Opposition Brief — Standard Insurance Co. v. Saklad

Supreme Court brief1994

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No. 93-799

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1993

STANDARD INSURANCE COMPANY,

Petitioner,

Vv.

JEROME SAKLAD,

Respondent.

On Petition for Wnt of Certiorari to the

Court of Appeals of the State of Oregon

RESPONDENT’S BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

Paul R.Q. Wolfson

(Counsel of Record)

David C. Vladeck

Alan B. Morrison

PUBLIC CITIZEN LITIGATION GROUP

2000 P Street, N.W.

Suite 700

Washington, D.C. 20036

(202) 833-3000

Attorneys for Respondent

February 11, 1994

QUESTION PRESENTED

Under the preemption provision of the Employee

Retirement Income Security Act of 1974 ("ERISA"), 29

U.S.C. § 1144(a), may the State of Oregon provide a broad

exemption to its general garnishment statute that shelters

payments necessary to a subsistence income for the debtor,

when those payments may come from a wide variety of

sources, including, but not limited to, disability plans

covered by ERISA?

PARTIES TO THE CASE

All parties to the case appear in the caption.

ili

TABLE OF CONTENTS

QUESTION PRESENTED .......-2-22e2eeees i

PARTIES TO THE CASE ... 2.2 cscs cccccccen il

TABLE OF AUTHORITIES .........--e2246. iV

CPEPU AY wn ccc ctr ccc eee l

PEPE oc cc ccc ct ec ecw se ceeeses 2

STATUTES INVOLVED ......2ccccccceeeses 2

STATEMENT OF THE CASE ...........0e0-6. 3

REASONS FOR DENYING THE WRIT.......... 7

‘

A. The Decision Below is Consistent with this

Court’s ERISA Preemption Decisions, Including

B. The Decision Below Does Not Conflict with Any

Decision of a Federal Court of Appeals or State

oF @ ft 2 errr errr eee ee 14

REE cbt cas ee etc ence cece sense 22

TABLE OF AUTHORITIES

Cases: Page:

Aetna Life Ins. Co. v. Borges, 869 F.2d 142

(2d Cir.), cert. denied, 493 U.S. 811

es «alae wo eT ee ee ee 20, 21

Beers v. Haughton, 34 U.S. (9 Pet.) 329 (1835) .... 13

Carpenters Southern California Administrative Corporation

v. El Capitan Development Company,

53 Cal. 3d 1041, 811 P.2d 296, cert. denied,

beg Re ae fe i ora 19, 20

In re Dyke, 943 F.2d 1435

AR ee eee 14, 15, 16, 17

Fink v. O'Neil, 106 U.S. 272 (1882) ........... 13

Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550

FR, ae eee re gy ee ee 21

Fort Halifax Packing Co. v. Coyne, 482 U.S. |

SE Sn 3 ee ek Oo 6, passim

Guidry v. Sheet Metal Workers International Association,

Local No. 9, No. 92-1018, 1993 U.S. App. LEXIS

28,698 (10th Cir. Nov. 11, 1993) ....... i; iF

Guidry v. Sheet Metal Workers National Pension Fund,

ee A Oe ROE OC ese ea ke ee 14

Huron Holding Corp. v. Lincoln Mine Operating Co.,

Dee es ED 68366. 6 Ew 8 8 ee 12

Ingersoll-Rand Co. v. McClendon, 111 S. Ct. 478

oo Pee re Tee es oe ee Lp 10

Iron Workers Mid-South Pension Fund v. Terotechnology

Corp., 891 F.2d 548 (Sth Cir.), cert. denied,

GPT UD. WO Ce ve ko ssc ees 18, 19, 20

Mackey v. Lanier Collections Agency, 486 U.S. 825

Se «bho waa ee ee ee eee 5, passim

Martori Bros. Distributors v. James-Massengale,

781 F.2d 1349 (Sth Cir. 1986) ......... 20, 21

Pilot Life Ins. Co. v. Dedaux, 481 U.S. 41 (1987) ... 10

Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984),

cert. denied, 472 U.S. 1008 (1985) ......... 20

In re Schlein, 8 F.3d 745 (11th Cir. 1993) ..... 15, 16

Shaw v. Delta Air Lines, 463 U.S. 85 (1983) .. 8, 9, 15

Sommers Drug Stores v. Corrigan Enterprises,

793 F.2d 1456 (Sth Cir. 1986),

cert. denied, 479 U.S. 1034 (1987) ...... 20, 21

United States v. Miller, 229 F.2d 839 (3d Cir. 1956) . 13

In re Vickers, 954 F.2d 1426 (8th Cir.),

cert. dismissed, 113 S. Ct. 4 (1992) ........ 15

Statutes and Rules:

iS Ua BEE oa a es eee ee 15

—————— a ce =

Be sn BE 9 9 a eee ee 2

Employee Retirement Income Security Act of 1974:

y 238 Te: | rere aren 14

a Us SE bs saci * @ pene eee 5

ae Gas OP 6s cuss deere 3, passim

a Uae BCE, 6 6 okt eee 15

Colo. Rev. Stat. § 13-54-104(b) .............. 17

Or. Rev. Stat. § 23.160(1)G)(C) ............ 2,4

ee Oe SS re re ee 15

Gr. Rov. Dh. S Pe kt cveee eee eee 5

Federal Rule of Civil Procedure 69(a)........ iis a2

Supreme Court Rute 10.5 csc ccccsccsssscecs 7

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1993

No. 93-799

STANDARD INSURANCE COMPANY,

Petitioner,

Vv.

