Court Opinion

ID: 8912468
Source: CourtListenerOpinion
Date Created: 2022-11-27 03:35:09.356326+00
Date Added: 2024-06-11T17:08:39.504059
License: Public Domain

MANSFIELD, Circuit Judge
(concurring):
I concur in the result reached by Judge Lumbard in his carefully considered opinion. However, I do so solely on the ground that, while federal courts have concurrent jurisdiction over appellant’s only actionable claim, i. e., his allegation that he and members of his class are being denied benefits in breach of CMIC’s employee welfare benefit plan and that this violates his rights under ERISA, 29 U.S.C. §§ 1132(a)(1)(B), 1102(1), 1103(b), 1132(e)(1), we are faced with exceptional circumstances warranting abstention under the doctrine of Colorado River Water Cons. Dist. v. United States, 424 U.S. 800, *96996 S.Ct. 1236, 47 L.Ed.2d 483 (1976). Since the state court is already engaged in the comprehensive adjudication of rights in a single fund “the contemporaneous exercise of concurrent jurisdictions,” id. at 817, 96 S.Ct. at 1246, would only lead to duplication and a waste of judicial resources. Abstention is warranted only on the understanding that the state court is obligated to apply federal, not state, law in determining whether appellant has a valid claim for breach of his rights under ERISA, Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 77 S.Ct. 923, 1 L.Ed.2d 972 (1957). I am confident that federal law will be applied by the state courts.
Although appellant has stated a claim for breach of an ERISA welfare benefits plan he has failed to state a valid ERISA claim under 29 U.S.C. § 1132(a)(1)(A) against Superintendent Lewis as a fiduciary, see 29 U.S.C. § 1002(21)(A), over which federal courts would have exclusive jurisdiction. It is true that an ERISA “employee welfare benefit plan” may consist of unfunded insurance policies. Section 1002(1) provides:
“The terms ‘employee welfare benefit plan’ and ‘welfare plan’ mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer ... to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services. . . . ” (Emphasis added).
It is not unusual for such an unfunded plan, as is alleged here, to consist of various booklets and documents issued by the employer to its employees. Gordon v. ILWUPMA Benefit Funds, 616 F.2d 433 (9th Cir. 1980); Gould v. Continental Coffee Co., 304 F.Supp. 1 (S.D.N.Y.1969); Hunacek v. Union Welfare Fund, 100 Misc.2d 740, 420 N.Y.S.2d 156 (1979). However, § 1103(b) states that the requirement of § 1103(a) that all assets of an employee benefit plan shall be held in trust “shall not apply ... (1) to any assets of a plan which consist of insurance contracts or policies issued by an insurance company qualified to do business in a state.” Thus, although appellant alleges an ERISA plan and a breach of his rights thereunder, which states a claim over which we have concurrent jurisdiction, his effort to state a claim against Superintendent Lewis as a fiduciary must fail for lack of any plan assets over which Lewis has discretionary authority as a trustee, 29 U.S.C. § 1002(21). The unfunded plan here, which consists solely of the employer’s handbook and brochure, has no assets of which Lewis could have custody, much less discretion, or any fund or res with respect to which he could act as a fiduciary under ERISA. Therefore the exclusive federal jurisdiction provision, 29 U.S.C. § 1132(e)(1), does not apply.
Superintendent Lewis, however, remains under an obligation to treat appellant’s ER-ISA contract claim, if it is established, just as he would that of any other creditor’s claim. To the extent that appellant proved a claim to future insurance benefits under the plan, the claim presumably would be allowed in an amount based upon the cost of substitute health and welfare insurance policies for the balance of the retirees’ life expectancies.
