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Teresa Shappell v. Sun Life Assurance Company and Lincoln National Life

May 20, 2011


The opinion of the court was delivered by: Morrison C. England, Jr. United States District Judge


Through the present action, Plaintiff Teresa Shappell ("Plaintiff") seeks damages for the denial of total disability benefits she claims entitlement to under disability insurance plans issued by Defendants Sun Life Assurance Company ("Sun Life") and Lincoln National Life Insurance ("Lincoln"). Those disability plans were obtained by Plaintiff's former employer, Employers Insurance Company of Nevada ("Employers").

Although the gravamen of Plaintiff's lawsuit is for breach of contract against both Sun Life and Lincoln for failing to honor Plaintiff's claims, she also sues Employers in the instant matter for wrongfully interfering with her efforts to collect disability benefits. Her Third Cause of Action is directed to Employers and alleges interference with protected rights due to Employers' alleged failure to disclose pertinent information. As a Fifth Cause of Action, Plaintiff also appears to sue Employers for breach of the duty of good faith and fair dealing, although the substance of that claim appears to relate to the insurers' alleged breaches as opposed to any wrongful conduct on the part of Employers.*fn1

Employers now requests that the Court dismiss the claims being asserted against Employers in the present case on grounds that because said claims are already encompassed within another action filed against Employers on Plaintiff's behalf, the present lawsuit represents an impermissible attempt at "claim splitting" by asserting the same claims against Employers in two different forums. Employers alternatively requests dismissal on grounds that this Court lacks jurisdiction because of an arbitration provision, contained in Plaintiff's Employment Agreement, that requires any claim or controversy arising out of the Agreement to be settled through arbitration.

Plaintiff's dispute with Employers stems from Plaintiff's termination on or about January 25, 2008 and the events leading up to that termination. On April 13, 2008, Plaintiff filed a lawsuit in Nevada state court against Employers for gender discrimination, retaliation, and breach of contract. Employers proceeded to remove that case to the District of Nevada on May 5, 2009, and one week later, on May 12, 2009, Employers filed a Motion to Compel Arbitration and Motion to Dismiss. After a February 12, 2010 hearing on that Motion, the Nevada District Court found that the arbitration provision contained within Plaintiff's Employment Agreement was valid and enforceable, therefore requiring Plaintiff to arbitrate her claims against Employers. The Court accordingly granted the Motion to Compel Arbitration and dismissed Plaintiff's Complaint, with prejudice. The arbitration proceedings themselves remain pending.

Significantly, on March 2, 2011, Plaintiff filed a Motion to Amend the arbitration proceedings against Employers to include, inter alia, a claim against Employers for interference with her long-term disability benefits. Employers did not oppose Plaintiff's request to add that interference claim. In the meantime, however, on November 5, 2010, utilizing different counsel than those retained to prosecute the Nevada proceedings, Plaintiff filed the instant lawsuit in this District against both Sun Life, Lincoln and Employers. According to Employers, the present action seeks damages for the same interference with long-term disability benefits that Plaintiff has sought to add to the earlier-filed Nevada arbitration proceeding.

The prohibition against claim splitting bars subsequent litigation involving the same subject matter (Single Chip Systems Corp. v. Intermec IP Corp., 495 F. Supp. 2d 1052, 1058 (S.D. Cal. 2007)), and is designed "to protect the defendant from being harassed by repetitive actions based on the same claim." Clements v. Airport Auth. of Washoe County, 69 F.3d 321, 328 (9th Cir. 1995).

In assessing whether a suit is duplicative, Ninth Circuit case law looks to the causes of action asserted, the relief sought, and the parties to the action. See Adams v. Cal. Dep't of Health Servs., 487 F.3d 684, 689 (9th Cir. 2007) (overruled on other grounds by Taylor v. Sturgell, 553 U.S. 880 (2008)). A suit is deemed duplicative if the claims, parties and available relief do not vary significantly between the two actions. Id.

The singularity of successive causes of action is determined by reference to the so-called "transaction test". Id. That test entails consideration of four criteria; namely, 1) whether the rights or interests established in the initial action would be impaired by prosecution of a second suit; 2) whether substantially the same evidence would be presented in both actions; 3) whether both suits involve infringement of the same right; and 4) whether both suits arise out of the same transactional nucleus of facts. Costantini v. Trans World Airlines, 681 F.2d 1199, 1201-02 (9th Cir. 1982). The last factor has been deemed the most important. Id. at 1202.

Both actions at issue here stem from Employer's alleged interference with Plaintiff's procurement of long-term disability benefits. The substantive interference claims appear identical and arise from the same alleged misconduct and essentially the same factual allegations, to wit, that Employers failed to provide accurate information to its long-term disability carriers and that as a result, Plaintiff suffered damages through the denial of her claims. See Employers' Mot., 6:28-7:5. Consequently, it appears clear that the same evidence is applicable to both actions. Moreover, to the extent this second action against Employers is permitted, any decision reached by the arbitrator in the Nevada action would be subject to circumvention.

After weighing these pertinent factors, the Court concludes that the two actions, insofar as they pertain to Employers, are indeed duplicative. The inherent power to manage the Court's own docket permits it to order dismissal of duplicative claims in order to foster judicial economy and the "comprehensive disposal of litigation". See, e.g., Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 627-28 (9th Cir. 1991).

Dismissal is also warranted here for yet another reason. As already mentioned, Plaintiff's Employment Agreement contains an arbitration provision mandating that "[a]ny controversy arising out of this Agreement....shall be settled by arbitration according to the rules of the American Arbitration Association applicable to disputes arising in Nevada and under Nevada law."

See Employers' Mot., Ex. 2.*fn2 There can be no doubt here that Employers' alleged conduct in failing to disclose information pertaining to a perquisite of Plaintiff's employment (i.e., the long-term disability benefits provided by Employers to its employees) "arose" from Plaintiff's employment so as to come within the scope of the arbitration provision. Even Plaintiff does not argue otherwise. Her Complaint acknowledges that "[a]s a benefit of her employment with Employers, Plaintiff Teresa Shappell received coverage for short and long term disability under both the Lincoln Plan and the Sun Life Plan." Pl.'s Compl., ¶ 7.

Plaintiff instead claims that because disability plan benefits fall within the purview of ERISA, federal jurisdiction over ERISA matters permits the Court to entertain this lawsuit. That contention misses the mark, however, because arbitration provisions like those applicable here may properly extend to federal, as well as state claims.*fn3 See EEOC v. Luce, Forward, Hamilton & Scripps, 345 ...

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