Opposition Brief — Golden Gate Restaurant Ass'n v. City & County of San Francisco

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Supreme Court, U.S.

rIiLED

AUG 2 4 2009

OFFICE OF THE CLERK

Sn The

Supreme Court of the United States

GOLDEN GATE RESTAURANT ASSOCIATION,

Petitioner,

CITY AND COUNTY OF SAN FRANCISCO,

Respondent,

SAN FRANCISCO CENTRAL LABOR COUNCIL;

SERVICE EMPLOYEES INTERNATIONAL UNION

(“SEIU”), LOCAL 1021; SEIU UNITED HEALTHCARE

WORKERS-WEST; and UNITE HERE! LOCAL 2,

Intervenors/Respondents.

On Petition For Writ Of Certiorari

‘To The United States Court Of Appeals

For The Ninth Circuit

BRIEF FOR RESPONDENT IN OPPOSITION

PAUL R.Q. WOLFSON DENNIS J. HERRERA

WILMER CUTLER PICKERING City Attorney

HALE AND DORR LLP WAYNE SNODGRASS

1875 Pennsylvania VINCE CHHABRIA

Avenue, NW Counsel of Record

Washington, D.C. 20006 CHRISTINE VAN AKEN

Telephone: (202) 663-6390 Deputy City Attorneys

Facsimile: (202) 663-6363 City Hall, Room 234

One Dr. Carlton B.

Goodlett Place

San Francisco, CA 94102

Telephone: (415) 554-4674

Facsimile: (415) 554-4747

Attorneys for Respondent

COCKLE LAW BRIEF PRINTING CO (800) 225-6964

OR CALL COLLECT (402) 342-2831

QUESTION PRESENTED

San Francisco’s universal health care ordinance

contains two interlocking components: a comprehen-

sive public health care program available to all

uninsured residents at sliding scale fees, and a gen-

eral health care spending requirement for medium

and large employers. Employers may comply with the

spending requirement either through their own

health care plans, or by paying into the public

program. If employers choose the public option, their

employees receive a substantial discount on the

health care services available through that program.

The question presented is:

Does ERISA preempt the _ portion of San

Francisco’s universal health care ordinance that

imposes a general health care expenditure require-

ment on medium and large employers, where every

employer may readily comply without adopting an

ERISA plan or altering an existing plan, and where

the option of paying into the public program is a

rational choice for employers rather than a penalty?

TABLE OF CONTENTS

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a 5 ies orc bn ndenn iho dank det nents suindeeciveveesesens

The Health Care Security Ordinance........

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THERE IS NO CONFLICT WITH THE

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THERE IS NO CIRCUIT CONFLICT ON

WHETHER PAYMENTS TO THE CITY

INVOLVE THE CREATION OF AN

PN BRI io ai odsnctsnhihaseancescveceniacueneeans

THE DECISION BELOW IS CONSIS-

TENT WITH THIS COURT’S ERISA

PREEMPTION RULINGS...............ccsceneees

NUMEROUS OTHER FACTORS COUN-

SEL AGAINST A GRANT OF CERTIO-

MUNI Sha cis bcssunvencsiminvin tec nstarinionrnnadeates

A. Petitioner Greatly Exaggerates The

Impact Of The Ninth Circuit’s Ruling...

B. The Case Is A Poor Vehicle For

Consideration Of Most Arguments

Made By Petitioner And Its Allies.......

C. The Result Sought By Petitioner And

Its Allies Would Have A Devastating

Impact On The People Of San

ee yeas

ill

TABLE OF CONTENTS — Continued

Page

D. The Potential Enactment Of Federal

Health Care Legislation Counsels

Against A Grant Of Certiorari............. 39

Ce PE ares v-xxnn'vc nance chic onuanwoavedecentassennen@iatsueial 40

APPENDIX

APPENDIX A_ Joint Response to Applica-

tion for Order Staying Mandate and Vacating

Stay of District Court Judgment..................... App. 1

APPENDIX B-_ Department of Public Health

Regulations Implementing Healthy San

Francisco and Medical Reimbursement Ac-

count Provisions of the San Francisco Health

Clare ROOUFICY OTGINONC® «.05....0<cccrecvesceccconseens App. 43

APPENDIX C_ Excerpts from San Francisco’s

Memorandum in Opposition to GGRA’s

Motion for Summary Judgment in the U.S.

Pe ET ica bccnpencssunkcchaseceusniostcnusenctacesusseas App. 59

APPENDIX D Findings to San Francisco

Health Care Security Ordinance No. 218-06 ..App. 64

TABLE OF AUTHORITIES

FEDERAL CASES

Brundage-Peterson v. Compcare Health Servs.

Ins. Corp., 877 F.2d 509 (7th Cir. 1989) ................. 19

Cal. Div. of Labor Stds. Enforcement v.

Dillingham Constr, N.A., 519 U.S. 316

Oe RE ere seas eR eae a 12, 25, 27, 30, 35

De Buono v. NYSA-ILA Med. & Clinical

Services Fund, 520 U.S. 806 (1997).........0........0000.. 12

District of Columbia v. Greater Wash. Bd. of

Ps Ue Gl Ae Re CRED cnnevesuscccessecccccnecscnerssesceve 28

Egelhoff v. Egelhoff, 532 U.S. 141 (2001)...12, 28, 29, 30

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1

SN Ts Gi inion nicashectancts daesarecestteducitesienisanedeion 24, 25, 27

Golden Gate Rest. Ass’n v. City & County of

San Francisco, 512 F.3d 1112 (9th Cir. 2008) .......... 7

Keystone Chapter, Associated Builders & Con-

tractors v. Foley, 37 F.3d 945 (3d Cir. 1994) ............ 11

Local Union 598 v. J.A. Jones Constr. Co., 846

F.2d 1213 (9th Cir.), summarily aff’d, 488

1 Ng > SRRRSEIRERRIDy pce oie en 30, 31

Massachusetts v. Morash, 490 U.S. 107

2 SARS STORES EA pe Oe aN Sn re 19, 20, 25, 27

Metropolitan Life Ins. Co. v. Massachusetts,

en Ue os a canada ba deedbenendalaantanare 26

N.Y. State Conf. of Blue Cross & Blue Shield

Plans v. Travelers Ins. Co., 514 U.S. 645

SED aie cTcuniade shay Vixbaad sc aspsessispedieddacs vessel einpedians passim

TABLE OF AUTHORITIES —- Continued

Page

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

sf Fee RTE NO OED i? 5 Rn eee aD RN ARCH cen STOO 20

Retail Indus. Leaders Ass’n v. Fielder, 475 F.3d

ne eo agnuun jecupwunie van passim

Retail Indus. Leaders Ass’n v. Suffolk County,

497 F. Supp. 2d 403 (E.D.N.Y. 2007) ........cccceccceee- 32

Shaw v. Delta Air Lines, Inc., 463 U.S. 85

DN Joss ceudsasaaduneinspra¥ebassaneasunaie wand axcadedaemeiurieechtsusea 11

Standard Oil v. Agsalud, 633 F.2d 760 (9th Cir.

1980), summarily aff'd, 454 U.S. 801 (1981)..... 12, 26

WSB Elec., Inc. v. Curry, 88 F.3d 788 (9th Cir.

er rea asa 11

FEDERAL STATUTES

29 U.S.C.

IEEE «cob ova cadeduveuscastaeksdeedednbardtiundeckidesiacueviuenel iia 16

DP OUND coc ccccscexsctcessss Lr ieavataceuseessteudaainrecéuiateae 20

nn oo. 7 ra eack soap anabaWaadesaecwunenemenden 19, 20

i IE so ace ius pede maser aaennapdausaciananl 24

IIE cs. ss 5c cctupccauuba nue dcucesseassandsedwueleinciascienee 21

8 tS Re aOR P NL RITES AIDS TES « 21

OF ER ics Facareraisiscensvassuceiacderssauantedenainetaien 26

TABLE OF AUTHORITIES — Continued

Page

STATE STATUTES & CODES

114.5 Mass. Code

POE. RFR sive visnensstdishicciascstsers isch see

2006 Mass. Legis. Serv. Ch. 58 (West).....................+- 33

2009 Conn. Legis. Serv.

eae, FAG FEO BGS CPM) bc nics ivessvnaceasesesvacaceueemoen 33

N.Y.C. Admin. Code

Dy EI iccison snanounsdscocasesbacssensavesenmveciaaeion aaa 33

Vt. Stat. Avan. £36. 21, S DES CB onc issssccscveisccodavsuses 33

SAN FRANCISCO STATUTES, CODES & ORDINANCES

S.F., Cal. Admin. Code

DE BEG Bin vadcchncdsnnaepssaancveesessscieeea eee 4

DD RG RO veissisnsnve cdccavesceanpeessaesssesesuseeuenseeaneeee 2

DRG EOD oviestesscnncecesieesdassaneatmenseandaneeeeee 1

SAN FRANCISCO REGULATIONS

Department of Public Health

BROS Tn Paks 0kccexeessncosandsevuadanauevesvecteae gies 4

PR TEND vain sansevsnvcenssccevicssnrvserspersleenees ae 4

Office of Labor Standards Enforcement

BRE. BAI E Ponhccsesessisss cascsestschesdaovetpakascanstyeceeeeel 3

Be GPA Basie sv cncssnscdecinescuesenveaseuavacciee ee 4

Beg. C.F) ve vcssvssaiicssesseseecrensstesnssenea rege 5

Vii

TABLE OF AUTHORITIES — Continued

Page

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Tee ee ULL Us secon espescusveceoevedrocscoceses seer ecdaaaae

ARTICLES

Bob Egelko, Obama administration mum on

S.F° health plan, S.F. Chron., July 20, 2009,

Neen eres dy esbesenesdnsrcacrccdcccessocceessccccccees 23

Victoria Craig Bunce et al., Health Insurance

Mandates in the States, Council for Afford-

able Health Insurance (2008 ed.) at 1.................... 26

OTHER REFERENCES

eee Sekt LOM. (IN). ZOO8B).............c0ccccrcccscreeseBe

A.B. 860, 97th Leg., 2005-06 Sess. (Wis. 2005).........32

H.B. 1703, 159th Sess., 2d Year (N.H. 2006)............. 32

H.B. 2517, 59th Leg., 2d Sess. (Wash. 2005).............32

eee eee es OBS. CVA. ZOOG).........cccccccccserececevesccers 32

H.B. 4024, 77th Leg., 2d Sess. (W. Va. 2006).............32

H.R. 1316, 2d Reg. Sess. (Colo. 2006)............. sseusei ane

S. 1618, 107th Reg. Sess. (Fla. 2006).........................32

5.B. 2684, 2006 Reg. Sess. (Miss. 2006) .................... 32

S.B. 87, 94th Leg., Ist Reg. Sess. (Mich. 2007) .........32

STATEMENT

A. The Health Care Security Ordinance

In 2006, San Francisco was in the midst of a

health care crisis. An estimated 82,000 people were

without coverage. See Resp. App. 11. Tens of thousands

more only had coverage under bare-bones “safety-net”

programs, such as Medicaid, that provided limited

care to indigent residents. Jd. Not only did this

threaten the health and well-being of many San

Francisco residents; it put tremendous strain on the

taxpayers, who were forced to bear the cost when the

uninsured used public hospital emergency rooms for

preventable illness or injury. Jd. at 28.

To address this crisis, San Francisco’s Board of

Supervisors enacted the Health Care Security

Ordinance (“HCSO” or “ordinance”). The ordinance

has two interlocking components — a public health

care program, and an employer health care spending

requirement.

The public program is operated by the City’s

Department of Public Health (““DPH”). Its primary

feature is the Health Access Program (“HAP”), which

delivers health care to participants from a network of

public and private providers. Pet. App. 1l3a (S.F.,,

Cal., Admin. Code § 14.2(a) (2007)).'’ The HAP assigns

' The City has changed the name of the program from the

HAP to “Healthy San Francisco.” For purposes of litigation, the

parties have continued to use the name contained in the

ordinance.

a primary care physician, nurse practitioner or

physician assistant to each participant. Among the

specific services provided are preventive care,

inpatient and outpatient hospital services, diagnostic

and laboratory services, radiological services, mental

health services, home health care, and prescription

drug benefits. Pet. App. 114a (Admin. Code § 14.2(f )).

The value of this care is substantial — DPH estimated

that in 2008 it cost the City an average of $261 per

participant per month to provide. Resp. App. 13.

The HAP is funded primarily by City tax dollars

and partly by employer payments. It is available to

uninsured San Francisco residents, regardless of

whether they are employed. Enrollees must pay

quarterly participation fees on a sliding scale, and

must make co-payments for medical visits.

The other component of the ordinance is a

mandate that medium and large businesses make

minimum health expenditures on behalf of employees

who work more than a specified number of hours.

Specifically, in 2009, private employers with 20-99

employees, and nonprofit employers with 50 or more

employees, must spend $1.23 per hour on behalf of

any employee who has been employed for 90 days and

works more than eight hours per week. Private

employers with 100 or more employees must spend

$1.85 per hour for each such employee. The

requirement is capped at 40 hours per week. Pet.

App. llla-12a (Admin. Code § 14.1(b)(8), (10); Pet.

App. 138a (S.F°., Cal., Office of Labor Standards

Enforcement Reg. 5.2(A)(1)).

According to studies compiled by the San

Francisco Controller’s Office, roughly 90% of medium

and large businesses already provided health

insurance to their employees when the ordinance was

enacted. Resp. App. 15. And the average monthly

insurance premium in California at that time was

$379. Id.

To comply with the mandate, employers may

spend money through their own health care plans, or

make payments to the City on behalf of their workers.

Id. They may also fulfill the expenditure obligation

through a combination of methods. For example, an

employer may prefer to keep its full-time employees

in a private ERISA plan while selecting the public

option for its part-time employees.

The program is structured so that, if an employer

chooses the city payment option, it need only write a

check, and all employees on whose behalf payment is

made are eligible to participate in the City’s program.

Contrary to petitioner’s representation, the employer

does not “enroll [its] employees with the City.” Pet.

10. The employer simply pays the City on behalf of

specified workers, and notifies the workers that it has

done so. Pet. App. 144a (OLSE Reg. 7.2(A)(5)). The

rest (enrollment, the type of care _ provided,

copayments) is purely between the City and the

individual.”

Employees who qualify for HAP membership are,

if their employers choose to satisfy the spending

requirement by paying the City, entitled to enroll in

the program at a 75% discount on the quarterly

participation fees they would otherwise be required to

pay. Resp. App. 53-54 (DPH Reg. 7(f)). As discussed

more fully below, the result is that, when an employer

pays the City, the employer knows its workers will be

eligible for comprehensive care at a far lower cost

than what it would have to pay for private insurance.

The City also adopted two regulatory provisions —

unmentioned by petitioner — that facilitate com-

pliance for large, multijurisdictional employers. The

first may be utilized by employers that provide

traditional health insurance to their workers, such as

Kaiser or Blue Shield. It allows these employers to

establish compliance without keeping track of the

health care dollars spent on each individual em-

ployee, and without making any separate calculations

for their San Francisco employees. Pet. App. 14la

(OLSE Reg. 6.2(B)(1)). An employer that purchases

* Individuals who work in San Francisco but live elsewhere

do not qualify for HAP participation, but the City uses employer

payments to provide medical reimbursement accounts for such

individuals. They may draw from their accounts to obtain

reimbursement for medical expenses, including payments of

health insurance premiums. Pet. App. 110a, 114a-15a (Admin.

Code §§ 14.1(b)(7), 14.2(g)); Resp. App. 55 (DPH Reg. 7(g)G)).

insurance for its employees in San Francisco and in

other parts of the country need only divide its total

payments to the insurance company for all those

employees by the total number of employees.

Assuming the amount per employee is greater than

the spending obligation (and private health insurance

is far more expensive than the spending obligation),

this establishes compliance.

The second’ regulatory’ provision = allows

employers that operate “self-insured” plans (through

which the employer bears the risk of employee health

care costs on its own rather than paying an insurance

company a set rate to bear that risk) to establish

compliance in similar fashion. It provides that such

employers comply “if the preceding year’s average

expenditure rate per employee meets or exceeds the

applicable expenditure rate ... for that employer.”

Pet. App. 141a (OLSE Reg. 6.2(B)(2)). Accordingly, an

employer with a self-insured plan may establish

compliance simply by showing that it has spent a

certain amount per employee on a plan-wide basis.

The medium and large employers subject to the

ordinance must also keep records. These records are

generally already kept in the normal course of

business, and employers are not “required to

maintain such records in any particular form.” Pet.

App. 116a. Once per year, employers must file a one-

page report with the City, identifying the total

amount paid for health care and the manner in which

the money was spent. Pet. App. 144a (OLSE Reg. 7.3).

Since the HCSO became fully operational in

January 2008, San Francisco has taken great strides

towards the achievement of universal health care. In

less than 1% years, the number of residents without

health coverage dropped from 82,000 to fewer than

23,000, and that number continues to go down. Resp.

App. 25. Following enactment of the ordinance,

emergency room visits at San Francisco General

Hospital dropped almost seventy percent in one year

— from 29,976 to 8,944. Id. at 28.

