Employer and Employee--disability provisions--state action--no preemption
Plaintiff's state action against his employer's financial advisor should not have been
dismissed as preempted by federal ERISA legislation where none of plaintiff's claims raised any
of the concerns Congress sought to address by the ERISA. These claims arose from the
difference between the disability benefits plaintiff received and representations made to him;
among other things, these claims involved defendants who are not plan administrators or
fiduciaries.
Browne, Flebotte, Wilson, Horn & Webb, PLLC, by Martin J. Horn
and Adam A. Smith, for plaintiff-appellant.
Parker, Poe, Adams & Bernstein, L.L.P., by David N. Allen and
Jennifer E. Marsh, for defendants-appellees.
JACKSON, Judge.
Richard Jarvis, (“plaintiff”) appeals an order entered 19
March 2004 in Cabarrus County Superior Court dismissing, with
prejudice as to further state proceedings, his complaint alleging
breach of contract; detrimental reliance; negligence; negligent
misrepresentation; and unfair or deceptive trade practices.
Plaintiff filed his initial complaint on 11 June 2003 and his
first amended complaint and motion to amend complaint on 20 January
2004. The motion to amend complaint was heard and granted on 16
February 2004. Defendant-appellees, Nathaniel M. Stewart
(“Stewart”) and Stewart Financial Group, Inc. (“Stewart Financial”)(collectively “defendants”) responded to plaintiff's First Amended
Complaint with a Motion to Dismiss pursuant to Rules 12(b)(1) and
12(b)(6) of the North Carolina Rules of Civil Procedure. In their
Motion to Dismiss, defendants argued that plaintiff's claims were
preempted by the Employee Retirement Income Security Act of 1974,
29 U.S.C. . 1144, (ERISA) and therefore the state courts did not
have jurisdiction over the claims. In opposition to defendants'
Motion to Dismiss, plaintiff argued that his claims were
traditional state law claims and should not be preempted.
Plaintiff contended that since the terms of the disability policy
itself were not disputed and neither the plan nor any of the plan
administrators were named as parties to the action the claims
should not be preempted.
The trial court issued an order granting defendants' Motion to
Dismiss with prejudice as to further state court proceedings on the
claims on 19 March 2004. In its order the trial court held
plaintiff's claims were “relate[d] to” an “employee welfare benefit
plan” and were therefore preempted by ERISA. The trial court also
held concurrent jurisdiction under 29 U.S.C. . 1132(e) was not
proper as that section allows concurrent state court jurisdiction
in the “limited circumstance of a participant or beneficiary
seeking 'to recover benefits due 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.'”
(emphasis in original omitted) The trial court also noted in its
order that plaintiff did not seek to recover under the terms of theplan and had not sued the plan, the plan's administrator, the
plan's trustee, or the employer.
The basis of plaintiff's claim was a letter he received from
Stewart on behalf of Stewart Financial informing him that his
employer had made changes to his benefits package. These changes
included adding a company paid long term disability policy. The
letter also informed plaintiff that the new disability policy would
pay him sixty-six and two thirds percent (66 2/3%) of his income in
the event he became disabled. This information was confirmed to
plaintiff verbally by defendants on several occasions.
Plaintiff subsequently was disabled. His actual benefits paid
under the long term disability policy were only sixty percent (60%)
of his income. The difference in benefits between the amount
stated by defendants in the letter and the amount actually paid
under the policy during plaintiff's disability was $48,572.48.
Plaintiff only filed suit against Stewart, who had acted as a
financial advisor, and Stewart Financial and not against
plaintiff's employer; the plan administrator; the plan trustee; nor
the plan itself. His initial complaint was based on the grounds
that: (1) the letter and subsequent conversations with defendants
were sufficient to constitute a contract between the parties and
defendants breached that contract; (2) that defendants were
negligent in sending the misleading letter to plaintiff and in
failing to correct their misstatements; and (3) that plaintiff
relied on the statements in the letter to his detriment.
Plaintiff's amended complaint added claims for breach of contractbased on defendants contract with plaintiff's employer, negligent
misrepresentation and unfair or deceptive trade practices.
