Opposition Brief — Consolidated Beef Industries, Inc. v. New York Life Insurance

eupreme VOUT, Vie

FILED

WAT 19 1992

rd a :

OFFICE OF THE CLERK

No. 91-1342 es

In the

Supreme Court of the United States

October Term, 1991

CONSOLIDATED BEEF INDUSTRIES, INC.,

individually and as a fiduciary under

the C.B.I., INC. PENSION PLAN,

Petitioner.

NEW YORK LIFE INSURANCE COMPANY

and NEW YORK LIFE INSURANCE AND

ANNUITY CORPORATION,

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

RESPONDENTS’ BRIEF IN OPPOSITION TO

PETITION FOR WRIT OF CERTIORARI

Gary J. Haugen (Counse/ of Record

Wayne S. Moskowitz

MASLON, EDELMAN, BORMAN

& BRAND

3300 Norwest Center

G) South Seventh Street

Minneapolis, Minnesota 55402

(612) 672-8200

Attornevs for Respondents

1992 — Bachman Legal Printing, 835 Second Ave. So., Mpls., MN 55402 (812) 339-9518

@ FAX 612-837-8053

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QUESTIONS PRESENTED

1. Did the Court of Appeals properly rule that

purported state law claims relating to the administration of

an ERISA plan are pre-empted even if no remedy is

provided by ERISA?

2. Did the Court of Appeals properly rule that

Petitioner’s purported state law claims are pre-empted by

ERISA because they relate to the administration of an

ERISA plan?

3. Did the Court of Appeals properly rule that

Petitioner had failed to make a proper showing under Rule

56 to support a claim for non-fiduciary liability under

ERISA even if such a cause of action were cognizable?

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES .................... iv

STATEMENT OF THE CASE .................. 1

ES ee 1

MMMM UIE ow vce cece nesacas 2

C. The NALAC/NYL Program .............. 2

D. CBI Adopts a 401(k) Plan ............... 2

E. CBI’s_ Dissatisfaction with PPNA’s Plan

ane cba pawcensavaseces 3

REASONS FOR DENYING THE WRIT........... 4

I. THE COURT OF APPEALS’ RULING THAT

ERISA PRE-EMPTS STATE LAW CLAIMS

RELATED TO PLAN ADMINISTRATION

EVEN IF NO ERISA REMEDY IS

AVAILABLE IS CONSISTENT WITH THE

RULINGS OF THIS COURT ............ 4

A. Pilot Life Holds that an ERISA Remedy is

Not Required for ERISA Pre-emption ... 5

B. The Factual Record Makes This an

Inappropriate Case for Resolving the

Alleged Conflict Between the Circuits |

ll

Il. THE COURT OF APPEALS’ RULING THAT

CBI’S STATE LAW CLAIMS RELATE TO

PLAN ADMINISTRATION IS BASED ON A

FACTUAL REVIEW OF THE RECORD AND

IS CONSISTENT WITH THIS COURT'S

AMD 86 GAS EK REA 10

A. Certiorari is Inappropriate Because the

Court of Appeals’ Decision is Based on a

Determination that CBI Failed to Make

an Adequate Factual Showing under Fed.

Dn Ms SR ke ke ae eee 10

B. Certiorari is Inappropriate Because the

Court of Appeals’ Decision that CBI’s

Claims Relate to a Plan is Correct Under

rang ee ney eA c- 13

ill. RESOLUTION OF THE ALLEGED

CONFLICT REGARDING NON-FIDUCIARY

LIABILITY IS IRRELEVANT TO

DISPOSITION OF THIS CASE BECAUSE

THE COURT OF APPEALS ACCEPTED

CBI’S POSITION FOR PURPOSES OF THIS

BPE ek eae eee ee ee eee 15

(APOIO 6 oa oe hi SS eee 18

ill

TABLE OF AUTHORITIES

CASES

American Federation of Unions, Local 102 Health &

Welfare Fund v. Equitable Life Assur. Soc’y, 841 F2d 658

Ge RU. EE fa os ees ore ee ce oe a ee 7

Caterpillar Inc. v. Williams, 482 U.S. 386 (1987) ...... 8

Childers v. Northwest Airlines, Inc., 688 F. Supp. 1357 (D.

eS sae a ee ee eee eee 13

Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272

Se Sant ER ec at ee eee ee ae ee ee 8

Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208 (8th

Cir.), cert. denied, 454 U.S. 968 (1981) ............ 8

FMC Corp. v. Holliday, 1111 S. Ct. 403 (1990)..... 5,9

Farlow v. Union Cent. Life Ins. Co., 874 F.2d 791 (11th Cir.

