Opinion
For Susan P. Evans, Plaintiff: Daniel J Veroff, Michael James Munoz Quirk, LEAD ATTORNEYS, Pillsbury and Coleman LLP, San Francisco, CA; Ryan Hideki Opgenorth, Ryan Hideki Opgenorth, LEAD ATTORNEYS, Pillsbury and Levinson LLP, San Francisco, CA.
For Poms & Associates Insurance Brokers, Inc., Defendant: Elise D Klein, Lewis Brisbois Bisgaard and Smith LLP, Los Angeles, CA.
Honorable CHRISTINA A. SNYDER, J.
CIVIL MINUTES - GENERAL
Proceedings: DEFENDANT'S MOTION TO DISMISS (Dkt. No. 9, filed December 24, 2014) PLAINTIFF'S MOTION TO REMAND (Dkt. No. 13, filed December 29, 2014)
I. INTRODUCTION
On November 13, 2014, plaintiff Susan P. Evans filed this lawsuit in Los Angeles County Superior Court against defendant Poms & Associates Insurance Brokers, Inc. (" Poms") and Does 1 through 20. Dkt. No. 1. Plaintiff alleges that defendant, the employer of her late husband, failed to maintain life insurance coverage for plaintiff's husband as promised in his employment contract. See generally Compl. The complaint asserts claims for (1) breach of contract, (2) negligent or intentional misrepresentation, (3) negligence, (4) professional negligence, (5) fraud, (6) breach of fiduciary duty, and (7) intentional infliction of emotional distress. Id. On December 17, 2014, defendant removed the action to federal court on the basis of federal question jurisdiction, asserting that all of plaintiff's claims are preempted by the Employment Retirement Income Security Act of 1974 (" ERISA"), 29 U.S.C. § § 1001 et seq . Dkt. No. 1.
On December 24, 2014, Poms filed a motion to dismiss the complaint on the ground of ERISA preemption. Dkt. No. 9. On December 29, 2014, plaintiff filed a motion to remand the action to state court on the basis that she has no standing to sue under ERISA, and that ERISA's preemption provisions are therefore inapplicable. Dkt. No. 13. Each party filed an opposition to the other's motion on January 5, 2015, and each party filed a reply on January 12, 2015. Dkt. Nos. 14, 15, 18, 19. On January 26, 2015, the Court held a hearing at which counsel for both parties appeared and argued. For the reasons that follow, the Court GRANTS the motion to remand and DENIES AS MOOT the motion to dismiss.
II. FACTUAL BACKGROUND
The complaint alleges the following facts. Poms is an insurance broker licensed to transact business on behalf of insurers. Compl. ¶ 2. On or about November 29, 2012, plaintiff's late husband, John Evans (" John"), accepted an offer of employment in Poms' West Los Angeles office. Id. ¶ 5. Poms agreed to provide John with various forms of insurance, including life insurance. Id. Plaintiff alleges that a promise to provide life insurance coverage was part of John's employment agreement with Poms. Id. ¶ 22. When John began work, he enrolled in group basic life insurance coverage in the amount of $300,000, and group voluntary life insurance coverage in the additional amount of $150,000. Id. ¶ ¶ 5-6. Both policies were offered as an employment benefit by Poms, and procured through Lincoln National Life Insurance Company (" Lincoln"), one of the insurers on whose behalf Poms was authorized to transact business. Id. ¶ 6. Both the basic and voluntary life insurance policies named plaintiff as the sole beneficiary. Id. Plaintiff alleges that Poms promised to keep the life insurance coverages in effect through the duration of John's employment with them. Id. ¶ 7.
On or about October 25, 2013, while John's basic and voluntary life insurance policies with Lincoln were still in effect, John fell ill and became disabled due to renal failure secondary to symptoms of cognitive impairment. Id. ¶ 8. On or about October 29, 2013, Poms informed John and plaintiff that John would be placed on a temporary leave of absence until he recovered from his illness, but that he would retain his status as a Poms employee and would continue to receive all benefits of employment, including the aforementioned life insurance benefits. Id. ¶ 9.
Plaintiff alleges that on October 29, 2013, Poms applied to switch its life insurance provider from Lincoln to Guardian Life Insurance Company of America (" Guardian"), another insurer with whom Poms regularly transacted business. Id. ¶ 10. Plaintiff contends that, in that application, Poms represented that all of its employees, including John, were actively at work. Id. According to plaintiff, three Poms employees certified that the application and all statements made therein were " true and complete to the best of [their] knowledge and belief." Id. Plaintiff alleges that Poms knew this representation was false because Poms had put John on a leave of absence that same day, but never informed Guardian of that fact or otherwise corrected the misrepresentation. Id. Poms provided John and plaintiff with a summary of life insurance benefits with Guardian, and advised them that they would only have to enroll in voluntary life insurance if John had not already done so. Id. ¶ 11. Plaintiff alleges that John did not elect any additional coverage because he was " already enrolled for such benefits." Id.
