FEHBA health plan carriers can ignore state anti-subrogation statutes

Faced with the threat of local laws that vary from state to state, the US Supreme Court unanimously held that insurance carriers operating under the Federal Employees Health Benefits Act can assert subrogation or reimbursement rights even though a state statute prevents carriers from seeking subrogation or reimbursement.

Missouri law prohibits the subrogation of personal injury claims. The Federal Employees Health Benefits Act (FEHBA) authorizes the Office of Personnel Management (OPM) to enter into contracts with private insurance carriers to administer benefit plans, and OPM's contracts require carriers to seek subrogation or reimbursement. Coventry Health Care of Missouri v. Nevils (US Supreme Court 04/18/2017) [Opinion text] held that these contractual subrogation and reimbursement provisions override state laws barring subrogation and reimbursement. The opinion was unanimous, and took only 11 pages.

Jodie Nevils was injured in a car wreck. He's a federal employee who was insured by Coventry Health Care under a FEHBA plan. Coventry paid his medical bills, and then Nevils recovered a settlement from a third party. Coventry asserted a subrogation lien on the recovery; Nevils satisfied the lien and then sued Coventry and ultimately won in the Missouri Supreme Court. He won because that court applied a state statute that prohibits subrogation in such cases, and also held that the federal scheme did not preempt that state statute.

Here's the federal statute, FEHBA §8902(m)(1):

“The terms of any contract under this chapter which relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits) shall supersede and preempt any State or local law, or any regulation issued thereunder, which relates to health insurance or plans.”

The US Supreme Court said:

"We hold, contrary to the decision of the Missouri Supreme Court, that contractual subrogation and reimbursement prescriptions plainly “relate to . . . payments with respect to benefits,” §8902(m)(1); therefore, by statutory instruction, they override state law barring subrogation and reimbursement."

"We further hold, again contrary to the Missouri Supreme Court, that the regime Congress enacted is compatible with the Supremacy Clause. Section 8902(m)(1) itself, not the contracts OPM negotiates, triggers the federal preemption. As Congress directed, where FEHBA contract terms “relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits),” §8902(m)(1) ensures that those terms will be uniformly enforceable nationwide, free from state interference."

For more on this case: Opinion analysis: Justices reject Missouri’s push to expand insurance benefits for federal employees by Professor Ronald Mann.

[For recent decisions and pending employment law cases, see Supreme Court Watch.] 

7th Circuit: Sexual orientation discrimination is a form of sex discrimination (with video)

In a monumental decision, the 7th Circuit has held that discrimination on the basis of sexual orientation is a form of sex discrimination under Title VII. Hively v. Ivy Tech Community College (7th Cir 04/04/2017) (en banc, 8-3) [Opinion text]. This is the first circuit court to reach this conclusion, and the 7th Circuit is not noted for being liberal.

Discussion of Hively v Ivy Tech Community College decision on sexual orientation discrimination (3:39 minutes)

Kimberly Hively alleged that her employer blocked her from a full-time position because of her sexual orientation, and this violated Title VII. The district court granted the employer's motion to dismiss for failure to state a claim. A three-judge panel of the 7th Circuit affirmed, relying on the idea that “Congress had nothing more than the traditional notion of ‘sex’ in mind when it voted to outlaw sex discrimination."

The 7th Circuit then reheard the case en banc, with 11 judges, and held "a person who alleges that she experienced employment discrimination on the basis of her sexual orientation has put forth a case of sex discrimination for Title VII purposes. It was therefore wrong to dismiss Hively’s complaint for failure to state a claim."

The court analyzed the case under what it calls the "comparative method," in which one holds all other things constant and changes only her sex, and then asks whether she would have been treated the same way. The court put it this way:

Hively alleges that if she had been a man married to a woman (or living with a woman, or dating a woman) and everything else had stayed the same, Ivy Tech would not have refused to promote her and would not have fired her. * * * This describes paradigmatic sex discrimination.

