Self-Insurance Institute of America, Inc. v. Korioth ( 1993 )

United States Court of Appeals,
Fifth Circuit.
No. 92-8444.
SELF-INSURANCE INSTITUTE OF AMERICA, INC., Plaintiff-Appellant,
v.
Claire KORIOTH, et al., Defendants-Appellees.
June 17, 1993.
Appeal from the United States District Court For the Western District of Texas.
Before, REYNALDO G. GARZA, WILLIAMS and JONES, Circuit Judges.
REYNALDO G. GARZA, Circuit Judge:
Self-Insurance Institute of America, Inc. ("SIIA"), initiated this declaratory judgment action
under 28 U.S.C. §§ 2201-02 requesting the district court to enjoin the enforcement of certain
provisions in the Texas Insurance Code on the ground that they were preempted by ERISA. The case
was dismissed because the district court determined that it lacked subject matter jurisdiction under
29 U.S.C. § 1132, and that SIIA lacked standing.
We find that the district court had general federal question jurisdiction under 28 U.S.C. §
1331, and we conclude that SIIA has associational standing. Consequently, we REVERSE the order
of the district court and REMAND for a determination as to the merits of the plaintiffs' case.
FACTS & PROCEDURE
SIIA is a California not-for-profit trade association organized to promote the general
advancement of the self-insurance industry. Members of SIIA include both employer/plan sponsors
and contract administrators of self-insured ERISA plans.
In July 1991, SIIA filed a declaratory judgment action in the Western District of Texas
requesting that the district court enjoin enforcement of two provisions in the Texas Insurance Code,
which are codified at Tex.Ins.Code arts. 4.11A and 21.07-6. SIIA also sought tax refunds for
contract administrators who had paid the taxes required by art. 21.07-6.1
Article 4.11A imposes a tax on contract administrators and a back-up tax on the underlying
plan if the administrator does not pay. Article 21.07-6 requires contract administrators both to pay
a $1,000 application fee for a certificate of authority and to pay a 1% maintenance tax on fees for
services. Article 21.07-6 also imposes on employer/plan sponsors and contract administrators many
obligations. SIIA claims that the statutes conflict with comparable provisions of ERISA and, thus,
are void because of ERISA's broad preemption clause.
In August 1991, t he defendants filed a motion to dismiss for lack of subject matter
jurisdiction, claiming that SIIA lacked standing to bring t he declaratory action. In October 1991,
SIIA responded by filing its motion either for partial summary judgment or for preliminary injunction.
The district court issued a stay in this case and denied all motions without prejudice because the
United States Supreme Court had issued a stay of a similar case pending its appeal from the Fifth
Circuit. See E-Systems, Inc. v. Pogue, 929 F.2d 1100 (5th Cir.), cert. denied, --- U.S. ----, 112 S. Ct.
585, 116 L. Ed. 2d 610 (1991).
In December 1991, after the Supreme Court denied certiorari in E-Systems, the district court
lifted the stay. Shortly thereafter, SIIA filed a renewed motion for summary judgment or preliminary
injunction, and the defendants filed their motion to dismiss for lack of subject matter jurisdiction.
In early 1992, SIIA answered the defendants' first set of interrogatories. The district court
subsequently ordered SIIA to submit further facts to prove that it had standing to pursue its action.
On July 21, 1992, the district court denied SIIA's motions and granted the defendants' motion to
dismiss the case for lack of subject matter jurisdiction and standing.2 SIIA then timely appealed.3
1
In response to the United States Supreme Court's denial of certiorari in E-Systems Inc. v.
Pogue, 929 F.2d 1100 (5th Cir.), cert. denied, --- U.S. ----, 112 S. Ct. 585, 116 L. Ed. 2d 610
(1991), Texas ceased to enforce art. 4.11A and entered into numerous agreed judgments to
refund with interest taxes collected under art. 4.11A. Because of the Texas' position regarding
art. 4.11A, the challenge to that statute is now moot.
