Nix v. United Health Care of Ala., Inc.

• Decision Date: 01 November 2001
• Docket Number: No. CIV. A. 01-D-686-N.,CIV. A. 01-D-686-N.
• Citation: 179 F.Supp.2d 1363
• Parties: Thomas NIX, Plaintiff, v. UNITED HEALTH CARE OF ALA., INC., et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

179 F.Supp.2d 1363

Thomas NIX, Plaintiff, v. UNITED HEALTH CARE OF ALA., INC., et al., Defendants.

No. CIV. A. 01-D-686-N.

United States District Court, M.D. Alabama, Northern Division.

November 1, 2001.

COPYRIGHT MATERIAL OMITTED

Cavender C. Kimble, Mark E. Tindal, Balch & Bingham, Daniel S. Wolter, Gaines, Wolter & Kinney, Birmingham, AL, for defendants.

Tiernan W. Luck, III, G. Robert Prescott, Luck Prescott & Associates, Montgomery, AL, for plaintiff.

MEMORANDUM OPINION AND ORDER

DE MENT, District Judge.

Before the court is Plaintiff Thomas Nix's ("Plaintiff") Motion To Remand and supporting brief, filed July 13, 2001. Defendant United Health Care, Inc. ("United") filed an Opposition To Motion To Remand ("Opposition") on July 31, 2001. Thereafter, the court granted United time for discovery on the issue of subject matter jurisdiction, after which United filed a Supplemental Opposition To Plaintiff's Motion To Remand ("Supplemental Opposition") on September 28, 2001. After careful consideration of the arguments of the parties, the relevant law, and the record as a whole, the court finds that Plaintiff's Motion To Remand is due to be denied.

I. FACTS

In October of 1997, Crystal Pools, Inc., purchased a medical insurance policy from United through its broker, Defendant Vincent Cedrone ("Cedrone").¹ The policy purchased was entitled "United Healthcare Of Alabama, Inc. Group Policy."² The insurance policy was entered into between United and Crystal Pools, Inc.³ Plaintiff and his wife Sonya were the sole owners of Crystal Pools, Inc.⁴ "During the time relevant to [Plaintiff's] claims, [they] had no employees."⁵ However, discovery revealed that when Crystal Pools, Inc., originally purchased the insurance policy, the two employees listed on the application were Plaintiff and Gerald Walters ("Walters").⁶ Plaintiff submitted a claim under the insurance policy, which was denied.⁷

Plaintiff filed suit in the Circuit Court of Montgomery County, Alabama, alleging several state law claims relating to the denial of the claim made under the insurance policy.⁸ Defendants filed a Notice Of Removal on June 8, 2001, asserting that Plaintiff's claims were preempted by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461. Plaintiff now seeks to have the case remanded.

II. REMAND STANDARD

A defendant, as the party removing an action to federal court, has the burden to establish federal jurisdiction. See Diaz v. Sheppard, 85 F.3d 1502, 1505 (11th Cir.1996).

Federal courts are courts of limited jurisdiction. They possess only that power authorized by Constitution and statute, which is not to be expanded by judicial decree. It is to be presumed that a cause lies outside this limited jurisdiction, and the burden of establishing the contrary rests upon the party asserting jurisdiction.

Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994) (citations omitted).

"A presumption in favor of remand is necessary because if a federal court reaches the merits of a pending motion in a removed case where subject matter jurisdiction may be lacking it deprives a state court of its right under the Constitution to resolve controversies in its own courts." See Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 411 (11th Cir.1999). Furthermore, any order by a federal court lacking subject matter jurisdiction, other than an order of dismissal or remand, is void. See Christopher v. Stanley-Bostitch, Inc., 240 F.3d 95, 100 (1st Cir.2001); Shirley v. Maxicare Texas, Inc., 921 F.2d 565, 568 (5th Cir.1991).

III. DISCUSSION

A. Preemption

Removal may be had when Congress so completely preempts an area of law that any civil complaint raising a certain group of claims is necessarily federal in character. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987); see also Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1211-12 (11th Cir.1999). The United States Court of Appeals for the Eleventh Circuit has labeled such preemption, in the ERISA field, as "complete preemption." Butero, 174 F.3d at 1211-12 (citing Taylor, 481 U.S. at 63-64, 107 S.Ct. 1542). See also Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 475, 118 S.Ct. 921, 139 L.Ed.2d 912 (1998). ERISA was intended to completely preempt state law claims involving rights to recover benefits under employee benefit plans. See Taylor, 481 U.S. at 63-66, 107 S.Ct. 1542.

