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Jerome Clay v. At&T Communications of California

November 16, 2012


The opinion of the court was delivered by: Kendall J. Newman United States Magistrate Judge


This action to recover unpaid "wages" was originally filed by plaintiff Jerome Clay as a small claims court case in the San Joaquin County Superior Court on July 11, 2012. (Dkt. Nos. 1-2, 1-3.) Subsequently, on August 2, 2012, defendants Pacific Bell Telephone Company ("Pacific Bell") (erroneously sued as AT&T Communications of California, Inc.) and Sedgwick Claims Management Service, Inc. ("Sedgwick") removed the action to this court, invoking the court's federal question jurisdiction under 28 U.S.C. § 1331. (Dkt. No. 1.)*fn1 More specifically, defendants contend that plaintiff's action for unpaid "wages" is essentially an action to recover short-term disability ("STD") benefits under his employer's welfare benefits plan, which is covered by the Employee Retirement Income Security Act, 29 U.S.C. §§ 1001 et seq. ("ERISA"). (Id.) As such, defendants claim that the federal courts have exclusive jurisdiction over plaintiff's claim. Plaintiff proceeds in this action without counsel.

Presently pending before the court is plaintiff's motion to remand the action to state court, and for an award of attorneys' fees and costs, originally noticed for hearing on September 20, 2012. (Dkt. No. 10.) On August 30, 2012, defendants filed an opposition to the motion. (Dkt. No. 11.) Thereafter, on September 18, 2012, the court rescheduled the hearing on plaintiff's motion for October 18, 2012, and ordered defendants to file supplemental briefing addressing the question of whether payment of STD benefits under the benefits plan at issue is a "payroll practice" exempt from ERISA's coverage under 29 C.F.R. § 2510.3-1(b)(2). (Dkt. No. 12.) On September 27, 2012, defendants filed a supplemental opposition to plaintiff's motion to remand, and on October 10, 2012, plaintiff filed a reply to defendants' supplemental opposition. (Dkt. Nos. 13, 17.)

At the October 18, 2012 hearing, plaintiff represented himself, and attorneys Katherine Kettler and Michael Nave appeared on behalf of defendants. (Dkt. No. 18.) After conferring with the parties at the hearing, the court on October 19, 2012, ordered defendants to file a supplemental declaration(s) within fourteen (14) days to further clarify certain aspects of STD benefits payments, including identifying the source from which the STD benefits are initially paid. (Dkt. No. 19.) The court also permitted plaintiff to file a response to defendants' supplemental declaration(s) within seven (7) days of service of the declaration(s). (Id.) On November 1, 2012, defendants filed three supplemental declarations pursuant to the court's order. (Dkt. Nos. 20-22.) On November 14, 2012, plaintiff filed a responsive declaration. (Dkt. No. 23.)

After considering the parties' briefing, the parties' oral argument, and appropriate portions of the record, the undersigned recommends that plaintiff's motion to remand the action to state court, and for an award of attorneys' fees and costs, be denied.


Plaintiff's state court complaint merely alleges that defendants owe him $10,000 for "Violation of the Health Insurance Portability and Accountability, 'HIPA' Law."*fn2 (Dkt. No. 1-2 at 2; Dkt. No. 1-3 at 2.) Plaintiff claims that he went on state disability from February 6, 2012, until May 21, 2012, and that defendants refused to pay him his "wages" even though his doctor filled out the necessary papers for "claim #8331." (Id.)

In their notice of removal, briefing in opposition to plaintiff's motion to remand, and supporting declarations, defendants provide more details regarding the factual context of this dispute. According to defendants, plaintiff is an employee of Pacific Bell,*fn3 which is a wholly owned subsidiary of AT&T Teleholdings, Inc., which in turn is a wholly owned subsidiary of AT&T Inc. ("AT&T"). (Declaration of Dale Fender, Dkt. No. 14 ["Fender Decl."] ¶ 3.) Plaintiff, as an employee of a member of AT&T's family of companies, is covered by the AT&T Umbrella Benefit Plan No. 1 ("Umbrella Plan"), which is a comprehensive welfare benefit plan combining "certain funded group medical, supplemental group medical, dental, vision, prescription drug, life insurance, short-term and long-term disability and accidental death and dismemberment plans sponsored by an Employer (each a "Program") into one welfare benefit plan." (Id., Ex. A at 1.)

One of the components of the Umbrella Plan is the AT&T West Disability Benefits Program ("Disability Program"), which provides STD benefits, long-term disability benefits, and vocational rehabilitation benefits to eligible employees who become disabled and unable to work. (Fender Decl. ¶ 4, Ex. B at 6.) The employer pays the full cost of the Disability Program. (Id.) Sedgwick is the independent third-party claims administrator for the Disability Program. (Dkt. No. 1 at 3; Declaration of Susan Hagestad, Dkt. No. 15 ["Hagestad Decl."] ¶ 1.)

