Opinion
No. 02-02168 GA
June 26, 2002
ORDER GRANTING PLAINTIFFS' MOTION TO REMAND
On February 25, 2002, plaintiffs Marie Almond and Medvantage, LLC ("Medvantage") filed this action against defendants Bart Berretta and Executive Employee Benefits, Inc. ("Executive") in the Chancery Court of Tennessee alleging common law negligence and breach of contract and violations of the Tennessee Consumer Protection Act, Tenn. Code Ann. § 47-18-101 et seq., and unlawful insurance acts in violation of Tennessee Code Annotated sections 56-53-103(2) and (3). Plaintiffs seek $500,000 for Almond's unpaid medical expenses, pain and suffering, premiums paid, and treble damages, prejudgment interest, and an award of attorneys' fees. On March 12, 2002, defendants removed the action to this court pursuant to 28 U.S.C. § 1446, asserting that this action presents a federal question governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., as plaintiffs' claims relate to payment of benefits by an employee benefit plan. On April 3, 2002, plaintiffs filed a motion to remand arguing that their causes of action arise under the common law and statutes of Tennessee and that a federal defense cannot be used as a basis for removal. The court now considers this motion.
The following factual allegations are included in plaintiffs' complaint and are taken as true for purposes of this order. All parties are resident citizens or Tennessee corporations with their principal places of business in Tennessee. (Compl. ¶¶ 1, 2.) The complaint alleges that defendants solicited the employee group health insurance business of Medvantage in the fall of 2000. Id. ¶ 4. Plaintiffs allege that defendants represented that an insurance company named Employers Mutual, LLC ("Employers Mutual"), a Nevada insurance corporation, would serve the employee group health insurance needs of Medvantage and its employees. Id. Medvantage contracted with defendants to begin its employee health insurance coverage with Employers Mutual effective March 1, 2001. Id. ¶ 5. Berretta informed Medvantage that Employers Mutual was not licensed to do insurance business in Tennessee but that it was not required to be licensed since the coverage purchased was an ERISA contract. Id. Plaintiffs relied upon these representations. Id. ¶ 4. Plaintiffs timely paid their premiums to Employers Mutual. Id. ¶ 6.
On July 1, 2001, Almond was diagnosed with breast cancer and began treatment. Id. ¶ 7. Her healthcare providers timely submitted bills for services rendered to Employers Mutual. Id. In October 2001, Almond learned that none of her health care providers had been paid. Id. ¶ 8. Plaintiffs repeatedly called Berretta demanding assistance in getting the bills paid. Id.
In the fall of 2001, plaintiffs learned that the state of Florida had issued a cease and desist order against Employers Mutual effective March 15, 2001, two weeks after the effective coverage date of the plaintiffs' policy. Id. ¶ 9. The state of Nevada issued an emergency cease and desist order against Employers Mutual on October 12, 2001. Id. ¶ 10. Similar orders were issued by the states of Texas, Alabama, Illinois, Washington, and Georgia. Id.
On December 13, 2001, the United States District Court for the District of Nevada found that Employers Mutual had violated ERISA. Id. ¶ 11. The Court removed Employers Mutual's owners and operators and appointed an independent fiduciary to run the company. Id. On February 1, 2002, all coverage issued by Employers Mutual was terminated, and health insurance coverage for plaintiffs ceased. Id. Almond has over $58,000 in unpaid medical bills which she asserts should have been paid by Employers Mutual. Id.
Defendants argue that this court has federal question jurisdiction over this action under 28 U.S.C. § 1331 since plaintiffs' causes of action are completely preempted by ERISA, 29 U.S.C. § 1144(a), and are displaced by ERISA's civil enforcement provision, 29 U.S.C. § 1132(a)(1)(B). In contrast, plaintiffs contend that removal is improper since a federal question, whether ERISA preempts state law causes of action, arises only in defendants' answer.
