Source: http://pa.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20090120_0000083.EPA.htm/qx
Timestamp: 2017-02-26 12:46:53
Document Index: 45581115

Matched Legal Cases: ['§ 1001', '§ 1003', '§ 1002', '§ 1144', '§ 1144', '§ 8371']

| Stout v. American Federation of State
Stout v. American Federation of State
WILLIAM C. STOUT, ADMINISTRATOR OF THE ESTATE OF EARL STOUT, DECEASED, PLAINTIFF,v.AMERICAN FEDERATION OF STATE, COUNTY AND MUNICIPAL EMPLOYEES DISTRICT COUNCIL 33, DEFENDANT.
Plaintiff William Stout, administrator of the Estate of Earl Stout, filed a two-count Complaint in the Philadelphia County Court of Common Pleas. Plaintiff alleged that Defendant, American Federation of State, County and Municipal Employees, District Council 33 (AFSCME), violated the Pennsylvania Bad Faith Statute and the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) by failing to pay insurance benefits upon Earl Stout's death. Defendant removed the case to this Court, arguing that the claims arise under federal law because they are preempted by the Employee Retirement Income Security Act (ERISA). After this Court denied Plaintiff's remand motion, Defendant filed the instant summary judgment motion, arguing that Stout's claims should be dismissed because they are preempted by ERISA. AFSCME also asserts that issue and claim preclusion bar Stout's claims. The Court agrees that Stout's bad faith and UTPCPL claims are preempted by ERISA and those claims are therefore dismissed. However, the Court will permit Stout the opportunity to file an amended complaint alleging an ERISA claim. If he does so, AFSCME may later raise its preclusion arguments.
Earl Stout became a member of the Executive Board of AFSCME District Council 33 in May, 1970. (Def.'s Mot. for Summ. J. Ex. J [Compl.] ¶ 8.) In March, 1987, the AFSCME Board of Directors voted that all members of the Executive Board of District Council 33 who served two consecutive terms would be entitled to company-sponsored life insurance equal to twice their annual salary. (Id. ¶ 9.) Defendant was required to maintain that insurance. (Id.) The New York Life Insurance Company issued a group life insurance contract to AFSCME in May of 1987 that included coverage for Earl Stout in the amount of $420,000, which was double Stout's salary. (Id. ¶¶ 10-11.) In August, 1988, however, Defendant allowed the coverage to lapse, "effectively becoming the (self) insurer of the lives of its current and past Executive Board Members." (Id. ¶ 13.)
Earl Stout stopped working for AFSCME in May, 1988. (Id. ¶ 12.) He died on March 14, 2006. (Id. ¶ 2.) Soon thereafter, Plaintiff's representative sought to collect benefits due under the policy. (Id. ¶ 14.) Defendant told Plaintiff that the beneficiaries of Earl Stout were entitled to a $30,000 insurance payment. (Id. ¶ 15.) This lawsuit seeks to capture the life insurance proceeds promised to Earl Stout.
Summary judgment is appropriate when the admissible evidence fails to demonstrate a dispute of material fact and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). When the moving party does not bear the burden of persuasion at trial, it may meet its burden on summary judgment by showing that the nonmoving party's evidence is insufficient to carry its burden of persuasion at trial.
Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Thereafter, the nonmoving party demonstrates a genuine issue of material fact if sufficient evidence is provided to allow a reasonable finder of fact to find for the nonmoving party at trial. Anderson, 477 U.S. at 248. In reviewing the record, "a court must view the facts in the light most favorable to the nonmoving party and draw all inferences in that party's favor." Armbruster v. Unisys Corp., 32 F.3d 768, 777 (3d Cir. 1994). Furthermore, a court may not make credibility determinations or weigh the evidence in making its determination. See Reeves v. Sanderson Plumbing Prods., 530 U.S.133, 150 (2000); see also Goodman v. Pa. Tpk. Comm'n, 293 F.3d 655, 665 (3d Cir. 2002).
ERISA "protect[s] . . . the interests of participants in employee benefit plans and their beneficiaries . . . by providing for appropriate remedies, sanctions, and ready access to the Federal courts." 29 U.S.C. § 1001(b) (2008). "The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans." Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004). ERISA applies to "any employee benefit plan if it is established or maintained . . . by any employer engaged in commerce." Deibler v. United Food & Commercial Workers' Local Union 23, 973 F.2d 206, 209 (3d Cir. 1992) (quoting 29 U.S.C. § 1003(a)). To determine whether a particular policy qualifies as a plan under ERISA, courts must look to the definitions in the statute. An "employee welfare benefit plan" or "welfare plan" is a "plan, fund, or program . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise . . . benefits in the event of sickness, accident, disability, death or unemployment . . . ." 29 U.S.C. § 1002(1). In the Third Circuit, an ERISA plan is established if "from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits." Deibler, 973 F.2d at 209.
Plaintiff's Complaint, as removed to this Court, consists of two state law claims: a claim under Pennsylvania's bad faith law and one under the Commonwealth's consumer protection law. Although Plaintiff's well-pleaded complaint raises no federal claims, a federal statute that fully displaces a state-law cause of action through complete preemption is an exception to the well-pleaded complaint rule. Davila, 542 U.S. at 207. ERISA is such a statute and, since the Court determined that Plaintiff's Complaint falls within the scope of ERISA, removal was proper. See id. at 208.
Now, AFSCME urges dismissal of Stout's claims because they are preempted by ERISA. This Court agrees. ERISA's preemption provisions are "expansive." Davila, 542 U.S. at 208. ERISA's express preemption clause states that "[e]xcept as provided in subsection (b) of this section, the provisions [of ERISA] shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). The statute does, however, include a saving clause that excepts from ERISA's preemptive powers those laws that "regulate[] insurance, banking, or securities." 28 U.S.C. § 1144(b)(2)(A).
The Third Circuit has decided that Pennsylvania's bad faith statute, 42 Pa. Cons. Stat. &sect; 8371, is both conflict preempted and expressly preempted by ERISA.*fn1 Barber v. Unum Life Insurance Company of America, 383 F.3d 134, 136 (3d Cir. 2004). Regarding conflict preemption, the court, relying on Davila, held that 42 Pa. Cons. Stat. § 8371 is a state remedy that allows an ERISA-plan participant to recover punitive damages for bad faith conduct by insurers and thus supplements the relief provided under ERISA. Id. at 140-41. Because the Supreme Court in Davila concluded that "any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make ...