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Townes Telecommunications, Inc. v. National Telecommunications Cooperative Association

United States District Court, E.D. Virginia, Alexandria Division

July 9, 2019

TOWNES TELECOMMUNICATIONS, INC., et a/., Plaintiffs,
v.
NATIONAL TELECOMMUNICATIONS COOPERATIVE ASSOCIATION, et al., Defendants.

          MEMORANDUM OPINION

          T. S. ELLIS, III, UNITED STATES DISTRICT JUDGE

         This removed action is a dispute over whether plaintiffs-seven employers seeking to withdraw from a pension plan-must pay a multi-million-dollar withdrawal liability to defendants-the trade association that offers the plan and the plan trustee. Plaintiffs object to defendants' imposition and calculation of the withdrawal liability. To vindicate their view, plaintiffs filed suit in Virginia state court, claiming that defendants' imposition and calculation of withdrawal liability violate Virginia law. Defendants then removed this case to federal court on the ground that plaintiffs' state law claims involve an important, disputed federal question.

         At issue now is plaintiffs' Motion to Remand the case to state court. For the reasons that follow, the motion must be denied; plaintiffs' state law claims require adjudication of a federal issue that is necessarily raised, actually disputed, substantial, and capable of resolution in federal court without disrupting the federal-state balance.

         I.

         According to the Complaint, plaintiffs are seven telecommunications companies[1] that are members of the National Telecommunications Cooperative Association ("NTCA"), a trade association that represents approximately 800 independent telecommunications companies operating in rural areas of the United States. The NTCA offers its members access to a multiple employer pension plan ("the Plan"), and plaintiffs have elected to participate in the Plan for the benefit of their employees. Defendant NTCA Retirement and Security/Savings Plan Trustee Committee ("NTCA Committee") serves as the plan fiduciary. Importantly, the Plan is governed by the Employment Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1001, et seq.

         Plaintiffs seek to withdraw from the Plan and transfer their employees' pension funds to a different plan because they contend the Plan has become increasingly costly. The NTCA informed plaintiffs that if they withdraw from the Plan, they must pay approximately $10 million in withdrawal liability. Defendants contend that the imposition of this withdrawal liability is authorized-indeed, mandated-by the document establishing the Plan, which is entitled "Specifications of the Retirement and Security Program for Employees of NTCA [a]nd Its Members" ("Program Specifications").

         Plaintiffs disagree with this contention. According to plaintiffs, contract provisions that violate a state or federal statute are unenforceable under Virginia law. See, e.g., Blick v. Marks, Stokes & Harrison, 360 S.E.2d 345, 348 (Va. 1987) ("Generally, a contract based on an act forbidden by [state] statute is void and no action will lie to enforce the contract."). Plaintiffs further contend that the provisions of the Program Specifications authorizing the imposition of withdrawal liability violate ERISA. This, plaintiffs argue, is because ERISA permits the imposition of withdrawal liability on employers participating in multi employer plans, but contains no such authorization with respect to multiple employer plans.[2] Plaintiffs also contend that defendants' method for calculating the withdrawal liability violates ERISA. As such, plaintiffs allege that both defendants' planned imposition of withdrawal liability and method of calculating that liability are invalid and unenforceable under Virginia law because they are contrary to ERISA. Accordingly, plaintiffs brought this action in the Circuit Court for Arlington County, Virginia, seeking a declaration that defendants are barred from imposing withdrawal liability and, alternatively, a declaration that defendants are barred from calculating the withdrawal liability as they propose.

         Defendants subsequently removed the action to federal court, alleging that both federal question and diversity jurisdiction supported removal. Defendants have since abandoned their diversity jurisdiction argument and now proceed solely on the theory that jurisdiction exists pursuant to 28 U.S.C. § 1331. In this regard, defendants' Notice of Removal alleges that the "action is properly removed ... because it arises under federal law by alleging as an essential element of the claims a violation of federal law." Notice of Removal ¶ 12. Specifically, defendants argue that jurisdiction exists because plaintiffs' state law claims necessarily raise the disputed and substantial federal issue whether the imposition of withdrawal liability or the method used to calculate that liability violates ERISA.[3]

         II.

