Opinion
Civil No. 03-1801-CO.
February 9, 2004
FINDINGS AND RECOMMENDATION
Plaintiffs filed this action in state court for money damages and interest alleging breach of an agreement to pay health insurance benefits. Plaintiffs also seek attorney's fees under Oregon Revised Statute (ORS) 742.061, costs, and disbursements.
Defendant removed this action to federal court. This court has jurisdiction pursuant to 28 U.S.C. § 1331. Defendant moves to dismiss the complaint for failure to state a claim upon which relief can be granted.
I. FACTS
The following paragraphs paraphrase relevant portions of plaintiffs' complaint allegation:
The Chamber of Medford/Jackson County is a mutual benefit with members doing business in Jackson, County, Oregon. (Complaint ¶ 1). Plaintiffs are residents of Jackson County, Oregon. (Complaint ¶ 1). Defendant is an employee benefits company which agreed to provide health insurance coverage to the plaintiffs. (Complaint ¶ 2).
Plaintiffs have performed all of their obligations under the benefit plan. (Complaint ¶ 3). Plaintiffs submitted health insurance claims to defendant. (Complaint ¶ 4). Defendant breached its agreement with plaintiffs by failing to pay health insurance benefits. (Complaint ¶ 5).
II. LEGAL STANDARDS
Federal courts require notice pleading. A complaint should not be dismissed for failure to state a claim unless it appears beyond a doubt that plaintiff can plead no set of facts in support of a claim. California Dump Truck Owners Ass'n v. Associated Gen. Contractors of America, 562 F.2d 607 (9th Cir. 1977). A complaint may be dismissed because of the lack of a cognizable legal theory or because insufficient facts are alleged under a cognizable legal theory. Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1988). The court accepts plaintiff's material allegations in the complaint as true and construes them in the light most favorable to plaintiff. Sands v. Lewis, 886 F.2d 1166 (9th Cir. 1989); Gorham v. Banovetz, 652 F.2d 750 (8th Cir. 1981). A pleading must contain a short and plain statement of the claim showing the party is entitled to relief. Jones v. Community Redevelopment Agency, 733 F.2d 646, 649 (9th Cir. 1984). It must give fair notice and state the elements of the claim plainly and succinctly. Id.
III. DISCUSSION
Defendant moves to dismiss plaintiffs's claims arguing that: 1) the claims are preempted by the Employee Retirement Income Security Act (ERISA); 2) plaintiffs have failed to exhaust plan procedures to recover benefits; 3) the plan itself is the proper defendant; 4) only participants and beneficiaries have standing to bring an action; and 5) if plaintiffs' claim is treated as a breach of fiduciary duty, it fails because there is no allegation of fiduciary status or breach of duty.Plaintiffs argue that: 1) liability under section 1132(a)(3) is not limited to the plan itself or its fiduciary; 2) claimants may bring an action against a plan administrator under section 1132(a)(1)(B); and the Chamber has a separate state law claim for breach of contract against defendant for failure to perform its obligations under a written contract. Plaintiffs request that they be allowed to amend their complaint.
In reply, defendant argues that: 1) plaintiffs have failed to allege that they meet certain procedural requirements to bring a claim under ERISA; 2) plaintiffs allegations do not support their alternative theories of recovery; 3) plaintiffs cannot use a claim for fiduciary breach to substitute for a benefits action.
29 U.S.C. § 1144(a) provides that, with certain exceptions, ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. . . ." Consistent with the purpose of the preemption provisions to establish employee benefit plan regulations as "`exclusively a federal concern,'" the phrase "relate to" in the preemption clause is construed broadly. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46 (1987) (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981)); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98-100 (1983). An "employee benefit plan" includes both employee welfare benefit plans and employee pension benefit plans. 29 U.S.C. § 1002(3). An "employee welfare benefit plan" means "any plan, fund, or program . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries . . . benefits in the event of . . . disability. . . ." 29 U.S.C. § 1002(1); 29 C.F.R. § 2510.3-1(2).
It is clear that the individual plaintiffs claims are governed by ERISA. Therefore, any state law claim for breach of contract based on defendant's failure to pay benefits under the plan is preempted by ERISA. See Pilot Life Insurance Company v. Dedeaux, 481 U.S. 41 (1987).
In the response, plaintiffs claim that the Chamber has a separate cause of action against defendant. The complaint does not plead a separate cause of action. It is not clear that the Chamber's claim, as stated in response brief, is preempted by ERISA. See Best International, U.S.A. v. Tucker and Clark, 2000 WL 819408 (N.D. Tex.) and Skilstaf, Inc. v. Adminitron, Inc., 66 F. Supp.2d 1210 (M.D. Ala. 1999).
The individual plaintiffs' claims for state law breach of contract should be dismissed. Plaintiffs should be given the opportunity to file an amended complaint stating ERISA claims for the individual plaintiffs and stating a separate claim for the Chamber.
III. RECOMMENDATION
Based on the foregoing, it is recommended that defendant's motion to dismiss (#5) be granted and that plaintiffs be given the opportunity to file an amended complaint.
This recommendation is not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any notice of appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of the district court's judgment or appealable order. The parties shall have ten (10) days from the date of service of a copy of this recommendation within which to file specific written objections with the court. Thereafter, the parties have ten (10) days within which to file a response to the objections. Failure to timely file objections to any factual determinations of the Magistrate Judge will be considered a waiver of a party's right to de novo consideration of the factual issues and will constitute a waiver of a party's right to appellate review of the findings of fact in an order or judgment entered pursuant to the Magistrate Judge's recommendation.