Amicus Curiae Brief — FMC Corp. v. Holliday

if Supreme Court, U.S.

| FILED

| JUN 4 1990

J} | yoserPt F. SPANIOL, JR.”

CLERK

— mer’

No. 89-1048

IN THE

SUPREME COURT OF THE UNITED STATES

October Term, 1929

FMC CORPORATION,

Petitioner,

V.

CYNTHIA ANN HOLLIDAY,

Respondent.

2.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE THIRD CIRCUIT

BRIEF FOR THE PENNSYLVANTA TRIAL

LAWYERS ASSOCIATION AS AMICUS CURIAE

IN SUPPORT OF RESPONDENT

John Patrick Lydon, Esquire

Counsel of Record

Sikov and Love, P.A.

1400 Lawyers Building

Pittsburgh, PA 15219

(412) 261-4202

Counsel for Amicus Curiae,

Pennsylvania Trial Lawyers Association

TABLE OF CONTENTS

Page

Table of Authorities.......... ii

Statement of Interest of

MMIGUS CUPITRC. cccccccceoce ]

Summary of Argument......ceece 3

Arguments:

1. CONGRESS DID NOT INTEND

AND THE DECISIONS OF

THIS COURT DO NOT REQUIRE

THAT THE PENNSYLVANIA

MOTOR VEHICLE FINANCIAL

RESPONSIBILITY LAW BE

PREEMPTED BY SECTION 514

OP ERISA. .cccee eoccccces 6

ra ERISA DOES NOT PERMIT A

PARTIAL PREEMPTION OF A

STATE LAW AS PETITIONER

REQUESTS occ ccccccccccccs 17

3. REVERSAL IN THE CASE AT

BAR WILL NOT PROMOTE

UNIFORMITY IN THE ADMINIS-

TRATION OF ERISA PLANS... 25

4, SECTION 1720 OF THE MVFRL

DOES NOT "DEEM" THE FMC

BENEFIT PLAN TO BE IN THE

BUSINESS OF INSURANCE.... 26

DORE See GenceeccSoecvcecos 35

ii 1ii

TABLE OF AUTHORITIES Liberty Mutual Insurance Group v.

Iron workers Health See Eastern

Page Michigan, 6579 F.2d 13 th Cir.

Al 1 Raybest Manhatt I 3

essi v. Raybestos-Manhattan nc., COSCO SESOeeeeeeeeeeoeeeeocecoccccce Sh

aa 504, 101 S.Ct. 1985 i

1951 Mackey v. Lanier Collections Agenc

ones oc ccc cccee ee been wen anne Be OS. 825, 108 S.ct. 2182, 100 -_

L.Ed 2d 836 (1988) 14, 15,

Allstate Insurance Co. v. Clarke, POSS CC SECS eee eeccerecccccecoccoccs coe LY, 22

364 Pa. Super. 196, 527 A.od

1021 (1987) Metropolitan Life Ins. Co. ue

eon TOVETTTTTTiTTT?,.t—“—tsO Massachusetts 471 U.S. 724, 105

S.Ct. 2380, 85 L.Ed 2d 728 (1985) By

Baxter v. Lynn, 886 F.2d 182 (8th PUPPET hinadedecesce DCSE Cheb eee cee. ll, 12,

Cir. 1989) 19, 31

coccccceeeeeesesn eel coeoceseeee Bee ee

Northern Group Services v. Auto

Children's Hospital v. Whitcomb, Owners Inc. Co., 833 F.2d 85 (Ath

773 F.2d 239 (Sth Cir. 1985) Cir. 1987), cert. denied, 108 S.Ct.

occvceeenten eee 000 cee ues enn 1754 (1988)

Beeeesecessecoocce peeeeeeeeecescececee 30, 34

FMC Corp. v. Holliday, 885 F.2d 79

(3d Cir. 1989) Pilot Life Ins. Co. v. Dedeaux,,

occceeseecese oun cocccscoeceeees On Oe 461 U.S. 41, 107 S.Ct. 1549, 95

L.Ed 2d 39 (1987)

