# Opposition Brief — Erbauer Construction Corp. v. Pan American Life Insurance

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Opposition Brief
- **Published:** January 1, 1991
- **Citation:** 502 U.S. 823

## Text

Supreme Court, U.S.
2. FILED

No. 90-1973 Fo

| L 26 499)

| OFFICE OF THE CLERK

—_—-—
-——_

In The

Supreme Court of the United States
October Term, 1991 ~

e

ERBAUER CONSTRUCTION CORPORATION,

Petitioner,

PAN AMERICAN LIFE INSURANCE COMPANY,
Respondent.

¢

Petition For A Writ Of Certiorari
To The Supreme Court Of Texas

«

RESPONDENT’S BRIEF IN OPPOSITION

->

REAGAN M. Brown
Counsel of Record
FULBRIGHT & JAWORSKI

1301 McKinney, Suite 5100
Houston, Texas 77010
(713) 651-5151

Attorneys for Respondent,
Pan American Life Insurance
Company

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964
OR CALL COLLECT (402) 342-2831

ES
a

QUESTIONS PRESENTED

The questions presented by petitioner rest upon a
flawed premise. The courts below did not determine
whether petitioner has a remedy under the Employee
Retirement Income Security Act of 1974 (ERISA). Peti-
tioner simply asserts that it has no such remedy in order
to present the following questions for review:

1. Does the Employee Retirement Income Security
Act of 1974 (ERISA) preempt state law claims. of an
employer, who is not empowered to bring a civil action
under ERISA?

2. Does ERISA preemption of an employer’s state
law claims, without an alternative federal remedy, deny
the employer’s constitutional right of access to the
courts?

These questions were not decided below and are not
properly presented here.

LIST OF PARTIES

Pan American Life Insurance Company is a parent
corporation, all subsidiaries of which are wholly owned.

ill

TABLE OF CONTENTS

Page

OR 0 Ug 1 ot ot be i
ee icc bs cose cre cs ssc ce ess ssceess ii
Sg 0 6 | iv
a iv
Constitutional Provisions ........................ vii
Statutes and Rules .................. 00. cece eee vii
STATEMENT OF THE CASE....................... 1
A. Factual Background ......................... 2
eee 3

REASONS THE PETITION SHOULD BE DENIED

I. THIS IS AN ORDINARY ERISA PREEMPTION
CASE RAISING NO SPECIAL OR IMPORTANT
Ee Oe sy osc vcccc re cecreseverce 5

A. The Judgment of the Supreme Court of Texas
Comports with Well-Settled Decisions of this
Court on ERISA Preemption............... 5

B. The Judgment of the Texas Supreme Court
Does Not Conflict with the Decisions of the
United States Courts of Appeals or State
eee cnc i eee cae nn ssvcesees 11

I]. ERISA PREEMPTION IN THIS CASE DOES NOT
DENY ERBAUER ANY CONSTITUTIONAL
TE so ccc cece cee sceceeereee 16

eee cosh ese hcrcenccescccetaaress 19

iv

TABLE OF AUTHORITIES

Page
CasES
Anshultz v. Connecticut Gen. Life Ins. Co., 850
F.2d 1467 (11th Cir. 1988)..........cceeecesecevees 12
Avco Corp. v. Machinists, 390 U.S. 557 (1968)........ 8
Blatt v. Marshall & Lassman, 812 F.2d 810 (2nd Cir.
Ente ery rerrr yr Sara ye rr eee eee 14
Broughton v. Courtney, 861 F.2d 639 (11th Cir.
arn rr rrr rr tre re ere ee 15
Carter v. Amax Coal Corp., 748 FSupp. 812 (D.
1) Seem rererr eer se errr eT err Tree 15

Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987)...8, 15

Cathey v. Metropolitan Life Ins. Co., 805 S.W.2d
387 (Tex. 1991), cert. denied, 59 U.S.L.W. 3946
oe A) ree 5,7, 13

Chicago & N.W. Transp. Co. v. Kalo Brick & Tile
oo BS BO errr reer 15

Christensen v. Ward, 916 F.2d 1462 (10th Cir. 1990) .... 17
Commercial Life Ins. Co. v. Superior Court, 47
Cal.3d 473, 253 Cal. Rptr. 682, 764 P.2d 1059
(1988), cert denied sub nom. Juliano v. Commer-
cial Life Ins. Co., 490 U.S. 1075 (1969)............ 13

Duke Power Co. v. Carolina Environmental Study
Group, 438 US. 59 (1978).............--eeeee renee 18

Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805
oe Bs gb. Be ae, | re err Terre 13

