Opinion ID: 1372750
Heading Depth: 1
Heading Rank: 1

Heading: A.1. The Distinction between a Jurisdictional Prerequisite and an Essential Ingredient of a Federal Claim to Relief

Text: In finding that it did not have jurisdiction over Plaintiffs breach of contract claim, the district court relied upon Bauer v. RBX Industries, Inc., 368 F.3d 569 (6th Cir.2004). Giving Bauer an exceedingly broad reading, the district court held that plaintiffs in a § 301 action must demonstrate a contractual violation to establish jurisdiction. Tackett, 523 F.Supp.2d at 691-92. The district court's interpretation of Bauer was over-broad. More importantly, the Supreme Court and this Court have both subsequently rejected the district court's requirement. After the Bauer decision, the Supreme Court clarified the distinction between a jurisdictional prerequisite and an essential ingredient of a federal claim to relief and provided a test that courts must use to determine what showing is required to establish jurisdiction and what showing is required to establish the merits of their claims. In Arbaugh, the plaintiff sued for alleged violations of Title VII. Id. at 503-04, 126 S.Ct. 1235. Title VII says that [e]ach ... United States district court... shall have jurisdiction of actions brought under this subchapter. Id. at 505-06, 126 S.Ct. 1235 (citing 42 U.S.C. § 2000e-5(f)(3)). Title VII makes it unlawful `for an employer ... to discriminate,'... on the basis of sex. Id. at 503, 126 S.Ct. 1235 (citing 42 U.S.C. § 2000e-2(a)(1)). Separately, Title VII defines employer to only include those employers with fifteen or more employees. Id. at 504, 126 S.Ct. 1235 (citing 42 U.S.C. § 2000e(b)). The central issue in Arbaugh was whether this statutory employee-numerosity requirement was a jurisdictional prerequisite, or merely an essential ingredient[ ] of the plaintiff's claim. Arbaugh, 546 U.S. at 513, 126 S.Ct. 1235. In resolving this central issue, the Arbaugh Court first criticized the frequent sloppiness in courts' treatment of motions to dismiss, noting that courts too often conflated Rule 12(b)(6) merits motions with Rule 12(b)(1) jurisdictional motions. Id. at 511, 126 S.Ct. 1235. To remedy this, the Supreme Court established a bright line rule: If the Legislature clearly states that a threshold limitation on a statute's scope shall count as jurisdictional, then courts and litigants will be duly instructed and will not be left to wrestle with the issue.... But when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as non-jurisdictional in character. Id. at 515-16, 126 S.Ct. 1235 (citations omitted) (emphasis added). In determining whether Congress intended courts to treat the employee numerosity requirement as jurisdictional, the Supreme Court noted that Title VII gave no indication that a district court should raise and resolve the employee-numerosity requirement on its own. Id. at 514, 126 S.Ct. 1235. In concluding that Congress did not intend to rank the employee-numerosity requirement as jurisdictional, the Court identified two additional practical considerations that supported its holding: the discretion that district courts enjoy when their fact-finding overlaps with the merits of the claims and judicial efficiency. Id. A district court can resolve disputed facts that underlie a jurisdictional prerequisite in a 12(b)(1) motion, but when the prerequisite is intertwined with the merits, this fact-finding undercuts the jury's role as the proper trier of contested facts. Id. Additionally, because subject-matter jurisdiction defects can be raised at any stage of litigation, and because a lack of subject-matter jurisdiction requires dismissal of pendent state-law claims, a district court may be required to dismiss state claims after expending considerable judicial resources. Id.
