Gast v. State, By and Through Stevenson

Citation36 Or.App. 441,585 P.2d 12
Decision Date02 October 1978
Docket NumberNo. A7710-14092,A7710-14092
Parties, 18 Fair Empl.Prac.Cas. (BNA) 210, 18 Empl. Prac. Dec. P 8688 Fred GAST, Bruce Wilson, Jim Nielsen, Harry McEllrath, Trustees of Warehousemen's Employer's Trust, Respondent, v. STATE of Oregon, By and Through Bill STEVENSON, Commissioner of the Bureau of Labor, Appellant. ; CA 9686.
CourtCourt of Appeals of Oregon

Jan P. Londahl, Asst. Atty. Gen., Salem, argued the cause for appellant. With him on the brief were James A. Redden, Atty. Gen., and Al J. Laue, Sol. Gen., Salem.

Richard H. Muller, Portland, argued the cause for respondent. With him on the brief was Bouneff, Muller & Marshall, Portland.

Lawrence Wobbrock, Portland, argued the cause amicus curiae for the American Civil Liberties Union Foundation of Oregon, Inc. On the brief was Ann Morgenstern, Portland.

Before JOHNSON, P. J., and GILLETTE and ROBERTS, JJ.

JOHNSON, Presiding Judge.

Plaintiff brought this suit for a declaratory judgment praying for a declaration of rights and duties under Oregon Laws 1977, ch. 330, amending ORS 659.030. 1 Chapter 330 provides:

" * * *

"SECTION 1. Section 2 of this Act is added to and made a part of ORS 659.010 to 659.110.

"SECTION 2. For purposes of ORS 659.030, the phrase 'because of sex' includes, but is not limited to, because of pregnancy, childbirth and related medical conditions or occurrences. Women affected by pregnancy, childbirth or related medical conditions or occurrences shall be treated the same for all employment-related purposes, Including receipt of benefits under fringe benefit programs, as other persons not so affected but similar in their ability or inability to work by reason of physical condition, and nothing in this section shall be interpreted to permit otherwise." (Emphasis supplied.)

The trial court entered a judgment declaring that Chapter 330 violates the Supremacy Clause of the United States Constitution, U.S.Const. Art. VI, insofar as it applies to employee welfare benefit plans subject to the Employee Retirement Income Security Act of 1974, 29 U.S.C. §§ 1001 to 1381 (ERISA). On appeal the state contends the trial court lacked jurisdiction because of sovereign immunity and that in any event ERISA does not preempt the state from regulating the matters covered by Chapter 330. 2 We conclude that the trial court had jurisdiction, but was in error as to federal preemption. 3

Sovereign Immunity

The state contends for the first time on appeal that the trial court lacks jurisdiction because of sovereign immunity. Immunity enjoys constitutional status in Oregon by virtue of Article IV, Section 24 of the Oregon Constitution. Vendrell v. School Dist. No. 26C et al., 226 Or. 263, 360 P.2d 282 (1961). That section provides:

"Provision may be made by general law, for bringing suit against the State, as to all Liabilities originating after, or existing at the time of the adoption of this Constitution; but no special act authorizeing (sic) such suit to be brought, or making compensation to any person claiming damages against the State, shall ever be passed." (Emphasis supplied)

The issue which we decide here is whether sovereign immunity extends to a suit in which the only relief prayed for is a declaration that a state statute violates the Supremacy Clause of the United States Constitution. Sovereign immunity does not apply to such suits because the relief sought is not against the state as sovereign, but to prevent government officials from engaging in ultra vires acts. 4 The seminal case is Ex parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed. 714 (1908), in which the U. S. Supreme Court stated:

" * * * The act to be enforced is alleged to be unconstitutional; and if it be so, the use of the name of the state to enforce an unconstitutional act to the injury of complainants is a proceeding without the authority of, and one which does not affect, the state in its sovereign or governmental capacity. It is simply an illegal act upon the part of a state official in attempting, by the use of the name of the state, to enforce a legislative enactment which is void because unconstitutional. If the act which the state attorney general seeks to enforce be a violation of the Federal Constitution, the officer, in proceeding under such enactment, comes into conflict with the superior authority of that Constitution, and he is in that case stripped of his official or representative character and is subjected in his person to the consequences of his individual conduct. The state has no power to impart to him any immunity from responsibility to the supreme authority of the United States. See Re Ayers, 123 U.S. 507, 8 S.Ct.Rep. 164, 31 L.Ed. 230. It would be an injury to complainant to harass it with a multiplicity of suits or litigation generally in an endeavor to enforce penalties under an unconstitutional enactment, and to prevent it ought to be within the jurisdiction of a court of equity * * * ."