The court also analyzed the case through the lens of the gender non-conformity line of cases, saying:

Hively represents the ultimate case of failure to conform to the female stereotype (at least as understood in a place such as modern America, which views heterosexuality as the norm and other forms of sexuality as exceptional): she is not heterosexual. * * * Hively’s claim is no different from the claims brought by women who were rejected for jobs in traditionally male workplaces, such as fire departments, construction, and policing. The employers in those cases were policing the boundaries of what jobs or behaviors they found acceptable for a woman (or in some cases, for a man).

Judge Sykes (joined by Judges Bauer and Kanne) dissented, saying:

The court’s new liability rule is entirely judge-made; it does not derive from the text of Title VII in any meaningful sense. The court has arrogated to itself the power to create a new protected category under Title VII.

SCOTUS: Decision to quash or enforce an EEOC subpoena is reviewed for abuse of discretion

The US Supreme Court has pulled the 9th Circuit into line with other circuits by holding that a district court’s decision whether to enforce or quash an EEOC subpoena should be reviewed for abuse of discretion, not de novo. McLane Co. v. EEOC (US Supreme Court 04/03/2017) [Opinion text] was unanimous on this question.

This case was an odd duck because both McLane Co. and the EEOC agreed that abuse of discretion was the proper standard. The Court had to press another lawyer into service to present arguments in favor of the 9th Circuit's outlier position that de novo was the correct standard.

Background: Damiana Ochoa filed an EEOC charge alleging sex discrimination based on pregnancy. She claimed she was fired because she failed a strength test following maternity leave. EEOC's investigation included a request for "pedigree information" such as names, addresses, and social security numbers of employees who had been required to take strength tests. The EEOC then issued a subpoena. The district court declined to enforce the subpoena as to pedigree information, writing that the pedigree information was “not relevant at this stage to a determination of whether the [test] systematically discriminates on the basis of gender.” On appeal, the 9th Circuit held that the subpoena should be enforced. In reaching that conclusion, the 9th Circuit reviewed the district court's decision de novo.

The Supreme Court decision by Justice Sotomayor took less than 12 pages to explain that district courts have a better handle on the details of ongoing litigation, and their decisions whether to enforce or quash EEOC subpoenas should be reviewed for abuse of discretion – not de novo.

Here are the reasons:

  • It's the longstanding practice of courts of appeals to use the abuse of discretion standard. This practice includes 30 years of NLRB cases before Title VII was enacted.
  • Subpoena enforcement usually turns on whether the evidence sought is relevant and whether production is unduly burdensome. District courts are better suited to resolving these issues than appellate courts.
  • District courts have more experience with these issues.
  • Deferential review helps streamline the litigation process.

If you're looking for excitement, you won't find it here.

[For recent decisions and pending employment law cases, see Supreme Court Watch.] 

SCOTUS argument: What's an ERISA church plan?

Advocate Health Care Network v. Stapleton [Supreme Court briefs] comes up for oral argument at the US Supreme Court on March 27. "Church plans" are specifically exempt from ERISA. Thus, church plans can ignore the many requirements and restrictions that ERISA requires of pension and benefit plans that are maintained by other private employers. The central issue is whether an employee benefit plan must be initially established by a church in order to qualify for ERISA's church plan exemption, or whether it is enough that the plan is maintained by a church or by a church-controlled or church-affiliated organization.

Discussing pending Supreme Court case on ERISA church plans. Advocate Health Care Network v. Stapleton  (2:50 minutes)

Three Circuit Courts (3rd, 7th, 9th) held that it is not enough that a plan is currently maintained by a church or by a church-controlled or church-affiliated organization. The holdings were that the plan also must have been initially established by a church or by a convention or association of churches. These three cases are consolidated for review.

"We've always done it that way" seems to be the main argument advanced by the government's amicus curiae brief in support of the plans' position. [Text of brief] Yet this case could possibly up-end thirty years of administrative interpretations that have granted a church plan exemption even though a plan was not initially established by a church – so long as it is maintained by an otherwise qualifying organization that is associated with or controlled by a church.