After oral argument in this case, this Court reexamined Bauer and its § 301 jurisprudence in light of the Arbaugh decision. Winnett v. Caterpillar, Inc., 553 F.3d 1000, 1004-07 (6th Cir.2009). In Winnett, this Court overruled the Bauer decision and held that the existence of a union contract is an element of Plaintiffs' merits claim, not a limit on federal subject-matter jurisdiction. Id. at 1007. In reaching this decision, the Winnett Court started with an examination of Congressional intent. Id. at 1005-06 ( Arbaugh now tells us to ask: Did Congress `clearly state[],' 546 U.S. at 515, 126 S.Ct. 1235, that the existence of a union contract is a jurisdictional prerequisite for a Section 301(a) claim?). In determining whether Congress intended a contract to be a jurisdictional prerequisite, the Court noted that the only reference to jurisdiction in § 301 was to personal jurisdiction and in that reference the statute had not impose[d] new barriers to federal courts, but had ease[d] access. Id. at 1006. Additionally, § 301 includes all of the prima facie elements of the cause of action in the jurisdiction-conferring provision. The Court reasoned that, if a contract is a jurisdictional prerequisite, then likely each other prima facie requirement in § 301 functions as a jurisdictional prerequisite. The Winnett Court was reluctant to conclude that Congress intended to create a cause of action that has no non-jurisdictional elements. Id. After finding no indication that Congress clearly state[d] that courts should treat a contract as jurisdictional, the Court went on to address the real-world considerations associated with treating a contract as jurisdictional. Id. This additional analysis after examining Congressional intent was drawn from the Arbaugh decision:  Arbaugh also tells us not to just look at labels but also pragmatically to consider the consequences of giving a jurisdictional label to an element of a cause of action. Id. The Winnett Court then pointed out that, when a district court finds a jurisdictional defect, the court must dismiss even meritorious pendent state-law claims, despite the time and resources the court and parties have expended on the case. Id. at 1007 (noting the wasteful inefficiencies on the parties or the courts). As directed by the Supreme Court in Arbaugh and the Winnett Court, we conclude that Congress did not clearly state[ ] an intent to treat the violation language as jurisdictional. See id. at 1005-06. Additionally, after examining the real-world considerations of labeling the violation language as jurisdictional, we find the district court's interpretation would wreak havoc. See id. at 1006. The Winnett Court has already determined that Congress did not intend the contract language in § 301 as jurisdictional. We agree and hold that Congress did not clearly state[ ] that courts should treat the violation language as jurisdictional for the same reasons identified by the Winnett Court. The language of § 301 suggests that a violation is not a prerequisite to jurisdiction: Suits for violation of contracts ... may be brought in any district court of the United States having jurisdiction of the parties.... 29 U.S.C. § 185(a) (emphasis added.) If we were to consider a violation a jurisdictional prerequisite, Congress would be requiring a district court to determine whether a violation had occurred before it could decide at the merits stage whether a violation had occurred. This cannot be the result intended by Congress with the use of the violation language. This conclusion is bolstered here, even more so than in Winnett, by the real-world considerations associated with labeling a violation as a jurisdictional prerequisite. Winnett, 553 F.3d at 1006. First, the LMRA gives the district court jurisdiction over [s]uits for violation of contracts. Section 301 does not limit jurisdiction to suits where a violation of contract has been established. The district court will consider the same set of underlying facts when deciding if there was a violation to support