# Amicus Curiae Brief — Great-West Life & Annuity Ins. Co. v. Knudson

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2002
- **Citation:** 534 U.S. 204

## Text

Wm 8 20 @
No. 99-1786

In the
Supreme Court of the Gnited States

GREAT-WEST LIFE & ANNUITY INSURANCE
COMPANY, EARTH SYSTEMS, INC., AND THE
HEALTH AND WELFARE PLAN FOR EMPLOYEES AND
DEPENDENTS OF EARTH SYSTEMS, INC.,

a Petitioners,

JANETTE KNUDSON AND ERIC KNUDSON,
Respondents.

On Petition for a Writ of Certiorari to the United
States Court of Appeals for the Ninth Circuit

MOTION FOR LEAVE TO FILE A BRIEF AS
AMICUS CURIAE AND BRIEF OF AMICUS CURIAE
CENTRAL STATES, SOUTHEAST AND SOUTHWEST
AREAS HEALTH AND WELFARE FUND IN
SUPPORT OF PETITION FOR WRIT OF CERTIORARI

WILLIAM J. NELLIS JOHN A. KUKANKOS

Secretary to the Board Counsel of Record

of Trustees JAMES L. COGHLAN
Central States, Southeast FRANCIS E. STEPNOWSKI

and Southwest Areas DEBRA M. CYRANOSKI

Health and Welfare Fund COGHLAN KUKANKOS COOK
9377 W. Higgins Road One N. Franklin Street
Rosemont, IL 60018 Suite 900
(847) 518-9800 Chicago, IL 60606

(312) 357-9200
Attorneys for Amicus Curiae

—_
ID _

Midwest Law Printing Company/Photex — Chicago — (312) 321-0220

‘ | Hef

1

MOTION FOR LEAVE TO
FILE A BRIEF AMICUS CURIAE

Central States, Southeast and Southwest Areas Health
and Welfare Fund (“Welfare Fund”), pursuant to Su-
preme Court Rule 37, respectfully moves this Honorable
Supreme Court of the United States of America to grant
it leave to file a brief amicus curiae in support of the
Petition for Writ of Certiorari filed by Great-West Life &
Annuity Insurance Company, Earth Systems, Inc., and
Health and Welfare Plan for Employees and Dependents
of Earth Systems, Inc. (collectively, “Petitioners”). The
Welfare Fund submits its brief amicus curiae together
with this motion. In support, the Welfare Fund states:

1. Petitioners have consented to the filing of the
Welfare Fund’s brief amicus curiae. The Welfare Fund
has been unable to obtain the consent of Respondents
Janette Knudson and Eric Knudson to the filing of the
Welfare Fund’s brief amicus curiae. Petitioners’ letter of
consent accompanies this motion for filing with the Clerk
of this Court.

2. The Welfare Fund is a Taft-Hartley trust and an
employee benefit plan as defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974
(“ERISA”), 29 U.S.C. § 1002(1). See Central States, South-
east & Southwest Areas Pension Fund v. Central Trans-
port, Inc., 472 U.S. 559, 561-62 (1985), reh’g denied, 473
U.S. 926 (1985). Welfare Fund beneficiaries are team-
sters and dependents of teamsters (collectively, “Benefi-
ciaries”) from local unions throughout the country who
negotiate collective bargaining agreements with their
employers. The employers pay contributions to the Wel-
fare Fund to fund benefits for Beneficiaries.

2

3. The Welfare Fund provides medical, hospital, den-
tal, disability, vision and life benefits to more than three
hundred thousand Beneficiaries who reside in thirty-six
states. The Welfare Fund is self-funded and not-for-
profit. Like Petitioners, the Welfare Fund has imple-
mented a subrogation program which it actively enforces
in all jurisdictions where its Beneficiaries reside.

4. The issue in this case is whether an employee bene-
fit plan regulated by ERISA can sue in federal court to
obtain reimbursement of paid medical benefits from the
proceeds of its beneficiary's personal injury settlement.
The resolution of this issue depends upon whether such
an action seeks equitable relief under Section 502(aX3)
of ERISA, 29 U.S.C. § 1132(aX3).

5. Pending before this Court are separate petitions for
writs of certiorari in the following cases which involve the
above issue: a) the case at bar; b) Reynolds Metals Co. v.
Ellis, 202 F.3d 1246 (9" Cir. 2000), petition for cert. filed,
No. 99-1787 (U.S. May 10, 2000) (the “Ellis Case”); and
c) Cement Masons Health and Welfare Trust Fund for
Northern California v. Stone, 197 F.3d 1003 (9 Cir.
1999), petition for cert. filed, No. 99-1403 (U.S. Feb. 22,
2000) (the “Stone Case”). Each of these cases involves a
decision of the Ninth Circuit holding that the above relief
is not equitable relief and that the federal court therefore
lacks jurisdiction to hear such matter under ERISA.

