# Petition for Writ of Certiorari — Combined Management, Inc. v. Atchinson > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_0133%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1994 - **Citation:** 513 U.S. 943 ## Text acy Supreme Court, U.S. , FILED 94 144 JUL 21 199% No. __QEFICE DF THE CLERK In The Supreme Court of the United States October Term, 1994 ¢ COMBINED MANAGEMENT, INC., Petitioner, BRIAN K. ATCHINSON, In His Representative Capacity As Superintendent, Bureau of Insurance of the State of Maine, Respondent. On Petition For Writ Of Certiorari To The United States Circuit Court Of Appeals For The First Circuit ¢ PETITION FOR WRIT OF CERTIORARI + RavpH A. Dyer, Esq. Counsel of Record Law Offices of RatpH A. Dyer, P.A. 477 Congress Street, Suite 702 Portland, Maine 04101 (207) 773-6489 COCKLE LAW BRIEF PRINTING CO., (800) 225-6964 OR CALL COLLECT (402) 342-2831 QUESTION PRESENTED Assuming, arguendo, that the employee benefit plan of the International Association of Entrepreneurs of America (“IAEA”), through which the Petitioner Com- bined Management, Inc. (“CMI”) allegedly provides a variety of benefits to its employees is a so-called Employee Retirement Income Security Act (“ERISA”) benefit plan, whether the funding requirements of the Maine Workers Compensation Act (39-A M.R.S.A. § 403) are preempted by § 514(a) of ERISA (29 U.S.C. § 1144)? i] CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 28.1, Petitioner hereby states that it is a privately owned corporation in which no outside persons have an interest, and it has no parent or subsid- lary corporations. ill TABLE OF CONTENTS Page PUPP e EWEN. BW PRRIOUESIN FESDD, 0. eee eee c ccc eeees i CORPORATE DISCLOSURE STATEMENT .......... ii ME EN PE OU PORE BOOP 5 yo vos i ees bade nee Vv i Me EG gid Seka bow bua eA. ee a Vv EE Vii SLOP SEE TPT FO PES CETTE ET EET TST Vii eg oy oa. yy a op ee ska a eee heen Vill i CE UN os cence secs entcencsnces Vill ee bas G6 se saa Se Swe me aos ix I OM cs ce anew acces aeuesns l eee ak cbse ks das ah ss ceases snes 2 eS Ak 5 2 Ere OO, CCAS... 5 kc ee eee nese 7 REASONS FOR GRANTING THE WRIT ........... 14 EY Sr 18 I. ERISA’s Overriding Purpose Is To Create a Uni- form, National Program For The Provision Of Health, Disability And Retirement Benefits To America’s Workers Exempt From State Regula- tion Relating To Such Benefit Plans ........... 18 Il. The Maine Workers’ Compensation Act Violates Federal Law And Policy Because It Specifically “Relates To” ERISA And It Purports To Regulate The Funding Of An ERISA Plan Or, In The Alterna- tive, To Require A Separate Benefit Plan ........ 21 Il. IV. iv TABLE OF CONTENTS —- Continued Page The Decision Of The First Circuit Court Of Appeals In This Case Seems To Contradict Pre- vious Holdings Of This Court Preempting State Regulations Of ERISA Plan Administration While Permitting The State To Mandate Mini- SE NES 0s View Saw eek RAG eee wet es a The Circuits Are Divided On The Question Whether A State Regulation Relating To An ERISA Plan May Avoid Preemption If It Relates Also To Workers’ Compensation, A Matter Of Traceetiosia! State TION 8 i gc oc ccc cds ceasvecess The Requirements Of The Maine Workers’ Com- pensation Act Will Raise The Employers’ Costs And Create Redundant Benefits, There Is Dis- agreement Among The Circuits Whether Such Costs Cause Preemption Of The State Regulation 22 24 V TABLE OF AUTHORITIES CASES: Aetna Life Insurance Co. v. Borges, 869 F.2d 142 (2d Cir. 1989) cert. denied, 493 U.S. 811 (1989)..... Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1899, 68 L.Ed.2d 402 (1981) ...... 18, Aloha Airlines, Inc. v. Auhe, 12 F.3rd 1498 (9th Cir. Arkansas Blue Cross & Blue Shield v. St. Mary's Hospital, Inc., 947 F.2d 1346 (8th Cir. 1991) cert. Page 24, Gen., Fi2 S.Ct. 2 Csi ss hens eens 26, 30 Barker v. Pick N’ Pull Auto Dismantlers, Inc., 819 Supe. ORS, (0) Cah, See acess peenees a Combined Management, Inc. v. Superintendent of the Bur. of Ins. of the State of Maine, 22 F.3rd 1 (1st in, TORE) i Sc io ee ae eee Lh, Bay ae District of Columbia v. Greater Washington Bd. of Trade, .... US. __. 113 S.Ct. SOO, 121 Lkdze SES: CI90Es 5 ost noah eee tea eee ee eee 12, 18, 24 Employee Staffing Services, Inc. v. Aubry, 20 F.3rd 1G38 COGN Cit. T9068). 35 «ova aan ven: $4, 22. 2a) aes aE E-Systems, Inc. v. Pogue, 929 F.2d 1100 (5th Cir. 1991) cert. Gden., Ti2 SAE Bee Pa oe be ee twee 29 FMC Corporation v. Holliday, 498 U.S. 52, 111 S.Ct. 405, 132 LAI FOe (IPs ow as cn ev erat siavers 23 Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 107 S.Ct. 2241, 9% L.Bd.ga 3 CURB). 02sec: 19, 22, 28 Vi TABLE OF AUTHORITIES — Continued Page In re Michigan Carpenters Council Health & Welfare Fund, 933 F.2d 376 (6th Cir. 1990) cert. den. 112 SCE, Te Cee vac sree eee rece tees berctesessensc. 30 Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S.Ct. 478, 112 L.Ed.2d 728 (1990)........... 12, 25, 28 McCoy v. Massachusetts Institute of Technology, 950 F.2d 13 (1st Cir. 1991) cert. denied, 112 S.Ct. ee Ey 7 7) ae meer OM NEN a Ola Ey rag ee 12, 27 Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 100 S.Ct. 1723, 64 L.Ed.2d 354 (TSGR cdc scckacwesecusencevse eee wert aeers 18 National Elevator Industries, Inc. v. Calhoon, 957 F.2d 1555 (10th Cir. 1992) cert. den. 113 S.Ct. 406 (RDO os don. 0 44k DENN aR cone ete 30 NYSA-ILA Medical and Clinical Services Fund v. Axelrod, 1994 WL 278325 (2nd Cir. 1994)....... 14, 28 PPG Industries Pension Plan A(CIO) v. Crews, 902 wo eer Fo ke | eee ee ree 25 Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984), cert. denied, 472 U.S. 10068 (1965)... 0... ccc cece ceeeees 12 Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2090, 77 UBB GO CIB G es coi evs nnnawaeens passim Smith v. Dunham-Bush, Inc., 959 F.2d 6 (2d Cir. 4 Dae Onn a MAP N GR Hye ch eL peo Ry 5 Fee 12, 28 Travelers Insurance Co. v. Cuomo, 14 F.3rd 708 (2nd ee) Pe EEE Tre rere rye ry Oy Pee 14, 28 Vil TABLE OF AUTHORITIES — Continued Page Travitz v. Northeast Dept. ILGWU Health & Welfare Fund, 13 F.2 DE Ce Se Be 6 ok svccce scans 14, 29 United Wire, Metal and Machine Health & Welfare Fund v. Morristown Memorial Hospital, 995 F.2d 1179 (3rd Cir. 1993) cert. den. 114 S.Ct. 651 WN hs ee ea 13, 14, 28 Unitep States CONSTITUTION: United States Constitution, Art. 1, sec. 8, cl. 3; i Co foto che es swdescnaascesbeakekaates 16 FEDERAL STATUTES: 28 United States Code § 1254 (West 1993)............ 2 28 United States Code § 2201 (West 1990)............ 9 29 United States Code § 1002 (West Supp. 1993) ..3, 19 29 United States Code § 1003 (West 1990, West. RE er erry ore rey 3, 12, 18, 23, 24 29 United States Code § 1132 (West 1990, West NT I co een cca cee NaS a we enn Wa ees ae 20 29 United States Code § 1133 (West 1990, West IN a5 oss ek peg euiuk bad uae ee aS Guabas conwGu 20 29 United States Code § 1144 (West 1990, West OS rye rer rrr rrr errr rey Sait i eee 29 United States Code § 1451 (West 1990, West S| er rr ry yp rere ert eee rrer re 2 Vill TABLE OF AUTHORITIES - Continued Page MAINE STATUTES: 32 Maine Revised Statutes Annotated § 14051, et seq. (West Supp. 1993)... ... <<. 60s cececsccnewessess 7 32 Maine Revised Statutes Annotated § 14055 CWNGRE Set, FITS) ons cece ise st ences senevetacayes 4 39-A Maine Revised Statutes Annotated § 101, et seq. (West Supp. 1993); Maine Workers’ Com- WORGRION ACE «oo cece cece ec ise whceusenacbnssesces 8 39-A Maine Revised Statutes Annotated § 154 CWROSE BOD: DOTS) oo vcs ene sneceseustseseaenccanns 6 39-A Maine Revised Statutes Annotated § 324 COROT. a. BG chee cee sccteccdaneruees ov 04s 23 39-A Maine Revised Statutes Annotated § 401 to 8 eS Perrrerer rere eee eee eee Go, a0 39-A Maine Revised Statutes Annotated § 403 CPE TD. Be vie a sin cence cin enters ewan passim Matin. AbpMINISTRATIVE REGULATION: Maine Bureau of Insurance, Rule 560 ................ 6 OTHER STATE STATUTES: California Labor Code § 700 (1994) .............. 2%, 20 Connecticut General Statutes Annotated § 31-284(b) Ie eh ead oo a ae ee ed yt a cha 21 Missouri Annotated Statutes § 287.280 (Vernon 1994) .... 21 Nebraska Revised Statutes § 48-106 (West 1994)..... 21 TABLE OF AUTHORITIES — Continued OTHER AUTHORITIES: 120 Congressional Record 29, 333 (1974) ......... Application of Maine Employers’ Mutual Insurance Company to Obtain a Certificate of Insurance in Maine, Docket No. INS-92-199, December 23, cg | BER ently eran OR eae lr is Ueland Se ee tl a BNA Occupational Safety and Health Daily, Apri SO Re Be Gora Federal Rules of Civil Procedure; Rule 12(c)...... Health Security Act, H.R. 3600/S. 1757).......... In re: Workers’ Compensation 1992 “Fresh Start” Pro- ceeding, Docket No, INS-92-116, November 18, a Ee Oe PE Ie AE Pao a “> “ae In re: Workers’ Compensation 1993 “Fresh Start” Proceeding, Docket No. INS-93-16, May 28, 1993 .... J. Kilgour, Workers Compensation Crisis: Developing Strategies to Address Costs, Benefits, Litigation and Fraud, 2 ACA Journal (Winter 1993/1994)...... L. Baker and A. Krueger, Twenty-Four Hour Cover- age in Workers’ Compensation Coverage, Health Affairs, March 1993, pp. 271-281............... P. Plax, Workers’ Comp Their Way, 7 Resource Exec- re ey ows bee cadence nen, Report of Blue Ribbon Committee to Examine Alterna- tives to the Workers’ Compensation System and to Make Recommendations Concerning the Replace- ment of the Present System, August 1, 1992...... “ee Page . ee we 56 ae ea oe os 20 ’ In The Supreme Court of the United States October Term, 1994 4 COMBINED MANAGEMENT, INC., Petitioner, v. BRIAN K. ATCHINSON, In His Representative Capacity As Superintendent, Bureau of Insurance of the State of Maine, Respondent. + On Petition For Writ Of Certiorari To The United States Circuit Court Of Appeals For The First Circuit + PETITION FOR WRIT OF CERTIORARI o OPINIONS BELOW The decision of the United States Court of Appeals for the First Circuit was rendered on April 22, 1994. That decision is reported at 22 F.3d 1 and is reproduced at page la of the Appendix to the Petition for Certiorari (“Pet. App. 1a”). The decision of the United States District Court was rendered on August 2, 1993, affirming the recommended decision of the United States Magistrate Judge dated June 15, 1993. A copy of the United States District Court decision is an unreported case and is reproduced at Pet. App. 19a. The recommended decision of the United States Magistrate Judge is unreported and is reproduced at Pet. App. 21a. ° JURISDICTION The decision of the United States Circuit Court of Appeals vas issued on April 22, 1994. This Court has jurisdiction pursuant to 28 U.S.C. § 1254(1) (West 1993). The jurisdiction of the United States District Court was invoked pursuant to 29 U.S.C. § 1451(c) (West 1990, West Supp. 1993). STATUTES INVOLVED This case involves certain provisions of ERISA, including § 514(a)(C), 29 U.S.C. § 1144(a)(C) (West 1990, West Supp. 1993) (Pet. App. 137a) which provides in relevant part as follows: (a) Supersedure; effective date 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 and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975. * * * (c) Definitions For purposes of this section: (1) The term “State law” includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State. A law of the United States applicable only to the District of Columbia shall be treated as a State law rather than a law of the United States. (2) The term “State” includes a State, any political subdivisions thereof, or any agency or instrumentality of either, which purports to reg- ulate, directly or indirectly, the terms and condi- tions of employee benefits plans covered by this subchapter. and ERISA § 4(b)(3), 29 U.S.C. § 1003(b)(3) (West 1990) (Pet. App. 134a-135a) which provides in relevant part as follows: (b) The provisions of this subchapter shall not apply to any employee benefit plan if - (3) such plan is maintained solely for the purpose of complying with applicable work- men’s compensation laws or unemployment compensation or disability insurance laws; ERISA defines “employee benefit plan” at ERISA § 3(1), 29 US.C. § 1002(1) (West Supp. 1993) as follows: § 1002. Definitions For purposes of this subchapter: (1) The terms “employee welfare benefit plan” and “welfare plan” mean any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their benefici- aries, through the purchase of insurance or oth- erwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event sickness, acci- dent, disability, death or unemployment, or vacation benefits, apprenticeship or other train- ing programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any bene- fit described in section 186(c) of this title (other than pensions on retirement or death, and insur- ance to provide such pensions). In addition, this case involves certain provisions of the laws of the State of Maine, including 32 M.R.S.A. § 14055(1)(B) (West Supp. 1993) (Pet. App. 151a) which provides in relevant part as follows: § 14055. Insurance; unemployment insurance; benefit plans 1. Benefits. The following provisions gov- ern the provision of benefits by employee leas- ing companies to their employees . B. The superintendent shall adopt rules gov- erning the provision of workers’ compensation insurance as required by Title 39-A, chapter 9 for workers provided by an employee leasing company to any client company. These rules must be consistent with subsection 2 and reflect consideration of the needs and operational effi- ciencies of employee leasing companies and the costs to the workers’ compensation system. and certain provisions of the Maine Workers’ Compensa- tion Act, 39-A M.R.S.A. §§ 401, 403 (West Supp. 1993) (Pet. App. 156a, 163a) which provide in relevant part as follows: § 401. Liability of employer 1. Private employers. Every private employer is subject to this Act and shall secure the payment of compensation in conformity with this section and sections 402 and 407 with respect to all employees, subject to the provi- sions of this section. § 403. Insurance by assenting employer; requirements as to self-insurers. An employer subject to this Act shall secure compensation and other benefits to the employer’s employees in one or more of the ways described in this section. 1. Insuring under workers’ compen- sation insurance policy. The employer may comply with this section by insuring and keep- ing insured the payment of such compensation and other benefits under a workers’ compensa- tion insurance policy. 