Lawyer Argues ERISA Preemption Statute Must Be Curtailed; Plan Participants Are Being Deprived of Constitutional Right to Due Process of Law

[Dave Baker]

Lawyer Brooks Hamilton has authored a work entitled Proposition: The Inalienable Rights of We The People to Life, Liberty, the Pursuit of Happiness, Due Process of Law ... Trump Any Authority (Constitutional or Otherwise) Asserted by Congress to Mandate Uniform National Laws Preempting Such Inalienable Rights

11 pages.

Mr. Hamilton is a longtime observer of retirement plans, especially 401(k) plans.

• Transcript of Frontline Interview with Brooks Hamilton
  
• Opinion: 401k Plans -- Is the Story Under-told or Over-sold?
  
• Opinion: Retirement Planning and 401(k) Decisions
  
• Others (click)
  

Comments here are welcome!

[Steelerfan]

I don't see at least one important point discussed there, which is that Congress is considered to have positive power as a result of the Supreme Court's broad interpretation of Congress's ability to regulate in areas that, prior to when the SC caved in, it could not historically regulate. As stated in the statute, Congress passed ERISA under the authority of the commerce clause, which is a positive power.

So it's a combination of the Supreme Court reversing it's historically narrow view of Congress's power to regulate under the commerce clause and Congress seeming need to control every aspect of our lives that is killing us. Maybe the course can be reversed, but it's hard to imagine.

[Guest Brooks]

It was not so much a question of whether or not Congress had the legislative power to pass an ERISA type law per se, whatever the powers theory. The issue intended to be put forth for discussion was whether or not Congress had the power to void and thus extinguish, by means of a direct and absolute preemption, ALL other laws, thus abolishing an inalienable right of "We the People" that had existed long before ERISA. Hamilton argues that Congress has no such right.

[Guest Ira Hayes]

Federal law is supreme via a consensus acroos the nation made up of a multitude of special interests. Either obey the law or change it.

If you can't do either, then move to Iraq.

[david rigby]

Federal law is supreme via a consensus acroos the nation made up of a multitude of special interests.

Consensus? Shouldn't that be Amendment 14?

[Steelerfan]

It was not so much a question of whether or not Congress had the legislative power to pass an ERISA type law per se, whatever the powers theory. The issue intended to be put forth for discussion was whether or not Congress had the power to void and thus extinguish, by means of a direct and absolute preemption, ALL other laws, thus abolishing an inalienable right of "We the People" that had existed long before ERISA. Hamilton argues that Congress has no such right.

I think both issues are there, but it's pretty well settled that where Congress has the authority to regulate, it has the authority to preempt state law since such laws could frustrate a legitimate federal regulatory purpose. The root issue is clearly whether congress has or should have constitutional authority to regulate. If not, the states presumably "retain" such authority. If not, the proper inquiry should be to what extent, if any, should regulatory authority be retained by the states.

[Guest mjb]

It was not so much a question of whether or not Congress had the legislative power to pass an ERISA type law per se, whatever the powers theory. The issue intended to be put forth for discussion was whether or not Congress had the power to void and thus extinguish, by means of a direct and absolute preemption, ALL other laws, thus abolishing an inalienable right of "We the People" that had existed long before ERISA. Hamilton argues that Congress has no such right.

There are erudite people who claim that the income tax laws are invalid because Ohio never properly ratified the 16th amendment and taxpayers who claim that the regs under IRC 861 exempt the w-2 income of US citizens from federal income tax but no court has ever agreed with such preposterious nonsense. Why is your idea different?

Under your idea of federalism Congress could never enact a federal law that would supercede any pre existing state law which has never been accepted by the US Supreme Ct.

[Steelerfan]

Right on--every now and then in a tax case, even recently, the court will address an argument that income taxes are unconstitutional. These arguments are addressed because they have to be, but are treated like a joke in the legal community, that's one reason why judges don't like taxpayers who represent themself.

