McCarthy v. Marshall

• Decision Date: 28 December 1983
• Docket Number: No. 83-1189,83-1189
• Citation: 723 F.2d 1034
• Parties: 84-1 USTC P 9141, 4 Employee Benefits Ca 2545 William J. McCARTHY, et al., Plaintiffs, Appellants, v. F. Ray MARSHALL, Secretary of the United States Department of Labor, et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 1034

723 F.2d 1034

84-1 USTC P 9141, 4 Employee Benefits Ca 2545

William J. McCARTHY, et al., Plaintiffs, Appellants, v. F. Ray MARSHALL, Secretary of the United States Department of Labor, et al., Defendants, Appellees.

No. 83-1189.

United States Court of Appeals First Circuit.

Argued Sept. 16, 1983.

Decided Dec. 28, 1983.

Gabriel O. Dumont, Jr., with whom James T. Grady, and Grady, Dumont & Dwyer, Boston, Mass., were on brief, for plaintiffs, appellants.

Michael J. Roach, Atty., Tax Div., Dept. of Justice, with whom Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup, Carleton D. Powell, Attys., Tax Div., Dept. of Justice, Washington, D.C., and William F. Weld, U.S. Atty., Boston, Mass., were on brief, for defendants, appellees.

Before BOWNES, Circuit Judge, and ALDRICH and COWEN ^*, Senior Circuit Judges.

COWEN, Senior Circuit Judge.

Appellants, trustees of the New England Teamsters and Trucking Industry Pension Fund (fund), appeal from an order of the district court which granted the appellee's (government's) motion to dismiss for lack of jurisdiction. Appellants instituted this action seeking a declaration as to the meaning and application of certain sections of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. Secs. 1001, et seq. In particular, they sought a declaration as to the legality of the regulations issued by the Secretary of Labor in 29 C.F.R. Sec. 2530.200b-2, whereby the Secretary required pension credit to be given for purposes of benefit accrual for hours worked by employees even where no contribution to the fund was made by employers. At issue in this appeal is whether the district court properly concluded that it lacked jurisdiction to consider appellants' action due to the applicability of the so-called federal tax exception to the Declaratory Judgment Act, 28 U.S.C. Sec. 2201. Appellants contend that (1) Congress did not intend actions such as theirs to be barred under the tax exception, or (2) that notwithstanding the tax implications of the action, the government could under no circumstances prevail on the merits. For the reasons to be set forth, we affirm the judgment of the district court.

I.

At the heart of this litigation is the question whether the New England Teamsters and Trucking Industry Plan (plan) must credit employees, for purposes of benefit accrual, for hours worked during periods for which employers fail to make their required contributions to the fund.

As a multi-employer plan, the plan is funded by employer contributions made under collective bargaining agreements with each of the 33 New England-based Teamsters Union locals. Since its inception in 1958, the plan has required the payment of employer contributions before pension credit is given for purposes of calculating benefit accrual. This practice conflicts squarely with regulations issued by the Secretary of Labor specifying that an employee is entitled to credit, for benefit accrual as well as other pension purposes, for any hours worked "for which an employee is paid, or entitled to payment" without the requirement of actual employer contribution to the fund on the employee's behalf. 29 C.F.R. Sec. 2530.200b-2.

The present controversy over the benefit accrual pension credits began with a letter dated August 31, 1976, from the Department of Labor to the Fund Manager of the plan advising her that the plan provision requiring contributions before credit was granted for purposes of benefit accrual, violated the provisions of ERISA, as well as the above-cited regulation issued pursuant to that statute. Although the Department of Labor contacted the fund regarding disputes resulting from the denial of pension benefits to individuals, the Department took no action to enforce its regulations. Thereafter, on October 6, 1978, in response to the fund's request for an advisory opinion, the Department of Labor reiterated its position that the fund's refusal to grant benefit accrual credit for hours worked by an employee, but for which no contribution was made to the fund by the employer, violated the requirements of ERISA. The advisory opinion indicated that Labor had conferred with the Internal Revenue Service (IRS) before the opinion was issued.

On July 19, 1978, the fund submitted a revised plan to the IRS for its approval, along with a request for a determination as to whether the plan maintained its status as a qualified trust under the Internal Revenue Code (Code). The plan, as restated, continued to require contribution by an employer before benefit accrual credit was to be given. The IRS issued a favorable determination letter on February 26, 1979, thus maintaining the fund's qualified trust tax status. Subsequent to the 1979 favorable determination letter, representatives of the fund and an agent of the IRS communicated about the fund's accrual requirement and the effect it might have on the fund's continued status as a qualified trust. Before any resolution had been reached, the appellants instituted this action on August 30, 1979. After further communication between representatives of the various parties involved, the Secretary of the Treasury informed the fund on August 30, 1982, that the IRS intended to revoke its previous favorable determination letter.