All three cases present the issue as follows:

The Employee Retirement Income Security Act of 1974 (“ERISA”) governs employers that offer pensions and other benefits to their employees. “Church plans” are exempt from ERISA’s coverage. 29 U.S.C. §§ 1002(33), 1003(b)(2). For over thirty years, the three federal agencies that administer and enforce ERISA—the Internal Revenue Service, the Department of Labor, and the Pension Benefit Guaranty Corporation—have interpreted the church plan exemption to include pension plans maintained by otherwise qualifying organizations that are associated with or controlled by a church, whether or not a church itself established the plan.
The question presented is whether the church plan exemption applies so long as a pension plan is maintained by an otherwise qualifying church-affiliated organization, or whether the exemption applies only if, in addition, a church initially established the plan.

ERISA Subsection (33)(A) has always defined a church plan as a “plan established and maintained” by a church. [Emphasis added.]

Subsection (33)(C), which was added later, states as follows:

(C) For purposes of this paragraph— (i) A plan established and maintained for its employees (or their beneficiaries) by a church or by a convention or association of churches includes a plan maintained by an organization, whether a civil law corporation or otherwise, the principal purpose or function of which is the administration or funding of a plan or program for the provision of retirement benefits or welfare benefits, or both, for the employees of a church or a convention or association of churches, if such organization is controlled by or associated with a church or a convention or association of churches. [Emphasis added.]

In each case, the employees are saying that Subsection (33)(A) requires that two separate elements must both be met for the exemption to apply: (1) a church must first create or establish the plan and then (2) maintain the plan.

And the plans are saying that Subsection (33)(C) enlarges the definition of a church plan.

The lower courts essentially are holding that Subsection (33)(C) is dealing with a subset of church plans, and is not put there to enlarge the definition of a church plan. Put simply, to qualify as a church plan a church must both first create or establish the plan and then also maintain the plan.

Meanwhile, I have considerable trouble with the plans' argument that Subsection (33)(C) changes (that is, expands) the Subsection (33)(A) definition. We shall see.

[For recent decisions and pending employment law cases, see US Supreme Court Watch.]

 

SCOTUS: Employees win structured dismissal bankruptcy case

In a sweeping decision, the US Supreme Court held that bankruptcy courts may not approve structured dismissals that provide for distributions that do not follow ordinary priority rules without the consent of affected creditors. Czyzewski v. Jevic Holding Corporation (US Supreme Ct 03/22/2017) (6-2) [Opinion text].

In this case an official unsecured creditors’ committee and a secured lender negotiated a settlement under which the lender set aside some money to distribute to unsecured creditors – and totally cut out former employees who had priority claims under the Bankruptcy Code. This "structured dismissal" did not follow the bankruptcy priorities, which would have preferred the drivers' wage claims.

The Supreme Court would have none of that. And not merely in cases involving special priorities for employees. In sweeping terms, the Court rejected the notion that there could be "rare cases" in which courts could find "sufficient reasons" to disregard priorities. The Court identified potentially serious consequences that could flow from such an exception: departure from the protections granted particular classes of creditors, changes in the bargaining power of different classes of creditors even in bankruptcies that do not end in structured dismissals, risks of collusion, and increased difficulty in achieving settlements. "[W]e conclude that Congress did not authorize a “rare case” exception."

All bankruptcy lawyers will need to pay close attention to this case.

For recent decisions and pending employment law cases, see US Supreme Court Watch.]

SCOTUS: NLRB's Acting GC was unlawfully appointed

Hundreds of NLRB decisions could be at risk after the Supreme Court's decision that for three years Lafe Solomon served improperly as the NLRB's Acting General Counsel. NLRB v. SW General US Supreme Ct 03/21/2017) (6-2) [Opinion text]. The NLRB's decision that SW General committed an unfair labor practice was vacated because the ULP complaint was issued at a time when Solomon lacked authority to issue the complaint.

NLRB decisions issued between January 5, 2011 and November 4, 2013 could now be at risk. The decisions are not automatically voided, but could be nullified if the losing party (usually an employer) properly raised and preserved an objection in proceeding before an ALJ or at the Board level. I assume the 180 days statute of limitations has run on these cases, so some folks are going to get a "get out of jail free" card.

