# Amicus Curiae Brief — De Buono v. NYSA-ILA Medical and Clinical Services Fund

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1997
- **Citation:** 520 U.S. 806

## Text

Supreme Court, U.S.
FILED

U wOV 27 1996
No. 95-1594
IN

Supreme Court of the United States
OCTOBER TERM, 1995

BARBARA A. DE BUONO, MD., in her capacity as New York State
Commissioner of Health; KAREN SCHIMKE in her capacity as New
York State Executive Deputy Commissioner of Health; DEPUTY
DIRECTOR, Division of Health Care Financing, Office of Health
Systems Management, New York State Department of Health,

Petitioners,
Vv.

NYSA-ILA MEDICAL AND CLINICAL SERVICES FUND, by its Trustees,
JOHN BOWERS, JAMES CAPO, FRANK LONARDO, WILLIAM P. LYNCH,
M. BRIAN MAHER, JAMES P. MELIA, GERALD OWENS, and PETER

VICKERS,
Respondents.

On Writ of Certiorari To The
United States Court of Appeals
For the Second Circuit

BRIEF AMICUS CURIAE OF THE
NATIONAL EMPLOYMENT LAWYERS ASSOCIATION
IN SUPPORT OF PETITIONERS

JEFFREY LEWIS MARY ELLEN SIGNORILLE
SIGMAN, LEWIS & FEINBERG (Counsel of Record)

405 Fourteenth St., Suite 1100 601 E Street, N.W

Oakland, CA 94612 Washington, DC 20049

(510) 839-6824 (202) 434-2070

Counsel for Amicus Curiae
National Employment Lawyers Association

YORK STATE’S LAW
HOSPITALS IS NOT PREEMPTED BY ERISA
BECAUSE THE LAW DOES NOT DIRECTL

G. If A State Law Accomplishes Through A Severe
Directly, It Is Preempted ............. 19

Under Any Of The Steps In NELA’s Suggested
Framework For Analyzing ERISA Preemption
Ge cla hd bd6 ee Ge ehe tec ceedbonr 20
Gee 6 GaSb ad wok bb bseTevvcivigeces 20

TABLE OF AUTHORITIES

Aetna Life Insurance Co. v. Borges,
869 F.2d 142 (2d Cir.), cert. denied,
Ge ED Swe ccc cc cece ccccccses:

Airparts Company, Inc. v. Custom Benefit Services
of Austin,
28 F.3d 1062 (10th Cir. 1994) 2... 2. ee eens

Akers v. Palmer,
71 F.3d 226 (6th Cir. 1995), cert. denied,
TS PTET TITELL TTL

Alessi v. Raybestcs-Manhatian, Inc.,

451 U.S. 504 (1981) 2... eee 3, 4, 6,

Arkansas Blue Cross & Blue Shield v. St. Mary's
Hospital, Inc..,
947 F.2d 1341 (8th Cir. 1991), cert. denied,
SP, SPEED oc ce SUS sc cc cccsesoveces

v. Boggs,
89 F.3d 1169 (Sth Cir.), cert. «x
65 U.S.L.W. 3332 (U.S., Nov. 1, 1996) .........

Boyle v. Anderson,
68 F.3d 1093 (8th Cir. 1995), cert. denied,
| |e. ll ees ee

SS See
Construction, N.A., Inc.,
$7 F.3d 712 (9th Cir. 1995), cert. granted,
116 S. Ct. 1415 (U.S., Apr. 15, 1996) ...........

Cipollone v. Liggett Group, Inc.,
} Fe =e e ee

Custer v. Sweeney,

89 F.3d 1156 (4th Cir. 1996) ................, 14, 17

Lighting, Inc. v. Missouri,
Se SE cc ckdabicels dn hate ticeecee

DeCanas v. Bica,

Gee ED 0-0.0004000068ens ile das 14, 18

District of Columbia v. Greater Washington Board
of Trade,
See BED once cuete stain 4, 6, 11,

Firestone Tire & Rubber Co. v. Bruch,
GP Gas: CED 6 6 bee Ss SU HRE ie Sek oc th

Forbus v. Sears Roebuck & Co..,
30 F.3d 1402 (11th Cir. 1994), cert. denied,
Sar Gh Gb SUE Wacceacdccocsepsieccee 15,

General American Life Insurance Co. v. '
984 F.2d 1518 (9th Cir. 1993) .......... 5, 15, 16,

HealthAmerica v. Menton,
555 So. 2d 235 (Ala. 1989), cert. denied,
Es LE ee ae Pe

Hewlett-Packard Co. v. Barnes,
571 F.2d 502 (9th Cir. 1978), cert. denied,
OE ere ree

Hospice of Metropolitan Denver, Inc. v. Group
Health Insurance of Okla., Inc.,

I

Co. v. McClendon,
EE. SEMEE UWS cose aseoe wes

Iron Workers Mid-South Pension Fund

v. Ti Corp.,
891 F.2d 548 (Sth Cir. 1990), cert. denied,
id ne ok ence we ees oe

John Hancock Mutual Life Insurance Co. v. Harris
Trust & Savings Bank,
iE DLibe des eicodvccc cours

Jordan v. Reliable Life Insurance Co.,
694 F. Supp. 822 (N.D. Ala. 1988) ..........

