United States District Court, Southern District of New York
April 29, 2003
THERESA KEIR, MICHELLE WASHINGTON, KAREN M. GATELY, AND THOMAS ROCCO, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED PLAINTIFFS,
UNUMPROVIDENT CORPORATION, THE PAUL REVERE LIFE INSURANCE COMPANY, PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, PROVIDENT LIFE AND CASUALTY INSURANCE COMPANY, FIRST UNUM LIFE INSURANCE COMPANY, UNUM LIFE INSURANCE COMPANY OF AMERICA AND COLONIAL LIFE AND ACCIDENT INSURANCE COMPANY, AND J. HAROLD CHANDLER, DEFENDANTS.
The opinion of the court was delivered by: Denise Cote, United States District Judge
OPINION AND ORDER
The defendants have moved to dismiss the First Amended Complaint pursuant to Rule 12(b)(6), Fed.R.Civ.P. The plaintiffs, who have filed this class action as beneficiaries under employee welfare benefit plans (specifically long term disability plans) funded by insurance policies issued by the defendants, allege violations of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. The five claims in the complaint include (1) breach of fiduciary duty by all defendants pursuant to ERISA Section 502(a)(3), (2) breach of fiduciary duty by J. Harold Chandler pursuant to ERISA Section 502(a)(3), (3) violation of 29 C.F.R. § 2560.503-1(b)(iii) which governs the processing of claims by all defendants pursuant to ERISA Section 502(a)(3), (4) violation of 29 C.F.R. § 2560.503-1(b)(3) which also governs the processing of claims by all defendants pursuant to ERISA Section 502(a)(3), and (5) interference with the attainment of benefits pursuant to ERISA Section 510. The plaintiffs seek injunctive and equitable relief requiring the imposition of new policies and procedures in the handling of long term disability claims by the defendants.
The plaintiffs allege that the defendants engaged in various illegal budgeting and incentive programs in violation of ERISA. For example, the plaintiffs assert that the defendants imposed monthly budget ceilings for the total amount to be paid on claims and would deny new claims or terminate existing claims when total claim payments exceeded the budget ceiling. The plaintiffs further allege that the defendants rewarded physicians and claims personnel with bonuses or financial incentives for denying or terminating claims regardless of the merits of the claims and for fabricating medical justifications for these denials or terminations. The defendants also maintained, according to the plaintiffs, secret shadow files — apart from the official claim files — that contained documents that did not support the decisions to deny or terminate benefits and that were established to evade production of such documents with the official claims files during litigation. Finally, the plaintiffs claim that the defendants destroyed documents related to their improper profitability targeting and claims denial practices.
The defendants' motion to dismiss rests principally on their contention that the plaintiffs are or should be seeking an award of benefits for their asserted disabilities, and are therefore required to bring this action, if at all, under ERISA Section 502(a(1)(B). That section is the ERISA provision under which plan participants may obtain benefits due under a plan or a plan interpretation. Varity Corp. v. Howe, 516 U.S. 489, 512 (1996). The defendants miscontrue the Amended Complaint. The plaintiffs are not seeking benefits. They are seeking reforms to the defendants' disability claim process on behalf of themselves and similarly situated plan participants and beneficiaries. They seek injunctions and equitable relief to bring the defendants' policies and procedures in compliance with ERISA. Their Amended Complaint adequately states claims under ERISA and these plaintiffs have standing to press these claims.
Turning to the specific issues raised by the defendants' motion, the defendants first argue that the plaintiffs may not bring an action under ERISA Section 502(a)(3) when the action could be brought under Section 502(a)(1)(B). See 29 U.S.C. § 1132(a) (2002). This argument is without merit. Section 502(a)(3) provides:
(a) Persons empowered to bring a civil action. A civil
action may be brought —
(3) by a participant, beneficiary, or fiduciary (A)
to enjoin any act or practice which violates any
provision of this title or the terms of the plan, or
(B) to obtain other appropriate equitable relief (i)
to redress such violations or (ii) to enforce any
provisions of this title or the terms of the plan.
