Opposition Brief — FMC Corp. v. Holliday

89-1048

No. 89-3226

JOSEPH F. SPANIOL, JR.

In The asa

Supreme Court of the United Sfates

October Term, 1989

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vr

FMC CORPORATION,

Petitioner,

VS.

CYNTHIA ANN HOLLIDAY,

Respondent.

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. 4

On Petition For Writ Of Certiorari To

The United States Court Of Appeals

For The Third Circuit

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RESPONDENT'S BRIEF IN OPPOSITION

TO PETITION FOR WRIT OF CERTIORARI

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—

Tuomas G. JOHNSON, Esquire

Counsel of Record

Attorney for Respondent

The Daugherty House

824 Church Street

Indiana, PA 15701

(412) 463-0226

Davip A. Cicota, Esquire

BARBOR AND CICOLA

917 Philadelphia Street

Indiana, PA 15701

(412) 465-5618

Attorneys for Respondent

COCKLE LAW BRIEF PRINTING CO,, (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

Whether Section 514 (A)-(B) of the Employee Retire-

ment Income Security Act of 1974 allows FMC Corpora-

tion’s self-funded employee welfare benefit plan to avoid

the effect of a Pennsylvania insurance statute abolishing

the common law remedy of subrogation as to all entities

which provide medical benefits to victims of motor vehi-

cle accidents?

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TABLE OF CONTENTS

Page

Question Presented... ......+ssicevesesu een i

Table of Authorities ........06ss000nse eee ili

Statutes Involved... ........+ssss0e5ne ee 1

statement of Cage... .....sss0<sceu nue eee |

summary of Argument .........5..555:0855n eee 5

Reasons for Denying the Writ ..................... 7

1. NO SUBSTANTIAL CONFLICT EXISTS

AMONG THE CIRCUIT COURTS OF

APPEALS ON THE NARROW ISSUE

BEFORE THIS COURT... ......s0s0uneeeee 7

2. THE THIRD CIRCUIT DECISION IS NOT IN

CONFLICT WITH ANY HOLDING OF THE

SUPREME COURT OF THE UNITED STATES

USEOENEEEEEOTTTT TTT UCC 13

3. ACCEPTANCE OF JURISDICTION OVER

THIS CASE WILL NOT SUBSTANTIALLY

REDUCE LITIGATION OVER ERISA PRE-

EMPTION

Conclusion

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TABLE OF AUTHORITIES

Page

Cases

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504

EE SO ee eee 15

Baxter vs. Lynn, 866 F.2d 182, reh’g denied, __

a eee ee 9

Brown Transport Corp. vs. Atcon, Inc., 439 U.S.

1014 (1978) (Dissenting opinion of Mr. Justice

eee a ease eb aces srscegesvccecccess 7

Children’s Hospital vs. Whitcomb, 778 F.2d 239

ES ee eee 9

FMC Corp. vs. Holliday, 885 F.2d 79, reh’g denied,

ES) passim

Fort Halifax Packing Co., Inc. vs. Coyne, 482 U.S.

ee regi tse ndcdcesescvses. 7, 14, 15

Insurance Board of Bethlehem Steel Corporation

vs. Muir, 819 F.2d 408 (3rd Cir. 1987).............. 9

Liberty Mutual Insurance Group vs. Iron Workers

Health Fund of Eastern Michigan, 879 F.2d 1384,

reh’g denied, «F.2d ___ (6th Cir. 1989) .......... y

Mackey vs. Lanier Collection Agency, 486 U.S.

re Ts te

McDaniel vs. Sanchez, 452 U.S. 130 (1981) .......... 14

Metropolitan Life Insurance Co. vs. Massa-

gE Sr | |.) passim

Northern Group Services, Inc. vs. Auto Owners

Insurance Co., 833 F.2d 85 (6th Cir. 1987) cert.

