UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 01-10581
HSC HOSPITALITY, INC.
Plaintiff,
v.
SUN LIFE ASSURANCE COMPANY OF CANADA,
Defendant-Third Party
Plaintiff-Appellee,
v.
GAVIN GRIFFITH,
Third Party Defendant-
Appellant.
Appeal from the United States District Court
for the Northern District of Texas
(3:00-CV-717)
March 14, 2002
Before ALDISERT*, DAVIS, and PARKER, Circuit Judges.
PER CURIAM:**
*
Circuit Judge of the Third Circuit Court of Appeals,
sitting by designation.
**
Pursuant to 5TH CIR. R. 47.5, the court has determined that
this opinion should not be published and is not precedent except
Gavin Griffith appeals from a district court order denying
his Motion and Application for Attorney’s Fees and Costs (the
“Motion”) incurred in defending against Sun Life Assurance
Company of Canada’s claim for declaratory relief. This appeal
requires us to decide whether the district court erred in denying
Appellant his request for attorney’s fees on the theory that it
lacked jurisdiction to entertain his request.
This dispute arises from litigation brought by Appellant’s
employer, HSC Hospitality, Inc., against Sun Life, that sought an
enforcement of a group life insurance policy it had purchased to
cover its employees. Allegedly, HSC failed to make timely
premium payments to Sun Life, which resulted in a deactivation of
the policy. HSC began paying premiums about two months later. A
few weeks later, Appellant was diagnosed with AIDS. Sun Life
refused to cover Appellant’s expenses, claiming that the policy
had not been reinstated in time.
HSC sued Sun Life in Texas state court to enforce the terms
of the insurance contract. Sun Life removed the case to federal
court based upon diversity and federal question jurisdiction.
Sun Life then filed a motion to bring a third-party complaint
against Appellant, an Arizona resident. The district court
granted the motion. Sun Life’s third-party complaint sought a
declaratory judgment against Appellant to clarify its rights
under the limited circumstances set forth in 5TH CIR. R. 47.4.
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under the contract as to Appellant. The complaint alleged
subject matter jurisdiction pursuant to diversity, federal
question, and the Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. § 1132(f). The complaint claimed that
personal jurisdiction was appropriate under ERISA’s grant of
nationwide service of process. 29 U.S.C. § 1132(e)(2).
Appellant moved to dismiss for lack of personal jurisdiction and
forum non conveniens.
In the meantime, HSC filed for bankruptcy, and its original
third-party complaint against Sun Life was dismissed. After
extensive negotiation, the parties agreed that Sun Life would
dismiss its third-party complaint against Appellant without
prejudice, and Appellant would file an action against Sun Life in
an Arizona federal court. The agreement expressly stated that
Appellant would seek attorney’s fees.
Appellant then sought attorney’s fees and costs in the
district court in Texas pursuant to ERISA’s fee-shifting rule.
29 U.S.C. § 1132(g). The district court denied Appellant’s
motion because it found that Sun Life did not have standing to
bring an action against Appellant under ERISA. This appeal
follows.
I.
Sun Life’s third-party complaint against Appellant was based
on the theory that it did not owe Appellant benefits because the
3
group life insurance policy maintained by his employer, HSC, had
terminated because of HSC’s failure to make timely premium
payments. In addition, Sun Life asserted that Appellant was not
part of an eligible class under the terms of the policy, that he
did not make a proper application for coverage and that he failed
to submit evidence of insurability.
The magistrate judge dismissed Sun Life’s third-party
complaint because it was not a “participant, beneficiary, [or]
fiduciary” under 29 U.S.C. § 1132(e). It is quite clear that
only plan participants and beneficiaries may maintain a
declaratory judgment action to clarify their rights under an
ERISA plan. TransAmerica Occidental Life Ins. Co. v. Di
Gregorio, 811 F.2d 1249, 1251-1253 (9th Cir. 1985). ERISA
defines “participant” and “beneficiary” as follows:
The term “participant” means any employee or former employee
of an employer, or any member or former member of an
employee organization, who is or may become eligible to
receive a benefit of any type from an employee benefit plan
which covers employees of such employer or members of such
organization, or whose beneficiaries may be eligible to
receive any such benefit.
The term “beneficiary” means a person designated by a
participant, or by the terms of an employee benefit plan,
who is or may become entitled to a benefit thereunder.
29 U.S.C. §§ 1002(7) and (8).
The magistrate judge concluded that because Sun Life lacked
standing to bring an action against Appellant under ERISA, the
court lacked jurisdiction to consider Appellant’s claim for
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attorney’s fees. Considering the unusual factual scenario this
case presents--in which Appellant was pulled into this case,
kicking and screaming by virtue of ERISA’s nationwide service
provision and as a consequence, incurred attorney’s fees and
costs, and is now told he may not even seek them because Sun
Life, as a third-party plaintiff, lacked proper standing to
institute the law suit against him–-it would seem that a denial
of a right to claim attorney’s fees is somewhat draconian.
