Court Opinion

ID: 2996823
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:31:42.593255+00
Date Added: 2024-06-11T12:04:10.027378
License: Public Domain

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

No. 03-2832
JUSTIN HART,
                                              Plaintiff-Appellee,
                               v.

WAL-MART STORES, INC. ASSOCIATES ’ HEALTH
ANDWELFARE PLAN,
                                  Defendant-Appellant.

                         ____________
           Appeal from the United States District Court
                for the Central District of Illinois.
            No. 02-4053—Michael M. Mihm, Judge.
                         ____________
    ARGUED JANUARY 20, 2004—DECIDED MARCH 1, 2004
                    ____________

  Before CUDAHY, KANNE, and EVANS, Circuit Judges.
  CUDAHY, Circuit Judge. Yogi Berra might describe this
case as “deja vu all over again.” For if the case seems fa-
miliar, it may be because we have decided the precise
question presented in this appeal twice before—both times
under virtually identical circumstances—and most recently,
against the same appellant. See Speciale v. Seybold, 147
F.3d 612 (7th Cir. 1998); Blackburn v. Sunstrand Corp., 115
F.3d 493 (7th Cir. 1997). In both of these earlier cases we
held that a petition to apportion claims to a settlement fund
2                                               No. 03-2832

between an ERISA plan subrogation claim and other
lienholders was not preempted by ERISA’s civil enforce-
ment provision and the allocation of the funds was a matter
for determination in the state court. In the present case,
Wal-Mart asks us to re-reconsider the issue, this time in the
context of an award of $11,500 in attorney’s fees, which the
district court taxed against Wal-Mart under 28 U.S.C. §
1447(c). After serious consideration (mainly of the possibil-
ity of sanctioning Wal-Mart for bringing this presumptuous
appeal), we reaffirm our previous holdings in Blackburn
and Speciale and affirm the order of the district court.

                             I.
  On December 25, 1999, Appellee Justin Hart suffered
permanent brain injury in an automobile accident with
Robert Chinn. As a result of his injuries, Hart received
substantial medical treatment and incurred certain re-
sulting liens. At the time of the accident, Hart was an
employee of Wal-Mart Stores. Blue Cross/Blue Shield is the
third-party administrator of the Wal-Mart Stores Associ-
ates’ Health and Welfare Plan, an employee welfare
benefits plan governed by the Employee Retirement Income
Security Act of 1974 (ERISA). The Plan paid out $61,475.45
in medical benefits for the treatment stemming from his
injuries.
   Hart filed a tort suit against Chinn in the Circuit Court
of Rock Island County and ultimately obtained a settlement
in the amount of $180,000. After reaching this settlement,
Hart filed a petition in the state court to adjudicate the
liens of six separate lienholders, including Blue Cross/Blue
Shield as Administrator of the Plan (hereinafter Wal-Mart).
Wal-Mart’s plan included a “right to reduction, reimburse-
ment and subrogation” provision. Wal-Mart Br. at 4. Wal-
Mart believed that unlike federal law, Illinois state law
allowed common fund reductions for attorney’s fees even
No. 03-2832                                                 3

when the plan’s terms expressly disclaimed the doctrine.
Thus, in an apparent effort to take advantage of the more
favorable federal law, Wal-Mart independently removed the
case to the Central District of Illinois pursuant to 28 U.S.C.
§ 1441(a), (b) and (c), arguing that Hart’s claim was com-
pletely preempted by ERISA.
  Hart filed a motion to remand on July 17, 2002, arguing
that the district court lacked subject matter jurisdiction. In
an order dated December 23, 2002, the district court or-
dered that the case be remanded. The district court relied
on our holdings in Blackburn and Speciale in finding that
ERISA preemption was not applicable. Moreover, the
district court noted that the case had not been properly
removed under 18 U.S.C. § 1441 because Wal-Mart failed to
join the other lienholders in its notice of removal.
  Thereafter, Hart filed a petition pursuant to 18 U.S.C.
§ 1447(c), seeking $13,750 in attorney’s fees and costs for
improper removal. Wal-Mart opposed this petition, arguing
that (1) Hart had not submitted any evidence of a reason-
able hourly rate; (2) Hart’s counsel’s claimed tasks were
insufficiently documented; (3) Hart’s counsel’s time entries
were excessive; and (4) Hart’s bill of costs should be denied.
In an order dated April 28, 2003, the district court awarded
$11,500 in attorney’s fees. This appeal followed.

