Self-Insurance Inst v. Korioth

UNITED STATES COURT OF APPEALS
for the Fifth Circuit

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No. 94-50089
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SELF-INSURANCE INSTITUTE OF AMERICA, INC.,

Plaintiff-Appellee,

VERSUS

CLAIRE KORIOTH, ET AL.,

Defendants-Appellants.

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Appeals from the United States District Court
for the Western District of Texas
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(May 22, 1995)

ON PETITIONS FOR REHEARING
(Opinion September 15, 5th Cir. 1994, 32 F.3d 175)

Before LAY,1 DUHÉ, and DeMOSS, Circuit Judges.

DUHÉ, Circuit Judge:

Defendants-Appellants, certain state officials of Texas, ask

that we reverse an award of back taxes and attorneys' fees against

them and in favor of Self-Insurance Institute of America (SIIA).

SIIA, an association whose members include self-insured ERISA plan

sponsors and third party administrators, sued to enjoin enforcement

of a maintenance tax on contract administrators of insurance plans

(Tex. Ins. Code art. 21.07-6 (West Supp. 1995)) against ERISA

plans, plan sponsors, and third-party administrators. The district

court held that ERISA preempted the state tax law, enjoined the

1
Circuit Judge of the 8th Circuit, sitting by designation.
State Defendants from enforcing or threatening to enforce article

21.07-6 with respect to ERISA plans and ERISA administrators,

ordered a refund of taxes and fees paid by ERISA plans or

administrators under article 21.07-6, and awarded attorneys' fees.

Conceding the equitable relief, Defendants have appealed only the

refund order and attorneys' fee award. Upon cross-petitions for

rehearing, the panel withdrew its opinion. 44 F.3d 245 (5th Cir.

1995). On rehearing, we vacate both the refund order and the

attorneys' fee award.

I.

In an earlier appeal this Court determined that SIIA, as a

plaintiff seeking injunctive relief from state regulation on the

basis of federal preemption, has presented a federal question, and

that SIIA met requirements for associational standing to seek

injunctive and declaratory relief on behalf of its members. Self-

Insurance Inst. of Am. v. Korioth, 993 F.2d 479 (5th Cir. 1993).

In addition to enjoining Defendants from enforcing the state tax

law, the district court on remand ordered Defendants to refund

taxes and fees paid by SIIA members.2 Defendants challenge the

refund order as being improperly beyond the scope of the

associational standing approved for SIIA.

We agree. The panel of the first appeal approved SIIA's

associational standing noting, "[I]t is undeniable that SIIA's

2
The judgment appealed provides in part "that the Defendants must
refund any taxes and/or fees paid by any self-funded ERISA plan,
employer/sponsor of such a plan, or contract administrator of such
a plan, as result of the attempted or threatened application of
these articles of the Texas Insurance Code." 3 R. 564.

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individual members need not participate in the litigation.

Therefore SIIA is properly in a position to represent its members

in a representative capacity and has standing to do so." Self-

Insurance, 993 F.2d at 484-85. Though an association may have

standing to seek "a declaration, injunction, or some other form of

prospective relief" on behalf of its members, it does not enjoy

standing to seek damages for monetary injuries peculiar to

individual members where the fact and extent of injury will require

individualized proof. Warth v. Seldin, 422 U.S. 490, 515-16

(1975).

As conceded by SIIA at oral argument, a refund cannot be

litigated without the individual participation of SIIA's members.3

In view of the State's continuing authority to tax non-ERISA

administration through article 21.07-6, each member of SIIA must

show the extent to which it administers ERISA-governed plans or

non-ERISA-governed insurance plans before a court could determine

refund eligibility and amount. See NGS Am., Inc. v. Barnes, 998

3
SIIA also conceded that state rather than federal proceedings
are the proper forum for the members seeking refunds. It became
apparent at argument that SIIA wants us to uphold the refund order,
not because it desires to obtain a federal money judgment on
remand, but because of dissatisfaction with the state remedy for
obtaining a refund. With a federal order of refund, SIIA could
threaten contempt if the State through dilatory tactics or
burdensome requirements frustrates the members' attempts to obtain
their refunds through the state administrative procedure.
Texas provides an administrative remedy for an administrator
seeking a refund but none of the members of SIIA have pursued it
yet. In the present posture of this case, SIIA's concerns about
the efficacy of Texas administrative procedures for refunds are not
before us. We will not countenance SIIA's efforts to obtain a
federal order of refund to use as a preemptive strike in state
administrative proceedings.

