Ervast v. Flexible Products Co.

[PUBLISH]

IN THE UNITED STATES COURT OF APPEALS
FILED
FOR TH E ELEV ENTH C IRCUIT
U.S. COURT OF APPEALS
________________________ ELEVENTH CIRCUIT
September 24, 2003
No. 02-15769 THOMAS K. KAHN
________________________ CLERK

D. C. Docket No. 01-00564-CV -JOF-1

ROG ER ERVA ST,

Plaintiff- Appe llant,

versus

FLE XIBL E PR ODU CTS COM PAN Y,
RAN DY P ETE RSO N,
DOU G CR UICK SHA NK,

Defen dants-A ppellees.

________________________

No. 02-15941
________________________

D. C. Docket No. 01-00564-CV -JOF-1

ROG ER ERVA ST,

Plaintiff- Appe llee,

versus
FLE XIBL E PR ODU CTS COM PAN Y,
RAN DY P ETE RSO N,
DOU G CR UICK SHA NK,

Defen dants-A ppellants .

________________________

Appeals from the United States District Court
for the N orthern District o f Geor gia
_________________________

(September 24, 2003)

Before BIRCH and HULL, Circuit Judges, and EDENFIELD *, District Judge.

BIRCH, Circuit Judge:

This case arose when an employee collected benefits from an Employee

Stock Ow nership Plan (“ESO P”) at the time of his resignation from the com pany.

The company did not disclose information to him about a potential merger during

the time h e made h is decision to resign . The em ployee cla ims he w as entitled to

the information and seeks damages for the difference in stock price. The issue

before us is whether he will litigate that claim in state court, where he filed the

case, or in federal co urt, wh ere the de fendan ts remov ed it by arg uing co mplete

preemption under the Employee Retirement Income Security Act (“ERISA”), 29

*
Honorable B. Avant Edenfield, United States District Judge for the Southern District of
Georgia, sitting by designation.

2
U.S.C. § 1001 et seq. We conclude that the district court improperly assumed

removal jurisdiction over this case because plaintiff-appellant Ervast’s state law

claims for breach of corporate fiduciary duty are not super preempted by ERISA.

Accor dingly, th e district co urt’s den ial of Erv ast’s motio n to rem and the action to

state cour t is REV ERS ED, an d the distr ict court is in structed to remand the case to

state court. Thus, we will not reach the merits of appeal No. 02-15941 because the

district court’s order denying sanctions was entered without jurisdiction over the

underly ing case.

I. BACKGROUND

A. The ERISA P lan

Flexible Products Company (“Flexible”) stock was not publicly traded, but

employees could obtain interest in the stock through the two employee incentive

plans, the Employee Stock Ownership Plan (“ESOP”) and the Long T erm

Incentive Plan (“Option Plan”).1 Pursuant to the ESOP, Flexible made

contributions to a trust, which invested primarily in Flexible stock and held the

assets for the bene fit of partic ipants. T he ES OP tru stee main tained a se parate

account for each participant, however, the participants did not directly own the

Flexible stock as s hareho lders. The E SOP provid ed that the “separate a ccounts

1
Ervast also directly purchased Flexible stock under the Option Plan. The provisions of
the Option Plan and the disbursement thereunder to Ervast is not at issue before us.
3
shall not require a segregation of the Trust assets and no Participant shall acquire

any right to or interest in any specific asset of the Trust as a result of the

allocation s provid ed for in the Plan .” R5-5 7, Exh . 13 at 13 .

Once a participant’s employment terminated, he was entitled to a

distribution commencing “not later than 120 days after the date the Participant

incurs a One Year Break in Service.” Id. at 25. Th e ESO P prov ided for a “put”

option, which obligated either the trust or Flexible to purchase any or all of

participan ts’ shares. Id. at 27. Wh en the participan t exercised the pu t, the stock’s

price was determined by the most recent annual independent valuation of the

company’s stock.

