Nichols v. Southeast Health Plan of Alabama, Inc., Civ. A. No. 93-0481-P-C.

Decision Date20 December 1993
Docket NumberCiv. A. No. 93-0481-P-C.
Citation859 F. Supp. 553
PartiesJudith Jordan NICHOLS, Plaintiff, v. SOUTHEAST HEALTH PLAN OF ALABAMA, INC.; Charles Hayes Real Estate, Inc.; and Coldwell Banker, Defendants.
CourtU.S. District Court — Southern District of Alabama

COPYRIGHT MATERIAL OMITTED

David F. Daniell, Mobile, AL, for plaintiff.

Patricia Clotfelder, Wesley C. Redmond, Birmingham, AL, Lester McIntyre, Saraland, AL, for defendants.

ORDER

PITTMAN, Senior District Judge.

This case is before the court on the defendants' motion to dismiss (tab 4), the plaintiff's objection to the notice of removal (tab 6), and the plaintiff's motion to remand (tab 19). For the reasons set forth below, the motion to remand (tab 19) is GRANTED, and this case is REMANDED to the Circuit Court of Mobile County, Alabama for further proceedings. The plaintiff's attorney fees and costs on removal are not taxed to the defendants, and this court does not reach the defendants' motion to dismiss.

Plaintiff, Judith Jordan Nichols (Nichols), filed this suit in the Circuit Court of Mobile County, Alabama. In the suit, she raised state law claims of negligence, wantonness, breach of contract, misrepresentation, and suppression.

The defendants, Charles Hayes Real Estate, Inc. (Hayes Real Estate), Southeast Health Plan of Alabama, Inc. (Southeast), and Coldwell Banker, removed this suit to federal court, asserting that plaintiff's claims were preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001, et seq.

I. Findings of Fact

The following facts are undisputed:

A. Undisputed Facts

Nichols began working for Hayes Real Estate in June of 1991. Hayes Real Estate did not provide health insurance benefits for its employees. Barbara Hayes (Mrs. Hayes), co-owner of Hayes Real Estate, agreed to pay $100.00 per month from her personal checking account towards Ms. Nichols's insurance premium. Each month, Nichols would give Mrs. Hayes $38.00, along with her premium notice. Mrs. Hayes would then write a check for $138.00, the amount of Nichols's premium, to the insurance company. Hayes Real Estate did not take a tax deduction for the $100.00, and never claimed it as a business expense.

Southeast offered insurance to members of the Alabama Association of Realtors (Association), as well as to the members' employees. Hayes Real Estate was a member of the Association. The Association provided a list of its members to Southeast. Southeast gave promotional literature to the Association, which passed it on to its members.

Participation in the insurance program was purely voluntary, and those who chose to enroll had to send their premium checks directly to Southeast. The Association played no role in administering the insurance program.

Nichols's insurance policy, which was written by Southeast, went into effect on July 1, 1991. Hayes Real Estate was a member of the Association, and merely publicized the policy to its employees. Hayes Real Estate did not endorse the policy, and did not collect premiums through payroll deductions. Hayes Real Estate did not contribute to the premiums of any of its 40 odd employees, although a number carried Southeast insurance.

Before January of 1992, Nichols had a mass removed from one of her breasts. This procedure was covered under the insurance contract, and was pre-approved by Southeast. However, payment was not made, and Nichols had to bear these expenses herself.1

The following facts are in dispute:

B. Disputed Facts

Nichols alleges that Mrs. Hayes failed to pay Nichols's January 1992 insurance premium to Southeast. Nichols also alleges that Mrs. Hayes failed to forward mail, including the premium notice, to Nichols.

II. Conclusions of Law

Since there is no ERISA plan involved in this case, plaintiff's motion to remand should be granted. However, plaintiff should not recover her costs and fees incurred as a result of the removal. Because remand should be granted, this court should not reach the defendants' motion to dismiss.

A. Remand

In ruling on a motion to remand, the non-movant bears the burden of showing that the requirements for removal have been met. Gould v. Artisoft, Inc., 1 F.3d 544, 547 (7th Cir.1993). See Wilson v. Republic Iron & Steel Co., 257 U.S. 92, 97, 42 S.Ct. 35, 37, 66 L.Ed. 144, 148 (1921). Thus, defendants bear the burden of showing that this court has subject matter jurisdiction under ERISA.

