ERISA-District Court Rules That ERISA Preempts State Law Claims Of Interference With A Contractual Relationship

In Hyde v. Hillerich & Bradsby Co., Civil Action No. 3:11-CV-422-H (W.D. Kentucky 2011), the plaintiff claimed to be a beneficiary of her spouse’s pension benefits under a plan subject to ERISA. In seeking those benefits, the plaintiff brought suit for violations of ERISA, and for state law claims consisting of tortious interference with a contractual relationship, conspiracy to interfere with a contractual relationship, outrageous conduct, and punitive damages. The question for the district court (the “Court”): are the state law claims preempted by ERISA, and therefore subject to dismissal?

In analyzing the case, the Court said that ERISA preemption is limited to state common law or statutory claims that fall within the ERISA civil enforcement provision of section 502(a)(1)(B) of ERISA (the provision allowing a participant or beneficiary to sue for benefits under a plan). To determine whether preemption applies, courts apply a three factor test: (1) whether the plaintiff has standing to bring a claim under ERISA section 502(a); (2) whether the plaintiff’s cause of action falls within the scope of an ERISA provision that the plaintiff can enforce via section 502(a); and (3) whether the court must interpret the plan in question to resolve the state court claim.

Further, the Court said that prong (1) is met since, as a beneficiary, the plaintiff has standing under section 502(a). Prong (2) is met since the plaintiff’s cause of action falls within the scope of an ERISA provision that can be enforced via section 502(a). Namely, the plaintiff may bring an action against the defendants for breach of their fiduciary duties under ERISA and improper disbursement of the pension benefits earned by her spouse. As to prong (3) the determination of the plaintiff’s state law claims will require inquiry into the retirement plan that covered her spouse . While the Court will not need to interpret the plan, the Court must look at its provisions to decide if punitive damages are appropriate, if the elements of outrage are met, and whether any changes made to the plan (in addition to other acts by the defendants) could amount to tortious interference with a contractual relationship or conspiracy thereof. The Court concluded that, since the three prongs are met, the plaintiff’s state law claims are preempted by ERISA and must be dismissed.

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