Subject:  FMC CORP. v. HOLLIDAY, Syllabus



 
    NOTE: Where it is feasible, a syllabus (headnote) will be released, as
is being done in connection with this case, at the time the opinion is
issued.  The syllabus constitutes no part of the opinion of the Court but
has been prepared by the Reporter of Decisions for the convenience of the
reader.  See United States v. Detroit Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES


Syllabus


FMC CORP. v. HOLLIDAY


certiorari to the united states court of appeals for the third circuit

No. 89-1048.  Argued October 2, 1990 -- Decided November 27, 1990

After petitioner FMC Corporation's self-funded health care plan (Plan) paid
a portion of respondent's medical expenses resulting from an automobile
accident, FMC informed respondent that it would seek reimbursement under
the Plan's subrogation provision from any recovery she realized in her
Pennsylvania negligence action against the driver of the vehicle in which
she was injured.  Respondent obtained a declaratory judgment in Federal
District Court that MDRV 1720 of Pennsylvania's Motor Vehicle Financial
Responsibility Law -- which precludes reimbursement from a claimant's tort
recovery for benefit payments by a program, group contract, or other
arrangement -- prohibits FMC's exercise of subrogation rights.  The Court
of Appeals affirmed, holding that the Employee Retirement Income Security
Act of 1974 (ERISA), which applies to employee welfare benefit plans such
as FMC's, does not preempt MDRV 1720.

Held: ERISA pre-empts the application of MDRV 1720 to FMC's Plan.  Pp.
3-12.

    (a) ERISA's pre-emption clause broadly establishes as an area of
exclusive federal concern the subject of every state law that "relate[s]
to" a covered employee benefit plan.  Although the statute's saving clause
returns to the States the power to enforce those state laws that
"regulat[e] insurance," the deemer clause provides that a covered plan
shall not be "deemed to be an insurance company or other insurer . . . or
to be engaged in the business of insurance" for purposes of state laws
"purporting to regulate" insurance companies or insurance contracts.  Pp.
3-5.

    (b) Section 1720 "relate[s] to" an employee benefit plan within the
meaning of ERISA's pre-emption provision, since it has both a "connection
with" and a "reference to" such a plan.  See Shaw v. Delta Air Lines, Inc.,
463 U. S. 85, 96-97.  Moreover, although there is no dispute that MDRV 1720
"regulates insurance," ERISA's deemer clause demonstrates Congress' clear
intent to exclude from the reach of the saving clause self-funded ERISA
plans by relieving them from state laws "purporting to regulate insurance."
Thus, such plans are exempt from state regulation insofar as it "relates
to" them.  State laws directed toward such plans are pre-empted because
they relate to an employee benefit plan but are not "saved" because they do
not regulate insurance.  State laws that directly regulate insurance are
"saved" but do not reach selffunded plans because the plans may not be
deemed to be insurance companies, other insurers, or engaged in the
business of insurance for purposes of such laws.  On the other hand, plans
that are insured are subject to indirect state insurance regulation insofar
as state laws "purporting to regulate insurance" apply to the plans'
insurers and the insurers' insurance contracts.  This reading of the deemer
clause is consistent with Metropolitan Life Ins. Co. v. Massachusetts, 471
U. S. 724, 735, n. 14, 747, and is respectful of the presumption that
Congress does not intend to pre-empt areas of traditional state regulation,
see Jones v. Rath Packing Co., 430 U. S. 519, 525, including regulation of
the "business of insurance," see Metropolitan Life Ins. Co. v.
Massachusetts, supra, at 742-744.  Narrower readings of the deemer clause
-- which would interpret the clause to except from the saving clause only
state insurance regulations that are pretexts for impinging on core ERISA
concerns or to preclude States from deeming plans to be insurers only for
purposes of state laws that apply to insurance as a business, such as laws
relating to licensing and capitalization requirements -- are unsupported by
ERISA's language and would be fraught with administrative difficulties,
necessitating definition of core ERISA concerns and of what constitutes
business activity and thereby undermining Congress' expressed desire to
avoid endless litigation over the validity of state action and requiring
plans to expend funds in such litigation.  Pp. 5-12.

885 F. 2d 79, vacated and remanded.

O'Connor, J., delivered the opinion of the Court, in which Rehnquist, C.
J., and White, Marshall, Blackmun, Scalia, and Kennedy, JJ., joined.
Stevens, J., filed a dissenting opinion.  Souter, J., took no part in the
consideration or decision of the case.