2
The district court found that:
1. SIIA is a trade association of contract administrators and plan sponsors;
2. SIIA is not a participant, beneficiary, or fiduciary of an ERISA plan; and
DISCUSSION
On appeal we need only confront two issues: (i) did the district court have jurisdiction to
entertain the case; and (ii) did the plaintiff have the requisite associational standing in order to wage
this action. We conclude that the district court improperly dismissed the case for lack of subject
matter jurisdiction. Further, we conclude that the plaintiff has standing to bring this action.
Consequent ly, we remand the case back to the district court so that the case may proceed to t he
merits.
Subject Matter Jurisdiction
The district court found that it had no jurisdiction under ERISA, 29 U.S.C. § 1132. Section
1132(a) limits the power to bring a civil action under ERISA to participants, beneficiaries, and
fiduciaries of an ERISA plan. The district court requested that SIIA present affidavits proving that
its members were enumerated parties under § 1132. The affidavits that SIIA submitted merely stated
that SIIA members were employer/plan sponsors or contract administrators, who had contacts with
Texas. The district court found that such a cursory description did not prove that the SIIA members
were fiduciaries. Consequently, the district court concluded that it lacked subject matter jurisdiction.
3. SIIA's members are contract administrators, who have no fiduciary relationship to the
plans for which they perform services.
From these findings, the district court concluded that:
1. SIIA had no statutory standing under 29 U.S.C. § 1132 to maintain the action
because a trade association is not an enumerated party in § 502(a)(3) of
ERISA; and
2. Because SIIA-member contract administrators were not fiduciaries, they had no
associational standing for SIIA.
3
Interestingly, in October 1992, the same district court judge who issued the order and
judgment in this case rendered a contradictory order in another case that was very similar to this
one. In NGS American, Inc. v. Philip Barnes, 805 F. Supp. 462 (W.D.Tex.1992), one plaintiff
was a third-party administrator of self-funded ERISA plans.
The district court noted that, under Texas law, NGS was considered a fiduciary
and, thus, might well be empowered to bring suit under ERISA. Regardless of NGS's
status, however, the district court found that there was general federal question
jurisdiction, that NGS had standing to bring the action, and that art. 21.07-6 was void
because it was preempted by ERISA.
SIIA co ntends that although the suit is not expressly authorized under § 1132, the district
court had general federal question jurisdiction pursuant to 28 U.S.C. § 1331. Section 1331 states:
The district courts shall have original jurisdiction of all civil actions arising under the
Constitution, laws or treaties of the United States.
28 U.S.C. § 1331.
SIIA argues that arts. 4.11A and 21.07-6 violate the Supremacy Clause of the United States
Constitution by virtue of the broad preemption provision in ERISA, which is codified at 29 U.S.C.
§ 1144. Consequently, SIIA asserts that federal common law governs the outcome and, thus, this
case "aris[es] under the ... laws ... of the United States" for jurisdictional purposes.4 In support of
its jurisdictional contentions, SIIA relies on Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S. Ct.
2890, 77 L. Ed. 2d 490 (1983). In Shaw, employer/plan sponsors claimed that certain state laws were
preempted by ERISA, and the Shaw Court noted:
It is beyond dispute that federal courts have jurisdiction over suits to enjoin state officials
from interfering with federal rights. See Ex Parte Young, 209 U.S. 123, 160-62 [28 S. Ct.
441, 454-55, 52 L. Ed. 714] (1908). A plaintiff who seeks injunctive relief from state
regulation on the gro und t hat such regulation is pre-empted by a federal statute which, by
virtue of the Supremacy Clause of the Constitution, must prevail, thus presents a federal
question which the federal courts have jurisdiction under 28 U.S.C. § 1331 to resolve.
Id. at 96 n. 14, 103 S. Ct. at 2899 n. 14. (citations omitted); see also Metropolitan Life Ins. Co. v.
