Menkes v. Prudential Ins. Co. of Am., J. Corp.

• Decision Date: 06 August 2014
• Docket Number: No. 13–1408.,13–1408.
• Citation: 762 F.3d 285
• Court: U.S. Court of Appeals — Third Circuit
• Parties: Alexander L. MENKES; Stephen Wolfe, individually and on behalf of all others similarly situated, Appellants v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation; Qinetiq North America Operations, LLC, a Delaware corporation; Qinetiq North America, Inc., a Delaware corporation; Westar Aerospace & Defense Group, Inc., a Nevada corporation; Does 1–100, presently known individuals, partnerships, companies and/or other entities, inclusive.

762 F.3d 285

Alexander L. MENKES; Stephen Wolfe, individually and on behalf of all others similarly situated, Appellants

v.PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation; Qinetiq North America Operations, LLC, a Delaware corporation; Qinetiq North America, Inc., a Delaware corporation; Westar Aerospace & Defense Group, Inc., a Nevada corporation; Does 1–100, presently known individuals, partnerships, companies and/or other entities, inclusive.

No. 13–1408.

United States Court of Appeals,Third Circuit.

Argued: Dec. 10, 2013.

Filed: Aug. 6, 2014.

Andrew P. Bell, Esq. (Argued), Michael A. Galpern, Esq., Locks Law Firm, LLC, Cherry Hill, NJ, for Appellants.

Hillary Richard, Esq. (Argued), MaryAnn Sung, Esq., Brune & Richard LLP, New York, N.Y., Melissa A. Herbert, Esq., Robin H. Rome, Esq., Kristine V. Ryan, Esq., Nukk–Freeman & Cerra, P.C., Chatham, NJ, for Appellee Prudential Insurance Co. of America.

Kimberly B. Martin, Esq., Scott B. Smith, Esq. (Argued), Bradley, Arant, Boult, Cummings LLP, Huntsville, AL, Edmund S. Sauer, Esq., Bradley, Arant, Boult, Cummings LLP, Nashville, TN, Diane A. Bettino, Esq., Kellie A. Lavery, Esq., Reed Smith LLP, Princeton, NJ, for Appellees Qinetiq N.A. Operations, LLC, Qinetiq, N.A., Inc., & Westar Aerospace & Defense Group, Inc.

Before: McKEE, Chief Judge, FUENTES, and CHAGARES, Circuit Judges.

OPINION

CHAGARES, Circuit Judge.

Putative class plaintiffs Alexander L. Menkes and Stephen Wolfe appeal the District Court's dismissal of their complaint for failure to state a claim. This appeal requires us to determine whether certain supplemental insurance coverage is governed by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq. We conclude that in the circumstances presented here, it is, and that it cannot be unbundled from the plaintiffs' broader employer-provided ERISA benefits plan. We then must decide whether ERISA preempts the various state law claims that the plaintiffs asserted. Concluding that it does, we will affirm the District Court's dismissal.

I.

We take the following facts from the plaintiffs' complaint, documents to which it referred and upon which it relied, and the plaintiffs' proposed amended complaint, which we must accept as true for the purposes of a motion to dismiss. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009). The plaintiffs were employed by defense contractor defendant Qinetiq ¹ to work on a military base in Kirkuk, Iraq in 2008. As employees, the plaintiffs were automatically enrolled in Qinetiq's Basic Long Term Disability, Basic Life, and Accidental Death and Dismemberment insurance policies (the “Basic Policies”). It is undisputed that Qinetiq offered this insurance coverage pursuant to ERISA. These policies were established pursuant to a single group contract with the Prudential Insurance Company of North America, and Qinetiq paid the premiums for each of these policies on behalf of its employees.

Both plaintiffs also purchased supplemental insurance coverage to augment their basic benefits. Both purchased what the plaintiffs term “Supplemental Long Term Disability” (“Buy Up LTD”) coverage, and Menkes purchased “Supplemental Accidental Death & Dismemberment” (“Supplemental AD & D”) coverage (collectively, the “Supplemental Coverage”).² The plaintiffs paid additional premiums out of their own funds for this Supplemental Coverage in return for enhanced benefits should they sustain a covered injury.

The Supplemental Coverage operated pursuant to the exact same benefit terms, rules, exclusions, and claim procedures as the Basic Policies. These terms, rules, exclusions, and claim procedures for the Basic Policies and Supplemental Coverage were outlined in a single insurance booklet certificate (“Booklet”) and a single summary plan description (“SPD”) for each type of insurance. That is, the terms, rules, exclusions, and claim procedures for Qinetiq's long term disability policy, for example, were contained in a single Booklet and SPD; there were not separate Booklets and SPDs for the Basic Policy and Supplemental Coverage. Each SPD explicitly stated that the insurance coverage was being provided “under your Employer's ERISA plan(s).” Appendix (“App.”) 553, 621. Each Booklet stated that the plaintiffs' coverage was governed by a single group contract between Qinetiq and Prudential, and that Qinetiq was the plan sponsor and administrator. App. 552, 620. Had Qinetiq chosen not to provide (or to terminate) the Basic Policies, its employees would not have been able to purchase (or continue) the Supplemental Coverage. An employee seeking benefits under a given policy would file a single claim, not separate claims for Basic Policy benefits and Supplemental Coverage benefits.

