United States District Court, Southern District of Illinois
October 3, 2002
JOHN D. ALLEMAN, INDIVIDUALLY, AND AS "CLASS REPRESENTATIVE," PLAINTIFF,
BLUECROSS BLUESHIELD OF ILLINOIS, AS ADMINISTRATOR OF THE ASSOCIATES' HEALTH AND WELFARE PLAN FOR WAL-MART AND SAM'S ASSOCIATES/PARTNERS, DEFENDANT
The opinion of the court was delivered by: J. Phil Gilbert, District Judge
This matter comes before the Court on the plaintiff's motion to
remand. (Doc. 11). The defendant has responded. (Doc. 13). For the
reasons discussed below, the Court will grant the motion to remand.
The plaintiff, John Alleman, is an attorney. At all times relevant to
this action, Donna Newcomb (who is not a party) was an employee at
Wal-Mart and had health insurance through the "Associates Health and
Welfare Plan," an ERISA plan (hereinafter "the Plan"). The plaintiff
alleges that the defendant, Blue Cross/Blue Shield of Illinois, is the
Newcomb was involved in an automobile accident, sustained injuries and
incurred medical bills, of which $5,513.60 were paid by the Plan. She
hired Alleman to represent her interests in a personal injury suit
against the other driver. Alleman worked for a 1/3 contingent fee and
settled Newcomb's claim for $100,000.00. Alleman created a common fund,
out of which he paid $5,513.60 to Blue Cross/Blue Shield as was required
by the Plan's reimbursement provision.
The reimbursement provision of the Plan further provided that there
would be no reduction of the Plan's lien for attorney's fees.
Nevertheless, Alleman sought attorney's fees, under the Illinois Common
Fund Doctrine, from Blue Cross/Blue Shield for 1/3 of the amount
remitted. Blue Cross/Blue Shield refused, and Alleman filed suit against
Blue Cross/Blue Shield in Jackson County, Illinois on behalf of himself
and an alleged class of similarly situated attorneys. His Complaint
asserts a claim under the Common Fund Doctrine.
The defendant removed the case to this Court under 28 U.S.C. § 1441
on the basis of diversity and federal question jurisdiction. The
plaintiff's motion to remand followed.
A defendant may remove to federal court a case filed in state court if
federal subject matter jurisdiction over the case.
28 U.S.C. § 1441(a). Federal courts are courts of limited subject
matter jurisdiction. Flight Attendants Against UAL Offset v. C.I.R.,
165 F.3d 572, 578 (7th Cir. 1999) (citing Kokkonen v. Guardian Life Ins.
Co., 511 U.S. 375, 377 (1994)). In its § 1441 notice of removal the
defendant asserts two bases for federal subject matter jurisdiction:
diversity jurisdiction, 28 U.S.C. § 1332, and federal question
jurisdiction, 28 U.S.C. § 1331. (Doc. 1).
Section 1332(a) confers upon federal courts subject matter jurisdiction
over civil actions where the amount in controversy exceeds $75,000.00 and
there is complete diversity of citizenship. The defendant now concedes
that the jurisdictional amount is not satisfied in this case. The
individual plaintiff's claim is well below $75,000.00. Under Zahn v.
International Paper Co., 414 U.S. 291 (1973), multiple plaintiffs with
separate claims must each meet the jurisdictional amount requirement.
Therefore, even though the plaintiff purportedly brings this suit on
behalf of a class, the jurisdictional amount is not satisfied by the
class's aggregate claim — even assuming that such a claim is
greater than $75,000.00.
Section 1331 confers upon federal courts subject matter jurisdiction
over civil actions "arising under" the laws of the United States. As a
general rule, whether a case arises under federal law is determined by
what appears in the plaintiff's well pleaded complaint as "[i]t is long
settled law that a cause of action arises under federal law only when the
plaintiff's well-pleaded complaint raises issues of federal law."
Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987) (citing
Gully v. First National Bank, 299 U.S. 109 (1936)). "Thus the defendant
cannot cause a transfer to federal court simply by asserting a federal
question in his responsive pleading." Rice v. Panchal, 65 F.3d 637, 639
(7th Cir. 1995). This is the so-called "well-pleaded complaint rule."
In this case, the face of the plaintiff's complaint does not raise any
There is, however, an exception to the to the well-pleaded complaint
rule — the "complete preemption doctrine." This jurisdictional
doctrine provides that "to the extent that Congress has displaced a
plaintiff's state law claim, that intent informs the well-pleaded
complaint rule, and a plaintiff's attempt to utilize the displaced state
law is properly `recharacterized' as a complaint arising under federal
law." Rice, 65 F.3d at 640 n. 2 (citing Metropolitan Life Ins. Co. v.
Taylor, 481 U.S. 58, 64 (1987)).
