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concluding that a second removal was improper when "[t]he information UNUM [the defendant] claims to have 'unearthed' at its deposition of Tierney . . . did not provide a new factual basis as contemplated in S.W.S., but rather supported the same facts UNUM had in its possession at the time of the first removal"
Summary of this case from Everett Fin. v. KocherOpinion
CIVIL ACTION NO. 3:00-CV-1601-G.
February 12, 2001.
MEMORANDUM ORDER
Before the court is the motion of the plaintiff Jancye H. Tierney ("Tierney") to remand the instant action to a state district court, from which it was previously removed. For the reasons stated below, this motion is granted.
I. BACKGROUND
Tierney alleges that she was insured under a disability policy issued by UNUM Life Insurance Company of America and UNUMProvident Corporation (collectively, "UNUM"). Plaintiff's Original Petition ("Petition") at 2, attached to Notice of Removal. This policy was sold by James Graham Insurance ("Graham"). Id. at 3. Tierney received this coverage through her employer. See Plaintiff's Motion to Remand and Brief in Support ("Motion") at 4. Tierney contends that UNUM paid her claim against the policy for a period of fourteen months and then, without explanation or reason, ceased payment. Petition at 3. Tierney alleges that in so doing, UNUM violated various provisions of the Texas Insurance Code and the Texas Deceptive Trade Practices Act, was negligent, and breached its contract. Petition at 4-7. In addition, Tierney charges that Graham was negligent in placing the policy with UNUM. Id. at 7. Tierney seeks to recover the benefits payable under the policy, together with exemplary damages, interest, penalties, costs, and fees. Id. at 8.
II. ANALYSIS A. Removal Jurisdiction
Title 28 U.S.C. § 1441(b) permits removal of "[a]ny civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties, or laws of the United States." Removal jurisdiction must be strictly construed, however, because it implicates important federalism concerns. Frank v. Bear Stearns Co., 128 F.3d 919, 922 (5th Cir. 1997); see also Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988). Furthermore, "any doubts concerning removal must be resolved against removal and in favor of remanding the case back to state court." Cross v. Bankers Multiple Line Insurance Company, 810 F. Supp. 748, 750 (N.D. Tex. 1992). The burden of establishing federal jurisdiction is on the parties seeking removal — in this case, UNUM and Graham. See Frank, 128 F.3d at 921-22; Willy, 855 F.2d at 1164.
District courts have original jurisdiction over civil cases arising under the laws of the United States. See 28 U.S.C. § 1331. Here, however, Tierney has filed a claim alleging only a violation of Texas law. And because it is well settled "that a cause of action arises under federal law only when the plaintiff's well-pleaded complaint raises issues of federal law," it would appear — at first glance — that no federal law is implicated in this case, and thus, no federal question jurisdiction exists.
Metropolitan Life Insurance Company v. Taylor, 481 U.S. 58, 63 (1987).
"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 Life Insurance Company v. Taylor, 481 U.S. 58, 63-64 (1987). 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 483, 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, UNUM contends that the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., completely preempts Tierney's state law claims and grants this court federal question jurisdiction.
B. ERISA Preemption
Certain state law claims that relate to an ERISA employee benefit plan and that are within the scope of ERISA's civil enforcement provision are subject to complete preemption. See 29 U.S.C. § 1144(a) ("[T]he provisions of this subchapter . . . shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan . . .".); Pilot Life Insurance Company v. Dedeaux, 481 U.S. 41, 52 (1987) (holding that ERISA § 502(a) provides the exclusive procedure and remedy in an action to recover benefits owed or to enforce rights under the terms of an employee benefit plan); Metropolitan, 481 U.S. at 66 ("[T]he rest of the legislative history consistently sets out this clear intention to make § 502(a)(1)(B) suits brought by participants or beneficiaries federal questions for the purposes of federal court jurisdiction. .".). Therefore this court must address three issues: (1) whether the disability policy issued by UNUM to Tierney is an "employee benefit plan" as defined by ERISA; (2) whether Tierney's claim "relates to" that plan; and (3) whether her claim falls within ERISA's enforcement provision.
