Court Opinion

ID: 9774696
Source: CourtListenerOpinion
Date Created: 2023-08-29 18:30:14.668501+00
Date Added: 2024-06-11T07:32:13.455688
License: Public Domain

DUNN, Justice,
dissenting.
I respectfully dissent.
Appellant’s first point of error presents several related questions for our consideration: (1) Does ERISA preempt the subject matter of Erbauer’s state law claims? (2) Would Erbauer’s lack of standing to sue under ERISA affect the question of preemption? (3) If ERISA does preempt the suit, does Pan American’s failure to assert preemption as a defense in the trial court constitute a waiver of its ERISA contentions? and (4) If ERISA preemption applies, and was not waived, did the state court have jurisdiction to hear Erbauer’s claim under ERISA or through any derivative theories?
The Employee Retirement Income Security Act was enacted by Congress as a comprehensive system to regulate employee benefit plans, “in the interests of employees and their beneficiaries, for the protection of the revenue of the United States, and to provide for the free flow of commerce.” 29 U.S.C.S. § 1001(a) (1982). To further these national public interests, Congress designed ERISA to provide minimum standards that would assure “the equitable character” of such plans and their financial soundness. Id. The statute’s express policies are to protect the interests of participants and beneficiaries in employee benefit plans by: (1) requiring minimum disclosure and reporting of financial information; (2) establishing standards of conduct, responsibility, and obligation for fiduciaries of those plans; and (3) providing appropriate remedies, sanctions, and ready access to the federal courts. 29 U.S.C.S. § 1001(b).
ERISA contains an extensive civil enforcement structure, by which certain enumerated plaintiffs may sue, inter alia, to recover benefits, to clarify and to enforce rights under their benefit plans, or to obtain information required to be furnished by ERISA. 29 U.S.C.S. § 1132(a) (1982). The statute mandates that most ERISA actions be heard exclusively in federal court, but allows concurrent jurisdiction in federal and state courts for certain specified types of claims. 29 U.S.C.S. § 1132.
ERISA Preemption
To further the end of uniformity and comprehensive regulation, the ERISA statute also contains broad preemption provisions, which state that ERISA “shall supersede any and all State laws insofar as they may now or hereafter relate to an employee benefit plan” covered by the Act. 29 U.S.C.S. § 1144 (1982). This provision is construed broadly, and the United States Supreme Court has held that the preemptive scope of ERISA’s civil enforcement provisions is “so powerful as to displace entirely any state cause of action....” Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 1546-47, 95 L.Ed.2d 55 (1987). Any suit relating to ERISA “is purely a creature of federal law, notwithstanding the fact that state law would provide a cause of action in the absence of [ERISA].” Id.
ERISA’s expansive preemption section defines which state laws are superseded as: “all laws, decisions, rules, regulations, or other State action having the effect of law, of any State.” 29 U.S.C.S. § 1144(c)(1). *156Thus, ERISA preempts both state common law and statutory law. The definition of “state” under ERISA’s preemption provision includes not only the state itself, but also any of its political subdivisions, agencies, or instrumentalities that purport to regulate employee benefit plans, directly or indirectly. 29 U.S.C.S. § 1144(c)(2). Given how broadly ERISA’s preemption clause is phrased and construed, and given the extensive remedial purpose of ERISA, “state laws found to be beyond the scope of [ERISA preemption] are few.” Cefalu v. B.F. Goodrich Co., 871 F.2d 1290, 1294 (5th Cir.1989), quoting Jackson v. Martin Marietta Cory., 805 F.2d 1498, 1499 (11th Cir.1986).
The first question for consideration is whether ERISA preempts the subject matter of Erbauer’s state law claims.
ERISA’s broad preemption section provides that ERISA supersedes all state laws or actions that “relate to” employee benefit plans covered by the Act. 29 U.S.C.S. § 1144. Congress intended that the language of ERISA’s preemption provision be given its broadest common sense interpretation. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). If a state law cause of action “relates to” an ERISA benefit plan, it is preempted, even if the state law was not designed specifically to apply to employee benefit plans and may regulate them only indirectly. Id.
