Joint Apprenticeship and Training Committee of Local Union No. 36 et al v. Weddle
MEMORANDUM OPINION AND ORDER REMANDING ACTION TO STATE COURT: IT IS HEREBY ORDERED that the motion of plaintiffs to remand this action to the Circuit Court of the City of St. Louis (ECF No. 17 ) is SUSTAINED. This action is hereby remanded to that court for all further proceedings. The pending motion of defendant to dismiss for failure to state a claim (ECF No. 8 ) is deferred to the state court. Signed by Magistrate Judge David D. Noce on 11/1/2016. (CC: Circuit Court of the City of St. Louis)(CLO)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
JOINT APPRENTICESHIP AND
TRAINING COMMITTEE OF LOCAL
UNION NO. 36, affiliated with
INTERNATIONAL ASSOCIATION OF
SHEET METAL, AIR, RAIL AND
INSTITUTE FOR THE SHEET METAL
AND AIR CONDITIONING INDUSTRY,
MITCHELL L. WEDDLE,
No: 4:16 CV 1371 DDN
MEMORANDUM OPINION AND ORDER
REMANDING ACTION TO STATE COURT
Before the court are the motions of defendant to dismiss for failure to state a claim
upon which relief can be granted (ECF No. 8) and of plaintiffs to remand the action to the
Missouri circuit court (ECF No. 17). The parties consented to the exercise of plenary
authority over this action by the undersigned United States Magistrate Judge under 28
U.S.C. § 636(c).
The court heard oral argument on these motions on October 18, 2016. For the
reasons stated below, plaintiffs’ motion to remand is sustained and defendant’s motion to
dismiss is deferred to the state court.
Plaintiff Joint Apprenticeship and Training Committee of Local Union No. 36
(JATC) is a joint labor management committee established under a union agreement
between the St. Louis Chapter of the Sheet Metal Air Conditioning Contractors National
Association and the International Association of Sheet Metal, Air, Rail and
Transportation Workers (SMART).
The JATC operates certain training and
On July 22, 1999, the Department of Labor’s Bureau of Apprenticeship and
Training approved JATC’s proposed apprenticeship program standards. (ECF No. 18,
Ex. 4, at 13). These standards included an addendum titled “Appendix A, Selection and
Admission of Apprentices,” which provides in part:
The applicant should understand and agree that the local Joint
Apprenticeship and Training Committee and National Training Fund will
provide various work books, text books and other training materials and
expend significant sums of money for the training of the Apprentice in the
specialized skills necessary for employment in the Sheet Metal Industry;
which will result in a substantial direct benefit, as well as substantial
indirect and intangible benefits, to the Apprentice from this training which
has significant value. The applicant should further understand that these
considerable expenditures will be repaid to the National Training Fund and
the Local Joint Apprenticeship and Training Committee by the Apprentice
working in the Sheet Metal Industry resulting in contributions being made
to the National Training Fund and Local Joint Apprenticeship and Training
Committee pursuant to Collective Bargaining Agreements.
The Apprentice agrees that he or she will neither seek nor accept
employment from an Employer engaged in, nor become an Employer
engaged in, any general, mechanical sheet metal, testing and balancing,
roofing, residential, sign or food service work or any other work covered by
the Constitution of the Sheet Metal Workers’ International Association
unless such employment is performed under the terms of a Collective
Bargaining Agreement that provides for the payment of contributions by
such Employer to the National Training Fund or to the Local Joint
Apprenticeship and Training Committee or to another Joint Apprenticeship
and Training Committee sponsored by or affiliated with a local Union of
the International Union.
If the Apprentice breaches this Agreement, all amounts due and owing on
the Scholarship Loan reduced by any credit received by the Apprentice, or
any cash payments made, will become immediately due.
The apprenticeship programs are funded by the SMART Local 36 Apprenticeship
and Training Fund (Local Fund) and the International Training Institute of the Sheet
Metal and Air Conditioning Industry (ITI). (ECF No. 18, Ex. 3, at 3). ITI provides the
training materials and curriculum for the apprenticeship program, while both ITI and the
Local Fund pay any remaining expenses. (Id. at ¶ 7). Both the Local Fund and ITI have
their own boards of trustees and trust agreements and are funded by contributions from
signatory employers under the terms of collective bargaining agreements. (Id.) The
JATC does not directly receive employer contributions. (Id.). The monies contributed by
signatory employers to ITI and the Local Fund may only be used to train apprentices who
will work for signatory employers. (Id. at Ex. 6, at 2, § 3). Accordingly, the scholarship
loan program requires apprentices to repay the cost of any training they have received if
they leave. (Id.) In exchange for the use of its materials and programs, ITI requires
JATC to use the scholarship loan agreements. (Id.) (“If a Local J.A.T.C. does not
implement the Scholarship Loan Agreement, the Local J.A.T.C. shall be prohibited from
utilizing International Training Institute materials and programs”).