6. On May 30, 2000, this Court allowed the motions of
the Welfare Fund and other employee benefit plans to file
briefs amicus curiae in support of the Petition for a Writ
of Certiorari in the Stone Case. On that same date, this

Court invited the Solicitor General to file a brief in the
Stone Case. The Welfare Fund is also filing its Motion
for Leave to File a Brief Amicus Curiae in the Ellis Case
together with the filing of this motion.

7. The Welfare Fund seeks leave to file its brief
amicus curiae to bring to the attention of the Court
relevant matters not raised by Petitioners, viz., the effect
which the Ninth Circuit’s decision wil! have on large
employee benefit plans, such as the Walfare Fund, which
operate in many states. For these employee benefit plans,
the decision of the Ninth Circuit will cause the exact
harm which Congress sought to prevent in enacting
ERISA. The decisions of the Ninth Circuit in this case,
the Ellis Case, and the Stone Case impact large, multi-
state employee benefit plans in the same way. For that
reason, the Welfare Fund’s briefs in each case are essen-
tially the same.

8. In enacting ERISA, Congress recognized the im-
portance of employee benefit plans, the problems which
conflicting state and local regulation could cause for such
plans, and the need for exclusive federal regulation of
such plans to ensure uniformity in enforcement of plan
terms. This Honorable Court has, on many occasions,
noted these laudable goals of ERISA. See Shaw v. Delta
Air Lines, Inc., 463 U.S. 85, 99 (1983) (quoting 120 Cong.
Rec. 29933 (1974)); FMC Corp. v. Holliday, 498 U.S. 52,
60 (1990).

9. The Ninth Circuit's decision not only creates a split
in the Circuits, but also directs plans to state court as the
exclusive forum for enforcing the terms of the plan and
redressing violations of the terms of the plan. For these

4

reasons, that decision will create the exact patchwork
enforcement of plan terms which Congress sought to
avoid in enacting ERISA.

10. As discussed in the brief amicus curiae, because
ERISA preempts state laws, 29 U.S.C. § 1144a), and
provides plan fiduciaries with access to federal district
courts which have exclusive jurisdiction in actions to
enforce plan terms and redress violations of plan terms,
29 U.S.C. §§ 1152(aX3) and 1132(e), directing fiduciaries
to state courts for such actions may result in no remedy
at all. Moreover, that direction invites state courts to
apply a wide range of varying state laws which diminish
or eliminate subrogation rights in different ways from
state to state.

11. Finally, subrogation results in significant cost-
savings for the Welfare Fund. Since its inception in 1984,
the Welfare Fund’s subrogation program has achieved
direct reimbursements and savings of approximately
$62.0 million. Because the decision of the Ninth Circuit
will result in the diminishment of subrogation recoveries
and savings, that decision will lead to the inevitable
reduction in benefits for Beneficiaries—a result which
further detracts from ERISA’s goals as described in
Shaw, 463 U.S. at 99, and FMC, 498 U.S. at 60.

For each of the above reasons, the Central States,
Southeast and Southwest Areas Health and Welfare
Fund requests this Honorable Court to grant it leave to

JOHN A. KUKANKOS
JAMES L. COGHLAN
FRANCIS E. STEPNOWSKI
DEBRA M. CYRANOSKI
COGHLAN KUKANKOS COOK
One North Franklin Street
Suite 900

Chicago, Illinois 60606
(312) 357-9200

WILLIAM J. NELLIS
Secretary to the Board of Trustees
Central States, Southeast
and Southwest Areas Health
and Welfare Fund
9377 West Higgins Road
Rosemont, Illinois 60018
(847) 518-9800

e

A. The Decision of the Court of Appeals
for the Ninth Circuit Prevents Uni-

2. The Decision of the Ninth Circuit
Fosters the Very Harm Which
Congress Sought to Prevent in

B. If Allowed to Stand, the Ninth Cir-
cuit’s Decision Will Diminish a Valu-
able Cost-Saving Mechanism for Self-

C. The Decision of the Ninth Circuit
Prevents the Trustees From Adminis-
tering the Plan in Accordance with
ERISA’s Mandate .................005- 15

0. GET. n.d eecencccchancnteomnecens 16

iii

TABLE OF AUTHORITIES
Cases PAGE(S)

Administrative Comm. v. Gauf,

188 F.3d 767 (7 Cir. 1999) ................... 3
Blue Cross & Blue Shield of Ala. v. Sanders,

138 F.3d 1347 (11" Cir. 1998)................. 3
Bollman Hat Co. v. Root,

112 F.3d 113 (3™ Cir. 1997),

cert. denied, 522 U.S. 952(1997).............. 12
Cagle v. Bruner,

112 F.3d 1510 (11" Cir. 1997),

reh’g denied, 124 F.3d 223 (11" Cir. 1997) ...... 16

Central States, Southeast & Southwest Areas
Pension Fund v. Central Transport, Inc.,
472 U.S. 559 (1985), reh’g denied, 473 U.S.
MITE WRU WUD Rb ites ocnnhcockccccecece, 1

