Amicus Curiae Brief — Ingersoll-Rand Co. v. McClendon

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No. 89-1298

IN THE

SUPREME, COURT OF THE UNITED STATES

OCTOBER TERM, 1989

INGERSOLL-RAND COMPANY,

Petitione,

LF

PERRY McCLENDON,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF TEXAS

MOTION AND BRIEF OF AMICUS CURIAE

AMERICAN PAPER INSTITUTE, INC.

IN SUPPORT OF PETITIONER

MARK E. BROSSMAN

“HADBOURNE & PARKE

Attorneys for Amicus Curiae

American Paper Jnstitute, Inc.

30 Rockefeller Plaza

New York, New York 10112

(212) 408-5100

Counsel of Record

Of Counsel

MICHAEL B. WEIR

RONALD E. RICHMAN

RECT AVAIL ARIE COPY

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1989

No. 89-1298

INGERSOLL-RAND COMPANY,

Petitioner,

Vv.

PERRY McCLENDON,

Respondent.

ON PETITION POR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF TEXAS

MOTION OF AMICUS CURIAE

AMERICAN PAPER INSTITUTE, INC.

IN SUPPORT OF PETITIONER

The American Paper Institute, Inc. ("API")

hereby moves for leave to file the attached brief amicus

curiae in support of a petition for a writ of certiorari. The

consent of the attorneys for the petitioner has been obtained.

The consent of the attorneys for the respondent was requested

but refused.

API is the national trade association of the pulp,

paper and paperboard manufacturing industry. The

approximately 170 member companies of API produce more

than 90% of the pulp, paper and paperboard manufactured in

the United States. At issue in this case is the Supreme Court

of Texas’ decision that a cause of action for wrongful

2

discharge exists under Texas law when an employee aleges

that the principal reasons for his termination was the

employer's desire to avoid contributing to or paying employee

benefits. The Supreme Court of Texas held, with minimal

discussion, that the Employee Retirement Income Security

Act of 1974 ("ERISA"), 29 U.S.C. § 1144, did not preempt

the state law cause of action recognized by the court.

API is interested in this action because its

members sponsor various employee benefit plans, and many

API members have employees in several states. The Supreme

Court of Texas’ decision rejecting ERISA’s preemptive

effect, if allowed to stand, will have deleterious effects

throughout the paper industry, as well as on employers in

other industries. This decision encourages wrongful

discharge actions and permits conflicting and inconsistent

state and local decisions whenever an employee alleges that

the reason for a discharge was the employer’s desire to

deprive the employee of employee benefits or to avoid benefit

contributions. It is believed that the brief which amicus

curiae is requesting permission to file will contain a more

complete argument on the issue of ERISA preemption.

Based on the foregoing, the motion for leave to

file the attached brief amicus curiae should be granted.

Mark E. Brossman

CHADBOURNE & PARKE

Attorneys for Amicus Curae

American Paper Institute, Inc.

