Smith et al v. Regional Transit Authority et al
Filing
86
ORDER & REASONS: granting 73 Defendants' Motion for Summary Judgment; Plaintiffs' federal law claims under ERISA and Section 1983 are DISMISSED WITH PREJUDICE. Plaintiffs' state law claims are DISMISSED without prejudice. Signed by Judge Carl Barbier on 10/23/15. (sek)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
MARY SMITH ET AL.
CIVIL ACTION
VERSUS
NO: 12-3059
REGIONAL TRANSIT
AUTHORITY ET AL.
SECTION: “J”(4)
ORDER & REASONS
Before the Court is a Motion for Summary Judgment (Rec.
Doc. 73) filed by Defendants, the Regional Transit Authority
(“RTA”) and Transit Management of Southeastern Louisiana, Inc.
(“TMSEL”);
an
opposition
thereto
(Rec.
Doc.
80)
filed
by
Plaintiffs; and a reply (Rec. Doc. 83) filed by Defendants. The
motion was set for hearing on September 30, 2015, with oral
argument.
Having
considered
the
motion,
legal
memoranda,
and
arguments of counsel; the record; and the applicable law, the
Court finds that the motion should be GRANTED.
FACTS AND PROCEDURAL BACKGROUND
This litigation arises out of claims asserted under the
Employee Retirement Income Security Act of 1974, 29 U.S.C. §
1001 et seq. ("ERISA"); 42 U.S.C. § 1983 (“Section 1983”); and
Louisiana law. Plaintiffs in this action are approximately forty
former employees of New Orleans Public Service, Inc. (“NOPSI”)
and retirees of TMSEL. On December 31, 2012, Plaintiffs filed
suit
against
Defendants,
alleging
violations
of
ERISA.
(Rec.
Doc.
1.)
Plaintiffs
assert
that
Defendants
wrongfully
denied
them benefits owed to them under their employee welfare benefits
plan (“the Plan”) in violation of 29 U.S.C. § 1132(a)(1)(B).
Specifically,
Plaintiffs
allege
that
Defendants
denied
them
premium-free medical insurance, quarterly Medicare premiums, and
deductible reimbursements as guaranteed by the Plan. Plaintiffs
also
assert
that
Defendants
breached
their
fiduciary
duties
under ERISA in violation of § 1132(a)(2).
On
February
20,
2013,
Defendants
moved
to
dismiss
the
complaint on the grounds that the benefit plan at issue is not
subject to ERISA because it falls within ERISA’s “governmental
plan”
exemption.
argument,
this
Plaintiffs’
(Rec.
Court
claims,
Doc.
12.)
granted
finding
After
the
that
briefing
motion
the
RTA
and
is
a
and
oral
dismissed
political
subdivision, TMSEL is an agency or instrumentality of the RTA,
and the Plan is therefore a governmental plan exempt from ERISA.
(Rec. Doc. 26.) Plaintiffs appealed and, on June 23, 2014, the
United States Court of Appeals for the Fifth Circuit vacated the
judgment
on
Defendants’
procedural
argument
grounds.
that
the
The
Plan
Fifth
was
a
Circuit
held
that
governmental
plan
exempt from ERISA did not raise a jurisdictional question. Smith
v.
Reg'l
Transit
Auth.,
756
F.3d
340,
346
(5th
Cir.
2014).
Therefore, the proper procedural vehicle to raise the question
of whether a purported ERISA plan is a governmental plan is
2
either
Rule
12(b)(6)
or,
if
factual
information
outside
the
pleadings is needed, Rule 56. Id. at 346-47.
Upon
remand,
the
amended
and
restated
action.
On
July
complaint,
Court
complaint
25,
wherein
ordered
setting
forth
Plaintiffs
2014,
they
Plaintiffs
filed
reassert
their
ERISA
to
an
causes
all
file
of
their
claims
amended
and
add
claims for “successor liability” under ERISA, a Section 1983
claim,
and
various
claims
under
Louisiana
law
for
tort
and
contractual causes of action related to Defendants’ conduct in
administering the Plan. (Rec. Doc. 40.) Defendants subsequently
filed
a
motion
for
summary
judgment.
(Rec.
Doc.
41.)
At
Plaintiffs’ request, the parties were granted time to conduct
discovery
necessary
management
of
to
TMSEL.
clarify
(Rec.
Doc.
the
ownership,
55.)
The
funding,
parties
and
agreed
for
discovery to be limited to the year 2006 because that is when
Plaintiffs
benefits
claim
under
instructed
they
the
began
Plan.
Defendants
to
paying
(Rec.
refile
out
Doc.
of
59,
their
pocket
at
2.)
motion
for
their
The
Court
for
summary
judgment upon the completion of discovery.
The parties completed discovery, and Defendants filed the
instant Motion for Summary Judgment (Rec. Doc. 73) on July 8,
2015. Pursuant to the schedule ordered by the Court, Plaintiffs
responded in opposition on July 31, 2015. Defendants replied on
August 6, 2015.
3
Plaintiffs’ amended complaint and the parties’ briefs set
out the following relevant facts. Prior to 1983, the New Orleans
transit system was operated by NOPSI, a private company. (Rec.
Docs. 73-1, at 3; 80, at 2.) In the late 1970s and early 1980s,
the system converted to a publicly held system, owned by the RTA
and operated by TMSEL. (Rec. Docs. 73-1, at 3; 80, at 2.) As a
result of the change in ownership and management, all employees
of NOPSI became employees of TMSEL. (Rec. Docs. 73-1, at 4; 80,
at 2.) At the time the RTA purchased the transit system, NOPSI,
the transit union, and the City of New Orleans had a preexisting
agreement
(“13(c)
Transportation
Act
Agreement”)
of
1964,
pursuant
which
to
provided
the
for
Urban
“fair
Mass
and
equitable arrangements” for employee benefits. (Rec. Doc. 40, at
7.) In March 1983, the RTA and TMSEL, as successors to NOPSI,
agreed that they would continue to provide the same benefits
employees enjoyed under the preexisting 13(c) agreement. (Rec.
Doc. 1-2, at 1.)
In June 1983, the RTA completed the purchase of the transit
system from NOPSI. (Rec. Docs. 40, at 6; 73-1, at 3.) At the
same time, the RTA, TMSEL, and NOPSI entered into an additional
agreement, “The Employee and Retiree Pension and Welfare Benefit
Agreement”
(the
“Benefit
Agreement”)
which
specifically
recognized the RTA and TMSEL's benefit obligations. (Rec. Doc.
1-4.) The RTA became the sponsor of the Plan, and TMSEL became
4
the
administrator.
employee
The
transferred
Benefit
from
Agreement
NOPSI
to
provided
the
RTA
or
that
TMSEL
each
would
continue to receive the same coverage and benefit levels they
received
as
an
employee
of
NOPSI.
Id.
at
2-3.
The
Benefit
Agreement also made the RTA and TMSEL responsible for making any
payments due for any benefits of the former NOPSI employees, and
established
a
funding
structure
to
ensure
that
the
pension
benefits were maintainable. Id. at 4-7.
At the time of the purchase and agreements, the RTA was
considered
a
public
entity—a
“political
subdivision”
of
the
state of Louisiana 1—and TMSEL was a privately owned corporation,
created
in
1983
by
an
agreement
between
the
RTA
and
ATE
Management and Service Company to operate the transit system.
(Rec.
Doc.
Legislature
litigation
21-1,
at
1-2.)
designated
TMSEL
purposes.
See
La.
