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Murphy v. First Reliance Standard Life Insurance Co.

December 15, 2009

THOMAS MURPHY, PLAINTIFF,
v.
FIRST RELIANCE STANDARD LIFE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Hurley, Senior District Judge

MEMORANDUM AND ORDER

Plaintiff Thomas Murphy ("Plaintiff") brings this action pursuant to the Employee Retirement Income Security Act ("ERISA"), as amended, 29 U.S.C. §§1132(a)(1)(B), 1132(g)(1), and 1140 seeking enforcement of cost of living adjustment ("COLA") benefits allegedly owed by Defendant First Reliance Standard Life Insurance Company ("Defendant" or "First Reliance") pursuant to a long-term disability insurance policy. Plaintiff also seeks to enforce a settlement agreement with Defendant and to recover damages for Defendant's alleged interference with the exercise of Plaintiff's rights under ERISA. Presently before the Court is Defendant's motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6). For the reasons stated below, Defendant's motion is granted in part and denied in part.

BACKGROUND

I. Factual Background

The following facts are taken from the complaint and are presumed true for purposes of this motion.

Plaintiff commenced his employment with Tullett & Tokyo Forex, Inc. ("Tullet & Tokyo"), a securities brokerage corporation, as a United States government securities broker on July 5, 1993. (Compl. ¶ 7.) In July 1994, Tullet & Tokyo entered into a Group Long-Term Disability Insurance Program with First Reliance to provide disability insurance benefits for its employees, which was funded by an insurance policy issued by First Reliance (the "Policy"). (Id. ¶¶ 8-9.) Plaintiff was an eligible employee of Tullet & Tokyo and became a participant and beneficiary under the Policy on July 1, 1994. (Id. ¶ 9.)

On July 26, 1996, Plaintiff suffered a detached retina in his right eye and underwent surgery to repair the retina. (Id. ¶¶ 12-14.) On September 16, 1996, Plaintiff underwent an additional surgery to repair a retinal tear in his left eye. (Id. ¶ 16.) Following these two surgeries, Plaintiff experienced distorted vision, which interfered with his ability to perform his job. (Id. ¶¶ 17-19.) On October 15,1996, Plaintiff applied for long-term disability insurance benefits under the Policy. (Id. ¶ 20.) On January 30, 1997, First Reliance approved Plaintiff's application for long-term disability benefits from October 1996 through December 31, 1996 in the gross monthly benefit amount of $6,884.93, and later notified Plaintiff that it had approved the continuation of his monthly disability benefits beyond December 31, 1996. (Id. ¶¶ 21-22.) For each month from January 31, 1997 through and including September 30, 2000, Defendant paid monthly disability income benefits to Plaintiff. (Id. ¶ 23.)

Under the terms of the Policy, Plaintiff became eligible to receive an additional cost of living benefit as of January 1997. (Id. ¶ 24.) First Reliance paid cost of living benefits to Plaintiff under the Policy for the calendar years 1997, 1998, 1999, and through September 30, 2000. (Id. ¶ 25.)

On March 30, 2000, First Reliance notified Plaintiff that his long-term disability benefits would be terminated effective September 30, 2000. (Id. ¶ 27.) At the time Defendant had terminated Plaintiff's disability benefits, Plaintiff was receiving a monthly benefit amount of $7,518.32, which included an additional cost of living benefit as provided by the Policy. (Id. ¶ 29.)

II. Procedural and Further Factual Background (Murphy I)

On November 7, 2000, Plaintiff commenced an action in this Court*fn1 against First Reliance, captioned as Murphy v. First Reliance Standard Life Ins. Co., Civil Action No. 00-CV-6647 (DRH) (WDW) (hereinafter "Murphy I" ), challenging Defendant's decision to terminate his long-term disability insurance benefits and seeking a declaratory judgment that he was entitled to the continued payment of monthly disability insurance benefits by First Reliance under the terms of the Policy. (Id. ¶ 30.) Following a bench trial, this Court issued a Memorandum & Order, dated May 20, 2004, finding that Plaintiff was totally disabled during the relevant period and holding that First Reliance had erred by ceasing payment of long-term disability benefits under the Policy. (Id. ¶ 35, Ex. A.) The Court held that: (i) Plaintiff was entitled to long-term disability benefits from October 1, 2000 until the date of the May 2004 Order; (ii) Plaintiff was entitled to prospective long-term disability benefits until either his condition improved to the point that he could perform his past occupation or until the terms of the Policy otherwise called for the cessation of benefits; and (iii) prospective benefits were to be paid by First Reliance in accordance with the schedule set forth in the Policy. (Id. ¶¶ 36-37.) The calculation of the amount of damages, interest, fees and costs was then referred to Magistrate Judge William D. Wall. (Id., Ex. B.)

