Opinion
Cause No. IP99-0307-C-M/S
March 31, 2000
ORDER ON MOTION TO DISMISS
This matter comes before the Court on the motion of defendants, Rubbermaid Incorporated ("Rubbermaid") and Newell Rubbermaid Inc. ("Newell") (collectively "Defendants"), seeking dismissal of Count I presented in the complaint filed by David Robertson ("Robertson") on March 10, 1999 for lack of subject matter jurisdiction. Robertson brought this action under the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq, after he was terminated from his employment with Newell. Robertson contends that he was denied payment of the severance pay and benefits to which he was entitled under a Change in Control Employment Agreement ("Agreement") that he had with Rubbermaid, Newell's predecessor. Am. Compl. ¶¶ 19, 20, 21. In their motion to dismiss, the Defendants assert that the Court lacks subject matter jurisdiction because the Agreement is not an employee benefit plan under ERISA. The Court has fully considered the parties' arguments and, for the reasons discussed below, DENIES the Defendants' motion to dismiss Count I of Robertson's complaint.
II. FACTUAL PROCEDURAL BACKGROUND
Robertson was employed by Rubbermaid in 1994 as a Senior Vice-President of Human Resources. Am. Compl. ¶ 10. On January 2, 1997, Robertson and Rubbermaid entered into a Change in Control Employment Agreement in which Robertson was designated as a "key executive." Id. at ¶¶ 10, 11. The Agreement was deemed effective October 21, 1996. Id. at ¶ 11. Rubbermaid also entered into agreements with its other "key executives." Id. The Agreement at issue superseded a prior Change in Control Agreement dated April 11, 1994 that did not offer as many benefits and protections. Id. at ¶ 12. Rubbermaid believed that the 1996 agreement significantly expanded the protections afforded to its employees. Id.
The Agreement provided that, if Robertson was terminated by Rubbermaid or he resigned under certain circumstances within two to five years after the occurrence of a change in control of Rubbermaid, then he would receive a lump-sum severance payment as well as certain employee benefits for a period of three years. Agreement §§ 1(a), (b); 2. The Agreement also provided that any termination or removal of Robertson prior to a change in control but following the commencement of "any discussion with a third party that ultimately results in a change in control" would trigger a severance payment plus certain benefits that would be payable after the change in control. Id. at § 9. Finally, the Agreement provided that if Robertson ceased for any reason to be employed with Rubbermaid prior to the occurrence of a change in control then the Agreement expired. Id. at § 13.
In March of 1998, Robertson's employment with Rubbermaid was terminated. Am. Compl. ¶ 16. On October 22, 1998, Rubbermaid and Newell Company announced a merger agreement and the filing of a Form 8-K with the Securities and Exchange Commission disclosing that a change in control of Rubbermaid would occur wherein the companies would merge into Newell-Rubbermaid, Inc. Id. at ¶ 17. Robertson contends that the discussions between Rubbermaid and Newell which ultimately led to the merger agreement commenced in 1996 or 1997, prior to his termination. Id. at ¶ 18. Thus, under the Agreement, Robertson's termination of his employment with Rubbermaid is a termination of a key executive after a change in control. Id.
By letter dated December 14, 1998, Robertson made a request to Rubbermaid for payment of his severance allowance and benefits package pursuant to the Agreement. Am. Compl. Ex. B. His request was denied on the basis that the discussions which led to a merger between Rubbermaid and Newell did not commence until after Robertson's termination. Am. Compl. Ex. C. Robertson then made a second demand for payment. Am. Compl. Ex. D. When neither Rubbermaid nor its successor agreed to pay, Robertson brought this action on March 10, 1999.
At present, this case is before the Court on the motion to dismiss filed by the Defendants on November 1, 1999. The Defendants have moved to dismiss Robertson's complaint pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). They assert that Robertson has failed to state a legally viable claim because Count I rests on the mistaken assertion that the Agreement is an employee benefits plan under ERISA. Having reviewed the factual background, the Court now turns to a brief overview of the standards governing its decision.
