Marriage of Nasca v. Peoplesoft

• Decision Date: 23 August 1999
• Docket Number: No. C 97-4639 VRW.,C 97-4639 VRW.
• Court: U.S. District Court — Northern District of California
• Parties: In re the MARRIAGE OF NASCA, Peter Nasca & Denise Nasca, Plaintiffs v. PEOPLESOFT, Defendant.

87 F.Supp.2d 967

In re the MARRIAGE OF NASCA, Peter Nasca & Denise Nasca, Plaintiffs v. PEOPLESOFT, Defendant.

No. C 97-4639 VRW.

United States District Court, N.D. California.

August 23, 1999.

Ann Riley, Law Offices of Terence Daniel Doyle, Danville, CA, for Peter Nasca, Plaintiff.

Karen Johnson, Johnson & Alexander, Walnut Creek, CA, for Denise Nasca, Plaintiff.

James M. Nelson, Diepenbrock Wulff Plant & Hannegan, Sacramento, CA, for Peoplesoft, Defendant.

ORDER

WALKER, District Judge.

This action originated in 1994, when plaintiff Peter Nasca filed for the dissolution of his marriage to plaintiff Denise Nasca in Contra Costa Superior Court. California Family Code § 2337(c)(6)(A) requires that a party's retirement or pension plan be joined as a party to a divorce proceeding. On December 10, 1997, plaintiffs joined Peter Nasca's employer, PeopleSoft, as a party pursuant to section 2337. PeopleSoft manages Mr. Nasca's retirement plan, which is regulated by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA").

On December 18, 1997, defendant removed the action to this court. On December 23, 1997, defendant filed two motions. The first sought to sever the pension joinder issue from the divorce action and remand the divorce action to state court. The second motion sought dismissal of PeopleSoft as a party pursuant to FRCP 12(b)(6) based on ERISA preemption. On January 7, 1998, plaintiffs filed a motion to remand the entire case to state court.

The matter was referred to Magistrate Judge James Larson, who heard all three motions on January 28, 1998. Magistrate Judge Larson denied both of defendant's motions and granted plaintiffs' motion. He also awarded to plaintiff attorney fees related to the removal.

On February 27, 1998, defendant appealed both the fee award order and the order regarding the substantive motions to the Ninth Circuit. The Department of Labor filed an amicus curiae brief in support of PeopleSoft's appeal. On January 17, 1999 on its own motion, the Ninth Circuit found that it did not have jurisdiction to hear the case because the parties had not followed the procedures necessary to consent to the jurisdiction of a magistrate judge. See Nasca v. Peoplesoft, 160 F.3d 578 (9th Cir.1999). The Ninth Circuit therefore remanded the case to this court for assignment to an Article III judge.

I

Jurisdiction in this case is controlled by ERISA. Congress enacted ERISA in 1974 to provide minimum standards to "ensure the continued well-being and security of millions of employees and their dependents" who rely upon retirement plans. H.R.Conf.Rep. No. 93-1280, at 7 (1974). One original protection, codified at 29 U.S.C. § 1056(d), prohibited the alienation or assignment of pension benefits. As first enacted, the anti-alienation provision afforded no way for non-employee spouses to recover pension benefits upon the death of the employee spouse or upon divorce.

In 1984, Congress amended ERISA with the Retirement Equity Act ("REA"), which created an exception to the anti-alienation clause permitting ERISA beneficiaries to direct their ERISA benefits to an alternate payee, defined as a spouse, former spouse, child or other dependent. See 29 U.S.C. § 1056(d)(3)(k). Under this procedure, a beneficiary or alternate payee requests the change by submitting a Domestic Relations Order ("DRO"), usually issued by a state court, to the plan administrator. The plan administrator then reviews the DRO to determine whether the DRO meets the requirements for a Qualified Domestic Relations Order ("QDRO") described in 29 U.S.C. § 1056(d)(3)(B). These requirements primarily ensure that the payee designated by the DRO is a legitimate alternate payee and that the DRO does not increase the payment burden on the plan or mandate the assignment of benefits previously assigned by another QDRO. If the plan administrator determines that the DRO is indeed a QDRO, he will then direct payment to the alternate payee. If the plan administrator determines that the DRO does not meet the requirements of a QDRO, the beneficiary or alternate payee may appeal the plan administrator's decision to a "court of competent jurisdiction" under 29 U.S.C. § 1056(d)(3)(H)(i).

