Hook v. Morrison Milling Co. ( 1994 )

UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 93-4115
ROXANNE HOOK,
Plaintiff-Appellee,
versus
THE MORRISON MILLING COMPANY,
Defendant-Appellant.
Appeal from the United States District Court
for the Eastern District of Texas
(November 14, 1994)
Before JONES and DEMOSS, Circuit Judges, and COBB,* District Judge.
DEMOSS, Circuit Judge:
The Morrison Milling Company ("MMC") appeals a district
court's remand of Roxanne Hook's negligence action against the
company. MMC argues that Hook's negligence claim is preempted by
the Employment Retirement Income Security Act of 1974 ("ERISA").
29 U.S.C. §§ 1001-1461. Because we conclude that Hook's claim does
not relate to MMC's ERISA plan, and therefore is not preempted, we
affirm the district court's decision to remand Hook's suit to state
court.
*
District Judge of the Eastern District of Texas, sitting by
designation.
I.
Texas' workers' compensation scheme resembles the workers'
compensation schemes of many other states. The Texas Workers'
Compensation Act ("TWCA"), for example, provides that any benefits
distributed pursuant to the TWCA are an employee's exclusive remedy
for any work-related injuries or death. TEX. REV. CIV. STAT. ANN.
art. 8308-4.01(a) (Vernon Supp. 1993).1 Texas' scheme, however,
differs from most states' in one important respect: employers may
choose not to carry insurance coverage under the TWCA, id. art.
8308-3.23(a).2 But the state makes that choice an unattractive
one. Specifically, the TWCA vests employees of non-subscribing
employers with the right to sue their employers for work-related
injuries or death. Id. art. 8308-3.04. Furthermore, in any such
action, the TWCA deprives the non-subscribing employer of
traditional common law defenses such as contributory negligence,
assumption of the risk and the fellow servant rule. Id. art. 8308-
3.03(a)(1)-(3).
Notwithstanding the risks associated with "opting out," MMC in
March 1989 elected to discontinue workers' compensation insurance
1
The TWCA recently was re-codified. See TWCA, 73rd Leg.,
R.S., ch. 269, § 1 (current version at TEX. LAB. CODE ANN. §§ 401-17
(Vernon Pamp. 1994)). Because none of the recent amendments to the
TWCA are relevant to this case, we will cite to the TWCA as
codified at the commencement of this suit in February 1992.
2
As of 1990, Texas, New Jersey, and South Carolina were the
only states that permitted employers to "opt out" of the state's
worker's compensation scheme. The remaining 47 states required
employers to carry worker's compensation insurance. Ellen S.
Pryor, Compensation and a Consequential Model of Loss, 64 TUL. L.
REV. 783, 801 n.50 (1990).
2
and began offering the Interim Employee Welfare Benefit Plan. The
Plan pays enrollees:
certain benefits for personal injuries suffered in the course
of their employment, or for death resulting from such
injuries, without the necessity of showing negligence on the
part of the Company, and to provide for the continuation or
partial continuation of their weekly salary or wages that
would otherwise be lost as a result of their inability to work
because of injury or illness incurred on the job.
The parties do not dispute that the Plan is governed by ERISA. See
29 U.S.C. § 1002(1). While participation in the plan is voluntary,
MMC requires employees who elect to participate to sign an
enrollment and waiver form, which is an entirely separate document.
Paragraph 3 of the form states:
In consideration of my election to enroll in, and thus become
eligible to receive benefits under, the Interim Plan, I hereby
waive my rights under TEX. REV. CIV. STAT. ANN. art. 8306, § 4,3
to bring suit and recover judgment against the Company and its
directors, officers, agents, and employees for any damages
sustained by reason of any personal injury received in the
course of my employment by the Company, or by reason of death
resulting from such injury. By electing to enroll in the
Interim Plan, I agree that benefits payable under the Interim
Plan shall be the exclusive remedy for me or my legal
beneficiaries arising from any such personal injury or death.
Hook began working for MMC in October 1990 after she elected
to participate in the Plan and completed the enrollment and waiver
form. In December 1990, Hook fell down a staircase at work and was
injured. Hook filed for benefits under the Plan with MMC, the
Plan's administrator. The Plan paid her a total of $5,383.03:
3
Article 8306, § 4, is the predecessor to articles 8308-3.03
and -3.04, wherein the employee of a non-subscribing employer is
vested with the right to sue that employer for work-related
injuries or death.
3
$4,749.28 for medical expenses and $633.75 for salary continuation
benefits. Hook then left her job with MMC in July 1991.
In February 1992, Hook filed a wrongful discharge and
negligence action in Texas state court against MMC. MMC removed
the case to federal court, arguing that the wrongful discharge
claim was preempted by ERISA. Hook then filed her first motion to
remand the case back to state court, which the federal district
court denied in July 1992 on the grounds that ERISA preempted her
wrongful discharge claim. Hook amended her petition to omit the
wrongful discharge claim, leaving the negligence claim as the sole
basis for her suit. She again moved to remand the case, claiming
that the negligence action was governed by state law.