2. Pilot projects. Workers’ compensa- tion health benefits pilot projects are authorized under the following provisions. A. The Superintendent of Insurance shall adopt rules to enable employers and employees to enter into agreements to provide the employees with health care benefits covering workplace injury and illness and nonworkplace injury and illness and other health care bene- fits in comprehensive pilot projects. The health care benefits may be provided by: organizations authorized to do busi- ness under Title 24; insurers or health maintenance organizations authorized 6 to do business under Title 24-A; employee benefit plans; and benefit plans of employers who self-insure under this section. The superintendent shall review all pilot project proposals and may approve a proposal only if it confers medical benefits upon injured employees substantially similar to ben- efits available under this Title. The superintendent shall revoke approval if the pilot project fails to deliver the intended benefits to the injured employees. Maine Administrative Regulation: Maine Bureau of Insurance, Rule 560 promulgated by the Maine Bureau of Insurance states the duty of employee leasing businesses to provide workers’ compensation benefits, and Rule 560 states in relevant part as follows: § 560 Section 4. Eligibility for Policy Issuance and Continuance A. Basic Rule. Except as provided in Subsection B, lessee, not authorized to self-insure pursuant to 39 M.R.S.A. §23 [39-A M.R.S.A. § 403], shall fulfill its statutory responsibility to secure benefits under the Workers’ Compensation Act by pur- chasing and maintaining a standard workers’ compensation policy approved by the Superintendent of Insurance. The exposure and experi- ence of the lessee shall be used in deter- mining the premium for policy. B. Exceptions A lessor which obtains coverage in the voluntary workers’ compensation mar- ket and is registered with the Superin- tendent of Insurance, pursuant to 32 M.R.S.A. §14052, may, with the volun- tary market insurer’s knowledge and consent, elect to secure the coverage on leased employees through a standard workers’ compensation policy issued to the lessor. The insurer of the lessor may take all reasonable steps to ascertain exposure under the policy and collect the appropriate premium .. . See, Pet. App. 198a. STATEMENT OF THE CASE This case challenges the right of the State of Maine to require a private employer to establish and maintain a separately funded employee benefit plan solely for the purpose of complying with the Maine Workers’ Compen- sation Act or, alternatively, to submit the private employers’ fully integrated, multi-benefit plan to State regulatory control. The employer contends that such State requirements and prohibitions are preempted by ERISA, 29 U.S.C. § 1144(a) (West 1990, Supp. 1993). The Petitioner Combined Management, Inc. (“CMI”), is a Maine corporation which has been engaged since January 10, 1992, in the business of employee leasing pursuant to 32 M.R.S.A. § 14051, et seq. (West Supp. 1993). See, Affidavit of Richard Spugnardi,{2-3 (“Spugn- ardi Aff.”), at Pet. App. 33a. Employee leasing business or | their client businesses are required to provide the workers’ compensation benefits mandated by the Maine Workers’ Compensation Act, 39-A M.R.S.A. § 101, et seq. (West Supp. 1993). Since January, 1993, CMI has provided such benefits by membership in the International Association of Entre- preneurs of America (“IAEA”) and participation in the IAEA Employee Welfare Benefit Plan and Trust offered by the IAEA (respectively, the “IAEA Plan” and the “IAEA Trust”). See, Spugnardi Aff. 74-9 at Pet. App. 33a-35a. The IAEA Plan provides, inter alia, that the employees of participating Employers shall receive “occupational injury and illness benefits at levels commensurate with the workers’ compensation laws” of the State of Maine. See, IAEA Plan, Article 18, Pet. App. 93a; Spugnardi Aff. T19 and 16 at Pet. App. 34a, 36a. The IAEA Plan is self-funded and self-adjusting. That is to say, the participating employers operate the IAEA Plan and are assessed currently for the cost of the opera- tion of the IAEA Plan as well as for the funding of the IAEA Trust which provides the benefits. Funding is based upon actuarial assumptions and formulae. The IAEA Plan and the IAEA Trust are reinsured pursuant to an insur- ance treaty with an independent insurance company. IAEA takes the position that the IAEA Plan and IAEA Trust provide only reimbursement of expenses incurred by employees through an ERISA Plan. Therefore, [AEA is not an insurer and has not applied to do business in Maine as an insurance company. On January 29, 1993, the Maine Bureau of Insurance notified CMI that subscription to the IAEA Plan and IAEA Trust does not satisfy CMI's obligation to provide workers’ compensation benefits. See, Spugnardi Aff. 410 at Pet. App. 35a. The Bureau takes the position that the employer’s obligation may be satisfied only by purchase of a workers’ compensation and employee liability insur- ance policy from a carrier authorized to do business in Maine or by obtaining authorization to sclf-insure from the Bureau of Insurance. The Bureau rejected any notion that the IAEA Plan and IAEA Trust were preempted from State supervision by ERISA § 514(a), 29 U.S.C. § 1144 (West 1990, West Supp. 1993). CMI commenced this case as an action seeking a declaratory judgment pursuant to 28 U.S.C. § 2201 (West 1990) and injunctive relief restraining the Bureau of Insurance from attempting to regulate or in any way interfering with the administration of the IAEA Plan and IAEA Trust on the grounds that the State’s regulatory effort is preempted by ERISA. The Bureau of Insurance answered and objected to both CMI's proposed declara- tory judgment and the grant of injunctive relief. The basic issue before the Court was joined. CMI then moved for a preliminary injunction. Following a scheduling conference, the Magistrate Judge issued the following scheduling order which framed the controversy to be decided as a threshold issue as the first step in deciding the case: 3/29/92 |Plaintiff’s motion to file memorandum in reply to the Bureau’s objection to Plaintiff’s motion for preliminary injunction is] [g]ranted in part as follows. During a telephone confer- ence with counsel this date, it was agreed that the following threshold issue presented by this 10 case should be decided first: Assuming, arguendo, that the plan of the International Association of Entrepreneurs of America (“IAEA”), through which the plaintiff allegedly provides a variety of benefits to its employees is a so-called ERISA employees benefit plan, is Maine’s workers’ compensation law pre- empted by ERISA? Plaintiff shall have to and including 4/12/93 within which to file a reply memorandum of not more than 15 pages addressing this issue only. The parties agree that no additional evidentiary materials need be pre- sented on the issue. The threshold issue as framed shall be decided on the papers filed to date and the piaintiff’s reply memorandum to be filed. If the question is answered in the affir- mative, the court will confer with counsel con- cerning additional filings to be made to complete the evidentiary record and briefing on remaining issues relating to qualification of the [AEA plan for ERISA protection. /s/ David M. Cohen, USMJ.” (Emphasis added.) See, Pet. App. 3la-32a. After consideration of the motion for preliminary injunction, the Magistrate Judge recommended that CMI's motion for preliminary injunction be denied and, acting sua sponte, recommended that the action be dis- missed pursuant to Rule 12(c) of the F.R.Civ.P. The Magis- trate Judge found in his Recommended Decision that the provisions of 39-A M.R.S.A. § 403 requiring the employer to obtain workers’ compensation benefits by the purchase of insurance or by means of an authorized self-insurance plan, do not “relate to” an employee benefit plan within the meaning of 29 U.S.C. § 1144 (West 1990, West Supp. 1] 1993) and are not preempted. The Court stated in relevant part as follows: 4é .... It is apparent from the language of [39-A M.R.S.A.] section 403 that its purpose is to guar- antee the solvency of workers’ compensation plans. The statute applies to all private employers, not just those who have adopted employee benefit plans covered by ERISA. It is not directed toward changing the rights or expectations of employee benefit plan partici- pants. The plaintiff may comply with state law without altering its employee benefit plan although, admittedly, there may be duplication or increased cost. However, many state laws indirectly affect the cost of administering ERISA-covered plans but in doing so do not trigger ERISA preemption. See, Aetna Life, 869 F.2d at 146! (where state statute does not affect structure, administration or the type of benefits provided by the ERISA plan, mere fact statute has some economic impact on plan does not require it to be invalidated). As the Second Cir- cuit has stated ‘[I]f ERISA is held to invalidate every State action that may increase the cost of operating employee benefit plans, these plans will be permitted a charmed existence that never was contemplated by Congress.’ Rebaldo v. Cuomo, 749 F.2d 133, 138-39 (2d Cir. 1984), cert. denied, 472 U.S. 1008 (1985).” See, Pet. App. 28a-29a. CMI asked for de novo review of the Recommended Decision on the grounds that Aetna Life Insurance Co. v. | The full citation is Aetna Life Insurance Co. v. Borges, 869 F.2d 142 (2d. Cir. 1989) cert. denied, 493 U.S. 811 (1989). 12 Borges, supra, and Rebaldo v. Cuomo, supra, had been abrogated by a more recent decision of the Second Circuit in Smith v. Dunham-Bush, Inc., 959 F.2d 6, 8 (2d Cir. 1992) in reliance upon Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S. Ct. 478, 483, 112 L.Ed.2d 728 (1990) and Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983). The U.S. District Court (Hornby, J.) construed McCoy v. Massachusetts Institute of Technology, 950 F.2d 13, 17 (1st Cir. 1991} cert. denied, 112 S.Ct. 1939 (1992) as affirming Aetna Life Insurance Co v. Borges, supra, and Rebaldo v. Cuomo, supra. The District Court affirmed and accepted the Recommended Decision of the Magistrate Judge. See.Pet. App. 19a-20a. On appeal, the Court of Appeals for the First Circuit (Tortuella, J.) upheld and affirmed the Decision of the District Court. The First Circuit determined that a State does have authority to compel an employer to establish a separate plan for the provision of occupational disability benefits, and once established, those separate plans fall within the exception from preemption created by Con- gress at ERISA § 4(b)(3), 29 U.S.C. § 1003(b)(3) (West 1990, West Supp. 1993) for plans created solely to provide workers’ compensation benefits. The Court relied primar- ily upon Shaw v. Delta Air Lines, Inc., 463 U.S. at 106-109 and District of Columbia v. Greater Washington Bd. of Trade, __ US. __, 113 S.Ct. 580, 584-585, 121 L.Ed.2d 513 (1992). The provision of occupational disability benefits was found to be a matter of traditional State supervision and interest that Congress did not intend to preempt. Even if there were no authority to require an employer to create a separately administered plan for the provision of occupational disability benefits, the First 13 Circuit found that the funding of such plans is a matter of critical State interest and at least equal in importance to the provision of the benefits in the first instance. There- fore, the First Circuit rationalized that Shaw v. Delta Air Lines, Inc., 463 U.S. at 108 provides sufficient authority for the State to compel an employer to establish a separate plan “if the State is not satisfied that the ERISA comports with the requirements of its disability insurance law.” Id. It was determined on appeal that the State has a direct interest in assuring the payment of future benefits by regulating the funding of occupational disability bene- fits. Both the District Court and the Court of Appeals seem to assume that it is only the State that has this concern and has established a funding responsibility. The Court of Appeals declined to address the question whether Maine’s funding requirements have such an eco- nomic impact upon the IAEA Plan as to trigger preemption because the State’s ability to require a separate plan was controlling. However, the Court did acknowledge that the question of the impact of increased costs is “far from set- tled”. See, Pet. App. 15a, n. 5. Apparently by way of dicta the Court of Appeals did indicate that costs incurred as a result of State regulation must relate directly to the ERISA Plan and not simply add to employer’s over-all cost of doing business. Therefore, 39-A M.R.S.A. § 403 does not “relate to” an ERISA plan and is not preempted. The Court cited United Wire, Metal and Machine Health & Welfare Fund v. Morristown Memo- rial Hospital, 995 F.2d 1179, 1181, 1193 (3rd Cir. 1993) cert den. 114 S.Ct. 651 (1993) as authority for the proposition that the incremental cost must directly effect the cost of providing benefits or administration before ERISA will preempt the 14 regulation. The cost to set-up and administer a second, separate plan was found, as a matter of law, to have too tenuous a relationship to the IAEA Plan as to be preempted. The Decision of the District Court was affirmed. REASONS FOR GRANTING THE WRIT [his case presents questions upon which the various Circuit Courts of Appeals are divided. The First and Ninth Circuits’ clearly differ with the Second Circuit and, possibly other Circuits on the question whether taxation of employee benefits or funding requirements that increase a private employer’s costs trigger preemption. lravelers Insurance v. Cuomo, 14 F.3rd 708 (2nd Cir. 1993) NYSA-ILA Medical and Clinical Services Fund v. Axelrod, 1994 WL 278325 (2nd Cir. 1994); and Travitz v. Northeast Dept. ILGWU Health & Welfare Fund, 13 F.2d 704 (3rd Cir. 1993) (distinguishing United Wire) conflicts with United Wire, Metal and Machine Health Welfare Fund v. Morristown Memorial Hospital, 995 F.2d 1179 (3rd Cir. 1993) and Employee Staffing Services, Inc. v. Aubry, 20 F.3rd 1038 (9th Cir. 1994) which were relied upon by the First Circuit as a controlling authority. Also, the decision of the First Circuit in this case and the Ninth Circuit in Employee Staffing Services, Inc. v. Aubry, supra, appears to be in conflict with the decision of this Court in Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (i983) by extending the power of the State to mandate minimum employee occu- pational disability benefits to regulation of the funding and administrative aspects of empioyee welfare benefit plans. rhe cost of workers’ compensation benefits are a national concern. The cost of workers’ compensation ben- efits in the United States is estimated to be $60 billion per year. See, J. Kilgour, Workers Compensation Crisis; Develop ing Strategies to Address Costs, Benefits, Litigation and Fraud, 2 ACA Journal (Winter 1993/1994). One