Fuller v. Norton

Decision Date19 June 1996
Docket NumberNo. 95-1163,95-1163
Citation86 F.3d 1016
Parties, 20 Employee Benefits Cas. 1364, Pens. Plan Guide (CCH) P 23921A Ross FULLER, Trustee of the International Association of Entrepreneurs of America Benefit Trust, Plaintiff-Appellant, and Great Oaks Management, a Colorado corporation, Plaintiff, v. Gale NORTON, Attorney General of the State of Colorado; John Ehnes, Commissioner, Colorado Division of Insurance, individually and in their professional capacities, Defendants-Appellees.
CourtU.S. Court of Appeals — Tenth Circuit

Joseph A. Jordano of Fitzgerald, Schorr, Barmettler & Brennan, P.C., Omaha, Nebraska (C. Scott Crabtree of Alexander Law Firm, P.C., Denver, Colorado, with him on the briefs), for Plaintiff-Appellant.

Robert M. Howard, Senior Assistant Attorney General (Gale A. Norton, Attorney General, and Stephen G. Smith, Assistant Attorney General, with him on the briefs), Denver, Colorado, for Defendants-Appellees.

Before BRORBY, McWILLIAMS and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.

Appellant is the trustee of an Employee Retirement Income Security Act of 1974 ("ERISA") plan offering benefits to the employees of its employer members through a multiple employer welfare arrangement ("MEWA"), as defined by section 3 of ERISA. 29 U.S.C. § 1002(3),(40). He claims that because his plan is within the protection of ERISA law, it may not be regulated as an insurance entity by the state of Colorado. Underpinning appellant's prosecution of this case is a belief that ERISA preemption allows a MEWA and its members to avoid state regulation that would apply to insurance companies and employers offering the same benefits. The district court did not find an ERISA-created exception to state regulation and dismissed the complaint. We affirm.


In 1992, a group of employers established a nonprofit organization, the International Association of Entrepreneurs of America ("IAEA"), to create an ERISA welfare benefit plan. The plan offered employees of its members health, disability, occupational illness or accident, and other benefits. To provide benefits, the IAEA established the International Association of Entrepreneurs of America Benefit Trust ("Benefit Trust") as an unincorporated trust. Plaintiff Ross Fuller is the trustee of the Benefit Trust. Great Oaks Management is a member of the IAEA and was a plaintiff in this action, but is not a party to this appeal. The Benefit Trust created an employee welfare plan established for the purpose of providing welfare benefits to the employees of its employer members. For purposes of this appeal we look only to allegations in the complaint, and assume the plan constitutes a MEWA as defined in 29 U.S.C. § 1002(40). 1 IAEA members may join the plan, which in turn provides employee benefits to plan participants and their beneficiaries. All benefits from the Benefit Trust plan are administered as one collective unit, and are funded by employer contributions to the trust. The trustee, Mr. Fuller, administers the Benefit Trust plan subject to the oversight of a Benefit Review Committee, elected by the employer members.

The Benefit Trust began soliciting members in Colorado and inquired of the Colorado Division of Insurance ("Division") how to obtain a certificate of insurance allowing it to provide health benefits and workmen's compensation benefits. Colorado prohibits entities from conducting insurance activities without a certificate from the Division, or providing workmen's compensation benefits without complying with certain insurance requirements. The Commissioner of the Division notified the Benefit Trust that it was unlawfully providing workmen's compensation and other insurance benefits in contravention of Colorado law. He ordered the Benefit Trust to cease and desist from these prohibited activities and to submit documents relating to any "unauthorized transaction of insurance." Rather than complying with the order, the plaintiffs responded by filing this suit. Plaintiffs requested a declaratory judgment that application of Colorado insurance laws to MEWAs like the IAEA is preempted by federal ERISA regulation, and alleged that Colorado's MEWA regulation violates the Commerce and Equal Protection clauses of the United States Constitution; they also asked the court to enter an injunction to prohibit the Division from interfering with the plan's activities in Colorado.

Defendants filed a motion to dismiss for failure to state a claim, Fed.R.Civ.P. 12(b)(6), that was granted as to both defendants. With respect to defendant Norton, the court found that the Colorado Attorney General has no initial responsibility for enforcing Colorado's insurance or workmen's compensation laws. Plaintiff does not appeal that dismissal.

