Hester v. Whatever It Takes
| Decision Date | 06 January 2022 |
| Docket Number | Civil Action 3:21-CV-578-RGJ |
| Court | U.S. District Court — Western District of Kentucky |
| Parties | KENNETH HESTER Plaintiff v. WHATEVER IT TAKES, ET AL Defendants |
Defendants Whatever It Takes Transmissions & Parts, Inc. (“WIT”), Whatever It Takes Transmissions & Parts, Inc. Deferred Compensation Plan (the “Plan”), and Rodney Peters (“Peters”) (collectively, “Defendants”), move to dismiss under Fed.R.Civ.P. 12(b)(6). [DE 11]. Plaintiff, Kenneth Hester (“Hester”), moves to remand this action to state court. [DE 12]. Briefing is complete and the matters are ripe. [DE 14; DE 15; DE 16]. For the reasons below Hester's Motion to Remand [DE 12] is GRANTED, Hester's Request for Attorney's Fees and Costs is DENIED [DE 12]; and WIT's Motion to Dismiss [DE 11] is DENIED AS MOOT.
Defendant WIT established the Plan to be effective January 1, 2005. [DE 1-2 at 81]. The Plan states that it is “a nonqualified deferred compensation plan . . . designed to provide specific benefits to a select group of management and highly compensated employees who contribute materially to the continued growth, development, and future business success of [WIT], and to provide flexibility to the Employer in attracting and retaining highly skilled executive employees.” [Id.]. Section 3 of the Plan provides that “[a]mounts payable under the Plan are not funded for tax purposes nor for purposes of [ERISA], and are paid exclusively from the general assets of the employer.” [Id. at 82]. Section 7 of the Plan provides that “[t]he Plan Administrator and the claimant shall follow the claims procedures set forth in Department of Labor Regulations §2560.503-1.” [Id. at 86]. Section 10 of the Plan states that “the provisions of this Plan are construed, administered, and enforced in accordance with the laws of Kentucky, to the extent such laws are not superseded by Federal law.” [Id. at 87]. Section 11 of the Plan states that “the Plan is intended to be exempt from otherwise applicable provisions of Title I of ERISA, and any ambiguities in construction shall be resolved in favor of an interpretation which will effectuate such intention.” [Id.].
Defendants state that the Plan was registered as a Top Hat plan with the United States Department of Labor in November 2005. [DE 15 at 155]. Defendants also state that the Plan has had no more than five participants including Hester since its inception, and that WIT employed around 630 employees during 2016, 2017, and 2018. [Id.]. Defendants contend that the “average compensation of plan participants was more than four (4) times that of non-participants during the years 2016-2018.” [Id.]. Defendants state that the “Plan sets forth the intended benefits (deferred compensation), the class of beneficiaries (selected management or highly compensated employees of WIT), the source of financing (the general assets of WIT, []), and the procedures for receiving benefits ([]; Department of Labor Regulations § 2560.503-1).” [Id. at 154-55].
Hester states that he was and “continues to be a participant in the Plan due to the fact that his Plan benefit has not been distributed to him, ” and that he was “a key employee of [WIT].” [DE 1-3 at 18-19; DE 12 at 124]. Defendants describe Hester's position as “CEO of WIT, ” the “highest ranking employee in the Company, ” and a “key employee who could participate in the plan, along with four other key employees.” [DE 15 at 154.] Defendants assert that “‘[a]ny management or other key employee of WIT' who was designated by the board as eligible could participate in the Plan.” [Id.].
Hester states that he was terminated from WIT “on August 5, 2018 in conjunction with the sale of his ownership interest in the company.” [DE 1-3 at 18-19]. After his termination, Hester requested payout of benefits under the Plan on August 31, 2020. [DE 1-3 at 14; DE 15 at 155]. Hester's counsel wrote to the Plan Administrator on December 9, 2020, appealing the denial of his claim for benefits, and that the Plan Administrator Counsel responded the same day, telling him that he had “forfeited any right to payment under the deferred compensation plan when he breached his fiduciary duty to WIT.” [DE 15 at 155-56]. Defendants assert they advised Hester that “he had the right to bring an action under Section 502(a) of ERISA.” [Id. at 156].
On August 12, 2021, Hester sued Defendants in state court, alleging three claims, one for “Benefits Due Under the Plan, ” and two separate claims for “Breach of Fiduciary Duty” related to the Plan. [DE 1-3 at 21-23; DE 11-1 at 69]. On September 17, 2021, Defendants removed to federal court. [DE 1]. On September 24, 2021, Defendants moved to dismiss under Fed.R.Civ.P. 12(b)(6). [DE 11]. On October 4, 2021, Hester moved to remand to state court. [DE 12].
