The Employee Retirement Income Security Act
The Employee Retirement Income Security Act of 1974 was created to bring stability and accountability to private-employee pension funds, which were too often failing to provide the benefits promised due to fiduciary mismanagement and unreasonable vesting requirements. Somewhat similarly to state worker-compensation laws, ERISA was designed as a compromise between the interests of employees and employers. The substantive funding, vesting, and insurance requirements for pensions protected employees’ retirement expectations. In exchange for suffering these regulatory requirements, employers were granted the boon of the statute’s preemption of state law. See Donald T. Bogan, “ERISA: The Savings Clause, § 502 Implied Preemption, Complete Preemption, and State Law Remedies,” 42 Santa Clara L. Rev. 105, 117-18 (2001). As retirement benefits are not mandated by any federal or state law, such a compromise gave employers an incentive to continue offering these fringe benefits to their workers, even with the ERISA hassles: “Congress drafted the statute with the intent that ERISA would provide a single, comprehensive set of rules to govern the private pension industry, thereby relieving large employers from the headache of complying with multiple and divergent state and local regulations in the administration of their retirement plans.” Id. See, also, Alessi v. Raybestos–Manhattan, Inc., 451 U.S. 504, 523 (1981); Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004).
ERISA has defined employee-welfare plans to incorporate more than just pension funds, and the definition includes health and disability benefit plans. See 29 U.S.C.A. § 1002. Although the statute contains a savings clause that allows states to continue to regulate certain aspects of the business of insurance, at 29 U.S.C. § 1144(b)(2)(A), the courts still interpret the preemption clause broadly. Thus, preemption has protected employers from myriad state and local regulations that formerly governed health plans. It has also led to a number of lawsuits over the years, as plaintiffs test the courts for a definition of which of these state-law claims ERISA preempts.
Complete Preemption and Conflict Preemption
ERISA preemption comes in two forms: complete preemption and conflict preemption. Complete, or “super” preemption, arises out of section 502(a)(1)(B), codified at 29 U.S.C. § 1132(a)(1)(B). The section reads:
A civil action may be brought (1) by a participant or beneficiary (B) 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.
The Supreme Court has read this section as an indication that Congress intended for all such actions to be brought under ERISA, and not under state law: “If a state law cause of action is completely preempted by a federal statute, the claim pled in terms of state law is in actuality based on the federal law.” Regency Hosp. Co. of S. Atlanta, L.L.C. v. United Healthcare of Georgia, Inc., 403 F. Supp. 2d 1221, 1224 (N.D. Ga. 2005) (quoting Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63–64 (1987); Beneficial National Bank v. Anderson, 539 U.S. 1, 8 (2003); Davila, 542 U.S. at 207–08). This reasoning has led to a virtually universally applied exception to the well-pleaded-complaint rule, and serves to prevent plaintiffs’ attempts to avoid ERISA by wording their pleadings as state-law claims filed in state court. Such a state-law claim, one that is clearly within the scope of the civil enforcement provisions of section 502(a), is converted into a federal claim under ERISA that is removable to federal court.
However, there may be state-law claims that involve an ERISA plan, but do not consist of a beneficiary seeking to recover benefits due him or her under the plan. If such claims “relate to” an ERISA plan, then they are not re-characterized as federal ERISA claims, and are subject to a different type of preemption, namely, "conflict" (defensive) preemption under ERISA section 514(a). See, 29 U.S.C. § 1144(a).
Conflict preemption is an affirmative defense to the state-law claims it preempts, and as such leads to dismissal of those claims by the state court in which they were filed. Because it does not confer jurisdiction, conflict preemption does not serve as a basis for removal to federal court. And conflict preemption necessarily covers a broader swath of claims than complete preemption, as many more claims can be said to “relate to” an ERISA plan than just those covered by ERISA 502(a). Thus arises the “treacherous path” into the “ERISA preemption thicket” that judges appear to love to hate: how to determine which state-law claims sufficiently relate to an ERISA plan that they will not survive an affirmative defense of conflict preemption.
