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explaining that the defendant "has the burden of overcoming an initial presumption against jurisdiction and establishing that removal is proper"
Summary of this case from Michael J. Quilling, Realty Trust, Inc. v. Dynex Capital, Inc.Opinion
Civil Action No. 3:04-CV-2475-D.
February 1, 2005
MEMORANDUM OPINION AND ORDER
Defendant Data Return, LLC ("Data") removed this case based on federal question jurisdiction, contending that plaintiff Michael Carnes' ("Carnes'") state-law claim for breach of contract is preempted by the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001- 1461. Carnes moves to remand the case and for costs, and the court grants the motion.
I
Data employed Carnes as a sales representative until he resigned. Following his resignation, Carnes sued Data in state court for breach of contract, quantum meruit, promissory estoppel, and economic coercion. During discovery, Data served an interrogatory that, in relevant part, required Carnes to "[d]escribe in complete detail every act that you contend supports your claim that [Data] breached its contract with you." P. Br. at 4 (quoting Int. No. 1). Carnes responded by citing nine acts that supported his breach of contract claim. One act he cited was that Data had failed to notify promptly the company that managed Carnes' 401(k) retirement plan of his change in employment status, thus delaying his access to the account funds. After Data received Carnes' answer to the interrogatory, it removed the case to this court based on federal question jurisdiction, contending that ERISA preempts the part of Carnes' breach of contract claim based on interference with access to his 401(k) account.
II
As the removing party, Data has the burden of overcoming an initial presumption against jurisdiction and establishing that removal is proper. See Howery v. Allstate Ins. Co., 243 F.3d 912, 916 (5th Cir. 2001). The removal statute is to be strictly construed, Frank v. Bear Stearns Co., 128 F.3d 919, 922 (5th Cir. 1997), and "doubts regarding whether removal jurisdiction is proper should be resolved against federal jurisdiction," Acuna v. Brown Root Inc., 200 F.3d 335, 339 (5th Cir. 2000).
Data maintains there is federal question jurisdiction because ERISA preempts Carnes' breach of contract claim to the extent it is based on Data's interference with his access to the 401(k) account. There are two types of preemption under ERISA, however, and Data appears to conflate them. In opposition to Carnes' remand motion, Data cites 29 U.S.C. § 1132(a), which provides for complete preemption of claims that seek the same relief as that provided under the statute. See McGowin v. ManPower Int'l, Inc., 363 F.3d 556, 559 (5th Cir. 2004). But Data also cites Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 45-47 (1987), which is not a complete preemption case. Pilot Life addresses preemption under 29 U.S.C. § 1144, which provides for ordinary preemption — sometimes called conflict preemption. See Pilot Life, 481 U.S. at 45-47. Moreover, the gravamen of Data's argument in support of removal is that Carnes' claim is preempted because it "relates to" an ERISA plan. The "relates to" standard for ERISA preemption concerns ordinary preemption, not complete preemption. See Copling v. Container Store, Inc., 174 F.3d 590, 595 n. 9 (5th Cir. 1999), overruled on other grounds by Arana v. Ochsner Health Plan, 338 F.3d 433, 440 (5th Cir. 2003) (en banc), cert. denied, 540 U.S. 1104 (2004).
The distinction between complete preemption and ordinary preemption is of critical importance, because only one would permit Data to remove the case from state court based on federal question jurisdiction. "Ordinarily, the well pleaded complaint rule governs federal question jurisdiction. Under the rule, `[r]emoval is not possible unless the plaintiff's "well pleaded complaint" raises issues of federal law sufficient to support federal question jurisdiction."' Ervin v. Stagecoach Moving Storage, Inc., 2004 WL 1253401, at *2 (N.D. Tex. June 8, 2004) (Fitzwater, J.) (quoting Rodriguez v. Pacificare of Tex., Inc., 980 F.2d 1014, 1017 (5th Cir. 1993)). Complete preemption, however, is an exception to the well pleaded complaint rule and, although it is not contained in Carnes' state court petition, it gives rise to removal jurisdiction. See Giles v. NYLCare Health Plans, Inc., 172 F.3d 332, 336-37 (5th Cir. 1999). Ordinary preemption under § 1144 is not an exception to the well pleaded complaint rule, and a claim that is preempted by § 1144 alone cannot be removed from state court based on federal question jurisdiction. See id. at 337 ("The presence of conflict-preemption does not establish federal question jurisdiction. Rather than transmogrifying a state cause of action into a federal one — as occurs with complete preemption — conflict preemption serves as a defense to a state action." (footnote omitted)).
Assuming arguendo that Carnes bases his breach of contract claim in part on Data's alleged interference with access to the 401(k) account, Data has failed to establish that this claim is completely preempted by ERISA under § 1132. Its argument that removal was proper because Carnes' claim relates to an ERISA plan is irrelevant because, as discussed above, ordinary preemption does not give rise to removal jurisdiction, it simply provides a defense.
The remaining question is whether Data's citation to § 1132 is sufficient to carry its burden of establishing that removal is proper. See Howery, 243 F.3d at 916. The court concludes that it is not. Data has not demonstrated that Carnes asserts a claim that seeks the same relief as that provided by § 1132. If anything, it appears that Carnes relies on the denial of access to his 401(k) account as a type of consequential damage caused by the alleged breach of contract. See P.Br. at 5-6 (quoting P. Ans. Int. No. 1) (stating that denial of account funds required that he borrow money to handle urgent living expenses)). He does not sue to recover under the account itself. Were the court to conclude that § 1132 provides a remedy in such circumstances, myriad contract claims that do no more than seek consequential damages based on interference with rights in ERISA-governed plans would be transformed into ERISA claims preempted by federal law. Although ERISA is deliberately expansive, it is not without limits.
The court is therefore unable to conclude that federal question jurisdiction exists based on complete preemption of Carnes' breach of contract claim. Accordingly, it concludes that it lacks subject matter jurisdiction.
III
Carnes moves for his costs incurred as a result of improper removal under 28 U.S.C. § 1447(c). Data does not state any grounds for opposing this request. Carnes shall recover from Data his just costs, and any actual expenses, including attorney's fees, limited to the "fees and costs incurred in federal court that would not have been incurred had the case remained in state court," Avitts v. Amoco Prod. Co., 111 F.3d 30, 32 (5th Cir. 1997). If the parties cannot agree concerning the amount Carnes is entitled to recover, he may apply to the court for such an award no later than 30 days from the date this order is filed.