# Amicus Curiae Brief — Metropolitan Life Insurance v. Massachusetts

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URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0138%3A04

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1985
- **Citation:** 471 U.S. 724

## Text

: . Office - Supreme Court. US |
Nos. 84-325 and 84-356 Pye Le

SEP 2 1e4

IN THE

DER L. STEVAS.

Supreme Court of the United ee

OCTOBER TERM, 1984

METROPOLITAN LIFE INSURANCE COMPANY,

Appellant,
v.

COMMONWEALTH OF MASSACHUSETTS.
Appellee.

THE TRAVELERS INSURANCE COMPANY,

Appellant,
v.

COMMONWEALTH OF MASSACHUSETTS,
Appellee.

On Appeal From The Supreme Judicial Court
For The Commonwealth Of Massachusetts

BRIEF AMICUS CURIAE OF THE
ERISA INDUSTRY COMMITTEE IN SUPPORT
OF APPELLANTS’ JURISDICTIONAL STATEMENTS

JOHN M. VINE
(Counsel of Record)
ARVID E. ROACH JI
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566

Washington, D.C. 20044
(202) 662-6000

Attorneys for
The ERISA Industry Committee

September 7, 1984

i

TABLE OF CONTENTS

Page
THE INTEREST OF AMICUS AND THE GREAT
PUBLIC SIGNIFICANCE OF THE ISSUES IN-
I Actinsttiieisdenittnandanidiiniantesnnanbicineatinenieduatmenmsescentn 2
THIS CASE PRESENTS SUBSTANTIAL FEDERAL
i deiiiheiiciicinihibhinstdeniduaiinbindianndnanmtannsasssiibionncies 5
Be ee ID aitciibitittitnitnrsipiiesintennsinictemnenincon 5
| oss ccrtenscndnennienceminanenmannsenenionens 11

ENT sisisctrenedesinccsneseuenesnentiny-crnepesennnnictascennins-cese 14

s

TABLE OF AUTHORITIES

CASES

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504
(| ) eee eee
Allied Chemical & Alkali Workers v. Pittsburgh Plate
Glass Co., 404 U.S. 157 (1971) ...ccecceececceeeeeeeeeeeeeeeees
Attorney General v. Travelers Insurance Co., 385
Mass. 598, 433 N.E.2d 1223, vacated & remanded,
103 S. Ct. 3563 (1983), on remand, 391 Mass. 730,
Pt bE OT), | ee
Group Life & Health Insurance Co. v. Royal Drug
Ca., GED UB. FES CBG DP ccccccssnsssestenseressntntentatininaniins

Local 24, International Brotherhood of Teamsters v.
oe LS el ea

Lodge 76, International Association cf Machinists v.
Wisconsin Employment Relations Commission, 427
UP Gi i) |

Malone v. White Motor Corp., 435 U.S. 497 (1978)...

Metropolitan Life Insurance Co. v. Whaland, 410
ABE GSS (PETE. BGT) eccccccsccscssssnsssentinstnscsntiiietsamemans

Michigan United Food & Commercial Workers Fund
v. Baerwaldt, 572 F. Supp. 943 (E.D. Mich. 1983),
appeal docketed, No. 83-1570 (6th Cir. Aug. 16,
|) ae

New York Telephone Co. v. New York State Depart-
ment of Labor, 440 U.S. 519 (1979)... ....cccecceeeeeeees

Ozawa v. United States, 260 U.S. 168 (1922)..............

San Diego Building Trades Council v. Garmon, 359
UO: 7)

Shaw v. Delta Air Lines, Inc., 103 S. Ct. 2890

United States vy. American Trucking Associations,
Bree.. S9O USD. S36 ( EDGED) accccccecesassnsecsensesssenstncsenente

STATUTES AND LEGISLATIVE MATERIALS

Employee Retirement Income Security Act of 1974,
Pub. L. No. 93-406, 88 Stat. 829 (1984), 29 U.S.C.
gS ee

§ 3¢ 1), 2D U.S.C. § 1OGRC 1 ) ncecccccccccseccsssccnsssssssses

passim

12,13

7-9,11

5-11

lll

§ 514(a), 29 U.S.C. § 1144( a) cecccccecceccesceeeseeseesees
§ 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A)...
§ 514(b)(2)(B), 29 U.S.C. § 1144(b)(2)(B)....
§ 514(c)(2), 29 U.S.C. § 1144(C)(2) ceccocccesesseeses
Mass. Gen. Laws ch. 175, § 47B .o........cccccccccccccccecccceeeee

McCarran-Ferguson Act, ch. 20, 59 Stat. 33 (1945),
ce

§ 2(b), 15 U.S.C. § 1012(b)........ sendonwessouneseqvescosee
Tc nrsncs ccctnecsncsosssensseceenscsscees

National Labor Relations Act, ch. 372, 49 Stat. 449
Ss es OE BN, OO BI concn ccccsccccccccccecesers

H.R. Rep. No. 1785, 94th Cong., 2d Sess. ( 1977).......

