JN'P Enterprises, LLC v. Companion Life Insurance Co et al
Filing
18
MEMORANDUM OPINION AND ORDER granting in part and denying in part 11 MOTION to Remand. This action is remanded to County Court at Law No. 3, Harris County, Texas. (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
IN'P ENTERPRISES, LLC,
§
§
§
§
§
§
§
§
§
§
§
Plaintiff,
v.
COMPANION LIFE INSURANCE
COMPANY and ASSURANCE
RESOURCES, INC.,
Defendants.
CIVIL ACTION NO. H-14-3633
MEMORANDUM OPINION AND ORDER
Plaintiff, IN'P Enterprises, LLC ("JNP"), brings this action
against defendants, Companion Life Insurance Company ("Companion")
and Assurance Resources,
Inc.
( "ARI" , collectively "defendants")
for a variety of claims arising from an alleged failure to pay
insurance benefits.
Pending before the court is IN'P Enterprises,
LLC's Motion to Remand for Lack of Subject Matter Jurisdiction and
Request for Attorney's Fees (Docket Entry No. 11).
For the reasons
explained below, JNP's motion to remand will be granted, and JNP's
request for attorney's fees will be denied.
I.
JNP
Factual and Procedural Background
initiated
Plaintiff's
this
Original
action
Petition
against
defendants
("Petition" )
and
by
filing
Request
for
Disclosures in Cause No. 1053197, styled IN'P Enterprises, LLC v.
Companion Life Insurance Company and Assurance Resources, Inc., in
the
County
November 18,
Court
2014,
at
Law
No.3,
Harris
County,
Texas.
On
JNP filed Plaintiff's First Amended Petition
with Request for Disclosure ("JNP's First Amended Petition").
In
the Amended Petition JNP made the following allegations of fact:
10.
JNP entered into an agreement with Companion,
whereby JNP would pay a premium to Companion, and,
in return Companion was to provide insurance
coverage to JNP.
11.
JNP paid its premiums and fulfilled all conditions
precedent.
12.
JNP submitted two unrelated claims to ARI for
coverage, and ARI attempted to obtain concessions
from JNP from one claim in order to provide a
defense for the other:
a.
"Valderrama Claim": The Valderrama Claim is an
occupational
accident
claim
covered
by
Companion Life Insurance Company and ARI' s
occupational
accident
policy.
Alberto
Valderrama is the injured individual.
b.
"Hernandez Claim": The Hernandez Claim is a
wrongful death claim against JNP covered by
American
Southern
and
ARI's
employer's
liability policy.
Jesus Alejandro Hernandez
is the decedent.
13.
On April 1, 2014, Alan Hardin, ARI claims manager,
submitted a letter regarding the Hernandez Claim
stating "JNP Enterprises is a covered entity and in
the event of a lawsuit, they will be provided a
defense by Assurance Resources on behalf of
American Southern Insurance Company."
14.
Regarding the Valderrama Claim, ARI and Companion
made misrepresentations and refused to provide
coverage,
in violation of the terms of the
occupational
accident
policy
and
the
Texas
Deceptive Trade Practices Act and the Texas
Insurance Code. On September 19, 2014, JNP filed a
lawsuit against ARI and Companion for their
misrepresentations,
violation
of
insurance
agreement,
breach of
contract,
violation of
-2-
statutory provisions
Valderrama Claim.
and
refusal
to
cover
the
15.
On October 7, 2014, ARI sent a letter to JNP
providing notice that JNP's occupational accident
policy was cancelled.
The letter contained the
heading
"Cancellation for Non-Compliance"
and
failed to state any act or omission of JNP
constituting non-compliance. Russell Coates, an[]
ARI representative, expressly told Pablo Fuentes at
JNP that the policy was being canceled based on the
Valderrama lawsuit.
16.
On October 22, 2014, Ruben Reyes at JNP sent an
email to Susan Wilson, an ARI representative,
providing notice that a lawsuit had been filed by
Itzel Camacho against JNP in the Hernandez Claim
and reported the claim under the Employer's
Liability policy.
In addition, we sent written
notice of the lawsuit and reported the claim to
both American Southern and ARI.
17.
On October 22, 2014, Patrick Lalor, ARI's counsel,
submi t ted a letter which contained a number of
unlawful quid pro quo threats, including:
Moreover, because your client has threatened
to file suit against ARI in a separate matter,
your client has created an irreconcilable
conflict of interest.
ARI cannot provide a
defense for a client that is contemplating an
action against ARI. Any counsel appointed by
ARI would be, in effect, an agent of ARI,
which would be an ethical conflict.
Therefore, if your
there is no action,
your client against
notify ARI that it
against your client
office will certify that
pending or otherwise, by
ARI, I will be happy to
should process the claim
by the Hernandez Estate. 1
Based on these allegations of fact,
JNP's First Amended Petition
asserted claims for breach of contract; breach of the duty of good
lJNP's First Amended Petition, Exhibit E to Notice of Removal,
Docket Entry No.1, pp. 2-4 ~~ 10-17.
