Present: Kinser, C.J., Lemons, Millette, Mims, McClanahan, and Powell, JJ., and Russell, S.J.
RICHARD ANTHONY, ET AL.
v. Record No. 130681 OPINION BY JUSTICE DONALD W. LEMONS VERIZON VIRGINIA, INC., June 5, 2014 ET AL.
FROM THE CIRCUIT COURT OF THE CITY OF PORTSMOUTH James A. Cales, Jr., Judge 1
In this appeal, we consider whether the Circuit Court of
the City of Portsmouth ("circuit court") erred by holding that
the plaintiffs' state law claims were completely preempted by §
301(a) of the Labor Management Relations Act of 1947 ("LMRA"),
29 U.S.C. § 185(a), and by granting the demurrers filed by
Verizon Virginia, Inc. ("Verizon") and the Communication Workers
of America, AFL-CIO District 2 (the "CWA").
I. Allegations in the Complaint and Proceedings
Richard Anthony, Michael Giles, Jeremy Autry, George
Cummings, James Hodge, William Murden, Jeffrey Reynolds, Pharoah
Mosby, Christopher Lee, and Ricky Rosser (collectively,
"employees") are technicians formerly employed by Verizon. Each
was a member of the CWA.
In May 2010, the employees allegedly received an Enhanced
Income Security Plan ("EISP") which stated that Verizon had a
1 Judge Cales retired after issuing his letter opinion on December 27, 2012. Judge James C. Hawks entered the final order. surplus of 12,000 employees and potentially would conduct a
layoff. Originally, the employees were told their jobs were not
in jeopardy given their seniority. However, on June 15, 2010,
the employees were told by the CWA and Verizon (collectively,
"defendants") that their jobs were subject to termination in
August 2010; and if they did not accept the EISP and voluntarily
resign, they would not receive any enhanced severance benefits. 2
Given this information, each of the employees accepted the EISP
and their employment with Verizon was terminated on July 3,
2010.
According to the complaints, the Virginia Employment
Commission conducted a hearing shortly after the employees
accepted the EISPs. In the hearing, Verizon allegedly claimed
there was not a surplus, the employees' jobs were never in
jeopardy, and the employees voluntarily resigned. Additionally,
Verizon allegedly advertised a shortage of 200 technicians in
2 The EISP offered each of the employees: (1) a $50,000 one-time cash bonus; (2) acceleration of pension band increase; (3) a guaranteed interest rate for pension lump sum conversion; (4) waiver of age-based pension reductions; and (5) increased cap on EISP payment. The EISP stated: "This Offer provides lucrative financial incentives to eligible Associates who choose to voluntarily leave Verizon. . . . The Company does not intend to offer these special enhancements again, so it is extremely important that you take the time to thoroughly review the enclosed materials and consider volunteering for this generous One-Time Offer. . . . ACT NOW . . . if you decide to volunteer for this Offer, you must fax a signed copy of the enclosed form no later than June 16, 2010."
2 the employees' region shortly after representing to the
employees that there was a surplus.
On October 7, 2011, Richard Anthony filed a complaint in
the circuit court alleging actual and constructive fraud against
Verizon and constructive fraud against the CWA:
The defendants, CWA and Verizon, negligently misrepresented material facts with the intent that plaintiff would rely upon such representations.
The plaintiff relied upon the aforementioned negligent misrepresentations made by the defendants to his detriment and sustained substantial damages.
The defendant, Verizon, misrepresented material facts, knowingly and intentionally, with the intent to mislead plaintiff, and plaintiff relied upon such misrepresentations to his detriment causing him to sustain substantial financial losses and damages.
Anthony alleges that he and similarly situated employees were
"misled . . . in order to obtain their signatures to the
[Enhanced Income Security Plan], thereby removing those workers
with more seniority, higher salaries and more fringe benefits
from [the] payroll." Michael Giles, Jeremy Autry, and George
Cummings filed virtually identical complaints on October 10,
2011. James Hodge, William Murden, Jeffrey Reynolds, Pharoah
Mosby, and Christopher Lee filed similar complaints on October
13, 2011. Finally, on October 14, 2011, Ricky Rosser filed his
3 complaint alleging actual and constructive fraud and negligent
infliction of emotional distress.
After the employees filed their complaints in circuit
court, the defendants filed notices of removal to the United
States District Court for the Eastern District of Virginia
("federal district court"), arguing that the employees' state-
law claims were completely preempted by § 301 of the LMRA. The
notices of removal stated that "[b]ecause each of these claims
will require a reviewing court to interpret the parties'
collective bargaining agreements, and because each is
inextricably intertwined with the terms of those agreements,
this action falls squarely within the ambit of Section 301 of
the LMRA." The defendants also filed motions in the district
court under Rule 12(b)(6) of the Federal Rules of Civil
Procedure seeking to dismiss each of the employees' claims. In
response, the employees filed motions to remand to state court.
