Smith v. McCormick-Armstrong Co., Inc. et al
Filing
19
MEMORANDUM AND ORDER denying 7 Motion to Remand. Signed by District Judge John W. Lungstrum on 10/11/2012. (ses)
IN THE UNITED STATES DISTRICT COURT
DISTRICT OF KANSAS
Bryan Smith,
Plaintiff,
v.
Case No. 12-4065-JWL
McCormick-Armstrong Co., Inc.;
High Plains Publishers, Inc.; The Lincoln
National Life Insurance Company; and
Jefferson Pilot Financial Insurance Company,
Defendants.
MEMORANDUM & ORDER
Plaintiff filed a petition in state court against defendants alleging wrongful denial of longterm disability benefits. Defendant Lincoln National Life Insurance Company removed the case
to this court, invoking the court’s original jurisdiction over actions brought by participants or
beneficiaries to recover benefits under employee welfare benefit plans pursuant to 29 U.S.C. §
1132(e), the Employee Retirement and Income Security Act (ERISA). This matter is now
before the court on plaintiff’s motion to remand (doc. 7). As will be explained, the motion is
denied.
In his state court petition, plaintiff alleges that he was employed by defendant
McCormick-Armstrong Co., Inc. and/or defendant High Plains Publishers, Inc. and that as part
of his employment with one or both of those entities, he was provided with long-term disability
insurance through a policy issued by defendant Jefferson Pilot Financial Insurance Company.
Plaintiff alleges that he was provided long-term disability benefits under that policy beginning
on August 4, 2007 but that on May 5, 2009, defendant Lincoln National Life Insurance
Company notified plaintiff that his long-term disability benefits would be terminated on August
4, 2009. Plaintiff appealed the termination decision through the process established by Lincoln
National and Lincoln National ultimately issued its final decision denying benefits. In his
petition, plaintiff alleges that he was wrongfully denied benefits under the long-term disability
policy because he was and remains totally disabled under the terms of the policy.
Defendant Lincoln National has removed plaintiff’s case to this court on the basis of
complete preemption under ERISA. Plaintiff, in turn, has moved to remand the case to state
court. Before turning to plaintiff’s arguments that are specific to ERISA, the court addresses
plaintiff’s two procedural objections to Lincoln National’s removal of the case. First, plaintiff
contends that Lincoln National’s removal notice is defective because defendant Jefferson Pilot
Financial Insurance Company, as the policy issuer, is the only party that may properly remove
this case. The argument is rejected. There is no statute or any other authority limiting the right
of removal in an ERISA case to the policy issuer. Lincoln National removed this case under the
general federal removal statutes, which, in multi-defendant actions, authorize any defendant
“desiring to remove any civil action” to remove that action so long as all defendants consent to
the removal of the action.
See 28 U.S.C. §§ 1441(a); 1446(b)(2)(A).
Lincoln National
represented in its removal notice that all other defendants consented to the removal.1 Moreover,
1
The Circuit Courts of Appeals are split on whether the consent requirement is satisfied by
a representation from counsel for the removing defendant that all co-defendants consent to
removal. See Proctor v. Vishay Intertechnology, Inc., 584 F.3d 1208, 1224-25 (9th Cir. 2009)
(collecting cases). Some Circuits have required only that “at least one attorney of record” sign
the notice and certify that the remaining defendants consent to removal. See id. at 1224. Other
Circuits have adopted the more demanding requirement that each co-defendant must
independently express their consent to removal within the statutory thirty-day period. See id.;
Pietrangelo v. Alvas Corp., 686 F.3d 62, 66 (2d Cir. 2012).
2
Lincoln National has submitted uncontroverted evidence that it is the successor by merger to
Jefferson Pilot; that Jefferson Pilot no longer exists as a separate entity; and that Lincoln
National assumed all rights and obligations under the insurance policy at issue in this case. For
these reasons, Lincoln National is a proper party to remove this action.
