Sankey v. Metropolitan Life Insurance Company et al
Filing
15
ORDER & REASONS denying 11 Motion to Remand to State Court and to Award Attorney's Fees. Signed by Judge Carl Barbier on 6/19/12. (sek, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
YONG OK SANKEY
CIVIL ACTION
VERSUS
NO: 12-1135
METROPOLITAN LIFE INSURANCE
COMPANY, et al.
SECTION: "J” (5)
ORDER AND REASONS
Before the Court are Plaintiff Yong Ok Sankey’s Motion to
Remand and to Award Attorney’s Fees (Rec. Doc. 11) and Defendant
Metropolitan Life Insurance Company’s opposition to same (Rec.
Doc.
13).
The
motion
is
set
for
submission
on
supporting
memoranda and with oral argument held on June 20, 2012.
PROCEDURAL HISTORY AND BACKGROUND FACTS
In this civil action, Plaintiff sues under a life insurance
1
policy under which she was the named beneficiary and her deceased
husband
was
the
named
insured.
Plaintiff’s
husband,
Donald
Franklin Sankey, Jr., was employed by Textron, Inc. (“Textron”)
and had life insurance coverage through a group policy with
Metropolitan
employment.
Life
Insurance
Company
(“MetLife”)
during
his
Plaintiff alleges that after Mr. Sankey terminated
his employment, Mr. Sankey converted his group policy into an
individual life insurance policy.
policy
was
$638.56.
worth
After
$188,000
Mr.
and
Sankey
Plaintiff alleges that the
was
passed
issued
away
for
on
a
April
premium
12,
of
2011,
Plaintiff submitted a claim to MetLife under the individual life
insurance policy, and she alleges that on June 21, 2011, she
received a letter from MetLife informing her that MetLife had
made a mistake in issuing the policy and would not honor the
death coverage benefits of $188,000.
She alleges that MetLife
only agreed to pay a lesser amount of $55,200, unilaterally
canceling the original policy and issuing a new policy pursuant
to which the limited death benefit was paid.
Plaintiff
MetLife
and
commenced
the
this
insurance
action
agent
in
who
individual policy on behalf of MetLife.
state
allegedly
court
against
procured
the
Her petition alleges
that MetLife breached its obligation to her in refusing to pay
2
the
full
amount
of
the
policy,
failing
to
act
upon
her
application within a reasonable amount of time, and retroactively
amending coverage.
She alleges that MetLife is liable for the
additional contractual amount representing the difference between
$188,000 and the $55,200 she was paid.
She also claims that she
is entitled to penalties, damages, and attorney’s fees.
MetLife
filed its notice of removal with this Court on May 3, 2012, and
Plaintiff subsequently filed the instant motion to remand.
PARTIES’ ARGUMENTS
Plaintiff
argues
that
the
Court
lacks
subject
matter
jurisdiction and therefore moves that her case be remanded to
state court.
She argues that MetLife’s removal based on alleged
federal question jurisdiction was improper because the policy in
question is an individual life policy not covered by the Employee
Retire Income Security Act (“ERISA”).
Plaintiff avers that her
claim does not involve a group policy procured on behalf of her
husband through his former employer, but rather an individual
policy that was converted from a group policy.
She asserts that
her husband terminated his employment with Textron and converted
some of the coverage in the employer’s group plan to a new,
separate individual policy based on conversion rights; that the
3
contract is between MetLife and her husband; that her husband did
direct
pay
individual
of
premiums
policy
did
from
not
his
require
bank
to
MetLife;
ongoing
that
administration
the
by
Textron; and that the individual policy was issued its own policy
number.
upon
a
Therefore, Plaintiff argues that her claim is not based
group
employer
plan
regulated
question jurisdiction is lacking.
by
ERISA,
and
federal
Plaintiff also asserts that
complete diversity is lacking and was not the basis for MetLife’s
removal.
Thus, she argues that this matter should be remanded to
state court.
