Metro. Life Ins. Co. v. Depalo

METROPOLITAN LIFE INS. CO., Plaintiff, v. DEBORAH DEPALO, Defendant.

Civil Action No. 13-3092 (KM)

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

September 22, 2014

NOT FOR PUBLICATION

OPINION

I. INTRODUCTION

This matter comes before the Court on the motion of Plaintiff Metropolitan Life Insurance Co. ("MetLife") to amend its Complaint. See Mot. to Amend, D.E. 18. Specifically, MetLife seeks to add two state-law causes of action against Defendant Deborah DePalo ("DePalo") for unlawful retention and conversion of funds. The Court decided this motion without oral argument pursuant to Fed. R. Civ. 78 and L. Civ. R. 78.1. For the reasons set forth below, MetLife's motion to amend is denied.

II. BACKGROUND

For purposes of the motion to amend, the Court must accept as true all well pleaded allegations in the proposed amended complaint. Fowler v. UPMC Shadyside, 578 F.3d 203, 210-11 (3d Cir. 2009).

The action arises from a life insurance plan provided by Merrill Lynch & Company, Inc. ("Merrill Lynch") to eligible employees (the "Plan"). Prop. Am. Compl., D.E. 18-2 ¶ 8. The Plan "is an employee welfare benefit plan as defined by ERISA." Id. ¶ 10. A group policy of insurance that Met Life issued to Merrill Lynch commencing March 16, 1995 (the "Group Policy")funded the Plan. Id. ¶ 9. When Bank of America purchased Merrill Lynch in 2009, Bank of America replaced MetLife with Aetna as its insurance carrier. Id. ¶¶ 13-14. As a result, all MetLife-Merrill Lynch life insurance coverage was canceled effective December 31, 2009. Id. ¶ 15.

Joseph DePalo, the decedent, was a Merrill Lynch employee who participated in the Plan. Id. ¶¶ 2, 11. Pursuant to the Plan's summary plan description ("SPD"), an employee was provided a basic group life insurance benefit ("basic coverage") and could elect to obtain contributory/optional life insurance ("optional coverage"). Id. ¶¶ 18-19. Joseph DePalo enrolled in the contributory/optional life insurance program. Id. ¶¶ 19. Pursuant to the Plan's terms, Joseph DePalo was eligible for $57,278.59 in basic coverage benefits and $286,394.45 in optional coverage benefits. Id. ¶ 22.

On March 10, 2008 (before Bank of America purchased Merrill Lynch), Joseph DePalo submitted a claim form seeking to accelerate $150,000 of his life insurance benefits. Id. ¶ 23. He was paid $28,639.45 from his basic coverage benefits and $121,360.55 in optional coverage benefits. Id. ¶ 24.¹

Joseph DePalo died on February 7, 2011. Id. ¶ 25. Joseph DePalo's wife, Defendant Deborah DePalo ("DePalo"), submitted a Claimant's Statement for his benefits. Id. The Claimant's Statement, signed by Deborah DePalo, contained the following provision:

MetLife has the right to recover any amounts that it determines to be an overpayment. An overpayment occurs if MetLife determines that (a) the total amount paid by MetLife on your claim is more than the total amount of benefits due to you under the benefit plan/insurance certificate; or (b) MetLife made payment to youwhen the payment should have been made to someone else. In case of an overpayment, I agree to repay MetLife the specifically overpaid funds. I further understand that if an overpayment is not repaid, MetLife reserves the right to rely on any means to recover the overpayment, including institution of litigation.

Id. ¶ 26.

On March 28, 2011, MetLife paid Deborah DePalo $28,639.44 in basic coverage benefits and $165,033.90 in optional coverage benefits (plus interest). Id. ¶ 28.² Deborah DePalo disputed this payment, arguing that she was due benefits from both Merrill Lynch and Bank of America. Id. ¶¶ 29-31.

On or around September 2, 2011, the Plan's record-keeper contacted MetLife, advising MetLife that the optional coverage benefits were not MetLife's obligation, but instead were Aetna's liability. Id. ¶ 33. MetLife then contacted Aetna and Aetna advised MetLife that Aetna should have paid the Decedent's optional coverage benefits. Id. ¶¶ 34-36. Aetna sent a letter to Deborah DePalo requesting that DePalo consent to Aetna reimbursing MetLife for MetLife's improper payment. Id. ¶ 36. When Deborah DePalo refused, Aetna "had no alternative" but to also pay her $165,033.90 in optional coverage benefits (plus interest). Id. ¶ 37. Thereafter, MetLife contacted Deborah DePalo and requested that she refund MetLife's payment of optional coverage benefits, but DePalo refused. Id. ¶¶ 38-40.

