Laiacona v. Lincoln Life Assurance Co. of Boston

[7] 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA [10] 11 FRANK LAIACONA, No. 2:21-cv-00222-JAM-DMC 12 Plaintiff, 13 v. ORDER GRANTING IN PART AND DENYING IN PART LINCOLN LIFE 14 LINCOLN LIFE ASSURANCE ASSURANCE’S MOTION TO DISMISS COMPANY OF BOSTON, d/b/a 15 LINCOLN FINANCIAL GROUP, f/k/a LIBERTY LIFE ASSURANCE 16 INSURANCE COMPANY OF BOSTON, and DOES 1-10, [17] Defendants. [18] 19 I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND1 20 Frank Laiacona (“Plaintiff”) worked as a pharmacist for a 21 Safeway in California. Compl. ¶ 5, ECF No. 1. Through this 22 employment he obtained short and long-term disability insurance 23 issued by Lincoln Life Assurance Company of Boston (“Defendant” 24 or “Lincoln”). Id. In October 2017, Plaintiff applied for long25 term disability benefits after the retinas in both his eyes [26] 27 1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled 28 for August 10, 2021. 1 became detached. Id. ¶ 7. Lincoln allegedly responded that 2 Plaintiff was not insured under the policy. Id. ¶ 8. Plaintiff 3 followed up with Lincoln repeatedly. Id. About three months 4 later, Lincoln’s claim examiner advised him that no payment could 5 be made until he first applied for Social Security disability 6 benefits. Id. ¶ 9. Then in August 2018, a Lincoln 7 representative contacted Plaintiff informing him that they made 8 an error in denying his claim. Id. ¶ 12. However, it wasn’t 9 until January 2019, that Plaintiff received a partial payment of 10 benefits. Id. ¶ 17. Around February 2019, Lincoln made a lump 11 sum payment to Plaintiff for the balance of the unpaid monthly 12 payments that were due. Id. ¶ 19. 13 Plaintiff alleges the delay in receiving the benefits meant 14 he was unable to pay for his monthly living expenses. Id. ¶ 16. 15 As a result, he was forced to rely on credit cards to support 16 himself and incurred increasingly higher monthly interest charges 17 on his unpaid balances. Id. Additionally, the lump sum payment 18 he received in 2019 put him at a higher federal income tax 19 bracket than he would have had if he received his benefits on 20 time. Id. ¶ 20. Accordingly, Plaintiff brought this action for: 21 (1) breach of contract; (2) bad faith; (3) malicious 22 misrepresentation; (4) gross negligence; and (5) violation of 23 ERISA. See Compl. at 6. Defendant now moves to dismiss all of 24 Plaintiff’s claims. Mot. to Dismiss (“Mot.”), ECF No. 15. 25 Plaintiff partially opposed this motion. See Opp’n, ECF No. 17. 26 Defendant replied. Reply, ECF No. 18. For the reasons set forth 27 below Defendant’s motion is granted in part and denied in part. 28 /// 1 II. OPINION 2 A. Legal Standard 3 A Rule 12(b)(6) motion challenges the complaint as not 4 alleging sufficient facts to state a claim for relief. Fed. R. 5 Civ. P. 12(b)(6). “To survive a motion to dismiss [under 6 12(b)(6)] a complaint must contain sufficient factual matter, 7 accepted as true, to state a claim for relief that is plausible 8 on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 9 (internal quotation marks and citation omitted). While 10 “detailed factual allegations” are unnecessary, the complaint 11 must allege more than “[t]hreadbare recitals of the elements of 12 a cause of action supported by mere conclusory statements.” Id. 13 “In sum, for a complaint to survive a motion to dismiss, the 14 non-conclusory ‘factual content,’ and reasonable inferences from 15 that content, must be plausibly suggestive of a claim entitling 16 the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 17 962, 969 (9th Cir. 2009). 18 B. Analysis 19 1. Preemption of State Claims 20 Congress enacted ERISA to protect “the interest of 21 participants in employee benefit plans and their beneficiaries.” 