Plaintiff further requests attorney’s fees and costs.
She
avers that “[c]ounsel for MetLife in this case are no strangers
to the lack of application of ERISA to a policy that had already
been converted from a group plan to an individual policy and the
law regarding same.”1
Plaintiff asserts that prior to filing the
instant motion to remand, her counsel gave MetLife’s counsel the
opportunity to voluntarily remand, which offer MetLife’s counsel
declined.
cast
in
Accordingly, Plaintiff requests that the defendants be
judgment
for
the
amount
of
time
her
counsel
spent
preparing the motion and supporting memorandum.
Defendant MetLife argues that the Court has federal question
1
Rec. Doc. 11-1, at 4.
4
jurisdiction
over
this
action.
MetLife
argues
that
ERISA
provides the exclusive federal remedy for resolution of claims
regarding
the
right
to
convert
group
life
insurance
to
an
individual policy, and therefore this case is removable due to
the presence of federal question jurisdiction.
MetLife argues
that the issue of whether Plaintiff’s husband was entitled to an
individual conversion policy is dependent upon the terms of the
ERISA
plan
that
provided
him
with
the
right
to
convert.
Therefore, MetLife argues that Plaintiff’s claims relate to an
ERISA plan, and thus ERISA preempts Plaintiff’s state law claims
and provides the exclusive federal remedy for their resolution.
MetLife
requests
that
the
Court
deny
Plaintiff’s
motion
to
remand, but if the Court remands the case, to deny Plaintiff’s
request for attorney’s fees because MetLife had a good faith
basis for its removal.
LEGAL STANDARD
Generally, a defendant may remove a civil action filed in
state
court
jurisdiction.
jurisdiction
if
a
See
exists
federal
court
would
28 U.S.C. § 1441(a).
where
the
matter
in
have
had
Original diversity
controversy
$75,000 and is between citizens of different states.
5
original
exceeds
28 U.S.C. §
1332(a)(1).
Original federal question jurisdiction exists for
civil actions arising under the Constitution, laws, or treaties
of the United States.
burden
of
proving
by
jurisdiction exists.
1412
(5th
Cir.
28 U.S.C. § 1331.
a
A defendant bears the
preponderance
of
the
evidence
that
De Aguilar v. Boeing Co., 47 F.3d 1404,
1995).
The
jurisdictional
facts
removal are examined as of the time of removal.
supporting
Gebbia v. Wal-
Mart Stores, Inc., 233 F.3d 880, 883 (5th Cir. 2000).
The
removal statute should be strictly construed in favor of remand.
Manguno v. Prudential Prop. and Cas. Ins. Co., 276 F.3d 720, 723
(5th Cir. 2002).
“It is long settled law that a cause of action arises under
federal
law
only
when
the
plaintiff’s
raises issues of federal law.”
481
U.S.
58,
63
(1987).
well-pleaded
complaint
Metro. Life Ins. Co. v. Taylor,
However,
where
Congress
clearly
manifests the intent to make causes of action within the scope of
the civil enforcement provisions of ERISA removable to federal
court,
a
case
bringing
such
causes
of
action
is
removable
regardless of whether federal preemption is obvious at the time a
petition
is
filed.
Id.
at
66.
ERISA’s
civil
enforcement
provision “completely preempts any state cause of action seeking
the same relief, regardless of how artfully pled as a state
6
action.”
Copling v. Container Store, Inc., 174 F.3d 590, 594
(5th Cir. 1999), overruled on other grounds by Arana v. Ochsner
Health Plan, 338 F.3d 433 (5th Cir. 2003).
Thus, a civil action
brought to enforce rights under an ERISA plan invokes federal
jurisdiction.
29 U.S.C. § 1132(f); Copling, 174 F.3d at 594 (“If
the plaintiff moves to remand, all the defendant has to do is
demonstrate a substantial federal claim, e.g., one completely
preempted by ERISA, and the court may not remand.”).
