Amicus Curiae Brief — Cigna Healthcare of Texas, Inc., Dba Cigna Corp. v. Calad
Supreme Court brief2003
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VW, Supreme Court, US.
FILED
1845 & 03
Nos. 02-
Bn The OFFICE OF THE CLERK
Supreme Court of the Anited States —
S
AETNA HEALTH, INC.,
Petitioner,
v.
JUAN DAVILA,
Respondent.
Sd
CIGNA HEALTHCARE OF TEXAS, INC.,
Petitioner,
Vv.
RUBY R. CALAD, et al.,
Respondents.
Sd
On Writs Of Certiorari To The
United States Court Of Appeals
For The Fifth Circuit
¢
BRIEF OF UNITED POLICYHOLDERS AS
AMICUS CURIAE IN SUPPORT OF RESPONDENTS
¢
AMY BACH ARNOLD R. LEVINSON
Of Counsel Counsel of Record
BaCH LAW OFFICE TERRENCE J. COLEMAN
42 Miller Avenue PILLSBURY & LEVINSON, LLP
Mill Valley, CA 94941 One Embarcadero Center, —
(415) 381-7627 38th Floor
San Francisco, CA 94111
(415) 433-8000
Counsel for Amicus Curiae
=——ooOoOoOoooo———————OOOOOOOOOOOOeeeeeeeeeeeeeeeeeeeeeee
COCKLE LAW BRIEF PRINTING CO. (800) 225-6964
OR CALL COLLECT (402) 342-2831
TABLE OF CONTENTS
Page
INTEREST OF THE AMICUS CURIAE..................00045 1
SUMMARY OF ARGUMENT................: bmancaniaaiisinia 1
EET icdehsiatindpiiitenntisiasadenininnmeniiisimdideermpumpereuniete 4
I. All Laws Which Regulate Insurance Are Saved
II.
ITI.
From Preemption Pursuant To The Clear And
Unambiguous Text Of ERISA ..............c eee
A Claim That Pilot Life’s Exclusive Remedy Anal-
ysis Should Be Extended To Laws Which Are
Saved From Preemption Is Deeply Flawed .......
A. The Structure Of ERISA, Including Sec-
tion 502, Establishes That Congress Did
Not Intend To Preempt State Remedial
Laws That Are Saved From Preemption ....
B. Nothing In The Legislative History Sup-
ports A Conclusion That Congress In-
tended To Preempt State Remedial Laws
That Are Saved From Preemption ..............
Recent Court Decisions Contain Repeated
Requests That This Court Reconsider Its Dicta
SIITITIITTT ssiestehieinanidsisipitiininiadeidabiaideiaiisbdimdannenereieneinn
ERISA’s Legislative History Is Unequivocal In
Disclosing That The Act Was Intended To
Regulate Pension Benefits And Was Not
Intended To Impact The Field Of Insurance .....
ee ircconsvnpsscacsocccennseccsunpneessansseemeansnecsovssenseeen
15
17
il
TABLE OF AUTHORITIES
Page
CASES
Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504
(1081 )........0.00cccecesesesssesensonnseenenesnsinnsnnnnnninnnnnnnnnnnnnnnnnnEEEE 29
Andrews-Clarke v. Travelers Ins. Co., 984 F. Supp.
- — DD. BEB. 1997). .20ccccscessoscrecossosssesennnnnsiannaa 17
Bast v. Prudential Ins. Co., 150 F.3d 1003 (9th Cir.
1998), cert. denied, 120 S.Ct. 170 (1999) oo... eee 17
Blau v. Del Monte Corp., 748 F.2d 1348 (9th Cir.
1BBE) ........corccccccsecesessceeeneneseenneneennennennnnnnnnnnnnnnnnnnnnnnnEEEE 12
Butero v. Royal Maccabees Life Ins. Co., 174 F.3d
1307 (126i Cie. 1600).....:cccscscssescenecensensiaiannnnnnnnnnn 12
California Division of Labor Standards Enforcement
v. Dillingham Construction N.A., Inc., 519 U.S.
SUG (1QBZ).....cccccccecccescesessoessenenensnnnsansnnnnnnnnnnnnnnnnnnnnEnEE 2
Cannon v. Group Health Serv. of Okla., Inc., 77 F.3d
1370 (160i Cie, 160G)........cccsccesccscssossssnsniiennnnnninnnnnnnnnn 17
Cicio v. Does, 321 F.3d 83 (2d Cir. 2008)...............00000000 2,18
Cohen v. Equitable Life Ass. Soc. of the United
States, 196 Cal. App.3d 669 (1987)............ccccsccceceeesseeees 12
Corcoran v. United Healthcare, Inc., 965 F.2d 1321
(GER Cie, 1GGR) ....00000000000se0eecerncennnnnnnusennnnnnnnnnnnnnnnnnn 17
Difelice v. Aetna U.S. Healthcare, 346 F.3d 442 (3rd
Clit. 3BGB)........<cccccescoceseessnsssssnnnnnnnennnannninnnnnnnnnnnE 1, 20, 21
Donovan v. Dillingham, 688 F.2d 1367 (11th Cir.
IGBB) ....cccccscecccsosccssensooseseunencnssessennsnalinnnnannnnnnnnnnnE 12
Everhart v. Allmerica Financial Life Ins. Co., 275
F.3d 751 (9th Cir. 2001), cert. denied, 536 U.S.
GSS (DOGR).......cccccoscssonssonssonsesnensnnsiunninnnnnnnnnnnnnnnn 12, 13
ili
TABLE OF AUTHORITIES - Continued
Page
Florence Nightingale Nursing Serv., Inc. v. Blue
Cross & Blue Shield of Alabama, 832 F. Supp.
1456 (N.D. Ala. 1993), aff’d, 41 F.3d 1476 (11th
i osnanonosonnnones 18
FMC Corp. v. Holliday, 498 U.S. 52 (1990)... 6
Franchise Tax Board of California v. Construction
Laborers Vacation Trust for Southern Cal., 463
EA 3, 16
Garratt v. Knowles, 245 F.3d 941 (7th Cir. 2001).............. 12
Garren v. John Hancock Mut. Life Ins. Co., 114 F.3d
i ceuoneeee 13
Gaylor v. John Hancock Mutual Life Ins. Co., 112
ae 12
Gelardi v. Pertec Computer Carp., 761 F.2d 1323
i ncusouennonen 12
Gibson v. Prudential Ins. Co. of N. Am., 915 F.2d
EEE 12
Humana, Inc. v. Forsyth, 525 U.S. 299 (1999) .................. 6
Jordan v. Reliable Life Ins. Co., 694 F. Supp. 822
a . conensuosnenscocecs 18
Kentucky Association of Health Plans, Inc. v. Miller,
538 U.S. 329, 123 S.Ct. 1471 (2008)...................... 2,3, 14
Malone v. White Motor Corp., 435 U.S. 497 (1978)............ 25
Marshall v. Bankers Life & Cas. Co., 2 Cal. 4th
a 12
Massachusetts v. Morash, 490 U.S. 107 (1989) ................. 14
- Metropolitan Life Ins. Co. v. Massachusetts, 471
er passim
iv
TABLE OF AUTHORITIES — Continued .
