Smith v. Reg'l Transit Auth.

Decision Date28 June 2016
Docket NumberNo. 15–31001,15–31001
PartiesMary Smith; Pamela Bagneris Batiste; Robert Bookman; Kenneth Bourgeois; James Brown, Jr., Plaintiffs–Appellants, v. Regional Transit Authority; Transit Management of Southeast Louisiana, Incorporated, Defendants–Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

James M. Garner, Esq., Joshua Paul Clayton, Martha Y. Curtis, Esq., Sher Garner Cahill Richter Klein & Hilbert, L.L.C., New Orleans, LA, for PlaintiffsAppellants.

Howard Shapiro, Esq., Robert Wilkinson Rachal, James Robert Sheppard, III, Esq., Proskauer, New Orleans, LA, for DefendantsAppellees.

Before REAVLEY, HAYNES, and HIGGINSON, Circuit Judges.

HAYNES

, Circuit Judge:

The PlaintiffsAppellants appeal the district court's grant of summary judgment in favor of DefendantsAppellees. The principal question on appeal is whether the plan at issue is exempt from the Employee Retirement Income Security Act of 1974 as a “governmental plan.” Plaintiffs also challenge the dismissal of their successor liability and 42 U.S.C. § 1983

claims, and contend that the district court erred in not granting their motion for additional discovery. For the following reasons, we AFFIRM.

I. Background

Mary Smith and approximately forty other individuals (collectively, Plaintiffs) are former employees of New Orleans Public Service, Inc. (“NOPSI”) who retired from Transit Management of Southeast Louisiana (TMSEL) and participated in TMSEL's retiree welfare benefit plan (the “Plan”). They brought claims against Defendants Regional Transit Authority (RTA), TMSEL, and their insurers under the Employee Retirement Income Security Act of 1974 (ERISA), and the district court dismissed the case for lack of jurisdiction. According to the district court, the plan was exempt from ERISA as a “governmental plan,” and the court lacked subject matter jurisdiction. On appeal, a panel of this court vacated and remanded, noting that:

because a federal district court has jurisdiction to decide whether or not a plan is an ERISA plan as claimed by the plaintiff in the complaint, we conclude that, under Supreme Court precedent and [ACS Recovery Services, Inc. v. Griffin , 723 F.3d 518 (5th Cir. 2013)

], the proper procedural vehicle to raise the question of whether a purported ERISA plan is a “governmental plan” is either Rule 12(b)(6) or, if factual information outside the pleadings is needed, Rule 56 (if factual issues cannot be resolved then, of course, a trial may be needed).

Smith v. Reg'l Transit Auth. , 756 F.3d 340, 346–47 (5th Cir. 2014)

.

After remand to the district court, Plaintiffs amended their complaint to add a claim for successor liability against the RTA, claims under 42 U.S.C. § 1983

, and various state law causes of action. Defendants filed a motion for summary judgment. In response, Plaintiffs filed a motion to conduct discovery and compel under Rule 56(d) of the Federal Rules of Civil Procedure. The district court granted the Rule 56(d) motion in part, “limiting the time frame and scope of any discovery to be taken to that which is relevant and necessary to clarify the ownership, funding, and management of [TMSEL],” and referred these discovery issues to the magistrate judge. The magistrate judge then entered an order pursuant to an agreement between the parties to confine discovery to agreed-upon documents and limit its temporal scope to the year 2006.

The facts underlying this dispute are as follows. “Prior to 1983, the New Orleans transit system was operated by [NOPSI], a private company. In the late 1970s and early 1980s, the system converted to a publicly held system, owned by [the RTA] and operated by [TMSEL].” Smith , 756 F.3d at 342

. The RTA was created by statute in August 1979 as “a body politic and corporate and a political subdivision of the state of Louisiana comprising all of the territory in the parishes of Jefferson, Orleans, St. Bernard, and St. Tammany.” La. Rev. Stat. Ann. § 48:1654(A). The RTA's purpose is “to plan, design, ... maintain, and administer a transit system within the metropolitan area to operate same or contract therefor, lease as lessor same for operation by private parties.” Id. § 48:1654(B). The RTA is authorized by statute to contract with private entities to operate, maintain, and administer the transit system. Id. § 48:1656(4).

TMSEL was incorporated in 1982. The Board of Directors manages the business of TMSEL, and the members of the Board are elected by the shareholders. From its creation until 2012, TMSEL was owned by a series of private entities.