In December 1992, the district court granted Hook's second
motion to remand. The court addressed two possible grounds for
preemption and rejected them. First, the court held that Hook's
negligence action is not preempted because it does not relate to
MMC's ERISA Plan. Second, the court concluded that the waiver does
not independently trigger preemption because it is incidental to
her negligence action and that, alternatively, such waivers are
void under Texas law.4 MMC then appealed the court's decision to
4
The court specifically relied on the TWCA's proscription
against waivers, which states "an agreement by an employee to waive
the employee's right to compensation is void." TEX. REV. CIV. STAT.
ANN. art. 8308-3.09. The TWCA defines compensation as "payment of
medical benefits, income benefits, death benefits, or burial
benefits." Id. art. 8308-1.03(11). As will be apparent below, we
do not reach the court's alternative holding that the waiver is
void under Texas law because, like the district court, we conclude
that ERISA does not preempt Hook's claim. The question of whether
the waiver is void will be answered by the state court upon remand.
4
remand Hook's negligence action. Hook did not file a brief on
appeal and instead chose to rely on the district court's opinion as
her brief. After oral argument, we requested5 the United States
and the State of Texas to submit amicus curiae briefs to address
the significant issues raised in this case, particularly because
Hook did not file a brief. Amici's briefs were thorough and
helpful, and we thank the United States and Texas for their
assistance.
II.
Before analyzing our appellate jurisdiction over this appeal,
we first note that the district court's subject matter jurisdiction
was proper at all times. To begin with, this case was properly
removed pursuant to 28 U.S.C. § 1446. Hook's original petition
alleged, inter alia, that she was wrongfully discharged in
retaliation for filing a workers' compensation claim. MMC removed
the suit to federal district court, whereupon Hook filed her first
motion to remand. The district court treated Hook's allegation as
a claim that she was fired in retaliation for filing a claim under
MMC's ERISA plan.6 Accordingly, the court concluded that her
wrongful discharge claim was preempted because the Supreme Court
5
See FED. R. APP. P. 29.
6
We note that the record supports the district court's
characterization of Hook's original petition as alleging wrongful
discharge for filing a claim under MMC's ERISA plan and not for
filing a workers' compensation claim. First, whereas Hook did, in
fact, file a claim under MMC's plan, she never filed a workers'
compensation claim. Second, to the extent she intended to file a
workers' compensation claim, Hook's efforts would have been
meaningless because MMC's plan is not a workers' compensation plan.
5
has established that ERISA preempts a Texas wrongful discharge
claim to the extent that that claim is dependent upon the existence
of an ERISA plan. See Ingersoll-Rand Co. v. McClendon, 111 S. Ct.
478, 482-84 (1990) (ERISA expressly preempts a Texas wrongful
discharge claim that is premised on the existence of an ERISA
plan); see also Anderson v. Electronic Data Sys. Corp., 11 F.3d
1311, 1313-14 (5th Cir. 1994) (same). Because allegations of
retaliation for filing a claim under an ERISA plan necessarily
assert a claim that is dependent upon the existence of such a plan,
MMC's removal of Hook's claims was unquestionably proper.
Furthermore, Hook's subsequent deletion of her wrongful discharge
claim does not render MMC's removal improper. We have stated on
several occasions that a post-removal amendment to a petition that
deletes all federal claims, leaving only pendent state claims, does
not divest the district court of its properly triggered subject
matter jurisdiction. Brown v. Southwestern Bell Tel. Co., 901 F.2d
1250, 1254 (5th Cir. 1990); In re Carter, 618 F.2d 1093, 1101 (5th
Cir. 1980). In a jurisdictional inquiry, we look at the complaint
as it existed at the time the petition for removal was filed,
regardless of any subsequent amendments to the complaint.
Anderson, 11 F.3d at 1316 n.8.
The issue of whether we have appellate jurisdiction arises
from the district court's decision to remand the case to state
court. On the one hand, we do not have jurisdiction to review a
remand order if it is made pursuant to 28 U.S.C. § 1447(c). In
particular, if a district court remands a case because of either a
6
defect in removal procedure or lack of subject matter jurisdiction,
we are powerless to review that remand order. 28 U.S.C. § 1447(d);
see also Thermtron Prods. v. Hermansdorfer, 423 U.S. 336, 350-52
(1976); Burks v. Amerada Hess Corp., 8 F.3d 301, 303-04 & n.4 (5th
Cir. 1993). On the other hand, if the court provides a reason
unrelated to § 1447(c), such as pendent jurisdiction, then we may
properly review that order. We have stated that "a federal
district court has discretion to remand a properly removed case to
state court when all federal-law claims have been eliminated and
only pendent state-law claims remain." Jones v. Roadway Express,
Inc., 936 F.2d 789, 792 (5th Cir. 1991) (citing Carnegie-Mellon
Univ. v. Cohill, 484 U.S. 343 (1988)). If the court exercises its
discretion to remand pursuant to this doctrine, then we may review
the remand order. Carnegie-Mellon, 484 U.S. at 343 n.11 ("the
remand authority conferred by the removal statute and the remand
authority conferred by the doctrine of pendent jurisdiction overlap
not at all"). The district court below made clear that it was
remanding Hook's state law negligence claim, i.e., her only
remaining claim, pursuant to its discretion. We therefore may
review the court's remand order. Burks, 8 F.3d at 303-04.