Page
Nachman Corp. v. Pension Benefit Guar. Corp., 446
SS See hinrtincitchinilinniniatiibiaiandiniaabcaedaataiadaiidacadiontad 29
New York State Conf. of Blue Cross & Blue Shield
| Plans v. Travelers Ins. Co., 514 U.S. 645 (1995)......2, 5, 6
Park’N Fly, Inc. v. Dollar Park and Fly, Inc., 469
ee rn OTE ET OE ecTaT 6
Pilot Life v. Dedeux, 481 U.S. 41 (1987) .0.......ccccccceee. passim
Roeder v. Chemfex, Inc., 863 F. Supp. 817 (E.D.
a a Ninsiteiicesisnepcincsianpeiaiiniitiniarmack dina aces ea 12
Rosen v. TRW, Inc., 979 F.2d 191 (11th Cir. 1992)............. 13
Rosenbaum v. Unum Life Ins. Co. of America, 2003
a ey GN SUI cccicindcinsniiuriceinaieliciiacbaiiamaidamaaies 2, 19, 20
Rush Prudential HMO Inc. v. Moran, 536 U.S. 355
ee arriccenesnensteinteitsentainniaaasidiiitieititeatiiabiniaidiaaiaiamsitata aaa passim
Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983).............. 4
Stone v. Disability Management Services, Inc., 288
+ | _,__,_—_—_——RIEE RT e Fes eee tee 2
UNUM Life Insurance Co. of Am. v. Ward, 526 U.S.
ae icenrsnnonstennentnsanaaiemcninmineiiiitiiiniimssiibinlaiast es s. passim
STATUTES
ae See passim
NE disicisniesiinpiinniniiabniinaaetintnaiinninetaicieiimnidhis rate 9
RS CE TET RITE EM 19
| ES See Sree ee passim
Ee Ce TET Ee eR 5, 10, 22
v
TABLE OF AUTHORITIES — Continued
Page
15 U.S.C. § 1012(b) (McCarran-Ferguson Act)...............++. 6
29 U.S.C. § 185 (Labor-Management Relations Act
OF Tie cctcenenesensansetansentnspianinaniaaneininenntniniidamennienntiansiel 8, 15
LE ee Sn 5
Te 4
SD UE. © BI ececcececescccsnsnsesescsessssnssssssensssnsnsees 13
ee 5
7.) -)>) 9
a Be creccncsecccctesnseninssninmsnpeneneiinieisiantis 12
ae 9
Eg nee 5
BD WBAG. § RRCERITIAD cccccccccvccccssecesssssescsncscccseseseses 5, 9, 10
Welfare and Pension Plans Disclosure Act..................+++++: 25
LEGISLATIVE MATERIALS
113 Cong. Rec. 4650-53 (1967) ...........ccccccceceeeeeeeeseeeeeeeees 26
119 Cong. Rec. 30,003 (1973), reprinted in 2
Castabative TRGB IG occccceccccccscccecesssccssssscsscssssessnasssssssnsssees 26
120 Cong. Rec. 29,933-34 (1974), reprinted in 3
ee 24, 26, 27
H.R. 2, 93d Cong. (1973), reprinted in 1 Legislative
ee 26
H.R. Rep. No. 93-533, reprinted in 1974
7) 24, 25, 26, 28
H.R. Rep. No. 93-533 (1973), reprinted in 1974
U.S.C.C.A.N., and in 2 Legislative History................... 27
vi
TABLE OF AUTHORITIES - Continued
Page
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 ....................ccccssseeeseeeeeeeees 25
Pub. L. No. 85-836, 72 Stat. 997 (1958) (repealed
Sa cnindescctennctbemeapceiastinneateaisedaitatiateaaennapeataai aa etsiaaimestaaaaiitaiaeiaiis 25
S. 4, 93d Cong. (1973); see S. Rep. No. 93-127
(1973), reprinted in 1974 U.S.C.C.A.N. .....ccccccccceeseeeeeees 26
S. Rep. No. 85-1440 (1958), reprinted in 1958
a eenaI TINIE siiieicteiteescaiieinanestenicenicscninsitabliahiaieaiteniiaciaiitiaasina thine 24
Be a ee Ce ee hicicneccicecnnntnecnistenssncintiiicianetenianunmnsitias 26
S. Rep. No. 93-127, reprinted in 1974 U.S.C.C.ALN. ......... 27
S. Rep. No. 93-127, reprinted in 1974 U.S.C.C.A.N.
and ten 1 Loaglalative FIs GOry .........ccccccccccccccssccsscccsecseceses 27
S. Rep. No. 93-127, reprinted in 1974 U.S.C.C.A.N.
and in 1 Legislative History ..................ccccccccccsesseees 26, 27
S. Rep. No. 93-127, reprinted in 1974 U.S.C.C.ALN. ......... 24
S. Rep. No. 93-127, reprinted in 1974 U.S.C.C.ALN. ......... 25
Special Comm. on Aging, U.S. Senate, 98th Cong.,
The Employment Retirement Income Security
Act of 1974: The First Decade 1-25 (Comm. Print
ee ET Wii icitnsrenicnscrninectnssintiiiintnnsasens 23
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 1974) (“Legislative History”).............. 23
Vii
TABLE OF AUTHORITIES — Continued
Page
OTHER AUTHORITIES
Solicitor General, Br. of United States as Amicus
Curiae in Ward, No. 97-1868 (November 1998).............. 9
Catherine L. Fisk, The Last Article About the
Language of ERISA Preemption? A Case Study of
the Failure of Textualism, 33 Harvard J. on
Ragatin. SB, BB CIID cncccccsccccscccccccsccecerescereseccsenscsssasees 18, 22
David Gregory, The Scope of ERISA Preemption of
State Law: A Study in Effective Federalism, 48 U.
DS yyy EEE 23, 2
Donald T. Bogan, ERISA: The Savings Clause,
§ 502 Implied Preemption, Complete Preemption,
and State Law Remedies, 42 Santa Clara L. Rev.
Donald T. Bogan, Protecting Patient Rights Despite
ERISA: Will the Supreme Court Allow States to
Regulate Managed Care?, 74 Tul. L. Rev. 951
I ivccssensvecsensnsensnessnntneensemmmenmseningionl 5, 18, 23, 30
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) ................ 29
James D. Hutchinson & David M. Ifshin, Federal
Preemption of State Law Under the Employee
Retirement Income Security Act of 1974, 46 U.
