Trustees of the Aftra Health Fund v. Biondi

In the
United States Court of Appeals
For the Seventh Circuit
____________
No. 00-3598
TRUSTEES OF THE AFTRA HEALTH FUND,
Plaintiff-Appellee,
v.
RICHARD BIONDI,
Third-Party Plaintiff-
Defendant-Appellant,
v.
THOMAS C. O’BRIEN, SELMA D’SOUZA,
O’BRIEN & BARBAHEN, A PARTNERSHIP, et al.,
Third-Party Defendants-Appellees.
____________
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 C 1286—Matthew F. Kennelly, Judge.
____________
ARGUED JANUARY 18, 2002—DECIDED SEPTEMBER 6, 2002
____________
Before MANION, ROVNER, and EVANS, Circuit Judges.
MANION, Circuit Judge. In 1993, Richard and Hazel Biondi
decided to end their marriage of thirty years. In doing so,
the Biondis entered into a divorce decree which required
Richard to pay COBRA health insurance premiums on
behalf of Hazel for two years. Instead, and without no-
2 No. 00-3598
tifying his employer of the divorce, Richard allowed Hazel
to remain listed under the existing medical plan as his
spouse for a period of approximately five years. During
that time, Hazel incurred substantial medical expenses.
Upon learning of this ruse, the Trustees of the American
Federation of Television and Radio Artists (“AFTRA”)
Health Fund filed suit against Richard Biondi, pursuant
to Employee Retirement Income Security Act (“ERISA”) and
state common law fraud principles, seeking to recover
monies paid to Hazel’s medical providers after she became
ineligible to receive dependent care health insurance ben-
efits. Biondi, in turn, filed a third-party complaint against
his former divorce attorneys and their law firms, alleging
that their malpractice caused the damages sought in the
Trustees’ complaint, and contending that they were re-
quired to indemnify him for any judgment obtained
against him and for the cost of defending the suit. The
district court dismissed the Trustees’ ERISA claim but
entered judgment in their favor on the common law fraud
claim. The district court also granted the third-party de-
fendants summary judgment on Biondi’s malpractice
claim. Biondi filed a timely Rule 59(e) motion to alter or
amend the district court’s judgment, which the court de-
nied. Biondi appeals the district court’s entry of judgment
against him on the Trustees’ common law fraud claim,
the court’s decision to grant the third-party defendants’
motion for summary judgment on his malpractice claim,
and the denial of his Rule 59(e) motion. The Trustees do
not appeal the district court’s dismissal of their ERISA
claim. We affirm.
I.
In 1992, Richard Biondi hired the law firm of O’Brien &
Barbahen to represent him in divorce proceedings initiated
by his wife, Hazel, in a New Mexico state court. On March
No. 00-3598 3
30, 1993, the state court rendered a judgment expressly
incorporating a Marital Settlement Agreement (“Settlement
Agreement”) entered into by the parties. The Settlement
Agreement provided that Hazel “would have contin-
ued medical insurance coverage through [Biondi’s] med-
ical insurance company pursuant to COBRA,” and that
“[Biondi] shall pay the medical insurance premiums for
[Hazel] for a period of twenty-four (24) months after the
filing of the Final Decree in this matter.” At all times rele-
vant to this lawsuit, Biondi was an AFTRA employee
and thus a plan “participant,” as defined by 29 U.S.C.
§ 1002(7), in the AFTRA Health Fund (“Fund”). The Fund
is an “employee welfare benefit plan” (“Plan”), as defined
in 29 U.S.C. § 1002(3), that provides medical, hospital,
and other welfare benefits to employees covered by col-
lective bargaining agreements between employers and
AFTRA. The Plan is established and maintained accord-
ing to the Agreement and Declaration of Trust of the
AFTRA Health and Retirement Funds (“Trust Agreement”).
Provisions of the Plan are published in the Fund’s Sum-
mary Plan Description (“Summary Plan”) in accordance
1
with 29 U.S.C. § 1022.
Before their divorce, Hazel was a covered “beneficiary,”
as defined by 29 U.S.C. § 1002(8), under the Plan. The
insurance premiums for that coverage were paid directly
by Biondi’s employer. After the divorce, Hazel was no
longer eligible for dependent care coverage under the
terms of the Plan. The Trust Agreement, Plan, and Sum-
mary Plan all emphasize that a “lawful” or “legal” spouse
is covered by the Plan. The Summary Plan provides that
1
According to the Trustees, copies of the Summary Plan were
distributed periodically to all Plan participants, including Biondi,
during the time period at issue in this case.
4 No. 00-3598
“[i]f you gain or lose a dependent by reason of marriage,
divorce, birth, death or otherwise, you must so advise
the nearest Fund office promptly. It is particularly impor-
tant that you contact the Fund office as soon as possible if you
2
marry or divorce.” (Emphasis added.) Although no longer
a dependent, Hazel was eligible for COBRA coverage, see
29 U.S.C. § 1161 et seq. Biondi did not, however, obtain
this coverage for her as required by the divorce decree.
Biondi also did not advise the Fund of his divorce, as
required, until December 1997, when one of his former
attorneys, Thomas C. O’Brien, sent a letter to the Fund
advising it of the divorce and conveying an offer by Biondi
to retroactively pay COBRA conversion premiums for the
five-year period that Hazel received dependent care cov-
erage under the Plan. In the letter, O’Brien noted that
“[since] the requirement that Mrs. Biondi’s coverage after
the divorce judgment be pursuant to a COBRA or conver-
sion plan was not brought to Mr. Biondi’s attention, he
simply left his union benefits in place and treated her as a
spouse, believing that this was the proper way to dis-
charge his liabilities under the divorce judgment.” (Empha-
sis added.) Shortly after receiving this correspondence,
the Fund terminated Hazel’s dependent care coverage
under the Plan, fifty-seven months after her divorce from
Biondi. During this time period, the Fund made medical
payments on Hazel’s behalf to the tune of $122,792.86.
On July 17, 1998, the Trustees of the Fund filed a com-
plaint against Biondi and Hazel in the United States Dis-
trict Court for the Southern District of New York, seeking
a declaratory judgment for equitable relief under the
Employee Retirement Income Security Act (“ERISA”), i.e.,
2
From this point forward, we will refer to the Trust Agreement,
Plan, and Summary Plan collectively as the “Plan.”