------------------------------------------------------------------------------




Subject: 89-1048 -- OPINION, FMC CORP. v. HOLLIDAY

 


NOTICE: This opinion is subject to formal revision before publication in
the preliminary print of the United States Reports.  Readers are requested
to notify the Reporter of Decisions, Supreme Court of the United States,
Washington, D. C. 20543, of any typographical or other formal errors, in
order that corrections may be made before the preliminary print goes to
press.
SUPREME COURT OF THE UNITED STATES


No. 89-1048



FMC CORPORATION, PETITIONER v. CYNTHIA
ANN HOLLIDAY


on writ of certiorari to the united states court of appeals for the third
circuit

[November 27, 1990]



    Justice O'Connor delivered the opinion of the Court.
    This case calls upon the Court to decide whether the Employee
Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended,
29 U. S. C. MDRV 1001 et seq., pre-empts a Pennsylvania law precluding
employee welfare benefit plans from exercising subrogation rights on a
claimant's tort recovery.

I
    Petitioner, FMC Corporation (FMC), operates the FMC Salaried Health
Care Plan (Plan), an employee welfare benefit plan within the meaning of
ERISA, MDRV 3(1), 29 U. S. C. MDRV 1002(1), that provides health benefits
to FMC employees and their dependents.  The Plan is self-funded; it does
not purchase an insurance policy from any insurance company in order to
satisfy its obligations to its participants.  Among its provisions is a
subrogation clause under which a Plan member agrees to reimburse the Plan
for benefits paid if the member recovers on a claim in a liability action
against a third party.
    Respondent, Cynthia Ann Holliday, is the daughter of FMC employee and
Plan member Gerald Holliday.  In 1987, she was seriously injured in an
automobile accident.  The Plan paid a portion of her medical expenses.
Gerald Holli day brought a negligence action on behalf of his daughter in
Pennsylvania state court against the driver of the automobile in which she
was injured.  The parties settled the claim.  While the action was pending,
FMC notified the Hollidays that it would seek reimbursement for the amounts
it had paid for respondent's medical expenses.  The Hollidays replied that
they would not reimburse the Plan, asserting that MDRV 1720 of
Pennsylvania's Motor Vehicle Financial Responsibility Law, 75 Pa. Cons.
Stat. MDRV 1720 (1987), precludes subrogation by FMC.  Section 1720 states
that "[i]n actions arising out of the maintenance or use of a motor
vehicle, there shall be no right of subrogation or reimbursement from a
claimant's tort recovery with respect to . . . benefits . . . payable under
section 1719."  {1}  Section 1719 refers to benefit payments by "[a]ny
program, group contract or other arrangement."  {2}
    Respondent, proceeding in diversity, then sought and received a
declaratory judgment in Federal District Court that MDRV 1720 prohibits
FMC's exercise of subrogation rights on Hol liday's claim against the
driver.  The United States Court of Appeals for the Third Circuit affirmed.
885 F. 2d 79 (1989).  The court held that MDRV 1720, unless pre-empted,
bars FMC from enforcing its contractual subrogation provision.  According
to the court, ERISA pre-empts MDRV 1720 if ERISA's "deemer clause," MDRV
514(b)(2)(B), 29 U. S. C. MDRV 1144(b)(2)(B), exempts the Plan from state
subrogation laws.  The Court of Appeals, citing Northern Group Services,
Inc. v. Auto Owners Ins. Co., 833 F. 2d 85, 91-94 (CA6 1987), cert. denied,
486 U. S. 1017 (1988), determined that "the deemer clause [was] meant
mainly to reach back-door attempts by states to regulate core ERISA
concerns in the guise of insurance regulation."  885 F. 2d, at 86.
Pointing out that the parties had not suggested that the Pennsylvania
antisubrogation law addressed "a core type of ERISA matter which Congress
sought to protect by the preemption provision," id., at 90, the court
concluded that the Pennsylvania law is not preempted.  The Third Circuit's
holding conflicts with decisions of other Circuit Courts that have
construed ERISA's deemer clause to protect self-funded plans from all state
insurance regulation.  See, e. g., Baxter v. Lynn, 886 F. 2d 182, 186 (CA8
1989); Reilly v. Blue Cross and Blue Shield United of Wisconsin, 846 F. 2d
416, 425-426 (CA7), cert. denied, 488 U. S. 856 (1988).  We granted
certiorari to resolve this conflict, 493 U. S. --- (1990), and now
reverse.
II
    In determining whether federal law pre-empts a state statute, we look
to congressional intent.  " `Pre-emption may be either express or implied,
and "is compelled whether Congress' command is explicitly stated in the
statute's language or implicitly contained in its structure and purpose." '
"  Shaw v. Delta Air Lines, Inc., 463 U. S. 85, 95 (1983) (quoting Fidelity
Federal Savings & Loan Assn. v. De la Cuesta, 458 U. S. 141, 152-153
(1982), in turn quoting Jones v. Rath Packing Co., 430 U. S. 519, 525
(1977)); see also Chevron U. S. A. Inc. v. Natural Resources Defense
Council, Inc., 467 U. S. 837, 842-843 (1984) ("If the intent of Congress is
clear, that is the end of the matter; for the court . . . must give effect
to the unambiguously expressed intent of Congress" (footnote omitted)).  We
"begin with the language employed by Congress and the assumption that the
ordinary meaning of that language accurately expresses the legislative
purpose."  Park 'N Fly, Inc. v. Dollar Park and Fly, Inc., 469 U. S. 189,
194 (1985).  Three provisions of ERISA speak expressly to the question of
pre-emption:


    "Except as provided in subsection (b) of this section [the saving
clause], the provisions of this subchapter and subchapter III of this
chapter shall supersede any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan."  MDRV 514(a), as set forth
in 29 U. S. C. MDRV 1144(a) (pre-emption clause).
    "Except as provided in subparagraph (B) [the deemer clause], nothing in
this subchapter shall be construed to exempt or relieve any person from any
law of any State which regulates insurance, banking, or securities."  MDRV
514(b)(2)(A), as set forth in 29 U. S. C. MDRV 1144(b)(2)(A) (saving
clause).
    "Neither an employee benefit plan . . . nor any trust established under
such a plan, shall be deemed to be an insurance company or other insurer,
bank, trust company, or investment company or to be engaged in the business
of insurance or banking for purposes of any law of any State purporting to
regulate insurance com panies, insurance contracts, banks, trust companies,
or investment companies."  MDRV 514(b)(2)(B), as set forth in 29 U. S. C.
MDRV 1144(b)(2)(B) (deemer clause).


    We indicated in Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S.
724 (1985), that these provisions "are not a model of legislative
drafting."  Id., at 739.  Their operation is nevertheless discernible.  The
pre-emption clause is conspicuous for its breadth.  It establishes as an
area of exclusive federal concern the subject of every state law that
"relate[s] to" an employee benefit plan governed by ERISA.  The saving
clause returns to the States the power to enforce those state laws that
"regulat[e] insurance," except as provided in the deemer clause.  Under the
deemer clause, an employee benefit plan governed by ERISA shall not be
"deemed" an insurance company, an insurer, or engaged in the business of
insurance for purposes of state laws "purporting to regulate" insurance
companies or insurance contracts.
III
    Pennsylvania's antisubrogation law "relate[s] to" an employee benefit
plan.  We made clear in Shaw v. Delta Air Lines, supra, that a law relates
to an employee welfare plan if it has "a connection with or reference to
such a plan."  Id., at 96-97 (footnote omitted).  We based our reading in
part on the plain language of the statute.  Congress used the words "
`relate to' in MDRV 514(a) [the pre-emption clause] in their broad sense."
Id., at 98.  It did not mean to pre-empt only state laws specifically
designed to affect employee benefit plans.  That interpretation would have
made it unnecessary for Congress to enact ERISA MDRV 514(b)(4), 29 U. S. C.
MDRV 1144(b)(4), which exempts from pre-emption "generally" applicable
criminal laws of a State.  We also emphasized that to interpret the
pre-emption clause to apply only to state laws dealing with the subject
matters covered by ERISA, such as reporting, disclosure, and fiduciary
duties, would be incompatible with the provision's legislative history
because the House and Senate versions of the bill that became ERISA
contained limited pre-emption clauses, applicable only to state laws
relating to specific subjects covered by ERISA. {3}  These were rejected in
favor of the present language in the Act, "indicat[ing] that the section's
pre-emptive scope was as broad as its language."  Shaw v. Delta Air Lines,
463 U. S., at 98.
    Pennsylvania's antisubrogation law has a "reference" to benefit plans
governed by ERISA.  The statute states that "[i]n actions arising out of
the maintenance or use of a motor vehicle, there shall be no right of
subrogation or reimbursement from a claimant's tort recovery with respect
to . . . benefits . . . paid or payable under section 1719."  75 Pa. Cons.
Stat. MDRV 1720 (1987).  Section 1719 refers to "[a]ny program, group
contract or other arrangement for payment of benefits."  These terms
"includ[e], but [are] not limited to, benefits payable by a hospital plan
corporation or a professional health service corporation."  MDRV 1719
(emphasis added).
    The Pennsylvania statute also has a "connection" to ERISA benefit
plans.  In the past, we have not hesitated to apply ERISA's pre-emption
clause to state laws that risk subjecting plan administrators to
conflicting state regulations.  See, e. g., Shaw v. Delta Air Lines, supra,
at 95-100 (state laws making unlawful plan provisions that discriminate on
the basis of pregnancy and requiring plans to provide specific benefits
"relate to" benefit plans); Alessi v. RaybestosManhattan, Inc., 451 U. S.
504, 523-526 (1981) (state law prohibiting plans from reducing benefits by
amount of workers' compensation awards "relate[s] to" employee benefit
plan).  To require plan providers to design their programs in an
environment of differing State regulations would complicate the
administration of nationwide plans, producing in efficiencies that
employers might offset with decreased benefits.  See Fort Halifax Packing
Co. v. Coyne, 482 U. S. 1, 10 (1987).  Thus, where a "patchwork scheme of
regulation would introduce considerable inefficiencies in benefit program
operation," we have applied the pre-emption clause to ensure that benefit
plans will be governed by only a single set of regulations.  Id., at 11.
    Pennsylvania's antisubrogation law prohibits plans from being
structured in a manner requiring reimbursement in the event of recovery