29 U.S.C. § 1132(a). A plaintiff may bring an action for breach of fiduciary duty under Section 502(a)(3) even when another remedy is available under other portions of Section 502, including Section 502(a)(1)(B). Devlin v. Empire Blue Cross and Blue Shield, 274 F.3d 76
, 89 (2d Cir. 2001). In fact, a plaintiff may simultaneously assert claims under Sections 502(a)(1)(B) and 502(a)(3). Id.
The second argument of the defendants, like the first, proceeds on a false premise. The defendants contend that the plaintiffs cannot plead a claim under Section 510 since their lawsuit is in essence a claim for benefits. Section 510 provides in relevant part:
It shall be unlawful for any person to discharge, fine,
suspend, expel, discipline, or discriminate against a
participant or beneficiary for exercising any right to
which he is entitled under the provisions of an employee
benefit plan . . . for the purpose of interfering with
the attainment of any right to which such participant may
become entitled under the plan.
29 U.S.C. § 1140 (2002) (emphasis supplied). As already noted, the plaintiffs seek to change the claims review practices of the defendants, they do not seek an award of benefits through this lawsuit. The defendants do not argue that they could never be proper parties under a Section 510 claim. Since the claim is adequately plead, the plaintiffs are entitled to pursue the claim.
The defendants' third argument, that J. Harold Chandler, the chief executive officer of defendant UnumProvident Corporation, may not be held individually liable for breach of fiduciary duty, also fails. ERISA defines a fiduciary as follows:
[A] person is a fiduciary with respect to a plan to the
extent (i) he exercises any discretionary authority or
discretionary control respecting management of such plan
or exercises any authority or control respecting
management or disposition of its assets, (ii) he renders
investment advice for a fee or other compensation, direct
or indirect, with respect to any moneys or other property
of such plan, or has any authority or responsibility to
do so, or (iii) he has any discretionary authority or
discretionary responsibility in the administration of
29 U.S.C. § 1002(21) (2002) (emphasis supplied). Section 409 of ERISA, which governs the liability of fiduciaries, provides in pertinent part:
Any person who is a fiduciary with respect to a plan who
breaches any of the responsibilities, obligations, or
duties imposed upon fiduciaries by this title shall be
personally liable to make good to such plan any losses to
the plan resulting from each such breach, and to restore
to such plan any profits of such fiduciary which have
been made through use of assets of the plan by the
fiduciary, and shall be subject to such other equitable
or remedial relief as the court may deem appropriate,
including removal of such fiduciary.
29 U.S.C. § 1109 (2002) (emphasis supplied). While a corporate officer is not strictly liable for all actions taken by the corporation as fiduciary, he is liable for any breaches of fiduciary duty which he personally commits. Dardaganis v. Grace Capital, Inc., 889 F.2d 1237
, 1242-43 (2d Cir. 1989). The plaintiffs have alleged that Chandler exercised discretionary control over the management of the plans and that he personally breached this fiduciary duty. This allegation is sufficient to survive the motion to dismiss.
The defendants' fourth argument is that the plaintiffs do not have standing to seek relief under ERISA Section 409. 29 U.S.C. § 1109. It is well established that individual participants or beneficiaries may seek relief under Section 409 so long as the relief sought inures to the benefit of the plan as a whole and is not focused on the rights of individual beneficiaries. See Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 140, 142 n. 9, 144 (1985). The plaintiffs are seeking relief with respect to the entire plan and are not seeking relief addressed to the resolution of their individual claims for benefits. The plaintiffs therefore have made sufficient allegations to seek relief under Section 409.
Finally, the parties agree that the right to a jury trial does not attach to these claims since the claims are inherently equitable in nature. The defendants' request to strike the jury demand is therefore granted. Conclusion For the reasons stated above, the defendants' motion to dismiss is denied. The defendants' motion to strike the jury demand is granted.
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