Fort Halifax Packing Co., Inc. v. PTT TT CLUE Dene eeeeeoeee 11, 30

Coyne, 482 U.S. 1, 107 S.Ct. e2ll,

96 L.Ed 2d 1 (1987) Powell v. Chesapeake & Potomac

occcesccteen eee 000 ee eee eee eee Telephone Co. of Virginia, 780 F.2d

14 419 (4th Cir. 1965), cert. denied,

|S 32

Insurance Board of Bethlehem Steel

Corporation v. Muir, 819 F.2d 408 Rebaldo v. Cuomo, 749 F.2d 133

(3d. Cir. 1987) Cand Cir. 1984)

cocccccccescceceeseseeee enn coeeeee 10, 30 POSS eee eeresccececcsccsescccccsese LF

Shaw v.

Delta Air Lines

iv

, Inc., 463

U.S. 95, 103 S.ct. 26090, 77 L.Ed

2d 490 (1983)

United Food & Commercial Workers

v. Pacyga, 801 F.od 1157 (9th Cir.

1986)

STATUTES:

29 U.S.C.

29

29

75

Pa.

Cons.

Cons.

Cons.

Stat.

seat.

stat.

§1144(a).....

~C. §1144(b) (2) (B)

Ann.

Ann.

Ann.

eGo FRSCRERDERIA) ccc cbeccdees

eGo BADOCL OMA 6c cckeandatswes

SITZOccccves

TLS ae

1. 24,

16

30, 3e,

33

6, Ts

26

7, 26

8, 27

21

5, 28,

29

18, 26,

28

18

STATEMENT OF THE INTEREST OF

AMICUS CURIAE PENNSYLVANIA

TRIAL LAWYERS ASSOCIATION

Pursuant to Rule 37.2 of the Rules

of the Supreme Court of the United

States, the Pennsylvania Trial Lawyers

Association files this Brief as Amicus

Curiae supporting the position of

Respondent Cynthia Ann Holliday. Signed

consents permitting the filing of this

Brief, from Counsel for Petitioner FMC

Corporation Charles Kelly, and from

Attorney Thomas G. Johnson representing

Respondent Cynthia Ann Holliday, have

been filed with the Clerk of this

Honorable Court. The Pennsylvania Trial

Lawyers Association is a private

non-profit association with a membership

of nearly 4,500 trial attorneys in the

Commonwealth of

Pennsylvania,

predominately representing injured

2

parties in their attempt to seek redress

for their injuries in the Courts. The

issue of subrogation in Pennsylvania

automobile cases has a- significant

impact on the interests of injured

parties and on the practice of law in

Pennsylvania. Any determination,

therefore, by this Honorable Court of

the issues in the case at bar will

directly affect the members of the

Pennsylvania Trial Lawyers Association

and the interests of their clients.

This Brief is filed timely pursuant

to the schedule established by Order of

this Honorable Court for the filing of

the Brief of the Respondent.

3

SUMMARY OF ARGUMENT

This Court has repeatedly stated

that it is necessary to consider the

Congressional purpose behind the ERISA

preemption, savings and deemer clauses

in order to determine if a state law is

preempted by ERISA. There is a

presumption against preemption and this

Court has determined that Congress did

not intend that the ERISA preemption

clause would invade the traditional

areas of state regulation, including

motor vehicle insurance laws~ which

includes the Pennsylvania Motor Vehicle

Financial Responsibility Law.

The "pright line" test of

Metropolitan Life Insurance Co., does

not provide an easy answer to the facts

of this case. FMC itself has invoked

4

the Pennsylvania law in question and

has used and seeks to continue to use

parts of the state law to its own

advantage. It therefore asks that this

Court only preempt certain portions of

the Pennsylvania law although this

Court has previously stated that a law

that is preempted by ERISA is not saved

merely because it furthers the purpose

of a plan or the substantative

requirements of the ERISA statute.

