Opposition Brief — Randol v. Mid-West National Life Insurance

No. 93-77 = Al

IN THE

Supreme Court of the United States

OCTOBER TERM, 1993

LINDA RANDOL AND BRUCE RANDOL, JR.,

Petitioners,

We

MID-WEST NATIONAL LIFE INSURANCE COMPANY

OF TENNESSEE,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

BRIEF OF RESPONDENT IN OPPOSITION

TO THE PETITION FOR A WRIT OF CERTIORARI

DAVIS CARR

(Counsel of Record)

JAMES W. LAMPKIN II

PIERCE, CARR & ALFORD, P.C.

Post Office Box 16046

Mobile, Alabama 36616

(205) 344-5151

Counsel for Respondent,

Mid-West National Life

Insurance Company of

Tennessee

WILSON - EPES PRINTING Co.. INC. - 789-0096 - WASHINGTON, D.C. 20001

BEST AVAILABLE COPY

QUESTION PRESENTED

1. Whether an employer “established or maintained”

an “employee welfare benefit plan” subject to the Em-

ployee Retirement Income and Security Act, 29 U.S.C.

§ 1001 et seg. (‘ERISA’) when the employer (1) al-

lowed a representatives of the insurer to discuss the

coverage at the place of employment and on company

time; (2) paid the first month premiums for its employees

who chose to participate; (3) contributed $75 per month

per employee to help defray costs of health coverage for

its employees and to provide an incentive for the employ-

ees to obtain health coverage; (4) established a payroll

deduction program to collect the remaining balance of

the premiums for coverage for its employees and their

dependents; and (5) allowed the insurer to draft the cor-

porate bank account to pay the premiums for coverage.

(i)

ii

RULE 29.1 STATEMENT

Mid-West National Life Insurance Company of Ten-

nessee is a subsidiary of United Insurance Companies, Inc.

TABLE OF CONTENTS

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STATUTES AND REGULATIONS INVOLVED IN

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A. Course of Proceedings Below _............................-

B. Facts Relevant to ERISA Issue................. Deis

C. The Eleventh Circuit’s Decision ....................

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ARGUMENT

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II.

THERE IS NO CONFLICT BETWEEN THE

ELEVENTH CIRCUIT’S HOLDING AND

ANY APPLICABLE DECISION OF THIS

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THERE IS NO CONFLICT BETWEEN THE

ELEVENTH CIRCUIT’S HOLDING AND

ANY APPLICABLE DECISIONS OF OTHER

UNITED STATES COURTS OF APPEALS

ON THE SAME MATTER ...... ieaidadbeaacedestanaasddaes

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Page

iv

TABLE OF AUTHORITIES

CASES Page

Allmendinger v. Aetna Life Ins. Co., 804 F. Supp.

GAR CBP SHIR, TD iscascse nesses ices sess cai: as 2

Blue Cross & Blue Shield of Ala. v. Peacock’s

Apothecrary, Inc., 567 F. Supp. 1258 (N.D. Ala.

SN akan pasa a er cts ee eet ee 3

Brown v. Ampco-Pittsburgh Corp., 876 F.2d 546

oe SS en ease 2

Deibler v. United Food & Commercial Workers’

Local Union 23, 973 F.2d 206 (3d Cir. 1992). 2

Dodd v. John Hancock Mut. Life Ins. Co., 688 F.

Supp. 654 (E.D. Cal. 1988) 3

Donovan v. Dillingham, 688 F.2d 1367 (11th Cir.

1982) (en banc) ........................... 1, 2, 7, 9, 10, 11, 12, 14

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

SR ieee 8,9

Fugarino v. Hartford Life & Acc. Ins. Co., 969

F.2d 178 (6th Cir. 1992), cert. denied, - U.S.

, 113 S. Ct. 1401, 122 L.Ed.2d 774 (1993)... 2

Gahn v. Allstate Life Ins. Co., 926 F.2d 1449

i he 2 | RRR R Bee ene ars 2

Garred v. General Am. Life Ins. Co., 723 F. Supp.