Ellis v. Blum, 643 F.2d 68 (2nd Cir. 1981) ........... 17

TABLE OF AUTHORITIES - Continued

Page
Farmers Educational and Cooperative Union of
American v. WDAY, 360 U.S. 525 (1959)........... 16
Fort Halifax Packing Co. v. Coyne, 482 US. 1
CURE alin sive ens Cee Ke US Ou phen se cbadesexssve- 6
Garner v. Teamsters C. & H. Local Union, 346 U.S.
ai LE PRS A TE ree Te ee 9
Genter v. Acme Scale & Supply Co., 776 F.2d 1180
Ge I I ao 50 oc Cenc vip nest dacasedacevnees 14
Great Lakes Steel Division of National Steel Corp.
v. Deggendorf, 716 F.2d 1101 (6th Cir. 1983) ...... 11
Hermann Hospital v. MEBA Medical & Benefits
Plan, 845 F.2d 1286 (5th Cir. 1988)............. ia, 35
Hines v. Davidowitz, 312 U.S. 52 (1941).............. 7
Howard v. Parisian, Inc., 807 F.2d 1560 (11th Cir.
MSE SRESS See w ees ess wil tiie tee eek Sins Ss 15
In re Life Ins. Co. of N. Am., 857 F.2d 1190 (8th
Se UNC eg fer aie enor eee 12
Ingersoll-Rand Co. v. McClendon, 111 S.Ct. 478
NE hon Cae CS ach ead Sb KA dM aN Sn Khe wend bs 6, 9, 10
Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d
489 (9th Cir. 1988), cert. denied 109 S.Ct. 3216
RN EN eee Che ong oe 3s ek ak ow a wk 12
Lee v. E.I. DuPont de Nemours & Co., 894 F.2d 755
ee yy cay a ceo ys ack os ss 15
Lister v. Stark, 890 F.2d 941 (7th Cir. 1989).......... 15

Longshoremen v. Davis, 476 U.S. 380 (1986).......... 9

vi

TABLE OF AUTHORITIES —- Continued

Lugar v. Edmondson Oil Co., 457 U.S. 922 (1982)....

Massachusetts Mut. Life Ins. Co. v. Russell, 473
U.S. 1346 (90GB .. oc oibae or eer eca ewes wes i

Memorial Hospital System v. Northbrook Ins. Co.,
904 F2d 236 (Stik Cie THRs 6 ss esis viiies sin oes

Pane v. Darden, 763 FSupp. 281 (N.D. Ill. 1991)..... 15

Paul v. Virginia, 75 U.S. 168 (1869)..................

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987)
see eee ce pw ue me pele aang nee ' 7.9, 1G, 2,

Pressroom Unions Fund v. Continental Assurance,
700 F.2d GOD Cae Ge We 6 is oncee seek eke cn tees

Provident Life and Accidental Ins. Co. v. Waller,
906 F.2d 965 (4th Cie. TOGO)... ccc ccc cc cs cesses. 5%,

San Diego Buildings Trade Council v. Garmon, 359
U.S. 236 (99GB. i5 vas eed eee te cess

Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983).......

Standard Oil Co. of California v. Agsalud, 442
F.Supp. 695 (N.D. Cal. 1977), aff'd, 633 F.2d 760
(9th Cir. 1980), aff'd, 454 U.S. 801 (1981)..........

U.S. Steel Mining Co. v. District 17, United Mine
Workers of America, 897 F.2d 149 (4th Cir. 1990) ...

United Const. Workers v. Laburnum Const. Corp.,
347 U.S. 656 (QO. « ivcveece ster se 3 sas een ilies 9

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1
(1976)... « an ein none wether enn ge

Wisconsin Public Intervenor v. Mortier, 59
U.S.L.W. 4755. CUS. Bee a FR nck cc ce cesses.

a Tee

Vili

TABLE OF AUTHORITIES - Continued

Page
CONSTITUTIONAL PROVISIONS
ED Be. a 17
ee a. nv da bab ad beewsskevcadeass 17
am MO. MONO. ALY. 0. i eect ew ewaeces 17
RULES AND STATUTES
ee bas cba nabs dy ka veseeessccesenedes 5
29 U.S.C. § 1002(16)(A)(ii)(1985). 2. ee, | ie
29 U.S.C. § 1002(16)(B)(i)(1985)...... (yaw senhas aes . 13
29 U.S.C. § 1103(a)(1985).......... eeene acnrnegnawen 8
29 U.S.C. § 1103(b)(2)(1985)... 2.0, teen
29 U.S.C. § 1103(c)(1)(1985) .. 0.2 en, 7, 8, 18
2 US.C. § 1132(1965) .................0.. 7, 11, 18, 19
29 U.S.C. § 1132(a)(3)(1985) .. 2. ee 13
29 U.S.C. § 1132(a)(5)(1985) .. 0. eee, 15
29 U.S.C. § 1132(k)(1985) .. 2.2.0.2 ee. 14
29 U.S.C. § 1144(a)(1988)... 2.02, ...6

No. 90-1973
.
In The

Supreme Court of the United States

October Term, 1991
+

ERBAUER CONSTRUCTION CORPORATION,

Petitioner,

PAN AMERICAN LIFE INSURANCE COMPANY,

Respondent.
*

Petition For A Writ Of Certiorari
To The Supreme Court Of Texas
.

