Westinghouse Elec. v. STATE OF MD. COM'N, ETC.

• Decision Date: 29 June 1981
• Docket Number: Civ. A. No. M-80-2915.
• Parties: WESTINGHOUSE ELECTRIC CORPORATION v. STATE OF MARYLAND COMMISSION ON HUMAN RELATIONS.
• Court: U.S. District Court — District of Maryland

520 F. Supp. 539

WESTINGHOUSE ELECTRIC CORPORATION v. STATE OF MARYLAND COMMISSION ON HUMAN RELATIONS.

Civ. A. No. M-80-2915.

United States District Court, D. Maryland.

June 29, 1981.

Bruce S. Harrison, Shawe & Rosenthal, Baltimore, Md., for plaintiff.

Henry B. Ford, Baltimore, Md., for defendant.

MEMORANDUM AND ORDER

JAMES R. MILLER, Jr., District Judge.

The plaintiff, Westinghouse Electric Corporation (Westinghouse), brought this action pursuant to sections 502(a)(3) and (e)(1) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. §§ 1132(a)(3) & (e)(1). In its complaint against the Maryland Commission on Human Relations (MCHR), Westinghouse seeks declaratory and injunctive relief with respect to the MCHR's application of section 16 and section 17 of Md.Code Ann. Art. 49B to Westinghouse's employee disability benefit plan. The sole issue presented by this case is whether these sections of Maryland's fair employment statute are preempted by section 514(a) of ERISA, 29 U.S.C. § 1144(a).

This case is presently before the court on cross-motions for summary judgment. There are no material facts in dispute, and both parties have submitted legal memoranda.¹ The court believes that oral argument, although requested, is not required. Local Rule 6(E). For the reasons set out below, the court holds that sections 16 and 17 of Md. Code Ann. Art. 49B are not preempted by ERISA. Consequently, the summary judgment motion of the MCHR will be granted.

I. Overview of the Case

Westinghouse is a Pennsylvania corporation that does business and employs persons in Maryland, as well as throughout the United States. As a result of four administrative charges filed in March of 1978, the MCHR issued a "statement of charges" against Westinghouse in June of 1979, alleging that the company was in violation of Md.Code Ann. Art. 49B, § 17 because the Westinghouse Insurance Plan for Employees did not provide accident and sickness benefits for disabilities related to pregnancy while providing such benefits for other temporary disabilities. In all four cases the hearing examiner found Westinghouse to be in violation of state law, and ordered the retroactive payment of disability benefits to all affected female employees. Westinghouse filed timely notices of appeal, and the four administrative cases are presently pending before an appeals board of the MCHR. The period of time relevant to this case is July 1, 1977 to April 29, 1979. The former date is the effective date of Md. Code Ann. Art. 49B, § 17. The latter date marks the effective date of the Pregnancy Disability Act of 1978, 42 U.S.C. § 2000e(k), which amended Title VII to "overrule" the Supreme Court's decision in General Electric Co. v. Gilbert, 429 U.S. 125, 97 S.Ct. 401, 50 L.Ed.2d 343 (1976). Westinghouse began to include benefits for pregnancy-related disabilities on April 29, 1979.

II. ERISA: The Statutory Scheme

ERISA was enacted to cure what Congress viewed as abuses and inequities in the operation of employee benefit plans.² Intending to protect working men and women, Congress declared a "national public interest" in "the continued well-being and security of millions of employees and their dependents who are directly affected by these plans." Section 2(a), 29 U.S.C. § 1001(a). In furtherance of this goal, Title I of ERISA, administered and enforced by the Secretary of Labor, sets out a comprehensive regulatory scheme, including reporting and disclosure requirements,³ participation and vesting standards,⁴ funding requirements,⁵ fiduciary responsibility regulations,⁶ and criminal and civil enforcement provisions.⁷ These provisions were designed to effectuate Congress' policy of "protecting interstate commerce and the interests of participants in employee benefit plans and their beneficiaries." Section 2(b), 29 U.S.C. § 1001(b). See Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361-62, 374-75, 100 S.Ct. 1723, 1726, 1732-33, 64 L.Ed.2d 354 (1980).

The parties are in agreement that the Westinghouse Insurance Plan for Employees is an "employee benefit plan" within the meaning of sections 3(1) and (3) and section 4(a) of ERISA, 29 U.S.C. §§ 1002(1) & (3), 1003(a). Further, the MCHR does not contend that the subject plan falls within one of the exceptions to coverage set out in section 4(b), 29 U.S.C. § 1003(b).⁸

Section 514(a) provides that ERISA's regulatory provisions "shall supersede 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). The only state laws,⁹ specifically excluded from the operation of this preemption language are those regulating insurance, banking or securities, or generally applicable criminal law. Section 514(b), 29 U.S.C. § 1144(b). Section 514(d) of ERISA, the "savings clause," however, provides as follows:

"Nothing in this subchapter shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States (except as provided in sections 1031 and 1137(b) of this title) or any rule or regulation issued under any such law."