analysis estimates that the cost to provide medical services for a work related injury is approximately double the cost t provide the same medical treatment for a non-work related injury. See, L. Baker and A. Krueger, Twenty-Four Hour Coverage in Workers’ Compensation Coverage, Health Affairs, March 1993, pp. 271-281. As a result, employers are searching for a means to reduce such costs. These alternatives frequently include the provision of benefits through a fully integrated, self-insured plan providing a comprehensive benefit package. A recent survey indicates 75% of employers find state regulation of workers’ com- pensation benefits to be unsatisfactory or difficult but manageable, and that 57% of employers now self-insure workers’ compensation benefits. See, P. Plax, Workers’ Comp Their Way, 7 Resource Executive (Nov. 1993). The interest of other persons and entities in this case evidence the importance of the recent trend to provide occupational disability benefits through self-funded ERISA plans. Fourteen States, the U.S. Department of Labor, the AFL-CIO and Maine Employers Mutual Insur- ance Company all filed amicus curiae briefs in the First Circuit Court of Appeals in support of the Maine Bureau of Insurance. os 16 Congress exercised its powers under the Commerce Clause of the United States Constitution, Art. 1, sec. 8, cl. 3, to authorize a federal benefit program. Congress speci- fically intended to promote uniform benefit programs exempt from crazy-quilt or patch-work regulation by the various states. The purpose was to make it possible for an employer to provide the most comprehensive package that it could afford and to avoid the cost and inefficiency of satisfying parochial regulation from each state in which the employer does business. It was recognized by Congress when it passed ERISA that each state has an interest in the well-being of its employee-citizens, but this local interest must yield to national interests. President Clinton has proposed national health care legislation (Health Security Act, H.R. 3600/S. 1757). At least 6 other plans are before Congress. Only President Clinton has considered the role of state workers’ compen- sation plans in the national health care plan. The Admin- istration proposes only a special commission to consider the integration of State mandated workers’ compensation benefits and national health care. There is no proposal in any plan that workers’ compensation benefits be reserved to the States as a matter of traditional responsibility and interest. See, BNA Occupational Safety and Health Daily, April 23, 1993; April 25, 1994. The Maine Workers’ Compensation Act contradicts national policy stated in ERISA and the proposed health care legislation by requiring each private employer to submit his self-funded ERISA plan to funding regulations imposed by the Bureau of Insurance or to purchase a workers’ compensation and liability policy from an insurer authorized to do business in Maine. It is not 17 possible to provide comprehensive health and disability benefits through an ERISA plan in Maine unless the employer agrees to State regulation of the plan adminis- tration. Interstate health benefit programs are subjected to patchwork regulation. The First Circuit Court of Appeals found two bases for State regulation; namely workers’ compensation bene- fits are a matter of traditional regulation as to both the benefits provided and the employer’s ability to pay those benefits, and, secondly, such funding requirements have a tenuous or no relationship to the operation of the ERISA plan because the cost to provide workers’ compensation benefits has no bearing, as a matter of law, on the cost to provide other benefits provided via an ERISA plan. Both this Court and other Circuits have found that a State’s regulation of the funding of an ERISA plan is preempted. Both this Court and other Circuits have found that State regulations resulting in an increase in the cost of operation of a multi-benefit, comprehensive ERISA plan “relate to” the plan and its preemption. The First Circuit has attempted to find a judicial solution to a conflict between state and federal interests in the provision of employee benefits by reserving workers’ compensation benefit plans to State regulation and excluding such plans from ERISA preemption. This conflict is a matter of legislative interest which should be resolved by Congress, and not by the courts. Congress acting pursuant to the Commerce Clause has exercised its ultimate authority by leaving the regulation of workers’ compensation plan funding and administration to the states only if the plan is addressed solely to the meeting 18 of state obligations. See, ERISA § 4(b)(3), 29 U.S.C. § 1003(b)(3). The Maine Workers’ Compensation Act attacks the basic purpose of ERISA by requiring separate plans or by controlling the funding of multi-benefits plans. In sum, the diversity of opinion among the Circuits as to the authority of an employer to include workers’ com- pensation benefits as a part of a multi-benefit ERISA plan needs clarification as private employers form alliances by means of employee leasing in an attempt to reduce benefit costs by amalgamating benefits into a single plan intended to provide a coordinated, single payor benefit package for employees on a national or regional basis. ¢ ARGUMENT I. ERISA’s Overriding Purpose Is To Create a Uniform, National Program For The Provision Of Health, Dis- ability And Retirement Benefits To America’s Workers Exempt From State Regulation Relating To Such Benefit Plans. It is well established that ERISA is a “comprehensive and reticulated statute”. See, Alessi v. Raybestos-Manhat- tan, Inc. 451 U.S. 504, 510, 101 S.Ct. 1899, 68 L.Ed.2d 402 (1981), citing Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361, 100 S.Ct. 1723, 1726, 64 L.Ed.2d 354 (1980). The preemption provisions of ERISA were stated in the most broad terms to take exclusive federal jurisdiction over all benefit plans when the plans are formed solely to comply with state law. See, District of Columbia v. Greater Washington Board of Trade, ___ U.S. __, 113 S.Ct. 580, 583, 121 L.-Ed.2d 513 (1992); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77 19 L.Ed.2d 490 (1983). ERISA specifically includes “disabil- ity” benefit plans within the scope of national interest and preemption. See, ERISA § 3(1), 29 U.S.C. § 1002(1). One of the principal congressional proponents of ERISA observed that ERISA’s preemption clause was expanded from a relatively narrow concept to the most broad proportions. Senator Williams stated that ERISA, with final form, was “intended to apply in its broadest sense to all actions of State or local governments, or any instrumentality thereof, which have the force or effect of law”. See, 120 Cong. Record 29, 333 (1974). If an employer decides to adopt a multi-benefit ERISA plan, it becomes a matter of federal interest to facilitate the provision of benefits at the least cost. “The most efficient way to meet these [administrative] respon- sibilities is to establish a uniform administrative scheme, which provides a set of standard procedures to guide processing of claims and disbursement of benefits.” See, Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 9, 107 S.Ct. 2211, 2216, 96 L.Ed.2d 1 (1987) (one time payment of severance benefits not preempted). The federal goal is to reduce costs and burdens so that the employer is moti- vated to increase benefits. It is undisputed that Maine’s cost of workers’ com- pensation and employee liability insurance is near the highest in the United States. See, Report of Blue Ribbon Committee to Examine Alternatives to the Workers’ Compen- sation System and to Make Recommendations Concerning the Replacement of the Present System, August 1, 1992. The high cost is a result, at least in part, of an 8.5% surcharge imposed on Maine employers to fund a $250 million 20 deficit in the residual market, an assessment to create the Workers’ Compensation Board Administrative Fund, and a 15% assessment for funding the capital of Maine Employers’ Mutual Insurance Company, the fall-back insurance provider created by the Maine Legislature. See, Maine Bureau of Insurance Decision and Order, In re: Workers’ Compensation 1992 “Fresh Start” Proceeding, Docket No. INS-92-116, November 18, 1992; Maine Bureau of Insurance Decision and Order, In re: Workers’ Compensation 1993 “Fresh Start” Proceeding, Docket No. INS-93-16, May 28, 1993; Maine Bureau of Insurance Deci- sion and Order, Application of Maine Employers’ Mutual Insurance Company to Obtain a Certificate of Insurance in Maine, Docket No. INS-92-199, December 23, 1992; and 39-A M.R.S.A. § 154 (West Supp. 1993) (Board funding assessment). The Bureau’s funding requirements frustrate CMI's purpose to provide workers’ compensation and disability benefits to its employees at a lesser cost by amalgamating the benefits into an ERISA plan providing a greater range of benefits. See Spugnardi Aff. | 15 at Pet. App. 35a. CMI may also avoid administrative costs by utilizing the less expensive claims procedures available to an ERISA plan. See, 29 U.S.C. §§ 1132, 1133 (West 1990, West Supp. 1993). Compliance with the Bureau’s order will threaten CMI's business. See, Spugnardi Aff. J 15 at Pet. App. 35a. The relevant language applicable in this or any other ERISA preemption case is as follows: “Except as provided in sub-section (b) of this section, the provisions of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee 2] benefit plan described in section 1003(b) of this title and not exempt under section 1003(b) of this title. (Emphasis added.) ERISA 514(a), 29 U.S.C. § 1144(a).” If the Maine Workers’ Compensation Act “relates to” an employee benefit plan, any attempt by Maine to regulate the administration and funding of the plan is preempted. Ii. The Maine Workers’ Compensation Act Violates Federal Law And Policy Because It Specifically “Relates To” ERISA And it Purports To Regulate The Funding Of An ERISA Plan Or, In The Alterna- tive, To Require A Separate Benefit Plan. 39-A M.R.S.A. §§ 401, 403 gives Maine employers two choices for the provision of workers’ compensation bene- fits; i.e. the employer may purchase insurance or submit its self-funded benefit plan to the Maine Bureau of Insur- ance for review and approval as to all elements of workers’ compensation benefits, including funding. The Bureau’s regulations are completely unique to Maine. No other state has the same qualification, admin- istrative or funding provisions for self-insured plans pro- viding occupational disability benefits. Three other states do have statutes purportedly to regulate self-insured employee benefit plans, but these laws vary from Maine. See, Conn. Gen. Stat. Ann. § 31-284(b) (West 1994), Neb. Rev. Stat. § 48-106 (West 1994); Mo. Ann. Stat. § 287.280 (Vernon 1994). California requires separate administra- tion of workers’ compensation benefit plans; Maine does not. See, Cal. Lab. § 700 (West 1994). Each employee benefit plan providing comprehensive benefits, including occupational death, disability benefits, to Maine 22 employees must submit to state regulation. This case suggests that, every state may impose its own set of regulations affecting workers’ compensation; thus render- ing it nearly impossible to provide coordinated benefits through a single plan on a multi-state basis. This theory is contrary to the principles established in Fort Halifax Pack- ing Co., Inc. v. Coyne, 482 U.S. 1, 10-11, 107 S.Ct. 2211, 2216-2217, 96 L.Ed.2d 1 (1987). See also Aloha Airlines, Inc. v. Auhe, 12 F.3rd 1498, 1504-1505 (9th Cir. 1993) which found that a state may not require an employer to modify an existing plan or establish a new separate plan even in an area of traditional state regulation. By specific reference in 39-A M.R.S.A. § 403(2) (West 1993), the Marine Workers’ Compensation Act “relates to” ERISA plans, and Maine’s regulatory effort exceeds the bounds established by prior decision of this Court. See, for example, Slaw v. Delta Air Lines, Inc., 463 U.S. at 108-110. III. The Decision Of the First Circuit Court Of Appeals In This Case Seems To Contradict Previous Holdings Of This Court Preempting State Regulations Of ERISA Plan Administration While Permitting The State To Mandate Minimum Benefits. At 22 E3rd 6, the First Circuit found that funding of benefits is as important as the establishment of minimum benefits. The case law from this Court seems, by analogy, to create a hypothetical ERISA factory which produces benefits for employers. The State is allowed to direct the type of benefits to be produced for its citizens, but this Court has not permitted a State to go inside the factory to control the 23 manufacturing process. It is only when the State is dissat- isfied with the benefits that it is allowed to create its own factory and manage the funding and administration pro- cesses. See Shaw, 463 U.S. at 107-108, 103 S.Ct. at 2905. Recognizing ERISA plans as administrative units, they should not be subject to “the administrative impracticality of permitting mutually exclusive pockets of federal and state 47 jurisdictions within a plan. . . The language in Shaw v. Delta Air Lines, Inc., 463 U.S. at 108, refers only to “benefits”. The Maine law focuses on payment of benefits. See, 39-A M.R.S.A. § 324 (West Supp. 1993). As Shaw found, it is the payment of the benefits to disabled workers that is of first interest. Shaw specifically allowed the benefits to be offered via a multi-benefit plan. The State may require that certain benefits be provided, but there is no case from this Court suggesting that the state may require separate or special funding of those benefits which are, in fact, being provided by the employer through its ERISA plan. Petitioner argues that no decision of this Court has allowed a State to take regulatory action as authorized by the First Circuit in this case. The Ninth Circuit in Employee Staffing Services, Inc v. Aubry, 20 F.3rd at 1042 found that areas of traditional state responsibility which are reserved to _ that State and exempt from preemption are specifically iden- tified in ERISA § 4, 29 U.S.C. § 1003. These exemptions in ERISA § 4, 29 U.S.C. § 1003 include plans created solely to meet state obligations and matters deemed to relate solely to insurance. See also, FMC Corporation v. Holiday, 498 U.S. 52, 60, 111 S.Ct. 403, 409, 112 L.Ed.2d 356 (1990) which similarly restricts the exemption from preemption. Therefore, preemp- tions are limited to specifically enumerated situations. See 24 also, District of Columbia v. Greater Board of Washington Board of Trade, __ U.S. __, 113 S.Ct. 580, 584, 121 L.Ed.2d 513 (1992) limiting exemption from preemption