from a third party.  It requires plan providers to calculate benefit levels
in Pennsylvania based on expected liability conditions that differ from
those in States that have not enacted similar antisubrogation legislation.
Application of differing state subrogation laws to plans would therefore
frustrate plan administrators' continuing obligation to calculate uniform
benefit levels nationwide.  Accord, Alessi v. Raybestos-Manhattan, Inc.,
supra (state statute prohibiting offsetting worker compensation payments
against pension benefits pre-empted since statute would force employer
either to structure all benefit payments in accordance with state statute
or adopt different payment formulae for employers inside and outside
State).  As we stated in Fort Halifax, "[t]he most efficient way to meet
these [administrative] responsibilities is to establish a uniform
administrative scheme, which provides a set of standard procedures to guide
processing of claims and disbursement of benefits."  Fort Halifax Packing
Co. v. Coyne, supra, at 9.
    There is no dispute that the Pennsylvania law falls within ERISA's
insurance saving clause, which provides, "[e]xcept as provided in [the
deemer clause], nothing in this sub chapter shall be construed to exempt or
relieve any person from any law of any State which regulates insurance,"
MDRV 514(b)(2)(A), 29 U. S. C. MDRV 1144(b)(2)(A) (emphasis added).
Section 1720 directly controls the terms of insurance contracts by
invalidating any subrogation provisions that they contain.  See
Metropolitan Life, 471 U. S., at 740-741.  It does not merely have an
impact on the insurance industry; it is aimed at it.  See Pilot Life Ins.
Co. v. Dedeaux, 481 U. S. 41, 50 (1987).  This returns the matter of
subrogation to state law.  Unless the statute is excluded from the reach of
the saving clause by virtue of the deemer clause, therefore, it is not
pre-empted.
    We read the deemer clause to exempt self-funded ERISA plans from state
laws that "regulat[e] insurance" within the meaning of the saving clause.
By forbidding States to deem employee benefit plans "to be an insurance
company or other insurer . . . or to be engaged in the business of
insurance," the deemer clause relieves plans from state laws "purporting to
regulate insurance."  As a result, self-funded ERISA plans are exempt from
state regulation insofar as that regu lation "relate[s] to" the plans.
State laws directed toward the plans are pre-empted because they relate to
an employee benefit plan but are not "saved" because they do not regulate
insurance.  State laws that directly regulate insurance are "saved" but do
not reach self-funded employee benefit plans because the plans may not be
deemed to be insurance companies, other insurers, or engaged in the
business of insurance for purposes of such state laws.  On the other hand,
employee benefit plans that are insured are subject to indirect state
insurance regulation.  An insurance company that insures a plan remains an
insurer for purposes of state laws "purporting to regulate insurance" after
application of the deemer clause.  The insurance company is therefore not
relieved from state insurance regulation.  The ERISA plan is consequently
bound by state insurance regulations insofar as they apply to the plan's
insurer.
    Our reading of the deemer clause is consistent with Metropolitan Life
Ins. Co. v. Massachusetts, supra.  That case involved a Massachusetts
statute requiring certain self-funded benefit plans and insurers issuing
group-health policies to plans to provide minimum mental-health benefits.
Id., at 734.  In pointing out that Massachusetts had never tried to enforce
the portion of the statute pertaining directly to benefit plans, we stated,
"[i]n light of ERISA's `deemer clause,' which states that a benefit plan
shall not `be deemed an insurance company' for purposes of the insurance
saving clause, Massachusetts has never tried to enforce [the statute] as
applied to benefit plans directly, effectively conceding that such an
application of [the statute] would be pre-empted by ERISA's pre-emption
clause."  Id., at 735, n. 14 (citations omitted).  We concluded that the
statute, as applied to insurers of plans, was not pre-empted because it
regulated insurance and was therefore saved.  Our decision, we
acknowledged, "results in a distinction between insured and uninsured
plans, leaving the former open to indirect regulation while the latter are
not."  Id., at 747.  "By so doing, we merely give life to a distinction
created by Congress in the `deemer clause,' a distinction Congress is aware
of and one it has chosen not to alter."  Ibid. (footnote omitted).
    Our construction of the deemer clause is also respectful of the
presumption that Congress does not intend to pre-empt areas of traditional
state regulation.  See Jones v. Rath Packing Co., 430 U. S., at 525.  In
the McCarran-Ferguson Act, 15 U. S. C. MDRV 1011 et seq., Congress provided
that the "business of insurance, and every person engaged therein, shall be
subject to the laws of the several States which relate to the regulation or
taxation of such business."  15 U. S. C. MDRV 1012(a).  We have identified
laws governing the "business of insurance" in the Act to include not only
direct regulation of the insurer but also regulation of the substantive
terms of insurance contracts.  Metropolitan Life Ins. Co. v. Massachusetts,