In Pilot Life, the Supreme Court explained that a state law or action “relates to” a benefit plan in the normal sense of the phrase, if it has a connection with or reference to such a plan. 481 U.S. at 47, 107 S.Ct. at 1552. Although the claim in Pilot Life, as here, was for the improper processing of a claim for benefits, the employee benefit plan was the underlying focus of the litigation, and because the state common law causes of action related to that plan, they were preempted by ERISA.
ERISA’s preemption clause does not apply only to state laws dealing directly with subject matters covered by ERISA. Shaw v. Delta Airlines, Inc., 463 U.S. 85, 98, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983). Rather, ERISA's preemption of state law claims focuses on the conduct to which the law is applied. Cefalu, 871 F.2d at 1294, and whether the payment of ERISA benefits are the true subject of the claim.
A recent Texas Supreme Court case briefly touched on the meaning of the term “relates to” in connection with ERISA preemption. Ames v. Ames, 776 S.W.2d 154 (Tex.1989). In Ames, the court interpreted ERISA’s “relates to” language in terms of the purpose of the state law or action. According to the decision in Ames, the ERISA preemption applies if the state action is an attempt to regulate areas explicitly governed by ERISA, instead of only indirectly relating to an ERISA plan so that the action does not conflict with ERISA’s purposes. Id. at 157-58. Although the court in Ames held that ERISA did not preempt the claims asserted there for conversion of benefits, it emphasized that the ERISA benefit plan involved had terminated, so the claim no longer required any interpretation of the plan’s terms or any regulation of the plan. Id. at 158. Thus, Ames is distinguishable from the typical situation in which preemption is at issue.
Following the Supreme Court’s standard of broad preemption in Pilot Life, lower courts have held that claims such as those asserted by Erbauer here are preempted by ERISA. For example, the Fifth Circuit has held that ERISA preempts state law claims for breach of fiduciary duty, negligence, equitable estoppel, breach of contract, and fraud. Hermann Hosp. v. MEBA Medical & Benefits Plan, 845 F.2d 1286, 1290 (5th Cir.1988). Texas courts have held that state law claims for deceptive trade practices, violations of state insurance law, and breach of the duty of good faith and fair dealing are preempted when they are based upon the circumstances surrounding payment or nonpayment of an ERISA plan benefit. See, e.g., Cadillac Ins. Co. v. L.P.C. Distrib. Co., 770 S.W.2d 892 (Tex.App.—San Antonio 1989, writ granted Oct. 18, 1989) (ERISA preempts wrongful insurance cancellation claims); Gorman v. Life Ins. Co. of North America, 752 S.W.2d 710 *157(Tex.App.—Houston [1st Dist.] 1988, writ requested) (ERISA preempts Tex.Ins.Code Ann. art. 21.21 claim); Sams v. N.L. Indus., Inc., 735 S.W.2d 486 (Tex.App.—Houston [1st Dist.] 1987, no writ) (ERISA preempts breach of contract and conversion claims); Giles v. Texas Instruments Employees Pension Plan, 715 S.W.2d 58 (Tex.App.—Dallas 1986, writ ref’d n.r.e.) (ERISA preempts DTPA and misrepresentation claims).
In light of these authorities, I would find that the subject matter of Erbauer’s cross-claim was preempted by ERISA. Erbauer sought damages for consequential injuries to its business that it claimed had occurred as a direct result of Pan American’s failure to pay benefits under the ERISA plan. Thus, at the core of Erbauer’s claim was the allegedly improper determination of the beneficiary’s entitlement to benefits or the improper processing of the claim under the plan. Erbauer’s cause of action could not be decided without judicial inquiry first into the employee’s entitlement to benefits or Pan American’s administration of the employee benefit plan. Clearly, such a claim “relates to” or has a connection with or reference to the employee benefit plan. Pilot Life, 481 U.S. at 47, 107 S.Ct. at 1552.
However, Erbauer argues that it lacks standing to sue under ERISA, which allows only beneficiaries or participants to enforce its provisions. Erbauer claims that preemption does not apply here, because if it did, Erbauer would have no remedy under federal law.