B. Ervast’s Resignation and the Dow Merger

Roger E rvast was em ployed w ith Flexible and participated in F lexible’s

ESOP and Option Plan, wherein he accumulated significant holdings during the

course o f his emp loymen t. On 4 O ctober 1 999, E rvast tend ered his r esignatio n to

Flexible, effective 15 October. On 5 October, Flexible discovered that E rvast

would be employed with a competitor, Hydroseal, promptly escorted him from

compa ny prop erty becau se he had access to c onfiden tial inform ation, and paid him

two weeks’ compensation in lieu of notice. Immediately following his 5 October

termination, Ervast exercised his rights under the ESOP and “put” his shares under
4
the ES OP. O n 12 O ctober, E rvast rece ived his p ayout fro m the E SOP and sold his

stock under the Option Plan. Pursuant to Ervast’s instructions, Flexible remitted a

total of $448,648.10 from the Flexible Products ESOP, which was transferred

directly to a rollover individu al retireme nt accou nt (“IRA ”).

During the fall of 1999, Flexible entertained the idea of selling the company

to an interested buyer, Dow Chemical Company (“Dow”). In September 1999, the

managers of both companies met to discuss the potential acquisition and negotiated

a confidentiality agreement in exchange for Dow’s agreement to make a takeout

bid. On 1 October 1999, the parties entered into a confidentiality agreement and

two managers entered into financial payout agreements in the event the merger was

consum mated. On 7 October, the senior management of both companies held a

meeting, after which Dow ’s Senior Vice President indicated an off er to purchase

Flexible was pe nding. On 26 Octob er, Dow offered a price F lexible w as willing to

consider. On 10 November 1999, Flexible executed a letter of intent with Dow,

authorizing the parties to engage in discussions about a potential merger. In

January 2000, th e merge r was co nsumm ated and the Flex ible ES OP m erged in to

the Dow benefit plan and then ceased to exist. During the pendency of the sale, no

one disc losed to E rvast the e xistence o f the mer ger neg otiations a t the time h e sold

his Flexible stock. After the merger between Flexible and Dow was consummated,

the 26 October 1999 date was selected as the point after which the shareholders
5
who s old their F lexible sh ares we re to receiv e the high er merg er price b ecause it

was the date Flexible deemed the merger negotiations became “material.”

C. Procedural History

On 23 January 2 001, Ervast filed suit against Flexible Products C ompany,

Randy Peterson, and Doug Cruickshank2 in the State Court of Fulton C ounty,

Georgia, alleg ing breach o f fiduciary duty a nd negligen ce resulting from Flexible’s

failure to disclose material information that would have affected Ervast’s decision

to liquidate his account in Flexible stock in the ESOP. On 28 February 2001,

Flexible removed the case to the federal district court in the Northern District of

Georg ia. On 18 July 2001, Ervast filed a motion to remand the case to state court

for lack o f subject m atter jurisd iction. Th e district co urt denie d Erva st’s motio n to

remand, finding that his claims were “related to Defendants’ administration of an

ERISA plan,” because the ESOP would have to be referenced to determine the

value the Flexible stock. R4-43 at 5. As a result, the district court determined that

Ervast’s claims were super preempted by ERISA, and that federal question

jurisdiction existed over Ervast’s claims. 3

2
Unless required for differentiation purposes, the defendants-appellees collectively will
be referred to as “Flexible.”
3
The entirety of the district court’s discussion regarding ERISA preemption is contained
in two orders: the order denying Ervast’s motion to remand, R4-43, and then further elaborated
upon in the order granting Defendant’s motion for summary judgment, R6-76. We note at the
outset that the district court performed a preemption analysis by only focusing on defensive
preemption pursuant to ERISA § 514(a), 29 U.S.C. § 1144(a), thereafter declaring that super
6
 During discovery, Flexible filed a mo tion for summary judgm ent and Ervast

filed a motion for partial summary judgment. The district court awarded summary

judgment to Flexible and denied Ervast’s motion. Although Ervast’s complaint

contained allegations in the rubric of state law, the district court determined that

