Tifft v. Commonwealth Edison Co.

• Decision Date: 27 April 2004
• Docket Number: No. 03-1596.,03-1596.
• Citation: 366 F.3d 513
• Parties: Terry TIFFT, Jim Crutchfield, Juanita Dixon, et al., Plaintiffs-Appellants, v. COMMONWEALTH EDISON COMPANY, and Exelon Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

366 F.3d 513

Terry TIFFT, Jim Crutchfield, Juanita Dixon, et al., Plaintiffs-Appellants, v. COMMONWEALTH EDISON COMPANY, and Exelon Corporation, Defendants-Appellees.

No. 03-1596.

United States Court of Appeals, Seventh Circuit.

Argued November 7, 2003.

Decided April 27, 2004.

COPYRIGHT MATERIAL OMITTED

Keith L. Hunt (argued), Lara A. Anderson, Hunt & Associates, Chicago, IL, for Plaintiffs-Appellants.

Scott E. Gross, James D. Weiss (argued), Sidley Austin Brown & Wood, Chicago, IL, for Defendants-Appellees.

Before COFFEY, RIPPLE, and KANNE, Circuit Judges.

KANNE, Circuit Judge.

I. History

Defendant-Appellee Exelon Corporation, through its subsidiaries, including Defendant-Appellee Commonwealth Edison Company ("ComEd"), generates and distributes electricity to commercial, residential, and industrial consumers in Illinois. Exelon was formed in 2000 as the result of a merger between the parent company of ComEd and Peco Energy ("Peco"). The Plaintiffs-Appellants were all employed at various facilities operated by corporate entities related to Exelon and ComEd ("Defendants") and, during their employment, were represented by Local Union 15 of the International Brotherhood of Electrical Workers ("Union"). As Union members, the Plaintiffs were covered by a collective bargaining agreement ("CBA") which, along with various side agreements, governed the terms and conditions of their employment.

Two such side agreements included a Memorandum of Understanding ("MOU") and Utility Agreement ("UA") entered into by the Union and the Defendants.¹ This was done in anticipation of the effective date of the Electric Service Customer Choice and Rate Relief Law of 1997, 220 Ill. Comp. Stat. 5/16-101, et seq. ("Electric Service Law" or "ESL"), which applied to the Defendants. These agreements addressed, among other issues, employees' rights and entitlements in the event of workforce reductions covered by the ESL. Specifically, the MOU addressed workforce reductions described in section 5/16-128(b), and the UA discussed severance packages for employees laid off during reductions covered by the ESL.

In part as a result of the merger between ComEd and Peco, the Defendants began plant closures and workforce reductions in July and September of 2001. Prior to their layoffs, the Plaintiffs were given two options: (1) in lieu of being laid off, they could accept a demotion to a lesser position with a lower rate of pay; and (2) if laid off, in exchange for waiving their right to be "recalled" under the CBA,² they could receive a severance benefit. Approximately twelve of the fourteen plaintiffs were offered demotions, and two employees were laid off.

They then filed suit in the Circuit Court of Cook County, Illinois, alleging wrongful termination, in violation of the ESL. Plaintiffs requested that the state court imply a private right of action under the ESL and sought both equitable and legal remedies. On June 7, 2002, the Defendants timely removed this action, 28 U.S.C. §§ 1441, 1446 (2002), to federal court on the grounds that any assessment of the alleged ESL violations would require the district court to interpret the CBA and/or other agreements and hence, the Plaintiffs' claims are completely preempted by section 301 of the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 185(a) (2002). The Plaintiffs then unsuccessfully attempted to have the case remanded to Illinois state court, 28 U.S.C. § 1447(c). This appeal resulted, and for the following reasons we affirm the district court's denial of the Plaintiffs' motion to remand.³

II. Analysis

We review the propriety of removal de novo. Garratt v. Knowles, 245 F.3d 941, 946 (7th Cir.2001); Moran v. Rush Prudential HMO, Inc., 230 F.3d 959, 966 (7th Cir.2000) (citation omitted), aff'd, 536 U.S. 355, 122 S.Ct. 2151, 153 L.Ed.2d 375 (2002). Similarly, we also review a district court's preemption ruling de novo. Bastien v. AT&T Wireless Servs., Inc., 205 F.3d 983, 987 (7th Cir.2000) (citations omitted).

