Respondents Brief — Ingersoll-Rand Co. v. McClendon

Z BEST AVAILABLE COPY.

I

QUESTIONS PRESENTED

(1) Whether the Employee Retirement Income Security

Act of 1974 (“ERISA”) pre-empts a state’s judicially

created cause of action, grounded on public policy, for

recovery of damages for wrongful discharge of a non-

governmental employee, which discharge was motivated

by the employer’s intent to avoid future pension plan

obligations, when none of the damages claimed or relief

sought includes any pension plan benefits or rights under

the plan itself.

(2) Whether Petitioner has waived any right to raise

or rely on any such alleged “ERISA” pre-emption by

failing to properly and timely raise such issue below.

Il

PARTIES TO THE PROCEEDINGS

The parties to the proceedings below were: Perry

McClendon and the Ingersoll-Rand Company. Mr. Mc-

Clendon has no interest in any corporate entity or

partnership.

Ill

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED .............cccesescesens I

PARTIES TO THE PROCEEDINGS .................. I

I MED os ow cos ese esses seeevers ve III

Eg 6 | ee IV

ee Ss Dis ws cece sec eeceeeeeses 1

STATUTORY PROVISIONS INVOLVED .............. 2

ey gt 7

SUMMARY OF ARGUMENT ............-scceceees: 8

CLs Sek cbeséaccscevecvnces 11

I. INDIVIDUAL STATES, AND NOT FEDERAL LAW,

HAVE TRADITIONALLY REGULATED AND GOV-

ERNED THE LAW REGARDING TERMINATION

OF EMPLOYMENT RELATIONSHIPS ........... 11

Il. BOTH ERISA AND ERISA’S PRE-EMPTION PRO-

VISION DO NOT APPLY TO THE CASE BEFORE

eee esce yee enussccsesccces 14

Ill. PETITIONER HAS NOT MET AND CANNOT

MEET ANY OF THE PRE-EMPTION TESTS AR-

Beeunneew BY THE COURT ................. 18

A. ERISA’s Pre-emption Provision Specifically Excludes

The State Law Before This Court .............. 19

B. Congress, Through ERISA, Did Not Pre-empt The

“Field” With Respect To All State Laws That In-

ee 24

C. The Texas Supreme Court’s Decision Creates Abso-

lutely No Conflict With ERISA ................ 26

IV. THE TEXAS LAW MAKES NO ATTEMPTS TO

REGULATE ERISA PENSION PLANS ........... 27

V. ALTHOUGH ERISA GENERALLY AND ITS PRE-

EMPTION PROVISIONS SPECIFICALLY DO NOT

APPLY TO THIS CASE, PETITIONER HAS

WAIVED ANY RIGHT TO ASSERT ERISA AS A

DEFENSE TO RESPONDENT’S TEXAS CAUSES

I 30

RIED, ns ce cece sccecesecesccccccccccces 31

IV

TABLE OF AUTHORITIES

CASES

Aetna Life Insurance Co. v. Borges, 869 F.2d 142 (2nd Cir.

BOOP 6000606 049,024.02000079s6008eR asad: ann wan aliel

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 (1981)

Allstate Insurance Co. v. The 65 Security Plan, 879 F.2d

Oe COU Fah. BOD wea 5.0 00505540446s eek xk eee ee ees

American Telephone & Telegraph Co. v. Merry, 529 F.2d

Sa. SON Ee, WONOE 6-6:095085- 04455 enededandieawanees

East Line and R.R.R. Co. v. Scott, 72 Tex. 70, 10 S.W. 99

COE 45:0 4:650-45s dees 645005050550 e00db0eeReRenees

English v. General Electric Co., 110 S.Ct. 2270 (1990) ...

Fairmont Creamery Co. v. Ewing, 43 Ohio App. 191, 182

ee WE COOUED in hin 8 saeencecesnasdieaelesdiies.

Florida Lime and Acocado Growers, Inc. v. Pall, 373 US.

SO BOE, 5 6-566s.00040608eshseeeesisds tence:

Ford Motor Co. v. Transport Indemnity Cc., 795 F.2d 538

Se ee: SOND. 660-060 00'00bssnbes tee ocala eee

Fort Halijax Packing Co. v. Coyne, 482 U.S. 1 (1987)

$4$6:665400 050035540800 NRd Uke 10, 11, 16, 17, 21, 24,

Fortune v. National Cash Register Co., 373 Mass. 96, 364

i ei | re er ben en

Franchise Tax Board ». Construction Laborers Vacation

Wome, GBS OE. 1 CIGGB. ook ods oc con ec we nce vccsne.

Greenblatt v. Budd Co., 666 F. Supp. 735 (E.D. Pa. 1987)

Hovey v. Lutheran Medical Center, 516 F. Supp. 554 (E.D.

Es ND a ucudusthedadeeresenehcdauee eee

Metropolitan Life Ins. Co. v. Taylor, 481 US. 58 (1987)

Monge v. Beebe Rubber Co., 114 N.H. 130, 316 A.2d 549

Rice v. Santa Fe Elevator Corp., 331 U.S. 218 (1946) ...

Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d 733 (Tex.

1985)

2S RO ERA ASAP CORSO S Sh ee or ee oe eS eee 8 oe oO

Page

21

20

30

25

12

18, 24, 26

12

30

25, 26, 28

12

18

27

12

12

21

14

30

14, 20, 21

21

Vv

CASES Page

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

pe LEED CERT TE PO PE TO OE Te ne 12

Scott v. Gulf Oil Corp., 754 F.2d 1499 (9th Cir. 1985) ... 22

Shaw v. Delta Air Lines, Inc., 453 U.S. 85 (1983) ....... 20, 25, 26

Schlenz v. United Airlines, Inc., 678 F. Supp. 230 (N.D.

a GUE Ca eae oh anne ues eee ee eee 23

U.S. v. Locke, 471 U.S. 84 (1985) .........cccecccccces 19

RULES

Federal Rule of Civil Procedure 8(c) ...............00. 6, 30

Texas Rule of Civil Procedure 94 ................0.005. 5,30

OTHER AUTHORITIES

120 Cong. Rec. 29932 (1974) .......cccecececcecuceecs 11

STATUTES

ERISA § 502, 29 U.S.C. $1132 ..... or ree 3

Mees 6 S00, 70 WC, £00 ico dsc vivaccicnc 4

ERISA § $14, 290 US.C. $1246 0... ccc ccccccccocccs 5

ERISA § 514(a), 29 U.S.C. $1144(a) 2... eee eee eee. 10, 19

ERISA § 514(c)(2), 29 U.S.C. § 1144(c)(2) oo... eee ee. 14, 15,19

dh ke Br ee ee eae ee 2

ok RG Pee ee ts ameter pene 16

No. 89-1298

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

INGERSOLL-RAND COMPANY,

Petitioner,

V.

