Joseph B. Koval v. WASHINGTON COUNTY REDEVELOPMENT AUTHORITY On Appeal from the United States District…

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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_____________
No. 08-2492
_____________
JOSEPH B. KOVAL,
Appellant
v.
WASHINGTON COUNTY REDEVELOPMENT
AUTHORITY
_____________
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
_____________
Submitted Under Third Circuit L.A.R. 34.1(a),
May 19, 2009
Before: FUENTES, JORDAN, and NYGAARD, Circuit
Judges.

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(Opinion Filed: July 23, 2009)
OPINION OF THE COURT
Peter M. Suwak
P.O. Box 1
Pete’s Surplus Building
Washington, PA 15301
Attorney for Appellant
John M. Giunta
Cipriani & Werner
650 Washington Road, Suite 700
Pittsburgh, PA 15228
Attorney for Appellee
FUENTES, Circuit Judge:
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

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reasons set out below, we affirm the judgment of the District
Court.
I.
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had been revoked in 2003.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.

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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

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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 business—an entity
whose employees are not subject to laws
governing public employees generally.
Id. (citations omitted).
The District Court in this case chose to apply the NLRB
test, distinguishing the employer-relationship test from Alley as
inapposite because that case dealt with a potential federal rather
than state government entity. The Court then determined that the
WCRA was a political subdivision in that it had been created by
a state statute for “‘public uses for which public money may be
spent and private property may be acquired by the exercise of
the power of eminent domain,’” and the statute defined a
“Redevelopment Authority” as “a public body,” “‘exercising
public powers of the Commonwealth as an agency thereof.’”
Koval v. WCRA, No. 07-cv-1432, 2008 WL 1773871, at *5
(W.D. Pa. Apr. 16, 2008) (quoting 35 Pa. Cons. Stat. Ann. §§
1702, 1703, 1709). The Court therefore dismissed the ERISA
claim for lack of subject matter jurisdiction and consequently
found that no supplemental jurisdiction existed over the state

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law claims.
Koval timely appealed, arguing that under either the
NLRB test or the Alley test, WCRA is ineligible for ERISA’s
“governmental plan” exception because it was not created as a
government entity and because it does not offer its employees
the opportunity to participate in a state pension plan.
II.
The District Court had jurisdiction over this action under
28 U.S.C. § 1331 and 29 U.S.C. § 1132(a)(1)(B), and we have
appellate jurisdiction pursuant to 28 U.S.C. § 1291. We exercise
plenary review over a dismissal for lack of subject matter
jurisdiction under Rule 12(b)(1). Swiger v. Allegheny Energy,
Inc., 540 F.3d 179, 180 (3d Cir. 2008).
III.
A.
Our first task is to decide what analysis we should use in
order to determine whether the benefit plan offered by the
WCRA was a “governmental plan” exempt from ERISA. The
district courts of this circuit have applied both the NLRB and
Alley analyses in making such determinations. See, e.g., Perazzo
v. Reliance Standard Life Ins. Co., No. 00-3342, 2001 WL
1468287 (E.D. Pa. Nov. 15, 2001) (relying on NLRB); Zarilla
v. Reading Area Cmty. Coll., No. 99-1057, 1999 WL 554609
(E.D. Pa. June 30, 1999) (following Alley). We hereby endorse
the NLRB test as the appropriate analysis to apply in
determining whether a state-affiliated entity is a “political
subdivision” of the state for purposes of 29 U.S.C. § 1002(32).
Cf. Shannon v. Shannon, 965 F.2d 542 (7th Cir. 1992) (adopting

