Primax Recoveries v. Gunter ( 2006 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
File Name: 06a0012p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
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Plaintiff-Appellee, -
PRIMAX RECOVERIES, INC.,
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No. 04-6357
v.
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JOAN GUNTER and WILLIAM GUNTER, -
Defendants-Appellants. -
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Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
No. 02-00240—Todd J. Campbell, District Judge.
Submitted: November 9, 2005
Decided and Filed: January 12, 2006
Before: MERRITT, MOORE, and SUTTON, Circuit Judges.
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COUNSEL
ON BRIEF: John M. Scannapieco, BOULT, CUMMINGS, CONNERS & BERRY, Nashville,
Tennessee, for Appellants. Thomas H. Lawrence, LAWRENCE & RUSSELL, Memphis,
Tennessee, for Appellee.
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OPINION
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MERRITT, Circuit Judge. The District Court rejected an application for ERISA attorney’s
fees and costs under 29 U.S.C. § 1132(g) on the grounds that it lacked subject-matter jurisdiction
over the case. The question presented in this appeal is whether an ERISA action ostensibly brought
under 29 U.S.C. § 1132(a)(3) apparently for solely “legal,” as distinguished from “equitable,” relief
–– a form of relief clearly barred by Supreme Court precedent in Great-West Life & Annuity Ins. Co.
v. Knudson, 534 U.S. 204, 221 (2002) –– falls outside the District Court’s subject-matter jurisdiction
or simply fails to state a claim upon which relief can be granted. In QualChoice, Inc. v. Rowland,
367 F.3d 638, 642 (6th Cir. 2004), our Court, relying on a prior binding precedent, stated that a
federal court has no subject-matter jurisdiction in such cases. Due to intervening Supreme Court
precedent, we reject our prior characterization and hold that a district court has subject-matter
jurisdiction in such cases, even if the pleading fails to state a claim upon which relief can be granted.
Two recent Supreme Court opinions, Kontrick v. Ryan, 540 U.S. 443 (2004), and Eberhart v. United
States, 546 U.S. ____, 126 S. Ct. 403 (2005) (per curiam), require us to depart from binding
precedent in our Circuit, Community Health Plan of Ohio v. Mosser, 347 F.3d 619 (6th Cir. 2003),
1
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followed in QualChoice, Inc. v. Rowland, 367 F.3d 638 (6th Cir. 2004), and to depart from our
normal rule that one panel may not overrule a prior panel. We, therefore, reverse the District
Court’s denial of the application of defendants Joan and William Gunter for attorney’s fees and
costs. We remand for further consideration of this issue.
I. Factual Background
The defendants, the Gunters, were injured in an automobile accident and received insurance
benefits from a number of sources, including $75,477.68 from a health and welfare plan covered by
ERISA, 29 U.S.C. § 1001. The plaintiff, Primax, sought to enforce the ERISA plan reimbursement
provision under 29 U.S.C. § 1132(a)(3) in the amount of the medical benefits paid to the Gunters.
The Gunters prevailed in that litigation because the District Court concluded that they had not been
“made whole” as a result of the combined insurance benefits received from the various insurance
sources.
Thereafter, the Gunters filed their application for ERISA statutory attorney’s fees under 29
U.S.C. § 1132(g). The District Court referred the Gunters’ application for attorney’s fees to a
magistrate judge for a report and recommendation. The magistrate judge recommended that
attorney’s fees and costs be granted to the Gunters in the amount of $67,255.46.
After the Gunters’ application for attorney’s fees had been fully briefed by the parties, but
before the entry of the magistrate judge’s recommendations, Primax brought to the District Court’s
attention our Court’s decision in QualChoice, Inc. v. Rowland, 367 F.3d 638, 642 (6th Cir. 2004),
which held that the federal courts lacked subject-matter jurisdiction over such reimbursement claims.
The Sixth Circuit in QualChoice based its determination upon its interpretation of a Supreme Court
opinion, Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 221 (2002), which held that
a health and welfare plan’s claim for reimbursement pursuant to the plan’s reimbursement provision
was not authorized by § 1132(a)(3) because it was a legal, not an equitable, action. QualChoice
relied upon binding Sixth Circuit precedent in Community Health Plan of Ohio v. Mosser, 347 F.3d
619, 620, 624 (6th Cir. 2003), that had held that federal subject matter jurisdiction was lacking under
such circumstances.