1325 (W.D. Ark. 1989), appeal denied, 902 F.2d

oe | ER ee oe eee 2.3

Hansen v. Continental Ins. Co., 940 F.2d 971 (5th

Re. Raced Re ee ivcichadeia Ee Mie Aas ke

Harris v. Arkansas Book Co., 794 F.2d 358 (8th

Rs. AED aciccaasencinbamesonntie NE ETN EY SRP SBE Ce NE 2

International Resources, Inc. v. New York Life

Ins. Co., 950 F.2d 294 (6th Cir. 1991), cert.

denied, US. , 112 S. Ct. 2941, 119

me eee eee eee

James v. National Business Sys., 924 F.2d 718

CMR Gs IED rice ccn ceed coneancuesésiaketcncneess Be hele Se 2

James v. National Business Sys., 721 F. Supp. 169

(N.D. Ind. 1989), vacated on other grounds, 924

bho

F.2d 718 (7th Cir. 1991) 3

Kidder v. H & B Marine, Inc., 932 F.2d 347 (5th

Ry SN pak ets cae seca ee sie eine 2,15

Massachusetts v. Morash, 490 U.S. 107 (1989) ....8, 9, 10

Vv

TABLE OF AUTHORITIES—Continued

Page

McCaslin v. Blue Cross & Blue Shield of Ala., 779

FP. SUPP. TEES CN. Bim, TOOT) cin csccc cca cesesennecenes 2

McIntyre v. Okurowski, 717 F. Supp. 10 (D. Mass.

RI INE ad SE a ae 3

Memorial Hosp. Sys. v. Northbrook Life Ins. Co.,

904 F.2d 236 (5th Cir. 1990) -...0002 2, 3, 11, 14, 15

Meredith v. Time Ins. Co., 980 F.2d 352 (5th Cir.

EE eidncdctie atstn cnchtare dalek dmeeaavakche baat Neen aks 2

Miller v. National Brokerage Servs., 782 F. Supp.

ee Bes A ED ebicea ne cha ee nace. 2

Moeller v. Bertrang, 801 F. Supp. 291 (D.S.D.

| ENFIELD OSS ea AOIPM ek OTR Re Sone” eh PL one 2

Peckham v. Gem State Mut. of Utah, 964 F.2d

et. Ge Ap. eee en 2,12

Rasmussen v. Metropolitan Life Ins. Co., 675 F.

Rie Se re Es PED ficieitinssccnncicnenbntiniidsines 3

Roe v. General Am. Life Ins. Co., 712 F.2d 450

Be BE etc t eae ak A ET 2

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

SUE stixcices seentothsaeensenidhaapcalicambas nea eacaebactence atin 2

Sims v. Lumbermens Mut. Casualty Co., 789 F.

Sew. FEL CEP. BEM. CODE) nace icceccsceccccnscvvansenanns 2

Taggart Corp. v. Life & Health Benefits Admin-

tration, 617 F.2d 1208 (5th Cir. 1980), cert.

denied, sub nom. Taggart:Corp. v. Efros, 450

SP. EE ETE. Seesiccseriectenencecrnceens 3, 11, 18, 14, 15

Thomas v. Burlington Indus., 763 F. Supp. 1570

1 ON ty a rem LEen. a Iara 2

Walters v. Pan Am. Life Ins. Co., 800 F. Supp. 436

(S.D. Miss. 1990) .......... oe re Re DOR CPT 2

Wickman v. Northwestern Nat. Ins. Co., 908 F.2d

1077 (ist Cir.), cert. denied, 498 U.S. 1013

SE IT asics dvetadintchaehiieceenacenecebtalbastinabasasienhdadastadinainbidbicnendiie 2

STATUTES

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vi

TABLE OF AUTHORITIES—Continued

REGULATIONS Page

7 29 C.F.R. § 2510.8-1(j) (1992) 2... ccececceeceee 5, 11

29 C.F.R. § 2510.8-8 (1992) ............eccccccoscoceceeseccoeeee 13, 14

OTHER AUTHORITIES

7

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|

IN THE

Supreme Cort of the United States

OCTOBER TERM, 1993

No. 93-77

LINDA RANDOL AND BRUCE RANDOL, JR.,

Petitioners,

V.

