Back in March, a three-judge panel in the Ninth Circuit Court of Appeals ruled in favor of the city in a legal challenge to the its ordinance mandating that hotels provide healthcare benefits to their employees. As expected, the plaintiffs in the case, the ERISA Industry Committee (ERIC), have asked the full Ninth Circuit to hear the case en banc.
Seattle’s ordinance, which was based on San Francisco’s similar ordinance and also was a rewrite of the version in Initiative 124 that was rejected by the courts, was challenged by ERIC under the argument that the federal ERISA act preempts it. Both the U.S. District Court and the three-judge Ninth Circuit panel upheld the ordinance, finding that it was not preempted under the precedent set by the San Francisco ordinance in Golden Gate Restaurant Association vs. City and County of San Francisco, a ruling by the Ninth Circuit in 2008.
The Golden Gate decision has been controversial because the Court ruled that states and their municipal corporations (like Seattle) have a presumption against preemption for their laws and ordinances in areas where they have traditionally regulated — even if the federal law has an explicit pre-emption clause (as ERISA does). The plaintiffs challenging Seattle’s ordinance tried to differentiate the Seattle and San Francisco ordinances so that Golden Gate wouldn’t be the controlling precedent, but also argued that even if Golden Gate is applicable, a subsequent U.S. Supreme Court ruling in 2016 makes it clear that there is no presumption against preemption when the federal law has an explicit preemption clause.
The three-judge panel decision earlier this year rejected the plaintiffs’ argument and in an unusually short ruling ignored most of the plaintiffs’ arguments and simply said that Golden Gate applied and therefore Seattle’s ordinance is not preempted and is legal.
ERIC’s petition asking for the full Ninth Circuit to hear the case is remarkable in that it doesn’t just argue that the three-judge panel wrongly decided the case. Instead, it makes a full-throated attack on Golden Gate, arguing that it was wrongly decided then, it has created a circuit split with the First and Fourth Circuits ruling the opposite on the question of preemption, and (once again) the Supreme Court’s 2016 decision makes it clear that there is no presumption of preemption.
One of the issues that ERIC raises in the case is that Golden Gate has opened up a floodgate of local municipalities creatively finding ways to structure a healthcare mandate or regulation so that it escapes ERISA’s preemption against local employee health plan regulation. In fact, ERIC just filed a notice to the court of another recent 9th Circuit ruling that is exactly that, as further justification of the importance of the Court revisiting Golden Gate.
Appeals courts don’t hear very many cases en banc, but when they do, it’s exactly this kind of case. So there is no guarantee that ERIC will get its hearing, but it has a decent shot. If not, it is likely to appeal the case up the line to the U.S. Supreme Court; since there is currently a circuit split, there is a better-than-average chance that it would hear the case too — though it’s still a longshot.
The City of Seattle has until July 15 to file its response to ERIC’s request for an en banc hearing.
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