No. 00-3598 5
29 U.S.C. § 1132(a)(3)(B)(i), and damages for common
law fraud. Specifically, the Trustees sought to recover
$122,792.86 paid by the Fund on Hazel’s post-divorce
medical claims, as well as applicable interest, attorneys’
fees, costs of litigation, and $50,000 in punitive dam-
ages. The Trustees’ complaint alleged that Biondi inten-
tionally failed to notify the Fund of his divorce, and misrep-
resented to the Fund that he was still married to his ex-wife,
in order to cause the Fund to continue to provide Hazel
with dependent care coverage and benefits. The Trustees
subsequently amended their complaint to dismiss Hazel
from the suit.
On February, 2, 1999, the Trustees filed a motion request-
ing the district court to transfer the action to the United
States District Court for the Northern District of Illinois,
which the court granted on February 17, 1999. On March 10,
1999, Richard Biondi filed a third-party complaint against
Thomas C. O’Brien, Selma D’Souza, O’Brien & Barbahen
3
(“third-party defendants”), alleging that they commit-
ted legal malpractice in their representation of him dur-
ing his divorce proceedings. He also sought indemnifica-
tion from them for any judgment the Trustees might obtain
against him, as well as reimbursement of all expenses
and attorneys’ fees incurred in his defense of the Trustees’
claim. Biondi’s legal malpractice claim is premised on the
attorneys’ collective failure to advise him of the Plan’s
requirements to notify it of the change in his marital sta-
tus and request COBRA coverage for his ex-wife.
3
Biondi also named Thomas O’Brien’s then-current law firm,
Gagliardi, Nelson & O’Brien (“GN&B”), as a defendant in the
third-party complaint. However, on March 27, 2000, Biondi and
GN&B entered into a “Tolling Agreement,” after which time
Biondi took no further action to prosecute his third-party claim
against GN&B.
6 No. 00-3598
On April 13, 2000, after conducting a bench trial, the
district court, relying on Mertens v. Hewitt Assoc., 508 U.S.
248 (1993), dismissed the Trustees’ declaratory action
for restitution under ERISA, holding that: (1) 29 U.S.C.
§ 1132(a)(3)(B)(i) only provides plan administrators and
fiduciaries with a remedy for equitable, not legal, relief
against nonfiduciaries like Biondi; and (2) the Trustees
could not obtain equitable relief against Biondi under
§ 1132(a)(3)(B)(i) because Biondi did not directly receive
any of the payments that the Fund made on his ex-
wife’s behalf. The district court did, however, rule in the
Trustees’ favor on their common law fraud claim, reject-
ing Biondi’s argument that ERISA expressly preempted
the claim. The court found that on February 21, 1997, Biondi
“knowingly made a false statement to the Fund [on a
claims form] that Hazel was his wife . . . in order to claim
medical benefits on her behalf with knowledge that the
Fund would rely on that statement.” At trial, Biondi de-
nied that he had filled out the claims form, but the dis-
trict court concluded that the handwriting on the form
was his and that the Fund relied on this misrepresenta-
tion in paying the claim. The district court also found
that Biondi fraudulently concealed his divorce from the
Fund and that he failed to disclose this fact “knowingly
and with the intent that the Fund would rely upon the
omission, in other words, that it would continue to believe
that she was his wife and provide her with medical cover-
age.” The district court reached this conclusion in large
part because of his former attorney’s December 22, 1997,
correspondence, wherein he indicated that Biondi made
a conscious decision to “treat [Hazel] as his spouse” for
purposes of insurance coverage. The court surmised that
this admission demonstrated that “whether or not Mr.
Biondi was aware of a specific obligation to tell the Fund
of the divorce, he did have some level of knowledge and
No. 00-3598 7
awareness that this status made some difference.” The court
also found Biondi’s decision not to “put his new wife on
the insurance policy” relevant. Finally, the court concluded
that Biondi’s fraudulent misrepresentation on the February
21, 1997 claims form “provides further confirmation that
he acted knowingly in failing to advise the Fund of the
divorce even if that statement by itself did not influence all
of the claims in this case.” The district court delayed enter-
ing judgment on the Trustees’ fraud claim, however, to
give the parties time to enter into a stipulation regarding
4
the measure of the Trustees’ damages for Biondi’s fraud.
In light of this ruling, on May 25, 2000, the third-party
defendants filed a motion for summary judgment of
Biondi’s malpractice claim, which the district court granted
on August 4, 2000, holding that “[e]ven if Biondi’s lawyers
were negligent and committed malpractice as he con-
tends, Biondi cannot seek to hold them responsible for the
damages he has to pay as a result of his fraud.” On Au-
gust 9, 2000, the district court entered judgment against
Biondi and in favor of the Trustees on their common law
4
The district court held that from the time of the divorce
through March 31, 1996, i.e., the COBRA coverage period, the
Trustees’ damages for Biondi’s fraud were “the difference
between the premium being paid by [his] employer and the
premium that would have been owed for COBRA coverage, a
total of $170 per month, for a grand total of $6,210.” From April
1, 1996, until the time Hazel’s dependent care coverage was
terminated, the district court held that “the Fund’s damages
consist of the amounts that it paid out for her medical expenses
for the services rendered . . . .” In a letter to the court, the parties
stipulated that “the amount payable by Mr. Biondi pursuant
to the formula set out in Your Honor’s . . . Findings of Fact
and Conclusions of Law is $118,006.70 [i.e., $111,796.70 for the
post-COBRA coverage time period].”
8 No. 00-3598
fraud claim, awarding them $118,006.70, and in favor of
the third-party defendants on Biondi’s third-party com-
5
plaint. Biondi filed a timely motion to alter or amend the
judgment, pursuant to Fed. R. Civ. P. 59(e), which the dis-
trict court denied. Biondi appeals the district court’s judg-
ment and its denial of his Rule 59(e) motion.
II.
On appeal, Biondi argues that the district court’s judg-
ment against him on the Trustees’ common law fraud claim
must be reversed because the claim is expressly preempted
by ERISA. A district court’s preemption ruling is a ques-
tion of law that we review de novo. See, e.g., Moran v. Rush
Prudential HMO, Inc., 230 F.3d 959, 966 (7th Cir. 2000),
aff’d by 122 S.Ct. 2151 (2002). Biondi also contends that the
district court erred when it granted the third-party defen-
5
The district court also mistakenly granted summary judg-
ment on behalf of the law firm of Gagliardi, Nelson & O’Brien
(“GN&B”), notwithstanding its tolling agreement with Biondi. See
supra n. 3. The district court’s inclusion of GN&B in its August 9,
2000 judgment appears to have been a clerical error. As such,
Biondi had the right, under Fed. R. Civ. P 60(a), to request that
the error be corrected during the pendency of this appeal. He
failed to do so, however, and, by all accounts, appears to have
abandoned his claim against GN&B. Biondi made no mention of
the error in his Rule 59(e) motion, and, on appeal, he seems
content to treat the district court’s mistake as a de facto dismiss-
al of GN&B from the lawsuit. In his initial appellate brief,
Biondi emphasizes that he “took no further action to pros-
ecute his third-party claim against [GN&B],” and that “no
formal order of dismissal was entered in connection with
[GN&B].” Given the foregoing, we decline to correct the error
sua sponte.
