UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS, EASTERN DIVISION
June 26, 1989
READY METAL MANUFACTURING COMPANY, Plaintiff,
INTERNATIONAL UNION, UNITED AUTOMOBILE, AEROSPACE AND AGRICULTURAL IMPLEMENT WORKERS OF AMERICA, UAW and its AMALGAMATED LOCAL 477 and AMALGAMATED TRUST AND SAVINGS BANK, Defendants
The opinion of the court was delivered by: SHADUR
MEMORANDUM OPINION AND ORDER
MILTON I. SHADUR, UNITED STATES DISTRICT JUDGE
Ready Metal Manufacturing Company ("Ready Metal") initially sued International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, UAW and its Amalgamated Local 477 (collectively "UAW") and Amalgamated Trust and Savings Bank ("Bank") in the Circuit Court of Cook County, seeking:
1. a declaration that the Supplemental Unemployment Benefits Trust (the "Trust") established pursuant to a now-expired collective bargaining agreement between Ready Metal and UAW had terminated and
2. an order distributing the remaining trust corpus to Ready Metal.
UAW, with Bank's consent, filed a timely notice of removal to this District Court, asserting grounds for removal identified later in this opinion.
Each of Ready Metal and UAW has now moved for summary judgment under Fed. R. Civ. P. ("Rule") 56. However, this Court's in-depth review occasioned by the cross-motions has disclosed a lack of subject matter jurisdiction here.
In accordance with 28 U.S.C. § 1447(c), then, this action will promptly be remanded to the state court unless this Court is persuaded to the contrary by a timely submission from any of the litigants.
In 1969 Ready Metal and UAW negotiated a collective bargaining agreement ("CBA") that established a Supplemental Unemployment Benefits Plan ("Plan"). In August 1971 Ready Metal, UAW and Bank entered into a Supplemental Unemployment Benefits Trust Agreement (the "Trust Agreement"), under which Ready Metal was to make contributions on behalf of the "eligible employees" and Bank was to serve as Trustee and implement the Plan's terms.
That arrangement continued through July 1985, when the last CBA between Ready Metal and UAW expired. Despite two months of negotiations the parties were unable to reach agreement, and a strike ensued. Ready Metal responded by hiring permanent replacements. In June 1986 UAW was decertified as the collective bargaining agent for Ready Metal's employees.
Ready Metal has ceased contributing to the Trust and has discontinued the Plan. Because the Plan is unquestionably an "employee welfare benefit plan" within the meaning of ERISA, 29 U.S.C. § 1002(1),
Bank (as Trustee) and the Trust are subject to extensive regulation under ERISA. All parties agree the Trust should be terminated, bringing into play Section 1103(d)(2):
The assets of a welfare plan which terminates shall be distributed in accordance with the terms of the plan, except as otherwise provided in regulations of the Secretary.
As for "the terms of the plan," however, Trust Agreement para. 14 says only this:
In the event of termination of the Trust, all assets then constituting the Trust Fund, less any amounts constituting charges and expenses payable from the Trust Fund, shall be used until exhausted to pay benefits to eligible employees under the Plan and their beneficiaries.
And that is the problem, for there are no longer any "eligible employees under the Plan."
Thus the remaining funds -- $ 27,253.17 (including accrued interest) as of December 31, 1988 -- are just sitting in the Trust. Ready Metal has made a demand for the funds, but Bank refuses to release them without either the consent of all interested parties or a court order.
On November 3, 1988 Ready Metal filed this action in the state court. Its "Complaint for Declaratory Judgment and Equitable Relief" comprises two counts:
1. As already suggested, Count I seeks a declaration under Ill. Rev. Stat. ch. 110, para. 2-701 that the Trust is terminated and void.
2. Count II reincorporates the allegations in Count I and asserts that if Bank "as Trustee of the Trust, is allowed to retain the funds accumulated thereunder, it would be unjustly enriched." Ready Metal thus asks for an order directing Bank to tender to it all funds held in the Trust.