Ervast n eed not a mend h is comp laint and th e court co nstrued the com plaint to sta te

a claim fo r recove ry of ben efits und er ERI SA § 502(a) (1)(B) , 29 U.S .C. §

1132( a)(1)(B ). The district court then found that, in accordance with the

undisputed facts, there was no evidence that Ervast was denied any benefits under

the ES OP. Because the district court found previously that Ervast’s claim was

super p reempte d by ER ISA a s a claim fo r benefits , he could not main tain his claim

for brea ch of fid uciary du ty, despite th e fact that h e continu ally couch ed his

argum ent in suc h terms. Nevertheless, “out of an abundance of caution,” the

district cou rt addres sed the b reach of fiduciary duty claim under 2 9 U.S .C. §

1132(a)(3), and found that no fiduciary duty existed under ERISA for a plan

adminis trator to d isclose m aterial bus iness dec isions of the com pany. R 6-76 at 1 0.

From this order, Ervast properly filed his notice of appeal, No. 02-15769.

D. Ervast’s Deposition Dishonesty and Flexible’s Motion for Sanctions

preemption was appropriate without performing the requisite super preemption analysis set forth
in Butero v. Royal Maccabees Life Ins., 174 F.3d 1207, 1212 (11th Cir. 1999).
7
 Durin g discov ery, Flex ible determ ined that E rvast gav e false testim ony in

his deposition regarding the date he communicated his acceptance of the Hydroseal

offer. In addition, Ervast allegedly failed to produce a letter dated 27 September

that Flexible argues proved the falsity of his statements, in response to the Rule 34

docum ent requ ests. On these two bases, F lexible filed a motion for sanctions,

which the district court denied because it found that there was no evidence that

Ervast possessed the letter and that Flexible had not demonstrated a Rule 37(c)

violation . Therea fter, Flex ible prop erly filed its n otice of ap peal, No . 02-15 941.

II. DISCUSSION

Ervast’s appeal p resents tw o issues: th e first focu ses upo n the den ial of his

motion to rem and the case to s tate court; and, seco nd, the grant o f Flexible’s

motion for summary judgment and the denial of his motion for partial summary

judgment. Flexible appeals the denial of its motion for sanctions against Ervast for

allegedly making dishonest statements during his deposition. Because the

preemption issue is a jurisdictiona l predicate, we firs t discuss wh ether Ervast’s

state law c laims w ere supe r preem pted by E RISA and the d istrict cour t proper ly

denied his motion to remand.4 Because w e disagree w ith the district court’s

4
Flexible argues, tardily, in its appellate brief, that there also exists diversity
jurisdiction, therefore, removal was proper absent the existence of ERISA super-preemption.
Although that may be the case, we decline the invitation to exercise jurisdiction on that basis
8
decision that Ervast’s claims were super preempted by ERISA, the district court

never had subject matter jurisdiction over the case, and Ervast’s appeal of the

district court’s summary judgment is moot. We will not address Flexible’s appeal

of the district court’s order denying sanctions against Ervast because it also was

rendered without jurisdiction over the underlying case.

Ervast’s appeal is before us because his state law claims were removed by

Flexible invoking federal question jurisdiction in the form of ERISA com plete (or,

alternative ly, super) preemp tion, and Ervast’s motion to reman d was d enied. A

district court’s preemption analysis is reviewed de novo. Hall v. Blue Cross/Blue

Shield of Ala., 134 F .3d 106 3, 1064 -65 (11 th Cir. 19 98).

