Opposition Brief — Blue Cross & Blue Shield of Maryland, Inc. v. Weiner

No. 89-250

i AOSEPH FS R

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In The a

Supreme Court of the United States

October Term, 1989

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Eleventh Circuit

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RESPONDENTS’ BRIEF IN OPPOSITION

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QUESTION PRESENTED FOR REVIEW

Whether t':e United States Court of Appeals for the

Eleventh Circuit erred in permitting a Florida state court

to decide whether its jurisdiction had been preempted by

ERISA.

il

TABLE OF CONTENTS

Page

QUESTION PRESENTED FOR REVIEW ............ i

TABLE GP CONTERIS: 8c Sika caeees ee eee eee ii

TARE UF AUTIOOREIIGS «oo sUiseinwtsess eee iii

SIATEMENT OF THE CAGE. «06555 css s004s sense 1

REASONS FOR DENYING THE WRIT............. 6

1. The Decision Below Does Not Raise the Ques-

tion Presented in the Petition................ 6

2. The Eleventh Circuit Correctly Applied the

Rooker-Feldman Doctrine..................00.. 9

3. ERISA Preemption is Not in Need of Clarifica-

errr err re + Ee ee es 14

4. The Eleventh Circuit’s Decision does Not Dem-

onstrate a Need for Guidance as to the Scope of

ERISA’s Coverage... .<.is2 54541 aeee eee 18

5. The Eleventh Circuit’s Decision Was Also

Proper on the Grounds of Abstention........ 21

CONCLUSION .........<000.<acc) ee 22

ili

TABLE OF AUTHORITIES

Page

CASES

Aluminum Co. of America v. Utilities Comm'n of

North Carolina, 713 F.2d 1024 (4th Cir. 1983), cert.

co ee OD 22

Amalgamated Clothing Workers of America v. Rich-

man Brothers, 348 U.S. 511 (1955)...... Pa nsk 14, 18

Atlantic Coast Line R.R. Co. v. Brotherhood of Loco-

motive Engineers, 398 U.S. 281 (1970).............. 12

Bagget v. Department of Professional Regulation Bd.

of Pilot Comm'rs, 717 F.2d 521 (11th Cir. 1983)..... 22

Barry v. Dymo Graphic Systems, Inc., 394 Mass. 830,

Ge ea SS) 8

Brandenberg v. First Maryland Sav. and Loan, Inc.,

660 FSupp. 717 (D. Md. 1987), aff'd, 859 F.2d

eg Re 22

Brotherhood of Locomotive Engineers v. Massachusetts

Commission Aga.nst Discrimination, 695 F.Supp.

Ee er 12

Browning Corp. Int'l v. Lee, 624 FSupp. 555 (N.D.

ahr ae hOKAN aks a dn deans acs ae

Bruenn v. Aetna Life Ins. Co., 197 Cai. App. 3d 1000,

243 Cal. Rptr. 262 (Cal. App. 2 Dist. 1987)......... 8

Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987) ...15, 18

Chick Kam Choo v. Exxon Corp., 486 U.S. 140 (1988) .... 14

District of Columbia Court of Appeals v. Feldman, 460

ES a ee 9, 10, 13

Donovan v. Dillingham, 688 F.2d 1367 (11th Cir.

1982)

iv

TABLE OF AUTHORITIES - Continued

Page

E-Systems, Inc. v. Taylor, 744 S.W. 2d 956 (Tex App.

ee i SEPT RTE SES EN Pee ee eUe Ty Eee ree

Fore Way Express, Inc. v. Wisconsin Dept. of Indus.,

Labor and Human Relations, 660 F.Supp. 310 (E.D.

WEN SUD onca kg ck in ehhuta hacker sci kes enka 22

Fresh Int'l Corp. v. Agricultural Labor Relations Bd.,

805 F.2d 1353 (9th Cir. 1986) r 22

Leer ne en ee ee ee ae ee ie

Hathorn v. Lovorn, 457 U.S. 255 (1982)

re eee 15

Hobbs v. United States Office of Personnel Manage-

ment, 485 FSupp. 456 (M.D. Fla. 1980)............ 11

Hollins v. Wessel, 819 F.2d 1073 (11th Cir. 1987)...... 13

Hood v. Prudential Ins. Co., 522 So.2d 265 (Ala.

WOM os Sas WV SVE OR SO GORNEN Cu eeVa LURES SELESN CRETE 8

Insurance Corp. of Ireland, Ltd. v. Compagnie des

Bauxites de Guinee, 456 U.S. 694 (1982)............ 16

International Longshoremen’s Ass'n v. Davis, 476

FR Me Bs pee eee rrr rs? See o ere taro Ss 7, 15

Johansen v. Employee Benefit Claims, Inc., 668

ee. TAPE CE. MR. ESRF os is iis didn nweenen’s 8

Kalb v. Feuerstein, 308 U.S. 433 (1940) ............ 15, 16

Kremer v. Chemical Const. Corp., 456 U.S. 461 (1982) .... 17

Marcal Paper Mills, Inc. v. Ewing, 790 F.2d 195 (1st

Cir. 1986)

Marrese v. American Academy of Orthopaedic Sur-

mneien, Are UD. Bee CUMOOK 6 ics eos cae seavensscen 17

Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58

pg SRN MGI ee ari ba atabms aa rt caseyrg yee oy 7, 8, 14

TABLE OF AUTHORITIES - Continued

Page

Parsons Steel, Inc. v. First Alabama Bank, 474 U.S.