Lordmann Inc. v. Equicor, Inc.,
32 F.3d 1529 (11th Cir. 1994), cert. denied,
SPER SUED cocks boe Se sbsccece.

Mackey v. Lanier Coliection Agency Service,
SEG GUS ss. Soass2 0 ess.

Massachusetts v. Morash,
ET ee

Memorial Hospital System v. Northbrook Life
Insurance Co..,
904 F.2d 236 (Sth Cir. 1990) .............

Metropolitan Life Insurance Co. v. Taylor,
Ee i ceceeewe' at Oe beer oe

Metropolitan Life Insurance v. Massachusetts ,

GEE DE. GPGPU cc ctw eb cwccccsoccces

Morstein v. National Insurance Services, Inc. ,
PE, ED og ccc cccccess

.. 15, 18

iv

New York State Conference of Blue Cross & Blue

Shield Plans v.Travelers Insurance Co..,

ee ee Se couse ne passim
Pilot Life Insurance Co. v. Dedeaux,

Laven os cause enéee be passim
Rice v. Pancha,

SP eee Ce ED oboe s cee ddedebiiccov’ 17
Rice v. Santa Fe Elevator Corp.,

Se CREE Bi desdews 60.s bas didrar 9, 11, 13
Rokohi v. Texaco,

Se I ED noc cc cccccsccece 2, 8, 15
Shaw v. Delta Airlines, Inc.,

a 3, 6, 10, 14

-House Cases,

ee ey ee ee ED ns 60bidis dé 0 decd dc 14

Sommers Drug Stores Co. Employee Profit

Sharing Trust v. Corrigan Enterprises, Inc.,
793 F.2d 1456 (Sth Cir. 1986), cert. denied,
Gee EE b6 6 £6.60 0 cdbeeWe o stunt 15, 18

Thorpe v. Rutland & Burlington R. Co.,
SF Wee BD). we BOGE Ui oo dive wk sec ed cbows 14

Travitz v. Northeast Department ILGWU Health
& Welfare Fund,
13 F.3d 704 (3d Cir.), cert. denied,
SPE Rec ecccced débeecded 15, 18

United Wire and Machine Health and Welfare Fund
v. Morristown Memorial Hospital,
995 F.2d 1179 (3d Cir. 1993), cert. denied,
Gee Gb PE bMS be 0 Culds Bees oe oo wes 7

Varity Corp. v. Howe,
SOE ED Go Sido kbb cedecsccoceec 2, 15

Zuniga v. Blue Cross & Blue Shield of Michigan,

Pee COOGEE OUD cccccccccceeeccoces 14

CONSTITUTION STATUTES AND RULES

a ee ee anes 9
Retirement Income Security Act of
1974 (ERISA), 29 U.S.C. § 1001 etseg. ........... 2
§ S34), USC. § UGG) 2... ccc c eee eees passim
§ 514(cX(1), 29 U.S.C. § 1144(cX1) .... ee ee eee, 4
§ 514(c)(2), 29 U.S.C. § 1144 (ch2) ...........20... 4
I 3
MISCELLANEOUS

C. L. Fisk, The Last Article About the Language
of ERISA Preemption? A Case Study of the Failure
of Textualism, 33 HARV. J. ON LEGIS. 35 (1996)... ... 6,7

S. Stabile, Preemption of State Law by Federal Law: A
Task for Congress or the Courts?, 40 Vill. L. Rev. 1
SY CGA ie 460 Ce WE Gwe 6 6 bb Sd He ce éde eee 6

No. 95-1594

IN THE
Supreme Court of the United States
OCTOBER TERM, 1995

BARBARA A. DE BUONO, MD., in her capacity as New York State
Commissioner of Health; KAREN SCHIMKE in her capacity as New
York State Executive Deputy Commissioner of Health; DEPUTY
DIRECTOR, Division of Health Care Financing, Office of Health
Systems Management, New York State Department of Health,
Petitioners,
v.

NYSA-ILA MEDICAL AND CLINICAL SERVICES FUND, by its Trustees,
JOHN BOWERS, JAMES CAPO, FRANK LONARDO, WILLIAM P. LYNCH,
M. BRIAN MAHER, JAMES P. MELIA, GERALD OWENS, and PETER
VICKERS,

Respondents.