PERRY McCLENDON,

Respondent.

On Writ of Certiorari to the Supreme Court of Texas

BRIEF FOR THE RESPONDENT

Perry McClendon respectfully submits this brief on the

merits and prays that this Honorable Court affirm the

Texas Supreme Court’s judgment.

OPINIONS BELOW

The opinion of the Supreme Court of Texas is reported

at 779 §.W.2d 69 (Tex. 1989). The opinion of the 14th

Court of Appeals of Texas is reported at 757 S.W.2d 816.

The opinion of the 133rd Judicial District Court of Harris

County, Texas is unreported.

2

STATUTORY PROVISIONS INVOLVED

Section 1001 of ERISA provides in pertinent part as

follows:

(a) Benefit plans as affecting interstate commerce

and the Federal taxing power. The Congress finds

that the growth in size, scope, and numbers of em-

ployee benefit plans in recent years has been rapid

and substantial; that the operational scope and eco-

nomic impact of such plans is increasingly interstate;

that the continued well-being and security of millions

of employees and their dependents are directly af-

fected by these plans; that they are affected with a

national public interest; that they have become an

important factor affecting the stability of employment

and the successful development of industrial relations:

that they have become an important factor in com-

merce because of the interstate character of their

activities, and of the activities of their participants,

and the employers, employee organizations, and other

entities by which they are established or maintained;

that a large volume of the activities of such plans is

carried on by means of the mails and instrumentali-

ties of interstate commerce; that owing to the lack

of employee information and adequate safeguards

concerning their operation, it is desirable in the in-

terests of employees and their beneficiaries, and to

provide for the general welfare and the free flow of

commerce, that disclosure be made and safeguards

be provided with respect to the establishment, opera-

tion, and administration of such plans; that they

substantially affect the revenues of the United States

because they are afforded preferential Federal tax

treatment; that despite the enormous growth in such

plans many employees with long years of employ-

ment are losing anticipated retirement benefits owing

to the lack of vesting provisions in such plans; that

Owing to the inadequacy of current minimum stand-

ards, the soundness and stability of plans with respect

3

to adequate funds to pay promised benefits may be

endangered; that owing to the termination of plans

before requisite funds have been accumulated, em-

ployees and their beneficiaries have been deprived

of anticipated benefits; and that it is therefore desir-

able in the interests of employees and their bene-

ficiaries, for the protection of the revenue of the

United States, and to provide for the free flow of

commerce, that minimum standards be provided as-

suring the equitable character of such plans and their

financial soundness.

(b) Protection of interest commerce and _ benefici-

aries by requiring disclosure and reporting, setting

standards of conduct, etc., for fiduciaries. It is here-

by declared to be the policy of this Act to protect

interstate commerce and the interests of participants

in employee benefit plans and their beneficiaries, by

requiring the disclosure and reporting to participants

and beneficiaries of financial and other information

with respect thereto, by establishing standards of

conduct, responsibility, and obligation for fiduciaries

of employee benefit plans, and by providing for ap-

propriate remedies, sanctions, and ready access to

the Federal courts.

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

relevant part as follows:

(a) Persons empowered to bring a civil action

A civil action may be brought—

(1) by a participant or a beneficiary—

(A) for the relief provided for in subsection

(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 his rights to

future benefits under the terms of the plan;

4

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

ficiary or fiduciary for appropriate relief under

section 1109 of this title:

(3) by a participant. beneficiary, or fiduciary

(A) to enjoin any act or practice which violates

any provision of this subchapter or the terms of

the plan, er (B) to obtain other appropriate equi-

table relief (1) to redress such violations or (11) to

enforce any provisions of this subchapter or the

terms of the plan:

(4) by the Secretory. or by a participant, or bene-

ficiary for apprepriate relief in the case of a viola-

tion 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 (il) to enforce any provision of this

subchapter: or

(6) by the Secretary to collect any civil penalty

under subsection (1) of this section.

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 ttle, or the Weifare and Pension Plans Dis-

closure 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

5

iniormation 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 as follows:

(a) Supersedure; effective date

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

tion, the provisions of this subchapter and subchapter

If] 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 section 1003

(a) of this title and not exempt under section 1003

(b) of this title. This section shall take effect on

January 1, 1975.

* *« * &

(c) Definitions

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 Cclumbia 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-

strumentality of either, which purports to regulate,

directly or indirectly, the terms and conditions of

employee benefit plans covered by this subchapter.

Texas Rule of Civil Procedure 94 provides as follows:

Rule 94. Affirmative Defenses

In pleading to a preceding pleading. a party shall

set forth affirmatively accord and satisfaction. arbi-

6

tration and award, assumption of risk, contributory

negligence, disefareein bankruptcy, duress, estoppel,

failure of consideration, fraud, illegality, injury by

fellow servant, laches, license, payment, release, res

judicata, statute of frauds, statute of limitations,

waiver, and any other matter constituting an avoid-

ance or affirmative defense. Where the suit is on

an insurance contract which insures against certain

general hazards, but contains other provisions limit-

ing such general liability, the party suing on such

contract shall never be required to allege that the

loss was not due to a risk or cause coming within

any of the exceptions specified in the contract. nor

shall the insurer be allowed to raise such issue unless

it shall specifically allege that the loss was due to

a risk or Cause coming within a particular exception

to the general liability; provided that nothing herein

shall be construed to change the burden of proof

on such issue as it now exists.

Federal Rule of Civil Procedure 8(c) provides as

follows:

(c) Affirmative Defenses. In pleading to a pre-

ceding pleading, a party shall set forth affirmatively

accord and satisfaction, arbitration and award as-

sumption of risk, contributory negligence, discharge

in bankruptcy, duress, estoppel, failure of considera-

tion, fraud, illegality, injury by fellow servant. laches,

license, payment, release, res judicata, statute of

frauds, statute of limitations, waiver, and any other

matter constituting an avoidance or affirmative de-

fense. When a party has mistakenly designated a

defense as a counterclaim or a counterclaim as a

defense, the court on terms. if justice so requires,

Shall treat the pleading as if there had been a proper

designation.

