Opinion ID: 2630686
Heading Depth: 2
Heading Rank: 1

Heading: ERISA Jurisdiction and Preemption

Text: The dispute in this case stems from confusion regarding the scope and interplay of two different sections of ERISA: (1) the jurisdictional provisions of section 502(a)(3), [2] codified at 29 U.S.C. § 1132(a)(3) (2002); and (2) the preemption clause of section 514(a), codified as 29 U.S.C. § 1144(a) (2002). In full, section 502(a)(3) provides that a civil action may be brought: by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan[.] (Emphasis added.) Section 502(e)(1) of ERISA, codified at 29 U.S.C. § 1132(e)(1) (2002), in turn provides that federal courts shall have exclusive jurisdiction of civil actions brought under section 502(a)(3). The question thus immediately arises as to whether an ERISA plan's reimbursement or subrogation interest in a third-party tort recovery should be considered equitable or legal; if the former, then a reimbursement action should be brought in federal courts under section 502(a)(3). The United States Supreme Court addressed this issue in Great-West, one of the cases cited by the circuit court here. In that case, an ERISA plan brought an action under section 502(a)(3) for declaratory and injunctive relief in federal court seeking to enforce a plan provision requiring a beneficiary to reimburse the plan, out of any subsequent recovery by the beneficiary from a third-party tortfeasor, for payment of the beneficiary's medical expenses resulting from injuries caused by the third party. 534 U.S. at 208, 122 S.Ct. 708. The Ninth Circuit held that the relief sought was not equitable and thus the suit was not authorized under section 502(a)(3). Id. at 209., 122 S.Ct. 708 The United States Supreme Court affirmed, holding that [b]ecause [the plan is] seeking legal reliefthe imposition of personal liability on [the plan beneficiary] for a contractual obligation to pay money § 502(a)(3) does not authorize this action. Id. at 221, 122 S.Ct. 708. Significantly, however, the Great-West Court expressly reserved its opinion on whether a plan could seek reimbursement outside of ERISA, stating: We note, though it is not necessary to our decision, that there may have been other means for petitioners to obtain the essentially legal relief that they seek. We express no opinion as to whether petitioners could have intervened in the state-court tort action brought by respondents or whether a direct action by petitioners against respondents asserting state-law claims such as breach of contract would have been pre-empted by ERISA. Id. at 220, 122 S.Ct. 708 (emphasis added). Here, because AFL has brought a state law breach of contract claim against a plan beneficiary, we are faced with the question left open by Great-West. [3] To answer the question framed by the Great West Court, this court must decide whether ERISA preempts a state law claim such as the one brought here by AFL. We recently set forth the framework of ERISA preemption analysis in Hawaii Mgmt. Alliance Assoc. v. Ins. Comm. [hereinafter, HMAA ], 106 Hawai`i 21, 100 P.3d 952 (2004). In HMAA, we observed that a state law will be deemed [impliedly] preempted if it conflicts with § 1132(a) (`conflict' preemption) or if Congress intended ERISA to occupy the entire field . . . (`field' preemption). Id. at 30, 100 P.3d at 961 (citation omitted). In addition, ERISA's express preemption clause, section 1144(a), provides that ERISA shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan covered by ERISA. Id. at 27, 100 P.3d at 958 (emphasis deleted). In other words, a state-law claim may be expressly preempted by section 1144(a) or impliedly preempted under section 1132(a). For the reasons set forth below, we hold that neither situation obtains here.