No. 00-3598 9
dants’ motion for summary judgment of his legal malprac-
tice claim. We review a district court’s decision to grant
a motion for summary judgment de novo, construing all
facts, and drawing all reasonable inferences from those
facts, in favor of Biondi, the nonmoving party. See, e.g.,
Peele v. Country Mut. Ins. Co., 288 F.3d 319, 326 (7th Cir.
2002). Summary judgment is proper when “the plead-
ings, depositions, answers to interrogatories, and admis-
sions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of
law.” Fed. R. Civ. P. 56(c). Finally, Biondi challenges the
district court’s denial of his Rule 59(e) motion to alter or
amend its judgment, which we review under an abuse
of discretion standard. See, e.g., Zivitz v. Greenburg, 279 F.3d
536, 539 (7th Cir. 2002).
A. The Trustees’ Common Law Fraud Claim and 29
U.S.C. § 1144(a)
Biondi argues that the district court erred in entering
judgment against him on the Trustees’ common law fraud
claim because the claim is expressly preempted under
ERISA’s preemption clause, 29 U.S.C. § 1144(a), which
provides, with certain exceptions not relevant here, that
ERISA “shall supersede any and all State laws insofar as
they may now or hereafter relate to any employee benefit
6
plan.” Id. (emphasis added). The critical statutory phrase—
6
Section 1144(a) is supplemented by two statutory definitions.
The first broadly defines “State Law” as including “all laws,
decisions, rules, regulations, or other State action having the
effect of law,” 29 U.S.C. § 1144(c)(1), and the second defines
(continued...)
10 No. 00-3598
“relate to any employee benefit plan”—is not, however,
self-defining, and the Supreme Court “[has] been at least
mildly schizophrenic in mapping its contours.” Carpenters
Local Union No. 26 v. U.S. Fid. & Guar. Co., 215 F.3d 136,
139 (1st Cir. 2000). See also Dishman v. UNUM Life Ins.
Co. of Am., 269 F.3d 974, 980 (9th Cir. 2001) (noting that
“ ‘[d]eveloping a rule to identify whether ERISA pre-
empts a given state law . . . has bedeviled the Supreme
Court.’ ”) (citation omitted). As such, before delving into
the murky waters of ERISA preemption, a brief summary
of the Court’s recent jurisprudence in this area is helpful.
The Supreme Court’s early ERISA preemption cases
glossed over the “relate to” text of § 1144(a) by portraying
the phrase as deliberately expansive. See, e.g., Pilot Life Ins.
Co. v. Dedeaux, 481 U.S. 41, 45-46 (1987). In recent years,
however, the Court has taken a more restrictive view of
§ 1144(a). The tide began to turn in this direction with
the seminal decision of New York State Conference of Blue
Cross & Blue Shield Plans v. Travelers Insurance Co., 514
U.S. 645 (1995), where the Court emphasized that:
Our past cases have recognized that the Supremacy
Clause, U.S. Const., Art. VI, may entail pre-emption
of state law either by express provision, by implica-
tion, or by a conflict between federal and state law.
And yet, despite the variety of these opportunities for
federal pre-emption, we have never assumed lightly
that Congress has derogated state regulation, but
instead have addressed claims of pre-emption with
6
(...continued)
an “employee benefit plan” as “an employee welfare benefit
plan or an employee pension benefit plan or a plan which is
both an employee welfare benefit plan and an employee pen-
sion plan.” 29 U.S.C. § 1002(3).
No. 00-3598 11
the starting presumption that Congress does not in-
tend to supplant state law. Indeed, in cases like this
one, where federal law is said to bar state action in
fields of traditional state regulation, we have worked
on the “assumption that the historic police powers of
the States were not to be superseded by the Federal Act
unless that was the clear and manifest purpose of
Congress.”
Id. at 654-55 (internal citations and citation omitted).
Additionally, the Travelers Court noted that because pre-
emption claims turn on congressional intent, it is necessary,
as with any exercise of statutory construction, to begin
“with the text of the provision in question, and move on,
as need be, to the structure and purpose of the Act . . . .”
Travelers, 514 U.S. at 655. In addressing the “clearly expan-
sive” text of § 1144(a), the Court concluded that if the
statute’s “words of limitation”—i.e., “relate to”—“were
taken to extend to the furthest stretch of its indeterminacy,
then for all practical purposes pre-emption would never
run its course, for ‘really, universally, relations stop no-
where.’ ” Id. (citation omitted). The Court also noted that
its prior attempt to place some meat on § 1144(a)’s bare
bones in Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983),
where it held that “[a] law ‘relates to’ an employee ben-
efit plan, in the normal sense of the phrase, if it has a
connection with or reference to such a plan,” id. at 96-97(emphasis added), was of limited utility because “an un-
critical literalism [of the phrase “connection with”] is no
more help than in trying to construe ‘relate to’ . . . [f]or the
same reasons that infinite relations cannot be the measure
of pre-emption, neither can infinite connections.” Travelers,
514 U.S. at 656. For this reason, the Court in Travelers
decided to add another layer to its ERISA preemption
analysis, holding that, for purposes of § 1144(a), a federal
12 No. 00-3598
court’s evaluation of a state law’s relation to an employee
benefit plan must “go beyond the unhelpful text and the
frustrating difficulty of defining its key term, and look
instead to the objectives of the ERISA statute as a guide to
the scope of the state law that Congress understood would sur-
vive.” Id. (emphasis added). The Court amended the “ob-
jectives” principle from Travelers slightly in California
Division of Labor Standards Enforcement v. Dillingham Con-
struction, N.A., Inc., 519 U.S. 316 (1997), rephrasing it to
stress that the objectives of ERISA are also to be used
to determine the “nature of the effect of the state law on
ERISA plans.” Id. at 325. See also De Buono v. NYSA-ILA Med.
& Clinical Services Fund, 520 U.S. 806, 813-14 (1997) (utiliz-
ing the “objectives” principle from Travelers and Dillingham);
Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001) (same).
