Hunter et al v. Shepherd et al
MEMORANDUM OPINION. Signed by Judge Virginia Emerson Hopkins on 4/23/2014. (JLC)
2014 Apr-23 PM 04:29
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
STEVEN HUNTER, et al,
W. HAL SHEPHERD, et al,
) Case No.: 4:14-CV-114-VEH
On December 21, 2013, the plaintiffs, Steven Hunter, Christy Hunter, and
Steven Hunter, Jr. (collectively “the Hunters”), filed this civil action in the Circuit
Court of St. Clair County, Alabama. (Doc. 1-1 at 13). The complaint named as
defendants W. Hal Shepherd, Ed Thomason, The Kennion Group, Inc. (“Kennion
Group”), Academic Benefit Trust Corporation (“Academic Benefit”), Preferred
Health Alliance Corporation (“Preferred Health”), Planned Benefit Services, Inc.
(“Planned Benefit”), and the Alabama High School Athletic Association (“AHSAA”).
(Doc. 1-1 at 13). All counts of the complaint arise out of an injury that Tanner Hunter
received while participating in an athletic event at his high school, and a claim for
benefits that he and Steve and Christy Hunter, his parents, made for benefits under
an allegedly applicable insurance policy or policies. (Doc. 1-1 at 15-17). The
complaint sets out claims under Alabama law for “Contract & Fiduciary Breach”
(Count One), Fraud (Count Two), Negligence/Wantonness (Count Three), Outrage
(Count Four), Bad Faith (Count Five), and Illusory Contract (Count Six). (Doc. 1-1
On January 17, 2014, the defendants removed the action to this court. (Doc.
1). The case is before the court on the plaintiffs’ motion to remand. (Doc. 12). For
the reasons stated herein, the motion will be GRANTED, and this case will be
REMANDED to the Circuit Court of St. Clair County, Alabama.
STANDARD FOR REMAND
“Federal courts are courts of limited jurisdiction. They possess only that power
authorized by Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of
America, 511 U.S. 375, 377 (1994). For removal to be proper, the court must have
subject-matter jurisdiction in the case. “Only state-court actions that originally could
have been filed in federal court may be removed to federal court by the Defendant.”
Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). In addition, the removal
statute must be strictly construed against removal, and any doubts should be resolved
in favor of remand. See, City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310,
1313 (11th Cir. 2012) (“[b]ecause removal jurisdiction raises significant federalism
concerns, federal courts are directed to construe removal statutes strictly. Indeed, all
doubts about jurisdiction should be resolved in favor of remand to state court.”)
“In removal cases, the burden is on the party who sought removal to
demonstrate that federal jurisdiction exists.” Friedman v. New York Life Ins. Co., 410
F.3d 1350, 1353 (11th Cir. 2005) (citation omitted); Williams v. Best Buy Co., 269
F.3d 1316, 1319 (11th Cir.2001).
That burden goes not only to the issue of federal jurisdiction, but also to
questions of compliance with statutes governing the exercise of the right
of removal. Albonetti v. GAF Corporation-Chemical Group, 520
F.Supp. 825, 827 (S.D. Texas 1981); Jennings Clothiers of Ft. Dodge,
Inc. v. U.S. Fidelity & Guaranty Co., 496 F.Supp. 1254, 1255 (D.Iowa
1980); Fort v. Ralston Purina Company, 452 F.Supp. 241, 242
Parker v. Brown, 570 F.Supp. 640, 642 (D.C. Ohio, 1983)
While it is undoubtedly best to include all relevant evidence in the
petition for removal and motion to remand, there is no good reason to
keep a district court from eliciting or reviewing evidence outside the
removal petition. We align ourselves with our sister circuits in adopting
a more flexible approach, allowing the district court when necessary to
consider post-removal evidence in assessing removal jurisdiction. We
emphasize, as did the court in Allen, that “under any manner of proof,
the jurisdictional facts that support removal must be judged at the time
of the removal, and any post-petition affidavits are allowable only if
relevant to that period of time.” Allen, 63 F.3d at 1335.