Taylor, 481 U.S. 58, 64-67, 107 S. Ct. 1542, 1546-48, 95 L. Ed. 2d 55 (1987) (claim of ERISA
preemption arises under the laws of the United States for § 1331 purposes); Provident Life &
Accident Ins. Co. v. Waller, 906 F.2d 985, 988-91 (4th Cir.1990) (absence of express statutory grant
of jurisdiction under § 1332 irrelevant under rationale of City of Milwaukee and claim could be
brought under 28 U.S.C. § 1331); Northeast Dep't ILGWU Health & Welfare Fund v. Teamsters
Local Union No. 229, 764 F.2d 147, 154-59 (3d Cir.1985) (Becker, J.) (same). See generally
Federal Jurisdiction over Declaratory Suits Challenging State Action, 79 Colum.L.Rev. 983 passim
(1979). Moreover, because there is no underlying state court action involved in this litigation the
preemption issue is particularly amenable to a federal forum.
4
In Illinois v. City of Milwaukee, Wis., 406 U.S. 91, 92 S. Ct. 1385, 31 L. Ed. 2d 712 (1972),
the Supreme Court established that § 1331 jurisdiction exists for not only claims rooted in federal
statutes, but federal common law as well. See id. at 100, 92 S.Ct. at 1391.
In Braniff Int'l, Inc. v. Florida Pub. Serv. Comm'n, 576 F.2d 1100 (5th Cir.1978), this court
was faced with an identical jurisdictional issue. Six air carriers filed suit for declaratory and injunctive
relief contending that state regulation of interstate air carriers violated the supremacy clause. The
court expressly held when a party seeks injunctive and declaratory relief based upon the
unconstitutionality of a state statute, and "there are no other concrete i mpediments to the proper
exercise of federal question jurisdiction," the availability of state administrative remedies does not
deprive a federal court of jurisdiction. See id. at 1106. Implicitly, the court held that general federal
question jurisdiction exists in cases seeking both declaratory and injunctive relief. See id.; see also
ANR Pipeline Co. v. Corporation Comm'n of Okla., 860 F.2d 1571, 1575-77 (10th Cir.1988)
(jurisdiction exists under § 1331 in cases seeking declaratory and injunctive relief challenging
constitutionality of state statute), cert. denied, 490 U.S. 1051, 109 S. Ct. 1967, 104 L. Ed. 2d 435
(1989); cf. Lowe v. Ingalls Shipbuilding, 723 F.2d 1173, 1180-81 n. 7 (5th Cir.1984) (general
federal question jurisdiction absent because no injunctive relief was sought and no allegation of state
action was made).
The defendants further contend that indirect jurisdiction under § 1331 would render
meaningless the limiting language of § 1132, and they distinguish Shaw by pointing out that the
plaintiffs in Shaw exercised discretionary authority, which made them fiduciaries and brought them
within § 1132. We reject this contention because well-settled principles of standing serve to guard
against this concern. Further, just because the plaintiffs in Shaw were able to exercise § 1132
jurisdiction does not preclude federal common law jurisdiction in this suit.
The defendants contend that the district court lacked subject matter jurisdiction because Fifth
Circuit authority states that ERISA standing is exclusively vested in the entities specifically
enumerated in § 1132. See Hermann Hosp. v. MEBA Medical & Benefits Plan, 845 F.2d 1286, 1287
(5th Cir.1988). The defendants argue that the district court should not infer subject matter
jurisdiction without a clear legislative mandate.
Hermann Hospital is inapplicable in the current context. In Hermann Hospital we noted that
"the hospital did not assert federal common law claims below and is now precluded from raising
federal question jurisdiction as a basis for standing." Hermann Hospital, 845 F.2d at 1287 n. 1.
Therefore, we did not even address whether 28 U.S.C. § 1331 conferred general federal question
jurisdiction in Hermann Hospital.