-3-
fai th and fair dealing i
arising
from
violation of
allegedly
unfair
the Texas
claim
Insurance Code
settlement
practices,
misrepresentations of insurance policy, and improper cancellation
of
insurance
policy i
and violation of
the
Texas
Business
and
Commerce Code arising from allegedly deceptive trade practices.
ARI and Companion were served with citation on November 26, 2014,
and December 1, 2014, respectively.
On December 19,
2014,
defendants filed a Notice of Removal
(Docket Entry No.1) on grounds that JNP's claims are all preempted
by
§
502(a) (1) (B)
(ERISA), 29 U.S.C.
of the Employee Retirement Income Security Act
§
1132 (a) (1) (B)
In pertinent part defendants
asserted:
Notwithstanding JNP's effort to plead around the
application of ERISA, it is nevertheless asserting that
Defendants failed to pay benefits under an ERISAregulated plan.
JNP's action is equivalent to a civil
action by the plan beneficiary to recover benefits and
enforce his rights under the terms of the plan.
29
U. S. C. § 1132 (a) (1) (B) .
Consequently, this Court has
original jurisdiction under 28 U.S.C. § 1331.2
On December 19, 2014, defendants also filed an Unopposed Motion to
Enlarge
Time
for
defendants
to
answer
or
otherwise
accordance with Federal Rule of Civil Procedure 12
No.4).
plead
in
(Docket Entry
On December 22, 2014, the court entered an Order Granting
Unopposed
Motion
to
Enlarge
Time
(Docket
Entry
No.6).
On
January 9, 2015, defendants filed Defendants' Motion to Dismiss and
Brief in Support (Docket Entry No.7), seeking dismissal of JNP's
2Notice of Removal, Docket Entry No.1, pp. 2-3
-4-
~
8.
Amended Petition for failure to state a claim for which relief may
be granted under Federal Rule of Civil Procedure 12(b) (6).
On January 30, 2015, JNP filed IN'P Enterprises, LLC's Second
Amended Complaint
(Docket Entry No.8).
In the Second Amended
Complaint JNP makes the follow allegations of fact:
8.
JNP entered into an agreement with Companion,
In
whereby JNP paid a premium to Companion.
Companion issued occupational accident
return,
(the
"Policy")
that
policy number AROA 1069
provided insurance coverage to JNP employees.
9.
The Policy required Companion to make weekly
indemnity payments as provided in Section V of the
Policy.
10.
JNP employee Alberto Valderrama ("Valderrama") was
injured
in
the
course
of
his
employment.
Valderrama was covered by the Policy, and submitted
a claim under the Policy to ARI and Companion.
11.
In
response
to
the
claim,
ARI
calculated
Valderrama's weekly payment amount, provided this
information to JNP and represented through words
and conduct that JNP was to make payments to
Valderrama.
12.
Based on ARI' s representations,
payments of $600 to Valderrama.
13.
In a telephone conversation in March of 2013,
Ms. Wilson reiterated that Valderrama's payments
were to be $600 weekly, and that they should
continue through September 21, 2013.
14.
On March 6,
2013,
Ms.
substance of the telephone
and approved the continued
through September 21, 2013
15.
JNP made each payment as directed by ARI for a
period of two years.
These payments totaled
$62,400.
-5-
JNP made weekly
Wilson confirmed the
conversation in writing
payments to Valderrama
in the amount of $600.
16.
On February 27, 2014, JNP attempted to obtain
information from ARI regarding repayment of the
$62,400.
Ms. Wilson informed JNP that she was
unaware of the reason for the delay in repayment to
JNP and that she would contact Companion for more
information.
17.
Ms. Wilson stated:
"This is the first time I have seen anything
like this. Since we were unable to manage the
claim I am not sure what the answer is. I am
submitting your question to the insurance
company and I will let you know what they
say."
18.
This was the first time ARI indicated to JNP there
was any issue with reimbursement, or that ARI
and/or Companion was unable to "manage" the claim.
19.
JNP received no response from ARI or Companion
until March 21, 2014 when ARI reversed course and
informed JNP that despite past representations by
words and conduct, Companion would not reimburse
JNP for payments made to Valderrama.
20.
Ms. Wilson communicated this
stating:
information to JNP
"I finally got an answer on this one.
They
will not reimburse at this point. We were not
allowed to manage the claim or direct care
therefore we are not responsible for the
indemnity payments. Also, the benefit period
is expired and cannot be applied retroactively."
21.
22.
23.
JNP attempted to resolve the issue with ARI and
Companion
prior
to
filing
suit
through
correspondence dated September 22, 2014.
In this
correspondence JNP requested reimbursement from ARI
and Companion.
ARI and Companion responded by cancelling the
Policy on October 7, 2014.
The cancellation letter included the heading
"Cancellation for Non-Compliance," but failed to
state any act or omission of JNP constituting noncompliance.
-6-
24.
Pablo Fuentes at JNP contacted ARI to discuss the
cancellation. Mr. Russell Coates of ARI stated the
policy was canceled because of JNP's demand for
payment of $62,400.
25.
In addition to cancelling the Policy, ARI also made
attempts
to
coerce
JNP
into
abandoning
reimbursement of the Valderrama payments.
26.
Specifically, JNP submitted a wholly unrelated
claim
to
ARI,
(Claim
Nos.
