Emard v. Hughes Aircraft Co., 96-56584

CourtUnited States Courts of Appeals. United States Court of Appeals (9th Circuit)
Citation153 F.3d 949
Parties22 Employee Benefits Cas. 1765, 98 Cal. Daily Op. Serv. 6468, 98 Cal. Daily Op. Serv. 6892, 98 Daily Journal D.A.R. 9544, Pens. Plan Guide (CCH) P 23947E Gary EMARD, Plaintiff-Appellant, v. HUGHES AIRCRAFT COMPANY, a corporation; Metropolitan Life Insurance Company, a corporation; Alex Stencel, Defendants-Appellees.
Docket NumberNo. 96-56584,96-56584
Decision Date20 August 1998

Page 949

153 F.3d 949
22 Employee Benefits Cas. 1765, 98 Cal. Daily
Op. Serv. 6468,
98 Cal. Daily Op. Serv. 6892,
98 Daily Journal D.A.R. 9544,
Pens. Plan Guide (CCH) P 23947E
Gary EMARD, Plaintiff-Appellant,
HUGHES AIRCRAFT COMPANY, a corporation; Metropolitan Life
Insurance Company, a corporation; Alex Stencel,
No. 96-56584.
United States Court of Appeals,
Ninth Circuit.
Argued Feb. 2, 1998.
Submitted Feb. 12, 1998.
Decided Aug. 20, 1998.

Page 951

Gerald N. Shelley, Costa Mesa, California, for plaintiff-appellant.

Ralph R. Loyd, Horwitz & Beam, Irvine, California, for defendant-appellee Alex Stencel.

Appeal from the United States District Court for the Central District of California; Alicemarie H. Stotler, District Judge, Presiding. D.C. No. CV-95-00410-AHS.

Before: PREGERSON, BEEZER and HALL, Circuit Judges.

Opinion by Judge BEEZER; Partial Concurrence and Partial Dissent by Judge CYNTHIA HOLCOMB HALL.

BEEZER, Circuit Judge:

Gary Emard ("Emard") filed an action in California state court seeking a declaration that, under California law, he is entitled to at least half of the proceeds of two term insurance policies insuring the life of his deceased wife, Ginger Emard ("Ginger"). The policies were issued as an employee benefit under

Page 952

the Hughes Aircraft Company plan, which is governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461. The action was removed to district court pursuant to 28 U.S.C. § 1441. The district court granted summary judgment in favor of Alex Stencel ("Stencel"), Ginger's former husband and the designated policy beneficiary, on the ground that ERISA preemption prohibits application of California's community property law. Emard appealed. We have jurisdiction. 28 U.S.C. § 1291. We hold that ERISA preemption does not bar the application of the California law on which Emard relies and that removal was improper. We reverse the judgment of the district court and remand with instructions to remand to state court.

Ginger and Stencel married in 1975. Two children were born of their marriage. In 1981 Ginger was hired by Hughes Aircraft Company ("Hughes"). Incident to her employment she was entitled to a $50,000 Basic Life Insurance policy provided through Hughes' employee benefit program. This term life policy was issued by Metropolitan Life Insurance Company ("Met Life") and paid for by Hughes. On August 8, 1981, Ginger filled out a designation of beneficiary form naming "Aleksander Stencel, husband," as primary beneficiary and their two sons as contingent beneficiaries.

Ginger and Stencel divorced in 1985. The dissolution decree was silent as to Ginger's employee life insurance policy. In 1986 Ginger married Emard. Ginger's two sons from her marriage to Stencel lived with Ginger and Emard. One child was born of the Emard marriage. In 1988 Ginger purchased through Hughes an optional term life insurance policy ($138,000 coverage). Met Life issued the policy. The policy premiums were paid through after-tax payroll deductions and, later, by personal check. Ginger did not fill out a new designation of beneficiary form.

Ginger died intestate in January 1995. The designation of beneficiary form signed in 1981 remained the only document directing the distribution of the insurance proceeds. Emard brought a state court action naming Stencel, Hughes and Met Life as defendants and seeking a declaration that he is entitled, under California law, to all or part of the proceeds of Ginger's insurance policies. Hughes and Met Life removed the action to federal court pursuant to 28 U.S.C. § 1441, contending that ERISA preemption barred Emard's claims. 1 The district court granted summary judgment in favor of the defendants. This timely appeal followed.


We review de novo a grant of summary judgment. See Babikian v. Paul Revere Life Ins. Co., 63 F.3d 837, 839 (9th Cir.1995). "We also review de novo the district court's interpretation and application of ERISA provisions and its determination that ERISA preempts a state law." Aloha Airlines, Inc. v. Ahue, 12 F.3d 1498, 1500 (9th Cir.1993). Removal is an issue of federal subject matter jurisdiction reviewed de novo. See Harris v. Provident Life and Accident Ins. Co., 26 F.3d 930, 932 (9th Cir.1994). We "must consider whether federal jurisdiction exists, even if no objection is made to removal ... and even if both parties stipulate to federal jurisdiction." Rains v. Criterion Systems, Inc., 80 F.3d 339, 342 (9th Cir.1996) (citations omitted).


