29 C.F.R. § 2510.3-3(c)(2); Bane v. Ferguson, 890 F.2d 11, 12 (7th Cir.1989). The Court is further aware of the differing results presented in the caselaw on whether a partner is covered by ERISA. See Wolk v. Unum Life Ins. of America, 186 F.3d 352, 356, 356 n. 5 (3d Cir.1999) (citing cases where employers have standing under ERISA and distinguishing cases where employers do not); Eichhorn, Eichhorn & Link v. Travelers Ins. Co., 896 F.Supp. 812, 813-14 (N.D.Ind.1995) (same).

Upon consideration of these factors, the policies of ERISA, and, in particular, the plain language of the statute, the Court concludes that the partners in this case, given the terms of the two insurance policies at issue, can be covered by ERISA. To have standing to bring an ERISA lawsuit, a plaintiff must be either a "participant" or a "beneficiary" of an ERISA plan. 29 U.S.C. § 1132(a)(1)(B). While plaintiffs do not qualify as "participants," the Court finds that they qualify as "beneficiaries." A beneficiary is defined as a "person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder." 29 U.S.C. § 1002(8) (emphasis added). The North American Life policy covers any eligible employee, and the policy explicitly states that "[f]or the purpose of this policy, a partner shall be considered to be an Employee of the Employer if he is engaged full-time in the business of the Employer." See North American Life policy § 1.3., Ex. A to Canada Life's Mot. To Dismiss. The Canada Life policy, while not as explicit in its terms, provides an insurance schedule for six different classes of individuals, including three different classes of partners. See Canada Life policy p. 8, Ex.C. to Canada Life's Mot. To Dismiss. The Court therefore finds that the individual plaintiffs' claims are not, as a matter of course, excluded from ERISA preemption by virtue of their status as employers. See Wolk. 186 F.3d at 358...