JEROME SAKLAD,

Respondent.

On Petition for Writ of Certiorari to the

Court of Appeals of the State of Oregon

RESPONDENT?’S BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

OPINIONS BELOW

The opinions of the Oregon Circuit Court, denying

respondent’s claim of exemption from garnishment, are

unreported. They are reprinted in the Appendix to the

Petition (“Pet. App.”) at 6-9. The opinion of the Oregon

Court of Appeals, reversing the Circuit Court and upholding

respondent’s claim of exemption, is reported at 119 Or. App.

91, 849 P.2d 1150, and is reprinted at Pet. App. 1-4. The

order of the Supreme Court of Oregon denying review is

noted at 317 Or. 486, 858 P.2d 876, and is reprinted at Pet.

App. 5.

JURISDICTION

This Court’s jurisdiction is invoked pursuant to 28

U.S.C. § 1257. The Supreme Court of Oregon denied

discretionary review on August 24, 1993, and the petition for

writ of certiorari was filed on November 19, 1993.

STATUTES INVOLVED

1. The Oregon statute governing execution of

judgments against property, Or. Rev. Stat. § 23.160,

provides in pertinent part as follows:

23.160. | Leviable property generally; selectable

exemptions. (1) All property, including franchises,

or rights or interest therein, of the judgment debtor,

shall be liable to an execution, except as provided in

this section and in other statutes granting exemptions

from execution. If selected and reserved by the

judgment debtor or the agent of the judgment debtor at

the time of the levy, or as soon thereafter before sale

thereof as the same shall be known to the judgment

debtor, the following property, or rights or interest

therein of the judgment debtor, except as provided in

ORS 23.220, shall be exempt from execution:

x~«x xk k

(j) The debtor’s right to receive, or

property that is traceable to:

xx * *

loss of future earnings of the debtor or an individual of

whom the debtor is or was a dependent, to the extent

reasonably necessary for the support of the debtor and

any dependent of the debtor.

2. Section 514(a) of the Employee Retirement

Income Security Act (“ERISA”), 29 U.S.C. § 1144(a),

provides as follows:

Except as provided in subsection (b) of this

section, the provisions of this subchapter and

subchapter III of this chapter shall supersede any and

all State laws insofar as they may now or hereafter

relate to any employee benefit plan described in section

1003(a) of this title dnd not exempt under section

1003(b) of this title. This section shall take effect on

January 1, 1975.

STATEMENT OF THE CASE

Oregon, like every other state, has a statute providing

for the execution of money judgments. Like every other

state, Oregon also has made the policy determination that

judgment debtors should be allowed to retain certain minimal

resources necessary to a subsistence living, and, to that end,

has exempted small amounts of assets and income from the

execution of judgments. This case concerns the validity of

Oregon’s determination that disabled judgment debtors, who

are unable to earn income by working at a job, should be

allowed to retain the resources necessary for their survival,

even in the face of a large tort judgment against them.

1. In the late 1970’s, respondent Jerome Saklad

became insured under a group long-term disability policy

issued by petitioner Standard Insurance Company to

Industrial Electronics Engineers, Inc. (“IEE”), his employer

at the time. After he contracted Legionnaires’ Disease,

respondent submitted a disability claim to Standard under the

IEE policy in October 1979. He was ultimately paid about

$200,000 in benefits, including a lump-sum payment of

$80,000.

Respondent later become insured under a second

disability policy issued by Standard to Master Plating, Inc.,

a business owned and operated by members of his family.

In 1987, respondent submitted a disability claim to Standard

under the Master Plating policy, stating that he suffered from

cardiomyopathy, a terminal degenerative heart disease. It is

uncontested that respondent’s second disability claim is valid,

and that Standard is obligated to pay respondent disability

benefits under the terms of the Master Plating policy.

Nevertheless, respondent’s second disability claim prompted

an investigation by Standard, and, based on _ this

investigation, Standard filed suit against respondent in the

United States District Court for the Central District of

California, seeking to recover the benefits previously paid to

him under the IEE policy. The District Court eventually

ruled that Standard was entitled to the return of benefits paid

to Saklad under the IEE policy from 1980 through 1984, plus

prejudgment interest, and entered a judgment against Saklad

for over $360,000.

2. Standard then registered the judgment in the

Circuit Court of Multnomah County, Oregon, where its

principal place of business is located, and attempted to

garnish for itself the benefits that it was obligated to pay

Saklad under the Master Plating policy. Saklad argued that

his benefits were exempt from garnishment under the

provision of Oregon’s general statute governing execution of

judgments that exempts any “payment in compensation of

loss of future earnings of the debtor ... to the extent

reasonably necessary for the support of the debtor and any

dependent of the debtor.” Or. Rev. Stat. § 23.160(1)(j)(C).

The Circuit Court for Multnomah County held that the

garnishment was valid, notwithstanding the Oregon law,

because the Oregon statute was preempted by ERISA. Pet.

App. 6-7.'