supra, at 742-744.  By recognizing a distinction between insurers of plans
and the contracts of those insurers, which are subject to direct state
regulation, and self-insured employee benefit plans governed by ERISA,
which are not, we observe Congress' presumed desire to reserve to the
States the regulation of the "business of insurance."
    Respondent resists our reading of the deemer clause and would attach to
it narrower significance.  According to the deemer clause, "[n]either an
employee benefit plan . . . nor any trust established under such a plan,
shall be deemed to be an insurance company or other insurer, bank, trust
company, or investment company or to be engaged in the business of
insurance or banking for purposes of any law of any State purporting to
regulate insurance companies [or] insurance contracts."  MDRV 514(b)(2)(B),
29 U. S. C. MDRV 1144(b)(2)(B) (emphasis added).  Like the Court of
Appeals, respondent would interpret the deemer clause to except from the
saving clause only state insurance regulations that are pretexts for
impinging upon core ERISA concerns.  The National Conference of State
Legislatures et al. as amici curiae in support of respondent, offer an
alternative interpretation of the deemer clause.  In their view, the deemer
clause precludes States from deeming plans to be insurers only for purposes
of state laws that apply to insurance as a business, such as laws relating
to licensing and capitalization requirements.
    These views are unsupported by ERISA's language.  Laws that purportedly
regulate insurance companies or insurance contracts are laws having the
"appearance of" reg ulating or "intending" to regulate insurance companies
or contracts.  Black's Law Dictionary 1236 (6th ed. 1990).  Congress' use
of the word does not indicate that it directed the deemer clause solely at
deceit that it feared state legis latures would practice.  Indeed, the
Conference Report, in describing the deemer clause, omits the word
"purporting," stating, "an employee benefit plan is not to be considered as
an insurance company, bank, trust company, or investment company (and is
not to be considered as engaged in the business of insurance or banking)
for purposes of any State law that regulates insurance companies, insurance
contracts, banks, trust companies, or investment companies."  H. R. Conf.
Rep. No. 93-1280, p. 383 (1974).
    Nor, in our view, is the deemer clause directed solely at laws
governing the business of insurance.  It is plainly directed at "any law of
any State purporting to regulate in surance companies, insurance contracts,
banks, trust companies, or investment companies."  MDRV 514(b)(2)(B), 29 U.
S. C. MDRV 1144(b)(2)(B).  Moreover, it is difficult to understand why
Congress would have included insurance contracts in the pre-emption clause
if it meant only to pre-empt state laws relating to the operation of
insurance as a business.  To be sure, the saving and deemer clauses employ
differing language to achieve their ends -- the former saving, except as
provided in the deemer clause, "any law of any State which regulates
insurance" and the latter referring to "any law of any State purporting to
regulate insurance companies [or] insurance contracts."  We view the
language of the deemer clause, however, to be either coextensive with or
broader, not narrower, than that of the saving clause.  Our rejection of a
restricted reading of the deemer clause does not lead to the deemer
clause's engulfing the saving clause.  As we have pointed out, supra, at 9,
the saving clause retains the independent effect of protecting state
insurance regulation of insurance contracts purchased by employee benefit
plans.
    Congress intended by ERISA to "establish pension plan regulation as
exclusively a federal concern."  Alessi v. Ray bestos-Manhattan, Inc., 451
U. S., at 523 (footnote omitted).  Our interpretation of the deemer clause
makes clear that if a plan is insured, a State may regulate it indirectly
through regulation of its insurer and its insurer's insurance contracts; if
the plan is uninsured, the State may not regulate it.  As a result,
employers will not face " `conflicting or inconsistent State and local
regulation of employee benefit plans.' "  Shaw v. Delta Air Lines, Inc.,
463 U. S., at 99 (quoting remarks of Sen. Williams).  A construction of the
deemer clause that exempts employee benefit plans from only those state
regulations that encroach upon core ERISA concerns or that apply to
insurance as a business would be fraught with administrative difficulties,
necessitating definition of core ERISA concerns and of what constitutes
business activity.  It would therefore undermine Congress' desire to avoid
"endless litigation over the validity of State action," see 120 Cong. Rec.
29942 (1974) (remarks of Sen. Javits), and instead lead to employee benefit
plans' expenditure of funds in such litigation.
    In view of Congress' clear intent to exempt from direct state insurance
regulation ERISA employee benefit plans, we hold that ERISA pre-empts the
application of MDRV 1720 of Pennsylvania's Motor Vehicle Financial
Responsibility Law to the FMC Salaried Health Care Plan.  We therefore
vacate the judgment of the United States Court of Appeals for the Third
Circuit and remand the case for further proceedings consistent with this
opinion.