Removal to a district court is appropriate when a cause of action "arises under" federal law. See 28 U.S.C. §§ 1331, 1441(a). And although a court will look to the face of a properly pleaded complaint to see if a federal question is present, Caterpillar, Inc. v. Williams, 482 U.S. 386, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987) (laying out the "well-pleaded complaint" rule), a plaintiff cannot avoid a federal forum by "artfully pleading" what is, in essence, a federal claim solely in terms of state law, see, e.g., Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 22, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983). Furthermore, when "a federal cause of action completely preempts a state cause of action, any complaint that comes within the scope of the federal cause of action necessarily `arises under' federal law." 463 U.S. at 24, 103 S.Ct. 2841. Due to the importance of uniformity in labor law, any state law claim "substantially dependent upon analysis of the terms of an agreement made between the parties in a labor contract" will be completely preempted by section 301 of the LMRA. Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 220, 105 S.Ct. 1904, 85 L.Ed.2d 206 (1985) (citation omitted); see also Loewen Group Int'l, Inc. v. Haberichter, 65 F.3d 1417, 1421 (7th Cir.1995) (citing Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S. 399, 403, 108 S.Ct. 1877, 100 L.Ed.2d 410 (1988)). However, where a state law cause of action requires mere reference to a CBA, section 301 preemption will not necessarily apply. See Livadas v. Bradshaw, 512 U.S. 107, 117-18, 114 S.Ct. 2068, 129 L.Ed.2d 93 (1994) (state claim not preempted where reference to CBA needed only to calculate damages for wrongful discharge); 471 U.S. at 211, 105 S.Ct. 1904; In re Bentz Metal Prod. Co., 253 F.3d 283, 289 (7th Cir.2001) (no preemption where state law issue was the priority of mechanics' liens for vacation pay owed under the CBA). Thus, in this case, although the Plaintiffs' complaint characterized their claims as arising wholly under the ESL, removal was nonetheless appropriate if the Plaintiff's claims require an interpretation of, and not simply reference to, the CBA and/or other labor agreements. See, e.g., Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 123 S.Ct. 2058, 2062, 156 L.Ed.2d 1 (2003); Atchley v. Heritage Cable Vision Assocs., 101 F.3d 495, 498 (7th Cir.1996).

The Plaintiffs argue that there is no preemption because no (or very little) interpretation of the CBA is necessary. And no interpretation of the CBA is necessary because the Defendants' acts were allegedly in clear violation of section 5/16-128 of the ESL.⁴ Under the Plaintiffs' reading of section 5/16-128(a)(3), (b), and (c), following the transfer of ownership of an Illinois electric utility, such an entity must maintain the "status quo" of all non-supervisory utility employees' compensation and cannot either lay off or demote such workers for at least thirty months. (R. 1, Ex. B at 8-9; Appellant's Br. at 8-9, 16.) Because the Plaintiffs were laid off or demoted within thirty months of the merger, they assert that the Defendants violated the ESL. And thus, because the Defendants are clearly liable for damages under their reading, a court need not look to the CBA or any other agreement. Put differently, the premise of all the Plaintiffs' arguments is that the ESL prohibits the layoff or demotion of any non-supervisory employee within thirty months of a transfer of ownership. We disagree.

The ESL was part of the electric, natural gas, and telephone deregulatory wave that swept the nation in the late 1990's. Policymakers, concerned over high prices and poor service quality, began to abandon the traditional assumption that utilities were natural monopolies. Robert Kelter, Peace, Love, Competition. An Initial Look at the Restructuring of Illinois Residential Energy Markets, 33 Loy. U. Chi. L.J. 875, 875-76 (2002). To do away with legislatively-sanctioned monopolies and to increase competition, policymakers adopted laws which lowered barriers to market entry in these industries. Thus, legislators hoped, efficiency would increase, new products would be developed, and prices would decrease. See 220 Ill. Comp. Stat. 5/16-101A (2003). Spurred by such changes in the federal regulatory scheme and in other states, the Illinois legislature adopted the ESL, its own attempt "to accommodate the competition that could fundamentally alter the structure of the electric services market." Id.

Increases in efficiency are, in part, the result of new market entrants' and existing participants' utilization of mergers, consolidations, and other transfers of ownership to reap the benefits of economies of scale and relative competitive advantages. But such transfers in ownership also typically result in the reduction of the workforce, at least as the market adjusts to increased competition. Recognizing this economic reality, the ESL sought to lessen the adverse effect of deregulation on electric services workers. 220 Ill. Comp. Stat. 5/16-128(a)(3), (b). Hence, the Plaintiffs are correct in their assertion that "the Illinois legislature clearly indicated its intent to protect [utility workers.]" (Appellant's Br. at 8.) But they misapprehend both the basic economics of deregulation, which predicts the elimination of some jobs in the short run, and, more critically, the ESL's express acceptance of that reality. See 220 Ill. Comp. Stat. 5/16-128(a)(3), (b) (stating "the impacts on employees ... of any necessary reductions in the utility workforce ... shall be mitigated to the extent practicable through such means as offers of voluntary severance, retraining, early retirement, outplacement, and related benefits.") (emphasis added).

No provision of the ESL prohibits the reduction of the workforce, prohibits agreed-upon demotions, or guarantees any specific type of severance or other benefit to those employees that are laid off. If the ESL imposed such...