Petitioners Brief — Ingersoll-Rand Co. v. McClendon

Supreme Court brief1990

Ask Donna

What actually matters in this document.

Text

No. 89-1298

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

INGERSOLL-RAND COMPANY,

Petitioner,

PERRY MCCLENDON,

Respondent.

On Writ of Certiorari to the Supreme Court of Texas

BRIEF FOR THE PETITIONER

GLEN D. NAGER

(Counsel of Record)

JONES, DAY, REAVIS & POGUE

1450 G Street, N.W.

Washington, D.C. 20005-2088

(202) 879-3939

Of Counsel: Houuis T. HurD

WILLIAM T. LITTLE JONES, DAY, REAVIS & POGUE

GILPIN, PAXSON & BERSCH One Mellon Bank Center

2300 First Interstate Tower 500 Grant Street

1300 Post Oak Boulevard Pittsburgh, Pennsylvania 15219

Houston, Texas 77056-3010 (412) 391-3939

(713) 623-8800 Counsel for Petitioner

EL A I RE ST RTI TM

~ WHILSON - EPEsS PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001

QUESTION PRESENTED

Whether the Employee Retirement Income Security Act

of 1974 (“ERISA”) preempts a state common law claim

that an employer has unlawfully discharged an employee

in order to interfere with his attainment of benefits

under an ERISA-covered pension benefit plan.

(i)

PARTIES TO THE PROCEEDING

The parties to the proceedings in the court below were:

Perry McCiendon and the Ingersoll-Rand Company.*

* Ingersoll-Rand Company has an interest in the following cor-

porate entities and partnerships: Dresser-Rand Company; Dresser-

Rand Machinery; Dresser-Rand Italia; Dresser-Rand S.A.; Dresser-

Rand Canada, Inc.; Dresser-Rand Compression Services S.A.;

Dresser-Rand Service Personnel B.V.; Dresser-Rand Japan Ltd.;

Dresser-Rand B.V.; Turbodyne S.A. de C.V.; Dresser-Rand Singa-

pore Pte. Ltd.; Dresser-Rand de Venezula S.A.; Dresser-Rand

GmbH; Kongsberg Dresser Power, Inc.; Kongsberg Dresser Power

Pte. Ltd.; KDP Commercio E. Industrial Ltd.; Kongsberg Dresser

Power A/S; Dresser-Rand Holding Company; Dresser-Rand Over-

seas Sales Company; Dresser-Rand Sales Company, S.A.; Southwest

Industries, Inc.; Turbodyne Electric Power Co.; Tepco/Pembroke

Power, Inc.; Dresser-Rand U.K. Ltd.; Dresser-Rand Service

S.a.r.e.; Norton/Torrington Ceramic Bearings Company; Nastach,

Inc.; Ingersoll-Rand (India) Limited; and Niject Services Company.

TABLE OF AUTHORITIES

OPINIONS BELOW

JURISDICTION

STATUTORY PROVISIONS INVOLVED

STATEMENT

ARGUMENT

TABLE OF CONTENTS

RRR ERE

ee ee eee eee

ee ee ee eee eee eee)

ereeer ete eee eee eee To

Oe ee ee eee ee eee

err rer

ERISA PREEMPTS A STATE COMMON LAW

CLAIM THAT AN EMPLOYER HAS DIS-

CHARGED AN EMPLOYEE IN ORDER TO IN-

TERFERE WITH ATTAINMENT OF BENEFITS

UNDER AN ERISA-COVERED PLAN

A. The State Common-Law Claim Recognized By

FE.

CONCLUSION

The Court Below “Relates To” An ERISA-

Covered Plan Within The Meaning Of Section

as eceemnmmnnananne

The Structure Of ERISA Confirms That The

Cause Of Action Recognized By The Court

Below “Relates To” An ERISA-Covered Plan

Within The Meaning Of Section 514 Of ERISA..

The Legislative History Of ERISA Confirms

That A State Law Making It Unlawful To Dis-

charge An Employee For The Purpose Of Inter-

fering With Attainment Of Pension Benefits

“Relates To” A Plan And Is Preempted ..............

Allowing State-Law Based Actions For Alleged

Interference With Attainment Of Benefits Un-

der ERJSA-Covered Plans Would Impermissibly

Burden The Maintenance Of Such Plans ............

The Arguments Advanced Against Preemption

Are Without Merit

Page

TABLE OF AUTHORITIES

Cases Page

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

| ERATE eens ae ese Roo EEE SERN ERE VY passim

Bass v. Retirement Plan of Conoco, Inc., 676 F.

Te Ce Es SIRE ccervescreeiereemanieenen 38

Conaway v. Eastern Associated Coal Corp., 358

Ss fF 8, SS eee 44

Coontz v. Gordon Jewelry Corp., 489 N.W.2d 223

SEIS Tira Se MII :sccshscccsdicsniussssiasiciceeiastdiatpeiitariaieenmein 44

Dependahl v. Falstaff Brewing Corp., 653 F.2d

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

es TE I lc 44

Fitzgerald v. Codex Corp., 882 F.2d 586 (1st Cir.

MII chesicestiscomcisnssncnsiieddeniatad.te ies eccie neee Ri ae ee 44

Folz v. Mariott Corp., 594 F. Supp. 1007 (W.D.

RR MRT TON rt ced RAC TMS DA ote. 25, 39

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1

HUTTE: ciccosscccenscosntinadlietiacheiintigiien tienen etter ae 37, 41, 42

Franchise Tax Bd. v. Construction Laborers Vaca-

— fs, © fF SE) | eee 19

Hughes v. General Motors Corp., 825 F.2d 568,

1988 U.S. App. LEXIS 9637 (6th Cir. 1988),

cert. denied, 109 S. Ct. 1535 (1989) -....00002.0220... 38

International Union UAW Local 91 v. Park-Ohio

Industries, Inc., 661 F. Supp. 1281 (N.D. Chio

BTIITTED crsapeoncascennsesunsshigtintinmhectnadeasnabieasidetdie iene, 39

K Mart Corp. v. Ponsock, 732 P.2d 1364 (Nev.

STII <ancsnaceasniescessees teseecisneculbidapdgcaiacsitiaieiaadicasatiaimeduaiabaa cia aiatiase 37, 39

Kross v. Western Electric Co., 701 F.2d 1238

SIE SHUN GENIE ccnsiisedicenscccenssacassdcamissbacenasntancandenii 25, 39

Mackey v. Lanier Collections Agency & Service,

itn Te Ts Te IED vecettccecicattianiaens 44

Massachusetts Mutual Life Ins. Co. v. Russell, 473

ee BD THIET scictoccsactecesonstestaisareemedunaadeekereubaadens 41

Metropolitan Life Ins. Co. v. Massachusetts, 471

Sy CHINES. NERNEY sacccieossssscistsisivieessctenhancrtescanteiesemeteaninaabaalacn 19, 24, 44

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58

(RSS I eee et years Ane eee a 19

Nachman Corp. v. Pension Benefit Guaranty

CB, GED Ui Be CI etceetninsteneenttcttocttntttcves 18

TABLE OF AUTHORITIES—Continued

Page

Nemeth v. Clark Equipment Co., 677 F. Supp. 899

CU Bs IIIT sevtnscancesshphnseccsnitinneatnccteteenionenes 38

Pane v. RCA Corp., 868 F.2d 631 (3d Cir. 1989) .... 37, 44

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

STII TD ss ots csetennosecectehaceioedeidmentadsiadanmanetennienenaaaiduamsined passim

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) ..passim

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

IN: “TIED © ns dees tcacsieenccininatiepssecah abadaninhaabammniaudaananiaaineninente 44

Varhola v. Doe, 820 F.2d 809 (6th Cir. 1987) -...... 38, 39

West v. Greyhound Corp., 813 F.2d 951 (9th Cir.

I ik: inn aces cali taliaadaniahlediendabpanepiatoamemaaminiaens 38

Statutes and Regulations

Internal Revenue Code (“IRC”), 26 U.S.C. § 411

| ht Semen eae a ER nee e Nera ee Me er OAL Ree et passim

IRC, 26 U.S.C. § 411(d) (1) (A) ......... 2 7, 24

By Sees Oe BID onvikccnschneratinsceaiipibicncsladstibdediibalisniehacnesiataents 1

Employee Retirement Income Security Act of 1974

(“ERISA”), Pub. L. No. 93-406, 88 Stat. 829....passim

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

ERISA § 2(b), 29 U.S.C. § 1001 (b) ................... 6

ERISA § 2(c), 29 U.S.C. § 1001 (c) ................... 6

ERISA § 4(b), 29 U.S.C. § 1003 (b) ................... 21

ERISA §§ 101-111, 29 U.S.C. §§ 1021-1031...... 6

ERISA § 101(d) (1), 29 U.S.C. § 1021 (d) (1).. 43

ERISA § 202, 29 U.S.C. § 1052 ........................- 6, 18, 22

ERISA § 203, 29 U.S.C. § 1058 .....................---. 6, 18, 22

ERISA § 204, 29 U.S.C. § 1054 ....................-.... 6, 18, 22

ERISA § 209 (a), 29 U.S.C. § 1059 (a) ............... 43

ERISA § 302, 29 U.S.C. § 1082 ......................... 7, 18, 22

ERISA § 320(c), 29 U.S.C. § 1082 (c) ............... 43

ERISA § 320(f), 29 U.S.C. § 1082 (f) ............... 43

ERISA § 303, 29 U.S.C. § 1088 ....................-...--- 7

ERISA § 304, 29 U.S.C. § 1084 ...................-..--.-. 7

ERISA § 305, 29 U.S.C. § 1085 ........................--- 7

ERISA § 307, 29 U.S.C. § 1085b ..................... es 43

ERISA §S§ 401-411, 29 U.S.C. §§ 1101-1114...... 7

ERISA §§ 501-515, 29 U.S.C. §§ 11381-1145... 7

TABLE OF AUTHORITIES—Continued

Page

ERISA § 502, 29 U.S.C. § 1182... passim

ERISA § 502 (a) (3), 29 U.S.C. § 1132 (a) (3).. 7

ERISA § 502(e) (1), 29 U.S.C. § 1132 (e) (1).. 7

ERISA § 502 (h), 29 U.S.C. § 1132 (h) -..00000.... 7

ERISA § 510, 29 U.S.C. § 1140-20. passim

ERISA § 514, 29 U.S.C. § 1144 00. passim

ERISA § 514(a), 29 U.S.C. § 1144 (a) -000... passim

ERISA § 514(b) (1), 29 U.S.C. § 1144(b) (1). 8

ERISA § 514(b) (2), 29 U.S.C. § 1144 (b) (2).. 8

ERISA § 514(b) (4), 29 U.S.C. § 1144 (b) (4).. 8

ERISA § 514(b) (5), 29 U.S.C. § 1144 (b) (5).. 8

ERISA § 514(b) (7), 29 U.S.C. § 1144 (b) (7).. 8

ERISA § 514(b) (8), 29 U.S.C. § 1144 (b) (8).. 8

ERISA § 514(c) (1), 29 U.S.C. § 1144(c) (1).. 8

ERISA § 514(c) (2), 29 U.S.C. § 1144(c) (2).. 8

ERISA § 606 (2), 29 U.S.C. § 1166 (2) -............. 43

ERISA § 4062, 29 U.S.C. § 1362 .......02.2 22

ERISA § 4063, 29 U.S.C. § 1368 ......................... 43

ERISA § 4201, 29 U.S.C. § 1381 ................2........ 43

26 C.F.R. § 1.410(a)-7(d) (1) (iii) ..........-. ee 10

eee ae IND secebchicattainaeaseniccidcattiindsianinaioasiinn 21

Legislative Materials

H.R. 2, 93d Cong., 1st Sess. (1973), reprinted in

1 Legislative History of the Employee Retire-

ment Income Security Act of 1974 (“Legislative

History”) (Comm. Print 1976) 3 -..........200...2202... 26

H.R. 9824, 93d Cong., 1st Sess. (1973), reprinted

in 1 Legislative History 686................................... 26, 27

H.k. 2, 93d Cong., 1st Sess. (1973), reprinted in

BD EABEBTEEEOS TEGIOOTY BGT cecncecccecescncescccececconsecsees 27, 28

H.R. Rep. No. 533, 93d Cong., Ist Sess. (1973, re-

printed in 2 Legislative History 2348 .................. 27, 28

H.R. Rep. No. 779, 93d Cong., 2d Sess. (1974),

reprinted in 2 Legislative History 2584 .............. 24

H.R. 12906, 93d Cong., 2d Sess. (1974), reprinted

in 2 Legislative History B76) ....................0.....-2...- 28

vii

TABLE OF AUTHORITIES—Continued

Page

H.R. 2, 93d Cong., 1st Sess. (1974), reprinted in

8 Legislative History SE06 ...........................-20020- 28, 29

H.R. Conf. Rep. No. 1280, 93d Cong., 2d Sess.