3. The Oregon Court of Appeals unanimously

reversed, ruling that the garnishment exemption provided by

Oregon law was not preempted by ERISA. See Pet. App. 1-

4. The Court first rejected Standard’s argument that

preemption was compelled under the reasoning of this

Court’s decision in Mackey v. Lanier Collections Agency,

486 U.S. 825 (1988), holding that ERISA preempted a

Georgia statute that specifically exempted benefits under

ERISA plans from garnishment. The Court pointed out that,

while Mackey indicated that such a specific reference to

ERISA plans in a state law invariably leads to preemption,

Oregon “does not treat ERISA plans differently from non-

ERISA plans and so is not automatically preempted.” Pet.

App. 3 (emphasis added).

The Court of Appeals then went on to consider the

significance of this Court’s second holding of Mackey, that

Georgia’s general garnishment statute was not preempted by

ERISA. In Mackey, this Court stated that Congress had

generally “acknowledged and accepted” the states’ practices

of garnishment as a method of executing judgments, and that

ERISA plans, as garnishees, were not per se exempt from

garnishment procedures. See Mackey, 486 U.S. at 837.

Standard argued to the Court of Appeals that, since Congress

had acknowledged the practice of garnishment generally in

' Saklad also argued that his benefits were exempt from

garnishment under Or. Rev. Stat. § 743.050, which provides that

the proceeds of insurance policies “providing benefits on account

of the insured’s disability” are exempt from all liability for debts

of an insured, and that Standard’s action in garnishing benefits that

it owed to Saklad was a “prohibited transaction” under section 406

of ERISA, 29 U.S.C. § 1106. The Circuit Court rejected these

arguments, and the Court of Appeals did not reach them, as it

reversed on the ground set forth in the petition.

ERISA, permitting the operation of the Oregon exemption in

this case would impair the garnishment procedure that

Congress had approved.

The Court of Appeals concluded that Standard’s

argument misread Mackey. According to the Court, the fact

that Congress, by remaining silent, had acknowledged the

possibility of garnishment against ERISA welfare plans, did

not mean that Congress had intended to override all state-law

exemptions or limitations to that practice. The Court of

Appeals reasoned that Congress must have been aware of,

and accepted, the various state practices concerning

garnishment, “including the practice of refusing

garnishment.” Pet. App. 3.

Finally, the Court of Appeals rejected Standard’s

argument that the Oregon garnishment exemption undermines

ERISA’s policy of uniform treatment of ERISA welfare

benefits because Oregon judgment debtors would be able to

claim the exemption for disability benefits while judgment

debtors in other states might not be able to claim a similar

exemption. The Court observed that Standard’s argument

was wide of the mark because ERISA does not mandate

uniform treatment of benefits, but only uniform regulation of

benefit plans. Relying on this Court’s decision in Fort

Halifax Packing Co. v. Coyne, 482 U.S. 1 (1986), the Court

of Appeals noted that the term “benefit plans,” as used in

ERISA’s preemption provision, refers to administrative

procedures governing claims processing, benefits calculation,

and pay-out. Because the Oregon garnishment statute does

not implicate any of Standard’s procedures in these areas, the

Court concluded, the possibility that disability benefits might

be garnished in another state, but not in Oregon, did not

raise any concern about uniformity of treatment of benefit

plans. Pet. App. 4.

aCe

The Oregon Supreme Court denied discretionary

review, Pet. App. 5, and Standard’s petition for certiorari

followed.”

REASONS FOR DENYING THE WRIT

The petition should be denied because it presents none

of the considerations warranting review outlined in this

Court’s Rule 10.1. The decision of the Oregon Court of

Appeals does not conflict with Mackey or with any of this

Court’s other ERISA preemption decisions. Nor is this a

case where a state court of last resort has decided a federal

question in a way that conflicts with the decision of another

state court of last resort or of a federal court of appeals. See

Sup. Ct. Rule 10.1(6). Since Mackey, no state supreme

court or federal appellate court has held that a state’s

garnishment exemption for employee welfare benefits is

preempted by ERISA. Finally, while the validity of a state’s

garnishment exemption is, in the abstract, an important issue,

there is no need for this Court’s intervention because the

Court of Appeals resolved that issue in a way that does not

impair the integrity of ERISA’s regulatory scheme.

* Standard has also filed another action against Saklad in the

United States District Court for the Central District of California,

alleging a right to equitable setoff against the benefits due under

the Master Plating Policy. The District Court recently entered an

order permitting Standard to deposit into the Court all funds due

to Saklad under the Master Plating Policy, pending the outcome of

the new action. Memorandum and Order Regarding Plaintiff's

Motion for Rule 67 Deposit, Standard Ins. Co v. Saklad, No. CV

93-5472 RG (C.D. Cal. Jan. 5, 1994). Therefore, despite the

Oregon Court of Appeals’ conclusion that Saklad was entitled to

an exemption from garnishment, Saklad is not currently receiving

any benefits under the Master Plating policy.

A. The Decision Below is Consistent with this

Court’s ERISA Preemption Decisions,

Including Mackey.

Section 514(a) of ERISA preempts state laws if they

“relate to” employee benefit plans. 29 U.S.C. § 1144(a).

