Purvis v. Lutheran Homes of S.C., Inc.

Mary Cathy Purvis, Plaintiff, v. The Lutheran Homes of South Carolina, Inc., Defendant.

Civil Action No.: 3:15-cv-02238-JMC

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF SOUTH CAROLINA COLUMBIA DIVISION

March 5, 2018

ORDER AND OPINION

Plaintiff Mary Cathy Purvis has pending against her former employer, Defendant The Lutheran Homes of South Carolina, Inc. ("Defendant" or "LHSC"), state law claims for breach of contract, breach of contract/detrimental reliance and bad faith failure to pay insurance. (ECF No. 1 at 11 ¶ 95-14 ¶ 127.)

This matter is before the court on Defendant's Renewed Motion for Summary Judgment asserting that the aforementioned state law claims are preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461. (ECF No. 30 at 1-2.) Alternatively, Defendant moves the court to amend its Order entered on March 30, 2017 (the "March Order," ECF No. 29), pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. (ECF No. 30 at 2.) Plaintiff opposes Defendant's Motion in its entirety. (ECF No. 37.) For the reasons set forth below, the court DENIES Defendant's Renewed Motion for Summary Judgment¹ and GRANTS IN PART Defendant's Rule 54(b) Motion to Amend.

I. LEGAL STANDARD AND ANALYSIS²

In the March Order, the court made the following observations in denying Defendant summary judgment on Plaintiff's state law claims for breach of contract, breach of contract/detrimental reliance and bad faith failure to pay insurance:

In this matter, Plaintiff alleged state law claims for breach of contract, breach of contract/detrimental reliance and bad faith failure to pay insurance. (ECF No. 1 at 11 ¶ 95-14 ¶ 127.) Defendant moved for summary judgment as to these claims on the basis that they were preempted by ERISA. (ECF No. 17-1 at 33.) The Magistrate Judge agreed and recommended dismissal of the claims because they were "all preempted by ERISA." (ECF No. 24 at 11.)

The court observes that "[i]n determining whether ERISA preempts a plaintiff's state law claims, the primary consideration [] requires applying the test the Fourth Circuit has adopted for determining whether ERISA completely preempts a state law claim." Hendrix v. Res. Real Estate Mgmt., Inc., 170 F. Supp. 3d 879, 887 (D.S.C. 2016) (citing Sonoco Prod. Co. v. Physicians Health Plan, Inc., 338 F.3d 366, 372 (4th Cir. 2003) (adopting the Court of Appeals for the Seventh Circuit's test for determining ERISA preemption); Tucci v. First Unum Life Ins. Co., 446 F. Supp. 2d 473 (D.S.C. 2006) (considering Sonoco in the context of a long term disability insurance plan)). "[T]he test sets forth three requirements to establish complete preemption:" (1) the plaintiff must have standing under [ERISA] § 502(a) to pursue its claim; (2) its claim must fall[] within the scope of an ERISA provision that [it] can enforce via § 502(a); and (3) the claim must not be capable of resolution without an interpretation of the contract governed by federal law, i.e., an ERISA-governed employee benefit plan. Id. (quoting Sonoco, 338 F. 3d at 372).

Upon review, the court observes that neither Defendant (ECF No. 17-1 at 33) nor the Magistrate Judge (ECF No. 24 at 10-11) addressed these factors before reaching the conclusion that Plaintiff's state law claims were preempted by ERISA. Without these factors having been addressed by the movant, the court is not persuaded that Defendant is entitled to judgment as a matter of law on this issue. As a result, the court denies the Motion for Summary Judgment on the basis of ERISA preemption as to Plaintiff's state law claims for breach of contract, breach of contract/detrimental reliance and bad faith failure to pay insurance without prejudice.

(ECF No. 29 at 12-13.)

Thereafter, on April 11, 2017, Defendant filed the instant Renewed Motion for SummaryJudgment "on the grounds that the Magistrate Judge's finding that Plaintiff's state law claims are preempted by ERISA is consistent with the Fourth Circuit's three-factor Sonoco test on this issue, despite LHSC's prior omission of a more complete discussion in that regard." (ECF No. 30 at 1-2.) In the alternative, Defendant argues that the court should amend the March Order pursuant to Rule 54(b) because (1) "the denial of summary judgment on those claims based on LHSC's prior omission of a more complete discussion of the ERISA preemption issue would present a 'manifest injustice' to LHSC, because the record supports the dismissal of Plaintiff's state law claims as a matter of law, irrespective of ERISA preemption" and (2) "the Court's denial of summary judgment based on the failure to address the Sonoco test amounts to clear error of law, because the Magistrate Judge's preemption conclusion was supported by a citation to a later Fourth Circuit decision with a different preemption test as Sonoco, indicating that a discussion of the Sonoco test was unnecessary under Fourth Circuit precedent to support a finding of ERISA preemption." (Id. at 2 (citing Wilmington Ship. Co. v. New Eng. Life Ins. Co., 496 F.3d 326 (4th Cir. 2007)).)

