Thiokol Corp. v. Department of Treasury, State of Mich., Revenue Div.

• Decision Date: 03 May 1993
• Docket Number: No. 92-1611,92-1611
• Citation: 987 F.2d 376
• Parties: , 25 Fed.R.Serv.3d 261, 16 Employee Benefits Cas. 1698 THIOKOL CORPORATION; Morton International, Inc., as successors through corporate reorganization to Morton Thiokol, Inc.; and Bee Chemical Company, Plaintiffs-Appellants, v. DEPARTMENT OF TREASURY, STATE of MICHIGAN, REVENUE DIVISION; 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, Robert Bowman, formerly Treasurer of the State of Michigan in his official capacity; and Melvin Van Vorst, former Acting Commissioner of Revenue of the State of Michigan, in his official capacity, Defendants.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 376

987 F.2d 376

61 USLW 2543, 25 Fed.R.Serv.3d 261,

16 Employee Benefits Cas. 1698

THIOKOL CORPORATION; Morton International, Inc., as successors through corporate reorganization to Morton Thiokol, Inc.; and Bee Chemical Company, Plaintiffs-Appellants, v. DEPARTMENT OF TREASURY, STATE of MICHIGAN, REVENUE DIVISION 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 Robert Bowman, formerly Treasurer of the State of Michigan in his official capacity; and Melvin Van Vorst, former Acting Commissioner of Revenue of the State of Michigan, in his official capacity, Defendants.

No. 92-1611.

United States Court of Appeals Sixth Circuit.

Argued Jan. 25, 1993.

Decided March 5, 1993.

Rehearing Denied May 3, 1993.

James H. Geary (argued and briefed), Howard & Howard, Kalamazoo, MI, for plaintiffs-appellants.

Thomas L. Casey, Office of Atty. Gen., Appellate Div., Steven D. Hughey (argued and briefed), Russell E. Prins, Office of the Atty. Gen. of Mich., Lansing, MI, for defendants-appellees.

Before: KENNEDY and GUY, Circuit Judges; and BROWN, Senior Circuit Judge.

KENNEDY, Circuit Judge.

Plaintiffs appeal an order dismissing their complaint in this ERISA action challenging various provisions of the Michigan Tax Code. On January 16, 1990, Thiokol Corporation, Morton International, Inc. and Bee Chemical Company ("plaintiffs"), all Michigan corporations, sued the Revenue Division of the Michigan Department of Treasury, 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") in federal district court. ¹ Under Michigan's Single Business Tax ("SBT"), contributions to employee benefit plans are taxed. Mich.Comp. Laws §§ 208.4(3), 208.9(5). In their complaint, the plaintiffs sought declaratory, injunctive and monetary relief. In count I, plaintiffs sought a declaration that these provisions of the SBT were invalid and preempted by section 514(a) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1144(a). In count II, plaintiffs asked the court to enjoin the collection of taxes based on the payment by employers to employee welfare benefit plans and to prohibit defendants from refusing to honor their refund requests. In count III, plaintiffs requested that taxes that they had allegedly erroneously overpaid, be refunded with interest.

On April 15, 1992, the District Court adopted the magistrate judge's Report and Recommendation, which found that the suit was barred by the Eleventh Amendment and the Tax Injunction Act ("TIA"), 28 U.S.C. § 1341, as the opinion of the court. The District Court ordered that the plaintiffs' motions for partial summary judgment and leave to file a second amended complaint be denied, and that the defendants' motion for dismissal be granted. This timely appeal followed. For the reasons stated below, we affirm in part and reverse in part.

I.

Two jurisdictional issues of first impression in this Circuit are presented in this appeal. The first involves the intersection of ERISA and the TIA; whether the TIA bars ERISA challenges to state taxes in federal court. The second asks whether by passage of ERISA, Congress intended to abrogate the states' immunity guaranteed by the Eleventh Amendment and subject them to ERISA suits in federal court.

A.

The Tax Injunction Act

The TIA provides:

The district courts shall not enjoin, suspend or restrain the assessment, levy or collection of any tax under State law where a plain, speedy and efficient remedy may be had in the courts of such State.

28 U.S.C. § 1341. The TIA reflects "the fundamental principle of comity between federal courts and state governments that is essential to 'Our Federalism,' particularly in the area of state taxation." Fair Assessment in Real Estate Ass'n v. McNary, 454 U.S. 100, 103, 102 S.Ct. 177, 179, 70 L.Ed.2d 271 (1981). This exclusion of federal courts from the state taxation area is so far reaching it precludes federal courts from declaring state tax laws unconstitutional. Id. (citing Great Lakes Dredge & Dock Co. v. Huffman, 319 U.S. 293, 63 S.Ct. 1070, 87 L.Ed. 1407 (1943)). Although the TIA mentions only injunctions, its policy of comity bars declaratory judgment and 42 U.S.C. § 1983 damage actions as well. Id. at 105.

ERISA contains an exclusive federal jurisdiction provision that is also very broad. Section 502(e)(1) provides that:

[T]he district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by the Secretary or by a participant, beneficiary or fiduciary.