With respect to the claim for breach of an ERISA plan over which we have concurrent jurisdiction, I disagree with the notion that Burford v. Sun Oil Co., 319 U.S. 315, 63 S.Ct. 1098, 87 L.Ed. 1424 (1943), or Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), authorizes abstention here. Burford is limited to cases where exercise of federal jurisdiction might result in disruption of complex or fragile state administrative or regulatory systems, i. e., state policy problems of substantial public interest whose importance transcends the result in the immediate federal action, 319 U.S. at 327, 334, 63 S.Ct. at 1104, 1107. No such situation is presented here. This is not a challenge to the administration of any *970state laws regulating the insurance business. The precise issue is one of federal law, the duties owed to retirees under an ERISA welfare plan to be financed by insurance. This is not an issue within the liquidator’s special competence. It would not damage the state regulatory system or even involve any issues of fact or law with respect to that system. Except for its dependence on interpretation of a federal statute, appellant’s claim is no different from that of any other creditor in the CMIC liquidation proceedings. Even in cases where Burford does apply we have been cautioned to apply it sparingly. Colorado River Cons. Dist. v. United States, supra, 424 U.S. at 815-16, 96 S.Ct. at 1245-1246. Here it does not apply at all. See in accord, Marshall v. Chase Manhattan Bank, N.A., 558 F.2d 680 (2d Cir. 1977). “[I]t was never a doctrine of equity that a federal court should exercise its judicial discretion to dismiss a suit merely because a State court could entertain it.” Colorado River, supra, 424 U.S. at 814-15, 96 S.Ct. at 1244-1245. The effect of applying Burford here might be to forego exercise of our concurrent federal jurisdiction with respect to any claim involving a regulated state insurance company, which would be unthinkable.
Nor do I agree with the majority that the doctrine of Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971), warrants abstention here. We firmly rejected an identical proposal in an opinion by Judge Mulligan in the closely analogous case of Marshall v. Chase Manhattan Bank, supra, 558 F.2d at 683-84, which likewise involved the administration of an ERISA plan. Noting that Younger related to a pending state court criminal action, Judge Mulligan stated:
“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, 51 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, 431 U.S. 434, 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. [Footnote omitted]
“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.”
These principles have not in my view been changed by Moore v. Sims, 442 U.S. 415, 99 S.Ct. 2371, 60 L.Ed.2d 994 (1979), where the Court stated:
“As was the case in Huffman, the State here was a party to the state proceedings, and the temporary removal of a child in a *971child-abuse context is, like the public nuisance statute involved in Huffman, ‘in aid of and closely related to criminal statutes.’ Id., 420 U.S. at 604, 95 S.Ct. at 1208.”
Lastly, nothing in Younger or its progeny supports the view that we should abstain from adjudicating appellant’s damage claims, which do not depend on the outcome of the state court liquidation proceeding.
In my view the majority also errs in suggesting that abstention in the present case is somehow supported by the McCar-ran-Ferguson Act, 15 U.S.C. §§ 1101-1015, which guarantees that the states may regulate “the business of insurance,” unimpeded by federal law. That Act does not in any way preclude adjudication by federal courts of claims merely because insurance companies are involved. We are here asked not to resolve any issues bearing on “the business of insurance,” such as the content or meaning of insurance policies, Wadsworth v. Whaland, 562 F.2d 70 (1st Cir. 1977), or the methods used by insurers to sell such policies, Dexter v. Equitable Life Assurance Society of United States, 527 F.2d 233 (2d Cir. 1975), but to answer the simple question of whether appellant has a valid claim for violation of an ERISA welfare benefit plan entitling him and other retirees to be recognized as creditors in the pending liquidation proceeding. See SEC v. National Securities, Inc., 393 U.S. 453, 89 S.Ct. 564, 21 L.Ed.2d 668 (1969) (holding that McCar-ran-Ferguson Act does not apply to Arizona laws regulating relationship between insurance companies and their shareholders). Exercise of federal jurisdiction here does not interfere with state autonomy in its regulation of the insurance business. Indeed, to the extent that appellant’s federal law claim is established, entitling it to be recognized along with claims of other creditors in the liquidation proceeding, CMIC policyholders will not be adversely affected, since their claims are guaranteed by the New York Security Fund.
Although Burford, Younger and the McCarran-Ferguson Act do not support abstention in the present case, I am persuaded that we may decline to hear the case under the doctrine of Colorado River Water Cons. Dist. v. United States, supra, which held that, although the pendency of a state court action is no bar to an action in the federal court with respect to subject matter over which both have concurrent jurisdiction, a federal court may decide not to entertain a claim in exceptional cases where appraisal of factors bearing upon exercise of federal jurisdiction clearly justify a declination. Here there are compelling reasons against exercising our concurrent jurisdiction. The state court proceeding has already progressed quite far. A determination by us as to the validity of appellant’s claim would not only be duplicative but might also delay and complicate the pending state court proceeding. We have no reason to believe that the state court will not correctly interpret and apply federal law in determining whether appellant has a valid ERISA claim for damages based on breach of the alleged CMIC welfare benefits plan and, if so, allow the claim in an amount sufficient to permit appellant and other CMIC retirees similarly situated to participate equitably in the distribution of its assets.