:: The “Long Arm” of ERISA: An Overview of ERISA Venue Provisions

“Applying the legal standards explained above, the court determines that ERISA’s national service of process provision permits this court to exercise personal jurisdiction over Defendant Jaeger, so long as he has had sufficient minimum contacts with the United States. The court finds that Jaeger’s lifelong residency within the United States establishes the necessary minimum contacts, such that an exercise of personal jurisdiction over him would comport with constitutional due process requirements.”

Verizon Employee Benefits Committee v. Jaeger, 2006 WL 2880451 (N.D.Tex.) (September 28, 2006)

The expansive reach of ERISA’s venue provision, 29 U.S.C. 1132(e)(2), is illustrated by the recent decision in Verizon Employee Benefits Committee v. Jaeger, 2006 WL 2880451 (N.D.Tex.) (September 28, 2006).

Henry Jaeger allegedly received an overpayment from his employer’s pension plan. When the plan commenced an action in a Texas district court, Jaeger, a West Virginia resident, filed a motion to dismiss on the ground that he lacked sufficient contacts with the Texas for the court to exercise personal jurisdiction over him. For similar reasons, he argued that service of process was inadequate.

In denying the motion to dismiss, the district court analyzed Jaeger’s claims under the provisions of ERISA Section 1132(e)(2) which provides:

Where an action under this subchapter is brought in a district court of the United States, it may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found, and process may be served in any other district where a defendant resides or may be found.

The Fifth Circuit has adopted the view that this provision authorizes “nationwide service of process”. This expansive concept of venue requires a readjustment of the typical “minimum contacts” required for due process.

The district court concisely contrasted the typical framework for personal jurisdiction over a party with the broader ERISA concept. Typically, a federal court has jurisdiction over a nonresident defendant if the state long-arm statute confers personal jurisdiction over that defendant, and if the exercise of jurisdiction is consistent with due process under the United States Constitution. This analysis requires that (1) the defendants have established “minimum contacts” with the forum state; and (2) whether the exercise of personal jurisdiction over the defendants would offend “traditional notions of fair play and substantial justice.”

On the other hand, the Fifth Circuit has interpreted ERISA’s venue provisions as requiring a broader view of minimum contacts. As the district court explained:

The Fifth Circuit has held that these provisions amount to a congressionally legislated “nationwide service of process” in ERISA actions, such that the relevant personal jurisdiction inquiry becomes whether the defendant has had minimum contacts with the United States. Bellaire Gen. Hosp. v. Blue Cross Blue Shield, 97 F.3d 822, 825 (5th Cir.1996) (citing Busch v. Buchman, Buchman & O’Brien, Law Firm, 11 F.3d 1255 (5th Cir.1994).

Applying this standard to the facts before it, the district court held that Jaeger was properly served with process and that venue was proper in the Northern District of Texas since the plan was administered there.

Interestingly, the facts did not involve an analysis of plan administration as a whole. For larger plans, this approach is significant since operations may not be all located in one district.

In this connection, the court stated:

Verizon’s Complaint alleges that “[r]esponsibility for day-to-day administration of the Plan (including recoupment of overpayments) has been delegated by the Verizon Employee Benefits Committee to the pension administration department within the Verizon human resources department in Coppell and Irving, Texas.” . . . Here, Jaeger contends that Plaintiffs have merely alleged “a delegation of certain of its responsibilities in connection with the employee benefit plan at issue to individuals in Texas,” which he believes is insufficient “to establish that this district is the one in which the plan was administered.” . . . Jaeger is merely arguing that not enough of the Plan is administered in Verizon’s Texas offices to justify venue in this District . . . This court is satisfied that Verizon’s pension plan is “administered” within this district, particularly in light of Verizon’s response to Defendant’s Motion to Dismiss.

The court noted that “other courts examining the issue of where a plan is ‘administered’ have taken the general meaning of the word, along with legislative history of § 1132(e)(2), and concluded that ‘the plain meaning of “administer” means “to manage,” so that one plan may be administered in more than one district. (citing, Wallace v. Am. Petrofina, Inc., 659 F.Supp. 829, 831 (E.D.Tex.1987).

Note: Not all courts agree with the analysis applied in Jaeger. The court itself noted that:

Other federal courts have disagreed with such a broad exercise of personal jurisdiction in cases involving nationwide service of process provisions. See Republic of Panama v. BCCI Holdings(Luxembourg) S.A., 119 F.3d 935, 947 (11th Cir.1997). The Eleventh Circuit, in rejecting the Fifth Circuit’s approach, held that the Fifth Amendment still requires a personal jurisdiction inquiry to “comport with traditional notions of fair play and substantial justice.” Id. “Therefore, even when a defendant resides within the United States, courts must ensure that requiring a defendant to litigate in the plaintiff’s chosen forum is not unconstitutionally burdensome.” Id.

The Fifth Circuit itself has expressed misgivings in Bellaire Gen. Hosp. v. Blue Cross Blue Shield, 97 F.3d 822, 825 (5th Cir.1996), but followed the precedent already established in Busch v. Buchman, Buchman & O’Brien, Law Firm, 11 F.3d 1255 (5th Cir.1994)

Other pertinent authorities include:

  • Peay v. BellSouth Medical Assistance Plan, 205 F.3d 1206, 1209 (10th Cir.2000) (rejecting the argument that § 1132(e)(2) confers nationwide jurisdiction)
  • Medical Mut. of Ohio v. deSoto, 245 F.3d 561 (6th Cir. 2001) (approving nationwide jurisdiction)
  • Denny’s, Inc. v. Cake, 364 F.3d 521 (4th Circ. 2001) (approving nationwide jurisdiction)

The advantage of nationwide service of process will not always run to the advantage of the plan. See, e.g., Bostic v. Ohio River Co. 517 F.Supp. 627 (D.C.W.Va. 1981) (“breach” occurred in State where participant resided and alleged failed to receive proper plan payment) Thus, the expansive view of Section 1132(e)(2) has “first to file” implications which may add another layer of analysis in appropriate cases.

Finally, though beyond the scope of this article, it is important to note that choice of venue does not always equate to choice of law. In some cases, particularly where pendent State law claims are brought, this consideration may be significant.