RR COME VAR rte Oa Ane Sern ee ee 13

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) 12

Freund v. Marshall & Ilsley Bank, 485 F. Supp. 629 (W.D.

ee ee Per Ree eer eee eer ase 16

eee ee a ee 7,11

ce | EER SR ree CSTE Oy ree NN IED et 7

Howard v. Parisian Inc., 807 F.2d 1560 (11th Cir. 1987) 7

iv

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

8 rere eer ee 5, 6, 9, 11, 14, 15

International Resources v. New York Life Ins. Co., 950 F.2d

ot OS. eee aaa 8

Jackson v. Martin Marietta Corp., 805 F2d 1498 (11th Cir.

BRT ace esr haar ateta te rata eee Cee 11

Lister v. Stark, 890 F. 2d 941 (7th Cir. 1989), cert. denied,

EEL De GA EIA 85 6h ww ee eevee eee be ees 7

Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134

eR eNO Near moe ere, NRRL ENR mary rut Geaege 6

Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d

mae tn GC, ND ee is eo Cw wk ew eke ckkn 7

Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724

tPA ep Ne ARBs are anmpane inet PUN AMES Moe oh 0. 5

Ree LAGNA Ce SE eae cane 16

NE a ee eae ae ees ea earns 7,9

Perry v. P*I*E* Nationwide, Inc., 872 F.2d 157 (6th Cir.

1989), cert. denied, 493 U.S. 1093 (1990) ............ 8

Phillips v. Amoco Oil Co., 799 F.2d 1464 (11th Cir. 1986),

cert. denied, 481 U.S. 1016 (1987) ................. 9

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46

tr ean 5, 6, 9, 11

Scott v. Gulf Oil Corp., 754 F.2d 1499 (9th Cir. 1985) .11

Settles v. Golden Rule Ins. Co., 715 F. Supp. 1021 (D. Kan.

1989), aff'd, 927 F.2d 505 (10th Cir. 1991) ........... 7

Shaw v. Delta Air Lines, Inc., 463 U.S. 85 (1983) 5,11,14

Smith v. Dunham-Bush, Inc., --F.2d--, 1992 WL 29049 (2d

o 2 Per rere ree 6

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

re yy ae ern ee ee 7

Tisdale v. Dobbs, 807 F.2d 734 (8th Cir. 1986)....... 16

United States v. Johnston, 268 U.S. 220 (1925) . 1011,17

STATUTES

oe ee re er ee reer rs)

rr ere array 6

a iS shake wht aekeecdea vie Lawn +)

oe SP Be OEE SoS eck even wenn ewnenwewen 5

vi

STATEMENT OF THE CASE

Respondents New York Life Insurance Company and

New York Life Insurance and Annuity Corporation

(collectively, "NYL") submit the following as an addition to

the Statement of the Case found in the Petition for Writ of

Certiorari of Consolidated Beef Industries, Inc. ("CBI").'

A. Background.

CBI sued NYL to recover damages allegedly resulting

from administration problems CBI purportedly experienced

with a 401(k) pension plan that it adopted for its employees

in December 1985 (the "Plan"). CBI alleges that it entered

into an oral contract with NYL to purchase a "turnkey

program for operating a 401(k) plan," and that the Plan did

not operate properly. Petitioner’s Appendix ("Pet. App.") A-

35-38. Based on the allegedly defective operation of the

Plan, CBI asserted various state law claims and a claim for

breach of fiduciary duty under ERISA.’ Id. at A-46-47.

CBI’s state law claims and ERISA claim are all based on

the same alleged conduct, and CBI seeks the same damages

for each of its claims, including its purported ERISA claim.

Id. at A-40, 42-43, 45-47.

1 Pursuant to Rule 29.1, Respondents state that New York Life

Insurance Company is the parent company of New York Life Insurance

and Annuity Corporation.

2 CBI’s state law claims allege, inter alia, that NYL breached a

contract to provide a turnkey plan program (Pet. App. A-39); that the

turnkey plan program breached implied warranties of fitness and

merchantability under the UCC (Id. at A-41-42); that NYL

misrepresented that the plan would be administered accurately and

efficiently by PPNA (Id. at A-44-46); that NYL became a fiduciary to CBI

by marketing and selling the plan program, and breached its fiduciary

duty by failing to determine that PPNA’s administration would be

unsuccessful (Id. at A-45); and that NYL negligently failed to train and

supervise its agents with regard to 401(k) plans and their administration

(Id. at A-47). CBI also seeks punitive damages. (Id. at A-47.)

