author: COHILL, Chief Judge.

text:
    Michael L. KILMER and Mark A. Kilmer, Plaintiffs, v. CENTRAL COUNTIES BANK, individually and t/d/b/a CCB Group Medical Plan, Defendant.
    Civ. A. No. 83-1007.
    United States District Court, W.D. Pennsylvania.
    Dec. 9, 1985.
    Richard M. Serbin, Levine, Reese & Serbin, Altoona, Pa., for plaintiffs.
    Mary L. Silverberg, Paul A. Manion, Manion, Alder & Cohen, Pittsburgh, Pa., for defendant.
   OPINION

COHILL, Chief Judge.

Presently before the court are the Plaintiffs’ and Defendant’s motions for summary judgment. This action was initially commenced in the Court of Common Pleas of Blair County, Pennsylvania then removed by Defendant to this court. The issues before us are: 1) whether this action was properly removed from state to federal court, and 2) whether Plaintiffs’ claim under state law is preempted by the Employee Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. §§ 1001-1461 (1982). Facts

On July 31, 1982, Plaintiff, Mark A. Kilmer, the son of Plaintiff, Michael L. Kilmer, was seriously injured in a vehicular collision on Route 220, Snyder Township, Blair County, Pennsylvania. At the time of the accident, Mr. Kilmer maintained medical coverage with Donegal Mutual Insurance Company, his no-fault carrier. In addition, Mr. Kilmer maintained medical coverage with the CCB Group Medical Plan, an employee benefit plan which was provided by his employer, Central Counties Bank. Since the commencement of this action, Central Counties Bank has been acquired by Mellon Bank, N.A.

On January 1, 1982, Central Counties Bank altered its health care coverage from a plan insured by an outside company, Blue Cross/Blue Shield, to its current self-insured coverage. As such, the bank relied on its general assets as a basis for coverage instead of purchasing insurance.

Pursuant to this change in coverage, the CCB Group Medical Plan no longer provided primary insurance and would only pay claims which were not covered by another insurer. The Plan’s “Coordination of Benefits” section provides for the reduction of a participant’s benefits in proportion to any additional coverage which is similar to those benefits provided binder the plan. Specifically, Article VI, 116.8(a) provides:

6.8 If a person who is covered for any benefits under this Plan (to which this provision applies) is covered simultaneously under any other plan, which provides health benefits similar to those provided under this Plan, payment of benefits for that person under this Plan shall be resolved in accordance with the following order of benefit determination: a. If any other plan does not contain provisions which would coordinate its benefits or reduce its benefits by any benefits paid or payable under this Plan, benefits of the other plan shall be determined prior to determination of the benefits of this Plan.

Stipulation of Facts, at Exhibit 2. Furthermore, the “General Exclusions” section of the CCB Group Medical Plan does not cover claims due to injury or sickness “to the extent that payment is made or required to be made under the terms of any ‘No-Fault’ type of automobile provision.” Article X, 1110.13. In response to these amendments, the monthly premium for adding a family member to coverage under the CCB Group Medical Plan was reduced from $8.00 to $5.00.

On November 23,1982, Johnson Administrators, who were responsible for managing the CCB Group Medical Plan, received a claim for the medical benefits which had already been reimbursed by Mr. Kilmer’s no-fault carrier. On January 13, 1983, Johnson Administrators rejected the claim for the reason that the CCB Group Medical Plan was self-funded and therefore governed by ERISA, which preempted the Pennsylvania No-Fault Motor Vehicle Insurance Act, 40 P.S. §§ 1009.101-1009.701, repealed and superseded by the Motor Vehicle Financial Responsibility Law, 75 Pa.C. S.A. §§ 1701-1798, as amended (effective October 1, 1984).

On March 2, 1983, Plaintiffs filed a complaint in assumpsit in the Court of Common Pleas of Blair County, Pennsylvania. Plaintiffs have based their claim for 'the recovery of medical expenses upon § 203 of the No-fault Act, 40 P.S. § 1009.203, which has been interpreted by Pennsylvania courts to allow double recovery under limited circumstances. See, e.g., Steppling v. Pennsylvania Manufacturers’ Ass’n In surance Co., 328 Pa.Super. 419, 477 A.2d 515 (1984) (§ 203 of No-fault Act, when read in conjunction with § 106, permits double recovery from no-fault carrier where medical expenses have already been reimbursed by Blue Cross).

On April 28, 1983, Defendant filed a petition to remove the present action to this court pursuant to 28 U.S.C. § 1441, which confers federal removal jurisdiction over any civil action over which the district courts would have had jurisdiction had the case been brought there originally.

In its petition, the Defendant asserts that this court has original jurisdiction under § 502(e)(1) of ERISA, 29 U.S.C. § 1132(e)(1), and that Plaintiffs’ claim may be removed to this court pursuant to 28 U.S.C. § 1441. Specifically, § 502(e)(1) provides as follows:

(e) Jurisdiction

(1) Except for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary, or fiduciary. State courts of competent jurisdiction and district courts of the United States shall have concurrent jurisdiction of actions under subsection (a)(1)(B) of this section.

29 U.S.C. § 1132(e)(1). Section 502 (a)(1)(B) provides:

(a) Persons empowered to bring a civil action
A civil action may be brought—
(1) by a participant or beneficiary—
(B) 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;

29 U.S.C. § 1132(a)(1)(B). Alternatively, the Defendant contends that this court has original jurisdiction pursuant to 28 U.S.C. 1331 since Plaintiffs’ claim arises under the laws of the United States (i.e., ERISA) and a federal question is presented.

Subsequently, the Plaintiffs filed an answer to Defendant’s petition for removal on May 4, 1983. On May 31, 1983, Defendants filed their answer to Plaintiffs’ complaint. A stipulation of facts was agreed upon, and both parties then filed their respective motions for summary judgment. Before the court can address the merits of the case, it must determine whether its removal jurisdiction is proper. 28 U.S.C. § 1447(c).

DISCUSSION

1. Removal Jurisdiction of this Court

At the outset, we note that removal jurisdiction is derivative in nature. “If the state court lacks jurisdiction of the subject matter or of the parties, the Federal court acquires none, although it might in a like suit, originally brought there, have had jurisdiction.” Lambert Run Coal Co. v. Baltimore & Ohio R.R., 258 U.S. 377, 382, 42 5. Ct. 349, 351, 66 L.Ed. 671 (1922). Since ERISA provides for concurrent state and federal jurisdiction of claims to recover benefits under the terms of a plan, 29 U.S.C. § 1132(a)(1)(B), we are not faced with such a problem here. However, all other ERISA civil actions are matters over which federal courts have exclusive jurisdiction. 29 U.S.C. § 1132(e)(1).

In light of the fact that federal courts are courts of limited jurisdiction, the removal statute involved here, 28 U.S.C. § 1441, must be strictly construed, and the burden of establishing federal jurisdiction is upon the removing party. See American Fire & Casualty Co. v. Finn, 341 U.S. 6, 10, 71 S.Ct. 534, 538, 95 L.Ed. 702 (1951); Salveson v. Western States Bankcard Ass’n, 731 F.2d 1423, 1426 (9th Cir.1984); LaChemise Lacoste v. The Alligator Co., 506 F.2d 339, 344 (3d Cir.1974), cert. denied, 421 U.S. 937, 95 S.Ct. 1666, 44 L.Ed.2d 94, reh’g denied, 421 U.S. 1006, 95 S.Ct. 2408, 44 L.Ed.2d 674 (1975); Brunwasser v. Mulvihill, 490 F.Supp. 965 (W.D.Pa.1980) (Cohill, J.). The Supreme Court has interpreted the removal statute as reflecting a congressional policy of severe abridgement of the right to remove a state action to federal court. Phillips Petroleum Co. v. Texaco, 415 U.S. 125, 94 S.Ct. 1002, 39 L.Ed.2d 209 (1974); Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 872, 85 L.Ed. 1214 (1941).