Therefore, FMC cannot’ preempt’ only

those portions of the law it seeks to

ignore. Any administrative burden

caused by different motor’ vehicle

insurance laws in each state was

willingly assumed by FMC when it

specifically incorporated those

different laws into its plan. If this

Court were to reverse the decision

5

below, it would not promote national

uniformity in the administration of

this ERISA plan since the plan itself

sought to invoke the benefits of the

different statute in each state.

The Pennsylvania law comes within

the definition of the "savings clause"

and it does not "deem" the plan to be

an insurance company. The law in

question regulates insurance companies

as well as other entities and the Court

below found that the plan was covered

by Section 1719 of the Pennsylvania

law, which section applies to insurance

companies as well as to other

noninsurance entities. Therefore, the

Pennsylvania law does not run afoul of

the deemer clause of ERISA.

6

ARGUMENT

CONGRESS DID NOT INTEND AND THE

DECISIONS OF THIS COURT DO NOT

REQUIRE THAT THE PENNSYLVANIA MOTOR

VEHICLE FINANCIAL RESPONSIBILITY LAW

BE PREEMPTED BY SECTION 514 OF

ERISA.

All of the parties and virtually

all of the Amicus briefs agree that

three sections of the Employment

Retirement Income Security Act of 1984

(ERISA), 29 U.S.C. §1144, must be

analyzed to determine if the

Pennsylvania Motor Vehicle Financial

Responsibility Law (MVFRL) is preempted

in this case.

Section 514(a) of ERISA, 29 U.S.C.

§1144(a), provides that ERISA "shall

Supersede any and all State laws

insofar as they may now or hereafter

relate to any employee benefit plan".

Therefore the first test of preemption

is whether a state law comes within the

7

meaning of section 514(a) such that it

would be preempted.

If a state law comes within this

section, then one must determine if it

comes within the "savings clause" which

provides as follows:

Except as provided in

subparagraph (B), nothing in

this title shall be construed

to exempt or relieve any

person from any law of any

State which regulates

insurance, banking or

securities.

29 U.S.C. §1144(b)(2)(A). <All of the

parties and their amicus’ supporters

agree that the MVFRL is "Saved" by the

savings clause.

When a particular state law is

"saved" by this section, then we must

still look to the so-called "deemer

clause" which provides as follows:

Neither an employee benefit

plan .. . nor any trust

established under such a

plan, shall be deemed to be

an insurance company or other

8

insurer, bank, trust company,

or investment company or to

be engaged in the business of

insurance or banking for

purposes of any law of any

State purporting to regulate

insurance companies,

insurance contracts, banks,

trust companies or investment

companies.

29--U.S.C. §1144(b)(2)(B).

It might initially seem that one

could simply read these three sections

and reach a determination as to whether

or not the MVFRL is preempted by ERISA.

However, the path to such a decision is

not that clear. This Court has noted

that:

The two preemption sections,

while clear enough on their

faces, perhaps are not a

model of legislative

drafting, for while the

general pre-emption clause

broadly preempts state law,

the savings clause appears

broadly to preserve the

States' lawmaking power over

much of the same regulation.

While Congress’ occasionally

decides to return to the

States what it has previcusly

9

taken away, it does not

normally do both at the same

time.

Metropolitan Life Ins. Co. Vv.

Massachusetts, 471 U.S. 724, 105 S.Ct.

2380, 2389, 85 L.Ed.2d 728 (1985).

