Skornick v. Principal Financial Group et al
Filing
42
OPINION & ORDER re: 36 MOTION to Remand to State Court . filed by Brian J. Skornick. For the reasons stated above, Plaintiff's motion to remand this case to New York State Supreme Court is DENIED. A status conference will be held in this case on May 9, 2019 at 11 a.m. The Clerk of Court is respectfully directed to terminate the pending motion. (Doc. 36.) SO ORDERED. (Status Conference set for 5/9/2019 at 11:00 AM before Judge Cathy Seibel.) (Signed by Judge Cathy Seibel on 4/18/2019) (mml)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
----------------------------------------------------------------------x
BRIAN J. SKORNICK,
Plaintiff,
- against -
OPINION & ORDER
PRINCIPAL FINANCIAL GROUP, PRINCIPAL LIFE
INSURANCE COMPANY and BROOKLYN PUBLIC
LIBRARY,
No. 18-CV-4324 (CS)
Defendants.
----------------------------------------------------------------------x
Appearances
Katie Wendle
Baker, Leshko, Saline & Drapeau, LLP
White Plains, New York
Counsel for Plaintiff
Robert P. Lesko
Wilson, Elser, Moskowitz, Edelman & Dicker, LLP
Florham Park, New Jersey
Counsel for Defendant Principal Life Insurance Company
Clifford R. Atlas
Charles F. Seemann III
Jackson Lewis P.C.
New York, New York
Counsel for Defendant Brooklyn Public Library
Seibel, J.
Before the Court is Plaintiff’s motion to remand this case to state court. (Doc. 36.)
1
I.
BACKGROUND1
On April 5, 2018, Plaintiff Brian J. Skornick brought this action in the New York State
Supreme Court in Westchester County to recover disability benefits under a policy he purchased
from Defendant Principal Financial Group (“Principal”) through his employer, Defendant
Brooklyn Public Library (the “Library”). (Wasserman Aff. ¶¶ 2-3; Compl. ¶¶ 4-5.) Plaintiff
alleges that he completed all of the required paperwork, paid the required premiums – at least
some of which were deducted from Plaintiff’s earnings or otherwise paid through the Library –
and was eligible for benefits, yet Principal has refused to honor his claim for disability benefits
or recognize that he has a viable life insurance policy. (Compl. ¶¶ 7-11.) Plaintiff’s complaint
alleges claims for fraud, breach of contract, negligence, and violation of New York General
Business Law § 349 against Principal, and a claim of negligence against the Library. (Id. ¶¶ 1831.)
The facts recited herein are drawn from the Complaint. (Doc. 1-1 at 9-15 (“Compl.”).) Doc. 11 comprises several documents that are not consecutively paginated, so citations to Doc. 1-1
refer to the page numbers generated by the Court’s Electronic Case Filing (“ECF”) System. In
resolving this motion, the Court treats all facts alleged in the Complaint as true. See Fed. Ins.
Co. v. Tyco Int’l Ltd., 422 F. Supp. 2d 357, 391 (S.D.N.Y. 2006) (“When considering a motion to
remand, the district court accepts as true all relevant allegations contained in the complaint and
construes all factual ambiguities in favor of the plaintiff.”) (citation and internal quotation marks
omitted). In addition, for purposes of determining the validity of Defendants’ removal, the Court
also considered the exhibits and affidavit attached to Principal’s notice of removal, (Doc. 1), the
Affirmation of Katie Wendle, (Doc. 37 (“Wendle Affirm.”)), in support of Plaintiff’s motion to
remand, and the Affidavit of Chloe Wasserman, (Doc. 41 (“Wasserman Aff.”)), in opposition to
that motion. See Arseneault v. Congoleum Corp., No. 01-CV-10657, 2002 WL 472256, at *6
(S.D.N.Y. Mar. 26, 2002) (“The Second Circuit . . . has said that, on jurisdictional issues,
‘federal courts may look outside [the] pleadings to other evidence in the record,’” and therefore
the court considers “material outside of the pleadings” submitted on motion to remand.) (citation
omitted) (second alteration in original), reconsideration granted on other grounds, 2002 WL
531006 (S.D.N.Y. Apr. 8, 2002).
