Clark v. Ameritas Investment Corp.

• Decision Date: 27 December 2005
• Docket Number: No. 4:05CV3251.,4:05CV3251.
• Citation: 408 F.Supp.2d 819
• Parties: James D. CLARK, Grant J. Deyonge, Clark Bros. Transfer, and Clark Bros. Employee Stock Ownership Plan, Plaintiffs, v. AMERITAS INVESTMENT CORP., Defendant.
• Court: U.S. District Court — District of Nebraska

408 F.Supp.2d 819

James D. CLARK, Grant J. Deyonge, Clark Bros. Transfer, and Clark Bros. Employee Stock Ownership Plan, Plaintiffs, v. AMERITAS INVESTMENT CORP., Defendant.

No. 4:05CV3251.

United States District Court, D. Nebraska.

December 27, 2005.

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David A. Yudelson, Gregory C. Scaglione, John M. Lingelbach, Koley, Jessen Law Firm, Omaha, NE, for Plaintiffs.

David M. Williams, Lincoln, NE, Steven D. Davidson, Baird, Holm Law Firm, Omaha, NE, for Defendant.

MEMORANDUM AND ORDER

PIESTER, United States Magistrate Judge.

INTRODUCTION

Pending before me is the plaintiffs' motion for remand, filing 7. Defendant Ameritas Investment Corporation ("Ameritas") timely removed this case to federal court pursuant to 28 U.S.C. § 1441. Ameritas alleges that the plaintiffs' claims, as set forth in their amended complaint filed in state court, (see filing 1, attachment 1 (amended complaint)), are completely preempted, by ERISA, and therefore this court has federal question subject matter jurisdiction. See 28 U.S.C. §§ 1331 and 1337.

Ameritas' notice of removal states:

This is an action arising from and relating to an employee benefit plan as described in 29 U.S.C. § 1003(a) and not exempt under 29 U.S.C. § 1003(b) and, as such, is subject to and governed by the Employee Retirement Income Securities Act of 1974, as amended ("ERISA"), 29 U.S.C. § 1001, et seq. This action, as pled, falls within the integrated enforcement mechanism of 29 U.S.C. § 1132(a) and thus is completely preempted by ERISA. By virtue of the complete preemption doctrine, this Court has original jurisdiction over this lawsuit, which raises a federal question as it arises under the laws of the United States and under an Act of Congress regulating commerce. See, 28 U.S.C. § 1331 & 1337. Moreover, to the extent that this matter is brought under 29 U.S.C. § 1132(a)(2) and/or (3), 29 U.S.C. § 1132(e)(1) explicitly acknowledges this Court's exclusive jurisdiction over such actions. Given that this case is within the original jurisdiction of this Court, removal is proper. 28 U.S.C. § 1441.

Filing 1 (Notice of Removal) at p. 2 ¶ 5.¹

The plaintiffs have moved to remand the case to the District Court of Douglas County, Nebraska. Filing 7. The plaintiffs' amended complaint seeks recovery from Ameritas for its alleged professional malpractice, negligent misrepresentation, and breach of contract in rendering an opinion as to the value of stock held in the Clark Bros. Employee Stock Option Plan. The plaintiffs argue that none of these claims seek recovery under ERISA, this court lacks subject matter jurisdiction, and the case must be remanded.

For the reasons discussed hereafter, I conclude this court lacks federal question subject matter jurisdiction and the case must be remanded to the District Court of Douglas County, Nebraska.

THE PLEADINGS

The allegations of the complaint existing at the time of removal control whether the plaintiffs' allegations are sufficient to establish federal question subject matter jurisdiction. Pullman Co. v. Jenkins, 305 U.S. 534, 537-538, 59 S.Ct. 347, 83 L.Ed. 334 (1939); Crosby v. Paul Hardeman, Inc., 414 F.2d 1, 3 (8th Cir. 1969). In this case the plaintiffs' complaint was amended before the action was removed, and the amended state court complaint was filed in this court upon removal. Therefore, the determination as to whether the court has federal question subject matter jurisdiction focuses on the allegations of the plaintiffs' amended complaint. The amended complaint alleges:

The plaintiffs, James D. Clark and Grant J. Deyonge, were plan participants in the Clark Bros. Transfer Inc. Stock Option Plan ("ESOP"). They have also filed suit as the assignees of the ESOP itself, the ESOP beneficiaries and participants, and Clark Bros. Transfer, Inc. (the "Company"). Filing 1, attachment 1 (amended complaint) ¶¶ 1-3.

In their capacity as fiduciaries, trustees and members of the Administrative Committee of the ESOP and as directors and officers of the Company, the plaintiffs hired Ameritas to perform a valuation of the Clark Bros. Transfer Inc. stock held in the ESOP (the "Company stock"). Ameritas was paid in full for these services. Filing 1, attachment 1 (amended complaint) ¶¶ 4-10, 13.