B. Procedural History

Petitioner filed suit in the Northern District of

California, alleging that the Employee Retirement

Income Security Act of 1974 (“ERISA”) preempts the

health care spending requirement. The district court

granted summary judgment for petitioner, reasoning

that the ordinance was “designed to act immediately

upon, and cannot operate successfully without the

existence of [ERISA] plans.” Pet. App. 93a. At the

same time, however, the court rejected petitioner’s

contention that monetary payments by employers to

the City themselves create a “de facto ERISA plan.”

Pet. App. 94a.

The Ninth Circuit granted the City’s application

for a stay of the district court’s ruling. The court ruled

that, given the availability of a non-ERISA com-

pliance option for every type of employer (namely,

payment to the City), the district court was wrong to

conclude that the ordinance acts immediately upon

ERISA plans or interferes with plan uniformity.

Golden Gate Rest. Ass’n v. City & County of San

Francisco, 512 F.3d 1112, 1119-23 (9th Cir. 2008). The

court noted that legal requirements like San

Francisco’s — that “only relate[] to ERISA plans at

the election of an employer” — are regularly upheld

against ERISA preemption challenges. Jd. at 1122

(quotations omitted). The court also concluded that

the balance of hardships tipped in favor of the City,

and that the public interest weighed in favor of a stay

pending appeal. /d. Petitioner filed an application to

this Court to lift the Ninth Circuit’s stay order, which

was denied by the Circuit Justice.

After the parties briefed and argued the case on

the merits, the Ninth Circuit reversed the district

court. This time, petitioner and its allies focused on

the argument that an employer actually creates an

ERISA plan when it writes a check to the City,

thereby leaving employers with no non-ERISA means

for complying with San Francisco’s requirement. The

Ninth Circuit rejected this argument, determining

that the city payment option lacks most indicia of an

ERISA plan. The court observed that the employer’s

obligations under the city payment option “do not run

the risk of mismanagement of funds or other abuse,”

which was the original concern that led to ERISA’s

passage. Pet. App. 20a. It observed that the HAP is a

government entitlement program, funded primarily

by taxpayer dollars, that is available to residents

regardless of employment status. Pet. App. 24a-25a.

And the court described the key differences between

the city payment option and an employer’s purchase

of health insurance from a third party, which coes

involve the creation of an ERISA plan. /d. at 26a.

Petitioner also persisted in the argument that,

even if payments to the City do not create an ERISA

plan, the spending requirement was preempted

because it had an improper “connection with” ERISA

plans. The court rejected this argument, explaining

that the existence of the city payment option meant

no employer was required to adopt an ERISA plan, or

to provide specific benefits through an existing

ERISA plan. Pet. App. 29a. The court also rejected

the argument that the HCSO has a= forbidden

“reference” to ERISA plans, observing that “[w]Jhere a

law is fully functional even in the absence of a single

ERISA plan ... as it is in this case, it does not make

an impermissible reference to ERISA plans” Pet.

App. 36a.

Petitioner sought en banc rehearing, which was

denied. Petitioner then filed an application to this

Court for a stay pending a petition for certiorari,

which was also denied.

ARGUMENT

The Court of Appeals correctly upheld San

Francisco’s program, because ERISA does _ not

preempt local requirements that give employers a

reasonable option for complying that does not involve

the adoption or alteration of an ERISA plan. The

option to pay the City is a reasonable choice for

employers, and it does not create an ERISA plan.

The city payment option is reasonable, indeed

attractive, because the employers’ payments make

their workers eligible for comprehensive health

services, funded primarily by City tax dollars, for far

less than the employers would have to pay for

comparable benefits on the private market. As such,

this case is clearly distinguishable from Retail Indus.

Leaders Ass’n v. Fielder, 475 F.3d 180 (4th Cir. 2007),

which struck down a Maryland law that imposed a

bare penalty on Wal-Mart for failing to provide an

adequate ERISA plan for its employees.

Nor does the employer create an ERISA plan by

exercising the city payment option. This arrangement

neither meets the statutory definition of such a plan

nor implicates ERISA’s central concern — ensuring

that benefits promises by private employers to their

employees are kept. As the Ninth Circuit explained in

detail, writing a check to the City on behalf of

specified employees is not cemotely analogous to

third-party health insurance contracts, which are

ERISA plans.

At the end of the day, petitioner’s argument rests

on a faulty premise: that ERISA immunizes

employers from being required to spend money in

areas, like health care, mentioned in the ERISA

statute. As this Court has already explained, ERISA

preemption protects only plan uniformity for

employers, not general expenditure uniformity.

Because the ordinance in no way interferes with plan

uniformity, the Ninth Circuit’s ruling that it is not

preempted is consistent with this Court’s ERISA

preemption jurisprudence.

This case is the wrong vehicle, at the wrong time,

to consider an employer’s claim that ERISA preempts

general health care spending requirements. Peti-

tioner presented no evidence that the city payment

option is not a rational choice for employers. Nor did

it present evidence that the ordinance, even if

replicated elsewhere, would impose anything but a

de minimis administrative obligation on employers.

Indeed, the only evidence in the record on these

issues contradicts petitioner’s claims.

Nor is there any immediate threat that

numerous similar laws will sprout up throughout the

country, particularly with Congress considering

federal health care reform legislation. And the serious

possibility that federal legislation will moot the

ERISA preemption issue in this case weighs heavily

against the Court granting certiorari now. Finally,

if federal legislation is not enacted, and if other

jurisdictions were then to enact laws similar to San

Francisco’s in the future, this Court would have the

opportunity to address the arguments presented by

petitioner and its allies at that time, and on a better

record.

I. THERE IS NO CONFLICT WITH THE

FOURTH CIRCOUIT.

There is widespread agreement that ERISA docs

not preempt a local requirement if employers have a

reasonable non-ERISA means to comply with that

requirement. See, e.g., Keystone Chapter, Associated

Builders & Contractors v. Foley, 37 F.3d 945, 960 (3d

Cir. 1994) (“LwJhere a legal requirement may be easily

satisfied through means unconnected to ERISA plans,

and only relates to ERISA plans at the election of an

employer, it affects employee benefit plans in too

tenuous, remote, or peripheral a manner to warrant a

finding that the law ‘relates to’ the plan”) (internal

quotations, citations and brackets omitted). See also

Fielder, 475 F.3d at 193 (state laws that “do not bind

the choices of employers or their ERISA plans [are]

generally not preempted”); WSB Elec., Inc. v. Curry,

88 EF3d 788, 795 (9th Cir. 1996) (“nothing in

California’s scheme requires the establishment of a

separate benefit plan in order to comply with the

state law. California’s statute does not require public

works contractors to modify their benefits plans at

all”).

The above rule is grounded firmly in this Court’s

precedents, which make clear that while ERISA

preempts laws th.it dictate employer choices about

employee welfare benefit plans, it does not preempt

generally applicable laws that merely influence

choices with respect to ERISA plans. Thus, ERISA

prevents states from dictating which benefits must be

contained in plans. See, e.g., Shaw v. Delta Air Lines,

Inc., 463 U.S. 85, 96-97 (1983) (striking down law

that required plans to include pregnancy benefits). It

prevents states from forcing employers to adopt

ERISA plans in the first place. See, e.g., Standard Oil

v. Agsalud, 633 F.2d 760, 766 (9th Cir. 1980),

summarily aff’d, 454 U.S. 801 (1981) (striking down

Hawaii law that required employers to adopt ERISA

plans with specified benefits). And it prevents states

from dictating who must benefit from ERISA plans.

Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001) (state

law preempted because it “binds ERISA plan

administrators to a particular choice of rules for

determining beneficiary status”).

In contrast, ERISA does not preempt health care

surcharges that exert a strong influence on decisions

about ERISA plans. See N.Y. State Conf. of Blue Cross

& Blue Shield Plans v. Travelers Ins. Co., 514 U.S.

645, 659-60 (1995). It does not preempt imposition of

a generally applicable tax upon facilities owned by

ERISA plans. De Buono v. NYSA-ILA Med. & Clinical

Services Fund, 520 U.S. 806, 816 & n.16 (1997). And

it does not preempt state laws that give powerful

incentive to ERISA apprenticeship programs to seek

regulatory approval from the state, and to make the

changes necessary to obtain such approval, as long as

the laws do not force them to do so. Cal. Div. of Labor

Stds. Enforcement v. Dillingham Constr, N.A., 519

U.S. 316, 332-33 (1997).

Obviously, if employers may readily comply with

a requirement without adopting or altering ERISA

plans, such a requirement does not dictate choices

with respect to plans. As set forth below, the Fourth

and Ninth Circuits merely applied this well-

established principle in the specific context of health

care spending, and reached consistent results.

Fielder involved a preemption challenge _ to

Maryland’s Fair Share Act, which provided that any

Maryland for-profit employer with more than 10,000

employees that does not spend up to 8% of its payroll

on health insurance (1.e., Wal-Mart) must make up

the deficiency by paying it to the Maryland Secretary

of Labor. 175 F.3d at 184. Wal-Mart’s employees

would not receive any benefits, services, or cost

savings in return for such payments. /d. at 193.

The Fourth Circuit held that this law effectively

required Wal-Mart to alter its ERISA plan because no

rational employer would choose to pay the money to

the State when the employer could instead increase

health care spending in a manner that benefited its

employees:

An employer would gain from increasing the

compensation it offers employees through

improved retention and _ performance of

present employees and ability to attract

more and better new employees. In contrast,

an employer would gain nothing in

consideration of paying a greater sum of

money to the State. Indeed, it might suffer

from lower employee morale and increased

public condemnation.

In effect, the only rational choice

employers have under the Fair Share Act is

to structure their ERISA healthcare benefit

plans so as to meet the minimum spending

threshold. The Act thus falls squarely under

Shaw’s prohibition of state mandates on how

employers structure their ERISA plans.

Id. at 193-94 (emphasis added).

As the Ninth Circuit explained, San Francisco’s

ordinance, “[iJn stark contrast to the Maryland law,

. offers employers a meaningful alternative that

allows them to preserve the existing structure of their

ERISA plans.” Pet. App. 38a-39a. Workers whose

employers comply through payments to the City,

rather than by establishing or altering ERISA plans,

receive “tangible benefits” in return. Jd.

Highlighting the reasonableness of the city

payment option, almost nine hundred medium and

large businesses selected it in the first 1% years of its

existence. Resp. App. 33. That so many employers

have selected this option is not surprising, since it

allows employers to avoid the inconvenience of

setting up their own ERISA plans, while knowing

that their workers will receive comprehensive health

coverage from the City at a price far lower than it

would cost the employers in the private market.”

In short, the option to pay the government in

Fielder was a penalty that no rational employer

would choose. The city payment option here is not a

penalty, because it gives employers a meaningful,

non-E RISA compliance alternative that allows them

to maintain plan uniformity. San _ Francisco’s

ordinance, in other words, is utterly indifferent to

whether an employer has an ERISA plan. Thus,

under the Fourth Circuit’s analysis, an ordinance like

San Francisco’s would survive a_ preemption

challenge. While the Fourth Circuit concluded that

Maryland’s law “directly regulatl[ed| the structuring

or administration of an ERISA plan,” 475 F.3d at 192,

it could not have made the same statement about the

HCSO. The two decisions operate in harmony, and

they are both consistent with established ERISA

precedent from other contexts.

“The City presented unrebutted evidence in the district

court that the health benefits received by employees from the

City are extraordinarily generous in relation to the amount paid

by the employer, and in comparison to the amount the employer

would be required to pay on the private market. The average

insurance premium in California was $379 per month when the

ordinance took effect. In contrast, for a medium-sized employer

with an employee who works 20 hours per week, the employer

could satisfy its spending obligation in 2008 by paying the City $

93.60 per month, even though it would cost the City much more

than that to provide the care. In short, the city payment option

gives employees a HAP membership that provides com-

prehensive health services at pennies on the dollar for the

employer.

Notwithstanding this, petitioner claims a circuit

conflict based on the Fourth Circuit’s discussion of an

issue that was not presented to, or considered by, the

Ninth Circuit. Specifically, after holding that the

option of paying the government was nothing more

than a penalty that forced Wal-Mart to alter its ERISA

plan, the Fourth Circuit turned to Maryland’s

alternative argument that Wal-Mart had other, private

non-ERISA alternatives for complying. According to

Maryland, Wal-Mart could satisfy the spending

requirement through the creation of on-site medical

clinics or Health Savings Accounts. The court rejected

this argument on the ground that the purported

alternatives were unrealistic. 475 F.3d at 196. And

then the court observed that even if Wal-Mart could

avail itself of these options, they would necessarily

also produce a change in the company’s ERISA plan:

If Wal-Mart were to attempt to utilize non-

ERISA health spending options to satisfy the

Fair Share Act, it would need to coordinate

those spending efforts with its existing

ERISA plans. For example, an individual

would be eligible to establish a Health

Savings Account only if he is enrolled in a

high deductible [ERISA] health plan. See 29

U.S.C. § 223(c)(1). In order for Wal-Mart to

make widespread contributions to Health

Savings Accounts, it would have to alter its

package of ERISA health insurance plans to

encourage its employees to enroll in one of its

high deductible health plans. From the

employer’s perspective, the categories of

ERISA and non-ERISA healthcare spending

would not be isolated, unrelated costs.

Decisions regarding one would affect the

other and thereby violate ERISA’s pre-

emption provision.

Id. at 196-97. This is not, as petitioner asserts, an

alternative holding by the Fourth Circuit that any

spending mandate in the health care area must be

preempted — i.e., that every conceivable non-ERISA

compliance option would become entangled with

ERISA plans and necessarily interfere with ERISA

plan uniformity. It is a rejection of the specific

arguments presented by Maryland.’

Finally, the implications of a rule preventing

local governments from imposing any general health

care spending requirement on employers show that

the Fourth Circuit could not have intended to adopt

such a rule. San Francisco’s ordinance goes out of its

way to avoid giving employers an incentive to adopt

or alter ERISA plans. If, instead, San Francisco

imposed a payroll tax on employers to fund a

comprehensive public health care program without

regard to whether employers already have health

care plans (that is, without giving employers credit

for the health care spending they already make), this

* Petitioner omits the sentences from the above passage

which show that the Fourth Circuit was addressing Maryland’s

specific argument about the non-ERISA compliance options it

offered. As Judge William Fletcher pointed out in his opinion

concurring in the denial of rehearing en banc, the eight

dissenting judges from the Ninth Circuit did the same thing.

Pet. App. 45a-46a.

would create a significant incentive for employers to

drop their ERISA plans, to avoid spending substantial

sums on health coverage that their employees could

instead obtain for free. Nobody could reasonably argue

that such a payroll tax would be preempted. It would

be ironic, then, if ERISA were held to preempt a law

that imposed far fewer incentives with regard to plans.

Given the backwards legal regime that would result

from the broad rule that petitioner ascribes to Felder,

there is no basis for concluding that the Fourth Circuit

intended to adopt it.”

Il. THERE {IS NO CIRCUIT CONFLICT ON

WHETHER PAYMENTS TO THE CITY

INVOLVE THE CREATION OF AN ERISA

PLAN.

Petitioner and some amici also argue that the

Ninth Circuit created a conflict by rejecting the

argument that when an employer opts to comply with

the HCSO by writing a check to the City, this itself

° As discussed by the Brief of Amicus Curiae Nibbi Bros.

Associates, Inc., courts have reached the same conclusion about

the many prevailing wage laws that allow employers to comply

in part by providing ERISA benefits to their employees. If

ERISA preempted prevailing wage laws that gave employers

credit for ERISA spending, while leaving undisturbed prevailing

wage laws that refused to give credit for ERISA spending, this

would incent employers to drop ERISA plans, which is precisely

the opposite of what the preemption provision intended.

Petitioners seek a result that would disturb the _ settled

understanding among the circuits that prevailing wage laws

with benefits components are not preempted.

involves the creation of an ERISA plan. But no other

appellate decision even considers whether a public

payment option is an ERISA plan. Accordingly, to

create the illusion of a conflict, petitioner and its

allies rely on cases which hold that an employer

creates an ERISA plan when it contracts with a

health insurance company to provide health care to

its workers. See, e.g., Brundage-Peterson v. Compcare

Health Servs. Ins. Corp., 877 F.2d 509, 511 (7th Cir.

1989). They attempt to analogize these insurance

contracts to the city payment option, and contend a

circuit conflict exists because the Ninth Circuit

rejected the analogy. That is not a real conflict. And

the Ninth Circuit was right to reject the analogy,

which is inapt, is contrary to the purposes of ERISA,

and would, if adopted, create serious problems in

ERISA preemption law.

ERISA defines an “employee welfare benefit

plan” as “any plan, fund, or program which was

heretofore or is hereafter established or maintained

by an employer .. . for the purpose of providing for its

participants or their beneficiaries, through the

purchase of insurance or otherwise,” specified

benefits. 29 U.S.C. § 1002(1). The specified benefits

include, among others, vacation, disability, unemploy-

ment, severance, and, of course, medical benefits. Id.

