Mary Smith v. Regional Transit Authority, e

Case: 13-30647 Document: 00512673006 Page: 1 Date Filed: 06/23/2014
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
United States Court of Appeals
Fifth Circuit
FILED
June 23, 2014
No. 13-30647
Lyle W. Cayce
Clerk
MARY SMITH; PAMELA BAGNERIS BATISTE; ROBERT BOOKMAN;
KENNETH BOURGEOIS; JAMES BROWN, JR.; et al,
Plaintiffs-Appellants,
v.
REGIONAL TRANSIT AUTHORITY; TRANSIT MANAGEMENT OF
SOUTHEAST LOUISIANA, INCORPORATED,
Defendants-Appellees.
Appeal from the United States District Court
for the Eastern District of Louisiana
Before HIGGINBOTHAM, DAVIS, and HAYNES, Circuit Judges.
HAYNES, Circuit Judge:
The principal question before the district court was whether the
employers’ pension benefit plan in this case is a “governmental plan” within
the meaning of section 3(32) the Employee Retirement Income Security Act of
1974 (“ERISA”), 29 U.S.C. § 1002(32). The Plaintiffs-Appellants (the
“Plaintiffs,” collectively) are approximately forty former employees of New
Orleans Public Service, Inc. and retirees of Transit Management of Southeast
Louisiana, Inc. They filed suit claiming denial of medical insurance, Medicare
premiums, and deductible reimbursements. The district court held that the
pension benefit plan was a “governmental plan” exempt from ERISA and
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granted RTA and TMSEL’s (the “Defendants,” collectively) motion to dismiss
for lack of subject matter jurisdiction. Because we conclude that the district
court employed the wrong procedural mechanism for analyzing this case, we
vacate the judgment and remand this case to the district court.
I.
Prior to 1983, the New Orleans transit system was operated by New
Orleans Public Service, Inc. (“NOPSI”), a private company. In the late 1970s
and early 1980s, the system converted to a publicly held system, owned by the
Regional Transit Authority (“RTA”) and operated by Transit Management of
Southeast Louisiana, Inc. (“TMSEL”). As a result of the change in ownership
and management, all employees of NOPSI became employees of TMSEL. At
the time the RTA purchased the transit system, NOPSI, the transit union, and
the City of New Orleans had a preexisting agreement pursuant to the Urban
Mass Transportation Act of 1964, which provided for “fair and equitable
arrangements” for employee benefits. In March 1983, the RTA and TMSEL, as
successors to NOPSI, agreed that they would continue to provide the same
benefits employees enjoyed under the preexisting agreement.
In June 1983, the RTA completed the purchase of the transit system from
NOPSI. At the same time, the RTA, TMSEL, and NOPSI entered into an
additional agreement, “The Employee and Retiree Pension and Welfare
Benefit Agreement” (the “Benefit Agreement”) which specifically recognized
the RTA and TMSEL’s benefit obligations. The RTA became the sponsor of the
Plan, and TMSEL became the administrator. The Benefit Agreement provided
that each employee transferred from NOPSI to the RTA or TMSEL would
continue to receive the same coverage and benefit levels they received as an
employee of NOPSI. The Benefit Agreement also made the RTA and TMSEL
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responsible for making any payments due for any benefits of the former NOPSI
employees, and established a funding structure to ensure that the pension
benefits were maintainable.
At the time of the purchase and agreements, the RTA was considered a
public entity—a “political subdivision” of the state of Louisiana 1—and TMSEL
was a privately owned corporation, created in 1983 by an agreement between
the RTA and ATE Management and Service Company to operate the transit
system. In 2004, the Louisiana State Legislature designated TMSEL as a
political subdivision for litigation purposes. See LA. REV. STAT. ANN.
§ 13:5102. In 2009, TMSEL ceased operations and no longer provided
services to the RTA. From 2009–12, the public transportation was instead
operated by a separate private corporation. 2 In 2012, the RTA became 100%
owner of TMSEL.
The Plaintiffs are retired former employees of NOPSI and/or TMSEL.
