Mayhew v. Hartford Life & Accident Ins. Co.
| Decision Date | 21 October 2011 |
| Docket Number | Case No. 11–2908 SC. |
| Parties | Melinda MAYHEW, Plaintiff, v. HARTFORD LIFE AND ACCIDENT INSURANCE COMPANY; Formfactor, Inc. Group Welfare Benefit Plan, Defendants. |
| Court | U.S. District Court — Northern District of California |
OPINION TEXT STARTS HERE
Michelle Lee Roberts, Cassie Springer-Sullivan, Springer-Sullivan & Roberts LLP, Oakland, CA, for Plaintiff.
Daniel William Maguire, Esq., Keiko Kojima, Burke Williams & Sorensen, LLP, Los Angeles, CA, for Defendants.
ORDER DENYING MAYHEW'S MOTION TO DISMISS COUNTERCLAIM
Plaintiff Melinda Mayhew (“Mayhew”) commenced this action for declaratory, injunctive, and monetary relief pursuant to § 502(a)(1) of the Employee Retirement Security Act (“ERISA”), 29 U.S.C. § 1132(a)(1), against Defendants Hartford Life and Accident Insurance Company (“Hartford”) and Formfactor, Inc. Group Welfare Benefit Plan (collectively, “Defendants”). ECF No. 1 (“Compl.”) ¶ 1. In answering the Complaint, Hartford asserted a Counterclaim for restitution. ECF No. 16 (“Counterclaim”) ¶¶ 67–72. Now before the Court is Mayhew's Motion to Dismiss the Counterclaim, which is fully briefed. ECF Nos. 18 (“Mot.”), 22 (“Opp'n”), 23 (“Reply”). For the reasons set forth below, Mayhew's Motion is DENIED.
II. BACKGROUND
As it must on a motion to dismiss Hartford's Counterclaim pursuant to Rule 12(b)(6), the Court assumes the veracity of Hartford's well-pleaded factual allegations. Mayhew alleges that Formfactor, Inc. (“Formfactor”) employed her as a technical writer between January 15, 2001 and December 15, 2006. Compl. ¶ 9. At all relevant times, Mayhew was a participant in Formfactor's Group Welfare Benefit Plan (“the Plan”), which was funded by Hartford through a group insurance policy. Id. ¶¶ 4–5. Mayhew alleges that she has been diagnosed with Graves Disease, an autoimmune disorder that leads to overactivity of the thyroid gland. Id. ¶ 10. Mayhew further alleges that her condition significantly worsened in November 2006 and, as a result, she ceased working altogether on December 15, 2006. Id. ¶¶ 10, 16. Hartford alleges that it commenced paying Mayhew monthly benefits under the Plan in March 2007. Counterclaim ¶ 68. In June 2010, Hartford terminated Mayhew's Long Term Disability (“LTD”) and Waiver of Premium claim. Id. ¶ 30; Compl. ¶ 30.
In addition to receiving benefits under the Plan, Hartford alleges that Mayhew was also awarded lump sum Social Security Disability (“SSDI”) benefit in the amount of $65,342.50 and Dependent Social Security Disability (“DSSD”) 1 benefits in the amount of $910,000. Counterclaim ¶¶ 61, 65. Hartford learned of the SSDI and DSSD payments after it had terminated Mayhew's claims. Id. Hartford alleges that, due to the SSDI and DSSD awards, Mayhew's claim under the Plan was overpaid by $79,393.51 and that Mayhew has yet to reimburse Hartford for the overpayments. Id. ¶ 65. Hartford further alleges that in a September 30, 2010 letter to Hartford, Mayhew stated, “I am willing to pay Hartford all that I owe [with respect to the SSDI benefits] but I am requesting an extension to pay the overpayment.” Id. ¶ 63.
Mayhew filed this action on June 13, 2011, alleging that Defendants violated ERISA by terminating her claim for LTD and her Life Insurance Waiver of Premium benefit under the Plan. Compl. ¶¶ 40, 43. Hartford filed the Counterclaim on August 8, 2011, seeking restitution of the alleged LTD overpayments resulting from Mayhew's receipt of SSDI and DSSD benefits. Counterclaim at ¶¶ 19–20.
Mayhew now moves to dismiss Hartford's Counterclaim on the grounds that: (1) it is preempted and otherwise prohibited by ERISA, and (2) the Plan does not permit offsets for DSSD benefits.
III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) “tests the legal sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir.2001). “Dismissal can be based on the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir.1988). “When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950, 173 L.Ed.2d 868 (2009). However, Id. (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). The allegations made in a complaint or counterclaim must be both “sufficiently detailed to give fair notice to the opposing party of the nature of the claim so that the party may effectively defend against it” and “sufficiently plausible” such that “it is not unfair to require the opposing party to be subjected to the expense of discovery.” Starr v. Baca, 633 F.3d 1191, 1204 (9th Cir.2011).