jurisdiction and when deciding if the Plaintiffs should ultimately succeed on the merits of their claim. Any merits-related fact-finding by a district court during a jurisdictional determination undercuts the jury's traditional role as the proper trier of contested facts. See Arbaugh, 546 U.S. at 514, 126 S.Ct. 1235 (citations omitted). Second, as both Winnett and Arbaugh noted, when a court lacks subject matter jurisdiction over a claim, it must immediately dismiss not just that claim but any pendent state-law claims as well  no matter how late in the case the district or appellate court identifies the jurisdictional defect. Winnett, 553 F.3d at 1007 (citing Arbaugh, 546 U.S. at 514, 126 S.Ct. 1235). For example, a case may go all the way to a jury trial on a § 301 claim and pendent state-law claims. If the jury finds that the state-law claims are meritorious but also that a plaintiff did not establish a violation of a labor contract, the court would be required to dismiss these meritorious state-law claims after expending considerable judicial resources on their adjudication. This required dismissal may impose ... wasteful inefficiencies on the parties or the courts. Id. These inefficiencies become exacerbated in the context of a § 301 action. In Charles Dowd Box Co. v. Courtney, 368 U.S. 502, 502, 82 S.Ct. 519, 7 L.Ed.2d 483 (1962), the Supreme Court addressed concurrent federal and state court jurisdiction over claims for a violation of a collective bargaining agreement. The Court held that state courts have concurrent jurisdiction over § 301 claims. Id. at 521-22, 82 S.Ct. 519 (We agree with the Supreme Judicial Court of Massachusetts that the courts of that Commonwealth had jurisdiction in this case, and we accordingly affirm the judgment before us.); see also, Valinski v. Detroit Edison, 197 Fed.Appx. 403, 407 (6th Cir.2006) (State courts have concurrent jurisdiction over § 301 claims, but must of course apply federal law.). If Plaintiffs' claim for breach of contract is dismissed for lack of jurisdiction, res judicata does not prevent re-litigation of the breach of contract claim in a state court with plenary jurisdiction. See 18A CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 4436 (The basic rule that dismissal for lack of subject-matter jurisdiction does not preclude a second action on the same claim is well settled.). Accordingly, we hold that the district court erred in dismissing the Plaintiffs' claims for lack of subject-matter jurisdiction. [5]
After dismissing the Plaintiffs' LMRA claim for lack of jurisdiction, the district court then assumed that it had jurisdiction and dismissed the Plaintiffs' complaint for failure to state a claim. We now address the district court's grant of the Defendants' 12(b)(6) motion. The district court decline[d] to consider material extrinsic to the pleadings in regard to the motion to dismiss, and therefore did not convert the 12(b)(6) motion into a motion for summary judgment. Tackett, 523 F.Supp.2d at 693. [6] The Defendants say that we should affirm that district court's 12(b)(6) ruling, or, alternatively, convert this into a Rule 56 motion and consider materials outside the pleadings. The Defendants say that conversion is appropriate because both parties submitted, and the district court considered, extrinsic materials in the Rule 12(b)(1) analysis. Under our 12(b)(1) analysis above, we did not consider matters outside the pleadings. Rule 12(b)(6), besides some minor exceptions, does not permit courts to consider evidence extrinsic to the pleadings. See Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 127 S.Ct. 2499, 2509, 168 L.Ed.2d 179 (2007) (citing 5B WRIGHT & MILLER § 1357). If, however, as the Defendants urge, we convert the 12(b)(6) motion into a Rule 56 motion, we would need to examine all of the extrinsic materials the parties submitted. Accordingly, we will first address whether such an examination is necessary, and decide if the Defendants' Rule 12(b)(6) motion should be converted into a Rule 56 motion on appeal.