Remo val jurisd iction bas ed on a f ederal qu estion is g overne d by the w ell-

pleaded compla int rule. Taylor v. Anderson, 234 U.S. 74, 75-76, 34 S. Ct. 724,

725 (1 914); Kemp v. Int’l Bus. Machs. Corp., 109 F.3d 708, 712 (11th Cir. 1997)

(citing Franchise Tax Bd . v. Constr. Laborers Vacation T rust. 463 U.S. 1, 11, 103

S. Ct. 2841, 2845 (1983)) (ERISA context). In plain terms, unless the face of a

plaintiff’s complaint states a federal question, a defendant may not remov e a case

because Flexible had the burden to plead this basis in its notice of removal, and it did not. See
Lupo v. Human Affairs Int’l, Inc., 28 F.3d 269, 273 (2d Cir. 1994); Leonard v. Enterprise Rent
A Car, 279 F.3d 967, 972 (11th Cir. 2002) (“A removing defendant bears the burden of proving
proper federal jurisdiction.”); see also Edwards v. Prudential Ins. Co. of Am., 213 F. Supp. 2d
1376, 1380 n.6 (S.D. Fla. 2002) (declining to investigate the existence of diversity jurisdiction
sua sponte and recognizing tension between resolving doubts in favor of remand and Congress’s
ability to completely preempt an area of law, i.e., in ERISA).
9
to federal court on this basis, even though a possible defense might involve a

federal question. Kemp, 109 F.3d at 712. A narrow exception to this rule is super,

or complete, preemption, existing when Congress has so fully legislated an area of

law suc h that a pla intiff’s state la w claim s filed in sta te court ar e “necessa rily

federal in character” and removable based on federal question jurisdiction.5

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64, 107 S. Ct. 1542, 1546

(1987 ); Kemp, 109 F .3d at 71 2.

Whether comp lete preemption applies is a jurisdictional issue, which must

be addressed first and is separate and distinct from whether a defendant’s ERISA §

514, 29 U.S.C. § 1144, preemption defenses apply, although there might be some

overlap between the two issues.6 Land v. Cigna Healthcare of Fla., 339 F.3d 1286,

1294 a t 1289- 90, 129 4 n.7 (1 1th Cir. J uly 30, 2 003); see also Schmeling v.

Nordam, 97 F.3d 1336, 1338 (10th Cir. 1996). We set forth the four-part test for

determining ERISA super preemption in Butero v. Royal Maccabees Life

5
Whether a plaintiff’s claims are super preempted by ERISA is determined at the time of
removal. Whitt v. Sherman Int’l Corp., 147 F.3d 1325, 1332 (11th Cir. 1998).
6
Super preemption is distinguished from defensive preemption, which provides only an
affirmative defense to state law claims and is not a basis for removal. Defensive preemption is
not a basis for federal jurisdiction, but it does require the dismissal of state law claims. Butero,
174 F.3d at 1212. ERISA defensive preemption applies pursuant to Title 29, U.S.C. § 1144(a),
which provides: “Except as provided in subsection (b) of this section, the provisions of this
subchapter . . . shall supersede any and all State laws insofar as they . . . relate to any employee
benefit plan . . . .” (emphasis added). If a state law claim is defensively preempted by ERISA, it
is dismissed from the suit.
10
Insurance Co., 174 F.3d 1207, 1212 (11th Cir. 1999): a (1) relevant ERISA plan

exists, under which a (2) plaintiff with standing is suing (3) an ERISA entity for

(4) “compensatory relief akin to that available under § 1132(a); often this will be a

claim for benefits d ue und er a plan.”

Ervast urges us to reverse the district court’s denial of his motion to remand

because the district court did not thoroughly consider whether his claims were

super preempted under Butero, but instead it authorized removal on the basis of

defensiv e preem ption, an imperm issible bas is. Metropolitan Life, 481 U.S. at 63,

107 S. Ct. at 1546 (“Federal pre-emption is ordinarily a federal defense to the

plaintiff’s suit. As a defense, it does not appear on the face of a well-pleaded

compla int, and, th erefore, d oes not a uthorize remov al to feder al court.”) ; Butero,