                             II.
  1. Jurisdiction
   An order remanding a case to the state court from which
it was removed is generally not subject to appeal. 28 U.S.C.
§ 1447(d). The purpose of precluding review is to avoid the
delay that might be caused by prolonged federal litigation
of jurisdictional questions. See Matter of Amoco Petroleum
Additives Co., 964 F.2d 706, 708 (7th Cir. 1992); Mobile
Corp. v. Abeille Geberal Ins. Co., 984 F.2d 664, 666 (5th Cir.
4                                                  No. 03-2832

1993); Appalachian Volunteers, Inc. v. Clark, 432 F.2d 530
(6th Cir. 1970); In re MacNeil Bros. Co., 259 F.2d 386, 388
(1st Cir. 1958). However, it is well-settled that an award of
attorney’s fees occasioned by a wrongful removal is an
independently appealable order not subject to the prohibi-
tion against reviewing a remand order. See Garbie v.
DaimlerChrysler Corp., 211 F.3d 407, 409-10 (7th Cir.
2000); LaMotte v. Roundy’s, Inc., 27 F.3d 314, 315 (7th Cir.
1994).
   It is equally clear that an evaluation of the merits of a
remand order may be required to determine whether the
district court’s award of attorney’s fees was appropriate. See
Sirotzky v. New York Stock Exch., 347 F.3d 985, 987 (7th
Cir. 2003) (“[P]laintiff must show the remand order was
correct (that is, that removal was improper) . . .”); Moore v.
Permanente Med. Group, 981 F.2d 443, 447 (9th Cir. 1992)
(“[S]ome evaluation of the merits of the remand order is
necessary to review an award of attorney’s fees . . .”);
Roxbury Condo. Ass’n, Inc. v. Anthony S. Cupo Agency, 316
F.3d 224, 227 (3d Cir. 2003); Miranti v. Lee, 3 F.3d 925,
927-28 (5th Cir. 1993). This merits review does not conflict
with the purpose of 28 U.S.C. § 1447(d) because the state
court action may proceed expediently while the appellate
court reviews the award of attorney’s fees. Even if the
appellate court determines that it was an abuse of discre-
tion to award attorney’s fees because the decision to remand
was improper, the remand itself may not be disturbed. See
Dahl v. Rosenfeld, 316 F.3d 1074, 1079 (9th Cir. 2003);
Roxbury Condo., 316 F.3d at 227-28.1

1
   The contrary rule would violate the purposes of 28 U.S.C.
§ 1447. If this Court were to vacate an award of attorney’s fees,
finding that remand was improper, and our decision could later be
used by the removing party to attempt to return to federal court,
proceedings might be slowed in the state court while the parties
                                                     continue...
No. 03-2832                                                     5

  Generally, we review a district court’s award of attorney’s
fees for abuse of discretion. See Tenner v. Zurek, 168 F.3d
328, 329 (7th Cir. 1999). However, “[a] district court would
necessarily abuse its discretion if it based its ruling on an
erroneous view of the law . . . .” Cooter & Gell v. Hartmarx
Corp., 496 U.S. 384, 405 (1990); Salgado by Salgado v. Gen.
Motors Corp., 150 F.3d 735, 739 n.4 (7th Cir. 1998). If
removal is found to be improper, the plaintiff is presump-
tively entitled to an award of fees. See Sirotzky, 347 F.3d at
987.