In Massachusetts v. Morash, 490 U.S. 107 (1989),

this Court explained that because the reach of the

above definition of an employee welfare benefit plan

is — like the preemption provision — potentially

limitless, the determination whether a particular

arrangement is the type of “plan” that falls within

ERISA’s ambit must be made with reference to “‘the

provisions of the whole law, and to its object and

policy.” Jd. at 115 (quoting Pilot Life Ins. Co. v.

Dedeaux, 481 U.S. 41, 51 (1987)). Applying this

principle, the Court in Morash determined that

vacation benefits paid out of general assets did not

present the types of risks that Congress intended to

address when it enacted ERISA and, therefore, that it

would not read the statute to encompass such an

employer policy to pay vacation benefits. Jd.

Here, an examination of ERISA’s “object and

policy” demonstrates why the Ninth Circuit was right

to reject petitioner’s analogy to an insurance contract.

While petitioner and its amici paint ERISA as a law

whose central purpose is to preserve some undefined

“uniformity” for employers, in actuality the statute’s

“primary concern” is “with the mismanagement of

funds accumulated to finance employee benefits and

the failure to pay employees benefits ... ” Morash,

490 U.S. at 115 Gnternal citations omitted). See also

29 U.S.C. § 1001(b). In other words, the primary

purpose of ERISA is to ensure that private employers’

benefits promises to their employees are kept.

These concerns are clearly implicated by an

employer’s promise to provide health insurance to its

employees, because under this arrangement the

employer remains’ ultimately responsible for

“providing” the benefits. 29 U.S.C. § 1002(1). The

employer, when negotiating the health insurance

contract, gives shape to the plan by deciding, for

example, which treatments will be covered or how

claims will be processed. And if the insurance

company does not fulfill its contractual obligation to

deliver the contemplated benefits to the employees,

the employer, as an ERISA fiduciary, can sue the

insurer to make sure that the employer’s promise to

the employees 1s kept. See 29 U.S.C. §§ 1132(a)(2), (3).

As the Ninth Circuit explained, with the city

payment option, “(t]he employer never negotiates or

signs a contract with the City, and the employer has

no control over the City’s coverage decisions. When

the City administers the HAP, it does not act as the

employer’s agent entrusted to fulfill the benefits

promises the employer made to its employees.” Pet.

App. 26a. Nor does the employer enroll its employees

with the HAP. The mere act of writing a check to the

City on behalf of specified employees, and informing

those employees that the check has been written, is

not remotely comparable to a contractual relationship

between an employer and a health insurance

company.

And because the Ninth Circuit explained why

third party insurance arrangements are ERISA plans

even while the city payment option is not, Pet. App.

25a-26a, there is no basis for petitioner’s assertion

that the decision will cause courts to begin ruling

that third-party contracts are not ERISA plans. See

Pet. 36 (“employers will be able to avoid ERISA’s

fiduciary duty rules and its civil and criminal

enforcement provisions merely by hiring a third-

party to perform the bundle of plan-design and

administrative-and-fiduciary tasks inherent in any

plan”). If a litigant had the audacity to make such an

argument in a future casc, the first authority a court

would cite to reject it is the Ninth Circuit’s decision

below.

In fact, had the Ninth Circuit concluded that an

employer creates an ERISA plan when it calculates

its health care spending obligation and makes

payments to the government, this would have created

major problems in ERISA preemption law. For

example, imagine that a local government, instead of

adopting a program like San Francisco’s, simply

imposed a payroll tax to be used to fund a public

health program for all persons who work in the

jurisdiction. Nobody could reasonably contend that an

employer creates an ERISA plan when it pays this

payroll tax. Yet petitioner here has advocated a

definition of “ERISA plan” that would include this

scenario — the employer creates a plan simply by

determining its spending obligation and satisfying

that obligation by making a payment to the govern-

ment, which the government then uses to fund a

public health program that includes the employer’s

workers.

Another consequence of deeming the _ city

payment option a “plan” would be that federal

obligations (and liabilities) could be imposed on

employers with respect to matters over which they

have no control, such as the obligations to act as a

fiduciary with respect to benefits provided to HAP

participants, and to create and operate a system for

processing claims by HAP participants. Equally

problematic, San Francisco public health officials who

operate this entitlement program could be subjected

to ERISA’s regulatory regime simply because some

employers chose to satisfy their health care spending

obligations by writing a check to the City. These

consequences underscore the serious flaws in the

argument that the city payment option creates an

ERISA plan.

Petitioner makes much of an amicus brief filed

below by the former Secretary of Labor agreeing that

the city payment option creates an ERISA plan. More

noteworthy, however, is that none of the 28 judges

invoived in the proceedings below adopted this novel

argument — not the district judge who ruled against

the City, and not the eight circuit judges who

dissented from denial of rehearing en banc. Moreover,

the current Department of Labor has stated it is

“considering issues in the case,” Bob Egelko, Obama

administration mum on S.F. health plan, S.¥. Chron.,

July 20, 2009, at Cl, so it would be wrong to assume

that the former Secretary’s brief is reflective of the

current Administration’s views.

Once it is understood that the city payment

option does not create an ERISA plan, the language

permeating the petition to the effect that the

ordinance intrudes on “plan regulation” is revealed to

be widely off the mark. See, e.g., Pet. 28 (arguing

decision below allows local governments to “regulate

ERISA plans themselves by first requiring their

establishment and then dictating what benefits the

plan provides ... ”). Such assertions depend on the

assumption that the city payment option creates a

plan, and the petition unravels when that assumption

is removed.

IH. THE DECISION BELOW IS CONSISTENT

WITH THIS COURT’S ERISA PREEMPTION

RULINGS.

At the end of the day, petitioner’s preemption

argument is based on the assumption that employers

are entitled to expenditure uniformity in areas

mentioned by the ERISA statute. That assumption is

wrong — ERISA does not insulate businesses from

being required to spend money in these areas. ERISA

protects plan uniformity for employers, but “cost

uniformity was almost certainly not an object of pre-

emption ...” Travelers, 514 U.S. at 662.

This is illustrated by Fort Halifax Packing Co. v.

Coyne, 482 U.S. 1 (1987), which makes clear that

states and localities may regulate expenditures on

benefits mentioned in ERISA (in that case severance

pay), so long as they do not require adoption or

alteration of ERISA pians:

Appelilant’s basic argument is that any state

law pertaining to a type of employee benefit

listed in ERISA necessarily regulates an

employee benefit plan, and therefore must

be pre-empted. Because severance benefits

are included in ERISA, see 29 U.S.C.

§ 1002(1)(B), appellant argues that ERISA

pre-empts the Maine statute. In _ effect,

appellant argues that ERISA forecloses

virtually all state legislation regarding

employee benefits. This contention fails,

however, in light of the plain language of

ERISA’s pre-emption provision, the under-

lying purpose of that provision, and the

overall objectives of ERISA itself. ... ERISA’s

pre-emption provision does not refer to state

laws relating to “employee benefits,” but to

state laws relating to “employee benefit

plans”.... The words “benefit” and “plan” are

used separately throughout ERISA, and

nowhere in the statute are they treated as the

equivalent of one another. Given the basic

difference between a “benefit” and a “plan,”

Congress’ choice of language is significant in

its pre-emption of only the latter.

482 U.S. at 7-8 (emphasis in original).

Two other cases in which the Court upheld local

regulation of benefits mentioned in ERISA were

Dillingham and Morash. In Dillingham, the state’s

regulation of apprenticeship programs _ created

powerful incentives for those programs to alter their

conduct, and may have affected employer costs, but

that was not sufficient to establish preemption. 519

U.S. at 332. In Morash, the state’s requirement that

employers reimburse employees for unused vacation

time obviously affected employers’ costs, but there was

no preemption in that case because the requirement

did not regulate ERISA plans. 490 U.S. at 114-15.

In the area of health care itself, ERISA

contemplates that employers will be subject to

disparate costs across jurisdictions. If the goal of

ERISA preemption had been health care expenditure

uniformity, Congress would not have included the

savings clause, which exempts from preemption state

laws regulating insurance. 29 U.S.C. § 1144(b)(2)A).

The savings clause has resulted in the enactment of

more than 1,961 mandates on health insurance, and

no two states impose identical sets of coverage man-

dates. Victoria Craig Bunce et al., Health Insurance

Mandates in the States, Council for Affordable Health

Insurance (2008 ed.) at 1. Accordingly, the cost of

employer-provided health insurance varies dramati-

cally from state to state. Jd. at 3-5. “Such disuni-

formities ... are the inevitable result of the congres-

sional decision to ‘save’ local insurance regulation.”

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

724, 747 (1985). And that is why “cost uniformity was

almost certainly not an object of pre-emption, just as

laws with only an indirect economic effect on the

relative costs of various health insurance packages in

a given State are a far cry from those ‘conflicting

directives’ from which Congress meant to insulate

ERISA vlans.” Travelers, 514 U.S. at 662.°

* Petitioner asserts that the preemption provision was

meant to preclude bare health care spending requirements at

the state or local level. Pet. 4-5 & n.13. But it does not point to a

single word in ERISA’s voluminous legislative history to support

this conclusion. And although one former Congressional staffer

has claimed that the provision was designed in part to preempt

the Hawaii health care statute in existence at the time, id., that

statute was not a general expenditure requirement; it required

that. employers actually adopt. employee welfare benefit plans.

See Agsalud, 633 F.2d at 766.

Petitioner also makes much of the possibility that

a local requirement in one jurisdiction might affect an

employer’s decisions about benefit expenditures in

other jurisdictions. But the local severance and

vacation pay requirements in Fort Halifax and

Morash, the hospital surcharges upheld in Travelers,

and the apprentice regulations upheld in Dillingham

may all provide employers with some incentive to

decrease spending on benefits in other jurisdictions.

These cases demonstrate that ERISA’s preemption

provision was never intended to provide employers

with umbrella protection against laws that might

simply change the mix of economic incentives to

increase or reduce benefit expenditures.

Petitioner and its allies disregard all of this, and

instead rely upon an analytical sleight-of-hand that

blurs the distinction between “expenditures” or

“benefits” on the one hand, and “plans” on the other.

For example, one brief asserts that “[t]he need to

monitor expenditures in multiple jurisdictions is

squarely at odds with ERISA’s purpose of establishing

a uniform system of plan regulation.” Similarly,

petitioner quotes Travelers as saying that the purpose

of ERISA preemption is to “‘avoid a multiplicity of

regulation in order to permit the nationally uniform

’ Brief for the Retail Industry Leaders Association and the

Chamber of Commerce of the United States of America as Amici

Curiae in Support of Petitioner (“RILA”) at 14 (emphasis added).

administration’ of employee benefits.” Pet. 22

(quoting Travelers, 514 U.S. at 657). What Travelers

actually says is that the purpose of ERISA

preemption is to “avoid a multiplicity of regulation in

order to permit the nationally uniform administration

of employee benefit plans.” Travelers, 514 U.S. at 657

(emphasis added).

When the distinction between expenditures and

plans is brought back into focus, it becomes clear that

there is no conflict with the two decisions primarily

relied upon by petitioner and its allies: Egelhoff and

District of Columbia v. Greater Wash. Bd. of Trade,

506 U.S. 125 (1992).

The Washington statute in Egelhoff provided

that, in the event a couple divorces, and then one

member of the couple dies after the divorce, the

survivor is not entitled to the benefits of the dead

spouse’s ERISA plan, even if the plan does not include

such a limitation on the rights of the divorced

survivor. 532 U.S. at 147. Washington argued the

statute was not preempted because it exempted

ERISA plans which explicitly provided that divorced

spouses should receive plan benefits. Thus,

Washington argued, there were two ways plan

administrators could comply with the statute: (1) by

administering their plans differently in Washington;

or (2) by changing the terms of their plans to include

specified language. But the Court held this did not

save the statute from preemption, because both

compliance options required plan administrators to

change the way they wrote or administered their

plans: “Plan administrators must either [disregard

the language of their plans and] follow Washington’s

beneficiary designation scheme or alter the terms of

their plan so as to indicate that they will not follow

it.” Id. at 150.

And it is in this context that the Egelhoff Court

expressed concern with the need to “maintain a

familiarity with the laws of all 50 States.” 532 U.S. at

151. If a law forces a plan administrator to change its

ERISA plan in a given state, that goes to the core of

what ERISA’s preemption provision guards against —

the possibility of plan administrators being forced to

“maintain a familiarity with the laws of all 50 States

so that they can update their plans as necessary to

satisfy the opt-out requirements of other, similar

statutes.” Jd. at 151 (emphasis added). Under the

HCSO, employers must track their health care

expenditures, just as they must already keep track of

wages and other payroll matters. But they are not

forced to change anything in their plans to comply

with the ordinance.”

" Similarly, the statement in Egelhoff that the “tailoring of

plans and employer conduct to the peculiarities of the law of

each jurisdiction is exactly the burden ERISA seeks to

eliminate” does not have the broad meaning petitioner gives it.

532 U.S. at 151 (citation and quotations omitted, emphasis

added). ERISA does not protect employers from tailoring their

conduct to local requirements with respect to everything; it

protects them from tailoring their conduct with respect to plans.

Nor does the decision below conflict with Greater

Washington. Petitioner argues that both the HCSO

and the ordinance struck down in Greater Washington

make unlawful “reference to” ERISA plans because

they involve measuring compliance with reference to

an existing ERISA plan. However, as the Court

explained in Dillingham, a local law makes an

unlawful “reference to” an ERISA plan if the law “acts

immediately and exclusively upon ERISA plans,” or if

the “existence of ERISA plans is essential to the law’s

operation.” Dillingham, 519 U.S. at 325. That was

true of the ordinance in Greater Washington because

an employer’s obligation was triggered directly by the

benefits it offered through an ERISA plan — whatever

ERISA benefits the employer offered, the employer

had to provide those same benefits to injured

employees on workers’ compensation. 506 U.S. at 126-

27. If the employer had no ERISA plan, there was no

obligation. Here, the HCSO operates on employers

“irrespective of the existence of an ERISA plan.”

Dillingham, 519 U.S. at 328 (quotations and ellipses

omitted).

Finally, some amici attempt to conjure up a

conflict with Supreme Court precedent by selectively

quoting the language of a Ninth Circuit decision that

this Court summarily affirmed: Local Union 598 uv.

J.A. Jones Constr. Co., 846 F.2d 1213 (9th Cir.),

summarily aff’d, 488 U.S. 881 (1988). See RILA Br.

at 8. They argue that the HCSO, by generally

mandating health care expenditures, is imposing a

“contribution” mandate of the kind struck down in

J.A. Jones. RILA Br. at 8. But again, this blurs the

distinction between general expenditures and plans.

The full quotation from /J.A. Jones _ further

underscores this distinction:

(The statute] mandates a particular level of

contributions by employers to employee

benefit plans.... A statute which mandates

employer contributions to benefit plans and

which effectively dictates the level at which

those required contributions must be made

has a most direct connection with an

employee benefit pian.

846 F.2d at 1219 (emphasis added).

In sum, no Supreme Court decision invalidates a

bare expenditure requirement that provides em-

ployers with a reasonable, non-EF RISA compliance

option. ‘To the contrary, the Ninth Circuit’s ruling is

fully supported by this Court’s precedent.

IV. NUMEROUS OTHER FACTORS COUNSEL

AGAINST A GRANT OF CERTIORARI.

A. Petitioner Greatly Exaggerates The

Impact Of The Ninth Circuit’s Ruling.

Petitioner and its amici contend the Ninth

Circuit’s ruling will cause an avalanche of “pay or

play” laws to crumble down upon multijurisdictional

employers. They dramatically overstate both the

possibility this will occur, and the impact it would

cause.

As a preliminary matter, petitioner and its allies

focus primarily on proposals, not actual laws. And

their primary citation is to a law review article from

2006 — two years prior to when the Ninth Circuit first

upheld the HCSO. See, e.g., Pet. 20. Most of those

proposals are long dead.°

As for the four measures that actually became

law, petitioner and its amici neglect to discuss

whether the Ninth Circuit’s reasoning applies to

those laws. It does not. The first law, from Suffolk

County, New York, has already been struck down on

the same ground relied upon by the Fourth Circuit:

none of the purported non-ERISA complhance options

was truly available to Wal-Mart, thereby effectively

forcing Wal-Mart to alter its ERISA plan. See Retail

Indus. Leaders Ass’n v. Suffolk County, 497 F. Supp.

2d 403, 417-18 (E.D.N.Y. 2007). The second law

creates a board charged with establishing a universal

health care program in Connecticut by mid-2010, but

does not mention an employer spending requirement

” See H.R. 1316, 2d Reg. Sess. (Colo. 2006); S. 1618, 107th

Reg. Sess. (Fla. 2006); S.B. 87, 94th Leg., Ist Reg. Sess. (Mich.

2007); S.B. 2684, 2006 Reg. Sess. (Miss. 2006); A.B. 1966, 213th

Leg. (N.J. 2008); H.B. 258, 2006 Sess. (Va. 2006); H.B. 2517,

59th Leg., 2d Sess. (Wash. 2005); H.B. 4024, 77th Leg., 2d Sess.

(W. Va. 2006); A.B. 860, 97th Lep., 2005-06 Sess. (Wis. 2005);

H.B. 1703, 159th Sess., 2d Year (N.H. 2006).

or explain how the program will be funded. See 2009

Conn. Legis. Serv., Pub. Act No. 09-148 (West).

