In a published decision this week, the Sixth Circuit reviewed the dismissal of an employee’s claim for excessive withholding of FICA taxes against her employer. In affirming the district court’s refusal to remand the federal tax case and subsequent outright dismissal of the claim, the court examined artful pleading, administrative remedies, and the timing of removal notices.
Berera v. Mesa Medical Group began when Berera, a nurse practitioner, sued her former employer, Mesa, alleging that Mesa had withheld not only Berera’s FICA tax share from her paycheck, but also Mesa’s own share. Berera instituted a putative class action against Mesa in Kentucky state court, alleging that their practice of improperly withholding their FICA share from employees’ wages was widespread. After receiving a transcript from a hearing in state court, Mesa removed the case to federal court, asserting that the FICA issue and CAFA provided federal jurisdiction. Concluding that Berera’s claim for “unpaid wages” due to Mesa’s paycheck adjustment was actually a FICA claim in disguise, and that tax law required Berera to first file a claim with the IRS, the district court dismissed her suit.
In affirming the district court’s ruling, the Sixth Circuit first held that, the “artful pleading” exception to the well-pleaded rule, Berera could not simply recast her fundamental claim for excessive FICA withholding as state-law claims for unpaid wages, despite Berera’s complaint not explicitly mentioning FICA in her complaint. Second, the court examined 26 U.S.C. § 7422(a), which requires a taxpayer to file a complaint with the IRS prior to suing for “wrongfully collected” revenue. Finding support in the Third and Fifth Circuits, the court held that Berera’s failure to comply with this statutory requirement mandated the dismissal of her claim. Finally, the court held that Berera’s original complaint did not put Mesa on notice that the case contained a federal cause of action. Thus, Mesa’s timing of removal was proper because it did not receive “solid an unambiguous information” that it could remove until the state court hearing in which Berera’s counsel conceded that her claim was based on FICA computations, and because the court deemed a transcript hearing to be an “other paper” for purposes of removal under 28 U.S.C. § 1446(b)(3).
It is worth noting that the Sixth Circuit modified the dismissal of Berera’s case to be without prejudice in order to allow her to pursue he FICA claim with the IRS and possibly eventually the U.S. government. Furthermore, although the maxim holds that the plaintiff generally is the “master of her complaint,” as the court demonstrated in its thorough examination of the artful pleading doctrine, a litigant cannot avoid federal court and mandatory statutory or administrative remedies just by cleverly recasting a legal issue.
