De Leon v. Standard Ins. Co., Case No. 2:15-cv-07419-ODW(JC)

• Decision Date: 05 May 2016
• Docket Number: Case No. 2:15-cv-07419-ODW(JC)
• Court: U.S. District Court — Central District of California
• Parties: ANGELA DE LEON, on behalf of herself and all others similarly situated, Plaintiff, v. STANDARD INSURANCE COMPANY, Defendant.

ANGELA DE LEON, on behalf of herselfand all others similarly situated, Plaintiff, v. STANDARD INSURANCE COMPANY, Defendant.

Case No. 2:15-cv-07419-ODW(JC)

United States District Court Central District of California

May 5, 2016

ORDER GRANTING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT[58] AND DENYING AS MOOT PLAINTIFF'S MOTION FOR CLASS CERTIFICATION[55]

I.INTRODUCTION

This is a putative class action lawsuit against Standard Insurance Company("Standard") under the Employee Retirement Income Security Act of 1974("ERISA").PlaintiffAngela De Leon, who suffered an on-the-job injury, alleges that Standard unlawfully offset her workers' compensation benefits against disability benefits it awarded to her under an ERISA-governed welfare plan.Before the Court are Standard's Motion for Partial Summary Judgment and Plaintiff's Motion for Class Certification.For the reasons discussed below, the CourtGRANTS Standard's Motion (ECF No. 58) and DENIES AS MOOTPlaintiff's Motion (ECF No. 55).¹

II.FACTUAL BACKGROUND

Plaintiff was an employee of Charlotte Russe Holdings, Inc., during which time she participated in a group long-term disability insurance plan ("LTD Plan") issued by Standard.(See Standard's Statement of Undisputed Material Facts ("SUF") 1, 25.)Plaintiff contends that she paid 72% of the LTD Plan premium and that Charlotte Russe paid the remaining 28%. (Compl. ¶ 11;SUF 26.)²After suffering an on-the-job injury, Plaintiff received both temporary total disability workers' compensation benefits and LTD Plan benefits.(SUF 9-13.)However, Standard deducted the full amount of workers' compensation benefits she received from the LTD Plan benefits it awarded to her.(SUF 8, 14.)

On September 22, 2015, Plaintiff filed a Complaint, in which she asserts one class claim and two individual claims.(ECF No. 1.)In the class claim, Plaintiff alleges that Standard violated California Labor Code section 3751 by deducting more than 28% of the workers' compensation benefits she received from her LTD Plan benefits.(Compl. ¶¶ 11-12.)Moreover, because section 3751 is allegedly incorporated by operation of law into the terms of the LTD Plan, violation of that statute also constitutes a violation of the terms the LTD Plan and is thus actionable under 29 U.S.C. § 1132(a).

On January 28, 2016, this Court denied Standard's preemptive motion to deny class certification.(ECF No. 45.)In March 2016, Plaintiff affirmatively moved for class certification, and shortly thereafter Standard moved for summary judgment onthe class claim.(ECF Nos. 55, 58.)The parties each timely opposed and replied to the other's Motion.(ECFNos. 62-69.)Both Motions are now before the Court for consideration.

III.LEGAL STANDARD

Summary judgment should be granted if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law.Fed. R. Civ. P. 56(a).The moving party bears the initial burden of establishing the absence of a genuine issue of material fact.Celotex Corp. v. Catrett, 477 U.S. 317, 322-24(1986).Once the moving party has met its burden, the nonmoving party must go beyond the pleadings and identify specific facts through admissible evidence that show a genuine dispute for trial.Id.;Fed. R. Civ. P. 56(c).

A disputed fact is "material" where the resolution of that fact might affect the outcome of the suit under the governing law.Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248(1968).Conclusory or speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and defeat summary judgment.Thornhill's Publ'g Co. v. GTE Corp., 594 F.2d 730, 738(9th Cir.1979).Moreover, there must be more than a mere scintilla of contradictory evidence.Addisu v. Fred Meyer, 198 F.3d 1130, 1134(9th Cir.2000).Where the moving and nonmoving parties' versions of events differ, courts are required to view the facts and draw reasonable inferences in the light most favorable to the nonmoving party.Scott v. Harris, 550 U.S. 372, 378(2007).A court may not weigh conflicting evidence or make credibility determinations.Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984(9th Cir.2007).