On or about December 1, 2013, Lincoln's coverage terminated and Guardian's coverage became effective for Poms employees. Id. ¶ 12. The Guardian policy, however, contained an " active work" requirement providing that coverage would only begin for employees who were actively at work on the day the policy became effective. Id. Because John was on a leave of absence at this time, he did not meet the " active work" requirement. Id. Plaintiff alleges that the inclusion of the " active work" requirement was the " direct result of Poms' intentional misrepresentation and concealment of the fact that it had employees who were not actively at work, " and that Poms knowingly obtained a policy that would not cover all of its policies, in " direct contravention of its promise to provide life insurance coverage to its employees and their beneficiaries." Id. Plaintiff alleges that Poms made and failed to correct the false statement that all of its employees were actively at work in order to obtain life insurance coverage at a lower premium than would have been available if Guardian knew that some of Poms' employees were not actively at work. Id. ¶ 10.
Plaintiff contends that Poms never disclosed to her or John that the Guardian policy did not cover them. Id. ¶ 12. Plaintiff avers that Poms continued to pay John's life insurance premiums and led the couple " to believe that both the basic and voluntary life insurance coverages which they had enrolled in remained in full force and effect and that they would be covered in the event of John's death regardless of whether he returned to work." Id. Plaintiff alleges that Poms never explained that John's life insurance coverage was ineffective because of the " active work" requirement, or that his coverage had in fact terminated. Id. ¶ 15. Plaintiff alleges that Poms instead " continued to maintain" that John's life insurance coverage was " in full force and effect." Id.
John never returned to work, and died on April 24, 2014. Id. ¶ 13. Plaintiff alleges that John was still a Poms employee at the time of his death. Id. ¶ 16. When John died, Guardian's policy was still in effect for Poms employees. Id. ¶ 13. As John's sole beneficiary, plaintiff applied for benefits first to Lincoln, and then to Guardian. Id. ¶ 14. Lincoln denied coverage, contending that its policy was not in force at the time of John's death because his insurance had been switched to Guardian on December 1, 2013. Id. Guardian denied coverage because it contended that John was never " actively at work" while its policy was in effect. Id.
Plaintiff asserts that the aforementioned conduct breached Poms' employment contract with John, through which Poms agreed to provide him with life insurance. Id. PP 22-25. Plaintiff also contends that Poms breached duties to notify her and John of the lack of coverage. Id. ¶ ¶ 28-29. Plaintiff alleges that Poms breached ordinary and professional duties of care as well as fiduciary duties owed to her and John, id. ¶ ¶ 33-40, 45-48, fraudulently induced her and John to thinking they had life insurance coverage when they did not, id. ¶ ¶ 42-43, and inflicted severe emotional distress, id. ¶ ¶ 50-52.
III. LEGAL STANDARD
The federal district courts " have removal jurisdiction over any claim that could have been brought in federal court originally." Hall v. N. Am. Van Lines, Inc., 476 F.3d 683, 686-87 (9th Cir. 2007). A motion for remand is the proper procedure for challenging removal. Remand may be ordered either for lack of subject matter jurisdiction or for any defect in removal procedure. See 28 U.S.C. § 1447(c). The Court strictly construes the removal statutes against removal jurisdiction, and jurisdiction must be rejected if there is any doubt as to the right of removal. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992). The party seeking removal bears the burden of establishing federal jurisdiction. See Prize Frize, Inc. v. Matrix, Inc., 167 F.3d 1261, 1265 (9th Cir. 1999).
" Federal district courts have original federal question jurisdiction of actions 'arising under the Constitution, laws, or treaties of the United States.' " Sullivan v. First Affiliated Secs., Inc., 813 F.2d 1368, 1371 (9th Cir. 1987) (quoting 28 U.S.C. § 1331). Generally, whether federal question jurisdiction exists is governed by the " well-pleaded complaint rule." Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). Under this rule, the federal question " must be disclosed upon the face of the complaint, unaided by the answer." Gully v. First Nat'l Bank in Meridian, 299 U.S. 109, 113, 57 S.Ct. 96, 81 L.Ed. 70 (1936).
