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Shears v. Symetra Life Insurance Company

United States District Court, S.D. Alabama, Southern Division

September 13, 2019

CASSANDRA SHEARS, Plaintiff,
v.
SYMETRA LIFE INSURANCE COMPANY, Defendant.

          REPORT AND RECOMMENDATION

          KATHERINE P. NELSON, UNITED STATES MAGISTRATE JUDGE

         This matter is before the Court on the Motion to Dismiss and to Strike (Doc. 2), and separate supporting brief (Doc. 3), filed by the Defendant, Symetra Life Insurance Company (“Symetra”). The assigned District Judge referred the motion to the undersigned Magistrate Judge for appropriate action under 28 U.S.C. § 636(a)-(b), Federal Rule of Civil Procedure 72, and S.D. Ala. GenLR 72(a). See S.D. Ala. GenLR 72(b); (4/8/2019 electronic reference). The Plaintiff, Cassandra Shears, has filed a response (Docs. 12, 13) to the motion, and Symetra has filed a reply (Doc. 14) to the response. The motion is under submission. (See Doc. 6). Upon consideration, the undersigned RECOMMENDS that Symetra's Motion to Dismiss and Motion to Strike (Doc. 2) be GRANTED in part and DENIED in part as explained herein.

         I. Applicable Legal Standards

         In deciding a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for “failure to state a claim upon which relief can be granted, ” the Court construes the complaint in the light most favorable to the plaintiff, “accepting all well-pleaded facts that are alleged therein to be true.” Miyahira v. Vitacost.com, Inc., 715 F.3d 1257, 1265 (11th Cir. 2013) (citing Bickley v. Caremark RX, Inc., 461 F.3d 1325, 1328 (11th Cir. 2006)). “[G]enerally, the existence of an affirmative defense will not support a rule 12(b)(6) motion to dismiss for failure to state a claim. A district court, however, may dismiss a complaint on a rule 12(b)(6) motion when its own allegations indicate the existence of an affirmative defense, so long as the defense clearly appears on the face of the complaint.” Fortner v. Thomas, 983 F.2d 1024, 1028 (11th Cir. 1993) (quotation omitted)). Accord Murphy v. DCI Biologicals Orlando, LLC, 797 F.3d 1302, 1305 (11th Cir. 2015) (“A district court may dismiss a complaint for failure to state a claim if an affirmative defense appears on the face of the complaint.”).

         Under Federal Rule of Civil Procedure 12(f) a court “may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act on its own or on a motion made by a party either before responding to the pleading…”

         II. Background

         Shears commenced this case in the Circuit Court of Mobile County, Alabama, on February 28, 2019. (See Doc. 1-1 at 2 - 7). On March 6, 2019, Shears filed an amended complaint, the operative pleading in this case, substituting Symetra as the named Defendant. (Doc. 1-3 at 6 - 11). Her causes of action arise from Symetra's denial of benefits under a $50, 000 spouse supplemental life insurance policy taken out by her now-deceased husband and naming her as a beneficiary. Counts One and Two of the amended complaint respectively allege claims for breach of contract, and misrepresentation and concealment. Count Three requests relief under the Employee Retirement Income Security Act of 1974, 88 Stat. 891, as amended, 29 U.S.C. § 1132(a) et seq. (“ERISA”), but only “if th[e] policy is deemed to be controlled by ERISA, ” which Shears disputes. On April 2, 2019, Symetra removed the case to this Court under 28 U.S.C. §1441 (see Doc. 1) and filed the present motion to dismiss and strike.

         III. Analysis

         A. ERISA Preemption

         Symetra argues that Shears's state law claims in Counts One and Two of her operative complaint are due to be dismissed because they are preempted by ERISA. The undersigned agrees.

         “Congress enacted ERISA to ‘protect ... the interests of participants in employee benefit plans and their beneficiaries' by setting out substantive regulatory requirements for employee benefit plans and to ‘provid [e] for appropriate remedies, sanctions, and ready access to the Federal courts.' 29 U.S.C. § 1001(b). The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans.” Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004).

ERISA is one of only a few federal statutes under which two types of preemption may arise: conflict preemption and complete preemption. Conflict preemption, also known as defensive preemption, is a substantive defense to preempted state law claims. This type of preemption arises from ERISA's express preemption provision, § 514(a), which preempts any state law claim that “relates to” an ERISA plan. 29 U.S.C. § 1144(a)…
Complete preemption, also known as super preemption, is a judicially-recognized exception to the well-pleaded complaint rule. It differs from defensive preemption because it is jurisdictional in nature rather than an affirmative defense. Complete preemption under ERISA derives from ERISA's civil enforcement provision, § 502(a), which has such extraordinary preemptive power that it converts an ordinary state common law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule. Consequently, any cause of action within the scope of the civil enforcement provisions of § 502(a) is removable to federal court.

