`United States District Court
`Southern District of Texas
`ENTERED
`February 09, 2021
`Nathan Ochsner, Clerk
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF TEXAS
`HOUSTON DIVISION
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`CIVIL ACTION NO.
`4:20-cv-01394
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`JUDGE CHARLES ESKRIDGE
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`§§
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`vs.
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`JOHN JUANOPULOS,
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`Plaintiff,
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`SALUS CLAIMS
`MANAGEMENT LLC,
`et al,
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`Defendants.
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`MEMORANDUM AND OPINION ON REMAND
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`The motion by Plaintiff John Juanopulos to remand this
`action to state court is granted. Dkt 16.
`1. Background
`Juanopulos owns J&A Paint and Body Shop. He alleges that
`he is the sole proprietor and its only employee. He purchased an
`occupational injury benefit plan for his business through
`Defendant Life Insurance Company of North America (LINA).
`Dkt 1-3 at ¶ 8. The plan in relevant part provided “certain medical
`benefits for Covered Employees who sustain an occupational
`injury.” Dkt 22-1 at 3.
`Juanopulos alleges that he kept a gun at his office to provide
`on-premises security. He inadvertently shot himself in the
`stomach while at work when attempting to remove a stuck bullet.
`He filed a claim with LINA for medical and disability benefits
`under his plan. Dkt 1-3 at ¶¶ 9–10.
`Defendant Salus Claims Management LLC is a third-party
`administrator responsible for managing work-related injury
`benefit claims. Defendant Matt Reiter is a Salus employee. He
`denied the claim, asserting that using or cleaning a gun wasn’t
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`within the covered scope of employment. Id at ¶ 11. Juanopulos
`appealed in writing to explain that he carried a gun “for my
`protection and my employee’s protection.” Id at ¶ 12 (screenshot
`of appeal letter). Salus denied the appeal. Id at ¶ 13.
`Juanopulos filed suit against LINA, Salus, and Reiter in
`Texas state court, alleging violations of the Texas Insurance Code
`and the Texas Deceptive Trade Practices Act, along with claims
`for fraud, breach of contract, and breach of the duty of good faith
`and fair dealing. See generally Dkt 1-3. Salus and Reiter timely
`removed on assertion that all claims are preempted as exclusively
`governed by the Employee Retirement Income Security Act of
`1974. Dkt 1 at 3–4. Juanopulos moved to remand, arguing that
`his plan isn’t governed by ERISA. Dkt 16.
`2. Legal Standard
`A defendant may typically remove any action from state
`court where “original jurisdiction” also exists in federal court.
`28 USC § 1441(a). But a district court must remand the case to
`state court if “at any time before final judgment it appears that
`the district court lacks subject matter jurisdiction.” 28 USC
`§ 1447(c).
`The removal statute is strictly construed in favor of remand.
`Manguno v Prudential Property & Casualty Insurance, 276 F3d 720,
`723 (5th Cir 2002). The removing party bears the burden of
`showing not only that federal jurisdiction exists, but also that
`removal was proper. Ibid, citing De Aguilar v Boeing Co, 47 F3d
`1404, 1408 (5th Cir 1995). This is no easy lift. A presumption
`exists against subject-matter jurisdiction, which “must be
`rebutted by the party bringing an action to federal court.” Coury v
`Prot, 85 F3d 244, 248 (5th Cir 1996) (citation omitted). The Fifth
`Circuit holds that any “doubts regarding whether removal
`jurisdiction
`is proper should be resolved against federal
`jurisdiction.” Acuna v Brown & Root, Inc, 200 F3d 335, 339 (5th Cir
`2000). A respected treatise on federal jurisdiction counsels that
`“issues of fact raised by a motion to remand are for the court
`alone to decide, with the removing party carrying the burden of
`proof.” Charles Alan Wright and Arthur R. Miller, Federal Practice
`& Procedure § 43 (West 2d ed April 2019 update).
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`The existence of federal subject-matter jurisdiction is
`determined at the time of removal. See In re Bissonnet Investments
`LLC, 320 F3d 520, 525 (5th Cir 2003), citing Arnold v Garlock,
`278 F3d 426 434 (5th Cir 2002). This includes consideration of
`“the claims in the state court petition as they existed at the time
`of removal.” Manguno, 276 F3d at 723 (citation omitted).
`Juanopulos here filed an amended complaint after removal.
`Dkt 17. This was timely as of right under Rule 15(a)(1)(B) of the
`Federal Rules of Civil Procedure. Even so, only the original
`complaint will be considered for purposes of remand.
