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April 16, 2003


The opinion of the court was delivered by: VICTOR Marrero, United States District Judge


Atlantis Health Plan, Inc. ("Atlantis") commenced a civil action in the Supreme Court of New York, County of New York, alleging breach of contract, breach of fiduciary duty, wrongful convergence, and negligence. Atlantis seeks relief in the form of $1,000,000 in insurance premiums it alleges was received by defendants, Local 713, International Brotherhood of Trade Unions ("I.B.O.T.U." or "Local 713"), U.S. Group Medical Administrators, Inc. ("USGMA") and U.S. Group Coverages, Inc. ("USGC") (collectively, "Defendants"), and improperly withheld from Atlantis. Defendants removed the case to federal court, invoking the Court's original jurisdiction under the Employee Retirement Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001-1461. Atlantis filed the instant motion seeking to remand the case to state court and for an award of attorney's fees and costs. For the reasons set forth below, Atlantis's motion is GRANTED in part and DENIED in part.


Judicial rulings serve the law as countless specks of light, each small in a universe, each lending its point to a whole. Combined, the candlepower of the myriad decisions that comprise our jurisprudence shed their wisdom and guidance on our lives and times, generally illuminating clearly-defined paths of social and legal rules, and informing as to what is and is not conforming behavior under recognized norms. However, occasional dark or opaque spots do appear in discrete corners of the law. By sheer density of the subject or accreted complexity over time, these occult spaces seem to resist elucidation and defy explication even by the most discerning jurists and scholars. The rule against perpetuities and the rule in Shelly's case come to mind as two blurry points from the distant past that we still hold in awe and respect for their lasting power to mystify, symbols of enduring perplexity as much to first year law students as to the seasoned judge.

In our time, ERISA, as the issues now before the Court illustrate, has, in the relatively brief period of its existence, come to earn the distinction as our modern contender for high rank in the law's order of obscurity. As one court perceived it, and styled in one of the many other metaphors the statute has inspired to portray its formidable labyrinths, ERISA is "a veritable Sargasso Sea of obfuscation." Travelers Ins. Co. v. Cuomo, 14 F.3d 708, 717 (2d Cir. 1993), rev'd sub nom., Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995). Indeed, the Supreme Court itself, laboring through an interpretation of the statute, took the occasion to comment on the "unhelpful text and the frustrating difficulty of defining its key term. . . ." Travelers, 514 U.S. at 656; see also Toumajian v. Frailey, 135 F.3d 648, 650 (9th Cir. 1998).*fn2 Undaunted, this Court now offers a contribution to this debate, even if its flicker may be likened to striking yet another match in a black hole, if nothing else, for the value that the instant its time and spark exists may serve in guiding the next bearer of the torch.

Atlantis is a health maintenance organization ("HMO") that contracted with Local 713, a labor organization, in around June of 2001 to provide group medical insurance to the members of Local 713. Pursuant to an agreement with Atlantis (the "Group Remittance Agreement"), USGMA*fn3 acted as a broker in effectuating group medical coverage provided by Atlantis for the benefit of Local 713 members and collected premiums from Local 713, which were then to be paid to Atlantis.

Atlantis commenced this action on August 21, 2002 in New York Supreme Court, New York County, alleging that Defendants failed to remit payment of approximately $1,000,000 in premiums to Atlantis in breach of the Group Remittance Agreement. Defendants removed the action to this Court on October 16, 2002, claiming that federal original jurisdiction over the matter exists under ERISA. USGMA filed an answer and counterclaims on October 31, 2002, and Local 713 filed its answer and counterclaims on November 1, 2002.

USGMA and Local 713 argue that this case is properly before the Court because Atlantis's state claims are preempted by ERISA. Atlantis counters that no ERISA claim appears on the face of the complaint and that complete ERISA preemption does not apply in this case. Therefore, Atlantis asserts that this case should be remanded to state court and that Defendants should be ordered to pay Atlantis's attorneys fees and costs incurred as a result of the allegedly improper removal.



It is well settled that a case may not be removed to federal court on the basis of a federal defense, even the defense of preemption, relying on what is labeled as the "well-pleaded complaint rule," and even if the defense is anticipated in the complaint and thus the federal defense is the only question at issue on removal. See Caterpillar Inc. v. Williams, 482 U.S. 386, 392-393 (1987) (noting that under the well-pleaded complaint rule, "federal jurisdiction exists only when a federal question is presented on the face of plaintiff's properly pleaded complaint."); Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for So. Cal., 463 U.S. 1, 12 (1983). Therefore, "[o]rdinarily, a claim of preemption is a defense to be raised in the defendant's answer, and thus cannot support jurisdiction under 28 U.S.C. § 1331 because it would not appear on the face of a well-pleaded complaint." Plumbing Industry Bd., Plumbing Local Union No. 1 v. E.W. Howell Co., Inc., 126 F.3d 61, 66 (2d Cir. 1997) (citing Louisville & N.R. Co. v. Mottley, 211 U.S. 149, 154 (1908); Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987)).

However, a plaintiff cannot, by deliberate drafting craft and wiles designed to avoid the effect of preemption, conceal the federal aspect of a cause of action by pleading only state claims, thereby defeating removal and depriving defendant of a proper federal forum. See Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 475 (1998); Funeral Financial Systems, Ltd. v. Solex Express, Inc., No. 01 Civ. 6079, 2002 WL 598530, at *4 (E.D.N.Y. April 11, 2002) ("[A] federal claim may not be brought in state court, disguised in the clothing of a state claim, merely for the purpose of bringing it in that forum.") To address this potential abuse, an exception to the well-pleaded complaint rule exists when Congress mandates "complete preemption" in a specific area of law, such as is the case with regard to ERISA preemption. "Any civil complaint raising a state law claim in [a preempted] area of law is of necessity so federal in character that it arises under federal law for purposes of 28 U.S.C. § 1331 and permits removal to federal court under 28 U.S.C. § 1441." Howell, 126 F.3d at 66; accord Taylor, 481 U.S. at 63-67.

Deciphering the mysteries surrounding the circumstances under which ERISA works to supersede a conflicting state statute or common law claim has become a task demanding nothing less than oracular power. It is at this intersection, where ERISA preemption, original federal question jurisdiction under 28 U.S.C. § 1331 and removal procedure pursuant to 28 U.S.C. § 1441 converge, that confusion really becomes confounded. In brief, based on the principle of complete preemption, ERISA provides a valid basis for removal if two conditions are met: (1) the state law cause of action is preempted by ERISA, and (2) that cause of action is "within the scope" of the civil enforcement provisions of ERISA § 502(a), 29 U.S.C. § 1132(a). Taylor, 481 U.S. at 64-66; Howell, 126 F.3d at 66; Greenblatt v. Delta Plumbing & Heating Corp., 68 F.3d 561, 573 (2d Cir. 1995).

In this case, the face of Atlantis's complaint does not include an ERISA claim: it does not explicitly invoke any provision of ERISA, nor does it seek payment of benefits, clarification of rights or enforcement of any particular term of a specific employee welfare plan under or encompassed by ERISA. In consequence, on its face, the complaint appears pleaded entirely under state common law. Therefore, since the parties are not diverse, for original jurisdiction to exist in this Court, the complete preemption doctrine must apply. Accordingly, ...

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