Rutledge v. Seyfarth

• Decision Date: 05 April 2000
• Docket Number: No. 98-15298,98-15298
• Citation: 201 F.3d 1212
• Parties: (9th Cir. 2000) ANTHONY RUTLEDGE, an individual on his own behalf and beneficiaries of the Hotel Union and Hotel Industry of Hawaii Pension Trust; AFL HOTEL AND RESTAURANT WORKERS' HEALTH AND WELFARE FUND,Plaintiffs-Appellees, ORDER AND AMENDED v. SEYFARTH, SHAW, FAIRWEATHER & GERALDSON, a California Law Partnership; MITCHELL WHITEHEAD, an individual, OPINION Defendants-Appellants
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1212

201 F.3d 1212 (9th Cir. 2000)

ANTHONY RUTLEDGE, an individual on his own behalf and beneficiaries of the Hotel Union and Hotel Industry of Hawaii Pension Trust; AFL HOTEL AND RESTAURANT WORKERS' HEALTH AND WELFARE FUND,Plaintiffs-Appellees, ORDER AND AMENDED v. SEYFARTH, SHAW, FAIRWEATHER & GERALDSON, a California Law Partnership; MITCHELL WHITEHEAD, an individual, OPINION Defendants-Appellants.

No. 98-15298

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Argued and Submitted March 9, 1999

Filed January 12, 2000

Amended April 5, 2000

Appeal from the United States District Courtfor the Northern District of California

COUNSEL: Brian T. Ashe, Seyfarth, Shaw, Fairweather & Geraldson, San Francisco, California; George E. Preonas and Steven B. Katz, Seyfarth, Shaw, Fairweather & Geraldson, Los Angeles, California, for the defendants-appellants.

Samuel Kornhauser, Law Offices of Samuel Kornhauser, San Francisco, California, for the plaintiffs-appellees.

Before: Diarmuid F. O'Scannlain and Kim McLane Wardlaw, Circuit Judges, and Wm. Matthew Byrne, Jr.,¹ District Judge.

OPINION

WARDLAW, Circuit Judge:

Seyfarth, Shaw, Fairweather & Geraldson, a law firm, and Mitchell Whitehead, one of its attorneys (collectively, "Seyfarth"), appeal from the district court's order awarding attorneys' fees and costs under 28 U.S.C. S 1447(c) to Anthony Rutledge and the AFL Hotel and Restaurant Workers' Health and Welfare Fund (collectively, "Rutledge"). The court made the award on the strength of its prior decision remanding the underlying action to state court for lack of federal subjectmatter jurisdiction, despite Seyfarth's claim of preemption under the Employee Retirement Income Security Act of 1974, 29 U.S.C. S 1001 et seq. ("ERISA"). Seyfarth's appeal presents the question whether the district court abused its discretion in awarding the fees and costs. We conclude that removal was proper, and, accordingly, we reverse.

I

The Hotel Union and Hotel Industry of Hawaii Pension Trust and the AFL Hotel and Restaurant Workers' Health and Welfare Fund (collectively, the "Plans") are two multiemployer employee benefit plans. The Plans are governed by ERISA. Rutledge is a labor trustee for and participant in the Plans. Seyfarth has provided legal services to the Plans since 1984.

Rutledge brought suit in the Superior Court of California on behalf of himself and all other participants and beneficiaries of the Plans. Rutledge claimed that Seyfarth overcharged the Plans for legal services rendered between 1986 and 1998 by charging them for Whitehead's time at his then-current hourly rate, which exceeded an allegedly agreed-upon rate of $155 per hour.² Rutledge raised various state law claims: breach of contract, breach of the covenant of good faith, breach of fiduciary duty, fraud, constructive fraud, and negligent misrepresentation. He prayed for relief in the form of damages according to proof, punitive damages, costs and attorneys' fees, and other relief as deemed appropriate by the court. The complaint did not expressly allege any causes of action under ERISA.

Seyfarth removed the complaint to the United States District Court for the Northern District of California on October 3, 1997, pursuant to 28 U.S.C. S 1441. Seyfarth sought to invoke the district court's federal question jurisdiction under 28 U.S.C. S 1331, on the grounds that ERISA preempted the state law claims such that there was federal jurisdiction despite the absence of any federal cause of action on the face of the complaint. Seyfarth then moved for judgment on the pleadings. Rutledge contested the removal and moved to remand.

On December 19, 1997, the district court conducted a hearing on the motion to remand. Relying on our decision in Yeseta v. Baima, 837 F.2d 380 (9th Cir. 1988), the district court stated that, "[i]t seems plain that the services to be performed by the Seyfarth firm . . . were traditional attorney services, and thus these professional functions will not support a determination that ERISA applies to their performance. And, accordingly, the basis for removal under ERISA is absent." Implicitly, the court concluded that the only basis for preemption would be a claim against Seyfarth in its fiduciary capacity and that Yeseta precluded it from finding that a fiduciary relationship existed. Because the district court determined that ERISA did not preempt Rutledge's state law claims and therefore did not confer federal subject-matter jurisdiction over the action, the court granted Rutledge's motion to remand and dismissed Seyfarth's motion for judgment on the pleadings as moot.