On Writ of Certiorari To The
United States Court of Appeals
For the Second Circuit

BRIEF AMICUS CURIAE OF THE
NATIONAL EMPLOYMENT LAWYERS
ASSOCIATION IN SUPPORT OF PETITIONERS

STATEMENT OF INTEREST OF AMICUS CURIAE

The National Employment Lawyers Association (NELA) is a
founded in 1985, of approximately 3,000

attorneys who specialize in representing individuals im controversies
arising out of the workplace. It is the country's only professional

2

benefits, wrongful discharge, and other employment-related
matters. NELA has devoted itself to supporting precedent-setting
litigation affecting the rights of individuals in the workplace.

NELA is qualified to brief the Court on the implications of the
decision in this case, having participated as amicus curiae in
numerous cases involving ERISA and other employment laws,
including among others, Varity Corp. v. Howe, 116 S. Ct. 1065
(1996), John Hancock Mutual Life Ins. Co. v. Harris Trust &
Savings Bank, 510 U.S. 86 (1993), and Firestone Tire & Rubber
Co. v. Bruch, 489 U.S. 101 (1989).

NELA members’ clients and other participants in pension and
welfare plans depend on ERISA to protect their rights under private
employer-sponsored employee benefit plans. 29 U.S.C. § 1001 er
seq. Contrary to its original purpose of safeguarding employee
benefits, ERISA through its preemptive effect has been used to
deprive employees of rights they previously enjoyed under state law
while failing to provide any comparable federal remedies. The
proliferation of ERISA preemption cases raises the question of
whether ERISA is having an effect contrary to that intended by
those who favored its adoption. To achieve uniform administration
of employee benefit plans, ERISA preemption need only be used as
a shield, not as a sword.”

This case, along with other ERISA preemption cases

Y See Rokohl v. Texaco, 77 F.3d 126, 130 (Sth Cir. 1996) (“an employer
may not use its ERISA plan as a ‘gimmick’ to trigger preemption and
thereby avoid litigation in state court. In the classic metaphor, ERISA
preemption may be used as a shield but not as a sword.” (citations

omitted)).

— —

3

currently pending before the Court,” presents the Court with the
opportunity to establish a more workable framework for the lower
courts to use for analyzing ERISA preemption cases. In particular,
the lower courts need a more precise test for determining the
boundaries of the phrase “relates to an employee benefit plan.”

The decision in this case will have a direct and vital bearing on
the economic security of NELA members’ clients and other
participants of pension and welfare plans. In light of the
significance of the issues presented by this case, NELA respectfully
submits this brief amicus curiae.¥

SUMMARY OF ARGUMENT

The number of cases the Court has decided construing the
phrase "relates to an employee benefit plan” in ERISA's
preemption clause illustrates the lower courts' struggle to define
the limits of "relates to." As this Court has recognized, this clause
is not a model of legislative drafting, and it has been difficult to
provide clear guidance to the lower courts to demarcate the limits

¥ California Division of Labor Standards Enforcement v. Dillingham
Construction, N.A., Inc., $7 F.3d 712 (9th Cir, 1995), cert. granted,

116 S. Ct. 1415 (U.S., Apr. 15, 1996) (No. 95-789) (whether ERISA
preempts state prevailing wage laws); Boggs v. Boggs, 89 F.3d 1169 (Sth
Cir.), cert. granted, 65 USLW 3332 (U.S., Nov. 1, 1996) (No. 96-79)

(whether ERISA preempts state community property laws).

¥ The written consent of each party has been filed with the Clerk of the
Court pursuant to Supreme Court Rule 37.3.

E.g., New York State Conference of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co., 115 S. Ct. 1671 (1995); Ingersoll-Rand Co. v.
McClendon, 498 U.S. 133 (1990); Mackey v. Lanier Collection Agency
Service, 486 U.S. 825 (1988); Pilot Life Ins. Co. v. Dedeaux, 481 U.S.
41 (1987); Metropolitan Life Ins. v. Massachusetts, 471 U.S. 724 (1985):
Shaw v. Delta Airlines, Inc., 463 U.S. 85 (1983); Alessi v. Raybestos-
Manhattan, Inc., 451 U.S. 504 (1981).

4

of this clause.” Hence, not only has development of a uniform
framework to analyze ERISA preemption been frustrated, but the
courts have been flooded with removed cases and preemption
Claims.

NELA suggests the following framework to use in analyzing
ERISA preemption claims.” First, where a state law directly
conflicts with ERISA, the state law is preempted by ERISA. See,
e.g., District of Columbia v. Greater Washington Board of Trade,
506 U.S. 125 (1992); Alessi v. Raybestos-Manhattan, Inc., 451
U.S. 504 (1981). Second, if a claim can be brought under ERISA
§ 502(a), then the state law action must be preempted under ERISA
§ 514(a). See Ingersoll-Rand Co. v. McClendon, 498 U.S. 133
(1990); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987). Third,
if the state law is not in direct conflict with ERISA or a claim
cannot be brought under ERISA § 502(a), then it must be
determined if that state law specifically refers to an ERISA plan; if
SO, it is preempted. See New York State Conference of Blue Cross
& Blue Shield Plans v. Travelers Ins. Co. ("Travelers"), 115 S. Ct.
1671, 1677 (1995); Mackey v. Lanier Collections Agency &
Service, 486 U.S. 825, 841 (1988). Fourth, if the state law does
not directly reference an ERISA plan, it is presumed that a state

¥ New York State Conference of Blue Cross & Blue Shield Plans v.
Travelers’ Ins. Co.,115 S. Ct. 1671, 1676 (1995).