We could waste the rest of our lives talking theory about what the forefather's said or believed, etc., but I'm not aware of anyone who ever put forth the proposition that Congress does or should have "the power to void and thus extinguish, by means of a direct and absolute preemption, ALL other laws, thus abolishing an inalienable right of "We the People" that had existed long before ERISA." If Congress is acting this way, we obviously have a big problem, but I think the Supreme Court provides the best opportunity to correct because ratifing new amendments to the Constitution doesn't seem plausible or likely in today's politics. We have to seek practical solutions.

At the risk of repeating myself, the bulk of the regulatory authority that has been seized by Congress is thought to be valid as pursuant to the commerce clause of the constitution. the Supreme Court finally gave in to the government's argument that it should be allowed to legislate in any area that is or could be affected by interstate commerce (the dormant commerce clause). The practical effect of this has been that just about every human activity affects or could affect interstate commerce thus Congress has been unstoppable in areas it want to regulate. (compounding the problem further is that states are dependent on federal money and the feds are permitted to attach conditions to the money, so the federal government can further regulate it areas that it normally wouldn't be able to by virtue of the conditional money)

The best way to reverse these problems without talking about amorphous inalienable rights of WE THE PEOPLE is to try get a supreme court that is willing to chip away at this vast power in a number of ways. Such as not interpreting ERISA's preemption provision as broadly as they have in the past or perhaps holding that it is unconstitionally vague and overbroad. Lawyers should bring certain case through the federal courts--then the Supreme Court should slowly scale back on the dormant commerce clause theory little by little by narrowing it's scope. But we need a Supreme Court willing to loosen the stare decisis principles just a little to bring us back to the proper balance of power.

[Guest Brooks]

It was not so much a question of whether or not Congress had the legislative power to pass an ERISA type law per se, whatever the powers theory. The issue intended to be put forth for discussion was whether or not Congress had the power to void and thus extinguish, by means of a direct and absolute preemption, ALL other laws, thus abolishing an inalienable right of "We the People" that had existed long before ERISA. Hamilton argues that Congress has no such right.

There are erudite people who claim that the income tax laws are invalid because Ohio never properly ratified the 16th amendment and taxpayers who claim that the regs under IRC 861 exempt the w-2 income of US citizens from federal income tax but no court has ever agreed with such preposterious nonsense. Why is your idea different?

Under your idea of federalism Congress could never enact a federal law that would supercede any pre existing state law which has never been accepted by the US Supreme Ct.

First, I regret being misunderstood. I believe that the Supremacy Clause enables Congress to pass laws that supercede state laws, and I have no problem with that fact. But I also believe that certain rights (life, liberty, pursuit of happiness, due process, equal protection, speech, religion, assembly, et cetera) are "inalienable" and thus cannot be abolished by Congress. I merely seek to encourage public discussion as to whether Congress can pass a national uniform law (like ERISA), and therein directly and absolutely preempt ALL other laws [crafted over hundreds of years] providing remedies in numerous instances where ERISA thereafter provides none at all? If a "forgetful" Congress abolishes ALL other legal remedies in a huge arena like "employee benefits" and provides very few in return, have "we the people" been deprived of the due process of law? And if not, why not? That is, can Congress really pass say the "Family Security Act of 2008" voiding ALL other laws that "relate to" the family in America, and in so doing "forget" to provide a federal remedy for perhaps 90% of the wrongs thereafter committed (assume incest to illustrate) within a family?

[Don Levit]

Folks:

I can appreciate turning more authority over to the states.

Assuming Congress thought of every possible benefit and cost befioe passing ERISA is a bit illogical.

However, if we look at returning more authority to the states, and away from ERISA, this was tried back in 1983.

ERISA was preempted by the Congress, when it passed legislation allowing states to regulate MEWAs.

Where did that new-found freedom get us?

Don Levit

[Guest Brooks]

Right on--every now and then in a tax case, even recently, the court will address an argument that income taxes are unconstitutional. These arguments are addressed because they have to be, but are treated like a joke in the legal community, that's one reason why judges don't like taxpayers who represent themself.

We could waste the rest of our lives talking theory about what the forefather's said or believed, etc., but I'm not aware of anyone who ever put forth the proposition that Congress does or should have "the power to void and thus extinguish, by means of a direct and absolute preemption, ALL other laws, thus abolishing an inalienable right of "We the People" that had existed long before ERISA." If Congress is acting this way, we obviously have a big problem, but I think the Supreme Court provides the best opportunity to correct because ratifing new amendments to the Constitution doesn't seem plausible or likely in today's politics. We have to seek practical solutions.

