Amicus Curiae Brief — Rush Prudential HMO, Inc. v. Moran

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Text

No. 00-1021

In The

Supreme Court of the United States

————e eo —

RUSH PRUDENTIAL HMO, INC.,

Petitioner,

DEBRA C. MORAN and STATE OF ILLINOIS,

Respondents

— ——____ ——— @ ------

On Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

_¢ ee

BRIEF OF UNITED POLICYHOLDERS AS AMICUS

CURIAE IN SUPPORT OF RESPONDENTS

o¢—- -— --- —

Amy BAcH ARNOLD R. Levinson

Of Counsel Counsel of Record

BacH Law Orfict TeRRENCE J. COLEMAN

42 Miller Avenue Piispury & Levinson, LLP

Mill Valley, CA 94941 One Embarcadero Center,

(415) 381-7627 38th FI.

San Francisco, CA 94111

(415) 433-8000

Counsel for Amicus Curiae

COCKLE LAW BRIEF PRINTING CO., (800) 225-6964

OR CALL COLLECT (402) 442-2831

BEST AVAILABLE COPY

QUESTION PRESENTED

Whether a law which is saved from preemption

under the terms of the saving clause of the Employee

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

ERISA Section 514(b)(2)\A), 29 U.S.C. § 1144(B)(2)(A), is

nonetheless preempted because it provides a remedy

other than those enumerated in ERISA’s remedial provi-

sion. ERISA § 502, 29 U.S.C. § 1132.

TABLE OF CONTENTS

Page

ee Be er ee ee i

TABLE OF AUTHORITIOS ......cccccccsccccccccess iii

INTEREST OF THE AMICUS CURIAE ............. 1

SUMMARY OF ARGUMENT.................000eee 1

RETRIUEEITD o 0600000 cenenentesseee 5

I. ERISA’S EXPRESS PREEMPTION CLAUSE CON-

TROLS OVER ANY CLAIM OF IMPLIED PRE-

EMPTION ARISING OUT OF ERISA SECTION

POs vcccccscccconcesesnessyedaeneninane 5

B. Pilot Life Does Not Control The Question Pre-

sented In This Action Because The State Law

At Issue In Pilot Life Was Not A Law Regulat-

ING GRGUSGRED. . oo s0scceneesensegbannenneen 8

C. ERISA’s Legislative History Is Unequivocal In

Disclosing That The Act Was Intended To Reg-

ulate Pension Benefits And Was Not Intended

To Impact The Field Of Insurance........... 14

D. This Court Has Recognized That Remedial

Laws Are At The Core Of The McCarran-Fer-

guson Act And Thus The Saving Clause... .. 21

E. ERISA’s Enforcement Mechanisms Leave

Insureds With No Effective Remedy And Do

Not Conform With ERISA’s Legislative His-

tory; Petitioner Is Not A Proper Party To An

Fe het EE 24

Il. THE TRIAL COURT LACKED SUBJECT MAT-

8 ltt RR) ot ae 30

COORG EG 8.0 0 v04ssssnecennadbensnsaebideucians 30

ili

TABLE OF AUTHORITIES

Page

Cases

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

CD nceenbbabetesesccceucecencoececccscccececees 20

Andrews-Clarke v. Travelers Ins. Co., 984 F.Supp. 49

TD, BEROR. BOPP. cccccccccccscsccccccccccecccccces 26

Bast v. Prudential Ins. Co., 150 F.3d 1003 (9th Cir

1998) cert. denied, 120 S.Ct. 170 (1999)............. 26

Blau v. Del Monte Corp., 748 F.2d 1348 (9th Cir.

EEE CREMP POTTTTITTTITTT TT TTT TTL 27

Butero v. Royal Maccabees Life Ins. Co., 174 F.3d

Sy GEE GE, BOE ccnccccccccccccccsccocccccces 27

Cannon v. Group Health Serv. of Okla., Inc., 77 F.3d

oe, Le TTT T TIT Terre eee 26

Cohen v. Equitable Life Assurance Soc. of the United

States, 196 Cal.App.3d 669 (1987) ............0005: 25

Corcoran v. United Healthcare, Inc., 965 F.2d 1321

LL EPPPPTTTTTITITITT TTT Tee 26

Everhart v. Allmerica Financial Life Ins. Co., 1999

WL 498244 (N.D. Cal. 1999) .......... 2.5 eee eeee 25

Florence Nightingale Nursing Serv., Inc. v. Blue Cross

& Blue Shield, 832 F.Supp. 1456 (N.D. Ala. 1993),

aff'd, 41 F.3d 1476 (11th Cir. 1995) ............-5+- 26

FMC Corp. v. Holliday, 498 U.S. 52 (1990)...........-- 7

Franchise Tax Board v. Construction Laborers Vacation

Trust for Southern Cal., 463 U.S. 1 (1983)....... 2, 11, W

Franklin H. Williams Ins. Trust v. Travelers Ins. Co.,

50 F.3d 144 (2nd Cir. 1995) ....... 6.6 c cece eee e ee ees 3

TABLE OF AUTHORITIES - Continued

Garratt v. Knowles, 245 F.3d 941 (7th Cir. 2001) ..

Garren v. John Hancock Mut. Life Ins. Co., 114 F.3d

See Gee Ga MI bbb dcdnceccsdocsdedvsceses

Gaylor v. John Hancock Mutual Life Ins. Co., 112 F.3d

ee? Ge GD. SU oc eer bas ceddhasennccsatane

Gelardi v. Pertec Computer Corp., 761 F.2d 1323 (9th

Sh Se caduabeousadndeedé otaatiebedketucie

Gibson v. Prudential Ins. Co. of N. Am., 915 F.2d 414

a Gh Sins coginsenskatechidadodesedeess

Hill v. Blue Cross Blue Shield of Alabama, 117

F.Supp.2d 1209 (N.D. Ala. 2000) ..............

Humana Inc. v. Forsyth, 525 U.S. 299 (1999)......

In Re Life Ins. Co. of N. Am., 857 F.2d 1190 (8th Cir.

Shes scuubssdécsenpscensccdiennsabesbeabnus

Jordan v. Reliable Life Ins. Co., 694 F.Supp. 822 (N.D.

Si, Ss ns btwannond beaekihealdee es

Kanne v. Connecticut General Life Ins. Co., 867 F.2d

489 (9th Cir. 1988), cert. denied, 492 U.S. 906

SUeSE DP oceccrnensneds ceccachscenecestseedbavees

Kransco v. American Empire Surplus Lines Ins. Co.,

23 Cal.4th 390, 2 P.3d 1 (2000)................

Lewis v. Aetna U.S. HealthCare, Inc., 78 F.Supp.2d

TAGS GUD. Clie. BORD)... wncccsccccccccescess

Malone v. White Motor Corp., 435 U.S. 497 (1978).

Marshall v. Bankers Life & Cas. Co., 2 Cal. 4th 1045,

ly treet

Massachusetts v. Morash, 490 U.S. 107 (1989).....

coos ae

TABLE OF AUTHORITIES - Continued .

age

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. |

FES CIDE wc ccccccccccccccccccccesccccvcesess passim

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

Gs BP GD cnccccccecccesscescesocccsvcecceces 20

New York State Conf. of Blue Cross & Blue Shield

Plans v. Travelers Ins. Co., 514 U.S. 645 (1995) ....6, 7

Pacific Gas & Elec. Co. v. State Energy Resources

Conservation & Dev. Comm'n, 461 U.S. 190 (1983) .... 12

Park’N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S.

BP CE s ccccccencapecceceesteceesecccceccccocee: 7

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

Ramirez v. Inter-Continental Hotels, 890 F.2d 760

BEE GOR BE oc ccccccccccccceecccscccccseccesece: 3

Roeder v. Chemrex, Inc., 863 F.Supp. 817 (E.D. Wis.

Bn vcdisctdvcccccccccccsveveesseccccctcepscccces 25

Rogers v. Tecumseh Bank, 756 P.2d 1223 (Okla. aa 4

Rosen v. TRW, Inc., 979 F.2d 191 (11th Cir. 1992)..... 25

SEC v. National Securities, Inc., 393 U.S. 453 (1969) .... 22

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983)....... 5

Silkwood v. Kerr-McGee Corp., 464 U.S. 238 (1984) .... 23

UNUM Life Insurance Co. of Am. v. Ward, 526 U.S.

