:: Plaintiffs’ Claims Under ERISA Section 510 and 502(a)(1)(B) Survive Motion To Dismiss

This case is before the court pursuant to defendant’s motion to dismiss for failure to state a claim upon which relief can be granted filed pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. When a Rule 12(b)(6) motion is filed, the court tests the sufficiency of the allegations in the complaint. The “complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)).

Put another way, granting the motion to dismiss is appropriate if plaintiff has not “nudged [her] claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570. The Third Circuit interprets Twombly to require the plaintiff to describe “enough facts to raise a reasonable expectation that discovery will reveal evidence of” each necessary element of the claims alleged in the complaint. Phillips v. Cnty. of Allegheny, 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556). Moreover, the plaintiff must allege facts that “justify moving the case beyond the pleadings to the next stage of litigation.” Id. at 234-35.

Manning v. Sanofi-Aventis, U.S. Inc., 2012 U.S. Dist. LEXIS 114129 (M.D. Pa. Aug. 14, 2012)

The important semantics of stating a “plausible” claim with sufficient particularity came before the district court in this case. The requirements of ERISA Section 510 and 502(a)(1)(B) set the bar for the ERISA claimant.

The Plaintiff claimed benefits under the Defendant’s Employee Retirement Income Security Act (“ERISA”) Separation Plan. The Plaintiff had been terminated for disputed reasons and her position filled by an employee with less experience and at a lower salary.  (The Court’s ample citations to authority are omitted but are indicated by quotations below.)

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:: New Scholarship – ERISA Section 510 Relief

Adam B. Gartner, Fordham University – School of Law, has published a note, “Protecting the ERISA Whistleblower: The Reach of Section 510 of ERISA” in the Fordham Law Review, Vol. 80, Fall 2011. The Note “addresses the unresolved circuit split over the reach of ERISA’s whistleblower protection provisions.”

Gartner, Adam B., Protecting the ERISA Whistleblower: The Reach of Section 510 of ERISA (January 24, 2011). Fordham Law Review, Vol. 80, Fall 2011.

The Note is Available at SSRN as a part of the Accepted Paper Series:

http://ssrn.com/abstract=1747286

:: Plaintiff’s Section 502(a)(3) Claim Prevails Over Varity-Based Defense

The Courts of Appeals disagree as to whether Varity prohibits a plaintiff from simultaneously pursuing equitable relief pursuant to Section 502(a)(3) and benefits due under the terms of the plan pursuant to Section 502(a)(1)(B).  The Third Circuit has not ruled on the issue, and district judges within the Third Circuit are split.

Trechak v. Seton Co. Supplemental Exec. Ret. Plan, 2010 U.S. Dist. LEXIS 124750 (E.D. Pa. Nov. 24, 2010)

This recent district court opinion addresses several recurring issues about available civil remedies under ERISA. The facts involve a “top hat” plan which is essentially a supplemental retirement benefit plan. The issues were presented in the context of a motion to dismiss.

The district court ultimately permitted the plaintiff to plead a claim for benefits under the terms of the plan (ERISA Section 502(a)(1)(B)) as well as equitable relief under ERISA Section 502(a)(3). The court noted a division in the Third Circuit among the district courts.

Before arriving at that analysis, however, the Court had to determine whether the plaintiff’s claim for equitable relief was preempted. The Court determined that it was not, stating:

Plaintiff has conceded that his unjust enrichment claim is preempted to the extent it is grounded in state law, as discussed above . . . However, Plaintiff contends that the claim survives as a claim for equitable relief under ERISA. Plaintiff clarified in his Response brief that Count Four was pled in the alternative as an ERISA claim for equitable relief pursuant to 29 U.S.C. § 1132(a)(3)(B) (“Section 502(a)(3)”).

In Nagy v. De Wese, 705 F. Supp. 2d 456 (E.D. Pa. 2010) (Yohn, J.), the plaintiff, whose benefit payments pursuant to an ERISA plan had ceased, clarified in his response to the defendant’s motion for judgment on the pleadings that his unjust enrichment claim was “more properly characterized as a demand for equitable relief” under Section 502(a)(3). Id. at 461. Judge Yohn held that the unjust enrichment claim, as pled in the alternative as a claim for equitable relief, was not preempted. Id.

