Opinion
3:99-CV-1977
August 11, 2000
RULING ON MOTION TO DISMISS ERISA CLAIMS INRTODUCTION
Plaintiff Bryan Scott Roddy ("Roddy" or "Plaintiff"), brings this seven-count Complaint against his former employer, Nac Re Corporation ("Nac Re or "Defendant") and officers of Nac Re who allegedly participated in the decision to terminate Plaintiff. The first two Counts are brought under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. ("ERISA) The third through seventh counts are state law claims, alleging negligent or intentional misrepresentation, breach of express contract, promissory estoppel, breach of the covenant of good faith and fair dealing, and statutory damages for wages withheld, pursuant to Conn.Gen.Stat § 31-76k.
Defendants now move to dismiss the First and Second Counts under ERISA on the grounds that a Letter Agreement (the "Letter") between Nac Re and Roddy is not a "welfare benefit plan" under ERISA and is, accordingly, non-actionable.
STATEMENT OF FACTS
The Court sets forth only those facts deemed necess arytoan understanding of the issues in, and decision rendered on, this Motion. The facts are distilled from the Complaint and the Letter, which is attached to the Complaint.
Roddy seeks a severance payment which he claims was wrongfully withheld by the Defendants after his employment with Nac Re was terminated on April 29, 1999.
Roddy was recruited by Nac Re and he accepted a position with NAC Reinsurance Group, a subsidiary of Nac Re, as an Assistant Vice President — Senior Underwriter. In the Letter, dated in November, 1995, Nac Re agreed to provide certain benefits to Roddy in the event of a Change in Control of the company./ The stated purpose of the Letter was "to induce [Roddy] to remain in the employ of the Company . . . in the event of a Change in Control. . . ." Roddy executed the Letter on November 30, 1995, thereby agreeing not to terminate his employment for a period of six months following the announcement of a potential Change in Control of Nac Re, subject to the terms and conditions of the Letter, which provided that no benefits would be paid if there was no Change in Control. The Letter provided that its terms would continue in effect through October 31, 1997 and be automatically extended for one year each November 1st thereafter, unless Nac Re gave notice that it would not be extended.
change of control is a defined term in the Letter. See p. 2, Section 2.
In the event of a Change in Control, Roddy would be entitled to "the benefits provided in Section 4 (iv) hereof upon the subsequent Notice of Termination of your employment with the Company or its subsidiaries during the two year period following the latest Change in Control unless such termination is (A) a result of your death or Retirement, or (B) your resignation for other than Good Reason, or (C) your being terminated by the Company or any of its subsidiaries for Disability or for cause." The Letter is exhaustively complete, defining each and every term used with absolute precision.
As Plaintiff alleges that he was terminated in order that Nac Re need not pay him his benefits at the Change in Control, one must examine the reasons one could be terminated from Nac Re. The two sections dealing with termination are to be found at pages 4- 6 and set forth termination for Cause, section 3(u), and Good Reason, section 3 (iii). The termination for Cause provides:
(ii) Cause. For purposes of this Agreement, "Cause" shall mean your willful breach of duty in the course of your employment, or your habitual neglect of your employment duties. For purposes of this Section 3(u), no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company and its subsidiaries. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board) finding that in the good faith opinion of the Board you were guilty of conduct set forth above in this Section 3(ii) and specifying the particulars thereof in detail.
Section 3 (iii), entitled Good Reason, contains seven, extensive reasons for termination by Roddy for Good Reason. The Court also finds than he did not exercise any of the options under this Section and did not terminate his own employment for Good Reason.
On April 29, 1999, Nac Re terminated Roddy's employment, after awarding him a merit bonus in the preceding month. On May 26, 1999, NAC Re shareholders approved a merger with XL Capital, Ltd.