BD GSO o ccc ceccsndccscccseccccesccoscvcvess passim

STATUTES

Employee Retirement Income Security Act of 1974

(“ERISA”)

OL TTT ee passim

TABLE OF AUTHORITIES - Continued

Page

PT) séseudueesécuetencentbeddadedabnaaed 4,5

DEE nSoneevtabivadcacnabenssvdonnesedeveccsaul 5

PE cccnnéechendeuésbeunneoossbads 6, 11, 12

Br ee Ea svdevicasccssedcecededucsueneanous 5

Pe HE Wd ddcdveccacescedeecvicd baéanee 5

SP UR & PO occ ccccccccccccccccsccess 25

SP Sn a PE Rbdbadbadossdaunds woncdeoiedandon 10

Oe ee Oe BINS 6neccncccesdenessecdanwas 25

ee ee es din chivigvccess dobedecdedeus 25

er le id chncmenbctensncectbensde 2, 25

BP Mere TE BED cc ccccccvcccccescccvesscccesveses 10

ee Se OF nninatcncasegedestedencdheviecel 5

BP We & BRIO oc ccccccccccccccccccces 6, 10

Se Cs Se SDS s cen cccsececcccesososcees 28

Illinois Health Maintenance Organization Act,

Saw Gbbétdénstococteccecssanendcbune passim

Labor-Management Relations Act of 1947

(“LMRA”)

Section S01, 29 UGC. § 185 2... cccccccccccess 9, 10

thins atididt btdthe dubenadunissanie baka 11

DEcC ase ONION AE... occ cccsccccécccccccecs passim

SP Ey MO nd eve cintbastcloetscsesccandeuts 7

Welfare and Pension Plans Disclosure Act........... 15

vii

TABLE OF AUTHORITIES - Continued

Page

REGULATIONS

29 C.F.R. § 2520.104-20..........2 cece cece cence eeeees 27

29 C.PR. § 2520.106-21........ccccccccccccrcevescees 27

LEGISLATIVE MATERIALS

113 Cong. Rec. 4650-53 (1967)..........-0seeeeeeeees 16

119 ae 30,003 (1973), reprinted in 2 Legisla-

tive HistOry ..........ccceeeeececceceeceeceseesees 17

120 Cong. Rec. 29,933-34 (1974), reprinted in 3 Leg-

islative History ..........sccccccccecccccececcssess 16

120 Cong. Rec. 29,933-35 (1974), reprinted in 3 Leg-

tolative PHIStOTy ........ccccccccccccccccccccscceees 18

120 Cong. Rec. 29,934 (1974), reprinted in 3 Legisla-

tive History .........--ccceeeee reece eeeeeeeeeneees 14

120 Cong. Rec. 29,935-44 (1974), reprinted in 3 Leg-

islative History ...........sccccccccccccccecccccess 17

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

PHISGOCY. . 0c cc ccccccccccccccccccsecesccsscscccees 17

H.R. Rep. No. 93-1280, 93rd Cong. 2d Sess. at 383,

reprinted in 3 Legislative History at 4650.......... 28

H.R. Rep. No. 93-533, at 1, 17-18, reprinted in 1974

U.S.C.C.A.N. at 4655-56... 2.0... cece cece eee ee eees 19

H.R. Rep. No. 93-533, at 1-28, reprinted in 1974

U.S.C.C.A.N. at 4639-70... 2.2... cece cece cece eee eees 18

H.R. Rep. No. 93-533, at 3, reprinted in 1974

US.C.C.A.N. at 4641 2.2... ccccccccccccccsccces 14, 15

H.R. Rep. No. 93-533, at 4, reprinted in 1974

USCICAIN. Ot 4642 2. .cccccccccccccccccccccccess 15

viii

TABLE OF AUTHORITIES - Continued

H.R. Rep. No. 93-533, at 5-8 (1973), reprinted in

1974 U.S.C.C.A.N. 4639, 4643-46 ..............

Interim Report of Activities of the Private Welfare and

Pension Plan Study, Subcommittee On Labor of the

Committee on Labor and Public Welfare, S. Rep.

No. 92-634, 92d Cong., 2d Sess. (1972) at 67-90...

President’s Comm. on Corporate Pension Funds

and Other Private Retirement and Welfare Pro-

grams, Public Policy and Private Pension Pro-

grams: A Report to the President on Private

Employee Retirement Plans, at vii-viii (1965). .

Pub. L. No. 85-836, 72 Stat. 997 (1958) (repealed

PPbsdhtebndibechndssancavess ukdbienwsdeetic

i I OI vend nti cdehenstccvadeds

S. Rep. No. 85-1440, at 2-11 (1958), reprinted in

BOD AE os acnnacddcscdsedocccccsnces

S. Rep. No. 92-634, at 1 (1972).............00005

S. Rep. No. 93-127 (1973), reprinted in 1974

2 tbccctinetitedediminedas ia 14, 15,

Special Comm. on Aging, U.S. Senate, 98th Cong.,

The Employment Retirement Incoine Security

Act of 1974: The First Decade 1-25 (Comm. Print

ODEN te ttcesdddddnnsvnes bdasdadndseteceinscds

Subcomm. on Labor of the Senate Comm. on

Labor and Pub. Welfare, 94th Cong., Legislative

History of the Employee Retirement Income

Security Act of 1974 (Comm. Print 1976)......

. 20

ocoe Me

TABLE OF AUTHORITIES - Continued

OrHER AUTHORITIES

Catherine L. Fisk, The Last Article About the Lan-

ge of ERISA Preemption? A Case Study of the

ailure of Textualism, 33 Harvard J. on Legis. 35,

BB (1996)... cece cece cree eeeeeeeeeeeeeerenees

David Gregory, The Scope of ERISA Preemption of

State ewe A Study in Effective Federalism, 48 U.

Pitt. L. Rev. 427 1987) .....ssseccceeeceeceeees

Bogan, Protecting Patient Rights Despite

Donald T.

Court Allow States to Regu-

ERISA: Will the Supreme

late Managed Care? 74 Tul. L. Rev. 951 (2000).....

James D. Hutchinson & David M. Ifshin, Federal

Preemption of State Law Under the Employee

Retirement Income Security Act of 1974, 46 U. Chi.

L. Rev. 23, 24 (1978)......ccccceceeccecerecees

Solicitor General's Brief filed in Unum Life Ins. Co.

Stephen S. Ashley, Bad Faith Actions: Liability And

amages § 9:02, at 9-3 through 9-10, & n.38 (2d

Od. 1997)... cc ccccrccccvcccccersccessesenesees

Page

INTEREST OF THE AMICUS CURIAE

United Policyholders is a national, not-for-profit edu-

cational organization whose mission is to educate the

public, legislators and the courts on insurance issues and

consumer rights, and to assist policyholders in securing

prompt and fair insurance settlements.! As explained in

the Summary of Argument, the resolution of the issue

presented in this case is of great importance tq United

Policyholders and its members because of its potential

application to a wide range of laws affecting employees

insured through an ERISA plan.

SUMMARY OF ARGUMENT

The principal argument set forth by petitioner and its

supporting amici is that Section 4-10 of the Illinois Health

Maintenance Organization Act provides a remedy differ-

ent than those remedies set forth in ERISA Section 502, 29

U.S.C. § 1132. A fortiori, they argue, even though the law

may be saved from preemption under ERISA’s saving

clause, the law conflicts with ERISA’s exclusive remedies

and therefore is preempted under this Court’s holding in

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

argue that the subject statute does not even fall within the

saving clause and therefore is subject to ERISA’s preemp-

tion clause.

We anticipate that respondents will thoroughly

address their contentions that (1) the Illinois law does fall

1 United Policyholders, as amicus curiae, has obtained the

consent of both the Petitioner and the Respondents to submit

this brief. The letters of consent have been lodged with the Clerk

of the Court. No counsel for any party in this case authored this

brief in whole or in part, and no person or entity other than

United Policyholders and its members made any monetary

contribution to the preparation or submission of this brief.

within the saving clause and (2) that it does not provide

an additional remedy, and therefore is not even subject to

the Pilot Life claim. This brief does not address those

questions. We only address the principal question

whether ERISA’s saving clause defeats a claim that the

law is preempted because it provides a remedy other than

those set forth in ERISA Section 502.

Petitioner relies almost exclusively upon Pilot Life.

Yet, this Court has recently pointed out that Pilot Life

does not address Section 502’s impact on laws encom-

passed by the saving clause. Rather, the issue presented

in this action is an open question. See UNUM Life Insur-

ance Co. of Am. v. Ward, 526 U.S. 358, 377 n.7 (1999) (“The

case therefore does not raise the question whether

§ 502(a) provides the sole launching ground for an ERISA

enforcement action”; Pilot Life's holding was “in the con-

text” of a law which was not saved from preemption).

