Bailey v. Minnesota Life Insurance Company, No. 5:2007cv00196 - Document 31 (E.D. Ky. 2009)
Court Description: MEMORANDUM OPINION & ORDER: (1) Defendant's 27 Motion to Amend the Notice of Removal is DENIED. (2) Plaintiff's 24 Motion to Remand is GRANTED. This matter is REMANDED to Montgomery Circuit Court. (3) All remaining motions are DENIED AS MOOT. (4) This matter is STRICKEN from the active docket. Signed by Judge Jennifer B Coffman on March 24, 2009. (AWD) cc: COR, certified copy to Montgomery Circuit Court
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UNITED STATES DISTRICT COURT EASTERN DISTRICT OF KENTUCKY CENTRAL DIVISION LEXINGTON CIVIL ACTION NO. 07-196-JBC RHONDA BAILEY, V. PLAINTIFF, MEMORANDUM OPINION AND ORDER MINNESOTA LIFE INSURANCE COMPANY, DEFENDANT. * * * * * * * * * * * This matter is before the court on the plaintiff s motion to remand, R. 24, and the defendant s motion for leave to amend its notice of removal. R. 27. The court, having review ed the record and being otherw ise advised, w ill deny the defendant s motion, grant the plaintiff s motion, and remand this matter to the Montgomery Circuit Court. I. Background Rhonda Bailey, the w idow of Franklin Lee Bailey, filed suit in Montgomery Circuit Court against Minnesota Life Insurance Company ( Minnesota Life ) after several failed internal appeals from a denial of benefits. R. 1-1. The policy at issue w as an accidental death and dismemberment ( AD&D ) policy offered by Minnesota Life as a component plan through the benefits program, NesCare, of Mr. Bailey s employer, Nestle USA, Inc. ( Nestle ). R. 13-1, 1. The defendant removed the case to this court, claiming that it presents a federal question under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. 1 ( ERISA ). R. 1-4, 1-5. At issue is the defendant s denial of benefits, including a $500,000.00 death benefit, under the AD&D policy, on the grounds that Bailey s death w as caused by driving a vehicle w hile intoxicated and, therefore, w as foreseeable. R. 1-1. On January 9, 2008, the court granted a motion for limited discovery by the plaintiff. R. 15. After completing that discovery, she moved to remand the action. The defendant raised the issue of diversity jurisdiction for the first time during the briefing of the plaintiff s motion to remand and, five days after the plaintiff s motion became fully briefed, filed the motion for leave to amend its notice of removal that is also at issue here. II. Motion to Amend Notice of Removal A. Legal Standards The defendant states that its motion is under Fed. R. Civ. P. 15. R. 27, at 2. Rule 15(a) provides that [a] party may amend the party s pleading once as a matter of course at any time before a pleading is served or, if the pleading is one to w hich no responsive pleading is permitted . . ., the party may so amend it . . . w ithin 20 days after it is served. Otherw ise, according to the Rule, a pleading may be amended only by leave of court or by w ritten consent of the adverse party; and leave shall be freely given w hen justice so requires. A defendant must remove a civil action to federal court w ithin thirty days of its being filed or the defendant s being served w ith the initial pleading, w hichever is shorter. 28 U.S.C. § 1446(b). Otherw ise, a defendant may remove an action 2 w ithin thirty days after receipt by the defendant, through service or otherw ise, of a copy of an amended pleading, motion, order or other paper from w hich it may first be ascertained that the case is one w hich is or has become removable, except that a case may not be removed on the basis of jurisdiction conferred by section 1332 of this title more than 1 year after commencement of the action. Id. B. Analysis Under either of the standards enunciated above Rule 15 or the removal statute the court must deny the defendant s motion to amend its notice of removal. The motion to amend came w ell after the onset of this action. Removal occurred on June 21, 2007, but the defendant filed the instant motion over a year later, on June 30, 2008, after the plaintiff had filed several pleadings, all of w hich required responses. Thus, assuming for the purpose of this motion that Rule 15 applies, the standard in that Rule by w hich the court must measure the instant motion is w hether justice so requires. Justice does not require such an amendment, how ever. The defendant removed this action on June 21, 2007, based solely upon its allegation that the case presents a federal question. In the year betw een the defendant s filing of its notice of removal and its present motion to amend that notice, the plaintiff reasonably assumed that federal question w as the only basis of jurisdiction being asserted by the defendant. Accordingly, she moved for limited discovery to assist w ith determining w hether ERISA s safe-harbor provisions apply (a motion opposed by the defendant); took limited discovery after it w as granted by the court; and 3 filed a lengthy motion to remand. Allow ing the defendant to amend its notice of removal to assert diversity jurisdiction at this late date w ould create an unjust result. Thus, Rule 15 cannot be a basis to allow such an amendment. III. Motion to Remand A. Legal Standard The plaintiff bases her motion to remand on an assertion that the court lacks subject-matter jurisdiction because the action does not present a federal question. A federal question exists w hen an action arises under the Constitution, law s, or treaties of the United States. 