Feldman v. Nat'l Benefits Network, Inc.

• Decision Date: 13 January 2022
• Docket Number: 2:21-CV-00419-CCW
• Court: U.S. District Court — Western District of Pennsylvania
• Parties: MAX C. FELDMAN, INDIVIDUALLY and AS TRUSTEE ON BEHALF OF THE MAX C. FELDMAN DEFINED BENEFIT PENSION PLAN, Plaintiff, v. NATIONAL BENEFITS NETWORK, INC et al. Defendants.

MAX C. FELDMAN, INDIVIDUALLY and AS TRUSTEE ON BEHALF OF THE MAX C. FELDMAN DEFINED BENEFIT PENSION PLAN, Plaintiff,
v.
NATIONAL BENEFITS NETWORK, INC et al. Defendants.

No. 2:21-CV-00419-CCW

United States District Court, W.D. Pennsylvania

January 13, 2022

MEMORANDUM OPINION

CHRISTY CRISWELL WIEGAND, United States District Judge.

Before the Court is Plaintiff Max C. Feldman's (“Mr. Feldman”) Motion to Remand Case to State Court (“Motion to Remand”), ECF No. 17. For the reasons that follow, Mr. Feldman's motion will be DENIED.

I. Background

On February 22, 2021, Mr. Feldman, individually and as trustee on behalf of the Max C. Feldman Defined Pension Plan (“the Plan”), filed a Complaint in the Court of Common Pleas of Allegheny County, Pennsylvania, against Defendants^[1] National Benefits Network, Inc., Scott Ivol Financial Group, LLC, Scott C. Ivol, Massachusetts Mutual Life Insurance Company, Talcott Resolution Life and Annuity Insurance Company, Allianz Life Insurance Company of North America, Jackson National Life Insurance Company, Brighthouse Life Insurance Company, and Mony Life Insurance Company.

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Mr. Feldman alleges that Defendants intentionally failed to disclose and misrepresented certain material facts relating to the creation of and continued contributions to the Plan, which was established under Section 412(i) of the Internal Revenue Code. See, e.g., ECF No. 1-2. The Complaint alleges seven state law counts: Count I - Fraud and/or Constructive Fraud; Count II -Negligent Misrepresentation; Count III - Breach of Fiduciary Duty; Count IV - Negligence; Count V - Unjust Enrichment; Count VI - Money Had and Received; Count VII - Violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law.

Specifically, Mr. Feldman alleges that he sought the financial expertise of Bruce Ivol and Scott Ivol regarding his financial situation, investments, and retirement goals. ECF No. 1-2 ¶ 39. Mr. Feldman asserts that the Ivols, individually and on behalf of National Benefits Network, Inc. (and from 2016 on, Scott Ivol Financial Group, LLC) acted in a fiduciary role as his financial advisors and were trusted “not only with his money, but with his family's financial well-being.” ECF No. 1-2. Mr. Feldman contends that the Ivols represented certain benefits and features of the Plan, which ultimately led him to create the Plan. The Plan was funded through various annuities and life insurance during its existence from 2005 to 2018. Id. ¶¶ 42-48. Mr. Feldman further alleges that the Ivols knew of, but intentionally failed to disclose, numerous material facts with respect to the Plan, including exorbitant commissions and enhanced scrutiny from the IRS due to 412(i) plans being listed transactions and perceived as abusive tax shelters. Id. ¶ 49 (listing material facts). Mr. Feldman further asserts that Defendants Massachusetts Mutual Life Insurance Company, Talcott Resolution Life and Annuity Insurance Company, Allianz Life Insurance Company of North America, Jackson National Life Insurance Company, Brighthouse Life Insurance Company, and MONY Life Insurance Company (the “Insurer Defendants”), among other actions, knew of the Plan's features, facilitated the sale of insurance products to the Plan,

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had Bruce Ivol and Scott Ivol acting as agents in the sale of their life insurance products, and knew of and intentionally failed to disclose to certain material facts. Id. ¶¶ 51-73. Ultimately, Mr. Feldman was audited by the IRS and subject to penalties. Id. ¶¶ 74-77. Mr. Feldman alleges losses due to professional fees stemming from the IRS audit and termination of his Plan, adverse tax consequences, lost investment opportunities, administration costs associated with adoption and operation of the Plan, the cost of life insurance that he would not have purchased but for Defendants' misrepresentations and omissions as well as mental anguish from the failure of his investment, the tax consequences, and IRS audit. Id.