It is so ordered.


    Justice Souter took no part in the consideration or decision of this
case.

 
 
 
 
 


------------------------------------------------------------------------------
1
    Section 1720 of Pennsylvania's Motor Vehicle Financial Responsibility
Law is entitled "[s]ubrogation" and provides:
    "In actions arising out of the maintenance or use of a motor vehicle,
there shall be no right of subrogation or reimbursement from a claimant's
tort recovery with respect to workers' compensation benefits, benefits
available under section 1711 (relating to required benefits), 1712
(relating to availability of benefits) or 1715 (relating to availability of
adequate limits) or benefits in lieu thereof paid or payable under section
1719 (relating to coordination of benefits)."

2
    Section 1719, entitled "[c]oordination of benefits," reads:
    "(a) General rule. -- Except for workers' compensation, a policy of
insurance issued or delivered pursuant to this subchapter shall be primary.
Any program, group contract or other arrangement for payment of benefits
such as described in section 1711 (relating to required benefits), 1712(1)
and (2) (relating to availability of benefits) or 1715 (relating to
availability of adequate limits) shall be construed to contain a provision
that all benefits provided therein shall be in excess of and not in
duplication of any valid and collectible first party benefits provided in
section 1711, 1712 or 1715 or workers' compensation.
    "(b) Definition. -- As used in this section the term `program, group
contract or other arrangement' includes, but is not limited to, benefits
payable by a hospital plan corporation or a professional health service
corporation subject to 40 Pa. C. S. Ch. 61 (relating to hospital plan
corporations) or 63 (relating to professional health services plan
corporations)."

3
    The bill introduced in the Senate and reported out of the Committee on
Labor and Public Welfare would have pre-empted "any and all laws of the
States and of political subdivisions thereof insofar as they may now or
hereafter relate to the subject matters regulated by this Act."  S. 4, 93d
Cong., 1st Sess., MDRV 609(a) (1973).  As introduced in the House, the bill
that became ERISA would have superseded "any and all laws of the States and
of the political subdivisions thereof insofar as they may now or hereafter
relate to the fiduciary, reporting, and disclosure responsibilities of
persons acting on behalf of employee benefit plans."  H. R. 2, 93d Cong.,
1st Sess., MDRV 114 (1973).  The bill was approved by the Committee on
Education and Labor in a slightly modified form.  See H. R. 2, 93d Cong.,
1st Sess., MDRV 514(a) (1973).





Subject: 89-1048 -- DISSENT, FMC CORP. v. HOLLIDAY

 


    SUPREME COURT OF THE UNITED STATES


No. 89-1048



FMC CORPORATION, PETITIONER v. CYNTHIA
ANN HOLLIDAY


on writ of certiorari to the united states court of appeals for the third
circuit

[November 27, 1990]



    Justice Stevens, dissenting.

