Powers v. South Central United Food & Commercial Workers Unions and Employers Health & Welfare Trust

• Decision Date: 31 October 1983
• Docket Number: No. 82-2319,82-2319
• Citation: 719 F.2d 760
• Parties: 4 Employee Benefits Ca 2552 Kathleen POWERS, etc., et al., Plaintiffs-Appellants Cross-Appellees, v. SOUTH CENTRAL UNITED FOOD & COMMERCIAL WORKERS UNIONS AND EMPLOYERS HEALTH & WELFARE TRUST, etc., Defendant-Appellee Cross-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 760

719 F.2d 760

4 Employee Benefits Ca 2552

Kathleen POWERS, etc., et al., Plaintiffs-Appellants Cross-Appellees, v. SOUTH CENTRAL UNITED FOOD & COMMERCIAL WORKERS UNIONS AND EMPLOYERS HEALTH & WELFARE TRUST, etc Defendant-Appellee Cross-Appellant.

No. 82-2319.

United States Court of Appeals Fifth Circuit.

Oct. 31, 1983.

Eliot P. Tucker, Houston, Tex., for plaintiffs-appellants cross-appellees.

Jeffrey P. Clark, Milwaukee, Wis., J.D. Page, Houston, Tex., for defendant-appellee cross-appellant.

Appeals from the United States District Court for the Southern District of Texas.

Before CLARK, Chief Judge, THORNBERRY and RANDALL, Circuit Judges.

RANDALL, Circuit Judge:

The decisive issue presented by this appeal is the propriety of the defendant's removal of this action to federal court from the Texas state court in which it was brought. Upon its removal, the federal district court denied the plaintiff's motion to remand, and granted the defendant's motion to dismiss. The court's dismissal was premised on its finding that the plaintiff's state law causes of action, which consisted of alleged violations of the Texas Deceptive Trade Practices-Consumer Protection Act, negligence, and fraud, were preempted by the Employment Retirement Income Security Act of 1974 ("ERISA"). Thus, the district court found that because the state court did not have original jurisdiction over the matter, the federal court did not have derivative jurisdiction under the removal statute. See, e.g., Lambert Run Coal Co. v. B. & O. R.R. Co., 258 U.S. 377, 382, 42 S.Ct. 349, 351, 66 L.Ed. 671 (1922). Because we conclude that this action does not arise under federal law, the state court did have jurisdiction over the case and the removal and resulting dismissal were improper; thus, we remand to the district court with directions to remand to the state court in which the action originated.

I. FACTS AND PROCEDURAL BACKGROUND.

The defendant in this case, South Central United Food & Commercial Workers Unions and Employers Health and Welfare Trust (the "Plan"), is a jointly trusteed employee health and welfare benefit plan, maintained in accordance with the Labor Management Relations Act (the "Taft-Hartley Act"), 29 U.S.C. Sec. 141 et seq. (1976 & Supp. V 1981), and subject to ERISA's regulatory scheme, 29 U.S.C. Sec. 1001 et seq. (1976 & Supp. V 1981). The plaintiff, Kathleen Powers, is a participant in the Plan, and her son is a beneficiary of the Plan. In 1981, Powers sought to have her son hospitalized at the Deer Park General Hospital. Because Powers was unsure whether the Plan would cover expenses incurred at Deer Park, a hospital employee telephoned the Plan. The Plan employee with whom the Deer Park employee spoke represented that the Plan would provide coverage. Powers hospitalized her son at Deer Park, where his expenses aggregated $10,534.60. Upon receiving bills for this amount, the Plan denied coverage and refused to pay. It is undisputed that the Plan does not provide coverage for the expenses at issue, because Deer Park does not fall within the Plan's definition of "hospital."

Powers brought suit in state court, alleging that the Plan's misrepresentation of coverage constituted negligence and fraud and violated the Texas Deceptive Trade Practices-Consumer Protection Act ("DTPA"), Tex.Bus. & Com.Code Ann. Sec. 17.41 et seq. (Vernon 1982 Supp.). The Plan petitioned for removal to federal court under 28 U.S.C. Sec. 1441 (1976), asserting that Powers' claim was preempted by ERISA and by the Taft-Hartley Act; thus, the action "arose under" federal law. Powers filed a motion to remand the case to state court, alleging that no federal question was presented by her complaint.

The district court concluded that Powers' complaint stated a claim under ERISA, that her state claim was preempted by ERISA, and that, because the claim was one falling within the exclusive jurisdiction of the federal courts and could not have been brought originally in state court, the federal court did not have derivative removal jurisdiction.