Further, in Franchise Tax Board of Cal. v. Construction

Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 25

(1983), this Court clearly held that “[the saving clause]

makes clear that Congress did not intend to preempt

entirely every state cause of action relating to” ERISA

plans.

When one looks at the clear language of ERISA, its

legislative history and the language of this Court's deci-

sions, the conclusion is inescapable that ERISA does not

preempt state insurance laws, such as Section 4-10 of the

Illinois law, merely because they provide remedies other

than those set forth in ERISA’s Section 502. Further evi-

dence for this conclusion is that ERISA provides that

petitioner is not a proper party to this ERISA action. 29

U.S.C. § 1132(d)(2). Rather, ERISA’s remedies were

designed to address the ability to redress abuses in pen-

sion plans, not insurance disputes. Accordingly, under

ERISA, an insured, such as Moran, would be limited to an

action against the welfare benefit plan itself. Congress

did not intend this result for insurance disputes. It

intended that States were free to continue to regulate and

provide remedies appropriate to the regulation of insur-

ance and that Moran is therefore free to pursue petitioner

on her state-law claim. Moreover, because the claim at

issue is saved from preemption, this matter was improp-

erly removed to the federal district court and should be

remanded to the State court where the action originated.

United Policyholders further believes that this

Court’s decision in Pilot Life has resulted in great confu-

sion and the denial of appropriate redress to innumerable

insureds and that this Court should revisit its holding in

Pilot Life.

The issue before the Court is of great importance to

United Policyholders, which is devoted to protecting the

rights of insureds in a wide variety of contexts, including

life, health and disability insurance as well as property

and liability insurance. There are numerous actual and

potential state insurance laws which fall squarely within

the saving clause, but whose enforcement has been nulli-

fied by courts which have interpreted this Court's prece-

dents as barring any such laws which provide a remedy

other than those set forth in ERISA.? Thus, the determina-

tion in this case of whether ERISA’s remedial provisions

bar enforcement even of those laws which are explicitly

2 See, e.g., Kanne v. Connecticut General Life Ins. Co., 867 F.2d

489 (9th Cir. 1988), cert. denied, 492 U.S. 906 (1989); Ramirez v.

Inter-Continental Hotels, 890 F.2d 760, 763-64 (Sth Cir. 1989); In Re

Life Ins. Co. of N. Am., 857 F.2d 1190, 1194 (8th Cir. 1988); but see

Franklin H. Williams Ins. Trust v. Travelers Ins. Co., 50 F.3d 144,

151 (2nd Cir. 1995) (“It would be quixotic to rule that a

claim under a state statute that is saved from ERISA

preemption . . . may nonetheless be enforced only via ERISA

provisions and remedies”).

saved from preemption has ramifications far beyond the

particular law in question here.?

An additional concern of United Policyholders is

that, in the event this Court does find that the law in

question is preempted, that it not foreclose the applica-

tion of other laws, which are not preempted. In particu-

lar, petitioner here claims that Section 4-10 of the Illinois

law is merely a substitute procedure for an ERISA partici-

pant’s right to institute a civil action under Section

502(a)(1)(B). However, other state laws exist which would

not be substitutes for, but would be in addition to the

claims available under ERISA. These claims may well

° For example, many states provide either a common law

remedy against insurers who violate the covenant of good faith

and fair dealing where, unlike the state law at issue in Pilot Life,

the claim is available solely against the insurance industry. See,

e.g., Kransco v. American Empire Surplus Lines Ins. Co., 23 Cal.4th

390, 400, 2 P.3d 1 (2000) (“The availability of [common law] tort

remedies in the limited context of an insurer’s breach of the

covenant advances the social policy of safeguarding an insured

in an inferior bargaining position who contracts for calamity

protection, not commercial advantage”); Rogers v. Tecumseh

Bank, 756 P.2d 1223, 1226 (Okla. 1988) (“the implied-in-law duty

of good faith and fair dealing [is imposed] on the insurer

because of the special purpose for obtaining insurance: An

insurer has a special relationship to its insured and has special

implied-in-law duties toward the insured”). Additionally, in

many States insureds may maintain a private right of action

under the state’s Unfair Insurance Practices statute. See Humana

Inc. v. Forsyth, 525 U.S. 299, 312 (1999) (referencing private right

of action under Nevada Unfair Insurance Practices Act);

Stephen S. Ashley, Bad Faith Actions: Liability And Damages

§ 9:02, at 9-3 through 9-10, & n.38 (2d ed. 1997); see also Hill v.

Blue Cross Blue Shield of Alabama, 117 F.Supp.2d 1209 (N.D. Ala.

2000) (finding state common law bad faith claim saved and no

longer preempted under reasoning of Ward, 526 U.S. 358); Lewis

v. Aetna U.S. HealthCare, Inc., 78 F.Supp.2d 1202 (N.D. Okla.

1999) (same).

complement rather than conflict with ERISA’s remedial

scheme. Saving such claims from preemption would per-

mit the insured appropriate relief by being able to pursue

both a Section 502(a)(1)(B) action together with other

state-law claims which are aimed at the insurance indus-

try.*

ARGUMENT

I. ERISA’S EXPRESS PREEMPTION CLAUSE CON-

TROLS OVER ANY CLAIM OF IMPLIED PREEMP-

TION ARISING OUT OF ERISA SECTION 502.

A. Preface

ERISA was enacted as a pension reform bill intended

to protect the retirement benefits of workers. Shaw v.

Delta Air Lines, Inc., 463 U.S. 85, 90 (1983); 29 U.S.C.

§ 1001(b). Protecting “the continued well-being and secu-

rity of millions of employees and their dependents was

an express Congressional declaration of policy. 29 U.S.C.

§ 1001. ERISA comprehensively regulates pension plans.

Importantly, ERISA does not comprehensively regulate

the terms of non-pension employee benefit plans.°

In addition to its substantive provisions, ERISA

includes a preemption clause, which provides that,

“except as provided in [the saving clause] the provisions

of this title . . . shall supersede any and all State laws

insofar as they . . . relate to any employee benefit

plan....” ERISA § 514(a), 29 U.S.C. § 1144(a). This Court

4 See note 3, supra, and note 46, infra.

5 See Donald T. Bogan, Protecting Patient Rights Despite

ERISA: Will the Supreme Court Allow States to Regulate Managed

Care? 74 Tul. L. Rev. 951 (2000) (hereafter, Bogan, Protecting

Patient Rights).

has described the preemption clause as “expansive.”6

However, the preemption clause is modified by the sav-

ing clause, which declares “ . . . nothing in this title shall

be construed to exempt or relieve any person from any

law of any State which regulates insurance. ...” ERISA

Section 514(b)(2)(A), 29 U.S.C. § 1144(b)(2)(A). This sav-

ing clause is “phrased with similar breadth” as the pre-

emption clause.”

In addition to ERISA’s express preemption language,

this Court has held that ERISA’s comprehensive civil

enforcement provisions, detailed in ERISA Section 502,

suggest that Congress intended all claims arising from an

ERISA-governed employee benefit plan which fall within

the ambit of ERISA Section 502 must be pursued exclu-

sively through ERISA.§ However, this Court has

explained that it has not yet determined whether Con-

gress’s express exemption from preemption for state laws

regulating insurance supersedes any inference of preemp-

tion arising from ERISA Section 502 when the state-law

remedy at issue provides a remedy aimed specifically at

the insurance industry. Ward, 526 U.S. at 377.

As the Court approaches this statutory interpretation

question, several guiding principles previously estab-

lished in the Court’s ERISA jurisprudence will apply. Like

Travelers Ins. Co., 514 U.S. 645, 655 (1995); Pilot Life, 481 U.S. at

46.

7 Ward, 526 U.S. at 363 (“[P]re-emption is substantially

qualified by an ‘insurance saving clause,’ . . . which broadly

[saves state insurance laws]... . ”); Metropolitan Life Ins. Co. v.

Massachusetts, 471 U.S. 724, 740-741 (1985) (“ .. . [W]hile the

general pre-emption clause broadly preempts state law, the

saving clause appears broadly to preserve the States’

lawmaking power over much of the same regulation”).

8 See Pilot Life, 481 U.S. 41.

all issues of statutory construction, preemption claims

turn on Congress's intent.? The Court must “begin with

the language employed by Congress and the assumption

that the ordinary meaning of that language accurately

expresses the legislative purpose.”!° Further, the Court

must also presume that Congress did not intend to pre-

empt areas of traditional State regulation.”

