Court Opinion

ID: 4119210
Source: CourtListenerOpinion
Date Created: 2017-01-27 20:01:00.757809+00
Date Added: 2024-06-11T14:19:45.931692
License: Public Domain

PUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                             No. 16-1075

BILLY    E.   PRINCE,    individually   and   as         personal
representative for the late JUDITH A. PRINCE,

                Plaintiff - Appellant,

           v.

SEARS HOLDINGS CORPORATION, a Delaware corporation,

                Defendant - Appellee.

Appeal from the United States District Court for the Northern
District of West Virginia, at Clarksburg. John Preston Bailey,
District Judge. (1:15-cv-00006-JPB)

Argued:   December 6, 2016                 Decided:   January 27, 2017

Before MOTZ, KEENAN, and THACKER, Circuit Judges.

Affirmed by published opinion. Judge Motz wrote the opinion, in
which Judge Keenan and Judge Thacker joined.

ARGUED:   Chad  Lewis   Taylor,  SIMMERMAN   LAW  OFFICE,  PLLC,
Clarksburg, West Virginia, for Appellant. Jill E. Hall, BOWLES
RICE LLP, Charleston, West Virginia, for Appellee.     ON BRIEF:
Frank E. Simmerman, Jr., SIMMERMAN LAW OFFICE, PLLC, Clarksburg,
West Virginia, for Appellant.    Gerard R. Stowers, BOWLES RICE
LLP, Charleston, West Virginia, for Appellee.
DIANA GRIBBON MOTZ, Circuit Judge:

      Alleging      that    his    employer      improperly       administered        life

insurance       benefits,          an       employee         brought         suit       for

misrepresentation,          constructive          fraud,      and        infliction      of

emotional     distress.          Because    the       Employee    Retirement        Income

Security      Act   (“ERISA”)       completely        preempts      these    state      law

claims, we affirm the judgment of the district court dismissing

the complaint.

                                            I.

      In November 2010, Billy E. Prince submitted an application

to his employer for $150,000 in life insurance coverage for his

wife,     Judith    Prince.         The     employer,        Sears,      sponsored      and

administered the life insurance program through The Prudential

Insurance     Company      of    America.        In    May   2011,       Sears   sent    an

acknowledgment letter to Prince and began withholding premiums

from his pay shortly thereafter.

      Later in 2011, Mrs. Prince learned she had Stage IV liver

cancer.       Almost a year after Mrs. Prince’s initial diagnosis,

Prince checked his online benefits summary, which confirmed his

election to purchase life insurance coverage for his wife in the

amount of $150,000.             Another year passed, and Sears sent Prince

a   letter    advising     him     that    Mrs. Prince’s         coverage     had    never

become       effective      because        no     “evidence         of      insurability

                                            2
questionnaire”       had       been    submitted.            Sears     explained         that

Prudential had sent a notice to Prince in January 2011 advising

that     unless     a      completed       insurability          questionnaire            was

submitted, Prudential would terminate his application for the

life insurance coverage.              Prince claims that he has no record of

receipt of that notice but does not dispute that Prudential sent

it to him.

       On May 26, 2014, Mrs. Prince died.                    Because Prince did not

receive the $150,000 in life insurance, he filed a complaint

against    Sears    in     the    Circuit       Court   of     Marion    County,         West

Virginia.        The complaint asserted one count of “constructive

fraud/negligent          misrepresentation”              and      one         count        of

“intentional/reckless infliction of emotional distress,” based

on     Sears’s     alleged       misrepresentations            regarding          the    life

insurance    policy      and     the   harm     thereby      inflicted       on    Mr.    and

Mrs. Prince.

        Sears removed the suit to the United States District Court

for the Northern District of West Virginia and asked the court

to     dismiss    the    complaint,         arguing       that       ERISA     completely

preempted Prince’s state law claims.                    Prince opposed the motion

and moved to remand the case back to state court.                            The district

court    held    that    ERISA     completely      preempted         Prince’s       claims.

