IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT _______________
No. 95-50539 _______________
DEE MARCUS BREWER,
Plaintiff-Appellant,
VERSUS
UNUM LIFE INSURANCE COMPANY OF AMERICA, et al.,
Defendants-Appellees.
_________________________
Appeal from the United States District Court for the Western District of Texas (A-94-CV-488) _________________________
July 12, 1996
Before JONES, SMITH, and STEWART, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
In this coverage dispute between Dee Marcus Brewer (“Brewer”)
and UNUM Life Insurance Company of America (“UNUM”), Brewer claims
that he is entitled to recover over $72,000 in benefits under a
group life insurance policy issued by UNUM. The district court
granted summary judgment for UNUM on Brewer’s breach of contract,
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circum- stances set forth in 5TH CIR. R. 47.5.4. breach of duty of good faith and fair dealing, and fraud claims and
granted UNUM’s motion for judgment as a matter of law (“j.m.l.”) on
Brewer’s misrepresentation claims. We reverse in part for want of
jurisdiction, vacate in part, and remand.
I.
In July 1993, UNUM submitted a proposal to the Eanes Independ-
ent School District (“EISD”) for group life, accidental death and
dismemberment (“AD&D”), and disability insurance coverage. EISD
requested basic term life insurance of $5,000 for each of its
employees, with supplemental term life coverage of one times the
employee’s salary, to be paid for by the employee. UNUM’s proposal
provided basic coverage of $10,000 and supplemental coverage of two
times the employee’s salary. The EISD board of trustees selected
UNUM as its group life, AD&D and disability insurance carrier on
September 8, 1993. The policy was to be effective November 1,
1993.
June Brewer (“June”) worked in the tax department of EISD and
was a full-time employee, eligible for teacher retirement at the
time of her death from cancer. Starting on July 31, 1993, she took
advantage of her accumulated sick leave. On October 4, 1993, she
signed enrollment forms and elected to purchase supplemental life
insurance coverage from UNUM. A premium for supplemental coverage
was deducted from her paycheck on October 22, 1993. On November
2 15, 1993, she died of cancer.
UNUM denied both basic and supplemental coverage to June’s
beneficiaries because she was not an active employee under the
terms of the insurance policy. UNUM relied on the “Effective Date”
provision of the policy, which states,
The effective date of any initial . . . or additional insurance will be delayed for a person if he is not in active employment because of an injury, a sickness, a temporary layoff or a leave of absence on the date that insurance would otherwise be effective. The initial . . . or additional insurance will start on the date that person returns to active employment.
The policy defines “active employment” to require that the employee
be working “for the employer on a permanent full-time basis and
paid regular earnings” and working at least thirty hours per week
at the employer’s place of business or location to which the
employer’s business requires the employee to travel.
On June 8, 1994, Brewer sued UNUM and two of its employees,
Kori Ann Peel and Stephanie A. Caraway, in state court. The
petition1 alleged breach of contract, violations of the Texas
Deceptive Trade Practice Act and TEX. INS. CODE art. 21.21, breach
of the duty of good faith and fair dealing, and fraud.
UNUM removed the case to federal court, on July 13, 1994,
based upon the existence of a federal question and diversity. UNUM
alleged the existence of federal question jurisdiction based upon
the fact that at least one of Brewer’s state law claims depended
1 In federal court, a petition is referred to as a complaint.
3 upon the correct application of the Employee Retirement Income
Security Act of 1974 (“ERISA”). Diversity jurisdiction was
premised on the theory that the resident defendants (Peel and
Caraway) were fraudulently joined.
On September 8, 1994, the district court entered an order
finding no federal question jurisdiction. Finding fraudulent
joinder, the court dismissed the resident defendants and retained
jurisdiction under 28 U.S.C. § 1332.
The district court granted UNUM’s motion for summary judgment
with respect to Brewer’s breach of contract, breach of duty of good
faith and fair dealing, and fraud claims. Following presentation
of the plaintiff’s case in chief, the court granted UNUM’s motion
for j.m.l. on Brewer’s misrepresentation claims. The court entered
a take nothing judgment in favor of UNUM and the resident defen-
dants.
II.
Brewer argues that the district court erred in determining
that Peel and Caraway were fraudulently joined. In order to
establish that a resident defendant has been fraudulently joined,
“the removing party must show . . . that there is no possibility
that the plaintiff would be able to establish a cause of action
against the in-state defendant in state court.” East Texas Mack
Sales, Inc. v. Northwest Acceptance Corp., 819 F.2d 116, 119 (5th
4 Cir. 1987) (citation omitted). The district court must evaluate
all factual allegations and uncertainties as to the current state
of controlling law in favor of the plaintiff. Id. “[I]f there is
even a possibility that a state court would find a cause of action
stated against any one of the named in-state defendants on the
facts alleged by the plaintiff, then the federal court must find
that the in-state defendant(s) have been properly joined, that
there is incomplete diversity, and that the case must be remanded
to the state courts.” B., Inc. v. Miller Brewing Co., 663 F.2d
545, 550 (5th Cir. Unit A Dec. 1981).
