Eide v. Grey Fox Technical Services Corp. ( 2003 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 02-1572
___________
Linda M. Eide, Anita J. Barber, *
Jack T. Chandler, John E. Coss, *
Alice M. Hruska, Veronica R. *
Mathison, Dale E. Miller, Robert J. *
Pechmann, David F. Ross, Kathleen *
J. Sheehan, Sandra K. Skrove, *
Reed T. Weseloh, *
*
Plaintiffs/Appellants, *
*
Dorothy E. Woodington, *
* Appeal from the United States
Plaintiff, * District Court for the
* District of Minnesota.
Larry A. Block, Robert S. Boyum, *
Lawrence D. Bross, Betty J. Carlson, *
*
Plaintiffs/Appellants, *
*
Fu-Gin Chen, *
*
Plaintiff, *
*
William P. Cress, Charles Debevec, *
Richard E. Kulla, *
*
Plaintiffs/Appellants, *
*
David M. Lee, *
*
Plaintiff, *
*
Sandra K. Lyke, Joseph Marquardt, *
Sandra M. Nelson, Tuan Nguyen, *
Dale A. Severude, Sharon Skaiem, *
Shirley A. Stene, Ronald W. Sweezo, *
*
Plaintiffs/Appellants, *
*
Suzanne A. Tuenge, Nancy J. Wikre, *
*
Plaintiffs, *
*
v. *
*
Grey Fox Technical Services *
Corporation, formerly known as Grey *
Fox Technology; General Dynamics *
Information Systems, Inc.; Grey Fox *
Technology Acquisition Corporation, *
jointly and severally, *
*
Defendants/Appellees. *
___________
Submitted: November 7, 2002
Filed: May 22, 2003
___________
Before LOKEN,1 Chief Judge, LAY, and WOLLMAN, Circuit Judges.
___________
WOLLMAN, Circuit Judge.
1
The Honorable James B. Loken became Chief Judge of the United States
Court of Appeals for the Eighth Circuit on April 1, 2003.
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Former employees (Employees) of Ceridian Corporation’s Computing Device
International division (Ceridian) initiated this action in Minnesota state court against
Grey Fox Technical Services Corporation and Grey Fox Technology Acquisition
Services (Grey Fox) and General Dynamics Information Systems (General
Dynamics), Ceridian’s successor in interest, to recover severance benefits allegedly
owed to them by Ceridian. Grey Fox and General Dynamics removed the case to
federal district court, asserting jurisdiction based on the Employee Retirement Income
Security Act (ERISA), 29 U.S.C. §§ 1001-1461. See 28 U.S.C. § 1441(b). The
district court held that Employees’ state law claims were preempted by ERISA and
thus were properly removed to federal court. Employees appeal the district court’s
grant of summary judgment in favor of Grey Fox and General Dynamics and assert
that removal was improper, as their claims are not preempted by ERISA. We agree,
and we therefore vacate the district court’s judgment and remand the case to the
district court with instructions to remand to the state court for further proceedings.
I. Background
Twenty-seven former employees of Ceridian’s Technology Center initiated this
action in Minnesota state court under the provisions of the Minn. Stat. § 181.64,
alleging breach of contract and implied contract, promissory estoppel, and false
statements as inducement to entering employment. Employees sought to recover
severance pay and compensation for paid days off accrued during their tenure at
Ceridian. While employed at Ceridian’s Technology Center, Employees participated
in a benefits plan, the Ceridian Corporation Severance Pay Plan (Ceridian plan),
pursuant to which they received paid days off and were guaranteed severance
payments. Only “active, full-time employees who . . . are employed by Ceridian or
any one of the affiliate operations which have adopted the Plan” were eligible to
participate in the Ceridian plan and receive consequent benefits.
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In late 1995, Ceridian management announced that it was negotiating with
Grey Fox to sell the Technology Center. On April 26, 1996, M. L. Dyste, Ceridian’s
Vice President, wrote to Employees, informing them that Grey Fox offered them
employment at their “current job descriptions, responsibilities, and base rate of pay.”
