Opinion ID: 453346
Heading Depth: 2
Heading Rank: 2

Heading: Arising Under Jurisdiction: 28 U.S.C. Sec. 1331

Text: 30 The ILGWU Fund argues in its supplemental brief that if this court holds that the present action is not expressly authorized by Sec. 1132 of ERISA, federal jurisdiction may nonetheless be predicated on the federal question statute, 28 U.S.C. Sec. 1331(a): 31 The district courts shall have original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States. 32 According to the ILGWU Fund, federal common law governs the outcome of this dispute pursuant to 29 U.S.C. Sec. 1144, with the result that it arise[s] under the laws of the United States for jurisdictional purposes. 33 Although at one time the issue was in doubt, see T.B. Harms Co. v. Eliscu, 339 F.2d 823, 827-28 (2d Cir.1964) (Friendly, J.), there is no longer any question that the word laws within the meaning of Sec. 1331(a) embraces claims founded upon federal common law. In Illinois v. City of Milwaukee, Wisconsin, 406 U.S. 91, 92 S.Ct. 1385, 31 L.Ed.2d 712 (1972), the Supreme Court definitively stated:We see no reason not to give laws its natural meaning ..., and therefore conclude that Sec. 1331 jurisdiction will support claims founded upon federal common law as well as those of a statutory origin. 34 Id. at 100, 92 S.Ct. at 1391. 35 In Illinois v. Milwaukee, the Court was faced with a claim by the State of Illinois that the City of Milwaukee, among others, was causing a public nuisance by dumping some 200 million gallons of raw sewage daily into Lake Michigan. The state requested that the Court, vested with original jurisdiction over suits in which a state is a party, abate the nuisance. The Court declined to exercise its original jurisdiction, but held that jurisdiction existed in the appropriate federal district court pursuant to 28 U.S.C. Sec. 1331. The Court noted that Congress had legislated extensively in the area of interstate water pollution, most specifically through the Federal Water Pollution Control Act, 33 U.S.C. Sec. 1151, and that under this Act only the United States was authorized to bring suits for abatement of water pollution. Nevertheless, the Court held that there exists a federal common law of nuisance, separate from and coexisting with the congressional scheme, which not only governs such disputes but also provides the laws under which such actions may arise within the meaning of Sec. 1331. 36 The Court's holding in Illinois v. Milwaukee appears to be applicable to the case at bar. If the ILGWU Fund's claim for declaratory relief arises under federal common law, the absence of an express statutory grant of jurisdiction in Sec. 1132 of ERISA is, under the rationale of Illinois v. Milwaukee, irrelevant, and this claim may be adjudicated in federal court pursuant to 28 U.S.C. Sec. 1331(a). See Jersey Central Power & Light Co. v. Local Unions of the International Brotherhood of Electrical Workers, 508 F.2d 687, 699 (3d Cir.1975) (inasmuch as the EEOC agreement must be interpreted according to federal substantive [common] law, ... the Company's cause of action joining EEOC 'arises under' laws of the United States), vacated and remanded on other grounds, 425 U.S. 987, 96 S.Ct. 2196, 48 L.Ed.2d 812 cert. denied, 425 U.S. 998, 96 S.Ct. 2215, 48 L.Ed.2d 823 (1976). 37 Although the Supreme Court's decision in Franchise Tax Board of the State of California v. Construction Laborers Vacation Trust for Southern California, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983), casts some doubt on the applicability of the Illinois v. Milwaukee rationale to ERISA cases, the former case is distinguishable. In Franchise Tax Board, a state taxing authority brought suit against an ERISA-qualified benefit trust fund in a California court seeking (1) damages for a failure to comply with tax levies issued under state law and (2) a declaration that its authority to levy was not preempted by ERISA. The defendant trust fund removed to federal court. One of the defendant's proffered bases for Sec. 1331 jurisdiction in federal court was that any state court action which would require the interpretation or application of ERISA to a plan document 'arises under' the laws of the United States. 103 S.Ct. at 2854 (quoting Brief of Appellees 20-21). The Supreme Court agreed with the defendants that the question whether the terms of the plan agreement and the provisions of ERISA would permit the trustees to obey the tax levies was a matter of federal common law. Nevertheless, the Court held that the federal district court lacked jurisdiction over the suit, stating: 38 Under Sec. 502(a)(3)(B) of ERISA [29 U.S.C. Sec. 1132(a)(3)(B) ], a participant, beneficiary, or fiduciary of a plan covered by ERISA may bring a declaratory judgment action in federal court to determine whether the plan's trustees may comply with a state levy on funds held in trust. Nevertheless, [the trust fund's] argument that [the tax board's] second cause of action arises under ERISA fails .... ERISA carefully enumerates the parties entitled to seek relief under Sec. 502; it does not provide anyone other than participants, beneficiaries, or fiduciaries with an express cause of action for a declaratory judgment on the issues in this case. A suit for similar relief by some other party does not arise under that provision. 