Trs. of the Carpenters' Health & Welfare Trust Fund of St. Louis v. Darr

• Decision Date: 21 August 2012
• Docket Number: 10–1793,Nos. 10–1682,10–2579.,s. 10–1682
• Citation: 694 F.3d 803
• Parties: TRUSTEES OF the CARPENTERS' HEALTH AND WELFARE TRUST FUND OF ST. LOUIS, Plaintiff–Appellee, Cross–Appellant, v. Lanny Howard DARR, II, et al., Defendants–Appellants, Cross–Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

694 F.3d 803

TRUSTEES OF the CARPENTERS' HEALTH AND WELFARE TRUST FUND OF ST. LOUIS, Plaintiff–Appellee, Cross–Appellant,
v.
Lanny Howard DARR, II, et al., Defendants–Appellants, Cross–Appellees.

Nos. 10–1682, 10–1793, 10–2579.

United States Court of Appeals,
Seventh Circuit.

Argued Nov. 30, 2010.
Decided Aug. 21, 2012.

[694 F.3d 804]

James E. Robertson (argued), Attorney, Millar Schaefer Hoffman & Robertson, St. Louis, MO, for Plaintiff–Appellee, Cross–Appellant.

Before KANNE, WILLIAMS, and TINDER, Circuit Judges.

[694 F.3d 805]

TINDER, Circuit Judge.

A federal court may not enjoin “proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.” 28 U.S.C. § 2283. This law, known as Anti–Injunction Act, represents “a necessary concomitant of the Framers' decision to authorize, and Congress' decision to implement, a dual system of federal and state courts.” Smith v. Bayer Corp., ––– U.S. ––––, 131 S.Ct. 2368, 2375, 180 L.Ed.2d 341 (2011) (quoting Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 146, 108 S.Ct. 1684, 100 L.Ed.2d 127 (1988)). Under the Act's broad command that state tribunals “shall remain free from interference by federal courts,” id. (quoting Atl. Coast Line R.R. v. Locomotive Eng'rs, 398 U.S. 281, 282, 90 S.Ct. 1739, 26 L.Ed.2d 234 (1970)), “the Act's core message is one of respect for state courts,” id. Any doubts about the Act's “three specifically defined exceptions,” id. (quoting Atl. Coast Line, 398 U.S. at 286, 90 S.Ct. 1739), ought to “be resolved in favor of permitting the state courts to proceed,” id. (quoting Atl. Coast Line, 398 U.S. at 297, 90 S.Ct. 1739).

The district court enjoined an attorney and his clients from pursuing an Illinois state court claim against an employee health and welfare benefit plan governed by the 1974 Employee Retirement Income Security Act (ERISA). Because the injunction against this state court lawsuit does not qualify under an exception to the Anti–Injunction Act, we order the injunction vacated.

I. Background

James Miller, a beneficiary of the Carpenters' Health and Welfare Trust Fund of St. Louis (the “Fund”), fell from a ladder resting on a pickup truck bed and injured his back. He secured the services of Illinois attorney Lanny Darr to represent him and his wife Kim Miller in a lawsuit seeking recovery from a third party (namely, the person who was supposed to hold the ladder steady) allegedly responsible for the accident. The Millers' agreement with Darr provided a contingent fee of one-third of any recovery before deducting medical expenses. The Fund advanced the Millers $86,709.73 in medical and disability benefits in connection with this injury on the condition that the Millers repay this advance from any recovery without deducting for attorneys' fees. In fact, James, along with Darr, signed a subrogation agreement allowing the Fund to pay his medical expenses in exchange for an assignment of any third-party recovery up to the amount advanced and undiminished by any deduction per the Fund's governing document (the “Plan”). The Millers' lawsuit ended up settling for $500,000, but this case isn't about James Miller's injury; this case is about attorneys' fees.

The Millers and Darr distributed the settlement proceeds by deducting Darr's fee based on only $413,290.27 instead of the full $500,000, a difference equal to what the Millers owed the Fund. Darr submitted $57,806.48 to the Fund from the Millers' settlement, told the Fund that he was withholding the remaining one-third ($28,903.25 as a fee), and noted that he was willing to tender the remainder to avoid jeopardizing the Millers' benefits. Yet Darr maintained that such payment would not resolve the dispute between his firm and the Fund. Darr later tendered the $28,903.25 amount to the Fund and wrote that the Millers “requested I send you full payment on his behalf so his future benefits are not in jeopardy.” Darr also asserted in that letter that his law firm held a $28,903.25 claim against the Fund. The Fund responded that if Darr pursued his claim they would consider Darr and the Millers in breach of Plan terms and in

[694 F.3d 806]

repudiation of their promise in the subrogation agreement to abide by Plan terms and that the Fund would consider terminating the Millers' coverage and seeking relief in federal court under ERISA.