(1974), reprinted in 3 Legislative History 4277.. 24, 32

120 Cong. Rec. 29197 (1974), reprinted in 3 Leg-

islative History, at 4670-71 ......................--------000 33

120 Cong. Rec. 29209 (1974), reprinted in 3 Leg-

islative History, at 4708-04 _...........222...2.222.eeeeeee-e 41

S. 4, 93d Cong., 1st Sess. (1973), reprinted in 1

ND CI TI ecactnncencdetcendanonneteincomamenes 29

S. 4, 98d Cong., Ist Sess. (1973), reprinted in 1

Legislative History S86 .............................000.s..008.+- 29, 30

Retirement Income Security for Employees Act,

1973: Hearings on S. 4 and S. 75 before the Sub-

committee on Labor of the Senate Committee on

Labor and Public Welfare, 93d Cong., 1st Sess.

II gc rere nee a a a an 30

S. Rep. No. 127, 93d Cong., 1st Sess. (1973), re-

printed in 1 Legislative History 587 .................... 23, 30

S. 1179, 93d Cong., Ist Sess. (1973), reprinted in

1 Legislative History T8O......................-ccc-cces-se0see. 30

S. Rep. No. 383, 93d Cong., 1st Sess. (1973), re-

printed in 1 Legislative History 1068 ................ 23, 40

Amendment No. 496, 93d Cong., Ist Sess. (1973),

reprinted in 1 Legislative History 1271 .............. 31

119 Cong. Rec. 30044 (1973), reprinted in 2 Legis-

lative History, at 1640-41 .............:cc.ccccessss.ss22eeesess 22, 23

119 Cong. Rec. 30374-75 (1973), reprinted in 2

Legislative History, at 1774-76 _.....................-...- 31, 32

119 Cong. Rec. 30400 (1973), reprinted in 2 Legis-

lative History, at 1835-37 .................. Fie epekcrated 23, 31, 32

119 Cong. Rec. 30428 (1973), reprinted in 2 Leg-

islative History, at 1881-82 ........................-.------+- 32

120 Cong. Rec. 29933 (1974), reprinted in 3 Leg-

islative History, at 4745-46 .....22....22.-2...-.eeeeeeeeeeee 33

120 Cong. Rec. 29935 (1974), reprinted in 3 Leg-

dolative History, G6 E761 .............000-..200..0.<0200200+5--00 34

120 Cong. Rec. 29942 (1974), reprinted in 3 Leg-

islative History, at 4770-71 ..............-..--..0::sseeeeeees 35

viii

TABLE OF AUTHORITIES—Continued

120 Cong. Rec. 29951 (1974), reprinted in 3 Leg-

EF See

120 Cong. Rec. 8861 (1974), reprinted in 3 Legis-

Be PN: I GI cneisciccncaceniteciiseshtininntiecseovnlsonenmuenecs

Administration Recommendations to the House

and Senate Conferees on H.R. 2 to Provide for

Pension Reform (April 1974), reprinted in 3

Legislative History GO4T ............<c--ceccccccccscococesesees

Miscellaneous

Vogel, Containing Medical And Disability Costs By

Cutting Unhealthy Employees: Does Section

510 Of ERISA Provide A Remedy?, 62 Notre

gg Et _C*=». ESRERES IE DNNNEND RET ty DnOUTEN

Page

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

No. 89-1298

INGERSOLL-RAND COMPANY,

7. Petitioner,

PERRY MCCLENDON,

Respondent.

On Writ of Certiorari to the Supreme Court of Texas

BRIEF FOR THE PETITIONER

OPINIONS BELOW

The opinion of the Supreme Court of Texas (Pet. App.

la-l6a) is reported at 779 S.W.2d 69. The opinion of the

Court of Appeals of Texas (Pet. App. 17a-24a) is re-

ported at 757 S.W.2d 816. The opinion of the district

court granting summary judgment for petitioner (Pet.

App. 25a-26a) is unreported.

JURISDICTION

The judgment of the Supreme Court of Texas was en-

tered on October 18, 1989. A timely motion for rehearing

was denied on November 15, 1989. Pet. App. 27a. The

jurisdiction of this Court is invoked under 28 U.S.C.

§ 1257.

STATUTORY PROVISIONS INVOLVED

Section 502 of ERISA, 29 U.S.C. § 1132, provides in

pertinent part:

(a) Persons empowered to bring a civil action

(e)

A civil action may be brought—

(1) by a participant or a beneficiary—

(A) for the relief provided for in subsec-

tion (c) of this section, or

(B) to recover benefits due to him under

the terms of his plan, to enforce his rights

under the terms of the plan, or to clarify

nis rights to future benefits under the terms

of the plan;

(2) by the Secretary, or by a participant, bene-

ficiary or fiduciary for appropriate relief under

section 1109 of this ti‘.e;

(3) by a particip.at, beneficiary, or fiduciary

(A) to enjoin any act or practice which violates

any provisien of this subchapter or the terms of

the plan, or (B) to obtain other appropriate

equitable relief (i) to redress such violations or

(ii) to enforce any provisions of this suochapter

or the terms of the plan;

(4) by the Secretary, or by a participant, or

beneficiary for appropriate relief in the case of

a violation of 1025/c) of this title;

(5) except as otherwise provided in subsection

(b) of this section, by the Secretary (A) to en-

join any act or practice which violates any pro-

vision of this subchapter, or (B) to obtain other

appropriate equitable relief (i) to redress such

violation or (ii) to enforce any provision of this

subchapter; or

(6) by the Secretary to collect any civil penalty

under subsection (i) of this section.

* * * +

Jurisdiction

(1) Except for actions under subsection fa) (1)

(B) of this section, the district courts of the

United States shall have exclusive jurisdiction

of civil actions under this subchapter brought

by the Secretary or by a participant, beneficiary,

or fiduciary. State courts of competent jurisdic-

tion and district courts of the United States

shall have concurrent jurisdiction of actions un-

der subsection (a) (1) (B) of this section.

(2) Where an action under this subchapter is

brought in a district court of the United States,

it may be brought in the district where the plan

is administered, where the breach took place, or

where a defendant resides or may be found, and

process may be served in any other district

where a defendant resides or may be found.

* * + *

(h) Service upon Secretary of Labor and Secretary

of the Treasury

A copy of the complaint in any action under this

subchapter by a participant, beneficiary, or fiduciary

(other than an action brought by one or more par-

ticipants or beneficiaries under subsection (a) (1)

(B) of this section which is solely for the purpose of

recovering benefits due such participants under the

terms of the plan) shall be served upon the Secre-

tary and the Secretary of the Treasury by certified

mail. Either Secretary shall have the right in his

discretion to intervene in any action, except that the

Secretary of the Treasury may not intervene in any

action under part 4 of this subtitle. If the Secretary

brings an action under subsection (a) of this section

on behalf of a participant or beneficiary, he shall

notify the Secretary of the Treasury.

Section 510 of ERISA, 29 U.S.C. § 1140, provides:

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, this subchapter, section

1201 of this title, or the Welfare and Pension Plans

Disclosure Act [29 U.S.C.A. § 301 et seq.], 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. It shall be unlawful

for any person to discharge, fine, suspend, expel, or

discriminate against any person because he has given

information or has testified or is about to testify in

any inquiry or proceeding relating to this chapter

or the Welfare and Pension Plans Disclosure Act.

The provisions of section 1132 of this title shall be

applicable in the enforcement of this section.

Section 514 of ERISA, 29 U.S.C. § 1144, provides in

pertinent part:

(a) Supersedure; effective date

Except as provided in subsection (b) of this sec-

tion, the provisions of this subchapter and subchap-

ter III of this chapter shall supersede any and all

State laws insofar as they may now or hereafter

relate to any employee benefit plan described in sec-

tion 1003(a) of this title and not exempt under sec-

tion 1003(b) of this title. This section shall take ef-

fect on January 1, 1975.

* * 2s *

For purposes of this section:

(1) The term “State law” includes all laws, de-

cisions, rules, regulations, or other State action

having the effect of law, of any State. A law of

the United States applicable only to the District

of Columbia shall be treated as a State law

rather than a law of the United States.

(2) The term “State” includes a State, any po-

litical subdivisions thereof, or any agency or in-

s.rumentality of either, which purports to reg-

ulate, directly or indirectly, the terms and con-

ditions of employee benefit plans covered by this

subchapter.

Section 411/d)(1) of the Internal Revenue Code, 26

U.S.C. § 411/di (1), provides in pertinent part:

(d) Special rules.—

(1) Coordination with section 401(a)(4).—A plan

which satisfies the requirements of this section

shall be treated as satisfying any vesting require-

ments resulting from the application of section 401

(a) (4) unless—

(A) there has been a pattern of abuse under

the plan ‘such as a dismissal of employees be-

fore their accrued benefits become nonforfeit-

able) tending to discriminate in favor of em-

ployees who are highly compensated employees

(within the meaning of section 414(q)), or

(B) there have been, or there is reason to be-

lieve there will be, an accrual of benefits or for-

feitures tending to discriminate in favor of em-

ployees who are highly compensated employees

(within the meaning of section 414(q) ).

STATEMENT

1. In 1974, after almost a decade of study, Congress

enacted the Employee Retirement Income Security Act of

1974, Pub. L. No. 93-406, 88 Stat. 829 (“ERISA”). Con-

gress found that “the growth in size, scope, and numbers

of employee benefit plans in recent years has been rapid

and substantial; that the operational scope and economic

impact of such plans is increasingly interstate; that the

continued well-being and security of millions of employees

and their dependents are directly affected by these plans;

fand] that they are affected with a national public inter-

est.”” 29 U.S.C. $ 1001 (a).

Congress further found that “despite the enormous

growth in such plans many employees with long years of

employment are losing anticipated retirement benefits

owing to the lack of vesting provisions in such plans; that

owing to the inadequacy of current minimum standards,

the soundness and stability of plans with respect to ade-

quate funds to pey promised benefits may be endangered;

[and] that owing to the termination of plans before req-

uisite funds have been accumulated, employees and their

beneficiaries have been deprived of anticipated benefits.”

Id. Congress therefore declared that the policy of ERISA

is “to protect ... the interests of participants in private

pension plans and their beneficiaries by improving the

equitable character and the soundness of such plans by

requiring them to vest the accrued benefits of employees

with significant periods of service,” and to protect the

interests of participants in all types of employee benefit

plans “by providing for appropriate remedies, sanctions,

and ready access to the Federal courts.” 29 U.S.C.

$ 1001(c¢), (b).

Specifically, in Title I of ERISA, Congress established

certain minimum standards applicable to an employer’s

design and maintenance of its employee benefit plans."

Among other things, it imposed new requirements for

reporting and disclosure relating to such plans. 29 U.S.C.

s$ 1021-1031. It limited the age and service conditions

that an employer may impose for “participation” in a

pension plan. 29 U.S.C. § 1052. It required that an

employee’s normal retirement benefit “accrue”—i.e., be

earned—more or less ratably during the period of the

employee’s participation in the plan, and that the employ-

ee’s right to his accrued benefit “vest’”—i.e., become non-

forfeitable—after a minimum service period. 29 U.S.C.

$$ 1053, 1054. With certain exceptions, it further re-

quired that an employer establish a trust and make

periodic contributions sufficient to fund promised benefits

1 ERISA is organized in four titles. Title I of ERISA—the so-

called “labor provisions”—establishes the federal law occuying the

field of employee benefits. Title II of ERISA—the so-called “Code

provisions”—-makes amendments to the Internal Revenue Code,

parallel to those Title I provisions that affect “qualified plans”

under Section 401(a) of the Code. Title III of ERISA concerns

coordination of administration among the various federal agencies.