Mip-WEsST NATIONAL LIFE INSURANCE COMPANY

OF TENNESSEE,

Respondent.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

BRIEF OF RESPONDENT IN OPPOSITION

TO THE PETITION FOR A WRIT OF CERTIORARI

Respondent Mid-West National Life Insurance Com-

pany of Tennessee (‘““Mid-West’’), respectfully requests

that this Court deny the petition for writ of certiorari to

review the judgment of the United States Court of Ap-

peals for the Eleventh Circuit.

INTRODUCTION

Petitioners ask this Court to overrule the en banc deci-

sion by the Eleventh Circuit in Donovan v. Dillingham,

688 F.2d 1367 (11th Cir. 1982) (en banc) on the basis

that a conflict exists between Donovan and decisions from

other circuits. There is no such conflict, however, inas-

y

much as the First,’ Third,® Fifth,* Sixth,‘ Seventh,®

Eighth,® Ninth’ and Tenth * Circuits all have followed the

test established in Donovan concerning whether a “plan”

exists. No contrary decision has been rendered by any

circuit which has addressed the issue. A number of

United States District Courts also have followed the

Donovan test.’ Petitioners, however, invite the Court to

1 See Wickman v. Northwestern Nat. Ins. Co., 908 F.2d 1077 (1st

Cir.), cert. denied, 498 U.S. 1018 (1990).

* See Deibler v. United Food & Commercial Workers’ Local Union

23, 973 F.2d 206 (3d Cir. 1992).

3 See Meredith v. Time Ins. Co., 980 F.2d 352 (5th Cir. 1993) ;

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

Kidder v. H & B Marine, Inc., 932 F.2d 347 (5th Cir. 1991); Gahn

v. Allstate Life Ins. Co., 926 F.2d 1449 (5th Cir. 1991); and

Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d (5th

Cir. 1990).

* See Fugarino v. Hartford Life & Acc. Ins. Co., 969 F.2d 178

(6th Cir. 1992), cert. denied, —— U.S. , 113 S. Ct. 1401, 122

L.Ed.2d 774 (1993); International Resources, Inc. v. New York

Life Ins. Co., 950 F.2d 294 (6th Cir. 1991), cert. denied, USS.

-——, 112 S. Ct. 2941, 119 L.Ed.2d 565 (1992); Brown v. Ampco-

Pittsburgh Corp., 876 F.2d 546 (6th Cir. 1989).

5 See James v. National Business Sys., 924 F.2d 718 (7th Cir.

1991).

6 See Harris v. Arkansas Book Co., 794 F.2d 358 (8th Cir. 1986).

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

8 See Peckham v. Gem State Mut. of Utah, 964 F.2d 1048 (10th

Cir. 1992); Roe v. General Am. Life Ins. Co., 712 F.2d 450 (10th

Cir. 1983).

® See, e.g., Moeller v. Bertrang, 801 F. Supp. 291 (D.S.D. 1992) ;

Allmendinger v. Aetna Life Ins. Co., 804 F. Supp. 4382 (D. Conn.

1992) ; Sims v. Lumbermens Mut. Casualty Co., 789 F. Supp. 781

(S.D. Miss. 1992); McCaslin v. Blue Cross & Blue Shield of Ala.,

779 F. Supp. 1812 (N.D. Ala. 1991); Miller v. National Brokerage

Servs., 782 F. Supp. 1440 (D. Nev. 1991); Thomas v. Burlington

Indus., 763 F. Supp. 1570 (S.D. Fla. 1991); Walters v. Pan Am.

Life Ins. Co., 800 F. Supp. 486 (S.D. Miss. 1990) ; Garred v. General

Am, Life Ins. Co., 723 F, Supp. 1825 (W.D. Ark. 1989), appeal

iii

3

adopt the holding of Taggart Corp. v. Life & Health

Benefits Administration, 617 F.2d 1208 (Sth Cir. 1980),

cert. denied, sub nom, Taggart Corp. v. Efros, 450 U.S.

1030 (1981), a pre-Donovan decision by the Fifth Cir-

cuit which later was expressly limited to its facts by the

Fifth Circuit itself in Memorial Hospital System v. North-

brook Life Insurance Co., 904 F.2d 236 (Sth Cir. 1990).

JURISDICTION

Mid-West agrees with petitioners’ statement concerning

jurisdiction.