Second, plaintiff contends that removal is improper because Lincoln National has
attached a fraudulent or forged insurance policy to its notice such that the document is
inadmissible and, in the absence of admissible evidence of the policy, removal on the grounds of
the policy is improper. The policy attached by Lincoln National is dated August 1, 2004 but
identifies the policy issuer as Lincoln National despite the fact that Lincoln National did not
merge with Jefferson Pilot until nearly 3 years later. According to plaintiff, then, Lincoln
National has fraudulently “back dated” the policy, which plaintiff deems an “after the fact
creation.” Lincoln National’s evidence, however, demonstrates that its name appears on the
policy as a result of the standard industry practice of maintaining policies in electronic form and
then printing the policies as needed on the forms and letterhead of the current company.
The Tenth Circuit has not addressed this issue. But even assuming the Tenth Circuit
adopted the more stringent test, the court concludes that the so-called “rule of unanimity” is
satisfied here. Although the non-removing defendants did not independently express their
consent within the 30-day statutory period, counsel for the removing defendant also represents
each of the co-defendants such that he is authorized to represent to the court what their positions
are and they are bound by the representations made. See Cook v. Randolph County, 573 F.3d
1143, 1150-51 (11th Cir. 2009) (Absent some basis for believing that any of the defendants did
not want the case removed, the representation of the attorney for the defendants that all of her
clients consented to the removal is enough).
3
Plaintiff does not dispute this evidence and the court concludes that plaintiff’s argument here is
a non-starter.2
The court turns, then, to plaintiff’s substantive arguments concerning the propriety of
removal of his state court case—namely, that the long-term disability insurance policy under
which he was denied benefits is not an ERISA plan and, in any event, Lincoln National has
waived its right to assert ERISA preemption. By way of background, the jurisdiction of the
federal courts is limited by Article III of the Constitution and by statutes passed by Congress.
Hansen v. Harper Excavating, Inc., 641 F.3d 1216, 1220 (10th Cir. 2011). “A case that is filed
in state court may be removed from state to federal court at the election of the defendant, but
only if it is one ‘of which the district courts of the United States have original jurisdiction,’
which is to say if federal subject-matter jurisdiction would exist over the claim.” Id. (quoting 28
U.S.C. § 1441(a)).
Typically, federal question jurisdiction turns on the “well-pleaded
complaint” rule, such that the federal question must appear on the face of the plaintiff’s
complaint; “that the defendant possesses a federal defense is not sufficient to invoke federal
question jurisdiction. Id. (citing Felix v. Lucent Techs., Inc., 387 F.3d 1146, 1154 (10th Cir.
2004)). In other words, if the plaintiff files in a state court pleading only state-law causes of
action, the case is generally not removable to federal court based on federal question
jurisdiction. Id. (citations omitted).
2
Plaintiff also contends that the policy attached by Lincoln National is materially different
from a March 1, 2004 policy submitted by plaintiff in support of his motion to remand. While
there may exist some dispute over which policy’s terms apply to plaintiff’s claim, the fact that
the two policies may have different terms due to policy amendments (it appears that the policy
attached by plaintiff is simply a prior version of the policy submitted by Lincoln National) is not
relevant to the removal question where plaintiff does not contend that any differences between
the policies’ terms affect whether plaintiff’s claim arises under an ERISA-regulated plan.
4
The Supreme Court, however, has recognized an exception to the well-pleaded complaint
rule for a narrow category of state-law claims that can independently support federal jurisdiction
and removal. Id. at 1220-21 (citing Felix, 387 F.3d at 1154). These claims are “completely
preempted” because “they fall within the scope of federal statutes intended by Congress
completely to displace all state law on the given issue and comprehensively to regulate the
area.” Id. at 1221 (quoting Felix, 387 F.3d at 1154–55). Complete preemption makes a statelaw claim “purely a creature of federal law,” and thus removable from state to federal court from
the outset. Id. (citations and quotations omitted). “The Supreme Court has recognized only a
few federal statutes that so pervasively regulate their respective areas that they have complete
preemptive force; ERISA is one.” Id. (citing Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 67
(1987)). Section 502(a) of ERISA authorizes civil actions “(1) by a participant or beneficiary . .