Not only is insurance an area of traditional State

regulation, but Congress has specifically designated

insurance as a special area of State regulation to be zeal-

ously protected from federal regulation. The McCarran-

Ferguson Act provides that federal laws shall not be

interpreted to supersede state laws regulating the busi-

ness of insurance. 15 U.S.C. § 1012(b); Humana, Inc. v.

Forsyth, 525 U.S. 299, 306 (1999). “Congress’ ‘primary

concern’ in enacting McCarran-Ferguson was to ensure

the States’ continued ability to regulate the business of

insurance.” Metropolitan Life Ins. Co. v. Massachusetts, 471

U.S. 724, 744 n.21 (1985). And the ERISA saving clause

was designed to preserve the McCarran-Ferguson Act's

reservation of the business of insurance to the States. Id.;

9 See Travelers, 514 U.S. at 655.

10 FMC Corp. v. Holliday, 498 U.S. 52, 57 (1990), citing Park’N

Fly, Inc. v. Dollar Park and Fly, Inc., 469 U.S. 189, 194 (1985).

11 See Travelers, 514 U.S. at 655 (“We have never assumed

lightly that Congress has derogated state regulation, but instead

have addressed claims of pre-emption with the starting

presumption that Congress does not intend to supplant state

law. Indeed, in cases . . . where federal law is said to bar state

action in fields of traditional state regulation, we have worked

on the ‘assumption that the historic police powers of the States

were not to be superseded by the Federal Act unless that was

the clear and manifest purpose of Congress’” (citations

omitted)).

Ward, 526 U.S. at 375 n.5. Moreover, “[t]here is no discus-

sion in [the legislative] history [of ERISA] of the relation-

ship between the general pre-emption clause and the

saving clause, and indeed very little discussion of the

saving clause at all.” Metropolitan Life, 471 U.S. at 745.

This Court therefore “decline[d] to impose any limitation

on the saving clause beyond those Congress imposed in

the clause itself... . If a state law ‘regulates insur-

ance,’ . . . it is not pre-empted. Nothing in the language,

structure, or legislative history of the Act supports a

more narrow reading of the clause... .” Id. at 746-47.

Given the unambiguous language of the saving

clause and the strong prohibitions against preemption of

state insurance laws, the conclusion that a state law that

falls within the saving clause is still preempted would

require a clear and manifest expression of Congressional

intent. Yet, as extensively discussed below, there is noth-

ing in the statutory history of ERISA even to suggest such

an intent, let alone a clear and manifest intention.

B. Pilot Life Does Not Control The Question Pre-

sented In This Action Because The State Law At

Issue In Pilot Life Was Not A Law Regulating

Insurance.

In Pilot Life, this Court held that ERISA preempted a

state-law claim for tortious breach of contract arising

from an insured ERISA disability benefits plan. The Court

found that the state-law claim related to ERISA and was

not saved from preemption because the Mississippi law

was not aimed specifically at the insurance industry.!2 As

? But cf., Humana, 525 U.S. 299. This holding in Pilot Life

appears to be in direct conflict with the Court’s later opinion in

Humana where the Court assumed, without analysis, that the

very same law in Nevada ~ a state common law tort remedy for

bad faith breach of an insurance contract - was within the ambit

part of the Court’s analysis of the saving clause issue in

Pilot Life, and in accordance with the views of the Solici-

tor General, it relied upon the structure and legislative

history of the civil enforcement provisions contained in

ERISA Section 502 to bolster its conclusion that Congress

intended ERISA to preempt the state-law remedy at issue

in that action. Pilot Life, 481 U.S. at 51-52.

Critically, the reasoning of the Court applied only to

laws of general application and does not logically extend

to laws that fall within the saving clause. Further, in the

recent case of Ward, 526 U.S. 358, 377 n.7, the Solicitor

General specifically pointed out that the Section 502

implied preemption analysis it presented in Pilot Life

would not apply in a case where the state-law remedy at

issue was a state law regulating insurance. The limited

application of Pilot Life's Section 502 implied preemption

analysis is reflected in the Court's final sentence:

“ .. [W]e conclude that Dedeaux’s state law suit assert-

ing improper processing of a claim for benefits under an

ERISA-regulated plan is not saved by [the saving clause}

and therefore is pre-empted by [the preemption clause].

Pilot Life, 481 U.S. at 57 (emphasis added).

In noting that ERISA’s remedies were intended to be

exclusive, the Pilot Life Court relied on two factors: (1) the

structure of ERISA itself and (2) reference in the legisla-

tive history of ERISA to the preemptive scope of Section

301 of the Labor-Management Relations Act of 1947

(“LMRA”), 29 U.S.C. § 185. Regarding the structure of

ERISA, the Court held that the ERISA remedies repre-

sented a comprehensive enforcement scheme, which, in

light of ERISA’s broad preemption clause, was intended

to be exclusive. The Court determined that parties were

of the McCarran-Ferguson Act. Id. at 311-313. See discussion in

text at Section D, infra.

not “free to obtain remedies under state law that Con-

gress rejected in ERISA.” Pilot Life, 481 U.S. at 54.

While this conclusion can be applied to generally

applicable state-law remedies, such as was before the

Court in Pilot Life, or more importantly, to laws affecting

pension benefits, the same is not true of laws which fall

within the specific Congressionally-carved exception,

which saves laws regulating insurance. Congress did not

“reject” remedies specifically provided for within the

confines of the saving clause. On the contrary, such laws

were specifically saved, not rejected. Further, the saving

clause is fundamental to the structure of the Act. It pro-

vides that “ . . . nothing in this subchapter shall be

construed to exempt or relieve any person from any law

of any State which regulates insurance. .. . ” 29 U.S.C.

§ 1144(b)(2)(A). Not only are the remedies contained in

the same subchapter as the saving clause (remedies in 29

U.S.C. § 1132, saving clause in 29 U.S.C. § 1144), but the

saving clause is in the very same statute as the preemp-

tion clause (29 U.S.C. § 1144). As such, the structure of

ERISA cannot serve as the clear and manifest intent of

Congress required to override the clear terms of the sav-

ing clause itself and, as set forth at length below, there is

nothing in the legislative history of the Act to support

such a conclusion. Thus, it is illogical to transfer this

Court's discussion of the structure of ERISA in Pilot Life

to the entirely different context of a law that the very

structure of the Act provides is “saved” from preemption.

The second claimed factor supporting the Pilot Life

conclusion is that the Conference Report contained refer-

ence to the LMRA. 481 U.S. at 55. The Pilot Life Court

determined that this statement reflected Congress’ intent

to compare ERISA’s preemptive effect with the powerful

preemptive force of Section 301 of the LMRA. Id. Once

again, this may apply with regard to laws of general

applicability or laws relating to pension benefits; how-

ever, it has no bearing with respect to a law that falls

within the saving clause. The LMRA has no saving clause

and thus is not comparable legislation when addressing a

law that is specifically saved from preemption. Indeed,

this Court has made this very point.

This Court has repeatedly pointed out that the saving

clause is just as broad as the preemption clause. Ward, 526

U.S. at 363; Metropolitan Life, 471 U.S. at 733. Thus, the

remedial clause cannot serve to trump the saving clause

simply because of reference in the legislative history to

the LMRA.

The phrasing of § 502 [ERISA’s remedial provi-

sion] is instructive. It does not purport to reach

every question relating to plans covered by

ERISA . . . Furthermore, § 514(b)(2)(A) of ERISA

[the saving clause] makes clear that Congress did not

intend to preempt entirely every state cause of action

relating to such plans. With important, but

express limitations, it states that “nothing in this

subchapter shall be construed to exempt or

relieve any person from any law of any State

which regulates insurance, banking, or securi-

ties.” In contrast, § 301 (a) of the LMRA applies

to all “suits for violation of contracts between an

employer and a labor organization representing

employees in an industry effecting commerce

. . or between any such organizations.”

Franchise Tax Board v. Construction Laborers Vacation Trust

for Southern Cal., 463 U.S. 1, 25 (1983) (emphasis added).

