Opinion ID: 792830
Heading Depth: 3
Heading Rank: 1

Heading: Subject-Matter Jurisdiction Versus Failure to State a Claim

Text: 7 Generations of jurists have struggled with the difficulty of distinguishing between Rules 12(b)(1) and 12(b)(6) in federal question cases . . . . Nowak v. Ironworkers Local 6 Pension Fund, 81 F.3d 1182, 1188 (2d Cir.1996). In theory, the difference is clear: the former determines whether the plaintiff has a right to be in the particular court and the latter is an adjudication as to whether a cognizable legal claim has been stated. 5B Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1350 (3d ed.2004). Yet in practice, the difference between the two motions is often difficult to discern. Id. That is true of the present case; and, due to intervening Supreme Court precedent, we reject our recent characterization in Mosser, followed as binding precedent in this court in a number of cases, see QualChoice, Inc., 367 F.3d at 642, 647, that a federal court has no subject-matter jurisdiction over an action ostensibly brought under 29 U.S.C. § 1132(a)(3) apparently for solely legal relief. We hold that, in such cases, a federal court has subject-matter jurisdiction, even if the plaintiff is unable to state a claim upon which relief can be granted. 8 The Constitution gives Congress the exclusive power to determine a lower federal court's subject-matter jurisdiction. U.S. Const. art. III, § 1; Kontrick v. Ryan, 540 U.S. 443, 452, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004). Congress has provided district courts with subject-matter jurisdiction over all civil actions arising under the Constitution, laws, or treaties of the United States. 28 U.S.C. § 1331 (2005). The particular federal law — 29 U.S.C. § 1132(a)(3) — whose grant of subject-matter jurisdiction is at issue here allows a participant, beneficiary, or fiduciary to bring a civil action: 9 (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan . . . . 10 In Knudson, 534 U.S. at 221, 122 S.Ct. 708, the Supreme Court, as noted earlier, held that this statute authorizes only equitable, not legal, relief. 11 Where an action brought pursuant to this provision seeks only legal relief, our Court in QualChoice, 367 F.3d at 642, following the binding precedent of Mosser, joined other courts in characterizing the basis for a motion to dismiss as a lack of subject-matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). See Bombardier Aerospace Employee Welfare Benefits Plan v. Ferrer, Poirot & Wansbrough, 354 F.3d 348, 358 (5th Cir.2003); Admin. Comm. of the Wal-Mart Stores, Inc. Assocs.' Health & Welfare Plan v. Varco, 338 F.3d 680, 688 (7th Cir.2003); Knudson, 534 U.S. at 224, 122 S.Ct. 708 (Ginsburg.J., dissenting) ([T]he [ Knudson ] Court concludes that Great-West's claim is beyond the scope of § 502(a)(3) and therefore outside federal jurisdiction.). We did so despite the growing number of courts taking the contrary view that such motions to dismiss should instead be resolved under Federal Rule of Civil Procedure 12(b)(6) to ascertain whether the plaintiff failed to state a claim upon which relief can be granted. See Mid Atl. Med. Servs., LLC v. Sereboff, 407 F.3d 212, 218 n. 5 (4th Cir.2005); Westaff (USA) Inc. v. Arce, 298 F.3d 1164, 1167 (9th Cir.2002); Blue Cross & Blue Shield of Alabama v. Sanders, 138 F.3d 1347, 1351-54 (11th Cir.1998); Health Cost Controls v. Skinner, 44 F.3d 535, 536-38 (7th Cir.1995); Wausau Benefits, Inc. v. Liming, 393 F.Supp.2d 713, 716 (W.D.Wis.2005); Mid-Century Ins. Co. v. Menking, 327 F.Supp.2d 1049, 1053 n. 5 (D.Neb.2003); Knudson, 534 U.S. at 222, 122 S.Ct. 708 (Stevens, J., dissenting) ([Section 1132(a)(3)] provides a proper basis for federal jurisdiction in the present case.). 12 In two very recent decisions, the Supreme Court has admonished courts to use the term jurisdiction with more precision, describing the term as a word of many, too many, meanings, Kontrick v. Ryan, 540 U.S. 443, 453, 124 S.Ct. 906, 157 L.Ed.2d 867 (2004) (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)). In Kontrick, a unanimous Court held that time requirements of Federal Rules of Bankruptcy Procedure 4004 and 9006 did not implicate subject-matter jurisdiction, but were instead claim-processing rules. Id. at 455, 124 S.Ct. 906. Just over one year later, in Eberhart v. United States, ___ U.S. ___, 126 S.Ct. 403, 407, 163 L.Ed.2d 14 (2005) (per curiam), the