Cataloging ERISA’s statutory objectives is a fairly straight-
forward exercise. ERISA’s primary objectives are to “pro-
tect . . . the interests of participants . . . and their beneficia-
ries, by requiring the disclosure and reporting . . . of
financial and other information . . . by establishing stan-
dards of conduct, responsibility, and obligation for fidu-
ciaries of employee benefit plans, and by providing for
appropriate remedies, sanctions, and ready access to the
Federal courts,” 29 U.S.C. § 1001(b), and “by improving the
equitable character and the soundness of such plans by
requiring them to vest the accrued benefits of employees
with significant periods of service, to meet minimum stan-
dards of funding, and by requiring plan termination
insurance.” 29 U.S.C. § 1001(c). Additionally, we know
that when Congress enacted § 1144(a) it intended:
to ensure that plans and plan sponsors would be sub-
ject to a uniform body of benefits law; the goal was
to minimize the administrative and financial burden
of complying with conflicting directives among States
No. 00-3598 13
or between States and the Federal Government . . ., [and
to prevent] the potential for conflict in substantive
law . . . requiring the tailoring of plans and employer
conduct to the peculiarities of the law of each jurisdic-
tion.
Travelers, 514 U.S. at 656-57 (citation omitted). See also
Darcangelo v. Verizon Communications, Inc., 292 F.3d 181, 190
(4th Cir. 2002) (noting that “ ‘[t]he basic thrust of [ERISA’s]
preemption clause . . . was to avoid the multiplicity of
regulation in order to permit the nationally uniform ad-
ministration of employee benefit plans.’ ”) (citation omitted).
Under this rubric, the Supreme Court has identified
at least three instances where a state law can be said to
have a “connection with” or “reference to” employee ben-
efit plans, when it (1) “mandate[s] employee benefit struc-
tures or their administration,” Travelers, 514 U.S. at 658;
(2) binds employers or plan administrators to particular
choices or precludes uniform administrative practice,
thereby functioning as a regulation of an ERISA plan it-
self, id. at 659-60; and (3) provides an alternative enforce-
ment mechanism to ERISA. Id. at 658.
With the foregoing in mind, we now turn to Biondi’s
argument that the Trustees’ state-law claim is expressly
preempted by ERISA. As an initial matter, we note that
because the Trustees’ claim is for common law fraud, a
traditional area of state regulation, Biondi bears “the
considerable burden of overcoming ‘the starting presump-
tion that Congress does not intend to supplant state law.’ ”
De Buono, 520 U.S. at 814 (citation omitted). See also
LeBlanc v. Cahill, 153 F.3d 134, 147 (4th Cir. 1998) (applying
presumption to common law fraud claim). However, we
also recognize that the mere fact that States have tradition-
ally regulated common law fraud does not, in and of it-
self, preclude the Trustees’ claim from being expressly
14 No. 00-3598
preempted under § 1144(a), if allowing the claim to go
forward would thwart the statutory objectives of ERISA.
See, e.g., Dillingham, 519 U.S. at 330.
In this case, the Trustees, as Plan fiduciaries, see 29 U.S.C.
§ 1102, are seeking to recoup monies that the Fund improp-
erly expended as a result of a plan participant’s fraud-
ulent conduct. Thus, far from thwarting ERISA’s stated
statutory objectives, the Trustees’ common law fraud
claim is an attempt to protect the financial integrity of
the Fund, which is certainly in the Plan participants’
and beneficiaries’ best interests, as well as being consis-
tent with the Trustees’ fiduciary obligations under ERISA.
See generally 29 U.S.C. §§ 1101-1114 (ERISA’s fiduciary
responsibility provisions). Furthermore, the Trustees’
state-law fraud claim clearly does not subject plan admin-
istrators and plan sponsors to conflicting directives among
States or between States and the federal government,
or create a potential conflict in substantive law requiring
the tailoring of plan and employer conduct to the pecu-
liarities of the law of each state. In sum, the Trustees’
claim does not threaten in any way Congress’s goal of
national uniformity in the administration of ERISA plans.
Finally, by no stretch of the imagination can the Trustees’
claim be said to mandate employee benefit structures
or their administration, or bind plan administrators to
particular choices or preclude uniform administrative
practices. As such, the Trustees’ claim “is quite remote
from the areas with which ERISA is expressly concerned—
‘reporting, disclosure, fiduciary responsibility, and the
7
like.’ ” Dillingham, 519 U.S. at 330 (citation omitted).
7
Because, as discussed infra, the Trustees’ fraud claim is largely
premised on Biondi’s failure to disclose his divorce to the
(continued...)
No. 00-3598 15
This leaves only the question of whether the Trustees
are using a common law fraud claim as an alternative
enforcement mechanism to ERISA’s civil enforcement
provisions, which are delineated in 29 U.S.C. § 1132(a). The
Supreme Court has identified two categories of state
laws that act as alternative enforcement mechanisms to
ERISA. One is where “the existence of a pension plan is a
critical element of a state-law cause of action,” De Buono,
520 U.S. at 815, and the other is where a “state statute
contains provisions that expressly refer to ERISA or ERISA
plans . . . .” Id. The former is preempted under ERISA’s
express preemption statute, i.e., § 1144(a), and the latter
is preempted under ERISA’s field (“complete”) preemp-
tion statute, i.e., 29 U.S.C. § 1132(a). Biondi maintains
that the Trustees’ fraud claim impermissibly “references”
8
an ERISA plan, within the meaning of § 1144(a), because
7
(...continued)
Fund, we pause to emphasize that ERISA’s “disclosure” provi-
sions only impose duties on plan administrators, employers,
and fiduciaries, not plan participants. See generally 29 U.S.C.
§§ 1021-1031.
8
Both of the alternative enforcement mechanisms identified by
the Supreme Court in De Buono also happen to be the two
categories of state laws which the Court has found as making
“reference to” ERISA plans. See Dillingham, 519 U.S. at 325(holding that “[w]here a state law acts immediately and exclu-
sively upon ERISA plans . . . or where the existence of ERISA
plans is essential to the law’s operation . . . that ‘reference’ will
result in pre-emption.”). We note in passing that the Supreme
Court has yet to explicitly apply the “objectives” principle
articulated in Travelers and Dillingham to a state law that makes
“reference to,” as opposed to merely having a “connection with,”
ERISA plans. See Carpenters, 215 F.3d at 143 (noting that the
(continued...)
16 No. 00-3598
“the existence of a pension plan is a critical element of
[their] . . . state-law cause of action,” De Buono, 520 U.S. at
815, and that but for the duties imposed upon him by
the Plan “[his] conduct would not even have been action-
9
able.”
