Washington v. AT&T Corp. et al, No. 4:2010cv03751 - Document 32 (N.D. Cal. 2011)

Court Description: ORDER DENYING 6 MOTION TO REMAND, GRANTING 25 MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT, AND SETTING DEADLINES IN CONTEMPLATION OF REMAND. Signed by Judge Beeler on 1/23/11. (lblc2, COURT STAFF) (Filed on 1/24/2011)

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Washington v. AT&T Corp. et al Doc. 32 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 Northern District of California 10 Oakland Division DONALD C. WASHINGTON, 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 No. C 10-03751 LB Plaintiff, ORDER DENYING MOTION TO REMAND BASED ON EXISTING FIRST AMENDED COMPLAINT [ECF No. 6], GRANTING PLAINTIFF’S MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT [ECF No. 25], AND SETTING DEADLINES IN CONTEMPLATION OF REMAND v. 13 AT&T CORP., 14 Defendant. 15 16 17 _____________________________________/ [ECF Nos. 6 & 25] 18 19 20 I. INTRODUCTION Defendant AT&T Corp. removed this case, which generally involves Plaintiff Donald 21 Washington’s claims of discrimination, harassment, and retaliation after he took medical leave, from 22 state court. Notice of Removal, ECF No. 1. The ground for removal was that the first amended 23 complaint – while not referencing the Employee Retirement Income Security Act of 1974 (ERISA) 24 explicitly – contained claims alleging that Defendant wrongfully denied Plaintiff’s short-term 25 disability under an ERISA plan, and that therefore, ERISA preempted the state claims. Id. at 3, ¶ 7. 26 Thereafter, Plaintiff moved to remand the case to state court on the ground that the case did not 27 implicate ERISA. Motion to Remand, ECF No. 6. Plaintiff suggested in his reply brief that if 28 ERISA did allow removal, he could amend the complaint to delete the allegations about the ORDER (C 10-03751 LB) Dockets.Justia.com 1 disability plan. Reply, ECF No. 13 at 10-12. At the court’s direction, Plaintiff moved for leave to 2 file a second amended complaint, asking for leave only if the court denied the motion to remand. 3 ECF No. 25. After full briefing on both motions, the court held a hearing on January 20, 2011. 4 The court finds that removal was appropriate under ERISA and thus denies Plaintiff’s motion to complaint currently lodged as an exhibit at ECF No. 25-1 and directs him to file it separately 7 (thereby ensuring a separate docket number) by Wednesday, January 26, 2011. That complaint adds 8 AT&T California as a new defendant. At the hearing, counsel for AT&T Corp. stated that she 9 would represent AT&T California and would file a written consent to this court’s jurisdiction 10 immediately after Plaintiff files the second amended complaint. Assuming filing of the second 11 amended complaint, the court orders AT&T California to file its written consent (or declination) by 12 For the Northern District of California remand and request for attorney’s fees. The court grants Plaintiff leave to file the second amended 6 UNITED STATES DISTRICT COURT 5 Friday, January 28, 2011. After filing of that consent, the court will issue the order remanding the 13 case to Alameda County Superior Court on the ground that it lacks subject-matter jurisdiction to 14 hear the case. 15 16 17 18 II. FACTS The relevant facts, taken from plaintiff’s first amended complaint (FAC), are as follows.1 A. Background Facts From June 21, 1999 to July 29, 2009, Plaintiff worked for Defendant as a “Service Technician” 19 installing phone lines. FAC, ECF No. 1 at 17, ¶ 7. Defendant terminated Plaintiff’s employment on 20 July 29, 2009. Id. Over the ten years, Plaintiff received performance bonuses ranging from $1,500 21 to $5,000 depending on the overtime he worked and the amount of Defendant’s yearly profits. Id. at 22 ¶ 8. Plaintiff never received negative performance evaluations and at times received recognition for 23 his “outstanding performance.” Id. at ¶ 9. 