Source: https://casetext.com/case/woodfork-v-marine-cooks-stewards-union
Timestamp: 2019-11-20 02:52:08
Document Index: 281286524

Matched Legal Cases: ['§ 1001', '§ 301', '§ 302', '§ 185', '§ 1132', '§ 1391', '§ 1001', '§ 1144', '§ 1132', '§ 1053', '§ 1053', '§ 1053', '§ 1132', '§ 1144', '§ 301']

Woodfork v. Marine Cooks Stewards Union, 642 F.2d 966 | Casetext
642 F.2d 966 (5th Cir. 1981)
Woodforkv.Marine Cooks Stewards Union
United States Court of Appeals, Fifth CircuitApr 17, 1981
Some appear to rely on what they perceive as ERISA's creation of a "federal common law" governing all…
Plaintiffs reasoned that federal courts must refer to state common law in developing the federal common law…
holding that district court must accept amended complaint that reasserts previously abandoned claim only where it finds that "justice so require"
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finding an abuse of discretion when the district court denied leave to amend to restore the plaintiffs federal claim because the plaintiff withdrew that claim in an earlier amendment
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In Woodfork v. Marine Cooks Stewards Union, 642 F.2d 966 (5th Cir. 1981), the predecessor to this court resolved the tensions by ruling that whenever a cause of action for employee benefits accrues after January 1, 1975, ERISA preempts the mechanism for seeking relief. See id. at 970.
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Dodd, Barker, Boudreaux, Lamy Gardner, C. Paul Barker, New Orleans, La., Ernst Daniels, Richard Ernst, San Francisco, Cal., for defendants-appellees.
In this federal diversity case we must decide whether federal law, under either the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1001- 1381 (1976), or § 301 or § 302 of the Taft-Hartley Act, 29 U.S.C. §§ 185 and 186 (1976), preempts a merchant seaman's statelaw claim that he is entitled to pension benefits. The district court determined that ERISA preempted the claim and accordingly dismissed the case. We think the district court misconstrued ERISA's preemption provision in making that determination and therefore reverse and remand the case for further proceedings.
In 1974, after ERISA was enacted, Woodfork hired an attorney to investigate his pension eligibility. The attorney sent a letter to the union on December 27, 1974, requesting various information he felt was needed to determine "what rights, if any, Mr. Woodfork has to obtain a pension, or the alternative [sic], to obtain a refund of whatever monies were deposited in the pension fund by either himself [sic] or any of his employers." Record, Exhibits Volume, D-23. The attorney sent a second letter, dated February 6, 1975, which stated that it should be treated as an application for pension benefits. Id. at D-24. The Pension Plan began processing the February letter as an application, but before it reached a final decision, Woodfork filed this lawsuit alleging entitlement to pension benefits. Shortly thereafter, the Pension Plan notified Woodfork that it had found him ineligible for benefits.
II [7] The Complaint and the Proceedings in the District Court
The officers of the Pension Plan were located in San Francisco, and the plan administrator and the plan trustees also resided in California. Defendants moved under the venue provisions of ERISA and the Taft-Hartley Act to transfer venue to the Northern District of California. To avoid the possibility that his suit would have to be prosecuted in California, Woodfork amended his complaint to substitute a state claim of pension entitlement for the federal claims. In the amended complaint, jurisdiction was premised on diversity. Since in a diversity case venue lies in any district in which the plaintiff resides, the defendants were compelled to withdraw their challenge to venue, and the case proceeded to trial.
In addition to the Pension Plan, Woodfork sued the Plan's administrator, William H. Clark, and the Marine Cooks Stewards Union. Service was accomplished on the Pension Plan and Clark under the Louisiana long arm statute, and they did not question the district court's jurisdiction over their persons. Woodfork never obtained service of process on the union, and the union has never appeared in the case.
Venue in an ERISA civil action is located "in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found . . ." 29 U.S.C. § 1132(e)(2) (1976). Venue for an action under Taft-Hartley is governed by 28 U.S.C. § 1391(b) (1976), which provides that venue can lie in either the district where all defendants reside or where the claim arose.
Woodfork contends that the costs of prosecuting the cause in the Northern District of California are prohibitive, given the relative financial insignificance of the relief he is seeking.
[T]he 1974 Employee Retirement Income Security Act (ERISA) preempted the field and superseded state law. The 1974 Act is applicable to all causes of actions [sic] arising after its effective date, January 1, 1975. Since application for benefits and the denial of them occurred subsequent to the effective date of the statute, and since Plaintiff alleged only a state law claim and state law was inapplicable, the claim [is] dismissed.