RESPONDENT'S BRIEF IN OPPOSITION
°

Respondent, Pan American Life Insurance Company
(Pan American) respectfully requests that this Court deny
the petition for writ of certiorari, seeking review of the
judgment of the Supreme Court of Texas in this case. The
opinion of the Supreme Court of Texas is reported at 805
S.W.2d 395 (Tex. 1991).

= ®

STATEMENT OF THE CASE

Petitioner Erbauer Construction Corporation
(Erbauer) fails to raise any special or important reasons to
warrant granting its petition for a writ of certiorari. The
arguments made by Erbauer involve issues that are well-

settled and do not involve conflicting decisions between
the United States courts of appeals or other state courts of
last resort. Erbauer’s claims do not implicate any federal
constitutional provision. This statement will describe the
pertinent facts omitted from Erbauer’s statement of the
case.

A. Factual Background

In February 1978, Erbauer established an employee
benefit plan funded by a group policy of insurance issued
by Pan American (PX 10).! The employee benefit plan
provided, among other employee benefits, major medical
disability benefits (PX 10). Under the terms of the
employee benefit plan, an Erbauer employee who made
written application for insurance for his dependents more
than thirty-one days after the date of eligibility for the
dependent’s insurance could not obtain the insurance
until the employee furnished satisfactory evidence of
insurability of each dependent (PX 10).

Erbauer’s personnel manager, Louise Hubbard was
responsible for submitting employee benefit applications
(S.F. 85-86). Hubbard would accommodate an employee
who was late in seeking to insure his dependents by
backdating the employee’s enrollment card to the date he
would have been eligible for the insurance (S.F. 676-77)
The plan did not authorize backdating (PX 10). Hubbard

1 The record on appeal is designated “Tr.” The trial testi-
mony is designated “S.F.” Exhibits are designated “PX” for
plaintiff's exhibits and “PAX” for Pan American’s exhibits. The
Appendix to Erbauer’s Petition is referred to as “A.”

also dealt directly with Pan American in sending and
receiving benefit applications, forms for processing
claims and verification of coverage (S.F. 86, 102).

One of the Erbauer employees Hubbard accommo-
dated by backdating his enrollment card was Dewey Gill.
Hubbard prepared an enrollment card for Gill more than
thirty-one days after the deadline for Gill to register his
dependent daughter, Crystal, as a participant in the plan
(PX 1, S.F. 130). Hubbard then backdated the effective
date of Gill’s enrollment card to a date that would make
his daughter eligible for benefits (PX 1, S.F. 130). Pan
American denied Gill’s subsequent claim for employee
benefits because it had no record that Gill or his daughter
were enrolled in the plan or had submitted evidence of
insurability (S.F. 685).

Erbauer was the only employer to establish or main-
tain the employee benefit plan involved in this case (PX
10). The employee benefit plan does not specifically des-
ignate the administrator (PX 10). In January 1980, Erbauer
exercised its fiduciary power by changing the insurance
company to fund its employee benefit plan (S.F. 270).

B. Procedural History

Dewey Gill sued Erbauer in Texas state court because
Erbauer failed to comply with its responsibilities under
the employee benefit plan in providing the required
information for employees to be enrolled with insurance
coverage (PAX 1, S.F. 666, 673, 685; Tr. 129). Erbauer, in
turn, sued Pan American for its processing of Gill’s claim
(Tr. 114). Specifically, Erbauer alleged that Pan American
wrongfully denied Gill’s claim for employee benefits (Tr.

114). When asked by the trial court to explain his client’s
cause of action against Pan American, Erbauer’s attorney
admitted that Erbauer’s claims were identical to Dewey
Gill’s claims except for the damages Erbauer sought to
recover (S.F. 7) (emphasis added).

The court of appeals did not decide whether or not
Erbauer had a remedy under the Employee Retirement
Income Security Act of 1974 (“ERISA”) in its opinion
affirming the trial court’s judgment in favor of Erbauer.
Instead, the court of appeals incorrectly held that ERISA
did not preempt Erbauer’s claims because ERISA had not
been pleaded as an affirmative defense at the trial court
level (A. 6). Justice Camille Dunn correctly recited in her
dissenting opinion that ERISA preemption in this case is
jurisdictional and could not be waived (A. 26-29).

In reversing the judgments of the lower courts, the
Texas supreme court held that Erbauer’s claims relate to
an employee benefit plan (A. 3). Erbauer’s petition does
not challenge this finding. The Texas supreme court fur-
ther held ERISA preemption in this case is jurisdictional
and could be raised for the first time on appeal (A. 3).
Erbauer’s petition also does not challenge this finding.

