Opinion
Civil No. 04-626 (RCL).
March 21, 2005
MEMORANDUM OPINION
Before the court is the motion [4] to dismiss of defendant American Academy of Acheivement ("Academy"). The Academy moves to dismiss plaintiff Gray's complaint on the grounds that this court lacks subject matter jurisdiction and that the complaint fails to state a claim for which relief may be granted. For the reasons set forth herein, the court will grant the motion to dismiss on jurisdictional grounds.
I. LEGAL FRAMEWORK
On a motion to dismiss for lack of subject matter jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(1), the court takes the complaint's factual allegations as true and the "court may dismiss a complaint for lack of subject matter jurisdiction only if it appears beyond doubt that the plaintiff can prove no set of facts in support of [her] claim which would entitle [her] to relief." Flynn v. Veazey Constr. Corp., 310 F. Supp. 2d 186, 189-90 (D.D.C. 2004).
II. ALLEGED FACTS
Victoria Gray and Wayne Reynolds were, at times, romantic and business partners. They both worked for the American Academy of Achievement ("Academy"). From 1986 until 1999, Gray and Reynolds were named together as beneficiaries on various life insurance policies. In 1998, due to Gray's changing relationship with Reynolds and the Academy and at Reynold's suggestion, Gray began to investigate the possibility of obtaining separate insurance policies. In 1999, Gray and the Academy worked out an arrangement. The Academy substituted out Gray's current life insurance policy for a new one. The new policy was subject to a so-called "split dollar" program. "Gray was the owner of the 1999 policy and her estate was the beneficiary." (Compl. ¶ 22.) "The Academy would pay periodic lump sums and a planned annual premium (payable monthly) in accordance with a policy illustration executed between Gray and the Academy." Id. The Academy made these payments from 1999 until September of 2001.
In October of 2001, the Academy terminated Gray pursuant to a May, 2001 severance agreement. In that agreement, the Academy promised to pay premiums and "deficit contributions" on the 1999 policy for 10 years. Instead of continuing payments, the Academy stopped making payments.
Gray filed her complaint in this case in April of 2004. The complaint has just one claim: a claim that the Academy violated its duties under Section 510 of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1140. The Academy argues this court has no subject matter jurisdiction because the 1999 split dollar insurance policy and surrounding agreements do not constitute a plan under ERISA.
III. ANALYSIS
The Employee Retirement Income Security Act ("ERISA") is designed to safeguard employees from the abuse and mismanagement of funds that are accumulated to finance various types of employee benefit plans. Massachusetts v. Morash, 490 U.S. 107, 112 (1989). ERISA governs employee benefit plans, which include employee welfare benefit plans and employee pension benefit plans. See id.; 29 U.S.C. § 1002(3). To create federal jurisdiction under ERISA, a plaintiff must allege facts that show the establishment of a plan of the type covered by ERISA. See Young v. Wash. Gas Light Co., 206 F.3d 1200 (D.C. Cir. 2000).
ERISA does not define the word "plan," id. at 1203, but courts have given the word meaning. Because ERISA's focus is "on the administrative integrity of benefit plans — which presumes that some type of administrative activity is taking place," Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 15 (1987), the statute only applies "to benefits whose provision by nature requires an ongoing administrative program to meet the employer's obligation,id. at 11. "It is the administrative scheme behind the benefits that Congress wanted to regulate." Johnson v. TCOM Systems, Inc., No. 89-0311, 1989 U.S. Dist. LEXIS 15723, at *7 (D.D.C. Dec. 19, 1989) (Lamberth, J.). "Therefore, whether a benefit is regulated by ERISA turns on the nature and extent of the administrative obligations that the benefit imposes on the employer." Young, 206 F.3d at 1203.