Here, as in Nagy, Plaintiff has clarified that his unjust enrichment claim was pled in the alternative as a claim for equitable relief pursuant to Section 502(a)(3).

The Plaintiff’s next hurdle appeared in the frequently encountered defense that the equitable relief claim was unavailable because the Plaintiff had asserted a claim for benefits.

. . . the Court must determine whether Plaintiff can plead a Section 502(a)(3) claim simultaneously with his claim in Count One for wrongful denial of benefits under 29 U.S.C. § 1132(a)(1)(B) (“Section 502(a)(1)(B)”).

Since Varity Corp. v. Howe, 516 U.S. 489, 116 S. Ct. 1065, 134 L. Ed. 2d 130 (1996) held that Section 502(a)(3) is a “catchall” provision that “offer[s] appropriate equitable relief for injuries caused by violations that § 502 does not elsewhere adequately remedy”, courts have often held that (a)(3) claims cannot be asserted where a claim for benefits has also been asserted.

The district court distinguished Varity, however, and permitted the (a)(3) claims to stand, at least at this stage of the proceedings, stating:

The Courts of Appeals disagree as to whether Varity prohibits a plaintiff from simultaneously pursuing equitable relief pursuant to Section 502(a)(3) and benefits due under the terms of the plan pursuant to Section 502(a)(1)(B).

The Third Circuit has not ruled on the issue, and district judges within the Third Circuit are split. For example, in Parente v. Bell Atlantic Pennsylvania, No. Civ. A. 99-5478, 2000 U.S. Dist. LEXIS 4851, 2000 WL 419981 (E.D. Pa. Apr. 18, 2000), Judge Reed held that “under Varity, a plaintiff is only precluded from seeking equitable relief under § 1132(a)(3) when a court determines that plaintiff will certainly receive or actually receives adequate relief for her injuries under § 1132(a)(1)(B) or some other ERISA section.” 2000 U.S. Dist. LEXIS 4851, [WL] at *3.

Judge Reed found that Fed. R. Civ. P. 8(e) specifically contemplated pleading in the alternative. Id. Therefore, Judge Reed reserved judgment on “the question of whether (and what kind of) equitable relief under § 1132(a)(3) is appropriate” until later in the litigation, when it could be determined “whether § 1132(a)(1)(B) will in fact provide the plaintiff adequate relief.” Id. (denying the motion to dismiss). See also Tannenbaum v. UNUM Life Ins. Co. of Am., No. Civ. A. 03-CV-1410, 2004 U.S. Dist. LEXIS 5664, 2004 WL 1084658, at *4 (E.D. Pa. Feb. 27, 2004) [*17] (Surrick, J.) (denying the motion to dismiss a claim for breach of fiduciary duty based on Section 502(a)(3) because “[a]t this stage, we cannot know whether Plaintiff will be able to prove his entitlement to benefits under § 1132(a)(1)(B)”).

If the plaintiff proceeds on both claims in the alternative, the defendant may properly reassert the argument that the plaintiff cannot recover under both ERISA sections at the summary judgment stage. Koert v. GE Grp. Life Assur. Co., No. Civ. A. 04-CIV-5745, 2005 U.S. Dist. LEXIS 14132, 2005 WL 1655888, at *3 (E.D. Pa. July 14, 2005) (Stengel, J.) (denying motion to dismiss and allowing plaintiff to proceed on claims for wrongful denial of benefits and breach of fiduciary duty simultaneously).

