Fuller v. Olson

• Decision Date: 14 November 1995
• Docket Number: No. 5:94-CV-139.,5:94-CV-139.
• Citation: 907 F. Supp. 257
• Parties: Ross FULLER as Trustee for the International Association of Entrepreneurs of America Benefit Trust, Plaintiff/Counter-Defendant, and Planmarc Leasing Co., a Michigan corporation, Plaintiff, v. D. Joseph OLSON, Commissioner, Michigan Bureau of Insurance, Defendant/Counter-Plaintiff, and Frank J. Kelley, Attorney General of the State of Michigan, and Jack Wheatley, Director, Michigan Bureau of Workers' Disability Compensation, Defendants.
• Court: U.S. District Court — Western District of Michigan

907 F. Supp. 257

Ross FULLER as Trustee for the International Association of Entrepreneurs of America Benefit Trust, Plaintiff/Counter-Defendant and Planmarc Leasing Co., a Michigan corporation, Plaintiff, v. D. Joseph OLSON, Commissioner, Michigan Bureau of Insurance, Defendant/Counter-Plaintiff and Frank J. Kelley, Attorney General of the State of Michigan, and Jack Wheatley, Director, Michigan Bureau of Workers' Disability Compensation, Defendants.

No. 5:94-CV-139.

United States District Court, W.D. Michigan, Southern Division.

November 14, 1995.

COPYRIGHT MATERIAL OMITTED

Scott L. Mandel, Foster Swift Colins & Smith, P.C., Lansing, MI, Randolph D. Phifer, Patterson, Phifer & Phillips, P.C., Detroit, MI, Joseph A. Jordano, Fitzgerald, Schorr, Barmettler & Brennan, P.C., Omaha, NE, for Plaintiffs.

William A. Chenoweth, Leonard J. Malinowski, Assistant Attorneys General, Lansing, MI, for Defendants.

OPINION OF THE COURT

McKEAGUE, District Judge.

This is an action for declaratory and injunctive relief. Plaintiffs challenge certain Michigan statutes as preempted by ERISA, the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq., and violative of the Commerce Clause of the United States Constitution. Now before the Court are the parties' cross-motions for summary judgment.

I

Plaintiff Ross Fuller is Trustee of the International Association of Entrepreneurs of America ("IAEA") Benefit Trust. The IAEA Benefit Trust was established for the purpose of enabling employer members of the IAEA to provide health care services and benefits and disability, death and accident benefits to eligible employees through an "employee welfare benefit plan," as defined under ERISA, 29 U.S.C. § 1002(1). Such a plan has been established and is maintained by participating employers. It constitutes a "multiple employer welfare arrangement" ("MEWA") under ERISA, 29 U.S.C. § 1002(40). Plaintiff Planmarc Leasing Co. is a Michigan corporation and participating employer.

This action was precipitated by correspondence received by Trustee Fuller and Planmarc from Michigan Attorney General Frank J. Kelley, defendant herein, advising that the IAEA welfare benefit plan's purported provision of workers' compensation coverage in Michigan was invalid as violative of Michigan law. Planmarc was advised that a Michigan employer must, pursuant to M.C.L. § 418.611, obtain approval from the Director of the Bureau of Workers' Disability Compensation to be a self-insurer for purposes of workers' compensation liability, or must purchase insurance against such liability from an insurer authorized to transact the business of workers' compensation insurance in Michigan. Planmarc has done neither. In addition, Trustee Fuller was advised that, pursuant to M.C.L. § 500.7004, a MEWA may not lawfully operate in Michigan unless it is fully insured or obtains a certificate of authority from the Commissioner of the Michigan Bureau of Insurance. No application for certification has been filed.

Plaintiffs contend both statutes are preempted by ERISA because they "relate to" an employee benefit plan. 29 U.S.C. § 1144(a). Plaintiffs also contend that, although the Michigan certification requirement might otherwise be deemed exempt from preemption as a law regulating insurance, it is nonetheless preempted to the extent it is "inconsistent" with the provisions of ERISA. 29 U.S.C. § 1144(b)(6)(A)(ii). Should the Court find the Michigan statutes not preempted by ERISA, plaintiffs ask the Court, under 42 U.S.C. § 1983, to declare them unenforceable because violative of the Commerce Clause.¹ By their cross-motions for summary judgment, the parties agree there are no genuine issues of material fact and ask the Court to rule on plaintiff's claims as a matter of law.

II

Under M.C.L. § 418.611, every Michigan employer subject to the Michigan Workers' Disability Compensation Act is required to secure the payment of workers' compensation benefits by either (1) obtaining authorization to operate as a "self-insurer," or (2) purchasing insurance from an authorized insurer. These requirements, plaintiffs contend, have the effect of requiring Michigan employers participating in the IAEA employee welfare benefit plan to obtain workers' compensation coverage separate from and in addition to the IAEA plan coverage. Because the requirements impose a burden upon IAEA plan participants which may affect their participation in the IAEA plan, the requirements are said to "relate to" a covered ERISA plan, triggering preemption under 29 U.S.C. § 1144(a).

