JOSÉ A. CABRANES, Circuit Judge:
Plaintiff-appellant Ralph J. Nowak appeals from a May 15, 1995, final judgment of the United States District Court for the Western District of New York granting summary judgment in favor of defendants-appellees Ironworkers Local 6 Pension Fund (the "Fund"), William Bohen, and Richard Kempf on the ground that the Fund's denial of Nowak's application for a disability retirement
For the purposes of this appeal, the parties do not dispute the following facts. Nowak was a member of the International Association of Bridge, Structural and Ornamental Iron Workers Local Union Number 6 (the "Union") from September 21, 1955, through June 1, 1973, and between September 1955 and June 1971, he worked to accrue approximately 15.2 years of service. As a member of the Union, Nowak was entitled to certain benefits as set forth in the Ironworkers Local No. 6 Pension Plan, which was first established in 1966. When Nowak left the Union, the 1973 version of the Plan was in effect; the Plan was later amended in 1985, 1988, and 1993.
On January 26, 1993, Nowak submitted an application to the Fund for a Total Disability Retirement Pension ("disability pension" or "disability benefits") based on a January 19, 1993, determination by the Social Security Administration that Nowak was disabled and therefore entitled to monthly Social Security disability benefits. Nowak's disability is not disputed.
On January 12, 1994, Nowak filed suit in the New York Supreme Court, Erie County, alleging (1) that the Fund breached its obligation to pay his disability pension under the Plan; (2) that Kempf, as Administrative Manager, breached his fiduciary duty by refusing to pay disability pension benefits under the Plan; and (3) that the Fund violated its obligations to pay retirement disability benefits under the Plan in violation of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B). On February 11, 1994, the Fund removed the proceeding to the United States District Court for the Western District of New York, pursuant to 28 U.S.C. § 1441, on the ground that the federal court had original subject matter jurisdiction of the ERISA action.
After removal to federal court, Nowak filed an amended complaint on March 1, 1994, again claiming that the action arose under ERISA, re-stating the three original causes of action, and adding a fourth claim for attorney's fees under ERISA. On June 8, 1994, with the consent of the parties, the district court entered an order referring all further proceedings in the case to United States Magistrate Judge Leslie G. Foschio. See 28 U.S.C. § 636(c).
On June 15, 1994, the defendants filed a motion to dismiss or, in the alternative, a motion for summary judgment, arguing that Nowak had failed to exhaust his remedies under the 1993 version of the Pension Plan (the "1993 Plan") before filing suit, and was therefore precluded from filing the action. That motion was amended to argue, as an additional ground for summary judgment, that Nowak was not entitled to benefits under the 1973 Plan because he had failed to accumulate the five years of future service necessary to entitle him to a Vested Deferred Pension under the Plan and he had incurred a break in service prior to fulfilling the requirements
In a thoughtful Decision and Order filed May 4, 1995, the district court held that it did not have federal subject matter jurisdiction because ERISA did not apply to Nowak's action. Relying on 29 U.S.C. § 1144(b)(1)'s statement that ERISA does not govern "any cause of action which arose, or any act or omission which occurred, before January 1, 1975," the magistrate judge found that Nowak's denial of disability benefits was based on the 1973 Plan's "break-in-service" provision. He held that the 1973 Plan's adoption of its break-in-service policy was the relevant act or omission under § 1144(b)(1), and that because this policy was adopted prior to January 1, 1975, ERISA could not apply to Nowak's action. Accordingly, he found that subject matter jurisdiction did not exist and remanded Nowak's state law claims to state court pursuant to 28 U.S.C. § 1447(c).
On Nowak's oral motion for reconsideration, the district court issued a second Decision and Order on May 12, 1995, exercising supplemental jurisdiction over Nowak's remaining state law claims. Reviewing Nowak's claims under state contract law principles, the court held that the administrative exhaustion requirement of the 1993 Plan was not relevant to Nowak's action and that no such requirement existed under the applicable 1973 Plan. However, it found that based on the unambiguous language of the 1973 Plan, Nowak was not entitled to benefits.
Nowak had applied for a Total Disability Retirement Pension under ¶ 3.4 of the Plan, which reads:
When the Plan was first established in 1966, it included two provisions for the calculation of accrual of benefits — one based upon a member's service before June 1, 1966, the effective date of the Plan, and the other based upon a member's service after June 1, 1966. Accordingly, an employee's total Credited Service takes into account his service before June 1, 1966 ("Credited Past Service"), and after June 1, 1966 ("Credited Future Service").
