5th Cir.: Transit Workers' Benefit Claims Improperly Dismissed for Lack of Jurisdiction

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June 23 — A federal trial court shouldn't have dismissed benefit claims by New Orleans transit system retirees for lack of jurisdiction after finding that the relevant plan was a governmental plan exempt from ERISA, the U.S. Court of Appeals for the Fifth Circuit held .  

The Fifth Circuit disagreed with the district court's decision to dismiss the case on jurisdictional grounds, saying in a June 23 ruling that the U.S. Supreme Court “has repeatedly instructed that we must avoid conflating the question of whether we have subject matter jurisdiction” with “whether the plaintiff has stated a valid claim.”

In particular, the Fifth Circuit looked to its 2013 decision in ACS Recovery Servs., Inc. v. Griffin, 723 F.3d 518, 55 EBC 1857 (5th Cir. en banc 2013). In that case, a full panel of Fifth Circuit judges held that federal courts have jurisdiction to determine whether a claim under Employee Retirement Income Security Act Section 502(a)(3) has been stated, “irrespective of the claim's ultimate merit.”

In the instant ruling, the Fifth Circuit expanded on the rule it adopted in Griffin, holding that the question of whether an ERISA-exempt governmental plan exists is generally subject to federal jurisdiction, regardless of the court's ultimate decision on that question.

The Fifth Circuit also overruled its decision in Shirley v. Maxicare Tex., Inc., 921 F.2d 565 (5th Cir. 1991), to the extent that case could be read as contrary to Griffin.

Challenge to Retiree Benefits

The plaintiffs are former employees of New Orleans Public Service Inc. and retirees of Transit Management of Southeast Louisiana Inc.

They filed a lawsuit in 2012, alleging that these entities violated ERISA by denying them premium-free medical insurance and other benefits.

The New Orleans Regional Transit Authority and Transit Management moved to dismiss, arguing that the plan in question qualified as an ERISA-exempt governmental plan.

The U.S. District Court for the Eastern District of Louisiana agreed with the RTA and Transit Management that the plan was ERISA-exempt and dismissed in May 2013 the retirees' claims for lack of jurisdiction.

Court Reviews Precedent

On appeal, the Fifth Circuit said that its decision in Griffin “effectively overruled” contrary circuit precedent such as Shirley and aligned the court with recent rulings of the Second, Sixth, Seventh Ninth and Tenth circuits.

According to the Fifth Circuit, these courts have rejected the notion that “the actual existence (as opposed to the allegation) of a plan covered by ERISA is a jurisdictional prerequisite.”

The Fifth Circuit also emphasized that its post-Griffin decision in Cantrell v. Briggs & Veselka Co., 728 F.3d 444, 56 EBC 1872 (5th Cir. 2013) didn't diminish Griffin's holding.

Cantrell was distinguishable, the Fifth Circuit said, because it involved a motion to remand the case to state court, rather than a dismissal for lack of federal jurisdiction.

Vacated, Remanded

Turning to the instant dispute, the Fifth Circuit said that nothing in ERISA's definition of governmental plan “clearly states” that the exemption is a jurisdictional limitation. Nor is the exemption listed in ERISA's jurisdictional provisions, the Fifth Circuit said.

Quoting Griffin, the Fifth Circuit said that “unless the Plaintiff's claim is ‘so insubstantial [or] implausible … as not to involve a federal controversy,' the Plaintiffs' pleading triggers federal jurisdiction.”

Given this, the court vacated the district court's dismissal and remanded the case for reconsideration “under a proper procedural vehicle.”

Judge Catharina Haynes authored the opinion, which was joined by Senior Judge Patrick Higginbotham and Judge W. Eugene Davis.

The retirees were represented by Sher Garner Cahill Richter Klein & Hilbert LLC. The RTA and Transit Management were represented by Proskauer Rose LLP.

Text of the opinion is at http://www.bloomberglaw.com/public/document/Mary_Smith_et_al_v_Regional_Transit_Authority_et_al_Docket_No_133.