  2. Waiver
  As an initial matter, Hart argues that Wal-Mart waived
its argument by not specifically reiterating it in opposing
attorney’s fees. Hart Br. at 8-11. It is true that in opposing
attorney’s fees below, Wal-Mart attacked only the amount
of the fees rather than the merits of the remand order.
However, Hart does not dispute that Wal-Mart actively
contested and lost the issue whether removal was proper
before opposing the award of attorney’s fees. After Wal-
Mart had made its position plain and lost the issue on the
merits, it would be senseless to require that Wal-Mart
reiterate its argument in a futile effort to oppose attorney’s
fees. See, e.g., Dawson v. New York Life Ins. Co., 135 F.3d
1158, 1166 (7th Cir. 1998) (rejecting a similar waiver ar-
gument and noting that “at some point further objection

...continue
and the court waited for the federal circuit court’s blessing.
Moreover, under the contrary rule, plaintiffs would be reluctant
to ever seek attorney’s fees based on improper removal because of
the risk of upsetting the remand order. The result would be open
season for defendants to attempt to frivolously remove state court
cases.
6                                                  No. 03-2832

became useless”); Dresser Indus. Inc. v. The Gradall Co.,
965 F.2d 1442, 1450 (7th Cir. 1992) (same). Hart cannot
claim that he was prejudiced in any way by Wal-Mart’s
decision not to beat a dead horse in the district court. Nor
did Wal-Mart’s decision deprive the district court of a
meaningful opportunity to review the issue of subject mat-
ter jurisdiction. Therefore, we find that Wal-Mart did not
waive its argument.

    3. Attorney’s fees
  To determine whether the district court’s award of at-
torney’s fees was appropriate, we must decide whether the
district court properly found that it lacked subject matter
jurisdiction. When determining whether federal jurisdiction
exists, we must follow the well-pleaded complaint rule,
which states that federal question jurisdiction exists only
“when the plaintiff’s well-pleaded complaint raises issues of
federal law.” Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63
(1987); Jass v. Prudential Health Care Plan, Inc., 88 F.3d
1482, 1486 (7th Cir. 1996) (“The issues raised in the
plaintiff’s complaint, not those added in the defendant’s
response, control the litigation.”). “The paramount policies
embodied in the well-pleaded complaint rule [are] that the
plaintiff is master of the complaint . . . and that the plaintiff
may, by eschewing claims based on federal law, choose to
have the cause heard in state court.” Caterpillar, Inc. v.
Williams, 482 U.S. 386, 398-99 (1987).
  However, there is an exception to the well-pleaded com-
plaint rule, known as the “complete preemption doctrine”
which provides that, where Congress has completely pre-
empted a given area of state law, a plaintiff’s state law
claim will be “recharacterized” as a federal claim so that
removal becomes proper. See Avco Corp. v. Aero Lodge No.
735 Int’l Ass’n of Machinists and Aerospace Workers, 390
No. 03-2832                                                  7

U.S. 557, 560 (1968). The Supreme Court has determined
that all state actions falling within the scope of section
502(a) of ERISA, 29 U.S.C. § 1132(a), are preempted under
the complete preemption doctrine. Taylor, 481 U.S. at 67.
Section 502(a) provides that “[a] civil action may be
brought—(1) by a participant or beneficiary—(A) for the
relief provided in subsection (c) of this section, or (B) to
recover benefits due to him under the terms of his plan, to
enforce his rights under the terms of the plan, or to clarify
his rights to future benefits under the terms of the plan.” 29
U.S.C. § 1132(a). Therefore, any claim by a participant or
beneficiary to enforce his rights under an ERISA plan is
completely preempted, and federal subject matter jurisdic-
tion would exist. See Jass, 88 F.3d at 1487.
   Wal-Mart argues that complete preemption under
§ 502(a) applies here. The problem for Wal-Mart is that we
have already decided in two nearly identical cases that it
does not. See Speciale, 147 F.3d at 615; Blackburn, 115 F.3d
at 495. In Blackburn, the plaintiffs were injured in an
automobile accident with another driver. Under their bene-
fits plan, covered by ERISA, Sunstrand paid $25,000 to the
plaintiffs in medical benefits. The plaintiffs filed a tort
action against the other driver in state court and obtained
a $105,000 settlement. Pursuant to a subrogation clause,
Sunstrand claimed a right to a portion of the settlement.
The plaintiffs’ lawyer also claimed a right to a portion of the
fund. The plaintiffs filed a petition to apportion the fund in
the state court. Sundstrand removed the case to federal
court under 28 U.S.C. §1441(b). The district court deter-
mined that it had subject matter jurisdiction by virtue of
the complete preemption doctrine. We reversed, holding
that
    [t]he “civil action” was the tort suit by the Blackburns
    against the other driver, which assuredly did not arise
    under the Constitution, treaties, or laws of the United
    States. Not even the most expansive reading of ERISA
8                                               No. 03-2832