Connecticut State Dental Ass'n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1344 (11th Cir. 2009) (quotations and some citations omitted). “Although related, complete and defensive preemption are not coextensive: ‘Complete preemption is [ ] narrower than “defensive” ERISA preemption, which broadly “supersede[s] any and all State laws insofar as they ... relate to any [ERISA] plan.” ERISA § 514(a), 29 U.S.C. § 1144(a) (emphasis added). Therefore, a state-law claim may be defensively preempted under § 514(a) but not completely preempted under § 502(a).' ” Id. (quoting Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1281 (11th Cir. 2005)).[1]

         “The [defensive] preemption provision of ERISA provides that it ‘shall supersede any and all state laws insofar as they may now or hereafter relate to any employment plan' covered by ERISA.” Variety Children's Hosp., Inc. v. Century Med. Health Plan, Inc., 57 F.3d 1040, 1042 (11th Cir. 1995) (quoting 29 U.S.C. § 1144(a)). “A state law ‘relates to' a covered employee benefit plan ‘if it has a connection with or reference to such a plan.' ” Id. (quoting District of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125, 129 (1992)). Defensive preemption requires dismissal of state-law claims. Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1212 (11th Cir. 1999). As defensive preemption is an affirmative defense, it is Symetra's burden to demonstrate its applicability. See id (“Defensive preemption provides only an affirmative defense to certain state-law claims.”); In re Rawson Food Serv., Inc., 846 F.2d 1343, 1349 (11th Cir. 1988) (“[I]t is well established that the party asserting an affirmative defense usually has the burden of proving it.” (quotation omitted)). Moreover, to dismiss a claim under Rule 12(b)(6), the “affirmative defense” of defensive preemption must “clearly appear[] on the face of the complaint.” Fortner, 983 F.2d at 1028.

         Shears disputes that the subject life insurance policy was issued as part of an ERISA-covered plan, pleading the ERISA claim in Count Three only as an alternative to her state law claims “if th[e] policy is deemed to be controlled by ERISA…” (Doc. 1-3 at 36).[2] “For present purposes, an ‘employee welfare benefit plan' governed by ERISA is any (1) plan, fund or program, (2) established or maintained (3) by an employer, (4) to provide beneficiaries (5) death benefits through an insurance policy.” Butero, 174 F.3d at 1214 (some quotation marks omitted). Here, it is undisputed that this case involves an insurance policy providing death benefits to beneficiaries. Moreover, the language of the policy itself (Doc. 3-1), [3] which states that the policyholder is NHS Management, LLC and that only certain “full-time Active Employees” are eligible for coverage (Doc. 3-1 at 3 - 4), sufficiently demonstrates that the policy was issued as part of a “plan” or “program” “established or maintained” “by an employer.”[4]

         Shears invokes 29 C.F.R. § 2510.3-1(j), “a ‘safe harbor' provision that excludes some programs for group insurance from the ‘employee welfare benefit plans' governed by ERISA.” Smith v. Jefferson Pilot Life Ins. Co., 14 F.3d 562, 568 (11th Cir. 1994).[5] Under that regulation, for ERISA purposes “the terms ‘employee welfare benefit plan' and ‘welfare plan' shall not include a group or group-type insurance program offered by an insurer to employees or members of an employee organization, under which (1) [n]o contributions are made by an employer or employee organization; (2) [p]articipation the program is completely voluntary for employees or members; (3) [t]he sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and (4) [t]he employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues checkoffs.” 29 C.F.R. § 2510.3-1(j) (emphasis added).

         However, the subject group insurance program does not satisfy the “safe harbor” provision's first requirement, as the policy's terms indicate that the employer made contributions towards some of the coverage offered under the plan. (See Doc. 3-1 at 4, 8 - 9, 11 (providing for both “contributory coverage” - “coverage for which [the insured] was required to contribute toward the cost” - and “non-contributory coverage - “coverage for which [the insured is] not required to contribute toward the cost”), and stating that the “Employer will automatically enroll” the insured in non-contributory coverage)). Thus, even if, as Shears claims, she and her husband paid all premiums for the Supplemental Life Insurance coverage themselves, the fact that the employer contributed towards the premiums for other plan coverage defeats application of the “safe harbor” provision. See Jefferson Pilot, 14 F.3d at 568 (“The regulation applies only to programs where no contributions are made by an employer; yet under the Plan the defendant contributed all of the premium except for the dependent coverage contribution. The employer must not subsidize the purchase of insurance for this safe harbor provision to apply.” (citing Randol, 987 F.2d at 1550)).

         Accordingly, the undersigned finds that the subject insurance policy is governed by ERISA, and that Shears's claims for breach of contract, misrepresentation, and concealment in Counts 1 and 2 of the operative complaint are therefore due to be dismissed with prejudice as preempted by ERISA. See Butero, 174 F.3d at 1215 (state-law bad faith, breach of contract, and fraud claims are all preempted under § 1144(a) (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 47-48 (1987)); Williams v. Wright, 927 F.2d 1540, 1549-50 (11th Cir. 1991) (“With regard to state law breach of contract claims specifically, this court and others have unanimously held that such claims are preempted by ERISA.”); Variety Children's Hosp., 57 F.3d at 1042 ...


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