Barker v. Pick N Pull Auto Dismantlers, Inc., Civ. No. S-91-1695

• Decision Date: 22 April 1993
• Docket Number: S-92-1722.,Civ. No. S-91-1695
• Citation: 819 F. Supp. 889
• Court: U.S. District Court — Eastern District of California
• Parties: Ben L. BARKER, Department of Industrial Relations, intervenor, Plaintiffs, v. PICK N PULL AUTO DISMANTLERS, INC., Employers Resource Management, Inc., Defendants. Arlette Faye GOMES, Department of Industrial Relations, intervenor, Plaintiffs, v. PICK N PULL AUTO PARTS, INC., Employers Resource Management, Inc., intervenor, Defendants.

819 F. Supp. 889

Ben L. BARKER, Department of Industrial Relations, intervenor, Plaintiffs, v. PICK N PULL AUTO DISMANTLERS, INC., Employers Resource Management, Inc., Defendants.

Arlette Faye GOMES, Department of Industrial Relations, intervenor, Plaintiffs, v. PICK N PULL AUTO PARTS, INC., Employers Resource Management, Inc., intervenor, Defendants.

Civ. Nos. S-91-1695, S-92-1722.

United States District Court, E.D. California.

March 18, 1993.

As Amended April 22, 1993.

Gary O'Mara, Counsel, James D. Fisher, Counsel, Vanessa L. Holton, Sr. Counsel, John Martin Rea, Chief Counsel, Calif. Dept. of Indus. Relations, San Francisco, CA, for intervenors Mark Ashcroft, Lloyd Aubry and Victoria Bradshaw.

Elliot D. Pearl, Sacramento, CA, for Ben Barker/plaintiff.

Allan J. Graf, Farmer & Ridley Los Angeles, CA, for Pick and Pull Auto Parts/defendant.

H. Thomas Cadell, Chief Counsel, Div. of Labor Standards Enforcement, CA, for California Dept. of Indus. Relations/plaintiff.

Alvin R. Webber, Stockton, CA, for Arlette Gomes/plaintiff.

Terry Fenucane, Farmer & Ridley, Los Angeles, CA, for Pick and Pull Auto Parts/defendant.

Daniel Lundgren, Atty. Gen., George Spanos, Deputy Atty. Gen., Sacramento, CA, for Dept. of Ins., State of Cal.

MEMORANDUM OF DECISION AND ORDER

LEVI, District Judge.

Plaintiffs Barker and Gomes move to remand their respective actions to state court. Both cases pose the question of whether the State of California may insist that employers provide a separate workers' compensation plan, conforming to certain standards, or whether such a rule violates the Employee Retirement Security Act ("ERISA"), 29 U.S.C. §§ 1001, et seq.

I

Barker and Gomes were injured in separate work-related accidents. At the time of their injuries, their employers, defendants Pick N Pull Auto Parts and Pick N Pull Auto Dismantlers, were not in compliance with California workers' compensation law, which requires an employer to either purchase insurance from an authorized carrier or to obtain a certificate of self-insurance.¹ Instead, the employers subscribed to an employee benefit plan administered by defendant-intervenor Employers Resource Management Company, Inc. ("ERM"). The ERM plan provided occupational injury benefits along with other health, hospital and death benefits. Both Barker and Gomes were enrolled in this plan. ERM claims its plan is an "employee welfare management plan" subject to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001, et seq.

On November 14, 1991, Barker filed a common law negligence action in Sacramento Superior Court against Pick N Pull under California Labor Code § 3706.² On September 20, 1992, Gomes filed an "Application for Adjudication of Claim" with the Workers' Compensation Appeals Board. Defendants removed both cases to this court on the basis of the complete pre-emption doctrine embodied in ERISA. See Metropolitan Life Insurance Company v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987). Barker and Gomes, and the California Department of Industrial Relations (plaintiff-intervenor in both cases), now move to remand. They contend that ERISA exempts from its scope the State's regulation of separately administered workers' compensation plans and thus that these actions, based on state law, are not pre-empted by ERISA. Absent such pre-emption, the court lacks jurisdiction. The issues raised by the motions are of considerable importance to the State's continued ability to regulate workers' compensation programs.

II

As a general matter, a federal defense, including the defense of pre-emption, offered to defeat a state cause of action, "does not appear on the face of a well-pleaded complaint, and, therefore does not authorize removal to federal court." Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987). See Caterpillar, Inc. v. Williams, 482 U.S. 386, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). In actions relating to ERISA covered plans, however, in reliance upon Congress' intention to completely pre-empt the field, the Supreme Court has found a broader basis for jurisdiction than the "well pleaded complaint" rule. Under the complete pre-emption doctrine, the Court will "recharacterize a state law complaint displaced by ERISA as an action arising under federal law." See Taylor, 481 U.S. at 66, 107 S.Ct. at 1547. Thus, the assertion of a defense of pre-emption under ERISA may provide a basis for jurisdiction if the state law cause of action is pre-empted and displaced by ERISA. See Franchise Tax Board of California v. Construction Laborers Vacation Trust for Southern California, 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420 (1983) (no removal if state action pre-empted by ERISA but no cause of action provided by ERISA); Allstate Insurance Co. v. The 65 Security Plan, 879 F.2d 90, 93 (3rd Cir.1989).