Employees, the majority of whom had been employed by Ceridian for more than a
decade, some for more than thirty years, had accrued substantial severance benefits,
as well as compensation for paid days off. Employees were concerned that the sale
of the Technology Center would adversely affect the value of and their ability to
obtain their severance benefits.
Employees allege that Ceridian management, aware of Employees’ concerns,
guaranteed that if they accepted employment with Grey Fox, and Grey Fox
subsequently terminated them within their first year of employment, Ceridian would
pay them severance equal to that which they would have received under the Ceridian
plan. Dyste’s April 26, 1996, letter to Employees informed them that should they
decline to become employees of Grey Fox, they would be ineligible for severance
under the Ceridian Plan: “As a matter of company policy, when employees receive
an offer of employment from the buyer of a Ceridian business and refuse such an
offer, those employees are considered to have terminated voluntarily from the
Company and are ineligible for severance.” The letter did not address Ceridian’s
statements concerning covering severance benefits for employees who transferred to
Grey Fox.
Ceridian sold the Technology Center to Grey Fox in May 1996. Employees
accepted employment with Grey Fox. Employees contend that they relied upon
Ceridian’s guarantee that they would receive severance pay should Grey Fox
terminate them within their first year of employment with Grey Fox. At the time of
the sale, Employees had accumulated in aggregate more than $800,000 in severance
payments and were owed $116,100 as compensation for paid days off.
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Between October and December 1996, Employees were terminated by Grey
Fox. Both Grey Fox and Ceridian refused to pay Employees severance benefits. On
December 31, 1997, General Dynamics purchased Ceridian’s Computing Device
International division and assumed Ceridian’s liability in this litigation.
The district court granted summary judgment in favor of Grey Fox and General
Dynamics, holding that Employees’ state common law and statutory claims to recover
severance benefits were preempted by ERISA. The court determined that Employees
could not recover severance pay based on Ceridian’s alleged oral promise because
such a delivery of benefits would be inconsistent with the terms of the Ceridian Plan
and because ERISA does not permit oral modifications of existing plans. The court
declined to grant summary judgment to either party on the issue of remuneration for
paid days off, holding that Grey Fox and General Dynamics did not dispute that
Employees were owed compensation reflecting paid days off accrued while at
Ceridian. The parties stipulated to a settlement of the claims concerning paid days
off. A final judgment was entered concerning the grant of summary judgment on the
ERISA issue, from which Employees now appeal.
II.
Our jurisdiction is founded on the district court’s determination that
Employees’ claims relate to an ERISA plan and are preempted by ERISA. We
therefore must consider first whether the promise of severance payments was
premised on or amended an ERISA plan. Shea v. Esensten, 107 F.3d 625, 627 (8th
Cir. 1997). We review de novo the district court’s determination of ERISA
preemption. Emmenegger v. Bull Moose Tube Co., 197 F.3d 929, 931 (8th Cir.
1999); Wilson v. Zoellner, 114 F.3d 713, 715 (8th Cir. 1997).
We review de novo a district court’s grant of summary judgment. Toghiyany
v. AmeriGas Propane, Inc., 309 F.3d 1088, 1091 (8th Cir. 2002). “We will affirm a
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grant of summary judgment if ‘the evidence, when viewed in the light most favorable
to the nonmoving party, indicates that no genuine issue of any material fact exists and
that the moving party is entitled to judgment as a matter of law.’” Id. (quoting Fisher
v. Pharmacia & Upjohn, 225 F.3d 915, 919 (8th Cir. 2000)); Fed. R. Civ. P. 56(c).
If, however, “the evidence presents a sufficient disagreement . . . [and is not] so one-
sided that one party must prevail as a matter of law[,]” summary judgment should not
have been granted, and we must reverse the district court. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 251-52 (1986).
A.
The Ceridian Plan is an “employee welfare benefit plan” as defined by ERISA.
