Jacob v. SmithKline Beecham

• Decision Date: 17 June 1993
• Docket Number: Civ. A. No. 92-0835.
• Citation: 824 F. Supp. 552
• Parties: Leonard S. JACOB, M.D., Ph.D., Plaintiff, v. SMITHKLINE BEECHAM, Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

824 F. Supp. 552

Leonard S. JACOB, M.D., Ph.D., Plaintiff, v. SMITHKLINE BEECHAM¹, Defendant.

Civ. A. No. 92-0835.

United States District Court, E.D. Pennsylvania.

June 17, 1993.

John W. Morris, Philadelphia, PA, for plaintiff.

Alan D. Berkowitz and Margaret A. McCausland, Dechert, Price & Rhoads, Philadelphia, PA, for defendant.

MEMORANDUM

ROBRENO, District Judge.

Defendant removed this case to this Court from the Philadelphia Court of Common Pleas. In his state court complaint, plaintiff had averred, in part, that defendant, plaintiff's former employer, improperly terminated certain health benefits which defendant was contractually obligated to provide to plaintiff. Defendant contends that the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., preempts plaintiff's contract claim and vests federal question jurisdiction on this Court. Plaintiff disagrees and wants the case remanded to state court.

Consideration of these issues compels the Court into the labyrinthian world of ERISA preemption jurisprudence. For the reasons set forth below, the Court finds that ERISA does not completely preempt plaintiff's claim, so that the motion to remand will be granted.

I. BACKGROUND

Plaintiff Leonard S. Jacob, M.D., Ph.D. ("Jacob") was employed by defendant SmithKline Beecham ("SmithKline") from 1980 to 1988. In the fall of 1988, SmithKline, in connection with corporate restructuring, decided to eliminate Jacob's position. On October 3, 1988, SmithKline and Jacob entered into a four page written agreement ("the Agreement"), which set forth the terms of Jacob's severance package. The Agreement included a provision relating to the post-termination continuation of Jacob's health insurance.

On October 15, 1990, Jacob commenced an action against SmithKline in the Philadelphia Court of Common Pleas. Jacob's one count complaint alleged, in vague terms, that he either was or should have been offered a certain amount of shares in an employee incentive plan² but that SmithKline wrongfully denied him these shares or their value.

Immediately after his termination, Jacob had obtained health insurance through SmithKline. Jacob became reemployed by another company in August of 1990, and obtained health insurance through his new employer, as well. SmithKline became aware of Jacob's reemployment in January of 1991, while the state court action involving the "Share Value Plan" was still pending. Jacob alleges herein that SmithKline, upon learning of Jacob's reemployment, wrongfully caused the termination of Jacob's access to the health insurance benefits Jacob was obtaining through SmithKline. SmithKline maintains that termination was permitted under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"), 29 U.S.C. §§ 1161-1168.

On January 10, 1992, Jacob filed a motion for leave to amend his complaint in state court. The proposed amended complaint attached to the motion sought leave to add a second count based on SmithKline's termination of Jacob's health benefits. On February 1, 1992, SmithKline removed the action to this Court.³ In its removal petition, SmithKline contended that Count II of the proposed amended complaint was preempted by ERISA, thereby creating federal question jurisdiction.

This case was reassigned to my docket on September 11, 1992. On October 6, 1992, the Court held a status conference with counsel for the parties. At that time, both parties agreed that removal was timely and that Count II was preempted by ERISA. Since that time, Jacob changed his mind on the question of ERISA preemption. Jacob now seeks remand of this action, contending that this Court has no jurisdiction to hear this claim because Count II is not preempted by ERISA.⁴

II. DISCUSSION

Under 28 U.S.C. § 1441, a defendant may remove any state court action over which the federal courts have "original jurisdiction." Generally, removal is proper only if plaintiff's claim establishes the basis for original jurisdiction. This long established rule, commonly referred to as the "well pleaded complaint" rule, precludes a defendant from removing a complaint grounded in state law if the only basis for federal jurisdiction is a defense arising out of federal law. Taylor v. Anderson, 234 U.S. 74, 75-6, 34 S.Ct. 724, 724, 58 L.Ed. 1218 (1914). The rule is grounded in federalism concerns, Ethridge v. Harbor House Restaurant, 861 F.2d 1389, 1395 (9th Cir.1988), recognizing that a plaintiff, as "master of the complaint," can choose to avoid a federal forum by "exclusive reliance on state law." Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987).

