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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 2010
- **Citation:** 561 U.S. 1024

## Text

No. 08-1515

Jn the Supreme Court of the Cnited States

GOLDEN GATE RESTAURANT ASSOCIATION,
PETITIONER
Vv.
CITY AND COUNTY OF SAN FRANCISCO, CALIFORNIA,
ET AL.

ON PETITION FORA WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

NEAL KUMAR KATYAL

M. PATRICIA SMITH Acting Solicitor General
Solicitor of Labor Counsel of Record
TimoTHy D. HAUSER EDWIN 5. KNEEDLER
ennai Mnllaliis Deputy Solicitor General
?) sw adeen Sapeiee MATTHEW Ly. ROBERTS
ata al , 1 . oe i y, > \’ 979 *
Counsel for Appellate and a esol the Solicit
Special Litigation ger cag

Department of Justice
MELISSA MOORE Washington, 12.C. 20530-0001
Attorney ; SupremeCtBriefs@usdoj.gov
Department of Labor (202) 514-2217
Washington, D.C. 20210

QUESTION PRESENTED

Whether the Employee Retirement Income Security
Act of 1974, 29 U.S.C. 1144(a), preempts the provisions
of San Francisco’s Health Care Security Ordinance, S.F.
Cal. Admin. Code §§ 14.1-14.8 (2007), mandating that
covered employers in San Francisco spend a specified
amount for health care benefits for their covered em-
plovees.

(1)

TABLE OF CONTENTS

Page
SE Ae Gane SOE SE sg cn ue kc abe) Wks bebe u eRe een l
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eee a eres a eke FOS ES CRA ERC EEE Cede oes 8
CN oc dG each ae Fees bate kee bee ee take ees an
TABLE OF AUTHORITIES
Cases:
Aetna Health Inc. v. Davila, 542 U.S. 200 (2004) 1.2.2.2... 3)
Black v. Cutter Labs., 351 U.S. 292 (1956) ............. 19
Chevron U.S.A. Inc. v. NRDC, 467 U.S. 857 (1984) ...... 8
District of Columbia v. Greater Washington Bd. of
TV, ee Ua. RR oo 6 6b econ woe hacevten 20, 21
Egelhoff v. Egethoff, 532 U.S. 141 (2001) ............ 10, 20
Fort Halifax Packing Co. v. Coyne, 482 U.S. 1
fo ee es er er ee eee 10, 11

Ingersoll-Rand Co.v. McClendon, 498 U.S. 138
8 REST Tere ere eee Te CPE E CR Ter ree 20), 21

Massachusetts v. Morash, 490 U.S. 107 (1989) .....0... 13
New York State Conference of Blue Cross & Blue

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

RN Boe hart cea are AA ee ara 9 10
Qualls v. Blue Cross of Cal. Imc., 22 F.3d 839 (9th Cir.

TS et od ae to Wine att ete at eal Rennes Cea) 1]
Retaal Indus. Leaders Ass’n v. Fielder, 475 F.3d 180

a I Ol 8 nt hs 2d ee La ae 7,17, 18, 19
Shaw v. Delta Air Lines, Inc., 463 U.S. 85

tS RAE OnE en PRE arte Monee eee PRS 4,9, 17, 20
Wisconsin Pub. Intervenor v. Mortier, 501 U.S. 597

| Bape ael empire rn Sear nagees i eur be ee Meanie gaarrey 16

[V

Statutes and regulations: Page

K;mployee Retirement Income Security Act of 1974,
29 U.S.C. 1001 et seq.:

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EB FR Re ee ene ee ee )
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ee Eb ok 06 0540 Koo ees eN eT EKEN ee 9
BRP Eg Ry 6 . 5 EIR a oe enn eae 9 16
ee ee EN Ss ages 0s he oo eS 60 eek eRe 17
l’ederal Insecticide, Fungicide, and Rodenticide Act,
Pe Se cae eV idee cee u nee Nes tick ecees 16
Health Care and Education Reconciliation Act of
2010, Pub. L. No. 111-152, 124 Stat. 1029 ......... S13

Patient Protection and Affordable Care Act, Pub. L.
ee ee ee, ee ctsesaneeeebs 8 13
Health Care Security Ordinance, S.J°. Cal. Admin.

BR ee, ES Ee eee ae a ae ee ]
Miscellaneous:
ee es ee Dk vce rence ne obce sks sue suepes 12

Jun the Supreme Court of the Gnited States

No. 08-1515
GOLDEN GATE RESTAURANT ASSOCIATION, PETITIONER
7.

Crry AND COUNTY OF SAN FRANCISCO, CALIFORNIA,
ET AL.

