Memorandum Opinion and Order
This matter is before the Court on Defendant Lincoln National Life Insurance Company’s (“Lincoln”) motion to dismiss. (DN 9.) Fully briefed, this matter is ripe for decision. For-the reasons stated below, the motion is GRANTED.
I. Background
This matter arises out of a long-term disability insurance policy. Plaintiff Barber was employed as a business litigation attorney with Stites - & Harbison PLLC (“Stites”). (Pl.’s Compl. [DN 1] ¶ 7.) Barber was diagnosed with Parkinson’s disease in November 2014. (Id. ¶ 8.) Stites has a long-term disability policy with Lincoln for its employees. (Id. ¶ 9.) This policy is, according to Barber, an “own occupation” policy, meaning that “a beneficiary’s entitlement to full disability benefits is determined not by his ability to work in any position, but rather by his ability to continue in his own occupation — in Mr. Barber’s case, as a litigator.” (Id. ¶ 11.) Due to his diagnosis, Barber applied for benefits un
After approving his claim for benefits, Lincoln began enquiring with Barber about any other sources of income he had. (Id. ¶ 15.) Barber informed Lincoln that he was working as an independent contractor for a political campaign. (Id. ¶ 16.) Lincoln then began reducing Barber’s monthly benefit due to this other source of income. (Id.) Barber requested that Lincoln reverse its decision to offset his monthly benefit, and Lincoln notified Barber via an October 25, 2016 letter that it was denying his request. (Id. ¶ 25.) Barber then initiated the present action, asserting claims under the Employee Retirement Income Security Act of 1975 (“ERISA”) for recovery of benefits owed to him (Count I) and seeking to enjoin unlawful withholding of offset benefits (Count II). He asserts these claims on behalf of himself and two classes of similarly situated persons. (Id. ¶ 26.) Lincoln has moved to dismiss Counts I and II pursuant to Fed. R. Civ. P. 12(b)(6), as well as Count II pursuant to Fed. R. Civ. P. 12(b)(1). (DN 9.)
II. Standard of Review
Upon a motion to dismiss for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6), a court “must construe the complaint in the light most favorable to plaintiffs,” League of United Latin Am. Citizens v. Bredesen,
III. Discussion
A. Count I — Denial of Benefits
Count I of the complaint seeks to recover benefits, pursuant to 29 U.S.C. § 1132(a)(1)(B), that are owed to Barber under the policy. Lincoln’s motion to dismiss argues that Barber has not plausibly stated a claim upon which relief may be granted, as the policy clearly entitled Lincoln to offset Barber’s monthly benefit with his outside income earned as a political consultant. Because the policy permits this offset, Lincoln argues that Barber cannot plausibly show that its decision to offset his benefit was “arbitrary or capricious.”
The policy offers two different types of benefits: total disability benefits and partial disability benefits. When one is “totally disabled”, the monthly benefit will equal “the Insured Employee’s Basic Monthly Earnings multiplied by the Benefit- Percentage ... minus Other Income Benefits.” (Policy [DN 1-2] at 24.) When one is only “partially disabled,” it means that the insured employee “is engaged in Partial Disability Employment,” which is defined as- “working at' his or her Own Occupation or any other occupation” under .reduced hours, pay, or duties. (Id. at 10, 24.) The monthly benefit for one who is partially disabled is the lesser of either the “Insured Employee’s Predisability Income, minus all Other Income Benefits (including earnings from Partial Disability Employment),” or the “Insured Employee’s Pre-disability Income multiplied by the Benefit Percentage ... minus Other Income Benefits, except for earnings from Partial Disability Employment.” (Id. at 28.)