STATUTES AND REGULATION

INVOLVED IN THE CASE

1. United States Code, 29 U.S.C. § 1002(1) provides,

in pertinent part:

The terms “employee welfare benefit plan” and “wel-

fare plan” mean any plan, fund or program which

was heretofore or is hereafter established or main-

tained by an employer or by an employee organiza-

tion, or by both, to the extent that such plan, fund

Or program was established or is maintained for the

purpose of providing its participants or their bene-

ficiaries, through the purchase of insurance or other-

wise, (A) medical, surgical, or hospital care or bene-

fits, or benefits in the event of sickness, accident,

disability, death or unemployment, or vacation

benefits, apprenticeship or other training programs,

or day care centers, scholarship funds, or prepaid

legal services, or (B) any benefit described in section

186(c) of this title (other than pensions or retire-

—

denied, 902 F.2d 1576 (8th Cir. 1990); James v. National Business

Sys., 721 F. Supp. 169 (N.D. Ind. 1989), vacated on other grounds,

924 F.2d 718 (7th Cir. 1991) ; McIntyre v. Okurowski, 717 F. Supp.

10 (D. Mass. 1989) ; Dodd v. John Hancock Mut. Life Ins. Co., 688

F. Supp. 564 (E.D. Cal. 1988) ; Rasmussen v. Metropolitan Life Ins.

Co., 675 F. Supp. 1497 (W.D. La. 1987); and Blue Cross & Blue

Shield of Ala. v. Peacock’s Apothecary, Inc., 567 F. Supp. 1258

(N.D. Ala. 1983).

4

ment or death, and insurance to provide such

pensions ).

29 U.S.C. § 1002(1) (emphasis added).

2. United States Code, 29 U.S.C. § 1132(a)(1)(b)

provides, in pertinent part:

A civil action may be brought—

(1) by a participant or beneficiary—

(A) for the relief provided for in subsection (c)

of his section, or

(B) the recover benefits due to him under the

terms of his plan, to enforce his rights

under the terms of the plan, or to clarify

his rights to future benefits under the plan;

29 U.S.C. § 1132(a)(1)(B).

3. United States Code, 29 U.S.C. § 1132(e)(1) pro-

vides, in pertinent part: -

Except for actions under subsection (a)(1)(B) of

this section, the district courts of the United States

shall have exclusive jurisdiction of civil actions under

this subchapter brought by the Secretary or by a

participant, beneficiary, or fiduciary. State courts of

competent jurisdiction and district courts of the

United States shall have concurrent jurisdiction of

actions under subsection (a)(1)(B) of this section.

29 U.S.C. § 1132(e) (1).

4. United States Code, 29 U.S.C. § 1144(a) provides,

in pertinent part:

Except as provided in subsection (b) of this section,

the provisions of this subchapter and subchapter III

of this chapter shall supersede any and all State laws

insofar as they may now or hereafter relate to any

employee benefit plan described in section 1003(a)

of this title and not exempt under section 1003(b)

of this title. This section shall take effect on Janu-

ary 1, 1975.

29 U.S.C. § 1144(a).

5

5. The Department of Labor’s Safe Harbor regulation

provides, in pertinent part:

(j) Certain group or group-type insurance pro-

grams. For purposes of title I of the Act and this

chapter, the terms “employee welfare benefit plan”

and “‘welfare plan” shall not include a group or

group-type insurance program offered by an insurer

to employee or members of an employee organiza-

tion, under which

(1) no contributions are made by an em-

ployer or employee organization;

(2) participation in the program is com-

pletely voluntary for employees or members;

(3) the sole functions of the employer or

employee organization with respect to the pro-

gram are, without endorsing the program, to

permit the insurer to publicize the program to

employees or members, to collect premiums

through payroll deductions or dues checkoffs

and to remit them to the insurer; and

(4) the employer or employee organization

receives no consideration in the form of cash

or otherwise in connection with the program,

other than reasonable compensation, excluding

any profit, for administrative services actually

rendered in connection with payroll deductions

or dues checkoffs.

29 C.F.R. § 2510.3-1(j) (1992).

STATEMENT OF THE CASE

A. Course of Proceedings Below

Mid-West agrees with petitioners’ statements concern-

ing the course of the proceedings below.

