Barber v. Lincoln National Life Insurance Co.
260 F. Supp. 3d 855
W.D. Ky.2017Background
- Plaintiff Barber, a Stites attorney diagnosed with Parkinson’s (Nov. 2014), received long-term disability benefits under his employer’s Lincoln policy (approved Dec. 14, 2015).
- After approval, Lincoln learned Barber worked as a political consultant and reduced his monthly disability payments by offsetting that income.
- Barber sued under ERISA for recovery of benefits (29 U.S.C. § 1132(a)(1)(B)) and for equitable relief for alleged improper premature offsets (29 U.S.C. § 1132(a)(3)), seeking class treatment.
- Lincoln moved to dismiss under Rule 12(b)(6) (and 12(b)(1) as to Count II); the policy was attached to the complaint and grants Lincoln discretionary authority to interpret and administer benefits.
- Central factual dispute: whether Lincoln permissibly offset Barber’s political consulting earnings under the policy’s definition of “Other Income Benefits,” and whether Lincoln unlawfully offset before the income was reported for federal tax purposes.
- Procedural disposition: Court reviews Count I under arbitrary-and-capricious standard (plan grants discretion) and evaluates Count II for standing and exhaustion; Count I dismissed for failure to plead arbitrary and capricious conduct, Count II dismissed with prejudice for failure to exhaust administrative remedies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Lincoln’s offset of Barber’s political consulting income violated ERISA (denial of benefits under § 1132(a)(1)(B)) | Barber: consulting income is not “Other Income Benefits” and offset frustrates the policy’s own-occupation purpose; Lincoln’s conflicted role undermines deference | Lincoln: policy definition of “Earnings”/“Other Income Benefits” unambiguously includes such income; policy grants discretionary authority so decision reviewed only for arbitrary and capriciousness | Court: Policy text unambiguous; Lincoln’s offset reasonable under the policy; Barber did not plausibly allege arbitrary and capricious denial — Count I dismissed |
| Whether premature offsets (before income reported for federal tax purposes) state a statutory fiduciary breach (§ 1132(a)(3)) and confer Article III standing | Barber: premature offsets caused concrete injuries — loss of time value of money and actual excessive withholding when tax reporting later reduced income | Lincoln: Barber lacks particularized injury and failed to exhaust administrative remedies | Court: Allegation of actual excessive withholding is a concrete, particularized injury sufficient for standing; however, the claim is essentially a policy-based challenge, not a statutory fiduciary claim, so exhaustion is required — Count II dismissed with prejudice for failure to exhaust |
| Whether conflict of interest (administrator is also payor) alters standard of review | Barber: conflict requires no deference or heightened scrutiny | Lincoln: conflict is a factor but does not change the arbitrary-and-capricious standard | Court: Conflict is only a factor in the arbitrary-and-capricious analysis; even accounting for it, Barber’s pleadings fail to show arbitrary and capricious conduct |
| Whether the statutory-exception to exhaustion applies (challenge to legality of plan administration vs. interpretation) | Barber: his claim alleges systemic, statutory ERISA violations so exhaustion would be futile | Lincoln: claim challenges policy application/interpretation and thus requires administrative exhaustion | Court: Claim is policy-based (challenges how plan terms were applied) not a distinct statutory fiduciary breach; exception does not apply — exhaustion required and not done |
Key Cases Cited
- League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523 (6th Cir. 2007) (Rule 12(b)(6) pleading standard applied in circuit)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility pleading standard)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (pleading requires more than labels and conclusions)
- Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989) (de novo review absent plan discretion; otherwise arbitrary-and-capricious review)
- Perez v. Aetna Life Ins. Co., 150 F.3d 550 (6th Cir. 1998) (give effect to unambiguous ERISA plan terms)
- Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016) (Article III standing requires concrete and particularized injury)
- Durand v. Hanover Ins. Grp., Inc., 560 F.3d 436 (6th Cir. 2009) (narrow exhaustion exception where plaintiff challenges legality of plan, not interpretation)
- Ravencraft v. UNUM Life Ins. Co. of Am., 212 F.3d 341 (6th Cir. 2000) (ERISA administrative exhaustion requirement)
- Hitchcock v. Cumberland Univ. 403(b) DC Plan, 851 F.3d 552 (6th Cir. 2017) (statutory fiduciary claims may avoid exhaustion but not plan-based claims)