# Amicus Curiae Brief — District of Columbia v. Greater Washington Bd. of Trade > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0245%3A12 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1992 - **Citation:** 506 U.S. 125 ## Text Cy FILED No. 91-1326 ; JUN 5 1992 IN THE Supreme Court of the United States OCTOBER TERM, 1991 THE DISTRICT OF COLUMBIA and SHARON PRATT KELLY, MAYOR, Petitioners, v. THE GREATER WASHINGTON BOARD OF TRADE Respondent. On Writ of Certiorari to the United States Court of Appeals for the District of Columbia Circuit BRIEF OF THE AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS AS AMICUS CURIAE IN SUPPORT OF PETITIONERS _——— tS MARSHA S. BERZON 177 Post Street, Suite 300 San Francisco, CA 94108 (415) 421-7151 LAURENCE GOLD (Counsel of Record) 815 16th Street, N.W. Washington, D.C. 20006 (202) 637-5390 WILSON - Eras Printinc Co., Inc. - 789-0096 - WASHINGTON, D.C. 20001 ® Do oo 26 TABLE OF CONTENTS TABLE OF AUTHORITIES ...0000022.0..0.222.202.:ccccssseseeeeeeeee INTRODUCTION AND SUMMARY OF ARGU- ENE REET Cane ORR Ses te Se a 1. The Necessity for Line Drawing ........................ 2. The Relevance of the ERISA §4(b)(3) Ex- SEE SSS Sa eee , Ae SER ee 4. Application of ERISA § 514(a) to the Connec- tion Between the Equity Amendment Act and Respondent’s Health Benefits Plan ..................... SMNIIUUIIIET idtlintenstdasuiis nsbinidieniieinisccsinummentensencorsansieemnennace ii TABLE OF AUTHORITIES CASES Page Aetna Life Ins. v. Borges, 869 F.2d 142 (2d Cir.) .. 6 Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504 } | | | SEES 9,17, 25 Arkansas Blue Cross & Blue Shield v. St. Mary’s Hospital, 947 F.2d 1341 (1991) ............0.--- 6 Bartholet v. Reishauer A.G., 953 F.2d 1073 (7th Che. 21GB) nccccccocccecccnscescnncesensenceessnanisssnnnaaaa 7 Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272 (6th Cir. 1991) . ; 7 E-Systems v. Pogue, 929 F.2d. 1100 “(5th ‘Cir.), cert. denied, U.S. ——, 112 S. Ct. 585 (19GB) acencecvaeencnossesssescesonncssenssssisiiuasiaiiianann 24 Ethridge v. Harbor House Restaurant, 861 F.2d 19808 (Otte Cle. 39GB) ...ccoccccccncescescsscennsmectenmmecaintins 30 Feist Publications v. Rural Television Service Co., US. , 111 S. Ct. 1282 (1991)................. 25 Firestone Tire & Rubber Co. v. Neusser, 810 F.2d ie Sb , | ee 24 FMC Corp. v. Holliday, —— U.S. ——, 111 S. Ct. GBB (1GBO) ..cccccccccccnsecsccsssecssesecsssennn 18 Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 C2GBT) nccocecoccsescencscesesscennssecsasesasennssiase passim General Motors v. California Board of Equalization, 815 F.2d 1305 (9th Cir. 1987) ..........................--... 24 Gilbert v. Burlington Industries, Inc., 765 F.2d 320 (2d Cir. 1985), aff'd mem., 477 U.S. 901 (1986).. 19 Greater Washington Bd. of Trade v. District of Columbia, 948 F.2d 1317 (D.C. Cir. 1991) —........ passim Holland v. Burlington Industries, Inc., 772 F.2d 1140 (4th Cir. 1985), aff'd mem., 477 U.S. 901 (1GBB) cccecececsceccssecerestismnummse 19 Hospice of Metro Denver v. Group Health Ins. of Oklahoma, 944 F.2d 752 (1991) .............2--22--2-222--0 7 Ingersoll-Rand Co. v. McClendon, US. —, tee Re ey ee passim Mackey v. Lanier Collection Agency & Service, Inc., 406 UB. GBB (IGG) ccccocecsccseenmmenma passim iii TABLE OF AUTHORITIES—Continued Page Martori Bros. Distributors v. James-Massengale, 781 F.2d 1349, amended, 791 F.2d 799 (9th ESD 6, 29 Massachusetts v. Morash, 490 U.S. 107 (1989) __. 30 Memorial Hos. System v. Northbrook Health Ins., 904 F.2d 236 (5th Cir. 1990) 00 6 Metropolitan Life Ins. Co. v. Massachusetts, 471 I cecenses 17 Morales v. Trans World Airlines Inc., No. 90-1604 (U.S. S. Ct. Jume 1, 1902) ................... an Pilot Life Ins. v. Dedeaux, 481 U.S. 41 (1987). 17 Pizlo v. Bethlehem Steel Corp., 884 F.2d 116 (4th Cir, 1989) _.... nnttiitalldiniadireenetsieertenenessensnsnntecsoce 30 Retirement Fund Trust v. Franchise Tax Board, 909 F.2d 1266 (9th Cir. 1990) 0 23 Shaw v. Delta Airlines, 463 U.S. 85 ( 1983) . a passim Smith v. Dunham-Bush, Inc., 959 F.2d 6 (2d Cir. ESS 7 Standard Oil Co. of Calif. v. Aosalud, 633 F.2d 760 (9th Cir. 1980), summarily aff'd, 454 U.S. EE 9 United States v. 12 200-Ft. Reels of Super 8mm. Film, 413 U.S. 123 (1978)... 0... Llactate 6 STATUTES | Employee Retirement Income ae Act of 1974, EEE 2 SS 8 aT 8, 9, 10 EEE passim I eee passim EES passim nn 2 ES —_—— a sisiein 12 EEE SS 25, 26 iv TABLE OF AUTHORITIES—Continued LEGISLATIVE HISTORY Page 120 Cong. Rec. 29197 (1974) .....................0....2.eececeeeee 14 120 Cong. Rec. 29983 (1974) .....................--.cc-cecceeeees 14 OE 14 Subcommittee on Labor of the Senate Comm. on Labor & Public Welfare, 94th Cong., 2d Sess., Legislative History of the Employee Retirement Income Security Act 4789 (1976) ................... 14 IN THE Supreme Court of the United States OcToRER TERM, 1991 No. 91-1326 THE DISTRICT OF COLUMBIA and SHARON PRATT KELLY, MAYOR, . Petitioners, THE GREATER WASHINGTON BOARD OF TRADE, Respondent. On Writ of Certiorari to the United States Court of Appeals for the District of Columbia Circuit BRIEF OF THE AMERICAN FEDERATION OF LABOR AND CONGRESS OF INDUSTRIAL ORGANIZATIONS AS AMICUS CURIAE IN SUPPORT OF PETITIONERS This brief amicus curiae of the American Federation of Labor and Congress of Industrial Organizations (“AFL-CIO”), a federation of 90 national and interna- tional unions with a total membership of approximately 14,000,000 working men and women, is filed with the consent of the parties and in support of petitioners, as provided for in the Rules of this Court. INTRODUCTION AND SUMMARY OF ARGUMENT In Shaw v. Delta Airlines, 463 U.S. 85 (1983), the Court summarized the portion of the Employee Retire- ment Security Act of 1974 (“ERISA”) pertinent to de- termining the interplay between the federal statute and state law as follows: The federal Employee Retirement Income Security Act of 1974, 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq. (1976 ed. and Supp. V) subjects to federal reg- ulation plans providing employees with fringe bene- fits. ERISA is a comprehensive statute designed to promote the interests of employees and their bene- ficiaries in employee benefit plans . . . The term “employee benefit plan” is defined as including both pension plans and welfare plans. The statute im- poses participation, funding and vesting requirements on pension plans. 201-306, 29 U.S.C. §§ 1051-86 (1976 ed. and Supp. V). It also sets various uni- form standards, including rules concerning report- ing, disclosure and fiduciary responsibility, for both pension and welfare plans. 101-111, 401-414, 29 U.S.C. §§ 1101-1114 (1976 ed. and Supp. V). ERISA does not mandate that employers provide any par- ticular benefits. .. . Section 514(a) of ERISA, 29 U.S.C. § 1144/a), preempts “any and all State laws insofar as they may now or hereafter relate to any employee benefit plan” covered by ERISA. . . [Section] 4(b) (3) of ERISA, 29 U.S.C. §1003(b)(3) exempts from ERISA coverage employee benefits plans that are “maintained solely for the purpose of complying with applicable workmen’s compensation laws or unem- ployment compensation or disability insurance laws.” [463 U.S. at 90-91 (footnotes omitted) }.’ The immediate preemption question raised by this case is whether a statute such as the Equity Amendment Act —a District of Columbia statute that requires employers to provide, as part of the benefits payable under the Dis- trict’s workers compensation statute, health benefits equiv- alent to those included in the employer’s own health bene- fit plan—is preempted by ERISA. The D.C. Circuit viewed that question—properly, in our view, for reasons delineated in Part 1, infra—as 1 There are also a number of explicit exceptions to the preemptive force of § 514(a), none of them directly pertinent here. See ERISA §§ 514(b) and (d), 29 U.S.C. §§ 1144(b) and (d). turning not upon the proper interpretation of ERISA § 4(b) (3)’s “workers compensation” plan exemption, but upon the proper interpretation of the “relates to” lan- guage of ERISA §514(a), the affirmative preemption provision. The D.C. Cireuit then stated three reasons why, in its view, the Equity Amendment Act “relate{s] to” employee health benefit plans within the meaning of ERISA §514(a) and is therefore preempted: (1) “by requiring that . . . new benefits be ‘equivalent’ to those already provided under an existing covered plan” (Greater Washington Bd. of Trade v. District of Colum- bia, 948 F.2d 1317, 1322); (2) “by defining the employ- ers who are obliged to provide . . . new benefits as those who already provide benefits under a covered plan” (id.) ; and (3) by reason of “the additional financial burden associated with an increase in ERISA health benefits, an employer might choose to forego such an increase alto- gether” (id. at 1325). The argument that follows is devoted to demonstrating that the D.C. Circuit erred in regarding any of these three intersections between the Equity Amendment Act and an ERISA-covered health benefit plan as a sufficient “relationship” to that plan to invoke ERISA § 514(a) preemption. 