The well pleaded complaint rule applies with full force even when the defense involved is one of federal preemption; i.e. federal courts are without jurisdiction to adjudicate a state law claim even if the defendant argues that the claim is preempted by federal law. Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 14, 103 S.Ct. 2841, 2848, 77 L.Ed.2d 420 (1983). Of course, the well pleaded complaint rule does not state that such a defense is barred. To the contrary, the well pleaded complaint rule allows for preemption determinations to be made by state courts, recognizing that state courts are perfectly competent to evaluate whether a state claim is federally preempted. See Lister v. Stark, 890 F.2d 941, 943, n. 1 (7th Cir.1989), cert. denied, 498 U.S. 1011, 111 S.Ct. 579, 112 L.Ed.2d 584 (1990).

Application of the well pleaded complaint rule, however, is subject to the doctrine of "complete preemption." First approved by the United States Supreme Court in Avco Corp. v. Aero Lodge No. 735, Int'l Ass'n of Machinists & Aerospace Workers, 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968), the complete preemption rule allows a defendant to remove when plaintiff's ostensibly state law claim arises out of an area of law in which Congress has manifested an intent to "occupy the field." In such a situation, it is said that plaintiff's cause of action has been "completely preempted" because it is really a federal claim dressed in state law clothing. The state law claim, accordingly, must be "recharacterized" as federal. Railway Labor Executives Association v. Pittsburgh & Lake Erie Railroad Co., 858 F.2d 936, 942 (3d Cir.1988). Allowing removal in this context is consistent with the policy underlying the well pleaded complaint rule since plaintiff's state law complaint is, in reality, federal in nature.⁵

Applying the well pleaded complaint rule and its complete preemption exception, there are two circumstances under which removal of Jacob's case is permissible. First, removal is proper if Jacob's claim "relies upon a federal law ground as a ground for recovery." Allstate Insurance Co. v. 65 Secur. Plan, 879 F.2d 90, 93 (3d Cir.1989). If not, removal is appropriate only if the complaint "makes a claim that is `completely preempted.'" Id.; see also Lister, 890 F.2d at 944.

Count II of Jacob's complaint stems from paragraph 6 of the agreement. In relevant part, paragraph 6 states as follows:

Health and dental insurance coverage will be continued for three months following termination (to July 30, 1989). SmithKline Beckman health and dental benefits may be continued beyond that point for a period of 18 months through individual arrangements with Blue Cross and Aetna. A special payment of $8,000 will be provided to you on April 30, 1989 to cover costs of health and dental insurance through January 31, 1991. This payment includes gross up for taxes.

In turn, Count II states in relevant part:

20. As part of the separation agreement ..., in Paragraph 6 thereof, it was further agreed that Plaintiff would be entitled to continued health and dental benefits through January 31, 1991.

21. The aforesaid agreement was specially negotiated and important to the Plaintiff due to the fact that, as known to the Defendant, Plaintiff is the parent of two disabled children who require extensive medical care.

22. Following the institution of this lawsuit, Defendant contacted the carriers providing coverage to Plaintiff and his family and instructed them to retroactively cancel Plaintiff's coverage. Despite being informed of the financial and emotional distress caused to Plaintiff, Defendant refused to reinstate the coverage.

Amended Complaint (emphasis added).⁶ Removal would clearly be proper if Jacob's amended complaint stated, even implicitly, that SmithKline's act of terminating Jacob's health insurance was violative of ERISA or COBRA.⁷ The amended complaint, however, makes no such reference, and instead appears predicated on SmithKline's alleged breach of the Agreement. Additionally, while Jacob may have been equivocal on the issue at one point during these proceedings, it is now clear that Jacob intends to proceed on a breach of contract theory. Since Jacob does not raise a federal cause of action, the question becomes whether Jacob's state law claim should be "recharacterized" as an ERISA claim under the complete preemption doctrine.

In the ERISA context, only claims that fall within the broad scope of ERISA's civil enforcement provision are completely preempted. Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987); Richmond v. American Systems Corporation, 792 F.Supp. 449, 456 (E.D.Va.1992). Cf. Goehl v. Mellon Bank, 92-2547, 1993 U.S.Dist. LEXIS 5123 (E.D.Pa. April 21, 1993) (to find complete preemption, "the statute relied upon by the defendant as preemptive must contain civil enforcement provisions within the scope of which the plaintiff's state claim falls," quoting Railway Labor, supra (brackets in Goehl)). ERISA's relevant civil enforcement provision, 29 U.S.C. § 1132(a)(1)(B), provides:

A civil action may be brought—

(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

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