When a court considers matters outside the pleadings in a Rule 12(b)(6) motion, Rule 12(d) requires that the motion must be treated as one for summary judgment under Rule 56. FED.R.CIV.P. 12(d). A district court may convert the motion sua sponte. This conversion, however, should be exercised with great caution and attention to the parties' procedural rights. 5C WRIGHT & MILLER § 1366. In the Sixth Circuit, before a district court may convert the motion sua sponte, the district court must afford the party against whom sua sponte summary judgment is to be entered ten-days notice and an adequate opportunity to respond. Yashon v. Gregory, 737 F.2d 547, 552 (6th Cir.1984). Despite this clearly established rule, an appeals court will reverse for failure to notify only if the losing party can demonstrate prejudice. Id.; Harrington v. Vandalia-Butler Bd. of Educ., 649 F.2d 434, 436 (6th Cir.1981) (A District Court's failure to comply with the ten-day requirement of Rule 56(c) is subject to the harmless error rule.). Yashon states that the notice requirement is flexible and that a failure to give notice will result in reversal only if there was sufficient prejudice to the non-moving party. See 5C WRIGHT & MILLER § 1366 ([T]he absence of formal notice will be excused when it is harmless or when the parties were otherwise apprised of the conversion ... and, in fact, had a sufficient opportunity to present the materials relevant to a summary judgment motion.). In asking this court to convert the 12(b)(6) motion sua sponte, the Defendants point to Cunningham v. Osram Sylvania, Inc., 221 Fed.Appx. 420, 423 (6th Cir.2007), an unreported Sixth Circuit opinion where the district court granted the defendant's 12(b)(6) motion to dismiss, but considered materials extrinsic to the pleadings. On appeal, the parties conceded that, although the district court decided the motion under Rule 12(b)(6), a decision under Rule 56 was appropriate. Id. This Court did not reverse because the district court committed a technical error and merely mislabeled its analysis: the district court's decision was the functional equivalent of a Rule 56 determination. Id. Cunningham involved the review of a district court opinion that was the functional equivalent of a ruling under Rule 56. The merits analysis presented here under Rule 12(b)(1), however, was not at all the functional equivalent of a Rule 56 determination. Here, the district court weighed and resolved the claim without viewing the facts, and all inferences to be drawn from them, in the light most favorable to the nonmoving party. Abercrombie & Fitch Stores, Inc. v. Am. Eagle Outfitters, Inc., 280 F.3d 619, 629 (6th Cir.2002) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). Additionally, the district court made no conclusions regarding whether the claim presented any genuine issue as to any material fact. FED.R.CIV.P. 56(c). Because the district court's ruling was not the functional equivalent of a Rule 56 ruling, we decline the Defendants' invitation to base our ruling on Rule 56. Therefore, we will not consider matters extrinsic to the pleadings and we will proceed to review the district court's Rule 12(b)(6) analysis.
In deciding a Rule 12(b)(6) motion, a district court must (1) view the complaint in the light most favorable to the plaintiff and (2) take all well-pleaded factual allegations as true. Gunasekera v. Irwin, 551 F.3d 461, 466 (6th Cir.2009) (citations omitted). But the district court need not accept a bare assertion of legal conclusions. Columbia Natural Res., Inc. v. Tatum, 58 F.3d 1101, 1109 (6th Cir.1995). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1974, 1965, 167 L.Ed.2d 929 (2007), the Supreme Court said that, when viewing the complaint under the above standards, to survive a motion to dismiss a complaint must contain (1) enough facts to state a claim to relief that is plausible, (2) more than a formulaic recitation of a cause of action's elements, and (3) allegations that suggest a right to relief above a speculative level. Just weeks after the Twombly decision, however, the Supreme Court cited Twombly to reaffirm the liberal pleading standard in Rule 8(a)(2): Rule ... 8(a)(2) requires only a `short and plain statement of the claim showing that the pleader is entitled to relief.' Specific facts are not necessary; the statement need only `give the defendant fair notice of what the ... claim is and the grounds upon which it rests.' Erickson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007) (quoting Twombly, 127 S.Ct. at 1964). On several occasions, the Sixth Circuit has identified uncertainty regarding the scope of Twombly,  and noted that Twombly may be limited to expensive, complicated litigation. Gunasekera, 551 F.3d at 466. In reviewing a motion to dismiss, [w]e read Twombly and Erickson in conjunction with one another. Sensations, Inc. v. City of Grand Rapids, 526 F.3d 291, 295-96 (6th Cir.2008). We will now address whether the Plaintiffs have sufficiently pleaded their LMRA and ERISA claims to survive a Rule 12(b)(6) motion.
