Jeffrey Hansen won twice — once in the United States District Court for the District of Utah when he won summary judgment that his former employer had violated ERISA and a second time at the Tenth Circuit Court of Appeals when he won remand of a second case he filed against his former employer, a win based on the finding that he was not entitled to pursue claims under ERISA.
The facts are described as follows: Mr. Hansen went to work for Harper Excavating, Inc. (“Harper”) in November 2003. At that time, Harper provided him with a benefit disclosure and acknowledgement form that stated he would be eligible for benefits beginning on the first day of the month following 90 days of employment. In January 2004, Harper asked its insurer, Blue Cross Blue Shield (“BCBS”), to change its hire and rehire effective dates to the first day of the month following 60 days of employment. BCBS made the change; however, Harper never notified Mr. Hansen of the change. Once he became eligible on March 1, 2004, Mr. Hansen completed and submitted application forms to enroll in the various insurance plans offered by Harper. Mr. Hansen’s application for health insurance was dated March 9, 2004; however, Stacy Henderson, Harper’s employee who was in charge of benefits, treated his application as though it was subject to a 60-day waiting period, listed the “effective date” of his application as February 1, 2004 and submitted the application to BCBS. Harper also immediately began deducting insurance premiums from Mr. Hansen’s paychecks for insurance, including health insurance through BCBS. Mr. Hansen’s application for health insurance was denied by BCBS as untimely since Harper had applied the 60-day policy instead of the 90-day policy. Mr. Hansen terminated his employment with Harper in late April 2004, at which time he had not been informed by Harper that he was not covered by the health insurance plan. It was not until early June 2004 that Ms. Henderson informed Mr. Hansen that had not been covered by the health insurance plan, at which time she sent to Mr. Hansen a check reimbursing him for the health insurance premiums that had been deducted from his paychecks since his “enrollment” in March 2004. This was after Mr. Hansen sought medical treatment at a hospital in May 2004 and was told his coverage had terminated.
In November 2005, Mr. Hansen filed suit against Harper in the United States District Court for the District of Utah, invoking ERISA jurisdiction and seeking damages under ERISA. Mr. Hansen won summary judgment against Harper on his claim that Harper breached its fiduciary duties to Mr. Hansen under ERISA, with damages, attorneys’ fees and costs to be determined during a bench trial. Hansen v. Harper Excavating, Inc., No. 2:05-cv-00940-DAK (“Hansen I”), Memorandum Decision and Order at 9, Dkt. 99 (D. Utah May 8, 2007). As set forth in the Findings of Fact and Conclusions of Law and Order dated March 13, 2008, Dkt. 127, the Court ordered Harper to pay Mr. Hansen $57,182.33 in medical expenses and $102,056.88 in fees and costs. Harper did not appeal the judgment.
On June 6, 2007, after winning summary judgment in Hansen I, but before the bench trial on damages, Mr. Hansen filed a second lawsuit in the Third Judicial District Court in and for Salt Lake County, Utah, Case No. 070907873 (“Hansen II”), urging five causes of action–fraudulent nondisclosure, negligent misrepresentation, conversion, breach of contract/good faith and fair dealing, and special damages. Mr. Harper stated the lawsuit was based on information he learned in discovery in Hansen I. Harper removed Hansen II in September 2007 (2:07-cv-00679-BSJ) and moved to dismiss the case. Mr. Hansen moved for remand, but the district court denied remand and dismissed Hansen II. In the opinion, Dkt. 25, the district court found that in Hansen I, Mr. Hansen had requested and received benefits under ERISA, that Hansen II alleged no duties breached by Harper that were outside the scope of ERISA, that ERISA limits remedies to those enumerated in ERISA, that Hansen II pled facts duplicative of Hansen I and that Hansen I was res judicata to Hansen II.
Mr. Hansen appealed to the Tenth Circuit Court of Appeals, which concluded that Mr. Hansen’s claims were not completely preempted by ERISA and the district court erred in denying Mr. Hansen’s motion to remand. Discussing the distinction between ordinary preemption and complete preemption, the Tenth Circuit Court described that only the latter makes a state-law claim “purely a creature of federal law” and therefore removable to federal court from the outset. Hansen II, No. 08-4089 (10th Cir. Apr. 13, 2011), citing Felix v. Lucent Techs., Inc., 387 F.3d 1146, 1154-55 (10th Cir. 2004). The Tenth Circuit Court then explained that a lawsuit falling within Section 502(a) of ERISA is removable. Section 502(a) authorizes civil actions by a “participant or beneficiary” to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan. Focusing on the requirement that the plaintiff be a participant or beneficiary, the Tenth Circuit Court quickly dismissed the possibility that Mr. Hansen was a beneficiary since neither party asserted he was. Quoting the Supreme Court’s opinion in Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 117 (1989), the Tenth Circuit Court then described the requirements to be a participant–either employees in, or reasonably expected to be in, currently covered employment, or former employees who have a reasonable expectation of returning to covered employment or who have a colorable claim to vested benefits.
The Tenth Circuit Court went on to analyze whether Mr. Hansen was a participant. First, the court analyzed the point at which standing should be determined– as of the time of filing the complaint or as of the time when the wrongful behavior occurred. Citing Felix, the Tenth Circuit Court held that standing to sue under ERISA is assessed as of the filing of the complaint. The court then reviewed an argument urged by Harper–that but for Harper’s wrongful behavior, Mr. Hansen would have been a participant in the plan. The Tenth Circuit Court reiterated its position as a minority jurisdiction (along with the Fourth and Eleventh Circuits) rejecting the doctrine of “but for” standing. Determining that standing could therefore be based only on whether Mr. Hansen was a participant of the plan at the time he filed his complaint in June 2007, the Tenth Circuit Court analyzed the various possibilities. The court found that Mr. Hansen would not have standing as a current employee given he was no longer employed by Harper and that Mr. Hansen could not have standing as a former employee with a reasonable expectation of returning to covered employment since there was no evidence to that effect. The Tenth Circuit Court then rejected the final possibility, that Mr. Hansen could have standing as a former employee with a colorable claim for benefits. Specifically, the court dismissed the idea that Mr. Hansen would fulfill eligibility requirements in the future and further dismissed the idea he would prevail in a suit for benefits. It is this last finding that is most interesting. According to the court, because Mr. Hansen had already prevailed in a suit for benefits in Hansen I, he no longer had a colorable claim he would prevail in the future. Thus, Mr. Hansen had no standing to sue under ERISA and his claim could not be completely preempted. The Tenth Circuit Court also declined to use the principle of judicial estoppel to hold that Mr. Hansen was bound by his urging of ERISA jurisdiction in Hansen I–“In our view, complete preemption is meant to be a narrow exception to the well-pleaded complaint rule, and we are not inclined to widen it by holding that a party may establish subject-matter jurisdiction based on complete preemption via judicial estoppel.” What the state court will do with Hansen II remains to be seen but the case has survived to see another day. Click here to read the Tenth Circuit Court opinion.