28 U.S.C. § 1331. 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). As the removing party, the defendant bears the burden of proving the existence of federal jurisdiction. Eastman v. Marine Mechanical Corp., 438 F.3d 544, 550 (6th Cir. 2006); Long v. Bando Mfg. of Am. Inc., 201 F.3d 754, 757 (6th Cir. 2000). Removal statutes are construed narrow ly, and doubts about the propriety of removal are resolved in favor of remand. Long, 201 F.3d at 757. B. Analysis The plaintiff argues that the AD&D policy at issue here is not governed by ERISA. A court should conduct a three-step factual inquiry to determine w hether a plan is governed by ERISA: First, the court must apply the so-called safe harbor regulations established by the Department of Labor to determine w hether the program w as exempt from ERISA. Second, the court must look to see 4 if there w as a plan by inquiring w hether from the surrounding circumstances a reasonable person could ascertain the intended benefits, the class of beneficiaries, the source of financing, and procedures for receiving benefits. Finally, the court must ask w hether the employer established and maintained the plan w ith the intent of providing benefits to its employees. Thompson v. American Home Assur. Co., 95 F.3d 429, 434-35 (6th Cir. 1996) (internal citations and quotations marks omitted). 1. Safe Harbor Provisions Under the ERISA safe harbor regulations laid out by Department of Labor regulations, an employee insurance policy is excluded from ERISA coverage if the follow ing four prongs are satisfied: (1) the employer makes no contribution to the policy; (2) employee participation in the policy is completely voluntary; (3) the employer s sole functions are, w ithout endorsing the policy, to permit the insurer to publicize the policy to employees, collect premiums through payroll deductions and remit them to the insurer; and (4) the employer receives no consideration in connection w ith the policy other than reasonable compensation for administrative services actually rendered in connection w ith payroll deduction. Thompson, 95 F.3d at 435 (6th Cir. 1996) (citing 29 C.F.R. § 2510.3-1(j)). The defendant concedes that the plaintiff can satisfy the first, second and fourth prongs but argues that the plaintiff cannot satisfy the endorsement prong. [T]he relevant framew ork for determining if endorsement exists is to examine the employer s involvement in the creation or administration of the policy from the employees point of view . 95 F.3d at 436-37. [A] finding of endorsement is appropriate if, upon examining all the relevant circumstances, there is some factual show ing on the record of substantial employer involvement in the 5 creation or administration of the plan. 95 F.3d at 436. The factors Thompson points to for courts to use in determining w hether an employer behaved neutrally tow ards a plan are: (1) Has the employer played an active role in either determining w hich employees w ill be eligible for coverage or in negotiating the terms of the policy or the benefits thereunder? (2) Is the employer named as the plan administrator? (3) Has the employer provided a plan description that specifically refers to ERISA or that the plan is governed by ERISA? (4) Has the employer provided any materials to its employees suggesting that it has endorsed the plan? (5) Does the employer participate in processing claims? Booth v. Life Ins. Co. of North America, 2006 U.S. Dist. LEXIS 82856, at * 6-7 (W.D. Ky. 2006) (citing Thompson, 95 F.3d at 437). A finding of the applicability of one or more of these factors may support a finding that the policy w as endorsed. Id. at * 7. Moreover, endorsement can be either a factual or a legal issue: The question of endorsement vel non is a mixed question of fact and law . In some cases the evidence w ill point unerringly in one direction so that a rational factfinder can reach but one conclusion. In those cases, endorsement is a question of law . . . . In other cases, the legal significance of the facts is less certain, and the outcome w ill depend on inferences that the factfinder chooses to draw . . . . In those cases, endorsement becomes a question of fact. Id. at 437 (citing Johnson v. Watts Regulator Co., 63 F.3d 1129 (1st Cir. 1995) 6 (citations omitted)) (quotation marks omitted). a. Role of Nestle in determining terms and eligibility for coverage As to the first Booth factor, the plaintiff argues that Nestle played a minimal role in determining the terms of the policy and eligibility for coverage, only providing