Plaintiffs, former employees of the Caterpillar Tractor Company, appeal the dismissal of their damage action for breach of employment contracts. We reverse on the ground that the action was improperly removed from state court and hold that the district court lacked jurisdiction to address the merits of the preemption defense or to dismiss the action.

* BACKGROUND

The plaintiffs were all employed by defendant, Caterpillar Tractor Company, at its facility in San Leandro, California. They were initially employed in positions covered by a collective bargaining agreement, but were eventually elevated to positions as management or weekly salaried employees outside the scope of the collective bargaining unit.

During the period of time in which the plaintiffs were employed in positions outside of the bargaining unit, Caterpillar officials allegedly promised the plaintiffs permanent employment with Caterpillar as long as their performance was satisfactory. They were allegedly told that, even if the San Leandro plant were closed, they would be given the opportunity to transfer to positions at other Caterpillar facilities or with related companies or subsidiaries of Caterpillar. The plaintiffs claim they relied upon these promises in remaining in Caterpillar's employment.

Subsequently, all of the plaintiffs were downgraded in position and returned to bargaining unit jobs. They were then discharged shortly after the San Leandro facility closed in 1983.

The plaintiffs filed an action in California state court against Caterpillar and various Caterpillar officials alleging breach of an employment contract, breach of a covenant of good faith and fair dealing, intentional infliction of emotional distress, and fraudulent misrepresentation, all causes of action under state law. Caterpillar removed the action to federal district court on the ground that the state claims were preempted by section 301 of the Labor Management Relations Act, 29 U.S.C. Sec. 185, and that the action must be recharacterized as an action arising under Sec. 301. Caterpillar contended that the alleged agreements which were made with the plaintiffs while they were not members of the bargaining unit were merged into and superseded by the collective bargaining agreement when the plaintiffs were subsequently downgraded to bargaining unit positions.

The district court denied the plaintiffs' motion under 28 U.S.C. Sec. 1447(c) to remand the action to state court, with the exception of the claims of one plaintiff who had not been employed in a position covered by the collective bargaining agreement at the time of his discharge.

The district court ruled that the complaint stated a federal labor law claim cognizable under Sec. 301, on the ground that the complaint involved a dispute over employment agreements including both personal employment contracts and the collective bargaining agreement. The district court's oral opinion, although not unambiguous, indicates the ruling hinged on the fact the plaintiffs were in positions covered by the collective bargaining agreement at the time of the plant closure.

The district court then dismissed the action, with leave to amend the complaint, on the ground that the plaintiffs had failed to exhaust the mandatory grievance-arbitration procedures provided in the collective bargaining agreement. The plaintiffs elected not to amend their complaint, and timely filed this appeal.

Removal of a case from state to federal court is a question of federal subject matter jurisdiction which is reviewable de novo. Bright v. Bechtel Petroleum, Inc., 780 F.2d 766, 768 (9th Cir.1986). The burden of establishing federal jurisdiction falls on the party invoking the removal statute. Hunter v. United Van Lines, 746 F.2d 635, 639 (9th Cir.1984), cert. denied, --- U.S. ----, 106 S. Ct. 180, 88 L. Ed. 2d 150 (1985).

A suit may be removed to federal district court under 28 U.S.C. Sec. 1441(a) only if it could have been brought there originally. Harper v. San Diego Transit Corp., 764 F.2d 663, 666 (9th Cir.1985). Federal district courts are granted original jurisdiction under 28 U.S.C. Sec. 1331 over all civil actions "arising under the Constitution, laws, or treaties of the United States."

An action "arises under" federal law only if "resolution of the federal question must play a significant role in the proceedings." Hunter, 746 F.2d at 646. Under the "well-pleaded complaint" rule, the federal question must appear from the complaint and not from any defense the defendant might raise to defeat the cause of action. Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 10, 103 S. Ct. 2841, 2846, 77 L. Ed. 2d 420 (1983); Bright, 780 F.2d at 769; see generally 13B C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure Sec. 3566 (1984).

On the face of the complaint, the employees have alleged state law causes of action. However, Caterpillar contends the action actually implicates section 301 of the Labor Management Relations Act (LMRA), 29 U.S.C. Sec. 185(a), which governs actions for violations of collective bargaining agreements.

