Case: 10-20243 Document: 00511369715 Page: 1 Date Filed: 02/02/2011
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
February 2, 2011
No. 10-20243 Lyle W. Cayce
Clerk
JOE RENE GARCIA,
Plaintiff - Appellant
v.
BEST BUY STORES, L.P.; OCCUPATIONAL HEALTH BENEFITS PLAN
FOR THE TEXAS EMPLOYEES OF BEST BUY STORES, L.P.,
Defendants - Appellees
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 4:07-CV-851
Before JONES, Chief Judge, and DENNIS and CLEMENT, Circuit Judges.
PER CURIAM:*
This employee-benefit case is governed by the Employee Retirement
Income Security Act of 1974 (“ERISA”). See 29 U.S.C. § 1001 et seq. Joe Rene
Garcia, an employee of Best Buy Stores, L.P. and a beneficiary of the
Occupational Health Benefits Plan for the Texas Employees of Best Buy Stores,
L.P., (“the Plan,” and together with Best Buy Stores, L.P., “Best Buy”) appeals
*
Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
Case: 10-20243 Document: 00511369715 Page: 2 Date Filed: 02/02/2011
from the district court’s grant of final judgment in favor of Best Buy. We
AFFIRM.
FACTS AND PROCEEDINGS
The facts underlying Garcia’s claim are uncomplicated and largely
undisputed. Garcia, a store manager at a Best Buy in Houston, claims he was
injured while loading a dishwasher into a delivery truck. Best Buy is a non-
subscriber to the Texas Workers’ Compensation Act and, as such, has
implemented the Plan. The Plan provides benefits for covered injuries suffered
by Best Buy employees in the course and scope of employment. Garcia submitted
a claim for compensation for his injuries to the Plan administrator, who denied
the claim for failing to comply with the Plan’s requirement that injuries be
reported within twenty-four hours. Garcia appealed to the Plan’s Steering
Committee, arguing 1) that his report of injury was timely; 2) that the twenty-
four hour reporting requirement violated Department of Labor regulations; and
3) that the Texas’s notice-prejudice rule should be applied to his claim for
benefits. The Steering Committee denied Garcia’s appeal and “did not address
any of Garcia’s three legal arguments” in its decision. Garcia v. Best Buy Stores
L.P., No. 4:07-CV-851, 2009 U.S. Dist. LEXIS 82212, at *10 (S.D. Tex. Sept. 10,
2009). Garcia then brought suit in the district court, advancing the same
arguments he made before the Steering Committee.
The case became “a procedural mess.” See id. at *1–2. Eventually, Garcia
moved for summary judgment. Best Buy opposed the motion, and Garcia filed
a reply. The district court denied summary judgment and gave the parties two
weeks to “present to the Court any reason why a final judgment should NOT be
entered in this case.” Id. at *10. Garcia filed a motion for reconsideration. Best
Buy opposed the motion. The district court denied Garcia’s motion to reconsider
and entered final judgment in favor of Best Buy. Garcia timely appealed to this
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court only as to the issue of whether Texas’s notice-prejudice rule should be
applied to his claim.
STANDARD OF REVIEW
“The grant or denial of a motion for summary judgment is reviewed de
novo.” Smith v. Am. Family Life Assur. Co. of Columbus, 584 F.3d 212, 215 (5th
Cir. 2009). Summary judgment is proper only if there are no genuine issues of
material fact and the moving party is entitled to judgment as a matter of law.
F ED. R. C IV. P RO. 56(a).
DISCUSSION
A. Texas’s Notice-Prejudice Rule
In 2008, the Texas Supreme Court clarified a somewhat-muddled area of
Texas law and determined that an insured’s failure to timely notify its insurer
of a claim does not defeat coverage under the policy unless the insurer was
prejudiced by the delay. PAJ, Inc. v. Hanover Ins. Co., 243 S.W.3d 630, 636–37
(Tex. 2008). In so doing, the Texas Supreme Court affirmed its earlier holding
that “an immaterial breach does not deprive the insurer of the benefit of the
bargain and thus cannot relieve the insurer of the contractual coverage
obligation.” Id. at 631. This court had previously noted that leading treatises
recognized “a modern trend in favor of requiring proof of prejudice” and its belief
that “the Texas Supreme Court would follow this modern trend.” Hanson Prod.
Co. v. Americas Ins. Co., 108 F.3d 627, 631 (5th Cir. 1997).
Application of Texas’s notice-prejudice rule to Garcia’s claim would require
Best Buy to demonstrate that it was prejudiced by Garcia’s failure to report his
injury within twenty-four hours. Best Buy did not make any showing of
prejudice in either its initial denial of benefits or its denial of Garcia’s appeal.