Where
complete ERISA preemption of a state law claim occurs, the claim
is within the jurisdiction of the federal court.
Day v. Lockheed
Martin Corp., 428 F. App’x 275, 278 (5th Cir. 2011).
DISCUSSION
To
determine
whether
Plaintiff’s
claims
are
completely
preempted by ERISA, the Court must determine whether the claims
fall within the scope of ERISA § 502(a)(1).2
v. Davila, 542 U.S. 200, 210 (2004).
2
Aetna Health Inc.
A claim falls within the
ERISA § 502(a)(1) provides, in pertinent part:
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)(1)(B).
7
scope of § 502(a)(1) when the claimant is entitled to coverage
only because of the terms of an ERISA-regulated employee benefit
plan, and where no legal duty independent of ERISA or the plan
terms is violated.
words,
if
an
Aetna Health, 542 U.S. at 210.
individual,
at
some
point
in
time,
“In other
could
have
brought his claim under ERISA § 502(a)(1)(B), and where there is
no
other
independent
legal
duty
that
is
implicated
by
a
defendant’s actions, then the individual’s cause of action is
completely pre-empted by ERISA § 502(a)(1)(B).”
Id.
Section
502(a)(1) permits a plan participant or beneficiary to sue to (1)
recover benefits due under the plan, (2) enforce his or her
rights under the plan, or (3) clarify his or her rights to future
benefits under the plan.
29 U.S.C. § 1132(a)(1)(B).
determine
preemption
where
complete
exists,
so
as
Thus, to
to
create
federal jurisdiction, the Court considers whether Plaintiff’s
claims are claims to recover benefits under or to enforce her
rights under a plan regulated by ERISA.
The parties do not appear to dispute that the life insurance
policy Mr. Sankey had while he worked at Textron was an ERISAregulated plan.
However, Plaintiff does not sue under that plan,
but rather under the individual life insurance policy allegedly
created when Mr. Sankey exercised conversion rights under the
8
ERISA group plan.
under
federal
law
MetLife argues that Plaintiff’s claim arises
because
resolution
of
the
claim
requires
interpretation of the group plan funded by MetLife to determine
whether conversion from the plan to an individual life policy was
proper.
Mr. Sankey was a participant in Textron’s group plan,
which provided life insurance benefits, and the plan was funded
and administered by MetLife.3
Mr. Sankey applied to convert his
supplemental group life coverage to an individual policy, which
MetLife avers that it then erroneously issued.4
language
in
the
Textron
group
plan
MetLife cites
explaining
that
the
appropriate conversion amount is decreased by the amount of the
accelerated benefit paid.5
Thus,
MetLife
argues
that
although
the
law
is
unclear
3
See Rec. Doc. 1-2, at 2, ¶¶ 3-5 (declaration of James
McCarthy, Senior Technical Insurance Advisor at MetLife, attached
to MetLife’s notice of removal).
4
See Rec. Doc. 1-2, at 3, ¶¶ 11-12 (McCarthy’s
declaration). MetLife avers that when it approved payment of an
accelerated benefits claim to Mr. Sankey, MetLife explained the
effects of this payment on Mr. Sankey’s remaining group
supplemental coverage. Rec. Doc. 1, at 3, ¶ IV (MetLife’s notice
of removal). MetLife avers that it subsequently erroneously
issued an individual policy on the mistaken belief that, at the
time of Mr. Sankey’s application for conversion, he had optional
life insurance under the group plan in the amount of $276,000.
Id. at 4, ¶ V.
5
See Rec. Doc. 1-3, at 44 (Textron Benefit Plan).
9
concerning whether claims for benefits under conversion policies
are governed by ERISA, it is clear that rights to conversion are
governed by ERISA.
MetLife argues that Mr. Sankey’s right to
convert from the group plan to an individual policy is governed
by ERISA, and therefore this case was properly removable.