III. MOTION TO DISMISS STANDARD
It is well-settled that the absence of a valid, as opposed to arguable, cause of action does not implicate subject matter jurisdiction. Steel Co. v. Citizens for a Better Env't., 118 S.Ct. 1003, 1010 (1998). Thus, when both the subject matter jurisdiction of the Court and the substantive claim for relief are based on a federal statute, dismissal for lack of subject matter jurisdiction is proper only when the allegations of the complaint are frivolous. Health Cost Controls v. Skinner, 44 F.3d 535, 537 (7th Cir. 1995). More specifically, dismissal for lack of subject matter jurisdiction because of the inadequacy of a federal claim is appropriate only when the claim is "so insubstantial, implausible, foreclosed by prior decisions of this Court, or otherwise completely devoid of merit as not to involve a federal controversy." Steel, 118 S.Ct. at 1010 (quoting Oneida Indian Nation of N.Y. v. County of Oneida, 414 U.S. 661, 666 (1974)).
If a plaintiff fails to properly allege a claim for relief brought under a federal statute, the case should be dismissed under Federal Rule of Civil Procedure 12(b)(6), rather than Rule 12(b)(1). Romero v. International Terminal Operating Co., 358 U.S. 354, 359 (1959). In ruling on a motion to dismiss under Rule 12(b)(6), the Court must take the plaintiff's well-pleaded allegations as true. Gomez v. Illinois State Bd. of Educ., 811 F.2d 1030, 1039 (7th Cir. 1987). In addition, the Court must view those allegations in the light most favorable to the plaintiff. Id. Finally, while a lack of intimation of any facts underlying the claim will justify dismissal, the Court must construe pleadings liberally and cannot dismiss a claim for mere vagueness or lack of detail. McMath v. City of Gary, 976 F.2d 1026, 1031 (7th Cir. 1992) (emphasis in original).
IV. DISCUSSION
The Defendants contend that Robertson has failed to plead sufficient facts to support his allegation that the Agreement is an employee benefit plan under ERISA. The existence of an ERISA plan is an "essential precursor" to federal jurisdiction. UIU Severance Pay Trust Fund v. Local Union No. 18-U, United Steelworkers of Am., 998 F.2d 509, 510 n. 2 (7th Cir. 1993). Thus, the Defendants argue that the Court lacks subject matter jurisdiction because the Agreement is not an ERISA plan but merely a severance contract.
Section 502(a)(1)(B) of the ERISA statute provides that "[a] civil action may be brought — (1) by a participant or beneficiary — (B) to recover benefits due to him under the terms of his plan [or] to enforce his rights under the terms of the plan. . . ." 29 U.S.C. § 1132(a)(1)(B). Section 3(3) defines a "plan" as "an employee welfare benefit plan or an employee pension plan or a plan which is both an employee welfare benefit plan and an employee pension benefit plan." 29 U.S.C. § 1002(3). As the Seventh Circuit has stated, this definition is tautological because the defined term and the definition each include the word "plan." Cvelbar v. CBI Illinois Inc., 106 F.3d 1368, 1374 (7th Cir. 1997), cert. denied, 522 U.S. 812 (1997), (abrogated on other grounds by International Union of Operating Engineers v. Rabine, 161 F.3d 427, 430 (7th Cir. 1998)). Based on this finding, the Seventh Circuit has looked beyond the language of the statute to determine what constitutes an ERISA plan. Thus, the Court must turn to precedent to determine whether the Agreement in this case is an employee benefit plan under ERISA. Those cases hold that an ERISA plan requires an ongoing administrative scheme, Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12 (1987), and that its terms must be reasonably ascertainable, Diak v. Dwyer, Costello Knox, P.C., 33 F.3d 809, 812 (7th Cir. 1994). See Cvelbar, 106 F.3d at 1374.
A. Ongoing Administrative Scheme
In Fort Halifax, the Supreme Court considered whether a Maine statute that required employers who terminate or relocate their operations to pay a lump-sum payment to their employees was in effect requiring employers to establish or maintain an ERISA plan. In concluding that it did not, the Court held that while the lump-sum payment constituted a benefit, it did not constitute a benefit plan, stating: "The requirement of a one-time, lump-sum payment triggered by a single event requires no administrative scheme whatsoever to meet the employer's obligation. The employer assumes no responsibility to pay benefits on a regular basis, and thus faces no periodic demands on its assets that create a need for financial coordination and control." Halifax, 482 U.S. at 12. In essence, the statute in that case did not require the company to monitor its budget for future disbursements because an employer could satisfy its duty all at once by making a set of single payments to the employees when the plant closed. Id. Thus, the Court concluded that ERISA was not implicated because the chance of a one-time obligation in the future did not create a need for an ongoing administrative program for processing claims and paying benefits. Id.
