NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 08a0777n.06
Filed: December 22, 2008
No. 07-4505
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
TAYLOR CHEVROLET INC, aka Taylor Team of )
Dealerships, dba Taylor Dealerships, ) ON APPEAL FROM THE
) UNITED STATES DISTRICT
Plaintiff-Appellee, ) COURT FOR THE
) SOUTHERN DISTRICT OF
v. ) OHIO
)
MEDICAL MUTUAL SERVICES LLC, ) OPINION
)
Defendant-Appellant. )
BEFORE: ROGERS, SUTTON, and McKEAGUE, Circuit Judges.
McKEAGUE, Circuit Judge. Plaintiff Taylor Chevrolet, Inc. (“Taylor”) sued Defendant
Medical Mutual Services LLC (“Medical Mutual”) in Ohio state court, alleging breach of contract,
breach of fiduciary duty, and other state law claims. Medical Mutual removed the suit to federal
district court, contending that Taylor’s claims were completely preempted by the Employee
Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et. seq. The district court
granted Taylor’s motion to remand to state court, as well as Taylor’s subsequent request, pursuant
to 28 U.S.C. § 1447(c), for attorneys’ fees and costs incurred as a result of the removal. On appeal,
Medical Mutual challenges the award of attorneys’ fees and costs to Taylor. Because the district
court did not abuse its discretion in this matter, we AFFIRM.
I
No. 07-4505
Taylor Chevrolet Inc. v. Medical Mutual Services LLC
In March 2003, Taylor created a self-funded health benefit plan (the “Plan”) for the purpose
of providing medical benefits to its eligible employees and their dependents. The parties do not
dispute that the Plan was an employee welfare benefit plan established and maintained in accordance
with ERISA.
From March 2003 to 2005, Taylor and Medical Mutual entered into a series of administrative
services agreements. Under the terms of these agreements, Taylor was obligated to establish the
Plan, prepare a governing Plan document, and prepare and distribute a summary Plan description.
Taylor was also financially liable for claims incurred by the Plan’s participants and beneficiaries, or,
as the Plan defined them, “Covered Persons.” Medical Mutual was to act as third-party administrator
of the Plan. Among other things, Medical Mutual was required to receive and process claims for
benefits and to disburse payments under the Plan. Upon payment of a claim, Medical Mutual would
send Taylor a weekly invoice of the amounts expended. The agreements required Taylor to pay the
invoiced amounts on the next business day following the date of the invoice.
Taylor was also party to an excess loss reinsurance contract with American National
Insurance Company (“American National”) to protect itself from catastrophic financial loss.
Although Taylor was still required to reimburse Medical Mutual for the entire amount of approved
medical claims, Taylor was entitled to reimbursement from American National for any claims Taylor
paid on behalf of a single Covered Person in excess of $50,000. To ensure that Taylor was
reimbursed under its contract with American National, Taylor claims Medical Mutual was required
to timely notify American National of any excess amount.
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No. 07-4505
Taylor Chevrolet Inc. v. Medical Mutual Services LLC
On December 12, 2006, Taylor sued Medical Mutual in the Court of Common Pleas of
Fairfield County, Ohio, alleging breach of contract, breach of fiduciary duty, negligence, unjust
enrichment, fraud, and bad faith under Ohio law. Taylor’s claims were based on two factual
allegations. First, Taylor contended that Medical Mutual breached its duty to timely notify American
National that Taylor had incurred costs of claims in excess of the $50,000 individual excess amount
for at least four Covered Persons. Due to this alleged failure to notify, Taylor claimed American
National had refused to pay Taylor $40,347.70 in reimbursement benefits that would have been
covered by the reinsurance contract. Second, Taylor claimed that it had inadvertently made a double
payment on a $50,031.13 invoice from Medical Mutual. Medical Mutual apparently applied the
initial payment to the amount due and retained the second (double) payment in an account. It used
the funds from this account to pay claims that became due under Taylor’s former self-insured plan.1
Taylor claimed that Medical Mutual breached its duty to inform Taylor of this overpayment for
approximately one year, and accordingly owed Taylor $2,587.91 in interest.