Mass. Gen. Court, Jt. COMM. ON INSURANCE, AD-
(i974) IN HEALTH INSURANCE IN MASSACHUSETTS
SST

120 Conc. Rec. 29197, 29933, 29942 (1974) (re-
marks of Rep. Dent, Sen. Williams, and Sen.
i ccedenenccee

OTHER

Brummond, Federal Preemption of State Insurance
Laws Under ERISA, 62 lowa L. Rev. 57 (1976)...

HEALTH INSURANCE ASSOCIATION OF AMERICA,
Source Book or HEALTH INSURANCE Data, 1982-
EES

Hutchinson & Ifshin, Federal Preemption of State
Law Under the Employee Retirement Income Secu-
rity act of 1974, 46 U. Cui. L. Rev. 23 (1978)........

Kilberg & Heron, The Preemption of State Law
Under ERISA, 1979 DUKE L.J. 383 ..0.....ccccccccccseeeeee

| US. DEPARTMENT OF LABOR, BUREAU OF LABOR

STATISTICS, EMPLOYEE BENEFITS IN MEDIUM AND
LARGE FIRMS, 1982 (1983) ...........cccccccceeeccecseeeeeeeeeeee

U.S. DEPARTMENT OF LaBor, LABOR-MANAGEMENT
SERVICES ADMINISTRATION, GROUP HEALTH Cov-
ERAGE OF PRIVATE FULL-TIME WAGE AND SALARY
GE

Page

11

9,13

IN THE
Supreme Court of the United States

OcTOBER TERM, 1984

Nos. 84-325 and 84-356

METROPOLITAN LIFE INSURANCE COMPANY,
Appellant,
Vv.

COMMONWEALTH OF MASSACHUSETTS,
Appellee.

THE TRAVELERS INSURANCE COMPANY,
Appellant,
Vv.

COMMONWEALTH OF MASSACHUSETTS,
Appellee.

On Appeal From The Supreme Judicial Court
For The Commonwealth Of Massachusetts

BRIEF AMICUS CURIAE OF THE
ERISA INDUSTRY COMMITTEE IN SUPPORT
OF APPELLANTS’ JURISDICTIONAL STATEMENTS

This case presents a question of fundamental importance
to the Nation’s employers and their employees—whether state
legislatures are free, in the guise of “insurance regulation,” to
dictate the benefits that must be provided by insured employee
benefit plans. The decision below holds that a Massachusetts
Statute requiring specific mental health benefits to be included

2

in all health insurance policies covering state residents—a
statute whose express purpose and principal effect were to
govern employee benefit plans—is not pre-empted by the
Employee Retirement Income Security Act of 1974 (“ERISA”)
or the National Labor Relations Act (“NLRA”). This result
threatens to force employers either to assume the great burden
and expense of conforming their insured employee benefit
plans to ever-changing laws of fifty different states, or to
abandon insured employee benefit plans altogether.

The ERISA Industry Committee submits this amicus curiae
brief, with the consent of the parties, to urge the Court to note
jurisdiction of these two appeals and give plenary consideration
to this important state-court decision.

THE INTEREST OF AMICUS AND THE GREAT
PUBLIC SIGNIFICANCE OF THE ISSUES INVOLVED

The ERISA Industry Committee (“ERIC”) is a nonprofit
association of over one hundred major corporations doing
business in a wide variety of American industries. A list of
ERIC’s members is set forth in the Appendix hereto. Through
ERIC, member companies express their views to the courts, the
Congress, and the Executive Branch on issues affecting privaic
pension and welfare plans.

ERIC represents a broad cross-section of firms maintaining
health benefit plans and other employee welfare plans. (“Wel-
fare plans” are employee benefit plans that provide non-
pension benefits, such as health, accident, or supplemental
unemployment benefits.) ERIC members’ welfare plans cover
tens of millions of beneficiaries. All of the members of ERIC
do business in more than one state, and a number have
employees in all fifty states. Transfers of employees from one
state to another are common. Many of the welfare plans of
ERIC’s members provide uniform benefits in all states where
beneficiaries are located. Such nationwide benefit uniformity is
important to employee morale and yields significant savings in
administrative expenses.