Accordingly,      the    court    denied      Prince’s       motion     to    remand      and

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dismissed the complaint without prejudice.                 Prince timely filed

this appeal. 1

                                     II.

     “We     review     de    novo     questions      of      subject   matter

jurisdiction,    ‘including    those       relating   to    the   propriety   of

removal.’”    Sonoco Prods. Co. v. Physicians Health Plan, Inc.,

338 F.3d 366, 370 (4th Cir. 2003) (quoting Mayes v. Rapoport,

198 F.3d 457, 460 (4th Cir. 1999)).             The party seeking removal

bears the burden of showing removal is proper.                     Mulcahey v.

Columbia Organic Chems. Co., 29 F.3d 148, 151 (4th Cir. 1994).

When reviewing the grant of a motion to dismiss, we assume all

facts in the complaint as true and resolve all doubts in favor

of the non-moving party.       Edwards v. City of Goldsboro, 178 F.3d

231, 243–44 (4th Cir. 1999).

     “Under the removal statute, ‘any civil action brought in a

State court of which the district courts of the United States

have original jurisdiction, may be removed by the defendant’ to

federal court.”       Aetna Health Inc. v. Davila, 542 U.S. 200, 207

     1 Sears moved to dismiss the appeal, arguing that the
district court’s order was not final.   We denied the motion,
explaining that “no amendment to the complaint would enable
Prince’s [state law] claims to survive the district court’s
holding that they were preempted by ERISA.”  Order, Prince v.
Sears Holdings Corp., No. 16-1075, at *2 (4th Cir. May 13,
2016).

                                       4
(2004) (quoting 28 U.S.C. § 1441(a) (2012)).                     District courts

have    original     jurisdiction      over    claims     “arising       under    the

Constitution,      laws,    or    treaties    of   the   United    States.”        28

U.S.C. § 1331.       To determine whether a plaintiff’s claims “arise

under” the laws of the United States, courts typically use the

“well-pleaded complaint rule,” which focuses on the allegations

of the complaint.        Aetna, 542 U.S. at 207.

       An exception to the well-pleaded complaint rule occurs when

a   federal      statute    completely    preempts       state    law    causes   of

action.       Id. at 207–08.         “[C]omplete preemption ‘converts an

ordinary state common law complaint into one stating a federal

claim.’”      Darcangelo v. Verizon Commc’ns, Inc., 292 F.3d 181,

187 (4th Cir. 2002) (quoting Metro. Life Ins. Co. v. Taylor, 481

U.S. 58, 65 (1987)).             “[W]hen complete preemption exists, ‘the

plaintiff simply has brought a mislabeled federal claim, which

may be asserted under some federal statute.’”                    Sonoco, 338 F.3d

at 371 (quoting King v. Marriott Int’l, Inc., 337 F.3d 421, 425

(4th Cir. 2003)).           Defendants may remove preempted state law

claims to      federal     court,    regardless    of    the   “label”    that    the

plaintiff has used.         See id.; Griggs v. E.I. DuPont de Nemours &

Co., 237 F.3d 371, 379 (4th Cir. 2001).

       ERISA’s     broad     civil     enforcement       provision,       § 502(a),

codified at 29 U.S.C. § 1132(a), has the potential to preempt

state law causes of action.           That provision allows a participant

                                         5
or beneficiary of an ERISA plan to bring a civil action “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[,]

. . . to enjoin any act or practice which violates any provision

of    this   subchapter   or    the    terms    of    the    plan,    or   .   .   .   to

obtain . . . equitable          relief.”             Id.          “This    integrated

enforcement mechanism . . . is a distinctive feature of ERISA,

and    essential   to   accomplish      Congress’          purpose   of    creating    a

comprehensive      statute     for    the   regulation       of    employee    benefit

plans.”      Aetna, 542 U.S. at 208.