Conflict Preemption: Take the Treacherous Path
Defense lawyers will want to walk the conflict-preemption path. Complete preemption leads to a re-characterization of the state-law claim into a federal one that can be removed to federal court. But conflict preemption is an affirmative defense, and leads to dismissal of conflicting claims. A defense lawyer who does not appreciate this distinction may lose a valuable opportunity to characterize its own response to an ERISA or ERISA-related claim masked as a state-law claim that is filed in state court. Because of the judicial discomfort with the statute, judges themselves do not find the two types of preemption to be clearly defined. And ERISA defendants can use the lack of clarity in ERISA precedent to their advantage in determining how to draft and construct their preemption arguments.
Further confusion is added by the different ways in which the federal circuit courts handle complete and conflict preemption analysis for a single claim. In the Sixth Circuit, complete preemption and conflict preemption are mutually exclusive propositions, and cannot coexist in a single claim. Ackerman v. Fortis Benefits Ins. Co., 254 F. Supp. 2d 792, 818 (S.D. Ohio 2003). Thus a completely preempted claim may go forward in the Sixth Circuit, although subject to the ERISA rules. The same is true in the Ninth and Tenth Circuits. Crull v. GEM Ins. Co., 58 F. 3d 1386, 1391–92 (9th Cir. 1995); Carland v. Metro. Life Ins. Co., 935 F.2d 1114, 1119 (10th Cir. 1991).
In the Eleventh and Seventh Circuits, however, a completely preempted claim is also necessarily conflict-preempted, and any such claim removed to federal court will automatically be dismissed there as well. Butero v. Royal Maccabees Life Ins. Co., 174 F. 3d 1207, 1213 (11th Cir. 1999); Lister v. Stark, 890 F. 2d 941, 944 (7th Cir. 1989). The Eleventh Circuit’s decision in Butero relied upon a Fifth Circuit case that has since been overruled. Thus the Fifth Circuit rule appears to be that a case that is completely preempted is not necessarily also conflict-preempted, but may still be. Arana v. Ochsner Health Plan, 338 F. 3d 433, 440 (5th Cir. 2003) (overruling McClelland v. Gronwaldt, 155 F. 3d 507, 510 (5th Cir. 1998)).
The Eighth Circuit has, at one time, recognized a wholly separate third category of preemption, which it called “relate to” preemption. Clark v. Ameritas Inv. Corp., 408 F. Supp. 2d 819, 827 (D. Neb. 2005), report and recommendation adopted, 2006 WL 1401727 (D. Neb. May 19, 2006). It appears that at one time the Eleventh Circuit recognized three separate types of ERISA preemption as well. See, Hughes v. Attorney General of Florida, 377 F. 3d 1258, 1265–66 (11th Cir. 2004).
In the First Circuit, completely preempted claims are dismissed and do not go forward unless the plaintiff amends the complaint to properly state an ERISA claim—which amendment the courts will typically allow. See, e.g., Degnan v. Publicker Indus., Inc., 83 F. 3d 27, 29 (1st Cir. 1996). For its part, the Second Circuit does not appear to consistently make a clear distinction between complete and conflict preemption. See, e.g., Arditi v. Lighthouse Int'l, 676 F. 3d 294, 296 (2d Cir. 2012) (referring only to “ERISA preemption”); Montefiore Med. Ctr. v. Teamsters Local 272, 642 F. 3d 321, 327–28 (2d Cir. 2011) (discussing ERISA preemption only in terms of section 502(a), with a glancing reference to its divergence from general defensive preemption).
The Supreme Court has not provided much clarity to the struggling, disagreeing circuit courts. The Supreme Court had issued roughly two dozen opinions regarding ERISA preemption as of 2012, but still left Sixth Circuit Judge Birch decrying the statute’s ongoing confusion. See Sanson v. Gen. Motors Corp., 966 F.2d 618 (11th Cir. 1992) (Birch, J., dissenting).
Ultimately, the path that still may be a treacherous thicket for judges and plaintiff’s counsel is one that can be ripe with fruit for ERISA attorneys. The law is confusing, the circuit courts are divided, and the Supreme Court has been unable to “bring clarity to the law,” as Justice Scalia dryly noted in California Division of Labor Standards Enforcement v. Dillingham Construction. 519 U.S. at 335. Nevertheless, a defense attorney should not shrink from using the affirmative defense of ERISA conflict preemption. Willingness to wade into the fray could lead to the quick dismissal of ERISA claims brought under color of state law.
Keywords: litigation, pretrial practice, discovery, ERISA, complete preemption, conflict preemption
Gillian W. Egan is an associate with Burr & Forman LLP in Mobile, Alabama.