Thiokol Corp., Morton Intern., Inc. v. Roberts

• Decision Date: 23 February 1996
• Docket Number: Nos. 94-1903,M-I,95-1116 and 95-1171,s. 94-1903
• Parties: , 19 Employee Benefits Cas. 2871, Pens. Plan Guide P 23918J THIOKOL CORPORATION, MORTON INTERNATIONAL, INC. (as successors through corporate reorganization to Morton, Thiokol, Inc.) and Bee Chemical Company, Plaintiffs-Appellants, v. Douglas B. ROBERTS, in his official capacity as Treasurer of the State of Michigan, and Thomas M. Hoatlin, in his official capacity as Commissioner of Revenue of the State of Michigan, Defendants-Appellees. AKZO AMERICA, INC., a Delaware corporation, Akzo Chemicals, Inc., a Delaware corporation, Akzo Coatings, Inc., a Delaware corporation, Akzo Salt, Inc., a Delaware corporation, Beecham, Inc. (TN), a Tennessee corporation, Beloit Corp., a Delaware corporation, BOC Group, Inc., a Delaware corporation, BOC Healthcare Inc., a Delaware corporation, Butler Manufacturing Co., a Delaware corporation, Coca Cola Company, a Delaware Corporation, Georgia-Pacific Corp., a Georgia corporation, Hanischfeger Corp., a Delaware Corporation, Jefferson Smurfit Corp., a Delaware Corporation, Kroger Co., an Ohio Corporation,Drilling Fluids Co., a Texas partnership, May Department Stores Co., a New York corporation, Miles, Inc., an Indiana corporation, Quaker Chemical Corp., a Pennsylvania corporation, Sears Roebuck and Co., a New York Corporation, Timken Company, an Ohio corporation, UpJohn Corporation, a Delaware corporation, and W.R. Grace & Co., a Connecticut corporation, Plaintiffs-Appellees/Cross-Appellants, v. REVENUE DIVISION, DEPARTMENT OF TREASURY, STATE OF MICHIGAN; Douglas B. Roberts, in his official capacity as Treasurer of the State of Michigan; and Thomas M. Hoatlin, in his official capacity as Commissioner of Revenue of the State of Michigan, Defendants-Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 751

76 F.3d 751

64 USLW 2558, 19 Employee Benefits Cas. 2871,

Pens. Plan Guide P 23918J

THIOKOL CORPORATION, MORTON INTERNATIONAL, INC. (as

successors through corporate reorganization to

Morton, Thiokol, Inc.) and Bee Chemical

Company, Plaintiffs-Appellants, v. Douglas B. ROBERTS, in his official capacity as Treasurer of

the State of Michigan, and Thomas M. Hoatlin, in his

official capacity as Commissioner of Revenue of the State of

Michigan, Defendants-Appellees.

AKZO AMERICA, INC., a Delaware corporation, Akzo Chemicals,

Inc., a Delaware corporation, Akzo Coatings, Inc., a

Delaware corporation, Akzo Salt, Inc., a Delaware

corporation, Beecham, Inc. (TN), a Tennessee corporation,

Beloit Corp., a Delaware corporation, BOC Group, Inc., a

Delaware corporation, BOC Healthcare Inc., a Delaware

corporation, Butler Manufacturing Co., a Delaware

corporation, Coca Cola Company, a Delaware Corporation,

Georgia-Pacific Corp., a Georgia corporation, Hanischfeger

Corp., a Delaware Corporation, Jefferson Smurfit Corp., a

Delaware Corporation, Kroger Co., an Ohio Corporation, M-I

Drilling Fluids Co., a Texas partnership, May Department

Stores Co., a New York corporation, Miles, Inc., an Indiana

corporation, Quaker Chemical Corp., a Pennsylvania

corporation, Sears Roebuck and Co., a New York Corporation,

Timken Company, an Ohio corporation, UpJohn Corporation, a

Delaware corporation, and W.R. Grace & Co., a Connecticut

corporation, Plaintiffs-Appellees/Cross-Appellants, v. REVENUE DIVISION, DEPARTMENT OF TREASURY, STATE OF MICHIGAN;

Douglas B. Roberts, in his official capacity as Treasurer

of the State of Michigan; and Thomas M. Hoatlin, in his

official capacity as Commissioner of Revenue of the State of

Michigan, Defendants-Appellants, Cross-Appellees.