Barber alleges that his income as a political consultant is not “Other Income Benefits” that can be deducted from his monthly benefit. However, “Other Income Benefits” is defined in the policy as “benefits, awards, settlements or Earnings,” with Earnings defined as “pay the Insured Employee earns or receives from any occupation or form of employment,” including “salaried or hourly Employee’s gross earnings.” (Id. at 30.) This definition would clearly encompass any compensation Barber received from his political consulting, since that is an “occupation or form of employment.” Thus,.the plain text of the policy indicates that Barber’s income from political consulting could be considered
Barber argues in opposition that no deference should be given to Lincoln’s interpretation, as it both makes decisions on eligibility for benefits and pays- out those same benefits, creating an inherent conflict of interest. However, the arbitrary and capricious standard is “not altered by the existence of [the defendant’s] inherent conflict of interest created by acting as both the administrator and issuer of the Plan ... we consider it a factor in determining whether the plan administrator’s decision was arbitrary and capricious.” Tate,
Barber also argues- that Lincoln’s interpretation of the contract and the offsetting of his benefits frustrates the essential purpose of the policy, which, according to Barber, is “to protect earning power in a person’s own occupation.” (PL’s Resp. to Def.’s Mot. to Dismiss [DN 14] at 8) (emphasis in original). But this argument is without merit, as Lincoln merely. applied the unambiguous terms of the policy to Barber’s claim. The definition of “Earnings” clearly includes “pay the Insured Employee earns or receives from any occupation or form of employment. ” (Policy [DN 1-2] at 30) (emphasis added). It was not unreasonable to interpret that phrase as Including income an individual receives for his professional services. While Barber takes issue with what he perceives as -a contravention of “the fundamental bargained-for aspect of the policy,” the Court cannot see what could be more fundamental to the bargain than the terms of the policy. (PL’s Resp. to Def.’s Mot. to Dismiss [DN 14] at 9.)
Finally, Barber argues that Lincoln’s offsetting of his political consulting income from his monthly benefit “renders meaningless” many of the.distinctions made in the policy between partial and total disability. But this argument fails for two reasons. First., Barber’s complaint does not allege that he was improperly reclassified as having only a partial disability when he began working again. The allegations in the complaint solely pertain to the impropriety of Lincoln’s reduction of his benefits without reference to which level of disability he was classified as having. And second, even if there was error in classifying Barber as having either a total or partial disability, his political consulting income would be used in calculating his monthly benefit regardless of whether he was totally or partially disabled. The formula for determining the monthly benefit for a totally disabled individual deducts Other Income Benefits, which Barber’s political consulting income clearly is. (Policy [DN 1-2] at 24.) And a partially disabled indi
Lincoln’s decision to reduce Barber’s monthly benefit due to his political consulting income is supported by the plain text of the' policy. As such, Barber does not plausibly allege that Lincoln’s decision was arbitrary and capricious. Therefore, the motion to dismiss Count I is GRANTED. See Estep,
B, Count II — Premature Offsetting
Count II of the complaint asserts, pursuant to 29 U.S.C. § 1132(a)(3), that Lincoln’s offsetting of Barber’s monthly benefit violated the duties Lincoln owed to Barber under ERISA, as Lincoln did not wait until Barber had reported his other income for federal income tax purposes before reducing his monthly benefit. He seeks an injunction against Lincoln prohibiting it from making offsets before Barber (and all' others similarly situated) reports other income for federal tax purposes, as well as restitution of all amounts that were prematurely withheld from his monthly benefit. Lincoln makes four arguments in favor of dismissal: (1) Barber has not alleged a particularized, concrete injury sufficient to confer standing upon him, (2) Barber has failed to exhaust his administrative remedies, (3) the complaint fails to plausibly allege a claim for relief, and (4) Barber’s request for restitution is impermissible. The Court will address each in turn.
1.' Standing
The “‘irreducible constitutional minimum’ of'standing consists of three elements. The plaintiff must have (1)' suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, — U.S. —,
Lincoln argues that Barber has failed to satisfy the first element, as he has not alleged a particularized and concrete injury that would confer standing upon him. Barber argues that he has alleged two injuries that satisfy this constitutional standard: the loss of the time value of money through premature offsetting,' and
But Barber argues that he has alleged a different injury that is sufficient to establish standing: the loss of money from excessive offsetting. The complaint states that “none of the amounts used for deduction had been reported for federal income tax purposes at that point (and only eventually would be reported, at a lesser amount than Lincoln used for reducing Mr. Barber’s payment) ...”
