Pac. Bells, LLC v. Inslee
| Decision Date | 21 April 2022 |
| Docket Number | C21-1515 TSZ |
| Citation | 600 F.Supp.3d 1149 |
| Parties | PACIFIC BELLS, LLC ; Brunswikst., LLC ; Wow Distributing, Inc.; Melissa Johnston; Lena Madden; Judi Chapman; Katherine Solan; John Edmundson ; and Mike Lindbo, on their own behalf and on behalf of similarly situated entities or persons, Plaintiffs, v. Jay INSLEE, Governor of the State of Washington; Cami Feek, Commissioner of the Washington Employment Security Department; Jilma Meneses, Secretary of the Washington Department of Social and Health Services; and the Long-Term Services and Supports Trust Fund, Defendants. |
| Court | U.S. District Court — Western District of Washington |
Christine Hawkins, Davis Wright Tremaine, Bellevue, WA, Richard J. Birmingham, Davis Wright Tremaine, Seattle, WA, Brent Hamilton, Wm., Jr., Davis Wright Tremaine, Portland, OR, for Plaintiffs.
Daniel J. Judge, William McGinty, Meha Goyal, Washington State Attorney General's Office, Olympia, WA, Jacob William Dishion, Attorney General's Office (LIC), Seattle, WA, for Defendants.
On November 9, 2021, plaintiffs commenced this class action to challenge the validity of RCW Chapter 50B.04, the statute creating the Long-Term Services and Supports ("LTSS") Trust Program, also known as "WA Cares." See Compl. (docket no. 1); see also https://wacaresfund.wa.gov. In adopting WA Cares, Washington became the first state in the nation to enact a long-term care ("LTC") benefit program that is independent of Medicaid. See Foutch Decl. at ¶ 18 (docket no. 25); Ex. A to Birmingham Decl. (docket no. 21-1 at 2). Plaintiffs assert the following four claims: (1) WA Cares2 is preempted by the Employee Retirement Income Security Act ("ERISA"); (2) WA Cares violates ERISA, as well as the Fourteenth Amendment of the United States Constitution; (3) WA Cares violates ERISA, as well as the Age Discrimination in Employment Act of 1967, as amended by the Older Workers Benefit Protection Act (the "ADEA"); and (4) the LTSS Trust Fund is a multiple employer welfare arrangement, as defined by ERISA, operating without a certificate of authority, and "the forfeiture provisions [of WA Cares], the offering of impermissible benefits, and the setting of premiums based on income violate ERISA," as well as defendants’ "fiduciary duties under ERISA and at common law, and insurance law." Compl. at ¶¶ 7.1–7.8.3
Defendants have brought a motion, docket no. 17, seeking to dismiss each of the claims for lack of subject-matter jurisdiction. For the reasons set forth in this Order, the Court concludes it does not have jurisdiction for two reasons. First, WA Cares is not governed or preempted4 by ERISA, as alleged by plaintiffs, and thus ERISA does not confer jurisdiction on the Court. Second, the Court lacks jurisdiction by operation of the Tax Injunction Act, which provides that the Court may not "enjoin, suspend or restrain the assessment, levy or collection of any tax under State law," if "a plain, speedy and efficient remedy may be had in the courts of such State," 28 U.S.C. § 1341. The Court is persuaded that the challenged WA Cares premium constitutes a tax, and the Tax Injunction Act "drastically" limits federal district court jurisdiction "to interfere with so important a local concern as the collection of taxes." Rosewell v. LaSalle Nat'l Bank , 450 U.S. 503, 522, 101 S.Ct. 1221, 67 L.Ed.2d 464 (1981). As a result, the Court cannot consider the merits of plaintiffs’ claims and must dismiss this action without prejudice. Any legal challenge to WA Cares must be brought in state court.
Pursuant to Federal Rule of Civil Procedure 12(b)(1), defendants present a facial, rather than a factual, jurisdictional challenge. A facial attack asserts that the allegations of the complaint are insufficient on their face to invoke federal jurisdiction. See Safe Air for Everyone v. Meyer , 373 F.3d 1035, 1039 (9th Cir. 2004). With respect to a facial jurisdictional challenge, a plaintiff is entitled to the same safeguards that apply to a Rule 12(b)(6) motion to dismiss for failure to state a claim. See Friends of Roeding Park v. City of Fresno , 848 F. Supp. 2d 1152, 1159 (E.D. Cal. 2012). The allegations of the complaint are presumed to be true, id. , and the Court may not consider matters outside the pleading without converting the motion into one for summary judgment, see White v. Lee , 227 F.3d 1214, 1242 (9th Cir. 2000). A federal court is presumed to lack jurisdiction in a particular matter unless a contrary showing is made, see Friends of Roeding Park , 848 F. Supp. 2d at 1159 (citing Gen. Atomic Co. v. United Nuclear Corp. , 655 F.2d 968, 968–69 (9th Cir. 1981) ), and plaintiffs bear the burden of establishing that the Court has subject-matter jurisdiction, see Nat'l Wildlife Fed'n v. Johanns , No. C04-2169, 2005 WL 1189583, at *4 (W.D. Wash. May 19, 2005).