Based on these filings, the federal district court entered
an order on July 2, 2012, denying the defendants' motions to
dismiss and granting the employees' motions to remand. The
federal district court held:
Defendants argue that Plaintiff[s] must refer to the collective bargaining agreement in two ways: First, the collective bargaining agreement is relevant to determining whether Plaintiff[s] [were] really at risk of being terminated. Second, Plaintiff[s] will have to show that [their]
4 fear of termination was reasonable despite any protections that [they] had under the collective bargaining agreement.
Defendants' first argument is unpersuasive. Even if the collective bargaining agreement reinforces Plaintiffs' claim[s] that [they were] not actually at risk of termination, Plaintiff[s] do[] not rely on the agreement, but instead rel[y] on Verizon's hiring practices in late 2010 to show that [they] [were] in no danger of being fired, and that Defendants' representations to the contrary were false.
Defendants' second argument also fails. Plaintiff[s] do[] not contend that Defendants failed to warn [them] of something for which they were duty-bound to warn. Williams v. Nat’l Football League, 582 F.3d 863, 881 & n.14 (8th Cir. 2009). Nor do [they] assert that Defendants made false factual allegations that were tailored to satisfy the collective bargaining agreement. Augustin v. SecTek, Inc., 807 F.Supp.2d 519, 525 (E.D. Va. 2011).
Instead, Plaintiff[s] claim[] that [they] relied on an affirmative statement that Verizon intended to do something (terminate [them]), which was possibly prohibited by the collective bargaining agreement. Regardless of whether the collective bargaining agreement prohibited Verizon from firing Plaintiff[s], [their] reliance on statements, made by both [their] union and employer, that Verizon was likely to fire [them] in violation of the collective bargaining agreement was reasonable.
When the case was remanded to circuit court, Verizon and
the CWA filed demurrers to each of the complaints, arguing the
state-law claims were completely preempted by § 301 of the LMRA.
5 Although the federal district court had previously decided that
the employees' state-law claims were not completely preempted
and there was no federal jurisdiction, the circuit court
considered the defendants' complete preemption argument. The
circuit court consolidated these cases and, following a hearing,
it issued a letter opinion on December 27, 2012 holding:
Plaintiffs' claims do in fact require the interpretation of the collective bargaining agreement (CBA) between Verizon and the Union representatives. Specifically, the Plaintiff[s] allege[] that Verizon determined it had a "surplus" of employees which prompted the issuance of a severance package to the defendants. It was this surplus that then triggered the alleged misrepresentations to the Plaintiffs. The Complaint goes on to state that Verizon then went before the State Corporation Commission 3 and stated that they did not have a surplus in regards to the Plaintiffs' jobs. Were this case to continue these facts would be hotly litigated and the term surplus would supply the heat.
Unfortunately, for the Plaintiffs such a surplus is provided for in the CBA. Such an event, in this context, carries with it duties and responsibilities for Verizon and the Union . . . . The acts that were undertaken by the Defendants will be at issue and those acts are governed by the CBA. Therefore, allegations such as are before this Court, would require this judicial body to inquire as to what actions were taken and why, which would cast our net of inquiry squarely over the CBA. This is
3 The circuit court's ruling incorrectly refers to the State Corporation Commission. The plaintiffs' pleadings actually alleged that Verizon appeared before the Virginia Employment Commission.
6 flatly forbidden under superseding federal law.
On March 26, 2013, following a rehearing, the circuit court
granted the defendants' demurrers on the ground of complete
preemption, and dismissed the cases with prejudice. The
employees filed timely notices of appeal and we granted an
appeal based on their single assignment of error:
The circuit court erred in dismissing the Appellants['] Complaint on the basis that section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185, preempts the Appellants['] claims.
II. Analysis
A. Standard of Review
Whether the employees' state law claims for actual and
constructive fraud and negligent infliction of emotional
distress are completely preempted by § 301 of the LMRA is a
question of federal law reviewed de novo. See Maretta v.
Hillman, 283 Va. 34, 40, 722 S.E.2d 32, 34 (2012). Whether a
state claim is completely preempted by federal law is a question
of congressional intent: "The purpose of Congress is the
ultimate touchstone." Malone v. White Motor Corp., 435 U.S.
497, 504 (1978). "While the nature of the state tort is a
matter of state law, the question whether the . . . tort is
sufficiently independent of federal contract interpretation to
avoid pre-emption is, of course, a question of federal
7 law." Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 213-14
(1985).
"At the demurrer stage, it is not the function of the trial
court to decide the merits of the allegations set forth in a
complaint, but only to determine whether the factual allegations
pled and the reasonable inferences drawn therefrom are
sufficient to state a cause of action." Friends of the
Rappahannock v. Caroline Cnty. Board of Supervisors, 286 Va. 38,
44, 743 S.E.2d 132, 135 (2013) (citing Riverview Farm Assocs.
Va. Gen. P'ship v. Board of Supervisors of Charles County, 259
Va. 419, 427, 528 S.E.2d 99, 103 (2000)). On appeal, we accept
as true "all facts properly pled, as well as reasonable
inferences from those facts." Steward v. Holland Family Props.,
LLC, 284 Va. 282, 286, 726 S.E.2d 251, 253 (2012).