On January 25, 2007, Medical Mutual removed the case to the United States District Court
for the Southern District of Ohio. As the basis for removal, Medical Mutual claimed that the federal
district court had subject matter jurisdiction under 28 U.S.C. § 1331 because ERISA completely
preempted Taylor’s state law claims. Taylor filed a motion to remand the case to state court, which
the district court granted. The district court reasoned that ERISA did not completely preempt
1
Effective March 1, 2005, Medical Mutual began providing a fully-insured health benefit plan
to Taylor and its eligible employees and their eligible dependents.
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No. 07-4505
Taylor Chevrolet Inc. v. Medical Mutual Services LLC
Taylor’s state law claims, because Taylor would have lacked standing to sue under ERISA’s civil
enforcement provision, 29 U.S.C. § 1132(a).
After its motion to remand was granted, Taylor filed a motion seeking attorneys’ fees and
costs under 28 U.S.C. § 1447(c). The district court granted that motion as well, concluding that
Medical Mutual had no objectively reasonable basis for removal. The parties stipulated to the
amount of attorneys’ fees Taylor had incurred, and the district court entered a final order awarding
the fees. Medical Mutual timely appealed.
II
Generally, a defendant may remove a civil case commenced in state court to federal district
court if the case could have been brought there originally. 28 U.S.C. §1441(a). But “[i]f at any time
before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall
be remanded.” 28 U.S.C. § 1447(c). “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.” Id.
Although “[a]n order remanding a case to the State court from which it was removed is not
reviewable on appeal or otherwise,” 28 U.S.C. § 1447(d), we have jurisdiction to review a district
court’s decision whether to award attorneys’ fees incurred as a result of improper removal under §
1447(c), Stallworth v. Greater Cleveland Regional Transit Auth., 105 F.3d 252, 255 (6th Cir. 1997).
We review a district court’s decision to award attorneys’ fees under § 1447(c) for abuse of
discretion. Bartholomew v. Town of Collierville, 409 F.3d 684, 686 (6th Cir. 2005). A district court
abuses its discretion when it relies on clearly erroneous findings of fact, improperly applies the law,
or uses an erroneous legal standard. Id.
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Taylor Chevrolet Inc. v. Medical Mutual Services LLC
The Supreme Court recently clarified the legal standard governing a district court’s discretion
in granting attorneys’ fees under § 1447(c). “Absent unusual circumstances, courts may award
attorney’s fees under § 1447(c) only where the removing party lacked an objectively reasonable basis
for seeking removal.” Martin v. Franklin Capital Corp., 546 U.S. 132, 141 (2005). “Conversely,
when an objectively reasonable basis exists, fees should be denied.” Id.; see also Bartholomew, 409
F.3d at 687 (“[A]n award of costs, including attorney fees, is inappropriate where the defendant’s
attempt to remove the action was ‘fairly supportable,’ or where there has not been at least some
finding of fault with the defendant’s decision to remove.”).
III
Applying the standard set forth in Martin, we hold that the district court did not abuse its
discretion in awarding attorneys’ fees to Taylor under § 1447(c). A defendant may remove a state
court action under §1441(a) only if the action “originally could have been filed in federal court.”
Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987). Although a civil action “arising under the
Constitution, laws, or treaties of the United States” may be brought originally in federal court, 28
U.S.C. § 1331, Medical Mutual lacked an objectively reasonable basis for believing that Taylor’s
entirely state law complaint raised a federal question.2
A. Federal Question Jurisdiction and ERISA Complete Preemption
2
The parties do not dispute that diversity of citizenship under 28 U.S.C. § 1332 would not
have been an objectively reasonable basis for removal, as both Taylor and Medical Mutual are
citizens of Ohio for diversity jurisdiction purposes.