information and possibly having input into the inclusion of an additional accidental death benefit for employees w ho died w earing seatbelts. While the information provided to employees to explain the component plan, w hich included the AD&D policy at issue here, did provide a detailed account of w hich employees w ere eligible to participate, see AR 565-67, it also noted several important restrictions imposed by the defendant. These restrictions w ere laid out in the Overview of NesCARE given to Nestle employees and included the follow ing: Participation in a Component Plan may be limited or restricted. As a result, not all Coverage Options of NesCARE are available to all Participants. In addition, the effective date of insurances or coverages under a Component Plan may be delayed or depend on evidence of insurability. You should review the summary of the Component Plan in w hich you have an interest to determine if you or your Dependents are eligible, w hen your insurance or coverage becomes effective, and w hether you must provide evidence of insurability. AR 565. Nestle employees also could elect the level of coverage [they] desire from the various options listed in the enrollment materials. Some options may be subject to evidence of insurability. AR 700. Given these limitations and restrictions, the defendant has not carried its burden as the removing party to show that reasonable employees w ould conclude that Nestle determined w hich 7 employees w ere eligible for coverage or that Nestle negotiated the terms of the policy instead of the defendant. The defendant cites Johnson v. Connecticut General Life Ins. Co., 2007 WL 2509866 (N.D. Ohio Aug. 30, 2007), in w hich the court found that the employer played an active role in determining w ho w as eligible for coverage. Id. at * 3. In Johnson, how ever, the employer allow ed new ly hired individuals to seek benefits w ithout providing evidence of good health, and, in addition to the classifications used by Nestle, annual compensation, something determined by the employer (along w ith w hether overtime, bonus, and additional pay w ould count tow ard annual compensation), governed w hat benefits w ere available. Id. In contrast to the Johnson factors, a reasonable employee in the instant case w ould conclude that the defendant, as the insurer, w as determining eligibility by determining w hether limitations and restrictions, such as requirements for evidence of insurability, w ere met. Details about the logistics of the relationship betw een Nestle and the defendant, see, e.g., R. 28, at 7-8, w hich illuminate the intent of the employer, may not be raised to shift the focus aw ay from the conclusions draw n from the perspective of a reasonable employee. See Thompson, 95 F.3d at 436. Moreover, w hile Nestle may have played a role in negotiating certain additional provisions for the AD&D policy, such as the additional seatbelt benefit or additional discounts, see R. 28, at 9-10, these negotiations w ould not have been apparent to the reasonable 8 employee, w ho w ould have no reason to conclude that the defendant s limitations and restrictions w ere negotiated by Nestle. In Vazquez v. Paul Revere Life Ins. Co., 289 F. Supp. 2d 727, 731-32 (E.D. Va. 2001), endorsement w as found w here an employer s 30% discount [belied] a subsidy and constructive contributions to Plaintiff s premium payments and the employer w as required to approve an employee s plan before such employee could benefit from the 30% discount. Id. Here, if the defendant cannot specify in its brief the exact amount of subsidy its negotiations provided to employees, see R. 28, at 10-11, it is not reasonable to expect an employee to be able to do so. Nor did Nestle employees have to receive approval from Nestle for any subsidy, rendering Vazquez inapposite to the present case. b. Whether Nestle w as listed as the plan administrator As to the second Booth factor, the plaintiff argues that [e]ven though Nestle is named as the plan administrator of the umbrella NesCARE Plan, Minnesota Life is the claim administrator of the AD&D plan. R. 24-2, at 10-11. [W]here the employer is named as the plan administrator, a finding of endorsement may be appropriate. Thompson, 95 F.3d at 436 (emphasis added). [A]n employer can be a plan administrator in name only and still satisfy the four requirements of the safe harbor regulation. Stuart v. UNUM Life Ins. Co. of America, 217 F.3d 1145, 1152-53 (9th Cir. 2000) (also noting that the evidence presented by the insured still allow ed a reasonable person to conclude that the 9 employer satisfied the third requirement of the safe harbor regulation ) (citing Zavora v. Paul Revere Life Ins. Co., 145 F.3d 1118, 1121 (9th Cir. 1998)). Being listed as plan administrator goes to the employer s role in administering the plan, see Thompson, 95 F.3d at 436, but the issue still must be analyzed from the employee s point of view , Id. at 437. Here the listing of Nestle as plan administrator does not w eigh in favor of endorsement