Opinion
Case No. 1:00CV01195
September 19, 2003
MEMORANDUM OPINION
This matter is before the Court on Plaintiff's Motion to Remand to the Superior Court of Guilford County, North Carolina [Doc. #6] and Defendant's Motion to Dismiss [Doc. #4]. For the reasons set forth below, the Plaintiff's Motion to Remand is GRANTED. Because the case is remanded, the Motion to Dismiss must be decided by the state court.
I.
Plaintiff Johnny Holder is a resident of Davidson County, North Carolina. Defendant Petree Stoudt Associates, Inc. (Petree) is a North Carolina corporation with its principal place of business in Guilford County. Mr. Holder began work as a manufacturing manager for Petree in July, 1996.
When Mr. Holder was first hired, he had a conversation with one of Petree's officers, David Petree. During that conversation, Mr. Petree allegedly requested that Mr. Holder provide the company with six months notice when the time came for him to retire. Mr. Petree stated that he wanted the advance notice so that Mr. Holder could help train his own replacement. Mr. Holder agreed to provide the requested notice.
Mr. Holder worked for Petree approximately four years. During his term of employment, Petree had in place a profit sharing program. Under the program, Petree distributed benefits according to a special formula involving employer contributions and employee annual pay. In order for an employee to share in the program each year, the employee had to have been employed on December 31 of that year.
On or about June 18, 2000, Mr. Holder gave notice to the Vice President of Petree, Daniel McRae, that he intended to retire in January, 2001. At that time, Mr. McRae allegedly approved the retirement date and confirmed that Petree would provide Mr. Holder with his annual bonus and his profit sharing for the year 2000. In a later deposition, Mr. Holder said that Mr. McRae had also told him at some point that the profit sharing and bonus would be available even if he decided to retire before the end of the year.
This is the date given in the complaint. Mr. Holder later gives the date as "a week and a half, I guess, before I left from there." (Holder Dep. at 53).
The complaint gives the retirement date as January, 2001 (Compl. ¶ 4). In a later deposition, Mr. Holder said that he told Mr. Petree he would be retiring on December 31, 2000 (Holder Dep. at 54).
Mr. Holder understood his conversations with Petree employees to mean that, if he gave Petree the requested notice, he would be employed through the end of that six month period. However, Petree fired Mr. Holder on July 26, 2000, shortly after he gave notice of his retirement plans. Mr. Holder received his paycheck for the month of July and an additional three months severance pay. He did not receive any money from the profit sharing plan for the year 2000 because his termination prevented him from being employed on December 31, 2000 as required under the plan. Had Mr. Holder worked through his planned retirement date, he would have been entitled to a bonus and profit sharing for the year 2000.
Using the date in the Complaint, Mr. Holder was fired approximately one month after giving notice. Using the time frame given in the deposition, he was fired less than two weeks after giving notice.
Mr. Holder brought suit in the Superior Court of Guilford County alleging breach of contract, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, and alternatively, breach of implied contract. He seeks damages consisting of lost wages for the additional months he had planned to work, and the annual bonus and profit sharing he had anticipated for the year 2000. Petree filed a Notice of Removal on November 28, 2000, and a Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure on December 4, 2000. Mr. Holder timely filed a Motion to Remand.
II.
A proper defendant may remove a claim from state court to federal court if the claim is one over which the district court has original jurisdiction. 28 U.S.C. § 1441 (a) (2003). However, a case must be remanded to state court "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction." 28 U.S.C. § 1447(c) (2003). The party seeking to remove a case to federal court has the burden of establishing federal jurisdiction.Mulcahey v. Columbia Organic Chemical Cem. Co., 29 F.3d 148, 151 (4th Cir. 1994). If federal jurisdiction is doubtful, a remand is necessary. Id.
