Paparella v. Liddle & Robinson, L.L.P.

Background

Andrea Paparella sued Liddle & Robinson, L.L.P.; Jeffrey Lew Liddle; Blaine H. Bortnick; David I. Greenberger; James W. Halter; and James R. Hubbard in New York Supreme Court, New York County. She alleged that the defendants discriminated against her because of her sex during and after her employment as an attorney at Liddle & Robinson. Her original complaint asserted 13 causes of action under state and local law, including claims under the New York City Human Rights Law, the New York Labor Law, the New York Equal Pay Act, breach of contract, and several tort theories.

The defendants removed the case to federal court. They argued that the complaint’s allegation that Paparella was deprived of vested funds in Liddle & Robinson’s profit-sharing plan was necessarily a federal claim under the Employee Retirement Income Security Act of 1974, or ERISA. Paparella moved to remand, meaning she asked the federal court to return the case to state court. She argued that the profit-sharing-plan allegation was factual support for her state and local discrimination claims, not an ERISA claim. She later filed a First Amended Complaint that omitted any reference to the profit-sharing plan and asserted only state and local law claims.

ERISA preemption and remand

The court explained that a defendant generally may remove a case only when the complaint presents a federal question. One exception applies when a federal statute completely preempts a state-law claim—meaning the federal statute so fully replaces the state claim that the claim is treated as federal for jurisdictional purposes.

The court applied the two-part test for complete preemption under ERISA. First, the claim must be one that could be brought under ERISA’s provision allowing a plan participant or beneficiary to recover benefits, enforce rights under a plan, or clarify future benefit rights. Second, the defendant’s conduct must implicate no independent legal duty apart from the rights and obligations established by the benefit plan.

The court held that Paparella’s claims failed both parts of the test. The complaint did not allege the terms of the profit-sharing plan, seek a determination of coverage or benefits under those terms, or request recovery, enforcement, or clarification of her rights under the plan. Instead, it sought relief such as back pay, reinstatement or front pay, liquidated damages, and compensation for emotional distress.

The court also held that the claims were based on duties independent of ERISA. The claims primarily concerned alleged sex discrimination under state and local law. The complaint’s reference to the profit-sharing plan appeared as part of Paparella’s allegations that the defendants repeatedly discriminated against her, including by depriving her of vested funds while she was aware of no similarly treated man. The court concluded that the plan reference provided context for the state and local claims rather than making those claims dependent on the plan’s terms.

Because the defendants did not establish federal jurisdiction through ERISA complete preemption, the court held that removal was improper and granted Paparella’s motion to remand. The court did not need to decide whether it should exercise supplemental jurisdiction over the First Amended Complaint. It stated, however, that even if federal jurisdiction had existed at removal, it would decline supplemental jurisdiction over the amended complaint because only state and local claims remained, the case was at a relatively early stage, and state courts were well equipped to decide those claims.

Attorney’s fees

Paparella also sought attorney’s fees under 28 U.S.C. § 1447(c), which permits a court to award fees in connection with a remand based on lack of subject-matter jurisdiction. The court declined to award fees because, although it found the remand decision clear, the defendants’ basis for removal was not objectively unreasonable. The court also stated that the alleged technical defects in removal were waivable procedural defects that Paparella had not raised within the required 30-day period.

Disposition

The court granted Paparella’s motion to remand, directed the Clerk of Court to remand the action to the New York Supreme Court, New York County, and directed that the federal case be closed. The court denied Paparella’s request for attorney’s fees under Section 1447(c).