2. Exhaustion or Remedies
Next, Lincoln argues that Barber failed to adequately plead that he exhausted his administrative remedies, as is required by
The Sixth Circuit has recognized a narrow exception to the general rule that requires exhaustion of administrative remedies. In an ERISA case, “when the plaintiffs suit is directed to the legality of a plan, not to a mere interpretation of it, exhaustion of the plan’s administrative remedies would be futile,” and no exhaustion is required. Durand v. Hanover Ins. Grp., Inc.,
Count II of Barber’s complaint alleges that Lincoln’s “systemic process in not requesting and using appropriate tax reporting documentation in connection with calculating benefits payments violates Defendant’s duties under ERISA.” (Pl.’s Compl. [DN 1] ¶ 35.) ERISA does impose certain duties on employee benefit plans, including that the fiduciary of the plan “discharge his .or her duties with the care, skill, prudence,,and diligence” that the circumstances require. Hitchcock,
The Court concludes that Barber’s claim is merely an attempt to dress up claims for violations of the policy as statutory claims under ERISA. The substance of Barber’s claim is that Lincoln was not' permitted to offset his monthly benefit with income he earned until that income had been reported for federal taxation purposes. There is no provision in ERISA that would require this; it could only arise' from the policy itself. (See Policy [DN 1-2] at 30) (defining “Earnings” as pay the Insured Employee earns “as reported for federal income tax purposes ... including] ... salaried.or hourly Employee’s gross earnings (shown-on Form W-2”)). Barber does not point to how this caused Lincoln to breach its fiduciary duty
The complaint itself tends to show that-Barber is simply couching his policy-based complaint in fiduciary duty terms, as the paragraph that details how Lincoln prema--turely applies offsets to Barber’s benefits concludes by stating, “Lincoln flagrantly breaches' the contract and its fiduciary duties in administering the contract.”' (PL’s Compl. [DN 1] ¶ 20) (emphasis added). The complaint treats the two as one in the-same, .making no meaningful distinction between what duty Lincoln owes Barber under the policy and what duty it owes' Barber under ERISA’s fiduciary duty requirements. This is. the situation envisioned in Hitchcock where a claim is presented in the language of a fiduciary duty claim but in essence is nothing more than a claim under .the terms of the policy. Barber’s allegations are simply that Lincoln breached the policy by, withholding benefits based on other income before that income was reported for tax purposes; this may be sufficient to state a claim -for denial of benefits, but it does not state a claim for breach of the fiduciary duty owed to Barber under ERISA. T,o conclude otherwise would do away with the .distinction between policy-based claims, which do require exhaustion, and statutory claims, which do not, since Barber would be permitted to reframe any instance where Lincoln’s interpretation of the policy is contrary to his understanding of it as a breach of Lincoln’s fiduciary duty and .avoid any exhaustion requirements. Accord Stacy v. Appalachian Regional Healthcare, Inc.,
Because the claim is policy-based as opposed to statutory-based, exhaustion of administrative remedies is required. It is uncontested that Barber has not done this. Therefore, the motion to dismiss Count II is GRANTED. Lincoln argues that the time for administrative review of the claim (180 days) has now closed; and the claim should be dismissed with prejudice, since it will now be impossible for Barber to exhaust his remedies. Barber does not respond to this argument. The policy does state that requests for review of denied claims must be brought within 180 days of receipt of the denial. (Policy [DN 1-2] at 17.) Therefore, Count II is DISMISSED WITH PREJUDICE.
IV. Conclusion
For the reasons set forth above, IT IS HEREBY ORDERED that the Motion to Dismiss is GRANTED.
Notes
. At the outset, the Court notes that “[tjhere is a degree of analytical tension between the deference to plan interpretation required by Firestone [Tire and Rubber Co. v. Bruch,
. It is also worth noting that the other formula used in calculating the partial disability benefit explicitly excludes income from Partial Disability Employment, a category which Barber’s political consulting income may qualify. (Policy [DN 1-2] at 10.) The policy clearly indicates when a source of income is not to be considered, just as it makes clear when a source of income is to be considered, •in reducing the monthly benefit. Thus, Barber’s arguments that the plain text of the policy, • which requires deductions- for Other Income Benefits,-does not actually mean what it says is unavailing.
, Barber argues in his brief opposing dismissal that this paragraph "is expressly incorporated into Count II[.]” (DN 14, at 14.) Count II of the complaint does not “expressly incorporate” any of the preceding paragraphs, but it is clear from the entirety of the complaint that the allegations in paragraph 20 refer to Lincoln’s practice of offsetting on a monthly basis that is the focus of Count II.