Upon being advised of the QualChoice decision, the District Court concluded that it was
“without subject matter jurisdiction to award attorneys fees or expenses” in the underlying litigation,
the judgment in which had become final. The Gunters now appeal that denial of their application
for attorney’s fees and costs.
II. Analysis
A. Subject-Matter Jurisdiction Versus Failure to State a Claim
“Generations of jurists have struggled with the difficulty of distinguishing between Rules
12(b)(1) and 12(b)(6) in federal question cases . . . .” Nowak v. Ironworkers Local 6 Pension Fund,
81 F.3d 1182, 1188 (2d Cir. 1996). In theory, the difference is clear: “the former determines
whether the plaintiff has a right to be in the particular court and the latter is an adjudication as to
whether a cognizable legal claim has been stated.” 5B Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 1350 (3d ed. 2004). Yet in practice, “the difference between the
two motions is often difficult to discern.” Id. That is true of the present case; and, due to
intervening Supreme Court precedent, we reject our recent characterization in Mosser, followed as
binding precedent in this court in a number of cases, see QualChoice, Inc., 367 F.3d at 642, 647, that
a federal court has no subject-matter jurisdiction over an action ostensibly brought under 29 U.S.C.
§ 1132(a)(3) apparently for solely legal relief. We hold that, in such cases, a federal court has
subject-matter jurisdiction, even if the plaintiff is unable to state a claim upon which relief can be
granted.
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The Constitution gives Congress the exclusive power to determine a lower federal court’s
subject-matter jurisdiction. U.S. Const. art. III, § 1; Kontrick v. Ryan, 540 U.S. 443, 452 (2004).
Congress has provided district courts with subject-matter jurisdiction over “all civil actions arising
under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331 (2005). The
particular federal law –– 29 U.S.C. § 1132(a)(3) –– whose grant of subject-matter jurisdiction is at
issue here allows a “participant, beneficiary, or fiduciary” to bring a civil action:
(A) to enjoin any act or practice which violates any provision of this subchapter or
the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress
such violations or (ii) to enforce any provisions of this subchapter or the terms of the
plan . . . .
In Knudson, 534 U.S. at 221, the Supreme Court, as noted earlier, held that this statute authorizes
only equitable, not legal, relief.
Where an action brought pursuant to this provision seeks only legal relief, our Court in
Qualchoice, 367 F.3d at 642, following the binding precedent of Mosser, joined other courts in
characterizing the basis for a motion to dismiss as a lack of subject-matter jurisdiction under Federal
Rule of Civil Procedure 12(b)(1). See Bombardier Aerospace Employee Welfare Benefits Plan v.
Ferrer, Poirot & Wansbrough, 354 F.3d 348, 358 (5th Cir. 2003); Admin. Comm. of the Wal-Mart
Stores, Inc. Assocs.’ Health & Welfare Plan v. Varco, 338 F.3d 680, 688 (7th Cir. 2003); Knudson,
534 U.S. at 224 (Ginsburg. J., dissenting) (“[T]he [Knudson] Court concludes that Great-West’s
claim is beyond the scope of § 502(a)(3) and therefore outside federal jurisdiction.”). We did so
despite the growing number of courts taking the contrary view that such motions to dismiss should
instead be resolved under Federal Rule of Civil Procedure 12(b)(6) to ascertain whether the plaintiff
failed to state a claim upon which relief can be granted. See Mid Atl. Med. Servs., LLC v. Sereboff,
407 F.3d 212, 218 n.5 (4th Cir. 2005); Westaff (USA) Inc. v. Arce, 298 F.3d 1164, 1167 (9th Cir.
2002); Blue Cross & Blue Shield of Alabama v. Sanders, 138 F.3d 1347, 1351-54 (11th Cir. 1998);
Health Cost Controls v. Skinner, 44 F.3d 535, 536-38 (7th Cir. 1995); Wausau Benefits, Inc. v.
Liming, 393 F. Supp. 2d 713, 716 (W.D. Wis. 2005); Mid-Century Ins. Co. v. Menking, 327 F. Supp.
2d 1049, 1053 n.5 (D. Neb. 2003); Knudson, 534 U.S. at 222 (Stevens, J., dissenting) (“[Section
1132(a)(3)] provides a proper basis for federal jurisdiction in the present case.”).
