Young v. Reliance Standard Life Ins. Co.

• Decision Date: 01 February 2021
• Docket Number: CIVIL NO. 1:20-CV-739-LY-SH
• Parties: JASON THOMAS YOUNG, Plaintiff v. RELIANCE STANDARD LIFE INSURANCE COMPANY and MATRIX ABSENCE MANAGEMENT, INC., Defendants
• Court: U.S. District Court — Western District of Texas

JASON THOMAS YOUNG, Plaintiff v. RELIANCE STANDARD LIFE INSURANCE COMPANY andMATRIX ABSENCE MANAGEMENT, INC.,¹ Defendants

CIVIL NO. 1:20-CV-739-LY-SH

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF TEXAS AUSTIN DIVISION

February 1, 2021

REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

TO: THE HONORABLE LEE YEAKEL UNITED STATES DISTRICT JUDGE

Before the Court are Defendants' Motion to Dismiss Plaintiff's First Amended Complaint (Dkt. 11), filed November 3, 2020; Plaintiff's Amended Motion for Attorney's Fees (Dkt. 17), filed November 17, 2020; and the associated response and reply briefs. On October 27, 2020, the District Court referred all pending and future non-dispositive and dispositive motions to the undersigned Magistrate Judge for resolution and Report and Recommendation,² pursuant to 28 U.S.C. § 636(b)(1), Federal Rule of Civil Procedure 72, and Rule 1 of Appendix C of the Local Rules of the United States District Court for the Western District of Texas.

I. General Background

In January 2019, Plaintiff Jason Thomas Young worked as a truck driver for Pilot Travel Centers, L.L.C., and participated in a long-term disability benefits plan governed by the EmployeeRetirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461 ("Plan" or "Policy"). The Plan provided that Plaintiff would receive a "Monthly Benefit" if Plaintiff became totally disabled. Dkt. 7 at ¶ 14. The Plan also provided that "Other Income Benefits³ are to be deducted from the Monthly Benefit." Id. Reliance Standard Life Insurance Company ("Reliance") is the insurer of the Plan, and Matrix Absence Management, Inc. ("Matrix") is the administrator.

On January 2, 2019, Plaintiff sustained "permanent and disabling injuries" in a car collision. Id. ¶ 6. After the collision, Plaintiff submitted to Reliance a claim for long-term disability benefits under the Plan. Reliance agreed that Plaintiff was totally disabled and agreed to pay him a monthly benefit of $3,150.76. After Plaintiff received $153,774.14 from a settlement with the third party that had caused the accident, however, Reliance notified Plaintiff on January 17, 2020, that it would offset his benefits by the settlement amount ("Settlement Offset") because it considered the settlement to be "Other Income Benefits" under the Plan. Id. ¶ 17. Accordingly, Reliance immediately reduced Plaintiff's monthly benefit by $2,562.90, to $587.86 per month.

On March 17, 2020, Plaintiff appealed Reliance's decision, arguing that the settlement of a third-party tort liability suit and the payment of underinsured motorist benefits were not included in Other Income Benefits under the Plan. On June 5, 2020, Reliance affirmed its original decision that it was entitled to the Offset.

On July 10, 2020, Plaintiff filed this action against Reliance and Matrix ("Defendants") "to clarify the rights to benefits under a policy of long term disability benefits." Dkt. 1 at 1. Specifically, in his Original Complaint, Plaintiff alleged a claim under 29 U.S.C. § 1132(a)(1)(B) that "there is no basis in the policy for any offset or reduction based on the third party settlement that Plaintiff made." Id. ¶ 26. Plaintiff further alleged that Defendants violated their duties under 29 U.S.C. § 1133 by failing to advise him "in the initial denial letter that they did not consider any of the settlement monies received by him to have been based on medical expenses incurred in the past or future." Id. ¶ 28. In the alternative, Plaintiff alleged that he is entitled to equitable relief pursuant to 29 U.S.C. § 1132(a)(3). Plaintiff sought to recover benefits due, to enforce his rights to benefits under the Policy, and to clarify his future rights to benefits under the terms of the Reliance policy, as well as attorney's fees and pre-judgment and post-judgment interest.

Eighteen days after Plaintiff filed suit, Reliance sent Plaintiff an email notifying him that "at this time we will be terminating the offset in the amount of $2,562.90 (monthly), and will refund Mr. Young the monies that have been offset to date." Dkt. 7-1 at 2. Reliance's email, however, also warned Plaintiff that "under the policy, any monies paid under a compulsory benefit law, such as PIP coverage (i.e. wage loss), are to be offset." Id. The email asked Plaintiff to "advise if you will be requesting a formal Dismissal of the lawsuit recently file[d]. If not we will refer the matter to our outside counsel." Id.