Note: For a contrary outcome, the Court noted the opinion in Cohen v. Prudential Ins. Co., Civ. A. No. 08-5319, 2009 U.S. Dist. LEXIS 71422, 2009 WL 2488911 (E.D. Pa. Aug. 12, 2009), where the judge ruled that held that the Plaintiff could “only permit the § (a)(3) claim to progress if the plaintiff can demonstrate that § (a)(1) (B) alone may not provide an adequate remedy.” 2010 U.S. Dist. LEXIS 32166, [WL] at *4; and see Miller v. Mellon Long Term Disability Plan, Civ. A. No. 09-1166, 2010 U.S. Dist. LEXIS 63167, 2010 WL 2595568, at *6 (W.D. Pa. June 25, 2010)

Other Circuits – The Court noted decisions in Katz v. Comprehensive Plan of Group Ins., 197 F.3d 1084, 1088 (11th Cir. 1999), Tolson v. Avondale Indus., Inc., 141 F.3d 604, 610 (5th Cir. 1998), Frommert v. Conkright, 433 F.3d 254, 270 (2d Cir. 2006) and Forsyth v. Humana, Inc., 114 F.3d 1467, 1475 (9th Cir. 1997) which align with the Cohen reasoning.

Claim Against Individuals – The Court held that a claim for equitable relief under Section 502(a)(3) may be pled against an individual defendant, citing Harris Trust & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238, 120 S. Ct. 2180, 147 L. Ed. 2d 187 (2000) (“502(a)(3) admits of no limit . . . on the universe of possible defendants.”)

Section 510 Claim – I am not a big fan of Section 510 theories, but when they are appropriate then they have a place.  It just seems they so often don’t.  In any event, the Defendants also moved to dismiss Plaintiff’s claim for interference with benefit rights, pursuant to Section 510.

The Court noted that:

A plaintiff must make a three-pronged showing to establish a prima facie case under section 510: “1. prohibited employer conduct; 2. taken for the purpose of interfering; 3. with the attainment of any right to which the employee may become entitled.” Dewitt v. Penn-Del Directory Corp., 106 F.3d 514, 522 (3d Cir. 1997) (quoting Gavalik v. Cont’l Can Co., 812 F.2d 834, 852 (3d Cir. 1987)).

. . .

In this case, Plaintiff does not allege that he was discharged, fined, suspended, expelled, or disciplined by his employer. Furthermore, Plaintiff has not pled facts that show unlawful discrimination within the employer-employee relationship, such as demotion or termination. Plaintiff’s allegations that Defendants decided to suspend payments owed him, improperly influenced the Plan Administrators, and sent him an unauthorized notice terminating his benefits all pertain to actions outside of the employer-employee relationship for purposes of Section 510. Id

Defendants also moved to dismiss Plaintiff’s claim for interference with benefit rights, pursuant to Section 510. Section 510 of ERISA states:
It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan . . . for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan . . . The provisions of section 1132 of this title shall be applicable in the enforcement of this section.
29 U.S.C. § 1140. A plaintiff must make a three-pronged showing to establish a prima facie case under section 510: “1. prohibited employer conduct; 2. taken for the purpose of interfering; 3. with the attainment of any right to which the employee may become entitled.” Dewitt v. Penn-Del Directory Corp., 106 F.3d 514, 522 (3d Cir. 1997) (quoting Gavalik v. Cont’l Can Co., 812 F.2d 834, 852 (3d Cir. 1987)).
Congress intended for Section 510 to protect beneficiaries from dismissal and adverse employment actions such as “termination  [*13] motivated by an employer’s desire to prevent a pension from vesting.” Ingersoll-Rand, 498 U.S. at 143. The Third Circuit interpreted “discriminate against,” the broadest term in Section 510, as being “limited to actions affecting the employer-employee relationship.” Haberern v. Kaupp Vascular Surgeons Ltd. Defined Benefit Pension Plan, 24 F.3d 1491, 1503 (3d Cir. 1994) (holding that amending the defined benefit plan to eliminate life insurance benefits for beneficiaries over a certain age, which affected only the plaintiff, did not constitute “discrimination” in the employer-employee relationship).
In this case, Plaintiff does not allege that he was discharged, fined, suspended, expelled, or disciplined by his employer. Furthermore, Plaintiff has not pled facts that show unlawful discrimination within the employer-employee relationship, such as demotion or termination. Plaintiff’s allegations that Defendants decided to suspend payments owed him, improperly influenced the Plan Administrators, and sent him an unauthorized notice terminating his benefits all pertain to actions outside of the employer-employee relationship for purposes of Section 510. Id

Thus, the Court provides a kind of roadmap for what a Section 510 claim has to look like – if it can fit the facts.

