Petition for Writ of Certiorari — HealthAmerica v. Menton

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Supreme Court of the United States

;

PETITION FOR WRIT O! EI

SUPREME COURT 0!

rune

ALAN BLOOM

JOHN SOUTH WORTE

Maxicare Health Plans, Inc

5200 West Century Boulevard

Los Angeles, California 90045

December 12, 1989

Wusce . Eras Peers Co

lnc 788-0O86 Wasrime’

QUESTIONS PRESENTED

(1) Whether the Employee Retirement Income Security

Act (“ERISA”) preempts state common law fraud

claims, including unlimited punitive dam.ages, whch arise

out of the process of explaining plan options and cover-

ages to participants in an existing welfare benefit plan.

(2) Whether Alabama’s “twisting statute” is a law

which regulates the business of insurance under Section

514(b) of ERISA and is thus saved from preemption

(3) Whether a punitive damages award must be propor-

tionate to a Plaintiff’s actual damages and to the char-

acter of a Defendant’s alleged misconduct to avoid viola-

tion of a Defendant’s rights to substantive di

under the Fourteenth Amendment.

(4) Whether the Alabama standard governing whether

punitive damages may be awarded for civil fraud violates

the due process clause of the Fourteenth Amendment

ue process

(5) Whether the Alabama trial and appellate procedures

allowing the jury ungoverned and unlimited discretion

in awarding punitive damages for civil fraud vio.ates the

due process clause of the Fourteenth Amenament

PARTIES TO THE PROCEEDING

Health America * and Pamela Merle

Edward Menton

* Menton sued “Health America” and Pamela Merle. Health-

America and the Mobile Press Register, Inc. entered into a contract

Group Application) whereby HealthAmerica agreed to provide

certain health care services and benefits in accordance with the

provisions of a Group Subscription Agreement and Schedule of

Benefits. According to the Group Subscription Agreement, Health-

America Alabama L. P., was the legal entity providing health care

services and benefits. HealthAmerica Alabama L. P. was formed

in December of 1983 to operate a health maintenance organization

ir Alabama. Its ultimate general partner is HealthAmerica G. P..,

Inc.. which is a wholly owned subsidiary of HealthAmerica Corpora-

tion. Neither HealthAmerica G. P., Inc., nor HealthAmerica Cor-

poration operate health maintenance organizations. In November

of 1986, all of the outstanding stock of HealthAmerica Corporation

was acquired by Maxicare Health Plans, Inc. In March of 1987, the

name of HealthAmerica Alabama L. P., was changed to Maxicare

Alabama, L. P. In August of 1987, Maxicare Southeast Health

Plans. Inc.. acquired the assets and liabilities, but not the partner-

ship interest of Maxicare Alabama L. P., and continued to conduct

Alabama operations. The following are companies that may be

deemed affiliates or subsidiaries of Maxicare Southeast Health

Plans, Inc, or HealthAmerica Corporation: Account Management

Services, Inc.; American Medical Plan, Inc.; Bressco, Inc.; Family

Health Services, Inc.; Fhills Partnership; General Med Investors,

Ltd: General Medica! Centers, Inc.; HCS Computer, Inc.; Health-

America Frankford. Inc.; HealthAmerica G.P., Inc.; HealthAmerica

Partners. L.P.: HealthAmerica Tennessee, Inc.; Healthcare Alterna-

tives, Inc; Healthcare Assurance Company, Ltd.; Healthcare Con-

sultants, Inc; Healthcare USA Inc.; Highland Medical General

Partnership: Highland Medical Limited Partnership; Independence

Health Plan, Inc.: Independence Health Plan of Southeastern Michi-

gan. Inc.. Lomita-Torrance Building Joint Venture; Mauli-Ola, Inc. ;

Maxicare: Maxicare Alabama, L.P.; Maxicare Arizona, Inc.; Maxi-

Health Plans,

Health Plans of Kentucky, Inc.; Maxicare Health Plans the

Midwest, Inc . Maxicare Holdings, Inc.; Maxicare Kentucky, Inc.;

’ = '

siana wa are yl

ans. if Vi are \ S

Max are N\ ur a : 5

are narmacies, i Ma re

7 > ’ . > >

tional Pharmaceuticai Ser es

RCP, In Tucson—Group Health Me s

Out of an over-abundance t caut I ret ners ~ .

Attorney General of Alabama with this pf .

U.S.C. § 2403 (t even though th ure hallenging :

stitutionality of any statute; ratne tne ir g b %

of punitive damages based on a clair mn aw fraud

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ............................................. i

PARTIES TO THE PROCEEDING .......... te

pe SF RS + fy 5 - eee vii

GE IE en Oe a eas 1

JURISDICTIONAL STATEMENT ...... 1

CONSTITUTIONAL AND STATUTORY PROVI-

SIONS INVOLVED ....................... 2

STATEMENT OF THE CASE ._.. 2

REASONS FOR GRANTING THE WRIT . 8

I. The Preemption Standard Adopted By The Ala-

bama Court Was Rejected By Congress _ .

II. The Decision Of The Alabama Court Is In

Direct Conflict With The Decisions Of This

Court And Other Federal Appellate Courts On

The Scope Of Federal Preemption Under Sec-

RRR 10

III. Congress Specifically Regulated Information

Disclosure And Fiduciary Standards Applicable

To The Administration Of Welfare Plans, And

The Application Of State Remedies In This Area

Would Interfere With ERISA’s Exclusive En-

forcement Scheme... 13

A. Congress Specifically Regulated The Disclos-

ure Of Information About Plan Benefits 13

B. Congress Specifically Imposed Fiduciary

Standards And Remedies Governing The

Conduct Of HealthAmerica As A Plan

(v)

TABLE OF CONTENTS—Continued

Page

C. The Award Of Punitive Damages Under Con-

flicting And Inconsistent State Law Stand-

ards Would Interfere With ERISA’s Civil

Enforcement Scheme .........................--....--~.-- 17

IV. The Alabama Court Plainly Misconstrued And

Misapplied The ERISA Insurance Savings

Clause In Direct Conflict With The Decisions

Of This Court And Other Federal Appellate

COORD ..--.nncsscssnvcsieciceeiesakammpaaeniieeena nee 19

V. The Disproportionate Punitive Damages Award

And The Alabama Standard Governing Puni-

tive Damages Awards For Civil Fraud Violate

The Due Process Clause Of The Fourteenth

AMIR «iccncdintnieictanaitn de 24

VI. The Alabama Procedure Allowing The Jury Un-

governed And Unlimited Discretion In Award-

ing Punitive Damages For Civil Fraud Violates

The Due Process Clause Of The Fourteenth

PTOI recievers nvinichadinigeaniaaeneae 25

CONCLUSION

vii

TABLE OF AUTHORITIES -

CASES Page

Aetna Life Ins. Co. v. Lavoie, 470 So.2d 1060 (Ala.

1984), rev’d, 475 US. 818 (1986) .............. 26

American Federation of Unions Local 102 v. Equi-

table Life Assurance Society, 841 F.2d 658 (5th

REARS S SII A Ee 16

Amos v. Blue Cross-Blue Shield of Ala., 681 F.

Supp. 1515, reversed, 868 F.2d 430 (11th Cir.),

cert. denied, 110 S.Ct. 158 (1989) ...0000 0... 18, 21

Anschulz v. Connecticut General Life Ins. Co., 850

F.2d 1467 (11th Cir. 1988) .. 20

Badgett v. McDonald, 304 So. 2d 228 (Ala. Civ.

ESS ING SEES eee 26

Bankers Life & Casualty v. Crenshaw, 486 U.S. 71

ae A a CS 26

Belasco v. W.K.P. Wilson & Sons, Inc., 833 F.2d

ae a a 10, 11, 13

Berlin v. Michigan Bell Tel. Co., 858 F.2d 1154

(6th Cir. 1988) ............... 17

Browning-Ferris Industries v. - Kelco, Inc., 109

ee ree 24, 26

Butler v. Fringe Benefits Plan, Inc., 701 F. Supp.

804 (N.D. Ala. 1988)... Oe im 20

Coates v. City of Cincinnati, 402 U. S. 611 (1971). 25

Commercial Life Ins. Co. v. Juliano, 764 P.2d 1659

(Cal. 1988), cert. denied, 109 S.Ct. 2087 (1989) .. 23

Comprehensive Care Corp. v. Doughtry, 682 F.

Supp. 616 (S.D. Fla. 1988) ...........00... 12

Connally v. General Construction Co., 269 ‘U. S.

EEE EASE I ea 25

Davidian v. Southern Cali ‘fornia Meat Cutters

Union & Food Employees Benefit Fund, 859

F.2d 134 (9th Cir. 1988) 0... ....10, 11, 12, 18

Davis v. Liberty Mutual Ins. Co., 871 F.2d 1134

(D.C. Cir. 1989) .. . 14,15

Davis v. Schnell, 81 F. “Supp. “872. (SD. “Ala.),

aff'd per curiam, 836 U.S. 933 (1949) . 25

Dennette v. Life of Indiana Ins. Co., 693 F. - Supp.

959 (D. Colo. 1988) ... 0) ee 22

viii

TABLE OF AUTHORITIES—Continued

Page

Edwards v. State Farm Mutual Auto Ins. Co., 851

if BB 8 ve & ) See aoneoear ee 14, 15

FMC Corp. v. Holliday, 885 F.2d 79 (8rd Cir.

eR TR OE terest creer en EP REE 23

Farlow v. Union Central Life Ins. Co., 874 F.2d

yi tt. Re S| eee 10, 11, 18, 19

Firestone Tire & Rubber Co. v. Bruch, 489 U.S.

3 pee telh Sy Seca Ee Oe tan 9

Franchise Tax Board v. Construction Laborers

Vacation Trust, 463 U.S. 1 (1988) .................... 9

Genter v. ACME Scale & Supply Co., 776 F.2d

RE Re RR) Be eens 15

Giacco v. Pennsylvania, 382 U.S. 399 (1977)........ 24

Grayned v. City of Rockford, 408 U.S. 104 (1972).. 24

Group Life & Health Ins. Co. v. Royal Drug Co.,

Rik S&S BS... Se a ere eree 20, 21, 22

Hathorn v. Lovorn, 457 U.S. 255 (1982) —......0.-...... 25

Herman Hospital v. MEBA Medical & Benefits

Plan, 845 F.2d 1286 (5th Cir. 1988) _............. 10

Johnson v. District Two Marine Engineering Bene-

ficial Association, 857 F.2d 514 (9th Cir. 1988) .. 12

Juzwin v. Amtorg Trading Corp., 705 F. Supp.

1053, reh’g granted, 718 F. Supp. 1233 (D. N.J.

OGD seieink. co ckenb tle 26

Kanne v. Connecticut General Life Ins. Co., 859

F.2d 96 (9th Cir. 1988), cert. denied, 109 S.Ct.

SSS Tee oct ee eee 23

Keel v. Group Hospitalization Medical Services,

Inc., 695 F. Supp. 223 (F.D. Va. 1988) ............... 22

Kochendorfer v. Rockdale Sash & Trim Co., Inc.,

653 F. Supp. 612 (E.D. Ill. 1987) -....0002. 15

Local Union 2134, UMW of America v. Powhatan

Fuel, Inc., 828 F.2d 710 (11th Cir. 1987) 0... 17

McKnight v. Southern Life & Health Ins. Co., 758

ye PB Fit, ts S| eee 15

Makar v. Health Care Corp. of the Mid-Atlantic,

OTR FDS GD CA Ga ee ake es 17

Massachusetts Mutual Life Ins. Co. v. Russell, 478

U.S. 184 (1985)

2 a Nl a I

TABLE OF AUTHORITIES—Continued

Metropolitan Life Ins. Co. v. Massachusetts, 471

7 ERSTE af ED i ted OPE

Moran v. Aetna Life Ins. Co., 872 F. 2d 296 (9th

Ep NAAR ai RES EN ae NG Cee eae ol

Perry v. P*I*E Nationwide, Inc., 872 F.2d 15

Tee TS NR eS

Phillips v. Amoco Oil Co., 799 F.2d 1464 (11th

Cir.), cert. denied, 481 U.S. 1016 (1987) ...........

Pierre v. Connecticut Gen. Life Ins. Co., 866 F.2d

141 (5th Cir. 1989) ..

Page

19, 21

12,13

10, 12

Pilot Life Ins. Co. v. Dedeauz, 481 US we (1987) passim

Powell v. Chesapeake & Potomac Telephone Co. of

Virginia, 780 F.2d 419 (4th Cir. 1985), cert. de-

nied, 476 U.S. 1170 (1986)

Reilly v. Blue Cross & Blue Shield of W isconsin,

ff FP a Le Il ) rane

Rodriguez v. Meba Pension Trust, 872 F.2d 69

(4th Cir.), cert. denied, 110 S.Ct. 202 (1989)

Rollo v. Maxicare of Louisiana, Inc., 695 F. Supp.

245 (E.D. La. 1988) .. ‘ Toesincaaian

Shaw v. Delta Air Lines, Ine. “463 U Ss. 85 (1983)

Smart v. State Farm Ins. Co., 868 F.2d 929 (7th

| a

Straub v. Western Union Te legraph Co., 851 F.2d

1262 (10th Cir. 1988) aC

Trawick v. Michaels of Oregon Co., No. 88-C-413-N

(N.D. Ala. 1989)

Tucker v. Employers Life Ins. Co., 689 F. Supp.

1073 (N.D. Ala. 1988)

Whett v. Goodyear Tire & Rubber Co. 676 F. Supp.

1119 (N.D. Ala. 1987) ..........

STATUTES

ERISA § 2, 29 U.S.C. § 1001 (1982)

ERISA § 3(21), 29 US.C. § 1002 (21A)

ERISA § 101, 29 U.S.C. § 1021(a) (1982)

ERISA § 102, 29 U.S.C. § 1022 (a) (1) (1982)

ERISA § 104, 29 U.S.C. § 1024(b) (1) (1982)

ERISA § 104, 29 U.S.C. § 1024(b) (2) (1982)

ERISA § 104, 29 U.S.C. § 1024(b) (4) (1982)

14,

» 21

TABLE OF AUTHORITIES—Continued

Page

ERISA § 404, 29 U.S.C. § 1104(a) oS ens 16

ERISA § 409, 29 U.S.C. § 1109 (a) , ———aae 18

ERISA § 501, 29 U.S.C. § 1131 (| 14

ERISA &§ 502, 29 U.S.C. § 1182 (a) (1982) _. 16

ERISA § 514(a), 29 U-S.C. § 1144(a) (1982) —-...- *

ERISA, 29 U.S.C. § 1144 (b) (2) (B) ____- : 23

ERISA, 29 U.S.C. § 1144 (b) (5) (A) (1982) ------- 9

ERISA, 29 U.S.C. § 1144(b) (7) (Supp. V 1988) 9

15 U.S.C. § 1012 ........---------------- POT Re RE ee cere 20

Ala. Code, § 6-11-20 (Supp. 1989) .......-.-----------~ 25

Ala. Code, § 6-11-21 (Supp. 1989) —........-.-----------~ 25

Ala. Code, § 6-11-30 (Supp. 1989) setotahe 25

Ala. Code, § 27-12-6 (1975) ...-.-------------------- 19

CONSTITUTION

U.S. Const., amend. XIV, § 1 .-..----------------- 24, 25

U.S. Const., art. VI, Cl. 2 .....-..-------------------- 10

CONGRESSIONAL MATERIALS

H.R. Rep. No. 533, 93d Cong., lst Session (1973),

reprinted in 1974 U.S. Code Cong. & Admin.

Doerrres GOB a nner 8, 14, 17, 18

120 Cong. Rec. 29197 (1974) (remarks by Rep.

1 5 nnn eee ail 8

120 Cong. Rec. 29933 (1974) (remarks by Sen.

Williams) —........ « ssseeniiinsdimaaiannientasaaitesttaetennetrnestet &

120 Cong. Rec. 29942 (1974) (remarks of Sen.

pe en rea aaa ae 8

120 Cong. Rec. 29928, 99931-32 (1974) (remarks

by Sen. Williams) rr 14

MISCELLANEOUS

Gregory, The Scope of ERISA Preemption of

State Law: A Study m Effective Federalism,

48 U. Pitt. L. Rev. 427 (1987) x

Note, Defining the Contours of ERISA Preemp-

tion of State Insurance_ Regulation: Making

Employee Benefit Plan Regulation an Exclu-

sively Federal Concern, 42 Vand. L. Rev. 607

(1989) ........ 8

IN THE

Supreme Court of the United States

OCTOBER TERM, 1989

HEALTHAMERICA and PAMELA MERLE.

- Petitioners,

EDWARD MENTON,

_ Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

SUPREME COURT OF ALABAMA

The Petitioners, HealthAmerica and Pamela Merle, re-

spectfully pray that a writ of certiorari issue to review

the judgment and opinion of the Supreme Court of Ala-

bama entered in this proceeding on July 21, 1989.

OPINIONS BELOW

The opinion of the Supreme Court of Alabama is re-

ported at 23 ABR 3436 (1989) (Ala. Bar Rep.), and

appears in App. A, la-44a. The Circuit Court of Mobile

County, Alabama, issued no opinion.

JURISDICTIONAL STATEMENT

The opinion and judgment of the Supreme Court of Ala-

bama, affirming the $1,800,000.00 judgment against Peti-

tioners, was entered on July 21, 1989. Petitioners filed a

timely Application for Rehearing on August 4, 1989,

which was denied on September 15, 1989 and no further

opinion was issued. App. B, 45a-46a. This petition for

writ of certiorari is being filed within ninety (90) days

from the denial of Petitioners’ Application for Rehearing

in the Supreme Court of Alabama. The jurisdiction of

this Court is invoked under 28 U.S.C. § 1257 (a).

CONSTITUTIONAL PROVISIONS

AND STATUTES INVOLVED

This case involves sections 2, 101, 102, 104, 401, 404,

409. 502, and section 514 of the Employee Retirement In-

come Security Act of 1974 (“ERISA”), as amended, 29

U.S.C. §§ 1001, 1021/a), 1022, 1024(b), 1101, 1104, 1109,

1132. and 1144(a) & (b); the McCarran-Ferguson Act,

15 U.S.C. § 1012 (1988); the Fourteenth Amendment of

the United States Constitution; and Ala. Code, § 27-12-6

(1975). The relevant portions of these provisions are

reproduced at App. D, 50a-63a.