B. An ERISA "Employee Welfare Benefit Plan" Was Established

The first issue the court must address is whether an ERISA plan was instituted. In Donovan v. Dillingham, the Eleventh Circuit Court of Appeals laid out the test for whether an "employee welfare benefit plan" exists for the purposes of ERISA:

By definition ... a welfare plan requires (1) a "plan, fund, or program" (2) established or maintained (3) by an employer or by an employee organization, or by both, (4) for the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death, unemployment or vacation benefits, apprenticeship or other training programs, day care centers, scholarship funds, prepaid legal services or severance benefits (5) to participants or their beneficiaries.

688 F.2d 1367, 1371 (11th Cir.1982).

First, a "plan, fund, or program" existed. Such a plan exists when there are "intended benefits, intended beneficiaries, a source of financing, and a procedure to apply for and collect benefits." Id. at 1372. Here, the benefits included those provided by the Policy issued by United, such as medical and hospital care.⁹ The intended beneficiaries were the employees of Crystal Pools, Inc., who worked 30 or more hours per week.¹⁰ At the time the policy was purchased, the intended beneficiaries included Plaintiff and Walters.¹¹ The primary source of financing was Crystal Pools, Inc.¹² Plaintiff, in his deposition, states that Walters paid $10 of his $80 monthly premium and that Crystal Pools, Inc., paid the remaining $70.¹³ In addition, the Employer Application to United stated that the employer would contribute 100% of the contributions required,¹⁴ and a copy of a check from Crystal Pools, Inc., paying the entirety of an installment of the insurance premium, is included as Exhibit 5 to Defendant's Supplemental Opposition. The procedure for applying for and collecting benefits was outlined in the United Group Policy.¹⁵

Second, the plan was established. "A plan is `established' when there has been some degree of implementation by the employer going beyond a mere intent to confer a benefit." Butero, 174 F.3d at 1214. As previously stated, in this case, the employer, Crystal Pools, Inc., paid most, if not all, of the insurance premiums on the plan.¹⁶ Thus, a plan was established.

Third, the plan was established by an employer. Crystal Pools, Inc., is listed as the Company name on the Employer Application.¹⁷ Fourth, the plan was purchased to provide benefits in the form of medical insurance.¹⁸ Fifth, the plan was provided to participants or their beneficiaries. As previously stated, those participating in the plan at its inception were Plaintiff and Walters.¹⁹

Thus, an ERISA "employee welfare plan" was established and, at its inception, it covered Plaintiff and Walters. Sometime later, however, Walters ceased his employment with Crystal Pools, Inc.²⁰ Thereafter, United was reviewing its files and discovered that only one person was employed by Crystal Pools, Inc., and the Policy required that a minimum of two Eligible Persons be enrolled for coverage under the Policy.²¹ United notified Sonya Nix, Plaintiff's wife, by a letter dated November 20, 1998, that the Policy for Crystal Pools, Inc. was coming up for renewal.²² The letter also stated that United's records indicated the company only had one employee, and that, as previously discussed between Sonya Nix and a representative of United,²³ Sonya Nix could fill the eligible employee spot left by Walters.²⁴ Sonya Nix was required, however, to file wage and tax forms as proof of her employment with the company, and a change form and application, which she did.²⁵ On the United Change Request Form, signed by Sonya Nix and dated December 1, 1998, Sonya Nix changed from a dependent under her husband's coverage to an employee of Crystal Pools, Inc., so that the Policy could continue to remain in effect.²⁶

C. The Plan Continues To Be Governed By ERISA

The next issue the court must determine is whether replacing Walters with Sonya Nix extinguished the ERISA plan. Plaintiff argues that, because the plan covered only an owner and his spouse on the date he filed his claim, the plan does not fall within the scope of ERISA.²⁷ At first glance, his argument sounds convincing because the formation of an ERISA "employee welfare benefit plan" requires that benefits be provided to at least one employee, not including an owner of a business or a partner in a partnership, nor the spouse of the owner of a business or a partner in a partnership. See Slamen v. Paul Revere Life Ins. Co., 166 F.3d 1102, 1104-05 (11th Cir.1999); Peterson v. Am. Life & Health Ins. Co., 48 F.3d 404, 407 (9th Cir.1995); Meredith v. Time Ins. Co., 980 F.2d 352, 357 (5th Cir.1993); Williams v. Wright, 927 F.2d 1540, 1545 (11th Cir.1991); 29 C.F.R. § 2510.3-3(c)(1).²⁸ Further analysis, however, requires the court to reach a conclusion contrary to Plaintiff's position. For the reasons that follow, the court finds that, regardless of the characteristics of the plan on the date Plaintiff filed his claim, ERISA governs the plan because the plan originally covered a non-owner employee.

First, the court finds that this case is distinguishable from Slamen. In Slamen, a dentist, who was the sole owner of his practice, purchased a disability insurance policy that covered only himself. 166 F.3d at 1103. When the insurance company refused to pay the dentist's claim under the policy, the dentist brought suit alleging a...