United States District Court, E.D. Kentucky, Southern Division, London
MEMORANDUM OPINION AND ORDER
L. BUNNING UNITED STATES DISTRICT JUDGE.
Reliance Standard Life Insurance Company
(“Reliance”) seeks dismissal of Plaintiff Cheryl
Stacy’s Complaint for failure to exhaust her
administrative remedies, as required by the Employee
Retirement Income Security Act of 1974 (“ERISA”).
(Doc. # 5). Accordingly, Reliance claims that Stacy has
failed to state a claim upon which relief can be granted, and
asks the Court to dismiss Stacy’s claims against
Reliance with prejudice pursuant to Federal Rule of Civil
Procedure 12(b)(6). The motion is fully briefed (Docs. # 8
and 9), and ripe for the Court’s review. The Court has
jurisdiction over this matter pursuant to 28 U.S.C. §
FACTUAL AND PROCEDURAL BACKGROUND
worked for Appalachian Regional Healthcare, Inc.
(“ARH”) as a Registered Nurse for approximately
thirty years, until February 24, 2014, when she became
disabled. (Doc. # 1-1 at ¶¶ 8, 13). Initially,
Stacy applied for and received short-term disability benefits
from Reliance. Id. at ¶ 40. After receiving
short-term disability benefits “for the maximum
duration allowable,” Stacy “began the process of
transitioning her claim into” a long-term disability
(“LTD”) claim. (Doc. # 8 at 1). Stacy
simultaneously made a claim for and pursued disability
retirement benefits under ARH’s retirement plan. (Doc.
# 1-1 at ¶ 16).
August 21, 2014, before receiving a decision regarding her
LTD claim, Stacy advised Reliance via e-mail that she no
longer wished to pursue that claim. Id. at ¶
43; see also (Doc. # 8-1). Stacy alleges that she
withdrew her LTD benefits claim with Reliance because ARH
informed her that the “application for and approval of
LTD benefits with Reliance … would prevent her from
receiving her retirement benefits” under ARH’s
plan. Id. at ¶ 43. Stacy’s decision to
abandon her LTD claim with Reliance proved to be a misstep;
her claim for disability retirement benefits with ARH was
ultimately denied. Id. at ¶ 22-24.
August 25, 2014, Reliance sent Stacy a denial letter,
informing her that she was “not entitled to disability
benefits under” the LTD policy. (Doc. # 8-2 at 2). In
this letter, Reliance acknowledged that she did not want to
pursue her claim and explained that it was unable to complete
its LTD claim evaluation because Stacy had failed to respond
to requests for additional information. Id. The
letter also advised Stacy that a “written request for
review must be submitted within 180 days” if she
intended to appeal Reliance’s benefit determination.
Id. at 4. Over one year and eight months later
– on May 18, 2016, Stacy appealed the denial of her LTD
benefits. (Doc. # 1-1 at ¶ 45). By letter dated May 25,
2016, Reliance informed Stacy that it would not accept her
untimely appeal. Id. at ¶ 46.
Complaint, Stacy claims that she is “entitled to LTD
benefits” and that Reliance “should be required
to perform under the contract and pay LTD benefits to
Plaintiff.” Id. at ¶ 47. Specifically,
Stacy alleges that the denial of her LTD benefits claim
constitutes a breach of contract, a breach of fiduciary
duties, and was arbitrary and capricious. Id. at
¶ 48-49. Reliance seeks dismissal of Stacy’s
Complaint for failure to exhaust her administrative remedies,
as required by ERISA. (Doc. # 5 at 1). Reliance argues that
Stacy failed to appeal the denial of her LTD benefits claim
within the prescribed 180-day time period; and instead,
waited approximately 632 days before filing her appeal.
Id. Accordingly, Reliance claims that Stacy has
failed to state a claim upon which relief can be granted, and
asks the Court to dismiss Stacy’s unexhausted ERISA
claims with prejudice because her opportunity to pursue
administrative remedies has expired. Id. at 7.
Standard of Review
survive a Rule 12(b)(6) motion to dismiss, “a complaint
must contain sufficient factual matter, accepted as true, to
state a claim to relief that is plausible on its face.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The
plausibility standard is met when the facts in the complaint
allow “the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Id. The complaint need not contain “detailed
factual allegations,” but must contain more than mere
“labels and conclusions.” Id. Put
another way, the “[f]actual allegations must be enough
to raise a right to relief above the speculative
level.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007).
ERISA’s Enforcement Options and Exhaustion
initially asserted state-law breach of contract claims,
believing Reliance’s LTD Policy was not governed by
ERISA. (Doc. # 1-1 at ¶¶ 48-50). However,
Stacy’s Complaint alternatively pled, pursuant to
ERISA, that the “decision made by Defendant [Reliance]
to deny Plaintiff’s claims was arbitrary and
capricious, against the overwhelming evidence provided to
Defendant, and a breach of fiduciary duties, which entitles
Plaintiff to contractual benefits, interest, and
attorney’s fees.” Id. at ¶ 51.
Stacy also alleged that Reliance “should be enjoined
from stopping LTD payments under the terms of the LTD
policy.” Id. at ¶ 52. As Stacy has since
conceded, her state law claims are completely preempted by
§ 502(a), and ERISA governs this action. (Doc. # 8 at
“authoriz[es] civil actions for six specific types of
relief.” Rush Prudential HMO, Inc. v. Moran,
536 U.S. 355, 376 (2002). These civil enforcement provisions,
more commonly known by their original section number in the
Act, § 502(a), create an “interlocking,
interrelated, and interdependent remedial scheme.”
Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134,
146 (1985). This scheme “represents a careful balancing
of the need for prompt and fair claims settlement procedures
against the public interest in encouraging the formation of
employee benefit plans.” Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41, 54 (1987).
of these avenues are open to plan participants who, like
Stacy, wish to sue the plan or plan administrator. First,
participants may sue to recover benefits due, enforce their
rights, or clarify their rights under the terms of the plan
pursuant to § 502(a)(1)(B). See 29 U.S.C.
§ 1132(a)(1)(B). Second, participants may assert a claim
for breach of fiduciary duty under § 502(a)(2).
See 29 U.S.C. § 1132(a)(2). This subsection
does not yield individualized relief – any benefits
from suit inure to the plan itself. Russell, 473
U.S. at 143-45. Third, participants may seek
“appropriate equitable relief” under §
502(a)(3). See 29 U.S.C. § 1132(a)(3). This may
include injunctions and individualized relief for breach of
fiduciary duties. See Varity Corp. v. Howe, 516 U.S.
489, 509 (1996). However, relief under § 502(a)(3) is
typically only available to plan participants who cannot
proceed under either § 502(a)(1)(B) or § 502(a)(2).
Id. at 512.
a plaintiff-participant can bring a civil enforcement action
under ERISA, he or she may be required to exhaust
administrative remedies. “Although ERISA is silent as
to whether exhaustion of administrative remedies is a
prerequisite to bringing a civil action, [the Sixth Circuit
has] held that ‘the administrative scheme of ERISA
requires a participant to exhaust his or her administrative
remedies prior to commencing suit in federal
court.’” Coomer v. Bethesda Hosp., Inc.,
370 F.3d 499, 504 (6th Cir. 2004) (quoting Miller v.
Metro. Life Ins. Co., 925 F.2d 979, 986 (6th Cir.
1991)). “The exhaustion requirement ‘enables plan
fiduciaries to efficiently manage their funds; correct their
errors; interpret plan provisions; and assemble a factual
record which will assist a court in reviewing the
fiduciaries’ actions.’” Id.
(quoting Ravencraft v. UNUM Life Ins. Co. of Am.,
212 F.3d 341, 343 (6th Cir. 2000)).
administrative scheme requires “[e]very employee
benefit plan … to ‘afford a reasonable
opportunity to any participant whose claim for benefits has
been denied for a full and fair review … of the
decision denying the claim.’” Coomer,
370 F.3d at 504 (quoting 29 U.S.C. § 1133). Similarly,
pursuant to ERISA regulations, when a claim is denied by an
insurer, the insurer has an obligation to provide the
claimant “appropriate information as to the steps to be
taken … to submit his or her claim for review.”
29 C.F.R. § 2560.503-1(f). Reliance complied with these
regulations and afforded Stacy an opportunity to appeal (Doc.
# 8-2), but she did not take advantage of her appeal rights
within the 180-day time period. (Doc. # 1-1 at ¶ 45).
Therefore, failure to file a timely appeal and exhaust her
administrative remedies may bar Stacy’s claims against
bringing an action for benefits under § 502(a)(1)(B),
plan participants must exhaust their administrative remedies.
See Miller, 925 F.2d at 986. However, the Sixth
Circuit recently held that the exhaustion requirement does
not apply to claims for breach of fiduciary duty, which
“alleg[e] statutory, rather than plan-based,
violations.” Hitchcock v. Cumberland Univ. 403(b)
DC Plan, No. 16-5942, 2017 WL 971790, at *8 (6th Cir.
Mar. 14, 2017). Because “actions brought to enforce the
terms of a plan are distinguishable from those brought to
assert rights granted by federal statute,” the Sixth
Circuit has determined that “ERISA plan participants or
beneficiaries do not need to exhaust internal remedial
procedures before proceeding to federal court when they
assert statutory violations of ERISA.” Id. at
*9 (internal citations and quotation marks omitted).
exhaustion is required only for certain claims and because
Stacy’s Complaint did not specifically identify which
civil enforcement mechanism she seeks to utilize, it is
imperative that the Court determine which of ERISA’s
civil remedies may support her claims. Stacy is
attempting to recover benefits allegedly due to her under the
terms of Reliance’s LTD plan; therefore, the Court
construes this claim as one under § 502(a)(1)(B).
Stacy’s Complaint also asserts an individualized
“breach of fiduciary duty” claim and seeks an
injunction, both of which constitute claims for equitable
relief under § 502(a)(3).
§ 502(a)(1)(B) and § 502(a)(3) claims cannot be
brought in tandem. See Varity Corp., 516 U.S. at 512
(holding that § 502(a)(3) “act[s] as a safety net,
offering appropriate equitable relief for injuries caused by
violations that § 502 does not elsewhere adequately
remedy”). However, in “some circumstances, an
ERISA plaintiff may simultaneously bring claims under
both” sections. Gore v. El Paso Corp. Long Term
Disability Plan, 477 F.3d 833, 839 (6th Cir. 2007)
(citing Hill v. Blue Cross and Blue Shield of Mich.,
409 F.3d 710 (6th Cir. 2005)). “Where a claimant
asserts an injury separate and distinct from the denial of
benefits, then dual ERISA claims and remedies may be
appropriate.” Brown v. United of Omaha Life Ins.
Co., 661 F. App’x 852, 859 (6th Cir. 2016)
(internal citations and quotation marks omitted). Thus, if an
award of individual benefits under § 502(a)(1)(B) does
not provide an adequate remedy for the alleged injury caused
by the breach of fiduciaries, then a plaintiff may be able to
pursue claims under both sections. See Gore, 477
F.3d at 840-42 ...