3

Most of the welfare plans of ERIC’s members are insured
plans—that is, they provide benefits through the purchase of
group insurance policies covering their beneficiaries. Under an
insured plan, the employer pays a premium to the insurance
company, and the insurance company generally assumes the
risk as to the actual level of benefits that will be payable during
the term of the policy.1 Some ERIC members maintain non-
insured plans. Under these plans, the cost of benefits is the
direct responsibility of the employer, who is sometimes referred
to as a “self-insurer.” As a rule, “self-insurance” is an econom-
ically feasible alternative to purchasing insurance from an
insurance company only where a plan is large enough to allow
the risk to be spread over a large population. While self-
insurance has been growing, insured welfare plans remain
much more common. For example, among medium and large
firms nationwide, insured health plans covered about four times
as many individuals as self-insured plans in 1982. USS.
DEPARTMENT OF LABOR, BUREAU OF LABOR STATISTICS, EM-
PLOYEE BENEFITS IN MEDIUM AND LARGE FIRMS, 1982, at 36
(1983).

Whether state governments can dictate the benefits of
insured welfare plans is a question of great importance to
ERIC’s members and their employees. The companies
participating in ERIC spend hundreds of millions of dollars
each year on insurance premiums and administrative expenses

‘Some insurance policies, particularly for large plans, are “experience
rated,” which means that the premium is based on the actual claims
experience under the policy. Generally, under such policies, if the plan has a
surplus in a particular year ( premiums exceed c«!aims and expenses), the plan
receives a refund or credit of some portion of the premiums, while if the plan
incurs a deficit (claims and expenses exceed premiums), the employer can
choose between not renewing the policy, in which case the insurance company
absorbs the deficit, or renewing the policy and paying some or all of the
deficit over a period of time. Under experience-rated policies of this kind,
risks are not borne entirely by the insurance company, but rather are shared
between the insurance company and the employer.

4

for insured welfare plans.2 Laws increasing the costs of insured
welfare plans can have a substantial economic impact on a
business. Welfare-plan benefits are a major issue in collective
bargaining negotiations and are a major factor in compensation
decisions for non-union employees.

If the states are permitted to enforce a crazy quilt of
mandatory-benefit laws against insured welfare plans, both
employers and employees will suffer. Companies with insured
plans will be forced either to adopt all-encompassing benefit
packages that satisfy the laws of every state, which will greatly
increase total benefit costs, or to provide a variety of different
benefits on a state-by-state basis, which will impose costly
administrative burdens and cause dissatisfaction and confusion
among employees. Free give-and-take in collective bargaining,
as well as employers’ ability to offer their non-union employees
attractive pay and benefit packages at acceptable cost, will be
supplanted by state prescription of a key element of com-
pensation. Employees will be forced to accept benefits they
would not have chosen themselves, and to sacrifice benefits they
would have preferred. The only other alternative for such
employers will be to abandon their insured plans completely
and shoulder the risks and costs of “self-insurance”—risks and
costs they decided not to incur when they established insured
plans. In sum, both employers and employees will be pre-
vented from achieving the best possible benefits at the most
reasonable cost.

The result will be that fundamental purposes of ERISA—
national uniformity in benefit-plan regulation and the growth
and soundness of employee benefit plans—will be frvstr. :d.
These grave consequences, as well as the importance of .he
legal questions presented, call for this Court’s review of the
decision below.

2 Nationally, health insurance premiums totalled $85 billion in 1981,
most of which was paid by employers. HEALTH INSURANCE ASSOCIATION OF
America, Source Book or HEALTH INSURANCE Data, 1982-1983, at 6
(1982). Some three-fourths of the full-time employees of private firms are
covered by health plans. U.S. DEPARTMENT oF LaBor, LABOR- MANAGEMENT
SERVICES ADMINISTRATION, GrouP HEALTH INSURANCE COVERAGE OF PRI-
VATE FULL-TIME WAGE AND SALARY Workers, 1979, at 15 (1981).

5

THIS CASE PRESENTS SUBSTANTIAL
: FEDERAL QUESTIONS

Section 47B of Chapter 175 of the Massachusetts General
Laws requires that insurance policies that provide hospital and
surgical benefits for state residents also must provide specified
mental health benefits.? Section 47B also requires that these
same benefits be provided by “any employees’ health and
welfare fund which provides hospital expense and surgical
expense benefits” in the state. Thus, the statute’s clear purpose
is to mandaf2 health benefits for all employee benefit plans, both
insured and non-insured. This is confirmed by the only
legislative material available. The explanatory report of the
joint committee that originated the bill makes clear that the
committee’s objective was to furnish mental health benefits for
“workers.” Mass. GEN. Court, JT. COMM. ON INSURANCE,
ADVANCES IN HEALTH INSURANCE IN MASSACHUSETTS I, 3, 4
(1974).

A. ERISA Pre-Emption

In this action, the appellants argued that Section 47B was
pre-empted by both ERISA and the NLRA. The ERISA pre-
emption issue received the primary attention of the court below.