DRO acca barks Co ee Te ee 16

Peick v. Murray, 141 Ill. App. 3d. 1081, 491 N.E. 2d

We Rees A. CREE. WORD oo kc eG ecakencceseayenas 8

Pennzoil Cu. v. Texaco, Inc., 481 U.S. 1 (1987) ........ 21

Pilot Life ins. Co. v. Dedeaux, 481 U.S. 41 (1987) 6, 8, 14

Provikence Hosp. v. National Labor Union Health and

Welfare Fund, 162 Mich. App. 191, 412 N.W. 2d

ee es ER raw ee er er 8

Richland Hosp. Inc. v. Raylon, 33 Ohio St. 3d 87, 516

eee ee Eg eee reer ta eres 8

Rooker v. Fidelity Trust Co., 263 U.S. 413 (1923) ....... 9

Staley v. Ledbetter, 837 F.2d 1016 (11th Cir. 1988). .11, 13

Stoll v. Gottlieb 305 U.S. 165 (1938).................. 16

Taggart Corp. v. Life & Health Benefits Administra-

tion, 617 F.2d 1208 (5th Cir. 1980), cert. denied,

ee ee ee 21

Takeda v. Northwestern Nat'l Life Ins. Co., 765 F.2d

Pam Cees Gia MI ain os onde ew teen vk ese snekiekee 8

Texaco, Inc. v. Pennzoil Co., 784 F.2d 1133 (2d Cir.

1986), rev'd on-other grounds, 481 U.S. 58 (1987).... 11

Texas Employers’ Ins. Assoc. v. Jackson, 820 F.2d 1406

(Sth Cir. 1987), modified on reh’g, 862 F2d 491

(SO ce Sah N So 550s eRe ARES ERS S VOUS SR AREASS ERROR 17

Transamerica Occidental Life Ins. Co. v. Digregorio,

Cll Fal TOP Trem Ge TGF), «oni wh weve cae civ aeens 8

vi

TABLE OF AUTHORITIES —- Continued

Page

Underwriters Nat'l Assurance Co. v. North Carolina

Life and Accident and Health Ins. Guar. Assoc., 455

CM I ong 64's 6 0.0 Nk 'S YO ORAS ROE ee 16

Wisconsin Educ. Ass’n Ins. Trust v. lowa State Bd. of

Public Instruction, 804 F.2d 1059 (8th Cir. 1986) .... 20

Younger v. Harris, 401 U.S. 37 (1971). .............5.. 21

STATUTES

Anti-Injunction Act, 28 U.S.C. §2283 ............. 12, 17

Civil Rights Act of 1964, 42 U.S.C. §2000e .......... 17

Employee Retirement Income Security Act of

1974, 29 US.C. $1001 ef seg. - 2... cence 1, 6, 7, 19

Full Faith and Credit Act, 28 U.S.C. §1738....... 16, 17

Labor Management Relations Act of 1947, 29

OS) tie |. ee eee Sr cee era 15

Longshore and Harbor Workers’ Compensation

Pes ae USA.. GOO1 OF 006. 5 ois cccevenssaadeansceni 17

National Labor Relations Act, 29 U.S.C. §151 et

Voting Rights Act of 1965, 42 U.S.C. §1971 et seq..... 15

OTHER AUTHORITIES

H.R. Rep. No. 1785, 94th Cong., 2nd Sess. 48

(1977)

Supreme Court of the United States

October Term, 1989

—_— —_—___—@-—_ —___—_ —

BLUE CROSS AND BLUE SHIELD

OF MARYLAND, INC.,

Petitioner

ROBERT WEINER, SR., MARGARET WEINER,

MARK WEINER, and ROBERT WEINER, SR.,

as Personai Representive of the Estate of Steven Weiner,

Respondents

—o

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Eleventh Circuit

SS >---- ——

RESPONDENTS’ BRIEF IN OPPOSITION

STATEMENT OF THE CASE

Petitioner, Blue Cross and Blue Shield of Maryland,

Inc. (“BCBSM”), begs the question that confronted the

United States Court of Appeals for the Eleventh Circuit

when it introduces the case as one to set aside the judg-

ment of a state court whose subject matter jurisdictior.

was preempted by the Employee Retirement income

security Act of 1974 (“ERISA”), 29 U.S.C. § 1001 et seq. As

=

will be set forth below, the case in reality was one to

prevent the Florida courts from determining the very

issue BCBSM at first prejudged, and then lost. The issue

is not whether the Florida courts can proceed without

jurisdiction, but whether they can determine if they have

it.

In 1982, Respondent Robert Weiner, Sr. purchased

health insurance for his family from BCBSM. That sum-

mer, one of -his sons, Respondent Mark Weiner, was

involved in an accident and became a quadriplegic. At

about the same time another son, Steve, became ill and

was diagnosed as having AIDS. Steve would also become

paralyzed before he died.

