Baker, James A. v. Kingsley, Alfred D. , 387 F.3d 649 ( 2004 )

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 04-1071 & 04-1096
JAMES A. BAKER, RAYMOND WOLFE and
WILLIAM PATE, on behalf of themselves
and all others similarly situated,
Plaintiffs-Appellants, Cross-Appellees,
v.
ALFRED D. KINGSLEY, DAVID D. JONES, JR.,
ROBERT L. FIX, et al.,
Defendants-Appellees, Cross-Appellants.
____________
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 03 C 1750—Robert W. Gettleman, Judge.
____________
ARGUED SEPTEMBER 15, 2004—DECIDED OCTOBER 27, 2004
____________
Before FLAUM, Chief Judge, and COFFEY and KANNE,
Circuit Judges.
FLAUM, Chief Judge. Plaintiffs-appellants, individually
and on behalf of all others similarly situated, initiated this
suit in Illinois state court alleging that defendants-appellees
violated the Illinois Wage Payment and Collection Act
(“Illinois Wage Act”), 820 ILCS § 115/5. Defendants removed
2 Nos. 04-1071 & 04-1096
the case to the United States District Court for the Northern
District of Illinois, citing as the basis for the court’s juris-
diction the complete preemption of plaintiffs’ claim by § 301
of the Labor Management Relations Act (“LMRA”), 29
U.S.C. § 185. Thereafter, plaintiffs amended their com-
plaint, adding a claim for breach of fiduciary duty in violation
of the Employee Retirement Income Security Act (“ERISA”),
29 U.S.C. §§ 1022 and 1104. The district court then granted
defendants’ motion to dismiss plaintiffs’ ERISA claim, held
that the Illinois Wage Act claim was not preempted by the
LMRA, and remanded the case to state court. Plaintiffs now
appeal the dismissal of the ERISA claim and defendants
cross-appeal the remand order. For the reasons stated here-
in, we reverse and remand for further proceedings consis-
tent with this opinion.
I. Background
Plaintiffs-appellants were employees of Outboard Marine
Corporation (“OMC”) in its Waukegan, Illinois, manufactur-
ing and production facility. According to their second amended
complaint, on or about September 11, 1997, defendant
Greenmarine Holdings, LLC completed a takeover of OMC
and installed the individually named defendants as directors.
In September 1999, defendants anticipated having to close
OMC’s Waukegan plant over a two-year period as part of
the takeover. Because the then-existing collective bargain-
ing agreement with the International Marine and Machinists
Association (“IMMA”) was set to expire in October 1999,
defendants negotiated an extension of the agreement
(“Shutdown Agreement”) by promising to pay IMMA mem-
bers, including the named plaintiffs, certain severance and
retention wage supplements if they worked to the end of the
Shutdown Agreement, or until the actual shutdown of the
Waukegan plant.
Nos. 04-1071 & 04-1096 3
The Waukegan plant closed on December 21, 2000, and
OMC filed for bankruptcy the following day. In the after-
math, OMC terminated its employee health plan and failed
to pay the wage supplements provided for in the Shutdown
Agreement.
Plaintiffs’ first claim alleges that defendants’ failure to
pay the Shutdown Agreement’s wage supplements violated
the Illinois Wage Act. In their second claim, plaintiffs allege
that defendants violated their fiduciary duty under ERISA
by failing to notify plaintiffs of the likely termination of the
OMC Health Plan and by failing to fund the plan. This
appeal follows the district court’s order dismissing the
ERISA claim and remanding the Illinois Wage Act claim.
II. Discussion
A. Appellate Jurisdiction
We first must decide whether we have appellate jurisdic-
tion over the parties’ cross-appeals. The only challenge to
our jurisdiction comes from plaintiffs-appellants who assert
that 28 U.S.C. § 1447(d) precludes the exercise of appellate
jurisdiction over defendants’ cross-appeal of the remand of
the Illinois Wage Act claim. Nevertheless, we have an inde-
pendent duty to determine that jurisdiction exists before we
can proceed to the merits of either appeal. See ITOFCA, Inc.
v. MegaTrans Logistics, Inc., 235 F.3d 360, 363 (7th Cir.
2000).
Our general appellate jurisdiction derives from 28 U.S.C.
§ 1291, which provides in relevant part: “The courts of ap-
peals . . . shall have jurisdiction of appeals from all final
decisions of the district courts of the United States.” “Whether
a decision is final for purposes of § 1291 generally depends
on whether the decision by the district court ‘ends the
litigation on the merits and leaves nothing for the court to
4 Nos. 04-1071 & 04-1096
do but execute the judgment.’ ” ITOFCA, 235 F.3d at 363
(quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 467
(1978)).
The “final decision” requirement of § 1291 restricts piece-
meal appeals. See id. Ordinarily, a party is precluded from
appealing a district court’s order resolving some but not all
of the claims in a case. See United States v. Ettrick Wood
Prods., Inc., 916 F.2d 1211, 1217 (7th Cir. 1990). Where,
however, a district court has resolved all federal claims and
has remanded the remaining claims to state court, we have
appellate jurisdiction to review the federal claims, the district
court having nothing of the matter left on its docket. See, e.g.,
Hileman v. Maze, 367 F.3d 694, 696 (7th Cir. 2004) (review-
ing dismissal of federal claims where district court declined
to retain jurisdiction over state-law claims); McCullah v.