According to the Plaintiffs, from the system’s private-to-public conversion in
1983 until March 2006, the RTA administered the Employee Benefit Plan (“the
Plan”) consistent with the Benefit Agreement: it provided premium-free
medical insurance, life insurance, supplemental Medicare payments, and
reimbursed Medicare premiums. However, the Plaintiffs allege that, in March
2006, the RTA and/or TMSEL stopped providing Medicare premiums and
1 The RTA was created by state statute on August 1, 1979, and defined as a “body politic and
corporate and a political subdivision of the state of Louisiana.” LA. REV. STAT. ANN.
§ 48:1654(A).
2 In 2005, the RTA entered into a Cooperate Endeavor Agreement with Interregional Transit,
Inc. for the operation of the transit system. In 2008, TMSEL entered into an agreement with
Veolia Transportation Services, Inc. for a similar purpose. It is unclear which corporation
was operating the system after TMSEL ceased operations in 2009. We do not need to resolve
this question, however, as it is not relevant to the determination of this appeal.
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deductible reimbursements to retirees and began charging premiums for
medical insurance. The Plaintiffs aver they were originally told the changes
were temporary, but that they have continued until the present day.
In December 2012, the Plaintiffs filed suit against the RTA as plan
sponsor under § 1002(16)(B), and TMSEL as plan administrator under
§ 1002(16)(A), alleging that the Defendants violated ERISA when they
implemented the changes to the benefit plan. The Plaintiffs sought to collect
the same welfare benefits they had received from NOPSI. The complaint
alleges that the RTA and/or TMSEL wrongfully denied ERISA welfare and
retirement benefits in violation of 29 U.S.C. § 1132(a)(1)(B), and that the RTA
and/or TMSEL breached their fiduciary duties under ERISA in violation of
§ 1132(a)(2). The Defendants filed a motion to dismiss the complaint for lack
of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1).
The Defendants asserted that the benefit plan fell within the “governmental
plan” exemption to ERISA, and that ERISA provided the only basis for subject
matter jurisdiction. 3 See 29 U.S.C. § 1003(b)(1) (“The provisions of [the
coverage] subchapter shall not apply to any employee benefit plan if such plan
is a governmental plan.”). The district court granted the Defendants’ motion.
The Plaintiffs appealed.
II.
We have previously suggested that the “governmental plan” exemption
implicates our subject matter jurisdiction such that claims concerning such a
plan should be dismissed under Rule 12(b)(1). Shirley v. Maxicare Tex., Inc.,
921 F.2d 565, 567 (5th Cir. 1991). In Shirley, we held that because a benefits
3 The Defendants alternatively moved for dismissal under Rule 12(b)(6), but the district court
issued its ruling based solely upon Rule 12(b)(1).
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plan was a “governmental plan” exempt from ERISA’s requirements, the
district court lacked jurisdiction to order arbitration. Id. at 566–67 (citing
§ 1003(b)). However, more recent developments in Supreme Court case law
and our en banc decision in ACS Recovery Services, Inc. v. Griffin, 723 F.3d 518
(5th Cir. 2013) (en banc), cert. denied, 134 S. Ct. 618 (2013), make Shirley
inapplicable to our decision today.
The Supreme Court has repeatedly instructed that we must avoid
conflating the question of whether we have subject matter jurisdiction to
consider a claim with the determination of whether the plaintiff has stated a
valid claim for relief. See Arbaugh v. Y&H Corp., 546 U.S. 500, 510–11 (2006);
see also Reed Elsevier, Inc. v. Muchnick, 559 U.S. 154, 160–61 (2010)
(explaining that the word “jurisdiction” refers to a court’s adjudicatory
authority and therefore only properly applies to specific delineations of that
authority). For instance, the Court in Arbaugh rejected the argument that
proving a defendant is an “employer” for purposes of Title VII was necessary
to establish subject matter jurisdiction. Arbaugh, 546 U.S. at 508, 514–16.
In so concluding, the Court applied a “readily administrable bright line”
standard for determining whether a statute’s provision is an element of a
plaintiff’s claim for relief or a jurisdictional requirement. Id. This standard
turns on whether Congress has specifically designated a statutory limitation
on coverage as jurisdictional. Id. at 516 (“[W]hen Congress does not rank a
statutory limitation on coverage as jurisdictional, courts should treat the
restriction as nonjurisdictional in character.”). Applying this standard, the
Court focused primarily on the definition of “employer” in 42 U.S.C. § 2000e(b),
explaining that the statute’s text did not “clearly stat[e]” that the defendant
must fall within the definition of “employer” in order for there to be federal
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jurisdiction to consider the claim. Arbaugh, 546 U.S. at 515. The Court also
observed that the definition of “employer” was not located in Title VII’s
jurisdictional provision, but rather “appeared in a separate provision that does
not speak in jurisdictional terms or refer in any way to the jurisdiction of the
district courts.” Id. (citation and internal quotation marks omitted).