The boys’ health care needs were staggering, but for

almost-a year they were met with BCBSM’s coverage.

Then, in 1983, BCBSM denied coverage to both Mark and

Steve. This was done through fabricated coverage

defenses, and on the basis of terms contained in the

master policy which were intentionally contrary to the

coverage representations BCBSM made in the benefits

book it provided the Weiner family (collectively

“Weiners”) when the policy was sold. Without insurance

coverage, the family subsisted in a trailer with Mr. and

Mrs. Weiner trying to take care of their two paralyzed

sons, one dying. The ordeal they went through cannot,

and fortunately need not, be described in the limited

space available here.

In 1984 the Weiners instituted suit against BCBSM

and its servicing agent, Blue Cross and Blue Shield of

Florida, Inc. (“BCBSF”), in Florida state court. After more

than two years of discovery, the case went to the jury on

the Weiners’ claims of fraud, intentional infliction of emo-

tional distress and negligence. The jury returned separate

verdicts against both BCBSM and BCBSF, finding against

BCBSM on ali counts. Final judgments were entered by

the state trial court in the fall of 1986. BCBSM never

raised the issue of ERISA preemption in the state trial

court.

BCBSM appealed the state court judgment to the

District Court of Appeal of Florida, Fourth District. In

obvious recognition of the fact that Florida courts could

decide the question of ERISA preemption, BCBSM raised

the issue before the Florida appellate court in 1987, con-

tending that the judgment was void because the trial

court’s subject matter jurisdiction had been preempted by

ERISA.

The problem with BCBSM’s argument was that the

evidence at trial showed that no employee benefit plans

existed in connection with Mr. Weiner’s purchase of

health insurance. While the insurance Mr. Weiner pur-

chased from BCBSM purported to be part of a plan estab-

lished by the Service Station Dealers of America

(“SSDA”), an association of employers, it turned out that

this was just a fraudulent marketing scheme. The reality

was that the group policy was established and main-

tained by BCBSM and Associated Financial Services, Inc.

(“AFSI”), an insurance broker, to target a perceived mar-

ket niche. (R. 1-24-1, 2, 89, 101, 103).! SSDA was never

1 Citations are to the Record below.

consulted about the plan, it never gave BCBSM permis-

sion to use its name, and its signature was actually forged

on the insurance contracts which made up the plan. (R.

1-24-72-77, 84). The decision to limit the insureds to ser-

vice station dealers and their employees was an “under-

writing decision” made by BCBSM and AFSI (R. 1-24-96),

not the product of any employer‘employee relationships.

Twelve days after the insurance contracts were

forged, an endorsement was issued to the policies elim-

inating SSDA as both the contracting party and the

insured group. AFSI, the insurance broker, was substi-

tuted in its place. (R. 1-24-59, 77). Thereafter, no further

agreements or endorsements, with the Allied Gasoline

Retailers Association of Florida (“AGRA”) or any other

entity, were made. (R. 1-24-65, 85).

The group insurance policy was then marketed as an

SSDA plan, but it was nothing more than an arrangement

between two entrepreneurial businesses to sell insurance.

It was never established or maintained by an employer or

association of employees. Consistent with its true nature,

no attempt was ever made to comply with ERISA’s

reporting requirements.

Mr. Weiner himself ran a service station in Dania,

Florida as a sole proprietor. His purpose in purchasing

BCBSM’‘s insurance was to provide coverage for his fam-

ily, and they were the only insureds. (R. 1-24-63, 100;

2-36-69). One son did work for him, but no insurance was

purchased for any other employees. Mr. Weiner made no

attempt to comply with ERISA’s reporting requirements.

In April of 1988, some 18 days before oral argument

was to take place in the Florida appellate court, BCBSM

filed an action for declaratory and injunctive relief and a

motion for preliminary injunction in the United States

District Court for the Southern District of Florida. BCBSM

asked the district court to declare the state court judg-

ment void and unenforceable, to temporarily and perma-

nently enjoin the Weiners from attempting to enforce

their judgment, and to temporarily and permanentiy

enjoin the Weiners from taking any further action in the

Florida appellate court —- all on the basis of ERISA

preemption.

The district court afforded BCBSM an emergency

hearing, received extensive memoranda, and on May 16,

1988 entered an Order Denying Motion for Preliminary

Injunction. In addition to denying preliminary injunctive

relief, the district court abstained, noting that ERISA

preemption was “a far cry from being ‘readily apparent’.”

BCBSM appealed the district court’s decision to the

Eleventh Circuit which on April 5, 1989 affirmed the

district court’s decision to abstain and ordered BCBSM’s

action dismissed because the district court lacked subject

matter jurisdiction under the Rooker-Feldman doctrine.

BCBSM’s Suggestion of Rehearing in Banc was denied.

On April 26, 1989 the Florida court issued its decision

affirming the judgment against BCBSM and reversing the

judgment against BCBSF. With regard to BCBSM’s claim

of ERISA preemption, the Florida appellate court rejected

it because the facts showed there was no employee bene-

fit plan.

