Opinion
CIVIL ACTION NO. 3:01-CV-0088-G
August 2, 2001
MEMORANDUM ORDER
Before the court is the motion of the plaintiff Corporate Resource Management, Inc. ("CRM") to remand this action to a state district court from which it was previously removed. Also before court are the motions to dismiss of the defendants Tucker Clark, Inc. ("Tucker Clark") and Group Resources Incorporated ("Group Resources"). For the reasons stated below, CRM's motion is granted, and the motions of Tucker Clark and Group Resources are denied.
I. BACKGROUND
CRM provides human resource services to businesses. Notice of Removal, Exhibit 3, Plaintiffs' [sic] Original Petition ("Petition") ¶ 2. CRM also administers an employee benefits plan which provides health insurance benefits to its employees. Id. Tucker Clark and Group Resources are third party claims administrators who process health insurance claims for employee benefit plans. Id.
On December 7, 1988, CRM entered into a written Administrative Services Agreement (the "Agreement") with Tucker Clark whereby Tucker Clark agreed to process health insurance claims for CRM's employee welfare benefit plan. Id. ¶ 3; Defendant Tucker Clark, Inc.'s Brief in Support of Response in Opposition to Plaintiff's Motion to Remand ("Tucker Clark Response") ¶ 7. Thus, Tucker Clark agreed to serve as the third party claims administrator of the Plan. The Plan was governed by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq. Tucker Clark Response ¶ 1. Tucker Clark was compensated for its services through payment by CRM of a monthly service fee based on an agreed fee schedule. Plaintiff's Brief in Support of Motion to Remand ("Motion to Remand"), Exhibit A, Administrative Services Agreement ("Agreement"), Exhibit B, Administrative Fees. CRM additionally agreed to indemnify Tucker Clark for any liability from all claims, lawsuits and judgments arising from Tucker Clark's duties under the Agreement. Agreement ¶ 13.
During October 1999, Tucker Clark assigned its obligations under the Agreement to Group Resources. Petition ¶ 3. This assignment was executed without CRM's prior notice or consent. Id.
According to the Agreement, CRM was designated as the Plan's "[s]ponsor" and "named ERISA fiduciary of the [P]lan." Agreement ¶ 1; id. ¶ 11 ("`Sponsor' shall be defined to include the employer or corporation sponsoring the Plan. . . . The Sponsor will be the named fiduciary under ERISA.").
Pursuant to the Agreement, CRM was obligated to:
a) Be responsible for and provide funding for the plan, either from participant contributions, general funds of the plan sponsor, or trustee assets.
b) Establish any contributions to be collected from participants and collect any contributions to be made by participants or beneficiaries of the plan.
c) Be responsible for and comply with ERISA, C.O.B.R.A., or any other statutory requirements, either federal or state, imposed or required of the plan.
d) Notify [Tucker Clark] timely of changes in enrollment, eligibility, employment status or any other event which impacts or affects the insurance status or benefits of participants.Id. ¶ 1.
Under the terms of the Agreement, Tucker Clark served as an "independent contractor" and agreed to perform "administrative services in conjunction with the operation and maintenance of the Plan." Id. ¶¶ 2, 10. The Agreement further specified that "[t]he services to be performed by [Tucker 6, Clark] shall be ministerial in nature and shall be performed within the framework of policies, interpretations, rules, practices and procedures made or established by [CRM]." Id. ¶ 2. Tucker Clark and Group Resources admit that although they had "no discretion or control to determine the eligibility of Plan participants or to fund the Plan, [they] had an obligation to process claims and perform other administrative services for the Plan." Tucker Clark Response ¶ 7; Defendant Group Resources Incorporated's Brief in Supports [sic] of its Motion to Dismiss Under Fed.R.Civ.P. 12(b)(6) ("Group Resources Response") ¶ 7.
CRM claims that the Agreement specified that Tucker Clark merely served as the contract administrator, not a fiduciary of the Plan. Motion to Remand ¶ 2. CRM avers that it "as the employer, is the actual administrator, sponsor, and fiduciary under the Plan. CRM was responsible for funding the [P]lan, establishing contribution collections, and generally complying with ERISA and C.O.B.R.A. requirements." Id.
On December 15, 2000, CRM filed the instant suit against Tucker Clark and Group Resources in the 44th Judicial District of Dallas County, Texas. See generally Petition. CRM sought recovery for breach of contract. Petition ¶ 2. Specifically, CRM alleged that Tucker Clark and Group Resources violated the Agreement by:
a. failing to process claims in a timely manner;
b. failing to properly handle correspondence for claims administration;
c. incorrectly approving payment for claims of terminated non-COBRA employees;
d. incorrectly approving payment a second time for claims which have been previously paid;
e. failing to process claims for eligible dependents of employees;
f. incorrectly processing lab fees with Lab One, a discount provider;
g. failing to provide monthly receipt and disbursement reports;
h. failing to provide timely premium reports, statements, and claim reports;
i. failing to include the drug provider, United Provider Services, in claim reports; and
j. failing to be responsive to telephone calls and correspondence.Id. ¶ 4.
