>That’s because both sides in a controversial dispute involving a suit filed under Pennsylvania’s bad faith statute have settled the matter out of court without laying it in the judicial laps of the jurists at the US 3 rd Circuit Court of Appeals, according to The Legal Intelligencer.
>The case of Rosenbaum v UNUM Life Insurance Co captured the fascination of ERISA watchers because it pitted Senior US District Judge Clarence Newcomer against eight other Eastern District federal judges. The issue: Is the Keystone State’s bad-faith statute pre-empted by ERISA or does it fall into ERISA’s savings clause and escape pre-emption?
In July 2002, Newcomer ruled it was not knocked out
by ERISA and that a bad-faith claim could proceed to
trial. Eight of Newcomer’s colleagues ruled in separate
cases that he was wrong, but Newcomer stuck to his guns
Disagree on ERISA Pre-Emption
). September 8, Newcomer refused to reconsider last
The 2002 decision was considered a huge victory for plaintiffs because it opened the door to the possibility of both a jury trial and punitive damages. On the other hand, an ERISA claim must be tried by a judge without a jury and punitive damages aren’t provided for. Not surprisingly, Newcomer’s original Rosenbaum decision prompted plaintiffs’ lawyers across the state to amend their ERISA suits to add bad-faith claims.
However, over the next few months, other Eastern District jurists rejected the Newcomer view, handing down a string of decisions that said bad-faith claims were still foreclosed by ERISA because Congress intended that ERISA’s remedies be “exclusive.” Defense lawyers in the Rosenbaum case urged Newcomer to reconsider.
US Supreme Court Weighs In
But the issue became complicated when
the US Supreme Court handed down its decision last term in
Kentucky Association of Health Plans Inc. v. Miller
Newcomer asked for new briefs to address whether
had announced a new test for deciding when ERISA pre-empts
a state law claim and, if so, whether the Pennsylvania
bad-faith statute survives the new test.
On Sept. 8, Newcomer handed down a decision saying that he had been right all along and that the Miller decision proved it. Miller , Newcomer said, “dramatically changed the analysis for determining whether state legislation qualifies for exemption from express pre-emption under ERISA via ERISA’s saving clause.” As a result, Newcomer concluded that the rationale of all his colleagues’ decisions was flawed because they were relying on faulty dicta from a pair of earlier US Supreme Court decisions.
Newcomer found that his Eastern District colleagues relied on flawed dicta in two US Supreme Court decisions – Pilot Life Insurance Co. v. Dedeaux , handed down in 1987, and Rush Prudential HMO Inc. v. Moran , handed down in 2002 – in which the justices suggested that because Congress failed to include certain remedies in ERISA’s remedial scheme, such remedies were specifically excluded.
“The problem with such a requirement is that the courts have taken an implied intent, which was derived by questionable means, and have interpreted that implied intent to overrule Congress’ express intent, as reflected in the saving clause,” Newcomer wrote.