Gadert, 344 F.3d 655, 656 (7th Cir. 2003) (same). The district
court’s order dismissed plaintiffs’ ERISA claim and re-
manded the Illinois Wage Act claim, leaving it with nothing
to do but enter judgment on the former. Accordingly, the
dismissal of the ERISA claim is an appealable “final deci-
sion.”
A remand order that marks the end of litigation in federal
court, like the order issued in this case, is also a “final
decision.” See Kircher v. Putnam Funds Trust, 373 F.3d 847,
848 (7th Cir. 2004) (citing Quackenbush v. Allstate Ins. Co.,
517 U.S. 706, 711-15 (1996)). There is, however, an additional
obstacle to appellate jurisdiction over remand orders. The
general grant of appellate jurisdiction in 28 U.S.C. § 1291
is limited by § 1447(d), which states in relevant part: “An
order remanding a case to the State court from which it was
removed is not reviewable on appeal or otherwise.” Apart
from a specific exception for civil rights cases, the language
of § 1447(d) is unqualified and would seem to suggest that
the courts of appeals lack jurisdiction over all remand
orders. As we have explained before, however, the Supreme
Court has read § 1447, the statute governing removals and
Nos. 04-1071 & 04-1096 5
remands, as a whole and has interpreted the limitation on
appellate jurisdiction in subsection (d) in relation to the
reasons for remand set forth in subsection (c). See Adkins v.
Ill. Cent. R.R. Co., 326 F.3d 828, 831 (7th Cir. 2003)
(discussing Thermtron Prods., Inc. v. Hermansdorfer, 423
U.S. 336 (1976), abrogated on different ground by
Quackenbush, 517 U.S. 706); Kircher, 373 F.3d at 848-49
(same).
In its first case dealing with the issue, the Supreme Court
held that “only remand orders issued under § 1447(c) and
invoking the grounds specified therein that removal was
improvident and without jurisdiction are immune from
review under § 1447(d).” Thermtron, 423 U.S. at 346. The
Court phrased its statement of the rule in this way to
reflect the language of § 1447(c), which permitted remand
“[i]f at any time before final judgment it appears that the
case was removed improvidently and without jurisdiction.”
In 1988, Congress amended § 1447(c) to permit remand
when “it appears that the district court lacks subject matter
jurisdiction” or when a defect in removal procedure is raised
in a motion to remand within 30 days of removal. See
Judicial Improvements and Access to Justice Act, Pub. L.
No. 100-702, Title X, § 1016(c), 102 Stat. 4642 (Nov. 19,
1988). Accordingly, the Supreme Court’s next statement of
the scope of § 1447(d) reflected the language of the amended
statute: “As long as a district court’s remand is based on a
timely raised defect in removal procedure or on lack of sub-
ject-matter jurisdiction—the grounds for remand recognized
by § 1447(c)—a court of appeals lacks jurisdiction to enter-
tain an appeal of the remand order under § 1447(d).” Things
Remembered, Inc. v. Petrarca, 516 U.S. 124, 127-28 (1995).
In an important case revealing the limits of the Thermtron
rule, the Supreme Court addressed a split among the circuits
as to “whether a district court has discretion to remand a
removed case to state court when all federal-law claims
have dropped out of the action and only pendent state-law
6 Nos. 04-1071 & 04-1096
claims remain.” Carnegie-Mellon Univ. v. Cohill, 484 U.S.
343, 348 (1988).1 Though the question came to the Court on
appeal from a remand order, the Court reached the merits
of the appeal without doubting the circuit court’s, or its own,
appellate jurisdiction. See id. at 345-57; see also Rothner v.
City of Chicago, 879 F.2d 1402, 1409 (7th Cir. 1989) (noting
that the majority and dissent in Carnegie-Mellon agreed
that the remand order was reviewable).
In accordance with this case law, our appellate review is
barred by § 1447(d) only as to “remands based on grounds
specified in § 1447(c).” Things Remembered, 516 U.S. at 127,
quoted in Benson v. Si Handling Sys., Inc., 188 F.3d 780,
782 (7th Cir. 1999). Stated obversely, if a district court’s re-
mand is based on a ground other than a timely raised defect
in removal procedure or lack of subject-matter juris-
diction—i.e., the discretionary exercise of the power to de-
cline supplemental jurisdiction pursuant to § 1367—then
§1447(d) does not affect our § 1291 appellate jurisdiction.
We recently applied this rule in Adkins v. Illinois Central
Railroad Company, 326 F.3d 828 (7th Cir. 2003). There, the
plaintiffs filed suit in state court alleging several state-law
claims against non-diverse defendants. One of the defen-
dants removed the case, arguing that the state-law claims
were completely preempted by the federal Locomotive
Inspection Act. Later, one of the defendants filed a third-
party complaint against Amtrak, a federal instrumentality.
The district court initially accepted the “complete preemption”
argument and concluded that removal was proper, based on
1
Carnegie-Mellon was decided before the passage in 1990 of 28
U.S.C. § 1367, which expressly authorized district courts to de-
cline to exercise supplemental jurisdiction over a state-law claim
if all claims within the court’s original jurisdiction had been
dismissed. See Judicial Improvements Act of 1990, Pub. L. 101-650,
Title III, § 310, 104 Stat. 5089 (Dec. 1, 1990).
