Denny's, Incorporated v. Chuck CakeDenny's, Incorporated v. Chuck Cake
Vacated and remanded by published opinion. Judge DIANA GRIBBON MOTZ wrote the opinion, in which Judge WIDENER joined. Judge WILLIAMS wrote a concurring opinion.
OPINION
DIANA GRIBBON MOTZ, Circuit Judge:
Upon notification from California officials that its vacation pay practices violated state labor law, Denny‘s, Inc. brought this action in federal court in South Carolina. Denny‘s asked the court to declare that the Employee Retirement Income Security Act (ERISA) preempted these state-law claims, and enjoin the California Labor Commissioner from applying the state law against Denny‘s. Shortly thereafter, the Commissioner sued Dеnny‘s in state court in California seeking to enforce the state law. Several months later, the district court dismissed this action, finding it lacked personal jurisdiction over the Commissioner. We believe that the court did have jurisdiction, but conclude that the Anti-Injunction Act bars all of the relief that Denny‘s seeks. Accordingly, we vacate the judgment of the district court and remand for entry of an order dismissing the complaint for failure to state a claim upon which relief can be granted.
Denny‘s, a restaurant chain with its principal place of business in South Carolina, maintains the Denny‘s, Inc. Vacation Plan (“the Plan“) and the Denny‘s, Inc. Employee Benefits Trust (“the Trust“) for the stated purpose of providing vacation benefits to eligible employees. The Plan provides that salaried and hourly employees cannot use vacation benefit days and will not be paid any vacation benefits upon termination of their employment until and unless they have completed, respectively, six months or one year of continuous employment with Denny‘s.
On July 11, 2002, Denny‘s received a letter from an attorney at the California Department of Industrial Relations. The purpose of the letter was “to come to a global resolution” of issues raised by claims of former Denny‘s employees filed with the California Labor Commissioner. The attorney explained that Denny‘s policy requiring forfeiture of vacation benefits when employees leave prior to six months or one year of employment violated
The California attorney noted that the Department had concluded that “Denny‘s method of funding its vacation pay plan constituted a payroll practice and the plan is not therefore an ERISA plan which preempts state enforcement laws.” The attorney recounted prior discussions and litigation between the parties on this issue, including a state court‘s refusal to grant summary judgment to Denny‘s on its pre-emption defense. Given the numerous claims filed with the Department, the attorney proposed that Denny‘s meet with the Commissioner and discuss an “amicable resolution” to avoid “the time and expense of litigation.” Otherwise, the Department would have “to file an action against Denny‘s to finally resolve this issue.”
In response, on September 6, 2002, Denny‘s1 filed this action for declaratory and injunctive relief in federal court in South Carolina against the Commissioner and the director of the Department of Industrial Relations (collectively, “Commissioner“). Denny‘s sought: (1) a declaration that the Plan and Trust constitute an ERISA plan; (2) a declaration that “ERISA preempts the California statutes, regulations, and any action or decision” of the Commissioner “having the effect of law that [the Commissioner] seek[s] to enforce against [Denny‘s] based upon California law“; and (3) “[p]reliminary and permanent injunctions barring [the Commissioner] from taking any action to enforce California law against [Denny‘s] with regard to the Plan and the Trust.”
Three weeks later, the Commissioner filed a complaint against Denny‘s in California state court, for damages and injunctive relief. The Commissioner asked the state court to award it unpaid vacation wages and waiting time penalties pursuant to
The Commissioner then moved to dismiss the present action, contending that a federal district court in South Carolina lacked personal jurisdiction over the California officials, notwithstanding ERISA‘s nationwide service of process provision,
We turn first to the question of whether the district court could exercise personal jurisdiction over the Commissioner under
ERISA contains a nationwide service of process provision that permits an ERISA enforcement action to be brought in federal court in a district “where the plan is administered” and process to be “served in any other district where a defendant resides or may be found.”
(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan[.]
Section 1132(a)(3)(B) thus permits an ERISA fiduciary to bring an action to “enforce any provisions of this subchapter.” Id. Indisputably, “this subchapter” refers to subchapter I of Chapter 18 of the United States Code, which codified Title I of ERISA and includes
Indeed, the Supreme Court has expressly stated that “[u]nder § 502(a)(3)(B) of ERISA [§ 1132(a)(3)(B)], a participant, beneficiary or fiduciary of a plan covered by ERISA may bring a declaratory judgment action in federal court to determine whether the plan‘s trustees may comply with a state [law].” Franchise Tax Bd. v. Constr. Laborers Vacation Trust, 463 U.S. 1, 26-27, 103 S. Ct. 2841, 77 L. Ed. 2d 420 (1983). The Court ultimately rejected the view that a state action brought by the California Franchise Tax Board against an ERISA fiduciary for a declaration that the fiduciary must comply with state law arose under ERISA and so could be removed to federal court — but only because the tax board itself was not an ERISA “participant, beneficiary, or fiduciary,” as required by
Yet, the district court held that Denny‘s declaratory and injunctive action based on ERISA‘s preemption provision,
We acknowledge that this result may at first seem odd because, just as the present action depends on whether the plaintiff‘s claim falls within
The district court based its contrary decision almost exclusively on NGS American, Inc. v. Jefferson, 218 F.3d 519 (6th Cir. 2000). There the Sixth Circuit held that an ERISA fiduciary‘s federal suit — seeking a declaration that ERISA preempted a beneficiary‘s threat to initiate private state court litigation against the fiduciary based on an alleged violation of state law — could not be brought under
In determining whether a case falls within
In sum, Denny‘s declaratory and injunctive action to enforce
III.
