Lindа C. Lehmann, Danielle M. Brown, and Alexis I. Brown, Plaintiffs-Appellants,
v.
Timothy K. Brown and Teachers Insurance and Annuity Association / College Retirement Equities Fund, Defendants-Appellees.
No. 99-3550
In the United States Court of Appeals For the Seventh Circuit
Submitted September 29, 2000
Decided October 16, 2000
Appeal from the United States District Court for the Western District of Wisconsin. No. 98-C-0825-S--John C. Shabаz, Chief Judge.[Copyrighted Material Omitted]
Before Bauer, Easterbrook, and Evans, Circuit Judges.
Easterbrook, Circuit Judge.
After Richard Brown and Linda Lehmann divorced in 1987, Richard created an inter vivos trust for the benefit of the couple's childrеn, Danielle and Alexis. Richard instructed his insurers and financial intermediaries, including Teachers Insurance and Annuity Association / College Retirement Equities Fund (TIAA/CREF), that in the еvent of his death they should pay all benefits to this trust, of which Richard's brother Timothy was trustee. Richard died in 1994, and TIAA/CREF paid the trust approximately $68,000, representing Richаrd's full entitlement under his TIAA/CREF contracts-- which are defined-contribution retirement plans, regulated by the Employee Retirement Income Security Act (ERISA). Alleging that distribution of the benefits in a lump sum, pursuant to Timothy's instructions, subjected the trust to approximately $18,000 in federal taxes that could have been avoided by periodic distributions, Lehmann and her children filed suit in Wisconsin court seeking damages from both Timothy and TIAA/CREF. The complaint asserted that Timothy violated his fiduciary duties in this and other respects; it also sought relief on the theory that TIAA/CREF violated its duties under Connecticut law by distributing any benefits before Timothy "qualified" as trustee of Richard's trust.
The claim against TIAA/CREF is hard to understand. Lehmann and her children are citizens of Connecticut, but Richard was a citizen of Minnesota when he died; a claim based оn the relation between the trust and probate courts would be decided under Minnesota law. Moreover, plaintiffs' apparent assumption that stаte courts are responsible for appointing a trustee is unfounded; Timothy became trustee under the declaration of trust and did not need to "qualify" оr be appointed by a state court as if he were the administrator of Richard's estate. Inter vivos trusts are designed in large measure to bypass probate of a decedent's estate, allowing the decedent's property to be managed and distributed immediately following his death. Plaintiffs do not cоntend that such vehicles for the control and distribution of wealth are unlawful in either Minnesota or Connecticut. But instead of asking the state court to dismiss the claim as frivolous (which it appears to be) or contending that any liability under state law is preempted by sec.514(a) of ERISA, 29 U.S.C. sec.1144(a) (which it almost certainly would be), TIAA/CREF removed the proceedings to federal court, contending that plaintiffs' claim "arises under" ERISA and therefore may be removed under the doctrine known as "complete preemption." See Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58 (1987); Bartholet v. Reishauer A.G. (Zurich),
If, as the district judge held at thе urging of TIAA/CREF, plaintiffs are strangers to the ERISA plan, then their claims cannot possibly have arisen under ERISA, and removal could not be supported by federal-question jurisdiction. Although the parties are of diverse citizenship, plaintiffs' claim against TIAA/CREF is only $18,000, well short of the jurisdictional minimum. 28 U.S.C. sec.1332(a). The district judge appears to have believed that any claim preempted by sec.514(a) of ERISA, because "related to" a pension or welfare plan, may be removed to federal court. This, however, is not so. Following established precedent, we have distinguished between federal defenses, such as preemрtion, which must be presented to state court, and claims based on federal law, which are removable. For applications to ERISA in particulаr, see Blackburn v. Sundstrand Corp.,
Cases such as Blackburn, Rice, and Bartholet observe that the phrase "complete preemption" has caused confusiоn--evident in this case--by implying that preemption sometimes permits removal. Unfortunately "complete preemption" is a misnomer, having nothing to do with рreemption and everything to do with federal occupation of a field. The name misleads because, when federal law occupies the field (as in labor law), every claim arises under federal law. See In re Amoco Petroleum Additives Co.,
When the complaint alleges that a welfare- benefit plan has committed a tort--for example, when a physician employed by a HMO that has been offered as a benefit to employees commits medical malpractice--the claim must arise under state law, because ERISA does not attempt to specify standards of medical care. See Pegram v. Herdrich,
This case must be remanded to stаte court. TIAA/CREF, which wrongfully removed the suit, must bear costs under Fed. R. Civ. P. 54(d)(1). But like the district court we see no non-frivolous claim available to plaintiffs; they should consider not only the wastefulness of further litigation but also the prospect of sanctions if they persist in state court.
Vacated and Remanded with Instructions to Remand