29 U.S.C. § 1132(e)(1). This grant of exclusive federal jurisdiction intersects with the TIA's bar of federal jurisdiction and creates the issue in this case.

The issue of whether the TIA bars challenges to state tax laws under ERISA in federal courts was expressly reserved by the Supreme Court in Franchise Tax Board of California v. Construction Laborers Vacation Trust For Southern California, 463 U.S. 1, 20 n. 21, 103 S.Ct. 2841, 2852 n. 21, 77 L.Ed.2d 420 (1983).

We express no opinion, however, whether a party in CLVT's position could sue under ERISA to enjoin or to declare invalid a state tax levy, despite the Tax Injunction Act, 28 U.S.C. § 1341. See California v. Grace Brethren Church, 457 U.S. 393 [102 S.Ct. 2498, 73 L.Ed.2d 93] (1982). To do so, it would have to show either that state law provided no "speedy and efficient remedy" or that Congress intended [section] 502 of ERISA to be an exception to the Tax Injunction Act.

To decide this issue, which is squarely before us, we must first determine whether a "plain, speedy and efficient" remedy exists in the Michigan courts, and then, if necessary, determine whether Congress, in passing ERISA, intended to create an exception to the TIA.

Whether a "plain, speedy and efficient" state remedy exists in this case depends on whether the Michigan courts have jurisdiction to decide plaintiffs' ERISA claims despite ERISA's grant of exclusive federal jurisdiction. If they do not, there is, of course, no state remedy. This Circuit has stated that the statutory grant of exclusive jurisdiction in a particular court strips other courts of their original jurisdiction in all cases covered by the statute. Greater Detroit Resource Recovery Authority v. EPA, 916 F.2d 317, 322 (6th Cir.1990). Similarly, the D.C. Circuit has found it "well settled that ... a statute which vests jurisdiction in a particular court cuts off original jurisdiction in other courts in all cases covered by that statute." Telecommunications Research & Action Center v. FCC, 750 F.2d 70, 77 (D.C.Cir.1984) (citations omitted). See also Mississippi v. Louisiana, --- U.S. ----, 113 S.Ct. 549, 121 L.Ed.2d 466 (1992) (28 U.S.C. § 1251(a), which gives "original and exclusive jurisdiction" over all controversies between the states to the Supreme Court, necessarily denies jurisdiction of such cases to any other federal court). Accordingly, we find that ERISA's express grant of exclusive jurisdiction to the federal courts divests state courts of jurisdiction to hear claims brought under ERISA. Accord E-Systems, Inc. v. Pogue, 929 F.2d 1100, 1102 (5th Cir.), cert. denied, --- U.S. ----, 112 S.Ct. 585, 116 L.Ed.2d 610 (1991). Cf. Shofer v. Hack Co., 970 F.2d 1316, 1319 (4th Cir.1992) (where ERISA claims are within the exclusive jurisdiction of the federal courts, state courts are plainly without jurisdiction); Pension Trust Fund for Operating Engineers v. Triple A Machine Shop, 942 F.2d 1457, 1461 (9th Cir.1991) (because of the exclusive jurisdiction of federal courts over ERISA § 502(a)(3) claims, state court had no jurisdiction to hear these claims). But see Barnes v. E-Systems, Inc., --- U.S. ----, ----, 112 S.Ct. 1, 3, 115 L.Ed.2d 1087 (1991) (Scalia, Circuit Justice) ² ("That is not an inevitable implication, and perhaps not a likely one.").

The lower court recognized that federal courts have exclusive jurisdiction of all cases "brought under" ERISA. It concluded, however, that the instant case merely involved an ERISA issue. It concluded that "the state courts lack jurisdiction to determine ERISA preemption only when the plaintiffs' cause of action falls within the scope of section 502(a) of ERISA, that is, if the action is one by a participant, beneficiary, or fiduciary for relief under ERISA, to enjoin an act or practice violating ERISA, or to obtain other relief enumerated in section 502(a)." It further concluded that all of the plaintiffs' claims fall outside of section 502(a), relying upon Franchise Tax Board, supra. In Franchise Tax Board, the Supreme Court ordered a remand of an action to state court, even though the central issue in the case was ERISA preemption. 463 U.S. at 28, 103 S.Ct. at 2856. However, in Franchise Tax Board, the state had sued CLVT in state court seeking 1) to enforce levies against funds covered by ERISA, and 2) a declaration that such levies were valid in anticipation of the defendant's ERISA preemption defense. The defendants removed the case to federal district court under 28 U.S.C. § 1441. The Court held that under the well-pleaded complaint rule, the case was not removable despite the fact that the federal defense was the only question truly at issue, because the plaintiff's claims did not arise under federal law.

"A suit arises under the law that creates the cause of action." Id. at 8-9, 103 S.Ct. at 2846 (quoting American Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 36 S.Ct. 585, 586, 60 L.Ed. 987 (1916)).

Section 502(a)(3) of ERISA, [29 U.S.C. § 1132(a)(3),] specifically grants trustees of ERISA-covered plans like CLVT a cause of action for injunctive relief when their rights and duties under ERISA are at issue, and that action...