Cox v. Reliance Standard Life Insurance Company, No. 1:2013cv00104 - Document 44 (E.D. Cal. 2014)

Court Description: ORDER granting defendant LKQ Corporation's Motion to Dismiss with Prejudice. Referring Matter to Magistrate Judge Thurston for Status Conference. signed by District Judge Anthony W. Ishii on 3/3/14. (Nazaroff, H)

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1 2 3 4 5 UNITED STATES DISTRICT COURT 6 EASTERN DISTRICT OF CALIFORNIA 7 8 9 10 11 NICOLE COX, MILES EDWARDS, A MINOR, JAXDEN EDWARDS, A MINOR, AND KAYDEN COX, A MINOR, BY THEIR GUARDIAN AD LITEM, NICOLE COX AS ADMINISTRATOR OF THE ESTATE OF STEVEN MILES EDWARDS, DECEDENT, 12 13 14 15 16 17 CASE NO. 1:13-CV-00104-AWI-JLT ORDER GRANTING DEFENDANT LKQ CORPORATION’S MOTION TO DISMISS PURSUANT TO FEDERAL RULE OF CIVIL PROCEDURE 12(B)(6) ORDER DISMISSING COMPLAINT AGAINST LKQ WITH PREJUDICE Plaintiffs, v. ORDER REFERRING CASE TO THE MAGISTRATE JUDGE FOR A STATUS CONFERENCE WITH THE REMAINING DEFENDANT RELIANCE STANDARD LIFE INSURANCE COMPANY, a Pennsylvania corporation; LKQ CORPORATION, a California Corporation; DOES 1-10, inclusive, (Doc. 43) Defendants. 18 19 20 I. INTRODUCTION 21 Defendant LKQ Corporation (“LKQ”) has filed a motion to dismiss Plaintiffs Second 22 Amended Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). For the following 23 reasons, LKQ s motion is GRANTED and Plaintiffs Second Amended Complaint against LKQ is 24 DISMISSED with PREJUDICE. 25 II. BACKGROUND 26 On November 8, 2012, Nicole Cox, Miles Edwards, Jaxden Edwards, and Kyden Cox 27 (collectively “Plaintiffs”) filed claims alleging breach of contract and breach of the duty of good 28 1 1 faith and fair dealing in the California Superior Court against Reliance Standard Life Insurance 2 Company (“Reliance”). Plaintiffs assert that Decedent Steven Miles Edwards (“Decedent”) 3 registered to obtain life insurance coverage provided by Reliance through Decedent s employer, 4 LKQ. Plaintiffs allege Reliance did not make all required life insurance benefits payments upon 5 Decedent s death, in breach of contract. On January 22, 2013, Reliance removed the action to 6 federal court, contending that Plaintiffs state law claims were barred by the Employee Retirement 7 Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (“ERISA”). 8 9 On May 16, 2013, this Court granted Reliance s motion to dismiss Plaintiffs initial complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) on the basis that ERISA 10 preempted Plaintiffs state law claims for breach of contract and breach of the duty of good faith 11 and fair dealing. Plaintiffs were granted leave to file an amended complaint that pled a cause of 12 action under ERISA. 13 On June 14, 2013, Plaintiffs timely filed their First Amended Complaint, which asserted a 14 claim against Reliance under ERISA, 29 U.S.C. section 1132(a)(1)(B), and sought recovery of 15 $110,000 in unpaid life insurance benefits, attorneys fees, and interest. On July 16, 2013, 16 pursuant to a joint stipulation by Plaintiffs and Reliance, this Court granted Plaintiffs leave to file 17 a Second Amended Complaint (“SAC”) and excused Reliance from answering the First Amended 18 Complaint. 19 On July 17, 2013, Plaintiffs filed their SAC. The SAC added LKQ as a defendant to the 20 lawsuit and added a second claim for relief, breach of fiduciary duty under ERISA section 21 1132(a)(3). Reliance filed its answer to Plaintiffs SAC on July 30, 2013. On September 6, 2013, 22 pursuant to Federal Rule of Civil Procedure 12(b)(6), LKQ filed a motion to dismiss Plaintiffs 23 SAC. LKQ asserts in its motion to dismiss that it is not a proper defendant for Plaintiffs section 24 1132(a)(1)(B) claim, that Plaintiffs section 1132(a)(1)(B) and 1132(a)(3) claims are 25 impermissibly duplicative, and that LKQ is not a proper defendant to Plaintiffs section 1132(a)(3) 26 claim because LKQ does not qualify as an ERISA fiduciary. 