ERISA-Seventh Circuit Rules That A District Court Has Subject Matter Jurisdiction Over An Employer’s Suit For Declaratory Judgment That Its Reduction Of Retiree Health Benefits Did Not Violate ERISA

In NewPage Wisconsin System Inc. v. United Steel, Paper & Forestry, Rubber, Manufacturing, Energy Allied Industrial and Service Workers International Union, AFL-CIO/CLC, No. 10-2887 (7th Cir. 2011), the plaintiff/ employer had maintained a retiree health plan (the “Plan”) for its current and former workers, pursuant to a series of collective bargaining agreements between the plaintiff and the defendant /union. As a cost savings measure, the plaintiff eliminated a subsidy under the Plan for the medical care of retirees who are 65 or older. The plaintiff brought this suit, as a fiduciary of the Plan, asking for a declaratory judgment that the elimination of this subsidy did not violate ERISA (among other statutes). The district court dismissed the suit, on the grounds that it did not have subject matter jurisdiction over the ERISA claim. Its theory was that section 502(a) (3) of ERISA does not authorize relief when “plan administrators. . . seek declaration of their right to reduce or deny benefits.” The plaintiff appealed. The issue for the Seventh Circuit Court of Appeals (the “Court”): was the district court correct as to the absence of subject matter jurisdiction?

One important note-the defendant/union had brought its own, separate suit on this matter, claiming (among other things) that the elimination of the subsidy should be remedied under section 502(a)(3) (the “Parallel Suit) (this suit has been dismissed).

The Court in this case noted that section 502(a)(3) of ERISA states that a civil action may be brought “by a participant, beneficiary, or fiduciary . . . to obtain appropriate equitable relief” or to enforce any terms of the plan. Here, the plaintiff, acting as a fiduciary of the Plan, wants the district court to declare that the changes it made to the Plan are consistent with its legal obligations. The plaintiff’s request does not ask for equitable relief, or asks the court for help in enforcing the Plan.

However, subject matter jurisdiction depends on a claim arising under federal law, not on whether a particular remedy is available or whether a claim is sound on the merits. Section 502(e) of ERISA gives the district court jurisdiction over ERISA matters. A federal district court is the right forum for a dispute about the meaning of ERISA and the validity of changes to a welfare benefit plan, such as the Plan. The underlying controversy is a claim by the union/defendant -actually made in the Parallel Suit- that the elimination of the Plan’s subsidy should be remedied under section 502(a)(3). A district court had jurisdiction over the Parallel Suit under section 502(e), the district court in this case has subject matter jurisdiction under ERISA over this suit for a declaratory judgment by the plaintiff/employer. As such, the Court vacated the district court’s dismissal of the case, and remanded the case back to the district court.

Posted in:
Updated:

Comments are closed.