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5th Cir. - Preemption and Equitable Relief

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  • 5th Cir. - Preemption and Equitable Relief

    Here’s a new case out of the Fifth Circuit, Katheryn Swenson v. United of Omaha Life Insurance Company. This is a very short opinion and does not hash over the facts of the case at all. The issue before the court is whether the District Court properly dismissed the plaintiff’s claim for equitable relief and whether ERISA preempts the plaintiff’s state law claims. The Fifth Circuit concludes that the District Court acted properly.

    Swenson attempts to avoid this complete preemption by invoking ERISA’s savings clause, which provides that “[e]xcept as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.” 29 U.S.C. § 1144(b)(2)(A). Swenson emphasizes that the cited exception to the savings clause, id. § 1144(b)(2)(B), itself excludes from its carve out a “plan established primarily for the purpose of providing death benefits.” This means, according to Swenson, that the Louisiana statutes she cites in seeking to recover death benefits are within the scope of the savings clause and not preempted.

    The problem for Swenson is that the savings clause does not allow state law claims seeking recovery of ERISA benefits to escape preemption. Quality Infusion Care Inc. v. Humana Health Plan of Texas Inc., 290 F. App'x 671, 681–82 (5th Cir. 2008) (citing Aetna Health Inc. v. Davila, 542 U.S. 200, 217–18 (2004)); see also Prudential Ins. Co. of Am. v. Nat'l Park Med. Ctr., Inc., 413 F.3d 897, 913–14 (8th Cir. 2005) (explaining that even a state law saved from preemption by the savings clause is itself preempted “if it provides a separate vehicle to assert a claim for benefits outside” of section 502 of ERISA). It only saves certain state laws from conflict preemption, which is a federal defense that can be asserted when a federal law conflicts with a state law. Quality Infusion, 290 F. App’x. at 681–82. In other words, although the savings clause preserves a role for certain state laws that regulate insurance, state claims that provide a separate vehicle for seeking benefits from an ERISA plan remain preempted as such claims must be brought under ERISA's civil enforcement provision (section 502). Otherwise the exclusivity and uniformity of that federal remedy would be undermined. Davila, 542 U.S. at 217–18 (“ERISA § 514(b)(2)(A) must be interpreted in light of the congressional intent to create an exclusive federal remedy in ERISA § 502(a).”). That is not to say that, when challenging the lawfulness of the denial of ERISA benefits, a beneficiary cannot argue that the administrator failed to comply with applicable laws including any state laws that retain force because of the savings clause. But that must be done in the context of ERISA’s civil enforcement provision, a claim that was not ripe when Swenson filed this suit because she had not engaged in the administrative review process. Because Swenson’s claim for benefits must be brought under federal law, the district court correctly dismissed her state law claims seeking the same relief.

    The availability of that statutory remedy under section 502 of ERISA also defeats Swenson’s claim for equitable relief under federal law. Equitable relief under ERISA is normally unavailable “where Congress elsewhere provided adequate relief for a beneficiary's injury.” Varity Corp. v. Howe, 516 U.S. 489, 515 (1996). Because ERISA’s civil enforcement provision provides a direct mechanism to address the injury for which Swenson seeks equitable relief, she cannot assert a separate ERISA claim for breach of fiduciary duty. Tolson v. Avondale Indus., Inc., 141 F.3d 604, 610 (5th Cir. 1998).
    The very short opinion is attached hereto.
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