Nelson v. Stewart

• Decision Date: 29 August 2005
• Docket Number: No. 03-4026.,No. 03-4027.,03-4026.,03-4027.
• Citation: 422 F.3d 463
• Parties: Roy G. NELSON, Clarence Alsip, Charles Andrews, et al., Plaintiffs-Appellants, Cross-Appellees, v. John STEWART, Donald R. Say, et al., Defendants-Appellees, Cross-Appellants, and United Steelworkers of America, Local Union # 12213, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

422 F.3d 463

Roy G. NELSON, Clarence Alsip, Charles Andrews, et al., Plaintiffs-Appellants, Cross-Appellees, v. John STEWART, Donald R. Say, et al., Defendants-Appellees, Cross-Appellants, and United Steelworkers of America, Local Union # 12213, Defendant-Appellee.

No. 03-4026.

No. 03-4027.

United States Court of Appeals, Seventh Circuit.

Argued January 21, 2005.

Decided August 29, 2005.

Michael C. Kendall (argued), Kendall-Hahn & Associates, Carmel, IN, for Plaintiffs-Appellants.

Richard J. Swanson (argued), Macey Swanson & Allman, Indianapolis, IN, for Defendants-Appellees.

Before RIPPLE, WOOD and SYKES, Circuit Judges.

RIPPLE, Circuit Judge.

Retired bargaining unit workers ("retirees") of Indiana Steel and Wire Company ("ISW") filed this state common law action in Indiana state court against the United Steelworkers of America, Local Union 12213 and the United Steelworkers of America, AFL-CIO (collectively, "Union"), as well as individual union members ("individual defendants"). The Union removed the case to the district court. The district court determined that removal was proper because the claims against the Union presented a federal question. See 28 U.S.C. § 1441(a). It later granted summary judgment in favor of the Union on statute of limitations grounds. The district court then exercised its discretion to remand to state court the retirees' claims against the individual defendants, over which the court believed it had only supplemental jurisdiction. The parties have cross-appealed. For the reasons set forth in the following opinion, we now affirm in part, and reverse and remand in part the judgment of the district court.

I BACKGROUND

A. Facts

In March 1998, the Union negotiated a collective bargaining agreement on behalf of the production employees at ISW's Muncie, Indiana plant. Three months later, ISW filed a petition for relief under Chapter 11 of the Bankruptcy Code. The Union and ISW then entered into negotiations for the modification of the March 1998 collective bargaining agreement. The parties sought to achieve sufficient cost savings to enable ISW to continue operating and to reorganize. Briefly, through the course of the bankruptcy process, the Union and the individual defendants repeatedly assured the retirees that their health insurance benefits were not a topic of negotiation and that the retirees did not need their own representation in the negotiations with ISW.

On August 7, 1998, ISW filed a motion, in accordance with 11 U.S.C. §§ 1113 and 1114, in the bankruptcy court seeking permission to reject the March 1998 collective bargaining agreement and to modify the contract benefits of the retired bargaining unit members. On August 24, 1998, Durrell Corporation ("Durrell") made an offer to purchase all of ISW's assets subject to the approval of the bankruptcy court. The Union pursued collective bargaining negotiations with Durrell in the event that Durrell successfully purchased the assets of ISW. In September, the local union membership ratified ISW's final proposal to modify the March 1998 collective bargaining agreement. The new agreement terminated the health coverage of the retirees and modified other retiree benefits. At this time, the local union membership also ratified the final purchase offer by Durrell. On October 12, 1998, the bankruptcy court issued an order approving ISW's and the Union's agreement to reject the March 1998 collective bargaining agreement and to implement the modified contract. On October 23, 1998, the bankruptcy court approved the sale of ISW to Durrell. The final contract of sale did not provide for retiree medical coverage.

After the retirees learned that they had lost their health care benefits, they filed suit against the Union and the individual defendants in state court; the suit alleged negligence, misrepresentation and promissory estoppel.

