Barlow v. Marriott Corporation

Decision Date30 June 1971
Docket NumberCiv. No. 70-710.
Citation328 F. Supp. 624
PartiesMilton A. BARLOW et al. v. MARRIOTT CORPORATION.
CourtU.S. District Court — District of Maryland

Paul R. Connolly, Frank X. Grossi, Jr., and Williams & Connolly, Washington, D. C., and C. Edward Jones, Baltimore, Md., for plaintiffs.

Robert W. Barker, Pierre J. LaForce and Wilkinson, Cragun & Barker, Washington, D. C., and Robert R. Bair and Venable, Baetjer & Howard, Baltimore, Md., for defendant.

FRANK A. KAUFMAN, District Judge.

On August 15, 1960, defendant established a trust fund pursuant to an Employees' Profit Sharing Savings & Retirement Plan and Trust, pursuant to which defendant and its employees have since made contributions, and pursuant to which management and control of the fund is said to be vested in three trustees, who are appointed by, and serve at the pleasure of, defendant's board of directors. Plaintiffs allege that the plan, as established originally, provided that—

* * * an employee who terminated after ten years service was entitled to receive his full proportionate share of the combined contributions and the total earnings thereon accumulated in the Fund. An employee who terminated with less than ten years service was entitled to participate fully in the earnings of the Fund to the extent of his vested interest.

Article 14.13 of the plan states:

This plan is intended to qualify as a tax exempt Profit Sharing Plan pursuant to the provisions of Section 401 of the Internal Revenue Code of 1954 together with any amendments thereto.

In accordance therewith, defendant sought and obtained a ruling from the Internal Revenue Service that the plan qualified under sections 401 et seq. of the Internal Revenue Code, 26 U.S.C. § 401 et seq.1

The plaintiffs, six former employees of defendant who contributed to defendant's profit sharing trust, allege that defendant amended the plan in 1964 and 1967, in contravention of the original amendment provision, by eliminating or paring down rights of employees who had terminated their employment by defendant. Plaintiffs contend that the effect of those changes,

* * * in addition to constituting a breach of contract with each terminated employee, effectively discriminates in favor of Marriott officers, supervisory personnel and highly compensated employees since such persons as a class enjoy a disproportionate share of the earnings of the Pension Fund as affected by the amendments. The forbidden discrimination is accomplished as follows:
The rate of earnings of the Pension Fund upon the accumulated employer contributions has substantially exceeded the annual rate of return allowed or allowable by the Trustees to the accounts of terminated employees.
The excess of earnings (measured by the difference between the amount allowed terminated employees by the Trustees and the amount actually realized on Fund investment proportionate to the accumulated contributions of these terminated employees) is transferred to the capital accounts of current employees.
By virtue of their management positions, Marriott officers, supervisory personnel and highly compensated employees tend to have greatter longevity of employment with Marriott than the average employee or those in the lower employee levels and thereby disproportionately enjoy the accretions of earnings of the Fund allocable to current employees at the expense of terminated employees.

That discrimination, plaintiffs urge, disqualifies the plan under 26 U.S.C. § 401(a) (4).2 Accordingly, plaintiffs contend, the actions of defendant's board of directors, in enacting such amendments, constituted not only a breach of trust but a violation of federal rights created by the Congress in favor of plaintiffs and other employees covered by the plan.

The plaintiffs, alleging that two of them are citizens of Maryland, two of Florida, one of Connecticut, and one of Utah, seek to institute this action as a class suit pursuant to Rule 23 of the Federal Rules of Civil Procedure on behalf of themselves and other employees of defendant. Two of the plaintiffs, Barlow and Curtis, are said to have claims each exceeding Ten Thousand Dollars ($10,000.00). Defendant is alleged to be a Delaware corporation with its principal offices located in Maryland. No claim of diversity jurisdiction is asserted by plaintiffs pursuant to 28 U.S.C. § 1332. Rather, plaintiffs assert the existance of federal jurisdiction under 28 U.S.C. §§ 1331 and 1340. Section 1331 (a) provides:

§ 1331. Federal question; amount in controversy; costs
(a) The district courts shall have original jurisdiction of all civil actions wherein the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and arises under the Constitution, laws, or treaties of the United States. Emphasis supplied.

Section 1340 provides:

§ 1340. Internal revenue; customs duties
The district courts shall have original jurisdiction of any civil action arising under any Act of Congress providing for internal revenue, or revenue from imports or tonnage except matters within the jurisdiction of the Customs Court.

Defendants have moved to dismiss under Rule 12(b) of the Federal Rules of Civil Procedure, contending, inter alia, that the complaint does not pose a federal question. This Court hereby "assumes jurisdiction to decide whether the allegations state a cause of action on which the court can grant relief * * *," Bell v. Hood, 327 U.S. 678, 682, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946), and upon so doing, holds, for the reasons set forth infra, that subject matter jurisdiction is lacking. Therefore, this Court does not reach the question of whether plaintiffs have stated an appropriate class action, either with or without reference to principles enunciated in Snyder v. Harris, 394 U.S. 332, 89 S.Ct. 1053, 22 L.Ed.2d 319 (1969). See also Dierks v. Thompson, 414 F.2d 453 (1st Cir. 1969); and C. Wright, Law of Federal Courts 315-316 (1970 ed.).

