MICHEL v. UNITED HEALTHCARE OF LOUISIANA, INC., (E.D.La. 2003)

MARCEL LIVAUDAIS, Jr., United States District Judge.

plaintiff Glenn R. Michel's ("Michel") motion to remand is before the court. Rec. Doc. No. 2. Defendants jointly oppose the motion. The matter was submitted on the briefs on April 2, 2003. For the reasons that follow, Michel's motion to remand is granted.

Michel is on disability retirement from his former job as a police officer for the City of Gretna. During his employment, Michel participated in the health benefit plan established by Gretna for its employees. He continued to participate in the plan after his retirement. Michel filed suit against the defendants in state court alleging various discrimination claims related to the administration of his plan. Defendants removed the lawsuit to federal court claiming federal subject matter jurisdiction because the plan at issue is subject to the Employee Retirement Income Security Act (ERISA).

Removal jurisdiction must be strictly construed because federal courts are courts of limited jurisdiction, and because removal of a case implicates significant federalism concerns. Carpenter v. Wichita Falls Independent School District, 44 F.3d 362, 365 (5th Cir. 1995) (citations omitted). The rule is well settled that party invoking federal subject matter jurisdiction bears the burden of establishing that jurisdiction.Marathon Oil Company v. Ruhrgas, 145 F.3d 211, 216 (5th Cir. 1998) ( en banc), citing 13 CHARLES A. WRIGHT, ARTHUR R. MILLER EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE § 3522 at 61-62 (2nd ed. 1984)

Federal district court derives its jurisdiction solely from the authority of Congress, which "may give, withhold or restrict such jurisdiction at its discretion, provided it be not extended beyond the boundaries fixed by the Constitution." Marathon Oil Company, 145 F.3d at 215, quoting Kline v. Burke Constr. Co., 260 U.S. 226, 234, 43 S.Ct. 79, 82, 67 L.Ed. 226 (1922). Thus, the Constitution leaves to Congress the policy choice concerning the extent of that jurisdiction. Id.

Michel argues that remand is appropriate because the benefit plan at issue is exempt from ERISA pursuant to 29 U.S.C. § 1003 (b)(1), which expressly excludes government plans from the provisions of ERISA. Defendants do not dispute that the City of Gretna is a local governmental entity as contemplated by 29 U.S.C. § 1003 (b)(1); that the plan at issue is a "governmental plan" as defined at 29 U.S.C. § 1002 (32) and therefore initially exempt from federal jurisdiction under ERISA; nor that the plan at issue is a "welfare benefit plan" as defined at 29 U.S.C. § 1002 (1). The crux of the argument is that Gretna could and did "opt out" of the general statutory exemption of governmental plans because nothing in the statute precludes a governmental entity from voluntarily establishing an ERISA health benefit plan for its employees.

The sole issue before the court is whether a governmental entity whose employee welfare benefit plan is included within the scope of the statutory exemption from ERISA regulation voluntarily submits itself to federal jurisdiction pursuant to ERISA when it purchases a "private" welfare benefit insurance plan for its employees.

Defendants cite Livolsi v. City of New Castle, Pennsylvania, 501 F. Supp. 1146 (W.D. Pa. 1980) in support of the argument. Livolsi is factually distinguishable from this case. In Livolsi, the trustees of an employee welfare benefit fund brought suit in federal court against the city and its sanitation authority arising out of the defendant's alleged failure to file monthly reports listing all employees eligible for fund benefits. Id. at 1148. The fund at issue was a multi-employer welfare fund to which both public and private employers agreed to contribute. The plaintiffs alleged that as a result of defendants' failure to fulfill their contractual obligation, the fund paid out monies to ineligible beneficiaries. Id. In their motion to dismiss for lack of subject matter jurisdiction, defendants argued that the exercise of federal jurisdiction pursuant to ERISA would violate the principal of local sovereignty and autonomy, citing National League of Cities v. Usery, 426 U.S. 833, 96, S.Ct. 2465, 49 L.Ed.2d 245 (1976). Id. at 1150. The district court disagreed, distinguishing Usery because that case involved a constitutional challenge to the extension, under the Fair Labor Standards Act, of mandatory wage and hour provisions to virtually all employees of states and their political subdivisions. Id. The district court reasoned that the element of compulsion that marked the Usery case was not present in Livolsi because ERISA does not contemplate federal regulation of state and local governments, but, on the contrary, expressly exempts plans operated by state and local governments from its regulation. Id. Without any further analysis or citation to any other case law, the district court concluded that "when a state or local government body chooses a private welfare benefit plan for its employees, it will subject itself to federal jurisdiction under ERISA." Id. at 1150.

Defendants also point to the language of the plan at issue in support of their argument that the City of Gretna clearly chose to provide its employees with a health benefit plan governed by ERISA. The United Healthcare Choice Group Policy for City of Gretna, Group Number: 14683, Master Group Policy at p. 1 (Exhibit "A", Opposition), and the Certificate of Coverage (Open Access Plans) at p. 1 (Exhibit "B", Opposition) state as follows: "This Policy is delivered in the State of Louisiana and is governed by ERISA. To the extent that state law applies, the Policy will be governed by the laws of the State of Louisiana." Both documents include various other references to ERISA.