Erbauer bases all of its arguments on a single flawed
premise: that the judgment of the Texas supreme court
leaves Erbauer without any cause of action or remedy.
Neither the Texas supreme court nor the court of appeals
decided whether or not ERISA provides some type of
remedy to Erbauer or the extent of that remedy. As Jus-
tice Dunn correctly outlined in her dissenting opinion in
the court of appeals, the existence and extent of Erbauer’s
cause of action under ERISA is a question properly left to

a federal district court having jurisdiction over Erbauer’s
lawsuit (A. 24). Instead of refiling its suit in a court
having jurisdiction, Erbauer filed this petition.

S

REASONS THE PETITION SHOULD BE DENIED

I. THIS IS AN ORDINARY ERISA PREEMPTION
CASE RAISING NO SPECIAL OR IMPORTANT
ISSUES.

Rule 10 of this court permits the discretionary writ of
certiorari to be granted “only when there are special and
important reasons therefor.” (Emphasis added). This
Court recently denied the petition for certiorari in Cathey
v. Metropolitan Life Ins. Co., 805 S.W.2d 387 (Tex. 1991),
cert. denied, 59 U.S.L.W. 3946 (U.S. June 25, 1991). The
Texas supreme court decided Cathey the same day it
decided this case. The court applied Cathey and held that
Erbauer’s claims relate to an employee benefit plan and
are preempted by ERISA (A. 3). Because the issues raised
by Erbauer’s petition involve matters of law well-settled
by prior decisions of this Court and do not involve con-
flicting state or federal decisions, the petition should be
denied.

A. The Judgment of the Supreme Court of Texas
Comports with Well-Settled Decisions of this .
Court on ERISA Preemption

In Cathey v. Metropolitan Life Ins. Co., the foundation
of the decision in this case, the Texas supreme court
relied on the well-settled decisions of this Court that all
suits alleging improper claims processing relating to an

employee benefit plan be governed only by ERISA. 805
S.W.2d at 391, citing Ingersoll-Rand Co. v. McClendon, 111
S.Ct. 478, 485 (1990) and Pilot Life Ins. Co. v. Dedeaux, 481
U.S. 41, 52-54 (1987). Erbauer sued Pan American for its
processing of Dewey Gill’s employee benefit claim (Tr.
114). The supreme court properly held that ERISA pre-
empted Erbauer’s claim against Pan American (A. 3).

Federal law preempts state law when the federal
statute contains a provision expressly preempting state
law. Ingersoll-Rand v. McClendon, 111 S.Ct. at 482. Federal
law preempts state law if the latter conflicts directly with
an ERISA cause of action. Ingersoll-Rand, 111 S.Ct. at
484-85. Federal law also preempts state law to the extent
state and federal law actually conflict. Wisconsin Public
Intervenor v. Mortier, 59 U.S.L.W. 4755, 4757 (U.S. June 21,
1991). All three types of federal preemption exist in this
case.

ERISA expressly preempts all-state laws that “relate
to” an employee benefit plan. 29 U.S.C. § 1144(a)(1988). A
law “relates to” an employee benefit plan if it has a
connection or reference to such a plan. Shaw v. Delta
Airlines, Inc., 463 U.S. 85, 96-97 (1983). A state law may
“relate to” a benefit plan even if the law is not specifically
designed to affect the plan or the effect is only indirect.
Ingersoll-Rand, 111 S.Ct. at 483. Furthermore, ERISA pre-
empts state laws relating to plans, rather than simply to
plan benefits. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1
(1987).

Erbauer’s causes of action indisputably “relate to”
the employee benefit plan in this case. Erbauer alleged
that Pan American was guilty of improperly processing

Dewey Gill’s employee benefit claim (Tr. 114). Erbauer
admitted in open court that its claims were identical to
Gill’s claims except for the damages it sought to recover
(S.F. 7). Erbauer’s causes of action against Pan American
can be decided only after a court first determines the
employee’s entitlement to benefits and Pan American's
interpretation and administration of the plan. Because
Erbauer’s cause of action against Pan American exists
solely because of the presence of an employee benefit
plan, Erbauer’s cause of action necessarily relates to the
plan. In fact, Erbauer has not challenged this finding of
the Texas supreme court.

The second type of federal preemption, a conflict
between a state cause of action and an ERISA cause of
action, also exists in this case. Erbauer’s state law claims
conflict with ERISA’s causes of action for improper claims
processing. The civil enforcement portion of ERISA, 29
U.S.C. § 1132, does not permit the recovery of extra-
contractual damages for the improper processing of a
benefit claim. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. at
51-57; Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S.
134, 144 (1985); Cathey v. Metropolitan Life Ins. Co., 805
S.W.2d at 391. Furthermore, as outlined below, Erbauer’s
state law claims conflict directly with the ERISA causes of
action available to entities like Erbauer. Infra at 13-15.

