Durham v. Prudential Ins. Co. of Am.

• Decision Date: 15 February 2017
• Docket Number: Case No. 2:16–cv–08202–ODW(KSx)
• Parties: Melvyn L. DURHAM, Plaintiff, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA; Loyola Marymount University; and Does 1–100, inclusive, Defendants.
• Court: U.S. District Court — Central District of California

236 F.Supp.3d 1140

Melvyn L. DURHAM, Plaintiff,

v.The PRUDENTIAL INSURANCE COMPANY OF AMERICA; Loyola Marymount University; and Does 1–100, inclusive, Defendants.

Case No. 2:16–cv–08202–ODW(KSx)

United States District Court, C.D. California.

Signed February 15, 2017

Daniel Mitchell Graham, Daniel M. Graham APC, Torrance, CA, for Plaintiff.

Linda Marie Lawson, Jason A. James, Meserve Mumper and Hughes LLP, Los Angeles, CA, for Defendant.

ORDER GRANTING DEFENDANTS' MOTION TO DISMISS [10] AND DENYING PLAINTIFF'S MOTION TO REMAND [11]

OTIS D. WRIGHT, II, UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

Plaintiff Melvyn L. Durham alleges that Defendants The Prudential Insurance Company of America ("Prudential") and Loyola Marymount University ("LMU") wrongfully denied him disability benefits. Plaintiff filed a complaint in state court asserting claims for breach of contract and breach of the implied covenant of good faith and fair dealing. Defendants removed the case to federal court, arguing that the Employee Retirement Income Security Act of 1974 ("ERISA") completely preempts Plaintiff's state law claims. Plaintiff contends that the benefit plan at issue is a "church plan," and thus exempt from ERISA. Defendants now move to dismiss Plaintiff's First Amended Complaint based on ERISA preemption, and Plaintiff moves to remand the case based on lack of subject matter jurisdiction and the existence of a forum selection clause. For the reasons discussed below, the Court DENIES Plaintiff's Motion to Remand, and GRANTS Defendants' Motion to Dismiss. (ECF Nos. 10, 11.)¹

II. BACKGROUND

For approximately thirteen years, LMU employed Plaintiff as a Craft Shop Manager. (First Am. Compl. ¶ 10, ECF No. 1–5.) During this time, Plaintiff participated in a long-term disability plan administered by Prudential. (Id. ¶ 11.) Plaintiff alleges that Defendants wrongfully denied him benefits under the plan. (See id. ¶¶ 12–18.) In September 2016, Plaintiff filed this action in state court. (ECF No. 1–2.) Three weeks later, Plaintiff filed a First Amended Complaint, in which he asserted state law claims for breach of contract and breach of the implied covenant of good faith and fair dealing. (First Am. Compl. ¶¶ 19–29.) Plaintiff specifically alleged that the benefit plan is a church plan as defined under ERISA, pointing to LMU's mission statement describing the university as "institutionally committed to Roman Catholicism" and stating that its "Catholic identity and religious heritage distinguish LMU from other universities and provide touchstones for understanding our threefold mission." (Id. ¶ 9.)

Defendants timely removed this action to federal court. (ECF No. 1.) In their Notice of Removal, Defendants contend that ERISA completely preempts Plaintiff's state law claims, thereby conferring federal question jurisdiction. (Not. of Removal ¶¶ 5–17.) Defendants also submitted a declaration from LMU's Vice President of Human Resources stating that while LMU is "affiliated with the Catholic Church, [it] is not a church in and of itself, is not operated by the Catholic Church, and does not receive most of its funding from the Catholic Church." (Chandler Decl. ¶ 4, ECF No. 1–11.) Thus, Defendants contend, the benefit plan at issue is not a church plan under ERISA. (Not. of Removal ¶¶ 21–23.)²

After removal, Defendants moved to dismiss Plaintiff's claims based on ERISA preemption. (ECF No. 10.) Plaintiff then moved to remand the action to state court based on lack of subject matter jurisdiction and the existence of a forum selection clause in the benefit plan. (ECF No. 11.) Both parties opposed the other's Motion. (ECF Nos. 14, 16.) Those Motions are now before the Court for decision.

III. MOTION TO REMAND

Federal courts have subject matter jurisdiction only as authorized by the Constitution and by Congress. U.S. Const. art. III, § 2, cl. 1 ; Kokkonen v. Guardian Life Ins. Co. of Am. , 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Federal courts have original jurisdiction where an action arises under federal law, or where each plaintiff's citizenship is diverse from each defendant's citizenship and the amount in controversy exceeds $75,000. 28 U.S.C. §§ 1331, 1332(a). A defendant may remove a case from state court to federal court only if the federal court would have had original jurisdiction over the suit. 28 U.S.C. § 1441(a). The removal statute is strictly construed against removal, and "[f]ederal jurisdiction must be rejected if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc. , 980 F.2d 564, 566 (9th Cir. 1992). The party seeking removal bears the burden of establishing federal jurisdiction. Durham v. Lockheed Martin Corp. , 445 F.3d 1247, 1252 (9th Cir. 2006).

