Nat. Management Ass'n v. Transamerica Financial

• Decision Date: 18 March 2002
• Docket Number: No. C-3-01-168.,C-3-01-168.
• Citation: 197 F.Supp.2d 1016
• Parties: NATIONAL MANAGEMENT ASSOCIATION, INC., Plaintiff, v. TRANSAMERICA FINANCIAL RESOURCES, INC., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

197 F.Supp.2d 1016

NATIONAL MANAGEMENT ASSOCIATION, INC., Plaintiff, v. TRANSAMERICA FINANCIAL RESOURCES, INC., et al., Defendants.

No. C-3-01-168.

United States District Court, S.D. Ohio, Western Division.

March 18, 2002.

Barry Mancz, Dayton, OH, John Cloud, Dayton, OH, for plaintiff.

Walter Reynolds, Dayton, Joseph Coates, III, Fairborn, OH, Joseph Dehner, Cincinnati, OH, Matthew Blickenderfer, Cincinnati, OH, W. Michael Conway, Dayton, OH, Philip Kaufman, for defendants.

DECISION AND ENTRY SUSTAINING PLAINTIFF'S MOTION FOR REMAND (DOC. # 9); DEFENDANT TRANSAMERICA FINANCIAL RESOURCE, INC.'S MOTION TO DISMISS (DOC. # 11) IS OVERRULED AS MOOT; CAPTIONED CAUSE IS REMANDED TO THE MONTGOMERY COUNTY COURT OF COMMON PLEAS; JUDGMENT TO ENTER ACCORDINGLY; TERMINATION ENTRY

RICE, Chief Judge.

The instant litigation arises out of the alleged embezzlement of funds by Frank J. Skelly, Sr. ("Skelly"). According to the Complaint (Doc. # 1), Plaintiff National Management Association, Inc. ("NMA"), is a non-profit corporation. Defendant Skelly was an officer of and sole owner of Defendant Skelly, Skelly & Associates ("SSA"). Defendant Transamerica Financial Resources, Inc. ("TFR"), is a security broker-dealer, licensed to do business in Ohio. Skelly was a registered representative of TFR, and he transacted business in this State on TFR's behalf, pursuant to an Agency Agreement between them.

In 1984, Plaintiff entered into an agreement with Skelly, as an agent for SSA and TFR, for the placement of NMA's retirement accounts with TFR. By virtue of the agreement, Skelly collected retirement contributions from NMA for deposit with accounts managed by TFR, until his death on May 5, 2000.

In June of 2000, NMA became aware that Skelly had allegedly collected retirement contributions intended for deposit with accounts managed by TFR, but had deposited those funds into accounts controlled by him and SSA. Skelly had concealed this alleged embezzlement by (1) disseminating statements, represented to be those of TFR, which suggested that NMA's contributions were being deposited in accordance with its agreement with TFR, and (2) by funding retirement payments following requests by NMA on behalf of its employees, so that it appeared that account balances were being properly maintained.

On March 16, 2001, Plaintiff initiated the instant litigation in the Montgomery County Court of Common Pleas, setting forth four claims for relief, to wit: (1) a state law claim against all Defendants for breach of an express and implied contract, (2) a state law claim against all Defendants for fraud, (3) a state law claim against SSA and TFR for negligent supervision of Skelly, and (4) state law claims against all Defendants for conversion, embezzlement and defalcation (Doc. # 1). Plaintiff requested damages, including treble damages, in accordance with Ohio Rev.Code § 2307.61. On April 20, 2001, TFR removed the action to this Court.¹ In its Notice of Removal, TFR alleged that the Court has subject matter jurisdiction, pursuant to 28 U.S.C. § 1331, because Plaintiff's claims are governed by the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001, et seq. ("ERISA").

Pending before the Court are Plaintiff's Motion for Remand (Doc. # 9) and Defendant TFR's Motion to Dismiss (Doc. # 11). For the reasons assigned, Plaintiff's Motion is SUSTAINED. Defendant TFR's Motion to Dismiss (Doc. # 11) is OVERRULED AS MOOT. As a means of analysis, the Court will first address set forth the standard governing Plaintiff's motion, and then turn to the merits of the parties' arguments.

The party seeking to litigate in federal court bears the burden of establishing the existence of federal subject matter jurisdiction. McNutt v. General Motors Acceptance Corp. of Indiana, 298 U.S. 178, 189, 56 S.Ct. 780, 80 L.Ed. 1135 (1936). This is no less true where, as here, it is the defendant, rather than the plaintiff, who seeks the federal forum. E.g., Ahearn v. Charter Twp. of Bloomfield, 100 F.3d 451, 453-54 (6th Cir.1996). When the party asserting federal jurisdiction finds its allegations challenged, it must submit evidence substantiating its claims. Amen v. City of Dearborn, 532 F.2d 554, 560 (6th Cir.1976). The removing defendant's burden is to prove, by a preponderance of the evidence, that the jurisdictional facts it alleges are true. Gafford v. General Electric Co., 997 F.2d 150, 158 (6th Cir.1993). The district court has "wide discretion to allow affidavits, documents and even a limited evidentiary hearing to resolve disputed jurisdictional facts." Ohio Nat. Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir.1990) (citations omitted). The court may consider such evidence without turning the motion into one for summary judgment. Id.

