Engelhardt v. Paul Revere Life Ins. Co., Civil Action No. 96-D-699-N.

• Decision Date: 06 November 1996
• Docket Number: Civil Action No. 96-D-699-N.
• Citation: 951 F.Supp. 1003
• Parties: Miller B. ENGELHARDT, Plaintiff, v. PAUL REVERE LIFE INSURANCE COMPANY, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

951 F.Supp. 1003

Miller B. ENGELHARDT, Plaintiff, v. PAUL REVERE LIFE INSURANCE COMPANY, et al., Defendants.

Civil Action No. 96-D-699-N.

United States District Court, M.D. Alabama, Northern Division.

November 6, 1996.

Dennis R. Bailey; Nicholas T. Braswell, III; Charles A. Stakely, Jr., Montgomery, AL, for plaintiff.

Mark D. Hess, Bert Nettles, Birmingham, AL, Mark E. Schmidtke, Valparaiso, IN, Clarence M. Small, Jr., Birmingham, AL, for defendants.

MEMORANDUM OPINION AND ORDER

DE MENT, District Judge.

This matter is now before the court on plaintiff Miller B. Engelhardt's ("Engelhardt") motion to remand, filed May 24, 1996, and Engelhardt's "Motion For Dismissal of Count Two Without Prejudice" filed on October 3, 1996.¹

Filings concerning Engelhardt's motion to remand include Defendant Paul Revere Life Insurance Co.'s ("Revere") response filed on June 14, 1996, Engelhardt's supplemental brief to his motion filed on July 3, 1996, and Revere's reply filed on July 12, 1996. Revere next filed supplemental authority in support of its opposition to remand on August 28, 1996, and Engelhardt filed his response on September 6, 1996. Finally, Revere filed a supplemental brief in opposition to Engelhardt's motion to remand on September 24, 1996. Revere also filed a letter brief on October 2, 1996, and Engelhardt answered on October 3, 1996. After careful consideration of the arguments of counsel, the relevant case law, and the record as a whole, the court finds that Engelhardt's motion to remand is due to be granted.

Revere responded to Engelhardt's motion to dismiss on October 8, 1996. After careful consideration of the arguments of counsel, the relevant case law, and the record as a whole, the court finds that Engelhardt's motion to dismiss is due to be granted.

Facts

This dispute arises from the purchase of a disability insurance policy ("Policy") by Montgomery Orthopaedic Surgeons, P.C. ("Surgeons"), for the four physicians in the practice and the practice's business manager. Engelhardt's Mot. Remand at 1-2; Gerald L. Gwin Aff. at 1. Defendant Montgomery was the agent who sold the Policy issued by Revere to Surgeons. Gwin Aff. at 1-2; Engelhardt Aff. at 3. The Policy became effective on July 1, 1993. Gwin Aff. at 1. At the time Surgeons applied for the Policy, Engelhardt was one of the four physicians in the practice and served as President of the group. Gwin Aff. ¶ 2. Engelhardt noted in his application that he had previously been diagnosed for glaucoma. Engelhardt Aff. 3. Engelhardt claims that following receipt of his application, Revere and Montgomery fraudulently induced him to sign an amendment to his application which excluded, among other things, "coverage for either or both eyes." Id. at 1-2, Exhibit A. Engelhardt alleges that Montgomery and Revere assured him that this exclusion would only preclude benefits for conditions resulting from glaucoma. Id. at 2. Engelhardt ultimately signed the amendment to his application on October 25, 1993. Id. at 2, Exhibit A.

In October of 1995 Engelhardt experienced serious vision problems allegedly resulting from a detached or torn retina, a condition unrelated to glaucoma. Id. at 2-3. Following eye surgery, Engelhardt was still allegedly unable to continue his medical practice. Id. at 3. When Engelhardt applied for disability policy benefits, Revere denied coverage based upon the disputed amendment to Engelhardt's application. Revere's Opp'n Engelhardt's Mot. Remand at 4.

Engelhardt originally filed suit in the Circuit Court of Montgomery County on April 2, 1996, alleging a state law claim of fraudulent inducement arising out of the disability policy ("Count I"). Revere removed the action to this court on April 25, 1996, asserting that Engelhardt's claims were preempted by the Employee Retirement Income Security Act of 1974 ("ERISA") and, in the alternative, that supplemental jurisdiction applied to any claims that do not concern federal questions. On April 25, 1996, Montgomery consented to removal of this matter to federal court. On April 30, 1996, the Plaintiff amended his complaint to add a second claim for lost benefits ("Count II") under § 502(a)(1) of ERISA, 29 U.S.C.A. § 1132(a)(1)(B). Plaintiff now seeks to remand the case.