At this point, it is important to emphasize that the Trust-
ees’ claim encompasses two separate and distinct forms
of common law fraud, fraudulent misrepresentation and
8
(...continued)
Supreme Court’s decisions in Travelers and Dillingham “stop
short of explicitly endorsing a new analytic modality for the
‘reference to’ inquiry.”). Nevertheless, we join the First Circuit
in concluding that when the nexus between a state law and
ERISA is less than clear, federal courts are required to evaluate
the law in light of ERISA’s statutory objectives—regardless of
which category of preemption the state law might fall under. Id.See also Dishman, 269 F.3d at 981 n.15 (noting that “the Supreme
Court’s recent [ERISA preemption] cases have eschewed . . .
multi-factor tests in favor of a more holistic analysis guided
by congressional intent.”). Therefore, whether the Trustees’
common law fraud claim is characterized as being one that has
a “connection with” or “reference to” an ERISA plan, we be-
lieve that the nature of the Trustees’ claim is such that an
“objectives” analysis is clearly required to determine whether
it is subject to preemption under § 1144(a).
9
Biondi also argued in his initial appellate brief that the Trust-
ees’ claim was “completely” preempted under § 1132(a). Biondi,
however, failed to make this argument before the district court,
thereby waiving the right to argue the issue on appeal. See, e.g.,
Moulton v. Vigo County, 150 F.3d 801, 803 (7th Cir. 1998). In any
event, this waiver is of no consequence because, as we dis-
cuss infra, § 1132(a) does not provide the Trustees with a rem-
edy that would enable them to recover damages for Biondi’s
fraudulent conduct.
No. 00-3598 17
fraudulent concealment. The district court found that
Biondi fraudulently misrepresented his marital status to
the Fund when he signed a claims form indicating that
he was still married to his ex-wife “in order to claim med-
ical benefits on her behalf with knowledge that the Fund
10
would rely on that statement.” The district court also
concluded that Biondi had a duty under Illinois tort law
to disclose his divorce to the Fund and that his failure to
do so constituted fraudulent concealment.
With respect to the Trustees’ claim for fraudulent mis-
representation, Biondi’s argument is a non-starter. Regard-
less of any contractual duties Biondi owed the Fund under
the terms of the Plan, he had a separate and distinct duty
under Illinois tort law not to misrepresent his marital
status on the claims form he submitted to the Fund on
February 21, 1997. See, e.g., Peter J. Hartmann Co. v. Capital
Bank & Trust Co., 694 N.E.2d 1108, 1114 (Ill. App. Ct. 1998)
(holding that “[f]raudulent misrepresentation claims do
not require articulation of a duty to disclose as an ele-
ment of the cause of action, because such claims are predi-
cated on a more general moral obligation to speak the
truth and not to deceive when an affirmative action is
taken, such as a representation intended to initiate a re-
sponse on the part of the reliant recipient.”). However,
while the district court found that the Fund relied on
10
To prevail in a cause of action for fraudulent misrepresenta-
tion under Illinois law, a plaintiff must prove that “(1) the
defendant intentionally made a false statement of a material
fact; (2) the plaintiff had a right to rely on that false statement;
(3) the statement was made for the purpose of inducing reli-
ance thereon; (4) the plaintiff in fact relied on the statement;
and (5) the plaintiff suffered injury as a direct result.” Rolando v.
Pence, 769 N.E.2d 1108, 1112-13 (Ill. App. Ct. 2002).
18 No. 00-3598
Biondi’s misrepresentation as to that particular claim, it
also concluded that there was no evidence that the Fund
relied on this misrepresentation as to any other claim. The
district court held that with respect to “the other claims
in question, [the Fund] was relying on Mr. Biondi’s fail-
ure to disclose that Hazel was no longer his wife and thus
was not eligible for coverage.” And this brings us to the
heart of Biondi’s argument on appeal.
Biondi maintains that the Trustees cannot prove that
he fraudulently concealed his divorce from the Fund
without referring to the Plan’s provisions, and as such the
claim is subject to preemption under § 1144(a). In order for
a plaintiff to demonstrate fraudulent concealment under
Illinois law, it must prove: (1) the concealment of a ma-
terial fact; (2) that the concealment was intended to in-
duce a false belief, under circumstances creating a duty to
speak; (3) that the innocent party could not have discovered
the truth through a reasonable inquiry or inspection, or
was prevented from making a reasonable inquiry or in-
spection, and relied upon the silence as a representation
that the fact did not exist; (4) that the concealed informa-
tion was such that the injured party would have acted
differently had he been aware of it; and (5) that reliance by
the person from whom the fact was concealed led to his
injury. See, e.g., Schrager v. North Community Bank, 767
N.E.2d 376, 384 (Ill. App. Ct. 2002). Biondi claims that the
“concealment” portion of the Trustees’ fraud claim consti-
tutes an alternative enforcement mechanism to ERISA
because the “circumstances creating a duty to speak” on his
part, a critical element of proving fraudulent concealment,
arose from the Plan provisions requiring him to disclose
his divorce to the Fund.
In support of his argument, Biondi relies heavily on the
Supreme Court’s decision in Ingersoll-Rand Co. v. Mc-
No. 00-3598 19
Clendon, 498 U.S. 133 (1990), where the Court held that
Texas’s judicially created cause of action for the tort of
wrongful discharge was expressly preempted by ERISA
because “[t]he . . . cause of action makes specific reference
to, and indeed is premised on, the existence of a pension
plan.” Id. at 140. There is, however, a key difference be-
tween the cause of action at issue in Ingersoll-Rand and
the Trustees’ claim against Biondi for fraudulent conceal-
ment. In Ingersoll-Rand, the Court held that the common
law cause of action created by the Supreme Court of
Texas was “specifically designed” to affect employee ben-
efit plans because it only “ ‘allows recovery when the
plaintiff proves that the principal reason for his termina-
tion was the employer’s desire to avoid contributing to
or paying benefits under the employee’s pension fund.’ ”
Id. (citation omitted). In contrast, Illinois’s common law tort
of fraudulent concealment, a traditional state-based law
of general applicability, see, e.g., LeBlanc, 153 F.3d at
147-48, clearly makes no direct reference to ERISA plans
nor relies on the existence of such plans to operate. This
is an important distinction because in Ingersoll-Rand the
Court specifically noted that it was “not dealing . . . with
a generally applicable statute that makes no reference
to, or indeed functions irrespective of, the existence of an
ERISA plan.” Ingersoll-Rand, 498 U.S. at 139. Thus, when the
Supreme Court describes Ingersoll-Rand as a case “where
the existence of a pension plan [was] a critical element of
a state-law cause of action,” De Buono, 520 U.S. at 815(emphasis added), or one where “a common law cause
of action [was] premised on the existence of an ERISA
plan,” Dillingham, 519 U.S. at 324-25, it is referring to a
claim where the state law at issue relied, for its very opera-
tion, on a direct and unequivocal nexus with ERISA plans.
