NGS American v. Jefferson

Page 519

218 F.3d 519 (6th Cir. 2000)

NGS American, Inc., Plaintiff-Appellant, v. Mickey Jefferson, representative of Estate of Bernetta Jefferson, Deceased; Andrew Jefferson and Stephan Lamb, minors, by their guardian, Mickey Jefferson; and Mickey Jefferson, individually, Defendants-Appellees.

No. 98-2209

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: December 9, 1999

Decided and Filed: July 5, 2000

Appeal from the United States District Court for the Eastern District of Michigan at Detroit; No. 97-76208--Bernard A. Friedman, District Judge.

Ronald S. Longhofer, Raymond M. Kethledge, HONIGMAN, MILLER, SCHWARTZ & COHN, Detroit, Michigan, for Appellant.

Jonathan M. Pavsner, LAW OFFICES OF SHELDON J. SCHLESINGER Ft. Lauderdale, Florida, for Appellee.

Before: BOGGS and SUHRHEINRICH, Circuit Judges; and POLSTER^*, District

Judge.

OPINION

BOGGS, Circuit Judge.

NGS American, Inc., ("NGS") is a Michigan-based, third-party administrator of the Flint Ink Corporation Employees Group Medical Benefit Plan ("the Plan") in Florida. Mickey Jefferson's wife Bernetta received services as a beneficiary under the Plan. She died in the hospital two weeks after giving birth to the Jeffersons' son, of a condition that Mickey Jefferson claims was readily detectable and treatable. On November 19, 1997, Jefferson served NGS and the health care providers who he claims were responsible for his wife's death with a pre-suit Notice of Intent to Initiate Litigation, as required by Florida state law in medical malpractice lawsuits.¹ The notice informed NGS of the imminent suit for failure to monitor and treat appropriately, failure to diagnose the patient's true condition, and for discouraging the health care providers from incurring costs for necessary treatment.

Apparently energized by that notice, NGS brought suit against Jefferson in federal court in Michigan on December 23, 1997, seeking a declaration that any state-court claims would be preempted under 29 U.S.C. § 1144, the Employee Retirement Income Security Act preemption provision. Jefferson filed suit in Dade County, Florida, court in January 1998. Because Florida law requires a 90-day waiting period between giving notice and filing suit in medical malpractice cases, NGS brought suit in federal court before Jefferson could legally file his state court action.² Jefferson moved to dismiss NGS's action for lack of personal jurisdiction, because he lives in Florida and has no ties to Michigan. NGS responded that the ERISA nationwide service of process provision suffices to establish personal jurisdiction in an action to enforce ERISA's preemption provision.³ The district court held a hearing and ordered supplemental briefing on an issue raised therein. Both parties complied, and NGS also filed an Amended Complaint seeking an injunction barring prosecution of Jefferson's state-court claims in addition to declaratory relief.

In a September 30, 1998 order, the district court held that § 1132(e)(2) does not apply to NGS's case and dismissed it for lack of personal jurisdiction. The question presented on appeal is whether the district court erred in deciding that ERISA's nationwide service of process provision does not suffice to establish personal jurisdiction over Jefferson in this case. NGS asserts that it is a fiduciary, and that its action seeking injunctive and declaratory relief has been brought under § 1132(a)(3) to enforce 29 U.S.C. § 1144, which states that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan. . . ." 29 U.S.C. § 1144(a). Jefferson responds that NGS's status as an ERISA fiduciary and the existence of an employee benefit plan governed by ERISA have not been proven. Jefferson also denies that § 1132(a)(3) authorizes NGS's action and notes that NGS has raised the ERISA preemption issue in its motion to dismiss the Florida lawsuit, which the state court has stayed pending the resolution of this appeal.

This court reviews de novo the district court's dismissal for lack of personal jurisdiction. See Nationwide Mut. Life Ins. Co. v. Tryg Int'l Ins. Co., 91 F.3d 790, 793 (6th Cir. 1996). Since we ultimately conclude that the district court lacked jurisdiction over Jefferson, we merely assume for purposes of analysis that NGS is a fiduciary and that ERISA governs Jefferson's benefit plan. Because we agree with the district court that NGS's action in no way enforces an ERISA provision and is not "an action under this subchapter" to which personal jurisdiction might attach, we affirm.