Sierminski v. Transouth Financial Corp., 216 F.3d 945, 949 (11th Cir. 2000).
Allegations in the Complaint
In pertinent part, the following allegations appear in the complaint:
On December 21, 2011, Tanner Hunter, while a student at the
Leeds Alabama public High School, received a permanent spinal
cord injury while participating in a wrestling tournament at St.
Clair High School in Odenville, St. Clair County, Alabama.
As a result of the accident, Tanner Hunter has no use of his legs
and a very limited use of his upper arm: a quadriplegic.
. . . Leeds High School, and every government funded public high
school in the state of Alabama, pays the [AHSAA] a premium
each year to purchase insurance . . . for all student athletes . . . in
their school, to cover a multitude of benefits for their athletes and
their families for insurance coverage for a catastrophic accident
. . ..
. . . [Such insurance] was purchased from [Kennion Group] and/or
[Academic Benefit] and/or [Preferred Health] and/or [Planned
Benefit] and/or [the AHSAA] . . . and/or . . . Shepherd and/or . .
During Tanner Hunter’s initial course of treatment in critical
intensive care, the Hunter[s] were visited by a representative of
AHSAA and [were] assured that insurance was in place to handle
a multitude of expenses arising from Tanner’s injury, covering
both Tanner, and expenses that arise for parents in the event of
such an accident including travel, earnings, training, and medical
expenses . . ..
Leeds High School executed paperwork for the claim for the
Steven and Christy Hunter were contacted and met with
defendants . . . [Thomason] and . . . Shepherd from the Kennion
Group who offered themselves in a claims representative capacity
for the insurance referenced above.
Steven and Christy [Hunter] were told specifically by [Thomason]
and Shepherd that expenses incurred for Tanner, including but not
limited to medical not covered by insurance, [f]amily [t]ravel,
[l]oss of [e]arnings, [f]amily [t]raining and other benefits that
would be covered.
The insurance coverage described by [Thomason] and Shepherd
would allow Tanner to seek additional immediate treatment
necessary outside of his parents insurance coverage; to optimize
the potential for a better recovery and current treatment; extra
rehabilitation costs and expenses; and other potential medical
treatments that would allow a better present and future outcome
for Tanner hunter and his family. This insurance coverage
described by [Thomason] and Shepherd would have allowed the
Hunter[s] to retain savings, wages [sic] and would have allowed
them to better assist their child. These benefits would have
assisted Tanner directly.
The Hunter[s] gathered and submitted information to [Thomason]
and Shepherd but were then told by [Thomason] that Tanner’s
injury was not considered to be permanent and catastrophic and
additionally that since there was family coverage, only the initial
Fifty Thousand Dollars ($50,000.00) of coverage already paid
was available under any of the areas of the insurance.
The policy of insurance is not what the AHSAA represented as
being purchased by AHSAA on behalf of Leeds High School and
Tanner Hunter and Steven and Christy Hunter.
. . . [T]he policy of insurance is not insured by “Lloyds of London
and Underwriters at Lloyds, Mutual of Omaha and other A or
higher rated carriers” as stated in the policy.
The policy of insurance is not what [Thomason] and Shepherd
represented to the Hunters.
The policy of insurance appears not to confer the benefits
Due to the foregoing actions of the [d]efendants, the plaintiffs
were caused to pay sums amounts [sic] that they would not have
paid but for the statements of the defendants and/or insurance
Due to the foregoing actions of the [d]efendants, the plaintiffs
were unable to obtain medical treatment that should have been
afforded under the policy.
(Doc. 1-1 at 15-17).
The Notice of Removal
The Notice of Removal notes:
15. As set forth in the Notice of Removal, AHSAA is a private agency
founded in 1921 and organized by its member schools to regulate,
coordinate, and promote the interscholastic athletic programs among its
member schools. AHSAA contracted with Planned Benefit to provide
accident coverage through a plan named “The Academic Benefit Trust”
(hereinafter referred to as “The Plan”). A true and correct copy of The
Plan entered into between AHSAA and Planned Benefit is attached to
the Notice of Removal as Exhibit C. As stated in The Plan, the
Managing General Agent (MGA) is Planned Benefit, the Managing
General Underwriter (MGU) is Kennion Group, and the Third Party
Administrator (TPA) is Preferred Health.
