Ray Marshall, Secretary of Labor, United States Department of Labor v. The Chase Manhattan Bank (National Association), 558 F.2d 680, 2d Cir. (1977)
Ray Marshall, Secretary of Labor, United States Department of Labor v. The Chase Manhattan Bank (National Association), 558 F.2d 680, 2d Cir. (1977)
2d 680
1 Employee Benefits Ca 1796
Since 1961, the Chase Manhattan Bank (National Association) (Chase) has
been the trustee of the assets of an employee pension benefit plan the Pension
Plan for Wage Employees of Federal Sweets and Biscuit Company, Inc. Chase
was obligated to invest the corpus and to make distributions periodically at the
direction of a Pension Board designated by the employer. The employer,
Federal Sweets and Biscuit Company, was adjudicated a bankrupt on
September 3, 1974. All the members of the Pension Board are believed to be
deceased. Chase has received no directions for distribution from that Board
since April 1972 but has continued to make payments to nine former employees
of the bankrupt from assets which approximate $188,000. Chase decided that
the plan should be terminated and the corpus distributed to the beneficiary
employees. To accomplish this, Chase commenced an action in the Supreme
Court of the State of New York to secure judicial consent to a wind-up of the
plan as well as a judicial settlement of its trustee's account for the calendar
years 1970 through 1975. That state court action was filed in July 1976 and is
now pending.
2
In December 1976, the Secretary of the United States Department of Labor (the
Secretary) commenced an action in the United States District Court for the
Southern District of New York seeking declaratory as well as injunctive relief
against Chase. The Secretary alleged that under the provisions of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.) (ERISA)
which became effective January 1, 1975, the state court has no jurisdiction to
approve the trustee's 1975 account. The Secretary alleged that 502(e)(1) of
ERISA vested exclusive jurisdiction of actions concerning 1975 fiduciary
conduct in the federal courts, and that under 514(a) of ERISA federal law
supersedes all state law relating to covered employee benefit plans. The
complaint alleges that the entry of any judgment by the state court will result in
"irreparable injury to the public interest in the uniform administration and
enforcement of Title I of ERISA." Hence judgment is sought (1) declaring that
the portion of Chase's action seeking release and discharge of its 1975 account
represents a cause of action relating to an employee benefit plan covered by
ERISA which arose after January 1, 1975; (2) declaring that the Supreme Court
of New York lacked jurisdiction over that part of the state court proceeding
which seeks the 1975 accounting; and (3) preliminarily and permanently
enjoining Chase from pursuing its state court action insofar as it relates to the
post-1974 period.
In its answer, Chase denied that the state court lacked jurisdiction and asserted
inter alia that the plan in question was not covered by ERISA since the
employer was not engaged in commerce or in any activity affecting commerce
on or after the date of enactment of the statute. See 29 U.S.C. 1003(a). It was
further alleged that since the matter was still pending in the state court, the
district court should abstain from consideration until the state court had made
its determination. We note that the Secretary has not appeared in the state court
action even to contest jurisdiction but has advised that court of its position by
letter.
Shortly after issue was joined, District Judge Thomas P. Griesa called a
conference of the parties on January 19, 1977 since the Secretary was in the
process of preparing motion papers for a preliminary injunction. A reading of
the transcript of that conference reveals that the district judge felt that if the
Secretary believed that the state court had no jurisdiction with respect to the
1975 accounting period, his proper remedy was to appear in the state court to
contest its jurisdiction rather than to burden the federal court with a second
action at the expense of the fund and its beneficiaries. Judge Griesa did not
simply deny the preliminary injunctive relief sought by the Secretary, but rather
dismissed the action on his own motion "on the ground that the only
appropriate way to proceed is for you to make a motion in the state court to
dismiss that action, in whole or in part, for lack of subject matter jurisdiction.
This action is dismissed." This appeal by the Secretary followed.
5
Chase has taken the position that since the employer became bankrupt in 1974
and was therefore not involved in commerce after the effective date of the
statute, ERISA does not govern. But surely the interpretation of a federal statute
providing for exclusive jurisdiction in the federal courts presents a federal
question to be decided by that court and not the state tribunal.
Chase also argues that the dismissal of the complaint can be upheld under the
terms of the anti-injunction statute, 28 U.S.C. 2283.4 However, in NLRB v.
Nash-Finch Co., 404 U.S. 138, 146, 92 S.Ct. 373, 30 L.Ed.2d 328 (1971), the
Court has held that the general language of 2283 was not intended to
hamstring federal agencies in the utilization of federal courts to protect federal
rights. See Mitchum v. Foster, 407 U.S. 225, 235-36, 92 S.Ct. 2151, 32 L.Ed.2d
705 (1972); Leiter Minerals, Inc. v. United States,352 U.S. 220, 77 S.Ct. 287, 1
L.Ed.2d 267 (1957). The superior federal interest sought to be vindicated here
is clear from 502 and 514 of the Act as well as its legislative history which
establish the congressional intent that the United States regulate the field of
employee benefit plans eliminating the threat of conflicting and inconsistent
local regulation.5
II
8
Chase further argues that the decision below is justified on the basis of the
doctrine of abstention. Since the court did not address the merits and
emphasized the pending state action, it is probable that this did constitute the
basis for the dismissal. However, as the Supreme Court has noted, "Abstention
from the exercise of federal jurisdiction is the exception, not the rule."
