Summary
applying Texas' two-year statute of limitations in an ERISA section 510 case where plaintiff challenged defendants' alleged refusal to enroll plaintiff in ERISA plan
Summary of this case from Murphy v. Verizon Communications, Inc.Opinion
No. 4:04-CV-576-A.
March 31, 2005
MEMORANDUM OPINION and ORDER
Came on for consideration the motions of defendants Volt Management Corporation ("Volt") and Norman (or Norma) J. Kraus ("Kraus"), Vice President of Human Resource as plan administrator of Volt, to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Having considered the motions, the responses of plaintiff, Peter Onyebuchi, the replies of Volt and Kraus, and applicable authorities, the court concludes that the motions should be granted in part and denied in part.
There appears to be confusion as to the correct name of Volt's plan administrator. Plaintiff's amended complaint refers to him or her as Norman J. Kraus, while Kraus's motion to dismiss and reply refer to him or her as Norma J. Kraus.
I. Plaintiff's Claims
On October 31, 2002, plaintiff filed a petition in state court ("original petition") naming Strategic Resource Company ("SRC") as defendant. On June 30, 2004, plaintiff filed an amended petition in state court ("amended petition"), which added Volt as a defendant. The action was subsequently removed to this court. The court granted plaintiff leave to file his second amended complaint ("amended complaint"), which plaintiff filed on October 5, 2004. The amended complaint added defendants Kraus and the Volt Management Corporation Group Benefit Plan (the "Plan"), and it remains plaintiff's active pleading in this action. In his amended complaint, plaintiff asserts claims against Kraus and Volt for: (1) breach of fiduciary duty against Kraus ("fiduciary duty claims"), Am. Compl. at 11-13 (Count One); (2) failure to provide a certificate of creditable coverage, as required by 29 U.S.C. § 1181, against Kraus ("certificate claims"), id. at 13-15 (Count Two); (3) violations of COBRA (§ 606 of Employee Retirement Income Security Act of 1974, as amended ["ERISA"] [ 29 U.S.C. 1166]), against Volt and Kraus ("COBRA claims"), id. at 15-17 (Count Four); and (4) interference with rights under ERISA in violation of § 510 of ERISA ( 29 U.S.C. § 1140) against Volt and Kraus ("interference claims"), id. at 17-18 (Count Five).II. Grounds of the Motion
Kraus argues that COBRA violations cannot form the basis of a fiduciary-duty claim, and that plaintiff's other fiduciary-duty claims are time-barred under 29 U.S.C. § 1113. Volt and Kraus argue that plaintiff's COBRA claims and the interference claims are time-barred by the applicable statutes of limitations.
The court does not construe Kraus's motion to dismiss as moving for dismissal of plaintiff's certificate claims. Although Kraus mentions the failure to provide a certificate of creditable coverage in connection with the argument that plaintiff's COBRA claims are time-barred, Kraus's Mot. at 6-7, a certificate of creditable coverage is required by 29 U.S.C. § 1181 rather than by COBRA, 29 U.S.C. § 1166. Kraus provides no authorities or arguments related to 29 U.S.C. § 1181.
III. Applicable Legal Standards
The standards for deciding a motion to dismiss for failure to state a claim under Rule 12(b)(6) are well settled. The court's task is to determine "not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Scheuer v. Rhodes, 416 U.S. 232, 236 (1974). A complaint "should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). The court construes the allegations of the complaint favorably to the pleader. Scheuer, 416 U.S. at 236. However, the court does not accept conclusory allegations or unwarranted deductions of fact as true. Tuchman v. DSC Communications Corp., 14 F.3d 1061, 1067 (5th Cir. 1994); Guidry v. Bank of LaPlace, 954 F.2d 278, 281 (5th Cir. 1992).
IV. Analysis
A. Fiduciary Duty Claims.
In Count One, plaintiff asserts that Kraus breached his fiduciary duties by: (1) "stating to [p]laintiff that he was ineligible to participate in the Plan and refusing to allow [p]laintiff to participate in the Plan after [p]laintiff had completed 160 hours of service with [Volt]"; (2) "refusing to provide [p]laintiff with his election forms and notices as required by COBRA" ("COBRA-based fiduciary-duty claims") and (3) "failing to correct statements made to [p]laintiff that he was not eligible to participate in the plan." Am. Compl. at ¶¶ 6.4-6.6.
