Opinion
Civil Action No. 5:03-CV-182-C
January 6, 2004
MEMORANDUM OPINION AND ORDER
On this date the Court considered LYNN COUNTY HOSPITAL DISTRICT'S ("Plaintiff) Motion to Remand and Motion to Strike Notice of Removal and Brief in Support, filed October 27, 2003, and its Motion for Emergency Stay Pending Order on Motion to Remand, filed on November 12, 2003. The Court further considered TIM DENTON's ("Defendant") Notice of Removal, filed July 30, 2003, and Defendant's Response in Opposition to Motion to Remand and Brief in Support, filed on November 13, 2003, together with Plaintiffs Reply and Brief in Support, filed on December 3, 2003. The Court further considered Defendant's Response in Opposition to Plaintiffs Motion for Emergency Stay, filed on November 25, 2003, and Defendant's Amended Motion for Leave to File Third-Party Complaint and Brief in Support, filed November 12, 2003. After considering all the relevant arguments and evidence, this Court GRANTS Plaintiffs Motion to Remand and REMANDS this action to the 106th Judicial District Court in and for Lynn County, Texas.
I. BACKGROUND
Plaintiff, Lynn County Hospital District, is a statutorily created governmental entity serving Lynn County, Texas. On July 2, 2003, Plaintiff filed suit against Defendant, an insurance agent, in the 106th District Court in and for Lynn County, Texas, alleging that Defendant fraudulently misrepresented an employee group health insurance benefits package sold to it by Defendant. Plaintiff further alleges that Defendant's actions violated certain provisions of the Texas Insurance Code, in particular, article 21.02 and sections 4(2) and (11) and section 16 of article 21.21, and the Texas Deceptive Trade Practices Act. In addition, Plaintiff alleges negligence and breach of contract against Defendant for failure to procure legal and authorized insurance for Plaintiffs employees.Defendant timely filed his Notice of Removal with this Court on July 30, 2003, alleging that Plaintiffs claims arise under 29 U.S.C. § 1001 et seq., the Employee Retirement Income Security Act ("ERISA"), thereby conferring federal question jurisdiction in the case. Plaintiff filed a Motion to Remand on October 27, 2003, alleging that no federal jurisdiction exists because its claims are based solely on state law causes of action and are not preempted by ERISA. Plaintiff further alleges in its Motion to Remand that federal jurisdiction is lacking because it is a governmental entity specifically exempt from ERISA.
II. STANDARD FOR REMAND IN ERISA CLAIMS
Federal courts are courts of limited jurisdiction and should exercise jurisdiction only over such cases as Congress has provided by statute. Beiser v. Weyler, 284 F.3d 665, 674 (5th Cir. 2002). Federal district courts have original jurisdiction over actions arising under the Constitution, laws, or treaties of the United States. 28 U.S.C. § 1331. A defendant is entitled to removal of a civil action from state court to federal court provided the federal court has original jurisdiction over the plaintiff's claims. 28 U.S.C.A. § 1441(a) and (b). Original jurisdiction over subject matter is necessary to maintenance of an action in federal court. See Avitts v. Amoco Prod. Co., 53 F.3d 690 (5th Cir. 1995) (per curiam).
Once a case has been removed, the removing party bears the burden of proving that jurisdiction exists. Dodson v. Spiliada Maritime Corp., 951 F.2d 40, 42 (5th Cir. 1992) (citations omitted). Whether a case is removable or not "is to be determined by the allegations of the complaint or petition and . . . if the case is not then removable it cannot be made removable by any statement in the petition for removal or in subsequent pleadings by the defendant." Great N. Ry. Co. v. Alexander, 246 U.S. 276, 281 (1918); Avitts, 53 F.3d at 693. "[B]ecause the effect of removal is to deprive the state court of an action properly before it, removal raises significant federalism concerns." Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 365 (5th Cir. 1995). Remand is proper if there is any doubt about the existence of federal jurisdiction, and all "ambiguities are to be construed against removal." Samuel v. Langham, 780 F. Supp. 424, 427 (N.D. Tex. 1992).
The "well-pleaded complaint rule" determines whether federal jurisdiction exists. Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 9-10 (1983). According to this rule, "federal jurisdiction is lacking unless a federal question appears on the face of a properly pleaded complaint; a federal defense does not confer subject-matter jurisdiction." In re U.S. Healthcare, Inc., 193 F.3d 151, 160 (3d Cir. 1999). Nevertheless, "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 Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987).
