United States District Court, D. New Jersey
May 5, 2005.
TIMOTHY J. KANE, III, Plaintiff,
ORTHO PHARMACEUTICAL CORP, Defendant.
The opinion of the court was delivered by: STANLEY CHESLER, Magistrate Judge
This matter is before the Court on the Motion of Timothy J.
Kane, III ("Kane") to Remand to the Superior Court of New Jersey,
Law Division, Somerset County, where Kane filed his Complaint.
Kane's Complaint, on its face, seeks benefits under a "Long
Term Disability Income Plan" ("LTD plan" or "Plan"), maintained
by the Defendant Ortho-McNeil Pharmaceutical Corporation
("Ortho"), Kane's former employer. Complaint ("Compl.") ¶ 1. Kane
claims, inter alia, of a breach of fiduciary duty and failure
to pay benefits on the part of Ortho. Compl. ¶¶ 3, 6, 7. Ortho
filed a Notice of Removal with this Court on February 18, 2005,
stating that removal of the case is proper pursuant to
28 U.S.C. § 1441, on the basis of federal question jurisdiction. Notice of
Removal ¶ 4. In its Notice of Removal Ortho explained that,
[t]he aforesaid LTD plan is an "employee welfare
benefit plan" within the meaning of § 3(1) of the
Employee Retirement Income Security Act ("ERISA"),
29 U.S.C. § 1002(1). Plaintiff's claims, therefore,
arise under § 502 of ERISA, 29 U.S.C. § 1132.
Specifically, his claim to recover benefits allegedly
due to him under the terms of the aforesaid LTD plan arises under § 502(a)(1)(B)
of ERISA, 29 U.S.C. § 1132(a)(1)(B), and his claim
for breach of fiduciary duty arises under § 502(a)(2)
of ERISA, 29 U.S.C. § 1132(a)(2). Further,
plaintiff's claim for attorneys' fees arises under §
502(g)(1) of ERISA, 29 U.S.C. § 1132(g)(1), which
provides that the court may allow a reasonable
attorneys' fee and costs of action to either party in
Notice of Removal ¶ 6. Kane's Motion challenges the removal on
several bases detailed below.
First, Kane argues that state contract law, not federal law,
applies to his claim because his particular plan is exempt from
ERISA. See Plaintiff's Affidavit in Support of Motion to Remand
("Plt. Supp. Aff") ¶¶ 9-11, 14; Addendum to Plaintiff's Affidavit
in Support of Motion to Remand ("Plt. Add. Aff") ¶¶ 1, 3, 6. Kane
makes two arguments that his plan is exampt from ERISA: (1) that
the LTD plan that forms the gravamen of his Complaint is an
"excess benefit plan" as defined in § 3(36) of ERISA,
29 U.S.C. § 1002(36), and it is therefore exempt from Title I of ERISA, Plt.
Add. Aff. ¶¶ 2-3; and (2) that the long-term disability plan "is
a group exempt insurance plan which meets the criteria of an
exemption," referring to 29 C.F.R. § 2510.3-1(j), see Plt. Add.
Aff. ¶ 6.
With respect to Kane's first argument, there is indeed a genre
of employee benefit plans known as "excess benefit plans" to
which Title I of ERISA is not applicable. See
29 U.S.C. § 1003(b) (Section 4(b)(5) renders the provisions of Title I
inapplicable to any employee benefit plan that "is an excess
benefit plan (as defined in section 3(36)) and is unfunded").
Kane's Plan, however, is not such an exempt plan. Section 415(a)
of the Internal Revenue Code states that it applies solely to a
trust "which is part of a pension, profit-sharing, or stock bonus
plan" and to employee annuity plans described in § 403(a),
annuity contracts described in § 403(b), and simplified employee
pensions described in § 408(k). Kane's Plan for the payment of
disability benefits is not any of these, and the limitations to which §
3(36) refers and relates have no application to his Plan. Kane's
Plan is clearly a welfare plan defined by § 3(1) of ERISA,
29 U.S.C. § 1002(1), as distinguished from an employee pension
benefit plan, or pension plan, under § 3(2).