The defendants also point to Franchise Tax Bd. v. Construction Laborers' Vacation Trust,
463 U.S. 1, 103 S. Ct. 2841, 77 L. Ed. 2d 420 (1983), which they argue limits federal subject matter
jurisdiction to the parties enumerated in Section 1132. In Franchise Tax Board, the plaintiff, a state
taxing authority, brought suit in state court seeking: (i) damages for a failure to comply with tax
levies; and (ii) a declaration that its authority to levy was not preempted. The defendant removed
the case to federal court. The defendant asserted section 1331 as a basis for federal jurisdiction on
the ground that any interpretation or application of ERISA implicated federal common law.
The Supreme Court agreed that the case presented a question of federal common law, but
nonetheless held that the district court lacked subject matter jurisdiction. The court rejected subject
matter jurisdiction primarily because it limited its analysis to consider whether the action arose under
ERISA. See id. at 2855.5 Additionally, the court found that if it were to recognize the tax board's
claim under section 1331 it would violate the "well-pleaded complaint rule." See id. at 13-22, 103
S.Ct. at 2848-53.6
5
The Franchise Tax Board court stated:
[The trust fund's] argument that [the tax board's] second cause of action arises
under ERISA fails ... ERISA carefully enumerates the parties entitled to seek relief
under § 502; it does not provide [anyone else] with an express cause of action for
a declaratory judgment on the issues in this case. A suit for similar relief by some
other party does not "arise under" that provision.
Id. at 27, 103 S.Ct. at 2855.
6
It is axiomatic that to invoke federal question jurisdiction, a federal issue must appear on the
face of the complaint. An anticipation of a defense that implicates a federal issue does not give
rise to federal question jurisdiction. See Franchise Tax Board, 463 U.S. at 9-10, 103 S.Ct. at
2846; Louisville & Nashville R. Co. v. Mottley, 211 U.S. 149, 29 S. Ct. 42, 53 L. Ed. 126 (1908).
Federal question jurisdiction is available if either: (i) "some substantial, disputed
question of federal law is a necessary element of one of the well-pleaded state claims;" or
(ii) one of the claims is effectively one of federal law. See Franchise Tax Board, 463 U.S.
at 13, 103 S.Ct. at 2848.
In Shaw, the Supreme Court distinguished between cases lacking federal
Without entering into the intricacies of the "well-pleaded complaint rule" in the present action,
suffice it to say that we are not confronted with a well-pleaded complaint problem because a federal
declaratory judgment action affirmatively brought to determine whether a state law is preempted
presents a valid basis for federal question jurisdiction.7 See Shaw, 463 U.S. at 96 n. 14, 103 S. Ct. at
2899 n. 14; see also Waller, 906 F.2d at 989.
The defendants' contention that allowance of § 1331 jurisdiction would gut the limitations
imposed by § 1132 is not necessarily accurate. In fact, the defendants' entire subject matter
jurisdiction argument confuses standing with jurisdiction. SIIA is not seeking benefits under a plan
or claiming violations of a plan. The question of preemption is particularly one for the federal courts
and arises as much from the Constitution as from ERISA. Therefore, the district court erred in
finding that it lacked subject matter jurisdiction.
Is this a Proper Party?
The district court focused on section 1132(d), and determined that SIIA was not an
enumerated party. The district court reviewed the proffered interrogatories and determined that SIIA
had failed to prove that its members were fiduciaries. Consequently, the court held that SIIA lacked
standing. On appeal, SIIA contends that it has associational standing to wage this suit despite the
district court's finding that its members were not fiduciaries.
A trade group has associational standing when:
(a) its members would otherwise have standing to sue in their own right; (b) the interests it
seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted
nor the relief requested requires the participation of individual members in the lawsuit.
