767 F2d 919

767 F.2d 919

ACCIDENT FUND, A LEGAL ENTITY AUTHORIZED BY THE MICHIGAN
LEGISLATURE PURSUANT TO 1912 PA10 (FIRST EXTRA SESSION) PART
V, SEC. 1; 1915 CL 5477, WARD ELLISON AND MAX GROST,
INDIVIDUALLY, ELSTON-RICHARDS STORAGE COMPANY AND RUSSELL
JAMESON, INDIVIDUALLY, PLAINTIFFS-APPELLANTS,
v.
NANCY A. BAERWALDT, COMMISSIONER OF INSURANCE OF THE STATE
OF MICHIGAN; SILVERIA O. KANOYTON, PERSONAL DIRECTOR OF THE
STATE OF MICHIGAN; JOHN HEUENI, DIRECTOR OF THE DEPARTMENT
OF LICENSING AND REGULATION OF THE STATE OF MICHIGAN; LOREN
MONROE, TREASURER OF THE STATE OF MICHIGAN; GERALD MILLER,
DIRECTOR OF MANAGEMENT AND BUDGET OF THE STATE OF MICHIGAN;
AND MICHIGAN CIVIL SERVICE COMMISSION, DEFENDANTS-APPELLEES.

NO. 84-1130

United States Court of Appeals, Sixth Circuit.

6/26/85

W.D.Mich.

AFFIRMED

On Appeal From The United States District Court for the Western District of Michigan

BEFORE: KEITH and KURPANSKY, Circuit Judges, and PHILLIPS, Senior Circuit Judge.

PER CURIAM:

1

The plaintiffs in this case are the Accident Fund (the Fund), a state-created insurer of workmen's compensation plans; and two long-term employees of the Fund who hold pension policies governed by the Employees' Pension Trust and Plan, a benefits plan maintained by the Fund for its employees.1 The defendants, all officers of the State of Michigan, include the Commissioner of Insurance, the Personnel Director of the Civil Service Commission, and the Director of the Department of Licensing and Regulation.

2

The plaintiffs appeal from an order entered by the United States District Court for the Western District of Michigan dismissing the case on February 2, 1984. The dismissal was based on the district court decision not to exercise federal jurisdiction pursuant to the doctrines of abstention espoused in Burford v. Sun Oil Company, 319 U.S. 315 (1943) and Railroad Commission v. Pullman Company, 312 U.S. 496 (1941). For the reasons stated below, the district court judgment is affirmed.

3

The facts of this case arise from a dispute over whether the Accident Fund is a state agency or an autonomous insurer of workmen's disability compensation. In 1912, the Michigan Legislature created the Fund in conjunction with one of four methods authorized under the first Michigan Workers' Compensation Act for employer payment of workers' compensation claims. 1912 Public Act 10 (First Extra Session) Part V Sec. 1; See 1969 P.A. 313 as amended (MCLA 418.101; MSA 17.237(101)). Under the fourth method of compensation payment provided in the Act, five or more employers may request the Commissioner of Insurance to collect compensation premiums from them and administer the monies through the Fund. Id.

4

In the provisions of the Act governing administration of the Fund, the Legislature accorded the Commissioner broad authority over the Fund's operation, including the discretionary power to dissolve it. However, the plaintiffs allege that since the Fund's inception, Michigan Commissioners of Insurance have not exercised this plenary authority but have instead allowed the Fund's Advisory Board to direct its operations. Thus, the plaintiffs assert that until December 1976, the Board conducted Accident Fund activities fiscally and administratively independent of the State, including maintenance of the Fund employees' pension plan under the Employee Retirement Income Security Act of 1974 (ERISA).2

5

On December 7, 1976, Attorney General Frank Kelly issued an opinion which precluded the Fund's operation as an independent entity; the opinion formally classified the Fund as a state agency and assigned its employees to the State Civil Service. O.A.G. 1975-1976 No. 5147, p. 695, 698 (December 7, 1976). Pursuant to the Attorney General's opinion, state agencies proceeded with measures to transfer fund employees to the State Civil Service system. The plaintiffs first challenged this reassessment of the Fund's status by requesting a hearing before the Commissioner of Insurance and by persuading the Michigan Senate to initiate legislation establishing the Fund as an autonomous entity controlled by the Advisory Board. Both of these efforts, however, failed. On May 1, 1981, the plaintiffs filed a complaint for injunctive and declaratory relief in the district court.