The district court agreed with appellees' contention that the court lacked jurisdiction because of the federal tax exception to the Declaratory Judgment Act, and granted the motion to dismiss.

II.

Under the Declaratory Judgment Act, a federal district court may grant declaratory relief "[i]n a case of actual controversy within its jurisdiction, except with respect to Federal taxes ...." 28 U.S.C. Sec. 2201. This section, of course, neither provides nor denies a jurisdictional basis for actions under federal law, but merely defines the scope of available declaratory relief. The jurisdictional boundaries in tax cases are drawn by the Anti-Injunction Act, 26 U.S.C. Sec. 7421, which provides, with exceptions not relevant here, that "no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is a person against whom such tax was assessed." The Supreme Court has noted that the main purpose of the Anti-Injunction Act is "the protection of the Government's need to assess and collect taxes as expeditiously as possible with a minimum of pre-enforcement judicial interference, 'and to require that the legal right to the disputed sums be determined in a suit for refund.' " Bob Jones University v. Simon, 416 U.S. 725, 736, 94 S.Ct. 2038, 2046, 40 L.Ed.2d 496 (1974), quoting Enochs v. Williams Packing & Navigation Co., 370 U.S. 1, 7, 82 S.Ct. 1125, 1129, 8 L.Ed.2d 292 (1962). The Court also observed that "[t]he congressional antipathy for premature interference with the assessment or collection of any federal tax also extends to declaratory judgments," and that there is no dispute that "the federal tax exception to the Declaratory Judgment Act is at least as broad as the Anti-Injunction Act." Bob Jones University, 416 U.S. at 732 n. 7, 94 S.Ct. at 2044 n. 7.

In determining whether the present case falls within the combined ambit of the Anti-Injunction Act and the tax exception to the Declaratory Judgment Act, we must look at the nature of appellants' claim. If it called in question a specific provision of the Internal Revenue Code, or to a ruling or regulation issued under the Code, the claim would clearly come under the general bars to jurisdiction and declaratory relief at this stage of proceedings. See California v. Regan, 641 F.2d 721, 722 (9th Cir.1981); Investment Annuity, Inc. v. Blumenthal, 609 F.2d 1, 4-5 (D.C.Cir.1979); Ingham v. Hubbell, 462 F.Supp. 59 (S.D.Iowa 1978), aff'd sub nom. Ingham v. Turner, 596 F.2d 315 (8th Cir.1979). Conversely, if jurisdiction were otherwise established and the controversy concerned essentially nontax matters, there would be no question of dismissing the case merely because a decision on the merits might have some collateral tax repercussions.

Here, appellants challenge a regulation initially issued by the Secretary of Labor under Title I of ERISA. While acknowledging the substantial tax implications of their claim, namely, the qualified status of their pension fund under Sec. 401 of the Internal Revenue Code, appellants insist that the special jurisdictional provision in 29 U.S.C. Sec. 1132(k) applies here. That section gives federal district courts jurisdiction over "[s]uits by an administrator, fiduciary, participant, or beneficiary of an employee benefit plan to review a final order of the Secretary [of Labor], to restrain the Secretary from taking any action contrary to the provisions of this Act, or to compel him to take action required under this title." On its face, Sec. 1132(k) does provide a sufficient jurisdictional basis for challenges to the Secretary of Labor's regulations in matters within his exclusive competency such as the prohibited transaction provisions of Title I. See Cutaiar v. Marshall, 590 F.2d 523 (3d Cir.1979).

This case, however, is distinguishable from Cutaiar in the decisive respect that the benefit accrual provisions in question here do not lie within the Secretary of Labor's exclusive competency. Pursuant to the congressional intent, ¹ the White House Reorganization Plan No. 4 of 1978, 5 U.S.C.Supp. II, App. 297-98, transferred to the Secretary of the Treasury express authority to issue regulations, inter alia, under the benefit accrual section, 29 U.S.C. Sec. 1054, and the Secretary of Labor became bound by such Treasury regulations. Id. Secs. 101 & 104. Thus, we conclude that the benefit accrual regulation in issue here, even though initially promulgated by the Secretary of Labor, should be viewed as a Treasury regulation in substance because its subsequent adoption, amendment, and enforcement lies expressly within the authority of the Treasury.

We also...