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Electronically Filed
Supreme Court
SCWC-30286
27-MAY-2015
09:41 AM
IN THE SUPREME COURT OF THE STATE OF HAWAII
---o0o---
________________________________________________________________
GARY W. RODRIGUES,
Petitioner/Plaintiff-Appellant,
vs.
UNITED PUBLIC WORKERS, AFSCME LOCAL 646, AFL-CIO,
Respondent/Defendant-Appellee.
________________________________________________________________
SCWC-30286
CERTIORARI TO THE INTERMEDIATE COURT OF APPEALS
(ICA NO. 30286; CIV. NO. 08-1-2538)
MAY 27, 2015
RECKTENWALD, C.J., NAKAYAMA, McKENNA, POLLACK, AND WILSON, JJ.
OPINION OF THE COURT BY WILSON, J.
I. Introduction
Petitioner Gary Rodrigues (Rodrigues) is the former
State Director of United Public Workers, AFSCME Local 646, AFL-
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CIO (UPW) and a former administrator of UPW’s Mutual Aid Fund
trust (MAF), an employee benefit plan established to provide
hospital and related benefits to UPW members and their families.
In 1998, Rodrigues, as the MAF’s plan administrator,
made six loans totaling $1.1 million to Best Rescue Systems,
Inc. (Best Rescue) a startup company located in Florida. Best
Rescue never repaid the loans and in October 2003, the MAF filed
a complaint in the United States District Court for the District
of Hawaii (federal district court) alleging, inter alia, that
Rodrigues was negligent in making the loans and had thus
breached his fiduciary duties as plan administrator to the MAF.
The federal district court1 found that the MAF is an
Employee Retirement Income Security Act (ERISA) plan under 29
U.S.C. § 1002(1) and that Rodrigues breached his fiduciary
duties to the MAF. DeCosta v. Rodrigues, Civ. No. 03-00598 DAE-
LEK, 2008 WL 1815716, at *6, *12 (D. Haw. Mar. 20, 2008), aff’d
sub nom. De Costa v. Rodrigues, 334 F. App’x 807 (9th Cir.
2009). The federal district court held Rodrigues liable for
making imprudent investments under ERISA and entered judgment
against him for five of the six failed loans in the amount of
$850,000. Id. at *14.
1
The Honorable David Alan Ezra presided.
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In 2008, Rodrigues filed a complaint in the Circuit
Court of the First Circuit (circuit court) seeking that UPW
indemnify him for the $850,000 plus attorneys’ fees and costs
incurred in defending the federal lawsuit on the grounds that
his liability to the MAF arose from actions he took solely in
his capacity as agent for UPW and/or that UPW ratified his
actions. UPW responded that Rodrigues was not entitled to
indemnification because he was negligent in making the loans,
and his indemnification claims were preempted by ERISA. The
circuit court agreed with UPW and granted summary judgment in
favor of UPW.
Rodrigues appealed to the Intermediate Court of
Appeals (ICA) arguing that his state indemnification claims were
not preempted under ERISA’s “implied conflict” doctrine because
they did not “duplicate, supplement, or supplant” remedies
provided by ERISA’s civil enforcement scheme. The ICA held that
ERISA did not preempt Rodrigues’ indemnification claims but
affirmed the circuit court, stating that “[b]ecause Rodrigues is
responsible for his own conduct, he is not entitled to be
indemnified for his negligent acts as a matter of law.”
Rodrigues v. United Public Workers, No. 30286, 2014 WL 983024,
at *12 (App. Mar. 13, 2014).
Rodrigues’ state indemnity claim derives from the
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federal district court’s conclusion that Rodrigues breached his
fiduciary duties to the MAF Plan, an employee benefit plan under
ERISA. Thus, we must enter the “ERISA preemption thicket” to
determine whether Rodrigues’ state law claim survives
preemption. Gonzales v. Prudential Ins. Co. of Am., 901 F.2d
446, 451-52 (5th Cir. 1990) (“Obviously, any court forced to
enter the ERISA preemption thicket sets out on a treacherous
path.”), superseded by statute on other grounds as recognized in
Guidry v. Nw. Mut. Life Ins. Co., 88 F. App’x 12, 13-14 (5th
Cir. 2004).