STATEMENT OF THE CASE <

A. Materia! Facts

—Prtor to 1985, Respondent’s employer, the Mobile Press

benefit plan. The MPR solicited proposals from different

insurers as a routine matter each year for possible in-

clusion in its welfare benefit plan, in order to provide

“the best benefit package for our employees.” In the

spring of 1985, the MPR entered into negotiations with

two health maintenance organizations (Prime Health and

Respondent HealthAmerica) for the purpose of possibly

including these HMOs as alternatives to the traditional in-

surance option within its benefit plan. On May 15, 1985,

the MPR entered into a written contract with Health-

America whereby HealthAmerica agreed to provide cer-

tain health care benefits to eligible members of the MPR

group and their dependents.

It is undisputed that Respondent was a participant in

the MPR’s welfare benefit plan prior to July 1, 1985,

under the traditional health insurance policy, was a par-

ticipant in the MPR’s plan after July 1, 1985, and re-

mains an employee and participant in the MPR’s plan.

Under the traditional health insurance option in which

Respondent was enrolled prior to July 1, 1985, Connecticut

General paid 80% of the cost of physical therapy and

medica] 2ppiiances, such as crutches, braces, and walkers.

The Assistant General Manager at the MPR, David

Parker, solicited information from insurers and Health-

America, negotiated with HealthAmerica, and signed the

May 15 agreement between HealthAmerica and the MPR.

Parker sent a letter and a packet of information from his

office to MPR employees, including Respondent. Parker's

May 23, 1985 letter to MPR employees states, “Manage-

ment will soon offer employees, as an alternative medica!

benefit selection, the two health maintenance organizations

(HMOs) in our area... .” Parker also prepared and

distributed a two page “summary of benefits.”

Although Respondent received this literature from the

MPR, he could not determine whether physica! therapy,

crutches, and braces would be covered under the new HMO

options. Respondent was concerned about these benefits

because his son suffered certain medica! problems which

would require surgery followed by physical therapy. Re-

spondent was interested in a program that would pay

more than the 80% paid under the traditional] insurance

option. Respondent went to see Parker with his question,

and Parker suggested that Respondent should go to one

of the scheduled informational meetings and ask the rep-

resentatives of the two new plan options. Parker testi-

fied that he avoided answering questions about coverage

“I try and avoid putting myself in the position of answer-

ing specific questions about coverage just to avoid an)

liability on the company’s part as to making a representa-

tion of coverage.”

Respondent attended a June 17, 1985 meeting at the

MPR during which Petitioner Pamela Merle (a Health-

America employee) explained the HealthAmerica option,

a representative from Prime Health explained its option,

and Parker explained the traditional Connecticut General

insurance. At the end of the meeting, Respondent ap-

proached the HMO representatives and informed them

of his son’s need of surgery and subsequent rehabilitation.

He said, “and I asked how they covered or would it be

covered or something like that.” Respondent testified, “I

was told it would be covered a hundred percent by Health-

America.”

The HealthAmerica schedule of benefits does cover

physical therapy or rehabilitation at one hundred percent,

but only for the first two months of treatment. There is

no evidence that Ms. Merle was aware of the limitation

on physical therapy or rehabilitation benefits when she

answered Respondent’s question at the meeting.

Immediately after the meeting, Parker, who was pres-

ent when Respondent asked his question, told Respondent,

“You're not going to lose anything if you go that way,”

meaning HealthAmerica.

On June 24, 1985, Respondent enrolled himself and his

family under the HealthAmerica option, with an effective

date of July 1, 1985. He testified that he did not receive

a copy of the actual Schedule of Benefits under the

HealthAmerica program until after he had enrolled.

Although he received the Schedule before his son com-

menced therapy on July 30, 1985, he was concerned be-

cause the Schedule clearly indicated that physical therapy

er rehabilitation services were covered for only two

months from the beginning of such treatment. Respond-

ent again consulted Parker and told him, “It looks like

this particular coverage on rehabilitation is limited or

excluded.” Parker suggested Respondent cal] Ms. Merle

at HealthAmerica.

Respondent called Ms. Merrie. He told Merle he had

received the Schedule of Benefits and it indicated that

coverage was limited, and, “She said she wasn’t sure

about that, she would check on it and call me back.”

Merle called him back and confirmed that he was reading

the schedule correctly. Respondent then went to Parker

and got him involved with handling the problem. There

were several telephone communications between Respond-

ent, Parker, and HealthAmerica, attempting to resolve

the situation, and Parker wrote a letter to HealthAmerica.

By letter of November 11, 1985, HealthAmerica said it

would extend rehabilitation benefits for an additional

sixty days. Ultimately, HealthAmerica paid for Re

spondent’s son’s physical therapy for only the first sixty

days, through September 30, 1985, and did not extend

benefits for the additional sixty days. Respondent's ac-

tual or out-of-pocket damages equal $2,412.00. App. at

24a.

The Group Subscription Agreement provides for the fil-

ing of written proof of a claim for benefits and, if such

a claim is denied by HealthAmerica, the Agreement also

provides for a formal grievance procedure, which includes

an appeal to HealthAmerica’s Board of Governors. While

Respondent did attempt an informal resolution of his

problem, it does not appear from the record that he ex-

hausted these administrative procedures. Instead, Re-

spondent filed a one count claim for common law fraud.

The complaint was not predicated on any Alabama statu-

tory provision.

B. Presentation of Federa! Issues

Over a month before trial, Petitioners filed a motion

for summary judgment and motion to strike Respondent's

jury demand, supported by a brief, pursuant to the Em-

ployee Retirement Income Security Act of 1974 (ERISA).

Petitioners’ motions were denied on January § and 11,

1988, respectively. The day before trial, Petitioners filed

a supplemental memorandum of law in support of their

ERISA motions.

At the close of the Plaintiff’s case, Petitioners moved

for a directed verdict based upon ERISA preemption,

inter alia. When the motion was argued, the trial court,

ex mero motu, asserted that Alabama’s “twisting” stat-

ute, Ala. Code § 27-12-6 (1975), and HMO statute, Ala.

Code § 27-2la-1 (1975), might “save” Respondent’s fraud

claim from ERISA preemption. Despite Petitioners’ ob-

jections that they were not sued for violation of those

statutes and that neither statute provides a private cause

of action, the trial court denied the Petitioners’ motion

and submitted the case to the jury on Respondent’s com-

mon law fraud claim.

The jury returned a verdict for Respondent in the

amount of $1,800,000.00. Final judgment was entered on

January 14, 1988. Respondent subsequently filed an

Amended Complaint alleging a violation of Alabama's

twisting statute.

Petitioners filed a timely motion for JNOV or, in the

alternative, for new trial or remittitur, which included

challenges to the constitutionality of the punitive dam-

ages award. The trial court entered a written order deny-

ing Petitioners’ motions and holding that Petitioners’ fed-

eral constitutional issues were timely raised:

‘T]he Court has considered Defendants’ claims that

the imposition of punitive damages, both generally

under Alabama law and specifically in the amount

and as returned by the jury under the facts of this

case, is unconstitutional under the Alabama as well

as the United States Constitutions (particularly, the

Due Process Clause of the 5th Amendment; the Due

Process, Equal Protection, and Privileges and Im-

munities Clauses of the 14th Amendment; Ex

cessive Fines Clause of the 8th Amendment;

tracts Clause and prohibition of Ex Post

of Article I, Section 10, Clause 1)

damages, both generally under Alabama law and spe-

cifically in the amount as returned by the jury under

the facts of this case, is constitutional under both

the state and federal constitutions.

App. at 48a.

On appeal, a majority of the Alabama Supreme Court

affirmed the judgment of the trial court, including the

damages award. The majority adopted an alternative

standard on the issue of ERISA preemption which finds

no support in the decisions of this Court: A state law is

not preempted unless it “purports” .o regulate, directly or

indirectly, “the terms and conditions of a plan.” This

alternative approach to ERISA preemption directly con-

travenes the intent of Congress in enacting the broadest

express preemption clause in federal law. The Alabama

court reached its opinion notwithstanding that: (a)

ERISA and its legislative history demonstrates that Con-

gress intended federal standards to be the exclusive source

of law governing ERISA plans; ‘b) the imposition of in-

consistent state law remedies in the administration of

ERISA plans impedes interstate commerce and deters em-

ployers, insurers, and health care providers, from offering

new benefits and options to participants; ‘c) Congress

has specifically mandated the disclosure of information

regarding plan benefits and coverages to participants and

provided remedies for violation of said provisions and the

allowance of state common law fraud actions interferes

with this congressional plan and civil enforcement scheme;

(d) the award of punitive damages under state fraud

actions directly supplants the exclusive ERISA enforce-

ment scheme and subject plans to ungovernable and in-

consistent state standards.

REASONS FOR GRANTING THE WRIT

Il. The Preemption Standard Adopted By The Alabama

Court Was Rejected By Congress

Prior to the enactment of ERISA, Congress was dis-

satisfied with attempts at pension plan regulation which

left many aspects subject to a conflicting system of state

and federal regulation. H. R. Rep. No. 533, 93d Cong.,

Ist Session 2-5 (1973), reprinted in 1974 U.S. Code Corg.

& Admin. News 4639, 4640-43 [hereinafter Report 533].

In enacting ERISA, Congress sought to protect interstate

commerce and the interests of participants in employee

benefit plans by creating a comprehensive federal regula-

tory scheme which would require the disclosure and re-

porting of information to participants, establish uniform

standards of conduct and fiduciary obligations, and would

provide certain specified remedies. ERISA Section 2, 29

U.S.C. § 1001 (1982). To insure that this framework

would be preeminent, eliminating the threat of conflicting

and inconsistent state regulation, Congress expressly pre-

empted, with narrow exceptions, all state laws which “re-

late to any employee benefit plan.” ERISA Section 514

(a), 29 U.S.C. § 1144(a) (1982).

ERISA’s sponsors emphasized that the bill was intended

to foreclose non-federal regulation of employee benefit

plans and to eliminate the threat of conflicting and in-

consistent state laws. 120 Cong. Rec. 29197 (1974) (re-

marks of Rep. Dent) ; 120 Cong. Rec. 29933 (1974) (re-

marks of Sen. Williams); 120 Cong. Rec. 29942 (1974)

(remarks of Sen. Javits). As the Court recognized in

Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98 (1983), the

original House and Senate versions would have limited

: For a genera! discussion of plan regulation prior to ERISA, see,

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

in Effective Federalism, 48 U. Pitt. L. Rev. 427 (1987); and Note,

Defining the Contours of ERISA Preemption of State Insurance

Regulation: Making Employee Benefit Plan Regulation an Ezciu-

sively Federal Concern, 42 Vand. L. Rev. 607 (1989).

r cA oorr ’

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Il. The Decision Of The Alabama Court Is In Direct Con-

flict With The Decisions Of This Court And Other

Federal Appellate Courts On The Scope Of Federal

Preemption Under Section 514(a)

The decision of the Alabama court has resulted in the

anomalous situation that a state law fraud claim in an

Alabama court is not preempted while the identical claim

in a federal district court in Alabama is preempted. This

intolerable violation of the supremacy clause, U.S. Const.

Article VI, must be resolved. The decisions of this Court,

the Fifth, Ninth, and Eleventh Circuits all hold that a

claim such as Respondent’s is within the scope of Section

514\a) because it is concerned with and arises out of the

administration of an ongoing ERISA benefit plan. Pilot

Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987); Farlow v.

Union Central Life Ins. Co., 874 F.2d 791 (11th Cir.

1989}; Davidian v. Southern California Meat Cutters

Union & Food Employees Benefit Fund, 859 F.2d 134

9th Cir. 1988); Herman Hospital v. MEBA Medical &

Benefits Plan, 845 F.2d 1286 (5th Cir. 1988) ; Belasco v.

W.K.P. Wilson & Sons, Inc., 833 F.2d 277 (11th Cir.

1987); Phillips v. Amoco Oil Co., 799 F.2d 1464 (11th

Cir.), cert. denied, 481 U.S. 1016 (1987).

In Shaw v. Delta Air Lines, Inc., the Court recognized

that Congress used the words “relate to” in Section 514

a) in their broad sense and that the Courts must give

effect to the intent of Congress and the plain language

of the preemption clause. In Pilot Life Ins. Co. v. De-

deaux, 481 U.S. 41, 43 (1987), the Plaintiff brought state

law claims for “Tortious Breach of Contract,” “Breach

of Fiduciary Duties,” and “Fraud in the Inducement”

against the insurer providing benefits under the plan.

After reviewing the legislative history of Section 514/a)

and reaffirming that, “the express preemption provisions

of ERISA are deliberately expansive, and designed to

‘establish pension plan regulation as exclusively a federal

concern,’” id. at 46, the Court stated that all three of

the Plaintiff's common law claims related to the benefit

Sm ae

plan: “There is no dispute that the common law causes

of action asserted in Dedeaux’s complaint ‘relate to’ an

employee benefit plan and therefore fall under ERISA’s

express pre-emption clause, § 514/a).” Jd. at 47.

In Farlow v. Union Central Life Ins. Co., 874 F.2d 791

(11th Cir. 1989), the Eleventh Circuit held that Alabama

state law claims of fraudulent misrepresentation and

negligence arising out of representations made to induce

the Plaintiffs to purchase a new or different health plan

related to the ERISA plan and were preempted. In de-

termining whether a cause of action “relates to” an em-

ployee benefit plan, the Eleventh Circuit looked to whether

the conduct giving rise to suek*claim was not “wholly

remote in content” from the benefit plan. /d. at 794. In

the present case, Respondent brought his fraud action

when he failed to receive physical therapy and rehabilita-

tion benefits beyond the sixty days specified in the Health-

America schedule of benefits. Respondent’s claims are

based on certain representations which were made to him

during the process, established by his employer, of ex-

plaining the coverages and benefits available under the

three options within his employer’s welfare benefit plan.

Clearly, Respondent’s claim would be preempted under the

Farlow standard.

Similarly, in Belasco v. W.K.P. Wilson & Sons, Inc., 833

F.2d-277 (11th Cir. 1987), the Plaintiffs claimed in their

Amended Complaint that they were induced into pur-

chasing certain coverage under an ERISA plan and, in

reliance upon representations regarding coverage under

that plan, into discontinuing their coverage under another

existing policy of insurance. The Eleventh Circuit held

that such Alabama fraud claims “relate to” the plan and

are preempted. A certified copy of the Amended Com-

plaint in Belasco was submitted to the Alabama Supreme

Court following oral argument in this case.

The decision of the Alabama court is also in direct con-

flict with Davidian v. Southern California Meat Cutters

Union & Employees Benefit Fund, 859 F.2d 134 (9th

Cir. 1988). In Davidian, the Plaintiff elected to switch

or change options within his employer’s welfare benefit

plan as a result of certain representations made to him

concerning the merits of the various available options.

The Ninth Circuit held that the Plaintiff's fraud and de-

ceit claims “related to” the plan and were preempted.*

In reaching its decision, the majority of the Alabama

court relied on several] inapplicable federal district court

decisions which involved suits against employers for

wrongful breach of the employment contract, for repre-

sentations which induced the Plaintiff to accept employ-

ment, and for representations made by the employer dur-

ing the ordinary course of business and not as part of the

administration of a benefit plan. None of these cases can

be properly applied to the facts of this case where the

representation providing the basis for Respondent’s suit

occurred during the process of explaining coverages and

options under an existing welfare benefit plan.

The majority opinion also relied on Perry v. P*]*E*

Nationwide, Inc., 872 F.2d 157 (6th Cir. 1989). Perry

is factually distinguishable from the present case as the

isrepresentation in Perry arose out of the sale of the

corporation which employed the Plaintiffs and concerned

the continuation or termination of employment if the

Plaintiffs did not take certain action concerning a stock

investment plan. The representations of the employer

3’ Numerous other decisions recognize that a fraud or fraud in

the inducement claim “relates to” the administration of the benefit

plan and is preempted: Herman Hospital v. MEBA Medical & Bene-

fits Plan: Johnson v. District Two Marine Engineering Beneficial

Association. 857 F.2d 514 (9th Cir. 1988) ; Straub v. Western Union

Telegraph Co., 851 F.2d 1262 (10th Cir. 1988) ; Reilly v. Blue Cross

& Blue Shield of Wisconsin, 846 F.2d 416 (7th Cir. 1988) ; Phillips

v. Amoco Oil Co., 799 F.2d 1464 (11th Cir. 1986); Tucker v. Em-

ployers Life Ins. Co., 689 F. Supp. 1078 (N.D. Ala. 1988); Com-

prehensive Care Corp. v. Doughtry, 682 F. Supp. 516 (S.D. Fla.

1988).

were made by the employer in its capacity as employer

rather than by any entity providing benefits as part of

an employee welfare benefit plan, and the misrepresenta-

tion did not occur during either the employer’s or pro-

vider’s conduct in administering a benefit plan. In the

instant matter the representation occurred during the

administration of an existing welfare benefit plan and the

explanation of options available under that plan. This

Court should accept this petition and take this opportunit)

to insure that factually distinguishable cases are not used

to narrow improperly the scope of ERISA preemption.

To the extent that Perry could be applied to the facts

of this case, it is in conflict with the weight of federal

authority. It is abundantly clear from P lot Life, Farlow,

Belasco, and Davidian that Congress did intend to pre-

empt state laws regulating fraud or representations which

occur during or arise out of the administration of an

ERISA governed welfare benefit plan. The explanation

of plan benefits and options within a plan is obviously

part of the administration of the plan and, in fact, the

disclosure of information to participants is specifically

regulated by Congress. Thus, Respondent’s claims ‘“‘re-

late to” the benefit plan and are preempted because they

arise out of the administration of the plan and the con-

duct giving rise to his claims is not “wholly remote in

content” from the benefit plan.

III. Congress Specifically Regulated Information Disclos-

ure And Fiduciary Standards Applicable To The Ad-

ministration Of Welfare Plans, And The Application

Of State Remedies In This Area Would Interfere With

ERISA’s Exclusive Enforcement Scheme

A. Congress Specifically Regulated The Disclosure Of

Information About Plan Benefits

In the Court below, Respondent insinuated that he is

left without a remedy if his state claim is preempted

However, Congress provided for the disclosure of benefit

information to plan participants and provided remedies if

these disclosure requirements are not met.

One of the primary purposes of Congress in enacting

ERISA was to insure that plan participants would receive

accurate and full information about the benefits available

under a plan. Rodriguez v. Meba Pension Trust, 872

F.2d 69, 74 (4th Cir.) cert. denied, 110 S.Ct. 202 (1989) ;

Edwards v. State Farm Mutual Auto Ins. Co., 851 F.2d

134 (6th Cir. 1988); ERISA Section 2, 29 U.S.C. § 1001

(a) and (b); Report 533, at 7-11, 18-20, reprinted in

1974 U.S. Cong. & Adm. News 4645-50, 4656-58; 120

Cong. Rec. 29928, 29931-32 (1974) (remarks of Sen.