The COBRA-based fiduciary-duty claims are discussed in subsection B, below. As to the non-COBRA-based fiduciary-duty claims, the applicable statue of limitations is provided in 29 U.S.C. § 1113, which states:
No action may be commenced under this subchapter with respect to a fiduciary's breach of any responsibility, duty, or obligation under this part, or with respect to a violation of this part, after the earlier of —
(1) six years after
(A) the date of the last action which constituted a part of the breach or violation, or
(B) in the case of an omission the latest date on which the fiduciary could have cured the breach or violation, or
(2) three years after the earliest date on which the plaintiff had actual knowledge of the breach or violation;
except that in the case of fraud or concealment, such action may be commenced not later than six years after the date of discovery of such breach or violation.
Kraus argues that plaintiff's non-COBRA-based fiduciary-duty claims accrued on November 8, 2001, while plaintiff argues that the first date on which he had "actual knowledge" was November 19, 2002. See id. However, the court need not decide the issue, because plaintiff filed his amended complaint on October 5, 2004, within three years of the date Kraus asserts plaintiff's claims accrued. Therefore, Kraus has failed to show that plaintiff can prove no set of facts that would entitled him to relief on those claims.
The court is troubled by an apparent lack of candor in the motion to dismiss and reply of Kraus. Kraus asserts that plaintiff first brought claims against her on November 24, 2004, when Kraus waived service. See Kraus's Mot. at 5. Apparently this assertion is based on the misapplication of Gonzales v. Wyatt, 157 F.3d 1016, 1020-21 n. 1 (5th Cir. 1998), in which the Fifth Circuit noted that in the state courts of Texas a plaintiff must use diligence in procuring service of process to toll statutes of limitation. Kraus's Mot. at 7 n. 1. Although this rule arguably applies to state law claims brought in federal courts, the Fifth Circuit has indicated that it would not apply to claims based on federal law. Gonzales 157 F. 3d at 1021 n. 1 (citing McGuire v. Turnbo, 137 F. 3d 321, 323-24 (5th Cir. 1998). In addition, Kraus admits in connection with another issue that she was served with plaintiff's request for waiver on or about October 27, 2004, which was within the three-year limitations period. Kraus's Reply at 9. Despite this, Kraus continues to maintain, with no arguable basis, that plaintiff's fiduciary-duty claims are time-barred. Id. at 1-2; see also Fed.R.Civ.P. 11.
B. COBRA-based Claims.
1. COBRA Notice Requirements.
At the time of commencement of coverage, a group health plan is required to provide written notice to each covered employee and spouse of the rights provided under COBRA ("general notice"). 29 U.S.C. § 1166(a)(1). Additional notice is required within forty-four days after a "qualifying event" such as termination ("qualifying-event notice"). See 29 U.S.C. § 1166(a)(2) (requiring employer to notify administrator within thirty days of qualifying event); § 1166(c) (requiring administrator to notify employee within fourteen days). Under § 1132(c)(1)(A), an administrator may be liable for failure to provide general notice of COBRA rights under § 1166(a)(1) or qualifying-event notice under §§ 1166(a)(4) and 1166(c). In addition, under § 1132(c)(1)(B), an administrator may be liable for failure or refusal to comply with a participant's request for any information the administrator is required to furnish under Subchapter I, 29 U.S.C. §§ 1001- 1191c, which includes the COBRA notice requirements under 29 U.S.C. § 1166.