39 Id. at 2855 (emphasis added and footnotes omitted). 40 The language of the quoted paragraph makes clear, however, that the Court was not presented with, and did not consider, the possibility that the suit need not have arisen under the express statutory provision of ERISA (Sec. 1132) for it to arise under federal law. In other words, in Franchise Tax Board, jurisdiction on the basis of federal common law in accordance with the Court's decision in Illinois v. Milwaukee was not considered, and so Franchise Tax Board left this question open. Moreover, it appears that two other factors in Franchise Tax Board made the Court reluctant to find federal jurisdiction, and these factors are not present here. First, the Court had held in an earlier part of the opinion that, if it were to interpret as a claim arising under Sec. 1331 the tax board's request for a declaration that federal law does not preempt state law, it would violate the well pleaded complaint rule. 103 S.Ct. at 2848-52; see infra at 159 (suggesting that federal jurisdiction over the present action does not violate this rule). Second, the suit involved the ability of a state to tax, which the Court viewed as implicating primarily state concerns. Id. 103 S.Ct. at 2855 (the State's right to enforce its tax levies is not of central concern to the federal statute[;] ... there are many reasons completely unrelated to the provisions of ERISA why the State may or may not be entitled to the relief it seeks). 41 In addition, the Court's opinion in Shaw v. Delta Airlines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983), decided the same day as Franchise Tax Board, lends support to the view that the latter case should not be read too broadly. In Shaw, the Court entertained a suit brought by employers claiming that certain state laws were preempted by ERISA. Despite the fact that employers are not explicitly listed in Sec. 502 of ERISA (29 U.S.C. Sec. 1132), the court held in a footnote that there was federal jurisdiction over the action. A plaintiff who seeks injunctive relief from state regulation, on the ground that such regulation is preempted by a federal statute which, by virtue of the Supremacy Clause of the Constitution, must prevail, thus presents a federal question over which the federal courts have jurisdiction under 28 U.S.C. Sec. 1331 to resolve. Id. at 2899 n. 14. 42 For the reasons set out above, the rule enunciated in Illinois v. Milwaukee should be applicable in ERISA related actions. Thus, if the ILGWU Fund's claim arises under federal common law, there is jurisdiction over this action pursuant to Sec. 1331(a). 7 43 An action arises under federal law if and only if the complaint seeks a remedy expressly granted by a federal law or if it requires the construction of a federal statute or a distinctive policy of a federal statute requires the application of federal legal principles for its disposition. Lindy v. Lynn, 501 F.2d 1367, 1369 (3d Cir.1979); see also Franchise Tax Board, 103 S.Ct. at 2846 (Leading commentators have suggested that for purposes of Sec. 1331 an action 'arises under' federal law 'if in order for the plaintiff to secure the relief sought he will be obliged to establish both the correctness and the applicability to his case of a proposition of federal law.' P. Bator, P. Mishkin, D. Shapiro & H. Wechsler, Hart & Wechsler's The Federal Courts and the Federal System 889 (2d ed. 1973)....). An action thus arises under federal common law if, inter alia, plaintiff's requested relief requires the interpretation and application of federal judge-made law. In order to decide whether this case is cognizable under general federal question jurisdiction, therefore, one must determine whether there exists a federal common law of employee benefit plans that governs this dispute between the ILGWU and Teamsters Funds. 44 Section 1144(a) of ERISA states, in pertinent part: 45 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 described in section 1003(a) of this title ... 46 29 U.S.C. Sec. 1144. In Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981), the Court read this provision as indicating that Congress intended to depart from its previous legislation that 'envisioned the exercise of state regulation power over pension funds' ... and meant to establish pension plan regulation as exclusively a federal concern. Id. at 523, 101 S.Ct. at 1906 (citation and footnote omitted). In Franchise Tax Board, the Court expanded on this interpretation, stating: 47 the meaning and enforceability of provisions in [a] trust agreement ... come[ ] within the class of questions for which Congress intended that federal courts create federal common law. 48 103 S.Ct. at 2855 (footnote omitted). This court has also read the congressional mandate in Sec. 1144(a), along with its legislative history, to authorize[ ] the evolution of a federal common law of pension plans. Murphy v. Heppenstall, 635 F.2d 233 (3d Cir.1980); see also Barrowclough v. Kidder, Peabody & Co., Inc., 752 F.2d 923, 936 (3d Cir.1985). 