This Court has stated 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.” Shaw v. Delta

Air Lines, 463 U.S. 85, 96-97 (1983) (emphasis added and

footnote omitted). While the reach of ERISA’s preemption

provision is therefore quite broad, this Court has also

cautioned that it is not boundless: “Some state actions may

affect employee benefit plans in too tenuous, remote, or

peripheral a manner to warrant a finding that the law ‘relates

to’ the plan.” Jd. at 100 n.21. Thus, ERISA does not

preempt state laws that merely “affect” benefit plans in some

way, nor does it preempt state laws that relate only to

“benefits,” and not “benefit plans.” See generally Fort

Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987). Without

these sensible limitations, ERISA would swallow up entire

sections of state codes in a fashion wholly unanticipated, and

undesired, by Congress.

Despite these limitations, Standard argues that state

laws are preempted whenever they affect ERISA plans,

regardless whether the laws were intended to regulate such

plans, or whether the laws implicate the specific concerns

that motivated Congress to enact the preemption provision.

This argument goes far beyond the reach of the ERISA

preemption provision, as intended by Congress and as

construed by this Court. Even though Oregon’s garnishment

exemption may have some incidental effect on ERISA plans,

just as it has on a wide range of other judgment creditors and

garnishees, it is not preempted because it has neither a

“reference to” nor a “connection with” ERISA plans, as this

Court has used those terms in its ERISA preemption

decisions.

1. The Oregon garnishment exemption does not have

a “reference” to employee benefit plans because it does not

single out such plans for special treatment. The Oregon

statute does not mention ERISA, or ERISA plans, or even

benefit plans generally. The Oregon statute simply provides

a limited shelter from execution for funds paid in

compensation for loss of future earnings, regardless of the

source of the funds, when the money is necessary for the

support of the debtor. It is irrelevant whether the funds

come from an ERISA plan, a personal injury judgment, a

worker’s compensation award, or a payment from an

individual (non-ERISA) disability insurance policy; all are

subject to the Oregon garnishment exemption. As the Court

of Appeals pointed out, the statute “does not treat ERISA

plans differently from non-ERISA plans and so is not

automatically preempted.” Pet. App. 3.

This conclusion is consistent with the first part of this

Court’s decision in Mackey, where the Court “reaffirmed”

the rule that state laws are preempted if they “make

‘reference to’ ERISA plans.” 486 U.S. at 829. This Court

explained that, in using the term “reference” to ERISA plans

in Shaw and subsequent cases, it had in mind those state laws

that specifically address employee welfare plans: “[W]Je

have virtually taken it for granted that state laws which are

‘specifically designed to affect employee benefit plans’ are

preempted under [ERISA]” Id.; see also id. at 830

(“adhering to our precedents in this area, we hold that [the

Georgia statute], which singles out ERISA employee welfare

benefit plans for different treatment under state garnishment

procedures, is preempted”) (footnote omitted).

2. Nor does the Oregon garnishment exemption have

a “connection to” ERISA plans, under any sensible reading

of that term. “ERISA’s preemption provision was prompted

by recognition that employers establishing and maintaining

employee benefit plans are faced with the task of

coordinating complex administrative activities.... Pre-

emption ensures that the administrative procedures of a

benefit plan will be governed by only a single set of

regulations.” Fort Halifax, 482 U.S. at 11.

The Oregon law at issue here does not implicate this

concern for uniformity. It does not govern the administration

of ERISA plans; nor does it require the payment of benefits,

regulate vesting, or impose substantive duties or obligations

on plan participants, beneficiaries, or fiduciaries. The statute

does not require any plan “to keep certain records in some

States but not in others; to make certain benefits available in

some States but not in others; to process claims in a certain

way in some States but not in others; [or] to comply with

certain fiduciary standards in some States but not in others.”

Id. at9. All the Oregon law does is provide a limited shelter

for disability payments from judgment creditors, whether or

not the benefits are traceable to an ERISA plan, and whether

or not the judgment creditor is an ERISA plan.

Standard objects to the Oregon law on the ground that

it supposedly creates “substantive mghts” in ERISA

participants that are not recognized by ERISA itself. See

Pet. for Cert. 9. This argument is wide of the mark,

however, because it has nothing to do with the particular

concern for uniform regulation of benefit plans that informs

this Court’s ERISA preemption decisions. While Oregon’s

garnishment exemptions may not be purely “procedural,” in

that they do more than merely set out the procedures which

must be followed in garnishment proceedings, they do not

create any rights that implicate the considerations that led to

the enactment of the ERISA preemption clause. The Oregon

garnishment law does not, for example, create any new duty

in the administration, funding, or vesting requirements of the

plan running from the fiduciary or the employer to the

beneficiary. Cf Ingersoll-Rand Co. v. McClendon, 111 S.

Ct. 478 (1990) (preempting state cause of action alleging

unlawful discharge to prevent vesting of benefits); Pilot Life

Ins. Co. v. Dedaux, 481 U.S. 41 (1987) (preempting state

cause of action for improper processing of insurance benefit

claim).

The fact that the judgment creditor in this case is an

ERISA plan is purely coincidental to the operation of the

garnishment exemption. Because Oregon has made the

policy determination that disability payments needed to

support the debtor should be exempt from all judgment

creditors, respondent would be entitled to the same

exemption if the judgment entered against him had arisen out

of a contract claim, or out of an individual (non-ERISA)

disability insurance policy. He would also be entitled to the

exemption even if his first disability insurance policy had

been an ERISA plan, but had been written by a different

insurer than the one that wrote the second policy. The fact

that the judgment creditor in this case happens to be an

ERISA plan, and the same ERISA plan as the garnishee, is

irrelevant to the operation of the Oregon statute.