In removal cases, jurisdiction is determined by examining the
petition at the time of removal. Cavallini v. State Farm Mut. Auto
Ins. Co., 44 F.3d 256, 259-60 (5th Cir. 1995). “While we have
frequently cautioned the district courts against pretrying a case
to determine removal jurisdiction, we have also endorsed a summary
judgment-like procedure for disposing of fraudulent joinder
claims.” Carriere v. Sears, Roebuck & Co., 893 F.2d 98, 100 (5th
Cir.), cert. denied, 498 U.S. 817 (1990).
The defendants concede that the district court did not pierce
the pleadings and consider summary judgment-type evidence, thereby
limiting this court’s inquiry to the pleadings. In order to find
fraudulent joinder, we must determine, assuming all the facts set
forth by the plaintiff are true, that there can be no recovery as
a matter of law. B., Inc., 663 F.2d at 551.
5 The first step in determining whether a party has been
fraudulently joined is determining the relevant state law.
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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT _______________
No. 95-50539 _______________
DEE MARCUS BREWER,
Plaintiff-Appellant,
VERSUS
UNUM LIFE INSURANCE COMPANY OF AMERICA, et al.,
Defendants-Appellees.
_________________________
Appeal from the United States District Court for the Western District of Texas (A-94-CV-488) _________________________
July 12, 1996
Before JONES, SMITH, and STEWART, Circuit Judges.
JERRY E. SMITH, Circuit Judge:*
In this coverage dispute between Dee Marcus Brewer (“Brewer”)
and UNUM Life Insurance Company of America (“UNUM”), Brewer claims
that he is entitled to recover over $72,000 in benefits under a
group life insurance policy issued by UNUM. The district court
granted summary judgment for UNUM on Brewer’s breach of contract,
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circum- stances set forth in 5TH CIR. R. 47.5.4. breach of duty of good faith and fair dealing, and fraud claims and
granted UNUM’s motion for judgment as a matter of law (“j.m.l.”) on
Brewer’s misrepresentation claims. We reverse in part for want of
jurisdiction, vacate in part, and remand.
I.
In July 1993, UNUM submitted a proposal to the Eanes Independ-
ent School District (“EISD”) for group life, accidental death and
dismemberment (“AD&D”), and disability insurance coverage. EISD
requested basic term life insurance of $5,000 for each of its
employees, with supplemental term life coverage of one times the
employee’s salary, to be paid for by the employee. UNUM’s proposal
provided basic coverage of $10,000 and supplemental coverage of two
times the employee’s salary. The EISD board of trustees selected
UNUM as its group life, AD&D and disability insurance carrier on
September 8, 1993. The policy was to be effective November 1,
1993.
June Brewer (“June”) worked in the tax department of EISD and
was a full-time employee, eligible for teacher retirement at the
time of her death from cancer. Starting on July 31, 1993, she took
advantage of her accumulated sick leave. On October 4, 1993, she
signed enrollment forms and elected to purchase supplemental life
insurance coverage from UNUM. A premium for supplemental coverage
was deducted from her paycheck on October 22, 1993. On November
2 15, 1993, she died of cancer.
UNUM denied both basic and supplemental coverage to June’s
beneficiaries because she was not an active employee under the
terms of the insurance policy. UNUM relied on the “Effective Date”
provision of the policy, which states,
The effective date of any initial . . . or additional insurance will be delayed for a person if he is not in active employment because of an injury, a sickness, a temporary layoff or a leave of absence on the date that insurance would otherwise be effective. The initial . . . or additional insurance will start on the date that person returns to active employment.
The policy defines “active employment” to require that the employee
be working “for the employer on a permanent full-time basis and
paid regular earnings” and working at least thirty hours per week
at the employer’s place of business or location to which the
employer’s business requires the employee to travel.
On June 8, 1994, Brewer sued UNUM and two of its employees,
Kori Ann Peel and Stephanie A. Caraway, in state court. The
petition1 alleged breach of contract, violations of the Texas
Deceptive Trade Practice Act and TEX. INS. CODE art. 21.21, breach
of the duty of good faith and fair dealing, and fraud.
UNUM removed the case to federal court, on July 13, 1994,
based upon the existence of a federal question and diversity. UNUM
alleged the existence of federal question jurisdiction based upon
the fact that at least one of Brewer’s state law claims depended
1 In federal court, a petition is referred to as a complaint.
3 upon the correct application of the Employee Retirement Income
Security Act of 1974 (“ERISA”). Diversity jurisdiction was
premised on the theory that the resident defendants (Peel and
Caraway) were fraudulently joined.
