In the
United States Court of Appeals
For the Seventh Circuit

No. 99-3550

Linda C. Lehmann, Danielle M. Brown,
and Alexis I. Brown,

Plaintiffs-Appellants,

v.

Timothy K. Brown and Teachers Insurance
and Annuity Association / College Retirement
Equities Fund,

Defendants-Appellees.



Appeal from the United States District Court
for the Western District of Wisconsin.
No. 98-C-0825-S--John C. Shabaz, Chief Judge.


Submitted September 29, 2000--Decided October 16, 2000



  Before Bauer, Easterbrook, and Evans, Circuit Judges.

  Easterbrook, Circuit Judge. After Richard Brown
and Linda Lehmann divorced in 1987, Richard
created an inter vivos trust for the benefit of
the couple’s children, Danielle and Alexis.
Richard instructed his insurers and financial
intermediaries, including Teachers Insurance and
Annuity Association / College Retirement Equities
Fund (TIAA/CREF), that in the event of his death
they should pay all benefits to this trust, of
which Richard’s brother Timothy was trustee.
Richard died in 1994, and TIAA/CREF paid the trust
approximately $68,000, representing Richard’s
full entitlement under his TIAA/CREF contracts--
which are defined-contribution retirement plans,
regulated by the Employee Retirement Income
Security Act (ERISA). Alleging that distribution of
the benefits in a lump sum, pursuant to Timothy’s
instructions, subjected the trust to
approximately $18,000 in federal taxes that could
have been avoided by periodic distributions,
Lehmann and her children filed suit in Wisconsin
court seeking damages from both Timothy and
TIAA/CREF. The complaint asserted that Timothy
violated his fiduciary duties in this and other
respects; it also sought relief on the theory
that TIAA/CREF violated its duties under Connecticut
law by distributing any benefits before Timothy
"qualified" as trustee of Richard’s trust.

  The claim against TIAA/CREF is hard to understand.
Lehmann and her children are citizens of
Connecticut, but Richard was a citizen of
Minnesota when he died; a claim based on the
relation between the trust and probate courts
would be decided under Minnesota law. Moreover,
plaintiffs’ apparent assumption that state courts
are responsible for appointing a trustee is
unfounded; Timothy became trustee under the
declaration of trust and did not need to
"qualify" or be appointed by a state court as if
he were the administrator of Richard’s estate.
Inter vivos trusts are designed in large measure
to bypass probate of a decedent’s estate,
allowing the decedent’s property to be managed
and distributed immediately following his death.
Plaintiffs do not contend that such vehicles for
the control and distribution of wealth are
unlawful in either Minnesota or Connecticut. But
instead of asking the state court to dismiss the
claim as frivolous (which it appears to be) or
contending that any liability under state law is
preempted by sec.514(a) of ERISA, 29 U.S.C.
sec.1144(a) (which it almost certainly would be),
TIAA/CREF removed the proceedings to federal court,
contending that plaintiffs’ claim "arises under"
ERISA and therefore may be removed under the
doctrine known as "complete preemption." See
Metropolitan Life Insurance Co. v. Taylor, 481
U.S. 58 (1987); Bartholet v. Reishauer A.G.
(Zurich), 953 F.2d 1073 (7th Cir. 1992). The
district court then dismissed the suit, ruling
that plaintiffs lack "standing" because none is
a beneficiary of Richard’s TIAA/CREF contracts, and
hence none has any possible claim under ERISA. Most
claims against Timothy were remanded to state
court once the claim supporting federal
jurisdiction had been resolved.