24 25 In June 2005, Plaintiff injured his left knee when he stepped off a ladder while installing phone lines at a job site. Id. at ¶ 10. He immediately reported the injury to his supervisor, who sent him to 26 27 28 1 The first amended complaint and the proposed second amended complaint are basically identical, except the second amended complaint proposes deleting the allegations discussed below in Section B. ORDER (C 10-03751 LB) 2 1 a doctor. Id. Plaintiff’s knee swelled, and he was unable to bend it or put weight on it. Id. 2 Plaintiff’s doctor recommended that he undergo an MRI to evaluate the scope of the knee injury, but 3 Plaintiff’s insurance provider denied him authorization for the procedure. Id. at ¶ 11. Plaintiff 4 contends that without an MRI, his doctor was unable to effectively determine the extent of the 5 damage to his left knee and as such, could not release Plaintiff to return to work. Id. at ¶ 12. 6 Plaintiff’s doctor placed him on medical leave from June 2005 to June 2006. Id. 17-18, ¶ 12. In 7 June 2006, Defendant sent Plaintiff a letter stating that he needed to return to work or it would 8 terminate his employment. Id. at 18, ¶ 13. To prevent termination, Plaintiff returned to work even 9 though his doctor had not released him to work full duty. Id. 10 In April 2008, Defendant assigned Plaintiff to work for a new supervisor named Phil Jones. Id. at ¶ 14. On September 3, 2008, Jones and Defendant’s District Manager, Josh Goodell, praised 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 Plaintiff for his good work. Id. at ¶ 15. On October 21, 2008 while at a job site in Alameda, 13 Plaintiff stepped into a large hole that was covered by grass clippings and further injured his left 14 knee. Id. at ¶ 16. Plaintiff immediately reported the incident to Jones, who came to the site and took 15 pictures of the hole. Id. As a result of this incident, Plaintiff saw Dr. Steven Isono, an orthopedic 16 surgeon specializing in knee injuries, on October 22, 2008. Id. at ¶ 17. Dr. Isono preliminarily 17 diagnosed Plaintiff with a patellar subluzation/dislocation and ordered an MRI of the left knee. Id. 18 Once again, Plaintiff’s insurance provider denied authorization for the procedure. Id. Dr. Isono then 19 placed Plaintiff on temporary total disability. Id. 20 While out on disability, Plaintiff had a stroke in the beginning of January 2009. Id. at 18-19, ¶ 21 18. Plaintiff attributes the stroke to the stress concerning his ability to pay bills including his 22 mortgage, providing for his two children, and “Defendants’ multiple refusals to authorize an MRI 23 scan for his left knee.” Id. On January 23, 2009, Plaintiff’s insurance provider authorized an MRI 24 on his left knee. Id. at 19, ¶ 19. Due to the persistence of Plaintiff’s symptoms, Dr. Virgil Williams, 25 the attending physician, recommended that he undergo surgery. Id. Plaintiff elected to undergo the 26 least invasive surgery available on April 27, 2009. Id. at ¶¶ 21-22. Plaintiff began a physical 27 therapy regimen on June 12, 2009 that lasted 12 visits before his insurance provider denied 28 authorization for further visits. Id. at ¶ 21. Plaintiff continuously apprised Jones, his supervisor, of ORDER (C 10-03751 LB) 3 1 his progress. Id. 2 Approximately one month after surgery, Plaintiff received a call from a union officer who 3 informed him that Defendant was going to terminate his employment for failure to inform it of his 4 medical status. Id. at ¶ 22. On July 27, 2009, Plaintiff received a letter from Defendant stating that 5 it was terminating him because “his doctor continued to keep Plaintiff on disability for his knee.” 6 Id. at ¶ 23. On July 29, 2009, Defendant fired Plaintiff. Id. at 20, ¶ 24. 7 In October 2009, Plaintiff’s insurance provider authorized further physical therapy. Id. at ¶ 25. 8 However, Plaintiff’s knee continued to cause pain and swelling. Id. At that time, Plaintiff’s right 9 knee developed pain and swelling as a result of his overcompensation for his left knee. Id. Dr. Isono recommended that Plaintiff use a cane as well as other medications in tandem with heat and 11 ice. Id. at ¶ 26. 