because Minnesota Life w as the claims administrator for the AD&D coverage, suggesting that, from the point of view of a reasonable employee, Nestle w as the plan administrator in name only. Stuart, 217 F.3d at 1153. c. Mention of ERISA in the plan description As to the third Booth factor, the plaintiff argues that even though the NesCARE summary plan description does mention ERISA, it does so only near the end of the booklet and not in the section discussing AD&D coverage. The plaintiff also notes that, in the section discussing AD&D coverage, the NesCARE summary plan description states that the AD&D coverage is governed by its ow n insurance document, w hich does not mention ERISA. How ever, the NesCARE summary plan description does state that NesCARE is a flexible benefit plan through w hich various Component Plans provide w elfare benefits as defined under [ERISA], AR 732, and outlines claimants rights and protections under [ERISA]. AR 733. While the AD&D policy at issue here is in fact a NesCARE component plan, the court finds that this factor does not w eigh heavily in favor of a finding of 10 endorsement because a few mentions of ERISA, including one buried in the back of a booklet, w ould do little to counter-balance the statement that the AD&D policy is governed by its ow n insurance document (w hich does not mention ERISA), from the perspective of a reasonable employee. d. Whether the employer provided materials suggesting it had endorsed the plan As to the fourth Booth factor, the plaintiff argues that claim forms, the insurance policy, and denial letters bear Minnesota Life s logo and heading and there is only a small Nestle logo on the last page of the open enrollment guide. As noted by the defendant, the enrollment w orksheet sent to the plaintiff confirmed the AD&D policy w as part of NesCARE and provided a telephone number for Nestle s Human Resources service center, a number that also appears on the plan summary. AR 147. The court finds that this factor also does not w eigh heavily in favor of endorsement, because a few mentions w ithin many pages of materials do not outw eigh the overall paucity of mentions. From the perspective of a reasonable employee, such a small number of mentions do not necessarily suggest that Nestle endorsed the AD&D policy at all because a reasonable employee could conclude that Nestle w as being helpful but impartial in providing the resources to its employees. This imbalance is magnified in light of the statement that the AD&D policy is governed by the defendant s insurance document, w hich mentions the 11 defendant prominently w hile NesCARE appears only once on the defendant s entire insurance document. Moreover, this single appearance of NesCARE has no context at all and a reasonable employee could at least as easily conclude that it w as printed on the document for purposes of some type of administrative sorting function as he or she could conclude that it indicated endorsement of the AD&D policy by Nestle. e. Whether the employer participated in processing claims As to the fifth, and final, Booth factor, the plaintiff argues that Nestle plays no role in processing claims beyond forw arding information to the defendant to aid in the processing of claims. The defendant points out that the plaintiff filed her initial claim w ith Nestle and that Nestle completed the claim and forw arded additional materials to the defendant. Deposition testimony by Gail Varhoe, Nestle s corporate representative, how ever, stated that filing a claim entailed contact[ing] our Nestle Employee Service Center and report[ing] the death, and then the process w as to send out a condolence letter and the applicable benefit statement that needed to be completed to file a claim w ith the carrier. R. 25, at 18 (emphasis added). While Nestle may have participated in the processing of claims, this factor also does not w eigh heavily in favor of endorsement because a reasonable employee w ould have been aw are at all times that Nestle w as performing minor administrative tasks on behalf of the defendant. f. Nestle did not endorse the AD&D policy 12 Taking all of the Booth factors together, the court finds that Nestle did not endorse the AD&D policy at issue in this case. Nestle made it clear to reasonable employees that coverage decisions w ere up to the defendant; Nestle s materials clearly stated that the AD&D policy w as governed by the defendant s ow n insurance document, w hich did not mention ERISA; the defendant, as the claims administrator, w as the de facto plan administrator and Nestle w as the plan administrator in name only ; mentions of ERISA in the plan description w ere in passing; and Nestle s participation in the processing of claims w as minimal. Consequently, the court finds that, w hen view ing all of the factors from the perspective of a reasonable employee, Nestle did not endorse the AD&D policy. Indications that the policy w as endorsed by Nestle w ere few and w ere far outw eighed by indicators that the policy w