7

STATEMENT OF THE CASE

This is a wrongful employment termination case which

presents no federal question. Respondent makes no claims

for pension benefits, and there are no issues with respect

to the administration or regulation of a pension plan.

Shortly after the litigation began, Petitioner. Ingersoll

Rand, vested Mc. MeCiendon’s pension. Since that time,

Respondent has pursued only his claims for damages

arising out of the rongtul termination of his employment.

Petitioner induced Mi McClendon to uproot his

family to move to a strange city In order to expand Inger-

soll Rand's sales territory. Once Mr. McClendon pioneered

a new territory and was about to earn substantial com-

missions, Ingersoll Rand fired him four months before

his ten year pension Vesting anniversary. Suit was then

filed in the 133rd Judicial District Court of Harris County.

Texas, alleging, among other things, a Texas state cause

of action for Wrongful employment termination and

breach of an implied covenant and/or duty of good faith

and fair dealing. Shortly after the suit was filed. Ingersoll

Rand informed Mr. McClendon that he was fully vested

in his pension benefits and. for the first time, agreed to

pay his pension benefits. Accordingly, Respondent seeks

no damages for pension benefits. and this suit raises no

issues with respect to the administration or regulation of

a pension plan. Rather, the suit seeks lost future wages,

mental anguish and punitive damages engendered by Peti-

tioner’s wrongful termination of Mr. McClendon's em-

ployment. Petitioner at no time in its pleadings in the

trial court raised any issue involving the Employer Retire-

ment Income Security Act of 1974 (“ERISA”) or the

possibility of pre-emption.

a a ee ee

EE eee

8

The trial court granted a motion for summary judg-

ment on grounds which had nothing to do with ERISA,

and that ruling was affirmed by the 14th Court of Appeals.

Pre-emption and ERISA were not raised at any stage by

Ingersoll Rand. The appellate court held that Mr. McClen-

don’s employment was an “at-will” employment which did

not fall within any of the specific exceptions that prohibited

employment termination in Texas. The appellate court

also refused to apply the doctrine of good faith and fair

dealing to the issue of employment termination.

The Texas Supreme Court granted writ on the issue

whether the doctrine of good faith and fair dealing

should apply to the employment setting. The Texas Su-

preme Court's decision. however. did not reach that issue.

Instead, the Court created an additional exception to the

Texas employment-at-will doctrine and held that a termi-

nated employee can recover damages in Texas if the

principal reason for the employment termination was the

employer's desire to avoid contributing to, or paying

benefits under, the employee's pension fund. Opp. Br. 1a.

The majority opinion by the Texas Supreme Court

specifically stated that the wrongful termination cause of

action Was not pre-empted by ERISA. Each state is en-

titled to develop its own laws with respect to wrongful

employment termination, and the Texas Supreme Court

has done so in this case.

SUMMARY OF ARGUMENT

Respondent has conceded that he has received and will

receive all of his pension rights and benefits. This is not

a case seeking any pension rights or benefits. Rather, this

case attempts to determine whether Petitioner’s motives

and reasons for terminating Respondent’s employment

9

were proper under Texas law. This is not a federal ques-

tion and has absolutely nothing to do with the Employ-

ment Retirement Income Security Act of 1974 (“ERISA”),

or the administration or regulation of a pension plan.

The Texas Supreme Court simply held that a plaintiff

can recover damages for employment termination prin-

cipally motivated by an attempt to avoid pension obliga-

tions.

Prior to this latest exception to the employment-at-will

doctrine, the Texas Supreme Court created an exception

whereby a plaintiff could recover damages if he or she were

fired for refusing to commit a crime. Sabine Pilot Service,

Inc. v. Hauck, 687 S.W.2d 733 (Tex. 1985 ). Under Sabine

Pilot v, Hauck, the fact finder must determine whether the

employment termination was motivated by such a refusal.

The crime can be a violation of a federal. state or local law:

the law itself is not the relevant issue. Rather, the issue

is Whether the employer's decision to terminate was moti-

vated by the refusal to commit the crime. The Texas

Supreme Court's newest exception to the “at-will” doc-

trine is analogous. The specific pension plan, its contents

Or its administration are not relevant issues. Rather, the

issue is whether the employer's decision to terminate was

motivated by the employer's attempt to avoid its pension

obligations. Consequently, ERISA and Ingersoll Rand's

pension plan are irrelevant to this case.

The pre-emption provision of ERISA was included in

that Act to standardize the administration and regulation

of pension plans so that employers would not be subject

to different rules and regulations when they operated

across state lines. The intent of this provision was to

forestall the administrative nightmares that would other-

wise follow and enable these plans to be managed in a

|

10

more efficient manner. This Court has stated that permit-

ting a federal law to pre-empt a state law is not favored

and will not be done unless Congress has unmistakably

ordained such a result to occur. Florida Lime and

Avocado Growers, Inc. v. Pall, 373 US. 132, 142

(1963). The present fact situation is not one to which

the ERISA pre-emption provision was intended to apply.

The plain meaning of Section 514(a), ERISA’s_ pre-

emption provision, applies only to a state law that “purports

to regulate, directly or indirectly, the terms and conditions

of employee benefit plans” covered by ERISA. (emphasis

added). The state law formulated by the Texas Supreme

Court is totally unrelated to the regulation of the terms and

conditions of pension funds. More importantly, the Texas

Supreme Court's exception to the employment at-will doc-

trine has nothing to do with ERISA-covered pension

plans. The statutory pre-emption language, therefore, is

inapplicable to this case.

In addition. this Court has confirmed that ERISA pre-

emption applies only to state laws that deal with the ad-

ministration or regulation of pension funds. In Fort

Halifax Packing Co. v. Coyne, 482 U.S. 1, 11 (1987), this

Court stated that the focus of ERISA is on the “adminis-

trative integrity” of pension plans and that “[ERISA] [ p]re-

emption ensures that the administrative practices of a

benefit plan will be governed by only a single set of

regulations.” (emphasis added). The Texas law before

the Court has absolutely nothing to do with the ad-

ministrative practices of any benefit plan. Rather, the

Texas law merely prohibits a Texas employer from term!-

nating one’s employment for the principal reason of avoid-

ing the payment of benefits under an employee benefit

plan. This law does not intrude on ERISA’s uniform

1]

administrative scheme for pension plans, and pre-emption

does not apply.