As is relevant to this appeal, each Booklet informed the plaintiffs of the policies' respective war exclusion policies. The Long Term Disability Booklet provided that “[y]our plan does not cover a disability due to war, declared or undeclared, or any act of war.” App. 531. The Accidental Death and Dismemberment Booklet provided that loss is not covered if it results from “[w]ar, or any act of war. ‘War’ means declared or undeclared war and includes resistance to armed aggression.” App. 594. These war exclusion clauses applied to both the Basic Policies and the Supplemental Coverage because, again, each type of coverage was governed by a single set of documents with a single set of rules and exclusions.

The plaintiffs were not otherwise uninsured for injuries they incurred on account of war or acts of war. As part of its government contract, Qinetiq also obtained insurance for its employees as required by the Defense Base Act (“DBA”), 42 U.S.C. § 1651. DBA insurance provides coverage for war-related injuries sustained by contract employees while serving at military bases abroad. Qinetiq obtained this coverage not from Prudential, but from the Insurance Company of the State of Pennsylvania (“ICSP”).

Menkes filed a claim under his Long Term Disability policy for three injuries he received while in Iraq: (1) a back injury, (2) a positive tuberculosis (“TB”) test, and (3) post-traumatic stress disorder (“PTSD”). Prudential denied his claim for all three injuries. It used the war exclusion provision to deny benefits only for his PTSD injury. It declined to compensate him for his back injury because it determined that his injury did not sufficiently impair his ability to pursue his regular occupation. It declined to compensate him for his claimed TB because he subsequently had a negative TB test and showed no signs of being affected by any TB symptoms. Menkes filed only a single claim for benefits owed to him under his Long Term Disability policy—he does not allege that he filed one claim for benefits under the Basic Policy and another for benefits under the Supplemental Coverage. Menkes filed another claim for benefits under his DBA policy for these same injuries. Although ICSP and Qinetiq disputed the extent of his injuries, the parties ultimately agreed to settle that claim.

Wolfe does not allege that he suffered any injury or ever filed any claim for benefits under either one of the Prudential policies or the DBA policy.

The plaintiffs filed this action in the District of New Jersey on May 14, 2012. In their original complaint, they alleged six counts, including: (1) violation of the New Jersey Consumer Fraud Act (“CFA”), N.J. Stat. Ann. § 56:8–1, et seq.; (2) violation of the Truth in Consumer Contract, Warranty, and Notice Act (“TCCWNA”), N.J. Stat. Ann. § 56:12–1, et seq.; (3) breach of contract and breach of the implied covenant of good faith and fair dealing; (4) intentional or negligent misrepresentation and/or omission; (5) punitive damages; and (6) alternatively, violation of the consumer fraud laws of various states. They contended that Prudential fraudulently induced them to buy the Supplemental Coverage knowing that any claim they filed would likely be subject to the war exclusion clauses because their place of employment was in a war zone in Iraq, rendering the Supplemental Coverage effectively worthless. ³ They additionally alleged that Prudential deliberately concealed a policy or practice of using the war exclusion clauses to deny benefits for any and all injuries suffered while stationed abroad. The remedies the plaintiffs sought were limited to return of the premiums they paid and punitive damages. ⁴

The District Court dismissed the suit in its entirety. It held that the Supplemental Coverage was governed by ERISA and could not be unbundled from the Basic Policies. Viewing the Basic Policies and Supplemental Coverage as closely related component parts of a single plan, it held that all of the plaintiffs' state law claims were expressly preempted by ERISA's broad preemption clause, § 514(a), which provides that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” 29 U.S.C. § 1144(a). In the alternative, it held that the plaintiffs' claims were preempted by § 502(a) of ERISA because the causes of action that the plaintiffs asserted conflicted with ERISA's exclusive civil enforcement scheme. It also held that the DBA preempted Menkes's state law claims.

The District Court also denied the plaintiffs' motion for leave to amend their complaint as futile. The plaintiffs submitted a proposed amended complaint in which they: (1) deleted any reference to the New Jersey TCCWNA, (2) deleted all references to the term life insurance policies, and (3) added a state law breach of fiduciary duty claim. The court addressed these proposed revisions in its opinion and held that the proposed amended complaint was substantially similar to the original. The plaintiffs timely appealed.

II.

The District Court exercised jurisdiction pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2). We have jurisdiction pursuant to 28 U.S.C. § 1291.

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