Hansen v. Harper Excavating Inc.

• Decision Date: 13 April 2011
• Docket Number: No. 08–4089.,08–4089.
• Citation: 641 F.3d 1216
• Parties: Jeffrey HANSEN, an individual, Plaintiff–Appellant,v.HARPER EXCAVATING, INC., Defendant–Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

641 F.3d 1216

Jeffrey HANSEN, an individual, Plaintiff–Appellant,

v.HARPER EXCAVATING, INC., Defendant–Appellee.

No. 08–4089.

United States Court of Appeals, Tenth Circuit.

April 13, 2011.

April Hollingsworth of the Hollingsworth Law Office, LLC (Leslie G. Schaar of Hoole & King LC, with her on the brief), Salt Lake City, UT, for Plaintiff–Appellant.Ryan B. Hancey (Scott O. Mercer with him on the brief) of Kesler & Rust, Salt Lake City, UT, for Defendant–Appellee.Before TYMKOVICH, EBEL, and GORSUCH, Circuit Judges.EBEL, Circuit Judge.

This case requires us to address the preemptive scope of the Employee Retirement Income Security Act (“ERISA”), as well as to clarify the relationship between judicial estoppel and subject-matter jurisdiction. Jeffrey Hansen worked for Harper Excavating for six months beginning in 2003. During this time, he attempted to enroll in Harper's ERISA-regulated health insurance plan, but, unbeknownst to him, Harper never effectively enrolled him in the plan, although it did deduct plan “payments” from his paycheck. Shortly after he left the company, Hansen fell ill, and incurred thousands of dollars in medical expenses when he discovered that he did not actually have insurance through Harper.

Hansen sued in federal court under ERISA and won a substantial damages award. During discovery related to that suit, Hansen learned of other alleged behavior on the part of Harper that led him to file a lawsuit based entirely on state law against his former employer in state court in Utah. Harper removed that case to federal court. The district court denied remand, then dismissed the case. Exercising jurisdiction under 28 U.S.C. § 1291, we REVERSE and REMAND with instructions to remand the case to state court.

BACKGROUND¹

Jeffrey Hansen was hired by Harper Excavating in November 2003. When he was hired, he was told by Harper that employees were eligible to enroll in its health insurance plan after 90 days on the job. He completed the enrollment forms, which he assumed would be submitted once he had worked the requisite 90 days. In February 2004, Hansen learned that premiums were not being deducted from his pay. Harper's benefits coordinator, Stacy Henderson, told Hansen that his original paperwork had been lost, and had him fill out a new set of enrollment forms, which she sent to Regence BlueCross BlueShield of Utah (“BCBS”), Harper's insurance provider. Henderson also provided Hansen with the policy and group numbers of Harper's insurance policy in the event Hansen needed to use the insurance before his own enrollment card arrived. Harper began regularly deducting premium payments from Hansen's check, for coverage retroactive to February 1, 2004 (i.e. 90 days after he began working for the company). On April 28, 2004, Hansen left his employment with Harper.

In May 2004, Hansen went to the hospital with breathing problems. When he presented the group and policy numbers given to him by Henderson, he was informed that he had no coverage under Harper's plan. As was later revealed in discovery, Harper's contract with BCBS required employees to apply for coverage between 60 and 90 days after starting employment, rather than after 90 days, as Hansen had been told. His initial paperwork had never been submitted, and when Henderson submitted his second round of paperwork in March 2004, it was rejected by BCBS as untimely (which is to say, after the 60–90 day window had closed). Harper was notified of this rejection, and yet never informed Hansen that he was not covered and, moreover, continued to deduct “premium payments” from his paycheck for the remainder of his tenure with the company. In June 2004, Harper sent Hansen a check for $279.91 in refunded payments, as well as a copy of the notification of rejection for Hansen it had received from BCBS in March 2004.

Because he was unable to obtain medical care, Hansen's condition worsened; he currently suffers from spinal cord damage and is blind in one eye due to glaucoma. On November 15, 2005, Hansen filed suit against Harper in the United States District Court for the District of Utah, in case number 05–cv–00940. This federal lawsuit sought damages based on three alleged violations of ERISA committed by Harper. On May 8, 2007, the district court granted summary judgment in Hansen's favor on liability. Hansen v. Harper Excavating, Inc., No. 2:05–cv–940–DAK, 2007 WL 1378561, Mem. Decision and Order at 9, Doc. 99 (D.Utah. May 8, 2007) [ Hansen I ].² In March 2008, after a hearing on damages, the district court awarded Hansen a total of $57,182.33 to recompense his medical expenses, and $102,056.88 in attorney's fees and costs. Id., Doc. 127 at 6–7. Harper did not appeal this award.