27 28 III. LEGAL STANDARD A complaint must contain a short and plain statement showing that the pleader is entitled to 2 1 relief. Fed. R. Civ. P. 8(a)(2). A court must take a complaint s allegations of material fact as true 2 and construe them in the light most favorable to the nonmoving party. Id. A party may move to 3 dismiss based on the failure to state a claim upon which relief may be granted. See Fed. R. Civ. P. 4 12(b)(6). A motion to dismiss based on Rule 12(b)(6) challenges the legal sufficiency of the 5 claims alleged. Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). 6 In making a 12(b)(6) determination, district courts follow a two-step approach. Bell Atl. 7 Corp. v. Twombly, 550 U.S. 544, 564–70 (2009). First, district courts should carefully examine the 8 complaint to weed out any “merely legal conclusions resting on the prior allegations.” Twombly, 9 550 U.S. at 564. “Conclusory” allegations are entitled to no weight in the 12(b)(6) calculus. 10 Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009). Second, district courts should weigh the remaining 11 facts and determine if they are sufficient to “nudge the claims across the line from conceivable to 12 plausible.” Twombly, 550 U.S. at 570. While a complaint “need not contain detailed factual 13 allegations, it must plead enough facts to state a claim of relief that is plausible on its face.” 14 Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). 15 Plausibility can be met even if a judge disbelieves a complaint s factual allegations. Iqbal, 16 556 U.S. at 696 (stating that “no matter how skeptical the court may be […] Rule 12(b)(6) does 17 not countenance […] dismissals based on a judge s disbelief of a complaint s factual allegations.”) 18 (internal citation and quotation marks omitted). “A claim has facial plausibility,” and thus survives 19 a motion to dismiss, “when the plaintiff pleads factual content that allows the court to draw the 20 reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 21 678. “The plausibility standard is not akin to a „probability requirement, but it asks for more than 22 sheer possibility that a defendant acted unlawfully.” Id. A Rule 12(b)(6) analysis is “not whether a 23 plaintiff will ultimately prevail, but whether the claimant is entitled to offer evidence to support 24 the claims” advanced in his or her complaint. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). 25 Allegations that are merely conclusory, unwarranted deductions of fact, unreasonable inferences, 26 or allegations that contradict exhibits attached to the complaint do not meet the plausibility 27 standard and need not be accepted as true. Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 998 28 (9th Cir. 2010). 3 1 Generally, courts “may not consider any material beyond the pleadings in ruling on a Rule 2 12(b)(6) motion [but may] consider materials that are submitted with and attached to the 3 Complaint.” United States v. Corinthian Colleges, 655 F.3d 984, 998–99 (9th Cir. 2011) (internal 4 citation and quotation marks omitted). On a motion to dismiss, “these documents are part of the 5 complaint and may be considered in determining whether the plaintiff can prove any set of facts in 6 support of the claim.” Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987). 7 8 IV. DISCUSSION A. Plaintiffs’ First Claim for Relief – Recovery of Benefits under 29 U.S.C. § 1132(a)(1)(B) 9 LKQ contends it is not a proper defendant to Plaintiffs First Claim for Relief under 29 10 U.S.C. § 1132(a)(1)(B) because Plaintiffs fail to allege that LKQ had discretionary authority to 11 resolve Plaintiffs life insurance benefits claim or had discretionary responsibility to pay out a 12 benefits claim under the policy. The Court agrees. 