Nor does the Oregon law’s treatment of Standard as

garnishee have anything to do with the operation of ERISA.

Respondent could also claim the exemption if the payments

were due to him from an individual insurance policy, or from

a tort judgment that he had won as a result of an automobile

accident. Thus, the exemption would operate in exactly the

same way if, for example, respondent had become entitled to

the disability payment as a result of an automobile accident,

but had a judgment for damages entered against him in a

lawsuit arising from his failure to close on a residential real

estate contract.

Further, the garnishment exemption imposes no

administrative burdens on the plan as garnishee. Unlike the

situation in Mackey, where the ERISA plan argued

(unsuccessfully) that the need to comply with garnishment

proceedings imposed undue administrative burdens on the

plan, the Oregon garnishment exemption does not require the

plan to respond to court proceedings, to pay money into the

court, or to undertake administrative processing of the

garnishment order. Cf Mackey, 486 U.S. at 831. Thus,

there is no reason to believe that the operation of the

garnishment exemption will even remotely implicate ERISA’s

concern for uniform treatment of administration of ERISA

plans.

The key flaw in Standard’s argument is its assertion,

based on a quotation from Mackey taken out of context, that

the state law exemption must be preempted because it

obstructs an ERISA plan’s right “‘to sue,’ which implies a

right to collect on money judgments.” Pet. for Cert. 13. If

Standard’s reasoning were extended to its logical conclusion,

then all state garnishment and attachment exemptions would

be inconsistent with ERISA. For example, state-law

homestead exemptions would be preempted, as would the

typical state law placing a percentage cap on wages that may

be garnished, because both obstruct a plaintiff's right to

collect fully on a judgment won under ERISA.

Moreover, as this Court has noted, “‘[a] cause of action

on a judgment is different from that upon which the judgment

was entered.’” Huron Holding Corp. v. Lincoln Mine

Operating Co., 313 U.S. 183, 194 (1941) (footnote and

citation omitted). ERISA itself makes no provision for

execution of judgments against employee welfare benefits,

and so Standard is dependent on Oregon law to invoke its

right to use garnishment proceedings to collect on its

judgment. Nothing in the language of ERISA or any other

federal law compels Oregon to offer the writ of garnishment

to judgment creditors as a method of execution. But, having

invoked Oregon law to claim its right to garnishment,

Standard is in no position to argue that parts of the same law

that it dislikes are preempted by ERISA. By seeking

dispensation from Oregon’s garnishment exemption, Standard

is really asking for special treatment in the enforcement and

collection of its judgments, but Standard, like every other

judgment creditor, must take the bitter with the sweet.

3. | Standard’s argument is also contrary to the policy

expressed in Rule 69(a) of the Federal Rules of Civil

Procedure, which incorporates state law governing the

execution of judgments:

The procedure on execution, in proceedings

supplementary to and in aid of a judgment, and in

proceedings on and in aid of execution shall be in

accordance with the practice and procedure of the state

in which the district court is held, existing at the time

the remedy is sought, except that any statute of the.

United States governs to the extent that it is applicable.

Rule 69(a) incorporates the “substantive” state-law

exemptions from garnishment as well as the procedures for

garnishment proceedings, even when the cause of action

arises under federal law, and even when the judgment

creditor is the United States. See United States v. Miller,

229 F.2d 839, 841 (3d Cir. 1956); see also Fink v. O’Neil,

106 U.S. 272, 279 (1882) (United States subject to state-law

homestead exemption on execution of judgment; federal

courts required to follow state law in execution of

judgments). Federal policy in this matter has been the same,

almost without interruption, since the Judiciary Act of 1789.

See Beers v. Haughton, 34 U.S. (9 Pet.) 329, 360-61 (1835).

As this Court noted in Fort Halifax, one of the

principles governing the limitation of ERISA’s preemption

provision is the need for “‘respect for the separate spheres of

governmental authority preserved in our federalist system.’”

482 U.S. at 19 (citation omitted). State law has traditionally

governed executions of judgment, and federal law has, to a

great degree, acknowledged and adopted that state law, even

when federal law has defined the substantive rights and

provided the causes of action leading to judgments. In

enacting ERISA, Congress gave no indication that it intended

to do what petitioner urges, to disrupt the traditional balance

between state and federal law as to execution against

employee welfare benefits.’

° Congress did alter that balance with regard to execution

against employee pension benefits, which \t largely prohibited in

(continued...)

Bie.

B. The Decision Below Does Not Conflict with Any

Decision of a Federal Court of Appeals or State

Court of Last Resort.

Even though Standard recognizes that the decision

below does not actually conflict with Mackey or any other

decision of this Court, it argues that review is warranted

because the lower courts are divided in their interpretation of

Mackey. See, e.g., Pet. for Cert. 9, 15. In fact, none of the

cases relied on by Standard conflicts with the decision below;

they all involve either state laws specifically targeting

employee benefit plans or issues remote from the one

presented in this case.

