[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT ________________________ FILED U.S. COURT OF APPEALS No. 97-6536 ELEVENTH CIRCUIT ________________________ 05/10/99 THOMAS K. KAHN D. C. Docket No. CV 97-L-328-S CLERK
ANNETTE BUTERO, SIMPLY FASHION STORES INC., et al.,
Plaintiffs-Appellants,
versus
ROYAL MACCABEES LIFE INSURANCE COMPANY, a corporation, ANITA LAWSON,
Defendants-Appellees.
________________________
Appeal from the United States District Court for the Northern District of Alabama _________________________ (May 10, 1999)
Before COX and BIRCH, Circuit Judges and GODBOLD, Senior Circuit Judge.
COX, Circuit Judge: Annette Butero, Simply Fashion Stores, Ltd., and its general partner Simply
Fashion Stores, Inc. appeal two district court orders: one refusing to remand to state
court their claims against Royal Maccabees Life Insurance Company and its employee
Anita Lawson, and another dismissing their complaint in its entirety. We affirm.
I. BACKGROUND
Simply Fashion provides its employees a cafeteria plan that makes available
health, life, and long-term disability insurance, as well as a 401(k) retirement savings
plan. In early 1996, Simply Fashion learned that its life-insurance carrier would
cancel the group policy that Simply Fashion offered to its employees. Simply
Fashion’s human resource director met with an independent insurance agent, who
notified Simply Fashion that Royal Maccabees would provide Simply Fashion a
replacement policy at the same premium as the prior insurer. According to the agent,
the replacement policy would have a portability feature.
Based on this information, Simply Fashion issued a memorandum to its full-
time employees. The memo announced that “our life insurance coverage” would be
provided by a new carrier starting on a certain date, and that employees insured by the
old carrier would be automatically “enrolled.” (Supp. R.-25 Ex. 6.) Employees would
pay the entire premium by payroll deduction, as they had in the past. Full-time
employees with 90 days’ tenure who were not enrolled under the old policy were
2 invited to enroll. The attached “Special Open Enrollment” form under the “Simply
Fashion Stores, Ltd. Cafeteria Plan” required employees to acknowledge that they had
received a “Summary Plan Description.” (Id.) That summary plan description, also
attached to the memo, identified the benefits provided under the life-insurance policy
($50,000) and who was eligible (full-time employees with 90 days’ tenure). The
enrollment form also warned employees that “[t]he Plan Administrator may reduce or
cancel my compensation reduction or otherwise modify this agreement in the event
he believes it advisable in order to satisfy certain provisions of the Internal Revenue
Code.” (Id. Ex. 5.) The form contained a signature space at the bottom to indicate
that the enrollment was “[a]ccepted and agreed to by the Company’s Authorized
Representative.” (Id.)
As it turned out, Royal Maccabees would not provide a portable policy to
Simply Fashion at the same premium as the old policy. Despite its representations to
its employees, Simply Fashion opted for a cheaper, nonportable policy. Although,
according to the insurance agent and the Complaint, “other insurance companies
offering coverage could have been purchased by Simply Fashions,” (Supp. R.-25 Ex.
4), Simply Fashion stayed with Royal Maccabees.
The Royal Maccabees policy that Simply Fashion procured was one that was
issued to Simply Fashion, and not to Simply Fashion’s employees. Royal Maccabees
3 advised Simply Fashion on administration of the policy and on premium billing.
Simply Fashion was also responsible for providing Royal Maccabees with
documentation supporting a claim. Simply Fashion began collecting premiums from
its employees, and it remitted two premium checks to Royal Maccabees.
After the policy’s putative effective date, Royal Maccabees asked Simply
Fashion to provide a “statement from the company that there had been no deaths or
disabilities since the effective date.” (Supp. R.-25 Ex. 4.) Over a month later, Simply
Fashion did so, after a fashion: it informed Royal Maccabees that from the effective
date of the policy to the day before the letter’s date, “we have had no death claims.”
(Id. Ex. 7.) The letter said nothing about disability. This omission was arguably
important, because a month earlier one of Simply Fashion’s warehouse managers,
Benedict Butero, had taken leave due to a severe illness. Butero had been
automatically enrolled for the insurance because he had elected to purchase the life
insurance that Simply Fashion had previously offered. The day after Simply Fashion
informed Royal Maccabees that there were no outstanding death claims, Butero died.