to those items described in ERISA § 4, 29 U.S.C. § 1003. Alessi v. Raybestos-Manhattan, Inc., 451 U.S. at 524, con- sidered New Jersey’s effort to ban pro-rated reduction of pension benefits payable to retired employees drawing workers’ compensation benefits. The employer was allowed to decide how to pay and how much to pay through his ERISA plan without interference from New Jersey as long as the minimum workers’ compensation benefits were paid. The First and Ninth Circuits’ extension of state regula- tions beyond those items designated in ERISA § 4, 29 U.S.C. § 1003(b) represents a new development in ERISA law that seems to contradict previous decisions of this Court. IV. The Circuits Are Divided On The Question Whether A State Regulation Relating To An ERISA Plan May Avoid Preemption If It Relates Also To Workers’ Com- pensation, A Matter Of Traditional State Interest. The First Circuit Court of Appeals looked primarily to Shaw v. Delta Air Lines, Inc. 463 U.S. at 108, as authority that Maine can require an employer to meet both State mandated benefit and funding requirements relating to workers’ com- pensation benefits. “In other words, while the State may not require an employer to alter its ERISA plan, it may force the employer to choose when providing disability ben- efits in a separately administered plan and includ- ing the State mandated benefits in its ERISA plan. If the State is not satisfied that the plan comports 25 with the requirements or its disability insurance law, it may compel the employer to initiate a sepa- rate plan that does comply.” Shaw, 463 U.S. at 108. California’s workers’ compensation law differs from Maine law because California requires separate administra- tion. The California employer may not provide such benefits through a comprehensive ERISA plan. See, Cal. Lab. § 700; Employee Staffing Services, Inc. v. Aubry, 20 F.3rd at 104; Barker v. Pick N’ Pull Auto Dismantlers, Inc., 819 F.Supp. 889, 892 (E.D. Cal. 1993). Maine specifically permits the use of broad based plans; therefore, there is a critical difference in the iegal ramifications of the laws of the two States. Based upon Employee Staffing, the Ninth Circuit apparently will find pre- emption if the State provides a choice between providing benefits through a separate unit and an ERISA plan. Once the choice is available to the employer, the State law “relates to” an ERISA plan and is preempted. Presumably, Maine’s law would be preempted in the Ninth Circuit. See also, Aloha Airlines, Inc. v. Auhe, 12 F.2d at 1505. Other jurisdictions have focused on benefits as a matter of State interest and have left the funding and administration aspects to ERISA. Those jurisdictions have followed a troika of cases. See, i.e., Shaw v. Delta Air Lines, Inc., supra; Alessi v. Raybestos-Manhattan, Inc., supra; and Ingersoll-Rand v. McLen- don, 498 U.S. 133, 11 S.Ct. 478, 118 L-Ed.2d 474 (1990). The Fourth Circuit, in PPG Industries Pension Plan A(CIO) v. Crews, 902 F.2d 1148, 1150-1151 (4th Cir. 1990), found a West Virginia law to be preempted by ERISA because it required separate administration of workers’ com- pensation benefits payable from a multi-benefit ERISA plan. The Fourth Circuit found that a principal purpose of ERISA was to allow an employer to combine funds in a separate 26 pool exempt from State regulation to pay benefits whether or not such benefits are mandated by the State. The Fourth Circuit would find both Maine and California laws relating to funding of benefits to frustrate the employer's effort to integrate benefits and, therefore, to be preempted by ERISA. The Fourth Circuit looked to Shaw v. Delta Air Lines, Inc., 463 U.S. at 108 as the source of authority for its decision. The fact that a State regulation of an ERISA plan falls in an area of traditional state interest was a controlling factor in this case and in Employee Staffing. In considering a non- workers’ compensation issue, the Eighth Circuit found that the question of traditional state interest is not controlling and found that question to be a policy issue applicable only in borderline cases. See, Arkansas Blue Cross & Blue Shield v. St. Mary’s Hospital, Inc., 947 F.2d 1346, 1350 (8th Cir. 1991) cert. den. 112 S.Ct. 2305 (1992). Therefore, there is disagreement among the Circuits whether any benefits are saved from preemption on that reason alone. Some Circuits find the State interest to be important only in borderline cases in which other factors are neutral. The economic impact of the Maine law upon the cost of benefits takes the analysis out of the borderline situation. V. The Requirements Of The Maine Workers’ Compensa- tion Act Will Raise The Employers’ Costs And Create Redundant Benefits. There Is Disagreement Among The Circuits Whether Such Costs Cause Preemption Of The State Regulation. The District Court found that Petitioner’s compliance with the Maine Workers’ Compensation Act may result in “duplication [of benefits] or increased cost”. See, Recom- mended Decision at p. 8, Pet. App. 28a-29a. The District Court found further that the economic impact of State regu- lation does not result in preemption unless the regulation effects the structure, administration or type of benefits pro- vided by the ERISA plan. The First Circuit Court of Appeals acknowledges that “the question of whether increased costs alone can trigger preemption is far from settled”. See, 22 F.3rd at 7, n.5. (Pet. App. 15a) The First Circuit seems to follow its decision in McCoy v. Massachusetts Inst. of Technology, 950 F.2d 13, 17 (1st Cir. 1991) in which it found that preemption is not triggered unless the increased cost from regulations applies specifically and uniquely to the ERISA plan as opposed to an overall increase in the employer’s cost of doing business. Similarly, findings of the Ninth Circuit in Employee Staff- ing Services, Inc. v. Aubry, 20 F.3rd at 1042 seem to be in accord with the First Circuit. The Ninth Circuit stated “Iwle venture no opinion on the economic desirability of such a scheme [required compensation insurance in a separate plan], or of enabling forms to avoid burdensome state workers’ compensation requirements, or of the practical sense of a state requiring firms to duplicate workers’ com- pensation benefits already provided in ERISA plans. We decide only that the State of California has power, not how it should exercise it. The practical policy decision about how to exercise that power, balancing the breadth and security of benefits against the loss of jobs as payroll costs increase, must be left to the democratic process of California.” Plainly and simply, the judicial policy decisions of the First and Ninth Circuits contradict the base policy of ERISA. 28 It is the principal purpose of ERISA to streamline the provi- sion of benefits and to reduce costs in order to increase the benefits that the employer can afford to provide. See, Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. At 10-11, 107 S.Ct. at 2216-2217. The Second Circuit has taken the position that regula- tion creating redundant benefits and the increased costs to provide benefits are the stuff that Congress intended to preempt. See, Smith v. Dunham-Bush, Inc., 959 F.2d 6, 9 (2nd Cir. 1992) in which the Second Circuit stated that an indirect effect on the ERISA plan triggered preemption and further found that a state law of general application effecting the amount or costs of benefits was preempted. Also in the Second Circuit, New York imposed a sur- charge on services provided to HMOs and insurers in order to force employers to switch benefits programs to Blue Cross/Shield. The Second Circuit found that Smith v. Dun- ham-Bush, Inc., 955 F.2d at 9 and Ingersoll-Rand, Co. v. McLen- don, 498 US at 139, 11 S.Ct. at 483, dictated that such surcharges are preempted by ERISA because they were intended to and did have a substantial effect, albeit indirect, on the New York ERISA plans. See Travelers Insurance Co. v. Cuomo, 14 F3rd at 719-720 (2nd Cir. 1993). The Second Circuit would find preempted those provisions in the Maine Workers’ Compensation Act that cause redundant benefits and increased benefit costs. See also, NYSA-ILA Medical and Clinical Services Fund v. Axelrod, 1994 WL 278325 (2nd. Cir. 1994). It is arguable that the Maine Workers’ Compensation Act would be preempted in the Third Circuit. In United Wire, Metal and Machine Health and Welfare Fund v. Morristown Mem. Hospital, 995 F.2d at 1194-1195, the Third Circuit found no nexus to an ERISA plan in a unique way as the result of generally applicable legislation attempting to control hospital costs. Maine, however, specifically requires employee benefit plans to buy insurance or subject the fund to State regula- tion. It has been found by the District Court in this case that the Maine law does have a resulting increase in costs. There- fore, the nexus is established to effect an ERISA plan differ- ently than employers who do not self-insure. In Travitz v. Northeast Dept. ILGWU Health & Welfare Fund, 13 F.2d 704, 709-710 n. 5 (3rd Cir. 1993) the Court distinguishes United Wire and found that a Pennsylvania statue making ERISA plans primarily liable for injuries suffered in auto accidents increased the ERISA plan’s potential for liability and increas- ing costs could lead to reduced benefits and was preempted. The developing law in the Third Circuit indicates that the effect of the Maine regulation would cause preemption. The Fifth Circuit considered indirect effect on ERISA plans in E-Systems, Inc. v. Pogue, 929 F.2d 1100, 1103 (5th Cir. 1991) cert. den., 112 S.Ct. 585 (1991). Texas attempted to impose a tax upon all persons providing services to employee benefit plans. Obviously E-Systems does present a situation in which a state attempted to tax ERISA plans in a unique manner. Maine requires that ERISA plans must pur- chase insurance or receive authorization to self-insure. In the first instance, the ERISA plan is subject to surcharges and assessments to fund shortcomings in the Maine workers’ compensation system. In the second instance, the ERISA plan must pay into the self-insurance guarantee fund. Again, it is noteworthy that the Maine statute specifically includes employee benefit plans within its scope. It is arguable that 30 the Fifth Circuit would preempt the Maine funding require- ments on the basis that the legislation increases costs of operation and benefit costs in a direct, material way. Recent Decisions in other Circuits also tend to confirm that regula- tions increasing costs are preempted even if the regulation is in an area of traditional state interest. See, Arkansas Blue Cross & Blue Shield v. St. Mary’s Hospital, Inc., 947 F.2d at 1348; In re Michigan Carpenters Council Health & Welfare Fund, 933 F.2d 376, 382-383 (6th Cir. 1990) cert. den. 112 S.Ct. 585 (1991); National Elevator Industries, Inc. v. Calhoon, 957 F.2d 1555, 1561 (10th Cir. 1992) cert. den. 113 S.Ct. 406 (1992). The law relating to the preemption of regulations affect- ing an economic impact upon ERISA plans is unclear and unsettled. The requirement that an ERISA plan subject itself to redundant funding and benefits at an incremental costs would, in all likelihood, be preempted in the Second, Third and Fifth circuits; and perhaps in the Ninth Circuit, but not in the First Circuit. CONCLUSION For the reasons set forth above, this Petition for Writ of Certiorari should be granted. Respectfully submitted, RatpH A. Dyer, Esa. Counsel of Record for the Petitioner 477 Congress Street, Suite 702 Portland, Maine 04101 (207) 773-6489 la COMBINED MANAGEMENT, INC., Plaintiff, Appellant, v. SUPERINTENDENT OF THE BUREAU OF INSURANCE OF THE STATE OF MAINE, Defendant, Appellee. No. 93-1874 United States Court of Appeals, First Circuit. Heard Jan. 6, 1994. Decided April 22, 1994. Employer brought action to enjoin Maine’s Superin- tendent of the Bureau of Insurance from enforcing statu- tory requirement that separate workers’ compensation plan be maintained. The United States District Court for the District of Maine, D. Brock Hornby, J., dismissed, and empioyer appealed. The Court of Appeals, Torruella, Cir- cuit Judge, held that Maine law requiring separately administered workers’ compensation plan was not pre- empted by Employee Retirement Income Security Act (ERISA). Affirmed. Richard G. Moon with whom Ralph A. Dyer, Port- land, ME, was on brief for appellant. James M. Bowie, Asst. Atty. Gen., Dept. of the Atty. Gen., with whom Michael E. Carpenter, Atty. Gen., Linda M. Pistner, Director, Regulatory Agency Unit, Dept. of the Atty. Gen., and Thomas D. Warren, Director, Litigation Unit, Dept. of the Atty. Gen., Augusta, ME, were on brief for appellee. 2a Robert Abrams, Atty. Gen., of the State of New York, Jerry Boone, Sol. Gen., Jane Lauer Barker, Asst. Atty. Gen. in Charge of Labor Bureau, and Jennifer 5S. Brand, Asst. Atty. Gen., New York City, on brief for State of NY, et al., amici curiae. John M. Rea, Chief Counsel, Vanessa L. Holton, Sr. Counsel, James D. Fisher, Staff Counsel, Gary J. O’Mara, Staff Counsel, Dept. of Industrial Relations, and Lloyd Aubry, Jr., Director, Dept. of Industrial Relations, State of CA, San Francisco, CA, on brief for State of CA, amicus curiae. Marsha S. Berzon, Michael Rubin, Indira Talwani, Altshuler, Berzon, Nussbaum, Berzon & Rubin on brief, San Francisco, CA, for the American Federation of Labor and Congress of Industrial Organizations and the Inter- national Ladies’ Garment Workers’ Union, AFL-CIO, amici curiae. Thomas S. Williamson, Jr., Sol. Of Labor, Marc I. Machiz, Associate Sol., Plan Benefits Sec. Div., Karen L. Handorf, Counsel for Special Litigation, Plan Benefits Sec. Div., and Elizabeth A. Goodman, Trial Atty., Plan Benefits Sec. Div., U.S. Dept. of Labor, on brief, Washing- ton, DC, for the Secretary of Labor, amicus curiae. Allan M. Muir and Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, ME, on brief for Maine Employers’ Mut. Ins. Co., amicus curiae. Michael M. Sykes, General Counsel, Oklahoma Dept. of Labor, and Kayla A. Bower, Attorney, Oklahoma Dept. 3a of Labor, on brief, Oklahoma City, OK, for State of Okla- homa ex rel. Dave Renfro, Commissioner of Labor, Okla- homa Dept. of Labor, amicus curiae. Before TORRUELLA, ALDRICH and CYR, Circuit Judges. TORRUELLA, Circuit Judge. Plaintiff-Appellant, Combined Management, Inc. (“CMI”), brought an action to enjoin Brian K. Atchinson, in his representative capacity as Superintendent of the Bureau of Insurance for the State of Maine (the “Superin- tendent”), from enforcing certain provisions of Maine’s workers’ compensation statute. 