]

B. CBI’s Principals.

When CBI adopted the Plan, its co-owners were Ronald

Likas and Carl Kuehne. Ronald Likas was a former

economic analyst and investment consultant for businesses,

and he had for many years sold insurance products in the

business market, along with his father, Frank Likas, who

was a long-time agent for NYL. Eighth Circuit Joint

Appendix ("8th Cir. App.") 90, 97, 123. Mr. Kuehne is an

attorney who had represented CBI before purchasing the

company. Id. at 82-84.

C. The NALAC/NYL Program.

In the spring of 1985, Frank Likas became aware of a

new program regarding 401(k) retirement plans offered by

NYL and North American Life and Casualty Company

("NALAC"). 8th Cir. App. 160. The details of this program

were set forth in a Memorandum of Understanding between

NYL and NALAC. Id. at 272.

According to the Memorandum of Understanding,

agents who were licensed by both NYL and NALAC could

market NYL individual annuities and NALAC life

insurance policies for use as investment vehicles in 401(k)

plans. Id. at §1.5. The agents could also market the

administrative services of Pension Planners of North

America ("PPNA"), a division of NALAC. The provision of

administration services was the exclusive province of

NALAC/PPNA; NYL was precluded from acting as a plan

administrator or fiduciary. Id. at §§ 1.1, 4.4, 15.3.

D. CBI Adopts a 401(k) Plan.

After reviewing materials regarding the program,

Frank Likas told another NYL agent, Robert Billings, that

a

Billings Should—"enroll his son’s company," i.e., CBI, in a

401(k) plan. They agreed-that. in return for doing the "leg

work," Billings would receive 40% ofthe commissions, and

Frank Likas would receive the remaining. 60%. 8th Cir.

App. 160-61, 163.

CBI adopted the Plan in December 1985. Id. at 244,

259. CBI appointed itself as the Plan administrator, and it

hired PPNA to act as third-party administrator. Id. at 241,

244, 493-96; Pet. App. A-35-36. NYL is not mentioned

anywhere in the Plan documents. NYL did not execute any

written contracts with CBI or the Plan, except for the

annuities it subsequently issued to the Plan trustee,

pursuant to its direction.

E. CBI’s Dissatisfaction with PPNA’s Plan

Administration.

After the Plan was implemented, CBI allegedly began

experiencing problems with PPNA’s administration of the

Plan. In January 1987 CBI fired PPNA and replaced it

with a new third-party administrator. 8th Cir. App. 75,

129. In June 1988, as part of a settlement agreement with

CBI, NALAC paid the Plan $28,000 and further agreed to

pay 25 percent of a statement for services from the

successor Plan administrator. Id. at 266. In return, CBI

released and discharged NALAC from all claims "arising

out of ... the 1985 sale, marketing and administration" of

the Plan. Id. at 268. CBI then brought this suit against

NYL for damages allegedly resulting from the same

problems with the Plan’s administration.

The district court granted NYL’s motion for summary

judgment. It held that CBI’s state law claims were pre-

empted by ERISA because they relate to the administration

of the Plan. Pet. App. A-8. It also held that CBI had failed

to state a claim for breach of fiduciary duty under ERISA

because CBI had failed to present any evidence that NYL

was a fiduciary to the Plan. Id. at A-11.

The Court of Appeals for the Eighth Circuit, after a de

novo review of the grant of summary judgment, affirmed.

Id. at A-16. It, too, found that CBI’s claims relate to the

administration of the Plan, and that CBI had not presented

any evidence that NYL was a Plan fiduciary. Id.

REASONS FOR DENYING THE WRIT

I. THE COURT OF APPEALS’ RULING THAT

ERISA PRE-EMPTS STATE LAW CLAIMS

RELATED TO PLAN ADMINISTRATION EVEN IF

NO ERISA REMEDY IS_ AVAILABLE IS

CONSISTENT WITH THE RULINGS OF THIS

COURT.

CBI argued before the Eighth Circuit Court of Appeals

and the district court that its purported state law claims

can only be pre-empted by ERISA if NYL is found to be a

fiduciary under ERISA. Both courts rejected this

contention, ruling that ERISA can pre-empt claims against

nonfiduciaries because the availability of an ERISA remedy

is not a requirement for ERISA pre-emption. CBI now

contends these rulings were in er: r and that Supreme

Court review is required because a conflict exists among the

circuits on this issue.

CBI’s petition should be denied because the Eighth

Circuit correctly applied controlling Supreme Court

precedent. Furthermore, CBI has failed to create an

adequate factual record demonstrating that it lacked an

ERISA remedy to make this an appropriate case for

Supreme Court review.

