Curtis v. Nevada Bonding Corp.

• Decision Date: 28 April 1995
• Docket Number: I-XX,No. 93-16981,93-16981
• Citation: 53 F.3d 1023
• Parties: , 19 Employee Benefits Cas. 1356, Pens. Plan Guide P 23907X Paul G. CURTIS and Mary Curtis, Plaintiffs-Appellees, v. NEVADA BONDING CORPORATION, Douglass Financial Corporation, and Does, inclusive, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1023

53 F.3d 1023

63 USLW 2804, 19 Employee Benefits Cas. 1356,

Pens. Plan Guide P 23907X

Paul G. CURTIS and Mary Curtis, Plaintiffs-Appellees, v. NEVADA BONDING CORPORATION, Douglass Financial Corporation and Does I-XX, inclusive, Defendants-Appellants.

No. 93-16981.

United States Court of Appeals Ninth Circuit.

Argued and Submitted March 16, 1995.

Decided April 28, 1995.

Christopher R. Hooper, Lionel Sawyer & Collins, Reno, NV, for defendants-appellants.

Robert F. Enzenberger, Haefner & Enzenberger, Reno, NV, for plaintiffs-appellees.

Appeal from the United States District Court for the District of Nevada.

Before FLETCHER, REINHARDT, and NOONAN, Circuit Judges.

FLETCHER, Circuit Judge:

Defendants Nevada Bonding Corporation and Douglass Financial Corporation appeal the district court's remand to the Nevada state district court of state law claims brought by Paul and Mary Curtis. The district court determined that it had subject matter jurisdiction over the Curtises' claims pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Sec. 1001, et seq., and that ERISA preempted some but not all of the Curtises' state law claims. We hold that the district court lacked subject matter jurisdiction, and we vacate the district court's judgment and remand to the district court with instructions to remand the case to the state court.

I

Defendant Nevada Bonding Corporation ("NBC") is a retail bond agency licensed to write bail bonds through defendant Douglass Financial Corporation ("DFC"). According to the Curtises' complaint, Paul Curtis met with representatives of DFC and NBC in May of 1992 to discuss a potential employment opportunity with NBC. Mr. Curtis indicated that one of his principal objectives in obtaining employment was to secure health and life benefits as soon as possible. After some negotiating, Mr. Curtis accepted an offer to begin working for NBC immediately. The Executive Vice President of DFC promised Mr. Curtis that his health and life benefits would take effect on June 1, 1992. Mr. Curtis was not informed how his new employers intended to secure insurance coverage or how they usually provided coverage to their employees.

In fact, the defendants' usual means of providing health and life benefits to NBC employees was through a group insurance policy purchased from Employers Health Insurance. The parties agree that NBC had a plan governed by ERISA to provide health and life benefits and that the Employers Health policy was part of that ERISA plan. Under the terms of the Employers Health policy, a new employee did not become eligible to receive benefits until the first day of the month following his first ninety days of employment. Thus, to fulfill their promise to Mr. Curtis, the defendants were obliged to procure an individual policy or make some alternative arrangement to provide benefits for Mr. Curtis from June 1, 1992 until he became eligible for participation in the ERISA plan on September 1, 1992.

When the Curtises incurred some minor medical expenses after June 1, they learned that the defendants had not in fact procured insurance coverage as promised. Reminded of their promise, the defendants reimbursed the Curtises for the medical expenses. Meanwhile, on August 12, 1992, Employers Health notified the Curtises that, because Mrs. Curtis currently was pregnant, Mr. Curtis was ineligible for coverage but could reapply after the child's birth. In late August, after receiving notice from the insurer that he was ineligible for current participation in the Employers Health policy, Mr. Curtis was informed by his treating physicians that he had developed a malignant tumor in his cervical spine and that significant medical expenses would be incurred. Informed of Mr. Curtis's diagnosis, the defendants ceased reimbursing the Curtises for incurred medical expenses. When Mr. Curtis demanded that the defendants fulfill their promise, the defendants refused and eventually terminated Mr. Curtis's employment with NBC.

On February 10, 1993, the Curtises filed a complaint in the Nevada state district court against NBC and DFC alleging breach of contract, negligence, breach of the covenant of good faith and fair dealing, and fraudulent misrepresentation. The heart of the Curtises claims was that, in order to obtain Mr. Curtis as an employee, the defendants promised to provide insurance coverage for Mr. Curtis starting June 1, 1992, knowing that the Employers Health policy would not cover Mr. Curtis until at least September 1, 1992. Allegedly relying on the defendants' representation, the Curtises did not obtain insurance from other potential sources. Had the defendants obtained insurance coverage as they allegedly promised, Mr. Curtis would have been insured when he was diagnosed with cancer; instead, he was left uninsured.