ERISA pre-empts all state laws insofar as they “relate to
any employee benefit plan.” ERISA § 5!4(a), 29 U.S.C.
§ 1144(a). Exempted from this pre-emption, however, is
any state law “which regulates insurance.” ERISA
§ 514(b)(2)(A). 29 U.S.C. § 1144(b)(2)(A). This is often
referred to as the “insurance savings clause.” ERISA also
provides that, in applying the insurance savings clause, an
employee benefit plan shall not “be deemed to be an insurance
company or other insurer . . . or to be engaged in the business of
insurance . . . for purposes of any law of any State purporting to
regulate insurance companies [or] insurance contracts.” ERISA
§ 514(b)(2)(B), 29 U.S.C. § 1144(b)(2)(B). This is often
referred to as the “deemer clause.”

3 These include payment for sixty days’ hospitalization in a mental
hospital, benefits for hospitalization in a general hospital for mental or
nervous conditions that are equal to the benefits provided for other illnesses,
and $500 per year for certain out-patient mental health benefits.

6

The question confronting the Massachusetts Supreme Judi-
cial Court below was whether Section 47B is a law “which
regulates insurance” within the meaning of ERISA’s insurance
savings clause—and thus exempt from pre-emption—or is
preempted by ERISA’s basic pre-emption provision, particu-
larly as read together with the expression of Congressional
intent in the deemer clause to prevent state insurance laws from
being used as a pretext for state regulation of employee benefit
plans.

The court began its analysis of this question by artificially
bifurcating Section 47B. The state had conceded that insofar as
the statute applied explicitly to non-insured employee benefit
plans, it was pre-empted by ERISA. The court concluded that
this aspect of the statute was severable as a matter of general
state-law severability doctrine, and thus proceeded to review
Section 47B as if it had been solely a law directed at insurance
policies. Attorney General v. Travelers Insurance Co., 385
Mass. 598, 601, 433 N.E.2d 1223, 1225, App. 13a, 1Sa-l6a
(1982), vacated & remanded, 103 S. Ct. 3563, App. 10a
(1983), on remand, 391 Mass. 730, 463 N.E.2d 548, App. la
(1984).

The court next recognized that a literal reading of the
insurance savings clause, exempting any state law bearing the
label “insurance” from pre-emption, was untenable, as this
would give states virtually unlimited rein to govern employee
benefit plans under the pretext of insurance regulation. As the
court put it, this construction “might permit the State, through
its insurance laws, to reach far into areas governed by ERISA,
and thereby negate the unmistakable intent of Congress to
work a broad preemption.” Jd. at 606, 433 N.E.2d at 1228,
App. at 21a.

The court was thus faced with the task of drawing a line
between non-pre-empted state insurance laws and those state
laws that, while purporting on their face to inyolve insurance,
are pre-empted. The court decided that the appropriate basis
for distinction was whether the state statute was in “clear
conflict” with affirmative regulatory provisions of ERISA. Id.
Since ERISA’s affirmative regulation of welfare plans is limited
to reporting, disclosure, fiduciary conduct, and plan adminis-

>

tration, and ERISA, in contrast to Section 47B, does not
prescribe the “substantive content of plans,” the court con-
cluded that Section 47B was not pre-empted. The court
rejected the idea that ERISA was also actuated by fundamental
policies of encouraging private initiative in structuring healthy,
growing, broad-based employee benefit plans and allowing
plan sponsors to enjoy < climate conducive to nationwide plan
uniformity without interference from conflicting state laws.
Instead, the court thought it could discern in this Court’s
decision in Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504
(1981), intimations that ERISA’s pre-emption was aimed
solely at state laws that “affected a subject covered by ERISA.”
385 Mass. at 608, 433 N.E.2d at 1229, App. at 23a.

On appeal, 103 S. Ct. 3563, App. 10a (1983), this Court
vacated and remanded for further consideration in light of
Shaw v. Delta Air Lines, Inc., 103 S. Ct. 2890 (1983). Shaw,
which repeatedly stressed that the exceptions from pre-emption
in ERISA are “narrow” (id. at 2902, 2903), undermined both
the Massachusetts Supreme Judicial Court’s conflict-based no-
tion of ERISA pre-emption and the Massachusetts court’s
rejection of private initiative and uniformity as fundamental
goals of ERISA.

Shaw held that ERISA pre-empted a New York
antidiscrimination law and a New York law requiring that sick-
leave benefits be paid to employees unable to work because of
pregnancy. In so holding, the Court specifically noted that
ERISA “does not mandate that employers provide any particu-
lar benefits, and does not itself proscribe discrimination in the
provision of employee benefits’—thus clearly rejecting the
notion of the Massachusetts court in this case that conflict is the
necessary predicate for pre-emption. Jd. at 2897.

