Cler v. Illinois Educ. Ass'n, 04-3193.

Decision Date09 September 2005
Docket NumberNo. 04-3193.,04-3193.
Citation423 F.3d 726
PartiesBarbara CLER, Plaintiff-Appellant, v. ILLINOIS EDUCATION ASSOCIATION, National Education Association, IEA Unified Legal Services Plan, and Kate Frank/DuShane Unified Legal Services Program, Defendants-Appellees.
CourtU.S. Court of Appeals — Seventh Circuit

David Stevens (argued), Heller, Holmes & Associates, Mattoon, IL, for Plaintiff-Appellant.

Ralph H. Loewenstein (argued), Loewenstein, Hagen, Oehlert & Smith, Springfield, IL, for Defendants-Appellees.

Before ROVNER, WILLIAMS, and SYKES, Circuit Judges.

SYKES, Circuit Judge.

When Barbara Cler was terminated from her job as a schoolteacher, she asked her union's legal services plan to provide her with an attorney for purposes of pursuing an employment action against her former employer. When the union refused her request, Cler hired an attorney at her own expense and was ultimately successful in her case. In the present action, Cler contends that the defendants wrongfully denied her request for legal services and seeks to recoup the approximately $25,000 she was forced to spend in retaining an attorney on her own. The district court dismissed the case on the defendants' motion pursuant to FED. R. CIV. P. 12(b)(6), holding that the only claim providing a basis for federal jurisdiction — specifically, under the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 et seq. ("ERISA") — failed to state a claim upon which relief could be granted. We reverse.

I. Background

The first task in resolving this appeal is identifying the defendant(s) against whom the various claims in the complaint are asserted, an inquiry that should be straightforward but has been complicated by the complaint's confusing structure and cavalier approach to grammatical usage. The caption and opening paragraph of the complaint identify four separate entities as defendants, two of which are labor unions — the Illinois Education Association ("IEA") and the National Education Association ("NEA"). The remaining two defendants are alleged to be welfare benefit plans sponsored by the defendant unions — the IEA Unified Legal Services Plan ("IEA plan") and the Kate Frank/DuShane Unified Legal Services Program ("DuShane plan").1

After asserting the separate existence of these four defendants, the complaint immediately becomes subsumed in confusion as to whether, and to what extent, the two labor unions and two legal services plans are considered separate and distinct entities for purposes of the claims in the lawsuit. Paragraph two of the complaint reads in part: "The Defendants [IEA] and [NEA] are a labor union . . . ." Paragraph three reads in part: "The plans, [DuShane plan] and [IEA plan], is an employee benefit plan . . . ." There is an obvious disconnect between the plural subjects of these sentences and their corresponding singular objects or verb tenses. The confusion generated by this careless usage is exacerbated by subsequent factual allegations referring only to "the Defendant" or "the Defendant union," without specifying which of the two unions or four defendants is intended. For example, the complaint alleges that "the Plaintiff made several requests of the Defendant that an attorney be appointed on her behalf" and "Plaintiff went to the Defendant union and requested that they provide legal representation for her . . . ." In short, it is difficult to assay the complaint and come away confident as to which defendant is being referenced at any given point.

This lack of clarity spills over into the third and final count of the complaint, in which it is alleged that the defendant(s)' failure to provide Cler with legal representation constituted a denial of benefits to which she was entitled under the terms of a welfare benefit plan, in violation of ERISA. This claim, by virtue of its invocation of ERISA, provides the sole basis for Cler's assertion of federal jurisdiction.2 The DuShane plan is mentioned by name in Count III, but there is no overt mention of the IEA plan. However, in the five paragraphs comprising Count III, the words "defendant" and "defendants" are used. For example, paragraph twenty of the complaint alleges that "the defendants failed to provide benefits to her which she was entitled [sic] under the plan in violation of the provisions of ERISA." As in other parts of the complaint, this allegation refers to plural defendants but a singular "plan." Count III of the complaint also references an exhibit described as an excerpt from "the Defendant unions' booklet relating to providing legal representation." This allegation uses the plural "unions" and the exhibit appears to be two pages taken from an overview of services provided jointly by the NEA and IEA to its members.

