Breaux v. Reliance Standard Life Insurance Company

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

ERNEST BREAUX CIVIL ACTION

VERSUS NO. 19-11537

RELIANCE STANDARD LIFE INSURANCE COMPANY SECTION A “5”

ORDER AND REASONS

Before the Court is a Motion to Dismiss (Rec. Doc. 5) filed by Defendant Reliance

Standard Life Insurance Company (“Reliance”) pursuant to Federal Rules of Civil Procedure

(“FRCP”) 12(b)(6). Plaintiff Ernest Breaux opposes the motion, (Rec. Doc 6), and Reliance

replied. (Rec. Doc 9). The motion, set for submission on September 4, 2019, is before the

Court on the briefs without oral argument.

I. BACKGROUND

This suit arises from Breaux alleging that Reliance wrongfully denied him Accidental

Death and Dismemberment benefits under an insurance policy between Breaux’s employer,

Laris Insurance Agency, LLC, and Reliance. (Rec. Doc 6, p. 1, Breaux’s Opposition). Breaux’s

injury occurred on July 5, 2016 when he gashed his left foot while getting up from his home

office desk. (Rec. Doc 1, p. 3, Breaux’s Complaint). The wound from this injury became

infected and led to him having his left leg amputated. Id. However, Reliance claimed an

exclusion applied and refused to pay benefits to Breaux. (Rec. Doc. 4, p. 1, Reliance’s

Answer). Importantly for this suit, the parties agree that Breaux’s claims are governed by the

Employee Retirement Income Security Act of 1974 (“ERISA”). (Rec. Doc 6, p. 1, Breaux’s

Opposition).

Reliance filed this partial Motion to Dismiss under FRCP 12(b)(6) for the following

three claims made by Breaux: (1) his claim for penalties under ERISA § 502(c)(1) for failure

to timely provide plan documents, (2) his claim for penalties and attorneys’ fees under state

law, and (3) his claim for breach of contract under state law.

II. STANDARD OF REVIEW

FRCP 12(b)(6) permits a court to dismiss a complaint when a plaintiff has failed to

state a claim for which relief can be granted. See Fed.R.Civ.P. 12(b)(6). “To survive a motion

to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a

claim to relief that is plausible on its face.'” Iqbal v. Ashcroft, 556 U.S. 662, 677 (2009) (quoting

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The factual matter contained in the

complaint must allege actual facts, not mere legal conclusions portrayed as facts. Id. at 667

(“Although for the purposes of a motion to dismiss we must take all of the factual allegations

in the complaint as true, we 'are not bound to accept as true a legal conclusion couched as a

factual allegation.'”) (quoting Twombly, 550 U.S. at 555). Additionally, the factual allegations

of a complaint must state a plausible claim for relief. Id. A complaint states a “plausible claim

for relief” when the factual allegations contained therein, taken as true, necessarily

demonstrate actual misconduct on the part of the defendant, not a “mere possibility of

misconduct.” Id.; see also Jacquez v. Procunier, 801 F.2d 789, 791–92 (5th Cir.1986). Lastly,

the Court “will not look beyond the face of the pleadings to determine whether relief should

be granted based on the alleged facts[.]” Spivey v. Robertson, 197 F.3d 772, 774 (5th Cir.

1999).

III. DISCUSSION

A. Claim One – Claim for Penalties under ERISA § 502(c)(1)

Reliance presents a simple three-step argument for why Breaux’s claim for penalties

under ERISA § 502(c)(1) must be dismissed. First, a litigant can only bring a claim under §

502(c)(1) against a Plan’s “Administrator.” (Rec. Doc 9, p. 2, Reliance’s Response). Second,

“the employer [under ERISA] is deemed to be the Administrator when there is no document

specifying [some other entity.]” Id. Third, no documents specify Reliance as the Plan’s

Administrator. Id. Thus, Reliance concludes Breaux cannot bring a claim against it for

penalties under § 502(c)(1). Furthermore, Reliance notes that Breaux has failed to satisfy his

burden under Rule 12(b)(6) by saying, “[s]ince Plaintiff has not even alleged in the Complaint

that Reliance Standard is the Plan Administrator, he has not plead sufficient factual matter,

accepted as true to state a claim to relief that is plausible on its face.” Id. (internal quotations

omitted).