1. Standard argues principally that the decision below

conflicts with In re Dyke, 943 F.2d 1435 (Sth Cir. 1991),

and Guidry v. Sheet Metal Workers International Association,

Local No. 9, No. 92-1018, 1993 U.S. App. LEXIS 28,698

(10th Cir. Nov. 4, 1993). Amicus Health Insurance

°(.. continued)

section 206(d)(1) of ERISA, 29 U.S.C. § 1056(d)(1). See Mackey,

486 U.S. at 836-37; Guidry v. Sheet Metal Workers Nat'l Pension

Fund, 493 U.S. 365 (1990). Section 206(d)(1) thus overrides Rule

69(a) of the Federal Rules of Civil Procedure and expressly

prohibits execution of judgment against pension benefits, even

when execution would be permitted by state law. By contrast,

Congress remained silent with respect to execution against

employee welfare benefits. When ERISA is placed against the

background of Congress’ traditional deference to state policy on

execution of judgments, it appears unlikely that Congress intended,

by this silence, to override all state exemptions protecting welfare

benefits from execution of judgment. See Mackey, 486 U.S. at

834 (“state-law methods for collecting judgments must, as a

general matter, remain undisturbed by ERISA”). As the Oregon

Court of Appeals correctly observed, “[i]t does not follow that by

[silently] acquiescing in garnishment Congress mandated that

practice.” Pet. App. 3.

Association of America also argues that the decision below

conflicts with In re Schlein, 8 F.3d 745 (11th Cir. 1993).

All these decisions are distinguishable because they concern

Statutes that expressly refer to employee benefit plans and

treat such plans differently from sources of income not

regulated by ERISA. Under a straightforward application of

Mackey, they make “reference to,” and therefore “relate to,”

employee benefit plans, and so they are preempted under

section 1144 of ERISA. But these decisions do not cast any

doubt on the validity of a broadly applicable state-law

garnishment exemption that applies to a wide variety of

assets and sources of income, like the law at issue here.‘

* Furthermore, both Dyke and Schlein held that the exemptions

at issue were saved from preemption by another provision of

ERISA, 29 U.S.C. § 1144(d), which provides that the preemption

clause shall not be construed to impair or supersede “any law of

the United States.” In reaching this conclusion, the Dyke and

Schlein courts emphasized that the Bankruptcy Code gives states

the right to “opt out” of the federal scheme providing for

exemptions from the bankruptcy estate and replace the federal list

of exemptions with their own exemptions. See Schlein, 8 F.3d at

748-54; Dyke, 943 F.2d at 1449; see also In re Vickers, 954 F.2d

1426, 1429 (8th Cir.), cert. dismissed, 113 S. Ct. 4 (1992); see

generally 11 U.S.C. § 522(b). States that do opt out of the federal

scheme usually replace the federal exemptions with their own

Statutes providing generally for exemptions from execution of

judgment. Thus, federal law incorporates these state-law

exemptions into the Bankruptcy Code. Cf. Shaw v. Delta Air

Lines, 463 U.S. at 102 (New York’s Human Rights Law saved

from preemption by § 1144(d), because preemption would impair

the operation of Title VII, which required recourse to state law for

enforcement).

Oregon has opted out of the federal bankruptcy exemption

scheme and replaced it with its own exemptions, including the one

at issue here. See Or. Rev. Stat. § 23.305. Thus, Oregon

residents who file for bankruptcy are unquestionably entitled to

(continued...)

In Dyke, for example, the Fifth Circuit emphasized that

the Texas statute exempting pension benefits from attachment

“specifically refer[red] to ERISA benefit plans.” 943 F.2d

at 1448. Although the statute did not use the word

“ERISA,” the Fifth Circuit observed that the statute covered

“stock bonus, pension, profit-sharing, [and] similar plan[s],”

which are “employee benefit plans” within the meaning of

ERISA. /d. (emphasis deleted). The Court also noted that

“the very purpose of [the statute] is to permit Texas debtors

to exempt ERISA-qualified pension plans under the state

exemption scheme.” Jd. For these reasons, the Court held

that the Texas attachment statute “related to” employee

benefit plans and distinguished that statute from laws of more

general application that might incidentally bring benefit plans

within their reach. See id. at 1447.°

*(...continued)

claim an exemption from garnishment for disability payments, to

the extent those payments are necessary for their support. But it

would be absurd for the validity of Oregon’s exemption to depend

on whether a particular judgment debtor has filed for bankruptcy,

and such a rule would only encourage debtors to file for

bankruptcy, with little benefit to Standard as a result.

* The reference to ERISA plans in the statute at issue in

Schlein was even more narrowly targeted. The Florida exemption

at issue there specifically sheltered pension plans qualified under

sections of the Internal Revenue Code that refer to ERISA plans.

The Eleventh Circuit thus had no difficulty in concluding that the

Florida statute “made reference” to ERISA plans, and it described

the issue in Dyke as “identical.” 8 F.3d at 750. The Oregon

exemption at issue here makes no specific reference to ERISA

plans, although benefits from a few such plans, such as plans

providing for disability benefits, are within its broad reach, while

benefits from other kinds of ERISA plans, like pension plans and

health-benefit plans, are not sheltered by the statute.

Guidry involved a similar garnishment statute that

exempted the “‘avails of any pension or retirement benefits,

or deferred compensation plan.’” 1993 U.S. App. LEXIS

28,698 at *38 (quoting Colo. Rev. Stat. § 13-54-104(b)).

