Petition for Writ of Certiorari — Lawrence Paper Co. v. Gomez
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95 180 ul 31 1995
OFFICE OF THE CLERK
In The
Supreme Court of the United States
October Term, 1994
THE LAWRENCE PAPER COMPANY,
Petitioner,
¥,
GEORGE R. GOMEZ,
Workers Compensation Director of the State of Kansas,
and
THE STATE OF KANSAS,
Respondents.
ON PETITION FOR A WRIT OF CERTIORARI
TO THE
SUPREME COURT OF THE STATE OF KANSAS
J. Donald Lysaught
Mustain, Higgins, Kolich,
Lysaught & Tomasic
P.O. Box 171855
Kansas City, Kansas 66117-1855
(913) 371-5750
Legal Printing Company, Inc. (913) 724-1623
QUESTION PRESENTED
Whether Congress intended the Employee Retirem:t Income
Security Act of 1974 (ERISA), 29 U.S.C. §1001 er seq., x’ preempt
state statutes, such as Kan. Stat. Ann. 44-511(a)(2)(E), whch calcu-
late workers compensati: s benefits in part on the basis of discontin-
ued benefits under ERISA plans?
LIST OF PARTIES
The Lawrence Paper Company which has no parent company and no
non-wholly owned subsidiaries
George R. Gomez, Workers Compensation Director of the State of
Kansas
The State of Kansas
TABLE OF CONTENTS
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IV
TABLE OF AUTHORITIES
Page
CASES:
District of Columbia v. The Greater Washington Board of Trade,
506 U.S. , 113 S. Ct. 580 (1992)
ectcitminesteeaiasediaaiietel 4, 7, 8, 9, 10, 11, 13, 14, 16, 17
Guidry v. Sheet Metal Workers Nat. Pension Fund,
39 F.3d 1078 (10th Cir. 1994) (en banc),
gare. aad, TIF FG: Be a it hcctenssantdbaccvcstabsncn 17
Keystone Chapter, Assoc. Builders v. Foley,
37 F.3d 945 (3d Cir. 1994),
cert. denied, 11S S. Ct. 1393 (1995)..............cccccecccceeess 16
Mackey v. Lanier Collection Agency & Serv.,
SU re ee aie cl a ee 10
Minnesota Chapter of Assoc. Builders v. Dept. of Labor,
i ee 8, Re eens 17
New York State Conference of Blue Cross & Blue Shield Plans
v. Travelers Ins., US. , 115 S. Ct. 1671 (1995)
Pohl v. National Benefits Consultants, Inc.,
et SE i Le RE EE member’ Daraepre 10
Simas v. Quaker Fabric Corp. of Fall River,
©: re ee ee a Nii enreicteseoiatsn tiered 15
TABLE OF AUTHORITIES
Page
STATUTES:
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Pa Se Se I TR cainsibiinnicidercdinwrseccinncoceasiasanaes 14
SE Es Sa EC iiccsiseks checks ctoesvncstbcsscieicc pees 14
D. C. Code Ann. 36-307(a-1)(1) and (3) (Supp. 1992)........... :
OR SIU: A IN cashscsoiieenscnintancechccctulatimesnaiess nase 15
ee ee ee Ean NOT ianeE eT OTS 2
Kan. Stat. Ann. 44-511(a)(2)(E).......0...ccccccecceeeeeseeees 2, 3, 4, 14
Seay: NO « TMP RI ah dis reasncsdviirdic vecscedeeaiicssoses 1
Maine Rev. Stat. 39A-102(4)(H) (1994)... cccccccceeeceeeeeees 14
Mich. Compiled Laws Ann. 418.371(2) (1993)...00000.ccccccceeceeee. 14
Mo. Rev. Stat. 287.250.2 (1993 Cum. Supp.).....0..0.00.cccccccceeeeee. 15
Mont. Code Ann. 39-71-123(2) (1993)..0..0.cccccccccccceceeceseseeeeeees 15
ge a E:T SE 16
Tex. Code Ann. 408.045 (1995 Supp.)....0..00ccccccccccccceseeseeeeceeee. 14
No.
In The
Supreme Court of the United States
October Term, 1994
THE LAWRENCE PAPER COMPANY
Petitioner,
¥,
GEORGE R. GOMEZ,
Workers Compensation Director of the State of Kansas,
and
THE STATE OF KANSAS,
Respondents.
On Petition for a Writ of Certiorari to the
Supreme Court of the United States
PETITION FOR WRIT OF CERTIORARI
OPINIONS BELOW
The September 14, 1994, memorandum decision of the Kan-
sas District Court, Shawnee Country, Eleventh Division, denying
Petitioner ’s motion for summary judgment and granting Respondents’
motion for summary judgment, and that court’s journal entry of judg-
ment entered on September 26, 1994, are unreported and included as
Appendix B. The decision of the Kansas Supreme Court affirming
2
the district court is reported, Kan. ' P.2d (1995),
and is included as Appendix A.
STATEMENT RISDICTION
This Court’s jurisdiction to review the final judgment of the
Kansas Supreme Court is invoked pursuant to 28 U.S.C. § 1257{(a).
The Kansas Supreme Court issued its final decision in this case on
June 2, 1995, App. A, and this petition has been filed within ninety
days of that date as required by Supreme Court Rule !3.1.
TATUTORY PROVISIONS INVOLVED
In relevant part, section 514(a) of ERISA provides that ERISA
“shall supersede any and all State laws inso-
far as they may now or hereafter relate to any em-
ployee benefit plan [covered by ERISA] ....” 29
U.S.C. § 1144(a).
The Kansas Workers Compensation Act, Kan. Stat. Ann. 44-
501 et seg., defines “additional compensation” for the purposes of
calculating an “average weekly wage” under the Act to include:
“employer-paid life insurance, health and accident
insurance and employer contributions to pension and
profit sharing plans. * * * Additional compensation
shall not include the value of such remuneration until
and unless such remuneration is discontinued. If such
remuneration is discontinued subsequent to a com-
putation of average gross weekly wages under this
section, there shall be a recomputation to include such
discontinued remuneration.” Kan. Stat. Ann. 44-
511(a)(2)(E).
TA EN ASE
Procedural History
Petitioner, The Lawrence Paper Company (TLPC), filed this
action against Respondents, the Kansas Director of Worker’s Com-
pensation and the State of Kansas, in the state district court for the
District of Shawnee County, Kansas. TLPC sought a declaration that
ERISA, 29 U.S.C. § 1001 ef seg., preempts Kan. Stat. Ann. 44-
511(a)(2)(E) and requested an injunction preventing respondents from
enforcing the Kansas statute. TLPC moved for summary judgment
and respondents filed a cross-motion for summary judgment. The
trial court denied TLPC’s motion and granted respondents’ motion.
App. B. The Kansas Supreme Court affirmed the trial court’s ruling.
App. A.
Statement oi Facts
There are no disputes between the parties regarding the mate-
rial facts. TLPC is a corporation incorporated under the laws of the
State of Kansas with its principal office and place of business located
in Lawrence, Kansas. TLPC is a company which produces and dis-
tributes various paper products. TLPC furnishes employer-paid health
insurance to its employees, as well as contributing to savings, profit-
sharing and pension plans for its employees. There is no dispute that
TLPC’s employee benefit plans are within the scope of ERISA and
are not subject to any exemptions from ERISA.'
The Kansas Workers’ Compensation Act (KWCA) requires
that the value of certain discontinued employer-paid benefits be in-
cluded in the wage base used to calculate workers compensation ben-
efits for injured employees. Specifically, Kansas law defines “wage”
ITLPC is engaged in interstate commerce and its activities and opera-
tions affect interstate commerce, see 29 U.S.C. § 1003(a), and, as the Kansas Su-
preme Court expressly recognized, TLPC's plans are not exempt from ERISA un-
der 29 U.S.C. § 1003(b)3) (exemption for benefit plans maintained solely for the
purpose of complying with state workers compensation laws), because TLPC's plans
are not maintained solely for purpose of complying with applicable Kansas work-
ers compensation laws. See App. A 3.
to include both “money” and “additional compensation” received for
services rendered for an employer. Kan. Stat. Ann. 44-511(a)(3).
‘Additional compensation” is defined to include the value of “em-
ployer-paid life insurance, health and accident insurance and employer
contributions to pension and profit sharing plans” if such benefits are
discontinued. Kan. Stat. Ann. 44-511(a)(2)(E). Respondents require
employers such as TLPC to recalculate workers compensation ben-
efits paid to injured workers on the basis of § 511(a)(2)(E) whenever
the ERISA benefits of an employee receiving workers compensation
have been terminated.
Proceedings in the Trial Court
TLPC filed this suit in state district court, seeking a declara-
tion that § 511(a)(2)(E) is preempted by section 514(a) of ERISA, 29
U.S.C. § 1144(a), and an injunction preventing respondents from en-
forcing the Kansas statute. TLPC moved for summary judgment and
respondents filed a cross-motion for summary judgment. The trial
court denied TLPC’s motion and granted the cross-motion of respon-
dents. See App. B 8.
The trial court recognized that ERISA preemption “is broad
in scope,” App. B 1, but concluded that this Court’s decision in Dis-
trict of Columbia v. The Greater Washington Board of Trade, 506
U.S. _, 113 S. Ct. 580 (1992), “more comprehensively embraces
the Defendants’ position than that of the Plaintiff.” App. B 2. In
Greater Washington Board of Trade, this Court, by an 8-1 vote, held
that ERISA preempted a District of Columbia law which required
employers who provided ERISA-covered health insurance plans for
their employees to provide equivalent health insurance coverage for
injured employees eligible for workers compensation benefits. The
trial court acknowledged that the Kansas statute does in certain “cir-
cumstances requires the recalculation of Workman’s Compensation
benefits considering a benefit plan covered by ERISA.” App. B 2.
The court nonetheless rejected TLPC’s assertion that ERISA preempts
the Kansas statute for two primary reasons. First, the court opined
that “the Kansas statute does not materially alter an existing adminis-
trative scheme under ERISA.” App. B 8. Second, the court con-
cluded that any relationship between the Kansas statute and any ERISA
plan maintained by TLPC was too “remote, tenuous and peripheral”
to invoke preemption. Jd.