Rodrigues requested certiorari on the ground that the
ICA erred in concluding that his negligence defeats his
indemnification claim as a matter of law. We do not reach this
issue because we hold that ERISA preemption, not his negligence,
defeats Rodrigues’ state indemnity claims against UPW as a
matter of law.
II. Background
A. Facts
Rodrigues was the State Director of UPW from 1981
until 2002. UPW is a labor union representing government
employees as well as those who work in the private sector. In
July of 1984, UPW established the MAF. More than 10,000 persons
participate in the MAF. The MAF is funded entirely by
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contributions from UPW members, UPW employees, and its
dependents; employers do not contribute to the MAF. A majority
of employee participants are employed by the government.
Although the MAF is a 501(c)(9) trust and is a separate legal
entity from UPW, the MAF’s Board of Trustees (Board) includes
the President, Secretary-Treasurer, and the Vice Presidents of
five UPW divisions: Private Sector, Oahu, Maui, Kauai, and the
Big Island. As State Director, Rodrigues was not a member of
the Board; however, under the terms of the “Administrative
Services Agreement” entered between UPW and the MAF Board, UPW
agreed to “[r]eceive, collect, hold, invest and disburse all
money payable to or by the [MAF]” through its State Director
acting on behalf of UPW.
Beginning in 1998, Rodrigues acted as the MAF plan
administrator to make six loans totaling $1.1 million to Best
Rescue, a startup company located in Florida. Best Rescue never
returned the money. On October 31, 2003, the MAF filed a
complaint in federal district court, seeking recovery from
Rodrigues for all of the MAF’s losses resulting from its
investments in Best Rescue.
B. Federal District Court Proceedings
The MAF alleged the following counts in its federal
district court complaint: (1) breach of fiduciary duty in
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violation of 29 U.S.C. § 1104(a)(1)(A);2 (2) breach of fiduciary
duty by co-fiduciary pursuant to 29 U.S.C. § 1105;3 and (3)
engaging in prohibited transactions in violation of 29 U.S.C.
§ 1106(a)(1)(D).4
2
29 U.S.C. § 1104(a)(1)(A) (2012) provides:
(a) Prudent man standard of care
(1) Subject to sections 1103(c) and (d), 1342, and
1344 of this title, a fiduciary shall discharge his
duties with respect to a plan solely in the interest
of the participants and beneficiaries and—
(A) for the exclusive purpose of:
(i) providing benefits to participants
and their beneficiaries; and
(ii) defraying reasonable expenses of
administering the plan[.]
3
29 U.S.C. § 1105(a) (2012) states in relevant part:
[A] fiduciary with respect to a plan shall be liable
for a breach of fiduciary responsibility of another
fiduciary with respect to the same plan in the following
circumstances:
(1) if he participates knowingly in, or
knowingly undertakes to conceal, an act or omission
of such other fiduciary, knowing such act or omission
is a breach;
(2) if, by his failure to comply with section
1104(a)(1) of this title in the administration of his
specific responsibilities which give rise to his
status as a fiduciary, he has enabled such other
fiduciary to commit a breach; or
(3) if he has knowledge of a breach by such
other fiduciary, unless he makes reasonable efforts
under the circumstances to remedy the breach.
4
29 U.S.C. § 1106(a)(1)(D) (2012) states in relevant part:
A fiduciary with respect to a plan shall not cause
the plan to engage in a transaction, if he knows or should
know that such transaction constitutes a direct or
indirect-- . . .
(D) transfer to, or use by or for the benefit
of a party in interest, of any assets of the plan
. . . .
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After a three-day bench trial, the federal district
court entered its “Findings of Fact and Conclusions of Law.”
The federal district court first concluded that the MAF is an
employee benefit plan governed by ERISA pursuant to 29 U.S.C.
§ 1002(1),5 and that it had jurisdiction pursuant to 28 U.S.C.
§ 1331, which grants the district courts of the United States
original jurisdiction of all civil actions arising under the
Constitution, laws, or treaties of the United States. DeCosta,
2008 WL 1815716, at *6-7.
Second, focusing on Rodrigues’ activities rather than
his title as UPW’s State Director, the court found that the
evidence was “sufficient to establish by far more than a
preponderance of the evidence that [Rodrigues] exercised
discretionary authority and control over the management of the
[MAF’s] assets” in making the loans to Best Rescue. Id. at *9.