Defendant Mitchell L. Weddle was an apprentice in plaintiffs’ apprenticeship
training program. Mr. Weddle entered into three such scholarship loan agreements with
the JATC and the ITI to cover the costs of his apprenticeship training in the sheet metal
industry. He signed a separate agreement for each year of training. (ECF Nos. 1-1 to 13). These agreements provided in part that:
The Apprentice understands and agrees that [plaintiffs] will provide various
workbooks, textbooks and other written material . . . expend significant
sums of money for educating and training the Apprentice in the specialized
skills necessary for employment in the Sheet Metal Industry. The
Apprentice also understands and agrees that this training will result in a
substantial direct benefit, as well as a substantial indirect and intangible
benefit, to the Apprentice[.]
The Apprentice further understands that these considerable expenditures
will be repaid to [plaintiffs] by the Apprentice working in “Qualifying
Employment” within the “Sheet Metal Industry” . . . which will result in
contributions being made to [plaintiffs] pursuant to Collective Bargaining
The Scholarship Loan will be repaid by the Apprentice in full, either in
cash or by in-kind credits[.] . . . An Apprentice who works in Qualifying
Employment will receive a credit for each calendar year of Qualifying
It will constitute an immediate breach of this Agreement if the Apprentice
accepts or continues in “Disqualifying Employment.” “Disqualifying
Employment” is: (a) employment in the Sheet Metal Industry with an
employer which does not have a Collective Bargaining Agreement . . . or
(b) self-employment in the Sheet Metal Industry without having a
Collective Bargaining Agreement[.]
(Id. at Ex. 1-1 at 10-11, 16-17).
[Plaintiffs] will expend significant sums of money for education and
training necessary to enable [Weddle] to complete the [plaintiffs’]
sponsored apprenticeship training program and/or education and training in
certain advanced and/or specialized skills . . . . [Weddle] understands and
agrees that receipt of this education and training . . . will result in a
substantial direct benefit, as well as substantial indirect and intangible
benefit, to [Weddle]. [Plaintiffs] agree that the amounts set out in
Paragraph 1 below represent the costs to [plaintiffs] in providing education,
training, and Training Materials and that the total of such amounts
constitute a Loan to [Weddle] which, to the extent not forgiven pursuant to
the terms of this agreement, is to be repaid in full with interest.
It shall constitute an immediate breach of this Agreement and immediate
payment of the amount of the loan outstanding (i.e. the Loan amount less
amount forgiven) shall be required if Borrower accepts or continues in
employment in the Sheet Metal Industry that does not constitute Qualifying
(Id. at 22-23).
Plaintiffs allege that Weddle failed to meet his obligations under the agreements.
They allege that he left his apprenticeship training in April 2016, was terminated by his
employer, refused a referral to another union employer, stated he did not want to return to
the apprenticeship program, began working for a non-union employer in the sheet metal
trade, and his status as an apprentice ended. (ECF No. 18, Ex. 3, ¶ 9).
On July 12, 2016, plaintiffs brought suit in the Circuit Court of the City of St.
Louis against defendant Weddle for breach of contract under Missouri law to recover
$25,041.20. (ECF No. 1-1 at 6-27).
Defendant removed the case to this court under 28 U.S.C. § 1441(a), asserting
subject matter jurisdiction under 28 U.S.C. § 1331, alleging that plaintiffs' claim is
completely preempted by the federal Employee Retirement Income Security Act of 1974
(ERISA), 29 U.S.C. §1132. (ECF No. 1 at 2).
II. PLAINTIFFS’ MOTION TO REMAND
Plaintiffs timely move to remand this case, arguing that the court does not have
subject matter jurisdiction over their breach of contract claim because it is not preempted
by ERISA. Defendants maintain that ERISA preemption applies to the claim such that it
must remain in federal court and be dismissed for failure to state a permissible ERISA
a. Legal Standard
A defendant may remove a case from state court to federal district court if the
district court would have original jurisdiction over it. See 28 U.S.C. § 1441(a). A federal
law “may so completely preempt a particular area” that any civil complaint in that area,
however it might be pleaded, necessarily raises a federal question. Metropolitan Life Ins.
