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Abadie v. CCG Systems, Inc.

United States District Court, E.D. Virginia, Norfolk Division

April 28, 2015

PAMELA J. ABADIE FORMERLY PAMELA J. NELSON, Plaintiff,
v.
CCG SYSTEMS, INC. EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST, Defendant

          For Pamela J. Abadie, formerly known as Pamela J. Nelson, Plaintiff, Counter Defendant: John Frederick Sawyer, Samuel Warrenton Meekins, Jr., LEAD ATTORNEYS, Wolcott Rivers Gates P. C., Virginia Beach, VA USA.

         For Ccg Systems, Inc. Employee Stock Ownership Plan And Trust, Defendant, Counter Claimant: James Richard Theuer, LEAD ATTORNEY, James R. Theuer, PLLC, Norfolk, VA USA; Lars Calvin Golumbic, Natasha Sophia Fedder, PRO HAC VICE, Groom Law Group, Chartered, Washington, DC USA.

         MEMORANDUM SHOW CAUSE ORDER

         REBECCA BEACH SMITH, Chief United States District Judge.

         This matter comes before the court on the Notice of Removal filed by CCG Systems, Inc. Employee Stock Ownership Plan and Trust (the " Plan" ) on April 17, 2015. ECF No. 1

         I. FACTS AND PROCEDURAL HISTORY

         Pamela Jo Abadie, formerly Pamela J. Nelson (" Abadie" ), is the former president and former majority stockholder of CCG Systems, Inc. (" CCG" ). Exh. A, Notice of Removal [hereinafter Compl. ] ¶ 1, ECF No. 1-1.[1] CCG was a closely held corporation, and Abadie rewarded her employees with shares of stock. Id. ¶ ¶ 4-5. In 2003, the decision was made to create an employee stock ownership plan (" ESOP" ), which eventually became the Plan. The Complaint alleges that Abadie and the other shareholders, who were all employees of CCG, sold their shares of CCG stock to the Plan in exchange for promissory notes and cash. Id. ¶ ¶ 8-9. The promissory note (the " Note" ) executed between Abadie and the Plan -- of which Abadie was the trustee at the time -- was for a total of $2,399,358.00 at a per annum interest rate of 5.0%. Promissory Note, Ex. A. to Compl. The Note was issued without recourse against the Plan or its assets, meaning that the lender's only remedy for a breach of contract is against any collateral pledged. Id. Abadie has not worked for CCG or held a fiduciary position with the Plan since February of 2009. Compl. ¶ 11-

         The Plan regularly made payments to Abadie on the Note from 2005 through 2012. See Loan Amortization Schedule, Exh. B. to Compl. However, Abadie claims that in July 2013, the Plan, through counsel, demanded that she enter into a new promissory note that would reduce the remaining balance owed from $1,897,168 to $738,751. Compl. ¶ 13. Abadie alleges that, in order to compel her to enter into this revised agreement, the Plan refused to continue to make payments to her and advised her that her payments were being " escrowed," although it never identified an escrow agent. Compl. ¶ ¶ 14-15. The Plan, in the Notice of Removal, contends that a Department of Labor investigation revealed " evidence of various violations of the Employee Retirement Income Security Act (" ERISA" ) by Abadie in the formation of the Plan, which occurred while Abadie was in the conflicted roles of the Company's CEO, trustee, and majority shareholder." Notice of Removal ¶ 14. The Plan contends that it contacted Abadie in an attempt to amend the Note in order to bring it into compliance with ERISA, an offer which Abadie declined. Id. ¶ ¶ 16, 18. As a consequence, the Plan began to place the payments to her in an escrow account. Id. ¶ 18.

         On March 13, 2015, Abadie filed a Complaint against the Defendant in the Circuit Court of the City of Virginia Beach, seeking a judgment " for the amounts due her pursuant to the Promissory Note for 2013 and 2014, and any others that may accrue in the course of this litigation, for the costs incurred as a result of this action, and for such other and further relief the Court deems appropriate in this matter." Compl. at 4.

         On April 17, 2015, the Plan removed the action to this court pursuant to 28 U.S.C. § § 1441 and 1446. Although the Plan acknowledges that " federal jurisdiction is not expressly presented on the face of the plaintiff's complaint," it claims that the action may nevertheless be removed because " it falls within the class of claims to which the doctrine of 'complete preemption' applies." Notice of Removal ¶ 25. Specifically, the Plan argues that " ERISA is one of the particular subject matter areas in which Congress has completely preempted groups of ERISA qualified plan-related claims." Id. ¶ 26. Because the Plan's claim involves a loan made to an ESOP, which is covered by ERISA, it maintains that ERISA's comprehensive statutory scheme " completely preempt[s] and federalize[s] Abadie's claim that she is entitled to relief based on [its] alleged breach of the [promissory note]." Id. ¶ 32.

         II. ANALYSIS

         Although Abadie has not yet contested this court's jurisdiction over this matter, " questions concerning subject-matter jurisdiction may be raised at any time by either party or sua sponte by this court." Plyler v. Moore, 129 F.3d 728, 731 n.6 (4th Cir. 1997); 28 U.S.C. § 1447 (" If at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." ). While the Plan asserts that federal question jurisdiction is satisfied in this case because Abadie's state law claim is completely preempted by ERISA, questions remain that need to be addressed before this court assumes jurisdiction of this case.

         First, a case that is filed in state court may only be removed to federal court by a defendant, if such a case could have been filed in federal court originally. 28 U.S.C. § 1441(a) (" [A]ny 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." ); Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). The burden of demonstrating such subject matter jurisdiction " resides with the party seeking removal." Sonoco Prods. Co. v. Physicians Health Plan, Inc., 338 F.3d 366, 370 (4th Cir. 2003) (internal citation omitted). Moreover, federal courts " are obliged to narrowly interpret removal jurisdiction because the removal of proceedings from state courts raises significant federalism concerns." Id. (internal citation omitted). If removal is based on federal question jurisdiction, the federal question must ordinarily appear on the face of the state complaint. Metro. Life Ins. Co., 481 U.S. at 63. Pursuant to this " well-pleaded complaint rule," a federal issue that may be raised as a defense, such as federal preemption, does not suffice to confer subject-matter jurisdiction on the case. Id. However, when a federal statutory scheme is so comprehensive that it encapsulates any related state claims, courts have deemed such claims to be completely preempted by the federal statutory scheme. Id. at 63-64 (" Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." ). In other words, the state law claim is recharacterized as an action arising under federal law. Id. at 64. This " complete preemption" doctrine has only been extended to certain comprehensive statutes, one of which is ERISA. Aetna Health Inc. v. Davila, 542 U.S. 200, 209, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (" Therefore, any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted." ).

         However, a state claim may be preempted by ERISA without being completely preempted, and, therefore, it is not removable to federal court. Sonoco, 338 F.3d at 371 (" The fact that a state law claim is 'preempted' by ERISA - i.e., 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." ). In order for a claim to be completely preempted by ERISA's comprehensive scheme, and therefore removable, the Court of Appeals for the Fourth Circuit has recognized three " essential requirements" :

(1) the plaintiff must have standing under § 502(a) to pursue its claim; (2) its claim must fall within the scope of an ERISA provision that it can enforce via § 502(a); and (3) the claim must not be capable of resolution without an interpretation of the contract ...

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