`Actions presenting claims arising under federal law are
`plainly removable. See 28 USC § 1331; see also Gutierrez v Flores,
`543 F3d 248, 215 (5th Cir 2008). Whether a particular case arises
`under federal law turns on the well-pleaded complaint rule. PCI
`Transportation, Inc v Fort Worth & Western Railroad Co, 418 F3d 535,
`543 (5th Cir 2005). By this, federal jurisdiction exists “only when
`a federal question is presented on the face of plaintiff’s properly
`pleaded complaint.” Ibid (citations omitted). No federal question
`appears on the face of the complaint here, as Juanopulos asserts
`what appear to be only violations of the Texas Insurance Code
`and related state-law torts and remedies. Dkt 1-3 at 7–13.
`But there is an exception to the well-pleaded complaint rule.
`A state-law cause of action can be removed where a federal
`statute wholly displaces the claim through complete preemption.
`Beneficial National Bank v Anderson, 539 US 1, 8 (2003). One such
`statute is ERISA, codified at 29 USC § 1001 et seq. See Aetna
`Health Inc v Davila, 542 US 200, 208 (2004); McAteer v Silverleaf
`Resorts, Inc, 514 F3d 411, 416–17 (5th Cir 2008). Its expansive
`preemption provisions are “intended to ensure that employee
`benefit plan regulation would be exclusively a federal concern.”
`Aetna Health, 542 US at 208 (citation omitted). Cases presenting
`claims governed by ERISA are thus removable to federal court
`for the very reason that state-law claims are preempted. Cantrell v
`Briggs & Veselka Co, 728 F3d 444, 448 (5th Cir 2013).
`3. Analysis
`The parties dispute whether ERISA applies to this case.
`More particularly, they dispute whether the at-issue occupational
`injury benefit plan is subject to ERISA. If it is, then ERISA may
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`preempt the asserted causes of action. If it’s not, there’s no
`preemption—meaning that subject-matter jurisdiction is lacking,
`and the case must be remanded.
`ERISA was enacted by Congress in relevant part to protect
`“the interests of participants in employee benefit plans and their
`beneficiaries.” 29 USC § 1001(b). It applies to “any employee
`benefit plan . . . established or maintained” by (among others)
`“any employer engaged in commerce.” See 29 USC § 1003(a)
`(coverage). Such plan can be either “an employee welfare benefit
`plan” or an “employee pension benefit plan” (or both).
`29 USC § 1002(3) (definition of employee benefit plan). The plan at
`issue here is, if anything, an employee welfare benefit plan. See
`29 USC § 1002(1) (definition of employee welfare benefit plan);
`see also Dkt 22-1.
`Some other definitions are necessary. An employee is defined
`in somewhat circular fashion as “any individual employed by an
`employer.” See 29 USC § 1002(6). More important here, a
`participant is defined as any employee or former employee “who
`is or may become eligible to receive a benefit” from an employee
`benefit plan as defined above, or “whose beneficiaries may be
`eligible to receive any such benefit.” 29 USC § 1002(7). And a
`beneficiary is “a person designated by a participant, or by the terms
`of an employee benefit plan, who is or may become entitled to a
`benefit thereunder.” 29 USC § 1002(8). Properly understood, all
`participants in ERISA plans are employees, but not all employees
`must be participants. For example, see Habets v Waste Management,
`363 F3d 378, 386 (5th Cir 2004); Nugent v Jesuit High School, 625
`F2d 1285, 1288 (5th Cir 1980) (citations omitted).
`The Fifth Circuit has set out three distinct inquiries that
`courts must resolve to determine whether a particular plan
`qualifies as an employee welfare benefit plan under ERISA.
`These are:
`o First, whether the plan exists;
`o Second, whether it falls within the safe-harbor
`provision established by the Department of Labor,
`which pertains to 29 CFR § 2510.3-1(j); and
`o Third, whether it satisfies the primary elements of an
`ERISA “‘employee benefit plan’—establishment or
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`maintenance by an employer intending to benefit
`employees.”
`Meredith v Time Insurance Co, 980 F2d 352, 355 (5th Cir 1993). The
`particular plan isn’t governed by ERISA if any of these inquiries
`is answered in the negative. Ibid.
`The parties purport to dispute only the last inquiry—whether
`the subject plan was established or maintained to benefit
`employees. But their dispute in this regard is in part factual,
`concerning whether the subject plan covers more than just
`Juanopulos as an owner—or more precisely, whether it also
`covers an employee besides him. The Fifth Circuit in House v
`American United Life Insurance Company made clear that a dispute of
`that nature is better characterized as one pertaining to the first
`inquiry—whether a plan governed by ERISA even exists.