1. This Court has both stated that the term “relates to” in ERISA § 514(a) is a broad one and recognized that certain state law connections with or references to ERISA-covered employee benefit plans do not suffice to constitute the required relationship. Although at earlier stages of the process of litigating elucidation, the Court has declined to delineate the precise line separating those two classes of state laws, it is now time to do so. 2. Before proceeding to discuss the line-drawing issue, we explain, in Part 1, infra, why the reach of the $514(a) “relates to” standard is in fact the determi- 4 native issue here. In describing the preemptive scope of ERISA, § 514(a) refers to the §4(b) coverage exemp- tions. Section 514(a) includes this cross-reference to con- form the coverage and preemption provisions of the stat- ute by assuring that state laws are not preempted because of their impact upon exempted plans alone. The D.C. Circuit’s preemption conclusion turned not on the rela- tionship between the Equity Amendment Act and ERISA- exempt workers’ compensation plans, but upon the inter- action between the Equity Amendment Act and nonex- empt health benefits plans. Thus, as the court below cor- rectly understood, this case, at bottom, turns on the scope of ERISA’s preemption provision, standing alone, not on the relationship between ERISA §§ 514(a) and 4(b). 3. Surveying both the ERISA legislative materials and this Court’s ERISA preemption case law, it becomes apparent that Congress meant to preempt the class of state laws that either are specifically designed to affect ERISA-covered employee benefit plans particularly or that, while not so designed, in fact have a substantial and unavoidable impact upon the operation of such plans. 4. Under that dual standard, the interaction between the Equity Amendment Act and respondent’s ERISA- covered health benefit plan does not rise to level of an ERISA § 514(a) relationship. Indeed, that interaction is most similar to the connection between ERISA-covered employee benefit plans and state law damages calculations where replacement of lost compensation is at issue. In both instances, the only possible impacts upon the actual operation of the ERISA-covered plans is that the em- ployer could possibly be influenced by the economic con- sequences of the state law to alter the shape of its ERISA plan. Purely speculative economic effects of that kind are simply too tenuous to sustain preemption under § 514(a). 5 ARGUMENT 1. The Necessity for Line Drawing: In Shaw v. Delta Airlines, supra, this Court noted that “lal law ‘relates to’ aun employee benefit plan, in the nor- mal sense of the phrase, if it has a connection with or reference to such a plan” and that “Congress used the words ‘relate to’ in § 514(a) in [this] broad sense.” 463 U.S. at 96-98. At the same time, Shaw recognizes that some “state actions . . . affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law ‘relates to’ the plan,” but declined at that juncture to “express .. . views about where it would be appropriate to draw the line.” 463 U.S. at 100 n.21. “Relates to,” in sum, is a broad, but not a limitless, term; not every “connection” and not every “reference” constitutes a § 514(a) relationship. Since Shaw, this Court has had seven additional oc- casions to consider ERISA preemption issues. The opin- ions in the post-Shaw cases continue to repeat both Shaw's “connection with or reference to such a plan” language and the concomitant observation that some “connections with” or “references to” ERISA employee benefit plans are too insubstantial to “relate to” a covered plan within the meaning of § 514(a). See, e.g., most recently, Jngersoll- Rand Co. v. McClendon, —— U.S. ——, 111 St. Ct. 478, 483 (1990); see also, summarizing and relying upon the ERISA preemption cases in construing another statute, Morales v. Trans World Airlines Inc., 8. Ct. No. 90-1694, slip op. at 14 (June 1, 1992). And the Court has on several occasions implicitly, and on one occasion explicitly, held that there was no ERISA preemption despite some con- nection between a state law and employee benefit plans. See Fort Halifax Packing Co. v. Coyne, 482 US. 1 (1987), and Mackey v. Lanier Collection Agency & Serv- ice, Inc., 486 U.S. 825, 829 (1988). None of these cases, however, marks with precision the line between connections supporting a preemptive result 6 and those too weak to warrant such a result. Because the real world of economic transactions creates an endiess webb of connections, because state law regulates so many facets of these transactions, and because em- ployee benefit plans are ubiquitous as a form of com- pensation in modern places of employment, the result has been an epidemic of ERISA preemption litigation.’ Given the inherent tension between the two parts of Shaw’s for- mulation of the ERISA preemption standard and the lack of subsequent guidance, the lower courts have tended to take a mechanistic approach to ERISA preemption that depends more on plucking boilerplate phrases at random from this Court’s decisions than on reasoned statutory analysis.° Until the limiting principles that place a_ particular legal rule in the overall structure of the law are enun- ciated, the rule’s reach tends to expand incrementally until “the aggregate or end result is one that would never seriously have been considered in the first instance.” United States v. 12 200-Ft. Reels of Super 8mm. Film, 413 U.S. 123, 127 (1973). In this instance, application of Shaw’s “connection with or reference to” catchall for- mulation without due regard to this Court’s repeated ad- monition that not all connections and not all references * An April, 1992 Lexis search for ERISA preemption cases turned up 400 cases in the federal district and circuit courts and the state appellate courts in 1991 and 1992 alone. 3 In other instances, federal courts of appeals have made thought- ful and sensible attempts to develop a principaled approach to the linedrawing problem by collecting and categorizing decided ERISA preemption cases on each side of the dim Shaw line. See, e.g., Memorial Hos. System v. Northbrook Health Ins., 904 F.2d 236 (5th Cir. 1990); Aetna Life Ins. v. Borges, 869 F.2d 142 (2d Cir.), cert. denied, U.S. , 110 S. Ct. 57 (1989); Arkansas Blue Cross & Blue Shield v. St. Mary’s Hospital, 947 F.2d 1341 (1991): Martori Bros. Distributors v. James-Massengale, 781 F.2d 1349, amended, 791 F.2d 799 (9th Cir.), cert. denied, 479 F.2d 149 (1986). 7 suffice has yielded results that cannot possibly be justified if one returns to the cases and considers the legislative materials afresh. See pp. 13-16, infra.* For all these reasons, the corpus of ERISA preemption law has now reached the stage of “gestative propensity that calls for the ‘line drawing’ familiar in the judicial ... process: “thus far, but not beyond.” 12 200-Ft. Reels, supra, 413 U.S. at 127. The Court in this case should therefore begin to delineate the line distinguishing 4 The circumstances of a few of these cases illustrates some of the anomalous results the lower courts are reaching. Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272 (6th Cir. 1991), for example, holds preempted by ERISA suits by medical care providers against health benefit plans where the provider per- formed service to a patient in reliance upon erroneous information from the plan that the employee was covered for the services pro- vided. Yet, because there is no cause of action under ERISA itself by which the provider can recover, the result is to displace wel!- developed common law rules concerning accountability for one’s actions, to the detriment of a third party who is outside the em- ployee benefit plan. See 944 F.2d at 1279 (Jones, J., dissenting) (contending that cenerally lower court ERISA preemption cases suffer from “an overzealous readiness in the federal courts to bar all state-law claims which even smell of ERISA .. . without engag- ing in the complex case-by-case analysis which the statute and precedent require,” with the result that “such a boiler-plate un- reflective approach to ERISA preemption . . . frequently leave[s] deserving claimants without recourse in state or federal court.’’). Cf. Hospice of Metro Denver v. Group Health Ins. of Oklahoma, 944 F.2d 752 (1991) (same issue, opposite result on the doctrinally irrelevant basis that no ERISA remedy is available to the health care provider). Similarly, several courts have held that where an employer prom- ises, as part of an individual employment contract, that certain benefit p.ans will be maintained, the employee has no state cause of action for breach of the employment contract if the plans are not in fact maintained, even if the result is to leave the employee with no remedy at all for the employer’s breach of his explicit promise. See, e.g., Bartholet v. Reishauer A.G., 953 F.2d 1073 (7th Cir. 1991); Smith v. Dunham-Bush, Inc., 959 F.2d 6 (2nd Cir. 1992). 8 the circumstances in which a state law may be said to “relate to” an ERISA employee benefit plan within the meaning of the statute from those circumstances in which there is some connection between the state law and bene- fit plans, but that connection is too insubstantial to war- rant displacing state authority. In particular, the Court should make clear (1) that, as several lower court cases have held, it is not a “rela- tionship” for ERISA preemption purposes that a state law takes into account in establishing a non-ERISA re- quirement the terms of an ERISA employee benefit plan; and (2) that it is not a “relationship” for ERISA pre- emption purposes that a state law imposes on employers a non-ERISA requirement that may have some impact upon an employee’s economic decisions regarding its ERISA-covered plans. 2. The Relevance of the ERISA § 4(6)(3) Exception: Before turning to the ERISA § 514(a) issue that is at the core of this case, we pause to explain why the D.C. Circuit was correct in holding that this case turns upon the reach of §514(a)’s “relates to” language, and not on the relationship between $$ 514(a) and 4(b). (a) Workers’ compensaion benefit plans—like the dis- ability benefit plans involved in Shaw and like unemploy- ment compensation benefit plans—are “employee welfare benefits plans” within the meaning of ERISA’s defini- tional and coverage provisions. See §§$ (3) (1) and (4)a, 29 U.S.C. §$ 1002(1) and 1003(a). Specifically, § 3(1}, 29 U.S.C. § 1002(1), defines “employee welfare benefit plan” as including, inter alia, plans providing sickness, accident, or disability benefits, of which workers’ com- pensation benefits are a variety; and § 4/a), 29 U.S.C. $ 1003(a), describes as covered by ERISA “any” em- ployee welfare benefit plan established or maintained by an employer, and employe organization, or both. 9 ERISA §$514(a), in turn, preempts state laws “in- sofar as they ... relate to any employee benefit plan de- scribed in section 1003(a) of this title and not exempt under section 1003(b) of this title.” 29 U.S.C. § 1144(a). Thus, if that were all there were to the matter, § 514(a) would preempt state laws mandating workers compensa- tion plans. See Fort Halifax Packing Co. v. Coyne, su- pra, 482 U.S. at 12 (noting that Standard Oil Co. of Cal- ifornia v. Agsalud, 633 F.2d 760 (9th Cir. 1980), sum- marily aff'd, 454 U.S. 801 (1981) held, correctly, that a state employee benefit plan is preempted by § 514(a)). Section 514/a) goes on to say that state laws relating to employee benefit plans that are “exempt under § 1003(b)” are not preempted. Plans “maintained solely for the purpose of complying with applicable. . . workers’ compensation laws” are exempt from ERISA coverage under §4(b) (3), 29 U.S.C. § 1003(b)(3). The Piain language of §514(a), then, provides that there is no preemption of a state law simply because the law “relates to” a § 4(b) (3) exempt workers’ compensation plan. The purpose of the reference in §514(a) to plans “exempt under § 1003(b) of this title,” then, is to con- form the preemption and coverage provisions of the stat- ute’s text.° In particular, the § 1003(b) cross-reference assures that the very state laws that would otherwise in- sulate §4(b)(3) plans from affirmative ERISA cover- age are not preempted. The syntax of ERISA § 514(/a), however, makes lucid that state laws are preempted insofar as the laws “re- 5 The conforming language is structurally necessary because, as this Court opined in Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 525 n.20 (1981), “ERISA’s plain language . . . preempts not plans, but ‘State laws.’” Section 4(b), on the other hand, exempts from ERISA coverage generally not state laws but certain plans. /d. Thus, § 4(a), which exempts § 4(b) plans from the affirmative cov- erage of ERISA’s substantive provisions, would not, absent some explicit statement in that regard, exempt laws relating to those plans from the ERISA preemption provisions. 10 late to” ERISA employee benefit plans not exempt from ERISA coverage under § 4(b), whether or not the state law also relate to exempt plans.° (b) Accordingly, in Shaw, this Court, addressing the validity of a state law that mandated certain disability benefit provisions, applied just this understanding of ERISA § 514(a): First, the Shaw Court held that the disability benefit law in question did “ ‘relate to’ an employee benefit plan” within the meaning of ERISA § 514(a) because the state law “requires employers to pay employees certain bene- fits.” 463 U.S. at 96-97. Second, Shaw determines that the state statute is none- theless enforceable with respect to an employer disability benefit plan that “provides only those benefits required by the applicable state law,” because of the exclusion from preemption for laws relating to plans exempt from ERISA under § 4(b). 463 U.S. at 107. At the same time, the Court in Shaw held the state statute unenforceable insofar as it required that employers pro- vide certain disability benefits within “benefit plans [that] . .. provide benefits not required by that law.” 463 U.S. at 106-107. “|T|hose portions of the Airlines’ multibenefit plans maintained to comply with the Disability Benefits Law. .. are not exempt from ERISA and are not subject to state regulation.” /d. at 107. While “|/a] State may * The statute, for example, could have provided, but does not, that ERISA supersedes state laws “insofar as they ... relate to any employee benefit plan described in § 4(a)” but “shall not super- sede any law relating to any employee benefit plan exempt under $4(b),” In that event, the statutory language would have been ambiguous with regard to state laws bearing the requisite relation- ship to both ERISA-covered and non-ERISA covered employee bene- fit plans. As actually drafted, however, the language negates any possible ambiguity, by making clear that the requisite relationship to an ERISA-covered benefit plan is sufficient, without regard to any additional relationship to a non-covered benefit plan. 11 require an employer to maintain a disability plan com- plying with state law as a separate administrative unit” (id. at 108, emphasis supplied), a state may only permit, but not require, an employer to comply with state law by including mandated disability benefits within an ERISA- covered plan (id.). (c) The D.C. Circuit’s understanding of this aspect of Shaw was not strictly accurate: The court of appeals said that “[t]he key issue in distinguishing Shaw from this case is that the Court in Shaw never found that the New York Disability Benefits Law related to an ERISA- covered plan.” 948 F.2d at 1323 (emphasis in original). In fact, as recounted above, this Court did find that the New York disability law “related to” an ERISA-covered plan insofar as New York required that employee benefit plans providing benefits other than those mandated by state law also provide mandated disability benefits. That infelicity aside, the D.C. Circuit got the threshold point right. Insofar as Shaw upheld the New York Dis- ability Law, it was because “|t|he [only] plan to which the New York Disability Benefits Law related was exempt, so the law did not qualify at the threshold for preemp- tion.” 948 F.2d at 1323." Nothing in Shaw, then, insulates from ERISA’s pre- emptive reach state laws that relate to both ERISA- covered employee benefit plans and benefit plans exempt from ERISA coverage under §4(b). The outcome of this case, then, turns upon whether or not the points of intersection between the Equity Amendment Act and ERISA-covered health benefit plans constitute, as the D.C. Circuit held, a sufficient relationship between the statute and those plans to trigger ERISA § 514/a) pre- emption. 