* ERISA preemption analysis involves numerous steps. The initial
inquiries under ERISA § 514(a) are whether a State, state law and an
employee benefit plan are involved. ERISA §§ 514(c)(1) & (c)(2), 29
U.S.C. §§ 1144(c)(1) & (c)(2). If any one of these inquiries is negative,
there can be no preemption. See Massachusetts v. Morash, 490 U.S. 107
(1989) (vacation payments from an employer's general assets did not
constitute a plan and therefore state law cannot be preempted); Fort
Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) (a state law requiring
a one-time severance payment was not preempted because there was no
plan due to a lack of an ongoing scheme or administrative structure).
Here, none of the parties dispute that a State, state law and employee
benefit plan are involved. Only after the existence of a plan and a state
law are established does one begin NELA’s analysis.

5

law in an area of traditional state regulation is not preempted,
Travelers, 115 S. Ct. at 1671, unless the state law directly regulates
an ERISA-governed relationship, see, ¢.g, Airparts Company, Inc.
v. Custom Benefit Services of Austin, 28 F.3d 1062 (10th Cir.
1994); General American Life Ins. Co. v. Castonguay, 984 F.2d
1518 (9th Cir. 1993), or the state law accomplishes through an
acute indirect economic effect what it cannot do directly, that is,
regulate ERISA plans. See Travelers, 115 S. Ct. at 1683.

Adoption of such a framework will serve to produce more
uniformity in the interpretation of the phrase "relates to an
employee benefit plan," to implement Congress’ intent in enacting
ERISA's preemption clause, and to decrease the number of
preemption cases and claims flowing into the federal courts.

Applying this framework to the facts of this case, the New York
general operations of all hospitals in New York does not directly
conflict with ERISA, does not duplicate an ERISA claim under
ERISA § 502(a), does not reference an ERISA plan, and is a state
law in an area of traditional state regulation that neither directly
regulates an ERISA-governed relationship nor produces an acute
indirect economic effect. Thus, the state law does not "relate to an
employee benefit plan", and it is not preempted under ERISA
§514(a), 29 U.S.C. § 1144(a).

6
ARGUMENT

I. THE COURT SHOULD DEVELOP A MORE
WORKABLE FRAMEWORK FOR ANALYZING
ERISA'S PREEMPTION CLAUSE TO ACHIEVE
CONGRESS’ INTENT OF UNIFORM
ADMINISTRATION OF EMPLOYEE BENEFIT
PLANS.

Although the Court has attempted to provide guidance in the
area of ERISA preemption,” the lower courts are continuing to
struggle with the boundaries of ERISA's preemption clause,
particularly with the meaning of the phrase "relates to an employee
benefit plan." Memorial Hospital System v. Northbrook Life Ins.

” E.g., New York State Conference of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co.,115 S. Ct. 1671 (1995); John Hancock Mutual Life Ins.
Co. v. Harris Trust and Savings Bank, 510 U.S. 86 (1993); FMC Corp.
v. Holliday, 498 U.S. 52 (1990); Ingersoll-Rand Co. v. McClendon, 498
U.S. 133 (1990); Massachusetts v. Morash, 490 U.S. 107 (1988); Fort
Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987); Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41 (1987); Metropolitan Life Ins. Co. v.
Massachusetts, 471 U.S. 724 (1985); Shaw v. Delta Airlines, Inc., 463
U.S. 85 (1983); Alessi v. Raybestos-Manhatan, Inc., 451 U.S. 504
(1981).

© See District of Columbia v. Greater Washington Board of Trade, 506
U.S. 125, 135 n.3 (1992) (Steven J., dissenting) (noting that in December
1992, there were 2800 cases on LEXIS addressing ERISA preemption);
HealthAmerica v. Menton, 555 So. 24 235, 241 (Ala. 1989), cert. denied,
493 U.S. 1093 (1990) (White and O’Connor, JJ., dissenting to denial of
certiorari); see generally C. L. Fisk, The Last Article About the
of ERISA Preemption? A Case Study of the Failure of Textualism, 33
HARV. J. ON LEGIS. 35, 58-59 (1996) (foomotes omitted) (“The relatively
large number of ERISA preemption opinions has not, however, led to
clarity in the law. The lower courts have decided thousands of preemption
cases, yet remain mired in confusion about basic points.”); S. Stabile,
Preemption of State Law by Federal Law: A Task for Congress or the
(continued...)