B. Complete Preemption
In their demurrers before the circuit court, Verizon and
the CWA argued the employees' claims were completely preempted:
When a claim requires a court to interpret a collective bargaining agreement . . . in an industry affecting commerce, Section 301 completely preempts and wholly displaces the claim, even if it is pled under state tort law. . . . Each and every one of the Plaintiffs' claims are, therefore, completely preempted under Section 301, and must be either dismissed outright or construed as Section 301 claims.
8 Complete preemption is a doctrine which transmutes state
law claims into federal claims and permits federal courts to
exercise their removal jurisdiction, even if federal issues are
not pleaded on the face of the complaint. See, e.g., Lingle v.
Norge Div. of Magic Chef, 486 U.S. 399, 403-07 (1988). See
also Whitman v. Raley's, Inc., 886 F.2d 1177, 1181 (9th Cir.
1989). Complete preemption has been described as a narrow
exception to the well-pleaded complaint rule. Caterpillar Inc.
v. Williams, 482 U.S. 386, 393 (1987)("On occasion, the Court
has concluded that the pre-emptive force of a statute is so
extraordinary that it converts an ordinary state common law
complaint into one stating a federal claim for purposes of the
well-pleaded complaint rule.")(internal citation and quotation
marks omitted).
The complete preemption doctrine was developed to permit
federal courts to exercise their removal jurisdiction when state
claims implicate uniquely federal policy concerns like
collective-bargaining contracts between labor unions, employers,
and employees. When addressing claims of complete preemption,
federal courts are required to decide whether the state law
claims actually "arise under" federal law. If the claims arise
under federal law, federal courts may exercise their subject
matter jurisdiction.
9 Complete preemption must be distinguished from ordinary
preemption which serves as a substantive defense to state law
claims. Ordinary preemption — which includes express
preemption, implied conflict preemption and implied field
preemption — does not create federal jurisdiction. Caterpillar,
482 U.S. at 393.
The differences between complete preemption and ordinary
preemption are well-noted. In Baldridge v. Kentucky-Ohio
Transportation, Inc., the United States Court of Appeals for the
Sixth Circuit stated:
[In Whitman v. Raley, Inc.], [t]he Ninth Circuit drew a helpful distinction between "complete preemption" and "the substantive defense of preemption."
According to Whitman, when a district court, considering the removal of a suit alleging state law violations, decides whether "Congress intended a preemptive force so powerful as to displace entirely any state cause of action within the ambit of the federal cause of action," the court is considering only a jurisdictional issue. The focus there is "on whether it was the intent of Congress to make the cause of action a federal cause of action and removable despite the fact that the . . . complaint identifies only state claims." This jurisdictional inquiry is distinct from the question whether a legal defense of preemption may be raised. Whether the defendant has a valid preemption defense "would be a matter for trial" by a court that has concluded it has jurisdiction over the case. "If the court rules that the claim is not completely preempted, the
10 federal court lacks jurisdiction to rule on the substantive preemption defense."
983 F.2d 1341, 1345-46 (6th Cir. 1993)(citing Whitman, 886 F.2d
at 1180-81).
Based on the defendants' demurrer, we are only concerned
with whether the complete preemption doctrine applies in this
case. See TC MidAtlantic Dev., Inc. v. Commonwealth, 280 Va.
204, 214, 695 S.E.2d 543, 549 (2010)(only grounds stated in the
demurrer may serve as a basis for granting the demurrer).
i. The Circuit Court Erred by Dismissing the Employees' Claims for Lack of Jurisdiction
Here, the federal district court determined the employees'
claims were not completely preempted by § 301 and it could not
exercise its removal jurisdiction. It remanded to the circuit
court to adjudicate the employees' state law claims. Following
remand, the circuit court dismissed the state tort claims under
the complete preemption doctrine, apparently holding it lacked
jurisdiction to decide claims "arising under" federal law.
The majority of federal courts have held that remand orders
have no preclusive effect on a state court's subsequent
substantive decisions. See Nordan v. Blackwater Sec.
Consulting, LLC, 460 F.3d 576, 590 (4th Cir. 2006)("[T]he
district court's finding that complete preemption did not create
federal removal jurisdiction will have no preclusive effect on a
subsequent state-court defense of federal
11 preemption."); Whitman, 886 F.2d at 1182 (when a federal court
remands to state court for lack of federal jurisdiction, "no
rulings of the federal court have any preclusive effect on the
substantive matters before the state court"). In Kircher v.