12 For the Northern District of California UNITED STATES DISTRICT COURT 10 On November 24, 2009, Dr. Isono suggested another MRI of Plaintiff’s left knee to examine 13 whether the surgery was successful. Id. at ¶ 27. Again, Plaintiff’s insurance provider denied 14 authorization for the MRI. Id. On January 7, 2010, Dr. Isono concluded that given Plaintiff’s 15 clinical history and persistent pain and stiffness in his left knee, an MRI was medically necessary to 16 determine the appropriate course of further treatment. Id. at ¶ 28. The following day, Dr. Isono 17 completed a Comprehensive Medical Legal Evaluation. Id. at 21, ¶ 29. 18 Plaintiff filed charges with the California Equal Employment Opportunity Commission against 19 Defendant alleging discrimination, retaliation, and harassment. Id. at 22-23, ¶ 44. The California 20 EEOC forwarded the charges to the California Department of Fair Employment and Housing, which 21 subsequently issued a right-to-sue letter to Plaintiff on October 20, 2009. Id. 22 B. Allegations about Disability Plan 23 In his first amended complaint, Plaintiff asserted seven claims based on violations of California 24 Government Code Section 12940: (1) discrimination based on race; (2) harassment based on 25 disability; (3) disability discrimination; (4) harassment based on race; (5) retaliation; (6) failure to 26 prevent harassment, discrimination, or retaliation; and (7) failure to enter into the interactive 27 process. First Amended Complaint, ECF No. 1 at 15-42. Plaintiff also asserted a claim for wrongful 28 termination in violation of public policy. Id. At paragraphs 67, 80, 105, 118, and 132 (which ORDER (C 10-03751 LB) 4 1 2 3 correspond to claims 2, 3, 5, 6, and 7), Plaintiff alleged the following: Defendants further [harassed]/[discriminated against]/[retaliated against] Plaintiff for taking medical leave when on January 12, 2009 they denied his short term disability claiming his medical condition did not meet the criteria, despite the fact that Defendants refused to authorize a MRI which would have clarified and determined the extent of Plaintiff’s injury. 4 5 FAC, ECF No. 1 at 26-27, ¶ 67, 29, ¶ 80, 34, ¶ 105, 36, ¶ 118, 39, ¶ 132. 6 C. Proposed Second Amended Complaint and Other Relevant Procedural Facts 7 Plaintiff’s second amended complaint is largely identical to his first amended complaint except 8 that he deleted the five paragraphs at issue and added AT&T California as a defendant. SAC, ECF 9 No. 25-1 at 1-27. 10 According to Defendant, it offered to stipulate to the amendment and remand provided that Plaintiff agreed to (1) provide a written letter stating that Plaintiff would not pursue any ERISA- 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 related claims in state court and (2) forego his request for attorney’s fees related to the removal. 13 Opposition to Motion to File SAC, ECF No. 27 at 2 n.1. III. LEGAL STANDARDS 14 15 16 17 18 A. Removal Jurisdiction And ERISA Preemption2 A state law claim may be subject to “complete preemption” or “conflict preemption” under ERISA. If a state law claim is subject to complete preemption under the civil enforcement provisions of 19 ERISA section 502(a), it may be removed under 28 U.S.C. § 1441. See 28 U.S.C. § 1441 (defendant 20 may remove case brought in state court if federal district courts have original jurisdiction); 28 21 U.S.C. § 1331 (original jurisdiction over claims arising under the Constitution, treaties, or laws of 22 the United States); Marin General Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 944-46 23 24 25 26 27 28 2 In cases removed from state court, ordinarily federal jurisdiction must appear on the face of the well-pleaded complaint at the time of removal. See Libhart v. Santa Monica Dairy Co., 592 F.2d 1062, 1065 (9th Cir. 1979). Complete preemption under ERISA is an exception to that rule in that federal law displaces a plaintiff’s state-law claim, no matter how carefully pleaded. See Metropolitan Life Ins. Co. v. Taylor 481 U.S. 58, 63-64 (1987); Gregory v. SCIE, LLC, 317 F.3d 1050, 1052 (9th Cir. 2003). For the reasons set forth in this order, the court finds that the state law claims at issue are preempted. Thus, plaintiff’s invocation of the well-pleaded complaint rule fails. See Motion to Remand, ECF No. 6 at 3-4. ORDER (C 10-03751 LB) 5 1 (9th Cir. 2009). 