Cantrell v. Great Republic Ins. Co., 88-6025
| Decision Date | 24 April 1989 |
| Docket Number | No. 88-6025,88-6025 |
| Citation | 873 F.2d 1249 |
| Parties | 10 Employee Benefits Ca 2642 Anne CANTRELL, an individual and as administratrix of the Estate of Jennifer Cantrell, Plaintiff-Appellant, v. GREAT REPUBLIC INSURANCE COMPANY and Great Republic Life Insurance Company, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Raphael Metzger, Seal Beach, Cal., for plaintiff-appellant.
John Chakmak (argued), and Charles L. Zetterberg, on brief of Buxbaum & Chakmak, Newport, Cal., for Great Republic Ins. Co.
Roger A. Ginsburg, Claremont, Cal., for Great Republic Life Ins. Co.
Appeal from the United States District Court for the Central District of California.
Before SNEED, FARRIS and PREGERSON, Circuit Judges.
I. BACKGROUND
On October 8, 1985, appellant Anne Cantrell filed an action in state court for wrongful rescission of an insurance contract. She alleged that defendant Great Republic Insurance Company (GRIC), a California corporation, had breached the implied covenant of good faith and fair dealing and wrongfully denied the existence of a contract when it rescinded the policy she had obtained in 1981. The complaint charged that GRIC had rescinded Cantrell's insurance policy in bad faith to avoid paying the medical expenses arising from illnesses suffered by Cantrell's husband and daughter. Clerk's Record (C.R.) 1, Exhibit No. A-83.
Cantrell's complaint alleged that in June of 1981, Cantrell was interviewed at her place of employment by an agent of GRIC for the purpose of determining her eligibility for health insurance with GRIC. Cantrell obtained an insurance policy from GRIC which was to become effective August 1, 1981. The policy covered Cantrell, her husband, and her son. GRIC's representative told Cantrell that the child she was then pregnant with would be added to the policy as a dependent upon birth.
On August 27, 1981, Cantrell's husband was admitted to a hospital suffering from acute myocardial infarction. On October 14, 1981, Cantrell's recently-born daughter was hospitalized and subsequently diagnosed as suffering from cystic fibrosis. (Cantrell's daughter died from cystic fibrosis on May 9, 1987 at the age of five.)
During the fall of 1981, Cantrell submitted claims to GRIC for the medical expenses incurred as the result of her husband's and daughter's illnesses. On December 24, 1981, GRIC rescinded Cantrell's insurance policy, citing "unadmitted medical history."
Although Cantrell named GRIC as the defendant in her complaint, the complaint was answered by Great Republic Life Insurance Company (GRLIC), a Washington corporation, in January of 1986. C.R. 1, Exhibit No. A-73. 1 GRLIC also cross-complained against Cantrell, 2 alleging breach of the duty of good faith and fair dealing. 3 C.R. 1, Exhibit No. A-49.
On May 9, 1986, Cantrell propounded a request for admission to GRIC. C.R. 9, Exhibit A. Request for Admission Number four stated:
On or about August 1, 1981, Great Republic issued a certificate of insurance, number 01-036-04407-1 for group medical expense insurance coverage to plaintiff.
On June 13, 1986, GRLIC responded to Request for Admission Number four as follows:
Objection: Great Republic objects to this request for admission on the ground said request is vague, ambiguous, and unintelligible. Great Republic further objects to this request for admission on the ground that said request is compound in nature, making a response by this Defendant impossible. However, in the interest of good faith discovery, but without in any way waiving the above-stated objections, Great Republic offers the following response to Plaintiff's Request for Admission No. 4:
Great Republic admits that on or about August 1, 1981, certificate of insurance no. 01-036-04407-1 was issued with coverage for Plaintiff. Except as specifically admitted, Great Republic denies Request for admission No. 4.
On September 18, 1987, counsel for Cantrell mailed to counsel for GRIC (which was, at that stage in the litigation, apparently also counsel for GRLIC) a copy of a proposed First Amended Complaint. The First Amended Complaint amended Cantrell's original complaint to add GRLIC as a defendant and to add as a plaintiff Cantrell in her capacity as administrator of the estate of her daughter. C.R. 9, Exhibit C; C.R. 1, Exhibit No. A-17. After counsel for appellees declined to stipulate to the filing of the First Amended Complaint, Cantrell filed a motion for leave to file the First Amended Complaint, which was granted on October 21, 1987.