On January 12, 2001, Tucker Clark removed the state court action to this court. Group Resources subsequently filed a counterclaim against CRM for attorneys' fees and costs. See Defendant Group Resources Incorporated's Answer and Counterclaim to Plaintiff Corporate Resource Management, Inc.'s Original Petition ¶ 38. On February 7, 2001, Tucker Clark filed counterclaims against CRM for attorneys' fees, costs, and declaratory relief. See Defendant Tucker Clark, Inc.'s First Amended Original Answer and Counterclaims Against Corporate Resource Management, Inc. ¶¶ 39-42.
Tucker Clark and Group Resources argue that ERISA preempts CRM's state law claim as the Agreement "relates to" an ERISA plan and provides the basis for removal. Tucker Clark Response ¶ 1; Group Resources Response ¶ 1; Notice of Removal ¶ 4. Reiterating the defendants' contention that CRM's breach of contract claim "relates to" the Plan, the defendants argue that ERISA preempts CRM's state law claim, and, therefore, CRM has not stated a claim on which relief can be granted. Defendant Tucker Clark, Inc.'s Brief in Support of its Motion to Dismiss Under F.R. CIV. P. 12(b)(6) ¶ 1; Group Resources Response ¶ 1. Consequently, the defendants seek dismissal with prejudice of CRM's claim against each of them. On the other hand, CRM argues that its claims are based solely on common law breach of contract, and that "[t]his action is a commercial dispute between two businesses under Texas law . . . [and] as such is not preempted by ERISA." Plaintiff's Motion to Remand ¶ 2. CRM now seeks remand of this case to the 44th Judicial District Court of Dallas County.
II. ANALYSIS A. Preemption Standard
The Supreme Court discussed at length the effects of ERISA preemption in Metropolitan Life Insurance Company v. Taylor, 481 U.S. 58 (1987). Specifically, the Court held that ERISA is more than a defense to claims under state law. Id. at 63. Instead, the Court held, the plaintiff's state law cause of action was displaced and recharacterized as a claim arising under federal law. Id. The Court concluded that ERISA preemption serves as an exception to the "well-pleaded complaint" rule and thereby can serve as the basis of removal from state court to federal court. Id. at 63-64. Thus, under the well-pleaded complaint rule, a case is not removable where the complaint asserts only state law causes of action. Kramer v. Smith Barney, 80 F.3d 1080, 1082 (5th Cir. 1996) (citing Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 10 (1983)).
"One corollary of the well-pleaded complaint rule developed in the case law, however, is that Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metropolitan, 481 U.S. at 63-64. Cases implicating these preempted areas may be removed to federal court "even if the complaint is artfully pleaded to include solely state law claims for relief. . . ." Heimann v. National Elevator Industry Pension Fund, 187 F.3d 493, 500 (5th Cir. 1999).
A court must be careful, however, to distinguish between two types of federal preemption. Ordinary federal preemption is a federal defense to a plaintiff's suit derived from an express statutory term or from a direct conflict between federal and state laws. Because it is simply a defense, ordinary preemption "does not appear on the face of a well-pleaded complaint, and, thus, does not authorize removal to a federal court." Id. "Complete preemption," on the other hand, converts a state law cause of action into a federal claim, resulting in the establishment of federal question jurisdiction. See Metropolitan, 481 U.S. at 64-67. In the instant case, the defendants contend that ERISA completely preempts CRM's state law claim and grants this court federal question jurisdiction. Notice of Removal ¶¶ 3, 4.
Congressional intent determines whether a federal statute preempts a state cause of action. FMC Corporation v. Holliday, 498 U.S. 52, 56 (1990). Any inquiry into such intent necessarily includes an examination of the statutory language and the structure and purpose of the statute taken in its entirety. Id. at 56-57. ERISA expressly preempts state laws "relating to" employee benefit plans. See 29 U.S.C. § 1144(a); see also McNeil v. Time Insurance Company, 205 F.3d 179, 189 (5th Cir. 2000), cert. denied, ___ U.S. ___, 121 S.Ct. 1189 (2001); McClelland v. Gronwaldt, 155 F.3d 507, 5 16 (5th Cir. 1998). "A state law `relates to' an employee benefit plan `if it has a connection with or reference to such a plan.'" Rozzell v. Security Services, Inc., 38 F.3d 819, 821 (5th Cir. 1994) (quoting Shaw v. Delta Air Lines, 463 U.S. 85, 96-97 (1983)).