MetLife does not dispute that it remained liable for Joseph DePalo's basic coverage benefits. Instead, MetLife argues that the Plan's SPD provided that "[optional] insurance provided under this section will end at the earliest of: . . . (9) the date the Group Policy ends" and coverage was canceled on December 31, 2009. Id. ¶¶ 15, 21. MetLife asserts that "[t]hroughinadvertence, the termination of the Decedent's contributory/optional life insurance under [the Plan] was not recognized when DePalo was paid benefits. Accordingly, MetLife was mistaken when it paid DePalo $165,033.90[.]" Id. ¶¶ 41-42.

MetLife filed suit on May 15, 2013, seeking monetary and equitable relief under the Employee Retirement Income Security Act of 1974 ("ERISA") for, inter alia, unjust enrichment. See Compl., D.E. 1. MetLife now seeks to file a First Amended Complaint that would add state-law claims for unlawful retention and conversion. See Mot. to Amend, D.E. 18.

III. ANALYSIS

1. Federal Rule of Civil Procedure 15(a)

"The threshold issue in resolving a motion to amend is the determination of whether the motion is governed by Rule 15 or Rule 16 of the Federal Rules of Civil Procedure." Karlo v. Pittsburgh Glass Works, LLC, No. 10-1283, 2011 WL 5170445, at *2 (W.D. Pa. Oct. 31, 2011). Rule 15 states, in pertinent part, that "a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires." Fed. R. Civ. P. 15(a)(2). "Rule 16, on the other hand, requires a party to demonstrate 'good cause' prior to the Court amending its scheduling order." Karlo, 2011 WL 5170445, at *2 (citing Fed. R. Civ. P. 16(b)(4)). There is "tension" between the standards of the two Rules, which the Third Circuit Court of Appeals has not resolved directly. Id. at *2 n.3 (citing Assadourian v. Harb, 430 Fed. App'x 79 (3d Cir. 2011)). However, Third Circuit courts "have consistently reached the same conclusion: a party seeking to amend the pleadings after the deadline set by the Court must satisfy the requirements of Rule 16(b)(4) - i.e., they must show 'good cause.'" Id. (citations omitted). Therefore, if a party has filed a motion to amend "after the deadline set by the Court, the movant must satisfy the [good cause standard] of Rule 16 before theCourt will turn to Rule 15." Id. at *2.

Here, the Court ordered that any motion to amend the pleadings must be filed by February 28, 2014. See October 21, 2013 Pretrial Scheduling Order, D.E. 15, ¶ 12. As MetLife filed its motion on February 28, 2014, the more liberal Rule 15 standard, rather than the Rule 16(b)(4) "good cause" standard, governs its application.

Rule 15(a) provides that leave to amend a pleading shall be freely given "when justice so requires." The Court may deny leave to amend the pleadings only where there is (1) undue delay, (2) bad faith or dilatory motive, (3) undue prejudice, (4) repeated failures to cure deficiencies, or (5) futility of amendment. Foman v. Davis, 371 U.S. 178, 182 (1962); Long v. Wilson, 393 F.3d 390, 400 (3d Cir. 2004) ("We have held that motions to amend pleadings [under Rule 15(a)] should be liberally granted.") (citations omitted); Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002) ("Under Rule 15(a), if a plaintiff requests leave to amend a complaint . . . such leave must be granted in the absence of undue delay, bad faith, dilatory motive, unfair prejudice, or futility of amendment.").

In this case, Deborah DePalo argues that the Court should deny MetLife's motion for leave to file a First Amended Complaint because of the futility of the proposed amendment. Specifically, Deborah DePalo asserts that MetLife's proposed Fourth and Fifth Causes of Action are futile because: (1) they are conflict preempted by ERISA; and (2) regardless of preemption, both causes of action are legally deficient. See Def. Opp'n Br., D.E. 21; see also Hill v. City of Scranton, 411 F.3d 118, 134 (3d Cir. 2005) (establishing that "it would have been futile to allow [plaintiff] to amend his complaint because his allegations before the District Court did not state a claim on which he could have obtained relief."). Because Deborah DePalo does not argue that there is undue delay, bad faith, undue prejudice, or that MetLife has failed repeatedly to curedeficiencies, the Court bases its determination on whether to grant MetLife's motion to amend solely on whether it would be futile to allow MetLife's proposed new counts to proceed.

A court will consider an amendment futile if it "is frivolous or advances a claim or defense that is legally insufficient on its face." Harrison Beverage Co. v. Dribeck Imps., Inc., 133 F.R.D. 463, 468 (D.N.J. 1990) (citations omitted) (internal quotations marks omitted). To determine whether an amendment is insufficient on its face, the Court employs the standard applied to Rule 12(b)(6) motions to dismiss. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1434 (3d Cir. 1997). Under this standard, the question before the Court is not whether the movant will ultimately prevail, but whether the complaint sets forth "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); Hishon v. King & Spalding, 467 U.S. 69, 73 (1984) (establishing that a "court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations."); Harrison Beverage, 133 F.R.D. at 468 ("'Futility' of amendment is shown when the claim or...