State of Nev. v. Contract Services Network, Inc.
| Decision Date | 13 October 1994 |
| Docket Number | No. CV-S-93-00686-PMP (RJJ).,CV-S-93-00686-PMP (RJJ). |
| Citation | 873 F. Supp. 385 |
| Parties | STATE OF NEVADA, ex rel. its DEPARTMENT OF INSURANCE, Plaintiff, v. CONTRACT SERVICES NETWORK, INC., Contract Service Union Local 211, United States Administrators, Inc., Contract Services Employee Trust, Gary Duke, Mark Grimes, Forrest O'Hara, Richard Kester, Donald W. Tourville, Murel D. Rucks, Defendants. |
| Court | U.S. District Court — District of Nevada |
COPYRIGHT MATERIAL OMITTED
Edward T. Reed, Deputy Atty. Gen., Dept. of Ins., Carson City, NV, for plaintiff.
Allen B. Breslow, Frank & Breslow, Melville, NY, for defendant Financial Consultants Guild of America.
Gary Moss, Las Vegas, NV, for defendants Contract Services Network, Inc., U.S. Administrators, Inc., Contract Services Employees Trust, Gary Duke, Mark Grimes, Donald Tourville and Murel D. Rucks.
John McManus, Michelle L. Morgando, Schreck, Jones, Bernhard, Woloson & Godfrey, Las Vegas, NV, John A. Claro, Claro & Claro, Oklahoma City, OK, for defendants Contract Services Union Local 211, Forrest O'Hara and Richard Kester.
Before the Court is Plaintiff State of Nevada's First Motion for Partial Summary Judgment (# 41), filed April 25, 1994. Defendants Contract Services Union, Local 211, Forrest O'Hara and Richard Kester, Contract Services Network, Inc., Contract Services Employees Trust, Gary Duke, Mark Grimes, Donald W. Tourville and Murel D. Rucke (collectively "Defendants") filed their Opposition to Plaintiffs Motion for Partial Summary Judgment (# 47) on May 18, 1994. Plaintiffs filed their Reply (# 49) on May 31, 1994.
Defendants also filed a Motion To Stay Proceedings Pending Outcome of Related Proceedings (# 47) ("Motion to Stay") on May 18, 1994. Plaintiffs filed their Opposition (# 49) on May 31, 1994. No reply was filed.
This Court heard oral argument on both Motions on September 2, 1994.
This case began when Plaintiff filed its Complaint for Injunctive and Declaratory Relief and Fines ("Complaint") in Nevada state court. Plaintiff alleged that Defendants Contract Services Union, Local 211 ("Union"), Financial Consultants Guild of America, Contract Services Network, Inc., ("CSN"), United States Administrators ("USA"), Contract Services Employee Trust ("Trust"), Gary Duke, Mark Grimes, Forrest O'Hara, Richard Kester, Donald W. Tourville, and Murel D. Rucks all violated Nev. Rev.Stats. § 685B.030, which prohibits the unauthorized transaction of the business of insurance.1
Plaintiff alleges that Defendants are not authorized by the Nevada Department of Insurance to act as insurers in the State of Nevada, yet Defendants contacted Nevada employers in order to solicit the CSN plan. See, Complaint, attached as Exhibit A to Notice of Removal (# 1). Specifically, Plaintiffs allege that the plan offered by Defendants does not comply with the Nevada Industrial Insurance Requirements. See, Complaint, attached as Exhibit A to Notice of Removal (# 1). Defendants maintain, however, that their Trust is an ERISA trust set up pursuant to a collective bargaining agreement among employers and not subject to state regulation. See, Joint Status Conference Memorandum (# 12).
Pursuant to Federal Rule of Civil Procedure 56, summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."
The party moving for summary judgment has the initial burden of showing the absence of a genuine issue of material fact. See Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970); Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir.1982), cert. denied, 460 U.S. 1085, 103 S.Ct. 1777, 76 L.Ed.2d 349 (1983). Once the movant's burden is met by presenting evidence which, if uncontroverted, would entitle the movant to a directed verdict at trial, the burden then shifts to the respondent to set forth specific facts demonstrating that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). If the factual context makes the respondent's claim implausible, that party must come forward with more persuasive evidence than would otherwise be necessary to show that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); California Arch. Bldg. Prod. v. Franciscan Ceramics, 818 F.2d 1466, 1468 (9th Cir.1987), cert. denied, 484 U.S. 1006, 108 S.Ct. 698, 98 L.Ed.2d 650 (1988).