" One corollary of the well-pleaded complaint rule that has developed in the case law, however, is that Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987); see Caterpillar, 482 U.S. at 393 (" Once an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law."). Complete preemption " is a narrow doctrine." TPS Utilicom Servs., Inc., 223 F.Supp.2d 1089, 1097 (C.D. Cal. 2002). But it applies " where state tort or contract claims are preempted by § § 502(a)(1)(B) and 502(f)" of ERISA. Robinson v. Mich. Consol. Gas. Co. Inc., 918 F.2d 579, 585 (9th Cir. 1990) (citing Metro. Life Ins. Co., 481 U.S. at 66-67); see Metro Life Ins. Co., 481 U.S. at 66 (" [C]auses of action within the scope of the civil enforcement provisions of § 502(a) [are] removable to federal court.").
IV. ANALYSIS
A. ERISA Preemption and Standing
ERISA preemption is designed to further the statute's purpose of " provid[ing] a uniform regulatory regime over employee benefit plans" and making employee benefit plan regulation " exclusively a federal concern." Aetna Health Inc. v. Davila, 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (citing Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981)). " There are two strands of ERISA preemption: (1) 'express preemption' under ERISA § 514(a), 29 U.S.C. § 1144(a); and (2) preemption due to a 'conflict' with ERISA's exclusive remedial scheme set forth in ERISA § 502(a), 29 U.S.C. § 1132(a)." Fossen v. Blue Cross & Blue Shield of Mon., Inc., 660 F.3d 1102, 1107 (9th Cir. 2011) (internal quotation marks and brackets omitted) (quoting Paulsen v. CNF Inc., 559 F.3d 1061, 1081 (9th Cir. 2009)). Section 514(a) provides in relevant part that ERISA " shall supercede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a). Section 502(a) permits an ERISA plan 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). This enforcement mechanism " creates an exclusive remedial scheme" which does not " permit state law claims in addition to the claims actionable under ERISA." Lea v. Republic Airlines, Inc., 903 F.2d 624, 631 (9th Cir. 1990). " Claims relating to ERISA plans must therefore invoke the specific remedies of ERISA." Id. at 632.
But before a court applies the often-complicated law concerning ERISA preemption, " it must first resolve the simpler question of whether a party may assert a claim under ERISA." Miller v. Rite Aid Corp., 504 F.3d 1102, 1105 (9th Cir. 2007). An ERISA action " may be brought by a 'participant' in or 'beneficiary' of an ERISA plan, " whose state-law claims relating to the ERISA plan are preempted. Id. at 1105-06 (citing 29 U.S.C. § 1132(a)). ERISA " does not, " however, " preempt the claims of parties who do not have the right to sue under ERISA because they are neither participants in nor beneficiaries of an ERISA plan." Id. at 1106. Thus, plaintiff's claims are preempted--and removal appropriate--only if they are cognizable under ERISA section 502(a). See Ledwidge v. Ziehm Imaging, Inc., No. EDCV 11-00217 VAP (OPx), 2011 WL 836446, at *4 (C.D. Cal. Mar. 9, 2011).
Plaintiff argues that the Ninth Circuit's decision in Miller v. Rite Aid Corp. mandates a conclusion that ERISA does not preempt her claims because John was not an ERISA " participant" at the time of his death. In that case, Miller had been employed by Rite Aid, which promised that she " would be provided with life insurance" as part of her employment agreement. Miller, 504 F.3d at 1104. For some time, Rite Aid provided Miller with life insurance through a group plan provided by an insurance company named ReliaStar. Id. In February 2001, Miller was diagnosed with terminal cancer and placed on disability; she never returned to work, but Rite Aid assured her and her family that her life insurance coverage would continue through the time of her death. Id. at 1104-05. In July 2001 (before Miller's death), Rite Aid terminated its ReliaStar plan and replaced it with a group plan provided by a different insurance company, Standard. Id. at 1104.
The Standard plan, however, included an " active at work" requirement providing that an employee who was incapable of active work on the day before the scheduled effective date of her insurance would not be enrolled in the insurance " until the day after [she] complete[s] one full day of Active Work as an eligible member." Id. Because Miller was on disability when the Standard group life insurance plan took effect and never returned to work, she never became enrolled in the Standard plan. Id. After Miller's death, Miller's named beneficiaries discovered that they were not eligible for any benefits because Miller was not enrolled in any life insurance plan at the time of her death. Id. at 1105. The named beneficiaries and Miller's estate brought state-law claims against Rite Aid, alleging that the company breached Miller's employment contract by " failing to provide Miller with life insurance" and " negligently failed to 'ensure that [Miller's] fringe benefits would be preserved.' " Id. (brackets in original). Rite Aid sought, and the district court granted, summary judgment on the basis of ERISA preemption. Id. The Ninth Circuit vacated that grant of summary judgment, finding that the plaintiffs were " not participants in or beneficiaries of an ERISA plan" within the meaning of the statute, and therefore had no claim under ERISA. Id. at 1109.
