Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_07-cv-04811/USCOURTS-cand-4_07-cv-04811-3/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 28:1441 Petition for Removal

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United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

EVA DENES,

Plaintiff,

 v.

TRAVELERS INDEMNITY CO. and YVONNE

GARRISON,

Defendants. /

No. C 07-4811 CW

ORDER GRANTING

PLAINTIFF’S MOTION FOR

REMAND AND DENYING

WITHOUT PREJUDICE

DEFENDANTS’ MOTION TO

COMPEL ARBITRATION

Plaintiff Eva Denes moves to remand this action to state court

on the basis that the Court lacks subject matter jurisdiction. 

Defendants Travelers Indemnity Co. and Yvonne Garrison oppose

Plaintiff’s motion and simultaneously move to compel arbitration

and stay these proceedings. The matter was taken under submission

on the papers. Having considered all of the papers submitted by

the parties, the Court grants Plaintiff’s motion and denies without

prejudice Defendants’ motion.

BACKGROUND

The following facts are alleged in the complaint. Plaintiff

is a resident of California and a former employee of Defendant

Travelers Indemnity Co., a Connecticut corporation. Defendant

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United States District Court

For the Northern District of California

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Yvonne Garrison, a California resident, was formerly Plaintiff’s

supervisor at Travelers.

Plaintiff began working at Travelers in 1974. In 2003,

Travelers merged with St. Paul Insurance Company. Travelers and

its managers, including Garrison, subsequently began a campaign

designed to force older employees out of their positions. To this

end, Defendants subjected older employees to different performance

standards than younger employees; assigned older employees extra

work and unduly menial tasks; subjected older employees to

unnecessarily critical evaluations; and encouraged supervisors to

downgrade the performance reviews of the targeted employees.

Plaintiff, who was in her fifties during the relevant time

period, was among the targeted workers. She was given extra case

files, but was not given access to the materials she needed in

order to perform her job. She was also subjected to constant

demands that were intended to interfere with her ability to

complete her work. As Plaintiff’s manager, Garrison relentlessly

criticized and harassed her, subjecting her to negative performance

reviews that were a pretext for age discrimination.

On or about August 15, 2005, Garrison notified Plaintiff that

her employment with Travelers was being terminated. In the section

of the complaint entitled, “Facts Common to All Causes of Action,”

Plaintiff alleges that, although at the time of her termination

“she was eligible for at least fifty-two weeks of severance pay by

virtue of her commendable and satisfactory thirty-one year tenure,”

Travelers “gave her none.” Compl. ¶ 20.

Plaintiff originally filed her complaint in California state

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United States District Court

For the Northern District of California

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court. The complaint asserts five causes of action, identified by

their headings as: 1) age discrimination; 2) failure to prevent

discrimination; 3) breach of employment contract; 4) breach of the

implied covenant of good faith and fair dealing; and 5) violation

of the California unfair competition law.

With respect to the first cause of action, the complaint

alleges, “Defendants’ actions described herein have violated

California laws prohibiting age discrimination in the workplace,

including Government Code §§ 12940(a) and 12941. These sections

required Defendants, among other things, to refrain from

discriminating against any employee over the age of 40; yet

Defendants targeted older workers for harassment and termination.” 

Id. ¶ 25. In setting out this cause of action, the complaint also

alleges that Plaintiff’s termination “was preceded by an

unrelenting campaign of harassment and discrimination directed

against her, accompanied by hints that she should retire.” Id.

¶ 27.

With respect to the third cause of action, the complaint

alleges the existence of an implied-in-fact employment contract

between Plaintiff and Travelers, pursuant to which Plaintiff would

be permitted to continue her employment “indefinitely as long as

she carried out her duties in a proper and competent manner.” Id.

¶ 40(A). The complaint alleges that the contract “was evidenced by

various written documents,” including “Travelers’ written Benefits

Manual.” Id. ¶¶ 41, 41(A). The third cause of action does not,

however, assert that Travelers breached the terms of the Benefits

Manual.

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United States District Court

For the Northern District of California

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Defendants removed this action to federal court, claiming

that: 1) the complaint does not state a viable claim against

Garrison, and therefore this Court has diversity jurisdiction over

the matter; and 2) Plaintiff’s claim for severance pay is preempted

by the federal Employee Retirement Income Security Act (ERISA), and

therefore this Court has federal question jurisdiction.

LEGAL STANDARD

 A defendant may remove a civil action filed in state court to

federal district court so long as the district court could have

exercised original jurisdiction over the matter. 28 U.S.C.