On the
other hand, Plaintiff argues that there is no right-to-convert
issue raised by her petition because Mr. Sankey obtained an
individual policy and paid the premiums directly to MetLife.6
There
is
arguably
some
disagreement
concerning
whether
claims for benefits under conversion policies are governed by
ERISA.
(8th
See Painter v. Golden Rule Ins. Co., 121 F.3d 436, 439-40
Cir.
1997)
(concluding
that
claim
for
benefits
under
conversion policy was governed by ERISA because the policy came
into being as a result of the insured’s exercise of her right
under the group policy to obtain the conversion policy); contra
Waks v. Empire Blue Cross/Blue Shield, 263 F.3d 872, 874 (9th
Cir. 2001) (“An individual insurance policy is not subject to
ERISA solely because it was created through the conversion of a
group policy that was subject to ERISA.”); Demars v. CIGNA Corp.,
173 F.3d 443, 450 (1st Cir. 1999) (holding that conversion policy
6
Although her argument is a bit unclear, Plaintiff seems to
argue that there is no right-to-convert issue present because
MetLife actually permitted Mr. Sankey to convert.
10
is
not
ERISA
plan
and
that
state
law
claims
conversion policy are not preempted by ERISA).
relating
to
Plaintiff cites
Shelton v. Standard Insurance Co., No. 07-6030, 2008 WL 2067024
(E.D. La. May 14, 2008), for the proposition that her husband’s
life insurance policy is not preempted by ERISA.
In Shelton, the plaintiff, who had been insured through his
employer’s group plan, exercised his option under the plan to
purchase a conversion policy.
Id. at *1.
When he filed suit
against the insurer in state court, the insurer removed the case
to
federal
jurisdiction.
court,
Id.
alleging
The
diversity
insurer
and
argued
federal
that
question
because
ERISA
governed the original plan, it also controlled the conversion
policy.
After noting that the Fifth Circuit has not addressed
the boundaries of ERISA preemption with respect to conversion
policies, the court applied the Fifth Circuit’s three-part test
for determining whether a given plan is an ERISA plan subject to
federal preemption:
(1) the plan must exist, (2) the plan must
be established or maintained by an employer for the purpose of
benefitting the plan participants, and (3) the plan cannot fall
into the Department of Labor’s “safe harbor provision.”
Id. at
*3.
Applying this test, the court in Shelton noted that the plan
11
certainly existed.
The court found, however, that the second and
third prongs revealed that the conversion policy was not an ERISA
plan.
The court noted that the plaintiff had exercised his
option to insure through the conversion policy and had paid all
premiums
former
employer
policy.
been
directly
to
was
the
not
insurer.
involved
Further,
with
the
plaintiff’s
administration
of
the
Thus, the court found that the conversion policy had
established
and
maintained
by
the
conversion policy was not an ERISA plan.
plaintiff,
Id. at *4.
and
the
The court
likewise found that under the third prong, because the insured
paid
all
premiums
directly
to
his
insurer,
and
because
voluntarily converted, the “safe harbor” provision applied.
he
Id.7
However, the court noted that the question was whether ERISA
preempted claims under the conversion policy, “not whether ERISA
governs the right to convert.”
Id. at *3 n.5; see also id. at *5
(“Clearly, a suit regarding the right to a conversion policy is
7
The safe-harbor contains an additional four
(4) factors to determine whether an insurance
policy is subject to ERISA: (1) does the
employer contribute to the plan; (2) is
participation voluntary; (3) is the
employer’s role limited to collecting
premiums and remitting them to the insurer;
and (4) does the employer receive profit from
the plan?
Shelton, 2008 WL 2067024, at *4.
12
not the same as a suit to enforce the terms of an already
obtained conversion policy.”).
Therefore, the Court may not need to reach whether the
conversion plan at issue is an ERISA-regulated plan that would
invoke
federal
preemption.
Rather,
as
MetLife
argues,
if
Plaintiff’s claim is essentially a suit regarding the right to
convert
from
Mr.