In addition to the specific reasons for the denial of

pre-emption, the general purpose of ERISA mandates that

this case remain a state cause of action. ERISA was

originally conceived to safeguard employees from “such

abuses as self-dealing imprudent investing, and misappro-

priation of plan funds.” Fort Halifax Packing Co. vy.

Coyne, 482 U.S. at 15, quoting 120 Cong. Rec. 29932

(1974). It is clear from the facts that this case has noth-

ing to do with the operation or administration of Peti-

Coyne, 482 U.S. at 15, quoting 120 Cong. Rec. 29932

tioner’s pension fund or with the types of laws intended

to be covered by the ERISA pre-emption clause. Ac-

cordingly, pre-emption is inappropriate.

ARGUMENT

I,

INDIVIDUAL STATES, AND NOT FEDERAL

LAW, HAVE TRADITIONALLY REGULATED

AND GOVERNED THE LAW REGARDING

TERMINATION OF EMPLOYMENT

RELATIONSHIPS

It is beyond question that the individual states of the

union have traditionally governed employer-employee rela-

tinoships and have sought to formulate laws governing

this relationship consistent with the public policy concerns

of each state. More specifically, the individual states have

traditionally and almost exclusively developed a set of

laws and rules detailing the conditions and circumstances

under which an employer could terminate a given employ-

i2

ment relationship with a specific employee. For example,

the employment at-will doctrine has been a part of Texas

law for over 100 years, and this doctrine, until recently,

has enabled employers to terminate employees employed

on an indefinite basis with or without cause for such

termination.’ East Line and R.R.R. Co. v. Scott, 72 Tex.

70, 10 S.W. 99 (1888). Recently, the Texas Supreme

Court has carved out specific exceptions to the employ-

ment at-will doctrine in Sabine Pilot Service, Inc. v.

Hauck and in this case.

In addition to Texas. other states have formulated their

own rules with respect to an employer's ability to termi-

nate one’s employment. For example, the states uniformly

recognize that an employer-employee may contractually

agree that an employment relationship may not be termi-

nated without good cause. See, e.g., Fairmont Creamery

Co. v. Ewing, 43 Ohio App. 191, 182 N.E. 883 (1932).

In addition, a number of states imply a covenant and/or

duty of good faith and fair dealing into all employment

contracts.” Finally, by way of example, New York, like

Texas, provides a state cause of action for New York

employees terminated solely because the employer sought

to deprive the employee of his or her pension benefits. See

e.g. Savodnic v. Korvettes, Inc., 488 F. Supp. 822 (E.D.

N.Y. 1980): Hovey v. Lutheran Medical Center, 516

. ve 554 (E.D. N.Y. 1981).

| Fede ral and state legislation has been enacted placing certain

limits upon an employer's ability to discharge an employee at-will,

but such legislation refers to very fact specific situations and does

not apply to the current case. See Texas Supreme Court's summary

of such laws at Opp. Br. 3a.

2. See. for example, Monge v. Becbe Rubber Ce., 114 NH. 130,

316 A2d 549 (N.H. 1974): Fortune v. National Cash Register Co.,

373 Mass. 96, 364 N.B.2d 1251 (1977); and A-JMart Corp. v.

Ponsock, 732 P.2d 1304, 1370 (Nev. 1987).

13

These examples demonstrate that the individual states

have traditionally formulated the rules governing wrongful

employment termination based on the public policies of

each state.

As stated, the Texas Supreme Court has recently scru-

tinized the Texas version of the emplowment at will doc-

trine and has taken steps to mitigate the harshness of the

doctrine in accordance with the modern realities of the

employment setting. In Sabine Pilot Service, Inc. v. Hauck.

687 S.W.2d 733 (Tex. 1985), the Texas Supreme Court

recognized a cause of action for a plaintiff alleging that

his employment termination was motivated by his refusal

to perform an illegal act. The Court created an exception

to the employment at-will doctrine to render this doctrine

more consistent with the state’s public policy. In the case

before the Court, the Texas Supreme Court created

another public policy exception to the “at-will” doctrine

and provided a cause of action for employees whose termi-

nation is principally motivated by a desire to avoid mak-

ing contributions to or paying benefits under a pension

plan.

A comparison of these two recent exceptions to the

Texas employment at will doctrine points out the weak-

ness of Petitioner’s pre-emption argument. If an employee

is fired tor refusing to commit a crime. it is irrelevant

if it is a state, federal or local crime. The employer's

motivation, not the type of crime, is the relevant issue.

Similarly, if an employer terminates an employee to avoid

making pension contributions and later enables the em-

ployee’s pension to vest, the regulation or adminis-

tration of the pension plan is irrelevant. Only the em-

ployer’s motivation is relevant, and the substance or ad-

ministration of the pension plan is unaffected.

ee

14

It is axiomatic that each state has the power to formu-

late and devise laws affecting and governing the employ-

ment relationship between the employer and employee.

and this power includes the state’s ability to enact laws

governing employment terminations. Absent the specific

federal statutes that largely address certain types of em-

ployment discrimination (which do not apply to this case ),

the sovereign power of each state enables each state to

formulate its own laws governing the employment rela-

tionship. This is what the Texas Supreme Court has done

in its case. Its ruling does not conflict in any way with

ERISA and has no effect on any pension plan, and ERISA

generally, and its pre-emption provision specifically, there-

fore do not apply to this case.

If,

BOTH ERISA AND ERISA’S PRE-EMPTION

PROVISION DO NOT APPLY TO THE

CASE BEFORE THE COURT

As stated, the individual states have traditionally regu-

lated their own laws regarding wrongful employment

termination. The Texas Supreme Court employed that

function with its ruling in the proceedings below. In its

rulings on federal pre-emption of state laws, this Honor-

able Court has “presume[d] that Congress did not intend

to pre-empt areas of traditional state regulations.” Metro-

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

724. 740 (1985). See also Massachusetts v. Morash,

109 S.Ct. 1668. 1675 (1989). Accordingly, the new

Texas law. which embodies a part of traditional state

regulation, should not be pre-empted by ERISA.

In addition to this general presumption, Section 514

(c)(2) confirms that ERISA’s specific pre-emption

15

clause is inapplicable to this case. ERISA pre-emp-

tion applies only to any governmental entity that “pur-

ports to regulate, directiy or indirectly, the terms and

conditions of employee benefit plans covered by this sub-

chapter.” (emphasis added). The Texas law set forth in

the decision below has absolutely no affect or impact

on the regulation of the terms and conditions of Peti-

tioner’s benefit plans. Rather, it deals solely with Peti-

tioners motivation for terminating Respondent's employ-

ment. Therefore, the decision below “regulates” a Texas

employers conduct and in no way “regulates” or attempts

fo r@gulate the terms or conditions of a pension plan.