The court's finding was based on its determination that the Plan employee who made the misrepresentation concerning coverage was a Plan fiduciary as defined in 29 U.S.C. Sec. 1002:

[One who] exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets.

Section 1104(a) provides that a plan fiduciary must discharge his or her duties

solely in the interest of the participants and beneficiaries ... with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims....

Because section 1132(a)(3) authorizes civil actions by plan participants or beneficiaries to enforce any of ERISA's provisions, the district court reasoned, Powers' suit stated a violation of the standard of care provided by section 1104(a); thus her claim stated a federal question. The enforcement provisions of ERISA provide that the state and federal courts shall have concurrent jurisdiction over actions:

[T]o recover benefits due to him under the terms of his plan, or to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan....

29 U.S.C. Sec. 1132(a)(1)(B). The federal courts have exclusive jurisdiction over all other civil actions. 29 U.S.C. Sec. 1132(e)(1). Powers' claim does not fall within section 1132(a)(1)(B), because it is undisputed that the Plan does not cover the expenses in controversy. Thus, the district court concluded that the case is one within the exclusive jurisdiction of the federal courts under section 1132(e)(1). Our disposition of this appeal precludes our reaching the merits of the case or the district court's determinations thereon.

II. REMOVAL.

The basic removal statute, 28 U.S.C. Sec. 1441, provides:

(a) Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.

Moreover, section 1446 provides:

(b) The petition for removal of a civil action or proceeding shall be filed within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, ...

28 U.S.C. Sec. 1446(b) (1976 & Supp. V 1981) (emphasis added). In construing the removal statutes, the Supreme Court has mandated a "strict construction" approach, in recognition of the congressional intent to restrict the jurisdiction of federal courts on removal. See American Fire & Casualty Co. v. Finn, 341 U.S. 6, 10, 71 S.Ct. 534, 538, 95 L.Ed. 702 (1951) ("The Congress, in [Sec. 1441], carried out its purpose to abridge the right of removal"); Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09, 61 S.Ct. 868, 872, 85 L.Ed. 1214 (1941) (referring to precursor to Sec. 1441); see also La Chemise Lacoste v. Alligator Co., 506 F.2d 339, 344 (3d Cir.1974), cert. denied, 421 U.S. 937, 95 S.Ct. 1666, 44 L.Ed.2d 94 (1975).

The "original jurisdiction" to which section 1441 refers can rest with the federal courts because of diversity of citizenship between the parties, see 28 U.S.C. Sec. 1332 (1976), because the claim "arises under" federal law, see 28 U.S.C. Sec. 1331 (1976 & Supp. V 1981), or by virtue of some other explicit grant of jurisdiction, see, e.g., 28 U.S.C. Sec. 1337 (discussed infra ). In the instant case there is no diversity of citizenship; thus, for removal to have been proper under section 1441, our inquiry must focus on whether Powers' complaint stated a claim "arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. Sec. 1331.

III. DISCUSSION.

We begin by noting that the "arising under" component of federal subject matter jurisdiction has been exhaustively analyzed by courts and commentators alike. ¹ The Supreme Court has recently noted that "when considered in light of Sec. 1441's removal jurisdiction, the phrase 'arising under' masks a welter of issues regarding the interrelation of federal and state authority and the proper management of the federal judicial system." Franchise Tax Board of California v. Construction Laborers Vacation Trust for Southern California, --- U.S. ----, 103 S.Ct. 2841, 2846, 77 L.Ed.2d 420 (1983). While the precise boundaries to which federal jurisdiction extends are not matters upon which all agree, ² certain principles are firmly established, and none more so than the "well-pleaded complaint" rule. As stated by the Supreme Court in Taylor v. Anderson, 234 U.S. 74, 75-76, 34 S.Ct. 724, 724, 58 L.Ed. 1218 (1914), that doctrine provides:

[W]hether a case is one arising under the Constitution or a law or treaty of the United States, in the sense of the jurisdictional statute ... must be determined from what necessarily appears in the plaintiff's statement of his own claim in the bill or declaration, unaided by anything alleged in anticipation or avoidance of defenses which it is thought the defendant may interpose.

See also Franchise Tax Board, supra; Pan American Petroleum Corp. v. Superior Court, 366 U.S. 656, 81 S.Ct. 1303, 6 L.Ed.2d 584 (1961); Gully v. First National Bank in Meridian, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936); Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908). The well-pleaded complaint rule dictates that "a defendant may not remove a case to federal court unless the plaintiff 's complaint establishes that the case 'arises under' federal law." Franchise...