Firestone Tire & Rubber Co. v. Neusser

• Decision Date: 02 February 1987
• Docket Number: 3985,Nos. 85-3849,s. 85-3849
• Parties: , 8 Employee Benefits Ca 1161 The FIRESTONE TIRE & RUBBER COMPANY; Virgil E. Arrington, Plaintiffs-Appellants, v. James A. NEUSSER, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 550

810 F.2d 550

55 USLW 2455, 8 Employee Benefits Ca 1161

The FIRESTONE TIRE & RUBBER COMPANY; Virgil E. Arrington, Plaintiffs-Appellants, v. James A. NEUSSER, Defendant-Appellee.

Nos. 85-3849, 3985.

United States Court of Appeals, Sixth Circuit.

Argued Nov. 10, 1986.

Decided Feb. 2, 1987.

Patricia M. Ritzert (argued), Akron, Ohio, for defendant-appellee.

John M. Glenn (argued), Joseph C. Weinstein, Buckingham, Doolittle & Burroughs, Akron, Ohio, Steven E. Sigalow, for plaintiffs-appellants.

Before MARTIN, MILBURN and BOGGS, Circuit Judges.

MILBURN, Circuit Judge.

Plaintiffs Firestone Tire & Rubber Company ("Firestone") and Virgil E. Arrington appeal from the summary judgment granted by the district court in favor of the defendant, the tax commissioner of the city of Akron, Ohio. Both plaintiffs appeal the district court's holding that Akron Ordinance 1298-1962, which imposes a municipal income tax, is not preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Sec. 1001 et seq. In addition, plaintiff Firestone appeals from the judgment of the district court granting defendant's motion for attorney's fees. Because we conclude that the Akron ordinance is not preempted by ERISA and that the district court did abuse its discretion in awarding attorney's fees, we affirm in part and reverse in part.

I.

Plaintiff Firestone is an employer in the city of Akron. Plaintiff Arrington is an employee at Firestone's Akron facility. Defendant, James A. Neusser, is tax commissioner of the city of Akron.

Pursuant to Ordinance No. 1298-1962, Akron imposes a two percent tax on all income earned by residents of the city, as well as income earned by non-residents for work done within the city. Firestone is required to withhold the tax from the wages and salaries of its Akron employees and to pay the taxes to the city under section 6 of the ordinance.

As part of its employee benefit plan, Firestone has implemented two programs governed by ERISA. The first, a "Tax Efficient Savings Plan," enables an employee to divert up to seventeen percent of his income for each pay period into the Tax Efficient Savings Plan Trust. The first two percent of these contributions is invested in Firestone common stock. Employees making additional contributions may direct that they be invested in any or all of three separate investment funds.

Under the Tax Efficient Savings Plan, an employee may redirect his contributions to the three funds once annually, on January 1. On January 1 and July 1 of each year, an employee may increase or decrease his total contribution to the fund. He may cease all contributions at the end of any month.

An employee may withdraw his balance in the plan only in the event of financial hardship. He may borrow up to one-half of his account balance, within certain limitations, after participating for two years. In the event that an employee leaves the company, he receives the full market value of all savings and investment earnings.

The second ERISA plan implemented by Firestone is a "Health Care Expense Account." This plan permits an employee to direct Firestone to withhold an amount ranging from four dollars ($4.00) to two hundred dollars ($200.00) per month from his gross earnings to be used to reimburse the employee for medical expenses incurred by the employee or his dependents which are not covered by insurance. These contributions are not directed into a separate fund, but are payable from the general assets of the corporation.

These benefit plans were implemented on May 1, 1984, and Firestone requested that defendant tax commissioner rule that the amounts contributed by its employees under the plans are not subject to taxation under the Akron municipal ordinance. In a letter dated April 2, 1984, the tax commissioner ruled that the contributions were subject to taxation.

Firestone appealed the ruling to the City of Akron Tax Board of Review. Plaintiff Arrington joined in the appeal following an August 17, 1984, ruling by the Tax Commissioner. In its memorandum opinion dated August 27, 1984, the Tax Board of Review affirmed the rulings of the Tax Commissioner.

On November 29, 1984, plaintiffs filed the present action seeking a declaratory judgment pursuant to 28 U.S.C. Secs. 2201 and 2202, and injunctive relief pursuant to 29 U.S.C. Sec. 1132(a)(3)(A). In Count I of the complaint, plaintiffs alleged that Akron Ordinance No. 1298-1962 is preempted by ERISA because it relates to an employee benefit plan. In Count II of the complaint, plaintiffs alleged that the employer contributions are not taxable income as defined by the ordinance. On April 18, 1985, the district court dismissed Count II of the complaint. Firestone Tire and Rubber Co. v. Bodle, 645 F.Supp. 305 (N.D.Ohio 1985). There is no appeal from this dismissal.