The FMC Corporation and its Amicus

Supporters would argue that the Court

can simply apply the "bright line" test

of Metropolitan Life to determine

whether or not a particular law is

preempted. The test would solely turn

on whether a plan was self-funded or

purchased insurance policies to provide

benefits. Apparently, FMC argues that

a self-funded plan is not subject to

any state laws of any type no matter

how tenous the relationship is to a

plan. This method of analysis is

10

appropriate and useful in determining

whether ERISA preempts state laws that

require insurance companies or other

entities to provide certain mandatory

minimum benefits. However, *he test is

too simplistic and inappropriate to

apply in a case such as the matter at

bar which does not involve the

mandatory provision of benefits. The

Court of Appeals below has applied this

bright line test in appropriate cases,

see Insurance Board of Bethelem Steel

ll

intention of the Congress in enacting

the preemption clause in order to

determine if a particular law is

preempted by ERISA. Shaw v. Delta

Airlines, Inc., 463 U.S. 85, 95, 103

S.Ct. 2890, 77 L.Ed.2d 490 (1983);

Metropolitan Life Ins. Co., 105 S.Ct.

at 2389; Pilot Life Ins. Co. v.

Dedeaux, 481 U.S. 41, 51-52, 107 S.Ct.

1549, 95 L.Ed.2d 39 (1987). There is a

presumption against preemption.

Metropolitan Life Ins. Co., 105 S.Ct.

Corp. v. Muir, 819 F.2d 408, 410 (3d

Cir. 1987). However, the Court of

Appeals held that this test was

inappropriate to determine the issues

in the case at bar.

Contrary to the argument of FMC

and its supporters, this Court has held

that it is necessary to determine the

at 2390.

While the preemption clause of

ERISA is very broad, this Court has

determined that "we must also presume

that Congress did not intend to preempt

areas of traditional state regulation."

Metropolitan Life Ins. Co., 105 S.Ct.

at 2389. Certainly state automobile

12

insurance laws are a familiar example

of an area of traditional state

regulation; see Metropolitan Life Ins.

13

Fort Halifax Packing Co., 107 S.Ct. at

Co., 105 S.Ct. at 2383.

The Congressional intent in

enacting the preemption provision of

ERISA was to shield benefit plans from

conflicting state and local regulations

which would interfere with the

administration of employee benefit

plans. Fort Halifax Packing Co., Inc.

2221, citing Alessi _v. Raybestos-

Manhattan, Inc., 451 U.S. 504, 522, 101

v. Coyne, 482 U.S. 1, 107 S.Ct. 2211,

2216-2217, 96 L.Ed.2d 1 (1987); Shaw,

463 U.S. at 105. Congress intended for

ERISA to do this without interfering

with the ability of the states to

regulate their “traditional areas of

responsibility.

ERISA pre-emption analysis

"must be guided by respect

for the separate spheres of

governmental authority

preserved in our federalist

system,'

S.Ct. 1895, 1905 (1981). This is

exactly the analysis which the Court of

Appeals undertook in this matter. This

analysis was in keeping with the clear

mandate of the decisions of this Court.

State automobile insurance laws

are clearly a traditional area of

regulation by the states and all of the

briefs submitted in this matter agree

that the MVFRL is such a state auto-

mobile insurance plan. Nonetheless,

Petitioner and its amicus supporters do

not undertake any analysis as to the

Congressional intent behind the

preemption clause other than to argue

that it is an automatic preemption

which requires no further analysis.

14

This argument does not comport with the

decisions of this Court noted above.

This Court has in several of its

recent decisions permitted state laws

to withstand preemption even beyond

those that would be saved by the

"savings clause" of ERISA. Mackey v.

Lanier Collections Agency, 486 U.S.

825, 108 S.Ct. 2182, 100 L.Ed.2d 836

(1988); Fort Halifax Packing Co., Inc.

v. Coyne, supra.

