Opinion
Civil Action No. 3:01-CV-1296-D
August 28, 2001
MEMORANDUM OPINION AND ORDER
Plaintiff Carmen Magallon-Laffey ("Magallon-Laffey") sued defendant Sun Life Assurance Company of Canada ("Sun Life") in state district court after it denied her claim for disability benefits. She sought to recover for breach of contract and breach of the duty of good faith and fair dealing and for violations of the Texas Deceptive Trade Practices-Consumer Protection Act ("DTPA"), Tex. Bus. Com. Code Ann. §§ 17.41-17.826 (Vernon 1987 Pamp. Supp. 2001), and the Texas Insurance Code. Sun Life removed the case to this court based on ERISA preemption, and Magallon-Laffey moves to remand. Concluding that Magallon-Laffey's state-law causes of action are completely preempted by ERISA, the court denies the motion.
Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001-1461.
I
After Magallon-Laffey was injured in a motor vehicle accident, she sought benefits from Sun Life under an insurance policy ("Policy") that her employer had purchased. When Sun Life declined her claim, she sued in state court contending that Sun Life had failed promptly to investigate and appraise her claim and to provide her timely, fair, and reasonable compensation. Sun Life removed the case and Magallon-Laffey moves to remand, contending that (1) none of her claims is preempted by ERISA and (2) the amount-in-controversy requirement for diversity jurisdiction is not met in this case. She posits that the Policy is not an employee welfare benefit plan and therefore is not covered under ERISA.
Because the court has federal question jurisdiction, it need not address Magallon-Laffey's argument concerning the amount-in-controversy requirement for diversity jurisdiction.
II
The determination whether the court has federal question jurisdiction turns on whether Magallon-Laffey's claims are completely preempted by ERISA. Ordinarily, the well-pleaded complaint rule governs federal question jurisdiction. Under that rule, "[r]emoval is not possible unless the plaintiff's `well pleaded complaint' raises issues of federal law sufficient to support federal question jurisdiction." Rodriguez v. Pacificare of Tex., Inc., 980 F.2d 1014, 1017 (5th Cir. 1993). Even if federal claims are available, the plaintiff may remain in state court by relying exclusively on state law. See Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987). There are, however, exceptions to the rule's application. One such exception — the complete preemption doctrine — applies to areas "in which Congress has `so completely pre-empt[ed] a particular area that any civil complaint raising this select group of claims is necessarily federal in character.'" Rodriguez, 980 F.2d at 1017 (quoting Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987)). "Because they are recast as federal claims, state law claims that are held to be completely preempted give rise to `federal question' jurisdiction and thus may provide a basis for removal." McClelland v. Gronwaldt, 155 F.3d 507, 512 (5th Cir. 1998).
The complete preemption doctrine is narrow. See Richardson v. United Steelworkers of Am., 864 F.2d 1162, 1169 (5th Cir. 1989). It applies only where the statute at issue (1) contains a civil enforcement provision, (2) includes a specific grant of federal subject matter jurisdiction, and (3) reflects a clear manifestation of congressional intent to make preempted state-law claims removable to federal court. See Hart v. Bayer Corp., 199 F.3d 239, 245-46 (5th Cir. 1999) (citing Aaron v. National Union Fire Ins. Co., 876 F.2d 1157, 1163-66 (5th Cir. 1989)).
III
The Supreme Court has held that the complete preemption doctrine applies to certain claims preempted by ERISA. See Metropolitan Life, 481 U.S. at 66-67. Whether ERISA preemption applies regarding a particular insurance policy depends on whether the policy is properly classified as an employee welfare benefit plan under the terms of the statute. See Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 238 (5th Cir. 1990). To qualify as an employee welfare benefit plan, a plan must (1) exist, (2) not fall within the safe-harbor provision established by the Department of Labor, and (3) satisfy the primary requirements of an ERISA "employee benefit plan" — establishment or maintenance by an employer intending to benefit employees. Meredith v. Time Ins. Co., 980 F.2d 352, 355 (5th Cir 1993).
A
To decide whether a plan exists, the court determines from the surrounding circumstances whether a reasonable person could ascertain the intended benefits, beneficiaries, sources of financing, and procedures for receiving benefits. Id. (adopting Eleventh Circuit test in Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir. 1982) (en banc)). Magallon-Laffey does not dispute the existence of a plan in this case. It appears from the face of the Policy that the intended benefits, see D. App. 50, beneficiaries, see id. at 34, sources of financing, see id. at 33, 50, and procedures, see id. at 50, are evident. The Policy thus meets the surrounding-circumstances test.