    The Court's construction of the statute draws a broad and illogical
distinction between benefit plans that are funded by the employer
(self-insured plans) and those that are insured by regulated insurance
companies (insured plans).  Had Congress intended this result, it could
have stated simply that "all State laws are pre-empted insofar as they
relate to any self-insured employee plan."  There would then have been no
need for the "saving clause" to exempt state insurance laws from the
pre-emption clause, or the "deemer clause," which the Court today reads as
merely reinjecting into the scope of ERISA's pre-emption clause those same
exempted state laws insofar as they relate to self-insured plans.
    From the standpoint of the beneficiaries of ERISA plans -- who after
all are the primary beneficiaries of the entire statutory program -- there
is no apparent reason for treating selfinsured plans differently from
insured plans.  Why should a self-insured plan have a right to enforce a
subrogation clause against an injured employee while an insured plan may
not?  The notion that this disparate treatment of similarly situated
beneficiaries is somehow supported by an interest in uniformity is
singularly unpersuasive.  If Congress had intended such an irrational
result, surely it would have expressed it in straightforward English.  At
least one would expect that the reasons for drawing such an apparently
irrational distinction would be discernible in the legislative history, or
in the literature discussing the legislation.
    The Court's anomalous result would be avoided by a correct and narrower
reading of either the basic pre-emption clause or the deemer clause.
I
    The Court has endorsed an unnecessarily broad reading of the words
"relate to any employee benefit plan" as they are used in the basic
pre-emption clause of MDRV 514(a).  I acknowledge that this reading is
supported by language in some of our prior opinions.  It is not, however,
dictated by any prior holding and I am persuaded that Congress did not
intend this clause to cut nearly so broad a swath in the field of state
laws as the Court's expansive construction will create.
    The clause surely does not pre-empt a host of general rules of tort,
contract, and procedural law that relate to benefit plans as well as to
other persons and entities.  It does not, for example, pre-empt general
state garnishment rules insofar as they relate to ERISA plans.  Mackey v.
Lanier Collection Agency & Service, Inc., 486 U. S. 825 (1988).  Moreover,
the legislative history of the provision indicates that throughout most of
its consideration of pre-emption, Congress was primarily concerned about
areas of possible overlap between federal and state requirements.  Thus,
the bill that was introduced in the Senate would have pre-empted state laws
insofar as they "relate to the subject matters regulated by this Act,"  {1}
and the House bill more specifically identified state laws relating "to the
fiduciary, reporting, and disclosure responsibilities of persons acting on
behalf of employee benefit plans."  {2}  Although the compromise that
produced the statutory language "relate to any employee benefit plan" is
not discussed in the legislative history, the final version is perhaps best
explained as an editorial amalgam of the two bills rather than as a major
expansion of the section's coverage.
    When there is ambiguity in a statutory provision preempting state law,
we should apply a strong presumption against the invalidation of
well-settled, generally applicable state rules.  In my opinion this
presumption played an important role in our decisions in Fort Halifax
Packing Co. v. Coyne, 482 U. S. 1 (1987), and Mackey v. Lanier Collection
Agency & Service, Inc., supra.  Application of that presumption leads me to
the conclusion that the pre-emption clause should apply only to those state
laws that purport to regulate subjects regulated by ERISA or that are
inconsistent with ERISA's central purposes.  I do not think Congress
intended to foreclose Pennsylvania from enforcing the anti subrogation
provisions of its state Motor Vehicle Financial Responsibility Act against
ERISA plans -- most certainly, it did not intend to pre-empt enforcement of
that statute against self-insured plans while preserving enforcement
against insured plans.
II
    Even if the "relate to" language in the basic pre-emption clause is
read broadly, a proper interpretation of the carefully drafted text of the
deemer clause would caution against finding pre-emption in this case.
Before identifying the key words in that text, it is useful to comment on
the history surrounding enactment of the deemer clause.
    The number of self-insured employee benefit plans grew dramatically in
the 1960's and early 1970's. {3}  The question whether such plans were, or
should be, subject to state regulation remained unresolved when ERISA was
enacted.  It was, however, well recognized as early as 1967 that requiring
self-insured plans to comply with the regulatory requirements in state
insurance codes would stifle their growth:


"Application of state insurance laws to uninsured plans would make direct
payment of benefits pointless and in most cases not feasible.  This is
because a welfare plan would have to be operated as an insurance company in
order to comply with the detailed regulatory requirements of state
insurance codes designed with the typical operations of insurance companies
in mind.  It presumably would be necessary to form a captive insurance
company with prescribed capital and surplus, capable of obtaining a
certificate of authority from the insurance department of all states in
which the plan was `doing business,' establish premium rates subject to
approval by the insurance department, issue policies in the form approved
by the insurance department, pay commissions and premium taxes required by
the insurance law, hold and deposit reserves established by the insurance
department, make investments permitted under the law, and comply with all
filing and examination requirements of the insurance department.  The
result would be to reintroduce an insurance company, which the direct
payment plan was designed to dispense with.  Thus it can be seen that the
real issue is not whether uninsured plans are to be regulated under state
insurance laws, but whether they are to be permitted."  Goetz, Regulation
of Uninsured Employee Welfare Plans Under State Insurance Laws, 1967 Wis.
L. Rev. 319, 320-321 (emphasis in original).