The district court found that Nowak accumulated 10.8 years of Credited Past Service and 4.4 years of Credited Future Service for a total of 15.2 years of total Credited Service at the time of his "break in service"
Before considering Nowak's appeal on its merits, we must determine whether the district court, having dismissed Nowak's ERISA claim, properly asserted supplemental jurisdiction over his state law claims. To the extent that this inquiry involves a question of subject matter jurisdiction, we determine sua sponte whether the court properly exercised its authority. Mansfield, C. & L.M. Ry. v. Swan, 111 U.S. 379, 382, 4 S.Ct. 510, 511-12, 28 L.Ed. 462 (1884); Clarkson Co. v. Shaheen, 544 F.2d 624, 627 (2d Cir. 1976).
A. Supplemental Jurisdiction
Under 28 U.S.C. § 1367(a), district courts have "supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution." While the district court may, at its discretion, exercise supplemental jurisdiction over state law claims even where it has dismissed all claims over which it had original jurisdiction, see 28 U.S.C. § 1367(c)(3), it cannot exercise supplemental jurisdiction unless there is first a proper basis for original federal jurisdiction. Cushing v. Moore, 970 F.2d 1103, 1106 (2d Cir. 1992); see In re Joint Eastern and Southern Dist. Asbestos Litig., 14 F.3d 726, 730 n. 2 (2d Cir.1993) ("[T]he court may not exercise supplemental jurisdiction over claims unless the court has `original jurisdiction' over at least one of the plaintiff's claims.").
In its May 4, 1994, Decision and Order, the district court held that it lacked federal subject matter jurisdiction over Nowak's case because ERISA did not apply to Nowak's claim for recovery of benefits. Although it initially remanded the action to state court pursuant to 28 U.S.C. § 1447(c), upon reconsideration, the district court asserted supplemental jurisdiction over Nowak's state law claims on the ground that
Insofar as the district court previously determined that there was no original federal subject matter jurisdiction over the suit, it could not exercise supplemental jurisdiction over Nowak's state claims. Nevertheless, because we find that the dismissal of Nowak's ERISA claim is properly construed as a dismissal for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6) — rather than a dismissal for lack of subject matter jurisdiction under Rule 12(b)(1) — we affirm his exercise of supplemental jurisdiction and his consideration of Nowak's state contract claims.
A case is properly dismissed for lack of subject matter jurisdiction under Rule 12(b)(1) when the court lacks the statutory or constitutional power to adjudicate the case. In contrast, a dismissal under Rule 12(b)(6) is a dismissal on the merits of the action — a determination that the facts alleged in the complaint fail to state a claim upon which relief can be granted. While distinguishing between a dismissal for lack of subject matter jurisdiction under Rule 12(b)(1) and a dismissal for failure to state a claim under Rule 12(b)(6) appears straightforward in theory, it is often much more difficult in practice. This is particularly so in cases involving federal question jurisdiction under 28 U.S.C. § 1331, which provides district courts with "original jurisdiction of all civil actions arising under the Constitution, laws or treaties of the United States." In federal question cases, the very statute that creates the cause of action often confers jurisdiction as well — that is, the claim "arises under" the same federal law that gives the plaintiff a cause of action.
Generations of jurists have struggled with the difficulty of distinguishing between Rules 12(b)(1) and 12(b)(6) in federal question cases, described by Judge Friendly as a "lesson [that] has been taught as often in decision as it has been ignored in argument and dicta." Fogel v. Chestnutt, 668 F.2d 100, 106 (2d Cir.1981), cert. denied, 459 U.S. 828, 103 S.Ct. 65, 74 L.Ed.2d 66 (1982). In The Fair v. Kohler Die and Specialty Co., 228 U.S. 22, 25, 33 S.Ct. 410, 411-12, 57 L.Ed. 716 (1913), Justice Holmes described the differences in a federal question case as follows:
(citations omitted). Two decades later, Justice Black explored the same question:
Bell v. Hood, 327 U.S. 678, 682-83, 66 S.Ct. 773, 776, 90 L.Ed. 939 (1946) (citations and footnote omitted).
Because of the more-than-occasional difficulties involved in parsing a claim alleging federal question jurisdiction to determine whether it fails to state a claim or fails to meet jurisdictional requirements, the federal courts have followed a general practice of granting jurisdiction in most cases and dismissing for lack of subject matter jurisdiction only under narrow circumstances. In the words of Professor Moore,
Nowak's complaint alleged federal question jurisdiction on the ground that his claim for benefits "arose under" ERISA, 29 U.S.C. § 1132(a)(1)(B), which gives a plan participant or beneficiary a cause of action "to recover benefits due to him under the terms of his plan." ERISA's jurisdictional provision, 29 U.S.C. § 1132(e)(1), gives state courts and federal district courts "concurrent jurisdiction of actions under subsection (a)(1)(B)." However, pursuant to 29 U.S.C. § 1144 — commonly referred to as ERISA's "preemption provision" — ERISA is not applicable where (1) the plaintiff's asserted claim accrued, or (2) the relevant act or omission that served as the basis for the plaintiff's claim occurred, before January 1, 1975.