(I uploaded this case on erisaboard.com)

:: Section 510 Claims Defeated By Causation Defense

Giordano v. Thomson, 2009 U.S. App. LEXIS 8887 (2d Cir. Apr. 27, 2009), which I reviewed today on erisaboard.com, reveals a few interesting points about executive severance compensation disputes.  The facts are colorful and the rather short opinion is worth the time it takes to read.

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:: Sixth Circuit Holds That Plaintiffs Fail To Make ERISA Section 510 Case

But of course: the whole issue is whether reducing pension benefits by shutting down a plant with employees close to vesting was a “motivating factor” or was instead “incidental” because there were other, neutral, business reasons at play. See Smith, 129 F.3d at 865.

At the pretext stage, judges must still bring their judgment to bear on whether or not plaintiffs have met their burden–in effect, the Burdine/McDonnell-Douglas framework has fallen away and the question reduces to whether plaintiffs can prove improper motivation.

Crawford v. Trw Auto. United States Llc, 2009 FED App. 0124P (6th Cir.) (6th Cir. Mich. 2009)

In this recent Sixth Circuit opinion, the plaintiffs launched an attack on their employer’s plant closure using the most unreliable weapon of a Section 510 interference claim. Lacking direct evidence of a specific intent to interfere with benefit rights, the plaintiffs were forced to turn to the peculiar method of proving a circumstantial case unique to discrimination cases.

The Facts

The plaintiffs, a class of former TRW Automotive employees, alleged that TRW violated ERISA by closing the plant where they worked to interfere with the vesting of their retirement benefits. The defendant blamed the plant closure on overcapacity problems which hampered profits. Adding to the controversy, the defendant placed some new work at a non-union facility, but there were operational jusifications offered for that decision.

First a ray of hope appeared, but these hopes were soon overshadowed by economic differences:

Shortly before TRW shut Van Dyke down, however, the company discussed with the UAW the possibility of preferentially hiring laid-off Van Dyke employees to the Mancini plant and “bridging” the benefits of Van Dyke employees who were close to vesting. TRW also offered a severance to employees who opted out of their available retiree benefits. But the two sides failed to reach an agreement and TRW closed Van Dyke in January 2007. At that time, three employees missed the 30-year retirement mark by less than one year of benefit service (all three had been laid-off in 2005), and four others missed the 30-year mark by less than two years.

ERISA Section 510 Invoked

Ultimately the plaintiffs sued, alleging that TRW violated ERISA § 510 by (1) failing to recall employees following a layoff, (2) refusing to transfer employees to the Mancini Drive facility, and (3) improperly discharging employees to interfere with their attainment of retirement eligibility. The district court granted summary judgment to TRW on all counts, and also later dismissed plaintiffs’ motion for relief from the judgment on the basis of new evidence.

Making The Section 510 Case

ERISA § 510 makes it “unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary . . . for the purpose of interfering with the attainment of any right to which such participant may become entitled under [an employee benefit plan].” 29 U.S.C. § 1140.

The Sixth Circuit posed the question as follows: Did the plaintiffs proffered enough evidence of this improper motive to get to a jury.

The Burden Shifting Minuet

The Court noted that “the plaintiffs must show that TRW fired them for the purpose of interfering with the attainment of their retirement benefits.” and that the plaintiffs may make this showing either through direct or circumstantial evidence. If circumstantial, the case must be made “via the ubiquitous burden-shifting framework that has, like some B-movie villain, devoured nearly every area of law with which it has come into contact.” (citing, Texas Dep’t of Community Affairs v. Burdine, 450 U.S. 248, 253 (1981); McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973)).

The Circumstantial Case

Lacking direct evidence, the plaintiffs began the burden-shifting minuet. In the ERISA context, the burden-shifting framework first requires the plaintiffs to establish their “prima facie” case “by showing the existence of (1) prohibited employer conduct (2) taken for the purpose of interfering (3) with the attainment of any right to which the employee may become entitled.” Smith v. Ameritech, 129 F.3d 857, 865 (6th Cir. 1997).

