Massachusetts Nurses Ass'n v. Dukakis, 83-1732

• Decision Date: 08 February 1984
• Docket Number: No. 83-1732,83-1732
• Citation: 726 F.2d 41
• Parties: 115 L.R.R.M. (BNA) 2713, 100 Lab.Cas. P 10,798, Medicare&Medicaid Gu 33,946 MASSACHUSETTS NURSES ASSOCIATION, Plaintiff, Appellant, v. Michael S. DUKAKIS, et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

Page 41

726 F.2d 41

115 L.R.R.M. (BNA) 2713, 100 Lab.Cas. P 10,798,

Medicare&Medicaid Gu 33,946

MASSACHUSETTS NURSES ASSOCIATION, Plaintiff, Appellant, v. Michael S. DUKAKIS, et al., Defendants, Appellees.

No. 83-1732.

United States Court of Appeals,

First Circuit.

Argued Jan. 5, 1984.

Decided Feb. 8, 1984.

Alan J. McDonald, with whom McDonald & Noonan, Boston, Mass., was on brief, for plaintiff, appellant.

William L. Pardee, Asst. Atty. Gen., Government Bureau, with whom Francis X. Bellotti, Atty. Gen., Boston, Mass., was on brief, for defendants, appellees.

Before COFFIN, ALDRICH and BOWNES, Circuit Judges.

COFFIN, Circuit Judge.

The issue presented is whether a new Massachusetts statute aimed at restraining increases in hospital costs impermissibly interferes with the collective bargaining efforts of the plaintiff, the Massachusetts Nurses Association (MNA), in such a way that the statute must be held to be preempted by the Labor Management Relations Act, 29 U.S.C. Secs. 141 et seq., and the policies it embodies.

The district court dismissed the complaint in a comprehensive opinion, 570 F.Supp. 628 (D.Mass.1983). We affirm on the basis of the district court's opinion, as supplemented by this opinion.

The Massachusetts statute, Chapter 372 of the Laws of 1982, amending Massachusetts General Laws Chapter 6A, Sections 31 et seq., established as of October 1, 1982 a prospective method of reimbursing hospital costs. Under this system an overall figure of prospective reasonable costs is derived at the beginning of the year by projecting estimates of component costs. The resulting figure, which is called the maximum allowable cost, is the amount that a hospital is allowed to collect for care provided in a given year to all its patients, whatever may be the source of payment. We reproduce in the Appendix the district court's more detailed description of reimbursement procedures under the Massachusetts statute.

The district court traced in some detail the background of both federal and state efforts since 1965 to devise fair and effective means of reimbursing hospitals and of regulating their costs. We note that initially, the federal government reimbursed actual costs; later it moved to reimburse "reasonable costs". Massachusetts developed a new approach. It instituted a federally approved prospective reimbursement plan for Medicaid patients. Subsequently it broadened its plan to cover the costs of non-Medicaid patients, such as those insured by Massachusetts Blue Cross and commercial insurers, as well as self-paying patients, in order to avoid unfairness in the allocation of hospital costs.

The district court summarized the complaint and discussed what we might term the secondary issues raised by the complaint--those allegations charging the Massachusetts Hospital Association (MHA) with lobbying for Chapter 372, challenging the statute's dependence on the criteria of the agreement negotiated between MHA and Blue Cross, and attacking MHA's roles in recommending individuals to serve on a rate setting commission policy review board and in making recommendations for hardship relief to the Massachusetts Rate Setting Commission. We see no useful purpose served in repeating the discussion of these matters. We adopt the entire opinion and restrict our additional discussion to some further analysis of the law of preemption applicable to this case.

We observe first that no contention is advanced that the state law we are dealing with is in a field which Congress has evidenced an intent to occupy. Cf. Fidelity Federal Savings & Loan Ass'n v. de la Cuesta, 458 U.S. 141, 153, 102 S.Ct. 3014, 3022, 73 L.Ed.2d 664 (1982); San Diego Building Trades Council v. Garmon, 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775 (1959). We confront, rather, the contention that this state law is preempted to the extent it actually conflicts with federal law. Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-43, 83 S.Ct. 1210, 1217, 10 L.Ed.2d 248 (1963). Thus we are faced with the argument that Chapter 372 "stands as an obstacle to the accomplishment of the full purposes and objectives of Congress", Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.Ct. 399, 404, 85 L.Ed. 581 (1941), in enacting the Labor Management Relations Act. ¹ "An appreciation of the true character of the national labor policy expressed in the NLRA and the LMRA indicates that in providing a legal framework for union organization, collective bargaining, and the conduct of labor disputes, Congress struck a balance of protection, prohibition, and laissez-faire in respect to union organization, collective bargaining, and labor disputes that would be upset if a state could also enforce statutes or rules of decision resting upon its views concerning accommodation of the same interests."