1397548001
and
1397012801) .
On April I, 2014, prior to the
escalation of the dispute over reimbursement of the
Valderrama payments, ARI notified JNP that it was
"a covered entity" and "in the event of a lawsuit,
[would]
be provided a
defense
by Assurance
Resources.
." in the unrelated matter.
27.
On October 22, 2014, after the dispute over the
Valderrama payments escalated, ARI changed its
position and informed JNP it would not receive a
defense from ARI in the unrelated matter because
the dispute over the Valderrama payments created an
"irreconcilable conflict of interest" and ARI could
not provide JNP a defense until JNP agreed to
abandon any claim related to the Valderrama matter.
ARI repeated its intention to withhold a defense in
writing on October 30, 2014 and stated that ARI
would withhold a defense from JNP if it pursued any
claim against ARI "in any matter."
28.
Defendants canceled the Policy and issued threats
to JNP to obtain concession from JNP with respect
to repayment of the Valderrama payments.
These
actions
evidence
Defendants
acted
willfully,
maliciously and fraudulently in their dealings with
JNP.3
Based on these allegations of fact, JNP's Second Amended Complaint
asserts claims for negligent misrepresentation and fraud.
"In the
alternative and to the extent it is determined that JNP can pursue
claims
under
the
Employee
Retirement
Income
Security
Act's
3JN' P Enterprises, LLC's Second Amended Complaint ("JNP' s
Second Amended Complaint"), Docket Entry No.8, pp. 2-5 ~~ 8-28.
-7-
( "ERISA" )
civil
enforcement
Complaint asserts a
§
502 (a) (3),
provisions," 4
JNP' s
Second Amended
civil enforcement action pursuant to ERISA
29 U.S.C.
1132 (a) (3),
§
relief under an ERISA plan. 5
for appropriate equitable
If, however, ERISA does not preempt
JNP's claims, JNP asserts additional state law causes of action for
breach
of
contract,
violation
of
the
Texas
Deceptive
Trade
Practices Act, the Texas Insurance Code, and the duty of good faith
and fair dealing. 6
II.
JNP's Motion to Remand
JNP moves to remand this action for lack of subject matter
jurisdiction.
A.
Standard of Review
A civil action may be removed from state to federal court if
"the
district
courts
jurisdiction."
of
28 U.S.C.
§
the
United
1441(a).
States
See Anderson v.
Airlines, Inc., 2 F.3d 590, 593 (5th Cir. 1993).
have original
have
jurisdiction over civil cases
1331.
Cir.
"arising under the
4Id.
at 8
Because
~
5Id. at 8-9
6Id.
28 U.S.C.
See Frank v. Bear Stearns & Co., 128 F.3d 919,
1997).
at 9
~
"removal
jurisdiction
47.
~~
48-52.
53.
-8-
American
District courts
Constitution, laws, or treaties of the United States."
§
original
raises
922
(5th
significant
federalism
concerns,"
the
removal
statute
must
be
strictly
construed.
Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir.
1988).
See also Gutierrez v. Flores, 543 F.3d 248, 251 (5th Cir.
2008).
Although the court must remand the case to state court if
at any time before final judgment it appears that it lacks subject
matter jurisdiction, the court's jurisdiction is fixed as of the
time of removal.
101 F.3d 448,
See 28 U.S.C.
456
§
1447(c); Doddy v. Oxy USA, Inc.,
(5th Cir. 1996).
Once the case is removed, a
plaintiff's voluntary amendment to a complaint will not necessarily
defeat federal jurisdiction; whether to remand the action to state
court
lies wi thin the district
court's discretion.
Lone Star
OB!GYN Associates v. Aetna Health Inc., 579 F.3d 525, 528-29 (5th
Cir.
If
2009).
"substantial
the
federal
defendant
claim,
demonstrates
e. g.,
one
Inc.,
presence of
a
completely preempted by
ERISA," the district court may not remand.
NYLCare Health Plans,
the
172 F.3d 332,
Id.
337
(citing Giles v.
(5th Cir.
1999)).
The party seeking removal bears the burden of establishing federal
jurisdiction, and doubt as to the propriety of removal should be
resolved in favor of remand.
323 (5th Cir. 2007)
B.
In re Hot-Hed, Inc., 477 F.3d 320,
(per curiam) .
ERISA Preemption
Questions of removal jurisdiction are generally determined
from
the
face
of
Pharmaceuticals Inc.
a
"well-pleaded
v.
Thompson,
-9-
complaint."
106 S.
Ct.
3229,
Merrell
3232
Dow
(1986)
(citing
Franchise
Tax
Board
of
the
State
of
California
v.
Construction Laborers Vacation Trust for Southern California, 103
S.
Ct.
2841,
2846-47
(1983)).
The well-pleaded complaint rule
means that the federal question must appear on the face of the
complaint.
542
See Torres v. Southern Peru Copper Corp., 113 F.3d 540,
(5th Cir.
1997).
Here,
JNP asserts only state law claims
against defendant.
Thus, on the face of JNP's complaint a federal
question
exist.
does
not
But
well-pleaded complaint rule:
displaces
the
state-law
'"
there
is
an
exception
cause
of
Davila, 124 S. Ct. 2488, 2495 (2004)
action
through
is
appropriate
because
'"
complete
Aetna Health Inc. v.