7

Co., 904 F.2d 236, 244 (Sth Cir. 1990). Indeed, more than one
judge has expressed frustration with ERISA preemption and its
impact. See, €.g., United Wire and Machine Health and Welfare
Fund v. Morristown Memorial Hosp., 995 F.2d 1179, 1197 (3d
Cir. 1993), cert. denied, 114 S. Ct. 382 (1993) (Nygaard, J.
dissenting) (“ERISA could become a legal black hole with an
attractive force no state law could resist.”); Jordan v. Reliable Life
Ins. Co., 694 F. Supp. 822, 827 (N.D. Ala. 1988) (“The ERISA
quicksand is fast swallowing up everything that steps in it or near
it. This morass serves as the stage for a theater of the absurd.”).
And, this Court recently acknowledged its own frustration in its
attempts to provide detailed guidance concerning ERISA
preemption, Travelers, 115 S. Ct. at 1676, mainly because
ERISA's preemption clause is not a "’model of legislative i

This Court's own experience with ERISA preemption illustrates
the lower courts’ struggle. The Court has issued twelve decisions
on this issue, even though ERISA has been in effect for only
twenty-one years. Roughly half of the cases which the Court has
decided concerning ERISA have been preemption cases.2 This
term alone the Court has granted certiorari in three ERISA
preemption cases.

¥(.. continued)
Courts?, 40 VILL L. REV. 1, 18 n. 42 (1995) (detailing the volume of
cases and law review articles on ERISA preemption).

” C. L. Fisk, The Last Article About the Language of ERISA Preemption?
A Case Study of the Failure of Textualism, 33 HARV. J. ON LEGIS. 35, 58-
59 (1996), cited with approval in Morstein v. National Ins. Services, Inc.,
93 F.3d 715, 719 n. 7 (11th Cir. 1996).

4,

and a shield to participants pursuing bona fide claims.

SeeRokohl v. Texaco, 77 F.3d 126, 130 (Sth Cir. 1996). ERISA's

a gt he cn catty ater a ear a
undercutting Congress’ objective in

oa. of employee benefit plans and safeguarding

participants’ benefits. Travelers, 115 S. Ct. at 1677-78;

Massachusetts v. Morash, 490 U.S. 107, 119 (1989). In order to

i in the application of ERISA's preemption
produce more uniformity

a more precise test for determining when a state law “relates to an
employee benefit plan."

fl. NEW YORK STATE’S LAW TAXING HOSPITALS IS
NOT PREEMPTED BY ERISA BECAUSE THE LAW
DOES NOT DIRECTLY CONFLICT WITH ERISA,
DOES NOT DUPLICATE A CLAIM UNDER ERISA §
502, DOES NOT REFERENCE AN ERISA PLAN, AND
IS A STATE LAW IN A TRADITIONAL AREA OF
STATE REGULATION THAT NEITHER REGULATES
AN ERISA-GOVERNED RELATIONSHIP NOR
PRODUCES AN ACUTE INDIRECT ECONOMIC
EFFECT.

A. ERISA Preemption Analysis Must Be Grounded In
The Presumption That A State Law Is Not
Unles« Congress’ Intent To Do So Is Clear.

ERISA preemption analysis is no different than any other
preemption analysis. John Hancock Mutual Life Ins. Co. v. Harris
Trust and Savings Bank, 510 U.S. at 99 ("we discern no solid basis
for believing that, Congress, when it designed ERISA, intended
fundamentally to alter traditional preemption analysis"). As with
other statutes, the Court has cautioned that, in order to avoid
unintentionally encroaching on state authority, courts should be
reluctant to find preemption when interpreting a federal statute.
Travelers, 115 S. Ct. at 1676; Rice v. Santa Fe Elevator Corp., 331
U.S. 218, 230 (1947) (“the historic police powers of the State [are]
not to be superseded by...[federal law]”). Accordingly, *’the
purpose of Congress is the ultimate touchstone of preemption
analysis."" Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516
(1992) (quoting Malone v. White Motor Corp., 435 U.S. 497, 504
(1978) (quoting Retail Clerks v. Schermerhorn, 375 U.S. 96, 103
(1963))); see U.S. Const. art. VI, cl. 2.

“To discern Congress’ intent we examine the explicit statutory
language and the structure and purpose of the statute.” Ingersoll-
Rand Co. v. McClendon, 498 U.S. 133, 138 (1990). Congress
explicitly stated its intent to preempt state laws in the
language of ERISA § 514(a), 29 U.S.C. § 1144(a). Section 514(a)
that ERISA “shall supersede any and all State laws insofar as

. . felate to any employee benefit plan” covered by the

In Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983), the
Court explained that state law relates to an employee benefit plan
“if it has a connection with or reference to such a plan.”
Nevertheless, the Court admonished that "[s}ome 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.”
Shaw, 463 U.S. at 100 n. 21. It follows that “relates to” must have
some limitation, otherwise it “would never run its course.”
Travelers, 115 S. Ct. at 1677. To hold otherwise would be
inconsistent with the presumption against preemption absent a clear
indication of Congressional intent to do so, in order that state law
is given the fullest effect possible. Travelers, 115 S. Ct. at 1676-
78; Mackey v. Lanier Collections Agency & Service, 486 U.S. 825,
841 (1988).

