MIDDLE DIVISION STEVEN HUNTER, CHRISTY HUNTER, ) STEVEN TANNER HUNTER, JR., ) ) Plaintiffs, ) ) vs. ) CASE NO. 4:14-CV-114-VEH ) W. HAL SHEPHERD; ED THOMASON; ) THE KENNION GROUP, INC.; ACADEMIC ) BENEFIT TRUST CORPORATION; ) PREFERRED HEALTH ALLIANCE ) CORPORATION; PLANNED BENEFIT ) SERVICES, INC.; ALABAMA HIGH ) SCHOOL ATHLETIC ASSOCIATION, ) ) Defendants. ) MOTION TO DISMISS PLAINTIFFS STATE LAW CLAIMS, CLAIMS FOR PUNITIVE AND EXTRA-CONTRACTUAL DAMAGES, AND TO STRIKE DEMAND FOR JURY TRIAL PURSUANT TO ERISA COME NOW W. Hal Shepherd (Shepherd); Ed Thomason (Thomason); The Kennion Group, Inc. (Kennion Group); Academic Benefit Trust Corporation (Academic Benefit); Preferred Health Alliance Corporation (Preferred Health); Planned Benefit Services, Inc. (Planned Benefit); and Alabama High School Athletic Association (AHSAA) (collectively referred to as Defendants) and pursuant to Rule 12(b)(6), F. R. CIV. P. , hereby move this Honorable Court to dismiss Plaintiffs state law claims, including related claims for extra-contractual and punitive damages, and to strike Plaintiffs demand for a jury trial on the ground such claims are preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1001, et seq. In support of this Motion, the Defendants set forth and state the following: 1. On December 21, 2013, Plaintiffs filed their Complaint in the Circuit Court of St. Clair County, Alabama. FILED 2014 Jan-24 PM 01:36 U.S. DISTRICT COURT N.D. OF ALABAMA Case 4:14-cv-00114-VEH Document 10 Filed 01/24/14 Page 1 of 8 2. In their Complaint, Plaintiffs allege that on December 21, 2011, Tanner Hunter, while a student at the Leeds Alabama public High School, received a permanent spinal cord injury while participating in a wrestling tournament at St. Clair High School in Odenville, St. Clair County, Alabama. (Complaint 11). Plaintiffs further allege that upon information and belief Leeds High School pays AHSAA a premium each year to purchase insurance for all student athletes in their school, and such insurance was purchased from Kennion Group and/or Academic Benefit and/or Preferred Health and/or Planned Benefit and/or Shepherd and/or Thomason. (Complaint 13 & 14). 3. The Plaintiffs claim that after Tanner Hunters initial course of treatment, they were visited by a representative of AHSAA and were assured that insurance was in place to handle a multitude of expenses arising from Tanners injuries. (Complaint 15). The Plaintiffs further claim that they were contacted and met with Shepherd and Thomason and were told that their expenses would be covered by insurance. (Complaint 18 & 19). The Plaintiffs maintain that they gathered and submitted information to Thomason and Shepherd, but were later told that Tanners injury was not considered to be permanent and catastrophic and that only $50,000 of coverage was available. (Complaint 20). In short, the Plaintiffs allege the coverage is not what AHSAA or Thomason and Shepherd represented it would be and does not confer the benefits bargained for. (Complaint 21-24). 4. Plaintiffs Complaint contains six counts as follows: Contract and Fiduciary Duty Breach (Complaint 29-32); Fraud (Complaint 33-39); Negligence/Wantonness (Complaint 40-42); Outrage (Complaint 43-45); Bad Faith (Complaint 46-50); and Illusory Contract (Complaint 51-53). Within each count, Plaintiffs claim the following damages: a. Have incurred and will continue to incur costs associated to the health education and welfare due to the injury that is the basis of this proceeding; b. Suffered and will continue to suffer mental anguish and physical suffering; -2- Case 4:14-cv-00114-VEH Document 10 Filed 01/24/14 Page 2 of 8 c. Failed to receive the basis of their contract; d. Lost wages, lost future wages, educational expenses; e. Caused to incur incidental damages; f. Any and all other damages as allowed by law including attorney fees, expenses lost interest. 5. On January 17, 2014, the Defendants removed this case from the Circuit Court of St. Clair County to the United States District Court for the Northern District of Alabama pursuant to 28 U.S.C. 1331. 6. As set forth in the Notice of Removal, AHSAA is a private agency founded in 1921 and organized by its member schools to regulate, coordinate, and promote the interscholastic athletic programs among its member schools. AHSAA contracted with Planned Benefit to provide accident coverage through a plan named The Academic Benefit Trust (hereinafter referred to as The Plan). A true and correct copy of The Plan entered into between AHSAA and Planned Benefit is attached to the Notice of Removal as Exhibit C. As stated in The Plan, the Managing General Agent (MGA) is Planned Benefit, the Managing General Underwriter (MGU) is Kennion Group, and the Third Party Administrator (TPA) is Preferred Health. 