  If, as the district judge held at the urging of
TIAA/CREF, plaintiffs are strangers to the ERISA
plan, then their claims cannot possibly have
arisen under ERISA, and removal could not be
supported by federal-question jurisdiction.
Although the parties are of diverse citizenship,
plaintiffs’ claim against TIAA/CREF is only $18,000,
well short of the jurisdictional minimum. 28
U.S.C. sec.1332(a). The district judge appears to
have believed that any claim preempted by
sec.514(a) of ERISA, because "related to" a pension
or welfare plan, may be removed to federal court.
This, however, is not so. Following established
precedent, we have distinguished between federal
defenses, such as preemption, which must be
presented to state court, and claims based on
federal law, which are removable. For
applications to ERISA in particular, see Blackburn
v. Sundstrand Corp., 115 F.3d 493 (7th Cir.
1997), and Rice v. Panchal, 65 F.3d 637 (7th Cir.
1995). A claim usually arises under the law that
creates the right of recovery, for only when a
well-pleaded complaint depends on a proposition
of federal law does the claim arise under federal
law. Compare Metropolitan Life, 481 U.S. at 63,
with Caterpillar Inc. v. Williams, 482 U.S. 386,
398-99 (1987). Everyone agrees that ERISA does not
give plaintiffs any right of recovery. They do
not seek to collect benefits under Richard’s
pension plan; they contend, instead, that TIAA/CREF
violated state law by distributing those benefits
to a trustee who had not been appointed by a
state court, and in a manner that exposed the
benefits to taxation. That claim sounds in tort
under state law; it has no parallel under ERISA. If
it is preempted then TIAA/CREF has a good defense,
but federal defenses do not permit removal.

  Cases such as Blackburn, Rice, and Bartholet
observe that the phrase "complete preemption" has
caused confusion--evident in this case--by
implying that preemption sometimes permits
removal. Unfortunately "complete preemption" is
a misnomer, having nothing to do with preemption
and everything to do with federal occupation of
a field. The name misleads because, when federal
law occupies the field (as in labor law), every
claim arises under federal law. See In re Amoco
Petroleum Additives Co., 964 F.2d 706, 709-10
(7th Cir. 1992). Any attempt to present a state-
law theory then is artful pleading to get around
the federal ingredient of the claim; courts look
at substance, see the importance of federal law
to recovery, and permit removal. Franchise Tax
Board of California v. Construction Laborers
Vacation Trust, 463 U.S. 1, 22 (1983). ERISA
occupies much of the field of pension and fringe
benefits; the size and distribution of these
benefits depends on federal law, so Metropolitan
Life holds that a claim to benefits necessarily
"arises under" federal law no matter how it is
pleaded. State law is "completely preempted" in
the sense that it has been replaced by federal
law--but this happens because federal law takes
over all similar claims, not because there is a
preemption defense. See, e.g., Anderson v.
Humana, Inc., 24 F.3d 889 (7th Cir. 1994)
(discussing the provision of information to
beneficiaries, another respect in which federal
law has completely taken over).

  When the complaint alleges that a welfare-
benefit plan has committed a tort--for example,
when a physician employed by a HMO that has been
offered as a benefit to employees commits medical
malpractice--the claim must arise under state
law, because ERISA does not attempt to specify
standards of medical care. See Pegram v.
Herdrich, 120 S. Ct. 2143 (2000). Claims outside
the scope of ERISA arise independently of federal
law, and the possibility that sec.514(a) preempts
one or another state-law theory is just a federal
defense. This is the line Rice drew; it is
entirely sensible, however hard it may be to
implement when (as here) the complaint does not
present any recognizable theory of liability.
This complaint is on the state-law side of the
line if only for the reasons the district judge
gave: none of the plaintiffs is a beneficiary of
the TIAA/CREF plan, and none seeks those benefits
(as opposed to damages for supposedly tortious
conduct in the process of disbursing them to the
trust).

  This case must be remanded to state court.
TIAA/CREF, which wrongfully removed the suit, must
bear costs under Fed. R. Civ. P. 54(d)(1). But
like the district court we see no non-frivolous
claim available to plaintiffs; they should
consider not only the wastefulness of further
litigation but also the prospect of sanctions if
they persist in state court.

Vacated and Remanded
with Instructions to Remand