Although the Court reiterated the

11

B. If A State Law Conflicts With
> Directly ERISA, It Must

conflicts with a federal law, either on its face or in application,

disclosure, vesting, and the like, Hewlett-Packard Co. v. Barnes,
571 F.2d 502 (9th Cir. 1978), cert. denied, 439 U.S. 831 (1978)
(state law regulating funding and disclosure requirements of ERISA
plans is preempted); and (3) establish rules for the calculation of
benefits, ¢.g., FMC Corp. yv. Holliday, 498 U.S. 52 (1990)
(interference with calculation of benefits through state
US. 500 (1981) Cent v. Raybessoe-Manhanan, Inc, 451
benefits against retirement benefits are preempted) are preempted.
See generally Airparts Company, Inc. v. Custom Benefit Services
of Austin, 28 F.3d 1062, 1064-65 (10th Cir. 1994); Iron Workers
Mid-South Pension Fund v. T:

12

as to funding, reporting, disclosure, vesting, and the like, and we
must go on to the next step of the preemption analysis.

C. If A State Law Claim May Be Brought Under ERISA

§502(a), Then Such Claim Is Necessarily Preempted By
ERISA § 514(a).

Where a state law claim can be brought under ERISA § 502(a)
and thus is completely preempted under that section, Metropolitan
Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987), it is necessarily

under ERISA § 514(a). See Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41 (1987) (state law claim for bad faith denial
of benefits preempted under ERISA § 514(a) because it would
displace exclusive remedies under ERISA § 502(a)); Ingersoll-Rand
Co. v. McClendon, 498 U.S. 133 (1990) (state law action
supplanted by ERISA § 510 as enforced via ERISA § 502(a) when
ERISA offers same remedies).

NELA suggests that a determination of whether a state law claim
may be brought under ERISA § 502(a) should be the second step
in the preemption analysis. If a state law claim may be brought
under ERISA § 502(a), then it is preempted, and no additional
preemption analysis is needed.

In this case, ERISA § 502(a) does not provide the State of New
York with a cause of action to collect a tax, and thus the

i Under this framework, the preemption analysis in /ngersoll-Rand and
Pilot Life would end here. There would be no need to rely on a more
general interpretation of ERISA § 514(a) as a basis for preemption.

of Washington Board of
Trade, 506 U.S. 125 (1992) (striking down District of Columbia
law that “specifically refers to welfare benefit plans regulated by

i
|
:

the consistently
unless Congress’ intent to do
so is clear. Travelers, 115 S. Ct. at 1676; Rice v. Santa Fe
Elevator Corp., supra (the historic police powers of the State [are]

persons.’” Slaughter-House , . 3%
(1872), quoting Thorpe v. & Burlington R. Co., 27 Vt.
140, 149 (1855). These include: regulation of hospital costs,
Travelers, 115 S. Ct. at 1681; Beat eh ce Np gg
other laws, laws occupational ‘a
° en bn a UT 356 (1976): laws abolishing
or modifying the common law doctrines of common employment
and assumption of the risk, Howard v. Illinois Central Railroad
Co., 207 U.S. 463 (1908); laws prescribing mandatory state
holidays, payment for jury duty or time spent voting, Day-Brite
Lighting, Inc. v. Missouri, 342 U.S. 421 (1952); legal malpractice
claims, Custer v. Sweeney, 89 F.3d 1156 (4th Cir. 1996); escheat
of abandoned property, Aetna Life Ins. Co. v. Borges, 869 F.2d
142 (2d Cir.), cert. denied, 493 U.S. 811 (1989); and enforcement
of commercial contracts under common law, Zuniga v. Blue Cross
& Blue Shield of Michigan, 52 F.3d 1395 (6th Cir. 1995). These
laws concern issues that the states have historically regulated. This
Court has made it clear that the states should be able to continue
regulate in these areas, unless there is clear Congressional intent to
the contrary. Travelers, 115 S. Ct. at 1676.