Co. v. Taylor, 481 U.S. 58, 63-64 (1987). The Supreme Court has concluded that ERISA
is such a law. See id. at 63-67. State law causes of action filed in state court that are
preempted by ERISA are removable to federal district court. See id. at 64-76.
As the party seeking removal, defendant has the burden to establish the existence
of federal subject matter jurisdiction. In re Bus. Men’s Assur. Co. of Am., 992 F.2d 181,
183 (8th Cir. 1993). If a case does not present a federal question and is not removable
based on diversity of citizenship and the amount in controversy, then it must be remanded
to state court. The court must resolve any doubts about federal jurisdiction in favor of
ERISA explicitly preempts “any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan described in section 1003(a) of this title and
not exempt under section 1003(b) of this title.” 29 U.S.C. § 1144(a). A benefit plan
under Section 1003(a) is one maintained “by any employer engaged in commerce or in
any industry or activity affecting commerce” or “by any employee organization or
organizations representing employees engaged in commerce or in any industry or activity
affecting commerce.” Id. at § 1003(a)(1)-(2).
It is well established that ERISA preempts common law causes of action for
breach of contract if they “relate to” an ERISA plan. See, e.g., Metro. Life Ins. Co. v.
Taylor, 481 U.S. 58, 60 (1987); Johnson v. U.S. Bancorp, 387 F.3d 939, 942 (8th Cir.
2004). The effect of this preemption may be to deny claims under applicable state law
while at the same time affording no remedy under ERISA. See, e.g., Massachusetts Mut.
Life Ins. Co. v. Russell, 473 U.S. 134, 148 (1985). Plaintiffs argue, however, that ERISA
preemption does not apply in this case because (1) interpreting ERISA to preempt
plaintiffs’ claim would impair another federal statute in violation of ERISA’s savings
clause and (2) plaintiffs’ claim does not “relate to” an ERISA plan for purposes of
preemption. The court addresses each of these arguments.
i. ERISA’s Savings Clause Does Not Save this Claim
ERISA’s savings clause provides that “[n]othing in this subchapter shall be
construed to alter, amend, modify, invalidate, impair, or supersede any law of the United
States . . . or any rule or regulation issued under any such law.” 29 U.S.C. § 1144(d). In
determining whether a construction of ERISA “impairs” the operation of another federal
statute, the question is whether that construction would “frustrate the goal” of the second
statute. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 102 (1983).
Plaintiffs argue that were ERISA preemption to apply in this case, it would
frustrate the goals of the Fitzgerald Act of 1937, 29 U.S.C. § 50. The Fitzgerald Act
authorizes the U.S. Secretary of Labor “to formulate and promote the furtherance of labor
standards necessary to safeguard the welfare of apprentices” in cooperation with state
agencies engaged in the same type of work. Minn. Chapter of Assoc. Builders &
Contractors v. Minn. Dep’t of Labor and Indus., 47 F.3d 975, 981 (8th Cir. 1995) (citing
29 U.S.C. § 50).
The Fitzgerald Act is administered by the Department of Labor, which has issued
the following relevant regulations pursuant to that Act:
An apprenticeship program, to be eligible for approval and registration by a
Registration Agency, must conform to the following standards:
(a) The program must have an organized, written plan (program standards)
embodying the terms and conditions of employment, training, and
supervision of one or more apprentices in an apprenticeship occupation, as
defined in this part, and subscribed to by a sponsor who has undertaken to
carry out the apprentice training program.
(b) The program standards must contain provisions that address:
(19) Provision for registration of apprenticeship agreements, modifications,
and amendments; notice to the Registration Agency of persons who have
successfully completed apprenticeship programs; and notice of transfers,
suspensions, and cancellations of apprenticeship agreements and a
statement of the reasons therefore.
29 C.F.R. § 29.5.
Plaintiffs assert that the scholarship loan agreements were made pursuant to
JATC’s written program standards, which were submitted and approved by the
Department of Labor under the Fitzgerald Act. The Fitzgerald Act’s aim is to safeguard
the welfare of apprentices by promoting national apprenticeship program standards.
Allowing the loan agreements to become unenforceable via ERISA preemption, plaintiffs
argue, would defeat the purpose of the Act.
