Hightower v. Texas Hospital Ass'n

COBB, District Judge,

concurring in part and dissenting in part:

I concur with analysis and holding of the court concerning Title IV and dissent from majority’s Title I analysis and holding.

It is true that no federal court has yet decided to enforce the Title I exemption based on fulfillment of only one of the “established or maintained” criteria. However, at least three circuits have recognized that a literal reading of the language in Title I’s governmental exemption leads to very anomalous results. See Alley, 984 F.2d at 1205 & n. 11; Silvera v. Mutual Life Insurance Company of New York, 884 F.2d 428 , 425-426 (9th Cir.1989); Rose, 828 F.2d at 919-920.

I agree the starting point of statutory construction is the text of the statute and, if Congress’ intent is clear in the plain language of the statute, that is also the end of the construction. Here the plain language is disjunctive but Congress’ intent is certainly less than lucid. Interpreting section 1002(32) either in the disjunctive or conjunctive presents serious problems when considered with the general purpose of the governmental exemption and the statute as a whole.

Rose explains why the use of conjunctive or disjunctive construction for Title I’s governmental exemption provisions leads to results inconsistent with the apparent legislative purpose of ERISA. See Rose, 828 F.2d at 919-920. The court recognized the difficulty in interpreting section 1002(32). It noted that adopting the literal meaning of “established or maintained” under section 1002(32) would enable a private entity, lacking the government-backed security of taxing powers, to take over a governmental plan without subjecting itself to the requirements of ERISA. Id. at 919.

Alternatively, if the “established and maintained” language of section 1321(b)(2) was adopted, a governmental entity could not take over a private pension plan and qualify for an ERISA exemption. Id. at 920. Both interpretations lead to results contrary to the stated goals of the statute. Although the court did not reach the merits of this statutory quandary, Rose recognized that “the status of the entity which currently maintains a particular pension plan bears more relation to Congress’ goals in enacting ERISA and its various exemptions, than does the status of the entity which established the plan.” Id. at 920; see also Alley v. Resolution Trust Corp., 984 F.2d 1201 , 1205 n. 11 (D.C.Cir.1993) (adopting a similar test based on “the core concern for ERISA purposes — the nature of an entity’s relationship to and governance of its employees.”) The Alley court also used this test to determine whether the Federal Asset Disposition Association was an “agency or instrumentality” for purposes of Title I’s governmental exemption, (citing Rose, 828 F.2d at 918); and see Silvera v. Mutual Life Insurance Co. of New York, 884 F.2d 423, 425-426 (9th Cir.1989) (Holding “ ‘Congress, in exempting governmental plans, was concerned more with the governmental nature of public employees and public employers than with the details of how a plan was established or maintained.’”) (quoting Rose, 828 F.2d at 920 (quoting Feinstein, 477 F.Supp. at 1262)).

As stated above, the legislative history and purpose of this statute is improve the “fairness and effectiveness of qualified retirement plans in their vital role of providing retirement income.” H.R.Rep. No. 93-807, 1974 U.S.Code Cong. & Ad.News 4670, 4676. The main concern of Congress was to create legislation that would curb the misuse of pension funds and the resulting loss of benefits which had enured to the employees/beneficiaries of private retirement plans. H.R.Rep. No. 93-807, 1974 U.S.Code Cong. & Ad.News at 4681; and see Roy, 878 F.2d at 49 (citing H.R.Rep. No. 533, 93d Cong., 2d Sess., re *452 printed in 1974 U.S.Code Cong. & Admin.News 4639).

With the prevailing goals of ERISA at issue, the lease executed between the Foundation and the County should be dispositive. Paragraph 5.3 of the lease provides that “[e]ffeetive the Commencement date, Lessee [Foundation] shall assume sole responsibility for hiring, promotion, discharge, setting of wage scales and rates, supervision of employees, and, without regard to when they arise, workers’ compensation claims, employee grievances, and disciplinary actions.” Without question, the execution of this lease made the Foundation the employer of the Hospital employees. 1

As such, the governmental status of the pension plan has changed. Once the Foundation executed the lease, thereby assuming responsibility for the employees and the Plan, the Plan should have ceased to be a governmental plan for purposes of Title I. The lease specifically called for the Foundation to assume the status of employer of the hospital employees and assume responsibility for their pension plan. The Hospital employees could then no longer be considered governmental employees. For these reasons, the Plan could no longer remain exempt from the Title I provisions of ERISA.

Being persuaded that the Second Circuit’s analysis in Rose, that “the status of the entity which currently maintains a particular pension plan bears more relation to Congress’ goals in enacting ERISA and its various exemptions, than does the status of the entity which established the plan” is more in keeping with the purposes of ERISA, I would hold that the use of “or” in Title I does not, in this case, exempt the Plan before us from ERISA. Rose, 828 F.2d at 920. At least two other circuit courts have also recognized the Rose analysis quoted here and found it a better test for governmental exemption status under Title I. Alley, 984 F.2d at 1205 & n. 11; Silvera, 884 F.2d at 425-426 . 2

In the case sub judice, the Foundation assumed control over the Plan and the Hospital employees when it executed the lease. Reviewing the Foundation’s status with respect to the Plan and its employees does more to implement Congress’ goals in enacting ERISA and its various exemptions, than does the County’s status as the governmental entity which “established or maintained” the Plan. I would hold the governmental exemption under Title I for this Plan ceased to applicable once the Foundation executed the lease and assumed control over the Plan. For these reasons, I respectfully dissent from the court’s holding reversing the district court’s holding as to Title I.

. Paragraph 5.2 also provides that "[ljessee [Foundation] shall supervise, manage and operate the hospital and its financial and fiscal affairs in a manner consistent with all applicable federal, state, and local laws and ordinances and in accordance with the terms of this agreement."

. The Supreme Court has also recognized that the statute does not clearly set out ERISA's coverage provisions. See Massachusetts v. Morash, 490 U.S. 107, 115 , 109 S.Ct. 1668, 1673 , 104 L.Ed.2d 98 (1989) (finding it necessary to “look to the provisions of the whole law, and its object and policy” in determining the scope of employee welfare benefit plans under section 1002(3)).