§ 1441(a). If at any time before final judgment it appears that

the district court lacks subject matter jurisdiction over a case

previously removed from state court, the case must be remanded. 28

U.S.C. § 1447(c). On a motion to remand, the scope of the removal

statute must be strictly construed. Gaus v. Miles, Inc., 980 F.2d

564, 566 (9th Cir. 1992). “The ‘strong presumption’ against

removal jurisdiction means that the defendant always has the burden

of establishing that removal is proper.” Id. Courts should

resolve doubts as to removability in favor of remanding the case to

state court. Id.

DISCUSSION

I. Diversity Jurisdiction

District courts have original jurisdiction over all civil

actions “where the matter in controversy exceeds the sum or value

of $75,000, exclusive of interest and costs, and is between . . . 

citizens of different States.” 28 U.S.C. § 1332(a). When federal

subject matter jurisdiction is predicated on diversity of

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citizenship, complete diversity must exist between the opposing

parties. See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365,

373-74 (1978). 

 A defendant may remove a case lacking complete diversity and

seek to persuade the district court that any non-diverse defendant

was fraudulently joined. See McCabe v. Gen. Foods Corp., 811 F.2d

1336, 1339 (9th Cir. 1987). “If the plaintiff fails to state a

cause of action against a resident defendant, and the failure is

obvious according to the settled rules of the state, the joinder of

the resident defendant is fraudulent.” McCabe, 811 F.2d at 1339. 

The defendant need not show that the joinder of the non-diverse

party was for the purpose of preventing removal. Instead, the

defendant must demonstrate that there is no possibility that the

plaintiff will be able to establish a cause of action in state

court against the alleged sham defendant. See id.; Ritchey v.

Upjohn Drug Co., 139 F.3d 1313, 1318 (9th Cir. 1998).

Defendants argue that diversity jurisdiction exists here

because the complaint does not state a claim against Garrison, the

only Defendant who defeats complete diversity. Under the

California Fair Employment and Housing Act, a supervisory employee

may not be held personally liable for discriminatory employment

decisions; only the employer may be held liable. Reno v. Baird, 18

Cal. 4th 640, 645 (1998). However, individual employees may be

held personally liable for harassment. Cal. Gov’t Code

§ 12940(j)(3).

While discrimination and harassment have similar roots, the

distinction between them is important. As the California Supreme

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Court explained:

[T]he Legislature’s differential treatment of

harassment and discrimination is based on the fundamental

distinction between harassment as a type of conduct not

necessary to a supervisor’s job performance, and business

or personnel management decisions -- which might later be

considered discriminatory -- as inherently necessary to

performance of a supervisor’s job. . . . [H]arassment

consists of conduct outside the scope of necessary job

performance, conduct presumably engaged in for personal

gratification, because of meanness or bigotry, or for

other personal motives. Harassment is not conduct of a

type necessary for management of the employer’s business

or performance of the supervisory employee’s job.

Discrimination claims, by contrast, arise out of the

performance of necessary personnel management duties.

While harassment is not a type of conduct necessary to

personnel management, making decisions is a type of

conduct essential to personnel management. While it is

possible to avoid making personnel decisions on a

prohibited discriminatory basis, it is not possible

either to avoid making personnel decisions or to prevent

the claim that those decisions were discriminatory.

Reno, 18 Cal. 4th at 645-46 (quoting Janken v. GM Hughes

Electronics, 46 Cal. App. 4th 55, 62-64 (1996)) (citations

omitted).

Defendants argue that, although the complaint asserts a claim

for employment discrimination, it does not purport to state a claim

for harassment. The complaint is admittedly ambiguous as to

whether Plaintiff intends to pursue a claim of harassment, which is

made actionable by § 12940(j) of the California Government Code. 

“Harassment” is not denominated as a separate cause of action in

the complaint, and Plaintiff purports to bring her age

discrimination claim under § 12940(a) of the Government Code, which

prohibits discrimination in employment decisions. Nonetheless, the

complaint is littered with variants of the word “harass,” including

in the description of the cause of action for age discrimination.