1
2
On May 15, 2018, Principal removed the case to this Court under 28 U.S.C. §§ 1331 and
1441(a), claiming that the Employee Retirement Income Security Act of 1974 (“ERISA”), 29
U.S.C. § 1001 et seq., governs Plaintiff’s claim, and that therefore the case involved a federal
question. (Doc. 1 ¶¶ 8-9.) On May 25, 2018, the Library consented to removal. (Doc. 5.)
Plaintiff now moves to remand the case to state court, arguing that no federal question exists
because the Library’s disability plan under which Plaintiff alleges he is entitled to benefits is a
“governmental plan” within the meaning of section 3(32) of ERISA and is therefore exempt from
compliance with Title I of that statute. See 29 U.S.C. § 1003(b)(1).
II.
LEGAL STANDARD
An action filed in state court may be properly removed by a defendant if “the district
courts of the United States have original jurisdiction.” 28 U.S.C. § 1441(a). “The district courts
shall have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties
of the United States.” 28 U.S.C. § 1331. As a general matter, removal jurisdiction must be
“strictly construed,” Syngenta Crop Prot., Inc. v. Henson, 537 U.S. 28, 32 (2002), and any
doubts should be resolved against removability “out of respect for the limited jurisdiction of the
federal courts and the rights of states,” In re Methyl Tertiary Butyl Ether Prods. Liab. Litig., 488
F.3d 112, 124 (2d Cir. 2007). Therefore, “[a] party seeking removal bears the burden of showing
that federal jurisdiction is proper.” Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321,
327 (2d Cir. 2011).
III.
DISCUSSION
A civil action may be brought [under ERISA] . . . by a participant or a
beneficiary . . . to recover benefits due to him under the terms of his plan, to enforce
his rights under the terms of the plan, or to clarify his rights to future benefits under
the terms of the plan.
3
29 U.S.C. § 1132(a)(1)(B). But ERISA does not apply to a “governmental plan,” 29 U.S.C.
§ 1003(b)(1), which is defined 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,” 29 U.S.C. § 1002(32). Thus, if the
plan Plaintiff purchased through the Library is a governmental plan not covered by ERISA, there
is no basis for federal jurisdiction and the case should be remanded to state court.
Because ERISA is a federal statute, courts interpret the government plan exception by
reference to federal law. See Rose v. Long Island R.R. Pension Plan, 828 F.2d 910, 915 (2d Cir.
1987). And because ERISA is “remedial legislation,” it “should be liberally construed in favor
of protecting participants in employee benefits plans.” Parise v. Riccelli Haulers, Inc., 672 F.
Supp. 72, 74 (N.D.N.Y. 1987) (internal quotation marks omitted).
Plaintiff does not allege that the Library is a government or political subdivision, (see,
e.g., Doc. 38 (“P’s Mem.”) at 7-8), so the question is whether it is an “agency or instrumentality”
of the government of New York City (the “City”) or the Borough of Brooklyn (the “Borough”).
In determining whether a party is an agency or instrumentality of a political subdivision, the
Court considers six factors:
(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.
Rose, 828 F.2d at 918. In considering these factors – bearing in mind that the “party seeking
removal bears the burden of showing that federal jurisdiction is proper,” Montefiore, 642 F.3d at
4
327 – I find that the Library is not an agency or instrumentality of the government for purposes
of the ERISA exception.
The first Rose factor asks whether the Library is used for a governmental purpose or
performs a governmental function. This test is not as simple as it sounds. The question cannot
turn simply on whether the organization does something beneficial for the people of a political
subdivision. If that were the test, numerous organizations – from the Little League to Planned
Parenthood – would be considered to serve a governmental purpose. The test must mean
something more specific: whether the organization does something the government would
otherwise have to do, and whether it does it in a way similar to how the government would do it.