In
as
2004,
a
Rev.
the
Louisiana
political
Stat.
§
State
subdivision
13:5102.
In
for
2009,
TMSEL ceased operation and management of the transit system, and
no longer provided services to the RTA. (Rec. Docs. 12-3, at 2;
73-5,
at
7.)
From
2009-2012,
the
public
transportation
was
instead operated by a separate private corporation. 2 In 2012, the
RTA became 100% owner of TMSEL. (Rec. Doc. 12-3, at 3.)
1
The RTA was created by state statute on August 1, 1979, and defined as a
“body politic and corporate and a political subdivision of the state of
Louisiana.” La. Rev. Stat. § 48:1654(A).
2
In 2005, the RTA entered into a Cooperate Endeavor Agreement with
Interregional Transit, Inc. (“Interregional”) for the operation of the
5
According
to
Plaintiffs,
from
the
system's
private-to-
public conversion in 1983 until March 2006, the RTA administered
the
Plan
consistent
premium-free
with
medical
the
Benefit
insurance,
life
Agreement:
insurance,
it
provided
supplemental
Medicare payments, and reimbursed Medicare premiums. (Rec. Doc.
40, at 12.) However, Plaintiffs allege that, in March 2006, the
RTA
and/or
deductible
TMSEL
stopped
reimbursements
providing
to
Medicare
retirees
and
premiums
began
and
charging
premiums for medical insurance. Id. Plaintiffs aver they were
originally told the changes were temporary, but that they have
continued until the present day. Id.
the
changes
are
in
violation
of
Plaintiffs contend that
ERISA
or,
alternatively,
Louisiana law, and that they are owed the same welfare benefits
that they received from NOPSI. Id. at 15, 18-21. Plaintiffs also
allege that RTA and/or TMSEL breached their fiduciary duties to
Plaintiffs under ERISA or, alternatively, Louisiana law. Id. at
15-16, 21-23. Lastly, Plaintiffs claim that Defendants violated
their constitutional due process rights. Id. at 18.
LEGAL STANDARD
Summary judgment is appropriate when “the pleadings, the
discovery and disclosure materials on file, and any affidavits
show that there is no genuine issue as to any material fact and
transit system. In 2008, TMSEL entered into an agreement with Veolia
Transportation Services, Inc. (“Veolia”) for a similar purpose. It is unclear
which corporation was operating the system after TMSEL ceased operations in
2009.
6
that the movant is entitled to judgment as a matter of law.”
Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (citing Fed.
R. Civ. P. 56(c)); Little v. Liquid Air Corp., 37 F.3d 1069,
1075 (5th Cir. 1994). When assessing whether a dispute as to any
material fact exists, the Court considers “all of the evidence
in
the
record
but
refrains
from
making
credibility
determinations or weighing the evidence.” Delta & Pine Land Co.
v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir.
2008).
Summary
judgment
is
improper
where
the
court
merely
believes it unlikely that the nonmoving party will prevail at
trial. Nat'l Screen Serv. Corp. v. Poster Exch., Inc., 305 F.2d
647, 651 (5th Cir. 1962). All reasonable inferences are drawn in
favor of the nonmoving party, but a party cannot defeat summary
judgment
with
conclusory
allegations
or
unsubstantiated
assertions. Little, 37 F.3d at 1075. A court ultimately must be
satisfied that “a reasonable jury could not return a verdict for
the nonmoving party.” Delta, 530 F.3d at 399.
If the dispositive issue is one on which the moving party
will bear the burden of proof at trial, the moving party “must
come forward with evidence which would ‘entitle it to a directed
verdict if the evidence went uncontroverted at trial.’” Int’l
Shortstop, Inc. v. Rally’s, Inc., 939 F.2d 1257, 1264-65 (5th
Cir. 1991). The nonmoving party can then defeat the motion by
either
countering
with
sufficient
7
evidence
of
its
own,
or
“showing that the moving party’s evidence is so sheer that it
may not persuade the reasonable fact-finder to return a verdict
in favor of the moving party.” Id. at 1265.
If
the
dispositive
issue
is
one
on
which
the
nonmoving
party will bear the burden of proof at trial, the moving party
may satisfy its burden by merely pointing out that the evidence
in
the
record
is
insufficient
with
respect
to
an
essential
element of the nonmoving party’s claim. See Celotex, 477 U.S. at
325. The burden then shifts to the nonmoving party, who must, by
submitting
showing
or
that
referring
a
genuine
to
evidence,
issue
set
exists.
out
See
specific
id.
at
facts
324.
The
nonmovant may not rest upon the pleadings, but must identify
specific facts that establish a genuine issue for trial. See,
e.g., id. at 325; Little, 37 F.3d at 1075.
PARTIES’ ARGUMENTS AND DISCUSSION
A.
ERISA Governmental Plan Exemption
Defendants contend that Plaintiffs’ claims fail because the
Plan
is
a
Defendants
governmental
plan
assert
for
that
excluded
the
from
purposes
ERISA’s
of
Title
coverage.
I,
ERISA
defines “governmental plan” as a plan established or maintained
for its employees by the government of any State or political
subdivision thereof, or by any agency or instrumentality of any
of the foregoing. Defendants argue that the RTA and TMSEL, the
entities who maintain the Plan, are political subdivisions. In
8
support,
Defendants
subdivision
point
developed
in
to
the
National
definition
Labor
of
Relations
political
Board
v.
Natural Gas Utility District of Hawkins County, Tennessee, 402
U.S. 600 (1971), which interpreted the same term in the National
Labor Relations Act (“NLRA”). Defendants argue that in Hawkins,
the
United
States
Supreme
Court
held
that
"an
entity
is
a
political subdivision if it is either (i) created by the State
so as to constitute a department or administrative arm of the
government,
or
(ii)
administered
by
individuals
who
are
responsible to public officials or the general electorate." Id.
at 604-05. Defendants assert that in this case, both RTA and
TMSEL
are
currently
designated
as
political
subdivisions
by
state statute. Moreover, they contend that the members of RTA
are appointed by public officials. Lastly, they claim that in
2009, TMSEL ceased operations and no longer provided services to
RTA,
and
Therefore,
in
January
Defendants
2012,
assert
RTA
became
that
these
100%
owner
facts
of
TMSEL.
eliminate
any
argument that the Plan is administered by a private corporation.
As such, they contend that this is a governmental plan under
ERISA.
In the alternative, Defendants argue that TMSEL was and is
an agency or instrumentality of the RTA. In support, Defendants
contend that the appropriate test for determining whether an
entity is an agency or instrumentality is the six-factor test
9
provided in the Internal Revenue Code, Revenue Ruling 57-128.
Defendants
argue
that
the
TMSEL
qualifies
as
an
agency
or
instrumentality under this test because its sole purpose was to
manage
RTA’s
the
public
mass
governmental
transit
system
obligations,
it
in
furtherance
carried
out
of
its
the
public
function under the exclusive direction and control of the RTA,
the
RTA
presently
owns
100%
of
TMSEL’s
outstanding
capital
stock, the RTA exercised exclusive control over the managerial
personnel of TMSEL, the Louisiana legislature designated TMSEL a
political subdivision in 2004, and the RTA has been the sole
source of TMSEL’s funding since TMSEL’s inception.