39-A M.R.S.A. § 101 et seq. CMI claimed that because CMI provides workers’ com- pensation benefits through a welfare benefit plan that is covered by the Employee Retirement Income Security Act (“ERISA”), the Superintendent's efforts to apply the workers’ compensation law to CMI are preempted by ERISA § 514(a) of ERISA, 29 U.S.C. § 1144(a). The district court dismissed CMI's complaint, finding that ERISA did not preempt Maine law. We affirm. I. BACKGROUND CMI is an employee leasing company that leases the services of its workers’ [sic] to a variety of businesses on a long-term basis. CMI provides employee benefits including occupational injury and disability benefits, to the leased employees through a subscription to the international Asso- ciation of Entrepreneurs of America Welfare Benefit Plan (the “IAEA Plan”). The workers’ compensation portion of the IAEA Plan is not separately insured or administered. 4a Maine state law, 32 M.R.S.A. § 14055(1)(B), mandates that employee leasing companies or their client busi- nesses must arrange for, the payment of workers’ com- pensation benefits in accordance with the requirements of the Maine Workers’ Compensation Act, 39-A M.R.S.A. § 101 et seq. The Workers’ Compensation Act requires that all employers provide workers’ compensation either through an insurance carrier authorized by the state or through a self-insurance plan that meets the state’s qualifications. 39-A M.R.S.A. § 403.2.! Maine requires authorized insurance carriers and self-insurers to provide 1 39-A M.R.S.A. § 403 provides in part: An employer subject to [the Workers’ Compensation} Act shall secure compensation and other benefits to the employer's employees in one or more of the ways_ described in this section. ... 1. INSURING UNDER WORKERS’ COMPENSA- TION INSURANCE POLICY. The employer may com- ply with this section by insuring and keeping insured the payment of such compensation and other benefits under a workers’ compensation insurance policy... . 2. PILOT PROJECTS. [The emplover may participate in an authorized pilot project.] . . 3. PROOF OF SOLVENCY AND FINANCIAL ABIL- ITY TO PAY; TRUST. The employer may comply with this section by furnishing satisfactory proof to the Superintendent of Insurance of solvency and finan- cial ability to pay the compensation and benefits, and depositing cash, satisfactory securities, irrevocable standby letters of credit issued by a qualified finan- cial institution or a surety bond with the board, in such sum as the superintendent may determine. .. . 4. GROUP SELF-INSURERS; APPLICATION. Except for the provision relating to individual public employer self-insurers, subsection 3 is equally appli- cable in all respects to group self-insurers. 5a evidence of their financial solvency and meet certain funding requirements. See, e.g., 24-A M.R.S.A. §§ 221-A, 410, 4431-4452; 39-A M.R.S.A. §§ 403, 404. On January 29, 1993, the Maine Bureau of Insurance sent a letter to CMI stating that CMI’s subscription to the [AEA Plan did not satisfy its obligation under state law to provide workers’ compensation benefits through one of the methods authorized by 39-A M.R.S.A. § 403. The letter did not “constitute a formal order or action of the Superintendent” but it did warn that-failure of CMI to comply with the law could prompt some action in the future. One month later, CMI filed suit to enjoin the Superin- tendent from requiring, CMI to obtain separate workers’ compensation insurance or to establish a qualified pro- gram of self-insurance pursuant to 39-A M.R.S.A. § 403. CMI also sought a declaratory judgment stating that any enforcement of 39-A M.R.S.A. § 403 against CMI is pre- empted by ERISA. In response to CMI's request for a preliminary injunction, the magistrate judge suggested that he first address the issue of whether ERISA preempted Maine's workers’ compensation laws. Although CMI would have to establish that its benefit plan, the IAEA Plan, was an ERISA covered plan under 29 U.S.C. §§ 1002(3) and 1002(37)(A) before it could invoke the protections of ERISA’s preemption provision, the magistrate noted that determining the status of the IAEA Plan would involve a fact intensive inquiry requiring additional discovery. Instead, with the agreement of the parties, the magistrate ordered that the preemption issue be addressed first on 6a the understanding that if he found ERISA did not pre- empt Maine law, he would then dismiss the case. Thus, for purposes of this threshold question only, the IAEA Plan is assumed to be a valid ERISA benefit plan. On June 15, 1993, the magistrate recommended a denial of the requested preliminary injunction and a dis- missal of the case on the grounds that ERISA did not preempt Maine’s workers’ compensation law. The magis- trate found that the workers’ compensation law did not “relate to” the IAEA Plan offered by CMI because the law is a matter of general application affecting all private employers, whether or not they have adopted ERISA plans, and because the law does not affect the structure, administration, or type of benefits provided by any ERISA plan. On August 2, 1993, the district court affirmed and adopted the magistrate’s recommended decision. CMI now appeals this decision. Il. ERISA PREEMPTION ERISA preempts state laws that “relate to” an ERISA covered welfare benefit plan. ERISA § 514(a), 29 U.S.C. § 1144(a).2 A state law “relates to” an ERISA covered plan “ 4€ it has a connection with or reference to such a plan.’ ” District of Columbia v. Greater Washington Bd. of Trade, ___ U.S. __, __, 113 S.Ct. 580, 583, 121 L.Ed.2d 513 (1992) 2 Section 514(a) provides that the provisions of ERISA: 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 and not exempt under section 1003(b) of this title. 29 U.S.C. § 1144(a). 7a (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2899-2900, 77 L.Ed.2d 490 (1983)); see also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 483, 112 L.Ed.2d 474 (1990). A state law may “relate to” a benefit plan “even if the law is not speci- fically designed to affect such plans, or the effect is only indirect.” Greater Washington Bd. of Trade, Vo. ee... 113 S.Ct. at 583 (quoting Ingersoll-Rand, 498 U.S. at 139, 111 S.Ct. at 483). However, preemption will not occur where the state law has only a “tenuous, remote, or peripheral” connection with covered plans, “as is the case with many laws of general applicability.” Id. ___ U.S. at __n. 1, 113 S.Ct. at 583 n. 1 (citing Shaw, 463 U.S. at 100 n. 21, 103 S.Ct. at 2901 n. 21); see also Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 830-38, 108 S.Ct. 2182, 2185-90, 100 L.Ed.2d 836, 1988). State laws that do not “relate to” an ERISA covered plan but instead “relate to” a benefit plan established solely to comply with state workers’ compensation laws are not preempted by ERISA. Section 514(a); ERISA § 4(b)(3), 29 U.S.C. § 1003(b)(3).* As Maine’s workers’ compensation law falls within this special exemption, we affirm the district court’s determination that ERISA does not preempt any efforts by the Superintendent to require CMI to provide workers’ compensation benefits through 3 Section 4(b)(3) provides that ERISA shall not apply to any employee benefit plan if: such plan is maintained solely for the purpose of complying with applicable workmen’s compensation laws or unemployment compensation or disability insurance laws. 29 U.S.C. § 1003(b)(3). 8a an authorized insurance provider or qualified self-insur- ance. See Employee Staffing Servs., Inc. v. Aubry, 20 F.3d 1038 (9th Cir.1994) (holding that California’s workers’ compensation law, which is quite similar to Maine's, is not preempted by ERISA). A. The Worker’s Compensation Exemption Congress explicitly exempted state workers’ compen- sation schemes from ERISA’s purview, see. H.R.Rep. No. 93-1280, 93d Cong., 2d Sess. 383 (1974), reprinted in 1974 U.S.Code Cong. & Admin. News 4639, 5038, 5162, leaving intact the states’ traditional regulation and oversight of this specialized system of insurance. See also 28 U.S.C. § 1445(c) (forbidding removal of workers’ compensation benefits claims to federal court). In the statute, § 4(b)(3) excludes benefit plans created solely to comply with state workers’ compensation statutes from coverage under ERISA, and § 514(a) excludes from preemption state laws that relate to those plans described in § 4(b). 29 U.S.C. §§ 1003(b) and 1144(a). Some state workers’ compensa- tion laws might “relate to” ERISA covered benefit plans, instead of, or in addition to, plans exempt under § 4(b)(3), and thus fall under the broad sweep of ERISA’s preemp- tion clause. Greater Washington Bd. of Trade, __ a? 113 S.Ct. at 584-85. Laws which relate only to welfare benefit plans exempt from ERISA’s coverage, however, fit safely under the umbrella of § 4(b)’s exemption. Id. In Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 106-09, 103 S.Ct. 2890, 2905-06, 77 L.Ed.2d 490 (1983), the Supreme ‘Court held in part that a New York law mandating the provision of certain disability benefits to employees was Ya exempt from preemption under ERISA pursuant to § 4(b)(3), even though employers could provide the required benefits through their ERISA covered plans. Because disability benefit laws are exempted from ERISA’s coverage by the same provision exempting workers’ compensation laws, § 4(b)(3), 29 U.S.C. § 1003(b)(3), the Shaw decision applies directly to this case. The Supreme Court found in Shaw that: A State may require an employer to maintain a disability plan complying with state law as a separate administrative unit. Such a plan would be exempt under § 4(b)(3). . . . [WJhile the State may not require an employer to alter its ERISA plan, it may force the employer to choose between providing disability benefits in a sep- arately administered plan and including the state-mandated benefits in its ERISA plan. If the State is not satisfied that the ERISA plan com- ports with the requirements of its disability insurance law, it may compel the employer to maintain a separate plan that does comply. Id. at 108, 103 S.Ct. at 2905-06. See also Greater Washington Bd. of Trade, ___ U.S. at , 113 S.Ct. at 584-85 (reaffirm- ing the holding in Shaw). The Supreme Court also noted that although the exemption in § 4(b)(3) applies only to separately adminis- tered disability plans maintained solely to comply with state law, and does not include ERISA covered benefit plans that provide a combination of exempt and non- exempt benefits, employers are not: completely free to circumvent the Disability Benefits Law by adopting plans that combine disability benefits inferior to those required by 10a that law with other types of benefits. Congress surely did not intend, at the same time it pre- served the role of state disability laws, to make enforcement of those laws impossible. Shaw, 463 U.S. at 108, 103 S.Ct. at 2905. Maine’s workers’ compensation law falls squarely within the dictates of Shaw. 39-A M.R.S.A. § 403 mandates that employers provide workers’ compensation by pur- chasing approved insurance or by establishing an approved self-insurance plan. This is precisely what the Supreme Court contemplated when it found that states “may require an employer to maintain a [§ 4(b)(3) exempt] plan as a separate administrative unit.” Id.; accord Greater Washington Bd. of Trade, ___ U.S. at ___, 113 S.Ct. at 584-85. In the present case, the Superintendent expressed an opinion that CMI’s subscription to the IAEA Plan does not satisfy the requirements of Maine’s law. Further efforts to ensure CMI’s compliance with the law would clearly constitute an act to “compel the employer to maintain a separate plan that does comply” with the workers’ compensation law, an act which is explicitly approved of by Shaw. Shaw, 463 U.S. at 108, 103 S.Ct. at 2906. Even though CMI provides workers’ compensation benefits through the IAEA Plan, which we assumed is an ERISA covered plan, Maine’s law does not require, and the Superintendent does not request, that CMI alter the IAEA Plan in any way or provide or not provide certain benefits through the IAEA Plan. In fact, the Maine law imposes no limitations or requirements, regulatory or otherwise, on the IAEA Plan or on any ERISA covered plan. Consequently, it does not “relate to” an ERISA plan lla such that preemption is triggered. In such a situation, CMI cannot don the mantle of ERISA preemption simply by including workers’ compensation benefits in its wel- fare benefit plan and thereby escape the requirements of Maine’s law. See Shaw, 463 U.S. at 108, 103 S.Ct. at 2905-06; Foust v. City Ins. Co., 704 F.Supp. 752, 754 (W.D.Tex.1989). CMI misinterprets Shaw to hold that states can only require employers to provide a specified level or package of workers’ compensation benefits and cannot otherwise interfere with plan administration through provisions like the funding and solvency requirements established in 39-A M.R.S.A. § 403. CMI would thus limit the ERISA exemption under § 4(b)(3) to laws mandating benefit outputs instead of laws establishing separate benefit plans. As a corollary to this claim, CMI contends that Shaw requires states to give employers a choice of provid- ing the specified benefits in its own ERISA plan or in a state mandated benefits plan. CMI maintains that because ERISA allows welfare benefit plans to provide workers’ compensation benefits, refusing to give CMI the option of providing such benefits through the IAEA Plan would effectively bar what ERISA permits. See Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 524, 101 S.Ct. 1895, 1906-07, 68 L.Ed.2d 402 (1981) (finding state law that barred one method of calculating benefits permitted by ERISA to be preempted). CMI cites several cases for the proposition that states may not force employers to separate workers’ compensa- tion benefits from their fully integrated ERISA plans. Id. at 521-26, 101 S.Ct. at 1905-08; PPG Industries Pension Plan A v. Crews, 902 F.2d 1148, 1150-51 (4th Cir.1990). CMI | 12a extends this proposition to argue that states are also prohibited from forcing employers to set up separate workers’ compensation plans. Although ERISA preempts state laws that prohibit an ERISA covered plan from providing certain benefits or from calculating benefits in a certain way (including laws that would force a plan to separate out a portion of its existing coverage), we find no support in Shaw, or any other case, for CMI's proposition that ERISA preempts state laws that force employers to adopt a separately administered workers’ compensation benefits plan. On the contrary, § 4(b)(3) and Shaw itself expressly permit states to do just that. Shaw, 463 U.S. at 108, 103 S.Ct. at 2905-06. Shaw does not require states to give employers the option of complying with state law by providing workers’ compensation benefits in their ERISA covered plans. Instead, Shaw merely states that the existence of such an option does not automatically result in preemp- tion, id. at 108, 103 S.Ct. at 2905-06; it certainly does not suggest the converse proposition, that an option is required for the § 4(b)(3) exemption to apply. See Barker v. Pick N Pull Auto Dismantlers, Inc., 819 F.Supp. 889, 891-96 (E.D.Cal. 1993) (rejecting the identical argument that Shaw requires states to offer employers the option of providing workers’ compensation through their ERISA plans).4 + We note that this case differs from our recent decision in Simas v. Quaker Fabric Corp., 6 F.3d 849 (1st Cir.1993), where we held that states cannot mandate the establishment of an ERISA covered plan. Id. That holding does not apply to state workers’ compensation laws such as Maine’s which mandate the estab- lishment of exempt, non-ERISA covered plans. 