Community Ins. Co. v. Richardson,
172 F.3d 872 (6" Cir. 1999) .................. 12

Cutting v. Jerome Foods, Inc.,
993 F.2d 1293 (7 Cir. 1993),
cert. denied, 510 U.S. 916 (1993)........... 12, 16

Davis v. Line Constr. Benefit Fund,
589 F. Supp. 146 (W.D. Mo. 1984) ............ 12

iv

Descant v. Administrators of the Tulane Educ.
Fund, 706 So. 2d 618 (La. Ct. App. 1998) ...... 11

Electro-Mechanical Corp. v. Ogan,
9 F.3d 445 (6 Cir. 1993) ........ 6. cece ee ees 12

Fields v. Farmers Ins. Co., Inc.,
18 F.3d 831 (10 Cir. 1994) ...........ceeeeee 13

Firestone Tire & Rubber Co. v. Bruch,
GBD UD. 100 CIBER) oc cccccesccccccccccccees 16

FMC Corp. v. Holliday,
GED TEE, GREED cccccscceceocessun 7,9, 12,13

Fort Halifax Packing Co., Inc. v. Coyne,
GBB UB. 1 CAGRT) nc ccccccccccccess 4, 8,9, 10, 13

Hampton Indus., Inc. v. Sparrow,
981 F.2d 726 (4 Cir. 1992) ........-. eee eee: 12

Health Cost Controls v. Isbell,
139 F.3d 1070 (6" Cir. 1997) ........0. eee eee 12

Health Cost Controls v. Washington,
187 F.3d 703 (7" Cir. 1999),
cert. denied, 120 S. Ct. 979 (2000) ...........- 15

Ingersoll-Rand Co. v. McClendon,
498 U.S. 183 (1990) ....... ccc cece eee eens 11

Jefferson-Pilot Life Ins. Co. v. Krafka,
57 Cal. Rptr.2d 723 (Cal. Ct. App. 1996) ....... 11

v
Pilot Life Ins. Co. v. Dedeaux,
EERE ee eae ae 9,10
Ryan v. Federal Express Corp.,
78 V.O8 188 (9 Cllr. 1006) . o.oo. occ cicecee. 12
Shaw v. Delta Air Lines, Inc.,
EE ee RS 4, 7,8,13
Southern Council of Indus. Workers v. Ford,
83 F.3d 966 (8 Cir. 1996) .................... 3
Sunbeam-Oster Co., Inc. v. Whitehurst,
102 F.3d 1368 (5" Cir. 1996) .............. 15, 16
United McGill Corp. v. Stinnett,
154 F.3d 168 (4 Cir. 1998) .................. 12
Walker v. Wal-Mart Stores, Inc.,
159 F.3d 938 (56 Cir. 1998) .................. 12
Waller v. Hormel Foods Corp.,
120 F.3d 138 (8 Cir. 1997) .................. 12
Wendy’s Int'l v. Karsko,
94 F.3d 1010 (6 Cir. 1996) .................. 15

vi
Statutes

i Ae. |... i cesceceeunenesaen 1

SOG, CODED, « 6 ci cdidsnneddasndeibnads 6

SOE: OOMIIIID . 65. «5 isvacceviscdsceninveue 1

OG AE. oo. ccvscutavekonienes 15
29 U.S.C. § 1104(aXIMA) oo. cece cece eee eeeeeeeees 2
SD UAM. 6 LIDGE i. 00.0060 ccsnenadocennin 2
29 U.S.C. § 1132(aNX3). 2.2... cece . 5,7, 11
SPUD. OUMIND ... . 5 siddccesescucemss 5,7, 11, 15
SPUR, BOO k. 5. shccstemadonneeenw 7,9

Other Authorities

120 Cong. Rec. 29983 (1974) .........eeceeeeeeees 7
120 Cong. Rec. 29942 (1974) ........0seeeeeeeeees 7

H.R. Rep. No. 1785, 94th Cong., 2d Sess.,
Py YAO i) 8

H.R. Rep. No. 533, 93rd Cong., 1st Sess.,
at 12 (1973), reprinted in 1974
U.S.C.C.A.N. 4639, 4650 .. 0.6... cece eee eee 10

1

BRIEF OF AMICUS CURIAE
I. THE INTEREST OF THE AMICUS CURIAE

Central States, Southeast and Southwest Areas Health
and Welfare Fund (“Welfare Fund”) is an employee
benefit plan as defined in Section 3(1) of the Employee
Retirement and Income Security Act of 1974 (“ERISA”),
29 U.S.C. § 1002(1). See Central States, Southeast &
Southwest Areas Pension Fund v. Central Transport, Inc.,
472 U.S. 559, 561-62 (1985), reh’g denied, 473 U.S. 926
(1985). Welfare Fund beneficiaries are teamsters and
dependents of teamsters (collectively, “Beneficiaries”)
from local unions throughout the country who negotiate
collective bargaining agreements with their employers.
These collective bargaining agreements require employ-
ers to pay a certain level of contributions to the Welfare
Fund in return for a set benefit package offered by the
Welfare Fund for that particular contribution rate. Each
contributing employer executes a participation agree-
ment with the Welfare Fund agreeing, among other
things, to pay the required contributions and to abide by
all rules and regulations set by the Welfare Fund Trust-
ees who administer the Welfare Fund. Established under
the Taft-Hartley Act, the Welfare Fund has ten trust-
ees—five appointed by contributing employers and five
elected by the unions whose members are Beneficiaries.
See 29 U.S.C. § 186.