—

REASONS FOR DENYING THE WRIT

1. The Decision Below Does Not Raise the Ques-

tion Presented in the Petition

BCBSM recasts the case below as one in which the

Eleventh Circuit held that a Florida Court could proceed

even though its subject matter jurisdiction was pre-

empted by ERISA. But the Eleventh Circuit made no such

determination. The issue decided by the Eleventh Circuit

was whether the Florida court should be prevented from

determining if its subject matter jurisdiction was pre-

empted by ERISA.

When the question is properly presented, the Elev-

enth Circuit’s decision falls into a long line of legislative

and judicial pronouncements that state courts may, and

indeed must decide whether their jurisdiction has been

preempted by ERISA.

The issue before the Florida appellate court when

BCBSM sought to enjoin it was not the reach of ERISA

preemption, which was clearly defined in Pilot Life Ins.

Co. v. Dedeaux, 481 U.S. 41 (1987), but whether or not an

employee benefit plan existed at all. Congress itself

intended for state courts to have the power to make this

determination. For example, Congress gave state courts

concurrent jurisdiction over actions by participants to

clarify rights or obtain benefits due under an ERISA plan.

29 U.S.C. §1132(a)(1)(b), (e)(1). This grant of jurisdiction

presumes both the power and the ability to determine if

an employee benefit plan exists in the first place. Sim-

ilarly, Congress provided that state laws regulating insur-

ance would not be preempted by ERISA, but that certain

employee benefit plans could not be deemed to be in the

insurance business. 29 U.S.C. §1144(b)(2)(A)-(2)(B).

Again, this presumes that state courts will have the

power and ability to identify ERISA plans in the enforce-

ment of their own insurance laws.

This Court has also mandated that state courts make

the threshold federal preemption decision in the analo-

gous context of preemption under the National Labor

Relations Act (“NLRA”), 29 U.S.C. §151 et seq.? In Interna-

tional Longshoremen’s Ass‘n v. Davis, 476 U.S. 380 (1986),

an employee filed a common law fraud action against a

union in an Alabama state court. The union did not raise

the issue of federai preemption until after trial, and the

Alabama courts refused to consider it for procedural

reasons. In holding that the Alabama courts erred in

refusing to consider the issue, the Court commanded that

when a claim of federal preemption is raised

it must be considered and resolved by the state

court.

Id. at 393. There is no reason for the rule to be any

different with ERISA preemption,’ and the Florida appel-

late court was trying to do exactly what this Court man-

dated in Davis when BCBSM sought to enjoin it.

2 The Court equated the preemptive power of ERISA and

NLRA in Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987).

3 This is also an inescapable corollary of the Court's deci-

sion in Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987),

where an ERISA preemption defense was held to justify federal

question removal. Removal is not self-executing, and if the

state court action is not removed, as was the case here, the

state court must, perforce, resolve the question of ERISA

preemption.

Likewise, the lower federal courts have repeatedly

stated that state courts can properly determine whether

claims before them have been preempted by ERISA. See,

e.g., Transamerica Occidental Life Ins. Co. v. Digregorio, 811

F.2d 1249, 1255 n.5 (9th Cir. 1987) (“[T]he state courts are

perfectly competent to decide this issue”); Takeda v. North-

western Nat'l Life Ins. Co., 765 F.2d 815, 822 n.10 (9th Cir.

1985) (“[T]he state court to which we remand this case is

fully capable to decide issues of preemption if defendants

continue to assert them.”); Johansen v. Employee Benefit

Claims, Inc., 668 F.Supp. 1294, 1297 (D. Minn. 1987) (“If

defendants are correct that the Dedeaux and Taylor cases

provide a federal pre-emption defense and that ERISA

and not state law controls, the state court will be bound

to apply federal law”); Browning Corp. Int’l v. Lee, 624

F.Supp. 555, 557 (N.D. Tex. 1986) (“[S]tate courts as well

as federal courts are of competent jurisdiction to deter-

mine whether a particular plan is governed by ERISA and

therefore not by state law”).

Finally, the state courts are routinely making this

determination and dismissing state claims if they are

preempted by ERISA. See, e.g., Hood v. Prudential Ins. Co.,

522 So.2d 265 (Ala. 1988); Bruenn v. Aetna Life Ins. Co., 197

Cal. App. 3d 1000, 243 Cal. Rptr. 262 (Cal. App. 2 Dist.

1987); Peick v. Murray, 141 Ill. App. 3d 1081, 491 N.E. 2d

100 (Ill. App. 1 Dist. 1986); Barry v. Dymo Graphic Systems,

Inc., 394 Mass. 830, 478 N.E. 2d 707 (Mass. 1985); Provti-

dence Hosp. v. National Labor Union Health and Welfare

Fund, 162 Mich. App. 191, 412 N.W. 2d 690 (Mich. App.

1987); Richland Hosp. Inc. v. Ralyon, 33 Ohio St. 3d 87, 516

N.E. 2d 1236 (Ohio 1987); E-Systems, Inc. v. Taylor, 744

S.W. 2d 956 (Tex App. — Dallas 1988).