Petree removed the case to federal court pursuant to 28 U.S.C. § 1441, alleging that the district court has original jurisdiction under the Employee Retirement Income Security Act, 29 U.S.C. § 1001-1461 (1999) ("ERISA"). The general rule is that federal question jurisdiction must be clear from the face of the well-pleaded complaint. Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 So. Ct. 1542, 1546, 89 L.Ed.2d 299 (1987). Because federal preemption is a defense, and hence does not appear in the complaint, it normally cannot provide a basis for removal jurisdiction. However, the Supreme Court has held that the civil enforcement provisions of ERISA are completely preempted by federal law and may be removed even though the complaint only alleges state law claims. 481 U.S. at 63, 107 S.Ct. at 1546, 89 L.Ed.2d 299.
29 U.S.C. § 1132(a)(1)(B) (relevant provisions include suits by a participant "to recover benefits due to him under the terms of his plan").
ERISA was enacted in order to protect the interests of employers, employees and beneficiaries of employee benefit plans. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983). The law regulates matters such as participation in and funding of pension plans, and provides uniform standards for the administration of such plans. Shaw. 463 U.S. at 91, 103 S.Ct. at 2896. In order to secure the rights of the parties and avoid inconsistent standards, ERISA preempts any and all state law claims which "relate to any employee benefit plan," unless the claims are specifically exempted by the statute. 29 U.S.C. § 1144(a). However, state law claims which relate to employee benefit plans in "too tenuous, remote, or peripheral a manner" are not preempted. Shaw, 463 U.S., at 100, n. 21, 103 S.Ct., at 2901, n. 21.
The issue presented is whether Mr. Holder's claim sufficiently "relates to" an employee benefit plan, and is therefore preempted by federal law. Petree maintains that this case is essentially a dispute over the terms of Mr. Holder's profit sharing plan, an "employee benefit plan" as defined by ERISA. 29 U.S.C. § 1002. Mr. Holder instead maintains that the cause of action is breach of a definite employment contract, for which the profit sharing serves only as one measure of damages.
Consistent with the legislative purposes of ERISA, the Supreme Court has broadly defined claims that "relate to" employee benefit plans to include claims with any connection with or reference to such a plan.Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990). However, ERISA does not go as far as to preempt a general state law which "functions irrespective of the existence of an ERISA plan." Ingersoll-Rand, 498 U.S. at 139, 111 S.Ct. at 483. In other words, if the state law cause of action would be available regardless of the existence of the ERISA plan, the state law cause of action is not preempted. Ingersoll-Rand, 498 U.S. at 140, 111 S.Ct. at 483-84.
One instance where state law claims are not preempted by ERISA is where the plaintiff's claim is for breach of employment contract and the ERISA plan benefits are used merely as a measure of damages. Pizlo v. Behlehem Steel Corp., 884 F.2d 116 (4th Cir. 1989). The employer inPizlo allegedly orally promised to employ the plaintiff employees until they reached the age of 62. Id. at 117. The employees were subsequently fired prior to the agreed date and sued the employer for breach of contract, promissory estoppel, and negligent misrepresentation. The plaintiffs sought damages for the benefits and wages they would have received if they had been employed for the entire agreed term. Id. at 120. Even though pension trust benefits were one measure of damages, the Fourth Circuit held that the claims were not preempted by ERISA because the trust itself was not liable and plan administrators would not be burdened. Id. at 120-21.
Petree denies that Pizlo applies to this case. Instead, Petree characterizes Mr. Holder's complaint as twofold: a claim for breach of employment for a definite term, and a claim for breach of a promise to provide an employee benefit plan. Focusing on the second claim, Petree argues the following: Mr. Holder was not employed on December 31 of the year for which he seeks payment from the profit sharing plan, therefore he was not rightfully entitled to participate in Petree's profit sharing plan. Hence, if Petree stated that Mr. Holder could receive plan benefits regardless of when his employment ended, the case focuses on the terms of the ERISA benefit plan and whether the parties attempted to orally modify those terms in violation of ERISA. Petree concludes that, because the dispute involves the interpretation of, and improper attempt to modify an employee benefit plan, Mr. Holder's state law claims are preempted and the federal court has original jurisdiction pursuant to 29 U.S.C. § 1132 (e)(1).
