General Motors Corp. v. Buha

• Decision Date: 16 June 1980
• Docket Number: No. 78-1175,78-1175
• Citation: 623 F.2d 455
• Parties: GENERAL MOTORS CORPORATION, Plaintiff-Appellee, v. David J. BUHA and James B. Stone, County District Judge, Defendants-Appellants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 455

623 F.2d 455

GENERAL MOTORS CORPORATION, Plaintiff-Appellee, v. David J. BUHA and James B. Stone, County District Judge Defendants-Appellants.

No. 78-1175.

United States Court of Appeals Sixth Circuit.

Argued March 31, 1980.

Decided June 16, 1980.

Perry T. Christy, Christy, Robbins & Gantz, Dearborn, Mich., for defendants-appellants.

David M. Davis, Detroit, Mich., for plaintiff-appellee.

Before WEICK, LIVELY and ENGEL, Circuit Judges.

LIVELY, Circuit Judge.

This appeal requires us to determine whether benefits under a pension plan which is covered by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001 et seq. (1976), are subject to garnishment by a creditor of a plan beneficiary. The appeal is from an order of the district court which permanently enjoined a judgment creditor and a state court judge from enforcing or attempting to enforce a writ of garnishment served on the trustee of a pension plan. General Motors Corporation (GM) sought the injunction as a fiduciary of the plan.

I.

The facts are not in dispute. The defendant Buha obtained a state court judgment against Walter D. Kinsky and his wife in a tort action. When the judgment was not paid Buha instituted post-judgment garnishment procedures. A writ of garnishment was served on the National Bank of Detroit in its capacity as trustee of a General Motors pension fund. When the trustee filed a disclosure indicating no liability to Kinsky, Buha demanded an examination of the garnishee. The matter was set for hearing on November 8, 1977 before the defendant, the Honorable James B. Stone, judge of the 34th judicial district of Michigan.

On November 2, 1977 GM filed the present action in the district court seeking to restrain enforcement of the writ of garnishment. The district court entered a temporary restraining order (TRO) pending hearing on GM's motion for a preliminary injunction. The TRO was entered at 5:40 p. m. on November 2nd without notice to the defendants. In granting the TRO the district court found that GM, as fiduciary of the pension plan, would be prevented from carrying out its lawful duties and responsibilities and "thereby be irreparably damaged and harmed" unless the defendants were immediately restrained. The defendants moved to dissolve the TRO and gave notice for a hearing on November 7th. Following a hearing the district court granted a preliminary injunction upon a finding of irreparable injury virtually identical to the finding which was recited in the TRO. Subsequently, on February 22, 1978, the district court entered a permanent injunction accompanied by an opinion in which it discussed all of the issues raised by the defendants.

II.

Before dealing with the substantive issue in the case we consider several procedural objections raised by the defendants.

A.

The defendants contend the district court had no authority to issue the TRO without notice to them. Rule 65(b), Fed.R.Civ.P., sets forth the conditions under which a TRO may be issued without notice to the adverse parties. It appears that one of these requirements was not met in that the attorney for GM did not certify "to the court in writing the efforts, if any, which have been made to give the notice and the reasons supporting his claim that notice should not be required." Thus it was error for the district court to issue a TRO on the application of GM. However, the TRO was superseded by a preliminary injunction following notice and hearing. No prejudice resulted from entry of the TRO. Though it should not have been entered without compliance with Rule 65(b), in light of subsequent steps we conclude it was harmless error to grant the TRO.

B.

The judge to whom the application for injunctive relief was first presented by GM was disqualified to hear the matter. Upon representation by GM that this action was a "companion case" to an earlier one before Judge Ralph B. Guy, Jr., this action was reassigned to Judge Guy. The defendants contend that the two actions are not companion cases and that the present case should have been reassigned by "blind draw" pursuant to a local court rule of the Eastern District of Michigan. Judge Guy found that the present case and the earlier one before him were "provable by substantially the same evidence" and that judicial economy was served by assigning the present case to him. While the cases were not actually "companion cases," we find no abuse of discretion in his decision to accept assignment of the present case which involved the identical legal issue contained in the earlier case.

C.

The defendants next argue that the district court injunction in the present case violated the federal anti-injunction act, 28 U.S.C. § 2283 (1976), which provides:

A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protect or effectuate its judgments.

