Lyons v. Philip Morris Inc.

• Decision Date: 12 June 2000
• Docket Number: No. 99-2843,99-2843
• Citation: 225 F.3d 909
• Parties: (8th Cir. 2000) ROBERT E. LYONS, ET AL., PLAINTIFFS - APPELLANTS, v. PHILIP MORRIS INCORPORATED, ET AL., DEFENDANTS - APPELLEES. :
• Court: U.S. Court of Appeals — Eighth Circuit

Page 909

225 F.3d 909 (8th Cir. 2000)

ROBERT E. LYONS, ET AL., PLAINTIFFS - APPELLANTS, v. PHILIP MORRIS INCORPORATED, ET AL., DEFENDANTS - APPELLEES.

No. 99-2843

UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

Submitted: June 12, 2000

Filed: September 1, 2000

Appeal from the United States District Court for the District of Minnesota. [Copyrighted Material Omitted] Before Loken and Bright, Circuit Judges, and Hand,^* District Judge.

Loken, Circuit Judge.

The trustees of twenty-five multi-employer health benefit plans (the Trustees) commenced this action in Minnesota state court, asserting various state law claims against defendant tobacco companies. The Trustees seek damages and equitable relief to remedy alleged injury to the plans, including "higher administrative costs . . . in the form of paying claims for care associated with tobacco related illnesses." Defendants removed the case to federal court, and the Trustees moved to remand. Concluding that the Trustees "are essentially making subrogation claims" for the recovery of health benefits paid, the district court¹ denied their motion to remand because those claims are preempted by the Employee Retirement Income and Security Act, 29 U.S.C. §§ 1001 et seq. (ERISA). The Trustees then filed a second amended complaint, which contained none of the earlier state law claims, nor any claim under ERISA, but asserted claims under the federal antitrust laws and RICO. In separate orders, the district court dismissed those claims on the merits and dismissed defendant B.A.T Industries (BAT) for lack of personal jurisdiction. The Trustees appeal, arguing the district court lacked removal jurisdiction over their initial suit and improperly dismissed their antitrust claims, their RICO claims, and defendant BAT. We affirm.

I. Removal Jurisdiction

The Trustees argue that removal was improper because the district court lacked subject-matter jurisdiction over their state court complaint. Therefore, we should remand the case to the district court with instructions to remand it to state court. We reject this contention for two independent reasons.

A. ERISA Preemption.

A civil action is removable if the district court has "original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States." 28 U.S.C. § 1441(b). Here, the Trustees' state court complaint pleaded only state law claims. That is a plaintiff's prerogative, and it is normally honored. Under the "well-pleaded complaint" rule, "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." Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 14 (1983). However, the well-pleaded complaint rule does not apply if Congress has evidenced an intent that federal law completely displace state law. "Once an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law." Caterpillar, Inc. v. Williams, 482 U.S. 386, 393 (1987).

In Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 52-56 (1987), the Supreme Court held that the comprehensive civil remedies in § 502(a) of ERISA, 29 U.S.C. § 1132(a), completely preempt state law remedies. On the same day, the Court applied this ruling to a challenged removal, concluding that "causes of action within the scope of the civil enforcement provisions of § 502(a) [are] removable to federal court." Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 66 (1987). In other words, "[c]auses of action within the scope of, or that relate to, the civil enforcement provisions of 502(a) are removable to federal court despite the fact the claims are couched in terms of state law." Hull v. Fallon, 188 F.3d 939, 942 (8th Cir. 1999). If any of the Trustees' state law claims are within the scope of § 502(a), the case was properly removed.²

Section 502(a) provides that an ERISA fiduciary may bring a civil action "to obtain . . . appropriate equitable relief . . . to enforce . . . the terms of the plan." 29 U.S.C. § 1132(a)(3)(B)(ii). The federal courts have exclusive jurisdiction over such actions. See § 502(e)(1), 29 U.S.C. § 1132(e)(1). Here, the Trustees are ERISA fiduciaries, and some of their state law claims included requests for equitable relief. Section 502(a) preemption extends to § 502(a)(3). See Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 144-45 (1990). Thus, the issue is whether any of the Trustees' claims fall within the scope of § 502(a)(3).