IV. DISCUSSIONA. ERISA § 502(a)(3)
Under § 502(a)(3) of ERISA, a fiduciary may bring a civil action “(A) to enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan.” 29 U.S.C. § 1132(a)(3). This provision authorizes only “those categories of relief that were typically available in equity (such as injunction, mandamus, and restitution, but not compensatory damages).” Mertens v. Hewitt Assocs., 508 U.S. 248, 256, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993).
Mayhew contends that, in spite of its label, Hartford's Counterclaim for restitution constitutes a claim for legal or money damages, which is barred by ERISA. Mot. at 5. Hartford responds that the Counterclaim is equitable in nature and thus permissible. Opp'n at 6–7. The parties' dispute turns on the Supreme Court's decisions in Great–West Life v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L.Ed.2d 635 (2002) and Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006).
Knudson dealt with the reimbursement provision of an insurance plan that gave the insurer, Great–West, the “right to recover from the [beneficiary] any payment for benefits” paid by Great–West which was later recovered from a third party. 534 U.S. at 207, 122 S.Ct. 708. After Great–West paid a portion of the Knudsons' medical expenses resulting from a car accident, the Knudsons entered into a settlement agreement with a car manufacturer which established a special needs trust to provide for the Knudsons' medical care. Id. at 207–08, 122 S.Ct. 708. The Supreme Court rejected Great–West's § 502(a)(3) reimbursement claim because the settlement funds sought were in a special needs trust rather than the Knudsons' possession. Id. at 214, 122 S.Ct. 708. The Court concluded that Great–West was not seeking equitable relief but “the imposition of personal liability for the benefits that they conferred upon [the Knudsons].” Id. at 214, 122 S.Ct. 708.
In Sereboff, the Supreme Court allowed an insurer's claim for reimbursement under similar facts. The Sereboffs were injured in a car accident, received insurance benefits for medical expenses incurred, and later settled against third parties involved in the accident. Sereboff, 547 U.S. at 360, 126 S.Ct. 1869. Pursuant to § 502(a)(3), the insurer, Mid Atlantic, sought to enforce a plan provision which required “a beneficiary who receives benefits under the plan ... to reimburse [Mid Atlantic] for those benefits from [a]ll recoveries from a third party.” Id. at 359, 126 S.Ct. 1869 (internal quotation marks omitted). The Supreme Court distinguished Sereboff from Knudson on the grounds that the Sereboffs' settlement funds were not held by a trust and, as such, Mid Atlantic was seeking particular funds in the Sereboffs' possession, not the imposition of personal liability. Id. at 362–63, 126 S.Ct. 1869. The Court concluded that Mid Atlantic's claim was permissible under ERISA. Id. at 369, 126 S.Ct. 1869.
The Supreme Court found that the reimbursement provision in the Sereboffs' insurance plan gave rise to an equitable lien by agreement. Id. at 363–365, 126 S.Ct. 1869. The Court explained:
[T]he Sereboffs' plan specifically identified a particular fund, distinct from the Sereboffs' general assets—“[a]ll recoveries from a third party (whether by lawsuit, settlement, or otherwise)”—and a particular share of that fund to which Mid Atlantic was entitled—“that portion of the total recovery which is due [Mid Atlantic] for benefits paid.”
Id. at 364, 126 S.Ct. 1869. Under “a familiar rule of equity,” the insurer could “follow[ ] a portion of the recovery ‘into the [Sereboffs'] hands' ‘as soon as [the settlement fund] was identified,’ and impos[e] on that portion a constructive trust or equitable lien.” Id. (quoting Barnes v. Alexander, 232 U.S. 117, 123, 34 S.Ct. 276, 58 L.Ed. 530 (1914)). The Supreme Court noted that “the fund over which a lien is asserted need not be in existence when the contract containing the lien provision is executed.” Id. at 366, 126 S.Ct. 1869. Further, no “strict tracing rules” apply to an equitable lien by agreement. Id. at 365, 126 S.Ct. 1869. Accordingly, the property to which the lien attached could be converted to other property without destroying the lien. See id. at 364–65, 126 S.Ct. 1869.
Mayhew argues that Hartford's counterclaim is barred under Knudson since Hartford “seeks to impose personal liability on [Mayhew] for her alleged breach of the plan.” Mot. at 8. Hartford responds that it seeks permissible equitable relief under Sereboff because the Plan created an equitable lien by agreement. Opp'n at 6.
The Court agrees with Hartford. The Plan created an equitable lien as it “specifically...
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