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Spillane v. AXA Financial

July 22, 2009


The opinion of the court was delivered by: Schiller, J.


William Spillane filed a complaint in the Chester County Court of Common Pleas against AXA Equitable Life Insurance Company (AXA); Financial Planning Directions, Inc.; and James Hughes. The Complaint alleged breach of contract, fraudulent and negligent misrepresentation, bad faith, and unfair trade practices stemming from Defendants' discontinuation of disability insurance payments to Spillane. The Complaint was removed because Defendants contend that this Court has jurisdiction under the Employee Retirement Income Security Act (ERISA). Following two previous motions to remand, an amended complaint, discovery on the applicability of ERISA, and a change of counsel for Plaintiff, Plaintiff filed the motion to remand now before this Court. For the reasons that follow, the Court concludes that ERISA applies and therefore denies the motion.


In March of 1988, Spillane was the President of David M. Spillane Company (sometimes referred to as "the Company"). (Am. Compl. ¶ 6.) Around that time, Defendant James Hughes, acting as an agent for AXA's predecessor in interest, sold Spillane a disability insurance policy ("the Policy"). (Id. ¶ 7.) Spillane resigned as President of the Company in 1998 because he was no longer able to withstand the physical rigors of the position; nonetheless, he remained with the company as a consultant throughout 1998 and 1999. (Id. ¶¶ 8-9.) Spillane started a new business in January of 2000, and because he was able to earn enough money in his new position between 1998 and 2005, Spillane never applied for benefits under the disability insurance policy. (Id. ¶¶ 10-11.) However, on a number of occasions -- both before and after leaving the David M. Spillane Company -- Spillane confirmed with Hughes that he was covered under the Policy. (Id. ¶ 12.) Because Hughes assured Spillane that he was covered, Spillane continued to pay annual premiums to AXA. (Id. ¶¶ 13-14.) In July of 2005, Spillane's physical condition worsened and left him unable to maintain his prior level of activity. (Id. ¶ 15.)

The Policy provides that AXA will pay Spillane a monthly income if a disability starts while the Policy is in force and continues beyond the Elimination Period. (Id. ¶¶ 20-21.) According to Spillane, he "began Total Disability" in 1998 because he was no longer able to continue as President of the Company. (Id. ¶ 25.) Nonetheless, because he was not under the regular care of a doctor between 1998 and 2005, he was not able to recover under the Policy. (Id. ¶ 26.) Since July 20, 2005, Spillane has regularly been under the care of a doctor. (Id. ¶ 18.) Spillane submitted a notice of claim under the policy around January 10, 2006 and AXA paid benefits for the period from October 25, 2005 through January 25, 2006 but thereafter stopped making payments under the Policy. (Id. ¶¶ 27, 29.)

According to AXA's Notice of Removal, Plaintiff's Complaint, which included claims for breach of contract, fraudulent and negligent misrepresentation, bad faith, and unfair trade practices, presented an action for disability benefits governed by ERISA and thus involved a federal question.

(Notice of Removal ¶¶ 2-3, 9.) On June 5, 2008, Plaintiff filed a motion to remand, but on June 25, 2008, this Court approved a stipulation whereby Plaintiff withdrew his motion to remand and agreed to file an amended complaint. Thereafter, Plaintiff filed his Amended Complaint, which raised the same claims and named the same parties as the complaint filed in state court but included, in the alternative, two claims under ERISA and also named the David M. Spillane Company Disability Insurance Plan in the event that ERISA applied. Subsequently, Plaintiff's attorney filed a motion to withdraw as counsel, which the Court granted on October 29, 2008. Plaintiff was able to secure another lawyer and the Court conducted a Rule 16 Conference on January 29, 2009. Nothing happened in the case until the Court issued a Rule to Show Cause why the case should not be dismissed for failure to prosecute. That prompted another motion to remand. On April 20, 2009, the Court denied the motion without prejudice and allowed the parties discovery limited to the issue of whether ERISA covered the Plan. Following discovery and in accordance with that Order, Plaintiff filed the motion to remand now before this Court.


The law grants subject matter jurisdiction to the federal district courts over "all civil actions arising under the Constitution, law, or treaties of the United States." 28 U.S.C. § 1331 (2009). A defendant may remove a civil action that could have originally been brought by the plaintiff in federal court. See 28 U.S.C. § 1441(a) ("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 defendants . . . ."). As the parties in this case are not completely diverse, this Court has subject matter jurisdiction -- and Defendants therefore can remove -- only if Plaintiff's Amended Complaint presents a federal question. See Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). When the basis of removal is federal question jurisdiction, the propriety of the removal rests on whether plaintiff's well-pleaded complaint raises claims that arise under federal law. Id. If federal law creates the cause of action, subject matter jurisdiction is undeniable. "One corollary of the well-pleaded complaint rule developed in the case law, however, is that Congress may so completely preempt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987). ERISA is one such area. Aetna Health Inc. v. Davila, 542 U.S. 200, 208-09 (2004).

A defendant bears the burden of showing the existence of federal jurisdiction. See Pullman Co. v. Jenkins, 305 U.S. 534, 540 (1939); Boyer v. Snap-On Tools Corp., 913 F.2d 108, 111 (3d Cir. 1990). "Because lack of jurisdiction would make any decree in the case void and continuation of the litigation in federal court futile, the removal statute should be strictly construed and all doubts should be resolved in favor of remand." Abels v. State Farm Fire & Cas. Co., 770 F.2d 26, 29 (3d Cir. 1995); see also Brown v. Francis, 75 F.3d 860, 864-65 (3d Cir. 1996).


ERISA "protect[s] . . . the interests of participants in employee benefit plans and their beneficiaries . . . by providing for appropriate remedies, sanctions, and ready access to the Federal courts." 29 U.S.C. § 1001(b). "The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans." Davila, 542 U.S. at 208. ERISA comprehensively regulates employee welfare benefit plans that, through the purchase of insurance or otherwise, provide medical, surgical, or hospital care, or benefits in the event of sickness, accident, disability, or death. Viechnicki v. Unumprovident Corp., Civ. A. No. 06-2460, 2007 WL 433479, at *2 (E.D. Pa. Feb. 8, 2007) (citing Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 44 (1987)).

A. Whether the Policy is Governed by ERISA

ERISA applies to "any employee benefit plan if it is established or maintained . . . by any employer engaged in commerce." Deibler v. United Food & Commercial Workers' Local Union 23, 973 F.2d 206, 209 (3d Cir. 1992) (quoting 29 U.S.C. § 1003(a)). An "employee welfare benefit plan" or "welfare plan" is a "plan, fund, or program . . . established or maintained by an employer . . . for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise . . . benefits in the event of sickness, accident, disability, death or unemployment . . . ." 29 U.S.C. § 1002(1). Hence, a disability insurance policy is covered by ERISA if it is obtained through: (1) a plan, fund, or program; (2) that is established or maintained; (3) by an employer; (4) for the purpose of providing benefits; (5) to its participants or beneficiaries. Viechnicki, 2007 WL 433479, at *3 (citing 29 U.S.C. § 1002(1)); see also Stone v. Disability Mgmt. ...

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