ON PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

INTEREST OF THE UNITED STATES
This bricf is submitted in response to the order of
this Court inviting the Solicitor General to express the
views of the United States. In the view of the United
States, the petition for a writ of certiorari should be de-
nied.

STATEMENT

1. In 2006, respondent City and County of San Fran-
cisco (City) enacted the Health Care Security Ordinance
(HCSO), S.F. Cal. Admin. Code. §§ 14.1-14.8, to provide
health care for its uninsured residents. The HCSO has
two primary components: the Health Access Plan
(HAP) and employer spending requirements. Pet. App.
3a.

(1)

y 4

The HAP is a public health care program, operated
vy the City, which provides health care through a net-
work of public and private providers. The HAP is pri-
marily funded by city taxes but also receives part of its
funding from employer payments under the HCSO and
from payments by participating individuals. All San
IF'rancisco residents who lack health insurance and meet
age and income requirements are eligible to participate
in the HAP whether or not they are employed. Partici-
pants in the HAP pay income-based fees, and employees
who are covered by the employer spending provisions of
the HCSO may enroll at a significantly reduced rate.
Pet. App. 3a, 8a, 113a-115a.

The employer spending requirements mandate that
covered employers make minimum “health care expendi-
tures” to or on behalf of covered employees each calen-
dar quarter. “Covered employers” are for-profit em-
ployers engaged in business within the City that have an
average of at least 20 paid employees during the quarter
and non-profit employers that have an average of at
least 50 paid employees. “Covered employees” are indi-
viduals who work within the City for a certain minimum
number of hours each week, have worked for the em-
ployer for at least 90 days, and are not otherwise ex-
cluded from coverage. Pet. App. 5a-6a, 107a-109a, 127a-
128a, 130a-135a.

The required expenditures are determined by multi-
plying the total number of hours worked by each cov-
ered employee during the quarter by the applicable
“health care expenditure rate.” The current rate is ei
ther $1.23 or $1.85 per hour, depending on the type and
size of the employer, but the rate may increase in future
years based on projections from an annual ten-county

9
2)

survey of health care spending. Pet. App. 6a, 1!1a,
139a-140a.

The HCSO defines “health care expenditures” as
“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 ser-
vices for covered employees or reimbursing the cost of
such services fur its covered employees.” Pet. App.
110a. Eligible “health care expenditures” include but
are not limited to (1) contributions on behalf of covered
employees to federal health savings accounts or other
accounts having substantially the same purpose or ef-
fect; (2) reimbursement of expenditures by covered em-
ployees for health care services; (3) payments to third
parties for the provision of health care services to cov-
ered employees; (4) costs incurred in providing direct
delivery of health care services to covered employees;
and (5) payments to the City to be used on behalf of cov-
ered employees (the city-payment option). The City
uses funds received under the city-payment option ei-
ther to fund membership of covered employees in the
HAP (Gif tne employees are eligible to participate) or to
fund medical reimbursement accounts for the covered
employees (if the employees are not eligible). 7d. at 7a-
Sa, 110a-llla, 1385a-137a.

The HCSO includes a number of recordkeeping re-
quirements to ensure compliance with the health care
spending obligations. Employers must keep records of
health care expenditures and proof that the required
expenditures are made each quarter; they must provide
the City with the information necessary to determine
employees’ eligibility to participate in the HAP or to es-
tablish medical reimbursement accounts; and they must
notify employees if they are making payments to the

4

City to satisfy the health care spending requirements.
Employers who fail to comply with the spending or
recordkeeping requirements may be subject to adminis-
trative action, including monetary penalties. Pet. App.
9a, 116a-119a, 142-144a, 149a-154a.

2.a. After the HCSO was enacted, petitioner, a
trade association for the City’s restaurant industry, filed
suit in the United States District Court for the Northern
District of California, contending that the HCSO’s
spending requirements are preempted by the Employee
Retirement Income Security Act of 1974 (ERISA), 29
U.S.C. 1144(a). Subject to certain exceptions not impli-
cated here, FRISA preempts “any and all State laws
insofar as they may now or hereafter relate to any em-
ployee benefit plan.” Jb¢d. Under ERISA, employee
benefit plans include “welfare plan[s],” which in turn
include “any plan, fund, or program * * * established
or maintained by anemployer * * * for the purpose of
providing for its participants or their beneficiaries”
medical care or benefits. 29 U.S.C. 1002(1).

b. The district court granted summary judgment in
favor of petitioner. Pet. App. 88a-103a. The court con-
cluded that the HCSO’s spending requirements “relate
to” ERISA-covered employee benefit plans within the
meaning of Section 1144(a). Jd. at 98a. The court ex-
plained that state or local laws “relate to” ERISA plans
under that provision if they are “connected with” or
“make reference to” ERISA plans. /d. at 89a (citing
Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983)).
The court concluded that the HCSO’s spending require-
ments are connected with ERISA plans because they
interfere with nationally uniform administration of
plans, affect the structure and administration of plans,
and mandate the provision of benefits covered by plans.

