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ERISA Preemption of State Law Claims Concerning Management of Pension Plan

Posted by Ted A. Schmidt | May 04, 2022 | 0 Comments

Naumann v. Benefit Strategies West, Inc., No. 1 CA-CV 20-0537 (App. Div. I, April 21, 2022) (J. Furuya)

Plaintiffs hired defendants to set up and administer a pension plan under the Employee Retirement Income Security Act of 1974 [ERISA], codified at 29 U.S.C. §§ 1001–1461. When plaintiffs discovered the plan was underfunded by $460,000 they sued in federal court alleging breach of fiduciary duty under ERISA. The federal court dismissed the lawsuit finding it was preempted by ERISA.
Plaintiffs then sued in state court alleging breach of contract, breach of warranty and professional negligence.  The trial court dismissed the claims likewise finding ERISA preemption.  The Arizona Court of Appeals reversed and remanded.
ERISA is a “comprehensive” federal statutory law governing employee benefit plans including pension plans.” The statutory scheme sets forth standards and administrative remedies for noncompliance. Broad preemption provisions apply to assure regulation of these plans is “exclusively a federal concern.”
That said, here the plaintiffs were not suing for violation of ERISA regulations or improper administration of the plan but rather were suing a third party administrator  for the non-discretionary and ministerial miscalculation of  contributions to a pension plan under a professional service contract.  As such allowing plaintiffs to pursue these state law claims would not “Interfere with nationally uniform plan administration.”  The state law claims here are not impermissibly connected with “a central matter of plan administration.” 
Further, the state law claims do not have an “impermissible reference to the plan” in that they do not turn on the interpretation or administration of the plan but rather solely on  the accuracy of contribution calculations.

Finally, “conflict preemption” is inapplicable because enforcement of the state law claims do not conflict with any of the ERISA enforcement provisions,  render “compliance with both federal and state regulations a physical impossibility” or create an “obstacle to the accomplishment and execution of the full purposes and objectives of Congress.”

About the Author

Ted A. Schmidt

Ted's early career as a trial attorney began on the other side of the fence, in the offices of a major insurance defense firm. It was there that Ted acquired the experience, the skills and the special insight into defense strategy that have served him so well in the field of personal injury law. Notable among his successful verdicts was the landmark Sparks vs. Republic National Life Insurance Company case, a $4.5 million award to Ted's client. To this day, it is the defining case for insurance bad faith, and yet it is only one of several other multi-million dollar jury judgments won by Ted during his career. He is certified by the State Bar of Arizona as a specialist in "wrongful death and bodily injury litigation".


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