The complete preemption doctrine, therefore, "functions as an exception to the well-pleaded complaint rule." Giles v. NYL Care Health Plans, Inc., 172 F.3d 332, 336-37 (5th Cir. 1999). Complete preemption is an extraordinary measure and requires a clear expression of congressional intent. Aaron v. Nat'l Union Fire Ins. Co., 876 F.2d 1157, 1163 (5th Cir. 1989). However, if complete preemption is clearly intended, then a state law cause of action on which a plaintiffs claim is based, no matter how artfully pleaded, is recast as a federal cause of action, and a federal question is presented thereby making removal proper. See Giles, 172 F.3d at 337.
III. ANALYSIS
Plaintiff contends that ERISA does not govern this dispute because its complaint raises only state-law causes of action and because its plan is a governmental plan that is exempt from ERISA. Plaintiff urges that its suit belongs in state court. Clearly, Plaintiff has not asserted a federal claim on the face of its complaint. However, Defendant contends that federal question jurisdiction does exist as to Plaintiffs claims, because the doctrine of complete preemption recharacterizes those state-law claims as federal-law claims under ERISA, thereby making removal to federal court proper.
Under ERISA, there are two kinds of preemption. Complete preemption occurs where a state-law cause of action falls within the scope of a particular enforcement provision in § 502 of ERISA. 29 U.S.C. § 1132; Arana v. Ochsner Health Plan, 338 F.3d 433, 440 (5th Cir. 2003). In particular, a state-law cause of action falls within the scope of a specific ERISA enforcement provision where an ERISA-plan participant or beneficiary seeks to recover benefits due or to enforce rights under the plan. Under those circumstances, a state-law cause of action is completely preempted and recast as a federal cause of action. See Carpenter v. Harris Community Health, 154 F. Supp.2d 928, 931 (N.D. Tex. 2001). Under complete preemption, federal question jurisdiction exists regardless of how well pleaded the complaint, and removal is proper. See Giles, 172 F.3d at 337. ERISA also provides for another kind of preemption, referred to as ordinary or conflict preemption, pursuant to the provisions of ERISA § 514, under which ERISA's provisions "supersede any and all State common laws insofar as they . . . relate to any employee benefit plan." 29 U.S.C. § 1144(a); Carpenter, 154 F. Supp.2d at 931. Although § 514's conflict preemption has been broadly construed, the mere fact that an action "relates to" an ERISA plan does not necessarily implicate ERISA's particular civil enforcement provisions to the extent that a plaintiffs state-law claims are recast as federal claims. Rather, conflict preemption is defensive in nature and, unlike complete preemption, does not displace the well-pleaded complaint rule. See Vega v. Nat'l Life Ins. Servs., Inc., 188 F.3d 287, 291 (5th Cir. 1999). Conflict preemption under § 514, without complete preemption under § 502, is not sufficient in itself to grant the federal court removal jurisdiction to resolve the § 514 dispute, making remand to the state court proper to resolve the dispute. See Carpenter, 154 F. Supp.2d at 931; Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 355 (3d Cir. 1995).
29 U.S.C. § 1132(a)(1)(B) states: "A civil action may be brought — (1) by a participant or beneficiary — . . . (B) to recover benefits due to him under the terms of his plan, or to clarify his rights to future benefits under the terms of the plan."
Balancing a removing defendant's burden of proof against Congress' intention to completely preempt certain claims, as it has under ERISA, is a delicate task involving due regard for the policy choices behind both concerns. See, e.g., Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54 ("In sum, the detailed provisions of § 502(a) set forth a comprehensive civil enforcement scheme that represents a careful balancing [of the parties' respective needs]. . . . The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERIS A-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA."). Placing too much emphasis on a defendant's removal burden may indeed deny him the opportunity to have the case tried to a federal court. However, a doctrine of preemption, based as it is on the Supremacy Clause of the United States Constitution, is not intended to assure a federal forum, but rather exists to insure the application of federal law. See Nashoba Communications v. Town of Danvers, 893 F.2d 435, 440 (1st Cir. 1990). Clearly, "state courts have inherent authority, and are thus presumptively competent, to adjudicate claims arising under the laws of the United States," Giles, 172 F.3d at 339 n. 19 (quoting Tafflin v. Levitt, 493 U.S. 455, 458 (1990)). Section 502 of ERISA specifically recognizes that "State courts of competent jurisdiction shall have concurrent jurisdiction of actions under paragraph 1(B) [to recover benefits due under an ERISA plan]." See 29 U.S.C. § 1132(e)(1); Franchise Tax Bd., 463 U.S. at 24. Indeed, "allowing a defendant . . . to remove [a] case by chanting an 'ERISA' mantra raises significant federalism concerns." Edwards v. Prudential Ins. Co. of Am., 213 F. Supp.2d 1376, 1381 (S.D. Fla. 2002).