Goad, Te, Bees BB, BS CRIED ccccccccccccccncccscessentosssssssesssssserses 24
ue
Te eg
Pi ri
7
Se Pd
ty
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1
INTEREST OF THE AMICUS CURIAE
United Policyholders is a national, not-for-profit
educational organization whose mission is to educate the
public, legislators and the courts on insurance issues and
consumer rigiits, and to assist policyholders in securing
prompt and fair insurance settlements.’ The resolution of
the issue presented in this case is of great importance to
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
In Difelice v. Aetna U.S. Healthcare, 346 F.3d 442, 453
(3rd Cir. 2003), Justice Becker writes in concurrence, “I
write separately to add my voice to the rising judicial
chorus urging that Congress and the Supreme Court
revisit what is an unjust and increasingly tangled ERISA
regime.” Id. at 453. We submit that the root of the innu-
merable difficulties that have plagued the Courts is
language from this Court’s decision in Pilot Life v. Dedeux,
481 U.S. 41 (1987). Petitioners have urged this Court to
extend that dicta and apply it to the circumstances here.
We urge the Court to resist such an extension of Pilot Life,
which we posit cannot withstand either scrutiny or logic in
light of all that has transpired since its issuance. Indeed,
Pilot Life’s dicta has required federal courts to “struggle
mightily to maintain fidelity to ERISA’s expansive”’
' 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.
_* Difelice 346 F.3d at 54 (Becker, J., concurring.)
2
preemption while continuing to respect the rights of states
to regulate insurance.
This Court has courageously remarked on prior
occasions that its initial take on ERISA preemption has
not always been accurate and has stepped forward to
correct itself on more than one occasion. See Kentucky
Association of Health Plans, Inc. v. Miller, 538 U.S. 329,
123 S.Ct. 1471 (2003) (making a clean break from past
criteria used to determine whether a law regulates insur-
ance within scope of saving clause); California Division of
Labor Standards Enforcement v. Dillingham Construction
N.A., Inc., 519 U.S. 316, 335 (1997) (ERISA preemption
criteria set forth in some of the court’s earlier cases,
including Pilot Life, have “in effect been abandoned” as “a
project doomed to failure” (Scalia, J., concurring); N.Y.
State Conference of Blue Cross & Blue Shield v. Travelers
Ins. Co., 514 U.S. 645, 655 (1995) (recognizing that prior
attempts at construing the phrase “relate to” in preemp-
tion clause “does not give us much help.. .”).
United States Senior District Judge Newcomer has
recently found Pilot Life’s reasoning “unpersuasive” and
“flawed” in important respects. Rosenbaum v. Unum Life
Ins. Co. of America, 2003 WL 22078557 (E.D. Pa.). See also
Stone v. Disability Management Services, Inc., 288
F. Supp.2d 684, 695-96 (2003) (noting “persuasive” reason-
ing of Rosenbaum). As Justice Becker proposes, the inequi-
ties inherent in ERISA, as interpreted thus far by the
courts, “cry out for clarification by Congress or, failing
that, by the Supreme Court.... The time might be right
[for the Supreme Court] to reconsider its prior rulings.” Id.
at 461, 465. And Justice Calabresi in Cicio v. Does, 321
F.3d 83, 106 (2d Cir. 2003), writes, “... the injury that the
courts have done to ERISA will not be healed until the
Supreme Court reconsiders the existence of consequential
damages under the statute, or Congress revisits the law to
the same end.” (Calabresi, J. dissenting in part.)
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
3
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.’ As
part of the Court’s analysis of the saving clause issue in
Pilot Life, and in accordance with the views of the Solicitor
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.
This Court has recently pointed out that Pilot Life
does not resolve Section 502’s impact on laws encompassed
by the saving clause. See Rush Prudential HMO Inc. v.
Moran, 536 U.S. 355, 377 (2002) (“we have yet to encoun-
ter a forced choice between the congressional policies of
exclusively federal remedies and the ‘reservation of the
business of insurance to the States,’”); UNUM Life Insur-
ance Co. of Am. v. Ward, 526 U.S. 358, 377 n.7 (1999)
(“[This] case does not raise the question whether § 1132(a)
provides the sole launching ground for an ERISA enforce-
ment action”; Pilot Life’s holding was “in the context” of a
law which was not saved from preemption). Further, in
Franchise Tax Board of California v. Construction Labor-
ers 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. In
addition, the Solicitor General has 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. Ward, 526 U.S. 358, 377 n.7. Moreover, the
* This holding in Pilot Life was substantially modified in Kentucky
Association of Health Plans, Inc. v. Miller, 538 U.S. 329, 123 S.Ct. 1471,
1478-79 (2003) in which this Court made a clean break from the criteria
used in Pilot Life, to determine whether a law regulated insurance
within the meaning of the saving clause.
4
limited application of Pilot Life’s Section 502 implied
preemption analysis is reflected in the Court’s final sen-
tence: “ ... [W]Je conclude that Dedeaux’s state law suit
asserting improper processing ofa 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 Pilot Life the Court notes that the remedial provi-
sion of ERISA was intended to represent the exclusive
remedies available to an ERISA plan participant and thus,
the state law at issue was preempted to the extent it
provided a remedy not authorized under ERISA. Pilot Life,
481 U.S. at 54. Petitioners urge the Court to extend that
reasoning to apply even if the law at issue is saved from
preemption. Critically, however, the reasoning this Court
used in Pilot Life only applies to laws of general applica-
tion and does not logically extend to laws that fall within
the saving clause. ERISA’s clear purpose, when enacted,
was to regulate pension and not insurance difficulties and
the statute is clear on its face that the saving clause is not
affected by Section 502. In addition, the remedies provided
under ERISA are not suited to insurance disputes and
there is nothing in the legislative history of ERISA which
would constitute a clear and manifest intent of Congress
that the saving clause be subservient to Section 502.
Eminent jurists and commentators have also concluded
that an extension of Pilot Life, as advocated by Petitioners
here, strains all logic in both the interpretation of ERISA
as well as its practical application. They urge this Court,
as we do, to limit the effect of Pilot Life.
ARGUMENT
I. All Laws Which Regulate Insurance Are Saved
From Preemption Pursuant To The Clear And
Unambiguous Text Of ERISA.
ERISA was enacted as a pension reform bill intended
to protect the retirement benefits of workers. Shaw uv.
Delta Air Lines, Inc., 463 U.S. 85, 90 (1983); 29 U.S.C.
§ 1001(b). Protecting “the continued well-being and
5
security 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, ERISA] . . . shall super-
sede 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 has described the preemption clause
as “expansive.”* However, the preemption clause is modi-
fied by the saving clause, which declares “ ... nothing in
this subchapter shall be construed to exempt or relieve
any person from any law of any State which regulates
insurance ...” ERISA §514(bX2A), 29 U-S.C.
§ 1144(b)(2)(A). This saving clause is “phrased with similar
breadth”® as the preemption clause.’
A remedial provision is found in the same subchapter
as the preemption and saving clauses. ERISA Section 502,
29 U.S.C. § 1102, contains a set of remedies avai'able
under ERISA to plan participants. Thus, on the face of the
statute, all remedies available under ERISA would consti-
tute the exclusive remedies, unless a state remedial law
was saved from preemption. In that event, “nothing in this
* 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).