Sankey’s
ERISA
plan
to
an
individual
life
insurance policy, then federal jurisdiction may exist by virtue
of complete federal preemption.
MetLife cites White v. Provident
Life & Accident Insurance Co., 114 F.3d 26 (4th Cir. 1997), in
which the claimant sought a declaration that he was entitled to
life
insurance
benefits
under
individual conversion policy.
both
a
group
policy
and
an
The terms of the group policy
permitted employees who were no longer employed by the company to
apply for a conversion policy.
Id. at 27.
After discovering
that it had made a mistake in issuing the conversion policy, the
insurer
notified
simultaneous
policies.
the
coverage
Id.
insured
under
that
both
he
the
could
group
not
and
maintain
conversion
After the insured filed a declaratory action in
state court, the insurer removed the case to federal court on the
grounds that the insured’s claims were preempted by ERISA.
Id.
On summary judgment, the court concluded that ERISA governed the
13
case because ERISA governs the right of conversion from a group
policy
to
an
individual
policy.
Id.
at
28.
Because
the
insured’s rights were clearly related to the conditions placed by
the group policy on the right of conversion, the insured’s claims
were governed by ERISA.
Id.
A similar result obtained in
Pergosky v. Life Insurance Co. of North America, No. 01-4059,
2003 WL 1544582 (E.D. Pa. Mar. 24, 2003), which MetLife also
cites.
See
Pergosky,
2003
WL
1544582,
at
*6
(where
the
plaintiff’s claim for benefits related to conditions placed by
the group plan on the right of conversion, the claim was governed
by ERISA).
Where
both parties to an insurance contract would not have
agreed to the contract had they known the proper construction of
the group policy, there is a mutual mistake about the scope of
coverage such that the disadvantaged party is entitled to avoid
the contract.
Ramsey v. Colonial Life Ins. Co. of Amer., 12 F.3d
472, 480 (5th Cir. 1994).
Here, MetLife alleges mistake as to
the scope of coverage under the Textron group plan.
The Court
finds MetLife’s argument persuasive, that even though Plaintiff’s
petition designates her claim as one concerning a non-ERISA plan,
effective
resolution
of
that
claim
requires
judicial
consideration of whether Mr. Sankey had a right to convert based
14
on the Textron group plan.
The Court agrees with the reasoning
of White that such a right to convert from an ERISA plan presents
a claim that is preempted by ERISA.
See also Wright v. Anthem
Life Ins. Co. of Ind., No. 399CV33-P-A, 2000 WL 870807, at *7
(N.D. Miss. Jun. 14, 2000) (“Claims arising from the right to
convert to an individual policy are grounded in ERISA and are to
be decided by reference to the terms of the ERISA plan.”) (citing
29
U.S.C.
§
1162(5)
(providing
conversion
options
in
ERISA
plans)); Gabner v. Metro. Life Ins. Co., 938 F. Supp. 1295, 1302
(E.D. Tex. 1996) (right to conversion to an individual life
insurance policy was governed by ERISA).
Although Plaintiff argues that this case does not present a
right-to-convert
conversion
issue
policy
until
because
after
MetLife
Mr.
did
Sankey’s
not
alter
death,
Plaintiff
acknowledges that MetLife unilaterally canceled the policy.
Doc. 1-1, at 4, ¶ XII.
individual
life
conversion
rights
Accordingly,
the
policy
Rec.
Whether MetLife properly canceled the
depends
enumerated
Court
the
finds
upon
in
that
the
construction
of
the
Textron
group
plan.
Plaintiff’s
claim,
which
requires the interpretation of ERISA plan conversion rights, is
preempted by ERISA, such that the Court has jurisdiction.
15
CONCLUSION
For all the reasons expressed above, Plaintiff’s Motion to
Remand and to Award Attorney’s Fees (Rec. Doc. 11) is hereby
DENIED.
New Orleans, Louisiana, this 19th day of June, 2012.
____________________________
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
16
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?