Williams). Specifically, Congress provided that a suffi-

ciently accurate and comprehensive summary plan de-

scription should be furnished to all participants. ERISA

Section 101, 29 U.S.C. § 1021(a) (1982); ERISA Section

102, 29 U.S.C. § 1022(a) (1) (1982); ERISA Section 104,

29 U.S.C. § 1024(b) (1982). Plan administrators are

also required to make copies of the plan description avail-

able for examination by any plan participant in the prin-

cipal office of the administrator and, upon written re-

quest of a participant, to furnish a copy of the latest up-

dated summary plan description. ERISA Section 104, 29

U.S.C. § 1024(b) (2) & (4). Congress even provided crim-

inal penalties for willful violation of the disclosure and

reporting requirements of the act. ERISA Section 501,

29 U.S.C. § 1131 (1982).

An ERISA plan “administrator” has a statutory duty

of disclosure and reporting. Moran v. Aetna Life Ins.

Co., 872 F.2d 296 (9th Cir. 1989); 29 U.S.C. § 1021 (a)

(1982). Because neither the Group Subscription Agree-

ment nor Schedule of Benefits designates HealthAmerica

as the administrator, the MPR as the “plan sponsor” is

the administrator. Moran v. Aetna; Davis v. Liberty

Mutual Ins. Co., 871 F.2d 1134 (D.C. Cir. 1989).

Mr. Parker, acting on behalf of the MPR, solicited

and received information from the two new HMO op-

tions. Parker prepared a two page comparative summary

of benefits available under the three options which he

sent to MPR employees before the June 17, 1985 meeting

and before the June 30, 1985 option election date. After

receiving information from Parker, including the sum-

mary, Respondent went to Parker with his question about

coverage under the HealthAmerica option and, instead of

either making a copy of the complete schedule of benefits

available for Respondent to review in his office or obtain-

ing a schedule for Respondent to review, Parker merely

instructed him to attend the informational meetings

being held at the MPR.

The MPR may have failed to provide Respondent with

a “sufficiently accurate and comprehensive” description

of the HealthAmerica option within its welfare benefit

plan as required under 29 U.S.C. §§ 1021(a), 1024/b) (1)

(1982). The MPR may have failed to make a copy of

the HealthAmerica option available for examination by

plan participants prior to the option election date, which

may be a violation of 29 U.S.C. § 1024(b) (2) (1982).

Section 1024(b) (1) imposes a duty on the administrator

to furnish a plan description, without requiring a writ-

ten request, and the failure to supply such information

_or the distribution of inaccurate or incomplete summary

plan description provides the basis for an action under

ERISA’s civil enforcement scheme. Davis v. Liberty

Mutual; Rodriguez v. Meba Pension Trust. An inaccu-

rate or incomplete summary plan description provided by

the administrator, upon wh‘ch the participant relies. pro-

vides the basis for an action for benefits under ERISA.

Edwards v. State Farm; McKnight v. Southern Life &

Health Ins. Co., 758 F.2d 1566 (11th Cir. 1985); Genter

v. ACME Scale & Supply Co., 776 F.2d 1180 (3rd Cir.

1985) ; Kochendorfer v. Rockdale Sash & Trim Co., Inc.,

653 F. Supp. 612 (E.D. Ill. 1987). Also, if Respondent

made a written request to Parker for a complete schedule

_of benefits and Parker failed to comply before the option

election date, July 1, 1985, the MPR would have violated

29 U.S.C. § 1024(b) (4) (1982) for which there would

be an additional action under ERISA’s enforcement

scheme.

In conclusion, Congress specifically regulated the dis-

closure of information to plan participants so as to enable

them to make informed choices regarding plans and op-

tions therein, and Respondent may have an action under

ERISA’s civil enforcement scheme for violation of these

provisions. Since Congress has specifically regulated this

aspect of the administration of welfare benefit plans and

provided remedies for enforcement, the intrusion of state

law and remedies into this area is beyond question pre-

empted by Section 514(a). This case should have been

remanded to the trial court for a determination of Re

spondent’s rights under 29 U.S.C. § 1182(a) (1982).

B. Congress Specifically Imposed Fiduciary Standards

And Remedies Governing The Conduct Of Health-

America As A Plan Fiduciary

According to the documents governing the Health-

America option within the MPR’s benefit plan, the Sched-

ule of Benefits and Group Subscription Agreement,

HealthAmerica had the responsibility for determining

claims for benefits and coverage under the HealthAmerica

option. Accordingity, HeaithAmerica is an ERISA fidu-

ciary. Pierre v. Connecticut General Life Ins. Co., 866

F.2d 141 (5th Cir. 1989); Smart v. State Farm Ins. Co.,

868 F.2d 929 (7th Cir. 1989); America Federation of

Unions Local 102 v. Equitable Life Assurance Society,

841 F.2d 658 (5th Cir. 1988); ERISA Section 3(21), 29

U.S.C. § 1002/21) (A). “ERISA imposes a prudent man’s

standard of care upon anyone acting as a fiduciary with

respect to an employee benefit plan as defined in the Act.”

American Federation of Unions Local 102, 841 F.2d at

662. Any fiduciary who violates 29 U.S.C. §1104(a)’s

duty to act in the best interest of participants is subject

to liability under 29 U.S.C. §1109(a). Jd. Pamela Merle

Was stil] in the process of being trained as a representa-

tive for HealthAmerica and her answer of Respondent's

specific coverage question, obviously given without know!-

edge of the sixty day limit on rehabilitation benefits, may

have constituted a breach of fiduciary duty under ERISA.

Berlin v. Michigan Bell Tel. Co., 858 F.2d 1154, 1163

(6th Cir. 1988); Local Union 2134, UMW v. Powhatan

Fuel, 828 F.2d 710 (11th Cir. 1987).

Additionally, Respondent testified that Ron Scott, a

manager at HealthAmerica, called Mr. Parker and told

him to tell Respondent not to fill out the formal “griev-

ance forms” sent to him by HealthAmerica because

“we're going to take care of this.” If this conversation

actually occurred and if Respondent failed to pursue his

formal grievance or appeal procedures because of this,

HealthAmerica could be liable for additional breach of

fiduciary duties under ERISA’s enforcement scheme.

Congress intended that the internal dispute resolution

procedures required by the act should be followed, in part,

because the exhaustion of such forma! procedures creates

a fully developed factual record which assists courts in

reviewing the actions of fiduciaries. Makar v. Health

Care Corp. of the Mid-Atlantic, 872 F.2d 80 (4th Cir.

1989) (Plaintiff failed to exhaust the grievance and ap-

peal procedures established by the health maintenance

organization).

C. The Award Of Punitive Damages Inder Conflicting

And Inconsistent State Law Standards Would In-

terfere With ERISA’s Civil Enforcement Scheme

Congress provided uniform nationwide standards gov-

. erning the duties and liabilities of plan sponsors, admin-

istrators, and fiduciaries; and Congress enacted a care

fully crafted civil enforcement scheme which was intended

to be exclusive so as to insure a uniform nationwide

source of law. Pilot Life Ins. Co. v. Dedeaur, 481 US.

at 54-56. See also Report 533, supra at 12, 17, reprinted

in 1973 U.S. Code Cong. & Admin. News 4649, 4655.

Congress recognized that benefit plans were increasingly

interstate in nature and intended to promote the growth

of benefit plans by providing a uniform set of standards

and remedies. Id. The Alabama court’s imposition of

conflicting and inconsistent state law remedies arising

out of the process of explaining plan coverages, benefits,

and options would discourage the growth and development

of benefit plans contrary to the express intent of Con-

gress.

In Massachusettes Mutual Life Ins. Co. v. Russell, 473

U.S. 134 (1985), the Court held that ERISA Section 409,

99 U.S.C. §1109(a), providing an action for breach of

fiduciary duty, does not allow the recovery of extra con-

tractual or punitive damages by a participant or bene-

ficiary. The Court stated that, “The six carefully inte-

grated civil enforcement provisions . . - provide strong

evidence that Congress did not intend to authorize other

remedies that it simply forgot to incorporate expressly.”

473 U.S. at 146. The majority of the circuits have held

that plan participants cannot recover extracontractual or

punitive damages for claims, whether designated as state

law claims or ERISA claims, that “relate to” the benefit

plan. Amos v. Blue Cross-Blue Shield of Alabama, 868

F.2d 430, 431 n.2 (11th Cir.), cert. denied, 110 S.Ct. 158

(1989). The imposition of state law remedies allowing

the award of ungoverned and unlimited punitive dam-

ages, such as Respondent’s Alabama claims, for conduct

occurring during the administration of a benefit plan

and the explanation of options and coverages within that

forcement mechanism and would discourage plans from

offering new options or benefits which might subject them

to devastating punitive awards. Whether or not Respond-

ent would prevail on his potential claims for breach of

ERISA’s information disclosure and fiduciary responsi-

bilities in this case, Congress intended that state law

claims such as Respondent’s would be preempted.

IV. The Alabama Court Plainly Misconstrued and Mis-

applied The ERISA Insurance Savings Clause In

Direct Conflict With The Decisions Of This Court And

Other Federal Appellate Courts

The Alabama court failed to address the question of

whether Alabama’s “twisting” statute, Ala. Code § 27-

12-6 (1975), provides for a private cause of action.* In-

stead, having held that Respondent’s common law fraud

claim is not preempted, the Court opined that “if some

other court” decides that such a fraud claim is pre-

empted, “then we would hold that a claim under § 27-16-6

‘sic] could still be maintained under the savings clause

of ERISA as a state law regulating the business of in-

surance.” App. at 16a. The Court so held even though

HealthAmerica, a health maintenance organization, was

not engaged in the business of insurance and did not

issue policies of insurance. Second, the twisting statute

does not meet any of the three McCarran-Ferguson Act

factors applied by this Court to determine whether a

state law regulates the “business of insurance.” Third,

the judicial creation of private remedies under trade

practices acts would allow the different states to regulate

the information disclosure and fiduciary standards spe-

cifically regulated by Congress and reserved to the fed-

eral government under ERISA. Simply put, to allow

such remedies would devastate ERISA’s exclusive en-

forcement scheme and the “savings clause” would con-

sume the preemption clause.

In Pilot Life, and Metropolitan Life Ins. Co. v. Mass-

achusetts, 471 U.S. 724 (1985), the Court established a

three tiered test to determine whether a state law is

* This issue was extensively briefed and the Alabama court was

well aware that the majority of courts nationwide recognize that a

trade practices act does not support a private action unless ex-

pressly provided therein. See Farlow v. Union Centrai Life Ins. Co.,

874 F.2d 791 (11th Cir. 1989).

Ce Sa ee ee ee

eS a ee ee re * —_—— ae

“saved” from ERISA preemption under Section 514(b)

(2): First, a Court must take whatever guidance is avail-

able from a “common sense view” of the language of the

savings clause itself; second, a Court must consider the

case law interpreting the phrase “business of insurance”

under the McCarran-Ferguson Act, 15 U.S.C. § 1012;

third, and most significant, the Court must consider the

relationship between the application of the specific state

law and the role of the savings clause in ERISA as a

whole.

‘“A common-sense view of the word ‘regulate’ would lead

to the conclusion that, in order to regulate insurance, a

law must not just have an impact on the business of in-

surance, but be specifically directed toward that indus-

try.” Pilot Life, 41 U.S. at 50. As the Court noted in

Group Life & Health Ins. Co. v. Royal Drug Co., 440 U.S.

205, 230, n. 38, “[m]Jany aspects of insurance companies

are regulated by state law, but are not the ‘business of

insurance.’ Alabama’s twisting provision, whether ap-

plied to an insurance company or, as in the instant case,

an entity not engaged in the business of insurance, does not

“regulate” the “business of insurance” as that phrase is

used in the narrowing context of McCarran-Ferguson or

ERISA.

The first McCarran-Ferguson factor, “the spreading

and underwriting of a policyholder’s risk,” in the one in-

dispensable characteristic of insurance. Royal Drug Co.,

440 U.S. at 211-12. See also Anschulz v. Connecticut Gen-

eral Life Ins. Co., 850 F.2d 1467 (11th Cir. 1988) ; Powell

v. Chesapeake & Potomac Telephone Co. of Virginia, 780

F.2d 419 (4th Cir. 1985), cert. denied, 476 U.S. 1170

(1986). Even District Judge Acker in Butler v. Fringe

Benefits Plan, Inc., 701 F. Supp. 804 (N.D. Ala. 1988),

a case relied on by the majority of the Alabama court,

recognized that Alabama’s twisting statute does not

spread or transfer policyholder risks.* Alabama’s twisting

Statute does not regulate how insurers assign or transfer

risks, establish reserves, or otherwise underwrite risks

To the contrary, the twisting provision is simply con-

cerned with prohibiting certain practices in the solicita-

tion of insurance policies and nothing more.

With regard to the second McCarran-Ferguson factor.

this Court has observed that the core of the business of in-

surance is the “relationship between the insurer and the

insured, the type of policy which could be issued, its re-

liability, interpretation, and enforcement.” Royal Drug

Co., 440 U.S. at 215-16. See also Pilot Life, 481 U.S. at

51. Unlike the mandated benefits law “saved” in Metro-

politan Life Ins. Co. v. Massachusetts, 471 U.S. 72

(1985), the twisting statute does not regulate the terms

provisions, or benefits available under a policy of insur-

ance—those things integral to the insurer-insured rela-

tionship. Rather, according to the opinion of the Alabama

court, the twisting statute somehow allows the imposition

of a private remedy for certain prohibited practices.

In Powell v. Chesapeake & Potomac Telephone Co. of

Virginia, the Fourth Circuit found that the Plaintiff's

state law claims, including a claim under Virginia’s Un-

fair Trade Practices Act, were not saved from preemption

as they did not bear upon the “busines of insurance.” '

5 The Alabama court chose to rely on Judge Acker’s opinion i:

the Butler case even though the Court was aware that Judge Acker

has a record of being reversed on ERISA matters: Amos v. Blue

Cross-Blue Shield of Ala., 681 F. Supp. 1515, reversed, 868 F.2d 43)

(11th Cir. 1989); Whett v. Goodyear Tire & Rubber Co., 676 F

Supp. 1119, 1132 (N.D. Ala. 1987) (Judge Acker was forced to

reverse himself in face of overwhelming precedent).

* Plaintiff's claims included an alleged violation of Section 28 1-

52.1 of the Virginia Unfair Trade Practices Act, which provides as

follows: “No person shall make, issue, circulate... any estimate

illustration, circular, statement, sales presentation, omission. or

comparison which (1) Misrepresent the benefits, advantages, condi-

tions, or terms of any insurance policy.” 780 F.2d at 422 n.4.

Similarly, in Dennette v. Life of Indiana Ins. Co., 693 F.

Supp. 959 (D. Colo. 1988), the Court held that claims

under Colorado’s code, including a claim under a statute

which prohibited “[mJisrepresenting pertinent facts or

insurance policy provisions relating to coverages at issue”

were not saved from ERISA preemption because such

state laws did not effect the transferring or spreading of

policyholder risk and were not integral to the insurer-

insured relationship because they did not seek to regulate

the substantive terms of the insurance contract itself. See

also Keel v. Group Hospitalization Medical Services, Inc.,

695 F. Supp. 223 (E.D. Va. 1988); Rollo v. Maxicare

of Louisiana, Inc., 695 F. Supp. 245 (E.D. La. 1988).

The twisting statute, as applied in this case, also fails

to meet the third McCarran-Ferguson criteria. Although

the Alabama Trade Practices Law is generally directed

to the insurance industry, the twisting provision is not

so restricted as it applies to any “person.” The evidence

was undisputed that HealthAmerica is a health mainte-

nance organization and not an insurance company and did

not issue any policy of insurance to Respondent or to the

welfare benefit plan. There is authority that health main-

tenance organizations and other alternative health care

providing arrangements are not generally considered en-

gaged in the business of insurance for purposes of the

McCarran-Ferguson Act. Royal Drug Co., 440 U.S. at

225-26. The Alabama court impliedly held that Health-

America was engaged in the busines of insurance and

subject to state insurance regulations even though it did

not discuss this question or cite any authority for the

proposition that HMOs are subject to such regulation.

Further, Alabama’s twisting statute would not be saved

even if HealthAmerica was an insurance company en-

gaged in the busines of insurance because the statute fails

to satisfy the other two McCarran-Ferguson factors.

Additionally, a claim for punitive damages against an

ERISA administrator or fiduciary based upon violation of

a state insurance trade practices act provision, even if

the state law otherwise satisfied the above criteria. would

be preempted because of its disruption of ERISA’s ex-

clusive civj] enforcement scheme. Kanne vy. Connecticut

General Life Ins. Co., 859 F.2d 96 (9th Cir. 1988). cert

denied, 109 S.Ct. 3216 (1989) - Commercial Life Ins. Co.

v. Juliano, 764 P.2d 1059 (Cal. 1988), cert. denied, 109

S.Ct. 2087 (1989).

As shown above, the disclosure of information to plan

participants concerning plan coverages and options is spe-

cifically governed under ERISA, as js the standard of

conduct which governs ERISA fiduciaries in their deal-

ings with plan participants, and Respondent may have

a claim under ERISA’: enforcement scheme for Violation

of these areas Specifically regulated by Congress. Accord-

ingly, it appears that the ERISA “deemer clause,” 29

U.S.C. § 1144(b) (2) (B), may also be implicated as “the

deemer clause guards against any insurance regulation

that infringes on such ERISA areas as reporting, dis-

closure, and non-forfeitability.” FMC Corp. v. Holliday,

885 F.2d 79. gg (3rd Cir. 1989). To the extent that

Alabama’s twisting statute purports to treat Health-

America as an insurance Company and purports to regu-

late HealthAmerica’s conduct in the explanation of cov-

erages and administration of benefits under the MPR

welfare benefit plan, the deemer clause may require the

preemption of Alabama’s twisting provision even jf said

Provision was otherwise Saved from ERISA preemption

as a law regulating the business of insurance.

As the dissent in this Case indicated, Respondents’ claim

should be remanded to the trial court for determination of

the unlikely event that Respondent's situation is not gov-

erned by ERISA’s information and fiduciary standards or

enforcement scheme, it is within the power of Congress

to broaden the information requirements or expand the

enforcement scheme. Additionally, the federal courts have

a duty to develop the federal common law of ERISA to

fulfill the purposes of the Act. However, regardless of

whether Respondent will prevail in an ERISA action

against Petitioners, Congress has expressly preempted his

state law claims; and the conflict in the application of

federal law, created by the Alabama court, must be re-

solved.

