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Koval v. Washington County Redevelopment Authority

July 23, 2009


On Appeal from the United States District Court for the Western District of Pennsylvania (D.C. No. 07-cv-01432) District Judge: Honorable Nora B. Fisher.

The opinion of the court was delivered by: Fuentes, Circuit Judge


Submitted Under Third Circuit L.A.R. 34.1(a), May 19, 2009

Before: FUENTES, JORDAN, and NYGAARD, Circuit Judges.


Appellant Joseph Koval contends that his former employer, the Washington County Redevelopment Authority ("WCRA"), arbitrarily revoked his retirement health plan in violation of Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001-1461. The District Court dismissed Koval's suit for lack of subject matter jurisdiction, finding that the WCRA plan was subject to ERISA's exemption for "governmental plans." 29 U.S.C. § 1003(b)(1). For the reasons set out below, we affirm the judgment of the District Court.


Joseph Koval is a former employee of the WCRA. He retired in 2005 after having worked there for fifteen years. The WCRA's retirement health plan, a Blue Cross/Blue Shield plan, had been revoked in 2003. While it was reinstated as to most employees in 2004, Koval was denied reinstatement. He subsequently sued the WCRA in the Western District of Pennsylvania, alleging that its revocation of his health plan violated ERISA. He also brought state law contract and quasi-contract claims.

The WCRA moved to dismiss the suit under Fed. R. Civ. P. 12(b)(1) for lack of subject matter jurisdiction, arguing that its benefit plan was a "governmental plan," exempted from ERISA by 29 U.S.C. § 1003(b)(1). 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 an agency or instrumentality of any of the foregoing." 29 U.S.C. § 1002(32). The District Court granted the motion to dismiss.

As the District Court noted in its decision, ERISA does not define a "political subdivision," "agency," or "instrumentality" under § 1002(32), nor have we addressed the meaning of those terms. Therefore, the District Court turned to two tests that have been used by other circuits, and applied by district courts in our Circuit, to determine whether an entity is a political subdivision for ERISA purposes.

The Second and Seventh Circuits have adopted the NLRB test, formulated by the Supreme Court in National Labor Relations Board v. Natural Gas Utility District of Hawkins County, Tenn., 402 U.S. 600 (1971), to determine what constitutes a "political subdivision" exempt from the NLRB's jurisdiction under the National Labor Relations Act. Id. at 604-05; see Shannon v. Shannon, 965 F.2d 542 (7th Cir. 1992); Rose v. Long Island R.R. Pension Plan, 828 F.2d 910 (2d Cir. 1987). The NLRB test looks at whether an entity is "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." 402 U.S. at 604-05. In Rose, the Second Circuit adopted this analysis, explaining 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.'" 828 F.2d at 916 (citation omitted). The Seventh Circuit adopted the NLRB approach for similar reasons in Shannon. 965 F.2d at 547-48.

Meanwhile, the D.C. Circuit has applied an "employer-relationship" test as laid out in Alley v. Resolution Trust Corp., 984 F.2d 1201 (D.C. Cir. 1993). That methodology, used in Alley to determine whether a federally chartered savings and loan association constituted a government entity, focuses on whether the entity relates to its employees as a private business would or treats them as government workers. Id. at 1206 (finding entity not to be governmental given that its employees "were outside the civil service system, and were not subject to personnel rules or restrictions on salaries and benefits imposed generally on federal employees"). The D.C. Circuit explained its approach as rooted in the:

background assumption underlying the governmental plan exemption . . . that public employees exempted from ERISA were in fact covered by some distinctively 'public' employment benefit scheme. . . . We find no indication that Congress meant the governmental plan exemption to reach an entity that relates to its employees as would a private ...

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