Breaux counters Reliance’s points by arguing that a Rule 12(b)(6) Motion is premature

on this issue because “there are no plan documents before the Court and no facts before the

Court stating who the Plan [A]dministrator is in this case.” (Rec. Doc 6, p. 4, Breaux’s

Opposition). More specifically, Breaux notes that for Rule 12(b)(6) motions, “courts are not to

look beyond the pleadings. Defendant has not provided any documents that would support

its claim that it is not the Plan administrator and even if it did, evaluating would be

inappropriate in the context of a 12(b)(6) Motion to Dismiss.” Id.

Here, the Court is persuaded by Breaux’s reasoning and concludes dismissal of

Breaux’s § 502(c)(1) claim is premature. For instance, because the Plan documents were

never filed into the record, the Court has no way of determining if Reliance was the Plan

Administrator under the parties’ agreement. More particularly, the ERISA statute defines the

term “Administrator” as:

(i) the person specifically so designated by the terms of the instrument under

which the plan is operated;

(ii) if an administrator is not so designated, the plan sponsor;

or (iii) in the case of a plan for which an administrator is not designated and a

plan sponsor cannot be identified, such other person as the Secretary may by

regulation prescribe. 29 U.S.C.A. § 1002(16)(A)(i)-(iii).

In other words, Breaux makes a “plausible claim for relief” in his Opposition by arguing that

the Plan’s documents may ultimately designate Reliance as the Plan’s Administrator. Thus,

the Court cannot dismiss Breaux’s claim for penalties under § 502(c)(1) without having the

Plan documents before it.1

B. Claim Two – Claim for Penalties under La. R.S. § 22:1821

Next, Reliance asserts that Breaux’s claims under Louisiana Revised Statute §

22:1821 should be dismissed because they are preempted by ERISA. More specifically,

ERISA contains an explicit preemption clause, § 514(a), which states that ERISA “shall

supersede any and all State laws insofar as they may now or hereafter relate to any employee

benefit plan[.]” 29 U.S.C. § 1144(a) (emphasis added). It is “well-established that the

‘deliberately expansive’ language of [Section 514(a)] . . . is a signal that it is to be construed

extremely broadly.” Reliable Home Health Care, Inc. v. Union Cent. Ins. Co., 295 F.3d 505,

515 (5th Cir. 2002). This provision is purposefully expansive, and it is intended to “ensure that

employee benefit plan regulation would be exclusively a federal concern.” Aetna Health, Inc.,

v. Davila, 542 U.S. 200, 208 (2004). Thus, any state law cause of action that “duplicates,

1 As an aside, the Court declines to determine whether Reliance can qualify as a de facto Plan

Administrator. However, the Court does note that the Fifth Circuit has expressed its disapproval

towards the de facto Plan Administrator doctrine. See Life Ins. Co. v. Humble Surgical Hosp.,

L.L.C., 878 F.3d 478, 486 (5th Cir. 2017) (“The Fifth Circuit has never adopted the de facto plan

administrator theory.”).

supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear

congressional intent to make the ERISA remedy exclusive and is therefore pre-empted.” Id.

To help with this analysis, the Fifth Circuit adopted a two-prong test for determining

whether a state law claim is preempted by ERISA. See Hubbard v. Blue Cross & Blue Shield

Assoc., 42 F.3d 942, 945 (5th Cir.1995). Under this test, ERISA preempts a state law claim

if: “(1) the state law claim addresses an area of exclusive federal concern, such as the right

to receive benefits under the terms of an ERISA plan; and (2) the claim directly affects the

relationship between the traditional ERISA entities-the employer, the plan and its fiduciaries.”

Id.

While the general rule is that ERISA preempts any state law which relates to an

employee benefit plan, the ERISA “insurance savings clause” expressly exempts state laws

that regulate insurance from preemption. Tingle v. Pacific Mutual Insurance Company, 996

F.2d 105, 107 (5th Cir.1993). However, Fifth Circuit precedent notes that, “the mere fact that

a statute is part of a comprehensive state insurance code will not exempt it from preemption.”

Aucoin v. RSW Holdings, L.L.C., 476 F.Supp.2d 608, 614 (M.D. La. 2007) (quoting Tingle v.

Pacific Mutual Insurance Co., 996 F.2d 105, 109 (5th Cir. 1993)). Accordingly, a state statute

is only considered a law that regulates insurance under the saving clause if (1) “the state law

[is] specifically directed toward entities engaged in insurance;” and (2) “the state law must

substantially affect the risk pooling arrangement between the insurer and the insured.”

