On July 3, 2018, a District Court in Alabama upheld, on reconsideration, its initial decision to dismiss a plaintiff’s breach of fiduciary duty claim under ERISA § 502(a)(3), 29 U.S.C. § 1132(a)(3), finding that ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), provided the plaintiff with an adequate remedy. This decision adds to the growing amount of case law regarding whether—and when—a breach of fiduciary duty claim should be dismissed in benefit claim litigation.
The case, Stewart v. Hartford Life & Accident Insurance Co., 2:17-cv-01423-KOB (N.D. Ala), involves a fairly common scenario: plaintiff Carol Stewart contends that Hartford Life wrongfully denied her long-term disability benefits under her employer’s group benefit plan. In addition to a claim under section 502(a)(1)(B) seeking to recover the benefits to which she claims to be entitled and a claim for injunctive relief to reinstate her waiver of premium benefits, Stewart also alleged that Hartford Life had breached its fiduciary duties to her in violation of section 502(a)(3) of ERISA.
Hartford Life moved to dismiss the breach of fiduciary duty claim, arguing that such a claim cannot be sustained when the plaintiff is also seeking recovery of benefits under § 502(a)(1)(B). The Court agreed with Hartford Life and dismissed the breach of fiduciary duty claim. Plaintiff moved for reconsideration of the decision, arguing that the Court had misconstrued her claims, misinterpreted Eleventh Circuit case law, and reached an incorrect conclusion in its opinion on dismissal. In support of her motion for reconsideration, Ms. Stewart apparently spent a “great deal of time” explaining how Hartford Life had allegedly breached its fiduciary duties and how it had benefited from the breach.
The Court was not persuaded by her arguments and upheld its initial decision, noting that Ms. Stewart’s allegations supporting her §502(a)(3) claim were also sufficient to state a cause of action under § 502(a)(1)(B), and that § 502(a)(1)(B) provided an adequate remedy.
In its analysis, the Court pointed out that all of plaintiff’s allegations addressed the manner in which Hartford Life purportedly had organized its claims handling practices so as to deny her benefits and how Hartford Life allegedly was unjustly enriched by the denial. Assuming that the allegations were true, the Court noted that those actions “would constitute a breach of fiduciary duty, and that § 502(a)(3) could provide the pathway for such a cause of action.” (emphasis in original). However, the Court explained that Eleventh Circuit precedent established that Ms. Stewart could not state a claim under § 502(a)(3) if “the allegations of the § 502(a)(3) claim were also sufficient to state a cause of action under § 502(a)(1)(B), regardless of the relief sought, and irrespective of [Ms. Stewart’s] allegations supporting [her] other claims.” (emphasis in original; internal citations omitted).
Applying that standard, the Court determined that her allegations regarding how Hartford Life had applied the plan in denying her benefits were also sufficient to state a claim under § 502(a)(1)(B), and that the allegations in support of her breach of fiduciary duty claim were not substantially different than her § 502(a)(1)(B) claim. The Court held that because Ms. Stewart had a § 502(1)(B) cause of action available to her, she was precluded from seeking further remedy under § 502(a)(3).
Takeaway: This decision illustrates that courts can be receptive to dismissing breach of fiduciary duty claims when the plaintiff has a viable cause of action under § 502(a)(1)(B) to recover benefits and/or enforce the terms of the applicable plan. Many courts have issued similar rulings in favor of defendants, and there may be some strategic advantages in getting such claims resolved early in the litigation. On the other hand, however, not all courts are receptive to deciding this issue on a motion to dismiss, noting that the standard for such motions requires allegations to be construed in favor of the plaintiff and that plaintiffs have the right to plead in the alternative. These courts have indicated that this issue is more suitable to resolution on summary judgment, where the record—and facts—are more fully developed. We have previously written about the interplay between a claim for benefits and a claim for equitable relief and options to consider in responding to a complaint alleging both causes of action; that earlier post is available here.
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