Ameritas knew its valuation of the Company stock would be relied on when selling, buying, and redeeming the stock, and knew the ESOP was scheduled to be terminated effective December 31, 2002. However, it rendered stock valuation opinions which significantly undervalued the Company stock held by the ESOP. Filing 1, attachment 1 (amended complaint) ¶¶ 10-12.

In 2001 and 2002, the ESOP fiduciaries and trustees accepted Ameritas' stock valuation, and plan participants sold, and the Company redeemed stock in reliance upon the value placed on the Company stock by Ameritas. By March or April 2003, all the Company stock held by ESOP participants had been redeemed. Filing 1, attachment 1 (amended complaint) ¶¶ 14-17.

The Company was sold on February 17, 2004 for a price substantially higher than the amount paid to ESOP participants who sold their Company stock. The plan participants filed a class action ERISA suit against the plaintiffs for undervaluing the Company stock assets of the ESOP. See Olsen et al v. Clark et al, 8:04-CV-00106 (D.Neb. March 9, 2004). In the course of that suit, the plaintiffs learned that Ameritas' 2001 and 2002 stock valuations were defective and substantially undervalued the stock. The class action suit was settled. Filing 1, attachment 1 (amended complaint) ¶¶ 18-23.

The plaintiffs allege professional malpractice, negligent misrepresentation, and breach of contract claims against Ameritas for its conduct in undervaluing the Company stock held by the ESOP. They seek reimbursement of the amounts paid to Ameritas for its valuation services; reimbursement of attorney fees, expert fees, mediator fees, costs, and expenses incurred in defending and prosecuting the class action lawsuit; recovery of their economic losses related to the stock transactions of Clark, DeYonge and the plan participants; general damages; and interest. Filing 1, attachment 1 (amended complaint) ¶¶ 24-43.

Ameritas has filed evidence in opposition to the motion for remand (filing 15); the plaintiffs have objected to the defendant's evidence (filing 16), have also filed their own evidence in response to the defendant's proffer (filing 17). It is within the court's discretion to determine how to proceed on jurisdictional questions, and the court "may consider materials outside the pleadings such as depositions or affidavits in determining whether the record demonstrates lack of subject matter jurisdiction." Satz v. ITT Financial Corp., 619 F.2d 738, 742 (8th Cir.1980). See also Land v. Dollar, 330 U.S. 731, 735 & n. 4, 67 S.Ct. 1009, 91 L.Ed. 1209 (1947); Western Nebraska Resources Council v. Wyoming Fuel Co., 641 F.Supp. 128, 139 (D.Neb.1986) (Urbom.J.).

Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction — its very power to hear the case — there is a substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiff's allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of the Jurisdictional claims.

Western Nebraska Resources, 641 F.Supp. at 139.

Accordingly, I have reviewed the evidence submitted by Ameritas in support of its claim that this court has federal question subject matter jurisdiction. I have also reviewed the plaintiffs' counter-evidence. I conclude, however, that although the evidence submitted may be relevant to the pending Rule 12(b)(6) motion to dismiss or the merits of this case, it is not relevant to determining whether the plaintiffs' claims are completely preempted by ERISA. I shall therefore sustain the plaintiffs' objection to the evidence submitted by Ameritas, and I shall not discuss, refer to, or rely upon the evidence submitted by either the defendant or the plaintiffs as filings 15 and 17.

LEGAL ANALYSIS

"A defendant may remove a state law claim to federal court when the federal court would have had original jurisdiction if the suit originally had been filed there." Phipps v. F.D.I.C. 417 F.3d 1006, 1010 (8th Cir.2005) (citing 28 U.S.C. § 1441(b)). See also, City of Chicago v. International College of Surgeons, 522 U.S. 156, 163, 118 S.Ct. 523, 139 L.Ed.2d 525 (1997). As the party opposing remand, Ameritas bears the burden of establishing that federal subject matter jurisdiction exists over the plaintiffs' case. Green v. Ameritrade, Inc., 279 F.3d 590 (8th Cir.2002). Where the defendant alleges federal preemption provides the authority to exercise federal jurisdiction over the case, if the defendant proves that any claim within the plaintiffs' complaint is completely preempted by a federal statute, the defendant may remove the entire case to federal court, including any alleged state law claims arising from the same core of operative facts. See 28 U.S.C. § 1367; City of Chicago, 522 U.S. at 164, 118 S.Ct. 523; Phipps, 417 F.3d at 1010 (citing Gaming Corp. of Am. v. Dorsey & Whitney, 88 F.3d 536, 543 (8th Cir.1996)). However, all doubts as to the propriety of exercising federal jurisdiction over a removed case must be resolved in favor of remand. Transit Cas. Co. v. Certain Underwriters at Lloyd's of London, 119 F.3d 619, 625 (8th Cir.1997).

A. FEDERAL PREEMPTION AS THE BASIS FOR FEDERAL QUESTION SUBJECT MATTER JURISDICTION.

Ameritas asserts that though couched as claims for recovery under Nebraska common law, the plaintiffs' claims set forth in the amended complaint actually arise under ERISA, and therefore, the court should exercise federal question jurisdiction over this action. As recently summarized in Phipps:

Removal...