In support of their claim, plaintiffs
specifically point to 29 C.F.R. § 29.5(b)(19), which requires apprenticeship programs to
have a written standard for the cancellation of apprenticeship agreements. But this
provision only requires a written standard for the notice of such cancellations, and it does
not, in any case, dictate what the standard for cancellation must be. This court is unable
to conclude that the Department of Labor’s implementation of the Fitzgerald Act would
be impaired by ERISA preemption in this case. Nor has it been able to discover any
other court’s conclusion that a breach of contract claim was saved from preemption
because it was also related to an apprenticeship program registered under the Fitzgerald
The cases on which plaintiffs rely do not provide this support. Those cases are
concerned with the express preemption of state statutes regulating apprenticeship wages,
not the complete preemption of a breach of contract claim as argued by defendant
Weddle. See Cal. Div. of Labor Stds. Enforcement v. Dillingham Constr. N.A., 519 U.S.
316, 330 (1997); Minnesota Chapter of Associated Builders & Contractors v. Minnesota
Dep’t of Labor and Indus., 47 F.3d at 981.
First, in Minnesota Chapter, the Eighth Circuit analyzed whether ERISA expressly
preempted Minnesota’s prevailing wage law, which provided an exemption for any
apprenticeship program that had received state or federal approval. 47 F.3d at 980-81.
The Eighth Circuit held that the state statute was saved by ERISA’s savings clause
because the “federal approval” to which the state statute referred would be administered
by the Bureau of Apprenticeship and Training (Bureau) under the Fitzgerald Act. Id.
Thus, Minnesota’s law was specifically authorized by the Fitzgerald Act and its
accompanying regulations. Id. Express preemption of the Minnesota law would directly
interfere with the Fitzgerald Act’s primary purpose: approval of apprenticeship programs.
Here, defendant Weddle is not arguing that ERISA expressly preempts the Missouri state
common law cause of action for breach of contract. Instead, he argues that plaintiffs’
specific claim is completely preempted by ERISA and converted from a state law claim
to an ERISA claim.
Further, while the scholarship loan agreements at issue are
referenced in the written standards plaintiffs submitted to the Bureau for approval, the
specific agreements at issue in this dispute do not in any way depend on the
administration of the Fitzgerald Act. Just because the Bureau approved those written
standards does not mean the loan agreements are thereby implementations of the
Fitzgerald Act. The court does not conclude that preemption of plaintiffs' claim would
frustrate the goals of the Fitzgerald Act, which are essentially to induce apprenticeship
programs to register at the state or federal level and thereby promote the welfare of
apprentices. See, e.g., Minnesota Chapter, 47 F.3d at 980-81.
In the second case plaintiffs cite, Dillingham, the Supreme Court footnoted that,
while preemption was "not inconceivable," ERISA's silence about preemption of specific
state law programs fostered by preexisting federal statutes, e.g. the Fitzgerald Act,
“counseled against” preemption of California’s prevailing wage statute. 519 U.S. at 332
n.7. But it ultimately concluded that the state statute was not preempted, because it did
not “dictate the choices” facing ERISA plans, it merely “alter[ed] the incentives.” 519
U.S. at 334. In the case at bar, the argued conflict between ERISA and the Fitzgerald Act
is even more remote; plaintiffs have not demonstrated how the Fitzgerald Act’s mandate
for standards has in any way dictated how they implemented the apprentice scholarship
In other words, just because the Fitzgerald Act establishes that apprenticeship
programs must have standards related to specific topics, without dictating what those
standards must be, does not make it inconsistent with the plaintiffs’ administration of an
ERISA plan. Neither the Fitzgerald Act nor its implementing regulations contemplate
enforcement mechanisms. See Hydrostorage, Inc. v. N. Cal. Boilermakers Local Joint
Apprenticeship Comm., 891 F.2d 719 (9th Cir. 1989), abrogated on other grounds by
Indep. Training & Apprenticeship Program v. Cal. Dep't of Indus. Relations, 730 F.3d
1024 (9th Cir. 2013).
Instead, the Fitzgerald Act authorizes the registration of
apprenticeship programs and conditions this registration on a program’s conformity with
national apprenticeship program standards. See id.; 29 C.F.R. § 29.3.