It is axiomatic that the plaintiff is generally considered the "master" of his complaint. Franchise Tax Board, 463 U.S. at 22, 103 S.Ct. at 2853; The Fair v. Kohler Die & Specialty Co., 228 U.S. 22, 25, 33 S. Ct. 410, 411, 57 L. Ed. 716 (1913) ("Of course the party who brings a suit is master to decide what law he will rely upon") (Holmes, J.). As such, the employees would be entitled to allege a state law cause of action, rather than a federal cause of action, and seek relief in a state forum. However, the "artful pleading" doctrine constitutes an exception to that general principle. This doctrine provides that the federal courts may take jurisdiction over a complaint removed from state court where the plaintiff, although framing his action under state law, in actuality raises an essential federal law question.1 Bright, 780 F.2d at 769; see generally Hunter, 746 F.2d at 640-44.

The "artful pleading" doctrine may come into play in two related contexts. First, when the plaintiff alleges a state law claim that is preempted by federal law and a federal remedy exists for the plaintiff's grievance. Hunter, 746 F.2d 642-43. Second, when the plaintiff's state law claim necessarily implicates a federal law question, other than as a defense. Bright, 780 F.2d at 769; see also Franchise Tax Board, 463 U.S. at 9, 22, 103 S. Ct. at 2846, 2853.

This case requires us to consider the propriety of "preemption removal" as applied to the Caterpillar employees' complaint. The federal courts have long struggled with the question of whether, and under what circumstances, removal can be based upon a defendant's allegation of federal preemption. See generally Comment, Federal Preemption, Removal Jurisdiction, and the Well-Pleaded Complaint Rule, 51 U.Chi.L.Rev. 634 (1984). Recently, the Supreme Court directly addressed this problem in Franchise Tax Board v. Construction Laborers Vacation Trust, 463 U.S. 1, 103 S. Ct. 2841, 77 L. Ed. 2d 420 (1983).

In Franchise Tax Board, the Supreme Court held that the federal courts had no jurisdiction to decide whether state tax authorities were preempted from executing a levy for unpaid taxes on a benefit plan fund covered by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001-1461. Id. 3-4, 103 S.Ct. at 2843. The levy action had been removed from state to federal district court on the ground the state cause of action was preempted because it interfered with an ERISA protected plan. Id. at 7, 103 S.Ct. at 2845. Since the Supreme Court held that there was no independent basis for removal jurisdiction, it expressly declined to reach the merits of the preemption defense. Id. at 7, 103 S.Ct. at 2845.

The Court's decision affirmed the long-standing rule in this circuit that the question of federal preemption is ordinarily relevant only as a potential defense to an obligation created by state law. See id. at 13-14, 103 S.Ct. at 2848; see also Guinasso v. Pacific First Federal Saving & Loan Ass'n, 656 F.2d 1364, 1366 (9th Cir.1981), cert. denied, 455 U.S. 1020, 102 S. Ct. 1716, 72 L. Ed. 2d 138 (1982); Hunter, 746 F.2d at 641. In such a case, federal jurisdiction does not lie, and the action must be remanded to state court for consideration of the federal preemption defense. See Franchise Tax Board, 463 U.S. at 3-4, 12, 103 S. Ct. at 2843, 2848.

However, "if a federal cause of action completely pre-empts a state cause of action any complaint that comes within the scope of the federal cause of action necessarily 'arises under' federal law." Id. at 24, 103 S.Ct. at 2854. The Court expressly stated that the "preemptive force of Sec. 301 [of the LMRA] is so powerful as to displace entirely any state cause of action" for violation of a collective bargaining agreement. Id. at 23, 103 S.Ct. at 2853. In such a case, the action may be removed to federal court even if an otherwise adequate state cause of action may exist. Id. at 24, 103 S.Ct. at 2854.

The distinction thus established is between preemption as a defense, allegedly precluding the plaintiff's state law cause of action, as opposed to "complete preemption" which means that the plaintiff's cause of action is necessarily a federal one. See Comment, supra, 51 U.Chi.L.Rev. at 652. Where there is "complete preemption," the court determines that Congress' intent was to preempt an entire field of law and provide a uniform federal law cause of action. See id. at 660 n. 122. The "necessary jurisdictional consequence is that the cause of action is made federal, permitting removal." Id.

A state law cause of action has been "completely preempted" when federal law both displaces and supplants the state law--that is, when federal law provides both a superseding remedy replacing the state law cause of action and preempts that state law cause of action.2 See generally Hunter, 746 F.2d at 642-43; Note, Removal Doctrine Reaffirmed: Franchise Tax Board v. Construction Laborers Vacation Trust, 70 Cornell L.Rev. 557, 577-78 (1985). These are two distinct inquiries, both of which must be satisfied to permit removal of an action to federal court.

