Court Opinion

ID: 2996946
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:32:36.948957+00
Date Added: 2024-06-11T12:04:09.787818
License: Public Domain

In the
 United States Court of Appeals
              For the Seventh Circuit
                        ____________

No. 03-1596
TERRY TIFFT, JIM CRUTCHFIELD, JUANITA DIXON, et al.,
                                          Plaintiffs-Appellants,
                               v.

COMMONWEALTH EDISON COMPANY,
and EXELON CORPORATION,
                                         Defendants-Appellees.

                         ____________
       Appeal from the United States District Court for the
         Northern District of Illinois, Eastern Division.
            No. 02 C 4110—Ruben Castillo, Judge.
                         ____________
   ARGUED NOVEMBER 7, 2003—DECIDED APRIL 27, 2004
                   ____________

 Before COFFEY, RIPPLE, and KANNE, Circuit Judges.
 KANNE, Circuit Judge.

                          I. History
  Defendant-Appellee Exelon Corporation, through its sub-
sidiaries, including Defendant-Appellee Commonwealth
Edison Company (“ComEd”), generates and distributes
electricity to commercial, residential, and industrial con-
sumers in Illinois. Exelon was formed in 2000 as the result
2                                                 No. 03-1596

of a merger between the parent company of ComEd and
Peco Energy (“Peco”). The Plaintiffs-Appellants were all
employed at various facilities operated by corporate entities
related to Exelon and ComEd (“Defendants”) and, during
their employment, were represented by Local Union 15 of
the International Brotherhood of Electrical Workers (“Un-
ion”). As Union members, the Plaintiffs were covered by a
collective bargaining agreement (“CBA”) which, along with
various side agreements, governed the terms and conditions
of their employment.
   Two such side agreements included a Memorandum of
Understanding (“MOU”) and Utility Agreement (“UA”)
entered into by the Union and the Defendants.1 This was
done in anticipation of the effective date of the Electric
Service Customer Choice and Rate Relief Law of 1997, 220
Ill. Comp. Stat. 5/16-101, et seq. (“Electric Service Law” or
“ESL”), which applied to the Defendants. These agreements
addressed, among other issues, employees’ rights and
entitlements in the event of workforce reductions covered by
the ESL. Specifically, the MOU addressed workforce
reductions described in section 5/16-128(b), and the UA
discussed severance packages for employees laid off during
reductions covered by the ESL.
  In part as a result of the merger between ComEd and
Peco, the Defendants began plant closures and workforce
reductions in July and September of 2001. Prior to their
layoffs, the Plaintiffs were given two options: (1) in lieu
of being laid off, they could accept a demotion to a lesser
position with a lower rate of pay; and (2) if laid off, in
exchange for waiving their right to be “recalled” under the

1
  These agreements were actually entered into by a number of
local unions, including the Plaintiffs’ union, the International
Brotherhood of Electrical Workers International Union, and se-
veral electric utilities, including the Defendants.
No. 03-1596                                                      3

CBA,2 they could receive a severance benefit. Approximately
twelve of the fourteen plaintiffs were offered demotions, and
two employees were laid off.
   They then filed suit in the Circuit Court of Cook County,
Illinois, alleging wrongful termination, in violation of the
ESL. Plaintiffs requested that the state court imply a
private right of action under the ESL and sought both
equitable and legal remedies. On June 7, 2002, the
Defendants timely removed this action, 28 U.S.C. §§ 1441,
1446 (2002), to federal court on the grounds that any
assessment of the alleged ESL violations would require the
district court to interpret the CBA and/or other agreements
and hence, the Plaintiffs’ claims are completely preempted
by section 301 of the Labor Management Relations Act
(“LMRA”), 29 U.S.C. § 185(a) (2002). The Plaintiffs then
unsuccessfully attempted to have the case remanded to
Illinois state court, 28 U.S.C. § 1447(c). This appeal re-
sulted, and for the following reasons we affirm the district
court’s denial of the Plaintiffs’ motion to remand.3

2
   Recall refers to the process by which employees, previously laid
off due to economic necessity, begin working again as economic
circumstances improve. This process by which employees are
brought back to work is governed by the employees’ CBA, taking
into account employees’ seniority and other factors. During the
layoff period, although employees are not working (and hence not
earning any wages), they are still covered by the CBA.
3
  The district court’s order in this case became final for purposes
of our review when the Plaintiffs chose not to file an amended
complaint. The district court administratively closed this case on
February 27, 2003 and the Plaintiffs filed Notices of Appeal on
February 26 and March 24—the second filing as a precautionary
measure just in case we determined that the adjudication in the
district court was not “final” until administratively closed. We
treat the finality requirement of 28 U.S.C. § 1291 practically, not
                                                    (continued...)
4                                                     No. 03-1596