Accordingly, a state law in an area of traditional state regulation
will generally not be preempted unless it directly regulates an
ERISA-governed relationship or attempts to do through indirect

In this case, regulation of health care providers is a traditional
exercise of state authority, See Travelers, 115 S. Ct. at 1676.
Preemption analysis must continue with a presumption that the state
law is not preempted.

and therefore will be preempted. Morstein v. National Ins.
Services, Inc., 93 F.3d 715, 722-23 (11th Cir. 1996) (en banc);
Boyle v. Anderson, 68 F.3d 1093, 1103 (8th Cir. 1995), cert.
denied, 116 S.Ct. 1266 (1996); Lordmann Enterprises, Inc. v.
Equicor, Inc., 32 F.3d 1529, 1533-34 (11th Cir. 1994), cert.
denied, 116 S. Ct. 335 (1995); Travitz v. Northeast Dept. ILGWU
Health & Welfare Fund, 13 F.3d 704, 709 (3d Cir.), cert. denied,
114 S.Ct. 2165 (1994); General American Life Ins. Co. v.
Castonguay, 984 F.2d 1518, 1521-22 (9th Cir. 1993); Arkansas
Blue Cross & Blue Shield v. St. Mary’s Hospital, Inc., 947 F.2d
1341,1344-45 (8th Cir. 1991), cert. denied, 504 U.S. 957 (1992);
Memorial Hospital System v. Northbrook Life Ins. Co., 904 F.2d
ee

regulatory scheme, and are presumptively preempted. General
American Life Ins. Co. v. Castonguay, 984 F.2d at 1521-22.

governed relationship because that relationship concerns the employment
relationship, not a relationship growing out of benefits. Rokohl v. Texaco,
77 F.3d 126, 130 (Sth Cir. 1996); Forbus v. Sears Roebuck & Co., 30
F.3d 1402, 1406-07 (11th Cir. 1994), cert. denied, 115 S. Ct. 906 (1995).
of. Variety Corp. v. Howe, supra (where employer is held to be acting as
a fiduciary, state law claims would be preempted).

16

Conversely, if the state law does not regulate an ERISA-
governed relationship, it will not be preempted. For example, if
the state law only regulates one of the principal ERISA entities,
then there is no relationship, and there is no preemption. Hospice
of Metro Denver, Inc. v. Group Health Ins. of Okla., Inc., 944
F.2d 752, 753 (10th Cir. 1991) (a law affecting the relations
between an ERISA entity and an outside party is not preempted).
Quite simply, if there is no regulation of an ERISA-governed
relationship, more likely than not, there will be no significant effect
on the structure, administration, or the type of benefits provided by
the plan. Id.

Moreover, if the principal ERISA entities are not being regulated
in their ERISA capacities, then there is no ERISA-governed
relationship. Cf. John Hancock Mutual Life Ins. Co. v. Harris
Trust & Savings Bank, 510 U.S. at 106 (where an insurance
company is acting as an investment manager the insurance company
must comply with fiduciary standards). Thus, “lawsuits against
ERISA plans for run-of-the-mill state-law claims such as unpaid
rent, failure to pay creditors, or even torts committed by an ERISA
plan” are against the plan in a capacity other than as a plan — i.¢.,
as a commercial entity — and are not preempted. Mackey v. Lanier
Collections Agency & Service, 486 U.S. 825, 833 (1988). None of
these claims concern the plan acting as an ERISA plan — that is,
these claims do not impact plan administration or the payment of
benefits. Where the plan is acting like a commercial entity and not
like an ERISA plan, it should be treated the same as any
commercial entity. JId.; General American Life Ins. Co. v.
Castonguay, 984 F.2d at 1521-22.

This part of NELA’s suggested framework is consistent with the
Court's admonition in Shaw, because when a state law concerns a
third party and therefore does not regulate an ERISA-governed
relationship, the effect on employee benefit plans will be too
tenuous or peripheral to find that it relates to a plan. Moreover,
this prong is also consistent with Congress’ objective to avoid
multiplicity of regulation; obviously if a state law does not regulate
an ERISA-governed relationship, Se tee
regulation. Travelers, 115 S. Ct. at 1677-78. As a coroliary, this

17

analysis is consistent with the presumption against preemption of

state laws unless Ccngress' intent to do so is clear. Jd. Finally,

adoption of this part of NELA’s suggested analysis will not require

overturning any precedent; application of this test to past ERISA

Se eee
isions.

Cf. Akers v. Palme;, 71 F.3d 226 (6th Cir. 1995), cert. denied, 116
S. Ct. 2523 (1996) (decision to terminate plan is made in corporate

and there is no ERISA-governed relationship.
Travelers, 115 S. Ct. at 1680. Claims for medical malpractice
against doctors would not be preempted because the doctor is not
one of the principal ERISA entities. Rice v. Panchal, 65 F.3d 637

agent (and agency) and the employee is not regulated by ERISA.
Morstein v. National Ins. Services, Inc., 93 F.3d 715, 722-23 (11th

no ERISA-governed relationship is involved; the service provider
is a non-fiduciary. Custer v. Sweeney, 89 F.3d 1156 (4th Cir.

1996). Mere inclusion of a request for fringe benefits to fully
compensate an employee for a wrongful discharge, otherwise
unconnected to an benefit plan, would not be preempted

Forbus v. Sears Roebuck & Co., 30 F.3d 1402,
1406-07 (11th Cir. 1994), cert. denied, 115 S. Ct. 906 (1995).