28 U.S.C. § 1331 states, "The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States."
A civil case originally filed in state court may be removed by a defendant to federal court if it could have been brought in federal court originally. 28 U.S.C. § 1441(a). Removal statutes are to be narrowly construed since they implicate federalism concerns. Long v. Bando Mfg. of Am., Inc., 201 F.3d 754, 757 (6th Cir. 2000). As the party seeking removal, defendants have the burden of showing that the district court has original jurisdiction. Id.
28 U.S.C. § 1441(a) provides:
Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.
The central inquiry in determining whether there is a federal question in this case is the "well-pleaded complaint rule." Rivet v. Regions Bank of La., 522 U.S. 470, 475 (1998). The well-pleaded complaint rule provides that "federal question jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987) (citing Gully v. First Nat'l Bank, 299 U.S. 109 (1936). When the complaint asserts only state law causes of action, federal courts generally lack subject matter jurisdiction and the action is not removable. Peters v. Lincoln Elec. Co., 285 F.3d 456, n. 11 (6th Cir. 2002). "That a defendant raises a federal defense to a state law claim, including a preemption defense, is immaterial for jurisdictional purposes." Id. (citing Caterpillar, 482 U.S. at 393.
However, the complete preemption doctrine provides a narrow exception to the well-pleaded complaint rule. If Congress intends to completely preempt a particular area of state law, then any civil action raising this type of claim is necessarily presumed to allege a claim arising under federal law. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65-66 (1987) The Supreme Court has found that ERISA contains a broad preemption provision, 29 U.S.C. § 1144(a), which mandates the application of the complete preemption doctrine to claims arising under ERISA, id., such that ERISA preempts any state law claims that "relate to" any employee benefit plan as that term is defined by ERISA. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987). Such preemption is narrowly limited "to state common law or statutory claims that fall within the ERISA civil enforcement provision of 29 U.S.C. § 1132(a)(1)(B)," which provides:
29 U.S.C. § 1144(a) provides:
[T]he provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.
ERISA defines an employee welfare benefit plan as one which provides to employees "medical, surgical, or hospital care of benefits or benefits in the event of sickness, accident, disability, [or] death," whether these benefits are provided "through the purchase of insurance or otherwise." 29 U.S.C. § 1002(1).
A civil action may be brought by a participant or beneficiary to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.29 U.S.C. § 1132(a)(1)(B). Thus, state law causes of action that seek to recover benefits, enforce rights, or clarify rights to future benefits should be re-characterized by the court as a superseding ERISA action enforceable by § 1132(a)(1)(B) and, thus, arise under federal law. Metropolitan Life, 481 U.S. at 64-66.
Section 1144(a)'s phrase "relate to" has been given broad meaning. Authier v. Ginsberg, 757 F.2d 796, 800 (6th Cir. 1985) (citing Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)). The Supreme Court has held that a state claim is preempted if "it has connection with or reference to that plan." Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985). The Sixth Circuit has explained: "It is not the label placed on a state law claim that determines whether it is preempted, but whether in essence such a claim is for the recovery of an ERISA plan benefit." Cromwell v. Eguicor-Eguitable HCA Corp., 944 F.2d 1272, 1275-76 (6th Cir. 1991). For example, a breach of contract claim arising out of a failure to provide benefits under the insurance contracts is preempted by ERISA. See, e.g., Pilot Life, 481 U.S. at 41. Only state law claims which have a tenuous, remote, or peripheral effect on employee benefit plans are not preempted. Cromwell, 944 F.2d at 1276; see also Warner v. Ford Motor Co., 46 F.3d 531 (6th Cir. 1995) (holding that an employee's state age discrimination claim, which has no counterpart or superseding cause of action in ERISA, is not removable even though the employee had taken an early retirement in lieu of discharge and was receiving benefits under a retirement agreement governed by ERISA).