7 As we note below (at p. 16), under this analysis, the Court in Shaw necessarily held there is not a sufficient relationship to trigger preemption where the State provides a non-ERISA compliance op- tion, but also permits compliance through an ERISA-covered plan. 12 3. The Reach of ERISA § 514(a) Preemption Generally: Shaw considered not only ERISA § 4(b)(3) and the interaction of that provision with ERISA § 514(a) pro- visions, but also addressed the correct interpretation of §$ 514(a) standing alone. (a) Shaw concerned two state laws, one the Disability Benefits Law discussed above, mandating the payment of certain benefits from employee benefit plans, the ciher a state law prohibiting pregnancy-based discrimination in employee benefits plans. The state statutes, then, di- rectly and substantially controlled the operation of em- ployee benefits plans (although not necessarily, as dis- cussed above, ERISA-covered employee benefit plans), by mandating in certain respects how those plans are to operate. 463 U.S. at 97 (“the Human Rights Law . prohibits employers from structuring their employee ben- efits in a manner that discriminates on the basis of preg- nancy, and the Disability Benefit Law, .. . requires em- ployers to pay employees specific benefits.” ) Shaw concluded that the relationship between each of these two statutes and ERISA-covered benefit plans comes within the preemptive reach of §514(a). In coming to that conclusion, the Court considered and rejected two specific arguments limiting the reach of § 514(a). Those arguments set the context in which Shaw’s “connection with or reference to” standard was first enunciated. first, the state in Shaw maintained that “$514(a)... preempt(s] only state laws specifically designed to affect employee benefit plans.”” 463 U.S. at 98. Because “|i|t would have been unnecessary to exempt generally ap- plicable state criminal statutes from preemption. . . if $514(a) applied only to state laws dealing specifically with ERISA plans,” and because ERISA § 514(b) (4) states just such an express affirmation of state criminal law authority, the Court rejected that contention. At the same time, there is nothing in Shaw embracing the con- verse proposition, that whenever a state statute does men- 13 tion employee benefit plans in a way that includes ERISA- covered plans, that state statute is, without more, pre- empted. Second, on the basis of the legislative history of §$514(a), Shaw disavowed New York’s suggestion that ERISA “can... be interpreted to pre-empt only state laws dealing with the subject matters covered by ERISA —reporting, disclosure, fiduciary responsibility, and the like.” 463 U.S. at 98. That history showed that earlier versions of ERISA’s preemption provisions would have superseded state laws “relat|ing] to” only the particular aspects of employee benefit plans regulated by ERISA. As the legislative process went forward the locution of the requisite pre- emptive intersection between the federal law and state laws——“related to’’-remained unchanged. See 463 U.S. at 98 n.18. But as the legislation progressed, the class of state laws that were to be preempted was enlarged to include not only state laws that regulate benefit plans in the same way ERISA regulates such plans—-in the case of employee welfare benefit plans by requiring reporting, disclosure, imposing fiduciary responsibility, and provid- ing certain remedial provisions—but also state laws gen- erally regulating benefits pians.* ®* The language of ERISA §514/a), on its face, does not unmis- takably indicate that broad “field” preemption is intended. Unlike the preemption language in some other statutes, §514(a) does not flatly prohibit the enactment or enforcement of state laws within a given field of application. Compare, e.g., 49 U.S.C. $1205(a)(1) (“no State ... shall enact or enforce any law, rule. regulation, standard or other provision having the force and effect of law relating to rates, routes, or services of any air carrier”): see also Morales wv. Trans World Airlines, supra, construing that section as broadly preemptive, in reliance on the ERISA preemption cases. Instead, §514(a) provides that “the provisions of this title and title IV shall supersede any and all State laws” relating to ERISA- covered employee benefit plans. (Emphasis supplied). Read without regard to the legislative history, one could well have concluded that a federal statutory “provision” can “supersede” a state law only 14 Thus, in every instance, the members of Congress who managed the bill in the House and the Senate, quoted in Shaw, described the final, conference version of § 514(a) as preempting state actions specifying in some manner requirements for the operation of ERISA plans, not as preempting laws which merely mention ERISA plans or have some derivative impact on those plans or on em- ployer behavior with respect to those plans. For example, Representative Dent, in the passage quoted in Shaw, stressed that the conference version of § 514(a) was in- tended to assure “the reservation to Federal authority [of] the sole power to regulate the field of employee ben- efit plans .. . by eliminating the threat of conflicting and inconsistent State and local regulation.” 463 U.S. at 99, quoting 120 Cong. Rec. 29197 (1974) (emphasis sup- plied). Similarly, Senator Williams referred to an inten- tion “to preempt the field for Federal regulations, thus eliminating the threat of conflicting or inconsistent State and local regulation.” Id., quoting 120 Cong. Ree. at 29933 (emphasis supplied). And Senator Javits said that $514(a) addresses “the desirability of further regulation —at either the State or Federal level.” Jd. at 99 n.20, quoting 120 Cong. Ree. 29942 (1974) (emphasis sup- plied) ; see also Senator Javits’ comment, in a colloquy not quoted in Shaw, that with respect to plans providing prepaid legal services “it is intended that State regula- tion—but not bar association ethical rules, guidelines, or disciplinary actions” be preempted, Legislative History of ERISA, 4789 (Sen. Labor Sub. Print, 1976) ; id. (“the State, directly or indirectly through the bar, is preempted insofar as there is the particular federal provision covers an issue addressed by that state law; under this view, where there is no ERISA provision available to override a state law on a common subject, the state law could be enforced. Consequently, it is ERISA legislative history, not the statutory language standing alone, that provides the requisite evidence that broad field preemption was intended, and that indicates the limita- tions of that broad field preemption as well. 15 from regulating the form and content of a legal service plan”) (emphasis supplied). Shaw in two respects recognizes, moreover, that the “relate to” connection must ordinarily be one pursuant to which the state law substantially and necessarily affects ERISA-covered employee benefit plans and that a mere contingent impact, a simple mention, or remote, deriva- tive effect is not an ERISA § 514(a) relationship. First, as noted above, Shaw explicitly states that “{slome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law ‘relates to’ the plan.” 463 U.S. at 100 n.21. The very locution used—that § 514(a) concerns “state actions” that “affect” employee benefit plans— demonstrates that there must, at a minimum, be some impact on the plan because of the state action; state laws that mention or refer to employee benefit plans not in order to affect the plans but in order to accomplish some other end plainly do not come within this language. Second, Shaw necessarily—although without directly so acknowledging—approved as not “relating to” an ERISA- covered employee benefit plan a state statute that pro- vides employers with the option of complying by altering an ERISA-covered plan, or by creating a free-standing, non-ERISA covered compliance scheme.