In Rose, the Second Circuit found that the Metropolitan Transportation Authority
(“MTA”) performed a governmental function because the statute that created the MTA expressly
stated that the MTA was “in all respects for the benefit of the people of the state of New York”
and that it performed “an essential governmental function in carrying out its purpose and in
exercising the powers granted by this title.” Rose, 828 F.2d at 916 (citing N.Y. Pub. Auth. Law
§ 1264) (internal quotation marks omitted). But Plaintiff has pointed to no comparable language
appearing in the statute that created the Library.2 (See P’s Mem. at 1-3.) Even today, New York
2
Before 1901, Andrew Carnegie offered five million dollars to the City of New York to establish
public libraries. Brooklyn Pub. Library v. City of N.Y., 250 N.Y. 495, 497 (1929). As a result,
the New York State legislature enacted chapter 580 of the Laws of 1901, which authorized the
City to enter into contracts with Carnegie or his representatives to build and maintain new
libraries. Id. At that time there were two library corporations in Brooklyn – the Brooklyn
Library, a private subscription service, and the Public Library – which were consolidated into the
present Brooklyn Public Library under chapter 606 of the Laws of 1902, amended by chapter
500 of the laws of 1903. Id.; Brooklyn Pub. Library v. Craig, 194 N.Y.S. 715 (App. Div. 1922).
The City and the Library entered into a formal contract in 1903, under which “the city
recognized and accepted the separate corporate identity and existence of the Brooklyn Public
Library, and envisaged the survival or devolution into it of the powers of self-control possessed
by the merged organizations.” Craig, 194 N.Y.S. at 715. The City agreed to appropriate funds
for the maintenance and administration of the library, id., and the Brooklyn Public Library took
5
City’s charter expressly excludes the Library from its definition of agency. See N.Y.C. Charter
§ 2601(2) (“[a]gency . . . shall not include . . . any corporation or institution maintaining or
operating a public library.”).
The absence of an express statutory provision that mirrors the statutory provision in Rose
might not alone doom Plaintiff’s arguments. But, in addition, the Library operates for tax
purposes as a 501(c)(3) non-profit organization. (Wendle Affirm. Ex. H at 7.)3 It files Form 990
with the Internal Revenue Service (“IRS”), identifying itself as a public charity “that normally
receives a substantial part of its support from a governmental unit or from the general public.”
(Id. Ex. G at 23.) It is not designated as a “political subdivision,” which is described in the
Internal Revenue Manual as “an organization [that] possess[es] a sovereign power (traditionally
regarded as the power to tax, to condemn property, or to police or regulate).” Internal Revenue
Manual 7.26.2.6.1 (Dep’t Treasury 2014). The Library cannot exercise those government
functions or powers even though it receives substantial government funding. See Hollenbaugh v.
Carnegie Free Library, 545 F.2d 382, 383 (3d Cir. 1976) (“[I]t [cannot] be said that the
operation of a library constitutes private performance of a function traditionally associated with
sovereignty.”). The Rose test is borrowed from the IRS, see Rose, 828 F.2d at 917-18, so the
Library’s tax status is telling.
Moreover, New York Education Law § 254 authorizes the Board of Regents to fix
standards of library service for public libraries and free association libraries which receive public
funds. The Board of Regents issues charters to four types of libraries: (1) association libraries;
over the property, as well as the direction and control, of the two other libraries, Brooklyn Pub.
Library, 250 N.Y. at 498.
Citations to Wendle Affirm. Ex. H refer to the page numbers generated by the Court’s ECF
System.
