Lawrence v. Nation, CASE NO. 2:16-CV-61-WKW [WO]
| Decision Date | 14 June 2016 |
| Docket Number | CASE NO. 2:16-CV-61-WKW [WO] |
| Parties | NANCY LAWRENCE, et al., Plaintiffs, v. ERIC M. NATION, et al., Defendants. |
| Court | U.S. District Court — Middle District of Alabama |
On April 13, 2016, the Magistrate Judge filed a Recommendation in this case. (Doc. # 28.) Defendant Guardian Life Insurance Company of America ("Guardian") filed Objections (Doc. # 29), in which Defendant Eric M. Nation ("Nation") joined (Doc. # 30). Plaintiffs Nancy Lawrence ("Lawrence") and Freddrick A. Hardy Sr. ("Hardy") filed a Response to Defendants' Objections (Doc. # 33), and Defendants filed a Reply (Doc. # 34). Plaintiffs then sought and were granted leave to file a Surreply. (Docs. # 35, 39, and 40.) Upon careful consideration, Defendants' Objections will be overruled, the Recommendation will be adopted, and Plaintiffs' Motion to Remand (Doc. # 15) will be granted. All other pending motions must be denied for lack of subject-matter jurisdiction.
Where a party makes objections to the recommendation of the magistrate judge, the portions of the recommendation to which objections are made are reviewed de novo. 28 U.S.C. § 636(b)(1).
Federal courts have a strict duty to exercise the jurisdiction conferred on them by Congress. Quackenbush v. Allstate Ins. Co., 517 U.S. 706, 716 (1996). At the same time, "[f]ederal courts are courts of limited jurisdiction." Burns v. Windsor Ins. Co., 31 F.3d 1092, 1095 (11th Cir. 1994). In removal actions, federal courts must strictly construe removal statutes, resolve all doubts in favor of remand, and place the burden of establishing federal jurisdiction on the removing party. See Miedema v. Maytag Corp., 450 F.3d 1322, 1328-30 (11th Cir. 2006).
This action arises from a dispute over insurance benefits. The relevant facts and procedural history will first be discussed.
Kingdom Now Movement ("Kingdom Now") is a faith-based organization incorporated under the laws of Alabama. Its mission is to foster a community of pastors, leaders, and other individuals who will work together to promote the movement's religious philosophy. The Kingdom Now network includes a number of affiliate churches.
Guardian issued a group life insurance plan to Kingdom Now. The group plan, by its terms, only allowed Kingdom Now employees to purchase coverage. According to Lawrence and Hardy, Guardian, acting through its agent Nation, approached affiliate churches within the Kingdom Now network seeking to sell insurance policies under the Kingdom Now group plan. Lawrence and Hardy allege that Nation represented to church members that, because Kingdom Now is a faith-based organization, Guardian could offer life insurance policies under the group plan to all church members, including those who were not traditional paid employees of Kingdom Now. Lawrence and Hardy both applied for life insurance policies based on these representations.
Lawrence purchased life insurance policies for her mother and father, neither of whom was a paid employee of Kingdom now. Lawrence was listed as the beneficiary under both plans. She alleges that she made timely premium payments on both policies, and that the policies were in full force and effect during the time periods relevant to this action. When Lawrence's mother and father died, Lawrence made claims for death benefits under each policy. Guardian denied these claims because the insureds were not paid employees of Kingdom Now.
Hardy similarly purchased a life insurance policy for his grandfather, who was not a paid Kingdom Now employee. Hardy was listed as a beneficiary under the plan. He contends that he made timely premium payments on the policy, and thatthe policy was in full force and effect during time periods relevant to this suit. When Hardy's grandfather died, Hardy made a claim for benefits under the plan. Guardian denied the claim, reasoning that Hardy was not entitled to benefits under the plan because the insured was not a paid employee of Kingdom Now. Guardian has not paid Lawrence or Hardy any benefits under these policies.
Plaintiffs filed this action in the Circuit Court of Montgomery County. Their complaint (Doc. # 1-2) raises nine state-law causes of action: (1) fraudulent misrepresentation; (2) fraudulent suppression; (3) negligent or wanton misrepresentation and suppression; (4) negligent or wanton hiring or training; (5) negligent or wanton procurement; (6) conversion; (7) breach of contract; (8) bad faith; and (9) failure to investigate. They seek compensatory and punitive damages.