Nos. 04-1071 & 04-1096 7
the presence of a federal question (and, implicitly, supplemen-
tal jurisdiction over the remaining claims). The court then
dismissed on preemption grounds all claims that the plaintiffs
had asserted against the removing defendant. Finally, finding
that none of the other defendants was arguing that complete
preemption created federal question jurisdiction, the court
concluded that the case must be remanded to state court for
lack of jurisdiction. See Adkins, 326 F.3d at 830.
We recognized in Adkins that the district court’s remand
order was not entirely clear with respect to its own juris-
diction and was subject to at least two interpretations. The
order could be regarded as based on the district court’s con-
clusion that it never had jurisdiction over the remaining
claims because there was no federal question. Though we
noted that the district court may have made a mistake in
not recognizing its supplemental jurisdiction under § 1367,
we concluded that such a mistake “does not defeat the bar
found in § 1447(d).” Id. at 833. Similarly, the fact that the
“district court did not think that Amtrak saved its jurisdic-
tion,” even if this belief was erroneous, rendered the order
unreviewable. Id. at 834 (emphasis in original).
We went on to find in Adkins that the district court’s or-
der was subject to an alternative reading, namely, that it
believed that it continued to have jurisdiction over the case,
but that remand was appropriate for some other reason,
such as a discretionary exercise of the power to decline sup-
plemental jurisdiction. We explained that if this latter
reading was correct, “then our appellate jurisdiction would
be secure and we would have to consider the merits of the
district court’s decision.” Adkins, 326 F.3d at 834. Based on
this alternative interpretation of the district court’s order, we
considered the merits of the remand and concluded that the
Locomotive Inspection Act did not completely preempt the
plaintiffs’ state-law claims. Id. at 835.
Section 1447(d), as construed in the decisions of the
Supreme Court and this Circuit, is not a bar to appellate
8 Nos. 04-1071 & 04-1096
review of the district court’s remand order in this case. As
in Adkins, the order is not entirely clear as to jurisdiction.
It might be read as based on a determination by the court
that, after dismissal of the ERISA claim, no basis remained
for jurisdiction over the Illinois Wage Act claim. Alterna-
tively, the order can be read to reflect the court’s belief that
it had jurisdiction over the case after dismissing the ERISA
claim, but that the remand was appropriate as a discretion-
ary exercise of its power to decline supplemental jurisdic-
tion. Appellate review is unavailable under the first reading,
but is permitted under the second.
In its order, the district court dismissed plaintiffs’ ERISA
claim, held that the Illinois Wage Act claim was not pre-
empted by the LMRA, and then stated, “the court notes that
there remains no basis for exercising federal jurisdiction over
the instant dispute, which consists solely of plaintiff[s’] Wage
Act claim.” Though this tends to support the first interpre-
tation, a thorough examination of the order as a whole per-
suades us that the second interpretation is correct.
First, the district court stated that it had decided to remand
“[r]ather than reach the merits of defendants’ remaining
arguments [for dismissal].” This phrasing suggests a rec-
ognition that retaining supplemental jurisdiction was an
available option. Second, the court stated that it “need not
reach the merits of defendants’ other arguments in support
of dismissal” of the Illinois Wage Act claim. The use of “need
not,” rather than “may not” or “cannot,” again suggests that
the court was aware of its discretion under § 1367. Finally,
the court, having decided to remand, went on to quash ser-
vice as to defendant Katz. In doing so, it must have intended
to exercise supplemental jurisdiction. If the district court
believed that its finding of no preemption divested it of
jurisdiction over the claim, it would have gone no further
than remanding the case as to defendant Katz as well. Hav-
ing determined that there is no statutory basis for its subject
matter jurisdiction, a district court, which is a court of
Nos. 04-1071 & 04-1096 9
limited jurisdiction, should proceed no further than deter-
mining whether to dismiss or transfer the case. Cf. Sheldon
v. Sill, 49 U.S. (8 How.) 441, 449 (1850) (“Courts created by
statute can have no jurisdiction but such as the statute
confers.”).
We conclude that the district court, having dismissed the
ERISA claim, believed that it retained supplemental juris-
diction over the state-law claim and exercised its discretion
to remand it. Our appellate jurisdiction to review this order
is firmly established. See Carnegie-Mellon, 484 U.S. at 345-
57; Adkins, 326 F.3d at 834; see also Kircher, 373 F.3d at
850 (“District courts should relinquish supplemental
jurisdiction under certain circumstances, remanding to state
court if the suit originated there. 28 U.S.C. §§ 1367(c), 1441(c).
We know from Carnegie-Mellon that § 1447(d) does not
foreclose review of such a remand.”).
At oral argument, plaintiffs ultimately conceded that the
district court had supplemental jurisdiction over the Illinois
Wage Act claim, noting simply that the district court had
“decline[d] to take it.” Plaintiffs argued, however, that our
appellate jurisdiction extends only to review of the district
court’s decision to decline supplemental jurisdiction, but not
to its preemption determination. We disagree. Review of the
district court’s exercise of discretion in declining supplemen-
tal jurisdiction necessarily entails review of its decision on
preemption.