B
To qualify as an employee welfare benefit plan, a plan must not fall within the scope of the Department of Labor's safe-harbor provision. To be within the provision, the Policy must (1) involve no contribution by Magallon-Laffey's employer, (2) involve voluntary participation, (3) limit Magallon-Laffey's employer to collecting premiums and remitting them to Sun Life, and permitting Sun Life to advertise the plan, and (4) not permit the employer to receive a profit from administering the plan. See Gahn v. Allstate Life Ins. Co., 926 F.2d 1449, 1452 (5th Cir. 1991).
C.F.R. § 2510.3-1(j) (1990). See 29 U.S.C. § 1055 (authorizing Secretary of Labor to promulgate regulations interpreting ERISA).
Magallon-Laffey appears to assert that Sun Life must prove all four of these elements in order for the Policy to qualify as an ERISA plan, but this assertion misstates the safe-harbor provision. Rather, she must establish each of these elements in order for the safe-harbor provision to apply and thereby protect her claims from ERISA preemption. See Meredith, 980 F.2d at 355 ("The plan must meet all four criteria to be exempt."). As Sun Life points out, the Policy fails to meet the first criterion because Magallon-Laffey's employer pays the premium for the long-term-disability coverage under the Policy. See D. App. 33 (requiring employer rather than employee contribution to disability coverage). The safe-harbor provision thus does not apply, and the Policy satisfies the second requirement for ERISA preemption.
C
To qualify as an employee welfare benefit plan, the Policy (1) must be established or maintained by Magallon-Laffey's employer, and (2) the employer must have the intent of providing benefits to its employees. Hansen v. Continental Ins. Co., 940 F.2d 971, 977 (5th Cir. 1991). The second element of this requirement — the intent to provide employee benefits — is not controversial here. Magallon-Laffey's employer pays disability coverage premiums for all its employees, and the Policy specifically prohibits payment for coverage by employees themselves. See D. App. 32-33. The intent to provide benefits to employees is evident.
Magallon-Laffey disputes the "established or maintained" element by arguing that "[i]f the employer does not more than purchase insurance for employees, and he has no further involvement . . . he has not established an ERISA plan." P. Br. at 2. It is true that "bare purchase" of insurance coverage is insufficient. See Taggart Corp. v. Life Health Benefits Admin., 617 F.2d 1208, 1211 (5th Cir. 1980); Memorial Hosp., 904 F.2d at 242; Kidder v. H B Marine, Inc., 932 F.2d 347, 353 (5th Cir. 1991); Hansen, 940 F.2d at 978. In Hansen the Fifth Circuit noted instead that sufficient involvement requires "some meaningful degree of participation by the employer in the creation or administration of the plan." Hansen, 940 F.2d at 978.
The degree of participation required depends on the context of the particular plan at issue. In Kidder, a case with relevant facts similar to the instant case, the Fifth Circuit concluded that "H B Construction's payment of premiums on behalf of its employees is `substantial evidence that a plan, fund, or program [was] established.'" Kidder, 932 F.2d at 353 (quoting Donovan, 688 F.2d at 1373). The panel based its reasoning on Memorial Hospital, which similarly held that where an employer has chosen to provide insurance benefits to all its employees and maintains sole responsibility for submitting monthly premiums directly to the insurance provider, there is substantial evidence of "establishment" of a plan. See Memorial Hosp., 904 F.2d at 242-43. The key issue for the court in Memorial Hospital was the existence of an employer-employee-plan relationship. See id. This relationship was lacking in Taggart, which provided the initial articulation of the "bare purchase" doctrine. Taggart involved a company composed of a single employee who was essentially purchasing insurance for himself while attempting to characterize his insurance as a group health plan. See Kidder, 932 F.2d at 353 (citing Taggart, 617 F.2d at 1211).
In the present case, Magallon-Laffey's employer pays insurance premiums for all its employees by remitting the money monthly to Sun Life. See D. App. 50, 67. This degree of involvement, under the specific reasoning of Kidder and Memorial Hospital, demonstrates the employer-employee-plan relationship sufficient to fulfill the "established or maintained" element of an ERISA welfare benefit plan. Contrary to Magallon-Laffey's assertion, this involvement extends beyond "bare purchase" and does not require any additional steps. See Memorial Hosp., 904 F.2d at 243 ("The fact that Noffs' administrative functions under the policy are minimal is perfectly in keeping with its intent that Northbrook administer the plan as well as insure it.").
IV
The court's determination that the Policy is an ERISA welfare benefit plan that meets the three requirements for complete preemption means that Magallon-Laffey's common law claims, as well as her claims under the DTPA and the Texas Insurance Code, are preempted. See Meredith, 980 F.2d at 352. The court therefore holds that it has federal question jurisdiction, the case was removable, and the motion to remand must be denied.
* * *
Magallon-Laffey's July 26, 2001 motion to remand is denied.SO ORDERED.