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The Sixth Circuit reversed. The court held that because the plaintiffs merely alleged that the defendants' actions resulted in a diminution in the value of their retirement plan, this does not necessarily vest the federal judiciary with jurisdiction. Rather, the court found that the plaintiffs' complaint “raised only state-law issues involving the legitimacy of business decisions made by the defendants,” and the record failed to establish diversity jurisdiction. The court noted that regardless of whether a claim is so characterized by the plaintiff, an action can be removed to federal court if the true nature of the claim is federal. Here, however, the plaintiffs' complaint “does not challenge the actions of a plan fiduciary. Instead, the complaint merely questions the propriety of certain business decisions made by the company's board of directors.” Further, the complaint only alleges mismanagement of the company that led to a drop in stock value, which in turn devalued the ESOP. “A claim that company directors did not operate the business itself in conformity with sound business practices does not, however, implicate the protections afforded by ERISA,” the court stated. “Absent any indication in the amended complaint that the plaintiffs intend to challenge the decisions or actions of plan fiduciaries, the filing contains no claims arising under federal law.”

Employer's Breach of Contact Claim Against HMO Not Preempted by ERISA

The Fourth Circuit has held that an employer's state court breach of contract claim against an health maintenance organization (HMO) is not preempted by the Employee Retirement Income Security Act (ERISA) and may not be removed to federal court since the employer did not have standing to bring an ERISA enforcement action. Sonoco Products Co. v. Physicians Health Plan Inc., No. 02-2137 (July 31).

An employer brought suit against an HMO in state court alleging that by raising its premiums, the HMO breached a contract to provide health insurance to the plaintiff's employees. The suit sought damages representing the difference between the contact price and the employer's cost of obtaining replacement coverage. The HMO sought to remove the suit to federal court and the district court ruled that removal was proper.

The Fourth Circuit reversed, noting that there are two types of preemption: “ordinary” or “conflict” preemption and “complete” preemption. Under ordinary or conflict preemption, state laws that conflict with federal laws are preempted, and preemption is asserted as a defense to a cause of action. Ordinary or conflict preemption does not, however, authorize removal to federal court. Complete preemption, on the other hand, does provide a basis for federal jurisdiction if Congress has designated a particular area as necessarily federal in character, and requiring that any civil complaint raising this select group of claims be heard in federal court. With respect to ERISA, the court stated that “the fact that a state law claim is 'preempted' by ERISA – ie, that it conflicts with ERISA's exclusive regulation of employee welfare benefit plans – does not, however, provide a basis for removing the claim to federal court. The only state law claims properly removable to federal court are those that are 'completely preempted' by ERISA's civil enforcement provision.” To qualify for complete preemption, the court noted that that the Seventh Circuit has identified three essential requirements: First, the plaintiff must have standing under '502(a) of ERISA to pursue its claim; second, this claim must fall within the scope of an ERISA provision that can be enforced under ?502(a); and third, the claim must not be capable of resolution without interpreting the contract governed by federal law. Here, because the court found that the employer lacked standing to pursue its breach of contract claims under '502(a), it was not necessary to assess the other prongs of the complete preemption analysis.

A Union Worker Has the Right to Select a Specific Representative at an Interview

The Fourth Circuit has ruled that a union worker's employer violated Section 8(a)(1) of the National Labor Relations Act by refusing to allow the worker to select a specific representative to accompany him to an investigatory interview. Anheuser-Busch Inc. v. National Labor Relations Board, No. 02-1740 (August 1).

A union employee was approached by his employer about a work-related incident. The worker requested a specific shop steward be present at a meeting with the employer on two occasions. The requests were denied and the employee was disciplined. The union filed unfair labor practice charges and the National Labor Relations Board agreed that the employer should not have denied the employee's requests.

The Fourth Circuit concurred. Under the Supreme Court's decision in NLRB v. J. Weingarten Inc., 420 U.S. 251 (1975), an employee has a right to union representation at an investigatory interview where disciplinary action is threatened. Here, the Fourth Circuit expanded Weingarten, stating that “absent extenuating circumstances, an employee should be entitled to designate the union representative who will assist him during his employer's investigatory interview.”

Shareholder Suit in State Court Not Completely Preempted by ERISA

The Sixth Circuit declined to remove a state court action to federal court, ruling that the Employee Retirement Income Security Act (ERISA) did not completely preempt the shareholders' state law claims that corporate mismanagement allegedly led to a dilution of stock value affecting their employee stock ownership plan (ESOP). Husvar v. Rapoport, No. 01-4254 (July 23).