5
)

Id. at 93a-98a. The court also found that the HCSO’s
spending requirements make unlawful reference to
ERISA plans because the vast majority of employers
conduct their health care spending through ERISA
plans and, in order to enforee the spending require-
ments, the City will have to ascertain whether and how
much employers are paying for health care coverage
under their existing ERISA plans. /d. at 98a-102a.

3. a. The City, along with several unions that had
intervened in the lawsuit, sought a stay of the district
court’s judgment pending appeal. The district court
denied their request, but the court of appeals granted a
stay. Pet. App. 3a-4a. In granting the stay, the court of
appeals concluded that the City had a strong likelihood
of success on the merits of the preemption issue. Golden
Gate Rest. Ass'n v. City & County of S.F., 512 F.3d 1112,
1114 (9th Cir. 2008).

b. After briefing and argument on the merits, in-
cluding by the Department of Labor, which argued that
ERISA preempts the HCSO’s spending requirements,
the court of appeals reversed the district court’s judg-
ment. Pet. App. la-40a. The court first concluded that
employers can comply with the spending requirements
without creating or changing ERISA plans because they
can utilize the city-payment option. /d. at 15a-26a. The
court rejected the position that the record-keeping, re-
porting, and payment obligations employers assume
when they choose the city-payment option in themselves
constitute the creation of an ERISA plan. 7d. at 16a-
23a. The court reasoned that, under the city-payment
option, an employer has no responsibility other than to
calculate and make the required payments to the City
for covered employees and to retain records to show
that it has done so. /d. at 18a. The court observed that

6

those administrative obligations are similar to obligu-
tions imposed on employers under many federal, state,
and local tax laws. /d. at 19a. The court similarly con-
cluded that the employers’ responsibilities under the
city-payment option do not involve sufficient discretion
to constitute an “ongoing administrative scheme,” which
is necessary to qualify as an ERISA plan. /d. at 20a
(citation omitted).

The court then rejected the proposition that the
City’s HAP itself is an ERISA plan. Pet. App. 23a-26a.'
The court observed that the HAP is a government enti-
tlement program, administered by the City and available
to City residents regardless of their employment status.
Id. at 24a. In addition, the court noted, the City, rather
than any employer, controls eligibility and coverage de-
cisions and determines the kind and level of benefits.
Id. at 25a-26a.

The court of appeals also rejected the contention that
the HCSO has an impermissible connection with ERISA
plans because it interferes with uniform administration
of ERISA plans. Pet. App. 26a-32a. The court reasoned
that the HCSO does not require any employer to adopt
an ERISA plan, to provide specific benefits, or to foliow
particular rules in administering any ERISA plan that
the employer may provice. /d. at 29a-3la. The court
acknowledged that the HCSO imposes administrative
burdens on covered employers, but concluded that those
burdens do not impermissibly interfere with plan admin-
istration because they exist whether or not an employer
has an ERISA plan. /d. at 32a.

' Contrary to the court’s statement (see Pet. App. 23a-24a), the De-
partment of Labor did not argue that the HAP is itselfan ERISA plan.
See id. at 68a, 77a.

7

The court of appeals further coneluded that the
HCSO’s spending requirements do not make a forbidden
“reference” to ERISA plans because the requirements
“can have [their] full force and effect even if no em-
ployer in the City has an ERISA plan.” Pet. App. 33a.
The court noted that an employer’s obligations under
the I1CSO are not measured by the level of benefits pro-
vided by an ERISA plan but by the payments that the
employer provides either to a plan or to another entity,
such as the City. /d. at 35a.

Finally, the court of appeals rejected petitioner’s
contention that the HCSO would. be preempted under
the analysis adopted by the Fourth Circuit in Retaa/
Industry Leaders Ass’n v. Fielder, 475 F.3d 180 (2007),
which held that a Maryland law mandating a specified
level of health care expenditures was preempted. Tet.
App. 36a-40a. The court reasoned that, unlike the Mary-
land law, which gave employers no realistic method of
compliance that did not involve an ERISA plan, the
HCSO gives employers the city-payment option, which
in the court’s view does not entail creation of an ERISA
plan. The court explained that the city-payment option
is a realistic alternative for employers because, unlike
the state-payment option under the Maryland law in
Fielder, the city-payment option gives employers some-
thing in return for their payments—health care benefits
for their employees. /d. at 38a-40a.

ec. Petitioner sought rehearing en banc, which the
Department of Labor supported in a second amicus
brief. See Pet. App. 82a. The court of appeals denied
the petition for rehearing, with eight judges dissenting
from the denial and one judge concurring and writing to
respond to the dissent. /d. at 4la-61a.

