ERISA precludes man's breach of contract and insurance fraud claims

By Nicholas Malfitano | Jun 22, 2016

PHILADELPHIA – The U.S. Court of Appeals for the Third Circuit agreed with a trial court that the Employee Retirement Income Security Act of 1974 (ERISA) pre-empted a Philadelphia man’s breach of contract and fraud claims.

Judges D. Michael Fisher, Patty Shwartz and Robert E. Cowen, in a per curiam ruling issued June 16, ruled Andre D. Butler’s claims leveled against Liberty Mutual were groundless and affirmed a prior decision from the U.S. District Court for the Eastern District of Pennsylvania in this matter.

“On June 8, 2011, Butler allegedly suffered an injury at work as an employee of Home Depot U.S.A., Inc. He applied for short term disability benefits under a disability insurance policy with Liberty Life Assurance Company of Boston that Home Depot sponsored,” the Third Circuit explained. “Butler received short term disability benefits through Sept. 27, 2011, after which Liberty Life determined that Butler was no longer eligible.”

According to the federal appellate court, Butler simultaneously attempted to receive workers’ compensation benefits, which ultimately failed after his lawsuit challenging the denial of workers’ compensation benefits was dismissed in the District Court on July 23.

“Butler then brought the action at issue here challenging the denial of his claim for disability benefits under the disability insurance policy that Home Depot sponsored,” the Third Circuit judiciary said.

“Butler’s complaint alleged breach of contract and fraud claims, and named Liberty Mutual as a defendant. After two pre-service amendments, a second amended complaint was served, with counsel appearing on behalf of an entity listed as Liberty Mutual Insurance Company,” the Third Circuit added.

According to the appellate court, Liberty Mutual motioned to dismiss Butler’s second amended complaint, arguing it was “not a proper party” because Liberty Life had made the benefits-denial determination, and because ERISA preempted Butler’s state law claims.

“Thereafter, Butler filed a third amended complaint in order to name Liberty Life as a party, then moved separately to add a conspiracy count. Liberty Mutual moved to dismiss the third amended complaint. The District Court dismissed the complaint with prejudice, and denied leave to add the conspiracy count as futile. This appeal followed,” the Third Circuit said.

Based on ERISA’s “uniform regulatory regime” over employee benefit plans”, the Third Circuit believed the District Court was correct to rule it pre-empted Butler’s contract and fraud claims, and affirmed their ruling.

The Third Circuit commented, “On the face of Butler’s complaint, which includes copies of various policy documents from the disability-insurance plan, state-law claims like the contract and fraud claims that Butler has brought in his complaint fall within the scope of ERISA preemption because they ‘relate’ to an ERISA-governed benefits plan. Consequently, the District Court did not err when it dismissed Butler’s complaint on preemption grounds.”

“Furthermore, pleading more factual support for Butler’s state-law contract and fraud claims would not change the above preemption analysis. We are satisfied that any additional potential amendment to those claims – which Butler did not request – would have been futile,” the Third Circuit clarified.

“Relatedly, we agree with the District Court’s conclusion that Butler’s request to again amend his complaint and add a new conspiracy count was futile because Butler never plausibly pleaded the elements of conspiracy. We will thus affirm the District Court’s judgment dismissing Butler’s case with prejudice,” the Third Circuit concluded.

The defendant is represented by Sarah C. Yerger of Post & Schell, in Harrisburg.

U.S. Court of Appeals for the Third Circuit case 16-1316

U.S. District Court for the Eastern District of Pennsylvania case 2:15-cv-04138

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at

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