Within this framework, the Fifth and Eleventh Circuits have both found that Congress did not intend for ERISA to preempt state law tort claims brought against an independent insurance agent. Morstein v. Nat'l Ins. Servs., Inc., 93 F.3d 715, 722-24 (11th Cir. 1996) (holding that a plan beneficiary's claim against an independent agency and its agent for fraudulently inducing her to change benefit plans was not preempted by ERISA); Perkins v. Time Ins. Co., 898 F.2d 470, 473 (5th Cir. 1990) (holding that an independent insurance agent's fraudulent conduct in inducing potential participants to contract for an ERISA plan only relates to the plan indirectly). The Fifth Circuit reasoned that such preemption would "immunize agents from personal liability for their solicitation of potential participants in an ERISA plan prior to its formation." Perkins, 898 F.2d at 473. The Eleventh Circuit adopted this logic and found that "when a state law claim brought against a non-ERISA entity does not affect relations among principal ERISA entities as such, then it is not preempted by ERISA." Morstein, 93 F.3d at 722. Furthermore, it found that, while the employer, the plan, the plan fiduciaries, and the beneficiaries under the plan are ERISA entities, an individual or entity with no control over the payment of benefits or a determination of rights under the plan is a non-ERISA entity. Id. at 722-23. Additionally, the Eleventh Circuit found that while the remedy sought against an independent agent may affect the plan in that damages may be measured based on what the insured would have received under the plan, "such indirect relation between the beneficiary and the plan is not enough for preemption." Id. at 723. In Massachusetts Casualty Insurance Company v. Reynolds, 113 F.3d 1450, 1454 (6th Cir. 1997), the Sixth Circuit cited Perkins with approval, emphasizing the distinction between a claim against an insurance company and one against an independent agent or agency. Thus, state law claims against an independent insurance agent and/or agency only relate to an ERISA plan indirectly and are not preempted.
In Lion's Volunteer Blind Indus., Inc. v. Automated Group Admin., Inc., 195 F.3d 803 (6th Cir. 1999), the Sixth Circuit found that the dispositive issue in determining whether a state law claim is preempted by ERISA is the kind of relief sought. Id., 195 F.3d at 809 (explaining their previous holding in Perry v. P*I*E Nationwide, Inc., 872 F.2d 157 (6th Cir. 1989)). Specifically, the Sixth Circuit held that a state claim of misrepresentation against an insurance provider sufficiently relates to ERISA so as to require preemption when a court would be required to calculate damages based upon the benefits owed to a plan beneficiary in accordance with an ERISA plan. Id. at 809. However, in Lion's, the plaintiffs were seeking relief directly from the health insurance provider. Given the Sixth Circuit's approval of Perkins, it seems that Lion's is inapplicable to a case in which plaintiffs seek relief from an independent insurance agent and/or agency.
In the case at bar, the parties do not dispute that the health insurance at issue is an ERISA plan. The sole question before the court is whether plaintiffs' state law claims against defendants are sufficiently related to the plan itself such that they are preempted by ERISA, which turns on whether Berretta is an independent insurance agent and Executive is an independent insurance agency.
Although the complaint provides few facts regarding Berretta's and Executive's relationship with Employers Mutual, it appears to the court that Berretta is an independent agent and Executive is an independent agency. Significantly, the complaint alleges that "defendants solicited the employee group health insurance business of Medvantage." (Compl. ¶ 4.) Thus, Berretta, doing business as Executive, acted as some sort of agent. In addition, plaintiffs paid their premiums directly to Employers Mutual rather than to Berretta or Executive. Id. ¶ 6. Thus, it appears that defendants operated independently of Employers Mutual. Additionally, there are no allegations in the complaint suggesting that Berretta or Executive had any control over the payment of benefits or the determination of rights under the plan.
Since Berretta is an independent insurance agent and Executive is an independent agency, plaintiffs' state law claims against them are not sufficiently related to the ERISA plan to trigger preemption. Thus, there is no federal court jurisdiction and plaintiffs' motion to remand is granted.
IT IS SO ORDERED.