3
6
(2) municipal public libraries; (3) school district public libraries; and (4) special district public
libraries. Types of Public Libraries: A Comparison, N.Y. State Library,
http://www.nysl.nysed.gov/libdev/libs/pltypes.pdf (last visited Apr. 16, 2019). An association
library is “a library established and controlled, in whole or in part, by a group of private
individuals operating as an association, close corporation or as trustees under the provisions of a
will or deed of trust,” while a “public” library is defined as a library “established for free public
purposes by official action of a municipality or district or the legislature, where the whole
interests belong to the public.” N.Y. Educ. Law § 253. The Board of Regents – after
considering such factors as how the Library was established, its funding sources, and the
composition of its Board of Trustees – issued the Library a charter for an association library, not
a public library. See Brooklyn Public Library, N.Y. State Library,
http://www.nysl.nysed.gov/libdev/libs/publibs/3brook.htm (last visited Apr. 16, 2019). While
not outcome determinative, the Board of Regent’s decision to designate the Library as an
association library instead of a public library suggests that the Library’s fundamental features are
not governmental.
Plaintiff argues that the Library’s mission statement, vision statement, and statutory
purpose dictate that the Library is used for a governmental function: the “education and
intellectual advancement” of Brooklyn residents. (P’s Mem. at 15-16.) In other words, because
the Library provides educational opportunities to Brooklyn residents, Plaintiff contends that the
Library has undertaken the governmental function of educating the citizens of Brooklyn. In
support of his argument, Plaintiff cites to Allugard v. Principal Life Insurance Co., 685 F. Supp.
2d 947, 955 (D. Ariz. 2010), where the court determined that a private company conducting
research to improve education was performing a governmental function. But that case is not
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binding or convincing. The Library provides no cases that state that providing free educational
opportunities is tantamount to performing a governmental function. Numerous private
institutions – such as museums – provide educational opportunities for the public, and courts do
not consider them to be performing a governmental function. See e.g., Schoeps v. Museum of
Modern Art, 603 F. Supp. 2d 673, 675 n.1 (S.D.N.Y. 2009) (Museum of Modern Art not a
governmental agency); Forbes v. City of N.Y., No. 05-CV-7331, 2008 WL 3539936, at *6-7
(S.D.N.Y. Aug. 12, 2008) (Lincoln Center does not provide public function through its
agreement with New York City to manage Damrosch Park). Further, while patrons of a library
can surely educate themselves there, libraries also provide recreational, entertainment, and social
opportunities, at least the latter two of which do not comfortably fit our common conception of a
governmental function. And even if they did, the Library does not provide them in the way a
government would. It has not taken on from the City the responsibility of educating the citizens
of Brooklyn, and it does not tax, legislate, or police. Although the Library’s ties to government
may be closer than those of some City contractors – say, a bus company that contracts to
transport schoolchildren – its relationship to the City, and its concomitant ability to run the
libraries of Brooklyn, are creations of contract. See Brooklyn Pub. Library, 250 N.Y. at 499-500
(Library is “a distinct and separate corporation, receiving budgetary contributions from the city”)
(citation and internal quotation marks omitted). I thus conclude that the Library does not
perform a governmental function. Cf. N.Y. Pub. Library v. N.Y. State Pub. Emp’t Relations Bd.,
357 N.Y.S.2d 522, 533 (App. Div. 1974) (New York Public Library not government or public
employer within meaning of Taylor Act, Civil Service Law § 201; “the Library . . . merely
provide[s] a service, which although of public interest and benefit, is not the equivalent of the
exercise of governmental powers”), aff’d, 37 N.Y.2d 752 (1975).