This case was removed to the district court pursuant to 28 U.S.C. § 1441 2

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(federal question jurisdiction). In general, "a cause of action arises under federal law only when the plaintiff's well-pleaded complaint raises issues of federal law." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1546, 95 L.Ed.2d 55 (1987). Some federal statutes, though, "may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Id. at 63-64, 107 S.Ct. at 1546. Such complete preemption occurs under ERISA if (1) ERISA preempts the plaintiff's cause of action and (2) the cause of action falls within the scope of 29 U.S.C. § 1132(a). See Harris v. Provident Life and Accident Ins. Co., 26 F.3d 930, 934 (9th Cir.1994).

Emard's state court complaint did not raise issues of federal law on its face, but instead relied solely on state law to establish Emard's rights to the proceeds of Ginger's two life insurance policies. A life insurance policy provided as part of an ERISA benefits package is part of an employee welfare benefit plan and is therefore governed by ERISA. See 29 U.S.C. § 1002(1) (defining "employee welfare benefit plan"). Ginger's life insurance policies were provided as part of an ERISA benefits package and are therefore governed by ERISA. If Emard's claims to the proceeds of those policies are preempted by ERISA and fall within the scope of § 1132(a), then removal was proper. See Harris, 26 F.3d at 934. We must first determine, therefore, whether ERISA preemption bars application of the California law on which Emard relies.


By its terms, ERISA "supersede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by the statute. 29 U.S.C. § 1144(a). 3 "The term 'State law' includes all laws, decisions, rules, regulations, or other State action having the effect of law...." Id. § 1144(c)(1).

Initially, the Supreme Court interpreted ERISA's preemption statute as creating a "deliberately expansive" preemption of state law. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). In Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990), the Court stated that "a state law may 'relate to' a benefit plan, and thereby be pre-empted, even if the law is not specifically designed to affect such plans, or the effect is only indirect."

Recently, "the Court has come to recognize that ERISA preemption must have limits when it enters areas traditionally left to state regulation." Operating Engineers Health and Welfare Trust Fund v. JWJ Contracting Co., 135 F.3d 671, 677 (9th Cir.1998) (citing De Buono v. NYSA-ILA Medical and Clinical Svcs. Fund, 520 U.S. 806, 117 S.Ct. 1747, 1751, 138 L.Ed.2d 21 (1997)); see also Toumajian v. Frailey, 135 F.3d 648, 654 n. 3 (9th Cir.1998) ("Recently, the scope of this broad 'relate to' preemption was markedly narrowed.").

Under this new approach to preemption, courts "must go beyond the unhelpful text and the frustrating difficulty of defining its key term ['relate to'], and look instead to the objectives of the ERISA statute as a guide to the scope of the state law that Congress understood would survive." New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 656, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995). The Court has also directed the courts to look "to the nature of the effect of the state law on ERISA plans." California Div. of Labor Standards Enforcement v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 117 S.Ct. 832, 838, 136 L.Ed.2d 791 (1997). Taken together, these recent cases demonstrate, as Justice Scalia noted in his concurrence in Dillingham, that the Court now applies "ordinary field pre-emption, and, of course, ordinary conflict pre-emption" analysis to ERISA preemption questions. 117 S.Ct. at

Page 954

843 (Scalia, J., concurring). See also John Hancock Mut. Life Ins. Co. v. Harris Trust and Sav. Bank, 510 U.S. 86, 99, 114 S.Ct. 517, 126 L.Ed.2d 524 (1993) ("[W]e discern no solid basis for believing that Congress, when it designed ERISA, intended fundamentally to alter traditional preemption analysis.").

To guide our preemption analysis within the specific context of ERISA, we ask whether the state law at issue has (1) a "reference to" or (2) a "connection with" an ERISA plan. Operating Engineers, 135 F.3d at 677 (quoting District of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125, 129, 113 S.Ct. 580, 583, and Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983)). A state law has "reference to" ERISA plans where it "acts immediately and exclusively upon ERISA plans, ... or where the existence of ERISA plans is essential to the law's operation." Dillingham, 519 U.S. at 117 S.Ct. at 838 (citations omitted). The California laws at issue here do not "act[ ] immediately and exclusively upon ERISA plans," nor is "the existence of ERISA plans ... essential to the [laws'] operation." See id. We therefore limit our analysis to the question whether those laws have "a connection with" ERISA benefit plans.


Emard seeks first to have a constructive trust imposed on the proceeds of Ginger's life insurance policies. Under California law, "a constructive trust is an equitable remedy imposed where the defendant holds...

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