B. ERISA’s Effect on Texas’s Notice-Prejudice Rule
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The parties do not dispute that the Plan is an employee benefit plan
subject to ERISA. Generally, ERISA “supersede[s] any and all State laws insofar
as they may now or hereafter relate to any employee benefit plan” described in
ERISA. 29 U.S.C. § 1144(a). “The pre-emption clause is conspicuous for its
breadth.” FMC Corp. v. Holliday, 498 U.S. 52, 58 (1990). “As an exception,
however, ERISA’s so-called savings clause allows state laws ‘which regulate
insurance, banking, or securities’ to survive ERISA preemption.” Ellis v. Liberty
Life Assur. Co., 394 F.3d 262, 276 (5th Cir. 2004) (citing 29 U.S.C.
§ 1144(b)(2)(A)). For a state law to be deemed a “law . . . which regulates
insurance” under the savings clause, “it must satisfy two requirements. First,
the state law must be specifically directed toward entities engaged in insurance.
Second . . . the state law must substantially affect the risk pooling arrangement
between the insurer and the insured.” Ky. Ass’n of Health Plans, Inc. v. Miller,
538 U.S. 329, 341-342 (2003) (citations omitted). Finally, the “deemer clause” in
29 U.S.C. § 1144(b)(2)(B) “restricts the savings clause, as it exempts employee
benefit plans from state regulation as insurance companies.” Custom Rail
Emplr. Welfare Trust Fund v. Geeslin, 491 F.3d 233, 235 (5th Cir. 2007).
In UNUM Life Insurance Company v. Ward, the Supreme Court
determined that California’s notice-prejudice rule is a “‘law . . . which regulates
insurance’ and is therefore saved from preemption by ERISA.”1 526 U.S. 358, 364
1
In Ward, the Supreme Court applied a two-part test first announced in Metropolitan
Life Insurance Co. v. Massachusetts, 471 U.S. 724 (1985), to determine whether an insurance
law would be saved from preemption by virtue of the ERISA savings clause. Ward, 526 U.S.
at 367. Briefly, that test required the court to determine first whether, “from a common-sense
view of the matter, the contested prescription regulates insurance” and second, to address the
“business of insurance as that phrase is used in the McCarran-Ferguson Act.” Id. (quotations
omitted). In Miller, the court made “a clean break from the McCarran-Ferguson factors” and
announced the current test as stated above. Miller, 538 U.S. at 341–42.
Although Ward was decided under the former test, its holding that the California
notice-prejudice rule triggers the savings clause remains sound. The Court observed that the
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(1999). The Court noted that California’s notice-prejudice rule prescribes “a
defense based on an insured’s failure to give timely notice [of a claim] requires
the insurer to prove that it suffered actual prejudice. Prejudice is not presumed
from delayed notice alone. The insurer must show actual prejudice, not the mere
possibility of prejudice.” Id. at 366–67 (alteration in original) (citation omitted).
The district court properly determined that Texas’s notice-prejudice rule “is not
substantially different from California’s [as described] in Ward “and properly
concluded that Texas’s rule “‘regulates insurance’ under the savings clause
. . . and is applicable to ERISA-regulated plans.” Garcia, 2009 U.S. Dist. LEXIS
82212 at *28.
The deemer clause, however, provides an important limitation. “We read
the deemer clause to exempt self-funded ERISA plans from state laws that
‘regulate insurance’ within the meaning of the saving clause.” FMC Corp. v.
Holliday, 498 U.S. 52, 61 (1990). “State laws that directly regulate insurance are
‘saved’ but do not reach self-funded employee benefit plans because the plans
may not be deemed to be insurance companies, other insurers, or engaged in the
business of insurance for purposes of such state laws.” Id. The district court
stated that “[i]t is undisputed that Best Buy’s plan is self-insured,” Garcia, 2009
U.S. Dist. LEXIS 82212 at *29, and accordingly concluded that Texas’s notice-
prejudice rule was not applicable to Garcia’s claim.
C. Waiver
California notice-prejudice rule “by its very terms, is directed specifically at the insurance
industry and is applicable only to insurance contracts” and that the rule “controls the terms
of the insurance relationship.” Ward, 526 U.S. at 368 (quotations omitted). In Miller, the Court
affirmed that “[t]he notice-prejudice rule governs whether or not an insurance company must
cover claims submitted late, which dictates to the insurance company the conditions under
which it must pay for the risk that it has assumed. This certainly qualifies as a substantial
effect on the risk pooling arrangement between the insurer and insured.” Miller, 538 U.S. at
339 n.3.
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On appeal, Garcia argues that the district court erred in entering final
judgment in Best Buy’s favor2 and holding that ERISA preempts Texas’s notice-
prejudice rule for two reasons:
1) because “[t]he record does not include, and Best Buy Plan has
never cited to, any evidence that the Best Buy is self-insured”; and
2) because “[p]reemption is an affirmative defense, and therefore
must be pleaded. Best Buy never pleaded—indeed, never even
argued—that preemption applies to the Texas notice-prejudice rule.”
Best Buy argues that Garcia has waived these arguments. We agree.