The district court also dismissed the suit with respect to the Director of the Division. The court first found that ERISA explicitly limited preemption of state regulation of MEWAs, and created an exception for state regulation of workmen's compensation coverage; second, it held that Colorado's laws regulating MEWAs and workmen's compensation fit within the exceptions and are not inconsistent with ERISA regulation; and, finally, it held that Colo.Rev.Stat. § 10-3-903.5(7), which exempts from much state insurance regulation qualified MEWAs that have been operating continuously since 1983, is not inconsistent with ERISA provisions, primarily because this regulation does not prohibit more recent MEWAs from operating in Colorado--it merely subjects them to Colorado's insurance laws. Its order did not address plaintiffs' constitutional challenges. On appeal, Fuller renews each of the issues raised in the complaint.


We uphold a dismissal under Fed.R.Civ.P. 12(b)(6) only when it appears that the plaintiff can prove no set of facts in support of the claims that would entitle him to relief, accepting the well-pleaded allegations of the complaint as true and construing them in the light most favorable to the plaintiff. Roman v. Cessna Aircraft Co., 55 F.3d 542, 543 (10th Cir.1995). We review the district court's legal rulings on ERISA preemption de novo. Airparts Co. v. Custom Benefit Servs., Inc., 28 F.3d 1062, 1064 (10th Cir.1994). Plaintiff's attack on Colorado's ability to regulate benefits offered by the Benefit Trust plan takes three forms. First, he contends that Colorado's workmen's compensation scheme is preempted from interfering with MEWA plans so long as the plans' benefits comply with minimum state requirements. Second, ERISA does not allow the state to regulate MEWAs as insurance, and requirements of Colorado's insurance regulation are inconsistent with ERISA provisions. Third, even if Colorado's MEWA regulatory scheme does not run afoul of ERISA, the MEWA regulation is unconstitutional as an irrational classification under the Equal Protection Clause of the Fourteenth Amendment, or a violation of reserved congressional power under the dormant Commerce Clause.

A. Are Colorado's restrictions on the provision of workmen's compensation benefits preempted by ERISA?

Colo.Rev.Stat. § 8-44-101 requires employers to provide workmen's compensation benefits through one of a number of mechanisms. Choices include obtaining insurance through a state fund, insuring through a licensed insurance company, or procuring a self-insurance permit from the director of insurance. Colo.Rev.Stat. § 8-44-101(1)(a)-(c). Plaintiff contends that the workmen's compensation laws are inconsistent with ERISA because they do not permit MEWAs to provide benefits that are expressly contemplated by ERISA; for this reason, ERISA preempts application of these requirements to the MEWA under review.

ERISA provides a complex and extensive preemption regime: "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." 29 U.S.C. § 1144(a). 2 A state law "relates to" an employee welfare plan 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). Preemption has been applied very broadly, and prevents states from applying a wide body of law to employee benefit plans, including laws that only indirectly affect ERISA plans. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45-46, 107 S.Ct. 1549, 1551-52, 95 L.Ed.2d 39 (1987) ("[T]he express pre-emption provisions of ERISA are deliberately expansive and designed to establish pension plan regulation as exclusively a federal concern." (quotation omitted)).

Exempted from ERISA preemption are laws regulating some arrangements that constitute employee benefit plans, including plans "maintained solely for the purpose of complying with applicable workmen's compensation laws or unemployment compensation laws or disability insurance laws." 29 U.S.C. §§ 1003(b)(3), 1144(a). In this case we review the relationship between the broad preemptive language in § 1144(a) and Congress's desire, reflected in § 1003(b), to leave to the states their traditional role in regulating workmen's compensation, disability, and unemployment benefits. We "must presume that Congress does not intend to pre-empt areas of traditional state regulation" when we determine the scope of express ERISA preemption. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 740, 105 S.Ct. 2380, 2389, 85 L.Ed.2d 728 (1985) (citing Jones v. Rath Packing, Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 1309-10, 51 L.Ed.2d 604 (1977)). In Shaw, the Supreme Court held that New York State, through its disability benefits law, could not regulate multibenefit plans offering disability benefits. 463 U.S. at 107-08, 103 S.Ct. at 2905-06. While the state cannot regulate the...

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