Asbestos Workers Local No. 23 Pension Fund V. U.S., CIV.A.1:01-CV-2253.

• Decision Date: 12 January 2004
• Docket Number: No. CIV.A.1:01-CV-2253.,CIV.A.1:01-CV-2253.
• Parties: ASBESTOS WORKERS LOCAL NO. 23 PENSION FUND, by and through Robert T. Norcross and Les J. Zane, as Trustees, Plaintiff v. UNITED STATES of America, Internal Revenue Service and Patrick Kelley, Defendants
• Court: U.S. District Court — Middle District of Pennsylvania

303 F.Supp.2d 551

ASBESTOS WORKERS LOCAL NO. 23 PENSION FUND, by and through Robert T. Norcross and Les J. Zane, as Trustees, Plaintiff v. UNITED STATES of America, Internal Revenue Service and Patrick Kelley, Defendants

No. CIV.A.1:01-CV-2253.

United States District Court, M.D. Pennsylvania.

January 12, 2004.

COPYRIGHT MATERIAL OMITTED

Charles W. Johnston, Johnston & Diamond, PC, Camp Hill, PA, for Plaintiffs.

Jennifer L. Best, Trial Attorney, U.S. Department of Justice, Washington, DC, Joseph J. Terz, U.S. Attorney's Office, J. Stephen Feinour, L. Renee Lieux, Nauman, Smith, Shissler & Hall, LLP, Harrisburg, PA, for Defendants.

MEMORANDUM

CONNER, District Judge.

Presently before the court in this interpleader action are cross-motions for summary judgment by defendants, Patrick Kelley and the Internal Revenue Service ("IRS"), seeking disbursement of payments owed under a pension benefit plan administered by plaintiff, Asbestos Workers Local No. 23 Pension Fund ("Fund"), and governed by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1401. Patrick Kelley, named as designated beneficiary under the plan, became entitled to a guaranteed amount of benefits following the death of his father, Richard Kelley, the participant in the plan. The IRS contends that tax liens against Richard Kelley's property attached to the term benefits payable to Patrick Kelley. The Fund filed this interpleader action to resolve the rights of the IRS and Patrick Kelley to the benefit payments.

The question presented is whether guaranteed minimum benefits payable to a designated beneficiary under a pension plan constitute "property" of the participant to which a tax lien may attach.¹ For the reasons that follow, the court finds that such benefits do not constitute property of the participant and will grant Patrick Kelley's motion for summary judgment.

I. Statement of Facts²

For a number of years, plaintiff's father, Richard Kelley, was employed under a collective bargaining agreement that included a pension benefit plan. (Doc. 27 ¶ 6; Doc. 29, Exs. 7-8). The plan offered several payment options, one of which granted monthly benefits to the participant throughout the participant's life and, if the participant died before receiving 120 payments, "the remainder of said [120] payments" to a designated beneficiary. (Doc. 29, Ex. 7 at 17a). Under this option, deemed the "ten-year-guarantee pension," either the participant or the beneficiary was guaranteed to receive at least 120 monthly benefit payments from the Fund.

On May 20, 1996, Richard Kelley applied for benefits under the plan and selected the ten-year-guarantee pension option. (Doc. 27 ¶ 7; Doc. 29, Ex. 8). He named his son, Patrick Kelley, as his designated beneficiary. His retirement became effective on June 1, 1996, and on that date he began receiving pension benefits of approximately 31100 per month. (Doc. 27 ¶¶ 9-10; Doc. 29, Ex. 8).

In 1997, after Richard Kelley failed to satisfy IRS demands for satisfaction of tax obligations from previous years, a lien in favor of the United States attached by operation of law to all of his property, including his interest in pension benefits under the plan. (Doc. 27 ¶ 12; Doc. 29, Exs. 1-6). The IRS served notices of levy on the Fund, demanding disbursement of a portion of the monthly pension benefits as they became due. Consequently, starting in November 1997 the Fund reduced Richard Kelley's benefit payments by approximately $500, remitting this sum to the IRS each month. (Doc. 27 ¶¶ 13-15; Doc. 29, Exs. 9-10).

The payments continued until June 5, 2001, when Richard Kelley died. At the time of his death, Richard Kelley had received sixty-one payments under the plan. (Doc. 27 ¶ 18; Doc. 29, Ex. 11). Soon thereafter, the IRS advised the Fund that the lien against Richard Kelley remained attached to the minimum benefits payable to his designated beneficiary and that the Fund should continue to honor the agency's levy. The Fund notified Patrick Kelley that he was eligible under the plan to receive fifty-nine benefit payments as designated beneficiary but that the IRS had asserted a levy against the benefits. (Doc. 27 ¶¶ 19-21). The Fund reduced Patrick Kelley's monthly benefits by the amount allegedly subject to the IRS levy and placed that portion in a separate escrow account pending resolution of the conflicting claims. (Doc. 29, Ex. 11).