Hester's Motion to Remand challenges this court's jurisdiction. As a result, the Court must first consider the question of jurisdiction. See Steel Co. v. Citizens for Better Env't, 523 U.S. 83, 94 (1998). When considering a motion to remand, the Court looks to “whether the action was properly removed in the first place.” Ahearn v. Charter Twp. of Bloomfield, 100 F.3d 451, 453 (6th Cir. 1996). Defendants would have a right to remove this case if Hester “could have brought it in federal district court originally . . . as a civil action arising under the Constitution, laws or treaties of the United States.” Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S.308, 312 (2005) (citing 28 U.S.C. §§ 1331, 1441(a)) (internal quotation marks and citations omitted). In most cases, a party invokes federal-question jurisdiction by pleading a cause of action created through federal law. Id. “To determine whether a case arises federal law within the meaning of § 1331, the Court must ascertain if a federal cause of action would appear on the face of a well-pleaded complaint.” Kentucky Fair Plan v. Kobe, No. CIV.A. 1:99-CV-5-R, 1999 WL 33603121, at *1 (W.D. Ky. Aug. 25, 1999); see also Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 690 (2006) (quoting Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27-28 (1983)). “Under this rule, a federal question must appear on the face of the complaint rather than as part of a defense, even if a federal-law defense is anticipated.” Chase Bank USA, N.A. v. City of Cleveland, 695 F.3d 548, 554 (6th Cir. 2012).
The Supreme Court has created a limited exception to the well-pleaded complaint rule: the complete preemption doctrine. Gentek Bldg. Prod., Inc. v. Sherwin-Williams Co., 491 F.3d 320, 325 (6th Cir. 2007). Where Congress “intends that a federal statute should completely preempt an area of state law, ” state claims in the same area are “presumed to allege a claim arising under federal law” and may be removed to federal court, even where there is no federal question on the face of the complaint. Id. ERISA is one such statutory scheme. Aetna Health Inc. v. Davila, 542 U.S. 200, 207 (2004). The party seeking removal bears the burden of showing that federal jurisdiction exists. See Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 871 (6th Cir. 2000). “All doubts as to the propriety of removal are resolved in favor of remand.” Coyne v. Am. Tobacco Co., 183 F.3d 488, 493 (6th Cir. 1999). If the Court lacks original subject matter jurisdiction over a removed action, it must remand that action to state court. 28 U.S.C. § 1447(c).
Hester argues that his state law claims should be remanded to state court because the Plan is a non-qualified deferred compensation bonus plan not subject to the provisions of ERISA. [DE 12 at 123-25]. Defendants argue that Hester's state-law causes of action are completely preempted by ERISA and therefore removable, because the Plan is a Top Hat plan, and Hester's claims are for benefits due and breaches of fiduciary duty related to the Plan. [DE 1 at 2-4].
Hester also requests attorney's fees and costs incurred in conjunction with his Motion for Remand. [DE 12 at 129].
The Court first considers whether it has jurisdiction to hear this case. In considering whether it has subject matter jurisdiction, the Court looks at whether Hester's claims are subject to preemption. There are two types of ERISA preemption: (1) “complete preemption, ” a subject-matter “jurisdictional doctrine” that applies to disputes arising from removal, Lowe v. Lincoln Nat'l Life Ins. Co., 821 Fed.Appx. 489, 491 (6th Cir. 2020); and (2) “express preemption, ” related to a claim's substantive merit (as opposed to subject-matter jurisdiction), that “does not provide a basis for removal [and] creates only a traditional preemption defense.” Hogan v. Jacobson, 823 F.3d 872, 879 (6th Cir. 2016). If Hester's causes of action are subject to complete preemption, this Court has subject matter jurisdiction, and Hester's motion to remand must be denied.
Under ERISA, “a claim is completely pre-empted . . . if the state law claim could be brought pursuant to ERISA's enforcement provision, [29 U.S.C.] § 1132(a)(1)(B).” Harvey v. Life Ins. Co. of N Am., 404 F.Supp.2d 969, 973 (E.D. Ky. 2005) (citing Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65-67 (1987)). A state claim falls within the scope of ERISA's enforcement provision if “(1) the plaintiff complains about the denial of benefits to which he is entitled only because of the terms of an ERISA-regulated employee benefit plan; and (2) the plaintiff does not allege the violation of any legal duty (state or federal) independent of ERISA or the plan terms.” Gardner v. Heartland Indus. Partners, LP, 715 F.3d 609, 613 (6th Cir. 2013) (citing Aetna Health Inc., 542...
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