3
F.2d 296, 300 (5th Cir. 1993) (affirming an injunction against

collection of the article 21.07-6 tax from third-party

administrators, but only in their capacities as administrators of

ERISA-governed plans; noting that Commissioner may enforce the tax

against third-party administrators in their capacity as

administrators of non-ERISA governed plans).

Though SIIA enjoys associational standing to seek injunctive

relief, we conclude that to obtain refund relief, each member of

SIIA who claims a refund must be a party. SIIA therefore has no

standing to claim a refund on its members' behalf. See Warth, 422

U.S. at 516; see also United Steelworkers of Am. v. University of

Ala., 599 F.2d 56, 59 (5th Cir. 1979) (recognizing Union's standing

to seek declaratory and injunctive relief, but no standing to seek

money damages on behalf of members where damages are not common to

entire membership nor shared by all in equal degree). We conclude

that the refund order exceeds the scope of SIIA's associational

standing and vacate the refund order.4

II.

In its motion for attorneys' fees, SIIA invoked an ERISA

provision for a fee award by an ERISA "participant, beneficiary, or

fiduciary." 29 U.S.C.A. § 1132(g)(1)(West 1985). Defendants argue

that the court erred in awarding attorneys' fees because it had

4
Defendants have also argued that the court erred by ordering the
state Defendants to pay tax refunds at all because of the Eleventh
Amendment sovereign immunity of states. With vacatur of the refund
order, the judgment does not call for Defendants to pay money. We
therefore do not reach the question whether the order of refund
would offend the Eleventh Amendment.

4
previously found that SIIA was not an ERISA participant,

beneficiary, or fiduciary. We agree.

SIIA is not an entity enumerated in § 1132(g)(1); it had

associational standing only because its members were. See 3 R. 532

(district court's finding that SIIA not an enumerated entity);

Self-Insurance, 993 F.2d at 481-84 (finding federal question

jurisdiction notwithstanding fact that suit was not authorized by

ERISA § 1132(g)(1) conferring standing upon participants,

beneficiaries, and fiduciaries only); id. at 484 (upholding SIIA's

standing because its members were fiduciaries). Because the

statute authorizes attorneys' fees only in favor of the enumerated

entities, we will not expand the privilege to include a party with

associational standing. See Runyon v. McCrary, 427 U.S. 160, 185

(1976) (requiring "explicit Congressional authorization" to alter

the "American Rule" that attorneys' fees are not a recoverable cost

of litigation); Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421

U.S. 240, 247 (1975) (recognizing that some fee-shifting statute

must apply in order to alter the American Rule). ERISA does not

support a fee award in favor of SIIA.

SIIA alternatively argues that fees are authorized under the

Declaratory Judgment Act, 28 U.S.C.A. § 2201-02 (West 1994).

Section 2201, which authorizes federal courts to grant declaratory

relief, plainly does not grant a right to fees. Also, § 2202, the

provision authorizing "further necessary or proper relief"5 in a

5
28 U.S.C. § 2202 provides in full, "Further necessary or proper
relief based on a declaratory judgment or decree may be granted,
after reasonable notice and hearing, against any adverse party

5
declaratory action, does not provide statutory authority for an

award of attorneys' fees. Mercantile Nat'l Bank v. Bradford Trust

Co., 850 F.2d 215, 218 (5th Cir. 1988).

SIIA makes much of a statement in Mercantile that § 2202 does

not authorize a fee award "that would not otherwise be available

under state law in a diversity action." Id. SIIA contends that

this statement allows us to consider whether the Texas Declaratory

Judgment Act (DJA) would grant SIIA a right to fees. We disagree,

because the Texas DJA is inapplicable. Jurisdiction in this case

is under 28 U.S.C.A. § 1331 (West 1993) (federal question

jurisdiction), not diversity where state law applies. Mercantile

recognizes that a party may recover fees in a federal declaratory

judgment action where "controlling substantive law" permits such

recovery. Mercantile, 850 F.2d at 216, 217. The Texas DJA is

neither substantive nor controlling.

SIIA having failed to show its entitlement to fees under an

applicable fee-shifting statute, we vacate the award of attorneys'

fees in SIIA's favor.

III.

We vacate the refund order because SIIA's individual members'

entitlement to refunds involves questions beyond which SIIA was

granted standing to litigate. Because no statute authorizes a fee

award, we vacate the fee award as well. SIIA's additional request

for attorneys' fees in this appeal is denied.

VACATED; fee request DENIED.

whose rights have been determined by such judgment."

6