13 Section 1132(a)(1)(B) states that an ERISA plan participant may bring a civil action “to 14 recover benefits due him under the terms of the plan, to enforce his rights under the terms of the 15 plan, or to clarify his rights to future benefits under the terms of the plan.” 29 U.S.C. § 16 1132(a)(1)(B). Plaintiffs First Claim for Relief seeks recovery of $110,000 in unpaid 17 supplemental life insurance benefits, attorney s fees, and interest under section 1132(a)(1)(B). 18 The proper defendant to a section 1132(a)(1)(B) claim is the party with authority to resolve 19 benefit claims or responsibility to pay them. Cyr v. Reliance Standard Life Ins. Co., 642 F.3d 20 1202, 1206–07 (9th Cir. 2011) (holding the proper defendant to a section 1132(a)(1)(B) claim was 21 an entity with authority to resolve benefit claims or responsibility to pay them, rather than a plan 22 administrator who lacked such authority) (en banc); Cox v. Allin Corp. Plan, 2013 WL 1832647, 23 at *4 (N.D. Cal. 2013) (dismissing the plaintiff s 1132(a)(1)(B) claim when the plaintiff failed to 24 allege any facts establishing that the defendants had “any authority or obligation to resolve or pay 25 Plaintiff s benefit claims”); Anderson v. Sun Life Assur. Co. of Canada, 2013 WL 6076547, at 26 *11–12 (D. Ariz. 2013) (holding that an entity without authority to resolve benefit claims or any 27 responsibility to pay them was not a proper defendant to an action to recover benefits under 28 section 1132(a)(1)(B)). 4 1 Plaintiffs rely on Gaines v. Sargent Fletcher, Inc., 329 F. Supp. 2d 1198 (C.D. Cal. 2004), 2 for the proposition that an employer who is a sponsor and administrator of an ERISA plan is a 3 proper defendant to a claim under section 1132(a)(1)(B), and therefore LKQ is a proper defendant 4 to Plaintiffs First Claim for Relief. See Plaintiffs Oppo. at 8–10. Plaintiffs, however, 5 misunderstand the thrust of Gaines. In finding that an employer who was the named ERISA plan 6 administrator was a proper defendant, the Gaines court relied on the fact that the “employer [was] 7 responsible for making any employee or benefit changes” and had “full and sole discretionary 8 authority to, among other things, modify the plan.” Gaines, 329 F. Supp. 2d at 1204–05, 1215. 9 The Ninth Circuit clarified the relevant standard in Cyr and holds that the proper defendant to a 10 section 1132(a)(1)(B) claim is the entity with authority to resolve a benefits claim or responsibility 11 to pay a legitimate benefits claim. Cyr, 642 F.3d at 1206–07. The Ninth Circuit in Cyr explained 12 that a complaint against a named plan administrator who lacked such authority must be dismissed. 13 Id. Accordingly, a proper defendant to a section 1132(a)(1)(B) claim is the party with 14 discretionary authority to resolve or pay a benefits claim. 15 Here, Plaintiffs allege that “LKQ Corporation is and at all times relevant was the sponsor 16 for the [life insurance] Plan” and “acted as an ERISA fiduciary of the Plan” SAC ¶8. Despite 17 these conclusory allegations, Plaintiffs pleadings show that LKQ lacked the authority to resolve 18 Plaintiffs benefit claims. Indeed, Plaintiffs allege that Reliance “is and at all relevant times was 19 the claims administrator for supplemental life insurance benefits” who “acted as an ERISA „claims 20 review fiduciary ” SAC ¶ 6. Exhibit 1. Plaintiffs declare in paragraph 6 of their SAC to be a “true 21 and correct copy” of the life insurance policy issued by Reliance to Decedent, and it states: 22 23 24 25 26 27 28 Reliance Standard Life Insurance Company shall serve as the claims review fiduciary with respect to the insurance policy and the Plan. The claims review fiduciary has the discretionary authority to interpret the Plan and the insurance policy and to determine eligibility for benefits. Decisions