The Kansas Supreme Court
The Kansas Supreme Court affirmed. The court observed
that “[t]he issue is simply whether the way in which the KWCA,
through K.S.A. 44-511(a)(2)(E), defines an employ. .’s compensa-
tion for purposes of computing disability benefits is preempted by
ERISA§ 514(a), 29 U.S.C. § 1144(a) (1988).” App. A 3. In decid-
ing that issue, the Kansas Supreme Court first opined that this Court’s
approach to ERISA preemption had evolved over time, from disfa-
voring such preemption (citing Alessi v. Raybestos-Manhattan, Inc.,
451 U.S. 504(1981)), to an expansive view of ERISA preemption
(citing District of Columbia v. The Greater Washington Board of
Trade,506U.S.___, 113 S. Ct. 580 (1992)), to perhaps a narrower
approach most recently (citing New York Conference of Blue Cross v.
Travelers Ins., __US.__, 115 S. Ct. 1671 (1995)). App. A 8.
The court rejected TLPC’s contention that Greater Washing-
ton Board of Trade, in which this Court held that ERISA preempted a
District of Columbia law which required employers who provided
ERISA-covered health insurance plans for their employees to provide
equivalent health insurance coverage for injured employees eligible
for workers compensation benefits, controlled the outcome of this case.
Although the court candidly acknowledged that Justice Stevens’ state-
ment of the issue in Greater Washington Board of Trade seems equally
applicable to the Kansas Statute,? App. A 10, the court attached no
significance to that fact, pointing out that Justice Stevens’ was the
lone dissenter in Greater Washington Board of Trade. App. A 10.
The Kansas Supreme Court also rejected TLPC’s contention
that, because the benefit levels of the KWCA under Kan. Stat. Ann.
2Justice Stevens framed the issue in Greater Washington Board of Trade
as follows: “The basic question that this case presents is whether Congress in-
tended to prevent a State from computing workmen's compensation benefits on the
basis of the entire remuneration of injured employees when a portion of that remu-
neration is provided by an employee benefit plan.” 113 S. Ct. at 58S.
renensieeaataemeainiiitiiaiiaaiiimeaiiaaitiiiaaaiiaaiaiiaes
6
44-511(a)(2)(E) are tied directly to the value of ERISA-covered plans,
Greater Washington Board of Trade compelled a finding of preemp-
tion in this case. The court acknowledged that “[i]t is true that under
K.S.A. 44-511(a)(2)(E) there is a direct correlation between benefits
provided to an employee under certain ERISA-covered benefit plans
and the amount of disability benefits the emplayee may be eligible to
receive under the KWCA.” App. A 10. The cour’, however, distin-
guished the Kansas statute from the District of Columbia law at issue
in Greater Washington Board of Trade on the ground that the Kansas
law “imposes no mandate for the continuation of ERISA benefits (or
their equivalent) to injured employees.” App. A. 11.
After briefly surveying four recent federal court of appeals
decisions in which the courts declined to find ERISA preemption of
state laws concerning garnishment, prevailing wages, and a require-
ment that an employer maintain a workers compensation plan, see
Guidry v. Sheet Metal Workers Nat. Pension Fund, 39 F.3d 1078
(10th Cir. 1994) (en banc), cert. denied, 115 S. Ct. 1691 (1995) (Colo-
rado garnishment law); Keystone Chapter, Assoc. Builders v. Foley,
37 F.3d 945 (3d Cir. 1994), cert. denied, 115 S. Ct. 1393 (1995)
(Pennsylvania prevailing wage law); Minnesota Chapter of Assoc.
Builders v. Dept. of Labor, 47 F.3d 975 (8th Cir. 1995) (Minnesota
prevailing wage law); Combined Management v. Superintendent of
Bureau of Ins., 22 F.3d 1 (Ist Cir.), cert. denied, 115 S. Ct. 350
(1994) (Maine law requiring employers to maintain a workers com-
pensation plan administered separately from any multi-benefit ERISA-
covered plan), the Kansas Supreme Court tumed its attention briefly
to this Court’s recent decision in New York Conference of Blue Cross
v. Travelers Ins., _ U.S.___, 115 S. Ct. 1671 (1995), which was
issued six days after the oral argument in this case. In New York
Conference of Blue Cross, this Court held the ERISA does not pre-
empt a New York statute requiring hospitals to collect a surcharge
from patients covered by commercial insurers, who were fiduciaries
of ERISA plans, but not from patients insured by a Blue Cross/Blue
Shield plan. Based on its reading of New York Conference of Blue
Cross, the Kansas Supreme Court concluded that Kan. Stat. Ann. 44-
511(a)(2)(E) has only a “tenuous, remote or peripheral” connection to
TLPC’s ERISA plans, so that the statute does not “relate to” ERISA
plans within the meaning of 29 U.S.C. § 1144(a) and, therefore, ERISA
does not preempt the Kansas statute. App. A 18.
REASONS FOR GRANTING THE WRIT
I. The Kansas Supreme Court’s Decision Is Contrary To This
Court’s Decision In District of Columbia v. Greater Wash-
ington Board of Trade, 506U.S.__, 113 S. Ct. 580 (1992),
And Should Be Summarily Reversed.
A. This Court’s Decision in District of Columbia v.
Greater Washington Board of Trade, 506 U.S.__, 113
S. Ct. 580 (1992), Requires a Finding of ERISA Preemp-
tion In This Case.
1. The Majority Opinion
In District of Columbia v. The Greater Washington Board of
Trade,506U.S.___, 113 S. Ct. 580 (1992), this Court , in an opin-
ion written by Justice Thomas and by a vote of 8 - 1, held that ERISA,
specifically § 514(a) (29 U.S.C. § 1144(a)), preempted a District of
Columbia statute which required “employers who provide health in-
surance for their employees to provide equivalent health insurance
coverage for injured employees eligible for workers’ compensation
benefits.”? 113 S$. Ct. at 582. In deciding whether ERISA preempted
the District of Columbia law, this Court observed that “[s]ection 514(a)
provides that ERISA ‘shall supersede any and all State laws insofar
as they may now or hereafter relate to any employee benefit plan’
covered by ERISA.” 113 S. Ct. at 582. The Court went on to declare
that “ERISA pre-empts any state law that refers to or has a connec-
tion with covered benefit plans ... ‘even if the law is not specifically
designed to affect such plans, or the effect is only indirect ....’” Jd. at
>The precise language of the District of Columbia statute was as follows:
"Any employer who provides health insurance coverage for an employee shall pro-
vide health insurance coverage equivalent to the existing health insurance cover-
age of the employee while the employee receives or is eligible to receive workers’
compensation benefits under this chapter." D. C. Code Ann § 36-307(a-1 1) Supp.
1992).
aaa a |
583 (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139
(1990)) (emphasis added). At the same time, the Court pointed out in
a footnote that “[p]re-emption does not occur, however, if the state
law has only a ‘tenuous, remote, or peripheral’ connection with cov-
ered plans ....” Jd. at 583 n. 1 (quoting Shaw v. Delta Air Lines, Inc.,
463 US. 85, 100 n. 21 (1983)).
This Court then held that the District of Columbia law “spe-
cifically refers to welfare benefit plans regulated by ERISA and on
that basis alone is pre-empted.” 113 S. Ct. at 583 (emphasis added).
The Court explained that “[t]he health insurance coverage that [the
District of Columbia law] requires employers to provide for eligible
employees is measured by reference to ‘the existing health insurance
coverage’ provided by the employer and ‘shall be at the same benefit
level.” Id. at 583-84 (quoting D.C. Code Ann § 36-307(a-1)(1) and
(3) (Supp. 1992)). Because many of the employers affected by the
District of Columbia statute maintained ERISA-regulated plans, this
Court declared that “any state law imposing requirements by refer-
ence to such covered programs must yield to ERISA.™ Jd. at 584.
This Court then further observed that “{i]t makes no difference that
(the District of Columbia law’s] requirements are part of the District’s
regulation cf, and therefore also ‘relate to,” ERISA-exempt workers’
compensation plans.” Jbid. This Court rejected the District’s attempt
to engraft further considerations onto the preemption analysis, hold-
ing that the District of Columbia law related to ERISA plans, “and
that is the end of the matter.” Jd. at 585.
The Court’s decision in Greater Washington Board of Trade
controls the outcome of this case and requires a finding that ERISA
preempts Kan. Stat. Ann. 44-51 1(a)(2)(E). The Kansas Supreme
Court’s decision to the contrary is plainly inconsistent with Greater
Washington Board of Trade and should be summarily reversed. The
Kansas statute, like the District of Columbia statute, mandates cer-
‘In a footnote, the Court pointed out that "ERISA does not pre-empt [the
District of Columbia law] to the extent its requirements are measured only by
reference to ‘existing health insurance coverage’ provided under plans that are ex-
empt from ERISA regulation . . . ." 113 S. Ct. at 584 n. 3.
tain workers compensation benefits by express reference to ERISA-
covered plans and, “on that basis alone is pre-empted.” 113 S. Ct. at
583. The Kansas statute clearly is a “state law imposing require-
ments by reference to” ERISA-covered plans and, therefore, “must
yield to ERISA.” 113 S. Ct. at 584. “It makes no difference” that
Kan. Stat. Ann.44-511(a)(2)(E) is part of Kansas’ regulation of, and
also relates to, ERISA exempt plans. 113 S. Ct. at 584.
Even a cursory comparison of the District of Columbia stat-
ute at issue in Greater Washington Board of Trade and the Kansas
statute at issue in this case demonstrates that there is no meaningful
basis for distinguishing the statutes and, thus, no justification for di-
rectly contrary outcomes with respect to the ERISA preemption ques-
tion. The Kansas statute requires that “additional compensation” for
purposes of calculating an “average weekly wage” under the KWCA
includes “employer-paid life insurance, health and accident insurance
and employer contributions to pension and profit sharing plans” when
such benefits are discontinued. See Kan. Stat. Ann. 44-511(a)(2)(E).
The District of Columbia statute required that “[a]Jny employer who
proves health insurance coverage for an employee shall provide health
insurance coverage equivalent to the existing health insurance cover-
age of the employee while the employee receives or is eligible to re-
ceive workers’ compensation benefits under this chapter.” D.C. Code
Ann § 36-307(a-1)(1) (Supp. 1992).
Indeed, the economic effect of the District of Columbia and
Kansas statutes on ERISA-covered plans is identical. Both statutes
create financial incentives for employers not to fund, not to provide,
or not to expand ERISA-covered employee benefit plans; the statutes
may even create incentives for employers to reduce or eliminate such
plans. Under either statute, an employer who provides no such ben-
efits is at a financial advantage over an employer who does when
injured workers receive workers compensation benefits.
The District of Columbia statute, by requiring employers to
provide “equivalent” health insurance coverage, may have created a
stronger incentive than the Kansas statute for employers not to fund
ERISA-covered employee benefit plans, but the Kansas statute has
the same effect. Essentially, under the Kansas statute, employers who
provide ERISA-covered benefit plans are required to fund two-thirds
10
(the workers compensation level) of the value of any ERISA-benefit
plans in which an employee participated prior to receiving workers
compensation benefits. Thus, the extent of the employer’s potential
additional liability is different under the District of Columbia and
Kansas statutes, but the effect is the same. “By tying the benefit
levels of the workers’ compensation plan to those provided in an
ERISA-covered plan,” 113 S. Ct. at 583, the Kansas statute, like the
District of Columbia statute, “‘could have a serious impact on the
administration and content of the ERISA-covered plan.”” Ibid. (quot-
ing The Greater Washington Board of Trade v. District of Columbia,
948 F.2d 1317, 1325 (D.C. Cir. 1991)).°
2. Justice Stevens’ Dissent
Justice Stevens was the only Justice to dissent from the Court’s
decision in Greater Washington Board of Trade. Justice Stevens be-
gan his dissent with the following statement of the issue:
The basic question that this case presents is
whether Congress intended to prevent a State from
computing workmen’s compensation benefits on the
basis of the entire remuneration of injured employees
when a portion of that remuneration is provided by
an employee benefit plan. 113 S. Ct. 585 (Stevens,
J., dissenting).
5This Court has recognized that ERISA does not preempt every action
which has an economic effect on ERISA plans. See, e.g., Mackey v. Lanier Collec-
tion Agency & Serv., 486 U.S. 825, 833 and n. 8 (1988) (giving as examples suits
against ERISA plans for unpaid rent, unpaid attorney's fees, and some tort suits).
But, in the words of Chief Judge Posner of the Seventh Circuit, "[t}his is not a
banana-peel case." Pohl v. National Benefits Consultants, Inc., 956 F.2d 126, 128
(7th Cir. 1992). In other words, this is not a case in which the economic effect on
the plans is the result of a generally applicable law that is unrelated to the issues of
employee benefits and compensation. The Kansas workers compensation statute
deals specifically with the question of benefits and compensation to be paid to
qualifying, injured employees, the same types of concerns that are at the core of
ERISA.
11
Justice Stevens’ framing of the issue further confirms that this
Court’s decision in Greater Washington Board of Trade mandates a
holding that ERISA preempts Kan. Stat. Ann. 44-511(a)(2)(E). The
Kansas Supreme Court acknowledged that TLPC “correctly notes
that Justice Stevens’ statement of the issue in Washington Board of
Trade seems also to target K.S.A. 44-511(a)(2)(E).” App. A 10 (em-
phasis added). The court, however, refused to attach any significance
to Justice Stevens’ statement of the issue, offering only the facile ob-
servation that “[h]ad a majority of the Court expressly endorsed Jus-
tice Stevens’ statement of the issue, then LPC’s argument might be
more persuasive, but no member of the majority joined any portion of
the dissent. We limit our consideration of Washington Board of Trade
to the majority opinion.” Jd. at App. A 10.
Of course, the converse of the Kansas Supreme Court’s ob-
servation also is true: no member of the majority in Greater Washing-
ton Board of Trade expressly disavowed nor disagreed with Justice
Stevens’ statement of the issue. Moreover, there was no reason for
the majority to disagree with Justice Stevens’ statement of the issue.
Because the majority disagreed with Justice Stevens regarding the
outcome of the case, there was no reason for the majority to take issue
with his statement of the question presented. The real question is
whether Justice Stevens correctly framed the issue in Greater Wash-
ington Board of Trade, not whether the majority commented upon his
characterization or expressly joined his statement. As the foregoing
discussion demonstrates, TLPC believes that Justice Stevens’ charac-
terization of the question at issue in Greater Washington Board of
Trade was accurate. At the least, the Kansas Supreme Court offered
no persuasive reason for completely disregarding the potential sig-
nificance of Justice Stevens’ statement of the issue in his dissenting
opinion.
B. This Court’s Recent Decision in New York State
Conference of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co.,_ _ U.S.___, 115 S. Ct. 1671
(1995), In No Way Alters The Essential Holding
Of District of Columbia v. Greater Washington
Board of Trade, 506 U.S.__, 113 S. Ct. 580 (1992)
12
In New York State Conference of Blue Cross & Blue Shield
Plans v. Travelers Ins. Co., __ U.S. __, 115 S. Ct. 1671 (1995),
this Court unanimously held that ERISA does not preempt a New
York statute regulating certain hospital costs. In particular, the New
York statute at issue required hospitals to collect surcharges from
patients covered by commercial insurers other than Blue Cross and
Blue Shield. The asserted purpose for the statute was to equalize the
playing field between the commercial insurers, who sometimes of-
fered cheaper but more restrictive coverage policies, and Blue Cross/
Blue Shield which accepted many customers for coverage that the
other insurers would not but consequently might charge higher rates.
115 S. Ct. at 1678-79. Thus, the goal of the statute was to make Blue
Cross/Blue Shield health insurance plans “more attractive (or less
unattractive) as insurance alternatives,” Id. at 1679, a goal which the
Court recognized may have an indirect economic effect on insurance
buyers, including ERISA plans. Ibid.
In considering the contention that ERISA preempted the New
York statute, Justice Souter, writing for the Court, declared that
In Shaw [v. Delta Air Lines, Inc., 463 US.
85 (1983)], we explained that “[a] law ‘relates to’ an
employee benefit plan, in the normal sense of the
phrase, if it has a connection with or reference to
such a plan.” The latter alternative, at least, can be
ruled out [in the New York case]. The surcharges
are imposed upon patients and HMOs, regardless of
whether the commercial coverage or membership,
respectively, is ultimately secured by an ERISA plan,
private purchase, or otherwise, with the consequence
that the surcharge statutes cannot be said to make
“reference to” ERISA plans in any manner. Cf |
Greater Wash. Bd. of Trade, 506 U.S. at__, 113 S.
Ct., at 583 (striking down District of Columbia law
that “specifically refers to welfare benefit plans regu-
lated by ERISA and on that basis alone is pre-
empted”). 115 S. Ct. at 1677 (internal citations
omitted) (emphasis added).
The Court then proceeded to examine the New York statutes
13
under the “connection with” aspect of the ERISA preemption analy-
sis. In so doing, Justice Souter observed that the Court must “go
beyond the unhelpful text and the frustrating difficulty of defining”
ERISA’s key phrase, the “relate to” provision, “and look instead to
the objectives of the ERISA statute as a guide to the scope of the state
law that Congress understood would survive.” 115 S. Ct. at 1677.
Applying that analysis, the Court concluded that the statutes in ques-
tion were not preempted. Jd. at 1677-82. Nonetheless, the Court was
careful to emphasize that “we do not hold today that ERISA preempts
only direct regulation of ERISA plans, nor could we do that with
fidelity to the views expressed in our prior opinions on the matter.”
Id. at 1683 (emphasis added).
The Kansas Supreme Court in this case misread the Court’s
analysis in Blue Cross & Blue Shield Plans. Ignoring the portion of
the Court’s opinion which refers to Greater Washington Board of
Trade, and the importance of the Court’s conclusion that the New
York statutes did not make “reference to” ERISA plans, the Kansas
Supreme Court focused solely on its apparent (but unexpressed) per-
ceptions of the objectives of ERISA. After quoting a single sentence
from this Court’s opinion regarding the objectives of ERISA®, the
Kansas Supreme Court concluded that Kan. Stat. Ann. 44-511
(a)(2)(E)’s “connection” to ERISA plans is too “tenuous, remote or
peripheral,” App.A 18, to justify preemption.
The Kansas Supreme Court, however, ignored the distinction
this Court recognized in Greater Washington Board of Trade and
Blue Cross & Blue Shield Plans between state laws that “make refer-
ence” to ERISA plans (and are therefore preempted) and state laws
‘The Kansas Supreme Court relied solely on this Court's statement that
"[iJndeed, to read the pre-emption provision as displacing all state laws affecting
costs and charges on the theory that they indirectly relate to ERISA plans that
purchase insurance policies or HMO memberships that would cover such services,
would effectively read the limiting language in § 514(a) out of the statute, a con-
clusion that would violate basic principles of statutory interpretation and could not
be squared with our prior pronouncement that '[p]reemption does not occur . . . if
the state law has only a tenous, remote, or periphsral connection with covered
plans, as is the case with many laws of general applicability.” 115 S. Ct. at 1679-
80 (quoting Greater Washington Board of Trade, 113 S. Ct. at 583 n. 1).
14
which arguably only have some “connection to” ERISA plans (a situ-
ation in which the objectives of ERISA become relevant under Blue
Cross & Blue Shield Plans). As explained above in Part 1.A.1, Kan.
Stat. Ann, 44-511(a)(2)(E) “makes reference” to ERISA plans in pre-
cisely the same fashion as the District of Columbia statute which the
Court held ERISA preempted in Greater Washington Board of Trade
“on that basis alone.” Because there is no meaningful basis for distin-
guishing this case from Greater Washington Board of Trade, and this
Court’s unanimous opinion in Blue Cross & Blue Shield Plans clearly
and expressly reaffirms the holding in Greater Washington Board of
Trade, the latter case remains controlling with respect to the Kansas
statute. This Court’s decisions dictate the conclusion that ERISA
preempts Kan. Stat. Ann. 44-51 l(a)(2)(E).
The Kansas Supreme Court’s decision in this case is directly
contrary to the relevant precedent from this Court. For the foregoing
reasons, petitioner TLPC respectfully requests that this Court sum-
marily reverse that court’s decision and direct the Kansas Supreme
Court to enter judgment in TLPC’s favor.
II. The Kansas Supreme Court’s Decision Addresses An Is-
sue Which Has Generated Confusion In The Lower Fed-
eral And State Courts And Which Merits This Court’s
Attention
The Kansas statute at issue in this case, Kan. Stat. Ann. 44-
511(a)(2)(E), is not unique in state workers compensation systems.
See, e.g., Ala. Code § 25-5-1(6)(1992)(“average weekly earnings”
include “fringe benefits,” defined as “the employer’s portion of health,
life, and disability insurance premiums,” unless the employer contin-
ues to pay such benefits during the employee’s period of disability);
Maine Rev. Stat. § 39A-102(4)(H)(1994)(“average weekly wages,
earnings or salary” includes any fringe benefits paid by the employer
but which are discontinued during the employee’s disability); Mich.
Compiled Laws Ann. § 418.371(2)(1993)(same), Tex. Code Ann. §
408.045 (1995 Supp.)(“nonpecuniary wages” are not included in av-
erage weekly wage if employer continues to provide such during the
employee’s period of disability). Cf Alaska Stat. §
23.30.265(15)(1990)(“gross earnings” includes a percentage of the
15
total employer contributions to a qualified pension or profit-sharing
plan in the two years preceding the injury); Fla. Stat. §
440.02(24)(1993)(“wages” includes employer contributions to em-
ployee health insurance plans). Indeed, as the Kansas Supreme Court
observed in this case, “Kansas’ approach with respect to fringe ben-
efits is shared by many states.” App. A 6. Some states, however, in
stark contrast to Kansas, expressly exclude employer contributions to
employee benefit plans in calculating wages for workers compensa-
tion purposes. See, e.g., Mo. Rev. Stat. § 287.250.2(1993 Cum.
Supp.)(term “wages” does not include fringe benefits such as retire-
ment, pension, health and welfare, life insurance or “other employee
or dependent benefit plan furnished by the employer for the benefit of
the employee”); Mont. Code Ann. § 39-7 1-123(2)(1993)(term “wages”
does not include employer contributions for group insurance or pen-
sion plans). Thus, it is neither impossible nor impractical to design a
workers compensation system that does not interfere with the pur-
poses of ERISA. As a practical matter, the resolution of the issue
presented in this case is of importance to many states and potentially
thousands of employers and employees.
Moreover, there is considerable uncertainty and disagreement
in the lower federal and state courts regarding the scope of ERISA
preemption with respect to workers compensation schemes in general.
A number of federal court of appeals decisions resolve the ERISA
preemption question in conflicting ways when considering statutes
that are similar in nature and effect to the Kansas statute at issue in
this case, although TLPC is unaware of any decisions that address
ERISA preemption with respect to the precise type of workers com-
pensation statute at issue in this case.
In Simas v. Quaker Fabric Corp. of Fall River, 6F.3d 849
(ist Cir. 1993), for example, the First Circuit held that ERISA pre-
empted a Massachusetts “tin parachute” law, which provided “for
substantial severance payments to employees who lose their jobs within
specified periods before or after a corporate takeover.” Jd. at 851.
The Massachusetts statute, in terms of its purpose and effect, is not
unlike a workers compensation system. Like a workers compensation
system, the “tin parachute” law relates to the compensation an em-
ployee is to receive following an event that terminates the employee’s
previous source of income.
The First Circuit held that ERISA preempts the Massachu-
16
setts statute. In so doing, the Court first observed that “a state law
may relate to an employee benefit plan even though it does not con-
flict with ERISA’s own requirements.” Jd. at 852 (citing District of
Columbia v. Greater Washington Board of Trade, 506 U.S. ___, 113
S. Ct. 580, 583 (1992)). The court opined that “explanation for the
broad preemption provision is clear: By preventing states from im-
posing divergent obligations, ERISA allows each employer to create
its own uniform plan, complying only with one set of rules (those of
ERISA) and capable of applying uniformly in all jurisdictions where
the employer might operate.” Jd. The First Circuit also commented
that
It may also seem ironic that a federal statute
enacted in large part to protect workers should in-
validate a state measure that has worker protection
as one of its primary objectives. But ERISA, like
many a reform statute has more than one purpose
and more than one beneficiary. The uniformity of
regulation gained by employers under ERISA was
assuredly part of the legislative balancing of inter-
ests and trade-offs. Jd. at 856.
Finally, the court concluded that “[cJourts, who are the least
representative branch of government, are the wrong place to restrike
the balance.” Jd.
Taking a contrary view are decisions, such as Keystone Chap-
ter Assoc. Builders v. Foley, 37 F. 3d 945 (3d Cir. 1994), cert. de-
nied, 115 S. Ct. 1393 (1995). In Keystone, the Third Circuit held that
ERISA does not preempt a Pennsylvania prevailing wage law which
calculates the prevailing wage by expressly including ERISA plan
benefits. See, e.g. Penn. Stat. Ann. 43-260 2a (1992) (“wages” in-
cludes “fringe benefits” which include “all monetary employer pay-
ments to provide benefits under any employee benefit plan, as defined
in section 3(3) of the Employee Retirement Income Security Act of
1974”). The Third Circuit distinguished Greater Washington Board
of Trade as follows: “While the Supreme Court has held a statute’s
reference to ERISA plans grounds for preemption, [citing Greater
Washington Board of Trade}...that statute referred only to the ERISA
plan as the basis for the rights it accorded. But the listing of an
17
ERISA plan as an example of the factors to be calculated into a broader
determination, such as a prevailing wage, is in and of itself, inconse-
quential.” 37 F. 3d at 957 n. 17. See also Guidry v. Sheet Metal
Workers Nat. Pension Fund, 39 F. 3d 1078 (10th Cir. 1994)(en banc),
cert denied, 115 S. Ct. 1691 (1995)(holding that ERISA does not
preempt Colorado garnishment law exempting seventy-five percent
of “disposable earnings” from garnishment where “earnings” is de-
fined to include compensation in the form of pension, retirement, health,
accident, and disability benefits); Minnesota Chapter of Assoc. Build-
ers v. Dept. of Labor, 47 F. 3d 975 (8th Cir. 1995)(holding to the
same effect as Keystone with regard to a Minnesota prevailing wage
law).
Simas, Keystone, and the other cited decisions all were ren-
dered after this Court’s decision in Greater Washington Board of
Trade, and they demonstrate continuing confusion and difficulty on
the part of the lower federal courts in ascertaining the scope of ERISA
preemption in employee compensation matters such as workers com-
pensation, severance payments, gamishment and prevailing wage laws.
For the foregoing reasons, TLPC respectfully requests that
this Court grant this petition for a writ of certiorari and engage in
plenary review of the important and unresolved issue the petition raises.
Alternatively, TLPC respectfully suggests that, given the interests of
the United States in the proper administration and application of
ERISA, this Court could request the views of the Solicitor General
regarding the preemptive scope of ERISA with respect to state work-
ers compensation systems.
—T
18
CONCLUSION
For the foregoing reasons, petitioner The Lawrence Paper Com-
pany respectfully requests that this Court summarily reverse the deci-
sion of the Kansas Supreme Court in this case or, alternatively, grant
this petition for a writ of certiorari and set this case for plenary re-
view.
Respectfully submitted,
J. Donald Lysaught
Mustain, Higgins, Kolich, Lysaught & Tomasic
P.O. Box 171855
Kansas City, Kansas 66117-1855
Attorney for Petitioner
(913) 371-5750
Tuly 2 1995
APPENDIX
Al
IN THE SUPREME COURT OF THE STATE OF KANSAS
THE LAWRENCE PAPER COMPANY, )
a corporation, )
Appellant, )
)
Vv. ) No. 72,751
)
GEORGE R. GOMEZ, )
Workers Compensation Director )
of the State of Kansas )
and )
THE STATE OF KANSAS )
Appellees. )
SYLLABUS BY THE COURT
1.
K.S.A. 44-511(a)(2)(E) of the Kansas Workers Com-
pensation Act, K.S.A. 44-501 ef seq., is not preempted by the
Employee Retirement Income Security Act (ERISA), 29 U.S.C.
§ 1001 ef seg. (1988).
y 4
K.S.A. 44-511(a)(2)(E) has only a tenuous, remote, or
peripheral connection with the covered ERISA plans and does
not “relate to” such plans within the meaning of ERISA § 514(a),
29 U.S.C. § 1144(a) (1988).
Appeal from Shawnee district court; MATTHEW J.
DOWD, judge. Opinion filed June 2, 1995. Affirmed.
J.D. Lysaught, of Mustain, Higgins, Kolich, Lysaught
& Tomasic, Chartered, of Kansas City, argued the case and was
on the briefs for appellant.
C. Michael Lennen, of Morris, Laing, Evans, Brock &
Kennedy, Chartered, of Wichita, argued the cause, and A. J.
A2
Kotich, of Kansas Department of Human Resources, was with
him on the brief for appellee.
The opinion of the court was delivered by
SIX, J.: This is a federal preemption case. The Lawrence
Paper Company (LPC) seeks a judgment under K.S.A. 60-1701
et seq. declaring that a provision of the Kansas Workers Com-
pensation Act (KWCA), K.S.A. 44-501 ef seq., is preempted
by the federal Employee Retirement Income Security Act
(ERISA), 29 U.S.C. § 1001 ef seg. (1988).
K.S.A. 44-0511(a)(2)(E), the Kansas provision in ques-
tion, requires that the value of discontinued employer-paid in-
surance and employer contributions to pension and profit-shar-
ing plans be factored into the computation of disability benefits
for injured employees.
The district court held for the defendants George R.
Gomez, Workers Compensation Director, and the State, rea-
soning that ERISA does not preempt K.S.A. 44-51 1(a)(2)(E).
The district courts’ conclusion rested primarily on the follow-
ing determinations:
“1. The challenged provision of the
KWCA does not materially alter an existing ad-
ministrative scheme under ERISA, nor does it
affect the primary function of plaintiff's benefit
plans."
“2. Any relationship between the chal-
lenged provision of the KWCA and any ERISA-
covered plan maintained by plaintiff is at most
remote, tenuous and peripheral and does not in-
voke the preemptive or supersedure provisions
of 29 U.S.C. § 1144.”
A3
The issue is simply whether the way in which the KWCA,
through K.S.A. 44-511(a)(2)(E), defines an employee’s com-
pensation for purposes of computing disability benefits is pre-
empted by ERISA § 514(a), 29 U.S.C. § 1144 (a) (1988). LPC
seeks to prevent the State from adding the value of discontin-
ued employer-paid insurance, pension, and profit-sharing ben-
efits into the calculation of workers compensation benefits, which
are based on an employee’s compensation at the time of injury.
Our jurisdiction is under K.S.A. 60-1709 (declaratory
judgments) and K.S.A. 20-3017 (transfer from the Court of
Appeals). We hold that the provisions of K.S.A. 44-511(a)(2)(E)
do not “relate to” LPC’s employee benefit plans within the mean-
ing of ERISA’s preemption provision, § 514(a), 29 U.S.C. §
1144(a), and consequently are not subject to preemption. We
affirm the district court.
The preemption issue is one of statutory construction.
Our standard of review is unlimited. See Gillespie v. Seymour,
250 Kan. 123, 129, 823 P.2d 782 (1991).
FACTS
The material facts are not in dispute. LPC is a Kansas
corporation that engages in interstate commerce. It is neither a
religious nor a governmental entity. LPC maintains a health
insurance plan, a 401(k) savings and profit-sharing plan, and a
pension plan for its employees who choose to participate. The
employee benefit plans are within the scope of ERISA, and none
of the above-described plans are maintained for purposes of
complying with the KWCA. Contributions to the plans are made
on behalf of and for the benefit of eligible employees.
LPC is a self-insurer under K.S.A. 44-532. It maintains
self-insured status solely for purposes of complying with the
KWCA.
A4
DIS ION
ERISA preemption is a question of federal law. Deci-
sions of the United States Supreme Court, to the extent they are
applicable, control. Ritchie v. Johnson, 158 Kan. 103, 117, 144
P.2d 925 (1944). Ifthere is no controlling Supreme Court opin-
ion, the weight of authority in the lower federal courts is con-
sidered persuasive. 158 Kan. at 118.
K.S.A. 44-511(a)(2)(E) and the KWCA
Under the KWCA, an injured employee ordinarily is
entitled to receive benefits based upon a percentage of the
employee’s “average weekly wage.” For permanent and total
disabilities and scheduled injuries, compensation ordinarily is
paid at 66-2/3 percent of an employee’s average gross weekly
wage. This compensation level is limited by statutorily estab-
lished maximum levels of weekly compensation, by limits on
total benefits paid, and by limits on the number of weeks for
which benefits may be paid. K.S.A. 44-510c and K.S.A. 44-
510d. The value of discontinued employer-paid life insurance,
health and accident insurance, and employer contributions to
pension and profit-sharing plans is encompassed in the “aver-
age weekly wage” calculation. K.S.A. 44-511(a)(2)(E) and (b).
The term “wage” means the salary or hourly pay, plus “addi-
tional compensation.” K.S.A. 44-511(a)(3). “Additional com-
pensation” includes, among other things, gratuities, cash bo-
nuses, employer-provided room and board, and also the follow-
ing:
“employer-paid life insurance, health and ac-
cident insurance and employer contributions to
pension and profit sharing plans....Additional
compensation shall not include the value of such
remuneration until and unless such remuneration
A5
is discontinued. If such remuneration is discon-
tinued subsequent to a computation of average
gross weekly wages under this section, there shall
be a recomputation to include such discontin-
ued remuneration.” (Emphasis added.) K.S.A.
44-511(a)(2)(E).
The limitation that fringe benefits are added into the
average weekly wage only if such benefits are discontinued is
supported by logic and common sense. The limitation prevents
double recovery by an injured employee whose employer con-
tinues to provide fringe benefits during the employee’s period
of disability. See Maxwell v. City of Topeka, 5 Kan. App. 2d 5,
10, 611 P.2d 161, rev. denied 228 Kan. 807 (1980)(noting that
“the logical reason for the [K.S.A. 44-511(a)(2)(E)] provisos
appears to have been a legislative attempt to add fringe benefits
into a claimant’s average weekly wage only when such benefits
have, in fact, been cut off from the claimant”).
The KWCA imposes few specific restrictions on how
employers must carry out their statutory obligation to pay the
required benefits. Generally, workers compensation payments
must be made “at the same time, place and in the same manner
as the wages of the worker were payable at the time of the
accident,” subject to certain exceptions. K.S.A. 44-512. In
addition, every employer must maintain adequate workers com-
pensation insurance, qualify as a self-insurer, or belong to a quali-
fied group-funded workers compensation pool in order to” secure
the payment of compensation” to its injured employees. K.S.A.
44-532.
The KWCA does not mandate which payment-security
option an employer must exercise. It does not mandate that
employers set up ERISA-covered benefit plans for their em-
ployees or control the terms of any such plan should an em-
ployer elect to provide one. Employers may provide, refuse to
provide, modify, or cancel any ERISA covered benefit plan with-
A6
out violating any provision in the KWCA.
The Kansas Legislature, in K.S.A. 44-511(a)(2)(E),
elected to define an employee’s compensation broadly to in-
clude fringe benefits such as employer-paid insurance, profit-
sharing, and pension contributions. The provision challenged
by LPC is neither new nor unique. It first appeared in the KWCA
in 1974 and remains today in substantially the same form. L.
1974, ch. 203, § 18. Kansas’ approach with respect to fringe
benefits is shared by many states. See, e.g., Ala. Code § 25-5-
57 (1992) (“average weekly earnings” includes “allowances of
any character,” which includes employer-paid medical and life
insurance premiums); Alaska Stat. § 23.30.265(15)
(1990)(“gross earnings” includes a percentage of the total em-
ployer contributions to a qualified pension plan in the two years
preceding the injury); Fla. Stat. § 440.02(24) (1993) (“wages”
includes employer contributions for health insurance for the
employee).
Sc f ERISA
ERISA establishes comprehensive and uniform federal
regulations for private employee pension and welfare benefit
plans. Dist. of Col. v. Washington Trade Bd., 506 US. , Zi
L. Ed. 2d 513, 518, 113 S. Ct. 580 (1992).
“Subject to certain exemptions, ERISA
applies generally to all employee benefit plans
sponsored by an employer or employee organi-
zation. § 4(a), 29 U.S.C. § 1003(a). Among the
plans exempt from ERISA coverage under § 4(b)
are those ‘maintained solely for the purpose of
complying with applicable workmen’s compen-
sation laws or unemployment compensation laws
or unemployment compensation or disability in-
surance laws.’ § 4(b)(3), 29 U.S.C. §
a tes hp Ra SAE et veal
A7
1003(b)(3).” 121 L. Ed. 2d at 518.
LPC maintains employee welfare and pension benefit
plans subject to ERISA, and such plans are not exempt under §
4(b)(3), 29 U.S.C. 1003(b)(3)(1988). The record is less clear,
however, on the nature of LPC’s “plan” for paying workers com-
pensation benefits. LPC’s counsel said in response to a ques-
tion at oral argument that LPC pays workers compensation ben-
efits through its own plan, administered separately from the
ERISA-covered plans it offers employees, stating, “[t]heir [LPC]
personnel director is over that type of administration.” LPC’s
ERISA-covered health care plan provides support for counsel’s
response. The plan specifically excludes from its coverage any
“occupational” injury or illness “for which the individual is en-
titled to benefits under any workers’ compensation law.” Fur-
thermore, in response te a request from defendants to admit
that “there is no connection between [LPC’s] status as a self-
insurer under the Workers’ Compensation Act and any employee
benefit plan,” the LPC alleged no direct administrative connec-
tion. Rather, LPC asserted only the economic link between an
increase in employer-paid ERISA fringe benefits and an increase
in potential liability under the KWCA.
ERISA Preemption
The ERISA preemption provision, § 514 (a), 29 U.S.C.
§ 1144 (a), assures exclusive federal regulation of covered plans.
The intention of Congress in passing § 514 (a) was
oor
to ensure that plans and plan sponsors would
be subject to a uniform body of benefits law; the
goal was to minimize the administrative and fi-
nancial burden of complying with conflicting di-
rectives among States or between States and the
Federal Government..., [and to prevent] the po-
A8
tential for conflict in substantive law...requiring
the tailoring of plans and employer conduct to
the peculiarities of the law of each jurisdiction. ’
Ingersoll-Rand, 498 U.S., at 142.” N.Y. Con-
ference of Blue Cross v. TravelersIns.,__ U.S.
be Bd 26, SS Oe er, 2er
(1995).
An early ERISA preemption case noted that
“[p]reemption of state law by federal statute or regulation is not
favored ‘in the absence of persuasive reasons--either that the
nature of the regulated subject matter permits no other conclu-
sion, or that Congress has unmistakably so ordained.” Alessi v.
Raybestos-Manhattan, Inc., 451 U.S. 504, 522, 68 L. Ed. 2d
402, 101 S. Ct. 1895 (1981)(quoting Chicago & N.W. Tr. Co. v.
Kalo Brick & Tile Co., 450 U.S. 311, 317, 67 L. Ed. 2d 258,
101, S. Ct. 1124 [1981]). A decade after Alessi, the Supreme
Court seemed to abandon the principle of disfavored federal
preemption in ERISA cases, instead emphasizing the broad lan-
guage of § 514(a), superseding all state laws that “relate to”
ERISA plans. Washington Board of Trade, 121 L. Ed. 2d at
520. Aclose reading of Blue Cross suggests that the Court has
backed away from, or at least tempered, the broad § 514(a)
interpretation suggested in Washington Board of Trade. See
Blue Cross, 115 S. Ct. at 1676-80.
Washington Board of Trade
We next address LPC’s contention that Washington
Board of Trade controls the outcome of the instant case. LPC
argues that Washington Board of Trade raised an “identical ques-
tion” to the one now before us and answered it in favor of ERISA
preemption. We do not agree either that the questions are iden-
tical or that Washington Board of Trade controls.
Washington Board of Trade preempted the District of
A9
Columbia’s workers compensation law which, in 1991, added
the following requirement:
“Any employer who provides health in-
surance coverage for an employee shall provide
health insurance coverage equivalent to the ex-
isting health insurance coverage of the employee
while the employee receives or is eligible to re-
ceive workers’ compensation benefits under this
chapter.” D.C. Code Ann. § 36-307(a-1)(1)
(1992 Supp.) (Emphasis added).
The Greater Washington Board of Trade, a nonprofit
corporation that provided health insurance coverage for its
employees, challenged the “equivalent”-benefits requirement as
preempted by ERISA. The United States Supreme Court agreed,
holding that the District of Columbia law “specifically refers to
welfare benefit plans regulated by ERISA and on that basis alone
is pre-empted.” Washington Board of Trade, 121 L. Ed. 2d at
520. The Court further said that “any state law imposing re-
quirements by reference to such covered programs must yield
to ERISA.” 121 L. Ed. 2d at 521.
The Court also observed that “[p]re-emption does not
occur, however, if the state law has only a ‘tenuous, remote, or
peripheral’ connection with covered plans.” 121 L. Ed. 2d at
520 n.1.
Justice Stevens was the lone dissenter. He described
the Court’s analysis as entering “uncharted territory” and hav-
ing “open-ended implications.” 121 L Ed. 2d. at 524-26
(Stevens, J., dissenting.) Justice Stevens framed what he be-
lieved to be the issue as follows:
“The basic question that this case pre-
sents is whether Congress intended to prevent a
State from computing workmen’s compensation
A 10
benefits on the basis of the entire remuneration
of injured employees when a portion of that re-
muneration is provided by an employee benefit
plan.” 121 L. Ed. 2d at 522 (Stevens, J., dis-
senting).
LPC correctly notes that Justice Stevens’ statement of
the issue in Washington Board of Trade seems also to target
K.S.A. 44-511(a)(2)(E). LPC argues that the majority’s failure
to expressly challenge Justice Stevens’ statement of the issue
establishes its concurrence in his framing of it. Thus, LPC rea-
sons that the outcome of preemption in Washington Board of
Trade dictates the same result for K.S.A. 44-51 1(a)(2)(E). Had
a majority of the Court expressly endorsed Justice Stevens’ state-
ment of the issue, then LPC’s argument might be more persua-
sive, but no member of the majority joined any portion of the
dissent. We limit our consideration of Washington Board of
Trade to the majority opinion.
LPC next contends that preemption is required under
Washington Board of Trade because “(t]he benefit levels of the
Kansas Workers Compensation Act are tied directly to the mon-
etary value of the ERISA-covered plans furnished by plaintiff.”
In support, LPC cites a similar statement in Washington Board
of Trade discussing the Court of Appeals’ opinion, which was
affirmed. See 121 L. Ed. 2d at 519-20.
It is true that under K.S.A. 44-511(a)(2)(E) there is a
direct correlation between benefits provided to an employee
under certain ERISA-covered benefit plans and the amount of
disability benefits the employee may be eligible to receive under
the KWCA. For every dollar that an employee, at the time of
injury, receives in K.S.A. 44-511(a)(2)(E) fringe benefits which
in many (but not all) cases will be paid through ERISA-covered
plans, the employee is eligible to receive two-thirds of a dollar
in disability benefits in the event the injured employee’s fringe
benefits are discontinued. The same correlation exists with re-
All
spect to wages, gratuities, cash bonuses, employer-provided
room and board, and payments in forms other than cash. The
more an employee earns prior to a compensable disability, the
more the employee is eligible to receive (and the employer li-
able to pay) in workers compensation.
Significantly, the KWCA imposes no mandate for the
continuation of ERISA benefits (or their equivalent) to injured
employees. Kansas merely looks to the value of ERISA ben-
efits, if discontinued, as one factor to be included in the defini-
tion of “wages” used to compute workers compensation benefit
levels--no less, no more. If an employee has been paid a weekly
cash wage of $100, but receives no other benefits, the employee’s
“wage" for the purpose of determining workers compensation
payment levels under the KWCA is $100. Similarly, under the
KWCA, if an employee has received weekly compensation of
$100 composed of $80 cash and discontinued ERISA benefits
having a value of $20, the employee’s “wage” is again $100.
LPC, however, urges that the $20 compensation attributable to
discontinued ERISA benefits be ignored.
The connection between ERISA plans and workers com-
pensation benefits is significantly different in K.S.A. 44-
511(a)(2)(E) from the connection reviewed in Washington Board
of Trade. The District of Columbia law required that any em-
ployer who provided health insurance coverage for an employee
must continue, for up to 52 weeks, the “existing health insur-
ance coverage” or its equivalent at the same benefit level that
the employee had at the time of injury. 121 L. Ed. 2d at 519.
Thus, the District of Columbia law did more than merely attach
a dollar value to a fringe benefit and include a percentage of
that value in computing workers compensation benefits. The
District of Columbia law essentially mandated the continuation
of ERISA-covered benefit plans. In practical effect, the law
prevented an employer from discontinuing ERISA-covered
health insurance coverage for employees receiving workers com-
pensation benefits. 121 L. Ed. 2d at 520.
Al2
Several circuits have considered ERISA preemption is-
sues since Washington Board of Trade. Certiorari has been
denied in each case. The Third Circuit has expressed the fol-
lowing guidelines for determining if a law “relates to” an ERISA
plan, either directly or indirectly:
“A rule of law relates to an ERISA plan
if it is specifically designed to affect employee
benefit plans, if it singles out such plans for spe-
cial treatment, or if the rights or restrictions it
creates are predicated on the existence of such a
plan...
This does not end our inquiry, however.
A state rule of law may be preempted even
though it has no such direct nexus with ERISA
plans if its effect is to dictate or restrict the
choices of ERISA plans with regard to their ben-
efits, structure, reporting and administration, or
if allowing states to have such rules would im-
pair the ability of a plan to function simulta-
neously in a number of states.” Keystone Chap-
ter, Assoc Builders v. Foley, 37 F. 3d 945, 955
(3d Cir. 1994), cert. denied 115 S. Ct. 1393
(1995)(quoting United Wire v. Morristown Mem.
Hosp., 995 F. 241179, 1192-93 [3d Cir.], cert.
denied 114 S. Ct. 382 [1993]).
In Guidry v. Sheet Metal Workers Nat. Pension Fund,
39 F3d 1078 (10th Cir. 1994)(en banc), cert. denied 115 S. Ct.
1691 (1995), the Tenth Circuit examined whether ERISA pre-
empted a Colorado law exempting 75 percent of “disposable
earnings” from garnishment, where “earnings” was defined to
include
“compensation paid or payable for per-
A 13
sonal services, whether denominated as wages,
salary, commission, bonus, avails of any pen-
sion or retirement benefits, or deferred compen-
sation plan, avails of health, accident, or dis-
ability insurance, or otherwise.” Colo. Rev.
Stat. § 13-54-104(1)(b)(1987). (Emphasis
added.)
Guidry held that despite the law’s “generic reference to pension
benefits,” it was “nonetheless one of general application” that
did not come within ERISA’s preemptive provision. 39 F.3d at
1086. Guidry reasoned that “[t]he Colorado garnishment ex-
emption does not affect the calculation of plan benefits, nor does
it otherwise impact the administration of the plan or the rela-
tionship among the plan entities.” 39 F.3d at 1085.
In Foley, 37 F.3d 945, the Third Circuit considered
whether ERISA preempted provisions of the Pennsylvania Pre-
vailing Wage Act. The Prevailing Wage Act required public
works contractors to pay employees the prevailing minimum
wage, which was defined to include both a cash component and
a benefits component. 37 F.3d at 950. The benefits component
of the prevailing minimum wage was determined by “‘[f]ringe
benefits’ paid or to be paid, including payment whether made
directly or indirectly, to the workmen for sick, disability, death,
other than Workmen’s Compensation, medical, surgical, hospi-
tal, vacation, travel expense, retirement and pension benefits.”
37 F.3d at 950. Foley held that ERISA preemption did not arise
simply because “some of the benefits the Secretary is permitted
to count in calculating the prevailing wage will come from
ERISA plans.” 37 F.3d at 957. The court continued: “[W]e do
not believe ERISA requires a state to ignore the existence of
ERISA benefits when considering overall remuneration to work-
ers.” 37 F.3d at 957.
The Foley court distinguished the prevailing wage law’s
“connection” to ERISA plans from the “equivalent” benefits
Al4
law preempted in Washington Board of Trade. Foley explained
that whereas the equivalent benefits requirement, and resulting
legal right for employees, was “premised on the existence of
ERISA plans, “ the Pennsylvania prevailing wage law “could be
meaningfully applied” even “[iJn the absence of ERISA plans.”
37 F.3d at 957. The court explained further:
“[T]hat statute [in Washington Board of Trade}
referred only to the ERISA plan as the basis for
the rights it accorded. But the listing of an
ERISA plan benefit as an example of the factors
to be calculated into a broader determination,
such as a prevailing wage, is in and of itself in-
consequential. We have held that ‘[w]here, as
here, a reference to an ERISA plan can be ex-
cised without altering the legal effect of a stat-
ute in any way, we believe the reference should
be regarded as without legal consequences for §
514(a) purposes.” 37 F.3d at 957 n. 17 (quot-
ing United Wire, 995 F.2d at 1192).
Recently, the Eighth Circuit followed the reasoning of the Third
Circuit’s Foley opinion in an ERISA preemption challenge to
the Minnesota Prevailing Wage Law. Minn. Chapter of Assoc.
Builders v. Dept. Labor, 47 F.3d 975, 979-80 (8th Cir, 1995).
Finally, the First Circuit found in Combined Mgt. v. Su-
perintendent of Bur. of Ins., 22 F.3d 1 (ist Cir.), cert. denied
115 S. Ct. 350 (1994), that ERISA did not preempt a Maine
law requiring employers to maintain a workers compensation
plan administered separately from any multi-benefit ERISA-
covered plan. Combined Management, Inc., (CMI) challenged
the law, asserting a right under ERISA to continue providing
workers compensation benefits through its multi-benefit ERISA
plan. The First Circuit upheld the state law, reasoning, in part,
as follows:
“Maine’s law, while having an economic impact
on CMI, does not have an economic impact on
the IAEA Plan itself. Clearly, any law that in-
creases a company’s cost of doing business can
be said to affect that business’s ability to provide
benefits under its welfare benefit plan. This is
not the same, however, as imposing burdens on
the welfare benefit plan, itself. The increased
cost or administrative burdens imposed by the
state law must have some connection to the cov-
ered ERISA plan before the preemption analysis
can come into play.”
The same reasoning applies to K.S.A. 44-511(a)(2)(E).
We do not read Washington Board of Trade as requiring
preemption merely on the basis that a statute refers to ERISA
benefits or plans. Each of the circuit courts in Guidry, Foley,
Minn. Chapter, and Combined Mgt. carefully examined the ac-
tual effect of the challenged state law on any ERISA covered
plans to decide whether preemption was required.
We agree with (1) the Foley court’s suggestion that
merely listing ERISA fringe benefits as one factor to be included
in a broader calculation is “in and of itself inconsequential” for
§ 514(a) purposes, and (2) the Combined Mgt. court’s recogni-
tion that ERISA preemption does not arise merely because of a
state law that increases a company’s cost of doing business in a
way that could be alleviated by ERISA preemption.
Blue Cross
Six days after oral argument in the instant case, the United
States Supreme Court filed Blue Cross, 115 S. Ct. 1671. A
unanimous court, speaking through Justice Souter, reversed the
trial court, (813 F. Supp. 996 [S.D.N. Y. 1993]), and the Court
A 16
of Appeals, (14 F.3d 708, 718 [2d Cir. 1993]), holding that the
New York statute in question was not preempted by ERISA.
The Court of Appeals in Blue Cross, in affirming the
trial court’s finding of ERISA preemption, relied on Shaw v.
Delta Air Lines, Inc., 463 U.S. 85, 77 L. Ed. 2d 490, 103 S. Ct.
2890 (1983), and Washington Board of Trade. The Court of
Appeals reasoned that ERISA’s preemption clause must be read
broadly to reach any state law having a connection with, or ref-
erence to, covered benefit plans. See 115 S. Ct. at 1675-76.
The Supreme Court disagreed. 115 S. Ct. at 1676.
The New York statute questioned in Blue Cross required
hospitals to collect surcharges from patients covered by a com-
mercial insurer but not from patients insured by a Blue Cross/
Blue Shield plan. Blue Cross/Blue Shield, Medicaid, and HMO
patients were billed at the hospital’s Diagnoses Related Group
(DRG) rate. Patients covered by commercial insurance plans
were billed at the DRG rate plus a 13% surcharge to be retained
by the hospital. Commercially insured patients were also billed
an additional 11% surcharge to be turned over to the State.
The Court of Appeals decided that the surcharges were meant
to increase the costs of certain insurance and HMO health care
and held that this purposeful interference with the choices that
ERISA plans make for health care coverage constitutes a “con-
nection with” ERISA plans, triggering preemption. 14 F.3d at
719.
The Supreme Court disagreed, holding that New York’s
surcharge provisions do not “relate to” employee benefit plans
within the meaning of § 514(a) and, thus, are not preempted.
Blue Cross charts its course into the ERISA preemption seas,
observing:
“(W]e have never assumed lightly that
Congress has derogated state regulations, but
instead have addressed claims of pre-emption
with the starting presumption that Congress does
Al7
not intend to supplant state law. [Citations omit-
ted.] Indeed, in cases like this one, where fed-
eral law is said to bar state action in fields of
traditional state regulation, [citation omitted] we
have worked on the ‘assumption that the his-
toric police powers of the States were not to be
superseded by the Federal Act unless that was
the clear and manifest purpose of Congress.””
115 S. Ct. at 1676.
As to the meaning of the phrases “relate to” and “con-
nection with,” Blue Cross instructs us to “go beyond the un-
helpful text and the frustrating difficulty of defining its key term,
and look instead to the objectives of the ERISA statute as a
guide to the scope of the state law that Congress understood
would survive.” 115 S. Ct. at 1677. Blue Cross observes:
“Indeed, to read the pre-emption provi-
sion as displacing all state laws affecting costs
and charges on the theory that they indirectly
relate to ERISA plans that purchase insurance
policies or HMO memberships that would cover
such services, would effectively read the limit-
ing language in § 514(a) out of the statute, a
conclusion that would violate basic principles of
statutory interpretation and could not be squared
with our prior pronouncement that ‘[p]reemption
does not occur...if the state law has only a tenu-
ous, remote, or peripheral connection with cov-
ered plans, as is the case with many laws of gen-
eral applicability."" 115 S. Ct. at 1679-80.
ee
Al8
CONCLUSION
We hold that the connection between K.S.A.(a)(2)(E)
and LPC’s ERISA plans is only “tenuous, remote, or periph-
eral.” The provisions of K.S.A. 44-511(a)(2)(E) do not “relate
to” the plans within the meaning of ERISA § 514(a). Blue
Cross and the recent federal Circuit Court ERISA preemption
decisions referenced herein support our conclusion that K.S.A.
44-511(a)(2)(E) of the KWCA is not preempted by § 514(a) of
ERISA.
Affirmed.
Abbott, J., not participating.
Miller, C. J. Retired, assigned.
Bl
IN THE DISTRICT COURT
OF SHAWNEE COUNTY, KANSAS
ELEVENTH DIVISION
THE LAWRENCE PAPER COMPANY, _ )
a corporation, )
Plaintiff, )
)
vs. YNo. 93 CV 639
)
GEORGE R. GOMEZ, Workers’ )
Compensation Director of the State )
)
)
of Kansas, and THE STATE OF KANSAS,
Defendants.
RAND F DECISION
THIS ACTION was filed as a Declaratory Judgment
suit seeking determination of the issue regarding preemption by
the Federal ERISA law of a statutory provision in the Kansas
Workman’s Compensation statute. Both parties through coun-
sel have filed Motions for Summary Judgment. The matter has
been argued and extensively briefed and the Court is prepared
to render a decision herein. The Court adopts the findings of
fact presented by the Defendants and indeed there are no sub-
stantial disputes between the parties as to the facts before the
Court.
The Plaintiff correctly states that the Federal Statutory
and Administrative scheme announced by ERISA does preempt
any state statutes which attempt to affect employee welfare ben-
efit plans. The cases have stated that this preemption is broad
in scope but there are exceptions to the preemption provisions.
This Court determines that the cases discussing exceptions to
the preemption provisions are controlling and that the Workman’s
Compensation provision of the Kansas law in question should
B2
be, and is exempt from ERISA preemption. In the Court’s judg-
ment the case cited by both parties, District of Columbia vs.
Greater Washington Board of Trade, 506 U.S.__, 121 L-Ed.2d.
513, 522, 113 S. Ct. (1992), more comprehensively embraces
the Defendants’ position than that of the Plaintiff.
The Kansas statute in question, K.S.A. 44-511(a)(1)
defincs additional compensation to include:
“employer-paid life insurance, health and acci-
dent insurance and employer contributions to
pension and profit sharing plans... Additional
compensation shall not include the value of such
remuneration until and unless such remuneration
is discontinued. If such remuneration is discon-
tinued subsequent to a computation of average
gross weekly wages under this section, there shall
be a recomputation to include such discontin-
ued remuneration.”
This provision does in certain isolated circumstances require
the recalculation of Workman’s Compensation benefits consid-
ering a benefit plan covered by ERISA. In the Court’s judg-
ment this does not preempt the Kansas law, but merely is an
isolated incidental and peripheral reference to an ERISA plan.
The Court also believes that the distinction made between plans
and benefits by the Defendants is a good and viable distinction
and that where the State law does not affect a benefit plan, it is
not preempted. And this is the case in Kansas as well as other
states where this issue has been explored.
ERISA defines employee benefit plan as “any plan. . .es-
tablished or maintained by an employer. . .for the purpose of
providing for its participants or their beneficiaries, . (A) medi-
cal, surgical, or hospital care or benefits, or benefits in the event
of sickness, accident, disability, death or unemployment. . .” 29
U.S.C. Section 1144(a) (1985).
B3
Employee benefit plans subject to ERISA’s provisions
include plans established or maintained (1) by any employer
engaged in commerce or in any industry or activity affecting
commerce. 29 U.S.C. Section 1003(a) (1985). Plaintiff is an
employer engaged in commerce or in any industry or activity
affecting commerce.
ERISA preempts state laws if they relate to any em-
ployee benefit plan established or maintained by an employer
engaged in commerce or in any industry or activity affecting
commerce. 29 U.S.C. Section 1144(a) (1985).
In Shaw v. Delta Airlines, Inc., the U.S. Supreme Court
first determined the scope of ERISA preemption. Shaw v. Delta
Airlines, Inc., 463 U.S. 85, 103 S. Ct. 2890, 77 L.Ed.2d 490
(1983). The issue was whether ERISA preempted New York
laws prohibiting discrimination in employee benefit plans. Jd.
at 88. The state law required employers to pay sick-leave ben-
efits to pregnant employees. Jd. The Court ruled that the New
York laws at issue “related to” employee benefit plans. /d. at
96. A law “relates to” an employee benefit plan in the normal
sense of the phrase, if it has a connection with or reference to
such a plan. /d. at 96-97. The Court held that if a state law
“relates to” an employee benefit plan, ERISA preempts it even
if the state law does not involve subject matters explicitly cov-
ered by ERISA. /d. at 100.
In Metropolitan Life Ins. Co. v. Massachusetts, the is-
sue was whether ERISA preempted a Massachusetts statute
requiring that Massachusetts residents receive mental health-
care benefits. Metropolitan Life Ins. Co. v. Massachusetts, 471
U.S. 724, 105 S. Ct. 2380, 85 L.Ed.2d 728 (1985). Massachu-
setts argued that its benefit law, as applied to insurance compa-
nies that sell insurance to benefit plans, was a law which regu-
lated insurance, not health, and that ERISA’s saving clause
1144(b)(2)(A), saved the law from ERISA’s preemption clause.
Id. at 733.
Section 1144(b)(2)(A) states that “[e]xcept as provided
B4
in subparagraph (B), nothing in this subchapter shall be con-
strued to exempt or relieve any person from any law of any
State which regulates insurance, banking, or securities.” Sub-
paragraph (B) states that:
Neither an employee benefit plan described in
section 1003 (a) of this title, which is not ex-
empt under section 1003 (b) of this title. . .shall
be deemed to be an insurance company or other
insurer. . .or to be engaged in the business or
insurance. . .for purposes of any law of any State
purporting to regulate insurance companies. .
Section 1144(b)(B).
The Metro Life court ruled that the Massachusetts law
related to benefit plans and therefore, was preempted by ERISA.
Id. at 735. However, the Court stated that Section 1144 sub-
stantially qualified ERISA’s preemption power with regard to
insurance laws which regulate insurance. Jd. To determine
whether the benefit law was a law regulating insurance, the Court
used a three-pronged test. Jd. 743. First, whether the practice
had the effect of transferring or spreading a policyholder’s risk.
Second, whether the practice was an integral part of the policy
relationship between the insurer and the insured. Third, whether
the practice was limited to entities within the insurance indus-
try. Id. The Court determined that the Massachusetts law met
these criteria holding that “if a state law regulates insurance
.. .it is not preempted” by ERISA. /d. at 746.
In Fort Halifax Packing Co. v. Coyne, the issue was
whether ERISA preempted a Maine statute requiring employ-
ers to make a one-time, lump sum severance payment to termi-
nated employees. Fort Halifax Packing Co. v. Coyne, 482 U.S.
1, 14 L.Ed.2d 1, 107 S. Ct. 2211 (1987). No employer-created
severance benefit plan existed at the time the state enacted the
statute. 482 U.S. at 6. The severance payment requirement
B5
was driven entirely by the operation of the statute, not by an
employer-created benefit plan. Jd. No administrative scheme
whatsoever was required to implement the one-time lump-sum
payment. /d. Only in the event of termination would the
employer’s obligation to pay arise. /d. at 8. The statute re-
quired the employer to assume neither responsibility to pay ben-
efits on a regular basis, nor periodic demands on its assets cre-
ating a need for financial coordination and control. Jd. The
Court explained the purpose behind ERISA’s preemption pro-
vision:
ERISA’s preemption provision was prompted by
recognition that employers establishing and main-
taining employee benefit plans are faced with the
task of coordinating complex administrative ac-
tivities. A patch-work scheme of regulation
would introduce considerable inefficiencies in
benefit program operation, which might lead
those employers with existing plans to reduce
benefits, and those without such plans to refrain
from adopting them. Preemption ensures that
the administrative practices of a benefit plan will
be governed by only a single set of regulations.
HR Rep. No. 93-533, p. 12 (1973)
In light of ERISA’s purpose, the Court determined that
Maine’s statute in no way raised the types of concerns that
prompted preemption. /d. at 11. The statute neither conflicted
with nor impeded the employer’s adoption or maintenance of a
uniform benefit plan. Jd. The Court defined employee benefit
plan as “benefits whose provision by nature requires an ongoing
administrative program to meet the employer’s obligations.” /d.
at 11. The Court held that ERISA did not preempt the statute
because the statute merely related to “employee benefits.” The
Court reasoned that Congress, in enacting ERISA, did not in-
B6
tend to preempt one-time, lump-sum payments entailing no
implementation or regulation of an administrative scheme. . ."[t]o
do little more than write a check hardly constitutes the opera-
tion of a benefit plan.” Jd. at 7.
