Newpage Wisconsin System Inc. v. United Steel, Paper & Forestry, Rubber, Manufacturing, Energy Allied Industrial & Service Workers International Union

In the

United States Court of Appeals
For the Seventh Circuit

No. 10-2887

N EWP AGE W ISCONSIN S YSTEM INC. and
NPWSI R ETIREE H EALTH P LAN,
Plaintiffs-Appellants,
v.

U NITED S TEEL, P APER & F ORESTRY,
R UBBER, M ANUFACTURING, E NERGY A LLIED
INDUSTRIAL AND S ERVICE W ORKERS
INTERNATIONAL U NION, AFL–CIO/CLC, et al.,

Defendants-Appellees.

Appeal from the United States District Court
for the Western District of Wisconsin.
No. 10-cv-41-bbc—Barbara B. Crabb, Judge.

A RGUED A PRIL 5, 2011—D ECIDED JULY 12, 2011

Before E ASTERBROOK , Chief Judge, B AUER, Circuit Judge,
and Y OUNG, District Judge.^
E ASTERBROOK, Chief Judge. NewPage Wisconsin System
Inc. operates paper mills in Wisconsin. It provides

^
Of the Southern District of Indiana, sitting by designation.
2 No. 10-2887

health care as a fringe benefit for current and former
workers. Its Retiree Health Plan is governed by a series
of collective bargaining agreements between NewPage
Wisconsin and the United Steel Workers Union. (The
agreements were made by predecessors of both NewPage
Wisconsin and the Union, but we use the current
names for simplicity.) NewPage Wisconsin recently
closed several mills as a cost-saving measure. Seeking
further savings, it eliminated the subsidy for medical
care of retirees who are 65 or older.
Asserting that this change violated both the CBA and
the Retiree Health Plan, the Union filed suit in
December 2009 under §301 of the Labor Management
Relations Act (LMRA), 29 U.S.C. §185, and §502 of the
Employee Retirement Income Security Act (ERISA), 29
U.S.C. §1132. That suit is not the subject of this appeal,
however, because it was filed in the Southern District
of Ohio.
Five weeks after the Union filed its suit in Ohio,
NewPage Wisconsin filed a declaratory-judgment action
in the Western District of Wisconsin. This suit
raises the same substantive issues as the Union’s but
did not last long: the district court dismissed it on the
pleadings. 2010 U.S. Dist. L EXIS 71511 (W.D. Wis. July 16,
2010). The court held that it did not have subject-
matter jurisdiction over the ERISA claim because
§502(a)(3) does not authorize relief when “plan admini-
strators . . . seek declaration of their right to reduce or
deny benefits.” Id. at *22. The court concluded that it had
jurisdiction over the LMRA claim but exercised its dis-
No. 10-2887 3

cretion to dismiss in favor of the Union’s suit in Ohio.
Id. at *28–29. NewPage Wisconsin’s appeal challenges
both aspects of the district court’s decision.
Declaratory judgment actions are authorized, see 28
U.S.C. §2201, as long as there is an actual controversy
between the two parties. MedImmune, Inc. v. Genentech,
Inc., 549 U.S. 118, 127 (2007). Yet §2201 is not a grant of
subject-matter jurisdiction, so the district court properly
looked to the substantive claims to determine whether
it had jurisdiction. Franchise Tax Board v. Construction
Laborers Vacation Trust, 463 U.S. 1 (1983); Ameritech
Benefit Plan Committee v. Communication Workers of
America, 220 F.3d 814, 818 (7th Cir. 2000).
Section 502(a)(3) of ERISA states that a civil action may
be brought “by a participant, beneficiary, or fiduciary . . .
to obtain appropriate equitable relief” or to enforce
any terms of the plan. Although NewPage Wisconsin
is a fiduciary and can therefore request “appropriate
equitable relief” from a district court, relief properly
called “legal” rather than “equitable” is not covered by
§502(a)(3)—and not all equitable relief is “appropriate”
in a given suit. See CIGNA Corp. v. Amara, 131 S. Ct. 1866
(2011); Sereboff v. Mid Atlantic Medical Services, Inc., 547
U.S. 356 (2006); Great-West Life & Annuity Insurance Co. v.
Knudson, 534 U.S. 204 (2002); Mertens v. Hewitt Associates,
508 U.S. 248 (1993).
NewPage Wisconsin wants the district court to
declare that the changes it made to the Retiree Health
Plan are consistent with its legal obligations. Looking
at NewPage Wisconsin’s complaint, we cannot identify
4 No. 10-2887