When administrative obligations call for an administrator to exercise discretion, ERISA will generally apply if other requirements are met. See id.; see e.g., Bogue v. Ampex Corp, 976 F.2d 1319, 1323 (9th Cir. 1992). On the other hand, ERISA will not apply when an administrator of a benefit need only make "mechanical" determinations, Young, 206 F.3d at 1203, or "simple arithmetical calculations and clerical determination[s]," James v. Fleet/Norstar Fin. Group, Inc., 992 F.2d 463, 468 (2d Cir. 1993); accord O'Connor v. Commonwealth Gas Co., 251 F.3d 262, 267 (1st Cir. 2001); Velarde v. PACE Membership Warehouse, Inc., 105 F.3d 1313, 1316-17 (9th Cir. 1997); Delaye v. Agripac, Inc., 39 F.3d 235, 237 (9th Cir. 1994). As the First Circuit explained:
Particularly germane to assessing an employer's obligations is the amount of discretion wielded in implementing them. Where subjective judgments would call upon the integrity of an employer's administration, the fiduciary duty imposed by ERISA is vital. But where benefit obligations are administered by a mechanical formula that contemplates no exercise of discretion, the need for ERISA's protections is diminished.O'Connor, 251 F.3d at 267.
In Young, our own Circuit Court held that ERISA did not apply to a program in which an employee seeking voluntary separation from his employer would be terminated at a date chosen by the employer and would receive a lump-sum severance payment equal to 52 weeks of base pay. 206 F.3d at 1202. In Delaye, the Ninth Circuit held that ERISA did not apply to a program in which an employee fired without cause would receive "a fixed monthly amount for twelve to twenty-four months according to a set formula, plus accrued vacation pay and insurance benefits." 39 F.3d at 237. The Delaye court, using a similar analysis to theYoung court, reasoned that
While payment could continue for as long as two years, there is nothing discretionary about the timing, amount or form of the payment. Sending Delaye, a single employee, a check every month plus continuing to pay his insurance premiums for the time specified in the employment contract does not rise to the level of an ongoing administrative scheme.Id.
The alleged plan in the complaint is Gray's 1999 split dollar insurance policy and the surrounding agreements obligating the Academy to pay lump sums, premiums, and deficit contributions during and after the time of Gray's employment. While the Academy was to make these payments, Gray owns the policy and her estate is the beneficiary.
Gray has simply failed to allege facts about this insurance arrangement that would allow this court to characterize that policy as an ERISA plan. As in Young and Delaye, Gray's insurance arrangement does not subject the Academy to ongoing administrative obligations of a discretionary nature. Rather, the agreement binds the Academy to the clerical, mechanical task of writing periodic checks to the insurance company. Further, the insurance policy was "individually negotiated," Gray was one of only "a few top managers that have similar . . . benefits," and "[t]here is no trust set up to fund the" policy. Johnson, 1989 U.S. Dist. LEXIS 15723, at *8. "The benefits here are more akin to employment perquisites, which are a form of compensation, and not subject to ERISA regulation," id., and do not require an administrative scheme, let alone one that requires the employer to exercise discretion.
The Delaye court specifically held that continued payment of insurance premiums pursuant to an agreement did not "rise to the level of an ongoing administrative scheme." 39 F.3d at 237. One district court has similarly held. Fludgate v. Mgmt. Techs., Inc., 885 F. Supp. 645, 649 (S.D.N.Y. 1995). In that case, the court noted that an employer's purchase of life insurance pursuant to an agreement "is properly viewed as the purchase of an individual policy not requiring the establishment of an ongoing administrative program." Id. "Rather than necessitating the creation of a regulatory regime, [the employer's] involvement was no more complicated than the purchase of the policy. [The employer] did not own, control, administer or assume responsibility for the benefits derived from the policy." Id. (citing Taggart Corp. v. Life Health Ben. Admin., Inc., 617 F.2d 1208, 1211 (5th Cir. 1980)).
