Airparts Co., Inc. v. Custom Ben. Services of Austin, Inc., 93-3268

• Decision Date: 30 June 1994
• Docket Number: No. 93-3268,93-3268
• Citation: 28 F.3d 1062
• Court: U.S. Court of Appeals — Tenth Circuit
• Parties: , 18 Employee Benefits Cas. 1616 AIRPARTS COMPANY, INC., a Kansas corporation; Marta E. Maxwell, Terry A. Gardner, each in their capacity as co-trustees of the Airparts Company, Inc. Defined Benefit Pension Plan and Trust, Plaintiffs-Appellants, v. CUSTOM BENEFIT SERVICES OF AUSTIN, INC., d/b/a First Actuarial Corporation, Defendant-Appellee.

Page 1062

28 F.3d 1062

63 USLW 2041, 18 Employee Benefits Cas. 1616

AIRPARTS COMPANY, INC., a Kansas corporation; Marta E Maxwell, Terry A. Gardner, each in their capacity as co-trustees of the Airparts Company, Inc. Defined Benefit Pension Plan and Trust, Plaintiffs-Appellants, v. CUSTOM BENEFIT SERVICES OF AUSTIN, INC., d/b/a First Actuarial Corporation, Defendant-Appellee.

No. 93-3268.

United States Court of Appeals Tenth Circuit.

June 30, 1994.

Paul Arabia, Wichita, KS, for plaintiffs-appellants.

Joseph H. Bocock, Michael F. Lauderdale, Oklahoma City, OK, for defendant-appellee.

Before LOGAN, SETH, and BARRETT, Circuit Judges.

SETH, Circuit Judge.

Plaintiffs, residents of Kansas and co-trustees of an ERISA plan, filed a complaint in federal district court against First Actuarial Corporation (FAC), a Texas corporation, alleging negligence, implied indemnity, and fraud. Concluding that the state law claims were preempted by ERISA, the district court dismissed the complaint. Airparts Co. v. Custom Benefit Servs. of Austin, Inc., 828 F.Supp. 870, 876 (D.Kan.1993). Because we do not agree that the claims here relate to an ERISA plan, we reverse. ¹

As an initial matter, we deny defendant's motion to dismiss this appeal. As part of its analysis in dismissing plaintiffs' claims because of preemption, the district court concluded that plaintiffs could bring their claims against defendants for equitable relief. Id. Defendant seizes upon this dicta to argue that the order of the district court is not final. It is clear from the overall tenor of the district court's order, however, that the order is final, and that no claims remain to be disposed of by the district court. Further, any elaboration by the district court on the possibility of equitable relief for plaintiffs was purely academic since plaintiffs' complaint did not request such relief.

We now turn to the merits of this appeal. Whether plaintiffs' state law claims are preempted by ERISA is a question of law which we review de novo. See National Elevator Indus., Inc. v. Calhoon, 957 F.2d 1555, 1557 (10th Cir.), cert. denied, --- U.S. ----, 113 S.Ct. 406, 121 L.Ed.2d 331 (1992). The district court's dismissal under Fed.R.Civ.P. 12(b)(6) is similarly subject to de novo review to determine whether plaintiffs were legally able to prove any set of facts in support of their claim which would entitle them to relief. Hospice of Metro Denver, Inc. v. Group Health Ins. of Okla., Inc., 944 F.2d 752, 753 (10th Cir.1991).

Plaintiffs are Airparts Company, Inc. (Airparts) and the co-trustees of the Airparts ERISA plan. As noted above, they brought state law claims of negligence, implied indemnity, and common law fraud against FAC, a firm hired by plaintiffs to provide expert benefit plan consultation. Plaintiffs specifically alleged that FAC failed to give timely advice to plaintiffs on the effects of the Omnibus Budget Reconciliation Act of 1987, improperly calculated pension benefits, proposed and drafted a useless plan amendment, and deliberately concealed the cost of the amendment and its eventual uselessness from plaintiffs. It is important to bear in mind, as we begin our analysis, that FAC was an outside consultant hired to advise the plan's trustees. FAC was not a fiduciary, nor was it the administrator of the plan; that role was assigned to Airparts. Airparts Co., 828 F.Supp. at 874.

The relevant part of the ERISA preemption provision is found at 29 U.S.C. Sec. 1144(a):

[T]he provisions of this title and title IV shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan....

29 U.S.C. Sec. 1144(a) (emphasis added). This case requires us to decide whether Sec. 1144 preempts plaintiffs' state law claims.

Before preemption will be found, three requirements must be met. "There must be a state law, an employee benefit plan, and the state law must 'relate to' the employee benefit plan." National Elevator, 957 F.2d at 1557 (footnote omitted). There is no dispute here that plaintiffs' claims are based on state law and that the Airparts plan is an employee benefit plan under ERISA. The issue is whether plaintiffs' state law claims "relate to" the Airparts plan.