Putnam Funds Trust, 547 U.S. 633, 647 (2006), the Supreme Court
made clear that remand orders are only conclusive as to the
determination of federal jurisdiction and a state trial court
may not treat the remand as if it were an appellate court:
While the state court cannot review the decision to remand in an appellate way, it is perfectly free to reject the remanding court's reasoning, as we explained over a century ago in Missouri Pacific Railway: "[A]s to applications for removal on the ground that the cause arose under the Constitution, laws, or treaties of the United States," the finality accorded remand orders is appropriate because questions of this character "if decided against the claimant" in state court are "open to revision . . ., irrespective of the ruling of the [federal court] in that regard in the matter of removal." Nor is there any reason to see things differently just because the remand's basis coincides entirely with the merits of the federal question; it is only the forum designation that is conclusive.
(Emphasis added; internal citations omitted.) Therefore, a
federal district court's decision concerning its own
jurisdiction is conclusive, and a state court is barred from
reviewing it.
In this case, the circuit court implicitly determined that
the employees' claims were completely preempted, that the
12 federal district court possessed exclusive jurisdiction, and
concluded that it consequently lacked jurisdiction:
Having had the opportunity to review the pleadings and the arguments presented by all parties, the Court hereby GRANTS the Defendants' demurrer/plea in bar and dismisses the Plaintiffs['] claim[s]. . . . [A]llegations such as are before this Court, would require this judicial body to inquire as to what actions were taken and why, which would cast our net of inquiry squarely over the CBA. This is flatly forbidden under superseding federal law. . . . It is for this reason that we must grant the demurrer/plea in bar. 4
This was error.
Clearly, the circuit court possesses jurisdiction over
state law claims. It remains to be answered whether a state
court may exercise jurisdiction over a case if it finds the
state law claims actually "arise under" federal law.
If the employees' claims are completely preempted, then,
by operation of law, they are transformed from state tort claims
to § 301 claims. 5 State courts have concurrent jurisdiction to
4 The defendants filed demurrers. The circuit court inexplicably refers to the pleadings as demurrers/pleas in bar. 5 We agree with the Courts of Appeal for the Ninth and Tenth Circuits that after a finding of complete preemption the substantive state law claim transmutes into a federal law claim. See Crull v. GEM Ins. Co., 58 F.3d 1386, 1392 (9th Cir. 1995); Carland v. Metro. Life Ins. Co., 935 F.2d 1114, 1119 (10th Cir. 1991), cert. denied, 502 U.S. 1020 (1991). After a finding of complete preemption, state law claims need not be dismissed and re-filed as federal claims, because they already, by nature, "arise under" federal law. See also Caterpillar, 482 U.S. at 393 ("Once an area of state law has been completely pre-empted,
13 try § 301 claims. Lingle, 486 U.S. at 403 (citing Charles Dowd
Box Co. v. Courtney, 368 U.S. 502 (1962)). If the employees had
originally filed § 301 claims in state court, the circuit court
would have possessed jurisdiction over those claims. It is
perfectly logical that the circuit court also possesses
jurisdiction to try the employees' claims following remand –
even if it subsequently determines the state tort theories
actually state § 301 claims. Therefore, the circuit court erred
by dismissing the employees' claims, even if they were
completely preempted.
Even though we conclude dismissal was an improper remedy,
we must also address the circuit court's holding that the
employees' well-pleaded fraud and negligent infliction of
emotional distress claims "arose under" federal law.
ii. The Employees' Claims Were Not Completely Preempted
We agree with the United States District Court for the
Eastern District of Virginia that the employees' complaints do
not give rise to § 301 claims. In Allis-Chalmers Corp., the
Supreme Court of the United States held that a state-law claim
is transformed into a § 301 claim when it is "inextricably
intertwined with consideration of the terms of the labor
contract." 471 U.S. at 213. State law claims are not
any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law.").
14 completely preempted by § 301 when the state law "confers
nonnegotiable rights on employers or employees independent of
any right established by contract." Id. In Lingle, the Supreme
Court further clarified that: "[a] purely factual question[]"
about an employee's conduct or an employer's motives does not
"require[] a court to interpret any term of a collective-
bargaining agreement." 486 U.S. at 407. See also Hawaiian
Airlines v. Norris, 512 U.S. 246, 261-62 (1994).
In this case, the employees' state tort claims are
completely preempted only if they implicate "rights created by
[the] collective-bargaining agreements," or their claims are
"substantially dependent on analysis of [the] collective-
bargaining agreement[s]." Caterpillar, 482 U.S. at 394
(quoting Electrical Workers v. Hechler, 481 U.S. 851, 859 n.3
(1987)); see also Allis-Chalmers, 471 U.S. at 220. Lingle
directs courts to analyze § 301 preemption within the context of
the elements of the state law claims. 486 U.S. at 403-07.
Therefore, to resolve whether the employees' claims are within
the complete preemptive reach of § 301, we must examine the
elements of actual and constructive fraud and negligent
1. Fraud Claims
In Caperton v. A.T. Massey Coal Co., 285 Va. 537, 553, 740
S.E.2d 1, 9 (2013), we recited the elements of common law fraud:
15 "[A] false representation of a material fact; made
intentionally, in the case of actual fraud, or negligently, in
the case of constructive fraud; reliance on that false
representation to [plaintiff's] detriment; and resulting
damage." (Internal quotation marks omitted.) To establish
fraud, "it is essential that the defrauded party demonstrates
the right to reasonably rely upon the
misrepresentation." Metrocall of Delaware, Inc. v. Continental
Cellular Corp., 246 Va. 365, 374, 437 S.E.2d 189, 193-94 (1993).
