Opinion ID: 660213
Heading Depth: 2
Heading Rank: 1

Heading: Jurisdiction Founded Upon a Sec. 1144 ERISA Preemption Defense

Text: 13 Two different sections of ERISA are important in this preemption analysis. The civil enforcement section of ERISA is 29 U.S.C. Sec. 1132. Under that section, anyone who qualifies as a participant or beneficiary of an employee benefit plan may sue under ERISA to enforce various rights conferred by ERISA. Section 1132 impliedly preempts actions brought in state court that could have been brought under ERISA's civil enforcement section. See, e.g., Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 53-56, 107 S.Ct. 1549, 1556-58, 95 L.Ed.2d 39 (1987). Title 29, U.S.C. Sec. 1144 is ERISA's express preemption provision. That section preempts state laws insofar as they relate to any employee benefit plan. 29 U.S.C. Sec. 1144(a). Distinguishing between Sec. 1132 preemption and Sec. 1144 preemption is important when determining whether a preemption defense raises a federal question supporting federal jurisdiction. As already noted, the district court found federal jurisdiction based on its determination that Sec. 1144 preempted Alexander's claim. We hold that jurisdiction based on Sec. 1144 of ERISA was improper. 14 In its order denying Alexander's petition for remand, the district court assumed that a successful Sec. 1144 preemption defense would create federal question jurisdiction. The only authority cited in the court's entire discussion of preemption and jurisdiction was Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990). Ingersoll-Rand, however, did not address jurisdictional issues. The primary cases involving jurisdiction based on ERISA preemption are Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987), and Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). 15 In Franchise Tax Board, the Supreme Court restated the general rule regarding removal jurisdiction based on a preemption defense: 16 [S]ince 1887 it has been settled law that a case may not be removed to federal court on the basis of a federal defense, including the defense of preemption, even if the defense is anticipated in the plaintiff's complaint, and even if both parties admit that the defense is the only question truly at issue in the case. 17 Franchise Tax Board, 463 U.S. at 14, 103 S.Ct. at 2848. Federal question jurisdiction exists whenever a claim arise[s] under the ... laws ... of the United States. 28 U.S.C. Sec. 1331. According to the Court,  '[b]y unimpeachable authority, a suit brought upon a state statute does not arise under an act of Congress or the Constitution of the United States because prohibited thereby'. Franchise Tax Board, 463 U.S. at 12, 103 S.Ct. at 2848 (quoting Gully v. First National Bank in Meridian, 299 U.S. 109, 116, 57 S.Ct. 96, 99, 81 L.Ed. 70 (1936)). 18 The Court's hesitancy to find federal question jurisdiction premised on preemption appears partly motivated by respect for the well-pleaded complaint rule. The well-pleaded complaint rule generally provides that the plaintiff is the master of his complaint, and the fact that the wrong asserted could be addressed under either state or federal law does not ordinarily diminish the plaintiff's right to choose a state law cause of action. Franchise Tax Board, 463 U.S. at 13, 22, 103 S.Ct. at 2848, 2852; Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908). The well-pleaded complaint rule has been correctly understood to apply, even in cases in which neither the obligation created by state law nor the defendant's factual failure to comply are in dispute, and both parties admit that the only question for decision is raised by a federal pre-emption defense. Franchise Tax Board, 463 U.S. at 12, 103 S.Ct. at 2848 (stating that the party who brings a suit is master to decide what law he will rely upon). 19 A special corollary to the well-pleaded complaint rule provides that federal question jurisdiction exists when the plaintiff's claim occurs in an area of the law which Congress has so completely preempted that any complaint raising a claim in that area necessarily presents a federal issue. Avco Corp. v. Aero Lodge No. 735, Int'l Ass'n of Machinists, 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968); Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). In Metropolitan Life, the Supreme Court applied the corollary to a claim that could have been brought under the civil enforcement section of ERISA. As a result, the Court held that the plaintiff's claim was removable to federal court based on a Sec. 1132 preemption defense notwithstanding the absence of a federal issue on the face of the complaint. 20 EDS urges us to interpret Metropolitan Life as conferring federal question jurisdiction whenever an ERISA preemption defense is raised, regardless of whether the defense is premised on Sec. 1132, Sec. 1144, or some other section. We decline to make such a broad interpretation ofMetropolitan Life. 21 The plaintiff in Metropolitan Life was a terminated employee who sued for wrongful termination, breach of contract and retaliatory discharge. One of the claims in that case demanded reinstatement of all benefits and insurance coverages Plaintiff is entitled to. Metropolitan Life, 481 U.S. at 61, 107 S.Ct. at 1545. Because Taylor was a former employee of the defendant, he was a beneficiary under ERISA, and could have brought his claim for benefits under ERISA's civil enforcement section, Sec. 1132. The defendant removed the case to federal court based on the Sec. 1132 defense, and the district court accepted pendent jurisdiction over the non-benefit-related claims. Id. 22 While discussing Franchise Tax Board, the Court, in Metropolitan Life, acknowledged that even ERISA preemption defenses do not generally create federal question jurisdiction. Specifically, the Court noted that, [i]n Franchise Tax Board, the Court held that ERISA pre-emption, without more, does not convert a state claim into an action arising under federal law. Metropolitan Life, 481 U.S. at 64, 107 S.Ct. at 1546. 