First, as an initial matter, a federal court must determine whether "it is apparent from a review of the complaint that federal law provides plaintiff a cause of action to remedy the wrong he asserts he suffered." See Hunter, 746 F.2d at 643. If no federal right is violated by the acts the plaintiffs allege occurred, then no federal question is raised in the complaint and the federal courts are without jurisdiction. The preemption argument then focuses only on the proposition that the state cannot regulate the field, which is a defensive allegation. Id. at 642 (quoting Garibaldi v. Lucky Food Stores, Inc., 726 F.2d 1367, 1371 n. 5 (9th Cir.1984), cert. denied, --- U.S. ----, 105 S. Ct. 2319, 85 L. Ed. 2d 839 (1985) ). Consequently, such an action must be remanded to state court.

The Supreme Court's decision in Franchise Tax Board makes clear that the actual merits of the defendant's preemption allegation are not to be considered at all if a cognizable federal cause of action is not stated in the complaint. See also Franchise Tax Board v. Construction Laborers Vacation Trust, 679 F.2d 1307, 1309-10 (9th Cir.1982) (Tang, J., dissenting) (under the well-pleaded complaint rule, district court had no jurisdiction to address merits of ERISA preemption defense), rev'd, 463 U.S. 1, 103 S. Ct. 2841, 77 L. Ed. 2d 420 (1983).

If, and only if, federal law provides an analogous substitute cause of action to the plaintiff, then a federal court must proceed to determine whether the state law cause of action is preempted. If the state law cause of action is preempted, the claim must be recharacterized under the federal cause of action and the district court has proper jurisdiction over it. The complaint thus is regarded as having been "artfully pleaded" to avoid a necessary federal question.

On the other hand, if the state law cause of action is not preempted, then the action must be remanded to state court. Even though a federal cause of action could have been raised, the plaintiff remains the "master" of his complaint and " 'is free to ignore the federal question and pitch his claim on the state ground.' " Salveson v. Western States Bankcard Ass'n, 731 F.2d 1423, 1427 (9th Cir.1984) (quoting 1A Moore's Federal Practice p 0.160, at 185 (2d ed. 1979) ). The plaintiff is entitled to pursue his state law cause of action in state court, despite the availability of a federal cause of action, with the caveat that failure to raise a parallel federal cause of action may result in its preclusion by the doctrine of res judicata in any future proceeding. See Hunter, 746 F.2d at 640-41.

It is not clear that the approach outlined in this opinion, requiring ascertainment of a superseding federal cause of action as a jurisdictional prerequisite to addressing the merits of the preemption allegation, has been consistently followed in this circuit, although no decision has held to the contrary.

Two decisions in this circuit, filed subsequent to the Supreme Court's analysis of the "removal preemption" problem in Franchise Tax Board, failed to expressly determine the existence of a federal remedy as a prerequisite to the consideration of the preemption issue.

In Garibaldi v. Lucky Food Stores, Inc., 726 F.2d 1367, 1371-73, 1376 (9th Cir. 1984), cert. denied, 105 S. Ct. 2319 (1985), this court held that the plaintiff's state law cause of action for wrongful discharge in violation of public policy was not preempted by Sec. 301 of the LMRA. The plaintiff alleged he was discharged in retaliation for reporting the employer to the health department for delivering adulterated milk. The employer removed the action to federal district court, claiming it was preempted by Sec. 301.

The Garibaldi court expressly stated that removal depended, not on preemption, but on whether a federal claim was stated in the complaint. Id. at 1370. It was also recognized that where the federal question is not raised affirmatively in the complaint, the final resolution of a preemption defense is for the state court on remand. Id. at 1369 n.4. However, the opinion then proceeded to address only the preemption argument. Id at 1371-76. In addressing the preemption issue, the Garibaldi decision cited for authority Guinasso v. Pacific First Federal Savings & Loan Association, 656 F.2d 1364 (9th Cir. 1981), cert. denied, 455 U.S. 1020 (1982), although in Guinasso, we expressly declined to consider the preemption argument once we ascertained the absence of a federal remedy, id. at 1367.

In Aragon v. Federated Department Stores, Inc., 750 F.2d 1447 (9th Cir. 1985), cert. denied, 106 S. Ct. 229 (1985) & 54 U.S.L.W. 3454 (U.S. Jan. 13,1986)(No. 85-386), this court held that a state law cause of action for malpractice against a union attorney in handling an employee grievance under the collective bargaining agreement was not preempted by "federal labor law," without clarifying whether the issue of preemption was being considered under Sec. 301 or rather under the National Labor Relations Act. This action had also been removed from state court. As in Garibaldi, the opinion proceeded to address the preemption argument without first stating that a federal claim existed to provide jurisdiction to address the merits of the preemption claim.