III [16] ERISA Preemption
The Employee Retirement Income Security Act was enacted on September 2, 1974; the effective date of the provisions of the Act relevant to this appeal is January 1, 1975. One of the purposes of ERISA is "to protect . . . the interests of participants in employee benefit plans . . . by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies . . . and ready access to the Federal courts." 29 U.S.C. § 1001(b) (1976). ERISA's drafters felt that this purpose would best be served by creating a comprehensive federal scheme of pension plan regulation that preempted all state regulation. The need for preemption was explained by Senator Harrison A. Williams, one of the principal authors of ERISA, as follows:
[1974] U.S. Code Cong. Adm.News 4639, 5188.
(a) Except as provided in subsection (b) of this section, the provisions of this subchapter . . . shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan . . . . This section shall take effect on January 1, 1975.
Under section 1144, then, the question whether ERISA preempts California common law turns on whether subsection (b)(1) applies to Woodfork's claim. Subsection (b)(1) removes from the supercession requirement (a) causes of action which arose before January 1, 1975 (the "cause-of-action exception") and (b) acts or omissions which occurred before January 1, 1975 (the "actor-omission exception"). Woodfork presents a two-fold argument that ERISA has no application in his case: (1) his cause of action arose before January 1, 1975; and, alternatively, (2) that his cause of action is based in part on an act or omission that occurred prior to that date.
Congress did not, either by express statutory definition or by ERISA's legislative history, provide guidance on the meaning of the term "act or omission." See Bacon v. Wong, 445 F. Supp. 1189, 1192 (N.D.Cal. 1978). We must therefore divine specific statutory meaning from general statements of Congressional intent and the rules of statutory construction.
A basic principle of statutory construction is that "a statute should not be construed in such a way as to render certain provisions superfluous or insignificant." Zeigler Coal Co. v. Kleppe, 536 F.2d 398, 406 (D.C. Cir. 1976). See also United States v. Wong Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972). If we are to assume, as Woodfork contends we should, that ERISA does not preempt a cause of action if its factual basis includes acts or omissions occurring before 1975, the cause-of-action exception would be superfluous. This is because any cause of action arising before 1975, by definition, must be based on acts or omissions occurring before 1975. Thus, the cause-of-action exception would have independent significance only if it applies in contexts to which the act-or-omission exception is inapplicable. We think it is possible to construe the statute in a way that achieves this result.
A cause of action, in common legal parlance, is a state of facts which would entitle a person to sustain an action and to seek a judicial remedy on his behalf. See Fraticelli v. St. Paul Fire Marine Insurance Co., 375 F.2d 186, 188 n. 6 (1st Cir. 1967); Swankowski v. Diethelm, 98 Ohio App. 271, 129 N.E.2d 182, 184 (Ohio 1953). ERISA preempts state law, however, whether or not it provides the legal basis for a cause of action. For example, ERISA's preemption section covers pension-related state administrative proceedings and criminal prosecutions, which certainly cannot be characterized as causes of action. See 29 U.S.C. § 1144(c)(1) (1976); Azzaro v. Harnett, 414 F. Supp. 473 (S.D.N.Y. 1976) (preemption of state administrative agency's regulation of pension disclosure), aff'd, 553 F.2d 93 (2d Cir.), cert. denied, 434 U.S. 824, 98 S.Ct. 71, 54 L.Ed.2d 82 (1977). In such contexts, the cause-of-action exception is simply inapposite and only the act-or-omission exception is applicable. We think a reasonable construction of the statute is to confine use of the latter exception to acts or omissions that set in motion legal proceedings other than causes of action.
Judge Rubin, in note 2 of his dissent, writes that the majority opinion "do[es] not consider the right to initiate a legal proceeding a cause of action." 642 F.2d 978. This, we think, mischaracterizes our opinion. While we agree with our dissenting brother that a private litigant's right to initiate a legal proceeding is always a cause of action, we do not think the term "cause of action" is descriptive of a state or local governmental body's right to initiate an administrative action or a criminal prosecution. The legislative history of ERISA, however, demonstrates that such state regulation of the pension field was to be preempted entirely.
[1974] U.S. Code Cong. Adm.News pp. 5188-5189. Since legal proceedings initiated by the state are not causes of action, it is reasonable to conclude that Congress included the acts-or-omissions language to preempt such legal proceedings and not civil actions such as Woodfork's.