Finally, Massachusetts, Vermont and New York City

adopted employer health care spending requirements

that include an option of making a payment to the

government, but those payments, to use the words of

the Ninth Circuit, give “nothing in return — either to

an employer or its employees — for the employer’s

payment to the State,” beyond what any other

qualifying resident would receive. Pet. App. 37a. See

2006 Mass. Legis. Serv. Ch. 58 (West); 114.5 Mass.

Code Regs. 16.01-.05; Vt. Stat. Ann. tit. 21, § 2003

(2009); N.Y.C. Admin. Code § 22-506.

That no other jurisdiction has enacted a program

like San Francisco’s, either before or after the Ninth

Circuit’s initial published opinion in January 2008,

is unsurprising. It would be extraordinarily difficult

for other jurisdictions to establish the type of

non-ERISA compliance option provided by San

Francisco’s ordinance: payment into a comprehensive,

government-run health care program that the City

invested significant public dollars to build, and

spends significant tax dollars to maintain. And as

discussed further below, other jurisdictions are

particularly unlikely to make such investments while

Congress debates national health care reform, which

could well include a uniform federal employer health

care mandate.

Petitioner goes on to assert that if additional San

Francisco-type programs do come into being, this

would “overload the largest human_resources

departments and the most expensive software-

systems.” Pet. 38. That is preposterous. As discussed

above, employers commonly face differing cost (and

recordkeeping) requirements in different juris-

dictions, including severance pay requirements,

minimum and = prevailing wage requirements,

vacation pay requirements, apprenticeship and/or

training program requirements, taxes, tax credits,

fees, and sick leave requirements. Such is the

unavoidable, unremarkable consequence of doing

business in multiple jurisdictions in the United

States. And as discussed more fully by amicus curiae

Nibbi Bros. Associates, multijurisdictional employers

already regularly use payroll and other human

resources software, provided by companies like ADP

and Oracle, that are geared to facilitate compliance

with disparate loca) requirements of this kind.

Petitioner and its allies also fail to account for

the HCSO regulations that make it particularly easy

for multijurisdictional employers’ to establish

compliance. For example, one amicus brief asserts the

ordinance will “require employers [with self-insured

plans] to create a special pool of funds for San

Francisco employees that is separate from the rest of

the employees covered by the company plan.” RILA

Br. at 13. In truth, a large, multijurisdictional

employer with a self-insured plan need only establish

that it has spent a certain amount per employee plan-

wide. Supra at 4-5. The same is true of a large

employer that provides uniform health coverage to its

employees through a traditional insurance plan. Id.

Of course, if petitioner is correct that numerous

laws will sprout up and that they will be unworkable

for employers, this also means the Court will have

ample opportunity to consider this ERISA preemption

issue in future cases. And as discussed below, future

cases would have much better records.

B. The Case Is A Poor Vehicle For Con-

sideration Of Most Arguments Made By

Petitioner And Its Allies.

Two key contentions in this case have been: (i)

the city payment option is not a rational choice for

employers; and (11) the ordinance imposes intolerable

administrative burdens on employers. Although there

was discovery in the district court, petitioner

proffered no evidence to support cither contention.

Indeed, the record contains significant evidence to

refute them both. Accordingly, this case presents a

poor vehicle for consideration of an employer’s claim

that a general health care spending requirement is

preempted by ERISA.

With respect to the argument that the city

payment option is not a “rational decision” for

employers,” petitioner had the burden of making this

showing. See, e.g., Dillingham, 519 U.S. at 333 (“it

has not been demonstrated here that the added

’ Brief of Amici Curiae the ERISA Industry Committee and

National Business Group on Health in Support of Petitioner at

a7.

inducement created by the wage break available on

state publ’: works projects is tantamount to a

compulsion upon apprenticeship programs”);

Travelers, 514 U.S. at 664 (“no showing has been

made here that the surcharges are so prohibitive as

to force all health insurance consumers to contract

with the Blues”). However, in contrast to Fielder,

where Wal-Mart presented unrebutted evidence that

Maryland’s law would force it to alter its ERISA pian,

274 F.3d at 193, petitioner submitted no evidence and

made no showing that the choice between setting up

an ERISA plan and using the city payment opiion

was remotely a “Hobson’s choice” for any employer.

Travelers, 514 U.S. at 664. In fact, at oral argument

in the Ninth Circuit, counsel for petitioner conceded

that, if anything, employers had an incentive to

choose the city payment option, which contradicted

the central contention in petitioner’s briefs in the

district court and the Ninth Circuit.'’ And in contrast

to petitioner’s non-showing, the City presented

unrebutted evidence that the city payment option

provides a reasonable alternative. Supra note 3.

Petitioner also relies heavily on the argument

that the HCSO’s" recordkeeping and_ other

administrative obligations are burdensome. Again,

this argument is made only at the highest level of

abstraction. Petitioner presented no evidence to

" See http://www.caQ9.uscourts.gov (Audio Files, No. 07-

17370, first entry, minutes 31:00-34:20).

refute the common-sense notion that employers keep

records of hours worked, and health care dollars

spent, in the normal course of business. Nor did

it present any other evidence of the exorbitant

administrative burden it now alleges. The only

evidence below demonstrated that one of petitioner’s

member restaurants — Max’s — already kept the key

records, including hours worked per employee and

health care expenditures per employee. Resp. App.

60-62. There is no basis, on this record, to conclude

that the HCSO’s recordkeeping obligations are

anything other than de minimis for employers.

C. The Result Sought By Petitioner And

Its Allies Would Have A Devastating

Impact On The People Of San

Francisco.

In contrast to the abstract assertions by

petitioner and its allies about the impact of the Ninth

Circuit’s ruling, the result they advocate would have

a real and devastating impact on San Francisco and

its residents: the City would be thrust back into the

health care crisis that left more than 82,000 people

without coverage, and that imposed a tremendous

strain on the taxpayers by forcing public emergency

rooms to treat illnesses and injuries that could have

been prevented. In just 1% years, the number of

uninsured declined from roughly 82,000 to under

23,000, and the number continues to go down. Use

of public emergency rooms declined seventy percent.

Resp. App. 25-30.

Nor is the care provided by the City to the

previously uninsured limited to traditional “safety

net” care. Those enrolled in the HAP are receiving

essential preventive and diagnostic treatment for

chronic conditions such as asthma, heart disease,

diabetes, hypertension or cancer. Resp. App. 25-26.

To cite just one example, a former restaurant

worker with a chronic heart condition, mitral valve

prolapse, was unable to obtain health insurance. She

needed surgery for her condition, which would have

cost her more than $100,009 if performed at a private

facility, rendering it unaffordable for her. Because

this person was able to join the HAP, she obtained the

surgery, and believes she might not still be alive

today if she had been unable to obtain this service

from the City’s new program. Resp. App. 26-27.

As the City showed in its response to the stay

application, the universal] health care program cannot

survive without the employer spending requirement.

Resp. App. 28-29. See also Brief for Zazie Restaurant

as Amicus Curiae in Support of Respondents. Thus,

the result petitioner and its allies seek is to terminate

San Francisco’s successful, first-of-its-kind universal

health care program, based on _ speculation and

exaggeration about the as-yet unfelt impact of the

Ninth Circuit’s ruling on = multijurisdictional

employers.

D. The Potential Enactment Of Federal

Health Care Legislation Counsels

Against A Grant Of Certiorari.

Finally, the question presented by the petition

may be mooted by national health care reform, so

granting certiorari would not be a good use of the

Court’s resources. As petitioner and its allies point

out, Congress is considering federal legislation that

would include a national employer mandate. If the

predictions of petitioner and its amici about the

enactment of such a law are correct, it would be that

new law, not ERISA, that preempts the City’s health

care spending requirement. And if that new law

preempts local health care spending requirements,

the ERISA preemption issue presented here would be

relevant only for a relatively brief gap period, until

the effective date of the legislation.

By the same token, if Congress does not enact

health care reform legislation in the next several

years, and if other localities then seek to emulate San

Francisco’s solution to the health care crisis, the

Court will have another opportunity to take up the

question at that time. Either way, the present state of

flux regarding national health care reform counsels

against Court intervention.

CONCLUSION

The Court should deny the petition for a writ of

certiorari.

Respectfully submitted,

DENNIS J. HERRERA

City Attorney

WAYNE SNODGRASS

VINCE CHHABRIA

Counsel of Record

CHRISTINE VAN AKEN

Deputy City Attorneys

Attorneys for Respondents

App. 1

APPENDIX A

NO. 08A824

IN THE SUPREME COURT OF

THE UNITED STATES

OCTOBER TERM, 2008

GOLDEN GATE RESTAURANT ASSOCIATION,

Applicant,

Uv.

CITY AND COUNTY OF SAN FRANCISCO,

Respondent,

SAN FRANCISCO CENTRAL LABOR COUNCIL;

SERVICE EMPLOYEES INTERNATIONAL UNION

(“SEIU”), LOCAL 21; SEIU UNITED HEALTHCARE

WORKERS-WEST; and UNITE HERE! LOCAL 2,

Intervenor/Respondents,

On Application to The Honorable

Anthony M. Kennedy, Associate Justice of the

United States Supreme Court and Circuit Justice

for the Ninth Circuit, for Order Staying Mandate

and Vacating Stay of District Court Judgment

JOINT RESPONSE TO APPLICATION FOR

ORDER STAYING MANDATE AND VACATING

STAY OF DISTRICT COURT JUDGMENT

App. 2

STEPHEN P. BERZON DENNIS J. HERRERA

SCOTT KRONLAND City Attorney

STACEY M. LEYTON WAYNE SNODGRASS

Counsel of Record VINCE CHIHABRIA

ALTSHULER BERZON LLP Counsel of Record

177 Post Street, Suite 300 CHRISTINE VAN AKEN

San Francisco, CA 94108 Deputy City Attorneys

Telephone: (415) 421-7151 City Hall, Room 234

Facsimile: (415) 362-8064 One Dr. Carlton B.

Attorneys for Intervenor/ Goodlett Place

Respondents San Francisco, CA

94102-4682

Telephone: (415) 554-4674

Facsimile: (415) 554-4747

Attorneys for Respondent

li] TABLE OF CONTENTS

RE SPE FACS PEA OICL © LIED oo scccccccccccccvcsccscscsssescees il

Nee condo sca cacsacveveiedhesssenedasueesiee ces 5

A. The Health Care Security Ordinance ......... 5

B. Procedural Background .................cccceseeeeeees 8

SM EPRREED CPE BOE; VEIG WY .......0.0cccsccceccccsccssscccscesecs )

cee caccinsepvdcaaubacessansdenseseasthanses 11

I. GGRA HAS FAILED TO ALLEGE, MUCH

LESS ESTABLISH, IRREPARABLE HARM... = 11

Il. THE EQUITIES MILITATE STRONGLY

EE FEA OEE cescesecscccsssiseesscsssessecsssesesene 12

A. The Harm To GGRA And To Other

Businesses Is Minimal ...................0ee00ee 13

App. 3

b. A Stay Would Impose Substantial Hard-

ship On The City And Its Residents..... 15

iil. TIE CASE IS NOT WORTHY OF CER-

FRSA sas ievssisicatsdciee eal 20

A. The Decision Below Does Not Create A

Split With The Fourth Circuit .............. 20

B. Other Factors Counsel Against A Grant

Je CINE, vakcuc susp ccaxedsaianhavekucteicetsiaueen 24

IV. THE DECISION BELOW IS CORRECT.... 26

CA PI se GIS yaiucdasoniccusscvaveexracetacsas aan 28

[u] TABLE OF AUTHORITIES

Federal Cases

Barnes v. I}-Systems, Inc.

ee FE Rok sen bicdcauin vennkecadnauomeantanameautaneeen 11

Bartlett v. Stephenson

ee Goes. EE CIEE knbckcandidcciuseeenecdasistseuvasedianeeeas Ll

Cal. Div. of Labor Stds. Enforcement v.

Dillingham Constr., N.A.

<p) BAR Be ps Fal > 9 Renew Ramen memento 21, 29

CBS Inc. v. Davis

ee ee ee sn en Ce 11

Certain Named and Unnamed Non-citizen

Children and Their Parents v. Texas

ee ee a re ed eee 11, 12

Fort Halifax Packing Co., Inc. v. Coyne

OEE ris 8 Re oivkicidscintesacteristcndarincecse ee

App. 4

Golden Gate Restaurant Ass’n v. City and

County of San Francisco

ee Oe ee EE Ie MI Pincccnnexsccunececaccesesscuccscasas 9

Golden Gate Restaurant Ass’n v. City and

County of San Francisco

DES F.06 GSe COC CAF. BOGE) vec cseccesecccsscconcsssceces 10, 23

Golden Gate Restaurant Ass'n v. City and

County of San Francisco

Supreme Court Case No. 07A654.......................042. 10

Hattem v. Schwarzenegger

449 F.3G6 425 (3a Civ, BOOB) .....cccccccoscccccsscvecceccccssssnsBd

Keystone Chapter, Associated Builders &

Contractors v. Foley

Se ee Ee Oe Ge ID on vc censceccctorcnesceceoecsccccenssen 21

Massachusetts v. Morash

a casesukueanauens 5, 28, 29

New York State Conf of Blue Cross & Blue

Shield Plans v. Travelers Ins. Co

514 U.S. 645 (1995) 5, 21

[iii] Retail Indus. Leaders Ass’n v. Fielder

STB F.0G BGO (GG Car, BOOT) vcsscevccccecccvesesenses 4,21, 22

Rostker v. Goldberg

448 U.S. 1306 (1BG0)........cccccosccscceesses cakitee Sane 11

Ruckelshaus v. Monsanto Co.

ed le caareacbeenaudaesiadnas 11

S. Cal. IBEW-NECA ‘Trust Funds v. Standard

Industrial Elec. Co.

247 F.3d 920 (9th Cir. 2001) 21

Whalen v. Roe

ee Site ee rE wens nka vadccncdens sdcccedanstsdudsecscesannaes 1]

App. 5

WSB Elec. Inc. v. Curry

a Bak oD 21

Federal Statutes

28 United States Code

I gg RES AE RE De SEEN ee pn one 10

29 United States Code

CD cabuncouucduvddecuececedeudacececksece. 24

Ee ee ee nT

i eacdacuuecetcuencdiceuiaes 27

RD co cc acckeevabecnaceccaccececes 28

State Statutes & Codes

California Labor Code

Tenn nn eet cunusawsguccecedacki 14

California Welfare & Institution Code

ON SES ene a ee 18

San Francisco Statutes, Codes & Ordinances

Department of Public Health Regulations

ASSIA reer yea at orale ot sei ye rr 7

rae eke cal nies wml egunauvinndesdweni 7

liv] Administrative Code

EE rns. uvcceecunincoweenddceveuucauesweds 8

Ds dabncusenasuwacce usual 8

(ES EE ES) a ee en ee 6

SRG ENE Be ee eS em eT a 7

I Ste oa adccevaneuskdesisduameduubeckans a

UN Es ia BD hea ee ee i ee ....14

App. 6

Rules

Supreme Court Rule

UE re eee ent ce ace G inna Dia vinnssy VaRvaA neh dame as 10

Other References

H. Knight, Not all restaurants back suit over

Healthy S.F-

San Francisco Chronicle, Mar. 22, 2009 ..................3

House Bill No. 2517

59th Leg., 2006 Reg. Sess. (Wash. 2006)................ 15

House Bill No. 2579

81st Leg., 2006 Reg. Sess. (Kan. 2006) .................. 15

R. Gressman, K. Geller, S. Shapiro, T. Bishop

& EK. Hartnett, Supreme Court Practice

Re I I ieee aieisrherasecictdndenus -pvivarcnsaevaxsen 11

Senate Bill No. 1414

2065-2006 Reg. Sess. (Cal. 2006)...................2-...--.: 15

Victoria Craig Brunce et al., Health Insurance

Mandaies tn the States,

Council for Affordable Health Insurance

NN ayy iieckcr era tciiesk ints capenueesveuatdencpuoneacsenvertaavarn 28

[1] INTRODUCTION

The fatal flaw in the application filed by the

Golden Gate Restaurant Association (“GGRA” or

“association”) is its failure to provide any reason for

emergency intervention. In February 2008, one

month after San Francisco’s health care spending

requirement took effect, the Circuit Justice denied

GGRA’s first application for a stay. Since that time,

App. 7

the City’s program has become fully operational, the

medium and large employers covered by the ordi-

nance have been complying with the spending

requirement for 15 months, and tens of thousands of

previously-uninsured workers now have _ health

coverage under the City’s program. There is no basis

for disturbing this status quo while the normal

certiorari process runs its course.

As a threshold matter, a stay may not issue

unless the applicant has demonstrated a likelihood of

irreparable harm. Not only has GGRA failed to

Gemonstrate irreparable harm — it has not even

alleged irreparable harm. The association skips over

this prong of the test for a stay entirely, addressing

only the three subsequent prongs. This alone requires

denial of the stay application.