Gemeem, toe o.0t. 1754 (1966) ................. passim

iv | STATUTES INVOLVED

In addition to the statutes cited in the Petition for

TABLE OF AUTHORITIES - Continued Writ of Certiorari, Section 1719 of the Pennsylvania Motor

rege Vehicle Financial Responsibility Law of 1984 (“Motor

Pilot Life Insurance Co. vs. Dedeaux, 481 US. 41 Vehicle Law”) provides

ee ee er ee Net en Oe 7, 8, 11, 12 A fd, ‘

' ' § 1719. Coordination of benefits

Powell vs. Chesapeake and Potomac Telephone ay ‘

Co. of Virginia, 780 F.2d 419 (4th Cir. 1985), cert. a) oe = Pee wr Pesan : aie

Game, SO: UB. VEFD GRR oe vec ivecececnasceass 8 eer pencil gy Mie omagpsee cr aismgiiete~ gel

: ered pursuant to this subchapter shall be

Reilly vs. Blue Cross and Blue Shield United of primary. Any program, group contract or other

Wisconsin, 846 F.2d 416, 425-26 (7th Cir.) cert. MUAQURENE TOE POY OF TERER SUCH 88

denied, 104 S.Ct. 145 (1988) 8 described in Section 1711 (relating to required

a a a aaa ak St cit alah benefits) 1712(1) and (2) (reiating to availability

Shaw vs. Delta Air Lines, Inc., 463 U.S. 85 (1983) ...6, 8 of benefits) or 1715 (relating to availability of

adequate limits) shall be construed to contain a

United Food & Commercial Workers & Employers provision that all benefits provided therein shall

Arizona Health & Welfare Trust vs. Pacyga, 801 be in excess of and not in duplication of any

Pa TO GU Ge PODS x csconconcsecceaensaaass 12 valid and collectible first party benefits pro-

vided in Section 1711, 1712 or 1715 or workers’

compensation.

STATUTES (b) Definiti A din thi ;

efinition. — As used In this section the term

I PPrere yy rrr ere peers e ere passim “program, group contract or other arrange-

28 U.S.C. § 1332 ee ment” includes, but is not limited to, benefits

ad ad seavcceectncaude kunsPeeereaes p payable by a hospital plan corporation or a pro-

Oe ae EE hiok oh bbb se dddanereeeeteneas assi fessional health service corporation subject to 40

S ae Pa.C.S. Ch. 61 (relating to hospital plan corpora-

AR «cra ca erwin kevieaes passim tions) or 63 (relating to professional health ser-

vices plan corporations).

ae RAG ee POR inks cob keeees eaweexes passim

Fa Fe, Cae, GO. AO BUI cnc vies acdsccs passim 7

STATEMENT OF THE CASE

see SD eer reer ee passim

As noted in FMC’s statement of the facts, Cynthia

75 Pa. Cons. Stat. Ann. §§ 1761-1769............ passim Ann Holliday was entitled to medical benefits under the

FMC Salaried Health Plan as of January 16, 1987. (App.

RULES 6A, 7A, 87A). Ms. Holliday was critically injured in an

Rule 17.1, Rules of the Supreme Court of the

SE IN 5:5. 6 v.05 60 cases caducupcietaataneeees 7 1

automobile accident on that date, having suffered mas-

sive head injuries which have resulted in permanent

impairment. Her medical expenses to date exceed

$178,000.00; the cost of future care is unknown. (App. 7A,

87A, 103A).!

The plan provides for coordination of benefits

between first-party automobile coverage and the Plan as

follows:

If you or a covered member of your family are

eligible to receive benefits under another group

medical plan, Health Maintenance Organization

(HMO), governmeni plan, or by “no-fault” auto-

mobile insurance which provides medical cover-

age, you may be eligible for benefits from those

Plans and your FMC Plan. In the case of cover-

age by “no-fault” automobile insurance, FMC

will pay covered expenses not paid for by no-

fault insurance.

(App. 58A)

No-Fault

In some states with no-fault motor vehicle cov-

erage, the carrier is the primary insurer in these

jurisdictions. All medical expenses related to an

accident must be submitted to the carrier and

not the FMC Health Care Plan. Eligible expenses

not paid for by no-fault insurance will be paid

by the FMC Plan.

(App. 62A)

In accordance with the coordination of benefits and

“no-fault” language of the Plan, the first $10,000.00 in

' All citations labeled “App.” are to the appendix filed to

the brief of FMC which was docketed with the Third Circuit

Court of Appeals.

medical bills were paid by the State Farm Mutual Auto-

mobile Insurance Company under a motor vehicle insur-

ance policy owned by Mr. Holliday on the date of the

accident. (App. 217A-219A). The Plan availed itself of the

coordination of benefits and no-fault clauses,? commenc-

ing payment of medical bills only after State Farm’s cov-

erage was exhausted. (App. 220A-222A). Significantly,

although Ms. Holliday’s bills were well in excess of the

$100,000.00 threshold required for eligibility under the

Pennsylvania Catastrophic Loss Trust Fund, Act of Febru-

ary 12, 1984, P.L. 26, 11-12, 75 Pa.C.S.A. Sections

1761-1769, (App. 223A-224A), and the Plan provides a

one million dollar lifetime maximum per person (App.