As noted by the Seventh Circuit in Cvelbar v. CBI Illinois Inc., the Supreme Court did not define the precise "contours" of an ongoing administrative program in Fort Halifax. Cvelbar, 106 F.3d at 1374. However, the Seventh Circuit has held that: "Simple or mechanical determinations do not necessarily require the establishment of such an administrative scheme; rather, an employer's need to create an administrative scheme may arise where the employer, to determine the employee's eligibility for and level of benefits, must analyze each employee's particular circumstances in light of the appropriate criteria." Id. at 1375. Further, the Court has stated that one factor to be considered in determining when an obligation is complex enough to require an ongoing administrative program is "whether the employer's undertaking or obligation requires managerial discretion in its administration." Id. (quoting Schonholz v. Long Island Jewish Med. Center, 87 F.3d 72, 76 (2nd Cir. 1996), cert. denied, 519 U.S. 1008 (1996)).
In Cvelbar, the Court held that a Change in Control Agreement which provided that a bank would pay Cvelbar severance benefits in the event he was terminated was a ERISA plan. Like the case at bar, the agreement in that case provided for a one-time, lump-sum payment as well as benefits for a period of three years. Cvelbar, 106 F.3d at 1370. However, the Court stated that the payments to be made to Cvelbar could not be determined by simple arithmetical computations in light of several factors. Id. at 1377. First, the Court noted that the bank initially had to determine the reason for Cvelbar's termination because he would not have been eligible for benefits if he had retired or willfully engaged in fraud. Id. Second, the Court reasoned that the bank would have to monitor Cvelbar to ensure he did not break a three-year non-compete provision that was included in the agreement. Id. Third, the bank had to track the amounts paid to Cvelbar because if any payments were found to be "parachute payments" under the Internal Revenue Code the amounts paid were limited to 299% of Cvelbar's average annual compensation. Id. Fourth, the company had to reevaluate the agreement each year to determine whether it should be extended another year. Id. Finally, the Court stated that the contract extended medical coverage and pension benefits on the terms and conditions of the bank's retirement plan which required the company to make administrative determinations about Cvelbar's eligibility and level of coverage, determinations that were not simple mechanical calculations. Id. at 1378. Taken together, the Court held that these factors demonstrated that the agreement necessitated the establishment and maintenance of an ongoing administrative program. Id.
Similarly, in Collins v. Ralston Purina Co., 147 F.3d 592 (7th Cir. 1998), the Seventh Circuit concluded that a Change in Control Agreement which provided for a lump-sum payment of six months salary and one year of benefits upon termination was also a ERISA plan. There, the agreement provided that termination included: (1) any substantial reduction of duties or responsibilities, (2) any failure on the acquirer's part to continue to offer existing or substantially similar employee benefits, or (3) transfer outside the metropolitan South Bend, Indiana area. Id. at 594. In determining whether the agreement required an ongoing administrative scheme, the Court noted that the employer had executed agreements with numerous executives and thus "faced the prospect of [making] multiple payments to various managers at different times and under different circumstances." Id. at 595-96. In addition, the Court reasoned that the event prompting a payout in this case demanded the exercise of discretion because the employer was required to pay only if a manager's responsibilities were "substantially reduced" and to make this assessment the employer would have to compare an employee's present job with his past jobs and to keep records. Id. at 596. Thus, the Court concluded that an ongoing administrative program was required. Id. at 597.
Applying Cvelbar and Collins to the facts at hand, the Court finds that the Agreement in this case necessitates the establishment and maintenance of an ongoing administrative program for several reasons. First, as in Cvelbar, where an employee is terminated within a period of two years following a change in control, Rubbermaid must initially determine the reason for his termination because the employee is not eligible for the severance payment or benefits if he was terminated "for cause." To find an employee terminated for cause, the Rubbermaid Board of Directors is required to draft and deliver a resolution, duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting called and held for this purpose, which states that in the "good faith opinion" of the Board, the employee was guilty of conduct set forth in the Agreement as good cause. Agreement § 2(a). The Defendants assert that requiring a for cause determination does not establish an administrative scheme in this case because here the Agreement limits the exercise of discretion by narrowly defining "cause" to cover only a few extraordinary circumstances. However, the Court finds this argument unpersuasive because the Defendants have failed to distinguish this case from Collins where the Seventh Circuit held that a company was exercising managerial discretion when it determined whether an employee was terminated and terminated was specifically defined in the agreement to include only three specific situations. See Collins, 147 F.3d at 596.
