Court Of Appeals Holds No ERISA Preemption Of Section 419(b)

The Ninth Circuit Court of Appeals' recent holding in Sender v. Franklin Res., Inc., 2015 U.S. App. LEXIS 10113 (9th Cir. Cal. June 16, 2015) is reasonably clear and yet there is much about the case that puzzles me.

The case involved the seemingly quixotic quest of Mr. Sender to obtain stock certificates that he allegedly never received from an ESOP established by Franklin Resources, Inc.  Mr. Sender's employment with Franklin ended in 1978 and the ESOP was terminated in 1981.  Mr. Sender alleges that he never received his shares from the ESOP and wasn't even aware that he was supposed to have received shares until 2007 when he received a letter from the Social Security Administration.  He initially filed suit in state court, but Franklin succeeded in having the case removed to federal court.

Among other things, Mr. Sender invoked California Corporations Code Section 419(b).  U.S. District Court Judge Edward M. Chen refused to remand the case to state court on the basis of preemption under the Employee Retirement Income Security Act (ERISA).  Sender v. Franklin Res., Inc., 931 F. Supp. 2d 959 (N.D. Cal. 2013).  In an unpublished memorandum opinion, the Ninth Circuit reversed, holding that "Sender's claim under Cal. Corp. Code § 419(b) was not preempted by ERISA."

That is what is clear to me about the case.  I am, however, puzzled by two aspects of the case.

First, in reversing Judge Chen, the Ninth Circuit said "the district court can exercise supplemental jurisdiction over the Cal. Corp. Code § 419(b) claim and need not remand it to state court."  This calls to mind my question of whether a state statute that empowers a state court to award a specific remedy confers any power on a federal court.  See Court Refuses To Break Board Deadlock By Appointing A Provisional Director.

Another question concerns Franklin Resources, Inc.  Neither Judge Chen nor the Ninth Circuit mention where it was incorporated.  A check of the California Secretary of State's website lists a Delaware corporation by that same name.  If the Franklin Resources, Inc. involved in this case is, in fact, a Delaware corporation, the question arises whether Corporations Code Section 419(b) even applies.  Here's the statute:

If a corporation refuses to issue a new share certificate or other certificate in place of one theretofore issued by it, or by any corporation of which it is the lawful successor, alleged to have been lost, stolen or destroyed, the owner of the lost, stolen or destroyed certificate or the owner’s legal representative may bring an action in the superior court of the proper county for an order requiring the corporation to issue a new certificate in place of the one lost, stolen or destroyed.

Readers will know that "corporation" is a defined term in the California General Corporation Law.  See When A Corporation May Not Be A Corporation At All.  Because the CGCL separately defines "foreign corporation" in Section 171, the legislature clearly knows how to draft a statute that is applicable to either or both categories.  Section 419(b) refers only to a "corporation", leading to what might seem to be the ineluctable conclusion that it applies only to corporations as defined in Section 162.  However, the fact that Section 419(a) refers to "domestic or foreign corporations" throws the question into confusion ("domestic corporation" is itself a defined term).

On a final note, the Ninth Circuit opinion is unpublished, please see Federal Rules of Appellate Procedure Rule 32.1 regarding citation of unpublished opinions.