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Cotter v. Milly LLC

January 22, 2010


The opinion of the court was delivered by: Paul G. Gardephe, U.S.D.J.


Plaintiff Bruce Cotter filed a verified complaint against Defendant Milly LLC, his former employer, in the Supreme Court of the State of New York, County of New York, on February 12, 2009. (Rosen Decl. Ex. A) The complaint alleges that Defendant breached Cotter's employment contract, violated New York Labor Law, and was unjustly enriched, and seeks damages of approximately $38,000 plus costs, interest and attorneys' fees. (Pltf. Br. at 2)

On May 15, 2009, Milly removed the action to this Court on the basis of federal question jurisdiction, alleging that Cotter's claims relate to or concern claims for benefits under employee benefit plans subject to the Employee Retirement Income Security Act of 1974 ("ERISA"). (Docket No. 1) On May 21, 2009, Cotter filed a motion to remand this action to state court, arguing that Milly's notice of removal was untimely. (Docket No. 4) On June 22, 2009, Milly filed a motion to dismiss, alleging that Cotter's state law claims are either completely preempted by ERISA or fail to state a claim on which relief may be granted under Rule 12(b)(6). (Docket No. 12) For the reasons stated below, Cotter's motion to remand is GRANTED and Milly's motion to dismiss is DENIED as moot.


Federal courts have jurisdiction over civil actions "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. A case arises under federal law where "'a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law.'" Empire Healthchoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 689-90 (2006) (quoting Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 27-28 (1983)).

Under the well-pleaded complaint rule, a plaintiff is "free to avoid federal jurisdiction by pleading only state claims even where a federal claim is also available." Marcus v. AT&T Corp., 138 F.3d 46, 52 (2d Cir. 1998). Plaintiffs are limited only by the artful pleading doctrine -- "an independent corollary of the well-pleaded complaint rule" -- which prevents a plaintiff from defeating federal jurisdiction by "omitting to plead necessary federal questions in a complaint." Franchise Tax Bd. of Cal., 463 U.S. at 22. Federal jurisdiction may not be premised on the assertion of a federal defense, "even if the defense is anticipated in the plaintiff's complaint, and even if both parties admit that the defense is [essential to adjudication of the claims]." Id. at 14. One well recognized exception to the well-pleaded complaint rule, however, allows state claims to be removed "when a federal statute wholly displaces the state-law cause of action through complete pre-emption." Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 8 (2003); see also Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987). "ERISA is one of these statutes." Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004).

In assessing whether a plaintiff's state law claim "necessarily depends on resolution of a substantial question of federal law," Empire Healthchoice Assurance, Inc., 547 U.S. at 689-90 (internal quotation omitted), the Supreme Court has held that courts must determine whether the claim "necessarily raise[s] a stated federal issue, actually disputed and substantial, which a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 314 (2005).

The party seeking to preserve removal has the burden of proving that federal jurisdiction exists. See Pan Atl. Group v. Republic Ins. Co., 878 F. Supp. 630, 638 (S.D.N.Y. 1995). The Second Circuit has held that courts must "'construe the removal statute narrowly, resolving any doubts against removability.'" Lupo v. Human Affairs Int'l, Inc., 28 F.3d 269, 274 (2d Cir. 1994) (quoting Somlyo v. J. Lu-Rob Enters., Inc., 932 F.2d 1043, 1045-46 (2d Cir. 1991)).

Cotter alleges a series of state law claims related to his termination of employment, including breach of contract, violations of state labor law, and unjust enrichment. (Rosen Decl. Ex. A) Milly argues that Cotter's claims seeking "'wages' pursuant to Milly's profit sharing plan and 401(k) plan" present a federal question because they arise under "ERISA's expansive preemptive scope," and therefore federal jurisdiction is proper under 28 U.S.C. § 1331. (Notice of Removal ¶ 4) Because the issue of proper removal involves this Court's subject matter jurisdiction, it must be decided prior to Milly's motion to dismiss under Rule 12(b)(6). See, e.g., Rhulen Agency, Inc. v. Alabama Ins. Gaur. Ass'n, 896 F.2d 674, 678 (2d Cir. 1990) ("Where . . . the defendant moves for dismissal under Rule 12(b)(1) . . . as well as on other grounds, the court should consider the Rule 12(b)(1) challenge first since if it must dismiss the complaint for lack of subject matter jurisdiction, the accompanying defenses and objections become moot. . . ."); Chiropractic Neurodiagnostic, P.C. v. Allstate Ins. Co., 08 Civ. 2319 (SJF)(AKI), 2009 WL 210866, *2 (E.D.N.Y. Jan 26, 2009). Because this action must be remanded, Milly's motion to dismiss will be denied as moot.


Cotter and Milly entered into an employment agreement on May 4, 2007 ("Employment Agreement"), which states that Cotter will begin his position as corporate comptroller at Milly on May 21, 2007. (Moscow Decl. Ex. A) The Employment Agreement provides that upon accepting this offer of employment, Cotter will be eligible to receive: (1) "Salary: Annual gross starting salary of $150,000"; (2) "Management Performance Incentive Plan: Ten percent of your annual gross salary"; and, (3) "Profit Sharing: Ten percent of your annual gross salary will be contributed to a 401(k) account." (Id.) The Agreement further specifies that Cotter will be "eligible to participate in the 401(k) savings plan effective [his] first day of work. Employee contributions, up to 4% of base salary are matched by the Company at dollar for dollar. Company matching contributions are vested at 100% immediately." (Id.) Cotter assumed the position of corporate comptroller and worked for Milly until he was terminated on April 25, 2008.

At the time of Cotter's dismissal, the parties had discussed but had not reached agreement concerning a separation package. (Def. Opp. at 2; Orshrin Decl. ¶ 5 E & Ex. A)

Cotter filed an action for breach of the Employment Agreement and other state law claims in state court. In his complaint, Cotter asserts that upon his termination Milly "willfully failed to pay Plaintiff the balance of $5,980 in incentive compensation wages that were due and owing to Plaintiff based on ten percent of Plaintiff's prorated $150,000 salary, less payments made" (Cmplt. ¶ 6); "willfully failed to pay Plaintiff $13,980 in profit sharing wages that were due and owing to Plaintiff based on ten percent of Plaintiff's prorated $150,000 salary" (Id. ¶ 7); "willfully failed to pay Plaintiff $5,592 in 401(k) matching wages pursuant to the 401(k) payment agreement contained in the Employment Agreement" (Id. ¶ 8); "further withheld $5,792.23 in accrued vacation wages from Plaintiff, representing two weeks of [unused] accrued vacation time" (Id. ¶9); "failed to reimburse Plaintiff in the sum of $1,507.94, representing unreimbursed taxicab fares that Plaintiff incurred" when working late (Id. ¶10); and "failed to reimburse Plaintiff in the sum of approximately $1,500, representing reasonable expenses incurred by Plaintiff while Plaintiff was attending an industry conference." (Id. ¶ 11)

On February 23, 2009, Cotter served Milly by delivering two copies of the summons and complaint to the New York State Secretary of State, the statutory agent for service of process, pursuant to Limited ...

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