Even the Pilot Life decision makes this clear. In citing

to the legislative history, the Court quoted one of the

bill’s sponsors, Senator Williams as follows: “[W]ith the

narrow exceptions specified in the bill, the substantive and

enforcement provisions of the conference substitute are

intended to preempt the field... . ” 481 U.S. at 46

12 |

(emphasis added). Manifestly, the saving clause is the

principal exception.!5 Moreover, Senator Williams’ state-

ment, as well as those of the other sponsors of the bill,’

were made in the context of the intended purpose of the

Act. ERISA was intended as pension reform legislation. It

did not intend to deal with or replace state laws regulat-

ing insurance. ERISA is silent with regard to any mean-

ingful regulation of insurers. Instead, it saves to the

States the continuing responsibility to regulate insurers.

Field preemption “strips the states of all regulatory

authority in the defined field and is normally inferred by

the courts only when Congress has comprehensively reg-

ulated the subject area or when the subject is peculiarly

with the federal domain.”!5 Yet, ERISA’s comprehensive

regulations are entirely directed at pension benefits, and

insurance is a field in which regulation is traditionally

left to the states. Bogan, Protecting Patient Rights, supra

note 15, 74 Tul. L. Rev. at 974-75. Thus, to imply a Con-

gressional intent to preempt the field of nonpension ben-

efits is to void all state regulation, while failing to replace

it with any federal regulation, let alone comprehensive

federal regulation. It is apparent that the very purpose of

the saving clause was to avoid such a regulatory void by

3 Reference in Senator Williams’ remarks to the “narrow”

exception is “far too frail [to] support” a restricted reading of

the saving clause. Metropolitan Life, 471 U.S. at 746.

* Further, while these comments were persuasive to this

Court in the context of a law of general application, they are “of

little help in analyzing § 514(b)(2)(A) for . . . the saving clause is

broad on its face and specific in its reference.” Metropolitan Life,

471 U.S. at 746 n.24.

15 Bogan, Protecting Patient Rights, supra, at 956; see also

Pacific Gas & Elec. Co. v. State Energy Resources Conservation &

Dev. Comm'n, 461 U.S. 190, 204 (1983).

saving the entire field of state insurance regulation, for

which ERISA provides no meaningful substitute.

It makes little sense for Congress to have supplanted

an entire field of traditional state regulation and replace

it with virtually nothing. Similarly, it makes little sense to

have specifically saved state insurance laws and then

strip the States of their ability to enforce their state laws

by limiting the remedies only to those specifically drafted

for the unrelated field of pension benefits. While peti-

tioner repeatedly asserts that ERISA was intended to

provide uniformity and that an expansive application of

the saving clause would “swallow ERISA whole”, Pet'r

Br. at 36, this Court has already rejected such claims. “We

recognize that applying the States’ varying insurance reg-

ulations creates disuniformities for ‘national plans that

enter into local markets to purchase insurance.’ [citation]

As we have observed, however, ‘[s]uch disunifor-

mities . . . are the inevitable result of the congressional

decision to “save” local insurance regulation.’ ” Ward, 526

U.S. at 376 n.6.

Thus, the two reasons upon which this Court derived

its exclusive remedy discussion in Pilot Life have no

applicability to state insurance laws which are not only

saved from preemption, but which Congress in the

McCarran-Ferguson Act specifically mandated remain

free of federal interference. The position set forth herein

is precisely the view presented by the United States Solic-

itor General in Ward. See Br. of United States as Amicus

Curiae in Ward, No. 97-1868 (filed November 1998) at

22-25.

C. ERISA’s Legislative History Is Unequivocal In

Disclosing That The Act Was Intended To Reg-

ulate Pension Benefits And Was Not Intended

To Impact The Field Of Insurance.?®

ERISA was the direct outgrowth of the explosion in

private pension plans during the middle of the last cen-

tury. The number of employees covered by such plans

grew from approximately 4 million in 1940 to over 30

million by 1973.17 The estimated assets held by such plans

during this same period grew from $2.4 billion to $150

billion."* With this explosive growth came a similarly

expansive growth in the abuses of such funds.!9 In

16 See generally Subcomm. on Labor of the Senate Comm. on

Labor and Pub. Welfare, 94th Cong., Legislative History of the

Employee Retirement Income Security Act of 1974 (Comm. Print

1976) [hereinafter “Legislative History”]; Special Comm. on -

Aging, U.S. Senate, 98th Cong., The Employment Retirement

Income Security Act of 1974: The First Decade 1-25 (Comm.

Print 1984) [hereinafter “The First Decade”).

The legislative history discussed herein is carefully and

extensively set forth in greater detail in Bogan, Protecting Patient

Rights, supra, 74 Tul. L. Rev. 951; See also David Gregory, The

Scope of ERISA Preemption of State Law: A Study in Effective

Federalism, 48 U. Pitt. L. Rev. 427, 437-457 (1987).

17 See S. Rep. No. 93-127, at 3, reprinted in 1974 U.S.C.C.A.N.

at 4839-40, and in 1 Legislative History, supra note 16, at 589.

18 See H.R. Rep. No. 93-533, at 3, reprinted in 1974

U.S.C.C.A.N. at 4641, and in 2 Legislative History, supra note 16,

at 2350; The First Decade, supra note 16, at 5; James D.

Hutchinson & David M. Ifshin, Federal Preemption of State Law

Under the Employee Retirement Income Security Act of 1974, 46 U.

Chi. L. Rev. 23, 24 (1978).

19 See 120 Cong. Rec. 29,934 (1974), reprinted in 3 Legislative

History, supra note 16, at 4748 (remarks of Sen. Javits); The First

Decade, supra note 16, at 6 n.22 (citing congressional hearings

on abuse in pension plan administrations); see also David

Gregory, The Scope of ERISA Preemption of State Law: A Study in

addition, the enormous accumulation of such funds exer-

ted a major impact on the country’s financial markets.?°

This explosion occurred without the benefit of any effec-

tive federal or state regulation.”?

In 1954, at the request of President Eisenhower, Con-

gress undertook an extensive study of the private pension

industry.2? This study disclosed abuses, including incom-

petent management of pension funds, looting, embezzle-

ment, kickbacks, excessive administration costs and

imprudent investment practices.?> In response, Congress

enacted the Welfare and Pension Plans Disclosure Act

(“WPPDA”) in 1958.24 This law merely required the dis-

closure of certain financial information to the employees

and did not provide any meaningful regulation of the

funds themselves.?° ,

This legislation was wholly ineffective.* Conse-

quently, in 1962 President Kennedy appointed a special

ism, supra note 16, at 443-45 (referring to the

> naa trtonter niger: set pension plans listed in ERISA’s

legislative history).

20 Jd.; H.R. Rep. No. 93-533, at 3, reprinted in 1974

U.S.C.C.A.N. at 4641, and in 2 Legislative History, supra note 16,

at 2350. ;

21 See note 17 supra.

22 See S. Rep. No. 85-1440, at 2-11 (1958), reprinted in 1958

U.S.C.C.A.N. at 4137.

23 Id. at 4137-47.

24 Pub. L. No. 85-836, 72 Stat. 997 (1958) (repealed 1974).

25 See H.R. Rep. No. 93-533, at 4, reprinted in 1974

U.S.C.C.A.N. at 4642, and in 2 Legislative History, supra note 16,

at -2351; Malone v. White Motor Corp., 435 U.S. 497, 507 (1978)

(plurality opinion).

26 See S. Rep. No. 93-127, at 4, reprinted in 1974 U.S.C.C.A.N.

at 4841, and in 1 Legislative History, supra note 16, at 590; H.R.

Rep. No. 93-533, at 4, reprinted in 1974 U.S.C.C.A.N. at 4642, and

in 2 Legislative History, supra note 16, at 2351.

task force to study the problem.?” The task force con-

cluded that further federal regulation of private pension

plans to include mandatory minimum vesting and fund-

ing requirements was necessary and that further study

was required on other issues.?8 Significantly, the task

force specifically did not investigate or consider any

reforms of nonpension plans, such as health insurance

plans.?° In response to these concerns, New York Senator

Jacob Javits introduced legislation in 1967 to create fed-

eral funding and participation requirements for private

pension plans. This lead to further Congressional

27 See President’s Comm. on Corporate Pension Funds and

Other Private Retirement and Welfare Programs, Public Policy

and Private Pension Programs: A Report to the President on

Private Employee Retirement Plans, at vii-viii (1965)

{hereinafter “President's Committee Report”]; see also The First

Decade, supra note 16, at 8-10 (describing the formation of the

committee and its findings).