as a Minnesota Life policy for w hich Nestle w as merely passing information back and forth. Most importantly, there is a separate insurance document that does not mention ERISA, on w hich the w ord NesCARE appears only once, and that bears no indication of being anything other than a stand-alone plan. See Oliver v. Sun Life Assurance Co. of Canada, 417 F. Supp. 2d 865, 867 (W.D. Ky. 2005) ( [W]hen an employer separates itself from the plan, making it reasonably clear that the plan is a third-party offering, rather than haw king the plan to its employees as our plan, and an integral part of its offering, the employer cannot be seen as endorsing the plan. (citing Johnson, 63 F.3d 1129)). See also Thompson, 95 F.3d at 436 ( [A]s long as the employer merely advises employees of the availability of group insurance, accepts payroll 13 deductions, passes them on to the insurer, and performs other ministerial tasks that assist the insurer in publicizing the program, it w ill not be deemed to have endorsed the program . . . . It is only w hen an employer proposes to do more, and takes substantial steps in that direction, that it offends the ideal of employer neutrality and brings ERISA into the picture. (citing Johnson, 63 F.3d at 1133). 2. Whether the AD&D Component Coverage Is an ERISA Plan The plaintiffs argue that the AD&D policy is not an ERISA plan. In determining w hether a plan, fund or program [exists], a court must determine w hether from the surrounding circumstances a reasonable person could ascertain the intended benefits, beneficiaries, source of financing, and procedures for receiving benefits. Int l Resources, Inc. v. New York Life Ins. Co. 950 F.2d 294, 297 (6th Cir. 1991) (citation omitted). International Resources presents the classic ERISA plan scenario, because International Resources did not merely advertise alternate plans and then refrain from making any contributions on behalf of its employees. Instead, International Resources chose the plan, paid the premiums, and gave this coverage to all of its employees as an employee benefit. Id. at 298 (citation omitted). Here, the plaintiff chose the plan and paid the premiums, but the policy w as not given to all employees. Therefore, a reasonable employee w ould not conclude that the AD&D policy at issue in this case w as an ERISA plan. He or she w ould be more likely to conclude that Nestle w as merely advertising the policy. 14 3. Whether Nestle Established or Maintained AD&D Coverage Finally, the plaintiff argues that Nestle did not establish or maintain the AD&D policy. As Thompson explains, the test is w hether the employer established or maintained the plan w ith the intent of providing benefits to its employees. 95 F.3d at 435. This analysis should [focus] on the employer . . . and [its] involvement w ith the administration of the plan. Hansen v. Continental Ins. Co., 940 F.2d 971, 978 (5th Cir. 1991). In McDonald v. Provident Indemnity Life Ins. Co., 60 F.3d 234 (5th Cir. 1995), the Fifth Circuit found that an employer established or maintained the plan for the purpose of providing benefits to its employees because it purchas[ed] the insurance, select[ed] the benefits, identif[ied] the employee-participants, and distribut[ed] enrollment and claim forms. Id. at 236 (footnote omitted). Nestle w as not nearly so active, going only so far as to make the insurance available and assisting w ith enrollment and the transfer of documents betw een its employees and the defendant. The defendant argues that Nestle identified the employees w ho could participate in the AD&D insurance but the effective date of insurances or coverages under a Component Plan may be delayed or depend on evidence of insurability, AR 565, and Nestle employees could elect the level of coverage [they] desire from the various options listed in the enrollment materials. Some options may be subject to evidence of insurabilit y. AR 700. These elements of the policy, w hich indicate that the defendant retained control over w hich employees w ere insurable, preclude the 15 court from finding that Nestle established or maintained the AD&D policy. Because the court has found as matters of fact (1) that Nestle did not endorse the AD&D policy, (2) that the AD&D policy is not an ERISA plan, and (3) that Nestle did not establish or maintain the AD&D policy, the court concludes that the AD&D policy at issue here is not governed by ERISA. Therefore, this action does not arise under ERISA and the court does not have jurisdiction over it. Consequently, the court must remand this matter to Montgomery Circuit Court. IV. Conclusion Accordingly, IT IS ORDERED that the defendant s motion to amend its notice of removal, R. 27, is DENIED. IT IS FURTHER ORDERED that the plaintiff s motion to remand, R. 24, is GRANTED, and this matter is REMANDED to Montgomery Circuit Court. IT IS FURTHER ORDERED that all remaining motions are DENIED AS MOOT. This matter shall be STRICKEN from the active docket. 16
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