In
response,
Plaintiffs
argue
that
Defendants
have
the
burden of showing that the Plan is a governmental plan exempt
from ERISA and they fail to do so. First, Plaintiffs argue that
Defendants
fail
instrumentality
to
of
demonstrate
RTA.
that
According
to
TMSEL
is
an
Plaintiffs,
agency
this
or
Court
should not apply the six-factor test set forth in IRS Revenue
Ruling
57-128
because
it
is
an
inferior
test
that
was
not
developed in the context of employment-related claims. Instead,
Plaintiffs
contend
relationship”
Corp.,
984
test
F.2d
this
Court
enunciated
1201
(D.C.
should
in
Cir.
apply
the
Alley
v.
1993),
which
“employment
Resolution
Trust
evaluates
the
entity within the context of the employment relationship rather
than
engaging
in
an
all-purpose
10
characterization.
Under
the
employment-relationship test, Plaintiffs argue that TMSEL is not
an
agency
or
relationship
instrumentality
with
Plaintiffs
is
because
TMSEL’s
employment
specially
crafted
as
a
non-
governmental one.
In the alternative, Plaintiffs argue that TMSEL is not an
agency or instrumentality even under the factors set forth in
IRS
Revenue
Ruling
57-128
for
the
following
reasons.
First,
relative to the rights of its employees, TMSEL was created to
avoid any governmental characterization so that the employees’
collective
bargaining
preserved.
Second,
behalf
Metro
of
and
TMSEL
New
other
private
performed
Orleans
its
Transit,
rights
function
Inc.
would
directly
(“Metro”),
be
on
which
utilized TMSEL to satisfy its contractual obligations to RTA.
Third, extensive private interests are involved and, prior to
2012, TMSEL was wholly owned by private companies. Fourth, TMSEL
is an entity separate and apart from RTA, and TMSEL’s board
members
are
elected
by
its
shareholders.
Fifth,
statutory
authority was not necessary to create TMSEL. Sixth, although RTA
funded TMSEL’s operating expenses, RTA was not the employer of
any of TMSEL’s employees.
Second,
Plaintiffs
argue
that
Defendants
fail
to
demonstrate that RTA is a political subdivision. According to
Plaintiffs, the Hawkins test does not apply to transit workers
who have collective bargaining rights under the NLRA. Because
11
the
Hawkins
test
does
not
apply
to
determine
Plaintiffs’
employment rights in the labor relations context, the context in
which the test was conceived, Plaintiffs argue that the test
also cannot apply to define their rights in the ERISA context.
In the alternative, Plaintiffs argue that the RTA is not a
political subdivision even under the Hawkins test. Plaintiffs
contend that the Court in Hawkins considered multiple factors to
assess
whether
sovereign
the
authority
entity
and
in
question
governmental
possessed
control.
indicia
Under
such
of
an
inquiry, Plaintiffs argue that the RTA is a hybrid entity that,
while governmental for some purposes, is not governmental for
ERISA purposes.
In
reply,
misinterpreted
and
Defendants
misstated
argue
the
that
pertinent
Plaintiffs
have
ERISA
law.
case
Furthermore Defendants allege that Plaintiffs have made several
immaterial statements of fact in an effort to defeat summary
judgment and misdirect the Court. First, Defendants contend that
Plaintiffs’ argument that the RTA cannot satisfy the test in
Hawkins is incomprehensible given the undisputed fact that the
RTA was created by the State of Louisiana pursuant to a public
act. Second, Defendants point out that Plaintiffs continue to
rely solely on the employment-relationship test set forth in
Alley and previously rejected by this Court. Defendants maintain
that it is proper for the Court to focus on the status of the
12
entities at issue, as opposed to the employment relationship,
because
federalism
concerns
exist
given
the
involvement
of
state-related entities. Thus, the Court should apply IRS Revenue
Ruling
57-128
to
conclude
that
TMSEL
is
an
there
agency
is
or
instrumentality of RTA.
Moreover,
Defendants
allege
that
no
factual
dispute that the RTA solely funded TMSEL’s operating expenses,
including Plan benefits, since TMSEL’s inception. In addition,
Defendants argue that the RTA exercised substantial control over
TMSEL, such as by controlling appointments of TMSEL’s officers
and key personnel, exercising budgetary control, and providing
all funding to TMSEL, despite the previous ownership of TMSEL’s
stock
by
private
corporations.
For
this
reason,
Defendants
maintain that the ownership of TMSEL’s stock by entities prior
to the RTA’s ownership of TMSEL’s stock does not negate the fact
that
the
RTA
had
substantial
control
over
TMSEL
since
its
inception.
As
an
initial
matter,
the
parties
disagree
about
which
party bears the burden of proof regarding the governmental plan
exemption. In the Fifth Circuit’s opinion, the court held that
the
actual
existence
of
a
plan
covered
by
ERISA
is
not
a
jurisdictional prerequisite, but more properly characterized as
an element of a plaintiff’s claim. Smith, 756 F.3d at 345 & n.5
(citing Dahl v. Charles F. Dahl, M.D., P.C. Defined Ben. Pension
13
Trust, 744 F.3d 623, 629 (10th Cir. 2014) (“[R]ecent Supreme
Court decisions compel the conclusion that the existence of a
benefit plan subject to ERISA is . . . an element of a claim
under ERISA.”); Daft v. Advest, Inc., 658 F.3d 583, 587 (6th
Cir.
2011)
(“[T]he
nonjurisdictional
Accordingly,
the
existence
element
case
of
law
of
an
ERISA
Plaintiffs'
supports
plan
ERISA
Defendants’
is
a
claim.”)).
argument
that
Plaintiffs have the burden of proving the actual existence of a
plan covered by ERISA; that is, a plan that does not fall within
the
governmental
plan
exemption.
Plaintiffs
point
to
no
authority to support their contention that Defendants bear the
burden of proof. Even so, the Court need not determine which
party has the burden on this issue, as Defendants have come
forth
with
sufficient
evidence
showing
that
the
Court
Plan
is
is
a
governmental plan.
The
principal
question
before
the
whether
the
benefit plan in this case is a “governmental plan” and therefore
exempt
from
comprehensive
ERISA.
Congress
regulation
of
enacted
employee
ERISA
benefit
to
provide
plans.
Aetna
Health, Inc. v. Davila, 542 U.S. 200, 208 (2004). Under ERISA,
an
employee
benefit
plan
is
defined
as
“any
plan,
fund,
or
program . . . established or maintained by an employer . . . for
the
purpose
of
providing
for
its
participants
or
their
beneficiaries . . . benefits in the event of sickness, accident,
14
disability,
death
or
unemployment.”
29
U.S.C.
§
1002(1).
Although ERISA's scope is expansive, certain types of employee
benefit
Congress
plans
are
decided
excluded
that
any
from
its
employee
coverage.
benefit
Specifically,
plan
that
is
a
“governmental plan” should be excluded from the ERISA framework.
See id. § 1003(b)(1). Title I of ERISA defines a governmental
plan as "a plan established or maintained for its employees by
the Government of the United States, by the government of any
State
or
political
subdivision
thereof,
or
by
any
agency
or
instrumentality of any of the foregoing." Id. § 1002(32). The
Fifth Circuit has explained that the definition of governmental
plan under Title I is disjunctive and, therefore, a plan may be
considered to be a governmental plan where a party can prove
that it was either (1) established by an entity falling within
the confines of the aforementioned definition, or (2) that it is
currently maintained by such an entity. Hightower v. Tex. Hosp.
Ass'n, 65 F.3d 443, 450 (5th Cir. 1995). Defendants have not
argued that the Plan was established by a governmental entity,
but rather than the Plan has been maintained by a governmental
entity. Thus, the Court must determine whether RTA and/or TMSEL
constitute
political
instrumentalities
of
the
subdivisions,
United
political subdivision of either.