Claims which "relate to" employee benefit plans under ERISA are within the exclusive jurisdiction of the federal courts. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 62, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55, 63 (1987), on remand Taylor v. General Motors Corp., 826 F.2d 452 (6th Cir.1987). See 29 U.S.C. §§ 1105, 1109. The term "relate to" is given a broad reading, thus, a state law claim having any connection with or reference to an employee benefit plan gives rise to ERISA jurisdiction. Id. at 62-63, 107 S.Ct. at 1546; Howard v. Parisian, Inc., 807 F.2d 1560, 1563 (11th Cir.1987).

For this court to have subject matter jurisdiction over this case, the arrangements regarding Nichols's health insurance must constitute an employee benefit plan within the meaning of ERISA. Because the arrangements do not constitute an ERISA plan, Nichols's claims are not preempted, and this court lacks subject matter jurisdiction.

The health insurance, which was paid for in part by Mrs. Hayes, does not constitute an employee welfare benefit plan. The term "employee welfare benefit plan" is defined as:

any plan, fund, or program ... established or maintained by an employer ... to the extent that such plan ... was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, ... medical, surgical, or hospital care or benefits....

29 U.S.C. § 1002(1).

A plan requires: (1) a plan, fund, or program; (2) established or maintained; (3) by an employer; (4) for the purpose of providing medical, surgical, or hospital care; (5) to participants or their beneficiaries. Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir.1982) (en banc).

While the purchase of insurance for an employee by an employer is evidence that an ERISA plan has been created, the purchase — by itself — is not sufficient to conclusively establish that a plan has been created. Donovan, 688 F.2d at 1373. An employer's purchase of group health insurance for its employees can fall within the definition of a plan. Randol v. Mid-West National Life Ins. Co., 987 F.2d 1547, 1550 (11th Cir.1993), cert. denied, ___ U.S. ___, 114 S.Ct. 180, 126 L.Ed.2d 139 (1993).

However, there was no purchase of group health insurance by the employer in this case. Hayes Real Estate did not provide health insurance to its employees. Rather, Mrs. Hayes personally paid part of the health insurance premium for one employee, the plaintiff.

This case falls within the "safe-harbor" regulations. An insurance plan which falls within the safe harbor is not subject to regulation under ERISA, 29 C.F.R. § 2510.3-1(a)(1), and thus does not lead to ERISA jurisdiction. Cf. Howard, 807 F.2d at 1563.

As the Eleventh Circuit has recognized, the regulations flesh out the definition of an employee benefit plan. Randol, 987 F.2d at 1549. In Randol, the plan in question did not fall within the regulatory safe harbor. Id. at 1549-50. Here, however, Nichols's health insurance does fall within the safe harbor, therefore no ERISA plan exists.

The pertinent regulation provides that the definition of an employee benefit plan does not include insurance offered to employees where no contribution is made by the employer. In order to fall within the safe harbor, the requirements are that:

(1) No contributions are made by an employer or employee organization;
(2) Participation in the program is completely voluntary for employees or members;
(3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer, and
(4) The employer or employee organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profit, for administrative services actually rendered in connection with payroll deductions or dues check-offs.

29 C.F.R. § 2510.3-1(j).

The health insurance at issue meets all the safe harbor requirements. Hayes Real Estate, Nichols's employer, made no contributions toward the insurance premiums, for any of its employees. ERISA defines an employer as:

any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan.

29 U.S.C. § 1002(5). This definition is, of course, circular. Cf. Nationwide Mut. Ins. Co. v. Darden, ___ U.S. ___, ___, 112 S.Ct. 1344, 1348, 117 L.Ed.2d 581, 589 (1992), on remand Darden v. Nationwide Mut. Ins. Co., 969 F.2d 76 (4th Cir.1992) (ERISA statute's definition of employee is circular). Thus, the Darden Court held that the common law definition of the term employee applied to ERISA. Id.2

Mrs. Hayes cannot be considered Ms. Nichols's employer for the purposes of ERISA. Even assuming, for the sake of argument, that she is an officer or director of Hayes Real Estate, that status does not make Mrs. Hayes an ERISA employer. Sasso v. Cervoni, 985 F.2d 49, 50 (2d Cir.1993), cert. denied Bourgal v. Cervoni, ___ U.S. ___, 113 S.Ct. 2964, 125 L.Ed.2d 664 (1993); Plumber's Pension Fund v. Niedrich, 891 F.2d 1297, 1298 (7th Cir.1989), cert. denied 495 U.S. 930, 110 S.Ct. 2169, 109 L.Ed.2d 499 (1990). Even the sole shareholder and CEO of a business is not am employer under ERISA. Scarbrough v. Perez, 870 F.2d 1079, 1083 (6th Cir.1989). Accord Meredith v. Time Ins. Co., 980 F.2d...

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