III.
A.
We begin by establishing the appropriate standard of review.
If a district court's decision to remand a case to state court is
based on its discretion, then we obviously review that decision for
abuse of discretion. In Re Wilson Indus., 886 F.2d 93, 95-96 (5th
7
Cir. 1989). The determination of whether the court has that
discretion, however, is a legal one, which we review de novo.
Burks, 8 F.3d at 304. In this case, we therefore will review the
district court's preemption analysis de novo. If we conclude that
ERISA does not preempt Hook's suit, meaning no federal claim exists
that would require the district court to maintain jurisdiction, we
then will review the court's decision to remand for abuse of
discretion.
B.
Section § 514(a) of ERISA, 29 U.S.C. § 1144(a), expressly
provides that ERISA "shall supersede any and all State laws insofar
as they may now or hereafter relate to any employee benefit plan
described in section 4(a) and not exempt under section 4(b)." The
Supreme Court has established that "[a] law ``relates to' an
employee benefit plan, in the normal sense of the phrase, if it has
a connection with or reference to the plan." Shaw v. Delta Air
Lines, Inc., 463 U.S. 85, 96-97 (1983). The Court has further
stated that its interpretation of "relate to" effectuates "the
``deliberately expansive' language chosen by Congress." District of
Columbia v. Greater Washington Bd. of Trade, 113 S. Ct. 580, 583
(1992) (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46
(1987)). Thus, ERISA preempts any state law7 that refers to or has
a connection with an ERISA plan even if that law (i) is not
specifically designed to affect such plans, Shaw, 463 U.S. at 98,
7
ERISA § 514(c)(1) defines "state law" to mean "all laws,
decisions, rules, regulations, or other State action having the
effect of law." 29 U.S.C. § 1144(c).
8
(ii) affects such plans only indirectly, Alessi v. Raybestos-
Manhattan, Inc., 451 U.S. 504, 525 (1980), or (iii) is consistent
with ERISA's substantive requirements, Metropolitan Life Ins. Co.
v. Massachusetts, 471 U.S. 724, 739 (1985). The Supreme Court
reiterated these concepts in FMC Corporation v. Holliday, 111 S.
Ct. 403, 407-09 (1990), when it held that a Pennsylvania statute
which expressly prohibited ERISA plans from subrogating damages
that plan participants had recovered in tort actions arising out of
automobile accidents is preempted.8
But as broad as ERISA's preemptive scope has been stated to
be, it has its limits. The Supreme Court noted in Shaw that
"[s]ome state actions may affect employee benefit plans in too
tenuous, remote, or peripheral a manner to warrant a finding that
the law ``relates to' the plan." Shaw, 463 U.S. at 100 n.21. The
Court's warning in Shaw on the limits of ERISA preemption stems
from the Court's view that ERISA's scope, though comprehensive,
remains subject to the traditional principle of federalism. In
determining ERISA's preemptive scope, the Court has advised that we
"must be guided by respect for the separate spheres of governmental
authority preserved in our federalist system." Alessi, 451 U.S. at
522; see also Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904
8
Our colleague in dissent argues that FMC Corporation controls
this case. We find that case distinguishable for two reasons.
First, the statute in FMC Corporation expressly referred to ERISA
plans. FMC Corp., 111 S. Ct. at 408. Second, the anti-subrogation
statute triggered ERISA's "savings" and "deemer" clauses. Id. at
409-11 (citing 29 U.S.C. § 1144(b)(2)(A),(B)). Neither of those
circumstances exist with regard to Hook's common law negligence
claim against MMC.
9
F.2d 236, 244 (5th Cir. 1990). To further aid us in narrowing our
preemption inquiry, we have devised a two-prong test. We have
found preemption of a state law claim if (1) the claim addresses
areas of exclusive federal concern, such as the right to receive
benefits under the terms of an ERISA plan, and (2) the claim
directly affects the relationship among the traditional ERISA
entities (i.e., plan administrators/fiduciaries and plan
participants/beneficiaries). Memorial Hospital, 904 F.2d at 245;
see also Sommers Drug Stores Co. v. Corrigan Enterprises, Inc., 793
F.2d 1456, 1467-68 (5th Cir. 1986).
C.
The United States and Texas contend that Hook's negligence
cause of action does not "relate to" MMC's ERISA plan.9 Both argue
that Hook's cause of action involves only the employer/employee
relationship between the two parties and, therefore, does not
relate to MMC's ERISA plan. In particular, they argue that Hook's
cause of action stems from MMC's failure to maintain a safe
workplace and not from a dispute over the administration of MMC's
plan or the disbursement of benefits from the plan. Hook's claim,
in fact, would exist whether or not MMC had established an ERISA
plan. This case, amici argue, is controlled by Sommers Drug
Stores, 793 F.2d at 1467-68, which involved a suit by an ERISA plan
against its parent company and the company's principal shareholder.