Although some of the cases discuss, in reference to this “prima facie” case, the need for the plaintiff to prove the existence of the employer’s “specific intent,” see, e.g., Schweitzer v. Teamsters Local 100, 413 F.3d 533, 537 (6th Cir. 2005); Humphreys v. Bellaire Corp., 966 F.2d 1037, 1043 (6th Cir. 1992), that requirement is superfluous and not relevant (at this first stage at least) because it gets to the ultimate question of whether the employer purposefully interfered with the employee’s pension rights. This confusion stems in part because the term “prima facie” as used here, does not comport with the traditional understanding of that term–namely, that plaintiffs have proven enough to get to a jury, see 9 WIGMORE ON EVIDENCE § 2494, 378-79 nn. 1,3 (1981).

Instead, “prima facie” is Burdine/McDonnell-Douglas shorthand for saying whether the plaintiffs have shown enough to create a rebuttable presumption such that the employer must then produce evidence supporting a legitimate, non-discriminatory reason for the discharge. If the employer makes this showing, the burden shifts back to the plaintiff to show that this proffered reason was a “pretext”–i.e. a phony reason–and instead that the intent to interfere with the plaintiff’s ERISA rights was a “motivating factor.” Id.

Step 1

The plaintiffs “easily” satisfied the low-threshold for establishing their prima facie case.

TRW’s Vice President of Operations for the Suspension Group stated that pension costs–colloquially known within the company as “legacy” or “heritage” costs–were among the reasons to close down the plant. And that is no surprise: labor costs are often among the largest costs for a plant, and such “legacy” or retirement and benefits costs typically make up the largest portion of labor costs. See Hylton, 55 BUFF. L. REV. at 1204-11. Indeed, as the district court observed, the work done at Van Dyke was transferred to a non-union facility where such costs “were reduced or non-existent.”

The Court viewed this as sufficient “to erect the presumption” and require TRW to make an evidentiary showing.

Step 2

TRW’s answer was rather obvious. It stated that it closed Van Dyke because of its overcapacity: only 30,000 square feet of its available 300,000 square feet was being used, so roughly 26% of every sales dollar went to fixed costs and overhead.

This is a strong non-discriminatory reason, especially when coupled with the fact that there are necessarily a variety of concerns at play whenever a company decides to shut down a plant.

And so the Court moved on.

Step 3

So we reach the “pretext” stage.

Plaintiffs claimed that:

TRW’s proffered reason is phony because the plant was so poorly run; specifically, that the company could have kept Van Dyke going if it had cut a variety of possible costs and placed the DaimlerChrysler work there. Thus, plaintiffs argue, because they did not do those things, it must have been the company’s desire to interfere with their pension benefits that motivated it to close their plant.

TRW, in turn, claimed that:

since its stated reason concerned “business judgment,” then its reason is unassailable. In support, TRW quotes dicta from the cases, like: “Measures designed to reduce costs in general that also result in an incidental reduction in benefit expenses do not suggest discriminatory intent.” Daughtrey v. Honeywell, Inc., 3 F.3d 1488, 1492 (11th Cir. 1993).

The Issue Reduced To A Single Question

Returning to the larger theme, the Court stated:

the whole issue is whether reducing pension benefits by shutting down a plant with employees close to vesting was a “motivating factor” or was instead “incidental” because there were other, neutral, business reasons at play. See Smith, 129 F.3d at 865.

At the pretext stage, judges must still bring their judgment to bear on whether or not plaintiffs have met their burden–in effect, the Burdine/McDonnell-Douglas framework has fallen away and the question reduces to whether plaintiffs can prove improper motivation.

After a review of various details, some of them rather odd, the Court concluded that, “despite plaintiffs’ evidence, we cannot say that TRW’s reason was a mere pretext.”

