Trustees of the Carpenters' Health & Welfare Trust Fund v. Darr

694 F.3d 803, 54 Employee Benefits Cas. (BNA) 1337, 2012 WL 3573360, 2012 U.S. App. LEXIS 17524
CourtCourt of Appeals for the Seventh Circuit
DecidedAugust 21, 2012
Docket10-1682, 10-1793, 10-2579
StatusPublished
Cited by16 cases

This text of 694 F.3d 803 (Trustees of the Carpenters' Health & Welfare Trust Fund v. Darr) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Trustees of the Carpenters' Health & Welfare Trust Fund v. Darr, 694 F.3d 803, 54 Employee Benefits Cas. (BNA) 1337, 2012 WL 3573360, 2012 U.S. App. LEXIS 17524 (7th Cir. 2012).

Opinion

*805 TINDER, Circuit Judge.

A federal court may not enjoin “proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.” 28 U.S.C. § 2283. This law, known as Anti-Injunction Act, represents “a necessary concomitant of the Framers’ decision to authorize, and Congress’ decision to implement, a dual system of federal and state courts.” Smith v. Bayer Corp., — U.S. -, 131 S.Ct. 2368, 2375, 180 L.Ed.2d 341 (2011) (quoting Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 146, 108 S.Ct. 1684, 100 L.Ed.2d 127 (1988)). Under the Act’s broad command that state tribunals “shall remain free from interference by federal courts,” id. (quoting Atl. Coast Line R.R. v. Locomotive Eng’rs, 398 U.S. 281, 282, 90 S.Ct. 1739, 26 L.Ed.2d 234 (1970)), “the Act’s core message is one of respect for state courts,” id. Any doubts about the Act’s “three specifically defined exceptions,” id. (quoting Atl. Coast Line, 398 U.S. at 286, 90 S.Ct. 1739), ought to “be resolved in favor of permitting the state courts to proceed,” id. (quoting Atl. Coast Line, 398 U.S. at 297, 90 S.Ct. 1739).

The district court enjoined an attorney and his clients from pursuing an Illinois state court claim against an employee health and welfare benefit plan governed by the 1974 Employee Retirement Income Security Act (ERISA). Because the injunction against this state court lawsuit does not qualify under an exception to the Anti-Injunction Act, we order the injunction vacated.

I. Background

James Miller, a beneficiary of the Carpenters’ Health and Welfare Trust Fund of St. Louis (the “Fund”), fell from a ladder resting on a pickup truck bed and injured his back. He secured the services of Illinois attorney Lanny Darr to represent him and his wife Kim Miller in a lawsuit seeking recovery from a third party (namely, the person who was supposed to hold the ladder steady) allegedly responsible for the accident. The Millers’ agreement with Darr provided a contingent fee of one-third of any recovery before deducting medical expenses. The Fund advanced the Millers $86,709.73 in medical and disability benefits in connection with this injury on the condition that the Millers repay this advance from any recovery without deducting for attorneys’ fees. In fact, James, along with Darr, signed a subrogation agreement allowing the Fund to pay his medical expenses in exchange for an assignment of any third-party recovery up to the amount advanced and undiminished by any deduction per the Fund’s governing document (the “Plan”). The Millers’ lawsuit ended up settling for $500,000, but this case isn’t about James Miller’s injury; this case is about attorneys’ fees.

The Millers and Darr distributed the settlement proceeds by deducting Darr’s fee based on only $413,290.27 instead of the full $500,000, a difference equal to what the Millers owed the Fund. Darr submitted $57,806.48 to the Fund from the Millers’ settlement, told the Fund that he was withholding the remaining one-third ($28,903.25 as a fee), and noted that he was willing to tender the remainder to avoid jeopardizing the Millers’ benefits. Yet Darr maintained that such payment would not resolve the dispute between his firm and the Fund. Darr later tendered the $28,903.25 amount to the Fund and wrote that the Millers “requested I send you full payment on his behalf so his future benefits are not in jeopardy.” Darr also asserted in that letter that his law firm held a $28,903.25 claim against the Fund. The Fund responded that if Darr pursued his claim they would consider Darr and the Millers in breach of Plan terms and in *806 repudiation of their promise in the subrogation agreement to abide by Plan terms and that the Fund would consider terminating the Millers’ coverage and seeking relief in federal court under ERISA.

Darr’s law firm proceeded to sue the Fund in Illinois state court to recover the $28,903.25 under the common fund doctrine, which permits a party (Darr’s firm) who creates a fund (the $500,000 settlement) in which others (the Fund) have an interest (the Fund’s reimbursement) to obtain reimbursement from the fund for litigation expenses (Darr’s fee) incurred in creating that fund (Darr’s representation on the Millers’ behalf). E.g., Scholtens v. Schneider, 173 Ill.2d 375, 219 Ill.Dec. 490, 671 N.E.2d 657, 662 (1996). In response, the Fund’s Trustees sued Darr and the Millers in federal court to enjoin Darr from pursuing his state claim. The Trustees sought in alternative counts a construction and declaration under express trusts that Darr- and the Millers owed the Fund an amount equal to any judgment Darr obtained in state court along with the Trustees’ attorneys’ fees. The district court issued a temporary restraining order against Darr’s suit, held a hearing, entered a permanent injunction against Darr’s lawsuit, and dismissed with prejudice the alternative counts. Trs. of Carpenters’ Health & Welfare Trust Fund v. Darr, No. 10-0130-DRH, 2010 WL 850171, at *3-4 (S.D.Ill. Mar. 5, 2010). The court later awarded the Trustees their fees and costs in the federal court case but not in the state court case. Trs. of Carpenters’ Health & Welfare Trust Fund v. Darr, No. 10-0130, 2010 WL 2607392, at *3 (S.D.Ill. June 24, 2010). Darr appeals the injunction and the fees and costs award and the Fund conditionally cross-appeals the alternative counts’ dismissal.

II. Analysis

District courts “have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. A case arises under federal law if “ ‘a well-pleaded complaint establishes either that federal law creates the cause of action or that the plaintiffs right to relief necessarily depends on resolution of a substantial question of federal law.’” Empire Healthchoice Assur., Inc. v. McVeigh, 547 U.S. 677, 689-90, 126 S.Ct. 2121, 165 L.Ed.2d 131 (2006) (quoting Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for S. Cal., 463 U.S. 1, 27-28, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983)); see also Mims v. Arrow Fin. Servs., LLC, — U.S. -, 132 S.Ct. 740, 744, 181 L.Ed.2d 881 (2012) (long recognized that a “suit arises under the law that creates the cause of action” (quoting Am. Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 36 S.Ct. 585, 60 L.Ed. 987 (1916))); Grable & Sons Metal Prods., Inc.

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694 F.3d 803, 54 Employee Benefits Cas. (BNA) 1337, 2012 WL 3573360, 2012 U.S. App. LEXIS 17524, Counsel Stack Legal Research, https://law.counselstack.com/opinion/trustees-of-the-carpenters-health-welfare-trust-fund-v-darr-ca7-2012.