Saylor v. Parker Seal Co.

• Decision Date: 14 September 1992
• Docket Number: No. 91-5735,91-5735
• Citation: 975 F.2d 252
• Parties: , 15 Employee Benefits Cas. 2798 Ruby SAYLOR, Plaintiff-Appellant, v. PARKER SEAL COMPANY and Commonwealth of Kentucky, Department of Workers' Claims, Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 252

975 F.2d 252

61 USLW 2172, 15 Employee Benefits Cas. 2798

Ruby SAYLOR, Plaintiff-Appellant, v. PARKER SEAL COMPANY and Commonwealth of Kentucky, Department

of Workers' Claims, Defendants-Appellees.

No. 91-5735.

United States Court of Appeals, Sixth Circuit.

Argued March 20, 1992.

Decided Sept. 14, 1992.

Jackie Aubrey (argued and briefed), Walker, Emmons, Shannon & Aubrey, Richmond, Ky., for plaintiff-appellant.

P. Douglas Barr (argued and briefed), Melissa A. Stewart, Stoll, Keenon & Park, Lexington, Ky., Valerie L. Salven (briefed), General Counsel, Dept. of Workers' Claims, Frankfort, Ky., for defendants-appellees.

Before: JONES and NORRIS, Circuit Judges; and JOINER, Senior District Judge. ^*

NATHANIEL R. JONES, Circuit Judge.

Plaintiff, Ruby Saylor, appeals the district court's order dismissing her ERISA action for failure to state a claim. For the reasons that follow, we affirm.

I

Saylor was employed by the defendant, Parker Seal Company ("Parker"), for twenty-two years. During her employment with Parker, Saylor was covered by an employee benefit plan entitled "Hourly-Wage Employees Pension Plan" ("Plan"). This Plan was maintained as the result of a collective bargaining agreement. The Plan provides, in relevant part, as follows:

6.1 Eligibility. Each Employee who retires from employment with the Employer due to permanent and total disability and who has completed at least ten years of service shall be eligible for a monthly disability retirement benefit....

....

6.3 Payment.... [N]o disability retirement benefit hereunder shall commence prior to the cessation of any accident or sickness benefit payments which an Employee retired because of permanent and total disability is entitled to receive for such disability under any insurance policy or programs or under any state or local legislation providing for benefits to permanently and totally disabled persons (except under the federal Social Security Act and under any Workers' Compensation law or occupational disease law) which are allocable to taxes, premiums, or other payments made by the Employer therefor.

J.A. at 27-29. When Saylor became disabled, she applied for and received disability benefits under the Plan.

Saylor also filed a claim with the Kentucky Department of Workers' Claims ("Department") for workers' compensation under Kentucky law, contending that her disability was the result of a work-related injury. The Department, also a defendant in this action, found that Saylor was totally disabled, but only forty percent due to the work-related injury, and awarded her occupational disability benefits based on that percentage. The Department, however, allowed Parker to offset the amount of workers' compensation payments it paid to Saylor by the amount she received in disability pension benefits under the Plan. Kentucky courts have allowed the Department to credit employers for any "compensation" paid prior entry of a workers' compensation awards, including compensation consisting of benefits paid under an employer-funded disability plan. See South Cent. Bell Tel. Co. v. George, 619 S.W.2d 723, 725 (Ky.Ct.App.1981); Beth-Elkhorn Corp. v. Lucas, 670 S.W.2d 480, 482 (Ky.Ct.App.1983) (noting that employer largess provides the plan benefits in the first place); cf. General Elec. Co. v. Morris, 670 S.W.2d 854, 856 (1984) (allowing weekly credit, for amounts not exceeding the amount of workers' compensation due, where employer made voluntary payments that were not from an ERISA employee benefits plan).

Saylor filed a complaint in district court, seeking a determination that (1) the offset practice employed in her case violates the preemption provision of the Employee Retirement Income Security Act of 1974 ("ERISA" or the "Act"), 29 U.S.C. § 1144 (1988) (amended 1989), (2) the practice allows Plan benefits to inure to the benefit of the employer in violation of 29 U.S.C. § 1103 (1988) (amended 1990), and (3) both of these alleged statutory violations contravene the terms of the Plan as well.