LEGAL ANALYSIS
I. The Standards of Review
A. Federal Rule of Civil Procedure 12(b)(1)
A Motion to Dismiss under Rule 12(b)(1) "challenges the court's statutory or constitutional power to adjudicate the case . . ." and "typically . . . alleges that the federal court lacks either federal question or diversity jurisdiction over the action." 2A James W. Moore et al., Moore's Federal Practice, ¶ 12.07, at 12-49 (2d ed. 1994) quoted in Beiler v. Christwood Contracting Co., Inc., 868 F. Supp. 461, 464 (D.Conn. 1994), affirmed in part, reversed in part on other grounds, 72 F.3d 13 (2d Cir. 1995)
B. Federal Rule of Civil Procedure 12(b)(6)
A motion to dismiss pursuant to Fed.R.Civ.P. 12(b)(6) should be granted only if "it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Hishon v. Spalding, 467 U.S. 69, 73, (1984). "The function of a motion to dismiss is merely to assess the legal feasibility of a complaint, not to assay the weight of evidence which might be offered in support thereof." Ryder Energy Distribution Corp. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir. 1984) quoting Geisler v. Petrocelli, 616 F.2d 636, 639 (2d Cir. 1980)
Pursuant to a Rule 12(b)(6) analysis, the Court takes all well- pleaded allegations as true, and all reasonable inferences are drawn and viewed in a light most favorable to the plaintiff.Leeds v. Meltz, 85 F.3d 51, 53 (2d Cir. 1996). However, the Court is not bound to accept legal conclusions couched as factual allegations. Jazini v. Nissan Motor Co., Ltd., 148 F.3d 181, 185 (2d Cir. 1998), citing Papasan v. Allain, 478 U.S. 265, 286 (1986). The proper test is whether the complaint, viewed in this manner, statesany valid ground for relief. Conley v. Gibson, 355 U.S. 41, 45-46 (1957)
II. The Standards As Applied
". . .ERISA was enacted because Congress found it desirable that disclosure be made and safeguards be provided with respect to the establishment, operation, and administration of [employee benefits] plans.'" Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 15 (1987), quoting 29 U.S.C. § 1001a. The purpose of ERISA is to regulate employee welfare and benefit plans, and because only "plans" involve administrative activity subject to employer abuse, the Fort Halifax Court held that the touchstone for the application of ERISA is the existence of an undertaking or obligation by an employer requiring the creation of an ongoing administrative program. Fort Halifax, 482 U.S. at 11-12.
The Court of Appeals for the Second Circuit rejected a claim that an employer's agreement to provide an additional sixty-days pay to employees who remained on the job until an internal consolidation was completed was an "employee welfare benefits plan" within the meaning of ERISA. James v. Fleet/Norstar Financial Group. Inc., 992 F.2d 463 (2d Cir. 1993). InJames, the employees had different termination dates and different eligibility requirements for receiving the payment, which had to be calculated individually for numerous employees. The employer also gave the employees the option to receive the money in installments instead of one lump sum. TheJames Court held that such an arrangement did not constitute a "plan" under ERISA because the employer's "need to make simple arithmetical calculations did not requirement the establish[ment of] a uniform administrative scheme, which provides a set of standard procedures to guide processing of claims and disbursement of benefits." Id. at 467, quoting Fort Halifax, 482 U.S. at 9.
In contradistinction, the Second Circuit found that an employer had created an employee benefit plan by virtue of its promise to pay severance benefits to discharged senior employees in amounts based upon each employee's length of service and prospects for reemployment. Schonholz v. Long Island Jewish Medical Center, 87 F.3d 72 (2d Cir.), cert. denied 519 U.S. 1008 (1996)./ Further, the benefit offer had an unlimited effective period and thus would have reasonably been understood by an employee as an ongoing commitment to provide benefits. As in the present case, the Schonholz agreement required much more than the simple mathematical calculation held to be insufficient in James. The Letter necessitated both ongoing managerial discretion, especially as to termination, a separate analysis of each employee with a similar Letter in light of the criteria set forth therein.
Unlike the Letter before this court, the Schonholz plan had no provision for its termination or amendment.
The Second Circuit has set down three factors which may be determinative of whether an alleged plan does indeed constitute an employee benefits plan. Tischmann v. ITT/Sheraton Corp., 145 F.2d 561, 566 (2d Cir. 1998); Schonholz, 87 F.3d at 76. The following should be examined in order to determine which employer obligations and undertakings should be deemed to have created an ERISA plan: (1)"whether the employer's undertaking or obligation requires managerial discretion in its administration, "
(2) "whether a reasonable employee would perceive an ongoing commitment by the employer to provide benefits"; and (3) "whether the employer was required to analyze the circumstances of each employee's termination in light of certain criteria."Tischmann, 145 F.2d at 566. No one factor is determinative. Id.
An application of these factors must result in a finding that the Letter is an ERISA employee benefit plan. The Letter sets forth with precision what the Company's obligations are to each individual employee with such a Letter and it would not be unreasonable for an employee such as Roddy to expect an ongoing commitment to pay him during the time the Letter was in effect. Roddy alleges that he was fired in order to avoid paying him his severance package, which gains some credence in that Roddy was given a merit raise one month before his termination. In addition, the employer has to analyze the circumstances of the employee's termination, using the certain criteria as set forth in the Letter.
As noted above, Plaintiff's discharge within one month of the Change in Control is credible evidence that the behavior of Nac Re may be in violation of 29 U.S.C. § 1140, which prohibits an employer from acting to interfere with an employee's benefits. The employee is not required to show that the employer's sole motivation was to interfere with employee benefits, he need only show that it was a motivating factor. See, e.g,Garratt v. Walker, 164 F.3d 1249, 1256 (10th Cir. 1998); Dister v. Continental Group, 859 F.2d 198, 111 (2d Cir. 1988)
CONCLUSION
For each of the foregoing, reasons, the Court hereby finds that the Letter is an employee benefit plan under ERISA. Accordingly, Defendants' Motion to Dismiss [Doc. No. 16] is hereby DENIED.
SO ORDERED