The district court found that an injunction in the present case was "expressly authorized by (an) Act of Congress . . . ." This exception to the prohibition against federal courts' enjoining state court proceedings has been discussed in several recent Supreme Court decisions. See Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 97 S.Ct. 2881, 53 L.Ed.2d 1009 (1977), and Mitchum v. Foster, 407 U.S. 225, 92 S.Ct. 2151, 32 L.Ed.2d 705 (1972). The parties agree it is not necessary for an Act of Congress to refer specifically to § 2283 in order to provide an express authorization and that Mitchum, supra, establishes the test for determining whether this exception applies. After ruling out several stricter tests, Justice Stewart wrote, "The test, rather, is whether an Act of Congress, clearly creating a federal right or remedy enforceable in a federal court of equity, could be given its intended scope only by the stay of a state court proceeding." Mitchum, supra, 407 U.S. at 238, 92 S.Ct. at 2160 (citations deleted). The defendants agree that the first prong of this test has been met in ERISA that it confers a uniquely federal right or remedy. However, they contend that the second requirement of the test is not satisfied that ERISA is not an act which "could be given its intended scope only by the stay of a state court proceeding."

The defendants assert that Vendo Co. v. Lektro-Vend Corp., supra, is controlling. In Vendo a plurality of the Court found that Section 16 of the Clayton Act does not come within the "expressly authorized" exception to the anti-injunction act. In reaching this conclusion the Court found that the first part of the Mitchum test was met that the Clayton Act creates a "uniquely federal right or remedy." However, the Court then found that the second prong of the Mitchum test was not met. Emphasizing that § 2283 creates prohibitions that go beyond traditional principles of equity and comity, the Court stated that more is required to establish an exception than the fact that an important federal law is involved. To come within the "expressly authorized" exception "the Act countenancing the federal injunction must necessarily interact with, or focus upon, a state judicial proceeding." 433 U.S. at 640-41, 97 S.Ct. at 2892. Two Justices concurred in the result without adopting the plurality's test as quoted above and four members of the Court dissented.

ERISA was enacted, in part at least, to provide a uniform and systematic framework for regulation of employee benefit plans. It contains a provision for preemption of state laws ¹ and confers exclusive jurisdiction in federal district courts ² for actions by a participant, beneficiary or fiduciary "to enjoin any act or practice which violates any provision of (the subchapter entitled "Protection of Employee Benefit Rights") or the terms of the plan." 29 U.S.C. § 1132(a). Congress sought to establish minimum standards to assure "the equitable character of such plans and their financial soundness" ³ in enacting ERISA. It is central to the statutory scheme that ERISA not be subject to state and local laws which might frustrate its goals. This was emphasized by Representative Dent, Chairman of the Subcommittee on Labor of the House Committee on Education and Labor, who stated:

Finally, I wish to make note of what is to many the crowning achievement of this legislation, the reservation to Federal authority the sole power to regulate the field of employee benefit plans. With the preemption of the field, we round out the protection afforded participants by eliminating the threat of conflicting and inconsistent state and local regulation. 120 Cong.Rec. 29197 (1974).

We conclude that ERISA meets both prongs of the Mitchum test. When a district court finds that an action in a state court will have the effect of making it impossible for a fiduciary of a pension plan to carry out its responsibilities under ERISA, the anti-injunction provisions of § 2283 do not prohibit it from enjoining the state court proceedings. See Marshall v. Chase Manhattan Bank, 558 F.2d 680 (2d Cir. 1977); Senco of Florida, Inc. v. Clark, 473 F.Supp. 902 (M.D.Fla.1979); Cartledge v. Miller, 457 F.Supp. 1146 (S.D.N.Y.1978).

D.

The defendants also maintain that the district court should have abstained even if it is determined that the anti-injunction act does not prohibit an injunction in this case. The defendants argue that considerations of federalism and comity require federal courts not to interfere in state procedures designed to make the judgments of state courts effective. Such considerations must always be weighed carefully by district courts when asked to enjoin state court proceedings. However, the state court proceedings which were enjoined in the present case were not criminal (Younger v. Harris, 401 U.S. 37, 91 S.Ct. 746, 27 L.Ed.2d 669 (1971)) or akin to criminal (Huffman v. Pursue, Ltd., 420 U.S. 592, 95 S.Ct. 1200, 43 L.Ed.2d 482 (1975)) and did not involve the integrity of the...