5
Pursuant to 29 U.S.C. § 1002(1) (2012):
The terms “employee welfare benefit plan” and
“welfare plan” mean any plan, fund, or program which was
heretofore or is hereafter established or maintained by an
employer or by an employee organization, or by both, to the
extent that such plan, fund, or program was established or
is maintained for the purpose of providing for its
participants or their beneficiaries, through the purchase
of insurance or otherwise, (A) medical, surgical, or
hospital care or benefits, or benefits in the event of
sickness, accident, disability, death or unemployment, or
vacation benefits, apprenticeship or other training
programs, or day care centers, scholarship funds, or
prepaid legal services, or (B) any benefit described in
section 186(c) of this title (other than pensions on
retirement or death, and insurance to provide such
pensions).
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The court additionally concluded that pursuant to 29 U.S.C.
§ 1104, plaintiffs had demonstrated by a preponderance of the
evidence that Rodrigues “clearly breached his fiduciary duties”
with respect to five of the six loans made to Best Rescue. Id.
at *11. Specifically, the federal district court concluded that
a prudent fiduciary would have done more before authorizing and
recommending further investments with Best Rescue after
Rodrigues’ first loan to the company. Id. at *12. The court
also concluded that the actions of the MAF Board in relation to
the failed investments did not make Rodrigues any less liable
for his own actions. Id. The court held that Rodrigues was
liable under ERISA for making imprudent investments and that he
was liable for five of the six failed loans, which totaled
$850,000. Id. at *14. The Ninth Circuit Court of Appeals
subsequently affirmed the federal district court’s judgment. De
Costa, 334 F. App’x at 810.
C. Hawaii State Court Proceedings
1. Circuit Court Proceedings
On December 9, 2008, Rodrigues filed a “Complaint for
Indemnity” in the circuit court, alleging that his liability to
the MAF “arose solely from acts and/or omissions” committed by
Rodrigues “in his capacity as agent of Defendant UPW and/or were
authorized and/or ratified by the trustees of the [MAF] and/or
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Defendant UPW.” Rodrigues sought indemnification from UPW in
the amount of $850,000 plus attorneys’ fees and costs incurred
in defending the ERISA breach of fiduciary duties action. UPW
filed an answer asserting multiple defenses, including ERISA
preemption.
Rodrigues moved the circuit court for partial summary
judgment in his favor as to the duty/liability of UPW to
indemnify Rodrigues for the loss he suffered in the federal
district court proceedings. Rodrigues argued that the
underlying actions for which he was held liable under ERISA were
within the scope of his performance of duties assigned to him by
UPW. Rodrigues thus asserted that UPW was vicariously liable to
the MAF for Rodrigues’ actions, and also directly liable for its
negligence in assigning him as the MAF’s administrator.
Accordingly, Rodrigues contended that UPW had a duty to
indemnify him for the federal district court judgment.
In opposition, UPW argued that Rodrigues had no right
of indemnity under ERISA and that ERISA preempted any alleged
state law indemnity claim. The circuit court agreed with UPW;
it concluded that Rodrigues’ indemnity claim was preempted by
ERISA and entered summary judgment in favor of UPW.6
2. ICA Proceedings
6
The Honorable Karl K. Sakamoto presided.
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On appeal to the ICA, Rodrigues argued that his action
was not preempted under the doctrine of implied conflict
preemption because his indemnity claim did not “‘duplicate[],
supplement[], or supplant[]’ remedies provided in ERISA’s civil
enforcement scheme.” He also asserted that his action was not
expressly preempted by ERISA’s preemption clause. Rodrigues
contended that his indemnification claim arose solely from his
employment relationship with UPW, which was not an ERISA party
in the underlying federal court action. Rodrigues thus argued
that his indemnity claim was not preempted by ERISA’s express
preemption clause because,
(1) his claims [were] entirely independent of any ERISA
duties or obligations; (2) adjudication of these claims
[would] not involve the plan’s administration and the
benefits provided; and (3) adjudication of these claims
[would] not encroach on any ERISA relationship or have any
impact on any ERISA plan or party.
(Citation omitted).
