Blaylock v. Hynes

• Decision Date: 21 June 2000
• Docket Number: No. 00-180 ADM/AJB.,00-180 ADM/AJB.
• Citation: 104 F.Supp.2d 1184
• Parties: Michael BLAYLOCK, Plaintiff, v. James J. HYNES, Defendant.
• Court: U.S. District Court — District of Minnesota

104 F.Supp.2d 1184

Michael BLAYLOCK, Plaintiff, v. James J. HYNES, Defendant.

No. 00-180 ADM/AJB.

United States District Court, D. Minnesota.

June 21, 2000.

James J. Galman, Lawrence M. Rocheford, and Marlene S. Garvis, Jardine, Logan & O'Brien, P.L.L.P., St. Paul, Minnesota, for plaintiff.

William A. Cumming, Moss & Barnett, P.A., Minneapolis, Minnesota, for defendant.

MEMORANDUM OPINION AND ORDER

MONTGOMERY, District Judge.

I. INTRODUCTION

The above-titled matter came on for hearing before the undersigned United States District Judge on May 3, 2000, pursuant to Plaintiff Michael Blaylock's ("Blaylock") motion to remand [Doc. No. 14] and Defendant James J. Hynes' ("Hynes") motion for summary judgment [Doc. No. 5]. The parties dispute whether Blaylock's claims were properly removed to federal court and, if jurisdiction is proper, whether the Employee Retirement Income Security Act of 1974 ("ERISA") preempts Blaylock's state-law claims for fraud, reckless and negligent misrepresentation, violations of the Minnesota Consumer Fraud Act, and the Minnesota Regulation of Trade Practices Act. For the reasons set forth below, Blaylock's motion to remand is granted. Hynes' motion for summary judgment is not addressed.

II. BACKGROUND

A. Parties

Plaintiff Blaylock, a Burnsville, Minnesota, resident, is president and part owner of Blaylock Plumbing. He is eligible for participation in employee benefit plans managed by the Twin City Pipe Trades Service Association ("Association") and is a participant in the Twin City Pipe Trades Welfare Plan ("Welfare Plan"). He has multiple sclerosis ("MS").

Hynes, the Defendant, is Executive Administrator of the Association, a non-profit corporation that provides administrative services to three employee benefit plans established for union members employed in the pipe trades industry. Hynes is responsible for determinations on eligibility, participation, benefits, and claims for the Welfare Plan. The Welfare Plan is a self-funded welfare benefit plan that provides health care insurance to participants. It is operated and maintained pursuant to ERISA.

B. Factual Background

Prior to January 1, 1997, Blaylock independently purchased health insurance from Federated Mutual Insurance Company, which covered all claims relating to Blaylock's care and treatment for MS. See Affidavit of Scott M. Flom ¶ 6. In the spring of 1996, Blaylock received a letter from a union official stating that he was eligible to participate in the Association's plans. See Affidavit of Michael Blaylock ¶ 3. Blaylock contacted Hynes and asked whether he could participate in the union's pension plan. Hynes responded that Blaylock would be required to participate in both the pension plan and the Welfare Plan. See id. ¶ 4. Blaylock also told Hynes about his MS condition and asked whether he would be eligible for full health care coverage without restrictions. Blaylock contends that Hynes told him he would have full coverage and did not mention he would be subject to a preexisting condition limitation. See id. ¶ 5. Blaylock began participating in the Welfare Plan on January 1, 1997, and cancelled his coverage through Federated Mutual Insurance Company with the expectation that the Welfare Plan would cover all claims relating to his MS treatment. See id. ¶ 8.

In the fall of 1998, Blaylock incurred medical expenses of $15,017.76 for treatment of a urinary tract infection resulting from an implanted catheter. See Affidavit of Marlene S. Garvis ¶ 2. The Welfare Fund, contending the medical bills related to Blaylock's preexisting MS, denied coverage. See id. ¶ 3. Blaylock appealed the denial to the Twin City Pipe Trades Board of Trustees. The Board agreed to pay the expenses, but only a portion of subsequent specific payment requests have been paid. See id. ¶¶ 5, 7. Blaylock has not been reimbursed for about $4,000 of the medical bills. See id. ¶ 8. Hynes contends Blaylock's claims have been paid according to the terms of the Welfare Plan, which limits benefits for preexisting conditions to $5,000 per year.

C. Procedural Background

Blaylock filed this suit in Ramsey County District Court, claiming fraud, reckless and negligent misrepresentation, violations of the Minnesota Consumer Fraud Act, and the Minnesota Regulation of Trade Practices Act. Blaylock seeks to recover damages, including "monies paid, due and owing for medical expenses," resulting from Hynes' alleged misrepresentation. Complaint ¶ 22. Blaylock also seeks legal damages for future expenses he will incur because of his MS that would have been covered by his prior health insurance plan. See Complaint ¶¶ 27, 32. On January 25, 2000, Hynes removed the matter to this Court, contending the claims are preempted by ERISA.