29 U.S.C. § 1002(1) (defining employee welfare benefit plan as “any plan . . .
established or maintained by an employer . . . for the purpose of providing for its
participants . . . benefits in the event of . . . unemployment . . . or any benefit
described in section 186(c) of this title”). ERISA “supersede[s] any and all State laws
[that] relate to any employee benefit plan . . . .” 29 U.S.C. § 1144(a); Shea, 107 F.3d
at 627. ERISA, therefore, preempts state common law causes of action that reference
or pertain to an ERISA plan. Shea, 107 F.3d at 627 (citing Pilot Life Ins. Co. v.
Dedeaux, 481 U.S. 41, 47-48 (1987)). Actions initiated in state court that are within
the scope of and are preempted by ERISA may be removed to federal court. Crews
v. Gen. Am. Life Ins. Co., 274 F.3d 502, 505 (8th Cir. 2001) (citing Metro. Life Ins.
Co. v. Taylor, 481 U.S. 58, 64-67 (1987)).
The district court held that removal of Employees’ claims was proper because
it determined that Employees’ claims were related to the Ceridian plan and thus were
preempted by ERISA. See id. Thus, the threshold question that we must decide is
whether Ceridian’s alleged promise to pay Employees severance was premised on or
amended an employee benefit plan, such that any state common law or statutory
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causes of action to enforce Ceridian’s alleged promise would “relate to” an ERISA
plan.
A company’s delivery of benefits to employees or former employees constitutes
an ERISA benefit plan when the payment arrangement has specific characteristics.
See Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 11-12 (1987). An
arrangement to provide benefits to employees does not invoke ERISA’s protections
solely because it delivers benefits; not all policies, or disbursement schemes,
providing severance payment benefits are ERISA plans. Fort Halifax, 482 U.S. at 11-
12; Crews, 274 F.3d at 506-07; Velarde v. Pace Membership Warehouse, 105 F.3d
1313 (9th Cir. 1997); Kulinski v. Medtronic Bio-Medicus, Inc., 21 F.3d 254, 256 (8th
Cir. 1994) (“An employer’s decision to extend benefits does not constitute, in and of
itself, the establishment of an ERISA plan.”); Sherrod v. Gen. Motors Corp., 33 F.3d
636, 639 (6th Cir. 1994); Fontenot v. NL Indus. Inc., 953 F.2d 960, 962 (5th Cir.
1992); Angst v. Mack Trucks, Inc., 969 F.2d 1530, 1532-33 (3d Cir. 1992).
Whether an ERISA plan exists, or whether benefits are premised on an ERISA
plan, may be determined by whether the employer requires “an ongoing
administrative program to meet [its] obligation.” Fort Halifax, 482 U.S. at 12. “An
ongoing administrative scheme” is necessary when “to determine the employees’
eligibility for and level of benefits[, the employer] must analyze each employee’s
particular circumstances in light of the appropriate criteria.” Kulinski, 21 F.3d at 257.
An ongoing administrative scheme is unnecessary, however, when severance
payments may be calculated by “simple or mechanical determinations.” Id. For
example, 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.” Fort Halifax, 482 U.S. at 12. A “one-time, lump sum payment,”
furthermore, is inconsistent with ERISA plans because “the delivery of benefits [does
not create] an on-going demand on employer assets. A plan may be an ERISA plan
if the employer ‘assumes . . . responsibility to pay benefits on a regular basis, and thus
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faces . . . periodic demands on its assets that create a need for financial coordination
and control.’” Cassidy v. Akzo Nobel Salt, Inc., 308 F.3d 613, 616 (6th Cir. 2002)
(quoting Fort Halifax, 482 U.S. at 12). Thus, when benefit disbursement
arrangements lack the characteristics of and are formally inconsistent with ERISA
plans, they do not constitute ERISA plans. See Fort Halifax, 482 U.S. at 8.
