Court: District Court, S.D. Texas; February 22, 2017; Federal District Court
Defendant Reliance Standard Life Insurance Company filed a Motion to Dismiss under Fed. R. Civ. P. 12(b)(6) regarding its termination of long-term disability payments to Reginald Peters, who had entered into a settlement agreement with his employer, Averitt Express, Inc. This agreement allegedly released Averitt and its insurers from liability, but Peters contends it did not absolve Reliance of its obligation to continue disability benefits. The court granted the motion to dismiss.
The relevant facts include that Peters, employed by Averitt, had disability insurance through Reliance. After sustaining injuries from an accident involving another Averitt employee in 2011, Peters sued Averitt for negligence. He later settled for $2,500,000, releasing Averitt from future claims. The agreement defined "Releasees" to include Averitt and various related entities and extended to all claims, including long-term disability benefits.
The General Release section of the agreement indicates that Peters, in exchange for the settlement, fully released the Releasees from past, present, and future claims related to his employment, the incident, and any associated benefits. Peters acknowledged that by accepting the settlement, he may have waived rights to various benefits, including long-term disability payments.
Plaintiffs Reginald and Joyce Peters affirm that they are entering this Agreement based on their own judgment and legal counsel's advice. They state the Agreement is binding on them and that they are not involved in any other legal actions related to the Incident, except for this lawsuit. The Agreement is governed by Texas law.
The lawsuit arises from Reliance's termination of Peters' long-term disability benefits, which Peters claims was improper and motivated by a desire to evade its obligations. He asserts claims for denial of benefits, breach of fiduciary duty, and interference, seeking damages and injunctive relief. Reliance argues it is released from any obligations due to the Agreement with Averitt, citing language that includes Averitt’s insurers as Releasees, thereby discharging them from disability claims. Peters contends that Reliance is not named as a Releasee in the Agreement.
The dispute centers on two main issues: the applicable law and whether Peters released Reliance from its duty to pay benefits. The court has federal question jurisdiction under ERISA, and the legal sufficiency of the complaint is evaluated under Rule 12(b)(6) of the Federal Rules of Civil Procedure. A motion to dismiss tests whether the complaint states a plausible claim for relief, requiring factual content that supports the inference of liability and necessitating that the court accepts the complaint's allegations as true, favoring the plaintiff in its interpretation.
Rule 12(b)(6) motions to dismiss are generally disfavored and infrequently granted. A complaint does not need to address all potential affirmative defenses to survive dismissal; however, if a plaintiff's allegations clearly indicate that an affirmative defense applies, dismissal may be warranted. Specifically, if the facts in the pleadings demonstrate that a claim is barred, dismissal under Rule 12(b) is permissible.
Regarding ERISA claims, which Congress established to regulate employee benefit plans, any plan providing benefits in cases of sickness, accident, disability, death, or unemployment falls under ERISA's jurisdiction. The claims in question are acknowledged to be governed by ERISA, with the complaint citing three relevant provisions: denial of benefits (29 U.S.C. § 1132(a)(1)(B) and (3)), breach of fiduciary duties (29 U.S.C. §§ 1104, 1109, and 1132(a)(2)), and interference (29 U.S.C. § 1140). The parties concur that federal common law governs the interpretation of releases for federal claims, although they dispute the existence of relevant federal common law. Reliance argues that the case Chaplin v. NationsCredit Corp. provides pertinent guidance for determining release under the agreement, while Peters contends that the differences between that case and the current situation prevent reliance on its precedent. Peters claims that there is no federal common law addressing whether to enforce a release concerning a non-signee insurer when the agreement generically releases "insurers" without specifying which insurer is included, suggesting that state law, specifically Texas law, should be consulted for clarity. He supports this position with a reference to a Virginia case where state law was used to interpret a settlement agreement due to the absence of governing provisions in ERISA and the ADA regarding waiver of claims.
The choice to reference state law in federal court decisions is discretionary and must be evaluated on a case-by-case basis. Some federal courts inaccurately cite 'the federal common law of release'; however, following Erie R.R. Co. v. Tompkins, these references should pertain to specific federal common law rules for enforcing releases of federal rights rather than a broad federal common law. Federal courts can either create a federal common law rule or adopt state law to address questions of federal law, making this decision dependent on individual statutes and issues.
Most federal circuits utilize a 'knowing and voluntary' standard for waiver validity, with heightened scrutiny for ERISA claims, reflecting Congress's intent to protect defined benefits. The Fifth Circuit employs a two-step burden-shifting process regarding waivers, where the burden shifts to the opposing party to prove the waiver's invalidity once a valid release is established. The totality of circumstances is evaluated using a six-factor test, known as the O’Hare factors, which consider the plaintiff's education, time to review the agreement, decision-making role, clarity of the agreement, legal representation, and whether the consideration exceeds pre-existing benefits.
In this case, Reliance has met its initial burden of establishing that Peters signed a release addressing the claims and received adequate compensation of $2,500,000. Thus, Peters's pursuit of injunctive relief would breach the release. The burden now shifts to Peters to demonstrate the release's invalidity. Peters contends that Reliance's absence from the agreement suggests it was not intended to be included as a releasee. However, an analysis of the relevant O’Hare factors reveals insufficient evidence to support Peters's claim, particularly regarding the first three factors. Consequently, the Court will concentrate on the remaining three factors in its examination.
The Agreement clearly defines 'Releas-ees' to include Averitt and its insurers, specifically mentioning long-term disability benefits provided by Reliance. In exchange for consideration, Peters releases all claims against these parties, including the right to long-term disability benefits. Peters argues that Reliance's absence from the specific list of insurers implies it is not included in the release; however, the Court emphasizes the broad language of the Agreement, particularly the phrase "but not limited to," which allows for the inclusion of Reliance.
Peters, represented by an attorney, experiences serious injuries from an incident involving a tractor-trailer, leading to ongoing physical and mental issues and a loss of past and future earnings. Although the record lacks specific financial details about Reliance’s disability payments or future medical expenses, it shows Peters received $2,500,000 as consideration for the release. This amount, when considered over a twenty-year period, is projected to exceed his contractual employee benefits and is guaranteed to his beneficiaries, unlike the disability benefits which would end upon his death. The Court concludes that the adequacy of consideration favors Reliance.
Peters's claims are barred, leading to the granting of Reliance's motion to dismiss. The case is dismissed with prejudice, meaning no further amendments are allowed. An order for final judgment will follow. Initially, Peters contested the applicability of ERISA, arguing the Agreement lacked explicit reference to it. However, Reliance cited Chaplin, which establishes that an Agreement does not need to mention ERISA to preserve a claim under it. A general release of 'any and all' claims encompasses all causes of action unless a statute mandates explicit mention for the release to apply, which ERISA does not require. Consequently, the releases are applicable to Peters’s ERISA benefits claims. Peters later acknowledged that federal law is controlling and did not assert that Texas law should govern interpretation of the Agreement. The Court opted not to pursue this argument independently. Peters's claims included those under the Americans with Disabilities Act, the Age Discrimination in Employment Act (ADEA), and ERISA. Various cases were cited to support these conclusions, indicating that the terms ‘waiver’ and ‘release’ are often used interchangeably in legal contexts. Waiver is defined as the voluntary relinquishment of a known right.