15
States,
agencies,
Louisiana,
or
or
any
1.
Political Subdivision
ERISA does not define the term political subdivision. See
Koval v. Wash. Cnty. Redevelopment Auth., 574 F.3d 238, 240 (3rd
Cir.
2009)
political
Circuit
(noting
subdivision).
has
political
that
not
the
Likewise,
directly
subdivision
ERISA
for
it
addressed
the
statute
does
appears
whether
purposes
of
not
that
an
the
entity
ERISA.
The
define
Fifth
is
a
Second
Circuit, Third Circuit, and Seventh Circuit interpret “political
subdivision”
according
to
the
standard
used
in
Hawkins.
See
Koval, 574 F.3d at 241; Shannon v. Shannon, 965 F.2d 542, 547
(7th Cir. 1992); Rose v. Long Island R.R. Pension Plan, 828 F.2d
910, 915-16 (2d Cir. 1987). Additionally, one district court
within the Fifth Circuit has applied the Hawkins test to ERISA.
See Scott v. Unum Life Ins. Co. of Am., No. 09-0922, 2010 WL
114404, at *5 (W.D. La. Jan. 11, 2010).
In Hawkins, the Supreme Court considered whether a utility
district fell within the political subdivision exception to its
jurisdiction under the NLRA. 402 U.S. at
601. Like ERISA, the
NLRA did not define the term "political subdivision," nor did
the legislative history indicate that Congress had considered
its
meaning.
Id.
at
604.
Therefore,
the
Court
adopted
the
criteria typically applied by the National Labor Relations Board
("NLRB") in agency determinations. Specifically, the Court found
that
the
proper
test
considers
16
whether
an
entity
is
either
“created directly by the state, so as to constitute departments
or administrative arms of the government,” or “administered by
individuals who are responsible to public officials or to the
general electorate.” Id. at 604-05. The Court concluded that the
utility district was a political subdivision under this twoprong test. In further support of its decision, the Court noted
that the utility district had the power of eminent domain, was a
public
corporation
property
and
under
revenues
state
were
law,
exempt
and
from
that
all
the
state
district’s
and
local
taxes. Id. at 606-07.
Similarly, in Rose v. Long Island Railroad Pension Plan,
the Second Circuit determined the Metropolitan Transit Authority
was a political subdivision under the Hawkins test. The court
explained
that
"[t]he
NLRB
guidelines
are
a
useful
aid
in
interpreting ERISA's governmental exemption, because ERISA, like
the
National
Labor
Relations
Act,
'represents
an
effort
to
strike an appropriate balance between the interests of employers
and labor organizations.'" Id. (quoting H.R. Rep. No. 522, 1974
U.S. Code Cong. & Ad. News at 4647). Likewise, both the Third
and Seventh Circuits have explained that ERISA's broad concerns
with
balancing
federalism
and
labor
relations
parallel
the
concerns raised by the NLRA and, therefore, make the Hawkins
test the proper test for determining whether an entity is a
political subdivision under ERISA as well. See Koval, 574 F.3d
17
at 241-43; Shannon, 965 F.2d at 547-48. Accordingly, the Court
finds
that
the
Hawkins
test
is
the
appropriate
test
for
determining whether an entity is a political subdivision and
will proceed with that analysis.
The Hawkins test comprises two prongs, only one of which
need be satisfied. The entity is a political subdivision if it
is
“either
(1)
created
directly
by
the
state,
so
as
to
constitute departments or administrative arms of the government,
or (2) administered by individuals who are responsible to public
officials or to the general electorate.” Shannon, 965 F.2d at
548 (quoting Hawkins, 402 U.S. at 604-05). Under this test, it
is clear that the RTA is a political subdivision of Louisiana.
The
RTA,
"a
body
politic
and
a
corporate
and
political
subdivision of the state," was created on August 1, 1979, by
public
act.
See
La.
Rev.
Stat.
§
48:1654.
The
RTA’s
stated
purpose is "to plan, design, lease as lessee, purchase, acquire,
hold,
own,
maintain,
construct,
and
improve,
administer
have
a
an
equity
transit
system
in,
finance,
within
the
metropolitan area." Id. These purposes are for the benefit of
the people of Jefferson, Orleans, St. Bernard, and St. Tammany
parishes (the geographical area in which RTA was created). Thus,
the RTA meets the first prong of the Hawkins test because it was
"created
directly
department[]
or
by
the
state,
administrative
so
arm[]
18
as
of
to
the
constitute
[a]
government."
See
Hawkins, 402 U.S. at 604-05. Therefore, the RTA is a political
subdivision of Louisiana for the purposes of ERISA.
In addition, the RTA meets the second prong of the Hawkins
test. The RTA is administered by a board consisting of "three
members from each participating parish, [who are] appointed by
the
chief
executive
officer
of
that
parish,
subject
to
the
approval of its governing authority” as well as two additional
members who are appointed "by the chief executive officer for
the
parish
revenue."
with
La.
the
Rev.
greatest
Stat.
§
percentage
48:1655.
of
public
These
transit
members
are
recommended by the legislative delegation of each parish. Id.
All members "serve at the pleasure of the appointing authority."
Id.
Thus,
the
RTA
is
"administered
by
individuals
who
are
responsible to public officials or the general electorate." See
Hawkins, 402 U.S. at 604-05. As such, the Court concludes that
the RTA is a political subdivision under either prong of the
disjunctive
Hawkins
test
and
is
therefore
a
political
subdivision under ERISA.
Although Plaintiffs argue that the RTA is not a political
subdivision under the Hawkins test because it lacks the power of
eminent domain, its members are prohibited from holding public
office,
reserved
and
for
it
lacks
the
governmental
full
taxing
entities,
authority
Plaintiffs
typically
fail
to
demonstrate that any of these factors are required to satisfy
19
the two-prong Hawkins test. The factors discussed by Plaintiffs
may be worth noting, but they are not part of the Hawkins test.
See Koval, 574 F.3d at 243-44. As mentioned above, the Hawkins
test comprises two prongs, only one of which need be satisfied.
Here, the RTA satisfies both prongs and is therefore a political
subdivision.
Defendants also argue that TMSEL qualifies as a political
subdivision under the Hawkins test. Because the Court finds that
TMSEL
more
precisely
instrumentality
under
fits
the
ERISA,
description
it
declines
of
to
an
agency
analyze
or
TMSEL’s
status as a political subdivision and makes no conclusion on
that point.
2.
Agency or Instrumentality
ERISA does not define the terms agency or instrumentality.
See
Rose,
828
F.2d
at
917.
The
parties
have
proposed
two
different tests for determining whether an entity is an agency
or instrumentality.
Defendants argue that the appropriate test for determining
whether an entity is an agency or instrumentality is the sixfactor test provided in IRS Revenue Ruling 57-128, which has
been adopted by the Second Circuit. See Rose, 828 F.2d at 91718. In contrast, Plaintiffs assert that the proper test is the
Alley test, which is a three-factor test developed by the D.C.
Circuit. See Alley, 984 F.2d at 1206. Specifically, Plaintiffs
20
argue
that
emphasizes
this
the
three-factor
employment
test
is
appropriate
relationship
between
because
it
entity
in
the
question and its employees. 3 Plaintiffs assert that the leading
Fifth Circuit case addressing governmental plans under ERISA,
Hightower
v.
importance
Texas
of
Hospital
the
Association,
employment
focuses
relationship
on
in
the
making
determinations as to whether a plan is an ERISA plan. 4 Therefore,
Plaintiffs
contend
that
this
test
best
comports
with
Fifth
Circuit case law.