It is apparent that unless either impliedly excepted from the operation of section 514(a), or held to be within the reach of section 514(d), section 16 and section 17 of Md.Code Ann. Art. 49B are preempted by ERISA. These statutory provisions plainly "relate" to employee benefit plans that are regulated by the Act.¹⁰

Three lines of analysis have developed in the federal courts concerning the proper interpretation of section 514(a) and section 514(d), and the preemption of state law by ERISA. The first, typified by then District Judge Newman's decision in Pervel Industries, Inc. v. State of Connecticut Commission on Human Rights and Opportunities, 468 F.Supp. 490 (D.Conn.1978), aff'd 603 F.2d 214 (2d Cir. 1979), cert. denied, 444 U.S. 1031, 100 S.Ct. 701, 62 L.Ed.2d 667 (1980), interprets section 514(a) broadly and holds preempted all state fair employment laws as applied to federally regulated employee benefit plans. An alternative analysis, employed by the Seventh Circuit in Bucyrus-Erie Co. v. Department of Industry, Labor and Human Relations, 599 F.2d 205 (7th Cir. 1979), cert. denied, 444 U.S. 1031, 100 S.Ct. 701, 62 L.Ed.2d 667 (1980), adopts the so-called "double savings clause" theory to preserve the application of state fair employment laws to federally regulated plans. A third theory has been applied to save state family laws from preemption by ERISA. This "implied exception" rationale was sanctioned in American Tel. & Tel. Co. v. Merry, 592 F.2d 118 (2d Cir. 1979), and in Stone v. Stone, 450 F.Supp. 919 (N.D.Cal. 1978), aff'd, 632 F.2d 740 (9th Cir. 1980). See also Provience v. Valley Clerks Trust Fund, 509 F.Supp. 388, 390-91 (E.D.Cal. 1981).¹¹

III. Discussion

At first blush, the plain language of section 514(a) would seem to be dispositive of the question presented in this case. According to Westinghouse, that section evidences an explicit congressional intention to preempt all state laws that in any way "relate" to covered employee benefit plans. Nevertheless, despite the surface appeal of that approach, the court is constrained to engage in a more probing analysis for several reasons.

First, preemption implicates important federal-state relationships. In enacting section 16 and section 17 of Md.Code Ann. Art. 49B, Maryland engaged in a legitimate exercise of its police powers in an area in which it has a strong local interest. See Colorado Anti-Discrimination Commission v. Continental Air Lines, Inc., 372 U.S. 714, 721-22, 83 S.Ct. 1022, 1025-26, 10 L.Ed.2d 84 (1963). Consequently, "when a State's exercise of its police power is challenged under the Supremacy Clause, `we start with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.'" Ray v. Atlantic Richfield Co., 435 U.S. 151, 157, 98 S.Ct. 988, 994, 55 L.Ed.2d 179 (1978), quoting Rice v. Sante Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947). As Mr. Justice Marshall noted in Jones v. Rath Packing Co., 430 U.S. 519, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977), "this assumption provides assurance that `the federal-state balance' will not be disturbed unintentionally by Congress or unnecessarily by the courts." 430 U.S. at 525, 97 S.Ct. at 1309 (citation omitted). Thus, as is usually the case, "the purpose of Congress is the ultimate touchstone." Retail Clerks v. Schermerhorn, 375 U.S. 96, 103, 84 S.Ct. 219, 222, 11 L.Ed.2d 179 (1963). See Malone v. White Motor Corp., 435 U.S. 497, 504, 98 S.Ct. 1185, 1190, 55 L.Ed.2d 443 (1978) (plurality opinion).

It is also apparent that, if construed broadly, section 514(a) of ERISA might conflict with another piece of important social legislation, the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. It is the meshing of these federal statutes that gives rise to the "double savings clause" theory.

The scheme embodied in the Civil Rights Act of 1964 contemplates and encourages the enforcement of state fair employment laws as an essential component of the federal statutory framework. See, e. g., New York Gaslight Club v. Carey, 447 U.S. 54, 67, 100 S.Ct. 2024, 2032, 64 L.Ed.2d 723 (1980); Alexander v. Gardner-Denver Co., 415 U.S. 36, 47-49, 94 S.Ct. 1011, 1019-20, 39 L.Ed.2d 147 (1974). State fair employment laws are specifically preserved by two sections of the Civil Rights Act.¹² Section 708 of Title VII provides:

"Nothing in this subchapter shall be deemed to exempt or relieve any person from any liability, duty, penalty, or punishment provided by any present or future law of any State or political subdivision of a State, other than any such law which purports to require or permit the doing of any act which would be an unlawful employment practice

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