Countdown to the Supreme Court’s ERISA Preemption Oral Argument in Rutledge — Two Noteworthy Case Developments

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Seyfarth Synopsis: As the Supreme Court prepares to hear oral arguments on a key case that could have major ramifications on the scope of ERISA preemption, two recent case developments show just how important the high court’s decision will be.

Regular blog readers are familiar with Rutledge v. Pharmaceutical Care Management Association, (No. 18-540), in which the Supreme Court has agreed to hear Arkansas’s challenge to a decision by the Court of Appeals for the Eighth Circuit holding that ERISA preempts an Arkansas law regulating prescription drug reimbursement. Merits briefing is now complete and oral argument is set for October 6, 2020. Our prior posts on Rutledge appear here and here.

The Supreme Court’s decision in Rutledge will have resounding implications on ERISA plans. fiduciaries and administrators. Not only are state laws regulating pharmaceutical benefits (the subject matter of Rutledge) widespread, states have also taken to regulating a host of other benefit matters, presenting high hurdles for multi-state employers, fiduciaries and administrators seeking to establish uniform nationwide procedures.

So the precise location of where the Supreme Court draws the line on preemption will likely cause ripple effects well beyond pharmaceutical benefits. And the Court’s line-drawing reasoning is important given that the statute preempts all state laws “relating” to employee benefit plans regulated by ERISA.

Two recent case developments underscore Rutledge’s importance, both in the pharmaceutical benefits realm and beyond.

First, this month, the Eighth Circuit held that a North Dakota law regulating pharmaceutical benefits is preempted by ERISA because the law’s “provisions apply to plans subject to ERISA regulation and therefore the law cannot function irrespective of any ERISA plan.” Pharm. Care Mgmt. Ass’n v. Tufte, No. 18-2926, 2020 WL 4554980, at *1 (8th Cir. Aug. 7, 2020) (internal quotation marks omitted). The Court relied on its prior decisions (including Rutledge) striking down similar laws.

Additionally, in another case (just filed this month in the U.S. District Court for the District of New Jersey), an employer trade association is alleging that New Jersey’s WARN Act expansion requiring mandatory severance payments for certain employees is preempted by ERISA. The ERISA Industry Comm. v. Angelo, No. 20-cv-10094 (D.N.J. Aug. 6, 2020). The plaintiff contends that the severance obligation requires the creation of a benefit plan that has ongoing administrative obligations and requires the use of discretion in determining benefit eligibility. The plaintiff alleges that this sort of plan would be governed by ERISA and therefore that the New Jersey law impermissibly “relates” to an ERISA plan. The plaintiff also alleges that the New Jersey law creates the sort of state-by-state regulatory patchwork that ERISA was designed to avoid.

Stay tuned to see how Rutledge is orally argued and decided.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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