## Facts

- Denny’s, a national restaurant company headquartered in South Carolina, administered an employee vacation-benefit plan and related trust.
- The plan conditioned eligibility for vacation use and payout on completing a minimum period of continuous employment and denied vacation pay upon termination for employees who had not met the service threshold.
- California labor officials asserted that this termination “forfeiture” policy violated California Labor Code § 227.3, which requires payment of vested vacation upon termination and bars forfeiture of vested vacation time.
- After receiving a letter referencing claims filed with California labor authorities, Denny’s sued California officials in federal court in South Carolina seeking (i) a declaration that ERISA preempted the California claims and (ii) an injunction preventing enforcement of § 227.3 against the plan.
- Shortly thereafter, the California Labor Commissioner filed a state-court enforcement action in California seeking vacation wages allegedly withheld from former employees.
- The district court dismissed the South Carolina federal action for lack of personal jurisdiction over the California officials.

## Issues

1. Whether ERISA’s nationwide service-of-process provision permitted a South Carolina federal court to exercise personal jurisdiction over California state officials who lacked minimum contacts with South Carolina.
2. Whether the Anti–Injunction Act barred the requested federal declaratory and injunctive relief because it would effectively stay ongoing California state-court proceedings, and whether any statutory exception applied.

## Decision

- The Fourth Circuit held the district court had personal jurisdiction because ERISA authorizes nationwide service of process and the due process inquiry in that setting turns on contacts with the United States, not the forum state.
- The court nevertheless concluded the Anti–Injunction Act barred all requested relief because both the injunction and the declaration would have the practical effect of halting the pending California state action.
- The court found no applicable Anti–Injunction Act exception: ERISA did not “expressly authorize” enjoining state proceedings; the federal action did not require protection of a res or similar jurisdictional interest; and there was no prior federal judgment to protect from relitigation.
- The Fourth Circuit vacated the jurisdictional dismissal and remanded with instructions to dismiss for failure to state a claim.

## Legal Principles

- When a federal statute provides nationwide service of process, personal jurisdiction in a federal-question case may be assessed based on the defendant’s contacts with the United States as a whole.
- The Anti–Injunction Act broadly bars federal relief that would stay state-court proceedings, including declaratory judgments that operate as the functional equivalent of an injunction.
- The Anti–Injunction Act’s exceptions are narrowly construed; general federal preemption and ordinary civil-enforcement provisions do not, without specific statutory authorization, permit federal courts to enjoin state proceedings.
- The “necessary in aid of jurisdiction” exception generally does not apply to ordinary in personam disputes, and the “relitigation” exception requires an existing federal judgment.

## Conclusion

The Fourth Circuit ruled that ERISA’s nationwide service-of-process provision supported personal jurisdiction over California officials in South Carolina, but the Anti–Injunction Act required dismissal because the requested declaratory and injunctive relief would effectively stop a pending California state enforcement case and no statutory exception permitted such federal interference.


Denny’s, Inc. v. Cake, 364 F.3d 521 (4th Cir. 2004)