Id. at 325 (holding that “where the existence of ERISA
plans is essential to the law’s operation, as in . . . Ingersoll-
20 No. 00-3598
Rand, that ‘reference’ will result in pre-emption.”). See also
Smith v. Cohen Benefit Group, Inc., 851 F. Supp. 210, 213
(M.D. N.C. 1993) (holding that plaintiffs’ claims for com-
mon law fraud, constructive fraud, and negligent mis-
representation were not preempted by § 1144(a) because,
unlike the cause of action in Ingersoll-Rand, these claims
involved “general laws that function irrespective of the
existence of an ERISA plan.”).
Biondi glosses over the holding of Ingersoll-Rand, focus-
ing instead on the Court’s observation in that case that
“[u]nder [the] ‘broad common sense meaning’ [of Shaw’s
“connection with” or “reference to” definition] a state law
may ‘relate to’ a benefit plan, and thereby be pre-empted,
even if the law is not specifically designed to affect such
plans, or the effect is only indirect.” 498 U.S. at 139. Biondi,
however, fails to place this language in its proper context.
In noting that state laws may “relate to” an ERISA plan
even when they are not specifically designed to affect
them, the Court explicitly relied on its previous decisions
in Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41 (1987), and
Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981),
id., neither of which involved claims similar to the one
at issue in this case.
In Pilot Life, the Supreme Court held that a plan benefi-
ciary’s generally applicable state common law tort and
contract actions were preempted under § 1144(a) because
they were based on ” alleged improper processing of a claim
for benefits under an insured employee benefit plan . . . .”
481 U.S. at 48. In Alessi, the Court held that a group of
retirees’ claim against their former employer—for violating
a New Jersey statute prohibiting workers’ compensation
benefits from being used to offset pension benefits—was
expressly preempted under § 1144(a) because the statute
“eliminates one method for calculating pension bene-
No. 00-3598 21
fits—integration—that is permitted by [ERISA].” 451 U.S.
at 524. In both of these cases, and in Ingersoll-Rand, the
Court was dealing with claims brought by plaintiffs for
a wrongful denial of benefits under an ERISA plan—
a fundamental concern of ERISA. See Rush Prudential
HMO, Inc. v. Moran, 122 S.Ct. 2151, 2166 (2002) (noting
that “Congress ha[s] so completely preempted the field
of benefits law that an ostensibly state cause of action
for benefits was necessarily a ‘creature of federal law’
removable to federal court.”). Thus, even after Travelers,
Dillingham, and De Buono—cases that dramatically alt-
ered the landscape of ERISA preemption jurisprudence—
the Supreme Court’s holdings in Pilot Life and Alessi re-
main viable because the state-law claims in those cases
clearly “implicate[d] an area of core ERISA concern.”
Egelhoff, 532 U.S. at 147. On the other hand, as pre-
viously discussed, the Trustees’ common law fraud claim
does not implicate any of ERISA’s fundamental con-
cerns; the Plan is merely the context in which Biondi’s
fraudulent conduct occurred.
The Second Circuit came to this same conclusion in
Geller v. County Line Auto Sales, Inc., 86 F.3d 18 (2d Cir.
1996), where the court held—in addressing a claim vir-
tually indistinguishable from the one at issue in this
case—that a common law fraud claim brought by the
trustees of a multi-employer ERISA plan against an em-
ployer and two of its officers was not preempted under
§ 1144(a). In that case, the trustees were seeking to recover
damages resulting from the defendants falsely listing the
girlfriend of an officer as a full-time employee in order to
make her an eligible participant in the company’s em-
ployee benefit plan. Id. at 20. The girlfriend subsequently
incurred $104,554.82 in medical expenses, all of which
were paid by the employee benefit trust fund. Id. After
her passing, the trustees discovered that the officer’s
22 No. 00-3598
girlfriend had never been employed with the defendant
company and promptly demanded reimbursement for
the medical benefits the trust fund paid on her behalf. Id.
The defendants refused, and the trustees initiated an
action against them seeking restitution under § 1132(a),
and compensatory and punitive damages under New York
common law fraud and restitution. Id. The district court
found that the trustees could not prevail under ERISA’s
civil enforcement provisions because “first, as fiduciaries
the plaintiffs were limited to equitable relief under . . .
§ 1132(a)(2) and the claim here was for money damages;
second, the broad panoply of remedies available against
fiduciaries under . . . § 1132(a)(3) was not available to
the plaintiffs because the defendants were not fiduciaries.”
Id. The district court then held that the trustees’ com-
mon law claims for fraud and restitution were preempted
under § 1144(a). Id.
On appeal, the Second Circuit agreed with the district
court that the trustees were unable to recover damages
against the defendants under §§ 1132(a)(2) or (a)(3), id. at
20-22, and with the court’s dismissal of the trustees’ com-
mon law restitution claim “because restitution is accounted
for in ERISA.” Id. at 21. The Second Circuit disagreed,
however, with the district court’s conclusion that the
trustees’ common law fraud claim was preempted under
§ 1144(a), noting:
We believe, however, that the plaintiffs’ fraud claim
may stand. ERISA is a remedial statute enacted to
protect the interests of beneficiaries of private retire-
ment plans by reducing the risk of loss of pension
benefits. ERISA established a comprehensive federal
statutory program intended to control abuses associated
with pension benefit plans . . . . In this case, however,
allowing the plaintiffs to pursue their common law
No. 00-3598 23
fraud claim would in no way compromise the pur-
pose of Congress and does not impede federal con-
trol over the regulation of employee benefit plans. To
the contrary, “insuring the honest administration of
financially sound plans” is critical to the accomplish-
ment of ERISA’s mission. ERISA is designed to protect
the interests of participants and beneficiaries of em-
ployee benefit plans, and the preemption provision
should not be read to contravene the statute’s underly-
ing design. The unauthorized diminution of pension
benefits—in the present case, the outright squander-
ing of funds—is squarely at odds with the congres-
sional purpose of protecting pension benefits. The
plaintiffs’ common law fraud claim, which seeks to
advance the rights and expectations created by ERISA,
is not preempted simply because it may have a tangen-
tial impact on employee benefit plans . . . . The plain-
tiffs’ fraud claim does not rely on the pension plan’s
operation or management. The “bare bones” of the
complaint are that 1) the defendants fraudulently
misrepresented that [the officer’s girlfriend] was a full-
time employee and 2) in reliance on the defen-
dants’ representation, the plaintiffs paid out more
than $104,000 on her behalf. The plan was only the
context in which this garden variety fraud occurred.