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It is most likely that Plaintiff’s failure specifically to

allege a violation of § 12940(j) as a separate cause of action is

simply an oversight. “It is an elementary principle of modern

pleading that the nature and character of a pleading is to be

determined from its allegations, regardless of what it may be

called, and that the subject matter of an action and issues

involved are determined from the facts alleged rather than from the

title of the pleadings.” Lovejoy v. AT&T Corp., 92 Cal. App. 4th

85, 98 (2001) (concluding that the complaint stated a cause of

action for fraudulent concealment despite its label as fraud based

on affirmative misrepresentation). Thus, there is no basis for the

Court to disregard Plaintiff’s assertion that she intends to pursue

a harassment claim against Garrison, regardless of the labels in

the complaint.

Defendants also argue that, even if the complaint were

interpreted as asserting a harassment claim, the factual

allegations in the complaint are nonetheless insufficient to state

such a claim. To determine its jurisdiction, the Court need not

decide whether Plaintiff can prove a legally cognizable claim of

harassment against Garrison, but need only conclude that she has

pleaded one under state law. Briggs v. Lawrence, 230 Cal. App. 3d

605, 610 (1991). It is Defendants’ burden to demonstrate that

there is no possibility that Plaintiff will be able to establish a

cause of action against Garrison in state court. On a demurrer, a

California court will liberally construe all of the complaint’s

properly pleaded material allegations as true, and will “give the

complaint a reasonable interpretation by reading it as a whole and

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all its parts in their context” to “ensure the pleading . . .

apprises the adversary of the factual basis for the claim.” People

ex rel. Lungren v. Superior Court, 14 Cal. 4th 294, 300 (1996); Lim

v. The.TV Corp. Int’l, 99 Cal. App. 4th 684, 690 (2002); see also

Cal. Civ. Proc. Code § 452. Moreover, “[i]n testing the legal

sufficiency of a pleading against a general demurrer, all properly

pleaded allegations, including those that arise by reasonable

inference, are deemed admitted regardless of the possible

difficulty of proof at trial.” Saxer v. Philip Morris, Inc., 54

Cal. App. 3d 7, 18 (1975).

The complaint is rife with allegations that Garrison

“harassed” Plaintiff. It is true that “[a]n allegation that an act

is wrongful and unlawful is a mere conclusion,” and “conclusions of

law are not admitted by demurrer.” Metzenbaum v. Metzenbaum, 86

Cal. App. 2d 750, 754 (1948); see also Vilardo v. Sacramento

County, 54 Cal. App. 2d 413, 418-419 (1942). However, although the

complaint contains few details of the nature of Garrison’s alleged

harassment, it nonetheless clearly alleges that Garrison and other

supervisors went out of their way to make working conditions

unpleasant for Travelers’ older employees. The multiple references

to continual harassment and criticism imply that Garrison was

hostile to Plaintiff in a way that went beyond simply making

adverse employment decisions on the basis of Plaintiff’s age. 

Excessive or inappropriate criticism is not a “business or

personnel management decision,” Reno, 18 Cal. 4th at 645, nor is it

“conduct of a type necessary for . . . performance of the

supervisory employee’s job,” id. at 646, and therefore may rise to

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1In any event, the complaint’s shortcomings are of the type

that is readily curable by amendment. Garrison is directly linked

to the events leading to Plaintiff’s termination. Even if the

Court were to find that the complaint did not allege sufficient

facts to state a claim against Garrison, it would dismiss the

harassment claim with leave to amend. See Cook, Perkiss & Liehe,

Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 246-47 (9th

Cir. 1990). Following amendment, Plaintiff would be permitted

again to move for remand.

2Plaintiff asserts that the complaint states several other

claims against Garrison. Because the Court finds that Plaintiff

has stated a harassment claim, it need not determine whether the

complaint states other claims as well.

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a level that constitutes harassment.

With all reasonable inferences drawn in favor of Plaintiff,

she has alleged conduct of the type actionable as harassment. 

Though the complaint is short on details, Defendants have cited no

California case dismissing a claim of harassment for failure to set

forth in exhaustive detail the specific comments and actions upon

which the claim is based.1 Thus, while it remains to be seen

whether Plaintiff will be able to produce evidence sufficient to

prove such a claim, the Court cannot conclude that there is no

possibility that she will be able to establish a cause of action

for harassment against Garrison. Accordingly, Defendants have not

met their heavy burden of establishing that this Court has removal

jurisdiction.2

II. Federal Question Jurisdiction

Defendants contend that the Court has federal question

jurisdiction over this action under 28 U.S.C. § 1331 because

Plaintiff’s claims are preempted by ERISA. Under ERISA, state law

claims are preempted if they “relate to” an ERISA plan and fall

within the scope of ERISA’s civil enforcement mechanism. Toumajian

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3

The Court notes that, as with Plaintiff’s harassment claim,

any ambiguity in the complaint could be resolved by amending it. 