16. The Plan provides it is covered under the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), 29 U.S.C. § 1001,
et. seq. Specifically, The Plan states in pertinent part:
Plan Administrator - means the licensed Third Party
Administrator that administers the plan and is responsible
for its routine administration within the meaning of section
3(16) of ERISA. This Plan has elected to be covered under
Plan Sponsor - means the group that sponsors the plan and
is responsible for its overall administration within the
meaning of Section 3(16) of ERISA. This Plan has elected
to be covered under ERISA.
([Doc. 1-3 at 5])(Emphasis added).
Conformity with State and Federal Statutes. This Plan
has elected to be covered under ERISA. Any provision of
this Plan of Benefits which, on its effective date, is in
conflict with the statutes of any state or federal regulation
is hereby amended to conform to the minimum
requirements of those statutes.
([Doc. 1-3 at 9])(Emphasis added).
The Plan Sponsor is ABT. Participating Members in the
Plan are the participating School, School District, System,
Association or other School established and organized
body recognized by the State in which it is located. The
Plan Administrator is Preferred Health Alliance
Corporation. Both the Plan Sponsor AND the Plan
Administrator are responsible for discharging all
obligations that ERISA and its regulations impose upon
plan sponsors and plan administrators, such as delivering
summary plan descriptions, annual reports, and other
notices when required by law.
([Doc. 1-3 at 12]) (Emphasis added).
(Doc. 1 at 5-6) (emphasis added in original as noted).
The case was removed by the defendants under the premise that this court has
jurisdiction pursuant to 28 U.S.C. § 1331, which states that “[t]he district courts shall
have original jurisdiction of all civil actions arising under the Constitution, laws, or
treaties of the United States.” While the complaint appears to set out only Alabama
state law claims, in the Notice of Removal the defendants argue:
17. Because The Plan is covered under ERISA, the Plaintiffs’ claims
for benefits under The Plan arise under ERISA Section 502(a)(1)(B).
See 29 U.S.C. § 1132(a)(1)(B).
18. ERISA is a federal statute and confers jurisdiction on this Court.
Id. at § 1132(e).
19. ERISA preempts all state laws related to a covered plan. 29
U.S.C. § 1144(a). The Eleventh Circuit has held that “state law claims
relate to an ERISA plan for preemption purposes whenever the alleged
conduct at issue is intertwined with the refusal to pay benefits.” Hall v.
Blue Cross Blue Shield, 134 F. 3d 1063, 1065 (11 Cir. 1989). The
Defendants contend that all of the Plaintiffs’ claims are preempted by
ERISA. However, to the extent that Plaintiffs’ claims are not preempted
by ERISA, this Court can exercise supplemental jurisdiction over the
state law claims because these claims form part of the same case or
controversy as the ERISA claims. 28 U.S.C. § 1367(a).
(Doc. 1 at 5-6).
ERISA preemption in the context of removal has been explained by the
Eleventh Circuit as follows:
ERISA is one of only a few federal statutes under which two types
of preemption may arise: conflict preemption and complete preemption.
Conflict preemption, also known as defensive preemption, is a
substantive defense to preempted state law claims. Jones v. LMR Int'l,
Inc., 457 F.3d 1174, 1179 (11th Cir.2006). This type of preemption
arises from ERISA's express preemption provision, § 514(a), which
preempts any state law claim that “relates to” an ERISA plan. 29 U.S.C.
§ 1144(a). Because conflict preemption is merely a defense, it is not a
basis for removal. Gully v. First Nat'l Bank, 299 U.S. 109, 115–16, 57
S.Ct. 96, 99, 81 L.Ed. 70 (1936); see also Ervast v. Flexible Prods. Co.,
346 F.3d 1007, 1012 n. 6 (11th Cir.2003) (stating that “defensive
preemption ... provides only an affirmative defense to state law claims
and is not a basis for removal”).
