Filed: Jan. 27, 2017
Latest Update: Mar. 03, 2020
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 16-1075 BILLY E. PRINCE, individually and as personal representative for the late JUDITH A. PRINCE, Plaintiff - Appellant, v. SEARS HOLDINGS CORPORATION, a Delaware corporation, Defendant - Appellee. Appeal from the United States District Court for the Northern District of West Virginia, at Clarksburg. John Preston Bailey, District Judge. (1:15-cv-00006-JPB) Argued: December 6, 2016 Decided: January 27, 2017 Before MOTZ, KEENAN,
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 16-1075 BILLY E. PRINCE, individually and as personal representative for the late JUDITH A. PRINCE, Plaintiff - Appellant, v. SEARS HOLDINGS CORPORATION, a Delaware corporation, Defendant - Appellee. Appeal from the United States District Court for the Northern District of West Virginia, at Clarksburg. John Preston Bailey, District Judge. (1:15-cv-00006-JPB) Argued: December 6, 2016 Decided: January 27, 2017 Before MOTZ, KEENAN, ..
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 16-1075
BILLY E. PRINCE, individually and as personal
representative for the late JUDITH A. PRINCE,
Plaintiff - Appellant,
v.
SEARS HOLDINGS CORPORATION, a Delaware corporation,
Defendant - Appellee.
Appeal from the United States District Court for the Northern
District of West Virginia, at Clarksburg. John Preston Bailey,
District Judge. (1:15-cv-00006-JPB)
Argued: December 6, 2016 Decided: January 27, 2017
Before MOTZ, KEENAN, and THACKER, Circuit Judges.
Affirmed by published opinion. Judge Motz wrote the opinion, in
which Judge Keenan and Judge Thacker joined.
ARGUED: Chad Lewis Taylor, SIMMERMAN LAW OFFICE, PLLC,
Clarksburg, West Virginia, for Appellant. Jill E. Hall, BOWLES
RICE LLP, Charleston, West Virginia, for Appellee. ON BRIEF:
Frank E. Simmerman, Jr., SIMMERMAN LAW OFFICE, PLLC, Clarksburg,
West Virginia, for Appellant. Gerard R. Stowers, BOWLES RICE
LLP, Charleston, West Virginia, for Appellee.
DIANA GRIBBON MOTZ, Circuit Judge:
Alleging that his employer improperly administered life
insurance benefits, an employee brought suit for
misrepresentation, constructive fraud, and infliction of
emotional distress. Because the Employee Retirement Income
Security Act (“ERISA”) completely preempts these state law
claims, we affirm the judgment of the district court dismissing
the complaint.
I.
In November 2010, Billy E. Prince submitted an application
to his employer for $150,000 in life insurance coverage for his
wife, Judith Prince. The employer, Sears, sponsored and
administered the life insurance program through The Prudential
Insurance Company of America. In May 2011, Sears sent an
acknowledgment letter to Prince and began withholding premiums
from his pay shortly thereafter.
Later in 2011, Mrs. Prince learned she had Stage IV liver
cancer. Almost a year after Mrs. Prince’s initial diagnosis,
Prince checked his online benefits summary, which confirmed his
election to purchase life insurance coverage for his wife in the
amount of $150,000. Another year passed, and Sears sent Prince
a letter advising him that Mrs. Prince’s coverage had never
become effective because no “evidence of insurability
2
questionnaire” had been submitted. Sears explained that
Prudential had sent a notice to Prince in January 2011 advising
that unless a completed insurability questionnaire was
submitted, Prudential would terminate his application for the
life insurance coverage. Prince claims that he has no record of
receipt of that notice but does not dispute that Prudential sent
it to him.
On May 26, 2014, Mrs. Prince died. Because Prince did not
receive the $150,000 in life insurance, he filed a complaint
against Sears in the Circuit Court of Marion County, West
Virginia. The complaint asserted one count of “constructive
fraud/negligent misrepresentation” and one count of
“intentional/reckless infliction of emotional distress,” based
on Sears’s alleged misrepresentations regarding the life
insurance policy and the harm thereby inflicted on Mr. and
Mrs. Prince.
Sears removed the suit to the United States District Court
for the Northern District of West Virginia and asked the court
to dismiss the complaint, arguing that ERISA completely
preempted Prince’s state law claims. Prince opposed the motion
and moved to remand the case back to state court. The district
court held that ERISA completely preempted Prince’s claims.
Accordingly, the court denied Prince’s motion to remand and
3
dismissed the complaint without prejudice. Prince timely filed
this appeal. 1
II.
“We review de novo questions of subject matter
jurisdiction, ‘including those relating to the propriety of
removal.’” Sonoco Prods. Co. v. Physicians Health Plan, Inc.,
338 F.3d 366, 370 (4th Cir. 2003) (quoting Mayes v. Rapoport,
198 F.3d 457, 460 (4th Cir. 1999)). The party seeking removal
bears the burden of showing removal is proper. Mulcahey v.
