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Pensado v. Life Insurance Company of North America

United States District Court, W.D. Texas

October 3, 2019





         Before this Court are Defendant Life Insurance Company of North America's Rule 12(b)(6) Motion to Dismiss, filed on April 8, 2019 (Dkt. No. 12); Plaintiff's Response, filed on April 17, 2019 (Dkt. No. 14); and Defendant's Reply, filed on April 23, 2019 (Dkt. No. 15). On August 23, 2019, the District Court referred the above motion to the undersigned Magistrate Judge for Report and Recommendation pursuant to 28 U.S.C. § 636(b)(1), Federal Rule of Civil Procedure 72, and Rule 1 of Appendix C of the Local Rules of the United States District Court for the Western District of Texas (“Local Rules”).

         I. BACKGROUND

         Plaintiff Juan Pensado (“Plaintiff”) worked at the Four Seasons hotel organization for nearly 30 years and was most recently the Director of Banquets for the Four Seasons Hotel in Austin, Texas. As the Director of Banquets, Plaintiff “had a very physical job requiring him to constantly walk, stand, climb stairs all day-nearly 10-12 hours on a normal day and often for 18 hours a day.” Dkt. No. 1 at ¶ 8.

         In March 2014, Plaintiff stepped into a pothole and injured his left foot. Plaintiff was eventually diagnosed with Charcot foot, “a condition caused by nerve damage especially in people with diabetes, like Pensado, and which can further result in bone breakage, joint deterioration, foot ulcers and infections.” Id. at ¶ 10. Plaintiff was prescribed pain medication and his foot was placed in a cast. After several months, Plaintiff attempted to return to work, but his injury worsened, and he eventually had to undergo several surgeries on his foot. Despite the surgeries and continued treatment, Plaintiff's condition did not improve. As a result of the surgeries and his restricted mobility, Plaintiff missed several months of work at the Four Seasons.

         Through his employment with the Four Seasons, Plaintiff was eligible to apply for both short-term and long-term disability benefits under a disability benefits plan entitled the “Life Insurance of North America Group Policy” (the “Policy”) issued by Life Insurance Company of North America, also known as CIGNA Group Insurance Company (“LINA”).[1] Plaintiff applied and was granted 24 months of short-term disability benefits under the Policy, which provides for such benefits when a participant “is unable to perform the material duties of his or her Regular Occupation.” Id. at ¶ 19.

         In late 2014, Plaintiff lost his job with the Four Seasons because his disability prevented him from returning to work. Accordingly, Plaintiff applied for long-term disability benefits (“LTD”) under the Policy, which provides that a participant is eligible for LTD benefits if he is “unable to perform the material duties of any occupation for which he or she is, or may reasonably become, qualified based on education, training or experience.” Id. at ¶ 22. Although LINA initially denied Plaintiff's application in July 2015, it reversed its denial after Plaintiff appealed the decision. However, on June 15, 2017, LINA again denied, and continues to deny, LTD benefits to Plaintiff based on the “any occupation” language in the Policy, contending that Plaintiff could perform an occupation. Plaintiff alleges that LINA “unreasonably, arbitrarily and capriciously ignored a mountain of medical evidence and expert medical opinions from Pensado's treating doctors whose conclusions showed him unable to perform any occupation.” Id. at ¶ 24. On December 12, 2018, Plaintiff received his final denial notice and was informed that he had exhausted all administrative appeals in his case.

         While Plaintiff's LTD benefits claim was pending before LINA, Plaintiff also filed for Social Security benefits with the Social Security Administration (“SSA”). Plaintiff alleges that LINA referred him to Advantage 2000 Consultants (“Advantage”), a consultant company that represents individuals seeking Social Security disability benefits. Plaintiff retained Advantage to represent him in his claim for Social Security benefits and Advantage assigned Plaintiff an attorney for the proceedings. In September 2017, Plaintiff was awarded Social Security benefits.

         Plaintiff alleges that he was not aware that Advantage “had a longstanding relationship with [LINA] in which . . . Advantage 2000 receives a contingency fee from [LINA] from the Social Security benefits . . . when it recovers such benefits for a person who may also be covered by a private plan for disability benefits.” Id. at ¶ 49. Plaintiff alleges that this “[t]his contractual sweetheart arrangement between [LINA] and Advantage 2000 creates not only a conflict of interest between Advantage 2000 and Pensado, but also a breach of fiduciary duty between Pensado and the attorney who provides legal services to Pensado.” Id. at ¶ 50. Plaintiff complains that this arrangement interfered with and reduced Advantage's objectivity in negotiating any subrogation by LINA to the Social Security benefits obtained for Plaintiff. “By receiving a contractual contingent fee for work performed for [LINA] and ostensibly for Pensado's benefit, the fee arrangement between [LINA] and Advantage 2000 and its attorney assigned to represent Pensado creates an irreconcilable conflict of interest.” Id. at ¶ 51. In addition, Plaintiff complains that Advantage shared with LINA confidential information obtained from representing Plaintiff in his Social Security proceedings. Thus, Plaintiff alleges that LINA tortiously interfered with “the contract that Advantage 2000 and its attorney have with Pensado, as well as with the fiduciary duties owed Pensado by Advantage 2000 and its attorney for the work they perform to obtain and retain as much of his Social Security benefits as possible.” Id. at ¶ 53.

         On February 19, 2019, Plaintiff filed this lawsuit against LINA and “Life Insurance Company of North America Group Policy, ” alleging (1) wrongful denial of benefits under the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001-1461 (“ERISA”), (2) failure to provide documents allegedly required by ERISA, and (3) breach of fiduciary duty under ERISA. Plaintiff also has asserted a tortious interference with business relationship claim under Texas law against LINA, alleging that LINA interfered with his business relationship with the consulting company and his lawyer who represented him before the Social Security Administration.

         On April 8, 2019, LINA filed this Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), arguing that Life Insurance Company of North America Group Policy should be dismissed from this lawsuit because it is not a proper defendant under ERISA and is not a legal entity capable of being sued. LINA also argues that Plaintiff's Texas tortious interference claim is preempted by ERISA.


         Federal Rule of Civil Procedure 12(b)(6) allows a party to move to dismiss an action for failure to state a claim upon which relief can be granted. In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court “accepts all well-pleaded facts as true, viewing them in the light most favorable to the [nonmovant].” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal quotation marks omitted). The Supreme Court has explained that a complaint must contain sufficient factual matter “to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the [nonmovant] pleads factual content that allows the court to draw the reasonable inference that the [movant] is liable for the misconduct alleged.” Ashcroft, 556 U.S. at 678. “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitle[ment] to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (internal quotations and citations omitted). “Factual allegations must be enough to ...

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