# Opposition Brief — Rizzi v. Blue Cross of Southern California

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1989
- **Citation:** 493 U.S. 821

## Text

| BEST AVAILABLE COPY '

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Dotan

supreme Court, U.S,

FILED
JUL 13. 1989
No. 88-2055 —*" A on JR.
In The

Supreme Court of the United States
October Term, 1988

ANTHONY M. RIZZI,

Petitioner,

BLUE CROSS OF SOUTHERN CALIFORNIA,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI
TO THE CALIFORNIA COURT OF APPEAL

RESPONDENT?’S BRIEF IN OPPOSITION

Of Counsel. WILLIAM S. BOGGS
Counsel of Record
VILMA MARTINEZ CHARLES L. DEEM
MUNGER, TOLLES & OLSON GRAY, CARY, AMES & FRYE
355 South Grand Avenue 1700 First Interstate Plaza
35th Floor San Diego, California 92101-4219
Los Angeles, California 90071-1560 (619 ) 699-2758/2978
(213) 683-9100 Attorneys for Respondent

Blue Cross of Southern California

QUESTIONS PRESENTED

1. Does the Employee Retirement Income Security Act of
1974 preempt private causes of action under California In-
surance Code section 790.03(h) for alleged improper process-
ing of a claim for benefits under an employee benefit plan?

2. Is a health and hospitalization program established and
maintained by an employer through the purchase of insurance
an employee benefit plan within the meaning of the
Employee Retirement Income Security Act of 1974 if the
employer plays an administrative role in the plan, serving as
more than a mere conduit for the payment of insurance
premiums?

PARTIES TO THE PROCEEDINGS

Respondent Blue Cross of Southern Califomia has
changed its name to Blue Cross of California. Blue Cross of
California has no parent company, subsidiary, or affiliate.

ill

TABLE OF CONTENTS

QUESTIONS PRESENTED ......

PARTIES TO THE PROCEEDINGS

TABLE OF CONTENTS .........

50 ') SS: oS OS SS Oe S

ens £22) 22 2 2 OO OOD

1. There Is No Conflict Among the Circuits or
State Courts Concerning ERISA Preemption. . .
2. There Is No Conflict Among the Circuits
or State Courts Concerning the Elements of

en BRISA Plan. ...........

3. The Decision Has Little Impact on Future Claims.
4. This Identical Issue Was Twice Recently
Denied Review by Petition for Certiorari...... .

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SS Oo. 8.6 £68. 4 SS 28 Oe ee

iV

TABLE OF AUTHORITIES

Cases

Amos v. Blue Cross-Blue Shield of Alabama,

ee Fe Goer CRUG, BSD on ws ce ceca ewes
Anschultz v. Connecticut General Life

Insurance Co., 850 F.2d 1467 (11th Cir. 1988) ....
Coleman v. Balkcom, 451 U.S. 949 (1981) ..........
Commercial Life Insurance Co. v. Superior Court,

47 Cal. 3d 473 (1988), cert denied sub nom.

Juliano v. Commercial Life {Insurance Co.,

57 U.S.L.W. 3753 (U.S. May 15, 1989)

eh cane e eee ce nase 5.4 |
Credit Managers Ass'n v. Kennesaw Life & Acc. Ins.,

809 F.2d 617 (9th Cir. 1987) .............
Desmarais v. Joy Manufacturing Co.,

130 N.H. 299, 538 A.2d 1218 (1988) ....
Donovan y. Dillingham, 688 F.2d 1367

Oo ae Sm pee a
Fort Halifax Packing Co. v. Coyne,

OEE UB. LAIST) nk viv oi ves kcecc a's
Hoo v. United States, 108 S. Ct. 742 (1988)
Hood v. Prudential Insurance Co.,

522 So. 2d 265 (Ala. 1988) ............
In re Life Insurance Co. of North America,

857 F.2d 1190 (8th Cir. 1988) ............
Kanne v. Connecticut General Life Insurance Co.,

867 F.2d 489 (9th Cir. 1989), cert. denied,

57 U.S.L.W. _ (U.S. June 26, 1989)

[poe ec anG cee saa ks

39

6

6

369

Table of Authorities Continued

Cases Page
Moradi-Shalal v. Fireman’s Fund Insurance Cos.,

GG CM. SU Tee Cle kon hose eee 8
Pilot Life Insurance Co. v. Dedeaux,

MGA UD SEA) . 5 60s 6 cxceessceerenetes passim

Roberson v. Equitable Life Assurance Society,
869 F.2d 1498 (9th Cir. 1989), aff’ g without op.,