by the claims review fiduciary shall be complete, final and binding on all parties. SAC Exhibit 1, page 12.0. Exhibit 1, Page 12.0 of the SAC indicates that Reliance is “the claims review fiduciary” with “discretionary authority to interpret […] the insurance policy and to determine eligibility for 5 1 benefits.” SAC Exhibit 1, page 12.0 (emphasis added). The singular nature of Reliance s 2 discretionary authority with respect to a benefits determination is further established by the 3 language indicating that Reliance s judgment is “complete, final and binding on all parties.” Id. 4 Indeed, Plaintiffs themselves state that “[t]he Plan vests discretion in Reliance to make benefit 5 [sic] determination.” SAC ¶ 25. From this language, it would seem to foreclose the possibility that 6 an entity other than Reliance had discretionary authority to make claims decisions. Despite this, 7 Plaintiffs allege LKQ had a part in “denial of the Plaintiffs claim for the full amount of Life 8 Benefits under the Plan.” SAC ¶ 28. 9 LKQ contends that Plaintiffs have failed to allege LKQ had any role in the payment of 10 Plaintiffs life insurance benefits claim. The pleadings indicate that Reliance was the sole entity 11 with responsibility to pay under the policy. SAC ¶ 18 (explaining that “Reliance paid $200,000.00 12 in Life Benefits to Plaintiffs as named beneficiaries, but held and continues to withhold 13 $110,000.00”). Plaintiffs SAC Exhibit 1 contains sections titled “BENEFICIARY AND 14 FACILITY OF PAYMENT,” “SETTLEMENT OPTIONS,” and “CLAIMS PROVISIONS” 15 which detail the process by which Reliance pays out benefits claims under the policy. SAC 16 Exhibit 1, pages 7.0, 8.0, 12.0. Additionally, SAC Exhibit 1 variously refers to LKQ as the 17 “policyholder” or “applicant,” but not as a payor under the policy. See SAC Exhibit 1. Based on 18 the pleadings before the Court, Reliance is solely responsible for paying out Plaintiffs life 19 insurance benefits claim. 20 The life insurance policy attached to Plaintiffs SAC vests in Reliance the sole 21 discretionary authority over claims decisions and the policy does not share such authority with 22 LKQ, despite Plaintiffs vague allegations to the contrary. SAC Exhibit 1, page 12.0, SAC ¶ 28. 23 Additionally, the SAC fails to allege that LKQ is responsible for paying out benefit claims under 24 the policy. On closer inspection of the policy, it indicates that Reliance is solely responsible for 25 paying out Plaintiffs life insurance benefits claim. SAC ¶ 18, Exhibit 1. 26 On a motion to dismiss, a district court is not required to accept as true allegations that 27 contradict an exhibit attached to a complaint. Daniels-Hall, 629 F.3d at 998. The complaint s 28 implied allegation that LKQ possessed the requisite discretionary authority over claims decisions 6 1 and/or had benefit payment responsibility contradicts the life insurance policy Reliance issued to 2 Decedent (attached to Plaintiffs SAC as Exhibit 1). As such, this Court is not required to accept 3 Plaintiffs contrary allegations as true. Id. On this basis, Plaintiffs have failed to plausibly allege 4 that LKQ had discretionary authority to resolve Plaintiffs life insurance benefits claim or had the 5 responsibility to pay out a benefits claim under the policy, as required to establish a party is a 6 proper defendant under a section 1132(a)(1)(B) claim. Cyr, 642 F.3d at 1206–07. Accordingly, 7 LKQ is not a proper defendant to Plaintiffs First Claim for Relief and LKQ s motion to dismiss 8 Plaintiffs First Claim for Relief is GRANTED. 9 B. Plaintiffs’ Second Claim for Relief – Equitable Relief under 29 U.S.C. § 1132(a)(3) 10 LKQ argues Plaintiffs Second Claim for Relief under 29 U.S.C. § 1132(a)(3) must be 11 dismissed because it is impermissibly duplicative of their First Claim for Relief under section 12 1132(a)(1). The Court agrees. 