28 Id.

29 See President’s Committee Report, supra note 27, at iv

(“Although the area of investigation assigned to the Committee

included welfare plans as well as retirement programs, the

President’s memorandum specifically raised questions about

issues which arise primarily from retirement plans. Other types

of welfare plans, such as health and insurance plans, make

important contributions to the economic security of American

workers; they do not, however, have the impact of pension

plans on accumulation of savings, labor mobility, and similar

matters touched upon by the President. Consequently, the

Committee has confined its efforts to an inquiry into private

employee retirement plans (i.e., excluding plans for self-

employed persons) without any extensive study of other types

of welfare plans.”). T

30 See 113 Cong. Rec. 4650-53 (1967) (remarks of Sen. Javits);

see also 120 Cong. Rec. 29,933-34 (1974), reprinted in 3 Legislative

History, supra note 16, at 4748 (remarks of Sen. Javits)

(recounting his continued efforts to reform the private pension

and welfare system).

investigations and eventually ERISA. In 1970, the Sub-

committee on Labor of the Senate Committee on Labor

and Public Welfare began a three-year study “undertaken

to ascertain the need for statutory protections for

workers’ pension programs and to formulate appropriate

corrective legislation.”>!Like the previous investigations,

the subcommittee’s hearings disclosed a morass of abu-

sive practices resulting in the loss of retirement benefits

to employees as the result of inadequate funding, mis-

management and unreasonable vesting requirements.*? It

agreed with President Kennedy’s task force and recom-

mended comprehensive regulation of the pension indus-

try.33 Shortly thereafter, Senator Javits introduced Senate

Bill 4. It stated, “[t]he purpose of S.4 is to prescribe

legislative remedies for the various deficiencies existing

in the private pension plan systems which have been

determined by the Senate Subcommittee’s comprehensive

study of such plans.”*4 A corresponding House bill was

also introduced.%°

31 See S. Rep. No. 92-634, at 1 (1972); see also 119 Cong. Rec.

30,003 (1973), reprinted in 2 Legislative History, supra note 16, at

1598 (statement of Sen. Williams).

32 See H.R. Rep. No. 93-533, at 5-8 (1973), reprinted in 1974

U.S.C.C.A.N. 4639, 4643-46, and in 2 Legislative History, supra

note 16, at 2355.

33 See 120 Cong. Rec. 29,935-44 (1974), reprinted in 3

Legislative History, supra note 16, at 4748 (remarks of Sen.

Javits).

34 S. 4, 93d Cong. (1973); see S. Rep. No. 93-127 (1973), at 1,

reprinted in 1974 U.S.C.C.A.N. 4838, and in 1 Legislative History,

supra note 16, at 587.

35 See H.R. 2, 93d Cong. (1973), reprinted in 1 Legislative

History, supra note 16, at 3.

These bills were sent to their appropriate committees,

which issued their own reports. Each of these reports

concerned themselves solely with abuses in, and the con-

sequent need for, regulation of private pension plans.*

The Senate Committee on Labor and Public Welfare

report states:

The provisions of S.4 are addressed to the issue

of whether American working men and women

shall receive private pension plan benefits

which they have been led to believe would be

theirs upon retirement from working lives. It

responds by mandating protective measures and

prescribing minimum standards for promised

benefits. The purpose of S.4 is to prescribe legis-

lative remedies for the various deficiencies exis-

ting in the private pension plan systems... . 97

The report states that “[t]he principal issues affecting

the vital and basic needs for legislative reform involve

consideration of the essential elements of pensions: (1)

“vesting,” (2) “funding,” (3) “reinsurance,” (4) “por-

tability” and (5) “fiduciary responsibility and dis-

closure.”38 Similarly, the House Committee on Education

and Labor report states that the “primary purpose of the

bill is the protection of individual pension rights” and

36 See S. Rep. No. 93-127, at 1-36, reprinted in 1974

U.S.C.C.A.N. at 4838-89, and in 1 Legislative History, supra note

16, at 587-622; H.R. Rep. No. 93-533, at 1-28, reprinted in 1974

U.S.C.C.A.N. at 4639-70, and in 2 Legislative History, supra note

16, at 2348-75; 120 Cong. Rec. 29,933-35 (1974), reprinted in 3

Legislative History, supra note 16, at 4746-51 (remarks of Sen.

Javits).

37 S. Rep. No. 93-127, at 1, reprinted in 1974 U.S.C.C.A.N. at

4844-77, and in 1 Legislative History, supra note 16, at 587.

38 S. Rep. No. 93-127, at 8-11, reprinted in 1974 U.S.C.C.A.N.

at 4844-77, and in 1 Legislative History, supra note 16, at 594-97

(emphasis omitted).

that the legislation was designed to: (1) establish mini-

mum fiduciary standards for retirement plans, (2) pro-

vide for enforcement and public disclosure of finances,

(3) improve the equitable character and soundness of

private pension plans by requiring (a) appropriate vest-

ing and (b) minimum funding standards, and (4) guaran-

tee the adequacy of the plan’s assets prior to

termination.%9

ERISA’s legislative history is unequivocal that it was

intended as a pension reform bill. In describing ERISA,

Senator Javits said, “[T]he pension reform bill is the

greatest development in the life of the American worker

since social security. For the first time in our history most

workers will be able to truly retire at retirement age and

live decently on their social security and private pen-

sions.”4° Senator Williams, Chairman of the Senate Com-

mittee on Labor and Public Welfare, described his

committee’s study which lead to ERISA. “This study

clearly established that too many workers, rather than

being able to retire in dignity and security after a lifetime

of labor rendered on the promise of a future pension, find

that their earned expectations are not to be realized.”4! In

the House, one of the principal proponents, Representa-

tive Dent, described ERISA’s purpose in this way: “[W]e

started out with only one aim in view and that was to

give a pension participant his entitlements under the

39 H.R. Rep. No. 93-533, at 1, 17-18, reprinted in 1974

U.S.C.C.A.N. at 4655-56, and in 2 Legislative History, supra note

16, at 2348, 2364-65.

40 3 Legislative History, supra note 16, at 4747 (remarks of

Sen. Javits).

41 3 Legislative History, supra note 16, at 4733 (remarks of

Sen. Williams).

contract of the pension plan he belonged to.”42 The

record repeatedly references tragic examples of workers

deprived of pension benefits after 30, 40 and 50 years of

employment because they were a few days short of vest-

ing before retiring, the company was sold or went bank-

rupt, or because the employer could not afford to pay the

promised retirement benefits.*

While this Court has referred to ERISA as a “compre-

hensive and reticulated statute,” it is so only with

respect to pension plans, and the Court’s description of

the Act as such a statute originated in the context of

pension cases.*° The Act substantially regulated pension

plans but contained virtually no meaningful regulation of

insurers or insurance “plans.”

What is clear from this long and extensive legislative

history and the statute itself is that the exclusive concern

of Congress in passing ERISA was to address abuses in

the pension field. “ERISA was passed by Congress in

1974 to safeguard employees from the abuse and misman-

agement of funds that had been accumulated to finance

various types of employee benefits.” Massachusetts v.

Morash, 490 U.S. 107, 113 (1989). Not a single insurance

concern is expressed anywhere in the legislative history.

42 3 Legislative History, supra note 16, at 4665 (remarks of

Rep. Dent).

43 See, e.g., 3 Legislative History supra note 16, at 4749-50

(remarks of Sen. Javits on “Why Pension Reform Is Needed”),

(4791-96) (remarks of Sen. Bentson), (4664-65) (remarks of Rep.

Thompson), (4710) (remarks of Rep. McClory); Interim Report of

Activities of the Private Welfare and Pension Plan Study,

Subcommittee on Labor of the Committee on Labor and Public

Welfare, S. Rep. No. 92-634, 92d Cong., 2d Sess. (1972) at 67-90.

“4 See, e.g., Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504,

510 (1981); Nachman Corp. v. Pension Benefit Guar. Corp., 446 U.S.

359, 361 (1980).

45 Id.

Instead, Congress expressly saved all insurance regula-

tion to the States. This Court has endorsed this view,

noting that the broad preemption clause was added at the

last minute, that there is no legislative history discussing

the relationship between the saving clause and the gen-

eral preemption clause, and that there is a “complete

absence of evidence” to support a narrow reading of the

saving clause. Metropolitan Life, 471 U.S. at 745-46 n.21. As

one commentator who has extensively reviewed ERISA’s

legislative history reports:

ERISA’s legislative history is

remarkable .. . for what it does not contain.

ERISA’s legislative history provides no evidence

that Congress seriously investigated, studied, or

debated any issues or concerns with nonpension

employee benefit plans.