6

The plaintiffs alleged inter alia that the Fund had operated as an independent legal entity since its inception; that the pension plan provided for Fund employees wass subject to ERISA; and that the defendants' effort to convert the Fund into a state agency violated several provisions of ERISA, as well as the plaintiffs' rights under the fifth and fourteenth amendments of the Constitution to just compensation for deprivation of property by the state, due process of law and equal protection of the laws. The plaintiffs also alleged that the defendants' actions impaired the plaintiffs' contracts in violation of Article 1, Section 10 of the Constitution, and generally deprived them of the rights, privileges and immunities accorded by the Constitution in violation of 42 U.S.C. Sec. 1983. The defendants denied that the Fund is an independent entity and all other material assertions made by the plaintiffs.

7

On August 9, 1982, the district court initially granted partial summary judgment to the defendants. The court ruled that the Fund was a state agency. Upon reconsideration, the district court reversed its ruling on November 16, 1982, and subsequently certified several questions about the Fund's status to the Michigan Supreme Court. The Michigan Supreme Court declined to review the certified questions. The defendants filed a second motion for summary judgment and a motion to dismiss which the court denied on November 15, 1983. Trial was set for January 9, 1984. On that date, however, the court entered a consent judgment on the policy holders' claims and issued from the bench an oral judgment not to exercise federal jurisdiction. In support of its decision, the district court cited the Burford and Pullman doctrines of abstention. The court entered its order dismissing the case on February 2, 1984. This appeal followed.

DISCUSSION

8

On appeal, the plaintiffs contend that the district court decision to abstain under Railroad Commission v. Pullman, 312 U.S. 496 (1941), constitutes reversible error because the Michigan Supreme Court refused to consider the certified questions of state law submitted by the district court and because the plaintiffs' ERISA claim involved no issues of state law. We do not agree.

9

In Railroad Commission of Texas v. Pullman Co., 312 U.S. 496 (1941), the Supreme Court held that federal court abstention from exercising jurisdiction is appropriate where state court adjudication of an issue under state law would be determinative of related federal claims. Id. at 501. As stated in Colorado River Water Conversation District v. United States, 424 U.S. 800 (1976), 'abstention is appropriate 'in cases presenting a federal constitutional issue which might be mooted or presented in a different posture by a state court determination of pertinent state law." Id. at 814 (quoting County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 189 (1959). In Tyler v. Collins, 709 F.2d 1106, (6th Cir. 1983), this Court established two requirements for Pullman abstention: an unclear state law and the likelihood that a clarification of the state law would obviate the necessity of deciding the federal claim question. Id. at 1108.

10

We agree with the district court that both requirements of Pullman abstention are present in this case. It is clear from the record that the threshold question underlying all of the plaintiffs' claims, (whether the Fund is a state agency), is an unsettled question of Michigan law. The most likely resolution of this issue is that the Fund is a state agency,3 a decision which obviates any need to address the plaintiffs' ERISA claim since that statute does not govern government pension plans. See 29 U.S.C. 1002(32); 1003(b)(1).

11

Accordingly, we find no merit in the plaintiffs' contention that the district court was required to entertain the ERISA claims as they involved no issues of state law. This argument is unsound. Preliminary consideration of the plaintiffs' ERISA claims requires resolution of the same underlying threshold issue of state law: is the Fund a state agency? As noted above, if Michigan courts answer yes to this query, then the ERISA claims do not arise.

12

We also find no merit in the plaintiffs' contention that the Michigan Supreme Court failure to resolve the certified questions required the district court to exercise jurisdiction. The Michigan Supreme Court's refusal to consider the questions submitted by the district court is not determinative of the decision to abstain in this case. At the time of certification, several unresolved factual disputes over how the Fund operated, precluded issuance of a cogent ruling on the Fund's status. As those disputes are currently under consideration in the Ingham County Circuit Court, on appeal the Michigan Supreme Court will have the benefit of a clear factual record with which to resolve the dispute over the Fund's status. Since the two requirements for Pullman abstention are present in this case, the district court judgment to abstain is affirmed with instructions for the district court to retain jurisdiction over the plaintiffs' ERISA claims.

1

The claims of plaintiffs Elston-Richards Storage Company and Russell Jameson, employers who have memberships on the Advisory Board to the Fund and workmen's compensation policies insured by the Fund, were resolved by stipulation and a consent judgment entered by the district court on January 9, 1984. Thus, Elston-Richards Storage Company and Russell Jameson are not parties to this appeal

2

29 U.S.C. Sec. 1001

3

We base this observation on the unrepealed legislation according on the Commissioner of Insurance plenary power over the Fund, and direct liability for the receipt and disbursement of Fund monies. We also note the latest pronouncement by the Michigan Attorney General classifying the Fund as a state agency

Unpublished Disposition NOTICE: Sixth Circuit Rule 24(c) states that citation of unpublished dispositions is disfavored except for establishing res judicata, estoppel, or the law of the case and requires service of copies of cited unpublished dispositions of the Sixth Circuit.