8

DISCUSSION

In the court of appeals, the Department of Labor
took the position that ERISA preempts the employer
health care spending requirements of San Francisco’s
HCSO because an employer can comply with those re-
quirements only by creating or altering an ERISA plan.
After the court of appeals rejected that position, the
Department of Labor began te reexamine its views and
was considering the promulgation of a regulation clarify-
ing when state and local health care programs result in
the creation of ERISA plans. Because that regulation
would have been entitled to deference under Chevron
U.S.A. Ine. v. NRDC, 467 U.S. 837 (1984), it could have
affected the preemption analysis in this case. Since
then, however, Congress has enacted comprehensive
national health care legislation. Patient Protection and
Affordable Care Act (PPACA), Pub. L. No. 111-148, 124
Stat. 119; Health Care and Education Reconciliation Act
of 2010 (HCERA), Pub. L. No. 111-152, 124 Stat. 1029.
Although the federal legislation accommodates state
authority over regulation of health insurance, it signifi-
cantly reduces the potential that state or local govern
ments will choose to enact health care programs like the
HCSO and may also affect the question whether such
programs are preempted by federal law. For these rea-
sons, the Department of Labor has decided that regula-
tory action would be premature at this time. For the
same reasons that the Department has decided that reg-
ulatory action affecting the ERISA preemption issue
would be premature, this Court’s review of the issue is
not warranted at this time. Accordingly, the petition for
a writ of certiorari should be denied.

1. Subject to exceptions not applicable here, ERISA
preempts “any and all State laws insofar as they may

9

now or hereafter relate to any employee benefit plan.”
29 U.S.C. 1144(a). ERISA defines the term “State” to
include subdivisions and agencies of a State, such as the
City and County of San Francisco, and defines “State
law” to include “rules, regulations, or other State action
having the effect of law,” 29 U.S.C. 1144(¢)(1) and (2),
which include ordinances such as the HCSO.

This Court has explained that a law “relate[s] to any
employee benefit plan,” 29 U.S.C. 1144(a), “in the nor-
mal sense of the phrase, if it has a connection with or
reference to such a plan.” New York State Conference
of Blue Cross & blue Shield Plans v. Travelers Ins. Co.,
514 U.S. 645, 656 (1995) (Travelers) (citation omitted).
But the Court has cautioned against conducting that
analysis with an “uncritical literalism,” and has stressed
that whether a law has a prohibited connection with
KE RISA plans turns on whether the law interferes with
I. RISA’s core objectives. /bid.

One core objective of ERISA is “to protect
* * * the interests of participants * * * and their ben-
eficiaries” in those plans. 29 U.S.C. 1001(b); see 29
U.S.C. 1001(a), 1001a(e), 1001b(c). Another core objec-
tive of ERISA, and its preemption provision in particu-
lar, “is to provide a uniform regulatory regime over em-
ployee benefit plans,” Aetna Health Inc. v. Davila, 542
U.S. 200, 208 (2004), by “establishling] the regulation
of * * * benefit plans as exclusively a federal concern,”

Travelers, 514 U.S. at 656 (citation and internal quota-
tion marks omitted).

[In light of these purposes, this Court has held that a
state law has a prohibited connection with ERISA plans
if it “mandate[s] employee benefit structures or their
administration.” Vravelers, 514 U.S. at 658. See, e.g.,
Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97 (1983)

10

(finding state law related to ERISA plans because it
mandated provision of specific benefits). State laws are
alsuv preempted if they “interfere[ | with nationally uni-
form plan administration.” Egelhoff v. Egelhoff, 532
U.S. 141, 148 (2001). Accordingly, ERISA preempts not
only state laws that mandate the provision of benefits or
require plans to calculate benefit levels differently in
different locations, see Travelers, 514 U.S. at 657-658,
but also state laws that mandate the creation of ERISA
plans, see Fort Halifax Packing Co. v. Coyne, 482 U.S.
1, 16-17 (1987).

