Laiacona v. Lincoln Life Assurance Co. of Boston

Opinion

FRANK LAIACONA, No. 2:21-cv-00222-JAM-DMC Plaintiff, v. ORDER GRANTING IN PART AND DENYING IN PART LINCOLN LIFE LINCOLN LIFE ASSURANCE ASSURANCE’S MOTION TO DISMISS COMPANY OF BOSTON, d/b/a f/k/a LIBERTY LIFE ASSURANCE and DOES 1-10, Defendants. I. FACTUAL ALLEGATIONS AND PROCEDURAL BACKGROUND1 Frank Laiacona (“Plaintiff”) worked as a pharmacist for a Safeway in California. Compl. ¶ 5, ECF No. 1. Through this employment he obtained short and long-term disability insurance issued by Lincoln Life Assurance Company of Boston (“Defendant” or “Lincoln”). Id. In October 2017, Plaintiff applied for long- term disability benefits after the retinas in both his eyes

1 This motion was determined to be suitable for decision without oral argument. E.D. Cal. L.R. 230(g). The hearing was scheduled for August 10, 2021. became detached. Id. ¶ 7. Lincoln allegedly responded that Plaintiff was not insured under the policy. Id. ¶ 8. Plaintiff followed up with Lincoln repeatedly. Id. About three months later, Lincoln’s claim examiner advised him that no payment could be made until he first applied for Social Security disability benefits. Id. ¶ 9. Then in August 2018, a Lincoln representative contacted Plaintiff informing him that they made an error in denying his claim. Id. ¶ 12. However, it wasn’t until January 2019, that Plaintiff received a partial payment of benefits. Id. ¶ 17. Around February 2019, Lincoln made a lump sum payment to Plaintiff for the balance of the unpaid monthly payments that were due. Id. ¶ 19. Plaintiff alleges the delay in receiving the benefits meant he was unable to pay for his monthly living expenses. Id. ¶ 16. As a result, he was forced to rely on credit cards to support himself and incurred increasingly higher monthly interest charges on his unpaid balances. Id. Additionally, the lump sum payment he received in 2019 put him at a higher federal income tax bracket than he would have had if he received his benefits on time. Id. ¶ 20. Accordingly, Plaintiff brought this action for: (1) breach of contract; (2) bad faith; (3) malicious misrepresentation; (4) gross negligence; and (5) violation of ERISA. See Compl. at 6. Defendant now moves to dismiss all of Plaintiff’s claims. Mot. to Dismiss (“Mot.”), ECF No. 15. Plaintiff partially opposed this motion. See Opp’n, ECF No. 17. Defendant replied. Reply, ECF No. 18. For the reasons set forth below Defendant’s motion is granted in part and denied in part. /// A. Legal Standard A Rule 12(b)(6) motion challenges the complaint as not alleging sufficient facts to state a claim for relief. Fed. R. Civ. P. 12(b)(6). “To survive a motion to dismiss [under 12(b)(6)] a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citation omitted). While “detailed factual allegations” are unnecessary, the complaint must allege more than “[t]hreadbare recitals of the elements of a cause of action supported by mere conclusory statements.” Id. “In sum, for a complaint to survive a motion to dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir. 2009). B. Analysis 1. Preemption of State Claims Congress enacted ERISA to protect “the interest of participants in employee benefit plans and their beneficiaries.” Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004) (quoting 29 U.S.C. § 1001(b)). It did so by “setting out substantive regulatory requirements for employee benefit plans and to ‘provide appropriate remedies, sanctions, and ready access to the Federal courts.’” Id. (quoting 29 U.S.C. § 1001(b)). To achieve uniformity in employee-benefit plan regulations, ERISA includes “expansive pre-emption provisions, which are intended to ensure that employee benefit plan regulation would be ‘exclusively a federal concern.’” Id. (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981)). Section 29 U.S.C. § 1144(a) states that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan.” Defendant argues all of Plaintiff’s state law claims are preempted by ERISA as they are based on the alleged improper processing of his disability benefits and thus relate to the ERISA plan. Mot. at 5-7. Plaintiff concedes ERISA preempts his state law causes of action and does not oppose their dismissal. Opp’n at 3 n.1. Accordingly, Plaintiff’s state law claims for breach of contract, bad faith, malicious misrepresentation of material fact and gross negligence are dismissed with prejudice. See Deveraturda v. Globe Aviation Sec. Servs., 454 F.3d 1043, 1046 (9th Cir. 2006) (explaining a district court need not grant leave to amend where amendment would be futile). 2. ERISA Claims Plaintiff also asserts a claim under ERISA. See Compl. ¶ 31-5. However, it is not clear from his complaint under what provision. See generally id. His opposition implies he seeks relief under 29 U.S.C. § 1132(a)(1), § 1132(a)(2), and § 1132(a)(3). See Opp’n at 7. Thus, the Court addresses whether Plaintiff has stated a plausible claim for relief under any of these provisions. 1132(a)(1)(B) Section 1132(a)(1)(B) allows a plan participant “to recover benefits due to him under the terms of the plan, to enforce his rights under the terms of the plan, or to clarify his right to future benefits under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B). As Defendant points out, Plaintiff acknowledges in his complaint that he has been paid all the benefits owed to him under the terms of the plan. See Compl. ¶ 19. Instead, Plaintiff here seeks interest on the benefits Defendant delayed paying him. See Opp’n. Because Plaintiff alleges he has recovered the benefits due to him under the terms of the plan, he has failed to state a claim under § 1132(a)(1)(B). See Mathews v. Xerox Corp., 319 F.Supp.2d 1166 (S.D. Cal. 2004) (no claim under § 1132(a)(1)(B) for interest on delayed benefits payments when the plan does not provide for such a remedy). To the extent Plaintiff’s claim relies on this section, it is dismissed with prejudice. See Deveraturda, 454 F.3d 1043, 1046 (district court need not grant leave to amend where amendment would be futile).2 1132(a)(2) Section 1132(a)(2) “permits a plan participant to bring a civil enforcement action against any fiduciary ‘to make good to such plan any losses to the plan resulting from [the fiduciary’s] breach.’” Wise v. Verizon Comm’n, Inc., 600 F.3d 1180, 1189 (9th Cir. 2010) (quoting 29 U.S.C. § 1109(a)). This section, however, only provides a remedy for injuries to the

