Siaperas v. Montana State Compensation Insurance Fund ( 2007 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PATSY SIAPERAS, 
Plaintiff-Appellant, No. 05-35459
v.
 D.C. No.
CV-04-00013-RWA
MONTANA STATE COMPENSATION
INSURANCE FUND, OPINION
Defendant-Appellee.

Appeal from the United States District Court
for the District of Montana
Richard W. Anderson, Magistrate Judge, Presiding
Submitted February 5, 2007*
Seattle, Washington
Filed March 27, 2007
Before: Raymond C. Fisher and Richard C. Tallman,
Circuit Judges, and Richard Mills, District Judge.**
Opinion by Judge Mills
*This panel unanimously finds this case suitable for decision without
oral argument. See Fed. R. App. P. 34(a)(2).
**The Honorable Richard Mills, Senior United States District Judge for
the Central District of Illinois, sitting by designation.
3521
SIAPERAS v. MONTANA STATE COMPENSATION 3523
COUNSEL
Robert C. Kelleher, Sr., Butte, Montana, for the plaintiff-
appellant.
Charles G. Adams, Keller, Reynolds, Drake, Johnson, and
Gillespie, P.C., Helena, Montana, for the defendant-appellee.
3524 SIAPERAS v. MONTANA STATE COMPENSATION
OPINION
MILLS, District Judge:
FACTS & PROCEDURAL HISTORY
Patsy Siaperas severely injured her back on August 17,
1996, while working for High Plains Pizza in Dillon, Mon-
tana. She filed a workers’ compensation claim and was deter-
mined to be permanently totally disabled pursuant to § 39-71-
702, Montana Code. The State of Montana Mutual Insurance
Fund (the “State Fund”), as the insurer of Siaperas’ employer,
accepted liability for Siaperas’ injury. The State Fund com-
puted her disability rate to be $369.23 (two-thirds her $553.84
average current earnings (“ACE”)). Once Siaperas’ bonuses
came to light, the State Fund recognized that her ACE was
$759.99 and that her disability rate should have been $506.66.
However, Montana law capped workers’ compensation bene-
fits at $384 per week; thus, the underpayment amounted to
$14.77 per week.
What brought this case to the fore is what happened when
Siaperas sought Social Security Disability Insurance benefits
(“SSDI”) from the Social Security Administration. On June
28, 2002, an administrative law judge found Siaperas to be
totally disabled as of February 6, 1997, for purposes of SSDI.
As a result, Siaperas received SSDI retroactively to December
1, 1999, at a rate of $290.74 per week. On April 16, 2003, the
State Fund reduced Siaperas’ workers’ compensation benefits
by $145.37, an amount equal to 50% of her SSDI. The reduc-
tion was done pursuant to § 39-71-702(4) Montana Code. The
State Fund notified Siaperas that she had been overpaid bene-
fits totaling $25,397.59. On May 6, 2003, an adjuster for the
State Fund notified Siaperas that a recalculation showed her
overpayment to be the still higher figure of $28,299.17.
Siaperas contested the State Fund’s calculations before the
Montana Workers’ Compensation Court, Siaperas v. Montana
SIAPERAS v. MONTANA STATE COMPENSATION 3525
State Fund, WCC No. 2003-0841, unsuccessfully arguing that
an off-set of her benefits violated the U.S. Constitution’s
Equal Protection Clause as well as 42 U.S.C. § 424a. She
appealed to the Montana Supreme Court, but was again
unsuccessful on this issue. See Siaperas v. Mont. State Fund,
100 P.3d 167 (Mont. 2004) (unpublished disposition). She
then filed a declaratory judgment action in the U.S. District
Court for the District of Montana. The parties consented to
having their case heard by U.S. Magistrate Judge Richard W.
Anderson.
Siaperas made no Equal Protection claim. However, she
again contended that § 424a barred the State Fund from
reducing her benefits below 80% of her ACE. Although Siap-
eras’ Second Amended Complaint did not argue preemption,
the district court considered whether Montana law was pre-
empted by § 424a. The State Fund moved to dismiss the case
under Federal Rule of Civil Procedure 12(b)(6). Judge Ander-
son sided with the State Fund on both issues and granted the
State Fund’s motion on April 7, 2005. Siaperas timely
appealed.
STANDARD OF REVIEW
The court uses a de novo standard when reviewing a district
court’s decision to grant a motion to dismiss for failure to
state a claim. Bassiri v. Xerox Corp., 463 F.3d 927, 929 (9th
Cir. 2006). “Upon review, we ‘must construe the complaint in
the light most favorable to the plaintiff and must accept all
well-pleaded factual allegations as true.’ ” Syverson v. Int’l
Bus. Machines Corp., 472 F.3d 1072, 1075 (9th Cir. 2007)
(quoting Shwarz v. United States, 234 F.3d 428, 435 (9th Cir.
2000)). Dismissal is proper only when there is no cognizable
legal theory or an absence of sufficient facts alleged to sup-
port a cognizable legal theory. Balisteri v. Pacifica Police
Dep’t, 901 F.2d 696, 699 (9th Cir. 1990).