22 Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (quoting [23] 29 U.S.C. § 1001 (b)). It did so by “setting out substantive 24 regulatory requirements for employee benefit plans and to 25 ‘provide appropriate remedies, sanctions, and ready access to 26 the Federal courts.’” Id. (quoting 29 U.S.C. § 1001 (b)). To 27 achieve uniformity in employee-benefit plan regulations, ERISA 28 includes “expansive pre-emption provisions, which are intended 1 to ensure that employee benefit plan regulation would be 2 ‘exclusively a federal concern.’” Id. (quoting Alessi v. 3 Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981)). Section [4] 29 U.S.C. § 1144 (a) states that ERISA “shall supersede any and 5 all State laws insofar as they may now or hereafter relate to 6 any employee benefit plan.” 7 Defendant argues all of Plaintiff’s state law claims are 8 preempted by ERISA as they are based on the alleged improper 9 processing of his disability benefits and thus relate to the 10 ERISA plan. Mot. at 5-7. Plaintiff concedes ERISA preempts his 11 state law causes of action and does not oppose their dismissal. 12 Opp’n at 3 n.1. Accordingly, Plaintiff’s state law claims for 13 breach of contract, bad faith, malicious misrepresentation of 14 material fact and gross negligence are dismissed with prejudice. 15 See Deveraturda v. Globe Aviation Sec. Servs., 454 F.3d 1043 , 16 1046 (9th Cir. 2006) (explaining a district court need not grant 17 leave to amend where amendment would be futile). 18 2. ERISA Claims 19 Plaintiff also asserts a claim under ERISA. See Compl. 20 ¶ 31-5. However, it is not clear from his complaint under what 21 provision. See generally id. His opposition implies he seeks 22 relief under 29 U.S.C. § 1132 (a)(1), § 1132(a)(2), and 23 § 1132(a)(3). See Opp’n at 7. Thus, the Court addresses 24 whether Plaintiff has stated a plausible claim for relief under 25 any of these provisions. 26 1132(a)(1)(B) 27 Section 1132(a)(1)(B) allows a plan participant “to recover 28 benefits due to him under the terms of the plan, to enforce his 1 rights under the terms of the plan, or to clarify his right to 2 future benefits under the terms of the plan.” 29 U.S.C. 3 § 1132(a)(1)(B). 4 As Defendant points out, Plaintiff acknowledges in his 5 complaint that he has been paid all the benefits owed to him 6 under the terms of the plan. See Compl. ¶ 19. Instead, 7 Plaintiff here seeks interest on the benefits Defendant delayed 8 paying him. See Opp’n. Because Plaintiff alleges he has 9 recovered the benefits due to him under the terms of the plan, 10 he has failed to state a claim under § 1132(a)(1)(B). See 11 Mathews v. Xerox Corp., 319 F.Supp.2d 1166 (S.D. Cal. 2004) (no 12 claim under § 1132(a)(1)(B) for interest on delayed benefits 13 payments when the plan does not provide for such a remedy). To 14 the extent Plaintiff’s claim relies on this section, it is 15 dismissed with prejudice. See Deveraturda, 454 F.3d 1043 , 1046 16 (district court need not grant leave to amend where amendment 17 would be futile).2 18 1132(a)(2) 19 Section 1132(a)(2) “permits a plan participant to bring a 20 civil enforcement action against any fiduciary ‘to make good to 21 such plan any losses to the plan resulting from [the 22 fiduciary’s] breach.’” Wise v. Verizon Comm’n, Inc., 600 F.3d 23 1180, 1189 (9th Cir. 2010) (quoting 29 U.S.C. § 1109 (a)). This 24 section, however, only provides a remedy for injuries to the [26] 2 Defendant is correct that while 28 U.S.C. § 1961 allows the Court to award interest on any money judgment, it is not a cause 27 of action under which Plaintiff can bring suit. See 28 U.S.C. § 1961 ; Blankenship v. Liberty Life Assur. Co. of Boston, 486 28 F.3d 620 , 628 (9th Cir. 2007). 1 ERISA plan as a whole. Id. It does not provide “a cause of 2 action for extra-contractual damages caused by improper or 3 untimely processing of benefit claims.” Mass. Mut. Life Ins. 4 Co. v. Russell, 473 U.S. 134, 148 (1985). 5 Here, Plaintiff does not allege any injury to the plan as a 6 whole. See generally Compl. Rather, Plaintiff seeks extra7 contractual damages caused by the improper and untimely 8 processing of his individual claim for benefits. Id.; see also 9 Opp’n. Accordingly, Plaintiff has failed to state a claim under 10 § 1332(a)(2) of ERISA. See Russell, 473 U.S. at 148 . To the 11 extent Plaintiff’s claim rests on § 1332(a)(2) it is also 12 dismissed with prejudice. See Deveraturda, 454 F.3d at 1046 . 13 1132(a)(3) 14 Section 1132(a)(3) “authorize[s] ERISA plan beneficiaries 15 to bring a lawsuit [. . .] that seeks relief for individual 16 beneficiaries harmed by an administrator’s breach of fiduciary 17 obligations.” Varity Corp v. Howe, 516 U.S. 489, 492 (1996). 