Accordingly, pre-emption is inappropriate.

Detinitive evidence that this case does not involve the

“regulation” of the “terms and conditions” of ERISA

pension plans is found by Petitioner’s total failure to

plead pre-emption, ERISA or any specific terms and con-

ditions of its pension plan. Indeed, there is no trial court

pleading on which to conclude that Petitioner's pension

plan qualifies as an ERISA plan. In addition to the fact

that a failure to plead pre-emption is a waiver of that

defense (see discussion infra at Section V). the absence

of details regarding Petitioner's pension plan confirms the

fact that the terms and conditions of Petitioner’s plan are

irrelevant to Petitioner’s motivation for the termination

of Mr. McClendon’s employment.

Petitioner’s argument for ERISA pre-emption rests pre-

cariously upon the presumptuous, but incorrect, assump-

tion that the Texas Supreme Court’s holding implicates

or touches the general regulatory and administrative con-

cerns for which ERISA was enacted. Congress expressly

delineated its findings and declaration of policy with

respect to ERISA and pension plans and stated:

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16

that owing to the lack of employee information

and adequate safeguards concerning their operation,

it is desirable in the interests of employees and their

beneficiaries, and to provide for the general welfare

and the free flow of commerce, that disclosure be

made and safeguards be provided with respect to the

establishment. operation and adminisiration of (pen-

sion) plans...

29 U.S.C. § 1001(a). This case does not deal with the

establishment, operation or administration of pension

plans.

In addition, this Court has specificaily held that ERISA’s

pre-emption provision does not relate to “employee bene-

fits” but only to state laws governing “employee benefit

plans” Cemphasis added). Fort Halifax Packing Co. v.

Coyne, 482 U.S. at 11-12. In Fort Halifax Packing Co.

v. Coyne, this Court held that a Maine plant closure

Statute requiring employers to provide a one-time sever-

ance payment to employees was not pre-empted by

ERISA and stated:

ERISA pre-emption analysis “must be guided by

respect for the separate spheres of governmental au-

thority preserved i our federalist system.” Alessi v.

Raybestos-Manhattan, Inc., 451 U.S, at 522. The argu-

ment that ERISA pre-empts state laws relating to cer-

tain employee benefits, rather than to employee benefit

plans, is refuted by the express language of the statute,

the purposes of the pre-emption provision, and the reg-

ulatory focus of ERISA as a whole. /f a State creates

no prospect of contlict with a federal statute, there

is no warrant for disabiing it from attempting to

address uniquely local social and economic problems.

Since the Maine severance payment statute raises no

17

danger of such conflict, we hold that the statute is

not pre-empted by ERISA. (emphasis added).

Fort Halifax Packing Co. v. Coyne, 482 U.S. at 19.

Just as the State of Maine in Fort Halifax Packing Co.

v. Coyne, the State of Texas in the case below has taken

steps to protect its workers in accordance with the State's

public policy. This protection, which takes the form of

a cause of action for wrongful employment termination,

does not relate in any way to the regulation of pension or

benefit plans, and does not create a prospective conflict

with ERISA. Just as in Fort Halifax Packing Co. v. Coyne,

therefore, this Honorable Court should hold “that the

Texas law set forth in the case below is not pre-empted

by ERISA.

The Fort Halifax Packing Co. v. Coyne Court also

noted that ERISA was enacted because Congress desired

to safeguard employees from “such abuses as self--dealing,

imprudent investing and misappropriation of plan funds.”

Fort Halifax Packing Co. v. Coyne, 482 U.S. at 15, quot-

ing 120 Cong. Rec. 29932 (1974). These are all factors that

protect employees. The Texas Supreme Court's holding

is totally consistent with this motivation. The Texas Su-

preme Court's holding below creating an exception to the

at-will doctrine has absolutely no relationship to the types

of abuses from which ERISA was designed to protect

employees. The holding tn no way alters the law with

respect to the commingling of funds, self-dealing, or any

other abuse that would clearly be for ERISA to govern.

Rather, this opinion simply represents one state’s decision

to change its employment law to include a much needed

protection for Texas workers. The opinion has absoluely

no effect on the regulation or administration of any pen-

sion funds.

18

In Franchise Tax Board v. Construction Laborers Vaca-

tion Trust, 463 U.S. 1 (1983), this Court addressed

whether ERISA permits state tax authorities to collect un-

paid state income taxes by levying upon taxpayer funds kept

in an ERISA-covered benefit plan. This Court held that

a state’s right to enforce its tax levies is not of central

concern to the ERISA statute. That is, even though the

California statute would subject certain funds held in an

ERISA plan to a state levy, this Court held that a state’s

right to enforce its tax levies is not something about which

ERISA is concerned. This holding clearly impacts upon

an ERISA plan with far more force than does the holding

by the Texas Supreme Court in this case. The Franchise

Tax Board yv. Construction Laborers Vacation Trust hold-

ing enables states, under the proper circumstances, to

remove certain funds from a pension plan that would

otherwise be available to plan participants. The Texas

Supreme Court’s holding. on the other hand, has no effect

on any pension plan and would require the employer, not

the pension fund, to compensate the plaintiff. Moreover,

a State’s right to formulate its own laws with respect to

employment termination is, like a state’s right to enforce

its tax levies, not something with which ERISA is con-

cerned.

II.

PETITIONER HAS NOT MET AND CANNOT

MEET ANY OF THE PRE-EMPTION TESTS

ARTICULATED BY THIS COURT

In English v. General Electric Co., 110 §.Ct. 2270, 2275

(1990), this Court identified the conditions necessary

for federal legislation to pre-empt a state law: (1) Con-

19

gress explicitly defines the extent to which its enac ient

pre-empts state law; (2) absent explicit statutory

language, state law is pre-empted when it regulates

conduct in a field that Congress intended the federal

government to occupy exclusively: and (3) state law is

pre-empted to the extent that it actually conflicts with

federal law. As will be demonstrated herein, none of these

conditions is present in this case, and pre-emption is

improper.