3526 SIAPERAS v. MONTANA STATE COMPENSATION
ANALYSIS
[1] A person who receives SSDI and workers’ compensa-
tion benefits cannot receive combined benefits that exceed
80% of her ACE. See 42 U.S.C. § 424a(a). When a person’s
combined benefits exceed 80% of her pre-disability earnings,
SSDI must be reduced via an “offset.” Id. Nevertheless, a
state can reduce its own workers’ compensation benefits on
the basis of social security disability benefits. Id. at § 424a(d).
This is commonly referred to as a “reverse offset.” To prevent
a person from being subjected to state and federal offsets, the
Social Security Act provides that a person’s workers’ com-
pensation benefits will not be offset if the state is executing
a reverse offset. Id.
The State Fund executed a reverse offset against Siaperas’
SSDI. The reverse offset, which totaled 50% of Siaperas’
SSDI, was authorized by Montana law. See § 39-71-702(4)
Mont. Code Ann. (authorizing reduction “by an amount equal
. . . to one-half the federal periodic benefits for the week”).
That law has been tested and deemed constitutional. See
McClanathan v. Smith, 606 P.2d 507 (Mont. 1980).
[2] After the reverse offset, Siaperas’ combined benefits
totaled less than 80% of her ACE. Siaperas contends that
§ 424a prevents her combined benefits from being reduced to
an amount that is less than 80% of her ACE. Section 424a
creates a benefits “ceiling” that prevents individuals from
obtaining more than 80% of their ACE. See Bubnis v. Apfel,
150 F.3d 177, 179 (2d. Cir. 1998); accord, Berger v. Apfel,
200 F.3d 1157, 1159 (8th Cir. 2000); Merz v. Sec’y of Health
& Human Serv., 969 F.2d 201, 204 (6th Cir. 1992); Draper
v. Sullivan, 899 F.2d 1127, 1128 (11th Cir. 1990); Sciarotta
v. Bowen, 837 F.2d 135, 137 (3d Cir. 1988); Iglinsky v. Rich-
ardson, 433 F.2d 405, 407 (5th Cir. 1970). However, no cir-
cuit court has held that § 424a creates a benefits “floor” of
80%. Nothing in § 424a’s statutory language establishes one
either. Rather, Congress enacted § 424a out of concern that
SIAPERAS v. MONTANA STATE COMPENSATION 3527
workers might be discouraged from returning to work if their
combined federal and state benefits exceeded 80% of their
ACE. See Richardson v. Belcher, 404 U.S. 78, 82-83 (1971).
Had Congress intended to create a “floor,” it would have pro-
vided language to that effect.
This leaves us to consider preemption. We review a district
court’s preemption analysis de novo. Chamber of Commerce
v. Lockyer, 463 F.3d 1076, 1082 (9th Cir. 2006) (en banc).
Preemption analysis begins with the “basic assumption that
Congress did not intend to displace state law.” Id. at 1085
(quoting Maryland v. Louisiana, 451 U.S. 725, 746 (1981)).
Preemption is a question of congressional intent, and the
“ ‘purpose of Congress is the ultimate touchstone’ of preemp-
tion analysis.” Alameda Newspapers, Inc. v. City of Oakland,
95 F.3d 1406, 1413 (9th Cir. 1996) (quoting Malone v. White
Motor Corp., 435 U.S. 497, 504 (1978)).
[3] Federal law may preempt state law under the Suprem-
acy Clause of the Constitution. U.S. Const. art. VI, cl. 2. “Pre-
emption can occur in one of three ways: express pre-emption
by statute, occupation of the field, or conflict between state
and federal regulation.” Air Conditioning & Refrigeration
Inst. v. Energy Res. Conservation & Dev. Comm’n, 410 F.3d
492, 495 (9th Cir. 2005), cert. denied, 126 S. Ct. 2887, 165
L. Ed. 2d 916 (U.S. Jun. 19, 2006).
[4] “Express preemption occurs when Congress enacts a
statute that expressly commands that state law on the particu-
lar subject is displaced.” Gadda v. Ashcroft, 377 F.3d 934,
944 (9th Cir. 2004). Express preemption is not a possibility
here because Congress has not enacted any law to give the
federal government authority over state workers’ compensa-
tion programs.
[5] Additionally, it is clear that Congress did not intend to
occupy the field of disability benefits. Congress would not
have coordinated benefits between the federal and state gov-
3528 SIAPERAS v. MONTANA STATE COMPENSATION
ernments, as it did in § 424a(d)’s reverse offset provision, if
it intended to occupy the field of disability benefits. To deter-
mine if Congress intended to occupy a field, courts must
ascertain Congress’ intent in enacting the federal law. See
Metro. Life Ins. Co. v. Massachusetts, 471 U.S. 724, 747-48
(1985). The Supreme Court’s Richardson decision recognized
this lack of intent to occupy the field when it stated that if
there is any overlap between a federal disability insurance
program and a state workers’ compensation program, “work-
men’s compensation programs should take precedence . . . .”
Richardson, 404 U.S. at 82.
[6] Finally, there is no conflict between § 424a and Mon-
tana Code § 39-71-702(4). A conflict occurs when compli-
ance with both federal and state laws is impossible. See Fla.
Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-43
(1963). Because § 424a does not establish a combined bene-
fits floor of 80% ACE, no conflict occurs when § 39-71-
702(4) causes a combined benefits award to be less than 80%
ACE.
CONCLUSION
For these reasons, the Court AFFIRMS the district court’s
order granting the State Fund’s motion to dismiss.