Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ared-4_07-cv-00790/USCOURTS-ared-4_07-cv-00790-2/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1001 E.R.I.S.A.: Employee Retirement

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IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

BILL and EDITH RAMSEY PLAINTIFFS

VS. CASE NO. 4:07CV00790

SOUTHEASTERN EMPLOYEE BENEFIT

SERVICES, INC., FIRST CHARTER

CORPORATION, PAYCHEX, INC., and

STEPHENS INC. d/b/a STEPHENS

CAPITAL MANAGEMENT DEFENDANTS

ORDER

Pending is the Plaintiffs’ Motion to Remand, docket #12. Defendants have filed

responses and the Court held a hearing on the pending motion on November 6, 2007. Plaintiffs’

motion to remand is denied for the reasons set forth below.

“In reviewing a motion to remand, the district court must strictly construe the removal

statute against the party seeking removal and resolve all doubts as to the propriety of federal

jurisdiction in favor of state court jurisdiction.” Masepohl v. American Tobacco Co., Inc., 974 F.

Supp. 1245, 1249 (D. Minn. 1997) (citing In re Potash Antitrust Litig., 866 F. Supp. 406, 410 (D.

Minn. 1994)); in accord Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-109, 61 S. Ct

868, 872 (1941). A heavy burden of proof is on the party contesting a remand motion. 14A

Wright, Miller & Cooper, Federal Practice and Procedure, Jurisdiction 2d § 3739 (1994).

After careful review of the record and briefs of the parties on this issue, the Court finds

that federal jurisdiction exists in this case. Defendants assert that removal is appropriate because

Plaintiffs’ action arises under the provisions of the Employee Retirement Income Security Act of

1974 ( “ERISA”), 29 U.S.C. §1001 et. seq. Plaintiffs argue that their Complaint states causes of

action for breach of Defendants’ contractual and professional duties to Plaintiffs. Plaintiffs

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contend that they do not seek to recover under the plan or on behalf of the plan therefore the

complaint does not fit within §502(a). 

Generally, the jurisdiction of a federal court is governed by the “well-pleaded complaint

rule.” This rule provides that federal question jurisdiction exists only where the federal question

is present on the face of the plaintiff’s properly pled complaint. Caterpillar Inc. v. Williams, 482

U.S. 386, 107 S. Ct. 2425 (1987). However, the United States Supreme Court has created an

exception to the well-pleaded complaint rule known as the complete preemption doctrine. 

The doctrine states that when the preemptive force of a statute is ‘extraordinary,’

it ‘converts an ordinary common-law complaint into one stating a federal claim

for purposes of the well-pleaded complaint rule.’ This exception prohibits a

plaintiff from defeating removal by failing to plead necessary federal questions in

a complaint and allows a defense of federal preemption as a basis for removal. 

Hanson v. Blue Cross Blue Shield of Iowa, 953 F.Supp. 270, 273 (N.D. Iowa 1996)(quoting

Caterpillar, 482 U.S. at 393; Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 65, 107 S. Ct.

1542, 1547 (1987)). The United States Supreme Court and the Eighth Circuit Court of Appeals

have found complete preemption in the area of ERISA. Hanson, 953 F.Supp. at 273.

There are two types of preemption under ERISA: “complete preemption” under ERISA §

502, 29 U.S.C. § 1132, and “express preemption” under ERISA § 514, 29 U.S.C. § 1144.

Express preemption differs from complete preemption. Section 514(a) states that ERISA

preempts any state law that "relate[s] to any employee benefit plan." 29 U.S.C. § 1144(a). The

Supreme Court has recognized that this preemption language is “conspicuous for its breadth.”

FMC Corp. v. Holliday, 498 U.S. 52, 58, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990). However, the

Court has acknowledged, that “[s]ome state actions may affect employee benefit plans in too

tenuous, remote, or peripheral a manner to warrant a finding that the law ‘relates to’ the plan.”

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Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n. 21, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). To

determine whether a state action “relates to” an employee benefit plan covered by ERISA, the

Court applies a two-part test. Wilson v. Zoellner, 114 F.3d 713, 716 (8th Cir. 1997). A law relates

to a covered employee benefit plan for purposes of ERISA if it has (1) “a connection with” or (2)

“reference to such a plan.” Parkman v. Prudential Ins. Co. of America, 439 F.3d 767, 771 (8th

Cir. 2006). 