B. Facts Relevant to ERISA Issue

Mid-West does not agree with petitioners’ statements

concerning the facts relevant to the issues presented in

6

this petition. For the sake of brevity, Mid-West refers

the Court to the statement of facts contained in the

Eleventh Circuit’s opinion set forth in Appendix A to the

Petition for Writ of Certiorari.

C. The Eleventh Circuit’s Decision

Contrary to petitioners’ statement, the Eleventh Circuit

thoroughly examined all of the facts and circumstances

before determining that the employer established or main-

tained a plan. Petitioners’ arguments ignore the Eleventh

Circuit’s opinion in this case, wherein the court stated:

Since the instant insurance plan qualifies as a “plan,

fund, or program,” as that terms is used in

§ 1002(1), then whether the plan satisfies the full

§ 1002(1) definition of an ERISA employee welfare

benefit plan depends on whether it was “established

or maintained by [the] employer.” We hold that

through his actions the employer in this case has

“maintained” the plan within the meaning of ERISA.

The employer wrote the first check purchasing the

policies, established a system whereby the premiums

would be paid monthly by a means of a bank draft

on the corporate account, contributed $75 per em-

ployee per month toward the premiums, and col-

lected from the employees the balance of the pre-

miums through a withholding system. Moreover, the

employer did the foregoing in order to facilitate his

employees’ obtaining health coverage. We find these

undisputed facts amply demonstrate that the em-

ployer “maintained” the plan.

Petition for Writ of Certiorari at 8a-9a (emphasis added).

This language refutes petitioners’ assertions that the Elev-

enth Circuit failed to thoroughly examine the employer’s

conduct or intent. Additionally, contrary to petitioners’

contention that the employer did “virtually nothing . . .

[except] check [my] statement once a month to see that

the premium had been deducted” (Petition for Writ of

Certiorari at 4), the undisputed facts established the

7

employer paid the first month’s premiums, contributed

$75 per month, established a payroll deduction program

and allowed the corporate bank account to be drafted.

SUMMARY OF ARGUMENT

Contrary to petitioners’ contentions, this. decision and

Donovan are not in conflict with any decision by this

Court or the Fifth Circuit’s decision in Hansen. The

Donovan test has been adopted and followed by nine

of the twelve Circuit Courts of Appeal. Inimical to

petitioners’ assertions, the Donovan test has not been re-

jected, either explicitly or implicitly, by a single circuit

court of appeals. Petitioners also have misconstrued the

Eleventh Circuit’s opinion in this case. The Eleventh

Circuit did not hold that, simply because the Donovan

test *® had been satisfied, the plan was automatically an

ERISA plan. Instead, the Eleventh Circuit, after holding

a plan existed, analyzed the employer’s involvement to

determine whether the plan was an ERISA plan. Ac-

cordingly, this petition presents no “special and important

reasons” justifying granting the writ as required by Rule

10.1. S.Ct. R. 10.1.

10 In Donovan, the Eleventh Circuit held:

In determining whether a plan, fund or program (pursuant to

a writing or not) is a reality a court must determine whether

from the surrounding circumstances a reasonable person could

ascertain the intended benefits, beneficiaries, source of financ-

ing, and procedures for receiving benefits.

Donovan, 688 F.2d at 1878.

a eT

8

ARGUMENT

I. THERE IS NO CONFLICT BETWEEN THE ELEV-

ENTH CIRCUIT’S HOLDING AND ANY APPLI-

CABLE DECISION OF THIS COURT

Petitioners misinterpret this Court’s decisions in Fort

Halifax Packing Co. v. Coyne, 482 US. 1 (1987), and

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

attempt to invent a conflict between those decisions and

the Eleventh Circuit’s holding in this case.

In Fort Halifax, this Court addressed whether ERISA

preempted a Maine statute, which required a one-time

severance payment in the event of a plant closing. Fort

Halifax, 482 U.S. at 3-4. This Court held ERISA pre-

emption did not apply because the statute neither estab-

lished nor required an employer to “maintain” an “em-

ployee welfare benefit plan.” Jd. at 6. The basis for this

Court’s decision was:

The Maine statute neither establishes, nor requires

an employer to maintain, an employee benefit plan.