Further, Shaw cited Alessi for the proposition that ERISA,
in “establishing benefit plan regulation ‘as exclusively a federal
concern,’” was aimed at minimizing “the need for interstate
employers to administer their plans differently in each State in

which they have employees.” Jd. at 2904 (quoting Alessi, 451
U.S. at 523). In words equally applicable here, Shaw pointed
out that allowing “varied and perhaps conflicting” state laws to
be enforced against employee benefit plans would undercut
employers’ freedom to administer efficicnt, uniform employee
benefit plans and would leave employers with a series of
unattractive options. Among these options would be setting up
different plans in each state—with “the inefficiency of such a
system presumably... paid for by lowering benefit levels” —
and adopting uniform plans that met the requirements of all
states—which would require the employer to “reduce wages or
eliminate those benefits not required by any State” in order to
“offset the additional expenses.” Jd. at 2904 n.25. These very
same adverse consequences are the inevitable result of the
Massachusetts court’s decision in this case.

Despite the clear rejection in Shaw of the Massachusetts
Supreme Judicial Court’s earlier reasoning, the court refused on
remand to alter its decision. Shaw’s repeated characterization
of ERISA’s pre-emption exceptions as “narrow” was dismissed
as “dictum,” and the Supreme Judicial Court instead insisted on
its own view of the insurance savings clause as “broad.” 391
Mass. at 733-35, 463 N.E.2d at 550-51, App. at 4a-6a. The
court acknowledged that Shaw “rejected a conflict-based anal-
ysis” of ERISA’s general pre-emption provision, but nonethe-
less reaffirmed its own conflict-based theory of ERISA’s insur-
ance savings clause. Jd. at 734, 463 N.E.2d at 551, App. at Sa.
Finally, the court, while conceding that it was required to
“accept as authoritative” this Court’s conclusion in Shaw that
ERISA was intended to foster private initiative and uniformity
in benefit plans, now treated these policies as irrelevant. Jd. at
734, 463 N.E.2d at 551, App. at 6a. While the Massachusetts
court’s earlier decision had recognized that ERISA’s insurance
savings clause cannot be applied literally, and had sought to
interpret it based on the court’s views of the, policies animating
ERISA, now, faced with an authoritative Supreme Court
decision rejecting its notions of Congress’ intent, the court set
aside intent and reaffirmed its prior decision on the basis of the
“language” that it had previously recognized to be the begin-
ning—not the end—of the analysis. Jd. at 735, 463 N.E.2d at
551, App. at 6a.

9

The ERISA pre-emption issue presented in this case is a
substantial federal question for the following reasons:

1. It is an important question of first impression. No
prior decision of this Court interprets ERISA’s insurance
savings clause. The lower courts are divi’ed on the
matter,* as are the commentators.5

2. The treatment of the issue by the court below is
unsatisfactory. In reaffirming its earlier decision, the
Massachusetts Supreme Judicial Court evaded the many
conflicts between that decision and this Court’s holdings in
Shaw and Alessi. Moreover, while the court recognized (at
least in its first opinion) that the insurance savings clause
could not be interpreted literally because this would turn it
into a loophole that could consume ERISA’s primary
mandate of preemption—a conclusion that was clearly
correct ®&—the “clear conflict” standard that the court

4 Compare, e.g., Metropolitan Life Insurance Co. v. Whaland, 410 A.2d
635 (N.H. 1979) (state mandatory benefit law not pre-empted), with, e.g.,
Michigan United Food & Commercial Workers Fund v. Baerwaldt, 572 F.
Supp. 943 (E.D. Mich. 1983), appeal docketed, No. 83-1570 (6th Cir. Aug.
16, 1983) (state mandatory benefit law pre-empted ).

5 Compare, e.g., Brummond, Federal Preemption of State Insurance Laws
Under ERISA, 62 lowa L. Rev. 57, 115-21 (1976) (opposing pre-emption ),
with, e.g., Hutchinson & Ifshin, Federal Preemption of State Law Under the
Employee Retirement Income Security Act of 1974, 46 U. Cui. L. Rev. 23, 68-
69 (1978) (favoring pre-emption). See also Kilberg & Heron, The Preemp-
tion of State Law Under ERISA, 1979 Duke L.J. 383, 402 (courts have
“given little guidance in determining when a state law which is merely labeled
as an ‘insurance law’ may be a guise to regulate employee benefit plans and
when such a law is a legitimate exercise of the state’s traditional authority in
the area of insurance”).