. +

There is no documentation anywhere in ERISA’s

legislative history of any study or investigation

of the history or growth of nonpension benefit

plans, or of any specific concern with the man-

agement of nonpension plan assets. Further,

ERISA’s legislative history fails to disclose any

concerted investigation of any complaints about

nonpension benefits, such as inadequate health

care, accident, death or disability coverage, or

problems with health, life, or disability benefits

claims. In short, Congress just was not dealing

with nonpension benefit plans when it enacted

ERISA.

Bogan, Protecting Patient Rights, supra, at 972, 976-77.

D. This Court Has Recognized That Remedial

Laws Are At The Core Of The McCarran-Fer-

guson Act And Thus The Saving Clause.

This Court has repeatedly made clear that insurance

enforcement mechanisms and laws regulating claims

practices are at the core of McCarran-Ferguson and thus

ERISA’s saving clause.

Congress was concerned [in the McCarran-Fer-

guson Act] with the type of state regulation that

centers around the contract of insurance. . . . The

relationship between insurer and insured, the

type of policy which could be issued, its

reliability, its interpretation, and enforcement -

these were the core of the “business of insur-

ance.” [T]he focus [of the statutory term] was on

the relationship between the insurance company

and the policyholder. Statutes aimed at protect-

ing or regulating this relationship, directly or

indirectly, are laws regulating the “business of

insurance.” SEC v. National Securities, Inc., 393

U.S. 453, 460 (1969) (emphasis added).

Metropolitan Life, 471 U.S. at 744 (emphasis added). Accord

Ward, 526 U.S. at 374 n.5 (stating that “laws regulating

claims practices . . . [are included] in catalogue of state

laws that regulate insurance.”).

That state remedial statutes are squarely protected by

McCarran-Ferguson was underscored again in Humana,

525 U.S. 299. Therein, insureds under certain health

insurance contracts brought suit under RICO claiming

that the insurers were secretly obtaining kickbacks from

hospitals in violation of the health insurance agreements.

The applicable Nevada state laws permitted the insured

to sue the insurer in tort for violation of the covenant of

good faith and fair dealing and for violation of the state’s

Unfair Insurance Practices Act. 525 U.S. at 312. The

insurers sought to prevent the application of the federal

RICO claim on the grounds that McCarran-Ferguson pre-

cluded the application of federal law in the face of these

state-law remedies. This Court found that the RICO claim

did not impair the state laws and therefore was not

barred by McCarran-Ferguson.

Most significant is the fact that this Court less than

three years ago specifically considered Nevada's state

insurance remedies to be protected by McCarran-Fer-

guson. Indeed, the conclusion was apparently so obvious

to this unanimous Court that its opinion reveals no

inquiry or analysis as to whether the state insurance

remedial laws were covered by McCarran-Ferguson.

Of even greater significance is that Humana appears

to be directly at odds with Pilot Life's holding that the

Mississippi insurance bad faith law at issue there was not

within the scope of McCarran-Ferguson and thus ERISA’s

saving clause. Indeed, the Nevada insurance bad faith

law appears to be indistinguishable from the Mississippi

law at issue in Pilot Life. In Pilot Life, the Court concluded

that the State bad faith law did not fall within the ambit

of the McCarran-Ferguson Act. Yet, in Humana, the Court

appears to have assumed it obvious that the identical

Nevada law did.

Humana is significant for another reason. Petitioners

claim that any law which provides a remedy other than

those set forth in ERISA’s Section 502 is necessarily in

conflict with Section 502 and therefore preempted by

principles of conflict preemption. Yet, under federal con-

flict analysis, preemption only occurs where it is impossi-

ble to comply with both state and federal law or where

the state law stands as an obstacle to the accomplish-

ments of the full purposes and objectives of Congress.

Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 248 (1984).

Simply because a State may have an insurance remedy

which may be either an alternative to the ERISA remedies

or a supplement to them does not mean that it is either

impossible to comply with both state and federal law or

that the state law stands as an obstacle to the accomplish-

ments of ERISA. As noted in Humana, Nevada has a

“comprehensive administrative” scheme that prohibits

various forms of insurance fraud and misrepresentations.

RICO provides a different remedy. Nonetheless, the RICO

claims “complemented” the Nevada administrative reg-

ime and thus did not impair its laws. Humana, 525 U.S. at

313. The same can be said of the law in question here.

ERISA was intended to protect employee benefits. State

insurance laws which further that goal, do not frustrate

or impair ERISA. The fact that a remedy in addition to

those set forth in ERISA is available to Moran enhances

ERISA’s basic purpose through an appropriate applica-

tion of the saving clause.

E. ERISA’s Enforcement Mechanisms Leave

Insureds With No Effective Remedy And Do

Not Conform With ERISA’s Legislative History;

Petitioner Is Not A Proper Party To An ERISA

Action.

Strong evidence that ERISA was not intended to pre-

empt state insurance enforcement actions is the fact that

ERISA’s remedies were drafted with pension plans in

mind and are not suited to insurance claims. ERISA was

intended to remedy abuses rampant in the administration

of funds, which were held for the benefit of employees,

Morash, 490 U.S. at 112-113, and thus ERISA only pro-

vides a remedy against the plan itself. In most insurance

instances, however, there is no “fund,” only a group

insurance policy issued to an employer or employee orga-

nization insuring the employees, funded by premiums

paid directly by the employer, employees or both to the

Section 502 claim and seek additional appropriate relief by

proceeding under a state law which is directed solely at the

insurance industry, such as the Nevada bad faith claim or the

claims referenced in note 3, supra. Rather than conflicting with

ERISA, such state actions are entirely consistent with and

complement ERISA’s intent to protect employees by

encouraging the prompt and fair payment of claims.

insurer.*” The disputes in this context are fundamentally

between the insured/employees and a third party, the

insurer.

Strikingly, ERISA provides no effective remedy for an

insured to obtain insurance benefits wrongfully denied.

ERISA permits an insured to bring a civil action to

recover benefits due. 29 U.S.C. § 1132(a)(1)(B). However,

it does not permit a suit against the insurer, which owes

the benefits. “ERISA permits suits to recover benefits

only against the Plan as an entity.” Gelardi v. Pertec Com-

puter Corp., 761 F.2d 1323, 1324 (9th Cir. 1985); Garratt v.

Knowles, 245 F.3d 941, 949 (7th Cir. 2001). “An employee

benefit plan may sue or be sued . . . as an entity.” 29

U.S.C. § 1132(d)(1). “Any money judgment . . . against an

employee benefit plan shall be enforceable only against the

plan as an entity and shall not be enforceable against any

othér person... .” 29 U.S.C. § 1132(d)(2) (emphasis

added).

Because of this, courts have repeatedly held insurers

are not proper parties to an action under ERISA and have

repeatedly dismissed actions filed against insurers. See,

e.g., Gibson v. Prudential Ins. Co. of N. Am., 915 F.2d 414,

417 (9th Cir. 1990); Everhart v. Allmerica Financial Life Ins.

Co., 1999 WL 498244 (N.D. Cal. 1999); Roeder v. Chemrex,

Inc., 863 F.Supp. 817, 828 (E.D. Wis. 1994); Cohen v. Equita-

ble Life Assurance Soc. of the United States, 196 Cal.App.3d

669, 672-73 (1987).48 This, coupled with the Court’s hold-

ing in Pilot Life, has had the effect of granting insurers a

47 The exception is the instance of a self-funded plan, which

' is encompassed within ERISA and which is not typically

regulated comprehensively by the States.

48 Some courts have held, without statutory authority, that

the administrator who controls the plan may be sued. See, e.g.,

Garren v. John Hancock Mut. Life Ins. Co., 114 F.3d 186, 187 (11th

Cir. 1997); Rosen v. TRW, Inc., 979 F.2d 191, 193 (11th Cir. 1992).

In any event, insurers generally are not administrators as

defined by ERISA. 29 U.S.C. § 1002(16)(A)(i).

broad-based immunity, a result wholly unintended under

ERISA. ERISA, a law enacted to protect employees, has

thus been turned on its head to deny any meaningful

relief against insurance industry abuses, a tragic result

that numerous courts have decried.*9

49 See Bast v. Prudential Ins. Co., 150 F.3d 1003, 1005 (9th Cir.

1998) cert. denied, 120 S.Ct. 170 (1999) (“Although this case

presents a tragic set of facts, the district court properly

concluded that under existing law the Basts are left without a

remedy”); Cannon v. Group Health Serv. of Okla., Inc., 77 F.3d

1270, 1271 (10th Cir. 1996) (“Although moved by the tragic

circumstances of this case and the seemingly needless loss of life

that resulted, we conclude the law gives us no choice but to

affirm [the grant of summary judgment to the insurer]”);

Corcoran v. United Healthcare, Inc., 965 F.2d 1321, 1338 (5th Cir.