III. DISCUSSION

A. Remand

1. Statutory authority for remand

This case was removed pursuant to 28 U.S.C. § 1441(a), which allows a defendant to remove a matter from state court if it originally could have been brought in federal court. A case shall be remanded back to state court "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction. ..." 28 U.S.C. § 1447(c). The party seeking removal and opposing remand has the burden of establishing federal subject matter jurisdiction. See In re Bus. Men's Assurance Co. of Am., 992 F.2d 181, 183 (8th Cir.1993). When reviewing a motion to remand, a court must resolve all doubts about federal jurisdiction in favor of remand. See id.

Hynes alleges this Court has subject matter jurisdiction for two reasons: (1) because ERISA preempts the state claims, and (2) because ERISA provides a cause of action for Blaylock's claims. Blaylock contends that his claims are based solely on state statutory and common law, which have no effect on the ERISA-regulated Welfare Plan. Blaylock argues this Court lacks subject matter jurisdiction and must grant his motion to remand.

2. The Doctrine of Complete Preemption

Two very different forms of preemption arise in the ERISA context, and it is not unusual for parties and even the federal judiciary to be confused about the difference.¹ On a motion to remand, a court must consider whether the state claims that were removed to federal court are properly in federal court. This is a question of subject matter jurisdiction. In the removal context, a court must determine whether a state claim is removable under the doctrine of "complete" preemption, an exception to the well-pleaded complaint rule. Determining whether a state claim is nullified by "ordinary" preemption, which is used as an affirmative defense, is a separate analysis to be done once jurisdiction is established. See Tovey v. Prudential Ins. Co. of Am., 42 F.Supp.2d 919, 921-25 (W.D.Mo.1999).

The two preemption concepts are analytically different. "Complete preemption ... has jurisdictional consequences that distinguish it from preemption asserted only as a defense. The defense of preemption can prevent a claim from proceeding, but in contrast to complete preemption it does not convert a state claim into a federal claim." Gaming Corp. of Am. v. Dorsey & Whitney, 88 F.3d 536, 543 (8th Cir.1996) (discussing the doctrine of complete preemption in the context of the Indian Gaming Regulatory Act). The Ninth Circuit in Whitman v. Raley's Inc., 886 F.2d 1177 (9th Cir.1989) addressed the distinction this way:

This jurisdictional issue of whether `complete preemption' exists is very different from the substantive inquiry of whether a `preemption defense' may be established. The jurisdictional question concerning `complete preemption' centers on whether it was the intent of Congress to make the cause of action a federal cause of action and removable despite the fact that the plaintiff's complaint identifies only state claims. The latter inquiry, concerning a `preemption defense,' is a substantive inquiry as to whether a legal defense exists. This would be a matter for trial by a court having jurisdiction. The possible existence of a `preemption defense' does not justify removal.

Id. at 1181; see also Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 66, 107 S.Ct. 1542, 1548, 95 L.Ed.2d 55 (1987) ("[E]ven an `obvious' pre-emption defense does not, in most cases, create removal jurisdiction.").

Generally, a complaint may not be removed from state court unless it could originally have been filed in federal court. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987). Under the well-pleaded complaint rule, federal question jurisdiction exists only if the federal question is presented on the face of the complaint. See id. A case may not be removed on the basis of a federal defense, such as preemption, even if the defense is anticipated in the complaint and both parties concede that it is the only question at issue. See Franchise Tax Bd. of Cal. v. Construction Laborers Vacation Trust, 463 U.S. 1, 12, 103 S.Ct. 2841, 2847, 77 L.Ed.2d 420 (1983). A exception to the well-pleaded complaint rule is the doctrine of complete preemption. This doctrine applies where Congress has "so completely preempt[ed] a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metropolitan Life, 481 U.S. at 63-64, 107 S.Ct. at 1546. Removal is proper when Congress clearly manifests its intent to make such causes of action removable. See id. at 1548.

The Supreme Court has extended the doctrine of complete preemption to actions under § 502(a) of ERISA, the statute's civil enforcement provision, codified at 29 U.S.C. § 1132(a). See Metropolitan Life, 481 U.S. at 66, 107 S.Ct. at 1548. The Court held that Congress "has clearly manifested an intent to make causes of action within the scope of the civil enforcement provisions of § 502(a) removable to federal court." Id. Thus, even when a plaintiff asserts only state-law claims, a case is removable to federal court if the claims fall within the...