The day Butero died, Royal Maccabees sent Simply Fashion a letter stating that
Royal Maccabees was “declin[ing] your request for coverage” and that “[n]o contract
of insurance exists.” (Supp. R.-25 Ex. 8.) The letter was accompanied by a check
reimbursing Simply Fashion for the paid premiums. The letter did not explain why
4 Royal Maccabees rejected the policy application, although Royal Maccabees now
argues that it was because Simply Fashion provided no information about disabled
employees.
A few days later, Annette Butero, Benedict’s wife, made a claim for benefits
through Simply Fashion. The claim was denied. This lawsuit followed.
Butero, joined by Simply Fashion, sued in state court, naming as defendants
Royal Maccabees, its employee Anita Lawson, and the independent insurance agent.
The complaint — a classic “shotgun” pleading — joins every defendant in every
count, and it seeks unspecified compensatory damages for breach of contract, bad
faith refusal to pay, and fraud in the inducement; it also includes three counts alleging
fraud that are apparently duplicative. The defendants removed the action to federal
court, asserting that the insurance policy was part of a plan governed by the Employee
Retirement Income Security Act of 1974.
The plaintiffs then moved to remand, arguing that the insurance policy was not
part of an ERISA plan, and in the alternative that the claims against the insurance
agent were not preempted by ERISA. The court apparently rejected the first
argument, but agreed with the second: the claims against the independent insurance
agent were severed and remanded. The court otherwise denied the motion to remand.
5 The remaining defendants, Royal Maccabees and Anita Lawson, then moved
to strike the plaintiffs’ state-law claims. Royal Maccabees argued that ERISA
governed the insurance policy, and that all the remaining state-law claims were
preempted. The district court agreed. It issued a one-page order dismissing the
complaint without prejudice to the right to refile a complaint stating claims under
ERISA.
The plaintiffs appeal and challenge the district court’s orders on two grounds.
First, they argue that the insurance policy is not part of an ERISA plan because it is
anchored in a regulatory safe harbor from ERISA for certain “group or group-type
insurance program[s].” 29 C.F.R. § 2510.3-1(j). Second, they contend that even if
the policy is part of an ERISA plan, their causes of action are not preempted under the
principles enunciated in Morstein v. National Ins. Servs., Inc., 93 F.3d 715, 722 (11th
Cir. 1996) (en banc). We review de novo both the denial of the motion to remand and
the dismissal. See Whitt v. Sherman Int’l Corp., 147 F.3d 1325, 1329 (11th Cir.
1998); Hall v. Blue Cross/Blue Shield, 134 F.3d 1063, 1064-65 (11th Cir. 1998).
II. DISCUSSION
Reviewing the two district court orders at issue here requires juggling two
different kinds of ERISA preemption. The first kind is what this circuit has called
complete preemption or “super preemption.” Whitt v. Sherman Int’l Corp., 147 F.3d
6 1325, 1329 (11th Cir. 1998). Superpreemption arises from Congress’s creation of a
comprehensive remedial scheme in 29 U.S.C. § 1132 for loss or denial of employee
benefits. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S. Ct.
1542, 1546 (1987). When Congress comprehensively occupies a field of law, “any
civil complaint raising this select group of claims is necessarily federal in character”
and thus furnishes subject-matter jurisdiction under 28 U.S.C. § 1331. Id. Therefore,
federal courts have subject-matter jurisdiction over state-law claims that have been
superpreempted, and defendants may remove to federal court those actions that
contain such claims. See id. There being no other basis for subject-matter jurisdiction
here, whether the district court properly denied the motion to remand for lack of
removal jurisdiction thus turns on whether some or all of the state-law claims are
superpreempted.
The second kind of preemption we will call “defensive.” It originates in
ERISA’s express preemption provision, 29 U.S.C. § 1144(a).1 Defensive preemption
provides only an affirmative defense to certain state-law claims. See id. As an
affirmative defense, defensive preemption does not furnish federal subject-matter
jurisdiction under 28 U.S.C. § 1331; “a cause of action arises under federal law only
1 “[T]he provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.” 29 U.S.C. § 1144(a).
7 when the plaintiff’s well-pleaded complaint raises issues of federal law.” Id. at 63,
107 S. Ct. at 1546. On the other hand, defensive preemption does require dismissal
of state-law claims. See id. Reviewing the district court’s dismissal of the complaint
therefore raises only the question of whether the state-law claims were subject to
defensive preemption.
