Intermountain Consulting Group et al v. Guarantee Insurance et al
MEMORANDUM DECISION AND ORDER finding as moot 7 Motion to Stay; denying 11 Motion to Remand to State Court. Signed by Judge David Nuffer on 3/31/14 (alt)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
INTERMOUNTAIN CONSULTING GROUP,
INC. d/b/a EMPLOYER OPERATIONS
OPTIONS HR, a Nevada corporation; and
EMPLOYER OPERATIONS LLC, a Nevada
limited liability company,
MEMORANDUM DECISION AND
ORDER FINDING MOTION TO STAY
MOOT and ORDER DENYING MOTION
GUARANTEE INSURANCE COMPANY, a
Florida corporation; ULLICO CASUALTY
COMPANY, a Delaware corporation; and
PATRIOT UNDERWRITERS, INC., a
Case No. 2:13-cv-13-DN
District Judge David Nuffer
This is a contractual dispute between an insurer (Defendants) and an employer
(Plaintiffs). Plaintiffs seek remand pursuant to 28 U.S.C. § 1445(c), alleging their causes of
action arise under Utah workers’ compensation law. The motion to remand is DENIED.
This case was removed from Utah Third District Court. After removal, Defendants filed a
motion to stay 1 pending resolution of a motion to dismiss in an earlier filed case in the U.S.
District Court for the Southern District of Florida. That case involved the same parties and
substantially the same issues. 2 Defendants “believe this case should ultimately be dismissed or
Motion to Stay and to Extend Time to Answer (Motion to Stay), docket no. 7, filed January 18, 2013.
Guarantee Insurance Company and Ullico Casualty Company v. Intermountain Consulting Group, Inc., d/b/a
Employer Options HR, and Employer Operations, LLC, Case No. 12-cv-61989-JIC (Florida Action), Complaint
filed October 7, 2012.
transferred under the first-to-file rule.” 3 Defendants also requested an extension of time to
answer or otherwise respond to the complaint. 4 Plaintiffs filed a motion to remand to state court. 5
Defendants’ motion for an extension of time to answer was granted, 6 but the motions to remand
and stay were taken under advisement. 7 Defendants were ordered to file a sur-reply to the motion
to remand, and each party was directed to file a supplemental memorandum regarding
removability of this dispute in light of 18 U.S.C. § 1445(c). 8
Motion to Stay
On April 1, 2013, the parties filed a status report on the progress of the Florida action, 9
On March 28 the court, due to the fact that substitute counsel [for ICG and Employer
Operations LLC] had failed to appear, (1) struck ICG and Employer Operations LLC’s
answer, affirmative defenses, counterclaim, and third party complaint, (2) denied the
motion to dismiss as moot, (3) directed the clerk of court to enter default against them,
and (4) ordered Patriot (and, if not subject to the rehabilitation order, Ullico) to file a
motion for default judgment on or before April 26, 2013. (See Ex. A.) As directed the
clerk entered default as to ICG and Employer Operations LLC. (A copy of the docket text
is attached as Ex. E.) 10
Motion to Stay at 2.
Motion to Stay at 1.
Amended Motion to Remand and Memorandum in Support (Motion to Remand), docket no. 11, filed February 7,
Order granting Motion for Extension of Time to Answer, docket no. 6, filed January 15, 2013.
Order Granting Motion for Extension of Time to File Answer and Taking Under Advisement Motion to Stay and
Motion to Remand at 2, docket no. 17, filed March 7, 2013.
Id. (As noted by the parties, the court’s order contained a typographical error inadvertently citing to 28 U.S.C. §
1446(c) instead of the correct statute 28 U.S.C. § 1445(c)).
Joint Statement of the Status of the Florida Action, docket no. 23, filed April 1, 2013.
Id. at 2 (referenced Ex. A is docket no. 23-1; referenced Ex. E is docket no. 23-5).
Because the Florida action resolved through default judgment, 11 the reason Defendants
wanted to stay this case and transfer it under the first to file rule 12 no longer exists and the
motion to stay is now MOOT. The motion to remand will now be decided.