The requirement of a one-time lump-sum payment

triggered by a single event requires no administrative

scheme whatsoever to meet the employer's obliga-

tion. The employer assumes no responsibility to pay

benefits on a regular basis, and thus faces no periodic

demands on its assets that create a need for financial

coordination and control. Rather, the employer's

obligation is predicated on the occurrence of a single

contingency that may never materialize. The em-

ployer may well never have to pay the severance

benefits. To the extent that the obligation to do so

arises, satisfaction of that duty involves only making

a single set of payments to employees at the time

the plant closes. To do more than write a check

hardly constitutes the operation of a benefit plan.

Once this single event is over, the employer has no

further responsibility. The theoretical possibility of

a one-time obligation in the future simply creates no

9

need for an ongoing administrative program for

processing claims and paying benefits.

Id, at 12 (emphasis added in part). Not only is Donovan

not in conflict with Fort Halifax, this Court in Fort

Halifax expressly cited Donovan for the proposition that

a decision to extend benefits was not the establishment

of a plan. Jd. at 12, n.6.

In the case sub judice, the employer did more than

write a check for a one-time lump-sum payment. The

employer wrote a check for the first month’s premiums;

contributed $75 per month per employee; established a

payroll deduction program to collect the remaining bal-

ance of the premiums from the employees; and allowed

the company bank account to be drafted to pay the

premiums. By doing so, the employer assumed a re-

sponsibility to pay certain benefits on a regular basis, i.e.

$75 per month per employee. The Eleventh Circuit cor-

rectly held that the type of employer activity present in

this case constituted “maintenance” of a plan and in-

volved a great deal more than “writing a check.” There-

fore, the Eleventh Circuit’s decision was correct and does

not conflict with Fort Halifax.

In Morash, this Court addressed whether ERISA pre-

empted a Massachusetts statute requiring an employer to

pay unused vacation time to a discharged employee and

imposing criminal sanctions for violations of the statute.

Morash, 490 U.S. at 109. This Court held ERISA did

not preempt the statute and stated:

Because ordinary vacation payments are typically

fixed, due at known times, and do not depend on

contingencies outside the employee’s control, they

present none of the risks that ERISA is intended to

address. If there is no danger of defeated expecta-

tions, it is no different from the danger of defeated

expectations for wages for services performed—a

danger Congress chose not to regulate in ERISA.

ee

10

This conclusion is supported by viewing the refer-

ence to vacation benefits not in isolation but in light

of the words that accompany it and give the provi-

sion meaning. Section 3(1) subjects to ERISA regu-

lation plans to provide medical, sickness, disability,

and death benefits, training programs, day care cen-

ters, scholarship funds, and legal services. The dis-

tinguishing feature of most of these benefits is that

they accumulate over a period of time and are pay-

able only upon the occurrence of an contingency

outside the control of the employee... .

Id. at 115-16 (emphasis added).

In Morash, the vacation benefits were “fixed, due at

known times, and [did] depend on contingencies outside

the employee’s control.” In the present case, although

the contributions by the employer were fixed and due at

known times, the employee welfare benefit plan at issue

was a plan to provide medical, surgical or hospital care

benefits, or benefits in the event of sickness. The bene-

fits payable under the plan was not “fixed, due at known

times” and payment did depend on contingencies outside

the employee’s control. The benefits, other than the em-

ployer’s contribution, were payable only when there was

a claim for medical, surgical or hospital care. Such claims

were based on contingencies outside the control of peti-

tioners. Accordingly, there is no conflict between the

Eleventh Circuit’s decision and Morash.

Il. THERE IS NO CONFLICT BETWEEN THE ELEV-

ENTH CIRCUIT'S HOLDING AND ANY APPLI-

CABLE DECISIONS OF OTHER UNITED STATES

COURTS OF APPEALS ON THE SAME MATTER

Petitioners incorrectly argue that the “plan” test estab-

lished in Donovan basically asks “Is there a plan?” and

does not examine the employer’s involvement in the plan.

This argument ignores that the Eleventh Circuit, in the

case at bar, first determined a “plan” existed, then exam-

ined the employer’s involvement to determine whether

the plan was indeed an ERISA plan. Moreover, petition-

11

ers’ reliance on Hansen" and Taggart™ is misplaced.