We start with the superpreemption issue because, for the reasons explained
above, it ultimately decides the existence of federal subject-matter jurisdiction. As it
turns out, some claims are superpreempted, and others are not. Here’s the rule:
ERISA superpreemption exists only when the “plaintiff is seeking relief that is
available under 29 U.S.C. § 1132(a).” Whitt, 147 F.3d at 1330. Regardless of the
merits of the plaintiff’s actual claims (recast as ERISA claims), relief is available, and
there is complete preemption, when four elements are satisfied. First, there must be
a relevant ERISA plan. See id.; Kemp v. International Business Machs. Corp., 109
F.3d 708, 713 (11th Cir. 1997). Second, the plaintiff must have standing to sue under
that plan. See Engelhardt v. Paul Revere Life Ins. Co., 139 F.3d 1346, 1350 n.3 (11th
Cir. 1998). Third, the defendant must be an ERISA entity. See id.; Franklin v. QHG
of Gadsden, Inc., 127 F.3d 1024, 1029 (11th Cir. 1997); see also Morstein v. National
Ins. Servs., Inc., 93 F.3d 715, 722 (11th Cir. 1996) (en banc) (no preemption at all —
not even defensive preemption — when the defendant is “a non-ERISA entity” and
8 the claims do not “affect relations among principal ERISA entities as such”). Finally,
the complaint must seek compensatory relief akin to that available under § 1132(a);
often this will be a claim for benefits due under a plan. See Engelhardt, 139 F.3d at
1354; Franklin, 127 F.3d at 1029.
The claims in this complaint that are not superpreempted are those brought by
Simply Fashion. The second element, standing to sue under ERISA, is missing:
Simply Fashion’s role on ERISA’s stage is “employer.” See 29 U.S.C. § 1002(5).
Section 1132(a) grants employers no cause of action for damages. See 29 U.S.C. §
1132(a). Simply Fashion thus has no standing to assert a statutory cause of action.
See Engelhardt, 139 F.3d at 1351. Hence, Simply Fashion’s claims are not
Butero’s claims, on the other hand, are superpreempted. To begin with, the
second, third, and fourth elements are plainly present. First, if the life insurance
policy is part of an ERISA plan (more on that below), then she is a potential
beneficiary. See 29 U.S.C. § 1002(8) (“‘[B]eneficiary’ means a person designated by
a participant . . . who is or may become entitled to a benefit thereunder.”). She thus
has standing to assert a variety of claims under § 1132(a). See 29 U.S.C. § 1132(a)(1),
(2), (3), (4); Engelhardt, 139 F.2d at 1351. Second, if we have an ERISA plan, Royal
9 Maccabees2 is an ERISA entity. It could “control . . . the payment of benefits” and the
“determination of [Butero’s] rights” under any plan we may have here.3 Morstein, 93
F.3d at 723. Third, the damages apparently sought here are available under § 1132:
we have held that claims against an insurer for fraud and fraud in the inducement to
purchase a policy are in essence claims “to recover benefits due to [the beneficiary]
under the terms of the plan.” 29 U.S.C. § 1132(a)(1)(B); see Engelhardt, 139 F.3d at
1353 (fraud in the inducement is claim for benefits under § 1132(a)(1)); Franklin, 127
F.3d at 1029 (claim based on alleged misrepresentation that certain coverage would
exist is claim for benefits). And the claims here of bad faith refusal to pay and breach
of contract both pursue the same relief as the fraud claims — payment of the life
2 As we mentioned earlier, the plaintiffs sued both Royal Maccabees and one of its employees, Anita Lawson. Arguably, the claims against Anita Lawson would not be superpreempted because of element three of our four-part test: Lawson is probably not an ERISA entity. We have found no authority on this precise question, and the parties have cited none — the parties in fact ignore that Lawson has been sued at all. (There are cases concerning independent insurance agents, but not mere employees of insurance companies.) But we decline to hold that claims against an ERISA entity’s employee escape the preemption that would doom state-law claims against the entity itself. Such a holding would reduce all of ERISA’s preemptive scope to nothing but a trap for an artless pleader. 3 We note that Franklin suggests in dicta (since the issue was not before it) that an insurance company allegedly obligated to pay benefits under a plan is not considered an ERISA entity if the complaint alleges pre-policy fraud. See Franklin, 127 F.3d at 1029. No one has argued that this dictum governs this case, and we doubt that ERISA status can be so cleanly switched on and off. After all, we aren’t here today solely because of any fraud; we’re here because Butero thinks she is due benefits under an ERISA plan. The benefits were denied by the insurer in its status as an ERISA entity.