15A), the Plan paid no expenses which qualified for Cata-

strophic Loss Trust Fund coverage.

FMC’s Statement of Facts correctly recites a portion

of the clause which purports to reserve subrogation

rights to the Plan and further correctly notes that Mr.

Holliday signed a third-party reimbursement form pre-

sented to him by an FMC representative under the

authority of this provision. However, Mr. Holliday did so

as a result of the final sentence of the subrogation clause

contained in the Plan, which presents a Hobson’s Choice

to the beneficiary:

Unless you sign the Company’s “third party

reimbursement form”, the claims administrator

will not process any claim where there is possi-

ble liability on behalf of a third-party. (App.

63A).

2 These clauses parrot Pennsylvania’s Motor Vehicle Law

in this regard. See Statutes Involved, supra.

Mr. Holliday then commenced the civil action as

described in FMC’s Statement of Facts. On September 3,

1987, President Judge Robert C. Earley of the Common

Pleas Court of Indiana County, Pennsylvania, entered an

Order granting the Petition of the tortfeasor to interplead

his automobile liability insurance policy limit of

$100,000.00 and directed all potential plaintiffs to make

claims against such funds. (App. 184A-192A). On May 2,

1989, an Order was entered approving a settlement by

and between Ms. Holiday, three other individuals who

made claim against the liability insurance proceeds in

response to the interpleader, and the tortfeasor, the effect

of which was to limit Cynthia Ann Holliday’s recovery

from the tortfeasor to $49,875.50, plus accrued interest.

(Petition for Writ of Certiorari, Page 5).

FMC notified Ms. Holliday of its intent to exercise

subrogation rights with respect to the Indiana County

action. Ms. Holliday refused to acknowledge the subroga-

tion claim of FMC, citing Section 1720 of the Motor Vehi-

cle Law. FMC then instituted a declaratory judgment

action in the United States District Court for the Western

District of Pennsylvania (Civil Action Number 88-1098),

asserting a right of subrogation under the language of the

Plan.

Upon cross-motions for summary judgment, the

Honorable Alan N. Bloch granted Ms. Holliday’s Motion

for Summary Judgment and denied that of FMC.

The United States Court of Appeals for the Third

Circuit affirmed the District Court in all respects. The

Third Circuit, having conducted an exhaustive analysis of

the congressional intent underlying the various provi-

sions of Section 514 of ERISA, held that Congress did not

intend to preempt legitimate state regulations which do

not operate to undermine the congressional purposes

underlying the preemption clause. The Court found the

anti-subrogation provision of the Motor Vehicle Law to be

such a state regulation, and determined that Congress did

not intend Section 514 of ERISA to preempt that Act of

the Pennsylvania Legislature.

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SUMMARY OF ARGUMENT

For many reasons, the Court should not accept this

case for review.

First, the Third Circuit Court of Appeals was correct

that Pennsylvania’s coordination of benefit laws should

not be preempted merely because such laws have ) tan-

gental effect upon ERISA plans. In so holding, the Third

Circuit is in concert with, and has followed, an equally

cogent and well-reasoned opinion out of the Sixth Circuit.

Northern Group Services, Inc. vs Auto Owners Insurance Co.,

833 F.2d 85 (6th Cir. 1987) cert. denied, 108 S.Ct. 1754

(1988), held that the proper inquiry under the deemer

clause is whether the state insurance regulation inten-

tionally or unintentionally addresses a core type of ERISA

matter which Congress sought to protect by the preemp-

tion provision. The Third Circuit opinion conflicts only

with an earlier result reached by the Ninth Circuit

through a truncated analysis of the specific issue pre-

sented for decision. The other cases cited by FMC in its

attempt to construct a serious conflict are highly distin-

guishable on their essential facts, and lend nothing to an

analysis of the importance (or lack thereof) of FMC’s

plea. The minor conflict which does exist is neither wor-

thy of this Court’s attention nor soluble by a review of

this case.