IV.DISCUSSION

Before turning to the merits, Plaintiff's rather complex theory of liability on the class claim requires some elaboration.Section 3751(a) provides, in relevant part: "No employer shall exact or receive from any employee any contribution, or make or take any deduction from the earnings of any employee, either directly or indirectly, tocover the whole or any part of the cost of compensation under this division."Cal. Lab. Code § 3751(a).The California Supreme Court has held that an employer that deducts workers' compensation benefits from other benefits to which the employee is entitled violates section 3751, because doing so effectively forces the employee to pay for his or her own workers' compensation benefits—at least where the employee paid the premium for those other benefits.Symington v. City of Albany, 5 Cal. 3d 23, 27(1971);City of Los Angeles v. Indus. Acc. Comm'n(Fraide), 63 Cal. 2d 242, 243(1965);but seeAppleby v. Workers' Comp. Appeals Bd., 27 Cal. App. 4th 184, 187(1994)(approving offset of workers' compensation benefits against other benefits paid for entirely by employer).

Building on this, Plaintiff contends that section 3751 also prohibits Standard—which is not Plaintiff's employer, but simply an insurer and administrator of a welfare benefits plan in which Plaintiff is participating—from offsetting her workers' compensation benefits against her LTD Plan benefits by a percentage that is greater than the percentage of the LTD Plan premium paid by the employer.(Compl. ¶¶ 11-12.)Thus, because Charlotte Russe paid only 28% of the LTD Plan premium, Plaintiff contends that Standard was not permitted to deduct more than 28% of her workers' compensation benefits from her LTD Plan benefits.(Id.)Moreover, Plaintiff contends that state law automatically incorporates the requirements of section 3751 into the terms of the LTD Plan, and thus Standard has effectively breached those terms by not complying with section 3751.(Opp'n 8, ECF No. 64;Pl.'s Add'l Material Facts 3, ECF No. 65.)And where an insurer denies benefits owed to an employee under the terms of an ERISA-governed plan, that employee may bring an action under 29 U.S.C. § 1132(a).(Opp'n 8.)

A.Motion for Partial Summary Judgment

Plaintiff's theory of liability fails for a simple reason: neither the text nor the purpose of section 3751 supports its application to non-employers like Standard.Not only does section 3751 expressly apply only to "employers," but the fact that non-employers are not responsible for the costs of compensation demonstrates the fallacy of trying to rope them into the statute's reach.

In interpreting a California statute, federal courts"are bound by California rules of construction."In re Anderson, 824 F.2d 754, 756(9th Cir.1987);see alsoIn re Goldman, 70 F.3d 1028, 1029(9th Cir.1995).In California, interpretation of a statute"begin[s] with its text, as statutory language typically is the best and most reliable indicator of the Legislature's intended purpose.[The court must] consider the ordinary meaning of the language in question as well as the text of related provisions, terms used in other parts of the statute, and the structure of the statutory scheme.If the statutory language in question remains ambiguous after [the court] consider[s] its text and the statute's structure, then we may look to various extrinsic sources, such as legislative history, to assist [the court] in gleaning the Legislature's intended purpose."Larkin v. W.C.A.B., 62 Cal. 4th 152, 157-58(2015)(citations omitted).

1.Text

The statute, by its terms, applies only to "employer[s]."Id.The California Labor Code defines "employer" as "[e]very person including any public service corporation, which has any natural person in service."Id.§ 3300(c).While Standard is obviously an "employer" in the sense that it is a company that employs people, the relevant consideration is whether it is Plaintiff's employer—which it indisputably is not.(SeeSUF 25("De Leon was an employee of Charlotte Russe . . . .");Compl.¶ 5("Plaintiff . . . was an employee of Charlotte Russe . . . .");id.¶ 6(noting that "[w]ith respect to the allegations contained [in this Complaint]," Standard was acting simply as an ERISA plan fiduciary).)Thus, the statute by its terms does not apply to Standard.

2.Purpose and Structure

Moreover, neither the purpose nor the structure of either section 3751 or California's general workers' compensation scheme suggests that the statute should apply to Standard.Workers' compensation laws were originally enacted "to eliminatethe three common law defenses that had prevented recovery for injuries received on the job: contributory negligence, assumption of risk, and fault of a fellow employee.Employees were relieved of these defenses and given the certainty of financial and other benefits whenever the 'conditions of compensation' were established.In exchange, employers were given an exemption from civil actions for damages."Hisel v. County of Los Angeles, 193 Cal. App. 3d 969, 974-75(1987).However, to prevent employers from avoiding sub silentio both civil liability and compensation liability, section 3751 prohibits employers from receiving any "contribution" from employees that has the effect of paying the "cost of compensation."Cal. Lab. Code § 3751(a);see alsoRodriguez v. RWA Trucking Co., Inc., 238 Cal. App. 4th 1375, 1396(2013)(section 3751"require[s] the employer to bear the entire cost of securing compensation").³

Plaintiff argues that Standard's conduct has this prohibited effect.That is, Standard reduced her LTD Plan benefits—for which she paid 28% of the premium—because she received workers' compensation benefits, which in turn reduces the...