    In 1974 while ERISA was being considered in Congress, the first state
court to consider the applicability of state insurance laws to self-insured
plans held that a self-insured plan could not pay out benefits until it had
satisfied the licensing requirements governing insurance companies in
Missouri and thereby had subjected itself to the regulations contained in
the Missouri insurance code.  Missouri v. Monsanto Co., Cause No. 259774
(St. Louis Cty. Cir. Ct., Jan. 4, 1973), rev'd, 517 S. W. 2d 129 (Mo.
1974).  Although it is true that the legislative history of ERISA or the
deemer clause makes no reference to the Missouri case, or to this problem
-- indeed, it contains no explanation whatsoever of the reason for enacting
the deemer clause -- the text of the clause itself plainly reveals that it
was designed to protect pension plans from being subjected to the detailed
regulatory provisions that typically apply to all state-regulated insurance
companies -- laws that purport to regulate insurance companies and
insurance contracts.
    The key words in the text of the deemer clause are "deemed," "insurance
company," and "purporting."  {4}  It provides that an employee welfare plan
shall not be deemed to be an insurance company or to be engaged in the
business of insurance for the purpose of determining whether it is an
entity that is regulated by any state law purporting to regulate insurance
companies and insurance contracts.
    Pennsylvania's insurance code purports, in so many words, to regulate
insurance companies and insurance contracts.  It governs the certification
of insurance companies, Pa. Stat. Ann., Tit. 40, MDRV 400 (Purdon 1971),
their minimum capital stock and financial requirements to do business, MDRV
386 (Pur don 1971 and Supp. 1990-1991), their rates, e. g., MDRV 532.9
(Purdon 1971) (authorizing Insurance Commissioner to regulate minimum
premiums charged by life insurance companies), and the terms that insurance
policies must, or may, include, e. g., MDRV 510 (Purdon 1971 and Supp.
1990-1991) (life insurance policies), MDRV 753 (Purdon 1971) (health and
accident insurance policies).  The deemer clause prevents a State from
enforcing such laws purporting to regulate insurance companies and
insurance contracts against ERISA plans merely by deeming ERISA plans to be
insurance companies.  But the fact that an ERISA plan is not deemed to be
an insurance company for the purpose of deciding whether it must comply
with a statute that purports to regulate "insurance contracts" or entities
that are defined as "insurance companies" simply does not speak to the
question whether it must nevertheless comply with a statute that expressly
regulates subject matters other than insurance.
    There are many state laws that apply to insurance companies as well as
to other entities.  Such laws may regulate some aspects of the insurance
business, but do not require one to be an insurance company in order to be
subject to their terms.  Pennsylvania's Motor Vehicle Financial
Responsibility Act is such a law.  The fact that petitioner's plan is not
deemed to be an insurance company or an insurance contract does not have
any bearing on the question whether petitioner, like all other persons,
must nevertheless comply with the Motor Vehicle Financial Responsibility
Act.
    If one accepts the Court's broad reading of the "relate to" language in
the basic pre-emption clause, the answer to the question whether petitioner
must comply with state laws regulating entities including but not limited
to insurance companies depends on the scope of the saving clause. {5}  In
this case, I am prepared to accept the Court's broad reading of that clause
but it is of critical importance to me that the category of state laws
described in the saving clause is broader than the category described in
the deemer clause.  A state law "which regulates insurance," and is
therefore exempted from ERISA's pre-emption provision by operation of the
saving clause, does not necessarily have as its purported subject of
regulation an "insurance company" or an activity that is engaged in by
persons who are insurance companies.  Rather, such a law may aim to
regulate another matter altogether, but also have the effect of regulating
insurance.  The deemer clause, by contrast, reinjects into the scope of
ERISA pre-emption only those state laws that "purport to" regulate
insurance companies or contracts -- laws such as those which set forth the
licensing and capitalization requirements for insurance companies or the
minimum required provisions in insurance contracts.  While the saving
clause thus exempts from the pre-emption clause all state laws that have
the broad effect of regulating insurance, the deemer clause simply allows
pre-emption of those state laws that expressly regulate insurance and that
would therefore be applicable to ERISA plans only if States were allowed to
deem such plans to be insurance companies.
    Pennsylvania's Motor Vehicle Financial Responsibility Act fits into the
broader category of state laws that fall within the saving clause only.
The Act regulates persons in addition to insurance companies, and affects
subrogation and indemnity agreements that are not necessarily insurance
contracts.  Yet because it most assuredly is not a law "purporting" to
regulate any of the entities described in the deemer clause -- "insurance
companies, insurance contracts, banks, trust companies, or investment
companies," the deemer clause does not by its plain language apply to this
state law.  Thus, although the Pennsylvania law is exempted from ERISA's
preemption provision by the broad saving clause because it "regulates
insurance," it is not brought back within the scope of ERISA pre-emption by
operation of the narrower deemer clause.  I therefore would conclude that
petitioner is subject to Pennsylvania's Motor Vehicle Financial
Responsibility Act.
    I respectfully dissent.
 
 
 
 
 
 

------------------------------------------------------------------------------
1
    S. 4, 93d Cong., 1st Sess., MDRV 609(a) (1973), reprinted at 1
Legislative History of the Employee Retirement Income Security Act of 1974
(Committee Print compiled by the Subcommittee on Labor of the Senate
Committee on Labor and Public Welfare) 93, 186 (1976) (Leg. Hist.).

2
    H. R. 2, 93d Cong., 1st Sess., MDRV 114 (1973); 1 Leg. Hist. 51.

3
    See Comment, State Regulation of Noninsured Employee Welfare Benefit
Plans, 62 Geo. L. J. 339, 340 (1973).

4
    Section 514(b)(2)(B), as set forth in 29 U. S. C. MDRV 1144(b)(2)(B),
provides:
    "Neither an employee benefit plan . . . nor any trust established under
such a plan, shall be deemed to be an insurance company or other insurer,
bank, trust company, or investment company or to be engaged in the business
of insurance or banking for purposes of any law of any State purporting to
regulate insurance companies, insurance contracts, banks, trust companies,
or investment companies."  (Emphasis added).

5
    Section 514(b)(2)(A) of ERISA, as set forth in 29 U. S. C. MDRV
1144(b)(2)(A), provides:
    "Except as provided in subparagraph (B) nothing in this subchapter
shall be construed to exempt or relieve any person from any law of any
State which regulates insurance, banking, or securities."