6 The purpose of a statute, and not its literal words, must be followed
where literalism would produce a result “plainly at variance with the policy of
the legislation as a whole.” United States v. American Trucking Ass’ns, Inc.,
310 U.S. 534, 543 (1940) (quoting Ozawa v. United States, 260 U.S. 168, 194
(1922)). As the Massachusetts court recognized in its first decision, this
would be the effect of a literal reading of ERISA’s insurance savings clause.
Such a construction would give states unlimited power to regulate insured
employee benefit plans. ERISA specifically recognizes the particular impor-
tance of insured plans, in defining “employee welfare benefit plan” as a plan
that provides benefits “through the purchase of insurance or otherwise.”
ERISA § 3(1), 29 U.S.C. § 1002(1).

10

advanced as an alternative is untenable. It allows basic
policies behind ERISA—fostering uniformity in employee
benefit plans and encouraging their growth and soundness
through private initiative—to be defeated by statutes that
are labelled “insurance regulation” but are actually aimed
at governing employee benefit plans. As this Court said in
Alessi, “ERISA’s authors clearly meant to preclude the
States from avoiding through form the substance of the
pre-emption provision.” 451 U.S. at 525.

This Court should assume jurisdiction of this case and
adopt a construction of ERISA’s insurance savings clause
that preserves legitimate state insurance regulation without
undermining Congress’ overriding objective of freeing
employee benefit plans from conflicting and intrusive state
regulation. The proper conclusion is that Congress meant
to leave traditional insurance regulation to the states—
regulation, for example, of capitalization, the form of
policies, fiduciary and investment standards, and sales
practices—but not to leave the states free to adopt laws
formally classified as insurance laws but with the primary
effect of governing employee benefit plans. Construing the
insurance savings clause in this way clearly requires pre-
emption of the present statute—which was expressly aimed
at employee benefit plans 7—while leaving the states wide
scOfee to enact insurance laws with secondary or incidental
effects on employee benefit plans.

+

7 ERISA’s pre-emption provisions are directed at state laws that regulate
“the terms and conditions of employee benefit plans.” ERISA § 514(c)(2),
29 U.S.C. $ 114(c)(2). This was exactly the intent and result of Section 47B.
The Massachusetts Supreme Judicial Court’s bifurcation of the statute dis-
regarded this fact, and failed to come to grips with the federal-law question of
statutory interpretation—independent of any state-law severability issue—of
whether, in light of its purpose and effect, Section 47B could be considered a
law “which regulates insurance” within the meaning of ERISA’s insurance
savings clause.

ll

3. The court below ignored or misconstrued materials
that illuminate Congress’ intent. One source of guidance is
the deemer clause, which the Massachusetts court dealt
with only in passing, asserting without explanation that it
reinforced the court’s conclusion. 385 Mass. at 606, 433
N.E.2d at 1228, App. at 2la (deemer clause described as
“one indication of the breadth of the savings clause”’).
Rather than supporting the decision below, the deemer
clause demonstrates a Congressional concern that the
insurance savings clause not become a pretext for state
action evading ERISA’s establishment of “benefit plan
regulation ‘as exclusively a federal concern’” ( Shaw, 103
S. Ct. at 2904 (quoting Alessi, 451 U.S. at 523)).

Another source of guidance is the legislative history of
ERISA. That history makes clear that ERISA’s pre-
emption provisions were adopted in order to preclude
“multiple,” “conflicting,” and “inconsistent” state laws
regulating employee benefit plans—not just, as the court
below thought, in areas affirmatively regulated by ERISA,
but in all areas. See 120 Cona. Rec. 29197, 29933, 29942
(1974) (remarks of Rep. Dent, Sen. Williams, ana Sen.
Javits) (quoted in Shaw, 103 S. Ct. at 2901 & n.20).®

B. NLRA Pre-Emption

Many insured welfare plans are collectively bargained.
Section 47B undeniably intrudes on the freedom of labor and
management to negotiate the terms of employment contracts.
The impact is significant. Health benefits, for example, are a
principal issue in labor negotiations. State-mandated benefits
of one kind force workers to sacrifice other, preferred benefits
of a different kind.

8 See alsoH.R. Rep. No. 1785, 94th Cong., 2d Sess. 47 (1977) (report of
oversight hearings on ERISA pre-emption, declaring that “the Federal
interest and the need for uniformity are so great that enforcement of state
regulation should be precluded,” and suggesting that this policy is threatened
by unduly broad constructions of “our efforts to ensure minimum disruption
to the regulatory efforts of the states in the fields of insurance, banking and
securities”). The committee’s reference to “sn inimum” disruption of state
regulation is significant. It clearly implies t..t a literal reading of the
insurance savings clause—which would permit no disruption of state insur-
ance regulation—was not intended.