The court has reviewed the standards promulgated by the Secretary of Labor under
the Fitzgerald Act but can find no standard that would be impaired by ERISA preemption
in this case. 29 C.F.R. § 29.1-29.13. The closest provision is found in Section 29.7,
which requires an apprenticeship agreement to contain “a statement of . . . whether or not
the required related instruction is compensated.” Id. at § 29.7(g). ERISA preemption of
plaintiffs’ breach of contract claim would not impair the operation of this provision.
Any authority the court has found for the Fitzgerald Act’s saving power is limited
to the context of state regulation of apprenticeship programs. See id. The present dispute
arises out of a wholly separate context: an individual claim related to an apprentice’s
scholarship loan agreement. While the underlying apprenticeship program happens to be
governed to some extent by the Fitzgerald Act, as well as ERISA, the instant breach of
contract claim is not saved on that ground. The two federal statutory schemes do not
conflict in this case but are complementary.
ii. Plaintiffs’ Claim Does Not Relate To
An ERISA Plan and Is Therefore Not Preempted
In Aetna Health Inc. v. Davila, the Supreme Court held that ERISA completely
preempts a claim when (1) the claim could have been brought, at some point in time,
under ERISA and (2) the claim is dependent on an ERISA plan or duty and does not
involve the violation of any independent legal duty. 542 U.S. 200, 208-10 (2004).
Plaintiffs contend that their cause of action is not preempted by ERISA because it fails
the second prong of the Davila test, in that “there is no plan in this case on which the
claim could be based.” (ECF No. 18 at 11). They advance three arguments to support
this proposition. First, programs exclusively providing apprenticeship training benefits
are exempted from having employee welfare benefit plans. (Id.) (“DOL regulations
exempt training funds from having a plan of benefits and, accordingly, neither Plaintiffs
have such a plan”). Second, the scholarship loan agreements are standalone contracts
based on an independent contractual duty, not an ERISA plan. (See id.; ECF No. 20 at 3
(“[Weddle’s] legal duty does not arise under any plan term, but under the scholarship
loan agreements, which are part of the Joint Committee’s standards approved by the
United States Department of Labor pursuant to the Fitzgerald Act.”); ECF No. 24 oral
argument). And, third, the scholarship benefits are funded out of general assets and not
an ERISA fund. (ECF No. 24 oral argument).
Plaintiffs first argue that 29 C.F.R. § 2520.104-22 exempts apprenticeship training
funds from having ERISA plans of benefits.
But this regulation only exempts
apprenticeship training benefit plans from ERISA’s requirement that benefit plans be
formally written. 29 C.F.R. § 2520.104-22. This regulation provides only that the
documents collectively representing the apprenticeship fund need not be formally
reported and disclosed as such. See id.; Milwaukee Area Joint Apprenticeship Training
Comm. for Elec. Indus. v. Howell, 67 F.3d 1333, 1338 (7th Cir. 1995). The regulation
implicitly recognizes that a fund that provides apprenticeship training benefits can be an
employee welfare benefit plan; it simply relaxes the general reporting and disclosure
requirements for such a plan. 29 C.F.R. § 2520.104-22(a). This exemption does not
establish that the apprenticeship program is not an ERISA plan.
Plaintiffs further argue that the scholarship loan agreements are not part of an
employee welfare benefit plan under ERISA, but rather are standalone contracts made
pursuant to JATC’s “standards” approved by the Department of Labor under the
Fitzgerald Act. Plaintiffs argue that the loan agreements require no reference to, or
interpretation of, other documents.1
Defendant responds, however, that the
The case to which plaintiffs cite in support of this proposition, Urista v. Ohman, is not
instructive. 2012 Minn. Dist. LEXIS 233 (Minn. 1st Jud. Dist., Nov. 19, 2012); (ECF
No. 18, Ex. 1, at 6, 8). In that case, an apprentice had promised to repay the value of
scholarship loan amounts to a union in promissory notes that did not notify the apprentice
of the training or benefits he was entitled to under the benefit plan. Urista, 2012 Minn.
LEXIS 233 at *16-17. The Minnesota trial court held that the scholarship loan
agreements were part of the benefit plan but distinguished the notes from the loan
agreements, construing them as an independent basis for a breach of contract claim. Id.
at *16-17, *23-24. However, in a later section of the case opinion, the court made a
apprenticeship program is a welfare benefit plan and the loan agreements are an integral
part of that plan.
Under ERISA, an “employee welfare benefit plan” includes, among other things,
“apprenticeship or other training programs” and “scholarship funds.”
1002(1)(A); 29 C.F.R. § 2510.3-1(a)(2).
