Nicholson v. Prudential Ins. Co. of Am.

• Decision Date: 07 January 2003
• Docket Number: No. CIV.02-202-P-C.,CIV.02-202-P-C.
• Citation: 235 F.Supp.2d 22
• Parties: Eric P. NICHOLSON, Plaintiff v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant
• Court: U.S. District Court — District of Maine

235 F.Supp.2d 22

Eric P. NICHOLSON, Plaintiff v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant

No. CIV.02-202-P-C.

United States District Court, D. Maine.

January 7, 2003.

James B. Smith, Esq., Woodman Edmands Danylik & Austin, P.A., Biddeford, ME, for plaintiff.

Edward P. O'Leary, Esq., Amy C. Cashore-Mariani, Esq., Fitzhugh & Associates, Boston, MA, for Defendants.

MEMORANDUM OF DECISION AND ORDER GRANTING DEFENDANT'S MOTION TO DISMISS AND GRANTING IN PART PLAINTIFF'S MOTION TO AMEND THE COMPLAINT

GENE CARTER, Senior District Judge.

Defendant,¹ The Prudential Insurance Company of America ("Prudential"), moves to dismiss all claims asserted against it in this action which it removed to this Court from the Maine Superior Court, York County. On the same day on which he filed his opposition to the Motion to Dismiss, Plaintiff also filed a Motion to Amend His Complaint. Defendant opposes that motion. For the reasons stated below, the Court will grant Defendant's Motion to Dismiss and grant in part Plaintiff's Motion to Amend his Complaint.

I. Factual Background

The Complaint includes the following relevant factual allegations. Plaintiff, a resident of Old Orchard Beach, Maine, was employed by Staples, Inc. as the general manager of its store in Newington, New Hampshire from on or about February 18, 2001, at least until he stopped working on May 7, 2001. Complaint (Exhibit A to Notice of Removal (Docket Item No. 1)) ¶¶ 1, 3, 8-9. As a benefit of his employment Staples provided Plaintiff with a short-term disability insurance policy paid for by Staples and underwritten by Prudential and the opportunity to obtain long-term disability insurance underwritten by Prudential, a plan in which Plaintiff enrolled at his own expense. Id. ¶¶ 4-5. Plaintiff's long-term disability coverage became effective April 1, 2001. Id. ¶ 7. Plaintiff stopped working on May 7, 2001, as a result of chronic fatigue syndrome and is under the regular care of a physician. Id. ¶¶ 8-10. Plaintiff received short-term disability benefits from on or about May 14, 2001, until July 2, 2001, when Prudential terminated those benefits and disallowed his application for long-term disability benefits. Id. ¶¶ 11-12. Plaintiff remains unable to perform the substantial duties of his occupation. Id. ¶ 13.

II. Discussion

A. Motion to Dismiss

Defendant's Motion to Dismiss invokes Fed.R.Civ.P. 12(b)(6). The Prudential Insurance Company of America's Motion to Dismiss for Failure to State a Claim upon Which Relief Can Be Granted ("Motion to Dismiss") (Docket Item No. 6) at 1. "When presented with a motion to dismiss, the district court must take as true the well-pleaded facts as they appear in the complaint, extending the plaintiff every reasonable inference in his favor." Medina-Claudio v. Rodriguez-Mateo, 292 F.3d 31, 34 (1st Cir.2002) (citation and internal punctuation omitted). Defendant is entitled to dismissal for failure to state a claim only when the allegations are such that Plaintiff can prove no set of facts to support the claim for relief. See Clorox Co. Puerto Rico v. Proctor & Gamble Commercial Co., 228 F.3d 24, 30 (1st Cir.2000) (citation and internal punctuation omitted); see also Tobin v. University of Maine Sys., 59 F.Supp.2d 87, 89 (D.Me.1999).

Plaintiff's Complaint appears to allege breach of contract (Count I) and violation of 24-A M.R.S.A. § 2436-A, which deals with unfair claims settlement practices by insurers (Count II). Complaint at 3-4. Prudential contends that these are state-law claims which are preempted by the Employee Retirement Income Security Act of 1974 ("ERISA") and accordingly must be dismissed. Motion to Dismiss at 1. Plaintiff admits that the claims are appropriately characterized by Prudential, Plaintiff's Opposition to Defendant's Motion to Dismiss, etc. ("Dismissal Opposition") (Docket Item No. 8) at 1, but contends that, if preempted, they should be considered transformed into claims under ERISA rather than dismissed, id. at 3-4. At the same time, Plaintiff filed a proposed Amended Complaint that repeats these claims against Prudential, [Proposed] Amended Complaint (attached to Plaintiff's Motion to Amend His Complaint (Docket Item No. 9)), Counts II and IV, asserts several claims against Staples, and adds a claim against Prudential alleging ERISA violations (Count VI). Prudential opposes the motion for leave to amend on the ground of futility, asserting that it is not a fiduciary with regard to the short-term disability plan, and thus may not be held liable on Plaintiff's claims with respect to that plan, and that the allegations in the proposed Amended Complaint fail on their face to establish Plaintiff's eligibility for benefits under the long-term disability plan. Memorandum of the Prudential Insurance Company of America in Opposition to Plaintiff's Motion to Amend His Complaint ("Amendment Opposition") (Docket Item No. 14) at 2.