A. Pilot Life Holds that an ERISA

Remedy is Not Required for ERISA

Pre-emption.

ERISA was intended by Congress to "establish pension

plan regulation as exclusively a federal concern." ngersoll-

Rand Co. v. McClendon, 111 S. Ct. 478, 482 (1990) (quoting

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46 (1987)). To

achieve this end, ERISA contains an express pre-emption

provision. 29 U.S.C. § 1144(a). This Court has determined

that ERISA’s civil remedies scheme is exclusive. Pilot Life,

481 U.S. at 54-55. The express pre-emption provision pre-

empts "any and all State laws insofar as they... relate to

any employee benefit plan," 29 U.S.C. § 1144(a), (with

certain exceptions not applicable here).®

Congress used the words "relate to" in their broad

sense, rejecting more limited pre-emption language that

would have made the clause applicable only to state laws

concerning specific subjects covered by ERISA, such as

fiduciary responsibility. FMC Corp. v. Holliday, 111 S. Ct.

403, 409 (1990); Shaw v. Delta Air Lines, Inc., 463 U.S. 85,

98 (1983). Instead, the phrase "relates to" must be

"construed expansively" and "given its broad common sense

meaning," Metropolitan Life Ins. Co. v. Massachusetts,

471 U.S. 724, 739 (1985), so that a state law "relates to" a

benefit plan under ERISA’s pre-emption provision "if it has

a connection with or reference to such a plan." Pilot Life,

481 U.S. at 47 (quoting Metropolitan Life, 471 U.S. at 739);

Ingersoll-Rand, 111 S. Ct. at 483.

§ State laws regulating insurance, banking and securities are exempt

from pre-emption under ERISA’s "savings" clause. 29 U.S.C.

§ 1144(bX2XA). CBI does not contend the savings clause applies.

Furthermore, the parties agree CBI’s plan is governed by ERISA. See

29 U.S.C. § 1002(2) (defining "pension plan").

5

In addition to ERISA’s express pre-emption provisicn,

this Court has held that ERISA’s exclusive remedies

provision, 29 U.S.C. § 1132(a), also has an implied pre-

emptive effect. In Pilot Life the Court held that state law

claims based on the improper processing of a claim for

benefits were pre-empted based not only on ERISA’s

express pre-emption clause, but also on ERISA’s civil

remedies provision. 481 U.S. at 52-53. The Court held that

the remedies contained in § 1132(a) were intended by

Congress to be exclusive and that Congress "did not intend

to authorize other remedies that it simply forgot to

incorporate expressly." Id. at 54 (quoting Massachusetts

Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 146 (1985)).

Furthermore, the Court stated that ERISA’s "pre-

emptive force" was modeled after §301 of the

Labor-Management Relations Act of 1947 (the "LMRA").

481 U.S. at 54. The Court emphasized that in so doing

"Congress was well aware that the powerful pre-emptive

force of .. . the LMRA displaced all state actions . . . even

when the state action purported to authorize a remedy

unavailable under the federal provision." Id. at 55

(emphasis added); see also Ingersoll-Rand, 111 S. Ct. at

485-86 (reaffirming that under Pilot Life ERISA displaces

all state law claims regardless of whether ERISA provides

a remedy). Thus ERISA, like the LMRA, need not provide

a remedy to pre-empt state law.

The Eighth Circuit accordingly was correct when it held

ERISA pre-empts CBI’s purported state law claims despite

the fact NYL is not an ERISA fiduciary. ERISA pre-empts

any and all state law claims that "relate to" an ERISA plan,

even if ERISA does not provide a remedy.

Virtually every circuit court that has addressed the

issue has come to the same conclusion, as mandated by

Pilot Life. See Smith v. Dunham-Bush, Inc., --- F.2d ---,

1992 WL 29049 (2d Cir. Feb. 7, 1992) ("the preclusion of

remedy does not bar the operation of ERISA pre-emption");

Pane v. RCA Corp., 868 F.2d 631 (3d Cir. 1989) (state law

claims pre-empted despite lack of ERISA remedy); Hansen

v. Continental Ins. Co., 940 F.2d 971, 979 (5th Cir. 1991)

("ERISA’s pre-emption provision bars state law causes of

action even though such pre-emption may leave a [plaintiff]

without a remedy"); Lister v. Stark, 890 F. 2d 941, 946 (7th

Cir. 1989), cert. denied, 111 S.Ct. 579 (1990) (‘the

availability of a federal remedy is not a prerequisite for

federal pre-emption"); Olson v. General Dynamics Corp.,

951 F.2d 1123, 1127 (9th Cir. 1991) ("There is simply no

reason to assume that Congress intended ERISA’s pre-

emptive reach to be coextensive with the Act’s civil

remedial scheme."); Straub v. Western Union Tel. Co., 851

F.2d 1262 (10th Cir. 1988) (ERISA pre-empts state law

claims despite lack of ERISA remedy); Howard v. Parisian

Inc., 807 F.2d 1560 (11th Cir. 1987) (state law claims

against non-fiduciary plan administrator pre-empted); see

also Gibson v. Prudential Ins. Co., 915 F.2d 414 (9th Cir.