29 U.S.C. §
While plaintiffs plainly administer an
apprenticeship and scholarship program, the court turns to plaintiffs’ third argument
about the funding for these programs to determine whether they are ERISA benefit plans.
The Supreme Court has noted that it is the existence of a separate fund that
triggers ERISA coverage. California Div. of Labor Standards Enf't v. Dillingham Const.,
N.A., Inc., 519 U.S. at 327. If a program that administers benefits is not supported by
monies placed into a separate fund, it is not considered an ERISA benefit program. Id.
This is apparent in the regulations: scholarship programs paid for out of an employer’s or
an employee organization’s general assets are not ERISA plans, 29 C.F.R. § 2510.3-1(k),
and on-the-job training funded by general assets does not constitute an ERISA plan. 29
C.F.R. § 2510.3-1(b)(3)(iv). See also Dillingham, 519 U.S. at 327.
Based on the evidence presented to the court, JATC’s apprenticeship program is
an ERISA plan, not an unfunded scholarship program nor a qualified on-the-job training
program. The Department of Labor considered an analogous program to be an ERISA
plan in a 1994 advisory opinion: in that matter, a Joint Apprenticeship Trust (JAT) had
been established under collective bargaining agreements, provided apprenticeship
training and work in the insulation industry, and paid these benefits out of assets derived
exclusively from employer contributions. ERISA Advisory Op. No. 94-14A (1994).2
The opinion held that because the JAT provided benefits in the form of apprenticeship or
training and the benefits were not paid from the general assets of an employer or
employee organization, the JAT was an employee welfare benefit plan under ERISA. Id.
contrary holding: that the notes were derived entirely from the scholarship loan
agreements, which it had found to be part of the benefit plan. Id. at *23-24.
Available at https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/
advisory-opinions/1994-14a (last accessed Oct. 26, 2016).
So here, the benefits paid under the JATC’s program are not paid from the general assets
of an employer or an employee organization; rather they are funded by the SMART Local
Fund and ITI. Indeed, as a joint apprenticeship committee, JATC is required under the
Labor Management Relations Act to defray its apprenticeship and training expenses with
money placed in a separate fund. 29 U.S.C. § 186(c)(6). Accordingly, the program is an
ERISA plan. See Dillingham, 519 U.S. at 326.
Now the court must determine whether the scholarship loan agreements are part
of or related to the apprenticeship program such that ERISA preemption applies. On the
one hand, as defendant argues, JATC’s standards detail the terms of the ERISA
apprenticeship program and reference the scholarship loan agreements as part of that
program. Additionally, signing the loan agreements is required to participate in the
ERISA plan, and the loan agreements notify the apprentice of his or her benefits under
the ERISA plan. On the other hand, these agreements are, as plaintiffs argue, standalone
contracts between an employer and a single apprentice, and they do not fall within the
ambit of Congress’ intention in enacting the ERISA framework.
The Supreme Court’s jurisprudence on whether a claim “relates to” an ERISA
plan was originally very broad. See, e.g., Shaw v. Delta Air Lines, Inc., 463 U.S. at 97.
But recent decisions have retreated from this expansive interpretation. New York State
Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 65458 (1995). The Court has explained that “[i]f ‘relate to’ were taken to extend to the
furthest stretch of its indeterminacy, then for all practical purposes preemption would
never run its course, for really, universally, relations stop nowhere.” Id. at 655. Instead,
courts are to look to the objectives of the ERISA statute as a guide to the scope of the
state law that Congress understood would survive. Id.
The Supreme Court has discerned that “Congress’ primary concern [in enacting
ERISA] was with the mismanagement of funds accumulated to finance employee benefits
and the failure to pay employees benefits from accumulated funds.” Massachusetts v.
Morash, 490 U.S. 107, 115 (1989). ERISA established extensive disclosure, reporting,
and fiduciary duty requirements to protect employees from poor plan management. Id.
Additionally, “One of the principal goals of ERISA is to enable employers 'to
establish a uniform administrative scheme, which provides a set of standard procedures to
guide processing of claims and disbursement of benefits.'” Egelhoff v. Egelhoff ex rel.
Breiner, 532 U.S. 141, 148 (2001) (citation omitted). As the Court held in Travelers, the
“basic thrust” of ERISA’s preemption clause is to avoid conflicting state and local
regulation in calculating and administering employee benefits. Travelers Ins. Co., 514
U.S. at 657.