Second, the Petition for Certiorari rests heavily on

dicta found in Metropolitan Life Insurance Co. vs. Massa-

chusetts, 471 U.S. 724 (1985). FMC asserts that this dicta

categorically exempts from state automobile insurance

regulation all self-funded employee benefit programs.

Such flawed reasoning is rooted in no holding of this

Court, ignores the approach uniformly applied by this

Court in preemption cases, and fails when viewed in the

context of the legislative history which underlies Section

514.

This Court has been repeatedly called upon or

requested to review and decide questions of federal pre-

emption under ERISA. This Court should not accept or

open its door to automatic preemption of state law as the

vehicle for resolution of every conceivable conflict arising

between state laws and an ERISA plan. The maintenance

of a federal system of government precludes adoption of

so-called “bright line” tests which trample the will of

Congress. The case at bar is inappropriate for Supreme

Court review because the Third Circuit has already

addressed the question presented in a manner consistent

with this Court’s earlier expressed views on the subject of

state causes of action and ERISA plans.

,™

ww

3 Metropolitan Life Insurance Co. vs. Massachusetts, 471 U.S.

724; 105 S.Ct. 2380; 85 L.Ed.2d 728 (1985); Shaw vs. Delta Air

(Continued on following page)

REASONS FOR DENYING THE WRIT

1. No substantial conflict exists among the Circuit

Courts of Appeals on the narrow issue before

this Court.

FMC asserts the existence of “a substantial and direct

conflict among the Courts of Appeals” as a justification

for the issuance of a Writ of Certiorari by this Court. Such

a Writ is “granted only when there are special and impor-

tant reasons therefore.” Rule 17.1, Rules of the Supreme

Court of the United States. While a genuine conflict

between the Courts of Appeals is concededly one of the

considerations viewed by this Court, the mere existence

of such a conflict in a given case does not control this

Court’s absolute discretion or justify an exercise of this

Court's jurisdiction. Whether in matters of personal lib-

erty or mere dollars, the sheer volume of conflict situa-

tions assures that far more of such cases must be rejected

than can be heard. See Brown Transport Corp. vs. Atcon,

Inc., 439 U.S. 1014 (1978) (Dissenting opinion of Mr. Jus-

tice White). Ms. Holliday submits that certiorari should

be granted only where the asserted conflict is genuine,

widespread and pervasive, and is fundamental to the

precise issue placed before the Court in the proffered

case.

(Continued from previous page)

Lines Inc., 466 U.S. 85; 103 S.Ct. 2890; 77 L.Ed.2d 490 (1983);

Fort Halifax Packing Co. vs. Coyne, 482 U.S. 1; 107 S.Ct. 2211; 96

L.Ed.2d 1 (1987); Pilet Life Insurance Co. vs. Dedeaux, 481 U.S.

41; 107 S.Ct. 1549; 95 L.Ed.2d 39 (1987); Mackey vs. Lanier

Collection Agency, 486 U.S. __, 108 S. Ct. 2182 (1988).

Perhaps in a tacit acknowledgment of this concept,

FMC attempts to elevate its voice above the clamor by

painting a portrait of pervasive conflict among the Circuit

Courts of Appeals upon an issue defined with far greater

breadth than may be justified by the facts of this dispute.

This case neither demands nor requires the broadstroke

ruling sought by FMC as to the tension between the

preemption clauses of ERISA and every state insurance

law which might, in any conceivable way, someday affect

the legal rights of a self-funded employee welfare benefit

plan such as FMC’s.

Viewed in the light of the true question presented by

this case, ie., the effect of ERISA’s preemption clause

upon a state motor vehicle insurance law barring certain

subrogation claims, the colossus of conflict erected by

FMC crumbles. Several of the cases cited by FMC address

the viability of state law remedies asserted by Plan partic-

ipants against self-funded plans. See, e.g., Powell vs. Ches-

apeake and Potomac Telephone Co., 780 F.2d 419 (4th Cir.

1985), cert. denied, 476 U.S. 1170 (1986); Reilly vs. Blue

Cross and Blue Shield Linited of Wisconsin, 846 F.2d 416 (7th

Cir.), cert. denied, 104 S.Ct. 145 (1988). This Court has left

no room for doubt that ERISA proscribes such claims.