Nos. 94-1903, 95-1116 and 95-1171.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 4, 1995.

Decided Feb. 23, 1996.

Patrick R. Van Tiflin (argued and briefed), Howard & Howard, Lansing, MI, for Thiokol Corp., Bee Chemical Co.

Richard R. Roesch, Office of Atty. Gen. of Michigan, Lansing, MI, for Department of Treasury, State of Mich., Revenue Div.

Michael R. Bell, Office of Atty. Gen. of Mich., Daniel M. Greenberg (argued and briefed), Lansing, MI, for Douglas B. Roberts, Thomas M. Hoatlin.

James H. Geary, Patrick R. Van Tiflin (argued and briefed), Michele L. Halloran (briefed), Howard & Howard, Lansing, MI, for Akzo America, Inc., Akzo Chemicals, Akzo Coatings, Inc.

Russell E. Prins, Michael R. Bell (briefed), Office of Atty. Gen. of Michigan, Daniel M. Greenberg (argued), Lansing, MI, for Department of Treasury, State of Mich., for Douglas B. Roberts, Thomas M. Hoatlin.

Before: BROWN, KENNEDY, and GUY, Circuit Judges.

KENNEDY, Circuit Judge.

In this consolidated appeal from divergent District Court opinions, we are required to decide whether § 514(a) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1144(a), pre-empts the Michigan Single Business Tax, Mich.Comp.Laws Ann. § 208.1 et seq (West 1986 & Supp.1995). Michigan's Single Business Tax ("SBT") requires taxpayers doing business in Michigan to include within their tax base all compensation, including payments to employee benefit plans covered by ERISA. In Thiokol Corp. et al. v. Roberts, 858 F.Supp. 674 (W.D.Mich.1994) (94-1903), the District Court found that ERISA did not pre-empt the SBT. In Akzo America, Inc. et al. v. Michigan Dep't of Treasury, No. 4:93-CV-101, 1995 WL 44043 (W.D.Mich. Jan.13, 1995) (95-1116), the District Court found that ERISA did pre-empt the SBT. We conclude that ERISA does not pre-empt the SBT, and shall reverse in 95-1116 and affirm in 94-1903.

We also affirm the District Court's ruling in Akzo America, Inc. et al. v. Michigan Dep't of Treasury, No. 4:93-CV-101, 1995 WL 44043 (W.D.Mich. Jan.13, 1995) (95-1171), that Michigan's 90-day statute of limitations for filing a refund request on the grounds that a tax violates the federal constitution, Mich.Comp.Laws Ann. § 205.27a(6) (West Supp.1995), is not pre-empted by ERISA. Yet we reverse the District Court's holding that this statute of limitations does not violate equal protection or due process, for it lacked jurisdiction to decide these issues.

I

Michigan's SBT levies a 2.35 percent tax on businesses' adjusted tax base. The SBT defines the tax base as the sum of a business's compensation to officers and employees, depreciation, interest payments, and profits. The compensation prong of the tax base is based on certain adjustments made to taxable income as defined under the Internal Revenue Code. The SBT includes within the definition of compensation employers' payments to retirement and health benefit plans. ¹

Thiokol Corporation and AKZO America, Inc. are corporations doing business in Michigan. Each corporation sponsors employee benefit plans governed by ERISA and files Michigan SBT returns. Each corporation brought an action in federal court seeking, inter alia, declaratory relief in the form of an order finding Michigan's SBT pre-empted by ERISA.