(quoting Beneficial National
Bank v. Anderson, 123 S. Ct. 2058, 2063 (2003)).
claim
the
[W] hen a federal statute wholly
preemption,' the state claim can be removed."
a
to
[w]hen
the
Removal of such
federal
statute
completely pre-empts the state law cause of action, a claim which
comes within the scope of that cause of action, even if pleaded in
terms of state law, is in reality based on federal law. '"
Id.
See
also Metropolitan Life Insurance Co. v. Taylor, 107 S. Ct. 1542,
1546
(1987)
Davila,
"ERISA is one of those statutes."
124
S. Ct. at 2495.
ERISA may preempt state law claims in one of two ways.
Giles, 172 F.3d at 336
(citing McClelland v. Gronwaldt,
507, 515-19 (5th Cir. 1998)
under ERISA
§
502 (a),
See
155 F.3d
(distinguishing "complete" preemption
29 U.S.C.
"conflict" preemption under ERISA
§
§
-10-
1132 (a),
from
"ordinary"
514(a), 29 U.S.C.
§
or
1144(a)),
overruled in part on other grounds by Arana v. Ochsner Health Plan,
338 F.3d 433, 440 n.11 (5th Cir. 2003)
may occupy a particular field,
under
§
502 (a),
29 U.S.C.
§
(en banc)).
"First, ERISA
resulting in complete preemption
1132 (a)."
Id.
(citing Metropolitan
Life, 107 S. Ct. 1542, and McClelland, 155 F.3d at 516-17).
also Arana,
338 F. 3d at 437.
ERISA
§
502 (a)
See
provides several
causes of action that may be brought by an ERISA plan beneficiary,
participant,
the
fiduciary.
Secretary of
ERISA
§
502(a) (1)
Labor,
(B)
or plan administrator or
provides 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
1132 (a) (1)
relief
as
"regardless
(B) .
a
under
terms
of
the
plan."
29
U.S.C.
Any state cause of action that seeks the same
cause
of
the
of
how
action
artfully
completely preempted.
Giles,
authorized
pleaded
as
by
a
ERISA
state
172 F. 3d at 337.
§
502(a),
action,"
Thus,
is
if a plan
beneficiary or participant seeks to recover benefits from an ERISA
plan under a state law cause of action, those claims are completely
preempted and subject to removal.
Id.
The second form of ERISA preemption is known as "ordinary" or
"conflict"
affirmative
§
preemption.
defense
514(a), 29 U.S.C.
to
§
It
exists
state
law
1144(a).
when
claims
ERISA
and
provides
involves
Giles, 172 F.3d at 337.
an
ERISA
Section
514(a) provides that ERISA "shall supersede any and all State laws
-11-
insofar as they may now or hereafter relate to any employer benefit
plan."
The Fifth Circuit in Giles made clear, however, that the
existence of conflict preemption under
itself,
§
514 of ERISA does not, by
create an exception to the well-pleaded complaint rule.
"'State law claims [that] fall outside the scope of ERISA's civil
enforcement provision,
§
502, even if preempted by
514(a), are
§
still governed by the well-pleaded complaint rule and, therefore,
are
not
removable
under
the
complete-preemption
established in Metropolitan Life. "'
Id.
Healthcare,
(3d Cir.
Inc.,
57 F.3d 350,
Franchise Tax Board,
even though ERISA
claim,
§
§
103 S.
355
Ct.
2841,
principles
(quoting Dukes v.
1995)).
2853-56
U.S.
See also
(explaining that
514(a) may preclude enforcement of a state law
removal of a claim that falls outside the scope of ERISA
502(a)
is
preemption
inappropriate)
does
not
raise
The
a
mere
federal
presence
question.
of
conflict
Instead
"transmogrifying a state cause of action into a federal one
of
as
occurs with complete preemption - conflict preemption serves as a
defense to a state action."
Giles, 172 F.3d at 337.
Thus, for a district court to exercise removal jurisdiction,
complete preemption must exist.
preemption does not apply,
arguably preempted
under
but
§
"When the doctrine of complete
the plaintiff's
514 (a),
the
state claim is
district
court,
being
without removal jurisdiction, cannot resolve the dispute regarding
preemption."
Id.
In the absence of complete preemption,
the
district court "lacks power to do anything other than remand to the
-12-
state
court
resolved."
where
Id.
the
preemption
issue
can
(citing Dukes, 57 F.3d at 355).
be
addressed
and
The Supreme Court
has held that state law causes of action are completely preempted
by ERISA
time,
§
502(a) when both:
could have
brought
(1) an individual, at some point in
the
claim under
ERISA
§
502 (a),
and
(2) there is no other legal duty independent of ERISA or the plan
terms that is implicated by the defendant's actions.
Davila, 124
S. Ct. at 2496.
c.
Application of ERISA Preemption Law to the Alleged Facts
1.
JNP Could Not Have Brought a Claim Under ERISA § 502(a)
The first part of the Davila inquiry requires the defendants
to establish that JNP could have brought its claims under
i.e.,
§
29 U.S.C.
502(a)
§
1132(a).