Shaw vs. Delta Air Lines, Inc., 463 U.S. 85 (1983); Pilot Life

Insurance Co. vs. Dedeaux, 481 U.S. 41, 95 L.Ed.2d 39, 107

S.Ct. 1549 (1987). Such cases are not pertinent to the

analysis of this conflict because Holliday seeks no ajfir-

mative relief against a plan fiduciary and asserts no state

remedy for benefits under the Plan.

A second cluster of cases cited by FMC involve hold-

ings that state law cannot direct self-insured employee

welfare benefit plans to provide certain types of plan

benefits. See, e.g., Children’s Hospital vs. Whitcomb, 778

F.2d 239 (Sth Cir. 1985); Insurance Board of Bethlehem Steel

Corp. vs. Muir, 819 F.2d 408 (3rd Cir. 1987); Liberty Mutual

Insurance Group vs. Iron Workers Health Fund of Eastern

Michigan, 879 F.2d 1384, re-hearing denied, F.2d ___

(6th Cir. 1989). Far from contributing to a splintering of

opinion among the various Circuit Courts of Appeals on

the subrogation issue, these decisions simply recognized

dicta found in Metropolitan Life Insurance Company vs.

Commonwealth of Massachusetts, et al., 471 U.S. 724 (1985),

wherein this Court determined the validity of such “man-

dated benefits” laws as applied to insured plans. These

cases did not require consideration of the status of state

laws affecting attempts by self-insured plans to assert

subrogation against the tort recoveries of injured parties.

To afford deference to dicta of this Court in a case involv-

ing the precise subject matter addressed by this Court in

generating such dicta does not create a true conflict with

a decision in a wholly different field of regulation.

Finally, FMC cites four decisions relating to the

attempted enforcement of Plan subrogation rights in the

face of state law which either provides no such right or

affirmatively bars them from being asserted. A closer

examination of these decisions reveals that the conflict is

not so absolute as FMC would have this Court believe.

Baxter vs. Lynn, 886 F.2d 182 (8th Cir. 1989), is a panel

holding that “the (state’s common) iaw of subrogation,

while generally applicable to insurance contracts, is not

specifically directed to the insurance industry.” 886 F.2d

at 186. The key factual distinction was the absence in

Baxter of a state precept geared towards insurance regula-

tion; the Court thus found a law of general application

10

not to have been saved from preemption by ERISA Sec-

tion 514(b). The Court was not squarely faced with a state

insurance regulation or the “deemer” question which

FMC concedes to lie at the core of this appeal. The Panel’s

comments regarding the theoretical application of the

“deemer” clause were mere dicta and are not necessarily

indicative of the full Eighth Circuit Court of Appeal’s

position on the question presented to this Court today.

Two of the remaining decisions were born of exhaus-

tive analyses of congressional intent, concluding that the

“deemer” clause was not intended to preempt core provi-

sions of state automobile insurance regulations, even as

applied to self-funded plans. Northern Group Services, Inc.

et al. vs. Auto Owners Insurance Co., et al., 833 F.2d 85 (6th

Cir. 1987), cert. denied 108 S.Ct. 1754 (1988); FMC Corp.

vs. Holliday, 885 F.2d 79, re-hearing denied __ F.2d __

(3rd Cir. 1989). Although FMC’s petition stresses the dif-

ferences in intellectual approaches between the Sixth Cir-

cuit and the Third Circuit Courts of Appeals, the nature

of the analysis utilized by each Court is in essence identi-

cal. Each Court scrutinized Congress’ intent in enacting

the relevant preemption provisions of ERISA, and con-

cluded that, as to the particular type of state automobile

insurance regulation before it, Congress did not intend

federal preemption to occur because the state provision at

issue was not a surreptitious attempt to supplant federal

pension regulation with state controls. See Northern Group

Services, 833 F.2d at 93; Hollidav, 885 F.2d at 87-90. FMC’s

complaint that the Northern Group Services and Holliday

Courts created “two different, but equally amorphous,

tests” dissipates in the face of the language of the opin-

ions. The Northern Group Services Court determined that,

11]

“where there is no demonstrated interest in

national uniformity and preemption of state law

which substantially disrupt a state regulatory

scheme generally applicable to both insured and

self-insured ERISA plans, as well as to insurers

generally, the deemer clause does not bar regu-

lation.” 833 F2d at 95.

