United States District Court, Central District of Illinois, Springfield Division
April 20, 1987
IN RE THE ESTATE OF JAMES A. SHEPPARD, A MINOR. THE ESTATE OF JAMES A. SHEPPARD. A MINOR, PLAINTIFF,
CATERPILLAR, INC., ALLSTATE INSURANCE CO., AND MENNONITE HOSPITAL, DEFENDANTS.
The opinion of the court was delivered by: Mills, District Judge:
The employer here may not enter the federal court by the
back stairs when the main door to the courthouse is locked.
Can the mere fact that ERISA is involved in this suit confer
The Estate of James Sheppard originally brought this suit in
the Circuit Court of Illinois, McLean County. In re Estate of
Sheppard, No. 86-P-309 (Cir.Ct. McLean Co., filed Nov. 12,
1986). Therein, the estate sought, inter alia, a declaration
that a $54,000 lien placed by Caterpillar upon the proceeds of
its proposed settlement with a tortfeasor was invalid.
Sheppard, a minor, sustained serious injury when a vehicle
in which he was riding overturned. Under the terms of a group
insurance plan entered into with his father (a Caterpillar
employee) the company covered a portion of the child's medical
expenses. Subsequently, the estate reached a tentative
structured settlement with the auto driver's insurance
company, Fireman's Fund. The insurer, however, indicated it
would put the names of Caterpillar and other claimants on the
initial $175,000 payment check to protect itself, unless the
liens were adjudged null as to the settlement — a settlement
thus giving rise to the present litigation.*fn1
Caterpillar now petitions this Court pursuant to 28 U.S.C. § 1441(a),
(c) for removal of the state probate
proceeding.*fn2 The company contends that since the policy
under which it made payments to the minor is an "employee
benefit plan" regulated by the Employee Retirement Income
Security Act of 1974 (ERISA), 29 U.S.C. § 1002(1), (3),
1003(a), the Plaintiff's claim arises under ERISA and so is
more properly addressed to a federal tribunal.*fn3
The estate, in turn, petitions for remand to the Eleventh
Circuit of Illinois, asserting neither ERISA's provisions nor
federal common law governs the controversy; it urges, rather,
that state substantive law and the terms of Defendant's plan
In compliance with 28 U.S.C. § 636(b)(1)(B), the United
States Magistrate has entered a recommendation to remand the
cause. Relying upon Golen v. Chamberlain Mfg. Corp., 139 Ill. App.3d 53,
93 Ill.Dec. 677, 487 N.E.2d 121 (1st Dist. 1985), he
suggests that Plaintiff's action only tangentially concerns
ERISA.*fn4 Hence, he concludes that the conflict is for an
Illinois court to decide as a matter of state law. See also
Local Union 212 Int'l Bhd. of Elec. Workers Vacation Trust Fund
v. Local 212 IBEW Credit Union, 549 F. Supp. 1299 (S.D.Ohio
1982), aff'd, 735 F.2d 1010 (6th Cir. 1984).
Having carefully reviewed the record, as well as the status
of applicable law, the Court finds the procedural posture of
this case and the jurisdictional problem it presents both
complex and confusing. Nevertheless, it is convinced that to
decide the validity of Caterpillar's lien would be to act
"improvidently and without jurisdiction." 28 U.S.C. § 1447(c).
Consequently, the Court adopts the Magistrate's recommendation,
albeit upon a different course of reasoning.
Before proceeding with an analysis, however, further
clarification of the parties' respective positions is in
Caterpillar asserts its lien on the settlement proceeds
through an alleged right of subrogation contained in the ERISA
governed insurance policy. Thus, the estate's action
purportedly seeks a declaration of rights under the employee
benefit plan pursuant to 29 U.S.C. § 1132(a)(1)(B):
A civil action may be brought by a participant or
beneficiary to recover benefits due 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.
In other words, the minor, a beneficiary, requests a
determination of the propriety of the employer's subrogation
claim — a suit over which, Defendant alleges, state and federal
courts exercise concurrent jurisdiction.
29 U.S.C. § 1132(e)(1).
In contrast, the estate's position as set forth on the face
of its state petition is two-fold. First, it contends that the
Illinois Family Expense Statute, Ill.Rev.Stat. ch. 40, §
1015 (1985), renders only parents liable for the medical expenses of
their minor children: "Thus, the obligation to pay the medical
expenses is on the parent, and the cause of action to recover
for the medical expenses lies in the parent, not in the child."