Davila,
124 S.
Ct.
502(a),
§
at 2496.
ERISA
limits the claims against insurers to claims brought by
participants, beneficiaries, and fiduciaries.
29 U.S.C.
§
1132(a).
See also Franchise Tax Board, 103 S. Ct. at 2855 ("ERISA carefully
enumerates the parties entitled to seek relief under
§
502")
JNP argues that this action should be remanded because
[c] omplete preemption under ERISA exists only if the
complainant could have, at some point, brought its claims
under ERISA's civil enforcement provisions.
JNP has no
standing under ERISA, and cannot assert its claims
through § 502(a) (1) (B). JNP's claims are not completely
preempted and there is no basis for federal jurisdiction
over JNP's causes of action. 7
7JNP's Motion to Remand, Docket Entry No. 11, p. 1
-13-
~
1.
In other words,
JNP argues
that
its
claims
because it could not bring claims under
§
are
not preempted
502(a) (1) (B) and because
defendants' actions implicate legal duties independent of ERISA. s
Defendants respond that:
1.
JNP's live pleading at the time of removal sought to
recover employee plan benefits governed by ERISA
§ 1132(a) (1).
Therefore, ERISA preemption applies and
federal court jurisdiction is invoked.
That JNP
ultimately lacked standing to recover on the claims it
asserted does not change the claims as filed.
2.
In its post-removal filings, JNP asserts new claims,
which it argues are not subject to ERISA. However, the
new claims are within the scope of ERISA § 1132 (a) (3) .
Therefore,
ERISA
preemption
and
federal
court
9
jurisdiction remain.
Asserting that "JNP's action is equivalent to a civil action by the
plan beneficiary to recover benefits and enforce his rights under
the terms of the plan, ,,10 defendants argue that "this Court has
original jurisdiction under 28 U.S.C.
§
that
similarly
JNP's
post-removal
pleadings
1331."11
Defendants argue
support
federal
question jurisdiction, because
JNP focuses its pleadings on allegations that, in
essence, assert JNP paid the Valderrama Claim and should
be reimbursed by Defendants.
But, JNP continues to
assert a purported breach of contract claim.
See
SId. at 4-7 ~~ 9-15.
See also IN'P Enterprises, LLC's
Response to Defendants' Motion to Dismiss, Docket Entry No. 12,
pp. 2-5 ~~ 4-11.
9Defendants' Response, Docket Entry No. 15, p. 1
.
10Id. at 3
~
6.
-14-
~~
1-2 .
Complaint, p. 9.
[A] determination of whether Plan
benefits were owed to Valderrama is central to JNP's
purported breach of contract claim.
Although JNP
concedes it lacks standing under ERISA § 1132(a) (1) to
seek recovery of Plan benefits or to challenge a benefit
determination, it continues to do so. Consequently, this
Court has original jurisdiction, under 28 U.S.C. § 1331,
to address this federal question. 12
Asserting that "JNP expressly, albeit in the alternative, asserts
its own ERISA claim to recover 'appropriate equitable relief' from
Defendants
for
Plan
benefits
JNP
allegedly
advanced
to
Valderrama,"13 defendants argue that "JNP's state law claims are
within
§
the
scope
502(a) (3)
of
§
502 (a) (3)
and,
(a)
§
1331, to address this federal question."14
JNP Could Not Have Brought a
A civil action under ERISA
§
Inc. v.
§
502(a) (1) (B) Claim
502(a) (1) (B) may be brought only
by a participant or a beneficiary.
See 29 U.S.C.
such
§
1132(a) (1) (B)
i
Carpenters District Council of Houston Pension &
Welfare Trusts, 954 F.2d 299, 302 (5th Cir. 1992).
by
preempted by
Consequently, this Court has original jurisdiction,
under 28 U.S.C.
Jamail,
therefore,
persons
for
benefits
or
improper
completely preempt state law causes of action.
S. Ct. at 2496.
Claims brought
claims
processing
See Davila,
124
Third parties that are neither participants nor
beneficiaries of an ERISA plan do not have independent standing to
12Id. at 3
13Id.
~
~
8.
9.
14Id.
-15-
seek recovery under
502(a) (1) (B).
§
904 F.2d 236, 250 & n. 20
v. Northbrook Life Ins. Co.,
1990)
See Memorial Hospital System
(5th Cir.
(citing Hermann Hosp. v. MEBA Med. & Benefits Plan, 845 F.2d
1286, 1290 (5th Cir. 1988)).
however,
assign their rights to receive benefits under an ERISA
plan to a third-party.
assigned
Participants and beneficiaries may,
may
bring
Third-parties to whom such rights have been
derivative
actions
participants' and beneficiaries' claims.
Fort Worth v.
In
enforce
Id.
such
(5th Cir. 2005)
actions
the
ERISA
plan
See Harris Methodist
Sales Support Services Inc.
Plan, 426 F.3d 330, 333-34
1289-90.
to
Employee Health Care
Hermann,
i
plaintiff
does
845 F.2d at
not
assert
an
independent legal duty owed directly to the plaintiff but, instead,
stands in the shoes of the ERISA participant or beneficiary to
assert the participant's or beneficiary's rights under the plan.