Additionally, in Caperton, we concluded that "[f]raudulent
misrepresentation shares none of the elements of a breach of
contract action, and the evidence required to support each claim
is, therefore, manifestly different." 285 Va. at 553, 740
S.E.2d at 9.
"Lingle teaches that. . . whether the employer's actions
make out the element[s] of [fraud] under state law -- is a
'purely factual question.'" Hawaiian Airlines, 512 U.S. at 266
(quoting Lingle, 486 U.S. at 407). Verizon and the CWA argue
that we must interpret the CBA to determine whether there was a
surplus and whether the employees were terminated in accord with
the CBA. Verizon asserts that its initial representation to the
employees is only false if there was actually no surplus
according to the terms of the CBA. In contrast, the employees
contend their allegations of Verizon's statement and counter-
16 statement can prove fraudulent conduct without any reference to
the CBA. We must decide whether the employees, based on their
factual allegations, can prove the elements of fraud without
requiring analysis of the CBA. In this case, only the falsity
and reasonable reliance elements are in dispute.
a. Falsity of the Representation
The employees allege that "[o]n June 15, 2010 plaintiff[s]
[were] told by each of the defendants that [their] employment
was in serious jeopardy and that a decision would have to be
made by June 16, 2010 regarding whether or not [they] would
accept the EISP or be terminated in August, 2010."
The employees also pled:
Subsequent to the plaintiff[s'] termination[s], Verizon, before the Virginia Employment Commission, took the position that plaintiff[s'] job[s] [were] not surplus, that [their] job[s were] not in jeopardy and that [their] termination was voluntary.
Almost immediately after plaintiff[s were] terminated, Verizon recalled 84 technicians who had previously been removed and brought in technicians from outside the area to meet its needs. . . . .
Shortly after plaintiff[s'] termination[s], Verizon advertised for an unprecedented 200 technicians to transfer to the Potomac Region where plaintiff[s] had been employed.
Finally, the employees claim "the defendants misrepresented
material facts, knowingly and intentionally [or negligently],
17 [and] caus[ed] the plaintiffs to operate under a set of beliefs
originating with each defendant that [they] had no choice but to
accept the EISP or be terminated from [their] employment."
Whether Verizon had a contractual right under the CBA to
declare a surplus and terminate the employees is not before us.
The issue is whether Verizon and the CWA knowingly or
negligently misrepresented material facts to induce the
employees' resignations. The gravamen of this inquiry is the
veracity of the statements. We conclude that if the plaintiffs'
allegations are proven at trial, a trier of fact could resolve
the falsity element without any reference to the CBA.
In her dissent, Justice McClanahan declares that falsity
cannot be proven without referencing the CBA. She posits that
the defendants could have believed that the employees' jobs were
in jeopardy at the time they made their representation. She
further speculates that Verizon's purported testimony before the
Virginia Employment Commission could have been based on its
subsequent knowledge that the shortage had been alleviated
through voluntary attrition.
The employees pled that: (1) the defendants stated their
jobs were "in serious jeopardy," and (2) Verizon then testified
before the Virginia Employment Commission that the employees'
jobs were "not in jeopardy." The employees also pled that
shortly after claiming a surplus and terminating the employees,
18 Verizon "recalled 84 technicians who had previously been removed
[,] brought in technicians from outside the area to meet its
needs" and subsequently "advertised for an unprecedented 200
technicians to transfer to the Potomac Region where plaintiff[s]
had been employed." At the demurrer stage, we are obligated to
accept the truthfulness of these allegations and are not
permitted to construct alternative factual scenarios to test the
plaintiffs' allegations. Steward, 284 Va. at 286, 726 S.E.2d at
253.
The employees' allegations of a false representation are
sufficient to survive demurrer. The employees' complaint
contained Verizon's two conflicting statements: (1) Verizon
initially represented to the employees that their jobs were in
serious jeopardy and they would be terminated if they did not
accept the EISPs, and (2) Verizon subsequently represented to
the Virginia Employment Commission that the employees' jobs were
not in jeopardy and they voluntarily resigned. The employees'
additional allegations, including that Verizon rehired and
transferred workers into the region and advertised openings for
200 technicians shortly after terminating the employees, support
an inference that the initial statement that Verizon made on
June 15, 2010 was false.
b. Reliance
19 The employees allege they would have never accepted the
EISPs in the absence of the misrepresentation:
The plaintiff[s] accepted the EISP package because of the representations made by each of the defendants . . . that if they did not do so, they would receive significantly fewer or no benefits after their termination by Verizon.
The plaintiff[s] had no intention of accepting the EISP package before being told by the defendants that they were going to be terminated. . . . .