In the court of appeals, the Department of Labor
took the position that ERISA preempts the HCSO’s em-
ployer spending requirements because those require-
ments both mandate employee benefit structures and
interfere with the uniformity of plan administration.
See C.A. Br. for the Seec’y of Labor as Amicus Curiae
Supporting Appellee and Requesting Affirmance 11-28
(Labor Department Br.); Pet. App. 73a-79a. Central to
that position was the Department’s conclusion that “all
of the options for compliance” with the HCSO “require
an employer to create or alter an ERISA plan.” Labor
Department Br. 11.

The court of appeals did not dispute that, in the case
of employers that do not already make health care ex-
penditures at the level mandated by the HCSO’s spend-
ing requirements, many of the options that the HCSO
provides for compliance will involve employers’ altering
existing ERISA plans or establishing new ones. But the
court concluded that “the City-payment option allows
employers to make payments directly to the City, if they
so choose, without requiring them to establish, or to al-
ter existing, ERISA plans.” Pet. App. 12a. The Depart-
ment of Labor disagreed with that conclusion, instead

11

taking the view that when an employer complies with
the HCSO’s spending requirements by utilizing the city
payment option, the administrative undertakings that
the employer must assume constitute the creation of an
ERISA-covered plan. /d. at 73a-75a; see Labor Depart
ment Br. 12-19.

The Department of Labor reasoned that ERISA de-
fines an “employee welfare benefit plan” to include “any
plan, fund, or program * * * established or maintained
by anemployer * * * for the purpose of providing for
its participants or their beneficiaries, through the pur-
chase of insurance or otherwise, * * * medical, surgi-
eal, or hospital care or benefits.” 29 U.S.C. 1002(1).
Accordingly, an employer creates a plan whenever it
establishes “an ongoing administrative scheme” for the
provision of medical or other covered benefits. Fort
Halifax Packing Co., 482 U.S. at 18.

The Department of Labor explained that use of the
city-payment option requires an employer to establish
an ongoing administrative scheme because, each calen-
dar quarter, the employer must determine which em-
ployees are covered by the IfCSO’s spending require
ments and how much is due for those covered employ-
ees. Inthe Department’s view, those calculations some-
times require employers to make discretionary deci-
sions, without clear guidance from the HCSO, about who
is covered and to what extent. Labor Department Br.
14-15. For that reason, the Department concluded that
an employer utilizing the city-payment option “estab
lishes an ERISA-covered plan for its employees, just as
an employer establishes an EF RISA-covered plan when
it provides health benefits for its employees through the
purchase of insurance.” Pet. App. 74a-75a (citing Qualls
v. Blue Cross of Cal., Ine., 22 F.3d 839, 843 (9th Cir.

12

1994) (holding that an employer’s purchase of insurance
for its employees creates an ERISA-covered plan)). The
Department perceived “no relevant difference” between
the two scenarios, noting that, “in both cases, the em-
ployees receive their benefits from a third party and the
program is substantially administered by a third party.”
Id. at 75a.

After the court of appeals’ extensive analysis of the
HCSO and the court’s rejection of the Department of
Labor’s position, the Department began to reexamine its
view. The court of appeals had emphasized the limited
amount of discretion exercised by employers under the
city-payment option and the fact that the City, rather
than the employer, determines the terms, structure, and
administration of the program. Pet. App. 20a, 25a-26a.
In light of those facts, a difficult question arises about
whether an employer’s role under the city-payment op-
tion more closely resembles the collection and payment
of a payroll tax to support a government health program
(which does not involve the creation of an ERISA plan)
than it does the purchase of health insurance from a pri-
vate company (which does involve the creation of an
ERISA plan). As part of the reconsideration process,
the Department stated that it planned to issue a pro-
posed regulation “clarify|ing | the circumstances under
which health care arrangements established or main
tained by state or local governments for the benefit of
non-governmental employees do not constitute an em-
ployee welfare benefit plan” covered by ERISA. 74 Fed.
Reg. 64,276 (2009).

The Secretary of Labor has broad authority to pre-
scribe such regulations as she finds “necessary or appro-
priate” to carry out the provisions of Title I of ERISA.
29 U.S.C. 1155. The Secretary’s authority includes the

13

power to promulgate regulations defining what consti-
tutes a “plan” within the meaning of Title 1. See Massa-
chusetts v. Morasn, 490 U.S. 107, 116-117 (1989). The
Secretary’s reasonable interpretation of what consti-
tutes an ERISA-covered “plan” is entitled to Chevron
deference. See zd. at 116. Therefore, had the Secretary
promulgated a regulation clarifying whether and when
employers’ coverage under local programs like the
HCSO does or does not entail creation of ERISA plans,
that regulation would have been entitled to Chevron def-
erence and could have altered the preemption analysis
in this case.