"Cause" is defined in the Agreement as termination based on: (1) an intentional act of fraud, embezzlement or theft in connection with duties with Rubbermaid or resulting or intended to result directly or indirectly in substantial personal gain to the Key Executive at the expense of Rubbermaid or a subsidiary, (2) intentional wrongful disclosure of secret processes or confidential information, or (3) intentional wrongful damage to property of Rubbermaid or a subsidiary, and any such act shall have been materially harmful to Rubbermaid. Agreement § 2(a).
Second, where an employee is terminated within a period of two years following a change in control and prior to the expiration of five years following the change in control, Rubbermaid is again required to determine the reason for his termination because an employee is eligible for payment only if he was terminated "without cause" or he terminated his employment for "good reason." Like the provision in Collins which required the employer to assess whether an employee's new job responsibilities had been "substantially reduced," this provision requires Rubbermaid to exercise managerial discretion on such issues as whether an employee's overall compensation or perquisites are "adversely modified," whether an employee's authority or duties are "materially changed" and whether an employee has been "substantially hindered" in the performance of his activities. See Agreement § 2(e)(iv)-(v). Further, while the terms of the Agreement set various standards, they are hardly easily discernible ones. Thus, in order to process claims for payment under the Agreement in a consistent manner, Rubbermaid was likely prompted to maintain some sort of record of who received benefits and why because the company executed agreements with other employees besides Robertson. See Collins, 147 F.3d at 596.
"Good Reason" is defined in the Agreement as "any one of the following situations, if not fully remedied within ten (10) calendar days after written notice to Rubbermaid from the employee of such determination:
(i) Failure by Rubbermaid to honor any of this material obligations under this Agreement; or
(ii) Any purported termination of the Key Executive's employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Section 3 below, and for the purposes of this Agreement, no such purported termination shall be effective; or
(iii) Failure to elect or reelect or otherwise to maintain the Key Executive to or in the office or the position (or a substantially equivalent office or position) in Rubbermaid or a subsidiary (or a successor company or division) that the Key Executive held immediately prior to a Change in Control, or the removal of or failure to reelect the Key Executive as a Director of Rubbermaid or a subsidiary, if the Key Executive shall have been a Director of Rubbermaid or such subsidiary immediately prior to such removal or failure to reelect; or
(iv) The Key Executive's overall compensation or perquisites are reduced or adversely modified, or the Key Executive's authority or duties are materially changed, in either case without the voluntary prior written consent of the Key Executive. For purposes of this Agreement, the Key Executive's authority or duties shall be conclusively considered to have been "materially changed" if, without the Key Executives's express and voluntary written consent, there is any substantial diminution or adverse modification in the Key Executive's title, status, overall position, responsibilities, reporting relationship, general working environment (including without limitation secretarial and staff support, offices, and frequency and mode of travel), or if, without the Key Executive's express and voluntary written consent, the Key Executive's job location is transferred to a site more than twenty five (25) miles away from his place of employment as of the date of the Change in Control; or
(v) A determination by the Key Executive made in good faith that as a result of a change in circumstances significantly affecting his position, including without limitation, a change in the scope of the business or other activities for which he was responsible as of the date of this Agreement or on the date of a Change in Control, he has been rendered substantially unable to carry out, has be substantially hindered in the performance of, or has suffered substantial reduction in any of the authorities, powers, functions, responsibilities or duties attached to the position held by the Key Executive as of the date hereof or on the date of a Change in Control."
Agreement § 2(e).
Third, as in Cvelbar, the Agreement contains a non-compete clause which prohibits its employees from engaging in "any competitive activity" without the prior consent of Rubbermaid during the year following their date of termination. The Defendants contend that the mere presence of a non-compete provision in the Agreement does not create an administrative scheme because the clause simply requires an employee to seek permission to engage in competitive activity for one year after a change in control and if the provision was breached the Agreement did not require the employee to repay any severance allowance or benefits received. But, the Court finds this argument unavailing as it is reasonable to infer that this provision imposes a duty on Rubbermaid to monitor the business activity of the employees with whom it has executed a copy of the Agreement, particularly in a case like Robertson where the employee is a key executive with access to company secrets and confidential information.
