James R. Husvar, Sidney B. Gutzwiller, Robert V. Caruso v. MICHEL RAPOPORT, WILLIAM A. MARQUARD, THOMAS R. WALL, IV, and ROBERT A. YOUNG, III

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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2003 FED App. 0242P (6th Cir.)
File Name: 03a0242p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
JAMES R. HUSVAR, SIDNEY B.
GUTZWILLER, ROBERT V.
CARUSO, and RONALD W.
BARNETT, individually and as
the representatives of the
plaintiff class,
Plaintiffs-Appellants,
v.
MICHEL RAPOPORT, WILLIAM
A. MARQUARD, THOMAS R.
WALL, IV, and ROBERT A.
YOUNG, III,
Defendants-Appellees.
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No. 01-4254
Appeal from the United States District Court
for the Southern District of Ohio at Cincinnati.
No. 01-00430—Sandra S. Beckwith, District Judge.
Argued: May 7, 2003
Decided and Filed: July 23, 2003
Before: GUY, BOGGS, and DAUGHTREY, Circuit Judges.
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_________________
COUNSEL
ARGUED: Robert A. Steinberg, WAITE, SCHNEIDER,
BAYLESS & CHESLEY, Cincinnati, Ohio, for Appellants.
Robert E. Zimet, SKADDEN, ARPS, SLATE, MEAGHER &
FLOM, New York, New York, for Appellees. ON BRIEF:
Robert A. Steinberg, WAITE, SCHNEIDER, BAYLESS &
CHESLEY, Cincinnati, Ohio, Richard S. Wayne, STRAUSS
& TROY, Cincinnati, Ohio, for Appellants. Robert E. Zimet,
Susan L. Saltzstein, SKADDEN, ARPS, SLATE, MEAGHER
& FLOM, New York, New York, for Appellees.
_________________
OPINION
_________________
MARTHA CRAIG DAUGHTREY, Circuit Judge. The
plaintiffs, all of whom are shareholders and former employees
of Mosler, Inc., brought this class action in Ohio state court
against the company itself and against four members of the
Mosler board of directors, seeking recompense for the
diminution in value of company stock that, in part, was used
to fund employee retirement plans. Although the plaintiffs
couch their causes of action in terms of direct and derivative
claims for breach of fiduciary duty under state law, the district
court concluded that the complaint and amended complaint
filed by the plaintiffs actually implicated the Employee
Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.
§§ 1001-1461, and thus was properly removable to federal
court. Ultimately, however, the district court dismissed the
action in its entirety on motion of the defendants, based not on
ERISA but on a finding that the plaintiffs lacked standing to
bring a derivative action because the nominal defendant,
Mosler, was involved in bankruptcy proceedings.

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No. 01-4254 Husvar, et al. v. Rapoport, et al. 3
On appeal, the plaintiffs contend that the district court erred
in denying their motion to remand the action to state court and
thus had no jurisdiction to enter an order of dismissal on the
merits. For the reasons set out below, we agree that the district
court lacked jurisdiction over what appear to be solely state-
law claims. We therefore find it necessary to reverse the
district court’s judgment, vacate the order of the district court
denying the plaintiffs’ motion to remand, and remand the case
to the district court with directions to remand this matter to the
Ohio state courts for resolution of the plaintiffs’ claims.
FACTUAL AND PROCEDURAL BACKGROUND
As non-union employees of Mosler, Inc., the plaintiffs
received shares of company stock in conjunction with their
participation in an employee stock option plan (ESOP). As
alleged in the amended complaint filed in this matter,
“Mosler’s ESOP is a defined contribution stock bonus plan for
which all salaried non-union employees are eligible. Mosler
has funded the ESOP primarily with its own common and
preferred stock.”
According to the plaintiffs, the company’s fortunes, under
the direction of defendants Michel Rapoport, William A.