The third type of federal preemption, conflicting
state and federal law, is present in this case. Federal law
preempts state law when the latter “stands as an obstacle
to the accomplishment and execution of the full purposes
and objectives of Congress.” Hines v. Davidowitz, 312 U.S.
52, 67 (1941). Erbauer’s state law claims for extracontrac-
tual damages conflict directly with 29 U.S.C.

§ 1103(c)(1)(1985). Section 1103(c)(1) provides that the
assets of an employee benefit plan shall never inure to the
benefit of any employer. Because Erbauer did not estab-
lish a trust under section 1103(a), the assets of this
employee benefit plan are the assets of Pan American. 29
U.S.C. § 1103(b)(2)(1985). ERISA must preempt Erbauer’s
state law claims in order that the plan assets be held “for
the exclusive purposes of providing benefits to partici-
pants in the plan and their beneficiaries...” 29 U.S.C.
§ 1103(c)(1)(1985).

The federal-preemption doctrine does not require
that a party must have a cause of action under federal
law in order for state law to be preempted. Justice Bren-
nan, writing for a unanimous court in Caterpillar, Inc. v.
Williams, 482 U.S. 386 (1987), rejected the court of
appeals’ conclusion that complete preemption, permitting
a litigant to remove a case to federal court, does not occur
unless the federal cause of action relied upon provides
the plaintiff with a remedy. Justice Brennan noted that the
lower court’s analysis was squarely contradicted by Avco
Corp. v. Machinists, 390 U.S. 557 (1968), where the court
stated: ~ <

The nature of the relief available after jurisdic-
tion attaches is, of course, different from the
question whether there is jurisdiction to adjudi-
cate the controversy.

Williams, 482 U.S. at 391, n. 4 citing Avco Corp., 390 U.S. at
561.

The nature of the relief available to Erbauer after
jurisdiction attaches was not before the Texas supreme

court because it lacked jurisdiction to adjudicate the con-
troversy. Furthermore, this Court’s recognition in Inger-
soll-Rand of “express preemption” as one type of federal
preemption would be superfluous if a party must have an
ERISA cause of action in order for ERISA to preempt state
laws relating to employee benefit plans. In that regard,
Erbauer’s argument is moot because its petition does not
challenge the Texas supreme court’s finding that
Erbauer’s claim “relates to” an employee benefit plan and
is therefore “expressly preempted” by ERISA.

Erbauer’s reliance on United Const. Workers v. Labur-
num Const. Corp., 347 U.S. 656 (1954) is misplaced. Labur-
num involved a claim of implied preemption under the
authority of Garner v. Teamsters C. & H. Local Union, 346
U.S. 485 (1953). Unlike ERISA, the Labor Management
Relations Act involved in Laburnum did not contain a
provision expressly preempting state laws. Express pre-
emption, as described by this Court in Ingersoll-Rand,
does not require the existence of a substitute federal
cause of action.

Laburnum concerned the scope of preemption under
the Labor Management Relations Act as opposed to the
nature of that preemption. Longshoremen v. Davis, 476 U.S.
380, 393 (1986). The Labor Management Relations Act did
not preempt the plaintiff’s suit in Laburnum because the
regulated activity was a “merely peripheral concern” of
the act. See, San Diego Buildings Trade Council v. Garmon,
359 U.S. 236, 243-44 (1959). In contrast, the need for
uniformity of law concerning claims processing of
employee benefit claims is at the heart of ERISA. Pilot
Life, 481 U.S. at 54. As this Court recognized in Ingersoll-
Rand:

10

It is foreseeable that state courts, exercising
their common law powers, might develop differ-
ent substantive standards applicable to the same
employer conduct, requiring the tailoring of
plans and employer conduct to the peculiarities
of the law of each jurisdiction. Such an outcome
is fundamentally at odds with the goal of uni-
formity that Congress sought to implement.

111 S.Ct. at 484.

Unlike ERISA, Congress intended to preserve exist-
ing state law remedies for illegal union picketing when it
passed the Labor Management Relations Act. Laburnum,
347 U.S. at 668-69. In contrast, Congress intended to limit
the remedies available for improper claims processing of
benefit claims to those contained within ERISA. As this
Court noted in Pilot Life:

The deliberate care with which ERISA’s civil
enforcement remedies were drafted and the bal-
ancing of policies embodied in its choice of
remedies argue strongly for the conclusion that
ERISA’s civil enforcement remedies were
intended to be exclusive. This conclusion is fully
confirmed by the legislative history of the civil
enforcement provision.

481 US. at 54.

The well-settled decisions of this Court support the
judgment of the Texas supreme court and reject Erbauer’s
arguments. Under Ingersoll-Rand and Pilot Life, ERISA
expressly and impliedly preempts Erbauer’s state law
causes of action. Erbauer’s petition should be denied.