Section 5 of the Agreement provides: "During a period ending one (1) year following the Date of Termination, if the Key Executive shall have received or shall be receiving benefits under this Agreement, the Key Executive shall not engage in any Competitive Activity, without prior written consent of Rubbermaid, which consent shall not unreasonable be withheld. For purposes of this Agreement, the term `Competitive Activity' shall mean the Key Executive's participation, without the written consent of an officer of Rubbermaid, in the management of any business enterprise if such enterprise engages in substantial and direct competition with Rubbermaid and such enterprise's sales of any product or service competitive with any product or service of Rubbermaid amounted to 10% of such enterprise's net sales for its most recently completed fiscal year and if Rubbermaid's net sales of said product or service amounted to 10% of Rubbermaid's net sales for its most recently completed fiscal year. `Competitive Activity' shall not include (i) the mere ownership of securities in any such enterprise and the exercises of rights appurtenant thereto or (ii) participation in the management of any such enterprise other than in connection with the competitive operations of such enterprise."
Fourth, like the benefits in Cvelbar which were based on the company's retirement plan and thus required the employer to make administrative determinations regarding eligibility and coverage, the benefits in this case afford Rubbermaid employees participation in all "welfare benefit policies, plans, programs or arrangements in which [he] is entitled to participate . . . or any successor policies, plans, programs or arrangements that may be adopted hereafter." Agreement § 2(d) (emphasis added). To determine an employee's eligibility and coverage in a future benefit program yet to be adopted, Rubbermaid will have to analyze the employee's circumstances at the time of its implementation. Thus, the benefits to be paid under the Agreement cannot be calculated mechanically without administrative involvement.
Finally, the Agreement provides that Rubbermaid or the employee may reevaluate the terms of the arrangement each year to determine whether the Agreement should be extended for another year. The Defendants assert that this provision is distinguishable from that in Cvelbar because here the Agreement is automatically renewed for another year unless one of the parties gives notice that it wishes to terminate the arrangement. However, the Court is unpersuaded by this distinction because the facts alleged in Robertson's complaint show that the Agreement at issue superseded a prior Change in Control Agreement dated April 11, 1994, which did not offer as many benefits and protections to Rubbermaid executives. Thus, while on its face the Agreement could be renewed with no action or evaluation from Rubbermaid the facts suggest that the company was in fact reviewing the plan and exercising its discretion to make changes as it saw fit. Taken as a whole, the Court finds that these aspects of the Agreement demonstrate that the arrangement required Rubbermaid to make ongoing administrative determinations, not simple mechanical calculations.
Section 13 of the Agreement provides: "The term of this Agreement shall commence as of the date hereof and shall expire as of the later of the close of business on December 31, 1997, and the expiration of any Change in Control employment guarantee; provided, however, that (A) the term of this Agreement shall automatically be extended for an additional year unless, not later than November 30 of the immediately preceding year, Rubbermaid or the Key Executive shall have given notice that it or he, as the case may be, does not wish to have the Term extended, and (B) subject to Sections 1 and 9 hereof, if prior to a Change in Control, the Key Executive ceases for any reason to be an employee of Rubbermaid or a subsidiary, thereupon this Agreement shall immediately terminate and be of no further effect; and provided further, however, that notwithstanding any notice by Rubbermaid to terminate this Agreement, if a Change in Control shall have occurred prior to the Termination Date this Agreement shall continue in effect for a period of five (5) years from the date of the occurrence of the Change of Control."
B. Reasonably Ascertainable Terms
Having determined that execution of the Agreement demands ongoing administration, the Court now turns to the issue of whether the Agreement contains reasonably ascertainable terms. In Diak v. Dwyer, Costello Knox, P.C., the Seventh Circuit stated that in determining whether a plan is a reality under ERISA a court must determine "whether from the surrounding circumstances a reasonable person could ascertain the intended benefits, beneficiaries, source of financing and procedures for receiving benefits." 33 F.3d at 812 (quoting Donovan v. Dillingham, 688 F.2d 1367, 1373 (11th Cir. 1982)). Under the so-called "Donovan test," the Defendants argue that the Agreement is not a ERISA plan because it fails to specify the intended benefits, the source of financing or the procedures for receiving benefits.