And Title TV of ERISA establishes the plan termination insurance

program, administered by the Pension Benefit Guaranty Corporation.

on a sound actuarial basis. 29 U.S.C. §§ 1082-1085. It

also established certain standards of conduct for fiduci-

aries of employee benefit plans. 29 U.S.C. §§ 1101-1114.

And, finally, it established comprehensive rules for the

administration and enforcement of employee rights in

benefit plans that the statute’s minimum standards are

designed to protect and regulate. 29 U.S.C. §§ 1131-1145.

Among the enforcement rules so created are certain

provisions aimed at protecting participants from wrongful

interference with attainment of rights under the employee

benefit plans. Section 510 of ERISA makes it “unlawful

for any person to discharge, fine, suspend, expel, dis-

cipline, or discriminate against a participant or bene-

ficiary . . . for the purpose of interfering with the attain-

ment of any right to which such participant may become

entitled under the plan... .” 29 U.S.C. $1140. In

addition, Section 1012(a) of Title II of ERISA added

Section 411/d) (1) to the Internal Revenue Code, which

states that a plan may be required to provide an acceler-

ated vesting schedule if “there has been a pattern of

abuse under the plan (such as dismissal of employees be-

fore their accrued benefits become nonforfeitable) tending

to discriminate in favor of employees who are highly com-

pensated....” 26 U.S.C. § 411(d) (1) (A).

ERISA makes the civil enforcement “provisions of

[Section 502 of ERISA] applicable in the enforcement oc

[Section 510].” 29 U.S.C. $ 1140. Section 502 of ERISA

authorizes a plan participant, beneficiary, or fiduciary to

bring suit “(A) to enjoin any act or practice which vio-

lates any provision of [Title I of ERISA] or the terms

of the plan, or (B) to obtain other appropriate equitable

relief... .” 29 U.S.C. $ 1132(a) (3). It also confers

exclusive jurisdiction over such suits on the federal courts.

29 U.S.C. £ 1132(e) (1). Finally, it requires that a certi-

fied copy of the complaint in any such action be served

upon both the Secretary of Labor and the Secretary of

Treasury, either of whom may intervene as a matter of

right in the action. 29 U.S.C. § 1182(h).

ERISA caps these substantive and enforcement provi-

sions by providing, in Section 514, that, except where ex-

pressly noted otherwise,? “the provisions of this sub-

chapter and subchapter III of this chapter shall supersede

any and all State laws insofar as they may now or here-

after relate to any [covered] employee benefit plan. . . .”

29 U.S.C. § 1144(a). Section 514 defines the term “State

law” to “include[] all laws, decisions, rules, regulations,

or other State action having the effect of law, of any

State,” 29 U.S.C. § 1144(¢) (1), and the term “State” to

“include[] a State, any political subdivisions thereof, or

any agency or instrumentality of either, which purports

to regulate, directly or indirectly, the terms and condi-

tions of employee benefit plans” covered by the statute,

29 U.S.C. $ 1144(e) (2).

2. Petitioner, Ingersoll-Rand Company, hired respond-

ent, Perry McClendon, in August 1972 as a salesperson

and distributor of construction equipment. Pet. App. la-

2a; J.A. 24-26. At the time, petitioner provided respond-

ent with a “Compensation Agreement” that detailed the

commissions that respondent would earn on any sales

made during the course of the next year. Pet. App. 2a,

18a, 19a; J.A. 28. Petitioner thereafter updated the

“Compensation Agreement” on an approximately annual

basis. Pet. App. 18a. Petitioner also allowed respondent

to participate in its employee benefit plans, including its

ERISA-covered pension plan. Pet. App. 2a, 18a; J.A. 28,

38-39.

* ERISA expressly excepts from preemption: (1) any cause-

of-action which arose, or any act or omission which occurred, before

January 1, 1975, see 29 U.S.C. § 1144(b) (1); (2) state laws regulat-

ing insurance, banking, or securities, see 29 U.S.C. § 1144(b)(2):

(3) any generally applicable criminal law of a state, see 29 U.S.C.

§$1144(b)(4); (4) the Hawaii Prepaid Health Care Act, see 29

U.S.C. §1144(b)(5); (5) qualified domestic relations orders, see

29 U.S.C. § 1144(b)(7); or (6) certain state laws regarding health

plans that are necessary for the state to be eligible to receive reim-

bursements under Title XIX of the Social Security Act, see 29

U.S.C. § 1144(b) (8).

With the exception of an eight-month period in 1977

(J.A. 25-26), respondent was continuously employed by

petitioner for approximately the next ten years. Pet. App.

2a. When the market for construction equipment de-

clined in the fall of 1982, however, petitioner terminated

the employment of respondent as part of a company-wide

reduction-in-force. Pet. App. 2a, 24a; J.A. 21, 29, 34-35.

At the time of his termination, respondent had accumu-

lated nine years and eight months of actual service with

petitioner. Pet. App. 2a, 18a; J.A. 25. Without investi-

gating the matter or discussing his pension rights with

any representative of petitioner (J.A. 39-41), respondent

apparently concluded that he was four months shy of

vesting under petitioner’s pension plan. Pet. App. 2a, 18a;

J.A. 41-43.

3. Respondent thereafter initiated suit against peti-

tioner in state court for wrongful discharge. Pet. App. 2a

& n.2; J.A. 5-7, 14-17, 65-71. Respondent principally

claimed that petitioner had breached both a contract of

employment with him and a duty of good faith and fair

dealing in connection with the employment relationship.

Pet. App. 2a & n.2; J.A. 6, 14-15, 66-67. Respondent al-

ternatively claimed that petitioner had wrongfully termi-

nated him in order to prevent his vesting under its pen-

sion plan. Pet. App. 2a & n.2; J.A. 14, 66-68. As reme-

dies for these allegedly unlawful acts, respondent asked

to be awarded, among other things, lost commissions, lost

pension and other benefits, damages for emotional dis-

tress, and punitive damages. J.A. 6-7, 15-16, 67-68.

After a period of discovery, petitioner moved for sum-

mary judgment. In support of its motion, petitioner was

able to show that the construction industry had suffered

a “devastating” recession in 1982; that, as a consequence,

petitioner had implemented a company-wide reduction-in-

force; that respondent was terminated as part of this

company-wide reduction-in-force; and that respondent

was an at-will employee at the time of his termination.

J.A. 21-22, 29, 31-35, 37, 53-54, 58. In addition, peti-

tioner was able to show both that respondent’s claim of

interference with pension benefits was based entirely on

his subjective impression that petitioner had saved ex-

penses by terminating him prior to his perceived vesting

date, and that, contrary to his perception, respondent

was, prior to his termination, in fact fully vested under

the terms of the pension plan (because, under the plan’s

“break-in-service” rules,* respondent had received im-

puted vesting credit for the eight-month period in 1977

when he was not actually employed by petitioner). J.A.

41-43, 43-45, 60-61. The trial court rendered summary

judgment in favor of petitioner. Pet. App. 25a-26a.

4. The court of appeals affirmed. Pet. App. 17a-24a.

It initially held (id. at 20a-22a) that, contrary to re-

spondent’s claim, the “Compensation Agreement” in no

way limited the circumstances in which petitioner could

dis-“lve its employment relationship with respondent.

The court further held (id. at 22a-24a) that, under

Texas law, no covenant of good faith and fair dealing is

implied into the employment relationship. Finally, it re-

jected respondent’s claim that he had been discharged

for an illicit reason, finding (id. at 24a) that the undis-

puted evidence showed that respondent had “incorrectly

* Attachments not included in the record below to a letter sent by

petitioner to respondent prior to the filing of the summary judg-

ment motion explain the break-in-service rules of the plan and their

effect on respondent. See J.A. 62. These break-in-service rules were

designed to comply with a regulation of the Treasury Department,

which provices, in pertinent part, that:

In determining a participant’s period of service for vesting

purposes, a plan shall take into account the following periods of

severance—

(A) If an employee severs from service by reason of a quit

. . and the employee then performs an hour of service within

the meaning of 29 C.F.R. 2530.200b-2(a)(1) within 12 months

of the severance from service date, the plan is required to take

into account the period of severance.

26 C.F.R. § 1.410(a)-7(d) (1) iii).

concluded that being discharged before ten years of serv-

ice would prevent him from collecting certain benefits,”

and that petitioner “did nothing more than react to an

economic downturn by reducing its sales force.”

5. In a 5-4 decision, the Supreme Court of Texas re-

versed and remanded. Pet. App. la-l6a. It declined to

address respondent’s claim that a duty of good faith and

fair dealing should be implied into the employment rela-

tionship between petitioner and respondent. Jd. at 2a,

n.l. Instead, it held that a cause-of-action lies under

Texas common law against an employer whose “principal

reason” for terminating an employee is to avoid con-

tributing to or paying benefits under the employee’s pen-

sion fund. Id. at la, 5a. In reaching this conclusion, the

court expressly held that Section 514 of ERISA does not

preempt such a state common-law cause of action. Jd. at

5a n.3.

a. The majority of the Supreme Court of Texas began

its opinion by noting (Pet. App. 3a) that, while “Texas

courts have traditionally followed the employment at-will

doctrine,” they have placed “numerous exceptions .. .

on its application.” The majority explained (id. at 4a)

that many states, including Texas, “have accepted the

principle that public policy can limit an employer’s power

to discharge at-will employees.” Specifically, it pointed

out (id. at 4a-5a) that the United States District Court

for the Eastern District of New York, construing New

York law, “has recognized a cause of action for wrongful

discharge when an employee alleges that he was termi-

nated to deprive him of pension benefits.”

The majority next found (Pet. App. 5a) that the State

of Texas “has an interest in protecting employees’ inter-

ests in pension plans.” In support of this conclusion, the

court cited (id. at 5a) both a Texas statute (Tex. Rev.

Civ. Stat. Title 110B), which provides pensions for pub-

lic employees of the State of Texas, and Section 510 of

ERISA. Indeed, the majority stated (Pet. App. 5a) that

Bi t]he very passage of ERISA demonstrates the great

significance attached to income security for retirement

purposes.”

The majority then concluded (Pet. App. 5a) that “pub-

lie policy favors the protection of integrity in pension

plans and requires in this case an exception to the em-

ployment at-will doctrine.” Specifically, it held that (id.

at 5a) an employee should be “allow/ed] recovery when

[he] proves that the principal reason for his termination

was the employer’s desire to avoid contributing to or pay-

ing benefits under the employee’s pension fund.” In so

concluding, the majority conceded (id. at 5a n.3) that

there are cases holding “that a claim for wrongful dis-

charge in order to avoid the payment of pension funds is

preempted by ERISA.” But the majority determined (id.

(emphasis in original) ) that these cases are distinguish-

able because respondent “is not seeking lost pension bene-

fits but is instead seeking lost future wages, mental an-

guish and punitive damages as a result of the wrongful

discharge.”

b. Justice Cook, joined by Chief Justice Phillips and

Justice Hecht, filed a dissenting opinion. Pet. App. 6a-

13a. Justice Cook agreed with the majority (id. at 6a)

that “ERISA demonstrates the great significance at-

tached to income security for retirement.” But he found

it even more significant (id.) that ERISA “confers upon

employees a federal version of the cause of action cre-

ated by this court, confines litigation of the federal cause

of action to the federal courts, and preempts the state

cause of acticn.” Significantly he found (id. at 7a) that,

under Section 514 of ERISA, “all provisions of the sub-

chapter in which § 510 is contained preempt state laws

that ‘relate to’ employee benefit plans,” and that “|t|here

can be no doubt that the law created today by [the ma-

jority] relates to a pension plan and directly conflicts

with the specific provision of § 510 establishing a federal

cause of action under ERISA.” Indeed, he found (id. at

7a-8a) that, “because preemption of the claim at issue

leaves plaintiff with a cause of action that can be liti-

gated only in federal court, ERISA preempts the |state|

forum as well as | the] cause of action.”