Federal courts have exclusive jurisdiction in civil actions for breach of fiduciary duty under ERISA, see 29 U.S.C. § 1104, 1109, and 1132(e)(1), but no such claim is before this Court in the instant action.
In order for this Court to determine whether Defendant has met his burden of proof for removal, Defendant must demonstrate that Plaintiffs state-law claims do more than merely "relate to" an ERISA plan generally, i.e., that they are conflict-preempted. Defendant must go further and demonstrate to this Court from the face of the complaint that Plaintiffs state-law claims are completely preempted by showing that Plaintiffs claims (or at least one of them) "seek relief 'within the scope of the civil enforcement provisions of § 502(a).'" Arana v. Ochsner Health Plan, 338 F.3d 433, 439-40 (5th Cir. 2003) (citing Taylor, 481 U.S. at 66). For Plaintiffs state-law claims to fall within the scope of ERISA's enforcement provisions, the plan in question must meet the broad qualifications necessary to be considered an "employee welfare benefit plan" as that term is defined in ERISA. See 29 U.S.C. § 1002(1), 1003; Meredith, 980 F.2d 352, 353 (5th Cir. 1993). ERISA defines an employee welfare benefit plan as "any plan, fund, or program which was . . . established or maintained by an employer or employee organization, or both . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits." 29 U.S.C. § 1002(1). The evidence shows that Plaintiffs plan clearly appears to be such a plan.
However, there are certain narrow exceptions to ERISA's broad coverage of employee welfare benefit plans. ERISA specifically exempts from the scope of its § 502(a) enforcement provisions, "any employee benefit plan if . . . such plan is a governmental plan (as defined in section 1002(32) of this title)." 29 U.S.C. § 1003(b)(1); § 1132(1)(B). Section 1002(32) defines a governmental plan as "a plan established or maintained for its employees . . . by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing." 29 U.S.C. § 1002(32). A plan established by a government or political subdivision of a state does not fall within the scope of ERISA's enforcement provisions, and therefore any claims made under such a plan cannot be completely preempted.
Plaintiff claims that it is a subdivision of the State of Texas, created by the Legislature in the 60th Regular Session in 1967, ch. 66, 1967 Gen. Laws 17 (codified at Tex. Rev. Civ. Stat. Ann. art. 4494q (Vernon 2000). [Pl's. Brief in Support of M. to Remand ¶ 2.5 at 5]. Defendant does not dispute this fact. There being no evidence before this Court disputing the fact that Plaintiff is a governmental entity as described by ERISA, Defendant fails to meet his burden to demonstrate to this Court that Plaintiffs state-law claims are completely preempted under ERISA. Accordingly, the Court holds as a matter of law that the plan at issue does not constitute an ERISA-benefit plan and there is no complete preemption and no subject matter jurisdiction basis for removal. Remand of this action to state court for ultimate resolution is therefore proper under 28 U.S.C. § 1447(c).
ERISA § 514 likewise does not apply to plans that are exempt under 29 U.S.C. § 1003(b). 29 U.S.C. § 1144(a). But since ERISA § 514 only implicates conflict preemption, it is not relevant to our determination of the removal issue. See Arana, 338 F.3d at 440.
IV. CONCLUSION
After considering all the relevant arguments and evidence, this Court finds, for the reasons set forth above, that removing Defendant, Tim Denton, has failed to meet his burden to establish that Plaintiffs claims arise under federal law. As such, removal is improper as this Court is without subject matter jurisdiction to adjudicate this action, and remand to state court is proper in accordance with 28 U.S.C. § 1447(c). Therefore, this Court GRANTS Plaintiffs Motion to Remand and all claims asserted in this case are hereby REMANDED to the 106th Judicial District Court in and for Lynn County, Texas, with the parties to bear their own costs. The Court further DENIES all other pending motions as moot.
The Clerk of the Court shall transmit a certified copy of this Order to the Clerk of the 106th Judicial District Court in and for Lynn County, Texas.
SO ORDERED.