Thus, the Eleventh Circuit’s decision to let.the Flor-

ida appeliate court decide whether state court jurisdiction

had been preempted by ERISA is consistent with the

pronouncements of Congress, this Court and the lower

federal courts, and is in keeping with the actual practice

of the state courts. Moreover, when the decision is seen

for what it is, the reasons BCBSM invokes to promote

review by this Court disappear. The Eleventh Circuit did

not commit an injustice by deciding that the Florida

courts could proceed without jurisdiction. The issue of

who should decide the ERISA preemption question was

decided pursuant to, rather than in the absence of guid-

ance by this Court. And the scope of ERISA’s coverage

was not even an issue.

BCBSM’s real complaint is that the Florida court’s

factual determination that no ERISA plan existed was

incorrect. BCBSM is wrong, but the point at this juncture

is that the Flotida court’s decision does not provide a

basis for review of the Eleventh Circui*’s decision.

2. The Eleventh Circuit Correctly Applied The

Rooker-Feldman Doctrine

Because the state court proceedings BCBSM sought to

enjoin had already gone to judgment, the Eleventh Circuit

rested its decision not to halt the Florida appellate pro-

cess on the Rooker-Feldman doctzine.

The Rooker-Feldman doctrine, named for this Court’s

decisions in Rooker v. Fidelity Trust Co., 263 U.S. 413

(1923), and District of Columbia Court of Appeals v. Feldman,

460 U.S. 462 (1983), is a product of federalism, and more

a

10

particularly of the limited jurisdiction of federal district

courts in our dual court system. Specifically,

a United States district court has no authority to

review final judgments of a state court in judi-

cial proceedings.

District of Columbia Court of Appeals v. Feldman, 460 U.S. at

482. Thus, when issues of federal law arise in state court

proceedings, their review is left to the state appellate

process and ultimately to this Court. A federal district

court may not entertain original proceedings which

would have the effect of reviewing and overturning a

state court judgment.

This is precisely what BCBSM’s district court action

for declaratory and injunctive relief was designed to

accomplish. But BCBSM argues that the Eleventh Circuit

erred in relying on the Rooker-Feldman doctrine because it

only applies to district court review of federal constitu-

tional issues, and not when the federal issue is one of

preemption or jurisdiction. No authority is cited for this

proposition, and the limitations BCBSM perceives in the

Rooker-Feldman doctrine are fanciful.

On a conceptual level, the limited jurisdiction of a

federal district court does not depend upon the nature of

the federal question subsumed in a state court judgment.

A federal district court either has original jurisdiction to

review state court judgments or it does not. And there is

certainly nothing about the ERISA preemption decision,

which state courts are supposed to make, that alters the

structure of our dual court system.

In application, .‘o court has ever imposed the limits

BCBSM would impose on the Rooker-Feldman doctrine.

1]

While it is certainly invoked when constitutional chal-

lenges are launched against state court judgments, it is

also applied when the federal challenge is based upon

non-constitutional grounds,4 and when the federal issue

goes to preemption or state court jurisdiction. In Texaco,

Inc. v. Pennzoil Co., 784 F.2d 1133 (2d Cir. 1986), rev’d on

other grounds, 481 U.S. 58 (1987), Texaco sought to enjoin

enforcement of Pennzoil’s state court judgment on the

ground, inter alia, that the judgment was void because

Pennzoil’s claims were preempted by federal securities

law over which the federal courts had exclusive jurisdic-

tion. The Second Circuit held that the district court had

no jurisdiction over this aspect of Texaco’s claim because

it was barred by the Rooker-Feldman doctrine. 784 F.2d at

1143.5

In Hobbs v. United States Office of Personnel Manage-

ment, 485 F.Supp 456 (M.D. Fla. 1980), a California court

had awarded the wife part of the husband’s federal pen-

sion in a divorce decree. The husband brought an action

in federal district court to have the divorce decree

declared void on the ground that the California court had

4 See, e.g., Staley v. Ledbetter, 837 F.2d 1016 (11th Cir. 1988)

(challenge based upon constitutional rights as well as Child

Welfare Act of 1980).

> This Court went on to reverse the Second Circuit’s deci-

sion that an injunction was proper based upon Texaco’s consti-

tutional challenges to Texas’ supersedeas requirements. A

majority of the Court felt that this aspect of the case was not

controlled by the Rooker-Feldman doctrine because the require-

ment of a bond was collateral to the state court’s judgment.

12

no jurisdiction over the Federal Retirement Fund. Sum-

mary judgment was granted on the basis of the Rooker-

Felman doctrine.

In Brotherhood of Locomotive Engineers v. Massachusetts

Commission Against Discrimination, 695 F.Supp. 1321 (D.

Mass. 1988), a union brought an action to enjoin state

discrimination proceedings on the ground of federal pre-

emption. The district court abstained, but also noted that

it had “no competence to sit in review of state court

judgments” because of the Rooker-Feldman doctrine. Id. at

1324 n.1

And in Atlantic Coast Line R.R. Co. v. Brotherhood of

Locomotive Engineers, 398 U.S. 281 (1970), this Court

affirmed the Rooker-Feldman principle in the context of

federal preemption. The union sought an injunction from

the district court on the ground that it had a right to

picket under federal law, and that state law was pre-

empted. The decision centered on the Anti-Injunction

Act, 28 U.S.C. §2283, but because the union was trying to

get the federal district court to review the state court’s

irterpretation of federal law, the Court reiterated that

lower federal courts possess no power whatever

to sit in direct review of state court decisions.