Relying solely on ERISA,5 plaintiffs assert that the Court has federal-question subject-matter jurisdiction. See Compl. at ¶ 2.1; see also 28 U.S.C. § 1331. ERISA § 502(e)(1), codified at 29 U.S.C. § 1132(e)(1), confers on federal district courts "exclusive jurisdiction of civil actions" under Subchapter I of ERISA, except for claims brought under § 502(a)(1)(B), as to which state courts have concurrent jurisdiction. ERISA enumerates the types of claims that may be asserted and the categories of persons who may assert them, and for purposes of the legal theories tendered in this matter, plaintiffs must be either participants or beneficiaries of an "employee benefit plan." See 29 U.S.C. §§ 1132(a)(2)–(3) ; see also 29 U.S.C. §§ 1002(7) – (8). In moving to dismiss, defendants did not raise the issue of whether plaintiffs can, as a matter of law, establish that WA Cares constitutes an "employee benefit plan" as to which they are participants or beneficiaries. Because the question relates to the Court's jurisdiction, the parties were directed to provide additional briefing, and counsel were afforded an opportunity to present oral argument on the topic.
ERISA applies to "any employee benefit plan if it is established or maintained -- (1) by any employer engaged in commerce or in any industry or activity affecting commerce; or (2) by any employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce; or (3) by both." 29 U.S.C. § 1003(a) (emphasis added); see also 29 U.S.C. §§ 1002(1) – (3) (). WA Cares is a creation of the Washington Legislature, which, in this context, is neither an employer nor an employee organization as defined by ERISA. See 29 U.S.C. §§ 1002(4) – (5) (defining "employee organization" and "employer"); see also Howard Jarvis Taxpayers Ass'n v. Cal. Secure Choice Ret. Sav. Program , 997 F.3d 848, 859–60 (9th Cir. 2021). Because WA Cares is not "established or maintained" by an employer and/or employee organization, it is not an "employee benefit plan" and it is not governed by ERISA. See Howard Jarvis , 997 F.3d at 859–63.
Plaintiffs attempt to distinguish Howard Jarvis , arguing that employees of the State of California were not required to participate in the state-managed retirement savings plan challenged in that case, but employees of the State of Washington will be subject to the premiums related to WA Cares. Plaintiffs reason that, because WA Cares will impact state employees, as well as employees of private entities, the Washington Legislature operated as an "employer," within the meaning of ERISA, in establishing WA Cares. Plaintiffs further contend that, because WA Cares will extend benefits to more than a de minimis number of private employees, WA Cares cannot qualify as a "governmental plan" that is exempt from ERISA pursuant to 29 U.S.C. § 1003(b)(1). Plaintiffs’ creative contentions have no merit.
WA Cares is designed to assess premiums and offer LTC benefits regardless of whether a person is employed by the State of Washington. For example, an individual might begin working for the State prior to July 2023, when WA Cares premiums will become due, but then shift to the private sector and retire in July 2033; such person will have paid WA Cares premiums for ten years and will be eligible for LTC benefits if needed,6 even though he or she was not employed by the State during the latter years of the standard vesting period. Thus, unlike when a state acts in its capacity as an employer in offering health and/or pension plans that extend or accrue benefits only while individuals are employed by the state, the State of Washington enacted WA Cares in its role as sovereign. Contrary to plaintiffs’ assertion, ERISA does not provide the Court with jurisdiction in this matter.
The Tax Injunction Act "has its roots in equity practice, in principles of federalism, and in recognition of the imperative need of a State to administer its own fiscal operations." Rosewell , 450 U.S. at 522, 101 S.Ct. 1221 (quoting Tully v. Griffin, Inc. , 429 U.S. 68, 73, 97 S.Ct. 219, 50 L.Ed.2d 227 (1976) ). The latter consideration was "the principal motivating force" behind the Tax Injunction Act. Id. When Congress passed the Tax Injunction Act, it "knew that state tax systems commonly provided for payment of taxes under protest with subsequent refund as their exclusive remedy." Id. at 523, 101 S.Ct. 1221. This protocol for challenging the validity of a tax law and/or its specific application allows "the States and their various agencies to survive while long-drawn-out tax litigation is in progress." Id. (quoting S. Rep. No. 75-1035, at 1 (1937)); see also California v. Grace Brethren Church , 457 U.S. 393, 410, 102 S.Ct. 2498, 73 L.Ed.2d 93 (1982) (...
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