The closest the association comes to touching

upon irreparable harm is its assertion that its

members, by continuing to make health care

expenditures as they have done for the past 15

months, “may” suffer harm for which there is “no

effective remedy.” App. at 26. Such a tepid assertion

could not establish irreparable harm, even if GGRA

had attempted to argue that it did. Indecd, putting

aside the general rule that financial loss does not

warrant the kind of relief GGRA now seeks, the

evidence here suggests there is no financial harm at

all. GGRA’s members have passed the cost of the

health care spending requirement on to their

customers in the [2] form of a health care surcharge,

which severely undermines any claim of financial

App. 8

harm. See Declaration of Vince Chhabria in Oppo-

sition to Application for Order Staying Mandate. In

fact, just days after GGRA submitted this application,

the association’s own director admitted that the

health care spending requirement is “working all

right now.” H. Knight, Not all restaurants back suit

over Healthy S.F., San Francisco Chronicle, Mar. 22,

2009 at B-1 (CCSF Appendix, Ex. A).

Nor would a balancing of the equities justify a

stay. In addition to the alleged financial harm to its

members, GGRA contends that maintenance of the

current status quo would inflict harm on businesses

nationwide. The association speculates that other

state or local governments might emulate San Fran-

cisco’s program, thereby requiring multi-jurisdictional

employers to keep track of more than one local health

care spending requirement. This argument primarily

goes to the merits of GGRA’s preemption challenge.

But to the extent GGRA means to argue that laws

similar to San Francisco’s will crop up before the

certiorari process runs its course (and that this

somehow would provide a legal basis for emergency

intervention), the argument is baseless. Although

GGRA makes opaque reference to “similar” measures

having been “proposed,” it does not, and cannot, point

to the actual enactment of a single law similar to San

Francisco’s since the Court of Appeals allowed the

program to take effect 15 months ago. In fact, GGRA

does not even cite a proposal that was made after San

Francisco’s program took effect — it cites only a law

App. 9

review article from 2006 that listed laws proposed

before the litigation even began.

Pitted against these alleged harms to the asso-

ciation are the very real harms that GGRA’s

application seeks to inflict upon the City and its [3]

residents. As a result of the employer spending re-

quirement, more than 37,000 San Francisco workers

are now covered through the City’s program. Staying

the lower court decision, and thereby enjoining the

health care spending requirement, would cause these

workers to lose their coverage and access to critical

diagnostic and preventive care and_ treatment.

Moreover, elimination of the spending requirement

could outright destroy San Francisco’s new health

care program, forcing the City to revert to the old,

failed model of providing emergency care to un-

insured people at public hospitals once it is too late to

administer proper preventive and diagnostic care.

Aside from the equities, the case is not worthy of

certiorari. Far from creating a split with the Fourth

Circuit’s ruling in Retail Indus. Leaders Ass’n v.

Fielder, 475 F.3d 180 (4th Cir. 2007), the decision

below operates in harmony with that ruling to stand

for the proposition — well established by prior case

law — that local governments may impose expenditure

requirements on employers so long as those re-

quirements do not interfere with plan uniformity.

Moreover, the Court need not rush to decide this legal

question, because the likelihood is low that other

jurisdictions would quickly adopt similar health care

programs. Both the success and legality of San

App. 10

Francisco's program depend on the existence of a

comprehensive, government-run health care delivery

system that operates at great expense to the City’s

taxpayers. Particularly given current economic condi-

tions, it is unrealistic to expect that other juris-

dictions will rush to follow suit.

In addition, one outcome of the current debate on

national health care reform could be to obviate the

need for local governments to regulate in this area.

Indeed, national health care legislation could moot

the legal [4] question at hand, either by preempting

programs like San Franciscos or by expressly

authorizing them. This possibility suggests the Court

should avoid venturing into the national debate on

health care reform by deciding a weighty ERISA

preemption question that could be mooted before it

ever arises again.

Finally, even if certiorari were granted, it is

unlikely the Court would reverse the decision below.

GGRA’s argument on the merits is that employers

have the right not to be required to spend money

in areas, like health care, mentioned by the ERISA

statute. This fails to recognize the distinction

between plan uniformity, which ERISA’s preemption

provision protects, and expenditure uniformity, which

it does not. As the Court has stated, “cost uniformity

was almost certainly not an object of pre-emption

...” New York State Conf. of Blue Cross & Blue

" 29 U.S.C. § 1002(1).

App. 11

Shield Plans v. Travelers Ins. Co, 514 U.S. 645, 662

(1995). And as the Court has explained in cases such

as Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1

(1987) and Massachusetts v. Morash, 490 U.S. 107

(1989), there is a reason ERISA’s_ preemption

provision explicitly singles out employee benefit

“plans,” rather than covering employee benefits

generally. See, e.g., Fort Halifax, 482 U.S. at 115

(“Given the basic difference between a ‘benefit’ and a

‘plan,’ Congress’s choice of language is significant in

its pre-emption of only the latter”). States and

localities may regulate the benefits mentioned in

ERISA so long as they do not require alteration of

ERISA plans. Because that is precisely what San

Francisco’s ordinance does, it is not preempted.

[5] STATEMENT

A. The Health Care Security Ordinance

Because GGRA’s description of the ordinance is

incors} ete, and because its discussion of the effects of

the ord::.ance on employers and their ERISA plans is

inaccurate, we provide a brief description here.

In 2006, roughly 82,000 San Francisco adults

suffered from a lack of health insurance — more than

one-tenth of the City’s population. CCSF Appendix,

Ex. B at 3.’ In response to this health care crisis, the

* A common misconception about the uninsured is that they

are “taken care of” because they qualify for state or federally

funded health care programs for the indigent like Medi-Cal

(Continued on following page)

App. 12

San Francisco Board of Supervisors unanimously

passed, and the Mayor signed into law, the Health

Care Security Ordinance (“HCSO” or “ordinance”).

The ordinance has two key related components — a

government health care program and an employer

health spending requirement.

The government health care program is operated

by the San Francisco Department of Public Health

(“DPH”). Its primary feature is the Health Access

Program (“HAP”), which delivers health care to its

participants from a network consisting of San Fran-

cisco General Hospital, DPH clinics, and participating

non-profit and private providers. S.F. Admin. Code

§ 14.2(a).* The HAP assigns a primary care physician,

nurse practitioner or physician assistant to each

participant. And it provides “medical services with an

emphasis on wellness, preventive care and [6] inno-

vative service delivery.” S.F. Admin. Code § 14.2(f).

Among the specific services provided are inpatient

and outpatient hospital services, diagnostic and

laboratory services, radiological services, mental

(California’s Medicaid program). In reality, most people without

health care do not qualify for such programs; rather, they simply

go without care or resort to trips to the emergency room when it

is too late to receive proper preventive treatment (and then are

billed for the high cost of such trips). The 82,000 San ‘‘rancisco

residents who were uninsured do not include the people who

were already enrolled in San Francisco’s indigent health care

programs. CCSF Appendix, Ex. B at 4.

* The ordinance, along with the implementing regulations,

can be found at CCSF Appendix, Ex. B.

App. 13

health services, home health care, and prescription

drug benefits. Jd. The value of this care is substantial

— DPH estimated that in 2008 it cost an average of

$261 per participant per month to provide it.* CCSF

Appendix, Ex. B at 5.

The HAP, which is funded in large part by the

City’s general fund, is available to uninsured San

Francisco residents, regardless of whether they are

employed or unemployed. Enrollees must pay quar-

terly participation fees to receive HAP coverage.”

The other key component of the HCSO is the

employer spending requirement — a mandate that

medium and large businesses make minimum health

expenditures on behalf of employees who work more

than a specified number of hours. Specifically, in

2008 private employers with 20-99 employees and

nonprofit employers with 50 or more employees were

* Incidentally, DPH changed the name of the HAP program

to “Healthy San Francisco” after determining that the name

“TJealth Access Program” would create confusion among San

Francisco residents because of its similarity to other programs.

See DPH Reg. No. 1(b). For purposes of this litigation the parties

have continued to use the name contained in the ordinance.

* Individual residents who work in San Francisco but live

elsewhere do not qualify for HAP participation, but the program

contains a feature for those people as well. The ordinance

authorizes DPH to establish and maintain medical reimburse-

ment accounts for qualified nonresident employees who work in

the City. S.F. Admin. Code §§ 14.1(b\7), 14.2(g). Beneficiaries of

this aspect of the City’s program may draw from their accounts

to obtain reimbursement for medical expenses, including pay-

ments of health insurance premiums. DPH Reg. No. 7(g)i).

App. 14

required, for any employee who has been employed

for 90 days and works more than ten hours per week,

to make health care expenditures of $1.17 per hour

on behalf of that employee. Private employers with

100 or more employees were required to make health

care expenditures of $1.76 per [7] hour on behalf of

each covered employee. S.F. Admin. Code. § 14.1(b)(8);

OLSE Reg. No. 5.2(A)(1).°

It is entirely up to each covered employer to

decide how to comply with this spending requirement.

The Ordinance defines health care expenditures to

mean “any amount paid by a covered employer to its

covered employees or to a third party on behalf of its

covered employees for the purpose of providing health

care services for covered employees or reimbursing

the cost of such services for its covered employees.”

S.F. Admin. Code § 14.1(b)(7). The ordinance makes

clear that employers may set up health care plans

themselves, or, of they prefer not to do so, they may

make payments to the City on behalf of their workers

(hereinafter “the city payment option”). Jd. They may

also fulfill the expenditure obligation through a

combination of the two. The program is structured so

that, if an employer chooses the city payment option,

* The amount has increased slightly for 2009: $1.85 per

hour for large employers and $1.23 per hour for medium em-

ployers. OLSE Reg. No. 5.2(B). GGRA has argued that the

amount will skyrocket after 2010, CCSF Appendix, Ex. A, but

that is false, and in any event, not relevant to whether a stay

should be in effect during the certiorari process.

App. 15

it need only write a check and all employees on whose

behalf the payment is made will be eligible to receive

health care benefits.

Covered employees who qualify for HAP mem-

bership are, if their employers choose to satisfy the

spending requirement by paying the City, entitled to

enroll in the program at a 75% discount on the

quarterly participation fees they would otherwise be

required to pay. DPH Reg. No. 7(f). Furthermore, any

covered employee whose fee, after the 75% discount,

falls below $50 per quarter is simply allowed to enroll

for free. Id.

[8] According to studies compiled by the San

Francisco Controller’s Office, the large majority —

approximately ninety percent — of businesses with 20

or more employees already provided health care

benefits to their employees at the time the ordinance

was enacted. CCSF Appendix, Ex. B at 9. The average

monthly health insurance premium in California at

that time was $379. Id.

The employer health care spending requirement

has now been in effect for 15 months. As a result,

37,000 San Francisco workers are covered under the

government health program described above. Decla-

ration of Dr. Mitchell H. Katz in Opposition to

Application for Order Staying Mandate at J 11.

Thousands of others are enrolled in the program

separate and apart from any payment made by an

employer. Jd. Overall, the number of San Francisco

App. 16

residents without health coverage is down to under

23,000, and counting. /d. at 410.

B. Procedural Background

On December 26, 2007, the district court ruled

that the ordinance was preempted by ERISA. The

next day, the City and Intervenors filed an emergency

application with the United States Court of Appeals

for the Ninth Circuit, seeking an order staying the

district court’s ruling and allowing the employer

spending requirement to take effect pending appeal.

On January 9; 2008, the Ninth Circuit granted this

request, ordered expedited briefing, and set an

accelerated date for oral argument on the merits.

Golden Gate Restaurant Ass’n v. City and County of

San Francisco, 512 F.8d 1112 (9th Cir. 2008).

After waiting more than one month after the

emergency application was granted, GGRA filed an

application for a stay of the Ninth Circuit’s order with

the Circuit Justice. GGRA made arguments that are

precursors [9] to the ones it raises in the present

application, namely, that restaurants could suffer

financial harm if the spending requirement were

allowed to take effect, that the ordinance would

require them to keep records, and that businesses

could be subject to multiple health care spending

obligations as a result of the ordinance. The Circuit

Justice denied the stay application. Golden Gate

Restaurant Ass’n v. City and County of San Francisco,

Sup. Ct. Case No. 07A654.

App. 17

Oral argument on the merits in the Court of

Appeals took place on April 17, 2008, and the panel

issued its ruling on September 30, 2008, reversing the

district court and concluding San Francisco's ordi-

nance is not preempted. Golden Gate Restaurant

Ass’n v. City and County of San Francisco, 546 F.3d

639 (9th Cir. 2008) (““GGRA II”). GGRA did not ask

the panel for a stay at that time. Instead, it filed a

petition for rehearing en banc (but it did not ask the

en banc court for a stay either). The en banc petition

was denied on March 9, 2009. GGRA Appendix, Ex. F.

The mandate issued on March 17, 2009. Meanwhile,

San Francisco’s health care spending requirement

has been in effect, the restaurants and other em-

ployers have been complying with it, and 37,000

workers obtained health coverage from the City’s

program as a result.

STANDARD OF REVIEW

An application for a stay brought pursuant to

Supreme Court Rule 23.1 and 28 U.S.C. § 2101(f)

may not be granted unless: (1) the applicant demon-

strates a likelihood of irreparable harm; (2) the

equities favor a stay; (3) there is a reasonable prob-

ability that four members of the Court would consider

the underlying issue worthy of certiorari; and (4)

there is a significant possibility that the Court will

reverse the decision below. See, e.g., Certain Named

and Unnamed Non-citizen Children and Their Par-

ents [10] v. Texas, 448 U.S. 1327, 1330 (1980) (“Non.-

citizen Children”) (Powell, J., in chambers).

App. 18

It bears emphasis that if an applicant fails to

demonstrate a likelihood of irreparable harm, the

stay application must be denied for that reason alone,

rendering consideration of the other elements of the

test unnecessary. See Whalen v. Roe, 423 U.S. 1318,

1316 (1975) (Marshall, J., in chambers) (conclusion

that applicant has shown no irreparable harm

“necessarily decides the application and renders

unnecessary” any consideration of the remaining

elements). See also Ruckelshaus v. Monsanto Co., 463

U.S. 1315, 1317 (1983) (Blackmun, J., in chambers).

However, if an applicant does demonstrate

irreparable harm, this does not obviate the need to

inquire whether the equities justify a stay, including

whether a stay would be in the public interest. “It is

ultimately necessary, in other words, ‘to balance the

equities — to explore the relative harms to applicant

and respondent, as well as the interests of the public

at large.’” Barnes v. E-Systems, Inc., 501 U.S. 1301,

1305 (1991) (Scalia, J., in chambers) (quoting Rostker

v. Goldberg, 448 U.S. 1306, 1308 (1980) (Brennan, J.,

in chambers)). See Generally R. Gressman, K. Geller,

S. Shapiro, T. Bishop & E. Hartnett, Supreme Court

Practice 873 (9th. ed. 2007).

More generally, in the context of an in-chambers

stay application, there is a “presumption that the

decisions below — both on the merits and on the

proper interim disposition of the case — are correct.”

Rostker, 448 U.S. at 1308. Accordingly, a Circuit

Justice “will grant a stay only in extraordinary

circumstances.” Bartlett v. Stephenson, 535 U.S. 1301,

App. 19

1304 (2002) (Rehnquist, C.J., in chambers) (quoting

Whalen, 423 U.S. at 1316). See, e.g., CBS Inc. vu.

Davis, 510 U.S. 1315, 1317 (1994) (Blackmun, in [11]

chambers) (“extraordinary circumstances” present

where lower court ruling would lead to “indefinite

delay” of broadcast that would “cause irreparable

harm to the news media that is intolerable under the

First Amendment”).

ARGUMENT

I. GGRA HAS FAILED TO ALLEGE, MUCH

LESS ESTABLISH, IRREPARABLE HARM.

There is a fatal omission in GGRA’s application.

It argues three of the four requirements for a stay:

that there is a reasonable probability the Court will

grant certiorari, App. at 8, that there is a significant

possibility the Court will reverse the decision below,

App. at 12, and that the “balance of equities” favors

the association. App. at 24. But the application

completely omits any discussion of whether there is a

likelihood of irreparable harm. GGRA has submitted

no evidence, made no factual assertions, and

advanced no legal argument about irreparable harm.

Accordingly, no further inquiry is needed — the

application must be denied for failure to allege, much

less demonstrate, irreparable harm. See p. Ll, supra.

The only portion of the application that could be

construed as relating to irreparable harm (even

though GGRA does not characterize it as such) is the

statement that, absent a stay, restaurants with more

App. 20

than 20 employees will continue making health care

expenditures under the ordinance, as they have done

for the past 15 months. GGRA asserts that there

“may” not be an “effective remedy” for this alleged

injury. App. at 26. Putting aside the general rule that

monetary injury does not give rise to relief of this

kind, cf. Non-cttizen Children, 448 U.S. at 1332-34, in

this case the evidence indicates there has been no

financial harm at all — irreparable or otherwise.

Shortly after the program took effect, restaurants in

San Francisco began passing the cost of the health

care spending [12] requirement on to their customers,

in the form of a “Healthy San Francisco” surcharge.

See Chhabria Decl., Ex. A (receipts and menus

reflecting surcharge). Indeed, because restaurants

have successfully passed ‘on this cost, and because

San Francisco restaurant patrons have been widely

supportive of it, GGRA’s own director has publicly

stated that the health care expenditure requirement

is “working all right now.” CCSF Appendix, Ex. A.