The Holliday Court found that,

“self-insured plans would merely be considered

on a case by case basis as to whether the state

regulation involved affects a central concern of

ERISA. Northern Group Services, 833 F.2d at

94-95. In light of the available interpretive

materials, the proper inquiry under the deemer

clause is whether the state insurance regulation

intentionally or unintentionally addresses a core

type of ERISA matter which Congress sought to

protect by the preemption provision. The Court,

reviewing a state insurance law, should inquire

whether that law conflicts with any substitute

mandate in ERISA.” 885 F.2d at 89-90.

It is impossible to identify any conceptual difference

between an “interest in federal uniformity” and a “central

concern of ERISA”; these are the same thought variously

expressed. It is difficult to fathom any real difference in

the aims or approaches of the two Courts, as each is

concerned with identification of the congressional intent

underlying ERISA. “The purpose of Congress is the ulti-

mate touchstone. (Citations)”. Pilot Life Insurance Company

vs. Dedeaux, 107 S.Ct. at 1552.

Nor does FMC’s concern over future litigation justify

this Court’s attention to the Third Circuit opinion in this

case. This Court has previously recognized that, at least

in the context of ERISA’s civil enforcement provisions,

federal courts would have to develop common law to

12

define rights and liabilities in an ERISA world. Pilot Life

Insurance Company vs. Dedeaux, 107 S.Ct. at 1557-1558. The

judicial development of ERISA rules born of the efforts of

federal courts to identify the congressional intent and

federal interests underlying a statutory scheme, is to be

anticipated given the language of this statute. See Metro-

politan Life, 471 U.S. at 724.

Ms. Holliday recognizes that the decision of the

Ninth Circuit panel in United Food and Commercial Workers

vs. Pacyga, 801 F.2d 1157 (9th Cir. 1986) is in conflict with

the holdings of the Northern Group Services and Holliday

Courts. A brief perusal of it’s opinion demonstrates that

the Pacyga Court, failing to concern itself with congres-

sional intent as this Court and others have done, chose

the path of blind application of certain dicta offered in a

different context by this Court in Metropolitan Life Insur-

ance Co. vs. Massachusetts, op. cit., and dismissed out of

hand any suggestion that the Arizona anti-subrogation

law might survive ERISA’s preemption provisions. Thus,

on the real subject matter of the current controversy, this

Court must consider whether the existence of a conflict

between two Circuit Courts which have taken parallel

paths to the same conclusions and one which has “short-

cut” in the opposite direction justifies the extraordinary

relief of certiorari.

The magnitude of this conflict dims as the facts of

each cited case are illuminated in the background. Total

uniformity, while a classroom ideal, is not a species found

in the living law. This Court, as it should, has always

devoted its energies to serious conflicts. The slight devia-

tion by the Ninth Circuit in Pacyga does not warrant the

13

application of this Court’s resources to the Third Circuit's

mainstream opinion.

2. The Third Circuit decision is not in conflict

with any holding of this Court.

FMC asserts that the Third Circuit has ignored bind-

ing precedent created in Metropolitan Life Insurance Co. vs.

Massachusetts, 471 U.S. 724 (1985). In so doing, FMC

incorrectly analyzes the scope of the Metropolitan Life

holding.

Metropolitan Life resulted from a state court action

seeking insurance company compliance with a Massa-

chusetts statute requiring any insurance policies sold

within the state to contain certain mental health care

coverages. The carriers resisted, arguing that ERISA Sec-

tion 514 preempted the Massachusetts “mandated bene-

ts” law. The result of this Court’s painstaking analysis of

Section 514(b) was a holding that the Massachusetts stat-

ute was not preempted as to the parties litigating the

issue.

Critically, none of the parties to Metropolitan Life were

a self-funded employee welfare benefit plan. This Court

took great care to note that Massachusetts removed the

question of mandated benefits laws as applied directly to

self-funded plans before that matter could reach the

Court. 471 U.S. at 734, n.14. This Court was neither

required nor requested to encompass self-funded plans

within its holding in Metropolitan Life. The language relat-

ing to self-funded plans, upon which FMC relies to estab-

lish a conflict between this Court and the Third Circuit

14

Court of Appeals, is dicta. Dicta is neither binding prece-

dent nor part of any holding of this Court. McDaniel vs.

Sanchez, 452 U.S. 130 (1981).

