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Existence Of ERISA Plan Not Jurisdictional Requirement, But Element Of Plaintiff’s Claim, Says Sixth Circuit

Blogs, Erisa

A circuit split is now resolved on a key ERISA question, thanks to a decision last week from the Sixth Circuit Court of Appeals.

In Daft v. Advest, Inc., Nos. 08-3212 and 10-3151 (5th Cir. Sept. 23, 2011), the Sixth Circuit reversed itself on the question of whether the existence of an ERISA plan is a prerequisite for federal jurisdiction (its prior position) or only an element of the plaintiff’s benefits claim (which is now the court’s view).

With the reversal, the Sixth Circuit joins other circuit courts of appeals, and resolves the split of authority – and brings its position in line with recent Supreme Court authority.

The Sixth Circuit reversed, although it did send the matter back to the district court for further proceedings.

The Sixth Circuit considered that, if the plan’s existence is jurisdictional, then the issue could not be waived and may be raised at any time. Alternatively, if the plan’s existence is merely an element of the plaintiff’s claim, then the defendant can waive the issue.

One of the issues in Daftwas that the defendants said that the plan did not come within the scope of an ERISA pension benefit plan. Even if it did, the defendants claimed, the plan was not a “top hat” plan and therefore the plaintiffs’ claims failed.

The court considered the jurisdictional question “head-on” for the first time since recent Supreme Court authority on the subject:

Now that the time has come to confront the question head-on, we find that recent Supreme Court precedent has abrogated the conclusion, assumed in our previous cases and explicitly adopted in the majority of our sister circuits, that the existence of an ERISA plan is a prerequisite to federal subject-matter jurisdiction. In the last several years, the Court has repeatedly warned that jurisdiction “ ‘is a word of many, too many, meanings’ “ that have sometimes led courts to “profligate … use of the term.” Arbaugh, 546 U.S. at 510 (quoting Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 90, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998)). “Because the consequences that attach to the jurisdictional label may be so drastic, [the Court] ha[s] tried in recent cases to bring some discipline to the use of this term.” Henderson ex rel. Henderson v. Shinseki, ––– U.S. ––––, ––––, 131 S.Ct. 1197, 1202, 179 L.Ed.2d 159 (2011); see also Reed Elsevier, Inc. v. Muchnick, ––– U.S. ––––, –––– – ––––, 130 S.Ct. 1237, 1243–44, 176 L.Ed.2d 18 (2010); Union Pacific R.R. Co. v. Bhd. of Locomotive Eng’rs & Trainmen Gen. Comm. of Adjustment, Cent. Region, ––– U.S. ––––, ––––, 130 S.Ct. 584, 596, 175 L.Ed.2d 428 (2009); Arbaugh, 546 U.S. at 510–11; Eberhart v. United States,546 U.S. 12, 18–19, 126 S.Ct. 403, 163 L.Ed.2d 14 (2005) (per curiam); Scarborough v. Principi, 541 U.S. 401, 413–14, 124 S.Ct. 1856, 158 L.Ed.2d 674 (2004); Kontrick v. Ryan, 540 U.S. 443, 454–455, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004). Of particular relevance is Arbaugh,which counsels that “[s]ubject matter jurisdiction in federal-question cases is sometimes erroneously conflated with a plaintiff’s need and ability to prove the defendant bound by the federal law asserted as the predicate for relief—a merits-related determination.” 546 U.S. at 511 (internal quotation marks omitted).

* * *

An examination of the relevant sections of ERISA does not reveal a clear statement from Congress that the existence of an ERISA plan constitutes a jurisdictional requirement. . . . Section 502(e)(1) of ERISA grants federal courts “jurisdiction of actions under” section 502(a)(1)(B), 29 U.S.C. § 1132(e)(1), and does not “specif[y] any threshold ingredient” on which that jurisdiction depends, Arbaugh, 546 U.S. at 515. Section 502(a)(1)(B) gives “a participant or beneficiary” a cause of action “to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan,” 29 U.S.C. § 1132(a)(1)(B), and does not “speak in jurisdictional terms or refer in any way to the jurisdiction of the district courts,” Zipes, 455 U.S. at 394, quoted in Arbaugh,546 U.S. at 515; neither do the definitions of “plan” or “employee pension benefit plan” in ERISA Section 3, see 29 U.S.C. § 1002(2), (3). 

Therefore, in light of Arbaughand its progeny, the existence of an ERISA plan must be considered an element of a plaintiff’s claim under Section 502(a)(1)(B), not a prerequisite for federal jurisdiction. . . . 

* * *

The relevant sections of ERISA do not evidence a Congressional intent, let alone a clear one, that the existence of an ERISA plan is a jurisdictional question. Therefore, it is best considered an element of Plaintiffs’ claim.

Because the existence of an ERISA plan is not a jurisdictional prerequisite, federal subject-matter jurisdiction lies over Plaintiffs’ suit as long as they raise a colorable claim under ERISA. That is, federal jurisdiction exists over Plaintiffs’ ERISA claim unless “the claim ‘clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or … is wholly insubstantial and frivolous.’ “ Steel Co., 523 U.S. at 89 (quoting Bell v. Hood,327 U.S. 678, 682–83, 66 S.Ct. 773, 90 L.Ed. 939 (1946)). Plaintiffs have clearly met this burden, as evidenced by the fact that the district court, after considering the question on the merits, determined that the AE Plan did qualify as an ERISA plan. Defendants forfeited any objection to this element of the Plaintiffs’ claim by failing to raise the issue before the district court granted summary judgment to Plaintiffs. SeeFed.R.Civ.P. 12(h)(2) (specifying that “[f]ailure to state a claim upon which relief can be granted” may be raised “in any pleading allowed or ordered under Rule 7(a),” “by a motion under Rule 12(c),” or “at trial”); Winnett, 553 F.3d at 1006–07 (stating that this Court “usually require[s] timely and reasoned presentation of non-jurisdictional issues to avoid forfeiture” in order to “ensure fair and evenhanded litigation by requiring parties to disclose legal theories early enough in the case to give an opposing party time not only to respond but also to develop an adequate factual record supporting their side of the dispute”); cf. Barner v. Pilkington N. Am., Inc., 399 F.3d 745, 749 (6th Cir.2005) (“Our function is to review the case presented to the district court, rather than a better case fashioned after a district court’s unfavorable order.” (internal quotation marks omitted)).

Daft v. Advest, Inc., Nos. 08-3212 and 10-3151.

Thus, the Sixth Circuit, upholding the district court’s decision, determined that the existence of the plan was an element of the benefits claim and not a jurisdiction issue. Although holding that the defendants waived the right to raise the existence of the plan as an issue in the case, the court found that there were fact issues precluding a determination as to whether the ERISA plan was a top hat plan, and thus, the court reversed the district court and remanded for further proceedings.

The full opinion is available here.