174 F .3d at 12 12. Fu rther, Er vast argu es that the n ature of h is claim did not fulfill

the first, second, and fourth prongs of the Butero analysis. First, we hold that the

district court erred in deciding the super preemption issue by applying the

defensive preemption analysis. 7 Second, we hold that Ervast’s claims did not seek

7
The district court’s confusion is not unfounded. There are seemingly two approaches
employed by the circuit courts resulting from similar confusion: that is, whether the § 1144
preemption provision in ERISA is a component, or prerequisite, of the complete preemption
analysis. See Tovey v. Prudential Ins. Co. of Am., 42 F. Supp. 2d 919, 923-24 (W.D. Mo. 1999)
(noting the split between circuits that applied a two prong analysis and those that did not require
defensive preemption as a prerequisite to complete preemption). Some circuits require defensive
preemption as a prerequisite to complete preemption, thus applying a two-step analysis, while
other circuits do not. Tovey listed our circuit as applying the two-step analysis, citing Franklin
v. QHG of Gadsden, Inc., 127 F.3d 10924, 1028 (11th Cir. 1997) (“ERISA ‘completely
preempt[s]’ the area of employee benefit plans and thus converts state law claims into federal
11
“compensatory relief akin to that under § 1132” under the fourth prong, and thus

we need not reach the arguments concerning the remaining three prongs of the

Butero analysis. Accordingly, Ervast’s claims were not super preempted.

State law claims are comple tely preem pted by E RISA , and thu s remov able

to federal court as federal claims pursuant to the Butero analysis, if they state a

claim seeking the relief “akin to” that provided for in § 1132(a). Section

1132(a)(1)(B) permits a civil action by a participant or beneficiary “to recover

claims when the state law claim is preempted by ERISA and also falls within the scope of the
civil enforcement section of ERISA, Section [1132(a)].”); however, in Butero, we did not follow
the language in Franklin and considered it dicta. Butero set forth the proper complete
preemption analysis and made no mention that defensive preemption was a prerequisite. Butero,
174 F.3d at 1212.
The en banc Fifth Circuit recently in Arana v. Ochsner Health Plan, 338 F.3d 433 (5th
Cir. July 10, 2003) (en banc), disentangled the analyses and held them to be distinct inquiries,
and overruled its prior precedent that merged the two. It refused to reach the issue of defensive
preemption because it is a substantive, and not jurisdictional, issue, and if a state law claim is not
completely preempted because it seeks relief available under § 1132(a), then it is inappropriate
to decide the substantive issue of defensive preemption without proper jurisdiction. Id. at 439-
40.
Defensive preemption may not be a prerequisite for complete preemption, but they
usually co-exist. Naturally, if a claim were for the recovery or clarification of benefits under an
ERISA plan, then the claim will “relate to” the plan. There are, however, statutory exceptions to
ERISA preemption under § 1144, i.e., state securities and insurance laws, and thus a state
securities claim might appropriately be completely preempted, but defensive preemption may
not apply. 29 U.S.C. § 1144(b)(2)(A) (saving state insurance, banking, or securities laws from
preemption); see Arana, 338 F.3d at 439-40. To explicitly require defensive preemption under §
1144 would permit a loophole for state law claims that are excepted from defensive preemption
to avoid appropriate complete preemption, thus denying a party federal jurisdiction. This is not
to say that the “relate to” analysis and the law interpreting such can not inform the issue facing a
court that must determine whether state law claims are completely preempted, however,
complete preemption is not dependent on the existence of defensive preemption. Moreover, a
decision regarding complete preemption does not decide the issue of defensive preemption. As
we stated, supra note 7, defensive preemption is a substantive issue that must be decided by a
court with competent jurisdiction.
12
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 . . . .” If a state court plaintiff’s state law claim seeks this relief, then the

plaintiff is deemed to have brought a federal claim, the state law claims are thus

converted to a federal claim under § 1132, and the case is removable via federal

question jurisdictio n.