. (B) 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.” Id.
(quoting ERISA § 502(a)(1)(B)).
Under Taylor, then, a state-law suit that falls within the scope of this section may be
removed to federal court via complete preemption. Id. A state-law suit falls within § 502(a) and
may be removed to federal court if the “claim is for benefits due or claimed under an ERISAregulated plan, or to enforce or clarify rights under a plan, and no legal duty independent of
ERISA is implicated in the claim.” Id. (citing Aetna Health Inc. v. Davila, 542 U.S. 200, 210
(2004)). According to plaintiff, Lincoln National’s removal of the case was improper because
the policy at issue is not an ERISA plan and Lincoln National has procedurally and contractually
waived its right to assert ERISA preemption.
5
Plaintiff contends that the policy at issue is not an ERISA-regulated plan for two reasons.
First, plaintiff argues that his employer High Plains Publishers, Inc. did not procure the
insurance coverage; rather, it was obtained by McCormick-Armstrong, Inc.
According to
plaintiff, then, the plan is not an “employee welfare benefit plan” as defined by ERISA because
the definition requires that the plan be “established or maintained by an employer.” See 29
U.S.C. § 1002(1). Second, plaintiff contends that the policy is not an ERISA plan because he
paid for 100 percent of the premiums such that the plan falls within the “safe harbor” exclusion
from ERISA under the pertinent Department of Labor regulations. As will be explained, the
court rejects both of these arguments.
ERISA governs “employee benefit plans,” 29 U.S.C. § 1003(a), one form of which is an
“employee welfare benefit plan,” 29 U.S.C. § 1002(3). ERISA defines “employee welfare
benefit plan” as:
any plan, fund, or program . . . established or maintained by an employer . . . for
the purpose of providing for its participants or their beneficiaries, through the
purchase of insurance or otherwise . . . medical, surgical, or hospital care or
benefits, or benefits in the event of sickness, accident, disability, death or
unemployment . . .
Gaylor v. John Hancock Mut. Life Ins. Co., 112 F.3d 460, 464 (10th Cir. 1997) (quoting 29
U.S.C. § 1002(1)). The definition, then, “can be broken down into five elements: (1) a “plan,
fund, or program” (2) established or maintained (3) by an employer (4) for the purpose of
providing health care or disability benefits (5) to participants or their beneficiaries.” Id. (citation
omitted). Plaintiff challenges only whether the plan here was maintained “by an employer,” as
it is undisputed that his employer, High Plains Publishers, did not establish or maintain the plan.
ERISA, however, does not define an “employer” as the employer of the plan participant;
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it defines that term much more broadly. See Frank v. U.S. West, Inc., 3 F.3d 1357, 1363 n.5
(10th Cir. 1993). Indeed, the ERISA statute defines an employer as “any person acting directly
as an employer, or indirectly in the interest of an employer, in relation to an employee benefit
plan.” 29 U.S.C. § 1002(5). Lincoln National’s evidence demonstrates that McCormickArmstrong was acting in the interest of High Plains Publishers in connection with the benefit
plan at issue here. Specifically, Lawrence Lampe, the Chief Financial Officer of High Plains
Publishers, Inc., has submitted a declaration in which he states that High Plains Publishers and
McCormick have common ownership and are considered “sister” companies. He further states
that while McCormick is the policy holder, the plan covers eligible employees of both
McCormick and High Plains Publishers. While plaintiff objects to Mr. Lampe’s declaration on
certain evidentiary grounds which the court overrules,3 plaintiff does not dispute the substance
of Mr. Lampe’s testimony. Moreover, the policy itself defines the “employer” to include the
policyholder as well as “any division, subsidiary or affiliated company named in the
Application.” While the Application is not before the court, Mr. Lampe states that High Plains
Publishers is an “affiliate” of McCormick as that term is used in the policy definition of
3
Plaintiff’s first objection to Mr. Lampe’s declaration is that it does not comply with 28
U.S.C. § 1746 because he qualifies his declaration by stating that it is true and correct “to the
best of [his] knowledge.” The objection is overruled as moot. Mr. Lampe has submitted an
amended declaration that removes this language and plaintiff has not objected to that amended
declaration.