In Mackey v. Lanier Collections

Agency, the Supreme Court considered a

Georgia garnishment law which

specifically exempted the funds. or

benefits of an ERISA employee benefit

plan from garnishment. The Court

initially struck that portion of the

Georgia garnishment law because it

15

specifically applied only to ERISA

plans. However, the Court refused to

rule that ERISA superseded Georgia

garnishment laws in general and as part

of its discussion listed numerous state

laws which "although obviously

affecting and involving ERISA plans and

their trustees, are not preempted by

ERISA §514(a)." 108 S.Ct. at 2187.

The Court in Mackey analyzed the

purpose behind the preemption clause

and held that Congress did not intend

to preempt garnishment laws even though

they do "relate to" ERISA benefit

plans.

A similar result was reached in

Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir.

1984). There the Second Circuit held

that the state plan regulating hospital

insurance rates was not preempted by

16

ERISA noting that it is clear that

ERISA does not preempt every state law

that incidentally touches pension

plans. 749 F.2d at 138. In Shaw v.

Delta Airlines, Inc., 463 U.S. 85, 87,

103 S.Ct. 2890, 2901 the Supreme Court

held that "some state actions may

effect employee benefit plans in too

tenuous, remote, or peripheral a manner

to warrant a finding that the law

‘relates to' the plan."

The Pennsylvania MVFRL is not

directed at ERISA plans nor does it

deal with the subjects regulated by

ERISA. This Pennsylvania law is

concerned with no-fault automobile

insurance and state civil pleading and

evidentiary rules, all of which are

areas of traditional state regulation.

It does not require employee benefit

II.

17

provide

plans to coverage for

automobile accidents or even to provide

any heaith benefits coverage at all.

The MVFRL does not materially "relate

to" or "purport to regulate" ERISA

plans and therefore is not preempted.

Indeed, it is the FMC Corporation

itself which invoked the Pennsylvania

MVFRL for its benefit and now seeks to

preempt only certain portions of that

law.

ERISA DOES NOT PERMIT A PARTIAL

PREEMPTION OF A STATE LAW AS PETITIONER

REQUESTS.

It must be noted that the FMC plan

specifically invokes state automobile

no-fault motor vehicle coverage. In

this case FMC took advantage of the

Pennsylvania MVFRL to its benefit. As

the Amicus brief for the United States

notes in footnote 1 on page three of

18

its brief, the Plan took advantage of

the statute to have the first

$10,000.00 of medical expenses paid by

Mr. Holliday's automobile insurance

carrier. It also appears, as noted in

that footnote, that the plan obtained

further relief from the Pennsylvania

Catastrophic Loss Trust Fund

established in the Pennsylvania MVFRL,

75 Pa. C.S.A. §§1761 et seq. (Repealed

December 12, 1988). The Catastrophic

Loss Trust Fund was a state established

medical fund financed by a charge on

every registered vehicle in the state

which paid those medical expenses

incurred in motor vehicle accidents in

excess of $100,000.00.

FMC does not actualiy seek to

preempt the entire state law but rather

seeks to preempt Section 17290 of the

ill

19

law while taking advantage of all of

the other benefits of the law. This

Court has already decided trat if a

state law is preempted then it does not

matter that the state law is consistent

with the purposes of the benefit plan

or with the substantative requirements

of ERISA. Mackey, 108 S.Ct. at 2185;

Metropolitan Life, 105 S.Ct. at 2389.

As this Court pointed out in Mackey,

- e« e there is simply no

logical way to construe the

English language so that

, garnishment or attachment

laws "relate to" benefit

plans when they are invoked

by creditors of the bene-

ficiaries, but not when they

are invoked by beneficiaries

or creditors of the plan

itself.

Mackey, 108 S.Ct. at 2188.

In Mackey, the Georgia garnishment

law in question clearly supported the

benefit plan and furthered the purpose

20

of ERISA by exempting funds or benefits

of a plan from garnishment. This Court

held that this portion of the Georgia

garnishment law was preempted. FMC has

not attempted to explain how parts of

the MVFRL would be preempted but other

parts would not.