Section 1367(a) provides: “[I]n any civil action of which
the district courts have original jurisdiction, the district
courts shall have supplemental jurisdiction over all other
claims that are so related to claims in the action within
such original jurisdiction that they form part of the same
case or controversy under Article III of the United States
Constitution.” Section 1367(c)(3) grants district courts au-
thority to decline to exercise supplemental jurisdiction and
remand a case “if . . . the district court has dismissed all
10 Nos. 04-1071 & 04-1096
claims over which it has original jurisdiction.” Accordingly,
the authority to remand pursuant to § 1367 extends only to
claims that are not within the district court’s original
jurisdiction. See Adkins, 326 F.3d at 847-48 (Ripple, J.,
dissenting); Borough of West Mifflin v. Lancaster, 45 F.3d
780, 787 (3rd Cir. 1995) (“nothing in § 1367(c) authorizes a
district court to decline to entertain a claim over which is
has original jurisdiction”); Gaming Corp. of Am. v. Dorsey &
Whitney, 88 F.3d 536, 542 (8th Cir. 1996) (“A district court
has no discretion to remand a claim that states a federal
question.”); In re City of Mobile, 75 F.3d 605, 607 (11th Cir.
1996) (“Section 1367(c) cannot be fairly read as bestowing
on district courts the discretion to remand to a state court
a case that includes a properly removed federal claim.”). It
is an abuse of discretion for a district court to remand a
federal claim that is properly before it.
Even if our appellate jurisdiction extends only to review
of the district court’s decision to decline supplemental jur-
isdiction, which we do not here hold, we must review the
district court’s preemption decision to determine whether it
had original jurisdiction over the Illinois Wage Act claim. If
the claim is preempted by § 301 of the LMRA, then it was
within the district court’s original jurisdiction and to
remand it was an abuse of discretion. Thus, whether or not
our appellate jurisdiction is limited as plaintiffs suggest, we
must complete the preemption analysis to determine
whether it was within the district court’s power to remand.
B. Illinois Wage Act Claim
Having established that we have appellate jurisdiction
over the district court’s remand order, we review de novo its
determination that plaintiffs’ Illinois Wage Act claim is not
preempted by § 301 of the LMRA. See Tifft v. Commonwealth
Edison Co., 366 F.3d 513, 516 (7th Cir. 2004) (citing Bastien
v. AT&T Wireless Servs., Inc., 205 F.3d 983, 987 (7th Cir.
2000)).
Nos. 04-1071 & 04-1096 11
Section 301 provides: “Suits for violation of contracts be-
tween an employer and a labor organization representing
employees . . . may be brought in any district court of the
United States having jurisdiction of the parties.” 29 U.S.C.
§ 185(a). The Supreme Court has construed the preemptive
force of § 301 to be “so powerful as to displace entirely any
state cause of action for violation of contracts between an
employer and a labor organization.” Franchise Tax Bd. of
Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1,
23 (1983) (internal quotations omitted), quoted in Beneficial
Nat’l Bank v. Anderson, 539 U.S. 1, 7 (2003). “Any such suit
is purely a creature of federal law, notwithstanding the fact
that state law would provide a cause of action in the
absence of § 301.” Id.
Even where a plaintiff relies on state law in a complaint
and makes no mention of § 301, the federal statute will
displace the state-law claim to ensure uniform interpretation
of collective bargaining agreements. See Atchley v. Heritage
Cable Vision Assocs., 101 F.3d 495, 498 (7th Cir. 1996). The
Supreme Court has cautioned, however, that “not every
dispute concerning employment, or tangentially involving
a provision of a collective-bargaining agreement, is pre-empted
by § 301 or other provisions of the federal labor law.” Allis-
Chalmers Corp. v. Lueck, 471 U.S. 202, 211 (1985), quoted
in In re Bentz Metal Prods. Co., Inc., 253 F.3d 283, 286 (7th
Cir. 2001) (en banc). To determine whether a state-law claim
is preempted, we must look at the “legal character” of the
claim: a “question of state law, entirely independent of any
understanding embodied in the collective bargaining agree-
ment,” may go forward as a state-law claim, Livadas v.
Bradshaw, 512 U.S. 107, 124-25 (1994); whereas a claim,
the resolution of which “is sufficiently dependent on an in-
terpretation of the CBA,” will be preempted. Bentz Metal,
253 F.3d at 286. If a state-law claim requires reference to,
but not interpretation of, a collective bargaining agreement,
the claim is not preempted. Id. at 285.
12 Nos. 04-1071 & 04-1096
Defendants argue that plaintiffs’ Illinois Wage Act claim
is preempted by § 301 of the LMRA. The Wage Act provides:
“Every employer shall pay the final compensation of separ-
ated employees in full, at the time of separation, if possible,
but in no case later than the next regularly scheduled
payday for such employee.” 820 ILCS § 115/5. Plaintiffs’
complaint alleges that defendants violated the Act by failing
to pay IMMA members the Shutdown Agreement’s wage
supplements following closure of the Waukegan plant.
In Metalcrafters v. McNeil, 784 F.2d 817 (7th Cir. 1986),
we considered whether a similar claim under the Illinois
Wage Act was preempted by § 301 of the LMRA. There, the
union alleged that the employer had violated the Illinois
Wage Act by failing to pay vacation benefits and argued
that the claim merely required application of an unequivocal
term in the collective bargaining agreement. The collective
bargaining agreement, however, did not explicitly provide
for the vesting of the vacation benefits under the circum-
stances of the case.