It would defeat the goal of judicial economy to require Plaintiff

to amend the complaint to eliminate the reference to severance pay,

only ultimately to grant a renewed motion for remand.

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v. Frailey, 135 F.3d 648, 654 (9th Cir. 1998). A “core factor” in

determining whether a claim “relates to” an ERISA plan is whether

“the claim bears on an ERISA-regulated relationship.” Rutledge v.

Seyfarth, Shaw, Fairweather & Geraldson, 201 F.3d 1212. 1219 (9th

Cir. 2000).

Defendants’ preemption argument is based primarily on their

interpretation of the complaint as asserting a claim for the fiftytwo weeks of severance pay for which Plaintiff claims she was

eligible. The parties appear to agree that such a claim would be

governed by Travelers’ employee benefit plan, and thus would be

preempted by ERISA. However, Plaintiff denies that she is

asserting a claim for severance pay.

As with Plaintiff’s harassment claim, the complaint does not

clearly specify whether Plaintiff asserts a claim based on

Travelers’ failure to pay severance benefits to her. The

allegation concerning severance pay is contained in the section

entitled, “Facts Common to All Causes of Action,” and Travelers’

failure to provide Plaintiff with severance pay is not specifically

mentioned in the section of the complaint listing the causes of

action. While the complaint could be interpreted as asserting a

claim for severance pay, the Court sees no reason to disregard

Plaintiff’s representation that she in fact does not assert such a

claim.3

 It would not be appropriate for the Court to assert

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4Defendants need not be concerned that Plaintiff may attempt

to assert a claim for severance pay following remand of this

action. Such a claim would be preempted by ERISA, and in any

event, Plaintiff would likely be judicially estopped from asserting

the claim. See New Hampshire v. Maine, 532 U.S. 742, 749 (2001)

(“Where a party assumes a certain position in a legal proceeding,

and succeeds in maintaining that position, he may not thereafter,

simply because his interests have changed, assume a contrary

position, especially if it be to the prejudice of the party who has

acquiesced in the position formerly taken by him.”) (quoting Davis

v. Wakelee, 156 U.S. 680, 689 (1895)).

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subject matter jurisdiction over this action based on a claim that

Plaintiff does not intend to pursue.4

Nor do the complaint’s other references to employee benefits

render this an action subject to ERISA preemption. Contrary to

Defendants’ suggestion, Plaintiff does not claim that Travelers

breached the written “Benefits Manual” -- the complaint refers to

the manual only as evidence that there was an implied-in-fact

employment contact between Plaintiff and Travelers. See Compl.

¶ 41(A). Travelers is alleged to have breached this employment

contract, not by failing to give Plaintiff the benefits she was

due, but by terminating Plaintiff without cause because of her age. 

This type of claim does not relate to ERISA, and is not preempted. 

See Sorosky v. Burroughs Corp., 826 F.2d 794, 800 (9th Cir. 1987)

(plaintiff’s breach of contract claim for discharge without good

cause was not preempted, because it relied on a legal theory that

was independent of the employer’s benefit plan). Additionally, the

allegation that Plaintiff suffered the loss of employee benefits as

a result of this breach, Compl. ¶ 45, does not convert the claim

into an ERISA claim; “a claim does not ‘relate to’ an ERISA

employee benefit plan simply because a court would refer to the

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plan in calculating damages.” Funkhouser v. Wells Fargo Bank,

N.A., 289 F.3d 1137, 1143 (9th Cir. 2002).

Regardless of how they are framed, Plaintiff’s claims are for

harassment and employment discrimination on the basis of her age. 

Resolving these claims will not require reference to ERISA or

interpretation of the Travelers employee Benefit Manual, nor could

Plaintiff pursue these claims under ERISA’s civil enforcement

mechanism. Accordingly, they are not preempted by ERISA, and the

Court does not have federal question jurisdiction over this action.

CONCLUSION

For the foregoing reasons, Plaintiff’s motion to remand this

action to state court is GRANTED. Because the Court lacks subject

matter jurisdiction over this case, it is without power to

adjudicate Defendants’ motion to compel arbitration. Therefore,

that motion is DENIED WITHOUT PREJUDICE to Defendants’ re-filing it

in the state court proceedings. The clerk shall close the file. 

Each party shall bear its own costs.

IT IS SO ORDERED.

Dated: 2/15/08 

CLAUDIA WILKEN

United States District Judge

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