The parties dispute whether the Plaintiffs have plausibly alleged a violation of the CBA. The Plaintiffs allege that Defendants unilaterally modified the Plaintiffs' vested health-care benefits. Health-care benefits vest only if the parties so intend. Noe v. PolyOne Corp., 520 F.3d 548, 552 (6th Cir.2008). If the parties do not intend to vest the benefits, the former employer can modify the retiree benefits without breaching a collective bargaining agreement. In determining whether the parties intended health care benefits to vest, this Court applies the principles first described in UAW v. Yard-Man, 716 F.3d 1476, 1479 (6th Cir.1983). In Yard-Man, we held that, when interpreting a collective bargaining agreement, a court must start with the explicit language. Id. General principles of contract interpretation should guide a district court's interpretation of the explicit language. [7] When a contractual provision is ambiguous, the court may turn to extrinsic evidence. UAW v. BVR Liquidating, Inc., 190 F.3d 768, 774 (6th Cir.1999). Language in a collective bargaining agreement that equate[es] eligibility for retiree health benefits with eligibility for a pension suggests an intent to vest. McCoy v. Meridian Auto. Sys., Inc., 390 F.3d 417, 421 (6th Cir.2004) (citing Golden v. Kelsey-Hayes Co., 73 F.3d 648 (6th Cir.1996)). Courts reviewing a collective bargaining agreement must also keep in mind the context of labor-management negotiations on retiree health-care benefits: because retirement health care benefits are not mandatory or required to be included in an agreement, and because they are `typically understood as a form of delayed compensation or reward for past services' it is unlikely that they would be `left to the contingencies of future negotiations.' Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 580 (6th Cir.2006) (quoting Yard-Man, 716 F.2d at 1481-82). Here, the Plaintiffs have pointed to language in the collective bargaining agreement sufficient to survive a 12(b)(6) motion. In their Complaint, the Plaintiffs pointed to language in the November 6, 2000 CBA between M & G and the USW: Employees who retire on or after January 1, 1996 and who are eligible for and receiving a monthly pension under the 1993 Pension Plan ... whose full years of attained age and full years of attained continuous service ... at the time of retirement equals 95 or more points will receive a full Company contribution towards the cost of [health-care] benefits. .... Employees who have less than 95 points at the time of retirement will receive a reduced Company contribution. The Company contribution will be reduced by 2% for every point less than 95. Employees will be required to pay the balance of the health care contribution, as estimated by the Company annually in advance, for the [health-care] benefits.... Failure to pay the required medical contribution will result in cancellation of coverage. (emphasis added). The district court held that the full Company contribution language meant that qualifying retirees will receive the total amount of the company's potential contribution toward the cost of health benefits. Tackett, 523 F.Supp.2d at 695. The district court found that the language, [e]mployees will be required to pay the balance of the health care contribution, supported its reading. Id. at 696. We disagree with the district court's reading of the relevant portions of the CBA. First, the full Company contribution language suggests that the parties intended the employer to cover the full cost of health-care benefits for those employees meeting the age and term-of-service requirements. Keeping in mind the context of the labor-management negotiations identified in Yard-Man, we find it unlikely that Plaintiff USW would agree to language that ensures its members a full Company contribution, if the company could unilaterally change the level of contribution. The CBA has no limitation on the amount of a company contribution and if the Defendants' argument were accepted, the company presumably could lower the contribution to zero without violating this language. Such a promise would be illusory. Second, the limiting language, [e]mployees will be required to pay the balance of the health care contribution, follows the provision requiring contributions by those retirees who had not attained the requisite seniority points. From the placement of this language, we can reasonably infer that it did not apply to all retirees, but only to those retirees who had not attained the requisite seniority points. Third, the collective bargaining agreement tied eligibility for health-care benefits to pension benefits. This is another factor indicating that the parties intended the health care benefits to vest upon retirement. We hold that the Plaintiffs' Complaint presented a plausible claim that the parties intended to vest health-care benefits. Accordingly, we hold that the district court erred in granting the Defendants' Rule 12(b)(6) motion on the § 301 claim.