Motion to Remand
Defendants removed the case to this court based on diversity jurisdiction. 13 Plaintiffs
claim the case arises under workers’ compensation laws and move to remand to state court,
based on 28 U.S.C. § 1445(c): “A civil action in any State court arising under the workmen's
compensation laws of such State may not be removed to any district court of the United States.”
Plaintiffs claim that their causes of action arise under the workers’ compensation laws because
this is a dispute between the employer and insurance carrier over a workers’ compensation
policy, and because Plaintiffs’ claims rely on substantial interpretation of Utah’s workers’
compensation laws. 14 Defendants disagree, arguing that 28 U.S.C. § 1445(c) was never intended
to bar removal of disputes between carriers and employers. Defendants argue that Plaintiffs’
claims are contractual, and therefore do not arise out of workers’ compensation laws. 15
Plaintiffs’ claims are: 1) Breach of Contract, 2) Breach of the Implied Covenant of Good Faith
and Fair Dealing, 3) Unjust Enrichment, 4) Declaratory Judgment, 5) Conversion, 6) Fraudulent
Concealment, and 7) Civil Conspiracy. 16
See Florida Action, docket nos. 46-47, filed May 22, 2013 (granting Plaintiffs’ motions for default judgment and
Motion to Stay at 2.
Notice of Removal of a Civil Action, docket no. 2, filed January 7, 2013.
Motion to Remand at 2-3.
Memorandum in Opposition to Plaintiffs’ Amended Motion to Remand (Memorandum in Opposition) at 3, docket
no. 13, filed February 14, 2013.
State Summons & Complaint (Complaint), docket no. 2-2, filed January 7, 2013.
This order will first examine the propriety of remand under Tenth Circuit precedent and
then under an alternative, non-conflicting analysis used in other circuits. These cases usually
analyze whether retaliatory discharge claims arise under workers’ compensation laws. That is the
type of claim most often examined under 28 U.S.C. § 1445(c). Regardless of the different subject
matter, the same analysis applies.
The Tenth Circuit applied the “arising under” test of 28 U.S.C. § 1445(c) in Suder v.
Blue Circle, Inc. 17 The Tenth Circuit held that a plaintiff’s claim for retaliatory discharge arose
under the workers’ compensation laws of the state of Oklahoma because state workers’
compensation law created the cause of action. 18 This conclusion was based on the text of
Oklahoma’s Workers’ Compensation Act and previous Oklahoma case law. 19
The Suder court distinguished Spearman v. Exxon Coal USA, Inc., 20 in which the Seventh
Circuit held that a retaliatory discharge claim did not arise under Illinois workers’ compensation
law. The difference between Suder and Spearman was that “Illinois law of retaliatory discharge
had its genesis, not in any statutory workers' compensation scheme, but rather in the general tort
law of the state.” 21
The Suder court relied on Humphrey v. Sequentia, Inc., 22 where the Eighth Circuit found
that a Missouri plaintiff’s claim for retaliatory discharge arose under Missouri workers’
compensation law because text of the state workers’ compensation statute created a specific
116 F.3d 1351 (10th Cir. 1997).
Id. at 1352.
16 F.3d 722 (7th Cir.1994).
Suder, 116 F.3d at 1352.