Ceridian allegedly promised Employees that they would receive severance
benefits if Grey Fox terminated them within their first year of employment. Pursuant
to this promise, benefits would be awarded automatically and mechanically if the
specific conditions of termination were satisfied. Payment of benefits would not
create an on-going demand on Ceridian’s assets. According to the record, the amount
of the severance pay to be distributed to Employees upon their termination was set
as of the last date of Employees’ employment with Ceridian. During the course of
this litigation, Ceridian has not disputed the specific amounts of severance pay
claimed by Employees. Because Ceridian’s benefits determinations for the
Employees were set as of Employees’ final date of employment at Ceridian, the
determinations were not “made on an individual, ongoing basis, after exercising
discretion . . . .” Emmenegger, 197 F.3d at 935 (citation omitted).2 Although the
benefits to be paid to Employees were calculated according to the formulas provided
by the Ceridian plan, they were not to be delivered pursuant to that plan. Instead,
Employees were to receive a lump-sum payment of benefits in the event that Grey
Fox terminated them within their first year of employment.
2
Standard Formula Enhanced Formula
(Service Exceeds 10 Years)
Length of Service Severance Pay Severance Pay
More than 1 year 1 week’s base pay for 1 week’s base pay for each full yr. of
each full year of service for the first 10 years of service;
service plus 2 week’s base pay for each full yr.
of service after 10 yrs .
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No “ongoing administrative scheme” is required for Ceridian to meet its
obligations to Employees. Once Grey Fox terminated Employees, “there was nothing
for [Ceridian] to decide, no discretion for it to exercise, and nothing for it to do but
write a check.” Kulinski, 21 F.3d at 258. As in Fort Halifax, Ceridian’s obligation
to pay severance to Employees
is predicated on the occurrence of a single contingency that
may never materialize. The employer may well never have
to pay the severance benefits. To the extent that the
obligation to do so arises, satisfaction of that duty involves
only making a single set of payments to employees . . . .
To do little more than write a check hardly constitutes the
operation of a benefit plan. Once this single event is over,
the [former] employer has no further responsibility. The
theoretical possibility of a one-time obligation in the
future simply creates no need for an ongoing administrative
program for processing claims and paying benefits.
Fort Halifax, 482 U.S. at 12 (first emphasis added) (footnotes omitted). As in Crews,
where we held that differences between the existing ERISA plan and the promised
benefits led us “to conclude that the promised benefits were free-standing and were
not premised in any way on the existing plan,” Crews, 274 F.3d at 505-06, Ceridian’s
promise to provide severance to Employees if terminated by Grey Fox within their
first year of employment does not constitute an ERISA plan or demonstrate that the
promised benefits were premised on an ERISA plan.
B.
ERISA requires that “[e]very employee benefit plan shall be established and
maintained pursuant to an written instrument.” 29 U.S.C. § 1102(a)(1). Courts have
interpreted § 1102(a)(1) to preclude oral modifications of or amendments to ERISA
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plans. United Paperworkers Int’l Union v. Jefferson Smurfit Corp., 961 F.2d 1384,
1386 (8th Cir. 1992). The district court granted summary judgment in favor of Grey
Fox and General Dynamics in part because it reasoned that the oral promise by
Ceridian to provide severance to Employees, if terminated by Grey Fox, constitutes
an impermissible oral amendment to the Ceridian plan, as it contradicts the terms of
the Ceridian plan that detail when severance payments will be made to participants
in that plan. The district court determined as a matter of law that “oral statements, in
the presence of an existing, formal ERISA plan, cannot be enforced.”
Oral statements are unenforceable under ERISA when they amend or supersede
contradictory terms in an ERISA plan. United Paperworkers Int’l Union, 961 F.2d
at 1386. The Ceridian Plan provides, “Severance pay may be paid to full-time
employees to help ease the financial burden that may result from work force
adjustment or a mutual agreement resignation. Severance pay is pay received in
addition to regular wages upon termination.” The plan explicitly states that only
“active, full-time employees who . . . are employed by Ceridian” may participate in
the plan and will be eligible for benefits pursuant to the plan.