2. Statute of Limitations.
Kraus and Volt assert that all of plaintiff's COBRA-based claims, whether characterized as claims under 29 U.S.C. § 1132(c) or as claims for breach of fiduciary duty, are time-barred. The statute of limitations for breaches of fiduciary duties, 29 U.S.C. § 1113, applies only to claims based on violations of Part 4 of ERISA, 29 U.S.C. §§ 1101- 1114, entitled Fiduciary Responsibility, and it does not apply to claims based on a failure to provide required COBRA notices. Myers v. King's Daughters Clinic, 912 F. Supp. 233, 237 (W.D. Tex. 1996),aff'd 96 F.3d 1445 (5th Cir. 1996); see also Kennedy v. Electricians Pension Plan, IBEW # 995, 954 F.2d 1116, 1120 (5th Cir. 1992) (holding that § 1113 applies only to claims brought under Part 4). The Fifth Circuit recently cited Myers with approval and held that, in Texas, the statute of limitations for COBRA is the two-year limitations period applicable to unfair insurance practices. Lopez v. Premium Auto Acceptance Corp., 389 F.3d 504, 509-10 (5th Cir. 2004); see Tex. Ins. Code Art. 21.21. Therefore, all of plaintiff's COBRA-based claims are subject to a two-year statute of limitations.
3. COBRA Claims in Count Four.
In Count Four, plaintiff asserts claims under 29 U.S.C. § 1132(c) against Kraus and Volt for failure to provide the notices required by COBRA, 29 U.S.C. 1166. The court assumes without deciding that, as asserted by Volt, claims for failure to provide notice under COBRA accrue when a plaintiff either knows or has reason to know of the injury that is the basis of his complaint. See Kraus's Mot. at 7 (citing Russell v. Bd. of Trustees of Firemen, 968 F.2d 489, 493 (5th Cir. 1992)); Volt's Reply at 3-4. Under this standard, Volt argues that plaintiff's claim for failure to provide qualifying-event notice following his May 1, 2002, termination accrued on June 16, 2002, one day after such notice was required. Volt's Mot. at 3-4; see also 29 U.S.C. § 1166(a)(2) (requiring employer to notify administrator within thirty days of qualifying event); § 1166(c) (requiring administrator to notify employee within fourteen days). However, Volt has provided no authority that such a claim accrues as a matter of law on the first date a violation occurs, and the court is unable to determine, based on the allegations of plaintiff's amended complaint, when he knew or should have known that he had suffered an injury. Therefore, Volt and Kraus have failed to convince the court that plaintiff can prove no set of facts that would entitle him to relief on his COBRA claims. Conley, 355 U.S. at 45-46.
Plaintiff argues that an action under ERISA accrues when the cause of action arises and the plaintiff has actual notice.See Resp. to Kraus Mot. at 5-6 (emphasis in original) (citingMaher v. Stachan Shipping Co., 68 F. 3d 951 (5th Cir. 1995)). However, that standard applies to the "actual knowledge" requirement of 29 U.S.C. § 1113, which applies to breaches of fiduciary duty. As discussed above, § 1113 does not apply to plaintiff's COBRA claims, and the court has not been directed to any authority applying the "actual knowledge" standard to claims based on COBRA violations.
4. COBRA-based Fiduciary-Duty Claims in Count One.
In addition to asserting claims under 29 U.S.C. § 1132(c) for violations of COBRA (Count Four), plaintiff also asserts claims against Kraus for breach of fiduciary duty under 29 U.S.C. § 1104, based on the same alleged COBRA violations (Count One). Am. Compl. at ¶ 6.5.
Kraus argues that failure to provide COBRA notice is not a breach of fiduciary duty, and the court agrees. The notice requirements of COBRA are not enumerated in the fiduciary duties listed in 29 U.S.C. § 1104. And Fifth Circuit has stated that the sole remedy for the failure to provide the required COBRA notices is provided by 29 U.S.C. § 1132(c), as discussed above. Lopez, 389 F.3d at 509 n. 9. Therefore, the court concludes that those fiduciary-duty claims based on alleged violations of COBRA fail to state a claim for which relief may be granted, and such claims should be dismissed.
C. The Interference Claims.
Plaintiff alleges in Count Five that Volt and Kraus violated § 510 of ERISA ( 29 U.S.C. § 1140) by: "(i) refusing to enroll [p]laintiff in Volt's Plan in a timely manner and in accordance with the terms of the plan; (ii) terminating the [p]laintiff for retaliation and to prevent [p]laintiff from receiving benefits under the Plan; and finally, (iii) causing delay in [p]lainiff's receipt of [p]laintiff's notices and forms, as required by COBRA." Compl. at ¶ 9.3. Under § 510, it is unlawful for any person "to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary" for exercising any right under the provisions of an employee benefit plan or under 29 U.S.C. §§ 1001- 1191c, or for the purpose of interfering with any right to which the participant may become entitled under the plan or 29 U.S.C. §§ 1001- 1191c. 29 U.S.C. § 1140.