1. Is the UNUM Disability Policy an "Employee Welfare Benefit Plan"?
The term "employee benefit plan" includes an "employee welfare benefit plan." 29 U.S.C. § 1002(3). Thus, a determination that a particular arrangement qualifies as an "employee welfare benefit plan" necessarily means that it also satisfies the broader definition of an "employee benefit plan."
The Fifth Circuit has devised a test for determining whether a particular plan qualifies as an "employee welfare benefit plan." The test requires this court to decide whether a plan: (I) exists; (2) falls outside the safe-harbor provision established by the Department of Labor; and (3) satisfies the primary elements of an ERISA "employee benefit plan." See Meredith v. Time Insurance Company, 980 F.2d 352, 355 (5th Cir. 1993); McNeil v. Time Insurance Company, 977 F. Supp. 424, 428-29 (N.D. Tex. 1997), aff'd, 205 F.3d 179 (5th Cir. 2000), petn. for cert. filed, 69 U.S.L.W. 3383 (Nov. 27, 2000) (No. 00-848). If the UNUM disability policy satisfies these criteria, it is an employee benefit plan under ERISA. See McNeil, 977 F. Supp. at 428-31.
2. Does a Plan Exist?
The initial inquiry as to whether a plan exists is governed by the test first articulated by the Eleventh Circuit in Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir. 1982) (en banc), and adopted by this circuit in Memorial Hospital System v. Northbrook Life Insurance Company, 904 F.2d 236, 240-41 (5th Cir. 1990):
In determining whether a plan, fund or program (pursuant to a writing or not) is a reality a court must determine whether from the surrounding circumstances a reasonable person could ascertain the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits.Donovan, 688 F.2d at 1373. If any part of the inquiry is answered in the negative, the policy is not a plan governed by ERISA. Meredith, 980 F.2d at 355.
The court has little information about the UNUM disability plan. Tierney notes only that UNUM issued a policy under which she was insured and that she filed a claim against the policy on August 18, 1998. Petition at 2. UNUM contends that Tierney has conceded that the UNUM policy is an employee welfare benefit plan within the meaning of ERISA. UNUM's basis for making this argument is threefold. First, UNUM points to Tierney's reference to the policy in the Petition as her "employer's coverage." Response of Defendants UNUM Life Insurance Company of America and UNUMProvident Corporation to Plaintiff's Motion to Remand ("Response") at 5. In addition, UNUM argues that Tierney's prayer for damages in the amount of "a sum of money equal to the benefits payable under the insurance policy made the basis of this suit" constitutes further proof that Tierney herself regards the policy as an employee benefit plan. Id. (emphasis omitted). Lastly, UNUM directs the court to what it claims is Tierney's concession "that her claims against UNUM are subject to ordinary preemption under § 514."
With regard to Tierney's "employer's coverage" reference and her prayer for damages, neither of these two facts permits the court to ascertain with any certainty, as Donovan requires, the intended benefits, beneficiaries, source of financing, or procedures for receiving benefits. From Tierney's petition, the court can infer that the policy at issue pays disability benefits, that Tierney was a beneficiary, and that Tierney obtained benefits by submitting a claim. See Petition at 2-3. It is not clear, however, whether Tierney was the only beneficiary of the policy at issue or whether she was one of a class of potential beneficiaries. In addition, and most importantly, there is no way to ascertain from the surrounding circumstances, whether Tierney or her employer funded the UNUM policy. A single reference by Tierney to her "employer's coverage" is insufficient to permit the inference that Tierney's employer in fact funded the plan. Thus, under the Donovan analysis, UNUM has not shown that a plan exists.