Justice Cook strongly objected (Pet. App. 8a-9a) that

the majority opinion “misleads employees by providing

them with an imaginary claim.” While he believed (id.

at 9a) that “ERISA’s provisions make it doubtful that a

state court even has power to adjudicate the new cause

of action,” he was certain (id.) that “astute defendants

need not wait to find out. They need only remove to fed-

eral court and raise a defense of preemption.” Justice

Cook expressed (id.) “regret [for] the confusion and pro-

longed litigation we have thrust upon employers and em-

ployees in their efforts to resolve disputes concerning

their pension plans.”

Justice Cook also objected (Pet. App. 9a-lla) that the

majority opinion “undercuts the very purpose of sum-

mary judgment proceedings, which are designed to elimi-

nate patently unmeritorious claims and untenable de-

fenses.”” He noted (id. at 10a) that, under ERISA, “an

employee must establish more than the mere fact that the

termination of his employment resulted in a monetary

savings to his employer.” Yet he observed (id.) that,

under the majority’s opinion, “an employee is presumably

guaranteed a jury trial by merely alleging that the prin-

cipal reason for his termination was the employer's de-

sire to avoid contributing to or paying benefits under the

employee’s pension fund.” Justice Cook concluded (id. at

10a-1la! that the majority’s approach to the summary

judgment issue would both “unduly chill|] an employer's

right to terminate an at-will employee with or without

cause” and open the “proverbial ‘floodgates of litiga-

a ies

ec. Justice Gonzalez also filed a dissenting opinion. Pet.

App. 18a-16a. He agreed with Justice Cook’s conclusion

(id. at 13a-14a) that “this cause of action is preempted

by ERISA” and that “it will be very difficult, if not im-

possible, to filter out meritless cases by summary judg-

ment as a result of today’s opinion.” He further found

(id. at 14a-16a) that “the federal authority that the

court finds persuasive is questionable,” and noted that

other courts had refused to follow it.

SUMMARY OF ARGUMENT

In ERISA, Congress wanted to ensure that the benefit

promises that employers make are kept. It thus devised

a comprehensive and reticulated regulatory scheme which,

among other things, protects employees against purpose-

ful interference by their employer with attainment of

their rights under an employee benefit plan. The Su-

preme Court of Texas, by its decision below, has at-

tempted to create an alternative set of rights and reme-

dies available to an employee in such a situation. The

language, legislative history, and purpose of ERISA’s

preemption provision, however, make it clear that the

Supreme Court of Texas may not lawfully do so.

A. By the plain terms of Section 514(a) of ERISA,

the statute preempts “any and all State laws insofar as

they may now or hereafter relate to any employee benefit

plan” covered by the statute. 29 U.S.C. §1144(a). As

this Court has repeatedly recognized, this expansive lan-

guage occupies for Federal authority the sole power to

regulate the field of employee benefit plans. See, e.g.,

Pilot Life Insurance Co, v. Dedeaux, 481 U.S. 41 (1987):

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

(1981). Specifically, Section 514(a) displaces any state

law that has “a connection with or reference to” an

ERISA-covered plan. Shaw v. Delta Air Lines, Inc., 463

U.S. 85, 97 (1983).

The state common law claim recognized by the court

below plainly “relates to” an ERISA-covered plan in this

sense, Absent “reference to” petitioner’s ERISA-covered

pension plan, respondent simply would have no cause-of-

action at all under Texas law. Moreover, the purpose and

effect of the Texas law are to insulate from wrongful

interference the employee’s right to benefits promised

under the pension plan—the very heart of the plan itself.

Indeed, the law seeks to protect vesting rights—substan-

tive rights that ERISA itself requires the plan to afford

to employees. As an enforcement mechanism for benefit

rights brought into being by ERISA and provided by an

ERISA-covered plan, the Texas law clearly “relates to”

that plan and must be preempted.

B. The structure of ERISA confirms that the cause-of-

action recognized by the court below “relates to” an

ERISA-covered plan, because ERISA itself contains pro-

visions to secure the rights of employees against improper

threats of employer-interference with attainment of

promised benefits. These provisions evidence the under-

standing of Congress that such laws “relate to” the pians

covered by the statute.

Specifically, Section 510 of ERISA bars employers from

terminating or discriminating against employees for the

purpose of interfering with their attainment of rights

under a plan. See 29 U.S.C. § 1140. It prevents employ-

ers from circumventing, and thus gives meaning to, the

vesting and other minimum standards established bv

ERISA and contained in pension plans. It is thus part of

the interrelated scheme of minimum standards that Con-

gress devised to ensure that benefit promises are kept.

The Congress enacting Section 510 must have understood

it to “relate to” the plans that ERISA was seeking to

protect and regulate.

Two other provisions of ERISA confirm this congres-

sional understanding. First, as a parallel to Section 519,

ERISA enacted Section 411/d) (1) of the Internal Rev-

enue Code, under which a plan may be required to pro-

vide an accelerated vesting schedule if there has been a

pattern of abuse--such as dismissal of employees before

they became vested under a plan; such a direct regulation

of the terms of a plan by a parallel ERISA provision

demonstrates that Congress understood Section 510, and

thus any comparable state law, indirectly to have this

relation as well. Second, Section 502 of ERISA is ex-

pressly designated as the enforcement mechanism for

Section 510 claims and, as this Court has made clear,

Section 514 of ERISA is properly read to encompass, and

thus-to preempt, all state law causes-of-action for claims

within the scope of Section 502. See Pilot Life Ins. Co. ».

Dedeauyv, 481 U.S. at 52-54, 57. The cause-of-action rec-

ognized by the court below states such a claim.

C. The legislative history of the statute confirms that,

in enacting Section 514, Congress understood that ERISA

would preempt, among other things, any state law that,

like Section 510 ef ERISA, seeks indirectly to protect

rights under employee benefit plans by prohibiting em-

ployment décisions that might otherwise purposefully de-

feat rights unvler ERISA-covered plans. The bills passed

by the Hose and Senate purported to preempt only state

laws velating to specific subjects covered by ERISA. The

conferenc® committee rejected these provisions as unduly

narrow and instead enacted language designed to reserve

regulation of the entire field of emplovee benefit plans to

the federal scheme. In fact, the record of the committee’s

leliberations indicates that Section 510 was viewed as a

critical component of the federal scheme: that Congress

deliberately designed Sections 502. 510s and 514 to form

an interrelated system for safeguarding employees’ rights

inder plans; and that Section 514’s “relate to” language

was understood to subsume—and extend beyond—all sub-

ect matters regulated by ERISA, including the subjects

addressed in Sections 510 and 502.

D. The preemption of state laws that, like Section 510,

seek indirectly to protect rights under employee benefit

plans hy prohibiting employment actions taken for the

purpose of defeating rights under those plans is con-

sistent with, and indeed mandated by, the purpose of

Section 514 of ERISA. Congress enacted that provi-

sion to save plans and plan sponsors from the adminis-

trative and financial burdens produced by multiple and

potentiaily conflicting regulations. Allowing state-law

based actions for wrongful interference with rights un-

der plans would, however, potentially subject plan spon-

sors to multiple jurisdictional and procedural rules, dif-

ferent substantive standards of prohibited conduct, and

far-reaching damages claims. As a consequence, plan

sponsors would have a strong incentive to take actions

detrimental! to the interests of plan participants—by, for

example, declining to establish plans, deciding to elimi-

nate existing plans, or altering the design of plans to

reduce the likelihood that interference-type claims will

be asserted. In Section 510, Congress delibe raigy and

carefully crafted the rights, procedures, and remedies so

as not to discourage tHe creation and maiatenance of em-

ployee benefit plans. The same cannot be said for the

patchwork quilt of laws, procedures, and remedies tha’

states might choose to impose. Accordiagly, preemption

is necessary. P

E. The arguments advanced by respondent. against

preemption are without merit. | * espondent is n

longer seeking lost pension benefits as par’ of his remed)

does not defeat preemption : his. cause-of-action is still

one that “relates to” an ERISA-covered tes and ti is

within the scope of Sections 502 and 510 of ERISA.

Moreover, a law may “relate to”’ an ERISA-covered plan

even though it imposes obligations only on the employer

and does not directly require the payment of benefits or

regulate the administrative activities of the plan. Many

of ERISA’s obligations—such as recordkeeping obliga-

tions and funding obligations—are imposed only on the

emplayver. These obligations have a fundamental “con-

nection with or reference to” the plans regulated by

ERISA, and the states clearly cannot regulate the

employer-activities to which those obligations are directly

addressed. The same conclusion shoulc be true for See-

tion 510 and the employer-activities to which it (or any

comparable state law) is addressed. Indeed, with the

exception of the court below, the federal and state ap-

pellate courts to address this issue have uniformly so

concluded.

ARGUMENT

ERISA PREEMPTS A STATE COMMON LAW CLAIM

THAT AN EMPLOYER HAS DISCHARGED AN EM-

PLOYEE IN ORDER TO INTERFERE WITH ATTAIN-

MENT OF BENEFITS UNDER AN ERISA-COVERED

PLAN

“ERISA is a comprehensive statute designed to pro-

mote the interests of employees and their beneficiaries in

employee benefit plans.” Shaw v. Delta Air Lines, Inc.,

463 U.S. 85, 90 (1983). Specilically, in enacting ERISA,

Congress wanted to ensure that the benetit promises that

employers make are kept. See Alessi v. Raybestos-

Manhattan, Inc., 451 U.S. 504, 510 (1981). It thus de-

vised a “comprehensive and reticulated” regulatory scheme

which requires, among other things, that normal retire-

ment benefits be earned—i.e., “accrue”—more or less

ratably during the period of employees’ participation in

a pension plan, that employees ‘“‘vest” in their accrued

benefits after a minimuia service period, that employers

make certain contributions to a trust to fund promised

pension benefits on an actuarially sound basis, and that

employees be protected against purposeful interference

With attainment of their rights under the plan. See

Nachman Corp. v. Pension Benefit Guar. Corp., 446 US.

359, 361 (T1980); see also 29 U.S.C. $$ 1052-1054. 1082,

1140.

The Supreme Court of Texas, by its decision below,

has attempted to create an alternative set of rights and

remedies available to an employee-who claims that his

employer has discharged him in order to prevent him

from receiving promised pension benefits. The language,

legislative history, and purpose of ERISA’s preemption

provision, however, make it clear that the Supreme Court

of Texas has no authority to superimpose on ERISA its

own view of the appropriate rights and remedies avail-

able to employees in such situations.

A. The State Common-Law Claim Recognized By The

Court Below “Relates To” An ER!SA-Covered Plan

Within The Meaning Of Section 514 Of ERISA

“'T]he question whether a certain state action is

yreempted by federal law is one of congressional intent.

‘The purpose of Congress is the ultimate touchstone.’ ”

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45 (1987)

(citations omitted). As this Court has repeatedly ob-

served, the purpose of Congres in enacting ERISA’s pre-

emption provision was the “reservation to Federal au-

thority |of] the sole power to regulate the field of em-

ployee benefit plans.” Jd. at 46. See also Franchise Tax

Bd. v. Construction Laborers Vacation Trust, 463 U.S.

1, 24 n.26 (1983); Alessi v. Rayhestos-Manhattan, Ine.,

451 U.S. at 523. Thus, by the plain terms of Section

514\a), “the provisions of [ERISA]... supersede any

and a!l State laws insofar as they may now or hereafter

relate to any employee benefit plan’’ covered by the stat-

ute. 29 U.S.C. §$ 1144(a). The common-law claim recog-

nized by the court below is plainly such a state law.

This Court has previously noted the “expansive sweep”

of Section 514. Ptiot Life Ins. Co. v. Dedeaux, 481 US.

at 47. Ie has held the provision applicable to state

comm@r-law as well as to state statutory claims. See,

e.g., Wd. at 47-48; Metropolitan Life Ins. Co. v. Taylor,

$81 U.S. 58, 62 (1987). It has further held that “*!t}he

pre-emption provision was intended to displace all state

laws that fall within its sphere, even including state laws

lat are consistent with BRISA’s substantive require-

* : . ‘2 , . —

ments” | MetrapelitanaLife rns. ( . Massa setts, 471

— _ — ‘ - earhe 2) ~ [ae ee

[ .F (24, io IMS ladeed, wnhle acknowledging

, z ' : £ : . 3 .

provision gives Pris some contusion woere,

" “7.