The ERISA preemption clause, states, in relevant part:
Except as provided in subsection (b) of this section, the 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. . . .29 U.S.C. § 1144(a) (emphasis added).
It is well settled that § 1144(a) is deliberately broad and expansive in its language and its application. Manning v. Hayes, 212 F.3d 866, 870 (5th Cir. 2000), cert. denied, ___ U.S. ___, 121 S.Ct. 1401 (2001); Corcoran v. United Healthcare, Inc., 965 F.2d 1321, 1328 (5th Cir.), cert. denied, 506 U.S. 1033 (1992). However, the Fifth Circuit has noted that "[the courts] faithfully followed the Supreme Court's broad reading of `relate to' preemption under § 502(a) in its opinions decided during the first twenty years after ERISA's enactment. Since then, in a trilogy of cases, the Court has confronted the reality that if `relate to' is taken to the furthest stretch of its indeterminacy, preemption will never run its course, for `really, universally, relations stop nowhere.'" Corporate Health Insurance, Inc. v. Texas Department of Insurance, 215 F.3d 526, 532 (5th Cir. 2000) (quoting New York State Conference of Blue Cross Blue Shield Plans v. Travelers Insurance Group, 514 U.S. 645, 655 (1995)), pet. for cert. filed, 69 U.S.L.W. 3317 (October 24, 2000).
Causes of action founded on state law are barred by § 1144(a) if (1) the state law claim addresses an area of exclusive federal concern, such as the right to receive benefits under the terms of an ERISA plan; and (2) the claim directly affects the relationship between the traditional ERISA entities — the employer, the plan and its fiduciaries, and the participants and beneficiaries. Hubbard v. Blue Cross Blue Shield Association, 42 F.3d 942, 945 (5th Cir.), cert. denied, 515 U.S. 1122 (1995); Perkins v. Time Insurance Company, 898 F.2d 470, 473 (5th Cir. 1990) (citations omitted). However, § 1144(a) preemption is not without limits.
State law claims that affect ERISA plans in too tenuous, remote, or peripheral a manner are not preempted by § 1144(a). Rokohl v. Texaco, Inc., 77 F.3d 126, 129 (5th Cir. 1996). When analyzing this association, the court must examine how the state law affects relations among ERISA's named entities. Memorial Hospital System v. Northbrook Life Insurance Company, 904 F.2d 236, 249 (5th Cir. 1990). "[C]ourts are more likely to find that a state law relates to a benefit plan if it affects relations among the principal ERISA entities — the employer, the plan, the plan fiduciaries, and the beneficiaries — than if it affects relations between one of these entities and an outside party, or between two outside parties with only an incidental effect on the plan." Id. (quoting Sommers Drug Stores Co. Employee Profit Sharing Trust v. Corrigan Enterprises, Inc., 793 F.2d 1456, 1467 (5th Cir. 1986), cert. denied, 479 U.S. 1034 (1987)).
The task in determining ERISA preemption is to discern precisely when and if a state law claim reaches the level of remoteness which no longer justifies a finding that it "relates to" an ERISA plan. Without expressly offering a three-part test, courts have examined three separate, yet related, indicia: first, as previously mentioned, an analysis to determine if the relationships among the principal ERISA entities (i.e., employer, fiduciaries, the plan, and its beneficiaries) are affected, Perkins, 898 F.2d at 473; see Sommers Drug Stores, 793 F.2d at 1470; second, the necessity of determining the scope of a party's rights or duties under an ERISA plan, see Smith v. Texas Children's Hospital, 84 F.3d 152, 154-55 (5th Cir. 1996); see also Cefalu v. B.F. Goodrich Company, 871 F.2d 1290, 1292-95 (5th Cir. 1989); and third, "the preemption clause of ERISA must be read in context with the Act as a whole, and with Congress's goal in creating an exclusive federal enclave for the regulation of benefit plans." Memorial Hospital, 904 F.2d at 244.
B. Application of Preemption Standard 1. Analysis of Relationship Among Traditional ERISA Entities
The Fifth Circuit has held that a state law claim is preempted by ERISA when "the claims directly affect the relationship among the traditional ERISA entities — the employer, the plan and its fiduciaries, and the participants and beneficiaries." Memorial Hospital, 904 F.2d at 245.
The wording of the Agreement between CRM and Tucker Clark was carefully chosen to avoid even the appearance of creating a relationship between "traditional ERISA entities." Tucker Clark was not authorized to exercise any discretionary control over the Plan or the Plan's funds. Under the terms of ERISA and the Agreement, Tucker Clark was not a fiduciary, plan administrator, or third-party beneficiary; the relationship of the Plan Sponsor and the Contract Administrator is one of independent contractors.
