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March 8, 2000


The opinion of the court was delivered by: Scheindlin, District Judge.


This uncertified class action raises a narrow but important issue that remains unsettled in the Second Circuit, namely whether a plan beneficiary may maintain an action under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., solely to recover interest on plan benefits that were paid after a period of delay. Although the majority of courts to consider this issue have found that ERISA does not provide a remedy for those who seek interest on delayed benefit payments rather than payment of benefits themselves, both the Third and Seventh Circuits recently recognized the viability of independent claims for interest under the statute.

Plaintiff Helen Dunnigan and the other purported class members are beneficiaries of various long-term disability insurance policies issued by defendant Metropolitan Life Insurance Company ("MetLife").*fn1 Plaintiffs seek, pursuant to two alternative provisions of ERISA, an award of interest on disability benefit payments they received retroactively from MetLife. Plaintiffs do not dispute the principal amounts of their benefit payments. Rather, plaintiffs complain that MetLife's delay in payment of those benefits deprived them of the time value of their money.

Defendant now moves, pursuant to Federal Rule of Civil Procedure 12(b)(6), to dismiss the amended class action complaint ("Complaint") for failure to state a claim upon which relief may be granted.*fn2 Specifically, defendant contends that plaintiffs' claims for interest are properly characterized as claims for extracontractual, compensatory damages and that such damages are not recoverable under ERISA.

Although the language and policy of ERISA, together with common law contract principles, support recognition of an independent cause of action for recovery of interest under the statute, any such action requires an individualized assessment of the facts and equities surrounding each claim and thus cannot be maintained on behalf of a class of plaintiffs. Accordingly, and for the reasons that follow, defendant's motion is granted in its entirety.

I. Legal Standard

Dismissal of a complaint for failure to state a claim pursuant to Rule 12(b)(6) is proper only where "it appears beyond doubt that the plaintiff can prove no set of facts in support of [her] claim that would entitle [her] to relief." Harris v. City of N Y, 186 F.3d 243, 247 (2d Cir. 1999). "The task of the court in ruling on a Rule 12(b)(6) motion is merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Cooper v. Parsky, 140 F.3d 433, 440 (2d Cir. 1998) (internal quotations omitted). Thus, in deciding such a motion, the court must accept as true all material facts alleged in the complaint and draw all reasonable inferences in the nonmovant's favor. Harris, 186 F.3d at 247. Nevertheless, "[a] complaint which consists of conclusory allegations unsupported by factual assertions fails even the liberal standard of Rule 12(b)(6)." De Jesus v. Sears, Roebuck & Co., 87 F.3d 65, 70 (2d Cir. 1996) (internal quotations omitted). In deciding a Rule 12(b)(6) motion, the district court must limit itself to facts stated in the complaint, documents attached to the complaint as exhibits or documents incorporated in the complaint by reference. See Dangler v. New York City Off Track Betting Corp., 193 F.3d 130, 138 (2d Cir. 1999).

II. Background

The facts and allegations set forth below are taken from the Complaint. They are presumed true for purposes of this motion.

A. Factual Background

MetLife is an insurance company with its principal place of business in New York, New York. Complaint ¶ 5. MetLife issues disability insurance policies for employee welfare benefit plans nationwide. Id. ¶¶ 5-6. With respect to the various MetLife disability insurance policies at issue in this case, MetLife is a "fiduciary" within the meaning of section 3(21)(A) of ERISA, 29 U.S.C. § 1002(21)(A). Id. ¶ 7.

In October 1990, Dunnigan joined the New York City office of Deloitte & Touche as an auditor. Id. ¶ 14. Deloitte & Touche provides its employees with disability insurance through a group Long Term Disability Plan (the "Deloitte Plan" or the "Plan") issued by MetLife. See Summary Plan Description of Deloitte & Touche Long Term Disability Plan ("Deloitte Plan Summary"), Ex. A to Affidavit of Scott Riemer, Counsel for Plaintiff ("Riemer Aff."), at 4.17.*fn3 The Deloitte Plan is an employee welfare benefit plan within the meaning of section 3(1) of ERISA, 29 U.S.C. § 1002(1). Complaint ¶ 4. Dunnigan enrolled in the Deloitte Plan and was at all relevant times a plan "participant" within the meaning of section 3(7) of ERISA, 29 U.S.C. § 1002(7). Id.

In March 1994, Dunnigan was diagnosed with Chronic Fatigue Syndrome. Id. ¶ 15. She was rendered totally disabled by the disease. Id. On July 11, 1994, Dunnigan applied to MetLife for long-term disability benefits. Id. ¶ 16. MetLife denied Dunnigan's application for benefits on November 15, 1994. Id. ¶ 17. MetLife's denial of benefits was issued approximately 125 days after Dunnigan filed her application. The Complaint makes no allegations with respect to the circumstances surrounding MetLife's denial of plaintiff's application. Specifically, the Complaint does not allege that the denial of benefits, or the 125-day delay in notification, were due to any bad faith on the part of MetLife.

On February 15, 1995, Dunnigan appealed MetLife's denial of benefits. Id. ¶ 19. In a letter dated August 2, 1995, MetLife denied plaintiff's appeal and stated that plaintiff could bring no further appeals. Id. ¶ 21. MetLife's denial of plaintiff's appeal was issued approximately 165 days after she filed her initial appeal. Again, the Complaint makes no allegations with respect to the circumstances surrounding MetLife's denial of plaintiff's appeal. Specifically, the Complaint does not allege that the denial of plaintiff's appeal, or the 165-day delay in notification, were due to any bad faith on the part of MetLife.