Mayfield v. UNUM Life Ins. Co. of Am., 2016 WL 4261771, at *5 (E.D. La. Aug. 12, 2016)

(quoting Garcia v. Best Buy Stores, L.P., 416 Fed.Appx. 384, 386 (5th Cir. 2011)). To affect

the risk-pooling arrangement, a “statute must alter the scope of permissible bargains between

insurers and insureds and thus substantially affect the risk-pooling arrangements that

insurers may offer.” Ellis v. Liberty Life Assur. Co. of Boston, 394 F.3d at 277-78. Lastly,

statutes that are remedial in nature that provide remedies “to which the insured may turn

when injured by the bad faith of the insurer,” do not affect the bargain that an insurer makes

with its insured, and therefore, do not affect the “risk” contracted for by the insurer. Id.

Here, Breaux claims he is entitled to penalties and attorneys’ fees under La. R.S. §

22:1821. Breaux’s state law claim clearly “relates to” an ERISA plan because this claim is

specifically based on Reliance denying him Accidental Death and Dismemberment benefits.

Further, courts have consistently held that § 22:1821 is remedial in nature such that it is not

saved from preemption by the savings clause of 29 U.S.C. § 1144(b)(2)(A). See, e.g., Trahan

v. Metropolitan Life Insurance Co., 2016 WL 3443658, at *7 (W.D. La., 2016) (collecting cases

and explaining that “[c]ourts consistently have recognized that ERISA preempts a claim for

unpaid benefits, penalties, and fees under Louisiana Revised Statute § 22:657 (now §

22:1821)”); Wright v. Louisiana Corrugated Products, LLC, 59 F.Supp.3d 767, 776 (W.D.

La.,2014) (“Courts consistently have recognized that ERISA preempts a claim for unpaid

benefits, penalties, and fees under Louisiana Revised Statute § 22:657 (now § 22:1821)”).

Thus, the Court finds here that Breaux’s claim for penalties and attorneys’ fees under La. R.S.

§ 22:1821 is preempted by ERISA.

C. Claim Three – Claim for Breach of Contract

Similarly, Breaux’s breach of contract claim is also preempted by ERISA. Because

Breaux’s breach of contract claim is a state law claim, the Court will apply the same two-

prong framework mentioned above. First, both Reliance and Breaux agree that the Plan at

issue here is an ERISA plan, so the test’s first prong is satisfied. (Rec. Doc 6, p. 1, Breaux’s

Opposition). As to the second prong, the Fifth Circuit has specifically found that ERISA

preempts claims for improper processing of claim benefits and claims for breach of contract

because these two types of claims require interpretation and administration of an ERISA plan.

See Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 13 F.3d 172, 176 (5th Cir.1994) (holding

that ERISA preempts state law claims for improper processing of claim benefits); see also

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 57 (1987) (finding that ERISA preempts contract

and tort claims alleging improper processing of ERISA benefits).

In an attempt to maneuver around this unfavorable case law, Breaux argues that he

does not need to reference the Plan to make his claim because he “alleged a breach

independent of the language of the plan.” (Rec. Doc 6, p. 6, Breaux’s Opposition). Thus, □□□□

in the present case Mr. Breaux can show that Defendant failed to pay benefits for some

reason other than interpretation of the language of the plan, this claim may not be preempted.”

Id. However, the Court finds this argument meritless. For instance, in order to determine if

Reliance improperly denied Breaux’s benefits, the trier of fact must necessarily interpret the

Plan in order to determine what benefits were due and whether or not those benefits were

improperly denied. Therefore, the Court finds that Breaux’s claim for breach of contract is

preempted by ERISA and must be dismissed.

Accordingly;

IT 1S ORDERED that the Motion to Dismiss Plaintiff's Complaint (Rec. Doc. 5) filed

by Reliance pursuant to FRCP 12(b)(6) is GRANTED IN PART AND DENIED IN PART. The

motion is GRANTED insofar as Reliance seeks dismissal of Breaux’s claim for penalties and

attorneys’ fees under Louisiana Revised Statute § 22:1821. Further, the motion is also

GRANTED insofar as Reliance seeks dismissal of Breaux’s claim for breach of contract under

state law. However, the motion is DENIED insofar as Reliance seeks dismissal of Breaux’s

claim for penalties under ERISA § 502(c)(1).

C )

October 11, 2019 JUDGE A AAINEY

(onyx $ GE AY CANINE DGE

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