Claims processing is not, in and of itself, an activity which necessitates ERISA preemption. The Agreement between CRM and Tucker Clark established Tucker Clark as an independent contractor, and "ERISA doesn't purport to regulate those relationships where a plan operates just like any other commercial entity for instance, the relationship between the plan and its own employees, or the plan and its insurers or creditors, or the plan and the landlords from whom it leases office space." General American Life Insurance Company v. Castonguay, 984 F.2d 15 18, 1522 (9th Cir. 1993); see also Weaver v. Employers Underwriters, Inc., 13 F.3d 172, 176 (5th Cir.), cert. denied, 5 11 U.S. 1129 (1994); Orthopaedic Surgery Associates of San Antonio, P.A. v. Prudential Health Care Plan, Inc., No. SA00CA1529FB, ___ F. Supp.2d ___, 2001 WL 760590, at *3-*6 (W.D. Tex. May 11, 2001); Union Health Care, Inc. v. John Alden Life Insurance Company, 908 F. Supp. 429, 433 (S.D. Miss. 1995) ("[T]he relationship here involved is that between the employer/plan sponsor and its insurer, i.e., between a standard ERISA entity and a third party. And the fact that ERISA is lurking in the background does not alter the fact that this is simply a contract dispute between these parties."); Bromenn Healthcare v. Northwestern National Life Insurance Company, 806 F. Supp. 799, 805 (C.D. Ill. 1992). Tucker Clark contracted to be the "Contract Administrator" for CRM. In this relationship, Tucker Clark was providing routine administrative services to enable the Plan to function, much like employees of the Plan would do. This is exactly the type of relationship which, in the words of Castonguay, "ERISA doesn't purport to regulate." Castonguay, 984 F.2d at 1522.
Moreover, CRM has asserted a state law claim which relates to a separate and independent agreement for services from the Plan, and CRM's claim may be decided strictly under Texas contract law. See River Parishes, Inc. v. Aetna U.S. Healthcare, Inc., No. CIV. A. 00-3380, 2001 WL 277938, at *4 (E.D. La. March 20, 2001); Travis-Owen v. IVP Pharmaceutical Care, Inc., No. 3:99-CV-0085-P, 1999 WL 1095388, at *3 (N.D. Tex. December 2, 1999). A state law claim with such a limited connection to ERISA will not lead to preemption of that claim.
2. ERISA Plan Not in Need of Interpretation
The present case does not require preemption because resolution of the claims against Tucker Clark and Group Resources does not involve interpretation of the Plan's ERISA-imposed provisions. See Christopher v. Mobil Oil Corporation, 950 F.2d 1209, 1218 (5th Cir.), cert. denied, 506 U.S. 820 (1992). No ERISA-regulated duty is involved; on remand, a state court would not be required to make determinations about the rights of either participants or beneficiaries or about the duties of a fiduciary, employer, sponsor, or plan administrator. Nor would the claims presented by CRM require either ERISA interpretation or enforcement.
3. Conformity with Congressional ERISA Goals
According to the Supreme Court, "the question whether a certain state action is pre-empted by federal law is one of congressional intent. `The purpose of Congress is the ultimate touchstone.'" Allis-Chalmers Corporation v. Lueck, 471 U.S. 202, 208 (1985) (internal quotation marks omitted) (quoting Malone v. White Motor Corp., 435 U.S. 497, 504 (1978)). CRM's breach of contract claim does not address an area of exclusive federal concern. The Supreme Court has held that the main purpose of ERISA's preemption clause is "to avoid a multiplicity of regulation in order to permit the nationally uniform administration of employee benefit plans." Travelers Insurance, 514 U.S. at 657; Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 522 (1981) (holding that ERISA preemption analysis "must be guided by respect for the separate sphere of governmental authority preserved in our federalist system."). This purpose would not be thwarted if CRM were permitted to pursue its claims against Tucker Clark and Group Resources (unpreempted by ERISA) in a state forum.III. CONCLUSION
CRM asserts straightforward claims arising solely under state law. The well-pleaded complaint raises no issues that would require a state court to interpret or enforce ERISA. Because CRM's claim is related the to the Plan in such a tenuous, remote, and peripheral manner, § 1144(a) does not preempt CRM claim. See Rokohl, 77 F.3d at 130. Remand would not frustrate the congressional purpose of providing a national regulatory scheme for employees benefit plans. The defendants' motions to dismiss are DENIED.
For these reasons, the doctrine of ERISA preemption, broad though it is, is not applicable to this case. CRM's motion to remand is GRANTED, and this case is REMANDED to the 44th Judicial District Court of Dallas County, Texas. The clerk shall mail a certified copy of this order to the district clerk of Dallas County, Texas. 28 U.S.C. § 1447(c).