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IN RE ESTATE OF SHEPPARD

April 20, 1987

IN RE THE ESTATE OF JAMES A. SHEPPARD, A MINOR. THE ESTATE OF JAMES A. SHEPPARD. A MINOR, PLAINTIFF,
v.
CATERPILLAR, INC., ALLSTATE INSURANCE CO., AND MENNONITE HOSPITAL, DEFENDANTS.



The opinion of the court was delivered by: Mills, District Judge:

OPINION ORDER

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 federal jurisdiction?

No.

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 are dispositive.

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 order.

The Controversy

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 ...

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