Id. at 22-23 (internal citations omitted) (emphasis added).
Biondi attempts to distinguish Geller by arguing that “the
essence of the fraudulent conduct complained of in
Geller—an employer’s misrepresentation to the plan’s
administrator that a person was an employee when, in fact,
she never was—was a fraudulent act that did not rely on the
plan’s operation or management,” whereas in this case
“Biondi was a Plan participant within the meaning
of ERISA, and the fraud that the Trustees complain of . . .
24 No. 00-3598
is totally dependent on the Plan’s requirement that partici-
pants notify the Fund of any change in marital status . . . .”
This argument, however, strikes us as “smack[ing] of the
‘uncritical literalism’ the Supreme Court has admonished
use to eschew.” Dishman, 269 F.3d at 984. A state-law claim
is not expressly preempted under § 1144(a) merely because
it requires a cursory examination of ERISA plan provisions.
See, e.g., Coyne & Delany Co. v. Selman, 98 F.3d 1457, 1472
(4th Cir. 1996). While we have held that ERISA “preempts
a state law claim if the claim requires the court to interpret
or apply the terms of an employee benefit plan,” see, e.g.,
Collins v. Ralston Purina Co., 147 F.3d 592, 595 (7th Cir.
1998), the Trustees’ common law fraud claim does not re-
quire us to interpret or apply any of the Plan’s provisions.
See, e.g., Central Laborers Welfare Fund v. Philip Morris, Inc.,
85 F. Supp. 2d 875, 891 (S.D. Ill. 1998) (holding that trust-
ees’ claims, one of which was for common law fraud,
could be resolved without an interpretation of the em-
ployee benefit plan where “[t]he meaning of the subroga-
tion clause is not at issue . . . [and] the Plaintiffs are attempt-
ing to recover monies . . . expended for plan participants’
or beneficiaries’ health care . . . [not] monies on behalf
of the plan participants or beneficiaries.”).
In this case, neither party disputes the meaning of the
Plan provision requiring Biondi to keep the Fund apprised
of his marital status. In fact, the district court concluded
that Biondi had fraudulently concealed his divorce from
the Fund even though he “probably did not realize that
there was a specific provision [requiring him to disclose this
fact to the Fund].” Furthermore, under Illinois law, a duty
under a contract may also create a separate and distinct
duty under tort law. See, e.g., Dial v. Mihalic, 438 N.E.2d
546, 550-51 (Ill. App. Ct. 1982) (holding that non-lessee
plaintiff had standing to sue lessor of land for breach of
covenant to repair land “where the breach creates an un-
No. 00-3598 25
reasonable risk to persons upon the land which performance
of the lessor’s agreement would have prevented,” and
noting that in such a case “[t]he lessor’s duty . . . ‘is not
merely contractual . . . It is a tort duty [and thus] . . . extends
to persons on the land with the consent of the lessee, with
whom the lessor has made no contract.’ ”) (quoting Restate-
ment (Second) of Torts § 357 cmt. d (1965)). See also Restate-
11
ment (Second) of Torts § 551(1) (1976)). Therefore, to the
extent the Plan’s provisions are to be examined, it is only
done to determine whether the Trustees’ have established
that Biondi had a duty under tort law not to conceal his
divorce from the Fund. See Coyne, 98 F.3d at 1471-72 (hold-
ing that “[c]ommon law imposes the duty of care regard-
less of whether the malpractice involves an ERISA plan,”
and as such “the duty of care does not depend on ERISA
in any way,” because while “resolution of . . . [the] claim
will require an examination of certain [plan] provisions . . .
the court’s inquiry will be centered on whether the de-
fendants’ conduct comported with the relevant profes-
sional standard of care . . . [and] on legal duties generated
outside the ERISA context.”). See also Roach v. Mail Handlers
Benefit Plan, 298 F.3d 847, 851 (9th Cir. 2002); Cohen Benefit
Group, 851 F. Supp. at 213. As such, we hold that a plan
participant’s decision to commit fraud in the context of an
employee benefit plan does not immunize him from tort
11
Restatement (Second) of Torts § 551(1) provides that “[o]ne
who fails to disclose to another a fact that he knows may justifi-
ably induce the other to act or refrain from acting in a business
transaction is subject to the same liability to the other as though
he had represented the nonexistence of the matter that he
has failed to disclose, if, but only if, he is under a duty to the
other to exercise reasonable care to disclose the matter in ques-
tion.”
26 No. 00-3598
12
liability under state law. The Fourth Circuit came to a
similar conclusion in Darcangelo v. Verizon Communications,
Inc., 292 F.3d 181 (4th Cir. 2002), holding that:
[T]he simple fact that a defendant is an ERISA plan
administrator does not automatically insulate it from
state law liability for alleged wrongdoing against a
plan participant or beneficiary . . . . The facts alleged in
this case prompt us . . . to “doubt that Congress in-
tended the category of fiduciary administrative func-
tions to encompass” tortious conduct by a plan admin-
istrator that is completely unrelated to its duties
under the plan [and this doubt] “hardens into convic-
tion when we consider the consequences that would
follow from [the defendants’] contrary view.” Under the
12
See LeBlanc, 153 F.3d at 148 (holding that “[t]he fact that the
Pension Fund is subject to ERISA is of no consequence to its
common law fraud claim . . . [because in bringing the claim] the
Pension Fund is simply in the role of an investor allegedly
wronged.”); Arizona State Carpenters Pension Trust Fund v.
Citibank, 125 F.3d 715, 723-24 (9th Cir. 1997) (holding that a
pension trust fund’s common law fraud claim was not an
alternative enforcement mechanism to ERISA because the
claim arose from “state law doctrines of general application,”
and noting that “[a]s a service provider offering nonfiduciary
custodial services, Citibank’s relationship with the Trust Funds
was no different from that between Citibank and any of its
customers.”); Morstein v. Nat’l Ins. Services, 93 F.3d 715, 723
(11th Cir. 1996) (holding that a plan participant’s common law
fraud claim against insurance agents for “fraudulently induc-
ing her to change benefit plan” was not expressly preempted
by ERISA because, among other things, “[t]hese same agents
currently face the threat of state tort claims if they make fraud-
ulent representations to individuals and entities not governed
by ERISA plans.”).