In Diak, the Court considered whether an accounting firm had established a ERISA plan when it began paying pension benefits to certain retired employees. There, Diak was never told that his employer had a pension plan while he was employed. 33 F.3d at 810. But, after he retired he learned that four retirees had received pension payments. Id. When Diak made a formal demand for payment, his former employer responded that it had no pension plan. Id. Diak brought suit under ERISA. Id. at 811. The district court entered summary judgment in favor of the employer, finding that Diak had not established a pension plan under ERISA. Id. In affirming summary judgment, the Seventh Circuit concluded that the alleged plan did not meet several of the Donovan criteria. First, with respect to intended benefits, the Court noted that each of the individuals who received pensions received different packages, ranging from $75 to $2500 per month, and that it was difficult to discern a formula at work in the distribution of payments. Id. at 812. In concluding that this arrangement did not satisfy Donovan, the Court stated: "Obviously, a plaintiff need not show the exact dollar amount she would expect to receive in benefits. However, there must be some evidence in the record from which the court can ascertain the benefits due under a plan." Id. Second, regarding intended beneficiaries, the Court held that Diak's mere assertion that all retirees from the business were beneficiaries of the alleged plan was insufficient to support a conclusion that the intended beneficiaries were ascertainable. Id. Finally, the Court concluded that the procedures for obtaining benefits were unclear because the benefits paid were clearly not distributed according to an established plan but rather represented ad hoc arrangements with each individual. Id. at 813.
In contrast to Diak, the Agreement in this case satisfies each of the Donovan criteria. Here, the Agreement provides a lengthy description of the method by which the severance payment is calculated as well as a comprehensive definition of what is included in the benefits package. While the benefits are not explicitly outlined in the Agreement, the definition provides that the employee will receive benefits from the plans and programs in which he was eligible to participate at the time of his termination as well as any plans and programs that a successor company might adopt in the future. Given that Rubbermaid likely has records of what benefits an employee is receiving at the time of his termination, the Court finds that the benefits are ascertainable. In addition, the intended beneficiary is ascertainable because the Agreement is clearly labeled as an arrangement between Rubbermaid and Robertson to insure the continued employment of Robertson.
Section 2(d) defines "employee benefits" as : "[T]he perquisites, benefits and service credit for benefits as provided under any and all welfare benefit policies, plans, programs or arrangements in which the Key Executive is entitled to participate, including without limitation any welfare benefit, pension, deferred compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by Rubbermaid), disability, salary continuation, expense reimbursement and other welfare benefit policies, plans, programs or arrangements that may now exist or any other successor policies, plans, programs or arrangements that may be adopted hereafter, providing perquisites, benefits, and service credit for benefits at least as great in the aggregate as are payable thereunder immediately prior to a Change in Control."
Section 2(f) defines "severance payment" as: "[A] lump sum amount equal to the product of (a) three, multiplied by (b) the sum of the items described in clauses (i) through (iv):
(i) the amount of annualized base salary that the Key Executive is earning immediately prior to the Qualifying Termination, or if greater, immediately prior to a Change in Control of Rubbermaid;
(ii) the greatest of (A) the amount that the Key Executive received or earned from any Rubbermaid annual incentive bonus with respect to the fiscal year immediately preceding the fiscal year in which the qualifying termination occurs or (B) the amount the Key Executive received with respect to the fiscal year in which the qualifying termination occurs or (C) the amount the Key Executive received under the Plan with respect to the fiscal year immediately prior to a Change in Control of Rubbermaid;
(iii) the dollar value of the Key Executive's most recent long term incentive award prior to the Qualifying Termination or, if greater, immediately prior to a Change in Control of Rubbermaid, and
(iv) $50,000.00, which shall be increased by a percentage equal to the percentage increase in the U.S. Consumer Price Index from 1996 to the Date of Termination as published by the United States Department of Labor, Bureau of Labor Statistics."
The Court also finds that the source of funding is ascertainable because the Agreement provides that Rubbermaid will pay and retain liability for all benefits and payments. The Agreement also states that in the event of an imminent change in control, Rubbermaid may establish a trust which is funded with sufficient principal to pay the employee's severance payment and benefits. See Agreement § 14. The fact that this trust may never be created does not change the Court's outcome on this issue as in Cvelbar the Seventh Circuit explicitly stated that "payment of benefits out of general funds satisfies the requirement of an ascertainable source of funding." 106 F.3d at 1378. Moreover, the Court noted that where, as in this case, an agreement references the company's existing benefit plans the source of funding is ascertainable because an examination of those plans will reveal the source of funds for such benefits. Id.