8
As to the second Rose factor, Plaintiff essentially repeats his argument on the first Rose
factor, i.e., that because the Library provides free educational or other benefits for the people of
Brooklyn, it necessarily performs its function on behalf of the Borough. (P’s Mem. at 16.) But
Plaintiff has conflated Rose’s concept “on behalf of one or more states or political subdivisions”
with an amorphous concept of performing “for the benefit of” the people of Brooklyn. Plaintiff
has not cited authority for the proposition that providing free educational benefits to the public is
a function performed on behalf of a political subdivision. Adopting Plaintiff’s logic – that an
entity that benefits a city’s or state’s residents performs that function “on behalf of” a political
subdivision – would result in large swaths of non-profit organizations avoiding ERISA’s reach
simply because they provide services that benefit the public. If Congress had intended to
exclude such organizations from ERISA’s ambit, it could easily have done so in unambiguous
terms. Congress’s decision not to do so is strong evidence that organizations like the Library
were intended to be covered by ERISA. Thus, the second Rose factor also favors Defendants.
As to the third Rose factor, Plaintiff argues that the City and the Borough have the
powers and interests of an owner because the City provides funding to the Library, Library
employees can participate in the New York State Retirement System, the City has exercised
eminent domain to provide real estate for the Library, and the City audits the funds the City
provides to the Library. (P’s Mem. at 17-19.) But these arguments fail too. The Library
receives its funding as a matter of contract, (Wasserman Aff. Ex. 2 at 3), and the government’s
funding of an institution or entity is not the same as government’s ownership of the institution or
entity, cf. Rosenthal v. Roberts, No. 04-CV-5205, 2005 WL 221441, at *7 (S.D.N.Y. Jan. 28,
2005) (despite receiving government funds, New York Public Library and Metropolitan Museum
of Art “do not constitute political subdivisions as that term is commonly understood by . . .
9
federal courts”). That the Library’s employees can participate in the New York State
Employees’ Retirement System was also agreed upon by contract, (Wasserman Aff. Ex. 2 at 3),
and does not suffice to render Library employees the equivalent of state, let alone city,
employees. In any event, the insurance plans at issue here are funded solely by employee
contributions, are offered by the Library and not the City of New York, and are not associated
with the New York State Retirement System. (Wasserman Aff. ¶¶ 2-5.) And Plaintiff’s
argument that the City’s exercise of eminent domain on the Library’s behalf suggests the
Library’s “status as an agency or instrumentality of the City of New York” is unpersuasive
because the City is contractually obligated to provide for the maintenance and construction of
libraries in Brooklyn, and it is well settled that “the government’s pursuit of a public purpose
will often benefit individual private parties.” Kelo v. City of New London, 545 U.S. 469, 484
(2005). Likewise, that the City contracted for the right to audit a contractor is neither unusual
nor indicative of ownership. There is simply no suggestion that the City or Borough treats the
Library as an owner would; for example, the Library does its own hiring and firing, manages its
own budget, and decides what books to buy and programs to offer. Thus, the third Rose factor
also favors Defendants.
Under the fourth Rose factor – whether control and supervision of the organization is
vested in public authority or authorities – a decision-making body that consists of publicly
appointed members can be indicative of a governmental entity under the Rose analysis. See Yu v.
N.Y.C. Hous. Dev. Corp., No. 07-CV-5541, 2011 WL 2326892, at *24 (S.D.N.Y. Mar. 16, 2011)
(board consisting of solely public officials and appointees of public officials satisfies Rose’s
10
third and fourth factor). Here, as described by the Library’s corporate bylaws,4 the Board of
Trustees consists of thirty-eight members, falling into three categories: (1) twelve trustees
elected by the Library’s Board of Trustees; (2) the Mayor, Comptroller, Brooklyn Borough
President, and Speaker of the New York City Council serving as ex-officio trustees; and (3)
twenty-two trustees, eleven of whom are appointed by the Mayor of New York City and the
other eleven by the Brooklyn Borough President. (Wendle Affirm. Ex. I at 1.) Thus, twenty-six
of the thirty-eight Board members fall within the same categories – government officials and
political appointees – as those discussed in Yu as sufficient to satisfy the fourth Rose factor. So
there is some merit to Plaintiff’s arguments.