V. The Disproportionate Punitive Damages Award And

The Alabama Standard Governing Punitive Damages

Awards For Civil Fraud Violate The Due Process

Clause Of The Fourteenth Amendment

The punitive damages award represents 745 times the

amount of Plaintiff's actual damages and was made

based upon a punitive damages standard which is incom-

prehensibly vague and unintelligible.’ The verdict is so

grossly disproportionate to the character of Petitioners’

alleged misconduct as to be constitutionally excessive and

to violate Petitioners’ rights to substantive due process.

See Browning-Ferris Industries v. Kelco, Inc., 109 S.Ct.

2909 (1989). Further, Petitioners were given no warn-

ing that their conduct would be subject to such penalties,

and the absence of a meaningful standard resulted in the

deprivation of Petitioners’ “property” rights without due

process of law.

Fundamental to the concept of due process is an ele

ment of fair warning and notice of what conduct will

give rise to punishment so that a person of ordinary in-

telligence would have a reasonable opportunity to under-

stand what conduct is prohibited. See Grayned v. City

of Rockford, 408 U.S. 104, 108-109 (1972); Giacco v.

Pennsylvania, 382 U.S. 399, 402-403 (1977).* The Ala-

™The meaningless standard customarily applied in Alabama is

stated in the opinion, App. A, 22a-24a: “so recklessly done as to

amount to the same thing” as intentional] fraud.

® Although Defendants’ constitutional issues were first raised

post-trial, the trial judge carefully considered them and specifically

bama standard allowing the imposition of punitive dam-

ages for fraud does not provide a rational or intelligible

standard for the jury to use in determining whether to

award punitive damages and fails to provide potential!

Defendants with an adequate notice of what conduct will

subject them to punitive sanctions.

A law is unconstitutionally vague “when men of com-

mon intelligence must necessarily guess as to its meaning

and differ as to its application.”” Connally v. General

Construction Co., 269 U.S. 385, 391 (1926); Coates

City of Cincinnati, 402 U.S. 611 (1971); Davis

Schnell, 81 F. Supp. 872 (S.D. Ala.), aff'd per curiam,

836 U.S. 933 (1949). Anyone of “common intelligence”’

would have to “guess’”’ as to the meaning of the standard

used in Alabama, as the jury did in this case. As a

result of such a “standard,” juries are given an unre-

strained license to impose their own persona! biases and

prejudices against unpopular Defendants.

VI. The Alabama Procedure Allowing The Jury Ungov-

erned And Unlimited Discretion In Awarding Punitive

Damages For Civil Fraud Violates The Due Process

Clause Of The Fourteenth Amendment

The jury had unlimited discretion in determining the

amount of punitive damages awarded to Menton.'® One

held that they were “timely” raised. App., at 48a. Further. there

is ample precedent to support the power of this Court t nsider

these issues. Hathorn v. Lovorn, 457 U.S. 255, 262-65 (1982

* Plaintiff’s counsel repeatedly referred to Defendant Health

America as an “insurance company” at trial even though Health-

America is a health maintenance organization

10 In 1987, the Alabama legislature enacted “tort reform” statutes

which capped punitive damage awards at $250,000.00, with excep-

tions, and imposed a “clear and convincing evidence” standard for

the award of punitive damages. Ala. Code Ann. §§ 6-11-20; 6-11-21

(Supp. 1989). However, these statutes do not apply to the case at

bar. Ala. Code Ann. § 6-11-30 (Supp. 1989). Further, the statute

capping punitive damage awards is currently under attack in at

court has held that due process places a limit on punitive

damage awards in some contexts. See Juzwin v. Amtorg

Trading Corp., 705 F. Supp. 1054, 1064, reh’g granted,

718 F. Supp. 1233 (D.N.J. 1989). Further, Petitioners

submit that the Alabama punitive damages scheme chills

their “fundamental right of access to the courts by au-

thorizing unlimited punitive damages,” and members of

this Court have noted the amount of jury discretion in

awarding punitive damages “may violate the Due Process

Clause.” See Bankers Life & Casualty v. Crenshaw, 486

U.S. 71, 108 S.Ct. 1645, 1655 (1988) (O’Connor. J.. dis-

senting); see also Browning-Ferris Industries v. Kelco.

Inc., 109 S.Ct. 2909 (1989)

As a matter of common law in Alabama, punitive dam-

ages are intended to punish a civil defendant and deter

future similar conduct. See Aetna Life Ins. Co. v. Lavoie,

470 So.2d 1060 (Ala. 1984), rev’d., 475 U.S. 813 (1986) -

Badgett v. McDonald, 304 So.2d 228 (Ala. Civ. App.

1974). However, under Alabama’s scheme Petitioners

were not provided any semblance of the procedural] and

substantive safeguards afforded criminal defendants be-

fore they can be punished: The jury was not given mean-

ingful guidelines to apply in determining the award of

punitive damages; there was no limit on the amount

which could be awarded; there was no requirement that

the punitive award bear any particular relationship to

the amount of actual damages; there was no increased

burden of proof required for the imposition of such pun-

ishment; and there was no meaningful appellate review

of the jury’s excessive award. Such a scheme violates

the Due Process Clause of the Fourteenth Amendment.

least one court in Alabama. Trawick v. Michaels of Oregon Co.,

No. 88-C-413-N (N.D. Ala. 1989). If that statute is struck down.

then the unbridled and standardless scheme approved in Menton

will again apply in Alabama.

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December 12, 1989 4 ttorneys

APPENDICES

APPENDIX TABLE OF CONTENTS

APPENDIX A

July 21, 1989 Opinion of Supreme Court of Ala-

0 et

APPENDIX B

September 15, 1989 Order of Supreme Court of

Alabama denying Application for Rehearing

APPENDIX C

June 13, 1988 Order of Trial Court denying De

fendant’s post-trial motions...» -

APPENDIX D

Federal Statutory and Constitutional Provisions:

29 U.S.C. § 1001 (1982) (Congressional findings &

declaration of policy) .-...............................

29 U.S.C. §1021(a) (Duty of disclosure and re-

porting)... SE

29 U.S.C. § 1022 (Plan description and summary

plan Aencciation)..

29 U.S.C. § 1024 (b) “(1982 & ‘Supp. Vv 1988) ( Fil-

ing and iucbiihing of information—Publication

of summary plan description and annual report to

participants and beneficiaries of plan) ___.....

29 U.S.C.§1101(a) (Fiduciary responsibility—

Coverage) _

29 U.S.C. § 1104(a) (1) ‘(Fiduciary duties).

29 U.S.C. § 1109 (Liability for breach of fiduciary

sc crcreeccdevgueeneooeeoces- oo

29 U.S.C. § 1131 (Criminal penalties)

29 U.S.C. §1132(a) (1982) and (c) (Civil en-

forcement) (Supp. V 1988) ......

29 U.S.C. § 1144(a) and (b) (2) (A) and (b) (2)

(B) (Other laws) and (b)(5)(A) (1982) and

(b) (7) (Supp. V 1988) .

15 U.S.C. § 1012...

U.S. Constitution, Amendment XIV, § 1.

U.S. Constitution, Article VI, Cl. 2.0.0.0.

APPENDIX E

State Statutes :

47a

APPENDIX A

THE STATE OF ALABAMA

JUDICIAL DEPARTMENT

THE SUPREME COURT OF ALABAMA

SPECIAL TERM, 1989

87-1100

HEALTHAMERICA and PAMELA MERLE

EDWARD MENTON

Appeal from Mobile Circuit Court

(CV-86-003049)

SHORES, JUSTICE.

The plaintiff /appellee, Edward Menton, was employed

as city editor for the Mobile Press Register newspaper

(“Press Register”), As part of his employment, Menton

was provided with medical insurance coverage, for which

the Press Register paid 50 to 60 percent of the premiums

and the balance was deducted from Menton’s salary. In

June 1985, the Press Register offered an alternative

medical benefit selection, which allowed qualified Press

that they had, or to cancel it and enroll in one of the

two health maintenance organizations then in the Mobile

area, Prime Health and defendant/appellant, Health-

America, without suffering an interruption of benefits.

Menton had a son, Jacob, whose premature birth neces-

sitated a series of surgical operations to lengthen and

straighten the tendons in his legs and feet. After each

such operation, and after his casts were removed, Jacob

would undergo physical therapy treatments three times a

week until he was ready for his next surgical operation.

Menton’s health insurance under the Press Register’s

employment benefit plan paid 80% of the cost of Jacob’s

physical therapy treatments and orthopedic appliances.

Jacob’s second operation was imminent when the Press

either of the health maintenance organizations. Health-

America’s list of physicians included both of the physi-

cians who had been treating Jacob’s legs; Prime Health’s

did not. Menton read the promotional literature regard-

ing HealthAmerica’s coverage but could not determine

from that whether HealthAmerica would provide cover-

age for Jacob’s physical therapy and orthopedic appli-

ances.

At the suggestion of the assistant general manager of

the Press Register, who had initially reviewed the cover-

age provided by HealthAmerica and had helped Health-

America distribute information about its plan to the

Press Register employees, Menton attended an informa-

tional meeting of Press Register employees three days

before Jacob’s second surgery. This meeting was pre-

sided over by defendant/appellant Pamela Merle, who

had worked for HealthAmerica for approximately one

and one-half months prior to this meeting. During the

meeting, the Press Register employees were repeatedly

told that the coverage provided by the health maintenance

organizations such as HealthAmerica and Prime Health

was generally the same as, or was better than, the

medical coverage that Menton and other employees had.

After the meeting, Menton asked Merle specific questions

about HealthAmerica’s coverage of Jacob’s medical ex-

penses. He explained Jacob’s medical history, his im-

pending operation, and his need for extensive physical

therapy and orthopedic appliances after his second sur-

gery. In response to a direct question from Menton,

Merle informed Menton that Jacob’s medical expenses

would be “covered one hundred percent by Health-

America.”

In reliance upon Merle’s representations, Menton

dropped his health insurance and enrolled in the Health-

America plan. After Menton enrolled in the Health-

America plan, he received a schedule of benefits in the

mail. On reviewing the schedule, Menton noticed that

outpatient services for physical therapy were apparently

covered for only 60 days. Menton attempted to get

HealthAmerica to provide the coverage that he had been

promised when he dropped his previous insurance, which

provided coverage for 80% of Jacob’s physical therapy

expenses for an unlimited period of time. HealthAmerica

extended coverage for 60 additional days after the initial

60-day period, but would not provide coverage beyond

that. Jacob’s physical therapy expenses amounted to

approximately $150 a week.

Menton filed this suit against HealthAmerica and its

agent, Merle, in which he alleged a state common law

action for fraud, asserting misrepresentations of a mate-

rial fact made willfully to deceive, or recklessly without

knowledge, that caused him to drop the hospital coverage

he had under an insured employment benefit plan and to

elect the HealthAmerica coverage also provided under the

plan. The defendants pleaded the general issue and pre-

emption by the Employee Retirement Income Security

Act of 1974 (“ERISA”), 88 Stat. 829 as amended, 29

U.S.C. § 1001 et-seg. Menton did not file a claim under

ERISA. Predicated on the ERISA preemption, the de-

fendants moved for a directed verdict at the close of

Menton’s case and at the close of all the evidence. The

trial court observed that the Alabama Health Main-

tenance Organizations Statutes (“HMO Statutes’), Code

1975, §§27-21A-1 to 27-21A-32, and the Alabama

“twisting” statute, Code 1975, § 27-12-6, might be saved

by §514\b) of ERISA if Menton’s claim were subject to

ERISA preemption; overruled the defendants’ motions

for a directed verdict: and submitted the case to the jury

with instructions on Alabama civil actions for misrepre-

sentation, without reference to the HMO statutes or the

twisting statute. The jury returned a verdict in favor of

Menton. After final judgment was entered, Menton filed

a motion to amend his complaint to conform to the evi-

dence, alleging a violation of § 27-12-6, the “twisting”

statute. The defendants’ objection to this was overruled,

as was their motion for a judgment notwithstanding the

verdict or in the alternative for a new trial.

The first issue presented by this case is whether

ERISA preempts a state common law action for fraud

where the plaintiff alleges that he relied on misrepre

sentations made by the defendants in dropping his old

hospital insurance and electing coverage under the de

fendants’ plan. We hold that a claim for fraud in the

inducement does not “relate to” an employee benefit plan

and is therefore not preempted by ERISA.

The courts in Alabama have recognized a common law

right of action for fraud, at least since the case on Ein-

stein, Hirsch & Co. v. Marshall & Conley, 58 Ala. 153

(1877), when Justice Stone criticized the old case of

Chandelor v. Lopus, 1 Smith Lead. Cas. 319 (9th ed.

1889) (adjudged in the Court during the Reign of James

the First), which involved alleged fraud in the sale of a

stone, which the seller represented as a bezoar stone and

sold as such. All the Barons, except Anderson, in the

Court of Exchequer held that “ ‘the bare affirmation that

it was a Bezoar stone, without warranting it to be so, is

no cause of action; and although he knew it to be no

Bezoar stone, it is not material.’” 58 Ala. at 160 (quot-

ing Chandelor v. Lopus). To this Justice Stone wrote,

“We submit, if this language does not sanction looser

ne ae ee ip ee ee

morals than the present state of the law will justify.”

58 Ala. at 160. To make certain that it did not sanction

those looser morals of Chandelor v. Lopus, the legislature

of Alabama in 1907 codified laws that it had enacted

that provided civil actions for fraud (now Code 1975,

s 6-5-100), for misrepresentations of material fact (now

$ 6-5-101), for suppression of material facts (now § 6-5-

102), and for deceit (now § 6-5-103).

With ERISA, Congress imposed comprehensive federal

oversight of employee benefit plans of employers engaged

in interstate commerce. Under ERISA Section 502(a),

as set forth in 29 U.S.C. § 1132(a) (1) (B), a civil action

may be brought by a participant or beneficiary “to re-

cover benefits due to him under the terms of his plan,

to enforce his rights under the terms of the plan, or to

clarify his rights to future benefits under the terms of

the plan.” This limits the options of the employee, who

is preempted from brigning actions under state laws

when they “relate to” any employee benefit plan.

ERISA’s preemption provision states:

“Except as provided in subsection (b) of this sec-

tion [the saving clause], the provisions of this sub-

chapter and subchapter III of this chapter supersede

any and all State laws insofar as they may now or

hereafter relate to any employee benefit plan... .”

29 U.S.C.A. § 1144 (a).

The defendants argue that Menton is preempted under

this ERISA preemption provision from filing a state com-

mon law action for fraud. Under the facts of this case,

the Press Register is engaged in interstate commerce;

the undisputed evidence shows that the Press Register

solicits advertisements from outside Alabama, advertises

for businesses located outside Alabama, and sells its

papers outside Alabama. Menton was a full-time em-

ployee of the Press Register, and the Press Register had

an employee benefit plan prior to and after Menton ¢n-

rolled in the HealthAmerica plan.

Therefore, we must determine whether his claim is

preempted by ERISA. The defendants rely upon Pilot

Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S. Ct. 1549,

95 L. Ed. 2d 39 (1987), wherein the Supreme Court

ruled that a state lawsuit asserting improper processing

of a claim for benefits under an ERISA-regulated plan

was preempted by federal law. In Pilot Life the Supreme

Court held that the phrase “relate to” is to be given its

“*broad common-sense meaning, such that at state law

“relate[s] to” a benefit plan “in the normal sense of the

phrase, if it has a connection with or reference to such

a plan.”’” 481 U.S. at 47, citing Metropolitan Life

Insurance Co. v. Massachusetts, infra, and Shaw v. Delta

Air Lines, Inc., infra.

The United States Supreme Court had considered

ERISA’s preemption provision three times prior to Pilot

Life: Alessi v. Raybestos Manhattan, Inc., 451 U.S.

504, 101 S.Ct. 1985, 68 L.Ed.2d 402 (1981); Shaw v.

Delta Air Lines, Inc., 463 U.S. 85, 103 S. Ct. 2890, 77

L.Ed.2d 490 (1983); and Metropolitan Life Ins. Co. v.

Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d

728 (1985).

In Shaw v. Delta Air Lines, Inc., the Court noted that

“!s]ome state actions may affect employee benefits in too

tenuous, remote, or peripheral a manner to warrant a

finding that the law ‘relates to’ the plan.” 463 U.S. at

100 n.21. In Shaw, the Court cited with approval Ameri-

can Telephone & Telegraph Co. v. Merry, 592 F.2d 118

(2d Cir. 1979), in which the Second Circuit Court of

Appeals held that ERISA did not preempt a state’s gar-

nishment of a spouse’s benefit plan income to enforce

alimony and support orders. In accord, see, Savings &

Profit Sharing Fund of Sears Employees v. Gago, 717

F.2d 1038 (7th Cir. 1983); Howard v. Parisian, Inc. 807

F. 2d 1560 (11th Cir. 1987); Sommers Drug Stores Co.

Employee Profit Sharing Trust v. Corrigan Enterprises,

Inc., 793 F. 2d 1456 (5th Cir. 1986), cert. denied, 479

U.S. 1034, 107 S.Ct. 884, 93 L.Ed.2d 837 (1987).

HealthAmerica argues that Pilot Life forecloses debate

and that Menton’s claim is preempted by ERISA as one

“relating to” an employee benefit plan. We disagree.

Pilot Life involved an individual who was receiving

benefits under a plan insured by the Pilot Life Insurance

Company. In 1975, Everate W. Dedeaux injured his

back in an accident related to his employment with En-

tex, Inc. Entex sponsored a long-term disability plan

that qualified as an employee benefit plan under ERISA,

for employees who became permanently disabled. While

Entex assumed responsibility for the disability plan’s

day-to-day operation and administration, benefits under

the plan were provided by a group insurance policy is-

sued by Pilot Life Insurance Company.

Following Dedeaux’s accident, Pilot Life provided bene-

fits to him for two years. His benefits under the plan

were first interrupted, then terminated altogether. When

they were discontinued, Dedeaux sued Pilot Life. Al-

though the complaint in Pilot Life contained a count for

“fraud in the inducement,” the opinion makes it unmis-

takably clear that the only claims he pursued were claims

seeking damages for improperly processing his claims for

benefits under an ERISA-regulated plan. Justice O’Con-

nor, writing for the Supreme Court, stated as follows:

“Although Dedeaux’s complaint pled several state

common law causes of action, before this Court De-

deaux has described only one of the three counts—

called ‘tortious breach of contract’ in the complaint,

and ‘the Mississippi law of bad faith’ in respondent’s

brief—as protected from the pre-emptive effect of

§ 514(a). The Mississippi law of bad faith, Dedeaux

argues, is a law ‘which regulates insurance,’ and

thus is saved from pre-emption by § 514(b) (2) (A).”

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. at 48, 107 S.Ct.

1549, 1553, 95 L.Ed.2d 39, at 48 (footnote omitted).