However, it is important to note that neither Aragon nor Garibaldi cited Franchise Tax Board or commented on the Supreme Court's requirement that initial removal jurisdiction be proven before addressing the merits of the preemption allegation. Neither decision expressly considered whether the preemption issue was properly before the court.3

Most importantly, in several recent decisions, we have followed the proper approach to preemption removal" cases, although perhaps without always consciously doing so. In these decisions, all involving possible preemption under Sec. 301, we, although often loosely mentioning "preemption" in the same breath, have carefully focused the initial inquiry on whether a federal cause of action was stated under Sec. 301. See, e.g., Truex v. Garrett Freightlines, Inc., 784 F.2d 1347, 1350-51 (9th Cir. 1986)(opinion notes that plaintiffs conceded removal was proper under Sec. 301 because state law claims were in part a contract theory implicating the collective bargaining agreement, before addressing preemption issue); Harper v. San Diego Transit Corp., 764 F.2d 663, 667 (9th Cir. 1985); Carpenters Southern California Administrative Corp. v. Majestic Housing, 743 F.2d 1341, 1343-46 (9th Cir. 1984)(case also involved ERISA preemption issue, which we expressly declined to address due to lack of jurisdiction); Olguin v. Inspiration Consolidated Copper Co., 740 F.2d 1468, 1474-75 (9th Cir. 1984); Buscemi v. McDonnell Douglas Corp., 736 F.2d 1348, 1350-51 (9th Cir. 1984)(case also involved NLRA preemption). See also Clorox Co. v. United States District Court, 779 F.2d 517, 521 (9th Cir. 1985)(we clearly held ERISA created federal cause of action before finding preemption of state claims).

The most important recent case, in this respect, is Hunter v. United Van Lines, 746 F.2d 635 (9th Cir. 1984), cert. denied, 106 S. Ct. 180 (1985), where we gave the most express indication to date of agreement with the general approach outlined in this opinion. In that decision, we held there was no basis for removal jurisdiction in the federal district court as the federal claim alleged did not reach the jurisdiction amount and the state law claim did not "hinge on" federal law. We expressly concluded that the district court should have remanded the entire case to the state court without considering the preemption issue. Id. at 638, 652; see also id. at 653 (Sneed, J., concurring).

In conclusion, as the propriety of the order of decisions was not explicitly decided in Garibaldi and Aragon, and as Franchise Tax Board and Hunter reached a contrary result, we are not bound by any implication, if it exists, that the preemption issue may be decided before the jurisdictional federal cause of action issue. See Guinasso, 656 F.2d at 1366.

To avoid prematurely addressing the merits of the preemption issue, the scope of Sec. 301 as applied to the Caterpillar employees' complaint must first be determined. The question is whether the grievance they complain of, denial of the promised permanent right of employment during satisfactory performance, constitutes a violation of a right protected by Sec. 301.

Section 301 of the Labor Management Relations Act provides:

Suits for violation of contracts between an employer and a labor organization representing employees in an industry affecting commerce ... may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.

29 U.S.C. Sec. 185(a).

An action within the scope of Sec. 301 is governed by federal substantive law, Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 456-57, 77 S. Ct. 912, 917-18, 1 L. Ed. 2d 972 (1957), and is subject to removal to federal court under 28 U.S.C. Sec. 1441, Avco Corp. v. Aero Lodge No. 735, International Association of Machinists, 390 U.S. 557, 560-62, 88 S. Ct. 1235, 1237-38, 20 L. Ed. 2d 126 (1968). Section 301 is to be given broad interpretation. Smith v. Evening News Association, 371 U.S. 195, 199, 83 S. Ct. 267, 269, 9 L. Ed. 2d 246 (1962).

In Painting and Decorating Contractors Association v. Painters and Decorators Joint Committee, 707 F.2d 1067 (9th Cir.1983), cert. denied, 466 U.S. 927, 104 S. Ct. 1709, 80 L. Ed. 2d 182 (1984), we described the scope of Sec. 301:

All that is required for jurisdiction to be proper under Sec. 301(a) is that the suit be based on an alleged breach of contract between an employer and a labor organization and that the resolution of the lawsuit be focused upon and governed by the terms of the contract.

Id. at 1071 (emphasis added).

The complaint brought by the Caterpillar employees meets neither of these requirements, both of which must be satisfied for jurisdiction to be based upon Sec. 301.

