Perazzo v. Reliance Standard Life Insurance Company, Civil Action No. 00-3342 (E.D. Pa. 11/15/2001)

• Decision Date: 15 November 2001
• Docket Number: Civil Action No. 00-3342.
• Parties: JACQUELYN PERAZZO and ROBERT PERAZZO v. RELIANCE STANDARD LIFE INSURANCE COMPANY, and PHILADELPHIA PARKING AUTHORITY.
• Court: U.S. District Court — Eastern District of Pennsylvania

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JACQUELYN PERAZZO and ROBERT PERAZZO v. RELIANCE STANDARD LIFE INSURANCE COMPANY, and PHILADELPHIA PARKING AUTHORITY.

Civil Action No. 00-3342.

United States District Court, E.D. Pennsylvania.

November 15, 2001.

MEMORANDUM AND ORDER

HUTTON, J.

Presently before the Court are Defendant Reliance Standard Insurance Company's ("Reliance Standard") Motion to Dismiss Plaintiffs' Second Amended Complaint (Docket No. 14), Plaintiffs Jacquelyn Perazzo and Robert Perazzo's ("Plaintiffs") Response to Defendant Reliance Standard's Motion to Dismiss Plaintiffs' Second Amended Complaint (Docket No. 15), Reply Brief in Support of Defendant Reliance Standard's Motion to Dismiss Plaintiffs' Second Amended Complaint (Docket No. 16), Defendant Philadelphia Parking Authority's ("PPA") Sur-Reply to Defendant Reliance Standard's Motion to Dismiss (Docket No. 20), Defendant PPA's Motion to Dismiss Plaintiffs' Second Amended Complaint (Docket No. 17), Plaintiffs' Response to Defendant PPA's Motion to Dismiss Plaintiffs' Second Amended Complaint (Docket No. 18), and Defendant Reliance Standard's Response to Defendant PPA's Motion to Dismiss Plaintiffs' Second Amended Complaint (Docket No. 19). After full consideration of the arguments, Defendant Reliance Standard's motion is DENIED, and Defendant PPA's motion is GRANTED.

I. BACKGROUND

Plaintiffs Jacquelyn Perazzo and Robert Perazzo ("Plaintiffs"), filed the instant complaint against Defendants Reliance Standard Insurance Company ("Reliance Standard") and the Philadelphia Parking Authority ("PPA") on June 6, 2000 alleging that Reliance Standard wrongfully denied long term disability benefits to Plaintiff Jacquelyn Perazzo, a former employee of Defendant PPA. In their original complaint, Plaintiffs alleged a violation of a number of state law claims against Reliance Standard, including breach of contract, breach of good faith and fair dealing, breach of fiduciary duty, fraud, unfair trade practice, violation of the consumer protection act, and loss of consortium. On June 30, 2000, Reliance Standard successfully removed the case to this Court based upon Reliance Standard's allegations that Plaintiffs' claims were governed by the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq. Defendant PPA then filed a Motion to Dismiss Plaintiffs' Complaint for failure to state grounds for relief under federal law.¹ On November 11, 2000, the Court granted Plaintiffs' leave to file an amended Complaint to include a claim under ERISA.

Plaintiffs' amended complaint set forth an ERISA and fraud claim against Defendant PPA, but Plaintiffs continued to allege only state law claims against Reliance Standard. In turn, Reliance Standard filed a motion to dismiss Plaintiffs' amended complaint, which this Court granted as uncontested on January 8, 2001. The Court then granted Plaintiffs' motion for reconsideration, and permitted Plaintiffs to file a second amended complaint. On May 18, 2001, Plaintiffs filed a second amended complaint that stated an ERISA claim against Reliance Standard, in addition to the state law claims originally pled.² Reliance Standard and PPA then filed Motions to Dismiss Plaintiffs' Second Amended Complaint on May 24, 2001 and July 6, 2001 respectively.

II. LEGAL STANDARD

A. Standard for a Motion to Dismiss

When considering a motion to dismiss a complaint for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), this Court must "accept as true the facts alleged in the complaint and all reasonable inferences that can be drawn from them. Dismissal under Rule 12(b) (6) . . . is limited to those instances where it is certain that no relief could be granted under any set of facts that could be proved." Markowitz v. Northeast Land Co., 906 F.2d 100, 103 (3d Cir. 1990) (citing Ransom v. Marrazzo, 848 F.2d 398, 401 (3d Cir. 1988)); see also H.J. Inc. v. Northwestern Bell Tel. Co., 492 U.S. 229, 249-50 (1989). The Court will only dismiss the complaint if "`it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" H.J. Inc., 492 U.S. at 249-50 (quoting Hishon v. King & Spalding, 467 U.S. 69, 73 (1984)).