Supreme Court similarly described Federal Rule of Criminal Procedure 33 with its time limitations as a nonjurisdictional claim-processing rule. Clarity would be facilitated, the Supreme Court remarked, if courts and litigants used the label `jurisdictional' not for claim-processing rules, but only for prescriptions delineating the classes of cases (subject-matter jurisdiction) and the persons (personal jurisdiction) falling within a court's adjudicatory authority. Id. at 405 (quoting Kontrick, 540 U.S. at 455, 124 S.Ct. 906). Characteristically, a court's subject-matter jurisdiction cannot be expanded to account for the parties' litigation conduct . . . . Kontrick, 540 U.S. at 456, 124 S.Ct. 906. 13 Although these two decisions are not patterned on facts identical with the instant case, they address defenses more analogous to a motion to dismiss for failure to state a claim, than to a motion to dismiss for lack of subject-matter jurisdiction: 14 Even if a defense based on Bankruptcy Rule 4004 could be equated to failure to state a claim upon which relief can be granted, the issue could be raised, at the latest, at the trial on the merits. Fed. Rule Civ. Proc. 12(h)(2). Only lack of subject-matter jurisdiction is preserved post-trial. Fed. Rule Civ. Proc. 12(h)(3). And, as we earlier explained . . . Kontrick's resistance to the family-account claim is not of that order. No reasonable construction of complaint-processing rules, in sum, would allow a litigant situated as Kontrick is to defeat a claim, as filed too late, after the party has litigated and lost the case on the merits. 15 Id. at 459, 124 S.Ct. 906. Thus, like the claim-processing rules in Eberhart and Kontrick, an action under 29 U.S.C. § 1132(a)(3) seeking only legal relief does not fall outside a federal court's subject-matter jurisdiction, but instead raises the question whether a party has failed to state a claim upon which relief can be granted. 16 Our application of Eberhart and Kontrick to the instant case faithfully adheres to the Supreme Court's jurisprudence addressing situations where, as here, both the court's subject-matter jurisdiction and the substantive claim for relief are based on the same federal statute. The Supreme Court has set forth the standard in such cases: 17 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 this Court, or otherwise completely devoid of merit as not to involve a federal controversy. 18 Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 89, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (quoting Oneida Indian Nation of New York v. County of Oneida, 414 U.S. 661, 666, 94 S.Ct. 772, 39 L.Ed.2d 73 (1974)). This requirement of substantiality or non-frivolousness of the federal question refers to whether there is any legal substance to the position the plaintiff is presenting. 13B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 3564 (2d ed.1984). An ERISA claim can be non-frivolous (or sufficiently substantial) even if it is unsuccessful and possibly verging on the foolhardy in light of prior precedent barring the relief sought. Cement Masons Health & Welfare Trust Fund for N. California v. Stone, 197 F.3d 1003, 1008 (9th Cir.1999); see also Westaff (USA) Inc. v. Arce, 298 F.3d 1164, 1167 (9th Cir.2002) (exercising subject-matter jurisdiction over an action under section 1132(a)(3) seeking only legal relief, even though the Supreme Court in Knudson had previously held that legal relief was unavailable); Wausau Benefits, Inc. v. Liming, 393 F.Supp.2d 713, 716 (W.D.Wis.2005) (same). Although in many ERISA cases prior precedent will almost certainly preclude the sought remedy, the decision whether to classify a particular claim as legal or equitable presents a sufficiently substantial and non-frivolous issue for federal courts to exercise subject-matter jurisdiction over actions arising under section 1132(a)(3). 19 As the District Court properly concluded in the instant case, Primax's action for reimbursement pursuant to the plan's reimbursement provision was a legal, not equitable, claim. See QualChoice, 367 F.3d at 642. Primax failed to state a claim upon which relief can be granted; but, for the reasons stated above, the District Court had subject-matter jurisdiction over this action. Having concluded that subject-matter jurisdiction existed, we now turn to whether the District Court erred in denying the Gunters' application for attorney's fees and costs.