This court found no circuit court decisions precisely addressing the issue before this court. Most cases turn on the question of what is a governmental plan, not whether a governmental plan may "opt in" to federal ERISA jurisdiction. The Ninth Circuit addressed that issue inSilvera v. Mutual Life Ins. Co. Of New York, 884 F.2d 423 (9th Cir. 1989), where the parties were in the same posture on removal as in this case. The court carefully and thoroughly analyzed whether the benefit plan at issue, which had been purchased by a city for its employees, was a governmental plan. Id. at pp. 425-26. Upon determining that it was, the court held that where a governmental entity purchased a plan on behalf of governmental employees, the governmental entity "simply delegated a task it otherwise would have undertaken had it chosen to set up a self-funded plan." Id. at 427. Because the private provider simply "stepped into the employer's shoes and, for a fee, assisted in the employer's task", the plan was still a governmental plan exempt from ERISA.

Several district court cases are more on point. Krystyniak v. Lake Zurich Com. Unit Dist. No. 95, 783 F. Supp. 354 (N.D.Ill. 1991), is directly on point, although the posture of the litigants is reversed. Krystyniak, a school district employee, sought coverage under her employee health plan for breast cancer treatment. She filed a complaint in federal court purporting to state a claim for benefits pursuant to ERISA. Id. The only issue before the court was whether it had subject matter jurisdiction. Plaintiff argued that the health plan at issue had waived the statutory exemption and was an ERISA plan because a provision in the Plan designated a fiduciary for the purposes of ERISA. Id. At 355. The district court disagreed, observing that the plain language of the statute exempts governmental plans, and that "[n]othing in the legislative history suggests that Congress intended to permit governmental employers to `opt in' to ERISA." Id. at 356.

Hall v. Maine Municipal Employees Health Trust, 93 F. Supp.2d 73 (D. Maine 2000), and Fienstein v. Lewis, 477 F. Supp. 1256 (S.D.N.Y. 1979), aff'd in unpublished opinion, 622 F.2d 573 (2nd Cir. 1980), addressed the issue two decades apart. In each case, the trustees of the welfare benefit plan at issue complied with the regulatory and reporting requirements of ERISA for several years rather than complying with applicable state laws. The determinative question before the court in both cases was whether the plan was a governmental plan exempt from ERISA. TheFienstein case was originally brought in federal court and the jurisdictional issue was considered on a defense motion to dismiss. TheHall case was in federal court on removal from state court, and the issue was considered on plaintiff's motion to remand.

In each case the court found that the plan was in fact a governmental plan, therefore exempt from ERISA in spite of the trustees' obvious attempts to submit to ERISA jurisdiction. The Fienstein court looked to the language of the statute itself, and the legislative history. The Court concluded that had Congress intended that states and political subdivisions be covered, it could have expressly included them in the definition of "employer", but did not do so. Id. at 1262, citing Crilly v. Southeastern Pennsylvania Transportation Authority, 529 F.2d 1355, 1362 (3rd Cir. 1976) and 29 U.S.C. § 1002 (5). According to the court in Hall, Congress enacted ERISA "to curb abuses in the administration of private employee welfare and pension plans, [and] excluded governmental plans because it apparently thought that regulating the plans that state and local governments offered their employees would raise federalism concerns." Id., citing Fienstein, 477 F.2d at 1260-61. The court observed that clearly, the plan at issue desired to be an ERISA plan, and had complied with ERISA reporting requirements for years, but that "desire and compliance do not an ERISA plan make. A benefit plan does not choose whether to opt in or opt out of ERISA." Hall, 93 F. Supp.2d at 75.

The court finds the reasoning in these cases persuasive. Congress deliberately excluded governmental plans from the broad sweep of ERISA preemption of state laws, which extends to state common-law causes of action as well as state regulatory laws. Silvera, 884 F.2d at 425, citing Pilot Life Ins. Co. v. Dedeaux, 841 U.S. 41, 45-46, 107 S.Ct. 1549, 1551-52, 95 L.Ed.2d 39 (1987) and Scott v. Gulf Oil Corp., 754 F.2d 1499, 1502 (9th Cir. 1985) The exclusion is based on concerns of federalism. Fienstein, 477 F. Supp. at 1261. Moreover, as to the fundamental nature of federal subject matter jurisdiction, quoting Wright, et al, Federal Practice and Procedure, the Fifth Circuit has instructed the district courts as follows:

"The general rule is that the parties cannot confer on a federal court jurisdiction that has not been vested in that court by the Constitution and Congress. This means that the parties cannot waive lack of [subject matter] jurisdiction by express consent, or by conduct, or even by estoppel; the subject matter jurisdiction of the federal courts is too basic a concern to the judicial system to be left to the whims and tactical concerns of the litigants." 13 WRIGHT ET AL., supra, § 3522, at 66-68 (citations omitted); see, e.g., Insurance Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702, 102 S.Ct. 2099, 2104, 72 L.Ed.2d 492 (1982).

Accordingly,

IT IS ORDERED that plaintiff Glen R. Michel's motion to remand be and is hereby GRANTED; and,

IT IS FURTHER ORDERED that this matter be and is hereby REMANDED to Civil District Court for Orleans Parish, each party to bear its own costs.