13a Likewise, Shaw does not limit the exemption under § 4(b)(3) to state laws mandating a specific level or pack- age of benefits as opposed to laws mandating solvency and funding requirements. There is no basis for this distinction in § 4(b)(3) or in Shaw. Additionally, the lan- guage of those two authorities indicates that the case for exemption of solvency requirements is even stronger than the case for exemption of benefit requirements. See § 4(b)(3), 29 U.S.C. § 1003(b)(3) (stating that the provi- sions of ERISA shall not apply to any employee benefit plan if “such plan is maintained solely for the purpose of complying with applicable workmen’s compensation laws”) (emphasis added); Shaw, 463 U.S. at 108, 103 S.Ct. at 2905 (stating that states can require employers to com- ply with the “requirements” of its law by setting up “a separate administrative unit”); see also Barker, 819 F.Supp. at 895 (finding that “Shaw does not address ‘benefits’ but yon speaks only of ‘requirements,’ ” and that a state’s concern about the solvency of a workers’ compensation plan is “of equal stature as any concern as to the level of benefits.”). If anything, state laws mandating specific benefits from an ERISA covered plan are more likely to “relate to” that ERISA plan than laws which merely require the creation of an ERISA-exempt plan and which make no demands on the ERISA covered plan itself. Thus, the instant case presents an even clearer application of § 4(b)(3)’s exemp- tion than does Shaw. Maine’s law does not bar what ERISA permits. CMI remains free to provide the existing workers’ compensa- tion benefits to its employees and to integrate such bene- fits with the rest of its ERISA plan benefits. We are not presented in this case with a state workers’ compensation l4a law that prohibits ERISA covered plans from calculating pension benefits in a certain way, see Alessi, 451 U.S. at 521-26, 101 S.Ct. at 1905-08 (finding that ERISA pre- empted New Jersey law that prohibited ERISA plans from offsetting pension benefits by amounts awarded for workers’ compensation); PPG Industries, 902 F.2d at 1150-51 (finding preemption of West Virginia law that prohibited an employer from deducting the amount of pension benefits previously paid to a retiree from the retiree’s subsequent workers’ compensation award), or a law that specifically refers to ERISA covered benefit plans in order to determine workers’ compensation benefits, see Greater Washington Bd. of Trade, ___ U.S. at ___, 113 S.Ct. at “583-85 (holding that ERISA preempted District of Colum- bia law requiring that employers who provide health insurance coverage for their employees under an ERISA plan must provide equivalent health insurance coverage for injured employees eligible for workers’ compensa- tion). These cases cited by CMI in support of its mis- guided interpretation of Shaw found preemption for reasons that do not apply to this case. We therefore find that a state law that requires employers to operate a separately administered workers’ compensation benefit plan is not preempted by ERISA. B. Does Maine’s Law Nevertheless “Relate To” the IAEA Plan? CMI further argues that Maine’s workers’ compensa- tion law relates to an ERISA plan, and thus is preempted, because the law affects the cost of providing ERISA bene- fits to its employees. Specifically, CMI alleges that if it is 15a forced to adopt a separate workers’ compensation plan, the burdens of duplicate administration and the higher cost of separate workers’ compensation benefits provided outside of the integrated IAEA Plan will have a signifi- cant economic impact on CMI and render CMI unable to afford the existing level of benefits now offered through the IAEA Plan. According to CMI, a state law that creates a significant economic impact on an ERISA plan, without more, sufficiently “relates to” the plan and is therefore preempted. E-Systems, Inc. v. Pogue, 929 F.2d 1100, 1103 (5th Cir.), cert. denied, __ U.S. __, 112 S.Ct. 585, 116 L.Ed.2d 610 (1991); Travelers Ins. Co. v. Cuomo, 813 F.Supp. 996, 1002-06 (S.D.N.Y.1993).5 To begin with, we decline to address whether a sig- nificant economic impact on an ERISA covered plan may be sufficient by itself to trigger preemption because CMI's argument fails regardless of how that issue is resolved. The argument fails for two reasons. First, CMI's claim is at odds with Shaw and Greater Washington Bd. of Trade, in which the Supreme Court explicitly contem- plated state laws requiring the separate administration of ° As CMI points out, Travelers cites FMC Corp. v. Holliday, 498 U.S. 52, 58-60, 111 S.Ct. 403, 407-09, 112 L.Ed.2d 356 (1990), for the proposition that state laws that increase plan costs are preempted. Travelers, 813 F.Supp. at 1006. FMC Corp. v. Holliday makes no mention of state laws that merely impose additional costs. Instead, the Supreme Court found that state laws interfer- ing with an ERISA plan’s calculation of benefits, in that case through a state antisubrogation law, was preempted. FMC Corp., 498 U.S. at 58-60, 111 S.Ct. at 407-09. Although we need not decide the issue in this case, the question of whether increased costs alone can trigger preemption is far from settled. | 6a workers’ compensation plans without “relating to” exis- ting ERISA plans. Greater Washington Bd. of Trade, —— U.S. at, 113. S.Ct. at 584-85; Shaw, 463 U.S. at 108, 103 S.Ct. at 2905-06. - Second, Maine’s law, while having an economic impact on CMI, does not have an economic impact on the IAEA Plan itself. Clearly, any law that increases a com- pany’s cost of doing business can be said to affect that business’s ability to provide benefits under its welfare benefit plan. This is not the same, however, as imposing burdens on the welfare benefit plan itself. The increased cost or administrative burdens imposed by the state law must have some connection to the covered ERISA plan before the preemption analysis can come into play. See United Wire, Metal and Machine Health & Welfare Fund v. Morristown Mem. Hosp., 995 F.2d 1179, 1193 (3d Cir.1993) (“Where there is no direct nexus between a state statute and ERISA plans, no effect on the manner of such plans’ conducting business or their ability to operate in inter- state commerce, statutes have been upheld despite the fact that they may have the indirect ultimate effect of increasing plan costs.”). In requiring CMI to provide separate coverage for workers’ compensation, Maine does not increase the operational expenses or input costs of the IAEA Plan,° ® In contrast, two cases that defendant relies upon, E-Sys- tems and Travelers, involve laws that increase the costs of plan operation. See E-Systems, 929 F.2d at 1103 (finding that because the state tax in that case was collected from an ERISA covered plan, the “cost of the plan must therefore increase”); Travelers, 813 F.Supp. at 1003 (finding “little doubt that the Surcharges at 17a nor does it impose any additional administrative bur- dens, benetit requirements, or other obligations on the IAEA Plan. Maine’s law may increase CMI's cost of doing business, but it does not affect the IAEA Plan’s cost of providing benefits or costs of administration. Should CMI choose voluntarily to change its coverage under the [AEA Plan in response to Maine’s law, we consider such a decision to constitute, at most, an effect of the law that is too “tenuous” and “remote” to warrant preemption. See Employee Staffing Servs., Inc. v. Aubry, No. C-92-4096, 1993 WL 83310 (N.D.Cal.1993), aff'd, 20 F.3d 1038 (9th Cir.1994); cf. Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 831-32, 108 S.Ct. 2182, 2986-87, 100 L.Ed.2d 836 (1988) (finding generally applicable state gar- nishment law did not “relate to” ERISA covered plans even though the law might burden the administration oi such plans); Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 145-46 (2d Cir.), cert. dented, 493 U.S. 811, 110 S.Ct. 57, 107 L.Ed.2d 25 (1989) (finding state escheat law did not “relate to” ERISA plans and noting that ERISA does not preempt many laws that have a minimal, indirect impact on plan administration); Martort Bros. Distributors v. James-Massengale, 781 F.2d 1349, 1358-59 (9th Cir.), cert. denied, 479 U.S. 1018, 107 S.Ct. 670, 93 L.Ed.2d 722 (1986) (finding state unfair labor practices statute that required employers to pay damages based in part on fringe bene- fits employees would have received if employers had bargained in good faith did not “relate to” an ERISA issue will have a significant effect on the commercial insurers and HMOs which do or could provide coverage for ERISA plans and thus lead, at least indirectly, to an increase in plan costs”) (footnote omitted). not “relate preempted 1Ya UNITED STATES DISTRICT COURT DISTRICT OF MAINE COMBINED MANAGEMENT, INc., : Civir No. PLAINTIFE 93-39-P-H V. (Fitm Auc. 2, 1993) Brian K. ArCHINSON, SUPERINTENDENT, BUREAU ©} INSURANCE, STATE OF MAINE, tl i i i DrereENDANT Orver APrEIRMING RECOMMENDED Decision OF THE MAGISTRATE JUDG! The United States Magistrate Judge filed with the court on June 15, 1993, with copies to counsel, his:‘Recom- | mended Decision on Motion for Preliminary Injunction. (he plaintiff filed its objection to the Magistrate Judge's Recommended Decision on June 25, 1993. | have reviewed and considered the Magistrate Judge’s Recom- mended Decision, together with the entire record; I have made a de novo determination of all matters adjudicated by the Magistrate Judge’s Recommended Decision; and | concur with the recommendations of the United States Magistrate Judge for the reasons set forth in his Recom- mended Decision, and determine that no further proceed- ing is necessary. | am satisfied that the portions of Aetna Life Ins. Co. v. Borges, 869 F.2d 142 (2d Cir.), cert. denied, 493 U.S. 811 (1989), and Rebaldo v. Cuomo, 749 F.2d 133 (2d Cir. 1984), 20a cert. denied, 472 U.S. 1008 (1985), relied upon by the United States Magistrate Judge remain good law. See, e.g., McCoy v. Massachusetts Inst. of Technology, 950 F.2d 13, 17 (1st Cir. 1991) (referring to Rebaldo), cert. denied, 112 S. Ct 19359 (1992). It is therefore Orperep that the plaintiff’s motion for preliminary injunction is Deniep and the action is Dis- MISSED. So ORDERED. Dated at Portland, Maine this 2nd day of August, 1993. /s/ D. Brock Hornby D. Brock Hornby United States District Judge 2la UNITED STATES DISTRICT COURT DISTRICT OF MAINE COMBINED MANAGEMENT, INC., ee Civil No. P fy laintiff 93-39-P-H . (Filed June 15, 1993) ) ) ) ) ) BRIAN K. ATCHINSON, | ? SUPERINTENDENT, 4 BUREAU OF : ) ) ) INSURANCE, STATE OF MAINE, Defendant RECOMMENDED DECISION ON MOTION FOR PRELIMINARY INJUNCTION [his matter is before the court on the plaintiff's motion for a preliminary injunction to prohibit the defen- dant, Superintendent of the Maine Bureau of Insurance, from enforcing its compliance with Maine’s workers’ compensation law. The plaintiff claims that because it provides occupational disability insurance benefits through its subscription to a multi-employer welfare ben- efit plan covered by the Employee Retirement Income security Act (“ERISA”), 29 U.S.C. §§ 1001-1461, the Superintendent’s authority to regulate its workers’ com- pensation plan is preempted by ERISA. BACKGROUND The plaintiff, Combined Management, Inc. (“CMI”), is an employee leasing company located and duly pio' g ; : oS? . te € registered in Maine. It pays the wages of the employees it leases to client companies, withholds and remits applica- ble tederal and state taxes and provides its leased employees with a variety of employee welfare benetits, including medical and surgical coverage, dental cover- age, Vision care coverage and accidental death and dis- memberment coverage. These benefits are provided through a subscription to the International Association of Entrepreneurs of America Welfare Benefit Plan (“Plan”), which the plaintiff assets is a multi-employer welfare benefit plan as defined by 29 U.S.C. § 1002(3) and (37)(A). The Plan is established and maintained by the Interna- tional Association of Entrepreneurs of America Trust (“Trust”) tor the benefit of the employees and dependents of members of the International Association of Entrepre- neurs of America (“IAEA”). Among the benefits provided to the plaintiff's employees through the Plan are occupa- tional injury and illness benefits like those mandated by the Maine workers’ compensation laws currently in effect. CMI pays the entire premium for work-related in*ury and illness coverage. These benefits are neither separately insured nor separately administered. In January 1993 the Maine Bureau of Insurance noti- tied CMI that under Maine’s workers’ compensation law employers may satisfy their workers’ compensation bene- fit obligations either by purchasing liability insurance from an insurer authorized to do business in Maine or by securing authorization from the Bureau to self-insure.! *! 