10 insurance benefit. Cf. Engelhardt, 139 F.3d at 1354. We therefore conclude that all
of Butero’s claims are properly recast as claims for benefits due under any plan.
That leaves only the first element to discuss — whether there is a relevant
ERISA plan. The centerpiece of the plaintiffs’ argument on this point is a regulatory
safe harbor from “plan-ness,” 29 C.F.R. § 2510.3-1(j), and it is there that we start.
The regulation excepts from the definition of “employee welfare benefit plan” certain
“group or group-type insurance program[s]” “offered by an insurer to employees.”
29 C.F.R. § 2510.3-1(j). For the program to qualify for the exception, four elements
must be satisfied:
(1) No contributions are made by an employer or employee organization; (2) Participation [in] the program is completely voluntary for employees ...; (3) The sole functions of the employer . . . with respect to the program are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs and to remit them to the insurer; and (4) The employer . . . receives no consideration in the form of cash or otherwise in connection with the program . . . .
Id. There is no dispute here that elements (1), (2), and (4) are fulfilled. Element (3)
is in dispute, but it is hard to see why. The regulation explicitly obliges the employer
who seeks its safe harbor to refrain from any functions other than permitting the
insurer to publicize the program and collecting premiums. Simply Fashion did a lot
11 more. It picked the insurer;4 it decided on key terms, such as portability and the
amount of coverage; it deemed certain employees ineligible to participate; it
incorporated the policy terms into the self-described summary plan description for its
cafeteria plan; and it retained the power to alter compensation reduction for tax
purposes. So the safe harbor is barred. But that does not necessarily mean that the
insurance policy is part of an ERISA plan. See, e.g., Brundage-Peterson v. Compcare
Health Servs. Ins. Corp., 877 F.2d 509, 511 (7th Cir. 1989). So we turn next to the
high-seas definition of an “employee welfare benefit plan” to see if the insurance
policy here qualifies.
For present purposes, an “employee welfare benefit plan” governed by ERISA
is any (1) “plan, fund or program,” (2) established or maintained (3) by an employer,
(4) to provide beneficiaries (5) death benefits through an insurance policy. 29 U.S.C.
§ 1002(1); see also Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir. 1982) (en
banc) (breaking up the statutory definition into elements). Elements (3), (4) and (5)
are undisputedly satisfied. We conclude that the other two elements are satisfied, as
well.
4 We do not hold here, because the question is not presented, that picking an insurer by itself could move an employer out of the safe harbor.
12 First, we have a “plan.” An ERISA plan exists whenever there are “intended
benefits, intended beneficiaries, a source of financing, and a procedure to apply for
and collect benefits.” Donovan, 688 F.2d at 1372. The intended benefits here were
those paid if an employee dies. The intended beneficiaries were those named by the
employee. Financing was provided by the employee through payroll deductions. And
a “reasonable person” could figure out procedures for receiving benefits (certainly
Butero did here, for Simply Fashion filed an insurance claim on her behalf). See id.
at 1373.
Second, the plan was “established or maintained.” A plan is “established” when
there has been some degree of implementation by the employer going beyond a mere
intent to confer a benefit. See Whitt, 147 F.3d at 1331; Donovan, 688 F.3d at 1373
(“Acts or events that record, exemplify or implement the decision will be direct or
circumstantial evidence that the decision has become reality—e.g., financing or
arranging to finance or fund the intended benefits, establishing a procedure for
disbursing benefits, assuring employees that the plan or program exists—but it is the
reality of a plan . . . and not the decision to extend certain benefits that is
determinative.”). Such implementation happened here. Simply Fashion consulted an
insurance agent, selected the terms of the group policy it wished to purchase for its
employees, completed an application form for the policy, solicited enrollments from
13 its employees, collected money through payroll deductions, and remitted premium
checks to Royal Maccabees. These actions on Simply Fashion’s part take the
implementation of its plan sufficiently beyond that in cases where no establishment
occurred. Compare Whitt, 147 F.3d at 1331 (asserted “plan” was no more than several
draft plans), with Kenney v. Roland Parson Contracting Corp., 28 F.3d 1254, 1258
(D. C. Cir. 1994) (“plan” “established” when employer represented to employees that
contributions were being made to pension fund, and plan documents were prepared,
even though no contributions were ever made).
