Englert v. Prudential Ins. Co. of Am.

186 F.Supp.3d 1044

Peter Englert, Plaintiff,

v.The Prudential Insurance Company of America, Defendant.

Case No. 15-cv-04814-HSG

United States District Court, N.D. California.

Signed May 13, 2016

Michael James Quirk, Terrence J. Coleman, Pillsbury & Coleman LLP, San Francisco, CA, for Plaintiff.

Linda Marie Lawson, Cindy Mekari, Meserve Mumper & Hughes LLP, Los Angeles, CA, for Defendant.

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS PLAINTIFF'S SECOND CLAIM FOR RELIEF

Re: Dkt. No. 20

HAYWOOD S. GILLIAM, JR., United States District Judge

Pending before the Court is Defendant The Prudential Insurance Company of America's motion to dismiss Plaintiff Peter Englert's second claim for relief. Dkt. No. 20. Having considered Defendant's motion to dismiss, Plaintiff's opposition, and all related papers, the Court finds the matter appropriate for decision without oral argument. See Civil L.R. 7-1(b). For the reasons articulated below, the motion is GRANTED IN PART and DENIED IN PART.

I. BACKGROUND

On October 19, 2015, Plaintiff filed this action against The Prudential Insurance Company of America ("Defendant") and Does 1-20. Dkt. No. 1 ("Compl."). The complaint articulates two claims for relief under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA"): (1) a § 502(a)(1)(B) claim for recovery of wrongfully withheld long-term disability ("LTD") benefits, prejudgment interest, attorneys' fees, and costs; and (2) a § 502(a)(3) claim for equitable relief in the form of a permanent injunction preventing Defendant and Does 1-20 from serving as fiduciary with respect to Plaintiff's LTD plan, full payment of LTD benefits due, prejudgment interest, disgorgement of profits, surcharge, an injunction against termination of benefits during the maximum benefit period, attorneys' fees, costs, and other make-whole relief. Id. ¶¶ 21-36.

For purposes of this motion, the Court accepts the following as true:

At all relevant times, Plaintiff was employed by JP Morgan Chase Bank as a Sales Associate and participated in a group LTD plan sponsored by JP Morgan Chase Bank and underwritten by Defendant (the "Plan"). Id. ¶¶ 6-7. The Plan qualifies as a welfare benefit plan governed by ERISA, and Defendant was and is the Plan's de facto co-plan administrator and co-claims fiduciary. Id. ¶ 9. While Plaintiff was an employee of JP Morgan Chase Bank and a recipient under the Plan, Plaintiff experienced severe chronic back pain forcing him to take medical leave effective October 18, 2011. Id. ¶¶ 8, 13.

Plaintiff received short-term disability benefits for about seven months, and on November 20, 2012, Defendant sent Plaintiff a letter informing him that his LTD benefits claim had been approved. Id. ¶¶ 14-15. However, on September 16, 2013, Defendant terminated Plaintiff's LTD benefits. Id. ¶ 16. Plaintiff appealed the termination, and on June 2, 2014, Defendant paid Plaintiff back benefits, but only to May 21, 2014. Id. On November 25, 2014, Plaintiff submitted another appeal, and on January 14, 2015, Defendant again conceded its error and paid Plaintiff back benefits, but only to December 6, 2014. Id. On July 9, 2015, Plaintiff filed his third appeal, and Defendant denied the appeal on September 15, 2015. Id. ¶¶ 16-17.

Defendant's "vexatious method of reinstating only back benefits instead of acknowledging ongoing disability put Plaintiff in the stressful position of being in a constant and perpetual state of appeal" and caused Plaintiff "severe economic hardship and emotional distress." Id. ¶¶ 19, 21. Meanwhile, Defendant "benefitted significantly through reduction of the statutory loss reserve previously maintained on Plaintiff's claim." Id. As a result of Defendant's conduct, JP Morgan Chase Bank terminated Plaintiff's leave of absence and employment, "causing Plaintiff to incur unanticipated costs for individual health insurance and other benefits." Id. ¶ 23.

On December 31, 2015, Defendant filed the pending motion to dismiss Plaintiff's § 502(a)(3) claim for equitable relief in its entirety. Dkt. No. 20 ("MTD").