UPW argued that (1) under ERISA there is no right of
indemnity for a breaching fiduciary; (2) Rodrigues’ state law
indemnity claim was preempted by ERISA; (3) Rodrigues’ indemnity
claim was premature because he had not suffered a loss; and (4)
Rodrigues was an active wrongdoer, and accordingly, Rodrigues
should “bear the loss.”
The ICA held that ERISA did not preempt Rodrigues’
indemnity claim; it reasoned that because Rodrigues’ “liability
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to the plan for breach of his fiduciary duties had already been
established,” the resolution of his indemnity claims against UPW
“[did] not raise questions involving the [MAF’s] administration
and the benefits provided.” Rodrigues, 2014 WL 983024, at *8.
The ICA also explained that Rodrigues’ indemnity claim
did not supplement ERISA’s civil enforcement scheme because his
claim was an independent cause of action: “UPW’s alleged
obligation to indemnify derives not from the plan’s ‘particular
rights and obligations,’ but rather, from the alleged duties UPW
owed to Rodrigues by virtue of UPW designating Rodrigues as its
agent to serve as a plan fiduciary.” Id. at *9.
Recognizing, however, that the circuit court did not
address whether Rodrigues’ negligence was a bar to his indemnity
claim because it found the preemption issue dispositive, the ICA
entered summary judgment on the alternative ground that his own
negligence barred Rodrigues’ claim for indemnification.7 Id. at
*10-12.
III. Standards of Review
A. Motion for Summary Judgment
“We review [a] circuit court’s award of summary
7
The ICA concluded that it could “affirm a judgment of the lower
court on any ground in the record that supports affirmance.” Id. at *10
(quoting Canalez v. Bob’s Appliance Serv. Ctr., Inc., 89 Hawaii 292, 301, 972
P.2d 295, 304 (1999)) (internal quotation mark omitted).
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judgment de novo under the same standard applied by the circuit
court.” Garcia v. Kaiser Found. Hosps., 90 Hawaii 425, 429, 978
P.2d 863, 867 (1999) (alteration in original) (citing Amfac,
Inc. v. Waikiki Beachcomber Inv. Co., 74 Haw. 85, 104, 839 P.2d
10, 22 (1992)). “Summary judgment is appropriate if the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law.”
Amfac, 74 Haw. at 104, 839 P.2d at 22 (citation omitted)
(internal quotation marks omitted).
B. ERISA preemption
Questions of federal preemption under ERISA are
questions of law reviewable de novo under the right/wrong
standard. Ditto v. McCurdy, 90 Hawaii 345, 351, 978 P.2d 783,
789 (1999).
IV. Discussion
A. ERISA
ERISA is “the product of a decade of congressional
study of the Nation’s private employee benefit system.” Mertens
v. Hewitt Assocs., 508 U.S. 248, 251 (1993) (citing Nachman
Corp. v. Pension Benefit Guar. Corp., 446 U.S. 359, 361 (1980)).
It “is a comprehensive statute designed to promote the interests
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of employees and their beneficiaries in employee benefit plans.”
Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983). Employee
benefit plans covered under ERISA include pension plans as well
as welfare plans such as the MAF, which provides hospitalization
and related benefits for participating UPW employees and
members, and their dependents. See Massachusetts v. Morash, 490
U.S. 107, 113 (1989).
ERISA imposes various uniform standards for both
pension and welfare plans. Ingersoll-Rand Co. v. McClendon, 498
U.S. 133, 137 (1990). As part of this regulatory system,
Congress included “one of the broadest preemption clauses ever
enacted . . . .” Evans v. Safeco Life Ins. Co., 916 F.2d 1437,
1439 (9th Cir. 1990). The ERISA preemption clause, ERISA
§ 514(a), codified as 29 U.S.C. § 1144(a), states that ERISA
“shall supersede any and all State laws insofar as they may now
or hereafter relate to any employee benefit plan . . . .” 29
U.S.C. § 1144(a) (2012). “‘[S]tate laws’ include claims ‘based
upon common law of general application’” such as Rodrigues’
indemnity claim. See Garcia, 90 Hawaii at 431, 978 P.2d at 869
(quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 62
(1987)).
Questions involving this clause are recurrent in
state and federal courts. The number of ERISA preemption cases
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before the United States Supreme Court reflects the
“comprehensive nature of the statute, the centrality of pension
and welfare plans in the national economy, and their importance
to the financial security of the Nation’s work force.” Boggs v.