In two very recent decisions, the Supreme Court has admonished courts to use the term
“jurisdiction” with more precision, describing the term as “a word of many, too many, meanings,”
Kontrick v. Ryan, 540 U.S. 443, 453 (2004) (quoting Steel Co. v. Citizens for a Better Env’t, 523
U.S. 83, 90 (1998)). In Kontrick, a unanimous Court held that time requirements of Federal Rules
of Bankruptcy Procedure 4004 and 9006 did not implicate subject-matter jurisdiction, but were
instead “claim-processing rules.” Id. at 455. Just over one year later, in Eberhart v. United States,
546 U.S. __, 126 S. Ct. 403, 407 (2005) (per curiam), the Supreme Court similarly described Federal
Rule of Criminal Procedure 33 with its time limitations as a nonjurisdictional “claim-processing
rule.” “Clarity would be facilitated,” the Supreme Court remarked, “if courts and litigants used the
label ‘jurisdictional’ not for claim-processing rules, but only for prescriptions delineating the classes
of cases (subject-matter jurisdiction) and the persons (personal jurisdiction) falling within a court’s
adjudicatory authority.” Id. at 405 (quoting Kontrick, 540 U.S. at 455). “Characteristically, a
court’s subject-matter jurisdiction cannot be expanded to account for the parties’ litigation conduct
. . . .” Kontrick, 540 U.S. at 456.
Although these two decisions are not patterned on facts identical with the instant case, they
address defenses more analogous to a motion to dismiss for failure to state a claim, than to a motion
to dismiss for lack of subject-matter jurisdiction:
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Even if a defense based on Bankruptcy Rule 4004 could be equated to “failure to
state a claim upon which relief can be granted,” the issue could be raised, at the
latest, “at the trial on the merits.” Fed. Rule Civ. Proc. 12(h)(2). Only lack of
subject-matter jurisdiction is preserved post-trial. Fed. Rule Civ. Proc. 12(h)(3).
And, as we earlier explained . . . Kontrick’s resistance to the family-account claim
is not of that order. No reasonable construction of complaint-processing rules, in
sum, would allow a litigant situated as Kontrick is to defeat a claim, as filed too late,
after the party has litigated and lost the case on the merits.
Id. at 459. Thus, like the claim-processing rules in Eberhart and Kontrick, an action under 29
U.S.C. § 1132(a)(3) seeking only legal relief does not fall outside a federal court’s subject-matter
jurisdiction, but instead raises the question whether a party has failed to state a claim upon which
relief can be granted.
Our application of Eberhart and Kontrick to the instant case faithfully adheres to the
Supreme Court’s jurisprudence addressing situations where, as here, both the court’s subject-matter
jurisdiction and the substantive claim for relief are based on the same federal statute. The Supreme
Court has set forth the standard in such cases:
Dismissal for lack of subject-matter jurisdiction because of the inadequacy of the
federal claim is proper only when the claim is “so insubstantial, implausible,
foreclosed by prior decisions of this Court, or otherwise completely devoid of merit
as not to involve a federal controversy.”
Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 89 (1998) (quoting Oneida Indian Nation of
New York v. County of Oneida, 414 U.S. 661, 666 (1974)). This requirement of substantiality or
non-frivolousness of the federal question refers “to whether there is any legal substance to the
position the plaintiff is presenting.” 13B Charles Alan Wright, Arthur R. Miller & Edward H.
Cooper, Federal Practice and Procedure § 3564 (2d ed. 1984). An ERISA claim can be non-
frivolous (or sufficiently substantial) even if it is “unsuccessful and possibly verging on the
foolhardy” in light of prior precedent barring the relief sought. Cement Masons Health & Welfare
Trust Fund for N. California v. Stone, 197 F.3d 1003, 1008 (9th Cir. 1999); see also Westaff (USA)
Inc. v. Arce, 298 F.3d 1164, 1167 (9th Cir. 2002) (exercising subject-matter jurisdiction over an
action under section 1132(a)(3) seeking only legal relief, even though the Supreme Court in
Knudson had previously held that legal relief was unavailable); Wausau Benefits, Inc. v. Liming, 393
F. Supp. 2d 713, 716 (W.D. Wis. 2005) (same). Although in many ERISA cases prior precedent will
almost certainly preclude the sought remedy, the decision whether to classify a particular claim as
legal or equitable presents a sufficiently substantial and non-frivolous issue for federal courts to
exercise subject-matter jurisdiction over actions arising under section 1132(a)(3).