UNUM's assertion that Tierney has conceded the applicability of an ordinary preemption defense does not change the analysis. First, it is not at all clear that Tierney has made any such concession. Even if Tierney has conceded that her claims are subject to an ordinary preemption defense, the existence of such a defense has no impact at all upon whether her claims are completely preempted by ERISA for purposes of removal jurisdiction. The court agrees with Tierney that UNUM is confusing the concepts of ordinary preemption and complete preemption. See Plaintiff's Reply to Defendant's Response to Plaintiff's Motion to Remand and Brief in Support ("Reply") at 1.
Presumably, UNUM bases this contention upon the following language: "Assuming, arguendo, that Ms. Tierney's claims against defendant UNUM may be subject to a federal preemption defense under 29 U.S.C. § 1144(a), removal is improvident because her claims are not completely preempted under 29 U.S.C. § 1132." Plaintiff's Motion to Remand and Brief in Support ("Motion") at 3.
3. Is the Plan Excluded from ERISA and Is the Plan an ERISA Plan?
Because the court has concluded that no plan exists, it need not pursue the analysis further. However, even if the court were to assume arguendo that Tierney's "employer's coverage" reference is sufficient to warrant a finding that a plan exists, the dearth of information regarding Tierney's employer's role in the UNUM policy is fatal to the two remaining elements of the Meredith analysis. The second step of that analysis is the determination of whether a plan is exempt from ERISA. Certain plans are exempt from ERISA because they fall within the safe-harbor provision promulgated by the Department of Labor. 29 C.F.R. § 2510.3-1(j)(1)-(4); see also Gahn v. Allstate Life Insurance Company, 926 F.2d 1449, 1452 (5th Cir. 1991); Memorial Hospital, 904 F.2d at 241 n. 6. Under the safe-harbor provision, a plan is not covered by ERISA if (1) an employer did not contribute to the policy; (2) participation was voluntary; (3) the employer's involvement with the policy was limited to collecting premiums and remitting them to an insurer; and (4) the employer received no profit from administering the policy. See Gahn, 926 F.2d at 1452; Memorial Hospital, 904 F.2d at 241 n. 6. "The plan must meet all four criteria to be exempt." Meredith, 980 F.2d at 355.
In the third and final step of the Meredith analysis, the court must determine whether a plan falls within the broad parameters of ERISA. Meredith, 980 F.2d at 355. In making this determination, the court "look[s] to the two `primary elements of an ERISA "employee welfare benefit plan" as defined by the statute: (1) whether an employer established or maintained the plan; and (2) whether the employer intended to provide benefits to its employees.'" Id. (quoting MDPhysicians Associates, Inc. v. State Board of Insurance, F.2d 178, 183 (5th Cir.), cert. denied, 506 U.S. 861 (1992), and Hansen v. Continental Insurance Company, 940 F.2d 971, 977 (5th Cir. 1991)). Meredith, 980 F.2d at 355. There is no way to establish solely on the basis of the reference by Tierney to her "employer's coverage," whether the UNUM policy at issue here is or is not exempt from ERISA under the safe-harbor provision. Furthermore, the "employer's coverage" reference does not tell the court whether Tierney's employer established or maintained the plan or intended to benefit employees. This court is unwilling to base a detailed and fact specific analysis upon such a slender reed as Tierney's passing reference to her "employer's coverage." As a result, the court cannot find that the UNUM Disability Policy is an employee welfare benefit plan within the meaning of ERISA. It necessarily follows that Tierney's claims are not completely preempted by ERISA, and this court lacks subject matter jurisdiction.
