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Cynthia Krukowski v. Omicron Technologies

March 31, 2011

CYNTHIA KRUKOWSKI , PLAINTIFF,
v.
OMICRON TECHNOLOGIES, INC. ,MARILYN G. RABB FOUNDATION ,AND LIONEL RABB , DEFENDANTS.



The opinion of the court was delivered by: Magistrate Judge Martin C. Ashman

MEMORANDUM OPINION AND ORDER

Plaintiff Cynthia Krukowski ("Krukowski") filed this action against Defendants Omicron Technologies, Inc. ("Omicron"), the Marilyn G. Rabb Foundation ("the Foundation"), and Lionel Rabb ("Rabb") (collectively, "the Defendants"), alleging sex discrimination under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., violations of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., breach of contract, fraud, and consumer fraud. After the Defendants filed an initial motion to dismiss, Krukowski submitted an amended complaint alleging the same claims with greater specificity. The parties subsequently consented to this Court's jurisdiction, and the case was reassigned for all proceedings, including an entry of final judgment, pursuant to N.D. Ill. Rule 73.1. Before the Court now is Defendants' Motion to Dismiss Count II (ERISA), Count V (fraud), and Count VI (consumer fraud) alleged in the amended complaint. After careful consideration of the amended complaint and the parties' briefs, the Court finds that the motion should be granted in part and denied in part.

I. Background*fn1

In May or June of 2009, Krukowski became an employee of Omicron, a consulting firm based in Chicago, Illinois that specializes in developing software packages used in the student information industry and in educational organizations. See http://www.omicrontech.net/About. Acting as a Senior Project Manager, Krukowski alleges that she performed job duties for both Omicron and the Foundation, a non-profit organization dedicated to creating programs for young people in the Chicago area. See http://www.omicrontech.net/MGRF. According to Krukowski, Omicron and the Foundation are indistinguishable entities, with Defendant Rabb serving as the Foundation's founder and as Omicron's president.

On July 29, 2009, Krukowski and Omicron memorialized their employment relationship by entering an employment agreement. In addition to the terms of employment, compensation, and other job-related rights and obligations, the agreement guaranteed that Krukowski would be able to participate in any health insurance plan maintained by Omicron on the same basis as other Omicron employees as follows:

Employee shall be eligible to participate in any employee benefit plans, medical insurance plans, life insurance plans, disability income plans, retirement plans, expense reimbursement plans and other benefit plans or programs made available to other employees of Employer as long as they are kept in force by Employer and provided that Employee meets all eligibility requirement and other terms, conditions and restrictions of such plans and programs.

As part of her employment, Omicron provided Krukowski with health insurance under a group policy written by Aetna. Krukowski, however, never received a summary plan description of the Aetna group policy. Krukowski alleges that her coverage was cancelled on October 31, 2009, and that Omicron then transferred most of its employees covered by the Aetna plan to another health insurance plan held by the Foundation in December. When Krukowski sought emergency medical treatment in December, 2009 at Northwestern Memorial Hospital, however, she was told by the hospital's admission department that her medical insurance -- which she alleges was the now-cancelled Aetna plan -- was no longer valid.

Concerned by this news, Krukowski contacted Rabb, who told her that she was covered by medical insurance and that should she receive the medical treatment she needed. Krukowski did so, only to learn later that she was not, in fact, covered by any medical insurance by her employer. As a result, she incurred $10,000 in medical bills that were not covered by insurance. Krukowski was later terminated in January, 2010, and subsequently brought the instant suit.

II. Legal Standard

Federal Rule of Civil Procedure 12(b)(6) provides that a party may move for the dismissal of a cause of action for failure to state a claim on which relief can be granted.

Fed. R. Civ. P. 12(b)(6). Rule 12(b)(6) motions are analyzed in conjunction with the legal standard set forth in Rule 8, which requires that a complaint give the defendant fair notice of what the plaintiff's claims are and the grounds on which they rest. Swierkiewicz v. Sorema, N.A., 534 U.S. 506, 510-12 (2002). In reviewing a motion under Rule 12(b)(6), a court accepts a complaint's fact allegations as true and draws all reasonable inferences in the plaintiff's favor. Pugh v. Tribune Co., 521 F.3d 686, 692 (7th Cir. 2008). A plaintiff's legal conclusions, however, are not taken as true. Ashcroft v. Iqbal, - U.S. -, 129 S.Ct. 1937, 1949 (2009).

A complaint survives a Rule 12(b)(6) challenge when it contains sufficient factual material "to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007). The complaint need not be stated in such detail that it is probable the plaintiff will prevail; indeed, a complaint can survive dismissal "even if it strikes a savvy judge that actual proof of [its] facts is improbable[.]" Id. at 556. A plaintiff need only allege sufficient facts for a court to conclude there is a reasonable expectation that discoverable evidence will support the complaint's allegations. Id.

III. Discussion

Defendants argue that Count II (ERISA) in Krukowski's amended complaint should be dismissed pursuant to Fed. R. Civ. P. 12(b)(6) for failing to state a claim, and Counts V (fraud) and VI (consumer fraud) should be dismissed under the same standard because they are preempted by ERISA. The Court begins by addressing the intricate and often entangled provisions at issue in Count II of the amended complaint, forewarned that ERISA's enforcement scheme constitutes a "Serbonian bog wherein judges are forced to don logical blinders and split the linguistic atom to decide even the most routine cases." DiFelice v. Aetna U.S. Healthcare, 346 F.3d 442, 454 (3d Cir. 2003).

A. Count II

Liberally construed, Count II of Krukowski's amended complaint alleges four violations of ERISA. By failing to notify her of the termination of her insurance within sixty days of being fired, the Defendants violated: (1) § 1024(b)(1), which requires a plan administrator to provide participants with a summary description of modifications such as a material reduction of services or benefits within sixty days of the adoption of such changes, 29 U.S.C. § 1024(b)(1); and (2) § 1109(a), which makes a plan fiduciary who violates his statutory responsibilities personally liable to the plan for any losses that stem from the violation of those duties, 29 U.S.C. § 1109(a).*fn2 Krukowski further alleges that the Defendants' alleged failure to notify her that her health insurance coverage had been terminated violated: (1) § 1132(a)(1)(B), which permits plan participants to bring an action to recover benefits due under the plan, 29 U.S.C. § 1132(a)(1)(B); and (2) § 1132(a)(3), allowing participants to obtain equitable relief to address plan violations or to enforce the terms of a plan, 29 U.S.C. § 1132(a)(3).

1. Section 1024(b)(1)

Section 1024(b)(1) of ERISA provides, in relevant part, that whenever a plan modification occurs "that is a material reduction in covered services or benefits provided under a group health plan . . . a summary description of such modification or change shall be furnished to participants and beneficiaries not later than 60 days after the date of the adoption of the modification or change."*fn3 29 U.S.C. § 1024(b)(1). Although the parties do not specify which portion of § 1024(b)(1)'s broad notice provisions are at issue in this case, the Court assumes that Krukowski's allegation that she should have been notified within sixty days of changes in her insurance coverage refers to the quoted language. (Amend. Compl. at ¶ 45.)

Citing the Seventh Circuit's decision in Andersen v. Chrysler Corp., 99 F.3d 846 (7th Cir. 1996), the Defendants argue that Krukowski's claim under § 1024(b)(1) fails because such "technical" violations of ERISA's notice requirements cannot support a claim for benefits or damages. To some degree, this position is correct because Andersen and other Seventh Circuit precedents have made clear that narrow violations of the various notice obligations imposed on plan administrators by § 1024(b)(1) do not ordinarily give ...


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