Parker filed a Federal Rule of Civil Procedure 12(b)(6) motion to dismiss, which the district court granted on May 29, 1991, holding as follows: "Under Kentucky common law, the [Department] reduces workers' compensation awards when an employee receives benefits under a [sic] employer-funded plan. ERISA does not preempt the law because it does not 'relate to' Saylor's benefit plan. Saylor's allegations, therefore, do not implicate ERISA." J.A. at 110 (citations omitted). The district court concluded that, insofar as Saylor's only claim was that the offset violated ERISA, Saylor's complaint must be dismissed for failure to state a claim upon which relief can be granted. This appeal followed.

II

Whether the district court properly dismissed the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) is a question of law subject to de novo review. Dugan v. Brooks, 818 F.2d 513, 516 (6th Cir.1987). The factual allegations of the complaint must be accepted as true, Kerasotes Mich. Theatres v. National Amusements, 854 F.2d 135, 136 (6th Cir.1988), cert. dismissed, 490 U.S. 1087, 109 S.Ct. 2461, 104 L.Ed.2d 982 (1989), and construed in the light most favorable to the plaintiff, Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 1686, 40 L.Ed.2d 90 (1974). "A court may dismiss a complaint only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. King & Spaulding, 467 U.S. 69, 73, 104 S.Ct. 2229, 2232, 81 L.Ed.2d 59 (1984).

Two specific ERISA provisions are relevant to Saylor's appeal. First, 29 U.S.C. § 1144(a) governs the relationship between ERISA provisions and related state provisions: "[T]he provisions of this subchapter and subchapter III of this chapter shall supercede 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) (1988) (amended 1989). Second, Congress has determined that "[e]xcept as provided [in certain sections of ERISA], the assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purposes of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administering the plan." 29 U.S.C. § 1103(c)(1) (1988) (amended 1990).

Thus, the question of whether the district court properly dismissed Saylor's action for failure to state a claim under Rule 12(b)(6) contains two issues. The first issue we address is whether the Kentucky common law allowing employers to offset workers' compensation payments against ERISA plan benefits is preempted by the Act. If not, we then must consider whether the Kentucky common law operates to cause the assets of the Plan to inure to Parker's benefit in violation of the Act.

A

There are several cases from both the Supreme Court and this circuit that address whether ERISA preempts the Kentucky common law practice of offsetting, as stated in South Central Bell Telephone Co. v. George, 619 S.W.2d 723, 724 (Ky.Ct.App.1981) and Beth-Elkhorn Corp. v. Lucas, 670 S.W.2d 480, 482 (Ky.Ct.App.1983). The leading case on this issue is Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981). In Alessi, the Supreme Court considered a New Jersey law that prohibited the very arrangement that Kentucky law invites in the instant case. The Court identified an important, recurring practice in calculating benefits, called "integration," "under which benefit levels are determined by combining pension funds with other income streams available to the retired employees." Id. at 514, 101 S.Ct. at 1901. Whereas Saylor complains of the Kentucky law that allows for integration, the plaintiff in Alessi complained of a law New Jersey had enacted prohibiting the practice. Id. at 509, 101 S.Ct. at 1899. Rejecting the argument that the law only indirectly "related to" employee benefits plans, the Supreme Court held that the New Jersey law was preempted by § 1144(a) of the Act. See id. The Court noted that "Congress did not prohibit 'integration,' " id. at 514, 101 S.Ct. at 1901, and reasoned that the New Jersey law therefore eliminated one legitimate method of administering an employee benefits plan, see id. at 525, 101 S.Ct. at 1907. Such state prerogatives, the Court concluded, could cause the very type of administrative headache that the ERISA preemption statute was designed to prevent. See id.

The Court's opinion in Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987), expanded on the uniformity-of-administration aspect of the Alessi decision. Focusing again on Congress's purpose in enacting ERISA's preemption provision, the Court noted that the field of employee benefits plans was to be swept clear of all but federal regulations, " 'thus eliminating the threat of conflicting or inconsistent State and local regulation.' " Id. at 9 (quoting 120 Cong.Rec. 29,933 (1974) (statement of Sen. Williams). The Court recognized that employers who undertake to administer employee benefits plans accept a host of related duties, such as "determining the eligibility of claimants, calculating benefit levels, making disbursements, monitoring the availability of funds for benefit payments, and keeping appropriate records in order to comply with applicable reporting requirements." Id. For an employer to have to perform these duties differently in each state in which he maintains a plan would be a great disincentive to maintaining one. As the Court stated, "[f]aced with the difficulty or impossibility of structuring administrative practices according to a set of uniform guidelines, an employer may decide to reduce benefits or simply not to pay them at all." Id. at 13. Under this reasoning, the Court held that ERISA did not preempt the Maine law at issue in...