This interpretation of the statute is consistent with meeting a basic legislative goal of ERISA: allowing a participant to bring a civil action in federal court "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) (1976). It is reasonable to assume that Congress desired to provide this federal court access as quickly as possible. Nevertheless, Congress did not choose to open the federal forum to nonpreempted state claims. Martin v. Bankers Trust Co., 565 F.2d 1276, 1278 (4th Cir. 1977). Rather, actions brought in the federal forum were to be those "regarded as arising under the laws of the United States . . . ." [1974] U.S. Code Cong. Adm.News 5188 (Comment of Senator Harrison Williams).
A state claim not preempted by ERISA obviously does not arise under federal law and the federal forum is thus, absent diversity, closed to it. See Martin v. Bankers Trust Co., supra. Thus, our acceptance of Woodfork's contention that causes of action are excepted from preemption whenever they involve any pre-1975 acts or omissions could deny many individuals the right to sue in federal court. This would conflict with the goal of providing access to a federal forum for pension plan participants. It would also conflict with Senator Williams' admonition that the preemption exceptions are to be construed narrowly. See supra, 642 F.2d at 970.
For example, consider a participant in Woodfork's pension plan who on January 1, 1975, was 55 years of age, and whose employment aboard union ships ended in 1971. Under the terms of the pension plan, he would have to wait until 1982, when he attained age 62, to apply for a pension. In such a case, under Woodfork's reasoning, he would be denied a federal forum when he turned 62 unless he met the requirements for federal diversity jurisdiction.
In his brief counsel for [the participant] concedes that he is not charging the defendants with liability for any new duty imposed upon them by ERISA and which did not exist prior to [ERISA], but argues that ERISA grants him a federal forum to determine his rights to benefits under the plan [where his cause of action arose before January 1, 1975]. We reject this argument for we agree with the defendants that to place such a construction upon the statute would raise a serious constitutional question.
Without deciding whether Congress could have constitutionally provided a federal forum for causes of action arising before ERISA's enactment, we agree with the Fourth Circuit that Congress's concern in 1974 over the possible unconstitutionality motivated it to deny a federal forum to litigants with pre-existing causes of action.
Providing a federal forum for causes of action arising after January 1, 1975 raised fewer constitutional implications, even though it was still possible the cause might be based primarily on events occurring before 1975. See Hampton Roads Stevedoring Corp. v. O'Hearne, 184 F.2d 76, 80 (4th Cir. 1950).
Woodfork's view might be persuasive if ERISA in fact failed to replace his preempted state remedy with a federal remedy. In our view, however, ERISA does provide Woodfork with a federal remedy. The reason Woodfork believes it does not is that he looks only to its substantive provisions. The substantive provision dealing with vesting of benefits would make illegal a pension plan's denial of benefits because of a break-in-service, see 29 U.S.C. § 1053 (1976), but that provision does not apply to service breaks, like Woodfork's, that occurred before ERISA's effective date, see 29 U.S.C. § 1053(b)(1)(F) (1976). Since Woodfork's break began in 1964, this substantive provision provides him no protection.
A second reason Woodfork receives no protection from ERISA's substantive sections is that he failed to earn at least three years of service after December 31, 1970. See 29 U.S.C. § 1053(b)(1)(E) (1976).
[P]articipants and beneficiaries may bring suit to recover benefits denied contrary to the terms of their plan, and where such claims by participants or beneficiaries do not involve application of the substantive requirements of this legislation, they may be brought in either State or Federal courts of competent jurisdiction. It is intended that such actions will be regarded as arising under the laws of the United States, in similar fashion to those brought under section 301 of the Labor Management Relations Act.
[1974] U.S. Code Cong. Adm.News 5188 (Comment of Senator Harrison Williams) (emphasis supplied). We think in interpreting the terms of a pension plan in a case such as Woodfork's, this federal common law allows a court to interpret a pension plan's terms in light of a worker's pre-ERISA state law rights. Thus, if Woodfork is correct that under California law the Pension Plan would have been required to pay him benefits notwithstanding plan provisions to the contrary, he may, in our view, raise these rights as part of a judicially created body of federal law governing pension entitlement. Having concluded that the "act or omission" exception does not preclude ERISA preemption of Woodfork's claim, we turn to the question whether his cause of action arose after January 1, 1975.
Judge Rubin takes issue with our conclusion that ERISA, in some circumstances, may absorb pre-ERISA state law. Apparently, Judge Rubin agrees with us that ERISA should not be construed to deny a worker a pension to which his pre-ERISA employment would have entitled him under pre-ERISA state law, but concludes that "the protection of federal law will [not] be less adequate than the protection of prior state law." 642 F.2d 980. Therefore, incorporation of state law is unnecessary.