398 U.S. at 296.

These decisions make it clear that the Eleventh Cir-

cuit did not misapply the Rooker-Feldman doctrine. Fur-

ther, no conflict of decisions exists-and none is claimed to

exist.

BCBSM also challenges the Eleventh Circuit’s deci-

sion on the ground that the ERISA preemption question

13

was not “inextricably intertwined” with the Florida court

judgment because the issue was never raised in the trial

court. No authority is citea for this argument, and for

good reason. The Rooker-Feldman doctrine is routinely

applied when the federal issue raised in the district court

was not raised in state court at all, or was raised for the

first time on appeal. See, e.g., District of Columbia Court of

Appeals v. Feldman, 460 U.S. at 482 n. 16; Staley v. Ledbetter,

837 F.2d 1016 (11th Cir. 1988); Hollins v. Wessel, 819 F.2d

1073 (11th Cir. 1987). At any rate, the point is moot now

because BCBSM raised the question before the Florida

appellate court, and it was decided.

Beyond this, the question of whether or not the Flor-

ida trial court’s jurisdiction was preempted by ERISA is

obviously inextricably intertwined with its judgment.

Apart from the fact that the issue of a court’s subject

matter jurisdiction is always inherently bound up in its

judgment, the factual issues upon which the claim of

ERISA preemption depends - the nature of the Weiners’

insurance policy, the circumstances under which it was

purchased and the relationship between their tort claims

and the administration of benefits under the policy, were

all litigated in state court and are part and parcel of the

final judgment.

Finally, BCBSM’s suggestion that the Eleventh Cir-

cuit’s application of the Rooker-Feldman doctrine should

be considered “dangerous” because state courts are not

competent to decide questions of ERISA preemption is ill-

conceived. As discussed in the previous section of this

brief, the lower federal courts have repeatedly held that

state courts are competent to make this decision, and this

Court has rejected the argument “that federal rights will

14

not be adequately protected in state courts” in the context

of federal preemption of state court jurisdiction. Amalga-

mated Clothing Workers of America v. Richman Brothers, 348

U.S. 511, 518 (1955). Accord, Chick Kam Choo v. Exxon

Corp., 486 U.S. 140 (1988). ;

3. ERISA Preemption is Not in Need of

Clarification

BCBSM suggests that the Eleventh Circuit’s decision

demonstrates a need to clarify ERISA’s preemptive power

because the effect of the decision was to deprive it of a

collateral attack upon a Florida judgment. There'are two

responses to this non sequitur.

First, the preemptive force of ERISA was only

recently defined and clarified by this Court in Pilot Life

and Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58 (1987),

and BCBSM has demonstrated no confusion in this

regard. To the contrary, the authorities cited in the first

section of this brief indicate that ERISA preemption is

understood, and that the framework for enforcing it is

well established.

Second, BCBSM had no right to a collateral attack.

The argument might be legitimate if the Florida court had

determined that the claims before it were preempted by

ERISA but proceeded anyway, i.e., usurped jurisdiction.

But this did not happen. The Florida court simply consid-

ered and resolved the ERISA preemption defense on the

facts before it. As already discussed, the Florida court

had both the power and the obligation to make this

decision.

15

This is further demonstrated by this Court’s repeated

recognition of the role of state courts in deciding federal

preemption defenses, even when the defense goes to the

jurisdiction of the state court because of the potential for

exclusive federal jurisdiction. In International Longshore-

men’s Ass'n v. Davis, the Court required state courts to

consider and resolve NLRA preemption defenses. In

Hathorn v. Lovorn, 457 U.S. 255 (1982), where exclusive

federal jurisdiction over actions under the Voting Rights

Act of 1965, 42 U.S.C. §1971 et seq., was at issue, the Court

held that state courts had the authority to determine

whether the Act applied to actions before them. And in

Caterpillar, Inc. v. Williams, 482 U.S. 386 (1987), where

federal preemption under the NLRA and the Labor Man-

agement Relations Act of 1947, 29 U.S.C. §185, was at

issue, the Court told the employer to make its preemption

arguments in state court.

What BCBSM really suggests with its collateral attack

argument is that a postscript be added to the ruie that

state courts have the power to decide federal preemption

defenses - that their decisions do not count. The argu-

ment is based upon this Court’s decision in Kalb v. Feuer-

stein, 308 U.S. 433 (1940), where a collateral attack based

upon federal preemption and exclusive federal jurisdic-

tion was permitted. In Kalb, however, the state court

proceeded in the face of the automatic stay of bankruptcy

and refused to consider the question of its own subject

6 BCBSM also cites Durfee v. Duke, 375 U.S. 106 (1963). But

the Court’s statement in that case that the doctrine of federal

preemption “may in some contexts be controlling”, #d. at 114,

was dicta. There was no issue of federal preemption involved

in the case.

16

matter jurisdiction. There is no such usurpation of juris-

diction here, and the difference is manifest. Here, the

ouster of subject matter jurisdiction was not automatic,

but depended upon a factual determination as to whether

or not an employee benefit plan existed. The Florida

court did not refuse to consider this issue. Rather, it

considered and resolved it, just like it was supposed to

do. The principle in Kalb does not apply in this situation.