Still, courts that have considered similar questions about the relationship between the
Library and New York City in other contexts likely would have sided with Defendants here. In
La Marca v. Brooklyn Public Library, 10 N.Y.S.2d 129 (App. Div. 1939), the question presented
was whether the City was liable for damages arising out of the negligence of a janitor employed
to care for the library building. The Second Department affirmed dismissal of the complaint and
observed, “The building was owned by the City of New York, but was operated and controlled
by the Brooklyn Public Library . . . . [T]he city had no control of any part of the building, and []
the library employees were not in the employ of the city.” Id. at 130. Similarly, in Craig, the
Second Department noted that the library “is not a branch of the city government, but is a distinct
and separate corporation, receiving budgetary contribution from the city.” 194 N.Y.S. at 715.
And in New York Public Library, the First Department, in concluding that New York City could
not be considered the employer of the New York Public Library’s employees, said
The Library’s bylaws were adopted as of December 18, 2007, and amended as of September
21, 2010, May 17, 2011, and February 21, 2012. (Wendle Affirm. Ex. I at 9.)
4
11
[N]ot only is the [New York City Public] Library a separate and distinct body from
the city, but by contract it . . . retains general control over the direction and
management of its own affairs. And more specifically, by contract and in practice,
the hire, discharge and promotion of the employees, as well as the supervision of
their daily and over-all duties are vested in the Library through its self-perpetuating
Board of Trustees. There is no proof in the record that the City interferes in these
matters or has the power to do so. Hence, under all the traditional tests it is the
[New York City Public] Library that is the employer and not the City.
357 N.Y.S.2d at 528. On balance, however, that most of the Board that runs the library consists
of City officials or persons appointed by City officials, and the remainder are people on whom
those officials or appointees have agreed, suffices to tip the fourth Rose factor in Plaintiff’s
favor.
The fifth Rose factor – which explores under what authority the instrumentality was
created – is neutral. While the Library was created by state law, as discussed above, that
legislation envisioned a contract between the Library and the City. Contracting is a routine event
for the City that does not suggest that the other contracting party is a governmental entity. For
example, in Rendell-Baker v. Kohn, the Supreme Court found that a private school, the income
of which was derived primarily from public sources and which was regulated by public
authorities, was not a state actor when it discharged certain employees, explaining that “[t]he
school . . . is not fundamentally different from many private corporations whose business
depends primarily on contracts” with the government, and whose acts “do not become acts of the
government by reason of their significant or even total engagement in performing public
contracts.” 457 U.S. 830, 840-41 (1982). Indeed, the contract here acknowledged “the separate
corporate identity and existence of” the Library. Craig, 194 N.Y.S. at 715.
As to the sixth Rose factor – the degree of financial autonomy and the source of its
operating expenses – Defendants do not dispute that the Library relies on the significant financial
support of the government to operate. Plaintiff has provided ample evidence of this fact, (see,
12
e.g., Wendle Affirm. Ex. H at 3, 11), and is probably right that the Library “would likely not
exist, but for the funding of the City,” (P’s Mem. at 23). But the Library exercises a sufficient
degree of financial autonomy to balance that fact and render this factor neutral. As the Second
Department explained,
it seems clear that, under the various statutes delegating powers to various libraries
and the contract made with the city of New York, the board of trustees of the
[L]ibrary is the body charged with the duty of distributing the fund already
appropriated by the board of estimate. The board of trustees was intended, both by
the statutes and the contract, to have discretionary powers, so long as they were
exercised in good faith, to fix the various salaries of its employees and carry out
generally its administrative duties.
Craig, 194 N.Y.S. at 715. Therefore, despite the government’s substantial financial investment
in the Library, the Library maintains a great degree of financial autonomy to allocate the
government funding as it sees fit.5 This factor favors neither side.
