OTET v. Hillsboro Garbage Disposal

Health and welfare benefit plans governed by the Employee Retirement Income Security Act of 1974 cannot recover damages for a breach of contract claim against a business who received health care benefits for ineligible employees.

Oregon Teamster Employers Trust (OTET) is a health benefit plan that is governed by Employee Retirement Income Security Act of 1974 (ERISA). Hillsboro Garbage Disposal, Inc. (Hillsboro Garbage) entered into a collective bargaining agreement, making Hillsboro Garbage a subscriber of OTET. To be eligible for the health and welfare plan, individuals must be bona fide employees of Hillsboro Garbage. In 2003, OTET had received contributions for health care benefits for coverage for Henderson and Jackson, who were not in fact employees of Hillsboro, but a separate company. In 2006, an audit found that Hillsboro had made unauthorized contributions on behalf of Henderson and Jackson. OTET sought restitution, specific performance, and common law breach of contract claims against Hillsboro. The district court held that OTET was preempted by ERISA. Hillsboro Garage filed a timely appeal. On appeal, the Ninth Circuit whether ERISA preempts state law. The panel held that an ERISA analysis was required here because the claims were related to the plan since the case turned to whether the two workers were eligible plan participants. Under 29 U.S.C. §1144(a), ERISA supersedes any state laws as they relate to employee benefit plans under ERISA. The focus on whether or not a common law claim has reference to an ERISA plan is whether the claim is premised on the existence of an ERISA plan, and whether the plan’s existence is essential to the claim’s survival. A relationship test is used to determine whether the claim has an ERISA-regulated relationship, which is found here. Therefore, the panel held that summary judgment for restitution and specific performance were properly granted, because the claims were not authorized equitable claims under ERISA. AFFIRMED.