On September 8, 1994, the district court entered an order
finding no federal question jurisdiction. Finding fraudulent
joinder, the court dismissed the resident defendants and retained
jurisdiction under 28 U.S.C. § 1332.
The district court granted UNUM’s motion for summary judgment
with respect to Brewer’s breach of contract, breach of duty of good
faith and fair dealing, and fraud claims. Following presentation
of the plaintiff’s case in chief, the court granted UNUM’s motion
for j.m.l. on Brewer’s misrepresentation claims. The court entered
a take nothing judgment in favor of UNUM and the resident defen-
dants.
II.
Brewer argues that the district court erred in determining
that Peel and Caraway were fraudulently joined. In order to
establish that a resident defendant has been fraudulently joined,
“the removing party must show . . . that there is no possibility
that the plaintiff would be able to establish a cause of action
against the in-state defendant in state court.” East Texas Mack
Sales, Inc. v. Northwest Acceptance Corp., 819 F.2d 116, 119 (5th
4 Cir. 1987) (citation omitted). The district court must evaluate
all factual allegations and uncertainties as to the current state
of controlling law in favor of the plaintiff. Id. “[I]f there is
even a possibility that a state court would find a cause of action
stated against any one of the named in-state defendants on the
facts alleged by the plaintiff, then the federal court must find
that the in-state defendant(s) have been properly joined, that
there is incomplete diversity, and that the case must be remanded
to the state courts.” B., Inc. v. Miller Brewing Co., 663 F.2d
545, 550 (5th Cir. Unit A Dec. 1981).
In removal cases, jurisdiction is determined by examining the
petition at the time of removal. Cavallini v. State Farm Mut. Auto
Ins. Co., 44 F.3d 256, 259-60 (5th Cir. 1995). “While we have
frequently cautioned the district courts against pretrying a case
to determine removal jurisdiction, we have also endorsed a summary
judgment-like procedure for disposing of fraudulent joinder
claims.” Carriere v. Sears, Roebuck & Co., 893 F.2d 98, 100 (5th
Cir.), cert. denied, 498 U.S. 817 (1990).
The defendants concede that the district court did not pierce
the pleadings and consider summary judgment-type evidence, thereby
limiting this court’s inquiry to the pleadings. In order to find
fraudulent joinder, we must determine, assuming all the facts set
forth by the plaintiff are true, that there can be no recovery as
a matter of law. B., Inc., 663 F.2d at 551.
5 The first step in determining whether a party has been
fraudulently joined is determining the relevant state law. Brewer
believes he has two viable claims against Peel and Caraway. The
first cause of action is based on Peel and Caraway’s alleged
misrepresentations to EISD and June Brewer; the second is premised
on alleged omissions by Peel and Caraway.
There was, at the time of removal, at least a possibility
under Texas law that a state court would find a cause of action
against an agent of an insurance company for misrepresentations
made in the course of his agency. A number of courts have
recognized a cause of action against an insurance agent for
misrepresentations, implicitly overruling Hodges v. Casey, 646
S.W.2d 175 (Tex. 1983). See Light v. Wilson, 663 S.W.2d 813, 815
(Tex. 1983) (Spears, J., concurring); State Farm Fire & Casualty
Co. v. Gros, 818 S.W.2d 908, 913 (Tex. App.SSAustin 1991, no writ);
East Texas Mack, 819 F.2d at 119. Even if Hodges is still good
law, the uncertainty in the law created by Light and subsequent
cases should be resolved in favor of the plaintiff for purposes of
determining fraudulent joinder. East Texas Mack, 819 F.2d at 119.
Taking the factual allegations of the petition to be true,
Brewer has stated a cause of action for misrepresentation. Brewer
consistently alleges that UNUM, Peel, and Caraway made material
misrepresentations to EISD and June. The petition contains
allegations that UNUM, Peel, and Caraway affirmatively represented
6 that “all employees who were eligible to participate in EISD’s
previous life insurance plan could participate in the UNUM plan,”
“that persons who had previously participated in EISD’s employee
benefit plans would not be subject to a ‘waiting period’ before
becoming eligible to participate in the plan,” and “that UNUM would
provide EISD with ‘readable’ certificates of insurance which would
clearly communicate to EISD’s employees the most important terms
and conditions of UNUM’s life insurance plan.” Each of these
allegations, when taken as true, could provide inferences that Peel
and Caraway misrepresented the policy coverage to EISD and June.