23 After recognizing that Taylor's action was likely preempted under both Sec. 1144 (the express preemption provision), and Sec. 1132 (the civil enforcement section), the Court focused on the congressional intent surrounding Sec. 1132. The Court noted striking similarities between Sec. 1132 of ERISA, and Sec. 301 of the Labor Management Relations Act (LMRA), and pointed to a Conference Report on ERISA describing the civil enforcement provisions of Sec. 502(a) (29 U.S.C. Sec. 1132) regarding the removability of actions that could have been brought under Sec. 1132. Metropolitan Life, 481 U.S. at 65-66, 107 S.Ct. at 1547-48. That Conference Report instructed that: 24 [W]ith respect to suits to enforce benefit rights under the plan or to recover benefits under the plan which do not involve application of the title I provisions, they may be brought not only in U.S. district courts but also in State courts of competent jurisdiction. All such actions in Federal or State courts are to be regarded as arising under the laws of the United States in similar fashion to those brought under section 301 of the Labor-Management Relations Act of 1947. H.R.Conf.Rep. No. 93-1280, p. 327 (1974). 25 Id. at 65-66, 107 S.Ct. at 1547-1548 (emphasis supplied by the Court). 5 Based on that congressional pronouncement, the Court found that Taylor's action was removable. We interpret the Court's decision as only a modest encroachment upon the well-pleaded complaint rule: 26 Taylor argues strenuously that this action cannot be removed to federal court because it was not obvious at the time he filed suit that his common law action was both pre-empted by ... Sec. 1144(a), and also displaced by the civil enforcement provisions of [Sec. 1132(a) ].... But the touchstone of the federal district court's removal jurisdiction is not the obviousness of the pre-emption defense but the intent of Congress. Indeed, as we have noted, even an obvious pre-emption defense does not, in most cases, create removal jurisdiction. In this case, however, Congress has clearly manifested an intent to make causes of action within the scope of the civil enforcement provisions of [Sec. 1132] removable to federal court. Since we have found Taylor's cause of action to be within the scope of [Sec. 1132(a) ], we must honor that intent whether preemption was obvious or not at the time this suit was filed. 27 Id. 481 U.S. at 66, 107 S.Ct. at 1547. 28 As the concurrence made clear, the crucial congressional intent was to allow removal, not merely the intent to preempt. The concurrence noted: 29 [O]ur decision should not be interpreted as adopting a broad rule that any defense premised on congressional intent to preempt state law is sufficient to establish removal jurisdiction. The Court holds only that removal jurisdiction exists when, as here, Congress has clearly manifested an intent to make causes of action ... removable to federal court. 30 Metropolitan Life, 481 U.S. at 67-68, 107 S.Ct. at 1548 (Brennan, J., concurring) (emphasis in original). 31 In Metropolitan Life, the Court clearly found that an Sec. 1132 preemption defense confers federal question jurisdiction. Id. at 67. The Court was silent, however, about Sec. 1144. We find it telling that the Court in Metropolitan Life had the opportunity to find federal jurisdiction based on a Sec. 1144 defense, but declined to do so, instead relying on specific congressional intent relating only to Sec. 1132. Because Metropolitan Life only found clear congressional intent to allow removal of actions implicating Sec. 1132, we do not interpret it as directly authorizing the removal of Alexander's action to federal court. 32 Additionally, we do not believe that Metropolitan Life implicitly authorizes removal of actions that are possibly preempted under Sec. 1144. The parties have not highlighted and we have found no clear congressional intent to allow removal of actions that potentially relate to employee benefit plans analogous to the congressional intent clearly manifested in the Conference Report regarding ERISA's civil enforcement section. Moreover, we find instructive the Supreme Court's careful protection of the well-pleaded complaint rule, and its hesitancy to allow removal based on a preemption defense. Consequently, we believe that a defense premised on Sec. 1132 preemption creates federal question jurisdiction, but that one based on Sec. 1144 preemption does not. 6 Therefore, the district court erred by taking jurisdiction founded on EDS' Sec. 1144 preemption defense. 7 B. Jurisdiction Founded on a Sec. 1132 ERISA Preemption Defense 33 In its opinion granting summary judgment to EDS, the district court noted an additional jurisdictional basis. 