From August 1995 through November 1998, plaintiff retained counsel and submitted additional appeals to MetLife. Id. ¶ 23. Then, in February 1999, MetLife reversed its denial of plaintiff's disability benefits and granted plaintiff retroactive benefits for the period from June 23, 1994 through January 31, 1999. Id. ¶ 24. MetLife tendered those retroactive benefits in a lump sum payment by check dated February 8, 1999. Id. ¶ 25. The lump sum amount was calculated by multiplying plaintiff's monthly benefit as specified under the terms of the Deloitte Plan by the number of months from the date of entitlement — here, June 23, 1994. Id. ¶ 8(c). The Complaint does not make any allegations as to why, in February 1999, MetLife reversed its position regarding plaintiff's entitlement to benefits. Nor does the Complaint allege that the more than four year delay between the time plaintiff first applied for benefits and MetLife's determination that she was eligible for such benefits was due to bad faith on the part of MetLife.

As a matter of company policy, MetLife did not pay plaintiff any interest on her retroactive benefits. Id. ¶ 26. Cindy McKillip, Case Management Specialist for MetLife, informed plaintiff's counsel that "regardless of the factual circumstances[,] MetLife never pa[ys] interest on back benefits except when ordered to do so by a court of law." Id. ¶ 28.

B. Procedural Background

Plaintiff commenced litigation on June 4, 1999. Three months later, on September 29, plaintiff filed the instant Complaint.*fn4

In the Complaint, plaintiff seeks to represent a proposed class of persons who:

(a) were covered by a policy of longterm disability insurance issued by MetLife, id. ¶ 8(a);
(b) were determined by MetLife, after a period of delay, to be totally disabled and entitled to disability benefits, id. ¶ 8(b);
(c) were paid retroactive benefits in a lump sum by MetLife, id. ¶ 8(c); and
(d) were not paid interest on those retroactive benefits, id. ¶ 8(d).

Plaintiff contends that she and the purported class members are entitled to an award of interest on their retroactive benefits to compensate them for "the time-value loss" of receiving benefit payments in a lump sum after a period of delay. Id.

The Complaint sets forth four alternate claims for relief. Claim I seeks an award of interest as a matter of plan interpretation pursuant to section 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B). Id. ¶¶ 29-36. Claims II and III seek equitable relief pursuant to section 502(a)(3)(B) of ERISA, 29 U.S.C. § 1132(a)(3)(B). Id. ¶¶ 37-48.*fn5 Claim IV seeks payment of attorneys' fees and costs pursuant to section 502(g)(1) of ERISA, 29 U.S.C. § 1132(g)(1). Id. ¶¶ 49-50.

Defendant moved to dismiss the Complaint on November 4, 1999, arguing that claims for interest on delayed benefit payments cannot be maintained under ERISA. On December 9, the Secretary of the United States Department of Labor requested permission to file an amicus curiae brief. With the Court's permission, the Department of Labor filed an amicus brief in support of plaintiff's claims for interest on December 22.*fn6 On January 12, 2000, defendant replied jointly to plaintiff's opposition and the Department of Labor's amicus brief.

III. Discussion

As set forth above, defendant's motion turns upon the issue of whether a plan beneficiary may maintain an action under ERISA solely to recover interest on benefits that were paid retroactively after a period of delay. Before analyzing the applicable legal principles, it is helpful to consider the gravamen of the Complaint through the lens of common sense and basic notions of fairness.

Plaintiff's claim for interest is premised upon the truism that monthly benefits have a time-value component that is lost when those benefits are paid retroactively in a lump sum. See Pl. Opp. at 7-8. To illustrate, there is a real economic difference between a payment of $1,000 in June 1994 and payment of that same $1,000 in February 1999. If an employee is entitled to a benefit payment of $1,000 in June 1994 but does not receive that payment until February 1999, then the employee has lost the present value of her June 1994 benefit payment.

At the same time, administrators of employee benefit plans face the enormous administrative task of processing applications for disability benefits and determining which employees are entitled to such benefits under the terms of the relevant plan. Some period of delay between an employee's application for benefits and the plan's final determination of eligibility is necessary and inevitable. The question is whether, under ERISA, the employee is entitled to — and the plan is responsible for — payment of interest as compensation for the period of delay.

In Varity Corp. v. Howe, 516 U.S. 489, 497, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996), the Supreme Court described ERISA as embodying "competing congressional purposes". On the one hand, there is "Congress' desire to offer employees enhanced protection for their benefits . . . and, on the other, its desire not to create a system that is so complex that administrative costs, or litigation expenses, unduly discourage employers from offering welfare benefit plans in the first place." Id. The Varity Court instructed that in resolving issues that arise under ERISA, "courts may have to take account of" these competing congressional goals. Id. This case requires exactly that — a fair balancing between the rights of the plan beneficiary and the integrity and reasonable administration of the plan.

Turning now to the statute, section 502(a) of ERISA sets forth "six carefully integrated civil enforcement provisions" that constitute an "interlocking, interrelated, and interdependent remedial scheme". Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 146, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985). Two of those provisions, sections 502(a)(1)(B) and 502(a)(3)(B), are relevant to resolution of the instant dispute.

Section 502(a)(1)(B) authorizes a plan participant or beneficiary to sue "to recover benefits due to [her] under the terms of [her] plan, to enforce [her] rights under the terms of the plan, or to clarify [her] rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B). Section 502(a)(3)(B) allows a plan participant or beneficiary "to obtain other appropriate equitable relief (i) to redress [violations of ERISA or the terms of an ERISA plan] or (ii) to enforce any provisions of this subchapter or the terms of the plan." 29 U.S.C. § 1132(a)(3)(B).

Plaintiff invokes both sections as alternate grounds for recovery of interest. Although I conclude that only 502(a)(3)(B) supports recovery of such relief under the statute, I address plaintiff's arguments with respect to each provision below, keeping in mind the need ...

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