On defendants' motion, the trial court dismissed plaintiff's
claims on the ground that they were preempted by ERISA. Plaintiff
timely appealed. Plaintiff assigns as error: (1) the trial court's
granting of defendants' motion to dismiss plaintiff's claims on the
basis that they were related to a welfare benefits policy and
therefore preempted by Federal Law and (2) the trial court's
conclusion that state courts do not have concurrent jurisdiction
over plaintiff's claims.
ERISA contains an express preemption clause which provides
that ERISA supercedes “any and all State laws insofar as they may
now or hereafter relate to any employee benefit plan” covered by
ERISA. 29 U.S.C. . 1144(a). In its early attempts to interpret
this preemption clause, the United States Supreme Court relied
heavily on a textual analysis and dictionary definition of “relate
to”. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 77 L.
Ed. 2d 490, 501 (1983)(deciding, based on a definition from Black's
Law Dictionary, that a state law “relates to” an employee benefit
plan if it has a connection or reference to the plan). More
recently, however, the Supreme Court has determined that ERISA's
preemption clause analysis must begin with the “presumption that
Congress does not intend to supplant state law.” New York State
Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514
U.S. 645, 654, 131 L. Ed. 2d 695, 704
(1995). The Supreme Court has
instructed that, in applying ERISA's preemption clause, courtsshould “look . . . to the objectives of the ERISA statute as a
guide to the scope of the state law that Congress understood would
survive.” Id. at 656. Accordingly, the party asserting preemption
must convince the court that the statute sought to be preempted is
the type of law that Congress specifically intended ERISA to
preempt. De Buono v. NYSA-ILA Med. and Clinical Servs. Fund, 520
U.S. 806, 814 138 L. Ed. 2d 21, 29 (1997).
The anti-preemption presumption can be overcome, according to
the Supreme Court, in several ways. If the state law in question
“acts immediately and exclusively upon ERISA plans” or if “the
existence of ERISA plans is essential to the law's operation” then
the law “refers to” ERISA plans and is preempted. Cal. Div. Of
Labor Stds. Enforcement v. Dillingham Constr., NA, 519 U.S. 316,
325, 136 L. Ed. 2d 791, 800 (1997). ERISA also preempts state laws
that do not refer to ERISA or ERISA plans if there is a clear
“connection with” a plan in that the law “mandated employee
benefits structures or their administration” or “provides
alternative enforcement mechanisms.” Travelers, 514 U.S. at 658,
131 L. Ed. 2d at 707. Consistent with these opinions, the Ninth
and Tenth Circuits have held that ERISA preempts
(1) laws that regulate the type of benefits or
terms of ERISA plans, (2) laws that create
reporting, disclosure, funding, or vesting
requirements, (3) laws that provide rules for
calculation of the amount of benefits to be
paid under ERISA plans, and (4) laws that
provide remedies for misconduct growing out of
the administration of ERISA plans.
Farr v. U.S. West Inc., 58 F.3d 1361, 1365 (9th Cir. 1995)
(See footnote 1)
,
Airparts v. Custom Benefit Servs, 28 F.3d 1062, 1064-65 (10th Cir.
1994). Otherwise, the presumption against preemption is very
strong and state laws of general application that simply impose
some burdens on ERISA plans should not be preempted. Plumbing
Indus. Bd. V. E.W. Howell Co., 126 F.3d 61, 67 (2d Cir.,
1997)(citing De Buono, 520 U.S. 806, 138 L. Ed. 2d 21).
“The term 'State law' includes all laws, decisions, rules,
regulations, or other State action having the effect of law, of any
State. 29 U.S.C. . 1144(c)(1). “[I]n appropriate circumstances,
state common law claims fall within the category of state laws
subject to ERISA preemption.” Griggs v. E.I. Dupont De Nemours &
Co., 237 F.3d 371, 378 (4th Cir. 2001). Common law tort and breach
of contract claims are preempted by ERISA if they involve “efforts
by [plan] beneficiaries to undo some allegedly improper act of plan
administration.” Airparts, 28 F.3d at 1066.