The jurisdictional doctrine of complete preemption is often confused
with "conflict preemption." Conflict preemption exists when a federal
law provides a defense to a state law claim. Rice, 65 F.3d at 639.
Federal defenses can be raised in state court, and they do not create
federal jurisdiction. Id at 639-40. On the other hand, "federal subject
matter jurisdiction exists if the complaint concerns an area of law
`completely preempted' by federal law, even if the complaint does not
mention a federal basis of jurisdiction." Jass v. Prudential Health Care
Plan, 88 F.3d 1482, 1487 (7th Cir. 1996) (citing Rice, 65 F.3d at 642).
"In [Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987)], the
Supreme Court extended the `complete preemption' exception to the
well-pleaded complaint rule to ERISA cases." Jass, 88 F.3d at 1487.
Subsequently, the Seventh Circuit has held that cases within the scope of
ERISA § 502(a) are completely preempted while § 514(a)
provides the basis for conflict preemption. Rice, 65 F.3d at 639-40. In
this case, the Court must decide whether the plaintiff's common fund
doctrine claim is within the scope of Section 502(a).*fn2
The Illinois Common Fund Doctrine "permits a party who creates,
preserves, or increases the value of a fund in which others have ownership
interest to be reimbursed from that fund for litigation expenses
incurred, including counsel fees." Scholtens v. Schneider, 671 N.E.2d 657,
662 (Ill. 1996). The plaintiff argues that ERISA does not "completely
preempt" claims brought under the common fund doctrine. More
specifically, the plaintiff argues that the claim does not arise under
§ 502, but rather, that it arises under a wholly separate state law
theory, and that, therefore, the complete preemption doctrine is
inapposite. This position is supported by Blackburn v. Sundstrand
Corporation, 115 F.3d 493 (7th Cir. 1997), which presented facts similar
to this case.
In Blackburn, two beneficiaries of an ERISA plan, Ronald and Barbara
Blackburn, were injured in an automobile accident. Blackburn, 115 F.3d at
494. The plan paid $25,831.00 toward the cost of the Blackburns' medical
care. Id. Then, the Blackburns filed suit in an Illinois court against
the driver of the other car and accepted a settlement of $105,000.00.
Id. Two parties had claims against the settlement fund — the
Blackburns' attorney and their ERISA benefit plan. Id. The Blackburns
filed a petition in state court to apportion the fund. Id. The fund
administrator removed the case to federal court under § 1441. Id.
The district court held that the Illinois common fund doctrine was
"preempted" by ERISA § 514(a), and directed that the full $25,831.00
be paid from the fund to the plan. Id. Apparently, there was no motion
to remand as the district court never discussed the basis for its
The Seventh Circuit vacated the judgment of the district court, holding
that the district court lacked subject matter jurisdiction. The Court
Not even the most expansive reading of ERISA covers
motor vehicle collisions, just because part of the
recovery may inure to the benefit of a plan. The
petition to apportion the fund invoked the ancillary
jurisdiction of the state court and was part of that
original, non-removable action.
Id. In this case, the defendant focuses on the language above in arguing
that this case is a significantly different type of action. The
defendant notes that while Blackburn involved a petition to apportion
which was ancillary to the underlying tort case, this case is an
independent civil action. The Court, however, does not find that
distinction to be significant. In drawing that conclusion, the Court
relies, in part, upon the following language in Blackburn:
Even if we were to treat the petition as inaugurating
a separate "civil action," removal would have been
The fundamental claim — that the
Blackburns should be credited, for purposes of their
duty to reimburse [the plan administrator], with sums
paid to the attorney whose work produced the fund
— arises under state law.
Blackburn, 115 F.3d at 495. This Court understands the language quoted
above as meaning that any claim predicated upon the Illinois common fund
doctrine "arises under" state law and not under § 502(a). Moreover,
it simply would not make sense to treat this case as significantly
different than Blackburn just because this is a separate action instead
of an action ancillary to the underlying personal injury action. If
district courts are to draw such a distinction, then Blackburn merely
represents a preference for separate actions against plan administrators
as opposed to petitions to apportion.
The defendant argues, however, that this case is distinguishable from
Blackburn for a second reason. The defendant notes that, in this case,
unlike Blackburn, the Plan specifically precludes a reduction of its lien
for attorney's fees. Therefore, the defendant argues that the complete
preemption doctrine should be applied. The defendant cites two cases in
support of this argument. Great-West Life & Annuity Ins. Co. v.
Moore, 133 F. Supp.2d 677 (N.D.Ill. 2001) (Judge Darrah) (holding that
Blackburn was not controlling when the plan provided that its lien rights
would not be reduced due to attorney's fees and costs); McCotter v.