In the instant case, the district court determined that "Nowak applied for a disability benefit pension under the 1973 Plan, and was denied benefits based on the 1973 Plan's break-in-service policy." Drawing on our opinion in Lamontagne — in which we found that the district court properly dismissed a plaintiff's claim because the 1978 denial of his pension application "followed inexorably from the pension fund's pre-1975 adoption of its break in employment policy," Lamontagne, 869 F.2d at 156 — the court held that the inclusion of a break-in-service provision in
There can be no doubt that on its face Nowak's complaint claims a right of action under federal law, namely ERISA. Paragraph 4 of the amended complaint states: "This action arises under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a)(1)(B)." Nowak's third cause of action specifically sought recovery of the benefits owed to him under the Plan, based on his allegations that (1) he met the Plan's criteria for a total retirement disability pension (Complaint at ¶¶ 6-11), and (2) the Plan denied his pension application on October 28, 1993 (Complaint at ¶ 14). Furthermore, it cannot be said that Nowak's complaint is "plainly insubstantial" or that it fails to present any issue worthy of adjudication. See Giulini, 654 F.2d at 192. In this case both federal jurisdiction and the merits of Nowak's federal claim turn on the same question: did the relevant act or omission resulting in the Plan's denial of Nowak's application occur before January 1, 1975? See 29 U.S.C. § 1144(b)(1). In order for the district court to answer that question, it had to first study the 1973 Plan's break-in-service provision and assess whether or not the Plan's denial of benefits to Nowak in 1993 was a discretionary decision (in which case the relevant act or omission occurred in 1993) or an "inexorable consequence" of the adoption of the policy in 1973. The jurisdictional question (whether Nowak's claim "arose under" ERISA) and the question on the merits (whether Nowak stated a claim upon which relief could be granted) were inextricably bound together, and required the court to make a substantial inquiry into the statute's applicability. Even though Nowak's claim that ERISA applied to his case was ultimately unsuccessful, it cannot be said that Nowak failed to present any issue worthy of adjudication.
Because Nowak's asserted basis for federal question jurisdiction survives facial scrutiny and is neither immaterial nor insubstantial, we find that the district court erred in characterizing its dismissal of Nowak's claim as one for lack of subject matter jurisdiction. Insofar as Nowak's jurisdictional allegations were not frivolous on their face, his claim deserved at least "a preliminary review on the merits." Goldman, 878 F.2d at 73. In these circumstances, the court should, and effectively did, exercise jurisdiction and dismiss the ERISA claim pursuant to 12(b)(6). See Estate of Soler v. Rodriguez, 63 F.3d 45, 47 n. 1 (1st Cir.1995) (construing district court's judgment dismissing the complaint for lack of subject matter jurisdiction as one for failure to state a claim where district court failed to follow preferable practice of assuming subject matter exists in case where both federal jurisdiction and existence of federal claim turned on whether complaint stated a federal question).
In so concluding, we recognize that other courts have spoken of § 1144 in "jurisdictional" terms. That is, courts have concluded that § 1144 not only requires the application of state law where the relevant act or omission occurred prior to January 1, 1975, but also proscribes a federal forum where state law serves as the sole basis for a plaintiff to recover his pension benefits. See Menhorn, 738 F.2d at 1503-05; see also Stevens v. Employer-Teamsters Joint Council No. 84 Pension Fund, 979 F.2d 444, 449-54 (6th Cir.1992); Cowan v. Keystone Employee Profit Sharing Fund, 586 F.2d 888, 893-95 (1st Cir.1978). However, these cases do not squarely address the question now before us: whether a claim that fails to satisfy the requirements of § 1144 is properly dismissed for lack of subject matter jurisdiction under
We agree with Menhorn that federal courts should not entertain claims for benefits by plan participants that do not satisfy § 1144(b)(1)'s criteria — where "ERISA by its own terms does not supplant otherwise applicable state law."