The Tenth Circuit concluded that this statute was preempted

“[bJecause it is specifically applicable to ERISA pension

plans,” Id. at *39, and “because it singles out ERISA

benefits for special treatment.” Jd. at *39-*40. The Tenth

Circuit then went on to connect this holding to this Court’s

decision in Mackey, striking down the Georgia garnishment

exemption that was targeted directly at ERISA benefit plans:

“It is this singling out that preempts the Colorado anti-

garnishment exemption. Cf. Mackey, 486 U.S. at 838

n.12.” Guidry, supra, at *40 (footnote omitted).

Standard argues, however, that the decision below

conflicts with Guidry and Dyke because those cases

supposedly hold that a state law “relates to” an ERISA plan

whenever it “implicitly encompasses” such a plan, whereas

the decision below requires only that a state law not “single

out ERISA plans for special treatment.” Pet. for Cert. 17-

19. Standard’s interpretations of all three decisions are

inaccurate. While the challenged state laws in Guidry and

Dyke may not have specifically mentioned ERISA, they did

refer specifically to ERISA plans, even though they did so

circuitously by using language such as “avails of any pension

or retirement benefits or deferred compensation plan” instead

of “benefits from ERISA plans.”

Standard is therefore wrong when it argues that Guidry

and Dyke found that the state exemptions “related to” ERISA

plans because they had a “decided impact on such plans.”

Pet. for Cert. at 15. In Guidry and Dyke, the Courts of

Appeals concluded that the state laws “related to” ERISA

plans because they singled out or made specific reference to

those pians, not merely because they had some effect on

them.

In any case, the decision below is distinguishable from

Guidry and Dyke because the Oregon law takes an entirely

different approach. Rather than addressing the source of the

proceeds (e.g., a benefit plan), it addresses the purpose for

which the income is received (compensation because of

disability), regardless of its source. Thus, benefits from an

ERISA welfare plan attributable to accrued vacation pay

would not be exempt from execution (unless they were

payable because of disability), whereas proceeds of a

personal injury award would be exempt, just like disability

payments from an ERISA plan, even if the judgment had

nothing to do with an ERISA plan.

Standard argues further that the Court of Appeals and

other lower courts have misinterpreted Mackey and have been

willing to find that a state law “relates to” ERISA plans only

when the law singles out such plans. In fact, the Oregon

Court of Appeals did not fal! into this error. Standard seizes

on one sentence in the Oregon Court of Appeals’ opinion,

which stated that the Oregon garnishment statute was

distinguishable from the Georgia statute struck down in

Mackey because the Georgia law specifically targeted ERISA

plans. Pet. for Cert. 17. The Oregon Court of Appeals did

not hold, however, that state laws that do not specifically

target ERISA plans are never subject to scrutiny for

preemption. It stated only that such laws are not

“automatically preempted” under Mackey, as are statutes that

single out ERISA plans. Pet. App. 3 (emphasis added). The

Oregon Court of Appeals never suggested that a statute that

attempted to regulate ERISA plans by addressing the funding

or administration of ERISA plans would not be preempted

merely because the statute did not specifically mention

employee benefit plans. It was unnecessary for the Court of

Appeals to consider such a situation, because this case does

not involve a state law that attempts to regulate employee

benefit plans.

2. Standard also argues that the decision below

confiicts with Iron Workers Mid-South Pension Fund vy.

Terotechnology Corp. , 891 F.2d 548 (5th Cir.), cert. denied,

497 U.S. 1024 (1990), and Carpenters Southern California

Administrative Corporation v. El Capitan Development

Company, 53 Cal. 3d 1041, 811 P.2d 296, cert. denied, 112

S. Ct. 430 (1991). Pet. for Cert. 9. Those cases have little

to do with the issue presented here, however.

Both Jron Workers and Carpenters Southern involved a

situation where an employer had failed to pay contributions

to an ERISA welfare benefit fund, and the fund then

attempted to record a lien (similar to a mechanic’s lien)

against a third party that had no direct obligation to the fund

under ERISA. In both cases, the fund relied on a state law

allowing employee trust funds to proceed against property

owners, without regard to whether the owner was directly

liable to the fund under ERISA. In both cases, the courts

held the statute to be preempted because it was specifically

designed to, and did, regulate one of the core matters of

ERISA, liability for funding of an employee welfare benefit

plan. As the Fifth Circuit stressed in Iron Workers, the

Louisiana statute was preempted because it attempted to

interfere in one of the core concerns of ERISA, “the funding

of employee benefit plans,” 891 F.2d at 554, and also

because it expressly referred to employee benefit plans, id.

at 553. Similarly, in Carpenters Southern, the California

Supreme Court held that the California statute was preempted

by ERISA because it was specifically designed to affect

ERISA plans, 53 Cal. 3d at 1049, 811 P.2d at 300, because

it directly regulated ERISA plans by creating a funding

mechanism for those plans not provided by Congress, id. at

1052, 811 P.2d at 301, and because it “single[d] out ERISA

plans for special treatment,” id. at 1049, 811 P.2d at 300.

Neither Jron Workers nor Carpenters Southern

resembles the case at bar. The Oregon garnishment statute

does not intrude into the funding or administration of ERISA

plans, nor does it purport to give ERISA beneficiaries or

participants greater rights in the funding or administration of

the plan, or the payment of benefits, than they would have

under ERISA itself.