Defendant’s removal petition contends that Plaintiffs’ state law claim is, in essence, for the recovery of benefits allegedly due under an ERISA plan; thus, Plaintiffs’ claim arises under federal law. However, it is axiomatic that a case arises under federal law only if a federal question appears on the face of the Plaintiffs’ well-pleaded complaint unaided by the answer or petition for removal. See, e.g., Gully v. First National Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936); Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908); Westmoreland Hospital Ass’n v. Blue Cross of Western Pennsylvania, 605 F.2d 119, 122 (3d Cir.1979), cert. denied, 444 U.S. 1077, 100 S.Ct. 1025, 62 L.Ed.2d 759 (1980). Since removal jurisdiction exists only if jurisdiction would originally have been proper in federal court, the “well-pleaded complaint” rule applies to removal cases as well. Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983); Hunter v. United Van Lines, 746 F.2d 635, 639 (9th Cir.1984).

Therefore, the fact that a defendant may assert an affirmative defense grounded upon federal law is not a basis for federal jurisdiction. A federal right or immunity must be ascertained as an essential element of the plaintiff’s cause of action for the lawsuit to be maintained in federal court. See Gully v. First National Bank, 299 U.S. at 112, 57 S.Ct. at 97, 81 L.Ed. at 72. Thus, a defendant cannot remove a state law claim from state to federal court even if his defense is based entirely on federal law. See Northeast Dept. ILGWU v. Teamsters Local Union No. 229 Welfare Fund, 764 F.2d 147 (3d Cir.1985).

When applying the above principle, courts have consistently held that “the party who brings a suit is master to decide what law he will rely upon.” The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25, 33 S.Ct. 410, 411, 57 L.Ed. 716 (1913); Moreover, “where plaintiff’s claim involves both a federal ground and a state ground, the plaintiff is free to ignore the federal question and pitch his claim on the state ground.” Salveson v. Western States Bankcard Ass’n, 731 F.2d at 1427 (quoting 1A Moore’s Federal Practice H 0.160 at 185 (2d ed. 1979)). “Great weight is therefore given to plaintiff’s chosen forum, and any legitimate doubts as to the existence of federal jurisdiction must be resolved against removal and in favor of remand.” Stokes v. Bechtel North American Power Corp., 614 F.Supp. 732, 736 (N.D.Cal.1985).

Applying these principles to Plaintiffs’ complaint in the instant case, there does not appear to be a basis for federal jurisdiction since the claim asserted in the complaint does not explicitly rely upon ERISA or any other federal statute. Plaintiffs’ claim is grounded solely upon § 203 of Pennsylvania’s No-fault Act. Thus, the present cause of action appears to be governed by state law and the CCB Group Medical Plan concededly could not have removed the present action to this Court on the basis of the literal recitals of Plaintiff’s complaint.

On the other hand, several courts have found removal proper under circumstances analogous to those presented here. See, e.g., Chilton v. Savannah Foods, Inc., ESOP, (S.D.Ga.1985); Tolson v. Retirement Committee of the Briggs & Stratton Retirement Plan, 566 F.Supp. 1503 (E.D. Wis.1983); McConnell v. Marine Engineers Beneficial Association, 526 F.Supp. 770, 773 (N.D.Cal.1981); Leonardis v. Local 282 Pension Trust Fund, 391 F.Supp. 554, 557 (E.D.N.Y.1975). See also Roe v. General American Life Insurance Co., 712 F.2d 450 (10th Cir.1983) (removal proper because plan was regulated under ERISA). However, a definite split of authority exists as some courts have taken an opposite view. See e.g., Taylor v. General Motors Corp., 763 F.2d 216 (6th Cir.1985) (removal of action alleging state claims was improper despite contention that ERISA governed plan); Lederman v. Pacific Mutual Life Insurance Co., 494 F.Supp. 1020 (C.D. Cal.1980) (removal improper because plaintiff has choice of forum). The Court of Appeals for the Third Circuit has not, to our knowledge, addressed this issue.

2. Federal Preemption and the “Artful Pleading” Doctrine

Defendant argues that Plaintiffs’ claim is preempted by ERISA’s broad preemption clause, 29 U.S.C. § 1144, which displaces all state laws which relate to any employee benefit plan as described in ERI-SA. Generally, preemption is a defense and therefore “can not be considered when determining whether the complaint contains any federal question claims which support federal court jurisdiction.” Shiffler v. Equitable Life Assurance Society of the United States, 609 F.Supp. 832, 835 (E.D.Pa.1985). In Trent Realty Associates v. First Federal Savings and Loan Association of Philadelphia, 657 F.2d 29 (3d Cir.1981), the court noted:

Experienced litigators may almost certainly expect that a defendant will assert federal preemption if that doctrine supports its position, but this anticipated defense is indistinguishable for this purpose from the defense that federal law precludes maintenance of the state claim. Because the unavailability of removal in the latter situation is solidly entrenched, Louisville & Nashville R.R. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908), we can find no basis for removal jurisdiction in the anticipated defense of federal preemption.

657 F.2d at 35. Thus, subject matter jurisdiction is not conferred upon the court solely by the defendant invoking the defense of preemption.

However, an independent corollary of the well-pleaded complaint rule is the “artful pleading” doctrine which provides that a plaintiff may not defeat removal by omitting to plead necessary federal questions in a complaint. Franchise Tax Board, 463 U.S. at 22, 103 S.Ct. at 2853. The “artful pleading” doctrine is a form of judicial construction wherein the court examines the underlying nature of a complaint when the plaintiff has improperly attempted to defeat removal by pleading what in actuality is a federal cause of action, albeit disguised as a state claim.

Under “artful pleading,” instead of simply accepting the literal recitals of a plaintiff’s complaint—which would result in a remand by the federal court for lack of subject matter jurisdiction when the claim arises under state law—the district court (a) recharacterizes plaintiff’s state law claims as federal claims, (b) exercises jurisdiction over them, and (c) proceeds to consider whether the plaintiff should prevail under federal law. Hunter v. United Van Lines, 746 F.2d at 641.

In Salveson v. Western States Bankcard Association, 731 F.2d at 1427, the Ninth Circuit Court of Appeals stated that “[t]he artful pleading doctrine is to be invoked only in exceptional circumstances as it raises difficult issues of state and federal relationships and often yields unsatisfactory results.” While there is no concrete definition of what circumstances are “exceptional,” the doctrine applies in the preemption context when plaintiff has a federal claim to assert and attempts to defeat removal by fraudulent means or by “artfully” characterizing a federal cause of action as a state law claim. Hunter, 746 F.2d at 642. Recognizing the difficulty in drawing a distinction between the well-pleaded complaint cases, which are non-removable, and the “artful pleading” cases, which are removable, the Court in Hunter set forth guidelines for determining whether to apply the artful pleading doctrine. First, the court must determine whether federal preemption exists; if not, there is no federal jurisdiction, and remand is the proper course. If preemption exists, the court-must then determine whether a remedy is provided by federal law. As the Court in Hunter stated:

“Thus, at least in this Circuit, removal is improper when federal law simply displaces state law without replacing the state cause of action with a federal one. When federal law displaces state law without supplanting it, a plaintiff cannot be deemed to be attempting to avoid a federal cause of action; there is no federal cause of action to avoid. In such a case, federal preemption operates only as a defense.