The plaintiff[s], operating under a set of beliefs originating with each of the defendants, felt [t]he[y] had no choice but [to] accept the EISP and acted upon those beliefs and representations to [their] detriment.
. . . .
The plaintiff[s]relied upon such misrepresentations to [their] detriment causing [them] to sustain substantial financial losses and damages.
The employees clearly pled that they relied on the
defendants' statements in making their decisions to accept the
EISPs.
Justice Powell's dissent maintains that the element of
reliance cannot be proven without referencing the CBA's term
"surplus" and its provisions regarding termination. She notes
that the employees had access to the CBA and posits that the
employees could have used their understanding of the CBA to
20 detect the defendants' fraud. However, this case is not about
whether Verizon complied with the CBA's provisions for
addressing a surplus, but whether Verizon intentionally, and CWA
negligently, stated that the employees' jobs were in jeopardy
and that if the employees failed to accept the EISP, they would
receive fewer or no benefits after termination.
The common error shared by the dissents is "[the] failure
to recognize that a plaintiff covered by a collective-bargaining
agreement is permitted to assert legal rights independent of
that agreement." Caterpillar, 482 U.S. at 396 (emphasis in
original). In this case, based upon the pleadings, Verizon's
statement and counterstatement render interpretation of the
CBA's terms unnecessary. See, e.g., Franchise Tax Bd. of Cal.
v. Construction Laborers Vacation Trust for Southern Cal., 463
U.S. 1, 25 n.28 (1983) ("[E]ven under § 301 we have never
intimated that any action merely relating to a contract within
the coverage of § 301 arises exclusively under that section.
For instance, a state battery suit growing out of a violent
strike would not arise under § 301 simply because the strike may
have been a violation of an employer-union contract."). Like
the irrelevance of the contractual meaning of "strike" in a suit
for battery, a trial court, viewing the allegations in this
case, is not required to decide whether there was a "surplus"
21 under the terms of the CBA or whether Verizon was complying with
its contractual obligations under the CBA.
Viewing the well-pleaded allegations in these complaints as
true, we conclude the employees stated claims for fraud based on
facts outside the scope of the CBA. Therefore, we hold the
employees' well-pleaded fraud claims were not completely
preempted by § 301 of the LMRA.
2. Negligent Infliction of Emotional Distress Claim
In Delk v. Columbia/HCA Healthcare Corp., 259 Va. 125, 137-
38, 523 S.E.2d 826, 833-34 (2000), this Court discussed the
elements of a claim for negligent infliction of emotional
distress under Virginia law:
We adhere to the view that where conduct is merely negligent, not willful, wanton, or vindictive, and physical impact is lacking, there can be no recovery for emotional disturbance alone. We hold, however, that where the claim is for emotional disturbance and physical injury resulting therefrom, there may be recovery for negligent conduct, notwithstanding the lack of physical impact, provided the injured party properly pleads and proves by clear and convincing evidence that his physical injury was the natural result of fright or shock proximately caused by the defendant's negligence. In other words, there may be recovery in such a case if, but only if, there is shown a clear and unbroken chain of causal connection between the negligent act, the emotional disturbance, and the physical injury.
(Internal quotation marks and citations omitted and emphasis in
original.) In this case, Ricky Rosser's negligent infliction of
22 emotional distress claim is based on Verizon and the CWA's
allegedly fraudulent conduct. The underlying facts supporting
Rosser's emotional distress claim are the same as those
supporting the fraud claims. Accordingly, the allegation of
emotional distress contained in Rosser's complaint is also
outside the scope of the CBA — and therefore is not completely
preempted.
III. Conclusion
The circuit court erred in holding that the employees'
claims were completely preempted by § 301 of the LMRA and by
dismissing those claims. We will reverse the circuit court's
judgment and will remand this case for further proceedings in
accordance with this opinion.
Reversed and remanded.
JUSTICE McCLANAHAN, concurring in part and dissenting in part.
The circuit court held that the employees' claims are
completely preempted by Section 301 of the Labor Relations
Management Act of 1947 ("LMRA"), 29 U.S.C. § 185, and, on this
basis, dismissed their suits. I agree with the majority that
dismissal was an improper course of action and that the circuit
court has concurrent jurisdiction to try the employees' claims
if they are completely preempted. I dissent from the majority's
23 review of complete preemption and conclude that because the
employees' claims require interpretation of a collective
bargaining agreement they are completely preempted by Section
301.
All of the employees sue for fraudulent misrepresentation,
one element of which requires the employees to prove that the
defendants' representation was false. 1 Caperton v. A.T. Massey
Coal Co., 285 Va. 537, 553, 740 S.E.2d 1, 9 (2013)
(quoting Klaiber v. Freemason Assocs., Inc., 266 Va. 478, 485,
587 S.E.2d 555, 558 (2003)). The alleged misrepresentation in
this case was the defendants' statement to the employees that
their jobs were in serious jeopardy. As counsel for the
employees stated at oral argument, the allegation in the
complaints supporting this element is that after the employees
agreed to early termination, Verizon later told the Virginia
Employment Commission that the employees' jobs were not in
jeopardy. In an apparent attempt to avoid preemption, the
employees have tailored the face of their complaints to exclude
interpretation of a collective bargaining agreement, and in most
cases, under the well-pleaded complaint rule, whether a claim
arises under federal law depends only on whether "a federal
1 As noted in the majority opinion, plaintiff Ricky Rosser's negligent infliction of emotional distress claim is based on the defendants' alleged fraudulent conduct. Thus, this claim likewise will require him to prove that the defendants' representation was false.