Because a basis for original jurisdiction existed in this case, the district court had the discretion to retain jurisdiction over the plaintiff's supplemental state law claims once it dismissed the underlying federal claim. See 28 U.S.C. § 1367(c)(3) ("[D]istrict courts may decline to exercise supplemental jurisdiction over a claim" if "the district court has dismissed all claims over which it has original jurisdiction ....") (emphasis added). In reviewing such a decision to retain jurisdiction we consider factors such as judicial economy, convenience, fairness, and comity. Thus, if
Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir.1994) (quoting 28 U.S.C.A. § 1367, Practice Commentary at 835 (1993)). We find that the magistrate judge, having presided over the case since April 6, 1994, and having dismissed Nowak's federal claim only nine days before it was set for trial, acted well within his discretion in exercising supplemental jurisdiction over Nowak's related state causes of action.
B. State Law Contract Claims
We turn now to Nowak's contract claims under New York law. Nowak contends that the district court erred in determining that the provisions of the 1973 Plan were unambiguous as a matter of law with respect to the requirements for receiving a disability retirement pension, thereby rendering him ineligible for such benefits.
We have repeatedly held that, in a contract dispute, summary judgment may be granted only where the language of the contract is unambiguous. See, e.g., Sayers v. Rochester Tel. Corp., 7 F.3d 1091, 1094 (2d Cir.1993). Under New York law, whether a written contract is ambiguous is a question of law for the trial court whose determinations will be reviewed de novo. W.W.W. Assoc., Inc. v. Giancontieri, 77 N.Y.2d 157, 163, 565 N.Y.S.2d 440, 443, 566 N.E.2d 639 (1990). Contract terms are ambiguous if they are
Sayers, 7 F.3d at 1095 (internal quotation marks omitted). When the relevant language has "a definite and precise meaning, unattended by danger of misconception in the purport of the [contract] itself, and concerning which there is no reasonable basis for a difference of opinion," no ambiguity exists. Breed v. Ins. Co. of North America, 46 N.Y.2d 351, 355, 413 N.Y.S.2d 352, 355, 385 N.E.2d 1280 (1978). On a motion for summary judgment, any ambiguity must be construed against the moving parties, which in this case are the defendants-appellants. Seiden Assoc. Inc. v. ANC Holdings, Inc., 959 F.2d 425, 429 (2d Cir.1992).
Upon de novo review, we conclude that the district court properly granted summary judgment in favor of the defendants. The 1973 Plan clearly and unambiguously renders Nowak ineligible for a disability retirement pension. Under ¶ 3.4 of the Plan, which establishes the criteria for receiving a Total Disability Retirement Pension, the plaintiff must have become "Totally Disabled on or after June 1, 1966, and ... [have] completed at least 15 years of Credited Service." Paragraph 2.1 of the Plan states that Credited Service must be calculated "in accordance with this Section 2." (Emphasis added.) Specifically, under ¶ 2.5, an employee who suffers a "Break in Service before he has completed the age, service and other requirements for retirement ... shall lose all Credited Service under the Plan for employment prior to such Break in Service." (Emphasis added.)
Nowak concedes that he suffered a break in service in 1973 and that he became disabled in 1993. Because his break in service occurred before he fulfilled the requirements for obtaining a Total Disability Retirement Pension under ¶ 3.4 — that is, before he became disabled — Nowak, pursuant to ¶ 2.5, lost all credited service accumulated before 1973. Accordingly, he was unable to accrue the fifteen years of credited service needed to obtain a disability pension under ¶ 3.4.
Nowak argues that the break-in-service provision of ¶ 2.5 is ambiguous insofar as the term "other requirements" in ¶ 2.5 does not specifically incorporate ¶ 3.4's requirement that he be "Totally Disabled." Contrary to Nowak's contention, when read in conjunction with the rest of the Plan, the phrase "other requirements for retirement" clearly includes the criteria for receiving any of the
Because we find the terms of the 1973 Plan to be unambiguous, we need not reach Nowak's arguments urging us to apply contra proferentum and other rules of construction to resolve the alleged ambiguity against the defendants. Based on the clear, unambiguous terms of the 1973 Plan, Nowak is ineligible for the disability retirement pension, and the district court properly granted summary judgment in favor of the defendants.
1. Because Nowak's jurisdictional allegations were neither immaterial nor insubstantial, we construe the district court's dismissal of his claim for pension benefits under ERISA as a dismissal on the merits pursuant to Rule 12(b)(6).
2. The district court acted within its discretion, pursuant to 28 U.S.C. § 1367(c)(3), in exercising supplemental jurisdiction over Nowak's related state law claims.
3. Because the Plan clearly and unambiguously rendered Nowak ineligible for a disability pension, summary judgment was properly granted in favor of the defendants.
Accordingly, the judgment of the district court is affirmed.