Plaintiffs are right in arguing that "relate to" has been broadly construed by the courts in accordance with congressional intent. See District of Columbia v. Greater Washington Bd. of Trade, 506 U.S. 125, 128-29, 113 S.Ct. 580, 583, 121 L.Ed.2d 513 (1992). Yet, the courts have also consistently rejected the specific argument here posited by plaintiffs. Without exception, the courts have upheld, in the face of ERISA preemption challenge, the states' right to regulate workers' compensation by means similar to M.C.L. § 418.611. See Employers Resource Mgmt. Co., Inc. v. James, 62 F.3d 627, 632 (4th Cir.1995); Contract Services Employee Trust v. Davis, 55 F.3d 533, 536 (10th Cir.1995); Combined Mgmt., Inc. v. Superintendent of Bureau of Ins., 22 F.3d 1, 5-8 (1st Cir.1994), cert. denied, ___ U.S. ___, 115 S.Ct. 350, 130 L.Ed.2d 306 (1994); Employee Staffing Services v. Aubry, 20 F.3d 1038, 1040-41 (9th Cir.1994). Plaintiffs' attempts to distinguish these rulings or persuade that they are wrong are unavailing.

Accordingly, for the reasons set forth in the above opinions, the Court concludes that M.C.L. § 418.611 is not preempted by ERISA.

III

Under M.C.L. § 500.7004, "a person shall not establish or maintain an employee welfare benefit plan which is a multiple employer welfare arrangement in this state unless the MEWA obtains and maintains a certificate of authority pursuant to this chapter." The requirement does not apply to a benefit plan or MEWA that is fully insured. Id. The IAEA benefit plan is not fully insured.

Plaintiffs acknowledge that MEWAs are subject to state laws regulating insurance. 29 U.S.C. § 1144(b)(6)(A)(ii). However, they contend, chapter 70 of the Michigan Insurance Code, M.C.L. § 500.7001 et seq., is focused exclusively on multiple employer welfare arrangements, which are employee welfare benefit plans and, by definition, shall not be deemed to be insurance companies or to be engaged in the business of insurance. 29 U.S.C. § 1144(b)(2)(B). If chapter 70 deals exclusively with MEWAs, the argument goes, and MEWAs are not engaged in the business of insurance, then it necessarily follows that chapter 70 is not a state law regulating insurance.

This argument was specifically rejected in Atlantic Healthcare Benefits Trust v. Googins, 2 F.3d 1, 5 (2nd Cir.1993), cert. denied, ___ U.S. ___, 114 S.Ct. 689, 126 L.Ed.2d 656 (1994). In Googins, the court held that the "MEWA clause," 29 U.S.C. § 1144(b)(6), is an exception to the "deemer clause," 29 U.S.C. § 1144(b)(2)(A), expressly authorizing states to regulate MEWAs as insurance companies as long as the regulation is not inconsistent with ERISA. 2 F.3d at 5. See also Int'l Ass'n of Entrepreneurs of America v. Foster, 883 F.Supp. 1050, 1065 (E.D.Va.1995); Fuller v. Norton, 881 F.Supp. 468, 471 (D.Col.1995); ELCO Mechanical Contractors, Inc. v. Builders Supply Ass'n of W.Va., 832 F.Supp. 1054, 1057 (S.D.W.Va. 1993); Atlantic Health Care Benefits Trust v. Foster, 809 F.Supp. 365, 374 (M.D.Pa. 1992), aff'd, 6 F.3d 778 (3rd Cir.1993), cert. denied, ___ U.S. ___, 114 S.Ct. 689, 126 L.Ed.2d 656 (1994).

Plaintiffs offer no persuasive reason to depart from the rule established in these cases. They seek alternatively to demonstrate that the Michigan certification requirements are inconsistent with ERISA and therefore nullified.

Defendant D. Joseph Olson, Insurance Commissioner, argues in response that where Congress has not completely displaced state regulation, but has expressly exempted some state regulation of MEWAs from preemption, state regulation should not be deemed "inconsistent" with ERISA unless there is an actual conflict between state and federal law. Fidelity Federal Savings & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022-23, 73 L.Ed.2d 664 (1982). An actual conflict is said to arise only when "compliance with both federal and state regulations is a physical impossibility" or when state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Id. Defendant Olson contends that none of the provisions of chapter 70 poses such a conflict with ERISA.

The Court is not entirely satisfied that the formulation employed in de la Cuesta in connection with the scope of the preemption doctrine generally is what Congress intended by its particular use of "inconsistent" in the MEWA clause. Still, this construction appears to be a useful one, in the absence of other authority defining "inconsistent." Though the terms are not entirely synonymous, "conflict" certainly corresponds with "inconsistent." Moreover, it is a construction that appears to have been at least impliedly employed in recent case law.

In Googins, supra, the court considered alleged inconsistencies between Connecticut regulations affecting MEWAs and ERISA's regulatory scheme and found no "conflict" that warranted preemption. 2 F.3d at 6. The court further found that marginal costs and fees required by state regulations were not inconsistent with ERISA. Id. Similarly, several courts have held that application of state licensing requirements to ERISA-covered MEWAs is not inconsistent with ERISA. See Int'l Ass'n of Entrepreneurs of America v. Foster, supra, 883 F.Supp. at 1066; Atlantic Health Care Benefits Trust v. Foster, supra, 809 F.Supp. at 374; MDPhysicians & Assocs., Inc. v. Wrotenbery, 762 F.Supp. 695, 699 (N.D.Tex....