> ' . ton +}

stale iaW Ostenslbdu¥

524), the Court has “emphasized that the pre-emption

clause is not limited to ‘state laws specifically designed

to affect employee benefit plans’” (Pilot Life Ins. Co. v.

Dedeaux, 481 U.S. at 47-48), and that “even indirect

state action... may encroach upon the ares of exclusive

federal concern.” Alessi v. Raybestos-Manhattan, Inc.,

451 U.S. at 525. Specifically, the Court has held that a

state law “relates to” an ERISA-covered plan and _ is

preempted if it has “a connection with or reference to

such a plan.” Shaw v. Delta Aix Lines, Inc., 463 U-S.

85, 97 (1983).

The state common-law claim recognized by the court

below plainly “relates to” an F RISA-covered plan in this

sense. Absent “reference to’ petitioner’s ERISA-covered

pension plan, respondent simply would have no cause-of-

action at all under Texas law.' Moreover, the purpose

und effect of the Texas law is, as the Supreme Court of

Texas admitted, to protect “employees’ interests in pen-

sion plans” and to ensure that an employer cannot avoid

“paying benefits under the employee’s pension fund”

‘Pet. App. 5a). The Texas law thus seeks to insulate

from wrongful interference the employee's right to at-

tain benefits promised under an ERISA-covered pension

plan—the very heart of the plan itself. See Alessi v.

Raybestos-Manhattan, Inc., 451 U.S. at 510. Indeed,

the law expressly seeks to protect vesting rights under

an ERISA-covered plan—substantive rights that ERISA

4 Respondent’s claim under Texas law plainly depends on refer-

ence to petitioner’s pension plan and, indeed, to its particular terms.

Respondent claims that petitioner terminated him for the purpose

of interfering with his vesting under the pension plan. Unbeknownst

to respondent, however, he was fully vested under the pension plan

at the time of his termination. Thus, the application of the plan’s

complex vesting provisions would be the focus of petitioner’s de-

fense, since the claim that the employer acted to deprive the em-

ployee of vesting is less credible when the employee was already

vested at the time of the act. In this way, both the cause-of-action

and the defense have a tangible and significant connection to an

ERiISA-covered plan: both depend on the existence of the plan and

its particular terms,

itself requires the plan to afford to employees. As an en-

forcement mechanism for benefit rights brought into be-

ing by ERISA and provided by an ERISA plan,° the

Texas law clearly “relates to” petitioner’s ERISA-covered

plan in its very essence and as applied to such plan must

be preempted.®

B. The Structure Of ERISA Confirms That The Cause Of

Action Recognized By The Court Below “Relates To”

An ERISA-Covered Plan Within The Meaning Of Sec-

tion 514 Of ERISA

That this Texas common-law “relates to” an ERISA-

covered benefit plan is structurally confirmed by the pro-

visions of ERISA that Section 514 states “shall supersede

any and all state laws” relating to an ERISA-covered

plan. 29 U.S.C. § 1144(a). The structure of these pro-

visions reveals a deliberate effort to secure the rights of

employees under pension plans against potential threats to

enjoyment of those rights, including improper employer-

interference with attainment of promised benefits. In

other words, these provisions demonstrate that Congress

understood that such laws “relate to” employee benefit

plans covered by the statute.

-_—__

*The remedy for violation of the Texas law may be back or

front pay or other damages paid by the employer. See Pet. App.

5a n.3. But, as with any other law prohibiting a particular kind of

employer-conduct, the purpose of the law is not to provide damages

but rather to assure enjoyment of rights—here, pension rights.

Assuring that employees receive rights under plans plainly “re-

lates to” those plans.

* That the Texas law is preempted as applied in this case does not

mean that it is preempted in all circumstances. ERISA does not

apply to governmental plans, church plans, excess benefit plans,

or certain payroll practices. See 29 U.S.C. §1003(b): 29 C.F.R.

§ 2510.3-1(b). The Texas law could lawfully be applied to prevent

alleged interference with attainment of benefits from any one

of these sources, since the law would not in such circumstances

“relate to” an ERISA-covered plan.

1. As explained above, the principal goal of Congress

in enacting ERISA was to ensure that employce benefit

promises made by employers are kept. See Alessi v.

Raybestos-Manhattan, Inc., 451 U.S. at 510. To that end,

Congress secured the right of employees to participate in

pension plans. See 29 U.S.C. § 1052. Recognizing, how-

ever, that mere participation in plans would in many in-

stances not secure rights to benefits if benefits could be

forfeited upon termination of employment prior to nor-

mal retirement age, Congress further provided for vest-

ing of employee rights after a specific period of service.

See 29 U.S.C. § 1053. Likewise, recognizing that vesting

would in many instances be nugatory if employers de-

signed plans so as to postpone any meaningful accrual of

benefits until attainment of retirement age, Congress also

required that pension benefits be accrued more or less

ratably over the period of an employee’s anticipated par-

ticipation in a plan. 29 U.S.C. $1054. And, recognizing

thal vested and accrued pension benefits are of little value

to employees if no monies exist to pay them, Congress

provided that an employer must make periodic contri-

butions to fund any promised pension benefits on an

actuarially-sound basis. See 29 U.S.C. § 1082. Finally,

(Congress established the plan termination insurance pro-

gram, including employer-liability to the Pension Bene-

{i's Guaranty Corporation for underfunded pension plans.

See 29 U.S.C. § 1362.

In creating this comprehensive and interrelated scheme

of plan protectiens, however, Congress was concerned that

there remained at least one way in which an unscrupulous

employer might attempt to defeat an employee’s attain-

ment of benefits under a pension or other benefit plan:

by discharging the employee before he had accumulated

the service or otherwise satisfied the eligibility conditions

necessary for rights to vest under the plan. See, e.g., 119

Cong Rec. 30044 (19733, reprin'ed in 2 Legislative His-

tory of the Employee Retirement Income Security Act of

1974 (“Legislative History”) (Comm, Print 1976), at

1640 (remarks of Sen. Hartke) (“Is there not a di-

rect, positive incentive for every employer to fire a per-

son when he reaches 29 years and 364 days of age?’’).

Although it considered avoiding the problem by mandat-

ing graduated vesting (so that an employer would have

no incentive to terminate an employee prior to vesting),

see 8S. Rep. No. 383, 93d Cong., Ist Sess. 20 (1973)

reprinted in 1 Legislative History 1063, 1088, Congress

ultimately decided to address the problem through the

enactment of Section 510 of ERISA. See S. Rep. No. 127

93d Cong., 1st Sess. 35-36 (1973), reprinted in 1 Legis

lative History 587, 621-622 (“These provisions were

added by the Committee in the face of evidence that in

some plans a worker’s pension rights or the expectations

of those rights were interfered with by the use of eco-

nomic sanctions or violent reprisals.) : 119 Cong. Ree.

30044 (1973), reprinted in 2 Legislative History, at 1641

(remarks of Sen. Javits) (“The Senator from New Jer-

sey (Mr. Williams) and I have included an express

amendment on that score which would provide a remedy

for any person fired such as is provided for a person dis-

criminated against because of race or sex, for exarnple,

That is section 699A [as Section 510 was then num-

bered|.’’),

Among other things, Section 510 bars employers from

taking adverse employment actions for the purpose of

interfering with an individual’s attainment of benefits

under a plan. See 29 U.S.C. § 1140. Section 510 prevents

employers from circumventing, and thus gives meaning

to, the vesting and other minimum standards established

for and contained in pension plans. See 119 Cong. Ree.

30400 (1973) reprinted in 2 Legislative History, at 1836

(remarks of Sen. Hartke) (‘The key to effective pension

reform is early vesting, but a vesting provision is no

better than the protection employees have against im-

proper discharge—including layoff—discipline or other

discrimination that puts an employee out of a job before

vesting is achieved, thereby defeating his pension

claim.”). In addition, it protects the attainment of rights

under employee welfare benefit plans. See, CG Vogel,

Containing Medical And Disability Costs By Cu'ting Un-

healthy Employees: Does Section 510 Of ERISA Provide

A Remedy?, 62 Notre Dame L. Rev. 1024 (1987). ‘The

Congress enacting Section 510 must have understood it to

“relate to” the plans that ERISA was seeking to protect

and regulate.’

2. That Congress understood Section 510—and thus

any comparable state law—to “relate to” ERISA-covered

plans is conclusively confirmed by the parallel provision

added to the Internal Revenue Code by Section 1012(a)

of Title II of ERISA. See 120 Cong. Rec. 8861 (1974),

reprinted in 3 Legislative History, at 4273 (comparing

Section 510 and parallel Code provisions). Under that

provision, which appears as Section 411(d) (1) of om

Code, a plan may be required to provide an accelerated

vesting schedule if “there has been a pattern of abuse

under the plan (such as dismissal of employees before

their acerued benefits become nonforfeitable) tending to

discriminate in faver of employees who are highly com-

pensated... .” 26 U.S.C. §411(d) (1) (A). See also H.R.

Conf. Rep. No. 1280, 93d Cong., 2d Sess. 276-277 (1974),

reprinted in 3 Legislative History 4277, 4543-4544 ; H.R.

tep. No. 779, 93d Cong., 2d Sess. 63 (1974), reprinted in

2 Legisla'ive History 2584, 2652. Such a direct regulation

of the terms of a plan by a parallel provision of Title II

of RISA demonstrates that Congress understood Section

510, and thus any comparable state law, indirectly to

have this relation to the plan as well.

7 Because of the obvious comparability between ERISA Section

510 and the Texas law, respondent has the unenviable task of per-

suading the Court that Section 510 does not “relate to” employee

benefit plans—a proposition utterly at odds with the “common sense

view” that has principally guided the Court in ERISA preemption

cases. See Metropolitan Life Insurance Co. v, Massachusetts, 471

U.S. at 740; Pilot Life Insurance Co. v. Dedeaux, 481 U.S. at 47,

48, 50.

3. Finally, there is one other structural indication that

Congress understood Section 510 and any comparable

state law to “relate to” ERISA-covered employee benefit

plans. Section 510 provides that its terms are to be en-

forced pursuant to the provisions of Section 502 of

ERISA. See 29 U.S.C. § 1140. Like the Texas law, Sec-

tion 502 provides employment-related remedies such as

reinstatement, back pay, front-pay, and damages equal to

lost benefits for violations of Section 510 as a deterrent

to ensure the payment of benefits under plans. See, C.9.,

Kross v. Western Electric Co., 701 F.2d 1238, 1244 n.7

(7th Cir. 1983); Folz v. Marriott Corp., 594 F. Supp.

1007, 1015-1020 (W.D. Mo. 1984),

Importantly, in Pilot Life Ins. Co. v. Dedeaux, this

Court held that interpretation of the provisions of Sec-

tion 514 of ERISA—in that case, the so-called “savings

clause” in Section 514(b) (2) (A)—“must be informed

by the legislative intent concerning the civil enforcement

provisions” of Section 502. 481 U.S. at 52. The Court

reasoned (id. at 52, 54) that “{t]he civil enforcement

scheme of § 502(a) is one of the essential tools for ac-

complishing the stated purposes of ERISA,” and that

“varying state causes of action for claims within the

scope of $ 502(a) would pose an obstacle to the purposes

and objectives of Congress.” Thus, it held that the state

law at issue in that case—a tort for alleged improper

processing of benefits—must be preempted because it

overlaps with a claim within the scope of Section 502.

See id. at 57.

A state law like the one adopted in this case by the

Supreme Court of Texas must similarly be preempted:

It adds to the remedies available under Section 502 for a

claim relating to purposeful interference with attain-

ment of benefits under a plan, and thus “completely

undermines” “|t|he policy choices reflected in the inclu-

sion of certain remedies and the exclusion of others under

the federal scheme... .” Id. at 54. This is all the more

true where the state law, as here, seeks to protect and

enforce substantive rights under a plan which were not

created—and cannot be created—by state law.

