Schwartz v. Independence Blue Cross

• Decision Date: 31 December 2003
• Docket Number: No. Civ.A. 03-4003.,Civ.A. 03-4003.
• Citation: 299 F.Supp.2d 441
• Parties: Robert SCHWARTZ v. INDEPENDENCE BLUE CROSS, Independence Blue Cross Employee Health Benefit Plan, Independence Blue Cross Employee Pension Plan, Independence Blue Cross 401(k) Plan, Independence Blue Cross Separation Pay Plan, All Other Independence Blue Cross Employee Pension or Welfare Benefit Plans, the Fiduciaries and Administrators of the Foregoing Plans
• Court: U.S. District Court — Eastern District of Pennsylvania

299 F.Supp.2d 441

Robert SCHWARTZ v. INDEPENDENCE BLUE CROSS, Independence Blue Cross Employee Health Benefit Plan, Independence Blue Cross Employee Pension Plan, Independence Blue Cross 401(k) Plan, Independence Blue Cross Separation Pay Plan, All Other Independence Blue Cross Employee Pension or Welfare Benefit Plans, the Fiduciaries and Administrators of the Foregoing Plans

No. Civ.A. 03-4003.

United States District Court, E.D. Pennsylvania.

December 31, 2003.

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Carol A. Mager, Marjory P. Albee, Mager, White & Goldstein, LLP, Jenkintown, PA, for Plaintiff.

David A. Hitchens, William J. Delany, Morgan, Lewis and Bockius LLP, Philadelphia, PA, for Defendant.

MEMORANDUM AND ORDER

JOYNER, District Judge.

This case has been brought before the Court for disposition of the defendants' motion to partially dismiss the plaintiff's complaint pursuant to Fed.R.Civ.P. 12(b)(6). For the reasons which follow, the motion is granted in part and denied in part.

Statement of Facts

According to the complaint, in May, 1994, Independence Blue Cross ("IBC") hired Plaintiff, Robert Schwartz, to work as a computer programmer in its Information Services Department but immediately arranged for him to be paid through a separate company, ARMS Corporation. ARMS was later sold to IMI Systems, Inc., which continued to pay Plaintiff for his work at IBC. (Plaintiff's Complaint, ¶ s14-15). Thereafter, in April, 2000, IMI was acquired by Ajilon Consulting, which likewise continued to pay Mr. Schwartz for his work in the information systems department at IBC until April 26, 2002 when IBC terminated his employment. (Complaint, ¶ 16-17).

Plaintiff alleges that, as he worked continuously and exclusively on IBC's premises under the supervision and control of IBC and performed identical functions to Defendant's "regular" employees, he was in reality a "common law employee" of IBC despite the fact that he was characterized as an "independent contractor, leased employee, contract worker and/or employee of a third party employment agency" who received no benefits, accrued no service credit for pension, welfare or non-qualified benefit plan purposes and received no severance pay when he was terminated. (Complaint, ¶ 17-18). Plaintiff avers that IBC intentionally mis-classified him as a non-employee contingent worker so as to deprive him of benefits and other incidents of employment in violation of the Employee Retirement Income Security Act, ("ERISA"), 29 U.S.C. § 1001, et. seq., and that in so doing it also breached its fiduciary duty to him, breached its contract with him, and was unjustly enriched.¹ By this motion, Defendants move to dismiss all of Plaintiff's claims under ERISA for, inter alia, his purported failure to exhaust administrative remedies and to state a cause of action and his state law claims as having been pre-empted.

Standards Applicable to Rule 12(b)(6) Motions

It has long been the rule that in considering motions to dismiss pursuant to Fed. R.Civ.P. 12(b)(6), the district courts must "accept as true the factual allegations in the complaint and all reasonable inferences that can be drawn therefrom." Allah v. Seiverling, 229 F.3d 220, 223 (3d Cir.2000) (internal quotations omitted). See Also: Ford v. Schering-Plough Corp., 145 F.3d 601, 604 (3d Cir.1998). A motion to dismiss may only be granted where the allegations fail to state any claim upon which relief may be granted. See, Morse v. Lower Merion School District, 132 F.3d 902, 906 (3d Cir.1997). Dismissal is warranted "if it is certain that no relief can be granted under any set of facts which could be proved." Klein v. General Nutrition Companies, Inc., 186 F.3d 338, 342 (3d Cir.1999) (internal quotations omitted).