On November 27, 2001, the Fund filed a complaint for interpleader, naming the IRS and Patrick Kelley as defendants. The complaint `sought resolution of the competing claims of the two parties and a release from liability in connection with the withheld pension payments. (Doc. 1). The IRS filed a counterclaim against the Fund for immediate distribution of the amounts withheld and a cross claim against Patrick Kelley for foreclosure of the tax liens. (Doc. 8). Patrick Kelley filed a counterclaim' against the Fund for immediate disbursement of the amounts withheld. (Doc. 10). The court ordered the amount held in escrow by the Fund and all future payments owed under the plan to be deposited into the registry of the court pending disposition of the controversy. (Doc. 14). The claimants subsequently filed cross-motions for summary judgment. (Doc. 68).

II. Subject Matter Jurisdiction

Federal courts have an independent obligation to ensure the existence of subject matter jurisdiction over claims before them, even when the parties do not raise the issue. See Nesbit v. Gears Unlimited, Inc., 347 F.3d 72, 76-77 (3d Cir. 2003); see also FED. R. CIV. P. 12(h)(3) ("Whenever it appears ... that the court lacks jurisdiction of the subject matter, the court shall dismiss the action."). In this case, plaintiffs complaint premises jurisdiction on 28 U.S.C. § 1335, which grants district courts original jurisdiction over all actions "in the nature of interpleader" involving "[t]wo or more adverse claimants, of diverse citizenship as defined in section 1332 of this title." 28 U.S.C. § 1335. Under § 1332, however, diversity exists only among citizens of different states and "foreign state[s]," not between a citizen of a state and the federal government or an agency thereof. See id. § 1332; Commercial Union Ins. Co. v. United States, 999 F.2d 581, 584 (D.C.Cir.1993). Because the IRS is an agency of the federal government, no diversity of citizenship exists between the claimants, and the court cannot exercise jurisdiction over the action under § 1335. See Texas v. ICC, 258 U.S. 158, 160, 42 S.Ct. 261, 66 L.Ed. 531 (1922); Commercial Union Ins., 999 F.2d at 584.

This conclusion, however, does not mandate dismissal. In addition to § 1335, interpleader actions may be brought under Federal Rule of Civil Procedure 22, which, unlike its statutory counterpart, permits actions to be premised on a jurisdictional basis other than diversity of citizenship. See FED. R. CIV. P. 22; 7 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 1710, at 590 (3d ed.2001). Jurisdiction exists over a Rule 22 interpleader action if the claimants' potential causes of action against the stakeholder would be subject to the court's jurisdiction under federal law. Bell & Beckwith v. United States, 766 F.2d 910, 912-13 (6th Cir.1985) ("In interpleader actions as in declaratory judgment actions, federal question jurisdiction exists if such jurisdiction would have existed in a coercive action by the defendant."); accord Commercial Nat'l Bank of Chi. v. Demos, 18 F.3d 485, 488-89 (7th Cir.1994); Commercial Union, 999 F.2d at 585; Morongo Band of Mission Indians v. Cal. State Bd., 858 F.2d 1376, 1384 (9th Cir.1988); Home Corp. v. deLone, No. Civ. A. 96-7672, 1997 WL 214849, at *4 n. 11 (E.D.Pa. Apr.23, 1997). In this case, defendants' potential causes of action against plaintiff — actually asserted as counterclaims — arise under the Internal Revenue Code and ERISA. See 26 U.S.C. § 7403; 29 U.S.C. § 1132(a)(1)(B). These claims are subject to the district court's jurisdiction under 26 U.S.C. § 7402, which grants jurisdiction over claims by the United States to enforce the Internal Revenue Code, and 28 U.S.C. § 1331, which permits jurisdiction over claims by beneficiaries to recover benefits under ERISA. See 26 U.S.C. § 7402; 28 U.S.C. § 1331. Thus, the court will construe this action as one arising under Federal Rule of Civil Procedure 22 and exercise jurisdiction over plaintiffs claims. See St. Louis Union Trust Co. v. Stone, 570 F.2d 833, 835-36 (8th Cir.1978) (holding that district court could exercise jurisdiction over Rule 22 interpleader action brought by trust company to resolve claims by beneficiary of entitlement to benefits on which the IRS asserted a tax lien); see also 28 U.S.C. § 2410 ("[T]he United States may be named a party in any civil action or suit in any district court .. of interpleader or in the nature of interpleader with respect to ... property on which the United States has or claims a ... lien.").

III. Summary Judgment

A. Standard of Review

Federal Rule of Civil Procedure 56 permits the entry of summary judgment against a party on an issue or a claim when "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(e); see also Saldana v. Kmart Corp., 260 F.3d 228, 231-32 (3d Cir.2001). In resolving a motion for summary judgment, courts should not weigh conflicting evidence or make factual findings but, rather, should "consider all evidence in the light most favorable to the non-moving party" to determine whether "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Schnall v. Amboy Nat'l Bank, 279 F.3d 205, 209 (3d Cir.2002). Summary judgment is appropriate when a party "fails to make a showing sufficient to establish the existence of an...