To the extent the Trustees seek monetary relief, their state law claims (whether legal or equitable in nature) are premised on the recovery of health benefits paid by ERISA plans to ERISA beneficiaries on account of the beneficiaries' tobacco-related health care costs. It is undisputed that the plans contain subrogation clauses affording them a right to recover benefits paid when a beneficiary is entitled to recover for that loss from a third party.³ We have previously held that a fiduciary's claim against a plan beneficiary for specific performance of the plan's subrogation clause falls within § 502(a)(3)'s exclusive jurisdiction over suits to enforce the terms of the plan. See Southern Council of Indus. Workers v. Ford, 83 F.3d 966, 969 (8th Cir. 1996).

Defendants argue that Southern Council controls the jurisdiction issue in this case. The Trustees cite one obvious difference between this case and Southern Council -- they have sued third parties, not plan beneficiaries. We conclude that difference does not eliminate § 502(a)(3) jurisdiction over their claims to recover health care benefits paid by the plans. It is now settled that "§ 502(a)(3) admits of no limit . . . on the universe of possible defendants." Harris Trust v. Salomon Smith Barney, 120 S. Ct. 2180, 2187 (2000) (upholding action under § 502(a)(3) against third-party transferee of tainted plan assets). The only limitation in the statute is that a fiduciary may only obtain "appropriate equitable relief." In addition, we disagree with the Trustees' assertion that their state law claims against third-party tortfeasors do not impact core ERISA relationships. The Trustees' claims to recover benefits paid are no better than the as-yet-unasserted claims by plan beneficiaries who directly suffered the alleged tobacco-related injuries, and who would be entitled to recover health care costs if successful. If these beneficiaries did not intervene in the Trustees' state law action, their ability to recover from an insolvent defendant would be compromised if the Trustees won, and they would run the risk of being bound by an adverse decision if the Trustees lost. See RESTATEMENT (2D) JUDGMENTS § 41. If beneficiaries did intervene and all plaintiffs prevailed, the apportionment of damages would depend upon plan provisions regarding subrogation, assignment of claims, and the Trustees' authority to seek recovery on behalf of beneficiaries. In these circumstances, we conclude that § 502(a)(3) provides federal jurisdiction over at least some of the Trustees' claims, and their motion to remand was therefore properly denied.⁴

We do not share the Trustees' concern that Southern Council and this decision will "federalize" personal-injury litigation involving ERISA beneficiaries. When an ERISA plan has paid benefits and is entitled to subrogation, typically either the injured beneficiary or the subrogated plan sues the alleged tortfeasor in the name of the beneficiary for damages, including health care expenses the beneficiary incurred. The plan's subrogation rights are not at issue in that lawsuit. A separate § 502(a)(3) claim will arise, as in Southern Council, only if the beneficiary recovers from the tortfeasor and refuses to reimburse the plan. Here, on the other hand, the Trustees have sued the alleged tortfeasors directly, alleging the plans' own right to recover. Because the subrogation right is protected in the plans and impacts the relationship between the plans and injured beneficiaries, § 502(a)(3) applies.

B. The Trustees Waived This Issue.

Defendants further argue that the Trustees waived their objection to the district court's jurisdiction when they amended their complaint to include federal antitrust and RICO claims. Given the unusual procedural history of this case, we agree.

In general, "a district court's error in failing to remand a case improperly removed is not fatal to the ensuing jurisdiction if federal jurisdictional requirements are met at the time judgment is entered." Caterpillar, Inc. v. Lewis, 519 U.S. 61, 64 (1996). Here, the district court had subject-matter jurisdiction when it dismissed the Trustees' second amended complaint because that complaint asserted exclusively federal statutory causes of action. See 28 U.S.C. §§ 1331, 1337. The Trustees argue, however, that this case falls within an exception to the general rule because they amended their initial complaint "involuntarily" after the district court ruled that their state law claims were preempted. See In re Atlas Van Lines, Inc., 209 F.3d 1064, 1067 (8th Cir. 2000); In Home Health v. Prudential Ins. Co., 101 F.3d 600, 603-04 (8th Cir. 1996); Humphrey v. Sequentia, Inc., 58 F.3d 1238, 1241 (8th Cir. 1995).

In denying the Trustees' motion to remand, the district court concluded they "are essentially making subrogation claims, especially with respect to their equitable claims. These claims are preempted by ERISA, and removal to federal court was proper." (Emphasis added.) Defendants then moved to dismiss the state law claims, and the Trustees moved for leave to file a second amended complaint. The district court granted the Trustees' motion, explaining:

Due to ERISA preemption, Plaintiffs have indicated a desire to amend their complaint to add ERISA and other federal law claims. . ....