30 Rockefeller Plaza

New York, NY 10112

212 408-5100

Counsel of Record

Of Counsel

Michael B. Weir

Ronald E. Richman

TABLE OF CONTENTS

PAGE

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

Interest of the Amicus Curiae .................. I

EEE, SRMRESCEO ese sccercrcceccecececes 2

I. Public Policy Mandates That ERISA

Preempt State Wrongful Discharge Ac-

tions Relating to Employee Benefit

| 2

fl. Preemption of Wrongful Discharge

Claims Furthers The Purpose of ERISA

PUI ccc c ccc cc nc ceccces 4

fil. ERISA Section 510 Explicitly Applies ~

To Wrongful Discharge Actions And Is

Part Of ERISA’s Comprehensive Civil

Enforcement Scheme .............. 5

IV. The Claim Below "Relates To” An

Employee Benefit Plan and Is Pre-

A 7

er ®

a === _

5

TABLE OF AUTHORITIES

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

Ree TT TUT Torr ete

Authier v. Ginsberg, 757 F.2d 796 (6th Cir. 1985),

cert. denied, 474 U.S. 888 (1985) .......-.555-

Clark v. Coats & Clark, Inc., 865 F.2d 1237 (ilth

CE eine bu deswncendendceweseveses

Conaway v. Eastern Associated Coal Corp., 358

$.B.26 423 (W. Va. 1966)... ccc ccteccccees

Dependah! v. Falstaff Brewing Corp., 653 F.2d

1208 (8th Cir.), cert. denied, 454 U.S. 968 and

7 Lt OT | eee eeerrererrrrerce

Dister v. Continental Group, Inc., 859 F.2d 1108

CPE MED. oes esnevescnseccseesaneuesss

Firestone Tire and Rubber Co. v. Bruch, 109 S. Ct.

SD occ cas Coa h sc ok ee ceeeeseese aan

Fitzgerald v. Codex Corp., 882 F.2d 586 (ist Cir.

EN 5460 eke ne renee bauneeeee sa deeee vues

Si rrrererrrrerrr rer rT Tree rT re

Franchise Tax Board v. Construction Laborers

Vacation Trust, 463 U.S. 1 (1983) ............

Gavalik v. Continental Can Co., 812 F.2d 834 (3d

Cir. 1987), cert. denied, 484 U.S. 979 (1987)

PAGE

PAGE

Hovey v. Lutheran Medical Center, 516 F. Supp.

Ss SEE Wisse basbecacapscuscses 3

KMart Corp. v. Ponsock, 732 P.2d 1364 (Nev. 1987) 3

McClendon v. Ingersoll-Rand Company, 779

PEE heh ks ee sésccncocccrs 4,7

Metropolitan Life Insurance Co. v. Massachusetts,

Pe UC 068 pen eeeecccusvsscacecs 5,7

Pane v. RCA Corp., 868 F.2d 631 (3d Cir. 1989) .. 3

Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41

RO rrr oe cee nen ne eee passim

Savodnik v. Korvettes, Inc., 488 F. Supp. 822

8 I ee A ae ee 3

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) .. 3,5,7

Sorosky v. Burroughs Corp., 826 F.2d 794 (9th Cir.

NS £406. 5 OF 4 ee aoe ee a ae 3

Statutes

Employees Retirement Income Security Act of 1974

("ERISA"), 29 U.S.C. §§ 1001 ef. seg. ......... passim

ERISA § 2(b), 29 U.S.C. § 1001(b) ........... 5

ERISA § 502(a)-(g), 29 U.S.C. § 1132(a)-(g) ... 6

ERISA §510,29U.S.C.§1140 .............. passim

ERISA § 514,29 U.S.C. § 1144 .............., passim

ERISA § 514(a), 29 U.S.C. § 1144(a) ......... 7

Legislative History

120 Cong. Rec. 29197 (1974) ....... 00.0 ccc cee, 5

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1989

No. 89-1298

INGERSOLL-RAND COMPANY,

Petitioner,

Wa

PERRY McCLENDON,

Respondent.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

SUPREME COURT OF TEXAS

BRIEF OF AMICUS CURIAE

AMERICAN PAPER INSTITUTE, INC.

IN SUPPORT OF PETITIONER

American Paper Institute, Inc. ("API")

respectfully submits this petition, amicus curiae, pursuant to

Rule 36 of the Rules of the Supreme Court of the United

States, in support of a petition for a writ of certiorari to the

Supreme Court of Texas.

INTEREST OF THE AMICUS CURIAE

API is the national trade association of the pulp,

paper and paperboard manufacturing industry. The

approximately 170 member companies of API produce more

than 90% of the pulp, paper and paperboard manufactured in

the United States. API respectfully submits this brief amicus

curiae to urge the Supreme Court to grant the petition for

2

a writ of certiorari to the Supreme Court of Texas. The latter

Court held incorrectly that a cause of action for wrongful

discharge exists under Texas law when an employee alleges

that the principal reason for his termination was the

employer's desire to avoid contributing to or paying employee

benefits. The Supreme Court of Texas held, with minimal

discussion, that the Employee Retirement Income Security

Act of 1974 ("ERISA"), 29 U.S.C. § 1144, did not preempt

the state law cause of action. API is interested in this action

because its members sponsor various employee benefit plans,

and many API members have employees in several states.

