Prince v. Sears Holdings Corp.

• Decision Date: 27 January 2017
• Docket Number: No. 16-1075,16-1075
• Citation: 848 F.3d 173
• Parties: Billy E. PRINCE, individually and as personal representative for the late Judith A. Prince, Plaintiff–Appellant, v. SEARS HOLDINGS CORPORATION, a Delaware corporation, Defendant–Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

848 F.3d 173

Billy E. PRINCE, individually and as personal representative for the late Judith A. Prince, Plaintiff–Appellant,

v.SEARS HOLDINGS CORPORATION, a Delaware corporation, Defendant–Appellee.

No. 16-1075

United States Court of Appeals, Fourth Circuit.

Argued: December 6, 2016

Decided: January 27, 2017

ARGUED: Chad Lewis Taylor, SIMMERMAN LAW OFFICE, PLLC, Clarksburg, West Virginia, for Appellant. Jill E. Hall, BOWLES RICE LLP, Charleston, West Virginia, for Appellee. ON BRIEF: Frank E. Simmerman, Jr., SIMMERMAN LAW OFFICE, PLLC, Clarksburg, West Virginia, for Appellant. Gerard R. Stowers, BOWLES RICE LLP, Charleston, West Virginia, for Appellee.

Before MOTZ, KEENAN, and THACKER, Circuit Judges.

Affirmed by published opinion. Judge Motz wrote the opinion, in which Judge Keenan and Judge Thacker joined.

DIANA GRIBBON MOTZ, Circuit Judge:

Alleging that his employer improperly administered life insurance benefits, an employee brought suit for misrepresentation, constructive fraud, and infliction of emotional distress. Because the Employee Retirement Income Security Act ("ERISA") completely preempts these state law claims, we affirm the judgment of the district court dismissing the complaint.

I.

In November 2010, Billy E. Prince submitted an application to his employer for $150,000 in life insurance coverage for his wife, Judith Prince. The employer, Sears, sponsored and administered the life insurance program through The Prudential Insurance Company of America. In May 2011, Sears sent an acknowledgment letter to Prince and began withholding premiums from his pay shortly thereafter.

Later in 2011, Mrs. Prince learned she had Stage IV liver cancer. Almost a year after Mrs. Prince's initial diagnosis, Prince checked his online benefits summary, which confirmed his election to purchase life insurance coverage for his wife in the amount of $150,000. Another year passed, and Sears sent Prince a letter advising him that Mrs. Prince's coverage had never become effective because no "evidence of insurability questionnaire" had been submitted. Sears explained that Prudential had sent a notice to Prince in January 2011 advising that unless a completed insurability questionnaire was submitted, Prudential would terminate his application for the life insurance coverage. Prince claims that he has no record of receipt of that notice but does not dispute that Prudential sent it to him.

On May 26, 2014, Mrs. Prince died. Because Prince did not receive the $150,000 in life insurance, he filed a complaint against Sears in the Circuit Court of Marion County, West Virginia. The complaint asserted one count of "constructive fraud/negligent misrepresentation" and one count of "intentional/reckless infliction of emotional distress," based on Sears's alleged misrepresentations regarding the life insurance policy and the harm thereby inflicted on Mr. and Mrs. Prince.

Sears removed the suit to the United States District Court for the Northern District of West Virginia and asked the court to dismiss the complaint, arguing that ERISA completely preempted Prince's state law claims. Prince opposed the motion and moved to remand the case back to state court. The district court held that ERISA completely preempted Prince's claims. Accordingly, the court denied Prince's motion to remand and dismissed the complaint without prejudice. Prince timely filed this appeal.¹

II.

"We review de novo questions of subject matter jurisdiction, ‘including those relating to the propriety of removal.’ " Sonoco Prods. Co. v. Physicians Health Plan, Inc. , 338 F.3d 366, 370 (4th Cir. 2003) (quoting Mayes v. Rapoport , 198 F.3d 457, 460 (4th Cir. 1999) ). The party seeking removal bears the burden of showing removal is proper. Mulcahey v. Columbia Organic Chems. Co. , 29 F.3d 148, 151 (4th Cir. 1994). When reviewing the grant of a motion to dismiss, we assume all facts in the complaint as true and resolve all doubts in favor of the non-moving party.

Edwards v. City of Goldsboro , 178 F.3d 231, 243–44 (4th Cir. 1999).

"Under the removal statute, ‘any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant’ to federal court." Aetna Health Inc. v. Davila , 542 U.S. 200, 207, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (quoting 28 U.S.C. § 1441(a) (2012) ). District courts have original jurisdiction over claims "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. To determine whether a plaintiff's claims "arise under" the laws of the United States, courts typically use the "well-pleaded complaint rule," which focuses on the allegations of the complaint. Aetna , 542 U.S. at 207, 124 S.Ct. 2488.