9
Amici also raise other arguments against preemption. Because
we find their argument that Hook's claim does not "relate to" MMC's
plan dispositive, we do not reach the validity of amici's
alternative arguments.
10
The shareholder also served as the company's president, a board
member, and a trustee of the company's pension plan. The plan,
which was a minority shareholder in the company, alleged that the
defendants breached their fiduciary duties by failing to disclose
material information to the plan, in violation of both ERISA and
common law. We held that ERISA did not preempt the plan's common
law claim because the claim affected not the parties' ERISA
relationship but their relationship as corporate director and
shareholder. Sommers Drug Stores, 793 F.2d at 1468-70. By
comparison, the amici parties argue, Hook's claim affects only the
parties' employer/employee relationship; MMC has an independent
duty to maintain a safe workplace, and Hook alleges that MMC
breached that duty. While MMC has a parallel duty with regard to
the administration of its ERISA plan, the amici argue, that duty is
unaffected by Hook's common law negligence suit against MMC.
As for the waiver in MMC's plan, the amici parties insist that
its inclusion in the plan does not alter their analysis. The mere
fact, they argue, that a court may have to consider, by looking to
the plan, whether Hook has waived her claim does not mean the cause
of action "relates to" MMC's plan. They argue that Hook's claim,
whether or not it has been waived, does not involve the
administration of MMC's plan or the disbursement of benefits under
the plan. Furthermore, they contend, the waiver is nothing more
than a gimmick by MMC to trigger preemption, thereby avoiding
litigation in state court. The amici rely on Westbrook v. Beverly
Enterprises, 832 F. Supp. 188 (W.D. Tex. 1993), a case remarkably
11
similar to this one. In Westbrook, a non-subscribing employer
offered an ERISA plan that provided medical benefits for work-
related injuries. The plan also contained a "waiver-of-right-to-
sue" clause, whereby the employee waived his right to sue for work-
related injuries in exchange for medical benefits. In rejecting
the employer's preemption claim, the court concluded that neither
the cause of action nor the waiver related to the ERISA plan
because both involved only the employee-employer relationship and
not the administrator-beneficiary relationship. Id. at 189-92.
Amici urge us to reach the same conclusion. Otherwise, non-
subscribing employers in Texas could avoid a variety of obligations
merely by requiring employees to waive their right to sue for
anything as a condition for participation in the plan. Such a
result, they conclude, is inconsistent with the goal of ERISA,
which is "``to protect employee benefits, not to provide succor for
schemes that are designed to take rights from employees.'" Id. at
192 (quoting Nunez v. Wyatt Cafeterias, Inc., 771 F. Supp. 165, 169
(N.D. Tex. 1991)); see also Texas Health Enters. v. Reece, No. MO-
93-CA-057 (W.D. Tex. Mar. 2, 1994); Pyle v. Beverly Enters.-Texas,
826 F. Supp. 206 (N.D. Tex. 1993); O'Neill v. Pro-Set Press, 1992
WL 404456 (N.D. Tex. 1992).
MMC's argument that Hook's claim is preempted hinges on the
waiver. MMC, in other words, bypasses the issue of whether an
unsafe workplace claim, by itself, relates to an ERISA plan and
argues only that the inclusion of the waiver in its plan means
Hook's cause of action is one that necessarily relates to the plan.
12
MMC contends that this case is controlled by Christopher v. Mobil
Oil Corporation, 950 F.2d 1209 (5th Cir. 1992). In Christopher,
the employer sponsored an ERISA retirement plan that permitted
employees, subject to certain criteria, to receive their pension
benefits in one lump-sum payment rather than by the typical method
of monthly installments. The employer subsequently modified the
plan by changing the criteria that employees had to meet to qualify
for the lump-sum option. The employer, however, failed to disclose
the plan amendment to its employees. Several employees sued their
former employer. They alleged that the employer's actions in
amending the plan, and then failing to disclose the new terms of
the plan, fraudulently induced them to retire earlier than they
otherwise would have and, therefore, violated state common law.
We noted that a court, in addressing the employees' claims,
"would have to examine, at a minimum, the operation of the plan
prior to the amendment." Id. at 1218. The employees' claim
therefore closely resembled employee claims of wrongful
termination, wherein the employee asserts that the employer fired
him to avoid vesting of pension befits. Id. (citing Ingersoll-Rand
Co. v. McClendon, 111 S. Ct. 478 (1990)). We concluded that, in
both instances, the employees' common law claims were preempted,
i.e., the claim relates to an ERISA plan, "[b]ecause the underlying
conduct at issue here cannot be divorced from its connection to the
employee benefit plan." Id. at 1220. MMC insists that Christopher
controls this case because a court considering Hook's claim will
have to "examine" MMC's plan. The waiver, which is an integral
13
part of the plan, is also a significant factor in determining the
validity of Hook's claim, MMC argues. Thus, while an unsafe
workplace claim may otherwise be unrelated to an ERISA plan, MMC
concludes, the claim necessarily relates to the plan once a court
has to consider whether Hook has waived her claim, evidence of
which is included in the plan.