Because the district court found it lacked personal jurisdiction over the Commissioner, it did not address the Commissioner‘s alternative Anti-Injunction Act (hereinafter “the Act“) argument. The Commissioner reiterates on appeal that the Act bars a federal court from granting the relief requested by Denny‘s and so requires dismissal of the case for failure to state a claim upon which relief can be granted.
A court of the United States may not grant an injunction to stay proceedings in a State court except as expressly authorized by Act of Congress, or where necessary in aid of its jurisdiction, or to protеct or effectuate its judgments.
The Act serves as a “necessary concomitant of the Framers’ decision to authorize, and Congress’ decision to implement, a dual system of federal and state courts” and “represents Congress’ considered judgment as to how to balance the tensions inherent in such a system.” Chick Kam Choo v. Exxon Corp., 486 U.S. 140, 146, 108 S. Ct. 1684, 100 L. Ed. 2d 127 (1988). Accordingly, “[w]e take seriously the mandate in the Anti-Injunction Act and recognize that for over two hundred years, the Act has helped to define our nation‘s system of federalism.” Employers Res. Mgmt. Co., Inc. v. Shannon, 65 F.3d 1126, 1130 (4th Cir. 1995).
The Act constitutes “an absolute prohibition against any injunction of any state-court proceedings, unless the injunction falls within one of the three specifically defined exceptions in the Act.” Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 630, 97 S. Ct. 2881, 53 L. Ed. 2d 1009 (1977) (plurality opinion). These three exceptions are injunctions: (1) expressly authorized by statute; (2) necessаry to aid the court‘s jurisdiction; or (3) required to protect or effectuate the court‘s judgments. Chick Kam Choo, 486 U.S. at 146, 108 S. Ct. 1684; Atl. Coast Line R.R. Co. v. Bhd. of Locomotive Eng‘rs, 398 U.S. 281, 287-88, 90 S. Ct. 1739, 26 L. Ed. 2d 234 (1970). None of these exceptions apply here.9
Notwithstanding the inapplicability of the only exceptions to the Act recognized by Congress, Denny‘s contends that the Act does not bar its suit because of a judicial exception created by one of our sister circuits and followed by two others. Specifically, Denny‘s contends that the Act‘s prohibition on enjoining “proceedings in state court” does not apply because when it filed this action requesting injunctive relief in early September 2002, “there were no pending state proceedings, within the meaning of the [Act] or otherwise.” Reply Brief at 7.
As always, we turn first to the plain language of the statute to determine its meaning. See Williams v. Taylor, 529 U.S. 420, 431, 120 S. Ct. 1479, 146 L. Ed. 2d 435 (2000). The plain language of the Act clearly and unequivocally prohibits a federal court from granting “an injunction to stay proceedings in a State court.”
Courts must “presume that a legislature says in a statute what it means and means in a statute what it says there.” Conn. Nat‘l Bank v. Germain, 503 U.S. 249, 253-54, 112 S. Ct. 1146, 117 L. Ed. 2d 391 (1992). A court may not disregard the plain language of a statute unless a literal application of the statutory language “would lead to absurd results ... or would thwart the obvious purpose of the statute.” In re Trans Alaska Pipeline Rate Cases, 436 U.S. 631, 643, 98 S. Ct. 2053, 56 L. Ed. 2d 591 (1978) (internal quotation marks and citation omitted). Here literal application of the Act‘s language would neither thwart its purpose nor produce an absurd result. Quite the contrary, abiding by the statutory language clearly furthers the Act‘s purpose of avoiding “unseemly conflict between the state and the federal courts.” N.L.R.B. v. Nash-Finch Co., 404 U.S. 138, 146, 92 S. Ct. 373, 30 L. Ed. 2d 328 (1971).