The District Court in Thiokol held that because Michigan's SBT has only a tenuous connection with a covered plan, it was not pre-empted by ERISA. It also held that the SBT's mere reference to such plans was insufficient to justify pre-emption absent an effect that was more than tenuous, remote, or peripheral. In doing so, the District Court in Thiokol held that District of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125, 113 S.Ct. 580, 121 L.Ed.2d 513 (1992) did not require pre-emption solely on the basis of a reference to contributions to a covered plan.

In contrast, the District Court in Akzo held that under Greater Washington, once a statute contains any reference to ERISA or to a covered plan it is thereby pre-empted. Having found that Michigan's SBT contained a reference to covered plans, and that Greater Washington obviated the need to analyze whether the SBT had more than a tenuous, remote, or peripheral effect on a covered plan, the District Court in Akzo held that Michigan's SBT was pre-empted. We review both District Court's grants of summary judgment de novo. City Mgmt. Corp. v. United States Chem. Co., 43 F.3d 244, 250 (6th Cir.1994).

The District Court in Akzo also held that ERISA did not pre-empt Mich.Comp.Laws Ann. § 205.27a(6) (West Supp.1995), which imposes a 90-day statute of limitations on claims for refunds based on a taxpayer's challenge to the constitutionality of a state tax law. It also held that this statute of limitations does not violate the federal constitutional guarantees of due process and equal protection.

II

ERISA supersedes state laws that "relate to any employee benefit plan" covered by ERISA, and the Supreme Court has noted that "Congress used the words 'relate to' in § 514(a) in their broad sense." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983). "A law 'relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." Id. at 96-97, 103 S.Ct. at 2900. Moreover, a law that refers to or has an connection with an employee plan covered by ERISA is pre-empted "even if the law is not specifically designed to affect such plans, or the effect is only indirect, and even if the law is consistent with ERISA's substantive requirements." District of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125, 130, 113 S.Ct. 580, 583, 121 L.Ed.2d 513 (1992) (citations and internal quotations omitted). Nevertheless, the Supreme Court has carved out an exception that saves from pre-emption those state laws that "affect employee benefit plans in too tenuous, remote or peripheral a manner to warrant a finding that the law 'relates to' the plan." Shaw, 463 U.S. at 100 n. 21, 103 S.Ct. at 2901 n. 21. In the footnote raising this exception, the Court acknowledged the difficulty of determining what state laws fit within this narrow exception. Id. Nevertheless, the Supreme Court has continued to cite this footnote and has thus recognized the continuing viability of the Shaw exception. See Greater Washington, 506 U.S. at 130 n. 1, 113 S.Ct. at 583 n. 1; New York Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., --- U.S. ----, ----, 115 S.Ct. 1671, 1680, 131 L.Ed.2d 695 (1995), citing Greater Washington, 506 U.S. at 130 n. 1, 113 S.Ct. at 583 n. 1.

We begin by considering whether the SBT falls within the Shaw exception for state laws that have only a "tenuous, remote or peripheral" effect on a plan covered by ERISA. In Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550 (6th Cir.1987), we considered whether a statute that, like Michigan's SBT, used ERISA plan contributions to calculate the tax base, had more than a tenuous, remote, or peripheral effect on a covered plan. The municipal income tax at issue in Firestone imposed a two percent tax on income from work done within Akron, Ohio, and it defined income to include amounts employees contributed to health and savings plans covered by ERISA. ² In holding that Akron's income tax was not pre-empted, we considered three factors: whether the tax constituted a traditional exercise of state authority; whether it affected relations among the principal ERISA entities--the employer, the plan, the plan fiduciaries, and the beneficiaries--or relations between one of these entities and an outside party; and whether it had any more than a tenuous or peripheral effect on a covered plan. Firestone, 810 F.2d at 555-56.

Applying the Firestone factors to the Michigan SBT, we find that the SBT has, at most, a tenuous, remote, or peripheral effect on an ERISA plan. First, the Michigan SBT falls within an area of traditional state regulation. Although as we noted in Firestone, a state law's status as a tax is not dispositive on the issue of whether the law escapes pre-emption, see id. at 555-56, we are mindful that federal courts must give due respect to "the fundamental...