Hunt v. Washington Apple Advertising Comm'n, 432 U.S. 333, 343, 97 S. Ct. 2434, 2441, 53 L.Ed.2d
jurisdiction, such as Franchise Tax Board, because they seek a passive declaration that
state laws are not preempted, from federally cognizable cases, such as Shaw and the case
at bar, where companies subject to ERISA regulation seek an affirmative injunction
against claims that are preempted by ERISA.
7
In Franchise Tax Board, the case was brought pursuant to a state declaratory judgment
statute by the state itself seeking to establish that its levying power was valid. There was no
federal jurisdiction in Franchise Tax Board because general federal common law was implicated
only as a defense to the principal claim. However, where as here, when the primary claim states a
federal question on its face no such well-pleaded complaint problem is present.
383 (1977).
The district court found that SIIA's members were not fiduciaries because SIIA failed to
provide sufficient proof that they exercised discretionary authority. Interestingly, the same district
judge that issued this order found that third-party administrators of ERISA plans are fiduciaries
according to the Texas Insurance Code. See NGS Am., Inc. v. Phillip Barnes, 805 F. Supp. 462
(W.D.Tex.1992). Article 21.07-6 of the Texas Insurance Code states:
Premiums and contributions collected by an administrator on behalf of or for an insurer, plan,
or plan sponsor, and return premiums received from an insurer, plan, or plan sponsor are held
by the administrator in a fiduciary capacity.
Tex.Ins.Code art. 21.07-6(17)(a) (Vernon Supp.1992).
SIIA's members are fiduciaries under applicable state law and, thus, would have standing to
sue in their own right. Moreover, SIIA's individual members meet both prongs of the standing test
laid out in Association of Data Processing Serv. Org. v. Camp, 397 U.S. 150, 90 S. Ct. 827, 25
L. Ed. 2d 184 (1970). Under Data Processing, a plaintiff that seeks standing to maintain an action
alleging violations of a federal statute must: (i) suffer injury in fact; and (ii) fall within the zone of
interest protected by the statute. See Data Processing, 397 U.S. at 153, 90 S.Ct. at 830.
The plaintiffs allege that if they are required to pay the taxes imposed by the statute, they will
then suffer economic out of pocket injury. Further, they reason that if these taxes are found to be
preempted by ERISA, then they will obtain redress through this suit. Indeed, allegations of actual
injury that are likely to be remedied with favorable court action are sufficient to confer standing. See,
e.g., Warth v. Seldin, 422 U.S. 490, 498-99, 95 S. Ct. 2197, 2205, 45 L. Ed. 2d 343 (1975).
Second, SIIA argues that employer/plan sponsors and contract administrators are within the
zone of interest protected by ERISA. The genesis of the "zone of interest" requirement emanated
from Data Processing. The Supreme Court articulated:
The question of standing ... concerns, apart from the "case' or "controversy' test, the
question whether the interest sought to be protected by the complainant is arguably within the
zone of interests to be protected or regulated by the statute or constitutional guarantee in
question.
Data Processing, 397 U.S. at 153, 90 S.Ct. at 830.
It is beyond dispute that SIIA's members are impacted by the disputed provisions in the Texas
Insurance Code. Further, employer/plan sponsors and contract administrators providing services to
ERISA plans are sufficiently within ERISA's zone of interest. This finding is buttressed by the fact
that under Texas state law SIIA's members are considered fiduciaries and, thus, expressly enumerated
under § 1132.
Additionally, the second two requirements of associational standing are easily met. The
interest that SIIA seeks to protect are germane to the organization's purpose. Moreover, it is
undeniable that SIIA's individual members need not participate in the litigation. Therefore, SIIA is
properly in a position to represent its members in a representative capacity and has standing to do so.
CONCLUSION
The district court properly had jurisdiction to entertain this case as a general federal question.
Further, SIIA had associational standing to bring this case. We REVERSE the dismissal made by the
district court, and because the district court made no inquiry into the merits, we REMAND the case
for such an inquiry.