The Supreme Court of Texas’ decision rejecting ERISA’s

preemptive effect, if allowed to stand, will have deleterious

effects throughout the paper industry, as well as on employers

in other industries. This decision encourages wrongful

discharge actions and permits conflicting and inconsistent

state and loca! decisions whenever an employee alleges that

the reason for a discharge was the employer’s desire to

deprive the employee of employee benefits or to avoid benefit

contributions.

ARGUMENT

I

PUBLIC POLICY MANDATES

THAT ERISA PREEMPT

STATE WRONGFUL DISCHARGE ACTIONS

RELATING TO EMPLOYEE BENEFIT PLANS

As the Court recognized in Pilot Life Ins. Co. v.

Dedeaux, 481 U.S. 41 (1987), it is not surprising that the

Court is again called upon to interpret the scope of ERISA

preemption "[g]iven the ‘statutory complexity’ of GRISA's

three pre-emption provisions, as well as the wide variety of

state statutory and decisional law arguably affected by the

federal pre-emption provisions ... ." supra at 47 (citation

omitted). The decision of the Supreme Court of Texas

3

presents important ERISA preemption issues which have not

been addressed by the Court. Further, the opinion conflicts

with decisions of various federal circuit courts and the

Supreme Court of West Virginia. See Fitzgerald v. Codex

Corp., 882 F.2d 586 (1st Cir. 1989), Pane v. RCA Corp., 868

F.2d 631 (3rd Cir. 1989), Sorosky v. Burroughs Corp., 826

F.2d 794 (9h Cir. 1987), Dependahi v. Falstaff Brewing

Corp., 653 F.2d 1208 (8th Cir.), cert. denied, 454 U.S. 968

amd 454 U.S. 1084 (1981), and Conaway v. Eastern

Associated Coal Corp., 358 S.E. 2d 423 (W. Va. 1986).

The Court has never squarely addressed whether

ERISA preempts state wrongful discharge actions involving

benefit issues. Pilot Life, supra, Metropolitan Life Insurance

Co. v. Taylor, 481 U.S. 58 (1987), Shaw v. Delta Air Lines,

Inc., 463 U.S. 85 (1983), and Alessi v. Raybestos-Manhattan,

Inc., 451 U.S. 504 (1981), addressed related issues conceming

preemption of state common law claims and statutes, but did

not address wrongful discharge actions.

This is a critical issue to the members of API, as

well as employers in other industries. A recent study has

shown that approximately 39 states have recognized in

various circumstances that an employee has a common law

right of action for wrongful termination where the discharge

violates public policy. Four other states have not ruled out

recognition of a public policy exception. I. Shepard, P.

Heylman and R. Duston, Without Just Cause: An Employer's

Practical and Legal Guide on Wrongful Discharge 18, BNA

Special Report (1989). At least one other state and two

federal district courts have recognized a cause of action for

wrongful discharge based upon allegations of intended

interference with potential pension benefits. See K Mart

Corp. v. Ponsock, 732 P.2d 1364, 1365 (Nev. 1987). See also

Savodnik v. Korvettes, Inc., 488 F. Supp. 822, 826 (E.D.N.Y.

1980), Hovey v. Lutheran Medical Center, 516 F. Supp. 554,

557-58 (E.D.N.Y. 1981).*

° In none of these cases did the court discuss ERISA preemption.

4

If the decision below is not reviewed and

reversed by the Court, employers will be bombarded with

wrongful discharge claims alleging that a discharge was

prompted to avoid payment of employee benefits. The

Supreme Court of Texas’ decision also held that an employer

who discharges an employee in order to avoid benefit

contributions commits a tort under state law. Whenever an

employee covered by a benefit plan is terminated, a res‘t is

cessation of benefit contributions on behalf of the former

employee. If the decision below is permitted to stand, every

_ discharge may be challenged in state court on this theory.