On November 20, 1987, GRIC and GRLIC jointly removed the state court action to federal district court. C.R. 1. Appellees argued in their petition for removal that the action was one over which the district court had original jurisdiction under the Employee Retirement Income Security Act of 1974 ("ERISA"), and that removal was therefore justified under the removal statute, 28 U.S.C. section 1446(b). They also asserted that the removal was timely because of the addition of new parties in the First Amended Complaint. C.R. 1.
On December 18, 1987, Cantrell filed a motion to remand the action to state court, a motion to strike an affidavit offered by appellees in support of their removal petition, and a motion for expenses incurred by Cantrell in opposing appellees' allegedly wrongful removal of the action. The district court denied these motions on March 1, 1988. C.R. 17.
On April 21, 1988, the district court granted appellees' motion to dismiss the action, holding that dismissal was required under Fed.R.Civ.P. 12(b)(6) because Cantrell's action was time-barred under the terms of the rescinded insurance contract. C.R. 20.
Cantrell brought this appeal, which was timely filed. C.R. 22.
II. STANDARDS OF REVIEW
This court reviews de novo a district court's denial of a motion to remand. See Lewis v. Time, Inc., 710 F.2d 549, 551-52 (9th Cir.1983).
A dismissal under Fed.R.Civ.P. 12(b)(6) is subject to de novo review. See Kelson v. City of Springfield, 767 F.2d 651, 653 (9th Cir.1985).
III. DISCUSSION
In her motion to remand the action to state court, Cantrell argued that the case had been removed improvidently and without jurisdiction because, first, the action was not one "arising under" federal law within the meaning of 28 U.S.C. section 1331. C.R. 9 at 5. According to Cantrell, neither the original nor the amended complaint provided any indication that Cantrell had asserted a claim created by federal law. The "well-pleaded complaint rule," according to Cantrell, therefore precluded the district court from asserting jurisdiction because a federal question did not appear on the face of Cantrell's complaint. Id. at 6 (citing Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)).
The district court rejected this argument, pointing out that " '[a] suit may ... be removed where the real nature of the claim asserted in the complaint is federal....' " C.R. 17 at 2 (citing IA Moore's Federal Practice p 0.160). The court also noted that state causes of action for improper handling of employee benefits are preempted by ERISA and subject to removal, even if "artfully pleaded." Id. (citing Clorox v. United States District Court, 779 F.2d 517, 521 (9th Cir.1985)). The court went on to find that the insurance policy in question was part of an ERISA plan. Id. The court therefore concluded that Cantrell's complaint was founded upon federal law and hence was properly removed. Id.
The district court's conclusion on this issue was correct. The insurance policy issued to appellee was part of an ERISA plan. 4 See, e.g., C.R. 12, Exhibit No. A-68 (). For this reason, removal was appropriate. In Clorox v. United States District Court, the case relied on by the district court, this court held that although the plaintiff asserted only state law claims, her action was removable because ERISA creates a federal cause of action over claims by an employee "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." 779 F.2d at 521 (citing 29 U.S.C. Sec. 1132(a)(1)). The plaintiff in Clorox had alleged that her employer wrongfully and maliciously denied her employment benefits. This court concluded that plaintiff's "artful pleading" of her complaint in terms of state law could not avoid federal jurisdiction over her complaint. Id.
Even if Clorox is not directly applicable to the present case, 5 other authority supports the district court's conclusion that the action was removable due to ERISA. In Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987), the Supreme Court held that ERISA preempted an employee's state common law action against his insurer for alleged improper processing of his claim for benefits under an ERISA plan. In Pilot Life, the plaintiff had purchased a group insurance policy from Pilot Life. The plaintiff was subsequently injured and received benefits from Pilot Life for two years, after which Pilot Life terminated his benefits. The plaintiff brought an action against Pilot Life in federal court, alleging tortious breach of contract, breach of fiduciary duties, and fraud in the inducement. The plaintiff sought damages "for failure to provide benefits under the insurance policy...." Id., 107 S.Ct. at 1551. He did not assert any cause of action under ERISA. Id.
Pilot Life moved for summary judgment, arguing that ERISA preempted the insured's common law claim for failure to pay benefits on the group insurance policy. The Supreme Court agreed.
The Court first observed that, under ERISA, if a state law "relate[s] to" employee...
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