746 F.2d at 643 (footnote omitted); see also Guinasso v. Pacific First Federal Savings & Loan Ass’n, 656 F.2d 1364, 1367 (9th Cir.1981), cert. denied, 455 U.S. 1020, 102 S.Ct. 1716, 72 L.Ed.2d 138 (1982).

In Garibaldi v. Lucky Food Stores, Inc., 726 F.2d 1367 (9th Cir.1984), cert. denied,—U.S.-, 105 S.Ct. 2319, 85 L.Ed.2d 839 (1985), the court held that the plaintiffs state law claims could be recharacterized as federal claims since the state law was preempted by federal law, and it was apparent from a review of the complaint that federal law provided a cause of action to remedy the wrongs asserted in plaintiffs complaint. See also Fristoe v. Reynolds Metal Co., 615 F.2d 1209 (9th Cir.1980) (removal was proper because an alleged breach of a collective bargaining agreement states on its face an action under the federal Labor Management Relations Act). The Garibaldi court appeared to discourage a removal court from looking beyond the four corners of the complaint in order to determine whether removal was proper under the artful pleading doctrine. 726 F.2d at 1370 n. 5. However, the Ninth Circuit Court, in Olguin v. Inspiration Consolidated Copper Co., 740 F.2d 1468 (9th Cir.1984), laid to rest its earlier doubts when it stated:

The artful pleading doctrine would afford little protection if a plaintiff could avoid federal jurisdiction simply by leaving out material facts ... [T]he defendant’s removal petition may be considered because the plaintiff’s complaint—especially one that is “artfully pleaded”—is likely to omit facts necessary for the court to determine the true nature of the complaint____ We conclude that in determining whether a complaint is “artfully pleaded”, the court is not bound to consider only the facts pleaded in the complaint but may look elsewhere to ascertain facts that would appear in a “well pleaded” complaint. If on those facts it is apparent that the plaintiff can only proceed under federal law, the complaint is properly removable.

Id. at 1473 (citations omitted) (emphasis added). We find the reasoning of Olguin to be persuasive and directly applicable to the instant case. We also note that the rationale of Olguin has been applied in a recent Memorandum Opinion authored by District Judge Alan N. Bloch of this Court, which raises similar issues of preemption and artful pleading in an ERISA context. See Popovec v. United Technologies, C.A. No. 85-1611, slip op. at 6 (W.D.Pa. Oct. 4, 1985) (case remanded to state court because defendant’s petition to remove stated that at least part of the severance pay program at issue was not subject to ERISA preemption).

The artful pleading doctrine has most frequently been applied to cases which fall within the purview of § 301 of the Labor Management Relations Act (“LMRA”), see Avco Corp. v. Aero Lodge No. 735, Int’l Ass’n of Machinists, 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968), and it has been suggested that this doctrine is uniquely applicable to federal labor law issues. Eitmann v. New Orleans Public Service, Inc., 730 F.2d 359 (5th Cir.1984). In taking a restrictive view of the doctrine, some courts have declined to apply it to suits in which the claim based on state law is allegedly displaced by ERISA. See, e.g., Taylor v. General Motors Corp., 763 F.2d 216 (6th Cir.1985); Powers v. South Central United Food & Commercial Workers Unions and Employers Health & Welfare Trust, 719 F.2d 760 (5th Cir.1983); Bell v. Amcast Industrial Corp., 607 F.Supp. 486 (S.D. Ohio 1985).

However, the Supreme Court in Franchise Tax Board, stated that the artful pleading doctrine is not limited to labor law disputes. Relying on the principles articulated in Avco, Justice Brennan, speaking for a unanimous Court, stated:

Avco stands for the proposition that if a federal cause of action completely preempts a state cause of action any complaint that comes within the scope of the federal cause of action necessarily “arises under” federal law.
____It may be that as with § 301 [of the LMRA] as interpreted in Avco, any state action coming within the scope of § 502(a) of ERISA would be removable to federal district court, even if an otherwise adequate state cause of action were pleaded without reference to federal law.

Franchise Tax Board, 463 U.S. at 23-24, 103 S.Ct. at 2854 (footnotes omitted). While the Court in Franchise Tax Board ultimately found that the “artful pleading” doctrine was inapplicable there, it is evident from its analysis that where a complaint does not explicitly present federal claims, the lawsuit may be removed to federal court if a federal statute displaces the claim under state law. Id. See Shiffler, 609 F.Supp. at 836.

3. Application of the Above Principles

While there is no reference to ERI-SA on the face of Plaintiffs’ complaint, it does mention that the CCB Group Medical Plan provided the Plaintiffs with health insurance—the benefit which Plaintiffs seek to recover under their state law claim. However, as stated previously, this court is not bound by the four corners of Plaintiffs’ complaint, and “may look elsewhere” to clarify whether Plaintiffs’ claim encompasses an action within federal jurisdiction. Olguin, supra, 740 F.2d at 1473. While the Defendant’s petition to remove does not contain the magic word “preemption,” it clearly alleges that the present action falls within the exclusive parameters of ERISA. It also should be noted that prior to the filing of this lawsuit, Plaintiffs’ initial claim was rejected by Johnson Administrators, who informed Plaintiffs in a letter that ERISA preempted their claim. Despite this revelation, Plaintiffs proceeded to file the instant action in state court. Thus, the unique facts of this case are tailormade for the application of the artful pleading doctrine.

We must now examine whether, as Defendant alleges, Pennsylvania’s No-fault Act is preempted by ERISA. If there is no preemption, the inquiry ends, and the case must be remanded to state court. However, if it is ascertained that Plaintiffs’ claim is indeed preempted by ERISA, then the inquiry turns to whether or not ERISA confers an exclusive federal remedy. Hunter, supra, 746 F.2d at 642.

A) ERISA Preemption

As noted above, § 514(a) of ERISA contains a broad preemption clause which states that the statute 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). If a state law has a “connection with or reference to” an employee benefit plan, it “relates to” such a plan within the meaning of that section. Shaw v. Delta Air Lines Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2899-2900, 77 L.Ed.2d 490 (1983). While § 514(a) of ERISA broadly preempts state laws that relate to an employee benefit plan, that preemption is substantially qualified by § 514(b)(2)(A) of ERISA, the “insurance saving clause,” which broadly states that nothing in ERISA “shall be construed to exempt or relieve any person from any Jaw of any State which regulates insurance, banking or securities.” 29 U.S.C. § 1144(b)(2)(A). A single exemption to the “saving clause” is found in § 514(b)(2)(B), the so-called “deemer clause,” which states that no employee benefit plan, with certain exceptions not pertinent here, “shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company or to be engaged in the business of insurance or banking for purposes of any law of any State purporting to regulate insurance companies, insurance contracts, banks, trust companies, or investment companies.” 29 U.S.C. § 1144(b)(2)(B).

Plaintiffs assert that § 203 of the Pennsylvania No-fault Act, 40 P.S. § 1009.203, is a statute regulating insurance and thus it is saved from preemption by the insurance saving clause of ERISA, 29 U.S.C. § 1144(b)(2)(A). Defendant counters by asserting that the “deemer clause” of § 514(b)(2)(B) governs the instant dispute since the ERISA-covered employee benefit plan is not to be deemed an insurance company or other insurer for purposes of any state law regulating insurance. 29 U.S.C. § 1144(b)(2)(B).