* A valid state disability benefits statute, according to Shaw, could per- mit, but not require, compliance through inclusion of mandatory disability benefits in an ERISA-covered plan. Presumably, such a statute, or its implementing regula- tions or adjudicatory decisions, would have to so state, so that employers could be aware that this option exists. * The D.C. Circuit opinion in this case missed this point because that court misunderstood the factual context of Shaw. See p. 6, supra. Since the D.C. Circuit was erroneously of the view that no ERISA-covered employee benefit plan was at issue in Shaw, that court did not recognize that the Disability Benefits Law in Shaw, as upheld, did have some connection to an ERISA-covered plan. 16 Shaw, therefore, necessarily determined that the state law under attack would not “relate to” the ERISA-covered plan simply because the state statute mentions the possi- bility of compliance through that plan, or because the state permitted employers, on an optional basis, to sub- stitute compliance through an ERISA-covered plan for compliance through an option not within ERISA’s cov- erage. Put another way, had those tenuous connections to ERISA-covered plans been sufficient to bring a state law within the “relate to” language of § 514(a), Shaw could not have allowed the state to “force the employer to choose between providing disability benefits in a sep- arately administered plan and including the state-man- dated benefits in its ERISA plan.” 463 U.S. at 108; see also id. at 109 (“[wle further hold that the Disability Benefits Law is not preempted by ERISA, although New York may not enforce its provisions through regululion of ERISA-covered benefit plans.” ) In short, Shaw cannot fairly be read as holding inter- actions between employee benefit plans and state laws of the weak kind relied upon by the D.C. Circuit here are sufficient to constitute a §514(a) relationship. To the contrary, the Shaw opinion and the legislative history upon which the opinion relies is that Congress intended the broad reach of § 514(a) to extend to all state laws with an impact upon the internal operation of employee benefit plans that is both substantial and unavoidable. (b) The results and analyses in all the post-Shaw de- cided cases are consistent with the basic standard just set forth with one caveat: The Court has evolved a special rule for those sui generis state laws that are expressly designed to affect ERISA-covered employee benefit plans alone. Taking motive as sufficient to demonstrate effect, the Court has in those instances not inquired into either the actual impact of the statute or whether that impact 17 is avoidable, but has instead declared such statutes pre- empted, without more. (i) Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724 (1985)—the next case after Shaw in the ERISA preemption line—and Pilot Life Ins. v. Dedeaux, 481 U.S. 41 (1987) (which is analytically indistinguishable from Metropolitan Life for present purposes) involved state laws substantially affecting whether or not employee ben- efit plans generally (but not ERISA-covered benefit plans particularly) are required to pay benefits under certain circumstances."” The state action in each instance could be said to effect benefit plans “indirectly” (Metropolitan Life Ins. Co., 471 U.S. at 739), rather than directly, but only in the sense that the state rule in question was in terms addressed not to benefit plans as such, but to the insurers who provide benefits under such plans." Since '” Metropolitan Life involved a state law mandating that certain benefits be paid under any group health plan. See 471 U-S. at 729- 40. Pilot Life did not specify particular benefit payments, but set standards for judging the behavior of employee benefits plan admin- istrators in determining whether or not the terms of the plan require payment of benefits. 481 U.S. at 48. The distinction between these two kinds of mandatory requirements governing the payment of benefits by employee benefit plans is immaterial to ERISA pre- emption. ' This was also the sense in which the Court in Alessi v. Raybestos-Manhattan, Inc., supra, 451 U.S. at 525 used the term “indirect” in describing the reach of ERISA § 514(a). In that case, the state statute in question was part of its workers’ compensation law, but necessarily affected pension plans as well by prohibiting those plans from setting off workers’ compensation benefits against pension benefits. Jd. at 521. The effect on pension plans was “in- direct” only in the sense that the statute in terms was a protection of the right to workers’ compensation benefits, not a limitation upon the pension benefit plans. But the latter impact was in no way speculative or contingent; rather, a pension benefit plan that pro- vided for workers’ compensation setoffs would violate state law. . As Alessi explained, the reason for including state action indirect in this sense was “to preclude the States from avoiding through 18 insurers not in compliance with the state payment stand- ard would not be available to employee benefit plans in the state at all, the impact upon insured plans was in no way speculative, contingent, or derivative. As Metropolitan Life put the point, the impact upon “all insured benefit plans” was “substantial||”, since the stat- ute in question “requires” that such plans process and pay benefits in a certain manner. 471 U.S. at 739 (em- phasis added) ; see also FMC Corp. v. Holliday, —— U.S. , 111 S. Ct. 403, 408-09 (1990) (holding that a state statute that “prohibits plans from being structured in a manner requiring reimbursement in the event of recovery from a third party” (emphasis supplied) is preempted because the statute dictates the employee benefit plan’s payment formulae. )™ (ii) Fort Halifax Packing Co. v. Coyne, supra, did not turn on the meaning of the “relate to” phrase in ERISA $514(a), since the Court concluded that the state law at issue in that case did not concern any “employee ben- form the substance of the pre-emption provision.” 451 U.S. at 525. See also p. 25, n.16, infra (discussing Alessi’s reliance on § 514 (c)(2), the definition of “State” within the preemption section, as the source of its conclusion that indirect as well as direct state action is precluded.) 12 FMC Corp. one of this Court’s recent ERISA preemption cases, is instructive as well in demonstrating that while the Court continues to repeat the Shaw pronouncement that a state statute “relate[s] to” an employee benefit plan if the law has a “ ‘connec- tion with or reference to such a plan’” (see 111 S. Ct. at 407), the Court has never rested a preemption conclusion upon a state law’s mere mention of an ERISA-covered employee benefit | In FMC Corp., for example, the Court, after noting that the statute in question, as a verbal matter, did have a “reference” to employee benefit plans (111 S. Ct. at 408), went on to conclude that the state law had a “connection” to benefit plans of a kind that had a sub- stantial and unavoidable impact upon the interna! operations of those plans (id. at 408-09). If a mere “reference” to benefit plans were sufficient, the bulk of the “relate to” analysis in FMC Corp. would have been entirely superfluous. 