A. ERISA’s Pre-emption Provision Specifically

Excludes The State Law Before This Court

Section 514(a) of ERISA (codified at 29 U.S.C. § 1144

(a) ) states that the ERISA provisions shall “supersede any

and all state laws insofar as they may now or hereafter

relate to any (covered) employee benefit plan.” and

S$ 1144(c) defines the term “state” to include a state or

political subdivision or agency that “purports to regulate,

directly or indirectly, the terms and conditions of em-

ployee benefit plans covered by this subchapter.” This

Court has long recognized that Congress usually expresses

the purpose of its legislation by the ordinary meaning of

the words chosen by Congress, and a federal statute must

be strictly construed to give effect to the plain meaning

of the language employed by Congress. U.S. v. Locke,

471 U.S. 84, 95 (1985). The plain meaning of this

statute mandates pre-emption only if the state law in

question purports to regulate the terms and conditions

of employee benefit plans covered by ERISA.

Initially, the law outlined by the Texas Supreme Court

makes absolutely no mention of ERISA or plans governed

by ERISA. The Texas law merely states that an employee

20

has a state cause of action if the principal reason for

termination was the employer's desire to avoid paying

benefits under an employee benefit plan. Petitioner does

not and cannot show that the Texas Supreme Court's

ruling constitutes a direct or indirect regulation of the

terms and conditions of ERISA-covered employee benefit

plans. The terms and conditions of a specific plan, as

well as whether a specific plan is even covered by ERISA,

are totally irrevelant to the Texas iaw. The only relevant

inquiry is the employer's motivation for the termination.

Accordingly. application of the “plain meaning” analysis

shows that the statutory words employed by Congress

expressly exclude this Texas state law from pre-emption.

The decisions of this Court confirm that state laws

“relate to” ERISA-covered plans. and are subject to

ERISA pre-emption (absent the state law falling into a

specific ERISA exception) only when the state law pur-

ports to regulate the terms and conditions of ERISA

benefit plans. For example. in Alessi v. Raybestos-Man-

hattan, Inc., 451 U.S. 504 (1981), this Court held thet

a New Jersey statute designed to prevent a procedure

known as “integration” related to and was pre-empted

by ERISA. The New Jersey statute regulated ERISA

plans because it specifically eliminated one method for

calculating pension benefits that was otherwise avail-

able and permissible under ERISA. In Shaw v. Delta Air

Lines, Inc., 453 U.S. 85 (1983), this Court held that

state legislation mandating the payment of specific em-

ployee benefits and dictating the structure of benefit plans

vas pre-empted. That legislation specifically attempted to

regulate the structure of benefit plans in a way that would

preclude employers from discriminating against pregnart

women. Similarly. in Metropolitan Life Ins. Co. v. Massa-

21

chusetts, 471 U.S. 724 (1985), the Court held that a state

Statute requiring ERISA plans to provide minimum mental

health care benefits was pre-empted wherein the state at-

tempted to regulate the minimum benefits of ERISA plans.

In addition, this Court has twice held that a state law tort or

contract claim brought by a beneficiary asserting improper

processing or denial of benefit claims under ERISA plans

related to ERISA plans and were pre-empted by ERISA.

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

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987).

Both of these cases related directly to the processing or

denial of ERISA claims. Finally, this Court has held that

ERISA pre-emption applics when state laws expressly

refer to and apply solely to ERISA benefit plans. Mackey

v. Lanier Collections Agency & Service, Inc., 486 US.

825, 829 (1988). These cases confirm that ERISA pre-

empts only state laws, that, unlike the law at issue in this

case, attempts to regulate the terms and conditions of

ERISA plans.

Conversely, when, as here, the state law does not at-

tempt to regulate the terms and conditions of ERISA

plans, this Court has held that ERISA pre-emption does

not apply. See Fort Halifax Packing Co. v. Coyne, 482

U.S. at 22-23; Mackey v. Lanier Collection Agency, 486

U.S. at 833, 834.

Other federal Courts have confirmed that ERISA pre-

emption does not apply to the type of case before the

Court. In Aetna Life insurance Co. v. Borges, 869 F.2d

142, 146 (2nd Cir. 1989), the Court stated that ERISA only

pre-empts state laws that (1) provide an alternate cause

of action to employees to collect benefits under ERISA:

(2) refer specifically to ERISA plans and apply solely to

them; or (3) interfere with the calculation of benefits

9

owed to an employee. It is obvious that none of these

situations is applicable to the present Case.

In Scott v. Gulf Oil Corp., 754 F.2d 1499 (9th ni

1985). a terminated employee sougnt to recover, amnang

other things, lost accumulated and prospective Pension

benefits. Although accumulated benefits were pee

by ERISA, the Court held that the employee's state —

for the loss of prospective benefits was not pre-empted \

ERISA. The Court noted that the claim raised no _—

concerning matters pertaining to the regulation ane =

ministration of the pension plan and stated that the ig

issue involved in this claim ts no different from the —_

that would be involved in a claim alleging that the =

ployer conspired to force the employee to accept lower

wages. Scott v. Gulf Oil Corp., 754 F.2d at 1505. The

Ninth Circuit has clearly held, therefore, that agenntined

lost prospective benefits are not pre-empted by ER 7

unless they involve the regulation or administration : 7

pension plan. Based on this analysis, pre-emption does

not apply to the case before the Court.

The Fourth Circuit adopted a similar analysis tlio

v. Bethlehem Steel Corp., 884 F.2d 116 (4th ¢ ir. 1989).

This case involved a wrongful termination action alleging,

amone other things, breach of an employment yao

The employ ment termination impacted upon sw aise

benefits available to the employee. and the state law — 0

action sought to recover lost prospective benefits as a —

ponent ot damages. The Court held that the state law —

of action relating to loss of prospective pension benefits oe

not pre-empted by ERISA. The Court based this —

on the analysis that the claims would not (1) eqatees

employer to conflicting employer obligations aaapnonin

standards of recovery: (2) determine whether any benefits

23

are paid; (3) affect the administration of benefits under

the plan; or (4) be paid by the plan fiduciary with plan

funds. Pizlo v. Bethlehem Steel Corp., 884 F.2d at 120.