' As provided in United States Supreme Court Rule 37.6, the
Welfare Fund states that no counsel for any party authored any
part of this brief, and that no person other than amicus curiae,
its members, or its counsel made any monetary contribution to
the preparation or submission of the brief.

2

The Welfare Fund provides medical, hospital, dental,
vision, life and disability benefits to more than three
hundred thousand Beneficiaries who reside in thirty-six
states. The Welfare Fund is self-funded and pays benefits
directly from the contributions of participating employ-
ers. The Welfare Fund is not-for-profit, and its assets are
used exclusively to provide benefits for Beneficiaries or
to defray the reasonable costs of administering the bene-
fit plan. See 29 U.S.C. § 1104(aX(1)(A).

ERISA and the law of trusts require plan fiduciaries to

manage the asset3 of the Welfare Fund prudently and in
the best interests of all beneficiaries. 29 U.S.C. § 1104(a)
(1XB). To comply with these requirements, the Welfare
Fund has implemented cost-containment measures in-
cluding the promulgation of a subrogation provision. This
provision requires Beneficiaries who receive recoveries in
accident cases to, among other things, reimburse the plan
from any recovery in the full amount of accident-related
benefits advanced by the Welfare Fund. Since its incep-
tion in 1984, the Welfare Fund’s subrogation program
has achieved recoveries and savings totaling approxi-
mately $62.0 million.

Since benefit levels are based on actuarial assumptions
which assume a certain level of subrogation recoveries,
such recoveries are necessary to provide assets sufficient
to fund the benefit levels stated in the various benefit
plans offered by the Welfare Fund. Like other large
multiemployer plans where contribution rates are set
pursuant to collective bargaining agreements and a
participation agreement, the Welfare Fund cannot un-
ilaterally increase contribution rates. Thus, if subroga-

tion recoveries are reduced, benefits provided to Benefi-
ciaries will be correspondingly reduced.

The Welfare Fund will be materially and adversely
affected by the decision of the Ninth Circuit Court of
Appeals in this case. That decision conflicts with deci-
sions of the Seventh, Eighth and Eleventh Circuits which
permit the enforcement of subrogation and reimburse-
ment rights in federal courts. See Administrative Comm.
v. Gauf, 188 F.3d 767 (7 Cir. 1999); Blue Cross & Blue
Shield of Ala. v. Sanders, 138 F.3d 1347 (11 Cir. 1998);
Southern Council of Indus. Workers v. Ford, 83 F.3d 966
(8™ Cir. 1996). If the Ninth Circuit’s decision is allowed
to stand, state courts will be the exclusive forum for
enforcement of the Welfare Fund’s subrogation rights in
that Circuit. As a result, and as discussed herein, the
Welfare Fund will be able to enforce in piecemeal fashion
only, or not at all, its subrogation rights in the Ninth
Circuit and other jurisdictions which follow the Ninth
Circuit’s lead. In contrast, the Welfare Fund will be able
to fully enforce its subrogation rights in the Seventh,
Eighth and Eleventh Circuits and other jurisdictions.
Contrary to the intent of Congress when it passed
ERISA, the above split in the Circuits will lead to non-
uniform enforcement of the Plan and impose a costly
administrative burden on the Plan because the Welfare
Fund enforces its subrogation rights in many jurisdic-
tions. In addition, allowing the Ninth Circuit’s decision
to stand will lead to a reduction of subrogation recoveries
and the consequent loss of benefits for Plan Beneficiaries.

Moreover, the decision of the Ninth Circuit will have
implications for many other employee benefit plans.

4

Many multiemployer plans and plans of single employ-
ers with nationwide facilities operate in many different
states. The Ninth Circuit’s decision will cause for these
plans the same reduction in subrogation recoveries, in-
crease in administration expenses, and patchwork en-
forcement of plan terms. The administrative difficulty
and added expense caused by such a piecemeal scheme of
federal and state regulation of multistate employee bene-
fit plans which Congress rejected when it passed ERISA
will thus become a reality for many ERISA plans. See
Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 9-11
(1987); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 107-08
(1983).

Il. SUMMARY OF THE ARGUMENT

The Welfare Fund seeks to bring to the Court's at-
tention matters not focused on by Petitioners. When it
passed ERISA into law, Congress recognized the national
interest in employee benefit plans, and the need for ex-
clusive federal regulation of such plans to ensure unifor-
mity in enforcement of plan terms and to eliminate con-
flicting state and local regulation of such plans. For large
multistate plans like the Welfare Fund, the Ninth Cir-
cuit’s decision makes these laudable goals of ERISA un-
attainable, creates added administrative expense, and
results in reduced subrogation recoveries and consequent
reduced benefits for Beneficiaries.

