Minnesota Chamber of Commerce & Industry v. Hatch, CIVIL 4-87-707.

• Decision Date: 29 October 1987
• Docket Number: No. CIVIL 4-87-707.,CIVIL 4-87-707.
• Parties: MINNESOTA CHAMBER OF COMMERCE & INDUSTRY; Employers Association, Inc.; Independent Business Association of Minnesota; and Twin West Chamber of Commerce, Plaintiffs, v. Michael A. HATCH, Commissioner of Commerce, State of Minnesota, Thomas J. Triplett, Commissioner of Revenue, State of Minnesota, Defendant.
• Court: U.S. District Court — District of Minnesota

672 F. Supp. 393

MINNESOTA CHAMBER OF COMMERCE & INDUSTRY; Employers Association, Inc.; Independent Business Association of Minnesota; and Twin West Chamber of Commerce, Plaintiffs, v. Michael A. HATCH, Commissioner of Commerce, State of Minnesota, Thomas J. Triplett, Commissioner of Revenue, State of Minnesota, Defendant.

No. CIVIL 4-87-707.

United States District Court, D. Minnesota, Fourth Division.

October 29, 1987.

Scott W. Johnson, Faegre & Benson, Minneapolis, Minn., and Mark S. Anderson, General Counsel, Minnesota Chamber of Commerce & Industry, St. Paul, Minn., for plaintiffs.

John C. Bjork, Sp. Asst. Atty. Gen., St. Paul, Minn., for defendant.

MEMORANDUM AND ORDER

MacLAUGHLIN, District Judge.

This matter is before the Court on defendants' motion to dismiss Counts II and III, plaintiffs' motion for summary judgment and defendants' cross motion for summary judgment.

FACTS¹

During the summer of 1986, two large employers in northern Minnesota, Erie Mining Company and Reserve Mining Company, filed petitions for bankruptcy. As a result of these bankruptcies, the two companies discontinued health insurance coverage for their employees and retirees that the companies had previously provided through plans of self-insurance.² The ensuing hardship suffered by many Minnesota residents prompted the Minnesota Legislature to enact Minn.Stat. § 62A.29. Section 62A.29 provides that any employer

who provides a health benefit plan to its Minnesota employees, which is to some extent self-insured by the employer, and who purchases stop-loss insurance coverage, or any other insurance coverage, in connection with the health benefit plan, shall annually file with the commissioner ... security acceptable to the commissioner ... or a surety bond ... in an amount equal to one-fourth of the projected annual medical and hospital expenses to be incurred by the employer or $1,000, whichever is greater, with respect to its Minnesota employees by reason of the portion of the employer's health benefit plan which is self-insured by the employer.

Section 62A.29 further provides that "the commissioner of revenue shall deny any business tax deduction to an employer for the employer's contribution to a health plan for the period which the employer fails to comply with this section." This statute would allow an employee to file a claim for unpaid medical benefits against the employer's security or surety bond and thus obtain relief despite employer bankruptcy.

Plaintiffs are associations whose members are employers who provide health benefit plans to their Minnesota employees, whose plans are partially self-insured health benefit plans which purchase stop-loss or other insurance coverage in connection with the plans, and who are subject to section 62A.29. Plaintiff Minnesota Chamber of Commerce and Industry (the Minnesota Chamber) is a Minnesota not-for-profit corporation with its principal place of business in St. Paul, Minnesota. The Minnesota Chamber is an association comprising non-governmental Minnesota employers, local chambers of commerce and trade association members. The Minnesota Chamber advises its members on state and federal legislation and judicial developments of interest to the business community, represents its members before the Minnesota Legislature, and engages in litigation to protect its members' interests. Plaintiff Employers Association, Inc. (the Employers Association) is a Minnesota not-for-profit corporation with its principal place of business in Minneapolis, Minnesota. The Employers Association is an association comprising Minnesota and other employer members. Plaintiff Independent Business Association of Minnesota (IBAM) is a Minnesota not-for-profit corporation with its principal place of business in Bloomington, Minnesota. IBAM is an association comprising Minnesota employer members. Plaintiff Twin West Chamber of Commerce (the Twin West) is a Minnesota not-for-profit corporation with its principal place of business in Minnetonka, Minnesota. Twin West is an association comprising employer members in Crystal, Golden Valley, Hopkins, Medicine Lake, Minnetonka, New Hope, Plymouth and St. Louis Park, Minnesota.