2 If, however, a state claim is subject only to conflict preemption, ERISA provides merely a 3 federal defense. 29 U.S.C. § 1144(a) (relevant provisions of ERISA shall supersede state laws 4 insofar as they relate to any ERISA employee benefit plan not exempt); Marin General Hosp., 581 5 F.3d at 949. What this means is that with conflict preemption, a state claim is not converted into an 6 action “arising under federal law,” and removal is improper. Metropolitan Life Ins. Co. v. Taylor, 7 481 U.S. 58, 64 (1987); see also Marin General Hosp., 581 F.3d at 945. 8 9 As the removing party, AT&T has the burden of proving that jurisdiction is proper. That requires AT&T to demonstrate by a preponderance of the evidence that Plaintiff’s state law claims F.3d 398, 403-04 (9th Cir. 1996); Nishimoto v. Federman-Bachrach & Assoc., 980 F.2d 709, 712 n.3 12 For the Northern District of California are subject to complete preemption under ERISA. See Sanchez v. Monumental Life Ins. Co., 102 11 UNITED STATES DISTRICT COURT 10 (9th Cir. 1990). To do this, AT&T must prove that plaintiff’s state law claim is encompassed in 13 ERISA’s civil enforcement scheme set forth in section 502(a) of ERISA by showing the following: 14 (1) the plaintiff at some point in time could have brought his claim under ERISA section 15 502(a)(1)(B); and (2) there is no other independent legal duty implicated by a defendant’s actions. 16 See Marin General Hosp., 581 F.3d at 946 (quoting test in Aetna Health Inc. v. Davila, 542 U.S. 17 200, 210 (2004)). 18 B. Rule 15(a)(2) 19 “A party may amend its pleading once as a matter of course [] before being served with a 20 responsive pleading.” Fed. R. Civ. P. 15(a)(1). After a responsive pleading is filed, “a party may 21 amend its pleading only with the opposing party’s consent or the court’s leave.” Fed. R. Civ. P. 22 15(a)(2). “The court should freely give leave when justice so requires.” Id. This leave policy is 23 applied with “extreme liberality.” See Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 24 (9th Cir. 2003). A court considers five factors to determine whether to grant leave to amend: (1) bad 25 faith; (2) undue delay; (3) prejudice to the opposing party; (4) futility of amendment; and (5) 26 whether the plaintiff previously amended his complaint. See Nunes v. Ashcroft, 375 F.3d 805, 808 27 (9th Cir. 2004). Delay alone is insufficient to justify denial of leave to amend. Jones v. Bates, 127 28 F.3d 839, 847 n.8 (9th Cir. 1997). Of the factors, prejudice to the opposing party is the “touchstone ORDER (C 10-03751 LB) 6 1 of the inquiry under rule 15(a)” and “carries the greatest weight.” See Eminence Capital, 316 F.3d 2 at 1052. Absent prejudice or a strong showing on other factors, a presumption exists under Rule 3 15(a) favoring granting leave to amend. See id. 4 5 IV. DISCUSSION Because Plaintiff offers amending the complaint to remove allegations implicating ERISA only 6 if the court determines that complete ERISA preemption exists, the court first addresses whether 7 removal was appropriate. The court holds that it was and denies Plaintiff’s motion for remand. The 8 court then addresses (and grants) Plaintiff’s motion for leave to amend. Finally, the court addresses 9 the procedural issues about filing and consent that must take place before remand. 10 A. Removal Was Proper Because ERISA Preemption Is Complete 1. Prong One: ERISA Section 502(a) 12 For the Northern District of California UNITED STATES DISTRICT COURT 11 The first requirement for complete preemption is whether plaintiff’s claim could have been 13 brought under section 502(a) of ERISA. Section 502(a)(1)(B) authorizes a plan participant or 14 beneficiary to bring suit to (a) recover benefits promised to him under the plan that are not provided, 15 (2) enforce his rights under the plan, or (3) clarify his rights to future benefits under the terms of the 16 plan. 29 U.S.C. § 1132(a)(1)(B); Davila, 542 U.S. at 210. 