On December 14 UAW (with Bank's concurrence) filed a notice of removal to this District Court,
asserting two potential sources of jurisdiction:
1. under the civil enforcement provisions of ERISA Sections 1132(a)(3) and 1132(e)(1); and
2. under Labor-Management Relations Act ("LMRA") § 301, 29 U.S.C. § 185.
Both Ready Metal and UAW have since filed and tendered cross-memoranda on their respective summary judgment motions.
Though neither side raised the issue, this Court's review of the case in the context of the submitted materials suggested the absence of subject matter jurisdiction.
Further research and analysis have confirmed that such is the case under the principles of Franchise Tax Board of California v. Construction Laborers Vacation Trust For Southern California, 463 U.S. 1 77 L. Ed. 2d 420, 103 S. Ct. 2841 (1983).
Subject Matter Jurisdiction
It is of course axiomatic that "a defendant may not remove a case to federal court unless the plaintiff's complaint establishes that the case 'arises under' federal law" ( id. at 10 (footnote omitted, emphasis in original)). Whether that is true of Ready Metal's Complaint is a function of declaratory judgment procedure and of the unique preemption problems presented by ERISA -- both questions that were addressed by Franchise Tax Board in a context much like that in this case. Analysis is therefore facilitated by a brief review of Franchise Tax Board.
There the California Franchise Tax Board ("Board") sued the trustee of a multiemployer vacation trust ("Trustee") in a California state court, seeking to collect unpaid state income taxes by levying on funds held in trust for the employees. Trustee invoked its obligations under ERISA as the basis for nonpayment, removing the action to the federal court on that ground.
Board's two-count complaint failed to specify any particular statutory entitlement for the relief it sought. But the Supreme Court, after characterizing Board's first cause of action as a claim under the California Tax Code and the second under California's Declaratory Judgment Act, then said (463 U.S. at 13):
As an initial proposition, then, the "law that creates the cause of action" is state law, and original federal jurisdiction is unavailable unless it appears that some substantial, disputed question of federal law is a necessary element of one of the well-pleaded state claims, or that one or the other claim is "really" one of federal law.
As in Franchise Tax Board, neither of Ready Metal's claims (Count I for declaratory relief and Count II for relief in equity against Bank's unjust enrichment) facially contains a federal question. Hence the Franchise Tax Board analysis is squarely on point here. Federal jurisdiction does not exist unless (1) an element of Ready Metal's well-pleaded state claims is a federal question or (2) one of the claims is "really" federal.
1. Is "some substantial, disputed question of federal law . . . a necessary element" of either of Ready Metal's state claims ?
Plainly Count II's unjust enrichment claim implicates no federal law question. Federal law may come into play only by way of a defense: that is, ERISA may preempt any state law cause of action. Franchise Tax Board, id. at 14 is therefore fatal to Count II as a predicate for removal on that score:
Since 1887 it has been settled law that a case may not be removed to federal court on the basis of a federal defense, including the defense of pre-emption, even if the defense is anticipated in the plaintiff's complaint, and even if both parties admit that the defense is the only question truly at issue in the case.
Count I presents a more difficult problem, for its claim does pose at least one question on which ERISA provides the rule of decision. As in Franchise Tax Board, id., Ready Metal cannot obtain the relief it seeks "without a construction of ERISA and/or an adjudication of its pre-emptive effect . . . -- all questions of federal law."
This opinion will not retrace Franchise Tax Board's extended analysis of that issue, including its protracted discussion and application of Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 94 L. Ed. 1194, 70 S. Ct. 876 (1950) and Gully v. First National Bank in Meridian, 299 U.S. 109, 81 L. Ed. 70, 57 S. Ct. 96 (1936). Suffice it to say that Franchise Tax Board, 463 U.S. at 20 decided the declaratory judgment suit did not arise under federal law. Noting the fact -- critical to this case as well -- that Section 1132 authorizes suits only by employee benefit plan participants, beneficiaries, fiduciaries or the Secretary of Labor, the Court said ( id. at 21-22, adapted to this case (footnotes omitted and emphasis in original)):
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. It did not go so far as to provide that any suit against such parties must also be brought in federal court when they themselves did not choose to sue. The situation presented by [Ready Metal's] suit for a declaration of [its rights under the Trust Agreement] is sufficiently removed from the spirit of necessity and careful limitation of district court jurisdiction that informed our statutory interpretation in Skelly Oil and Gully to convince us that, until Congress informs us otherwise, such a suit is not within the original jurisdiction of the United States district courts. Accordingly, the same suit brought originally in state court is not removable either.