13 Section 1132(a)(3) authorizes a “participant, beneficiary, or fiduciary (A) to enjoin any act 14 or practice which violates any provision of this subchapter or the terms of the plan, or (B) to 15 obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any 16 provisions of this subchapter or the terms of the plan[.]” 29 U.S.C. § 1132(a)(3). Plaintiffs 17 Second Claim for Relief seeks $110,000 in unpaid life insurance benefits. Plaintiffs assert theories 18 of equitable estoppel and surcharge under section 1132(a)(3). SAC ¶ 39. 19 The U.S. Supreme Court has characterized section 1132(a)(3) as a “catchall” provision that 20 offers “appropriate equitable relief for injuries caused by violations that [section 1132(a)] does not 21 elsewhere adequately remedy.” Varity Corp. v. Howe, 516 U.S. 489, 512 (1996). The Varity court 22 held that “where Congress elsewhere provided adequate relief for a beneficiary s injury, there will 23 likely be no need for further equitable relief, in which case such relief normally would not be 24 appropriate.” 516 U.S. at 515 (internal citation and quotation marks omitted). 25 The Ninth Circuit has held that when plaintiffs claim under section 1132(a)(1)(B) against 26 LKQ or some other similar employer, equitable relief is unavailable under section 1132(a)(3). 27 Ford v. MCI Comm’ns Corp. Health and Welfare Plan, 399 F.3d 1076, 1083 (9th Cir. 2005) 28 (holding that “because plaintiff asserted specific claims under 29 U.S.C. §§ 1132(a)(1)(B) and 7 1 1132(a)(2), she cannot obtain relief under 29 U.S.C. § 1132(a)(3)”), overruled on other grounds 2 by Cyr v. Reliance Standard Life Ins. Co., 642 F.3d 1202 (9th Cir. 2011); Forsyth v. Humana, Inc., 3 114 F.3d 1467, 1475 (9th Cir. 1997) (holding that equitable relief under section 1132(a)(3) “is not 4 appropriate because section 1132(a)(1) provides an adequate remedy in this case”), overruled on 5 other grounds by Lacey v. Maricopa County, 693 F.3d 896 (9th Cir. 2012). The absence of relief 6 under section 1132(a)(3) remains regardless of whether a “plaintiff is successful on his § 7 1132(a)(1)(B) claim or not.” Moyle v. Liberty Mut. Ret. Ben. Plan, 2013 WL 3316898, *13–16 8 (S.D. Cal. 2013) (dismissing plaintiffs equity claim under section 1132(a)(3) because relief was 9 available under section 1132(a)(1)(B), despite the fact that on summary judgment, plaintiffs lost 10 11 their section 1132(a)(1)(B) claim). Plaintiffs rely on CIGNA Corp. v. Amara, 131 S. Ct. 1866 (2011), for the proposition that 12 they are entitled to seek relief under section 1132(a)(3). SAC ¶ 38. This argument is unpersuasive, 13 however, as the Amara plaintiffs did not simultaneously allege a section 1132(a)(1)(B) claim and 14 1132(a)(3) claim. Amara, 131 S. Ct. 1866. Thus, the Amara court did not consider the issue of 15 whether a section 1132(a)(3) claim is barred when a plaintiff alleges a section 1132(a)(1)(B) 16 claim. See id. Indeed, Plaintiffs themselves recognize that under section 1132(a)(3) relief “is 17 permitted when relief is not provided for under another subsection of ERISA.” Plaintiffs Oppo. at 18 13. By their own admission, Plaintiffs can only assert a claim for equitable relief under section 19 1132(a)(3) if they did not assert a claim under section 1132(a)(1)(B). 20 Plaintiffs allegations are factually similar to Hoffman v. Am. Soc. for Technion-Israel Inst. 21 of Tech., Inc., 2012 WL 3647803 (S.D. Cal. 2012). In Hoffman, the decedent s widower filed suit 22 against the decedent s life insurance company to recover unpaid life insurance benefits under 23 section 1132(a)(1)(B). Id. Alternatively, he sought to recover the same unpaid life insurance 24 benefits under section 1132(a)(3) by asserting theories of equitable estoppel and surcharge. Id. The 25 Hoffman court held that Varity barred the plaintiff s section 1132(a)(3) claims because relief was 26 available under section 1132(a)(1)(B). Id. at *2. Here, Plaintiffs First Claim for Relief seeks 27 unpaid life insurance benefits under section 1132(a)(1)(B), and in the alternative, their Second 28 Claim for Relief seeks the same unpaid life insurance benefits under section 1132(a)(3) on theories 8 1 of equitable estoppel and surcharge. SAC ¶¶ 28, 39. 