17 The issue here is whether the following allegation in five different claims of discrimination, 18 harassment, or retaliation requires a determination of benefits or rights under the ERISA disability 19 plan at issue here. 20 21 Defendants further [harassed]/[discriminated against]/[retaliated against] Plaintiff for taking medical leave when on January 12, 2009 they denied his short term disability claiming his medical condition did not meet the criteria, despite the fact that Defendants refused to authorize a MRI which would have clarified and determined the extent of Plaintiff’s injury. 22 23 FAC, ECF No. 1 at 26-27, ¶ 67, 29, ¶ 80, 34, ¶ 105, 36, ¶ 118, 39, ¶ 132. 24 The court concludes that Plaintiff’s claims incorporating this allegation satisfy the first prong of 25 the Davila test. Plaintiff is a participant of a qualified ERISA benefit plan (the short-term disability 26 plan). 29 U.S.C. §§ 1002(1)-(3), 1003(a); Nancy Watts Declaration, ECF No. 11-1 at 2-3, ¶¶ 3, 4, 27 and 11. The plan provides participants short-term disability benefits while they are medically 28 certified as disabled according to the terms of the plan. Watts Declaration, ECF No. 11-1 at 2, ¶ 6. ORDER (C 10-03751 LB) 7 1 Plaintiff alleges that he was entitled to those short-term disability payments under the plan and that 2 Defendant wrongfully denied him those benefits. FAC, ECF No. 1. The fact that Defendant denied 3 Plaintiff’s short-term disability to harass, discriminate, and retaliate against him may explain why 4 Defendant denied him the benefits, but it does not change the nature of the claims themselves. They 5 remain an effort by Plaintiff to “recover benefits due to him under the terms of his plan.” 29 U.S.C. 6 § 1132(a)(1)(B). Also, the dispute necessarily involves determining Plaintiff’s rights under the plan. 7 Id. 8 Plaintiff contends that he is claiming violations only of California anti-discrimination laws, 9 which do not involve a federal question, and that the claims are too tenuously related to ERISA to Plaintiff intended to only pursue state law claims or whether he mentions ERISA in his complaint 12 For the Northern District of California engender the court’s jurisdiction. Motion to Remand, ECF No. 6 at 7-8. The test is not whether 11 UNITED STATES DISTRICT COURT 10 but rather, whether he could have originally brought his claim under ERISA Section 502(a)(1)(B), 13 even if he never mentions ERISA at all. See Davila, 542 U.S. at 210; Bui v. American Tel. & Tel. 14 Co., Inc., 310 F.3d 1143, 1147 (9th Cir. 2002) (courts must “look to the behavior underlying the 15 allegations in the complaint to determine whether ERISA preempts a plaintiff's claims. If a claim 16 alleges a denial of benefits, ERISA preempts it.”). The analysis does not change even if Plaintiff 17 does not seek plan benefits but only “damages” from Defendant’s denial of benefits to him under the 18 plan. See Caterpillar Inc. v. Williams, 482 U.S. 386, 391 (1987); see also Davila, 542 U.S. at 214- 19 16 (Congress’ intent to make ERISA civil enforcement mechanism exclusive would be undermined 20 if state cause of action that supplemented ERISA remedies was permitted, even if the state cause of 21 action did not precisely duplicate the elements of an ERISA claim). 22 Here, Plaintiff’s first amended complaint alleges wrongful denial of benefits under an ERISA 23 short-term disability plan. Because he could have raised his claims under ERISA, this satisfies 24 prong one. See Davila, 542 U.S. at 210. 25 2. Prong Two: Independent Legal Duty 26 AT&T also must show that there is no other independent duty implicated by its actions. See 27 Marin Gen. Hosp., 581 F.3d at 946. That means the inquiry here is whether Plaintiff’s claim of 28 wrongful denial of ERISA short-term disability benefits “relies on a legal duty that arises ORDER (C 10-03751 LB) 8 1 independently of ERISA” that would exist whether or not an ERISA plan existed. Id. at 950 2 (holding that claims were not preempted because they sought to enforce the terms of an independent 3 oral contract, not the violation of the terms of an ERISA plan). 4 Plaintiff couches the wrongful denial of benefits as discrimination, harassment, and retaliation. 