Employers will be subjected to a multiplicity of state

wrongful discharge actions decided under different rules,

laws, and decisional authority.

U

PREEMPTION OF WRONGFUL

DISCHARGE CLAIMS FURTHERS THE

PURPOSE OF ERISA PREEMPTION

It is ironic that the Supreme Court of Texas, in

holding that a Texas wrongful discharge cause of action

exists, cited ERISA Section 510, 29 U.S.C. § 1140, to support

its proposition that public policy recognizes the importance of

protecting employees’ interests in pension plans. The Texas

Court added, "[t]he very passage of ERISA demonstrates the

great significance attached to income security for retirement

". McClendon v Ingersoll-Rand Co., 779 S.W.2d 69,

71 (Texas 1989). The Supreme Court of Texas’ own opinion

recognizes the strong federal interest in regulating wrongful

discharge actions relating to benefit claims.

Preemption of state wrongful discharge claims

relating to employee benefit plans furthers the purpose of

ERISA preemption. ERISA’s unique preemption provisions

were designed to develop a body of federal substantive law to

5

resolve issues involving rights and obligations under

employee benefit plans. See Firestone Tire and Rubber Co. v.

Bruch, 109 S. Ct. 948, 954 (1989); Franchise Tax Board vy.

Construction Laborers Vacation Trust, 463 U.S. 1, 24 n.26

(1983). In enacting ERISA, Congress intended to "round out

the protection afforded participants by eliminating the threat

of conflicting and inconsistent State and local regulation.”

120 Cong. Rec. 29197 (1974) (remarks by Representative

Dent). Consequently, Congress preempted state law if it

“relates tc” employee benefit plans. The Court has on several

occasions, broadly interpreted, the preemption provisions of

ERISA. See Pilot Life Ins. Co. v. Dedeaux, supra at 46,

Metropolitan Life Insurance Co. v. Massachusetts, 471 U.S.

724, 739 (1985), Shaw v. Delta Air Lines, Inc., supra at 98,

Alessi v. Raybestos-Manhattan, Inc., supra at 523. The

decision below undermines the application of the uniform

national standards of conduct that ERISA was designed to

create and is contrary to the Court's interpretation of ERISA

preemption. See ERISA Section 2(b), 29 U.S.C. § 1001(b).

Il

ERISA SECTION 510 EXPLICITLY APPLIES

TO WRONGFUL DISCHARGE ACTIONS

AND IS PART OF ERISA’S COMPREHENSIVE

CIVIL ENFORCEMENT SCHEME

Section 510 of ERISA explicitly applies to claims

of wrongful discharge relating to benefit claums. Section 510

states, in relevant part,:

It shall be unlawful for any person to discharge, fine,

suspend, expel, discipline, or discriminate against a

participant or beneficiary for exercising any right to

which he is entitled under the provisions of an

employee benefit plan . . . or for the purpose of

interfering with the attainment of any right to which

such participant may become entitled under the plan,

this subchapter, or the Welfare and Pension Plans

Disclosure Act.

6

Violations of Section 510 are enforced pursuant to the civil

enforcement scheme set forth in ERISA. See Section 502(a),

29 U.S.C. §1132(a). The Court has recognized the

ive nature of ERISA’s enforcement provisions.

Pilot Life Ins. Co., supra at 46. State law causes of actions

modelled on Section 510 improperiy intrude on the exclusive

reservation to federal authority of the sole power to regulate

the field of employee benefits.

ERISA protects not only employee benefits;

Section 510 protects participants and beneficiaries from

adverse employment actions related to their ERISA rights.

This section applies to any claim of improper discharge

relating to benefits. Perry McClendon alleges that he was

discharged for the purpose of interferirig with his right to a

pension. This claim falls squarely within the ambit of Section

510 and is clearly preempted. See, e.g., Dister v. Continental

Group Inc., 859 F.2d 1108 (2d Cir. 1988), Gavalik v.