At the risk of repeating myself, the bulk of the regulatory authority that has been seized by Congress is thought to be valid as pursuant to the commerce clause of the constitution. the Supreme Court finally gave in to the government's argument that it should be allowed to legislate in any area that is or could be affected by interstate commerce (the dormant commerce clause). The practical effect of this has been that just about every human activity affects or could affect interstate commerce thus Congress has been unstoppable in areas it want to regulate. (compounding the problem further is that states are dependent on federal money and the feds are permitted to attach conditions to the money, so the federal government can further regulate it areas that it normally wouldn't be able to by virtue of the conditional money)

The best way to reverse these problems without talking about amorphous of WE THE PEOPLE is to try get a supreme court that is willing to chip away at this vast power in a number of ways. Such as not interpreting ERISA's preemption provision as broadly as they have in the past or perhaps holding that it is unconstitionally vague and overbroad. Lawyers should bring certain case through the federal courts--then the Supreme Court should slowly scale back on the dormant commerce clause theory little by little by narrowing it's scope. But we need a Supreme Court willing to loosen the stare decisis principles just a little to bring us back to the proper balance of power.

Good for you! The challenge is now to decide whether or not, as you say, "Congress is acting this way . . . " for if they are, I agree that we indeed have a BIG PROBLEM. In fact, this was a growing concern that motivated this paper in the first place. I think the word "amorphous" could be interpreted as "artificial." I believe that certain of our rights (life, liberty, pursuit of happiness, due process, equal protection, speech, religion, assembly, et cetera) are "inalienable" and cannot be abolished [or even diminished] by Congress. It may foreshadow an even BIGGER PROBLEM for our descendants if too many of us view these rights to be, more or less, artificial.

[masteff]

It may foreshadow an even BIGGER PROBLEM for our descendants if too many of us view these rights to be, more or less, artificial.

I was unimpressed by your article but am even more unimpressed by your Dooms Day proclamation. Resorting to emotional arguments and threats is a sure sign of weakness.

Please prove to me that the ability to sue for damages is an essential and inherent part of due process.

[Guest Brooks]

It may foreshadow an even BIGGER PROBLEM for our descendants if too many of us view these rights to be, more or less, artificial.

I was unimpressed by your article but am even more unimpressed by your Dooms Day proclamation. Resorting to emotional arguments and threats is a sure sign of weakness.

Please prove to me that the ability to sue for damages is an essential and inherent part of due process.

Thanks for taking the time to reply; hopefully all will benefit from seeing the nature and scope of these various comments. I had meant to simply suggest that if too many of us believe that the Bill of Rights guarantee rights which are "artificial" then future generations may have a problem. Finally, as for the proof you request, assume that we could NOT sue for damages - ever again. Would our rights to the "due process of law" have been materially curtailed? Those that say "no" would probably conclude that damages are not part of due process; those saying "yes" would likely conclude that they are.

[masteff]

assume that we could NOT sue for damages - ever again. Would our rights to the "due process of law" have been materially curtailed? Those that say "no" would probably conclude that damages are not part of due process; those saying "yes" would likely conclude that they are.

You equivocate. You have stated in your article that the "inalienable" right to due process has been abridged by ERISA. Your conclusion is that ERISA needs to have damages restored in order to restore said due process. Again, please provide some form of fundamental argument that supports your supposition that damages are a component part of due process.

[Steelerfan]

My last word on this (for now) is that I don't really disagree with the general principles outlined in the article because more than once in reading cases and the statute, I felt it to be at the very least extremely unfair for Congress to have preempted so many remedies that would seem to be justified, especially if its been proved the employer did something wrong (whether intentionally or not)

I understand that the idea was to burden the empoyer as little as possible so they would be encouraged to maintain pension plans. But maybe it was a little misguided and in hindsight they probably did go overboard with ERISA. But the courts are partially to blame also, instead of clarifying and filling in gaps they were only to happy give too much credence to the badly drafted passages. When the courts don't feel like doing anything they say, "we can't do anything, we're just implementing the "intent" of the statute."