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 of action under which Plaintiff can bring suit. See 28 U.S.C. § 1961; Blankenship v. Liberty Life Assur. Co. of Boston, 486 F.3d 620, 628 (9th Cir. 2007). ERISA plan as a whole. Id. It does not provide “a cause of action for extra-contractual damages caused by improper or untimely processing of benefit claims.” Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985). Here, Plaintiff does not allege any injury to the plan as a whole. See generally Compl. Rather, Plaintiff seeks extra- contractual damages caused by the improper and untimely processing of his individual claim for benefits. Id.; see also Opp’n. Accordingly, Plaintiff has failed to state a claim under § 1332(a)(2) of ERISA. See Russell, 473 U.S. at 148. To the extent Plaintiff’s claim rests on § 1332(a)(2) it is also dismissed with prejudice. See Deveraturda, 454 F.3d at 1046. 1132(a)(3) Section 1132(a)(3) “authorize[s] ERISA plan beneficiaries to bring a lawsuit [. . .] that seeks relief for individual beneficiaries harmed by an administrator’s breach of fiduciary obligations.” Varity Corp v. Howe, 516 U.S. 489, 492 (1996). An individual bringing a claim under § 1132(a)(3) may seek “appropriate equitable relief,” which refers to “those categories of relief that, traditionally speaking (i.e. prior to the merger of law and equity) were typically available in equity.” CIGNA Corp. v. Amara, 563 U.S. 421, 439 (2011) (internal quotation marks and citations omitted). This relief may include surcharge, which is monetary compensation for a loss resulting from a trustee’s breach of duty. Id. at 441-42. “Through surcharge, a beneficiary may seek make-whole relief, the remedy that will put the beneficiary in the position he or she would have attained but for the trustee’s breach.” Castillo v. Metro. Life Ins. Co., 970 F.3d 1224, 1230 (9th Cir. 2020). “Because § 1132(a)(3) acts as a safety net, offering appropriate equitable relief for injuries caused by violations that § 502 does not elsewhere adequately remedy, relief is not available under § 1132(a)(3) where Congress elsewhere provided adequate relief for a beneficiary’s injury.” Id. at 1229. “Thus, a claimant may not bring a claim for denial of benefits under § 1132(a)(3) when a claim under § 1132(a)(1)(B) will afford adequate relief.” Id. Relying on Rochow v. Life Ins. Co. of N. Am., 780 F.3d 364 (6th Cir. 2015), Defendant argues Plaintiff cannot bring a claim under § 1132(a)(3). Reply at 3. In Rochow, the plaintiff brought a claim under § 1132(a)(1)(B) to recover the benefits he had been wrongfully denied, as well as a claim under § 1132(a)(3). Rochow, 780 F.3d at 370. The Sixth Circuit held that Rochow could not pursue a breach-of-fiduciary claim under § 1132(a)(3) based on a denial of benefits where the remedy under § 1132(a)(1)(B) was adequate to make him whole. Id. at 371. Because Rochow hadn’t shown that the benefits recovered, attorney’s fees, and potential prejudgment interest available was inadequate to make him whole, he could not maintain an action under § 1132(a)(3). Contrastingly here, as Defendant acknowledges, Plaintiff does not have a claim under § 1132(a)(1)(B). Reply at 2. Thus, unlike the plaintiff in Rochow, Plaintiff does not have an adequate remedy under § 1132(a)(1)(B). Rochow, therefore, does not support dismissing Plaintiff’s § 1132(a)(3) claim. In the absence of compelling authority to do so, the Court declines to dismiss Plaintiff’s ERISA claim at this early stage of the proceedings in so far as it is based on § 1132(a)(3). See Zisk v. Gannet Co. Income Prot. Plan, 73 F.Supp.3d 1115, 1121 (N.D. Cal. 2014) (declining to dismiss plaintiff’s § 1132(a)(3) claim for penalties and interest incurred when he used his retirement account in lieu of disability benefits); see also Parke v. First Reliance Standard Life Ins. Co., 368 F.3d 999, 1006 (8th Cir. 2004) (“courts may award prejudgment interest as ‘other appropriate equitable relief’ under § 1132(a)(3)(B) when benefits are wrongfully delayed”); Skretvedt v. E.I. Dupont De Nemours, 372 F.3d 193, 215 (3rd Cir. 2004) (finding that if a plaintiff’s benefits were withheld or delayed in violation of ERISA or an ERISA plan, then an action for interest under § 502(a)(3) would lie); Dunnigan v. Metro. Life Ins. Co., 277 F.3d 223, 229 (2nd Cir. 2002) (finding plaintiff could recover interest for delayed payments under § 1132(a)(3) as make-whole relief). For the reasons set forth above, the Court: 1. GRANTS Defendant’s Motion to Dismiss Plaintiff’s state law claims for breach of written contract, bad faith, malicious misrepresentation of material fact, and gross negligence with prejudice; 2. GRANTS Defendant’s Motion to Dismiss Plaintiff’s ERISA claim to the extent it is predicted on 29 U.S.C. § 1132(a)(1)(B) with prejudice; 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

claim to the extent it is predicted on 29 U.S.C § 1132(a) (2) with prejudice; and 4, DENIES Defendant’s Motion to Dismiss Plaintiff’s ERISA claim under 29 U.S.C. § 1132(a) (3). Dated: October 6, 2021 ke A teiren staves odermacr 7008