We reasoned that deciding whether an employer has
honored its contract and complied with the Act, “requires
interpreting the contract, unless, perhaps, the particular
contractual provision is so clear as to preclude all possible
dispute over its meaning.” McNeil, 784 F.2d at 824. Because
the employees’ entitlement to the vacation benefits was
“fairly debatable,” we held that the claim required interpre-
tation of the collective bargaining agreement and, therefore,
was preempted by § 301 of the LMRA. See id. at 824-25
(quoting Allis-Chalmers, 471 U.S. at 219 n.13).
After McNeil, the Supreme Court considered a claim under
a California law similar to the Illinois Wage Act. See Livadas,
512 U.S. 107. In Livadas, a supermarket employee, who had
been working under a collective bargaining agreement,
demanded immediate payment of earned wages upon her
discharge, as required by the California law. The store
Nos. 04-1071 & 04-1096 13
manager refused, referring to a company policy of mailing
payments from a central payroll office. Though the employee
received a check for the correct amount three days later, she
alleged that her employer was liable for a statutory penalty
of a sum equal to three days’ wages for the delay between
her discharge and the date the payment was received.
Livadas, 512 U.S. at 110-11.
The Supreme Court determined that, because there was
no dispute between the parties as to the amount of three
days’ wages, or therefore the amount of the statutory pen-
alty, there was no need to interpret the collective bargain-
ing agreement. According to the Court, the claim primarily
required reference to a calendar, and thus it found the col-
lective bargaining agreement to be “irrelevant” to the dispute
apart from “the simple need to refer to bargained-for wage
rates in computing the penalty.” Livadas, 512 U.S. at 125.
The Court held that the claim was not preempted.
Though Livadas cautioned against finding preemption
where reference to the collective bargaining agreement is
needed only for computation of damages, it did not under-
mine our analysis in McNeil or the rule that § 301 provides
the exclusive cause of action for contract disputes under col-
lective bargaining agreements. The holding of Livadas applies
only “when the meaning of contract terms is not the subject
of dispute.” Livadas, 512 U.S. at 124; see also Atchley, 101
F.3d at 500 (finding preemption of a claim brought under an
Indiana wage payment law which required interpretation
of the collective bargaining agreement to determine
whether, and on what date, the employer had an obligation
to pay wage increases and bonuses).
Under McNeil and Livadas, we hold that the LMRA pre-
empts plaintiffs’ Illinois Wage Act claim. Sections 18(a) and
19(a) of the Shutdown Agreement require that the retention
and severance wage supplements be paid to “Waukegan
Plant Bargaining Unit employees covered by this Agreement
14 Nos. 04-1071 & 04-1096
whose employment with the Company is terminated or who
are permanently laid off, pursuant to Section 8(I)(b) of this
Agreement.” Defendants argue that eligibility for wage
supplements under the Shutdown Agreement, and thus
liability under the Illinois Wage Act, turns on whether
plaintiffs were terminated or permanently laid off “pursu-
ant to Section 8(I)(b).” Section 8(I)(b) refers to employees
who are laid off or terminated “due to the transfer or
relocation of work . . . to other OMC facilities, subcontract-
ing of work to outside companies . . . , subcontracting of
work to subcontractors to perform bargaining unit work
within the plant . . . , and/or the consolidation or discontinu-
ance of operations.”
Sections 18(a) and 19(a), by their explicit reference to
§ 8(I)(b), necessarily exclude employees terminated or per-
manently laid off pursuant to § 8(I)(c), according to defendants’
argument. The latter subsection refers to layoffs and ter-
minations “due to the sale of all or substantially all of the
assets of the Waukegan Plant.” Defendants argue that the
sale of assets in a bankruptcy proceeding could be inter-
preted to fall within § 8(I)(c) rather than § 8(I)(b) and that,
therefore, the Shutdown Agreement excludes from entitle-
ment to the wage supplements employees terminated due to
bankruptcy. This interpretation of the Shutdown Agreement
may or may not be correct, an issue on which we do not
comment, but it is at least tenable. To determine plaintiffs’
entitlement to the wage supplements, a court would have to
interpret, not merely reference, these provisions of the
Shutdown Agreement. Accordingly, the claim is preempted
by § 301 of the LMRA.
Plaintiffs raise three arguments in response to defendants’
proposed interpretation of the Shutdown Agreement. First,
to show that liability for the wage supplements is uncon-
tested, plaintiffs point to OMC’s failure to contest its liability
before the bankruptcy court. Even if this could be deemed
an admission or a waiver by OMC, defendants are not
bound by the litigation choices of a distinct entity.
Nos. 04-1071 & 04-1096 15
Second, plaintiffs assert that defendants’ interpretation
of the Shutdown Agreement is “spurious” because “[l]ayoffs
are layoffs.” Plaintiffs’ counter-position, however, merely
lends support to the conclusion that contractual interpreta-
tion is required. Because defendants’ interpretation is
plausible, and demonstrates a genuine dispute between the
parties that can affect liability, it is a sufficient basis for
preemption.
Finally, plaintiffs argue that defendants’ failure to pre-
sent this interpretation of the Shutdown Agreement to the
district court results in forfeiture of the argument. Though
the district court did not address this issue of contract
interpretation in its order, defendants’ motion and reply
briefs filed with the district court both referred to the need
for interpretation of §§ 18 and 19 of the Shutdown Agreement
and the reply explicitly argued that the district court would
need to determine “whether and how, if at all, the sale of
assets in bankruptcy affects the calculation of severance
payments under applicable sections of the Shutdown CBA.