In its brief before the Third

Circuit Court of Appeals, FMC stated

that it wanted to invoke Pennsylvania

State law on subrogation and cited

several Pennsylvania case decisions to

that effect. (FMC did this even though

Subrogation has not been available in

automobile cases in Pennsylvania since

the passage of the 1974 No-Fault Motor

Vehicle Insurance Act.) If state laws

"relate to" ERISA plans when they

prohibit subrogation, then the state

laws permitting subrogation in other

21

cases would also "relate to" ERISA

plans. These subrogation laws would

also be preempted and therefore not

available to FMC. FMC tried to skirt

this issue by referring to to the

subrogation law as "common law" but its

citation of Pennsylvania cases clearly

indicated that it was referring to

Pennsylvania common law. "Common law"

is judicial decisional law as opposed

to statutory law. Under the definition

section of ERISA:

The term "state law" includes

all laws, decisions, rules,

regulations, or other State

action having the effect of

law, of any State.

29 U.S.C.S. §1144(c)(1). Obviously

this would include judicially decided

common law. If all state laws are

automatically superceded even if they

only remotely relate to an ERISA plan,

22

as FMC argues, then FMC could not take

advantage of state subrogation laws as

it seeks to do in this case. As this

Court determined in Mackey, Congress

never intended to provide such an

unbounded preemption.

The mischief posed by FMC's

interpretation of ERISA preemption

would go even beyond this point. As

the Petitioner quotes its plan on page

5 of its brief the plan requires that:

If you bring a liability

claim against any third

party, benefits payable under

this Plan must be included in

the claim, and when the claim

is settled you must reimburse

the Plan for the benefits

provided.

Under the MVFRL and similar state

automobile insurance laws, injured

parties are often precluded from

pleading or proving certain items of

23

damages in tort actions or are

otherwise restricted in bringing a suit

in tort. FMC's argument, however, is

that its subrogation language in the

benefit plan would be enforced

regardless of state law. This would

mean either that injured parties would

have to pay monies to FMC that they did

not recover in state court actions, a

definition of "subrogation" not known

heretofore, see Allstate Insurance Co.

v. Clarke, 364 Pa. Super. 196, 527 A.2d

1021 (1987), or else IMC would have the

federal courts change state automobile

tort law. Indeed, a plan could write

any procedural or evidentiary rule into

its plan and seek to enforce it against

non-beneficiaries. The state laws

limiting evidence or items of damages

in a no-fault system would be preempted

24

under FMC's argument.

For example, in

the case at bar, Ms. Holliday would be

required to bring FMC's claim against

the Defendant tortfeasor even though a

State law may prohibit the pleading or

proof of certain elements of medical

damages. Such a position would mean

chaos in the legal system. Because a

self-funded ERISA plan put’ certain

provisions into its Plan, a plan

beneficiary could sue a defendant for

damages not permitted to a

non-beneficiary in the same accident.

This would not be a case of federal law

preempting state law but, rather, a

case of a private plan preempting state

law. Such a result could never have

been the intention of Congress. This

would require a severe intrusion upon a

traditional area of state regulation

Ill.

25

while the state law only incidentially

touches an ERISA plan.

REVERSAL IN THE CASE AT BAR WILL NOT

PROMOTE UNIFORMITY IN THE ADMINIS-

TRATION OF ERISA PLANS.

The major argument advanced by

Petitioner and its amicus supporters is

that reversal of the Court below will

somehow enhance uniformity of the

administration of ERISA plans. This is

clearly not the case. It cannot be

overlooked that it was the Petitioner

invoked the

FMC Corporation which

Pennsylvania MVFRL by the language in

its plan. The FMC plan invokes the

state automobile insurance law of each

state in coordinating and construing

its benefits. By doing so, the plan

obviously intends to save money but

itself to

immediately subjects

IV.