The Ninth Circuit began its analysis by explaining that Miller's estate and named beneficiaries could bring an ERISA suit " only if Miller was a 'participant' in the ERISA plan at the relevant time, " defined as " 'any employee or former employee . . . who is or may become eligible to receive a benefit of any type from an employee benefit plan . . . or whose beneficiaries may be eligible to receive any such benefit.' " Id. at 1106 (quoting 29 U.S.C. § 1002(7)). The court explained that " a party is a 'participant' if he is an employee in, or reasonably expected to be in, currently covered employment, or if he is a former employee who has a reasonable expectation of returning to covered employment, or a 'colorable claim' to vested benefits." Id. (quoting Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989)). Because Miller was employed by Rite Aid until her death, the question was whether she was either (1) " covered by an ERISA life insurance plan at the relevant time, " or (2) " whether she may have become eligible for benefits from such a plan at such time." Id. For the second of these conditions to obtain, Miller would have to " 'have a colorable claim that (1) [she] will prevail in a suit for benefits [under ERISA], or that (2) eligibility requirements will be fulfilled in the future.' " Id. at 1106 & n.6 (quoting Bruch, 489 U.S. at 117-18). The court then determined that the " applicable time for evaluating the claims of a decedent's estate and beneficiaries" was " the time of the employee's death." Id. at 1106-07.
The court also looked to the time of death to determine whether the employee's children were " beneficiaries, " explaining that " ERISA defines a beneficiary as someone designated by a participant, or 'by the terms of an employee benefit plan, who is or may become entitled to a benefit thereunder, ' " and that " [t]he claim of Miller's children to benefits under ERISA can be no greater than Miller's claim." Miller, 504 F.3d at 1108 (quoting 29 U.S.C. § 1002(8)).
Having fixed the relevant time of inquiry, the court determined that " [a]t the time of Miller's death she did not qualify as a 'participant' . . . because at that time she was not covered by any life insurance policy and she did not have a colorable claim to benefits under any plan." Id. at 1107. Miller " was not covered by the ReliaStar life insurance plan because Rite Aid terminated the plan before she died" and a life insurance plan has " no obligation to pay benefits to any person who is still alive" when the plan is terminated. Id. Nor was Miller covered by the Standard life insurance plan, " because the Standard plan's active-at-work requirement made her ineligible for enrollment" and " [i]f Miller was never eligible for coverage under the Standard plan she could not have a colorable claim to benefits under that plan." Id. at 1108. Finally, the court rejected an argument that the " alleged fact that Rite Aid promised life insurance coverage to Miller or her daughter" made Miller a participant. The Ninth Circuit explained:
[M]ere promises do not create ERISA plans " unless . . . the benefits [are] offered pursuant to an organized scheme, " and " the terms of the offer, in the context . . . enable a reasonable person to discern the elements of the benefits scheme." Winterrowd v. Am. Gen. Annuity Ins. Co., 321 F.3d 933, 939 (9th Cir. 2003). The alleged fact that Rite Aid agreed to provide Miller life insurance benefits worth $150,000 does not by itself meet this threshold.
Id. (further citations omitted).
B. Application to This Case
Plaintiff argues that this case presents facts essentially identical to those in Miller. She points out that John's Lincoln coverage terminated before his death, and that the Guardian coverage never took effect for John because of the " active work" requirement. And as in Miller, plaintiff brings state-law claims alleging that an employer failed to provide insurance as promised in an employment contract, and in breach of state common law duties. Therefore, plaintiff argues, at the time of his death, John was not a participant in an ERISA plan, his named beneficiaries have no colorable claim under ERISA, and ERISA does not preempt plaintiff's claims. See Ledwidge v. Ziehm Imaging, Inc., No. EDCV 11-00217 VAP (OPx), 2011 WL 836446 (C.D. Cal. Mar. 9, 2011) (applying Miller and remanding where the plaintiff's late husband accepted an early retirement package on false assurances that his life insurance would not be terminated, the employer failed to notify the husband or insurer that the husband no longer met the policy's eligibility requirements, and the named beneficiaries sued for negligence and breach of the employer's promise to maintain the husband's life insurance coverage).