11

B. The Judgment of the Texas Supreme Court Does
Not Conflict with the Decisions of the United
States Courts of Appeals or State Courts of Last
Resort

Erbauer’s petition fails to raise a legitimate conflict
between the Texas supreme court’s judgment and other
state or federal courts. Like every other ‘argument
Erbauer asserts, its claim of conflicting decisions rests
upon the false premise that the judgment of the Texas
supreme court leaves Erbauer without a remedy under
ERISA. The judgment cannot conflict with the cases cited
by Erbauer when the supreme court did not address the
issue of Erbauer’s standing to sue under ERISA. Further-
more, the judgment preempting Erbauer’s state law
causes of action comports with other state and federal
courts that have considered claims similar to those
alleged by Erbauer.

None of the five cases cited on pages 9-10 of
Erbauer’s petition conflict with the judgment of the Texas
supreme court. Pressroom Unions Fund v. Continental
Assurance, 700 F.2d 889 (2d Cir. 1983), Provideni Life and
Accidental Ins. Co. v. Waller, 906 F.2d 985 (4th Cir. 1990)
and Great Lakes Steel Division of National Steel Corp. v.
Deggendorf, 716 F.2d 1101 (6th Cir. 1983) all concerned
attempts by employers to maintain an implied cause of
action under 29 U.S.C. § 1132. Two of the courts held the
employers in those cases had standing to sue as fiduci-
aries. Waller, 906 F.2d at 988, n. 5; Deggendorf, 716 F.2d at
1104-05. Pressroom Union Fund did not discuss ERISA
preemption.

In Memorial Hospital System v. Northbrook Ins. Co., 904
F.2d 236 (5th Cir. 1990), the court recognized that ERISA

12

preemption occurs when the state law claims involve
allegations such as improper claims processing and the
claims directly affect the relationship among the tradi-
tional ERISA entities — the employer, the plan and its
fiduciaries and the participants and beneficiaries. 904
F.2d at 245 (emphasis added). Erbauer sued Pan Ameri-
can for its alleged improper processing of Dewey Gill’s
benefit claim (Tr. 114). In Hermann Hospital v. MEBA Med.-
cal & Benefits Plan, 846 F.2d 1286 (5th Cir. 1988), the court
recognized:

Adopting Hermann’s position would allow par-

ties that lack standing to sue under ERISA to

circumvent its enforcement provisions by filing

suit in state courts under state law. Arguably,

they could thus obtain advantages denied to par-

ties plaintiff enumerated under § 1132(a). This is
an untenable result.

845 F.2d at 1290 (emphasis added). Instead of conflicting
with the judgment, the cases cited by Erbauer support the
finding that ERISA preempts Erbauer’s claim.

The judgment of the Texas supreme court also does
not conflict with the decisions of other courts holding
that ERISA preempts the type of causes of action asserted
by Erbauer. Erbauer alleged extracontractual damages on
the theories of breach of contract, breach of the duty of
good faith and fair dealing, the Texas Deceptive Trade
Practices Act and the Texas Insurance Code. ERISA pre-
empts these claims. See Pilot Life, 481 U.S. at 51-57; Massa-
chusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134 (1985);
Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d 489, 493-94
(9th Cir. 1988), cert. denied, 109 S.Ct. 3216 (1989); In re Life
Ins. Co. of N. Am., 857 F.2d 1190, 1194 (8th Cir. 1988);
Anshultz v. Connecticut Gen. Life Ins. Co., 850 F.2d 1467,

13

1469 (11th Cir. 1988); Cathey, 805 S.W.2d at 391; Commer-
cial Life Ins. Co. v. Superior Court, 47 Cal.3d 473, 253 Cal.
Rptr. 682, 764 P.2d 1059 (1988), cert. denied sub nom. Juliano
v. Commercial Life Ins. Co., 490 U.S. 1075 (1989).

Because it was without jurisdiction to consider the
question, the Texas supreme court did not decide whether
or not Erbauer has standing to sue under ERISA. Nev-
ertheless, other courts have held that ERISA preempts the
claims of entities similarly situated to Erbauer. In Provi-
dent Life & Acc. Ins. Co. v. Waller, the court held that a
“plan administrator” has standing to sue as a fiduciary
under 29 U.S.C. § 1132(a}{3). 906 F.2d at 988, n. 5. Because
Erbauer was the only employer to establish or maintain
the employee benefit plan (PX 10), Erbauer is a “plan
sponsor” under ERISA. 29 U.S.C. § 1002(16)(B)(i)(1985).
Because the employee benefit plan in this case does not
specifically designate the administrator (PX 10), Erbauer,
as the plan sponsor, is the “plan administrator”. 29 U.S.C.
§ 1002(16)(A)ii)(1985). Accordingly, Erbauer is a fiduci-
ary under ERISA. See also, U.S. Steel Mining Co. v. District
17, United Mine Workers of America, 897 F.2d 149 (4th Cir.
1990) (plan administrator is a fiduciary; employer also is
a fiduciary when it arranged for plan to continue medica!
insurance coverage).