Having considered this single count, the Court held:

“lWJe conclude that Dedeaux’s state law suit assert-

ing improper processing of a claim for benefits under

an ERISA-regulated plan is not saved by § 514(b)

(2) (A), and therefore is pre-empted by § 514/a).”

Id. 481 U.S. 41, at 57, 107 S.Ct. 1549 at 1558, 95 L.Ed.2d

39, at 54 (footnote omitted).

Pilot Life merely cleared the confusion that Metro-

politan Life had created in the lower federal courts.

Following Metropolitan Life, several lower courts heid

that insurance companies serving as claims review fidu-

ciaries to fully insured employee benefit plans were sub-

ject to the full measure of state remedies, while fidu-

ciaries of self-insured plans were not. Pilot Life rejected

the artificial distinction between fully-insured and self-

insured plans created by Metropolitan Life.

In this case, Menton does not claim improper process-

ing of a claim, nor any benefits under the terms of the

plan. To the contrary, he claims he was fraudulently

induced to drop his existing coverage by misrepresenta-

tions made by the defendants to him prior to his becom-

ing a member of the HealthAmerica plan. This is the

clear distinction between this case and Pilot Life.

The Supreme Court has not drawn a hard, clear line

as to which state law is preempted by §514/a). This is

demonstrated by the case of Ft. Halifax Packing Co. v.

Coyne, 482 U.S. 1, 107 S. Ct. 2211, 96 L-Ed.2d 1 (1987),

which was decided two months after Pilot Life. In Ft.

Halifax, the Court held that a Maine statute requir-

ing employers to make a one-time severance payment

to employees when a plant closed was not preempted

by ERISA. The Court noted that the preemption clause

expressly states that state laws are superseded to the

extent that they “relate to any employee benefit plar

The Court stated that the preemption provision “does no

refer to state laws relating to ‘employee benefits.’ bu:

State laws relating to ‘employee benefits plans.” Ju

at 7. (Emphasis in original.) The Court observed tha:

ERISA uses the words “benefit” and “plan” separate!’

throughout and nowhere treats the two as synonymous

“Given the basic difference between a ‘benefit’ and a

‘plan,” ‘Congress’ choice of language is significant in its

pre-emption of only the latter.” /d. at 8 107 S. Ch. a

2216, 96 L.Ed.2d at 9 (1987

The distinction made by the Court in Ft. Halifa:

tween laws that relate to employee benefits plans anc

laws that relate simply to employee benefits, is analogous

to the instant case and demonstrates why Menton’s ciain

for fraudulent inducement does no: “relate : Health

America’s plan.

Teper v. Park West Galleries, Inc.. 431 Mich. 202. 427

N.W. 2d 535 (198), presented a much closer questior

on preemption than exists here. In that case the Michigar

Supreme Court held that a plaintiff's claim agains: he:

employer for breach of an employment contract. wh ct

claimed, in part, compensation for future pension bene-

fits, was not preempted by ERISA. The court held tha

“the simple fact that the damage award was based >

part upon the terms of the plan does not place amy fiscs

or administrative burden upon the plan itself This rela-

tionship to the plan is, in the words of the Shaw Cour’

too ‘peripheral’ to trigger ERISA preemption.” 43°

Mich. at 208, 427 N.W.2d at 541. Chief Justice Riler

concurring with the majority in Teper found ERISA s

definition of a “state” important for the purposes of the

ERISA preemption clause.

“Congress has further explained the scope of ERISA

preemption im the definitional section. 29 [S¢

10a

§ 1144(c) (2), wherein the term ‘state’ for pre-

emption purposes is characterized as ‘a State, any

political subdivision thereof, or any agency or instru-

mentality of either, which purports to regulate, di-

rectly or indirectly, the terms and conditions of em-

ployee benefit plans covered by this subchapter.’ ”

431 Mich. at 212, 427 N.W.2d at 545 (emphasis in

original).

In Quigley v. UNUM Life Ins. Co., 688 F. Supp. 80

(D. Mass. 1988), the plaintiff’s decedent was a partici-

pant in a retirement pension plan. Plaintiff’s decedent

received eight years’ of monthly annunity payments fol-

lowing his retirement. Following his death, his estate

brought an action against UNUM for breach of contract

and misrepresentation. UNUM contended that the claims

were preempted by ERISA. The federal district court

rejected UNUM’s preemption argument, finding that the

plaintiff’s causes of action were “so tenuously related to

an ERISA plan that the claims are not preempted.” I/d.,

at 82. In so holding the court found:

“The dispute in this case does not involve the plan

and the plaintiffs do not claim that any term of the

pension plan was violated. ... Litigation of these

issues will not, in effect, result in stave regulation

of the pension plans contrary to the purposes of

ERISA. The concern which motivated the enactment

of the ERISA preemption provisions, the threat of

inconsistent and conflicting state regulations of

ERISA plans, is not implicated if this action is

allowed to go forward. See Ft. Halifax Packing Co.,

Inc. v. Coyne, 482 U.S. 1, 107 8. Ct. 2211, 2216, 96

L. Ed. 2d 1 (1987).”

Id., at 82-83.

In Greenblatt v. Budd Co., 666 F. Supp. 735 (E.D. Pa.

1987), the plaintiff sued his employer for misrepresenting

to him that the benefits he was receiving under one of

lla

two pension plans would be made equal to those available

under the other plan. The Court, after first acknowledg-

ing that the Supreme Court has determined that ‘Con-

_ ~~~~gress made the preemption provision ‘deliberately expan-

sive’ and-‘designed to “establish pension plan regulation

exclusively as a federal concern,”’” id., at 741, quoting

Pilot Life, rejected the employer’s argument that ERISA

preempted the plaintiff’s claim:

“The cause of action for misrepresentation alleged

by the plaintiff at Count II of his complaint should

not be preempted because, simply put, the premise

underlying this action was that plaintiff was deceived

by the verbal statements made and the actions taken

by his employer. That the subject of the deception

concerned pension benefits is only incidental and not

essential to the plaintiff’s cause of action. Like

promises for a raise in salary, a promotion, or the

use of tickets to a baseball game, plaintiff’s em-

ployer’s promise to provide the plaintiff with certain

benefits at some unknown time in the future, upon

which the plaintiff could reasonably rely, is the es-

sence of the fraud alleged.”

Id., at 742. In accord: Morningstar v. Meijer, Inc., 662

F. Supp. 555 (E.D. Mich. 1987) (plaintiff’s claim for

breach of empleyment contract against former employer

did not “relate to” ERISA plan, despite the fact that

plaintiff claimed as part of her damages the value of

certain future fringe benefits under an ERISA plan) ;

McNamee v. Bethlehem Steel Corp., 692 F. Supp. 1477

(E.D. N.Y. 1988) (plaintiff claimed fraudulent misrep-

resentation by employer that upon rehiring he would

suffer no break in pension coverage, and court found

that because plaintiff’s claims did not “seek benefits

under the plan” his claim was not preempted).

Courts nationwide continue to struggle with ERISA

preemption issues occasioned by the “relate to” language

in Section 514(a). See: Springer v. Wal-Mart Assoc.

12a

Group Health Plan, [No. 88-AR-5226, June 6, 1989]

F. Supp. (N.D. Ala. 1989); Amos v. Blue Cross-

Blue Shield of Alabama, 681 F. Supp. 1515 (N.D. Ala.

1988), rev’d, 868 F.2d 480 (11th Cir. 1989); Farlow v.

Union Central Life Ins. Co., 874 F.2d 791 (11th Cir.

1989) ; Anschultz v. Connecticut General Life Ins. Co.,

850 F.2d 1467 (11th Cir. 1988); Belasco v. W.K.P. Wil-

son & Sons, Inc., 8383 F.2d 277 (11th Cir. 1987) ; Jordan

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

1988) ; Graves v. Blue Cross of California, 688 F. Supp.

1405 (N.D. Cal. 1988); Mackey v. Lanier Collections

Agency & Service, Inc., 486 U.S. ——, 108 S. Ct. 2182,

100 L. Ed.2d 886 (1988); Board of Trustees of Cedar

Rapids Pediatric Clinic, P.A., Pension Plan v. Conti-

nental Assurance Co., 690 F. Supp. 792 (W.D. Ark.

1988); Perry v. P*I*E Nationwide, Inc., 872 F.2d 157

(6th Cir. 1989); Idaho Plumbers and Pipefitters Health

and Welfare Fund v. United Mechanical Contractors,

Inc., 875 F.2d 212 (9th Cir. 1989) ; Totton v. New York

Life Ins. Co., 685 F. Supp. 27 (D. Conn. 1987); Tesch

v. General Motors Corp., 685 F. Supp. 1084 (E.D. Wis.

1988) ; Southern California Meat Cutters Unions & Food

Employers Pension Trust Fund v. Investors Research Co.,

687 F. Supp. 506 (C.D. Cal. 1988); Hall v. Pennwalt

Group Comprehensive Medical Expense Benefits Plan,

(E.D. Pa. 1989); Schultz v. Boesken Elec. Co., 703

F. Supp. 656 (S.D. Ohio 1988); Urban Health Services,

Ltd. v. Travelers Ins. Co., 703 F. Supp. 53 (N.D. Il.

1989) ; Holmes v. Pacific Mut. Life Ins. Co., 706 F. Supp.

733 (C.D. Cal. 1989) ; Seafarers’ Welfare Plan v. Dixon,

512 So. 2d 53 (Ala. 1987); Davidian v. Southern Cali-

fornia Meat Cutters Union & Food Employees Benefit

Fund, 859 F. 2d 134 (9th Cir. 1988) ; Hood v.. Prudential

Ins. Co. of America, 522 So.2d 265 (Ala. 1988); Landy

v. Travelers Ins. Co., 530 So. 2d 214 (Ala. 1988) ; Massa-

chusetts v. Morash, 490 U.S. ——, 109 S.Ct. 1668, 104

L.Ed.2d 98, (Mass. 1989). Although there is authority

on both sides, the better reasoned cases, and those which

13a

recognize the dual role of state and federal law after

ERISA, have reached the conclusion that we have reached

today.

Authors Kilberg and Inman in their Observations, Pre-

emption of State Laws Relating to Employee Benefit

Plans: An Analysis of ERISA Section 514, 62 Tex.L.

Rev., at 1328-30 (1984), suggest that the Act contem-

plates a different approach to these cases. They argue,

and we agree, that the Act itself provides a better formula

for discerning which state cases are preempted and which

are not:

“Although the courts often have turned to the

‘indirectly’ language of section 514(c)(2) in their

analysis, they have largely ignored another critical

word contained in the same clause. Section 514(c) (2)

defines a ‘State’ as an entity that ‘purports to regu-

late, directly or indirectly, the terms and conditions’

of the plan.

“An inquiry into the significance of the word ‘pur-

ports’ sheds considerable light on the elusive ‘relate

to’ language of section 514(a). ‘Purport’ has two

ordinary meanings: ‘to . .. imply or profess out-

wardly’ and ‘to have in mind.’ Both meanings com-

prehend purpose—the first speaks to apparent pur-

pose, the second to actual purpose or intent. In the

state law context, an apparent purpose to regulate,

manifested by a reference to employee benefit plans

in the text of the law, invariably reflects an actual

regulatory purpose. Hence, any law expressly di-

rected toward employee benefit plans ‘purports’ to

regulate the plans within the meaning of section 514.

“Congress meant to preempt such state laws, how-

ever, whether or not they are styled as employee

benefit plan regulations. In light of this congres-

sional intent, ‘purports’ must be construed in its

‘normal sense’ of ‘to have in mind.’ This construc-

14a

tion necessitates an inquiry into the actual legislative

or judicial purpose underlying the state law in ques-

tion. To determine whether the purpose of a state

law is to regulate benefit plans, a court should iden-

tify what the law seeks to accomplish and ask

whether the law presupposes the existence of benefit

plans to achieve that aim. If the purpose of the law

is to affect the terms and conditions of employee

benefit plans, the law may be found to ‘relate to’ the

plans under section 514 (a). If such a purpose is

absent, the ‘relate to’ requirement will not be met

and the law will not be preempted, even though it

may have some tangible effect on benefit plans.

“This purpose-effect distinction serves well to iden-

tify those state ‘legislative’ laws that Congress in-

tended to preempt with section 514. In addition, this

approach is useful in determining whether section

514 preempts a state court or agency application of

an otherwise valid state law to a benefit plan. In

these adjudicative settings, a second ‘State Law’

emerges that seeks to impose a provision of state

law on the plan irrespective of the plan’s terms. Such

state adjudications invariably ‘purport’ to regulate

the plan and consequently should be preempted under

section 514(a). State adjudicative decisions raise a

different issue, however, when the decisions are

grounded in the terms of the plan itself, rather than

in the terms of the state law applied to the benefit

plan. The question then arises whether this act of

interepresentation itself constitutes a state law that

‘relates to’ the plan. This problem is treated in the

following subpart.

“Section 502(a) (1) (b) provides that a participant

or beneficiary of a plan may bring a civil action

‘to recover benefits due to him under the terms of

his plan, to enforce his rights under the terms of

the plan, or to clarify his rights to future benefits

15a

under the terms of the plan... .’ Section 502(e)

(1) provides that this civil action may be brought

in either federal or state court. To reconcile this

grant of concurrent jurisdiction with section 514’s

preemption of state laws that regulate the terms and

conditions of a plan, state court decisions that merely

interpret the terms of the plan in order to adjudi-

cate the rights of a participant or beneficiary must

be deemed not to regulate the plan’s terms and con-

ditions. Any other conclusion would reduce the grant

of concurrent jurisdiction to surplusage: decisions

sanctioned by sections 502(a) (1) (B) and 502(e) (1)

would be preempted by section 514.

“Thus, the jurisdictional sections of ERISA, by

allocating authority to the state courts to interpret

the terms of a plan, imply that interpretation alone

does not constitute regulation of the terms and con-

ditions of a plan. If interpretation is not regulation

of the plan’s terms when federal and state courts

have concurrent jurisdiction, there is no basis for a

different conclusion when the state court interprets

the terms of a plan in a case over which only the

state court has jurisdiction. Thus, although the

states are barred from regulating employee benefit

plans, they are invited to construe the plans’ terms,

a task that often entails construing ERISA’s require-

ments. The states can, therefore, create decisional

law, but they may not apply existing state law, deci-

sional or otherwise, that overrides the terms of the

plan.”

Neither Alabama’s fraud statute nor the common law

action for fraud purports to regulate, directly or in-

directly, the terms and conditions of a plan, and the

application of Alabama’s fraud law to the facts of this

case does not relate to or affect the administration of the

plan.

16a

The analysis suggested by Kilberg and Inman would

promote the policy endorsed by the United States Su-

preme Court in Ft. Halifax: “ERISA pre-emption anal-

ysis ‘must be guided by respect for the separate spheres

of government authority preserved in our federalist sys-

tem.’” 482 U.S. at ——, quoting Alessi v. Raybestos-

Manhattan, Inc., supra. It is equally consistent with the

Court’s decision in Metropolitan Life Insurance Co. v.

Massachusetts, where the Court stated: “We must also

presume that Congress did not intend to preempt areas

of traditional state regulation.” 471 U.S. at 724, 105

S.Ct. 2380, 85 L.Ed.2d 728 (1985).

The defendants argue that the trial court erred in

allowing Menton to amend his complaint after final judg-

ment was entered, to allege a violation of the “twisting”

statute, § 27-12-6. The trial court did not err, for two

reasons. The first is that every element underlying the

“twisting” statute is included in the plaintiff’s complaint

stating a common law cause of action for fraud, now

codified at § 6-5-101 (misrepresentations of a material

fact made willfully to deceive, or recklessly without

knowledge). Therefore, the amendment to the complaint

alleging violation of § 27-12-6 was redundant, and it

could not have prejudiced the defendants in any way.

Second, if it is assumed for purposes of argument, or

if some other court decides that a claim under § 6-5-101

or its common law counterpart is preempted by section

514(a) of ERISA, then we would hold that a claim

under § 27-16-6 could still be maintained under the sav-

ing clause of ERISA as a state law regulating the busi-

ness of insurance:

“{N]Jothing in this subchapter shall be construed to

exempt or relieve any person from any law of any

State which regulates insurance... .”

: 17a

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

The purpose of Chapter 12 (“Trade Practices Law’’)

of Title 27 (“Insurance”) of the Alabama Code is ex-

pressed in § 27-12-1(a):

“The purpose of this chapter is to regulate trade

practices in the business of insurance in accordance

with the intent of congress as expressed in the In-

surance Regulation Act by defining, or providing for

the determination of, all such practices in this state

which constitute unfair methods of competition or

unfair or deceptive acts or practices and by prohibit-

ing the trade practices so defined or determined.”

(Emphasis added.)

Section 27-12-6 (“Twisting’” ) provides as follows:

“No person shall make or issue, or cause to be

made or issued, any written or oral statement mis-

representing or making misleading incomplete com-

parisons as to the terms, conditions, or benefits con-

tained in any policy for the purpose of inducing, or

attempting or tending to induce, the policyholder to

lapse, forfeit, surrender, retain, exchange or convert

any insurance policy.”

Section 27-1-2(3) defines “person” for the purposes of

Title 27 as follows:

“An individual, insurer, company, association, or-

ganization, Lloyd’s insurer, society, reciprocal in-

surer or interinsurance exchange, partnership, syn-

dicate, business trust, corporation and every legal

entity.”

The United States Supreme Court in Pilot Life looked

to “common sense” and to the McCarran-Ferguson Act,

15 U.S.C. § 1011 et seqg., in interpreting the saving clause,

and in doing so it used the following criteria to deter-

mine whether a practice falls under the “business of

insurance” :

18a

“<“'FJirst, whether the practice has the effect of

transferring or spreading a policyholder’s risk; sec-

ond, whether the practice is an integral part of the

policy relationship between the insurer and the in-

sured; and third, whether the practice is limited to

entities within the insurance industry.”

Pilot Life, 481 U.S. at 48, 107 S. Ct. at 1553-54, 95

L.Ed.2d at 48 (1987) (quoting Union Labor Life Ins.

Co, v. Pireno, 458 U.W. 119, 129 (1982)). The legis-

lature of Alabama, in adopting the “twisting” statute

§ 27-16-6, has enacted a fraud and misrepresentation

statute that specifically relates to the insurance industry

and, therefore, we believe it is “saved” from preemption

by a proper interpretation of § 514(b).

We acknowledge that the Eleventh Circuit Court of

Appeals has held in Farlow v. Union Cen. Life Ins.