       ERISA § 502(a) completely preempts a state law claim when

the following three-prong test is met:

       (1) the plaintiff must have standing under § 502(a) to
       pursue its claim; (2) its claim must “fall[ ] within
       the scope of an ERISA provision that [it] can enforce
       via § 502(a)”; and (3) the claim must not be capable
       of resolution “without an interpretation of the
       contract governed by federal law,” i.e., an ERISA-
       governed employee benefit plan.

Sonoco, 338 F.3d at 372 (alterations in original) (quoting Jass

v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1487 (7th

Cir. 1996)).       Prince concedes that he has standing under ERISA

§ 502(a) to bring a claim and therefore meets the first prong of

the Sonoco test.        Accordingly, we need only consider the second

and third prongs.

                                            6
                                       A.

       The second prong requires us to determine whether Prince

can enforce his claims under § 502(a).            This analysis depends on

the scope of Prince’s claims.              Prince asserts that his claims

rely on the actions of Sears prior to the denial of benefits,

when the company deducted premiums from his pay and reported

that he had coverage.         Prince does not dispute that he never

submitted the required evidence of insurability and that Sears’s

decision to deny benefits was proper given the terms of the

plan.     Prince      apparently   believes    that    focusing    on    Sears’s

actions prior to the denial will allow his claims to escape

preemption.

       Prince   is    mistaken.    Regardless     of     whether   his    claims

attack Sears’s actions prior to the denial or in issuing the

denial, these claims are enforceable under § 502(a).                  This is so

because they challenge the administration of the ERISA plan -- a

core    § 502(a)     claim.   Prince    is    entitled    to   life    insurance

benefits only if the ERISA plan provided them.                 Sears withdrew

premiums from Prince’s pay only because the ERISA plan required

Sears to do so.        “It follows that if an individual brings suit

complaining of a denial of coverage . . . , where the individual

is entitled to such coverage only because of the terms of an

ERISA-regulated employee benefit plan, and where no legal duty

(state or federal) independent of ERISA or the plan terms is

                                       7
violated,   then   the   suit    falls       ‘within   the   scope   of   ERISA.’”

Aetna, 542 U.S. at 210.

       Contrary to Prince’s assertions, his claims implicate no

independent legal duty that Sears owed him.                   Of course, Sears

employs Prince, but the company also administers an ERISA plan.

Distinct from its duties as an employer, Sears has duties as the

plan   administrator     and    those    duties    clearly    fall   within    the

scope of ERISA.      Prince’s claims concern only the way in which

Sears assertedly breached these duties while administering his

benefits.    His claims are thus entirely within the scope of

ERISA § 502(a)(1)(B).          See Aetna, 542 U.S. at 211–13; see also

Pizlo v. Bethlehem Steel Corp., 884 F.2d 116, 120 (4th Cir.

1989) (explaining that while ERISA does not preempt claims based

on a contract of employment, it does completely preempt claims

related to modification of pension plans).

       In arguing to the contrary, Prince relies heavily on an

out-of-circuit district court case, Tovey v. Prudential Ins. Co.

of Am., 42 F. Supp. 2d 919 (W.D. Mo. 1999).                   There, the court

held that ERISA did not preempt a state law claim for negligent

misrepresentation.       But this was because “[f]irst and foremost”

Tovey was not an ERISA plan participant and for this reason was

not attempting in enforce her rights under an ERISA plan.                     Id.

at 925–26, 926 n.3.       In contrast, Prince concedes that he is an

ERISA plan participant.

                                         8
      Prince also asserts that his state law claims lie outside

the   scope    of     ERISA       preemption        because     he     asks   for    “damages”

rather than benefits. 2                 ERISA does not permit recovery of money

damages,      but     its    “preemptive        scope      is    not    diminished      simply

because a finding of preemption will leave a gap in the relief

available      to     a    plaintiff.”         Wilmington         Shipping      Co.    v.    New

England    Life       Ins.       Co.,    496   F.3d    326,      341    (4th    Cir.   2007).