                          II. Analysis
  We review the propriety of removal de novo. Garratt v.
Knowles, 245 F.3d 941, 946 (7th Cir. 2001); Moran v. Rush
Prudential HMO, Inc., 230 F.3d 959, 966 (7th Cir. 2000)
(citation omitted), aff’d, 536 U.S. 355 (2002). Similarly, we
also review a district court’s preemption ruling de novo.
Bastien v. AT&T Wireless Servs., Inc., 205 F.3d 983, 987
(7th Cir. 2000) (citations omitted).
  Removal to a district court is appropriate when a cause of
action “arises under” federal law. See 28 U.S.C. §§ 1331,
1441(a). And although a court will look to the face of a
properly pleaded complaint to see if a federal question is
present, Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987)
(laying out the “well-pleaded complaint” rule), a plaintiff
cannot avoid a federal forum by “artfully pleading” what is,
in essence, a federal claim solely in terms of state law, see,
e.g., Franchise Tax Bd. v. Constr. Laborers Vacation Trust,
463 U.S. 1, 22 (1983). Furthermore, when “a federal cause
of action completely preempts a state cause of action, any
complaint that comes within the scope of the federal cause
of action necessarily ‘arises under’ federal law.” 463 U.S. at
24. Due to the importance of uniformity in labor law, any
state law claim “substantially dependent upon analysis
of the terms of an agreement made between the parties in
a labor contract” will be completely preempted by section
301 of the LMRA. Allis-Chalmers Corp. v. Leuck, 471 U.S.
202, 220 (1985) (citation omitted); see also Loewen Group
Int’l, Inc. v. Haberichter, 65 F.3d 1417, 1421 (7th Cir. 1995)
(citing Lingle v. Norge Div. of Magic Chef, Inc., 486 U.S.
399, 403 (1988)). However, where a state law cause of action

(...continued)
technically, and thus, Judge Castillo’s ruling is final for purposes
of appeal and we have jurisdiction. See, e.g., Garratt v. Knowles,
245 F.3d 941, 945 (7th Cir. 2001).
No. 03-1596                                                      5

requires mere reference to a CBA, section 301 preemption
will not necessarily apply. See Livadas v. Bradshaw, 512
U.S. 107, 117-18 (1994) (state claim not preempted where
reference to CBA needed only to calculate damages for
wrongful discharge); 471 U.S. at 211; In re Bentz Metal
Prod. Co., 253 F.3d 283, 289 (7th Cir. 2001) (no preemption
where state law issue was the priority of mechanics’ liens
for vacation pay owed under the CBA). Thus, in this case,
although the Plaintiffs’ complaint characterized their claims
as arising wholly under the ESL, removal was nonetheless
appropriate if the Plaintiff’s claims require an interpreta-
tion of, and not simply reference to, the CBA and/or other
labor agreements. See, e.g., Beneficial Nat’l Bank v. Ander-
son, 539 U.S. ___, 123 S. Ct. 2058, 2062 (2003); Atchley v.
Heritage Cable Vision Assocs., 101 F.3d 495, 498 (7th Cir.
1996).
  The Plaintiffs argue that there is no preemption because
no (or very little) interpretation of the CBA is necessary.
And no interpretation of the CBA is necessary because the
Defendants’ acts were allegedly in clear violation of section
5/16-128 of the ESL.4 Under the Plaintiffs’ reading of
section 5/16-128(a)(3), (b), and (c), following the transfer of
ownership of an Illinois electric utility, such an entity must
maintain the “status quo” of all non-supervisory utility
employees’ compensation and cannot either lay off or
demote such workers for at least thirty months. (R. 1, Ex. B
at 8-9; Appellant’s Br. at 8-9, 16.) Because the Plaintiffs
were laid off or demoted within thirty months of the
merger, they assert that the Defendants violated the ESL.
And thus, because the Defendants are clearly liable for