7. The Plan provides it is covered under the Employee Retirement Income Security Act of 1974, as amended (ERISA), 29 U.S.C. 1001, et. seq. Specifically, The Plan states in pertinent part: Plan Administrator - means the licensed Third Party Administrator that administers the plan and is responsible for its routine administration within the meaning of section 3(16) of ERISA. This Plan has elected to be covered under ERISA. Plan Sponsor - means the group that sponsors the plan and is responsible for its overall administration within the meaning of Section 3(16) of ERISA. This Plan has elected to be covered under ERISA. (Exhibit C to the Notice of Removal, p. 2)(Emphasis added). -3- Case 4:14-cv-00114-VEH Document 10 Filed 01/24/14 Page 3 of 8 Conformity with State and Federal Statutes. This Plan has elected to be covered under ERISA. Any provision of this Plan of Benefits which, on its effective date, is in conflict with the statutes of any state or federal regulation is hereby amended to conform to the minimum requirements of those statutes. (Id., p. 6)(Emphasis added). The Plan Sponsor is ABT. Participating Members in the Plan are the participating School, School District, System, Association or other School established and organized body recognized by the State in which it is located. The Plan Administrator is Preferred Health Alliance Corporation. Both the Plan Sponsor AND the Plan Administrator are responsible for discharging all obligations that ERISA and its regulations impose upon plan sponsors and plan administrators, such as delivering summary plan descriptions, annual reports, and other notices when required by law. (Id., p. 9)(Emphasis added). 8. The Plaintiffs claims for benefits under The Plan arise under ERISA Section 502(a)(1)(B) (29 U.S.C. 1132(a)(1)(B)); and, therefore, all of the Plaintiffs claims are preempted by ERISA and due to be dismissed. 9. In addition, Plaintiffs claims for punitive and extra-contractual damages are due to be dismissed or stricken from the Complaint because such damages are not allowed under ERISA. I. ERISA PREEMPTS STATE LAW CLAIMS. 10. In Connecticut State Dental Association v. Anthem Health Plans, Inc., 591 F.3d 1337 (11 th Cir. 2009), the Eleventh Circuit adopted the test for ERISA preemption as set forth in the United States Supreme Court case Aetna Health, Inc. v. Davila, 542 U.S. 200, 124 S. Ct. 2488 (2004) as follows: that if an individual brings suit complaining of a denial of coverage for medical care, where the individual is entitled to such coverage only because of the terms of an ERISA-regulated employee benefit plan, and where no legal duty (state or federal) independent of ERISA or the plan terms is violated, then the suit falls within the scope of -4- Case 4:14-cv-00114-VEH Document 10 Filed 01/24/14 Page 4 of 8 ERISA 502(a)(1)(B). Metropolitan Life [v. Taylor], supra, [481 U.S. 58] at 66, 107 S. Ct. 1542. In other words, if an individual, at some point in time, could have brought his claim under ERISA 502(a)(1)(B), and where there is no other independent legal duty that is implicated by a defendant's actions, then the individual's cause of action is completely pre-empted by ERISA 502(a)(1)(B). 542 U.S. at 210, 124 S. Ct. at 2496. Thus, the Davila test requires two inquiries, (1) whether the plaintiff[s] could have brought [their] claim under 502(a); and (2) whether no other legal duty supports the plaintiffs claim. Connecticut State Dental Assn, 591 F.3d at 1345. 11. Both elements are satisfied in this case. Plaintiffs claims are within the scope of 502(a)(1)(B) as they are seeking benefits under The Plan. In addition, there is no separate legal duty supporting Plaintiffs claims. Plaintiffs claims for benefits arise under an ERISA plan as all of the claims relate to the alleged improper denial of benefits, and the Plaintiffs have specifically pled within each count that they seek the basis of their contract. Accordingly, both elements of the Davila test for ERISA preemption are met in this case. 12. Further, 514(a) (29 U.S.C. 1144(a)) sets forth that ERISA preempts any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. Section 514(a) is ERISAs express preemption provision that defeats claims that seek relief under state-law causes of action that relate to an ERISA plan. Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1212 & 1215 (11 th Cir. 1999). Claims relate to an ERISA plan if they have a connection with or reference to an employee benefit plan. Howard v. Parisian, 807 F.2d 1560, 1563-1564 (11 th Cir. 1987). 13. Further, ERISAs expansive preemption clause is broadly interpreted by the Eleventh Circuit. Swerhun v Guardian Life Ins. Co. Of Am., 979 F.2d 195, 197 (11 th Cir. 1992) (stating The -5- Case 4:14-cv-00114-VEH Document 10 Filed 01/24/14 Page 5 of 8 Supreme Court has noted that the preemption clause is conspicuous for its breadth . . . and has instructed that the clause should be expansively applied (citations omitted)). 14. Importantly, the Eleventh Circuit has repeatedly held that state law causes of action, including claims for breach of contract and bad faith failure to pay, as are alleged in the case here, are preempted by ERISA. See, Gilbert v. Alta Health & Life Ins. Co., 276 F.3d 1292, (11 th Cir. 2000). 15. As set forth above, all six counts of the Plaintiffs Complaint relate to The Plan, yet set forth causes of action pursuant to common law or statutory law of the State of Alabama. Accordingly, each claim is preempted and barred by ERISA. II. PUNITIVE AND EXTRA-CONTRACTUAL DAMAGES. 16. In their Complaint, Plaintiffs request an unspecified amount of punitive damages. (Complaint, 32, 39, 42, 45). 17. However, Plaintiffs claims for punitive damages are due to be dismissed or stricken from the Complaint because such damages are not recoverable under ERISA. Godfrey v. BellSouth Telecomm., Inc., 89 F.3d 755, 761 (11 th Cir. 1996). To be clear, ERISA contemplates and authorizes beneficiaries to bring actions to enforce rights under a plan, but does not provide for any extra- contractual relief such as punitive damages. Bishop v. Osborn Transp., Inc., 838 F.2d 1173, 1174 (11 th Cir. 1988). III. JURY TRIAL. 18. Plaintiffs Complaint includes a jury demand. (Complaint, 53). However, the Eleventh Circuit has held that Plaintiffs are not entitled to a jury trial under ERISAs provisions. Blake v. Unionmutual Stock Life Ins. Co. Of America, 906 F.2d 1525 (11 th Cir. 1990). -6- Case 4:14-cv-00114-VEH Document 10 Filed 01/24/14 Page 6 of 8 WHEREFORE, PREMISES CONSIDERED, Defendants respectfully request that this Honorable Court (1) dismiss Plaintiffs state law claims as set forth in all six counts and require Plaintiffs to amend their Complaint to assert an ERISA cause of action; (2) dismiss or strike Plaintiffs request for punitive damages; and (3) strike Plaintiffs demand for jury trial. Respectfully submitted this 24 th day of January, 2014. OF COUNSEL: /s/ James E. Williams JAMES E. WILLIAMS (ASB-9283-W84J) MELTON, ESPY & WILLIAMS, P.C. P. O. Drawer 5130 /s/ C. Mark Bain Montgomery, AL 36103-5130 C. MARK BAIN (ASB-8555-N58C) PH: (334) 263-6621 Attorneys for Defendant Alabama High FAX: (334) 269-9515 School Athletic Association EMAIL: jwilliams@mewlegal.com mbain@mewlegal.com /s/Richard A. Bearden MASSEY STOTSER & NCHOLS, P.C. RICHARD A. BEARDEN (ASB-0873-E41R) 1780 Gadsden Highway Attorney for Defendants, Ed Thomason; Birmingham, AL 35235-3106 The Kennion Group, Inc.; Academic PH: (205) 838-9004 Benefit Trust Corporation; Preferred Health FAX: (205) 838-9024 Alliance Corporation EMAIL: rbearden@msnattorneys.com /s/ James R. Seale HILL HILL CARTER FRANCO COLE & BLACK JAMES R. SEALE (ASB-3617-E68J) P. O. Box 116 Attorney for Defendant Planned Benefit Montgomery, AL 36101-0116 Services, Inc. PH: (334) 834-7600 FAX: (334) 263-5969 EMAIL: jrs@hillhillcarter.com /s/ John W. Clark IV BAINBRIDGE MIMS ROGERS & SMITH, LLP JOHN WILLIAM CLARK IV (ASB-5187-077C) P. O. Box 530886 Attorney for Defendant Hal Shepherd Birmingham, AL 35253-0886 PH: (205) 879-1100 FAX: (205) 879-4300 EMAIL: jclark@bainbridgemims.com -7- Case 4:14-cv-00114-VEH Document 10 Filed 01/24/14 Page 7 of 8 CERTIFICATE OF SERVICE I HEREBY CERTIFY that a copy of the foregoing has been electronically filed on the 24 th
day of January , 2014, with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following and a hard copy has been served by first-class mail: Attorneys for Plaintiffs: Alexander M. Weisskopf, Esq. MOORE, WEISSKOPF & HILL, PC P. O. Box 310 Moody, AL 35004 alex@stclairlawgroup.com kryals@stclairlawgroup.com /s/ C. Mark Bain OF COUNSEL -8- Case 4:14-cv-00114-VEH Document 10 Filed 01/24/14 Page 8 of 8