Id. at 245 & n.12.
JNP
employer,
argues
and defendants
agree
that
JNP
is
Valderrama's
and that as such JNP has no standing to bring a claim
under ERISA
" [e] mployers
§
502 (a) (1) (B) .15
are
The Fifth Circuit,
conspicuously
absent
from
entitled to bring a civil action," Jamail,
the
observing that
list
of
those
954 F.2d at 302,
held that employers do not have a right of action under
§
502.
has
Id.
15See JNP's Motion to Remand, Docket Entry No. 11, p. 5 ~ 10
(asserting that "[b]ecause of the narrow standing granted by the
statute, JNP, a nonparticipant and nonbeneficiary, could at no time
bring claims under § 502 (a) (1) (B)") i Defendants' Response Opposing
Plaintiff's Motion to Remand, Docket Entry No. 15, p. 3 ~ 7 ("JNP
argues it lacked standing to assert a claim under § 502(a) (1) (B).
See Motion, pp. 4-5. Defendants agree.")
-16-
Neither JNP nor defendants contend that JNP is bringing this action
as an assignee of Valderrama's claim and not as an independent
third-party.
The allegations in JNP' s Second Amended Complaint are
not that defendants have wrongfully denied Valderrama's claim for
benefits, but that defendants have wrongfully failed to reimburse
JNP after ARI represented to JNP that Valderrama was entitled to
weekly
benefit
Defendants'
that
§
payments
of
$600
for
a
period
of
two
years .16
response to JNP's motion to remand acknowledges both
502(a) (1) (B) provides no remedy to JNP because JNP is not an
ERISA plan participant or beneficiary, 17 and
that
Amended Complaint is focused
that,
"on allegations
JNP' s
Second
in essence,
assert JNP paid the Valderrama Claim and should be reimbursed by
Defendants. ,,18
Fifth Circuit precedent is clear that detrimental reliance
claims
brought
by
third-parties
preemption under ERISA.
Blue Shield of Texas,
~~
are
not
subject
to
complete
See Transitional Hospitals v. Blue Cross &
Inc.,
164 F. 3d 952,
954
(5th Cir.
1999)
16See JNP's Second Amended Complaint, Docket Entry No.8, p. 3
10-15.
17Defendants' Response Opposing Plaintiff's Motion to Remand,
Docket Entry No. 15, p. 3 ~ 7 (recognizing that § 502 (a) (1) (B)
provides no remedy to JNP because JNP is not an ERISA plan
participant or beneficiary, but asserting: "Yet, JNP nevertheless
asserted such a claim-expressly challenging Defendant's alleged
wrongful denial of the Valdarrama Claim.
JNP should not be heard
now arguing the Court lacks jurisdiction because JNP had no
standing for the claim it pleaded at the time of removal (and
remains central to its subsequent pleading.").
18Id.
~
8.
-17-
("ERISA does not preempt state law when the state-law claim is
brought by an independent, third-party health care provider (such
as a hospital)
against an insurer for its negligent misrepresen-
tation regarding the existence of healthcare coverage.").
See also
Memorial Hospital, 904 F.2d at 250 ("Memorial seeks damages from an
insurance company and its alleged agent, claiming that, had it not
been for negligent misrepresentations of coverage, Memorial would
not have accepted the financial risk of providing medical treatment
to
Echols.
regulate
We
the
situations.")
do
not
commercial
i
Access
think
that
Congress
interactions
Mediguip,
of
intended
such entities
L.L.C.
v.
United
Insurance Co., 698 F.3d 229 (5th Cir. 2012)
(per curiam)
ing
164
holdings
in
Transitional
Hospitals,
Memorial Hospital, 904 F.2d at 250)
ERISA
F.3d at
in
to
such
Healthcare
(reaffirm952,
and
Because JNP is neither a plan
participant nor beneficiary but,
instead,
the employer of plan
participants, and because neither JNP nor defendants contend that
JNP is asserting derivative claims based on Valderrama's assignment
of his right to benefits to JNP, the court has no basis on which to
conclude that JNP could have brought its claims for reimbursement
under ERISA
§
(b)
502(a) (1) (B).
JNP Could Not Have Brought a
A civil action under ERISA
§
§
502(a) (3) Claim
502(a) (3) may be brought
by a participant, beneficiary, or fiduciary (A) to enjoin
any act or practice which violates any provision of this
subchapter or the terms of the plan, or (B) to obtain
-18-
other appropriate equitable relief (i) to redress such
violations or (ii) to enforce any provisions of this
subchapter or the terms of the plan.
29
U.S.C.
1132(a)(3).
§
"catchall" provision.
78
(1996).
Section
502 (a) (3)
is
considered
a
Varity Corp. v. Howe, 116 S. Ct. 1065, 1077-
Section 502 (a) (3)
acts as a
safety net and offers
" [a]ppropriate equitable relief for injuries caused by violations
that
502 does not elsewhere adequately remedy."
§
Id.
at 1078.
The Supreme Court has held that the equitable relief available
under
§
502 (a) (3)
refers to those categories of relief that were
typically available in equity,
including injunctive relief,
but
does not refer to legal relief such as money damages.