24 question is presented on the face of the plaintiff's properly
pleaded complaint." See Caterpillar Inc. v. Williams, 482 U.S.
386, 392 (1987) (citing Gully v. First Nat'l Bank, 299 U.S. 109,
112-13 (1936)).
But Section 301 of the LMRA is one of three federal
statutes that the Supreme Court of the United States has held
completely preempts state-law claims. Lontz v. Tharp, 413 F.3d
435, 441 (4th Cir. 2005). "The doctrine of complete preemption
. . . . recognizes that some federal laws evince such a strong
federal interest that, when they apply to the facts underpinning
the plaintiff's state-law claim, they convert that claim into
one arising under federal law." Barbour v. International Union,
640 F.3d 599, 629 (4th Cir. 2011) (Agee, J.,
concurring); Caterpillar Inc., 482 U.S. at 393; Lontz, 413 F.3d
at 441. Complete preemption is an exception to the well-pleaded
complaint rule, Lontz, 413 F.3d at 439, and thus Section 301 may
completely preempt an action even where the complaint is
tailored to allege only a state-law claim. Franchise Tax Bd. v.
Constr. Laborers Vacation Trust, 463 U.S. 1, 23 (1983).
Consequently, a court must look beyond the face of the complaint
to determine whether the claim "requires the interpretation of a
collective-bargaining agreement" and is therefore completely
preempted by Section 301. Lingle v. Norge Div. of Magic Chef,
Inc., 486 U.S. 399, 405–06, 410, 413 (1988) (discussing the
25 Court's complete preemption analysis in a previous case, where
it "began by examining the collective-bargaining
agreement"); Foy v. Giant Food Inc., 298 F.3d 284, 287 (4th Cir.
2002); McCormick v. AT&T Techs., Inc., 934 F.2d 531, 534 (4th
Cir. 1991).
It is clear from the record in this case that the employees
must ask the court to interpret a collective bargaining
agreement in order to prove that the defendants' representation
was false.
Around the time Verizon declared an employee surplus,
Verizon and CWA entered into a Memorandum of Agreement ("MOA"),
a collective bargaining agreement that detailed the conditions
in which Verizon would either retain or terminate the surplus
employees. See 29 U.S.C. § 185(a) (applying to "contracts
between an employer and a labor organization"). Under Section
VIII of the MOA, Verizon offered early termination incentive
packages not only to surplus employees (which included these
employees) but also to non-surplus employees. Section VI of the
MOA explains that if at least 12,000 combined surplus and non-
surplus employees accepted the early termination incentive
packages, no post-August 2, 2003 hires (which included these
employees) would be laid off. Thus, the prospect of the
employees being terminated to relieve the surplus was a function
of the arrangement set out in the MOA, and in turn, the truth or
26 falsity of the defendants' representation to the employees
regarding the security of their positions depends on the terms
of the MOA.
The majority asserts that Verizon's statement to the
Virginia Employment Commission necessarily renders false the
defendants' earlier statement to the employees. Looking to the
MOA, it is clear that Verizon's statement to the Virginia
Employment Commission does not necessarily prove the falsity of
the defendants' earlier statement to the employees.
The MOA opened the possibility that the surplus would be
cured in part by non-surplus employees accepting early
termination, which in turn would spare these employees from
layoff. The defendants' alleged misrepresentation to the
employees was made before the deadline for accepting early
termination, and thus the defendants' statement was their
evaluation of the employees' job security based on the
defendants' knowledge at that time. Verizon's statement to the
Virginia Employment Commission was made months after the
deadline with knowledge of the number of employees who in fact
accepted early termination. Rather than conflicting, the
defendants' statements may be explained instead as the
defendants' truthful prediction of the employees' job security
given their ex ante knowledge and Verizon's relay of information
to the Virginia Employment Commission that enough early
27 terminations were in fact accepted that these employees would
have been spared layoff. 2 Thus, even if the employees'
allegations are true, these allegations do not necessarily prove
the falsity of the defendants' representation to the employees.
Instead, the employees must carry their burden and prove the
independent falsity of the defendants' representation, which as
discussed above requires the interpretation of the MOA. This
conclusion is not the product of speculation, but rather
recognition of the inevitable issues and evidence in the case.
Because proving the defendants' representation was false
"requires the interpretation of a collective bargaining
agreement," Section 301 completely preempts the employees'
claims. Lingle, 486 U.S. at 405–06; Foy, 298 F.3d at
287; McCormick, 934 F.2d at 534. After reversing the circuit
court's dismissal of the employees' suits, I would affirm the
circuit court's holding that Section 301 completely preempts the
employees' claims and remand for further proceedings.