As to the first requirement, the employees' complaint is not based upon any alleged breach of the collective bargaining agreement between the union and Caterpillar. Rather the contract breach alleged involves the violation of entirely separate and independent contracts made outside of the collective bargaining process. The alleged promises of permanent employment were made when the employees were in management positions and were not even members of the bargaining unit.

For jurisdiction to lie under Sec. 301, "the rights and liabilities of the parties ... must be a product of the bargaining agreement itself, and not of some other origin." Lumber Production Industrial Workers Local No. 1054 v. West Coast Industrial Relations Association, Inc., 775 F.2d 1042, 1046 (9th Cir.1985). The Caterpillar employees' cause of action arises out of independent contracts, most assuredly not from the collective bargaining agreement. Caterpillar cannot truly contend that the bargaining agreement offered any guarantee of permanent employment, or that the plaintiffs' claims actually "arise under" the bargaining agreement.4

As to the second requirement for jurisdiction based upon Sec. 301, resolution of the employees' state law cause of action is not focused upon interpretation of the collective bargaining agreement. Their claims are not "derived" in any way from the agreement. Compare Allis-Chalmers Corp. v. Lueck, --- U.S. ----, 105 S. Ct. 1904, 1914, 85 L. Ed. 2d 206 (1985) (state law tort duty of good faith "derived" from implied covenant found in collective bargaining agreement). Even if some reference to the collective bargaining agreement is required, that alone is not sufficient to transform a case into one that "arises under" Sec. 301.5 Carpenters Southern California Administrative Corp. v. Majestic Housing, 743 F.2d 1341, 1345 (9th Cir.1984). Here not even a reference to the collective bargaining agreement is necessary, other than to ascertain that no provision of the agreement can even arguably be construed to provide a remedy for their complaint.

Caterpillar does contend that the collective bargaining agreement must be referred to in determining whether the independent contracts to provide permanent employment are inconsistent with, and thus are superseded by and merged into, the bargaining agreement. The gravamen of Caterpillar's argument is that, through the preemptive force of Sec. 301, the bargaining agreement supersedes and extinguishes all previous obligations of the employer to his employees, including independent and pre-existing contracts.

This is not an argument that the employees' complaint can be recharacterized as a cause of action under Sec. 301. Although we do not comment on the validity of this argument, it remains a defensive allegation that Sec. 301, by merging pre-existing individual contracts into the bargaining agreement, preempts the state law cause of action. This preemption allegation is raised to defeat the plaintiffs' claims grounded in those independent contracts; it is not a necessary element of their affirmative cause of action.6

Contrary to Caterpillar's contention, application of the "artful pleading" doctrine would not change this conclusion. The "artful pleading" doctrine does not operate to transform a federal defense into a ground for the exercise of federal jurisdiction. It serves only to clarify the true nature of the plaintiff's affirmative claim. See Bright v. Bechtel Petroleum, Inc., 780 F.2d 766, 769 (9th Cir.1986); Schroeder v. Trans World Airlines, Inc., 702 F.2d 189, 191 (9th Cir.1983).

In sum, federal law does not create the right the Caterpillar employees alleged has been violated.7 See Hunter, 746 F.2d at 643. Section 301 does not provide the plaintiffs any cause of action for the injury they allege. Consequently, federal jurisdiction is lacking whether or not the state law cause of action is preempted. See id. at 643-44.

As the employees' complaint cannot be construed to allege a cause of action remedied by federal law, the district court did not have jurisdiction to consider the preemption defense or to dismiss the action.

In Franchise Tax Board, the Supreme Court recognized the incongruity of remanding to state court an action in which "the only question for decision is raised by a federal pre-emption defense." 463 U.S. at 12, 103 S.Ct. at 2848; see also Olguin v. Inspiration Consolidated Copper Co., 740 F.2d 1468, 1471-72 (9th Cir.1984). Nevertheless, such a suit cannot be maintained in federal court because " '[b]y unimpeachable authority, a suit brought upon a state statute does not arise under an act of Congress or the Constitution of the United States because prohibited thereby.' " Franchise Tax Board, 463 U.S. at 12, 103 S. Ct. at 2848 (quoting Gully v. First National Bank, 299 U.S. 109, 116, 57 S. Ct. 96, 99, 81 L. Ed. 70 (1936)). Despite the defendant's real and substantial interest in having the federal preemption argument decided by a federal court, such an interest cannot be the basis for federal jurisdiction under the removal statute. Hunter, 746 F.2d at 640.

The district court's judgment is vacated. The action is remanded to the district court with instructions to remand to state court.8

VACATED AND REMANDED.