1990) (ERISA pre-empts state law claims against

nonfiduciaries despite lack of ERISA remedy); American

Federation of Unions, Local 102 Health & Welfare Fund v.

Equitable Life Assur. Soc’y, 841 F.2d 658 (5th Cir. 1988)

(dismissing state law claims against insurance carrier on

pre-emption grounds and dismissing ERISA claim because

insurance carrier was not a fiduciary); Settles v. Golden

Rule Ins. Co., 715 F. Supp. 1021, 1022 (D. Kan. 1989) (state

law claims pre-empted even though defendant insurance

company was not a fiduciary), aff'd, 927 F.2d 505 (10th Cir.

1991).

‘ Despite the holdings of the Fifth Circuit in Hansen and American

Federation, CBI argues that the Fifth Circuit is not in accord with this

majority view, citing Memorial Hosp. Sys. v. Northbrook Life Ins. Co.,

904 F.2d 236 (5th Cir. 1990). Memorial held that a hospital which

provided treatment to a patient based on the erroneous verification by

her husband’s employer that she was covered by (footnote cont'd)

7

Even the Sixth Circuit, which alone has erroneously

held that ERISA pre-emption requires an ERISA remedy,

see Perry v. P*I°E* Nationwide, Inc., 872 F.2d 157 (6th Cir.

1989), cert. denied, 493 U.S. 1093 (1990), has recently

tacitly acknowledged the error of this conclusion.® In

Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272

(6th Cir. 1991), the court held that state law claims were

pre-empted because they related to an ERISA plan. In

setting forth the scope of ERISA pre-emption, the Sixth

Circuit correctly observed:

Nor is it relevant to an analysis of the

scope of federal pre-emption that

appellants may be left without a remedy.

Caterpillar Inc. v. Williams, 482 U.S. 386

.. » (1987).

944 F.2d at 1276.°

an insurance policy (a "plan" under ERISA) could recover the cost of

treatment from the employer and the insurance carrier under state law

because "a cause of action based on such conduct would not relate to the

terms or conditions of a welfare plan" or affect plan administration

(contrary to CBI’s claims). Id. at 250. The court did not hold that an

ERISA remedy was required for ERISA preemption.

© The Sixth Circuit in Perry relied on the Eighth Circuit’s pre-Pilot

Life opinion in Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208 (8th

Cir.), cert. denied, 454 U.S. 968 (1981), for the proposition that ERISA

preempts state claims only where ERISA provides a remedy. 872 F.2d

at 162. In rejecting CBI’s contentions in this case, however, the Eighth

Circuit held that Dependah! does not stand for this proposition. Pet.

App. A-21. Perry is therefore not only contrary to Pilot Life, it is also

based on an erroneous reading of Dependahl. See also International

Resources v. New York Life Ins. Co., 950 F.2d 294, 298 (6th Cir. 1991)

(stating that an ERISA remedy is required for pre-emption).

* In Caterpillar this Court reaffirmed that the LMRA preempts state

law claims even where there is no federal remedy. Caterpillar Inc. v.

Williams, 482 U.S. 386, 391 n.4 (1987).

8

ee

The Sixth Circuit’s failure to follow the dictates of Pilot

Life is not at issue in this petition. The Sixth Circuit's

erroneous interpretation of ERISA does not create a true

conflict among the circuits, because the Supreme Court has

spoken on this issue. The Eighth Circuit’s ruling on this

issue is correct and in accord with Pilot Life. Correcting

the Sixth Circuit’s erroneous view of ERISA pre-emption

should take place on review of a Sixth Circuit decision.

CBI argues that Congress could not have intended to

pre-empt its purported state law claims, because the

purpose of ERISA is to protect plans and employees. This

argument misses the mark. Congress decided that plan

participants on the whole would best be served if plans

were not subjected to potentially conflicting state laws,

because of the inefficiencies that would result. See, e.g.,

Ingersoll-Rand, 111 S. Ct. at 485; FMC Corp. v. Holliday,

111 S. Ct. 403, 409 (1990). "To argue that Congress has

created a gap’ in the law does not undermine the reasoning

on which a finding of pre-emption is based." Olson_v.