On September 24, 2020, Defendants filed their first motion to dismiss, arguing that Plaintiff's claims for benefits should be dismissed for lack of subject matter jurisdiction. Defendants contend that "the claims in this lawsuit have been mooted" because Reliance "reversed its prior decision and is now paying benefits in the amount claimed by Plaintiff." Dkt. 2 at 2, 4. Plaintiff filed hisFirst Amended Complaint (Dkt. 7) on October 26, 2020. The undersigned dismissed as moot Defendants' first motion to dismiss by text order issued November 18, 2020.

In his First Amended Complaint, Plaintiff alleges all claims in his Original Complaint, but adds a claim under § 1132(a)(1)(B) that "[t]here is no basis in the policy for any offset or reduction based on any payment of PIP benefits that Plaintiff has received." Dkt. 7 ¶ 33. Plaintiff seeks the following relief:

(1) Find that Defendants violated the terms of the Policy and Plaintiff's rights thereunder by reducing, and claiming an offset to, the benefits owed to Plaintiff as a result of his receipt of the settlements at issue in this matter, i.e., for the liability claim for bodily injuries, the payment of underinsured motorist benefits, or the payment of PIP benefits for medical bills;

(2) Find that the language of the "Other Income Benefits" section of the Policy does not reach or include: settlements of liability claims for bodily injuries; payment of claims for underinsured motorist benefits for bodily injuries; payment of claims for PIP benefits; and payment of claims under automobile insurance coverages that the claimant personally purchased;

(3) Enter an injunction prohibiting Matrix and Reliance from interpreting the "Other Income Benefits" language cited as including settlements of liability claims for bodily injuries, underinsured motorist claims for bodily injuries, PIP benefits paid for medical expenses, or any benefits flowing from insurance policies that the claimant personally purchased;

(4) Order Reliance to pay Plaintiff's future weekly disability benefits pursuant to the terms of the Policy without offsets for any past or future settlements of bodily injury claims, any past or future payment of underinsured motorist benefits for bodily injury claims, or any past or future payment of PIP claims;

(5) Award Plaintiff pre-judgment interest on the amount of his delayed benefits (seven months);

(6) Award Plaintiff reasonable attorney's fees and costs incurred; and

(7) Provide such other and further relief as the Court deems equitable, just and proper.

Id. ¶¶ 37-46.

In the instant Motion to Dismiss, Defendants again argue that this action should be dismissed under Rule 12(b)(1) for lack of jurisdiction because there is no longer a live case or controversy. Alternatively, Defendants argue that Plaintiff's newly asserted claim regarding PIP benefits should be dismissed for failure to exhaust under Rule 12(b)(6), and that Matrix is not a proper ERISA defendant. Plaintiff opposes the Motion to Dismiss and has filed an Amended Motion for Attorney's Fees and Costs.

II. Motion to Dismiss

The Court first addresses Defendants' Motion to Dismiss.

A. Rule 12(b)(1) Standard

Federal district courts are courts of limited jurisdiction and may exercise only such jurisdiction as is expressly conferred by the Constitution and federal statutes. Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). A federal court has subject matter jurisdiction over civil cases "arising under the Constitution, laws, or treaties of the United States," and over civil cases in which the amount in controversy exceeds $75,000, exclusive of interest and costs, and in which diversity of citizenship exists between the parties. 28 U.S.C. §§ 1331, 1332.

Federal Rule of Civil Procedure 12(b)(1) allows a party to assert lack of subject matter jurisdiction as a defense to suit. A federal court properly dismisses a case for lack of subject matter jurisdiction when it lacks the statutory or constitutional power to adjudicate the case. Home Builders Ass'n of Miss., Inc. v. City of Madison, 143 F.3d 1006, 1010 (5th Cir. 1998). "The burden of proof for a Rule 12(b)(1) motion to dismiss is on the party asserting jurisdiction." Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001). "Ultimately, a motion to dismiss for lack of subject matter jurisdiction should be granted only if it appears certain that the plaintiff cannot prove any set of facts in support of his claim that would entitle plaintiff to relief." Id. In ruling on a Rule 12(b)(1) motion, the court may consider (1) the complaint alone; (2) the complaint plusundisputed facts evidenced in the record; or (3) the complaint, undisputed facts, and the court's resolution of disputed facts. Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir. 2008).

B. Rule 12(b)(6) Standard

Federal Rule of Civil Procedure 12(b)(6) allows a party to move to dismiss an action for failure to state a claim on which relief can be granted. In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court "accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff." In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal quotation marks omitted). The Supreme Court has explained that a complaint must contain sufficient factual matter "to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). "A claim...