The Supreme Court’s recent decision in Metropolitan Life Insurance Co. v. Massachusetts,—U.S.-, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985), interpreted the meaning and scope of the insurance saving clause, and is, we believe, dispositive of the present case. In Metropolitan Life, two insurance companies mounted a challenge against a Massachusetts statute that required all insurers, including those who sold policies to employee benefit plans, to provide insurance coverage for mental health care services. The insurers attacked the validity of the so-called mandated benefit law by contending that the state statute was preempted by ERISA. A unanimous Supreme Court rejected the insurers’ arguments and held that while the state statute clearly related to pension plans governed by ERISA, the Massachusetts statute was saved from preemption since it regulates insurance and is therefore subject to the insurance saving clause. Id. See also Dedeaux v. Pilot Life Insurance Co., 770 F.2d 1311 (5th Cir.1985) (Metropolitan Life applied; no preemption of state contract and tort claims); Michigan United Food and Commercial Workers Unions v. Baerwaldt, 767 F.2d 308 (6th Cir.1985) (Metropolitan Life applied; no preemption of state mandated benefit law requiring substance abuse coverage).

However, the Metropolitan Life Court went on to note:

We are aware that our decision results in a distinction between insured and uninsured plans, leaving the former open to direct regulation while the latter are not. By so doing we merely give life to a distinction created by Congress in the “deemer clause,” a distinction Congress is aware of and one it has chosen not to alter. We also are aware that appellants’ construction of the statute would eliminate some of the disuniformities currently facing national plans that enter into local markets to purchase insurance. Such disuniformities, however, are the inevitable result of the congressional decision to “save” local insurance regulation. Arguments as to the wisdom of these policy choices must be directed at Congress.

Id. at -, 105 S.Ct. at 2393 (footnote omitted). Thus, Metropolitan Life drew a distinction between insured plans, those plans which purchase insurance contracts, and self-insured plans, like that in the present case, which utilize an employer’s assets to provide coverage.

Applying Metropolitan Life to the instant case, it is indisputable that: 1) Defendant’s self-insured plan is not subject to state insurance regulation; 2) that it is preempted by ERISA; and 3) that it fails to come under the auspices of ERISA’s saving clause. Moreover, an attempt to treat Defendant as if it were an insurance company would clearly fly in the face of the “deemer clause”- which, as stated before, prohibits the characterization of an ERISA-covered plan as an insurance company. 29 U.S.C. § 1144(b)(2)(B). See Standard Oil Co. of California v. Agsalud, 633 F.2d 760 (9th Cir.1980), aff’d, 454 U.S. 801, 102 S.Ct. 79, 70 L.Ed.2d 75 (1981); Hewlett-Packard Co. v. Barnes, 571 F.2d 502 (9th Cir.1978) cert. denied, 439 U.S. 831, 99 S.Ct. 108, 58 L.Ed.2d 125 (1978).

At this juncture, we have determined that Plaintiffs’ claim is preempted by ERISA; thus the first step of the artful pleading analysis has been satisfied.

The next step is to determine whether ERISA confers a federal remedy in the matter which is comprehensive in scope and coextensive with available state remedies. Hunter, 746 F.2d at 642. If such a remedy exists under federal law, then the district court is “indeed presented with a complaint which has been artfully pled to defeat adjudication in the federal forum, and jurisdiction there is proper.” Stokes, 614 F.Supp. at 739.

B) The Federal Remedy Under ERISA

ERISA comprehensively regulates employee pension and welfare plans if they are established or maintained “by an employer engaged in commerce or in any industry or activity affecting commerce.” . 29 U.S.C. § 1003(a)(1). An employee welfare benefit plan or welfare plan is defined as one which provides to employees “medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability [or] death,” whether such benefits are provided “through the purchase of insurance or otherwise.” 29 U.S.C. § 1002(1). We conclude that the CCB Group Medical Plan is covered by the above provisions.

In addition, as noted above, § 502(a)(1)(B) of ERISA explicitly provides that a participant or beneficiary may bring a civil action to recover benefits due to him under the terms of his plan. 29 U.S.C. § 1132(a)(1)(B). Therefore, ERISA confers a federal remedy upon the plaintiffs and the final step of the artful pleading analysis has been completed. As such, this Court has indeed been presented with a complaint which has been artfully pled to avoid adjudication before it.

In summary, we conclude that Plaintiffs’ claim is preempted by ERISA, which provides a federal remedy. However, the ERISA remedy has been satisfied since Plaintiffs have already recovered their medical expenses from Donegal Mutual Insurance Company and, as stated above, Article X, If 10.13 of the CCB Group Medical Plan specifically excludes the recovery of medical benefits previously paid by a “no-fault” carrier. Thus, Plaintiffs’ claim for double recovery must fail.

CONCLUSION

It follows from the foregoing that Plaintiffs’ motion for summary judgment must be denied. Because we find that there are no material issues of fact in dispute, and that Defendant is entitled to judgment as a matter of law, we will grant Defendant’s motion for summary judgment.


source: Caselaw Access Project

author: PEREZ-GIMENEZ, Chief Judge.

license: Public Domain

text:
    Enrique ALVAREZ RICARDO, d/b/a Alvarez Esso Service Station, Plaintiff, v. Antonio E. MEDINA, et al., Defendants.
    Civ. No. 85-0340(PG).
    United States District Court, D. Puerto Rico.
    Dec. 9, 1985.

      Oswald Evan Perkins, Santurce, P.R., for plaintiff.
    Frederick R. Auld, San Juan, P.R., Osvaldo Carlo Linares, Hato Rey, P.R., for defendants.
   OPINION AND ORDER

PEREZ-GIMENEZ, Chief Judge.

The instant case was originally filed in the Superior Court of the Commonwealth of Puerto Rico, Carolina Part. Upon petition filed by the United States on February 8, 1985, the same was removed to this Court under 28 U.S.C. §§ 1346, 1441, 1442(a)(1), and 1446.

Plaintiff herein does business in the town of Carolina, Puerto Rico, as Alvarez Esso Service Station. The complaint alleges that business profits have been cut off due to lack of access to Puerto Rico Highway No. 3 as a result of a series of structural changes being carried on said highway. Plaintiff claims that the project is carried out with combined state and federal funds and that the regulations and norms of the Federal Highway Administration are applicable to the project. On March 4, 1985, defendant Commonwealth of Puerto Rico filed a motion praying for the dismissal of the action for lack of subject matter jurisdiction. The motion was grounded on the allegation that the Commonwealth is immune from suit under the Eleventh Amendment, as well as under the doctrine of sovereign immunity. On March 13, 1985, plaintiff opposed the motion stating that dismissal is not a correct solution.

The government’s motion and plaintiff’s opposition thereto were referred to the U.S. Magistrate on March 19, 1985. A report and recommendation was rendered on April 26, 1985, which plaintiff opposed on May 9, 1985.

As stated in the Magistrate's Report and Recommendation, there is no jurisdiction in this Court as to the Commonwealth of Puerto Rico. The Commonwealth of Puerto Rico enjoys sovereign immunity and cannot be sued without its consent. 32 L.P.R.A. § 3077. Ezratty v. Commonwealth of Puerto Rico, 648 F.2d 770, 776 (1st Cir.1981); Litton Industries, Inc. v. Colon, 587 F.2d 70, 74 (1st Cir.1978). Therefore, the Magistrate’s Report and Recommendation is hereby adopted and approved.

Thereafter, on April 17, 1985, a motion to dismiss was filed by the federal co-defendants. Plaintiff opposed this motion on May 8, 1985.

Turning to the motion to dismiss filed by the federal co-defendants, the same advances the argument that in order to be sued under the Federal Tort Claims Act (FTCA) plaintiff is required to present an administrative claim to the responsible federal agency prior to the initiation of the suit, and that under 28 U.S.C. § 2675(a) this is a jurisdictional requirement.

The federal defendants further aver that as a matter of fact plaintiff did not file the required administrative claim with the pertinent federal agency. It is finally alleged that federal agencies may not be sued eo nomine.