On May 16, 2017, Plaintiff filed a Response in Opposition to Defendant's Renewed Motion for Summary Judgment and Motion to Amend arguing that the court "correctly ruled that [] Defendant was not entitled to summary judgment on Plaintiff's Breach of Contract claims." (ECF No. 37 at 4.)

II. JURISDICTION

This court has jurisdiction over Plaintiff's state law claims based on supplemental jurisdiction since they were "so related to claims in the action within such original jurisdiction that . . . it form[s] part of the same case or controversy . . . ." 28 U.S.C. § 1367(a). Even though it dismissed the federal claims against Defendant, the court has the authority to retain jurisdictionover the state law claims that were closely related to the original claims. Id.

III. LEGAL STANDARD

Rule 54(b) provides the following:

When an action presents more than one claim for relief—whether as a claim, counterclaim, crossclaim, or third-party claim—or when multiple parties are involved, the court may direct entry of a final judgment as to one or more, but fewer than all, claims or parties only if the court expressly determines that there is no just reason for delay. Otherwise, any order or other decision, however designated, that adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties does not end the action as to any of the claims or parties and may be revised at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities.

Id. Under Rule 54(b), the "district court retains the power to reconsider and modify its interlocutory judgments . . . at any time prior to final judgment when such is warranted." Am. Canoe Ass'n v. Murphy Farms, Inc., 326 F.3d 505, 514-15 (4th Cir. 2003); see also Moses H. Cone Mem. Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 12 (1983) (noting that "every order short of a final decree is subject to reopening at the discretion of the district judge"). The Fourth Circuit has offered little guidance on the standard for evaluating a Rule 54(b) motion, but has held motions under Rule 54(b) are "not subject to the strict standards applicable to motions for reconsideration of a final judgment." Am. Canoe Ass'n, 326 F.3d at 514; see also Fayetteville Investors v. Commercial Builders, Inc., 936 F.2d 1462, 1472 (4th Cir. 1991) (the Court found it "unnecessary to thoroughly express our views on the interplay of Rules 60, 59, and Rule 54"). In this regard, district courts in the Fourth Circuit, in analyzing the merits of a Rule 54 motion, look to the standards of motions under Rule 59 for guidance. See U.S. Home Corp. v. Settlers Crossing, LLC, C/A No. DKC 08-1863, 2012 WL 5193835, at *2 (D. Md. Oct. 18, 2012); R.E. Goodson Constr. Co., Inc. v. Int'l Paper Co., C/A No. 4:02-4184-RBH, 2006 WL 1677136, at *1 (D.S.C. June 14, 2006); Akeva L.L.C. v. Adidas Am., Inc., 385 F. Supp. 2d 559, 565-66 (M.D.N.C. 2005). Therefore, reconsideration under Rule 54 is appropriate on the followinggrounds: (1) to follow an intervening change in controlling law; (2) on account of new evidence; or (3) to correct a clear error of law or prevent manifest injustice. Beyond Sys., Inc. v. Kraft Foods, Inc., C/A No. PJM-08-409, 2010 WL 3059344, at *2 (D. Md. Aug. 4, 2010) ("This three-part test shares the same three elements as the Fourth Circuit's test for amending an earlier judgment under Rule 59(e), but the elements are not applied with the same force when analyzing an[] interlocutory order.") (citing Am. Canoe Ass'n, 326 F.3d at 514).

IV. ANALYSIS

A. The Parties' Arguments

In its Rule 54(b) Motion, Defendant first argues that the March Order should be amended to prevent manifest injustice. (ECF No. 30 at 18.) Specifically, Defendant asserts that it "demonstrated additional, alternative grounds in favor of summary judgment on Plaintiff's State Law Claims, separate and independent of its ERISA preemption argument, as to which Plaintiff demonstrated no issue of fact." (Id. at 18-19.) In this regard, Defendant asserts that Plaintiff failed to "to raise a genuine issue of fact that LHSC communicated a 'contract' or 'promise' to her regarding her eligibility for benefits, that Plaintiff relied on that alleged 'contract' or 'promise' in considering her eligibility for benefits, and that LHSC 'breached' that alleged contract or promise by failing to provide the benefits to which she was allegedly entitled." (Id. at 25.) Defendant further asserts that "it is patently clear from the record that Magistrate Judge Hodges did not consider LHSC's alternative arguments in favor of summary judgment, and ruled instead as if LHSC had only asserted ERISA preemption as the grounds for its entitlement to summary judgment." (Id. at 20.) As a result, Defendant urges the court to amend the March Order to "prevent 'manifest injustice' to LHSC by relieving LHSC of the burden of continuing to litigate...