As
case,
this
the
Court
explained
Court
does
in
its
not
previous
disagree
ruling
with
in
this
Plaintiffs’
characterization of the Fifth Circuit’s focus in Hightower on
the
employment
relationship;
however,
it
does
not
find
that
Fifth Circuit precedent requires that the Court apply the Alley
test. Rather, the Revenue Ruling test is more appropriate in the
instant case. See Rose, 828 F.2d at 918 (“Because the IRS is one
of
the
agencies
interpretations
deference.”).
The
charged
of
the
Third
with
administering
statute
Circuit
3
has
are
ERISA,
entitled
similarly
held
to
its
great
that
the
The Alley test, as Plaintiffs characterize it, focuses on the following
factors: (1) if the employee is excluded from the state civil service system;
(2) if the employee is subject to governmental personnel rules and salary
restrictions; and (3) if the employee is allowed to participate in the
pension and welfare plans reserved for civil servants and state employees.
See Alley, 984 F.2d at 1206-07.
4
In particular, Plaintiffs’ argument refers to the fact that when determining
whether a plan’s status had changed under Title IV of ERISA, the court in
Hightower emphasized that the “governmental entity’s status as employer” was
important. 65 F.3d at 448 (quoting Roy v. Teachers Ins. and Annuity Ass’n,
878 F.2d 47, 50 (2d Cir. 1989)).
21
employment-relationship test is inapposite in cases dealing with
a potential state rather than federal government entity. See
Koval, 238 F.3d at 240-41.
In
particular,
the
employment-relationship
Court
test,
notes
the
that
court
in
in
Alley
applying
the
specifically
explained that “a [Revenue Ruling] test focusing broadly on the
extent of governmental contacts may be more appropriate [than
the
employment-relationship
test]
where
state-affiliated
entities are concerned.” Alley, 984 F.2d at 1205-06 n.11. At
multiple points in the opinion, the court in Alley emphasized
that
the
entity
involved
was
affiliated
with
the
federal
government, which did not implicate the same federalism concerns
present
when
considering
entities
affiliated
with
state
governments. Id. As such, the court did not have to address the
federalism
concerns
legislative
history
that
and,
are
prevalent
consequently,
are
throughout
also
the
ERISA’s
primary
reason that the governmental plan exception was created. See,
e.g., Hightower, 65 F.3d at 448 (discussing ERISA’s legislative
history and noting that “Congress was reluctant to interfere
with the administration of public retirement plans due to the
resulting
federalism
implications”);
Rose,
828
F.2d
at
914
(discussing the federalism concerns underlying the governmental
plan provision). In the instant case, such federalism concerns
are present and, therefore, require that the Court look more
22
broadly at the relationship between TMSEL and the state, not
just
the
relationship
between
TMSEL
and
its
employees.
See
Koval, 238 F.3d at 241-42 (finding that the Alley test should
not apply where federalism concerns are implicated). Thus, the
Court finds that the six-factor test set forth in Revenue Ruling
57-128 is the appropriate test for determining whether TMSEL is
an agency or instrumentality of the RTA.
In Revenue Ruling 57-128, the IRS set forth the following
six factors to be considered in determining whether a particular
entity is an agency or instrumentality of a state or political
subdivision:
(1) whether it is used for a governmental purpose and
performs
a
governmental
function;
(2)
whether
performance of its function is on behalf of one or
more states or political subdivisions; (3) whether
there are any private interests involved, or whether
the states or political subdivisions involved have the
powers and interests of an owner; (4) whether control
and supervision of the organization is vested in
public authority or authorities; (5) if express or
implied statutory or other authority is necessary for
the creation and/or use of such an instrumentality,
and whether such authority exists; and (6) the degree
of financial autonomy and the source of its operating
expenses.
Rev. Rul. 57-128, 1957-1 C.B. 311. “One of the most important
factors to be considered . . . is the degree of control that the
[political
subdivision]
has
over
the
organization’s
everyday
operations.” Rev. Rul. 89-49, 1989-1 C.B. 117. 5
5
The IRS refined its six-factor criteria in Revenue Ruling 89-49. The factors
outlined in Revenue Ruling 57-128 and 89-49 are quite similar and compel the
23
Under the six-factor test articulated in Revenue Ruling 57128, TMSEL is either an agency or instrumentality of the RTA.
First, TMSEL was created specifically to manage and operate the
public transportation system in Jefferson, Orleans, St. Bernard,
and St. Tammany parishes. 6 As the Court noted in its analysis of
the RTA, the transportation system is for the benefit of the
public in those parishes and, for this reason, TMSEL is arguably
performing a governmental purpose and function. Moreover, the
Cooperative Endeavor Agreement entered into by the RTA for TMSEL
to operate the transit system expressly declares that operation
of the transit system serves a public purpose. (Rec. Doc. 21-1,
at 9-10.)
Second, TMSEL performs this function specifically on behalf
of the RTA, a political subdivision of Louisiana. As mentioned,
“TMSEL’s mission was basically to provide for the day-to-day
operations of the [RTA].” (Rec. Docs. 73-5, at 5; 80-2, at 34.)
Plaintiffs argue that TMSEL performed its function directly on
same result here. Because the parties briefed the application of the factors
articulated by the IRS in Revenue Ruling 57-128, the Court will focus its
discussion on those six factors.
6
Plaintiffs cite the Cooperative Endeavor Agreement (“CEA”) dated February
25, 2005, between the RTA, Interregional, and TMSEL to support its
proposition that TMSEL was not used for a governmental purpose because
“[r]elative to the rights of its employees,” TMSEL was created so that its
employees’ collective bargaining rights and other private rights under the
NLRA would be preserved. (Rec. Doc. 80, at 16.) However, Plaintiffs’ argument
in this regard is better suited for an employment-relationship test, such as
the test set forth in Alley. Here, the proper focus is on the broad purpose
of TMSEL. As the CEA explains, TMSEL was created specifically to “provide all
management and operational staff for the Transit System.” (Rec. Doc. 21-1, at
5.) TMSEL’s “critical mission” was public transportation (Rec. Doc. 73-5, at
9); that is, “to provide for the day-to-day operations of the [RTA].” (Rec.
Doc. 80-2, at 34.)
24
behalf of its parent companies, such as Metro, which utilized
TMSEL
to
However,
TMSEL
satisfy
its
Plaintiffs
other
than
contractual
point
to
to
operate
no
obligations
other
the
to
function
transit
the
RTA.
performed
system,
which
by
was
ultimately the obligation of the RTA. Although Plaintiffs argue
that TMSEL could not have performed its function on behalf of
the RTA after 2009, as Defendants contend that TMSEL has not
provided services to the RTA since it ceased operations in 2009,
Plaintiffs
function
have
after
not
demonstrated
2009
or
that
that
TMSEL
TMSEL
performed
any
not
performing
its
was
function on behalf of the RTA in March 2006, when Plaintiffs’
causes of action arose.
Third, although there are private interests involved in the
Plan because TMSEL is a private corporation and NOPSI, TMSEL's
predecessor, was also a private corporation, the RTA has the
powers
and
corporation
interests
does
instrumentality
not
of
a
of
an
owner.
prevent
it
political
TMSEL’s
from
being
subdivision.
status
as
a
an
agency
or
See
Wilcox
v.