Thereafter, in November 2004, the parties entered into a Settlement Agreement and Release (the "Settlement Agreement") wherein the parties reached a resolution of the damages and attorney's fees claims*fn2 and First Reliance agreed to and did pay Plaintiff the accumulated unpaid past benefits from October 1, 2000 through November 30, 2004 (the "Accumulated Past Benefits"). (Id. ¶¶ 41-42, Exs. B, D.) The Accumulated Past Benefits amount included a cost of living benefit for that same time period. (Id. ¶ 43.) In addition, the Settlement Agreement provided for the reinstatement of Plaintiff's long-term disability benefits, effective December 1, 2004, to be calculated in accordance with the terms of the Policy. (Id. ¶ 45.) Defendant reinstated Plaintiff's monthly long-term disability benefits commencing December 1, 2004. (Id. ¶ 46.)

Upon reinstatement in December 2004, First Reliance issued a monthly disability benefit payment to Plaintiff in the amount of $7,518.32.*fn3 (Id. ¶ 89.) In January 2005, Defendant again issued a monthly disability benefit payment to Plaintiff in the amount of $7,518.32. (Id. ¶ 91.) According to Plaintiff, these amounts did not include the proper cost of living benefit owed to him.*fn4 (Id.)

In February 2005, First Reliance notified Plaintiff that the prior years' cost of living benefits had been erroneously calculated in that it had computed the prior years' cost of living benefits using a compound cost of living adjustment rather than using a simple cost of living adjustment. (Id. ¶¶ 92-93.) According to Defendant, the computation error began with the 1998 cost of living benefit payable to Plaintiff when First Reliance had erroneously added all prior cost of living benefit adjustments in calculating Plaintiff's cost of living benefit adjustment for the given year. (Id. ¶¶ 94-95.) Plaintiff asserts that contrary to Defendant's position, the cost of living benefit adjustments calculated by First Reliance for the years 1997 through and including November 30, 2004 were correct as computed. (Id. ¶ 96.)

In February 2005, First Reliance adjusted the monthly disability payments paid to Plaintiff. (Id. ¶ 99.) From February 2005 through December 2005, Defendant made payments in the amount of $7,105.24 per month which Plaintiff maintains was improper and in breach of the Settlement Agreement.*fn5 (Id. ¶¶ 99-100.) For the calendar year 2006, First Reliance made monthly payments in the amount of $7,160.33, which Plaintiff again asserts was improper and in breach of the Settlement Agreement.*fn6 (Id. ¶101.)

In January 2007, First Reliance terminated the payment of cost of living benefit adjustments, which Plaintiff claims he is owed under the terms of the Policy and the Settlement Agreement. (Id. ¶¶ 108-09, 113.) Thus, beginning in January 2007 and continuing to date, Defendant has made monthly disability benefit payments in the amount of $6,884.92 per month, which Plaintiff maintains is contrary to the terms of the Policy.*fn7 (Id. ¶ 102.)

On May 21, 2007, Plaintiff moved for a pre-motion conference to discuss a post-settlement issue regarding the calculation of the COLA benefit owed to Plaintiff under the Policy. (Fisher Letter, dated May 21, 2007, Docket Entry No. 45 in Murphy I action.) Plaintiff maintained that under the terms of the parties' Settlement Agreement, Defendant had reimbursed Plaintiff for past disability benefits and reinstated his monthly benefits. (Id.) However, Plaintiff claimed that First Reliance had been improperly calculating the COLA benefits owed to him, which were part of his disability benefits. (Id.) Defendant opposed the application contending that the Court lacked subject matter jurisdiction over the dispute. (Bachrach Letter, dated June 14, 2007, Docket Entry No. 47 in Murphy I action.) In reply, Plaintiff asserted that the Court retained jurisdiction pursuant to the parties' Settlement Agreement. (Fisher Letter, dated June 20, 2007, Docket Entry No. 48 in Murphy I action.) By Memorandum and Order, dated April 17, 2008, this Court held that it lacked jurisdiction over the instant dispute, but noted that Plaintiff may have recourse under Fed. R. Civ. P. 60(b)(6) or may file a separate action. (Memorandum and Order, dated April 17, 2008.)

III. Procedural Background of the Instant Action

On September 4, 2008, Plaintiff commenced the instant action under ERISA against First Reliance (i) challenging the methodology Defendant used to calculate COLA benefits owed to Plaintiff under the Policy from December 1, 2004 through December 31, 2006 which had resulted in a reduction of benefits, and seeking recovery of the COLA benefits due and owing to him for that time period, (ii) seeking the continuation of COLA benefits after January 1, 2007 and for as long as he remains eligible to receive monthly disability benefits under the Policy, (iii) seeking a declaratory judgment, and (iv) seeking compensatory and consequential damages for Defendant's alleged interference with his statutory ERISA rights.

Defendant now moves to dismiss the complaint pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim upon which relief can be granted.

DISCUSSION

I. Motion to Dismiss: Legal Standards

Rule 8(a) provides that a pleading shall contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). The Supreme Court has recently clarified the pleading standard ...


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