Finally, although the Court has formulated the Davila test for determining whether
a claim relates to an ERISA plan such that it is completely preempted, neither of the postDavila Supreme Court cases addressing ERISA preemption cites to Davila nor employs
its test, indicating that Davila supplements rather than supplants Travelers. See Gobeille
v. Liberty Mut. Ins. Co., 136 S. Ct. 936 (2016); Kennedy v. Plan Administrator for
DuPont Savings and Investment Plan, 555 U.S. 285 (2009). Ultimately, it appears that a
court should use ERISA objectives as a guide to determine whether a state-law claim is
Accordingly, while the scholarship loan agreements at issue here might have been
made to facilitate participation in an ERISA plan, the court must determine whether they
“relate to" the plan such that they fall within the scope of state law that Congress
understood would survive. When considering the Supreme Court’s entire preemption
jurisprudence, plaintiffs’ claim does not appear to fall within the scope of congressional
ERISA jurisprudence is not well-settled, is conflicting, and is
generally complex, but the Supreme Court’s ERISA preemption cases consistently reason
that Congress intended ERISA to preempt state laws and causes of action that
substantially affect the determination and administration of benefits under an employee
benefit plan. See, e.g., Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936, 943 (2016)
(finding preemption when state statute required reporting detailed information about
benefit administration); DeBuono v. NYSA-ILA Medical and Clinical Services Fund, 520
U.S. 806, 814-15 (1997) (finding no preemption when the state law did not interfere with
the calculation of benefits); Dillingham, 519 U.S. at 334 (finding no preemption when the
state law altered incentives but did not dictate the choices facing ERISA plans); Alessi v.
Raybestos-Manhattan, Inc., 451 U.S. 504, 524 (1981) (finding preemption when state
statute regulated calculation of pension benefits).
The scholarship loan agreements at issue here memorialize the parties’
understanding that plaintiffs would distribute certain benefits to defendant and, if
defendant did not meet certain obligations, he would need to repay to plaintiffs the value
of the benefits distributed to him. Essentially, then, these agreements do not concern the
distribution of benefits, but rather the post-administration liability of defendant should he
not meet certain obligations.
The Supreme Court has left the question of post-administration preemption open,
that is, whether ERISA preempts actions related to plan benefits after the benefits have
been distributed. Kennedy v. Plan Administrator for DuPont Savings and Investment
Plan, 555 U.S. 285, 299 n. 10 (2009) (“Nor do we express any view as to whether the
Estate could have brought an action in state or federal court against [the beneficiary] to
obtain the benefits after they were distributed.”).
But the Third Circuit recently
considered whether ERISA preempted a waiver provision in a property settlement
agreement after the plan proceeds had been distributed. Estate of Kensinger v. URL
Pharma, Inc., 674 F.3d 131, 134 (3d Cir. 2012). That court held that “permitting suits
against beneficiaries after benefits have been paid does not implicate any concern of
expeditious payment or undermine any core objective of ERISA.” Id. at 137 (emphasis
Additionally, in an analogous, post-Davila case, the Ninth Circuit held that an
ERISA fiduciary could bring a state law breach of contract action against a doublecollecting beneficiary. Providence Health Plan v. McDowell, 385 F.3d 1168, 1172 (9th
Cir. 2004), cert denied, 544 U.S. 961 (2005).
The McDowell court reasoned that
“because this is merely a claim for reimbursement based upon the third-party settlement,
it does not ‘relate to’ the plan.” Id. It held that the ERISA plan insurer was “simply
attempting, through contract law, to enforce the reimbursement provision.” Id. The
claim was not preempted because its adjudication “[did] not require interpreting the plan
or dictat[ing] any sort of distribution of benefits.” The ERISA plan insurer had already
paid ERISA benefits on behalf of the beneficiaries and the correctness of the benefits
paid was not in dispute. Id.
This court finds the reasoning of the Third and Ninth Circuits persuasive. At
bottom, ERISA is concerned with the calculation and administration of ERISA benefits.
Its objective is to ensure that benefits promised to beneficiaries are actually received.