All four defendants moved to dismiss. The district court construed Count III as leveled only against the DuShane plan. The court then held that the DuShane plan was not a "welfare benefit plan" for purposes of ERISA because the scope of legal services it provided to members was limited to employment-related matters. This limitation, in the district court's view, took the DuShane plan outside ERISA's definition of a welfare benefit plan. That definition includes plans that provide "prepaid legal services," which the court construed as meaning "personal legal services" only, not legal services relating to employment matters. The court also held that the DuShane plan did not qualify as a welfare benefit plan because it did not provide benefits directly to participants such as Cler and instead only reimbursed state affiliates (such as the IEA) for legal expenses incurred "under delineated circumstances."

Having determined that the DuShane plan was not a welfare benefit plan within the meaning of ERISA, the district court held that Count III failed to state an ERISA claim, and also declined to exercise supplemental jurisdiction over the state law contract claims. Accordingly, the court dismissed the action in its entirety.

II. Discussion
A. Construction of Count III of the Complaint

Cler argues on appeal that she intended to bring Count III, the ERISA claim, against both the IEA plan and the DuShane plan and that her failure to specifically name the IEA plan in Count III was an obvious oversight that was improperly seized upon by the district court as a basis to dismiss her complaint. She argues that her intention to bring Count III against more than one defendant was clear enough under the liberal rules of notice pleading and that the district court erred when it analyzed only whether the DuShane plan was a welfare benefit plan for purposes of ERISA. Cler points to the fact that earlier in the complaint she clearly alleged that both the IEA and DuShane plans are welfare benefit plans for purposes of ERISA, thereby putting the defendants on notice that she was pursuing ERISA claims against both entities.

A motion under Rule 12(b)(6) challenges the sufficiency of the complaint, and dismissal of an action under the rule is warranted only if "no relief could be granted under any set of facts that could be proved consistent with the allegations." DeWalt v. Carter, 224 F.3d 607, 612 (7th Cir.2000). We review a district court's grant of a 12(b)(6) motion de novo, accepting the well-pleaded allegations in the complaint as true and drawing all reasonable inferences in favor of the plaintiff. Gen. Elec. Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir.1997).

Working hand in glove with Rule 12(b)(6) is FED. R. CIV. P. 8, subsection (a) of which requires a plaintiff's complaint to contain a "short and plain statement" of his claim and the basis for federal jurisdiction, and subsection (f) of which instructs the courts that "[a]ll pleadings shall be so construed as to do substantial justice." Rule 8(a) thus requires only a "short and plain statement of the claim that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." DeWalt, 224 F.3d at 612. In this regard, the Supreme Court has cautioned that "[t]he Federal Rules reject the approach that pleading is a game of skill in which one misstep by counsel may be decisive to the outcome and accept the principle that the purpose of pleading is to facilitate a proper decision on the merits." Conley v. Gibson, 355 U.S. 41, 48, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957); see also Luckett v. Rent-A-Center, Inc., 53 F.3d 871, 873 (7th Cir.1995) ("District judges must heed the message of Rule 8: the pleading stage is not the occasion for technicalities.").

The liberal construction given to a complaint, combined with the minimal notice pleading requirements of Rule 8 and our obligation to draw all reasonable inferences in Cler's favor, persuade us that the district court read the complaint too narrowly in determining that the DuShane plan was the only defendant alleged to have violated ERISA. As we have noted, the complaint is anything but a model of clarity, but neither absolute clarity nor proper attention to grammatical norms is a necessary prerequisite to surviving a Rule 12(b)(6) motion. The inexact wording of the complaint is undeniably confounding; the motion to dismiss presented the district court with the option of either construing Count III broadly and liberally so as to include both the DuShane and IEA plans or narrowly so as to exclude the IEA plan from consideration. The court's decision to construe Count III narrowly is inconsistent with Rule 8 and with the obligation to draw all inferences in favor of the nonmoving party when resolving a motion to dismiss. The dismissal order must therefore be reversed.

B. "Prepaid Legal Services" under ERISA

Because of its erroneously narrow reading of the complaint, the district court did not consider whether the IEA plan was a welfare benefit plan under ERISA. The court did conclude, however, that the DuShane plan was not a welfare benefit plan because it...

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