Moreover, the Supreme Court has directed that the Act, in particular, “is not a statute conveying a broad general policy for appropriate ad hoc application” but rather is “expressed in a clear-cut prohibition qualified only by specifically defined exceptions.” Amalgamated Clothing Workers v. Richman Bros., 348 U.S. 511, 515-16, 75 S. Ct. 452, 99 L. Ed. 600 (1955). Courts are not to “enlarge[]” these “exceptions ... by loose statutory construction.” Atl. Coast Line, 398 U.S. at 287, 90 S. Ct. 1739. Instead, “[a]ny doubts as to the propriety of a federal injunction against state court proceedings should be resolved in favor of permitting the state courts to proceed ... to finally determine the controversy.” Id. at 297, 90 S. Ct. 1739.
The Barancik court advanced several policy concerns in support of its holding. For example, it worried that “[u]nless the applicability of the statutory bar is determined by the state of the record at the time the motion for an injunction is made, a litigant would have an absolute right to defeat a well-founded motion by taking the very step the federal court was being urged to enjoin.” Id. at 937. But a federal court can eliminate this problem by issuing a temporary restraining order against the filing of a state court suit while considering a motion for a preliminary injunction seeking such relief. See Royal, 3 F.3d at 884; see also Dombrowski, 380 U.S. at 484 n. 2, 85 S. Ct. 1116 (noting that the Act does not prevent a federal court from restraining a party from instituting state proceedings). The Barancik court feared that such reliance on temporary restraining orders “might encourage the liberal granting of the kind of protective orders the statute was intended to prevent.” Barancik, 489 F.2d at 938. However, the basic harm the statute was intended to prevent was not the liberal granting of protective orders, per se, but the “needless friction between state and federal courts.” Mitchum v. Foster, 407 U.S. 225, 233, 92 S. Ct. 2151, 32 L. Ed. 2d 705 (1972) (internal quotation marks and citation omitted). Temporarily staying a potential state suit before it is filed so that an anti-suit injunction can be considered wоuld seemingly create significantly less friction than allowing a state suit to be commenced, only to enjoin it after it is filed.
The Barancik court also suggested that its ruling had “the salutary advantage of discouraging the unseemly race to the state courthouse ... while the federal court had under consideration a motion for a status quo order.” Barancik, 489 F.2d at 935 n. 5. But by hinging the applicability of
Although we recognize the legitimacy of the concerns raised by the Seventh Circuit in Barancik, the exception it created to meet these concerns poses its own problems. Moreover, even if application of the Barancik holding would result in better policy in the eyes of some, this is not the course Congress has chosen in the Act; views as to good policy cannot overcome a clear statutory directive. See, e.g., Sigmon Coal Co., Inc. v. Apfel, 226 F.3d 291, 308 (4th Cir. 2000) (noting that “our job is to determine the meaning of the statute passed by Congress, not whether wisdom or logic suggests that Congress could have done better“). Therefore, we hold that the Act‘s prohibition on enjoining state court proceedings applies to any such proceeding pending at the time the federal court acts on the request for injunctive relief, regardless of when the state court action was filed. Since the California proceeding was clearly pending at the time the district court acted on Denny‘s request for injunctive relief, the Act bars the relief Denny‘s requested.
IV.
For the foregoing reasons, the judgment of the district court is VACATED AND REMANDED.
WILLIAMS, Circuit Judge, concurring in part and concurring in the judgment in part:
At the outset, I concur completely in the majority‘s jurisdictional analysis. Having concluded that the district court had personal jurisdiction over the California state officials, this case requires our court to weigh in on two separate issues related to the Anti-Injunction Act that have divided the Courts of Appeals. I concur in the opinion of the court that the plain language of the Anti-Injunction Act bars an injunction in this case, unless one of its exceptions applies. In addition, because I believe that the judgment of the court is compelled by our prior decision in Employers Resource Management Co. v. Shannon, 65 F.3d 1126 (4th Cir. 1995), I concur in the judgment that ERISA does not authorize an injunction of state court proceedings in this case. I write separately to highlight some of my concerns with these latter two issues.
First, I address the application of the Anti-Injunction Act (AIA) to state proceedings filed after federal proceedings are filed. The plain language of the Anti-Injunction Act prohibits injunctions “to stay proceedings in a State court.”
Second, application of the AIA‘s “expressly authorized by Act of Congress” exception to this case also presents some very interesting issues. We addressed a similar issue in Employers Resource Management, and held that “§ 1132(a) of ERISA does not operate as an automatic exception to the Anti-Injunction Act.” Employers Res. Mgmt., 65 F.3d at 1129. Because the Supreme Court in Mitchum v. Foster, 407 U.S. 225, 92 S. Ct. 2151, 32 L. Ed. 2d 705 (1972), held that
Were we writing on a clean slate, I might conclude that ERISA should be an exception to the AIA in all cases where the plan fiduciary seeks injunctive relief against state officials who are trying to impose state law or regulations on an ERISA plan. That option, however, is not available to us after Employers Resource Management, because in that case, Virginia was attempting to apply its insurance laws to an ERISA plan. Thus, after Employers Resource Management, we are left with binding circuit precedent holding that at least one ERISA case is subject to the strictures of the AIA.