* See New York State Conf. of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co., 514 U.S. 645, 655 (1995); Pilot Life, 481 U.S. at 46.
* Unum Life Ins. Co. of America v. Ward, 526 U.S. 358, 363 (1999).
” 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) (“... [WJhile 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”).
6
subchapter,” which by definition includes Section 502’s
remedial provisions “shall [preempt]... any... State [law
which] regulates insurance.” (Emphasis added.) Accordingly,
any state iaw that regulates insurance, regardless of
whether it creates a remedy or not is saved from preemption.
Issues of statutory construction turn on Congress’
intent.* The Court must “begin with the language em-
ployed by Congress and the assumption that the ordinary
meaning of that language accurately expresses the legisla-
tive purpose.”* Further, the Court must also presume that
Congress did not intend to preempt 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
zealously protected from federal regulation. The McCar-
ran-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 insur-
ance.” 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 reserva-
tion of the business of insurance to the States. Id.; Ward, 526
* See Travelers, 514 U.S. at 655.
* 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).
° 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 regula-
tion, 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).
7
U.S. at 375 n.5. Moreover, “[tJhere is no discussion in [the
legislative] history [of ERISA] of the relationship 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 insurance,’ ... 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 nothing in either
the statute or the legislative history of ERISA even to
suggest such an intent, let alone a clear and manifest
intention.
Il. A Claim That Pilot Life’s Exclusive Remedy
Analysis Should Be Extended To Laws Which
Are Saved From Preemptica Is Deeply Flawed.
A. The Structure Of ERISA, Including Section
502, Establishes That Congress Did Not In-
tend To Preempt State Remedial Laws That
Are Saved From Preemption.
In Pilot Life, this Court stated that Congress intended
that all claims arising from an ERISA-governed employee
benefit plan which fall within the ambit of ERISA Section
502 must be pursued exclusively through ERISA.” This
Court founded its conclusion on two factors: (1) the structure
of ERISA itself and (2) ERISA’s legislative history and, in
" Pilot Life, 481 U.S. 41.
8
particular, reference in that history 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 not
“free to obtain remedies under state law that Congress
rejected in ERISA.” Pilot Life, 481 U.S. at 54.
It is certainly true that Section 502 contains a com-
prehensive enforcement scheme. However, the saving
clause is a fundamental element of that comprehensive
scheme. One cannot merely presume that, because Section
502 is comprehensive, that it was intended to prevail over
the saving clause in the event of a conflict. Surely Con-
gress was aware that, in order to accomplish such a result,
it only need have included in the saving clause language
providing that all such laws were saved “except laws
providing remedies other than those set forth in Section
502.” Or it could simply have prefaced the saving clause
with, “except as provided in Section 502.” Or it could have
invoked a multitude of other ways to make itself clear.
Indeed, if there was such a clear and manifest intent of
Congress to have Section 502 trump Section 514, it is hard
to fathom why Congress did not include such an easy
clause in the language of the statute itself.
We must also ask ourselves the question, “If we
presume that Congress intended to save from preemption
all laws regulating insurance — even laws providing
additional remedies — could Congress have expressed its
intent more clearly than it did in the statute itself?” The
short answer is that it would be hard to imagine language
that was more explicit. The statute itself provides that the
saving clause supersedes both the preemption clause and
the remedial provisions in the event of a conflict.
While the Court’s conclusion in Pilot Life can be applied
to generally applicable state law remedies, or more impor-
tantly, to laws affecting pension benefits, the same is not true
of laws which fall within the specific Congressionally-carved
9
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
provides 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) (emphasis added). Not only are the reme-
dies 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 preemption clause (29 U.S.C. § 1144).
The Solicitor General, upon whom ‘his Court relied in
Pilot Life, has also questioned this Court’s suggestion in
Pilot Life that ERISA Section 502 was intended to be
exclusive of all state law remedies. In his amicus brief to
the Court in Ward, he suggested that this Court should
reconsider this part of the Pilot life opinion. Br. of United
States as Amicus Curiae in Ward, No. 97-1868 (November
1998) at 7, 20-25.
We recognize that Pilot Life has been read to
preclude even state law causes of action arising
under laws that “regulate[ ] insurance.” That por-
tion of Pilot Life’s rationale is, however, in sig-
nificant tension with the text of the insurance
savings provision and was unnecessary to Pilot
Life ‘s holding that the law at issue there was not
in any event an insurance regulation within the
meaning of that provision.
* * *
We do not question [the exclusive remedy] rea-
soning in Pilot Life as a general matter. Unques-
tionably, “Congress intended § 502(a) to be the
exclusive remedy for rights guaranteed under
ERISA.” [Citations omitted.] And it is certainly
true that, outside the context of state laws that
“regulate insurance” within the meaning of the
ERISA insurance savings clause, that exclusivity
of the Section 502 civil enforcement provisions
10 ”
also appropriately informs the Court’s understand-
ing of the scope of ERISA preemption where a
plaintiff brings a cause of action under state law
that “relates to” an ERISA plan. [Citation omitted.]
Congress, in short, clearly intended the remedial
provisions of ERISA to be exclusive of any gener-
ally applicable state-law remedies related to ER-
ISA plans. (Citations omitted. ]
It does not follow, however, that ERISA Section
502 should inform the preemption inquiry to the
same extent with respect to a state-law cause of
action or remedy that specifically “regulates in-
surance” as it does with respect to one of general
applicability. In that situation, Congress has
saved state substantive law, and it is not' clear
why Congress would have wanted to foreclose all
access to state-created remedies or sanctions to
enforce that substantive law, see, e.g., Metropoli-
tan Life, 471 U.S. at 734 (suit by state Attorney
General against insurer of ERISA plans to en-
force provision of state insurance law), especially
where the causes of action provided under Sec-
tion 502 itself are not suited to that purpose.
The savings clause states that “nothing in this
subchapter shall be construed to exempt or re-
lieve any person from any law of any State which
regulates insurance.” 29 U.S.C. § 1144(b)(2)(A)
(emphasis added). “[TJhis subchapter” includes
Section 502, which has been construed to provide
exclusive remedies under ERISA, as well as the
preemption provision itself, Section 514(a). Ac-
cordingly, the savings clause by its terms directs
that nothing in Section 502, which concerns
causes of action and remedies under ERISA,
shall be “construed” to relieve or exempt any per-
son from “any law” of a State that regulates in-
surance. Thus, the insurance savings clause, on
its face, saves state law conferring causes of ac-
tion or affecting remedies that regulate insur-
ance, just as it does state-mandated benefits
laws and other prescriptive measures that do so.
11
This Court gave effect to the facially unrestricted
scope of the insurance savings clause in Metro-
politan Life, when it “declinfed] to impose any
limitation on the saving clause beyond those
Congress imposed in the clause itself and in the
‘deemer clause’ which modifies it,” and concluded
that “(if a state law ‘regulates insurance,’ as
mandated-benefit laws do, it is not preempted.”
