8 ABR 123
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MICHAEL R. JENKINS and ) MARIANNE JENKINS, ) Case No. A05-0063 CV (RRB) ) Plaintiffs, ) MEMORANDUM DECISION ) FROM CHAMBERS JAMES E. JOHNSON; JOHNSON ) [Re: Motion to Remand] DEALERSHIP, INC. MOTORS; and ) FAIRBANKS NISSAN, INC., ) ) Defendants ) ) I – MOTION PRESENTED
Plaintiffs Michael R. And Marianne Jenkins have moved the court to remand this matter to the Superior Court for the State of Alaska, Fourth Judicial District at Fairbanks. Defendants James E. Johnson, Johnson Dealership, Inc. Motors, and Fairbanks Nissan, Inc. have opposed the motion. The matter has been fully briefed. 1 Neither party has timely requested oral argument on the motion and the court has determined that oral argument would not materially assist in determining the motion. 2
II – BACKGROUND
On July 30, 2004, Michael R. And Marianne Jenkins filed a voluntary petition under chapter 13 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Alaska. On September 10, 2004, Michael R. and Marianne Jenkins filed an action in the Superior Court for the State of Alaska, Fourth Judicial District at Fairbanks against defendants. The summons and complaint were served on the defendants on November 1, 2004. Defendants timely removed the action to the bankruptcy court on November 19, 2005. Plaintiffs filed a Motion to Withdraw the Reference and a Motion to Remand the action to the state court on February 4, 2005. Upon the
8 ABR 145 recommendation of the bankruptcy court, this court withdrew the reference on April 21, 2005. On April 29, 2005, upon motion by the plaintiffs, the Bankruptcy Court dismissed the underlying chapter 13 case.
III – DECISION
28 U.S.C. 1452(b), applicable to removals in bankruptcy proceedings, provides in relevant part: “The court to which such claim or cause of action is removed may remand such claim or cause of action on any equitable ground.” 3 Plaintiffs’ motion is predicated upon the assumption that a federal court lacks subject matter jurisdiction. The court agrees that if original jurisdiction is lacking in this court, removal was improper and the case must be remanded to the state court. 4 Plaintiffs also correctly note that there is no diversity jurisdiction and the fact that defendants may have a defense under ERISA does not create a federal question sufficient to warrant the exercise of jurisdiction by a federal court. From this, Plaintiffs conclude that there is a lack of original federal jurisdiction and removal was improper. Unfortunately, for plaintiffs, as discussed further below, their position is incorrect. Original jurisdiction sufficient to support removal of this action existed on two independent bases.
[T]he district courts shall have original but not exclusive jurisdiction over all civil proceedings arising under title 11 or arising in or related to cases under title 11.” 5
The usual articulation of the test for determining whether a civil proceeding is related to bankruptcy is whether the outcome of the proceeding could conceivably have any effect on the estate being administered in bankruptcy. [citations omitted]. Thus, the proceeding need not necessarily be against the debtor or against the debtor's property. An action is related to bankruptcy if the outcome could alter the debtor's rights, liabilities, options, or freedom of action (either positively or negatively) and which in any
The Ninth Circuit has adopted the Third Circuit’s Pacor test for determining whether related to jurisdiction exists. 7
This case presents a claim that, both at the time the complaint was filed in the Alaska Superior Court and the time of removal, 8 was part of the bankruptcy estate. 9 As part of the bankruptcy estate, the claim upon which the present action is based clearly would impact the bankruptcy estate within the “related to jurisdiction” of this court. 10 Indeed, as property of the estate, at the time of removal, this court had exclusive jurisdiction over the subject matter of the complaint. 11
The fact that the underlying chapter 13 action has been dismissed does not necessarily deprive this court of jurisdiction over this adversary proceeding. The court has discretion to retain jurisdiction notwithstanding the dismissal of the underlying bankruptcy case. 12 Ordinarily, given the early stage of the proceedings, the court would be disinclined to retain jurisdiction and would remand the case to the state court. In this case, however, plaintiffs’ claims, on their faces as pleaded, are clearly preempted by ERISA squarely presenting a federal question.
ERISA §502(a)(1)(B), 13 provides that a beneficiary under an ERISA plan may bring an action to:
[R]ecover benefits due him under the terms of his plan, to enforce his rights under the terms of the plan, or to his clarify his rights to future benefits under the terms of the plan.
ERISA §514(a), 14 commonly referred to as the general preemption provision, provides:
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975.