B. District Court Proceedings

The Union removed this action to federal court, and the retirees filed a motion to remand. The district court determined that the retirees' state-law claims against the Union were subject to complete preemption because any purported duty of the Union to represent the retirees during ISW's bankruptcy process was derived from and was dependent on federal law. Specifically, § 1114 of the Bankruptcy Code provides:

A labor organization shall be, for purposes of this section, the authorized representative of those persons receiving any retiree benefits covered by any collective bargaining agreement to which that labor organization is a signatory, unless (A) such labor organization elects not to serve as the authorized representative of such persons, or (B) the court, upon a motion by any party in interest, after notice and hearing, determines that different representation of such persons is appropriate.

11 U.S.C. § 1114(c)(1). The district court perceived no real difference between the Union's role as the retirees' statutory representative in this case and a union's duty of fair representation when it acts as the exclusive representative of its bargaining unit members in collective bargaining agreements under section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185. Therefore, the district court applied cases in which courts have held that fair duty of representation claims are federal in character, even if pleaded under state law, because they fall within the field of law wholly occupied by the national labor laws. See BIW Deceived v. Local S6, Indus. Union of Marine & Shipbuilding Workers of America, IAMAW, Dist. Lodge 4, 132 F.3d 824 (1st Cir.1997). The district court accordingly held that it had original jurisdiction over the retirees' claims against the Union and that removal was appropriate.

The district court then granted summary judgment in favor of the Union on the ground that the retirees' claims were barred by the federal statute of limitations.

The district court then turned to the claims against the individual defendants. It determined that it had supplemental jurisdiction over the claims because they were part of the same case or controversy as the claims against the Union. See 28 U.S.C. § 1367. The court initially decided to exercise its supplemental jurisdiction, and it ordered supplemental briefs on the issue of the individual defendants' immunity from suit. Upon the parties' briefs, the district court concluded that case law holding that individual union members are immune from liability for actions taken in relation to a collective bargaining agreement covered by section 301 of the LMRA did not extend to actions individual union members take in relation to negotiations under 11 U.S.C. § 1114. After so ruling the district court decided in the same order that, because it had dismissed all claims over which it had original jurisdiction, it would not continue to exercise jurisdiction over the retirees' state-law claims against the individual defendants. Accordingly, the district court remanded those claims to the state court.

II DISCUSSION

A. Standard of Review

We review a district court's grant or denial of summary judgment de novo. Tutman v. WBBM-TV, Inc./CBS, Inc., 209 F.3d 1044, 1048 (7th Cir.2000). In doing so, we construe all facts and reasonable inferences in the light most favorable to the nonmoving party. Id. Summary judgment is proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

B. General Removal and Preemption Standards

A defendant may remove any civil action filed in state court over which federal district courts have original jurisdiction. 28 U.S.C. § 1441;¹ Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). Federal district courts, in turn, have original jurisdiction over "all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Ordinarily, a court must determine the presence or absence of a federal question by examining only the plaintiff's well-pleaded complaint. Caterpillar Inc., 482 U.S. at 392, 107 S.Ct. 2425. This rule requires that a federal question appear on the face of the complaint. Bastien v. AT & T Wireless Servs., Inc., 205 F.3d 983, 986 (7th Cir.2000) (citing Franchise Tax Bd. of California v. Constr. Laborers Vacation Trust for S. California, 463 U.S. 1, 10, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)). The plaintiff, as the master of his own complaint, may avoid federal jurisdiction by pleading only state-law claims. Id. Most often, a defendant raises federal preemption as a defense to a state-law action. Caterpillar Inc., 482 U.S. at 392, 107 S.Ct. 2425. A case may not be removed, however, based on a federal defense, "even if the defense is anticipated in the plaintiff's complaint, and even if both parties concede that the federal defense is the only question truly at issue." Id.; see Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003).

"On occasion, the Court has concluded that the preemptive force of a statute is so `extraordinary' that it `converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.'" Caterpillar Inc., 482 U.S. at 393, 107 S.Ct. 2425 (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987)). This "independent corollary" to the well-pleaded complaint rule is known as the "complete preemption" doctrine. Id. "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." Id.; see Beneficial Nat'l Bank, 539...