`499 F3d 443, 450 (5th Cir 2007).
`However approached here—first inquiry or third—the
`answer to each is negative. And so this particular plan isn’t
`governed by ERISA.
`Generally, with respect to the first inquiry, an ERISA plan
`“is established
`if from the surrounding circumstances a
`reasonable person can ascertain the intended benefits, a class of
`beneficiaries, the source of financing, and procedures for
`receiving benefits.” Donovan v Dillingham, 688 F2d 1367, 1373
`(11th Cir 1982, en banc); see also Memorial Hospital System v
`Northbrook Life Insurance Co, 904 F2d 236, 240–41 (5th Cir 1990)
`(adopting Donovan); Meredith, 980 F2d at 355. And an employee
`welfare benefit plan—being the type of employee benefit plan at
`issue—“requires (1) a ‘plan, fund, or program’ (2) established or
`maintained (3) by an employer or by an employee organization,
`or by both, (4) for the purpose of providing medical, surgical,
`hospital care, sickness, accident, disability, death, unemployment
`or vacation benefits, apprenticeship or other training programs,
`day care centers, scholarship funds, prepaid legal services or
`severance benefits (5) to participants or their beneficiaries.”
`Donovan, 688 F2d at 1371, citing 29 USC § 1002(1). It is that last
`aspect that is mainly disputed here.
`The Department of Labor has determined by regulation that
`“the term ‘employee benefit plan’ shall not include any plan, fund
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`or program, other than an apprenticeship or other training
`program, under which no employees are participants covered
`under the plan, as defined in paragraph (d) of this section.”
`29 CFR § 2510.3-3(b). In construing this regulation, the Fifth
`Circuit specifically holds, “An owner of a business is not
`considered an ‘employee’ for purposes of determining the
`existence of an ERISA plan; in other words, ERISA does not
`govern a plan whose only fully vested beneficiaries are a
`company’s owners.” House, 499 F3d at 450 (emphasis in original,
`citation omitted). Other circuits agree with this proposition. For
`example, see Slamen v Paul Revere Life Insurance Co, 166 F3d 1102,
`1105 (11th Cir 1999); In re Watson, 161 F3d 593, 596–97
`(9th Cir 1998); Securities and Exchange Commission v Johnston,
`143 F3d 260, 262–63 (6th Cir 1998).
`Juanopulos squarely alleges in his original complaint that he
`purchased the subject plan “to protect himself as the owner and
`sole employee” of his shop “in the event that he suffered an
`injury on-the-job.” Dkt 1-3 at ¶ 8. Juanopulos is thus considered
`here to be not only the owner and sole employee of J&A Paint
`and Body Shop, but also the only participant in the subject plan.
`As such, ERISA doesn’t govern it.
`Salus and Reiter raise several arguments to the contrary.
`First, they argue that ERISA governs the subject plan because
`Juanopulos was a working owner. Dkt 1 at 5. That assertion is
`entirely contrary to Meredith v Time Insurance Company. The Fifth
`Circuit there dealt with the owner of a small flower and fruit
`basket company “which she organized as a sole proprietorship,
`employing herself and, ostensibly, her husband.” 980 F2d at 353.
`And it specifically considered whether she “is both an employer
`and an employee for the purposes of ERISA” so as to make the
`plan “an employee welfare benefit plan.” Id at 356. In short, no.
`Id at 356–57. A sole proprietor “is not an employer because she
`has no employees and plans without employees are, by definition,
`not regulated by ERISA.” Id at 358.
`Salus and Reiter also argue on this point that the decision by
`the Supreme Court in Raymond B. Yates, MD, PC Profit Sharing
`Plan v Hendon, 541 US 1 (2004), abrogated Meredith. Dkt 22 at 9.
`But Yates was itself equally clear that plans covering “only sole
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`owners or partners” fall outside of ERISA’s domain. 541 US
`at 21. And the Fifth Circuit continues to follow Meredith, even
`expressly incorporating the Yates holding into its analysis under
`Meredith. See House, 499 F3d at 450; see also Peace v American
`General Life Insurance Company, 462 F3d 437, 439 & n 3 (5th Cir
`2006). Argument to the contrary isn’t tenable.