Defendants removed the action to federal court pursuant to 28 U.S.C. § 1441(a) on March 30, 2021. ECF No. 1 ¶¶ 7-8. Defendants assert federal question jurisdiction, see 28 U.S.C. § 1331, based on complete preemption by the Employee Retirement Income Security Act of 1974 (“ERISA”). Id.

Mr. Feldman timely moved to remand on the ground that Defendants have not satisfied their burden to establish that the claims in the Complaint are completely preempted by ERISA. See e.g., ECF Nos. 17 & 18.

II. Legal Standard

A district court has original jurisdiction over claims “arising under the Constitution, treaties or laws of the United States.” 28 U.S.C. § 1331. The federal statute at issue in this action is ERISA, which was enacted “to ensure the proper administration of pension and welfare plans, both during the years of the employee's active service and in his or her retirement years” by “protecting the financial security of plan participants and beneficiaries.” Nat'l Sec. Sys. v. Iola, 700 F.3d 65, 81 (3d Cir. 2012). Through ERISA, Congress established “detailed disclosure and reporting obligations for plans and imposes various participation, vesting, and funding requirements” as well standards of conduct for plan fiduciaries. Id. (citing 29 U.S.C. §§ 1021-86, 1101-14).

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To determine whether a claim “arises under” federal law and is therefore removable from state court by a defendant, the Court applies the “well-pleaded complaint rule.” See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987); see also Allstate Ins. Co. v. 65 Security Plan, 879 F.2d 90, 92-93 (3d Cir. 1989). Under the well-pleaded complaint rule, removal is proper only if a federal question is presented on the face of the plaintiff's properly pleaded complaint. Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 9-12 (1983). Thus, a federal defense to a plaintiff's state law cause of action, including a defense based on preemption, is typically insufficient to warrant removal to federal court by defendant. Dukes v. U.S. Healthcare, 57 F.3d 350, 353-54 (3d Cir. 1995).

However, the Supreme Court has recognized an exception to the well-pleaded complaint rule known as “complete preemption, ” which applies when Congress has “so completely pre-empt[ed] a particular area that any civil complaint raising this select group of claims is necessarily federal in character.” Dukes, 57 F.32 at 354 (citing Metropolitan Life Ins. Co., 481 U.S. at 63). Relevant in this case is the Supreme Court's determination that Congress intended complete preemption for state law causes of action that fit within the scope of ERISA's civil-enforcement provisions. Id.

As a result, state law causes of action in a complaint are completely preempted by ERISA and therefore removable to federal court only when (1) plaintiff could have brought his claim under ERISA § 502(a) (29 U.S.C. § 1132(a)), and (2) no other independent legal duty is implicated by a defendant's actions. Pascack Valley Hosp., Inc. v. Local 464A UFCW Welfare Reimbursement Plan, 388 F.3d 393, 400 (3d Cir. 2004) (citing Aetna Health Inc. v. Davila, 542 U.S. 200, 210 (2004)). “Because [the] test is conjunctive, a state-law cause of action is completely preempted

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only if both of its prongs are satisfied.” N.J. Carpenters & Tr. Thereof v. Tishman Const. Corp. of N.J., 760 F.3d 297, 303 (3d Cir. 2014).

Here, the narrow issue before the Court is whether the doctrine of complete preemption applies under ERISA § 502(a).^[2] See Estate of Maglioli v. All. HC Holdings LLC, Nos. 20-2833, 20-2834, 2021 U.S. App. LEXIS 31526, at *17 n.8 (3d Cir. Oct. 20, 2021). Although “a federal court may look beyond the face of the complaint to determine whether a plaintiff has artfully pleaded his suit so as to couch a federal claim in terms of state law, ” Pascack Valley Hosp., 388 F.3d at 400 (quoting Pryzbowski, 245 F.3d at 274), the burden of establishing removal jurisdiction rests with defendants. Dukes, 57 F.32 at 359. Any doubts as to jurisdiction upon removal “should be resolved in favor of remand.” Boyer v. Snap-on Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990) (quoting Steel Valley Auth. v. Union Switch & Signal Div., 809 F.2d 1006,...