Teresa Di Joseph v. Standard Insurance Company

NONPRECEDENTIAL DISPOSITION
To be cited only in accordance with Fed. R. App. P. 32.1
United States Court of Appeals
For the Seventh Circuit
Chicago, Illinois 60604
Argued January 15, 2019
Decided June 7, 2019
Before
JOEL M. FLAUM, Circuit Judge
MICHAEL S. KANNE, Circuit Judge
DAVID F. HAMILTON, Circuit Judge
No. 18-2178
TERESA DI JOSEPH, Appeal from the United States District
Plaintiff-Appellant, Court for the Northern District of Illinois,
Eastern Division.
v.
No. 1:17-CV-04444
STANDARD INSURANCE COMPANY
and UNITEDHEALTH GROUP, Rebecca R. Pallmeyer,
Defendants-Appellees. Judge.
ORDER
Teresa Di Joseph appeals the district court’s dismissal of her claims against
Standard Insurance Company and UnitedHealth Group. Di Joseph sued the companies
for terminating her long-term disability benefits. She brought thirteen claims under
Illinois law and alleged the companies violated the federal Racketeer Influenced and
Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962. The district court found that all
of Di Joseph’s state-law claims were preempted by the Employee Retirement Income
Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001, et seq. The court also held that the
claims DiJoseph framed as state-law claims were necessarily ERISA claims and were
barred under the contractual time limit of the insurance policy, and that the time limit
No. 18-2178 Page 2
was not equitably tolled. The court dismissed the RICO claim on the ground that Di
Joseph failed to allege the elements of civil racketeering. We affirm.
I. Facts and Procedural History
When reviewing a dismissal on the pleadings, we accept all well-pleaded facts as
true and draw reasonable inferences in the plaintiff’s favor. Regains v. City of Chicago,
918 F.3d 529, 533 (7th Cir. 2019), quoting Volling v. Kurtz Paramedic Servs., Inc., 840 F.3d
378, 382 (7th Cir. 2016). Plaintiff Di Joseph was an employee of UnitedHealth for
approximately 32 years. As an employee of UnitedHealth, she received long–term
disability insurance through the company, at no direct cost to her, under a policy issued
by Standard Insurance Company. The Standard policy required a claimant for long-
term disability benefits to file a “Proof of Loss” after a mandatory waiting period.
Important to this case, the policy established a three-year time limit for bringing any
legal action related to a long-term disability claim. Under the policy, the clock on the
three-year limit began running when Standard received a Proof of Loss.
Di Joseph struggled with poor health toward the end of her employment with
UnitedHealth. She took a leave of absence beginning January 14, 2013 and never
returned to her job. Standard confirmed that it received her Proof of Loss on July 12,
2013 and that she was eligible to receive $2,760.11 per month due to fibromyalgia,
complex regional pain syndrome following foot surgery, and Reflex Sympathetic
Dystrophy Syndrome. Standard paid monthly benefits to Di Joseph until a review of
additional medical records led it to conclude that she was no longer disabled. Standard
ceased payments to Di Joseph as of December 31, 2014.
As required by ERISA, Standard had established an administrative appeal
process for such decisions, and Di Joseph used the process to appeal the decision to end
her benefits. With her appeal, she provided a written description of her physical
ailments and letters from a psychologist and a psychiatrist. Standard completed the
administrative review and stood by its decision to end her benefits, which it explained
in a detailed letter dated April 30, 2015. Standard concluded that Di Joseph’s condition
had improved to the point that she could resume her prior occupation and that she
could do sedentary work full-time.
Having exhausted the administrative remedies, Di Joseph filed suit against
Standard and UnitedHealth in an Illinois state court on May 1, 2017. She alleged that
both UnitedHealth and Standard denied her benefits in bad faith, that UnitedHealth
breached its contract with her, and that liability against UnitedHealth was appropriate
under the theory of respondeat superior because it had “retained” Standard to administer
the disability insurance plan. The defendants removed the case to federal court,
No. 18-2178 Page 3
asserting that all of Di Joseph’s claims were preempted by ERISA under 29 U.S.C.
§ 1144(a). Defendants then moved to dismiss, arguing that her state-law claims were
preempted and that her (implicit) ERISA claim was untimely.
During a status conference on July 21, 2017, UnitedHealth orally moved for the
claims against it to be dismissed. UnitedHealth argued it was only the policyholder and
played no role in the denial of benefits. The district court granted the motion to dismiss
as to UnitedHealth and gave Di Joseph the opportunity to amend her complaint to
reflect the change in defendants.