For several reasons, the decision of the Ninth Circuit
causes the very harm which ERISA was designed to
prevent. First, the Ninth Circuit’s decision conflicts with
decisions of the Seventh, Eighth and Eleventh Circuits,

causing the unequal, non-uniform enforcement of the
Welfare Fund’s subrogation provision. Second, the re-
quirement that multistate plans sue in state court to
enforce subrogation rights invites state courts to apply a
panoply of state laws which diminish or eliminate sub-
rogation rights, further fostering piecemeal enforcement
of plan terms.

Moreover, the decision of the Ninth Circuit prevents
plan fiduciaries from enforcing the terms of the plan and
redressing violations of plan terms as required by ERISA.
See 29 U.S.C. § 1132(aX3). In fulfilling these obligations,
Congress authorized plan fiduciaries to sue exclusively in
federal court to obtain equitable relief under ERISA. 29
U.S.C. §§ 1132(aX3), 1132(e). In denying the Trustees re-
lief in federal court, the forum which has exclusive jur-
isdiction over these matters, the Ninth Circuit’s decision
effectively bars plan fiduciaries from enforcing plan
terms as required by ERISA.

Ill. ARGUMENT: REASONS FOR
GRANTING THE WRIT

A. The Decision of the Court of Appeals for the

and the Need for Exclusive Federal Regula-
tion of Such Plans to Ensure Uniformity in
Enforcement of the Terms of the Plan.

When Congress enacted ERISA in 1974, it recognized
that employee benefit plans involved the national public

interest and stressed the importance of the uniform
federal regulation of such plans. Congress set forth its
findings and declaration of policy in Sectidn 2 of ERISA,
which, in part, provides:
The Congress finds that the growth in size, scope,
and numbers of employee benefit plans in recent
years has been rapid and substantial; that the op-
erational scope and economic impact of such plans is
increasingly interstate; that the continued well-being
and security of millions of employees and their de-
pendents are directly affected by these plans; that
they are affected with a national public interest; that
they have become an important factor affecting the
stability of employment and the successful develop-
ment of industrial relations.
29 U.S.C. § 1001(a). As recognized by this Court,
ERISA’s legislative sponsors emphasized the necessity
for uniform federal regulation of not only the substantive
provisions, but also of enforcement provisions applicable
to such plans:

“It should be stressed that with the narrow excep-
tions specified in the bill, the substantive and en-
forcement provisions of the conference substitute are
intended to preempt the field for Federal regulations,
thus eliminating the threat of conflicting or inconsis-
tent State and local regulation of employee benefit
plans. This principle is intended to apply in its broad-
est sense to all actions of State or local governments,
or any instrumentality thereof, which have the force
or effect of law.”

7

Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 99 (1983)
(quoting 120 Cong. Rec. 29933 (1974));* see also FMC
Corp. v. Holliday, 498 U.S. 52, 60 (1990).

In order to permit plan Trustees to structure plan
provisions uniformly for all plan participants, Congress
enacted ERISA’s preemption provisions. See 29 U.S.C.
§ 1144. To further this same purpose, Congress enacted
Section 502(aX3) of ERISA, 29 U.S.C. § 1132(aX3),
ERISA’s enforcement provision, allowing plans to sue to
obtain equitable relief to enforce plan terms and redress
violations of plan terms. To ensure uniform enforcement
of plan terms, Congress provided that federal district
courts shall have exclusive jurisdiction in the above
actions. See 29 U.S.C. § 1132(e).

Congress rejected amendments to ERISA which would
have required ERISA plans to comply with multiple and
potentially conflicting state laws which would raise the
possibility of “endless litigation” on issues of whether
state regulation impinged upon federal regulation. Shaw,
463 U.S. at 99 n.20. Thus, after a period of monitoring by
the Congressional Pension Task Force and hearings by
a House Subcommittee, a report evaluating ERISA’s
preemption provisions was issued, stating that “‘the

* Senator Javits echoed these comments, stating: “‘Although
the desirability of further regulation—at either the State or
Federal level—undoubtedly warrants further attention, on bal-
ance, the emergence of a comprehensive and pervasive Federal
interest and the interests of uniformity with respect to inter-
state plans required—but for certain exceptions—the displace-
ment of State action in the field of private employee benefit
programs.’” Shaw, 463 U.S. at 99 n.20 (quoting 120 Cong. Rec.
29942 (1974)).

Federal interest and the need for national uniformity
are so great that enforcement of state regulation should
be precluded.’” Jd. (quoting H.R. Rep. No. 1785, 94th
Cong., 2d Sess., at 47 (1977)).