Note: The Court noted that both parties overstated their case:

TRW overreaches in stating that employees may never challenge discharges that result from a plant-closing decision. While “[e]mployers or other plan sponsors are generally free under ERISA . . . to adopt, modify or terminate” pension benefit plans, Coomer v. Bethesda Hosp. Inc., 370 F.3d 499, 508 (6th Cir. 2004), this discretion does not permit them to discharge employees or alter their plan rights to “circumvent the provision of promised benefits.” Inter-Modal Rail Emples. Ass’n v. Atchison, Topeka & Santa Fe Ry., 520 U.S. 510, 515 (1997) (internal quotations omitted).
. . .
Plaintiffs similarly overreach in claiming that TRW was legally required to recall many of them back to or to transfer them to the Mancini plant. As stated above, § 510 includes a list of prohibited actions, including improperly “discharg[ing], fin[ing], expel[ling],” and “discriminat[ing].” But nowhere is “transferring” or “recalling” listed. Neither have plaintiffs identified caselaw giving effect to such a claim.

Novel Theory Rejected – The plaintiffs, in support of their theory that § 510 gives them a right to be recalled or transferred, “try to import two doctrines into ERISA law: the corporate “alter-ego” doctrine, see Yolton v. El Paso Tenn. Pipeline Co., 435 F.3d 571, 587 (6th Cir. 2006), and the labor law “double-breasting” doctrine, see NLRB v. Fullerton Transfer & Storage, Ltd., Inc., 910 F.2d 331, 336 n.7 (6th Cir. 1990).”

The idea seems to be that the plaintiffs view the Mancini plant as the successor or “alter-ego” of the defunct Van Dyke plant. But, setting aside the nuanced analysis required to explain if and how these doctrines would apply to two plants both owned by the same company–rather than to a successor entity–it is unclear what satisfying these tests would get plaintiffs. Suppose the Mancini plant was the “alter ego” of Van Dyke: plaintiffs would still not be entitled to a transfer, because their plan granted them no such right and neither would they be entitled to a separate recall, so long as the original discharge was lawful. So, we decline the invitation to apply these two doctrines to ERISA law because any conclusion would be irrelevant to our decision today. Thus, § 510 does not include the right to be recalled or transferred if the discharge itself was lawful.

:: Discovery Responses Do Not Support Removal & ERISA Preemption

In the case at bar, Plaintiff is no longer  a participant in Defendant’s ERISA plan and he does not allege a wrongful withholding of benefits.  . . . Plaintiff does not claim that Defendant promised him continued participation in an ERISA plan. Plaintiff stated at his deposition that he thought that Defendant was at least partially motivated to fire him in order to avoid paying him higher pension benefits, which he would have accrued had he continued to work for Defendant.  However, Plaintiff’s statement does not automatically give rise to ERISA preemption.

Black v. Lear, 2008 U.S. Dist. LEXIS 86985 ( E.D. Mich. Oct. 28, 2008)

Plaintiffs walk a fine line when asserting claims under the ADA and state wrongful discharge laws.  This recent district court opinion exemplifies a successful avoidance of ERISA preemption, but not without the trouble of removal and remand.

The problem lies in the natural consequence of termination.  Aside from loss of wages and compensation benefits, the plaitntiff will lose participation in employee benefit plans.  If that becomes an important aspect of the case, the defendant should remove the case as more properly stating an ERISA Section 510 claim.

The trade is not an even one.   ERISA will preempt state law claims while offering in return a weapon with less range, less punch and prone to frequent operator error.

The Snare Is Laid

The motion practice associated with removal of claims offers a journey through one of the last remaining wilderness preserves where trial by ambush may be robustly pursued.  The stakes are high on either side.  If the defendant does not remove within 30 days, the right is lost.  If the plaintiff inadvertently triggers removal, then the complaint is restated as a set of ERISA claims which, as noted above, have inherent limitations.

In this instance, the parties began stalking the issue in depositions.

On July 24, 2008, Defendant deposed Plaintiff. (Def.’s Br. 1). During the deposition Defendant asked Plaintiff whether he claimed that Defendant terminated him to avoid paying him higher pension benefits. (Black Dep. 94-95). Plaintiff answered: “Seems reasonable, yes, to assume that. I don’t know why Lear terminated me. I worked 35 years for the company.” (Id. at 95).