The Department of Labor has, however, decided not
lo proceed with a proposed regulation at this ame be
cause of the recent passage of comprehensive federa!
health care legislation. See PPACA, Pub. L. No. 111-
148, 124 Stat. 119; HCE RA, Pub. L. No. 111-152, 124
Stat. 1029. As discussed in more detail below (sec
pp. 14-17, infra), the federal legislation has significantly
changed the legal landscape governing health care
spending requirements. In particular, the legislation
includes provisions designed to encourage the provision
and availability of health insurance that reduce substan-
tially the likelihood that state and local governments will
choose to enact new employer spending requirements
like those contained in San Francisco’s HCSO. ‘The fed-
eral legislation therefore significantly reduces the im-
portance of the question whether and when such re-
quirements are preempted by ERISA. See pp. 14-15,
infra. In addition, it is unclear whether the new federal
requirements may have independent preemption conse-
quences for local legislation or may affect the preemp-
tion analysis under ERISA. See pp. 15-17, infra.

14

For these reasons, in light of the new federal legisla-
tion, the Department of Labor has concluded that, at
present, it would be premature to proceed with regula-
tory action. In the unlikely event that additional state
or local governments choose to enact health care spend-
ing requirements like the I[CSO, the Department might
reconsider whether the preemption issue has sufficient
ongoing significance to warrant administrative action to
address it.

2. ‘The preemption issue does not warrant this
Court’s review at this time for the same reasons that the
Department of Labor has determined not to take regula-
tory action on the issue at this time.

Iirst, the new federal health care legislation contains
numerous provisions designed to promote broader ac-
cess to health care coverage. Those provisions include
an employer shared responsibility provision that im-
poses assessments on employers with 50 or more full-
time equivalent employees that do not provide health
insurance to their employees if any full-time employee
receives a premium tax credit in new health insurance
exchanges. See PPACA § 1513, as amended by HCERA
§ 1008. The legislation also includes a requirement that
non-exempted individuals maintain a minimum level of
health insurance or pay a penalty. See PPACA § 1501,
as amended by HCERA § 1002. And the legislation pro-
vides for automatic enrollment of employees in group
health plans offered by large employers, PPACA § 1511,
and contains several other provisions designed to make
health care coverage more affordable and available, e.q.,
id. § 1401, as amended by HCERA § 1001 (premium as
sistance tax credits); PPACA § 1402, as amended by
HCERA § 1001 (reduced cost-sharing); PPACA § 1421

15

(small business tax credits); and zd. § 1311 (state-based
insurance exchanges).

Many of the new provisions will be phased in over
several years, and three different federal agencies—the
Department of Health and Human Services, the Depart-
ment of the Treasury, and the Department of Labor—
will be promulgating regulations implementing the pro-
visions. ‘The full contours and effects of many aspects of
the new federal framework therefore remain to be
fleshed out. Nonetheless, although the new provisions
accommodate state authority over regulation of health
insurance, they will almost certainly significantly in-
crease health care coverage. They therefore make it
much less likely that States and localities will choose to
adopt their own health care programs. Accordingly, the
federal health care legislation reduces substantially the
ongoing importance of the question whether ERISA
preempts state and local health care programs like the
HCSO.

In addition, unresolved issues about the preemptive
force of the new federal legislation may affect the ques-
tion whether local health care programs like the HCSO
are preempted by federal law. The new legislation con-
templates a significant role for the States in promoting
the availability of health care coverage. For example,
the States are authorized to create and administer ex-
changes for the purchase of health insurance by individ-
uals and employers. The States have substantial flexi-
bility in the operation of those exchanges and the en-
forcement of related requirements, including the ability
to obtain waivers that authorize the establishment of
alternative programs. See PPACA 8§ 1311-1333. In
light of the significant role anticipated for the States,
the legislation includes a provision saving certain state

16

laws from preemption by the newly enacted federal pro-
visions. See zd. § 1321(d) (“Nothing in this title shall be
construed to preempt any State law that does not pre-
vent the application of the provisions of this title.”). At
present, however, the savings provision has not been
interpreted by any Department or court. For example,
the responsible federal Departments and the courts
have not addressed whether the PPACA’s savings provi-
sion applies to laws enacted by state subdivisions, such
as the HCSO, or only to laws enacted by the States
themselves. Compare 7d. § 1034(d) (defining “State,” for
purposes of the federal health care legislation, to mean
“each of the 50 States and the District of Columbia”)
with 29 U.S.C. 1144(¢)(2) (defining “State,” for purposes
of ERISA, to include “any political subdivisions thereof,
or any agency or instrumentality of either”); but see
Wisconsin Pub. Intervenor v. Mortier, 501 U.S. 597,
606-608 (1991) (interpreting the term “State” in the
Federal Insecticide, Fungicide, and Rodenticide Act
(FIFRA), 7 U.S.C. 136 et seq., to include local govern-
ments, even though FIFRA’s definition does not ex-
pressly include political subdivisions).