39-A M.R.S.A. § 403(1) provides, in relevant part, that “[t]he employer may comply with this section by insuring and keeping insured the payment of such compensation and other ee Ce 23a The Bureau made clear to the plaintiff that it did not approve CMI's subscription to the Plan as a discharge of its obligations under the workers’ compensation law. CMI contends that the state's attempted regulation of its workers’ compensation scheme represents an intrusion into the administration of an employee benefit plan cov- ered by ERISA that is preempted by federal law. Mem- orandum of Law in Support of Plaintiff's Motion for Preliminary Injunction (“Plaintiff's Memorandum”) at 5, 10-18 (Docket No. 4). The Superintendent asserts that the Plan does not qualify as an ERISA-covered plan but that, even if it does, Maine’s workers’ compensation law does not “relate to” it and so is not preempted by ERISA. Detendants’s [sic] Objection and Memorandum of Law in Opposition to Plaintiff's Motion for Preliminary Injunc- tion (“Detendant’s Memorandum”) at 7, 20 (Docket No. 11). STANDARD OF REVIEW In evaluating the plaintiff's entitlement to a prelimi- nary injunction, the court must consider four factors, one of which is the likelihood of success on the merits. Nar- ragansett Indian Tribe v. Guilbert, 934 F.2d 4, 5 (1st Cir. benefits under a workers’ compensation insurance policy.” Sec- tion 403(3) provides the option of self-insurance. It states, in part, “The employer may comply with this section by furnishing Satisfactory proof to the Superintendent of Insurance of sol- vency and financial ability to pay the compensation and bene- fits, and depositing cash, satisfactory securities, irrevocable standby letters of credit issued by a qualified financial institu- tionora surety bond with the board, in such sum as the superin- tendent may determine. ... ” 39-A M.R.S.A. § 403(3). yee.te 24a 1991); see also Augusta News Co. v. News America Publish- ing, Inc., 750 F.Supp. 28, 31 (D. Me. 1990). With the consent of the parties, I agreed that the court would bifurcate is consideration of the ERISA preemption ques- tion which is at the heart of this litigation. Because the Superintendent contends that the Plan is not one covered by ERISA and that additional discovery would be required before that issue could be determined, it was agreed that the court would decide the following ques- tion first: Assuming, arguendo, that the Plan is a so-called ERISA employee benefit plan, is Maine’s workers’ com- pensation law preempted by ERISA? See endorsement on Plaintiff's Motion to File Reply Memorandum (Docket No. 15). An affirmative answer will next require consider- ation of the Superintendent’s assertion that the Plan is not an ERISA plan. A negative answer will foreclose the plaintiff from the relief it is seeking and necessarily ter- minate this litigation. In this agreed posture, then, the court effectively now has before it a defendant’s motion to dismiss tor failure to state a claim upon which relief can be granted.? LEGAL ANALYSIS ERISA establishes a comprehensive system for the federal regulation of private employee benefit plans, including both pension and welfare plans. 29 U.S.C. § 1002. Section 1144(a) of ERISA provides that all state * Although both sides have submitted affidavits, it is not nécessary to go beyond the allegations of the complaint to estab- lish the factual framework necessary to a first-stage considera- tion of the preemption question as agreed upon. 25a laws shall be superseded “insofar as they now or hereaf- ter relate to any employee benefit plan described in sec- tion 1003(a) and not exempt under section 1003(b)3. .. . ” a state law “relates to” an employee benefit plan “if it has a connection with or reference to such a plan.” District of Columbia v. Greater Washington Bd. of Trade, 113 S. Ct. 580, 583 (1992) (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983)). Courts have been particularly critical of state laws which specifically refer to ERISA plans and single them out for special treatment. McCoy v. Massa- chusetts Inst. of Technology, 950 F.2d 13, 18 (1st Cir. 1991), cert. denied, 112 S. Ct. 1939 (1992). However, ERISA pre- empts state law which “relates to” covered plans ” ‘even if the law is not specifically designed to affect such plans, or the effect is only indirect’ ” Greater Washington Bd. of Trade, 113 S. Ct. at 583 (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139 (1990)) and even if the law is “ “consistent with ERISA’s substantive requirements’ ” (quoting Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739 (1985)). While the Court has emphasized the expansive nature of ERISA preemption, its reach is not unlimited. * 42 U.S.C. § 1003(b) provides for exemption from ERISA coverage in limited circumstances, including those in which a plan is maintained solely for the purpose of complying with applicable workers’ compensation laws or unemployment com- pensation or disability insurance laws. 42 U.S.C. § 1003(b)(3). Although the defendant suggests that there is an absence of evidence that CMI’s workers’ compensation program is com- bined significantly with other benefit programs, I will assume for purposes of this motion that it does not qualify for this exemption. 26a “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.” Shaw, 463 U.S. at 100 n.21. The distinction between state laws that “relate to” employee benefit plans and those that do not is far from clear. The First Circuit has suggested that where “gray areas” exist, the court should look to the policy rationales behind ERISA and its preemption clause, which include protection of the rights and expec- tations of plan participants and assurance that plans are subject to a uniform body of benefit law with minimal administrative and financial burdens of compliance with conflicting state and federal directives. McCoy, 950 F.2d at 17-18. Other circuits have provided some guidance for eval- uating “gray area” statutes. Comparing cases in which ERISA preemption was found to occur with those in which it was not, the Second Circuit concluded that pre- empted laws “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.” Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 146 (2d Cir.), cert. denied, 493 U.S. 811 (1989). Those that are not preempted are “laws of general application — often traditional exercises of state power or regulatory authority — whose effect on ERISA plans is incidental.” Id. “What triggers ERISA preemption is not just any indirect effect on administrative procedures but rather an effect on the primary administrative functions of benefit plans, such as determining an employee's eligibility for a bene- fit and the amount of that benefit.” Id. at 146-47. d/a ~— Similarly, the Ninth Circuit has grouped state statutes held preempted because they “relate to” ERISA plans into four categories: 1) laws that regulate the type of benefits or terms of ERISA plans; 2) laws that create reporting, disclosure, funding or vesting requirements for ERISA plans; 3) laws that provide rules for the calculation of the amount of benefits to be paid under ERISA plans; and 4) laws and common-law rules that provide remedies for misconduct resulting from the administration of ERISA plans. Martori Bros. Distrib. v. James-Massengale, 781 F.2d 1349, 1356-58 (9th Cir.), cert. denied, 479 U.S. 949 (1986). The court noted that the principle underlying all of the decisions finding preemption is that the state law regu- lates matters controlled by ERISA: disclosure, funding, reporting, vesting and enforcement of benefit plans. Id. A recent application of the Aetna Life and Martori Bros. framework appears in Employee Staffing Servs., Inc. v. \ubry, No. C-92-4096 SAW, 1993 U.S. Dist. LEXIS 3948 (N.D. Cal. Mar. 17, 1993), a case strikingly similar to the one here before the court inasmuch as it too involved the question whether a state workers’ compensation statute is preempted by ERISA.‘ In reviewing California’s workers’ 4 Section 3700 of California’s Labor Code is similar to 39-A M.R.S.A. § 403 in that it provides that every private employer must secure the payment of workers’ compensation by either obtaining insurance with an approved insurer or by receiving approval from the Director of Industrial Relations to self-insure. Approval is con- tingent upon the employer’s furnishing proof of the ability to self- insure and to pay any compensation that may become due to its employees. Cal. Lab. Code § 3700(a), (b). In Employee Staffing Ser- vices, the plaintiffs claimed that because they provided their employees with workers’ compensation benefits though an ERISA- covered plan, ERISA preempted state regulation. 28a compensation statute against the Martori Bros. standard, the court stated: The law is one [of] general application, and involves a traditional exercise of state power. It does not: provide for alternative causes of action tor employees to collect benefits protected by ERISA; refer to ERISA plans; apply solely to ERISA plans; nor interfere with the calculation of benefits owed to employees. Further, it does not: regulate the benefits or terms of ERISA plans; create any reporting, disclosure, funding, or vesting requirements; provide rules for the calculation of benefits; nor provide remedies for misconduct arising from the administration of ERISA plans. Rather, the California Workers’ Compensation law only requires that California employers purchase workers’ compensation insurance or meet the state’s requirements for self-insurance. Plaintiffs may comply with the state law without altering the [employee bene- fit] plan. Id. at *11-*12. The court concluded that the law thus does not “relate to” an ERISA-covered employee benefit plan and therefore is not preempted. Id. at *12. Exposing Maine’s workers’ compensation law to sim- ilar scrutiny compels the same conclusion. It is apparent from the language of section 403 that its purpose is to guarantee the solvency of workers’ compensation plans. The statute applies to all private employers, not just those who have adopted employee benefit plans covered by ERISA. It is not directed toward changing the rights or expectations of employee benefit plan participants. The plaintiff may comply with state law without altering its employee benefit plan although, admittedly, there may be 29a duplication or increased cost. However, many state laws indirectly affect the cost of administering ERISA-covered plans but in doing so do not trigger ERISA preemption. See Aetna Life, 869 F.2d at 146 (where state statute does not affect structure, administration or type of benefits provided by ERISA plan, mere fact statute has some economic impact on plan does not require it be invali- dated). As the Second Circuit has stated, “{I]f ERISA is held to invalidate every State action that may increase the cost of operating employee benefit plans, these plans will be permitted a charmed existence that never was contem- plated by Congress.” Rebaldo v. Cuomo, 749 F.2d io, 138-39 (2d Cir. 1984), cert. denied, 472 U.S. 1008 (1985). CONCLUSION For the foregoing reasons, I recommend that the plaintiff’s motion for preliminary injunction be DENIED and that the action be DISMISSED. NOTICE A party may file objections to those specified por- tions of a magistrate judge's report or proposed findings or recommended decisions entered pursuant to 28 U.S.C. § 636(b)(1)(B) for which de novo review by the district court ts sought, together with a supporting memorandum, within ten (10) days after being served with a copy thereof. A responsive memorandum shall be filed within fen (10) days after the filing of the objection. a a ee ee 30a Failure to file a timely objection shall constitute a waiver of the right to de novo review by the district court and to appeal the district court’s order. Dated at Portland, Maine this 15th day of June, 1993. /s/ David M. Cohen David M. Cohen United States Magistrate Judge 3la OFFICE OF THE CLERK United States District Court DISTRICT OF MAINE WILLIAMS S. BROWNELL CLERK Edward T. Gignoux U.S. Courthouse 156 Federal Street, Rm. 102 Portland, Maine 04101 Tel. (207) 780-3356 March 29, 1993 lo: All Counsel of Record Re: Combined Management v. Insurance, ME Supt. Civil No. 93-39-P-H Dear Counsel: Kindly be advised that plaintiff’s motion to file reply memorandum was endorsed as follows: 3/29/93 Granted in part as follows. During a telephone conference with counsel this date, it was agreed that the following threshold issue presented by this case should be decided first: Assuming, arguendo, that the plan of the Inter- national Association of Entrepreneurs of Amer- ica (“IAEA”), through which the plaintiff allegedly provides a variety of benefits to its employees, is a so-called ERISA employee bene- fit plan, is Maine’s workers’ compensation law preempted by ERISA? Plaintiff shall have to an [sic] including 4/12/93 within which to file a reply memorandum of not more than 15 pages addressing this issue only. The parties agree that no additional evidentiary materials need be pre- sented on the issue. The threshold issue as framed shall be decided on the papers filed to dete and the plaintiff’s reply memorandum to ce. 32a be filed. if [sic] the question presented is answered in the affirmative, the court will con- fer with counsel concerning additional filings to be made to complete the evidentiary record and briefing on remaining issues relating to quali- fication of the IAEA plan for ERISA protection. /s/ David M. Cohen, USM]. Sincerely, /s/ Kimberly A. Diamond, Kimberly A. Diamond, Deputy Clerk Ralph Dyer, Esq. lames Bowie, Esq. 33a UNITED STATES DISTRICT COURT DISTRICT OF MAINE COMBINED MANAGEMENT, INC., Plaintiff, -versuSs- BRIAN K. ATCHISON, Defendant. AFFIDAVIT OF RICHARD SPUGNARDI Now comes Richard Spugnardi, who being duly sworn, hereby deposes and says as follows: 1. Affiant is a principal of Combined Management, Inc. (“CMI”) and is responsible for the business opera- tions of the corporation, including the provision of medi- cal and other benefits to its employees. 2. CMI is engaged in the business of employee leas- ing and is duly registered in the State of Maine pursuant to 32 M.R.S.A. Sec. 14052, et seq. 3. CMI is an “employer” as defined by 29 U.S.C. Sec. 10025. CMI employs individuals and leases their services on a long-term basis to persons, associations, partnerships, corporations or other entities pursuant to written contracts. 4. CMI pays the wages of its employees leased to client companies, withholds and remits State and Federal taxes as required by applicable law and provides its leased employees with a variety of employee welfare benefits, including medical and surgical coverage, dental 34a coverage, vision care coverage and accidental death and dismemberment coverage. 5. These benefits are provided through a subscrip- tion by CMI to the International Association of Entrepre- neurs of America Welfare Benefit Plan (the “Plan”). This is a multi-employer welfare benefit plan as defined by 29 U.S.C. Sec.s 1002(3) and 1002(37)(A). A summary of the Plan was filed with the Department of Labor pursuant to the ERISA requirements in December, 1992. 6. The Plan is established and maintained by the International Association of Entrepreneurs of America Trust (the “Trust”) for the benefit of the employees and dependents of members of the International Association of Entrepreneurs of America (the “IAEA Association”). 7. Among the benefits provided to the employees of CMI are occupational injury and illness benefits manda- ted by the Maine Workers’ Compensation Act of 1992. Such benefits are described in Articles 18 and 19 of the Plan. 8. CMI pays a portion of the Plan’s required pre- mium for coverages for the employees and each respec- tive employee can make a contribution to obtain various optional benefits. CMI pays the entire premium for any work related injury and illness coverages as well as the basic medical coverage. Employees pay for elected, optional benefits. 