Indeed,    the      Supreme       Court     long     ago   held       that    “[t]he   policy

choices reflected in the inclusion of certain remedies and the

exclusion of others under the federal scheme would be completely

undermined       if       ERISA-plan      participants          and    beneficiaries        were

free to obtain remedies under state law that Congress rejected

in ERISA.”          Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54

(1987).

      Prince can enforce his claims under ERISA; that he cannot

recover damages does not require a different conclusion or avoid

complete preemption.

                                               B.

      Resolution            of     Prince’s         claims       would        also     require

interpretation of the ERISA plan, the third and final Sonoco

      2To the extent that he cites any law for this proposition,
Prince appears to rely on Tovey, but his reliance is misplaced.
Tovey did not hold that a plaintiff could avoid preemption by
asking for damages instead of benefits. Rather, the Tovey court
referred to Tovey’s request for damages to further illustrate
that she was not a plan participant. 42 F. Supp. 2d at 926.

                                                9
prong.     Prince disagrees.            He insists that he only challenges

the actions Sears took prior to the denial of benefits.                            This is

a distinction without a difference.

     Prince’s claims of misrepresentation and constructive fraud

require assessment of Sears’s “duty” as the plan administrator.

See Folio v. City of Clarksburg, 655 S.E.2d 143, 151 (W. Va.

2007)    (explaining       that       under       West    Virginia        law    negligent

misrepresentation        requires       “a     duty      to    give       information      to

another”)      (emphasis   added);       Stanley         v.   Sewell      Coal    Co.,    285

S.E.2d   679,     683    (W.    Va.    1981)       (explaining        that      under    West

Virginia law constructive fraud requires “breach of a legal or

equitable duty”) (emphasis added).                    The only duty Sears had to

Prince   regarding      his     benefits      (both      prior       to   and    after    the

denial of benefits) stemmed from the ERISA plan.                          See JA 42, 43,

45, 46, 48, 49, 96 (language in the plan explaining information

the administrator will provide and what actions it will take).

Determining whether Sears met its duty would require examining

what the plan obligated Sears to do.

     Prince’s infliction of emotional distress claim similarly

requires    assessment         of   Sears’s       conduct      in    administering       the

ERISA plan; only if that administration was so inept that it was

“outrageous” could Prince recover.                    See Travis v. Alcon Labs.,

Inc.,    504    S.E.2d     419,       425     (W.     Va.      1998)      (holding       that

intentional      or     reckless       infliction         of        emotional     distress

                                             10
requires        “that    the     defendant’s      conduct         was    atrocious,

intolerable,       and   so   extreme   and    outrageous    as    to    exceed   the

bounds of decency”).           Prince claims that Sears misled him when

it erroneously withheld the premiums and reported that he had

coverage.        He claims that these actions, and those Sears took

once       it   discovered     the   mistake,    caused     him    and    his     wife

distress.        Determining whether Sears acted in an “outrageous”

way would require examining and interpreting Sears’s duties and

responsibilities under the ERISA plan.

       In sum, Prince’s claims meet all three prongs of the Sonoco

test, and ERISA completely preempts them.

                                        III.

       Accordingly, the judgment 3 of the district court is

                                                                          AFFIRMED.

       3
       The district court dismissed Prince’s complaint without
prejudice to permit him to refile it as an ERISA action after he
had exhausted his administrative remedies.     At oral argument,
Prince’s   counsel  expressed   skepticism  that   administrative
remedies or mediation would be fruitful, but counsel for Sears
indicated that they might indeed be fruitful. We note that the
record   reflects  that   Sears  initially  offered   to   reopen
enrollment for Mrs. Prince, with Prudential evaluating her
coverage based on her 2011 medical information.       Given that
Prince has not explored his administrative remedies, it remains
unclear whether they would be productive.

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