Longo, No. 95 C 5985, 1997 WL 630188 (N.D.Ill. Sept. 30, 1997)
(Magistrate Judge Lefkow) (holding that Blackburn was inapplicable when
the plan expressly provided that its right to reimbursement would not be
reduced for attorney's fees). This Court respectfully disagrees with
Judges Darrah and Lefkow. In Great-West, Judge Darrah relied on Judge
Lefkow's decision in McCotter. In McCotter, Judge Lefkow relied on dicta
contained in the Blackburn decision. For reasons discussed below, this
Court believes that Judge Lefkow misconstrued the Blackburn dicta.
In Blackburn, after holding that Section 502 was "irrelevant" to the
common fund claim, Judge Easterbrook went on to discuss whether the
common fund doctrine was "preempted" by Section 514(a).*fn3
See id. at
495. At this point, Judge Easterbrook was no longer discussing the scope
of § 502(a), but rather, was mulling over the question of whether
ERISA, through § 514(a), would provide a defense against the common
fund doctrine. See id. Judge Easterbrook concluded that the common fund
doctrine was not preempted by § 514(a). See id. Later, apparently
still discussing § 514(a) conflict preemption, Judge Easterbrook
stated that "[a] plan might have a better argument if its governing
documents expressly required participants to pay their own legal fees
(alternatively, to hire only attorneys who agree to waive the common-fund
doctrine) and to remit the gross rather than the net proceeds from
litigation." Id. at 496. This Court does not believe that the Seventh
Circuit intended, through this dicta, to suggest an exception to the
Court's very clear holding that common fund claims "arise under" state
law — not § 502(a). See id. at 495.
Moreover, there is no other basis for concluding that Blackburn and
this case are significantly different for the
purposes of complete
preemption analysis. The claim in this case, like the claim in
Blackburn, is outside the scope of § 502(a). In determining whether
a claim is within the scope of § 502(a), three factors are examined:
"(1) whether the plaintiff is eligible to bring a claim under that
section; (2) whether the plaintiff's cause of action falls within the
scope of an ERISA provision that the plaintiff can enforce via §
502(a), and (3) whether the plaintiff's state law claim cannot be
resolved without an interpretation of the contract governed by federal
law." Jass, 88 F.3d at 1487 (internal quotation marks and citations
omitted). The law regarding the application of these three factors is
not clear. It appears that a plaintiff's eligibility under § 502(a)
is a prerequisite to a finding of complete preemption. See Rice, 65 F.3d
at 641 (stating that "one prerequisite of complete preemption under
§ 502(a) is a plaintiff eligible to bring a claim under that
section"). Moreover, in addition to satisfying the first element, it
appears that either the second or third element must be satisfied as a
prerequisite to complete preemption. See id. at 641-43 (holding that a
state law claim neither arising under § 502(a) nor alleging a breach
of an ERISA plan, may, nonetheless, be completely preempted if the claim
requires a court to construe an ERISA plan).
In this case, the first element is not satisfied. Newcomb, the plan
participant and beneficiary is not a party. The plaintiff, Newcomb's
attorney, is not suing as a fiduciary. Rather, he is suing the alleged
plan administrator on his own behalf. Under Illinois law, "the
quasi-contractual right to payment of fees for services rendered belongs
to the attorney who rendered the services and does not affect the
contractual relationship between the plan participant and the plan."
Bishop v. Burgard, 764 N.E.2d 24, 31 (Ill. 2002).
Moreover, neither the second nor third element is satisfied. The
plaintiff is suing under an equitable doctrine of Illinois common law that
has nothing to do with the claims arising under § 502(a). The
plaintiff's claim does not depend on any provision of ERISA, and the
plaintiff's claim does not rest upon any provision of the Plan.
Additionally, the plaintiff's claim does not require the Court to
construe the terms of the Plan. While the common fund doctrine is
contrary to one of the terms of the Plan, the Illinois courts apply the
common fund doctrine irrespective of such contractual terms. See Bishop
v. Burgard, 764 N.E.2d 24, 29-30 (Ill. 2002) (relying on Scholtens v.
Schneider, 671 N.E.2d 657 (Ill. 1996)).
Therefore, for all the reasons discussed above, the Court concludes
that there is no basis for federal subject matter jurisdiction, and the
Court will grant the plaintiff's motion to remand. This decision is
consistent with Bishop v. Burgard, where the Illinois Supreme Court
concluded "that an action to recover fees under the common fund doctrine
is an independent action invoking the attorney's right to the payment of
fees for services rendered, an action that is not preempted by ERISA."
764 N.E.2d at 31. The defendant's reliance on Lake v. Marten,
946 F. Supp. 605 (N.D.Ill. 1996) is misplaced as that case was decided
without the benefit of the Seventh Circuit's decision in Blackburn.
For the reasons discussed above, the motion to remand (Doc. 11) is
IT IS SO ORDERED.