19 efit plan” at all. 482 U.S. at 7-8. Fort Halifax is none- theless relevant here for two reasons. The Maine severance benefit statute in Fort Halifax provided that an employer must, upon closing a plant, pay either a severance benefit specified by state law or pay the benefits due under a contract providing for sev- erance benefits. Jd. at 5. The Court concluded that such a state-specified payment does not constitute an “employee benefit plan” because there is no ongoing obligation to make repeated payments. 482 U.S. at 7-8. The Court also recognized, however, that an employer’s own contrac- tual commitment to pay severance benefits could well con- stitute an employee benefit plan within the meaning of ERISA. 482 U.S. at 6 n.4, citing Holland v. Burlington Industries, Inc., 772 F.2d 1140 (4th Cir. 1985), sum- marily aff'd, 477 U.S. 901 (1986) ; Gilbert v. Burlington Industries, Inc., 765 F.2d 320 (2nd Cir. 1985), summar- ily aff'd, 477 U.S. 901 (1986). Thus, like Shaw, Fort Halifax necessarily held that as long as a state law creates one compliance option not covered by ERISA, there is no preemptive “relation to” an ERISA-covered employee benefit plan simply because the state provides an alternative of complying with its requirement through such a plan as well." Second, and more generally, Fort Halifax explains the purposes of ERISA preemption at some length, in a 13 It is worth noting that providing an optional ERISA-covered compliance alternative necessarily intersects with and impacts upen the ERISA-covered employee benefit plan in several ways: First the state statute, regulation, or decision providing the option almost certainly will “refer to” the ERISA-covered plan. Second it is almost inevitable that there will be some practical incentive to choose the ERISA-covered compliance alternative, simply because the cost of maintaining one scheme for paving benefits is likely to he less than the cost of maintaining two separate schemes Indeed, a statute such as the one involved in Fort Halifar provides an additional inducement, since an employer ean apparently opt « ut of the statutorily-required benefits by paying contractual 9 verunes benefits in any amount. . 20 manner that supports the conclusion that only substan- tial and unavoidable impacts upon the actual operation of employee benefit plans were ordinarily meant to be pre- empted : Statements by ERISA’s sponsors in the House and Senate clearly disclose the problem that the preemp- tion provision was intended to address. . . . These statements reflect recognition of the admin- istrative realities of employee benefit plans. . . . The most efficient way to meet these responsibilities is to establish a uniform administrative scheme, which provides a set of standard procedures to guide proc- essing of claims and disbursements of benefits. Such a system is difficult to achieve, however, if a benefit plan is subject to different regulatory requirements in differing States. A plan would be required to keep certain records in some States but not in others; to make certain benefits 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 fiduciary standards in some States but not in others. .. ERISA’s pre-emption provision was prompted by recognition that employer’s establishing and main- taining employee benefit plans are faced with the task of coordinating complex administrative activi- ties. A patchwork scheme of regulation would in- troduce considerable inefficiencies in benefit program operation. . . Pre-emption ensures that the admin- istrative practices of a benefit plan will be governed by only a single set of regulations. {471 U.S. at 9- 11 (emphasis supplied) .], See also id. at 10-11 (reviewing the earlier cases in which ERISA preemption was found, and concluding that “We have not hesitated to enforce ERISA’s preemption provision where state law created the prospect that an employer’s administrative scheme would be subject to conflicting requirements.”) (emphasis supplied). 21 Thus, Fort Halifaz’s analysis of the scope of ERISA preemption indicates that § 514(a), for all its breadth, would not apply where there is some tie between a state law or regulation and an employee benefit plan, but that tie does not necessarily subject plan designers and ad- ministrators to differing requirements in structuring and operating the plan. (iii) Mackey v. Lanier Collections Agency & Service Inc., 486 US. 825 (1988) is most a deciphered by analyzing its second holding separately, and by then con- sidering its initial holding in connection with Ingersoll- Rend Co, v. McClendon, —— U.S. ——, 111 S. Ct. 478 ). Mackey held that a general state garnishment statute— permitting garnishers to make employee benefit plans parties to a suit and to secure a court order requiring the plan to pay benefits to someone other than the desig- nated beneficiary—does not sufficiently “relate to” an em- ployee benefit plan so garnished to invalidate the state law. 486 U.S. at 835-36. In coming to that conclusion, the Mackey Court did not deny, as it could not, that a state garnishment proceeding against an employee benefit plan had a “connection with” that plan, and some likely im- pact upon its internal administration. 486 U.S. at 831- 32. Rather, Mackey said that the connection in question did not suffice. In reaching that conclusion, Mackey surveyed the legis- lative materials as a whole to determine whether the par- ticular connection between employee benefit plans and state garnishment procedures is one Congress intended to include an ERISA § 514(a) relationship. The Court’s conclusion was that “Congress did not intend to for- bid the use of state-law mechanisms of executing judg- ments against ERISA welfare benefit plans, even when those mechanisms prevent plan participants from receiv- ing their benefits.” 486 U.S. at 831-32 plied). (emphasis sup- 22 In other words, Mackey viewed the garnishment an ceedings against an employee benefit plan as an += to an underlying and otherwise valid, non-ERISA “ proceeding against the individual plan beneficiary. od sulating those judgments from enforcement against as sets with substantial economic value would have compro- mised the state’s ability to enforce rules of conduct en- tirely unrelated to ERISA, because of a real but quite minor impact upon the operation of ERISA employee benefit plans. This, said the Court, Congress had not in- tended to do. (iv) The other aspect of Mackey, and the first of ye two alternative holdings in Ingersoll-Rand, treated wit state rules of decision in adjudication that had no — ERISA-related purpose."* Indeed, in both Mackey an Ingersoll-Rand, the state law -- question ye nye le loyee compensation generally, or even benefit plans pane but only to ERISA-covered ee plans. See Mackey, 486 U.S. at 829; Ingersoll-Rand, 1 S Ct. at 483 (“in order to prevail, a plaintiff must plead, and the court must find, that an ERISA plan ex- ists and the employer had a pension-defeating motive in terminating the employment.”) As such, the exclusion from garnishment proceedings for ERISA-covered "4 fits plans only (Mackey, 486 U.S. at 828-29), and t e cause of action for ERISA pension-defeating termination only (Ingersoll-Rand, 111 S. Ct. 481) were | ——7 designed to affect employee benefit plans’ ”. Ingersoll - Rand, 111 S. Ct. at 483, quoting Mackey, 486 U.S. at 829) (emphasis supplied). - These unusual state laws, in other words, did not sim- ply mention, refer to, or have a derivative effect upon 14 In Ingersoll-Rand, the Court rested its holding not solely upon §514(a) preemption but, independently, upon the conclusion that “the Texas cause of action would be preempted because it con- flicts directly with an ERISA cause of action.” 