When Defendant asked Plaintiff a second time whether he claimed that he was fired to prevent him from earning higher pension benefits, Plaintiff responded, “That’s right.” (Id.at 98). Defendant followed up by asking Plaintiff if he knew of any facts that support his claim. (Id.) Plaintiff answered, “The only fact I know is that I’m not working there anymore.” Defendant pressed Plaintiff for other facts and Plaintiff said, “And I won’t accrue those benefits.”

In addition, the defendant developed the issue somewhat further by a set of requests for admissions directed a eliciting admissions as to the nature of claims asserted:

The second request asked Plaintiff to admit whether he alleges that Defendant intentionally terminated his employment with the purpose to deprive him of benefits under the Lear Corporation Pension Plan. (Id.) Plaintiff responded: “Denied, such may or may not have been the sole basis. The Complaint alleges multiple basis [sic] for Plaintiff’s termination.” (Id.)

The Claims Evaluated

The defendant having acquired all that could be adduced on the issue, then turned to federal court for an assessment of the results. The plaintiff filed a motion to remand.  The issue was then joined on whether the plaintiff had, in effect, plead an ERISA Section 510 claim.

The district court framed the issue with reference to the key Supreme Court opinion –

In Metropolitan Life Insurance, the United States Supreme Court held that ERISA preempts state common law claims when the action is to recover benefits, enforce rights, or clarify future benefits under an ERISA plan. 481 U.S. at 63-64.

– and then dialed in the applicable Sixth Circuit authority:

In accordance  with Metropolitan Life Insurance, the Sixth Circuit held in Peters v. Lincoln Electric Company, 285 F.3d 456, 467 (2002), that ERISA completely preempted the plaintiff’s state law breach of promise claim because the plaintiff asserted that the defendant breached a promise to continue his participation in an ERISA regulated benefit plan. In Peters, the plaintiff filed a complaint against his former employer alleging age discrimination, breach of contract, detrimental reliance and breach of public policy. Id. at 464.

During the plaintiff’s deposition, the defendant asked the plaintiff a series of questions designed to uncover the specific “unbroken promises” for which the plaintiff sought relief. Id. The plaintiff testified that one of the promises he sued to enforce was the defendant’s promise to continue his participation in its supplemental executive pension plan. Id. at 466.

The Facts Differ

The district court found the Peters case distinguishable.  In the court’s view, the plaintiff had avoided the preemption trip wire and thus was entitled to return to state court.

In the case at bar, Plaintiff is no longer a participant in Defendant’s ERISA plan and he does not allege a wrongful withholding of benefits. See Sears, 884 F.Supp. at 1131-32. Moreover, unlike in Peters, Plaintiff does not claim that Defendant promised him continued participation in an ERISA plan. 285 F.3d at 468. Plaintiff stated at his deposition that he thought that Defendant was at least partially motivated to fire him in order to avoid paying him higher pension benefits, which he would have accrued had he continued to work for Defendant. (Black’s Dep. 95, 98).

However, Plaintiff’s statement does not automatically give rise to ERISA preemption. Plaintiff’s wrongful discharge and age discrimination claims may give rise to an award of damages based on the value of the increased pension benefits Plaintiff would have received if he was not terminated, but he is only seeking the value of the employment he lost, not the benefits themselves. See Morningstar, 662 F.Supp. at 557. The gravamen of Plaintiff’s complaint is his claim that he was discharged in violation of his employment contract, against public policy and as a result of age discrimination. Plaintiff assures the Court that he is not asserting a purposeful deprivation  of benefits claim. (Plaintiff’s Br. 4).

Because the essence of Plaintiff’s state law claims are not for the recovery of an ERISA plan benefit, and Plaintiff only seeks to recovery the value of the benefits he lost as a consequence of his termination, there is no ERISA cause of action. Defendant, therefore, has failed to show that subject matter jurisdiction lies with this Court, and this matter must be remanded to the Wayne County Circuit Court.