         Section 1441 of Title 28 of the United States Code provides for the removal of "any civil action brought in a State court of which the district courts of the United States have original jurisdiction." As such, removal is proper where the state court action could have been initiated in federal district court. Merrell Dow Pharm. Inc. v. Thompson, 478 U.S. 804, 808 (1986). Congress has granted "[t]he district courts... original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. Ordinarily, an action "arises under" federal law within the meaning of § 1331 when federal law creates the cause of action. Gunn v. Minton, 568 U.S. 251, 257 (2013). But this is not the only circumstance in which a claim may "arise under" federal law. Specifically, "§ 1331 confers federal jurisdiction over state-law causes of action ... in a special and small class of cases." Burrell v. Bayer Corp., 918 F.3d 372, 376 (4th Cir. 2019) (internal quotation marks and citation omitted). The Supreme Court in Gunn v. Minton, 568 U.S. 251 (2013), provided an analytical framework for determining whether, as here, a federal question raised by a state cause of action supports federal jurisdiction. Specifically, "federal jurisdiction over a state law claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." Gunn, 568 U.S. at 258.

         Defendants argue that plaintiffs' state law action is within this "special and small category of cases in which arising under jurisdiction still lies." Gunn, 568 U.S. at 258. This, defendants contend, is because resolution of plaintiffs' claims necessarily raise a disputed and substantial federal issue-namely, whether defendants' planned imposition of withdrawal liability or their method of calculating that liability violates ERISA-that "a federal forum may entertain without disturbing any congressionally approved balance of federal and state judicial responsibilities." Id. As such, defendants contend that the four requirements for arising under jurisdiction over a state law action are satisfied and thus federal jurisdiction exists. See Id. Defendants are correct; for the reasons that follow, the ERISA issue is "(1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress." Id.

         A.

         First, plaintiffs' state law claims necessary raise the federal issue. A federal issue is necessarily raised where "every legal theory supporting the claim requires the resolution of a federal issue." Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004) (emphasis in original). Plaintiffs concede that this first factor is satisfied because plaintiffs cannot succeed on either of their claims without resolution of the ERISA issue. Specifically, plaintiffs' first claim alleges that the Program Specifications are unenforceable under Virginia law insofar as they authorize withdrawal liability because the imposition of such withdrawal liability violates ERISA. Compl. ¶¶ 50-54. Simply put, plaintiffs cannot succeed on this claim without resolving whether imposition of the withdrawal liability violates ERISA. Similarly, plaintiffs' second claim alleges that the method defendants used to calculate the withdrawal liability is invalid under Virginia law because this calculation method also violates ERISA. Compl. ¶¶ 56-61. Simply put, plaintiffs cannot succeed on this claim without resolving whether the method defendants used to calculate withdrawal liability violates ERISA. Accordingly, every legal theory supporting plaintiffs' claims requires the resolution of a federal issue-namely, whether the imposition of withdrawal liability on an employer in a multiple employer plan or the method defendants used to calculate that liability violates ERISA. As such, the federal issue is necessarily raised.

         B.

         Second, there is no doubt that the federal issue is actually disputed. Gunn, 568 U.S. at 258. Plaintiffs' argument that the issue is not actually disputed is meritless. Specifically, plaintiffs argue that the parties agree that ERISA is silent with respect to the imposition of withdrawal liability on an employer in a multiple employer plan. According to plaintiffs, the federal issue is not actually disputed because they contend that ERISA does not authorize withdrawal liability for multiple employer plans and defendants argue that withdrawal liability is authorized by the Program Specifications. This artful characterization of the issue and the parties' positions attempts to mask the true dispute between the parties. Yet, a straightforward and accurate description of the dispute plainly reveals an actual dispute over the federal issue. Plaintiffs contend that defendants' planned imposition of withdrawal liability, and proposed method of calculating that liability, violates ERISA. Defendants respond that neither the imposition of withdrawal liability nor the method they used to calculate that liability violates ERISA. Indeed, defendants argue that ERISA requires them to impose withdrawal liability. See 29 U.S.C. ยง 1104(a)(1)(D) (requiring a fiduciary such as the NTCA Committee to "discharge [its] duties with respect to a ...


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