Kane's second argument is that his Plan is exempt from ERISA is
based on a Department of Labor Regulation,
29 C.F.R. § 2510.3-1(j). Kane suggests that his Plan is "a group or grouptype
insurance program offered by an insurer to employees or members
of an employee organization," to which the terms "employee
welfare benefit plan" and "welfare plan" do not apply. Plt. Add.
Aff. ¶ 6. Section 2510.3-1(j) states four requirements for
classification as something other than an employee welfare
(1) No contributions are made by an employer or
(2) Participation the program is completely voluntary
for employees or members;
(3) The sole functions of the employer or employee
organization 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 or employee organization receives no
consideration in the form of cash or otherwise in
connection with the program, other than reasonable
compensation, excluding any profit, for
administrative services actually rendered in
connection with payroll deductions or dues checkoffs.
29 C.F.R. § 2510.1-1(j). But "[a] policy will be exempted under
ERISA only if all four of the `safe harbor' criteria are
satisfied." Thompson v. American Home Assur. Co., 95 F.3d 429,
435 (6th Cir. 1996). Here, Kane's plan fails to meet the third
requirement because the plan is not offered by an insurer, but
rather, by Ortho to its own eligible employees. Moreover, Kane
does not contest that Ortho not only endorsed the Plan, but that
its parent company created the plan and the plan documents that
set forth the terms of the plan. See McDonald Aff., Defendant's
Supplemental Brief in Opposition, Appendix (Exhibit A of the
affidavit, the Plan, shows that Ortho's parent company designated, in Article VII of the Plan,
the Johnson & Johnson Pension Committee as the main fiduciary of
the Plan, with plenary general powers). Having administered the
Plan, Ortho does not fit the bill for employers in
29 C.F.R. § 2510.1-1(j)(3) and the safe harbor is, therefore, inapplicable.
See Sarraf v. Standard Ins. Co., 102 F.3d 991
, 993 (9th Cir.
1996) (administration of a plan is sufficient to make the safe
harbor regulation inapplicable).
Next, Kane contends that his case should be remanded because
New Jersey law applies to all of his claims. Plt. Supp. Aff. ¶
9-10. Section 514(a), 29 U.S.C. § 1144(a) is clear, however, that
the provisions of Titles I and IV of ERISA "shall supercede any
and all State laws insofar as they may now hereafter relate to
any employee benefit plan described in section 1003 (a) and not
exempt under section 1003 (b)." As it has been established that
the Plan is not exempt from ERISA, the state law claims that Kane
describes for denial of benefits under the Plan and breach of
fiduciary duty are completely preempted by ERISA.
Kane additionally cites 28 U.S.C. § 1346(d), The General
Jurisdiction Act, which states that "[t]he district courts shall
not have jurisdiction under this section of any civil action or
claim for a pension." The Act, however, only applies to cases in
which the United States is, therefore, a defendant it is
inapplicable to Kane's Complaint.
Finally, Kane contends that his disability, which limits his
mobility, requires accommodation at the courthouse that is
closest to his home the Superior Court of New Jersey in
Somerset County. See Plt. Supp. Aff. ¶¶ 3-8. Kane argues
that he entitled to remand pursuant to the Americans with
Disabilities Act, 42 U.S.C. § 12101 et seq. Id. This statute,
however, provides no disability exemption to 28 U.S.C. § 1441
which provides that,
[e]xcept as otherwise expressly provided by act of
Congress, any civil action brought in a State court
of which the district courts of the United States
have original jurisdiction, may be removed by the
defendant or the defendants, to the district court of the United States for the district and division
embracing the place where such action is pending.
Thus, it appearing that there was no procedural defect in
Defendants' removal of this matter, nor a lack of subject matter
jurisdiction for this Court to hear this case, Plaintiff's
contentions that he is disabled do not constitute a valid basis
upon which to remand this matter to State Court. Of course, to
the extent possible, the Court will make every feasible effort to
accommodate Plaintiff with his special needs.
For all of the above reasons, Kane has failed to show why his
case was improperly removed from state court. Kane's Motion to
Remand is, therefore, denied.
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