18 An individual bringing a claim under § 1132(a)(3) may seek 19 “appropriate equitable relief,” which refers to “those 20 categories of relief that, traditionally speaking (i.e. prior to 21 the merger of law and equity) were typically available in 22 equity.” CIGNA Corp. v. Amara, 563 U.S. 421, 439 (2011) 23 (internal quotation marks and citations omitted). This relief 24 may include surcharge, which is monetary compensation for a loss 25 resulting from a trustee’s breach of duty. Id. at 441-42 . 26 “Through surcharge, a beneficiary may seek make-whole relief, 27 the remedy that will put the beneficiary in the position he or 28 she would have attained but for the trustee’s breach.” Castillo 1 v. Metro. Life Ins. Co., 970 F.3d 1224, 1230 (9th Cir. 2020). 2 “Because § 1132(a)(3) acts as a safety net, offering 3 appropriate equitable relief for injuries caused by violations 4 that § 502 does not elsewhere adequately remedy, relief is not 5 available under § 1132(a)(3) where Congress elsewhere provided 6 adequate relief for a beneficiary’s injury.” Id. at 1229. 7 “Thus, a claimant may not bring a claim for denial of benefits 8 under § 1132(a)(3) when a claim under § 1132(a)(1)(B) will 9 afford adequate relief.” Id. 10 Relying on Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364 11 (6th Cir. 2015), Defendant argues Plaintiff cannot bring a claim 12 under § 1132(a)(3). Reply at 3. In Rochow, the plaintiff 13 brought a claim under § 1132(a)(1)(B) to recover the benefits he 14 had been wrongfully denied, as well as a claim under 15 § 1132(a)(3). Rochow, 780 F.3d at 370 . The Sixth Circuit held 16 that Rochow could not pursue a breach-of-fiduciary claim under 17 § 1132(a)(3) based on a denial of benefits where the remedy 18 under § 1132(a)(1)(B) was adequate to make him whole. Id. at 19 371. Because Rochow hadn’t shown that the benefits recovered, 20 attorney’s fees, and potential prejudgment interest available 21 was inadequate to make him whole, he could not maintain an 22 action under § 1132(a)(3). 23 Contrastingly here, as Defendant acknowledges, Plaintiff 24 does not have a claim under § 1132(a)(1)(B). Reply at 2. Thus, 25 unlike the plaintiff in Rochow, Plaintiff does not have an 26 adequate remedy under § 1132(a)(1)(B). Rochow, therefore, does 27 not support dismissing Plaintiff’s § 1132(a)(3) claim. In the 28 absence of compelling authority to do so, the Court declines to 1 dismiss Plaintiff’s ERISA claim at this early stage of the 2 proceedings in so far as it is based on § 1132(a)(3). See Zisk 3 v. Gannet Co. Income Prot. Plan, 73 F.Supp.3d 1115, 1121 (N.D. 4 Cal. 2014 ) (declining to dismiss plaintiff’s § 1132(a)(3) claim 5 for penalties and interest incurred when he used his retirement 6 account in lieu of disability benefits); see also Parke v. First 7 Reliance Standard Life Ins. Co., 368 F.3d 999, 1006 (8th Cir. 8 2004) (“courts may award prejudgment interest as ‘other 9 appropriate equitable relief’ under § 1132(a)(3)(B) when 10 benefits are wrongfully delayed”); Skretvedt v. E.I. Dupont De 11 Nemours, 372 F.3d 193, 215 (3rd Cir. 2004) (finding that if a 12 plaintiff’s benefits were withheld or delayed in violation of 13 ERISA or an ERISA plan, then an action for interest under 14 § 502(a)(3) would lie); Dunnigan v. Metro. Life Ins. Co., 277 15 F.3d 223, 229 (2nd Cir. 2002) (finding plaintiff could recover 16 interest for delayed payments under § 1132(a)(3) as make-whole 17 relief). [18] 19 III. ORDER 20 For the reasons set forth above, the Court: 21 1. GRANTS Defendant’s Motion to Dismiss Plaintiff’s state 22 law claims for breach of written contract, bad faith, malicious 23 misrepresentation of material fact, and gross negligence with 24 prejudice; 25 2. GRANTS Defendant’s Motion to Dismiss Plaintiff’s ERISA 26 claim to the extent it is predicted on 29 U.S.C. § 1132 (a)(1)(B) 27 with prejudice; 28 3. GRANTS Defendant’s Motion to Dismiss Plaintiff’s ERISA ene nee en ee I III IIE IRE I IEE II IE OS IRIE IIE III OO 1 claim to the extent it is predicted on 29 U.S.C § 1132(a) (2) with 2 | prejudice; and 3 4, DENIES Defendant’s Motion to Dismiss Plaintiff’s ERISA 4 claim under 29 U.S.C. § 1132 (a) (3). 5 IT IS SO ORDERED. 6 Dated: October 6, 2021 ke A teiren staves odermacr 7008