Poms attempts to distinguish this case on the ground that Ledwidge's employment terminated prior to his death and that he therefore " had no reasonable expectation of returning to covered employment nor a colorable claim to benefits." Dkt. No. 15 at 11. But at the time his death, neither did John. Ledwidge's retirement was significant because it terminated his insurance under the terms of the policy the defendant had represented would cover Ledwidge post-retirement; here, John's leave of absence similarly made him ineligible for the insurance policy that Poms allegedly asserted would cover him.
Poms concedes that under Miller's " general" time-of-death rule, plaintiff would have no ERISA standing because John, " at the time of his death, was not covered under either the Lincoln policy or the Guardian policy." Dkt. No. 15 at 4. Poms asserts, however, that plaintiff nevertheless has standing under a " but for" exception that " confers ERISA standing upon those parties who, but for the alleged malfeasance of a plan fiduciary, would have had the requisite status and authority to seek benefits under § 502(a)(1)(B)." Id. Poms argues that Miller is inapposite because the Ninth Circuit " declined to apply the 'but for' exception to the relevant standing rule based on the lack of certain allegations that are present here." Dkt. No. 15 at 10. Poms relies on a footnote appended to the court's explanation that the Ninth Circuit had held that " whether a living party is a 'participant' or 'beneficiary' is determined at the time the lawsuit is filed, " but had never before Miller " identified the applicable time for evaluating the claims of a decedent's estate and beneficiaries." 504 F.3d at 1106. That footnote reads:
ERISA does not specify the relevant time, but we have deviated from our time-of-suit rule only once, when the employer's termination of the employee threatened to undermine the enforcement of ERISA's whistleblower provision, 29 U.S.C. § 1140, by an employee who was allegedly fired for challenging the decision to terminate the plan. McBride v. PLM Int'l, Inc., 179 F.3d 737, 742-43 (9th Cir. 1999). In this case we do not need to create an exception to the standard rule because Rite Aid did not unlawfully single Miller out in a way that undermined her ability to bring an ERISA claim, or take any other action designed to undermine the enforcement of ERISA.
Id. at 1106 n.4. Poms reasons that the " only allegation of fiduciary misconduct in Miller concerned the employer's reneging on a purported promise to provide life insurance coverage to the decedent until her death." Dkt. No. 15 at 11. But here, Poms argues, plaintiff " contends that Poms essentially 'singled [John] out' by misleading Guardian on the application about his then-current work status." Id. Poms asserts that this " alleged fiduciary breach by Poms is both actionable under ERISA and occurred while [John] was a participant in the Plan." Therefore, Poms claims, " because Plaintiff's allegations, when accepted as true, deprive her of standing to seek benefits under the Plan, the 'but for' exception to the general standing rule applies." Id.
This argument is unpersuasive. In Miller, the plaintiffs alleged that Miller " was not included in the list of employees exempt from the plan's 'active at work' requirement." 504 F.3d at 1104. If Poms' failure to notify Guardian that John was not actively at work at the time of application constitutes a fiduciary breach that triggers an exception to the time-of-death rule, it is difficult to see why Rite Aid's failure to include disabled Miller in a list of employees exempt from the Standard plan's " active at work" requirement would not. Indeed, in rejecting a similar argument to the one Poms advances here, one court noted that Miller involved " facts suggesting a breach of fiduciary duty-type claim, " but the court nevertheless looked to the time of death, not to the time of any alleged misconduct. Widdows v. Fred Meyer, Inc., No. CV 07-795 HU, 2008 WL 3992149, at *8-9 (D. Or. Aug. 22, 2008).
Moreover, the Miller footnote relied on by Poms simply does not support such a broad exception to its time-of-death rule. That footnote cited McBride v. PLM International, Inc., which deviated from the time-of-filing rule for determining the standing of living plaintiffs because " [p]olicy considerations stemming from ERISA mandate that participant status and standing under its whistleblower provision be adjudged at the time of the alleged ERISA violation." 179 F.3d 737 (9th Cir. 1999) (emphasis added). In that case, an employer fired an employee, McBride, who had opposed termination of an employee stock ownership plan. Id. at 740-41. McBride sued under ERISA's whistleblower provision, 29 U.S.C. § 1140, claiming that he was fired for airing concerns to the Department of Labor. Id. at 741. The district court granted summary judgment for the employer, holding that McBride was not a " participant" in an ERISA plan when he filed the lawsuit and therefore lacked standing to bring the claim. Id.