An exception to the well-pleaded complaint rule occurs when a federal statute completely preempts state law causes of action. Id. at 207–08, 124 S.Ct. 2488. "[C]omplete preemption ‘converts an ordinary state common law complaint into one stating a federal claim.’ " Darcangelo v. Verizon Commc'ns, Inc. , 292 F.3d 181, 187 (4th Cir. 2002) (quoting Metro. Life Ins. Co. v. Taylor , 481 U.S. 58, 65, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987) ). "[W]hen complete preemption exists, ‘the plaintiff simply has brought a mislabeled federal claim, which may be asserted under some federal statute.’ " Sonoco , 338 F.3d at 371 (quoting King v. Marriott Int'l, Inc. , 337 F.3d 421, 425 (4th Cir. 2003) ). Defendants may remove preempted state law claims to federal court, regardless of the "label" that the plaintiff has used. See id. ; Griggs v. E.I. DuPont de Nemours & Co. , 237 F.3d 371, 379 (4th Cir. 2001).

ERISA's broad civil enforcement provision, § 502(a), codified at 29 U.S.C. § 1132(a), has the potential to preempt state law causes of action. That provision allows a participant or beneficiary of an ERISA plan to bring a civil action "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[,] ... to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or ... to obtain ... equitable relief." Id. "This integrated enforcement mechanism ... is a distinctive feature of ERISA, and essential to accomplish Congress' purpose of creating a comprehensive statute for the regulation of employee benefit plans." Aetna , 542 U.S. at 208, 124 S.Ct. 2488.

ERISA § 502(a) completely preempts a state law claim when the following three-prong test is met:

(1) the plaintiff must have standing under § 502(a) to pursue its claim; (2) its claim must "fall[ ] within the scope of an ERISA provision that [it] can enforce via § 502(a)"; and (3) the claim must not be capable of resolution "without an interpretation of the contract governed by federal law," i.e., an ERISA-governed employee benefit plan.

Sonoco , 338 F.3d at 372 (alterations in original) (quoting Jass v. Prudential Health Care Plan, Inc. , 88 F.3d 1482, 1487 (7th Cir. 1996) ). Prince concedes that he has standing under ERISA § 502(a) to bring a claim and therefore meets the first prong of the Sonoco test. Accordingly, we need only consider the second and third prongs.

A.

The second prong requires us to determine whether Prince can enforce his claims under § 502(a). This analysis depends on the scope of Prince's claims. Prince asserts that his claims rely on the actions of Sears prior to the denial of benefits, when the company deducted premiums from his pay and reported that he had coverage. Prince does not dispute that he never submitted the required evidence of insurability and that Sears's decision to deny benefits was proper given the terms of the plan. Prince apparently believes that focusing on Sears's actions prior to the denial will allow his claims to escape preemption.

Prince is mistaken. Regardless of whether his claims attack Sears's actions prior to the denial or in issuing the denial, these claims are enforceable under § 502(a). This is so because they challenge the administration of the ERISA plan—a core § 502(a) claim. Prince is entitled to life insurance benefits only if the ERISA plan provided them. Sears withdrew premiums from Prince's pay only because the ERISA plan required Sears to do so. "It follows that if an individual brings suit complaining of a denial of coverage ..., where the individual is entitled to such coverage only because of the terms of an ERISA-regulated employee benefit plan, and where no legal duty (state or federal) independent of ERISA or the plan terms is violated, then the suit falls ‘within the scope of ERISA.’ " Aetna , 542 U.S. at 210, 124 S.Ct. 2488.

Contrary to Prince's assertions, his claims implicate no independent legal duty that Sears owed him. Of course, Sears employs Prince, but the company also administers an ERISA plan. Distinct from its duties as an employer, Sears has duties as the plan administrator and those duties clearly fall within the scope of ERISA. Prince's claims concern only the way in which Sears assertedly breached these duties while administering his benefits. His claims are thus entirely within the scope of ERISA § 502(a)(1)(B). See Aetna , 542 U.S. at 211–13, 124 S.Ct. 2488 ; see also Pizlo v. Bethlehem Steel Corp. , 884 F.2d 116, 120 (4th Cir. 1989) (explaining that while ERISA does not preempt claims based on a contract of employment, it does completely preempt claims related to modification of pension plans).

In arguing to the contrary, Prince relies heavily on an out-of-circuit district court case, Tovey v. Prudential Ins. Co. of Am. , 42 F.Supp.2d 919 (W.D. Mo. 1999). There, the court held that ERISA did not preempt a state law claim for negligent misrepresentation. But this was because "[f]irst and foremost" Tovey was not an ERISA plan participant and for this reason was not attempting in enforce her rights under an ERISA plan. Id. at 925–26, 926 n.3. In contrast, Prince concedes that he is an ERISA...