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No. 07-4505
Taylor Chevrolet Inc. v. Medical Mutual Services LLC
Generally, a cause of action arises under federal law only when it appears on the face of the
plaintiff’s well-pleaded complaint. Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987); see also
Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 10-11 (1983); Gentek Bldg.
Prods., Inc. v. Steel Peel Litig. Trust, 491 F.3d 320, 325 (6th Cir. 2007). “If the complaint relies
only on state law, the district court generally lacks subject matter jurisdiction, and the action is not
removable.” Gentek, 491 F.3d at 325. A claim in which a federal question arises only as a defense
to a state law action does not “arise under” federal law. See Franchise Tax Bd., 463 U.S. at 10-11.
Accordingly, because a defendant must ordinarily raise federal conflict preemption as a defense to
the allegations in a plaintiff’s complaint, it usually cannot serve as a basis for removal to federal
court. Caterpillar, 482 U.S. at 392-93 (1987); Metro. Life, 481 U.S. at 63.
The Supreme Court has developed two limited exceptions to the well-pleaded complaint rule:
the complete preemption doctrine and the substantial federal question doctrine.3 Complete
preemption arises where Congress has so completely preempted a particular area “that any civil
complaint raising this select group of claims is necessarily federal in character.” Metro. Life, 481
U.S. at 63-64. In such cases, the plaintiff has essentially “brought a mislabeled federal claim.” King
v. Marriott Int’l, Inc., 337 F.3d 421, 425 (4th Cir. 2003). The state law claims are converted into
federal claims and, as such, may be removed to federal court. Gentek, 491 F.3d at 325.
3
The substantial federal question doctrine applies “where the vindication of a right under state
law necessarily turn[s] on some construction of federal law.” Franchise Tax Bd., 463 U.S. at 9; see
also Mikulski v. Centerior Energy Corp., 501 F.3d 555, 560 (6th Cir. 2007) (en banc). Medical
Mutual did not assert the substantial federal question doctrine as a basis for removal, and does not
argue on appeal that it applies.
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Taylor Chevrolet Inc. v. Medical Mutual Services LLC
ERISA is one of the few statutes where both conflict and complete preemption may arise.4
ERISA preempts “any and all State laws insofar as they may now or hereafter relate to any employee
benefit plan.”5 29 U.S.C. § 1144(a). But, as discussed above, the mere fact that a party may raise
ERISA conflict preemption under § 1144(a) as a defense does not confer federal jurisdiction or
authorize removal to federal court. Warner v. Ford Motor Co., 46 F.3d 531, 534-35 (6th Cir. 1995)
(en banc) (noting that no removal jurisdiction exists under § 1144). A state law claim is not
completely preempted or removable unless it falls within the scope of ERISA’s civil enforcement
provision—29 U.S.C. § 1132(a). See Metro. Life, 481 U.S. at 67 (holding that ERISA completely
preempted a state cause of action within the scope of § 1132(a)(1)(B)); Aetna Health Inc. v. Davila,
542 U.S. 200, 209 (2004) (noting that causes of action within the scope of § 1132(a) are removable);
Thurman v. Pfizer, Inc., 484 F.3d 855, 860 (6th Cir. 2007) (“Actions that could have been brought
under § 1132 . . . are completely preempted by [ERISA].”); Smith v. Provident Bank, 170 F.3d 609,
613 (6th Cir. 1999) (holding that “[a] claim for breach of fiduciary duty against the fiduciary of an
ERISA plan” under § 1132(a)(2) may be removed to federal court); see also Sonoco Prods. Co. v.
Physicians Health Plan, Inc., 338 F.3d 366, 371 (4th Cir. 2003); Toumajian v. Frailey, 135 F.3d
4
In addition to ERISA, the Supreme Court has found that only two other statutes completely
preempt state law: section 301 of the Labor Management Relations Act of 1947, Avco Corp. v. Aero
Lodge No. 735, Int’l Ass’n of Machinists, 390 U.S. 557, 560 (1968), and sections 85 and 86 of the
National Bank Act, Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 10-11 (2003).
5
The Supreme Court recently narrowed the preemptive scope of the “relate to” language of
§ 1144(a) in N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S.
