Kirby v. TAD RESOURCES INTERN., INC.

95 P.3d 1063

136 N.M. 148

Stella R. KIRBY, Plaintiff-Appellant, v. TAD RESOURCES INTERNATIONAL, INC., a/k/a Tad Technical Services Corporation, a/k/a Adecco-Tad Resources International, a/k/a Adecco Employment Services, Inc., a/k/a Adecco SA, a/k/a Adecco International, Defendants/Third-Party Plaintiffs-Appellees, v. The Guardian Life Insurance Company Of America, Third-Party Defendant-Appellee.

No. 23,930.

Court of Appeals of New Mexico.

June 16, 2004.

Earl Mettler, Mettler & LeCuyer, P.C., Albuquerque, for Appellant.

Matthew T. Byers, McCormick, Caraway, Tabor & Riley, L.L.P., Carlsbad, for Appellee Adecco Employment Services, Inc.

Donald A. DeCandia, Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, for Appellee The Guardian Life Insurance Company of America.

OPINION

SUTIN, Judge.

{1} Plaintiff was denied long-term disability benefits under her employer's group insurance policy. The gut issue is whether, under ERISA, she can seek judgment against the ERISA plan itself as an entity when the disability insurer in control of administration of the plan has been dismissed on res judicata grounds and is not a party and Plaintiff cannot directly obtain a judgment against the insurer. The district court held she could not. We reverse.

BACKGROUND

{2} Plaintiff Stella Kirby sought damages stemming from the denial by Guardian Life Insurance Company of America (Guardian) of her claim for long-term disability benefits under a group insurance policy purchased by her employer TAD Resources International, Inc., whose successor-in-interest is Adecco SA (collectively referred to as Employer). Plaintiff had received disability benefit payments for about one year, after which payments ceased. Her initial complaint, filed in April 1999, named Guardian and Employer and asserted seven counts under state law for breach of the covenant of good faith and fair dealing, intentional infliction of emotional distress, fraud, negligent misrepresentation, unreasonable delay, violations of the Unfair Insurance Practices Act, and violations of the Unfair Practices Act.

{3} Before any responsive pleading was filed, Plaintiff filed an amended complaint that varied from the original complaint only by the addition of some minor language and by reordering some of the counts. Guardian filed a motion to dismiss the amended complaint on the ground Plaintiff's state law claims were preempted by the Employment Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 to 1461 (1974, as amended through 2004) (ERISA). The district court dismissed the amended complaint on preemption grounds, but granted Plaintiff fifteen days to file a second amended complaint seeking recovery under ERISA. We refer to the court's order of dismissal of the amended complaint as "the preemption order of dismissal" as we proceed through the procedural morass that followed.

{4} Plaintiff filed a second amended complaint in December 1999, in which she kept Employer as a defendant but dropped Guardian as a defendant. The structure of the second amended complaint was different than that of the first in that, in attempted compliance with the preemption order of dismissal, the second amended complaint alleged that the action was brought "in part" under provisions of ERISA and asserted a claim for failure to pay benefits. However, the second amended complaint also asserted state law claims for fraud and negligent misrepresentation based on allegations that Employer erroneously misled Plaintiff into believing that her medical insurance would continue as a converted policy if she paid Employer a premium for the coverage.

{5} Nearly a year after Plaintiff filed the second amended complaint, the district court granted Plaintiff's attorney's motion to withdraw as counsel based on irreconcilable differences. Thereafter, Plaintiff's new attorney and Employer's attorney filed a stipulation indicating that Plaintiff would file a third amended complaint based on ERISA. Based on the stipulation, the district court entered an order dismissing the second amended complaint without prejudice and ordering Plaintiff to file a third amended complaint.