`Second, Salus and Reiter argue that ERISA governs the at-
`issue plan because it covers “an entire class of actual or potential
`employees, not just Plaintiff.” Dkt 22 at 10; Dkt 1 at 5. They
`further argue that “ERISA applies to all actual or potential plan
`participants and beneficiaries.” Ibid. But they curiously avoid
`mention (again) of 29 CFR § 2510.3-3(b). It plainly states in part
`that “the term ‘employee benefit plan’ shall not include any plan,
`fund or program, other than an apprenticeship or other training
`program, under which no employees are participants covered under the
`plan.” (emphasis added). The Supreme Court holds that courts
`must interpret and apply 29 USC § 1003(a) in light of this
`regulation. Yates, 541 US at 24. And so, plans covering “only sole
`owners or partners and their spouses” fall outside ERISA’s
`domain, while “working owners and their nonowner employees,
`on the other hand, fall entirely within ERISA’s compass.” 541 US
`at 21 (emphasis in original); see also House, 499 F3d at 450;
`Meredith, 980 F2d at 358.
`Third, Salus and Reiter argue that statements in the plan itself
`control and subject it to ERISA. Dkt 22 at 6–7. For instance, the
`plan describes itself as an “employee benefit plan” under ERISA,
`and states that it “shall be construed and enforced pursuant to
`federal law under ERISA.” Dkt 22-1 at 4–5. But “whether an
`entity intended ERISA to govern is not relevant; rather ‘ERISA
`protection and coverage turns on whether the [plan] satisfies the
`statutory definition.’’’ Smith v Regional Transit Authority, 827 F3d
`412, 420 (5th Cir 2016) (alteration in original), quoting Meredith,
`980 F2d at 354; see also MDPhysicians & Associates, Inc v State Board
`of Insurance, 957 F2d 178, 183 n 7 (5th Cir 1992). Other circuits
`have also concluded that “an employer’s mere labeling of a plan”
`as subject to ERISA doesn’t make it so. McMahon v Digital
`Equipment Corp, 162 F3d 28, 38 (1st Cir 1998); see also Langley v
`DaimlerChrysler Corp, 502 F3d 475, 481 (6th Cir 2007); Stern v IBM,
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`326 F3d 1367, 1374 (11th Cir 2003). As such, the provisions cited
`by Salus and Reiter are neither pertinent nor dispositive. Indeed,
`while the plan is labeled as an ERISA plan, that label appears to
`be completely contrary to law as set out by 29 CFR § 2510.3-3(b).
`Fourth, Salus and Reiter argue that Juanopulos hasn’t “shown
`that he was the sole employee of J&A.” Dkt 22 at 10. They point
`to a letter by Juanopulos appealing the denial of his claim, which
`states, “I, John Juanopulos, am the owner operator of J&A Paint
`and Body Shop in Houston as well as a tow truck operator. For
`my two businesses I carry a gun with me for my protection and
`my employee’s protection.” Dkt 1-3 at ¶ 12 (screenshot of appeal
`letter). They also point to a witness report from someone
`designated as a “co-worker” who was present when Juanopulos
`injured himself. Dkt 22-1 at 7.
`Juanopulos pleaded without equivocation in his original
`complaint that he is the owner and sole employee of J&A Paint
`and Body Shop. Dkt 1-3 at ¶ 8. Neither the letter nor the witness
`report is dispositive to the contrary. The report indicates that the
`witness simply ticked the box for “co-worker,” where the only
`other options were “relative” or “other.” Dkt 22-1 at 7. Even as
`to the more specific phrasing in the letter, Juanopulos submits an
`uncontradicted affidavit that this person isn’t an actual employee
`of the body shop, but rather best fits legal description as an
`independent contractor. See Dkt 16-2 at ¶ 10; see also Dkt 16 at
`9–10. And Juanopulos provides corroborating evidence, noting
`that he paid $58.39 per month for his plan solely for his own
`coverage—which is valued at $58.39 per participant. Dkt 16-2 at
`¶ 4. To the extent doubt might exist on this factual issue, it is
`resolved in favor of remand. See Acuna, 200 F3d at 339; Wright
`& Miller, Federal Practice & Procedure § 43.
`Juanopulos has established that he is the sole participant in
`the J&A Paint and Body Shop occupational injury benefit plan.
`Dkt 1-3 at ¶ 8. There’s no compelling argument or evidence to
`the contrary. The plan at issue thus isn’t subject to ERISA. The
`action must be remanded to state court.
`4. Conclusion
`The motion by Plaintiff John Juanopulos to remand this
`action to state court is GRANTED. Dkt 16.
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`This case is REMANDED to the 269th Judicial District Court
`of Harris County, Texas.
`The Clerk of Court must provide a copy of this order to the
`District Clerk for Harris County, Texas.
`SO ORDERED.
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`Signed on February 9, 2021, at Houston, Texas.
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`Hon. Charles Eskridge
`United States District Judge
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