Gray cites one district court case in which a split dollar policy was held to constitute an ERISA plan, Williams v. HealthAlliance Hosps., Inc., 135 F. Supp. 2d 106, 110 (D. Mass. 2001). In that case, the court applied ERISA to a split dollar life insurance policy. In addition to meeting other requirements of an ERISA plan, the court found that the policy subjected the employer to ongoing obligations, because the employer "was designated the `named fiduciary' and `plan administrator' and it assumed responsibility for paying the premiums on [the employee's] life insurance policies and responding to requests for benefits by Williams or his beneficiaries." Id. Williams is unhelpful to Gray for several reasons. First,Williams is distinguishable on its facts. Here, Gray does not allege that the Academy was a named fiduciary or plan administrator. Nor does Gray allege that the Academy had any role in responding to requests for benefits under the policy. Second, the analysis in Williams is terse and lacks any discussion of whether the employer's duties were mechanical or discretionary, an important distinction, see Young, 206 F.3d at 1202. TheWilliams court never explains why an obligation to be a named fiduciary, to pay premiums, or any other obligation associated with the insurance policy requires the creation of an ongoing, administrative scheme requiring the exercise of the employer's discretion.
Gray also cites two unpublished cases from the Northern District of Illinois in which the court applied ERISA without questioning whether a split dollar insurance policy constitutes an ERISA plan. See Tatom v. Ameritech Corp., 2000 U.S. Dist. LEXIS 16720 (N.D. Ill. Sept. 27, 2000); First Midwest Bancrop, Inc. v. Hickey, 1994 U.S. Dist LEXIS 8100 (N.D. Ill. Sept. 23, 1994). Neither case analyzes the issue of whether an ERISA plan existed, and, apparently, the parties in these cases never raised the issue. Therefore, these cases are not persuasive.
Taking the allegations in Gray's complaint as true, Gray has failed to state a claim under ERISA because she has failed to allege the existence of an ERISA plan and her complaint must be dismissed for lack of subject matter jurisdiction. Because the court lacks subject matter jurisdiction, it cannot consider the second portion of the Academy's motion to dismiss, that the complaint fails to state a claim as required by Rule 12(b)(6). Additionally, because the court is granting the Academy's motion to dismiss, the court will enter judgment for the Academy. See Confederate Memorial Ass'n, Inc. v. Hines, 995 F.2d 295, 299 (D.C. Cir. 1993).
Gray, in her opposition to the Academy's motion to dismiss, alleges facts not contained in her complaint. She alleges that while she owns the policy, the Academy had "control of the policy" and that the Academy deals "with the periodic calculations and adjustments for the insurance policies." (Opp. at 11.) She also alleges that "[t]he Academy performed discretionary acts when it modified the 1986 split dollar insurance plan in 1992, 1995, and 1999." Id. at 12. "It is axiomatic that a complaint may not be amended by the briefs in opposition to a motion to dismiss." Arbitraje Casa De Cambio v. United States Postal Serv., 297 F. Supp. 2d 165, 170 (D.D.C. 2003). But even had the complaint alleged these things, the outcome today would be the same. First, the new allegations about the policy, if true, would not demonstrate that the Academy was required to take discretionary actions with respect to the policy. Making periodic calculations or adjustments (adjustments to what Gray does not say) can be painfully clerical. Second, Gray's new allegation about the modifications to earlier insurance policies is extraordinarily conclusory. A "court need not accept inferences drawn by plaintiffs if such inferences are unsupported by the facts set out in the complaint. Nor must the court accept legal conclusions cast in the form of factual allegations." Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C. Cir. 1994) (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). Moreover, it is inconsistent with Gray's claim that her attorney drafted the agreement regarding the 1999 policy and her claim that she was the one to investigate new insurance policies in 1998. (Compl. ¶¶ 20, 22.)
IV. CONCLUSION
For the foregoing reasons, the court will grant defendant's motion [4] to dismiss. A separate Order consistent with this Memorandum Opinion shall issue this date.