In Schlenz v. United Airlines, Inc., 678 F. Supp. 230

(N.D. Cal. 1988), a case similar to the present case, a

terminated employee brought a state law cause of action

against the employer alleging that the employer terminated

the employment because the employee (1) was about to

vest in a pension plan; (2) was a higher paid employee

because of seniority; and (3) was soon to be recalled to

a higher paying position with the company. The basis of

plaintiff's suit was that the plaintiff sought to recover

damages for the lost opportunity to earn future benefits,

including pension plan benefits, as a result of the em-

ployer’s wrongful conduct. The Court held that the state

law wrongful termination cause of action was not pre-

empted by ERISA because it was unrelated to an employee

benefit plan and touched, at best, only peripherally on

ERISA.

The present case is more remote from an ERISA claim

than the above cited cases. In this case, the Respondent

seeks absolutely no pension benefits, past or future. Re-

spondent has received his pension benefits. What he did

not receive was continued employment; and the evidence

shows that he was fired because the Petitioner wanted to

avoid its pension obligation. The Texas Supreme Court

has correctly held that the cause of action created by

Petitioner's egregious conduct is a state cause of action

that is not pre-empted by ERISA.

The Texas Supreme Court correctly held that such

employer conduct is against sound public policy. The

Court recognized that the employment-*t-will doctrine

should not be used by an emplover as a sword to exploit

unfortunate employees and a shield to excuse the avoid-

ance of pension plan obligations. Accordingly, the Su-

preme Court held that an employment termination en-

vendered by an attempt to avoid pension obligations 1s

actionable in the State of Texas. This holding has abso-

lutely no effect on the regulation or administration of

pension plans. Accordingly, Petitioner's requests for pre-

emption should in all things be denied.

B. Congress, Through ERISA, Did Not Pre-empt

The “Field” With Respect To All State Laws

That Involve Pension Plans

As stated, this case involves a State’s wrongful em-

ployment termination law and ERISA is inapplicable. It

should be noted. however, that this Court has made it

clear that Congress did not intend to pre-empt the “field”

with respect to pension plans, and the second test set forth

in Enelish v. General Electric Co., cannot be met. See,

e.g., Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987).

“N*,

This Court has stated that Congressional intent to

supersede or pre-empt a state law must be “clear and

manifest” if the area for which pre-emption is argued has

traditionally been an area occupied or regulated by the

states. Rice v. Santa Fe Elevator Corp., 331 U.S. 218,

230 (1946). As discussed in Section I, supra, regulation

of the employment relationship has traditionally and his-

torically been a function of state governments. As such,

ERISA could not be held to pre-empt the Texas Supreme

Court’s holding unless Congress had a “clear and manifest”

intent to pre-empt this particular state law setting forth an

impermissible reason for an employment termination, This

25

is an area traditionally left to the regulation of the in-

dividual states, and there was no intent by Congress to

pre-empt the law of employment termination.

In Fort Halifax Packing Co. v. Coyne, the Court stated:

It is thus clear that ERISA’s pre-emption provision

was prompted by recognition that employers estab-

lishing and maintaining employee benefit plans are

faced with the task of coordinating complex admin-

istrative activities. A patch-work scheme of regulation

would introduce considerable inefficiencies in bene-

fit program operation, which might lead those em-

ployers with existing plans to reduce benefits, and

those without such plans to refrain from adopting

them. Pre-emption assures that the administrative

practices of a benefit plan will be governed by only

a single set of regulations.

Fort Halifax Packing Co. v. Coyne, 482 U.S. at 11. (em-

phasis added). As stated, this case does not involve the

administrative practices of a benefit plan and pre-emption

dees not apply.

Petitioner seems to indicate that the mere mention of

“pension plan” in connection with employment termina-

tion mandates ERISA pre-emption. Where, as here, a

State law's relation to a benefit plan is at best “tenuous.

remote or peripheral”, ERISA pre-emption does not apply.

Shaw v. Delta Air Lines, Inc., 463 U.S. at 100. In addition.

the Shaw v. Delta Air Lines, Inc. Court cited with approval

American Telephone & Telegraph Co. v. Merry, 592 F.2d

118, 121 (2nd Cir. 1979), which held that ERISA did

not pre-empt a state law that permitted garnishment of

pension benetits in order to enforce alimony and child

support orders. The Court held that despite the law’s

|

.

i a i et i i ee i

Be ee ie, ea 4 eee

es Ss Sl ee e,mC Cll = a i

26

direct effect on ERISA pension plans, the effect was re-

mote and peripheral and, therefore, pre-emption was 1n-

appropriate. Shaw v. Delta Ar Lines, Inc., and the cases

cited therein demonstrate that Congress did hot attempt

to pre-empt the entire “field” regarding pension plans.

As stated in Fort Halifax Packing Co. v. Coyne, Con-

cress intended ERISA’s pre-emption provisions to afford

employers the advantages derived as a result of a uniform

set of administrative procedures governed by one set of

regulations. State laws. such as the one at issue, which

do not deal directly with the administration of ERISA

plans. are not pre-empted.

C. The Texas Supreme Court’s Decision Creates

Absolutely No Conflict With ERISA

Since the Texas Supreme Court's decision does not

conflict with ERISA, pre-emption is also impermissible

under the third test set forth in English v. General Electric

Co.. 110 S.Ct. at 2275. There is no conflict between the

Texas Supreme Court's holding enabling a terminated em-

ployee to bring a wrongful termination cause of action

against an employer and the ERISA legislation designed

to protect and preserve the integrity of pension pane.

The Texas Supreme Court’s opinion highlighted this fact:

Two federal district court cases have held that a

claim for wrongful discharge in order to avoid the

payment of pension funds ts preempted by ERISA.

Pratt v. Delta Air Lines, Inc., 675 F. Supp. 991 (D.

Md. 1987): Cahall v. Westinghouse Electric Corp..

644 F. Supp. 806 (E.D. Pa. 1986). These cases,

however, can be distinguished from the present action

because here the plaintiff acknowledges in his briet

to the Court of Appeals that he is not seeking lost

27

pension benefits but is instead seeking lost future

wages, mental anguish and punitive damages as a

result of the wrongful discharge.

Respondent's cause of action in the Texas State Courts will

address specifically the Petitioner’s motivation for Respon-

dent’s employment termination and would implicate no

ERISA concerns in any respect. It follows, therefore, that

such a cause of action does not conflict with ERISA and

is not pre-empted by ERISA.

If Respondent successfully proves that Petitioner termi-

nated his employment in order to avoid making contribu-

tions to Respondent's pension fund, Petitioner, not the

pension plan, will be liable for all damages recovered

by Respondent. In Greenblatt v. Budd Co., 666 F. Supp.