In this case the critical question is whether ERISA pre-empts the State's regulatory scheme for workers' compensation such that defendants may provide such benefits through a multi-benefit ERISA plan without complying with all state laws governing the workers' compensation insurance provider. As explained below, the court finds that Barker's and Gomes' state law claims are not pre-empted by ERISA.³

III

Section 514(a) of ERISA, codified at 29 U.S.C. § 1144(a), pre-empts "any and all State laws insofar as they may now or here-after relate to any employee benefit plan described in section 4(a) of this title and not exempt under section 4(b) of this title." Under section 4(a), 29 U.S.C. § 1003(a), ERISA applies to any employee benefit plan "established or maintained ... by any employer engaged in commerce or in any industry or activity affecting commerce." ERISA defines "employee benefit plan" to include "benefits in the event of sickness, accident, disability, death or unemployment." 29 U.S.C. § 1002(1).⁴ Section 4(b)(3) of ERISA, 29 U.S.C. § 1003(b)(3), in relevant part exempts from ERISA any employee benefit plan "maintained solely for the purpose of complying with applicable workmen's compensation laws or unemployment compensation laws or disability insurance laws."

The motions to remand require a consideration of the scope of the exemption for plans "maintained solely for the purpose of complying with applicable workmen's compensation laws," and the degree to which the states, through this exemption, may regulate employers that offer such benefits through multi-benefit plans. Plaintiffs argue that to further its regulatory objectives the State may require an employer to provide workers' compensation benefits in a plan maintained solely for that purpose. By definition such a plan is exempt from ERISA and its broad pre-empting effect and leaves the State free to impose its workers' compensation scheme and requirements on the exempt plan. Plaintiffs rely on Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 108, 103 S.Ct. 2890, 2905, 77 L.Ed.2d 490 (1983), which suggests that a State "may require" employers to maintain separate plans. Defendants contend that the State lacks authority to command an employer to establish a separate workers' compensation plan unless the employer's plan offers inadequate benefits. Rather, the State must permit an employer to offer the benefits through a multi-benefit plan covered by ERISA because ERISA explicitly permits such benefits to be offered in a covered plan. Defendants argue that the State's requirement of a separate plan forbids what ERISA permits and therefore must be pre-empted as "relating to" an ERISA covered plan. Defendants contend that the exemption in section 1003(b) only applies if the employer chooses to provide workers' compensation benefits in a plan restricted to that purpose and that the State is powerless to insist on such a restriction unless the multi-benefit plan offers workers' compensation benefits inferior to what is required by state law.

The dispute grows out of an ambiguity in the statutory language and scheme. ERISA has broad pre-emptive effect as to any state law that "relates to" employee benefit plans, 29 U.S.C. § 1144; it permits employers to offer multi-benefit plans that include workers' compensation benefits, 29 U.S.C. §§ 1002(1)(B) and 186(c)(5)(A); and it excludes from pre-emption plans that are maintained solely to provide workers' compensation benefits, 29 U.S.C. § 1003(b)(3). May the state insist that an employer provide workers' compensation plans in a plan "maintained solely" for that purpose — and therefore exempt from ERISA pre-emption — or is such a requirement itself pre-empted as "relating to" employee benefit plans?

IV

The California workers' compensation scheme requires all employers to offer a certain level of benefits — termed "compensation" — and to secure payment of such compensation in one of two ways: (1) by obtaining insurance with an approved insurer or (2) by receiving approval from the Director of Industrial Relations to self-insure. Cal.Lab. Code § 3700 (West 1989). As to the first method, all workers' compensation insurance policies issued by insurance companies in California must be pre-approved by the Policy Approval Bureau of the California Department of Insurance. Cal.Ins.Code § 11658 (West 1988). Only a licensed insurer may sell workers' compensation insurance in California. Declaration of Joseph P. Powers ¶ 3. Insurers authorized to write compensation policies must post a bond or make a cash deposit to secure payment of benefits. Powers Decl., ¶ 7. As to self-insurance, the statute requires "proof satisfactory to the Director of Industrial Relations of ability to self-insure and to pay any compensation that may become due." Cal.Lab.Code § 3700(b). A self-insured employer must post a security deposit of at least 135 percent of the employer's estimated future liability for compensation to secure payment of claims and administrative costs. Cal.Lab.Code § 3701(b); Declaration of Mark B. Ashcraft, ¶ 6. In addition...