The Department of Labor (“DOL”) advisory opinions on which Plaintiff relies, (see P’s
Mem. at 11-13, 17, 20-23), are not only not binding,6 but also inapposite as applied here. In
Plaintiff’s argument that the Office of Comptroller of New York City supervises the Library
through audits, (P’s Mem. at 19, 21; see Wendle Affirm. Ex. F), is only entitled to minimal
weight. The Comptroller’s Office performs audits not only of City agencies but also of Cityfunded entities. See Letter from Scott M. Stringer, N.Y.C. Comptroller, to Residents of the City
of N.Y. (June 9, 2015), https://comptroller.nyc.gov/wpcontent/uploads/documents/FM14_111A.pdf. The only audit reports of the Brooklyn Public
Library that are published on the New York City Comptroller’s website are dated June 9, 2015,
May 28, 2013, May 23, 2008, and June 22, 2005. See New York City Comptroller Scott M.
Stringer Reports, https://comptroller.nyc.gov/reports/?fwp_agency=public-library-brooklyn (last
visited Apr. 16, 2019). Not only are the audits interspersed over three- or five-year intervals, but
each audit report contains mere “recommendations,” rather than binding direction that the
Library is required to follow. The City’s authority to audit does not suffice to undermine the
Library’s overall financial autonomy to hire, make purchases, offer programs and otherwise
manage its budget.
5
6
See Montoya v. ING Life Ins. & Annuity Co., 653 F. Supp. 2d 344, 352 n.5 (S.D.N.Y. 2009)
(“While DOL advisory opinions are not binding, the DOL is ‘nonetheless a body of experience
and informed judgment to which courts and litigants may properly resort for guidance and we
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DOL Opinion 94-21A, the DOL concluded that the Carnegie Center for Literacy and Learning
(the “Center”) was an agency or instrumentality of the county government and that including the
Center’s employees in the County Employees Retirement Systems (“CERS”) would not affect
CERS’s status as a governmental plan within the meaning of ERISA’s governmental exemption.
Carnegie Ctr. for Literacy & Learning, Pens. Plan Guide (CCH) Op. No. 94-21A ¶ 23,897S
(June 17, 1994), 1994 WL 271163, at *1. DOL based its decision on certain features that the
Center shares with the Library: the Center was created by an ordinance, its board of directors
consisted mostly of political appointees, and it was funded in part by tax money. But aside from
addressing a somewhat different question – the DOL considered whether the Center’s
participation in CERS would disqualify CERS as a “governmental plan,” as opposed to the
inquiry here, where I must evaluate whether the Library’s plan falls within ERISA’s
governmental plan exemption in the first instance – the DOL advisory opinion ignores the first
Rose factor by not analyzing whether the Center performed a governmental function and only
partly addresses the sixth Rose factor by failing to evaluate whether the Center retained financial
autonomy over its public funding. Consideration of these factors might have changed the DOL’s
conclusion. Further, while the Center was created by a County ordinance, there was no
indication that the Center had a contract with the county. This factor, along with the advisory
opinion’s incomplete Rose analysis and the difference of the legal question addressed, renders its
persuasive force minimal.
Plaintiff also cites to DOL Opinion 97-02A, where the DOL faced a similar question:
whether the California State University, Hayward Foundation, Inc. (the “Foundation”), could
have often relied on DOL Opinion Letters for their persuasive value.’”) (quoting Gualandi v.
Adams, 385 F.3d 236, 243 (2d Cir. 2004)).
14
contract with the California Public Employees’ Retirement System (“CalPERS”) to provide for
the participation of its employees as members without affecting the status of CalPERS as a
governmental plan under section 3(32) of ERISA. Hayward Found., Pens. Plan Guide (CCH)
Op. No. 97-02A ¶ 19,986A (Jan. 6, 1997), 1997 WL 5392, at *1. In addition to the question
there differing from the question here, the Foundation was an “auxiliary organization” under
California law that operated for the benefit of California State University on its campus. See Cal.