Marquard, Thomas R. Wall, IV, and Robert A. Young, III,
spiraled downward dramatically. Regardless of that negative
trend, however, Rapoport continued to receive substantial
performance bonuses and additional stock issuances authorized
by the board of directors. The remaining defendants also
benefitted from various bonuses and fees, while the value of
the common and preferred stock distributed to the named
plaintiffs and other putative class members tumbled at least 80
percent.
Faced with the prospect of complete dissolution of their
retirement funds due to the perceived mismanagement of the
company by the defendants, the plaintiffs originally filed a
class action suit in Ohio state court claiming that those
defendants breached their fiduciary responsibilities to the
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employees and caused a “drastic reduction in the value of
Mosler’s stock and the resultant destruction of most of
Mosler’s employees’ retirement funds.” The complaint
contained both a direct common law claim for relief that
alleged financial injury to the class members “[a]s a proximate
result of these breaches of fiduciary duty,” and a derivative
common law claim, alleging damage and injury to the
company and to the shareholders as a result of those same
breaches.
The defendants subsequently sought removal of the
litigation to federal district court. In so doing, they recognized
that the complaint did not “on its face contain a federal
question.” Nevertheless, they argued that the ESOP was an
ERISA-covered plan and that the complaint’s perceived
allegations of improper management of that plan resulted in
the complete federal preemption of all matters relating to that
entity. Claiming that the plaintiffs failed to exhaust
administrative remedies and failed to comply with
requirements for filing derivative actions, the defendants also
moved to dismiss the complaint “for failure to state a claim
upon which relief may be granted.”
In response to the attempt to terminate the litigation, the
plaintiffs then filed both an amended complaint in district
court and a motion to remand the matter to state court. In the
amended complaint, they attempted to remove any indications
that the action was brought pursuant to ERISA. Instead, the
plaintiffs sought payment only for “the value of the stock lost”
as a result of defendants’ actions, not “the value of all benefits
lost,” as prayed for in the original complaint. The district
court nevertheless denied the motion to remand, ruling that,
despite the artful crafting of the language of the complaint,
“Plaintiffs seek to recover the loss of value of the retirement
savings that was occasioned by the individual Defendants’
mismanagement of the corporation and the ESOP.” According
to the district judge, such a prayer can be asserted only by
participants of the employee benefit plan and is governed

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No. 01-4254 Husvar, et al. v. Rapoport, et al. 5
preemptively by ERISA, thus vesting the federal courts with
jurisdiction over the dispute.
During the pendency of that motion, Mosler, Inc., filed a
bankruptcy petition, effectively staying all claims for monetary
damage against the company itself. The remaining, individual
defendants, however, continued their efforts to be dismissed
from the suit as well and filed a second motion to dismiss. In
that filing, the defendants contended that the plaintiffs lacked
standing to prosecute the derivative action described in the
complaint because, in the absence of abandonment, only the
debtor-in-possession of Mosler’s bankruptcy estate (the
bankruptcy trustee) can prosecute such a claim. The
defendants further argued that the direct claims of breach of
fiduciary duty should also be dismissed.
In response, the plaintiffs asserted that they “no longer
intend to pursue the direct claims currently alleged in the
Amended Complaint. As such, the issues contained in
Defendants’ Motion to Dismiss Plaintiffs’ Amended
Complaint with respect to Plaintiffs’ direct claims and class
action allegations are moot.” Furthermore, the plaintiffs did
not “dispute that Mosler’s filing of a Chapter 11 Petition
extinguished their rights to pursue a shareholder derivative
action at this time.” They requested, however, that the district
court stay its ruling on the defendants’ motion to dismiss that
claim pending a ruling by the bankruptcy court on another
motion by the plaintiffs in that forum seeking abandonment by
the trustee of the derivative cause of action.
In light of the plaintiffs’ assertions in their court filings, the
district court dismissed the federal court action in its entirety.
Specifically, the court “construe[d] Plaintiffs’ statement
regarding the direct claim in the amended complaint as an
accession to the dismissal of that claim.” Moreover, the
district judge ruled:
Plaintiffs’ concession that they do not have standing to
assert the derivative claim in the amended complaint is
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essentially an accession to the dismissal of that claim.