An ERISA plan “‘participant’ is naturally read to mean either ‘employees in,
or reasonably expected to be in currently covered employment,’ or former employees
who ‘have . . . a reasonable expectation of returning to covered employment’ or who
have ‘a colorable claim’ to vested benefits.” Firestone Tire & Rubber Co. v. Bruch,
489 U.S. 101, 117 (1989) (quotations omitted). “A former employee who has neither
a reasonable expectation of returning to covered employment nor a colorable claim
to vested benefits, however, simply does not fit within the [phrase] ‘may become
eligible.’” Id. Employees had not been active, full-time employees of Ceridian for
more than six months when they were terminated by Grey Fox. They were not in
“covered employment,” nor did they have the option or expectation of returning to
work for Ceridian. There is nothing in the record to support a finding of any intent
on the part of Ceridian or Employees to amend the plan so as to extend Employees’
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participation therein. Furthermore, Employees’ severance benefits did not continue
to accrue after their employment at Ceridian had ended, as they conceivably would
have had Employees remained participants in the plan.
The severance benefits allegedly guaranteed Employees as inducement to
transfer to Grey Fox were fixed as of Employees’ final date of employment at
Ceridian, which was also the final date of their participation in the Ceridian plan.
Because Employees were no longer participants in the Ceridian Plan and because they
were not full-time employees of Ceridian at the time Grey Fox terminated them, they
were ineligible for severance under the Ceridian plan.3 Thus, we conclude that
Ceridian’s promise to pay severance benefits to Employees if they were terminated
by Grey Fox within their first year of employment did not amend the Ceridian plan,
but rather constituted a free-standing contract providing severance payments upon the
occurrence of some future contingency. “We discern nothing in the record to indicate
that the alleged promise constituted a change in [Ceridian’s] plan as opposed to a
distinct, one-time offer of benefits. . . . [T]he promised benefits were free-standing
. . . .” Crews, 274 F.3d at 505; cf. Stearns v. NCR Corp., 297 F.3d 706, 711 (finding
that an enhanced benefit program amended an existing ERISA plan where the
benefits provided by the program were insufficiently explained in the documents
distributed to beneficiaries and the documents advised beneficiaries to “refer to [the
ERISA plan] booklet . . . for the details of the [program;]” and, documents by which
3
The Ceridian plan states, “Severance is available to eligible employees in the
following circumstances: When loss of employment results from work force
adjustment due to job elimination or restructuring. When loss of employment results
from a mutual agreement resignation initiated by the Company and agreed to by the
employee. Severance pay is not paid in the case of a divestiture (including sale or
transfer to a purchaser of any portion of a Ceridian business unit, or its assets, with
no break in employment) or for any other reason or form of separation not previously
identified. Severance is only paid if the employee signs a release of all claims
provided by the Company.”
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employer adopted the program “confirm[ed] that it was an amendment to the existing
employee benefit plans).
ERISA’s preemption of conflicting state laws enables employers to devise and
operate benefit plans without concern that they accommodate conflicting regulatory
schemes. Fort Halifax, 482 U.S. at 10-11; see also Shaw v. Delta Air Lines, Inc., 463
U.S. 85, 105 n.25 (“Obligating the employer to satisfy the varied and perhaps
conflicting requirements of particular state fair employment laws . . . would make
administration of a uniform nationwide plan more difficult.”); Wilson, 114 F.3d at
715. Nevertheless, ERISA was not intended to be construed so broadly as to protect
employers from legal recourse for their actions that were taken in knowing violation
of state law. See generally Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001)
(enumerating purposes of ERISA).
Where, as here, “federal subject matter jurisdiction is based on ERISA, but the
evidence fails to establish the existence of an ERISA plan, the claim must be
dismissed for lack of subject matter jurisdiction.” Kulinski, 21 F.3d at 256 (8th Cir.
1994) (citing Harris v. Arkansas Book Co., 794 F.2d 358, 360 (8th Cir. 1986); Jader
v. Principal Mut. Life. Ins. Co., 925 F.2d 1075, 1076-77 (8th Cir. 1991)). Because
the claims at issue here do not relate to an ERISA plan and therefore are not
preempted by ERISA, jurisdiction is lacking. See 28 U.S.C. § 1331; 28 U.S.C. §
1441(b). Accordingly, the judgment is vacated, and the case is remanded to the
district court with directions that the case be remanded to the state court from which
it was removed.
LOKEN, Chief Judge, concurs in the result.
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A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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