Neither the doctrine of implied field preemption nor the doctrine of implied conflict preemption preclude an ERISA plan from bringing a state common-law action for reimbursement. First, with respect to field preemption, this court has previously held that it does not apply in the ERISA context because the existence of an express preemption clause in ERISA and the fact that health care is a subject of traditional state regulation demonstrate no clear and manifest intent to supersede state law. HMAA, 106 Hawai`i at 30-31, 100 P.3d at 961-62. As to conflict preemption, we have held that any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted. Id. at 31, 100 P.3d at 962 (quoting Aetna Health, Inc. v. Davila, 542 U.S. 200, 209, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004)). However, the United States Supreme Court has expressly held that section 502(a)(3) of ERISA provides no legal remedy for reimbursement of expenses paid on behalf of plan beneficiaries for injuries caused by third parties. Great-West, 534 U.S. at 221, 122 S.Ct. 708. It is thus patent that a state law claim for relief for breach of contract such as the one brought here by AFL does not duplicate or supplant any federal cause of action under ERISA. That being said, there is still a question regarding the word supplement as used in Aetna. The Aetna Court emphasized: [I]t [would not] be consistent with our precedent to conclude that only strictly duplicative state causes of action are pre-empted. . . . Congress' intent to make the ERISA civil enforcement mechanism exclusive would be undermined if state causes of action that supplement the ERISA § 502(a) remedies were permitted, even if the elements of the state cause of action did not precisely duplicate the elements of an ERISA claim. Aetna, 542 U.S. at 216, 124 S.Ct. 2488. Fortunately, however, the Aetna Court identified the key to distinguishing between supplementary and independent causes of action, holding that the distinction turns on whether liability would exist only because of the ERISA plan; that is, whether the beneficiary's potential liability derives entirely from the particular rights and obligations established by the benefit plan[ ]. Id. at 213, 124 S.Ct. 2488. See also Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 140, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (holding that a state-law wrongful discharge claim was preempted because it was premised on the existence of the ERISA plan). Here, however, Bosque's liability is not entirely derived from the terms of the AFL plan; rather, liability is dependent on the Agreement, which is independent of the rights and obligations established by the plan. [4] Therefore, a state law breach of contract action, in which liability rests at least in part on the Agreement, does not supplement a federal claim for relief as that term is used in Aetna, and there is no conflict preemption.
In addition to creating federal claims for relief under ERISA, Congress also provided for the express preemption of all state-law actions related to ERISA. 29 U.S.C. § 1144(a). We previously considered the scope of ERISA's express preemption clause in Garcia v. Kaiser Foundation Hospitals, 90 Hawai`i 425, 978 P.2d 863 (1999). In Garcia, we recognized the United States Supreme Court's view that a state law relates to an ERISA plan if it has a connection with or reference to such a plan. Id. at 432, 978 P.2d at 870 (citation omitted). This court, again citing United States Supreme Court precedent, also remarked on the conspicuous breadth of ERISA preemption implied by the phrase relate to, and noted that ERISA could preempt state law claims even where the law is not specifically designed to affect ERISA plans or the effect is indirect. Id. at 431-32, 978 P.2d at 869-70. However, despite the acknowledged breadth of ERISA's express preemption clause, the United States Supreme Court has also stated that there are limits to its scope, such that infinite relations cannot be the measure of pre-emption in construing relate to because [i]f `relate to' were taken to extend to the furthest stretch of its indeterminacy, then for all practical purposes pre-emption would never run its course, for really, universally, relations stop nowhere. New York State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co. [hereinafter, Travelers ], 514 U.S. 645, 655-56, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995) (internal quotation marks, brackets, and citation omitted). See also Dist. of Columbia v. Greater Wash. Bd. of Trade, 506 U.S. 125, 130 n. 1, 113 S.Ct. 580, 121 L.Ed.2d 513 (1992) (stating that there is no preemption if the state law has only a tenuous, remote, or peripheral connection with covered plans, as is the case with many laws of general applicability) (internal quotation marks and citation omitted). Recognizing that relate to cannot be infinite in scope, this court in Garcia adopted the approach of the United States Court of Appeals for the Eighth Circuit, holding that state law claims are expressly preempted where they rely on a person's status as a beneficiary under the [ERISA] plan and ar[i]se from the administration of benefits under the plan. Garcia, 90 Hawai`i at 433, 978 P.2d at 871 (citing Kuhl v. Lincoln National Health Plan of Kansas City, Inc., 999 F.2d 298, 303-04 (8th Cir.1993)) (emphasis added). See also Egelhoff v. Egelhoff, 532 U.S. 141, 147-48, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001) (holding that a state statute providing that a beneficiary designation is automatically revoked on divorce was preempted because it bound plan administrators to a particular choice of rules for determining beneficiary status and thus govern[ed] the payment of benefits, a central matter of plan administration); Calif. Div. of Labor Stndrds. Enf. v. Dillingham Constr., N.A., Inc., 519 U.S. 316, 334, 117 S.Ct. 832, 136 L.Ed.2d 791 (1997) (holding that a state wage law was not preempted because it did not dictate the choices[ ] facing ERISA plans); Travelers, 514 U.S. at 658, 115 S.Ct. 1671 (observing that a state law is preempted when it mandate[s] employee benefit structures or their administration); Shaw v. Delta Airlines, Inc., 463 U.S. 85, 108, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) (concluding that state law was preempted where it required the provision of benefits in a manner not required by federal law); Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 524-25, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981) (holding that a state statute was preempted because it prohibited a method for calculating plan benefits that was allowed under federal law). Applying the rule in Kuhl to determine whether the state common law claims asserted in Garcia for breach of contract, fraud, infliction of emotional distress, and unfair and deceptive trade practices, inter alia, were preempted, we noted that each claim was based on the underlying contention that [the plan] failed to provide [the beneficiary] with reasonable and necessary medical services to which he believed he was entitled under his health plan. Garcia, 90 Hawai`i at 433, 978 P.2d at 871. Consequently, we held as follows: Essentially, as in Kuhl, [the plan beneficiaries] assert[ ] that [the ERISA plan] improperly withheld benefits under the health plan agreement. In order to have prevailed at trial, [the beneficiaries] would have had to show that [the ERISA plan] improperly refused to cover the [recommended surgical procedure]. As [the ERISA plan] argues, the adjudication of [the beneficiaries'] claims against [the plan] would necessarily involve an inquiry into: (1)[the] administration of the health plan; (2) the medical services that were provided by the health plan; and (3) the medical services that were provided by [the plan operator] as an HMO. Therefore, [the beneficiaries' state common law claims] undoubtedly related to an employee health plan agreement. Accordingly, we hold that the [beneficiaries' claims] were preempted by ERISA. Id. Here, however, there is no claim that AFL improperly withheld benefits, no need to inquire into the medical services provided, and no need to inquire into the administration of the plan or its benefit structures. Because the sole issue is whether AFL is entitled to money damages based on the breach of a contractual agreement, we find that the instant case is distinguishable from Garcia. [5] This view is consistent with the Ninth Circuit's conclusion in Providence that an ERISA plan's state law claims for reimbursement of medical expenses paid on behalf of a plan beneficiary out of a third-party tort recovery is not preempted by ERISA. In that case, an ERISA plan brought a state law breach of contract action against plan beneficiaries seeking reimbursement, out of proceeds from a third-party tort recovery, of benefits paid to cover the beneficiaries' injuries caused by the third party. 