2. Is either of Ready Metal's causes of action "really" one of federal law ?
Franchise Tax Board, id. at 22 also reconfirmed the principle that "a plaintiff may not defeat removal by omitting to plead necessary federal questions in a complaint." If Ready Metal's Complaint really presents federal law claims in substance, it may not defeat removal by cloaking those claims in state law terms. Perhaps the best known example of that proposition is a case that perforce arises under LMRA § 301, where "the pre-emptive force of § 301 is so powerful as to displace entirely any state cause of action 'for violation of contracts between an employer and a labor organization'" ( id. at 23 (footnote omitted)).
Is ERISA such a statute? Franchise Tax Board, id. at 27 (footnote omitted) said "no" -- at least when the plaintiff's claim does not come within the scope of Section 1132:
ERISA carefully enumerates the parties entitled to seek relief under [Section 1132]; it does not provide anyone other than participants, beneficiaries, or fiduciaries with an express cause of action for a declaratory judgment on the issues in this case. A suit for similar relief by some other party does not "arise under" that provision.
No more need be said to demonstrate the controlling force of that proposition here. Congress carefully limited the types of plaintiffs who may sue in federal court under ERISA. By clear negative implication, parties not listed in Section 1132 (and employers such as Ready Metal are conspicuously absent from the statutory enumeration) could not sue here. And because Ready Metal could not have sued here in the first instance, its lawsuit was not removable to this District Court -- Franchise Tax Board, id. at 10 n.9 confirms the coextensiveness of original and removal jurisdiction.
That result may seem anomalous, for the litigants correctly recognize that to the extent the current dispute flows out of an employee benefit plan -- an area with which ERISA is concerned -- it "comes within the class of questions for which Congress intended that federal courts create federal common law" (Franchise Tax Board, id. at 26 (footnote omitted)). That means this case will be sent back to a state court to apply federal law. Nevertheless, that is the effect of the congressional ERISA enactment. Given Franchise Tax Board's thorough analysis of the issue, this Court can add nothing more.
One final issue remains. UAW has also asserted the existence of jurisdiction here under LMRA § 301(a):
Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labor organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.
To be sure, the Supreme Court has taken a reasonably expansive view of the scope of that provision (see, e.g., Franchise Tax Board, 463 U.S. at 25 n.28). But the plain language of LMRA § 301(a) refutes UAW's characterization of this action. Although both UAW and Ready Metal did sign the Trust Agreement (along with Bank as Trustee), and although the Trust was established pursuant to a CBA, Ready Metal is not charging UAW with a "violation" of either contract. Nor is UAW asserting a "violation" by Ready Metal -- except perhaps in the far-fetched sense that the latter's bringing this lawsuit to secure distribution of the funds could be labeled such a "violation." Indeed, the dispute here centers not on an employer-union contract issue as such, but rather on the legal obligations of Bank (as trustee) with respect to the funds in its possession.
In sum, Ready Metal's dispute with Bank simply does not come within the language or spirit of LMRA § 301. Nor is that conclusion altered by the presence of UAW as a necessary party to that dispute, or even by perceiving that dispute as a contest between Ready Metal and UAW over the funds.
Although the parties failed to recognize the jurisdictional problem here, this opinion's analysis of Franchise Tax Board demonstrates this action was improperly removed. Accordingly this Court sua sponte orders this action remanded because "it appears that the district court lacks subject matter jurisdiction" (Section 1447(c)).
As already indicated, neither movant has spoken to that issue (and thus to the force of Franchise Tax Board as a powerful direct precedent). For that reason the Clerk of this District Court is ordered to delay mailing the certified copy of the remand order until June 30, 1989 (see this District Court's General Rule 30(b)). If any litigant files a submission in this Court's chambers on or before June 29 treating with the question of subject matter jurisdiction, that submission will be taken into account in determining whether the remand will be implemented as scheduled.