This Court has also on several occasions noted the
necessity for exclusive federal regulation of employee
benefit plans. In Shaw, the Court considered the question
of whether New York’s Disability Benefits Law was pre-
empted by ERISA. In finding preemption, this Court
noted that the obligation of the plans to comply with “the
varied and perhaps conflicting” requirements of particu-
lar state fair employment laws would make nationwide
administration of plans more difficult. 463 U.S. at 105
n.25. The Court emphasized that this sort of interference
with the administration of employee benefit plans was
exactly what ERISA’s comprehensive preemption of state
law was designed to minimize. Jd.

In Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1
(1987), this Court recognized that requiring an employer
to adopt different payment formulae for employees inside
and outside the State would subject the employer to pre-
cisely the burden that ERISA preemption was intended
to eliminate. Jd. at 10. This court recognized the diffi-

* Since the laws and regulations applicable to health care
benefits vary widely from state to state, the disruptive effect of
state regulation is compounded for employee benefit plans,
such as the Welfare Fund, which have empl yees in more than
one state. Benefit plans which operate in many states often
choose to self-fund benefit payments rather than purchase
insurance to cover such benefits. Because state laws vary dra-
matically, purchasing insurance for plans which operate in

(continued...)

culties which these state rules imposed on plan adminis-
trators and stated:

An employer that makes a commitment systemati-
cally to pay certain benefits undertakes a host of
obligations, such as determining the eligibility of
claimants, calculating benefit levels, making dis-
bursements, monitoring the availability of funds for
benefit payments, and keeping appropriate records in

order to comply with applicable reporting require-
ments. The most efficient way to meet these respon-

sibilities is to establish a uniform administrative
scheme, which provides a set of standard procedures
to guide processing of claims and disbursement of
benefits. Such a system is difficult to achieve, how-
ever, if a benefit plan is subject to differing regula-
tory 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.

Id. at 9.

ERISA’s uniform enforcement mechanism complements
ERISA’s administrative scheme. In Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41 (1987), this Court again confirmed
that ERISA was designed to achieve uniformity of deci-

——"—

* (...continued)

many states is inefficient, inequitable and increasingly ex-
pensive. It was for this reason that Congress passed the pre-
emption clause of ERISA, 29 U.S.C. § 1144. See Fort Halifax,
482 U.S. at 10; see also FMC Corp. v. Holliday, 498 U.S. 52
(1990).

10

sion to assist fiduciaries “‘to predict the legality of pro-
posed actions without the necessity of reference to vary-
ing state laws.’” Jd. at 56 (quoting H.R. Rep. No. 533,
93rd Cong., lst Sess., at 12 (1973), reprinted in 1974
U.S.C.C.A.N. 4639, 4650). This Court noted ERISA’s
expectation that federal courts would develop federal
common law:

The expectations that a federal common law of rights
and obligations under ERISA-regulated plans would
develop, indeed, the entire comparison of ERISA’s
§ 502(a) to § 301 of the LMRA, would make little
sense if the remedies available to ERISA participants
and beneficiaries under § 502(a) could be supple-
mented or supplanted by varying state laws.

Pilot Life, 481 U.S. at 56.

This Court also noted in enacting ERISA, Congress
realized that employers establishing and maintaining
employee benefit plans are faced with the task of coordi-
nating complex administrative activities:

A patchwork scheme of regulation would introduce
considerable inefficiencies in benefit program opera-
tion, which might lead those employers with existing
plans to reduce benefits, and those without such

plans to refrain from adopting them. Pre-emption
ensures that the administrative practices of a benefit

plan will be governed by only a single set of regula-
tions.
Fort Halifax, 482 U.S. 1, 11 (1987) (citing H.R. Rep. No.
533, 93rd Cong., 1st Sess., at 12 (1973), reprinted in 1974
U.S.C.C.A.N. 4639, 4650).

ll

2. The Decision of the Ninth Circuit Fosters the
Very Harm Which Congress Sought to Prevent
in Enacting ERISA.

The Ninth Circuit’s decision will create the exact
patchwork scheme of regulation and enforcement which
Congress sought to avoid in enacting ERISA. Ingersoll-
Rand Co. v. McClendon, 498 U.S. 133, 142 (1990). Most
obviously, the split in the Circuits which the Ninth
Circuit’s decision creates will result in the unequal, non-
uniform enforcement of the Welfare Fund’s subrogation
provision. First, denying ERISA plans the right to en-
force subrogation rights in federal court under Section
502(aX3) of ERISA, 29 U.S.C. § 1132(aX3), may indeed
result in the complete abrogation of such rights. Courts
in a number of jurisdictions have held that federal courts
have exclusive jurisdiction in enforcing such rights and
have dismissed lawsuits seeking to enforce these rights.
See, e.g., Descant v. Administrators of the Tulane Educ.
Fund, 706 So. 2d 618 (La. Ct. App. 1998); Jefferson-Pilot
Life Ins. Co. v. Krafka, 57 Cal. Rptr.2d 723 (Cal. Ct. App.
1996). In fact, ERISA itself provides that federal district
courts shall have exclusive jurisdiction over enforcement
of plan terms. 29 U.S.C. § 1132(e).