If local health care programs like the HCSO were
somehow independently preempted by the new health
care legislation, that would further reduce the impor-
tance of the question whether such laws would otherwise
be preempted by ERISA. If, on the other hand, local
health care programs were saved from preemption un-
der the new health care legislation, that consequence
could, in turn, alter the analysis of whether those pro-
grams would be preempted by ERISA, perhaps depend-
ing on the relationship between the local programs and
the implementation of the new legislation. As a general
matter, a savings provision, such as Section 1321(d) of

17

the PPACA, that shields state (or local) laws from pre-
emption by only one federal statute has no effect on pre-
emption by other federal statutes. But, unlike most
other federal statutes, ERISA expressly provides that
it shall not “be construed to alter, amend, modify, invali-
date, impair, or supersede any law of the United States.”
29 U.S.C. 1144(d). When state or local laws are integral!
to the operation of a federal law other than ERISA, Sec-
tion 1144(d)’s prohibition on “impair[ing]” other federal
laws may Shield those state or local laws from ERISA
preemption. See Shaw, 463 U.S. at 100-102.

At this early stage, the responsible federal Depart-
ments and the courts have not addressed the possible
relationship between state or local laws like the HCSO
and the new federal legislation—e.g., whether such laws
might form the basis for waivers under Section 1882 of
the PPACA of provisions concerning the creation of in-
surance exchanges. There accordingly is not yet a foun-
dation for assessing whether or how ERISA Section
1144(d) could be implicated by the implementation of the
new health care legislation. These considerations pro-
vide still further reasons why this Court’s review of the
ERISA preemption issue is not warranted at this time.

3.a. Petitioner contends (Pet. 15-34) that the Court
should grant review because the decision below purport-
edly conflicts with the Fourth Circuit’ s decision in Re-
tail Industry Leaders Ass’n v. Fielder, 475 F.3d 180
(2007). Although some of the reasoning contained in
Frelder is in tension with reasoning in the decision be-
low, the two cases do not present a direct conflict that
warrants this Court’s review.

Fielder involved a Maryland law requiring employers
with 10,000 or more Maryland employees to spend at
least eight percent of their total payrolls on health in-

18

surance costs for their employees or to pay the amount
that their spending falls short to the State. The law was
nominally of general application, but it covered only
Wal-Mart Stores, Inc., and it was designed to force Wal-
Mart to increase the health insurance benefits that it
provided under an ERISA plan. Felder, 475 F.3d at
183. The Fourth Circuit held that the Maryland law was
preempted by ERISA because “the only rational choice
employers” had to comply with the law was “to structure
their ERISA healthcare benefit plans so as to meet the
minimum spending threshold.” /d. at 198. Although
employers theoretically had the alternative of paying
money to the State, the court concluded that no rational
employer would select that option because the employer
and its employees would receive nothing in return. /b2d.

As the court below explained, unlike the state-pay-
ment option under the Maryland law, the HCSO’s city-
payment option is a realistic alternative for employers
because it offers them something in return for their
payments—health care benefits for their employees.
Pet. App. 38a-40a. Indeed, almost 900 employers had
selected the city-payment option at the time of the dis-
trict court’s summary judgment ruling. See Br. in Opp.
App. 33. The court below did not dispute that, if the
city-payment option itself effectively required creation
of ERISA plans by participating employers, the HCSO,
like the Maryland law, would be preempted. See Pet.
App. 15a. But the court concluded that the city-payment
option does not entail creation of an ERISA plan. /d. at
15a-26a. That assessment of the operation of the HCSO
does not itself give rise to any conflict with the Fourth
Circuit’s decision in Felder, which did not suggest that
an employer’s election of the state-payment option un-
der the Maryland statute would entail creation of an

19
ERISA plan. And, because that assessment of the
HCSO was the underlying premise of the court of ap-
peals’ ultimate decision in this case, its preemption rul
ing does not conflict with Felder.