Standing to Sue Under ERISA
ERISA provides for civil enforcement actions to be brought by a participant, a beneficiary, or a fiduciary, as defined in ERISA, or by the Secretary of Labor. 29 U.S.C.S. § 1132(a).
A “participant” includes an employee or former employee who is, or may become, eligible to receive any type of benefit from his employer’s benefit plan. 29 U.S.C.S. § 1002(7) (1982). A “beneficiary” means a person designated by a participant or by the benefit plan, as entitled to a benefit under the plan. 29 U.S.C.S. § 1002(8). The term “fiduciary” includes an administrator, officer, trustee, or custodian of the benefit plan. 29 U.S.C.S. § 1002(14). An “administrator” means a person so designated by the benefit plan, the plan sponsor, or a person chosen by the Secretary of Labor if no plan sponsor or other administrator can be identified. 29 U.S.C.S. § 1002(23).
There is a split of authority on the question of whether assignees of ERISA claims have standing to bring suit under § 1132. Compare Northeast Dep’t ILGWU Health & Welfare Fund v. Teamsters Local Union No. 229 Welfare Fund, 764 F.2d 147, 154 n. 6 (3d Cir.1985) (assignees have no standing under ERISA) with Misic v. Building Serv. Employees Health & Welfare Trust, 789 F.2d 1374, 1378 n. 4 (9th Cir.1986) (assignees may sue on behalf of participants or beneficiaries). However, both of these cases involved express assignments, not the type of implied derivative standing that might arguably be implicated here by reason of the beneficiaries’ (the Gills’) participation in the suit. Er-bauer sued in its own right for damages it sustained as the result of Pan American’s mishandling of Dewey Gill’s claim for benefits, and not expressly on behalf of its employee, the beneficiary.
An employer has no standing in its own right to sue under ERISA, because it is not ordinarily “a participant, beneficiary, or fiduciary,” as required by 29 U.S.C.S. § 1132(a). Giardono v. Jones, 867 F.2d 409, 412-13 (7th Cir.1989). Most courts have restricted the right to sue under ERISA to “enumerated” parties, i.e., those listed in the statute itself. Id.; Hermann Hosp., 845 at 1286; Grand Union Co. v. Food Employers Labor Relations Ass’n, 808 F.2d 66, 71 (D.C.Cir.1987); Whitworth Bros. Storage Co. v. Central States, 794 F.2d 221, 228 (6th Cir.1986), cert. denied, 479 U.S. 1007, 107 S.Ct. 645, 93 L.Ed.2d 701 (1987); Dime Coal Co. v. Combs, 796 F.2d 394, 396 (11th Cir.1986); Northeast Dep’t ILGWU Health & Welfare Fund, 764 F.2d at 154 n. 6.
One federal court has “implied” statutory authority for nonenumerated parties *158to sue under ERISA, based on a three-part test. See Fentron Indus. v. National Shopmen Pension Fund, 674 F.2d 1300, 1304 (9th Cir.1982). Under Fentron, statutory authority to sue will be implied if the potential plaintiff (1) has suffered an injury in fact, (2) arguably falls within the zone of interests the statute was designed to protect, and (3) can show that the statute itself does not expressly preclude the suit. Id.
However, as stated above, most courts, including the Fifth Circuit, have expressly rejected the notion of extending ERISA’s reach to parties other than those specified in the statute. Hermann Hosp., 845 F.2d at 1289. The court in Hermann Hosp. specifically held that “non-enumerated" parties do not have standing to sue under ERISA. The court agreed with the Second Circuit that “only Congress is empowered to grant and extend subject matter jurisdiction of the federal judiciary, ... and that courts are not to infer a grant of jurisdiction absent clear legislative mandate.” Id. at 1288, quoting Pressroom Union Printers League Income Security Fund v. Continental Assurance Co., 700 F.2d 889, 892 (2d Cir.), cert. denied, 464 U.S. 845, 104 S.Ct. 148, 78 L.Ed.2d 138 (1983). The court concluded that the silence of ERISA’s legislative history indicated Congress’ intent that ERISA’s standing/jurisdictional provisions be exclusive. Hermann Hosp., 845 F.2d at 1288.