Estate of Hammond v. Aetna Casualty, 141 Ill. App.3d 963, 965,
96 Ill.Dec 270, 272, 491 N.E.2d 84, 86 (1st Dist. 1986). Since
the minor is not primarily liable for the hospital bills, his
estate believes Caterpillar cannot enforce a right of
subrogation against it.
Furthermore, Plaintiff asserts the lien is invalid because
the settlement is not for past expenses, but rather for the
minor's pain, disability and suffering. The subrogation clause
of the plan states:
[T]he Employer . . . shall be subrogated to all
right of recovery of the Employee or Dependent
with respect to any expenses included in
any . . . settlement only to the extent that
said . . . settlement is expressly identified as a
payment for services. . . .
The estate, however, cites neither ERISA nor the clause in its
claim for relief.
Countering the petition, the corporation argues Plaintiff
may not assert state law against it.*fn5 It maintains the
subrogation right is an integral part of the plan's
administration. Therefore, any Illinois statute purporting to
override that right must be preempted by § 514 of ERISA,
29 U.S.C. § 1144: "[T]he provisions of this subchapter . . . shall
supercede any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan. . . ." See Shaw
v. Delta Air Lines, 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490
(1983). The estate's suit, then, necessarily arises under
ERISA. Removal of an action is proper where the real nature of
the claim is federal, regardless of Plaintiff's
characterization. Mitchell v. Pepsi-Cola Bottlers, Inc.,
772 F.2d 342 (7th Cir. 1985), cert. denied, ___ U.S. ___, 106 S.Ct.
1266, 89 L.Ed.2d 575 (1986); Waycaster v. AT & T Technologies,
Inc., 636 F. Supp. 1052 (N.D.Ill. 1986).
Admittedly, the artful pleading exception allows the Court
to review Defendant's removal petition in addition to the
complaint in determining whether Plaintiff actually pleads a
federal cause of action. Having done so, however, the Court
finds both parties somewhat misguided in their analyses.
As Caterpillar correctly notes, Plaintiff's state petition
in essence requests a declaratory judgment that the employer's
lien is of no force against the settlement. See Ill.Rev.Stat.
ch. 110, ¶ 2-701 (1985). Thus, upon removal, this Court must
consider the estate's action as originating under the Federal
Declaratory Judgment Act, 28 U.S.C. § 2201.*fn6 Illinois ex
rel. Barra v. Archer Daniels Midland Co., 704 F.2d 935, 939
(7th Cir. 1983). Consequently, we review the jurisdictional
question in light of the act's purpose and construction.
An historic function of the declaratory judgment suit is to
enable a potential defendant to avoid inconvenience by
accelerating a plaintiff's action. Thomas v. Shelton,
740 F.2d 478, 485 (7th Cir. 1984). For example, the Seventh Circuit in
v. Baker, 698 F.2d 1323, 1329-30 (7th Cir.), cert. denied,
463 U.S. 1207, 103 S.Ct. 3537, 77 L.Ed.2d 1388 (1983), allowed
removal of the state's declaratory count alleging members of an
Indian tribe had no federal right under a treaty to restrict
access to navigable waters:
[T]he State's federal claim is well-pleaded.
True, it is anticipatory in that it is a defense
to a coercive action defendants could have
brought in federal court. But it is precisely
this kind of anticipation that the Declaratory
Judgment Act was intended to allow.
Id. at 1329;*fn7
see also Sticker Indus. Supply Corp. v.
Blaw-Knox Co., 367 F.2d 744
, 746-47 (7th Cir. 1966). The
operation of the act then is procedural only: "Congress
enlarged the range of remedies available in the federal courts
but did not extend their jurisdiction." Skelly Oil Co. v.
Phillips Petroleum Co., 339 U.S. 667
, 671, 70 S.Ct. 876,
878-79, 94 L.Ed. 1194 (1950). Accordingly, where a declaratory
judgment plaintiff seeks in substance to assert defenses to an
adversary's imminent action, it is the character of the
threatened action, not the defenses, which determines federal
question jurisdiction. Public Service Comm'n v. Wycoff Co.,
344 U.S. 237
, 248, 73 S.Ct. 236, 242, 97 L.Ed. 291 (1952); see
generally Stone & Webster Eng'g Corp. v. Ilsley, 690 F.2d 323
327 (2d Cir. 1982).