In addition to Christopher, MMC relies on a Sixth Circuit
opinion to argue that mere consideration of the waiver by a court
triggers preemption. Van Camp v. AT&T Info. Sys., 963 F.2d 119
(6th Cir. 1992). In Van Camp, an employee, who refused to be
reassigned, was faced with the option of either retiring early or
being demoted. The employee chose to retire, whereupon the
employee signed a statement saying he was retiring voluntarily and
that he understood that his election to retire under the employer's
ERISA pension plan was irrevocable. The employee later sued the
employer, alleging that the employer's efforts to reassign him were
discriminatorily motivated and, therefore, violated state laws
against discrimination. Without relinquishing his rights under the
pension plan, the employee sought back pay, front pay, and
compensatory and exemplary damages.
The Sixth Circuit, relying in part on our decision in Sommers
Drug Stores, held that the employee's claims were preempted. Van
Camp, 963 F.2d at 122-24. The court began by noting that the
employee's state law claims obviously were inconsistent with the
retirement agreement: the employee claimed he was discriminatorily
forced into retirement, whereas the plan indicated that he had
14
voluntarily retired. Thus, the court reasoned, the determination
of whether the employer's ERISA plan was valid became the "fulcrum"
upon which the case turned. Id. at 123. Because "[s]uch a
determination could be made only with reference to ERISA and would
affect the existing benefit plan and the relations between [the
employee and the employer] as ``principal ERISA entities,'" the
Sixth Circuit concluded that the claims related to the plan and
therefore were preempted. Id. (indirectly quoting Sommers Drug
Stores, 793 F.2d at 1467). MMC maintains that Hook's claim
similarly relates to its ERISA plan in that her claim is
inconsistent with the plan. To consider her claim, a court must
determine the validity of MMC's plan and its waiver. MMC argues
that, as the Sixth Circuit concluded, such a determination involves
the relationship between ERISA entities and thus comes within
ERISA's preemptive sweep.
We agree with amici that Hook's claim, standing alone, is not
preempted by ERISA because it affects only her employer/employee
relationship with MMC and not her administrator/beneficiary
relationship with the company. In this sense, the claim is
distinctly different from various other common law claims found to
be preempted by ERISA. In Ingersoll-Rand, for example, an employee
sued his employer for wrongful discharge, alleging that the
employer fired him to avoid making contributions to his ERISA-
covered pension fund. The Court ruled that the employee's claim
was preempted because it "makes specific reference to, and indeed
is premised on, the existence of a pension plan." Ingersoll-Rand,
15
111 S. Ct. at 483. Similarly, Christopher, the case on which MMC
relies, involved common law claims alleging that the employer
improperly administered the company's ERISA plan. The claims
clearly stemmed from the existence of an ERISA plan, such that "if
the appellants' claims were stripped of their link to the pension
plans, they would cease to exist." Christopher, 950 F.2d at 1220;
see also Pilot Life, 481 U.S. at 47-48 (contract and tort claims
alleging improper processing of ERISA benefits); Metropolitan Life
Ins. v. Taylor, 481 U.S. 58, 62-63 (1987) (same); Memorial Hosp.,
904 F.2d at 239, 250 (contract claim alleging improper denial of
ERISA benefits); Lee v. E.I. DuPont de Nemours & Co., 894 F.2d 755,
756-58 (5th Cir. 1990) (tort claim alleging misrepresentation of
details of ERISA plan); Ramirez v. Inter-Continental Hotels, 890
F.2d 760, 762-63 (5th Cir. 1989) (contract, tort, and statutory
claims alleging improper denial of benefits); Cefalu v. B.F.
Goodrich Co., 871 F.2d 1290, 1292-95 (5th Cir. 1989) (contract
claim alleging improper denial of benefits); Degan v. Ford Motor
Co., 869 F.2d 889, 893-95 (5th Cir. 1989) (same).
Hook's unsafe workplace claim, however, is totally independent
from the existence and administration of MMC's ERISA plan. She
neither seeks benefits under the plan nor claims that MMC
improperly processed her claim for benefits. She seeks only
damages for MMC's alleged negligent maintenance of its workplace.
Numerous federal district courts in Texas that have concluded that
a tort claim alleging an unsafe workplace does not relate to an
ERISA plan. See e.g., Westbrook v. Beverly Enters., 832 F. Supp.
16
188 (W.D. Tex. 1993); Pyle v. Beverly Enters.-Texas, 826 F. Supp.
206 (N.D. Tex. 1993); Gibson v. Wyatt Cafeterias, 782 F. Supp. 331
(E.D. Tex. 1992); O'Neill v. Pro-Set Press, 1992 WL 404456 (N.D.
Tex. 1992); Nunez v. Wyatt Cafeterias, 771 F. Supp. 165 (N.D. Tex.
1991). In our view, Hook's claim is even further removed from
ERISA's preemptive reach than other common law claims which somehow
involved an ERISA plan but nonetheless did not relate to it. In
Sommers Drug Stores, for example, the ERISA plan itself sued the
parent company and the company's principal shareholder for breach
of fiduciary duty. We noted that although the claim seemed to
affect relations among the principal ERISA entities, that
appearance was misleading. Sommers Drug Stores, 793 F.2d at 1468.
