:: First Circuit Requires Abstention Where State Proceedings Have Begun

As the district court correctly noted, 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); Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 91 (1983). ERISA, however, does not preempt other federal laws, such as the ADA. See 29 U.S.C. § 1144(d) (“[N]othing in this subchapter shall be construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States.”) . . .

Colonial v Medley, Nos. 08-2332, 08-2379 (1st Cir.) (July 8, 2009)

Colonial v. Medley addresses when it is appropropriate for a district court to abstain from jurisdiction over a case in which state court proceedings have been instituted on facts which leave the question of preemption in doubt.   Jonathan M. Feigenbaum, of  Phillips & Angley, Boston,  MA, a careful observer of First Circuit ERISA cases, passed this opinion along to me today which I greatly appreciate.

The Facts

The plaintiff, Cauldron, had filed a claim against a short term diability carrier and also filed a charge with the Massachusetts Commission Against Discrimination (“MCAD”).  The central issue was a provision in the policy that excluded psychiatric or psychological conditions.

Federal v. State Proceedings

The carrier and the plaintiff’s employer filed an action in U.S. district court seeking declaratoryjudgement that Calderon’s state law claims were preempted by ERISA.  The plaintiff and MCAD filed motions to dismiss under the Younger abstention doctrine.  The  district court denied the motions and enjoined further proceedings by MCAD pending proceedings in the federal case.

The First Circuit Weighs In

Enjoining state court proceedings is a pretty drastic measure.  The First Circuit ruled that the district court overstepped its bounds.

As a matter of comity, federal courts are required to abstain from enjoining ongoing state court proceedings absent extraordinary circumstances. Younger, 401 U.S. at 43–47 (addressing state criminal prosecutions) . .  [W]e conclude that the principles set forth in Younger required the district court to abstain in deference to the state proceeding already underway.

Note: The Younger doctrine elements are as follows:

Under Younger, a federal court must abstain “if (1) there is an ongoing state judicial proceeding involving the federal plaintiff that (2) implicates important state interests and (3) provides an adequate opportunity for the federal plaintiff to assert his federal claims.” Id. at 77 (citing Middlesex County Ethics Comm. v. Garden State Bar Ass’n, 457 U.S. 423 (1982)).

Exception – In the case at bar, the district court found the elements satisfied, but applied an “exception”.   The First Circuit noted that abstention may not be appropriate:

“if the federal plaintiff will ‘suffer irreparable injury’ absent equitable relief

which might be proved by

a showing that the challenged state statute is ‘flagrantly and patently violative of express constitutional prohibitions.’”

which, in turn, in turn, gave rise to the view that

a “facially conclusive” claim of preemption may likewise be “sufficient to render abstention inappropriate.”

And a substantial part of the opinion addresses that point, i.e., whether the preemption of the state law claims was so clear as to fit within that exception.

Legal Questions – The First Circuit noted that “the existence of a question of first impression regarding the ADA’s applicability to Calderon’s claims preclude[d] preemption from being facially conclusive, and requires the district court to abstain under Younger”.

And Factual Issues – The Court also noted that, though  it “need not address whether the existence of a factual dispute as to the ERISA status of Colonial’s STD plan required the district court  either to make a factual determination or abstain under Younger”, nonetheless,

the record shows Calderon presented evidence sufficient to raise a factual dispute as to whether the STD plan she purchased from Colonial was governed by ERISA, or would instead find refuge in the “safe harbor” regulation under which the Secretary of Labor chose to exempt from ERISA certain group insurance programs where the employer is only minimally  involved in providing the coverage. See 29 C.F.R. § 2510.3-1(j).

Thus, the Court noted:

Because Younger prohibits a district court from addressing the merits of the parties’ claims unless preemption is facially conclusive, and ERISA preemption requires that the plan at issue be covered by ERISA, the plan’s ERISA status would have to be “facially conclusive.” See Local Union No. 12004, 377 F.3d at 78. At this juncture, we have substantial doubts as to whether such was the case in this instance.

All in all, a very interesting case which is worth consideration where ERISA preemption is at issue, particularly at the divide where disability claims overlap with ERISA claims