Terrytown Fifth Dist. Volunteer Fire Dep't, Inc., 897 F.2d 765,
767 (5th Cir. 1990) (holding volunteer fire department, a nonprofit corporation, was an agency of a political subdivision for
purposes
currently
of
Fair
100%
Labor
owned
by
Standards
RTA,
a
Act).
political
Moreover,
TMSEL
subdivision
of
is
the
state. Prior to the RTA’s acquisition of TMSEL’s stock in 2012,
25
the RTA exercised substantial control over TMSEL and was the
sole source of TMSEL’s funding. Accordingly, the RTA currently
has the “powers and interests of an owner,” and at the time
Plaintiffs’ causes of action arose in 2006, the RTA exercised
the powers of an owner.
Fourth,
and
most
importantly,
throughout
its
existence
TMSEL has operated with a high degree of oversight and control
by the RTA. Plaintiffs attempt to create factual issues on this
point by arguing that TMSEL was controlled by its private parent
companies, TMSEL was an independent contractor, audit reports
describe TMSEL as an entity separate from the RTA, and TMSEL is
not subject to Louisiana’s Open Meetings law. (Rec. Doc. 80, at
20-21.)
However,
Plaintiffs
overlook
the
fact
that
the
RTA
nevertheless exercised substantial control over TMSEL. 7 While it
is true that TMSEL’s Bylaws state that TMSEL appoints its own
officers,
provides
the
2005
CEA
between
the
RTA
that
TMSEL
must
appoint
its
board
and
Interregional
members
with
the
advice and consent of the RTA. (Rec. Doc. 21-1, at 10.) Lastly,
Plaintiffs claim that a genuine issue of material fact exists
7
The Management Services Agreement (“MSA”) dated October 1, 2001, between the
RTA, Metro, and TMSEL reflects the control the RTA exercised over TMSEL. See
Rec. Doc. 21-1, at 24-26, 28, 35 (describing the management relationship
between the RTA and TMSEL and noting that TMSEL's general manager and deputy
general manager can only be appointed with the advice and consent of the RTA;
that the RTA retains the right to issue new policies, rules, and regulations
for the transit system; that the RTA shall review all TMSEL pension
documentation; that all hourly rates for any exceptional service fees shall
be approved by the RTA, that the RTA shall audit and inspect all TMSEL books,
data, and records; that TMSEL shall maintain its books at the direction of
the RTA and that treatment of revenue shall be directed by the RTA).
26
regarding whether the RTA ever audited or had the power to audit
TMSEL’s
books.
However,
the
RTA’s
30(b)(6)
deponents
do
not
appear to disagree on this issue. Mr. Haley testified that “the
RTA
always
has
had
audit
control,
and
audits
were
always
conducted.” (Rec. Doc. 73-4, at 7.) Mr. Major did not disagree,
but rather testified that he is “not aware of a specific audit
of
TMSEL’s
books.”
(Rec.
Doc.
80-2,
at
44.)
Therefore,
it
follows that control and supervision of TMSEL is vested in the
RTA.
Fifth, the statute that created the RTA authorizes it to
contract with a party, such as TMSEL, to operate and maintain
its
mass
transit
system.
See
La.
Rev.
Stat.
§
48:1656(4).
Plaintiffs’ argument that the fifth factor weighs against the
conclusion that TMSEL was an agency or instrumentality because
TMSEL was not created by legislation is misguided. The fifth
factor of the Revenue Ruling test asks whether “statutory or
other authority is necessary for the creation and/or use of such
an instrumentality.” Rev. Rul. 57-128, 1957-1 C.B. 311 (emphasis
added). If the fifth factor required that the instrumentality be
created by statutory authority, then all such instrumentalities
would qualify as political subdivisions under the first prong of
the Hawkins test. See Hawkins, 402 U.S. at 604-05. Plaintiffs
also distinguish the applicable Louisiana statute here, which
authorizes the RTA to contract with a private party, from the
27
New York statute at issue in Rose, which permitted the MTA to
delegate operations to a wholly owned subsidiary. See Rose, 828
F.2d at 918 (citing N.Y. Pub. Auth. Law § 1266(5)). Although the
RTA contracted with TMSEL to perform functions on its behalf
pursuant
to
express
statutory
authority,
Plaintiffs
correctly
point out differences between the statute applicable here and
the statute in Rose.
Lastly, TMSEL’s operating expenses are wholly funded by the
RTA. 8 From its inception, TMSEL has been funded solely by the
RTA. (Rec. Doc. 20-1, at 3.) Plaintiffs do not dispute that the
RTA agreed to fund TMSEL’s operations, but rather argue that the
RTA also distanced itself from TMSEL’s employment relationship
with its employees. (Rec. Doc. 80, at 23.) Again, Plaintiffs’
arguments focus narrowly on the employment relationship. While
the employment relationship is a proper focus under the Alley
test, the Revenue Ruling test focuses more broadly on the extent
of governmental contacts. The RTA receives its funding through
federal grants, state taxes, and transportation fees. 9 The fact
that the RTA paid TMSEL’s operating expenses, which included
wages
and
benefits,
weighs
heavily
8
in
favor
of
finding
that
As reflected in the MSA, the RTA was responsible for providing TMSEL the
funds needed to operate and manage the transit system, including the payment
of wages and benefits. (Rec. Doc. 20-3, at 13.)
9
The fact that funding for the welfare benefit plan comes from tax revenue is
also important. In Hightower, the Fifth Circuit explained that “Government
plans received an exemption from ERISA because of their ability to tax and
thereby avoid the pitfalls of underfunding.” 65 F.3d at 449. The RTA has the
power to levy head and use taxes to fund its operations. La. Rev. Stat. §
48:1656.
28
TMSEL was an agency or instrumentality of the RTA. Cf. Gualandi
v.
Adams,
385
governmental
F.3d
funding
236,
244
(2d
is
enough
Cir.
2004)
to
constitute
facts
regarding
(“[E]xclusive
governmental
establishment of a plan.”).
Considering
the
undisputed
the
RTA
and
TMSEL set forth in the record and cited in the parties’ briefs,
the Court concludes that when Plaintiffs’ causes of action arose
in March 2006, the RTA was a political subdivision of Louisiana
and TMSEL was an agency or instrumentality of the RTA. TMSEL
maintained the Plan for its employees. Therefore, the Plan was
maintained
by
an
agency
or
instrumentality
of
a
political
subdivision. For this reason, the Plan was a governmental plan
excluded from ERISA’s coverage in March 2006, 10 and it remains a
governmental plan now. Accordingly, Defendants are entitled to
summary
judgment
in
their
favor
on
all
of
Plaintiffs’
ERISA
claims.
B.
ERISA Successor Liability Claims
In the event that the RTA is not directly liable under
ERISA,
Plaintiffs
claim
in
the
alternative
that
the
RTA
is
liable under the law of successor liability. (Rec. Doc. 40, at
17.)
Plaintiffs
contend
that
even
if
the
Plan
is
now
a
10
The Court notes that the parties agreed for discovery to be limited to the
year 2006. (Rec. Doc. 59, at 2.) However, to the extent that Plaintiffs now
object to the temporal scope of discovery (see Rec. Doc. 80, at 8, 18 n.88,
19 n.90, 28 n.132, 29), their objections are untimely. Plaintiffs were
entitled to seek review of the Magistrate Judge’s order within fourteen days
after being served with a copy. Fed. R. Civ. P 72(a).
29
governmental plan, the RTA bears successor liability for the
ERISA violations that occurred prior to time the Plan became
governmental.
