Butero v. Royal Maccabees Life Ins. Co.

• Decision Date: 10 May 1999
• Docket Number: No. 97-6536,97-6536
• Citation: 174 F.3d 1207
• Parties: 12 Fla. L. Weekly Fed. C 807 Annette BUTERO, Simply Fashion Stores Inc., et al., Plaintiffs-Appellants, v. ROYAL MACCABEES LIFE INSURANCE COMPANY, a corporation, Anita Lawson, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1207

174 F.3d 1207

12 Fla. L. Weekly Fed. C 807

Annette BUTERO, Simply Fashion Stores Inc., et al., Plaintiffs-Appellants, v. ROYAL MACCABEES LIFE INSURANCE COMPANY, a corporation, Anita

Lawson, Defendants-Appellees.

No. 97-6536.

United States Court of Appeals, Eleventh Circuit.

May 10, 1999.

David H. Marsh, Irene T. Grubbs, Birmingham, AL, for Plaintiffs-Appellants.

Carol A. Smith, Brenen G. Ely, Smith & Ely, Birmingham, AL, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Alabama.

Before COX and BIRCH, Circuit Judges, and GODBOLD, Senior Circuit Judge.

COX, Circuit Judge:

Annette Butero, Simply Fashion Stores, Ltd., and its general partner Simply Fashion Stores, Inc. appeal two district court orders: one refusing to remand to state court their claims against Royal Maccabees Life Insurance Company and its employee Anita Lawson, and another dismissing their complaint in its entirety. We affirm.

I. BACKGROUND

Simply Fashion provides its employees a cafeteria plan that makes available health, life, and long-term disability insurance, as well as a 401(k) retirement savings plan. In early 1996, Simply Fashion learned that its life-insurance carrier would cancel the group policy that Simply Fashion offered to its employees. Simply Fashion's human resource director met with an independent insurance agent, who notified Simply Fashion that Royal Maccabees would provide Simply Fashion a replacement policy at the same premium as the prior insurer. According to the agent, the replacement policy would have a portability feature.

Based on this information, Simply Fashion issued a memorandum to its full-time employees. The memo announced that "our life insurance coverage" would be provided by a new carrier starting on a certain date, and that employees insured by the old carrier would be automatically "enrolled." (Supp. R.-25 Ex. 6.) Employees would pay the entire premium by payroll deduction, as they had in the past. Full-time employees with 90 days' tenure who were not enrolled under the old policy were invited to enroll. The attached "Special Open Enrollment" form under the "Simply Fashion Stores, Ltd. Cafeteria Plan" required employees to acknowledge that they had received a "Summary Plan Description." (Id.) That summary plan description, also attached to the memo, identified the benefits provided under the life-insurance policy ($50,000) and who was eligible (full-time employees with 90 days' tenure). The enrollment form also warned employees that "[t]he Plan Administrator may reduce or cancel my compensation reduction or otherwise modify this agreement in the event he believes it advisable in order to satisfy certain provisions of the Internal Revenue Code." (Id. Ex. 5.) The form contained a signature space at the bottom to indicate that the enrollment was "[a]ccepted and agreed to by the Company's Authorized Representative." (Id.)

As it turned out, Royal Maccabees would not provide a portable policy to Simply Fashion at the same premium as the old policy. Despite its representations to its employees, Simply Fashion opted for a cheaper, nonportable policy. Although, according to the insurance agent and the Complaint, "other insurance companies offering coverage could have been purchased by Simply Fashions," (Supp. R.-25 Ex. 4), Simply Fashion stayed with Royal Maccabees.

The Royal Maccabees policy that Simply Fashion procured was one that was issued to Simply Fashion, and not to Simply Fashion's employees. Royal Maccabees advised Simply Fashion on administration of the policy and on premium billing. Simply Fashion was also responsible for providing Royal Maccabees with documentation supporting a claim. Simply Fashion began collecting premiums from its employees, and it remitted two premium checks to Royal Maccabees.

After the policy's putative effective date, Royal Maccabees asked Simply Fashion to provide a "statement from the company that there had been no deaths or disabilities since the effective date." (Supp. R.-25 Ex. 4.) Over a month later, Simply Fashion did so, after a fashion: it informed Royal Maccabees that from the effective date of the policy to the day before the letter's date, "we have had no death claims." (Id. Ex. 7.) The letter said nothing about disability. This omission was arguably important, because a month earlier one of Simply Fashion's warehouse managers, Benedict Butero, had taken leave due to a severe illness. Butero had been automatically enrolled for the insurance because he had elected to purchase the life insurance that Simply Fashion had previously offered. The day after Simply Fashion informed Royal Maccabees that there were no outstanding death claims, Butero died.