Plaintiff advances three reasons why the Court should remand this case: (1) the benefit plan at issue is a "church plan," and thus Plaintiff's state law claims are not preempted by ERISA; (2) ERISA preemption does not in any event prohibit the particular state law claims in this matter; and (3) the benefit plan contains a forum selection clause that requires disputes arising therefrom to be litigated in state court. (ECF No. 11–1.) The Court finds none of these reasons persuasive.

A. Complete Preemption Under ERISA

Under the well-pleaded complaint rule, the court determines the existence of federal question jurisdiction by looking at the plaintiff's claims rather than the defendant's defenses. Aetna Health Inc. v. Davila , 542 U.S. 200, 207, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004). Thus, a federal defense—such as preemption—typically does not give rise to federal question jurisdiction. Id. The only exception is where "a federal statute wholly displaces the state-law cause of action through complete pre-emption." Id. Federal question jurisdiction exists in those instances because the plaintiff's claim, "even if pleaded in terms of state law, is in reality based on federal law." Id. at 207–08, 124 S.Ct. 2488 (internal quotation marks omitted). The Supreme Court has adopted a two-part test for determining whether ERISA completely preempts state law claims: "if (1) ‘an individual, at some point in time, could have brought [the] claim under ERISA § 502(a)(1)(B),’ and (2) ‘where there is no other independent legal duty that is implicated by a defendant's actions.’ " Marin Gen. Hosp. v. Modesto & Empire Traction Co. , 581 F.3d 941, 946 (9th Cir. 2009) (quoting Davila , 542 U.S. at 210, 124 S.Ct. 2488 ).

1. First Prong of Davila

Under § 502(a)(1)(B), a participant in or beneficiary of a "plan" may bring a civil action "to recover benefits due to him under the terms of his plan." 29 U.S.C. § 1132(a)(1)(B). ERISA defines "plan" to include an "employee welfare benefit plan," id. § 1002(3), and in turn defines "employee welfare benefit plan" as "any plan, fund, or program ... established or maintained by an employer or by an employee organization ... for the purpose of providing for its participants or their beneficiaries ... disability ... benefits." Id. § 1002(1). Here, Plaintiff alleges that he was covered under a plan maintained by LMU, his employer, that provides eligible employees with long-term disability benefits, and that he was wrongfully denied disability benefits under that plan. (First Am. Compl. ¶¶ 11–18.) Thus, the plan qualifies as an "employee welfare benefit plan," § 1002(1), and the wrongful denial of benefits under that plan entitles Plaintiff to bring an action under § 502(a)(1)(B).

Plaintiff does not dispute this, but rather argues that the plan is nonetheless exempt from ERISA as a "church plan." See 29 U.S.C. § 1003(b)(2) ("The provisions of this subchapter shall not apply to any employee benefit plan if such plan is a church plan ...."). ERISA defines a "church plan" as "a plan established and maintained... for its employees (or their beneficiaries) by a church or by a convention or association of churches." 29 U.S.C. § 1002(33)(A) (emphasis added). ERISA further provides:

A plan established and maintained for its employees (or their beneficiaries) by a church or by a convention or association of churches includes a plan maintained by an organization, whether a civil law corporation or otherwise, the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention or association of churches.

29 U.S.C. § 1002(33)(C)(i) (emphasis added). For shorthand, the Court refers to such organizations as "principal purpose organizations."

Plaintiff's main argument with respect to ERISA's church plan exemption is that under subsection (33)(C)(i), a plan is a "church plan" if it is maintained by a principal purpose organization, regardless of who- or whatever initially established the plan. (Mot. to Remand at 5–6.) Plaintiff argues that LMU is a principal purpose organization that maintains the plan, and thus it qualifies as a "church plan." (Id. ) Plaintiff argues in the alternative that if the Court reads ERISA to require that the plan also be established by a church, LMU is in fact a church. (Id. ) Both arguments fail.

i. Whether a Church Plan Must be Established by a Church

The Third Circuit, Seventh Circuit, and Ninth Circuit have each held that "a plan must have been [1] established by a church and [2] maintained either by a church or by a principal-purpose organization" in order to qualify for the church plan exemption; it is insufficient that the plan is simply maintained by a principal purpose organization. Rollins v. Dignity Health , 830 F.3d 900, 905 (9th Cir. 2016), cert. granted , ––– U.S. ––––, 137 S.Ct. 547, 196 L.Ed.2d 442 (2016) ; see also Kaplan v. Saint Peter's Healthcare Sys. , 810 F.3d 175, 180–81 (3d Cir. 2015) ; Stapleton v. Advocate Health Care Network , 817 F.3d 517, 523–27 (...