Thus, § 1132(a)(l)(B)’s remedies apply only to participants or beneficiaries. “Congress simply made no provision in § 1132(a)(1)(B) for persons other than participants and beneficiaries to sue, including persons purporting to sue on their behalf.” See Northeast Dep’t ILGWU Health & Welfare Fund, 764 F.2d at 154 n. 6.
Erbauer was not a participant or beneficiary under the plan, and although Pan American attempts to characterize Erbauer as a fiduciary for purposes of ERISA standing, Erbauer denies this status. I do not address the issue of Erbauer’s standing to sue as a fiduciary under ERISA, a question properly left to the federal court.
I would find that Erbauer’s standing or lack of standing to sue under ERISA does not change the fact that ERISA preempts Erbauer’s suit, as discussed above. Preemption focuses on the subject matter of the claim, not on the party bringing suit. It would circumvent the well-defined, comprehensive regulatory purposes of ERISA to allow a nonenumerated party’s lack of standing to nullify the statute’s comprehensive preemption provisions. Hermann Hosp., 845 F.2d at 1290. ERISA provides that it “shall supersede any and all State laws insofar as they may now or hereafter relate to an employee benefit plan” covered by the Act. 29 U.S.C.S. § 1144. The statute makes no exception for state laws allowing a claim relating to an ERISA benefit plan that is brought by a party not entitled to sue under ERISA. “Any and all state laws” reasonably includes state causes of action brought by a nonenumer-ated party. It is unfortunate that Erbauer may be deprived of a claim he would otherwise have standing to assert under state law, but for federal law preemption, but that circumstance does not allow a court to ignore the language of the statute, the Congressional intent that ERISA’s coverage be comprehensive, and the judicial precedent on the scope of ERISA preemption.
Further, I note that even plaintiffs authorized to sue under ERISA may not recover extracontractual damages, such as those sought by Erbauer here, for a breach of fiduciary duty arising from the improper or untimely processing of a claim for benefits. Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134, 144, 105 S.Ct. 3085, 3091, 87 L.Ed.2d 96 (1985). Although ERISA allows participants and beneficiaries to recover the plan benefits, a remedy not available to a nonenumerated party, the additional injury alleged in an extracon-tractual claim is arguably the same as that asserted by a nonenumerated party. It is unlikely that Congress intended to allow parties with no standing to sue under ERISA to recover extracontractual damages, when the group that ERISA was designed to protect may not sue for such damages under ERISA. See Hermann Hosp., 845 F.2d at 1290.
*159I next turn to the question of whether Pan American waived its defense of ERISA preemption by failing to assert it in the trial court.
Waiver of ERISA
Despite the comprehensive scope of ERISA coverage and its extensive preemption provisions, recent decisions have held that the statute’s applicability can be waived in some instances. These decisions have drawn a distinction between ERISA as a choice-of-law issue and ERISA as a choice-of-forum issue. If the application of ERISA is a choice-of-law question, the failure to timely assert it has been held to constitute a waiver. Castillo v. Neely’s TBA Dealer Supply, Inc., 776 S.W.2d 290, 294 (Tex.App.—Houston [1st Dist.] 1989, writ denied); Great North Am. Stationers, Inc. v. Ball, 770 S.W.2d 631, 633 (Tex.App.—Dallas 1989, writ requested); see also Dueringer v. General Am. Life Ins. Co., 842 F.2d 127, 129-30 (5th Cir.1988).
If, on the other hand, the application of ERISA involves a choice of forum, the failure to assert it in the trial court does not constitute a waiver. See International Longshoremen’s Ass’n v. Davis, 476 U.S. 380, 391-92, 106 S.Ct. 1904, 1912-13, 90 L.Ed.2d 389 (1986). Although four dissenting justices in Davis would have held that even federal preemption affecting the choice of forum could be waived, the federal statute involved in Davis was the National Labor Relations Act, and not ERISA. The dissenting opinion is premised on the fact that the National Labor Relations Act was silent on the question of preemption of state court jurisdiction, and that Congressional intent as to preemption of a state forum was not at all clear from the Act. That is not the case with ERISA’s express designation of exclusive federal jurisdiction and when jurisdiction is concurrent in the state courts.