Plaintiff’s second objection to Mr. Lampe’s declaration is that his assertions lack
foundation to the extent he testifies as to matters pertaining to McCormick-Armstrong because
he is not an employee of McCormick-Armstrong. This objection is overruled. Mr. Lampe’s
declaration is sufficient to demonstrate that he has personal knowledge (or has gained sufficient
knowledge through an examination of company records) of the matters to which he has testified,
including matters pertaining to the corporate relationship between McCormick and High Plains
Publishers.
7
“employer.” There is no evidence suggesting otherwise. The court concludes that McCormickArmstrong may provide benefits for High Plains Publishers’ employees under ERISA. See
Frank, 3 F.3d at 1363 n.5 (“[I]t is not beyond the normal parent-subsidiary relationship for the
parent to serve as ERISA Plan Administrator for the subsidiary.”);
The court turns, then, to plaintiff’s argument that the plan is excluded from ERISA
pursuant to the regulatory “safe harbor” exception. The Department of Labor has issued “safe
harbor” regulations excluding certain group insurance programs from ERISA’s definition of
“employee welfare benefit plan”:
(j) Certain group or group-type insurance programs. For purposes of Title I
of the Act and this chapter, the terms “employee welfare benefit plan” and
“welfare plan” shall not include a group or group-type insurance program offered
by an insurer to employees or members of an employee organization, under which
(1) No contributions are made by an employer or employee organization;
(2) Participation in the program is completely voluntary for employees or
members;
(3) The sole functions of the employer or employee organization with
respect to the program are, without endorsing the program, to permit the insurer to
publicize the program to employees or members, to collect premiums through
payroll deductions or dues checkoffs and to remit them to the insurer; and
(4) The employer or employee organization receives no consideration in the
form of cash or otherwise in connection with the program, other than reasonable
compensation, excluding any profit, or administrative services actually rendered in
connection with payroll deductions or dues checkoffs.
29 C.F.R. § 2510.3-1(j). A plan must meet each of these four factors for exclusion from ERISA
coverage. See Gaylor v. John Hancock Mut. Life. Ins. Co., 112 F.3d 460, 463 (10th Cir. 1997).
Plaintiff argues that no contribution was made by McCormick-Armstrong or High Plains
Publishers with respect to his long-term disability insurance such that the first factor is satisfied.
8
The uncontroverted evidence, however, demonstrates that High Plains Publishers, Inc. paid
portions of premiums for employees on the health, life and accidental death parts of the Plan.
While it is undisputed that plaintiff paid for his long-term disability coverage, he cannot “sever
his optional disability coverage” from the rest of the benefits he received through the Plan. See
id. (rejecting safe harbor argument where employee paid for LTD premiums but employer
contributed to other benefits); Alloco v. Metropolitan Life Ins. Co., 256 F. Supp. 2d 1023, 102728 (D. Ariz. 2003) (refusing to consider LTD benefit plan in isolation from overall benefit plan
provided by employer). In any event, even if the long-term disability policy is viewed in
isolation, the evidence reflects that the third prong of the safe harbor regulation has not been
satisfied. Plaintiff does not dispute (other than by reasserting his previous objections to Mr.
Lampe’s affidavit) that McCormick-Armstrong negotiated certain features of the policy,
including the amount of the premiums, the length of the elimination period, the amount of
monthly benefit upon a finding of disability, and the maximum benefit amount. McCormick
also negotiated the classes of employees to whom coverage would apply and the terms and
conditions for each of them.
In such circumstances, McCormick’s role is not limited to
collecting premiums and remitting them to the insurer. See Carter v. Guardian Life Ins. Co.,
2011 WL 1884625, at *2 (E.D. Ky. May 18, 2011) (employer was sufficiently involved so as to
“endorse” the plan where employer negotiated certain terms of policy); Parrington v. Unum
Provident Corp., 2008 WL 4006907, at *4 (W.D. Ark. Aug. 26, 2008) (employer endorsed plan
for purposes of third prong of safe harbor regulation; employer was actively involved in
negotiating terms of the policies).
