EHLEN FLOOR COVERING, INC. v. LAMB No. 10-13968.
660 F.3d 1283 (2011)
EHLEN FLOOR COVERING, INC., a Florida corporation, Edward Ehlen, an individual, Thomas Ehlen, an individual, Francis Ehlen, an individual, Ehlen Floor Coverings Retirement Plan, Plaintiffs-Counter Defendants Appellees, Dolores Ehlen, Plaintiff-Counter Defendant, v. Jeffrey LAMB, individually, et al., Defendants, Innovative Pension Strategies, Inc., a California corporation, Defendant-Counter Claimant Appellant.
United States Court of Appeals, Eleventh Circuit.
October 18, 2011.
Jason H. Baruch, Richard M. Hanchett, Dean Adrian Kent, Roberta Watson, Trenam Kemker, Tampa, FL, for Plaintiffs-Appellees.
John Eamon Johnson, Michael Paul Silver, Janelle Alicia Weber, Shutts & Bowen, LLP, Tampa, FL, for Defendant-Appellant.
Walter D. Willson, Joshua P. Henry, Kenna L. Mansfield, Jr., Wells, Marble & Hurst, PLLC, Ridgeland, MS, for Pacific Life Insurance Company, Amicus Curiae.
Traci T. McKee, Henderson Franklin, Fort Myers, FL, for Independent Advisors of Florida, Inc.
Peter B. King, Dominique E. Heller, Wiand, Guerra, King, PL, Tampa, FL, for The Graduate Group, Inc.
Before MARCUS, WILSON and HILL, Circuit Judges.
WILSON, Circuit Judge:
Innovative Pension Strategies, Inc. ("IPS") appeals the district court's denial of its motion to compel arbitration and stay plaintiffs' claims against it. Plaintiffs cross-appeal, disputing the preemption of their claims under the Employment Retirement Income Security Act ("ERISA") and alleging a lack of federal jurisdiction. We find that jurisdiction is proper and affirm the district court's denial of IPS's motion to compel arbitration.
Thomas, Francis, Edward, and Dolores
Shortly after IPS stepped in as administrator of the Plan, it became aware that the Plan was not in compliance with several Internal Revenue Service ("IRS") rules and regulations. IPS contends that it drafted an amendment to correct these flaws, but the amendment was never officially adopted. In 2004, the IRS promulgated new rules explaining that it would consider 412(i) plans with beneficiary payout limitations to be listed transactions
In August 2007, plaintiffs filed a complaint in state court against a number of parties involved with the creation and initial administration of the Plan, asserting claims of negligence, fraudulent and negligent misrepresentation, negligent supervision, breaches of fiduciary duties, and unfair and deceptive trade practices. The case was removed to federal court on the basis of preemption under ERISA. In May 2009, as requested by the court, plaintiffs recast their complaints as federal matters in their Second Amended Complaint, but plaintiffs contested the removal and argued against federal jurisdiction. IPS was added as a defendant in the Second Amended Complaint. IPS then moved to compel arbitration of the dispute, claiming that the terms of the AA govern the matter. The district court denied the motion. IPS appeals; plaintiffs cross-appeal to challenge the existence of federal jurisdiction.
II. STANDARD OF REVIEW
We review questions of jurisdiction de novo. See McKusick v. City of Melbourne,
A. Complete preemption under ERISA grants federal jurisdiction
Questions of jurisdiction can be raised at any point in the litigation, see Cochran v. U.S. Health Care Fin. Admin.,
A federal district court has original jurisdiction over cases arising under federal law. 28 U.S.C. § 1331. Federal question jurisdiction generally exists only when the plaintiffs' well-pleaded complaint presents issues of federal law, but the complete preemption doctrine of ERISA creates an exception to that rule. Conn. State Dental Ass'n v. Anthem Health Plans, Inc.,
This court acknowledged in Conn. State Dental that the test articulated by the Supreme Court in Aetna Health Inc. v. Davila,
Step one of Davila entails two inquiries: first, whether the plaintiffs' claims fall within the scope of ERISA § 502(a), and second, whether ERISA grants the plaintiffs standing to bring suit. Conn. State Dental, 591 F.3d at 1350. ERISA § 502(a)(2) allows a civil action to be brought by "a participant, beneficiary[,] or fiduciary for appropriate relief under [29 U.S.C. § 1109]." 29 U.S.C. § 1132(a)(2). Section 1109 allows recovery against, "[a]ny person who is a fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties imposed upon fiduciaries by this subchapter." 29 U.S.C. § 1109(a). Fiduciary duties imposed by ERISA include "proper management, administration, and investment of fund assets, the maintenance of proper records, the disclosure of specified information, and the avoidance of conflicts of interest." Mass. Mut. Life Ins. Co. v. Russell,
Plaintiffs argue that their claims against IPS concern the design and repair of the Plan, not IPS's ERISA-regulated duties such as management and administration of the Plan. It is true that some of plaintiffs' assertions do not fall under the umbrella of ERISA, but their allegations of breach of fiduciary duties and failure to make required disclosures are clearly potential claims under 29 U.S.C. § 1109(a), thus fulfilling prong one. The second inquiry is satisfied because Ehlen Floor and
Step two of Davila looks to whether the plaintiffs' claims implicate a duty independent of ERISA. In Davila, the Supreme Court found that although respondents' claim asserted a breach of duty under the Texas Health Care Liability Act (THCLA), the "interpretation of the terms" of the benefit plan "form[ed] an essential part of their THCLA claim," such that there was no independent claim to defeat preemption. 542 U.S. at 213, 124 S.Ct. at 2498. Similarly, in Borrero v. United Healthcare of N.Y., Inc., appellants argued that their contractual duties were defined by state law, but this court found that even though the appellants' assertion was "true in the abstract," "the content of the claims necessarily require[d] the court to inquire into aspects of the ERISA plans because of the invocation of terms defined under the plans."
Plaintiffs here assert that IPS failed to disclose information related to the Plan— an ERISA violation—and abrogated its fiduciary obligations, which arise from the relationship established by the Plan and IPS's duties under ERISA. Like the claims in Borrero, the "legal duty implicated is dependent upon an ERISA plan." Id. at 1304. Because there is federal question jurisdiction over these claims, supplemental jurisdiction provides us with subject matter jurisdiction over the remaining claims. See id. at 1304-05.
B. The Arbitration Agreement does not govern this dispute
Plaintiffs and IPS agree on the following: Ehlen Floor signed the AA attached to the Administrative Services Agreement; the AA requires arbitration of disputes arising out of the provision of services under the Agreement; the Agreement lists available services that IPS is capable of providing; the Agreement states that the "particular services to be performed are indicated in Section VI, `Election of Services,'" within the Agreement; and Section VI does not exist. IPS argues that the AA should still govern Ehlen Floor's claims and that the Ehlens, non-signatories to the AA, should be equitably estopped from avoiding arbitration. We disagree.
Although there is a liberal federal policy favoring arbitration agreements, see Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp.,
IPS argues that an arbitrator should decide whether the AA applies, but this ignores the parties' intent to have a threshold limitation on the types of claims
IPS also asserts that principles of equitable estoppel bar the claims of the Ehlens, non-signatories to the AA. IPS contends that the Ehlens cannot assert claims arising dependent upon the Agreement while escaping other clauses of the Agreement. The Ehlens do not seek to enforce the Agreement, though, and as we explained above, the claims cannot be said to arise from services under the Agreement because the document specified no services.
We therefore affirm the district court's denial of IPS's motion to compel arbitration and to stay plaintiffs' claims against it.
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