Mertens v.
Hewitt Associates,
(rejecting
113
S.
Ct.
2063,
2068-70
(1993)
reading of ERISA that would have extended relief available under
§
502(a) (3)
to legal remedies typically beyond the scope of an
equi ty court's authority).
brought
a
claim under
JNP argues
ERISA
§
that
502 (a) (3)
it could not have
because
it
is
not
a
fiduciary and because its claims against the defendants are not
claims for equitable relief.
JNP's claims center around its right
weekly payments
representation
of
that
payments from JNP.
has
§
standing
to
$600
made
to
Valderrama
to reimbursement for
Valderrama pursuant
was
entitled
to
to ARI' s
receive
such
Defendants have failed to establish that JNP
pursue
a
claim
for
equitable
relief
under
502(a) (3) because they have not shown that JNP is a fiduciary of
the ERISA plan.
As the employer,
-19-
JNP does not have standing to
bring
an
enforcement
action.
See
Jamail,
954
F.2d
at
302.
Moreover, JNP's claim for reimbursement of money paid to Valderrama
pursuant to ARI's alleged misrepresentation is a claim for money
damages,
available
i.e.,
from
a
claim for legal relief that was not typically
equity
courts.
See
Great-West
Insurance Co. v. Knudson, 122 S. Ct. 708, 714
Life
(2002)
&
Annuity
(recognizing
that unless a claim for money seeks particular funds, it should be
"viewed essentially as [an] action[] at law for breach of contract
(whether
the
contract
was
actual
or
implied)"
even
when
characterized as a claim for injunctive relief or restitution).
Thus, regardless of whether JNP is an ERISA fiduciary, JNP's claim
for reimbursement is not cognizable under ERISA
§
502(a) (3) because
it is not a claim for relief typically available from equity courts
but, instead, a claim for money damages typically available at law.
2.
JNP's Claims Implicate an Independent Legal Duty
The second part of the Davila inquiry requires the defendants
to establish that JNP' s
allegations of their wrongdoing do not
implicate a legal duty independent of ERISA or the plan terms.
Davila, 124 S. Ct. at 2496.
See
Allegations of wrongdoing implicate an
independent legal duty when the plaintiff may bring a state law
claim regardless of the terms of an ERISA plan.
See id. at 2498.
JNP alleges that ARI negligently or intentionally represented that
weekly benefit payments should be made because they were covered by
the plan.
The Fifth Circuit has held that ERISA does not preempt
-20-
state law when the state law claim is brought by an independent,
third-party against an insurer for its negligent misrepresentation
regarding the existence of coverage.
See Transitional Hospitals
Corp., 164 F.3d at 954, and Memorial Hospital, 904 F.2d at 250.
In Transitional Hospitals, 164 F.3d at 952, the Fifth Circuit
addressed whether a hospital's claims against an ERISA plan insurer
were subject to complete preemption.
The hospital alleged that
prior to admitting the patient defendants misrepresented that the
ERISA plan would pay 100% of the patient's hospital bills after
The hospital sued defendants
Medicare benefits were exhausted.
based
on
breach
misrepresentation.
of
contract
and
common
law
and
statutory
The Fifth Circuit explained that "ERISA does
not preempt state law when the state-law claim is brought by an
independent, third-party health care provider (such as a hospital)
against an insurer for its negligent misrepresentation regarding
the existence of health care coverage."
Id. at 954.
But because
the hospital's breach of contract claims were "based on defendants'
alleged failure to pay the full amount of benefits due under the
terms of the
those
contract
Memorial
[ERISA]
policy,"
the Fifth Circuit concluded that
claims were preempted.
Hospital,
904
F.2d
at
250
Id.
("We
at
955.
cannot
See also
believe
that
Congress intended the preemptive scope of ERISA to shield welfare
plan fiduciaries from the consequences of their acts toward nonERISA health care providers when a cause of action based on such
-21-
conduct would not relate to the terms or conditions of a welfare
plan,
nor affect
-- or affect only tangentially --
the ongoing
administration of the plan.").
While the
factual
allegations made
in JNP's
First Amended
Petition could be read as an attempt to seek plan benefits due to
Valderrama,
careful review of the augmented factual allegations
made in JNP's Second Amended Complaint leads the court to conclude
that the state law claims for negligent misrepresentation and fraud
that JNP is now asserting against defendants are both based on the
prior misrepresentation theory of recovery recognized by the Fifth
Circuit in Transitional Hospitals and Memorial Hospital.
JNP's
claims for negligent misrepresentation and for fraud are both based
on allegations that ARI represented to JNP that Valderrama was
entitled to receive payments of $600 each week for a period of two
years and that JNP was to make the weekly payments to Valderrama,
that ARI confirmed its representation that JNP was to make weekly
payments of $600 to Valderrama with the intention that JNP rely on
the representation by making weekly payments to Valderrama,19 that
JNP reasonably relied on ARI's representations by making payments
to Valderrama,
that after making the payments JNP discovered that
20
ARI's prior representations were
Companion
intended
19Id. at 6-7
2°Id. at 7
~
~
to
reimburse
40.
41.