General Dynamics Corp., 951 F.2d 1123, 1128 (9th Cir.

1991) (quoting Phillips v. Amoco Oil Co., 799 F.2d 1464,

1470 (11th Cir. 1986), cert. denied, 481 U.S. 1016 (1987)).

Any such "gap" results from Congress’ policy decision to

pre-empt state laws that do not regulate subject matters

covered by ERISA, FMC Corp., 111 S. Ct. at 408, even if

ERISA does not provide a remedy, Pilot Life, 481 U.S. at

55-56. CBI’s argument is best addressed to Congress, not

the courts.

B. The Factual Record Makes This an

Inappropriate Case for Resolving the

Alleged Conflict Between the Circuits.

Furthermore, CBI has failed to demonstrate, as a

factual matter, that it had no ERISA remedy. All that has

been determined is that CBI has failed to state a claim

against NYL for breach of fiduciary duty under ERISA.

CBI may have had an ERISA remedy against NALAC for

the damages CBI seeks in this suit, because CBI alleges

NALAC was an ERISA fiduciary. Petition for Writ of

Certiorari ("Petition") at 15. If CBI is correct, it may have

been able to assert ERISA claims against NALAC. Instead,

it chose to compromise its purported claims in a monetary

settlement with NALAC. The settlement agreement

provides that NALAC is compensating CBI for "losses

claimed to have been sustained as a result of the

marketing, sale and administration of the C.B.I., Inc.

Pension Plan," (8th Cir. App. 266), i.e., the same alleged

losses CBI seeks to recover from NYL in this case. Thus,

CBI has not demonstrated, as a factual matter, that it

lacked any remedy under ERISA for its purported claims.

The lack of an adequate factual record makes this an

inappropriate case for granting certiorari. See, e.g., United

States v. Johnston, 268 U.S. 220, 227 (1925) ("We do not

grant a certiorari to review evidence and discuss specific

facts.").

II. THE COURT OF APPEALS’ RULING THAT CBI’S

STATE LAW CLAIMS RELATE TO PLAN

ADMINISTRATION IS BASED ON A FACTUAL

REVIEW OF THE RECORD AND IS CONSISTENT

WITH THIS COURT'S DECISIONS.

A. Certiorari is Inappropriate Because the

Court of Appeals’ Decision is Based on a

Determination that CBI Failed to Make

an Adequate Factual Showing under Fed.

R. Civ. P. 56.

CBI argues that its purported state law claims are not

pre-empted because they arose prior to the creation of the

Plan, and that a conflict exists in the circuits as to pre-

10

emption of claims based on alleged pre-plan conduct. Even

if such a conflict existed, CBI’s petition does not adequately

present this issue for review; the Court of Appeals found

that CBI failed to show that its purported claims arose pre-

plan, since they are based on allegedly improper plan

administration. Discretionary review is inappropriate

because no "special and important reasons" exist for

reviewing this fact-based determination. See Johnston, 268

U.S at 227.

CBI does not, and cannot, dispute the well-settled

principle that state law claims arising out of the

administration of an ERISA plan "relate to" a plan and

therefore are pre-empted. See Pilot Life, 481 U.S. at 57

(claim based on "improper processing of a claim for

benefits" pre-empted); Shaw, 463 U.S at 105 & n.25 (ERISA

pre-emption intended to preclude state interference in plan

administration); Gibson v. Prudential Ins. Co., 915 F.2d

414, 416 (9th Cir. 1990) (pre-emption applies where "claims

arise from the administration of [ERISA] plans whether

directly or indirectly"); Jackson v. Martin Marietta Corp.,

805 F.2d 1498, 1500 (11th Cir. 1986) (Congress intended "to

preclude state law claims pertaining to the administration

of employee benefit programs"); Scott v. Gulf Oil Corp., 754

F.2d 1499, 1505 (9th Cir. 1985) (pre-emption applies where

"the conduct challenged by each claim was part of the

administration of an employee benefit plan").’

As this Court has explained, ERISA was

intended to:

establish a uniform administrative

scheme, which provides a set of standard

7 ERISA pre-emption is not limited, however, to claims relating to

plan administration. See, e.g., Ingersoll-Rand, 111 S. Ct. at 484

(rejecting argument that ERISA pre-emption applies only to "those state

laws that affect plan terms, conditions, or administration").