Shareholders and former employees filed suit in state court alleging a breach of fiduciary duty on the part of corporate directors. The defendants sought to remove the suit to federal court, arguing that because the retirement plan in question was ERISA-qualified, the action was preempted by federal law. The district court found in favor of the defendants and removed the suit.

The Sixth Circuit reversed. The court held that because the plaintiffs merely alleged that the defendants' actions resulted in a diminution in the value of their retirement plan, this does not necessarily vest the federal judiciary with jurisdiction. Rather, the court found that the plaintiffs' complaint “raised only state-law issues involving the legitimacy of business decisions made by the defendants,” and the record failed to establish diversity jurisdiction. The court noted that regardless of whether a claim is so characterized by the plaintiff, an action can be removed to federal court if the true nature of the claim is federal. Here, however, the plaintiffs' complaint “does not challenge the actions of a plan fiduciary. Instead, the complaint merely questions the propriety of certain business decisions made by the company's board of directors.” Further, the complaint only alleges mismanagement of the company that led to a drop in stock value, which in turn devalued the ESOP. “A claim that company directors did not operate the business itself in conformity with sound business practices does not, however, implicate the protections afforded by ERISA,” the court stated. “Absent any indication in the amended complaint that the plaintiffs intend to challenge the decisions or actions of plan fiduciaries, the filing contains no claims arising under federal law.”

Employer's Breach of Contact Claim Against HMO Not Preempted by ERISA

The Fourth Circuit has held that an employer's state court breach of contract claim against an health maintenance organization (HMO) is not preempted by the Employee Retirement Income Security Act (ERISA) and may not be removed to federal court since the employer did not have standing to bring an ERISA enforcement action. Sonoco Products Co. v. Physicians Health Plan Inc., No. 02-2137 (July 31).

An employer brought suit against an HMO in state court alleging that by raising its premiums, the HMO breached a contract to provide health insurance to the plaintiff's employees. The suit sought damages representing the difference between the contact price and the employer's cost of obtaining replacement coverage. The HMO sought to remove the suit to federal court and the district court ruled that removal was proper.

The Fourth Circuit reversed, noting that there are two types of preemption: “ordinary” or “conflict” preemption and “complete” preemption. Under ordinary or conflict preemption, state laws that conflict with federal laws are preempted, and preemption is asserted as a defense to a cause of action. Ordinary or conflict preemption does not, however, authorize removal to federal court. Complete preemption, on the other hand, does provide a basis for federal jurisdiction if Congress has designated a particular area as necessarily federal in character, and requiring that any civil complaint raising this select group of claims be heard in federal court. With respect to ERISA, the court stated that “the fact that a state law claim is 'preempted' by ERISA – ie, that it conflicts with ERISA's exclusive regulation of employee welfare benefit plans – does not, however, provide a basis for removing the claim to federal court. The only state law claims properly removable to federal court are those that are 'completely preempted' by ERISA's civil enforcement provision.” To qualify for complete preemption, the court noted that that the Seventh Circuit has identified three essential requirements: First, the plaintiff must have standing under '502(a) of ERISA to pursue its claim; second, this claim must fall within the scope of an ERISA provision that can be enforced under ?502(a); and third, the claim must not be capable of resolution without interpreting the contract governed by federal law. Here, because the court found that the employer lacked standing to pursue its breach of contract claims under '502(a), it was not necessary to assess the other prongs of the complete preemption analysis.

A Union Worker Has the Right to Select a Specific Representative at an Interview

The Fourth Circuit has ruled that a union worker's employer violated Section 8(a)(1) of the National Labor Relations Act by refusing to allow the worker to select a specific representative to accompany him to an investigatory interview. Anheuser-Busch Inc. v. National Labor Relations Board, No. 02-1740 (August 1).

A union employee was approached by his employer about a work-related incident. The worker requested a specific shop steward be present at a meeting with the employer on two occasions. The requests were denied and the employee was disciplined. The union filed unfair labor practice charges and the National Labor Relations Board agreed that the employer should not have denied the employee's requests.

The Fourth Circuit concurred. Under the Supreme Court's decision in NLRB v. J. Weingarten Inc. , 420 U.S. 251 (1975), an employee has a right to union representation at an investigatory interview where disciplinary action is threatened. Here, the Fourth Circuit expanded Weingarten, stating that “absent extenuating circumstances, an employee should be entitled to designate the union representative who will assist him during his employer's investigatory interview.”