C. The Legislative History Of ERISA Confirms That A

State Law Making It Unlawful To Discharge An Em-

ployee For The Purpose Of Interfering With Attain-

ment Of Pension Benefits “Relates To” A Plan And Is

Preempted

The legislative history of ERISA confirms that a state

law making it unlawful to discharge an employee for the

purpose of interfering with attainment of pension bene-

fits “relates to” ERISA-covered plans and is preempied.

Specifically, the legislative history shows that Congress

viewed Section 510 as an indispensable component of its

comprehensive scheme for the protection and regulation

of employee benefit plans; that Sections 502, 510 and 514

were intended to comprise a single interrelated and exclu-

sive enforcement scheme to protect rights under plans

against improper interference; and that, as ultimately

formulated, Section 514 was understood to preempt, at a

minimum, any state law attempting to regulate the sub-

ject matters treated by ERISA.

1. The bill that eventually became ERISA, H.R. 2, was

first introduced in the House by Representative Dent on

January 3, 1973. See H.R. 2, 93d Cong., Ist Sess.

(1973), reprinted in 1 Legislative History 3. That bill

did not contain any provision like Section 510 of ERISA.

Moreover, while it contained a limited civil enforcement

section, it allowed participants or beneficiaries to insti-

tute civil actions in either state or federal court. See 1

Legislative History, at 34. Finally, it preempted state

laws only “insofar as they may now or hereafter relate

to the fiduciary, reporting, and disclosure responsibilities

of persons acting on behalf of employee benefit plans.”

id. at 50-51.

On August 2, 1973, Representative Dent introduced

H.R. 9824 as an alternative to H.R. 2. See H.R. 9824,

93d Cong., 1st Sess. (1973), reprinted in 1 Legislative

History 686. Like H.R. 2, H.R. 9824 did not contain a

provision like Section 510 of ERISA. Moreover, like H.R.

2, H.R. 9824 authorized civil actions to be brought in

either state or federal court. 1 Legislative History at

769-770. But H.R. 9824 did expand the remedies avail-

able in such actions to include, as ERISA now authorizes,

injunctions against “any act or practice which violates

any provision of this Act.” Jd. at 769. Moreover, it ex-

panded the preemption provision to encompass both state

laws that “may now or hereafter relate to the reporting

and disclosure responsibilities of persons acting on behalf

of employee benefit plans,” and state laws “insofar as

they may now or hereafter relate to the vesting of par-

ticipant’s benefits in employee benefit plans, the funding

requirements for employee benefit plans or the adequacy

of financing of employee benefit plans,” and “affect the

fiduciary responsibilities of those dealing with the plan

and such laws conflict with any provision of this Act.”

Id, at 776-777.

On October 2, 1973, the House Committee on Edueca-

tion and Labor reported H.R. 2 with an amendment that

essentially replaced the bill as introduced. See H.R. 2,

93d Cong., Ist Sess. (1973), reprinted in 2 Legislative

History 2181. As reported, the civil action provision of

H.R. 2—Section 503—was substantially the same as the

civil action provision of H.R. 9824. See 2 Legislative

History, at 2331-2338. As reported, the preemption pro-

vision of H.R. 2—Section 514(a)—was substantially the

same as the preemption provision of H.R. 9824, except

that it preempted all state laws addressing fiduciary re-

sponsibilities, whether they conflicted with ERISA’s pro-

visions or not. See H.R. Rep. No. 533, 93d Cong., 1st

Sess. 17, reprinted in 2 Legislative History 2348, 2364.

Finally, as reported, H.R. 2 for the first time included

among its “Enforcement” rules a provision stating (H.R.

2, 938d Cong., 1st Sess. 161, reprinted in 2 Legislative

History 2181, 2341) that:

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 the

plan or this Act, or for the purpose of interfering

with the attainment of any right to which such par-

ticipant may become entitled under the plan, or this

Act. The provisions of section 503 shall be applicable

in the enforcement of this section.

The committee report accompanying the bill described

this provision as necessary “to completely secure the

rights and expectations brought into being by this legis-

lation.” H.R. No. 533, 93d Cong., 1st Sess. 17 (1973),

reprinted in 2 Legislative History, at 2364.

While H.R. 2 was awaiting floor action, the Committee

on Edueation and Labor reported out yet another bill,

H.R. 12906. See H.R. 12906, 93d Cong., 2d Sess. (1974),

reprinted in 2 Legislative History 2761. The civil en-

forcement and non-interference with protected rights pro-

visions of H.R. 12906 were nearly identical to the com-

parable provisions in H.R. 2. See 2 Legislative History,

at 2916-2917. The preemption provisions of H.R. 12906,

however, were reorganized to preempt state laws insofar

as they “relate to the reporting and disclosure respons!-

bilities, and fiduciary responsibilities, of persons acting

on behalf of any employee benefit plan to which part 1

applies,” and “insofar as they may now or hereafter re-

late to the nonforfeitability of participant’s benefits in

emplovee benefits pians, . . . the funding requirements

for such plans, the adequacy of financing of such plans,

portability requirements for such plans, or the insurance

of pension benefits under such plans.” See 2 Legislative

History, at 2921-2922.

On February 26, 1974, the House considered both H.R.

12906 and H.R. 12855, a bill reported out of the Ways

and Means Committee. It consolidated the two bills into

a new H.R. 2, and passed that bill by a vote of 376 to 4

on February 28, 1974. As passed, the relevant provisions

of H.R. 2—Sections 503, 510, and 514—were identical to

the provisions of H.R. 12906. See H.R. 2, 93d Cong., 2d

Sess. (1974), reprinted in 3 Legislative History 3898,

4047, 4053-4054, 4057-4058. Thus, as passed, H.R. 2

included among its benefit plan protections a provision

making it unlawful for an employer purposefully to in-

terfere with attainment of rights under plans; allowed

that provision to be enforced in either federal or state

court; and preempted only certain specifically designated

subjects regulated by ERISA.

2. The principal pension reform bill considered in the

Senate, S. 4, was introduced by Senator Williams on Jan-

uary 4, 1973. See S. 4, 93d Cong., Ist Sess. (1973), re-

printed in 1 Legislative History 93. As was the case with

the initial bill introduced in the House, S. 4 did not con-

tain any provision comparable to Section 510 of ERISA.

Moreover, Section 603 of S. 4 contained a broad civil

enforcement provision entitling any participant or bene-

ficiary to sue in state or federal vourt for “appropriate

relief, legal or equitable, to redress or restrain a breach

of any responsibility, obligation or duty of a fiduciary

” 1 Legislative History, at 183-184. Section 604

entitled a participant or beneficiary to sue in state or

federal court “to recover benefits due him . . . or to clarify

his rights to future benefits under the terms of the plan

” Id. Finally, Section 609 of S. 4 provided that,

except for actions to recover benefits or clarify benefit

rights, “the provisions of this Act . . . shall supersede any

and all laws of the States and of political subdivisions

thereof insofar as they may now ov hereafter relate to

the subject matters regulated by this Act or the Welfare

and Pension Plans Disclosure Act... .” 1 Legislative

History, at 186-188. A summary of tk2 bill stated that

Section 609 “provides that this Act supersedes state laws

covering the same matters.”’ Jd. at 201.

On April 18, 1973, S. 4 was reported out of the Senate

Committee on Labor and Public Welfare. S. 4, 93 Cong.,

Ist Sess. (1973), reprinted in 1 Legislative History 389.

The civil enforcement provisions of the reported bill

were essentially the same as the provisions of S. 4 as

introduced. Id. at 579-581. The preemption provision of

the reported bill was identical in all relevant respects to

Section 609 of the bill as introduced. Jd. at 582-583. As

reported, however, S. 4 provided as part of its “Enforce-

ment” rules (1 Legislative History, at 585) that:

Sec, 610. It shall be unlawful for any person to dis-

charge, fine, suspend, expel, discipline, or discrimi-

nate against a participant or beneficiary for exer-

cising any rignt to which he is entitled under the

provisions of the plan, this Act, or the Welfare and

Pension Plans Disclosure Act, or for the purpose of

interfering with the attainment of any right to which

such participant may become entitled under the plan,

this Act, or the Welfare and Pension Plans Disclo-

sure Act. The provisions of sections 602 [suits by

the Secretary] and 603 shall be applicable. .. .

The Committee had heard testimony about instances in

which employers had discharged employees to prevent them

from vesting under plans. See Retirement Income Secu-

rity For Employees Act, 1973: Hearings on S. 4 and

S. 75 Before the Subcommittee on Labor of the Senate

Committee on Labor and Public Welfare, 93d Cong., 1st

Sess, 350 (1973). The committee report stated that Sec-

tion 609 was thus necessary “to completely secure the

rights and expectations brought into being by this land-

mark reform legislation.” S. Rep. No. 127, 93d Cong., Ist

Sess. 36 (1973), reprinted in 1 Legislative History 587,

622.

On August 21, 1973, the Senate Finance Committee re-

ported on S. 1179 as an alternative to S. 4. See S. 1179,

93d Cong., 1st Sess. (1973), reprinted in i Legislative

History 780. This bill contained a provision for civil ac-

tions for breach of fiduciary duty. 1 Legislative History,

at 950. The bill also authorized the Secretary of Labor

to “hear and decide” disputes between participants or

beneficiaries and plan administrators with respect to pre-

sent and future benefits under the plans. 7d. at 952. As

discussed supra at 22-23, however, this bill provided for

graduated vesting and contained neither a preemption

provision nor a non-interference provision.

On September 17, 1973, Senators Nelson, Long, Ben-

nett, and Bentsen introduced Amendment 496 as a com-

promise between S. 4 and S. 1179 and as a substitute for

5. 4. See Amendment No. 496, 93d Cong., 1st Sess.

(1973), reprinted in 1 Legislative History 1271. The

civil action provisions of this substitute bill—Section 693

and 694—were identical in all relevant respects to Sec-

tions 603 and 604 of S. 4 as originally reported. 1 Legis-

lative History, at 1490-1492. Similarly, the preemption

provision of the substitute bill—Section 699(a)—was

identical to Section 609 of the bill as originally reported.

Id, at 1493-1494. Finally, Section 699A. which addressed

interference with employee rights, was substantially the

same as Section 619 of the bill as originally reported (eXx-

cept that it added a prohib‘tion against retaliation for

— in any proceeding relating to the Act). Jd. at

Jb.

On September 19, 1973, the Senate took up considera-

tion of this substitute bill. Senator Hartke applauded

Section 610 of S. 4 as originally reported on the ground

(119 Cong. Ree. 30374-75 (1973), reprinted in 2 Legisla-

tive History, at 1774-1775) that “[n]o vesting formula

will produce real employee protection so long as employers

are free to fire employees to defeat pension eligibility.”

He argued, however, that these claims should be heard

by “an administrative tribunal with some expertise

in the subject,” and thus offered an amendment that

would have authorized and directed the Secretary of

Labor to hear and decide such disputes. See 119 Cong.

Rec. 30400, reprinted in 2 Legislative History, at 1835-

1836. Senator Williams, one of the two principal sponsors

of the bill, agreed (id. at 1775-1776) that a non-

interference provision was essential and pointed out (id.)

that such a provision had been included in the bill. He

thus concluded (id.) that “|t]he rights of the workers are

fully protected under this bill”; and he objected (id. at

1776, 18837) that the proposed administrative tribunal

amendment would create an expensive new layer of “‘bu-

renucracy” and might lead to the “defeat [of] the present

system of private pension plans that are on a voluntary

basis.”

The Senate agreed with Senator Williams, rejected

Senator Hartke’s proposed amendment, and, after other

amendments and modifications not relevant here, passed

the substitute bill (renumbered as H.R. 4200). See 119

Conz. Rec. 30428, reprinted in 2 Legislative History, at

1881-1882. As passed, the bill included a non-interference

provision among its “Enforcement” provisions; authorized

that provision to be enforced in either federal or state

court: and, in contrast to the House bill, preempted state

laws on all subjects addressed in ERISA.