209 U.S. at 159-60, 28 S.Ct. at 454, 52 L.Ed. at 729.

The United States Supreme Court continues to follow Ex parte Young, See, e. g., Edelman v. Jordan, 415 U.S. 651, 94 S.Ct. 1347, 39 L.Ed.2d 662 (1974). The Oregon Supreme Court expressly adopted that rationale in Hanson v. Mosser, 247 Or. 1, 7 427 P.2d 97, 100 (1967), in allowing a declaratory judgment action against state officials for allegedly entering into contracts prohibited by state statute. The court stated:

"The courts have recognized that acts done by officials of the state without authority or in excess or abuse of authority are done without the sanction of the state and may be enjoined. It is the theory of such suits that public officers hold and can exercise only the authority lawfully delegated to them. Where, then, officers act beyond or in abuse of their delegated authority they act as individuals, and a suit to enjoin their wrongful acts is not one against the state. * * * "

Hanson is distinguishable from the present case only in the fact that in Hanson the officials were named as defendants, whereas here the state is named as defendant acting "by and through" the Labor Commissioner. Courts in other states have held that jurisdiction lies even though the state or one of its agencies is named defendant on the theory that the determinative issue is not who is named as defendant, but whether the relief is directed against the state as sovereign or against state officials. 5 In Hanson the court stated:

"(I)n a suit against an officer Or agency of the state, the court is not bound by the record, but will look to determine the real party in interest and if that is the state then the suit may not be maintained unless consent has been given." (Emphasis supplied) (Citations omitted)

247 Or. at 6, 427 P.2d at 99.

To dismiss the present case because plaintiff failed to name the Labor Commissioner individually as a defendant would be to honor form over substance and invite the kind of vexatious litigation which Ex parte Young sought to prevent. As has been recognized, Ex parte Young and its progeny rest on a legal fiction designed to provide private citizens a means for challenging illegal conduct by government. See, e. g., Lister v. Board of Regents of the University of Wisconsin System, 72 Wis.2d 282, 240 N.W.2d 610 (1976); Gellhorn and Byse, Administrative Law 311 (6th ed. 1974). The transparency of that fiction should not become a device for defeating its purpose. Whether we follow the fiction or adopt the plausible rationale that the "liabilities" referred to in Article IV, Section 24 of the Oregon Constitution do not include a prospective declaration as to the constitutionality of a statute, we hold that the trial court had jurisdiction.

Federal Preemption

Plaintiffs are trustees of a health and welfare trust established pursuant to collective bargaining agreements between various employers and labor organizations. The employers make contributions to the trust which in turn purchases insurance providing death, disability, hospital, medical, dental and vision benefits for active and retired former employees and eligible dependents. The practical effect of Chapter 330 is that some of the insurance programs purchased by the trustees will have to include pregnancy benefits and failure to do so would constitute an unlawful employment practice under the Oregon Civil Rights Act. ORS 659.030. 6 The health and welfare trust administered by plaintiffs is an "employee benefit plan" subject to ERISA. 29 U.S.C. §§ 1002 and 1003. 7 ERISA is a federal regulatory statute encompassing both "employee pension benefit" and "welfare benefit" programs established or maintained by an employer or an employee organization or both. 29 U.S.C. § 1002(1), (2), (3) and (4). The plan at issue here is an "employee welfare benefit plan" in that it provides through "the purchase of insurance or otherwise" for "medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death." 29 U.S.C. § 1002(1).

The question of preemption turns on an interpretation of 29 U.S.C. § 1144, a provision of ERISA, which in pertinent part provides:

"(a) Except as provided in subsection (b) of this section, 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 described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975.

"(b) * * *

"(2)(A) 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.

"(B) Neither an employee benefit plan described in section 1003(a) of this title, which is not exempt under section 1003(b) of this title (other than a plan established primarily for the purpose of...

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