The parties subsequently filed a stipulation of the facts relevant to Count I of the complaint. On August 1, 1985, the district court granted summary judgment in favor of defendant on the ground that the Akron ordinance is a general tax of neutral application which is not preempted by ERISA. On November 15, 1985, the district court granted defendant's motion for attorney's fees pursuant to 29 U.S.C. Sec. 1132(g)(1). In this appeal, two issues are presented for our consideration:

A. whether the district court erred in concluding that Akron Ordinance No. 1298-1962 is not preempted by ERISA; and

B. whether the district court abused its discretion in awarding defendant attorney's fees.

II.

A.

In enacting ERISA, "Congress intended to make the regulation of pension plans solely a federal concern." Authier v. Ginsberg, 757 F.2d 796, 800 (6th Cir.), cert. denied, --- U.S. ----, 106 S.Ct. 208, 88 L.Ed.2d 177 (1985). Consequently, ERISA preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." 29 U.S.C. Sec. 1144(a). A state law relates to an employee benefit plan, and is preempted by ERISA, if it "has 'a connection with or reference to' an ERISA pension plan...." Authier, 757 F.2d at 800 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983)). ¹

The Supreme Court has consistently emphasized the broad scope of ERISA's preemption provision. In Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981), the Court considered whether ERISA preempted a New Jersey statute prohibiting the offset of a retiree's pension benefits by an amount equal to a workers' compensation award for which the retiree was eligible. The Court held that the statute was preempted in that "it 'relate[s] to pension plans' governed by ERISA...." Id. at 524, 101 S.Ct. at 1907. Moreover, the Court concluded that the New Jersey statute was not saved from ERISA's broad preemption provision merely because it affected the plan in an indirect manner:

It is of no moment that New Jersey intrudes indirectly, through a workers' compensation law, rather than directly, through a statute called "pension regulation." ERISA makes clear that even indirect state action bearing on private pensions may encroach upon the area of exclusive federal concern.... ERISA's authors clearly meant to preclude the States from avoiding through form the substance of the pre-emption provision.

Id. at 525, 101 S.Ct. at 1907.

The broad interpretation of ERISA's preemption provision was reaffirmed in Shaw, 463 U.S. at 96-97, 103 S.Ct. at 2899-2900. The Court concluded that "Congress used the words 'relate to' in Sec. 514(a) [29 U.S.C. Sec. 1144(a) ] in their broad sense." Id. at 98, 103 S.Ct. at 2900. The Court continued:

Nor, given the legislative history, can Sec. 514(a) be interpreted to pre-empt only state laws dealing with the subject matters covered by ERISA--reporting, disclosure, fiduciary responsibility, and the like. The bill that became ERISA originally contained a limited pre-emption clause, applicable only to state laws relating to the specific subjects covered by ERISA. The Conference Committee rejected these provisions in favor of the present language, and indicated that the section's pre-emptive scope was as broad as its language....

This court, following the mandate of Shaw, has construed ERISA's preemption provision in an expansive manner. For example, in Authier, we considered the effect of section 1144(a) upon "a state common-law cause of action for discharge in violation of public policy based on a fiduciary's alleged compliance with ERISA." 757 F.2d at 800. We concluded that, because the plaintiff's claim was based "upon his assertion that he was terminated for fulfilling his obligations under ERISA[,]" and because "ERISA created the public policy element of the common-law action[,]" the Michigan common-law cause of action, under the facts of that case, was preempted by ERISA. Id. We have consistently indicated our approval of a broad interpretation of ERISA's preemption provision. See, e.g., Whitworth Bros. Storage Co. v. Central States, Southeast and Southwest Areas Pension Fund, 794 F.2d 221, 233-36 (6th Cir.1986); Blakeman v. Mead Containers, 779 F.2d 1146, 1151 (6th Cir.1985) (state law contract claim for benefits from an ERISA plan preempted by section 1144); General Motors Corp. v. Buha, 623 F.2d 455, 459 (6th Cir.1980) (preemption provision essential to federal regulation under ERISA).

Despite the breadth of the preemption provision, the Supreme Court has indicated that "[s]ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law 'relates to' the plan." Shaw, 463 U.S. at 100 n. 21, 103 S.Ct. at 2901 n. 21. Our task in the present case is to determine whether the Akron ordinance falls within this "exception" to section 1144.

Plaintiffs argue that the Akron ordinance has a direct effect on the funding of programs governed by ERISA and that, consequently, the Akron ordinance is preempted. They...