Later in Reed Elsevier, the Court reiterated the importance of “using the
term ‘jurisdictional’ only when it is apposite.” 559 U.S. at 161. The Court
held that the Copyright Act’s requirement that holders register their works
before suing for copyright infringement was not a jurisdictional limitation, in
part because the registration requirement does not “clearly state[]” that it is
jurisdictional and therefore should not be treated as such. Id. 163–66; see also
17 U.S.C. § 411(a).
In accord with the Court’s direction, last year in Griffin we rejected our
prior precedent that a failure to state a valid claim for equitable relief under
ERISA deprived the court of subject matter jurisdiction. 723 F.3d at 522–23
(citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 89 (1998) (“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 [the Supreme Court], or otherwise completely devoid of
merit as not to involve a federal controversy.” (citation and internal quotation
marks omitted))). We noted that whether a party has a valid claim does not
implicate subject matter jurisdiction. Griffin, 723 F.3d at 523 (“[W]hether a
claim for equitable relief under ERISA § 502(a)(3) has been stated is within
federal courts’ jurisdiction irrespective of the claim’s ultimate merit.”). In so
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concluding, we effectively overruled our contrary precedent. 4 Compare
Griffin, 723 F.3d at 523, with Tinoco v. Marine Chartering Co., Inc., 311 F.3d
617, 623 (5th Cir. 2002) (“Where federal subject matter jurisdiction is based on
ERISA, but the evidence fails to establish the existence of an ERISA plan, the
claim must be dismissed for lack of subject matter jurisdiction.” (citation and
internal quotation marks omitted)), abrogated by Griffin, 723 F.3d at 523.
Our holding in Griffin employed exactly the kind of reasoning called for by the
Supreme Court in Arbaugh and Reed Elsevier which has led at least five of our
sister circuits to reject the notion that the actual existence (as opposed to the
allegation) of a plan covered by ERISA is a jurisdictional prerequisite. 5
4 Post-Griffin, we examined whether a case involving an employment agreement and
deferred compensation plan was a case about an ERISA plan through the lens of subject
matter jurisdiction in a case removed from state court under Metropolitan Life Insurance Co.
v. Taylor, 481 U.S. 58, 63–67 (1987) (holding that, where ERISA completely preempts all
state law claims raised, the case is removable under federal question jurisdiction despite the
lack of any federal issues raised in the plaintiff’s “well-pleaded” complaint). See Cantrell v.
Briggs & Veselka Co., 728 F.3d 444, 452 (5th Cir. 2013), cert. denied, 134 S. Ct. 1520 (2014).
Notably, Cantrell did not involve the question of whether dismissal under Rule 12(b)(1)
versus some other procedural mechanism was the appropriate procedure. Instead, the
question was whether the case should be remanded to state court because the plan in
question was not an ERISA plan (and, therefore, there would be no “complete preemption”).
Probably for this reason, Cantrell failed to address Griffin or even mention it, and, thus,
cannot be viewed as holding that Griffin is limited to its facts. Any language about “subject
matter jurisdiction” must be understood in the particular procedural posture presented in
Cantrell. Indeed, the Griffin analysis would not change the outcome in Cantrell. No one
disputed the absence of a federal question in the “well-pleaded complaint.” Instead, the case
turned on the defendant’s contention that the plan in question was an ERISA plan, allowing
removal under the Taylor exception. As such, if the plan were not an ERISA plan, remand
would be the appropriate remedy. In any event, to the extent that Cantrell and Griffin
conflict, under our rule of orderliness, we must follow our earlier-decided en banc decision in
Griffin, which effectively established that, where a plaintiff pleads that a plan is an ERISA
plan, the question of whether this is correct does not affect the court’s jurisdiction to
adjudicate the claim. See Rios v. City of Del Rio, Tex., 444 F.3d 417, 425 n.8 (5th Cir. 2006).
