Arancio v. Prudential Ins. Co. of America, 01 Civ. 12737(GEL).

• Decision Date: 07 August 2002
• Docket Number: No. 01 Civ. 12737(GEL).,01 Civ. 12737(GEL).
• Citation: 247 F.Supp.2d 333
• Parties: Joseph ARANCIO, Plaintiff, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA and Prudential Long Term Disability Conversion Insurance Trust, Defendants.
• Court: U.S. District Court — Southern District of New York

247 F.Supp.2d 333

Joseph ARANCIO, Plaintiff, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA and Prudential Long Term Disability Conversion Insurance Trust, Defendants.

No. 01 Civ. 12737(GEL).

United States District Court, S.D. New York.

August 7, 2002.

Frank P. Winston, of counsel, Wilkofsky Friedman Karel & Cummins, New York City, for plaintiff Joseph Arancio.

Julie M. Vales, Cuyler Burk, LLP, New York City, for defendants The Prudential Insurance Company of America and Prudential Long Term Disability Conversion Insurance Trust.

OPINION AND ORDER

LYNCH, District Judge.

Plaintiff Joseph Arancio brought this action in New York County Supreme Court on November 28, 2001, seeking disability benefits under a contract of insurance issued by defendants Prudential Insurance Company of America and Prudential Long Term Disability Conversion Insurance Trust (collectively "Prudential"). On December 28, 2001, Prudential removed the case to this Court, asserting that the underlying claims are governed by federal law, specifically, the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq. On March 8, 2002, plaintiff filed a Demand for Trial by Jury. About a month later, on April 12, 2002, Prudential moved to strike the jury trial demand arguing both that it was untimely and that ERISA plaintiffs are not entitled to jury trials. On the same day, plaintiff crossmoved for remand to state court, arguing that his claims are not governed by ERISA and that federal question jurisdiction is lacking. For the reasons stated below, plaintiffs motion is granted, defendants' motion is denied as moot, and the case is remanded to New York County Supreme Court.

BACKGROUND

From October 1993 until October 1999, Arancio was employed by Riverbay Corporation ("Riverbay"). Prior to leaving Riverbay, he participated in an employersponsored group disability plan offered by Prudential. Under that plan, employees had the option of converting to individual conversion policies with Prudential after their employment with Riverbay ceased. On October 29, 1999, Arancio's employment with Riverbay ended (Pl.Aff.H 7), and the following day, he converted his group disability plan to an individual policy (the "Conversion Policy") (id. 18). On January 18, 2000, Arancio filed a disability claim with Prudential. (Id. 1110.) Prudential denied plaintiffs initial claim and his subsequent administrative appeal. (Id. f 1110-11.) In this action, Arancio continues to seek those benefits.

DISCUSSION

A. Federal Question Jurisdiction

The essential issue before the Court is whether the Conversion Policy is governed by ERISA, and accordingly, whether this case properly presents a federal question.

ERISA governs "any employee benefit plan if it is established or maintained ... by any employer." 29 U.S.C. § 1003 (1999). An employee welfare benefit plan is defined as "any plan, fund, or program ... established or maintained by an employer." 29 U.S.C. § 1002(1) (1999). There is no dispute that the group disability plan in which Arancio participated during his employment at Riverbay was such a plan, and that claims under it would have been subject to federal jurisdiction. See 29 U.S.C. § 1144(a) (1999). There is also no dispute that Arancio's right under that plan to convert to an individual policy was also governed by ERISA. The Second Circuit has held that the notice process relating to such conversion rights cannot be regulated by state law, since such laws would regulate the actual content of an employee benefit plan. Howard v. Gleason Corp., 901 F.2d 1154, 1158 (2d Cir. 1990). ERISA aims to relieve employers of the administrative burden of complying with conflicting state and local regulations. See, e.g., Fort Halifax Packing Co., Inc., v. Coyne, 482 U.S. 1, 9-11, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987) (discussing the purpose of ERISA preemption). Thus, plans administered by employers, including those aspects of employee benefits that permit conversion, are governed by uniform federal law, and state laws regulating the right to convert are preempted.

The situation presented here is quite different. The parties do not dispute that Arancio had and exercised a right to convert, nor do they dispute that he now has a policy with the defendants. Now that Arancio has exercised his conversion right, the policy he holds is the same as any other individual policy. The Conversion Policy names Prudential, not the employer, as the administrator of claims. (PI. Aff.¶ 9.) Riverbay no longer finances the policy as it did under the group insurance plan. Instead, Arancio pays the premiums. (PI. Aff. Ex. 2 at 7-8.) Since the filing of plaintiffs disability claim, all communication regarding the claim has been between Arancio and Prudential, and not between Arancio and his former employer. (Pl.Aff.¶ 14.) In effect, the whole point of the conversion right is precisely to permit the employer to convert from participation in the employer's group plan to an individual insurance policy.

Arancio now has an independent relationship with Prudential, formed when he converted from his previous employersponsored plan. Such a relationship is not governed by ERISA. Accordingly, the controversy does not support federal question jurisdiction.

B. Diversity Jurisdiction

In their notice of removal, defendants asserted only federal question jurisdiction. However, in their briefs submitted on the current motions, Prudential claims that this action is properly before the Court on diversity grounds as well. (Def. Mem. at 19.) At the Court's request, the parties submitted additional briefing on July 23, 2002, to address whether or not this Court should exercise diversity jurisdiction. Neither party appears to dispute that the parties are citizens of different states, although plaintiff skirts the issue in his letter brief. (Defs. Letter Brief at 3; PI. Letter Brief at 2.) For purposes of this order, the Court will assume that diversity exists.

The parties approach the diversity question from different angles, each seeking to profit from the other's alleged procedural defaults. Plaintiff would have us consider whether the defendants can amend their petition for removal and add an entirely new ground once the statutory time for filing a removal petition has lapsed. (PI. Letter Brief at 2.) Defendants, although they initially ask the same question (Defs. Letter Brief at 2), reframe the issue as whether the plaintiff can move to remand for defective removal after the statutory time for such a motion has expired (id. at 2-4).

Plaintiffs procedural lapse, if lapse it was, is more easily overlooked. It is true that a plaintiff ordinarily may not raise a non-jurisdictional removal defect after 30 days. 28 U.S.C. § 1447(c) (1999). But this familiar rule is inapplicable here for several reasons. First, plaintiff is not seeking a remand because of any technical defect in the removal notice. Plaintiffs objection to Prudential's belated assertion of diversity jurisdiction is not the basis for his motion to remand; it is simply an effort to prevent Prudential from amending its original notice. Nor is Prudential's failure to...