Wouldn't it be interesting if congress made a legislative fix to fill in some of the remedy gaps?

[david rigby]

Wouldn't it be interesting if congress made a legislative fix to fill in some of the remedy gaps?

One could argue that state courts that sought to attach qualified plan benefits (in a divorce) were in violation of the original preemption clause of ERISA, but they did it anyway and no one wanted to litigate the point. Congress responded in DEFRA (1984) with the creation of a QDRO, thus creating a specific exemption.

[Steelerfan]

Wouldn't it be interesting if congress made a legislative fix to fill in some of the remedy gaps?

One could argue that state courts that sought to attach qualified plan benefits (in a divorce) were in violation of the original preemption clause of ERISA, but they did it anyway and no one wanted to litigate the point. Congress responded in DEFRA (1984) with the creation of a QDRO, thus creating a specific exemption.

That's probably true, but REA was percieved (properly) as a remedy for women so there was a great amount of support for that remedy. Before I get bashed for writing that, I'll tell you I knew Senator John Erlenborn, a co-author of REA, and he talked about that. For obvious reasons the statute couldn't be drafted that way.

[Don Levit]

Steelerfan:

John Erlenborn also helped write the MEWA Amendment of 1983 I mentioned earlier.

Do you think that he, or Congress, had in mind for states to regulate MEWAs, as if they were commercial insurers, such as an Aetna or United Health Group?

Don Levit

[WDIK]

For the sake of brevity, and without substantially altering its meaning, couldn't the title of this thread be truncated to "Lawyer Argues"?

[Steelerfan]

Steelerfan:

John Erlenborn also helped write the MEWA Amendment of 1983 I mentioned earlier.

Do you think that he, or Congress, had in mind for states to regulate MEWAs, as if they were commercial insurers, such as an Aetna or United Health Group?

Don Levit

Sorry Don, we never spoke specifically about the MEWA legislation. I was writing a paper at the time, a thesis on QDROs, and he was an adjuct professor. Heck of a nice man he was, but not much of clue about the practical aspects of the legislation he sponsored.

[Guest mjb]

Steelerfan:

John Erlenborn also helped write the MEWA Amendment of 1983 I mentioned earlier.

Do you think that he, or Congress, had in mind for states to regulate MEWAs, as if they were commercial insurers, such as an Aetna or United Health Group?

Don Levit

Sorry Don, we never spoke specifically about the MEWA legislation. I was writing a paper at the time, a thesis on QDROs, and he was an adjuct professor. Heck of a nice man he was, but not much of clue about the practical aspects of the legislation he sponsored.

Is that why there is no conference report to REA? Only two different committee reports from the House and Senate and accompanying floor statements from the floor managers.

[IRA]

Brooks,

In your article it seems to me that you take the "simply forgot" language out of context. The courts are not saying that Congress "simply forgot" to include other damages. They are saying that Congress did not "simply forget" to include other remedies but instead made a deliberate decision not to include them, and if Congress deliberately decided not to include them then the courts won't add them.

Also, why would your theory not take us back to the Lochner era? Why does have Congress have the power to prevent us from entering into a contract that requires an employee to work 80 hours a week for $2.00 an hour? If an employee is willing to do that and needs to do it to get a job and feed her family, how can Congress prohibit that? If the employee signs the contract and then breaches that contract demanding minimum wage and overtime, doesn't the employer, under your theory, have an inalienable constitutional right to sue for breach of contract notwithstanding the FLSA?

I think most ERISA lawyers worth their salt would agree that ERISA should be changed, if we could ever get the change past the special interests groups (yeah, right, and do we wonder why Bush's plan to make all health insurance premiums pre tax whether or not employer sponsored can't go through? Answer, employer plans would be gone and there would be no ERISA plans and thus no ERISA protections.) Day after day we see the financial industry and service providers using ERISA as a shield to protect them from claims arising out of their own negligence brought by both employers and plan participants and beneficiaries. Yet ERISA was supposed to protect the employers and plan beneficiaries and participants, not the financial industry and service providers.