IV [39] Taft-Hartley Preemption
Section 302(c)(5) of the Taft-Hartley Act, which applies to pension plans negotiated by a union for its members, creates requirements which the plan must satisfy before the employer may legally fund it. Among the requirements is that the trust be administered for the sole and exclusive benefit of the employer's employees. At least one circuit has interpreted these words to create a private cause of action, governed by federal substantive law, for a beneficiary to sue his pension trust for benefits. Alvares v. Erickson, 514 F.2d 156, 164-167 (9th Cir.), cert. denied, 423 U.S. 874, 96 S.Ct. 143, 46 L.Ed.2d 106 (1975). See also Goetz, Developing Federal Labor Law of Welfare and Pension Plans, 55 Cornell L.Rev. 911, 925-931 (1970). The Ninth Circuit has indicated its willingness in such cases to consider whether eligibility requirements, similar to those Woodfork challenges here, are arbitrary, capricious and, thus, unenforceable. This use of section 302(c)(5) to create a federal substantive law of pension eligibility has not been universally accepted, however, and some courts have held that prior to ERISA pension matters were to be governed primarily by state regulation. Beam v. International Organization of Masters, Mates Pilots, 511 F.2d 975 (2d Cir. 1975).
Finally, there is an exception to the preemption doctrine for "matters of peripheral concern to federal labor law". The Taft-Hartley Act did not remove all areas of labor law from the purview of state law. Indeed, Congress affirmatively provided that state law govern pension and welfare trust matters . . . . In light of the congressional objective of having state courts (or federal diversity courts) regulate pension and welfare trust relationships in accordance with state trust law, we hold that the court's incidental construction of a provision of federal labor law to determine if trustees have relied in their decision on an illegal act is not in itself sufficient to divest the court of jurisdiction.
V [45] The Motion to Amend
Assuming ERISA preempts Woodfork's state claim, the case is not necessarily concluded. Following dismissal of his diversity claim, Woodfork moved the court to allow him to amend his pleadings to restore his ERISA claim, which he had earlier withdrawn in order to preserve venue in Louisiana. If necessary to his motion, Woodfork agreed to have the case transferred to California. The district court refused him this opportunity, however, explaining as follows:
The ERISA venue provisions state that venue is located "in the district where the plan is administered, where the breach took place, or where the defendant resides or may be found." 29 U.S.C. § 1132(e). Because the Pension Plan is administered, the defendants reside, and the breach took place, in California, Woodfork's lawyer apparently concluded that Louisiana was an improper venue for Woodfork's ERISA action. In a relatively recent decision, however, the Ninth Circuit held that for ERISA-venue purposes, a defendant is found wherever personal "jurisdiction is properly asserted over the [defendant]." Varsic v. U.S. District Court for Central District of California, 607 F.2d 245, 248 (9th Cir. 1979). The Pension Plan has conceded in this litigation that the district court had jurisdiction over its person. Thus, if Varsic is adopted as the law of this circuit, the district court was a proper venue for the ERISA claims. Since this venue issue has not been briefed on this appeal, and, in any event, would be irrelevant if Woodfork's cause of action arose before 1975, we do not at this time determine if Varsic states the law of our circuit.
Finally, plaintiff sought to amend his complaint [to restore the ERISA claims] to allege a federal cause of action in order to allow transfer of the case to California. Plaintiff chose to avoid such a transfer initially and having had a trial on the merits sought to change the cause of action. The Court saw no purpose in this. If plaintiff wishes to seek a federal remedy, he may file an action in the appropriate forum, but the state law claim asserted herein is at an end.
On consideration, we hold that the district court's refusal was an abuse of discretion. Initially, we note that the court unconditionally accepted Woodfork's first motion to amend, which requested dismissal of his federal claim. Later, the court specifically, recognized that the dismissal was without prejudice: "If plaintiff wishes to seek a federal remedy, he may file an action in the appropriate forum . . . ." Record, Vol. I at 125. If Woodfork was free to bring a new ERISA action, there simply was no good reason to deny him the right to amend to add his ERISA-based claim.
Given the procedural history of this case — Woodfork requesting dismissal of his federal claim and the Pension Plan responsively dropping its venue challenge — we cannot say that the district court abused its discretion in not considering on its own initiative the possible federal law claim. When faced with Woodfork's motion to amend, however, the court should have considered, as one factor in the exercise of its discretion, its power to consider the federal claim.