Co., [No. 88-7513, June 6, 1989] —— F.2d (1989),

that the Alabama “twisting” statute does not create a

private cause of action and that, if it did, a claim under

it would be preempted under ERISA if the employer’s

conduct giving rise to the claim was not “wholly remote

in content” from the benefit plan. Presumably, under

this holding, the commissioner of insurance would be

preempted from imposing the statutory sanctions against

insurance companies that violate § 27-12-1 et seq. We

are unconvinced that Congress intended this result.

We recognize that the cases from the various federal

courts are disparate. We adopt the position taken by the

Sixth Circuit on the precise issue involved in this case:

fraud in the inducement. Perry v. P*I*E Nationwide,

Inc., 872 F.2d 157 (6th Cir. 1989). In that case, the

plaintiffs alleged that the defendant had fraudulently

induced them to participate in a plan covered by ERISA.

The defendants claimed preemption under § 514(a). The

district court held that “preemption by ERISA applies

only once the benefit plan is in existence” and does not

19a

apply to alleged common law actions of fraud or mis-

representation “to get the plaintiffs to join the plan.”

Because the purported misconduct of P*I*E occurred

before the plaintiffs became participants or beneficiaries,

and because they were not suing for benefits under the

plan, the district court had held that preemption did not

apply. In accord, Butler v. Fringe Benefits Plan, Inc.,

701 F.Supp. 804 (N.D. Ala. 1988).

The Circuit Court of Appeals for the Sixth Circuit

affirmed, citing Miller v. Lay Trucking Co., 606 F.Supp.

1326 (N.D. Ind. 1985) (holding that the plaintiff’s com-

mon law action for fraudulent inducement was not pre-

empted by ERISA because the fraud occurred prior to

the time the plaintiff entered the plan, and because the

fraud claim did not directly affect the regulation of the

ERISA plan).

The Sixth Circuit acknowledged, as we do, that there

is respectable authority for the positions taken by both

sides concerning preemption of state common law claims

of fraud, ete.’ It adopted in Perry the position expressed

in Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208

(8th Cir.), cert. denied, 454 U.S. 986, 102 S.Ct. 512, 70

L.Ed. 2d 384 (1981), that preemption should apply to a

state law claim only if Congress has provided a remedy

for the wrong or wrongs asserted.

Congress has not provided a remedy for the wrong

asserted by Mr. Menton, and we are loath to imply

an intent on its part to do so.

We next address the defendants’ contention that the

trial court erred in denying the defendants’ motion for a

1Cefalu v. B. F. Goodrich Co., 871 F.2d 1290 (5th Cir. 1989);

Cantrell v. Great Republic Ins. Co., 873 F.2d 1249 (9th Cir. 1989) ;

Straub v, Western Union Telegraph Co., 851 F.2d 1262 (10th Cir.

1988); Hermann Hosp. v. Meba Medical & Benefits Plan, 845 F.2d

1286 (5th Cir. 1988).

20a

mistrial based upon alleged improper argument by plain-

tiff’s counsel. The defendants claim that the plaintiff’s

counsel improperly aroused the passion and prejudice of

the jury against the defendants. The plaintiff claims

that the jury verdict is the result of the overwhelming

evidence of fraud, cover-up, and conspicuously selective

memories that was introduced at the trial of the case.

We have repeatedly held that in fraud actions “great

latitude is allowed in the scope of evidence introduced.”

Simmons Mach. Co. v. M & M Brokerage, Inc., 409 So.2d

743, 756 (Ala. 1981). The reason for allowing such lati-

tude is that the perpetrator of a fraud is often the sole

possessor of the actual knowledge of fraud. Sessions Co.

v. Turner, 493 So.2d 1387, 13891 (Ala. 1986).

Questions of materiality, relevancy, and remoteness of

evidence are matters resting within the discretion of the

trial court, whose exercise of that discretion will not be

reversed unless it has been grossly abused. Dorcal, Inc.

v. Xerox Corp., 398 So.2d 665, 670-71 (Ala. 1981). This

discretion extends to argument of counsel. We have said:

“The control of arguments rests largely in the dis-

cretion of the trial court, before whom the argument

is made, and who sees and can judge the demeanor

of the counsel making the argument, and who can

determine whether a prejudicial atmosphere is created

by such remarks; therefore, we will not interfere

where this discretion is not abused.”

Southern Ry. Co. v. Jarvis, 266 Ala. 440 at 446, 97 So.2d

549 (1957), in accord, Old Southern Life Ins. Co. v.

Woodall, 348 So.2d 1877 (Ala. 1977).

Counsel may state or comment upon all evidence ad-

mitted at trial and draw inferences and conclusions from

that evidence. Seaboard Coastline R. R. v. Moore, 479

So.2d 1131 (Ala. 1985). This Court has established a

standard of review on claims for improper argument

whereby we will not reverse unless substantial prejudice

21la

has resulted. Jd., at 1136. In denying defendants’ mo-

tion for a JNOV, new trial, and remittitur, the trial

court stated: “[T]he court cannot call to mind {nor|

have the attorneys for the defendants shown to the court

any factor at all that could be construed to indicate bias,

passion, prejudice, corruption, or other improper motive

or cause on the part of the jury.”

We recently affirmed a trial court’s refusal to grant a

mistrial, under circumstances similar to the present case,

in which there was a reference to the wealth of the de-

fendants. We observed that the court heard the remark

in context, witnessed the effect upon the jury, and was

able to make a better judgment than we were as to

whether the remark was improper argument and might

have prejudiced the jury. L. W. Johnson & Assoc., Inc.

v. Rivers Construction Co., 532 So.2d 618 at 625 (Ala.

1988). We have carefully examined the record in this

case and find no error by the trial judge, who had the

opportunity to judge the demeanor of counsel and who

could determine whether his remarks created a prejudi-

cial atmosphere.

The defendants also claim that the trial court erred in

charging the jury. The jury asked: “Are the defend-

ants ‘the corp. and Pam’ or ‘the corp. or Pam?’” The

judge replied:

“THE COURT: Well, for your purposes it doesn’t

make any difference. I mean the corporation is fully

responsible for the acts of its agents, so it dosen’t

make any difference. I mean, you know, we’re con-

cerned—you know, the representations are the rep-

resentations of the agent. I mean, I don’t think I—

is that—

“JUROR: That’s what we needed to know.”

Defendants admit that the trial court correctly instructed

the jury that a corporation is responsible for the acts

of its agents. We find no error in so instructing the jury.

22a

Defendants contend that the trial court erred in refus-

ing to submit special verdict questions to the jury and in

charging the jury as to reckless fraud. Under Rule 49,

Ala. R. Civ. P., the use of a special verdict is within the

sound discretion of the trial court. After instructing the

jury on willful misrepresentation, based on the Alabama

Pattern Jury Instructions, the trial court charged the

jury on the definition of reckless misrepresentation as

follows:

“A reckless misrepresentation which is also action-

able [sic]; the law says that if you are reasonably

satisfied from the evidence that the defendant mis-

represented a material fact recklessly without know!-

edge of the truth or the falsity thereof and with the

intent to induce the plaintiff to act and that the

plaintiff acted upon said reckless misrepresentation

to his injury, then the defendant is also guilty of a

legal fraud under those circumstances.

“If the plaintiff has not proved the case of fraud

through either an intentional or a reckless misrep-

resentation as I just described to you, you would go

no further. Your verdict would be for the defend-

ant.” [R. 295-96. ]

One of the Alabama pattern jury instructions defines

“reckless misrepresentation” as follows:

“Tf you are reasonably satisfied from the evidence

that the defendant misrepresented a material fact

recklessly without knowledge of the truth or falsity

thereof and with the intent to induce plaintiff to act

and that plaintiff acted upon said reckless misrepre-

sentation to his injury, then defendant is guilty of

a legal fraud.”

Alabama Pattern Jury Instructions (Civil), Instruction

18.02, p. 270.

During jury deliberations, the jury had a question. The

trial court asked the foreman: “You want me to define

23a

@ reckless misrepresentation”” The foreman reniiu

“Yes, Sir.” To this the tria! judge respondec

“If you are reasonabiy satisfied from the evidenc:

that the defendants misrepresented a materia tise

recklessly without knowledge of the truth or fais:

and with the intent to induce the pluinti®’ w or

and the plaintiff did act upon the reckless =» srep

resentation to his injury. then the defendam:

of a legal fraud.” ‘R. 306

The trial court gave the identical definition of rack: less

misrepresentation beth during his oral charge and at

the jury's question. In doing so. be correct ean riares

The defendants a contend that the court's charm

On punitive Sane’ ma Tau case constitutes re

ble error. The longstanding rule of thi: ar

follows.

“[P)umitive damages may be recoverad in 4 fray

action if the frauduient misrepresentution was ms

licious, oppressive. or gross. or made with know.

edge of its falsity or so reciiessiy as to amour:

the same thing OF Was Made With the purpos

juring the plaintiff ”

Curry Motor Co. v. Hasty. 505 So2d 347 Alp YoR”

See. Morgan v. South Central Bei! T eteonen a

So.2d 107 | Ala. 1985

In the present case. the trial judge instreened the oor

in his oral charge as foilows

“[TYhe law says that you are authorized % swe

Punitive damages in 2 frauc actor if t w& shown

24a

the same thing and committed with the intent to in-

jure and to defraud.” [R. 296-97. ]

The jury had a question on the meaning of reckless fraud

during its deliberations. The trial court further in-

structed the jury as follows:

“T just want to clarify one thing, ladies and gentle-

men, I want to clarify this: the definition I just

read to you would authorize if the plaintiff proved

it, to recover actual damages. With respect to re-

covering punitive damage, the law says that the

fraud must be malicious, oppressive or gross or made

with knowledge of the falseness of the representa-

tion or so recklessly done as to amount to the same

thing and committed with the intent to injure and

defraud.”

The trial court did not err in charging the jury.

The defendants argue that the trial court erred in

denying their motions for directed verdict, judgment not-

withstanding the verdict, and a new trial based upon

the insufficiency of the evidence or either intentional or

reckless fraud. We have carefully reviewed the record

in this case. The record supports the decision of the

trial judge.

The defendants argue that the award of punitive dam-

ages violates the Constitution of Alabama and the Con-

stitution of the United States of America. They argue

that the jury verdict of $1,797,588 in punitive damages

is based upon only $2,412 in compensatory damages.

However, the defendants did not raise any constitutional

question prior to filing their motion for judgment not-

withstanding the verdict, or, in the alternative, for a

new trial or for a remittitur. Although the trial judge,

in his order of June 13, 1988, states that the defend-

ants’ challenges to the constitutionality of the award of

punitive damages “were timely raised and effectively

25a

presented,” in fact, these issues were not raised until

29 days after the trial court had entered judgment on

the jury’s verdict.

It is settled law that constitutional issues must be

raised before the trial court in order to be preserved for

review upon appeal. Marion v. Hall, 429 So.2d 937 (Ala.

1983) ; Talley v. A & M Construction Co., 284 Ala. 371,

373, 225 So.2d 359, 360 (1969), cert. denied, 397 U.S.

995, 90 S.Ct. 1133, 25 L.Ed.2d 402 (1970); Hicks v.

Huggins, 405 So.2d 1324 (Ala. Civ. App.), cert. denied,

405 So.2d 1328 (Ala. 1981). We have declined previously

to consider similar issues because ‘these challenges were

not presented for resolution before the trial court and

[were] presented for the first time on appeal.” Nation-

wide Mutual Ins. Co. v. Clay, 525 So.2d 1339, 1344 (Ala.

1987), cert. denied, USS. , 109 S. Ct. 863, 102

L.Ed.2d 988 (1989). Thus, the defendants did not pre-

serve their constitutional issues for appeal. However,

we would be remiss if we neglected to note that the

United States Supreme Court has recently ruled in the

case of Browning-Ferris Industries of Vermont, Inc. v.

Kelco Disposal, Inc., |[No. 88-556, June 26, 1989]

U.S. —— (1989) that the excessive fines clause of the

Eighth Amendment does not apply to punitive damages

awards in cases between private parties. In doing so, the

Supreme Court upheld an award of $6 million in punitive

damages when the compensatory damages were $51,146.

Finally, the defendants claim that the verdict of the

trial court was excessive and should be set aside.

With respect to the question of a remittitur, it is

within the authority of this Court to order a remittitur,

pursuant to Code of Alabama (1975), § 12-33-71, if it

finds the judgment to be excessive. The rules that govern

this Court’s review of a verdict claimed to be excessive

were set out in Vest v. Gay, 275 Ala. 286, 154 So.2d 297

(1963) :

26a

“The rules governing our consideration of this

question are clear and have been reiterated quite

often. We refer to them briefly for emphasis: The

verdict of a jury should not be interfered with

merely because in the opinion of the court the jury

gave too little or too much. . .; and the authority

vested in the courts to disturb a verdict of the jury

on the ground of excessive damages is one which

should be exercised with great caution . . .; where

there is no set standard for the admeasurement of

the damages but the damages to be awarded are

left to the sound discretion of the jury, a remittitur

or a new trial should not be ordered on the ground

of excessiveness of the jury’s verdict except in those

cases where the court can clearly see that the verdict

has been reached on account of bias, passion, preju-

dice, corruption, or other improper motive or cause

. . .; but where the damages allowed are so excessive

as to warrant the belief that the jury must have

been misled by some mistaken view of the merits of

the case the court may interfere and set the verdict

aside . . .; also, where the trial court refuses to

grant a new trial because [it] does not believe the

verdict to be excessive, the favorable presumption

attending the jury’s verdict is thereby strengthened.

999

(As quoted in Black Belt Wood Co., Inc. v. Sessions, 514

So.2d 1249, at 1264-65 (Ala. 1986).)

The trial court issued an order denying defendants’

motion for a remittitur, and in it the trial judge ex-

pressly acknowledged that he had carefully considered all

of the evidence on all issues. The trial judge noted that

a remittitur or new trial is proper “where the court can

clearly see that the verdict is tainted by bias, passion,

prejudice, corruption, or other improper motive or cause

on the part of the jury.” The trial judge stated in his

order as follows:

27a

“The Court has carefully considered all of the

evidence in the case on all issues. The Court has

carefully considered the nature and quality of the

testimony of all of the witnesses, as well as the

demeanor of each witness while testifying. The

Court has further reviewed its Charge to the jury

on the issue of damages and has found that it cor-

rectly instructed the jury on damages. As a part of

the charge, the jury was instructed that if they

found in favor of the Plaintiff, Edward Menton, and

against the Defendants, HealthAmerica and Pamela

Merle, that in assessing damages they should take

into consideration and give due regard to the enor-

mity of the wrong and the necessity of preventing

similar wrongs in the future.

“After a careful review by the Court of the entire

trial of the case, including the testimony of all of

the witnesses, all of the documentary and demonstra-

tive evidence produced at trial, the Court’s observa-

tion of all parties and witnesses, and the Court’s

charge to the jury on damages, the Court is con-

vinced that the jury carefully and conscientiously

followed the Court’s instructions in assessing dam-

ages in the case at $1,800,000.00 and that the award

is consistent with the Court’s instructions and sup-

ported by the evidence.

“This Court finds, after a review of the entire

trial, that the central issue presented in the Defend-

ant’s motion for remittitur is whether or not the

jury verdict of $1,800,000.00 in this case is, in and

of itself, evidence of bias, passion, prejudice, corrup-

tion or other improper motive or cause. The Court

cannot call to mind [nor] have the attorneys for the

Defendants shown to the Court any factor at all that

could be construed to indicate bias, passion, preju-

dice, corruption, or other improper motive or cause

on the part of the jury. On the contrary, the Court

28a

finds that there was clear and convincing evidence of

fraud on the part of the Defendants, HealthAmerica

and Pamela Merle, which in the Court’s opinion fully.

justified the jury’s verdict.

“The Court finds that the $1,800,00.00 verdict is

not excessive and is not the result of bias, passion,

prejudice, corruption, or other improper motive or

cause.”

We have reviewed this order of the trial judge, and

we find that he followed the guidelines we have pre-

viously adopted to be used by a trial court in reviewing

judgments. Hammond v. City of Gadsden, 493 So.2d

1374 (Ala. 1986); Harmon v. Motors Ins. Corp., 493

So.2d 1370 (Ala. 1986); Alabama Farm Bureau Mutual

Cas. Ins. Co. v. Griffin, 493 So.2d 1879 (Ala. 1986). The

trial judge applied the principles of law adopted in those

cases, held a hearing, and set forth the reasons why he

felt that the law did not authorize him to order a

remittitur.

We have examined the record in the light of our rules

as to remittitur. We are of the opinion that the judg-

ment of the trial court, including the damages award,

which the trial court reviewed on motion for JNOV, for

a new trial, and for remittitur, is due to be, and it is

hereby is, affirmed.

AFFIRMED.

Hornsby, C. J., and Jones, Adams, Steagall, and Ken-

nedy, JJ., concur.

Maddox and Houston, JJ., dissent, with opinion by

Houston, J. ;

29a

HOUSTON, JUSTICE (dissenting).

The second paragraph in Article VI, of the Constitution

of the United States, provides:

“This Constitution, and the laws of the United

States which shall be made in pursuance thereof; and

all treaties made, or which shall be made, under the

authority of the United States, shall be the supreme

law of the land; and the judges in every state shall

be bound thereby, any thing in the Constitution or

laws of any state to the contrary notwithstanding.”

(Emphasis supplied. )

If I were writing on a clean slate, freed from the def-

erence that I do and must give to the opinions of the

United States Supreme Court, I could reach the result

reached by the majority of this Court in this case, on the

preemption issue, for I would adopt the “purpose-effect”’

and “regulation-interpretation” distinctions suggested as

an alternative approach to the “relate to” requirement by

William J. Kilberg’s and Paul D. Inman’s article Pre-

emption of State Laws Relating to Employee Benefit

Plans: An Analysis of ERISA Section 514, 62 Tex.L.

Rev. 1313, 1328-30 (1984). However, I have given my

solemn oath to uphold the Constitution of the United

States, and that includes the second paragraph of Article

VI; therefore, I must dissent.

Justice O’Connor, in delivering the opinion for a unani-

mous Court in Pilot Life Insurance Co. v. Dedeaux, 481

U.S. 41, 44-46, 107 S.Ct. 1549, 1551-52 (1987), wrote:

“In ERISA, Congress set out to

“ ‘protect . . . participants in employee benefit

plans and their beneficiaries, by requiring the

disclosure and reporting to participants and

beneficiaries of financial and other information

with respect thereto, by establishing standards

of conduct, responsibility, and obligation for

80a

fiduciaries of employee benefit plans, and by

providing for appropriate remedies, sanctions,

and ready access to the Federal courts.’ § 2, as

set forth in 29 U.S.C. § 1001 (b).