The claim, we found, actually centered on relations between a
corporate director and a shareholder and thus was not preempted.
Likewise, in Memorial Hospital, a hospital sued an insurance
company for breach of contract as well as negligent
misrepresentation.10 We concluded that, while the breach of
contract claim clearly was preempted because it was a claim for
benefits, the negligent misrepresentation claim was not preempted
because it neither sought benefits under the plan nor alleged
10
The hospital specifically alleged that an agent for the
insurance company informed the hospital that the wife of an
employee of the insured company was, in fact, covered by the
insured's policy. The hospital relied on this alleged
representation and treated the employee's wife. The employee then
transferred to the hospital his rights to benefits under the
policy. The hospital, in turn, sought payment from the insurance
company, but the insurance company informed the hospital that the
employee's wife was not covered and denied the claim. The hospital
then filed its suit against the insurance company. Memorial Hosp.,
904 F.2d 238-39.
17
improper processing of benefits. Memorial Hosp., 904 F.2d at 243-
50; see also Hartle v. Packard Elec., 877 F.2d 354 (5th Cir.
1989).11 Thus, ERISA's preemptive scope may be broad but it does
not reach claims that do not involve the administration of plans,
even though the plan may be a party to the suit or the claim relies
on the details of the plan.
Admittedly, the presence of the waiver in this case
complicates the issue of whether Hook's claim is preempted. Amici
charge that this complication was intended. Specifically, amici
claim that MMC, by including the waiver in its plan, is attempting
to avoid state court litigation simply by "don[ning] the mantle of
ERISA preemption." Combined Management v. Superintendent of the
Bureau of Ins., 22 F.3d 1, 5 (1st Cir. 1994). Amici also claim
that MMC's strategy, if successful, would undermine the viability
of the Texas workers' compensation system, because Texas employers
would have a greater incentive to opt out and defend themselves in
federal court rather than opt in to Texas' system. MMC responds
that their motive is not so sinister. Rather, MMC argues, the
structure of its plan represents a reasonable accommodation between
a non-subscribing employer and its employee. In exchange for the
11
Hartle involved an employee who sued his former employer for
various tort claims arising out of his termination. He alleged
that he had a fixed-term employment contract and therefore could
not be fired at will. To prove his case, he relied on certain
details in the employer's ERISA plan, to which he had contributed.
We concluded that the employee's claim "does not in any manner
implicate the federal regulation of employee benefit plans" because
the employee neither sought benefits nor alleged improper
processing. Id. at 356. Though an ERISA plan was at issue, the
employee's claim was only "peripherally connected to the concerns
addressed by ERISA." Id.
18
employee's agreement not to sue, the employer offers workers'
compensation-like benefits without the cost of complying with state
regulations. Whatever MMC's motive may be, our conclusion that
Hook's negligence cause of action is not preempted rests on our
reading of ERISA and the numerous Supreme Court and Fifth Circuit
cases interpreting it. We agree with amici that the waiver in
MMC's plan does not transform Hook's claim into one that is
preempted. By focusing on the waiver, MMC turns ERISA preemption
analysis on its head; it argues that Hook's cause of action is
preempted because the waiver, as part of the plan, relates to
Hook's claim. Instead, the appropriate question in any ERISA
preemption case is whether the state law relates to an ERISA plan.
29 U.S.C. § 1144(a). MMC's inverted analysis cannot be reconciled
with either ERISA's statutory language or the case law interpreting
it. More importantly, MMC's analysis would lead to a broad
expansion of employer authority that we believe has no basis in
ERISA. Specifically, MMC's analysis would enable employers to
avoid any state law simply by referring to that law in its ERISA
plan. Congress clearly did not intend to vest employers with such
authority. To the contrary, ERISA was "designed to promote the
interests of employees and their beneficiaries in employee benefit
plans." Shaw, 463 U.S. at 90.
The Ninth Circuit, in Employee Staffing Services v. Aubry, 20
F.3d 1038 (9th Cir. 1994), rejected a similar attempt to broaden
employers' authority under ERISA. In Employee Staffing, the
employer had argued that California's attempts to enforce its
19
workers' compensation statute were preempted because the employer
had already included benefits for work-related injuries in its
ERISA plan. In rejecting the employer's arguments, the Ninth
Circuit reasoned:
Syntactically, the preemption of "laws" and exemption of
"plans" might be construed to place the power to exempt in the
employer's hands, when it adopts a plan, instead of the state
legislature's hands, when it promulgates laws. But a
construction which attributes a rational purpose to Congress
makes this locus of power unlikely, because it would
accidentally allow employers to avoid the century-old system
of workers' compensation."
Id. at 1041. While Employee Staffing involved ERISA's exemption
for workers' compensation, we concur with its reasoning that ERISA
was not enacted to allow employers to control which laws or claims
are preempted and those that are not. With the exception of Van
Camp, 963 F.2d at 122-24, we find no authority for the proposition
that a law or claim is preempted merely because the employer crafts
its ERISA plan in such a way that the plan is inconsistent with
that law or claim. We decline to follow the Sixth Circuit's
analysis in Van Camp.