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In applying the NLRB test in this context, the Second1
and Seventh Circuits have taken slightly different approaches.
The Second Circuit used the NLRB test in Rose only to
determine whether an entity was a “political subdivision,”
utilizing yet a third approach—a six-factor analysis formulated
by the Internal Revenue Service to determine whether a plan
was a “governmental plan” under ERISA for purposes of certain
tax consequences—to determine whether the entity was an
“agency” or “instrumentality” under § 1002(32). Rose, 828 F.2d
at 916-18. The Seventh Circuit in Shannon, on the other hand,
used the two-prong NLRB analysis to decide if a hospital was
either a “political subdivision,” “agency,” or “instrumentality”
of the state. 965 F.2d at 548.
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NLRB test in applying § 1002(32)); Rose v. Long Island
Railroad Pension Plan, 828 F.2d 910 (2d Cir. 1987) (same).1
Alley itself suggests this result. In declining to apply
Rose’s approach to the federal entity at issue in that case, the
D.C. Circuit noted that “[c]oncern about protecting state
authority over relations with state employees was one reason for
the governmental plan exemption . . . ; a Rose-style test focusing
broadly on the extent of governmental contacts may be more
appropriate where state-affiliated entities are concerned.” 984
F.2d 1201, 1205 n.11 (D.C. Cir. 1993); see also Gualandi v.
Adams, 385 F.3d 236, 242-43 (2d Cir. 2004); Hightower v. Tex.
Hosp. Ass’n, 65 F.3d 443, 448 (5th Cir. 1995) (discussing
legislative history indicating governmental plan exception was
in part meant to preserve state and local self-determination);
Rose, 828 F.2d at 914 (highlighting federalism concerns
underlying governmental plan provision). The D.C. Circuit’s

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caveat as to the applicability of Alley to state benefit plans
recognizes that Congress deliberately gave state and local
governments a wide berth in enacting ERISA, with the House
Education and Labor Committee stating in its report:
The Committee is convinced that legislation
seeking reform in the public sector must proceed
with a thorough study of the effects of such
proposals. There are literally thousands of public
employee retirement systems operated by towns,
counties, authorities and cities in addition to the
state and Federal plans. Eligibility, vesting, and
funding provisions are at least as diverse as those
in the private sector with the added uniqueness
added by the legislative process. For this reason
the Committee is convinced that additional data
and study is necessary before any attempt is made
to address the issues of vesting and funding with
respect to public plans.
H.R. Rep. No. 93-533 (1974), reprinted in 1974 U.S.C.C.A.N.
4639, 4647.
The Alley court therefore rightly noted its concern that
the governmental plan analysis, when it arises in relation to a
state entity, should focus on that entity’s ties to state government
rather than the details of how it treats its employees. Such an
approach is reinforced by the language of ERISA itself, which
defines a governmental plan as one that is “established or
maintained” by a governmental entity, thus contradicting
Koval’s assertion that § 1002(32) does not apply here because
the WCRA’s employees do not participate in the state employee

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pension plan. 29 U.S.C. § 1002(32); see also Roy v. Teachers
Ins. & Annuity Ass’n, 878 F.2d 47, 49 (2d Cir. 1989) (holding
that plan need not be maintained by a government entity to fit
within § 1002(32)); Silvera v. Mut. Life Ins. Co. of N.Y., 884
F.2d 423, 426-27 (9th Cir. 1989) (similar).
While the Alley approach is not suited to cases involving
state entities, the NLRB test is particularly appropriate to the
ERISA context. As the Second Circuit explained in Rose v.
Long Island Railroad Pension Plan, 828 F.2d 910 (2d Cir. 1987),
“[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.’” Id. at 916 (quoting H.R. Rep. No. 93-533, 1974
U.S.C.C.A.N. at 4647). The NLRB approach has been utilized
in other contexts to decide whether an entity is a political
subdivision exempt from federal regulation. For example, in
importing the NLRB test to determine if a Chicago-area
zoological society was subject to the Occupational Safety and
Health Act of 1970 (“OSH Act”), 29 U.S.C. § 652(5), the
Seventh Circuit observed that the OSH Act’s “immediate
concern is with the employment relationship,” and that its
“political subdivision exemption represents an accommodation
between the Act’s general purpose of ensuring a safe workplace
and the states’ interest in preserving autonomy in their role as
employers.” Brock v. Chi. Zoological Soc., 820 F.2d 909, 913
(7th Cir. 1987).
Given ERISA’s similar focus on labor and federalism
issues, using the NLRB analysis to interpret its political
subdivision exemption is likewise befitting here. See also