11

procedures to guide processing of claims

and disbursement of benefits.... Pre-

emption ensures that the administrative

practices of a benefit plan will be governed

by only a single set of regulations.

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 9-11 (1987).

Rather than disputing the principle that state law

claims based on the improper administration of a plan are

pre-empted, CBI argues that its claims relate to pre-plan

representations because it was induced to buy an inherently

defective turnkey plan that was destined to have

administration problems. Thus, CBI argued below that its

claims arose "independently of, and incidentally to, the

administration of the plan." Appellant’s Eighth Circuit

Brief at 29.

The Court of Appeals rejected this argument, stating as

follows:

CBI’s claims ... arise directly from the

administration of the plan. CBI attempts

to argue that NYL should have foreseen

these difficulties and thus its claims arose

pre-plan and are not pre-empted. This

assertion is simply not supported by the

record. ...

Pet. App. A-20-21 (emphasis added).

The Court of Appeals was correct: CBI’s purported state

law claims are based on alleged administration problems,

not pre-plan conduct. As the district court aptly put it:

"(T]he claims necessarily relate to errors in administration

of the plan; otherwise, there would be no damages and thus

no claims." Pet. App. A-8. The factual premise of CBI’s

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proposed issue for review was properly found lacking by the

lower courts, and discretionary review by this Court would

therefore be inappropriate.

B. Certiorari is Inappropriate Because the

Court of Appeals’ Decision that CBI's

Claims Relate to a Plan is Correct Under

Ingersoll-Rand.

Review of the Court of Appeals’ decision would be

inappropriate for the additional reason that it is correctly

decided under Ingersoll-Rand. As an alternative basis for

affirming the district court, the Court of Appeals properly

rejected as untenable CBI's proposed distinction between

pre-plan and post-plan conduct. The Court of Appeals held

that regardless of when the alleged conduct took place, so

long as the state law claims "relate to" the plan, they are

pre-empted:

Additionally, even if CBI’s claims involved

misrepresentation in the sale of the

§ 401(k) program, its claims still relate to

the employee benefit plan. [Citations

omitted]. Thus CBI’s claims "relate to" an

employee benefit plan and therefore are

pre-empted.

Pet. App. A-21.°

® The Court of Appeals cited Farlow v. Union Cent. Life Ins. Co., 874

F.2d 791 (11th Cir. 1989) and Childers v. Northwest Airlines, Inc., 688

F. Supp. 1357 (D. Minn. 1988). In Farlow, the court held that claims

based on alleged misrepresentations about an ERISA plan were pre-

empted, stating "[W]e reject the Farlows’ contention that simply because

their claims involve misconduct in the sale and implementation of the

... plan, their claims do not relate to the plan." 874 F.2d at 794. In

Childers, the plaintiffs argued their state law claims were not pre-

empted because "they are founded on acts preliminary (footnote cont'd)

13

iii cineca

In Ingersoll-Rand, this Court held that state law claims

based on allegations an employer terminated an employee

to prevent him from becoming a plan participant so it could

avoid making contributions to a pension plan "related to"

the plan and were therefore pre-empted. This Court

explained:

[T]he existence of a pension plan is a

critical factor in establishing liability

under the State’s wrongful discharge law.

As a result, this cause of action relates not

merely to pension benefits, but to the

essence of the pension plan itseif.

. . . The Texas cause of action makes

specific reference to, and indeed is

premised on, the existence of a pension

plan. ... [I]n order to prevail, a plaintiff

must plead, and the court must find, that

an ERISA plan exists and the employer

had a_ pension-defeating motive in

terminating the employment. Because the

court’s inquiry must be directed to the

plan, this judicially created cause of action

"relate[s}] to" an ERISA plan.

111 S. Ct. at 483 (emphasis added).

Ingersoll-Rand’s holding demonstrates the Court of

Appeals was correct in ruling that CBI!’s claims "relate to"

to the adoption and creation of the ESOPs and, therefore, do not have

any connection or reference to any employee benefit plan," (the very

same argument offered by CBD. 688 F.Supp. at 1364. The court rejected

the argument because "[s]uch claims are ’related to’ a plan ... in the

‘broad common-sense meaning,’ Shaw, 463 U.S. at 97, 103 S. Ct. at 2900,

of that phrase and are, therefore, pre-empted by ERISA." Id.