See Burton v. State Farm Mut. Auto. Ins. Co., 869 F. Supp. 480, 486
(S.D. Tex. 1994) (opining that misrepresenting policy coverage
states a cause of action under Texas law), aff’d, 66 F.3d 319 (5th
Cir. 1995).
UNUM asserts an alternative ground for affirming the district
court: that federal question jurisdiction exists because the state
law claim turns on a construction of ERISA. A determination that
federal question jurisdiction exists depends upon the allegations
of the well-pleaded complaint. Louisville & N.R.R. v. Mottley, 211
U.S. 149 (1908). Under § 1331, a suit arises under federal law if
there appears on the face of the complaint some substantial,
disputed question of federal law. Franchise Tax Bd. v. Construc-
tion Laborers Vacation Trust, 463 U.S. 1, 12 (1983); Carpenter v.
Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 366 (5th Cir. 1995).
7 UNUM has failed to demonstrate federal question jurisdiction.
When UNUM pressed its claim, it did not argue that ERISA preempts
the cause of action but expressly disavowed preemption as a basis
for jurisdiction. UNUM’s argument was that federal law constituted
a substantial portion of the claim because the misrepresentation
claim relies on the assertion that UNUM’s policy and certificate
did not conform, as promised, to the requirements of ERISA.
UNUM’s case for jurisdiction is analogous to the one rejected
in Willy v. Coastal Corp., 855 F.2d 1160 (5th Cir. 1988), aff’d,
503 U.S. 131 (1992). The plaintiff in Willy filed a state law
wrongful discharge claim alleging that he was fired for refusing to
violate federal and state law on behalf of his employer. The
federal statute provided a private cause of action but did not
preempt the state law claim. The defendant removed, and the
district court found that a federal question was presented on the
face of the petition.
The Willy court reversed. The court identified three cases
where federal question jurisdiction could exist. The first is
where federal law creates the cause of action. Id. at 1167. The
second is where the state law claim is completely preempted by
federal law. Id. at 1165. The third is where a feature of the
plaintiff’s claim raises a substantial issue of federal law. Id.
at 1168. The court noted that this ground for federal jurisdiction
is limited by the requirement that the federal law provide a
8 private remedy before it can be a basis for federal jurisdiction.
Id. at 1168 (citing Merrell Dow Pharmaceuticals, Inc. v. Thompson,
478 U.S. 804 (1986)).
Turning to the complaint, the Willy court noted that despite
the fact that the state law claim depended on the application of a
federal statute, federal question jurisdiction was lacking.
Assuming arguendo that the existence of a federal remedy in the
statute met the requirements of Merrell Dow, the court found that
the federal element was not substantial enough to confer federal
question jurisdiction. Willy, 855 F.2d at 1169. The court based
its decision on the fact that the state law claim was based on more
than one theory, and the federal statute was implicated in only one
of the theories. Id. at 1170-71 (citing Christianson v. Cold
Indus. Operating Corp., 486 U.S. 800 (1988)).
The petition in this case suffers from the same defect as did
the complaint in Wiley. The causes of action in the petition are
not based upon a cause of action created by federal law, and the
defendant has disavowed any preemption argument. With regard to
the third ground for federal jurisdiction, the federal element of
Brewer’s cause of action is not substantial. The misrepresentation
claim is based upon a number of theories, only one of which
implicates ERISA. Willy, 855 F.2d at 1170-71. Even the ERISA
issues are not at the forefront of that one theory; the claim is in
essence one under state law. Id. at 1171.
9 III.
Brewer asks, in the event of a remand, that we award costs and
attorneys’ fees under 28 U.S.C. § 1447(c) (1995).2 We leave
consideration of the issue to the district court. See Carpenter,
44 F.3d at 372 n.14 (“The decision whether to allow the recovery of
costs is committed to the discretion of the district court upon its
order to remand the case to state court. Because the district
court has evidently not yet addressed this issue, we prefer to
leave it for consideration by the district court in the first
instance on remand.”) (citation omitted). The district court is in
a better position to determine whether fees and costs should be
awarded. Id.; Miranti v. Lee, 3 F.3d 925, 928-29 (5th Cir. 1993)
(discussing the standards to be applied in determining whether to
award costs and fees). An important factor is the defendants’
decision to remove. Id. at 928. Here, Brewer has not developed a
theory as to why it was improper for the defendants to remove.
Absent such arguments, this court is not in a position to determine
whether fees should be awarded.
For the foregoing reasons, the judgment is REVERSED in part,
VACATED in part, and REMANDED for consideration of attorneys’ fees
2 28 U.S.C. § 1447(c) provides in pertinent part:
If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded. An order remanding the case may require payment of just costs and any actual expenses, including attorney fees, incurred as a result of the removal.
10 and costs under 28 U.S.C. § 1447(c).