Tovey v. Prudential Ins. Co. of America

• Decision Date: 11 March 1999
• Docket Number: No. 98-6194-CV-SJ-1.,98-6194-CV-SJ-1.
• Citation: 42 F.Supp.2d 919
• Parties: Joyce TOVEY, Plaintiff, v. The PRUDENTIAL INS. CO. OF AMERICA, and Specialized Support Services, Inc., Defendants.
• Court: U.S. District Court — Western District of Missouri

42 F.Supp.2d 919

Joyce TOVEY, Plaintiff, v. The PRUDENTIAL INS. CO. OF AMERICA, and Specialized Support Services, Inc., Defendants.

No. 98-6194-CV-SJ-1.

United States District Court, W.D. Missouri, St. Joseph Division.

March 11, 1999.

Creath S. Thorne, Morton, Reed & Counts, St. Joseph, MO, for plaintiff.

Richard J. Pautler, Thompson Coburn, St. Louis, MO, for defendants.

ORDER

WHIPPLE, District Judge.

Two motions are pending before the Court. Plaintiff Joyce Tovey has moved the Court to remand her case to the Circuit Court of Buchanon County, Missouri for lack of federal subject matter jurisdiction. Defendants Specialized Support Services, Inc. and Prudential Insurance Company of America have moved the Court to dismiss Tovey's suit on grounds that her claims are preempted by § 514 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1144. The Court has read all of the parties' briefs on both motions. Because the Court must have subject matter jurisdiction over the case before it may rule on any substantive issue, it will first address Tovey's motion to remand.

I. FACTUAL BACKGROUND

Plaintiff Joyce Tovey ("Tovey") believed that she was covered under a group health insurance plan sponsored by her employer, Defendant Specialized Support Services, Inc. ("SSSI"), and administered by Defendant Prudential Insurance Company of America ("Prudential"). Tovey applied for such coverage on August 14, 1996. She alleges that one of Prudential's local agents informed her that she had not qualified for coverage but could still become a member of the group with coverage continuing under it if she supplied Prudential with her medical records. Tovey alleges that she authorized release of her medical records to Prudential and received a Prudential insurance card. Tovey also claims that SSSI deducted health insurance premiums from her paychecks. Assuming that she was enrolled in and covered under the group health insurance plan offered and administered by Defendants, Tovey sought hospitalization and medical treatment on January 2, 1997. When she submitted a claim for payment and reimbursement of her medical expenses, Defendants denied ever having granted health insurance coverage to her. Both parties now agree that Tovey was never covered under Defendants' group health insurance plan.

II. MOTION TO REMAND

Tovey filed suit against SSSI and Prudential claiming negligent misrepresentation, for telling her that she was covered under their group health insurance plan when she was not, and conversion, for misappropriating her insurance premiums. Defendants removed the case to this Court, and Tovey filed the pending motion to remand.

Removal of Tovey's complaint from state to federal court is only proper if one or more of Tovey's claims arise under federal law. 28 U.S.C. § 1441(a) and § 1332. Under the well-pleaded complaint rule, a claim arises under federal law only if a federal issue appears on the face of the plaintiff's well-pleaded complaint. See e.g. Oklahoma Tax Comm'n v. Graham, 489 U.S. 838, 840-41, 109 S.Ct. 1519, 1521, 103 L.Ed.2d 924 (1989). Tovey's claims appear to be based solely on the laws of the State of Missouri. Defendants assert, however, that the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., completely preempts the state laws on which Tovey's claims are based. Complete preemption is an exception to the well-pleaded complaint rule. Under the doctrine of complete preemption, a plaintiff's state law claims may implicate a particularly comprehensive federal statute such that they actually arise under federal law, regardless of whether the federal statute appears on the face of the complaint. To rule on Tovey's motion to remand, therefore, the Court must determine whether ERISA completely preempts Tovey's state law claims.

A. ERISA and the Doctrine of Complete Preemption

As an initial matter, the Court notes the confused state of the law in this circuit with respect to the jurisdictional consequences of ERISA preemption. Put another way: in the fog that is ERISA, the Eighth Circuit Court of Appeals appears to have run aground on the conceptual shoals of federal subject matter jurisdiction.¹ This is not surprising, as the confusion stems from two distinct concepts that carry an identical name—preemption. For sake of clarity, this Court will refer to these two different concepts as "ordinary preemption" and "complete preemption."