(See id. §§ 8(I)(b)-(c), 19 and 20(a)).” This was sufficient to
preserve the issue.
The resolution of plaintiffs’ Illinois Wage Act claim requires
interpretation of the Shutdown Agreement. Accordingly, the
claim, even though presented under state law, is a § 301
claim under the LMRA. In light of the complete preemptive
power of § 301, the claim arises under federal law and
remand was improper. See Tifft, 366 F.3d at 516 (citing 28
U.S.C. §§ 1331, 1441(a)). Upon remand from this Court, the
district court shall consider defendants’ arguments in favor
of dismissal of the § 301 claim.2
2
Defendants urge us to rule on the merits of the § 301 claim, but,
because the district court has not had an opportunity to address
the arguments for dismissal, we decline to do so at this time.
16 Nos. 04-1071 & 04-1096
C. ERISA Claim
Plaintiffs’ complaint alleges that defendants breached their
fiduciary duty under ERISA. The district court dismissed
the claim, holding that defendants could not be ERISA fi-
duciaries under the facts alleged. Accepting as true all well-
pleaded factual allegations and drawing all reasonable in-
ferences in plaintiffs’ favor, we review de novo whether
plaintiffs’ complaint states a claim for which relief can be
granted. See Fed. R. Civ. P. 12(b)(6); McCullah v. Gadert,
344 F.3d 655, 657 (7th Cir. 2003).
A claim for breach of fiduciary duty under ERISA is only
valid against a “fiduciary.” Plumb v. Fluid Pump Serv., Inc.,
124 F.3d 849, 854 (7th Cir. 1997). A person is a fiduciary
with respect to an ERISA plan, “to the extent [ ] he exer-
cises any discretionary authority or discretionary control re-
specting management of such plan or exercises any authority
or control respecting management or disposition of its assets.”
29 U.S.C. § 1002(21)(A). Because a person is deemed a fidu-
ciary only “to the extent” he or she exercises discretionary
authority, “a person may be an ERISA fiduciary for some
purposes, but not for others.” Plumb, 124 F.3d at 854 (cita-
tions omitted). “In assessing whether a person can be held
liable for breach of fiduciary duty, a court must ask whether
[that] person is a fiduciary with respect to the particular
activity at issue.” Id. (internal quotations omitted).
Plaintiffs’ complaint alleges that defendants violated
§§ 102 and 404 of ERISA in two ways: (1) by failing to
provide “reasonable advance notice” of the termination of
the OMC Health Plan so that plaintiffs could avoid a break
in coverage; and (2) by failing to fund the OMC Health Plan.
We must determine first whether these are cognizable duties
under ERISA, and second whether defendants can be fiduci-
aries with respect to these two particular activities under
the facts alleged.
Nos. 04-1071 & 04-1096 17
In addressing whether there was a duty to provide notice
of the future termination of the OMC Health Plan, the
district court explained that on February 20, 2001, OMC
filed a motion in the bankruptcy court to approve defendants’
termination of the plan pursuant to 11 U.S.C. §§ 1113 and
1114. Thereafter, the unions, including the IMMA, asked for
a delay of 120 days in any termination of the plan to permit
participants to seek group coverage. The bankruptcy court
denied this request and granted OMC’s motion for termina-
tion in its entirety, authorizing and directing the debtors to
terminate their medical plans “as soon as reasonably prac-
ticable.” From this, the district court concluded that “the
notice, or dearth thereof, afforded participants of the plan’s
termination was not a matter of the exercise of discretion-
ary authority on the part of the defendants, and cannot be
characterized as a breach of fiduciary duty.” The district
court held that, to the extent plaintiffs’ ERISA claim is
based on inadequate notice regarding the termination of the
plan, it fails to state a claim upon which relief can be
granted.
Plaintiffs argue that the district court misunderstood the
complaint and that it does not allege that the termination
of the plan violated a fiduciary duty. Rather, plaintiffs ar-
gue that the alleged breach occurred long before the bank-
ruptcy court issued its order. Plaintiffs point to paragraphs
77 through 81 of the second amended complaint, wherein
they allege the following: by late 2000, defendants knew
that OMC was faltering and that there was a “significant
risk that the OMC Health Plan would be terminated”;
defendants did not warn plaintiffs of this “significant risk”
or that defendants might exercise their right to terminate
the plan without notice; defendants failed to so warn
plaintiffs because they did not wish to alarm creditors of
OMC; defendants breached their fiduciary duty to the ex-
tent they put the interests of OMC and Greenmarine ahead
of plaintiffs’ interests; and plaintiffs could have obtained
18 Nos. 04-1071 & 04-1096
group health insurance had they been given reasonable
advance notice of the likely termination of the plan.
Defendants respond that this theory of liability must fail
as a matter of law because there is no fiduciary duty owed
to plan participants in terminating a plan, and it follows
that there is never a fiduciary duty to inform plan participants
of a risk of plan termination. The premise of defendants’
argument is firmly established. See Lockheed Corp. v. Spink,
517 U.S. 882, 890 (1996); Johnson v. Georgia-Pacific Corp., 19
F.3d 1184, 1188 (7th Cir. 1994). Defendants’ broad conclu-
sion, however, does not necessarily follow.