Note: The case gives a good discussion of the line of demarcation.  The issue turns on the facts, so analogy to caselaw can be difficult.  This excerpt probably offers the most important guidance that may be gleaned from the opinion and, for that reason, I’ll quote the entire passage:

Both the Sixth Circuit and courts in the Eastern District of Michigan have held that a plaintiff’s state sex, age and race employment discrimination claims are not preempted when the action is merely peripherally related to the ERISA plan in question. See Wright, 262 F.3d at 613 (“‘[e]ven if an action refers to a plan, . . . the action will not relate to the plan for preemption purposes when the action only peripherally affects the plan.” (quoting Crabbs v. Copperweld Tubing Products Company, 114 F.3d 85 (6th Cir. 1997)); Yageman v. Vista Maria, Sisters of the Good Shepherd, 767 F.Supp. 144, 145 (E.D. Mich. 1991)  (Duggan, J.) (holding that plaintiff’s loss of pension benefits was a mere consequence of, and not a motivating factor behind, his termination and, therefore, no ERISA action existed); Sears v. Chrysler Corp., 884 F.Supp. 1125, 1131-32 (E.D. Mich. 1995) (Rosen, J.) (holding that a former employee, who sought to recover the value of the benefits she would have received under the ERISA plan, is not a plan participant and cannot state a § 1132(a)(1)(B) ERISA claim); Morningstar v. Meijer, Inc., 662 F.Supp. 555, 556-57 (E.D. Mich. 1987) (Churchill, J.) (concluding that the plaintiff’s state law claim for breach of employment contract was not preempted when the plaintiff was not a plan participant, did not allege that the defendant fired her to prevent her benefits from vesting, to keep her from exercising rights under the plan or for any other improper purpose, and only sought to recover the value of the benefits).

Thus, in instances where a plaintiff is not a plan participant and is not alleging a wrongful withholding of benefits but seeks damages for the loss of ERISA benefits, an ERISA cause of action does not exist, and removal is improper.

See also – For more on Section 510, see :: Sixth Circuit Permits Claims Under Tolle Rule But Finds Wrong Without Remedy

For more on the timing and factual issues attending ERISA removal, see :: Challenge To Factual Basis Set Forth In Removal Notice Rejected

:: Sixth Circuit Permits Claims Under Tolle Rule But Finds Wrong Without Remedy

In sum, Plaintiffs are left without a remedy that falls under the rubric of “appropriate equitable relief” as permitted under ERISA § 502(a)(3). Such an unsettling phenomenon is not unheard of in ERISA cases. See Aetna Health Inc. v. Davila, 542 U.S. 200, 222 (2004) (Ginsburg, concurring) (noting “a host of situations in which persons adversely affected by ERISA-proscribed wrongdoing cannot gain make-whole relief”). Alexander v. Bosch Automotive Systems, Inc., Slip Copy, 2007 WL 1424299 (C.A.6 (Tenn.)) (May 14, 2007)

The case presents another treatment of benefit accrual of ERISA Section 510 claims as well as the Sixth Circuit’s view on the application of the “instatement” remedy previously discussed on this site. The case arises in the context of a plant closure by Bosch after which a group of plaintiffs sued, claiming, among other things, that Bosch calculated the plant closure date so as to deprive them of plant closure benefits.

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:: Claim of Interference With Benefits Rights Requires Bona Fide Employment Status

Although the Second Circuit has not squarely addressed this issue, courts in this District have held that § 510 only proscribes interference with the employment relationship . . . Thus, “plaintiffs must allege that defendant took some type of adverse employment action to interfere with the attainment of their benefit rights under the plan.”

Tirone v. New York Stock Exchange, Inc., 2006 WL 2773862 (S.D.N.Y.) (September 28, 2006)

In Tirone, the plaintiff commenced an ERISA class action against the NYSE on behalf of himself and at least 14 other former NYSE employees whose health and life insurance benefits were discontinued by a leave of absence policy. In early 1990, the plaintiff took a medical leave of absence after he began experiencing seizures. His employer, the NYSE, classified him as “totally disabled.”

Under the NYSE Welfare Benefit Plan, the Plaintiff was approved for long-term disability benefits payable by Unum Insurance Company on the basis of a total disability. The Plaintiff also participated in an HMO and enjoyed group benefits under separate policies – the curtailment of these benefits gave rise to the case. Continue reading