{6} Plaintiff's third amended complaint, filed in March 2001, asserted, as her sole claim, a claim under 29 U.S.C. § 1132(a)(1)(B) for wrongful denial of benefits. The third amended complaint continued to name Employer as a defendant, but also added the disability plan, naming Long-Term Disability Plan of Tad Resources International, Inc. (the Plan) as a separate defendant. In addition, the third amended complaint once again included Guardian as a defendant. Guardian responded with a motion to dismiss asserting that the claims in the third amended complaint were barred by the doctrine of res judicata related to the preemption order of dismissal. Guardian also asserted that the district court lost jurisdiction to allow Plaintiff to file a third amended complaint against Guardian because Plaintiff never appealed the preemption order of dismissal. On September 12, 2001, Plaintiff filed a motion requesting the court to reconsider an apparently verbal determination by the court granting Guardian's motion to dismiss the third amended complaint. On September 20, 2001, the court, based on res judicata, entered an order granting Guardian's motion to dismiss the third amended complaint as to Guardian, which we will refer to as "the first res judicata order of dismissal." On October 24, 2001, Plaintiff withdrew her motion to reconsider.

{7} In January 2002, Plaintiff filed a motion to reverse Guardian's administrative denial of benefits under the Plan on the grounds it was erroneous, without support in the administrative record, and arbitrary and capricious. Plaintiff asserted that she had a right to recover the benefits against the Plan and that a claims processor such as Guardian was not a necessary party for Plaintiff to obtain that relief. She sought a judgment ordering the Plan to pay disability benefits. Employer responded, asserting, among other things, that it was not a proper party defendant, that the court lacked jurisdiction, and that Plaintiff failed to exhaust administrative remedies.

{8} Meanwhile, using an alias summons issued in February 2002 Plaintiff re-served Guardian "as administrator of Adecco/TAD Technical Long-Term Disability Insurance Plan, No. G-290956." She also served summons and alias summons on the various legal incarnations of Employer in its capacity as administrator of the Plan, as well as on the United States Department of Labor. Thereafter, in April 2002 the court permitted Employer to amend its answer to include a third-party complaint against Guardian seeking indemnification if Employer were eventually ordered to pay benefits to Plaintiff. The court also remanded the case to the Plan and Employer for a period of sixty days to allow for the completion of the administrative appeal process that the court concluded had been started but not finished when Plaintiff's benefits were first denied. Consideration of Plaintiff's motion to reverse Guardian's denial of benefits was deferred pending this remand.

{9} While the case was on remand, Guardian filed a second motion to dismiss the third amended complaint in response to having been served in its capacity as the Plan administrator. Guardian reiterated previous arguments it had made in its first motion to dismiss the third amended complaint, and added the grounds that Plaintiff's failure to appeal the first res judicata order of dismissal precluded her from trying to bring Guardian back into the lawsuit and that, even if Plaintiff could bring Guardian back into the lawsuit as the Plan administrator, Plaintiff's claims would nevertheless be precluded by collateral estoppel. Plaintiff responded that re-service on Guardian was made only to perfect service on the Plan, not to re-assert previously dismissed claims against Guardian. Guardian's reply indicated that, whatever Plaintiff's characterization of its procedural activity, Plaintiff was attempting in effect to recover from Guardian, a claim and recovery precluded under res judicata and collateral estoppel. The district court thereafter, in July 2002, entered an order ruling that "Plaintiff's claims against Guardian in the Third Amended Complaint are barred by res judicata and collateral estoppel." We refer to this second dismissal of the third amended complaint granted in Guardian's favor as "the second res judicata order of dismissal."

{10} The parties then, during September through December 2002, filed a series of competing motions in an attempt to bring the case to a close. Guardian filed a motion seeking dismissal or summary judgment against Employer on Employer's third-party complaint against Guardian. Employer filed a motion for summary judgment against Plaintiff on the theory that Plaintiff could not recover benefits from Employer because Employer was the wrong party to sue under ERISA. Plaintiff filed a motion for default judgment or summary judgment against the Plan. In her motion, Plaintiff asserted that a default judgment was proper because no answer had been filed on behalf of the Plan; or, alternatively, no factual dispute existed as to whether Plaintiff qualified for benefits under the Plan and she was entitled to benefits as a matter of law. Guardian took the position that Plaintiff's motion "should be denied because Guardian is the only party from whom Plaintiff would have been entitled to obtain benefits, and Plaintiff's claims against Guardian have long since been dismissed." Plaintiff replied that "while res judicata insulates Guardian from a direct action by Plaintiff in this case, it does not affect Guardian's ultimate liability as insurer of the Plan." The record indicates nothing resulted from the administrative proceeding on remand.

{11} In February 2003, following a hearing on all outstanding motions, the district court issued a letter ruling analyzing the issues and...