Second, the requirement that multistate plans sue in
state court to enforce their subrogation provisions invites
state courts to apply local laws which diminish sub-
rogation rights and prevents the uniform enforcement of
plan terms. See Ingersoll-Rand, 498 U.S. at 142. For ex-
ample, the laws of some states prohibit the enforcement
of subrogation rights against uninsured motorist recov-
eries, recoveries by minors, or recoveries which do not

12

make a plan participant whole. In other states, the
amount of the recovery may be reduced by an award of
pro rata attorney’s fees for a participant’s attorney under
the common fund doctrine.‘

* Federal courts are often forced to decide whether to apply
state laws that would forbid or limit an ERISA plan’s sub-
rogation rights. When confronted with this issue, most federal
courts have held that ERISA preempts such laws or that the
written language of the plan overrides such laws. See, e.g.,
FMC, 498 U.S. 52 (1990) (ERISA preempts state automobile
insurance anti-subrogation law); Community Ins. Co. v. Rich-
ardson, 172 F.3d 872 (6™ Cir. 1999) (ERISA preempts Ohio
statute prohibiting reimbursement of medical claims from
municipalities); Electro-Mechanical Corp. v. Ogan, 9 F.3d 445
(6™ Cir. 1993) (ERISA preempts Tennessee statute prohibiting
subrogation of health care costs in malpractice cases); Hampton
Indus., Inc. v. Sparrow, 981 F.2d 726 (4" Cir. 1992) (ERISA
preempts North Carolina subrogation statute limiting a self-
funded ERISA plan’s recovery from third party settlement
funds); Davis v. Line Constr. Benefit Fund, 589 F. Supp. 146
(W.D. Mo. 1984) (ERISA preempts State law preventing sub-
rogation of an otherwise unassignable personal claim).

Courts have also considered application of the common fund
doctrine to ERISA plans. See, e.g., Walker v. Wal-Mart Stores,
Inc., 159 F.3d 938, 940 (5" Cir. 1998); United McGill Corp. v.
Stinnett, 154 F.3d 168, 173 (4 Cir. 1998); Bollman Hat Co. v.
Root, 112 F.3d 113, 118 (3™ Cir. 1997), cert. denied, 522 U.S.
952 (1997); Health Cost Controls v. Isbell, 139 F.3d 1070, 1072
(6" Cir. 1997); Ryan v. Federal Express Corp., 78 F.3d 123 (3™
Cir. 1996). In Waller v. Hormel Foods Corp., 120 F.3d 138, 141
(8 Cir. 1997), the court ruled that whether ERISA preempts
the common fund doctrine depends on the language of the
benefit plan. In Cutting v. Jerome Foods, Inc., 993 F.2d 1293,
1296 (7" Cir. 1993), cert. denied, 510 U.S. 916 (1993), and

(continued...)

13

The decision of the Ninth Circuit will create huge
burdens on multistate plans and force such plans to rely
on myriad rules to enforce subrogation and reimburse-
ment rights. Uniformity in the application of plan terms
will cease. The end result of the Ninth Circuit’s decision
will be the exact patchwork administration of employee
benefit plans that Congress sought to avoid in enacting
ERISA. See FMC Corp., 463 U.S. at 60; Fort Halifax, 482
U.S. at 10-11; Shaw, 463 U.S. at 105, n.25.

B. If Allowed to Stand, the Ninth Circuit’s Decision
Will Diminish a Valuable Cost-Saving Mechanism
for Self-Funded Plans.

Many of the cost-containment measures implemented
by employee benefit plans transfer actual costs to benefi-
ciaries or restrict the type, length or choice of medical
care. Unlike such cost-containment measures, a sub-
rogation provision merely prevents the duplication of
benefits by the plan where other coverage exists for a
particular injury or illness. In other words, the partici-
pant does not recover twice for accident-related medical
damages, and the responsibility for the medical care is
shifted to the party causing the injury or to the specific-
risk insurer who has specifically assumed the kind of risk
leading to the injury. Subrogation not only shifts the

* (...continued)

Fields v. Farmers Ins. Co. Inc., 18 F.3d 831, 835-36 (10" Cir.
1994), courts held that the terms of the plan override contrary
State laws related to subrogation in Wisconsin and Oklahoma,
respectively. See also footnote 6, infra, pp. 15-16.

14

costs of medical care to the responsible party, but also
constitutes a valuable cost-savings device. Since the in-
ception of the Welfare Fund’s subrogation program, the
Welfare Fund has achieved recoveries and subrogation
savings totaling approximately $62.0 million.