9. The benefits provided by the Plan are adminis- tered as a coordinated, integrated package. Occupational injury and disability are neither separately insured nor 35a separately administered. All claims for benefits are sub- ject to the approval of the Plan administrator. Claims are submitted to the administrator for review and _ for approval or denial. All benefit portions of the Plan, including Workmen’s Compensation, are fully re-insured in a single re-insurance package. 10. Affiant has had various communications with representatives of the Bureau of Insurance of the State of Maine. CMI has received notification from the Bureau of Insurance that it does not approve of the program for providing benefits to CMI’s employees. It is Affiant’s understanding that the Bureau of Insurance now requires CMI to obtain workers’ compensation and employers’ liability insurance from an insurer authorized te do busi- ness in Maine, and that it cease and desist from seeking to provide Workers’ Compensation benefits by means of the Plan. ll. A copy of the notification received from the Bureau of Insurance is attached hereto as Exhibit A. 12. A copy of the Plan is attached hereto as Exhibit 13. A copy of the Participation Agreement is attached hereto as Exhibit C. 14. CMI presently employs approximately 50 per- sons who are leased to 11 client companies located in Maine. 15. If the Bureau of Insurance is successful in requiring a separately administered Workmen’s Compen- sation and Employers’ Liability program by CMI for the benefit of its employees, CMI will suffer irreparable 36a injury. The cost of obtaining such Workmen’s Compensa- tion insurance is substantially in excess of the cost of similar benefits provided under the IAEA Plan. In addi- tion, this would seriously disrupt the ability of CMI to provide medical and other benefits to its employees. The Plan is an integrated and coordinated package and if CMI is required to provide separate Workmen’s Compensation and Employers’ Liability insurance it will necessarily result in redundant benefits at an-excessive cost to CMI. In addition, the Maine Workmen’s Compensation Act of 1992 provides that a failure to secure insurance as deemed necessary by the Bureau of Insurance constitutes a Class D crime and liability for a civil penalty of up to $10,000 as well as revocation of CMI's authorization to do business in the State of Maine. 16. The Plan meets all of the requirements for occu- pational health and disability benefits as mandated by the Workmen’s Compensation Act of 1992. 17. This Plan is in full force and effect. The Plan now covers more than 3,000 employees throughout the United States and has more than 40 employer subscribers. 18. There is no indication that any employee of CMI located in the State of Maine will suffer any disadvan- tage, harm or prejudice by reason of the continuation of the benefits through and by means of the IAEA Plan. Dated: February 10, 1993 /s/ Richard Spugnardi Richard Spugnardi neers a- Isa VERIFICATION February 10, 1993 STATE OF MAINE Cumberland, ss. On this date, there appeared before me the above named Richard Spugnardi, to me personally known, who, being duly sworn, did state under oath the foregoing Affidavit to be true and correct. /s/ Barbara Ann Willicka Notary Public/ Attorney At Law BARBARA ANN WILLICKA NOTARY PUBLIC, MAINE MY COMMISSION EXPIRES AUGUST 27, 1999 38a EXHIBIT A John R. McKernan, Jr. Brian K. Atchinson Governor Superintendent (Seal) DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION BUREAU OF INSURANCE (207) 582-8707 Telecopier (207) 582-8716 January 29, 1993 Michael Peterson Combined Management, Inc. 15 Lincoln St. Lewiston, Maine 04240 RE: Independent Association of Entrepreneurs of Amer- ica (IAEA) Dear Mr. Peterson: This letter is in confirmation of and to follow-up on our telephone conversation of January 25. As I under- stand it, you acknowledge soliciting a benefit program which is in some way associated with the referenced association. You portrayed the program as an alternative to workers’ compensation for employers as well as pro- viding further health care benefits. You represented that your belief is that the program is federally approved. | want to make sure that you are absolutely clear that our conversation leaves me with serious and substantial concerns regarding your program. Under the Maine Workers’ Compensation Act, Maine’s employers have ey, 39a two methods of securing their obligations; they may pur- chase a workers’ compensation and employers liability insurance policy from an authorized insurer or they may secure authorization to self-insure from the Bureau of Insurance. No other alternatives to secure obligations are permissible. Workers Compensation is a system which is based entirely on laws enacted by the States, and the federal government does not approve or authorize insurers to transact workers’ compensation coverage or employers to self-insure in the States. As it appears that your program contemplates neither of the above methods, I have no option other than to conclude that a substantial issue exists. Furthermore I am told that, based upon your representations, various employers are can- celling valid workers’ compensation coverage otherwise in force. You compared your program to those of Bath Iron Works and The Ceres Corporation. | would again note to you that this is not a valid comparison. Bath Iron Works is an authorized self-insurer. The Ceres Corporation caused policies of workers compensation insurance to be issued with respect to its’ [sic] clients. I have further concerns concerning the health benefit portion of the program you are offering. Your explana- tions give rise to the question as to whether the program is an uninsured multiple employer welfare arrangement (MEWA) which would be deemed to be acting as an unauthorized insurer under Maine law. Upon your referral, I spoke with John Geismar, Esq., of Isaacson & Raymond. He was neither able to satisfy any of my concerns nor to clarify for me the nature of the 40a underlying IAEA program. It is my understanding that you have not received a favorable opinion regarding its’ [sic] legality from him. If you are of a contrary view, | would suggest that your further consultation with him may be in your interest. If any such consultation should lead to Mr. Geismar’s comfort level with the program and your actions being enhanced, I would ask that he contact this office so that any concerns we may have may be addressed. This letter does not constitute a formal Order or action of the Superintendent of Insurance. I want you to be perfectly clear, however, that at this time you should not consider the program you are soliciting to enjoy either the explicit or implicit approval of this office and that any actions you engage in in furtherance of the program are done so at your own risk of adverse action by this office. You will be contacted further by an investigator from this office in the near future. Sincerely, /s/ Thomas M. Record THOMAS M. RECORD, Esq. Staff Attorney cc John Geismar, Esq. 4la EXHIBIT B INTERNATIONAL ASSOCIATION OF ENTREPRENEURS OF AMERICA BENEFIT TRUST EMPLOYEE WELFARE BENEFIT PLAN PLAN DOCUMENT AND SUMMARY PLAN DESCRIPTION PLAN NO. 501 THE INTERNATIONAL ASSOCIATION OF ENTREPRENEURS OF AMERICA BENEFIT TRUST EMPLOYEE WELFARE BENEFIT PLAN TABLE OF CONTENTS ARTICLE PAGE NUMBER eee OEE ox ote Carr cuen svete Oe eewhecaceras GENERAL CONTRIBUTION PROVISIONS ......... 5 SCHEDULE OF MAJOR MEDICAL BENEFITS +0 4 8 9D | Tore arrearage are Aes os SCHEDULE OF MAJOR MEDICAL BENEFITS 2 oe |, Sara nara trae eerie aye ee COVERED MAJOR MEDICAL EXPENSES.......... 11 DESCRIPTION OF MAJOR MEDICAL BENEFITS... 12 MAJOR MEDICAL EXCLUSIONS. .................. 17 PRE-ADMISSION CERTIFICATION (PAC) AND CONTINUED STAY REVIEW (CSR) REQUIRE- I oF id oe ae RRO hassel es eee 2] 5 8 8: SE rer re aero ene ee wien Mee erne s 2] TERMINATION OF BENEFITS.............-.. AY 23 MEDICARE PROVISIONS............ ere ee (cv ae GENERAL PLAN EXCLUSIONS ................-. 23 CLAIOE PROC BUUIREO. 6 cc cece cece as eneseswnes 24 42a COORDINATION OF BENEFITS .....-------+5++++: 29 CLIBROGATION oo. cece cas cccccsensscde mean eee rere 30 RIGHT TO RECOVERY ..... 6500 cescccccsercewetees 30) CONTINUATION OF COVERAGE (COBRA) .....-. 31 ooh pap ev eae eek’ eee ew eee 6 eee one 34 EMPLOYMENT-RELATED ACCIDENTAL DEATH AND DISMEMBERMENT BENEFITS...------ + +>: 37 OPREIONAL DENTAL CARE BENEFITS ...--------- 39 OPTIONAL VISION CARE BENEFITS........------ 48 GENERAL PLAN PROVISIONS......------++5++++" 51 STATEMENT OF ERISA RIGHTS.....----+++0255++> 56 THE INTERNATIONAL ASSOCIATION OF ENTREPRENEURS OF AMERICA BENEFIT TRUST EMPLOYEE WELFARE BENEFIT PLAN [his constitutes the Plan Document and Summary Plan Description for the International Association of Entrepreneurs of America Employee Welfare Benefit Plan (the “Plan”). The Plan was established and is main- tained by the International Association of Entrepreneurs of America Benefit Trust, for the benefit of the employees and dependents of members of the International Asso- ciation of Entrepreneurs of America (the “ Association’), which has elected to provide benefits under the Plan. The Plan conforms to and is governed by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The Plan is not a policy of insurance. Neither the Association, nor the Trust, is an insurance company. The Plan makes available two (2) alternative sched- ules of Major Medical Benefits, designated herein as Schedule Il and Schedule II. Plan Participants may choose to be covered under either schedule. Plan Partici- pants are eligible for benefits under only one of the schedules, however. The Plan makes available to all employees occupa- tional injury and illness benefits as described herein. The Plan further makes dental care benefits and vision benefits available, on an optional basis, to those Participants who have chosen to be covered under Sched- ule IIL. Participants who wish to choose the dental care benefits and vision benefits must make application for such and pay all required contributions to the Plan Administrator. Plan Administrator: International Associatien of Entrepreneurs of America 1520 W. Airport Freeway, Suite 102 Irving, Texas 75062 (214) 259-1944 Employer Identification Number 75-2456927 ARTICLE 1. DEFINITIONS The following terms as ised in this Plan Document shall have the meanings as described herein. 1.1 Accident. An unforeseen and unavoidable event resulting in an injury which 's not due to any fault of the covered person. ——————————————— tti‘séSCS 44a 1.2 Association. The term “Association” means The International Association of Entrepreneurs of America. 1.3 Benefit Year. The term “Benefit Year” means a period of twelve consecutive months beginning each Jan- uary and running through the following December. The terms Benefit Year and Year are used interchangeably in this Plan. 1.4 Claims Adjuster. The term “Claims Adjuster” means any person or entity dest mated, appointed and employed by the Committee or the Plan Administrator to verify eligibility, administer the payment of claims for reimbursement, and who engages in other routine and non-discretionary administrative functions in accordance with the terms of the Trust and this Plan. 1.5 Benefit Review Committee. The term “Benefit Review Committee” or “BRC” means the governing body that oversees the operation of the Plan, according to the Agreement and Declaration of Trust. Its members are appointed by the Association. amended, which provides for continuation coverage for qualified beneficiaries. 1.7 Employer. The term “Employer” means each employer which is a member of the Association and which has, or may hereafter, adopt the Plan with respect to its employees. 1.8 ERISA. The term “ERISA” refers to the Employee Retirement Income Security Act of 1974, as amended. 45a 1.9 Home Health Care Agency. The term “Home Health Care Agency” means a public or private agency or organization that specializes in providing medical care and treatment in the home. Such a provider must meet all of the following conditions: (A) It is primarily engaged in and duly licensed, if such licensing is required, by the appropriate licensing authority to provided [sic] skilled nursing services and other therapeutic services; (B) It has policies established by a professional group associated with the agency or organiza- tion. This professional group must include at least one physician and at least one registered nurse (R.N.) to govern the services provided and it must provide for full-time supervision of such services by a physician or R.N.; (C) It maintains a complete medical record on each individual; and (D) It has a full-time administrator. 1.10 Hospital. The term “Hospital” means a licensed accredited general hospital, which has full diagnostic, surgical and therapeutic facilities under the supervision of a staff of physicians, and regularly provides 24 hour nursing service by registered nurses or licensed practical nurses. Institutions maintained for care of the aged, rest or nursing homes, or other extended care facilities are not considered Hospitals within the meaning of the Plan. 1.11 Illness. The term “Illness” means a bodily disor- der, disease, physical sickness, mental infirmity, or func- tional disorder of covered person, which does not arise, and which is not caused or contributed to by, or as a 46a consequence of, any employment or occupation for com- pensation or profit. A recurrent illness will be considered an illness unless the concurrent illnesses are totally unre- lated. All such disorders existing simultaneously which are due to the same or related causes shall be considered an illness. 1.12 Injury. The term “Injury” means a condition caused by accidental means which results in damage to the covered person’s body from an external force, but which does not arise, and which is not caused or contrib- uted to by, or as a consequence of, any employment or occupation for compensation or profit. 1.13 Medically Necessary. The term “Medically Neces- sary” means health care services, supplies or treatment which, in the judgment of the attending physician, 1s appropriate and consistent with the diagnosis and which, in accordance with generally accepted medical standards, could not have been omitted without adversely affecting the patient’s condition or the quality of medica [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386012_0133%3A1. Public record. Not legal advice.