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Sherfel v. Newson

United States Court of Appeals, Sixth Circuit

September 30, 2014

JOAN SHERFEL, in her fiduciary capacity as a member of the Benefits Administrative Committee, Plan Administrator of the Nationwide-Sponsored Health and Welfare Employee Benefit Plans; BENEFITS ADMINISTRATIVE COMMITTEE, Plan Administrator of the Nationwide-Sponsored Health and Welfare Employee Benefit Plans; NATIONWIDE MUTUAL INSURANCE COMPANY, Plaintiffs-Appellees,
REGGIE NEWSON, Secretary, Department of Workforce Development, State of Wisconsin, in his official capacity; JOSEPH HANDRICK, Administrator of the Equal Rights Division, Wisconsin Department of Workforce Development, in his official capacity; J.B. VAN HOLLEN, Attorney General, State of Wisconsin, in his official capacity, Defendants-Appellants

Argued October 3, 2013

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[Copyrighted Material Omitted]

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Appeal from the United States District Court for the Southern District of Ohio at Columbus. No. 2:09-cv-00871--James L. Graham, District Judge.


Richard Briles Moriarty, WISCONSIN DEPARTMENT OF JUSTICE, Madison, Wisconsin, for Appellants.

Daniel W. Srsic, LITTLER MENDELSON, P.C., Columbus, Ohio, for Appellees.


Richard Briles Moriarty, WISCONSIN DEPARTMENT OF JUSTICE, Madison, Wisconsin, for Appellants.

Daniel W. Srsic, LITTLER MENDELSON, P.C., Columbus, Ohio, for Appellees.

Sarah C. Crawford, NATIONAL PARTNERSHIP FOR WOMEN & FAMILIES, Washington, D.C., Sherry Leiwant, A BETTER BALANCE: THE WORK AND FAMILY LEGAL CENTER, New York, New York, Jennifer A. Reisch, EQUAL RIGHTS ADVOCATES, San Francisco, California, Richard Saks, 9TO5 NATIONAL ASSOCIATION OF WORKING WOMEN, Milwaukee, Wisconsin, Douglas A. Darch, BAKER & MCKENZIE LLP, CHICAGO, ILLINOIS, for Amici Curiae.

Before: COLE, Chief Judge; KETHLEDGE and STRANCH, Circuit Judges. KETHLEDGE, J., delivered the opinion of the court, in which COLE, C.J., joined, and STRANCH, J., joined in part. STRANCH, J., delivered a separate opinion concurring in part and dissenting in part.


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KETHLEDGE, Circuit Judge.

ERISA is a statute unique in its preemptive effect. The statute includes an express preemption clause--any state law that " relate[s] to any employee benefit plan" is preempted--which is so broadly worded that the Supreme Court has struggled to draw boundaries around its scope. The statute also preempts state law impliedly, through the doctrine of conflict preemption. That doctrine invalidates state laws to the extent they obstruct the " purposes and objectives" of federal laws; and hence the broader a federal statute's purpose, the broader its implied-preemptive scope. ERISA's purpose is among the broadest, if not the broadest, recognized by the Supreme Court: " The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans." Aetna Health Inc. v. Davila, 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004). Thus, under ERISA, express and implied preemption are so broad as to overlap, laying down converging fields of fire whose intensity is greatest upon a single point: the one held by a state law that purports to mandate the payment of benefits contrary to the terms of an ERISA plan.

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That is the ground on which the Wisconsin Family and Medical Leave Act finds itself here. The terms of Nationwide's plan, whose participants extend across 49 States, allow its administrator to pay " short-term disability" benefits only to Nationwide employees who qualify as short-term disabled as defined by the plan. ERISA then federalizes that limitation, by requiring the administrator to pay benefits only as prescribed in " the documents and instruments governing the plan[.]" 29 U.S.C. § 1104(a)(1)(D). But the Wisconsin Act, as recently applied to Nationwide by the Wisconsin Department of Workforce Development (the " Workforce Department" ), requires the plan administrator to pay short-term disability benefits to certain beneficiaries who undisputedly are not short-term disabled as defined by the plan. As to those beneficiaries, therefore, the administrator has two choices: violate the Wisconsin Act, or violate ERISA. The district court held that, under the Supremacy Clause of the federal Constitution, the administrator was required to comply with ERISA rather than the Wisconsin Act. We agree, and affirm.