In this instance, Plaintiff's petition merely precipitates
Caterpillar's subrogation action against it. The estate had no
other choice but to seek a declaratory judgment when the
tortfeasor's insurance company threatened to place the alleged
lienholder's name on the settlement check. Its complaint
raises only defenses — namely, that Illinois law and the plan's
subrogation clause negate the employer's lien on the settlement
Thus, jurisdiction cannot be premised upon § 502(a)(1)(B) of
ERISA, 29 U.S.C. § 1132. As previously mentioned, that section
allows a beneficiary to enforce his rights under the plan. But
here, the minor's estate attempts to shield itself from a
subrogation right asserted by the corporation. Seeking a
declaration of liability does not "enforce" the plan. Gulf Ins.
Co. v. Arnold, 809 F.2d 1520, 1523-24 (11th Cir. 1987). Indeed,
Caterpillar, as an employer, attempts to enforce a claimed
right under the plan! Nothing, however, in subsection (a)(1)(B)
grants an employer the power to do so in federal court —
Congress gave only participants and beneficiaries this
The issue then becomes whether Caterpillar could bring an
ERISA-based action in this Court asserting its lien against
the estate. If not, the corporation is entitled to no relief.
The procedural structure of this lawsuit will not permit the
employer to enter the district court by an indirect means when
it cannot do so directly.
At the outset of its analysis, the Court notes that the
language of ERISA
must control: "[T]he legislative purpose is expressed by the
ordinary meaning of the words used. Thus, absent a clearly
expressed legislative intention to the contrary, that language
must ordinarily be regarded as conclusive." American Tobacco
Co. v. Patterson, 456 U.S. 63, 68, 102 S.Ct. 1534, 1537, 71
L.Ed.2d 748 (1982). Moreover, district courts possess limited
jurisdiction. They may not exercise judicial authority without
a clear legislative mandate. Pressroom Unions-Printers League
Income Sec. Fund v. Continental Assurance Co., 700 F.2d 889,
892 (2d Cir.), cert. denied, 464 U.S. 845, 104 S.Ct. 148, 78
L.Ed.2d 138 (1983).
On the issue at hand, the Seventh Circuit has not yet
spoken.*fn9 Nevertheless, courts generally agree that ERISA's
jurisdictional provision does not provide a civil action for
employers qua employers. See, e.g., Great Lakes Steel v.
Deggendorf, 716 F.2d 1101, 1102 (6th Cir. 1983). As the Supreme
Court stated: "The express grant of federal jurisdiction in
ERISA is limited to suits brought by certain parties as to whom
Congress presumably determined that a right to enter federal
court was necessary to further the statute's purposes."
Franchise Tax Board v. Construction Laborers Vacation Trust,
463 U.S. 1, 21, 103 S.Ct. 2841, 2852, 77 L.Ed.2d 420 (1983).
Those parties are enumerated in § 502(e)(1), 29 U.S.C. § 1132:
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. (emphasis added).
Nothing in the documents submitted to this Court, however,
indicates that Caterpillar is a "participant, beneficiary, or
fiduciary" as the terms are defined in 29 U.S.C. § 1002.
Rather, the corporation describes itself as an administrator.
See 29 U.S.C. § 1002(16)(A). But although Congress certainly
felt employers and administrators were important to the proper
functioning of ERISA's regulatory scheme, it provided them no
power under the act to institute a civil action. Congress
drafted § 1132 with particular precision — a precision upon
which United States Courts are not permitted to expand. As the
Second Circuit noted in Pressroom, 700 F.2d at 892:
We focus not on whether the legislative history
reveals that Congress intended to
prevent actions by employers or other parties, but
instead on whether there is any indication that the
legislature intended to grant subject matter
jurisdiction over suits by employers, funds, or
other parties not listed in § 1132(e)(1). . . .
ERISA's legislative history is silent on both these
questions, and we therefore conclude that absent
such expression, § 1132(e)(1) should be viewed as
an exclusive jurisdictional grant.*fn10
(criticizing Fentron Indus. Inc. v. National Shopmen Pension
Fund, 674 F.2d 1300
(9th Cir. 1982) (employer could bring
action under ERISA)). See also Stone & Webster Eng'g Corp. v.
Ilsley, 690 F.2d 323
, 326 (2d Cir. 1982), aff'd without
opinion, 463 U.S. 1220
, 103 S.Ct. 3564
, 77 L.Ed.2d 1405 (1983)
(employer afforded no jurisdiction under § 1132(e)(1));*fn11
Amalgamated Indus. Union Local 44-A Health & Welfare Fund v.