any request for “appropriate equitable relief” that would
bring its claim within §502(a)(3). The complaint neither
requests equitable relief nor asks the court for help in
enforcing the Plan. See Massey Ferguson Division of
Varity Corp. v. Gurley, 51 F.3d 102, 103 (7th Cir. 1995)
(dictum); Transamerica Occidental Life Insurance Co. v.
DiGregorio, 811 F.2d 1249 (9th Cir. 1987).
The district judge assumed that, if a complaint does not
seek relief authorized by §502(a)(3), there cannot be
subject-matter jurisdiction. Yet jurisdiction depends on
a claim arising under federal law, not on whether a par-
ticular remedy is available or whether a claim is sound
on the merits. See Bell v. Hood, 327 U.S. 678 (1946).
Section 502(a) concerns remedies, not jurisdiction. We
know from Grable & Sons Metal Products, Inc. v. Darue
Engineering & Manufacturing, 545 U.S. 308, 316–20 (2005),
that statutory authority to supply a remedy is a suf-
ficient but not a necessary component of federal jurisdic-
tion. Although §502(a)(3) does not authorize equitable
relief for an employer, there remains §2201, which autho-
rizes declaratory judgments.
The jurisdictional counterpart to §502(a) is §502(e),
which says that district courts have jurisdiction of
actions “under this subchapter”. NewPage Wisconsin
made a claim for a declaratory judgment “under this
subchapter”—that is, under ERISA. Whether a claim is
good differs from the question whether a district court
possesses jurisdiction, a matter of adjudicatory compe-
tence. See, e.g., Morrison v. National Australia Bank Ltd., 130
S. Ct. 2869, 2876–77 (2010). A federal district court is
No. 10-2887 5

the right forum for a dispute about the meaning of
ERISA and the validity of changes to a welfare-
benefit plan.
The district judge may have been thrown off by
the fact that declaratory-judgment suits often are
defensive in nature, as this one is. To decide whether
a declaratory-judgment action comes within federal
jurisdiction, a court must dig below the surface of the
complaint and look at the underlying controversy. If a
well-pleaded complaint by the defendant (the “natural”
plaintiff) would have arisen under federal law, then
the court has jurisdiction when the “natural” defendant
brings a declaratory-judgment suit. See Public Service
Commission v. Wycoff Co., 344 U.S. 237, 248 (1952);
DeBartolo v. HealthSouth Corp., 569 F.3d 736 (7th Cir.
2009); Wisconsin v. Ho-Chunk Nation, 512 F.3d 921 (7th Cir.
2008).
The Union has made the court’s work easy by
describing the controversy in its Ohio complaint (where
it was the plaintiff):
Defendants’ repudiation of the terms of the Plan is
actionable under ERISA §502(a)(1)(B) and (a)(3). . . .
These ERISA provisions allow a participant or
beneficiary to bring a civil action “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, . . .”.
The Union asked the court to “permanently enjoin Defen-
dants from terminating or modifying retiree health in-
6 No. 10-2887