661 F. Supp. 416 (C.D. Cal. 1987) ............. 3
Sampson v. Mutual Benefit Life Insurance Ce,
O63 F230 106 (iat Ce. TPS) ows ov cs edescinc 4

Sayble v. Blue Cross of Southern California,

208 Cal. App. 3d 1108, op. decertified,

___ Cal. 3d __, 89 Los Angeles Daily

Journal D.A.R. 7398 (June 8, 1989) ............ 7
Taggart Corp. v. Life & Health Benefits

Administration, 617 F.2d 1208 (Sth Cir. 1980),

cert. denied sub nom. Taggart Corp. v. Elfros,

O05 UZ. VE UIIEAD ck 6 cena xs sb taken 7
Wayne Chemical, Inc. v. Columbus Agency Service
Corp., 367 F.2d Goa (7: Cor. T8977) oo hia Ses 7

Federal Statutes and Regulations

CRM. 499003 1G) a 6
USE SI 5 or ee 2
29 S04 100MA) «2.000 oe en ee
URE SW joo os ee 6
SO. 6M Oe eee 5

State Statutes

California Insurance Code § 790.03(h) .......... passim

No. 88-2055

in The

Supreme Court of the United States
October Term, 1988

ANTHONY M. RIZZI,

Petitioner,
Vv.

BLUE CROSS OF SOUTHERN CALIFORNIA,
Respondent.

ON PETITION FOR A WRIT OF CERTIORARI
TO THE CALIFORNIA COURT OF APPEAL

RESPONDENT’S BRIEF IN OPPOSITION

Respondent, Blue Cross of Southern California, respect-
fully requests that this Court deny the petition for a writ of
certiorari seeking review of the decision of the California
Court of Appeal, Fourth Appellate District.

OPINION BELOW

The opinion below is adequately set forth in the petition.

STATEMENT OF THE CASE

Rather than correct the numerous factual inaccuracies in
petitioner’s statement of the case, respondent incorporates by
reference the statement of facts in the opinion below. In brief,
petitioner’s complaint alleges, inter alia, that respondent

violated CaliforniaInsurance Code section 790.03(h) by
denying petitioner’s claim for medical benefits under his
employer’s group health insurance policy. In accordance with
established law and this Court’s decision in Pilot Life In-
surance Co. v. Dedeaux, 481 U.S. 41 (1987), the trial court
granted summary judgment against petitioner on the ground
that his claims were preempted by the Employee Retirement
Income Security Act of 1974 ("ERISA"), 29 U.S.C. section
1001 et seq. The California Court of Appeal, Fourth Appellate
District, affirmed the judgment, and the California Supreme
Court denied petitioner’s petition for review.

REASONS WHY THE PETITION
SHOULD BE DENIED

1. There Is No Canflict_ Among the Circuits or State
Courts Concerning ERISA Preemption.

This Court set forth the standard for determining
ERISA preemption in Pilot Life Insurance Co. v. Dedeaux,
481 U.S. 41 (1987), in which the Court established a two-part
test to decide whether ERISA preempts state law claims. The
first part of the test requires the court to determine whether
the state law actually regulates the business of insurance or
merely relates to insurance companies. /d. at 50-51. The
second and “most important[ ]” part of the test examines the
remedies permitted under state law to determine whether they
supplement or supplant ERISA’s remedies for claims relating
to employee benefit plans. Under the second test, this Court
concluded that ERISA preempts all state law causes of action
that conflict with ERISA’s exclusive remedies for claims
under an employee benefit plan. /d. at 51-52. Petitioner does

oy)

not contest the propriety of the Pi/ot Life test, only its applica-
tion by the court below.’

