Self-Insurance Institute of America, Inc. v. Korioth

Citation: Not availableDocket: 92-8444

Court: Court of Appeals for the Fifth Circuit; June 11, 1993; Federal Appellate Court

Original Court Document: View Document

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The Self-Insurance Institute of America, Inc. (SIIA) filed a declaratory judgment action against Claire Korioth and others, seeking to enjoin certain provisions of the Texas Insurance Code, asserting they were preempted by the Employee Retirement Income Security Act (ERISA). The district court dismissed the case, ruling it lacked subject matter jurisdiction under ERISA and that SIIA did not have standing. Upon appeal, the Fifth Circuit determined that the district court had general federal question jurisdiction and that SIIA possessed associational standing. Consequently, the appellate court reversed the lower court's decision and remanded the case for a merits determination. SIIA's action arose after Texas imposed taxes and fees on contract administrators and employers under specific code provisions, which SIIA argued conflicted with ERISA. Following the Supreme Court's denial of certiorari in a related case, Texas stopped enforcing the challenged statute, rendering SIIA's claims regarding that provision moot.

The district court determined that SIIA, a trade association of contract administrators and plan sponsors, is neither a participant, beneficiary, nor fiduciary of an ERISA plan. On appeal, two main issues were addressed: (1) the district court's jurisdiction to hear the case and (2) whether the plaintiff had associational standing. The appellate court concluded that the district court wrongly dismissed the case for lack of subject matter jurisdiction and affirmed that the plaintiff had standing to proceed. 

The district court initially ruled it lacked jurisdiction under ERISA, specifically 29 U.S.C. § 1132(a), which restricts civil actions to participants, beneficiaries, and fiduciaries. SIIA's submitted affidavits described its members as employer/plan sponsors or contract administrators but failed to demonstrate that they were fiduciaries. Consequently, the district court found SIIA lacked statutory standing as a trade association under § 1132 and that its members did not have associational standing.

The appellate court noted a prior contradictory ruling by the same district court in NGS American, Inc. v. Philip Barnes, which acknowledged the fiduciary status of a third-party administrator under Texas law, allowing them to bring suit under ERISA. SIIA argued for general federal question jurisdiction under 28 U.S.C. § 1331, asserting that state laws violated the Supremacy Clause due to ERISA's preemption. Citing Shaw v. Delta Air Lines, SIIA contended that federal courts have jurisdiction over cases involving federal preemption of state laws, thereby justifying the appellate court's remand for the case to proceed on its merits.

ERISA preemption claims can be brought under federal jurisdiction (28 U.S.C. § 1331), as established by case law, including Metropolitan Life Ins. Co. v. Taylor and Provident Life, Accident Ins. Co. v. Waller. The lack of an express statutory grant under § 1332 does not hinder the ability to bring such claims federally, particularly in cases without an underlying state court action, making these issues suitable for federal forums. The Supreme Court in Illinois v. City of Milwaukee affirmed that jurisdiction exists for claims based on federal statutes and common law. Similarly, in Braniff Int'l, Inc. v. Florida Pub. Serv. Comm'n, the court determined that seeking injunctive and declaratory relief based on the unconstitutionality of a state statute does not preclude federal jurisdiction, even when state remedies are available. The defendants' arguments against federal jurisdiction, citing Hermann Hospital and Franchise Tax Bd. v. Construction Laborers' Vacation Trust, are countered by the assertion that general federal question jurisdiction remains applicable and that standing principles ensure no conflict with ERISA's limitations. The defendants' reliance on these cases is deemed inapplicable to the current situation, particularly as the context of claims and jurisdiction differs significantly.

The defendant removed the case to federal court, citing section 1331 for federal jurisdiction based on the interpretation of ERISA as implicating federal common law. Although the Supreme Court acknowledged the federal common law question, it ruled that the district court lacked subject matter jurisdiction, primarily because it narrowly focused on whether the action arose under ERISA. The court emphasized that recognizing the tax board's claim under section 1331 would breach the 'well-pleaded complaint rule.' The Franchise Tax Board decision clarified that ERISA specifies parties entitled to seek relief under section 502, and that a third party does not have an express cause of action for a declaratory judgment concerning ERISA issues. To establish federal question jurisdiction, a federal issue must appear on the complaint's face, and an anticipated defense implicating a federal issue does not suffice. Federal question jurisdiction exists if either a substantial, disputed federal law question is a necessary element of a well-pleaded state claim, or if the claim is fundamentally one of federal law. 

The Supreme Court distinguished Franchise Tax Board, which lacked federal jurisdiction, from cases where companies regulated by ERISA seek affirmative injunctions against preempted claims. The district court determined that SIIA was not an enumerated party under section 1132(d) and found SIIA lacked standing because it did not prove its members were fiduciaries. On appeal, SIIA argues for associational standing despite this finding, which requires that its members would have standing to sue individually, the interests sought to be protected align with the organization's purpose, and the claim does not necessitate individual member participation. The district court's ruling on fiduciary status was based on insufficient proof of discretionary authority by SIIA’s members, although the same judge had previously recognized third-party administrators of ERISA plans as fiduciaries under Texas law.

SIIA's members, classified as fiduciaries under state law, possess standing to sue individually. They satisfy the standing test from Association of Data Processing Serv. Org. v. Camp, which requires (i) a concrete injury and (ii) alignment with the statute's protective scope. The plaintiffs claim that tax obligations imposed by the statute would cause them financial harm and that a ruling deeming these taxes preempted by ERISA would provide them with relief. Allegations of likely remedial injury suffice for standing, as affirmed in Warth v. Seldin. SIIA asserts that employer/plan sponsors and contract administrators fall within ERISA's zone of interest, as established in Data Processing. It is evident that SIIA's members are affected by the Texas Insurance Code provisions in question. Furthermore, the requirements for associational standing are met; the interests SIIA aims to protect align with its organizational purpose, and individual member participation in the litigation is unnecessary. The district court appropriately had jurisdiction over the case. SIIA maintains associational standing, leading to the reversal of the district court's dismissal and a remand for a merits inquiry.