Garcia has waived these arguments by not raising them before the district
court. Marco Ltd. P’ship v. Wellons, Inc., 588 F.3d 864, 877 (5th Cir. 2009)
(“[A]rguments not raised before the district court are waived and cannot be
raised for the first time on appeal.”). Garcia argues that he has relied upon the
issue of the application of the notice-prejudice rule throughout this dispute.
However, Garcia misapprehends waiver. He “may not advance on appeal new
theories or raise new issues not properly before the district court to obtain
reversal of the [final] judgment.” Dunbar v. Seger-Thomschitz, 615 F.3d 574, 576
(5th Cir. 2010) (citing Little v. Liquid Air Corp., 37 F.3d 1069, 1071 (5th Cir.
1994) (en banc)). “We will not consider an issue that a party fails to raise in the
district court, absent extraordinary circumstances.” N. Alamo Water Supply
Corp. v. City of San Juan, Tex., 90 F.3d 910, 916 (5th Cir. 1996). “Extraordinary
2
Garcia’s briefing mistakenly states that the district court granted summary judgment
in favor of Best Buy. The record reflects that Best Buy never moved for summary judgment,
but rather only opposed Garcia’s own motion for summary judgment and motion for
reconsideration. The district court did enter final judgment in Best Buy’s favor, and the court
will treat Garcia’s appeal of the district court’s (nonexistent) order “granting summary
judgment in favor of Best Buy” as an appeal of the final judgment.
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circumstances exist when the issue involved is a pure question of law and a
miscarriage of justice would result from our failure to consider it.” Id.
Before the district court, Garcia argued that 1) Texas’s “Notice Prejudice
Rule applies to the Plan under the savings clause of ERISA” and 2) “the Notice
Prejudice Rule applies as a matter of federal common law.” Garcia, 2009 U.S.
Dist. LEXIS 82212 at *26. In denying Garcia’s motion for summary judgment,
the district court held that, due to the deemer clause’s limitation on the savings
clause, “the Notice Prejudice Rule will not be applicable by virtue of state law to
ERISA plans that are self-insured.” Id. at *29. The district court also declined
to create federal common law and apply the notice-prejudice rule to all ERISA
plans. Id. In the same order denying Garcia’s motion for summary judgment, the
district court gave the parties an opportunity to “present to the Court any reason
why a final judgment should NOT be entered in this case.” Id. at *30. With the
benefit of the district court’s analysis and opinion, Garcia afforded himself this
opportunity and moved the district court to reconsider its order. In his motion
to reconsider, Garcia argued that Ward, supra, did not “prohibit the application
of the notice-prejudice rule to self-insured plans.” He further argued that insured
and self-insured plans should be held to the same standard and that “[a]doption
of notice prejudice as a [sic] federal common law would assure a consistency of
treatments by the plans, the participates [sic], and the courts.”
On appeal, Garcia has abandoned the argument that federal common law
should be created to apply the notice-prejudice rule to all ERISA plans. E.g.,
Cinel v. Connick, 15 F.3d 1338, 1345 (5th Cir. 1994) (“An appellant abandons all
issues not raised and argued in its initial brief on appeal.”). Instead Garcia now
recognizes that, under the deemer clause, “[s]elf-funded plans are merely
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‘deemed’ to be insurers, and so are exempt from state laws and regulations, such
as the notice-prejudice rule.”
For the first time on appeal, Garcia advances two entirely new theories
why Texas’s notice-prejudice rule should be applied to the Plan. He now
contends that there is no evidence in the record that the Plan is self-insured and,
alternatively, that Best Buy waived preemption as an affirmative defense by
failing to raise preemption in its answer. We decline to address these arguments.
“‘[T]he Court will not allow a party to raise an issue for the first time on appeal
merely because a party believes that he might prevail if given the opportunity
to try a case again on a different theory.’” Leverette v. Louisville Ladder Co., 183
F.3d 339, 342 (5th Cir. 1999) (quoting Forbush v. J.C. Penney Co., 98 F.3d 817,
822 (5th Cir. 1996)). Nowhere in his multiple filings before the district
court—which include a complaint, an amended complaint, a trial brief, a motion
for summary judgment, a supplemental motion for summary judgment, a reply
brief, and a motion for reconsideration—does Garcia ever assert the theories he
advances on appeal.
In sum, Garcia seeks to try the notice-prejudice issue “anew because [he]
has discovered a more attractive theory.” McDonald v. Bd. of Miss. Levee
Comm’rs, 832 F.2d 901, 909 (5th Cir. 1987). But he has “waived [his] arguments
not presented below” and “we will not disturb [the district court’s] thoughtful
decision on the basis of a legal theory asserted for the first time on appeal.” Id.
“The trial court cannot have erred as to matters which were not presented to it.”
Gabel v. Lynaugh, 835 F.2d 124, 125 (5th Cir. 1988). Garcia offered no reason
why he did not present this theory to the district court and has made no showing
that extraordinary circumstances exist such that his new theories should be
explored for the first time on appeal.
CONCLUSION
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The judgment of the district court is AFFIRMED.
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