2 Based on the precedent found in Varity, Forsyth, and Ford, supra, this Court follows the 3 logic of our sister districts, such as Hoffman, and reaches the same result – Plaintiffs claim for 4 relief under section 1132(a)(3) is barred because Plaintiffs assert a duplicative claim under section 5 1132(a)(1)(B). Accordingly, LKQ s motion to dismiss Plaintiffs Second Claim for Relief is 6 GRANTED.1 7 V. LEAVE TO AMEND 8 The federal rules of civil procedure state leave to amend “shall be freely given when 9 justice so requires,” and the Ninth Circuit recognizes that “requests for leave should be granted 10 with extreme liberality.” Moss v. U.S. Secret Service, 572 F.3d 962, 972 (9th Cir. 2009); Fed. R. 11 Civ. P. 15(a)(2). A denial of leave to amend is reviewed for abuse of discretion. Leadsinger, Inc. v. 12 BMG Music Pub., 512 F.3d 522, 532 (9th Cir. 2008). A district court s dismissal without leave to 13 amend is improper unless it is clear that the complaint could not be saved by any amendment. 14 Harris v. Amgen, Inc., 573 F.3d 728, 737 (9th Cir. 2009); Eminence Capital, LLC v. Aspeon, Inc., 15 316 F.3d 1048, 1052 (9th Cir. 2003). Leave to amend is proper when a complaint s “deficiencies 16 can be cured with additional allegations that are consistent with the challenged pleading and that 17 do not contradict the allegations in the original complaint.” Corinthian Colleges, 655 F.3d at 995 18 (internal citation and quotation marks omitted, emphasis added). Plaintiffs First Claim for Relief fails on the basis that the allegations made against LKQ in 19 20 the SAC contradict Exhibit 1, which Plaintiffs declare is a “true and correct copy” of the life 21 insurance policy issued by Reliance to Decedent. SAC ¶ 6. Exhibit 1 indicates that Reliance is the 22 sole party with discretionary authority to resolve Plaintiffs life insurance benefits claim or pay 23 benefits under the policy. Plaintiffs cannot cure these deficiencies without adding inconsistent 24 allegations. Thus, leave to amend would be improper. Corinthian Colleges, 655 F.3d at 995. 25 Accordingly, the Court dismisses Plaintiffs First Claim against LKQ with PREJUDICE. Pursuant to Varity, Plaintiffs Second Claim for Relief under section 1132(a)(3) is barred 26 27 28 1 As Plaintiffs Second Claim for Relief has been dismissed as duplicative, this Court need not address the question of whether LKQ qualifies as an ERISA fiduciary. 9 1 as duplicative of their First Claim for Relief under section 1132(a)(1)(B). See Varity Corp., 516 2 U.S. 489. Plaintiffs cannot cure the duplicative nature of this claim through amendment. 3 Accordingly, because Plaintiffs Second Claim cannot be saved by amendment, the Court 4 dismisses Plaintiffs Second Claim against LKQ with PREJUDICE.2 5 VI. ORDER 6 Accordingly, the Court ORDERS: 7 1. Defendant LKQ Corporation s motion to dismiss pursuant to Federal Rule of Civil 8 Procedure 12(b)(6) is GRANTED; 2. Plaintiffs Second Amended Complaint against LKQ is DISMISSED with 9 10 PREJUDICE; and 11 3. This case is referred to the Magistrate Judge for a status conference with the remaining 12 Defendant, Reliance Standard Life Insurance Company. 13 14 15 IT IS SO ORDERED. Dated: March 3, 2014 SENIOR DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28 2 Reliance s liability is not before the Court for the current motion. 10

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