Pay or Play Acts, the Ninth Circuit, and the Never Ending Law of Unintended Consequences

Well, my trial this week is over, and I return to the blog with a - cue self-congratulatory, self-promoting note here - win in my back pocket. Last time I tried a case, I complained, tongue firmly in cheek, about the courts insisting on issuing major ERISA decisions while I was not available to discuss them, and they did it again this time around as well, with court decisions and legal developments in this area of the law pouring into my in-box all week. Its exactly as one of my favorite philosophers once wrote: “the wheel is turning and you can't slow down, you can't let go and you can't hold on, you can't go back and you can't stand still.”

Among the most prominent decisions issued while I was in court was, obviously, the Ninth Circuit’s ruling finding that San Francisco’s pay or play law was not preempted by ERISA. Can’t say I buy that one. Whatever is the scope of preemption in the field of ERISA, it logically reaches state efforts that result in a multi-jurisdictional company having to comply, with regards to its employee benefit plans, with a differing web of regulation that varies from one state to the next.

Of more interest, perhaps, is the wide ranging group of consequences, some predictable and others unintended, that the Ninth Circuit ruling likely unleashes. The first that jumps out at me is predictable, and the same that immediately occurred to every other commentator: that with the direct conflict it creates between the Fourth and Ninth Circuits on this issue, in combination with the political impetus in numerous states and localities to legislate on this issue, Supreme Court review seems certain. What is less predictable, or at least less widely predicted at this point, is what I fear may be the unintended consequences of that occurring; much as the LaRue decision did little, if anything, to clarify the law in the area of 401(k) losses going forward, but instead opened up a Pandora’s box of not yet addressed and still to be resolved legal issues (as commented on here, for instance), I suspect a ruling in this area by the Court will have the same effect on the question of the legal validity of state action in this area. I am disinclined, given the number of differing approaches to ERISA law and interpretation applied by the differing opinions in LaRue, to think that Supreme Court review of this issue will result in one coherent, uniform theory that can easily be interpreted and applied prospectively to these types of statutes, and suspect that such a ruling is instead more likely to open up a range of issues that will have to be litigated if and when such statutes are challenged as preempted. I could be wrong, but recent history in this area of the law suggests I am not; we may know more after the Supreme Court rules on the ERISA cases currently on its docket, as to how uniform an approach in this field of law and how much helpful guidance will come down from the Court. Bear in mind on this question though, that the Court’s decision in LaRue alone already has courts and litigants thinking that every issue (“every” may be a little bit of an overstatement, but you get the point) that was previously thought resolved is up for grabs in cases filed involving 401(k) plans, if those issues were originally resolved only in cases involving defined benefit plans.