During discovery in the federal lawsuit, Hansen learned of the actions of Henderson and Harper noted above. On June 6, 2007 (which is to say, after winning summary judgment in Hansen I but before the award of damages), Hansen filed the instant lawsuit, Hansen II, in the Third Judicial District Court of Salt Lake County, Utah. This suit alleged five causes of action, all brought under Utah state law: (1) fraudulent nondisclosure; (2) negligent misrepresentation; (3) conversion; (4) breach of contract—good faith and fair dealing; and (5) special damages. On August 12, 2007, Harper filed a Notice of Removal of the state-court case with the federal district court, arguing that Hansen's claims were completely preempted by ERISA, and thus federal jurisdiction over the claims existed; shortly thereafter, Harper also filed a motion to dismiss Hansen's claims. Hansen filed an objection to removal (which the district court treated as a motion to remand), a memorandum in opposition to dismissal, and sought leave to amend his complaint to add Henderson as a defendant, as well as to add claims for negligent supervision and vicarious liability against Harper. On April 28, 2008, the district court issued an order denying Hansen's motion to remand, dismissing the case on the basis of res judicata, and denying Hansen's motion to amend his complaint as moot.

We conclude that Hansen's claims are not completely preempted by ERISA and the district court erred in denying Hansen's Request to Remand. Accordingly, we also vacate the district court order dismissing Hansen's complaint on the basis of res judicata.

DISCUSSION

The district court denied Hansen's request to remand the case to state court, holding that his claims are completely preempted by ERISA. We review this decision de novo. Felix v. Lucent Techs., Inc., 387 F.3d 1146, 1153 (10th Cir.2004) (“We review de novo the question of whether Plaintiffs' state law claims are completely preempted.”).

I. Hansen's Claims Are Not Completely Preempted by ERISA

The jurisdiction of the federal courts is limited by Article III of the Constitution and by statutes passed by Congress. A case that is filed in state court may be removed from state to federal court at the election of the defendant, but only if it is one “of which the district courts of the United States have original jurisdiction,” which is to say if federal subject-matter jurisdiction would exist over the claim. 28 U.S.C. § 1441(a). Under the well-pleaded complaint rule, in order to invoke federal question jurisdiction under 28 U.S.C. § 1331 and thus to be removable on that basis, a federal question must appear on the face of the plaintiff's complaint; that the defendant possesses a federal defense is not sufficient to invoke federal question jurisdiction. Felix, 387 F.3d at 1154. Generally, the plaintiff is the master of his complaint, and if he files in a state court pleading only state-law causes of action, the case is not removable to federal court based on federal question jurisdiction. Id. (citing Caterpillar, Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987)).

The Supreme Court, however, has recognized an exception (or “independent corollary”) to the well-pleaded complaint rule for a narrow category of state-law claims that can independently support federal jurisdiction and removal. Felix, 387 F.3d at 1154. These claims are “completely preempted” because they fall within the scope of federal statutes intended by Congress completely to displace all state law on the given issue and comprehensively to regulate the area. Id. at 1154–55. Unlike ordinary preemption, which is a federal defense to a state-law claim under the Supremacy Clause of the Constitution that does not render a state-law claim removable to federal court, complete preemption makes a state-law claim “purely a creature of federal law,” and thus removable from state to federal court from the outset. See id. (quoting Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 23–24, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)).

The Supreme Court has recognized only a few federal statutes that so pervasively regulate their respective areas that they have complete preemptive force; ERISA is one. See Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 67, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). Section 502(a) of ERISA ³ authorizes civil actions “(1) by a participant or beneficiary ... (B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan.” ERISA § 502(a)(1)(B). Under Taylor, a state-law suit that falls within the scope of this section may be removed to federal court via complete preemption.

As to when a claim falls within the scope of ERISA § 502(a), the Supreme Court in Aetna Health Inc. v. Davila held:

[W]here the individual is entitled to such [claimed] coverage only because of the terms of an ERISA-regulated employee benefit plan, and where no legal duty (state or federal) independent of ERISA or the plan terms is violated, then the suit falls “within the scope of” ERISA § 502(a)(1)(B). In other words, if an individual, at some point in time, could have...