On appeal, the employer argued that McBride lacked standing because, at the time of filing, he was a former employee who had " received full distribution of [his] vested benefits" and had " no reasonable expectation of returning to covered employment, as the Plans themselves no longer exist[ed]." Id. at 742. The Ninth Circuit, however, created an exception to the general time-of-filing rule because of the " unusual context" of an ERISA whistleblower lawsuit. Id. at 742-43. The court noted that § 1140 " forbids employers . . . from interfering with certain protected rights" and that " [d]epriving a plaintiff of standing to sue under ERISA for his employer's clear violation of section 1140 would, in effect, make standing contingent upon the occurrence of subsequent events entirely within the control of the employer." Id. at 743. The court reasoned that " [r]equiring that claimants like McBride be plan participants at the time of suit would create a race to the courthouse" because " [s]tanding would depend upon which event occurred first: the plan's termination, or the claimant's filing of a lawsuit." Id. Therefore, the court held that " [w]hen an individual alleges . . . that he was discharged in violation of ERISA's whistleblower provisions, his employer cannot be allowed to evade section 1140 accountability simply by terminating the plan and distributing the benefits." Id. The McBride court made clear that its holding was driven by the policy concerns specific to the ERISA whistleblower provision. See id. at 743-44 (" To require that the claimant be a participant at the time of filing suit would undermine the very purpose of ERISA's whistleblower provision: to provide a federal remedy for discrimination against plan participants for exercising their protected rights under ERISA."). The instant case has nothing to do with ERISA's whistleblower provision, and does not implicate the policy concerns that led the Ninth Circuit to measure standing from the time of the alleged misconduct. For example, there could have been no race to the courthouse starting at the time of the alleged failure to notify Guardian of John's leave of absence, because plaintiffs did not learn of this failure and its consequences until after John's death.
Vaughn v. Bay Environmental Management, Inc., which decided the issue of " whether a former employee who has received a full distribution of his or her account balance under a defined contribution pension plan has standing as a plan participant to file suit under" ERISA, is similarly inapposite. 567 F.3d 1021, 1023 (9th Cir. 2008). Plaintiff Vaughn had been a member of ERISA-governed retirement plans, which his employer terminated and distributed in lump sums to all former participants. Id. Vaughn filed ERISA claims against the employer and plan trustees, alleging that they breached fiduciary duties by investing the plans' assets imprudently and seeking " the establishment of a trust for benefits owing to the Plan participants." Id. at 1023-24, 1026-27. The district court dismissed the suit for lack of standing, reasoning that Vaughn was not a " participant" because he had already received his entire account balance, and therefore was not entitled to additional benefits. Id. at 1024. The Ninth Circuit reversed, reasoning that " Vaughn [sought] an equitable remedy, " which ERISA provides for, and that ERISA's goal of enforcing statutorily-imposed fiduciary duties could only be advanced if Vaughn had standing to advance his claims of imprudent investment, despite the fact that he had been cashed out and the plan terminated. Id. at 1027; see id. at 1030 (terming the holding " necessary in order to give effect to one of the primary goals of ERISA, preventing the misuse and mismanagement of plan assets by fiduciaries" (internal quotation marks and citation omitted)). The court concluded that " [i]f former employees in Vaughn's situation did not have standing 'an employer who had mismanaged individual account plan assets [could] avoid liability by cashing out the participants.' " Id. (quoting Graden, 496 F.3d at 302)).
Vaughn, like McBride, did not involve the time-of-death rule laid out in Miller and implicated here; in fact, the Ninth Circuit has never articulated an exception to Miller's time-of-death rule. Moreover, the fiduciary duties asserted in Vaughn were ERIS-Agoverned duties pertaining to the management of employee funds, and the circumstance that led the Ninth Circuit to deviate from the time-of-filing rule was the action of cashing out the plan subsequent to the alleged breach, which otherwise would have stripped Vaughn of standing. Here, plaintiff alleges that Poms breached state-law duties owed to John and not imposed by any ERISA plan, and does not allege that Poms took any separate action designed to prevent her from pursuing ERISA remedies.
In short, the footnote in Miller and related Ninth Circuit case law do not suggest that the general rules for when to analyze ERISA standing are inapplicable whenever the defendant " singles out" a plaintiff in breaching a duty owed. Rather, the Ninth Circuit has recognized rare exceptions when the defendant singles out a plaintiff in a way that specifically " undermine[s] her ability to bring an ERISA claim" --for example, by terminating a whistleblower to strip him of standing, or by cashing out the ERISA plan of a plaintiff alleging fiduciary mismanagement. Neither McBride nor Vaughn supports a " but for" exception to Miller broad enough to confer ERISA standing on plaintiff.