There is simply no justification or authority for sanc-

tioning automatic collateral attacks against state court

determinations of ERISA.or any other kind of federal

preemption defense. The Full Faith and Credit Act, 28

U.S.C. §1738, requires federal courts to give the same

preclusive effect to state court judgments as another court

of that state would give. Parsons Steel, Inc. v. First Alabama

Bank, 474 U.S. 518 (1986). The principles of res judicata

this invokes apply to state court determinations of their

own subject matter jurisdiction. When the question of

subject matter jurisdiction has been decided, it may be

reviewed directly, including requesting this Court to

review the matter ona writ of certiorari, but it may not be

attacked collaterally. See, e.g., Underwriters Nat'l Assurance

Co. v. North Carolina Life and Accident and Health Ins. Guar.

Assoc., 455 U.S. 691, 706-710 (1982); Stoll v. Gottlieb, 305

U.S. 165 (1938).?

? The same rule applies when the party collaterally attack-

ing subject matter jurisdiction could have, but failed to raise

the issue in the court whose judgment is contested. Insurance

Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456

U.S. 694, 702 n. 9 (1982). This was the situation facing the

Eleventh Circuit, but the point is now moot. The question of

ERISA preemption has been contested and resolved in the

Florida appellate court.

17

These principles have also been invoked by federal

courts when the subject of the collateral attack is a lack of

state court jurisdiction due to exclusive federal court

jurisdiction. For example, in Texas Employers’ Ins. Assoc. v.

Jackson, 820 F.2d 1406 (5th Cir. 1987), modified on reh’g, 862

F.2d 491 (1988), the federal plaintiff sought declaratory

and injunctive relief to stop a state court action it claimed

was preempted by the Longshore and Harbor Workers’

Compensation Act, 33 U.S.C. §901 et seq., a form of pre-

emption the Fifth Circuit found to be as powerful as

ERISA or NLRA preemption. The state trial court had

already considered and rejected the preemption defense

in an interlocutory ruling, but no final judgment had

been rendered. The Fifth Circuit declined to accord the

state court interlocutory ruling res judicata effect, but

acknowledged that if the trial had gone to judgment res

judicata would have barred the federal courts from recon-

sidering the state court’s decision concerning federal pre-

emption. Similarly, this Court gave a state court

determination res judicata effect in a claim of employment

discrimination under Title VII of the Civil Rights Act of

1964, 42 U.S.C. §2000e, without feeling the need to decide

whether the federal courts had exclusive jurisdiction over

such claims. Kremer v. Chemical Const. Corp., 456 U.S. 461

(1982). Accord, Marrese v. American Academy of Orthopaedic

Surgeons, 470 U.S. 373 (1985).8

8 Both the Ful! Faith and Credit Act and the Anti-Injunc-

tion Act were enacted by Congress when the dual court system

of this country was first being structured. Each proceed from

similar concerns about the relationship between federal and

(Continued on following page)

18

Finally, BCBSM argues that, without an unabridged

right to collaterally attack, the state courts are free to

make a mockery of the national policies embodied in

ERISA. Apart from ignoring the strong national policy

embodied in the Full Faith and Credit Act, the argument

proves too much. It presumes that ERISA applies even

when state courts, charged with the responsibility of

making the decision, determine that it does not. The same

type of argument was rejected by this Court in Caterpillar,

Inc. v. Williams, 482 U.S. at 399 n. 15.

In short, the Eleventh Circuit’s decision was also

proper on the ground of res judicata, and BCBSM’s collat-

eral attack argument provides no basis for review.

4. The Eleventh Circuit’s Decision does not Dem-

onstrate a Need for Guidance as to the Scope of

ERISA’s Coverage

BCBSM’s assertion that the Eleventh Circuit’s deci-

sion warrants review so that guidance can be given as to

the scope of ERISA’s coverage is wide of the mark for

three reasons. First, the Eleventh Circuit’s decision did

(Continued from previous page)

state courts. In the context of the Anti-injunction Act, this

Court has specifically rejected the argument BCBSM now

makes:

[W]Je cannot accept the argument . . . that §2283 does

not apply whenever the moving party in the District

Court alleges that the state court is ‘wholly without

jurisdiction over the subject matter, having invaded

a field preempted by Congress’.

Amalgamated Clothing Workers of America v. Richman Brothers,

348 U.S. at 515 (1955).

As

not even deal with the scope of ERISA’s coverage. The

question was not whether an ERISA plan existed, but

who should decide. BCBSM’s complaints regarding the

scope of ERISA’s coverage are directed toward the Flor-

ida appellate court decision, which is not before the

Court.

Second, BCBSM does not demonstrate any need for

guidance concerning ERISA’s coverage. The problem per-

ceived, in its own words, is that “the State Appellate

Court ignored established federal court precedent”. (Peti-

tion, p. 18). The allegation that the Florida court ignored

established precedent belies any need for guidance con-

cerning the scope of ERISA coverage. .