471 U.S. at 746; cf. Pilot Life, 481 U.S. at 56-57
(Metropolitan Life clearly “rejected an interpreta-
tion of the [insurance] saving clause ... that
saved from preemption ‘only state regulations
unrelated to the substantive provisions of ER-
ISA’”). In addition, the force of the savings provi-
sion’s express terms is reinforced by the Court's
frequent recognition — particularly in recent
cases — that ERISA’s preemption provisions must
be read against the background of the “assump-
tion 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 Br. at 20, 22-25 (footnotes omitted).
As the Solicitor General has carefully explained, the
structure of ERISA and, in particular, Section 502 cannot
serve as the clear and manifest intent of Congress re-
quired to override the clear terms of the saving clause
itself. Moreover, a further look into the structure of the
remedial provisions discloses powerful evidence that
Congress did not intend the remedial provisions to prevail
over the saving clause.
To the extent ERISA is implicated, the disputes here —
and in nearly all the matters impacted by Pilot Life — are,
at bottom, insurance disputes between insureds and
his/her insurance company (or HMO). Logic would dictate
that such disputes be resolved in a lawsuit between an
insured on the one hand and the insurer or HMO on the
other hand. However, ERISA’s remedial provision is not
set up that way. There is a third party, which is inexplica-
bly inserted into the middle of the dispute. This is the
12
ERISA plan itself. ERISA requires that an action to
recover benefits must be brought against the plan as an
entity. “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 other
person... .” 29 U.S.C § 1132(d)(2) (emphasis added). Thus,
ERISA 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
Computer Corp., 761 F.2d 1323, 1324 (9th Cir. 1985);
Garratt v. Knowles, 245 F.3d 941, 949 (7th Cir. 2001).
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.”
In the context of a welfare benefit plan in which the
only benefit is the purchase of insurance, such a proce-
dures makes no sense in a dispute between an insured and
an insurer. A suit against the plan is, at best, a very odd
procedure. The plan is not really an entity at all. It is a
creation of ERISA and may exist without any documenta-
tion, any employees, any office or any funds.” Indeed, it
can be created as a matter of law without the expressed
intention or documentation of anyone.“ Why would Con-
gress insist that an action for insurance benefits must be
* See, e.g., Everhart v. Allmerica Financial Life Ins. Co., 275 F.3d
751, 754 (9th Cir. 2001), cert. denied, 536 U.S. 958 (2002); Gibson v.
Prudential Ins. Co. of N. Am., 915 F.2d 414, 417 (9th Cir. 1990); Roeder
v. Chemrex, Inc., 863 F.Supp. 817, 828 (E.D. Wis. 1994); Cohen v.
Equitable Life Ass. Soc. of the United States, 196 Cal.App.3d 669, 672-
73 (1987).
* See, e.g., Gaylor v. John Hancock Mutual Life Ins. Co., 112 F.3d
460, 463-65 (10th Cir. 1997) (ERISA plan determined from surrounding
circumstances); Butero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207,
1213-15 (11th Cir. 1999) (same); Donovan v. Dillingham, 688 F.2d 1367,
1373 (11th Cir. 1982) (written plan not necessary to establish ERISA
plan); Marshall v. Bankers Life & Cas. Co., 2 Cal. 4th 1045, 1054, 832
P.2d 573 (1992) (same).
* Blau v. Del Monte Corp., 748 F.2d 1348, 1352 (9th Cir. 1984).
13
filed against an entity, which exists in name only, but, in
reality, has no assets or personnel? Indeed, in these
circumstances, all of the claims decisions are delegated by
contract to the insurance company and thus an action by
the claimant against the insurer is the obvious manner of
resolving such disputes. State courts have been resolving
exactly that kind of insurance claim for over 200 years.
The “plan” really has no role whatsoever in resolution of
the dispute. Yet, under ERISA’s structure, in order to
obtain benefits, an insured must proceed against the plan
and, presumably, if a judgment is entered against the
plan, force a second action by the plan against the insurer
to obtain the amount of the judgment from the insurer.
This is a highly cumbersome and illogical method of
obtaining insurance benefits. It is hard to imagine why
Congress would impose such a burdensome procedure on a
claim that is between an insured and an insurer.
An action solely against the plan does make sense in
the case of pension plans and self-funded plans, which are
not subject to ERISA’s saving clause. These plans are
subject to ERISA’s substantive provisions regarding
vesting and financing. An action directly against such
plans makes sense because those plans actually have funds
and personnel administering those funds. Thus, ERISA’s
requirement that a monetary award can only be satisfied
“ 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). While insurers
are not generally administrators as defined by ERISA (29 U.S.C.
§ 1002(16A\i)) some courts have still suggested that an insurer may
be sued if the claimant can establish that the insurer was the adminis-
trator. See Moran, 536 U.S. at 363, n.3; Everhart v. Allmerica Financial
Life Ins. Co., 275 F.3d 751, 754 (9th Cir. 2001), cert. denied, 536 U.S.
958 (2002). Nonetheless, it is highly improbable that the drafters of
ERISA would have left an insured’s right to sue an insurer dependent
on the question of whether the insurer functioned as an administrator —
an issue the appellate courts still have not resolved or clarified nearly
30 years after ERISA was enacted.
14
against the plan, thereby immunizing the administrators
from personal liability, makes perfect sense. However,
ERISA provides no substantive protections for welfare
plans. It, therefore, made sense for Congress to permit
these substantive protections to be enforced in state
actions directly against insurers through the saving
clause. It would make little sense for Congress to have
intended that insureds jump through the complicated
hoops designed to apply effectively to funded plans, but
not designed to work in connection with unfunded plans.
Similarly, there is no reason for Congress to have left
substantive regulations to the states, but preempted the
states’ procedures to enforce those rights.
Further evidence of this is found in this Court’s
jurisprudence. ERISA was intended to “safeguard employ-
ees from the abuse and mismanagement of funds that had
been accumulated to finance various types of employee
benefits.” Massachusetts v. Morash, 490 U.S. 107, 113
(1989) (emphasis added). Congress was concerned with the
need of employers to be able to rely on uniform laws,
rather than individual state laws. Moran, 536 U.S. at 378-
79. Once again, this has applicability to funded plans, but
not to disputes among third-party insurers and insureds.
That liability does not rest with the employer, but with the
insurer. In any event, ERISA specifically contemplates that
disuniformities for national insurance plans will necessarily
occur as a result of the saving clause. Ward, 526 U.S. at 376,
n.6.
Moreover, 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. Kentucky Association, 123
S.Ct. at 1478, n.3 (“notice-prejudice” rule discussed in
Ward fell within saving clause because it directly affected
insurer’s claims processing function.); Ward, 526 U.S. at
374 n.5 (stating that “laws regulating claims practices .. .