49 In the wake of the foregoing cases, there can be little doubt that the ILGWU Fund's complaint presents a claim that requires an application of the federal common law of welfare funds authorized by Sec. 1144 of ERISA. In order to determine the validity of the ILGWU Fund's contention that the Teamsters Fund should be liable for the medical expenses incurred by Mrs. Fazio and persons similarly situated, the meaning and enforceability of seemingly conflicting provisions of two benefit funds that are covered by ERISA must be interpreted. This certainly presents a matter of federal concern. Resolution of the issue will affect not only the interests of beneficiaries, whose welfare it was the prime purpose of ERISA to protect, but also the interests of benefit trust funds, the solvency of which was a matter of serious congressional concern. Conversely, the policies underlying ERISA will inform our construction of the conflicting policy terms. See infra part IIIC. Federal common law thus supplies the rule of decision in this case. Even if this case were in a state court, federal common law would still apply. 8 50 Because this is an action for a declaratory judgment, an additional line of cases must be considered before one can conclude that this case arises under federal law. It has long been settled that an action does not arise under federal law for Sec. 1331 purposes when federal law is merely raised as a defense. Louisville & Nashville Railroad Co. v. Mottley, 211 U.S. 149, 29 S.Ct. 42, 53 L.Ed. 126 (1908). Moreover, this well-pleaded complaint rule cannot be circumvented by invoking what would normally be a defense in a complaint for a declaratory judgment because Congress did not intend the Federal Declaratory Judgment Act, 28 U.S.C. Sec. 2201, to extend the jurisdiction of the federal courts. Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 70 S.Ct. 876, 94 L.Ed. 1194 (1950). The scope of the Skelly Oil holding is unclear, and has been the subject of much debate among courts and scholars. Compare Franchise Tax Board, 103 S.Ct. at 2849-53 (action by state tax board for declaration that federal law (ERISA) is not preemptive of state law violates Skelly Oil rule) and Public Service Commission v. Wycoff, 344 U.S. 237, 73 S.Ct. 236, 97 L.Ed. 291 (1952) (in dictum, Court states that declaratory judgment plaintiff who has only federal defense probably does not have basis for federal jurisdiction) with Shaw v. Delta Airlines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 2899 n. 14, 77 L.Ed.2d 490 (1983) (action by employers for declaration that state law is preempted by ERISA does not run afoul of Skelly Oil ) and Stone & Webster Engineering Corp. v. Ilsey, 690 F.2d 323, 326-27 (2d Cir.1982), aff'd mem., 463 U.S. 1220, 103 S.Ct. 3564, 77 L.Ed.2d 1405 (1983) (same); see generally 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure Sec. 2767 (2d ed. 1983). 51 Regardless of the exact scope of Skelly Oil, however, there is no question that it does not bar the present action. This is not a case in which the declaratory judgment plaintiff seeks to obtain federal jurisdiction over his suit by raising a federal defense. Rather, the ILGWU Fund's complaint directly invokes federal law in an effort to obtain affirmative relief, and indeed would have implicated federal common law if it had been fashioned as an action for an order enjoining the Teamsters Fund from continuing to refuse to pay beneficiaries in the position of Mrs. Fazio, or as an action for damages to recover monies paid to Mrs. Fazio. 52 Finally, finding jurisdiction in cases such as the one at bar based on the rule of Illinois v. Milwaukee would expand the scope of federal jurisdiction over ERISA-related actions only minimally because the vast majority of ERISA cases involving entitlement to benefits will fall under the express jurisdictional provisions of the statute. Indeed, the instant case would have been in federal court without question had not the district court, out of sympathy for Mrs. Fazio, suggested that the parties pay her and reinstitute suit. For the odd case that does not fall under Sec. 1132, a finding of federal jurisdiction promotes certainty and uniformity by having federal courts decide issues of federal common law. 53 In sum, this suit is cognizable in federal court because it arises under the federal common law of ERISA related employee benefit plans, which is part of the laws of the United States for the purposes of federal question jurisdiction under 28 U.S.C. Sec. 1331. 54