No. 00-3598 27
defendants’ view, ERISA administrators would enjoy blan-
ket immunity—at least from damages under state tort
law—for any manner of wrongful conduct aimed at plan
participants and beneficiaries, regardless of how unre-
lated that conduct is to the ERISA plan. We cannot imag-
ine that Congress would have wanted such a result.
As our court has explained, state common law torts
such as invasion of privacy and negligence are tradi-
tional areas of state authority, and “[f]ederalism con-
cerns strongly counsel against imputing to Congress
an intent” to preempt large swaths of state law “ab-
sent some clearly expressed direction.”
Id. at 192-94 (internal citations omitted) (emphasis added).
For these same reasons, we see no reason why a plan
participant is entitled to “blanket immunity” from dam-
ages under state tort law simply because he chose to
defraud an employee benefit trust fund. The Trustees
were defrauded in the context of a contractual relation-
ship, and as such they are entitled under Illinois law to
sue in tort to recover damages for that fraud. See, e.g.,
In Re Chicago Flood Litigation, 680 N.E.2d 265, 275 (Ill. 1997).
The Trustees’ common law fraud claim is the same type
of “run-of-the-mill” state-law tort claim that the Su-
preme Court identified in Mackey v. Lanier Collection Agency
& Service, Inc., 486 U.S. 825 (1988), as being outside the
scope of ERISA’s preemption clause. Id. at 833. Thus,
while the Trustees’ claim obviously “relates to” the Plan
at some level, the Supreme Court has made it clear that
federal courts are to go “beyond the unhelpful text” of
§ 1144(a) and evaluate preemption challenges in light of
ERISA’s overall “objectives.” See Travelers, 514 U.S. at 656.
We, therefore, find the Second Circuit’s reasoning in Geller
persuasive and consistent with the ERISA preemption
28 No. 00-3598
principles articulated by the Supreme Court in Travelers
and its progeny. Accordingly, like the Second Circuit, we
conclude that it would be improper “to hold pre-empted
a state law in an area of traditional state regulation based
on so tenuous a relation without doing grave violence to
our presumption that Congress intended nothing of the
sort.” Dillingham, 519 U.S. at 334. It would, in our opin-
ion, elevate “uncritical literalism” to a new level to char-
acterize the Trustees’ common law fraud claim as an
“alternative enforcement mechanism” of ERISA when
ERISA’s civil enforcement provisions, i.e., § 1132(a)(1)-(9),
neither address nor provide a remedy for situations
where a employee benefit trust fund has been defrauded
by a non-fiduciary. See 29 U.S.C. §§ 1109, 1132(a)(1)(2),
1132(d)(2). See also Jass v. Prudential Health Care Plan, Inc.,
88 F.3d 1482, 1490 (7th Cir. 1996) (holding that § 1132(a)
only permits suits for legal relief against ERISA plans,
administrators, or fiduciaries). Because ERISA does not
provide any mechanism for plan administrators or fiducia-
ries to recoup monies defrauded from employee benefit
trust funds by plan participants, garden-variety state-law
tort claims must, as a general matter, remain undisturbed
by ERISA; otherwise, there would be no way for a trust fund
to recover damages caused by a plan participant’s fraud-
ulent conduct. See Mackey, 486 U.S. at 834 (where the Su-
preme Court made a similar conclusion regarding a plan
participant’s right to use “state-law methods for collecting
money judgments.”).
For all of the foregoing reasons, we conclude that the
district court was not precluded from entering judgment
in favor of the Trustees on their common law fraud claim,
and that the court did not abuse its discretion in deny-
ing Biondi’s Rule 59(e) motion regarding same.
No. 00-3598 29
B. Biondi’s Malpractice Claim Against His Former
Attorneys
Biondi also argues that the district court erred in grant-
ing the third-party defendants’ motion for summary
judgment of his malpractice claim. In a nutshell, Biondi
contends that the third-party defendants should be re-
quired to indemnify him for any monies that he is re-
quired to pay the Trustees because but for their malprac-
tice he would not have committed fraud. Specifically,
Biondi claims that the third-party defendants were negli-
gent in their representation of him during his divorce
proceedings because: (1) they failed to advise the Plan
directly of Biondi’s divorce and his need to obtain COBRA
benefits for his ex-wife; or (2) they did not advise Biondi
of the need for him to give notice of his divorce to the
Plan and request COBRA benefits for his ex-wife. Biondi
maintains that had the third-party defendants taken
either of these actions “any possibility of the kind of fraud
that occurred would have been impossible.”
In granting the third-party defendants’ motion for sum-
mary judgment, the district court rejected this argument,
holding that “[e]ven if Biondi’s lawyers were negligent
and committed malpractice as he contends, Biondi cannot
seek to hold them responsible for the damages he has to
pay as a result of his fraud.” We agree. While neither party
has cited authority directly on point, the general rule is
that Illinois courts “will not aid a fraudfeasor who in-
vokes the court’s jurisdiction to relieve him of the con-
sequences of his fraud.” Goldstein v. Lustig, 507 N.E.2d 164,
170 (Ill. App. Ct. 1987). “This refusal to aid derives not
from the consideration of the defendant, but from a desire
to see that those who transgress the moral or criminal
code shall not receive aid from the judicial branch of gov-
ernment.” Mettes v. Quinn, 411 N.E.2d 549, 551 (Ill. App. Ct.
30 No. 00-3598
1980). Furthermore, Illinois tort law, which both parties
agree applies in this case, distinguishes between condi-
tions and causes; when one party’s negligence simply
furnishes a condition by which an injury is made possible,
and that condition leads to an injury due to the later
independent act of another party, the creation of the condi-
tion is held not to be the proximate cause of the injury.
See, e.g., First Springfield Bank & Trust v. Galman, 720
N.E.2d 1068, 1071 (Ill App. Ct. 1999). We, therefore, con-
clude that the district court was correct in granting the
third-party defendants’ motion for summary judgment,
and in denying Biondi’s Rule 59(e) motion to alter or
amend its judgment as well.
III.
The Trustees’ common law fraud claim is not pre-
empted by § 1144(a). Accordingly, the district court did
not commit error by entering judgment against Biondi and
in the Trustees’ favor on the claim. Furthermore, the dis-
trict court properly granted the third-party defendants
summary judgment of Biondi’s malpractice claim because
under Illinois law a fraudfeasor may not hold others liable
for damages he incurs as a result of his own fraudulent
conduct. For these same reasons, we conclude that the
district court did not abuse its discretion in denying
Biondi’s Rule 59(e) motion to alter or amend its judgment.
The district court’s judgment is AFFIRMED.
No. 00-3598 31
A true Copy:
Teste:
_____________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-97-C-006—9-6-02