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a plan, and it precludes the simplistic distinction CBI seeks

to draw between pre-plan and post-plan conduct. CBI's

claims are premised on the allegation that it was induced

to purchase a "turnkey program for operating a 401(k)

plan." See Pet. App. A-35. As CBI puts it in its petition,

"The crux of CBI’s claims related to _ preplan

misrepresentations and inducement to purchase a 401(k)

program that had inherent defects." Petition at 14. Even

accepting this contention as true, CBI’s state law claims

would still be pre-empted, because each claim "makes

specific reference to, and indeed is premised on, the

existence of a pension plan." Ingersoll-Rand, 111 S. Ct. at

483. CBI’s claim that it bought a "defective" plan "relates

to" a plan, as that phrase is construed under Ingersoll-

Rand. Certiorari should be denied because the Court of

Appeals’ decision was consistent with Ingersoll-Rand, and

the distinction CBI would have this Court draw is

untenable.

III. RESOLUTION OF THE ALLEGED CONFLICT

REGARDING NON-FIDUCIARY LIABILITY IS

IRRELEVANT TO DISPOSITION OF THIS CASE

BECAUSE THE COURT OF APPEALS ACCEPTED

CBI’S POSITION FOR PURPOSES OF THIS

APPEAL.

The final issue CBI seeks to have reviewed is whether

a non-fiduciary can be liable under ERISA if it knowingly

participates in a breach of fiduciary duty by an ERISA

fiduciary. CBI contends certiorari should be granted

because a conflict exists among the circuits on this issue.

Regardless of whether such a conflict exists, CBI ignores

the fact that this case does not even present the issue for

resolution, for two reasons.

First, CBI did not properly preserve the issue for

appeal. CBI did not assert this theory of relief before the

15

district court, and therefore it could not properly raise the

issue for the first time on appeal. Moran v. Aetna Life Ins.

Co., 872 F.2d 296, 300 (9th Cir. 1989); Tisdale v. Dobbs, 807

F.2d 734, 740 (8th Cir. 1986). In fact, CBI has not even

pleaded such a claim in its complaint. See Pet. App. A-32-

49.

Second, the Eighth Circuit did not even address this

issue, because it found that CBI had failed to offer any

evidence to support such a claim. The Court of Appeals

held as follows:

CBI asserts that NYL has non-fiduciary

liability. Relying on Freund v. Marshall &

Ilsley Bank, 485 F. Supp. 629 (W.D. Wis.

1979) (Freund), CBI asserts that a person

who knowingly participates in a breach of

trust under ERISA can be held liable

under ERISA even though not a fiduciary.

This court expresses no opinion on the

validity of non-fiduciary liability because

even under the standards in Freund, CBI

has not proven NYL is liable as a non-

fiduciary. . . . CBI claims that NYL

developed a defective § 401(k) plan in

conjunction with NALAC and PPNA. The

mere marketing of the § 401(k) plan does

not implicate fiduciary conduct, nor has

CBI proven that the 401(K) plan was

actually defective, only that it was

administered poorly. NYL was not

involved in the administration of the plan

or any breach of trust that may have

occurred in the administration of the plan.

Pet. App. A-24 (emphasis added). Thus, the Court of

Appeals assumed that CBI’s position on this issue was

16

correct, that a non-fiduciary can be liable for participating

in a breach of fiduciary duty. It did so despite the fact CBI

failed to plead such a claim or raise the issue before the

district court. Review of this issue is irrelevant to the

disposition of this case, because the Court of Appeals

decided the issue in CBI’s favor for purposes of its appeal.

The Court of Appeals’ decision that summary judgment

was properly granted based on its review of the record does

not raise an issue suitable for review by certiorari. See

Johnston, 268 U.S. at 227. Furthermore, the Court of

Appeals’ decision was clearly correct. The conduct that CBI

points to as NYL’s participation in a breach of fiduciary

duty under ERISA is NYL’s alleged development and

marketing of a "defective" turnkey plan. Petition at 16.

Yet CBI contends that this very same conduct does not even

"relate to" the Plan under ERISA. Petition at 13-14. The

Court of Appeals properly concluded that CBI failed to show

that NYL had knowingly participated in an ERISA

fiduciary’s breach of fiduciary duty to the Plan, even

assuming such a cause of action existed.

17

CONCLUSION

The Petition for Writ of Certiorari should be denied.

Respectfully submitted,

MASLON EDELMAN

BORMAN & BRAND

GARY J. HAUGEN (Counsel of Record)

WAYNE S. MOSKOWITZ

3300 Norwest Center

90 South Seventh Street

Minneapolis, Minnesota 55402-4140

(612) 672-8200

ATTORNEYS FOR RESPONDENTS

Dated: March 19, 1992

EOP NINE LS RN PIG IPS ae

AN 7 CN FT ST PI

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