Columbia Organic Chems. Co.,
29 F.3d 148, 151 (4th Cir. 1994).
When reviewing the grant of a motion to dismiss, we assume all
facts in the complaint as true and resolve all doubts in favor
of the non-moving party. Edwards v. City of Goldsboro,
178 F.3d
231, 243–44 (4th Cir. 1999).
“Under the removal statute, ‘any civil action brought in a
State court of which the district courts of the United States
have original jurisdiction, may be removed by the defendant’ to
federal court.” Aetna Health Inc. v. Davila, 542 U.S. 200, 207
1 Sears moved to dismiss the appeal, arguing that the
district court’s order was not final. We denied the motion,
explaining that “no amendment to the complaint would enable
Prince’s [state law] claims to survive the district court’s
holding that they were preempted by ERISA.” Order, Prince v.
Sears Holdings Corp., No. 16-1075, at *2 (4th Cir. May 13,
2016).
4
(2004) (quoting 28 U.S.C. § 1441(a) (2012)). District courts
have original jurisdiction over claims “arising under the
Constitution, laws, or treaties of the United States.” 28
U.S.C. § 1331. To determine whether a plaintiff’s claims “arise
under” the laws of the United States, courts typically use the
“well-pleaded complaint rule,” which focuses on the allegations
of the complaint. Aetna, 542 U.S. at 207.
An exception to the well-pleaded complaint rule occurs when
a federal statute completely preempts state law causes of
action. Id. at 207–08. “[C]omplete preemption ‘converts an
ordinary state common law complaint into one stating a federal
claim.’” Darcangelo v. Verizon Commc’ns, Inc.,
292 F.3d 181,
187 (4th Cir. 2002) (quoting Metro. Life Ins. Co. v. Taylor,
481
U.S. 58, 65 (1987)). “[W]hen complete preemption exists, ‘the
plaintiff simply has brought a mislabeled federal claim, which
may be asserted under some federal statute.’”
Sonoco, 338 F.3d
at 371 (quoting King v. Marriott Int’l, Inc.,
337 F.3d 421, 425
(4th Cir. 2003)). Defendants may remove preempted state law
claims to federal court, regardless of the “label” that the
plaintiff has used. See id.; Griggs v. E.I. DuPont de Nemours &
Co.,
237 F.3d 371, 379 (4th Cir. 2001).
ERISA’s broad civil enforcement provision, § 502(a),
codified at 29 U.S.C. § 1132(a), has the potential to preempt
state law causes of action. That provision allows a participant
5
or beneficiary of an ERISA plan to bring a civil action “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[,]
. . . to enjoin any act or practice which violates any provision
of this subchapter or the terms of the plan, or . . . to
obtain . . . equitable relief.” Id. “This integrated
enforcement mechanism . . . is a distinctive feature of ERISA,
and essential to accomplish Congress’ purpose of creating a
comprehensive statute for the regulation of employee benefit
plans.”
Aetna, 542 U.S. at 208.
ERISA § 502(a) completely preempts a state law claim when
the following three-prong test is met:
(1) the plaintiff must have standing under § 502(a) to
pursue its claim; (2) its claim must “fall[ ] within
the scope of an ERISA provision that [it] can enforce
via § 502(a)”; and (3) the claim must not be capable
of resolution “without an interpretation of the
contract governed by federal law,” i.e., an ERISA-
governed employee benefit plan.
Sonoco, 338 F.3d at 372 (alterations in original) (quoting Jass
v. Prudential Health Care Plan, Inc.,
88 F.3d 1482, 1487 (7th
Cir. 1996)). Prince concedes that he has standing under ERISA
§ 502(a) to bring a claim and therefore meets the first prong of
the Sonoco test. Accordingly, we need only consider the second
and third prongs.
6
A.
The second prong requires us to determine whether Prince
can enforce his claims under § 502(a). This analysis depends on
the scope of Prince’s claims. Prince asserts that his claims
rely on the actions of Sears prior to the denial of benefits,
when the company deducted premiums from his pay and reported
that he had coverage. Prince does not dispute that he never
submitted the required evidence of insurability and that Sears’s
decision to deny benefits was proper given the terms of the
plan. Prince apparently believes that focusing on Sears’s
actions prior to the denial will allow his claims to escape
preemption.
Prince is mistaken. Regardless of whether his claims
attack Sears’s actions prior to the denial or in issuing the
denial, these claims are enforceable under § 502(a). This is so
because they challenge the administration of the ERISA plan -- a
core § 502(a) claim. Prince is entitled to life insurance
benefits only if the ERISA plan provided them. Sears withdrew
premiums from Prince’s pay only because the ERISA plan required
Sears to do so. “It follows that if an individual brings suit
complaining of a denial of coverage . . . , where the individual
is entitled to such coverage only because of the terms of an
ERISA-regulated employee benefit plan, and where no legal duty
(state or federal) independent of ERISA or the plan terms is
7
violated, then the suit falls ‘within the scope of ERISA.’”
Aetna, 542 U.S. at 210.
Contrary to Prince’s assertions, his claims implicate no
independent legal duty that Sears owed him. Of course, Sears
employs Prince, but the company also administers an ERISA plan.