Boggs, 520 U.S. 833, 839 (1997); see also California Div. of
Labor Standards Enforcement v. Dillingham Const., N.A. Inc., 519
U.S. 316, 334-35 (1997) (Scalia, J., concurring) (“Since ERISA
was enacted in 1974, this Court has accepted certiorari in, and
decided, no less than 14 cases to resolve conflicts in the
Courts of Appeals regarding ERISA pre-emption of various sorts
of state law. The rate of acceptance, moreover, has not
diminished . . . .” (footnote omitted)).
“[D]eveloping a rule to identify whether ERISA”
expressly preempts a state law based on the “relate to” language
has “bedeviled the Supreme Court” and other federal courts. See
Dishman v. UNUM Life Ins. Co. of Am., 269 F.3d 974, 980 (9th
Cir. 2001) (citation omitted) (internal quotation marks
omitted); see also Gen. Am. Life Ins. Co. v. Castonguay, 984
F.2d 1518, 1521 (9th Cir. 1993) (“It’s far easier to make ‘I
know it when I see it’ decisions in this field than to come up
with a general rule, but we must nonetheless try.”). Attempts
at construing the “relate to” language have yielded a number of
tests. The Supreme Court has held that a law “relates to” an
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ERISA plan if it has a reference to or connection with such a
plan. Dillingham, 519 U.S. at 324. The Court has concluded
that a state law has a forbidden reference where it “acts
immediately and exclusively upon ERISA plans” and “where the
existence of ERISA plans is essential to the law’s operation.”
Id. at 325; see also District of Columbia v. Greater Washington
Bd. of Trade, 506 U.S. 125, 130 (1992) (“Section 2(c)(2) of the
[District of Columbia’s] Equity Amendment Act specifically
refers to welfare benefit plans regulated by ERISA and on that
basis alone is pre-empted.”); Mackey v. Lanier Collection Agency
& Serv., Inc., 486 U.S. 825, 828-30 (1988) (preempting a law
that specifically exempted ERISA plans from an otherwise
generally applicable garnishment provision).
In construing the “connection with” part of the test,
however, the Court recognized that applying this term was no
more help than trying to construe the phrase “relate to” in
ERISA’s preemption clause. New York State Conference of Blue
Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645,
656 (1995). The Court opined: “For the same reasons that
infinite relations cannot be the measure of pre-emption, neither
can infinite connections.” Id. Accordingly, the Court held:
“We simply must go beyond the unhelpful text and the frustrating
difficulty of defining [the preemption clause’s] key term, and
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look instead to the objectives of the ERISA statute as a guide
to the scope of the state law that Congress understood would
survive.” Id.
The Court reiterated Travelers’ holding and provided
further guidance in De Buono v. NYSA-ILA Medical and Clinical
Services Fund, 520 U.S. 806, 813 (1997). In De Buono, the Court
explained that in its “earlier ERISA pre-emption cases, it had
not been necessary to rely on the expansive character of ERISA’s
literal language in order to find pre-emption because the state
laws at issue in those cases had a clear connection with or
reference to ERISA benefit plans.” De Buono, 520 U.S. at 813
(citation omitted) (internal quotation marks omitted). The
Court explained, however, that “ERISA’s ‘relates to’ language
was [not] intended to modify ‘the starting presumption that
Congress does not intend to supplant state law.’” Id. (quoting
Travelers, 514 U.S. at 654); see also John Hancock Mut. Life
Ins. Co. v. Harris Trust & Sav. Bank, 510 U.S. 86, 99 (1993)
(“[W]e discern no solid basis for believing that Congress, when
it designed ERISA, intended fundamentally to alter traditional
preemption analysis.”).
Since then, the Court has consistently looked to the
purposes and objectives of ERISA, and applied ordinary
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preemption principles in its ERISA preemption cases.8 See, e.g.,
Aetna Health Inc. v. Davila, 542 U.S. 200, 209, 217-18 (2004)
(preempting respondents’ state tort claim seeking to rectify a
wrongful denial of benefits because it would “pose an obstacle
to the purposes and objectives of Congress” because it
“conflict[ed] with the clear congressional intent to make the
ERISA remedy exclusive” (quoting Pilot Life Ins. Co. v. Dedeaux,
481 U.S. 41, 52 (1987)) (internal quotation marks omitted));
Boggs, 520 U.S. at 841 (“We can begin, and in this case end, the
analysis by simply asking if state law conflicts with the
provisions of ERISA or operates to frustrate its objects. . . .