The decision of the court below is consistent with the
decisions of all the federal and state appeals courts that have
considered the scope of ERISA preemption under the Pilot Life
decision. Petitioner seeks review by this Court because he is
not satisfied with the consistent application of the Pilot Life
ruling by all the appellate courts.

A number of courts have previously ruled on the issue of
ERISA preemption of California Insurance Code _ section
790.03(h). The California Supreme Court specifically ruled that
ERISA preempts causes of action asserted under
section 790.03(h) for improper claims procedures regarding an
employee benefit plan. Commercial Life Insurance Co. v.
Superior Court, 47 Cal. 3d 473, 484 (1988), cert. denied sub
nom. Juliano v. Commercial Life Insurance Co., 57 U.S.L.W.
3753 (U.S. May 15, 1989) (No. 88-1530).

The United States Court of Appeais for the Ninth Circuit
similarly ruled that private causes of action under
section 790.03(h) are preempted by ERISA. Kanne _y.
Connecticut General Life Insurance Co., 867 F.2d 489 (9th Cir.
1989), cert. denied, 57 U.S.L.W. _____ (U.S. June 26, 1989)
(No. 88-1659); Roberson v. Equitable Life Assurance Society,
869 F.2d 1498 (9th Cir. 1989), aff’ g without op., 661 F. Supp.
416 (C.D. Cal. 1987). Thus, the California Court of Appeal

The Califomia Court of Appeal applied the two-part Pilot Life test to

hold petitioner’s claims were preempted by ERISA. Although the court
below suggested that Califomia Insurance Code section 790.03 is a state law
directly aimed at the insurance industry (under the first part of the test), the
court found that the section supplemented the exclusive remedies available
under ERISA. Thus, the court below held that ERISA preempted petitioner's
claims under section 790.03(h).

decision in this case is consistent with the holdings of the
California Supreme Court and the Ninth Circuit Court of Ap-

peal.

Several other courts have had an opportunity to apply
this Court’s decision in Pilot Life to preemption issues under
ERISA, including several circuit courts of appeal. Every court
that considered the question since Pilot Life has reached the
same conclusion: ERISA preempts all state law claims,
whether asserted under state common law or state statutory law.
E.g., Amos v. Blue Cross-Blue Shield of Alabama, 868 F.2d
430, 431 (11th Cir. 1989) (ruling that “ERISA... is...a
barrier to state law causes of action, the effect of which
completely displaces state law claims”); Sampson v. Mutual
Benefit Life Insurance Co., 863 F.2d 108, 110 (1st Cir. 1988)
(ruling that ERISA preempts similar Massachusetts law); /n re
Life Insurance Co. of North America, 857 F.2d 1190, 1194 (8th
Cir. 1988) (dismissing state common law claims and a claim
under a Missouri statute that prohibited a “vexatious refusal to
pay” insurance benefits); Anschultz v. Connecticut General Life
Insurance Co., 850 F.2d 1467 (11th Cir. 1988) (finding that
Florida common law and statutory causes of action for
improper claims processing are preempted by ERISA).

Similarly, in those states that have considered the issue
of ERISA preemption, courts of final appeal have all ruled that
ERISA preempts state causes of action arising out of the
processing of insurance claims of ERISA programs. E.g., Hood
v. Prudential Insurance Co., 522 So. 2d 265 (Ala. 1988)
(holding that ERISA preempts Alabama claims for bad faith
refusal to pay an insurance claim); Desmarais v. Joy
Manufacturing Co., 130 N.H. 299, 538 A.2d 1218 (1988)
(ruling that ERISA preempts claims under New Hampshire
common law). Therefore, the California Court of Appeal

decision in this case is consistent with the decisions of all these
other state and federal court decisions.

The consistency of the decisions indicates that a grant of
certiorari and review of this case would serve little purpose.
This Court’s decision concerning ERISA preemption, as set
forth in Pilot Life, provides clear guidance to the lower courts.
The clarity of this guidance is attested to by the consistency
among the federal and state courts in applying the holding in
Pilot Life. As the Eighth Circuit stated in Jn re Life Insurance
Co. of North America, 857 F.2d at 1194, “[t}he Court in Pilot
Life could not have stated with any greater clarity that the
remedies afforded under ERISA are exclusive, and no state law
purporting to supply additional remedies will escape the
preemptive effect of § 1144(a) as laws ‘which regulate
insurance’ under [ERISA].” Absent the need to clarify or
resolve a conflict, this Court should not grant certiorari. See
Hoo v. United States, 108 S. Ct. 742 (1988) (White, J.,
dissenting).