Complete preemption, also known as super preemption, is a
judicially-recognized exception to the well-pleaded complaint rule. It
differs from defensive preemption because it is jurisdictional in nature
rather than an affirmative defense. Jones, 457 F.3d at 1179 (citing
Ervast, 346 F.3d at 1014). Complete preemption under ERISA derives
from ERISA's civil enforcement provision, § 502(a), which has such
“extraordinary” preemptive power that it “converts an ordinary state
common law complaint into one stating a federal claim for purposes of
the well-pleaded complaint rule.” Taylor, 481 U.S. at 65–66, 107 S.Ct.
at 1547. Consequently, any “cause[ ] of action within the scope of the
civil enforcement provisions of § 502(a) [is] removable to federal
court.” Id. at 66, 107 S.Ct. at 1548.
Although related, complete and defensive preemption are not
Complete preemption is [ ] narrower than “defensive”
ERISA preemption, which broadly “supersede[s] any and
all State laws insofar as they ... relate to any [ERISA]
plan.” ERISA § 514(a), 29 U.S.C. § 1144(a) (emphasis
added). Therefore, a state-law claim may be defensively
preempted under § 514(a) but not completely preempted
under § 502(a). In such a case, the defendant may assert
preemption as a defense, but preemption will not provide
a basis for removal to federal court.
Cotton v. Mass. Mut. Life Ins. Co., 402 F.3d 1267, 1281 (11th Cir.2005);
accord Ervast, 346 F.3d at 1012 n. 6 (“Super preemption is
distinguished from defensive preemption, which provides only an
affirmative defense to state law claims and is not a basis for removal.”).
Connecticut State Dental Ass'n v. Anthem Health Plans, Inc., 591 F.3d 1337, 1343-44
(11th Cir. 2009). As noted in Conn. State Dental, if complete preemption is not
applicable, there is no jurisdiction. Id. (“Because the propriety of removal is at issue,
our analysis concerns complete preemption.”).
In 2011 the Eleventh Circuit set out the standard for complete ERISA
preemption as follows:
A federal district court has original jurisdiction over cases arising
under federal law. 28 U.S.C. § 1331. Federal question jurisdiction
generally exists only when the plaintiffs' well-pleaded complaint
presents issues of federal law, but the complete preemption doctrine of
ERISA creates an exception to that rule. Conn. State Dental Ass'n v.
Anthem Health Plans, Inc., 591 F.3d 1337, 1344 (11th Cir.2009).
Regardless of its characterization as a state law matter, a claim will be
re-characterized as federal in nature if it seeks relief under ERISA.
Kemp, 109 F.3d at 712.
This court acknowledged in Conn. State Dental that the test
articulated by the Supreme Court in Aetna Health Inc. v. Davila, 542
U.S. 200, 210, 124 S.Ct. 2488, 2496, 159 L.Ed.2d 312 (2004), should
govern our inquiry into whether complete preemption under ERISA
exists. 591 F.3d at 1345. The Davila test asks (1) whether the plaintiffs
could have ever brought their claim under ERISA § 502(a) and (2)
whether no other legal duty supports the plaintiffs' claim. Id.
Step one of Davila entails two inquiries: first, whether the
plaintiffs' claims fall within the scope of ERISA § 502(a), and second,
whether ERISA grants the plaintiffs standing to bring suit. Conn. State
Dental, 591 F.3d at 1350. ERISA § 502(a)(2) allows a civil action to be
brought by “a participant, beneficiary[,] or fiduciary for appropriate
relief under [29 U.S.C. § 1109].” 29 U.S.C. § 1132(a)(2). Section 1109
allows recovery against, “[a]ny person who is a fiduciary with respect
to a plan who breaches any of the responsibilities, obligations, or duties
imposed upon fiduciaries by this subchapter.” 29 U.S.C. § 1109(a).
Fiduciary duties imposed by ERISA include “proper management,
administration, and investment of fund assets, the maintenance of proper
records, the disclosure of specified information, and the avoidance of
conflicts of interest.” Mass. Mut. Life Ins. Co. v. Russell, 473 U.S. 134,
142–3, 105 S.Ct. 3085, 3090, 87 L.Ed.2d 96 (1985).
