Opinion
Case No. 1:05 CV 2329.
June 23, 2006
MEMORANDUM OPINION AND ORDER
This matter is before the Court on a motion for judgment on the pleadings submitted pursuant to Federal Rule of Civil Procedure 12c). (ECF #7.) The Defendant submits that the Plaintiff's claim is barred by ERISA and, in the alternative, by the Ohio statute of limitations. After careful consideration of the pleadings, supporting material and a review of all relevant authority, the motion is hereby DENIED.
STANDARD OF REVIEW
Generally, a Rule 12(c) motion is decided using the same standard as a motion to dismiss under Rule 12(b)(6). However, if "matters outside the pleadings are presented to and not excluded by the Court, the motion will be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56." Fed.R.Civ.P. 12(c). In arguing this motion, the parties rely on materials outside of the pleadings, namely affidavit and deposition testimony. Because the Court considers these to be extrinsic materials, the summary judgment standard is the appropriate standard to apply in deciding the motion.
The Court believes that all evidence pertinent to this motion is before the Court. In any event, the parties may file additional dispositive motions by July 17, 2006.
Summary judgment is appropriate when the court is satisfied "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The burden of showing the absence of any such "genuine issue" rests with the moving party:
[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any,' which it believes demonstrates the absence of a genuine issue of material fact.Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (citing Fed.R.Civ.P. 56(c)). A fact is "material" only if its resolution will affect the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Determination of whether a factual issue is "genuine" requires consideration of the applicable evidentiary standards. The court will view the summary judgment motion in a light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Summary judgment should be granted if the party who bears the burden of proof at trial does not establish an essential element of their case. Tolton v. American Biodyne, Inc., 48 F.3d 937, 941 (6th Cir. 1995) (citing Celotex, 477 U.S. at 322). Accordingly, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Copeland v. Machulis, 57 F.3d 476, 479 (6th Cir. 1995) (citing Anderson, 477 U.S. at 252). Moreover, if the evidence presented is "merely colorable" and not "significantly probative," the court may decide the legal issue and grant summary judgment. Anderson, 477 U.S. at 249-50 (citations omitted). In most civil cases involving summary judgment, the court must decide "whether reasonable jurors could find by a preponderance of the evidence that the [non-moving party] is entitled to a verdict." Id. at 252. However, if the non-moving party faces a heightened burden of proof, such as clear and convincing evidence, it must show that it can produce evidence which, if believed, will meet the higher standard. Street v. J.C. Bradford Co., 886 F.2d 1472, 1479 (6th Cir. 1989).
Once the moving party has satisfied its burden of proof, the burden then shifts to the non-mover. The non-moving party may not simply rely on its pleadings, but must "produce evidence that results in a conflict of material fact to be solved by a jury." Cox v. Kentucky Dep't of Transp., 53 F.3d 146, 149 (6th Cir. 1995). Fed.R.Civ.P. 56(e) states:
When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial.
The Federal Rules identify the penalty for the lack of such a response by the nonmoving party as an automatic grant of summary judgment, where otherwise appropriate. Id.
Though parties must produce evidence in support of or in opposition to a motion for summary judgment, not all types of evidence are permissible. The Sixth Circuit has concurred with the Ninth Circuit that "`it is well settled that only admissible evidence may be considered by the trial court in ruling on a motion for summary judgment.'" Wiley v. United States, 20 F.3d 222, 225-26 (6th Cir. 1994) (quoting Beyene v. Coleman Sec. Servs., Inc., 854 F.2d 1179, 1181 (9th Cir. 1988)). Fed.R.Civ.P. 56(e) also has certain, more specific requirements:
[Rule 56(e)] requires that affidavits used for summary judgment purposes be made on the basis of personal knowledge, set forth admissible evidence, and show that the affiant is competent to testify. Rule 56(e) further requires the party to attach sworn or certified copies to all documents referred to in the affidavit. Furthermore, hearsay evidence cannot be considered on a motion for summary judgment.Wiley, 20 F.3d at 225-26 (citations omitted). However, evidence not meeting this standard may be considered by the district court unless the opposing party affirmatively raises the issue of the defect.