In his opposition thereto, plaintiff alleges that the suit has not been filed against the federal agency eo nomine, but instead, against the United States and the federal agency. He alleges that under 28 U.S.C. § 1346(a)(2) the United States is suable without regards to prior consent. Plaintiff further contends that this is not an action for damages.

We agree with plaintiff's contention to the extent that jurisdiction has not been invoked under the FTCA, 28 U.S.C. § 2671, et seq., and that the government’s arguments stemming therefrom are inapplicable to this case.

Rather, the complaint reveals that plaintiff has invoked jurisdiction over the United States under 28 U.S.C. § 1346(a)(2) and that no claim for damages has been made from the federal defendants. On this extreme we note that in the amended complaint filed with this Court on March 13, 1985, plaintiff alleged that as a result of the acts complained of “plaintiff is being damaged in an amount calculated at $2,000.00 per day from February 26, 1985 and at $900,000.00 gross volume income per year this ensuing 1985.” (Amended complaint, paragraph 8). In the prayer therein plaintiff requests that judgment be entered against defendant Antonio E. Medina, ordering him to pay plaintiff the damages caused at the rate of $2,000.00 per day to a maximum of no less than $900,-000.00 per year and reasonable attorney’s fees. Damages are solely sought from the state officer defendant. However, in a pri- or amended complaint filed on March 7, 1985, plaintiff requested judgment in said amount against all the defendants.

Although plaintiff amended the complaint and excluded the claim of damages against federal co-defendants on March 13, 1985, while he avoided the limitations set forth by the Federal Tort Claims Act, jurisdiction under the Tucker Act has not been met. The tactic to evade the Federal Tort Claims Act also renders the Court without jurisdiction under the Tucker Act. Portsmouth Redevelopment & Housing Auth. v. Pierce, 706 F.2d 471 (4th Cir.), cert. denied, 464 U.S. 960, 104 S.Ct. 392, 78 L.Ed.2d 336 (1983); Alamo Navajo School Board, Inc. v. Andrus, 664 F.2d 229, 233 (10th Cir.1981), cert. denied, 464 U.S. 963, 102 S.Ct. 2041, 72 L.Ed.2d 487 (1982).

Plaintiff invokes jurisdiction under the Tucker Act, 28 U.S.C. § 1346(a)(2). This section gives district courts concurrent jurisdiction with the Court of Claims over all civil actions or claims seeking damages of $10,000 or less. Army v. Air Force Exchange Service v. Sheehan, 456 U.S. 728, 734 n. 5, 102 S.Ct. 2118, 2122 n. 5, 72 L.Ed.2d 520 (1982). Section 1 of the Tucker Act, 28 U.S.C. § 1346(a)(2) provides in pertinent part:

The district courts shall have original jurisdiction concurrent with the Court of Claims of:
(2) Any other civil action or claim against the United States not exceeding $10,000 in amount founded in either upon the Constitution, or any Act of Congress or any regulation of an executive department, or upon any express or implied contract with the United States, or for liquidated or unliquidated damages in cases not sounding in tort.

Under the Tucker Act the jurisdiction of a district court has long been construed as limited to actions for money judgments. Werner v. U.S. Department of Interior, Fish & Wildlife, 581 F.2d 168, 171 (8th Cir.1978). Thus, the jurisdictional reliance upon 28 U.S.C. § 1346(a)(2) is misplaced. Richardson v. Morris, 409 U.S. 464, 93 S.Ct. 629, 34 L.Ed.2d 647 (1973); Alberio v. Hampton, 433 F.Supp. 447, 449 f.n. 1 (D.P.R.1977); Wham v. United States, 458 F.Supp. 147, 150 (S.Carolina 1970).

It has been held that when exercising jurisdiction under 28 U.S.C. § 1346(a)(2) a district court is not only limited to awarding damages, but is devoid of equitable powers and cannot grant injunctive relief. Lee v. Thorton, 420 U.S. 139, 95 S.Ct. 853, 43 L.Ed.2d 85 (1975); Bakersfield City School District of Kern County v. Byer, 610 F.2d 621, 628 (9th Cir.1979); Meladure Corp. v. United States, 490 F.Supp. 1368 (S.D.N.Y.1980); Trammel v. Callaway, 415 F.Supp. 212, 214 (N.D.Miss.1976); AccordGnotta v. U.S., 415 F.2d 1271 (8th Cir. 1969), cert. denied, 397 U.S. 934, 90 S.Ct. 941, 25 L.Ed.2d 115 (1970); Ostree v. Aronwall, 434 F.Supp. 379, 382 (S.D.N.Y.), aff'd, 567 F.2d 551 (1977).

We reject jurisdiction under the Tucker Act in the instant case. McKay v. United States, 703 F.2d 464, 470 (10th Cir. 1983). Not every claim invoking the Constitution, a federal statute or regulation is cognizable under the Tucker Act. The claim must be one for money damages against the United States and the claimant must demonstrate that the source of substantive law relied upon can be interpreted as mandating compensation by the federal government for the damages sustained. United States v. Mitchell, 463 U.S. 206, 209, 103 S.Ct. 2961, 2964, 77 L.Ed.2d 580 (1983).

WHEREFORE, in view of the foregoing, the motion to dismiss filed by the Commonwealth of Puerto Rico is hereby GRANTED; and the action is DISMISSED as to the federal co-defendants for the reasons stated herein. The case is REMANDED to the state court. Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 2nd, § 3739 at 585-586.

IT IS SO ORDERED.

      . Plaintiff alleged that a request to drop a party under Fed.R.Civ.P. 21 had been submitted to drop the Commonwealth Government.

      . Although plaintiff submits in his opposition to the Magistrate’s Report and Recommendation that the Commonwealth should be dropped as a party in order to preserve jurisdiction, plaintiff requests that co-defendant Antonio E. Medina remain in the action. However, on August 22, 1985, an informative motion was filed notifying that Antonio E. Medina was included in the action while he was acting as Executive Director of the Puerto Rico Highways Authority but that as of June 3, 1985, Germán Landrau Arroyo has been designated as the Executive Director of the Puerto Rico Highways Authority.


author: PHILIP PRATT, District Judge.

text:
    Elaine MONCRIEFF, Plaintiff, v. MERRILL, LYNCH, PIERCE, FENNER & SMITH, INC., and Hugh Mack, Defendants.
    Civ. No. 85-CV-73871-DT.
    United States District Court, E.D. Michigan, S.D.
    Dec. 10, 1985.
    Douglas G. Graham, Jack J. Mazzara, Butzel, Keidan, Simon, Myers & Graham, Detroit, Mich., for defendants.
    Abraham, Singer, Hertzberg, Jacob & Weingarten, P.C., Detroit, Mich., for plaintiff.
   MEMORANDUM OPINION AND ORDER

PHILIP PRATT, District Judge.

Plaintiff Elaine Moncrieff instituted this action against the defendant brokerage firm for alleged violations of federal and state securities laws. Plaintiff opened a series of accounts with defendant in the early and mid-1970’s. Each agreement contained a standard arbitration clause.

Any controversy between us [brokerage firm and customer] arising out of such option transactions or this agreement shall be settled by arbitration before the National Association of Securities Dealers, Incorporated, or the New York Stock Exchange, or an Exchange located in the United States upon which listed options transactions are executed, only____

There is no dispute that plaintiff executed these agreements. Plaintiff suffered substantial losses from May of 1980 until January of 1981. Because of these losses, plaintiff instituted suit against her brokerage firm on August 23, 1985. The complaint alleges violations of sections 12(a) and 17 of the Securities Act of 1933, Sections 9(a)(4) and 10(b) of the Securities Exchange Act of 1934, Rule 10(b)-5, the Investment Advisors Act of 1940, the Michigan Uniform Securities Act, rules of the Chicago Board Options Exchange, the American Stock Exchange, the New York Stock Exchange and the-National Association of Securities Dealers. Allegations sounding in fraud, negligence, breach of fiduciary duty, breach of contract, and failure to supervise are also contained in the plaintiffs complaint.