The Supreme Court has held that an employer breaches
its fiduciary duty by lying to employees in order to induce
them to surrender their benefits. Varity Corp. v. Howe, 516
U.S. 489, 506 (1996). In interpreting the limits of this hold-
ing, several Circuits have held that there is no fiduciary
duty to inform plan participants of a future risk. See Sprague
v. General Motors Corp., 133 F.3d 388, 406 (6th Cir. 1988)
(“We are not aware of any court of appeals decision impos-
ing fiduciary liability for a failure to disclose information
that is not required to be disclosed. At least three circuits
have held that there is no fiduciary duty to disclose planned
changes in benefits or even the termination of the plan be-
fore those actions become official. Pocchia v. NYNEX Corp.,
81 F.3d 275, 278 (2d Cir. 1996); Payonk v. HMW Indus.,
Inc., 883 F.2d 221, 229 (3d Cir. 1989); Stanton v. Gulf Oil
Corp., 792 F.2d 432, 435 (4th Cir. 1986). A fortiori, there
can be no fiduciary duty to disclose the possibility of a fu-
ture change in benefits.”).
We reached the same conclusion in Vallone v. CNA
Financial Corporation, 375 F.3d 623 (7th Cir. 2004). There,
the plaintiffs alleged a breach of fiduciary duty in the
defendant’s failure to warn plan participants of the possi-
bility that benefits would be terminated. We observed that
“[i]n this circuit, a breach of fiduciary duty exists if fiduci-
Nos. 04-1071 & 04-1096 19
aries ‘mislead plan participants or misrepresent the terms
or administration of a plan.’ ” Vallone, 375 F.3d at 640
(quoting Anweiler v. Am. Elec. Power Serv. Corp., 3 F.3d 986,
991 (7th Cir. 1993)). Nevertheless, we held that “the lack of
a specific warning that welfare benefits are terminable
would not alone create a breach of fiduciary duty.” Id. at 642.
We affirmed the district court’s grant of summary judgment
in favor of the defendants, explaining that “the employer
must have set out to disadvantage or deceive its employees,
as in Varity, in order for a breach of fiduciary duty to be
made out” and finding that there was no evidence of such
an intent to deceive. Id. at 642.
Although there is no fiduciary duty under ERISA to dis-
close the likelihood of a future termination of a plan, under
Varity, the same may not be true where the employer inten-
tionally misleads the plan participants about the future of
the plan, through statements or omissions. Plaintiffs allege
that defendants “directly and indirectly, continued to give
good assessments of OMC’s prospects, even after these
defendants knew that the company was likely to fail and that
there was a significant risk the OMC Health Plan would be
terminated,” and that defendants failed to disclose the im-
minent termination to plaintiffs “at least in part because
they did not wish to alarm creditors of OMC.”
We hold that these vague allegations of “assessments” of
the general economic well-being of an employer, especially
in the absence of specific allegations of intent to deceive, are
not sufficient to state a claim for breach of fiduciary duty
under ERISA. Under the facts alleged, the failure to
disclose the likelihood of bankruptcy and plan termination
may have been an innocent byproduct of the company’s ef-
forts to keep from its creditors and competitors information
it had no duty to disclose. Furthermore, if we were to create
a new fiduciary duty, as plaintiffs request, we run the risk of
disturbing the carefully delineated corporate disclosure
20 Nos. 04-1071 & 04-1096
laws. We decline to do so here, where there is no well-
pleaded allegation of intent to deceive the plan participants.
As to notice, plaintiffs also argue that it was a breach of
fiduciary duty under 29 U.S.C. § 1022, to fail to notify
plaintiffs in the summary plan description (“SPD”) of the
risk that their health benefits could be terminated without
notice. Section 1022 provides that the summary plan descrip-
tion shall include the “circumstances which may result in
disqualification, ineligibility, or denial or loss of benefits”
and “shall be sufficiently accurate and comprehensive to
reasonably apprise such participants and beneficiaries of
their rights and obligations.” 29 U.S.C. § 1022. The parties
agree that the SPD provided to plaintiffs states that cover-
age will end “when the Plan is terminated by the Company.”
Though the plan states that the employer “shall have the
right to terminate the Plan without notice to the Participants
or their Dependants,” this additional language does not
appear in the SPD.
We conclude that the SPD’s firm and unqualified state-
ment that termination of the plan by the company will end
coverage, is sufficient to satisfy § 1022 because it reasonably
apprises plan participants of a circumstance which will result
in loss of benefits. See Mers v. Marriott Int’l Group Acciden-
tal Death and Dismemberment Plan, 144 F.3d 1014, 1024
(7th Cir. 1998). The SPD does not encourage the plan
participants to incorrectly assume that they would receive
notice of the plan’s termination and it is sufficient to alert
participants of the need to inquire further to determine if
there were any conditions for termination. It was unneces-
sary to state explicitly in the SPD what is already suggested,
namely, that the company may terminate the plan without
more.