Moreover, the Metropolitan Life dicta must be viewed

in the context of the peculiar type of state law then before

the Court, i.e. a mandated benefits law. Such dicta has

persuasive value, only insofar as it indicates that manda-

ted benefits laws should not be applied to self-funded

plans. The Pennsylvania anti-subrogation statute, while

an insurance statute (as determined by the District Court

and the Third Circuit, and as argued by FMC), is of a

Gifferent character from mandated benefits laws; the for-

mer resiricts plan efforts to assert a traditional state law

remedy, while the latter dictates what coverages a plan

administrator must offer. The need to ferret out congres-

sional intent as to the former type of legislation is

obvious, as this Court has recognized that preemption is

not automatic. Fort Halifax Packing Co., Inc. vs. Coyne, 482

U.S. 1 (1987). The Third Circuit’s conduct in Holliday, far

from contradicting this Court’s holdings, marches in step

with this Court’s approach to ERISA preemption as to the

type of state enactment to be addressed in this case.

3. Acceptance of jurisdiction over this case will

not substantially reduce litigation over ERISA preemp-

tion.

FMC asserts a belief that, if this Court accepts juris-

diction and reverses the judgement of the Third Circuit

Court of Appeals, endless litigation and diversity of

national impact will be avoided. FMC thus proposes that

Congress intended to trample upon state regulatory

15

authority with no discrimination whatsoever and without

respect to the maintenance of a federal system of

government.

“ERISA preemption analysis must be guided by

respect for the separate spheres of governmental

authority presented in our federal system”.

Fort Halifax Packing Company, Inc. vs. Coyne, 482 U.S. 1,

__, 107 S.Ct. 2211, 2221 (1987), citing Alessi vs. Raybestos-

Manhattan, Inc., 451 U.S. 504, 522 (1981). Such sensitivity

to the continued existence of a federal system renders

inevitable a certain degree of litigation to balance the

ongoing tension between federal and state interests. This

Court has never suggested that ERISA preemption is

absolute; rather, it has continuously examined congres-

sional attitudes and found that Congress recognizes the

ongoing right of the states to regulate traditional areas of

concern, even where such regulation impacts upon

employee welfare benefit plans. See, e.g., Metropolitan

Life, op. cit.; Fort Halifax Packing Company, 482 U.S. at __,

107 S.Ct. at 2215; Mackey vs. Lanier Collection Agency, 486

U.S. ___, 108 S.Ct. 2182 (1988). Avoidance of adjudication

of the bounds between federal and state interplay is

simply not a justification for an exercise of this Court's

jurisdiction in view of the inherency of this process to our

federal system.

The Mackey decision perhaps best illustrates this idea.

This Court refused, in Mackey, to hold that Georgia’s

scheme for enforcement of civil judgements could not

apply to an ERISA plan. In so doing, this Court found

Congress to have intended that ERISA plans should be

amenable to suit upon various state causes of action.

16

Mackey, 108 S.Ct. at 2186-2187. In the context of widely

varying state laws and causes of action, this finding

belies FMC’s asserted mandate of absolute uniformity in

all matters touching upon all self-funded plans. Mackey

strongly suggests that Pennsylvania’s Section 1720 was

intended by Congress to survive Section 514(a), since it

not only falls into a class of regulations specifically desig-

nated by Congress as ERISA “survivors” (i.e., insurance

laws), but also addresses the existence (or non-existence)

of a traditional state law claim (i.e., subrogation in con-

junction with common law tort actions). Review of the

Third Circuit’s approval of this statute will, therefore,

add nothing to the debate over the scope of ERISA pre-

emption, as the Third Circuit dovetailed with this Court

and Congress in finding this statute to be outside the

scope of the pretextual sorts of enactments which Con-

gress sought to prevent through the enactment of Section

514. See 885 F.2d at 87-90.

»

>

CONCLUSION AND RELIEF

This case is not appropriate for Supreme Court

review and, therefore, the subject Petition for Writ of

Certiorari should be denied.

January 31, 1990

Respectfully submitted,

THomas G. JouNnson, Esquire Davin A. Cicoia, Esquire

Counsel of Record BARBOR AND CICOLA

The Daugherty House 917 Philadelphia Street

824 Church Street P.O. Box 1076

Indiana, PA 15701 Indiana, PA 15701

(412) 463-0226 (412) 465-5618

Attorneys for Respondent

Cynthia Ann Holliday

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