Yearous v. Pacificare of California
| Decision Date | 20 July 2007 |
| Docket Number | No. 07-CV-0574 H(RBB).,07-CV-0574 H(RBB). |
| Citation | 554 F.Supp.2d 1132 |
| Parties | Jeff YEAROUS, Plaintiff, v. PACIFICARE OF CALIFORNIA; UnitedHealth Group; Administaff of Texas, Inc.; and Does 1 through 20, inclusive, Defendants. |
| Court | U.S. District Court — Southern District of California |
D. Scott Mohney, Robert K. Scott, Law Offices Of Robert K. Scott, Irvine, CA, for Plaintiff Jeff Yearous.
Mazda K. Antia, William E. Grauer, Darcie A. Tilly, and Heather C. Meservy, Cooley Godward Kronish LLP, San Diego, CA, for Defendants PacificCare of California and UnitedHealth Group.
Dave Carothers, Carlton Disante & Freudenberger LLP, for defendant Administaff of Texas, Inc.
ORDER DENYING PLAINTIFF'S MOTION TO REMAND
Plaintiff Jeff Yearous initially filed suit in San Diego County Superior Court on February 21, 2007. (Doc. No. 1.) Defendants PacifiCare of California and United-Health Group (collectively "PacifiCare") filed a notice of removal on March 28, 2007. (Doc. No. 1.) Defendant Administaff of Texas, Inc. ("Administaff) filed a joinder in the notice of removal on April 3, 2007. (Doc. No. 2.) On May 1, 2007, Plaintiff filed a motion to remand. (Doc. No. 7.) PacifiCare filed a response in opposition on June 4, 2007. (Doc. No. 9.) Administaff filed a joinder to the opposition of Pacifi-Care on June 4, 2007. (Doc. No. 12.) Plaintiff filed a reply in support of his motion on June 8, 2007. (Doc. No. 14.)
On June 18, 2007, the Court heard oral argument on Plaintiffs motion. Joel Poremba appeared for Plaintiff, William Grauer and Mazda Antia appeared for Defendant PacifiCare, and Dave Carothers appeared for Defendant Administaff. Following the hearing, the Court requested supplemental briefing from the parties. PacifiCare filed supplemental papers in opposition to remand on June 22, 2007. (Doc. Nos. 19, 20.) Administaff filed a notice of joinder in the supplemental papers filed by PacifiCare on June 25, 2007. (Doc. No. 21.) Plaintiff filed supplemental papers on July; 2 and 3, 2007. (Doc. Nos. 22, 24.) For the reasons set forth below, the Court DENIES Plaintiffs motion to remand.
Defendants removed this case, asserting that the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001 et seq., preempts Plaintiffs state law claims, such that the Court has removal jurisdiction over them. Plaintiff seeks remand, arguing that he was not Administaffs employee for purposes of ERISA, and, thus, ERISA does not govern the health plan at issue. Accordingly, he contends that his claims are not completely preempted by ERISA, and the Court does not have removal jurisdiction over them.
Plaintiff and his wife are the co-owners of Zonson Customization ("Zonson"), a company specializing in golf accessory customization. (Compl. 118.) According to Kim Bacon, a Managing Director in the Health and Welfare department, Defendant Administaff is a professional employer organization that provides personnel management services to small and medium sized companies in a "co-employment" relationship, with an allocation of responsibilities set forth in the client service agreement. On November 19, 2005, Plaintiff, on behalf of Zonson, executed a client service agreement with Administaff. (Id., Ex. A.) The agreement between Administaff and Zonson states that each would be "co-employers" of the "worksite employees assigned to Client's worksite." (Id.)
According to Bacon, each worksite employee signs a written employment agreement with Adminstaff. (Id. ¶ 3.) Plaintiff executed an employment agreement with Administaff on November 22, 2005 providing that he would function as "President" and that his relationship with Administaff was at will. (Id., Ex. B) (employment agreement between Jeff Yearous and Administaff.) On November 30, 2005, Plaintiff completed the Administaff benefits enrollment/change request form electing healthcare coverage and listing his wife and their two daughters as dependents. (Id., Ex. E.) According to Plaintiff, only he, his wife, and two daughters were insured through the PacifiCare policy. (Id. ¶ 8). None of Zonson's employees were insured through Administaff. (Id.)
