Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-01442/USCOURTS-caed-2_06-cv-01442-1/pdf.json

Nature of Suit Code: 791
Nature of Suit: Employee Retirement Income Security Act (ERISA)
Cause of Action: 29:1132 E.R.I.S.A.-Employee Benefits

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IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF CALIFORNIA

IN RE TASHEEN MARSHALL,

Petitioner.

 

WATKINS ASSOCIATED INDUSTRIES,

Counterclaimant,

v.

TASHEEN MARSHALL, as Guardian

At Litem of Clinton Kelley

Jones, and WILCOXEN, CALLAHAN,

MONTGOMERY & DEACON, 

Counterdefendants.

 

CIV-06-1442-DFL-DAD

MEMORANDUM OF OPINION

AND ORDER

This case arises from an accident in which an uninsured

motorist hit a minor. The young man (“C.J.”) was covered by his

father’s health insurance policy, which was issued by Watkins

Associated Industries, Inc. (“Watkins”). Watkins paid medical

expenses as a result of the accident. Watkins now seeks

reimbursement from C.J. because he stands to recover from his

mother’s insurer, Viking Insurance Co. (“Viking”). Tasheen

Marshall, C.J.’s mother, petitioned a California state court to

approve a settlement between her son and Viking. Watkins

attempted to remove the state case, but the state court approved

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the settlement nonetheless. Watkins now moves to dismiss the

mother’s petition and to vacate the state court order. By way of

counterclaim, Watkins also seeks to obtain a constructive trust

over the Viking settlement funds. Marshall moves to dismiss the

counterclaim. For the reasons stated below, the court DENIES

Watkins’s motion to dismiss Marshall’s petition because the

removal was a nullity and GRANTS Marshall’s motion to dismiss

Watkins’s counterclaim.

I.

On June 16, 2004, C.J. was hit by an uninsured motorist

while riding his bicycle. C.J. suffered serious injury. His

medical expenses totaled $45,917.09. Through his father, C.J.

was covered by the Watkin’s Group Health Protection Plan (“the

plan”), a self-funded employee welfare benefit plan governed by

ERISA. Watkins alleges that the plan paid $44,165.61 in medical

expenses incurred by C.J..

C.J. also was covered by his mother’s uninsured motorist

insurance with Viking. Viking agreed to pay Marshall 

$15,000. California requires that a state court approve any

settlement involving a minor. On May 5, 2006, Marshall sought

court approval of the settlement and filed a “Petition to Approve

Compromise of Disputed Claim of a Minor” in Sacramento County

Superior Court. The settlement terms included: (1) depositing

the funds in a blocked account until C.J. turns 18; (2) paying 

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$3,750.00 in fees to petitioner’s attorney; (3) depositing

$9,314.15 in insured accounts in one or more financial

institutions in the state, subject to withdrawal only upon the

authorization of the court; and (4) paying $1,200 to Marshall to

purchase a computer for C.J. to do schoolwork. In the petition,

Marshall also requested that the court find that: (1) “[Watkins]

is entitled to no recovery for payments made relating to this

incident”; (2) “Watkins is precluded from withholding future

claims for covered services made by insureds under this policy to

satisfy the lien for payments made relating to this incident”;

and (3) “Watkins [must] pay future claims for covered services

relating to this incident.” However, Marshall did not name

Watkins as a defendant in the action, and Watkins was not a

party.

Notwithstanding its status as a nonparty, Watkins filed a

notice of removal. Despite the notice of removal, the state

court issued an order on July 27, 2006 that approved the proposed

settlement between C.J. and Viking and declared that Watkins was

not entitled to any recovery from that settlement. In the

meantime, proceeding in this court on the removed action, Watkins

filed a motion to dismiss the petition on the ground that the

petition was preempted by ERISA and that Marshall had not yet

exhausted administrative remedies. Watkins also filed a

counterclaim against Marshall to put a constructive trust over

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any settlement C.J. reached with Viking. The counterclaim

alleged federal jurisdiction under ERISA. 

Now pending are Marshall’s motion to dismiss Watkins’s

counterclaim and Watkins’s motion to dismiss Marshall’s petition

to approve the settlement. The key issues are: (1) whether

Watkins properly removed the state court petition; and (2)

whether Watkins is correct that the plan allows Watkins to

recover benefits that an insured receives from another insurer.