111 S. Ct. at 484. Thus. the “relates to” analysis in Ingersoll-Rand was not neces- sary to the result reached in that case. 23 ERISA-covered employee benefit plans in the course of accomplishing some separate objective within the state’s legitimate area of concern. Instead, both state laws were directed precisely at affecting ERISA-covered plans, and such plans alone. See Mackey, 486 U.S. at 838 n.12 (emphasis supplied) (it is “singl{ing] out ERISA plans, by express reference, for special treatment”, and not the bare reference to benefit plans in the statute, that “pre- empts the Georgia antigarnishment exception.” ) * It was thus critical to the result in Mackey that the general garnishment statute was held nonpreempted. If, instead, the Court had concluded that the general garnishment statute is preempted as applied to ERISA-covered employee benefit plans, then the statu- tory “special treatment” for those plans would have been compelled by the federal scheme, and statutory references to that exclusion could not have been the basis, standing alone, for concluding that the exclusion evidenced a state purpose to affect employee benefit plans. Similarly, state tax statutes must often “refer to” employee bene- fit plans in the purely verbal sense in order to explain whether contributions to or benefits paid by those plans are treated as taxable income or not, and, if the plan contributions or benefits are taxable, to provide for the tax calculation. See, e.g., Retirement Fund Trust v. Franchise Tax Board, 909 F.2d 1266, 1270 n.13 (9th Cir. 1990). The alternative of ignoring in state tax laws, regula- tions, and decisions the state tax treatment of ERISA employee- benefit-plan related contributions or benefit payments is entirely impractical. Those contributions and benefits have real world economic value, are often provided as tradeoffs for taxable cash income, and resemble taxable income in that they are basically a form of compensation for employment. Obviously, these explanatory verbal references to em- ployee benefit plans cannot, alone, sustain the conclusion that the statute “relates to” an employee benefit plan and is therefore pre- empted by ERISA. Moreover, there is no self-evident answer to the question whether it is taxing or not taxing the various economic values em- ployee benefit plans generate for participants that “relates to” the employee benefit plan; rather, in either case the state law “re- lates to” the plan both in the verbal sense and in the sense that the tax treatment may well affect whether contributions to the plan 24 This aspect of Mackey and the holding in Ingersoll- Rand, consequently, do not rest simply upon the linguistic mention of ERISA-covered employee benefit plans in a state statute. Both decisions do state, however, a special doctrinal corollary to the principles that have generally governed the interpretation of the “relates to” language of §514(a): Where the state statute singles out ERISA- covered employee benefit plans particularly for unique treatment and does so for the principal purpose of di- rectly affecting those plans, the Court has proscribed such direct state entries into the governance of ERISA plans, without regard to the actual impact of the statute upon ERISA plans. In effect, the Court has determined that where the central role of a state statute is precisely to affect only the federal interests in ERISA-covered em- ployee benefit plans, there is no reason to apply a more flexible preemption standard in order to accommodate legitimate, non-ERISA-related state interests.*® will be made at all, if so in what amounts, and when, and in what amount and when benefit payments will be made. Consequently, the few courts that have addressed ERISA pre- emption of state tax statutes have generally regarded a neutral tax law that broadly “ ‘applies to employees without regard to their status as ERISA participants “as one that does not ‘relate to’ ERISA plans” and is therefore not preempted, even if the result is to tax ERISA benefit plan contributions or benefit payments. Retire- ment Fund Trust v. Franchise Tax Board, 909 F.2d at 1282; Fire- stone Tire & Rubber Co. v. Neusser, 810 F.2d 550 (6th Cir. 1987). Conversely, where employee benefit plans themselves are singled out for unique taxes not otherwise levied on similar economic entities and transactions, such taxes are held to come within ERISA §514(a), as state laws that single out benefit plans for special treatment. E-Systems v. Pogue, 929 F.2d 1100 (5th Cir.), cert. denied, —— U.S. ——, 112 S. Ct. —— (1991); General Motors v. California Board of Equalization, 815 F.2d 1305 (9th Cir. 1987), cert. denied, 485 U.S. 491 (1988). 16 We note that this understanding of the ERISA § 514(a) analysis of Ingersoll-Rand may explain one aspect of that decision that is otherwise difficult to square with established principles of statutory 25 construction generally, and of th : ticularly. e construction of § 514 par- +f ERISA 3 514(c) (2), 29 U.S.C. §1144(c)(2), provides: “The rm “State” includes a State, any political subdivision thereof or any agency or instrumentality of either, which purports to regu late, directly or indirectly, the terms and conditions of employee a plans covered by this subchapter.” (emphasis supplied). lessi v. Raybestos-Manhattan, Inc., supra, relied upon this section of the statute as providing guidance in determining the preemptive ey of the “relates to” language of §514(a), “mak[ing] clear at even indirect state action bearing on private pensions may encroach i jurisdicti a upon the area of exclusive federal jurisdiction.” 451 U.S. In Ingersoll-Rand, however, without acknowledging at all the reliance of Alessi upon § 514(c) (2), the Court indicated that the only statutory role of that provision is to include within ERISA’s preemptive Scope “state agencies and instrumentalities whose ac- tions might not otherwise be considered state law.” 111 S. Ct. at 484, That construction of §514(c) (2), if applied generally, would conflict squarely with Alessi, and raise the question anew whether state action not addressed to ERISA benefit plans as such are within §$514(a). See pp. 26-27, infra. The Ingersoll-Rand con- struction of §514(c)(2) would also result in reading out of the statute the last eighteen words of § 514(c) (2). Under that construction, it appears, the only operative effect of that statutory section would be accomplished simply by including “any political subdivision, thereof, or any agency or instrumentality of either ;” the rest of the statutory provision—‘“which purports to veguiate directly or indirectly, the terms and conditions of employee bene fit plans covered by this subsection”—would be superfluous. As such, the /ngersoll-Rand interpretation of § 514(c) (2), if applied generally, would violate “ ‘the established principle that a court should give effect, if possible, to every clause and word of u statute.’” Feist Publications v. Rural Telephone Co., U.S 111 S. Ct. 1282, 1284 (1991), quoting Moskal v. United States 498 U.S. ——, 111 S. Ct. 461, 466 (1990). Moreover, the legislative history summarized above shows that members of Congress uniformly referred to state regulation in describing the preemptive reach of the final version of ERISA within the statute’s preemptive scope, not other forms of state action. See pp. 13-16, supra. And, in any event, the kind of 26 4, Application of ERISA § 514(a) to the Connection Be- tween the Equity Amendment Act and Respondent's Health Benefits Plan: The D.C. Circuit ruled that the Equity Amendment Act “relates to” ERISA-covered employee benefits plans within the meaning of ERISA § 514(a) because the state law defines the required health benefits payable to workers eligible for workers compensation as benefits equivalent to those provided under the employers’ basic health bene- fit plan. 948 F.2d at 1323. This kind of connection be- tween a state statute and an ERISA-covered benefit plan cannot suffice to support §514(a) preemption under the analysis of this Court’s cases presented above: First, as that analysis shows, this Court has never held that a purely verbal state law “reference to” an em- ployee benefit plan, standing alone, is sufficient to “re- late’ the state law to the employee benefit plan in the $ 514(a) sense. Second, the Equity Amendment Act does not relate to ERISA-covered employee benefit plans under the gen- ertlly applicable standard for determining the reach of $514(a). The Act has no substantial, unavoidable im- pact on the ERISA-covered health benefit plans in ques- tion; nothing in the Act requires that employers alter their ERISA-covered plan in any way. And, Shaw estab- lishes, as we have seen, that simply providing employers with the option