Defendant Michael A. Hatch is Commissioner of Commerce for the State of Minnesota. As commissioner, Hatch is responsible for accepting surety bonds required by section 62A.29 for filing, and for determining whether other security offered by an employer is acceptable under section 62A.29. Defendant Thomas J. Triplett is Commissioner of Revenue for the State of Minnesota. As commissioner, Triplett is required by section 62A.29 to deny any business tax deduction to an employer for the employer's contribution to a health plan for any period during which the employer did not file an approved surety bond or other approved security with the commissioner of commerce.

Minn.Stat. § 62A.29 became law on June 1, 1987, and has an effective date of August 1, 1987. In Count I of their complaint, plaintiffs allege that section 62A.29 is preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq. In Counts II and III plaintiffs further allege that section 62A.28 violates Article 3, Section 1 and Article 10, Section 1 of the Minnesota Constitution. Plaintiffs thus seek a declaration that section 62A.29 is invalid and further seek injunctive relief prohibiting its enforcement. Defendants move the Court for dismissal of Counts II and III, arguing that the eleventh amendment of the United States Constitution precludes a federal court from exercising jurisdiction over claims against state officials for violation of state law. Plaintiffs virtually concede the eleventh amendment issue, but move the Court for summary judgment on the issue of ERISA preemption. Jurisdiction is proper under 29 U.S.C. § 1132 and 28 U.S.C. § 1331.

DISCUSSION

A movant is not entitled to summary judgment unless the movant can show that no genuine issue exists as to any material fact. Fed.R.Civ.P. 56(c). In considering a summary judgment motion, a court must determine whether there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). The role of a court is not to weigh the evidence but instead to determine whether, as a matter of law, a genuine factual conflict exists. AgriStor Leasing v. Farrow, 826 F.2d 732, 734 (8th Cir.1987). In making this determination, the Court is required to view the evidence in the light most favorable to the nonmoving party and to give that party the benefit of all reasonable inferences that can be drawn from the facts. AgriStor Leasing, at 734. When a motion for summary judgment is properly made and supported with affidavits or other evidence as provided in Fed.R.Civ.P. 56(c), then the nonmoving party may not merely rest upon the allegations or denials of the party's pleading, but must set forth specific facts, by affidavits or otherwise, showing that there is a genuine issue for trial. Lomar Wholesale Grocery, Inc. v. Dieter's Gourmet Foods, Inc., 824 F.2d 582, 585 (8th Cir.1987). Moreover, summary judgment must be entered against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986). In the case at bar, the parties agree that no issues of material fact remain in dispute. Thus it is left to the Court to determine the legal sufficiency of plaintiff's claims.

I. ERISA Preemption

The federal Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq., comprehensively regulates employee pension and welfare plans. Title 29 U.S.C. § 1002(1) defines an employee welfare benefit plan as one through which an employer provides employees "through the purchase of insurance or otherwise" with "medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment." The parties agree that plaintiffs' members provide health benefit plans to their employees that are subject to ERISA. See Stipulation of Facts at 2, par. 5. The Court therefore need only determine whether Minn.Stat. § 62A.29, which places a burden on these plan providers, is preempted by the provisions of ERISA.

ERISA contains three provisions which define the scope of federal preemption in the area of health benefit plans. The first provision, contained in 29 U.S.C. § 1144(a), states that "except as provided in subsection (b) of this section the insurance saving clause, 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...." (Emphasis added.) Title 29 U.S.C. § 1144(b)(2)(A), the insurance saving clause, provides an exception to the broad preemption described in section 1144(a). Section 1144(b)(2)(A) states that "except as provided in subparagraph (B) the deemer clause, 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." The insurance saving clause is in turn modified by the deemer clause contained in 29 U.S.C. § 1144(b)(2)(B) which provides that

neither an employee benefit plan ... nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, bank, trust company, or investment company.

Therefore, under the above-quoted provisions, any state law that "relates to" an employee benefit plan is preempted. The insurance saving clause, however, preserves state laws that "regulate insurance." Still, a state law that "purports to regulate insurance" cannot deem an...