We need not inquire whether the statutory phrase ‘relate to’
provides further and additional support for the pre-emption
claim.”); see also Dillingham, 519 U.S. at 336 (Scalia, J.,
concurring) (“I think it accurately describes our current ERISA
8
Justices Scalia, Ginsburg, and Breyer have urged the court to
completely abandon the application of the “relate to” language in ERISA’s
preemption clause and instead, apply ordinary principles of preemption in
ERISA cases. In a concurring opinion joined by Justice Ginsburg, Justice
Scalia opined that the Court’s “first take” of the preemption provision was
wrong. Dillingham, 519 U.S. at 336 (Scalia, J., concurring). He explained
that the “relate to” clause of the preemption provision was meant, “not to
set forth a test for pre-emption, but rather to identify the field in which
ordinary field pre-emption applies-namely, the field of laws regulating”
employee benefit plans. Id.; see also Egelhoff v. Egelhoff, 532 U.S. 141,
153 (2001) (Breyer, J., dissenting) (noting his “fear” that “failure to
endorse” Justice Scalia’s approach in Dillingham, applying normal conflict
and field preemption principles in ERISA cases, would continue to produce an
“avalanche of litigation” as courts struggled to interpret ERISA’s preemption
clause (citation omitted) (internal quotation marks omitted)).
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jurisprudence to say that we apply ordinary field pre-emption,
and, of course, ordinary conflict pre-emption.”).
This court has similarly endeavored to apply
traditional preemption principles in our own ERISA cases,
recognizing that state law may be expressly or impliedly
preempted by federal law. See Garcia, 90 Hawaii at 430, 978
P.2d at 868 (“[W]e are presented with the question whether
Congress, in ERISA, expressly or impliedly intended to preempt
the state law claims asserted in Plaintiffs’ complaint.”).
We have held that state law claims asserted by
beneficiaries for improper processing of claims for benefits
under an ERISA plan are expressly preempted by ERISA. Id. at
432, 978 P.2d at 870. This is so because “Congress clearly
expressed an intent” that ERISA’s civil enforcement provision
“be the exclusive vehicle for actions by ERISA-plan participants
and beneficiaries asserting improper processing of a claim for
benefits, and that varying state causes of action for claims
within the scope [of these provisions] would pose an obstacle to
the purposes and objectives of Congress.” Pilot, 481 U.S. at
52. Accordingly, based on “the clear expression of
congressional intent that ERISA’s civil enforcement scheme be
exclusive,” ERISA expressly preempts such state causes of
action. Id. at 57; see also AFL Hotel & Rest. Workers Health &
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Welfare Trust Fund v. Bosque, 110 Hawaii 318, 324, 132 P.3d
1229, 1235 (2006) (“[S]tate law claims are expressly preempted
where they rely on a person’s ‘status as a beneficiary under the
[ERISA] plan and ar[i]se from the administration of benefits
under the plan.’” (alterations in original) (quoting Garcia, 90
Hawaii at 433, 978 P.2d at 871)).
In addition to express preemption, this court has
recognized that a federal statute can impliedly preempt state
law under field or conflict preemption. Under implied field
preemption, a federal statute preempts state law “when the scope
of a statute indicates that Congress intended federal law to
occupy a field exclusively . . . .” Freightliner Corp. v.
Myrick, 514 U.S. 280, 287 (1995) (citing English v. Gen. Elec.
Co., 496 U.S. 72, 78-79 (1990)). Under implied conflict
preemption, a federal statute preempts state law “when state law
is in actual conflict with federal law.” Id. Implied conflict
preemption has been found “where it is impossible for a private
party to comply with both state and federal requirements, or
where state law stands as an obstacle to the accomplishment and
execution of the full purposes and objectives of Congress.” Id.
(citations omitted) (internal quotation marks omitted).