8 The court reasoned that Alexander's complaint alleged facts which, if true, would subject his claims to preemption under Sec. 1132. Because a Sec. 1132 preemption defense raises a federal question supporting jurisdiction, the district court found jurisdiction proper under Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. at 1542 (1987). Alexander v. EDS, No. 91-CV-72494-DT, slip op. at 4 n. 12 (E.D.Mich.1991). In Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272 (6th Cir.1991), cert. dismissed, --- U.S. ----, 113 S.Ct. 2, 120 L.Ed.2d 931 (1992), this court held that jurisdiction on this basis is unfounded. At best, it is unclear as to whether Alexander's complaint alleges that he was ever an employee of EDS. His complaint alleges that he was offer[ed] ... a lower position and Alexander accepted the lower position. Three sentences later, however, Alexander's complaint alleges that Plaintiff Alexander did not receive either the systems engineer job or any other position with EDS. 34 As previously noted, Sec. 1132 preempts state claims by participants or beneficiaries to enforce certain rights guaranteed by ERISA. Claims by anyone other than a participant or beneficiary, however, fall outside the scope of ERISA's civil enforcement section. The district court determined that it was entitled to rely on the allegations in Alexander's complaint when determining his status as a participant or beneficiary. Alexander, slip op. at 6 n. 14. Because Alexander's complaint could be construed as alleging that Alexander was offered employment by EDS, (and was therefore a potential participant in the plan), the court concluded that EDS' Sec. 1132 preemption defense was apparently valid at the time the petition for remand was filed, and that the court had federal jurisdiction pursuant to that defense. We do not reach this same conclusion. 35 The majority decision in Cromwell v. Equicor-Equitable HCA Corp. held that a district court must look to the complaint as it existed at the time the petition for removal was filed to determine the matter of federal jurisdiction raised by the defendant's notice of removal. 944 F.2d at 1277 (emphasis added). 9 Both the concurring and dissenting opinions, however, held that the district court must make an independent inquiry at the outset to determine whether the plaintiff is a 'participant' ... within the meaning of ERISA, before it turns to the issue of preemption. Id. at 1279 (Suhrheinrich, J., concurring). The district court seemed to imply that, with regard to removal jurisdiction, it could or should rely on the plaintiff's allegations, as set forth in his complaint, that he accepted employment with EDS. J/A 37, n. 14. 36 In the plaintiff's motion to remand, he stated: 37 Plaintiff alleges that individual defendant Steven Brechtelsbauer acted as an agent of EDS by being part of the management team that interviewed and denied Plaintiff employment. Mr. Brechtelsbauer was part of the management team that interviewed Plaintiff. Complaint paragraph 16. The team instructed the Recruiter to offer a lower position to Plaintiff. Complaint paragraph 17. The purpose of the lower offer was to discourage Plaintiff from applying for work with EDS. Complaint paragraph 36. Plaintiff accepted. Complaint paragraph 18. He did not receive either position. 38 Complaint paragraph 21. These actions were in violation of the Michigan Handicappers' Civil Rights Act. Complaint paragraphs 33, 34 and 37. 39 .... 40 Defendant alleges in paragraph 12 of its removal petition that because plaintiff pleads that he accepted the alleged employment offer, he is participant [sic] in an employee benefit plan. Defendant's position is frivolous because plaintiff was never employed by defendant. 41 J/A 52, 53 (emphasis added). 42 The plaintiff added, in his motion to remand, that to be a participant he had to be actually employed or a former 'employee', citing ERISA provisions and Coleman v. General Electric Co., 643 F.Supp. 1229, 1235 (E.D.Tenn.1986), aff'd, 822 F.2d 59 (6th Cir.1987). 43 We believe that at this juncture an independent inquiry by the district court, based upon the pleadings, including the notice of removal and motion to remand, would have made it clear to the district court that the plaintiff had, in effect, abandoned any potential claim to benefits or damages under the ERISA plan, which he conceded applied only to participants. In point No. 9 of the motion to remand, the plaintiff made it clear that he was never an employee or a participant, and he made no claim to be a beneficiary under the ERISA plan. We construe the plaintiff's action, as described above, in the motion to remand as an effectual amendment or clarification with respect to disclaiming any rights as an actual or former EDS employee. The district court's appropriate inquiry into, or examination of, the plaintiff's status at this point would have made it clear that Alexander claimed and had no standing to pursue an ERISA cause of action. ERISA was enacted 'to promote the interests of employees and their beneficiaries in employee benefit plans.' Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983) (quoted in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 113, 109 S.Ct. 948, 955, 103 L.Ed.2d 80 (1989)). 44 We believe that since the plaintiff waived or dropped, as a matter of clarification, any claim as participant or employee, the district court failed to consider his lack of standing to assert any claim under ERISA at the time the issues were drawn on the question of remand to the state court. We hold that the district court erred and acted prematurely in dismissing the plaintiff's state law claims and in granting the defendants' summary judgment on the federal question and preemption issue. Had the proper inquiry under Cromwell been made, it would have been clear that Alexander lacked standing to sue under ERISA (because he was never an employee) and that EDS' Sec. 1132 ERISA preemption defense was misplaced (for the same reason). The district court should then have examined the question of jurisdiction by reason of diversity and alleged fraudulent joinder.