According to the Disability Program's Summary Plan Description ("SPD"), STD benefits begin on the eighth consecutive day of absence from work due to an illness or injury and continue for up to 52 weeks. (Employees may receive sick pay for the first seven days of an absence.) (Fender Decl. Ex. B at 6; Declaration of Crystal Miller, Dkt. No. 21 ["Miller Decl."] ¶ 6.) To be eligible for STD benefits, an employee must provide evidence that he or she suffers from "a sickness, injury or other medical, psychiatric or psychological condition that prevents you from engaging in your normal occupation or employment...." (Fender Decl. Ex. B at 11.) Sedgwick approves or denies claims for STD benefits in accordance with the terms of the Disability Program. (Declaration of Carl J. Strutz, Dkt. No. 20 ["Strutz Decl."] ¶ 11.) If STD benefits are approved, they replace 50% or 100% of the employee's pay during the disability period, depending on the employee's length of service with the employer and the duration of the disability leave. (Fender Decl. Ex. B at 6.)*fn4 However, STD benefits are offset or reduced by other specified sources of income, such as California state disability insurance ("SDI") and workers' compensation benefits, among others. (Id. at 13-14; Miller Decl. ¶ 8.) At the end of a 52-week period of STD benefits, an employee may be eligible for long-term disability benefits. (Fender Decl. Ex. B at 6.)

Defendants assert that on February 13, 2012, plaintiff's supervisor reported a disability claim for plaintiff to the AT&T Integrated Disability Service Center ("IDSC"), which is operated by Sedgwick. That claim was initially denied on March 5, 2012, and subsequent internal appeals were unsuccessful. (Hagestad Decl. ¶¶ 2-8.) As noted above, defendants contend that plaintiff's complaint concerns this claim for STD benefits, which they argue amounts to a claim for benefits under an ERISA plan over which this court has exclusive jurisdiction.

Although plaintiff's briefing is largely unintelligible, he appears to implicitly concede that the "wages" he is seeking are STD benefits. For example, plaintiff states in his motion to remand that "once he went out on State Disability, after Plaintiff provided proof from doctor he was unable to work [sic], Defendants were to pay wages to plaintiff based on years of services." (Dkt. No. 10 at 5.) In his supplemental reply brief, plaintiff also refers to the offsets from STD benefits allowed for other sources of income, for example, for any state disability payments he received, and argues that defendants were supposed to pay the difference. (Dkt. No. 17 at 3.) These assertions, combined with the fact that plaintiff named Sedgwick, the third-party claims administrator for the Disability Program, as a defendant, strongly suggests that the dispute involves plaintiff's entitlement to STD benefits.*fn5

With this factual background in mind, the court turns to plaintiff's motion to remand.


In plaintiff's motion to remand, plaintiff first argues that defendants' notice of removal is procedurally flawed, because it does not set forth the basis for removal. See 28 U.S.C. § 1446(a). However, the notice of removal states that removal is premised on the court's federal question jurisdiction under 28 U.S.C. § 1331, which in turn is invoked based on defendants' characterization of plaintiff's complaint as purporting to state a claim for STD benefits under an ERISA plan. As such, it appears that defendants at least procedurally complied with 28 U.S.C. § 1446(a).

Plaintiff next argues that the court lacks subject matter jurisdiction over the action. In relevant part, the federal removal statute provides:

(a) Except 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.

28 U.S.C. § 1441(a). "The defendant bears the burden of establishing that removal is proper." Provincial Gov't of Marinduque v. Placer Dome, Inc., 582 F.3d 1083, 1087 (9th Cir. 2009). "The removal statute is strictly construed against removal jurisdiction," id., and removal jurisdiction "must be rejected if there is any doubt as to the right of removal in the first instance" Geographic Expeditions, Inc. v. Estate of Lhotka, 599 F.3d 1102, 1107 (9th Cir. 2010) (citation and quotation marks omitted).

Additionally, a federal court has an independent duty to assess whether federal subject matter jurisdiction exists, whether or not the parties raise the issue. See United Investors Life Ins. Co. v. Waddell & Reed Inc., 360 F.3d 960, 967 (9th Cir. 2004) (stating that "the district court had a duty to establish subject matter jurisdiction over the removed action sua sponte, whether the parties raised the issue or not"); accord Rains v. Criterion Sys., Inc., 80 F.3d 339, 342 (9th Cir. 1996). Because subject matter jurisdiction may not be waived by the parties, a district court must remand a case if it lacks jurisdiction over the matter. Kelton Arms Condominium Owners Ass'n, Inc. v. Homestead Ins. Co., 346 F.3d 1190, 1192 (9th Cir. 2003) (citing Sparta Surgical Corp. v. Nat'l Ass'n of Sec. Dealers, Inc., 159 ...

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