Di Joseph, however, did not amend her complaint to reflect UnitedHealth’s
dismissal. Instead, on September 15, 2017, she reasserted the same four claims against
both UnitedHealth and Standard, added nine more state-law claims, and alleged that
Standard violated the federal RICO Act, 18 U.S.C. § 1962. She alleged that Standard
violated RICO with UnitedHealth by
engaging in deceptive trade practices, false advertising, and
unlawful activity known as [denying] claims for long term
disability insurance policies to claimants, to induce customers
to sign up for long term disability insurance policies, where
racketeers deny payments of long term disability benefits to
their customers . . . .
The complaint went on to allege that Standard and UnitedHealth “created . . . a
scheme of inducing customers to purchase long term disability insurance policies,
which the racketeers know will never be honored . . . . ” In response to the defendants’
motion to dismiss, Di Joseph made no arguments on the merits. Instead, she reasserted
the claims in her amended complaint and briefly mentioned in a footnote that she
believed the time limit should be tolled because she had been mentally disabled since
2013. Di Joseph offered no further details regarding the nature of this disability, nor did
she offer any case law in support of equitable tolling.
On January 8, 2018, the district court found that all of the state-law claims were
preempted by ERISA, and that the implicit ERISA claim was time-barred because the
complaint was filed after the contractual three-year limit had passed. As for equitable
tolling, the court found that the “complaint in this case includes nothing from which the
court could conclude that Ms. Di Joseph’s mental disabilities were such that she is
excused as a matter of law from compliance with reasonable time limitations.” The
district court allowed Di Joseph to amend her complaint once more, “but only if she can
do so consistent with the requirements of Fed. R. Civ. P. 11.”
No. 18-2178 Page 4
Di Joseph filed her Second Amended Complaint on January 29, 2018. She did not
address the court’s concerns. The new complaint alleged the same state-law claims
against both Standard and UnitedHealth, did not mention ERISA, and reasserted the
RICO claim. Defendants again moved to dismiss under Rule 12(b)(6). The district court
granted the motion and dismissed the action with prejudice on May 3, 2018. The court
again found that the state-law claims were preempted by ERISA and that the implicit
ERISA claim was barred by the deadline in the policy. The court dismissed the RICO
claim because some of the elements were “simply not pleaded” and the rest were based
on the theory that Standard and UnitedHealth were luring people like Di Joseph to
purchase the policy, but it was undisputed that UnitedHealth, as the policyholder, was
the one paying the premiums.
On appeal, Di Joseph concedes that her state-law claims are governed by ERISA.
Despite this concession, she argues her claims are not completely preempted by ERISA,
that the judge erred in finding her ERISA claim is time-barred, and that the RICO claim
should not have been dismissed. We affirm. Di Joseph’s state-law claims are preempted
by ERISA and the implicit ERISA claim is barred by the contractual time limit. There
was no plausible argument to support equitable tolling, and the RICO claim has been
waived on appeal.
II. Analysis
“We review a Rule 12(b)(6) dismissal de novo.” Ochoa v. State Farm Life Ins. Co.,
910 F.3d 992, 994 (7th Cir. 2018). To survive a Rule 12(b)(6) motion to dismiss for failure
to state a claim, the plaintiff needs to allege only enough facts to show her claim is
facially plausible. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “A claim has
facial plausibility when the plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the misconduct alleged.”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The plausibility standard in Iqbal, however,
does not amount to a “probability requirement.” Id.; Swanson v. Citibank, N.A., 614 F.3d
400, 404 (7th Cir. 2010). Under this standard, we consider first ERISA preemption, then
equitable tolling, and finally the RICO claim.
A. ERISA Preemption
ERISA was enacted to protect “the interests of participants in employee benefit
plans and their beneficiaries.” 29 U.S.C. § 1001(b). To accomplish this, “ERISA includes
expansive pre-emption provisions, . . . which are intended to ensure that employee
benefit plan regulation would be ‘exclusively a federal concern.’” Aetna Health Inc. v.
Davila, 542 U.S. 200, 208 (2004), quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504,
523 (1981).