2 Because the factual details underlying these events were not included in the record, and a determination regarding the truthfulness of the allegations is beyond the scope of this appeal, I make no judgment about these matters.
28 JUSTICE POWELL, concurring in part and dissenting in part.
I agree with the majority’s holding that the circuit court
erred in dismissing the employees’ claims. I also agree with
Justice McClanahan’s conclusion that complete preemption
constitutes an exception to the well-pleaded complaint rule.
However, I write separately because I do not believe the
employees can demonstrate the reasonable reliance required to
support a fraud claim under Virginia law without judicial
analysis of the collective bargaining agreements. * As a result,
the employees’ state law claims are completely preempted by §
301 of the Labor Management Relations Act of 1947 ("LMRA"), 29
U.S.C. § 185.
A tort action grounded in state law may be preempted by §
301 of the LMRA where the claim depends upon analysis of the
collective bargaining agreement between the parties. Williams v.
National Football League, 582 F.3d 863, 874 (8th Cir. 2009).
In Williams, the United States Court of Appeals for the Eighth
* The majority notes that the plaintiffs alleged reliance on the defendants’ representations. However, the question is not merely whether the plaintiffs relied on statements made by the defendants, but also whether that reliance was reasonable under the circumstances. Metrocall of Delaware, Inc. v. Continental Cellular Corp., 246 Va. 365, 374, 437 S.E.2d 189, 193-94 (1993). To ascertain the reasonableness of the plaintiffs’ reliance on these statements, a court must interpret the collective bargaining agreements. Circuit held that the plaintiffs’ claims of fraudulent
misrepresentation, brought under Minnesota law, were preempted
by § 301 of the LMRA because the plaintiffs could not
“demonstrate the requisite reasonable reliance to prevail on
their claims without resorting to the [collective bargaining
agreements].” Id. at 881. In Minnesota, claims of fraudulent
misrepresentation require plaintiffs to show that they
reasonably relied on the alleged misrepresentation. Id. at 881-
82 & n.14. The Williams court noted that, “[w]hether a
plaintiff’s reliance was justifiable is determined in light of
the specific information and experience it had.” Id. at 882
(quoting Trustees of the Twin City Bricklayers Fringe Benefit
Funds v. Superior Waterproofing, Inc., 450 F.3d 324, 331 (8th
Cir. 2006)). Furthermore, in determining whether the plaintiff
justifiably relied on the alleged misrepresentations, the court
noted that
the trier of fact would have to determine whether the contractual language in the [collective bargaining agreement] was ambiguous enough for a layman reasonably to believe that it was not contrary to the representations on which [the plaintiff] claims it relied. This would require the trier of fact to examine the provisions in [the collective bargaining agreement].
Williams, 582 F.3d at 882 (quoting Superior Waterproofing, 450
F.3d at 332).
The facts of this case are analogous to those considered by
30 the Eighth Circuit. As in Minnesota, in Virginia a plaintiff
asserting fraudulent misrepresentation must establish “the right
to reasonably rely upon the misrepresentation.” Metrocall of
Delaware, Inc. v. Continental Cellular Corp., 246 Va. 365, 374,
437 S.E.2d 189, 193-94 (1993). Reasonable reliance exists where
the defrauded party not only believes the statement, but is “so
thoroughly induced by it that, judging from the ordinary
experience of mankind, in the absence of it he would not, in all
reasonable probability, have entered into the contract or other
transaction.” American Surety Co. v. Hannah, 143 Va. 291, 301,
130 S.E. 411, 414 (1925).
In this matter, the employees claim that they relied on the
defendants’ assertions that there was a “surplus” of employees,
that their employment was “in serious jeopardy,” and that the
employees could either accept the EISP or be terminated in
August, 2010. Furthermore, the employees claim that they were
induced to voluntarily terminate their employment, and accept
the EISP by the defendants’ representation that, if they chose
not to accept the EISP, they would receive “significantly fewer
or no benefits after [their] termination by Verizon.”
The reasonableness of the employees’ reliance on these
representations cannot be evaluated without interpreting the
collective bargaining agreements that govern the employment
relationship between the parties. The collective bargaining
31 agreements delineated Verizon’s ability to terminate employment,
provided additional employment protection to more senior
employees, and guaranteed separation benefits upon termination.
To determine whether the employees had the right to rely on oral
representations made by the defendants, a fact finder would
first need to determine which protections an employee enjoyed
under the collective bargaining agreements; second, whether
Verizon’s representations conflicted with the collective
bargaining agreements; and finally, whether it was reasonable
for the employees to rely on Verizon’s oral representations,
even where those oral representations violated the written
guarantees contained in the collective bargaining agreements.
Accordingly, I would hold that the employees’ state law claims
are substantially dependent upon analysis of the collective
bargaining agreements, and are therefore preempted by § 301 of
the LMRA.