C. Diversity Jurisdiction 1. Fraudulent Joinder Standard
UNUM also contends that the court has diversity jurisdiction but that the defendant Graham was fraudulently joined by Tierney to defeat such jurisdiction. Response at 7-8. The removing party carries a heavy burden when attempting to prove fraudulent joinder. See Cavallini v. State Farm Mutual Auto Insurance Company, 44 F.3d 256, 259 (5th Cir. 1995); Ford v. Elsbury, 32 F.3d 931, 935 (5th Cir. 1994) (quoting B., Inc. v. Miller Brewing Company, 663 F.2d 545, 549 (5th Cir. 1981)). "The removing party must prove that there is absolutely no possibility that the plaintiff will be able to establish a cause of action against the in-state defendant in state court, or that there has been outright fraud in the plaintiff's pleading of jurisdictional facts." Cavallini, 44 F.3d at 259 (quoting Green v. Amerada Hess Corporation, 707 F.2d 201, 205 (5th Cir. 1983), cert. denied, 464 U.S. 1039, 104 S.Ct. 701, 79 L.Ed.2d 166 (1984)). Although this circuit has cautioned against "pretrying a case to determine removal jurisdiction," it has also endorsed "piercing the pleadings" in a summary judgment-like procedure to determine state law questions in an effort to resolve allegations of fraudulent joinder. See Carriere v. Sears, Roebuck and Company, 893 F.2d 98, 100 (5th Cir.), cert. denied, 498 U.S. 817, 111 S.Ct. 60, 112 L.Ed.2d 35 (1990). "After all disputed questions of fact and all ambiguities in the controlling state law are resolved in favor of the nonremoving party, the court determines whether that party has any possibility of recovery against the party whose joinder is questioned." Id.
To avoid remand, UNUM must show that there is no possibility that Tierney can establish any claim against Graham. See Burden v. General Dynamics Corporation, 60 F.3d 213, 216 (5th Cir. 1995). Therefore, if there is even a possibility that the state court would find a cause of action stated against Graham, then this court must find that Graham was properly joined and must remand the case. See B. Inc., 663 F.2d at 550. Tierney's petition alleges that Graham was negligent in selecting UNUM as the insurer in this case. Petition at 7. UNUM, however, contends that Tierney has failed to assert any factual allegations in support of her negligence claim against Graham and that her claim is thus merely a general, conclusory statement that fails to state a cause of action. Response at 7. In this case, then, the court must first determine whether Tierney has provided sufficient factual support in her petition to state a claim for negligence against Tierney. If she has, then the court must next address the question of whether Texas law even provides for a negligence cause of action by an insured against an insurance agent.
a. Is Tierney's Negligence Claim Against Graham Factually Sufficient?
Under Texas law, a petition must contain "a short statement of the cause of action sufficient to give fair notice of the claim involved." TEX. R. CIV. P. 47(a). "The test of the `fair notice' pleading requirement is whether an opposing attorney of reasonable competence, with pleadings before him, can ascertain nature and basic issues of controversy and testimony probably relevant." City of Alamo v. Casas, 960 S.W.2d 240, 251 (Tex.App.-Corpus Christi 1997, writ denied). Although Texas law requires only notice pleading, at the very least, a petition must provide sufficient information to permit a defendant to prepare a defense. Griggs v. State Farm Lloyds, 181 F.3d 694, 699 (5th Cir. 1999) (citing Casas, 960 S.W.2d at 251-52). Thus, Tierney's petition is factually sufficient if it provides sufficient information to permit Graham to ascertain the nature and basic issue in controversy and to prepare a defense against the claim.
UNUM cites three cases in which non-diverse insurance agent defendants were deemed to have been fraudulently joined. See Cavallini, 44 F.3d at 260-61; Griggs, 181 F.3d at 699; Waters v. State Farm Mutual Automobile Insurance Company, 158 F.R.D. 107 (S.D. Tex. 1994). None of these cases is helpful to UNUM. In Cavallini, for example, the insureds named the non-diverse insurance agent as a defendant in the caption and introductory paragraph of the complaint and named him for service. Cavallini, 44 F.3d at 260. Other than these three referencess, the agent's name did not appear anywhere else in the complaint, including those paragraphs in which the plaintiffs stated their claims and sought damages. Id. at 260-61. Similarly, the plaintiff in Griggs named State Farm's agent as a defendant, but "allege[d] no actionable facts specific to [her]." Griggs, 181 F.3d at 699. The only factual allegation was that State Farm issued the policy through the defendant agent. Id. In fact, the plaintiff in Griggs did not even make an effort to serve the agent. Id. Finally, in Waters, the court held that the plaintiffs had failed to state a cause of action against the defendant insurance agent because the petition failed to satisfy the requirement of FED. R. Civ. P. 9(b) that allegations of fraud and misrepresentation be pleaded with specificity. Waters, 158 F.R.D. at 108-09.