The objectives of Congress relevant to this case were recently identified in Lodge 76, International Association of Machinists v. Wisconsin Employment Relations Commission, 427 U.S. 132, 140 n. 4, 96 S.Ct. 2548, 2553 n. 4, 49 L.Ed.2d 396 (1976), where the Court endorsed the following quotation from Cox, Labor Law Preemption Revisited, 85 Harv.L.Rev. 1337, 1352 (1972):

Our national labor policy is, in other words, a set of Marquis of Queensberry Rules, covering rights, procedures, and practices which are to govern the adversarial contestants. 29 U.S.C. Sec. 141(b) could not be more clear: "It is the purpose ... of this chapter ... to prescribe the legitimate rights of both employees and employers ... to provide orderly and peaceful procedures ... to protect the rights of individual employees ... to define and proscribe practices ... and to protect the rights of the public ...."

It is not surprising, therefore, that the cases cited by plaintiff where preemption on the basis of frustration of labor policy objectives has been found are cases where states acted to proscribe activities which, though left unregulated by federal law, directly affected the balance of power between the participants in the bargaining process. In Local 24, International Brotherhood of Teamsters v. Oliver, 358 U.S. 283, 79 S.Ct. 297, 3 L.Ed.2d 312 (1959), the offending state statute, though nominally an antitrust measure, was held to have impinged on a carrier's contract clause whose long bargaining history required that it be considered a permitted wage provision, beyond the reach of the state. In Local 20, Teamsters Union v. Morton, 377 U.S. 252, 84 S.Ct. 1253, 12 L.Ed.2d 280 (1964), the Court held preempted a secondary boycott law that filled a gap that Congress had intended to leave vacant. Similarly, in Machinists, supra, the offending state law aimed to penalize workers for refusing overtime work--conduct Congress intended to leave free to play its part in any struggle. Our case, however, does not involve this sort of state interference with the rights of labor or management. Chapter 372 affects the labor-management relationship only indirectly through its regulation of the employers' annual gross income. ²

The district court placed considerable emphasis on Amalgamated Transit Union, Division 819 v. Byrne, 568 F.2d 1025 (3d Cir.1977) (en banc), in which the Third Circuit went so far as to hold that a state governor had not violated federal labor policy when he threatened to cut off state subsidies to any transit company that agreed with a union to include an open-ended cost of living increase provision in its collective bargaining agreement. Such a holding, arguing the imposition of a state-mandated What impresses us even more is that even the dissenters would seem to find little difficulty with our case. Judge Aldisert, writing for himself and two other judges, said:

wage policy on employers, would seem to us to resolve a considerably more difficult issue than that in the instant case where an overall cost ceiling on total operations is the only state objective.

"[T]here exists a critical difference between a state communicating to all affected parties the extent of finances it intends to grant for carriers' operations and a state communicating that it will not continue its subsidization if the carriers agree with the unions to retain uncapped cost of living clauses in their employment contracts. The former communication presumably does not constitute interference with negotiations over wages and working conditions, as it is not a state attempt 'to influence the substantive terms of collective bargaining agreements'." 568 F.2d at 1035 (Aldisert, J., dissenting).

Judge Adams, if anything, went even further in saying:

"In the context of an industry heavily subsidized by the state, a large number of statements of governmental policy could alter in some sense the economic forces or influence the terms which negotiating parties may reach. To establish a violation of the NLRA, however, the unions would first have to allege and then demonstrate that the state officials attempted to dictate specific terms of the collective bargaining agreement ...." 568 F.2d at 1042 (Adams, J., dissenting) (emphasis in original).

We therefore look on Byrne, whether we focus on the majority or dissenting opinions, as authority against preemption in this case. The state legislation involved here, unlike that in all the cases we have cited, is oriented toward neither labor-management issues in general nor wages in particular. The subject of hospital cost containment, for the benefit of all citizens, lies within "the historic police powers of the States [that are] not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress", Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947); it is an "interest[ ] so deeply rooted in local feeling and responsibility that, in the absence of compelling congressional direction, we [can] not infer that Congress ... deprived the States of the power to act." San Diego Building Trades Council v. Garmon, supra, 359...