735 (E.D. Pa. 1987), the court held that ERISA pre-

emption does not apply where, as here, the employer, and

not the plan, would pay the damages. Respondent seeks

no benefits from Petitioner’s pension plan: Respondent's law-

suit does not and will not impact upon the administration of

such plan’s benefits in any way; and no damage payment

would be made by the plan fidicuiary with plan funds.

Accordingly, the newly-created Texas cause of action does

not conflict with ERISA and is, therefore, not pre-empted

by ERISA.

IV.

THE TEXAS LAW MAKES NO ATTEMPTS TO

REGULATE ERISA PENSION PLANS

The Texas law at issue makes no attempt to regulate

ERISA pension plans or any other types of pension plans.

This Court has stated that the focus of ERISA is on the

ss

_ — — —————

28

“administrative integrity” of benefit plans. Fort Halifax

Packing Co. v. Coyne, 482 U.S. at 15. The purpose of

ERISA was to provide a set of standard procedures to

guide the administration of pension plans. This Court

has articulated the types of the potential problems that

required the uniform rules of ERISA:

A plan would be required to keep certain records

in some States but not in others: to make certain

benetits available in some States but not in others;

to process claims in a certain way in some States

but not in others: and to comply with certain fiduci-

ary standards in some States but not in others... .

(The court continued that] |[p|reemption ensures

that the administrative practices of a benefit plan

will be governed by only a simple set of regulations.

(emphasis added.) Fort Halifax Packing Co. v.

Coyne, 482 U.S. at 9-11.

The Texas Supreme Court's decision does not affect

in any way the regulation or administrative practices of

pension plans. Absolutely nothing regarding the terms,

conditions or administration oi Texas pension plans are

affected by the new law. In accordance with Fort Halifax

Packing Co. v. Coyne, the administrative practices of pen-

sion plans will still be governed by ERISA’s single set

of regulations. Since the purpose of the pre-emption pro-

vision is not affected by this law, pre-emption is improper.

Petitioner's brief alleges, for the first time and with no

support in the record, that “unbeknownst to respondent

... he was fully vested under the pension plan at the

time of his termination.’ Pet. Br. 20, n. 4. Petitioner uses

§. The record shows that Petitioner tired Mr. MeClendon and

denied his pension benetits. It was not until Mr. McClendon suffered

hardship and filed a lawsuit hat Petitioner agreed to pay Mr

29

this allegation to argue that the plan’s complex vesting

provisions would be the focus of Petitioner's defense in

the trial Court in an effort to show that Respondent had

already vested before he was terminated.

Petitioner's assertions, although not supported by the

record, illustrate the inapplicability of ERISA and man-

date the conclusion that ERISA pre-emption does not

apply to the Texas law. Regardless of the complexity of

the vesting provision or Petitioner's after the fact asser-

tion that the pension vested before termination, the central

issue under the Texas law is whether Petitioner, at the

time of termination, fired Mr. McClendon to avoid pension

benefits. If Petitioner terminated Mr. McClendon’s em-

ployment for the principal reason of avoiding pension

obligations, Petitioner is liable under Texas law regardless

of the terms and conditions of Petitioner's plan. Even if

the plan shows or Petitioner asserts that Mr. McClendon’s

pension vested before he was fired, he would still recover

if Petitioner, at the time Mr. McClendon was fired, termi-

nated Mr. McClendon’s employment to avoid its pension

obligations. Mr. McClendon does not seek pension benefits

and does not raise any questions regarding vesting or

Petitioner’s plan. Rather, Mr. McClendon seeks what he

lost because of his wrongful termination. Petitioner's own

example, therefore, highlights the fact that the Texas law

concentrates on the employer's motivation for firing an

employee and does not attempt to regulate ERISA pen-

sion plans in any way.

McClendon’s pension benefits. The relevant issue under the Texas

law deals with Petitioner's motivation for the firing at the time of

firing. If Petitioner did not understand the terms of its own plan

and fired Mr. McClendon for the principal purpose of avoiding

pension obligations, Mr. McClendon has a cause of action against

Petitioner, and the cause of action is totally unrelated to ERISA.

30 31

V. VI.

ALTHOUGH ERISA GENERALLY AND ITS PRE- CONCLUSION

EMPTION PROVISION SPECIFICALLY DO NOT AG St seltic D

APPLY TO THIS CASE. PETITIONER HAS The judgment of the Court below should be affirmed.

WAIVED ANY RIGHT TO ASSERT ERISA .

AS A DEFENSE TO RESPONDENT'S Respectfully submitted,

TEXAS CAUSES OF ACTION

The record shows that Petitioner failed to assert ERISA MICHAEL = SAUNDERS

and/or ERISA pre-emption as an affirmative defense in the (Counsel of Record )

trial court. Both Federal Rule of Civil Procedure 8(c) and

Texas Rule of Civil Procedure 94 provide in pertinent

part that a party shall set forth in a responsive pleading

JOUN W. TAVORMINA

Cart D. KULHANEK, JR

“any other matter constituting an avoidance or affirmative Counsel for Respondent

defense.” An affirmative defense has been defined as a Of Counsel:

defense that raises matters extraneous to a_ Plaintiff's HELM, PLETCHER, HOGAN, BOWEN & SAUNDERS

prima facie case. Ford Motor Co. v. Transport Indemnity 2700 America Tower

Co., 795 F.2d 538, 546 (6th Cir. 1986). It is well 2929 Allen Parkway at Waugh

: established that a litigant’s failure to assert an affirmative Houston, Texas 77019-2120

defense in a responsive pleading results in a waiver of (713) 522-4550

that defense. Menendez v. Perishable Distributors, Inc.,

763 F.2d 1374, 1379 (11th Cir. 1985). Further, Peti-

tioner’s claim of ERISA pre-emption is a defense to Re-

spondent’s cause of action, Allstate Insurance Co. v. The

65 Security Plan, 879 F.2d 90, 93 (3rd Cir. 1989), and

such a defense clearly constitutes an affirmative defense

pursuant to Ford Motor Co. v. Transport Indemnity Co.

It is obvious from reading Petitioner’s Original Answer

(J. A. 8) that Petitioner failed to raise ERISA pre-emp- o

tion as a defense, and such failure to raise this affirmative

defense in any responsive pleading constitutes a waiver of

the pre-emption defense. Accordingly, Petitioner cannot

employ ERISA or ERISA pre-emption as a defense to

Respondent's state law cause of action in this case.

4

"