Instead, we choose to adhere to our traditional mode of
analysis, as prescribed in ERISA § 514(a): a law or claim is
preempted when it relates to an ERISA plan, and not the reverse.12
12
Our colleague in dissent disagrees with our analytical
framework because we focus solely on the negligence claim and not
the fact that it squarely conflicts with a provision in MMC's plan.
Again, we point out that § 514(a) requires us to do as we have
done. We do not dispute our colleague's contention that Hook wants
to have her cake and eat it, too. But we are not assigned the role
of spoiler. A state court may perform that function upon remand if
that court is persuaded, as our colleague asserts, that the waiver
is enforceable under Texas law.
20
The Supreme Court cautioned that our ERISA preemption analysis
"must be guided by respect for the separate spheres of governmental
authority preserved in our federalist system." Alessi, 451 U.S. at
522. If we were to conclude that ERISA vests employers with the
type of authority MMC contemplates, we would be disregarding the
Supreme Court's cautionary advice in Alessi, because the practical
implications of such a conclusion are serious. If an employer, for
example, crafts an ERISA plan that conditions eligibility on
employees waiving their right to sue the employer for gross
negligence or intentional torts and an employee subsequently sues
the employer for assault and battery, the employee's suit would be
preempted, even though the suit has nothing to do with the ERISA
plan. Congress' quest for uniform regulation of employee benefit
plans could not have included the intent to permit employers to
disable the states from prosecuting unrelated common law causes of
action such as the assault claim in this hypothetical or Hook's
claim, which is based on Texas common law dating back to the last
century. See International & Great R.R. Co. v. Doyle, 49 Tex. 190
(1878).
As we stated in Memorial Hospital, "``[a] preemption provision
designed to prevent state interference with federal control of
ERISA plans does not require the creation of a fully insulated
legal world that excludes these plans from regulation of any purely
local transaction.'" Memorial Hosp., 904 F.2d at 250 (quoting
Rebaldo v. Cuomo, 749 F.2d 133, 138 (2d Cir. 1984)). In other
words, ERISA was not meant to consume everything in its path. In
21
Shaw, the Supreme Court "express[ed] no views about where it would
be appropriate to draw the line" between those claims that are too
tenuous or remote to warrant preemption and those that are not.
Shaw, 463 U.S. at 100 n.21. In this case, we draw the line here:
a common law negligence claim which alleges only that an employer
failed to maintain a safe workplace does not "relate to" an ERISA
plan merely because the employer has inserted a waiver of the right
to bring such a claim into its ERISA plan.13
D.
Having concluded that the district court properly determined
that ERISA does not preempt Hook's negligence cause of action
against MMC, we now turn to the district court's discretionary
decision to remand the case to state court. Given that we accord
district courts significant deference when reviewing their
decisions for abuse of discretion, Thomas v. Capital Sec. Servs.,
Inc., 836 F.2d 866, 883-84 (5th Cir. 1988) (en banc), we find no
reason to disturb the court's decision to remand Hook's suit to
state court.
IV.
We hold that Hook's common law negligence suit against MMC,
which alleges only that MMC maintained an unsafe workplace, does
not relate to MMC's ERISA plan and therefore is not preempted by
13
Our holding is consistent with the holding the United States
recommends in its amicus brief. The brief, it should be pointed
out, was authored by the Department of Labor, the federal agency
charged with primary jurisdiction over enforcing employee benefit
rights.
22
ERISA. We AFFIRM the district court's decision to remand this case
to district court.
23
No. 93-4115 -- Hook v. The Morrison Milling Co.
EDITH H. JONES, Dissenting:
With due respect to my colleagues, I disagree with their
conclusion that Ms. Hook's negligence claim against her employer
Morrison Milling Co. was not preempted by her participation in the
employer's ERISA benefits plan. I therefore dissent.
Texas is among a handful of states that do not require
its employers to furnish state-mandated worker's compensation
coverage. Morrison Milling availed itself of the privilege of
being a nonsubscriber, but it also sought to compensate its
employees for their on-the-job injuries. To do so, the company
established an ERISA welfare benefits plan and permitted, but did
not require, employees to enroll in that plan. Under the plan,
they would receive benefits for on-the-job injuries comparable to
or better than those under the state program simply by proving that
an on-the-job injury occurred. In exchange for the certainty and
promptness of payment of benefits, however, the employees were
asked to sign a waiver of right to sue the employer under the Texas
Workers' Compensation Act.14
Hook liked the plan's provision for benefits, which she
collected after falling down a staircase at work. She did not like
the waiver of right to sue, however, so she also filed suit against
Morrison Milling for negligence.
14
Under Texas law, an employee may sue a nonsubscriber to state workers
compensation and his employer may not take advantage of common law defenses.
24
This sequence of events should make it obvious why the
majority is wrong in concluding that Hook's lawsuit does not
"relate to" an ERISA plan for purposes of federal preemption. If
all of Morrison's employees tried to have their cake and eat it by
collecting benefits and then suing Morrison Milling, Morrison
Milling could not afford the luxury of providing its welfare
benefit plan. The plan is a substitute for, not a vehicle to
finance employee litigation.