In May of 2006, one of Plaintiffs daughters required hospitalization for severe mental illness and an eating disorder. (Id. ¶ 9.) After PacifiCare denied coverage for the resulting medical bills, Plaintiff filed suit in state court alleging breach of contract, breach of the covenant of good faith and fair dealing, and violation of California Business & Professions Code § 17200 against PacifiCare. (Id. ¶¶ 10-27.) Further Plaintiff alleged negligence against Administaff. (Id. ¶ 28-32.)
A court has removal jurisdiction so long as original jurisdiction would lie in the court to which the case is removed. 28 U.S.C. 1441(a). A district court must remand a case to state court, however, if the district court lacks subject matter jurisdiction. 28 U.S.C. § 1447(c). As the Ninth Circuit has indicated, courts strictly construe the removal statute against removal jurisdiction, and courts reject removal jurisdiction "if there is any doubt as to the right of removal in the first instance." Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir.1992). If removal is challenged, the defendant bears the burden of establishing that removal is proper. Id.
On its face, Plaintiffs complaint contains, only state law claims. In general, a state law claim cannot be removed on the ground that federal law preempts the claim. See, e.g., Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). This is because a cause of action arises under federal law only if the plaintiffs well-pleaded complaint raises issues of federal law, and federal preemption is a defense that does not appear on the face of the plaintiffs complaint. Id. (citing Gully v. First Nat'l Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936)). In limited cases, however, the preemptive force of federal preemption is so strong that it displaces any state causes of action and leaves room only for a federal claim for purposes of the well-pleaded complaint rule. Id. at 63-64, 107 S.Ct. 1542; Schwarzer, et al., California Practice Guide: Federal Civil Procedure Before Trial 12:722 (The Rutter Group 2007). If a federal statute "wholly displaces the state-law cause of action through complete pre-emption," the state claim is essentially recharacterized as a federal claim and may be removed. See, e.g., Aetna Health Inc. v. Davila, 542 U.S. 200, 207, 124 S.Ct. 2488,159 L.Ed.2d 312 (2004) (quoting Beneficial Natl Bank v. Anderson, 539 U.S. 1, 8, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003)).
According to ERISA's text, Congress enacted the statute to "protect . . . the interests of participants in employee benefit plans and their beneficiaries" by establishing regulatory requirements and by "providing for appropriate remedies, sanctions, and ready access to the federal courts." 29 U.S.C. § 1001(b). In line with this purpose, "ERISA includes expansive preemption provisions . . . intended to ensure that employee benefit plan regulation would be `exclusively a federal concern.'" Aetna Health, 542 U.S. at 208, 124 S.Ct. 2488 (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981)).
ERISA contains two preemption provisions. First, 29 U.S.C. § 1144(a) expressly preempts state laws that relate to employee benefit plans, except for state laws regulating insurance. 29 U.S.C. § 1144(a) (). Second, 29 U.S.C. § 1132(a) provides the exclusive cause of action for violations of ERISA. The Supreme Court has ruled that § 1132(a) displaces any state claims falling within the scope of ERISA's civil enforcement provisions. See Metro. Life Ins., 481 U.S. at 60, 107 S.Ct. 1542; Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54-55, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). As the Supreme Court has explained, "any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted." Aetna Health, 542 U.S. at 209, 124 S.Ct. 2488. Further, ERISA's preemptive force is so strong that it recharacterizes "an ordinary state common law complaint into one stating a federal claim for purposes of the wellpleaded complaint rule." Metro. Life. Ins., 481 U.S. at 65-66, 107 S.Ct. 1542. Under the complete preemption doctrine, because ERISA's preemption is complete as to causes of action within the scope of ERISA's civil enforcement provisions, these claims are removable to federal court. Id. at 66, 107 S.Ct. 1542; Aetna Health, 542 U.S. at 209, 124 S.Ct. 2488; Toumajian v. Frailey, 135 F.3d 648, 653 (9th Cir.1998). According to the Ninth Circuit, complete preemption applies when the plan at issue is subject to ERISA regulation, when the state law cause of action is expressly preempted under § 1144(a), and when the cause of action is within the scope of ERISA's enforcement provision, § 1132(a). Abraham v. Norcal Waste Sys., 265 F.3d 811, 819 (9th Cir. 2001); see also Schwarzer, et al, supra, ¶ 2:771.
In contrast to those state claims completely preempted by ERISA's civil enforcement provisions in § 1132(a) such that they are re characterized as federal claims for purposes of removal, other state law claims may nevertheless be preempted by § 1144(a). State law claims that fall outside the scope of ERISA's civil enforcement provisions in § 1132(a), even if preempted by § 1144(a), are governed by the well-pleaded complaint rule,...
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