Petree contends that Mr. Holder's case is analogous to Warren v. Blue Cross Blue Shield of S.C., 129 F.3d 118, 1997 WL 701413 (4th Cir. 1997). The plaintiff in Warren sued his employer for fraudulently inducing him to enter a separation agreement by misrepresenting the amount of retirement benefits he would be receiving. He sought actual damages or, alternatively, the amount due to him under his various retirement plan options. The Fourth Circuit, in an unpublished opinion, held that the complaint stated a claim for the recovery of benefits "due" under an ERISA plan and involved a decision of whether the plaintiff was entitled to benefits under the plan.Id. at *3. Mr. Holder, on the other hand, does not claim the money "due" to him from the profit sharing plan. He claims that Petree's breach of employment contract caused him several damages, one of which is the loss of benefits he would have received had he been allowed to continue employment.
Petree's argument would be persuasive if indeed the focus of this lawsuit was on Petree's alleged promise to provide pension plan benefits regardless of when Mr. Holder retired. However, Mr. Holder is suing for lost benefits and wages because he was fired before his planned retirement date. He planned to retire in January, 2001, a date which would have guaranteed him his bonus and pension plan benefits for the year 2000. He did not attempt to retire earlier than December 31, 2000 in reliance on Petree's promise to provide benefits.
The claim for breach of employment contract only refers to Petree's promise of continued employment, and assurance that Mr. Holder would be entitled to benefits on the date Mr. Holder planned to retire, "at the end of the year" 2000. (Compl. ¶ 4, 10). Mr. Holder did not mention any unconditional promise to provide benefits until his subsequent deposition. (Holder Dep. at 54). The claims for implied contract, negligent misrepresentation, and breach of the covenant of good faith only reference the continued employment promise (Compl. ¶¶ 13, 21, 25).
Like the plaintiff in Pizlo, Mr. Holder is suing on a breach of employment contract for a definite term. The lost pension benefits, along with lost wages and annual bonus are merely the measure of damages. Mr. Holder does not seek to obtain plan benefits per se, he seeks the money he lost from his early termination. See Smith v. Cohen Benefit Group, Inc., 851 F. Supp. 210 (M.D.N.C. 1993) (finding that claim arising out of an oral misrepresentation of health benefits under proposed health plan was not preempted by ERISA where the misrepresentation entitled the plaintiff to damages and not plan benefits); Welsh v. N. Telecom, Inc., 85 N.C. App. 281, 354 S.E.2d 746 (1987) (finding that suit for breach of promise to provide credit for prior years of service was not preempted because action was not against the plan but against the employer). Cf. Christopher v. Mobil Oil Corp., 950 F.2d 1209, 1218 (5th Cir. 1992) (finding that damages measured by pension benefits are enough of a connection for ERISA preemption where the employer misrepresented that the employees would lose certain retirement benefits if they did not retire within a certain period of time).
Furthermore, a finding that Mr. Holder's claims are not preempted by ERISA is not in conflict with the purposes behind ERISA preemption. ERISA preempts state laws relating to pension benefits because of the potential for "conflicting employer obligations and variable standards of recovery." Holland v. Burlington Indus., Inc., 772 F.2d 1140, 1147 (4th Cir. 1985). Here Mr. Holder is not questioning the terms of the pension plan, he is seeking damages against his employer for the losses he incurred when he was terminated in violation of an alleged employment contract. Such a claim does not create a risk of variable standards of recovery in other pension plan disputes as it is a unique demand for money damages.
Mr. Holder's claims do not "relate to" an employee retirement benefit plan as contemplated by ERISA, therefore the claims are not preempted by federal law. Because there is no other basis for federal jurisdiction, this case is remanded for further proceedings.
VI.
Because the Court does not have subject matter jurisdiction, Plaintiff's Motion to Remand is GRANTED and Defendant's Motion to Dismiss must be decided by the state court.