12

In Local 24, International Brotherhood of Teamsters v.
Oliver, 358 U.S. 283 (1959), this Court held that the NLRA
pre-empts state laws that prescribe terms of collectively-
bargained labor agreements. Health benefits are a mandatory
subject of bargaining. Allied Chemical & Alkali Workers v.
Pittsburgh Plate Glass Co., 404 U.S. 157, 159 (1971). Thus,
Oliver would seem to be square authority that the NLRA pre-
empts Section 47B as applied to collectively-bargained insured
plans.

This conclusion is supported by the Court’s decision in
Alessi, supra. There, in holding that ERISA pre-empted state
laws prohibiting workers’ compensation benefits from being
offset against pensions, the Court found its conclusion rein-
forced, insofar as collectively-bargained pension plans were
concerned, by “the additional federal interest in precluding
state interference with labor-management negotiations.” 451
U.S. at 525 (citing Oliver). Pre-emption was compelled, the
Court held, by the “direct clash between the state statute and
the federal policy to keep calculation of pension benefits a
subject of either labor-management negotiations or federal
legislation.” Jd. at 526 n.22.

The Massachusetts Supreme Judicial Court nonetheless
found that Section 47B was not pre-empted by the NLRA, on
two grounds. First, the court found that there was a “public
health” exception to NLRA pre-emption. The court reached
this conclusion based on a remark in Oliver (358 U.S. at 297)
that the state law pre-empted in that case was not a “local
health or safety regulation.” 385 Mass. at 613, 433 N.E.2d at
1232, App. at 29a-30a. Second, the court concluded that there
is no NLRA pre-emption where some other federal statute
expresses a Congressional intent to permit state regulation. The
court found such an intent in Section 2(b) of the McCarran-
Ferguson Act, 15 U.S.C. § 1012(b), which provides that
federal statutes should not be construed as superseding state
laws enacted “for the purpose of regulating the business of
insurance.” 385 Mass. at 613-14, 433 N.E.2d at 1232, App. at
30a.

This holding, like the lower court’s ERISA pre-emption
holding, presents a substantial question of federal law. This
Court has had little occasion to apply the doctrine of Oliver that

13

state laws directly dictating the substance of labor-management
agreements are pre-empted by the NLRA.? Rather, most of
this Court’s NLRA pre-emption decisions have focused on pre-
emption of state laws affecting the process of labor-
management relations. See, e.g., san Diego Building Trades
Council v. Garmon, 359 U.S. 236 (1959); Lodge 76, Inter-
national Association of Machinists v. Wisconsin Employment
Relations Commission, 427 U.S. 132 (1976). The Court has
never decided whether there is in fact a “public health”
exception to the Oliver doctrine, much less defined its scope.
Lower courts are divided on the issue. See, e.g., Hutchinson &
Ifshin, supra note 5, at 75.

Nor has this Court ever addressed whether the McCarran-
Ferguson Act, which was enacted long before state legislatures
first attempted to prescribe substantive terms of collective
bargaining agreements through the vehicle of insurance laws,
expresses a Congressional! intent to permit such state legislation.
The recent decision in Malone v. White Motor Corp., 435 U.S.
497, 513 (1978) (plurality opinion), indicates that any such
intent must be “evident” '°—a test that the court below did not
apply, and one it seems unlikely the McCarran-Ferguson Act
could pass. Moreover, it is not clear that a statute enacted with
the express purpose of regulating employee benefit plans
subject to ERISA is properly regarded as a statute “regulating
the business of insurance” within the meaning of the McCarran-
Ferguson Act.'' Finally, the Massachusetts court’s summary
dismissal in a footnote (385 Mass. at 614 n.25, 433 N.E.2d at
1232 n.25, App. at 30a n.25) of Section 4 of the McCarran-
Ferguson Act, 15 U.S.C. § 1014—which provides that the

* The continuing validity of the doctrine was recognized, however, in
Malone v. White Motor Corp., 435 U.S. 497, 512-14 (1978) (plurality
opinion ), and, as noted above, in Alessi.

10 See also New York Telephone Co. v. New York State Department of
Labor, 440 U.S. 519, 540-45 (1979) (plurality opinion); id at 546 n.*
(Brennan, J., concurring); id. at 547, 551 (Blackmun, J., concurring).

1 Cf. Group Life & Health Insurance Co. v. Royal Drug Co., 440 U.S.
205 (1979) ( Blue Shield Pharmacy Agreements are not exempt from antitrust
laws as “the business of insurance” under the McCarran-Ferguson Act,
particularly in light of the principle that exemptions from the antitrust laws
are to be narrowly construed ).

14
McCarran-Ferguson Act shall not affect “application [of the
NLRA|] to the business of insurance”—does not reflect the sort

of careful analysis called for by the important issue of labor-law
pre-emption posed by these cases.