The day Butero died, Royal Maccabees sent Simply Fashion a letter stating that Royal Maccabees was "declin[ing] your request for coverage" and that "[n]o contract of insurance exists." (Supp. R.-25 Ex. 8.) The letter was accompanied by a check reimbursing Simply Fashion for the paid premiums. The letter did not explain why Royal Maccabees rejected the policy application, although Royal Maccabees now argues that it was because Simply Fashion provided no information about disabled employees.

A few days later, Annette Butero, Benedict's wife, made a claim for benefits through Simply Fashion. The claim was denied. This lawsuit followed.

Butero, joined by Simply Fashion, sued in state court, naming as defendants Royal Maccabees, its employee Anita Lawson, and the independent insurance agent. The complaint--a classic "shotgun" pleading--joins every defendant in every count, and it seeks unspecified compensatory damages for breach of contract, bad faith refusal to pay, and fraud in the inducement; it also includes three counts alleging fraud that are apparently duplicative. The defendants removed the action to federal court, asserting that the insurance policy was part of a plan governed by the Employee Retirement Income Security Act of 1974.

The plaintiffs then moved to remand, arguing that the insurance policy was not part of an ERISA plan, and in the alternative that the claims against the insurance agent were not preempted by ERISA. The court apparently rejected the first argument, but agreed with the second: the claims against the independent insurance agent were severed and remanded. The court otherwise denied the motion to remand.

The remaining defendants, Royal Maccabees and Anita Lawson, then moved to strike the plaintiffs' state-law claims. Royal Maccabees argued that ERISA governed the insurance policy, and that all the remaining state-law claims were preempted. The district court agreed. It issued a one-page order dismissing the complaint without prejudice to the right to refile a complaint stating claims under ERISA.

The plaintiffs appeal and challenge the district court's orders on two grounds. First, they argue that the insurance policy is not part of an ERISA plan because it is anchored in a regulatory safe harbor from ERISA for certain "group or group-type insurance program[s]." 29 C.F.R. § 2510.3-1(j). Second, they contend that even if the policy is part of an ERISA plan, their causes of action are not preempted under the principles enunciated in Morstein v. National Ins. Servs., Inc., 93 F.3d 715, 722 (11th Cir.1996) (en banc). We review de novo both the denial of the motion to remand and the dismissal. See Whitt v. Sherman Int'l Corp., 147 F.3d 1325, 1329 (11th Cir.1998); Hall v. Blue Cross/Blue Shield, 134 F.3d 1063, 1064-65 (11th Cir.1998).

II. DISCUSSION

Reviewing the two district court orders at issue here requires juggling two different kinds of ERISA preemption. The first kind is what this circuit has called complete preemption or "super preemption." Whitt v. Sherman Int'l Corp., 147 F.3d 1325, 1329 (11th Cir.1998). Superpreemption arises from Congress's creation of a comprehensive remedial scheme in 29 U.S.C. § 1132 for loss or denial of employee benefits. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987). When Congress comprehensively occupies a field of law, "any civil complaint raising this select group of claims is necessarily federal in character" and thus furnishes subject-matter jurisdiction under 28 U.S.C. § 1331. Id. Therefore, federal courts have subject-matter jurisdiction over state-law claims that have been superpreempted, and defendants may remove to federal court those actions that contain such claims. See id. There being no other basis for subject-matter jurisdiction here, whether the district court properly denied the motion to remand for lack of removal jurisdiction thus turns on whether some or all of the state-law claims are superpreempted.

The second kind of preemption we will call "defensive." It originates in ERISA's express preemption provision, 29 U.S.C. § 1144(a). ¹ Defensive preemption provides only an affirmative defense to certain state-law claims. See id. As an affirmative defense, defensive preemption does not furnish federal subject-matter jurisdiction under 28 U.S.C. § 1331; "a cause of action arises under federal law only when the plaintiff's well-pleaded complaint raises issues of federal law." Id. at 63, 107 S.Ct. at 1546. On the other hand, defensive preemption does require dismissal of state-law claims. See id. Reviewing the district court's dismissal of the complaint therefore raises only the question of whether the state-law claims were subject to defensive preemption.

We start with the superpreemption issue because, for the reasons explained above, it ultimately decides the existence of federal subject-matter jurisdiction. As it turns out, some claims are superpreempted, and others are not. Here's the rule: ERISA superpreemption exists only when the "plaintiff is seeking relief that is available under 29 U.S.C. § 1132(a)." Whitt, 147 F.3d at 1330. Regardless of the merits of the plaintiff's actual claims (recast as ERISA cla...