[are included] in catalogue of state laws that regulate
insurance.”); Metropolitan Life, 471 U.S. at 744 (type of
state regulation encompassed by McCarran-Ferguson,
includes “enforcement”). :
15
Thus, a careful look at the structure of the remedial
provisions of ERISA shows, if anything, that the act was
intended to be enforced exactly as written — i.e., that all
state laws regulating insurance, including remedial laws,
are saved from preemption. This is entirely consistent
with ERISA’s purpose. ERISA imposes substantive regula-
tions on, and provides direct actions against, funded plans.
Yet, it does not provide substantive regulations against
unfunded welfare plans and thus permits direct state
actions against the parties ultimately responsible for the
payment of benefits. This is also consistent with the long-
standing principles of field preemption, whereby Congress
does not intend to completely preempt a field without
inserting substantive federal regulations in place of the
existing state regulations.
B. Nothing In The Legislative History Supports
A Conclusion That Congress Intended To
Preempt State Remedial Laws That Are
Saved From Preemption.
Pilot Life also discussed ERISA’s legislative history.
Yet, as set forth at length below, there is nothing in the
legislative history of the Act to support a conclusion that
ERISA was intended to preempt remedies that were
explicitly saved from preemption. The principle piece of
legislative history referred to in Pilot Life is the Confer-
ence Report’s reference to the Labor-Management Rela-
tions Act of 1947 (“LMRA”), 29 U.S.C. § 185. 481 U.S. at
55. The Pilot Life Court found this statement to reflect
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 funded pension
benefits; however, 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 frem preemp-
tion. Indeed, this Court has made this very point.
16
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 savings clause] makes clear that Congress
did not intend to preempt entirely every state
cause of action relating to such plans. With im-
portant, but express limitations, it states that
‘nothing in this subchapter shall be construed to
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 affecting commerce .. .
or between any such labor organizations.’
Franchise Tax Board of State of California 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: “{/WJith the narrow
exceptions specified in the bill, the substantive and en-
forcement provisions of the conference substitute are
intended to preempt the field. .. .” 481 U.S. at 46 (empha-
sis added). Manifestly, the saving clause is the principal
exception.” Moreover, Senator Williams’ statement, as well
* Reference in Senator Williams’ remarks to the “narrow” excep-
tion is “far too frail [to] support” a restricted reading of the saving
clause. Metropolitan Life, 471 U.S. at 746.
17
as those of the other sponsors of the bill," were made in
the context of the intended purpose of the Act as pension
reform legislation.
Once again, the Solicitor General is in agreement with
this view. The Solicitor General concluded its discussion in
its Ward brief by pointing out that this Court’s reference in
Pilot Life to the portion of ERISA’s legislative history
relating to Section 301 of the LMRA “does not bear directly
on the preemption of a state law cause of action or remedy
that ‘regulates insurance.’ That is because LMRA Section
301 does not contain any statutory exception analogous to
ERISA’s insurance savings provision.” Ward Br. at 25.
III. Recent Court Decisions Contain Repeated
Requests That This Court Reconsider Its Dicta
In Pilot Life.
Ever since its issuance, Pilot Life has led to repeated
expressions of angst among courts faced with its tragic
inequities. 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 uv.
” 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.
18
Travelers Ins. Co., 984 F. Supp. 49, 52-54, 65 (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.... Enacted to safeguard the inter-
ests of employees and their beneficiaries, ERISA has
evolved into a shield of immunity that protects health
insurers . . . from potential liability for the consequences of
their wrongful denial of health benefits ... [ERISA] has
gone conspicuously awry from its original intent. .. . Does
anyone care? Do you?” (footnotes omitted); Florence Night-
ingale Nursing Serv., Inc. v. Blue Cross & Blue Shield of
Alabama, 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 Donald
T. Bogan, ERISA: The Savings Clause, $502 Implied
Preemption, Complete Preemption, and State Law Reme-
dies, 42 Santa Clara L. Rev. 105 (concluding that saving
clause saves state law insurance remedies); Bogan, Pro-
tecting Patient Rights, supra note 4, at 996-1002 (contend-
ing that Supreme Court dicta in Pilot Life not consistent
with statutory text and legislative intent); 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 progres-
sive state laws.”) (footnote omitted).
In Cicio v. Does, 321 F.3d 83, 106 (2d Cir. 2003),
Justice Calabresi, in dissent, writes, “ ... the injury that
the courts have done to ERISA will not be healed until the
Supreme Court reconsiders the existence of consequential
damages under the statute, or Congress revisits the law to
19
the same end.” Justice Calabresi suggests that ERISA’s
drafters
. nicely “balancfed] the need for prompt
and fair claims settlement procedures against
the public interest in encouraging the formation
of employee benefit plans.” [cite]
Or so Congress and ERISA beneficiaries
fairly could have hoped. What they got instead
was the Supreme Court’s “Trail of Error,” in
which the Court lumped consequential and puni-
tive damages into the misleading category of “ex-
tracontractual relief,” [cite] and disallowed both
by dint of an anachronistic (and historically
false) law/equity distinction said to be implicit in
Congress’s provision for “appropriate equitable
relief” in § 502(a)(3).
321 F.3d at 107.
Justice Calabresi urges the Court to reconsider its
rulings limiting the form of relief available under ERISA.
However, the crux of the problem is Pilot Life, as it is the
lower courts’ interpretation of that opinion which has
divested claimants of the right to pursue claims directed
specifically at insurance abuses and which would provide
for compensatory damages.
In Rosenbaum v. UNUM Life Ins. Co., supra, the
Court looked carefully at Pilot Life and the language in
Moran which related to Pilot Life. It found the Court's
discussion of Congressional intent to be “flawed in three
important respects.” It failed to apply the fundamental
rule of statutory construction that courts must presume
that a statute means what it says (Rosenbaum at *7-8)
and ERISA’s saving clause is clear on its face that “noth-
ing,” including Sections 502 and 514, can affect state laws
saved from preemption. Id. -
Other than the obvious requiremes*t that the
law must regulate insurance, Congress placed no
other requisites or restrictions on the laws saved
from preemption under ERISA’s saving clause. In
this regard, Congress’ intent was clear, it wanted
all state laws which regulate insurance to be
20
ex.mpt from preemption under ERISA. The Pilot
Life and Rush holdings present an implied Con-
gressional intent which flatly contradicts this ex-
press intent. Rather than allowing any state law
which “regulates insurance” to survive ERISA
preemption, this implied intent adds an addi-
tional requirement, that is, the law must not of-
fer a remedy which is not listed unde: § 502(a).
The problem with such a requirement is that the
Courts have taken an implied intent, which was
derived by questionable means, and have inter-
preted that implied intent to overrule Congress’
express intent, as reflected in the saving
clause. ...
* * *
Finally, the Pilot Life and Rush Opinions
disregard the fundamental presumption against
implied preemption. “[TJhe historic police powers
of the States were not to be superseded by the
Federal Act unless that was the clear and mani-
fest purpose of Congress.” [cite] Here, the clear
and manifest purpose of Congress was memorial-
ized in the saving clause, which provides for
state regulation to be excluded from preemption
under ERISA when it “regulates insurance.” To
find to the contrary would supplant Congress’
express intent and, in the process, would violate
the spirit of the Tenth Amendment, “[t]he powers
not delegated to the United States by the Consti-
tution, nor prohibited by it to the states, are re-
served to the states respectively, or to the
people.” U.S. Const. Amend. X
Rosenbaum at *7-9.