    covers motor vehicle collisions, just because part of the
    recovery may inure to the benefit of the plan. The
    petition to apportion the fund invoked the ancillary
    jurisdiction of the state court and was part of that
    original, non-removable action.
Blackburn, 115 F.3d at 494. A year later, in Speciale, the
appellant, also an employee of Wal-Mart, sustained injuries
and incurred medical expenses in an automobile accident
totaling $70,563.91. Speciale, 147 F.3d at 614. Wal-Mart’s
health plan, covered by ERISA, paid $54,051.07 towards the
cost of Speciale’s medical bills, with $16,512.84 remaining
unpaid. The fifteen unpaid providers filed liens, as allowed
under Illinois statutes. Speciale filed a personal injury
action against the other driver in Illinois state court and
accepted $45,000 in settlement. Wal-Mart sent Speciale a
notice indicating that, pursuant to the terms of its plan, it
was entitled to reimbursement from the settlement.
Speciale filed a motion to adjudicate in state court, which
notified the court of the settlement and requested the court
to apportion the fund amongst Wal-Mart and the 16
providers asserting claims against the settlement fund.
Wal-Mart removed the action to federal court under 28
U.S.C. § 1441(b), maintaining that because the Plan arose
under and was governed by ERISA, the motion to adjudi-
cate was completely preempted. The district court agreed
with Wal-Mart. On appeal, we reversed again, following
Blackburn. We noted that
    [a]lthough Speciale was a plaintiff entitled to bring a
    claim under the Wal-Mart plan, her claim of personal
    injury was not a cause of action that falls within the
    scope of an ERISA provision nor did her state claim
    require resolution of an interpretation of the contract
    governed by federal law . . . . [N]either can Speciale’s
    request for apportionment be recharacterized as a suit
    to enforce her rights under the terms of the Plan and
    cannot be completely preempted under § 502(a).
No. 03-2832                                                   9

Speciale, 147 F.3d at 615-16. Wal-Mart does not deny that
the facts of this case are indistinguishable from Speciale
and Blackburn. In the face of such clear precedent, Wal-
Mart nonetheless argues that the district court abused its
discretion based on two out-of-circuit cases which had not
yet been decided at the time the district court awarded
attorney’s fees. See Arana v. Ochsner Health Plan, 338 F.3d
433, 440 (5th Cir. 2003); Singh v. Prudential Health Care
Plan, Inc., 335 F.3d 278, 291-92 (4th Cir. 2003). There are
at least two major problems with this argument. First,
absent a change in the state of the law, it would generally
be an abuse of discretion for a district court to follow out-of-
circuit precedent which conflicts with binding precedent
from its own circuit. See, e.g., United States ex rel.
Schnitzler v. Follette, 406 F.2d 319, 322 (2d Cir. 1969) (“In
this case, as in all others, the district court is required to
follow a binding precedent of a superior court, and it abused
its discretion in declining to do so.”); cf. Rendish v. City of
Tacoma, 123 F.3d 1216, 1226 (9th Cir. 1997) (holding that
district court did not abuse its discretion by refusing to
apply out-of-circuit precedent where there was controlling
precedent within the circuit).
   More importantly, Arana and Singh are completely
distinguishable from the present case. In Arana, the plain-
tiff filed a state-law claim in state court against the plan
itself, seeking a declaration that the plan could not obtain
reimbursement from the tort settlement. See Arana, 338
F.3d at 434. Similarly, in Singh, the plaintiff filed a state
claim seeking reimbursement of monies that she had paid
to Prudential pursuant to a subrogation term of the plan.
Singh, 335 F.3d at 280. The plaintiff’s complaint alleged
that the subrogation provision was illegal under state
law. Id. In both of these cases, it was clear from the face
of the complaint that the plaintiffs were challenging the
plan’s right to subrogation. In the present case, however,
10                                                   No. 03-2832