Nationwide has 32,000 employees across the country. Pursuant to an ERISA plan, the company offers its employees certain income benefits while they take leave from work. The Benefits Administrative Committee administers the plan. Among many other things, the Committee determines whether an employee is entitled to benefits under the plan's terms; and if so, the Committee pays those benefits out of a trust. The plan bars the Committee from paying benefits out of the trust if doing so would violate the plan's terms.

The plan provides three types of benefits: short-term disability (" STD" ), long-term disability (" LTD" ), and " Your Time" benefits. An employee can receive Your Time benefits for a number of personal reasons, such as vacation or illness. In contrast, to receive STD or LTD benefits, an employee must be " STD Disabled" or " LTD Disabled" as defined by the plan. STD Disabled means " a substantial change in medical or physical condition due to a specific illness that prevents an Eligible Associate from working their current position." Specific rules govern maternity leave. The first five days of paid maternity leave come out of an associate's Your Time benefits. Thereafter, a new mother is considered STD Disabled--and thus entitled to STD benefits--for six weeks following a vaginal delivery, or eight weeks following a cesarean section.

Wisconsin's Family Medical Leave Act requires that employers allow their employees six weeks of unpaid leave following " [t]he birth of an employee's natural child[.]" Wis. Stat. § 103.10(3). Critically for our purposes, the Act's " substitution provision" requires employers to allow an employee to substitute " paid or unpaid leave of any other type provided by the employer" for the unpaid leave provided by the statute. Id. § 103.10(5)(b). As recently applied by the Workforce Department, for example, a Nationwide employee could take the six weeks of paid maternity leave provided by the plan, and then substitute an additional three weeks of STD benefits for the unpaid leave provided by the Wisconsin Act--even if the employee is no longer short-term disabled as defined by the plan. Id.

If an employee believes that her employer has violated the Act, she can file a complaint with the Workforce Department, which is empowered to hold a hearing and " take action to remedy the violation, including providing requested family leave or medical leave[.]" Id. § 103.10(12). The employee can also bring a state-law civil

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action in Wisconsin circuit court once the administrative action is done. Id. § 103.10(13).

Nationwide faced such a complaint in 2007, after one of its Wisconsin employees, Katharina Gerum, had a baby. She received six weeks of STD benefits in accordance with Nationwide's plan. Gerum then requested an additional period of STD benefits pursuant to the Wisconsin Act's substitution provision. The Committee denied Gerum's request on the ground that she was no longer short-term disabled as defined by the plan. Gerum thereafter filed an administrative complaint with the Workforce Department, claiming that the Wisconsin Act required Nationwide to pay the additional STD benefits that she requested. By that time, the Wisconsin Supreme Court had already held that, in its view, ERISA did not preempt the Wisconsin Act even as applied to the administration of ERISA plans. See Aurora Med. Grp. v. Dep't of Workforce Dev., Equal Rights Div., 2000 WI 70, 236 Wis.2d 1, 612 N.W.2d 646, 654 (Wis. 2000). The Department also noted, in its investigation of Gerum's claim, that a Wisconsin circuit court had specifically held that disability-plan benefits are available for substitution under the Wisconsin Act. See N.W. Mut. Life Ins. Co. v. Dep't of Indus., Labor, & Human Relations, No. 94-CV-001022 (Wis. Cir. Ct., Jan. 16, 1995). The Department thus concluded that there was probable cause to believe that Nationwide's denial of STD benefits violated the Wisconsin Act. The Department then commenced an administrative proceeding against Nationwide. Eventually, an administrative law judge held that Nationwide had violated the Wisconsin Act when, per the terms of Nationwide's plan, it declined to pay the additional ( i.e., more than the six weeks it had already paid) STD benefits to Gerum. The ALJ thus ordered Nationwide to pay her the additional benefits.