The Fourth Circuit also stated in Felder that, even
assuming that an employer could comply with the Mary-
land law without creating an ERISA plan (such as by
providing on-site medical clinies or health savings ac-
counts), the law would still have an impermissible “con-
nection with” ERISA plans because it would interfere
with “uniform nationwide” plan administration by re-
quiring employers “to keep an eye on conflicting state
and local minimum spending requirements and adjust
[their] healthcare spending accordingly.” 475 F.3d at
196-197. That reasoning could also be applied to the
HCSO, and it is therefore in tension with the decision
below, as the Department of Labor pointed out in its
bricf supporting rehearing en banc in the court of ap-
peals. Pet. App. 80a-8la. But the Fourth Circuit’s view
that the Maryland law would disrupt uniformity of plan
administration also reflected in part that court’s conclu-
sion that the state-payment option was not a realistic
alternative for Wal-Mart, the one covered employer.
That conclusion does not apply to the IHCSO, which the
court below also concluded does not impose burdens
significantly different from those necessary to comply
with tax laws of various state and local jurisdictions. Jd.
at 19a. It is therefore not clear that the Fourth Circuit
would find that a law such as the HCSO poses the same
threat to uniformity of plan administration as the Mary-
land law and further find such a law preempted on tha
ground alone.

In any event, this Court “reviews judgments, not
statements In opinions,” Black v. Cutler Labs., 351 U.S.

20

292, 297 (1956), and the judgment in Fielder does not
conflict with the judgment below because, as inter-
preted, the laws at issue in the two cases have funda-
mental differences. As understood by the Fourth Cir-
cuit, the Maryland law in Felder effectively forced the
single affected employer to alter its ERISA plan; but, as
understood by the court below, the HCSO does not re-
quire employers to alter or create any ERISA plans.

b. Contrary to petitioner’s contention, the decision
below does not directly conflict with this Court’s ERISA
decisions. Unlike the law that the Court held preempted
in Shaw, the HCSO does not require employers to pro-
vide specific benefits. Compare Shaw, 463 U.S. at 97
(holding New York law preempted because it “re-
quire[d] employers to pay employees specific benefits”),
with Pet. App. 29a (noting that, unlike the law in Shaw,
the HCSO does not “require any employer to provide
specific benefits through an existing ERISA plan or
other health plan”). Similarly, this Court concluded that
the law in E'gelhoff was preempted because it offered no
method of compliance that did not require a change in
the way an ERISA plan was operated or written. 532
U.S. at 151. In this case, in contrast, the court of ap-
peals concluded that employers can comply with the
HCSO without creating or amending an ERISA plan.
See Pet. App. 29a-30a.

Finally, the decision bviow does not directly conflict
with either /ngersoll-Rand Co. v. McClendon, 498 U.S.
133 (1990), or District of Columbia v. Greater Washing-
ton Board of Trade, 506 U.S. 125 (1992). The law that
this Court held preempted in /ngersoll-Rand Co. was
“premised on[] the existence of [an ERISA] plan” be-
cause, in order to prevail on a claim under the law, the
plaintiff had to establish “that an ERISA plan exist-

21

led].” 498 U.S. at 140. Here, in contrast, under the view
of the court of appeals that the city-payment option does
not require employers to create ERISA plans, an em.
ployer can com»vly with the HCSO even if it has no
ERISA plans. Pet. App. 33a. The HCSO also differs
from the loeal ordinance that this Court held preempted
in Greater Washington Board of Trade because, under
that ordinance, employers were required to provide
workers’ compensation benefits at the same level pro-
vided by their existing ERISA plans. See 506 U.S. at
180. Under the HCSO, an employer’s payment obliga-
tion is based on the hours worked by covered employees.
Although an employer may receive a credit against its
obligation for other health-related expenditures, includ-
ing those made under an ERISA plan, an employer may
also receive credit for payments made to the City
(which, under the court of appeals’ view, do not involve
an ERISA plan). Pet. App. 34a-35a.

¢. In any event, even had a square conflict material-
ized in the courts of appeals, review by this Court would
not be warranted. As discussed above, the intervening
enactment of comprehensive federal health care legisla-
tion has dramatically changed the landscape governing
payment for health care, substantially reducing the im-
portance of the question whether ERISA preempts state
or local requirements and also giving rise to additional
legal issues that have not been addressed by the federal
Departments responsible for implementing the new leg-
islation or by the courts. Accordingly, this Court’s re-
view of the FRISA preemption issue is not warranted at
this time.

CONCLUSION
The petition for a writ of certiorari should be denied.

Respectfully submitted.

N@EAL KUMAR KATYAL

M. PATRICIA SMITH Acting Solicitor General
Solicitor of Labor EDWIN S. KNEEDLER

TrmoruHy D. HAUSER Deputy Solicitor General
Associate Solicitor MATTHEW D. ROBERTS

ELIZABETH HOPKINS Assistant to the Solicitor

TS can aan
Counsel for Appellate and General
Special Litigation
MELISSA MOORE
Attorney
Department of Labor

MAY 2010

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_0619%3A06. Public record. Not legal advice.