We applied the doctrine of implied conflict preemption
in a case involving a Hawaii state statute. In Hawaii
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Management Alliance Association v. Insurance Commissioner, we
concluded that a Hawaii statute that provided an independent
review of an insurer’s denial of benefits and provided claimants
the right to appeal that denial to the courts, allowing for a
judicial determination of the claimants entitlement to benefits,
was preempted. 106 Hawaii 21, 34-35, 100 P.3d 952, 965-66
(2004). We explained that in cases involving ERISA plans, such
adjudication was in actual conflict with ERISA’s civil
enforcement scheme, which the Supreme Court had concluded was
intended to be exclusive. Id. Accordingly, we held that
ERISA’s civil enforcement scheme impliedly preempted the Hawaii
statute under the doctrine of conflict preemption. Id. at 29-
30, 100 P.3d at 960-61.
The instant case is distinguishable from our previous
cases because it does not involve a claim for benefits under an
ERISA plan. Rather, the state law in the instant case is a
common law indemnification claim based on Rodrigues’ allegations
that UPW negligently supervised him in his role as an ERISA
fiduciary and thus, UPW, not he, should be held liable for his
breach of fiduciary duties under ERISA. Congress’s intent to
preempt such claims is not explicitly stated in ERISA’s language
nor is it clear on its face that the claim “relates to” an
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employee benefit plan within the meaning of ERISA’s preemption
clause.
Notwithstanding, we hold that Rodrigues’ state law
claim is in conflict with ERISA. Allowing Rodrigues to proceed
with his state law claim would pose an obstacle to the purposes
and objectives of Congress in enacting ERISA. See Boggs, 520
U.S. at 844 (“Conventional conflict pre-emption principles
require pre-emption . . . where state law stands as an obstacle
to the accomplishment and execution of the full purposes and
objectives of Congress.” (quoting Gade v. Nat’l Solid Wastes
Mgmt. Ass’n, 505 U.S. 88, 98 (1992)) (internal quotation mark
omitted)). Accordingly, Rodrigues’ state law claim cannot
survive under the doctrine of implied conflict preemption.
B. Rodrigues’ State Law Claim is Preempted
ERISA’s central focus is on the administrative
integrity of benefit plans. Fort Halifax Packing Co., Inc. v.
Coyne, 482 U.S. 1, 18 (1987). “In enacting ERISA, Congress’[s]
primary concern was with the mismanagement of funds accumulated
to finance employee benefits and the failure to pay employees
benefits from accumulated funds.” Morash, 490 U.S. at 115.
“Thus, Congress enacted ERISA . . . to protect plan participants
and beneficiaries from abuses and mismanagement in the
administration of employee pension and benefit plans.” Hawaii
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Laborers’ Trust Funds v. Maui Prince Hotel, 81 Hawaii 487, 493,
918 P.2d 1143, 1149 (1996). To this end, Congress “established
extensive reporting, disclosure, and fiduciary duty requirements
to insure against the possibility that the employee’s
expectation of the benefit would be defeated through poor
management by the plan administrator.” Morash, 490 U.S. at 115;
see also 29 U.S.C. § 1001 (2012) (declaring the policies of
ERISA).
The role of the ERISA fiduciary is critical to the
administrative integrity of an employee benefit plan. Congress
recognized that “without standards by which a participant can
measure the fiduciary’s conduct, [a participant] is not equipped
to safeguard either his [or her] own rights or the plan assets.”
Bird v. Shearson Lehman/Am. Express, Inc., 926 F.2d 116, 123 (2d
Cir. 1991) (citation omitted). ERISA thus specifies stringent
standards of conduct and responsibility on fiduciaries of
employee benefit plans to prevent potential fiduciary abuse.
Pilot Life, 481 U.S. at 44; Coyne, 482 U.S. at 15.
The duties imposed by ERISA are “the highest known to
the law.” Johnson v. Couturier, 572 F.3d 1067, 1082 (9th Cir.
2009) (quoting Howard v. Shay, 100 F.3d 1484, 1488 (9th Cir.
1996)) (internal quotation marks omitted). Congress chose to
hold plan fiduciaries to this high standard “to promote the
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interests of employees and their beneficiaries in employee
benefit plans[.]” Id. (quoting Shaw, 463 U.S. at 90) (internal
quotation marks omitted). An ERISA fiduciary must “discharge
his duties . . . solely in the interest of the participants and
beneficiaries” of the plan, and “for the exclusive purpose[s] of
. . . providing benefits to plan participants and their
beneficiaries[,]” and “defraying reasonable expenses of
administering the plan[.]” 29 U.S.C. § 1104(a)(1)(A)(i)-(ii).