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Shannon, 965 F.2d at 547-48 (citing Skills Dev. Servs., 728 F.2d
294, 299 & n.5 (6th Cir. 1984) (applying NLRB test’s two
prongs in Tenth Amendment context because labor statutes’
exemption for “political subdivisions” also rests on Tenth
Amendment federalism concerns)); Popkin v. N.Y. State Health
& Mental Hygiene Facilities Improvement Corp., 547 F.2d 18,
20 (2d Cir. 1976) (relying on NLRB test to interpret “political
subdivision” exemption from Civil Rights Act of 1964, 42
U.S.C. §§ 2000e et seq.)).
B.
Applying the analysis laid out by the Supreme Court in
the case that enunciated the NLRB test, Hawkins County, it is
clear that the WCRA is a political subdivision of Pennsylvania
under 29 U.S.C. § 1002(32) because it satisfies the first prong
of that test—it was “created directly by the state, so as to
constitute [a] department[] or administrative arm[] of the
government.” 402 U.S. at 604. The Pennsylvania Urban
Redevelopment Law (“URL”), the WCRA’s enabling statute,
defines a “Redevelopment Authority” as “[a] public body and a
body corporate and politic created and organized in accordance
with the provisions of this act.” 35 Pa. Cons. Stat. Ann. § 1703.
Although Appellant points to the statement in the same statute
that the Redevelopment Authority for a city or county “shall in
no way be deemed to be an instrumentality of such city or
county, or engaged in the performance of a municipal function,”
35 Pa. Cons. Stat. Ann. § 1704(a), the URL simultaneously
provides that while a Redevelopment Authority is not an
instrumentality of any particular city or county it is “a public
body, corporate and politic, exercising public powers of the
Commonwealth as an agency thereof.” Id. § 1709 (emphasis

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added); cf. Crilly v. Se. Pa. Transp. Auth. (“SEPTA”), 529 F.2d
1355, 1358 (3d Cir. 1976) (finding SEPTA to be a political
subdivision of Pennsylvania under the NLRB test because the
state statute creating SEPTA described it as “an ‘agency and
instrumentality’ of the Commonwealth [created] to ‘exercise . .
. public powers’”) (quoting 66 Pa. Stat. Ann. §§ 2001 et seq.).
Moreover, one other aspect of Hawkins County supports
a conclusion that the WCRA in particular is a political
subdivision of Pennsylvania. One of the factors noted by the
Supreme Court in determining that the Tennessee natural gas
utility district being considered was a political subdivision was
the fact that the district was, by statute, granted the power of
eminent domain. 402 U.S. at 606. The URL likewise gives
Redevelopment Authorities the authority “[t]o acquire by
eminent domain any real property . . . for the public purposes set
forth in this act . . . .” 35 Pa. Cons. Stat. Ann. § 1709(i).
Similarly, Hawkins County cited the fact that the district was
provided by statute with “‘all the powers necessary and requisite
for the accomplishment of the purpose for which such district is
created, capable of being delegated by the legislature.’” 402
U.S. at 606 (quoting Tenn. Code Ann. § 6-2612). That provision
is paralleled in the URL’s statement that “[a]n Authority shall
constitute a public body . . . exercising public powers of the
Commonwealth as an agency thereof, which powers shall
include all powers necessary or appropriate to carry out and
effectuate the purposes and provision of this act.” 35 Pa. Cons.
Stat. Ann. § 1709. In both respects, the WCRA clearly has
powers beyond those “of a private corporation.” Hawkins
County, 402 U.S. at 607.
Koval asserts that the District Court’s ruling was in error

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because the WCRA does not satisfy the second prong of the
NLRB test, under which an entity is a political subdivision if it
is administered by individuals who are responsible to public
officials or the general electorate. Id. at 605. Members of a
Redevelopment Authority are appointed by the relevant mayor
or board of county commissioners, but according to Koval they
are not subject to removal thereafter by public officials or the
general populace. However, this issue is irrelevant; having
found that the WCRA is a political subdivision under the first
prong of the disjunctive NLRB test, our inquiry is over. The
WCRA’s benefit plan is a “governmental plan” exempt from
ERISA under 29 U.S.C. § 1003(b)(1), and therefore the District
Court correctly ruled that it did not have subject matter
jurisdiction over Koval’s claims.
IV.
For the foregoing reasons, we will affirm the District
Court’s dismissal of Koval’s complaint under Rule 12(b)(1).

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