“ERISA comprehensively regulates, among other

things, employee welfare benefit plans that, ‘through

the purchase of insurance or otherwise,’ provide

medical, surgical, or hospital care, or benefits in the

event of sickness, accident, disability or death.

§ 3(1), 29 U.S.C. § 1002(1).

“Congress capped off the massive undertaking of

ERISA with three provisions relating to the pre-

emptive effect of the federal legislation:

“ “Except as provided in subsection (b) of this

section [the saving clause], the provisions of this

subchapter and subchapter III of this chapter

shall supersede any and all State laws insofar

as they may now or hereafter relate to any em-

ployee benefit plan... .’ §514(a), as set-forth

in 29 U.S.C. § 1144(a) (pre-emption clause).

coe ’

oes ©

“

““<'T]he question whether a certain state action is

pre-empted by federal law is one of congressional

intent. “ ‘The purpose of Congress is the ultimate

touchstone.’”’ Allis-Chalmers Corp. v. Lueck, 471

U.S. 202, 208, 105 S.Ct. 1904, 1909, 85 L.Ed.2d 206

(1985), quoting Malone v. White Motor Corp., 435

U.S. 497, 504, 98 S.Ct. 1185, 1189, 55 L.Ed.2d 443

(1978), quoting Retail Clerks v. Schermerhorn, 375

U.S. 96, 1038, 84 S.Ct. 219, 222, 11 L.Ed.2d 179

(1963). We have observed in the past that the

express pre-emption provisions of ERISA are delib-

erately expansive, and designed to ‘establish pension

plan regulation as exclusively a federal concern.’

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

3la

523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981).

As we explained in Shaw v. Delta Air Lines, Inc.,

463 U.S. 85, 98, 103 S.Ct. 2890, 2900, 77 L.Ed.2d

490 (1983) :

“The bill that became ERISA originally con-

tained a limited pre-emption clause, applicable

' only to state laws relating to the specific sub-

jects covered by ERISA. The Conference Com-

mittee rejected those provisions in favor of the

present language, and indicated that section’s

pre-emptive scope was as broad as its language.

See H.R.Conf.Rep. No. 93-1280, p. 383 (1974);

S.Conf.Rep. No. 93-1090, p. 383 (1974).’”

(Emphasis supplied.)

In Kilberg and Inman’s Preemption of State Laws Re-

lating to Employee Benefit Plans: An Analysis of

ERISA Section 514, 62 Tex.L.Rev. 1313, 1315-16, the

following appears:

“Express preemption provisions such as sectior

514 must be distinguished from the implied pre-

emption that arises from the supersession inherent

in antithetical federal and state commands or from

the encroachment of state law into a field occupied

by comprehensive federal regulation or interests. To

strike down a state law in an implied preemption

case, the court must find either a specific conflict

between federal and state commands for a clash be-

tween zones of sovereign interest. The goal of an

implicit preemption analysis should be to accommo-

date the federal interest with the least possible dis-

placement of state law. The goals of an express pre-

emption analysis, in contrast, should be to prevent

subtle or incremental state encroachment into a field

that Congress has chosen expressly to reserve for

federal law. Yet, courts have mistakenly applied

preemption doctrines fashioned in implied preemp-

tion cases to section 514 cases, in which the issue is

32a

whether the federal law—by its express terms—pre-

empts the state law in question. Once Congress has

declared its express intent to preempt or to save a

state law, it has largely obviated judicial inquiry

into considerations other than those concerning the

text of the preemption provision.” (Emphasis sup-

plied. )

“TAj]ny and all State laws insofar as they may now

or hereafter relate to any employee benefit plan,” sub-

ject to certain exceptions that will be discussed later, is

what Congress expressly preempted. 29 U.S.C. § 1144

(a). “The term ‘State law’ includes all laws, decisions,

rules, regulations, or other State action having the effect

of law... .” 29 U.S.C. §1144(c). Does this preempt

a civil action by Menton, who is a “participant” (29

U.S.C. § 1002(7)) and a “party in interest” (29 U.S.C.

§ 1002 (14)) for an intentional or reckless misrepre-

sentation by HealthAmerica, which is a “party in inter-

est” (29 U.S.C. § 1002 (14)) as to the medical coverage

benefits provided by a particular employee benefit plan?

Medical coverage benefits are benefits that “accumulate

over a period of time and are payable only upon the

occurrence of a contingency outside of the control of

[Menton] ;” therefore, they are “risks that ERISA is in-

tended to address,’ Massachusetts v. Morash, —— U.S.

, 109 S.Ct. 1668, 1669 (1989). Likewise, the phrase

“relate to” has been given its broad commonsense mean-

ing, so that a state law relates to an employee benefit

plan “if it has a connection with or reference to such

a plan.” Shaw v. Delta Air Lines, 463 U.S. 85, 97, 103

S.Ct. 2890, 77 L.Ed.2d 490 (1983); Metropolitan Life

Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380,

85 L.Ed.2d 728 (1985); Pilot Life Ins. Co. v. Dedeauz,

supra. In this case, the representation was made by a

party in interest as to an employee benefit plan to a

party in interest as to that same employee benefit plan

concerning medical benefits payable under that employee

33a

benefit plan. Clearly, the representation related to the

employee benefit plan, as “related to” is defined by the

United States Supreme Court.

In Pilot Life Ins. Co. v. Dedeaux, supra, Dedeaux’s

complaint contained three counts: “ ‘tortious breach of

contract’”’; “ ‘breach of fiduciary duties’: ”; and “ ‘fraud

in the inducement.’” (Emphasis supplied.) 481 U.S. at

43, 107 S.Ct. at 1551. At the close of discovery, Pilot Life

moved for summary judgment, arguing ERISA preemp-

tion. The district court entered summary judgment; the

Court of Appeals for the Fifth Circuit reversed; the

United States Supreme Court granted certiorari and re-

versed the Fifth Circuit and reinstated the summary

judgment for Pilot Life. In Belasco v. W.K.P. Wilson &

Sons, Inc., 883 F.2d 277 (11th Cir. 1987), the Eleventh

Circuit Court of Appeals held that Alabama state law

claims of bad faith and fraud (which a review of the

amended complaint in Belasco shows to be remarkably

similar to the fraud alleged in the case at issue) of a

plaintiff, who was a “participant” and a “party in inter-

est” as to an employee benefit plan against an insurance

company that was a “party in interest” as to that em-

ployee benefit plan related to the plan and were pre-

empted.

The facts in Davidian v. Southern California Meat Cut-

ters Union & Food Employees Benefits Fund, 859 F.2d

134 (9th Cir. 1988), are similar to the facts in the case

at issue. Davidian, a “participant” and “party in inter-

est” as to an employee benefit plan, alleged that he was

planning to retire and that the plan gave him a choice

of one of three benefits programs. A “party in interest”

as to the plan described the third option as paying “ap-

proximately 80%” of major medical coverage, like plain-

tiff’s prior coverage, but did not inform the plaintiff

that, unlike his prior coverage, reimbursement for major

medical expenses under the third option was capped at

$20,000.00. The plaintiff enrolled in the third option and

84a

subsequently underwent heart surgery. The plan refused

to pay plaintiff’s medical expenses in excess of $20,000.00.

Davidian filed suit against the plan for fraud and deceit.

The Ninth Circuit held that Davidian’s claims were pre-

empted and addressed Davidian’s contention that claims

for future benefits, as distinguished from past benefits,

are not preempted, as follows:

“There is no reason for such a distinction based on

the purpose of the preemption provisions of the Act.

The potential for conflicting and inconsistent state

and local regulation of employee benefit plans is as

real whether past or future benefits are involved.”

859 F.2d at 135.

This Court held that the bad faith refusal to pay insur-

ance benefits under an employee benefit plan by a party

in interest as to an employee benefit plan to a party in

interest as to that same employee benefit plan did not

relate to the plan and was not preempted by ERISA.

Hood v. Prudential Ins. Co. of America, 460 So.2d 1227

(Ala. 1984). After the United States Supreme Court de-

cided Massachusetts Mutual Life Insurance Co. v. Russell,

473 U.S. 134, 105 S.Ct. 3085, 87 L.Ed.2d 96 (1985), and

Pilot Life Ins. Co. v. Dedeaux, supra, we reversed our-

selves and held that Hood’s bad faith claim was pre-

empted. Hood v. Prudential Ins. Co. of America, 522

So.2d 265 (Ala. 1988). Having had our judicial flexibility

rendered rather rigid by our federalist system, we have

ruled in favor of ERISA preemption of common law

causes of action. See, Landy v. Travelers Insurance Co.,

530 So.2d 214 (Ala. 1988); Hood v. Prudential Ins. Co.

of America, 522 So.2d 265 (Ala. 1988); and Seafarers’

Welfare Plan v. Dixon, 512 So.2d 58 (Ala. 1987).

Justice O’Connor in Pilot Life, supra, wrote:

“The Solicitor General, for the United States as

amicus curiae, argues that Congress clearly expressed

an intent that the civil enforcement provisions of

“Ara mt

IE as Prt ——

35a

ERISA § 502(a) be the exclusive vehicle for actions

by ERISA-plan participants and beneficiaries assert-

ing improper processing of a claim for benefits, and

that varying state causes of action for claims within

the scope of § 502(a) would pose an obstable to the

purposes and objectives of Congress. Brief for

United States as Amicus Curiae 18-19. We agree.

The conclusion that § 502(a) was intended to be ex-

clusive is supported, first, by the language and struc-

ture of the civil enforcement provisions, and second,

by legislative history in which Congress declared that

the pre-emptive force of § 502(a) was modeled on the

exclusive remedy provided by § 301 of the Labor-

Management Relations Act (LMRA), 61 Stat. 156,

29 U.S.C. § 185.

“The civil enforcement scheme of § 502(a) is one

of the essential tools for accomplishing the stated

purposes of ERISA. The civil enforcement scheme is

sandwiched between two other ERISA provisions rel-

evant to enforcement of ERISA and to the processing

of a claim for benefits under an employee benefit

plan. Section 501, 29 U.S.C. § 1131, authorizes crim-

inal penalties for violations of the reporting and dis-

closure provisions of ERISA. Section 503, 29 U.S.C.

§ 1133, requires every employee benefit plan to com-

ply with Department of Labor regulations on giving

notice to any participant or beneficiary whose claim

for benefits has been denied, and affording a reason-

able opportunity for review of the decision denying

the claim.”

481 U.S. at 52-53, 107 S.Ct. at 1555-1556. (Emphasis

supplied. )

In view of this policy, I cannot see how civil actions

for bad faith in processing claims for benefits under

ERISA plans are preempted and civil actions for mis-

representations made by a “party in interest” to a “party

in interest/participant” concerning the coverage under

ERISA plans are not, and, indeed, they have been so p

empted in most cases since Pilot Life, supra. See, ie.

Pilot Life (fraud in the inducement); Relasco (| misrep-

resentation of benefits payable under ae ERISA plan);

Davidian (misrepresentation of benefit: payable under an

ERISA plan). I have studied all of the cases cited in the

majority opinion, in briefs, and at oral s»gument by the

_ parties, and I do not believe that an analys.* of each case

would be helpful to the bench or bar. Contrary to what

the majority contends, I believe that the weight of author-

ity of cases decided since Pilot Life, supra, supports my

conclusion,

Reluctantly, I would hold Menton’s claim to be related

to the Press Register’s employee benefit plan and pre

empted by ERISA on authority of Shaw v. Delta Air

Lines, supra; Metropolitan Life Ins. Co. v. Massechu-

setts, supra; Pilot Life Ins. Co. v. Dedeaur, supra: Bel-

asco v. W.K.P. Wilson & Sons, Inc., supra; and Devidien

v. Southern California Meat Cutters Union & Food Em-

ployees Benefits Fund, supra.

I am not persuaded that civil actions for bad faith or

fraud have anything to do with regulation of employee

benefit plans or that the purpose for such actions is te

affect the terms and conditions of emiployee benefit plans.

However, I believe that this has been decided otherwise

by a higher court; and I cannot justify holding that

Menton’s cause of action does not “relate to” an employee

benefit plan in order to save it from pre-emption, when

the causes of action asserted in Pilot Life, supra, for

tortious breach of contract and fraud in the inducement

and the causes of action asserted in Belasco, supra, for

bad faith and fraud were held to “relate to” employee

benefit plans and therefore to be preempted. To so hold

would be to make a distinction without a difference.

Is Menton’s cause of action exempted from preemption

under 29 U.S.C. § 1144(b) (2) (A)? That statute reads:

37a

“(Nothing im this subchaprer shal) be comet

exempt or relieve any person fem amy law of wm

State which regulates insurance

court indicated that &§ wae ne oernp

HealthAmenca? } Merie’s metnens for directed verstic

because the EWC sal a the Ajehwma “twistim

Statute were laws regulating Sazmance wd, andar ‘tn

evidence, could je the bass of Werte sy

Prior te final judgmem, Menten’: comin

tion or purpert to be brought under «ither stummt:

The HMO stature: did mot become offerte om

28. 1986. almost a vear after Mentem Che (7 ann

accrued. As a genera! rule statetes, excem rem:

uniess the language of the statute compres) onetime ohn

the Legisiature so intended. Jena tener, 80H Sait

S73 (Ala. 1988 There is mo express eens

intent that the EW statues apply tw cenees of ace

that accrued priur to the efertve date of th jemi

This Court defined remedia! states on Sew

Aamaton, 381 So.2t D6. 2 Alm. 190) me “nose rediaetrny

te remedies or modes af procedure wher do mm cm

new rights or iake away vested ome Mer Where

cause of action to be saved fram oreeminem te ote SV

Statutes, the statutes would sve reegmreriaete: rrvsreey renee

and give him 2 new orvwte cause of acto icastiugh

CTSesuang 2 new MEN. 2 new coom onion Bh thee

sulstantive in nature and would ne fe meen semen

Y lepsiatve invent. Teeter! Treit achetree «wttreritier | tte

Statutes

OQ acne

rrvesy)

creaie a provate came m oactiem, orn ten

@> they will not be @ivem retroetiwe eee Sherine

I need not discus wheter tine Aleta SM seni

“vaguiste insurance.” for Wertem') ceune of acm om

The purpose fer Chapter (2 “‘endie Penemice Liew

2 “ineureeee”) i eoorened om 6 U7)

38a

“The purpose of this chapter is to regulate trade

practices in the business of insurance in accordance

with the intent of congress as expressed in the In-

surance Regulation Act by defining, or providing for

the determination of, all such practices in this state

which constitute unfair methods of competition or

unfair or deceptive acts or practices and by prohibit-

ing the trade practices so defined or determined.”

Section 27-12-6 (“Twisting)” provides:

“No person shall make or issue, or cause to be

made or issued, any written or oral statement mis-

representing or making misleading incomplete com-

parisons as to the terms, conditions or benefits con-

tained in any policy for the purpose of inducing, or

attempting or tending to induce, the policyholder to

lapse, forfeit, surrender, retain, exchange or convert

any insurance policy.” (Emphasis supplied).

Section 27-1-2(3) defines “person” for th2 purposes of

Title 27 as follows:

“An individual, insurer, company, association, or-

ganization, Lloyd’s insurer, society, reciprocal insurer

or interinsurance exchange, partnership, syndicate,

business trust, corporation and every legal entity.”

Section 27-1-2(2) defines “insurer” for the purposes of

Title 27 as follows:

“Every person engaged as indemnitor, surety or

contractor in the business of entering into contracts

of insurance.”

In Pilot Life, supra, Dedeaux did not contend that his

cause of action for fraud in the inducement was a law

that regulated insurance and was thus saved from pre-

emption, so this was not discussed by Justice O’Connor

in her opinion. Dedeaux did contend that the cause of

action for bad faith did regulate insurance and was

saved from preemption by § 514(b)(2)(A). In regard

39a

to this, Justice O’Connor wrote that the Court first took

“what guidance was available from a ‘common-sense

view’ of the language of the saving clause itself.” 481

U.S. at 48, 107 S.Ct. 1553 (“any law of any State which

regulates insurance’). “Second,” she wrote, “we mane

use of the case law interpreting the phrase ‘business of

insurance’ under the McCarran-Ferguson Act, 15 U.S.C.

§ 1011 et seg., in interpreting the saving clause’; and,

she noted that in doing so the Court used these criteria:

“ «TF lirst, whether the practice has the effect of

transferring or spreading a policyholder’s risk; sec-

ond, whether the practice is an integral part of the

policy relationship between the insurer and the in-

sured; and third, whether the practice is limited to

entities within the insurance industry.’ ”

481 U.S. at 49, 107 S.Ct. at 1553.

In applying the “common sense view,” Justice O’Con-

nor reasoned that the phrase “regulates insurance” does

not support the argument that the Mississippi law of bad

faith falls under the saving clause, since the Mississippi

Supreme Court, as early as 1915, had recognized that

punitive damages were available in a contract case when

“‘the act or omission constituting the breach of any

{contract, not just an insurance] contract amounts also

to the commission of a tort.’ ”

“Certainly a common-sense understanding of the

phrase ‘regulates insurance’ does not support the

argument that the Mississippi law of bad faith falls

under the saving clause. A common-sense view of the

word ‘regulates’ would lead to the conclusion that in

order to regulate insurance, a law must not just have

an impact on the insurance industry, but be specifi-

cally directed toward that industry. Even though

the Mississippi Supreme Court has identified its law

of bad faith with the insurance industry, the roots

40a

of this law are firmly planted in the general prin-

ciples of Mississippi tort and contract law.”

481 U.S. at 50, 107 S.Ct. at 1554.

The Alabama “twisting” statute appears to be directed

toward the insurance industry. However, since 1907, the

Alabama Legislature has provided a civil action for

“(mJisrepresentations of a material fact made willfully

to deceive, or recklessly without knowledge.” § 6-5-101.

The Alabama Supreme Court, at least since 1933, has

allowed punitive damages to be recovered in such misrep-

resentation actions, when the misrepresentations were

made by the defendant with the intent to defraud the

plaintiff. Cartwright v. Hughes, 226 Ala. 464, 147 So.

399 (1933). So the roots of misrepresentation were

firmly planted in the general principles of Alabama tort

law, before the Legislature enacted the “twisting” stat-

ute in 1971. Until the post-final judgment amendment

of his complaint, Menton had pursued his civil action

against HealthAmerica and Merle under this firmly

planted general principle of Alabama tort law.