If the party seeking summary judgment meets this burden, then summary judgment will be granted unless there is significant probative evidence tending to support the opponent's legal theory. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 290, 88 S.Ct. 1575, 1593, 20 L.Ed.2d 569 (1968); Commodity Futures Trading Comm'n v. Savage, 611 F.2d 270 (9th Cir. 1979). Parties seeking to defeat summary judgment cannot stand on their pleadings once the movant has submitted affidavits or other similar materials. Affidavits that do not affirmatively demonstrate personal knowledge are insufficient. British Airways Bd. v. Boeing Co., 585 F.2d 946, 952 (9th Cir.1978), cert. denied, 440 U.S. 981, 99 S.Ct. 1790, 60 L.Ed.2d 241 (1979). Likewise, "legal memoranda and oral argument are not evidence and do not create issues of fact capable of defeating an otherwise valid motion for summary judgment." Id.
A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the differing versions of the truth. See Admiralty Fund v. Hugh Johnson & Co., 677 F.2d 1301, 1305-06 (9th Cir.1982); Admiralty Fund v. Jones, 677 F.2d 1289, 1293 (9th Cir.1982).
All facts and inferences drawn must be viewed in the light most favorable to the responding party when determining whether a genuine issue of material fact exists for summary judgment purposes. Poller v. CBS, Inc., 368 U.S. 464, 82 S.Ct. 486, 7 L.Ed.2d 458 (1962). After drawing inferences favorable to the respondent, summary judgment will be granted only if all reasonable inferences defeat the respondent's claims. Admiralty Fund v. Tabor, 677 F.2d 1297, 1298 (9th Cir.1982).
The trilogy of Supreme Court cases cited above establishes that "summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed `to secure the just, speedy and inexpensive determination of every action."' Celotex Corp., 477 U.S. at 327, 106 S.Ct. at 2555 (quoting Fed.R.Civ.P. 1). See also Avia Group Int'l, Inc. v. L.A. Gear Cal., 853 F.2d 1557, 1560 (Fed.Cir.1988).
The Nevada Industrial Insurance Act requires employers to "provide and secure compensation according to the terms, conditions and provisions" of Nev.Rev.Stats. Chapters 616 and 617. Nev.Rev.Stats. § 616.270(1) (1993); Nev.Rev.Stats. § 617.200 (1) (1993). The terms, conditions and provisions of Chapter 616 providing for the payment of premiums to the state insurance fund and for compensation when an employee is injured are "conclusive, compulsory and obligatory." Nev.Rev.Stats. § 616.285 (1993).
Alternatively, an employer may qualify as a self-insured employer under Nev.Rev.Stats. § 616.291(1) (1993). Upon qualification, the Commissioner of Insurance must issue a certificate of qualification as a self-insured employer. Nev.Rev.Stats. § 616.293 (1993).
An employer who fails to provide and secure compensation as required by the terms of Chapter 616 is subject to fines and criminal penalties as defined by Nev.Rev.Stats. § 616.630 (1993). Nonetheless, an employer can reject the terms of the Industrial Insurance Act. Sullivan v. Second Judicial District Court, 74 Nev. 334, 331 P.2d 602, 337 (1958). An employer may reject the terms of the Act in one of two ways: (1) by failing to pay all the premiums to the state insurance fund or (2) by failing to maintain a certificate of self-insurance. Nev.Rev.Stats. § 616.305(3) (1993).
It is clear, then, that Nevada allows an employer to provide workers' compensation only through two methods: through the State Industrial Insurance System and as a self-insured employer pursuant to Nev.Rev.Stats. § 616.293. See, Nev.Rev. Stats. § 616.305(3). See also, Nev.Rev.Stats. §§ 616.285 and 616.291(1). Moreover, both methods of coverage under the Industrial Insurance Act are heavily regulated. Nev. Rev.Stats. §§ 616.010-616.700. This system requires a separately administered plan. Cf., Barker v. Pick N Pull Auto Dismantlers, Inc., 819 F.Supp. 889, 892 (E.D.Cal 1993), fn. 5, citing Shaw v. Delta Airlines, 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) ().
Plaintiffs assert that the plan offered by Defendants does not comply with Nevada law. Defendants respond that compliance is not necessary because their plan is an ERISA plan which is not subject to state regulation.
Under 29 U.S.C. § 1144(a), the Employment Retirement Income Security Act ("ERISA") preempts "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) (1994). ERISA applies to any employee benefit plan if it is established or maintained (1) by any employer engaged in...
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