Defendants argue that there is no cognizable legal basis
for
successor
subdivision
from
because
ERISA’s
Defendants
liability
Congress
coverage.
claim
under
that
ERISA
has
(Rec.
the
against
excluded
Doc.
RTA
did
a
these
73-1,
not
political
state
actors
20.)
First,
at
continue
TMSEL’s
operations, but rather it shut them down. Id. Defendants point
out that TMSEL has no employees and it no longer operates the
transit
system.
Second,
Defendants
argue
that
if
TMSEL
were
deemed to be the RTA’s “alter ego,” any ERISA claim against
TMSEL fails because of the governmental plan exemption. Id. at
21. Third, Defendants assert that the federal common law cannot
indiscriminately fill gaps to impose liability when Congress has
excluded a claim from direct coverage by ERISA. Id. Defendants
also distinguish the cases cited by Plaintiffs in their amended
complaint, noting that those cases involved private parties and
their contribution liability to multiemployer trusts under the
ERISA Multiemployer Amendments Act of 1980. Id. at 20 (citing
Einhorn v. M.L. Ruberton Const. Co., 632 F.3d 89 (3d Cir. 2011);
Upholsterers' Int'l Union Pension Fund v. Artistic Furniture of
Pontiac,
contend
920
that
F.2d
any
1323
(7th
liability
Cir.
that
30
1990)).
RTA
has
In
sum,
assumed
Defendants
for
TMSEL’s
debts arises under state law, to be adjudicated in state court.
Id. at 20.
In
response,
successor
entities
violations
of
Plaintiffs
liable
assert
under
predecessor
that
federal
entities.
courts
law
(Rec.
for
Doc.
have
the
80,
held
ERISA
at
28.)
According to Plaintiffs, a successor is liable if the successor
(1) continues the predecessor’s operations and (2) had knowledge
of the predecessor’s liability. Id. (citing Einhorn, 632 F.3d
89; Artistic Furniture, 920 F.2d 1323). First, Plaintiffs argue
that the RTA continued the operations of TMSEL because the RTA
became “the assignee of all TMSEL contracts and rights arising
out
of
the
management
and
operation
of
the
Transit
System,”
pursuant to the 2012 Dissolution Agreement. Id. (quoting Rec.
Doc. 13-10, at 3). Second, Plaintiffs argue that the RTA cannot
reasonably
dispute
that
it
knew
of
TMSEL’s
ERISA
liability
because the RTA asserts that it exercised control over TMSEL
since 1983. Id. Lastly, according to Plaintiffs, ERISA is silent
on
successor
liability
in
the
governmental
plan
context,
inviting the application of federal common law. Id. at 29-30.
Because the Court determines that TMSEL was an agency or
instrumentality of the RTA in March 2006, prior to the RTA’s
acquisition
of
100%
of
TMSEL’s
stock,
the
Court
need
not
consider whether the RTA, a political subdivision, may be held
31
liable for ERISA violations under successor liability. 11 The Plan
was a governmental plan excluded from ERISA in 2006 and clearly
once the RTA acquired full ownership of TMSEL in 2012. Despite
TMSEL being owned by other private entities prior to 2012, the
RTA exercised substantial supervision and control over TMSEL.
Plaintiffs rely on this fact to demonstrate that the RTA must
have known about TMSEL’s alleged liability, which according to
Plaintiffs
is
claim.
is
It
the
second
largely
due
prong
to
of
this
their
successor
control
that
liability
the
Court
concludes that TMSEL was an agency or instrumentality of the RTA
and, therefore, that the Plan is exempt from ERISA. For this
reason, any claim against TMSEL for which Plaintiffs argue the
RTA is responsible does not arise under ERISA.
C.
Section 1983 Claims
In the alternative to their claims under ERISA, Plaintiffs
assert
claims
under
Section
1983,
alleging
that
Defendants
violated their federally protected property rights. (Rec. Doc.
40, at 18.) Defendants contend that Plaintiffs’ Section 1983
claims fail as a matter of law and are time-barred. (Rec. Doc.
73-1,
at
22.)
In
support
of
their
11
argument
that
Plaintiffs’
The Court notes that holding a governmental entity liable under ERISA
through successor liability may conflict with the federalism-based concerns
which led Congress to exempt governmental plans in the first place. See Rose,
828 F.2d at 920 (noting that if a plan that was established by a private
entity but subsequently taken over by a government body would continue to be
subject to ERISA, such an outcome would conflict with the federalism-based
concerns that caused Congress to exclude governmental plans).
32
Section 1983 claims fail on the merits, Defendants make three
contentions.
First,
Defendants
argue
that
Plaintiffs
cannot
identify any contractual right of which they have been deprived
because they were not signatories to the June 1983 agreement nor
were
they
referenced
intended
in
that
recipients
agreement.
Id.
of
the
at
funding
23.
mechanism
Second,
Defendants
argue that the retirement benefits at issue do not constitute
protected property interests. Id. Third, Defendants argue that
Plaintiffs have available state court procedures and remedies to
address
their
purported
contract-based
claims.
Id.
Lastly,
Defendants assert that Plaintiffs’ Section 1983 claims are timebarred under the one-year prescriptive period applicable to such
claims. Id.
In
response,
Plaintiffs
contend
that
Defendants
are
not
entitled to summary judgment on their alternative Section 1983
claims. (Rec. Doc. 80, at 30.) First, Plaintiffs argue that they
possess protected contractual rights to benefits as third-party
beneficiaries
argue
that
of
the
because
13(c)
Agreement.
their
benefits
Id.
Second,
have
vested,
Plaintiffs
they
can
establish a protected property interest under Section 1983. Id.
Third,
Plaintiffs
argue
that
Defendants
provide
insufficient
evidence that there are available state court procedures and
remedies that preclude Section 1983 claims. Fourth, Plaintiffs
contend that their Section 1983 claims are not time-barred. Id.
33
at 31. According to Plaintiffs, Defendants’ continuing refusal
to reinstate benefits to which Plaintiffs are entitled and to
reimburse
Plaintiffs
for
the
costs
and
expenses
incurred
constitute ongoing and continuing torts, preventing the accrual
of
prescription.
Id.
In
addition,
Plaintiffs
argue
that
the
doctrine of contra non valentem applies and prescription could
not
have
commenced
to
run
immediately
upon
the
denial
of
benefits in 2006 because Plaintiffs were led to believe that the
changes were only temporary. Id.
In
reply,
Defendants
argue
that
Plaintiffs
have
no
constitutionally protected property interest because no document
guarantees
welfare
Plaintiffs’
benefits
do
right
not
to
vest.
the
benefits
(Rec.
Doc.
they
83,
seek
at
and
14-15.)
Defendants also maintain that Plaintiffs’ Section 1983 claims
are time-barred, arguing that Plaintiffs fail to present any
facts proving that they were prevented from filing suit before
December 30, 2012, other than their mistaken, subjective belief
that premium-free benefits would return. Id. at 16. In addition,
Defendants
argue
that
Plaintiffs’
reliance
on
the
continuing
violation theory is inapplicable here, because the statute of
limitations may not be tolled under this theory when the alleged
violation merely has lingering effects. Id. at 16 n.46 (citing
McGregor v. La. State Univ. Bd. of Sup'rs, 3 F.3d 850, 867 (5th
Cir. 1993)).