Webb, 562 F. Supp. 185
(N.D.Ill. 1983) (adopting reasoning of
Pressroom). Thus, Caterpillar could not maintain an action
under ERISA in the district court to enforce its lien.
Consequently, it may not remove the estate's declaratory
judgment suit from state court.
The corporation argues vehemently that any state law which
might negate the lien seeks to regulate the insurance plan and
must be preempted by ERISA § 514(a), 29 U.S.C. § 1144. Even
assuming, however, that the Illinois Family Expense Statute,
Ill.Rev.Stat. ch. 40, ¶ 1015 (1985), "relates to" the plan, the
Court's power to hear this case as presenting a federal
question does not follow. The teaching of the Supreme Court is
ERISA carefully enumerates the parties entitled
to seek relief under § 502 [29 U.S.C. § 1132]; it
does not provide anyone other than participants,
beneficiaries, or fiduciaries with an express cause
of action . . . on the issues in this case. A suit
for similar relief by some other party does not
"arise under" that provision.
Franchise Tax Board, 463 U.S. at 27, 103 S.Ct. at 2855; see
also Whitworth Bros. Storage Co. v. Central States, Southeast &
Southwest Areas Pension Fund, 794 F.2d 221
, 224-28 (6th Cir.),
cert. denied, ___ U.S. ___, 107 S.Ct. 645
, 93 L.Ed.2d 701
(1986) (Congress intended to limit the parties who could
maintain actions pursuant to § 502).*fn12
federal jurisdiction to determine Caterpillar's subrogation
right under the ERISA-governed plan is absent in the case at
As an alternative to a jurisdictional approach, many courts
have analyzed employer suits under the act in terms of
standing. Id. at 226 n. 7. The issue of standing, however, is
undoubtedly analytically distinct from the question of
jurisdiction and warrants a brief discussion. Cf. Pressroom,
700 F.2d at 894. As the Pressroom court properly noted,
29 U.S.C. § 1132 addresses jurisdiction and standing separately.
Id. at 891-92. Subsection (a) sets forth the parties entitled
to bring certain types of actions while subsection (e)(1)
grants the district court jurisdiction over those suits.*fn13
Still, a separate review of both problems leads to the same
conclusion. Subsection 1132(a), like (e)(1), offers
Caterpillar no encouragement. It provides standing only to
participants, beneficiaries, fiduciaries, and the Secretary of
Labor. Most notably, that provision excludes employers and
administrators. Thus, an analysis of the standing issue
necessarily follows the Court's discussion of jurisdiction
closely. See, e.g., Tuvia Convalescent Center, Inc. v. National
Union of Hospital & Health Care Employees, 717 F.2d 726 (2d
Cir. 1983); R.M. Bowler Contract Hauling Co. v. Central States,
Southeast & Southwest Areas Pension Fund, 547 F. Supp. 783
Indeed, Caterpillar may satisfy the prerequisite for
standing under Article III of the Constitution: A personal
stake in the outcome of the controversy warranting invocation
of federal-court jurisdiction and justifying exercise of the
court's remedial powers on the claimant's behalf. Warth v.
Seldin, 422 U.S. 490, 498-99, 95 S.Ct. 2197, 2204-05, 45
L.Ed.2d 343 (1975). But Congress, through legislation, may
restrict the scope of the standing doctrine by choosing not to
expand the concept to the full extent allowed by Article III,
Gladstone Realtors v. Village of Bellwood, 441 U.S. 91, 100, 99
S.Ct. 1601, 1608, 60 L.Ed.2d 66 (1979). In drafting ERISA, the
lawmakers elected such a course.*fn14
The act seeks to protect the interests of participants and
beneficiaries in employee benefit plans by way of a carefully
drawn regulatory scheme. 29 U.S.C. § 1001. In § 1132, Congress
specified the parties and actions necessary to insure that the
law's aims were met. And while no doubt the legislature
considered employers and administrators to be an intricate part
of the plot, it failed to provide them with a cause of action
under ERISA. This tribunal is bound by that decision.
Thus, not only does the district court lack jurisdiction to
decide the validity of Caterpillar's lien, but moreover the
corporation does not possess the requisite standing to ask it
to do so.
Ergo, the recommendation of the United States Magistrate is
This cause is hereby REMANDED to the Circuit Court of
Illinois, McLean County, pursuant to 28 U.S.C. § 1447(c).