Once these benefits have been received by the beneficiary, the calculation and
administration of benefits is complete. A subsequent dispute between the fiduciary and
the beneficiary, while related to the agreement, is unrelated to benefit calculation or
administration. Therefore, the parties’ dispute over repayment under state law is not
Moreover, the scholarship loan agreements are individualized agreements between
plaintiffs and defendant. The Eighth Circuit has noted in the context of severance
benefits that “arrangements that involve a single employee require particularly careful
scrutiny.” Dakota, Minnesota & E. R.R. Corp. v. Schieffer, 648 F.3d 935, 936–38 (8th
Cir. 2011) (quoting Cvelbar v. CBI Illinois Inc., 106 F.3d 1368, 1376 (7th Cir. 1997). As
the Schieffer court noted:
Congress in the National Labor Relations Act broadly preempted state laws
that interfere with multi-employee collective bargaining, and in ERISA
broadly preempted state laws that interfere with multi-employee benefit
plans. But Congress has never preempted state laws that regulate and
enforce individual employment contracts between employers and their
executives. That remains an important prerogative of the States, no matter
how complex a contract may be to administer. Neither the administrative
nor the remedial purposes of ERISA preemption apply to the resolution of
contractual disputes between an employer and a single, salaried employee.
Schieffer, 648 F.3d at 938.
Unlike Davila, in which beneficiaries sought to use state-law claims to enforce
promises for benefits, here defendant Weddle has already received the promised benefits.
Plaintiffs are seeking to recover the value of those benefits after an alleged breach of the
contract between them and defendant Weddle, an individual apprentice. This claim does
not fall within the scope of ERISA. To hold otherwise would shield the beneficiary from
obligations he freely undertook. None of the objectives of ERISA are implicated in this
claim. This claim does not dispute the terms and conditions of the ERISA plan, the level
of benefits owed, or the method used to calculate benefits. Resolution of plaintiffs’ claim
will not undermine regulatory uniformity in the field of employee benefit plan regulation
or the policy concerns with ensuring that employees receive plan benefits. Therefore, it
does not “relate to” any ERISA plan at issue; it merely seeks to enforce a postadministration contractual provision.
Furthermore, under the Davila test, plaintiffs could not have brought their breach
of contract claim for monetary damages under ERISA, which only provides that
fiduciaries can enforce the terms of a welfare benefit plan through equitable
jurisprudence. 29 U.S.C. § 1132(a)(3); see also Mertens v. Hewitt Associates, 508 U.S.
248, 256-57 (1993). Several courts have held that this breach of contract claim is not
available under ERISA. See, e.g., Honolulu Joint Apprenticeship & Training Center
Comm. Of United Ass’n Local Union No. 675 v. Foster, 332 F.3d 1234 (9th Cir. 2003)
(holding that the enforcement of a scholarship loan agreement was not equitable relief
available under ERISA); Sheet Metal Local No. 24 Anderson v. Newman, 35 Fed. Appx.
204 (6th Cir. 2002) (same).
For these reasons, plaintiffs’ breach of contract claim is not preempted by ERISA.
This claim is not otherwise argued to present a question of federal law under 28 U.S.C. §
1331. Because the amount in controversy is not alleged to exceed $75,000.00, and the
parties are not diverse in citizenship (ECF No. 1, Ex. 1), this court does not have subject
matter jurisdiction over the claim under 28 U.S.C. § 1332.
Accordingly, because this court does not have subject matter jurisdiction over
plaintiffs' claim, the case must be remanded to state court. 28 U.S.C. § 1447(c).
c. Attorneys Fees
Pursuant to 28 U.S.C. § 1447(c), plaintiffs included a motion for attorney fees in
their motion to remand. A court may award attorneys fees under this provision, if the
removing party lacked an objectively reasonable basis for removal. Martin v. Franklin
Capital Corp., 546 U.S. 132, 141 (2005). ERISA’s remedial scheme is sufficiently
complex, DiFelice v. Aetna U.S. Healthcare, 346 F.3d 442, 454 & n. 1 (3d Cir. 2003)
(described as a “Serbonian bog) (Becker, J., concurring), to allow defendant an
objectively reasonable basis for removing plaintiffs' claim to this court.
plaintiffs' request for attorneys' fees is denied.
ORDER OF REMAND
For the reasons set forth above,
IT IS HEREBY ORDERED that the motion of plaintiffs to remand this action to
the Circuit Court of the City of St. Louis (ECF No. 17) is SUSTAINED. This action is
hereby remanded to that court for all further proceedings.
The pending motion of
defendant to dismiss for failure to state a claim (ECF No. 8) is deferred to the state court.
/S/ David D. Noce
UNITED STATES MAGISTRATE JUDGE
Signed on November 1, 2016.
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?