East Central Illinois Pipe Trades Health & Welfare Fund v. Prather Plumbing & Heating, Inc., No. 20-2525 (7th Cir. 2021)
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ERISA-covered employee benefit funds filed suit to hold a newly formed, family-run plumbing company liable for an existing ERISA judgment on the basis that it stepped into the predecessor family company’s obligations. The funds cited the federal common law doctrine of successor liability and contended that was enough to show their claim arose under federal law and raised a federal question properly in federal court under 28 U.S.C. 1331. The district court agreed, proceeded to the merits, and concluded it would be inequitable to hold the new entity responsible for the other’s unpaid plan contributions on a theory of successor liability.
The Seventh Circuit vacated, stating the suit must be dismissed. The reliance on federal common law alone does not suffice to show a claim “arising under” federal law for purposes of establishing federal question jurisdiction. Supreme Court precedent indicates that in these circumstances the funds needed to identify a source of law supplying them a federal cause of action—a federal law authorizing them to sue in federal court on their claim. Section 1331, the federal question jurisdiction statute, does not itself create or supply that cause of action here. Nor have the funds identified any other statute authorizing their action in federal court.
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