Not all sta te law claim s are com pletely pre empted and ma y be sub ject to

ERISA defensive preemption only. What is often confused is that these are two

differen t question s. The iss ue of co mplete p reemptio n is jurisd ictional; m eaning, if

the claims are not completely preempted, they are not pro perly removed and m ust

be rema nded to state cour t. Land, 339 F.3d at 1290. The defensive preemption

issue, however, is substantive; therefore, either in state or federal court, when a

state law claim is brought, the defendant may raise the defense that the claims are

preempted by ERISA under § 1144, and should be dismissed. Super preemption,

on the o ther han d, recharacterizes the state law claim into a federal claim under §

1132, so long as the other three Butero elements are prese nt.

That be ing said, if Ervast’s state law c laim for b reach of fiduciary duty is

actually (1) a claim for recovery of benefits due under the terms of the plan, (2) a

claim seeking to enforce his rights under the terms of the plan, or (3) a claim for

clarification of future benefits under the terms of the plan; it is construed as a
13
federal civil action under § 1132(a), is completely preempted, and confers federal

question jurisdictio n. See Land, 339 F .3d at 12 90. Although state-law claims

involving the denial of employee benefits invariably yield to ERISA substantive

law, the presence of an ERISA plan within the facts of a case does not, on its own,

automa tically subje ct the litigan t to federa l question jurisdictio n. Instead, along

with the other three elements of the Butero super preemption analysis, the court

evaluatin g federa l question jurisdictio n must p arse the ele ments o f the claim to

ascertain w hether th e claim, an d not jus t the factua l scenario , states a claim

resonant of recovery under § 1132. In Land, we recognized our past precedent

indicating that § 1132(a)(1)(B) claims “essentially are contract claims.” 339 F.3d

at 1293 (citing Harrison v. Digital Health Plan, 183 F.3d 1235, 1241 (11th Cir.

1999) ).

At the time of removal, Ervast’s complaint alleged four counts: breach of

fiduciary duty, attorney’s fees and expenses, punitive damages, and an alternative

count of negligence. In essence, Ervast claims that he is entitled to the difference

in the price he received for his ESOP shares and post-merger announcement price

of the shares because the defendants, as the majority shareholder and

officers/significant shareholders, had the fiduciary duty to inform him , as a

minority shareholder, of the merger discussions with Dow and they did not. If he

had acce ss to this in formatio n, Erva st maintain s that he w ould ha ve postp oned h is
14
resignation or put option in order to realize the post-mer ger share price. Ervast

does not contend that the valuation for the shares he received under the ESOP was

improper under the terms o f the ERISA plan. Rather, he hinges defendants’

liability on a failure to c ommu nicate ma terial infor mation to which he alleged ly

was entitled as a shareholder and affected his individu al decision to resign and cash

out his participant account of shares under the ESOP.

The relief Ervast seeks, and the basis upon which that relief is sought, is not

akin to that available under § 1132(a). Ervast’s allegations do not in any way

involve a clarification of his rights, nor is he seeking to enforce his rights under the

terms of the ESOP. Ervast does not dispute the distribution he received as being

contrary to the terms of the plan, or that under its terms he should have received

more than he did. Thus, neither the second nor third types of claims for recovery

under § 1132( a) are app licable her e.

The first type of § 1132(a) claim - for recovery of benefits due under the

terms of the ERISA plan - is what the district court construed Ervast’s state law

claim to be seeking. However, that assessment was incorrect. In its summary

judgment order, the district court construed Ervast’s state law claims as brought

under § 1132 for recovery of benefits and the court addressed the merits of

Flexible ’s summ ary judg ment m otion. T he cour t determin ed that, ev en thou gh it

liberally co nstrued Ervast’s uname nded co mplaint, h e could n ot mainta in a claim
15
for a denial of benefits under § 1132 because the valuation of the stock was

consistent with the terms of the ESOP.8 This conclusion exposes the preexisting

error by the district court - Ervast’s claim does not contest his distribution under

the terms of the ESOP. Instead, he claims a right to information that, if he

possessed, would have changed his decision making process with regard to the

time he so ught to c ollect his b enefits. E rvast also does no t claim entitle ment to th is

information under the terms of the ESOP; rather, his claim is based on his status as

minority shareholder and the duty ow ed him by the majority shareholders.