4
   We assume, for purposes of this appeal, that a private right of
action is implied under the ESL. Despite Plaintiffs’ arguments to
the contrary, for the purposes of our removal and preemption
analysis, the issue is wholly irrelevant. Hence, it is left for the
trial court to determine.
6                                                No. 03-1596

damages under their reading, a court need not look to the
CBA or any other agreement. Put differently, the premise
of all the Plaintiffs’ arguments is that the ESL prohibits the
layoff or demotion of any non-supervisory employee within
thirty months of a transfer of ownership. We disagree.
   The ESL was part of the electric, natural gas, and tele-
phone deregulatory wave that swept the nation in the late
1990’s. Policymakers, concerned over high prices and poor
service quality, began to abandon the traditional assump-
tion that utilities were natural monopolies. Robert Kelter,
Peace, Love, Competition. An Initial Look at the
Restructuring of Illinois Residential Energy Markets, 33
Loy. U. Chi. L.J. 875, 875-76 (2002). To do away with leg-
islatively-sanctioned monopolies and to increase compe-
tition, policymakers adopted laws which lowered barriers
to market entry in these industries. Thus, legislators hoped,
efficiency would increase, new products would be developed,
and prices would decrease. See 220 Ill. Comp. Stat. 5/16-
101A (2003). Spurred by such changes in the federal
regulatory scheme and in other states, the Illinois legisla-
ture adopted the ESL, its own attempt “to accommodate the
competition that could fundamentally alter the structure of
the electric services market.” Id.
   Increases in efficiency are, in part, the result of new
market entrants’ and existing participants’ utilization of
mergers, consolidations, and other transfers of ownership
to reap the benefits of economies of scale and relative com-
petitive advantages. But such transfers in ownership also
typically result in the reduction of the workforce, at least as
the market adjusts to increased competition. Recognizing
this economic reality, the ESL sought to lessen the adverse
effect of deregulation on electric services workers. 220
Ill. Comp. Stat. 5/16-128(a)(3), (b). Hence, the Plaintiffs
are correct in their assertion that “the Illinois legislature
clearly indicated its intent to protect [utility workers.]”
(Appellant’s Br. at 8.) But they misapprehend both the basic
No. 03-1596                                                   7

economics of deregulation, which predicts the elimination
of some jobs in the short run, and, more critically, the ESL’s
express acceptance of that reality. See 220 Ill. Comp. Stat.
5/16-128(a)(3), (b) (stating “the impacts on employees . . . of
any necessary reductions in the utility workforce . . . shall
be mitigated to the extent practicable through such means
as offers of voluntary severance, retraining, early retire-
ment, outplacement, and related benefits.”) (emphasis
added).
  No provision of the ESL prohibits the reduction of
the workforce, prohibits agreed-upon demotions, or guar-
antees any specific type of severance or other benefit to
those employees that are laid off. If the ESL imposed such
obligations on the electric utilities, the economic rationale
supporting deregulation would be significantly diminished.
Although the structure of section 5/16-128 confuses its logic,
the obligations it does impose on utilities engaging in a
transfer of ownership are organized according to whom the
obligation is owed. In relevant part, the ESL states:
    (b) . . . The General Assembly further finds that the
    impacts on employees and their communities of any
    necessary reductions in the utility workforce directly
    caused by this restructuring of the electric industry
    shall be mitigated to the extent practicable through such
    means as offers of voluntary severance, retraining,
    early retirement, outplacement, and related benefits.
    Therefore, before any such reduction in the workforce
    during the transition period, an electric utility shall
    present to its employees or their representatives a
    workforce reduction plan outlining the means by which
    the electric utility intends to mitigate the impact of such
    workforce reduction.
    (c) In the event of a . . . transfer of ownership during
    the mandatory transition period . . . the electric utility’s
    contract and/or agreements with the acquiring entity or
    persons shall require that the entity or persons hire a
8                                                No. 03-1596

    sufficient number of non-supervisory employees to
    operate and maintain [the utility]. . . by initially making
    offers of employment to the non-supervisory workforce
    . . . at no less than the wage rates, and substantially
    equivalent fringe benefits and terms and conditions of
    employment that are in effect at the time of transfer of
    ownership . . . ; and said wage rates and substantially
    equivalent fringe benefits and terms and conditions of
    employment shall continue for at least 30 months . . .
    unless the parties mutually agree to different terms
    and conditions . . . . The utility shall offer a transition
    plan to those employees who are not offered jobs by the
    acquiring entity because that entity has a need for fewer
    workers.
220 Ill. Comp. Stat. 5/16-128 (emphasis added). Hence,
the ESL required the Defendant utilities to: (1) present a
“workforce reduction plan” to all workers or their repre-
sentatives prior to implementing layoffs, 5/16-128(b); (2) fol-
lowing the merger, offer a “transition plan” to employees
who would be laid off, 5/16-128(c); and (3) following the
merger, hire (i.e., continue to employ) enough non-super-
visory employees necessary to “operate and maintain” the
utility (and who therefore would not be laid off), with the
same wages, fringe benefits, and terms of employment for
at least thirty months, unless the parties agree otherwise,
5/16-128(c).
  Stepping back to look at the bigger picture, given the
dynamic changes which occur as competition is introduced
to an industry, the ESL seeks to encourage labor and man-
agement interaction and negotiation during these transi-
tions, so that market disruptions and negative employment
effects are kept to a minimum. As stated above, the
ESL essentially requires negotiation between labor and
management regarding the implementation of layoffs and
the benefits for employees who will be laid off. And for
employees whose employment will continue after the
No. 03-1596                                                 9