In Ed Miniat, Inc. v. Globe Life Ins. Group, Inc., 805 F.2d
732 (7th Cir. 1986), the plaintiff-employer adopted an
employee benefit plan with benefits to be paid by the
defendant-insurer. When the insurer withdrew from writ-

ing insurance for the plan, the employer sued to require
the insurer to continue to provide benefits under the
plan. The court held the employer could be considered a
fiduciary because, like Erbauer, the employer had the

-~-—--

14

power to select a new insurance company for the plan.
805 F.2d at 736.

In Blatt v. Marshall & Lassman, 812 F.2d 810 (2nd Cir.
1987), an accounting firm failed to deliver a notice of
change form to the retirement committee until after a
participant had left the firm, thereby unreasonably delay-
ing the participant’s receipt of benefits. The court held
the accounting firm was an ERISA fiduciary who
breached its duty to the plan participant by preventing or
interfering with the participant’s receipt of benefits to
which he was entitled. 812 F.2d at 813. Dewey Gill sued
Erbauer because Erbauer failed to comply \v..th its
responsibilities under the plan in providing the required
information for employees to be enrolled with insurance
coverage (PAX 1, S.F. 666, 673, 685; Tr. 129). :

Erbauer’s role in backdating the eligibility of certain
employees for insurance coverage is similar to the action
that resulted in employer being a fiduciary in Genter v.
Acme Scale & Supply Co., 776 F.2d 1180 (3rd Cir. 1985). In
Genter, the employer permitted certain employees to
increase insurance coverage contemporaneous with sal-
ary increases, even though the employee benefit plan
required changes in the insurance coverage to occur on
the annual anniversary date of the policy. The court held
that the employer was the fiduciary because it accommo-
dated certain employees with mid-stream increases not
provided for in the terms of the plan. 776 F.2d at 1184.

ERISA also provides a remedy to Erbauer in its posi-
tion as an administrator under 29 U.S.C. § 1132(k)(1985).
Under this section, an administrator may bring suit in
federal court against the secretary of labor to, among

15

other matters, compel the secretary to take action
required under ERISA. Erbauer could have sued the sec-
retary of labor in federal court to require the secretary to
bring an action against Pan American to pay Dewey Gill,
under the authority of 29 U.S.C. § 1132(a)(5)(1985).
Erbauer, of course, made no attempt to pursue its
remedies as either an administrator or a fiduciary.

Furthermore, ERISA preempts Erbauer’s claims even
if a court were to determine that Erbauer has no remedy
under ERISA. The fact that giving preemptive effect to a
federal statute would leave a party without a remedy
does not mean that Congress did not intend to preempt
state law. Broughton v. Courtney, 861 F.2d 639, 643 (11th
Cir. 1988) (citing Howard v. Parisian, Inc., 807 F.2d 1560,
1565 (11th Cir. 1987). In fact, the courts to directly con-
front this issue have rejected Erbauer’s argument that
standing to sue under ERISA is a prerequisite for ERISA
preemption. See Lee v. E.!. DuPont de Nemours & Co., 894
F.2d 755 (5th Cir. 1990); Lister v. Stark, 890 F.2d 941, 946
(7th Cir. 1989); Hermann Hospital v. MEBA Medical & Bene-
fits Plan, 845 F.2d 1286, 1290 (5th Cir. 1988); Pane v.
Darden, 763 FSupp. 281, 283 (N.D. Ill. 1991) (claim pre-
empted so long as it “relates to” employer-sponsored
plan; preemption dependent on nature of plan involved,
not plaintiff’s “status” under that plan); Carter v. Amax
Coal Corp., 748 FSupp. 812 (D. Utah 1990).?

2 Erbauer’s statement on page 15 of the petition that “this
Court has never found state law preempted in the absence of
an alternative federal remedy” is untrue. See, e.g., Caterpillar,
Inc. v. Williams, discussed supra at 7-8; Chicago & N.W. Transp

(Continued on following page)

oo nn

16

The judgment of the Texas supreme court does not
conflict with any case cited in Erbauer’s petition. It does
not conflict with the federal and state courts holding that
ERISA preempts the type of claims made by Erbauer. The
judgment does not conflict with federal circuit cases
holding that ERISA preempts the claims of entities sim-
ilarly situated to Erbauer. In short, Erbauer’s petition
raises no special or important issues for this court to
consider.

Il. ERISA PREEMPTION IN THIS CASE DOES NOT
DENY ERBAUER ANY CONSTITUTIONAL
RIGHT OF ACCESS.

Erbauer again bases its constitutional “right of
access” argument on the flawed premise that the Texas
supreme court determined that Erbauer has no remedy
under ERISA. Because the Texas supreme court did not
decide that issue, Erbauer’s petition should be denied.
Furthermore, Erbauer has not been denied any substan-
tive due process “right of access.”