Darr's law firm proceeded to sue the Fund in Illinois state court to recover the $28,903.25 under the common fund doctrine, which permits a party (Darr's firm) who creates a fund (the $500,000 settlement) in which others (the Fund) have an interest (the Fund's reimbursement) to obtain reimbursement from the fund for litigation expenses (Darr's fee) incurred in creating that fund (Darr's representation on the Millers' behalf). E.g., Scholtens v. Schneider, 173 Ill.2d 375, 219 Ill.Dec. 490, 671 N.E.2d 657, 662 (1996). In response, the Fund's Trustees sued Darr and the Millers in federal court to enjoin Darr from pursuing his state claim. The Trustees sought in alternative counts a construction and declaration under express trusts that Darr and the Millers owed the Fund an amount equal to any judgment Darr obtained in state court along with the Trustees' attorneys' fees. The district court issued a temporary restraining order against Darr's suit, held a hearing, entered a permanent injunction against Darr's lawsuit, and dismissed with prejudice the alternative counts. Trs. of Carpenters' Health & Welfare Trust Fund v. Darr, No. 10–0130–DRH, 2010 WL 850171, at *3–4 (S.D.Ill. Mar. 5, 2010). The court later awarded the Trustees their fees and costs in the federal court case but not in the state court case. Trs. of Carpenters' Health & Welfare Trust Fund v. Darr, No. 10–0130, 2010 WL 2607392, at *3 (S.D.Ill. June 24, 2010). Darr appeals the injunction and the fees and costs award and the Fund conditionally cross-appeals the alternative counts' dismissal.

II. Analysis

District courts “have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. A case arises under federal law if “ ‘a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiff's right to relief necessarily depends on resolution of a substantial question of federal law.’ ” Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 689–90, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006) (quoting Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27–28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)); see also Mims v. Arrow Fin. Servs., LLC, ––– U.S. ––––, 132 S.Ct. 740, 744, 181 L.Ed.2d 881 (2012) (long recognized that a “suit arises under the law that creates the cause of action” (quoting Am. Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 36 S.Ct. 585, 60 L.Ed. 987 (1916))); Grable & Sons Metal Prods., Inc. v. Darue Eng'g & Mfg., 545 U.S. 308, 312, 125 S.Ct. 2363, 162 L.Ed.2d 257 (2005) (§ 1331 satisfied by pleading “a cause of action created by federal law”).

Darr challenges the district court's jurisdiction on a variety of grounds, e.g., Miller v. Herman, 600 F.3d 726, 731 (7th Cir.2010) (noting common conflation of “jurisdictional and non-jurisdictional” limits), but his only real jurisdictional argument is that federal courts lack jurisdiction when a state court defendant raises ERISA preemption as a basis for federal jurisdiction under the well-pleaded complaint rule. See Primax Recoveries, Inc. v. Sevilla, 324 F.3d 544, 548 (7th Cir.2003); Speciale v. Seybold, 147 F.3d 612, 616–17 (7th Cir.1998); Blackburn v. Sundstrand Corp., 115 F.3d 493, 495 (7th Cir.1997). Darr misses the jurisdictional basis of the Trustees' claim; it arises not as a defense to his state claim but under a federal law, § 502(a)(3), that created a federal remedy the Trustees seek to employ in a federal

[694 F.3d 807]

court. ERISA fiduciaries may bring claims under § 502(a)(3)(A) ¹ of ERISA “to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan.” 29 U.S.C. § 1132(a)(3). The Trustees, as ERISA fiduciaries, seek to do just that—enjoin an act they claim violates Plan terms. See Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356, 363, 126 S.Ct. 1869, 164 L.Ed.2d 612 (2006) (fiduciaries may bring § 502(a)(3) claims “ to enforce plan terms ”). Thus, the district court's jurisdiction is secure. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96 n. 14, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) (federal courts have § 1331 jurisdiction to grant “injunctive relief from state regulation, on the ground that such regulation is pre-empted by a federal statute”); Stone & Webster Eng'g Corp. v. Ilsley, 690 F.2d 323, 327–28 (2d Cir.1982) (claim for an injunction on grounds that ERISA preempted a state law was “not merely a defense,” but a suit for “affirmative and coercive relief” enjoining state law's enforcement), aff'd sub nom. Arcudi v. Stone & Webster Eng'g Corp., 463 U.S. 1220, 103 S.Ct. 3564, 77 L.Ed.2d 1405 (1983). We proceed then to the next barrier Darr raises to the district court's judgment, the Anti–Injunction Act.²

We review de novo the scope of the Anti–Injunction Act's exceptions. Zurich Am. Ins. Co. v. Superior Court for State of Cal., 326 F.3d 816, 824 (7th Cir.2003). The law states that:

A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.

28 U.S.C. § 2283. The Anti–Injunction Act, in existence in some form since 1793, see Chick Kam Choo, 486 U.S. at 146, 108 S.Ct. 1684 (citing Act of Mar. 2, 1793, ch. 22, § 5, 1 Stat. 335), ensures “the fundamental constitutional independence of the States, ... under which state proceedings ‘should normally be allowed to...