Under the Ninth Circuit’s ruling, employee benefit
plans will be ushered to state court to enforce their
subrogation rights. As discussed previously, some state
courts have held that the federal courts have exclusive
jurisdiction over such matters and will, therefore, not
entertain such actions. Other states may indeed apply
laws which prohibit or diminish the enforcement of
subrogation rights. (See footnote 4, supra, pp. 12-13.) The
inevitable result of the Ninth Circuit’s ruling will be a
loss in subrogation recoveries for the Welfare Fund and
_ other plans, and the consequent loss of benefits for plan

participants.°

* The Ninth Circuit’s decision could lead benefit plans to re-
consider their policy of advancing payment for medical bills
related to injuries sustained in accidents. If benefit plans can-
not enforce their subrogation rights in certain states, and in
order to avoid having one employer subsidize the benefits of
another employer's employees, plans could add plan provisions
to exclude from coverage claims related to accidents in those
states where the plan’s subrogation provision could not be en-
forced. Although compensating for lost subrogation recoveries,
this added layer of administration would delay payment of a
beneficiary's benefits, increase the costs of administering the
plan, and lead to the hodge-podge administration of plans
which ERISA condemned.

15

C. The Decision of the Ninth Circuit Prevents the
Trustees From Administering the Plan in Accor-
dance with ERISA’s Mandate.

ERISA requires that every employee benefit plan be
established pursuant to a written instrument and that
named fiduciaries control and manage the operation and
administration of the Plan. 29 U.S.C. § 1102(aX1). Con-
gress bestowed upon fiduciaries the power and author-
ity to accomplish these objectives by enacting ERISA’s
enforcement mechanism. Section 502(e) of ERISA, 29
U.S.C. § 1132(e), affords fiduciaries access to federal
courts to enforce plan terms and to redress violations of
plan terms. The Ninth Circuit’s decision, which denies
access to federal court, prevents fiduciaries from admin-
istering the Plan as required by ERISA.

Subrogation is not a simple contractual matter between
an insured and its insurer where state issues predomi-
nate. Subrogation involves enforcing the written terms of
the plan under the enforcement mechanism of ERISA. In
many instances, the enforcement of subrogation rights by
a self-funded employee benefit plan involves the interpre-
tation of a plan’s precise subrogation provision—a func-
tion best left to the discretion of plan Trustees.’ Because

° For example, plan fiduciaries must decide whether the writ-
ten terms of the plan include recoveries from tortfeasors as well
as their insurers or recoveries from uninsured motorist cov-
erage. See Health Cost Controls v. Washington, 187 F.3d 703,
711-12 (7 Cir. 1999), cert. denied, 120 S. Ct. 979 (2000);
Wendy’s Int'l, Inc. v. Karsko, 94 F.3d 1010, 1013 (6 Cir. 1996);
Sunbeam-Oster Co., Inc. v. Whitehurst, 102 F.3d 1368, 1378 (5"

Cir. 1996). Another question of interpretation arises when the
(continued...)

16

ERISA considerations permeate the enforcement of Plan
terms such as subrogation, Congress legislated that fed-
eral district courts have exclusive jurisdiction to enforce
Plan terms and redress violations of those terms. These
are core ERISA issues best left, as Congress intended, to
the federal courts. Contrary to the Ninth Circuit’s po-
sition, the equitable relief which Congress set forth in
ERISA is sufficient to accomplish these objectives.

IV. CONCLUSION

The Ninth Circuit’s decision is directly at odds with the
goals of Congress in enacting ERISA. If the decision of
the Ninth Circuit is permitted to stand, employee benefit
plans will be subjected to non-uniform regulations and
enforcement. The consequent increased administrative
expenses and decreased subrogation recoveries will result
in a loss of benefits for plan beneficiaries. Plan fiducia-
ries will be denied the uniform enforcement mechanism
needed to enforce plan terms and redress violations of
plan terms. For the reasons stated above, Central States,
Southeast and Southwest Areas Health and Welfare

® (...continued)

written terms of the plan set the priority of allocations between
the subrogee and subrogor. See Cagle v. Bruner, 112 F.3d 1510,
1520-22 (11 Cir. 1997), reh’g denied, 124 F.3d 223 (11® Cir.
1997); Sunbeam-Oster Co., 102 F.3d at 1373-76; Cutting v.
Jerome Foods, Inc., 993 F.2d 1293 (7™ Cir. 1993), cert. denied,
510 U.S. 916 (1993). See also Firestone Tire & Rubber Co. v.
Bruch, 489 U.S. 101 (1989) (arbitrary and capricious standard
_ applied when plan gives fiduciary discretionary authority to

construe terms of plan).

17

Fund respectively requests this Honorable Court to grant
the Petition for Writ of Certiorari.

June 8, 2000.
Respectfully submitted,
WILLIAM J. NELLIS JOHN A. KUKANKOS
Secretary to the Board Counsel of Record
of Trustees JAMES L. COGHLAN
Central States, Southeast FRANCIS E. STEPNOWSKI
and Southwest Areas DEBRA M. CYRANOSKI
Health and Welfare Fund COGHLAN KUKANKOS COOK
9377 W. Higgins Road One N. Franklin Street
Rosemont, Illinois 60018 Suite 900
(847) 518-9800 Chicago, Illinois 60606
(312) 357-9200
Attorneys for Amicus Curiae

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0368%3A07. Public record. Not legal advice.