5 See, e.g., Dahl v. Charles F. Dahl, M.D., P.C. Defined Ben. Pension Trust, 744 F.3d 623, 629
(10th Cir. 2014) (“[R]ecent Supreme Court decisions compel the conclusion that the existence
of a benefit plan subject to ERISA is not a jurisdictional requirement but an element of a
claim under ERISA.”); Leeson v. Transamerica Disability Income Plan, 671 F.3d 969, 979 (9th
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Here, the Plaintiffs filed suit seeking relief under ERISA and arguing
that the Plan in question is governed by ERISA. The Defendants responded
in the district court and before our court that federal jurisdiction is lacking
because the Plan falls within ERISA’s “governmental plan” exemption. See
§ 1003(b)(1). However, nothing in § 1003(b)(1) “clearly states” that the
“governmental plan” exemption is a jurisdictional limitation, nor is this
exemption listed in ERISA’s jurisdictional provision—29 U.S.C. § 1132(e).
See Reed Elsevier, 559 U.S. at 163; Arbaugh, 546 U.S. at 515. Therefore,
unless the Plaintiffs’ claim is “so insubstantial [or] implausible . . . as not to
involve a federal controversy,” the Plaintiffs’ pleading triggers federal
jurisdiction. See Griffin, 723 F.3d at 523 (citations and internal quotation
marks omitted). This commonsense approach espoused by Griffin to the
jurisdictional issue presented governs this case such that any contrary reading
of Shirley cannot stand. 6
Cir. 2012) (“[I]ntervening Supreme Court precedent compels us to conclude that participant
status is an element of an ERISA claim, not a jurisdictional limitation. . . . By asserting a
colorable claim that he is a plan participant, [the plaintiff] has satisfied the threshold for
establishing federal court subject matter jurisdiction. The issue of participant status goes to
the merits of his claim and not to the subject matter jurisdiction of the district court.”); Daft
v. Advest, Inc., 658 F.3d 583, 590–91 (6th Cir. 2011) (“Therefore, in light of Arbaugh and its
progeny, the existence of an ERISA plan must be considered an element of a plaintiff’s
claim[,] . . . not a prerequisite for federal jurisdiction.”); NewPage Wisc. Sys. Inc. v. USW, 651
F.3d 775, 777 (7th Cir. 2011) (“Whether a claim is good differs from the question whether a
district court possesses jurisdiction, a matter of adjudicatory competence. A federal district
court is the right forum for a dispute about the meaning of ERISA[.]” (citation omitted));
Carlson v. Principal Fin. Grp., 320 F.3d 301, 307 (2nd Cir. 2003) (holding that the question
of whether a plan qualifies as an employee benefit plan under ERISA goes to the issue of
whether a plan participant is able to assert a valid claim under the statute and “is irrelevant
to the question of whether the District Court has subject matter jurisdiction over her
complaint.”).
6 Notably, the result in Shirley would be the same either way because once it was
determined that ERISA did not apply, the district court could not compel arbitration under
ERISA. Also, the procedural weight afforded to cases such as Shirley has been called into
question by the Supreme Court. The Court has observed that judicial opinions have “often
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Of course, once it is determined (through a Rule 12(b)(6) or 56 motion or
a trial on the merits) that the plan at issue is a “governmental plan,” then
ERISA does not provide relief or remedies, and that claim must be dismissed.
See § 1003(b)(1) (“The provisions of this subchapter shall not apply to any
employee benefit plan if . . . such plan is a governmental plan.”). However,
that is different from stating that a district court lacks jurisdiction over a case
where one party contends Plan A is an ERISA plan and the other party
contends that Plan A is a “governmental plan” (or otherwise is not an ERISA
plan). See Steel, 523 U.S. at 89 (“[T]he absence of a valid (as opposed to
arguable) cause of action does not implicate subject-matter jurisdiction, i.e.,
the courts’ statutory or constitutional power to adjudicate the case.”); see, e.g.,
Daniels-Hall v. Nat’l Educ. Ass’n, 629 F.3d 992, 997 (9th Cir. 2010) (“[T]o ask
whether the alleged Plan is subject to ERISA is a merits question.”). 7
Accordingly, because a federal district court has jurisdiction to decide
whether or not a plan is an ERISA plan as claimed by the plaintiff in the
complaint, we conclude that, under Supreme Court precedent and Griffin, the
obscure[d] the issue by stating that the court is dismissing for lack of jurisdiction when some
threshold fact has not been established, without explicitly considering whether the dismissal
should be for lack of subject matter jurisdiction or for failure to state a claim.” Arbaugh, 546
U.S. at 511 (citation and internal quotation marks omitted). The Court has instructed that
these “drive-by jurisdictional rulings should be accorded no precedential effect on the
question whether the federal court had authority to adjudicate the claim in the suit.” Id.