3. As the federal Courts of Appeals have uniformly

recognized, when a state law does not specifically refer to

ERISA plans, but brings such plans incidentally within its

reach, the determination whether a state law is preempted by

ERISA must be based on the state law’s relation to the

specific concerns which led Congress to enact the ERISA

preemption provision. In the ERISA context, as with any

other pre-emption analysis, “‘the purpose of Congress is the

ultimate touchstone.’” Fort Halifax, 482 U.S. at 8 (citations

omitted). Thus, if the challenged law has little to do with

the core regulatory concerns of ERISA, “the mere fact that

[a] statute has some economic impact on the plan does not

require that the statute be invalidated.” Rebaldo v. Cuomo,

749 F.2d 133, 139 (2d Cir. 1984), cert. denied, 472 U.S

1008 (1985). This limitation on ERISA preemption is

necessary because “‘federal exclusivity [was] a corollary of

regulatory coverage, not an independent statutory goal’” of

Congress. Martori Bros. Distributors v. James-Massengale,

781 F.2d 1349, 1359 (9th Cir. 1986) (citation omitted). As

the Second Circuit has remarked, “[a] preemption provision

designed to prevent state interference with federal control of

ERISA plans does not require the creation of a fully insulated

legal world that excludes these plans from regulation of any

purely local transaction.” Kebaldo, 749 F.2d at 138.

While not every formulation by every court of the

principles underlying ERISA preemption is identical, the

basic approach taken by all the federal Courts of Appeals is

essentially the same: A state law is not preempted by ERISA

if it does not affect “relations among the principal ERISA

entities -- the employer, the plan fiduciaries, the plan, and

the beneficiaries -- as such[.]” Sommers Drug Stores v.

Corrigan Enters. , 793 F.2d 1456, 1470 (Sth Cir. 1986), cert.

denied, 479 U.S. 1034 (1987); see Aetna Life Ins. Co. v.

Borges, 869 F.2d 142, 146 (2d Cir.) (“[L]aws that have been

ruled preempted are those that provide an alternative cause

of action to employees to collect benefits protected by

ERISA, refer specifically to ERISA plans and apply solely to

them, or interfere with the calculation of benefits owed to an

employee”), cert. denied, 493 U.S. 811 (1989); Martori

Bros., 781 F.2d at 1357-58 (state law preempted if it

regulates “the matters regulated by ERISA: disclosure,

funding, reporting, vesting, and enforcement of benefit

plans”); Firestone Tire & Rubber Co. v. Neusser, 810 F.2d

550, 555-56 (6th Cir. 1987) (similar). Even if ERISA plans

are swept within the general regulatory reach of a state

Statute, that law is not preempted if the law applies to

persons “without regard to their status as participants in an

ERISA plan.” Firestone, 810 F.2d at 556.

Under any of these formulations, the Oregon

garnishment statute would not be preempted because it does

not affect the relationship of Saklad and Standard as ERISA

fiduciary and beneficiary. While it so happens that, in this

particular case, the judgment debtor protected by the statute

is an ERISA beneficiary, and the judgment creditor is an

ERISA fiduciary, that is a pure coincidence. This case is

therefore analytically similar to Sommers Drug Stores, supra,

where the Fifth Circuit rejected the argument that a

shareholder suit brought by an employee benefit plan against

the employer, based on the state law of corporate fiduciary

duty, was preempted by ERISA. The Court stressed that

“the shareholder’s rights against the corporate director

ar[o}se solely from his status as shareholder,” and that it was

irrelevant hat “the director happens also to be a plan

fiduciary and the shareholder a benefit plan[.]” 793 F.2d at

1468.

4. The approach taken by the Courts of Appeals is

consistent with, and based upon, this Court’s explication of

the scope of ERISA preemption in Fort Halifax Packing Co.

v. Coyne. In that case, this Court concluded that a Maine

law requiring employers to provide employees with a one-

time severance payment in the event of a plant closing was

not preempted by ERISA because “pre-emption of the Maine

Statute would not further the purpose of ERISA pre-

emption.” 482 U.S. at 8. After surveying Congress’

concern about the complexity of administering employee

benefit plans, this Court concluded that “Congress intended

pre-emption to afford employers the advantages of a uniform

set of administrative procedures governed by a single set of

regulations[,]” id. at 11, not a broad-ranging immunity from

State regulations of general applicability.

The concern underlying ERISA’s preemption provision

is remote from the issues raised by this case, which does not

concern the administration of the plan at all, but only what

happens to the benefits once they are due to be paid out by

the plan. Oregon has not directed Standard to evaluate

employee claims for disability benefits in a particular way.

Rather, Oregon has made the policy decision to shelter

minimal disability benefits against all creditors, including but

not limited to ERISA plans. The particular concerns for

uniform treatment of employee benefit plans that led to

ERISA’s preemption provision are not implicated by that

policy decision. See also Mackey, 486 U.S. at 836

(distinguishing ERISA’s anti-alienation provision, which has

to do with “pension plan benefits,” from ERISA’s

preemption provision, which has to do with benefit “plans”).

Because Oregon’s statute “creates no prospect of conflict”

with ERISA, Fort Halifax, 482 U.S. at 19, the decision

below is correct, and review by this Court is not warranted.

CONCLUSION

The wnit of certiorari should be denied.

Respectfully submitted,