Justice Becker in Difelice also wrote in concurrence to
urge this Court to reconsider its ERISA holdings, includ-
ing specifically its broad preemption holding. His language
is important and powerful. He notes that ERISA and
Section 514 preemption have become
... virtually impenetrable shields that insu-
late plan sponsors from any meaningful liability
for negligent or malfeasant acts committed
21
against plan beneficiaries in all too many cases.
This has unfolded in a line of Supreme Court
cases that have created a “regulatory vacuum” in
which virtually all state law remedies are pre-
empted but very few federal substitutes are pro-
vided.
* * *
This “regulatory vacuum” creates situations
in which plan beneficiaries have little or no re-
course for even the most egregious violations of
their rights. ...
* * *
The unavailability of extracontractual dam-
ages has effects that are perverse. ... it creates
strong incentives for HMOs to deny claims in bad
faith or otherwise “stiff” participants. ERISA
preempts the state tort of bad-faith claim denial,
see, Pilot Life, 481 U.S. at 54-56, 107 S.Ct. 1549,
so that if an HMO wrongly denies a participant’s
claim even in bad faith, the greatest cost it could
face is being compelled to cover the procedure,
the very cost it would have faced had it acted in
good faith. Any rational HMO will recognize that
if it acts in good faith, it will pay for far more
procedures than if it acts otherwise, and punitive
damages, which might otherwise guard against
such profiteering, are no obstacle at all. Not only
is there an incentive for an HMO to deny any
particular claim, but to the extent that this prac-
tice becomes widespread, it creates a “race to the
bottom” in which, all else being equal, the most
profitable HMOs will be those that deny claims
most frequently.
Difelice, 346 F.3d at 456-462.
Justice Becker believes that the bar to extracontrac-
tual damages has led to an ERISA “preemption night-
mare” and suggests that the Supreme Court revisit its
preemption analysis. He explains that ERISA’s legislative
history, upon which Pilot Life is based, is hardly clear, and
that the preemption clause was inserted at the last minute
22
and with little Congressional debate. Jd. at 466. He con-
cludes:
The evidence suggests that Congress did not care-
fully consider whether the scope of preemption
should reflect the different degrees of federal regu-
lation of pension plans and welfare benefit plans.
See Fisk, The Last Article about the Language of
ERISA Preemption?, 33 Harv. J. on Legis. at 56.
In my view, section 514(a)’s broad preemptive
scope is sensible with regard to pension plans, for
federal law fully displaces state law and provides
vesting, requirements, minimum funding require-
ments, and a raft of other employee safeguards.
However, to me, it makes much less sense with re-
spect to welfare plans. As discussed supra, Con-
gress exempted welfare benefit plans from most of
ERISA’s substantive regulations, such as its vest-
ing and minimum funding requirements.
As I see it, it is unlikely that Congress intention-
ally created this so-called “regulatory vacuum,”
in which it displaced state-law regulation of wel-
fare benefit plans while providing no federal sub-
stitute. The more likely explanation is that
Congress merely intended to create minimum
safeguards to protect the financial integrity of
welfare benefit plans while stopping short of fed-
eralizing the entire remedial regime, especially
in light of what was a workable state-law reme-
dial system. Congress’s failure to distinguish ex-
plicitly between pension and welfare benefit
plans in § 514(a) is understandable, for, as ex-
plained above, the managed care plans that
wreak havoc with § 514(a) as it relates to welfare
benefit plans did not exist when ERISA was en-
acted. There is no evidence that Congress envi-
sioned the current situation.
Id. at 467.
Undoubtedly these eminent jurists have gone to great
lengths to speak out because of their firm belief that Pilot
Life is a flawed decisior and thai the repeated tragic
consequences of that decision are so innumerable and have
23
gone so far as to cry out for this Court's intervention. They
recognize, as we discuss below, that the legislative history
is clear that Congress did not intend that ERISA preempt
state laws which are saved from preemption and that to do
so makes little sense.
IV. ERISA’s Legislative History Is Unequivocal In
Disclosing That The Act Was Intended To Regu-
late Pension Benefits And Was Not Intended To
Impact The Field Of Insurance."
As this Court has recognized, ERISA was a massive
legislative undertaking. Pilot Life, 481 U.S. at 44. Yet, the
briefing regarding the legislative history before the Court
in Pilot Life was nearly non-existent. This Court relied on
the last two pages of the Solicitor General’s short brief
supporting the grant of certiorari. Jd. at 52. However, none
of the other briefs in the case discussed the legislative
history at all. Thus, no one sought to assist the Court in
presenting the lengthy legislative history, which conflicts
with that presented in the Solicitor General’s original
brief. Moreover, as noted above, the Solicitor General has
since changed his view on the proper interpretation of
ERISA’s legislative history. When one views that history in
context, it is plain that there is nothing in that history to
support an implied Congressional intent which is contrary
to the plain words of the statute itself.
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) (hereinaf-
ter “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 Preemp-
tion of State Law: A Study in Effective Federalism, 48 U. Pitt. L. Rev.
427, 437-457 (1987). °
24
ERISA was the direct outgrowth of the explosion in
private pension plans during the middle of the last century.
The number of employees covered by such plans grew from
approximately 4 million in 1940 to over 30 million by 1973."
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.” In addition, the enormous accumula-
tion of such funds exerted a major impact on the country’s
financial markets.” This explosion occurred without the
benefit of any effective federal or state regulation.”
In 1954, at the request of President Eisenhower, Con-
gress undertook an extensive study of the private pension
industry.” This study disclosed abuses, including incompe-
tent management of pension funds, looting, embezzlement,
kickbacks, excessive administration costs and imprudent
investment practices.” In response, Congress enacted the
* See S. Rep. No. 93-127, at 3, reprinted in 1974 U.S.C.CAN. at
4839-40, and in 1 Legislative History, supra note 18, at 589.
® See H.R. Rep. No. 93-533, at 3, reprinted in 1974 U.S.C.C.AN. at
2350; The First Decade, supra note 18, at 5; 4641, and in 2 Legislative
History, supra note 18, 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).
™ See 120 Cong. Rec. 29,934 (1974), reprinted in 3 Legislative
History, supra note 18, at 4748 (statement of Sen. Javits); The First
Decade, supra note 18, 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 Effective Federalism, supra
note 18, at 443-45 (referring to the many abuses in employee pension
plans listed in ERISA's legislative history).
™ Id: H.R. Rep. No. 93-533, at 3, reprinted in 1974 US.C.C.AN. at
4641, and in 2 Legislative History, supra note 18, at 2350.
* See note 17 supra.