This Court may not entertain jurisdiction over a claim
asserted by a party without standing on the basis of an
hypothesis that it may gain subject matter jurisdiction in
the course of future events.
From that order of dismissal, as well as from the district
court’s denial of the motion to remand, the plaintiffs now
appeal.
DISCUSSION
We review a denial of a motion for remand de novo. See
Peters v. Lincoln Elec. Co., 285 F.3d 456, 465 (6th Cir. 2002).
Thus, in this case, we must examine the amended complaint to
determine whether the claims raised therein are not only
preempted by ERISA, but also are so tied to the statutory
scheme that federal courts, and only federal courts, must
exercise jurisdiction over their resolution.
Generally, a defendant is entitled to remove a cause of action
from state court to federal court when the federal district court
would “have original jurisdiction founded on a claim or right
arising under the Constitution, treaties or laws of the United
States.” 28 U.S.C. § 1441(b). In determining whether an
action meets this removal requirement, courts analyze the
litigation under the “well-pleaded complaint rule.” See
Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987). Pursuant
to that “rule,” the federal judiciary recognizes that “the
plaintiff is the master of the complaint, that a federal question
must appear on the face of the complaint, and that the plaintiff
may, by eschewing claims based on federal law, choose to
have the cause heard in state court.” Id. at 398-99.
Consequently, because a defendant’s argument that a cause
of action is preempted by federal law does not appear on the
face of a well-pleaded complaint, the doctrine of preemption
does not alone necessarily authorize removal to federal court.
See Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987).

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No. 01-4254 Husvar, et al. v. Rapoport, et al. 7
“One corollary of the well-pleaded complaint rule developed
in the case law, however, is that Congress may so completely
pre-empt a particular area that any civil complaint raising this
select group of claims is necessarily federal in character.” Id.
The defendants in this case assert that ERISA’s overarching
preemption provision constitutes an example of just such an
intent on the part of Congress to vest federal courts with
exclusive jurisdiction over all disputes involving employee
benefit and pension plans. In Warner v. Ford Motor Co., 46
F.3d 531, 535 (6th Cir. 1995), however, this court
unanimously held, in an en banc decision, that “[r]emoval and
preemption are two distinct concepts.” As the court explained:
Removal is allowed in § 1132(a)(1)(B) type cases under
Metropolitan Life because of the Court’s conclusion that
Congress intended federal law to occupy the regulated
field of pension contract enforcement. State claims for
damages or injunctive relief to enforce a pension plan
against an employer or trustee are subject to removal.
State causes of action not covered by § 1132(a)(1)(B) may
still be subject to a preemption claim under § 1144(a) . . .
because the state law at issue may “relate to” a pension or
employee benefit plan. But such actions are not subject to
removal.
. . . . .
“The fact that a defendant might ultimately prove that
a plaintiff’s claims are pre-empted” – for example under
§ 1144(a) – “does not establish that they are removable to
federal court.” Caterpillar, 482 U.S. at 398 . . . . The
federal preemption defense in such nonremovable cases
would be decided in state court and would be subject to
review on certiorari in the U.S. Supreme Court.
Id. See also Smith v. Provident Bank, 170 F.3d 609, 613 (6th
Cir. 1999) (“the mere availability of a federal preemption
8 Husvar, et al. v. Rapoport, et al. No. 01-4254
defense to a state-law claim does not, in general, confer federal
subject-matter jurisdiction”).
Clearly, the plaintiffs’ amended complaint does not
specifically mention ERISA and does not overtly purport to
invoke federal jurisdiction under that statutory scheme.
Nevertheless, an action can still be removed to federal court,
and a subsequent motion for remand be denied, “where the real
nature of the claim asserted in the complaint is federal,
irrespective of whether it is so characterized.” Sable v. Gen.
Motors Corp., 90 F.3d 171, 174 (6th Cir. 1996) (quoting 1A J.