Consistent with the above federal cases, is the opinion of
this Court in Vaughn v. CVS Revco D.S., Inc. 144 N.C. App. 534,
551 S.E.2d 122 (2001). In Vaughn, the plaintiff filed a common law
claim of anticipatory breach of contract and a statutory claim ofunfair and deceptive trade practices against the plaintiff's
employer in its individual corporate capacity. The plaintiff did
not seek relief from the plan administrator, did not attempt to
regulate the plan itself, nor seek to recover benefits from the
plan itself. Id. at 539. There, this Court held that the claims
were traditional state-based claims of general application and not,
therefore, preempted by ERISA. Id. at 540. See also Welsh v.
Northern Telecom, Inc., 85 N.C. App. 281, 354 S.E.2d 746 (1987)
(holding that a claim, that was not against the ERISA plan, seeking
amounts in addition to benefits under the plan based on an
agreement to provide additional benefits did not concern the
substance or regulation of the plan and was therefore not
preempted).
As instructed by the Supreme Court in Travelers and De Buono,
we begin by looking at the objectives of ERISA to determine if the
state laws in question here are of the type that Congress intended
ERISA to preempt. The ERISA preemption provision has two primary
purposes: to protect employees and their beneficiaries in employee
benefit plans and to ensure that there is a uniform body of benefit
law among the states by minimizing “the administrative and
financial burden of complying with conflicting directives among
States or between States and the Federal Government.”
Ingersoll-Rand Co. V. McClendon, 498 U.S. 133, 142, 112 L. Ed. 2d
474, 486 (1990). “Pre-emption ensures that the administrative
practices of a benefit plan will be governed by only a single setof regulations.” Fort Halifax Packing Co. v. Coyne, 482 U.S. 1,
11, 96 L. Ed. 2d 1 (1987).
In the instant case, plaintiff, in his amended complaint,
alleges six causes of action: 1) breach of express agreement and
contract (between himself and defendants); 2) negligence; 3)
detrimental reliance; 4) breach of contract (between plaintiff's
employer and defendants); 5) negligent misrepresentation; and 6)
unfair or deceptive trade practices. The Fourth Circuit, which has
jurisdiction over North Carolina federal claims, has found that
state law claims for breach of contract, promissory estoppel and
negligent misrepresentation were not preempted by ERISA where the
claims would not submit the employer to conflicting employer
obligations, create alternative standards of recovery, determine
whether the plaintiff would receive benefits under the plan, or
affect the administration of the plan. Pizlo v. Bethlehem Steel
Corp., 884 F.2d 116, 120 (4th Cir. 1989). In Pizlo, as here, the
damages sought were measured by the benefits the plaintiffs would
have received under the plan, yet the claims were held to not be
preempted. Id. at 120-121.
The common law and state statutory claims in the instant case
do not act immediately and exclusively on ERISA plans nor is the
existence of ERISA plans essential to the operation of these common
law doctrines or state statutes which are instead claims of general
application that do not fall within the situations that overcome
the anti-preemption presumption set forth in Dillingham. 519 U.S.
at 325. The basis of these claims is the actions of defendants whoare not plan administrators or fiduciaries. The claims do not seek
to recover benefits under the plan nor do they seek to mandate the
structure of benefits or the administration of the plan and
consequently do not fall within the situations outlined in
Travelers that justify preemption. 514 U.S. at 658. Nor do these
common law claims subject the plan to regulations that conflict
with the uniform body of law regulating ERISA plans. Consequently,
as none of plaintiff's claims raise any of the concerns Congress
sought to address when the ERISA preemption provision was enacted,
we hold that plaintiff's claims are not preempted by ERISA and
reverse the trial court's order dismissing plaintiff's claims.
Because we have held that plaintiff's claims are not preempted
by ERISA, it is unnecessary to reach plaintiff's second assignment
of error regarding concurrent state jurisdiction.
Reversed.
Judges HUNTER and CALABRIA concur.
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