In Pilot Life, supra, the United States Supreme Court

found that the factors set out in the MeCarran-Ferguson

Act did not support Dedeaux’s assertion that the Mis-

sissippi law of bad faith “regulates insurance,” for (1)

it did not affect a spreading of policyholder risk; (2)

“t]he state common law of bad faith is . . . no more

‘integral’ to the insurer-insured relationship than any

State’s general contract law is integral to a contract made

in that State.” 481 U.S. at 51, 107 S.Ct. at 1555; and

(3) “Mississippi’s law of bad faith, even if associated

with the insurance industry, has developed from general

principles of tort and contract law available in any Mis-

sissippi breach of contract case.” 481 U.S. at 51, 107

S.Ct. at 1555. The Court then held “the Mississippi com-

mon law of bad faith at most meets one of the three

criteria used to identify the ‘business of insurance’ under

4la

the McCarran-Ferguson Act, and used in Metropolitan

Life to identify laws that ‘regulat[e] insurance’ under

the saving clause.”

I do not find that the “twisting” statute affected a

spreading of the risks among policyholders; or that the

“twisting” statute is more integral to the insurer-insured

relationship than Alabama’s misrepresentation statute, as

developed from general principles of tort law; or that

the statute in its definition of “person” and “insurer” is

limited to entities in the insurance business.? Therefore,

using Justice O’Connor’s criteria for determining when

a state law “regulates insurance” and is therefore saved

from ERISA preemption, I would find that the “twist-

ing” statute does not save Menton’s claim from preemp-

tion. By this, I do not mean to imply that Alabama’s

“twisting” statute affords a private cause of action to

Menton.® I need not reach this issue.

A unanimous United States Supreme Court in Pilot

Life, supra, held that Dedeaux’s state law claims, includ-

2 Alabama Code 1975, § 27-12-24, provides:

“No insurer shall, without just cause, refuse to pay or

settle claims arising under coverages provided by its policies

in this state... .” (Emphasis supplied.)

From the pleadings in Belaseso v. W.K.P. Wilson & Son, Inc.,

supra, we cannot determine whether this Code section, which is

contained in Chapter 12 (“Trade Practices Law’) of Title 27

(“Insurance”) was relied on by Belasco as a law regulating in-

surance.

“Plaintiffs argue that the Alabama law of bad faith, which

forms the basis of one of their claims, is a ‘law . . . which

regulates insurance,’ 29 U.S.C. §1144(b) (2) (A), and there-

fore falls under the saving clause. However, the Alabama law

of bad faith appears to us to have the same roots ‘in the gen-

eral principles of .. . tort and contract law’ as was the case

in Dedeauz.”

833 F.2d at 281.

3In Farlow v. Union Cent. Life Ins. Co., 874 F.2d 791 (11th

Cir. 1989), the Eleventh Circuit Court of Appeals held that the

Alabama twisting statute does not create a private cause of action.

42a

ing bad faith and fraud in the inducement, were pre-

empted, even though Dedeaux elected not to assert any

of the remedies that would be available under ERISA.

Menton elected not to assert any of the remedies that

would be available to him under ERISA, i.e., to clarify

and enforce his rights under the terms of the plan as

represented to him, and to obtain equitable relief (ref-

ormation of the health insurance contract to remove the

time limitation on physical therapy and orthopedic ap-

pliances benefits), ete. 29-U.S.C.. § 1182(a). These bene-

fits and an award of attorney feés could have been avail-

able to Menton under ERISA, Whether he sued in fed-

eral or in state court, if he had prevailed on his ERISA

claim. Pilot Life, 481 U.S. at 58, 107 S.Ct. at 1556.

Therefore, ERISA did not deny Menton a remedy. At

the conclusion of Pilot Life, 481 U.S. at 57, 107 S.Ct. at

1558, Justice O’Connor wrote:

“Metropolitan Life [Ins. Co. v. Massachusetts,

supra], did not involve a state law that conflicted

with a substantive provision of ERISA. Therefore

the Court’s general observation—that state laws re-

lated to ERISA may also fall under the saving clause

—was not focused on any particular relationship or

conflict between a substantive provision of ERISA

and a state law. In particular, the Court had no

occasion to consider in Metropolitan Life the question

raised in the present case: whether Congress might

clearly express, through the structure and legislative

history of a particular substantive provision of

ERISA, an intention that the federal remedy pro-

vided by that provision displace state causes of ac-

tion....

“Considering the common-sense understanding of

the saving clause, the McCarran-Ferguson Act fac-

tors defining the business of insurance, and, most im-

portantly, the clear expression of congressional intent

that ERISA’s civil enforcement scheme be exclusive,

43a

we conclude that Dedeaux’s state law suit asserting

improper processing of a claim for benefits under an

ERISA-regulated plan is not saved by § 514(b) (2)

(A), and therefore is pre-empted by § 514(a).”

This action was filed while Hood v. Prudential Ins. Co.

of America, supra (Hood I), was the law. Prior to final

judgment in this case, the United States Supreme Court

decided Pilot Life, supra, and we decided Seafarers’ Wel-

fare Plan v. Dixon, supra. However, it was after final

judgment in this case that this Court reversed Hood v.

Prudential Ins. Co. of America, supra (Hood II) and

decided Landy v. Travelers Insurance Co., supra. There-

fore, I would reverse the judgment of the trial court;

however, rather than rendering judgment or remanding

with instructions that the trial court grant Health-

America and Merle’s motion for JNOV, I would reverse

and remand and afford Menton the opportunity to amend

to state a claim under ERISA.

At the time this complaint was filed, Menton had

every reason to believe, every reason to predict, that his

state law cause of action asserting misrepresentation of

coverage afforded by a health insurance plan would not

be preempted by ERISA. See Hood J. During the course

of this litigation in the circuit court and during this

appeal, the rules were changed. This Court could not and

did not predict this. See Hood I.

I, as a member of the Supreme Court of Alabama,

will not thwart an opportunity for a remedy for one

whose right to a particular remedy was foreclosed only

by his astute attorneys’ not being able to guess how Jus-

tices would rule. It seems appropriate and altogether

just to invoke equitable relief, which is afforded by 29

U.S.C. § 1132(a) (8), to one whose civil cause of action

was foreclosed by an expansion of the ERISA preemption

after that cause of action had accrued and after an action

to enforce it had been filed. See, Culberson v. Bankers

Life Co., 541 So.2d 480 (Ala. 1989).

44a

I would reverse and remand to permit Menton to

amend and proceed with a cause or action under ERISA,

29 U.S.C. § 1182(a). Therefore, I dissent.

Maddox, J., concurs.

i? as aed oboe eae ae

45a

APPENDIX B

Mailing Address: Telephone: 261-4609

P.O. Box 157

Montgomery. Alabama 36101

OFFICE OF

CLERK OF THE SUPREME COURT

STATE OF ALABAMA

MONTGOMERY

Re: 87-1100

HEALTH AMERICA AND PAMELA MERLE

Appellant

vs.

EDWARD MENTON

Appellee

You are hereby notified that the following indicated

action was taken in the above cause by the Supreme Court

today: :

Appeal docketed. Future correspondence should

refer to the above number.

Court Reporter granted additional time to file re-

porter’s transcript to and including

Clerk/Register granted additional time to file

clerk’s record/record on appeai to and including

Appell———granted 7 additional days to file

briefs to and including

—— Appellant(s) granted 7 additional days to file

reply briefs to and including

— —— Record of Appeal filed

9/15/89

bsa

46a

Appendix Filed

Submitted on Briefs

Petition for Writ of Certiorari denied. No opin-

ion.

Application for rehearing overruled. No opinion

written on rehearing.

Permission to file amicus briefs granted

/s/ Robert G. Esdale

ROBERT G. ESDALE

Clerk

Supreme Court of Alabama

47a

APPENDIX C

IN THE CIRCUIT COURT _

OF MOBILE COUNTY, ALABAMA

Civil Action No. CV-86-003049

EDWARD MENTON,

Plaintiff,

vs.

HEALTH AMERICA and PAMELA MERLE,

Defendants.

ORDER

[Filed June 13, 1988]

On the 18th day of May, 1988, came to be heard De-

fendants’ Motion for Judgement Notwithstanding the

Verdict or, In the Alternative, for New Trial cr, In the

Alternative, for Remittitur. Having considered the mo-

tions; the pleadings and other papers on file herein, the

evidence adduced at trial and objections and proceedings

in the course of the trial; the case law and other author-

ity cited by all parties either pretrial, during trial, or

post trial; and the argument of counsel, it is ORDERED,

ADJUDGED, and DECREED as follows:

1.(a) That Defendants’ motion for judgement notwith-

standing the verdict is due to be and hereby is DENIED;

(b) The Defendants’ motion for new trial is due to

be and hereby is DENIED;

to be and hereby is DENIED.

48a

2. In connection with all of Defendants’ motions, the

Court has considered Defendants’ claims tha the imposi-

tion of punitive damages, both generally under Alabama

law and specifically in the amount and as returned by the

jury under the facts of this case, is unconstitutional un-

der the Alabama as well as the United States Constitu-

tions (particularly, the Due Process Clause of the 5th

Amendment; the Due Process, Equal Protection, and Priv-

ileges and Immunities Clauses of the 14th Amendment;

the Excessive Fines Clause of the 8th Amendment; the

Contracts Clause and prohibition of Ex Post Facto laws

of Article I, Section 10, Clause 1). Although these argu-

ments were timely raised and effectively presented, the

Court is unpersuaded by such arguments and therefore

holds that the imposition of punitive damages, both gen-

erally under Alabama law and specifically in the amount

as returned by the jury under the facts of this case, is

constitutional under both the state and federal constitu-

tions.

3. With respect to Defendants’ Motion for a Remitti-

tur, Alabama Law is that a remittitur or new trial should

not be ordered on the grounds of excessiveness of the

jury’s verdict except where the court can clearly see that

the verdict is tainted by bias, passion, prejudice, corrup-

tion, or other improper motive or cause on the part of

the jury.

The Court has carefully considered all of the evidence

in the case on all issues. The Court has carefully consid-

ered the nature and quality of the testimony of all of the

witnesses, as well as the demeanor of each witness while

testifying. The Court has further reviewed its Charge

to the jury on the issue of damages and has found that

it correctly instructed the jury on damages. As a part of

the charge, the jury was instructed that if they found in

favor of the Plaintiff, Edward Menton, and against the

Defendants, Health America and Pamela Merle, that in

assessing damages they should take into consideration

49a

and give due regard to the enormity of the wrong and

the necessity of preventing similar wrongs in the future.

After a careful review by the Court of the entire trial

of the case, including the testimony of all of the wit-

nesses, all of the documentary and demonstrative evidence

produced at trial, the Court’s observation of all parties

and witnesses, and the Court’s Carge to the jury on dam-

ages, the Court is convinced that the jury carefully and_

conscientiously follows the Court’s instructions is assess-

ing damages in the case at $1,800,000.00, and that the

award is consistent with the Court’s instructions and sup-

ported by the evidence.

The Court finds, after a review of the entire trial, that

the central issue presented in the Defendants’ Motion for

Remittitur is whether or not the jury verdict of $1,800,-

000.00 in this case is in and of itself evidence of bias,

passion, prejudice, corruption or other improper motive

or cause. The Court cannot call to mind or have the

attorneys for the Defendants shown to the Court any fac-

tor at all that could be construed to indicate bias, passion,

prejudice, corruption or other improper motive or cause on

the part of the jury. On the contrary, the Court finds

that there was clear and convincing evidence of fraud

on the part of the Defendants, Health America and Pam-

ela Merle, which in the Court’s opinion fully justified the

jury’s verdict.

The Court finds that the $1,800,000.00 verdict is not

excessive and is not the result of bias, passion, prejudice,

corruption, or other improper motive or cause.

DONE and ORDERED this 13th day of June, 1988.

/s/ Braxton L. Kittrell

BRAXTON L. KITTRELL

Judge

Circuit Court of Mobile County

APPENDIX D

FEDERAL STATUTORY AND

CONSTITUTIONAL PROVISIONS

SUBTITLE A—GENERAL PROVISIONS

$1001. Congressional findings and declaration of pelicy

(a) Benefit plans as affecting interstate commerce and

the Federal taxing power

been rapid and substantial; that the operational srope anc

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52a

SUBTITLE B—REGULATORY PROVISIONS

Part I—Reporting and Disclosure

Cross References

Criminal penalties under this part, see section 1132 of

this title.

§ 1021. Duty of disclosure and reporting

(a) Summary plan description and information to be

furnished tu participants and beneciaries

The administrator of each employee benefit plan shall

cause to be furnished in accordance with section 1024 (b)

of this title to each participant covered under the plan

and to each beneficiary who is receiving benefits under

the plan—

(1) a summary plan description described in sec-

tion 1022(a) (1) of this title; and

(2) the information described in section 1024 (b)

(3) and 1025(a) and (c) of this title.

* * * *

§ 1022. Plan description and summary plan description

(a) (1) A summary plan description of any employee

benefit plan shall be furnished to participants and bene-

ficiaries as provided in setcion 1024(b) of this title. The

summary plan description shall include the information

described in subsection (b) of this section, shall be writ-

ten in a manner calculated to be understood by the aver-

age plan participant, and shall be sufficiently accurate

and comprehensive to reasonably apprise such partici-

pnats and beneficiaries of their rights and obligations

under the plan. A summary of any material modifica-

tion in the terms of the plan and any change in the in-

formation required under subsection (b) of this section

shall be written in a manner calculated to be understood

58a

by the average plan participant and shall be furnished

in accordance with section 1024(b) (1) of this title.

(2) A plan description (containing the information

required by subsection (b) of this section) of any em-

ployee benefit plan shall be prepared on forms prescribed

by the Secretary, and shall be filed with the Secretary

as required by section 1024(a)(1) of this title. Any

material modification in the terms of the plan and any

change in the information described in subsection (b) of

this section shall be filed in accordance with section 1024

(a) (1) (D) of this title.

(b) The plan description and summary plan description

shall contain the following information: The name and

type of administration of the plan; the name and ad-

dress of the person designated as agent for the service of

legal process, if such person is not the administrator;

the name and address of the administrator; names, titles,

and addresses of any trustee or trustees (if they are

persons different from the administrator); a description

of the relevant provisions of any applicable collective

bargaining agreement; the plan’s requirement respect-

ing eligibility for participation -and benefits; a descrip-

tion of the provisions providing for nonforfeitable pen-

sion benefits; circumstances which may result in dis-

qualification, ineligibility, or denial or loss of benefits;

the source of financing of the plan and the identity of

any organization through which benefits are provided;

the date of the end of the plan year and whether the

records of the plan are kept on a calendar, policy, or fiscal

year basis; the procedures to be followed in presenting

claims for benefits under the plan and the remedies avail-

able under the plan for the redress of claims which are

denied in whole or in part (including procedures re-

quired under section 1133 of this title).

(Pub. L. 98-406, Title I, § 102, Sept. 2, 1974, 88 Stat.

841.)

54a

§ 1024. Filing and furnishing of information

* * * *

(b) Publication of summary plan description and an-

nual report to participants and beneficiaries of plan

Publication of the summary plan descriptions and

annual reports shall be made to participants and bene-

ficiaries of the particular plan as follows:

(1) The administrator shall furnish to each partici-

pant, and each beneficiary receiving benefits under the

plan, a copy of the summary, plan description, and all

modifications and changes referred to in section 1022

(a) (1) of this titl—

(A) within 90 days after he becomes a partici-

pant, or (in the case of a beneficiary) within 90

days after he first receives benefits, or

paced (B) if later, within 120 days after the plan be-

comes subject to this part.

The administrator shall furnish to each participant, and

each beneficiary receiving benefits under the plan, every

fifth year after the plan becomes subject to this part an

updated summary plan description described in section

1022 of this title which integrates all plan amendments

made within such five-year period, except that in a case

where no amendments have been made to a plan during

such five-year period this sentence shall not apply. Not-

withstanding the foregoing, the administrator shall fur-

nish to each participant, and to each beneficiary receiving

benefits under the plan, the summary plan description

described in section 1022 of this title every tenth year

after the plan becomes subject to this part. If there is a

modification or change described in section 1022(a) (1)

of this title, a summary description of such modification

or charge shall be furnished not later than 210 days after

the end of the plan year in which the change is adopted

to each participant, and to each beneficiary who is re-

ceiving benefits under the plan.

55a

(2) The administrator shall make copies of the plan

description and the latest annual report and the bargain-

ing agreement, trust agreement, contract, or other in-

struments under which the plan was established or is

operated available for examination by any plan partici-

pant or beneficiary in the principal office of the admin-

istration and in such other places as may be necessary to

make available all pertinent information to all partici-

pants (including such places as the Secretary may pre-

scribe by regulations).

(3) Within 210 days after the close of the fiscal year

of the plan, the administrator shall furnish to each par-

ticipant, and to each beneficiary receiving benefits under

the plan, a copy of the statements and schedules, for

such fiscal year, described in subparagraph (A) and

(B) of section 1023(b) (3) of this title and such other

material (including the percentage determined under sec-

tion 1023(d) (11) of this title) as is necessary to fairly

summarize the latest annual report.

(4) The administrator shall, upon written request of

any participant or beneficiary, furnish a copy of the

latest annual report, any terminal report, the bargain-

ing agreement, trust agreement, contract, or other in-

struments under which the plan is established or oper-

ated. The administrator may make a reasonable charge

to cover the cost of furnishing such complete copies. The

Secretary may by regulation prescribe the maximum

amount which will constitute a reasonable charge under

the preceding sentence.

* * * *

56a

Part 4—Fiduciary Responsibility

§ 1101. Coverage

(a) This part shall apply to any employee benefit plan

described in section 1003(a) of this title (and not ex-

empted under section 1003(b) of this title), other than—

(1) a plan which is unfunded and is maintained

by an employer primarily for the purpose of pro-

viding deferred compensation for a select group of

management or highly compensated employees; or

(2) any agreement described in section 736 of

Title 26, which provides payments to a retired part-

ner or deceased partner or a deceased partner’s

successor in interest.

* * * -

§ 1104. Fiduciary duties

(a) Prudent man standard of care

(1) Subject to sections 1103(c) and (d), 1842, and

1344 of this title, a fiduciary shall discharge his duties

with respect to a plan solely in the interest of the par-

ticipants and beneficiaries and—

(A) for the exclusive purpose of:

(i) providing benefits to participants and

their beneficiaries; and

(ii) defraying reasonable expenses of admin-

istering the plan;

(B) with the care, skill, prudence, and diligence

under the circumstances then prevailing that a pru-

dent man acting in a like capacity and familiar

with such matters would use in the conduct of an

enterprise of a like character and with like aims;

so as to minimize the risk of large losses unless

57a

under the circumstances it is clearly prudent not to

do so; and

(D) in accordance with the documents and instru-

ments governing the »lan insofar as such documents

and instruments are consistent with the provisions

this subchapter or subchapter III of this chapter.

* * * +

§ 1109. Liability f

This text is long and has been trimmed here. Open the source document for the complete record.

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.