In further support of these rigorous fiduciary
responsibilities, ERISA holds its fiduciaries personally liable
for their breaches. Pursuant to 29 U.S.C. § 1109(a), a
fiduciary is personally liable for (1) “damages (to make good to
[the] plan any losses to the plan resulting from each such
breach)”; (2) “restitution (to restore to [the] plan any profits
of such fiduciary which have been made through use of assets of
the plan by the fiduciary)”; and (3) “such other equitable or
remedial relief as the court may deem appropriate, including
removal of the fiduciary.” Mertens, 508 U.S. at 252
(alterations in original) (quoting 29 U.S.C. § 1109(a) (1988))
(internal quotation marks omitted). ERISA forbids agreements
that relieve fiduciaries from such liability. Under 29 U.S.C.
§ 1110(a), “any provision in an agreement or instrument which
purports to relieve a fiduciary from responsibility or liability
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for any responsibility, obligation, or duty . . . [is] void as
against public policy.” 29 U.S.C. § 1110(a) (2012).
In this case, Rodrigues portrays himself not as a
fiduciary, but as a mere agent performing duties at the
direction of his principal, UPW. Rodrigues argues that UPW
assigned him to invest the MAF funds, was aware of the MAF
investments in Best Rescue, and acquiesced to them; thus UPW,
not he, should be held liable for the $850,000 judgment imposed
by the federal district court. We disagree.
ERISA’s regulatory standards and fiduciary provisions
were deliberately crafted to safeguard employees and “prevent
abuses of the special responsibilities borne by those dealing
with employee benefit plans” including “self-dealing, imprudent
investing, and misappropriation of plan funds.” Coyne, 482 U.S.
at 15 (citation omitted) (internal quotation marks omitted).
Rodrigues was more than simply UPW’s agent and employee; he was
the MAF’s administrator and an ERISA fiduciary. The federal
district court concluded that the evidence was “sufficient to
establish by far more than a preponderance of the evidence that
[Rodrigues] exercised discretionary authority and control over
the management of the [MAF’s] assets” in making the loans to
Best Rescue. DeCosta, 2008 WL 1815716, at *9. Accordingly,
Rodrigues’ actions with respect to the loans must be evaluated
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in his capacity as an ERISA fiduciary, not as an agent and
employee with no discretion or control over the MAF’s assets.
We also emphasize that contributions to the MAF are
made by UPW members, UPW employees, and their dependents;
contributions are not made by their employers. Thus, Rodrigues
seeks indemnity, essentially a dollar for dollar reimbursement
from UPW, for the liability he incurred for his mismanagement of
the MAF funds, not simply from his employer, UPW, but from the
very participants to whom he breached his duties. Under these
circumstances, permitting Rodrigues’ state indemnity claim would
undermine ERISA’s goal of protecting plan participants and
beneficiaries from abuses and mismanagement in the
administration of employee benefit plans. “In the face of this
direct clash between state law and the provisions and objectives
of ERISA, the state law cannot stand.” Boggs, 520 U.S. at 844.
We “are not free to change ERISA’s structure and balance” to
permit Rodrigues to escape any liability for his imprudent
investing. Id. ERISA requires fiduciaries to be personally
liable for damages to the plan resulting from a fiduciary
breach. Accordingly, we hold Rodrigues’ claim is preempted.
V. Conclusion
For the foregoing reasons, we hold that the circuit
court correctly concluded that Rodrigues’ indemnity claim was
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preempted by ERISA. Accordingly, we affirm the ICA’s April 15,
2014 judgment on appeal, entered pursuant to its March 13, 2014
opinion, on the grounds stated in this opinion.
Eric A. Seitz and /s/ Mark E. Recktenwald
Della A. Belatti,
for petitioner /s/ Paula A. Nakayama
James E.T. Koshiba and /s/ Sabrina S. McKenna
Charles A. Price
for respondent /s/ Richard W. Pollack
/s/ Michael D. Wilson
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Rodrigues v. United Public Workers, AFSCME Local 646, AFL-CIO.
Court: Hawaii Supreme Court
Date filed: 2015-05-27
Citations: 135 Haw. 316, 349 P.3d 1171
Copy CitationsCombined Opinion