Clearly, had Appellant sued Sun Life on a claim for coverage, he
would have standing under ERISA as a statutory beneficiary. In
addition, had he taken some minimal action in the form of a
counterclaim, the court would have been able to adjudicate it as
if it were an original claim notwithstanding Sun Life’s lack of
standing.1 This does smack of injustice.
We are reminded of Learned Hand’s experience with Justice
Oliver Wendell Holmes, Jr.:
I remember once I was with him; it was a Saturday when the
Court was about to confer. It was before we had a motor car,
and we jogged along in an old coupé. When we got down to the
Capitol, I wanted to provoke a response, so as he walked
off, I said to him: “Well, sir, goodbye. Do justice!” He
turned quite sharply and he said: “Come here. Come here.”
“I answered: “Oh, I know, I know.” He replied: “That is
1
“The dismissal of a plaintiff's complaint for lack of
jurisdiction requires dismissal of a defendant's counterclaim
unless the counterclaim presents independent grounds of
jurisdiction.” Kuehne & Nagel (AG & Co.) v. Geosource, Inc., 874
F.2d 283, 291 (5th Cir. 1989) (citations omitted). “However, if
a compulsory counterclaim rests on an independent ground of
federal jurisdiction, it may be adjudicated despite the dismissal
of the plaintiff's complaint.” Id. (citations omitted).
5
not my job. My job is to play the game according to the
rules.”2
Likewise, we have decided to play the game according to the
rules and refer to another statute that has relevance here in
addition to ERISA. Sun Life successfully sought removal to the
federal court, partially based on ERISA’s jurisdictional
provisions, but exclusively relying on ERISA’s grant of nation-
wide service upon Appellant, a resident of Arizona. Where there
is a remand to the state court after an improper removal,
Congress has explicitly provided for an award of just costs to
include attorney’s fees and actual expenses, incurred as a result
of the removal:
A motion to remand the case on the basis of any defect
other than lack of subject matter jurisdiction must be
made within 30 days after the filing of the notice of
removal under section 1446(a). If at any time before
final judgment it appears that the district court lacks
subject matter jurisdiction, the case shall be
remanded. An order remanding the case may require
payment of just costs and any actual expenses,
including attorney fees, incurred as a result of the
removal.
28 U.S.C. § 1447(c).
We now inquire into the applicability of both statutes to
the case at bar. Our analysis recognizes that in Cliburn v.
Policy Jury Ass’n of Louisiana, Inc., 165 F.3d 315, 316 (5th Cir.
2
Learned Hand, A Personal Confession. Printed in Continuing
Legal Education for Professional Competence and Responsibility,
the Report on the Arden House Conference, December 16-19, 1958,
at 116-123.
6
1999), we held that attorney’s fees cannot be awarded under 29
U.S.C. § 1132(g) where the case involves a plan over which there
is no ERISA jurisdiction.
That is not the case here. Both parties agree that ERISA
governs the insurance plan. The questions we must now resolve
are whether: (1) ERISA’s denial of standing to insurance
companies precludes Appellant from seeking attorney’s fees in an
action brought by an insurance company against him, a beneficiary
of an ERISA plan, and (2) Appellant may rely on the remand
statute for relief.
II.
Appellant seeks $7,896.39 in attorney’s fees and $461.07 in
costs incurred in defending the third-party complaint filed
against him. Appellant asserts his claim pursuant to ERISA’s
fee-shifting provision, which provides:
(1) In any action under this subchapter . . . by a
participant, beneficiary, or fiduciary, the court in
its discretion may allow a reasonable attorney's fee
and costs of action to either party.
29 U.S.C. § 1132(g)
Sun Life contests this claim for fees, arguing that when the
district court lacks subject matter jurisdiction over an ERISA
claim, the district court also lacks jurisdiction to award
attorney’s fees pursuant to the ERISA fee-shifting statute. Sun
Life’s contention is supported by case law in this court and
other Courts of Appeals.
7
Furthermore, given that ERISA is inapplicable to
Cliburn's claims, it is inconsistent to conclude that
either Cliburn or the Police Jury Association is "a
participant, beneficiary, or fiduciary" eligible to
invoke § 1132(g)(1). Given that the district court
lacked jurisdiction to hear Cliburn's claims under
ERISA, it logically follows that the court lacked
jurisdiction to entertain the Police Jury Association's
request for fees, costs, and expenses under ERISA.
Cliburn, 165 F.3d at 316.
It may be that the teachings of Cliburn would prevent
Appellant from sustaining a claim for fees under 29 U.S.C.
§ 1132(g)(1). Yet it could be argued that the facts here are
significantly different. Unlike Cliburn, where the plan did not
come under the purview of ERISA, the parties before us agree that
the HSC plan does so qualify. Thus, the sole flashpoint of
controversy is standing to sue. Whether this is a distinction
without a difference is not a question that we are inclined to
decide here, because the attorney’s fee provision of the remand
statute may be pertinent to our determination. We now turn to 28
U.S.C. § 1447(c).