Distinct from its duties as an employer, Sears has duties as the
plan administrator and those duties clearly fall within the
scope of ERISA. Prince’s claims concern only the way in which
Sears assertedly breached these duties while administering his
benefits. His claims are thus entirely within the scope of
ERISA § 502(a)(1)(B). See Aetna, 542 U.S. at 211–13; see also
Pizlo v. Bethlehem Steel Corp.,
884 F.2d 116, 120 (4th Cir.
1989) (explaining that while ERISA does not preempt claims based
on a contract of employment, it does completely preempt claims
related to modification of pension plans).
In arguing to the contrary, Prince relies heavily on an
out-of-circuit district court case, Tovey v. Prudential Ins. Co.
of Am., 42 F. Supp. 2d 919 (W.D. Mo. 1999). There, the court
held that ERISA did not preempt a state law claim for negligent
misrepresentation. But this was because “[f]irst and foremost”
Tovey was not an ERISA plan participant and for this reason was
not attempting in enforce her rights under an ERISA plan.
Id.
at 925–26, 926 n.3. In contrast, Prince concedes that he is an
ERISA plan participant.
8
Prince also asserts that his state law claims lie outside
the scope of ERISA preemption because he asks for “damages”
rather than benefits. 2 ERISA does not permit recovery of money
damages, but its “preemptive scope is not diminished simply
because a finding of preemption will leave a gap in the relief
available to a plaintiff.” Wilmington Shipping Co. v. New
England Life Ins. Co., 496 F.3d 326, 341 (4th Cir. 2007).
Indeed, the Supreme Court long ago held that “[t]he policy
choices reflected in the inclusion of certain remedies and the
exclusion of others under the federal scheme would be completely
undermined if ERISA-plan participants and beneficiaries were
free to obtain remedies under state law that Congress rejected
in ERISA.” Pilot Life Ins. Co. v. Dedeaux,
481 U.S. 41, 54
(1987).
Prince can enforce his claims under ERISA; that he cannot
recover damages does not require a different conclusion or avoid
complete preemption.
B.
Resolution of Prince’s claims would also require
interpretation of the ERISA plan, the third and final Sonoco
2To the extent that he cites any law for this proposition,
Prince appears to rely on Tovey, but his reliance is misplaced.
Tovey did not hold that a plaintiff could avoid preemption by
asking for damages instead of benefits. Rather, the Tovey court
referred to Tovey’s request for damages to further illustrate
that she was not a plan participant. 42 F. Supp. 2d at 926.
9
prong. Prince disagrees. He insists that he only challenges
the actions Sears took prior to the denial of benefits. This is
a distinction without a difference.
Prince’s claims of misrepresentation and constructive fraud
require assessment of Sears’s “duty” as the plan administrator.
See Folio v. City of Clarksburg, 655 S.E.2d 143, 151 (W. Va.
2007) (explaining that under West Virginia law negligent
misrepresentation requires “a duty to give information to
another”) (emphasis added); Stanley v. Sewell Coal Co.,
285
S.E.2d 679, 683 (W. Va. 1981) (explaining that under West
Virginia law constructive fraud requires “breach of a legal or
equitable duty”) (emphasis added). The only duty Sears had to
Prince regarding his benefits (both prior to and after the
denial of benefits) stemmed from the ERISA plan. See JA 42, 43,
45, 46, 48, 49, 96 (language in the plan explaining information
the administrator will provide and what actions it will take).
Determining whether Sears met its duty would require examining
what the plan obligated Sears to do.
Prince’s infliction of emotional distress claim similarly
requires assessment of Sears’s conduct in administering the
ERISA plan; only if that administration was so inept that it was
“outrageous” could Prince recover. See Travis v. Alcon Labs.,
Inc., 504 S.E.2d 419, 425 (W. Va. 1998) (holding that
intentional or reckless infliction of emotional distress
10
requires “that the defendant’s conduct was atrocious,
intolerable, and so extreme and outrageous as to exceed the
bounds of decency”). Prince claims that Sears misled him when
it erroneously withheld the premiums and reported that he had
coverage. He claims that these actions, and those Sears took
once it discovered the mistake, caused him and his wife
distress. Determining whether Sears acted in an “outrageous”
way would require examining and interpreting Sears’s duties and
responsibilities under the ERISA plan.
In sum, Prince’s claims meet all three prongs of the Sonoco
test, and ERISA completely preempts them.
III.
Accordingly, the judgment 3 of the district court is
AFFIRMED.
3
The district court dismissed Prince’s complaint without
prejudice to permit him to refile it as an ERISA action after he
had exhausted his administrative remedies. At oral argument,
Prince’s counsel expressed skepticism that administrative
remedies or mediation would be fruitful, but counsel for Sears
indicated that they might indeed be fruitful. We note that the
record reflects that Sears initially offered to reopen
enrollment for Mrs. Prince, with Prudential evaluating her
coverage based on her 2011 medical information. Given that
Prince has not explored his administrative remedies, it remains
unclear whether they would be productive.
11