II. DISCUSSION

A. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint if it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This "facial plausibility" standard requires the plaintiff to allege facts that add up to "more than a sheer possibility that a defendant has acted unlawfully." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). A plaintiff must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly , 550 U.S. at 555, 127 S.Ct. 1955. On a motion to dismiss, the court accepts as true a plaintiff's well-pleaded factual allegations and construes all factual inferences in the light most favorable to the plaintiff. Manzarek v. St. Paul Fire & Marine Ins. Co. , 519 F.3d 1025, 1031 (9th Cir.2008). But, the plaintiff must allege facts sufficient to "raise a right to relief above the speculative level." Twombly , 550 U.S. at 555, 127 S.Ct. 1955.

B. Analysis

Defendant urges the Court to dismiss Plaintiff's § 502(a)(3) claim for four reasons: (1) equitable relief is not available under § 502(a)(3) because adequate relief is available under § 502(a)(1)(B); (2) disgorgement of profits constitutes impermissible extracontractual damages; (3) allowing a § 502(a)(3) breach of fiduciary duty claim based on denial of benefits would frustrate ERISA's key policy of promoting the efficient and inexpensive resolution of benefits disputes; and (4) Plaintiff's allegations fail to meet Twombly's pleading requirements.

i. Adequate Relief Available Elsewhere

Defendant contends that Plaintiff's § 502(a)(3) claim for equitable relief "is nothing more than a repackaging of his ERISA § 502(a)(1)(B) claim," and thus, Plaintiff does not allege a claim for "appropriate equitable relief" under ERISA § 502(a)(3). See MTD at 4-5.

ERISA § 502(a)(1)(B) permits an ERISA participant or beneficiary to bring an action "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). ERISA's catch-all provision, § 502(a)(3), permits an action "by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3).

The Supreme Court has recognized that "where Congress elsewhere provide[s] adequate relief for a beneficiary's injury, there will likely be no need for further equitable relief, in which case such relief normally would not be ‘appropriate.’ " Varity Corp. v. Howe , 516 U.S. 489, 515, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996). In the Ninth Circuit, a plaintiff may bring a claim for "individual relief for a breach of fiduciary duty in an ERISA action [under § 502(a)(3) ] only where no other adequate relief is available." Forsyth v. Humana, Inc. , 114 F.3d 1467, 1475 (9th Cir.1997)aff'd , 525 U.S. 299, 119 S.Ct. 710, 142 L.Ed.2d 753 (1999)overruled on other grounds by Lacey v. Maricopa Cty. , 693 F.3d 896 (9th Cir.2012) ; see also Wise v. Verizon Commc'ns, Inc. , 600 F.3d 1180, 1190 (9th Cir.2010) (holding that " Section 1132(a)(3) is a ‘catchall’ or ‘safety net’ designed to offer appropriate equitable relief for injuries caused by violations that § 1132 does not elsewhere adequately remedy"). However, "[a] claim for relief under section (a)(1)(B) does not automatically preclude a claim under section (a)(3), especially at the pleading stage." Bush v. Liberty Life Assurance Co. of Boston , 77 F.Supp.3d 900, 908 (N.D.Cal.2015). Courts in this district have found § 502(a)(3) claims cognizable in conjunction with § 502(a)(1)(B) claims "particularly where the relief sought in connection with each claim is distinct." Id.

Thus, to the extent that Plaintiff's requests for relief under § 502(a)(3) are adequately provided for by another ERISA subsection such as § 502(a)(1)(B), Plaintiff's § 502(a)(3) claim must be dismissed. Accordingly, the Court will address each of Plaintiff's requests for relief under § 502(a)(3).

a. Permanent Injunction Against Defendants Serving as Fiduciary to the Plan

Plaintiff's § 502(a)(3) claim first requests a "judgment permanently enjoining Defendants from ever again serving as a fiduciary with respect to the Plan." Compl. ¶ 36. However, the Ninth Circuit has expressly proscribed removal of an ERISA fiduciary under ERISA's catch-all provision because such remedy is provided for under ERISA §§ 1109(a) and 1132(a)(2). Wise , 600 F.3d at 1190 ; see also Brady v. United of Omaha Life Ins. Co. , 902 F.Supp.2d 1274, 1279 (N.D.Cal.2012) (holding that an injunction against defendant from ever again serving as fiduciary to the plan under § 502(a)(3) is precluded by Wise ).

Accordingly, Plaintiff cannot assert a § 502(a)(3) claim to enjoin Defendant from ever again serving as fiduciary to the Plan, and Defendant's motion to dismiss is GRANTED as to this form of relief.¹

b. Back Benefits and Prejudgment Interest

Next, Plaintiff's § 502(a)(3) claim requests "an order by this Court that the full amount of benefits due since December 7, 2014, be paid with interest on all retroactive payments due and owing." Compl. ¶ 36.

Section 502(a)(1)(B) permits Plaintiff "to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29...