Erbauer’s petition cites three provisions of the
United States Constitution allegedly providing to Erbauer
a “right of access”: the privileges and immunities clause

(Continued from previous page)

Co. v. Kalo Brick & Tile Co., 450 U.S. 311 (1981) (Interstate
Commerce Act preempts shipper’s injunction suit under state
law even though shipper lacked any remedy under federal
law); Farmers Educational and Cooperative Union of America v.
WDAY, 360 U.S. 525, 535 (1959) (Federal Communications Act
preempts state law libel suit for damages against radio station,
leaving plaintiff without any remedy).

17

of Article IV, the First Amendment and the due process
clause of the Fourteenth Amendment. None of these three
constitutional provisions guarantee Erbauer a right to sue
Pan American for monetary damages.

The privileges and immunities clause of Article IV of
the United States Constitution does not apply to Erbauer
because Erbauer is a corporation. Paul v. Virginia, 75 U.S.
168 (1869). The Open Access Clause of the First Amend-
ment (providing citizens with the right to redress griev-
ances) focuses on procedural impediments to the exercise
of existing rights and does not prevent a court from
holding that a plaintiff has no remedy at law for the
injuries he may allege. Christensen v. Ward, 916 ¥.2d 1462,
1472 (10th Cir. 1990).

Erbauer’s petition also fails to raise a colurable argu-
ment under the due process clause of the Fourteenth
Amendment. A prerequisite to a showing of a due pro-
cess violation under the Fourteenth Amendment is con-
duct characterized as “state action.” Lugar v. Edmondson
Oil Co., 457 U.S. 922 (1982). Although the judges of the
Texas supreme court can be considered “state actors,”
they were not acting “under color of state law,” the legal
equivalent of “state action.” The judges of the Texas
supreme court applied federal law, not state law, to pre-
empt Erbauer’s state law claims. A state official who
applies federal law to determine a person’s claim acts
under color of federal law, not state law. Ellis v. Blum, 643
F.2d 68, 83 n. 17 (2nd Cir. 1981). Because the judgment of
the Texas supreme court applying ERISA does not consti-
tute “state action,” the due process clause of the Four-
teenth Amendment does not apply.

18

Moreover, a determination that ERISA preempts
Erbauer’s claims without leaving Erbauer a remedy
under ERISA (a finding no court has made) would not
violate any substantive due process “right of access.”
There is no federal constitutional requirement that a fed-
eral law cutting off state remedies either duplicate recov-
ery at common law or provide a reasonable substitute
remedy. Duke Power Co. v. Carolina Environmental Study
Group, 438 U.S. 59, 88 (1978). Acts of Congress adjusting
the burdens and benefits of economic life have a pre-
sumption of constitutionality and the burden is on one
complaining of a due process violation to establish that
Congress has acted in an arbitrary and irrational way.
Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 15 (1976).
ERISA preemption of state health insurance laws does not
violate the due process clause. Standard Oil Co. of Califor-
nia v. Agsalud, 442 F.Supp. 695 (N.D. Cal. 1977), aff'd, 633
F.2d 760 (9th Cir. 1980), aff'd, 454 U.S. 801 (1981).

Congress intended that all suits alleging improper
claims processing relating to employee benefit plans be
governed only by ERISA. Pilot Life, 481 U.S. at 52-54.
Congress intended to limit the type of remedies available
for improper claims processing to those contained within
29 U.S.C. § 1132. Pilot Life, 481 U.S. at 54. Congress
intended that the assets of an employee benefit plan
should never inure to the benefit of any employer. 29
U.S.C. § 1103(c)(1)(1985). It is inconceivable that Con-
gress, acting with those intentions, also intended for
employers such as Erbauer to have a right to recover
unlimited actual and punitive damages to be paid from

19

the assets of the plan when the participants anu oenefici-
aries of that plan would be limited to the remedies pro-
vided in section 1132. Not only is there a rational basis to
the ERISA civil enforcement scheme, to adopt Erbauer’s
position would be totally irrational and inconsistent with
the intentions of Congress.

CONCLUSION

The questions that Petitioner raises are neither spe-
cial nor important. The judgment of the Texas supreme
court involves no unsettled questions of law and is
entively consistent with the prior rulings of this Court
and other federal circuit courts and state courts of last
resort on ERISA preemption. ERISA preemption in this
case does not violate any right of access under the United
States Constitution. Accordingly, the petition should be
denied.

Respectfully submitted,

REAGAN M. Brown
Counsel of Record
FULBRIGHT & JAWORSKI

1301 McKinney, Suite 5100
Houston, Texas 77010
(713) 651-5151

Attorneys for Respondent,
Pan American Life Insurance
Company

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385009_2288%3A2. Public record. Not legal advice.