Educ. Code § 89901 (West 1977) (emphasis added). The Library is not an “auxiliary” of another
City agency or entity. Additionally, under California law an auxiliary organization’s obligations
become the obligations of the State of California. No such entanglement between the Library
and the City or Borough exists here. Therefore, Opinion 97-02A is also of limited value to my
decision.
Finally, Plaintiff points to DOL Opinion 94-03A, in which the Addison Community
Hospital (the “Hospital”) was deemed an agency or instrumentality of the government. Addison
Cmty. Hosp., Pens. Plan Guide (CCH) Op. No. 94-03A ¶ 23,891D (Feb. 17, 1994), 1994 WL
57175, at *1. There, political subdivisions of state and local government, acting pursuant to state
statute, jointly established a hospital authority, the Addison Community Hospital Authority (the
“Authority”), to operate and maintain the Hospital. That arrangement – the Authority’s
administration of the Hospital – persuaded the DOL that the Hospital’s pension plan was a
governmental plan under ERISA. The DOL did not focus on the features of the Hospital, such as
its funding, board arrangement, or operations, but instead focused on the Authority’s features,
including the power to tax, a uniquely governmental function. It also noted that the Authority
(plainly an instrumentality of government) controlled the Hospital’s everyday operations. Based
on the Authority’s relevant features, and not the Hospital’s, DOL concluded that the Hospital’s
15
plan fell within ERISA’s governmental exception. It seems likely that the DOL would have
come out the other way had the Authority contracted with an independent entity to run the
Hospital, hire the employees, and offer a pension plan. Here, there is no comparable authority
that wields a taxing power and administers the Library. Therefore, Opinion 94-03A is also
inapposite.7
In sum, the DOL opinions do not alter my analysis of the Rose factors, three of which
favor Defendants; one of which favors Plaintiff; and two of which are neutral. On balance,
Defendants have established that the disability and life insurance plan Plaintiff purchased
through the Library is not a “governmental plan” under 29 U.S.C. § 1002(32).
My finding is further supported by an examination of Congress’s reasons for including
the governmental plan exemption when it enacted ERISA: (1) public plans generally contain
more generous vesting provisions than private plans; (2) governments may use their taxing
powers to fulfill their obligations to employees, which eliminates the need for minimum funding
standards and plan termination insurance; and (3) ERISA’s minimum funding and other
standards might impose unacceptable costs on government entities. Rose, 828 F.2d at 914.
7
Plaintiff attaches a City of New York Conflicts of Interest Board advisory opinion to its motion
papers. (Wendle Affirm. Ex. E.) The Library is correct that this advisory opinion is limited in
that it concludes that the Library should be treated as a governmental agency for the purposes of
New York City Charter Section 2604(d)(6), a conflicts-of-interest provision discussing postemployment restrictions on City employees. (Doc. 40 at 21.) The advisory opinion does not
relate to ERISA or its governmental plan exemption and is thus of almost no import here.
Further, in clearing a City employee to work for the Library in a position that would otherwise
violate the conflict of interest law, the Board did not mention the contractual relationship
between the City and the Library. Moreover, the Conflicts of Interest Board’s interpretation that
the Library is an “arm” of local government seems to contradict the City charter’s express
provision that the Library is not an “agent” of the City. See N.Y.C. Charter § 2601(2)
(“Agency . . . shall not include any court or any corporation or institution maintaining or
operating a public library.”).
16
Because there is no evidence that any of these considerations apply to the Library, my conclusion
comports with Congress’s purpose in enacting ERISA’s governmental plan exemption.
IV.
CONCLUSION
For the reasons stated above, Plaintiff’s motion to remand this case to New York State
Supreme Court is DENIED. A status conference will be held in this case on May 9, 2019 at 11
a.m. The Clerk of Court is respectfully directed to terminate the pending motion. (Doc. 36.)
SO ORDERED.
Dated: April 18, 2019
White Plains, New York
_____________________________
CATHY SEIBEL, U.S.D.J.
17
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