This statement from GGRA’s director came just days

after GGRA submitted its emergency application to

the Circuit Justice. Perhaps that is why GGRA is

unwilling to allege its members suffer from irrep-

arable financial harm.

Il. THE EQUITIES MILITATE STRONGLY

AGAINST A STAY.

Even if one were to assume irreparable harm

despite GGRA’s failure to allege it, the equities would

App. 21

not justify a stay. In fact, compared to when GGRA

sought a stay from the Circuit Justice 13 months ago,

the equities in favor of the City and its residents are

now much stronger. Back then, the City had only

begun implementing its program, the medium and

large employers impacted by the spending require-

ment had not yet developed their systems for making

health care expenditures, and workers had not yet

obtained health coverage as a result of payments by

their emplovers. Now, the program is fully opera-

tional, the medium and large employers have been

making their payments, and roughly 37,000 workers

enjoy health coverage from the City as a result. A stay

would disturb this status quo by stripping people of

their health coverage, and could potentially destroy

the City’s new universal health program in the

process.

(13] A. The Harm To GGRA And To Other

Businesses Is Minimal.

Aside from GGRA’s tepid and unsupportable

assertion of financial hardship, the association claims

its members are being harmed by the ordinance’s

recordkeeping requirements. App. at 26. But those

requirements are neither onerous nor complex.

GGRA’s members must maintain itemized pay state-

ments, wiiich is already mandated by California

Labor Code section 226. The ordinance requires them

to maintain the name, address, phone number and

first day of work of each employee, and records of

health care expenditures made on behalf of those

App. 22

employees. And they must file annual reports with

the City to prove quarterly compliance, which simply

involves dividing the amount spent on health care by

the hours worked by covered employees. S.F. Admin

Code § 14.3. GGRA has not explained how main-

taining these records or reporting this information

would harm tis members. Indeed, GGRA has not

explained why such information would not already be

maintained in the normal course of business.

Beyond the purported recordkeeping hardship

for GGRA’s members, the association makes passing

reference to alleged financial and recordkeeping

hardship that other San Francisco employers covered

by the ordinance would suffer if the program con-

tinues during the certiorari process. However, no

other San Francisco employer has challenged the

validity of the program, and accordingly there is no

reason to assume that businesses other than some of

GGRA’s members consider themselves harmed by it.

Indeed, the great majority of medium and large

employers in San Francisco actually benefit from the

health care spending requirement, because they were

already providing health insurance to their em-

ployees. CCSF Appendix, Ex. B at 9. Any employer

that previously spent enough [14] money on health

care to satisfy the ordinance is no longer at a

competitive disadvantage vis-a-vis the minority of

App. 23

medium and large employers that had chosen not to

spend money on employee health benefits.’

GGRA next asserts that the decision below

inflicts harm beyond San Francisco, because it could

cause multi-jurisdictional employers to be subjected

to a flood of different health care spending obliga-

tions. To the extent GGRA means to contend that

multi-jurisdictional employers will be subjected to

different spending obligations during the certiorari

process, that is without any support. GGRA has not

identified a single piece of legislation that has even

been proposed, much less enacted, since the Court of

Appeals allowed San Francisco’s program to take

effect 15 months ago. Instead, it cites a law review

article from 2006 — before San Francisco’s ordinance

was even enacted — for the proposition that “over

thirty similar statutes had been proposed ...” App.

at 9 (emphasis added). The claim of impending

nationwide hardship during the certiorari process is

illusory.

Even if proposals like the ones listed in GGRA’s

law review article were pending today, this still would

not be a hardship. First, many of those proposals

were similar or identical to the Maryland law struck

’ Moreover, even these medium and large employers whose

health care spending was affected by the ordinance have

received a benefit, because their employees have received health

coverage as a result, thereby blunting any claim of harm to

those busiresses.

App. 24

down by the Fourth Circuit, and dramatically dif-

ferent from the ordinance San Francisco has enacted.*

As discussed in Section III, the Ninth Circuit

explained that San Francisco’s ordinance was not

preempted precisely because of its differences from

the Maryland law. Second, the claim of hardship for

[15] miulti-jurisdictional employers presumes that

GGRA is correct on the merits — specifically, that loca!

governments may not impose spending requirements

on employers. But as discussed in Section IV, this

Court has already made clear that ERISA does not

protect employers from local payment requirements

merely because they apply to areas mentioned by

ERISA.

GGRA’s final claim of hardship relates in some

fashion to the stimulus package recently passed by

Congress and signed into law by the President. App.

at 25. The association observes that the ordinance, by

allowing San Francisco employers to comply with the

health care spending requirement by making pay-

ments to the City for their employees’ benefit, has

given those employers a means to provide ‘health

coverage that would not be covered by COBRA. It is

difficult to understand what hardship this creates.

GGRA seems to be assuming that workers who

received no coverage prior to the ordinance, but who

® See., e.g., Senate Bill No. 1414, 2005-2006 Reg. Sess. (Cal.

2006); House Bill No. 2579, 81st Leg., 2006 Reg. Sess. (Kan.

2006); House Bill No. 2517, 59th Leg., 2006 Reg. Sess. (Wash.

2006).

App. 25

now receive comprehensive coverage from the City,

are worse off than before because COBRA does not

apply to the HAP. This makes no sense. GGRA’s

invocation of COBRA and the stimulus package

appears to be nothing more than an attempt to

manufacture one issue not already presented in its

unsuccessful s‘ay application from last year.

B. A Stay Would Impose Substantial Hard-

ship On The City And Its Residents.

Since San Francisco’s program took effect, the

number of residents without health coverage has

been reduced from 82,000 to fewer than 23,000. Katz

Dec. at 9 10. And as a direct result of the employer

spending requirement, more than 37,000 workers

now have heaith coverage from the [16] City’s pro-

gram. Id. at { 11.° A substantial percentage of those

enrolled in the program are receiving essential

preventive and diagnostic care for chronic conditions

such as asthma, heart disease, diabetes, hypertension

or cancer. In all, the HAP has so far provided 73,414

health visits, filled 83,200 prescriptions for medica-

tion, and performed 2,350 surgical procedures. 41% of

those health visits were for conditions that, if left

untreated, would lead to heart disease. Another 45%

were for conditions that, if left untreated, would lead

* This does not even account for the thousands of workers

whose employers chose to provide coverage themselves rather

than complying through the city payment option. The City has

not yet collected data on this point.

App. 26

to hospital-based emergency department overuse. /d.

at {{ 12-14. In short, San Francisco is well on its way

to resolving its health care crisis.

GGRA’s application seeks to force San Francisco

back into the old, failed paradigm for health care

delivery that the City and its health officials have

worked so hard to escape. Most immediately, elimina-

tion of the employer spending requirement would

deprive these 37,000 workers of their existing health

coverage through San Francisco’s program. /d. at

4 15. This loss of coverage would likely cause sub-

stantial numbers of these individuals to cancel

planned medical visits and surgeries, forego ongoing

medical treatment and prescription medicine, and

otherwise take health risks that will result in major

declines in health and unnecessary hospitalizations.

Id. And it has been firmly established that when

people lose their health coverage, they receive less

care, they are likely to experience major declines in

health, and are more likely to be hospitalized. Id.

Particularly given that many HAP participants have

chronic conditions that require regular treatment and

monitoring in order to avoid significant [17] health

risks and complications, serious human _ suffering

would result if the stay were granted.

To cite an example the Director of Public Health

provides to illustrate the importance of the program,

one former restaurant worker with a chronic heart

condition, mitral valve prolapse, was unable to obtain

health insurance. She needed surgery for her condi-

tion, which would have cost her more than $100,000

App. 27

if performed at a private facility, rendering it

unaffordable for her. Because this person was able to

join the HAP, she obtained the surgery, and believes

she might not still be alive today if she had been

unable to obtain this service from the City’s new

program. /d. at { 16.

GGRA misleadingly suggests none of this matters

because San Francisco “already has an obligation,”

under state law, “to provide health services to its

residents.” App. at 27. What California law actually

states is that counties must provide health services to

“indigent” residents. Cal. Welf. & Inst. Code § 17000.

Residents who qualify for indigent health care

services are deemed “insured” for purposes of this

measurement, and therefore the residents who

qualify as “indigent” for purposes of this code section

were not part of the group of 82,000 uninsured

residents that existed before the ordinance became

operative. CCSF Appendix B at 4. Accordingly, this

state law provision will do nothing to diminish the

adverse consequences of a stay for San Francisco and

its residents.

The association also suggests that even if the

37,000 workers lost their existing health coverage,

the harm they would suffer is speculative because,

should they encounter health problems, they might

still seek emergency care at San Francisco General

Hospital. App. at 28. But reliance on public hospital

emergency rooms to provide care to the [18] unin-

sured is the very embodiment of the health care crisis

the ordinance seeks to address (and that is now a

App. 28

subject of national debate, as discussed infra). As the

brief of the California Medical Association demon-

strated below, a system that relies on use of emer-

gency rooms by the uninsured imposes a tremendous

financial strain on local governments, prevents

emergency rooms from actually saving lives in true

medical emergencies, and deprives the uninsured of

the preventive care, diagnostic care, and the monitor-

ing they need to avoid emergencies in the first place.

CCSF Appendix, Ex. C at 8-12. Following enactment

of the ordinance, emergency room visits to San

Francisco General Hospital went down almost seventy

percent — from 29,976 in the second quarter of 2007 to

8,944 in the second quarter of 2008. Jd. at 5. GGRA’s

suggestion that there would be no harm in returning

to the old way of dealing with the health care crisis is,

to put it charitably, crass.

Even beyond the 37,000 workers who are cur-

rently covered, shutting down the health care spend-

ing requirement could destroy the City’s health care

program altogether. If the City were to offer compre-

hensive health care to its residents without an

employer spending requirement, there would be

tremendous incentive for employers that currently

provide health insurance to their workers to drop

that coverage, on the assumption that the workers

will simply be absorbed into the HAP. Indeed,

workers themselves might prefer that their employer-

based coverage be dropped in exchange for a wage

increase, given the availability of comprehensive

health coverage from the HAP. The impact of this

App. 29

shift could be tremendous — it bears repeating that,

prior to enactment of the ordinance, roughly 90% of

medium and large employers already provided health

insurance to their employees. If even a meaningful

portion of those [19] workers were foisted onto the

City’s program, the strain on the HAP may be too

great to bear. Katz Decl. at 418. The City, in this

time of budget shortfalls, cannot realistically be

expected to invest the even greater amounts of public

dollars that would be necessary to achieve universal

health care in the face of widespread cancellation of

employer-based health plans, not to mention the loss

of tens of millions of dollars in annual revenue the

HAP receives from employer payments. Id. at { 11.

Finally, the equities tip sharply on the side of the

City because it has invested a tremendous amount of

money and time to bring the employer spending

requirement into operation, all of which would have

to be repeated if the requested stay was entered and

the law was subsequently upheld. Over the past year,

the City has invested hundreds of thousands of

dollars on a widespread educational campaign to

inform employers of the ordinance and educate them

about their compliance options. Katz Decl. at { 7. And

it has spent millions of dollars to create enrollment

systems and other tools to ensure that employers and

their workers would readily benefit from the coverage

under the City’s program. Jd. at 9 9. If the health care

spending requirement were to be shut down, only to

resume again a year later (after favorable ruling by

this Court or, say, an act of Congress that explicitly

App. 30

authorized the program while the case is. still

pending), much of this time and expenditure would

have been wasted, and would have to be repeated. Jd.

at 7 8.

In short, the hardship alleged by GGRA pales in

comparison to the harm the City and its residents

would suffer should GGRA succeed in its effort to

obtain a Stay.

[20] Ill. THE CASE IS NOT WORTHY OF

CERTIORARI.

A. The Decision Below Does Not Create A

Split With The Fourth Circuit.

The circuits are in agreement that “[wlhere a

legal requirement may be easily satisfied through

means unconnected to ERISA plans, and only relates

to ERISA plans at the election of an employer, it

affects employee benefit plans in too tenuous, remote,

or peripheral a manner to warrant a finding that the

law ‘relates to’ the plan.” Keystone Chapter, Associated

Builders & Contractors v. Foley, 37 F.3d 945, 960 (3d

Cir. 1994) (internal quotations, citations and brackets

omitted). See also Fielder, 475 F.3d at 193; Hattem v.

Schwarzenegger, 449 F.3d 423, 429 (2d Cir. 2006); S.

Cal. IBEW-NECA Trust Funds v. Stan. rd Industrial

Elec. Co., 247 F.3d 920, 925 (9th Cir. 2001); WSB Elec.

Inc. v. Curry, 88 F.3d 788, 795 (1996).

This agreed-upon rule is based on this Court’s

authority, which establishes that local laws which

influence choices relating to ERISA plans are not

App. 31

preempted unless the influence on an employer’s

choice is so great that it amounts to a substantive

mandate regarding an ERISA plan. See Travelers Ins.,

514 U.S. at 664 (“Although even in the absence of

mandated coverage there might be a point at which

an exorbitant tax leaving consumers with a Hobson’s

choice would be treated as imposing a substantive

mandate, no showing has been made here that the

surcharges are so prohibitive as to force all health

insurance consumers to contract with the Blucs”);

see also Cal. Div. of Labor Stds. Enforcement v.

Dillingham Constr, N.A., 519 U.S. 316, 332-33

(1997).

Far from creating a split, the decisions of the

Fourth Circuit in Fielder and the Ninth Circuit

in this case, taken together, do nothing more than

apply these well-established principles in the context

of health care spending. As the Fourth Circuit

explained, the spending requirement at [21] issue in

Fielder was preempted because it imposed a penalty

that forced the employer to alter its ERISA health

care plan, while, as the Ninth Circuit explained, San

Francisco’s ordinance is not preempted because it

creates a comprehensive government health care

program into which employers may pay on behalf of

their workers, thereby providing them with a

reasonable compliance option that does not involve

the alteration of an existing ERISA plan or the

creation of a new plan.

Specifically, Fielder involved a_ preemption

challenge to Maryland’s Fair Share Act, which

App. 32

provided that any Maryland for-profit employer with

more than 10,000 employees that does not spend up

to 8% of its payroll on health insurance ({i.e., Wal-

Mart) must make up the deficiency by paying it to the

Secretary of Labor. /d. at 184. The Secretary of Labor

was authorized to use the proceeds of any payments

by Wal-Mart to fund Maryland’s Medicaid program.

Id. Wal-Mart’s employees would not receive any

additional benefits, services, or cost savings in return

for such payments. Jd. at 193.

Recognizing that a law which “effectively man-

dates some element of the structure or administration

of employers’ ERISA plans” is preempted while a law

that “doles] not bind the choices of employers or their

ERISA plans” is generally permissible, the Fourth

Circuit concluded that the Fair Share Act fell within

the former category and was thus invalid. Jd. at 193.

The Court reasoned that the Maryland law effectively

required Wal-Mart to alter its ERISA plan because no

rational employer would choose to pay this money to

the State when it could instead increase health care

spending in a manner that benefited its employees:

In effect, the only rational choice employers

have under the Fair Share Act is to structure

their ERISA healthcare benefit plans so as to

meet the minimum spending threshold. The

Act thus falls squarely under [22] Shaw's

prohibition of state mandates on how em-

ployers structure their ERISA plans.

Td. at 193-194.

App. 33

As the Ninth Circuit explained, San Francisco’s

ordinance, “[i]Jn stark contrast to the Maryland law,

offers employers a meaningful alternative that

allows them to preserve the existing structure of their

ERISA plans.” GGRA I/, 546 F.3d at 660. Employees

whose employers comply through payments to the

City, rather than by establishing or altering ERISA

plans, receive “tangible benefits” in return. /d.

Highlighting the reasonableness of this choice as

compared to the penalty in Maryland, 894 employers

have selected the city payment option since the

health care spending obligation took effect. Katz Decl.

at {| 11. That so many employers have selected the

city payment option is not surprising, since it allows

employers to avoid the inconvenience of setting up

their own ERISA plans, while ensuring that their

workers will receive comprehensive health coverage

from the City at a price far lower than it would cost in

the private market.”

" Specifically, by simply writing a check to the City,

employers avoid a burden that may include hiring an employee

benefits consultant, learning about and deciding among the

many benefit options, contracting with a third party adminis-

trator to maintain the plan and process employee claims,

preparing the disclosure documentation required by ERISA,

complying with ERISA’s reporting requirements, and potentially

exposing themselves to ERISA-related litigation. And the health

benefits received by employees from the City will often be

extraordinarily generous in relation to the amount paid by the

employer. As discussed at pp. 7-9, supra, the average insurance

premium in California $379 per month when the ordinance took

effect. In contrast, for a medium sized employer with an

(Continued on following page)

App. 34

[23] Notwithstanding this, GGRA claims an

inter-circuit conflict based on the Fourth Circuit’s

discussion of an issue that was not presented to, or

considered by, the Ninth Circuit here. Specifically,

after holding that the option of paying the govern-

ment was nothing more than a penalty that forced

Wal-Mart to alter its ERISA plan, the court went on

to address Maryland’s alternative argument that

Wal-Mart had other, private non-ERISA means for

complying. These alternatives, according to Mary-

land, were to satisfy the spending requirement

through the creation and administration of on-site

medical clinics, or through the establishment of

Health Savings Accounts (“HSAs”). The court rejected

this argument on the ground that the purported

alternatives were unrealistic. 475 F.3d at 196. And

then the court observed that even if Wal-Mart could

avail itself of these options, doing so would neces-

sarily also produce a change in the company’s ERISA

plan:

If Wal-Mart were to attempt to utilize non-

ERISA health spending options to satisfy the

Fair Share Act, it would need to coordinate

employee who works 20 hours per week, the employer could

satisfy its spending obligation in 2008 by paying the City $93.60

per month. This allowed the employee to obtain a membership

that provides comprehensive health services, which cost the City

on average $261 per month to provide. In other words, if the

employer chooses the government payment option, its employees

receive comprehensive health benefits for pennies on the dollar,

and the City picks up the rest of the tab.