This matter is now before the court on defendant^s motion to compel arbitration of all of plaintiffs claims except those brought under the 1933 Securities Act. Defendant admits that claims made under the 1933 Act cannot be compelled to arbitration. The parties have submitted extensive briefs in this matter and they have been carefully reviewed by the court.

Section 3 of the Federal Arbitration Act, 9 U.S.C. § 3 permits a party to compel arbitration of any “issue referable to arbitration under an agreement in writing for such arbitration.” An exception, however, has been established by the Supreme Court for certain federal claims. In Wilko v. Swan, 346 U.S. 427, 74 S.Ct. 182, 98 L.Ed. 168 (1953), the Court held that an agreement to arbitrate issues which came within the 1933 Securities Act is invalid and unenforceable against an investor. Thus, the securities broker/dealer in Wilko was precluded from compelling the investor to submit the dispute to arbitration. As in the present case, the investor in Wilko alleged that defendant violated federal securities laws and corresponding state laws. Wilko, however, arose under only the 1933 Securities Act.

Going even further, several courts have applied Wilko to claims arising under the 1934 Exchange Act. Surman v. Merrill, Lynch, Pierce, Fenner & Smith, 733 F.2d 59 (8th Cir.1984) (Wilko applies to claims brought under 1934 Act and regulations promulgated thereunder), Mansback v. Prescott, Ball & Turben, 598 F.2d 1017 (6th Cir.1979) (holding of Wilko “equally applicable to cases arising under the Securities Exchange Act of 1934”). See also Merrill, Lynch, Pierce, Fenner & Smith, Inc. v. Moore, 590 F.2d 823, 827-29 (10th Cir.1978), Weissbuch v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 558 F.2d 831, 834-35 (7th Cir.1977), Ayres v. Merrill, Lynch, Pierce, Fenner & Smith, Inc., 538 F.2d 532, 536 (3d Cir.), cert. denied, 429 U.S. 1010, 97 S.Ct. 542, 50 L.Ed.2d 619 (1976).

Since these rulings, however, the U.S. Supreme Court has announced a strong preference for enforcement of arbitration agreements. In Dean Witter Reynolds, Inc. v. Byrd, 470 U.S.-, 105 S.Ct. 1238, 84 L.Ed.2d 158 (1985), the Supreme Court suggested, though did not decide, that Wilko did not apply to claims brought under the 1934 Act. Writing for the Court, Justice Marshall held that when a complaint raises both federal securities claims and pendent state claims, a federal court must compel arbitration “of otherwise arbitrable claims when a motion to compel arbitration is made.” At-, 105 S.Ct. at 1242.

Although the majority did not directly address the question of whether Wilko applies to section 10(b) and Rule 10(b)-5 claims, the Court in a footnote admitted that it had earlier questioned “the applicability of Wilko to claims under the 1934 Act because of the differences under the 1933 and 1934 Acts.” At-, n. 1, 105 S.Ct. at 1240 n. 1.

Justice White’s separate concurrence was more illuminating on this question. Under Wilko, Justice White wrote, the Court relied on three “interconnected statutory provisions of the 1933 Act.” Those were:

Section 14 of the Act, which voids any ‘stipulation ... binding any person acquiring any security to waive compliance with any provision of the Act’; Section 12(2), which—creates a ‘special right to recover for misrepresentation which differs substantially from the common-law action;’ and section 22, which allows suit in any state or federal court of competent jurisdiction and provides for nationwide service of process.

At-, 105 S.Ct. at 1244, citing 346 U.S. at 434-35, 74 S.Ct. at 186, 15 U.S.C. §§ 77n, 771(2), 77v.

“Wilko’s reasoning,” Justice White wrote, “cannot be mechanically transplanted to the 1934 Act.” Two major distinctions between the Acts—the narrower grant of jurisdiction under the 1934 Act. and nature (implied) of the cause of action under section 10(b) and Rule 10(b)-5— caused Justice White to intimate that Wilko was not applicable to such claims. He stated:

The Court has expressed these reservations before. Scherk v. Alberto-Culver Co., 417 U.S. 506, 513-514 [94 S.Ct. 2449, 2454, 41 L.Ed.2d 270] (1974). I reiterate them to emphasize that the question remains open and the contrary holdings of the lower courts must be viewed with some doubt.

At-, 105 S.Ct. at 1244.

As Justice White noted in his concurrence, the Supreme Court has previously questioned the proposition that claims under the 1934 Act are not arbitrable. In Scherk v. Alberto-Culver Co., 417 U.S. 506, 513-14, 94 S.Ct. 2449, 2454, 41 L.Ed.2d 270 the Court said, “[A] colorable argument could be made that even the semantic reasoning of the Wilko opinion does not control” claims made under the 1934 Act.

Furthermore, the Supreme Court has repeatedly emphasized the strong national policy favoring arbitration. Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 470 U.S.-, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985). The Court observed in the Byrd case,

[T]he preeminent concern of Congress in passing the Act [Arbitration Act, 9 U.S.C. § 1, et seq.] was to enforce private agreements into which parties had entered ... a concern which requires that we rigorously enforce agreements to arbitrate.

See e.g. Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983), Prima Paint Corp. v. Floor & Conklin Mfg. Co., 388 U.S. 395, 87 S.Ct. 1801, 18 L.Ed.2d 1270 (1967).

In opposition to the motion to compel arbitration, plaintiff rests on the case of Mansbach v. Prescott, Ball & Turben, et al., 598 F.2d 1017 (6th Cir.1979). In that case, the Sixth Circuit held that claims under the 1934 Act, such as those now before the court, are not subject to arbitration. Defendant questions plaintiff’s reliance on Mansbach given the Court’s recent pronouncement in Byrd along with the trend towards enforcing arbitration agreements.

A closer look at Mansbach supports defendant’s position. At the district court level, the court dismissed the federal claims in Mansbach’s complaint and stayed all action. The Sixth Circuit, citing Wilko and without further explanation, stated:

[w]hile Wilko arose under only the Securities Act of 1933, its holding and rationale are equally applicable to eases arising under the Securities Exchange Act of 1934.

598 F.2d at 1030. The court then listed a number of cases which reached the same result and did not provide further analysis or explanation.

Given the substantial differences between the 1933 and 1934 Act, which the Mansbach panel did not address, along with the Court’s recent teachings in Byrd and Mitsubishi, this court must question the precedential value of Mansbach. The trend in Supreme Court rulings is toward arbitrability in an increasing number of cases. Mitsubishi, 105 S.Ct. at 3354-55 (antitrust claims). Byrd, 105 S.Ct. at 1242, Moses H. Cone, 460 U.S. at 24, 103 S.Ct. at 941. The Sixth Circuit in Mansbach simply concluded that under Wilko arbitration was proper and did not address any of the concerns now raised by defendant. Additionally, the Mansbach panel did not have the benefit of the Court’s rulings in either Byrd or Mitsubishi.

Wilko is distinguishable from the present' case as noted by Justice White in his Byrd concurrence. This court recognizes that Mansbach is prior Sixth Circuit precedent, but its continued viability is highly questionable given the Supreme Court’s pronouncement in Byrd, and it appears to be prudent to decline respectfully from applying it as binding precedent in the case at bar.

The overwhelming majority of lower federal courts have accepted the Court’s invitation in Byrd and have ordered arbitration of claims under the 1934 Act and Rule 10(b)-5. E.g., Ross v. Mathis, 624 F.Supp. 110, Fed.See.L.Reptr. ¶! 92,343 (N.D.Ga.1985), Land v. Dean Witter, Reynolds, Inc., 617 F.Supp. 52 (E.D.Va.1985).