Because of the same conflicting passages that are quoted above, however, I do not believe that Employers Resource Management answers the question of whether its holding necessarily extends to all ERISA cases (i.e., a categorical approach), or if instead we should apply a case-by-case approach to determine if ERISA is an “expressly authorized” exception under the circumstances of each particular case. I note that the majority in footnote 9 implicitly has adopted a categorical approach and extended Employers Resource Management to all ERISA cases. See ante at 526 n. 9; see also Total Plan Services, Inc. v. Texas Retailers Assoc., Inc., 925 F.2d 142 (5th Cir. 1991) (holding that
The Supreme Court has not spoken clearly as to whether the AIA should be interpreted using a categorical or a case-by-case approach. See Vendo Co. v. Lektro-Vend Corp., 433 U.S. 623, 97 S. Ct. 2881, 53 L. Ed. 2d 1009 (1977). In Vendo, the Court held that § 16 of the Clayton Act did not carve out an exception to the AIA. In a plurality opinion, then-Justice Rehnquist, joined by Justice Stewart and Justice Powell, focused solely on § 16 of thе Clayton Act — its text and legislative history — to determine that the “expressly authorized” exception did not apply. Id. at 631-41, 97 S. Ct. 2881 (Rehnquist, J.). After recognizing that the plain language of § 16 of the Clayton Act, like ERISA, authorized injunctions, but did not mention state-court proceedings, Justice Rehnquist noted that
in Mitchum, absence of express language authorization for enjoining state-court proceedings in
§ 1983 actions was cured by the presence of relevant legislative history. In this case, however, neither the respondents nor the courts below have called to our attention any similar legislative history in connection with the enactment of § 16 of the Clayton Act.
Id. at 634, 97 S. Ct. 2881. Thus, he concluded, § 16 of the Clayton Act is never an exception to the AIA. Id. at 641, 97 S. Ct. 2881 (noting that to be an “expressly authorized” exception to the AIA, “the Act countеnancing the federal injunction must necessarily interact with, or focus upon, a state judicial proceeding. Section 16 of the Clayton Act ... is clearly not such an Act.“). This “categorical” approach mirrors the approach taken by the Court in Mitchum v. Foster, 407 U.S. 225, 238-43, 92 S. Ct. 2151, 32 L. Ed. 2d 705 (1972), when it held that
In contrast, Justice Blackmun, joined by Chief Justice Burger, in his concurrence in the result in Vendo, applied a case-by-case approach. See Vendo, 433 U.S. at 643, 97 S. Ct. 2881 (Blackmun, J., concurring in the result) (noting that he “do[es] not agree that [it] is invariably the case” that § 16 of the Clayton Act is not an “expressly authorized” exception to the AIA). In Justice Blackmun‘s view, § 16 of the Clayton Act is an exception to the AIA if the “currently pending state-court proceedings ... are themselves part of a ‘pattern of baseless, repetitive claims’ that are being used as an anticompetitive device, all the traditional prerequisitеs for equitable relief are satisfied, and the only way to give the antitrust laws their intended scope is by staying the state proceedings.” Id.
Justice Stevens, joined by Justice Brennan, Justice White, and Justice Marshall, dissented. Justice Stevens would have held that § 16 of the Clayton Act “is an Act of Congress which expressly authorizes an injunction against a state-court proceeding which violates the antitrust laws” even though there is no mention of state-court proceedings or the AIA in § 16. Id. at 654, 97 S. Ct. 2881 (Stevens, J., dissenting).
I note that the categorical approach employed by Justice Rehnquist in Vendo has much to recommend it. A categorical approach seems to be more consistent with the statutory language of the AIA, which speaks of “Act[s] of Congress” rather than the circumstances of particular cases. Moreover, а case-by-case approach likely would be difficult to administer. For example, every plan fiduciary would undoubtedly claim that it would be unable to carry out its responsibilities under ERISA if the state court proceeding continued, thus, in effect creating an exception for all ERISA fiduciary cases.
In any event, we need not resolve that issue here because under either approach ERISA would not be an “expressly authorized” exception to the AIA in the circumstances of this case. If we apply a categorical approach, then we are hemmed in by our prior decision in Employers Resource Management. If, instead, we apply a case-by-case approach, the parties have not pointed us to anything in the text or legislative history of ERISA indicating that Congress intended to carve-out this type of case from the run-of-the-mill ERISA case. Accordingly, I concur in the majority‘s judgment that ERISA does not authorize the requested relief in this case.