to the question of how ERISA beneficiaries could possibly protect themselves from administrator malpractice, the court stated that "the interest ERISA beneficiaries have in competent plan consultants is already vindicated by the availability of state-law malpractice suits." Id. It seems unlikely the Seventh Circuit would suggest a remedy that does not exist.
At the district court level, the cases are conflicting. Judge Kocoras, in Ampere Automotive Corp. v. Employee Benefit Plans, Inc., 1992 WL 220912, p. 1-2 (N.D. Ill. Sept. 1, 1992), found that a state law action by an employer against plan agents for damages for manipulation of the plan's assets was preempted, despite the fact the employer had reimbursed the plan and was seeking damages for itself. Judge Kocoras noted that the action "related to" an ERISA plan, because all the wrongful conduct stemmed from the defendants' alleged fraudulent processing of claims. Id. While granting the employer leave to amend his complaint to make an ERISA claim, Judge Kocoras noted that just about all state law actions involving pension plans were preempted. Id. at 3.
Judge Shadur has taken a more restrictive view of preemption in two recent cases.
Sliwa v. Hunt, 806 F. Supp. 796 (N.D. Ill. 1992); Klank v. Sears, Roebuck & Co., 735 F. Supp. 260 (N.D. Ill. 1990). In Sliwa, Judge Shadur held that a plan trustee's action against a plan manager and their agents for state law professional malpractice/negligence, professional "stigma", and willful and wanton misconduct was not preempted. 806 F. Supp. at 798-799. Judge Shadur stated that the initial question a court must ask is whether the plaintiff seeks to assert any potential ERISA claims. Id. at 797. If not, the court must address whether the claims "relate to" a plan. Judge Shadur concluded that there was "no link" between the injury to the trustee and the nature of the trust, thus the claims were not "related to" an ERISA plan. Id. at 799 n.3. In essence, if the claim would be the same if the trust was not an ERISA plan, the claim was not "related to" an ERISA plan.
In Klank, Judge Shadur held that an employee's action against a former employer for fraud, breach of confidence, and negligent misrepresentation in connection with the employer's failure to disclose a special severance package, which resulted in the employee missing out on extra benefits, was not preempted. 735 F. Supp. at 264 . In granting a remand, Judge Shadur noted that the employee was not suing as a beneficiary or participant, and was not within the scope of Section 1132(a)(1)(B). Id. at 263. Judge Shadur based his holding on Pizlo v. Bethlehem Steel Corp., 884 F.2d 116 (4th Cir. 1989). Id. at 263-264.
In Pizlo, the Fourth Circuit found that an employee's claims for breach of contract, promissory estoppel, and negligent misrepresentation against an employer, based on the employer's failure to employ the employees until age 62 as the employer had promised, were not preempted, despite the fact the damages would be measured by lost benefits. 884 F.2d at 120. The Fourth Circuit stated that the claim did not "relate to" the plan, because there was no possibility of conflicting employer obligations, there was no determination of whether actual plan benefits would be paid, and there was no impact on the administration of the plan. Id. The Pizlo court concluded that the issue was not eligibility for benefits, but wrongful termination, for which the employer, not the plan, would be liable. Id.
Judge Shadur reached a similar conclusion in Klank, finding the claims were not preempted because there would be no conflicting employer obligations, no variable standard of recovery, no determination of whether benefits will be paid under the plan, and no impact on the administration of or liability to the plan. 735 F. Supp. at 264. That the measure of damages would be based on benefits that would have been due under the plan was deemed irrelevant. Id.
The reasoning in Pizlo and Klank matches quite closely with the reasoning of Pacific Airmotive v. First Interstate Bank, 178 Cal. App. 3d 1130, 224 Cal. Rptr. 233 (1986), a case which plaintiff stresses. In Pacific Airmotive, under nearly identical facts (including reimbursement by the employer to the plan), the court held that breach of fiduciary duty and breach of contract claims in relation to a trustee's inaccurate report of plan assets were not preempted. 224 Cal. Rptr. at 237-238. The court stated that, because the loss was to the employer and not the plan, there was no action under ERISA. Id. at 238. In evaluating whether a given action was preempted under ERISA, the court offered a four part test: 1) whether the claim was a traditional state law area; 2) the extent to which the claim impinges upon the terms and conditions of the plan; 3) the extent the relief sought is incompatible with ERISA; 4) the extent to which the rights plaintiff asserts arise under the plan. Id. at 237. The court concluded that because the plan would be completely unaffected by the outcome, and the action itself was no different than any other action for misrepresentation in any other context, the claims were too remote from the plan to be preempted. Id. at 238.
This court concludes that the plaintiff's claims are not preempted and should be remanded to state court for resolution. Plaintiff is asserting no claims under ERISA, and all parties concede plaintiff has no standing to do so. Plaintiff has brought this action in her own behalf, not on behalf of the Plan, and any damages received will go to the plaintiff and not the Plan. The outcome of the law suit would not effect the Plan, as the Plan would not be liable for any damages and could not have its administration in anyway burdened by any possible outcome.
The plaintiff will clearly not be subject to any conflicting obligations, and there will be no determination of whether any benefits are due to any party. Further, the plaintiff's claims, which amount to professional malpractice, are claims that are traditionally covered by state law. The nature of the plaintiff's claims are not different than they would be if based on poor professional advice given in any other business context. See, Sliwa, 806 F. Supp. at 798-799 n.3 (no link between injury to trustee and nature of the trust); Pacific Airmotive, 224 Cal. Rptr. at 238 (plaintiff's action for misrepresentation regarding plan funding no different than any other action for misrepresentation). Redressing professional malpractice claims in no way conflicts with the provisions and policies of ERISA.
Defendants argue that remand is not appropriate because the state court would have to evaluate several issues under ERISA, including whether defendants incorrectly advised plaintiff about the required amendment, whether the amendment to the plan was effective, and whether the amendment caused the underfunding. (PRI's Memorandum in Opposition to Remand, p. 3-5.) The fact a state court might have to address some issues under ERISA does not make remand inappropriate. ERISA specifically provides concurrent jurisdiction to both federal and state courts for certain ERISA claims. 29 U.S.C. § 1132(e). Concurrent jurisdiction indicates that Congress did not believe ERISA issues were per se beyond the capability of state courts.
This court's holding is in conformity with Supreme Court and Seventh Circuit precedent. While the Seventh Circuit has made broad statements regarding preemption, it has indicated a nonfiduciary plan advisor's malpractice may be best addressed in state court. Pappas, 923 F.2d at 540. The Seventh Circuit has also cautioned that the "related to" provision must not be taken literally. Pohl, 956 F.2d at 128 ("banana peel" example). Similarly, while the Supreme Court has made broad statements regarding preemption, these statements have to be read in the context of their cases as a whole. The Supreme Court stated in Ingersoll-Rand Co. that preemption is warranted whenever the existence of a plan is a critical factor in establishing liability or when there would be no cause of action if there was no plan. 111 S. Ct. 483-484. The Court, however, has also stated that preemption does not occur if the state law action has only a "tenuous, remote, or peripheral" connection to the plan. District of Columbia, 113 S. Ct. at 583 n.1. Further, the Court has held that such garden variety actions as suits for unpaid rent, failure to pay creditors, and torts may be brought against ERISA plans. Mackey, 108 S. Ct. at 2187. Any of these actions would clearly not exist but for the existence of a plan, ala Ingersoll, yet they are not preempted.
For the reasons stated above, the plaintiff's motion to remand is GRANTED, and the defendants' motions to dismiss are DENIED.
JAMES F. HOLDERMAN
United States District Judge
DATED: June 23, 1993