MOORE & B. RINGLE, MOORE’S FEDERAL PRACTICE ¶ 0.160[3.-
3] (2d ed. 1987)). In Smith, this court noted that claims to
recover ERISA benefits under 29 U.S.C. § 1132(a)(1)(B) are
clearly federal in nature and must be brought in federal court.
See Smith, 170 F.3d at 613. We then found “little reason to
distinguish between” § 1132(a)(1)(B) claims and claims for
breaches of fiduciary duties brought pursuant to 29 U.S.C.
§ 1132(a)(2), and stated:
ERISA is at least as concerned with defining and
standardizing the duties of a fiduciary as it is with
providing for recovery of benefits. A claim for breach of
fiduciary duty against a fiduciary of an ERISA plan
necessarily presents a federal question. Thus, [a] state-
law fiduciary duty claim is not only preempted but also
provides federal subject-matter jurisdiction.
Id. (citations omitted).
In this case, however, the complaint being examined does
not challenge the actions of a plan fiduciary. Instead, the
complaint merely questions the propriety of certain business
decisions made by the company’s board of directors.
Although those decisions, without question, affected the value
of the company stock that comprised the employees’ benefit
plan assets, that fact alone does not transform a state-law
breach of fiduciary duty claim into a federal ERISA action. As
this court concluded in Grindstaff v. Green, 133 F.3d 416, 423-

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No. 01-4254 Husvar, et al. v. Rapoport, et al. 9
24 (6th Cir. 1998), quoting from the Eighth Circuit decision in
Hickman v. Tosco, 840 F.2d 564, 566 (8th Cir. 1988):
“ERISA does not prohibit an employer from acting in
accordance with his interests as an employer when not
administering the plan or investing the assets.” In fact, in
Hickman, the Eighth Circuit specifically observed that
“day-to-day corporate business transactions, which may
have a collateral effect on prospective, contingent
employee benefits [do not have to] be performed solely in
the interest of plan participants.” In Martin v. Feilen,
[965 F.2d 660 (8th Cir. 1992)], the court concluded that
Hickman applied to ESOPs, noting that “[v]irtually all of
an employer’s significant business decisions affect the
value of its stock, and therefore the benefits that ESOP
plan participants will ultimately receive.” 965 F.2d at 666
(observing that section 1104 only applies to “transactions
that involve investing the ESOP’s assets or administering
the plan.”)
A close examination of the plaintiffs’ amended complaint
reveals that nowhere in that document do the former
employees allege that the defendants themselves mismanaged
any fund designated as a pension benefit plan for company
workers. Instead, the complaint is replete only with
allegations that the individual defendants mismanaged the
company so as to result in a dramatic decrease in the value of
Mosler stock – a result that, in turn, happened to devalue the
ESOP funded with such stock. A claim that company directors
did not operate the business itself in conformity with sound
business practices does not, however, implicate the protections
afforded by ERISA. Absent any indication in the amended
complaint that the plaintiffs intend to challenge the decisions
or actions of plan fiduciaries, the filing contains no claims
arising under federal law. We conclude, therefore, that the
district judge erred in denying the plaintiffs’ motion to remand
this matter to the state court system for resolution.
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In view of this conclusion, the plaintiffs’ contention that the
district court erred in dismissing their amended complaint for
failure to state a claim upon which relief could be granted is
moot.
CONCLUSION
The mere fact that the plaintiffs’ amended complaint
referenced alleged actions undertaken by the defendants that
ultimately resulted in a diminution in value of the assets of the
plaintiffs’ retirement plan does not necessarily vest the federal
judiciary with jurisdiction over this matter. Because we hold
that the amended complaint actually raised only state-law
issues involving the legitimacy of business decisions made by
the defendants, and the record does not establish diversity
jurisdiction, we find it necessary to VACATE the order
denying the plaintiffs’ motion for remand to state court.
Because such a remand was proper, the district court then had
no jurisdiction to enter an order of dismissal. The case is
therefore REMANDED to the district court with directions to
remand the matter to the state court.

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