No. 18-2178 Page 5
State-law civil claims involving employee retirement and welfare benefits
(including disability insurance) governed by ERISA are completely preempted by
ERISA, with only a few narrow exceptions. See 29 U.S.C. § 1144(a); Aetna Health, 542
U.S. at 208. ERISA is one of the few areas of law subject to “field” preemption, which
“occurs when federal law occupies a ‘field’ of regulation ‘so comprehensively that it has
left no room for supplementary state legislation.’” Murphy v. Nat'l Collegiate Athletic
Ass’n, 138 S. Ct. 1461, 1480 (2018), quoting R.J. Reynolds Tobacco Co. v. Durham County,
479 U.S. 130, 140 (1986); see also, e.g., Trustees of the AFTRA Health Fund v. Biondi, 303
F.3d 765, 776 (7th Cir. 2002) (recognizing ERISA’s field preemption). Courts recognize
the “congressional decision to foreclose any state regulation in the area, even if it is
parallel to federal standards.” Int'l Ass'n of Machinists Dist. Ten v. Allen, 904 F.3d 490,
498 (7th Cir. 2018), quoting Murphy, 138 S. Ct. at 1481.
ERISA’s preemption provision encompasses “any state-law cause of action that
duplicates, supplements, or supplants the ERISA civil enforcement remedy.” Aetna
Health, 542 U.S. at 209. Even claims that purport to be based on state law and do not
mention ERISA may be removed to federal court based on this preemption because
ERISA “converts an ordinary state common law complaint into one stating a federal
claim for purposes of the well-pleaded complaint rule.” Id., quoting Metropolitan Life Ins.
Co. v. Taylor, 481 U.S. 58, 66 (1987) (field preemption applies to ERISA because statute
used preemptive language similar to Labor Management Relations Act).
In the final version of her complaint, Di Joseph sued Standard under state law for
bad faith, promissory estoppel, equitable estoppel, breach of fiduciary duty, common
law fraud, unjust enrichment, negligent hiring and supervision, negligence, intentional
emotional distress, and civil conspiracy. She sued UnitedHealth under state law for bad
faith, breach of contract, and respondeat superior liability for Standard’s alleged
wrongdoing. The underlying theory for all these claims is that the defendants
improperly denied Di Joseph her long-term disability benefits, which are governed by
ERISA. All of these state-law claims therefore fall squarely within ERISA preemption.
As noted above, Di Joseph concedes that her claims are governed by ERISA but
asserts that they are not all completely preempted. She offers no explanation as to
which state-law claims are not preempted or how any portion of them might survive
preemption in the face of controlling precedent. In fact, she does not develop any
substantive argument in opposition to ERISA preemption. Di Joseph’s state-law claims
are completely preempted by ERISA. E.g., Teamsters Local Union No. 705 v. Burlington
Northern Santa Fe, LLC, 741 F.3d 819, 825–26 (7th Cir. 2014) (summarizing ERISA
preemption of state-law remedies); Rice v. Panchal, 65 F.3d 637, 641 (7th Cir. 1995)
No. 18-2178 Page 6
(complete preemption applies “whenever a plaintiff’s cause of action falls within the
scope of an ERISA provision that the plaintiff can enforce” under ERISA).
B. The Time Limit and Equitable Tolling
Di Joseph could still pursue relief under ERISA, of course, if she met the
applicable requirements. The policy at issue established a contractual time limit for
bringing any legal action related to long-term disability claims—three years after Proof
of Loss was received by the insurer. The Supreme Court has endorsed the “principle
that contractual limitations provisions ordinarily should be enforced as written,” calling
that principle “especially appropriate when enforcing an ERISA plan.” Heimeshoff v.
Hartford Life & Acc. Ins. Co., 571 U.S. 99, 108 (2013). ERISA requires benefit plans to set
up administrative dispute resolution processes. 29 U.S.C. § 1133. The statute does not
expressly require exhaustion of administrative remedies before filing suit, but “we have
interpreted ERISA as requiring exhaustion of administrative remedies as a prerequisite
to bringing suit under the statute.” Schorsch v. Reliance Standard Life Ins. Co., 693 F.3d
734, 739 (7th Cir. 2012), quoting Edwards v. Briggs & Stratton Ret. Plan, 639 F.3d 355, 360
(7th Cir. 2011). When determining whether a contractual time limit for filing suit should
be enforced, we consider whether the time limit provides the plaintiff a reasonable
opportunity to file suit after exhausting administrative remedies. Doe v. Blue Cross &
Blue Shield United of Wisconsin, 112 F.3d 869, 874 (7th Cir. 1997).
Di Joseph does not argue the policy’s three-year time limit is unenforceable, and
we see no reason it would be. Standard received her Proof of Loss on July 12, 2013,
which started the three-year clock. Her administrative remedies were exhausted on
April 30, 2015, when Standard denied her appeal of the termination of her benefits. Di
Joseph still had more than a year left to file suit within the three-year filing period. We
have found seven months between exhaustion of administrative remedies and a
contractual deadline to file suit to be reasonable. Abena v. Metropolitan Life Ins. Co., 544
F.3d 880, 883–84 (7th Cir. 2008) (applying three-year limit measured from original claim
to later decision to terminate benefits where limit still allowed seven months to file suit
after termination decision). Under Abena, the policy’s contractual time limit is
enforceable here because it still gave Di Joseph a reasonable opportunity to file suit after
she exhausted her administrative remedies for the benefit termination. 1
1
The three-year limit would obviously not be enforceable as written where, for example, an
insurer paid benefits for four years after receiving the Proof of Loss and only then cut off benefits. See
Abena, 544 F.3d at 884. This case poses no such issue.
No. 18-2178 Page 7
Di Joseph did not file her complaint until May 1, 2017, nearly ten months after
the time limit expired. She argues that mental incapacity prevented her from filing
within the time limit and that the district court should have allowed her claims to go
forward under the doctrine of equitable tolling.
ERISA permits equitable tolling of a contractual time limit in extraordinary
circumstances. Heimeshoff, 571 U.S. at 114. The burden falls on Di Joseph to show that
her mental incapacity prevented her from managing her affairs and acting upon her
legal rights. Miller v. Runyon, 77 F.3d 189, 191 (7th Cir. 1996) (“mental illness tolls a
statute of limitations only if the illness in fact prevents the sufferer from managing his
affairs and thus from understanding his legal rights and acting upon them”).
The district court properly found that equitable tolling was not appropriate here.
First, Di Joseph admitted in her complaint that there was never a time when her
disabilities prevented her from managing her affairs or acting upon her legal rights. In
fact, during the period of her supposed incapacity, her “mother became [Di Joseph’s]
caregiver and managed her daughter’s financial and legal affairs,” ensuring that her
interests were protected. The record also shows that Di Joseph actively participated in
the appeals process of her benefits claim and, through an attorney, initiated an
unrelated legal proceeding during the time she asserts she was incapacitated.
Finally, even if Di Joseph’s legal interests were not protected, she has not raised a
plausible claim in support of her argument for mental incapacity. The only details she
provided regarding any mental impairment come from the letters she submitted from
her psychologist and psychiatrist, both written in February 2013. Neither letter
indicated that Di Joseph had mental disabilities that were so severe that she was
excused from compliance with the reasonable time limitations of the policy. Because Di
Joseph did not present factual allegations sufficient to raise a claim for equitable tolling
above the speculative level, we affirm the district court’s decision.
C. The RICO Claim
We do not address the merits of Di Joseph’s RICO claim because she waived it on
appeal. Arguments properly raised in the district court are still “waived on appeal if
they are underdeveloped, conclusory, or unsupported by law.” Puffer v. Allstate Ins. Co.,
675 F.3d 709, 718 (7th Cir. 2012). Di Joseph’s argument that the district court improperly
dismissed her RICO claim is underdeveloped and unsupported by law, and thus
waived. She barely addressed her RICO claim in her opening brief, only citing the RICO
statute itself and asserting briefly that her RICO claim was not preempted by ERISA.
The latter assertion missed the point; the district court correctly recognized that one
federal statute would not preempt another. Di Joseph’s brief simply did not engage
No. 18-2178 Page 8
with the reasons the district court gave for its dismissal of the RICO claim, which
amounts to waiver. See Williams v. REP Corp., 302 F.3d 660, 666–67 (7th Cir. 2002)
(appellant waived argument by failing to address district court’s reasoning and
principal authority on state-law issue); see also United Central Bank v. Davenport Estate
LLC, 815 F.3d 315, 318 (7th Cir. 2016) (appellants waived challenge to part of district
court’s holding they did not address); Anderson v. Hardman, 241 F.3d 544, 545 (7th Cir.
2001) (dismissing appeal where pro se appellant failed to articulate basis for disturbing
district court’s judgment). On the RICO claim, Di Joseph’s brief offers only an
unexplained citation to United States v. Cagnina, 697 F.2d 915, 920 (11th Cir. 1983), a case
that is not remotely comparable to this one and does not address the district court’s
reasons for dismissing the RICO claims.
The judgment of the district court is AFFIRMED.