Board of Trustees v. McD Metals, Inc.

Decision Date15 May 1997
Docket NumberC.A. No. 96-1572-A.
Citation964 F.Supp. 1040
PartiesBOARD OF TRUSTEES, SHEET METAL WORKERS' NATIONAL PENSION FUND, et al., Plaintiffs, v. McD METALS, INC., Defendant.
CourtU.S. District Court — Eastern District of Virginia

Brian D. Black, Seth B. Popkin, Edward J. O'Connell, Kristein M. Finney, Office of the General Counsel, Alexandria, VA, for Plaintiffs.

Neal D. Mollen, Zachary D. Fasman, Erin M. Sweeney, Paul, Hastings, Janofsky & Walker, L.L.P., Washington, DC, Mark D. Lansing, Helm, Shapiro, Anito & McCale, P.C., Albany, NY, for Defendant.

MEMORANDUM OPINION

ELLIS, District Judge.

This suit presents the question whether personal jurisdiction over a defendant in an ERISA1 action should be determined on the basis of:

(i) defendant's "national" contacts with the United States as a whole pursuant to the Due Process Clause of the Fifth Amendment; or

(ii) defendant's "minimum" contacts with the forum state pursuant to the Due Process Clause of the Fourteenth Amendment.

Defendant here challenges personal jurisdiction on the ground that it has no contacts with Virginia. For the reasons that follow, this challenge fails: "minimum" contacts with Virginia is not the standard, as personal jurisdiction under ERISA is measured by reference to the Fifth Amendment, not the Fourteenth Amendment.

I

Defendant, McD Metals, Inc. ("McD"), a New York corporation headquartered in Schenectady, is a specialty steel construction firm that designs and installs heating and air conditioning systems for new and renovated commercial buildings. McD's offices and business records are located in upstate New York and all of its employees reside in the Albany-Schenectady region. McD has not designed or installed a heating or air conditioning system outside New York or Massachusetts. McD has never conducted business in Virginia and, except for mailing pension contributions to plaintiffs under preexisting collective bargaining agreements, it has no contacts with the state.

Plaintiffs, the Board of Trustees for the Sheet Metal Workers' Pension Fund ("Trustees"), manage the pension benefit plan for the members of the Sheet Metal Workers' International Association. The Trustees, who are fiduciaries of the pension fund pursuant to ERISA § 3(21)(A), 29 U.S.C. § 1002(21)(A), oversee the union's fund from their office in Alexandria, Virginia.

In June 1982, shortly after incorporating, McD entered into a series of collective bargaining agreements with Local Union No. 83 of the Sheet Metal Workers' Union ("Local 83"). Although the record does not indicate the precise number of McD's unionized employees, McD employs numerous members of Local 83. Pursuant to the terms and conditions of the collective bargaining agreements, McD obligated itself to submit monthly payments to the pension fund on behalf of its unionized employees and to provide monthly remittance reports itemizing the hours worked and wages earned by them.

The collective bargaining agreements did not explicitly cover James W. McDonald, McD's sole owner and president, even though he is a card-carrying union member. Nevertheless, McDonald wished to participate in the pension fund along with McD's unionized employees. To that end, McDonald contacted James McCabe, the Local 83's business manager, who advised him to execute a so-called "special class" agreement, which permits the Trustees to accept pension fund contributions for employees not represented under a collective bargaining accord. Thus, on December 20, 1982, McDonald, on behalf of McD, executed a special class agreement, entitled "The Sheet Metal Workers National Pension Fund Standard Form of Participation Agreement for Employers that Have Agreed to Contribute on Behalf of their Non-bargaining Unit Employers." Thereafter, McD submitted payments on McDonald's behalf to the pension fund.

In December 1990, the Trustees, by letter and telephone, advised McD that the special class agreement obligated it to contribute to the pension fund on behalf of all non-bargaining unit employees, not just McDonald. In response, McDonald contacted John Herrewyn, the Local 83's president, seeking a clarification of the Trustees' interpretation of the special class agreement. Herrewyn, in turn, sent a letter to the Trustees requesting information concerning McD's options in light of their expansive construction of the agreement. The Trustees did not respond to Herrewyn's inquiry. As a consequence, McD continued to submit pension payments solely on behalf of McDonald and McD's unionized employees.

In May 1995, the Trustees terminated the special class agreement. Then, on October 31, 1996, the Trustees filed this action, seeking an award of McD's purportedly delinquent pension fund contributions, interest, and liquidated damages. Specifically, the Trustees allege that McD failed to tender payments to the pension fund for all of its nonbargaining unit employees and to provide complete remittance reports. Further, the Trustees seek an audit of McD's wage, payroll, and personnel records for the purpose of establishing the precise measure of unpaid benefits.

