Alexander v. Electronic Data Systems Corp., 92-1591

Decision Date06 January 1994
Docket NumberNo. 92-1591,92-1591
Citation13 F.3d 940
Parties63 Empl. Prac. Dec. P 42,829, 17 Employee Benefits Cas. 2134, 2 A.D. Cases 1726, 4 NDLR P 413, 1994 Fed.App. 2P Leroy ALEXANDER, Plaintiff-Appellant, v. ELECTRONIC DATA SYSTEMS CORPORATION; James Jeros; Steven Brechtelsbauer; Jane Doe, Defendants-Appellees.
CourtU.S. Court of Appeals — Sixth Circuit

James Schuster, Southfield, MI, Lynn H. Shecter (argued & briefed), Roy, Shecter & Vocht, Birmingham, MI, for Leroy Alexander.

Lee J. Hutton (argued), David A. Posner (briefed), Duvin, Cahn, Barnard & Messerman, Cleveland, OH, Gail M. O'Brien, Electronic Data Systems Corp., Southfield, MI, Martin T. Wymer, Electronic Data Systems Corp., Dallas, TX, for Electronic Data Systems Corp.

Gail M. O'Brien, Southfield, MI, for Jane Doe, Steven Brechtelsbauer, James Jeros.

Before: MARTIN and SILER, Circuit Judges; and WELLFORD, Senior Circuit Judge.

WELLFORD, Senior Circuit Judge.

Plaintiff, Leroy Alexander, a Michigan resident, sued defendant, Electronic Data Systems (EDS), a Texas corporation, its manager, its personnel manager, and the staffing manager of its Oakland County, Michigan facility in a Michigan state court. The suit, filed May 1, 1991, sought equitable and monetary relief, asserting that EDS, a self-insured company, had wrongfully rejected the plaintiff's September, 1989 application for a position as systems engineer because he is a diabetic. 1

Alexander sought to represent a class of applicants for positions at this EDS Michigan facility who were "rejected because either they or members of their family had preexisting medical conditions." Count I asserted handicap discrimination under Michigan Compiled Laws Secs. 37.1101-37.1607 (1990). Specifically, in count I, Alexander averred that his "handicap [diabetes] was unrelated to his ability to do the job as systems engineer," and that EDS "had offered Plaintiff Alexander the lower position [associate systems engineer] in order to discourage him from applying for work with EDS."

Count II alleged fraud and misrepresentation in that "EDS represented to Plaintiff that he would be considered for employment ..., required [him] to fill out [a] health history questionnaire ... [and] strongly implied that the health history questionnaire would be used only to determine the extent of coverage once ... employed." The plaintiff claimed damages for fraud and misrepresentation, because, as previously claimed in the handicap discrimination count, defendants' actions "deprived [him] of salary and benefits," because they "did not intend to hire anyone with a preexisting medical condition."

Plaintiff asserted that "[t]he EDS recruiting team instructed the recruiter to offer Plaintiff Alexander a lower position, Associate Systems Engineer," and "Plaintiff Alexander accepted the lower position" and "was told to report to work...." Later, Alexander says in the complaint that he was told "that he should not report to work." He then claimed that he "did not receive either the systems engineer job or any other position with EDS." Plaintiff's complaint may have been construed to assert that he was offered a job as associate systems engineer and that he accepted this position, but was told, nevertheless, not to report to work and, therefore, did not receive any job with EDS because of his diabetic condition. Plaintiff's complaint did not mention any particular action taken or role played by Steven Brechtelsbauer, the alleged manager, by James Jeros, the alleged manager of staffing, or by "Jane Doe," the alleged personnel manager of EDS, but simply avers that "[d]efendants have engaged in unlawful employment practices." Plaintiff did not allege that any defendant other than EDS misrepresented the job situation to him. There is a complete absence of any specific averment of fraud on the part of any defendant.

Within thirty days, the defendants filed a notice of removal in the federal district court. Therein EDS stated that it was a Texas corporation (not, as incorrectly identified, a Delaware corporation). Brechtelsbauer and Jeros admit service of process upon themselves and that they are Michigan residents. Both claim to be fraudulently joined in the suit "solely for the purpose of defeating ... jurisdiction" in the federal court, and claim that the complaint "fail[s] to assert ... any unlawful conduct" as to them. 2

In the removal action, EDS claimed diversity of citizenship jurisdiction in the federal court and, in the alternative, that plaintiff's claimed causes of action " 'relate to' a plan covered by the Employment Retirement Income Security Act" (ERISA), and "conflict directly with an ERISA cause of action," and therefore invoke federal question jurisdiction.

Within a few days, EDS filed an answer with affirmative defenses. It admitted that a team of systems engineers, including Brechtelsbauer, interviewed plaintiff. On June 21, after defendant EDS began discovery procedures upon plaintiff, Alexander moved to remand the case to state court. Plaintiff asserted that the defendants had the burden of proving fraudulent joinder and that the Michigan Handicappers Civil Rights Act permits suit against an individual or agent. In that motion, plaintiff claimed for the first time that Brechtelsbauer "acted as an agent for EDS by being part of the [EDS] management team that interviewed ... Plaintiff." Once again, plaintiff asserted that he accepted an offer of a "lower position." In addition, plaintiff asserted, for the first time, that Jeros was manager of staffing "and in that capacity directs personnel services." 3 In the motion for remand, plaintiff asserted flatly that he "was never employed by defendant," (without specifying which defendant) and thus was not an "employee" or a plan "participant." 4

The district court assumed jurisdiction upon the petition for removal based upon its finding that "plaintiff has ... alleged a cause of action which relates to an ERISA plan," and therefore determined the motion to remand to be "inappropriate" by reason of preemption. The district court subsequently dismissed the plaintiff's state law claim and granted the defendants' motion for summary judgment. The plaintiff now appeals, challenging jurisdiction and the decision on the merits. No class action certification was ever granted.

I. FEDERAL QUESTION JURISDICTION

The initial uncertainty over whether Alexander was ever employed by EDS sparked considerable confusion regarding the district court's jurisdictional basis. In its petition for remand, EDS alleged diversity jurisdiction (based on a fraudulent joinder theory), or in the alternative, jurisdiction based on implied preemption under 29 U.S.C. Sec. 1132 (ERISA's civil enforcement section) and also under 29 U.S.C. Sec. 1144 (the express preemption provision).

The district court assumed jurisdiction upon the petition for removal based upon its finding that Alexander's action was expressly preempted by Sec. 1144. Specifically, the court found that the "plaintiff has ... alleged a cause of action which relates to an ERISA plan," and therefore determined the motion to remand to be "inappropriate" by reason of preemption. Consequently, the district court declined to address the possibility of diversity jurisdiction based on fraudulent joinder.

The district court subsequently dismissed the plaintiff's state law claim and granted the defendants' motion for summary judgment. The plaintiff challenges the decision both as to jurisdiction and the merits. We disagree with the district court's stated basis for jurisdiction.

A. Jurisdiction Founded Upon a Sec. 1144 ERISA Preemption Defense

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.

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).

In Franchise Tax Board, the Supreme Court restated the general rule regarding removal jurisdiction based on a preemption defense:

[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.

Franchise Tax Board, 463 U.S. at 14, ...

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