Appeals court overturns ruling in favor of public employer in pension benefit lawsuit

By Anna Aguillard | Jul 2, 2014

U.S. 5th Circuit Court of Appeals

NEW ORLEANS – In a decision contradictory to its own prior precedents, the U.S. Court of Appeals for the Fifth Circuit concluded that a district court dismissed a suit brought by retired employees seeking pension benefits through the wrong procedural mechanism.

The plaintiffs, approximately 40 former employees of the public Regional Transit Authority (RTA), filed suit against RTA and its operational company Transit Management of Southeast Louisiana Inc. (TMSEL), claiming denial of medical insurance, Medicare premiums, and deductible reimbursements that the Employee Retirement Income Security Act of 1974 (ERISA) protects.

The dispute was further complicated by the varying past of RTA and TMSEL – prior to 1983, the New Orleans transit system was operated by a private company. It was later converted to a publicly held system owned by the RTA after the transfer parties entered into a benefit agreement providing that each transferred employee would continue to receive the same coverage and benefit levels that they received prior to the transfer.

In 2006, plaintiffs aver that RTA and TMSEL stopped providing the pension benefits to retirees. In 2012, plaintiffs filed suit against RTA and TMSEL, alleging that the defendants violated ERISA by altering the pension provision. The defendants filed a motion to dismiss the complaint, arguing that because RTA/TMSEL was exempt from ERISA as a public governmental entity, the federal court lacked subject matter jurisdiction. The district court granted the motion. The plaintiffs appealed.

Rejecting its prior ruling in Shirley v. Maxicare Tex. Inc. suggesting that “’governmental plan’ exemption implicates… that such claims concerning such a plan should be dismissed,” the appeals court relied upon more recent Supreme Court rulings that instruct courts to avoid equating legislative exemptions with judicial jurisdictional limitations.

The Fifth Circuit ruled that because nothing in ERISA’s immediate language clearly deems the “governmental plan” exemption to be a strict jurisdictional limitation, the district court’s immediate dismissal was procedurally incorrect.

The appeals court vacated the district court’s order, and remanded it to be reconsidered through the utilization of the “proper procedural vehicle,” which it defined as “a Rule 12(b)(6) or 56 motion or a trial.”

The case was heard by Judges Patrick Higginbothom, W. Eugene Davis and Catharina Haynes.

Case no. 13-30647.

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