VI [56] Substantive Rights
[59] ALVIN B. RUBIN, Circuit Judge, dissenting:
Section 1144 of ERISA provides that the statute
shall supersede any and all State laws [except] with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975.
29 U.S.C. § 1144. State law thus applies to Woodfork's claim only if his cause of action arose before January 1, 1975, when ERISA did not yet protect employee pension rights. If his claim arose before the preemption date, the claim may be brought in federal court only on the basis of diversity jurisdiction. Cf. Martin v. Bankers Trust Co., 565 F.2d 1276 (4th Cir. 1977). If, as the district court held, his claim arose after the preemption date, then state law cannot provide a basis for recovery. The definitive question, we are agreed, is when Woodfork's cause of action arose.
I agree with the majority that Sections 301 and 302 of the Taft-Hartley Act, 29 U.S.C. § 301, 302, do not preempt state law protection of employee pension rights prior to the ERISA preemption date.
My brethren state that Woodfork " might be able to make plausible arguments that his claim against the Pension Plan ripened earlier than the district court held" for purposes of California law. 642 F.2d at 974 (emphasis added). This is an oblique recognition, later stated candidly, that plaintiff failed to make these arguments in the district court. My brethren excuse this failure because Woodfork may not have been "on notice as to the critical importance of when his cause of action accrued" or may not have had a fair opportunity to present his response on the preemption issue, even though the district court allowed both sides a full opportunity to brief all issues after testimony was taken.
I have equal difficulty understanding why we remand the issue of when the cause of action arose to the district court. My brethren state that there is "an unresolved question of fact, and of law, whether his cause of action accrued before January 1, 1975," justifying a remand. 642 F.2d at 970 (emphasis added). Plaintiff, however, has not contended that he proffered any evidence at the trial that was refused by the district court or that he has any additional facts to offer. We are left, therefore, with a pure question of law. Courts habitually decide when a cause of action arises on the pleadings, without requiring that the facts be established through the trial process. See, e.g., Anisgard v. Exxon Corp., 409 F. Supp. 212 (E.D.La. 1975).
[m]uch of the value of summary judgment procedure . . . would be dissipated if a party were free to rely on one theory in an attempt to defeat a motion for summary judgment and then, should the theory prove unsound, come back long thereafter and fight on the basis of some other theory.
In re Beef Industry Antitrust Litigation, 600 F.2d 1148, 1162 (5th Cir. 1979), cert. denied sub nom. Safeway Stores, Inc. v. Meat Price Investigators Association, ___ U.S. ___, 101 S.Ct. 280, 66 L.Ed.2d 137 (1980); Freeman v. Continental Gin Co., 381 F.2d 459, 469-70 (5th Cir. 1967).
My brethren reject this rationale on the ground that the Pension Plan did not assert its preemption defense until the eve of trial. They imply that, if Woodfork had known that his state claim was likely to fail, he would have pursued his federal claim. This contradicts my brethren's assertion that there are "plausible arguments" showing that Woodfork's state claim was not preempted (indicating that, even if Woodfork had sufficient time before the trial, he would still have pursued his state claim). Leaving aside this paradox, I see a more fundamental reason for not allowing amendment. If judgment after trial is to have a conclusive effect on litigation, it does not matter when plaintiff discovers he is going to lose. The proper course, in any event, is for plaintiff to request a continuance before trial. Having failed to do so, plaintiff cannot now complain of the district court's refusal to let him try again — at defendants' expense. I would also note that, while we may permit plaintiff to manipulate the jurisdiction and venue of the federal courts, we are under no obligation to encourage this manipulation by making it risk-free. Indeed, the costs of this very appeal will not fall on the maneuvering plaintiff but on the defendant with whose position my brethren as yet find no real fault.
Having resurrected Woodfork's federal claim, the majority proceeds to revivify state law as well. While we all agree that federal common law governs interpretation of ERISA, the majority holds that Woodfork's federal rights must be interpreted "in light of [the] worker's pre-ERISA state law rights." 642 F.2d at 973 (emphasis added). They further state that, if pre-ERISA state law rendered the contractual provision invalid, the federal court should apply state law, rather than enforce the terms of the contract. Although ERISA was intended to preempt state law, my brethren would nonetheless give state law full force as a matter of federal law. Moreover, they would not apply contemporaneous state law, but pre-1975 state law that could not serve as a basis of a cause of action under the statute. (In effect, pre-1975 California law now serves as a cause of action, transformed into a federal claim.)