Plaintiffs correctly argue that ordinarily, determining whether a particular case arises under federal law turns on the "well-pleaded complaint" rule, unaided by anything alleged in anticipation of avoidance of defenses which it is thought the defendant may interpose. In particular, the existence of a federal defense normally does not create statutory "arising under" jurisdiction, and a defendant may not generally remove a case to federal court unless the plaintiff's complaint establishes that the case arises under federal law. 15 “There is an exception, however, to the well-pleaded complaint rule. ‘[W]hen a federal statute wholly displaces the state-law cause of action through complete preemption,’ the state claim can be removed.” 16 “This is so because ‘[w]hen the federal statute completely pre-empts the state-law cause of action,
Wrongful Termination. In Count I the plaintiffs attempt to plead a state law claim for wrongful termination. The complaint plainly alleges that the basis for the termination was to avoid paying health insurance claims.
10. James E. Johnson, Fairbanks Nissan, Inc., Motors, Inc., and Johnson Dealership, Inc., fired Michael Jenkins in order to avoid paying health insurance benefits.
11. James E. Johnson, personally, directed that Michael Jenkins be fired in order to avoid having to pay the health insurance claims of Michael and Marianne Jenkins.“It is well-settled in this circuit that a wrongful termination claim based on the theory that the employer intended to avoid pension or insurance payments is preempted by ERISA.” 18
Bad Faith Failure to Insure. In Count II of the complaint, plaintiffs attempt to plead a state law claim for bad faith failure to insure. In addition to incorporating paragraphs 10 and 11, this count also plainly alleges that the action is based upon a failure to pay benefits.
19. James E. Johnson, Fairbanks Nissan, Inc., Motors, Inc., and Johnson Dealership, Inc., intentionally and in bad faith overruled the RBMS determination and stopped payment of covered medical bills. The Defendants’ actions constitute a bad faith failure to insure.
20. Defendants James E. Johnson, Fairbanks Nissan, Inc., Motors, Inc., and Johnson Dealership, Inc., wrongfully terminated the Jenkins’ insurance on October 31, despite the Jenkins’ payment of continued coverage under COBRA.This cause of action clearly seeks "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." 19 The added allegations that the actions were taken intentionally, in bad faith, or that the termination of the benefits was wrongful does not change what is an action to enforce the provisions of an ERISA plan into a cause of action under state law. 20
The allegations in the complaint clearly establish that plaintiffs are seeking to enforce their rights under the provisions of an ERISA plan. Plaintiffs cannot escape the limitations of ERISA preemption simply by dressing up what is essentially a claim under ERISA in the garb of a state law tort. 21 Original jurisdiction existing in this case and plaintiffs not having timely moved for remand on any other grounds, 22 there is no basis for remand.
The Motion to Remand is DENIED.
Dated: June 6, 2005
RALPH R. BEISTLINE
United States District Judge
N O T E S:1. Although not timely filed under the rules of either the bankruptcy court [AK LBR 90131(c)] or this court [D.Ak. LR 7.1(e)], the court has considered the reply brief filed by plaintiffs.
2. D.Ak. LR 7.2(a).
3. Plaintiffs incorrectly characterize the removal as having been effected under 28 U.S.C. §1441(a).
4. Syngenta Crop Protection, Inc. v. Henson, 537 U.S. 28, 34 (2002).
5. 28 U.S.C. §1334(b).
6. Pacor, Inc. v. Higgins, 743 F.2d 984, 994 (3rd Cir.1984) (emphasis in original).
7. Freitz v. Great Western Savings (In re Freitz), 852 F.2d 455, 457 (9th Cir.1988).
8. Federal jurisdiction is determined at the time of removal. St. Paul Mercury Indemnity Co. v. Red Cab Co., 303 U.S. 283, 289- 93 (1938); Local Union 598 v. J.A. Jones Construction Co., 846 F.2d 1213, 1215 (9th Cir. 1988); Gould v. Mutual. Life Ins. Co. of New York, 790 F.2d 769, 773 (9th Cir. 1986).
9. 11 U.S.C. §541(a).
10. Dunmore v. United States, 358 F.3d 1107, 1113 (9th Cir. 2004).
11. 28 U.S.C. §1334(e).
12. See Curry v. Castillo (In re Castillo), 297 F.3d 940, 945 (9th Cir. 2002).
13. Codified at 29 U.S.C. §1132(a)(1)(B).
14. Codified at 29 U.S.C. §1144(a).
15. Aetna Health, Inc. v. Davila, 542 U.S. 200, ___, 124 S.Ct. 2488, 2494 (2004).
16. Id, 124 S.Ct. at 2494–95 (internal citations omitted).
17. Id (internal citations omitted).
18. Fenton v. Unisource Corp., 940 F.2d 503, 508 (9th Cir. 1991); Ingersoll-Rand Corp. v. McClendon, 498 U.S. 133, 138-140 (1990).
19. 29 U.S.C. §1132(a)(1).
20. Cantrell v. Great Republic Ins. Co., 873 F.2d 1249, 1253 (9th Cir. 1989); Clorox v. United States District Court, 779 F.2d 517, 521 (9th Cir. 1985); see also Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 52–53 (1987).
21. Dishman v. UNUM Life Ins. Co. Of America, 269 F.3d 974, 983 (9th Cir. 2001).