Retail Industry Leaders Ass'n v. Fielder (4th Cir. Ct. Appeals)

Decided January 17, 2006-Opinion by Judge Paul V. Niemeyer, in which Judge M. Blane Michael joined. Judge William B. Traxler, Jr., dissented.

(Note: Currently, Maryland Courts Watcher does not regularly cover Fourth Circuit decisions. We have made an exception in this case due to the public interest in this case.)

On January 12, 2006, the Maryland General Assembly enacted the Fair Share Health Care Fund Act, which requires employers with 10,000 or more Maryland employees to spend at least 8% of their total payrolls on employees' health insurance costs or pay the amount their spending falls short to the State of Maryland. Resulting from a nationwide campaign to force Wal-Mart Stores, Inc., to increase health insurance benefits for its 16,000 Maryland employees, the Act's minimum spending provision was crafted to cover just Wal-Mart. The Retail Industry Leaders Association, of which Wal-Mart is a member, brought suit against James D. Fielder, Jr., the Maryland Secretary of Labor, Licensing, and Regulation, to declare that the Act is preempted by the Employee Retirement Income Security Act of 1974 ("ERISA") and to enjoin the Act's enforcement. On crossmotions for summary judgment, the District Court entered judgment declaring that the Act is preempted by ERISA and therefore not enforceable, and this appeal followed.

Held:

Because Maryland's Fair Share Health Care Fund Act effectively requires employers in Maryland covered by the Act to restructure their employee health insurance plans, it conflicts with ERISA's goal of permitting uniform nationwide administration of these plans. The Court concluded therefore that the Maryland Act is preempted by ERISA and it affirmed the District Court's judgment.

The Court rejected Maryland's attack on the Retail Industry Leaders Association's assertion of "associational standing" to enforce the rights of its members (See Hunt v. Washington State Apple Advertising Comm’n, 432 U.S. 333, 345 (1977) (authorizing the standing of an association when (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit)) and ripeness. It also turned aside a jurisdictional attack based upon the Tax Injunction Act, 28 U.S.C. §1341. Maryland characterized the Fair Share Act as a state law that imposes a tax on employers. The Court concluded that the Fair Share Act constitutes a "healthcare regulation," rather than a "tax."

In dissent, Judge Traxler argued that:

[B]ecause the Act does not force a covered employer to make a choice that impacts an employee benefit plan. An employer can comply with the Act either by paying assessments into the special fund or by increasing spending on employee health insurance. The Act expresses no preference for one method of Medicaid support or the other. As a result, the Act is not preempted by ERISA.

* * * * *

Maryland is being buffeted by escalating Medicaid costs. The [Maryland] Act is a permissible response to the problem. Because a covered employer has the option to comply with the Act by paying an assessment — a means that is not connected to an ERISA plan — I would hold that the Act is not preempted.

The opinion is available in PDF.