CONCLUSION

The Court should note probable jurisdiction in these cases.

Respectfully submitted,

JOHN M. VINE
(Counsel of Record)
ARVID E. ROACH II
Covington & Burling
1201 Pennsylvania Avenue, N.W.
P.O. Box 7566
Washington, D.C. 20044
(202) 662-6000

Attorneys for
The ERISA Industry Committee

September 7, 1984

APPENDIX

la
MEMBERS OF THE ERISA INDUSTRY COMMITTEE

Aetna Life and Casualty Company
Alexander & Alexander Services, Inc.
Allied Corporation

Aluminum Company of America
AMAX Inc.

American Telephone & Telegraph Company
Apache Corporation

ASARCO Incorporated

Atlantic Richfield Company

Bankers Trust Company

Bank of America N.T. & S.A.

Bell Communications Research
Bethlehem Steel Corporation

The Boeing Company

Bristol-Myers Company

Buck Consultants, Inc.

Caterpillar Tractor Co.

Champion International Corporation
The Chase Manhattan Bank, N.A.
Citibank, N.A.

The Coca-Cola Company

Colu.nbia Gas System Service Corp.
Combustion Engineering, Inc.
Connecticut General Life Insurance Co.

Consolidated Foods Corporation

2a

The Continental Group, Inc.
Coopers & Lybrand

Dart & Kraft Inc.

Deere & Company

Delta Air Lines Inc.

Digital Equipment Corp.

R. R. Donnelley & Sons Company
The Dow Chemical Company
Dresser Industries, Inc.

E. I. du Pont de Nemours & Company, Incorporated
Eastman Kodak Company

Eli Lilly and Company

Equitable Life Assurance Society of the United States
Esmark, Inc.

Exxon Corporation

Federated Department Stores, Inc.
FMC Corporation

Ford Motor Company

General Electric Company

Generai Mills, Inc.

General Motors Corporation

W. R. Grace & Co.

The Greyhound Corporation
Grumman Corporation

GTE Corporation

Gulf & Western Industries, Inc.
Frank B. Hall Consulting Company

3a

John mancock Mutual Life Insurance Co.
A. S. Hansen, Inc.

Hazlehurst & Associates, Inc.

H. J. Heinz Company

Hewitt Associates

Honeywell Inc.

ICI Americas, Inc.

Ingersoll-Rand Company

International Business Machines Corporatior
International Harvester Company
International Telephone & Telegraph Corporation
Internorth, Inc.

Johnson & Johnson

Knight-Ridder Newspapers, Inc.

LTV Corp.

Manufacturers Hanover Trust Company
William M. Mercer, Inc.

Metropolitan Life Insurance Company
Minnesota Mining & Manufacturing Co.
Mobil Oil Co-poration

Monsanto Company

Mutual of America

Occidental Petroleum Services, Inc.

Olin Corporation

Owens-Corning Fiberglas Corporation
Owens-Illinois, Inc.

J. C. Penney Company, Inc.

4a

Pennzoil Company
PPG Industries, Inc.
Procter & Gamble Company

The Prudential Insurance Company of America

_ Ralston Purina Company

RCA Corporation

Republic Steel Corporation

R. J. Reynolds Industries, Inc.
Rockwell International Corporation
Sears, Roebuck and Co.

Shell Oil Company

The Southland Corporation

Sperry Corporation

Standard Oil Company of California
Standard Oil Company of Indiana
Standard Oil Company of Ohio
Sun Company, Inc.

Tampa Electric Company

Tenneco Inc.

Texaco Inc.

Textron Inc.

Time Incorporated

Towers, Perrin, Forster & Crosby Inc.

The Travelers Insurance Company
TRW Inc.

Union Camp Corporation

Union Carbide Corporation

|
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Sa
United States Steel Corporation
United States Tobacco Company

United Technologies Corporation
Unocal Corporation
Westinghouse Electric Corporation

The Wyatt Company

Xerox Corporation

CERTIFICATE OF SERVICE

I certify that on this 7th day of September 1984 I served
the foregoing brief on each of the parties by sending three
copies thereof by first-class mail, postage prepaid, to:

Sally A. Kelly, Esq.

Administrative Counsel to the
Attorney General

Commonwealth of Massachusetts

Twentieth Floor

One Ashburton Place

Boston, Massachusetts 02108

Jay Greenfield, Esq.

Paul, Weiss, Rifkind, Wharton & Garrison
345 Park Avenue

New York, New York 10154

Steven A. Kaufman, Esq.
Ropes & Gray

225 Franklin Street

Boston, Massachusetts 02110

Arvid E. Roach II

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0138%3A04. Public record. Not legal advice.