To decide whether this case involves a choice-of-forum question or merely a choice-of-law question, I first examine ERISA’s grant of jurisdiction to the courts.
Federal or State Court Jurisdiction
ERISA provides for exclusive federal court jurisdiction in certain circumstances and for concurrent federal and state court jurisdiction in other types of ERISA actions. For most suits brought under ERISA, the federal courts have exclusive jurisdiction. 29 U.S.C.S. § 1132(e)(1). The only exception to exclusive federal court jurisdiction is that state courts have concurrent jurisdiction to hear suits brought under 29 U.S.C.S. § 1132(a)(1)(B), which allows a participant or beneficiary to sue:
to 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 terms of the plan.
Because § 1132(a)(1)(B) allows suit only by a participant or beneficiary, Erbauer’s claim on its face does not fall within its provisions. Thus, if Erbauer has a justicia-ble claim, it must necessarily fall within the exclusive jurisdiction of the federal courts, according to the express provisions of 29 U.S.C.S. § 1132(e).
Even disregarding the standing issue, I note that the substance of Erbauer’s claim against Pan American was not in any way analogous to a suit to recover benefits, to enforce a beneficiary’s rights, or to clarify the participant’s rights to future benefits under § 1132(a)(1)(B). Instead, the claim alleged Pan American’s improper handling of the employee’s claim for benefits, and was most closely analogous to one for breach of fiduciary duty under 29 U.S.C.S. § 1109, which may be brought by a participant, beneficiary, or fiduciary. 29 U.S.C.S. § 1132(a)(2). Thus, though the question of Erbauer’s standing to sue as a fiduciary has not been resolved, I find that even if Erbauer were found to be a fiduciary, its suit would fall within the exclusive jurisdiction of the federal courts. 29 U.S.C.S. § 1132(e).
I note that the Gills intervened in the original suit as party plaintiffs, and their status as beneficiaries would have conferred upon the state court the concurrent jurisdiction to hear their ERISA claims un*160der 29 U.S.C.S. § 1132(a)(1)(B). However, the Gills settled all their claims before the trial on Erbauer’s causes of action, and only Erbauer’s claims were litigated to judgment and appealed. Despite the unusual procedural history of having a beneficiary participate in the suit at one time, I would not infer any derivative jurisdiction over Erbauer’s claims from the fact that the court would have had jurisdiction to hear the Gills’ ERISA claims. Courts have no authority to extend a statutory grant of jurisdiction, especially one as clearly expressed by Congress as in ERISA. Congress here has given concurrent jurisdiction to the state courts only to hear specific kinds of claims brought by participants or beneficiaries.
Because the type of claim asserted by Erbauer was one reserved to the exclusive jurisdiction of the federal courts, the application of ERISA preemption involved a mandatory federal forum, rather than merely a choice-of-law question that could be resolved in either a state or a federal court. Thus, Pan American’s failure to assert ERISA preemption in the trial court was not waived, because ERISA expressly preempts state court jurisdiction to consider at all the type of claim asserted here. See International Longshoremen’s Ass’n, 476 U.S. at 391-92, 106 S.Ct. at 1912-13; Castillo, 776 S.W.2d at 292.
In sum, I would hold that (1) ERISA preempts the subject matter of Erbauer’s claim, without regard to whether Erbauer has standing to sue under ERISA, (2) the nature of Erbauer’s claim was such that it falls within the exclusive jurisdiction of the federal courts, (3) because ERISA preemption involves a mandatory choice of forum rather than merely a choice-of-law question, here, it was not waived, and (4) the state court had no jurisdiction to hear Er-bauer’s preempted claim.
I would reverse the judgment of the trial court and dismiss the case.