* See S. Rep. No. 85-1440, at 2-11 (1958), reprinted in 1958
U.S.C.C.A.N. 4137.
* Id. at 4137-47
25
Welfare and Pension Plans Disclosure Act in 1958.” This law
merely required the disclosure of certain financial informa-
tion to the employees and did not provide any meaningful
regulation of the funds themselves.”
This legislation was wholly ineffective.” Consequently,
in 1962 President Kennedy appointed a special task force
to study the problem.” The task force concluded that
further federal regulation of private pension plans to
include mandatory minimum vesting and funding re-
quirements was necessary and that further study was
required on other issues.” 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
* Pub. L. No. 85-836, 72 Stat. 997 (1958) (repealed 1974).
” See H.R. Rep. No. 93-533, at 4, reprinted in 1974 U.S.C.C.AN. at
4642, and in 2 Legislative History, supra note 18, at 2351; Malone v.
White Motor Corp., 435 U.S. 497, 507 (1978) (plurality opinion).
* See S. Rep. No. 93-127, at 4, reprinted in 1974 U.S.C.C.AN. at
4841; H.R. Rep. No. 93-533, at 4, reprinted in 1974 U.S.C.C.AN. at
4642, and in 2 Legislative History, supra note 18, at 2351.
* See President’s Comm. on Corporate Pension Funds and Other
Private Retirerrent 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).
” Id.
*" 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
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.”).
26
introduced legislation in 1967 to create federal funding
and participation requirements for private pension plans.”
This led to further Congressional investigations and
eventually ERISA. In 1970, the Subcommittee 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 abusive practices resulting in the
loss of retirement benefits to employees as the result of
inadequate funding, mismanagement and unreasonable
vesting requirements.” It agreed with President Ken-
nedy’s task force and recommended comprehensive regula-
tion of the pension industry.” Shortly thereafter, Senator
Javits introduced Senate Bill 4. It stated, “[tJhe 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 Subcommit-
tee’s comprehensive study of such plans.” A correspond-
ing House bill was also introduced.”
* See 113 Cong. Rec. 4650-53 (1967) (statement of Sen. Javits); see
also 120 Cong. Rec. 29,933-34 (1974), reprinted in 3 Legislative History,
supra note 18, at 4748 (remarks of Sen. Javits) (recounting his contin-
ued efforts to reform the private pension and welfare system).
* See S. Rep. No. 92-634, at 1 (1972); see also 119 Cong. Rec.
30,003 (1973), reprinted in 2 Legislative History, supra note 18, at 1598
(statement of Sen. Williams).
™ See H.R. Rep. No. 93-533, at 5-8 (1973), reprinted in 1974
U.S.C.C.AN. at 4639, 4643-46, and in 2 Legislative History, supra note
18, at 2355.
* See 120 Cong. Rec. 29,935-44 (1974), reprinted in 3 Legislative
History, supra note 18, at 4748 (remarks of Sen. Javits).
* S.4, 93d Cong. (1973); see S. Rep. No. 93-127 (1973), at 1,
reprinted in 1974 U.S.C.C.AN. at 4838, and in 1 Legislative History,
supra note 18, at 587.
* See H.R. 2, 93d Cong. (1973), reprinted in 1 Legislative History,
supra note 18, at 3.
27
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
consequent 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 prescrib-
ing minimum standards for promised benefits.
The purpose of S.4 is to prescribe legislative
remedies for the various deficiencies existing in
the private pension plan systems... .”
The report states that “[tJhe 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) ‘portability’ and
(5) ‘fiduciary responsibility and disclosure.’”“ Similarly,
the House Committee on Education and Labor report
states that the “primary purpose of the bill is the protec-
tion of individual pension rights” and that the legislation
was designed to: (1) establish minimum fiduciary stan-
dards for retirement plans, (2) provide for enforcement
and public disclosure of finances, (3) improve the equitable
7
* See S. Rep. No. 93-127, at 1-36, reprinted in 1974 U.S.C.CAN.
at 4838-89, and in 1 Legislative History, supra note 18, at 587-622; H.R.
Rep. No. 93-533, at 1-28, reprinted in 1974 U.S.C.C._AN. at 4639-70,
and in 2 Legislative History, supra note 18, at 2348-75; 120 Cong. Rec.
29,933-35 (1974), reprinted in 3 Legislative History, supra note 18, at
4746-51 (remarks of Sen. Javits).
* S. Rep. No. 93-127, at 1, reprinted in 1974 U.S.C.C_ AN. at 4844-
77, and in 1 Legislative History, supra note 18, at 587.
“ S. Rep. No. 93-127, at 8-11, reprinted in 1974 US.C.CAN. at
4844-77, and in 1 Legislative History, supra note 18, at 594-97 (empha-
sis omitted).
28
character and soundness of private pension plans by
requiring (a) appropriate vesting and (b) minimum fund-
ing standards, and (4) guarantee the adequacy of the
plan’s assets prior to termination.”
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.”” 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.” In
the House, one of the principal proponents, Representative
Dent, described ERISA’s purpose in this way: “[Wle
started out with only one aim in view and that was to give
a pension participant his entitlements under the contract
of the pension plan he belonged to.”“ The record is filled
with tragic examples of workers deprived of pension
benefits after 30, 40 and 50 years of employment because
they were a few days short of vesting before retiring, the
company was sold or went bankrupt, or because the
“ ELR. Rep. No. 93-533, at 1, 17-18, reprinted in 1974 U.S.C.C.AN. at
4655-56, and in 2 Legislative History, supra note 18, at 2348, 2364-65.
@ Legislative History, supra note 18, at 4747 (Remarks of Sen.
Javits).
* Legislative History, supra note 18, at 4733 (Remarks of Sen.
Williams).
“ Legislative History, supra note 18, at 4665 (Remarks of Rep. Dent).
——— ee
29
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 con-
tained 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. Not a single insurance concern is ex-
pressed anywhere in the legislative history. Instead,
Congress expressly saved all insurance regulation 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 relation-
ship between the saving clause and the general preemp-
tion 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 com-
mentator who has extensively reviewed ERISA’s legisla-
tive history reports,
... ERISA’s legislative history is remarkable .. .
for what it does not contain. ERISA’s legislative
“ See, e.g., Legislative History supra note 18, 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.
“ 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).
"a
30
history provides no evidence that Congress seri-
ously 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 manage-
ment 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, note 4 at 972,
976-77.
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. As
many Courts and commentators have now requested, this
Court should revisit the wisdom of its dicta in Pilot Life
and disapprove the analysis set forth therein.
Mill Valley, CA 94941
Respectfully submitted,
Amy BACH ARNOLD R. LEVINSON
Of Counsel Counsel of Record
BACH LAW OFFICE TERRENCE J. COLEMAN
42 Miller Avenue PILLSBURY & LEVINSON, LLP
(415) 381-7627 San Francisco, CA 94111
(415) 433-8000
Counsel for Amicus Curiae
One Embarcadero Center, 38th F1.
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.