At that point Nationwide sought to clarify its obligations under federal and Wisconsin law. Specifically, Nationwide filed this lawsuit in federal district court in Columbus (where its headquarters is located), seeking a declaration that ERISA preempted the Wisconsin Act to the extent the Act requires payment of STD benefits to employees who are not STD disabled under the terms of Nationwide's plan. Nationwide also sought an injunction to that effect. In a notably thorough opinion, the district court held that, as applied against Nationwide to require the payment of STD benefits contrary to Nationwide's plan, the Wisconsin Act was expressly and impliedly preempted in several different ways. The court therefore granted Nationwide the relief it requested and entered judgment in its favor.

This appeal followed.



We begin with the question whether the Wisconsin Act, as applied to Nationwide's plan, is expressly preempted. ERISA's express-preemption provision states that, with certain exceptions not relevant here ( e.g., for state laws that regulate insurance), ERISA " shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan[.]" 29 U.S.C. § 1144(a). Congress meant for this section " to ensure that plans and plan sponsors would be subject to a uniform body of benefits law[.]" Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990).

A state law " relate[s] to" an ERISA plan, within the meaning of § 1144(a), if the state law " has a connection with or reference to such a plan."

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Egelhoff v. Egelhoff ex rel. Breiner, 532 U.S. 141, 147, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001) (internal quotation marks omitted). State laws have such a connection or reference--and are therefore preempted--if, among other things, they (i) " mandate[] employee benefit structures[,]" N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 658, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995); (ii) " interfere[] with nationally uniform plan administration[,]" Egelhoff, 532 U.S. at 148; or (iii) create " alternative enforcement mechanisms" for the recovery of benefits provided under an ERISA plan. Travelers, 514 U.S. at 658.

The Wisconsin Act, as applied to require the payment of STD benefits contrary to the terms of Nationwide's plan, does all three of these things. First, state laws mandate " employee benefit structures" when, among other things, they require plan administrators to " pay benefits to the beneficiaries chosen by state law, rather than to those identified in the plan documents." Egelhoff, 532 U.S. at 147. Indeed, the Supreme Court " ha[s] virtually taken it for granted that state laws which are 'specifically designed to affect employee benefit plans' are preempted under § [1144](a)." Ingersoll-Rand, 498 U.S. at 140 (quoting Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 829, 108 S.Ct. 2182, 100 L.Ed.2d 836 (1988)). The Wisconsin Act is undisputedly such a law: it mandates payment of STD benefits to employees who are not STD disabled, contrary to the terms of the plan. Thus, the Act " governs the payment of benefits, a central matter of plan administration[,]" Egelhoff, 532 U.S. at 148--and for that reason is expressly preempted as applied here.

Second, the Act interferes with uniform administration of Nationwide's plan in the 49 states where it operates. State laws have this effect when they subject plans " to different legal obligations in different States." Id. The Wisconsin Act has that effect here, since it requires the plan administrator to pay benefits ( i.e., STD benefits to Wisconsin employees who are not short-term disabled) that the plan itself bars the administrator from paying in other States. The Wisconsin Act therefore " impose[s] precisely the burden that ERISA pre-emption was intended to avoid[,]" id. at 150 (internal quotation marks omitted); and for that reason too is expressly preempted as applied here.

Third, the Wisconsin Act creates an alternate enforcement mechanism for obtaining ERISA plan benefits. " Congress intended" ERISA's civil-enforcement provision, 29 U.S.C. § 1132(a), " to be the exclusive remedy for rights guaranteed under ERISA[.]" Ingersoll-Rand, 498 U.S. at 144. The Court has explained that " the detailed provisions of § [1132](a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans." Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987). That balancing " would be completely undermined" if states were free to put additional remedies on one side of the scale. Id. Thus, " any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts ...

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