As the District Court properly concluded in the instant case, Primax’s action for
reimbursement pursuant to the plan’s reimbursement provision was a legal, not equitable, claim.
See Qualchoice, 367 F.3d at 642. Primax failed to state a claim upon which relief can be granted;
but, for the reasons stated above, the District Court had subject-matter jurisdiction over this action.
Having concluded that subject-matter jurisdiction existed, we now turn to whether the District Court
erred in denying the Gunters’ application for attorney’s fees and costs.
No. 04-6357 Primax Recoveries v. Gunter, et al. Page 5
B. Attorney’s Fees and Costs
Characterizing Primax’s claim as implicating either the District Court’s subject-matter
jurisdiction or Primax’s failure to state a claim is not simply a struggle over semantics. The issue’s1
resolution has several practical consequences, including the availability of attorney’s fees and costs.
It is well established that a court without subject-matter jurisdiction over an ERISA action lacks the
authority to award attorney’s fees.2 Board of Trustees of the IUNHCAMP Health & Welfare Fund
v. Progressive Health Alliance, 135 Fed. App. 63, 64 (9th Cir. June 14, 2005); Citizens for a Better
Env’t v. The Steel Co., 230 F.3d 923, 929 (7th Cir. 2000); Cliburn v. Police Jury Ass’n of Louisiana,
Inc., 165 F.3d 315, 316 (5th Cir.1999) (per curiam); Laborers Local 938 Joint Health & Welfare
Trust Fund v. B.R. Starnes Co. of Florida, 827 F.2d 1454, 1458 (11th Cir. 1987) (per curiam); see
also Lynch v. Leis, 382 F.3d 642, 648 (6th Cir. 2004) (quoting Greater Detroit Res. Recovery Auth.
& Combustion Eng’g v. United States EPA, 916 F.2d 317, 320 (6th Cir. 1990)) (“[u]nless the statute
under which a party seeks attorney’s fees contains an independent grant of jurisdiction, an appellate
court must vacate an award of attorney’s fees if the district court did not have subject matter
jurisdiction over the litigation.”).
On the other hand, where a district court properly has jurisdiction over the case and a statute
authorizes the grant of attorney’s fees and costs, there is no jurisdictional barrier to such an award.
See, e.g., Gorman v. Carpenters’ & Millwrights’ Health Benefit Trust Fund, 410 F.3d 1194, 1202
(10th Cir. 2005); Mid Atl. Med. Servs., LLC v. Sereboff, 407 F.3d 212, 218 n.5, 221 (4th Cir. 2005);
Westaff (USA) Inc. v. Arce, 298 F.3d 1164, 1167 (9th Cir. 2002). As discussed earlier, the District
Court has subject-matter jurisdiction over this case, and 29 U.S.C. § 1132(g)(1) authorizes a district
court in its discretion to award “a reasonable attorney’s fee and costs of action to either party.”
Thus, the District Court may exercise its discretion in granting the Gunters’ application for
attorney’s fees and costs, as the Court indicated it would have done with subject-matter jurisdiction.
III. Conclusion
In sum, we hold that a district court has subject-matter jurisdiction over an action ostensibly
brought under 29 U.S.C. § 1132(a)(3) apparently for solely legal relief, even if that action fails to
state a claim upon which relief can be granted. Since the District Court, following our earlier
decision, erred in concluding that it lacked subject-matter jurisdiction to award attorney’s fees and
costs pursuant to 29 U.S.C. § 1132(g), we reverse. We remand for further consideration of the
question of attorney’s fees and costs.
1
For other practical implications of this distinction, see 13B Charles Alan Wright, Arthur R. Miller & Edward
H. Cooper, Federal Practice and Procedure § 3564 (2d ed. 1984); Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d
1182, 1188 (2d Cir. 1996).
2
This rule does not necessarily apply where a judgment becomes final even though the district court lacked
subject-matter jurisdiction over the case. In such instances, res judicata concerns generally counsel against a collateral
attack on that court’s determination of jurisdiction. See 18A Charles Alan Wright, Arthur R. Miller & Edward H.
Cooper, Federal Practice and Procedure § 4428 (2d ed. 2002) (“[M]ost federal-court judgments are res judicata
notwithstanding a lack of subject-matter jurisdiction.”).