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Motor Valet, Inc. v. Guardian Life Insurance Company of North America

January 15, 2009

MOTOR VALET, INC. AND DONALD V. PENOYER AS GUARDIAN OF LEVERNE PENOYER, PLAINTIFFS,
v.
GUARDIAN LIFE INSURANCE COMPANY OF NORTH AMERICA, DEFENDANT.



The opinion of the court was delivered by: George H. Lowe, United States Magistrate Judge

ORDER

With the consent of the parties (Dkt. No. 14), this matter was referred to the undersigned by the Honorable Glenn T. Suddaby, United States District Judge, to hear and finally determine Plaintiffs' motion to remand. (Dkt. No. 15.) After an initial review of the parties' papers, I requested oral argument. (Dkt. No. 16.) I heard the parties' arguments on January 9, 2009. After considering the parties' papers and their oral arguments, I find that Plaintiffs' lawsuit is a claim by a plan participant to recover benefits from an employee benefit plan. Therefore, as discussed more fully below, the motion to remand (Dkt. No. 7) is DENIED.

I. FACTUAL AND PROCEDURAL SUMMARY

Donald V. Penoyer is the president, treasurer and sole shareholder of Motor Valet, Inc. (DktNo. 7-3 at ¶ 1.)

In 1979, Motor Valet owned a convenience store/gas station, a restaurant, apartment rental properties, a motor court, a lumber and home center, and a laundromat. (Dkt. No. 7-3 at ¶ 4.) In September 1979, Defendant Guardian Life Insurance of America ("Guardian") issued a Small Group Insurance Policy to Motor Valet and provided Motor Valet with "the materials you will need to administer your plan." (Dkt. Nos. 7-3 at ¶ 2 and 9-3.) In its application for the policy, Motor Valet agreed to pay premiums under the policy and to "make the plan available to all its present and future eligible employees." (Dkt. No. 9-2.) At the time it was issued, the policy covered Donald Penoyer, his father, his brother, and his mother, LaVerne Penoyer. (Dkt. No. 7-3 at ¶ 6.) From 1980 to 1982, employees Paul L. Auringer and Harley L. Durfey, who are not related to the Penoyers, were also covered under the policy. (Dkt. Nos. 9-5, 9-6, 11 at ¶3.)

In 1985, LaVerne Penoyer contracted viral herpes simplex encephalitis, which rendered her completely disabled. She required 24-hour-per-day private duty skilled nursing. (Dkt. No. 7-3 at ¶ 10.)

In December 2007, Guardian informed Donald Penoyer that the insurance policy would be discontinued on April 15, 2008*fn1 . (Dkt. No. 7-3 at ¶ 11.) At the time of the notice of discontinuance, the policy covered Donald Penoyer, his son, and LaVerne Penoyer. (Dkt. No. 7- 3 at ¶ 14.) Motor Valet's business from December 2007 to the present time consists of owning a laundromat and apartment rental properties in Oswego County. (Dkt. No. 7-3 at ¶ 16.)

On April 11, 2008, Motor Valet and Donald Penoyer, acting as the guardian of LaVerne Penoyer, filed suit against Guardian in New York Supreme Court, County of Oswego, seeking a declaratory judgment that the policy remained in full force and effect. (Dkt. No. 1-2.) On May 5, 2008, Guardian removed the case to this Court on the grounds that Plaintiffs' state court complaint is preempted by the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001-1381 ("ERISA"). (Dkt. No. 1.) Plaintiffs now move pursuant to 28 U.S.C. § 1447(c) to remand the action to state court. (Dkt. No. 7.) Guardian opposes the motion. (Dkt. No. 9.) Plaintiffs have filed a reply. (Dkt. No. 11.)

II. LEGAL STANDARD

When a case has been removed to federal court from state court, the case shall be remanded "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c) (2006). When a plaintiff moves to remand based on lack of subject matter jurisdiction, the burden is on the defendant to demonstrate the propriety of removal. Grimo v. Blue Cross/Blue Shield, 34 F.3d 148, 151 (2d Cir. 1994).

III. DISCUSSION

ERISA comprehensively regulates employee welfare benefit plans that provide "medical, surgical or hospital care, or benefits in the event of sickness, accident, disability [or] death ..." 29 U.S.C. § 1002(1)(1999). "Any lawsuit by a plan participant to recover benefits from an employee benefit plan falls under ERISA ... which provides the exclusive cause of action for resolution of such disputes." Owens v. Metro. Life Ins. Co., 865 F. Supp. 100, 102 (N.D.N.Y. 1994). Any claim by a participant to recover benefits under an ERISA-governed plan "is necessarily federal in character" and a case that includes such a claim is preempted and removable to federal court even "though it purports to raise only state law claims." Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 67 (1987).

The issue, then, is whether Plaintiffs' lawsuit is a claim by a plan participant to recover benefits from an employee benefit plan. An "employee benefit plan" is (1) a plan, fund or program; (2) established or maintained; (3) by an employer or by an employee organization, or both; (4) for the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death, unemployment or vacation benefits, apprenticeship or other training programs, day care centers, scholarship funds, prepaid legal services or severance benefits; (5) to participants or their beneficiaries. Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir. 1982)*fn2 .

Plaintiffs argue that (1) Motor Valet is not an "employer" within the meaning of ERISA; (2) there were no "participants" in the program within the meaning of ERISA; and (3) Motor ...


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