After issuing its remand order, the district court ruled that Rutledge was entitled to attorneys' fees and costs, pursuant to 28 U.S.C. S 1447(c),³ under the rule of Moore v. Permanente Medical Group, Inc., 981 F.2d 443, 445 (9th Cir. 1992), that a district court retains jurisdiction to award costs and fees pursuant to 28 U.S.C. S 1447(c) even after issuing a remand order. The court ordered briefing as to the proper amount of attorneys' fees and costs, and on January 26, 1998, entered an order awarding $23,052.22, the full amount requested by Rutledge.⁴

Seyfarth timely appealed, invoking our jurisdiction under 28 U.S.C. S 1291.

II

On appeal, Seyfarth challenges the award of attorneys' fees, in part on the ground that the action should not have been ordered remanded.

A

Although the district court's remand order is not reviewable in this Court, see 28 U.S.C. S 1447(d), we do review the district court's award of attorneys' fees for abuse of discretion, see K.V. Mart Co. v. United Food and Commercial Workers Int'l Union, Local 324, 173 F.3d 1221, 1223 (9th Cir.) (citing Moore, 981 F.2d at 447), cert. denied, 120 S.Ct. 176 (1999), and one component of this review is "some consideration of the underlying remand order," Moore, 981 F.2d at 447. Although the district court has "wide discretion " in assessing fees under S 1447(c), id., we must reverse an award of attorneys' fees if the district court's exercise of discretion was grounded in a determination of law that we reject. See id. (citing Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990)). We review the district court's legal determination as to the propriety of removal, like all questions of subjectmatter jurisdiction, de novo. See Toumajian v. Frailey, 135 F.3d 648, 652 (9th Cir. 1998) (citing Kruse v. State of Hawaii, 68 F.3d 331, 333 (9th Cir. 1995)).

With these principles in hand, we turn to the question of whether Seyfarth properly removed the action to federal court.

B

Rutledge's complaint did not allege a federal cause of action on its face. Seyfarth therefore could have established federal subject-matter jurisdiction supporting removal if, but only if, ERISA "completely preempts" the state law claims. See Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987); Toumajian v. Frailey, 135 F.3d 648, 653-54 (9th Cir. 1998).

"Federal pre-emption is ordinarily a federal defense to the plaintiff's suit. As a defense, it does not appear on the face of a well-pleaded complaint, and, therefore, does not authorize removal to federal court." Metropolitan Life Ins. Co., 481 U.S. at 63. However, "[a]n independent corollary to the wellpleaded complaint rule is the `complete preemption' doctrine." Id. at 1358; see Harris v. Provident Life and Accident Ins. Co., 26 F.3d 930, 934 (9th Cir. 1994)."That is, `[o]n occasion, . . . the pre-emptive 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 wellpleaded complaint rule.' " Harris, 26 F.3d at 934 (quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 393 (1987)).

ERISA completely preempts a claim under state law, permitting the defendant to remove despite the well-pleaded complaint rule, if two circumstances exist: "(1) ERISA preempts the plaintiff's cause of action and (2) the cause of action falls within the scope of [ERISA's civil enforcement provision,] 29 U.S.C. S 1132(a)." Emard v. Hughes Aircraft Co., 153 F.3d 949, 953 (9th Cir. 1998), cert. denied, _____ U.S. _____, 119 S.Ct. 903, 142 L.Ed.2d 902(1999); see Buster v. Greisen, 104 F.3d 1186, 1188 (9th Cir. 1997) (Complete preemption occurs only when ERISA both "preempts" the state claim and "displaces the claim with its civil enforcement provision."), cert. denied, 522 U.S. 981 (1999).

i.

Developing a rule to identify whether ERISA preempts a given state law -the first step in determining whether ERISA completely preempts the law -has bedeviled the Supreme Court. See California Div. of Labor Standards v. Dillingham, 519 U.S. 316, 355 (1997) [hereinafter "Dillingham"] (Scalia, J., concurring) ("Since ERISA was enacted in 1974, this Court has accepted certiorari in, and decided, no less than 14 cases to resolve conflicts in the Courts of Appeals regarding ERISA pre-emption of various sorts of state law. The rate of acceptance, moreover, has not diminished. . . ." (footnote omitted)). The starting point has been the statute itself, which provides that ERISA preempts a state law claim if the claim "relates to" an employee benefit plan. 29 U.S.C. S 1144(a). The Court has regularly emphasized the broad effect of this statute. See Dillingham, 519 U.S. at 324 (quoting prior cases using the phrases "clearly expansive, " "broad scope," "expansive sweep," "broadly worded," "deliberately expansive," and "conspicuous for its breadth"). "In more recent decisions, however, the Supreme Court has limited the scope of the `relate to' provision of ERISA." Bast v. Prudential Ins. Co. of Am., 150 F.3d 1003, 1007 (9th Cir. 1998), cert. denied, 119 S.Ct. 903 (1999).

The Court has stated that "[a ] law `relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139 (1990) (quoting Shaw v. Delta Air...