App. 35

those spending efforts with its existing

ERISA plans. For example, an individual

would be eligible to establish a Health

Savings Account only if he is enrolled in a

high deductible [ERISA] health plan. See 29

U.S.C. § 223(c)(1). In order for Wal-Mart to

make widespread contributions to Health

Savings Accounts, it would have to alter its

package of ERISA health insurance plans to

encourage its employees to enroll in one of its

high deductible health plans. From _ the

employer’s perspective, the categories of

ERISA and non-ERISA healthcare spending

would not be isolated, unrelated costs.

Decisions regarding one would affect the

other and thereby violate ERISA’s preemp-

tion provision.

Id. at 196-97. As Judge William Fletcher pointed out

in his opinion concurring in the denial of rehearing en

banc, GGRA and the dissenting judges omit the

sentences from the above passage which show that

the [24] Fourth Circuit was addressing Maryland’s

specific argument pertaining to on-site medical clinics

and HSAs. GGRA Appendix, Ex. F.

Accordingly, the decisions of the Fourth and

Ninth Circuits are not in conflict. Both decisions

apply well-established precedent, and their holdings

operate in harmony to reaffirm the general ERISA

preemption principle — in the specific context of heath

care — that while a local government may not

effectively force employers to alter or adopt ERISA

plans, it may impose spending obligations that allow

App. 36

employers to comply while leaving ERISA plans

undisturbed."

B. Other Factors Counsel Against A Grant

Of Certiorari.

Particularly given the absence of an inter-circuit

conflict, even if the Court believes this ERISA

preemption issue may someday be worthy of review,

there are substantial reasons to avoid confronting the

issue at this time, in the context of this case.

First, there is no serious possibility that other

jurisdictions will adopt programs like San Francisco’s

in the near future. GGRA has cited only measures

that were proposed prior to 2006; it does not cite one

measure proposed after the Ninth Circuit allowed

San Francisco’s program to take effect. Furthermore,

many of those pre-2006 proposals were similar or

identical to the law struck down by the Fourth

Circuit, See p. 15, supra. Under the Ninth Circuit’s

reasoning, proposals of this kind have not been given

new life.

' GGRA also contends this case is worthy of certiorari

because the decision below conflicts with the decisions of this

Court. Because, in reality, a ruling striking down San Fran-

cisco’s program would require the Court to jettison its existing

precedent, GGRA’s contention in this regard is' more

appropriately addressed in Section IV, which explains why a

majority of the Court would be unlikely to reverse the decision

below.

App. 37

[25] Moreover, it would be extraordinarily

difficult for other jurisdictions to establish the type of

reasonable non-ERISA compliance option provided by

San Francisco’s ordinance: payment into a compre-

hensive, government-run health care program that

the City invested significant public dollars to build,

and spends significant public dollars (substantially

more than that received from employer payments) to

maintain. Particularly in this time of financial

hardship for state and local governments, it will be

challenging indeed to follow in San _ Francisco’s

footsteps.

Of course, if that turns out wrong, and if GGRA’s

dire forecast of multiple health care obligations

across jurisdictions bears out, then the Court will

have ample opportunity to address the matter in the

future. But because there is no reason to credit

GGRA’s assertion that multiple laws are on the verge

of sprouting up, and because GGRA’s contention that

compliance with multiple spending requirements will

be unworkable for employers is presently based on

pure speculation, intervention by the Court is not

required at this time.

On a related note, the national discussion on

President Obama’s proposal for health care reform is

beginning in earnest, and there are reasons for the

Court to avoid venturing into that discussion.

Generally speaking, the enactment of national heath

care legislation could obviate the need for local

governments to act separately to address the health

care crisis — indeed, this is presumably another

App. 38

reason other jurisdictions are not rushing to build

programs of the HAP’s magnitude. And if the federal

government enacts legislation that includes an

employer spending requirement as the President has

proposed, this would presumably preempt local

requirements like San Francisco’s. Or, national

health care reform may take another route, by

explicitly authorizing local requirements like |26] San

Francisco’s. Either way, the outcome of the health

care debate could very well moot the ERISA

preemption issue GGRA urges the Court to take up

immediately.

iV. THE DECISION BELOW IS CORRECT.

Finally, even if the Court were to grant certiorari,

it would likely affirm the decision below. GGRA’s

argument on the merits is that local governments

may not subject employers to health care expenditure

requirements. This argument rests on the assump-

tion that when it comes to matters (like health care)

that are mentioned in ERISA, local governments

simply may not impose expenditure requirements.

This Court has rejected that assumption. Indeed, the

Court would be required to repudiate the principles

expressed in its existing ERISA preemption cases to

rule in GGRA’s favor.

Although ERISA’s preemption provision protects

employers’ ability to maintain plan uniformity, it does

not guarantee expenditure uniformity for employers.

For example, in Fort Halifax, the Court held that a

App. 39

state law requiring minimum severance pay expen-

ditures was not preempted because it did not

interfere with plan uniformity. The Court made clear

that states and localities may regulate the benefits

mentioned in ERISA so long as they do not require

alteration of ERISA plans:

Appellant’s basic argument is that any state

law pertaining to a type of employee benefit

listed in ERISA necessarily regulates an

employee benefit plan, and therefore must

be pre-empted. Because severance benefits

are included in ERISA, see 29 U.S.C.

§ 1002(1)\(B), appellant argues that ERISA

pre-empts the Maine statute. In effect, appel-

lant argues that ERISA forecloses virtually

all state legislation regarding employee

benefits. This contention fails, however, in

light of the plain language of ERISA’s pre-

emption provision, the underlying purpose of

that provision, and the overall objectives of

ERISA itself.... ERISA’s pre-emption pro-

vision does not refer to state laws relating to

“employee benefits,” but to state laws [27]

relating to “employee benefit plans” ... The

words “benefit” and “plan” are used sepa-

rately throughout ERISA, and nowhere in

the statute are they treated as the equiv-

alent of one another. Given the _ basic

difference between a “benefit” and a “plan,”

Congress’ choice of language is significant in

its pre-emption of only the latter.

482 U.S. at 7-8 (emphasis in original).

App. 40

Similarly, in Morash, the Court considered the

preemptive effect of ERISA on state laws requiring

the payment of unused vacation benefits to employees

upon their discharge. Even though vacation pay is

listed in ERISA, the Court concluded that such state

laws are not preempted, so long as they do not

infringe upon ERISA plans. 490 U.S. at 114-15.

In the area of health care itself, the very struc-

ture of ERISA necessarily contemplates that em-

ployers will be subject to disparate costs across

jurisdictions. After all, ERISA’s savings clause ex-

empts from preemption state laws regulating in-

surance. 29 U.S.C. § 1144(b)(2)(A). This has resulted

in the enactment of more than 1,961 mandates on

health insurance, and no two states impose identical

sets of coverage mandates. Victoria Craig Brunce et

al., Health Insurance Mandates in the States, Council

for Affordable Health Insurance (2008 ed.) at 1.

Accordingly, the cost of employer-provided health

insurance varies wildly from state to state. Id. at 3-5.

Congress never could have included the savings

clause if it had viewed ERISA as preserving expen-

diture uniformity for employers in the area of health

care. “Such disuniformities ... are the inevitable

result of the congressional decision to ‘save’ local

insurance regulation.” Metropolitan Life Ins. Co. uv.

Massachusetts, 471 U.S. 724, 747 (1985). And that is

why “cost uniformity was almost certainly not an

object of pre-emption, just as laws with only an

indirect economic effect on the relative [28] costs of

various health insurance packages in a given State

App. 41

are a far cry from those ‘conflicting directives’ from

which Congress meant to insulate ERISA plans.”

Travelers, 514 U.S. at 662 (emphasis added).

The upshot is that employers commonly face

differing cost (and recordkeeping) requirements in

different jurisdictions. They are subject to varying

severance pay requirements, minimum wage require-

ments, vacation pay requirements, apprenticeship

and/or training program requirements, taxes, fees,

and sick leave requirements, to name just a few. And

a requirement in one of these areas may affect the

employer’s decision about expenditures in another

area. Such is the unavoidable (and utterly unre-

markable) consequence of doing business in multiple

jurisdictions in the United States.

In sum, ERISA does not insulate businesses from

being required to spend money. Local requirements

are only preempted if they interfere with plan

uniformity, and as discussed at length herein, San

Francisco's ordinance does not do that. To reverse the

decision below, the Court would be required to

repudiate the principles discussed above, as well as

the cases that articulate them, such as Fort Halifax,

Morash, Travelers, and Dillingham. Accordingly, it is

unlikely that five Justices of this Court would rule in

GGRA’s favor on the merits.

App. 42

[29] CONCLUSION

The application for a stay should be denied.

Dated: March 27, 2009

By: /s/

Respectfully submitted,

DENNIS J. HERRERA

City Attorney

WAYNE SNODGRASS

VINCE CHHABRIA

CHRISTINE VAN AKEN

Deputy City Attorneys

Vince Chhabria

VINCE CHHABRIA

Attorneys for Respondent

STEPHEN P. BERZON

SCOTT A. KRONLAND

STACEY M. LEYTON

ALTSHULER BERZON LLP

SML/re

STACEY M. LEYTON

Attorneys for

Intervenor/Respondents

App. 43

APPENDIX B

City and County Department of

of San Francisco Public Health

101 Grove Street

San Francisco, CA 92402

Telephone: (415) 554-2600

Facsimile: (415) 554-8111

[SEAL]

REGULATIONS IMPLEMENTING HEALTHY

SAN FRANCISCO AND MEDICAL

REIMBURSEMENT ACCOUNT

PROVISIONS OF THE SAN FRANCISCO

HEALTH CARE SECURITY ORDINANCE

1. Purpose

(a) The purpose of these Regulations is to im-

plement Chapter 14, Sections 14.2 and 14.4 of the

San Francisco Administrative Code, the San Fran-

cisco Health Care Security Ordinance (“HCSO” or

“Ordinance”) which authorizes the Department of

Public Health (“DPH”) to: (i) create and administer a

program to provide health care services to San

Francisco’s uninsured residents; and (ii) establish and

maintain Medical Reimbursement Accounts for non-

residents who work in San Francisco and other

qualified individuals.

(b) The program referenced in subsection (a)(3)

above is identified in the Ordinance as the “Health

Access Program.” However, DPH has determined that

the name “Health Access Program” creates confusion

App. 44

among San Francisco residents because of its simi-

larity to other programs. Accordingly, the program

shall be named “Healthy San Francisco,” and is here-

inafter referred to in these regulations as “Healthy

San Francisco.”

among those programs offered in satisfaction of the

City and County of San Francisco’s obligation to

provide services to indigent persons under California

Welfare and Institutions Code Section 17000. The

Regulations in no way shall be construed as an

expansion of the City and County of San Francisco’s

existing obligations to provide health care under any

California and/or federal law. Nor shall the regula-

tions limit an individual’s entitlement to those ser-

vices otherwise required under California law.

2. Definitions

(a) Applicant. Any person who applies. to

participate in the Healthy San Francisco program or

the Medical Reimbursement Account program.

(b) Application. The form developed by DPH to

determine applicant eligibility for Healthy San Fran-

cisco.

(d) Clinical Site or Clinical Setting. Any li-

censed facility that provides health services.

App. 45

(e) Covered Employee. Any person that meets

the definition provided in Section 14.1(b)(2) of the

Administrative Code and Regulation 3 of the Office of

Labor Standards and Enforcement’s Regulations Im-

plementing the Employer Spending Requirement of

the San Francisco Health Care Security Ordinance.

(f) Covered Employer. An employer that meets

the definition as set forth in Section 14.1(b)(3) and its

inclusive subparts of the Administrative Code and

Regulation 2 of the Office of Labor Standards and

Enforcement’s Regulations Implementing the Employer

Spending Requirement of the San Francisco Health

Care Security Ordinance.

(g) Federal Poverty Level. Level determined by

the “Poverty Guidelines for the 48 Contiguous States

and the District of Columbia” as contained in the

Annual Update of the HHS Poverty Guidelines de-

veloped by the United States Department of Health

and Human Services as published in the Federal

(h) Healthy San Francisco Participant. Any

uninsured San Francisco resident who fulfills all

Healthy San Francisco eligibility provisions and is

enrolled in the program.

(i) Health Services. Those services provided

through the Healthy San Francisco program which a

Participant will receive to treat a health or medical

condition, promote health and/or prevent disease.

App. 46

(j) Household Income. The total annual income

of all family members in a household.

(k) Medical Home. The clinical site or clinical

settling in which a Participant receives preventive

and primary care services.

(lL) Medical Reimbursement Account. An account

established and maintained by DPH or its vendor

from which eligible individuals may receive reim-

bursement for out-of-pocket medica! expenses.

(m) Ordinance. The San Francisco Health Care

Security Ordinance adopted by San Francisco Board

of Supervisors as Ordinance 218-06, inclusive of any

future and subsequent amendments.

(n) Participation Fee: A quarterly amount that

Participants in Healthy San Francisco must pay to

remain eligible for care under the program.

(o) Point-of-Service Fees: The amount(s) a Par-

ticipant must pay for specific services at the time

services are obtained.

(p) Provider: A California licensed health plan,

hospital, clinic, medical group or clinician contracted

to deliver health services to program Participants.

(q) Third-Party Administrator A vendor or

other entity that DPH enters into a contract with to

perform specified administrative functions on behalf

of the program.

App. 47

3. Healthy San Francisco Program Eligibility

(a)

An eligible Participant is any person who:

(i)

(41)

(iit)

(iv)

resides in San Francisco and provides

documentation of San Francisco resi-

dency based on the guidelines stated

in the Healthy San Francisco program

brochure provided to applicants;

is between the ages of 18 and 64 years

old, or is an emancipated minor, or a

minor not living in the home of a birth

or adoptive parent, a legal guardian,

,caretaker relative, foster parent, or

stepparent, and is applying for cover-

age on his or her own behalf;

has been without employer-based or

individually-purchased health insurance

for 90 days from the date of application

for Healthy San Francisco eligibility, or

has lost employer-based health care

coverage within 90 days of date of

application due to a change in employ-

ment status, or who has lost COBRA

coverage within 90 days of date of

application; and

is ineligible for California and/or

federally-funded health insurance or

assistance programs, provided that the

applicant’s eligibility for the following

programs shall not make the applicant

ineligible for Healthy San Francisco:

1) Pregnancy-Related Medi-Cal (Omni-

bus Budget Reconciliation Act);

App. 48

2) Pregnancy-Related Medi-Cal (Pre-

sumptive Eligibility);

3) AIM Access for Infants and Moth-

ers and

4) Omnibus Budget Reconciliation Act

Medi-Cal (non-pregnancy and emer-

gency only).

(b) Neither employment status, immigration

status nor the existence of pre-existing health con-

ditions shall be used to exclude a person from eligi-

bility for Healthy San Francisco.

ipation in Healthy San Francisco and a process for

obtaining a Medical Reimbursement Account for

potential participants.

(d) The Healthy San Francisco application will

collect information from the applicant necessary to

determine program eligibility and eligibility for any

subsidies for participation in the program, including,

but not limited to name, address, household income,

and employment status.

(e) An eligible Participant shall be enrolled for

participation into the Healthy San Francisco program

if he/she submits a completed application, fulfills the

eligibility requirements and pays the required partic-

ipation fees as established by DPH.

(f) DPH shall, from time to time, require par-

ticipants to re-establish eligibility for participation in

Healthy San Francisco.

App. 49

4. Healthy San Francisco Program Fees

(a) Healthy San Francisco will have two fee

components for its Participants; “participation fees”

and “point-of-service fees.” These fees shall be based

on Participant income which is measured with ref-

erence to the Federal Poverty Level.

(i) Participation fees shall be assessed on

a quarterly basis for continued partic-

ipation in the Healthy San Francisco

program.

(ii) Point-of-service fees shall be assessed

on a sliding scale based on a Partic-

ipant’s Federal Poverty Level when a

Participant receives services at a

clinical site or clinical setting.

Gili) Any person with an annual household

income between 0% and 500% of the

Federal Poverty Level shall be eligible

for a subsidy for the participation fee,

to be determined by DPH.

(b) Non-payment of the participation fee by the

program Participant can result in cancellation of

enrollment from the Healthy San Francisco program.