merger, where agreement cannot otherwise be reached, the
legislation protects those employees by guaranteeing their
wages, benefits, and terms of employment for thirty
months. Had the Defendants offered no “workforce reduc-
tion plan” to employees, nor any “transition plan” to laid-off
employees, nor reached any agreements with employees
who continued to work after the merger (i.e., the demotion
agreements) while simultaneously refusing to honor their
existing employment arrangements, then the ESL clearly
would have been violated. And, as the Plaintiffs allege, the
district court would then have had no need to interpret the
CBA or any other agreements, their state law claim would
be independent of the CBA, and their claims would not have
been preempted by section 301 of the LMRA. Cf. Caterpil-
lar, 482 U.S. at 395; Goetzke v. Ferro Corp., 280 F.3d 766,
779 (7th Cir. 2002) (state law retaliatory discharge claim
not preempted); Sprewell v. Golden State Warriors, 266 F.3d
979, 991 (9th Cir. 2001) (state law tortious interference
with contract claim not preempted); Voilas v. General
Motors Corp, 170 F.3d 367 (3d Cir. 1999) (state fraud claim
not preempted).
  But instead, the Defendants did comply with the most
basic requirements of section 5/16-128 of the ESL on its
face. All of the Plaintiffs, through their Union, negoti-
ated and reached three agreements with the Defendants:
the CBA, MOU, and UA. The layoffs and demotions at issue
here are covered by the CBA generally, and in greater
detail by the MOU, addressing the workforce reductions
described in section 5/16-128(b), and by the UA, addressing
severance packages for laid-off employees. Furthermore,
each individual Plaintiff who was offered a demotion was
free to reject that offer, and, assuming they were subse-
quently laid off, hold the Defendants to their obligations
under the CBA, MOU, and UA. If they chose to accept the
demotion to continue to work, then they reached an alter-
nate agreement, as explicitly contemplated by the ESL in
section 5/16-128(c).
10                                               No. 03-1596

   Therefore, whether the Defendants violated the ESL will
require a “substantive examination” of the CBA, MOU, and
UA to determine (1) if the agreements properly embodied
the directives of the ESL; and (2) if the Defendants failed to
comply with the terms of these agreements. Loewen, 65
F.3d at 1423-24. Admittedly, the Plaintiffs are correct
in their assertions that “the language of the ESL does not
reference a [CBA] at all,” and, assuming the ESL creates a
private right of action, a non-union employee could there-
fore file an action under the ESL. (Appellants’ Opening Br.
at 21-22.) But the employees in this case are covered by
collectively bargained agreements, two of which are the
direct result of the ESL’s requirements, and hence, the ESL
does not create any rights independent of those agreements.
As pointed out above, the state-law cause of action is
meaningless without reference to the agreements which
articulate the Defendants’ obligations toward these Plain-
tiffs. See Gibson v. AT&T Techs., Inc., 782 F.2d 686, 688
(7th Cir.), cert. denied, 477 U.S. 905 (1986); Dougherty v.
Am. Tel. and Tel. Co., 902 F.2d 201, 204 (2d Cir. 2001);
Commonwealth Edison Co. v. Int’l Brotherhood of Elec.
Workers, Local Union No. 15, 961 F. Supp. 1154, 1162 (N.D.
Ill. 1996).
  Whether the CBA, MOU, and UA properly incorporated
the directives of the ESL and whether Defendants respected
the employees’ rights as agreed to in those agree-
ments—and therefore whether they did or did not violate
the ESL—will require analysis of, for example, the process
the Defendants used to lay off and rehire employees post-
merger, pay severance and other benefits, recall laid-off
workers, and handle employee grievances. This requires
more than mere reference to the collectively bargained
agreements. The ESL, in this case, does not provide the
Plaintiffs with rights independent of the CBA, MOU, and
UA. Therefore, section 301 of the LMRA preempts the
Plaintiffs’ state law claims and the case was properly
removed to federal court.
No. 03-1596                                             11

                    III. Conclusion
  For the foregoing reasons, we AFFIRM the district court’s
denial of the Plaintiffs’ motion to remand.

A true Copy:
      Teste:

                        ________________________________
                        Clerk of the United States Court of
                          Appeals for the Seventh Circuit

                   USCA-02-C-0072—4-27-04