Nor does this Court reach the question of whether the $10,000 requirement is or is not to be read into 28 U.S.C. § 1340 or whether Snyder v. Harris, supra, has any different application with regard to § 1340 than § 1331 or § 1332. And finally, at this time, there is no need for this Court to determine whether the relief sought herein is declaratory in nature and/or is barred by the provisions of 28 U.S.C. § 2201, which provides:

§ 2201. Creation of remedy
In a case of actual controversy within its jurisdiction, except with respect to Federal taxes, any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such. Emphasis supplied.

The profit-sharing trust in issue herein was executed in Maryland and provides that it—

shall be governed by, construed, administered and regulated in all respects under the law of the State of Maryland.

If plaintiffs had alleged, without more, only a breach of trust by defendant, such allegations would not premise federal question jurisdiction. But plaintiffs contend that they leap that barrier because their claims of breach of trust are based upon their view that the trustees are required by the trust plan and/or by 26 U.S.C. § 401 to administer the plan so as to continue in force and effect the initial qualification of the plan for the tax benefits of that statute. See Lucas v. Seagrave Corp., 277 F.Supp. 338, 342 (D.Minn.1967). See also Langer v. Iowa Beef Packers, Inc., 420 F.2d 365, 369-370 (8th Cir. 1970). To maintain that contention, an initial determination, construing the plan as incorporating such a requirement, is needed at the threshold. But even assuming that determination in plaintiffs' favor, plaintiffs cannot successfully assert federal jurisdiction under § 1331 or § 1340 without establishing a federal right which is alleged to have been violated— and no such right exists in plaintiffs' favor in this case.

In Gully v. First National Bank of Meridian, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70 (1936), Mr. Justice Cardozo wrote:

* * * To bring a case within the statute, a right or immunity created by the Constitution or laws of the United States must be an element, and an essential one, of the plaintiff's cause of action. The right or immunity must be such that it will be supported if the Constitution or laws of the United States are given one construction or effect, and defeated if they receive another. A genuine and present controversy, not merely a possible or conjectural one, must exist * * *. Citations omitted; at 112-113, 57 S.Ct. at 97.
* * * * * *
* * * "A suit to enforce a right which takes its origin in the laws of the United States is not necessarily, or for that reason alone, one arising under those laws, for a suit does not so arise unless it really and substantially involves a dispute or controversy respecting the validity, construction or effect of such a law, upon the determination of which the result depends." Shulthis v. McDougal, 225 U.S. 561, 569 32 S.Ct. 704, 706, 56 L.Ed. 1205 * * *. Id. at 114, 57 S.Ct. at 98.

Professor Mishkin has suggested that the test is whether there exists "a substantial claim founded `directly' upon federal law." Mishkin, The Federal "Question" in the District Courts, 53 Col.L.Rev. 157, 168 (1953).2 Professor Wright has expressed the opinion that—

rather than attempting a test it might be wiser simply to recognize that "the existing doctrines as to when a case raises a federal question are neither analytical nor entirely logical," and that in the unusual case in which there is a debatable issue about federal question jurisdiction, pragmatic considerations must be taken into account. Footnotes omitted.

C. Wright, Law of Federal Courts 58 (1970 ed.).

Judged under any of those tests, the within action is...

To continue reading

Request your trial
9 cases
  • Comtronics, Inc. v. Puerto Rico Tel. Co.
    • United States
    • U.S. District Court — District of Puerto Rico
    • 17 Junio 1975
    ...83 S.Ct. 1441, 10 L.Ed.2d 605 (1963); Burgess v. Charlottesville S & L Association, 477 F.2d 40 (4 Cir. 1973); Barlow v. Marriott Corporation, 328 F.Supp. 624 (D.C.Md.1971). On the other hand, where benefits or rights have been established by Federal legislation, the Courts have frequently ......
  • Williams v. Williams
    • United States
    • U.S. District Court — District of Maryland
    • 27 Diciembre 1976
    ...6 infra. 6 See also McCorkle v. First Pennsylvania Banking & Trust Co., 459 F.2d 243 (4th Cir. 1972) (Sobeloff, J.); Barlow v. Marriott Corp., 328 F.Supp. 624 (D.Md.1971). 7 In Wilhelm v. United States Dep't of Air Force, 418 F.Supp. supra at 165, the Court Although lack of original jurisdi......
  • Hales v. Winn-Dixie Stores, Inc.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (4th Circuit)
    • 12 Julio 1974
    ...'arising under' that Act. McCorkle v. First Pennsylvania Banking and Trust Co., 459 F.2d 243 (4th Cir. 1972); Barlow v. Marriott Corporation, 328 F.Supp. 624 (D.Md.1971). However, claims, such as those stated in Count II, which relate to a duty of disclosure to an employee, do arise under t......
  • Francis v. Davidson
    • United States
    • U.S. District Court — District of Maryland
    • 28 Enero 1972
    ...held jurisdiction under § 1337 did not attach because the case did not arise "directly" under federal law. Cf. Barlow v. Marriott Corporation, 328 F.Supp. 624 (D.Md.1971). The possibility that § 1337 jurisdiction exists in this case has not been raised by counsel. Nor has this Court found a......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT