# Amicus Curiae Brief — Standard Insurance Co. v. Saklad

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1994
- **Citation:** 510 U.S. 1184

## Text

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se No. 93-799

IN THE

Supreme Court of the United States

OCTOBER TERM, 1993

STANDARD INSURANCE COMPANY,
Petitioner,

v.

JEROME SAKLAD,
Respondent.

On Petition for Writ of Certiorari to the
Court of Appeals of the State of Oregon

MOTION FOR LEAVE TO FILE
JOINT AMICI CURIAE BRIEF

JOINT AMICI CURIAE BRIEF IN SUPPORT OF
PETITION FOR WRIT OF CERTIORARI
FILED BY STANDARD INSURANCE COMPANY

I. FRANKLIN HUNSAKER
Counsel of Record

CuryYs A. MARTIN

BULLIVANT, HOUSER, BAILEY,
PENDERGRASS & HOFFMAN
300 Pioneer Tower

888 S.W. Fifth Avenue
Portland, OR 97204

(503) 228-6351

Attorneys for Movants and Amici Curiae
American Council of Life Insurance and
Defense Research Institute

(Additional Counsel listed on inside front cover)

Midwest Law Printing Co., Chicago 60611, (312) 321-0220

BEST AVAILABLE COPY

RICHARD E. BARNSBACK

PHILLIP E. STANO

AMERICAN COUNCIL OF LIFE INSURANCE
1001 Pennsylvania Avenue, N.W.
Washington, DC 20004

(202) 624-2183

Of Counsel for Movant and Amicus Curiae
American Council of Life Insurance

JOHN H. HOLMES

HOLMES, FOLAWN & RICKLES
#1850 Benj. Franklin Plaza

One Southwest Columbia
Portland, OR 97258

(503) 229-1850

Of Counsel for Movant and Amicus Curiae
Defense Research Institute

TT

——»

No. 93-799

IN THE

Supreme Court of the United States

OCTOBER TERM, 1993

STANDARD INSURANCE COMPANY,
Petitioner,
Ve

JEROME SAKLAD,
Respondent.

On Petition for Writ of Certiorari to the
Court of Appeals of the State of Oregon

MOTION FOR LEAVE TO FILE
JOINT AMICI CURIAE BRIEF

American Council of Life Insurance (“ACLI”) and De-
fense Research Institute (“DRI”) (hereinafter “Movants”
hereby jointly move this Court, pursuant to Rule 37.2 of
the Rules of this Court, for leave to file a joint amici
curiae brief in support of the Petition for Writ of Cer-
tiorari filed in this matter on November 19, 1993 by Stan-
dard Insurance Company (“Petitioner”). If such leave is
granted, a Joint Amici Curiae Brief is attached hereto
and submitted with this Motion. Pursuant to Rule 37.2,
this Motion is timely filed in that the Petition for Writ
of Certiorari filed in this matter was received by the at-
torneys for Respondent on November 23, 1993, and this
Motion and the attached Joint Amici Curiae Brief are be-
ing filed within 30 days of that date.

il

Although Petitioner has consented to the filing of the
attached Joint Amici Curiae Brief, Movants are unable
to state whether Respondent consents to the filing of that
Brief in that Movants’ attorneys have not attempted to
contact Respondent because they have been informed that
Respondent may be appearing pro se in this Court. How-
ever, as of the date of the filing of this Motion, Movants
were unable to determine whether Respondent definite-
ly would be appearing pro se and therefore their attorneys
did not attempt to contact Respondent to see if he would
consent to the filing of the Joint Amici Curiae Brief.

IDENTITY AND INTERESTS OF AMICI CURIAE

The issue presented by the Petition for Writ of Cer-
tiorari filed in this matter is whether the Employee Re-
tirement Income Security Act of 1974 (“ERISA”) (29 U.S.C.
§§ 1001-1461) preempts a state anti-garnishment law [Or.
Rev. Stat. § 23.160(1)jXC)] insofar as that law conflicts
with ERISA’s civil enforcement provision. That issue is
of great interest to Movants for the following reasons:

1. ACLI is the nation’s largest life insurance trade
association and has 634 members. ACLI members have
89.9 percent of the life insurance in force in the United
States in legal reserve life insurance companies. ACLI
members write 92.9 percent of the group life insurance
written in Oregon and 91.5 percent of the total group life
insurance written in the United States. ACLI members
include 422 companies that are licensed to conduct busi-
ness in Oregon. The issue presented by the Petition for
Writ of Certiorari is of great interest to ACLI because
of the volume of disability insurance written in Oregon
and other states with similar anti-garnishment laws by
numerous member companies of ACLI. The ACLI mem-
bers who administer and underwrite employee welfare

benefit plans will be significantly and adversely impacted
by the decision of the Oregon Court if it is not reversed
by this Court. The decision will require alteration of the
benefit and premium packages the ACLI members are
able to offer to employers who establish ERISA plans.

2. DRI is a national, non-profit research and defense
trial and insurance attorneys’ association whose purposes
include increasing the professional skill and knowledge of
attorneys, enhancing the services of the legal profession
to the public, promoting improvements in the adversary
system of jurisprudence, and working for the prompt and
fair administration of justice. DRI consists of over 18,000
trial attorneys and more than 400 corporate members na-
tionwide. Of its corporate members, many are insurers
of ERISA plans and others maintain insured and unin-
sured ERISA plans. DRI, like ACLI, is concerned that
the Oregon Court’s ruling in this matter threatens the
insurance industry’s efforts to thwart insurance fraud. The
battle against insurance fraud is an issue of great con-
cern to DRI and ACLI.

Particularly for the reasons set forth at pages 1-4 of
the attached Joint Amici Curiae Brief, this case presents
an issue of vital importance to Movants and to Movants’
members nationwide. Movants believe that the arguments
addressed in the attached Joint Amici Curiae Brief will
assist this Court in determining whether certiorari should
be granted. That is particularly true because the resolu-
tion of the preemption issue presented by the Petition
for Writ of Certiorari will have profound financial and ad-
ministrative impact on all federally governed ERISA plans
in Oregon and in other states with similar anti-garnish-
ment laws if other state courts rule as did the Oregon
Court on the preemption issue.

iv

For these reasons, Movants request that this Court grant
leave and allow the filing of the attached Joint Amici Curiae

Brief.
DATED: December 23, 1993.

Respectfully submitted,

I. FRANKLIN HUNSAKER
Counsel of Record

Curys A. MARTIN

BULLIVANT, HOUSER, BAILEY,
PENDERGRASS & HOFFMAN

Attorneys for Movants and Amici Curiae
American Council of Life Insurance and
Defense Research Institute

RICHARD E. BARNSBACK
PHILLIP E. STANO
AMERICAN COUNCIL OF LIFE INSURANCE

Of Counsel for Movant and Amicus Curiae
American Council of Life Insurance

JOHN H. HOLMES
HOLMES, FOLAWN & RICKLES

Of Counsel for Movant and Amicus Curiae
Defense Research Institute

v

TABLE OF CONTENTS

INTEREST OF AMICI CURIAE

Whether ERISA preempts Oregon’s anti-gar-
nishment law is an important issue that should
be addressed by this Court because it will affect
all federally pond ERISA plans in Oregon
and in other states with similar laws. ......

ARGUMENT

The decision of the Oregon Court is contrary
to decisions of this Court recognizing the ex-
tremely broad preemptive reach of ERISA
over state laws dike Oregon’s anti-garnishment
law) insofar as they relate to and conflict with
ERISA’s civil enforcement remedies. .....

1. Because Oregon’s anti-garnishment law
“relates to’”’ an ERISA employee benefit
plan, it is preempted by ERISA. .....

2. In ruling that Oregon’s anti-garnishment
law is not preempted because it does not

expressly refer to ERISA, the Oregon
Court misinterpreted and misapplied this
Court’s controlling decision in Mackey. .

3. The n Court also misconstrued this
Court’s ion in Mackey in ruling _
Congressional silence regarding garnis
ment of ERISA welfare plan neue ons ond
how constituted acceptance of laws like
Oregon’s anti-garnishment law. .......

4. The Oregon Court erred in ruling that
ERISA mandates uniform treatment of
ERISA plans but not ERISA benefits,
and also in ruling that Congress did not
intend for there to be uniformity of gar-
nishment procedures from state to state. ..

CORAM ceccvcncceasdccesesetcatsecans

PAGE

12

vi

TABLE OF AUTHORITIES
Cases PAGE

Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504
te se ee ae at 5, 6, 7, 14

Dist. of Col. v. Washington Trade Bd., ___ U.S.
___ 113 S. Ct. 580, 121 L. Ed. 2d 513 (1992) . . 6

E-Systems, Inc. v. Pogue, 929 F.2d 1100 (5th Cir.),
cert. denied, 112 S. Ct. 585 (1991) ......... 7,10

FMC Corp. v. Holliday, 498 U.S. 52 (1990) .. 5, 6, 7, 9, 10
Fort Halifax Packing Co. v. Coyne, 482 U.S. 1

SE Ch eaneewadawdeeauadnaenceaeewieenes 15-17
Greany v. Western Farm Bureau Life Ins. Co., 973
ef fF £ fs SS Pr rr yr rr rr re 17

Guidry v. Sheet Metal Workers Int’l. Assoc., Local
No. 9, _.__ F.3d ___., 1993 U.S. App. LEXIS
ee Ce Gal ED Oda ccdecccs dasnwteses 11,17

Ingersoll-Rand v. McClendon, 498 U.S. 133 (1990)... 6,8
John Hancock Life Ins. Co. v. Harris Bank, No. 92-

1074, 1993 U.S. LEXIS 7940 (Dec. 13, 1993) ... 5
Ky. Laborers Dist. Council Health & Wel. v. Hope,

861 F.2d 1003 (6th Cir. 1988) .............. 8
Mackey v. Lanier Collections Agency, 486 U.S. 825

SE cclaevits<easubbaasanewes 9, 10, 12, 13-14, 15

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) .. 5, 6, 8, 9
Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) .. 5,6

Standard Ins. Co. v. Saklad, 849 P.2d 1150, rev.
denied, 858 P.2d 876 (Or. 1993) .......... passim

Vii

Statutory Provisions

et WA ED hdd sin cond es ckvaccacedcs 14
oe kia cn cidWa ac vanucedei cee 1
ee ers on sa ccn ids ss nkeasewa 4,138
Employee Retirement Income Security Act of 1974

Gee CT. BO MOON NOOE) ccc incciccncsasces passim

Employee Retirement Income Security Act of 1974,
Pub. L. No. 93-406, § 206(dX1), 88 Stat. 829
NN AS OUEST Oe ONG See U wc tks epee cul ays 14

Employee Retirement Income Security Act of 1974,
Pub. L. No. 93-406, § 514(a), 88 Stat. 829 (1974) .. 13, 14

Or. Rev. Stat. § 23.160(1)jXC) (Oregon’s anti-gar-
WI etre ae kes chicas passim

Other Authorities
American Council of Life Insurance 1992 Life In-

a nears eer en eee 3
H.R. Rep. No. 93-533, 93d Cong., 2d Sess. 12 (1973),
reprinted in 1974 U.S.C.C.A.N. 4650 ....... 8

United States General Accounting Office, Report
to the Chairman, Subcommittee on Human Re-
sources and Intergovernmental Relations, Com-
mittee on Government Operations, House of
Representatives, May 1992 ................ 3

No. 93-799

IN THE

Supreme Court of the United States

OcTOBER TERM, 1993

STANDARD INSURANCE COMPANY,
Petitioner,
V.

JEROME SAKLAD,
Respondent.

On Petition for Writ of Certiorari to the
Court of Appeals of the State of Oregon

JOINT AMICI CURIAE BRIEF IN SUPPORT OF
PETITION FOR WRIT OF CERTIORARI
FILED BY STANDARD INSURANCE COMPANY

INTEREST OF AMICI CURIAE

Whether ERISA preempts Oregon’s anti-garnishment law
is an important issue that should be addressed by this
Court because it will affect all federally governed ERISA
plans in Oregon and in other states with similar laws.

The important issue presented in this matter is whether
the Employee Retirement Income Security Act of 1974
(“ERISA”) (29 U.S.C. §§ 1001-1461) preempts a state anti-
garnishment law [Or. Rev. Stat. § 23.160(1XjXC)] insofar
as that law conflicts with ERISA’s civil enforcement pro-
visions [29 U.S.C. § 1132(a)]. The Oregon Court erroneous-
ly ruled that the extremely broad preemptive reach of
ERISA repeatedly recognized by this Court somehow is

=

not broad enough to include Oregon’s anti-garnishment
law.

That preemption issue warrants review by this Court
because the resolution of that issue will have profound
financial and administrative impact on all federally gov-
erned ERISA plans in Oregon and in other states with
similar anti-garnishment laws if other state courts rule
as did the Oregon Court on that issue. The decision of
the Oregon Court, if not reversed, will thwart the legal
responsibility of a fiduciary [such as Petitioner Standard
Insurance Company (“Standard’’)] of a defrauded ERISA
plan to recoup losses due to fraud on the plan committed
by a plan beneficiary such as Respondent Saklad. That
will significantly impact the plan assets of employee wel-
fare benefit plans established by employers and the bene-
fits and premiums for employees covered under such plans.

Because of the volume of disability insurance written
in Oregon and other states with similar anti-garnishment
laws by numerous member companies of Amicus Curiae
American Council of Life Insurance (“ACLI’’), the issue of
whether ERISA’s comprehensive federal civil enforcement
statutory scheme prevails over Oregon’s anti-garnishment
law is of great interest to ACLI. The ACLI members who
administer and underwrite employee welfare benefit plans
will be significantly and adversely impacted by the deci-
sion of the Oregon Court if it is not reversed by this
Court. That decision will require alteration of the benefit
and premium packages the ACLI members are able to
offer to employers who establish ERISA plans.

Like ACLI, Amicus Curiae Defense Research Institute
(“DRI”) is concerned that the Oregon Court’s ruling threat-
ens the insurance industry’s efforts to thwart insurance
fraud. DRI has joined the battle against insurance fraud,
which is an issue of great concern to DRI and ACLI.

lie

The United States General Accounting Office recently
estimated that the cost attributable to health care fraud
constituted a 10 percent surcharge of $70 billion to the
nation’s $700 billion annual health care bill in the 1991-92
fiscal year. If health care fraud such as that committed
by Saklad remains unchecked, the estimated cost could
reach $100 billion annually by 1995.1 For example, in Oregon
alone the impact of health insurance fraud is a significant
factor. In the 1991 calendar year, Oregonians paid over
$388 million in health care premiums.? While these are
only estimates of the amount of health insurance fraud,
the cost of fraud undoubtedly is absorbed by both the
premium-paying public and insurers.

The decision of the Oregon Court, if not reversed, will
adversely impact the cost of employee benefit plans issued
in Oregon and will prevent ERISA plan fiduciaries from
exercising their right and duty under federal law to rem-
edy fraudulent misappropriation of ERISA plan assets.
It will send a message to those, like Saklad, who defraud
ERISA plans that in Oregon or other states with similar
anti-garnishment laws they have a safe harbor from pay-
ing restitution for their fraud.

The dangerous precedent created by the decision of the
Oregon Court is not limited to the garnishment issue in-
volved in this matter. The decision of the Oregon Court,

1 United States General Accounting Office, vy to the Chair-
man, Subcommittee on Human Resources and ntergovernmental
Relations, Committee on Government Operations, House of Repre-
sentatives, May 1992, p. 1.

2 American Council of Life Insurance 1992 Life Insurance Fact
Book (p. 74), published by ACLI. If the national 10 percent health
care fraud surcharge figure is applied to these costs in Oregon
alone, approximately $38 million of health insurance premiums is
attributable to fraud. The vast majority of these expenses are
funded through ERISA plans.

a ae

if not reversed, also will create a risk of undermining the
uniform federal regulation of ERISA plans that ERISA
mandates and that this Court repeatedly has recognized.

ARGUMENT

The decision of the Oregon Court is contrary to decisions
of this Court recognizing the extremely broad preemptive
reach of ERISA over state laws (like Oregon’s anti-gar-
nishment law) insofar as they relate to and conflict with
ERISA’s civil enforcement remedies.

ERISA established a comprehensive federal statutory
scheme designed to provide for the uniform administra-
tion of private retirement plans and employee benefit
plans. The Oregon Court correctly acknowledged that
ERISA includes an extremely broad preemption provision
that preempts all state laws that “relate to” any employee
benefit plan. 29 U.S.C. § 1144(a).3

However, despite the expansive interpretation of the
preemption provision repeatedly given it by this Court,
the Oregon Court reversed the Orders of the trial court
that would have enabled Standard (as the fiduciary of an
ERISA plan defrauded by Saklad) to garnish the benefits
that Saklad is receiving from another ERISA plan in or-
der to obtain restitution of the benefits fraudulently ob-
tained by Saklad. The Oregon Court either misunderstood
or misapplied leading precedent of this Court that sup-
ports the Orders of the trial court allowing the garnish-
ment. Standard, as the fiduciary of a defrauded ERISA
plan, should be allowed to garnish the benefits of Saklad’s

3 29 U.S.C. § 1144(a) provides in pertinent part: “Except as pro-
vided in subsection (b) of this section, the 2 paorene of this sub-
ny veel and subchapter III of this chapter shall supersede any and
all State laws insofar as they may now or hereafter relate to any
employee benefit plan.”’ (Emphasis added)

a

second ERISA plan notwithstanding Oregon’s anti-gar-
nishment law because that law is preempted by ERISA
insofar as it would prevent that garnishment.

1.

Because Oregon’s anti-garnishment law ‘“‘relates to’’ an
ERISA employee benefit plan, it is preempted by ERISA.

The Oregon Court acknowledged that the preemptive
reach of ERISA repeatedly has been described by this
Court to be “broad.” However, the Oregon Court erred
in ruling that Oregon’s anti-garnishment law does not fall
within that broad preemptive reach because the state law
does not “relate to” ERISA. Standard Ins. Co. v. Saklad,
849 P.2d 1150, 1152, rev. denied, 858 P.2d 876 (Or. 1993).

This Court consistently has emphasized the broad nature
of ERISA’s preemption provision in striking down state
laws having even an indirect connection with or impact on
ERISA plans. The ERISA preemption provision has been
described by this Court as “conspicuous for its breadth”’
[FMC Corp. v. Holliday, 498 U.S. 52, 58 (1990)], and its
language as “deliberately expansive” [Pilot Life Ins. Co.
v. Dedeaux, 481 U.S. 41, 46 (1987); see also Alessi v. Ray-
bestos-Manhattan, Inc., 451 U.S. 504, 525 (1981)]. In its
very recent decision in John Hancock Life Ins. Co. v.
Harris Bank, No. 92-1074, 1993 U.S. LEXIS 7940, at *9
(Dec. 13, 1993), this Court stated that ERISA “calls for
federal supremacy when [ERISA and a state law] can-
not be harmonized or accommodated.”

This Court has broadly construed the “relates to” lan-
guage in ERISA’s preemption provision to encompass any
state statute having either a “connection with or reference
to” employee benefit plans. Shaw v. Delta Air Lines, Inc.,
463 U.S. 85, 97 (1983). The Oregon Court, however, in-
correctly considered only one of those tests in ruling that

-

ERISA’s preemption is not “boundless’’ and does not ap-
ply to Oregon’s anti-garnishment law.

The issue in this matter is whether Oregon’s anti-gar-
nishment law “relates to” employee benefit plans and is
therefore preempted. That answer should be “yes” given
this Court’s broad interpretation of the “relates to” lan-
guage and its consistent rulings that even those state laws
that only collaterally or indirectly affect employee benefit
plans are preempted by ERISA. Alessi, 451 U.S. at 525
(“It is of no moment that New Jersey intrudes indirectly,
through a workers’ compensation law rather than directly,
through a statute called ‘pension regulation’ ’’); Shaw, 463
U.S. at 100 (New York’s human rights and disability ben-
efits law preempted because it dealt with subject matter
covered by ERISA and affected employee benefit plans);
Pilot Life Ins. Co., 481 U.S. at 47 (law need not be spe-
cifically designed to affect employee benefit plans in order
to “relate to” the plans; “‘indirect’’ effect is sufficient).

This Court repeatedly has rejected efforts to limit pre-
emption to state laws only relating to specific subjects
mentioned in ERISA. See, e.g., Dist. of Col. v. Washing-
ton Trade Bd., ___ U.S. ___, 113 S. Ct. 580, 121 L. Ed.
2d 518, 520 (1992); Ingersoll-Rand v. McClendon, 498 U.S.
133, 138-39 (1990) (Congress did not mean to preempt only
state laws specifically designed to affect employee benefit
plans); FMC Corp. v. Holliday, 498 U.S. at 58 (Pennsy!l-
vania anti-subrogation statute preempted by ERISA even
though statute did not expressly mention ERISA).

4 The effect of Oregon’s anti-garnishment law on ERISA plans

is comparable to the Pennsylvania anti-subrogation law at issue

in FMC Corp. v. Holliday that prohibited disability benefit plans

from being structured in a manner requiring reimbursement in the

event that the injured worker obtained a recovery of medical ex-

penses from a third-party tortfeasor. This Court ruled that the
(Footnote continued on following page)

=

Furthermore, it is well established under ERISA that
state statutes having a significant economic impact on
employee welfare benefit plans unequivocally “relate to”
those plans and are therefore preempted. E-Systems, Inc.
v. Pogue, 929 F.2d 1100 (5th Cir.), cert. denied, 112 S.
Ct. 585 (1991). In E-Systems, the court struck down a
Texas tax statute applied to administrators of self-funded
ERISA plans, holding that the tax clearly related to the
plans because it would have a significant economic impact
on them. 929 F.2d at 1103. The court in E-Systems relied
heavily upon this Court’s mandate in FMC Corp. v. Holli-
day, supra, and Alessi v. Raybestos-Manhattan, supra,
to expansively apply the “relates to” language of ERISA’s
preemption provision even to those state laws that only
indirectly affect employee benefit plans.5 Jd.

Clearly, Oregon’s anti-garnishment law “relates to” and
has a profound economic impact on ERISA plans. Like
the tax in E-Systems, Inc. v. Pogue, supra, Oregon’s anti-
garnishment law results in a loss to the ERISA plans,
thereby increasing premiums and reducing benefits avail-
able to plan participants (employees and their dependents).

* continued

Pennsylvania law, which precluded ERISA oe providers from
seeking reimbursement of heneitis through subrogation, interfered
with the rights and remedies afforded under ERISA’s civil enforce-
ment provision. This Court further ruled that differing state laws
affecting the right to seek reimbursement by subrogation would
undermine the congressional intent to provide for uniform treat-
ment of welfare benefit plans governed by ERISA. 498 U.S. at 60.

5 The state statute at issue in E-Systems, like Oregon’s anti-
garnishment law, made no direct reference to ERISA. The court
in E-Systems concluded that the statute indirectly regulated and
affected ERISA plans and therefore was conn to those plans,
resulting in preemption under ERISA’s preemption provision. That
is significant for the reasons discu at pages 9-12 below.

a

Oregon’s anti-garnishment law unquestionably “relates
to” the two employee benefit plans issued by Standard
to Saklad (the plan defrauded by Saklad and also the plan
being garnished). The plan assets of the defrauded plan
will suffer a severe economic impact in the amount of
$367,000 (the amount of benefits fraudulently obtained by
Saklad) if Standard is prohibited from garnishing the ben-
efits of the second ERISA plan being paid to Saklad.®
That will have a profound financial impact on the plan
assets of the defrauded plan that are available to pay valid
claims of other beneficiaries of that plan. It also will cause
an increase in premiums charged under that defrauded
plan due to the inability to recoup the plan assets fraud-
ulently obtained by Saklad. Moreover, the anti-garnish-
ment law directly refers to the type of benefits due Saklad
under the plan that Standard is attempting to garnish.
Finally, ERISA plans that are unable to garnish to re-
cover fraudulently paid claims will have increased adminis-
trative costs due to variances in state anti-garnishment
laws, and that is clearly against Congress’s goal of a uni-
form civil enforcement scheme under ERISA. Pilot Life
Ins. Co., 481 U.S. at 52.7

6 It is well established that ERISA plan fiduciaries have the
right, indeed the fiduciary duty, to recover plan benefits fraud-
ulently obtained by plan alg ET See Ky. Dist. Coun-
cil Health & Wel. v. Hope, 861 F.2d 1003, 1005 (6th Cir. 1988).

7 This Court has recognized that, consistent with the legislative
history of ERISA, ERISA’s preemption provision was included
“to ensure that plans and plan sponsors would be subject to a
uniform of benefits law; the goal was to minimize the admin-
istrative and financial burden of complying with conflicting direc-
tives among States or between States and the Federal Govern-
ment[; and that] [o}therwise, the inefficiencies created could work
to the detriment of plan beneficiaries.” J oll-Rand, 498 U.S.
at 142; see also H.R. Rep. No. 93-533, Cong., 2d Sess. 12
(1973), reprinted in 1974 U.S.C.C.A.N. 4650 (“The uniformity of
decision which the Act is designed to foster will help administra-
(Footnote continued on following page)

ee

The purpose of ERISA’s preemption provision is to
avoid conflicting or inconsistent state and local regulation
of ERISA plans. The decision by the Oregon Court direct-
ly conflicts with that purpose. If not reversed, that deci-
sion will frustrate the intent of Congress to provide for
nationwide uniformity in the regulation of ERISA plans
and increase plans’ administrative costs, thereby reduc-
ing benefits available to plan participants and their ben-
eficiaries.

2.

In ruling that Oregon’s anti-garnishment law is not pre-
empted because it does not expressly refer to ERISA, the
Oregon Court misinterpreted and misapplied this Court’s
controlling decision in Mackey.

The Oregon Court erred in ruling that a leading decision
of this Court in Mackey v. Lanier Collections Agency, 486
U.S. 825 (1988), is distinguishable. The incorrect basis of
that ruling was that the state law that this Court in Mackey
held was preempted expressly referred to ERISA, where-
as Oregon’s anti-garnishment law does not and therefore
is not preempted. Standard Ins. Co. v. Saklad, 849 P.2d
at 1152.

7 continued

tors, fiduciaries and participants to predict the legality of proposed
actions without the necessity of reference to varying state laws”).
Differing state laws that affect the ability of ERISA plan providers
to recoup amounts fraudulently paid out under an ERISA-regu-
lated plan would “frustrate plan administrators’ continuing obliga-
tion to calculate uniform benefit levels nationwide.” FMC Corp.
v. Holliday, 498 U.S. at 60. This Court has recognized that both
the administrative procedures and the benefits of a plan could be
affected by restrictions imposed by differing state laws on the abil-
ity he a plan provider to obtain reimbursement of amounts paid
as benefits.

x=

While ERISA’s preemptive reach may not be “bound-
less,”” as observed by the Oregon Court (id.), it certainly
is broad enough to preempt Oregon’s anti-garnishment law
insofar as that law conflicts with ERISA. In ruling other-
wise, the Oregon Court misconstrued the controlling deci-
sion of this Court in Mackey, which compels ERISA pre-
emption of Oregon’s anti-garnishment law under the facts
of this matter.®

The Oregon Court erroneously concluded that Mackey
is distinguishable on the grounds that the state law in
Mackey expressly referred to ERISA plans, while Ore-
gon’s anti-garnishment law does not. That is a flawed con-
clusion because, as discussed above, state laws are pre-
empted if they either have a “connection with” or “ref.-
erence to” ERISA. Mackey, 486 U.S. at 843.

® In Mackey, this Court ruled that a Georgia statutory provision
pe are | ae ERISA benefits from garnishment was pre-
empted by ERISA. This Court ruled that another provision cre-
5 the general right to garnishment was not preempted, as the
ERISA enforcement scheme provides that — can sue and be
sued and also allows them to be garnished. Georgia anti-gar-
nishment law was similar to that of Oregon’s. It attempted to ex-
empt ERISA plan-paid benefits from garnishment. This Court in
Mackey struck down that yong ion of the state law because it

i y referred to ERISA, but left intact the general garnish-
ment right. The Court held that such an express reference “suf-
fices to bring it within the federal law’s preemptive reach.” 486

U.S. at 830.
While this Court in M invalidated the Georgia anti-garnish-
ment law because it e referred to “ERISA plans” and sin-

gled out ERISA plans for different treatment, that ruling does not
mandate a different result in this matter. This Court in Mac
simply addressed the “reference to” provision of the ERIS
—— rule, as the state law i mentioned ERISA.

us, there was no need for this Court in Mackey to address the
additional prong of the argument applying to “connection with.”
Furthermore, “reference to” test not require use of the
magical words “ERISA” or “employee welfare benefit plan” be-
fore preemption can occur. FMC Corp. v. Holliday, supra; E-Sys-
tems, Inc. v. Pogue, supra.

=x

The ruling by the Oregon Court simply elevates form
over substance. Because Oregon’s anti-garnishment law
does not expressly use the words “ERISA” or “employee
welfare benefit plan,” the Oregon Court erroneously con-
cluded that the law is not preempted by ERISA. What
the Court ignored, however, is that Oregon’s anti-garnish-
ment law, in referring to “compensation of loss of future
earnings,” does use terms that clearly describe employee
benefit plans or plan assets.® The only benefits that “fu-
ture earnings” can refer to are liability benefits (which
are covered by ERISA) and workers’ compensation.

In order to be preempted, Oregon’s anti-garnishment
law need not refer specifically to “ERISA” or “employee
benefit plans” because, even without a “reference to”
ERISA or employee benefit plans, a state law’s “connec-
tion with” a plan is sufficient for preemption.’® As dis-
cussed above, it is clear that Oregon’s anti-garnishment
law has such a connection with and indirect reference to
ERISA plans because it results in a negative economic
impact on them.

There can be no doubt that Oregon’s anti-garnishment
law has a “connection with” ERISA plans because it
would apply in this matter to prohibit garnishment of
payments due from an ERISA plan to Saklad to repay
another ERISA plan for benefits fraudulently obtained by
Saklad. Nor can there be any doubt that a $367,000 loss

® Or. Rev. Stat. § 23.160(1XjXC) (the anti-garnishment law) ex-
empts from garnishment “{a] payment in compensation of loss of
future earnings of the debtor . . . to the extent reasonably neces-
sary for the support of the debtor and any dependent of the debtor.”

‘© See Standard’s Petition for Writ of Certiorari, pp. 14-22, where
Standard discusses this issue and a conflict between the Oregon
Court’s ruling in this regard and a recent decision of the Tenth
Circuit in Guidry v. Sheet Metal Workers Int'l. Assoc., Local No.
9, _. F.3d ___, 1993 U.S. App. LEXIS 28698 (10th Cir. 1993).

x

of plan assets resulting from Saklad’s fraud clearly has
a “connection with” the defrauded ERISA plan. Thus, the
absence of a direct ERISA reference is irrelevant. The
Oregon anti-garnishment law adversely-impacts the finan-
cial assets of the plan that Saklad defrauded; it will re-
quire an increase in premiums by Standard to that plan
and will increase administrative costs to ERISA plans due
to a lack of uniformity in the ability to collect restitution
for benefits fraudulently obtained.

Therefore, Oregon’s anti-garnishment law is preempted
by ERISA to the extent it applies to ERISA plans, leav-
ing intact the general garnishment law that would allow
Standard to garnish the ERISA plan benefits that Saklad
is now receiving. Contrary to the ruling of the Oregon
Court, this Court’s decision in Mackey is not distinguish-
able from this matter. The effect of both the Oregon and
Georgia anti-garnishment laws is identical. Both “relate
to” an ERISA plan; the Georgia law because it specifically
referred to ERISA, and the Oregon law because it refers
to benefits payable under an ERISA plan. Furthermore,
as applied, Oregon’s anti-garnishment law has a “‘connec-
tion with” both of the ERISA plans—that which Saklad
defrauded and that which Standard is seeking to garnish.
Therefore, the attempt by the Oregon Court to distinguish
this Court’s decision in Mackey simply cannot withstand
careful scrutiny.

3

The Oregon Court also misconstrued this Court’s decision
in Mackey in ruling that Congressional silence regarding
garnishment of ERISA welfare plan benefits somehow
constituted acceptance of laws like Oregon’s anti-garnish-
ment law.

The Oregon Court misunderstood and misconstrued this
Court’s decision in Mackey “to mean that the congres-

=

sional silence concerning garnishment of ERISA welfare
plans acknowledged and accepted various state practices
concerning garnishment, including the practice of refus-
ing garnishment.” Standard Ins. Co. v. Saklad, 849 P.2d
at 1152 (emphasis added). As discussed above, that por-
tion of a law like Oregon’s that prohibits garnishment of
ERISA plans is preempted by ERISA, leaving the re-
mainder of such a law intact. In Mackey, this Court ex-
pressly upheld the remaining Georgia garnishment law’s
applicability to ERISA plans after striking down the anti-
garnishment section. Thus, there can be no question that
if the Oregon anti-garnishment law is preempted, the re-
mainder of the garnishment law is applicable.

This Court in Mackey concluded that ERISA does not
preempt the general garnishment law because Congress
did not intend to preclude state laws regarding attach-
ment of ERISA plan benefits:

In our view, however, certain ERISA provisions, and
several aspects of the statute’s structure, indicate
that Congress did not intend to forbid the use of
state-law mechanisms of executing judgments against
ERISA welfare benefit plans, even when those mech-
anisms prevent plan participants from receiving their
benefits.

486 U.S. at 831-32. In footnote 6 (id. at 831), this Court
cited numerous other decisions of various circuit and dis-
trict courts in which those courts consistently have ruled
that ERISA does not preempt the application of state gar-
nishment procedures to ERISA plans.

This Court in Mackey acknowledged that ERISA allows
employee welfare benefit plans to ‘sue and be sued.” 486
U.S. at 833. Surely that contemplates obtaining and ex-
ecuting on judgments against such plans. This Court noted
that Section 514(a) [29 U.S.C. § 1144(a)] (the preemption
provision) makes no distinction between plan funds gen-
erally and those plan funds due a particular beneficiary:

~" o

If § 514(a) allows a creditor of a plan to employ state-
law procedures to attach plan funds (to collect a judg-
ment it has won against the plan)—if such an action
does not “relate to” a benefit plan—we do not see
how § 514(a) bars a participant’s creditor from em-
ploying the same state-law mechanisms.

Id. at 836. This Court also noted that where Congress
intended to prohibit alienation, it did so specifically in the
statute. [Section 206(dX1)—29 U.S.C. § 1056(dX1)—prohibits
alienation or assignment of pension benefit plans.]!! The
absence of a similar provision relating to welfare benefit
plans (at issue in this matter) is not aimless “congressional
silence,” as the Oregon Court concluded, but is a delib-
erate indication that garnishment of ERISA welfare bene-
fit plans was contemplated.

While this Court in Mackey recognized that “‘state-law
methods for collecting money judgments must, as a gen-
eral matter, remain undisturbed by ERISA”’ [486 U.S. at
834 (emphasis added)], there is nothing in Mackey to sup-
port the view of the Oregon Court that, because Congress
did not expressly provide for a procedural mechanism in
ERISA to collect judgments, Congress thereby intended
to express acceptance of “the practice of refusing garnish-
ment” of the benefits of an ERISA plan. Standard Ins.
Co. v. Saklad, 849 P.2d at 1152.

11 Thus, Congress was not silent on this issue. As this Court
noted in Mackey:

Once Congress was sufficiently aware of the prospect that
ERISA plan benefits could be attached and/or garnisheed—as
evidenced by its adoption of § 206(dX1)—Congress’ decision to
remain silent concerning the attachment or garnishment of
ERISA welfare plan benefits “acknowledged and accepted the
practice, rather than prohibiting it.’’ Alessi v Raybestos-
Manhattan, Inc. [supra].

486 U.S. at 837.

=

Congress did not silently “acquiesce” to the garnishment
of ERISA welfare benefit plans, as the Oregon Court erro-
neously suggested. Instead, as this Court noted in Mackey,
Congress deferred to state law “to provide methods for
collecting judgments.” 486 U.S. at 834 (emphasis added).

4.

The Oregon Court erred in ruling that ERISA mandates
uniform treatment of ERISA plans but not ERISA bene-
fits, and also in ruling that Congress did not intend for
there to be uniformity of garnishment procedures from
state to state.

The Oregon Court erroneously rejected preemption of
Oregon’s anti-garnishment law by ERISA based on a sup-
posed distinction the Court drew between ERISA plans
and ERISA plan benefits. Standard Ins. Co. v. Saklad,
849 P.2d at 1152. In that regard, the Court erroneously
relied on this Court’s decision in Fort Halifax Packing
Co. v. Coyne, 482 U.S. 1 (1987).

In Fort Halifax, this Court held that a Maine law re-
quiring a one-time severance payment to employees as a
result of a plant closing was not preempted by ERISA.
The reason that the state law was not preempted by
ERISA was that the subject of that law was not an em-
ployee welfare benefit plan; it was merely an employee
benefit:

We hold that the Maine statute is not pre-empted by
ERISA . . . because the statute neither establishes,
nor requires an employer to maintain, an employee
welfare benefit “plan” under that federal statute.

482 U.S. at 6 (footnote omitted). Thus, this Court drew
a distinction between an ERISA “plan” (with its accom-
panying benefits) and employee “benefits” not arising
from an ERISA plan.

