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STEIN v. UNUM PROVIDENT INSURANCE COMPANY OF AMERICA

September 22, 2005.

Robert Stein, Plaintiff,
v.
Unum Provident Insurance Company of America, Steve Foreman, and Prosource Financial, LLC, Defendants.



The opinion of the court was delivered by: MICHAEL MASON, Magistrate Judge

MEMORANDUM OPINION AND ORDER

This matter is before the Court on defendant Unum Life Insurance Company of America's (improperly named as Unum Provident Insurance Company of America ("Unum")) motion to dismiss Robert Stein's ("Stein") complaint and defendants Steve Foreman ("Foreman") and Prosource Financial, LLC's ("Prosource") motion to dismiss. For the reasons stated below, both motions to dismiss are granted.

Background

  Stein, a licensed accountant and principal of the firm Garen & Associates, filed an eight-count complaint against Unum, Foreman and Prosource. Stein alleges claims against Unum for breach of fiduciary duty (Count I), equitable estoppel (Count II), fraud (Count III) and breach of contract (Count VIII). Stein's breach of fiduciary duty count against Unum alleges that Unum violated the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1109(a) and 1132(a)(1)(B). Stein also alleges claims against Foreman and Prosource for fraud and negligent misrepresentation (Counts IV-VII). Stein alleges that he purchased a long term disability policy from Unum, policy no. 34793. The complaint alleges that Unum was the administrator of Stein's long term disability policy and had control of the management and distribution, if necessary, of funds to Stein. Stein further alleges that he was a participant in the long term disability plan and that he would be considered a beneficiary of the plan within the meaning of ERISA, should he become disabled.

  The complaint alleges that both Stein and Foreman, on Stein's behalf, spoke with Unum representative Pattie Lee. Stein alleges that Ms. Lee agreed to base Stein's disability benefits on his cash flow earnings rather than on his W-2 and K-1 schedules. From 1990-2003, Stein sent annual letters to Unum regarding his cash flow earnings for the previous year. In 1998, Unum representative Jennifer Doonan contacted Stein and instructed him to send his annual letter regarding his cash flow earnings to Unum's new office location. Stein alleges that he reasonably relied on Unum's representations that in the event of a disability, he would receive disability benefits based on his cash flow earnings.

  In 2003, Stein made a claim for disability benefits under the long term disability plan due to Multiple Sclerosis. Stein alleges that in spite of the agreement between Stein and Unum, Unum has unreasonably refused to pay his disability benefits based upon his cash flow earnings and is attempting to pay disability benefits based solely on Stein's W-2 and K-1 schedules.

  In the claims against Foreman and Prosource, Stein alleges that Foreman and Prosource breached duties owed to Stein by failing to adequately research, investigate and negotiate the insurance contract procured on Stein's behalf to allow for Stein's disability benefits to be based on his cash flow earnings; by failing to adequately research, investigate, negotiate and understand the consequences of the provisions of the contract; by failing to notice and correct the ambiguity in the contract; by failing to know that the insurance contract required Stein to furnish his K-1 and W-2 forms to compute Stein's disability benefits after 1990; and by failing to advise and warn Stein of the insufficient disability benefits he would receive under the insurance contract. Stein also alleges that Foreman and Prosource gave him advice with negligent misrepresentations prior to and during the signing of the insurance contract.

  Stein further alleges that Foreman represented to Stein that he entered into an agreement with Unum on Stein's behalf for Stein's disability benefits to be based upon his cash flow earnings. Stein alleges that Foreman made this misrepresentation knowing that it was false and that he relied on Foreman's misrepresentation. As a result, Stein alleges that he was financially injured and is now forced to litigate his entitlement to disability benefits based on his cash flow earnings.

  In each count of the complaint, Stein asks the Court to enter an order requiring Unum and/or Foreman and Prosource to pay him disability income benefits based on his cash flow earnings.

  Analysis

  A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) challenges the sufficiency of the complaint for failure to state a claim upon which relief may be granted. General Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). Dismissal is appropriate only if it appears beyond a doubt that the plaintiff can prove no set of facts in support of its claim that would entitle it to relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Kennedy v. Nat'l Juvenile Det. Ass'n, 187 F.3d 690, 695 (7th Cir. 1999). In ruling on the motion, the court accepts as true all well pleaded facts alleged in the complaint, and it draws all reasonable inferences from those facts in favor of the plaintiff. Jackson v. E.J. Brach Corp., 176 F.3d 971, 977 (7th Cir. 1999).

  Stein's State Law Claims

  A. State Law Claims Against Unum

  Unum argues that Stein's state law claims for equitable estoppel, fraud and breach of contract should be dismissed because the claims are preempted by ERISA. There are two ways in which state common law causes of action may be preempted by ERISA. First, state law claims may be displaced by the civil enforcement provisions of ERISA § 502(a), 29 U.S.C. § 1132(a). See Metro. Life Ins. Co. v. Taylor, 481 U.S. 58 (1987). When a claim is displaced by § 502(a), it is recharacterized as a claim arising under ERISA. Second, state law claims may be superseded by ERISA § 514(a), 29 U.S.C. § 1144(a). When a claim is superseded by § 514(a), it is ...


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