"A law 'relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2899-2900, 77 L.Ed.2d 490 (1983) (footnote omitted). Thus, even if a state law is not specifically directed toward the regulation of an ERISA plan or affects such a plan only indirectly, it can still be found to "relate to" a plan. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 483, 112 L.Ed.2d 474 (1990).

"There is no simple test for determining when a law 'relates to' a plan." National Elevator, 957 F.2d at 1558. This circuit has recognized four categories of laws which have been held preempted because they "relate to" ERISA plans. Those are:

First, laws that regulate the type of benefits or terms of ERISA plans. Second, laws that create reporting, disclosure, funding, or vesting requirements for ERISA plans. Third, laws that provide rules for the calculation of the amount of benefits to be paid under ERISA plans. Fourth, laws and common-law rules that provide remedies for misconduct growing out of the administration of the ERISA plan.

Id. at 1558-59 (quoting Martori Bros. Distribs. v. James-Massengale, 781 F.2d 1349, 1356-57 (9th Cir.), cert. denied, 479 U.S. 1018, 107 S.Ct. 670, 93 L.Ed.2d 722 (1986) (footnotes omitted)).

On the other hand, laws of general application--not specifically targeting ERISA plans--that involve traditional areas of state regulation and do not affect "relations among the principal ERISA entities--the employer, the plan, the plan fiduciaries, and the beneficiaries"--often are found not to "relate to" an ERISA plan.

Id. at 1559 (quoting Firestone Tire & Rubber Co. v. Neusser, 810 F.2d 550, 555-56 (6th Cir.1987)).

We acknowledge that the ERISA preemption provision is " 'deliberately expansive.' " Settles v. Golden Rule Ins. Co., 927 F.2d 505, 508 (10th Cir.1991) (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39 (1987)), and that "relate to" is to be given its "broad common-sense meaning," id. (quoting Pilot Life, 481 U.S. at 47, 107 S.Ct. at 1553). That does not mean, however, that ERISA preemption is unlimited. "Some 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, 103 S.Ct. at 2901 n. 21. " 'What triggers ERISA preemption is not just any indirect effect on administrative procedures but rather an effect on the primary administrative functions of benefit plans, such as determining an employee's eligibility for a benefit and the amount of that benefit.' " Monarch Cement Co. v. Lone Star Indus., Inc., 982 F.2d 1448, 1452 (10th Cir.1992) (quoting Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 146-47 (2d Cir.), cert. denied, 493 U.S. 811, 110 S.Ct. 57, 107 L.Ed.2d 25 (1989)).

In Monarch Cement, 982 F.2d 1448, this court summarized the type of state law claims which fall on either side of preemption:

[L]aws that have been ruled preempted are those that provide an alternative cause of action to employees to collect benefits protected by ERISA, refer specifically to ERISA plans and apply solely to them, or interfere with the calculation of benefits owed to an employee. Those that have not been preempted are laws of general application--often traditional exercises of state power or regulatory authority--whose effect on ERISA plans is incidental.

Id. at 1452. As long as a state law " 'does not affect the structure, the administration, or the type of benefits provided by an ERISA plan, the mere fact that the [law] has some economic impact on the plan does not require that the [law] be invalidated.' " Hospice of Metro Denver, 944 F.2d at 754 (quoting Rebaldo v. Cuomo, 749 F.2d 133, 139 (2d Cir.1984), cert. denied, 472 U.S. 1008, 105 S.Ct. 2702, 86 L.Ed.2d 718 (1985)). Even in instances where a plan might potentially be liable for a judgment, that fact alone is not enough to relate the action to the plan. See Hospice of Metro Denver, 944 F.2d at 755.

Ultimately, if there is no effect on the relations among the principal ERISA entities--the employer, the plan, the plan fiduciaries, and the beneficiaries--there is no preemption. Id. at 756. As a corollary, actions that affect the relations between one or more of these plan entities and an outside party similarly escape preemption. Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 249 (5th Cir.1990).

In applying these factors, it is clear that the state law claims here do not relate to an ERISA plan. The state laws involved do not regulate the type of benefits or terms of the plan; they do not create reporting, disclosure, funding, or vesting requirements for the plan; they do not affect the calculation of benefits; and they are not common law rules designed to rectify faulty plan administration. See National Elevator, 957 F.2d at 1558-59. Similarly, plaintiffs are not employees resorting to state law to avail themselves of an alternative cause of action to collect benefits, nor do the state laws here specifically apply to ERISA plans or interfere with the calculation of benefits. See Monarch Cement, 982 F.2d at 1452.

On the contrary, state laws of negligence, indemnity, and fraud are "laws of general application--not specifically targeting ERISA plans--that involve traditional areas of state regulation and do not affect 'relations among the principal ERISA entities.' " National Elevator, 957 F.2d at 1559 (citation omitted); see also Hospice of Metro Denver, 944 F.2d at 756 (no preemption unless there is an effect on the relations among the principal ERISA entitie...