As to plaintiff's claim that Volt and Kraus caused delay in his receipt of COBRA forms and notices, the court sua sponte concludes that he fails to state a claim for interference of rights under ERISA § 510. The remedy for an ERISA § 510 action is created by 29 U.S.C. § 1132(a). See Lopez, 389 F.3d at 509 n. 9; see also 29 U.S.C. § 1140. In contrast, the sole remedy for the failure to timely provide the notices required under COBRA, 29 U.S.C. § 1166, is provided by 29 U.S.C. § 1132(c), as discussed above. Lopez, 389 F.3d at 509 n. 9.
A district court may dismiss a complaint, sua sponte, for failure to state a claim upon which relief can be granted. See, e.g., Small Engine Shop, Inc. v. Cascio, 878 F.2d 883, 887 (5th Cir. 1989).
Plaintiff's remaining interference claims are barred by the two-year statute of limitations for wrongful discharge and discrimination provided by Texas law. See Lopez, 389 F.3d at 507 (citing McClure v. Zoecon, Inc., 936 F.2d 777, 778-79 (5th Cir. 1991); see also Kennedy, 954 F.2d at 1120 (holding that 29 U.S.C. § 1113 only applies to claims under Part 4 of ERISA). Volt and Kraus argue that plaintiff's respective interference claims accrued on November 8, 2001, when plaintiff alleges his enrollment in the Plan was refused ("enrollment claim"), and on May 1, 2002, when plaintiff alleges he was wrongfully terminated ("termination claim"). Except for arguing that the statute of limitations and accompanying accrual standard of 29 U.S.C. § 1113 apply, plaintiff does not contest the dates of accrual of such claims. Therefore, plaintiff's amended petition, which added Volt on June 30, 2004, and his amended complaint, which added Kraus on October 5, 2004, were both filed beyond the respective two-year limitations periods for plaintiff's enrollment and termination claims.
See Berry v. Allstate Ins., 252 F. Supp. 2d 336, 341 (E.D. Tex. 2003) (noting that the Fifth Circuit has not decided when ERISA § 510 claims accrue and applying the Seventh Circuit standard that such claims accrue when the discriminatory decision is made and communicated to plaintiff); Tolle v. Carroll Touch, Inc., 977 F.2d 1129, 1140-41 (7th Cir. 1992).
Plaintiff attempts to save his interference claims by arguing that his amended complaint should relate back to his original petition against SRC, and that equitable tolling and equitable estoppel should apply. However, plaintiff has not alleged facts that would support a finding that his amended complaint relates back to his original complaint against SRC under the requirements of Rule 15(c). See Fed.R.Civ.P. 15(c)(3). Likewise, the court is unpersuaded that plaintiff's allegations warrant the application of either equitable tolling or equitable estoppel to his ERISA § 510 claims. Therefore, the court concludes that plaintiff's interference claims should be dismissed. Accordingly,
Plaintiff also argues that the continuing-violations doctrine should apply, apparently in relation to his ERISA § 510 claims based on allegations that Kraus and Volt caused delay in his receipt of COBRA notices. See Resp. to Kraus Mot. at 10 n. 2 (citing Berry v. Allstate Ins. Co., 84 Fed. App. 442, 2004 WL 34807 (5th Cir.) (unpublished)). The court sua sponte has concluded such claims should be dismissed, and even assuming the continuing-violations doctrine is applicable to ERISA § 510 claims, plaintiff has made no other allegations that would justify its application.
V. ORDER
For the reasons discussed,
The court ORDERS that plaintiff's claims against Kraus for breach of fiduciary duty based on alleged violations of COBRA, as alleged in paragraph 6.5 of Count One of the amended complaint, be, and are hereby, dismissed.
The court further ORDERS that plaintiff's claims against Kraus and Volt for interference with his rights, as alleged in Count Five of the amended complaint, be, and are hereby, dismissed.
The court further ORDERS that all other relief sought by the motions to dismiss be, and is hereby, denied.