In June 1983, the RTA purchased the New Orleans public transit system from NOPSI. At the time of purchase, NOPSI and the City of New Orleans had an existing 13(c) agreement, which provided for “fair and equitable arrangements” for employee benefits. In accordance with the purchase of the transit system, the RTA, TMSEL, NOPSI, and the City of New Orleans entered into an Employee and Retiree Pension and Welfare Benefit Agreement (“Benefits Agreement”), which set forth the RTA and TMSEL's obligations regarding NOPSI's benefit plans. Under the Agreement, the RTA and TMSEL “shall provide or cause to be provided ... the same coverages and levels of benefits.” By separate letter, TMSEL and RTA also “agreed to assume, entirely, the rights, duties, and responsibilities contained in ... [the] § 13(c) Agreement.”

The general relationship between the RTA and TMSEL is discussed in the 2001 Management Services Agreement (“MSA”). As set forth in the MSA, TMSEL was (at that time) wholly owned by Metro New Orleans Transit, Inc. (Metro), which was “engaged in the business of providing management and advisory services for the operation of transit systems,” and TMSEL was “engaged in the business of providing personnel necessary for the operation of the [RTA's transit system].” Under the agreement, Metro would utilize TMSEL to manage the RTA transit system. Defendants entered evidence that TMSEL provided the day-to-day operations of the transit system. For example, TMSEL provided bus operators, mechanics, and other support personnel.

The MSA also provided that the RTA had the authority to remove the General Manager and Deputy General Manager of TMSEL if these individuals did not perform their job responsibilities in a manner acceptable to the RTA. It also specified that [a]ny document, report or data generated by TMSEL related to and/or in connection with this Agreement shall be the sole property of the RTA.” Defendants presented evidence that the RTA has the right to inspect and audit TMSEL's books and records and that TMSEL was funded solely by the RTA. In fact, the MSA provides that the RTA was responsible for providing TMSEL with the funds needed to operate and manage the transit system, which included the payment of wages and benefits, and that all revenue from operating the transit system was the property of the RTA, which retained authority to direct how the funds were to be treated. In 2012, the RTA obtained 100% ownership of TMSEL.

At the conclusion of discovery, Defendants filed another motion for summary judgment. The district court granted summary judgment on the federal claims and, declining to exercise supplemental jurisdiction, dismissed the state law claims without prejudice. Plaintiffs timely appealed.

II. Standard of Review

We review a grant of summary judgment de novo, applying the same standard that the district court applied. United States v. Lawrence , 276 F.3d 193, 195 (5th Cir. 2001)

. Summary judgment is proper where there is no genuine dispute of material fact, and a party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). [We] must view the evidence introduced and all factual inferences from the evidence in the light most favorable to the party opposing summary judgment[, but a] party opposing summary judgment may not rest on mere conclusory allegations or denials in its pleadings.” Hightower v. Tex. Hosp. Ass'n , 65 F.3d 443, 447 (5th Cir. 1995) (citations omitted). We can affirm the district court's grant of summary judgment on any ground supported by the record. Bluebonnet Hotel Ventures, L.L.C. v. Wells Fargo Bank, N.A. , 754 F.3d 272, 276 (5th Cir. 2014). We review a denial of a Rule 56(d) motion for discovery for an abuse of discretion. Stearns Airport Equip. Co. v. FMC Corp. , 170 F.3d 518, 534 (5th Cir. 1999).

III. Discussion
A. Governmental Plan

Plaintiffs brought claims under ERISA for improper denial of benefits, 29 U.S.C. § 1132(a)(1)(B)

, and breach of fiduciary duty, id. § 1132(a)(2). Governmental plans are excluded from ERISA's framework. Id. § 1003(b)(1). ERISA defines a governmental plan as “a plan established or maintained for its employees by the Government of the United States, by the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing.” Id. § 1002(32). The district court determined that the RTA was a political subdivision of Louisiana and that TMSEL was an agency or instrumentality of the RTA. According to the district court, because the Plan was maintained by an agency or instrumentality of a political subdivision of Louisiana, it was a governmental plan and exempt from ERISA, so Plaintiffs could not prevail under ERISA as a matter of law. We agree.

The RTA is a political subdivision of Louisiana. Plaintiffs all but conceded this point at oral argument; and we address it briefly. We agree with the district court that the proper test to determine whether an entity is a political subdivision comes from National Labor Relations Board v. National Gas Utility District of Hawkins County , 402 U.S. 600, 91 S.Ct. 1746, 29 L.Ed.2d 206 (1971)

. Political subdivisions are “entities that are either (1) created directly by the state, so as to constitute departments or administrative arms of the government, or (2) administered by individuals who are responsible to public officials or to the general electorate.” Hawkins Cty. , 402 U.S. at 604–05, 91 S.Ct....

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