Melito v. Royal Bank of Canada

Background

Christopher Melito sued Royal Bank of Canada, RBC Capital Markets, LLC, RBC USA Holdco Corporation, Life Insurance Company of North America, New York Life Insurance Company, and The Cigna Group. The complaint asserted fraud, misrepresentation, conspiracy to commit fraud, and aiding and abetting fraud against the RBC Defendants and LINA Defendants. It also asserted that the RBC Defendants tortiously interfered with Melito’s prospective business relationships.

Melito alleged that he developed health problems while working for RBC Capital Markets and applied for short-term disability benefits under his employer’s disability plan. The claim was denied in October 2010, and the denials were affirmed on appeals in July 2011 and January 2012. Melito alleged that the defendants wrongfully denied his claim and later interfered with his attempts to obtain employment between November 2022 and August 2023.

The RBC Defendants removed the case from New York Supreme Court to the Southern District of New York. Both groups of defendants moved to dismiss, arguing that the claims were preempted by ERISA and that any ERISA claim was time-barred. The RBC Defendants separately argued that the tortious-interference claim was time-barred and that Melito lacked standing.

Fraud Claims and ERISA Preemption

ERISA preemption generally prevents state-law claims that duplicate, supplement, or replace ERISA’s remedies, or that relate to an employee-benefit plan. The court concluded that Melito’s fraud, conspiracy, and aiding-and-abetting claims centered on the alleged wrongful denial of benefits under the disability plan. The court therefore found that those claims were preempted by ERISA.

The court rejected Melito’s argument that the disability plan was merely background for ordinary fraud claims. It distinguished cases involving fraud claims that did not depend on the operation or management of an ERISA plan. Here, the alleged fraud was a scheme to deny coverage under the plan, so resolving the claims would require addressing the plan and the disability-benefit denial.

Time Bar

The court also held that Melito could not now bring an ERISA claim concerning the disability denial because it was time-barred. Applying New York’s six-year limitations period for contract actions, the court determined that an ERISA claim accrued when the plan clearly rejected the claim and the rejection was known, or should have been known, to the plaintiff. The relevant denials occurred on October 25, 2010, July 13, 2011, and January 24, 2012, all more than ten years before this action.

Remaining State-Law Claim and Disposition

The court found that the tortious-interference claim did not directly relate to the disability claim and therefore was not preempted by ERISA. Because the federal claims were dismissed, however, the court declined to exercise supplemental jurisdiction over that remaining state-law claim. The court cited the early stage of the case and the interests of allowing New York courts to decide state-law issues.

The court granted the RBC Defendants’ motion to dismiss and the LINA Defendants’ motion to dismiss with respect to the fraud claims, and those claims were dismissed with prejudice. The court declined to exercise supplemental jurisdiction over Melito’s remaining tortious-interference claim against the RBC Defendants and remanded the case to state court. The clerk was directed to terminate the LINA Defendants and the two motions to dismiss.