If a party fails to object before the district court to the affidavits or evidentiary materials submitted by the other party in support of its position on summary judgment, any objections to the district court's consideration of such materials are deemed to have been waived, and [the Sixth Circuit] will review such objections only to avoid a gross miscarriage of justice.Id. at 226 (citations omitted).
As a general matter, the district judge considering a motion for summary judgment is to examine "[o]nly disputes over facts that might affect the outcome of the suit under governing law." Anderson, 477 U.S. at 248. The court will not consider non-material facts, nor will it weigh material evidence to determine the truth of the matter. Id. at 249. The judge's sole function is to determine whether there is a genuine factual issue for trial; this does not exist unless "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Id.
In sum, proper summary judgment analysis entails "the threshold inquiry of determining whether there is the need for a trial — whether, in other words, there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson, 477 U.S. at 250.
PROCEDURAL HISTORY
This breach of contract action was originally filed by the Plaintiff, Carl Bacik, in the Court of Common Pleas of Cuyahoga County, Ohio on August 25, 2005. Mr. Bacik alleges that the Defendant, Industrial Construction Company, Inc. ("ICC"), failed to make retirement payments to him, totaling $21,827 plus interest. ICC removed this action to the United States District Court for the Northern District of Ohio, Eastern Division on federal question grounds, on October 2, 2005. The Court granted the Defendant's motion for judgment on the pleadings, without objection from the Plaintiff. (ECF #10.) Subsequently, Mr. Bacik's request for reconsideration of the Court's ruling and time to conduct further discovery of his claims and to respond to the motion for judgment on the pleadings was granted. (ECF #15.) Having concluded his investigation, the Plaintiff has submitted his brief in opposition to the motion for judgment on the pleadings and the Defendant has filed a reply brief. The motion is now ready for consideration.
FACTUAL OVERVIEW
The Plaintiff was employed at ICC from 1950 to 1970 as a vice president. When Mr. Bacik ended his employment with the Defendant, he "was vested in certain retirement benefits under the terms of the [ICC's] retirement trust." (ECF #1.) This trust was acknowledged in a letter from an ICC authorized agent to Mr. Bacik dated March 25, 1971. The letter, written on ICC letterhead, stated that Mr. Bacik would receive a monthly retirement benefit of $119.28 "for a period of 120 months and life thereafter" beginning on May 1, 1990. The pension was to be funded by the cash value of four life insurance policies through the Phoenix Mutual Life Insurance Company ("Phoenix Mutual") in Hartford, Connecticut, totalling $14,000 and held in trust by the National City Bank of Cleveland. The Plaintiff alleges that, in 1978, Phoenix Mutual transferred the cash value of the policies which were in Mr. Bacik's name to ICC. The Defendant did not begin its monthly payments on May 1, 1990, nor has it made any subsequent payments to date.
ANALYSIS
According to the Complaint, this lawsuit seeks redress for a breach of contract by the Defendant. Mr. Bacik contends that a letter sent to the Plaintiff in 1971 guaranteed the payment of monthly installments of $119.28 from 1990 onwards. ICC has raised two challenges to this suit. First, the Defendant contends that the contract claim is barred by the Employee Retirement Income Security Act of 1974 ("ERISA") which preempts the claim. See 29 U.S.C. § 1144 (2000). Alternatively, the Defendant argues that, even if ERISA does not apply, the claim is still barred by the Ohio statute of limitations for contracts, since the alleged breach occurred more than fifteen years before the suit was filed. See Ohio Rev. Code Ann. § 2305.06 (2005).A. ERISA's Application