When Ronald Meisburg resigned as General Counsel in June 2010, the President appointed Solomon as Acting GC. So far so good. About six months later – January 5, 2011 – the President nominated Solomon to be permanent GC, and sent his name to the Senate for confirmation. Solomon never got confirmed by the Senate. But he continued serving as Acting GC until the Senate confirmed Richard Griffin as permanent GC on November 4, 2013.

The problem was that the Federal Vacancies Reform Act (FVRA) is pretty specific. Subsection (b)(1) of the FVRA prevents a person who has been nominated to fill a vacant Presidential-appointment-and-Senate-confirmation office from performing the duties of that office in an acting capacity.

The Court rejected the government's argument that "we've always done it this way," saying:

"The Board contends that legislative history, purpose, and post-enactment practice uniformly show that subsection (b)(1) applies only to first assistants. The text is clear, so we need not consider this extra-textual evidence. * * * In any event, the Board’s evidence is not compelling."

The Court also rejected the argument that FVRA Subsection (b)(1) should be read as meaning that only first assistants are barred from serving in an acting position after being nominated for the permanent position.

As for the two dissenters, this is a good summary:

"Congressional silence in the face of a decade-plus practice of giving subsection (b)(1) a narrow reach casts serious doubt on the broader interpretation. It indicates that Congress, like the Executive Branch, interpreted subsection (b)(1) in line with its text to reach only first assistants to the vacant office serving pursuant to subsection (a)(1)."

[For recent decisions and pending employment law cases, see Supreme Court Watch.]

 

- Web site for Ross Runkel, Arbitrator & Mediator: https://www.RossRunkel.com/ -

Oxford comma drama

Are dairy delivery drivers exempt from Maine's overtime law? No, because of a missing comma – the one known as the Oxford comma. Here's the first paragraph of O'Connor v. Oakhurst Dairy (1st Cir 03/13/2017):

For want of a comma, we have this case. It arises from a dispute between a Maine dairy company and its delivery drivers, and it concerns the scope of an exemption from Maine's overtime law. 26 M.R.S.A. § 664(3). Specifically, if that exemption used a serial comma to mark off the last of the activities that it lists, then the exemption would clearly encompass an activity that the drivers perform. And, in that event, the drivers would plainly fall within the exemption and thus outside the overtime law's protection. But, as it happens, there is no serial comma to be found in the exemption's list of activities, thus leading to this dispute over whether the drivers fall within the exemption from the overtime law or not.

Maine's overtime law says it does not apply to:

The canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of:
  (1) Agricultural produce;
  (2) Meat and fish product; and
  (3) Perishable foods

So what does "packing for shipment or distribution" mean? Dairy drivers perform distribution, but they do not perform packing for distribution. If you stick in a comma just before the words "or distribution," then it would be clear that the drivers were exempt. But the court pointed out that lack of a comma simply makes the whole thing ambiguous, and ambiguities need to be resolved in favor of the employees.

<Sigh>

Transgender bathroom case vacated and remanded

This is what I suggested [here] and [here]. The US Supreme Court has sent Gloucester County School Board v. G.G. back to the 4th Circuit after the government withdrew a "guidance" letter that the 4th Circuit had relied on. So oral arguments that were scheduled for March 28 are cancelled. The Court's order says: 

The judgment is vacated, and the case is remanded to the United States Court of Appeals for the Fourth Circuit for further consideration in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017.

This is a setback for G.G., a transgender high school student whose great transgression is that he wants to use the boys' restroom.

Both parties had requested the Supreme Court to go ahead with oral arguments, but the School Board was jockeying for a delay and had urged the Court to get a brief from the government before holding oral arguments. Here's a sketch of recent developments:

  • April 19, 2016: 4th Circuit held [opinion text] that G.G., a transgender high school student, must be allowed to use the boys' restrooms. The 4th Circuit relied on an interpretation of Title IX and its implementing regulations reflected in administrative guidance issued by the US Department of Education in 2015 and 2016.
  • June 23, 2016: District Court issued a preliminary injunction against the School Board.
  • August 3, 2016: Supreme Court issued a stay of the District Court's injunction.
  • October 28, 2016: Supreme Court granted writ of certiorari to review 4th Circuit's judgment.
  • February 3, 2017: Case set for oral argument on March 28.
  • February 22, 2017: The Department of Education and Justice Department withdrew the guidance documents that the 4th Circuit had relied on. [text]
  • February 23, 2017: Supreme Court requested the parties' "views on how this case should proceed in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017."
  • March 1, 2017: The parties submitted letters to the Supreme Court with their suggestions on how to proceed:
    • G.G. recommended [text] going ahead with the March 28 arguments: "The new 'Dear Colleague' letter abstains from providing any guidance with respect to 34 C.F.R. § 106.33 and makes resolution of Question Two even more urgent. That question has been fully developed in the lower courts, is fully briefed by the parties and amici before this Court, and is appropriate for resolution now. Delaying resolution would provide no benefit to the Court and would needlessly prolong harm to transgender students across the country awaiting this Court’s decision."
    • The School Board made three suggestions [text]: (1) Ask the US Solicitor General for the current views of the United States. (2) Postpone oral arguments until the new briefing is completed. (3) "[I]f the Court chooses not to resolve either question presented in light of the withdrawn documents, the Court should vacate the decisions below and remand for further proceedings."
  • March 6, 2017: The Supreme Court ordered: "The judgment is vacated, and the case is remanded to the United States Court of Appeals for the Fourth Circuit for further consideration in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017."

[For recent decisions and pending employment law cases, see Supreme Court Watch.]

 

- Web site for Ross Runkel, Arbitrator & Mediator: https://www.RossRunkel.com/ -

Transgender bathroom case next steps

Final update: Transgender bathroom case vacated and remanded

Both parties in Gloucester County School Board v. G.G. have requested the Supreme Court to hold oral arguments, but the School Board is jockeying for a delay and thinks the Court should get a brief from the government before holding oral arguments. Here's a sketch of recent developments:

  • April 19, 2016: 4th Circuit held [opinion text] that G.G., a transgender high school student, must be allowed to use the boys' restrooms. The 4th Circuit relied on an interpretation of Title IX and its implementing regulations reflected in administrative guidance issued by the US Department of Education in 2015 and 2016.
  • June 23, 2016: District Court issued a preliminary injunction against the School Board.
  • August 3, 2016: Supreme Court issued a stay of the District Court's injunction.
  • October 28, 2016: Supreme Court granted writ of certiorari to review 4th Circuit's judgment.
  • February 3, 2017: Case set for oral argument on March 28.
  • February 22, 2017: The Department of Education and Justice Department withdrew the guidance documents that the 4th Circuit had relied on. [text]
  • February 23, 2017: Supreme Court requested the parties' "views on how this case should proceed in light of the guidance document issued by the Department of Education and Department of Justice on February 22, 2017."
  • March 1, 2017: The parties submitted letters to the Supreme Court with their suggestions on how to proceed:
    • G.G. recommended [text] going ahead with the March 28 arguments: "The new 'Dear Colleague' letter abstains from providing any guidance with respect to 34 C.F.R. § 106.33 and makes resolution of Question Two even more urgent. That question has been fully developed in the lower courts, is fully briefed by the parties and amici before this Court, and is appropriate for resolution now. Delaying resolution would provide no benefit to the Court and would needlessly prolong harm to transgender students across the country awaiting this Court’s decision."
    • The School Board made three suggestions [text]: (1) Ask the US Solicitor General for the current views of the United States. (2) Postpone oral arguments until the new briefing is completed. (3) "[I]f the Court chooses not to resolve either question presented in light of the withdrawn documents, the Court should vacate the decisions below and remand for further proceedings."

It seems likely that the School Board's idea of delay and further briefing would throw the case over into next fall. Although unsaid in the Board's letter, the Court should be at full strength by then.

My view is that the Court should cancel arguments, vacate the 4th Circuit's judgment, and remand. Technically, of course, one issue presented in the petition for certiorari deals with Title IX by itself without the gloss of the earlier "guidance" letters. But the 4th Circuit's reasoning was dependent on those guidances, which are now gone and not replaced by anything else. So the whole reasoning process is different now. It's a different legal landscape. Let the lower courts work on this.