Plaintiffs also allege that defendants violated § 404 of
ERISA by failing to fund the OMC Health Plan. Section 404
provides: “[A] fiduciary shall discharge his duties with
Nos. 04-1071 & 04-1096 21
respect to a plan solely in the interest of the participants
and beneficiaries and . . . for the exclusive purpose of: (i)
providing benefits to participants and their beneficiaries;
and (ii) defraying reasonable expenses of administering the
plan.” 29 U.S.C. § 1104(1)(A). Plaintiffs allege that defendants
breached their fiduciary duty by failing to provide long term
funding to the plan, relying on articles X and XI of the plan
as the source of the duty. Article X, entitled “Plan Financ-
ing,” includes the following provisions:
The Employer shall make contributions in such amounts
and at such times as determined by the Company in
accordance with a funding method and policy consistent
with Plan objectives.
All contributions under this Plan shall be paid to the
Trustee. All assets of the Trust Fund, including invest-
ment income, shall be retained for the exclusive benefit
of Participants and their beneficiaries . . . and shall not
revert to or inure to the benefit of the Employer.
Plaintiffs argue that this reveals “an intent that the Plan
should be set up as a trust, with assets, and not operate on
a pay as you go basis” and that “[t]hough it is peculiar to
use ‘Employer’ and ‘Company’ in the same sentence in this
way, the intent is that the ‘Company’ as fiduciary will fix
and collect the amounts due from the ‘Employer,’ so as to
carry out the objective of creating a trust, with assets, and
a secure basis of funding.” Though defendants dispute that
there was any obligation to fund the plan within its terms,
they have not demonstrated that plaintiffs’ interpretation
of the plan’s language is incorrect as a matter of law. Draw-
ing all reasonable inferences in plaintiffs’ favor, we find
that there is a cognizable duty under the specific language
of this plan, such that plaintiffs’ claim should not be
dismissed at this early stage.
The final step in our analysis is to determine whether the
district court was correct to conclude as a matter of law that
22 Nos. 04-1071 & 04-1096
defendants were not fiduciaries with respect to funding the
plan. The district court cited § 11.6 of the plan which
provides:
The assets of this Plan shall be invested by a
“Management Committee.” The “Management Commit-
tee” shall be appointed by and serve at the pleasure of
the Board of Directors of the Company to assist in the
investment of the assets of this Plan. Such persons may
be the Company’s Vice President and Treasurer, Vice-
President of Human Resources and the Director of
Employee Benefits . . . . The Management Committee
shall have full power and authority to invest and
reinvest the assets of the Plan.
Relying on this language, the district court concluded that
“[a]lthough section 11.6 suggests that defendants may pro-
perly be characterized as fiduciaries with respect to their
appointment responsibilities regarding the Management
Committee, nothing in the OMC Health Plan suggests that
defendants were fiduciaries with respect to the investment
of the plan’s assets or the plan’s funding.” The court held
that plaintiffs failed to state a claim because defendants
were not fiduciaries with respect to the particular activity
of funding the plan.
Plaintiffs rely on Leigh v. Engle, 727 F.2d 113, 133-35 (7th
Cir. 1984), for the proposition that the power to appoint and
remove members of the Administrative and Management
Committees can, in some circumstances, create a duty to
monitor the administrators’ actions. The fiduciary duty to
oversee the plan administrators in Leigh arose from the
defendants’ close relationship with, and control over, the
administrators. Leigh, 727 F.2d at 134-35 n.33. We con-
cluded that, though the defendants “were not obliged to
examine every action taken by [the administrators], . . . we
think that [the defendants] were obliged to take prudent
and reasonable action to determine whether the administra-
Nos. 04-1071 & 04-1096 23
tors were fulfilling their fiduciary obligations.” Id. at 135.
This liberal standard for fiduciary status has been reiter-
ated in several of our subsequent decisions. See, e.g., Plumb,
124 F.3d at 855 (“It is true that a person can become a
fiduciary with respect to a particular activity even if there
is no formal written allocation of the duty.”); Mutual Life
Ins. Co. of N.Y. v. Yampol, 840 F.2d 421, 425 (7th Cir. 1988)
(noting “this court’s consistently broad reading” of the
definition of an ERISA fiduciary); Ed Miniat, Inc. v. Globe
Life Ins. Group, Inc., 805 F.2d 732, 736 (7th Cir. 1986) (“[I]n
Leigh we held that fiduciaries responsible for selecting and
retaining their close business associates as plan administra-
tors had a duty to monitor appropriately the administrators’
action. . . . Similarly, the corporate plaintiffs here may well
have some duty to monitor the actions of the plan adminis-
trator and the insurance company administering the Plan.”)
(citations omitted).
Plaintiffs’ complaint alleges that defendants “had very
specific involvement and control over the above described
Committee, by their power to appoint the members of such
Committee and expressly delegate certain authority and in
effect allocate their members’ responsibilities based on their
areas of respective expertise.” Though plaintiffs’ allegations
provide little detail about the management committee’s
funding decisions, we cannot say at this early stage in the
litigation that plaintiffs can prove no set of facts in support
of their claim that would entitle them to relief. See Conley
v. Gibson, 355 U.S. 41, 45-46 (1957). The district court erred
in holding that defendants cannot be ERISA fiduciaries
with regard to funding the plan.
III. Conclusion
For the foregoing reasons, we REVERSE the district court’s
dismissal of plaintiffs’ ERISA claim only insofar as it is
24 Nos. 04-1071 & 04-1096
based on a fiduciary duty to fund the plan, REVERSE the
district court’s remand of the Illinois Wage Act claim, and
REMAND for further proceedings consistent with this
opinion.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—10-27-04