5. Healthy San Francisco Services

(a) The program shall provide health services

for the treatment of medical conditions with an em-

phasis on wellness, preventive, and primary care.

Services include: professional services by clinicians

App. 50

(i.e., doctors, nurse practitioners, physician assis-

tants, and other licensed health care providers) in-

cluding preventive, primary, diagnostic, and specialty

services; inpatient and outpatient hospital services;

diagnostic and laboratory services, including thera-

peutic radiological services; behavioral health ser-

vices, including mental health and substance abuse

services; prescription drugs, excluding drugs for

excluded services; home health care; urgent care; and

emergency care provided in San Francisco.

(b) The following is a non-exclusive list of

services that shall not be provided by Healthy San

Francisco program:

G) Acupuncture;

Gi) Allergy Testing and Injections;

Gii) Audiology (including hearing aids);

‘iv) Chiropractic;

(v) Cosmetic;

(vi) Dental;

(vii) Gastric By-Pass Surgery and Services;

(viii) Genetic Testing and Counseling;

(ix) Infertility;

(x) Long-Term Care;

(a1) Organ Transplants;

(xii) Sexual Reassignment Surgery;

App. 51

(xiii) Transportation: Non-emergency; and

(xiv) Vision.

services, including emergency services, provided out-

side the City and County of San Francisco.

6. Healthy San Francisco Service Provision

and Delivery Network

(a) Each Participant shall have a designated

clinical site or clinical setting that shall serve as

his/her primary care medical home. The primary care

medical home shall coordinate a Participant’s access

to services in the program, monitor management of

medical conditions and previde continuity of care.

G) Upon enrollment into the program,

Participants shall select their primary

care medical home from a list of

participating Healthy San Francisco

clinic sites or clinical settings.

Gi) Participants may request a medical home

change during their pre-determined

program recertification and _ re-enroil-

ment process.

Gili) Participants may make requests to

change their primary care provider (i.e.,

a physician, nurse practitioner or phy-

Sician assistant) within their medical

home.

App. 52

(b) ‘The network of providers delivering services

to program Participants shall be confined to licensed

providers who have a physical location and practice

in the City and who have entered into agreements

and/or contracts with DPH and/or its Third-Party Ad-

ministrator to provide services under this program.

reimburse payment for services delivered to program

Participants by providers that have not entered into

agreements and/or contracts with DPH and/or its

Third-Party Administrator to provide services to Par-

ticipants under this program.

7. Covered Employee Participation Rules

(a) Covered Employers who chose to satisfy the

Employer Spending Requirement under the Ordi-

nance by making payments to the City shall deliver

the payments to DPH’s Third Party Administrator.

Payments shall be made consistent with the pro-

visions of Section 14.3(a) of the Administrative Code

and Regulation 6 of the Office of Labor Standards

and Enforcement’s Regulations Implementing the

Employer Spending Requirement of the San Fran-

cisco Health Care Security Ordinance.

(b) Along with its payments, the Covered Em-

loyer shall provide to DPH’s Third-Party Adminis-

rator: (i) the name of the Covered Employee, (ii) the

amount paid per Covered Employee and (iti) other

information as needed by DPH to determine whether

the Covered Employee is eligible for participation in

App. 53

Healthy San Francisco or for the establishment of a

Medical Reimbursement Account. DPH or its Third-

Party Administrator shali provide Covered Employers

with a form upon which they may provide this

information along with their payments.

the information provided by the Covered Employer

pursuant to subsection 7(b) above to determine

whether the payment made on behalf of a Covered

Employee shall be used to fund the Covered

Employee’s participation in Healthy San Francisco or

to establish a Medical Reimbursement Account for

the Covered Employee.

(d) Covered Employees on whose behalf a pay-

ment has been made to satisfy the Employer Spend-

ing Requirement shall be notified by their Covered

Employer that such a payment has been made in

accordance with Regulation 7.1 of the Office of Labor

Standards and Enforcement’s Regulations Imple-

menting the Employer Spending Requirement of the

San Francisco Health Care Security Ordinance.

(e) DPH or its Third-Party Administrator shall

inform Covered Employees where they may go to be

screened for enrollment in Healthy San Francisco

and/or establishment of Medical Reimbursement

Accounts.

(f) A Covered Employee on_ whose _ behalf

payment has been made to DPH must, in order to

participate in Healthy San Francisco, meet program

App. 54

eligibility requirements and enroll in Healthy San

Francisco.

(i)

(ii)

A Covered Employee who is determined

to be eligible for Healthy San Francisco

shall receive a discount of 75% off the

participation fee that s/he would other-

wise be required to pay to participate in

Healthy San Francisco. If as a result of

the discount the fee is less than $50 per

quarter, the participation fee shall be

waived.

Payments by the Covered Employer

shall entitle the Covered Employee to a

discounted Participation Fee for six

months from the date of enrollment.

After six months from the date of

enrollment, and every six months

thereafter, DPH or its Third-Party

Administrator shall determine whether

the Participant’s Covered Employer has

continued payments on the Partici-

pant’s behalf in the preceding six

months. If the Covered Employer has

continued to make such payments, the

Participant shall remain eligible for a

discounted Participation Fee for the

following six months. If DPH or its

Third-Party Administrator determines

that the Covered Employer has not

made payments on the Participant’s

behalf for the preceding six months, the

Participant may remain enrolled in

Healthy San Francisco by paying a non-

discounted Participation Fee.

App. 55

(g) A Covered Employee that does not meet the

program eligibility requirements for participation

in Healthy San Francisco but wishes to benefit from

the payment made on his/her behalf by a Covered

Employer, may sign up for a Medical Reimbursement

Account to be established and maintained by DPH’s

Third Party Administrator. Any funds collected on

behalf of a Covered Employee during the calendar

year shall be forfeited if the Covered Employee does

not sign up for a Medical Reimbursement Account by

July 1 of the subsequent calendar year. Any forfeited

funds shall be used by DPH to fund the programs

described in these regulations.

(i) Covered Employees may obtain

reimbursement from the Medical

Reimbursement Account for medical

care, services or goods that may qualify

as tax deductible medical expenses

under Section 213 of the Internal

Revenue Code including the costs of

diagnosis, cure, mitigation, treatment,

or prevention of disease, and the costs

for treatments affecting any part or

function of the body, including the costs

of equipment, supplies and diagnostic

devices needed for these purposes.

Reimbursable medical expenses may

also include dental expenses, premiums

paid for insurance that covers the

expenses of medical care and the

’ amount paid for transportation to

receive medical care.

App. 56

Gi) Any administrative fees charged to the

City to establish and maintain the

Covered Employee’s Medical Reim-

bursement Account shall be deducted

from the balance amount in_ that

Covered Employee’s Medical Reim-

bursement Account.

Gili) A Covered Employee must use the

money deposited into the Medical

Reimbursement Account within a

designated period of time as determined

by DPHI.

8. Public Information on Healthy San Fran-

cisco

(a) DPH shall make available to the public all

information necessary to facilitate participation in

the programs authorized by the Ordinance.

(b) Written program materials for applicants

and participants will be offered, at a minimum in the

following languages: Chinese, English and Spanish.

ensure that access to program information is avail-

able through the 311 System operated by the City.

9. Healthy San Francisco Administration

(a) DPH is responsible for the overall adminis-

tration of the Healthy San Francisco and Medical

Reimbursement Account programs. Its responsibil-

ities include, but are not limited to: overseeing overal]

App. 57

program development and implementation; defining

program goals, design and policy objectives; ensuring

adequate financing and evaluating the program’s

effectiveness.

(b) DPH may enter into a_ vendor/contract

relationship with a Third-Party Administrator and/or

other entities to perform specific administrative or

programmatic functions needed to appropriately

operate and maintain the program.

10. Reporting

(a) DPH shall make annual reports to the San

Francisco Health Commission on the status of the

Healthy San Francisco and Medical Reimbursement

Account programs.

(b) DPH shall comply with Section 14.4(f) of the

Administrative Code with respect to Healthy San

Francisco and Medical Reimbursement Account pro-

gram reports to the San Francisco Board of Super-

visors.

App. 58

APPENDIX C

DENNIS J. HERRERA, State Bar #139669

City Attorney

WAYNE SNODGRASS, State Bar #148137

VINCE CHHABRIA, State Bar #208557

Deputy City Attorneys

City Hall, Room 234

1 Dr. Carlton B. Goodlett Place

San Francisco, California 94102-4682

Telephone: (415) 554-4674

Facsimile: (415) 554-4747

E-Mail: vince.chhabria@sfgov.org

JEFFREY LEWIS, State Bar #66587

LEWIS, FEINBERG, LEE, RENAKER

& JACKSON, P.C.

1330 Broadway, Suite 1800

Oakland, CA 94612

Telephone: (510) 839-6824

Facsimile: (510) 839-7839

E-Mail: jlewis@lewisfeinberg.com

Attorneys for Defendant

CITY AND COUNTY OF SAN FRANCISCO

App. 59

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

GOLDEN GATE

RESTAURANT

ASSOCIATION, an

incorporated non-profit

trade association,

Plaintiff,

CITY AND COUNTY OF

SAN FRANCISCO and

Does 1 through 15, inclusive,

Defendants,

and

SAN FRANCISCO CENTRAL

LABOR COUNCIL,

SERVICE EMPLOYEES

INTERNATIONAL UNION

(“SEIU”) LOCAL 1021,

SEIU UNITED

HEALTHCARE WORKERS

WEST, and UNITE-HERE!,

LOCAL 2,

Intervenors.

Case No. C06-6997 JSW

SAN FRANCISCO’S

MEMORANDUM IN

OPPOSITION TO

GGRA’S MOTION

FOR SUMMARY

JUDGMENT

Hearing

Date:

ry.

lime:

Place:

August 31, 2007

9:00 a.m.

Courtroom 2

17th Floor

(Filed Aug. 3, 2007)

(9) GGRA appears to contend that any time a

state or

local government requires an employer to

keep records of its health care expenditures, this runs

afoul of ERISA. See GGRA’s Memorandum of Points

App. 60

and Authorities (““GGRA’s Opening Brief”) at 15-16.

or this proposition GGRA cites Aloha Airlines, Inc. v.

Ahue, 12 F.3d 1498, 1505 (9th Cir. 1993), in which the

Ninth Circuit struck down a law that imposed re-

porting requirements on a plan. But again, GGRA

fails to recognize that there is a distinction between

imposing recordkeeping requirements on an employer,

which is what the HCSO does, and imposing

recordkeeping requirements on an ERISA plan. As

the Ninth Circuit explained in WSB (a case not cited

by GGRA in its opening brief), this distinction is

significant. Although California’s prevailing wage law

required employers to keep track of benefit expen-

ditures for employees on an hourly basis, this was an

employer payroll practice, not a matter of ERISA plan

administration. Because the recordkeeping require-

ments were imposed on employers, the law was not

preempted. WSB, 88 F.3d at 793."

* An example of the distinction between employer payroll

practices and ERISA plan administration practices is provided

by GGRA itself. GGRA offers information about the plans

offered by Max’s Restaurants for the purpose of establishing

standing. See generally Declaration of Gregory Boro in Support

of GGRA’s Motion for Summary Judgment. Although the City

does not contest GGRA’s standing, Max’s plan documents

provide an illustration of how the recordkeeping provisions of

the Ordinance operate without interfering with uniform plan

administration.

Max’s provides health benefits to some of its employees

through Kaiser and HealthNet HMOs. See Declaration of Vince

Chhabria in Opposition to GGRA’s Motion for Summary

Judgment (“Chhabria Decl.”), Exh. A-B. As the documents for

(Continued on following page)

App. 61

Furthermore, the employer is already in posses-

sion of the minimal information necessary to estab-

lish compliance. As discussed above, the employer

need only determine: (1) the hours worked by its

covered employees; and (2) how much it spent on

those employees. With respect to the first [10] item,

numerous laws already require the employer to track

hours worked, including California Labor Code

section 226. Moreover, employers must already main-

tain records of hours worked by their San Francisco

employees, as set forth in the City’s Sick Leave

Ordinance. See S.F. Admin. Code § 12W.6.° With

respect to the second item, tracking the information

those plans demonstrate, Max’s has delegated virtually all

aspects of plan administration to the HMOs themselves. The

HMOs create the plan documents, process enrollment requests,

create procedures for paticnts to file claims for benefits, and

administer those claims procedures. See, e.g., Chhabria Decl.

Exh. A at 21, 30, 36, 42-43, 120-22, 133; Exh. B at 13, 17, 29, 40,

65-66, 72, 77-79. But the HCSO does not require the HMOs to

keep records of any of these functions. Rather, it requires

“covered employer|s]” to maintain records sufficient to demon-

strate compliance with the Ordinance and to provide an annual

report to the City. S.F. Admin. Code § 14.3(b). As even Mr. Boro

admits in his declaration, it is “the company,” not the HMOs,

that will prepare the records necessary to establish compliance

with the Ordinance. Boro Decl. at 4 8.

In any event, as demonstrated by the prevailing wage cases,

even if an employer administers its own plan, laws like the

HCSO impose recordkeeping obligations on the employer qua

employer, not the employer gua plan administrator.

* As the documents submitted by Max’s Restaurants dem-

onstrate, it already keeps track of hours worked. See Chhabria

Decl., Exh. C.

App. 62

is even easier. For example, Max’s Restaurants re-

ceives a bill every month from the HMOs which sets

forth the amount due for each individual employee.

Chhabria Decl., Exhs. D-E. With these two items of

information, the employer need only divide item two

by item one — 1.e., the amount spent on health care for

an employee by the number of hours worked by that

employee — to establish compliance.°

In sum, employers commonly must engage in

different payroll practices in different jurisdictions.

As the prevailing wage cases already demonstrate,

sometimes those payroll practices relate to health

benefits. And in San Francisco, with the enactment of

the HCSO, one of those payroll practices is the simple

act of division described above. The Ordinance does

not require ERISA plans to keep any records, nor

does it require ERISA plans to report any information

to the City. It requires employers to do so, and the

* In fact, for employers that provide uniform health benefits

to groups of employees, establishing compliance will be even

easier than the simple calculation described above. Those em-

ployers can simply divide their total employee health care ex-

penditures by the total number of hours their covered employees

have worked, and if that calculation demonstrates that the

employer is spending, on average, more than the minimum

required amount per employee, compliance has been estab-

lished. RJN Exh. B (OLSE Reg. No. 6.2(B)(1)). Based on Max’s

own description of its ERISA plans, see Boro Decl. at 4{ 5-7, it

appears Max’s could avail itself of this shortcut.

App. 63

Ninth Circuit has made clear that this creates no

preemption problem.’

C. The Enforcement Provisions Do Not In-

terfere With Uniform Plan Administra-

tion.

GGRA also contends the HCSO is preempted

because it creates “an enforcement scheme beyond

that provided by ERISA.” GGRA Opening Brief at 16.

Specifically, GGRA asserts that the provisions of the

Ordinance that permit the Office of Labor Standards

Enforcement (““OLSE”) to

* * os

* Furthermore, as discussed in the City’s Opening Brief,

even if the Ordinance were to impose these administrative

burdens on ERISA plans as opposed to employers, the Supreme

Court has upheld laws of general applicability that impose

administrative burdens far more onerous than this one on

ERISA plans. City’s Opening Brief at 23; Mackey v. Lanier

Collection Agency & Service, 486 U.S. 825, 831 (1988).

App. 64

APPENDIX D

Amendment of the whole

in committee. 7/17/06

FILE NO. 051919 ORDINANCE NO. 218-06

[San Francisco Health Care Security Ordinance]

Ordinance amending the San Francisco Ad-

ministrative Code to add Chapter 14, Sections

14.1 through 14.8, to provide health care

security for San Francisco residents by creat-

ing a public health access program for the

uninsured, requiring employer paid health ex-

penditures, identifying options for how an em-

ployer may make such expenditures, creating

an advisory health access working group, and

setting an operative date.

Note: Additions are single-underline italics Times

New Raman;

deletions are sétrtkethreush—ttattes—times

Sen diterereer tr.

Board amendment additions are double

underlined.

Board amendment deletions are strike-

threugh nermat.

Be it ordained by the People of the City and

County of San Francisco;

Section 1. Declaration of legislative find-

ings and intent. All San Francisco residents should

have quality, affordable health care. Currently,

approximately 82,000 adult San Francisco residents

are uninsured, even though more than half of those

App. 65

individuals are employed. San Francisco taxpayers

bear the cost of paying for emergency room visits and

other unnecessarily expensive health care for the

uninsured. By establishing a Health Access Program

for uninsured San Francisco residents with an em-

phasis on preventive care and by requiring busi-

nesses’ to make reasonable health care expenditures

on behalf of their employees depending on the busi-

nesses ability to pay, the burden on San Francisco

taxpayers for providing health care for the uninsured

can be reduced. At the same time, San Francisco can

offer uninsured individuals the choice to enroll in a

system that provides quality health care for an

affordable price and offer employers the choice to

enroll their employees in that system. San Francisco

also has a vital interest in preventing a “race to the

bottom” in which employers stop paying for employee

health care to remain competitive and instead shift

those costs to San Francisco taxpayers.

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