° A conference committee convened and agreed to re-

tain the provisions authorizing civil actions by partici-

pants and beneficiaries, but decided to limit state court

jurisdiction to actions involving claims for benefits and to

confer exclusive jurisdiction on the federal courts over all

other ERISA actions. See H.R. Conf. Rep. No. 1280, 93d

Cong., 2d Sess. 75-77 (1974), reprinted in 3 Legislative

History 4277, 4350-4352. The conference committee also

agreed to retain in the bill's “Enforcement” provisions

both a prohibition against interference with attainment

of an employee’s benefits and a requirement that the stat-

ute’s civil action provisions be used in enforcing that pro-

hibition. See 3 Legislative History, at 4350, 4350. Fi-

nally, the conference committee agreed to omit any refer-

ence to preemption of particular areas of regulation and

instead to provide that state laws are preempted to the

extent that they “relate to any employee benefit plan”; and

the conference committee did so in the face of objections

by the Avministration that the preemption provisions of

the House and Senate bills were “extremely vague” and

“409 broad,” respectively. 3 Legislative History, at 4357;

Administration Recommendations to the House and Sen-

ate Conferees on H.R. 2 to Provide for Pension Reform

(April 1974), reprinted in 3 Legislative History 5047,

5145-5146.

4. In the ensuing floor debate, key members of Con-

gress made clear the effect of the conference committee’s

actions. In the House, Representative Dent stated:

Finally, I wish to make note of what is to many

the crowning achievement of this legislation, the res-

ervation to Federai authority the sole power to reg-

ulate the field of employee benefit plans. With the

preemption of the field, we round out the protection

afforded participants by eliminating the threat of

conflicting and inconsistent State and local regula-

tion....

The conferees, with the narrow exceptions specifi-

cally enumerated, applied this principle in its broad-

est sense to foreclose any non-Federal regulation of

employee benefit plans. Thus, the provisions of sec-

tion 514 would reach any rule, regulation, practice

or decision of any State, subdivision thereof or any

agency or instrumentality thereof—including any

professional society or association operating under

code of law—which would affect any employee bene-

fit plan described in section 4(a) and not exempt

under section 4(b).

120 Cong. Rec. 29197 (1974), reprinted in 3 Legislative

History, at 4670-4671.

Similarly, in the Senate, Senator Williams, after de- -

scribing the various civil actions available to participants

or beneficiaries under Section 502, stated (120 Cong. Ree.

29933 (1974), reprinted in 3 Legislative History, at 4745-

4746):

A further protection for employees is the prohibi-

tion against discharge, or other discriminatory con-

duct toward participants and beneficiaries which is

designed to interfere with attainment of vested bene-

fits or other rights under the bill, or to discourage

the exercise of any rights afforded by the legisla-

tion....

It should be stressed that with the narrow excep-

tions specified in the bill, the substantive and enforce-

ment provisions of the conference substitute are in-

tended to preempt the field for Federal regulations,

thus eliminating the threat of conflicting or incon-

sistent State and local regulation of employee benefit

plans. This principle is intended to apply in its

broadest sense to all actions of State or local gov-

ernments, or any instrumentality thereof, which have

the force or effect of law....

Finally, Senator Javits remarked (120 Cong. Ree.

29935 (1974), reprinted in 3 Legislative History, at

4751) that:

The conference report represents a series of fun-

damental guarantees made to every American worker

—-guarantees which will secure for millions of Amer-

icans the expectation of a decent retirement income

in combination with social security. These guaran-

tees are nothing less than a pension “bill of rights”

to which every worker—regardless of his occupation,

salary or status—is entitled.

While the new law does not require employers to

install a private pension plan, it would for the first

time provide the following 14 basic rights to those

working for an employer with a private pension

plan.

He listed (id. at 4751-4753) under separate headings

the basic minimum standards of ERISA with regard to

participation, vesting, accrual, and so forth; and the four-

teenth right listed (id. at 4753) was “Protection Of Pen-

sion Rights Against Employer Or Union Interference”:

Every employee is to have the right, enforceable

by the Secretary of Labor, to be free from interfer-

ence with his pension benefits. This means that he

cannot be discharged, fined, suspended, expelled or

otherwise interferred with in order to prevent him

from receiving pension benefits or attaining eligibil-

ity for pension benefits. There are stiff criminal

penalties if this type of interference takes the form

of force, fraud or violence or threats of this nature.

These 14 guarantees to American workers are at

the heart of pension reform and provide much-needed

and long-denied protections.

Senator Javits then concluded (120 Cong. Rec. 29942

(1974), reprinted in 3 Legislative History, at 4770-4771)

that:

Both House and Senate bills provided for preemp-

tion of State law, but—with one major exception ap-

pearing in the House bill—defined the perimeters of

preemption in relation to the areas regulated by the

bill. Such a formulation raised the possibility of end-

less litigation over the validity of State action that

might impinge on Federal regulation, as well as open-

ing the door to multiple and potentially conflicting

State laws hastily contrived to deal with some par-

ticular aspect of private welfare or pension benefit

plans not clearly connected to the Federal regulatory

scheme.

Although the desirability of further regulation-—

at either the State or Federal level—undoubtedly

warrants further attention, on balance, the emerg-

ence of a comprehensive and pervasive Federal in-

terest and the interests of uniformity with respect

to interstate plans required—but for certain excep-

tions—the displacement of State action in the field

of private employee benefit programs.

5. This iegislative history confirms that, in enacting

Section 514, Congress understood that ERISA would pre-

empt, among other things, any state law that, like Section

510 of ERISA, seeks indirectly to protect employee bene-

fit rights by prohibiting employment decisions that might

otherwise purposefully defeat employee benefit rights un-

der ERISA-covered plans. As this Court has noted,

“'tihe bill that became ERISA originally contained a

limited pre-emption clause, applicable only to state laws

relating to the specific subjects covered by ERISA.”

Shaw v. Delia Air Lines, Inc., 463 U.S. at 98. As the

Court has also noted, however, “[t]he Conference Com-

mittee rejected these provisions in favor of the present

language, and indicated that the section’s pre-emptive

scope was as broad as its language.” Jd. at 98. There

is no basis in the legislative history for suggesting that,

in so expanding the scope of the preemption clause, the

conference committee intended to allow state regulation

of specific subjects covered by ERISA—such as Section

510’s coverage of actions that purposefully “interfere”

with attainment of benefits under a plan. On the con-

trary, the legislative history outlined above proves con-

clusively that Section 510 was viewed as a critical com-

ponent of ERISA’s minimum standards for plans, and

indeed, was described as one of the “14 basic rights” con-

ferred by ERISA; that Congress deliberately designed

Sections 502, 510 and 514 to form an interrelated system

for safeguarding employee rights under plans; and that

Section 514’s “relate to” language was understood to

encompass, among other things, all subject matters reg-

ulated by the bill’s “substantive and enforcement provi-

sions’’-—such as the subject matters regulated by Sections

510 and 502 of ERISA.

D. Allowing State-Law Based Actions For Alleged Inter-

ference With Attainment Of Benefits Under ERISA-

Covered Plans Would Impermissibly Burden The Main-

tenance Of Such Plans

The preemption of state laws that, like Section 510,

seek indirectly to protect employee benefit rights by pro-

hibiting employment decisions made for the purpose of

defeating employee benefit rights is consistent with, and

indeed mandated by, the purposes of Section 514 of

ERISA. As the legislative history makes clear, Congress

enacted that provision, and thereby preempted the field

of employee benefit plan regulation, in order to save

plans and plan sponsors from the administrative and fi-

nancial burdens produced by multiple and _ potentially

conflicting regulations. See Shaw v. Delta Air Lines,

Inc., 463 U.S. at 105 & n.25; see also Fort Halifax Pack-

ing Co. v. Coyne, 482 U.S. 1, 9-10 (1987). Allowing

state law-based actions for alleged interference with at-

tainment of benefits under ERISA-covered plans, how-

ever, would subject plans and plan sponsors to the pre-

cise burdens from which Congress sought to spare them.

On a procedure level, allowing such state-law based ac-

tions would potentially subject plan sponsors to multiple

jurisdictional and procedural rules for similar kinds of

interference claims. Whereas ERISA mandates that Sec-

tion 510 actions be subject to the exclusive jurisdic-

tion of the federal courts, state law-based actions of

this type would be subject to no such limitation and could

be filed in state courts; indeed, using state agencies, the

states could establish the very administrative machinery

for resolution of such claims that Congress rejected in

ERISA as unduly burdensome. In addition, whereas

ERISA requires that the Secretaries of Labor and Treas-

ury be formally notified of Section 510 actions and al-

lowed to intervene at their option, no such requirement

exists for claims that may be filed under state law.

Finally, whereas ERISA apparently anticipates that Sec-

tion 510 claims will be tried by a court, see Pane v.

RCA Corp., 8€8 F.2d 631, 635-637 (8d Cir. 1989),

similar if not identical state law-based claims may be

subject to trial by jury. See K Mart Corp. v. Ponsock,

732 P.2d 1364, 1372-1373 (Nev. 1987).

On a substantive level, allowing state law-based actions

of this type would mean that different substantive stand-

ards could potentially be applicable to the same employer

conduct. For examplé; whereas an employer's decision is

unlawful under Section 510 only if taken “for the pur-

pose of interfering with the attainment of any right to

which such participant may become entitled under the

plan,” the court below ruled (Pet. App. 5a) that the

employer’s decision is unlawful if “the principal reason”

for it is a “desire to avoid” paying benefits; and while

it is unclear what the court’s formulation wil] ultimately

come to mean, it appears, as Justice Couk noted in dissent

below (Pet. App. 10a), that the Texas standard allows

an individual to avoid summary judgment on the basis of

evidence that plainly would not be sufficient to state a

triable claim under Section 510 of ERISA. Moreover,

under the decision below (Pet. App. 5a), an employer’s

desire to avoid contributing to a pension fund is ap-

parently sufficient to state a violation of Texas law (even

if the employer’s purpose was not to interfere with the

attainment of benefits), thus raising the prospect that a

reduction-in-force for valid economic reasons would vio-

late Texas comon law if the savings were principally in

pension funding costs; this is a gross variance from

the substantive requirements of ERISA Section 510, and

is a clear invasion of the separate funding requirements

of ERISA. Other states could alter the substantive

standards applicable to Section 510-type claims even

further—and in vastly different ways.*

* Indeed, to appreciate the vista of mischievous state action that

is possible here, one need only imagine decisions in which state

courts decide to accept claims that federal courts have rejected

under Section £10. See, e.g., Hughes v. General Motors Corp., 852

F.2d 568, 1988 U.S. App. LEXIS 9637 (6th Cir. 1988), cert. denied,

109 S.Ct. 1535 (1989) (no violation of Section 510 where employer

offered early retirement benefits to other employees shortly after

plaintiffs voluntarily retired); Varhola v. Doe, 820 F.2d 809 (6th

Cir. 1987) (no violation of Section 510 to provide shutdown pensions

to employees who lost their jobs due to a sale but not to those who

transferred to the employ of the buyer); West v. Greyhound Corp.,

813 F.2d 951 (9th Cir. 1987) (no violation of Section 510 where

buyer refused to hire employees of seller unless they agreed to less

generous employee benefits) ; Bass v. Retirement Plan of Conoco, Inc.,

676 F. Supp. 735 (W.D. La. 1988) (no violation of Section 510

where seller offered improved pension benefits to employees who re-

mained after the sale but not to those who transferred to the

employ of the buyer and had only deferred vested interests in seller’s

plan); Nemeth v. Clark Equipment Co., 677 F. Supp. 899 (W.D.

Mich. 1987) (no violation of Section 510 where pension cost was

not a “but for’ cause of employer's decision to close one plant

Finally, on a remedial level, allowing state law-based

auctions of this type would expose plan sponsors to a va-

riety of sanctions that ERISA apparently does not

authorize. ERISA limits the remedies available in Sec-

tion 510 cases to equitable relief such as reinstatement,

back pay, front pay, and damages equal to lost bene-

fits. See Kross v. Western Electric Co., 701 F.2d 1238,

1244 n.7 (7th Cir. 1983); Folz v. Marriott Corp., 594

F. Supp. 1007, 1015-1020 (W.D. Mo. 1984). It appar-

ently does not allow for punitive and emotional distress

damages awards. See Varhola v. Doe, 820 F.2d 809, 817-

818 (6th Cir. 1987). By contrast, similar if not iden-

tical state law-based claims could lead to awards for

emotional distress and punitive damages. See, e.g., K

Mart Corp. v. Ponsock, 732 P.2d at 1373.