26

different state insurance schemes in

each of the 50 states. The fact that

FMC itself would invoke such laws

clearly undercuts its argument that

uniformity is necessary as to its

Subrogation interest when it is the

plan itself that invoked 50 separate

schemes. If uniformity of adminis-

tration had such overriding importance

as FMC argues to this Court, it is hard

to understand why the FMC plan would

deliberately chose to invoke 50

different laws.

SECTION 1720 OF THE MVFRL DOES NOT

"DEEM" THE FMC BENEFIT PLAN TO BE IN

THE BUSINESS OF INSURANCE.

All of the parties and their

amicus supporters agree that if the

MVFRL "relates to" ERISA such that it

is superseded by §514(a), then it is

"saved" by §514(b)(2)(A).

27

This means that the MVFRL would

not be preempted by ERISA unless the

Pennsylvania law "deems" the benefit

plan to be an insurance company or

other insurer for purposes of any law

purporting to regulate insurance

companies or insurance contracts. 29

U.S.C. §1144(b)(2)(B). It is important

to note that the language of the

savings clause and the language of the

deemer ciause are different. The

savings clause is very broadly worded

to preserve all state laws regulating

insurance. The deemer clause will only

allow preemption in the specific

instances where the state law "deems"

the benefit plan to be an insurance

company or other insurer as_ specified

in the deemer clause.

28

An analysis of the plain language

of the MVFRL shows that it does not

"deem" the benefit plan to be an

insurer in refusing to recognize

Subrogation. The language in Sections

1719 and 1720 of the MVFRL differen-

tiates between insurance companies and

other entities that might provide

benefits as listed in that law. FMC

recognizes this and in its brief in the

Court below pointed out that Section

1720 precludes recovery for four types

of entities, each entity defined

separately in Sections 1711, 1712, 1715

and 1719 of the MVFRL. FMC recognized

that Sections 1711, 1712 and 1715 apply

distinctly and solely to insurance

companies. If Cynthia Holliday had

attempted to resist the subrogation

clause pursuant to any of those three

29

sections, then the MVFRL would

effectively be deeming the benefit plan

to be an insurance company or other

insurer. This would not be permitted

under ERISA.

In the case at bar, however, the

Court below found that Section 1719 of

the MVFRL applied to the Petitioner.

This particular section of the MVFRL

applies to insurance companies as well

as to other entities, although "its

principal and substantial effect is

nonetheless on the insurance industry".

FMC v. Holliday, 885 F.2d 79, 86 (3d

Cir. 1989). Therefore, it was not

necessary for the MVFRL to deem the

benefit plan to be an insurance company

or other insurer and the Statute does

30

not run afoul of the "deemer clause".

FMC has argued that several

decisions of the Courts of Appeals for

l. It may be argued that,

because the MVFRL to this extent also

applies to entities other than solely

insurance companies, it may be outside

the savings clause. However such is

not the case. In United Food &

31

the various Circuits have found a

different interpretation of the deemer

clause than argued herein. However,

the cases cited by the Petitioner are

readily distinguished from the issue in

the case at bar. In Childrens Hospital

v. Whitcomb, 778 F.2d 239 (5th Cir.

Commerical Workers v. Pacyga, 801 F.2d

1157 (9th Cir. 1986), a case cited with

approval by FMC Corporation to this

Court, the Court of Appeals for the

Ninth Circuit noted that the

anti-subrogation law in that case

applied to parties other than insurance

companies but held nonetheless that the

law substantially complied with the

test of a McCarran-Ferguson Law and

therefore came within the savings

clause. 801 F.2d at 1161. Both this

Court and the Supreme Court have

recognized that no one part of the

three part McCarran- Ferguson test is

dispositive and a law may regulate the

insurance business without fully

complying with all three requirements.

Pilot Life, 41 U.S. at 51; Insurance

Board of Bethlehem Steel Corp. v. Muir,

619 F.2d 408, 411 (3d Cir. 1987); FMC

v. Holliday, 885 F.2d 79, 86 (3d Cir.