Continental Can Co., 812 F.2d 834 (3d Cir. 1987), cert.

denied, 484 U.S. 979 (1987).

The Supreme Court of Texas, in rejecting ERISA

preemption, eppears to emphasize the damages available

under state tort law which may not be available under ERISA,

such as punitive damages and compensation for mental

anguish. In addition, under a state wrongful discharge action,

there may be a right to a jury trial, which may not be present

under ERISA. The policy choices reflected in the selection of

remedies under ERISA would be "completely undermined" if

employees were free to obtain remedies under state law that

Congress rejected in ERISA. Pilot Life, supra at 42; see also

Authier v. Ginsberg, 757 F.2d 796, 801-2 (6th Cir. 1985).*

As stated by the Court in Pilot Life:

° The remedies provided under ERISA are extremely broad and

include injunctive relief, appropriate equitable relief, and reasonable

attorneys’ fees and costs. ERISA Section 502(a) and (g), 29 U.S.C.

$$ 1132(a) and (g).

7

The deliberate care with which ERISA’s civil

enforcement remedies were drafted and the balancing of

policies embodied in its choice of remedies argue

strongly for the conclusion that ERISA’s civil

enforcement remedies were intended to be exclusive.

Pilot Life, supra, at p. 54.

If state courts are permitted to grant remedies in

actions relating to employee benefits that were expressly

rejected by Congress in drafting ERISA, the exclusive federal

regulatory scheme will be emasculated.

IV

THE CLAIM BELOW "RELATES TO" AN

EMPLOYEE BENEFIT PLAN AND IS PREEMPTED

The Supreme Court of Texas concluded that

ERISA preemption was not applicable because the plaintiff

was not seeking lost pension benefits but was instead seeking

future wages, compensation for mental anguish and punitive

damages as a result of the wrongful discharge. McClendon,

supra at 71. This case raises important questions conceming

the interpretation of the term "relate to” as set forth in ERISA

Section 514(a), 29 U.S.C. § 1144(a).

The Supreme Court of Texas completely ignored

this Court’s analysis concerning the meaning of the term

"relate to any employee benefit plan" set forth in Section

514(a). The Court has interpreted the term “relate to”

expansively. See Ft. Halifax Packing Co. v. Coyne, 482 US.

1, (1987), Metropolitan Life Insurance Co. v. Massachusetts,

supra, Alessi v. Raybestos-Manhattan, Inc., supra. In Shaw v.

Delta Air Lines, Inc., supra at 97, the Court held that the

phrase should be given its broad common-sense meaning,

such that a state law "relates to” an employee benefit plan if it

has a "connection with or reference to such a plan”.

8

For example, in Pilot Life, an employee brought

State common law tort and contract actions asserting improper

processing of a claim for benefits under an insured employee

benefit plan. The Court stated that the employee’s state

common law claims of tortious breach of contract, breach of

fiduciary duties, and fraud in the inducement "related to” an

employee benefit plan and fell under ERISA’s preemption

ions. supra at 47. But see Clark v. Coats & Clark,

Inc., 865 F.2d 1237 (11th Cir. 1989).

In the case below, Perry McClendon alleges that

Ingersoll-Rand terminated him to escape its obligation to

contribute to his pension fund. Despite his failure to seek

pension benefits, his claim plainly relates to the Company's

pension plan. A “common-sense” understanding of the phrase

“relates to" leads to the conclusion that this case is preempted

by ERISA. Shaw, supra, at 97.

CONCLUSION

Based on the foregoing, the petition for a writ of

certiorari should be granted.

Respectfully submitted,

MARK E. BROSSMAN

CHADBOURNE & PARKE

Attorneys for Amicus Curiae

American Paper Institute, Inc.

30 Rockefeller Plaza

New York, New York 10112

(212) 408-5100

Counsel of Record

Of Counsel

Michael B. Weir

Ronald E. Richman

a