Examination of Hansen reveals the Fifth Circuit relied

on Donovan in rendering its decision and no conflict ex-

ists. Additionally, Taggart has been limited to its facts

not only by the Eleventh Circuit in Donovan but by the

Fifth Circuit in Memorial Hospital, when it adopted

Donovan’s limitation of Taggart.

As regards petitioners’ safe harbor argument, there is

no dispute that the plan in this case was not exempted

from ERISA by the Safe Harbor regulation, 29 C.F.R.

§ 2151.3-1(j) by reason of the employer’s contributions

on behalf of the employees. Moreover, petitioners’ argu-

ment concerning application of the Safe Harbor factors

in analyzing the employer’s involvement in the plan ig-

nores the Eleventh Circuit’s examination of the employ-

er’s conduct in the instant case. After determining the

safe harbor regulation did not apply and a plan existed,

the Eleventh Circuit examined the nature and degree of

the employer’s involvement in the plan before concluding

the plan was an “employee welfare benefit plan” which

was “maintained” by the employer and, therefore, subject

to ERISA. Petition for Writ of Certiorari at 8a-9a. Con-

sequently, as the opinion itself reveals, there is no merit

in the argument that the Eleventh Circuit failed to exam-

ine the employer’s conduct before deciding the plan was

“maintained” by the employer.

Additionally, petitioners erroneously claim the employer

did not have any administrative involvement with the

plan. The Tenth Circuit has addressed this same argu-

ment and stated “[petitioners’] contention that [the em-

ployer’s] function is not “administrative” appears to arise

from the mistaken assumption that an employer does not

administer a plan unless he controls eligibility for cover-

11 940 F.2d 971.

12 617 F.2d 1208.

18 904 F.2d 236.

12

age and processes claims for benefits under the plan.”

Peckham, 964 F.2d at 1048, n.9. In response, the Tenth

Circuit stated:

We do not believe that Fort Halifax requires an

employer to exercise control over eligibility or claims

—essentially to play the role of an insurer—or even

to be in direct contact with the insurer. An “em-

ployee welfare benefit plan’ is specifically defined to

include employers’ provision of benefits “through .. .

insurance or otherwise. . . . Presumably, in most in-

stances where an employer provides benefits through

the purchase of insurance, the insurer rather than

the employer makes determinations regarding eligi-

bility and claims.

Id. (emphasis added).

Contrary to petitioners’ arguments, there is no conflict

between the Eleventh Circvuit’s decision in this case and

Hansen. Both the present case and Hansen relied upon

the test established in Donovan to determine whether a

“plan” existed and, upon determining a plan existed, both

decisions examined the employer’s involvement in decid-

ing whether the plan was an “employee welfare benefit

plan” which was “established or maintained” by the em-

ployer. In examining the issues, both circuits consider

(1) whether the plan was excluded by the safe harbor

regulation; (2) if not excluded, whether a “plan’”’ existed;

and (3) if a “plan” existed, whether the plan was “estab-

lished or maintained” by the employer. The Hansen

language quoted by petitioners on page 23 demonstrates

that the employee welfare benefit plan at issue was sub-

ject to ERISA. As to the employer’s involvement, the

Fifth Circuit stated: ‘“[t]hus, if an employer does no more

than purchase insurance for [its] employees, and has no

further involvement with the collection of premiums, ad-

ministration of the policy, or submission of the claims,

[it] has not established an ERISA plan.” Hansen, 940

F.2d at 978 (emphasis added). In this case, it is undis-

puted that the employer had further involvement with the

13

collection of premiums and, a significant factual distinc-

tion from Hansen, contributed $75 per month per em-

ployee to help defray the cost of coverage.

Petitioners’ argument misstates the Hansen language

which states “the evidence must show that the employer

had an “intent to provide its employees with a welfare

benefit program through the purchase and maintenance

of [the] group insurance policy.” Hansen, 940 F.2d at

978. Such evidence of intent was present in this case and

noted by the Eleventh Circuit, which stated: “in order

to help the employees purchase the insurance and to

provide an incentive for them to do so, [the employer]

decided to contribute $75 toward the monthly premium

for each employee choosing to participate.” Petition for

Writ of Certiorari at 3a. Consequently, in the case sub

judice, the employer had “a purpose to provide health

insurance” to its employees. Hansen, 940 F.2d at 978.