Revere reconsidered its earlier denial and on August 15, 1996, agreed to pay disability benefits to Engelhardt. Letter from Franklin H. Jancura to Engelhardt of 8/15/96, at 1-2. In the letter communicating this decision, Revere included a check for previously unpaid benefits and represented that it would pay future disability benefits "to the extent you continue to be eligible for said benefits under the terms of the benefit plan." Id. at 2. Revere also offered to discuss the possibility of paying Engelhardt's attorneys fees incurred during this action. Id. In its motion for summary judgment, Revere contends that such payments constitute "all of the relief available to plaintiff." Revere's Br. Supp.Mot.Summ.J. at 5-6.

Following a telephone status conference with the court, Engelhardt submitted a "Motion for Dismissal of Count Two Without Prejudice" ("Pl.'s Mot. Dismiss") on October 3, 1996. Revere responded to this motion on October 8, 1996. In his motion for dismissal, Engelhardt stated that Revere has represented to Engelhardt's attorneys that it intended to make disability payments to Engelhardt as long as Engelhardt remained disabled. Pl.'s Mot. Dismiss ¶ 2. Engelhardt also represented to the court that Revere had also offered to adjust the interest payments on past-due amounts to reflect an interest rate of 1½% per month and to pay a reasonable attorney's fees to Engelhardt's counsel. In its response, Revere stated that it had not yet agreed to pay interest at the rate of 1½% on the past-due payments but was prepared to discuss the proper interest rate under ERISA. Further, Revere expressed its willingness to reimburse Engelhardt for a reasonable amount of attorney's fees and to participate in mediation if needed to resolve this question.

Discussion

Motion to Dismiss

Count II of Engelhardt's complaint states a cause of action implicating a question of federal law. Such a claim is sufficient to prevent the remand of an action to state court. However, the benefits claimed under Count II have been tendered by Revere and only two ancillary issues remain for resolution: attorney fees and the proper interest rate on past-due benefits.² The claimed disability benefits are now being provided in accordance with the Policy, which means that Engelhardt's alleged wrong has been righted. Therefore, the court finds that Engelhardt's motion to dismiss Count II is due to be granted in reliance upon the de facto settlement reached between the parties. This dismissal resolves Engelhardt's ERISA claims resulting from the initial denial of disability benefits under the Policy.³ The parties are left to resolve the issues of attorney's fees and the proper interest rate. The court retains jurisdiction over the resolution of these issues following this dismissal.

Motion to Remand

Count I, on the other hand, still awaits resolution. Engelhardt claims that this count is ripe for remand to state court, while Revere contends that it is preempted by ERISA. Revere argues that this preemption erases Count I from Engelhardt's complaint and results in complete dismissal of this action. Revere asserts that ERISA preempts Engelhardt's state law claim because the claim "relates to" an employee benefit plan, i.e., the Policy issued to Engelhardt's group practice. Engelhardt, nevertheless, argues that ERISA does not preempt his cause of action because state law fraudulent inducement claims are not subject to ERISA preemption and Engelhardt is not an ERISA entity, and therefore, ERISA does not preempt his claim. The court agrees with Engelhardt that Count I is due to be remanded to the Circuit Court of Montgomery County.

It is well-settled that the defendants, as the parties removing an action to federal court, have the burden of establishing federal jurisdiction. Sullivan v. First Affiliated Secs., 813 F.2d 1368 (9th Cir.1987), cert. denied, 484 U.S. 850, 108 S.Ct. 150, 98 L.Ed.2d 106 (1987). Because the removal statutes are strictly construed against removal, generally speaking, all doubts about removal must be resolved in favor of remand. See Shamrock Oil and Gas Corp. v. Sheets, 313 U.S. 100, 61 S.Ct. 868, 85 L.Ed. 1214 (1941); Butler v. Polk, 592 F.2d 1293 (5th Cir.1979); Paxton v. Weaver, 553 F.2d 936 (5th Cir. 1977).

In removal and remand situations, the plaintiff largely controls his or her own destiny through the complaint. The plaintiff "`may avoid federal jurisdiction by exclusive reliance on state law.'" Sexton v. Principal Financial Group, 920 F.Supp. 169, 173 (M.D.Ala.1996) (quoting Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987); Burke v. Humana Ins. Co., No. 95-T-299-N, slip op. at 4 (M.D.Ala. May 11, 1995)). In order to effectuate this narrow interpretation of the removal statute, the court should look to the "face of the complaint" and consider only the claims established according to the well-pleaded complaint rule. Id. at 172-173. For example, in Sexton, this court found that the plaintiff's complaint did not state a federal ERISA claim where it contained only state law claims. Id. at 173 (finding additionally that the plaintiff's action was not an "action for benefits by an employee pursuant to an insurance plan" and therefore did not qualify for ERISA preemption).

ERISA broadly preempts state law claims relating to employee benefit plans brought by ERISA participants and beneficiaries. 29 U.S.C. § 1144(a); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). The first step in deciding whether ERISA preempts Engelhardt's state law claim is determining if an "employee welfare benefit plan" was established. 29 U.S.C. § 1002(1) defines an "employee welfare...