surance coverage provided to Class Members under
the collectively-bargained agreements.” The Union’s
request that the district court prevent NewPage Wis-
consin from altering the Plan arises under §502(a)(3) as
well as §502(a)(1). Because the Union’s suit thus came
within the grant of jurisdiction in §502(e), this mirror-
image suit by the Plan’s sponsor also is within fed-
eral subject-matter jurisdiction.
Suppose this is wrong. A court still must inquire
whether another statute supplies jurisdiction. See Brill
v. Countrywide Home Loans, Inc., 427 F.3d 446 (7th Cir.
2005). Under 28 U.S.C. §1331, “district courts shall have
original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States”.
The Supreme Court has held that ERISA claims are
“necessarily federal in character by virtue of the clearly
manifested intent of Congress.” Metropolitan Life
Insurance v. Taylor, 481 U.S. 58, 67 (1987). See also Bartholet
v. Reishauer A.G. (Zürich), 953 F.2d 1073 (7th Cir. 1992);
Winstead v. J.C. Penney Co., 933 F.2d 576, 580 (7th Cir.
1991) (noting that §1331 would provide subject-matter
jurisdiction even if §502(e) did not). Nothing in §502
supersedes or abrogates §1331, and the Supreme Court
has suggested that §1331 provides subject-matter juris-
diction independently of §502(e). See Peacock v. Thomas,
516 U.S. 349, 354 (1996). State law regulating pension
and welfare-benefit plans has been displaced, see, e.g.,
Aetna Health Inc. v. Davila, 542 U.S. 200 (2004), so the
claim in this litigation must arise under federal law.
Jurisdiction is appropriate under both §502(e) and §1331.
No. 10-2887 7

The district court found that it had jurisdiction to
consider the LMRA claim. 2010 U.S. Dist. L EXIS 71511 at
*17. Yet §185(a) of the LMRA authorizes suit only for
“violations of contracts between an employer and a
labor organization representing employees”, and
NewPage Wisconsin’s complaint did not allege that the
Union had violated the CBA. How could the district
court have subject-matter jurisdiction over the LMRA
claim but not the ERISA claim? It must have jurisdic-
tion over both, or neither; we think that “both” is
right given the mirror-image approach to deciding
whether a declaratory action arises under federal law.
The reason why the district court distinguished the
ERISA claim from the LMRA claim is language in
Newell Operating Co. v. United Auto Workers, 532 F.3d 583
(7th Cir. 2008). The situation of Newell was materially
identical to this case: an employer changed the terms of
its welfare plan and then sued the participants seeking
declaratory relief under both ERISA and the LMRA.
The district court there believed it had jurisdiction over
the LMRA claim but lacked jurisdiction to hear the
ERISA claim. In affirming that decision, we said:
[A] complaint cannot invoke ERISA §502(a)(3)
jurisdiction by the mere assertion, without more,
that ERISA will be violated. If the Committee
administers the Plan as written, it will enforce
the terms of the Plan and vindicate its fiduciary
duties under ERISA—the retirees’ dissatisfaction
notwithstanding.
532 F.3d at 589. We did not mention the mirror-
image approach to determining whether a declaratory-
8 No. 10-2887

judgment action arises under federal law or inquire
what the natural plaintiffs might have alleged had
they filed a complaint.
Newell’s incomplete analysis was a consequence of a
deficient presentation by the litigants. The briefs in
Newell focused on whether the fiduciary’s complaint
asked for “appropriate equitable relief”; the parties as-
sumed that a negative answer would imply the absence
of jurisdiction. We have explained why this is not
the right perspective. Now that the subject has been
explored more fully, we conclude that Newell—
which no other circuit has followed—cannot be treated
as authoritative on the question of subject-matter juris-
diction in declaratory-judgment actions about plans
covered by ERISA.
Overruling a precedent is not a step we take lightly.
We are mindful of the potential for “disruption,
confusion, and uncertainty” that can result. John R. Sand
& Gravel Co. v. United States, 552 U.S. 130, 139 (2008).
See also Buchmeier v. United States, 581 F.3d 561, 565–66
(7th Cir. 2009) (en banc). Nevertheless a correction is
required, because this circuit stands alone. Newell
departed from our own precedent about the mirror-
image rule in declaratory-judgment actions, which the
parties’ briefs in Newell regrettably neglected. See, e.g.,
County Materials Corp. v. Allan Block Corp., 502 F.3d 730,
734 (7th Cir. 2007); Northeast Illinois Regional Commuter
R.R. v. Hoey Farina & Downes, 212 F.3d 1010, 1014 (7th
Cir. 2000); GNB Battery Technologies, Inc. v. Gould, Inc.,
65 F.3d 615, 619 (7th Cir. 1995). See also Samuel C. Johnson
No. 10-2887 9