1989); Northern Group Services v. Auto

Owners Insurance Co., 833 F.2d 85, 90

(6th Cir. 1987).

1985), the Court preempted a_ state

statute mandating that benefit plans

provide a certain level of benefits for

mental health problems and other

illnesses. In Liberty Mutual Insurance

Group v. Iron Workers Health Fund of

Eastern Michigan, 879 F.2d 1384 (6th

Cir. 1989), the Court preempted a state

law that required benefit plans to pay

benefits to automobile accident

victims. These decisions are directly

controlled by this Court's decision in

Metropolitan Life and the state law in

32

each case would necessarily treat the

plan as an insurance company.

In Powell v. Chesapeake & Potomac

Telephone Co. of Virigina, 780 F.2d 419

(4th Cir. 1985), cert. denied, 476 U.S.

1170 (1986), the issue was whether the

state insurance trade practices law

applied to a benefit plan. To hold the

plan subject to the insurance trade

practices law would necessarily require

that the state "deem" the plan to be an

insurance company. In United Food &

Commerical Workers v. Pacyga, 801 F.2d

1157 (9th Cir. 1986) and Baxter v.

Lynn, 886 F.2d 182 (8th Cir. 1989), the

Circuit Courts preempted state laws

prohibiting subrogation in general.

Neither of these cases involved a

comprehensive state automobile

insurance law regulating this

33

traditional area of state interest.

Indeed, the Baxter decision determined

that since this was a question of the

state common law prohibition on

Subrogation, the subrogation law was

not directed toward the insurance

industry and therefore did not even

come within the "savings clause" of

ERISA. There is agreement among all of

the parties and the amicus supporters

that the MVFRL does come within the

savings clause. In Pacyga, the Ninth

Circuit gave very limited discussion to

whether the general subrogation statute

was directed at the insurance industry

and noted that it did simply because

"many of the Arizona cases relating to

the law" were insurance cases although

the Court noted that many cases were

not. That case did not involve a

34

comprehensive state automobile

insurance law as does the case at bar.

The only cases which analyzed ERISA

preemption and the traditional state

regulation area of motor vehicle

insurance laws were the case at bar and

Northern Group Services v. Auto Owners

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

1987). Both of these decisions found

it necessary to analyze the reasons

behind the preemption, savings’ and

deemer clauses and determined that the

State motor vehicle insurance law was

not preempted by ERISA.

A straightforward reading of the

deemer clause in conjunction with the

Savings clause will show that the MVFRL

does not "deem" the plan to be an

insurance company or other insurer and

therefore, given the agreement by all

35

parties that the MVFRL is covered by

the savings clause so as to avoid

preemption, the Pennsylvania Law is not

preempted.

CONCLUSION

The congressional purpose behind

the ERISA preemption, savings and

deemer clauses does not support

preemption of Section 1720 of the

Pennsylvania Motor Vehicle Financial

Responsibility Law. FMC is not

permitted to pick those portions of

state laws which it wants to preempt

and those portions of state laws which

it wishes to exercise for its own

benefit. The FMC Corporation

specifically incorporated 50 different

state automobile insurance laws into

36

its plan and reversing the Court below

will therefore not further national

uniformity in the administration of

this ERISA plan.

There is no simple test for

determining the congressional intent

behind the preemption clause given the

facts in this case. There is a

presumption against preemption. Given

the tremendous mischief that the FMC

position would wreak on state tort

systems as well as on state

comprehensive automobile insurance

plans, there is no reason for ERISA to

preempt this state law.

The congressional purpose behind

the preemption clause of ERISA would

best be served by affirming the

37

judgment of the Court of Appeals for

the Third Circuit.

Respectfully submitted,

SIKOV AND LOVE, P.A.

¥ Gh [Hbidh Paleo LD

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Pg rots for Ps: at

Curiae Pennsylvania

Trial Lawyers Association