the plaintiff is not contesting the right to subrogation but
simply seeks to apportion the settlement fund amongst his
various creditors. See Serraiocco v. Seba, 286 F. Supp. 2d
860, 865 (E.D. Mich. 2003) (distinguishing Arana and not-
ing that “the plaintiffs in Arana . . . brought suit for the sole
purpose of determining the validity of an ERISA plan’s
reimbursement provision, while the Plan here has injected
the issue of reimbursement into the tail end of a state-court
tort action that the parties have agreed to settle.”).2
  Wal-Mart also argues that Speciale and Blackburn are
not controlling here because the analysis in those cases was
limited to § 502(a)(1)(B), whereas Hart’s claim is capable of
being recharacterized as a claim falling within the scope of
§ 502(a)(3). Wal-Mart Br. at 15. Section § 502(a)(3) autho-
rizes a participant, beneficiary, or fiduciary to “(A) enjoin
any act or practice that violates any provision of this title or

2
  Wal-Mart seems to argue here that Hart implicitly challenges
the plan’s right to subrogation by bringing the action in state
court because Illinois state law allows common fund reductions
even when the plan term disclaims the doctrine, in contrast to
federal law. Wal-Mart cites no authority which would suggest that
we can base subject matter jurisdiction on such an implication. In
any case, we find no such implication here. It is only logical that
Hart would seek to have the state court which adjudicated his tort
claim apportion the resulting settlement fund.
   Wal-Mart further argues that this result creates an impermissi-
ble incentive for forum shopping and encourages a race to the
courts, with the health plans running to federal court and plain-
tiffs running to state court. While this may be an unfortunate
result, it does not follow that the proper way to address the
problem is to extend federal subject matter jurisdiction, thereby
making state law irrelevant. The more logical solution and the one
which we would encourage, would be for federal courts to defer,
under such circumstances, to the state court in which the original
suit was filed.
No. 03-2832                                                        11

the terms of the plan, or (B) to obtain other appropriate
equitable relief (i) to redress such violations or (ii) to
enforce any provisions of this title or the terms of the plan.”
§ 502(a)(3)(B). However, as the district court properly
found, § 502(a)(3) does not apply because the plaintiff here
“is clearly not seeking to redress an ERISA violation or to
enforce any ERISA provisions or terms of the Plan.” Hart
Br. at A18. Wal-Mart relies on dicta from Rush Prudential
HMO, Inc. v. Moran, 536 U.S. 355, 363 n.2 (2002), but Rush
is distinguishable because it was based on “a suit to compel
compliance with [a state insurance statute] in the context
of an ERISA plan.” Id. In the present case, as we have
noted, Hart is merely seeking apportionment of his settle-
ment fund. Moreover, as Wal-Mart concedes, this Court has
never addressed whether the complete preemption doctrine
even applies to claims falling within the scope of § 502(a)(3).
  Therefore, we find that Wal-Mart’s arguments are with-
out merit, and the district court did not abuse its discretion
in awarding attorney’s fees.3 For the foregoing reasons, we
AFFIRM the district court’s award of attorney’s fees to the
plaintiff.

3
   Because we find that the district court correctly held that the
complete preemption doctrine does not apply, we need not address
the district court’s alternative holding that Wal-Mart did not meet
the procedural hurdles of the removal statute by failing to join the
other state court defendants in the removal. Because 28 U.S.C.
§ 1441 does not confer jurisdiction, the disposition of this alterna-
tive holding does not affect our decision today. 28 U.S.C. §1441(c)
(“Whenever a separate and independent claim or cause of action
within the jurisdiction conferred by section 1331 of this title is
joined with one or more otherwise non-removable claims or causes
of action, the entire case may be removed . . . .”) (emphasis added);
28 U.S.C. §1441(b) (“Any civil action of which the district courts
have original jurisdiction . . . shall be removable . . . .”) (emphasis
added).
12                                       No. 03-2832

A true Copy:
      Teste:

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

               USCA-02-C-0072—3-1-04