Where the Court elects to decide the jurisdictional issue on the written materials submitted, the removing Defendant is required only to make a prima facie case of jurisdiction. Armbruster v. Quinn, 711 F.2d 1332, 1335 (6th Cir.1983). In other words, it must only "demonstrate facts which support a finding of jurisdiction in order to avoid a motion to dismiss." Id. (citations omitted). The Court must consider the pleadings and affidavits in the light most favorable to the removing Defendant. Id.

Plaintiff contends that this Court lacks subject matter jurisdiction over its claims, because they are not completely preempted by ERISA. There are two aspects to federal preemption of state law: conflict preemption and complete preemption. Conflict preemption arises where compliance with both federal and state law is a physically impossible, or "where state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 85 L.Ed. 581 (1941); Silkwood v. KerrMcGee Corp., 464 U.S. 238, 248, 104 S.Ct. 615, 78 L.Ed.2d 443 (1984); see Warner v. Ford Motor Co., 46 F.3d 531, 533 (6th Cir.1995)(en banc)(discussing difference between conflict and complete preemption). In contrast, "[i]f Congress evidences an intent to occupy a given field, any state law falling within that field is [completely] preempted." Pacific Gas & Elec. Co. v. State Energy Resources Conserv. & Dev. Comm'n, 461 U.S. 190, 103 S.Ct. 1713, 75 L.Ed.2d 752 (1983).

In determining whether a court has federal subject matter jurisdiction, the court ordinarily begins by examining the plaintiff's well-pleaded complaint. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). The "well-pleaded complaint rule" provides that "the plaintiff is the master of the complaint, that [for removal to be proper] a federal question must appear on the face of the complaint, and that the plaintiff may, by eschewing claims based on federal law, choose to have the cause heard in state court." Warner, 46 F.3d at 533. If the plaintiff's claim arises under state law, the mere assertion of federal preemption as a defensive argument, i.e., a conflict preemption situation, will not confer federal question subject matter jurisdiction. As stated by the Supreme Court in Metropolitan Life Ins. Co. v. Taylor,

Federal pre-emption is ordinarily a federal defense to the plaintiff's suit. As a defense, it does not appear on the face of a well-pleaded complaint, and, therefore, does not authorize removal to federal court. One corollary of the well-pleaded complaint rule developed in the case law, however, is that Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character.

Id. at 63-64, 107 S.Ct. 1542. The Supreme Court has found that Congress intended to make causes of action within the scope of 29 U.S.C. § 1132(a)(1)(B), which allows plan participants or beneficiaries to bring a civil action to recover benefits due to him under the plan, either to enforce his rights under the terms of the plan or to clarify his rights to future benefits under the terms of the plan, removable to federal court under the doctrine of complete preemption. Id. at 66, 107 S.Ct. 1542. The Sixth Circuit has recognized that actions brought under §§ 1132(a)(2) and (3) are also removable. Smith v. Provident Bank, 170 F.3d 609 (6th Cir.1999). However, causes of action which raise conflict preemption are not removable.

The [Supreme] Court specifically stated "ERISA pre-emption, without more, does not convert a state claim into an action arising under federal law." Metropolitan Life, at 64, 107 S.Ct. at 1547. Section 1144 falls precisely into this category. It allows ERISA to preempt state laws when they "relate to" matters governed by ERISA but does not create a federal cause of action for matters which only "relate to" ERISA's field of concern. Thus, § 1144 preemption does not create a federal cause of action itself, and cannot convert a state cause of action into a federal cause of action under the well-pleaded complaint rule. As a consequence, no removal jurisdiction exists under § 1144.

Warner, 46 F.3d at 534. Accordingly, this Court must determine whether Plaintiff has raised claims within the scope of Section 1132(a), which are completely preempted, or whether TFR's arguments are merely assertions of conflict preemption, which cannot form the basis for removal.²

Plaintiff is neither a plan beneficiary nor participant. Accordingly, subject matter jurisdiction cannot be based on § 1132(a)(1). Moreover, § 1132(a)(3) is a provision providing for injunctive relief. Plaintiff herein has sought only monetary damages. Accordingly, Defendants cannot base removal on § 1132(a)(3). See Michigan Affiliated Healthcare Sys., Inc., v. CC Sys. Corp. of Mich., 139 F.3d 546, 550 (6th Cir.1998); Mertens v. Hewitt Assoc., 508 U.S. 248, 113 S.Ct. 2063, 124 L.Ed.2d 161 (1993)(rejecting the applicability of money damages in actions under § 1132(a)(3)). Thus, the only potential basis for removal is that Plaintiff...