Court: District Court, D. Delaware; June 19, 2014; Federal District Court
On August 14, 2013, Karen Friedland filed a complaint against Unum Group and Unum Life Insurance Company, contesting the denial of her ongoing disability benefits under a long-term disability plan governed by ERISA. Friedland asserts three legal claims: (1) a claim for benefits under ERISA, (2) common law fraud, and (3) a violation of RICO. She seeks payment for past and future benefits, economic losses from her job loss, treble damages under RICO, and attorney fees.
Defendants have moved to dismiss the complaint, arguing that Friedland's ERISA claim is time-barred or that she cannot recover future benefits. They also contend that her fraud claim is preempted by ERISA and that her RICO claim fails to state a viable claim.
Friedland is a Pennsylvania resident and former employee of Johns Hopkins University, insured under an ERISA-governed plan. After initially receiving benefits for total disability following a fall in 1994, Unum Life later determined that her condition had improved and terminated her benefits in 2010. Friedland alleges that this decision was based not on new medical evidence but on a purported scheme to reduce payouts, claiming reliance on the defendants' promises of fair claims handling.
The court has jurisdiction based on federal statutes, and the standard for reviewing the motion to dismiss evaluates the sufficiency of the complaint's factual allegations.
A complaint must provide a concise statement of the claim that demonstrates the pleader's entitlement to relief, ensuring the defendant receives fair notice of the claim and its basis, as established in Twombly and Iqbal. The Third Circuit mandates a two-part analysis for Rule 12(b)(6) motions: first, distinguish between factual allegations and legal conclusions, accepting only the facts; second, evaluate if the remaining well-pleaded facts establish a plausible claim for relief. Courts must accept well-pleaded factual allegations as true and view them favorably toward the plaintiff, while also considering pleadings, public records, and documents referenced in the complaint. The legal standard does not require proving the claim at this stage, but rather allows sufficient facts to suggest that discovery could provide evidence supporting the claim. The analysis is context-specific and relies on judicial experience and common sense.
Regarding ERISA claims, since ERISA lacks a specific statute of limitations for benefits recovery, courts apply the statute of limitations from the most analogous state law claim, borrowing from the forum state's laws. The Third Circuit has determined that Delaware's one-year statute of limitations (10 Del. C. 8111) applies to ERISA benefit claims, which accrue upon denial of the benefits claim.
Plaintiff filed her complaint on August 14, 2013, over a year after the termination of her disability benefits on January 15, 2010, and the confirmation of this decision on September 17, 2010. Consequently, her ERISA claim is time-barred due to the limitations statute. Furthermore, ERISA preempts her fraud claim, as the statute aims to create a uniform regulatory framework for employee benefit plans, preventing conflicting state regulations. The express preemption provision in Section 514 of ERISA supersedes any state laws relating to employee benefit plans. The Supreme Court has affirmed the broad scope of ERISA’s preemption. A claim is considered related to an ERISA plan if the existence of such a plan is essential for establishing liability, meaning any inquiry into the fraud allegations would inevitably involve the ERISA plan. The plaintiff's fraud allegations arise from the defendants' handling of her ERISA-governed disability policy, thereby making her fraud claim preempted by ERISA. Additionally, regarding the plaintiff's RICO claims, the defendants argue that she has not adequately alleged a distinct RICO enterprise separate from the defendants themselves.
Section 1962(c) of Title 18 U.S.C. prohibits individuals associated with an enterprise engaged in interstate or foreign commerce from participating in the enterprise's affairs through racketeering or unlawful debt collection. The term "person" encompasses any individual or entity with a legal interest in property, while "enterprise" includes various legal entities and groups of individuals, distinct from a legal entity. For a RICO claim under 1962(c), the defendant must be separate from the RICO enterprise, as affirmed by the Supreme Court in Cedric Kushner Promotions, which requires plaintiffs to demonstrate that the defendant engaged in the enterprise's affairs, rather than solely their own. The Third Circuit has ruled that a corporation cannot be a RICO defendant if it is merely conducting affairs through its subsidiaries or employees. Therefore, a claim against a corporation as both a "person" and "enterprise" is inadequate. A valid 1962(c) action necessitates allegations against distinct defendants operating through a separate RICO enterprise. The plaintiff contends that the alleged enterprise includes external professionals not affiliated with the defendants, yet the critical question remains whether the defendants were involved in a distinct enterprise or merely managing their business activities. The requirement for a viable complaint necessitates that the enterprise must include entities or individuals operating beyond the defendants' regular business scope.
The Sixth Circuit rejected the plaintiff's claims that the defendant insurance company's subsidiaries and other related entities constituted a distinct RICO enterprise. Similar rulings from district courts in the Third Circuit confirm that an insurer and its affiliates cannot form a RICO enterprise merely based on allegations of wrongful denial of insurance claims. The Supreme Court has indicated that while a corporation’s owner can be sued as a RICO person acting through the corporation, this differs from claims that arise from a corporation's relationship with its employees. In this case, the plaintiff's allegations, which involve defendants acting through their employees and outside vendors, do not demonstrate that the defendants engaged in the conduct of an enterprise’s affairs distinct from their own. Consequently, the court found the plaintiff did not adequately plead the existence of a RICO enterprise as required under 1962(c), leading to the dismissal of the claim.
Furthermore, Section 1962(d) prohibits conspiracy to violate any provisions of RICO, and the viability of a 1962(d) claim hinges on the validity of the corresponding 1962(c) claim. Since the court has already ruled the 1962(c) claim insufficient, the plaintiff’s conspiracy claim under 1962(d) was also dismissed. A claim under 1962(d) must be dismissed if it does not adequately allege an endeavor sufficient to establish a substantive RICO offense.
The court concludes that the plaintiff's ERISA claim is barred by the applicable statute of limitations, the fraud claim is preempted by ERISA, and the complaint lacks a valid cause of action against defendants Unum and Unum Life under RICO. Consequently, the court grants the defendants’ motion to dismiss all claims. The court distinguishes this case from Klimowicz v. Unum Life Ins. Co. of America, noting that ERISA claims in Delaware are governed by Syed, not Klimowicz. It states that the defendants denied the plaintiff's claim in 2010 and that no further review was available, contradicting the plaintiff's assertion of an ongoing appeal in September 2012. The court also finds that it need not consider the plaintiff's future benefits claim due to the time-bar on the ERISA claim. The plaintiff's reference to Weiss v. First Unum Life Ins. Co. to argue against preemption is found unpersuasive, as Weiss dealt with federal RICO claims and did not address ERISA preemption. The court notes that state law claims were previously dismissed in Weiss due to ERISA preemption, and thus it does not need to consider the defendants’ conflict preemption arguments under the Supremacy Clause. The statutory preemption under 29 U.S.C. § 1144 is deemed sufficient to dismiss the fraud claim.