But whatever we think of ERISA, I just don't think of punitive damages as being an inalienable right. Congress has the authority to regulate many contracts. Nobody has to be in an ERISA plan if they don't want to be; they don't have to work for that matter (See the 13th Amendment). But if they do agree to participate in an ERISA plan, they are subject to the contractual terms provided under that plan, even as those terms are modified by Congress.

[masteff]

http://biz.yahoo.com/ap/080220/scotus_pension.html

Supreme Court Allows Retirement Plan Participants to Sue Over Losses

...

The issue in the LaRue case was whether the Employee Retirement Income Security Act permits an individual account holder to sue plan administrators for breaching their fiduciary duties.

The language of the law refers to recovering money for the "plan" rather than for an individual, raising the question of whether a participant can sue solely for himself.

Justice John Paul Stevens, in his opinion for the court, said that such lawsuits are allowed. "Fiduciary misconduct need not threaten the solvency of the entire plan to reduce benefits below the amount that participants would otherwise receive," Stevens said.

The decision overturned a ruling by the 4th U.S. Circuit Court of Appeals in Richmond, Va.

...

[Guest Brooks]

Brooks,

In your article it seems to me that you take the "simply forgot" language out of context. The courts are not saying that Congress "simply forgot" to include other damages. They are saying that Congress did not "simply forget" to include other remedies but instead made a deliberate decision not to include them, and if Congress deliberately decided not to include them then the courts won't add them.

Also, why would your theory not take us back to the Lochner era? Why does have Congress have the power to prevent us from entering into a contract that requires an employee to work 80 hours a week for $2.00 an hour? If an employee is willing to do that and needs to do it to get a job and feed her family, how can Congress prohibit that? If the employee signs the contract and then breaches that contract demanding minimum wage and overtime, doesn't the employer, under your theory, have an inalienable constitutional right to sue for breach of contract notwithstanding the FLSA?

I think most ERISA lawyers worth their salt would agree that ERISA should be changed, if we could ever get the change past the special interests groups (yeah, right, and do we wonder why Bush's plan to make all health insurance premiums pre tax whether or not employer sponsored can't go through? Answer, employer plans would be gone and there would be no ERISA plans and thus no ERISA protections.) Day after day we see the financial industry and service providers using ERISA as a shield to protect them from claims arising out of their own negligence brought by both employers and plan participants and beneficiaries. Yet ERISA was supposed to protect the employers and plan beneficiaries and participants, not the financial industry and service providers.

But whatever we think of ERISA, I just don't think of punitive damages as being an inalienable right. Congress has the authority to regulate many contracts. Nobody has to be in an ERISA plan if they don't want to be; they don't have to work for that matter (See the 13th Amendment). But if they do agree to participate in an ERISA plan, they are subject to the contractual terms provided under that plan, even as those terms are modified by Congress.

First, thanks for your thoughtful comments. I appreciate both the "macro" and "micro" approach to a helpful analysis of these issues. I was more focused on the "macro" aspect than the details. And yes, I know where the devil lives! The Family Security Act is the best illustration of my concerns. Think long and hard about the query posed in this Paper: can Congress impose, on all of us, like it or not, a new uniform federal “Family Security Act (FSA)” law, voiding at the same time (by “preemption”) all state family laws that "relate to" marriage, divorce, adoption, et cetera. If Congress can pass such a FSA law, and 300 million citizens meekly submit, many would argue that our liberty is already lost. And this is really what Congress did, within the benefit industry, when it passed ERISA in 1974, at least in my opinion. My problem is that in too many situations no ERISA remedy is provided, yet all pre-existing remedies are voided. What happened to the due process of law? And what is wrong, really, with "conditional" preemption? It has been famously said that the Tree of Liberty has to be periodically watered by patriot’s blood! Brooks

[Steelerfan]

There is arguably less authority for Congress to regulate in the family law area since that has historically been the province of the states and is thought of in regards to the states' police police powers. On the other hand pension law is not exacly a matter of police powers, it begs for uniformity and has more of an effect on interstate commerce. I'd think just those facts and a slew that i'm sure i can't even think of would weaken the use of an analogy to family law.

But putting all that aside, what should be do? I suggested we need a Supreme Court with backbone.