5 Denial of benefits and Plaintiff’s rights to benefits under the plan’s terms still implicate AT&T’s 6 obligations under the plan. Those obligations would not exist if the plan did not exist. This satisfies 7 prong two. See Davila, 542 U.S. at 214 (holding that the plaintiffs’ claims were preempted because 8 they sought “only to rectify a wrongful denial of benefits promised under ERISA-regulated plans”). 9 Plaintiff’s motion to remand is denied. Because the court upholds removal and denies remand based only on the first amended 12 For the Northern District of California 3. Attorney’s Fees 11 UNITED STATES DISTRICT COURT 10 complaint, the court denies Plaintiff’s motion for attorney’s fees. See 28 U.S.C. § 1447(c) 13 (authorizes attorney’s fees upon remand of a case to state court); cf. Martin v. Franklin Capital 14 Corp., 546 U.S. 132, 136 (2005) (court should not award attorney’s fees where a defendant has 15 “objectively reasonable” grounds for removing the case). 16 B. Leave to File Second Amended Complaint 17 Plaintiff’s proposed second amended complaint mirrors the first amended complaint except that 18 it adds AT&T California and deletes the five paragraphs challenging AT&T’s alleged wrongful 19 denial of his short-term disability benefits. Compare FAC, ECF No. 1 at 15-76, with SAC, ECF No. 20 25-1, 1-27. 21 AT&T filed a short opposition on the ground that Plaintiff might pursue ERISA-preempted 22 claims on remand. Opposition to SAC, ECF No. 27 at 1. AT&T agreed, however, to stipulate to 23 remand if Plaintiff waived attorney’s fees and promised not to pursue ERISA claims in state court. 24 Id. at 2 n.1. At argument, given the court’s ruling upholding removal and denying attorney’s fees, 25 AT&T apparently no longer opposed amendment. 26 In any event, the factors support granting leave to amend. Nothing suggests bad faith, there has 27 been no undue delay, and AT&T articulated no real prejudice from a second amended complaint. 28 See Nunes, 375 F.3d at 808. The court grants Plaintiff’s motion for leave to file the second amended ORDER (C 10-03751 LB) 9 1 complaint currently filed in the record as an exhibit. See ECF No. 25-1. Plaintiff shall file the 2 complaint no later than Wednesday, January 26, 2011. 3 C. Consent by AT&T California for Second-Amended Complaint 4 Plaintiff’s second amended complaint adds a new defendant, AT&T California. At the hearing, 5 counsel for AT&T said that she had agreed to represent AT&T California too and would file a 6 written consent to this court’s jurisdiction after Plaintiff files the second amended complaint. 7 D. Remand Contemplated 8 After AT&T consents, the parties agreed at oral argument that remand to state court for lack of discrimination, harassment, and retaliation. The court agrees that it lacks subject-matter jurisdiction 11 and remand is appropriate and fair. See Carnegie-Mellon University v. Cohill, 484 U.S. 343, 351 12 For the Northern District of California federal subject-matter jurisdiction is appropriate because the complaint involves only state claims of 10 UNITED STATES DISTRICT COURT 9 (1988). The complaint now has only state claims, and there are no claims involving denial of 13 benefits under the short-term disability plan. The case is only at the pleadings stage, and no 14 discovery has been conducted. These factors all support remand. See Nishimoto, 903 F.2d at 715. 15 The court will issue the order remanding the case after AT&T California files its consent. 16 17 18 19 V. CONCLUSION The court denies Plaintiff’s motion to remand and request for attorney’s fees and grants Plaintiff’s motion for leave to file a second amended complaint. Plaintiff shall file the second amended complaint (currently filed only as an exhibit at ECF No. 20 25-1) by Wednesday, January 26, 2011. Defendant AT&T California shall file its consent (or 21 declination) by Friday, January 28, 2011. Assuming consent, the court then will remand the case to 22 the Alameda County Superior Court. 23 This terminates ECF Nos. 6 and 25. 24 IT IS SO ORDERED. 25 Dated: January 23, 2011 _______________________________ LAUREL BEELER United States Magistrate Judge 26 27 28 ORDER (C 10-03751 LB) 10

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