The Court notes that PPA moves for dismissal of the instant case under Federal Rule of Civil Procedure 12(b)(6), failure to state a claim, as opposed to Federal Rule of Civil Procedure 12(b)(1), lack of subject matter jurisdiction. PPA's dispositive challenges, however, relate to whether this Court has subject matter jurisdiction over this action. A federal court has an obligation to address a question of subject matter jurisdiction sua sponte. See Meritcare v. St. Paul Mercury Ins. Co., 166 F.3d 214, 217 (3d Cir. 1999) (holding that a district court may "address the question of jurisdiction, even if the parties do not raise the issue") (quoting Liberty Mut. Ins. Co. v. Ward Trucking Corp., 48 F.3d 742, 750 (3d Cir. 1995)); Employers Ins. of Wausau v. Crown Cork & Seal Co., Inc., 905 F.2d 42, 45 (3d Cir. 1990). Moreover, the need to examine the court's jurisdiction is made explicit in removal cases, like the case at bar, where "if at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c).

On a Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction, the Court determines whether it has authority or competence to hear and decide the case. See 5 C. Wright & A. Miller, Federal Practice and Procedure, § 1350 at 543, 547. In deciding whether there is subject matter jurisdiction, affidavits and other matters outside the pleadings may be considered. See Mortenson v. First Fed. Sav. and Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977); 5 C. Wright & A. Miller, Federal Practice and Procedure, § 1350 at 549-50. As the Third Circuit stated in Mortenson, the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. 549 F.2d at 891. In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims. Id.

III. DISCUSSION

Both Defendants now move this Court to dismiss Plaintiffs' Second Amended Complaint, but for conflicting reasons. Reliance Standard argues that Plaintiffs' Second Amended Complaint should be dismissed because ERISA governs the plan at issue, and thus preempts Plaintiffs' state law claims. See Def. Reliance Standard's Mot. to Dismiss at ¶ 11-12. Plaintiff does not object to a dismissal of the state law claims, so long as Plaintiffs can proceed under ERISA. See Pls.' Resp. to Def. Reliance Standard's Mot. to Dismiss at 3. Conversely, PPA moves to dismiss Plaintiffs' complaint because the long term disability policy involved in this case is a "governmental plan" under 29 U.S.C. § 1002(32), and is therefore exempt from ERISA coverage. See Def. PPA's Mot. to Dismiss at 3. Accordingly, the issue before this Court is whether the long term disability policy issued by Reliance Standard meets the criteria of a "governmental plan." If the plan qualifies as a governmental plan under 29 U.S.C. § 1002(32), then Plaintiffs' ERISA claims must be dismissed pursuant to 29 U.S.C. § 1003(b)(1). See Williams v. New Castle County, 970 F.2d 1260, 1265 (3d Cir. 1992) ("It is clear, however, that under 29 U.S.C. § 1003(b)(1), none of the ERISA provisions applies to a government employee benefits plan.").

A. Plaintiffs' ERISA Claims

. The "Governmental Plan" Exemption

"ERISA is designed to ensure the proper administration of pension and welfare plans, both during the years of the employee's active service and in his or her retirement years." Boggs v. Boggs, 520 U.S. 833, 839 (1997). As such, ERISA applies "to any employee benefit plan if it is established or maintained . . . by any employer engaged in commerce. . ." 29 U.S.C. § 1003(a)(1).

Despite its broad application, ERISA expressly exempts any "governmental plan" from its employee benefit plan provisions. 29 U.S.C. § 1003(b)(1); see also Rose v. Long Island R.R. Pension Plan, 828 F.2d 910, 914 (2d Cir. 1987), cert. denied 485 U.S. 936, 99 L.Ed.2d 273, 108 S.Ct. 1112 (1988) ("Although Congress considered whether ERISA should apply to `public' or `governmental' benefit plans, it ultimately decided to exempt such plans from compliance with most of ERISA's requirements.").

"The governmental plan exception to ERISA was established, in part, to protect state authority over relations with state employees." Zarilla v. Reading Area Cmty. Coll., Civ. A. No. 99-1057, 1999 WL 554609, at *1 (June 30, 1999) (citing Rose, 828 F.2d at 914). Section 1003(b) provides in relevant part that "[t]he provisions of [ERISA-Subcahpter I, Protection of Employee Benefit Rights] shall not apply to any employee benefit plan if . . . such a plan is a governmental plan." 29 U.S.C. § 1003(b)(1). Section 1002(32), in turn, defines a "governmental plan" as "a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing . . . ." 29 U.S.C. § 1002(32). Accordingly, the issue before this Court is whether PPA, the plan's sponsor, is a political subdivision, agency or instrumentality of Pennsylvania or any of its political subdivisions. If it is, then PPA's long term disability insurance plan falls under the governmental plan exception and is therefore not subject to ERISA.

Courts have construed the governmental exception to ERISA narrowly. See e.g., Poitier v. Sun Life of Canada, Civ. A. No. 98-3056, 1998 WL 754980, at *1 (E.D.Pa. Oct. 28, 1998); Krupp v. Lincoln Univ., 663 F. Supp. 289, 292 (E.D.Pa. 1987). As such, the exception is deemed to include only those "organizations traditionally...