1992) (“The result ERISA compels us to reach means the

Corcorans have no remedy, state or federal, for what may have

been a serious mistake”); Andrews-Clarke v. Travelers Ins. Co., 984

F.Supp. 49, 52-53 (D. Mass. 1997) (“The tragic events set forth in

Diane Andrews-Clarke’s Complaint cry out for relief... . Under

traditional notions of justice, the harms alleged . . . should

entitle [her] to some legal remedy. . . . Nevertheless, this Court

had no choice but to pluck [her] case out of the state court in

which she sought redress (and where relief to other litigants is

available) and then, at the behest of Travelers .. . , to slam the

courthouse doors in her face and leave her without any

remedy.”) (footnotes omitted); Florence Nightingale Nursing

Serv., Inc. v. Blue Cross & Blue Shield, 832 F.Supp. 1456, 1457

(N.D. Ala. 1993), aff'd, 41 F.3d 1476 (11th Cir. 1995); Jordan v.

Reliable Life Ins. Co., 694 F.Supp. 822, 827 (N.D. Ala. 1988); see

also Bogan, Protecting Patient Rights, supra note 5, at 996-1002;

Catherine L. Fisk, The Last Article About the Language of ERISA

Preemption? A Case Study of the Failure of Textualism, 33 Harvard

J. on Legis. 35, 38 (1996) (“It is a rich irony that ERISA, which

was heralded at its enactment as significant federal protective

legislation, has through its preemption provision been the basis

for invalidating scores of progressive state laws.”) (footnote

omitted).

Thus, if Moran’s state-law claim is preempted, peti-

tioner is not a proper party to this ERISA action. While

this result seems illogical, it is what ERISA would

require. If Moran is precluded from asserting her state

claim against petitioner, Moran’s only permissible action.

under ERISA would be against her ERISA plan, not the

insurer or HMO. It would be far more reasonable to

believe that Congress intended to permit her to proceed

against the insurer pursuant to the saved Illinois law than

require her to proceed under Section 502 against the plan.

An action against a “plan” makes sense where the

plan consists of a fund out of which benefits are paid, as

in a pension plan or self-funded insurance, and it was

these plans that concerned Congress when it passed

ERISA. Yet, there is no such funded “plan” in existence

with regard to insurance policies. In fact, the “plan” in

many instances does not really exist at all, but is a fic-

tional entity created under ERISA. Indeed, the “plan”

often is nothing more than a group insurance policy

issued to an employer and insuring the employees.*° The

“plan” itself has no bank account, no assets, no address,

no office, no employees and no trustees. And while there

are a few regulations applying to such plans, in many

instances these regulations merely require financial

reporting, which is meaningless in the case of an insur-

ance plan, and there is often no one to comply with these

regulations.*! '

50 See, e.g., Gaylor v. John Hancock Mutual Life Ins. Co., 112

F.3d 460, 463-65 (10th Cir. 1970); Butero v. Royal Maccabees Life

Ins. Co., 174 F.3d 1207 1213-15 (11th Cir. 1999); Marshall v.

Bankers Life & Cas. Co., 2 Cal. 4th 1045, 1054, 832 P.2d 573 (1992).

51 Indeed, the department of labor regulations do not even

require such reporting if the plan has fewer than 100

participants. 29 C.F.R. §§ 2520.104-20, 2520.104-21. Moreover,

even if all of the regulations are ignored, a plan will be deemed

to exist anyway. See Blau v. Del Monte Corp., 748 F.2d 1348, 1352

(9th Cir. 1984).

Further, the statutory history of the preemption

clause itself confirms that ERISA was intended to apply

to funds and not to comprehensively regulate private

insurance arrangements. As noted above, the preemption

clause was significantly broadened during the House/

Senate conference committee. Yet, while simultaneously

broadening the preemption clause, it also included the

deemer clause,5? which preserved ERISA’s preemption

for self-funded plans.% In light of the saving clause, this

created a clear distinction in ERISA’s impact or self-

funded insurance arrangements as opposed to private

insurance arrangements.** The former were swept into

ERISA’s broad preemption provision, the latter were

specifically excluded.

United Policyholders respectfully submits that many

of the problems arising out of ERISA insurance claims

stem from this Court’s decision in Pilot Life. United Poli-

cyholders submits that the Court should re-examine its

holding in Pilot Life. In light of (1) ERISA’s clear purpose

to regulate pension and not insurance difficulties, (2) the

_ Saving clause, which saves “any” laws regulating insur-

ance and (3) the complete unsuitability of ERISA’s

remedies to insurance claims, we believe Congress

intended to save from preemption all state laws which

would have the effect of regulating the conduct of

insurers. This would include such basic claims as breach

of contract, fraud and certainly insurance bad faith, to the

extent they are exercised to enforce claims against

insurers or to define impermissible conduct by insurers.

United Policyholders submits that Congress never

intended to deprive an insured of her basic right to sue

52 29 U.S.C. § 1144(b)(2)(B).

°° H.R. Rep. No. 93-1280, 93rd Cong. 2d Sess. at 383,

reprinted in 3 Legislative History, supra note 16, at 4650.

54 See Metropolitan Life, 471 U.S. 724, 747.

an insurer for breach of contact, to deprive her of her

basic right of a jury trial, and to preclude the insured

from pursuing the basic right to sue the insurer for bene-

fits wrongfully denied, only to replace it with a remedy

which effectively permits an insurer to deny a claim as

long as it does not do so in an arbitrary and capricious

fashion. It is hard to imagine why Congress would have

intended (but not stated in the statute) that traditional

state insurance remedies forged by the States to address

the specific issues of insurance enforcement be replaced

with remedies completely unsuitable to the resolution of

insurance disputes.°> It is a particularly difficult leap of

faith in light of the complete absence of legislative history

to support such a conclusion and the explicit terms to the

contrary of the saving clause itself.

At the end of his dissent in the Seventh Circuit

opinion, Justice Posner writes of the inconsistency of the

majority opinion. He argues that a law cannot be both

written into an insurance contract and an ERISA plan.

The answer, however, is not to preempt the Illinois law,

but to apply the saving clause and permit the state-law

claim to survive on its own.

55 An example can serve to illustrate the absurdity of the

ERISA remedy. Suppose an individual becomes disabled while

insured under a group disability policy issued to his employer

and within the scope of ERISA. The evidence of the disability

“plan” is the group policy itself and perhaps the booklet

explaining coverage delivered to him by his employer. Benefits

are paid and shortly thereafter the employer goes out of

business. Five years later the insurer wrongfully terminates

benefits. The insured would have to file suit against the “long

term disability plan” (a non-existent entity) of a non-existent

employer. No action would lie against the insurer, which owes

the benefits.

Il. THE TRIAL COURT LACKED SUBJECT MATTER

JURISDICTION.

This action was originally filed in the State court of

Illinois and removed to federal court. The Court of

Appeals found jurisdiction to be proper, concluding that

Moran’s claim should properly be considered as one aris-

ing under Section 502 and that Section 4-10 of the Illinois

law should be applied in the context of a claim for ERISA

benefits. As such, the Court found that she had no sepa-

rate state claims and thus, the doctrine of complete pre-

emption permitted removal.

United Policyholders submits this was incorrect.

Moran’s claim against petitioner was not preempted. She

was entitled te wroceed under state law directly against

petitioner. Because her claims are not completely pre-

empted, the well-pleaded complaint rule precludes

removal, notwithstanding petitioner’s claim of a federal

defense. Franchise Tax Bd., 463 U.S. at 10-11.

CONCLUSION

ERISA’s statutory history as pension reform legisla-

tion is unequivocal. Its language saving any state law

regulating insurance is unambiguous and, because ERISA

was not intended to regulate insurance, it fails to provide

a meaningful remedy to resolve insurance disputes.

Under this Court’s long-established principles of statu-

tory construction, Moran’s claim should be returned to

the Illinois State court, where she may pursue her Section

4-10 claim against petitioner directly.

Respectfully Submitted,

Amy BacH ARNOLD R. LEVINSON

Of Counsel Counsel of Record

42 Miller Avenue TERRENCE J. COLEMAN

Mill Valley, CA 94941 Pmussury & Levinson, LLP

(415) 381-7627 One Embarcadero Cntr., 38th FI.

San Francisco, CA 94111

(415) 433-8000

Counsel for Amicus Curiae

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.