As a threshold matter, Tierney has not made a claim for fraud or misrepresentation, so the heightened pleading requirements of FED. R. Civ. P. 9(b) do not apply and Waters is inapposite. Graham has answered the petition and does not contest service. Defendant's Original Answer, attached to Notice of Removal. Unlike the situation in Cavallini and Griggs, Tierney has done more than merely name Graham as a defendant. Rather, she alleges that Graham owed a duty of care in selecting her insurer, that Graham breached this duty by placing the insurance coverage with UNUM, and that she was damaged by this breach. See Petition at 7. It seems to the court that this statement of Tierney's claim against Graham is sufficient to allow an opposing attorney of reasonable competence to ascertain the nature of her allegations and to prepare a defense. Although brief, this statement of Tierney's claim gives Graham notice of the duty allegedly owed as well as the actions taken by Graham that Tierney charges constituted a breach of that duty. Tierney's allegation of negligence does not specifically delineate why Graham's selection of UNUM was a breach of his duty of care. In the context of the petition as a whole, however, it is clear that Tierney contends that Graham's selection of UNUM as insurer was in derogation of his duty to select a carrier that would fairly and promptly pay her claim.
b. Does Texas Law Give Tierney a Cause of Action Against Graham?
Having determined that Tierney's petition is factually sufficient in its allegation of negligence against Graham, the court next turns to the question of whether Texas law provides for such a cause of action. Tierney has a cause of action under Texas law only if an insurance agent in Texas has a duty to the insured to select an insurer that will fairly and promptly pay claims. In fact, in Texas, it is clear that:
A local agent . . . owes his clients the greatest possible duty. He is the one the insured looks to and relies upon. Most people do not know what company they are insured with. The insured looks to the agent he deals with to get the coverage he seeks, with a sound company who can and will properly and promptly pay claims when they are due. It is his duty to keep his clients fully informed so that they can remain safely insured at all times.Trinity Universal Insurance Co. v. Burnette, 560 S.W.2d 440, 442 (Tex.Civ.App.-Beaumont 1977, no writ) (emphasis added). At this stage of the case, the court must resolve all doubts of both fact and law in the favor of Tierney as the non-removing party. Carriere, 893 F.2d at 100. The court has determined that Tierney's allegation of negligence is factually sufficient. In addition, it is at least arguable that under Trinity Universal, Graham had a duty to select as an insurer a sound company that would properly and promptly pay her claim. The court expresses no opinion as to whether Tierney could prove that Graham breached such a duty. Nevertheless, because UNUM has not met its heavy burden of proving that "there is absolutely no possibility that [Tierney would] be able to establish a cause of action against [Graham] in state court," the court cannot find that Graham was fraudulently joined to defeat jurisdiction.
III. CONCLUSION
On this record, the court cannot find that the UNUM disability policy is an employee welfare benefit plan within the meaning of ERISA. As a result, Tierney's claims are not subject to complete preemption under ERISA and this court has no federal question jurisdiction. In addition, the court concludes that Tierney may be able to establish a cause of action against Graham in state court and thus that Graham was not fraudulently joined solely to defeat jurisdiction. Because the court lacks either federal question or diversity jurisdiction, Tierney's motion to remand is GRANTED.
This case is REMANDED to the 14th Judicial District Court of Dallas County, Texas. The clerk shall mail a certified copy of this memorandum order to the district clerk of Dallas County, Texas. 28 U.S.C. § 1447(c).