Step two of Davila looks to whether the plaintiffs' claims
implicate a duty independent of ERISA. In Davila, the Supreme Court
found that although respondents' claim asserted a breach of duty under
the Texas Health Care Liability Act (THCLA), the “interpretation of the
terms” of the benefit plan “form[ed] an essential part of their THCLA
claim,” such that there was no independent claim to defeat preemption.
542 U.S. at 213, 124 S.Ct. at 2498. Similarly, in Borrero v. United
Healthcare of N.Y., Inc., appellants argued that their contractual duties
were defined by state law, but this court found that even though the
appellants' assertion was “true in the abstract,” “the content of the claims
necessarily require[d] the court to inquire into aspects of the ERISA
plans because of the invocation of terms defined under the plans.” 610
F.3d 1296, 1304 (11th Cir.2010). This court held that if some of a party's
claims “implicate legal duties dependent on the interpretation of an
ERISA plan,” the claims are completely preempted. Id. at 1304–5.
Ehlen Floor Covering, Inc. v. Lamb, 660 F.3d 1283, 1287-88 (11th Cir. 2011).
The Notice of Removal does not cite to or discuss the Davila two-part analysis.
It undertakes no analysis regarding “whether the plaintiffs’ claims fall within the
scope of ERISA § 502(a), [and/or] whether ERISA grants the plaintiffs standing to
bring suit.” Ehlen Floor Covering, 660 F.3d at 1287-88 (part one of the Davila
analysis). It also does not “look to whether the plaintiffs’ claims implicate a duty
independent of ERISA.” Id. (part two of the Davila analysis).
The defendants’ argument section of their opposition to the motion to remand
begins with a quote from Conn. State Dental. (Doc. 15 at 4). But, the quote is not
to the part of that opinion that discusses or adopts the Davila analysis. The
opposition then continues:
The Hunters claim they are entitled to a remand of this case to
state court because: (1) the Plan’s choice of Alabama law outweighs its
choice to be governed by ERISA and federal law; (2) the Plan’s election
to allow venue in state or federal court vitiates the Plan’s determination
to be governed by ERISA; (3) the Plan failed to properly file ERISA
reports, thereby effectively waiving its election to be governed by
ERISA; (4) the Plan’s choice to be an “excess” plan for certain
beneficiaries excludes it from ERISA; (5) the Plan utilizes “government
funds” excluding the Plan from ERISA; and (6) there is no employeremployee relationship creating an ERISA plan. The Hunters fail to
provide the Court with any legal authority supporting these arguments,
other than references to the ERISA statutes themselves without further
explanation or examination. In addition to the Hunters’ failure to
provide this Court with any legal authority for their arguments, the
Motion to Remand should be denied because each of the asserted
arguments is incorrect. Each argument is discussed below.
(Doc. 15 at 4-5). Thereafter, the defendants, over the next 14 pages of their brief,
address those specific issues. (Doc. 15 at 5-18). Nowhere in those pages is the
Davila analysis mentioned or discussed. The burden of establishing subject matter
jurisdiction for the purposes of removal to this court is on the removing defendants.
See Williams v. Best Buy Co., 269 F.3d 1316, 1319 (11th Cir. 2001) (emphasis added)
(“Because this case was originally filed in state court and removed to federal court
by Best Buy, Best Buy bears the burden of proving that federal jurisdiction exists.”).
The court will not attempt to satisfy their burden for them by opining as to whether
some unidentified portion of the argument made in the opposition brief might relate
to some unknown portion of the Davila analysis.
The defendants have failed to satisfy their burden. In keeping with the
principle that “all doubts about jurisdiction should be resolved in favor of remand to
state court,” City of Vestavia Hills v. Gen. Fid. Ins. Co., 676 F.3d 1310, 1313 (11th
Cir. 2012), by separate order the motion to remand will be GRANTED, and this case
will be REMANDED to the Circuit Court of St. Clair County, Alabama.
DONE and ORDERED this 23rd day of April, 2014.
VIRGINIA EMERSON HOPKINS
United States District Judge
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