II.

Federal courts must “strictly construe the removal statute

against removal jurisdiction” and reject jurisdiction “if there

is any doubt as to right of removal in the first instance.” Gaus

v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (citations

omitted). Only a defendant possesses authority to remove a state

action to federal court. See 28 U.S.C. §§ 1441(a), 1446(a). 

Here, Watkins was not a defendant to the petition filed in

state court. Although the petition implicated Watkins’

interests, the petition did not name Watkins as a defendant. 

Moreover, the state court never considered that Watkins was a

party to the case. In its order, the state court expressly

listed only Viking as a defendant. Therefore, Watkins was

neither bound by the petition nor entitled to remove it. 

Accordingly, the court finds that Watkins lacked the authority to

remove the action. See Newman & Cahn, LLP v. Sharp, 388 F. Supp.

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2d 115, 117 (E.D.N.Y. 2005) (finding that a real party in

interest has no authority to seek removal unless it is a named

defendant); 14C Charles Alan Wright & Arthur R. Miller, Federal

Practice and Procedure § 3737 (2006) (“[R]emoval is not effective

until all the steps required by the federal statute have been

taken by the defendant.”) (emphasis added). 

Furthermore, because Watkins’s attempted removal was a

nullity, the court concludes that the petition is not pending

before it, and that the state court never lost jurisdiction. See

Tanzman v. Midwest Express Airlines, Inc., 916 F. Supp. 1013,

1016 (S.D. Cal. 1996) (finding that “the case at all material

times remained in [state court]” because removal was

ineffective). For that reason, the court denies Watkins’ motion

to dismiss and motion to vacate the state court order. 

III.

The plan’s Summary Plan Description states:

If you:

a. sustain an illness or injury as a result of the

tortious act of another party, and

b. as a result of such illness or injury you receive

benefits under the Plan or are eligible to receive

benefits and you reach an agreement to settle with the

responsible party, or a judgment against the

responsible party is entered in your favor, then you

agree to hold in trust for the benefit of the Plan the

“net proceeds” (defined below) from the amount the

responsible party will pay to you or to any other

person or entity on your behalf. By receiving Plan

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benefits you expressly acknowledge that the Plan shall

have a lien and/or constructive trust on any “net

proceeds” paid to you or on your behalf as the result

of a settlement or judgment with or against any party

responsible for your illness or injury. 

. . . 

You and/or your eligible dependants will be required to

sign a form recognizing the Plan’s lien/constructive

trust prior to receiving Plan benefits . . . The Plan

will have the right to withhold or offset future

benefit payments or recover prior benefit payments

through payroll deductions if you do not comply with

these provisions.

(emphasis added)

In the counterclaim, Watkins contends that, under the plan’s

reimbursement provision, it can recover from C.J. compensation he

received from any source. To the contrary, Marshall argues in

her motion to dismiss that the contract provision allows Watkins

to recover only if C.J. settled with or received a judgment

against the tortfeasor. The court has jurisdiction over the

counterclaim because it presents an independent basis for federal

jurisdiction under ERISA. See Niagara Mohawk Power Corp. v.

Tonawanda Band of Seneca Indians, 94 F.3d 747, 753 (2d Cir. 1996)

(“Where a court dismisses an action for lack of federal subject

matter jurisdiction, it may nonetheless adjudicate a counterclaim

presenting an independent basis for federal jurisdiction.”)

The court finds Marshall’s argument the more persuasive in

light of the “responsible party” and “party responsible” language

in the contract. This contract does not give Watkins the right

to recover benefits received from another insurer. Under the

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plan’s reimbursement provision, Watkins can recover from C.J.

only if C.J. settles with “the responsible party” or receives a

judgment against “the responsible party.” In light of this

language, the court finds that the term “responsible party”

describes the party who caused the insured’s “illness or injury,”

not another insurer. Therefore, the court grants Marshall’s

motion to dismiss.

III.

For the reasons stated above, the court DENIES Watkins’s

motion to dismiss Marshall’s petition and GRANTS Marshall’s

motion to dismiss Watkins’s counterclaim.

The clerk shall enter judgment.

IT IS SO ORDERED.

Dated: 16 November 2006

DAVID F. LEVI

United States District Judge

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