Although Ervast was a participant9 in the ESOP and Flexible was the plan

sponsor, we are not considering a claim casting the parties in these roles. Instead,

the breach of corporate fiduciary duty is premised on the p arties’ roles of majo rity

8
In addition, the court observed that Ervast could not simultaneously sustain a claim for
benefits and a claim for breach of fiduciary duty, pursuant to 29 U.S.C. § 1104, because they are
duplicative. R6-76 at 7 (citing Harrison, 183 F.3d at 1237 n.1). Tellingly, when the district
court also assessed whether Ervast could pursue his claim under ERISA for a breach of fiduciary
duty, the district court found that neither ERISA nor circuit law required Flexible, as a plan
administrator, to disclose discussions about a potential merger, because the merger plans “did
not pertain to the ESOP itself, but rather to a potential business decision unrelated to the
administration of the trust. . . . [A]ny disclosure duty found in § 1104 extends only to
information about the ERISA plan or its administration, and not to general business decisions.”
Id. at 12. In actuality, Ervast’s claim is not really that Flexible, as a plan administrator, owed
him the duty, but Flexible, as majority shareholder, owed him the duty to disclose information
about the potential merger. But, by attempting to force a square peg in a round hole, the district
court reached the inconsistent conclusion that Ervast’s state law claims were preempted by
ERISA, however, his claim could not be sustained under ERISA because it was for a breach of
fiduciary duty unrelated to the administration of the plan.
9
The parties dispute whether Ervast was a participant at the time of removal. We are not
addressing that issue before us, however, for the purpose of our analysis we are presuming that,
at one time, Ervast was a participant in the ESOP.
16
and minority shareholders. The state law action does not implicate the traditional

ERIS A roles , nor do es it call into q uestion th e admin istration o f the ES OP. See

Hook v. Morrison Milling Co., 38 F.3d 7 76, 784 (5 th Cir. 1994 ) (“ERIS A’s

preemptive scope may be broad but it does not reach claims that do not involve the

administration of plans, even though the plan may be a party to the suit or the

claim relies on the d etails of the plan.”). Accor dingly, w e hold th at Ervas t’s state

law claim for breach of corporate fiduciary duty is not completely pre-empted

because it does not seek compensatory relief “akin to” that available under §

1132.10

To div est a state co urt of jur isdiction a nd a plain tiff of his c hosen f orum in

this situation by complete preemption, would overreach the scope of actions

Congress sough t to bring within the purview o f ERISA civil enforcement actions.

Ervast’s claim is not addressing whether he received what money he was entitled

to unde r the ES OP, b ut rather w hether h e was en titled as a m inority sh arehold er to

the infor mation F lexible, as th e majority shareho lder, pos sessed. C onvertin g his

10
Although we conclude that the particular type of “failure-to-inform” claim asserted by
Ervast here sounds in state law and is not preempted, we note, however, that an ERISA
participant has a right to information and that a failure-to-inform claim may lie against an
ERISA administrator. See Krohn v. Huron Mem’l Hosp., 173 F.3d 542, 548-51 (6th Cir. 1999)
(an ERISA fiduciary with knowledge of a beneficiary’s status and situation has an affirmative
duty to communicate material facts to the beneficiary which will allow for an informed
decision); Bixler v. Central Pennsylvania Teamsters Health & Welfare Fund, 12 F.3d 1292,
1300-01 (3rd Cir. 1993) (an ERISA fiduciary’s duty to provide “complete and accurate
information to its beneficiaries” “entails not only a negative duty not to misinform, but also an
affirmative duty to inform when the trustee knows that silence might be harmful.”).
17
state law c laims der ived fro m state law duties to a n ERI SA civ il action su bject to

comple te preem ption w ould serve to insu late major ity shareh olders fr om min ority

shareholders seeking to exercise their rights by the coincidental nature in the means

by wh ich those minority shares w ere obtain ed, an E RISA plan.