9
Plaintiff next contends that, even if the long-term disability insurance policy is an ERISA
plan, Lincoln National has procedurally waived its right to assert that the policy is governed by
ERISA. By way of background, the record reflects that plaintiff’s counsel contacted Lincoln
National in April 2011 by letter for the purpose of advising Lincoln National that he was
“preparing to file an action in the Federal District Court” for wrongful denial of benefits and that
if Lincoln National was interested in reconsidering plaintiff’s claim, it should contact plaintiff’s
counsel. Plaintiff’s counsel also asked in the letter whether Lincoln National was “going to take
the position this is an ERISA policy.” A disability appeals specialist employed by Lincoln
National responded to plaintiff’s counsel, also by letter, stating that Lincoln National was
unwilling to review the claim any further because plaintiff had exhausted the appeals process.
The letter did not address whether the company believed or intended to assert that the policy was
an ERISA plan.
Because Lincoln National did not affirmatively assert in April 2011 that the policy was
an ERISA-covered plan, plaintiff contends that Lincoln National has waived its right to make
that assertion now. Plaintiff cites no authority to support this argument and he appears to
abandon the argument in his reply brief. In any event, the court rejects this argument and finds
no authority supporting the idea that a defendant waives the right to assert ERISA preemption
through its silence on the issue during pre-litigation correspondence. See Kerans v. Provident
Life & Acc. Ins. Co., 452 F. Supp. 2d 665, 676 (N.D. Tex. 2005) (denying motion for remand
based on waiver argument; defendant did not waive its right to assert ERISA preemption where
it raised that argument in its removal notice); Halprin v. Equitable Life Assurance Soc’y, 267 F.
10
Supp. 2d 1030, 1040 (D. Colo. 2003) (employer did not waive ERISA preemption argument by
raising it for the first time at summary judgment stage).
In a related vein, plaintiff contends that Lincoln National has contractually waived its
right to assert ERISA preemption because the first page of the policy states that “This Policy is
delivered in the state of Kansas and subject to the laws of that jurisdiction.” Again, plaintiff
cites no authority for his argument and appears to abandon it anyway in his reply brief.
Nonetheless, the court rejects this argument as Lincoln National may not contract to choose state
law as the governing law of an ERISA-governed benefit plan.
See Tompkins v. United
Healthcare of New England, Inc., 203 F.3d 90, 97-98 (3d Cir. 2000) (finding no case that parties
may contractually waive the right to assert ERISA preemption; policy language reflecting
commitment to “compliance with state law” did not operate as waiver); Allstate Ins. Co. v. My
Choice Med. Plan for LDM Techs. Inc., 298 F. Supp. 2d 651, 654-55 (E.D. Mich. 2004)
(rejecting argument that choice-of-law provision contractually foreclosed defendant from
asserting ERISA preemption; contractual waiver impermissible in ERISA context); In re Sears
Retiree Group Life Ins. Litig., 90 F. Supp. 2d 940, 951 (N.D. Ill. 2000) (“Even if Sears intended
to adopt Illinois law for purposes of interpreting the Plan documents, which is not at all certain,
ERISA preemption would negate such an attempt. A choice of law provision does not operate to
waive the applicability of federal law regarding interpretation of an ERISA plan.”).
In sum, the benefit plan at issue in this case meets ERISA’s definition of an employee
welfare benefit plan under 29 U.S.C. § 1002(1). Because plaintiff is undisputedly making a
claim for benefits under that plan, removal is proper. Hansen v. Harper Excavating, Inc., 641
F.3d 1216, 1221 (10th Cir. 2011).
11
IT IS THEREFORE ORDERED BY THE COURT THAT plaintiff’s motion to
remand (doc. 7) is denied.
IT IS SO ORDERED.
Dated this 11th day of October, 2012, at Kansas City, Kansas.
s/ John W. Lungstrum
John W. Lungstrum
United States District Judge
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