29 U.S.C. § 1132(a) creates two relevant causes of action, one which has exclusive federal jurisdiction and one which has concurrent jurisdiction. Section 1132(a)(1)(B) provides that:

[a] civil action may be brought by a participant or beneficiary 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 * * *.

And, section 1132(e)(1) grants concurrent jurisdiction to state and federal courts to decide matters brought under this provision.

Alternatively, a litigant may bring an action under 29 U.S.C. § 1132(a)(3).

A civil action may be brought by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or terms of the plan.

Federal district courts have exclusive jurisdiction of actions brought under this section. See 29 U.S.C. § 1132(e)(1).

The issue before the court concerns the application of these provisions in light of plaintiffs' motion to remand. In opposing a motion to remand, the defendant carries the burden of establishing that removal was proper. See Westinghouse Elec. Corp. v. Newman & Holtzinger, P.C., 992 F.2d 932, 934 (9th Cir.1993). The removal statute is strictly construed against removal jurisdiction. See Gaus v. Miles, 980 F.2d 564, 566 (9th Cir.1992). In areas of law that are traditionally fields of state regulation, claims are addressed "with the starting presumption that Congress did not intend to supplant state law." New York Conf. of Blue Cross v. Travelers Ins. Co., 514 U.S. 645, 655, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995).

Where federal jurisdiction is premised on the existence of a federal question, removal is proper only (1) where a federal question appears on the face of the plaintiff's well-pleaded complaint or (2) where federal law so completely preempts the plaintiff's state law cause of action that the complaint necessarily arises under federal law.

Emard v. Hughes Aircraft Co., 153 F.3d 949, 961 (9th Cir.1998) (citations omitted). The validity of a removal is normally analyzed under this two-pronged test. In this instance, the questions raised by both prongs merge into a single question: whether the Nascas' joinder of PeopleSoft can properly be characterized as falling under ERISA's civil enforcement provisions.

II

Part one of the test is referred to as the "well pleaded complaint rule." Under this standard, federal courts have jurisdiction to hear, "originally or by removal, only those cases in which a well-pleaded complaint establishes either that federal law creates the cause of action or that plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law." Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 27, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983).

Plaintiffs join defendant in this action under state law in accordance with Cal. Fam.Code § 2337(6)(A), which requires that "[prior to the entry of judgment] the party's retirement or pension plan shall be joined as a party to the proceeding for dissolution." Defendant argues, however, that the joinder is actually an ERISA claim covered by 29 U.S.C. § 1132(a), and that "there is no such thing as an ERISA claim (artfully pled or otherwise) over which the federal courts lack jurisdiction." Def. Supp. Mem. at 7. Defendant cites the Supreme Court's decision in Metropolitan Life v. Taylor, 481 U.S. 58, 66, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987), for the proposition that "Congress has clearly manifested an intent to make causes of action within the scope of [29 U.S.C. § 1132(a)] removable to federal court." To decide whether plaintiff's case warrants removal under the well-pleaded complaint rule, then, the court must determine whether it may be fairly characterized as an action pursued under section 1132(a).

Under the second, alternative prong of the test, the court must consider whether federal law completely preempts plaintiffs' cause of action. Preemption is not sufficient to justify removal — complete preemption is required.

The difference between preemption and complete preemption is important. When the doctrine of complete preemption does not apply, but the plaintiff's state claim is arguably preempted under section [1144(a)], the district court, being without removal jurisdiction, cannot resolve the dispute regarding preemption. It lacks power to do anything other than remand the issue to state court where the preemption issue can be addressed and resolved.

Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 354 (3d Cir.1995). See also Caterpillar, Inc. v. Williams, 482 U.S. 386, 398, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987)("The fact that an employer * * * might ultimately prove that an employee's claims are pre-empted does not establish that they are removable."); Metropolitan Life, 481 U.S. at 64, 107 S.Ct. 1542 ("ERISA preemption, without more, does not convert a state claim into an action arising under federal law."); Warner v. Ford Motor Co., 46 F.3d 531, 534 (6th Cir.1995)("removal and preemption are two distinct concepts").

While section 1144(a) remains a preemptive umbrella which mandates that ERISA provisions "shall supersede any and all state laws insofar as they may now or hereafter relate to any [ERISA] employee benefit plan," the complete ERISA preemption requisite for removal to federal court exists only for civil actions brought pursuant to section 1132(a). See Geweke Ford v. St. Joseph's Omni Preferred Care Inc., 130 F.3d 1355,...