I

As an initial matter, we note that federal courts frown upon declaratory judgment actions brought for procedural fencing purposes. See Allstate Ins. Co. v. Mercier, 913 F.2d 273, 277 (6th Cir. 1990) (listing 'procedural fencing' and providing 'an arena for a race for res judicata' as factors to consider in declining to render a prayed-for declaration); Factors Etc., Inc. v. Pro Arts, Inc., 579 F.2d 215, 219 (2d Cir. 1978) ("When the declaratory judgment action has been triggered by a notice [of suit] letter, this equitable consideration may be a factor in the decision to allow the later filed action to proceed to judgment in the plaintiffs' chosen forum"); Sturge v. Diversified Transp. Corp., 772 F. Supp. 183, 186 (S.D.N.Y. 1991) (dismissing without prejudice an action filed by underwriters seeking declaration of no liability under an oil spill clean-up policy, where the contractors' giving notice of suit in state court to the underwriters triggered the action's filing, and the claims were essentially defenses assertable in state court); Dresser Indus., Inc. v. Insurance Co. of North Am., 358 F. Supp. 327, 330 (N.D. Tex. 1973) (noting that the Declaratory Judgment Act affords a new form of relief where needed, not a new choice of tribunals or the ability to draw into federal courts the adjudication of causes properly cognizable by state courts) (emphasis added); First Fed. Sav. & Loan Ass'n of Bowling Green, Ky. v. McReynolds, 297 F. Supp. 1159, 1161 (W.D. Ky. 1969) (noting that the Declaratory Judgment Act does not permit a party to invoke the jurisdiction of the federal courts by simply commencing a declaratory-judgment action before the other party is able to commence its nonremovable coercive action in state court). See generally, 10A Charles A. Wright et al., Federal Practice and Procedure § 2758 (3d ed. 1998); 12 James Wm. Moore et al., Moore's Federal Practice, § 57.42[3] (3d ed. 1997).

In essence, NGS seeks a federal forum for determination of the ERISA preemption issue in the underlying state-court case. Even if NGS were entitled to a federal forum as a matter of law, its manner of vindicating that right is not immaterial. Removal is the standard method to seek the hearing of a federal claim in a federal rather than a state court. NGS purports to enforce ERISA preemption via its action for injunctive and declaratory relief, but such relief could only ever be appropriate when removal is mandatory (if then). Thus, NGS effectively seeks a removal determination in a forum other than "the district court of the United States for the district and division within which [the state court] action is pending" in contravention of the federal removal statute. 28 U.S.C. § 1446(a). That is procedural fencing taken to the extreme. Although the Eighth Circuit has entertained a declaratory action similar to the one brought by NGS, personal jurisdiction was not at issue there, the court was the same in which removal would be sought, and the court determined that the plaintiff's action did not represent "an improper use of the declaratory judgment to seek a favorable forum." Prudential Ins. Co. of Am. v. Doe, 140 F.3d 785, 790 (8th Cir. 1998) ("Doe II"). But see International Assoc. of Entrepreneurs of Am. v. Angoff, 58 F.3d 1266, 1270 (8th Cir. 1995) (refusing to issue a declaratory judgment after an unsuccessful removal attempt and holding that "the Declaratory Judgment Act is not to be used to bring to the federal courts an affirmative defense which can be asserted in a pending state action").

Without pretending to divine the motives of NGS in bringing this action where it did, this court may nevertheless take note that a rule permitting the action could frustrate a plaintiff's choice of forum and encourage forum shopping, races to the courthouse, needless litigation occasioning waste of judicial resources, delay in the resolution of controversies, and misuse of judicial process to harass an opponent in litigation. NGS intimates that Congress has already permitted any such ill effects because ERISA provides for injunctive relief (explicitly) and declaratory relief (implicitly). The extent of such provision remains to be determined, but we expect Congress would more clearly indicate that a statute impinges on removal jurisdiction than it has in ERISA's text, especially where an interpretation allowing such impingement raises further questions about the scope of the Anti-Injunction Act and abstention under Younger and its progeny. See 28 U.S.C. § 2283; Younger v. Harris, 401 U.S. 37 (1971); see also Juidice v. Vail, 430 U.S. 327 (1977) (extending Younger to all federal civil proceedings).⁴

Some courts have taken the abstention route to thwart procedural fencing in the ERISA context. See Prudential Ins. Co. of Am. v. Doe, 76 F.3d 206, 210 (8th Cir. 1996) ("Doe I") and Doe II, 140 F.3d at 789 (holding that the Declaratory Judgment Act provided jurisdiction for a declaratory action even if ERISA did not and noting that the district court could consider Brillhart abstention on remand of an ERISA declaratory action); Transamerica Occidental Life Ins. Co. v. DiGregorio, 811 F.2d 1249 (9th Cir. 1987) (holding that the district court lacked jurisdiction under ERISA, had discretionary jurisdiction under the Declaratory Judgment Act, but was permitted to abstain under Brillhart). Personal jurisdiction was not at...