In Angst v. Mack Trucks, Inc., plaintiff claimed its em-
ployer wrongfully denied him a promised severance package
consisting of continuation of certain employee benefits for a
period of one year, plus a one-time, lump-sum payment at the
time of termination. Angst v. Mack Trucks, Inc., 969 F2d 1530
(1992). The Court ruled that ERISA did not preempt the
plaintiff's claim although the claim involved an existing employee
benefit plan. Jd. at 1540-41. The Court determined that the
plaintiff's claim did not relate to an ERISA plan because it did
not require “the creation of a new administrative scheme, and
[the claim] did not materially alter an existing administrative
scheme.” /d. The Court stated that “while ERISA would con-
cededly preempt state legislation which purported to regulate
existing employee benefit plans, a terminated employee’s claim
to continued employment benefits does not implicate ERISA
when the continued benefits are administered pursuant to an
existing administrative scheme.
In Jacob v. Smithkline Beecham, the U.S. District Court
ruled, based on Angst, ruled that ERISA did not preempt a ter-
minated employee’s claim to continued employment benefits.
824 F.Supp. 552, 559 (E. D. Pa. 1993). The Jacob court ruled
that no ERISA plan was implicated because the continuation of
benefits did not require the employer to administer the benefits
under a separate administrative scheme. Jd. The court cited
District of Columbia v. Greater Washington Board of Trade,
decided five months after Angst, and acknowledged Greater
Washington's and Angst's contrary holdings. /d. at 558, n.12.
The Jacob court, however, distinguished the facts in its and the
Angst case from those in Greater Washington and declined to
deem Angst overruled. Jd. The Jacob court stated that “until
the Third Circuit says otherwise, this Court will continue to
B7
adhere to Angst in the absence of a Supreme Court holding that
does not unquestionably overrule it.” /d.
In Gray v. Quaker Fabric Corp., plaintiffs filed com-
plaints alleging a right to severance pay under a Massachusetts
statute which entitled certain terminated employees to a lump-
sum severance payment. Gray v. Quaker Fabric Corp., 809
F.Supp 163 (D.Mass 1992). Like the statute in Fort Halifax,
this statute required one-time, lump-sum payments in the event
of termination. Jd. However, the statute also required employ-
ers to monitor terminations and payments over two and three
year periods and establish and maintain procedures for deter-
mining employee payment eligibility. /d. at 167. The Gray court
ruled that the Massachusetts statute’s effect involved much more
than the “unthinking, one-time, nondiscretionary application. .
.in Fort Halifax. . .and that, as such, the statute was preempted
by ERISA. /d. 167.
In Monarch Cement Company v. Lone Star Industries,
Inc., the issue was whether a claim involving a business-sale
agreement related to an employee benefits plan thereby invok-
ing ERISA or whether Kansas State law should apply in decid-
ing breach of contract liability. Monarch Cement Company v.
Lone Star Industries, Inc., 982 F.2d 1148 (1982). The Tenth
Circuit explained that ERISA preemption is not “triggered [by]
just any indirect effect on administrative procedures but rather
[by] an effect on the primary administrative functions of benefit
plans, such as determing an employee’s eligibility for a benefit
and the amount of that benefit.” Ja The Court held that ERISA
did not preempt the plaintiff's claim because the claim neither
disturbed the administration of a plan, calculation of benefits,
determination of entitlement to benefits nor did it “affect the
relations among principal ERISA entities, the employer, the plan,
the plan fiduciaries, and the beneficiaries as such.” Hospice of
Metro Denver, Inc. v. Group Health Ins. of Okla., Inc., 944
F.2d 752, 756 (10th Cir. 1991). The Court agreed that “some
state actions may affect employee benefit plans in too tenuous,
B8
remote, or peripheral a manner to warrant a finding that the law
‘relates to’ the plan.” Jd. (citing Shaw. 463 U.S. at 100 n. 21,
103 S.Ct. at 2901 N. 21).
In conclusion the Kansas statute does not materially al-
ter an existing administrating scheme under ERISA. It has no
affect on the primary function of Lawrence Paper Company’s
benefit plan and therefore the Federal ERISA law is not pre-
emptive. The Defendant’s Motion for Summary Judgment is
granted and the Plaintiff's Motion for Summary Judgment is
denied. It is requested that the counsel for the Defendant pre-
pare an appropriate Journal Entry reflecting the Court’s find-
ings.
/S/ Matthew J. Dowd
MATTHEW J. DOWD
DISTRICT JUDGE
DIVISION ELEVEN
DATE: 9-14-94
B9
IN THE DISTRICT COURT Fy
OF SHAWNEE COUNTY, KANSAS 4&0 gy o
38D) STRICT oy ERK
JU Coy
THE LAWRENCE PAPER COMPANY, _) Sep P IS TRICT
a corporation, ) 6 2 28 Pp
Plaintiff, Mg
v )
YNo. 93 CV 639
)Court No. 11
GEORGE R. GOMEZ, Workers’ )
Compensation Director of the State )
of Kansas, and THE STATE OF KANSAS, )
Defendants. )
JOURNAL ENTRY OF JUDGMENT
NOW on this 2nd day of September, 1994, this matter
comes on for hearing on the motion for summary judgment of
plaintiff The Lawrence Paper Company and the cross-motion
for summary judgment of defendants George R. Gomez, Work-
ers Compensation Director, and the State of Kansas. The plain-
tiff appears by and through its attorney of record J. D. Lysaught
of Mustain, Higgins, Kolich, Lysaught & Tomasic, Chartered,
Kansas City, Kansas. Defendants appear by and through their
attorneys of record, Michael Lennen of Morris, Laing, Evans,
Brock & Kennedy, Chartered, Wichita, Kansas, and A. J. Kotich,
Kansas Department of Human Resources, Topeka, Kansas.
There are no other appearances.
WHEREUPON, the court having heard the statements
of counsel and having reviewed the files herein, and being duly
advised in the premises, enters judgment as follows and makes
the following findings of fact and conclusions of law:
B 10
FINDIN F FA
l. There are no genuine issues as to any material facts.
2. Plaintiff is a corporation organized and existing under
the laws of the State of Kansas and its principal office and place
of business is in Lawrence, Douglas County, Kansas.
3. Defendant, George R. Gomez, is the duly appointed,
qualified and acting Workers Compensation Director of the State
of Kansas, and the State of Kansas has heretofore been joined
as a proper party defendant in this action.
4. Plaintiff is engaged and operates in interstate commerce
and is an industry and activity affecting interstate commerce.
Plaintiff is also operating under and pursuant to the Kansas
Workers Compensation Act (““KWCA”), K.S.A. 44-501 ef seq.,
as amended, as a self-insurer and is duly qualified as such.
3 Plaintiff has heretofore furnished employer-paid life in-
surance, health and accident insurance and employer contribu-
tions to pension and profit sharing plans to and for the benefit of
its employees and such plans are included in the categories enu-
merated in K.S.A. 44-511(a)(2)(E).
6. Defendant, George R. Gomez, has heretofore required
that the monetary value of such benefits be utilized in recompu-
tation of workers compensation when remuneration, as defined
in K.S.A. 44-511(a)(2), is discontinued.
7. That the aforesaid employer-paid benefits are welfare
benefit plans under the Employee Retirement Income Security
Act of 1974 (“ERISA”) because they involve a fund or pro-
gram maintained by the plaintiff for the purpose of providing
benefits for plaintiff's employees through the purchase of insur-
ance or otherwise as defined in 29 U.S.C. § 1002(1).
8. Plaintiff's ERISA-covered employee benefit plans are
maintained separate and apart from any requirement of the
KWCA.
9. Plaintiff is not prevented by the KWCA from terminat-
ing any of its ERISA-covered employee benefit plans.
Bll
10. _— Plaintiff is not prevented by the KWCA from amending
or modifying terms of any of its ERISA-covered employee ben-
efit plans.
11. The KWCA does not require plaintiff to maintain or es-
tablish employee benefit plans for employees receiving work-
ers’ compensation benefits equivalent to any of its ERISA-cov-
ered employee benefit plans. The KWCA does not require plain-
tiff to maintain any ERISA-covered employee benefit plans upon
termination of an employee receiving workers’ compensation
benefits.
12. Plaintiff's status as a self-insurer under K.S.A. 44-532
is maintained for the purpose of complying with the KWCA and
as an economic alternative to purchase of workers’ compensa-
tion insurance.
13. | The challenged provision of the KWCA affects only the
level of workers’ compensation benefits awarded injured work-
ers under the KWCA and imposes no legal, regulatory or ad-
ministrative requirements on any ERISA-covered benefit plan.
CONCLUSIONS OF LAW
1. The challenged provision of the KWCA, K.S.A. 44-
511(a)(2)(E), does not materially alter an existing administra-
tive scheme under ERISA, nor does it affect the primary func-
tion of plaintiff's benefit plans.
"4. Any relationship between the challenged provision of
the KWCA and any ERISA-covered plan maintained by plain-
tiff is at most remote, tenuous and peripheral and does not in-
voke the preemptive or supersedure provisions of 29 U.S.C. §
1144.
3. The court adopts such other conclusions of law as are
set forth in its September 14, 1994, Memorandum of Decision
filed herein.
IT IS THEREFORE BY THE COURT ORDERED that
plaintiff's Motion for Summary Judgment be, and same is hereby,
B 12
denied.
IT IS FURTHER ORDERED BY THE COURT that
defendants’ Cross Motion for Summary Judgment be, and the
same is hereby granted; that judgment be entered against plain-
tiff denying its petition for declaratory and injunctive relief, and
that defendants be awarded costs.
IT IS BY THE COURT SO ORDERED.
/S/ Matthew J. Dowd
THE HONORABLE MATTHEW J. DOWD
APPROVED:
/S/ J. D. Lysaught
J.D. Lysaught #4056
MUSTAIN, HIGGINS, KOLICH, LYSAUGHT
& TOMASIC, Chartered
P. O. Box 171855
Kansas City, Kansas 66117-1855
(913) 371-5750
ATTORNEYS FOR THE PLAINTIFF
/S/ Michael Lennen
Michael Lennen #08505
MORRIS, LAING, EVANS, BROCK
& KENNEDY, Chartered
200 West Douglas, Fourth Floor
Wichita, Kansas 67202-3084
(3 16)262-2671
ATTORNEYS FOR THE DEFENDANTS
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