Additionally, the Vaughn court noted that Vaughn could not assert a claim for benefits under ERISA § 502(a)(1)(B), because claims under that provision can only be brought against the plan itself or the plan administrator, but could bring a claim under ERISA § 502(a)(2), because that type of claim " can be brought against any fiduciary." 567 F.3d at 1029 (quoting Graden v. Conexant Sys. Inc., 496 F.3d 291, 301 (3d Cir. 2007)). Poms is thus on shaky ground in citing Vaughn for the proposition that the " but for" exception " confers ERISA standing upon those parties who, but for the alleged malfeasance of a plan fiduciary, would have had the requisite status and authority to seek benefits under § 502(a)(1)(B)." See Dkt. No. 15 at 4-5.
Poms' argument has previously been rejected within this circuit. In Widdows, 2008 WL 3992149, at *1-3, the plaintiff brought state-law claims against her late husband's employer and plan administrator, pled conditionally in the event that the court determined that she was not eligible for benefits under the ERISA plan she also sued under. After his short-term disability leave had been exhausted, the husband's employer had terminated his employment with an offer to rehire him when he convalesced, purportedly so the husband could obtain continuing health insurance, but allegedly without informing him that he would lose his life insurance coverage as a result. Id. at *1. When his wife attempted to claim life insurance benefits after his death, she was advised that her husband was not eligible for insurance at the time of his death. Id. at *2. Applying Miller, the court determined that the ERISA claims failed because the husband was not a participant or beneficiary at the time of his death, and that for the same reason, the state law claims were not preempted and remand was required. Id. at *3-5, *9.
As here, the defendants argued that " Miller does not apply to the preemption of claims based on allegations of fiduciary misconduct." Id. at *8. The court squarely rejected this argument, pointing out that the Miller court considered " facts suggesting a breach of fiduciary duty-type claim, " and applied no such exception. Id. The court disagreed with the assertion that the Miller footnote " recognized an exception to Miller's 'time-of-death' participant determination for a decedent's estate or beneficiaries in cases with breach of fiduciary duty claims based on the defendant's actions depriving the plaintiff of participant or beneficiary status." Id. at *9. The court first noted that the footnote discussed an " exception to the court's 'time-of-suit' rule used for living plaintiffs, not its 'time-of-death' rule" for a decedent's estate or beneficiaries. Id. Next, the court explained that the Miller footnote relied on McBride, which was driven by the specific context of ERISA's whistleblower provision. See Id. at *10 (" McBride clearly limited its 'time-of-suit' exception to claims under section 1140. Nothing in Miller expands that exception to common law breach of fiduciary duty claims."). The court concluded that neither McBride nor Miller established a " 'but for' exception to ERISA standing applied to a breach of fiduciary duty case." Id. This thoughtful discussion provides an additional reason for the Court to reject Poms' argument that Miller does not apply.
The Court also notes that if the Ninth Circuit had established a " but for" exception to the time-of-death rule as broad as Poms insists (discussed below), surely it would have applied in Ledwidge, where the employer not only failed to maintain insurance coverage for Ledwidge, but also failed to notify the insurer or Ledwidge himself that Ledwidge was no longer eligible for his policy. 2011 WL 836446, at *1.
Finally, the Court is not persuaded to reach a contrary conclusion by Poms' citation of Estate of Hirata v. Ida, Civil No. 10-00084 LEK, 2012 WL 3777148 (D. Haw. Aug. 28, 2012). In that case, the estate of a decedent brought ERISA claims against the decedent's former employer for failure to notify the decedent that his life insurance policy was cancelled several years before his death as a cost-cutting measure. Id. at *2-3. The estate argued that the employer " was acting as an ERISA fiduciary when it significantly and deliberately misled" the decedent, and sought equitable relief. Id. at *6. Noting that the decedent would seem to lack standing under Miller because he was not a participant at the time of his death, the court nevertheless concluded that the estate could sue under ERISA because the employer had singled the decedent out in a way that undermined his ability to bring an ERISA claim. Id. at *9. The court reasoned that the defendant had an ERISA-mandated duty to timely notify the decedent that it had terminated his benefits, and that " [a]pplying the time-of-death rule would allow the plan administrator to escape liability under ERISA for the failure to provide timely notice . . . by concealing the cancellation until after an employee's death." Id. The court therefore concluded that " where an plan administrator actively and deliberately misleads an employee by failing to provide timely notice of the cancellation of an ERISA-governed employee benefit plan, the employee has standing to sue under ERISA if the employee was a participant at the time of the plan's cancellation." Id.
The court had previously ruled that monetary damages were not available. 2012 WL 3777148, at *8.