Finally, the procedure for obtaining benefits under the Agreement is ascertainable. In Cvelbar, the Court concluded that the procedures for obtaining benefits were reasonably clear even though the actual details were not explicitly stated. Id. at 1378-79. There, the Agreement provided that Cvelbar would have to be terminated, voluntarily or involuntarily, to become eligible and for his benefits to vest. Id. In addition, the Agreement stated that he was entitled to a lump-sum severance payment at the time of his termination as well as monthly payments and the medical coverage was to be made available at that time pursuant to the terms and conditions of the company retirement plan. Id. at 1379. Consequently, the Court held that a reasonable person could ascertain the procedures for receiving the Agreement's benefits. Id.
Similarly, in this case the Agreement requires that an employee be terminated, voluntarily with good reason or involuntarily without cause, within five years of a change in control to become eligible for payment and benefits under the plan. The Agreement then sets forth the method for calculating the lump-sum payment due upon termination and describes the employee's benefits, the terms and conditions of which are detailed in separate documents. Lastly, the Agreement details the actual procedure by which an employee obtains payment and receipt of benefits under the plan.
Section 3 provides: "Any termination of the Key Executive's employment by Rubbermaid or any subsidiary or by the Key Executive shall be communicated by a written notice to the other party hereto. The Notice of Termination shall specify the date on which the Key Executive's employment shall terminate (which date shall not be less than ten (10) nor more than twenty-one (21) calender days after the date that the Notice of Termination is deemed to have been duly given (as provided in Section 19) and indicate the specific provision in this Agreement that is applicable and is being relied upon, and if the termination is by the Company for Cause, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment."
Section 19 states: "Notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified mail, return receipt requested, postage prepaid, addressed to the respective addressees set forth below, directed to the attention of the Chairman or the Secretary of Rubbermaid (or any successor to Rubbermaid), or to such other address as any party may have furnished to the other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt."
Section 1(a) provides: "In the event of termination of employment of Key Executive. . . Rubbermaid shall pay to Key Executive within five (5) business days after the Date of Termination the Severance Payment and Rubbermaid shall provide the Key Executive Employee Benefits for a period of three (3) years after such termination." See also Section 1(b).
Section 11 states: "Payment of the Severance Payment set forth in Section 2(f) hereof is conditioned upon the Key Executive executing and delivering a release reasonably satisfactory to Rubbermaid releasing Rubbermaid from any and all claims, demands, damages, actions and/or causes of action whatsoever, which he may have had on account of the termination of his employment. . . Such release shall not, however, apply to the obligations of Rubbermaid arising under this Agreement, or rights of indemnification the Key Executive may have under Rubbermaid's Code of Regulations or by statute."
In sum, Robertson has alleged sufficient facts to show that the Agreement meets the Donovan criteria for finding an ERISA plan. Having reached this conclusion, the Court wishes to acknowledge the cases offered by the Defendants in which courts from other circuits have held that change in control agreements, or so-called "golden parachute" plans, do not qualify as ERISA plans. See Williams v. WCI Steel Co., Inc., 170 F.3d 598 (6th Cir. 1999) (memorandum agreement providing that trustee would allocate trust residue to employees not ERISA plan since reasonable person could not ascertain intended benefits or procedures); Kulinski v. Medtronic Bio-Medicus, Inc., 21 F.3d 254 (8th Cir. 1994) (change of control agreement not ERISA plan where once executive resigned for what he regarded as good reason nothing for company to do but make payment); Fontenot v. NL Industries, Inc., 953 F.2d 960 (5th Cir. 1992) (severance plan not ERISA plan where employee received benefits regardless of reason for termination). But, the Defendants provide no binding authority for the proposition that a change in control agreement is never a ERISA plan. The Court's analysis of cases from the Seventh Circuit reveals that determination of whether a particular agreement is a qualified plan under ERISA is a fact sensitive inquiry that must be done on a case-by-case basis. Here, the Defendants have offered no meaningful basis for distinguishing the plans at issue in Cvelbar and Collins from the change in control agreement at issue and thus the Court is bound by Seventh Circuit precedent unless and until a subsequent decision by that court or the Supreme Court undermines its holdings.
IV. CONCLUSION
The Defendants moved to dismiss Count I for lack of subject matter jurisdiction. Having reviewed the complaint and the arguments presented by the parties, the Defendants' motion to dismiss is hereby DENIED.