(citation and internal quotation marks omitted). Shirley concluded that the court lacked
subject matter jurisdiction without addressing the question of whether the missing threshold
fact—i.e., whether a plan was a “governmental plan”—meant that the matter should be
dismissed for lack of jurisdiction or for failure to state a claim. Shirley, 921 F.2d at 567.
Therefore, even absent Griffin, Shirley’s precedential value would be drawn into question by
the Supreme Court’s intervening admonitions. See Arbaugh, 546 U.S. at 511.
7 Part of the confusion about the timing question here was caused by the analysis of the
issue as one of subject matter jurisdiction, which is typically determined at the time the
lawsuit is filed. See, e.g., Carney v. Resolution Trust Corp., 19 F.3d 950, 954 (5th Cir. 1994)
(“Subject matter jurisdiction is determined at the time that the complaint is filed.”).
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proper procedural vehicle to raise the question of whether a purported ERISA
plan is a “governmental plan” is either Rule 12(b)(6) or, if factual information
outside the pleadings is needed, Rule 56 (if factual issues cannot be resolved
then, of course, a trial may be needed). The question then becomes whether
this procedural distinction makes a difference here. Cf. Daniels-Hall, 629
F.3d at 998 (no difference in the outcome between the two procedures). We
conclude that it does.
“A case is properly dismissed for lack of subject matter jurisdiction when
the court lacks the statutory or constitutional power to adjudicate the case.”
Krim v. pcOrder.com, Inc., 402 F.3d 489, 494 (5th Cir. 2005) (citation and
internal quotation marks omitted). In considering a challenge to subject
matter jurisdiction, the district court is “free to weigh the evidence and resolve
factual disputes in order to satisfy itself that it has the power to hear the case.”
Id. (citation and internal quotation marks omitted). Thus, under Rule
12(b)(1), the district court can resolve disputed issues of fact to the extent
necessary to determine jurisdiction; by contrast, disputed questions of fact are
anathema to Rule 12(b)(6) jurisprudence, unless those disputed facts are
immaterial to the outcome. Compare Montez v. Dep’t of Navy, 392 F.3d 147,
149 (5th Cir. 2004) (“In general, where subject matter jurisdiction is being
challenged, the trial court is free to weigh the evidence and resolve factual
disputes in order to satisfy itself that it has the power to hear the case.”), with
In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (When
deciding a Rule 12(b)(6) motion, “[t]he court accepts all well-pleaded facts as
true, viewing them in the light most favorable to the plaintiff.” (citation and
internal quotation marks omitted)). In light of the complexity of the facts here
involved, this case cannot be resolved without some resort to “the facts.” As
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such, because the procedural mechanism employed could very well affect the
outcome, the matter should be directed to the district court in the first
instance. 8
Accordingly, we VACATE the district court’s order in its entirety and
remand for reconsideration under a proper procedural vehicle. As a result, we
do not reach the merits of the “governmental plan” argument or the timing
question beyond noting that, typically, facts are assessed at the time the cause
of action arose. See, e.g., Hightower v. Tex. Hosp. Ass’n, 65 F.3d 443, 447 (5th
Cir. 1995) (deciding whether a benefit plan was a “governmental plan” at the
time it was terminated and members of the plan were denied payments from
the resulting surplus of funds).
VACATED and REMANDED.
8 Moreover, as the Supreme Court has observed, when the district court concludes that it
lacks subject matter jurisdiction, that matter must be dismissed. Arbaugh, 546 U.S. at 514.
However, when the district court grants a motion to dismiss for failure to state a federal
claim, the court has discretion to retain supplemental jurisdiction to consider pendent state-
law claims. Id.; see also 28 U.S.C. § 1367(a), (c)(3). That, too, is a question for the district
court in the first instance.
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