1988 Trust v. Bayfield County, No. 09-2876 (7th Cir. June 17,
2011) (reiterating the mirror-image approach).
Last year part of Newell was overruled by Envision
Healthcare, Inc. v. PreferredOne Insurance Co., 604 F.3d
983, 985–86 & n.1 (7th Cir. 2010) (appellate review of a
decision to dismiss a declaratory-judgment action in
favor of a suit pending elsewhere is deferential rather
than plenary, as Newell and some predecessors had
held). We now overrule the remainder of Newell. This
opinion has been circulated to all active judges under
Circuit Rule 40(e). None requested a hearing en banc.
The second question presented by this appeal is
whether the district court abused its discretion by
deciding that the Ohio litigation is the appropriate
forum for resolution of the parties’ controversy. Appel-
late review is deferential, as we held in Envision
Healthcare. Events have overtaken this aspect of the
district court’s decision.
NewPage Wisconsin’s suit in Wisconsin and the
Union’s suit in Ohio raise the same substantive issues—
did NewPage Wisconsin violate either the LMRA or
ERISA when it amended the Plan?—yet the parties differ:
the Union’s suit in Ohio named NewPage Corporation as
the defendant, while NewPage Wisconsin filed the action
in Wisconsin. NewPage Corporation is the parent of
NewPage Consolidated Papers Inc., which is the parent
of NewPage Wisconsin. The Union did not argue in
Ohio, and has not argued here, that members of this
holding-company structure have failed to respect
corporate formalities or that there is any other reason
10 No. 10-2887

why NewPage Corporation, as an indirect investor in
NewPage Wisconsin, should be liable under either
ERISA or the LMRA. See United States v. Bestfoods, 524
U.S. 51 (1998). When the Union realized that it had
sued the wrong entity, it moved to amend its complaint
to join NewPage Wisconsin. But the district court
rejected that amendment as futile because the court
lacks personal jurisdiction over NewPage Wisconsin. It
found that NewPage Wisconsin is outside the reach
of Ohio’s long-arm statute. Clendenning v. NewPage Corp.,
2010 U.S. Dist. L EXIS 112897 at *38–40 (S.D. Ohio
Oct. 12, 2010). The court added that NewPage Corpora-
tion is neither a signatory of the CBA nor a fiduciary of
the ERISA plan. It therefore dismissed the Union’s suit.
When dismissing the Wisconsin litigation, the district
judge assumed that the parties’ controversy would soon
be resolved elsewhere. That assumption is no longer
warranted. Even if the Sixth Circuit should reinstate
the Ohio suit, the Wisconsin action would remain
farther advanced. (The appeal in the Sixth Circuit will
not be argued until this fall.) Because the Wisconsin
district court has subject-matter jurisdiction over
all issues, and personal jurisdiction over all of the con-
testants, the declaratory-judgment suit now seems a
more attractive means of handling the controversy than
it did while the Ohio litigation was ongoing. On
remand, the district court should employ “considera-
tions of practicality and wise judicial administration”
(Wilton v. Seven Falls Co., 515 U.S. 277, 288 (1995)) to
decide whether to address the merits, or again wait
for developments in Ohio.
No. 10-2887 11

The judgment is vacated, and the case is remanded
for proceedings consistent with this opinion.

7-12-11