58 F.3d 1238 (8th Cir.1995).
cause of action for retaliatory discharge. The Eight Circuit pointed out that “[u]nlike the common
law tort action brought by the plaintiff in Spearman, plaintiff's original state court action . . . was
brought pursuant to a state statute.” 23
A district court in the Tenth Circuit used the Suder analysis to deny a motion to remand
in a retaliatory discharge claim. In Rundle v. Frontier-Kemper Constructors, Inc., 24 the District
of Colorado addressed whether a wrongful termination action arose under Colorado workers’
compensation law. The court explained the different results in the circuit decisions dealing with
retaliatory discharge claims. The varying results
primarily [depended] on whether the cause of action has been codified in the
state's workers' compensation statute. In cases where the cause of action is
statutorily created, the claim is generally held to “arise under” for purposes of
§ 1445(c). Conversely, where the claim has been judicially created, removal has
been held proper under § 1445(c). 25
The Rundle court then reviewed Colorado’s workers’ compensation law and found that
the Colorado cause of action for wrongful termination was not created by the state’s
workers’ compensation law, but is a common law claim. 26
Another district court in the Tenth Circuit used the Suder analysis to similarly deny
remand of a retaliatory discharge claim. In Vignery v. Ed Bozarth Chevrolet, Inc., 27 the District
of Kansas found that the claim was not created by state law, but by common law. Even though
the plaintiff’s complaint referenced state workers’ compensation law the court explained that just
as “[a] suit on a contract does not ‘arise under’ the copyright laws even though a copyright may
Id. at 1245.
170 F.Supp.2d 1075 (D. Colo.).
Id. at 1079.
Id. at 1080.
Vignery v. Ed Bozarth Chevrolet, Inc., 2009 WL 635128 (D. Kan. 2009).
have been the subject matter of the contract,” a suit on tort does arise under workers
compensation law just because it is referenced in the tort. 28
Of Plaintiffs’ seven claims, the only claim that Plaintiffs assert to be directly created by
the text of Utah workers’ compensation law is their sixth claim for fraudulent concealment. 29
This assertion was not made in the complaint, but in Plaintiffs’ motion to remand. 30 Utah Code
Ann. § 34A-2-110 lists the elements of a workers’ compensation fraud crime, but does not
mention a civil cause of action. 31 Plaintiffs’ general civil claim for fraud is not created by a
workers’ compensation statute which criminalizes fraudulent workers’ compensation schemes. In
their own complaint, Plaintiffs allege there was a duty to disclose, “by virtue of the 
Agreement,” 32 and that duty was breached. This language, as does the rest of the complaint,
suggests only common law claims.
Plaintiffs’ causes of action are not the specific type of claims envisioned by legislators
who enacted the workers’ compensation statutes to regulate the relationships of workers and
employers, and to separate injured workers’ causes of action from traditional tort law. Utah’s
Workers’ Compensation Act 33 was enacted to “relieve employers of any common law liability
for injuries sustained by an employee ‘on account of any accident or injury or death’ that is
‘contracted, sustained, aggravated, or incurred by the employee in the course of or because of or
Id. at 3, quoting 13B Charles Alan Wright, et al., Federal Practice & Procedure § 3582. See also Ausherman v.
Stump, 643 F.2d 715 (10th Cir.1981) (A suit brought for a breach of contract and fraud did not arise under federal
law, even though the contract and fraud dealt with patents and trademarks, which create federal causes of action.)
Complaint at 7-14.
Motion to Remand at 12-13.
Utah Code Ann. § 34A-2-110.
Complaint at 12.
Utah Code Ann. §§ 34A-2-101 to -1005.
arising out of the employee's employment.’” 34 No worker is a party to this case, and no
employee’s compensation benefits are at issue. This is a contractual dispute between an
employer and an insurance company.
Alternative Analysis: Substantial Question
Plaintiffs also argue that their claims present a substantial question of Utah’s workers’
compensation laws. They rely on precedent from other circuits which interpreted the words
“arising under” in section 1445(c) to have the same meaning as in 28 U.S.C. § 1331, which
governs federal question jurisdiction. 35 Under 28 U.S.C. § 1331 the Supreme Court has held that
“a well-pleaded complaint establishes either that federal law creates the cause of action or that
the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal
law.” 36 Plaintiffs argue that this case is “a fight over rates—not only what was paid, but what
payments qualify as premiums, as opposed to fees or claim reimbursements . . . ” and that
“determining the criteria by which Defendants’ bad faith is to be measured inescapably requires
a court to refer to Utah workers compensation law to define the standard that Defendants
breached .” 37 Additionally, Plaintiffs contend that their “contractual claims turn on, among other
things, the definitions of ‘rate’ and ‘premium’” 38 as defined in the Act.