655, 668 (1995).
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Taylor Chevrolet Inc. v. Medical Mutual Services LLC
648, 654 (9th Cir. 1998); Rice v. Panchal, 65 F.3d 637, 639 (7th Cir. 1995); Dukes v. U.S.
Healthcare, Inc., 57 F.3d 350, 354 (3d Cir. 1995).
B. Reasonableness of Removal on the Basis of Complete Preemption
To have an objectively reasonable basis for removal to federal court, Medical Mutual must
have reasonably concluded that Taylor’s claims fell within the scope of ERISA’s civil enforcement
provision, 29 U.S.C. § 1132(a). Such a conclusion obviously could not have been based upon any
explicit reference to ERISA—on its face, Taylor’s complaint referred only to violations of state law.
Instead, Medical Mutual’s argument centers on Taylor’s state law cause of action for breach of
fiduciary duty, in which Taylor alleged the following:
Given the relationship between the parties in this matter, Defendant Medical Mutual
owed Plaintiff Taylor certain fiduciary duties arising under state law. The acts and
omissions of the Defendant constitute breach of those fiduciary duties for which
Defendant has liability. As a direct and proximate result of the breach of fiduciary
duties, Defendant [sic] has been damaged, as set forth above.
Compl. ¶ 13, J.A. at 15. Medical Mutual argues that this state law fiduciary duty claim arose under
§ 1132(a)(2), the subsection of ERISA’s civil enforcement provision that authorizes “the Secretary”
or “a participant, beneficiary or fiduciary” to sue another fiduciary for breach of fiduciary duty.6
Medical Mutual first argues that any claim by Taylor for breach of fiduciary duty must have
arisen under § 1132(a)(2) because a fiduciary duty claim brought under state law would have been
meritless. Because Medical Mutual had no fiduciary relationship with Taylor under Ohio law, it
6
Section 1132(a)(2) incorporates §1109(a), which provides that “[a]ny person who is a
fiduciary with respect to a plan who breaches any of the responsibilities, obligations, or duties
imposed upon fiduciaries by this subchapter shall be personally liable to make good to such plan any
losses to the plan resulting from each such breach . . . .”
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Taylor Chevrolet Inc. v. Medical Mutual Services LLC
argues, it was reasonable in assuming that Taylor’s complaint asserted a fiduciary duty claim under
ERISA. But the supposed absence of such a cause of action under state law (a matter on which we
express no opinion), standing alone, was not enough to provide a reasonable basis for assuming that
the complaint stated a cause of action under ERISA. Medical Mutual needed an affirmative basis
for such a conclusion.
Ultimately, Medical Mutual lacked an objectively reasonable basis for believing that Taylor’s
cause of action fell within the scope of § 1132(a)(2) and was therefore completely preempted by
ERISA. As stated above, §1132(a)(2) authorizes “the Secretary” or a “participant, beneficiary or
fiduciary” to sue another fiduciary for breach of fiduciary duty. The parties do not dispute that
Taylor, as employer and Plan sponsor, could not have reasonably been characterized as a
“participant” or “beneficiary” within the meaning of ERISA.7 See COB Clearinghouse Corp. v.
Aetna U.S. Healthcare, Inc., 362 F.3d 877, 881 n.5 (6th Cir. 2004); Sonoco, 338 F.3d at 372 n.8
(noting that “an employer can neither be a participant nor a beneficiary”). And clearly, Taylor did
not bring its claim as the Secretary of Labor. Thus, the only capacity in which Taylor could have had
standing to sue was in its capacity as a “fiduciary” of the Plan.
A person is a fiduciary with respect to an ERISA plan to the extent that “(i) he exercises any
discretionary authority or discretionary control respecting management of such plan or exercises any
authority or control respecting management or disposition of its assets, . . . or (iii) he has any
7
A “participant” is “any employee . . . who is or may become eligible to receive a benefit of
any type from an employee benefit plan.” 29 U.S.C. § 1002(7). A “beneficiary” is “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(8).