18

In Boyle v. Anderson, 68 F.3d 1093, the court reviewed a state
statute similar to the one at issue in this case. The court found that
the MinnesotaCare provider tax, permitting a health care provider
to transfer the expense of a 2% provider tax to third party health
care providers, did not change the structure or terms of the plan.
Nor did it result in any alternation in the power or authority among
factors, among others, warranted a finding that the tax was not
preempted.

Accordingly, NELA suggests that this prong of ERISA
preemption analysis should be an inquiry as to whether the state law
regulates an ERISA-governed relationship.

In this instance, the New York state law does not regulate any
ERISA-governed relationship. It does not regulate the relationship
between the plan and its participants. It does not regulate the

i A number of courts of appeals have formulated similar tests focusing
on “principal ERISA entities” -- plan, participant, fiduciary, and
employer. Morstein v. National Ins. Services, Inc., 93 F .34 715, 722-23
(11th Cir. 1996) (en banc); Boyle v. Anderson, 68 F.3d 1093, 1103 (8th
Cir. 1995), cert. denied, 116 S.Ct. 1266 (1996); Lordmann Enterprises,
Inc. v. Equicor, Inc., 32 F.3d 1529, 1533-34 (llth Cir. 1994), cert
denied, 116 S. Ct. 335 (1995); Travitz v. Northeast Dept. ILGWU Health
& Welfare Fund, 13 F.3d 704, 709 (3d Cir.), cert. denied, 114 S.Ct. 2165
(1994); General American Life Ins. Co. v. Castonguay, 984 F.2d 1518,
1521-22 (9th Cir. 1993); Arkansas Blue Cross & Blue Shield v. St. Mary's
Hospital, Inc., 947 F.2d 1341,1344-45 (8th Cir. 1991), cert. denied, 504
U.S. 957 (1992); Memorial Hospital System v. Northbrook Life Ins. Co.,
904 F.2d 236, 249 (Sth Cir. 1990); Sommers Drug Stores Co. Employee
Profit Sharing Trust v. Corrigan Enterprises, Inc., 793 F.2d 1456, 1467-
68 (Sth Cir. 1986), cert. denied, 479 US 1034 (1987). While these tests
are helpful in clarifying that cases involving third-parties are not
preempted, they fail to recognize that employers and employees “wear
more than one hat,” that is, the employer has a relationship with the
employee outside of its possible fiduciary role, which relationship has been
regulated historically by the states. E.g., DeCanas v. Bica, 424 U.S. 351,
356 (1976).

19

relationship between the plan and the trustees. It does not regulate
the relationship between the plan and the employer. It does not
New York’s tax does not affect a participant’s benefit eligibility or
the calculation of benefits. Instead, it only regulates the plan in its
commercial capacity as a health care provider. See Travelers, 115

S. Ct. at 1680. Consequently, under this prong of the analysis,
New York state’s law is not preempted.

G. If A State Law Accomplishes Through A Severe Indirect
Economic Effect What It Could Not Do Directly, It Is

Preempted.

As the final prong of preemption analysis, an inquiry must be
made to ensure that the state is not accomplishing indirectly what

it cannot do directly.

A sate law taxing, or otherwise indirectly attempting through
economics to effect, an ERISA plan generally will not be
preempted because the economic effect will be so indirect that there
will not be the requisite connection to an ERISA plan. Travelers,
115 S. Ct. at 1680. However, there may be instances where “a
state law . . . produce[s] such acute, albeit indirect, economic
effects . . to force an ERISA plan to adopt a certain scheme of
substantive coverage” or administration that the state law will be
preempted. Travelers, 115 S. Ct. at 1683.

Thus, where the state law’s indirect economic effect is so
significant that it demonstrably and of necessity causes the plan to
choose certain types of benefits; to change its terms; to create
specific requirements as to funding, reporting and disclosure,
vesting, and the like; or to establish rules for the calculation of
benefits; or if the effect is to regulate an ERISA-governed
relationship, it must be preempted. See I], B, and Il, F, supra.

In this case, the New York state law’s economic effect on
ERISA plans is negligible, and thus is not preempted.

, an ERISA claim under
ERISA § 502(a), does not reference an ERISA plan, and is a
law in an area of traditional state regulation that does not directly
regulate an ERISA-governed relationship and does not produce an
acute demonstrable indirect economic effect on an ERISA plan.
Thus, the state law does not "relate to an employee benefit plan",
and it is not preempted under ERISA § 514(a), 29 U.S.C.
§ 1144(a).

CONCLUSION

For the foregoing reasons, NELA urges the Court to reverse the
decision of the Second Circuit Court of Appeals.

Respectfully submitted,

Mary Ellen Signorille
(Counsel of Record)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385013_0707%3A14. Public record. Not legal advice.