2. There Is No Conflict Among the Circuits or State
Courts Concerning the Elements of an ERISA Plan.

An employee health care program funded through the
employer’s purchase of insurance is an employee benefit plan
within the meaning of ERISA. Congress specifically provided
that employee benefit plans may be funded “through the
purchase of insurance... .” 29 U.S.C. § 1002, subd. (1). In
this Court’s recent decision in Pilot Life, there was apparently
no dispute that the employee medical program funded through
the purchase of insurance was an ERISA plan. .

Contrary to petitioner’s suggestion, guidance is not
needed from this Court regarding the elements necessary for
the establishment of an ERISA plan. This Court recently
discussed the guidelines for determining the existence of an
ERISA plan in Fort Halifax Packing Co. v. Coyne, 482 U.S. |

(1987). In Fort Halifax, the Court recognized that Congress
intended ERISA to provide financial coordination and control
when employees and their beneficiaries are dependent on the
employer’s fiscal responsibility, such as when an employer
faces periodic demands on its assets by assuming the
responsibility to make regular payments on behalf of the
program. /d. at 9. Employers who establish medical programs
for their employees face such periodic demands on their assets
whether they self-insure or fund the programs through the
purchase of insurance.

In this case the California Court of Appeal followed the
standards announced by this Court, as well as the guidelines set
forth in detail in the act itself and the regulations thereunder.
29 U.S.C. §§ 1002(1), 1003(a); 29 C.F.R. § 2510.3-1(j ). The
decision is supported by established case precedent. See Kanne
v. Connecticut General Life Ins. Co., 867 F.2d 489, 492-93 (9th
Cir. 1989), cert. denied, 57 U.S.L.W. ____ (U.S. June 26,
1989) (No. 88-1659); Credit Managers /..s'n v. Kennesaw Life
& Acc. Ins., 809 F.2d 617, 625 (9th Cir. 1987); Donovan vy.
Dillingham, 688 F.2d 1367 (11th Cir. 1982). These cases
provide that an employer may establish an ERISA employee
benefit plan through the purchase of insurance, so long as the
employer is more than a mere advertiser or endorser of group
insurance. In Credit Manager’s, the United States Court of
Appeal for the Ninth Circuit stated:

An employer . . . can establish an ERISA plan rather
easily. Even if an employer does no more than
arrange for a “group-type insurance program,” it can
establish an ERISA plan, unless it is a mere advertiser
who makes no contributions on behalf of its
employees.

Credit Managers Ass'n v. Kennesaw Life & Acc. Ins., 809
F.2d at 625.

Unsatisfied with the Califomia Court of Appeal’s
application of established guidelines to the facts of this case,
petitioner asks this Court to add to ERISA’s statutory
framework, a requirement that an insurance policy purchased
for an ERISA plan disclose that the policy is purchased under
ERISA. Petitioner’s suggestion is without case or statutory

support.

Petitioner’s authorities are not in conflict with the
decision of the Califomia Court of Appeal and are
distinguishable on their facts.” In Wayne Chemical, Inc. vy.
Columbus Agency Service Corp., 567 F.2d 692 (7th Cir. 1977),
the United States Court of Appeals for the Seventh Circuit held
that the employer had not established or maintained an ERISA
plan because the employer had no knowledge of the alleged
health insurance coverage arranged by an insurance and health
plan brokerage company. Similarly, Taggart Corp. v. Life &
Health Benefits Administration, 617 F.2d 1208 (5th Cir. 1980),
cert. denied sub nom. Taggart Corp. v. Efros, 405 U.S. 1030
(1981) is factually distinguishable from this case. In Taggart,
the United States Court of Appeals for the Fifth Circuit ruled
that insurance purchased by an insurance mutual fund acting on
behalf of a number of employers did not constitute an ERISA
plan because the organization that established and maintained
the program was neither an employer nor an employee
organization. /d. at 1210