We are not confronted with an “artful pleader” that has found a way around

ERISA preemption by couching the terms of his claim for benefits in a creative

way. See Englehardt v. Paul Revere Life Ins. Co., 139 F .3d 134 6, 1354 n.11 (1 1th

Cir. 1998). Simply put, Ervast claims that Flexible Products Co., Randy Peterson,

and Doug Cruickshank, as the majority shareholder and corporate officers, had the

fiduciary duty to tell him, as a minority shareholder, that it was considering a

merger with D ow. G eorgia co rporate la w perm its this direc t action by a minor ity

shareholder, apparently even if those shares are held in a trust form, as were

Ervast’s in the ES OP. Next C entury C ommu nications Corp v . Ellis, 171 F. Supp.

2d 137 4, 1381 (N.D . Ga. 20 01); see O.C.G.A. § 1 0-5-2(26) (defining “security”

broadly).11 Whether the defendants were required to tell Ervast about the merger

and whether it was a breach of their fiduciary duty as majority shareholder and

corpor ate officer s becaus e they did not, can o nly be an swered by Geo rgia state law .

Their duty to him, if any, exists by nature of state law only. As the district court

11
We are not in the position to evaluate the feasibility of Ervast’s claim or his relative
chance of success in state court. Our sole concern is the nature of the state law claim and
whether it is completely preempted by ERISA.
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noted, there was no duty under ERISA that the defendants to inform him of the

pendin g merg er becau se the fidu ciary relatio nship b etween a majority and min ority

shareho lders is no t one der ived fro m ER ISA. See Lupo, 28 F.3d at 273-74

(deciding that a plaintiff’s state law claims for professional malpractice, breach of

fiduciary duty, and intentional infliction of emotional distress against employer of

psychotherapist which had contracted with plaintiff’s employer to provide services

in conn ection w ith emplo yee health benefit p lan gov erned b y ERIS A, did n ot state

a claim aris ing und er ERI SA fo r purpo se of fed eral ques tion jurisd iction). T hat is

because the claim th at Ervas t broug ht agains t the defen dants is n ot an ER ISA c ivil

action fo r the reco very of b enefits du e under the terms of the pla n, but gr ounde d in

state law. E rvast orig inally sou ght his an swer in state cour t and, in o ur view , it is

the state co urt, and n ot the fed eral cour t, that has the jurisdictio n and au thority to

give it to h im. Erv ast’s claim w as not see king co mpens ation akin to that ava ilable

under § 1132, it w as not su per pree mpted b y ERIS A , and it was im proper ly

removed to federal court on that basis. Accordingly, the district court’s denial of

Ervast’s motion to remand is reversed and the district court is instructed to remand

the case to State Court of Fulton County, Georgia.12

III. CONCLUSION

12
Because the action is remanded to state court for lack of federal question jurisdiction,
the district court’s order granting Flexible’s motion for summary judgment is VACATED.
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 Ervast’s state law action was improper ly removed to federal court because

his state law claims w ere not co mpletely p reempte d by ER ISA, e ven though his

minority shareholder rights derived from shares held in an ERISA plan. The duties

owed him by Flexible and allegedly breached are grounded in state law and not

ERISA. The claims did not seek relief akin to that available under § 1132 and

could n ot form the basis o f remov al under federal q uestion ju risdiction .

Accor dingly, th e district co urt’s den ial of Erv ast’s motio n to rem and is

REV ERS ED an d the distr ict court is in structed to remand the case to the State

Court of Fulton County, Georgia. Flexible’s appeal is moot because the district

court’s d ecision w as rende red with out jurisd iction.

REVERSED WITH INSTRUCTIONS.

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