Opinion ID: 675124
Heading Depth: 3
Heading Rank: 1

Heading: Relates to

Text: 23 The Tenth Circuit recently has addressed the question of whether ERISA preempts the state common law doctrine of substantial compliance in Peckham v. Gem State Mut., 964 F.2d 1043, 1052-53 (10th Cir.1992). 6 In Peckham, a mother claimed that she was entitled to coverage for her newborn child by virtue of her substantial compliance with the terms of her policy with Gem State. The court held that the state's common law doctrine of substantial compliance was not preempted by ERISA. The Peckham court described the Act as follows: 24 ERISA is concerned with state law doctrines that serve to modify a plan because such doctrines could destabilize the plan as well as subject it to conflicting state regulation. However, these concerns apply only where the potential modification is material. By definition, the doctrine of substantial compliance does not materially modify a plan, but rather is simply a doctrine to assist the court in determining whether conduct should, in reality, be considered the equivalent of compliance under the contract. 25 Peckham, 964 F.2d at 1052. The Peckham court also cited the Supreme Court's language from Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 100 n. 21, 103 S.Ct. 2890, 2901 n. 21, 77 L.Ed.2d 490 (1983) as follows: Some state actions may affect employee benefit plans in too tenuous, remote or peripheral a manner to warrant a finding that the law 'relates to' the plan. 7 The Peckham court went on to address the merits of the plaintiff's substantial compliance argument under state law, ultimately finding against her. 26 In the instant case, the district court rejected the Tenth Circuit's analysis because the test of ERISA preemption is not whether a state law modifies a plan, but whether a state law 'relates to' a plan. Phoenix, 828 F.Supp. at 384 n. 6. The district court's analysis of the relates to language in the preemption provision is more persuasive than the Tenth Circuit's reasoning in Peckham and is more consistent with the guidance provided by the Supreme Court in Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39 (1987). Under Pilot Life, if a state law relates to an employee benefit plan, the law is preempted by ERISA. The Tenth Circuit's reliance on the fact that state substantial compliance law does not appear to modify the ERISA plan is unduly restrictive in light of the Supreme Court's language in Pilot Life: 27 In [Metropolitan Life 8 and Shaw 9 ] we noted the expansive sweep of the pre-emption clause. In both cases the phrase 'relate to' was given its broad common-sense meaning, such that a state law 'relate[s] to' a benefit plan 'in the normal sense of the phrase, if it has a connection with or reference to such a plan.'  ... In particular we have emphasized that the pre-emption clause is not limited to state laws specifically designed to affect employee benefit plans. 28 Pilot Life, 481 U.S. at 47-48, 107 S.Ct. at 1553 (citations omitted). 29 Holding that the state substantial compliance doctrine did not relate to the benefit plan at issue, the Peckham court wrote that the doctrine of substantial compliance does not denigrate from an ERISA plan in a way that is significant enough to implicate the concerns underlying ERISA preemption. Peckham, 964 F.2d at 1053. Under Pilot Life, however, such a statement is inapposite. As the district court noted, [g]enerally, the designation of the beneficiary of an ERISA life insurance policy 'relates to' an ERISA plan. Phoenix, 828 F.Supp. at 384. Accord, Metropolitan Life Ins. Co. v. Hanslip, 939 F.2d 904, 906 (10th Cir.1991) (applying ERISA preemption provision because the designation of beneficiaries to the life insurance policy relates to the ERISA plan); McMillan v. Parrott, 913 F.2d 310, 311 (6th Cir.1990) (finding designation of beneficiaries plainly relates to the ERISA plans at issue). Similarly, the doctrine of substantial compliance involves the determination of which of two or more purported beneficiaries will receive the proceeds of an ERISA life insurance policy. Phoenix, 828 F.Supp. at 384. Under Pilot Life, the substantial compliance doctrine, as applied to a change of beneficiary provision of an ERISA plan life insurance policy, does relate to the employee benefit plan at issue and to the determination of the appropriate beneficiary of Bill Adams' policy. 10 Consequently, we agree with the district court's conclusion that South Carolina's substantial compliance law is within the scope of ERISA's preemption provision.