NBC and DFC removed the action to federal district court and moved for summary judgment on the grounds that ERISA preempted the Curtises' claims and that the Curtises were not entitled to benefits under the terms of the Employers Health policy. The Curtises conceded that they could not recover benefits under the defendants' ERISA plan, but opposed the motion for summary judgment and moved to remand to the state court because the district court lacked subject matter jurisdiction and their claims did not "relate to" an ERISA plan and, therefore, were not preempted.

The district court, apparently believing that it had subject matter jurisdiction due to the existence of an ERISA plan, granted summary judgment in favor of the defendants to the extent that the Curtises' claims alleged that the parties had agreed to modify an existing ERISA plan or related in any other way to the Employers Health group policy. The district court remanded the Curtises' claims to the state court, however, regarding "one small area where [Mr. Curtis] appears to be alleging that [the defendants] fraudulently represented to him that he'd be covered with health and life insurance upon taking employment and he was not, period." Accordingly, the district court granted summary judgment in favor of the defendants on the Curtises' breach of contract and negligence claims, but remanded the Curtises' claims for fraudulent misrepresentation and breach of the covenant of good faith and fair dealing.

II

Although the Curtises objected to removal to the federal district court on the ground that the district court lacked subject matter jurisdiction, they appear to argue on appeal that the district court appropriately exercised jurisdiction over the case and correctly determined that their state law claims of fraudulent misrepresentation and breach of the covenant of good faith and fair dealing survive ERISA preemption. Nevertheless, "it is this court's duty to see to it that the District Court's jurisdiction, defined and limited by statute, is not exceeded." Freeman v. Jacques Orthopaedic & Joint Implant Surgery Medical Group, 721 F.2d 654, 655 (9th Cir.1983). To determine whether federal subject matter jurisdiction extends to the Curtises' suit, we must determine whether an "employee welfare benefit plan" as defined by ERISA exists, and whether the Curtises have standing to bring a civil suit to enforce ERISA. See Peterson v. American Life & Health Insurance Co., 48 F.3d 404, 408 (9th Cir.1995).

A

The parties agree that the group policy purchased by the defendants from Employers Health was the means of providing benefits to NBC's employees and is part of an employee welfare benefit plan governed by ERISA. They vigorously debate, however, whether the Curtises have standing to bring a claim for benefits under the plan, and, if not, whether ERISA may nevertheless preempt their state law claims. We address the latter dispute first.

The defendants argue that federal subject matter jurisdiction pursuant to ERISA and, therefore, ERISA preemption, may extend to a plaintiff's state law causes of action even if the plaintiff lacks standing to enforce ERISA. Their argument is foreclosed by Freeman v. Jacques Orthopaedic and Joint Implant Surgery Medical Group, Inc., 721 F.2d 654, 655 (9th Cir.1983), where we held that federal courts lack subject matter jurisdiction if the plaintiff in an action for benefits owed under an ERISA plan lacks standing to bring a civil suit enforcing ERISA under 29 U.S.C. Sec. 1132(a)(1)(B). Although the defendants argued in their brief that we should reexamine Freeman in light of Supreme Court decisions interpreting ERISA preemption broadly, ¹ we have since reiterated our holding in Freeman that a plaintiff's standing under section 1132(a)(1) is a prerequisite to ERISA jurisdiction. See Peterson, 48 F.3d at 409; Harris v. Provident Life and Accident Insurance Co., 26 F.3d 930 (9th Cir.1994).

Moreover, without standing to enforce ERISA, there can be no ERISA preemption. As we stated in Harris,

[I]t would be contradictory to rule that state law claims are preempted where the court has already held that the same plaintiffs may not assert a claim under ERISA because they [lack standing] ... Unlike the Chesire [sic] Cat, one cannot have the smile of preemption without the stripes of participation....

Id. at 934 (internal citations and quotations omitted).

Having established that a plaintiff's standing to enforce ERISA is a prerequisite to both subject matter jurisdiction and ERISA preemption, we now turn to the question of whether the Curtises have standing to bring a civil suit under ERISA. A civil action under ERISA may be brought by a "participant" in or "beneficiary" of an ERISA plan. 29 U.S.C. Sec. 1132(a)(1). A "participant" is "any employee or former employee of an employer ... who is or may become eligible to receive a benefit of" an ERISA plan. Id. Sec. 1002(7). ²

Whether a plaintiff is a plan participant is determined as of the time he files the lawsuit. Harris, 26 F.3d at 933; Olson v. General Dynamics Corp., 960 F.2d 1418, 1422 (9th Cir.1991), cert....