Under these circumstances, the court grants defendants’ motion to compel arbitration and orders this matter stayed for 90 days pending arbitration of the relevant claims. Thereafter, the parties are ordered to attend a conference before the court at 2:00 p.m. on Tuesday, March 18, 1986, to discuss the status of the case.

IT IS SO ORDERED.

      . Plaintiff and her now deceased husband executed a basic customer agreement with defendant on July 15, 1975. Standard option agreements were executed on December 13, 1977 and July 1, 1979. The three agreements contain substantially the same arbitration clause.

      . Defendant’s motion to compel arbitration was originally scheduled for oral argument on November 29, 1985. However, because of the thorough briefing of the issues involved, the court cancelled the hearing.

      . In Byrd, the petitioner brokerage firm and amici wanted the Court to consider the applicability of Wilko to actions brought under section 10(b) and Rule 10(b)~5. At the district court level, however, the defendant did not seek arbitration of these claims. Therefore, the Supreme Court held that the matter was not properly before it and declined to rule on the issue.


author: KRAM, District Judge.

text:
    Nadja De Magalhaes SPENCER, Plaintiff, v. BANCO REAL, S.A., Waldyr Bastos Jack Sitser and Newton Bleffe, Defendants.
    No. 79 Civ. 6318 (SWK).
    United States District Court, S.D. New York.
    Dec. 10, 1985.

      Vladeck, Waldman, Elias & Engelhard, P.C. by Judith Vladeck, New York City, for plaintiff.
    Epstein Becker Barsody & Green, P.C. by Gregory Hiestand, New York City, for defendants.
   MEMORANDUM OPINION AND ORDER

KRAM, District Judge.

PROCEDURAL BACKGROUND

On August 9,1979, plaintiff filed charges with the New York State Division of Human Rights and the Equal Employment Opportunity Commission (“EEOC”) alleging that defendant, Banco Real (“the Bank”), and the individual defendants had discriminated against her in the terms and conditions of her employment on the basis of her sex and national origin. One month later, the Bank discharged plaintiff, allegedly for wrongfully taking various confidential bank documents without authorization.

On November 9, 1979, the Bank instituted a replevin action in New York Supreme Court to recover the documents allegedly taken and sought an order enjoining the plaintiff from disseminating these documents. Additionally, the Bank asserted five causes of action, based on state law, in connection with the documents: conversion, trespass, unfair competition, tortious interference with business and contractual relationships, and breach of fiduciary duty. Plaintiff denied taking these documents and asserted three counterclaims, also based on state law: intentional infliction of physical and emotional distress, defamation, and abuse of process.

On November 13,1979, plaintiff filed two additional charges with the EEOC, claiming that both her discharge and the initiation of the state replevin action were in retaliation for the exercise of her rights under the Constitution and Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. (“Title VII”).

On November 15, 1979, two days after filing her retaliation charges, plaintiff removed the replevin action to this Court pursuant to 28 U.S.C. §§ 1441, 1443(1). Defendants then moved to remand the replevin action. On January 21, 1980, Judge Abraham Sofaer granted defendants’ motion and in a subsequent opinion, criticized the initial removal to federal court: “Irrespective of the merits of plaintiff’s claims, removal was clearly inappropriate.” (emphasis added).

Meanwhile, on November 26, 1979, while defendants’ motion to remand was sub judice, plaintiff instituted the instant Title VII action in federal court. In her complaint, plaintiff alleged that the defendants discriminated against her on the basis of sex, national origin, and marital status, and unlawfully retaliated against her while she was employed because she filed discrimination charges. Plaintiff also claimed that in further retaliation, the Bank instituted the state action.

In August, 1981, Judge Sofaer “So Ordered” a Stipulation and Order submitted by the parties which discontinued the state court action and provided that “the claims and counterclaims asserted in the state proceeding will be consolidated in this [federal] proceeding.” There is no indication that the parties offered any reason why Judge Sofaer’s initial finding that the federal court lacked subject-matter jurisdiction over the state court action should be reconsidered.

Pending before this Court are two motions: plaintiffs motion for partial summary judgment on three of defendant’s five counterclaims and both parties’ motions for the imposition of sanctions.

SUBJECT-MATTER JURISDICTION

Before addressing the pending motions, this Court, sua sponte, requested that the parties brief the issue of whether the Court has subject-matter jurisdiction over the state law claims raised by both parties.

After considering the briefs submitted by the parties, the Court concludes that subject-matter jurisdiction over the counterclaims interposed by the Bank does not exist, and thus, these claims should be dismissed. Additionally, since plaintiff’s state law claims were initially asserted solely in response to defendant’s counterclaims, and since these claims do not arise out of a common nucleus of operative fact with plaintiff’s Title VII claim, this Court declines to exercise pendent jurisdiction over plaintiff’s state law claims.

DISCUSSION

Ped.R.Civ.P. 13(a) requires a litigant to “state as a counterclaim any claim ... if it arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” Such counterclaims are denominated compulsory, and no independent basis of federal jurisdiction is needed for the court to adjudicate the ancillary issues thus raised, if the main claim itself presents a colorable federal issue. Harris v. Steinem, 571 F.2d 119, 121-22 (2d Cir.1978).

Fed.R.Civ.P. 13(b) allows a litigant to assert any non-compulsory counterclaim against an opposing party. Such unrelated counterclaims are referred to as permissive, since a party need not plead them, but instead may bring a separate action on the claim in the forum of his own choosing. Harris, 571 F.2d at 121-22. However, if a permissive counterclaim is raised in a federal district court, an independent jurisdictional ground must exist. Id. at 122.

This Court agrees with the parties’ contention that compulsory counterclaims fall under this Court’s ancillary jurisdiction. However, the parties have erroneously assumed that the Bank’s counterclaims are compulsory. In determining whether a counterclaim is compulsory, this Court must determine whether there is a “logical relationship” between the claim and the counterclaim. United States v. Aquavella, 615 F.2d 12, 22 (2d Cir.1980). This Court must determine whether the essential facts of the various claims are so logically connected that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit. Id.

The Bank’s counterclaims allege the torts of conversion, trespass, unfair competition, breach of fiduciary duty, and tortious interference with business contracts and relationships, including the taking, retention, and use of the Bank’s property. These counterclaims are based upon the Bank’s allegations of evidence that during her employment, plaintiff took and converted to her own use customer lists, trade secrets, secret formulas, and other proprietary information.

While the Bank’s counterclaims bear some factual relationship to plaintiff’s original claim of employment discrimination, they do not arise out of the same transaction or occurrence for the purpose of invoking ancillary jurisdiction. In fact, before this Court raised the issue of subject-matter jurisdiction, defendants’ had conceded that these counterclaims were not compulsory:

The claims that are the basis for the bank’s counterclaim were thus initiated only after careful consideration of the serious nature of plaintiff’s conduct, and only to protect the bank and its customers. They were and are asserted in good faith, with a legitimate basis therefor, and are entirely unrelated to plaintiffs claims.

Defendants’ Memorandum of Law in Opposition to Plaintiff’s Motion For Partial Summary Judgment, at 13 (emphasis added).

While the Court finds that this statement alone warrants a finding that the Bank’s counterclaims are not compulsory, another factor also supports this finding. On several occasions, defendants’ indicated that their primary purpose in raising these counterclaims was to enjoin plaintiff from disseminating the documents plaintiff allegedly removed from the Bank. Id. at 3, 19. While defendants’ attempt to obtain a preliminary injunction may have merit, it is “unrelated” to plaintiff’s Title VII claims.