III.
At the outset, we recognize that if the remand statute is
to be strictly construed in the abstract, its application would
be questionable because although there was improper removal to
the district court, there was no motion to remand the proceedings
to the state court. Instead, the parties agreed that Sun Life
would dismiss its third-party complaint against Appellant, and
8
that Appellant would subsequently file an action for attorney’s
fees in a district court in Arizona.
At the time the parties agreed to dismiss the third-party
complaint, Sun Life agreed that Appellant was entitled to bring a
claim for attorney’s fees in the district court. Had Sun Life
raised the standing issue at that time, thus defeating
Appellant’s claim under ERISA, Appellant would have had the
opportunity to attempt to remand the entire proceedings to the
original state court and thus come under the protection of 28
U.S.C. § 1447(c). The question then presented is whether,
considering the unusual circumstances present here, Sun Life
should be entitled to lie doggo and then later question
Appellant’s right to relief under § 1447(c).
Many courts have used § 1447(c) to award attorney’s fees to
parties in situations similar to that before us here.3 Although
3
See e.g., Township of Whitehall v. Allentown Auto Auction,
966 F. Supp. 385 (E.D. Pa. 1997) (holding that plaintiff was
entitled to attorney’s fees incurred as a result of removal,
where lack of jurisdiction was plain under law and would have
been revealed to defendant's counsel with a minimum amount of
research); S.M. v. Jones, 794 F. Supp. 638 (W.D. Tex. 1992)
(holding that plaintiffs were entitled to reasonable attorney’s
fees and expenses incurred as result of defendants' improper
removal of case); Knudsen v. Samuels, 715 F. Supp. 1505 (D. Kan.
1989) (holding that defendants would be required to pay just
costs and any actual expenses, including attorney’s fees,
incurred as a result of improvident removal); In re Friedman &
Shapiro, P.C., 185 B.R. 143 (S.D.N.Y. 1995) (holding that award
of costs under statute providing for costs incurred as a result
of improper removal of case is discretionary and does not require
finding that removant acted in bad faith); Greenidge v. Mundo
Shipping Corp., 60 F. Supp. 2d 10 (E.D.N.Y. 1999) (holding that
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the reasoning in those cases implicated sub silentio the
venerable doctrine of estoppel, we have decided to be specific in
applying the doctrine here to preclude Sun Life from denying the
applicability of § 1447(c), even though there was no remand to a
state court. The doctrine is familiar:
The four elements of estoppel are: (1) that the party to be
estopped was aware of the facts, and (2) intended his act or
omission to be acted upon; (3) that the party asserting
estoppel did not have knowledge of the facts, and (4)
reasonably relied on the conduct of the other to his
substantial injury.
Moosa v. INS, 171 F.3d 994, 1003 (5th Cir. 1999)4
All four factors are present here. Sun Life knew that
Appellant intended to petition for attorney’s fees and that
Appellant intended his attorney’s fee request to be acted on.
However, Appellant did not know that Sun Life planned to assert
lack of jurisdiction as a defense to his claim. Furthermore,
Appellant relied on Sun Life’s representation that he could
although defendant did not remove maritime case in bad faith, it
was nonetheless an appropriate exercise of court's discretion to
require defendant to pay reasonable costs and expenses for
improper removal; while plaintiffs opted to litigate their
relatively simple claims in state court, the removal greatly
complicated the case, thus making it unfair to require either the
plaintiffs or their counsel to absorb the cost of litigating the
remand motion, and impropriety of the removal should have been
clear to defendant, given that defendant's counsel was an
experienced maritime firm).
4
To be sure, the cited case is a situation in which the
government was a party, but as stated therein, “[t]o establish
estoppel against the government, a party must prove affirmative
misconduct by the government and also establish the four
traditional elements of the doctrine.” Moosa, 171 F.3d at 1003.
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properly present a claim for attorney’s fees. But for Sun Life’s
misdirection, Appellant would otherwise have had two viable
options to assert his right: (1) He could have counterclaimed on
the third-party ERISA complaint as a legitimate third-party
counter claimant who was a beneficiary under 29 U.S.C. § 1002(7)
and (8), or (2) he could have moved to remand to the state court
and presented a motion under 28 U.S.C. § 1447(c).
The classic elements of estoppel are present here, and Sun
Life is now estopped from denying Appellant’s right to proceed
for attorney’s fees and costs under § 1447(c).
* * * * *
In light of the unusual facts of this case, we therefore
conclude that the district court erred in dismissing Appellant’s
claim for lack of jurisdiction. The judgment is reversed and the
proceedings remanded for consideration of the merits of the claim
for attorney’s fees, costs and actual expenses under 28 U.S.C. §
1447(c).
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