To determine, under 28 U.S.C. § 1331, if a claim depends on a substantial question of
federal law under, the “disputed question of federal law [must be an] element of one of the well-
Helf v. Chevron U.S.A., Inc., 203 P.3d 962, 967 (Utah 2009).
Reed v. Heil Co., 206 F.3d 1055, 1059 (11th Cir.2000) (referencing Jones v. Roadway Express, Inc., 931 F.2d
1086, 1092 (5th Cir.1991) and Humphrey v. Sequentia, Inc., 58 F.3d 1238, 1245 (8th Cir.1995)).
Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 27–28 (1983).
Motion to Remand at 3.
Id. at 10.
pleaded state claims.” 39 “[T]he mere presence of a federal issue in a state cause of action does
not automatically confer federal-question jurisdiction.” 40 Likewise, to determine if a claim
depends on a substantial question of state workers’ compensation law under 28 U.S.C. § 1445(c),
the disputed question of state workers’ compensation law must be an element of one of the well
pleaded claims in the complaint, and the mere presence of workers compensation law in a cause
of action is not enough.
In Harper v. AutoAlliance Int’l, Inc., 41 the Sixth Circuit the court found a retaliatory
discharge claim did “not implicate the administrative or remedial mechanisms of that statutory
scheme, require courts to interpret the statute, or seek an award of compensation for personal
injury that causes a diminished wage-earning capacity, which is the only type of compensation
that the statute affords,” 42 and therefore did not rely on a substantial question of workers’
In this case, the contract between these parties, the insurer and the employer, will provide
the remedies, not a statute designed to provide remedies for injured workers. Even though
workers’ compensation law served as the “background” or “a premise” of the case, this “does not
mean that the [case] ‘arises under’ the workers’ compensation laws, any more than a state tort
based on the violation of a federal safety standard ‘arises under’ that standard for purposes of the
federal question jurisdiction in 28 U.S.C. § 1331.” 43
Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 813 (1986).
392 F.3d 195, 204 (6th Cir. 2004).
Id. at 205.
Warner v. Crum & Forster Commercial Ins. Co. denied remand of a common law breach
of good faith claim even though Texas workers’ compensation laws would affect damages
calculations. 44 Even if “the prayer for damages [includes] an element measured by withheld
worker's compensation benefits [this] does not convert the common law tort action to a worker's
compensation action—it simply defines the scope of relief plaintiff seeks for the alleged breach
of the common law duty.” 45
The most that can be said about the relationship between the worker's insurance
laws and the common law cause of action in such an event is that the worker's
compensation laws are incidentally related to the cause of action based on breach
of the common law duty.
If Congress had intended to a cause an action such as this to be nonremovable, it
undoubtedly would have used in 28 U.S.C. § 1445(c) the words “related to” rather
than the words “arising under.” 46
In this case, workers’ compensation law might be consulted in determining definitions of
rates or premiums, yet this does not mean the case relies on a substantial question of workers’
compensation law. This case may be related to workers compensation, but it does not arise under
Workers’ compensation law is not an element of any of Plaintiffs’ claims. Workers’
compensation law does not provide the remedies for Plaintiffs’ claims. Plaintiffs’ claims do not
present a substantial question of Utah workers’ compensation law, and consulting workers’
compensation law, while untangling this dispute, or the mere presence of workers compensation
law in the background does not convert Plaintiffs’ contract claims and common law fraud claims
into workers’ compensation claims.
839 F. Supp. 436, 439 (N.D. Tex. 1993).
Id. at 439.
IT IS HEREBY ORDERED that the Amended Motion to Remand 47 is DENIED because
Plaintiffs’ causes of action do not arise under workers’ compensation laws. The claims were not
created by workers’ compensation law and do not rely on a substantial question of those laws.
The prior filed motion to remand is MOOT. 48
IT IS FURTHER ORDERED that the motion to stay is MOOT. 49
Dated March 31, 2014.
BY THE COURT:
United States District Judge
Docket no. 11.
Docket no. 10.
Motion to Stay and to Extend Time to Answer (Motion to Stay), docket no. 7, filed January 18, 2013
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