State law-based causes-of-action of these types—im-

posing potentially different substantive standards of con-

duet, with different procedural and proof requirements,

as well as possible jury trials and punitive damages—

would, contrary to the purposes of Section 514, have

serious consequences for the participants of employee

benefit plans. Plan sponsors seeking to avoid the lawsuits

and concomitant administrative and financial burdens

fowing from such a myriad of laws could simply decline

to establish plans, or to eliminate any plans that they cur-

rently have in existence. Alternatively, they could delay

terminating employees until after any benefit rights have

vested; but, in doing so, they would be subjecting the

plans to unanticipated financial demands and thus ex-

posing other plan participants and beneficiaries (conceiv-

ably in all 50 states) to increased risks of non-payment.

Finally, the plan sponsors could change the vesting or

rather than another); Jnternational Union UAW Local 91 v. Park-

Ohio Industries, Inc., 661 F. Supp. 1281 (N.D. Ohio 1987) (no viola-

tion of Section 510 where award of benefits distinguished between

those who retired before or after a specific date).

qualification rules of the plans so as to decrease the like-

lihood of interference-type claims being asserted—either

by increasing the years-of-service required to qualify for

benefits (and thereby reducing the likelihood that a termi-

nated employee would be close to qualifying for benefits),

or by decreasing the years-of-service needed to qualify

for such benefits (and thereby increasing the likelihood

that a terminatec employee would already have qualified

for the benefits). In doing so, however, the plan spon-

sors would effectively be denying some employees benefits

that they otherwise would have been eligible to receive,

ov be inereasing the risk of non-payment to other plan

participsnts ‘or requiring a reduction in the per-capita

level of benefits provided to all participants). In short,

allowing such laws to be imposed could lead plan sponsors

‘9 take actions seriously detrimental to the interests of

come or all plan participants.”

Of course. as Congress recognized in enacting ERISA,

the minimum standards of the statute, including Section

510, impose burdens of a similar kind and may lead plan

sponsors te take comparable actions in response. See, ¢.9.,

S. Rep. No. 383, 93d Cong., 1st Sess. 19 (1975), reprinted

in 1 Legislative History 1063, 1087. But, as this Court

recognized in Pilot Life, in enacting these minimum

standards ‘including Section 510), Congress carefully

® An example readily illustrates this point. An employer in an

industry where there is rapid turnover of employees within the first

two years of employment, but relatively little thereafter, might wish

to design its pension plan with 2-year cliff vesting. If this em-

ployer were located in Texas, however, and every termination

within the first two vears of employment raised the spectre of a

state court action, tried before a jury, with a claim for punitive

damages, then the employer likely would resort either to 5-year

cliff vesting, so as to minimize the credibility of claims of employees

who were terminated within the first two years, or to full and im-

mediate vesting, so as to avoid the risk altogether. Alternatively,

the employer might erect an artificial barrier to termination in

Texas where the employee is close to vesting under the pension

plan.

fashioned the substantive rights, the procedures, and the

available remedies so that the burdens thereby created

would be tolerable when }alanced against the protections

afforded to employees. See 481 U.S. at 54. See also Mas-

sachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 184,

147 (1985). Congress carefully avoided creating rights,

procedures, or remedies that would “force employers to

end their plans or perhaps discourage other employers

from beginning them.” 120 Cong. Ree. 29209 (1974),

reprinted in 3 Legislative History, at 4703-4704 (remarks

of Rep. Collier). See also 120 Cong. Rec. 29951 (1974),

reprinted in 3 Legislative History, at 4797 ‘remarks of

Sen. Bentsen) (“The legislation achieves a fair balance

between the need to provide adequate protection to exist-

ing pension plan participants and the important need to

expand pension coverage. The legislation does this by set-

ting minimum standards—not ideal standards—which

would not impose such severe costs on employers so as

to discourage the creation of new plans or actually force

the termination of some existing plans.’’). The same can-

not be said for the Texas law or whatever patchwork

quilt of laws, procedures, and remedies other states might

choose to impose. And that is precisely why Section 514

was enacted and must be applied to preempt laws of this

type.’”

E. The Arguments Advanced Against Preemption Are

Without Merit

In his brief-in-opposition to the petition for certiorari,

respondent strives mightily to avoid the inevitable con-

clusion that flows from the language, legislative history,

and purpose of Section 514. But the arguments that he

musters against preemption are without merit.

10 As this Court has recognized, ERISA preemption was designed

to free employers from the need to either reduce multistate plans

to the lowest common denominator or establish separate plans for

each state. See Alessi v. Raybestos-Manhattan, Inc., 451 U.S. at 514,

524-525: Shaw v. Delta Air Lines, Inc., 463 U.S. at 105; Fort

Halifax Packing Co. v. Coyne, 482 U.S. at 10-13.

1. Mimicking the Supreme Court of Texas (Pet. App.

5a n.d), respondent first argues (Opp. Br. 6-7) that he

is not seeking lost pension benefits and that “this fact

alone is sufficient to defeat preemption.” Of course, this

argument conveniently ignores respondent’s prayer in the

trial court that, if successful, he be awarded “loss of em-

ployee benefits and profit sharing and retirement pro-

grams ....” J.A. 6, 15, 68. More importantly, however,

this argument ignores the Court’s conclusion in Pilot

Life that ERISA-preemption extends beyond claims for

benefits—.pecifically, that ERISA-preemption extends, at

« minimum, to any claim that is redressable under Sec-

tion 502 of ERISA. See 481 U.S. at 52-57 (preemption of

state common law action seeking punitive damages for

improper processing of a disability benefits claim). A

claim for alleged interference with attainment of benefits

fits squarely into the category of claims so redressable.

2. Respondent alternatively argues (Opp. Br. 7-18)

that preemption is inappropriate because the Texas law

regulates only the employment relationship between him-

self and petitioner, and neither requires the payment of

benefits nor regulates the administrative activities of

petitioner’s pension plan. This argument is unfounded.

A state law may “relate to” an employee benefit plan,

and thus be preempted by ERISA, even though it in terms

regulates only the employment relationship ‘and not the

terms or the administrative activities of the benefit plan).

Just like Section 510 of ERISA, a state law may seek

indirectly to protect employee benefit rights by directly

regulating the employment relationship—i.e., by prohib-

iting employment decisions that might otherwise defeat

employee benefit rights under a plan. Where the state

law does so by “reference to’”’ an ERISA-covered benefit

plan, the law “relates to” an ERISA-covered plan and is

preempted."!

11 This case thus does not present the problem posed in Fort

Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987). where the Court

Contrary to respondent’s argument, a law may “relate

to” an ERISA-covered plan and be preempted even though

it directly imposes obligations on only the plan sponsor

(2.e., the employer). Many of ERISA’s obligations are

imposed only on the plan sponsor. See, e.g., 29 U.S.C.

$ 1021(dj(1) (requiring employer to notify plan partici-

pants and beneficiaries if it fails to nake a payment re-

quired to meet minimum funding standards); 29 U.S.C.

$1059(a) (requiring employer to maintain records with

respect to employees and to furnish information to the

plan administrator) ; 29 U.S.C. § 1082/¢c) (requiring em-

ployer to make minimum contributions to the plan); 29

U.S.C. § 1082(f) (imposing a lien for unpaid contribu-

tions on all property and rights to property of the em-

ployer); 29 U.S.C. $ 1085b (requiring employer to post

security for any increase in benefits when a plan is seri-

ously underfunded) ; 29 U.S.C. § 1166(2) (requiring em-

ployer to notify plan administrator of events that qualify

an employee, spouse, or dependent for continuation of

health coverage); 29 U.S.C. $ 1363 (imposing liability

on the employer when an insufficiently funded plan is

terminated) ; 29 U.S.C. § 1381 (imposing withdrawal lia-

bility on an employer that incurs a complete or partial

withdrawal from a multiemployer plan). These disclosure,

funding, and other obligations quite plainly ‘relate to”

ERISA-covered plans, and the states clearly cannot reg-

ulate the employer-activities to which those obligations

are directly addressed. The same conclusion should be

true for Section 510 and the employer-activities to which

it is directly addressed.

A law simply need not directly require the payment of

benefits or regulate the administrative activities of the

plan in order to “relate to” an employee benefit plan.

held that a state law requiring plant closure severance payments

neither related to an existing employee benefit plan nor called an

ERISA-covered plan into being. The Texas law in this case, by its

own terms, relates to an existing ERISA-covered pension plan.

As this Court has repeatedly stated, “even indirect state

action ... may encroach upon the area of exclusive fed-

eral concern.” Alessi v. Raybestos-Manhattan, Inc., 451

U.S. at 525. Thus, the disclosure and funding rules cited

above “relate to” employee benefit plans even though they

do not directly require the payment of benefits or regu-

late the administrative activities of the plan. Similarly,

the state statute at issue in Metropolitan Life Ins. Co. v.

Massachusetts, which required insurance carriers—i.e.,

third-parties—io include certain provisions in group in-

surance policies that they sold, “related to” ERISA-

covered plans even though it did not directly require the

payment of benefits or regulate the administration of

claims. 471 U.S. at 739. Likewise, the statute held pre-

empted in Jlackcy v. Lanier Collections Agency & Serv-

ice, lne., which barred garnishment of benefits from

(RISA-covered plans, “related to’ such plans even

though it did not require the payment of any benefit or

actually impose an administrative requirement on such

plans, 486 U.S. 825, 837-838 (1988). The Texas law at

issue is similarly not exempt from preemption simply be-

cause it regulates the field of employee benefit plans in

an indirect manner.

Indeed, the overwhelming number of federal and state

appellate courts to address the specific question pre-

sente] hy this case have drawn this conclusion. With the

exception of the court below, those courts have uniformly

found that state non-interference laws like that of the

State of Texas “relate to” ERISA-covered plans and are

preempted. Sce Fitzgerald v. Codex Corp., 882 F.2d 586,

588 (1st Cir, 1989); Pane v. RCA Corp., 868 F.2d 631,

659 (3d Cir, 19891; Sorosky v. Burroughs Corp., 826

F.2d 794, 799-800 (9th Cir. 1987); Dependahl v. Falstaff

Brewing Corp., 653 F.2d 1208, 1215-1216 (8th Cir.),

cert, denied, 454 US. 968 and 454 U.S. 1084 (1981):

Conaway v. Kasiern Associated Coal Corp., 358 S.E.2d

423, 427 (W. Va. 1986): Coontz v. Gordon Jewelry Cor-

poration, 439 N.W.2d 223, 226 (Iowa App. 1989). This

judicial consensus is deserving of the Court’s endorse-

ment here.'”

CONCLUSION

The judgment of the court below should be reversed

and remanded.

Respectfully subnitted,

GLEN D. NAGER

(Counsel of Record)

JONES, DAY, REAVIS & POGUE

1450 G Street, N.W.

Washington, D.C. 20005-2088

(202) 879-3939

Of Counsel: Houuts T. HuRD

WILLIAM T. LITTLE JONES, DAY, REAV'S & POGUE

GILPIN, PAXSON & BERSCH One Mellon Bank Center

2300 First Interstate Tower 500 Grant Street .

1300 Post Oak Boulevard Pittsburgh, Pennsylvania 15219

Houston, Texas 77056-3010 (412) 391-3939

(713) 623-8800 Counsel for Petitioner

JUNE 1990

'2 This judicial consensus stands in harmony with the cases cited

by respondent in his brief-in-opposition (at 17-18). In those cases,

the termination of employment was alleged to have violated state

law for reasons entirely unrelated to any alleged intent to interfere

with the attainment of rights under an employee benefit plan; loss

of benefits was nothing more than a consequence of the termination

and thus did not “relate to” the underlying plan. Those “ases do not

bear on cases such as this one—where the termination is alleged to

violate a state law that expressly references and depends on the

existence of an employee benefit plan, was created for the purpose

and with the effect of protecting and enforcing an employee's rights

under an employee benefit plan, and creates rights and remedies that

encroach upon the comprehensive and exclusive scheme for enforce-

ment under ERISA Sections 510 and 502.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.