Discussion

As noted, the gravamen of plaintiff's complaint is that by intentionally mischaracterizing him as an independent contractor and not an employee, Independence Blue Cross wilfully interfered with the rights which he otherwise would have had to health, pension, welfare and other benefits under its various plans and thereby violated and breached its fiduciary duties under sections 502 and 510 of ERISA and the common law, breached the contract which it impliedly had with plaintiff and was unjustly enriched. Defendants move for dismissal of Counts I and VI of Plaintiff's complaint alleging claims for "misclassification of employment status" and "failure to rehire" on the grounds that these claims are not cognizable under the ERISA statute and Count II for failure to exhaust administrative remedies under the Plans. In addition, Defendants move to dismiss the plaintiff's state law claims for breach of contract and unjust enrichment in Counts IV and V as pre-empted.

Specifically, Plaintiff alleges that Defendants violated Section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B) and Section 510, 29 U.S.C. § 1140 by denying him benefits under the plans. Section 502(a)(1)(B) provides, in relevant part:

A civil action may be brought —

(1) by a participant or beneficiary — ........

(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.

Under Section 510 of the Act,

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, this subchapter, section 1201 of this title, or the Welfare and Pension Plans Disclosure Act [29 U.S.C. § 301 et. seq.], or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this subchapter, or the Welfare and Pension Plans Disclosure Act. It shall be unlawful for any person to discharge, fine, suspend, expel, or discriminate against any person because he has given information or has testified or is about to testify in any inquiry or proceeding relating to this chapter or the Welfare and Pension Plans Disclosure Act. The provisions of section 1132 of this title shall be applicable in the enforcement of this section.

29 U.S.C. § 1140.

A "participant" is defined in 29 U.S.C. § 1002 as "any employee or former employee of an employer, or any member or former member of an employee organization, who is or may become eligible to receive a benefit of any type from an employee benefit plan which covers employees of such employer or members of such organization, or whose beneficiaries may be eligible to receive any such benefit." 29 U.S.C. § 1002(2)(B)(7). The term "beneficiary" means a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder. 29 U.S.C. § 1002(2)(B)(8).²

It has been said that Congress enacted § 510 "primarily to prevent unscrupulous employers from discharging or harassing their employees in order to keep them from obtaining vested pension benefits." Eichorn v. AT & T Corp., 248 F.3d 131, 149 (3d Cir.2001), quoting Dewitt v. Penn-Del Directory Corp., 106 F.3d 514, 522 (3d Cir.1997). Thus, the Third Circuit has held that an employer violates § 510 when it acts with the specific intent to interfere with an employee's right to benefits. Id., citing DiFederico v. Rolm Co., 201 F.3d 200, 204-205 (3d Cir.2000). To prove a prima facie case under § 510 a plaintiff must show (1) that an employer took specific actions (2) for the purpose of interfering (3) with an employee's attainment of pension benefit rights. Id., citing Gavalik v. Continental Can Co., 812 F.2d 834, 852 (3d Cir.), cert. denied, 484 U.S. 979, 108 S.Ct. 495, 98 L.Ed.2d 492 (1987). Once a plaintiff makes such a prima facie showing, the employer has the burden of articulating a legitimate, non-discriminatory reason for his conduct. Then the burden shifts back to the plaintiff to show that the employer's rationale was pre-textual and that the cancellation of benefits was the determinative influence on the employer's actions. DiFederico, 201 F.3d at 205.

As a threshold matter, to be entitled to benefits under ERISA, a plaintiff must demonstrate that he is a "participant" within the meaning of the statute. To establish participant status, he must satisfy two requirements. First, the plaintiff must be a common law employee; and second, the plaintiff must be, according to the language of the plan itself, eligible to receive a benefit under the plan. Bauer v. Summit Bancorp, 325 F.3d 155, 160 (3d Cir.2003). An individual who fails on either prong lacks standing to bring a claim for benefits established pursuant to ERISA. Id. Given that ERISA's nominal definition of "employee" is completely circular, the Courts apply the common law test for determining who qualifies as an employee under ERISA. Nationwide Mutual Insurance Co. v. Darden, 503 U.S 318, 323-324, 112 S.Ct. 1344, 1348, 117 L.Ed.2d 581 (1992). Under this test, the following factors are considered: the hiring party's right to control the manner and means by which the product is accomplished, the skill required to perform the job, the source of the instrumentalities and tools, the location of the work, the duration of the relationship between the parties, whether the hiring party has the right to assign additional projects to the hired party, the extent of the hired party's discretion over when and how long to work, the method of payment, the hired party's role in hiring and paying assistants, whether the work is part of the regular business of the hiring party, whether the hiring party is in business, the provision of employee benefits and the tax treatment of the hired party. Id.

It is further well-established that courts require exhaustion of administrative remedies prior to hearing an action for a denial of ERISA benefits. Harrow v. Prudential Insurance Co. of America, 279 F.3d 244, 252 (3d Cir.2002).³...