Third, BCBSM’s complaints concerning the Florida

appellate court decision ignore the evidence upon which

it was based. In order for an employee benefit plan to

exist it must be established or maintained by an employer

or association of employers for the purpose of providing

benefits to employees. 29 U.S.C. §1002(1),(5),(7). Other-

wise stated:

A plan... falls within the ambit of ERISA only

if the plan . . . covers ERISA participants

because of their employee status in an employ-

ment relationship, and an employer... is the

person that establishes or maintains the plan

Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir.

1982).

A group insurance plan does not fall within the

ambit of ERISA if it is established and maintained by

“entrepreneurial businesses” as opposed to an employer

or employee organization. Donovan v. Dillingham, 688 F.2d

at 1373. This is precisely what happened here. BCBSM’s

20

group insurance plan was established and maintained by

BCBSM and AFSI, an insurance company and an insur-

ance broker. The evidence before the Florida court

showed that the plan was not established or maintained

by SSDA or AFSI. While the plan purported to be an

SSDA plan, this was a ruse. This kind of phenomenon,

where entrepreneurs sell insurance products to small

employers and claim they are ERISA_plans, became so

widespread that Congress was moved to note that ERISA

does not apply in these situations:

[T]hese plans are established and maintained by

entrepreneurs for the purpose of marketing

insurance products or services to others. They

are not established or maintained by the appro-

priate parties to confer ERISA jurisdiction, nor

is the purpose for their establishment or mainte-

nance appropriate to meet the jurisdictional pre-

requisite of the act.

H.R. Rep. No. 1785, 94th Cong., 2nd Sess. 48 (1977), cited

in Wisconsin Educ. Ass'n Ins. Trust v. Iowa State Bd. of

Public Instruction, 804 F.2d 1059, 1063 (8th Cir. 1986).

At the level of Mr. Weiner’s service station, an ERISA

plan would exist only if he purchased BCBSM’s policy for

the purpose of providing benefits to his employees

because of their status as such. But the evidence was that

Mr. Weiner only bought insurance for members of his

family, and that he did so only because they were mem-

bers of his family. He did not buy insurance for his

employees.

ERISA does not regulate purchases of health

insurance when there is not a welfare plan.

21

Donovan v. Dillingham, 688 F.2d at 1375. Accord, Taggart

Corp. v. Life & Health Benefits Administration, 617 F.2d 1208

(Sth Cir. 1980), cert. denied, 450 U.S. 1030 (1981).

The Florida appellate court’s decision was right on

the money.

5. The Eleventh Circuit’s Decision Was Also

Proper on the Grounds of Abstention

The Eleventh Circuit ordered BCBSM’s action for

declaratory and injunctive relief dismissed on the basis of

the Rooker-Feldman doctrine. Dismissal would also have

been proper under the abstention doctrine set forth in

Younger v. Harris, 401 U.S. 37 (1971).

BCBSM’s action in the district court sought to enjoin

ongoing Florida court proceedings. Specifically, it sought

to enjoin the Weiners from attempting to enforce the

Florida state trial court judgment and from participating

in the appellate process in the Florida courts. Under this

Court’s decision in Pennzoil Co. v. Texaco, Inc., 481 U.S. 1

(1987), Florida’s “vital” or “important” interest in enforc-

ing the judgments of its courts was implicated, and Youn-

ger abstention was proper.

As discussed in the first section of this brief, the final

element necessary to permit Younger abstention was also

present. BCBSM had the ability to present the ERISA

preemption question for decision in the Florida courts,

and in fact did so.

Finally, the fact that BCBSM’s request for an injunction

was based upon a claim of federal preemption, ERISA or

otherwise, did not render the district court’s decision to

22

abstain an abuse of discretion. Federal preemption, including

ERISA preemption, only militates against abstention where it

is obvious. The district court here found that ERISA preemp-

tion was “a far cry from being ‘readily apparent’”. Thus,

abstention was proper. See, e.g., Fresh Int'l Corp. v. Agricultural

-Labor Relations Bd., 805 F.2d 1353, 1361 (9th Cir. 1986); Marcal

Paper Mills, Inc. v. Ewing, 790 F.2d 195, 197-198 (1st Cir. 1986);

Aluminum Co. of America v. Utilities Comm'n of North Carolina,

713 F.2d 1024, 1029-1030 (4th Cir. 1983), cert. denied, 465 USS.

1052 (1984); Bagget v. Department of Professional Regulation Bd.

of Pilot Comm'rs, 717 F.2d 521, 524 (11th Cir. 1983); Branden-

berg v. First Maryland Sav. and Loan, Inc., 660 F.Supp. 717, 734

(D. Md. 1987), aff‘d, 859 F2d 1179 (4th Cir. 1988); Fore Way

Express, Inc. v. Wisconsin Dept. of Inds., Labor and Human

Relations, 660 FSupp. 310, 313-14 (E.D. Wis. 1987).

- 7X

v

CONCLUSION

For the above reasons, it is respectfully submitted

that BCBSM’s Petition for a Writ of Certiorari should be

denied.

Respectfully submitted,

Larry S. STEWART

Counsel of Record

James B. TILGHMAN, Jr.

STEWART TILGHMAN Fox &

BIANCHI, P.A.

44 West Flagler St.

Suite 1900

Miami, Florida 33130

(305) 358-6644

Attorneys for Respondents

September 13, 1989