Appellate Law

CA1: ERISA preemption and removal ? a very sexy dance

By S. COTUS

Negron-Fuentes v. UPS SCS, No. 07-2463.  This is a sad, but fun case.  The plaintiff took short term disability leave from UPS to be treated for a brain tumor.  When he visited UPS, as he was recovering, the folks there were not that nice to him, and made him depressed.  His benefits plan then told him that he could either apply for long term disability or seek reinstatement.  Then, ?psyche!? the plan told him that his benefits had not vested.  This was to be the first of many ?Psyches!?  However, the First eventually figures out that the District Court overdid claim preclusion on claims that might be ERISA claims.  (By the way, I had a very similar problem as a Civ. Pro. final.  Since most of you went to law schools that teach ?local law? you wouldn?t understand.)

So, he sued in Puerto Rico Superior Court asserting state claims.  UPS removed, arguing that his actions were completely preempted by ERISA.  In Federal Court, he added on a bunch of federal claims.  The District Court dismissed the state-law claims without prejudice.  He then went back to state court and asked to ?reopen? them (to avoid a statute of limitations problem).  UPS opposed this in the state court, but lost at the state trial and appellate courts.

In the state law claim, proceeding, with new life breathed into it, the plaintiff amended his complaint again.  UPS then removed again on ERISA grounds.  Then he amended his second complaint on federal grounds.

This is pretty awesome, right?

On summary judgment the District Court held that the wrongful termination claims and Puerto Rican constitutional were barred by claim preclusion from the 1st judgment (wait.. Wasn?t that without prejudice), and a new state law claim was dismissed because the District Court declined to exercise supplemental jurisdiction. 

Then the First starts laying down the law.

There is a case, Brough v. United Steelworkers of America, 437 F.2d 748 (1st Cir. 1971), which holds that a removed waives his right to seek a remand to state court if he amends his complaint in federal court.  However, the First says that waiver isn?t an issue here, because his amendment were really an attempt to conform to a determination that his state law claims were really federal ones in disguise.  So, the First doesn?t fault him for trying, and this wasn?t a purposeful assertion of federal jurisdiction.

On the underlying issue of whether he can remove the second complaint.  The First say that because one of his claims was really an ERISA claim (even though the complaint wan?t substantially ERISA in nature), the defendant can remove. 

Regarding the preclusion arguments, the First holds that:

Negron first argues that because his original Puerto Rico case was reopened, the judgment in Negron I was not "prior" to the current litigation and therefore lacks preclusive effect here. This is wrong. Whatever the merits of Negron's position that his claims in the instant case somehow relate back to his original complaint, filing dates are irrelevant for purposes of issue preclusion. A final judgment, as in Negron I, has preclusive effect on any pending (or yet-unfiled) suits, regardless of the order of filing.
The First also rejects the notion that the doctrine of ?unclean hands? prevents UPS from arguing preclusion.  However, the First says that this is really a collateral attack. 

After screwing the plaintiff on just about everything, the First does hold that claim preclusion should not have been used to bar the ERISA claims.  His original suit was against the employer.  Not the plan.  Therefore, ? the district court must decide whether a claim of the kind described in count 6--namely, for benefits mistakenly promised by a plan's claims administrator--can successfully be made out under ERISA on these facts.?

Full post as published by Appellate Law and Practice on June 18, 2008 (boomark / email).