34
To state a claim under Section 1983, plaintiffs must allege
two elements: “first, that they were deprived of a right or
interest
secured
by
the
Constitution
and
laws
of
the
United
States, and second, that the deprivation occurred under color of
state law.” Doe v. Rains Cnty. Indep. Sch. Dist., 66 F.3d 1402,
1406 (5th Cir. 1995). “In order for a person to have a property
interest within the ambit of the Fourteenth Amendment, he ‘must
have more than an abstract need or desire for it. He must have
more than a unilateral expectation of it. He must, instead, have
a legitimate claim of entitlement to it.’” Blackburn v. City of
Marshall,
42
F.3d
925,
936
(5th
Cir.
1995)
(quoting
Bd.
of
Regents of State Colleges v. Roth, 408 U.S. 564, 577 (1972)).
Because
there
is
no
federal
statute
of
limitations
for
Section 1983 claims, courts look for comparison to the forum
state's
statute
of
limitations
for
personal
injury
claims.
Wallace v. Kato, 549 U.S. 384, 387 (2007). Section 1983 claims
are best characterized as personal injury actions. Jacobsen v.
Osborne,
133
F.3d
315,
319
(5th
Cir.
1998).
In
Louisiana,
personal injury claims are governed by Civil Code article 3492,
which provides for a prescriptive period of one year from the
date of injury or damage. La. Civ. Code art. 3492. On the other
hand, federal law determines when a Section 1983 claim accrues.
Jacobsen, 133 F.3d at 319 (citing Moore v. McDonald, 30 F.3d
616, 620 (5th Cir. 1994)). “Under federal law, a cause of action
35
accrues when the plaintiff knows or has reason to know of the
injury which is the basis of the action.” Gartrell v. Gaylor,
981 F.2d 254, 257 (5th Cir. 1993). In applying the forum state's
statute of limitations, a federal court should also give effect
to any applicable tolling provisions. Id.
In the instant case, Plaintiffs admit that TMSEL informed
them in 2006 that they would be required to contribute to the
cost
of
health
insurance
premiums
and
that
that
TMSEL
had
discontinued reimbursement of Medicare premiums and deductibles.
(Rec. Doc. 40, at 12.) At that time Plaintiffs had reason to
know of the injury which is the basis of their Section 1983
claims. Accordingly, the one-year prescriptive period began to
run from that date.
Because their Section 1983 claims are prescribed on the
face of the complaint, Plaintiffs have the burden of proving
that their claims are not time-barred. Taranto v. La. Citizens
Prop. Ins. Corp., 62 So. 3d 721, 726 (La. 2011). Plaintiffs
cannot
rely
on
the
continuing
violation
theory
here.
A
continuing tort is occasioned by continual unlawful acts, not
the continuation of the ill effects of an original, wrongful
act. Hogg v. Chevron USA, Inc., 45 So. 3d 991, 1003 (La. 2010).
“The inquiry is essentially a conduct-based one, asking whether
the tortfeasor perpetuates the injury through overt, persistent,
and ongoing acts.” Id. In the instant case, Defendants’ alleged
36
conduct
does
not
constitute
a
continuing
tort.
Rather,
Defendants’ “continuing refusal to reinstate benefits” is merely
a lingering effect of the alleged violation. See McGregor, 3
F.3d at 867.
Further, Plaintiffs fail to establish that the doctrine of
contra non valentem applies in this case. The doctrine of contra
non
valentem
prevents
the
running
of
prescription
in
four
situations. Because Plaintiffs allege that Defendants led them
to
believe
that
the
changes
to
their
benefits
were
only
temporary, the Court assumes Plaintiffs rely on the third or
fourth categories of contra non valentem. The third category
prevents
the
running
of
prescription
“where
the
[defendant]
himself has done some act effectually to prevent the [plaintiff]
from availing himself of his cause of action.” Marin v. Exxon
Mobil Corp., 48 So. 3d 234, 245 (La. 2010). “This category is
implicated only when (1) the defendant engages in conduct which
rises to the level of concealment, misrepresentation, fraud or
ill practice; (2) the defendant's actions effectually prevented
the
plaintiff
from
pursuing
a
cause
of
action;
and
(3)
the
plaintiff must have been reasonable in his or her inaction.” Id.
at 252 (citations omitted). Though Plaintiffs may have believed
that the changes were only temporary, Plaintiffs fail to show
that
Defendants’
conduct
rose
to
the
level
of
“concealment,
misrepresentation, fraud or ill practice” or that Defendants’
37
actions prevented Plaintiffs from filing suit. Further, it was
unreasonable for Plaintiffs to wait over six years before they
filed
suit,
thinking
that
Defendants
would
restore
their
benefits.
The fourth category of contra non valentem suspends the
running of prescription “where the cause of action is neither
known
nor
reasonably
knowable
by
the
plaintiff
even
though
plaintiff's ignorance is not induced by the defendant.” Id. at
245.
However,
commencement
contra
of
misunderstanding
non
valentem
prescription
of
the
does
due
probable
not
to
extent
delay
the
or
the
plaintiff’s
duration
of
the
injuries. Fontenot v. ABC Ins. Co., 674 So. 2d 960, 964 (La.
1996).
Plaintiffs’
argument
that
Defendants
failed
to
inform
them that the changes were permanent is not sufficient to delay
the
commencement
of
prescription.
See
id.
(“Plaintiffs'
contention that [the defendant’s] failure to inform them that
[the]
condition
was
permanent
versus
temporary
is
of
no
consequence.”). As the Louisiana Supreme Court has made clear,
“the
doctrine
of
contra
non
valentem
only
applies
in
‘exceptional circumstances.’” Marin, 48 So. 3d at 245. Here,
Plaintiffs fail to demonstrate that “exceptional circumstances”
warrant
the
tolling
of
prescription.
Section 1983 claims are time-barred.
38
Accordingly,
Plaintiffs’
D.
State Law Claims
Plaintiffs
ask
the
Court
to
retain
supplemental
jurisdiction over their state law claims in the event that this
Court dismisses all of their federal claims. (Rec. Doc. 80, at
31.)
Under
jurisdiction
28
U.S.C.
shall
§
1367,
have
district
supplemental
courts
with
jurisdiction
original
over
all
claims that are so related to claims in the action within such
original jurisdiction that they form part of the same case or
controversy. 28 U.S.C. § 1367(a).
Section
1367(c)(3)
provides
that
a
district
court
“may
decline to exercise supplemental jurisdiction over a claim under
subsection (a) if . . . the district court has dismissed all
claims
over
which
it
has
original
jurisdiction.”
Id.
§
1367(c)(3). District courts enjoy wide discretion in determining
whether to retain supplemental jurisdiction over a state claim
once all federal claims are dismissed. Noble v. White, 996 F.2d
797, 799 (5th Cir. 1993). “Ordinarily, when the federal claims
are dismissed before trial, the pendent state claims should be
dismissed as well.” Wong v. Stripling, 881 F.2d 200, 204 (5th
Cir.
1989).
Accordingly,
the
Court
declines
to
exercise
supplemental jurisdiction over Plaintiffs’ state law claims.
CONCLUSION
Accordingly,
39
IT IS HEREBY ORDERED that Defendants’ Motion for Summary
Judgment
claims
(Rec.
under
Doc.
ERISA
73)
and
is
GRANTED.
Section
Plaintiffs’
1983
are
federal
DISMISSED
law
WITH
PREJUDICE. Plaintiffs’ state law claims are DISMISSED without
prejudice.
New Orleans, Louisiana this 23rd day of October, 2015.
CARL J. BARBIER
UNITED STATES DISTRICT JUDGE
40
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