The Ida court itself noted that its conclusion was driven by a factor that distinguishes the case at bar: " in cases such as [Ida], the alleged ERISA violation is not the failure to ensure a particular benefit at the time of the employee's death, but the failure to provide timely notice of the cancellation of the benefit plan. . . . Thus, the relevant time period is the time of the cancellation, not the time of the employee's death." Id. Here, the gravamen of plaintiff's complaint is precisely " the failure to ensure a particular benefit at the time of the employee's death." Ida is therefore distinguishable on its facts. And to the extent that Ida supports a reading of the Miller footnote and McBride as broad as the one Poms advances, the Court respectfully disagrees for the reasons stated above.
" If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. § 1447(c); see also Fed.R.Civ.P. 12(h)(3) (" If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action."). Poms has failed to meet its burden of demonstrating that the Court has federal question jurisdiction due to ERISA preemption of plaintiff's claims, and asserts no other basis for federal subject matter jurisdiction. Therefore, the Court GRANTS the motion to remand this case to the Superior Court.
At oral argument, Poms' counsel suggested without elaboration that an additional reason for not applying Miller to this case is that Miller preceded the Supreme Court's decision in CIGNA Corp. v. Amara, 131 S.Ct. 1866, 1878-80, 179 L.Ed.2d 843 (2011), which held that § 502(a)(3) gives a court the equitable power to reform the terms of an ERISA plan. No party in that case appeared to contest that the plaintiffs were participants in or beneficiaries of an ERISA plan. The Court's review of Amara does not alter its conclusion that plaintiff lacks standing under Miller to seek any remedy under ERISA because she was not a plan participant or beneficiary at the time of her husband's death.
C. Poms' Motion to Dismiss
Because the Court concludes that remand is required, Poms' motion to dismiss is DENIED AS MOOT.
D. Plaintiff's Request for Attorneys' Fees
Plaintiff argues this action was removed in bad faith, and requests that the Court impose sanctions on Poms' counsel in the amount plaintiff's attorneys' fees for opposing the remand motion. See Dkt. No. 13 at 11-12. A remand order " may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal." 28 U.S.C. § 1447(c). An award of attorneys' fees pursuant to this section " is within the discretion of the district court, and bad faith need not be demonstrated." Moore v. Permanente Med. Grp., Inc., 981 F.2d 443, 446 (9th Cir. 1992). Still, courts in this district have declined to assess fees under § 1447(c) where removal was supported by colorable, though ultimately unpersuasive, arguments. Lukens v. Broder/Kurland Agency, at *25 (C.D. Cal. Sept. 5, 2000) (" Defendants' arguments for removal, though mostly unsuccessful, were colorable. For this reason, the court declines to grant plaintiff attorneys' fees."); California v. Steelcase, Inc., 792 F.Supp. 84, 87 (C.D. Cal. 1992) (" [D]efendant's arguments for removal jurisdiction, while novel, are at least colorable. Under these circumstances, the court declines to exercise its discretion in favor of granting attorney's fees." (citation omitted)).
Plaintiff argues that Poms' removal and opposition to the remand motion was in bad faith because Poms refused to stipulate to remand the case despite being directed to Miller by plaintiff's counsel, and also filed a motion to dismiss that did not cite Miller. Dkt. No. 13 at 11. However, while Poms' arguments for avoiding Miller fail, they have some colorable support in case law, most notably in Ida. Accordingly, the Court declines to impose attorneys' fees or costs incurred as a result of removal.
V. CONCLUSION
In accordance with the foregoing, the Court GRANTS plaintiff's motion to remand and REMANDS the action to Los Angeles County Superior Court. The Court DENIES AS MOOT Poms' motion to dismiss, and DENIES plaintiff's request for attorneys' fees.
IT IS SO ORDERED
Initials of Preparer
Further undermining Poms' suggestion that Vaughn can be read as post-Miller confirmation of a " but for" exception that applies to this case, the Vaughn court stated that, in holding that a former employee whose pension plan has been cashed out can nevertheless sue under ERISA, it joined several other Courts of Appeal, including the Fourth Circuit. 567 F.3d at 1023. But Poms states in its opposition to the instant motion that the Fourth Circuit is among those that have " expressly rejected the 'but for' exception to the general rule of standing." Dkt. No. 15 at 13 n.6 (citing Leuther v. Blue Cross & Blue Shield of Ne. Pa., 454 F.3d 120, 128-29 (3d Cir. 2006) (in turn citing Stanton v. Gulf Oil Corp., 792 F.2d 432 (4th Cir. 1986))).