Guardian filed a notice of removal, in which Nation joined. They contend that the insurance policies in question are governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001, et seq. According to Guardian and Nation, the court has federal question subject-matter jurisdiction over Plaintiffs' claims because ERISA completely preempts those claims. See 28 U.S.C. § 1331.
In response to the notice of removal, Plaintiffs filed a motion to remand. (Doc. # 15.) Before responding to the motion to remand, Guardian filed a motion for summary judgment. (Doc. # 18.) Plaintiffs filed a motion to strike the motion forsummary judgment or, in the alternative, to hold the motion in abeyance until a ruling could be made on the motion to remand. (Doc. # 20.) Plaintiffs also sought an expedited ruling on the motion to strike. (Doc. # 21.) After the parties briefed these related motions, the Magistrate Judge entered a Recommendation (Doc. # 28) that Plaintiffs' motion to remand be granted.
Guardian filed objections to the Recommendation, which included a motion for jurisdictional discovery. (Doc. # 29.) Guardian then filed an amended motion for jurisdictional discovery. (Doc. # 32.) The issues raised in the objections and motions for jurisdictional discovery have been fully briefed. (See Docs. # 33, 34, 35, and 40.) Guardian requested oral argument (Doc. # 36), but this matter is considered submitted on the briefing and will be decided without oral argument.
The Magistrate Judge found that this action is due to be remanded to the Circuit Court of Montgomery County for two reasons. First, the Kingdom Now insurance plan constitutes a "church plan" such that it is exempt from the ERISA scheme. Second, Defendants failed to carry their burden of showing that Lawrence and Hardy have ERISA standing. Defendants object to both of these findings, arguing that Kingdom Now is not a church within the meaning of ERISA, and that Plaintiffs are beneficiaries with ERISA standing.
The principles governing ERISA preemption generally will first be outlined. Then the issue of whether Kingdom Now's plan constitutes a church plan will be considered. Finally, the issue of Plaintiffs' ERISA standing will be addressed.
Congress enacted ERISA with the overarching goals of expanding employee benefit plans and protecting participants in those plans. 29 U.S.C. § 1001. By implementing a comprehensive system of benefits plan regulation, ERISA ensures that benefit plan administration will be uniform across the nation. See Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004). The uniformity of ERISA's system is due in large part to its preemption of most state laws relating to employee benefits plans. See id. The statutory scheme allows for two forms of preemption: defensive and complete.
Defensive preemption is a creature of ERISA's express preemption provision. 29 U.S.C. § 1144. That portion of the statute provides preemption as an affirmative defense to certain state-law claims. Complete preemption arises from the comprehensive nature of ERISA's remedial scheme for claims of loss or denial of benefits. See 29 U.S.C. § 1132. Because ERISA's remedial provision "comprehensively occupies" this field of law, any state-law claims that seek relief available under that provision are necessarily federal in nature. Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1211-12 (11th Cir. 1999).
Whether Plaintiffs' state-law claims are subject to defensive or complete preemption is central to whether the court has subject-matter jurisdiction over this action. To invoke federal question jurisdiction, the complaint must raise a claim that arises under federal law. 28 U.S.C. § 1331. That the defense to a claim is federal in nature generally does not evidence a federal question. Franchise Tax Bd. v. Constr. Laborers Vacation Tr., 463 U.S. 1, 11 (1983) (). Accordingly, under this rule, defensive ERISA preemption of a plaintiff's claims is insufficient to invoke federal jurisdiction under § 1331. Butero, 174 F.3d at 1212. Where a plaintiff's claim falls within the remedial scheme contemplated by 29 U.S.C. § 1132, however, such that it is subject to complete ERISA preemption, it is entirely federal in nature and thus invokes federal question jurisdiction. Id. at 1211-12.
Because federal question jurisdiction is the only basis under which this action is properly removable, the motion to remand turns on whether ERISA completely preempts Plaintiffs' claims. Their claims are subject to complete preemption only if they seek relief that is available under 29 U.S.C. § 1132(a). Butero, 174 F.3d at 1212. To show that Plaintiffs' claims are completely preempted, and thus to establish the propriety of removal, Defendants bear the burden of satisfying four elements: (1) that there is a relevant ERISA plan; (2) that Plaintiffs have standing to sue under ERISA; (3) that Guardian is an ERISA entity; and (4) that Plaintiffs'state law claims seek compensatory relief akin to the relief available under § 1132(a). Id. The Magistrate Judge found that Defendants failed to carry their burden as to two of these elements.
The Magistrate Judge first found that Defendants failed to carry their burden as to the...
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