An action is subject to removal “where a claim ‘relate[s] to any employee benefit plan’ 29

U.S.C. §1144(a), such that the claim is preempted by federal law, and the claim seeks to recover

benefits due or to enforce rights under the terms of a plan, 29 U.S.C. §1132(a).” Neumann v.

AT& T Comm, Inc., 376 F. 3d 773, 779 (8th Cir. 2004) citations omitted. 

ERISA § 502(a) provides, "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). “The United States Supreme Court has concluded that suits under section 502(a)

of ERISA present a federal question for purposes of federal court jurisdiction. Causes of action

within the scope of, or that relate to, the civil enforcement provisions of 502(a) are removeable to

federal court despite the fact the claims are couched in terms of state law.” Hull v. Fallon 188

F.3d 939, 942 (8th Cir.1999) citations omitted. A state-law cause of action is completely

preempted "if an individual, at some point in time, could have brought his claim under [ERISA §

502], and where there is no other independent legal duty that is implicated by a defendant's

actions." Prudential Ins. Co. Of America v. National Park Medical Ctr., 413 F.3d 897, 914 (8th

Cir. 2005) (quoting Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004)). 

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Plaintiffs, Bill and Edith Ramsey filed suit against Stephens Inc. d/b/a Stephens Capital

Management (“Stephens”) and Southeastern Employee Benefit Services, Inc., First Charter

Corporation and Paychex, Inc. (collectively, “SEBS”) based on alleged acts and omissions in

connection with the creation, funding and administration of a retirement plan governed by

ERISA. The Complaint alleges that Plaintiffs are participants in and beneficiaries of the plan,

which their employer, Sunrise Arkansas, Inc. sponsors; that Stephens and SEBS are plan

administrators and fiduciaries; and, that in creating and administering the plan, Stephens and

SEBS negligently breached fiduciary duties. Plaintiffs claim to assert a state law breach of

contract claim against SEBS, the third-party administrator of the plan, for alleged breach of the

plan’s Administrative Services Agreement (“ASA”) and a state law negligence claim against

SEBS and Stephens based on their alleged breach of fiduciary duties in providing services to the

plan as required by the ASA and other plan documents. 

Plaintiffs’ complaint asserts that the Defendants owed to them fiduciary duties in

connection with the establishment and administration of the ERISA plan. They claim that

Stephens and SEBS selected an inappropriate funding method for the plan and failed to report

annually as to the funding status of the plan. There is no dispute that Plaintiffs are plan

participants and Plaintiffs allege that Defendants are administrators and fiduciaries. Section

502(a) provides that “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). 

Further, ERISA Section 502(a)(2) allows a participant or beneficiary to seek appropriate relief

against a plan fiduciary for losses to the plan caused by a breach of fiduciary duty owed to the

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plan. 29 U.S.C. 1109. Plaintiffs’ complaint seeks to hold the Defendants liable for an alleged

funding shortfall in the Plan and for the alleged breach of fiduciary duties. This action by plan

participants against plan administrators and fiduciaries falls within the civil enforcement

provision of ERISA and is completely preempted. 

Additionally, the Court finds that Plaintiffs’ state law claims are directly connected to,

and thus “relate to” an employee benefit plan pursuant to §514(a). In Consolidated Beef Indus.

Inc. v. New York Life Ins. Co., 949 F. 2d 960, 964 (8th Cir. 1991) the Eighth Circuit Court of

Appeals found that “given ERISA’s broad preemption provision, state law claims for improper

plan administration are preempted.” Id. at 963. Further, the court found that even if the

plaintiff’s claims involved misrepresentation in the sale of the plan, “its claims still relate to the

employee benefit plan.” Id. at 964. See also, Howard v. Coventry Health Care of Iowa, Inc.,

293 F.3d 442, 446 (8th Cir. 2002) (finding that ERISA preempts claims by a plan participant for

breach of contract, violation of public policy and bad faith premised on the argument that the

plan failed to provide certain benefits). Here Plaintiffs’ claims relate directly to the creation,

funding and administration of the plan. Accordingly, Plaintiffs’ claims are expressly preempted. 

Wherefore, Defendants’ removal of this cause of action was appropriate. Accordingly,

Plaintiffs’ motion for remand (Docket #12) is denied.

 IT IS SO ORDERED this 24th day of January, 2008.

________________________________________

James M. Moody

United States District Judge

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