Therefore, the Eleventh Circuit’s opinion does not conflict

with Hansen.

Petitioners’ reliance upon Taggart ** is misplaced be-

cause Taggart has been limited not only by the Eleventh

14 Taggart is factually distinguishable because in Taggart the

corporation was providing benefits for its sole employee, who was

the President of the corporation and although it is not clear from

the facts was probably the sole shareholder. Under the regulations

promulgated by the Department of Labor, this plan would have

been excluded from ERISA. 29 C.F.R. § 2510.3-8 (1992), provides

in pertinent part:

(a) General. This section clarifies the definition in section

3(3) of the term “employee welfare benefit plan” for the

purposes of title I of the Act and this chapter. It states a

general principle which can be applied to a large class of

plans to determine whether they constitute employee bene-

fit plans within the meaning of section 3(3) of the Act.

Under section 4(a) of the action, only employee benefit

plans within the meaning of section 3(3) are subject to

title I.

(b) Plans without employees. For purposes of title I of the

Act and this chapter, the term “employee benefit plan”

Se ee

14

Circuit in Donovan but also by the Fifth Circuit in

Memorial Hospital, which adopted Donovan’s limitation.

In Donovan, the Eleventh Circuit limited Taggart by

stating:

If Taggart implies that an employer or employee

organization that only purchases a group health in-

surance policy or subscribes to a MET to provide

health insurance to its employees or members cannot

be said to have established or maintained an em-

ployee welfare benefit plan, we disagree. To that

extent Taggart shall no longer be binding in the

Eleventh Circuit.

Donovan, 688 F.2d at 1375 (emphasis added). Likewise,

in Memorial Hospital the Circuit itself limited Taggart

and held:

Although we held in Taggart that the purchase of

an insurance policy does not, in and of itself, estab-

lish the existence of an ERISA plan, we certainly

did not hold, contrary to Memorial’s argument, that

an employer’s purchase of health insurance offers no

shall not include any plan fund or program, other than an

apprenticeship or other training program, under which no

employees are participants covered under the plan, as de-

fined in paragraph (d) of this section. For example, a

so-called “Keogh” or “H.R. 10” plan under which only

partners or only a sole proprietor are participants covered

under the plan will not be covered by title I. However, a

Keogh plan under which one or more common law em-

ployees, in addition to the self-employed individuals, are

participants covered under the plan, will be covered under

title I. Similarly, partnership buyout agreements described

in section 736 of the Internal Revenue Code of 1954 will

not be subject to title I.

(c) Employees. For the purposes of this section:

(1) An individual and his or her spouse shall not be

deemed to be employees with respect to a trade or

business, whether incorporated or unincorporated,

which is wholly owned by the individual or by the

individual and his or her spouse, and...

29 C.F.R. § 2510.3-3 (1992),

15

evidence of an intent to provide such a plan. We

agree with the reasoning of the Eleventh Circuit that

the purchase of insurance does not conclusively

establish a plan, fund, or program, but the pur-

chase is evidence of the establishment of a plan,

fund, or program; the purchase of a policy or

multiple policies covering a class of employees

offers substantial evidence that a plan, fund or

program has been established.

Donovan, 688 F.2d at 1373.

Memorial Hospital,-904 F.2d at 242. See also, Kidder,

932 F.2d at 352-53.

Unlike Taggart, petitioners obtained health coverage

under a plan where the employer (1) contributed $75

per month per employee; (2) established a payroll deduc-

tion program to collect the remaining balance of the

premiums from the employees; and (3) allowed Mid-

West to draft the company bank account to pay the

monthly premiums. Here, there was “an employer-

employee-plan relationship that was lacking in Taggart.”

Memorial Hospital, 904 F.2d at 243. Accordingly, there

is no conflict between the decisions of the Fifth Circuit

and Eleventh Circuit.

CONCLUSION

The petition for a writ of certiorari should be denied.

Respectfully submitted,

DAVIS CARR

(Counsel of Record)

JAMES W. LAMPKIN II

PIERCE, CARR & ALFORD, P.C.

Post Office Box 16046

Mobile, Alabama 36616

(205) 344-5151

Counsel for Respondent,

Mid-West National Life

Insurance Company of

Tennessee