One might argue, on the other hand, that Royal Maccabees’ retroactive refusal
to issue the policy precludes any plan from being “established.” We reject this
argument for two reasons.5 First, whether a plan is “established” is determined by the
employer’s conduct, not that of any other ERISA entity. The statutory definition
makes it clear that only an employer can establish an “employee welfare benefit plan,”
see 29 U.S.C. § 1002(1), and caselaw glosses on the definition have likewise focused
on the employer’s actions. See Kenney, 28 F.3d at 1258 (describing seven-factor test
5 Our explicit conclusion here was reached implicitly by the panel in Willett v. Blue Cross & Blue Shield, 953 F.2d 1335 (11th Cir. 1992). The Willett plaintiffs were putative beneficiaries of a health insurance policy that the insurer retroactively canceled as of its effective date, thus leaving the plaintiffs uncovered for care they had received during the time the policy had purported to be in effect. The plaintiffs sued the insurer for benefits. Not only did this court not hold that the ineffectiveness of the policy took it outside ERISA; it also held that the plaintiffs had a potential claim against the insurer notwithstanding the cancellation of the policy. See id. at 1342-43.
14 for establishment, including: (1) the employer’s representations in internally
distributed documents; (2) the employer’s oral representations; (3) the employer’s
establishment of a fund to pay benefits; (4) actual payment of benefits; (5) the
employer’s deliberate failure to correct known perceptions of a plan’s existence; (6)
the reasonable understanding of employees; and (7) the employer’s intent); Henglein
v. Informal Plan for Plant Shutdown Benefits for Salaried Employees, 974 F.2d 391,
400 (3d Cir. 1992); see also Donovan, 688 F.3d at 1367. Second, the facts-and-
circumstances standard for whether a plan has been “established” has many factors
other than payment of actual benefits. Thus, the facts that an employer represented
to employees that life insurance was available, took payroll deductions to pay
premiums, in fact paid premiums, and obviously intended for life insurance to take
effect can trump the underwriter’s rejection of an application nearly two months after
coverage putatively began. For these reasons, we conclude that the insurance policy
was part of an “employee welfare benefit plan” governed by ERISA. That means that
we have a relevant ERISA plan, and that all the elements of superpreemption are
satisfied for Butero’s claims.
So we conclude that all of Simply Fashion’s claims escape superpreemption,
while Butero’s claims fall to it. The upshot of this conclusion is that the district court
properly denied the motion to remand. Removal jurisdiction exists over the action by
15 virtue of the superpreemption of Butero’s claims. Because Simply Fashion’s claims
were joined with superpreempted (and therefore removable) claims, furthermore, the
district court could properly retain jurisdiction over them. See 28 U.S.C. § 1441(c);
see In re City of Mobile, 75 F.3d 605, 608 (11th Cir. 1996). The question of the
court’s jurisdiction thus resolved, we turn to whether the district court properly
dismissed the plaintiffs’ claims as defensively preempted.
Defensive preemption defeats claims that seek relief under state-law causes of
action that “relate to” an ERISA plan. 29 U.S.C. § 1144(a); Lordmann Enters. v.
Equicor, Inc., 32 F.3d 1529, 1532 (11th Cir. 1994). It has long been settled that
claims such as Simply Fashion’s “relate to” an ERISA plan. See Pilot Life Ins. Co.
v. Dedeaux, 481 U.S. 41, 47-48, 107 S. Ct. 1549, 1553 (1987) (state-law bad faith,
breach of contract, and fraud claims are all preempted under § 1144(a)). Butero’s
claims are defensively preempted, as well: If the plaintiff’s claims are
superpreempted, then they are also defensively preempted. See McClelland v.
Gronwaldt, 155 F.3d 507, 517 (5th Cir. 1998). The district court thus properly
dismissed both plaintiffs’ claims with leave to refile.
III. CONCLUSION
For the foregoing reasons, we affirm the district court’s orders.
AFFIRMED.
16 17