="

The Oregon Court incorrectly characterized the nature
of Standard’s argument as focusing on ERISA benefits.
Standard’s argument is not based on the premise that
Oregon’s anti-garnishment law relates to a “benefit” but
that it relates to an employee welfare benefit plan. While
the actual garnishment in this matter also would relate
to Saklad’s employee welfare benefits, it is the inability
of Standard to garnish under the anti-garnishment law
that “relates to” the defrauded ERISA welfare benefit
plan in a number of important ways, as discussed above.
It is not the effect on the “benefits” that is at issue and
requires preemption, it is the impact on ERISA employee
welfare benefit plans if they are unable to garnish and
be garnished.

Thus, the Oregon Court erroneously assumed that Stan-
dard is arguing that Oregon’s anti-garnishment law is pre-
empted because of its impact on the benefits that Standard
is attempting to garnish. Standard consistently has argued
that Oregon’s anti-garnishment iaw is preempted because
it relates both to ERISA plans (the defrauded plan and
the plan being garnished) and to employee welfare benefit
plans in general, not just to the benefits that are being
garnished.

The discussion in Fort Halifax about the difference be-
tween a “plan” and “benefits” is not applicable to this
matter because in this matter an ERISA plan is affected;
the defrauded ERISA plan is affected by not being able
to garnish and thus recoup its plan assets fraudulently
obtained by Sakiad, the current beneficiary of Standard’s
other ERISA plan. Fort Halifax stands for the proposi-
tion that if there is no ERISA plan, there is no preemp-
tion. However, if an ERISA plan does exist, then any
benefits that are affected by the anti-garnishment law
(which benefits would not exist absent the plan) are part
of the ERISA plan and thus governed by ERISA. Thus,

iain idan

=

while Fort Halifax stands for the proposition that not all
state laws relating to employee benefits are preempted
by ERISA, all employee benefits arising under an ERISA
plan are governed by ERISA exclusively, and any state
laws purporting to regulate them are preempted. Fort
Halifax, 482 U.S. at 14 n. 8.

The Oregon Court simply was wrong in concluding that,
based on an erroneous interpretation of ERISA’s preemp-
tion provision, “{wJhether or not a check is garnished after
administrative procedures are complete has nothing to do
with a ‘plan’” governed by ERISA. Standard Ins. Co.
v. Saklad, 849 P.2d at 1152. The reasoning of the court
in Greany v. Western Farm Bureau Life Ins. Co., 973
F.2d 812 (9th Cir. 1992), is instructive because the court
rejected a benefit-plan distinction, i.e., the court rejected
an argument that a conversion policy and the facts sur-
rounding its processing after an employee terminated his
employment constituted merely an employee benefit be-
cause the employee was no longer covered under the em-
ployee welfare benefit plan. Id. at 817. Such a distinc-
tion is meaningless, as the court in Greany ruled, because
the conversion policy related to the plan in that the “op-
portunity to convert the group plan to an individual policy
is a benefit provided pursuant to the group plan.” Jd. Be-
cause the individual conversion benefits are part of an
ERISA plan, the court in Greany correctly concluded that
the benefits are governed by ERISA, and any state law
claims therefore are preempted. Jd.12

12 See Standard’s Petition for Writ of Certiorari, pp. 22-24, where
Standard discusses this issue and a conflict between the Oregon
Court’s ruling in this regard and a recent decision of the Tenth
Circuit in Guidry v. Sheet Metal Workers Int’l. Assoc., Local No. 9,
supra, where that court rejected a similar distinction.

=<

Similarly, in this matter the ERISA plan benefits that
the defrauded ERISA plan is attempting to garnish do
not cease being part of an employee welfare benefit plan
after the check is issued, as they are payable due to the
existence of the ERISA plan and pursuant to its terms.
The Oregon Court, however, erroneously focused on the
effect of the actual garnishment on the beneficiary’s bene-
fits, not upon the effect of the inability of the defrauded
ERISA plan to garnish another ERISA plan and the ef-
fect on other ERISA plans in general.

CONCLUSION

The decision of the Oregon Court that Oregon’s anti-
garnishment law prohibits Standard from collecting on
a judgment in Oregon that was lawfully obtained under
ERISA’s exclusive civil enforcement provisions is contrary
to and inconsistent with decisions of this Court that rec-
ognize the extremely broad preemptive reach of ERISA.
That decision will thwart the legal responsibility of a
fiduciary of a defrauded ERISA plan to recoup losses due
to fraud committed by a plan beneficiary. That decision
also creates a risk of undermining the uniform federal
regulation of ERISA plans mandated by ERISA and re-

<< on

peatedly recognized by this Court. Therefore, this Court
should grant certiorari and reverse that decision.

DATED: December 23, 1993.
Respectfully submitted,

I. FRANKLIN HUNSAKER
Counsel of Record

CHRYS A. MARTIN

BULLIVANT, HOUSER, BAILEY,
PENDERGRASS & HOFFMAN

Attorneys for Movants and Amici Curiae
American Council of Life Insurance and
Defense Research Institute

RICHARD E. BARNSBACK
PHILLIP E. STANO
AMERICAN COUNCIL OF LIFE INSURANCE

Of Counsel for Movant and Amicus Curiae
American Council of Life Insurance

JOHN H. HOLMES
HOLMES, FOLAWN & RICKLES

Of Counsel for Movant and Amicus Curiae
Defense Research Institute

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386003_0794%3A3. Public record. Not legal advice.