Not only is the waiver of right to sue economically
essential to Morrison Milling's plan, but Hook's claim legally
"relates to" the plan by challenging the enforceability of that
waiver. I cannot follow the majority's assertions to the contrary.
First, the majority states that, taken alone, Hook's claim against
her employer based on an unsafe workplace would not be preempted.
This might well be true in the absence of a waiver. The majority
then opines that even considering the waiver, the question is not
whether Hook's claim "is preempted because the waiver, as a part of
the plan, relates to Hook's claim. Instead, the appropriate
question . . . is whether the claim or law relates to an ERISA
plan." Apparently, one should focus only on the negligence claim,
ignoring that it squarely conflicts with a provision of this ERISA
plan. This logic is rather like a borrower's accepting money under
a promissory note and asking the court to ignore its reference to
a security agreement.
Without parsing the majority's analysis further, I think
they have simply overlooked the breadth of the ERISA preemption
25
doctrine, and in particular, the significance of the Supreme
Court's holding in FMC Corp. v. Holliday, 498 U.S. 52, 111 S. Ct.
403 (1990). The Court held in FMC that a subrogation clause by
which an employee agreed to reimburse the ERISA plan for benefits
paid if the employee recovered on a claim in a liability action
against a third party preempted Pennsylvania's Motor Vehicle
Financial Responsibility Law. That state law purported to override
any right of subrogation of a tort recovery in a motor vehicle
accident. 111 S. Ct. at 406. The Supreme Court reasoned that the
anti-subrogation law had a "connection to" the ERISA plan because
it "prohibits plans from being structured in a manner requiring
reimbursement in the event of recovery from a third party." Id. at
408. Neither the amici nor the majority have in my view
successfully distinguished FMC Corp. from this case. In FMC Corp.,
the injured ERISA beneficiary surrendered his right to sue free of
subrogation rights to the ERISA plan, whereas in this case, the
injured party has ostensibly surrendered her right to sue for work-
related injuries. None of the cases cited by the majority
concerning the nature or extent of an "ERISA relationship" for
purposes of preemption analysis is relevant here; Hook's claim
directly draws into question the enforceability of the plan's
waiver of right to sue.
Like the majority, I reach this conclusion without having
expressly to decide whether the waiver of right to sue would be
26
enforceable, although I have concluded that if Texas law governs
this question, it ought to be enforceable.15
Moreover, I am not particularly pleased to reach the
conclusion that these matters are preempted by federal law. ERISA
contains an explicit exemption for welfare benefit plans that are
maintained to comply with state workers' compensation laws, and, as
noted above, ERISA leaves unaffected the mandatory compensation
schemes of nearly all the states. Had the ERISA statute been
drafted differently, it might easily have excluded the plans
promulgated by non-subscribers to Texas' compensation scheme.
There are strong policy reasons for preferring state regulation of
on-the-job injury claims to the indirect regulation that is
accomplished through federal monitoring of ERISA plans. Finally,
to hold that claims such as Hook's are preempted by the terms of
this ERISA plan is to impose a heavy burden on federal courts.
15
Both federal and state cases have held that a nonsubscriber may require
a release from an employee as a condition of receiving insurance benefits. Collier
v. Allstate Ins. Co., 395 F.2d 719 (5th Cir. 1968); Tigrett v. Heritage Bldg. Co.,
533 S.W.2d 65 (Tex. Civ. App.--Texarkana 1976 writ ref'd n.r.e); Employers Mutual
Casualty Co. v. Poorman, 428 S.W.2d 698 (Tex. Civ. App.--San Antonio 1968, writ
ref'd n.r.e.); United States Fidelity & Guaranty Co. v. Valdez, 390 S.W.2d 485 (Tex.
Civ. App.--Houston 1965, writ ref'd n.r.e.). One Texas case cites these authorities
and then holds that a waiver is "against public policy" unless it expressly
precluded the employer's reliance on common law defenses. Hazelwood v. Mandrell
Industries, Inc., 596 S.W.2d 204, 206 (Tex. Civ. App.--Houston 1980). Because the
coverage in Hazelwood required proof of negligence, whereas this plan does not,
Hazelwood is distinguishable.
More recently, the Beaumont Court of Appeals held that a waiver of the
right to sue the employer for negligence, contained in an ERISA benefits plan
offered by a nonsubscriber to Texas workers compensation, was void and against
public policy. Texas Health Enterprises, Inc. v. Kirkgard, 882 S.W.2d 630 (Tex.
App.--Beaumont 1994). Even if this decision is correct, in light of the above-cited
authorities, the case is distinguishable from the one before us. First, the waiver
in that case was involuntary, whereas participation in Morrison Milling's ERISA plan
is voluntary. Second, unlike Ms. Hook, appellees in that case did not seek benefits
under the employer's plan.
27
But despite my unease with this conclusion, I cannot
overlook the breadth of ERISA preemption and the applicability of
FMC Corp. v. Holliday in this case.
I respectfully dissent.
wjl\opin\93-4115.opn
jwl 28