Colorado River Water Cons. Dist. v. United States, 424 U.S. 800, 813, 96 S.Ct.
1236, 1244, 47 L.Ed.2d 483 (1976). In that case the Court reviewed its
abstention decisions and indicated that there were three categories of cases
where federal court abstention was appropriate: 1) In cases presenting a
constitutional issue which might be mooted or presented in a different posture
by a state court determination of state law, id. at 814. But there is no
constitutional issue involved here; 2) Where there are difficult questions of
state law bearing on policy problems of substantial public import whose
importance transcends the result in the case at bar. Id. at 814, 96 S.Ct. 1244.
But the question here involves federal and not state law; and 3) Where the relief
sought by way of injunction or declaratory judgment involved a pending
criminal action in the state court as in Younger v. Harris, 401 U.S. 37, 91 S.Ct.
746, 27 L.Ed.2d 669 (1971) and Samuels v. Mackell, 401 U.S. 66, 91 S.Ct. 764,
27 L.Ed.2d 688 (1971). 424 U.S. at 816, 96 S.Ct. 1236. Younger abstention has
been recently broadened by considerations of comity and federalism to include
federal abstention even where the pending state action is civil in nature but
where the state has a clear interest. Thus in Huffman v. Pursue, Ltd., 420 U.S.
592, 95 S.Ct. 1200, 43 L.Ed.2d 482 (1975), the state had brought an action to
enforce a nuisance statute. Since the state was a party to the proceeding and the
nuisance statute was akin to a criminal enactment, federal abstention was
decreed. In Juidice v. Vail, 430 U.S. 327, 97 S.Ct. 1211, 53 L.Ed.2d 376
(1977), Huffman was extended to require federal abstention where the federal
plaintiffs had previously been incarcerated by the state in contempt
proceedings. The interest of the state in vindicating its civil enforcement
proceedings required federal abstention on comity grounds. Similarly in Trainor
v. Hernandez, --- U.S. ----, 97 S.Ct. 1911, 52 L.Ed.2d 486 (1977), where a state
agency had brought a civil action against the federal plaintiffs in a state court to
recover welfare payments allegedly fraudulently obtained, the Supreme Court
held that the federal court should abstain under Huffman principles.6
9
This case does not fall within the ambit of Huffman, Juidice and Trainor.
Neither the Secretary nor the State of New York has ever been a party to the
state action. There are no federal constitutional issues which the state court has
been asked to determine so that no issue of comity or federalism is present. The
pending state action is between private parties with the state complaint simply
invoking the general equitable jurisdiction of the state court to settle an
account, terminate the trust and authorize a distribution. No state law involving
employee benefit plans was invoked in the state proceeding. More importantly,
the Secretary has initiated a federal action seeking the construction of a federal
statute which, as we have noted, provides that state laws are superseded and
that the federal courts have exclusive jurisdiction. Under these circumstances
federal abstention was improper.
10
We are not unmindful that the bifurcation of the action here creates problems of
expense for the fund and the beneficiaries. The fund is comparatively small, its
beneficiaries few and unquestionably the state court has jurisdiction over four
of the five years involved. On the remand, we are hopeful that with the
guidance of the district court the parties may find some method of reasonably
accommodating their conflicting interests. At this juncture, however, we have
no choice but to hold that the complaint was improvidently dismissed and that
federal court abstention is not appropriate.
11
described in section 1003(a) of this title and not exempt under section 1003(b)
of this title. This section shall take effect on January 1, 1975.
3
In Colorado River Water Cons. Dist. v. United States, supra, 424 U.S. at 818,
96 S.Ct. 1236, the Court, while finding that the case fell within none of the
abstention categories, nonetheless recognized that under "exceptional"
circumstances dismissal of a federal suit due to the presence of a concurrent
state proceeding may be countenanced. In that case, the United States had
commenced an action in the District of Colorado to determine reserved rights to
water in that state. Thereafter, a defendant in the federal action sought to make
the United States a party in a state water division proceeding as provided by
Colorado law. The Court held that the federal action should be dismissed
because of the unusual factors present, id. at 819-21, 96 S.Ct. 1236. Most
significant was the recognition by the McCarran Amendment, 43 U.S.C. 666,
of the desirability of unified adjudication of water rights, and the availability of
state systems such as that in Colorado for adjudication and management on a
continuous basis. Moreover there were 1,000 defendants in the federal action;
there was a 300-mile distance between the federal court and the state water
division court; and the United States was already participating in proceedings in
three other state water divisions
On the contrary, ERISA indicates, with exceptions noted in n. 3 supra, that the
federal courts are to have exclusive jurisdiction. There is no discernible state
interest in pension fund litigation and of course the United States has not
become or been joined as a party in the state proceeding.