ERISA's preemption provision is found at 29 U.S.C. § 1144(a): "[T]he provisions of this subchapter and subchapter III of this chapter shall supercede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title." "State law" is defined to include any state action "having the effect of law." 29 U.S.C. § 1144(c)(1). Plaintiff does not contend that any employee benefit plan that might be involved in this case is exempt under 29 U.S.C. § 1003(b).

The Supreme Court has addressed ERISA preemption on several occasions, as has the Court of Appeals for the First Circuit. It is clear that state-law claims for breach of contract are preempted by ERISA under certain conditions. See, e.g., Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). The same is true of claims invoking state statutes governing insurance claims practices. Id. at 50-52, 107 S.Ct. 1549. "ERISA preemption analysis ... involves two central questions: (1) whether the plan at issue is an `employee benefit plan' and (2) whether the cause of action `relates to' this employee benefit plan." McMahon v. Digital Equip. Corp., 162 F.3d 28, 36 (1st Cir.1998). "A law `relates to' a covered employee benefit plan ... if it [1] has a connection with or [2] reference to such a plan." California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 324, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997) (additional internal quotation and other marks and citations omitted). A common-law cause of action "premised on the existence of an ERISA plan" is preempted. Id. "[A] state law cause of action is expressly preempted by ERISA where a plaintiff, in order to prevail, must prove the existence of, or specific terms of, an ERISA plan." McMahon, 162 F.3d at 38.

It is clear that both of Plaintiff's state-law claims asserted in his Complaint are preempted by ERISA. See, e.g., Hampers v. W.R. Grace & Co., 202 F.3d 44, 51-52 & n. 10, 54 (1st Cir.2000) (breach of contract); Bast v. Prudential Ins. Co. of Am., 150 F.3d 1003, 1007-08 (9th Cir.1998) (breach of contract; asserted violation of state statute imposing duty to act in good faith); Tri-State Mach., Inc. v. Nationwide Life Ins. Co., 33 F.3d 309, 314-15 (4th Cir.1994) (breach of contract; asserted violation of state statute delineating unfair trade practices in business of insurance); Brandner v. Unum Life Ins. Co. of Am., 152 F.Supp.2d 1219, 1225-28 (D.Nev. 2001) (breach of contract; asserted violation of state statute regulating unfair insurance practices). Nevertheless, Plaintiff contends that dismissal is inappropriate even when preemption is established. In the instant case, there is no need to determine whether Plaintiff's preempted state-law claims might be construed to state federal-law claims under ERISA since Plaintiff has moved to amend his Complaint to include an explicit claim against Prudential under ERISA. In the Amended Complaint, the state-law claims (Counts II and IV), by Plaintiff's own argument would be duplicative. Accordingly, the Court will grant Defendant's Motion to Dismiss and not permit the inclusion of the state-law claims (Counts II and IV) in the Amended Complaint. See Belanger v. Healthsource of Maine, 66 F.Supp.2d 70, 73 (D.Me.1999) (dismissing preempted state-law claims).

B. Motion to Amend

Plaintiff has moved to amend his Complaint pursuant to Rule 15(a) asserting four additional counts: one ERISA claim asserted against Prudential (Count VI) and the three claims asserted against Staples, Inc. (Counts I, III and V). Rule 15 indicates that leave to amend a complaint "shall be freely given when justice so requires." Fed.R.Civ.P. 15(a). When leave to amend a complaint is sought before discovery is complete and neither party has moved for summary judgment, a proposed amendment may be found to be futile only if it sets forth no scenario which, if proven, would entitle the plaintiff to relief against the defendant on some cognizable theory. See Hatch v. Department for Children, Youth & Their Families, 274 F.3d 12, 19 (1st Cir.2001). The criteria of Rule 12(b)(6) are applicable. Id.

At this early stage in the case, the Court sees no reason why Plaintiff should not be permitted to amend his Complaint to add claims against Staples. The Court will grant Plaintiff's Motion to Amend with respect to Counts I, III, and V. Remaining for consideration is Count VI of the proposed Amended Complaint, which invokes section 1132(a)(1)(B) of ERISA against Prudential. See Amended Complaint ¶ 31. Section 1132(a)(1)(B) provides, in pertinent part, a cause of action for a plan participant or beneficiary to recover benefits due under the terms of the plan or to enforce rights under the terms of the plan. See 29 U.S.C. § 1132(a)(1)(B). Although Count VI, by its terms, appears to assert a claim only with respect to long-term disability benefits, Prudential contends that Count VI fails to state a...