On March 21, 1997, McD filed a motion to dismiss for lack of personal jurisdiction pursuant to Rule 12(b)(2), Fed.R.Civ.P. The Court heard oral argument and denied the motion.2 Board of Trustees, Sheet Metal Workers' National Pension Fund v. McD Metals, Inc., C.A. No. 96-1572-A (Order, April 21, 1997). This Memorandum Opinion elaborates on the Court's bench ruling.

II

McD contends that its contacts with the Commonwealth of Virginia are insufficient to comport either with Virginia's longarm statute, Virginia Code § 8.01-328.1, or the Fourteenth Amendment's due process requirements. The Trustees counter that McD applies the wrong standard. Specifically, the Trustees contend that because they sued McD under ERISA, a federal statute which authorizes nationwide service of process, Virginia's long-arm statute and the Fourteenth Amendment are wholly inapposite and that it is the Fifth Amendment that applies and permits personal jurisdiction on the basis of McD's "national" contacts. Settled authority supports the Board's contention.

When personal jurisdiction is properly challenged by motion under Rule 12(b)(2), Fed.R.Civ.P., a plaintiff bears the burden "to prove grounds for jurisdiction by a preponderance of the evidence." Mylan Laboratories, Inc. v. Akzo, N.V., 2 F.3d 56, 59-60 (4th Cir.1993). Yet, where, as here, such a motion is decided without an evidentiary hearing, "plaintiff need prove only a prima facie case of personal jurisdiction." Combs v. Bakker, 886 F.2d 673, 676 (4th Cir.1989). And, in deciding whether a plaintiff has proven a prima facie case, "the district court must draw all reasonable inferences arising from the proof, and resolve all factual disputes, in the plaintiff's favor." Id.; Wolf v. Richmond County Hosp. Auth., 745 F.2d 904, 908 (4th Cir.1984), cert. denied, 474 U.S. 826, 106 S.Ct. 83, 88 L.Ed.2d 68 (1985).

To exercise personal jurisdiction over a non-resident defendant in a federal question case, a federal court must: (i) initially establish whether defendant is amenable to service of summons under an applicable statute or rule; and (ii) then determine if that service comports with the Fifth Amendment due process principles.3 In other words, personal jurisdiction analysis in federal question cases calls for a two step inquiry. The first step is to determine whether a defendant is amendable to service under Rule 4(e), Fed. R.Civ.P. The second step requires a determination whether the exercise of personal jurisdiction in the circumstances is consistent with the Due Process Clause of the Fifth Amendment.

Several subsidiary principles guide a federal court in this two step process. With respect to the first step, "[b]efore a federal court may exercise personal jurisdiction over a defendant, the procedural requirement of service of summons must be satisfied." Omni Capital Int'l v. Rudolf Wolff & Co., Ltd., 484 U.S. 97, 104, 108 S.Ct. 404, 409, 98 L.Ed.2d 415 (1987). Rule 4, Fed.R.Civ.P., governs the service of summons in the federal courts. United Elec., Radio and Mach. Workers of Amer. v. 163 Pleasant Street Corp., 960 F.2d 1080, 1085 (1st Cir.1992). Unless otherwise provided by an applicable federal statute, a federal court must adhere to the methods prescribed by a rule of the state where it sits to determine whether a defendant is amenable to service of process. See Rule 4(e), Fed.R.Civ.P.4 Thus, for service of process, Rule 4 requires that a federal court must look first to any applicable federal law providing for service of process and, in the absence of such a law, to the long-arm statute of the state in which the court sits. Omni Capital, 484 U.S. at 105, 108 S.Ct. at 410.5

With respect to the second, constitutional step, it is the Fifth Amendment, not the Fourteenth Amendment, that controls due process analysis in non-diversity, or federal question, cases.6 Generally, the due process inquiry under the Fifth Amendment is broader than that under the parallel clause of the Fourteenth Amendment. Thus, whereas the Fourteenth Amendment dictates that a defendant have sufficient "minimum" contacts with a particular forum state,7 the Fifth Amendment requires only that a defendant have sufficient aggregate contacts with the United States as whole. This latter approach, colloquially referred to as the "national" contacts test,8 makes sense given the differing purposes served by the respective due process clauses of the Fifth and Fourteenth Amendments. The Fourteenth Amendment addresses state sovereignty and federalism concerns not operative under the Fifth Amendment.9

The two step jurisdictional analysis, applied here, compels the conclusion that personal jurisdiction over McD is entirely appropriate in Virginia. Despite the pellucidly clear weight of authority to the contrary, see Omni Capital, 484 U.S. at 105, 108 S.Ct. at 410, McD nonetheless contends...

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