1. Ordinary Preemption

Section 514 provides that ERISA "shall supercede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" covered by the statute. 29 U.S.C. § 1144(a). The provision provides a federal defense to a plaintiff's state law claims when those claims relate to an employee benefit plan governed by ERISA. Much of the jurisprudence, from the United States Supreme Court down, has focused on the meaning of the words "relate to" in determining ERISA's preemptive scope. The cental test that has emerged provides that a state law having a "connection with or reference to" an ERISA-governed plan is preempted by ERISA § 514. California Division of Labor Standards Enforcement v. Dillingham Constr., 519 U.S. 316, 322, 117 S.Ct. 832, 837, 136 L.Ed.2d 791 (1997).

The preemptive scope of § 514 is certainly important, and the Court may ultimately be required to determine whether Tovey's claims have a connection with or reference to an ERISA-governed plan. However, neither the provisions of ERISA § 514 nor any judicial analysis of ordinary preemption under that section can help the Court determine whether it has subject matter jurisdiction. Cf. Wilson v. Zoellner, 114 F.3d 713, 721-22 (8th Cir.1997); In Home Health v. Prudential Ins. Co. of America, 101 F.3d 600, 607 (8th Cir.1996). For a federal court to have subject matter jurisdiction over a case, the parties must be completely diverse or a federal question must appear on the face of the plaintiff's well-pleaded complaint. See e.g. Louisville N.R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908). It is not sufficient that federal law may provide a defense to the plaintiff's claims. Id. As a federal defense to a plaintiff's state law claims, ordinary preemption under ERISA § 514 "does not appear on the face of a well-pleaded complaint, and, therefore, does not authorize removal to federal court." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987).

2. Complete Preemption

The doctrine of complete preemption is an exception to the well-pleaded complaint rule. This exception derives from the reasoning that "Congress may so completely preempt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metropolitan Life Ins. Co., 481 U.S. at 63-64, 107 S.Ct. at 1546. Although a plaintiff's complaint may not explicitly state a federal question, it may implicate a particularly comprehensive federal law that would displace the plaintiff's state law claims. Such state claims are then said to be "completely preempted" by the federal law, allowing removal of the plaintiff's complaint to federal court. Id.

In the context of ERISA, complete preemption can only occur when a plaintiff's state law claims are "displaced" by ERISA § 502, the statute's civil enforcement mechanism. Id. at 64, 107 S.Ct. at 1547. Section 502(a) states 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." 29 U.S.C. § 1132(a). The Supreme Court has reasoned that Congress intended ERISA § 502 to be the exclusive means for a plan participant to recover benefits from an ERISA-governed plan. Metropolitan Life Ins. Co., 481 U.S. at 63, 107 S.Ct. at 1546 (citing Pilot Life v. Dedeaux, 481 U.S. 41, 56, 107 S.Ct. 1549, 1557, 95 L.Ed.2d 39 (1987)). Thus, whenever a plaintiff's cause of action falls within the scope of § 502(a), that cause of action is subject to complete preemption under ERISA. Id. at 66, 107 S.Ct. 1542, 107 S.Ct. at 1548.

3. Conflict between the Circuits

Several courts of appeals have created a two-part test for complete preemption, first determining whether the state law claim is preempted by ERISA § 514, and then considering whether the claim falls within the scope of ERISA § 502. See e.g. McClelland v. Gronwaldt, 155 F.3d 507, 517 (5th Cir.1998) ("the first step in the complete preemption analysis is to determine whether the claim is subject to ordinary preemption under section 514(a)"); Emard v. Hughes Aircraft Co., 153 F.3d 949, 953 (9th Cir.1998) (stating two-pronged analysis for complete preemption); Franklin v. QHG of Gadsden, Inc., 127 F.3d 1024, 1028 (11th Cir.1997) ("ERISA completely preempts ... when the state law is preempted by ERISA and also falls within the scope of the civil enforcement section"); Franklin H. Williams Ins. Trust v. Travelers Ins. Co., 50 F.3d 144, 149 (2nd Cir.1995) ("a state common law cause of action is removable under ERISA if it `relates to' an employee benefit plan within the meaning of section 514 and falls within the scope of the statute's civil enforcement provisions"). These courts derive their two-part test for complete preemption from the Supreme Court's statement that "ERISA preemption, without more, does not convert a state claim into an action arising under federal law." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 64, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987) (citing Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 25-27, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)).

For several reasons, this Court cannot agree that ordinary preemption serves as a prerequisite to complete preemption. First, the complete preemption exception to the well-pleaded complaint rule did not originate with ER...