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Studer v. Katherine Shaw Bethea Hospital

United States Court of Appeals, Seventh Circuit

August 10, 2017

Heather Studer, Plaintiff-Appellant,
Katherine Shaw Bethea Hospital, Defendant-Appellee.

          Argued May 19, 2017

         Appeal from the United States District Court for the Northern District of Illinois, Western Division. No. 15 C 50242 - Frederick J. Kapala, Judge.

          Before WOOD, Chief Judge, and POSNER and Kanne, Circuit Judges.

          Kanne, Circuit Judge.

         Katherine Shaw Bethea Hospital is a not-for-profit healthcare provider in Dixon, Illinois. Heather Studer worked at the hospital as an occupational therapist until she resigned. After she resigned, she filed a small-claims complaint in Illinois state court, alleging that the hospital violated certain provisions of the Illinois Wage Payment and Collection Act ("IWPCA") by failing to pay her money that she had accrued under the hospital's Paid Days Leave policy. The hospital removed the suit to federal court, claiming that Studer's claim was completely preempted by the Employee Retirement Income Security Act of 1974 ("ERISA").

         Studer then filed a motion to remand her suit to state court, challenging the hospital's preemption claim and asserting that the district court did not have jurisdiction over her state-law claim; the hospital filed a motion for summary judgment. The district court denied Studer's motion to remand, holding that it had federal-question jurisdiction because ERISA completely preempted the state-law claim. The court then granted the hospital's motion for summary judgment, holding that Studer had failed to name the welfare benefit plan as a defendant, which ERISA requires in most instances. See Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1490 (7th Cir. 1996) (citing 29 U.S.C. § 1132(d)(2)). In granting the motion, the court permitted Studer "to file an amended complaint naming the appropriate defendant and to issue summons." (R. 27 at 6.)

         But instead of filing an amended complaint, Studer filed a Rule 59(e) motion to alter or amend the judgment, again arguing that ERISA did not preempt her claim. The district court denied that motion, and this appeal followed. On appeal, Studer again contends that her IWPCA claim was not preempted by ERISA. Because we agree with the district court, we affirm.

         I. Analysis

         Ordinarily a defendant cannot remove a case to federal court unless the plaintiff's complaint demonstrates that the plaintiff's case arises under federal law. Aetna Health Inc. v. Davila, 542 U.S. 200, 207 (2004). This is known as the "well-pleaded complaint" rule. Id. (quoting Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Tr. for S. Cal., 463 U.S. 1, 9-10 (1983)).

         Under this rule, "the existence of a federal defense normally does not create statutory 'arising under' jurisdiction." Id. But there is an exception "[w]hen a federal statute wholly displaces the state-law cause of action through complete preemption." Id. (quoting Beneficial Nat. Bank v. Anderson, 539 U.S. 1, 8 (2003)). In those circumstances, a defendant can remove a plaintiff's state-law claim if the defendant can show complete preemption because the state law claim, "even if pleaded in terms of state law, is in reality based on federal law." Id. at 208 (quoting Anderson, 539 U.S. at 8).

         ERISA is one of those federal statutes with expansive preemptive power. See Hartland Lakeside Joint No. 3 Sch. Dist. v. WEA Ins. Corp., 756 F.3d 1032, 1035 (7th Cir. 2014) ("ERISA ... may contain the broadest preemption clause of any federal statute and completely occupies the field of employees' health and welfare benefits ... ."). And with the exception of a few identified circumstances, ERISA "supersede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan" created by any employer engaged in interstate commerce. ERISA § 514(a), 29 U.S.C. § 1144(a).

         In Davila, the Supreme Court created a two-step test to determine if a plaintiff's state-law claim is preempted by ERISA: a state-law claim is completely preempted (1) "if an individual, at some point in time, could have brought his claim under" ERISA's expansive civil enforcement mechanism- ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B)-and (2) "where there is no other independent legal duty that is implicated by a defendant's actions." Davila, 542 U.S. at 210. We consider each step of this test in turn.

         Here, to analyze Davila's first step, we must initially determine whether the hospital had created an ERISA employee welfare benefit plan and, if so, whether Studer was a participant in that plan. See ERISA § 502(a)(1), 29 U.S.C. § 1132(a)(1) (empowering a "participant or beneficiary" of an ERISA plan "to bring a civil action"). To make these determinations, we first look at the hospital's employee benefit policies.

         We begin with the Paid Days Leave ("PDL") policy, which the hospital created"[t]o provide [its employees] time away from the work environment in a way that conforms to an individual's lifestyle by allowing paid time off to be used for vacation, sick, personal, etc." (R. 17-2 at 40.) Under the PDL policy, certain hospital employees would accrue "PDL hours"-which those employees could use to take days off from work-based on a variable accrual rate that increased with the employees' seniority. (Id.) For example, "[f]ull-time regular employees" hired prior to December 20, 2009 with "0-9 years of service" accrued 7.38 PDL hours for every 80 hours of paid work. (Id.) And that accrual ...

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