385 F.3d at 1171. After the beneficiaries removed the case to federal court, the trial judge dismissed on the basis of ERISA preemption. Id. On appeal, the Ninth Circuit reversed, noting that the Great-West Court had explicitly left the issue open, id. at 1173, and holding: The district court erred in [dismissing the complaint] because [the ERISA plan's] action for breach of contract does not have the requisite connection with or reference to an ERISA plan. [The plan] is simply attempting, through contract law, to enforce the reimbursement provision [of the plan]. Adjudication of its claim does not require interpreting the plan or dictate any sort of distribution of benefits. [The plan] has already paid ERISA benefits on behalf of the beneficiaries, and they are not disputing the correctness of the benefits paid. Rather, [the plan] claims that the [beneficiaries] have breached two promises: (a) the reimbursement provision incorporated into their ERISA plan, as it applies to monies paid to them by a non-ERISA third party, and (b) their agreement to direct their lawyer to reimburse [the plan] in the event of a settlement. Because this is merely a claim for reimbursement based upon the third-party settlement, it does not relate to the plan. Id. at 1172 (citation omitted). Cf. Hamrick's, Inc. v. Roy, 115 S.W.3d 468, 474-76 (Tenn.Ct. App.2002) (holding that a state law action for breach of a reimbursement agreement by an ERISA plan against a beneficiary was not jurisdictionally barred under 29 U.S.C. § 1132(e)); Behavioral Sci. Inst. v. Great-West Life, 84 Wash.App. 863, 930 P.2d 933, 939 (1997) (concluding that a state law action by an ERISA plan against a reinsurer for breach of reinsurance contract was not preempted by ERISA, even though the dispute referenced the ERISA plan, because the case did not involve a beneficiary coverage dispute or a complex plan interpretation substantively affecting ERISA law). The reasoning in Providence is consistent with Garcia and equally applicable here: first, AFL does not dispute the correctness of the benefits already paid, nor would this court's decision affect the distribution of benefits or administration of the plan. Second, also as in Providence, AFL claims that the beneficiary has breached his contractual promise to reimburse the plan out of the proceeds of any third-party recovery. At first glance, the Garcia-Providence tandem would appear to be dispositive. However, as the Ninth Circuit panel in Providence noted, a finding of no preemption is directly in conflict with the decisions of some state courts. The Providence Court rejected the opposing view on the basis that those courts' construction of relate to is not supported by Great-West. Providence, 385 F.3d at 1173 (citing with disapproval Liberty N.W. Ins. Corp. v. Kemp, 192 Or.App. 181, 85 P.3d 871 (2004), and Jefferson-Pilot Life Ins. Co. v. Krafka, 50 Cal.App.4th 190, 57 Cal.Rptr.2d 723 (1996)). Bosque relies heavily on the Oregon Court of Appeals' decision in Kemp. In that case, on essentially the same facts as presented here, the court held: [I]n this case ERISA has preemptive force. [The ERISA plan's state law] complaint derives from and is based on an employee benefit plan. It alleges that [the beneficiary] was covered under [an ERISA plan], that [t]he [plan] provides. . . that when [the plan] has paid benefits on behalf of [the beneficiary], [the plan] will be subrogated to all rights of recovery that [the beneficiary] has against the person who is at fault, that pursuant to the terms of the [plan], . . . [the beneficiary] completed and signed a Reimbursement Agreement, and that [the beneficiary's] failure and refusal to reimburse plaintiff out of the proceeds of his recovery for the accident is in violation of the terms of the policy. To prevail, [the plan] had to prove the existence of the [ERISA plan] and a violation of one of its terms. Kemp, 85 P.3d at 877 (emphasis added; first ellipsis added, second ellipsis in original). See also MEBA Med. & Benefits Plan v. Lago, 867 So.2d 1184, 1188-90 (Fla.Dist.Ct. App.2004) (holding that ERISA preempted a plan's state law reimbursement claim because the claim would require the existence of a plan and violation of one the plan's terms). Kemp is unpersuasive because it is overbroad; in requiring only the existence of a plan, Kemp takes relates to to the furthest stretch of its indeterminacy, a construction rejected by the United States Supreme Court in Travelers and by this court in Garcia. In order for the state law claim to be related to, and thus preempted by, ERISA, Garcia, like Providence and unlike Kemp, requires not just the existence of an ERISA plan, but questions involving the plan's administration and the benefits provided. As set forth above, such involvement is not implicated here, and thus there is no express preemption. Accordingly, the circuit court erred in dismissing AFL's complaint.