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Data Marketing Partnership v. Department of Labor

Data Marketing Partnership (DMP) offers “limited partnership interests” to individuals who download tracking software onto their computers and phones and agree to furnish DMP with their data for the ostensible purpose of data marketing. If the individuals furnish a minimum amount of data to DMP, they may purchase health insurance from DMP’s plan, for which they must pay the full cost of the premium. If the individuals are participants in DMP’s plan for purposes of ERISA, state insurance laws that would otherwise apply to DMP’s provision of health insurance would be preempted.

DMP sought an advisory opinion from the Department of Labor (DOL) that DMP’s limited partners may be “participants” in DMP’s employee benefit plan under the Employee Retirement Income Security Act (ERISA). DOL issued an advisory opinion concluding that the limited partners are not plan participants because they are not DMP’s “employees” under ERISA. DMP sought judicial review, and the district court ruled in its favor. The court concluded that the Supreme Court’s decision in Raymond B. Yates, M.D., P.C. Profit Sharing Plan v. Hendon, 541 U.S. 1 (2004), permitted “working owners” of a business to be plan participants, and that DMP’s limited partners qualified as working owners. The district court set aside DOL’s advisory opinion and enjoined DOL from refusing to acknowledge that the limited partners are plan participants.

On appeal, Public Citizen filed an amicus brief in support of DOL’s position. The brief addresses two issues. First, the brief argues that the district court erred in relying on a description of working owner contained in a footnote to a 1999 DOL advisory opinion. Under that description, an individual with an equity interest in a business qualifies as a working owner if he or she is “actively engaged” in the business. As the brief explains, Yates did not adopt that definition in extending ERISA’s coverage to working owners, and the Court’s analysis of the type of working owner who can be a plan participant shows that the test used by the district court was overly broad. Second, the brief argues that the district court erred in deciding the working-owner question itself and enjoining DOL from refusing to acknowledge that outcome. Rather, the brief explains that, even assuming the court correctly faulted DOL for failing to address the description of working owner in its 1999 advisory ruling, the appropriate remedy under the Administrative Procedure Act (APA) would be to vacate the decision on review and remand to DOL for further consideration. By deciding the ERISA question itself, the brief argues that the district court overstepped its proper role as a reviewing court under the APA.

In August 2022, the Fifth Circuit affirmed the district court in part and vacated and remanded the district court’s decision in part. The Fifth Circuit concluded that DOL’s decision was arbitrary and capricious because DOL had failed to consider prior regulatory history in deciding whether DMP partners were working owners. The court also concluded that the district court had applied the wrong test in deciding that DMP’s plan qualified as an ERISA plan. The court remanded the case to the district court to perform the correct analysis.  The Fifth Circuit also vacated the district court’s injunction.