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Taylor Chevrolet Inc. v. Medical Mutual Services LLC
discretionary authority or discretionary responsibility in the administration of such plan.” 29 U.S.C.
§ 1002(21)(A). “[O]nly discretionary acts of plan management or administration, or those acts
designed to carry out the very purposes of the plan,” are acts of a fiduciary capacity. Hunter v.
Caliber Sys., Inc., 220 F.3d 702, 718 (6th Cir. 2000); see also 29 U.S.C. § 1002(21)(A). Moreover,
a party’s status as a fiduciary “is not an all or nothing concept”; a court must ask whether an entity
is a fiduciary “with respect to the particular activity in question.” Briscoe v. Fine, 444 F.3d 478, 486
(6th Cir. 2006) (quoting Moench v. Robertson, 62 F.3d 553, 561 (3d Cir. 1995)).
Here, Taylor’s complaint neither implied that Taylor was suing in its capacity as an ERISA
fiduciary nor that Medical Mutual was being sued in its capacity as such. Rather, the relationship
between Taylor and Medical Mutual was independent from any duties either party had to the Plan
or its participants and beneficiaries. Taylor’s claims related solely to Taylor’s own injuries—not any
injury to the Plan or its participants and beneficiaries—and Taylor was clearly seeking to enforce its
rights under a separate, distinct administrative services contract with Medical Mutual. See Sonoco,
338 F.3d at 373 (holding that where a plan sponsor’s claims “relate solely to its own injuries, and
not to its fiduciary responsibilities to the plan or to the plan’s participants and beneficiaries,” it is not
acting as a fiduciary under ERISA). Moreover, there was no allegation that Medical Mutual had
failed to pay benefits to any participants or beneficiaries of the Plan, or that it had paid any claims
in violation of the Plan’s terms. Thus, any failure by Medical Mutual was not a failure to properly
carry out its fiduciary duties of processing benefit claims and distributing Plan funds under the terms
of the Plan. See Geweke Ford v. St. Joseph’s Omni Preferred Care Inc., 130 F.3d 1355, 1359 (9th
Cir. 1997) (noting that third-party administrator’s “alleged failure was to file the claim with [the
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Taylor Chevrolet Inc. v. Medical Mutual Services LLC
excess liability insurer] properly and in a timely manner, it was not a failure to administer the Plan”).
Even assuming that Medical Mutual had a duty to notify American National of any excess amount
or to notify Taylor of its double payment, then, that duty could have only arisen out of the
administrative services agreements between the parties and ran only to Taylor.
Because Taylor’s claim involved neither Taylor’s nor Medical Mutual’s status as an ERISA
fiduciary, Medical Mutual could not have reasonably concluded that it fell within the scope of §
1132(a)(2).8 Accordingly, the district court did not abuse its discretion in awarding attorneys’ fees
and costs to Taylor under § 1447(c).
IV
For the foregoing reasons, we AFFIRM.
8
We briefly note that Medical Mutual could not have perceived Taylor’s claim as one brought
under any of the other subsections of ERISA’s civil enforcement provision. Only a “participant or
beneficiary” may bring a civil action under § 1132(a)(1), and, as discussed above, Medical Mutual
does not dispute that Taylor is neither a “participant” nor a “beneficiary.” Section 1132(a)(3) is also
inapplicable because Taylor did not allege that Medical Mutual had violated any provision of ERISA
or the terms of the Plan; it only alleged that Medical Mutual had violated the terms of the
administrative services agreements between the parties. See Penny/Ohlmann/Nieman, Inc. v. Miami
Valley Pension Corp., 399 F.3d 692, 701 (6th Cir. 2005) (noting that employer’s breach of contract
claim against third-party service provider was not preempted by ERISA in part because there was
“no allegation that any of the plan’s terms have been breached”). Finally, Medical Mutual does not
argue that Taylor’s claim fell within the scope of the remaining subsections, §§ 1132(a)(4)–(a)(10).
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