-22-
false
JNP
because neither ARI nor
for
payments
made
to
Valderrama,21 and that ARI and Companion made false representations
to JNP with knowledge that they were false,
or recklessly made
without any knowledge of their truth or falsity.22
JNP's claims for
negligent misrepresentation and fraud do not depend on Valderrama's
right to payment under the ERISA benefit plan but, instead, on the
truth and legal effect of ARI's representations that JNP was to
make weekly benefit payments to Valderrama that would be covered by
the plan.
2496,
Consistent with the holdings in Davila, 124 S. Ct. at
Transitional
Hospital,
Hospitals,
164
F.3d
at
954,
and
Memorial
904 F.2d at 250, the court concludes that JNP's claims
are based on a legal duty not to misrepresent material facts that
is independent of ERISA and the terms of any ERISA plan at issue.
3.
Conclusions
Because
neither
party
disputes
that
JNP
was
Valderrama's
employer and that as such has no right to recover amounts due to
Valderrama under the plan, and because neither party contends that
JNP is suing defendants as an assignee of Valderrama's rights to
benefits due under the plan,
the court has no basis to conclude
that JNP could have brought its claims under
§
502(a)
of ERISA.
Because JNP seeks reimbursement of amounts paid to Valderrama based
on ARI's representation that such amounts would be covered by the
plan,
JNP's
claims are
21Id.
~
~
for money damages
42.
22Id.
claims
43.
-23-
that were not
Therefore,
typically available in equity courts.
regardless of
whether JNP was a fiduciary, JNP could not have brought its claims
under
§
wholly
502(a) (3) of ERISA.
on
the
truth
Because JNP's state-law claims depend
and
legal
effect
of
ARI's
alleged
misrepresentation that weekly benefits would be covered by the
plan, JNP's claims are based on a legal duty that is independent of
ERISA and
the
Accordingly,
terms
JNP's
of
any ERISA plan
state-law
claims
that may be
are
neither
at
issue.
completely
preempted by ERISA nor subject to removal.
III.
JNP's Request for Attorney's Fees
Asserting that defendants' removal of its claims was "without
any basis in law or fact,"23 JNP seeks
"an order requiring JNP
and/or Companion to pay JNP's attorney's fees. 1124
"[a]
JNP argues that
cursory review of the law prior to removing the suit would
have revealed JNP lacks standing under
§
502(a) (1) (B),
and that
there is not complete preemption of JNP's claims and that there was
no basis for removal. 1125
Defendants respond that even if the court
concludes that this action should be remanded, JNP's attorney's fee
request should be denied. 26
Defendants argue
23JNP's Motion to Remand, Docket Entry No. II, p. 7 , 17.
24Id.
25Id. at 7-8 , 19.
26Defendants' Response, Docket Entry No. IS, p. 4 , 10.
-24-
JNP seemingly complains that Defendants should not have
removed this action because JNP lacked the standing
necessary to assert the claims it asserted. Whether JNP
had standing or not, Plaintiff's Petition expressly
sought recovery of benefits for the Valderrama Claim - a
claim arising from an ERISA-governed benefit plan.
To
the extent JNP did not mean what it pleaded, Defendants
should not be penalized for relying on the pleadings as
filed.
. JNP's request for attorneys' fees should be
denied because there is no evidence Defendants lacked an
"objectively reasonable basisH for the removal. 27
"An order remanding the case may require payment of just costs
and any actual expenses,
result of the removal. H
removed this action the
including attorney fees,
28
U.S.C.
§
1447 (c).
live pleading was
incurred as a
When de f endan t s
JNP' s
First Amended
Petition in which JNP alleged that defendants "made misrepresentat ions and refused to provide coverage, in violation of the terms
of
the
[ERISA-governed]
occupational
accident
policy.
H
28
Because these allegations made in JNP's First Amended Petition
could reasonably be read to assert a claim for benefits owed under
an ERISA-governed plan, the court concludes that JNP's request for
attorney's fees should be denied because defendants did not lack an
objectively reasonable basis for the removal.
IV.
Conclusions and Order
For the reasons stated in
that
the
27Id.
state-law
at 4-5
~
claims
§
II,
asserted
above,
in
the court concludes
JNP's
Second
Amended
10.
28Exhibit E to Notice of Removal, Docket Entry No. I-I, p. 3
~ 14.
-25-
Complaint are not completely preempted by ERISA.
stated in
For the reasons
III, above, the court concludes that JNP's request for
§
attorney's fees should be denied.
Accordingly, IN'P Enterprises,
LLC's Motion to Remand for Lack of Subject Matter Jurisdiction and
Request for Attorney's Fees
PART and DENIED in PART.
claims
asserted
in
(Docket Entry No.
11)
is GRANTED in
Because the court has concluded that the
JNP's
Second
completely preempted by ERISA,
Amended
Complaint
are
not
this action will be remanded to
state court.
This
action
Harris County,
is
Texas.
REMANDED
to
County
Court
at
Law
No.3,
The Clerk of this court is directed to
promptly send a copy of this Memorandum Opinion and Order to the
County Clerk of Harris County, Texas.
SIGNED at Houston, Texas, on this the 13th day of May, 2015.
SIM LAKE
UNITED STATES DISTRICT JUDGE
7
-26-
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