Since the Bank’s efforts to enjoin plaintiff from disseminating documents are not “logically related” to plaintiff’s discrimination claims under Title VII, the Bank’s counterclaims are not compulsory. Rather, they are permissive, and therefore require an independent basis of jurisdiction. Since defendants have failed to show any independent basis of jurisdiction for these permissive counterclaims, the Court must dismiss these counterclaims. See Harris v. Steinem, 571 F.2d 119, 125 (2d Cir.1978).

PLAINTIFF’S PENDENT CLAIMS

The remaining state law claims are those which were originally asserted by plaintiff as counterclaims in the state action: intentional infliction of emotional distress, defamation, and abuse of process. Plaintiff •urges this Court to exercise its pendent jurisdiction over these claims.

The application of pendent jurisdiction is discretionary. Federman v. Empire Fire & Marine Ins. Co., 597 F.2d 798, 809 (2d Cir.1979). A pendent claim is a cause of action without an independent federal jurisdictional basis, brought by a party who is also asserting a federal claim. The pendent and federal claims must share a “common nucleus of operative fact.” See United Mine Workers of America v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966). Additionally, where the considerations underlying the state law claims are so different from those underlying the federal claim, the exercise of pendent jurisdiction would not advance judicial economy and should be denied. See Arnell v. Pan American World Airways, Inc., 611 F.Supp. 908 (S.D. N.Y.1985).

Plaintiff’s state law claims fail to derive from a “common nucleus of operative fact” with the Title VII claims and thus, this Court declines to exercise pendent jurisdiction over them. Plaintiff’s claims of intentional infliction of emotional distress, defamation, and abuse of process are markedly different than the underlying federal discrimination claim. Malarkey v. Texaco, Inc., 559 F.Supp. 117, 122 (S.D.N.Y.1982), aff'd, 704 F.2d 674 (2d Cir.1983) (Plaintiff’s claim for negligent infliction of emotional and physical distress arising out of the alleged discrimination is not suited for the exercise of pendent jurisdiction). See also Bouchet v. National Urban League, Inc., 730 F.2d 799 (D.C.Cir.1984) (Pendent jurisdiction declined in Title VII action where state claims involved defamation and tortious interference with contractual relations); Alveari v. American Intern. Group, Inc., 590 F.Supp. 228, 232 (S.D.N.Y.1984) (Retention of jurisdiction in Title VII action over state statutory claim seeking compensation for emotional and physical distress would “complicate what can be a simple, straightforward non-jury case”); Kiss v. Tamarac Utilities, Inc., 463 F.Supp. 951 (S.D.Fla.1978) (Pendent jurisdiction declined in Title VII action where plaintiff alleged, inter alia, defamation and interference with employment relationships.).

Even if plaintiffs state law claims derived from a common nucleus of operative fact with the Title VII claims, however, the Court would decline to exercise pendent jurisdiction in the instant case. Plaintiff’s state law claims were initially asserted in response to the Bank’s state court action. Since the claims asserted by the Bank are dismissed, there is no reason for this Court to resolve plaintiff’s pendent claims.

THE STATE LAW CLAIMS WILL PREDOMINATE

Another reason for declining to exercise pendent jurisdiction over plaintiff’s claims is that it appears these claims will predominate in this action. The Supreme Court has stated, with respect to pendent jurisdiction, that if it appears the state law issues will substantially predominate, whether in terms of proof, the scope of the issues raised, or of the comprehensiveness of the remedy sought, the state law claims may be dismissed without prejudice and left for resolution to state tribunals. United Mine Workers of America v. Gibbs, 383 U.S. 715, 726-27, 86 S.Ct. 1130, 1139, 16 L.Ed.2d 218 (1966). See also, Arnell v. Pan American World Airways, Inc., 611 F.Supp. 908, 910 (S.D.N.Y.1985).

Plaintiff seeks damages of $250,000.00 with respect to her abuse of process claim, $500,000.00 for her defamation claim, and $250,000.00 for her intentional infliction of emotional distress claim. Since the relief available in a Title VII action is limited, the state law claims may become the predominant elements of the suit and may cause jury confusion. See Bouchet v. National Urban League, 730 F.2d 799, 805 (D.C.Cir.1984) (“There is a great discrepancy between the relatively limited equitable relief available under Title VII (reinstatement and back pay) and the much broader relief sought under this appellant’s state causes of action (full compensatory and punitive damages), so that the pendent claims might well become the predominant element of the lawsuit.”). Cf. Arnell v. Pan American World Airways, 611 F.Supp. 908, 910 (S.D.N.Y.1985) (plaintiffs’ claims seeking compensatory and punitive damages in age discrimination suit, involve questions of plaintiffs’ mental state and defendants’ malice which are irrelevant to ADEA claim and “could result in jury confusion.”).

In sum, there is a danger that even without the five state law claims asserted by the Bank, the three state law claims asserted by plaintiff will become the predominant matters in this suit. This factor, therefore, also supports the Court’s finding that the plaintiff’s state law claims should be dismissed.

THE PARTIES MAY LITIGATE THEIR CLAIMS IN STATE COURT

The Bank contends that “[a] finding of lack of subject matter jurisdiction over these counterclaims would severely prejudice the Bank should no other forum be determined to be available to adjudicate these claims”. Defendants’ Memorandum of Law In Support of the Court’s Subject Matter Jurisdiction Over Defendants’ Counterclaims, at 2.

However, since the Court has found that it lacks subject-matter jurisdiction to hear the Bank’s claims, the fact that the Bank may be time barred to assert these claims in state court is of no moment.

CONCLUSION

Since this Court has no subject-matter jurisdiction over the permissive counterclaims asserted by the Bank, these claims are dismissed. The Court declines to exercise its pendent jurisdiction over plaintiffs pendent state law claims. Thus, plaintiffs summary judgment motion is now moot. The parties’ motions for sanctions relate solely to the state law claims. Thus, this Court will not resolve these motions.

SO ORDERED.

      . Opinion and Order Dated September 24, 1980, at 2.

      . Another jurisdictional issue not addressed by the parties is whether the Bank’s claims may be asserted as counterclaims in a Title VII action. See EEOC v. First Nat. Bank of Jackson, 614 F.2d 1004, 1006 (5th Cir.1980), cert. denied, 450 U.S. 917, 101 S.Ct. 1361, 67 L.Ed.2d 342 (1981) (An employer may not counterclaim or defend based on tort claims when charged with discrimination in a Title VII action), and Giles v. Roadway Exp., Inc., 529 F.Supp. 37 (S.D.Miss. 1981) (Defendants’ counterclaims including allegations of civil conspiracy to prevent defendant from carrying on its business and to obtain unjust enrichment from defendant and malicious prosecution dismissed because all of defendant’s counterclaims sound in tort). However, since this Court has dismissed the Bank’s claims for other reasons, the Court need not resolve this issue.

      . Additionally, defendants have moved for punitive damages arising from plaintiffs alleged activities.

      . Moreover, the Bank will not be precluded from litigating in state court. In August, 1981, the parties stipulated and agreed not to assert any statute of limitations defenses with respect to the claims and counterclaims filed in the federal action which were initially brought in the state proceeding. Furthermore, N.Y.C.P. L.R. § 203(d) tolls the state statute of limitations periods during the pendency of federal actions.

      . Defendants’ motion for sanctions addresses defendants’ efforts to obtain plaintiffs medical records which are relevant to plaintiffs claims of serious physical and emotional injury. Plaintiff cross-moved for sanctions for the expenses incurred in responding to defendants’ motion for sanctions. Plaintiffs medical records have no connection with the pending Title VII action and are only relevant to the state law claims.