of complying with a statutory requirement state action involved in Ingersoll-Rand was regulatory in the sense that it established a mandatory rule of behavior. The reference to “regulat[ion]” in § 514(c) (2) should therefore be read, at a minimum, as a guide toward interpreting the “relates to” language in § 514(a) as ordinarly limited to such mandatory rules of behavior, rather than other forms of state action. Under that approach, only where the state statute unambiguously, directly, and predominantly “relates to” ERISA-covered employee benefit plans alone would that interpretative guide be unnecessary and non- regulatory state actions preempted as well. 27 through a qualifying ERISA plan, where a non-ERISA covered weeks of compliance is also available, is not a — relationship to trigger § 514(a)’s preemptive orce. Third, the Equity Amendment Act is not within the narrow range of circumstances, exemplified by the garnish- ment exclusion aspect of Mackey and by Ingersoll-Rand, in which the state statute in question is specifically de- signed to affect ERISA plans, and singles out such plans for special treatment. Rather, the state law is designed to provide a flexible measure of an appropriate level of health benefits, sensitive to particular employment situa- tions, payable by a workers compensation plan exempt from ERISA’s coverage under § 4(b) (3). And the state law, far from singling out ERISA-covered health bene- fit plans for special treatment, expressly provides a means of compliance which leaves existing ERISA benefit plans entirely intact, and treats ERISA and non-ERISA health benefit programs identically for purposes of the statutory equivalency standard. Fourth, and finally, the opinion below devotes consid- erable attention to demonstrating that the Equity Amend- ment Act “could have a substantial effect on the adminis- tration of an ERISA-covered plan” because “the addi- tional financial burden associated with an increase in ERISA health benefits “—viz, the increase in non-ERISA health benefits—“could induce an employer” to “choose to forego such an increase altogether.” 948 F.2d at 1325 (emphases supplied). Speculations of this kind on pos- sible derivative employer reactions to the economic impact of state laws that do not otherwise “relate to” employee benefit plans within the meaning of § 514(a), cannot pos- sibly supply the statutory relationship that does not other- wise exist. All manner of state laws entirely separate from any ERISA-covered employee benefit plan may affect, for eco- nomic reasons, an employer’s decision (or the decision of an employer and a union through collective bargaining) whether to maintain particular ERISA-covered benefit plans, and what terms and conditions to include in such plans. State and local minimum wage laws, taxes on in- dividual and corporate income, unemployment compensa- tion and other payroll taxes, sales taxes, and environ- mental regulations all affect both the total cost of doing business in a particular area and the amount and nature of employee compensation, and may thereby influence, to the same or greater degree than does the Equity Amend- ment Act, the design of ERISA-covered employee bene- fit plans."” The prevalence of this kind of economic interaction only demonstrates that complete insulation of ERISA-covered employee benefit plans from the al! nonfederal legal in- fluence, or even all substantial nonfederal influence, is an impossibility under our complex form of government. Congress clearly did not intend to enact such an absurdity in making a last-minute change broadening the preemp- tive scope of ERISA in the Conference Report. By far the better reading of ERISA § 514(a), as the legislative - materials and case law surveyed above establish, is that what Congress addressed in {£514(a) is the much nar- rower (but still numerous) class of state laws whose purpose is to affect ERISA-covered employee benefit pians, or that clearly, substantially, and inevitably have an im- pact on ERISA-covered plans. 17 For example, the opinion below conceded that there would be no preemption if the state statute simply specified minimum levels of health benefits payable to workers compensation recipients. If those minimum levels were higher than the health benefits paid under an employer's standard health benefit plan, the actual impact on the ERISA-covered health benefit plan is likely to be greater then the effect of the state law at issue here: The employer would be under pressure to conform its standard health plan to the one prescribed by the state for workers compensation recipients, yet would have less money available to distribute for health benefits generally because of the inflexibility of the law governing the ERISA-exempt plan. 29 In totality, then, the Equity Amendment Act bears no different relationship to ERISA-covered employee benefit plans than a state rule that includes the economic value of benefit plans in calculating the damages due to an individual who has for some reason suffered an action- able decrease in earnings."* In both instances, there must be a verbal “reference to” the terms of the ERISA- covered plan in order to apply the state rule. In both instances, however, the state rule in question is designed not to affect the ERISA-covered plan, but to affect a form of compensation or payment entirely outside ERISA coverage."” And in both instances, the ERISA-covered plan is either not affected at all, or is affected only de- rivatively, speculatively, and insubstantially, through some conceivable influence on employers when they design their ERISA-covered plans worked by the prospect that injured employees will be entitled to equivalent benefits. The lower courts considering the impact of ERISA’s preemption provisions on such state law damages calcula- tion principles have concluded, correctly in our view, that Congress could not have intended to reach tenuous con- nections of this kind through ERISA’s preemption provi- sions. E..g., Martori Bros. v. James-Massengale, 781 F.2d 1349, amended, 791 F.2d 799 (9th Cir.), cert. denied, 479 -- '* These situations include, for example, violation of any employ- ment contract; termination in violation of public policy, or without just cause, under a state statute or common law rule providing causes of action for such terminations; an automobile injury or other physical injury leading to incapacity to work; or illega! fail- ure to bargain over a collective bargaining agreement, where state law covers the particular collective bargaining relationship and mandates a make-whole remedy replicating the economic value of the agreement that would have been reached. In a damages action, for example, individuals are typically paid in noncontingent cash, a form of compensation certainty not within ERISA‘s statutory coverage. See generally Massachusetts v. Morash, 490 U.S. 107 (1989). U.S. 149 (1986); Pizlo v. Bethlehem Steel Corp., 884 F.2d 116, 120 (4th Cir. 1989); Ethridge v. Harbor House Restaurant, 861 F.2d 1389 (9th Cir. 1988).” For the same reasons, there is no ERISA § 514(a) preemption of the District of Columbia’s Equity Amendment Act. CONCLUSION For the above stated reasons, the decision of the court below should be reversed. Respectfully submitted, MARSHA S. BERZON 177 Post Street, Suite 300 San Francisco, CA 94108 (415) 421-7151 LAURENCE GOLD (Counsel of Record) 815 16th Street, N.W. Washington, D.C. 20006 (202) 637-5390 2 It bears noting, indeed, that workers compensation plans are a substitute for tort recovery, and ordinarily extinguish tort causes of action for occupational injuries. Were such tort causes of action still available against employers, damages for loss of compensation would presumably include retroactive damages meas- ured by the economic value of health benefits lost during the pe- riod of incapacity. No reason appears why, in devising the work- ers compensation substitute, states cannot require that the same purpose be met by prospectively providing a non-ERISA covered benefit plan, similarly measured by the otherwise available health benefits. --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0245%3A12. Public record. Not legal advice.