Thus, the Wayne and Taggart courts based their holdings
on the employers’ lack of involvement, not on the plans being

: The California Supreme Court has decertified one case upon which

petitioner relies, Sayble v. Blue Cross of Southern California, 208 Cal.
App. 3d 1108 (1989), op. decertified,___ Cal. 3d ___, 89 Los Angeles
Daily Journal D.A.R. 7398 (June 8, 1989), ordering that the reporter not
publish the opinion in the official reports.

funded through the purchase of insurance. Accordingly, these
decisions do not conflict with the decision of the court below
that petitioner’s employer had established and maintained an
employee benefit plan through the purchase of group health
insurance.

Therefore, the Califomia Court of Appeal decision in this
case is consistent with ERISA’s statutory framework, with prior
decisions of this Court, and with all other reported decisions
regarding the elements of an ERISA plan. Accordingly, a grant
of certiorari and review of this case is unnecessary and would

serve little purpose.
3. The Decision Has Little Impact on Future Claims.

Certiorari is inappropriate here because the decision in
this case wil! have minimal impact. This case concerns the
preemption of a private nght of action under California
Insurance Code section 790.03(h). The Califomia Supreme
Court has recently ruled that section 790.03(h) does not
provide a private right of action. Moradi-Shalal v. Fireman's
Fund Insurance Cos., 46 Cal. 3d 287, 292, 305 (1988). In
Moradi-Shalal, the court overruled earlier precedent to abolish
any private right of action under California Insurance Code
section 790.03(h) for all claims filed after the date the decision
became final.

As a result of the California Supreme Court’s decision in
Moradi-Shalal, the issue of preemption of Califomia Insurance
Code section 790.03(h) is now moot for all future claims.
Accordingly, a decision by this Court would have limited
precedential value, affecting only a relatively few cases filed
before the Moradi-Shalal decision. Such limited precedential
value provides further reason why this Court should deny
petitioner’s petition for writ of certiorari. See Coleman y.
Balkcom, 451 U.S. 949, 956 (1981) (Rehnquist, J., dissenting).

4. This Identical Issue Was Twice Recently Denied Review
by Petition for Certiorari.

In December 1988, the California Supreme Court ruled
that ERISA preempts a private cause of action brought under
California Insurance Code section 790.03(h) where the action
asserts a claim arising from an employee benefit plan. On
May 15, 1989, this Court denied certiorari in that case.
Commercial Life Insurance Co. v. Superior Court, 47 Cal. 3d
473 (1988), cert denied sub nom. Juliano v. Commercial Life
Insurance Co., 57 U.S.L.W. 3753 (U.S. May 15, 1989)
(No. 88-1530).

In February 1989, the United States Court of Appeals for
the Ninth Circuit similarly ruled that ERISA preempts claims
relating to employee benefit plans, including causes of action
brought under California Insurance Code section 790.03(h).
This Court recently denied certiorari in that case. Kanne v.
Connecticut General Life Ins. Co., 867 F.2d 489 (9th Cu.
1988), cert. denied, 57 U.'S.L.W. ___ (U.S. June 26, 1989)
(No. 88-1659).

CONCLUSION

No amount of rhetoric can transform this case into one jus-
tifying review by this Court. The decision of the California
Court of Appeal is consistent with ERISA’s statutory
framework, with prior decisions of this Court, and with all
other reported decisions regarding ERISA preemption and the
elements of an ERISA plan. There is no important question of
constitutional law or public policy requiring review by this

10

Court. Therefore, respondent respectfully requests that the
petition for a writ of certiorari be denied.

Dated: June 30, 1989
Respectfully submitted,

WILLIAM S. BOGGS
Counsel of Record
CHARLES L. DEEM
GRAY, CARY, AMES & FRYE
1700 First Interstate Plaza
San Diego, California 92101-4219
(619) 699-2758/2978
Attorneys for Respondent
Blue Cross of Southern California

Of Counsel:

VILMA MARTINEZ

MUNGER, TOLLES & OLSON

355 South Grand Avenue, 35th Floor

Los Angeles, California 90071-1560

(213) 683-9100

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385002_1544%3A2. Public record. Not legal advice.