ERISA came into force on January 1, 1975 by act of Congress. As a federal law it preempts any state law that conflicts with the scope of its applicability. U.S. Const. art. VI, cl. 2. However, its substantive breadth remains unclear. The purpose of ERISA is to create uniformity in the regulation of relationships between employers and their employees. Ky. Ass'n of Health Plans, Inc. v. Nichols, 227 F.3d 352, 361 (6th Cir. 2000) (citing N.Y. State Conf. of Blue Cross Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645 (1995)). The United States Supreme Court has noted that despite ERISA's facially broad scope, the statute does not have the power to preempt all aspects of the "complex interrelationships between employees, employers and [trade] unions." Malone v. White Motor Corp., 435 U.S. 497, 504 (1978). As a result, the exact boundaries of ERISA are undefined. Nichols, 227 F.3d at 357. Consequently, difficulty in interpreting congressional intent as to its scope has lead the courts to sustain state and local legislation unless it directly conflicts with the federal law. Malone, 435 U.S. at 504. Any pre-existing retirement arrangements were not automatically preempted, however. The Supreme Court has held that Congress did not intend for ERISA to apply retroactively to issues that were governed by state law prior to its enactment. Malone, 435 U.S. at 515. Courts have interpreted the Malone court's holding to mean that "Congress did not intend to render prior law irrelevant where it fairly accommodates the interests of the parties and is not inconsistent with ERISA's purposes." Shaw v. Kruidenier, 470 F. Supp. 1375, 1382 (S.D. Iowa 1979), aff'd, 620 F.2d 307 (8th Cir. 1980). The portions of ERISA dealing with retirement income security are not intended to "apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975." 29 U.S.C. § 1144(b)(1). In order to determine whether ERISA is the appropriate law, the Sixth Circuit developed a two-prong test, stating that "the application of ERISA thus depends upon: (1) a determination of the time the cause of action arose, and (2) a determination of the time of acts or omissions." Stevens v. Employer-Teamsters Joint Council No. 84 Pension Fund, 979 F.2d 444, 450-51 (6th Cir. 2003) (quoting Rodriguez v. MEBA Pension Trust, 872 F.2d 69, 71 (4th Cir. 1989)).
The first part of the test examines the time when the Plaintiff's cause of action arises. The Sixth Circuit held that "under section 1144(b)(1), if either `the cause of action arose' or relevant `acts of omissions' on which a pension fund based a post-1975 benefits decision occurred before January 1, 1975, then ERISA does not apply." Hansmann v. Fidelity Invs. Institutional Servs. Co., 326 F.3d 760, 763 (6th Cir. 2003) (quoting Stevens, 979 F.2d at 451). The breach of Mr. Bacik's retirement benefits contract makes his claim actionable giving rise to the cause of action at issue. The first breach occurred in May 1990, well after ERISA was in effect. Under the first prong of the test alone, ERISA would be the applicable law. The Sixth Circuit test, however, is written in the disjunctive. ERISA is inapplicable "if either the cause of action arose or relevant acts or omissions occurred" before 1975. Id. (emphasis added). The Sixth Circuit decided in Hansmann that the formation of an agreement between the parties before the enactment of ERISA constituted an act or omission for the statute's purposes, and therefore the federal law would not apply. Id. at 765 (holding that an adjustment to a life insurance policy that occurred prior to 1975 would bar application of ERISA). ICC sent the letter explaining Mr. Bacik's benefits to him in March 1971. This is four years before ERISA came into force. The letter states that ICC will pay Mr. Bacik in monthly installments as part of a retirement benefit beginning May 1, 1990. Although payments were to begin in 1990, after ERISA's enactment, the relevant act was the March 1971 letter. Moreover, in Stevens, the Sixth Circuit held that an act or omission did not have to relate to the most recent event, but rather "any event that occurred before 1975 on which a pension fund bases a post-1975 decision." 979 F.2d at 452. Therefore, the letter would satisfy the second prong of the Sixth Circuit test, constituting an action that gives rise to the claim.
This Court shares concurrent jurisdiction with a state court to hear this claim, even though ERISA does not retroactively apply. Reithmiller v. Blue Cross Blue Shield, 824 F.2d 510, 512 (6th Cir. 1987). Because ERISA does not apply, this Court applies the substantive state law appropriate to resolve the claim. Hansmann, 326 F.3d at 765. Since both the Plaintiff and the Defendant are citizens of Ohio, the state in which the alleged agreement was made, then Ohio substantive law would be the proper state law applied in a federal court.
B. Contract barred by the Ohio statute of limitations
Ohio contract law governs Mr. Bacik's claim since it was made prior to Congress's enactment of ERISA. Ohio law states that "an action upon a speciality or an agreement, contract or promise in writing shall be brought within fifteen years after the cause thereof accrued." Ohio Rev. Code Ann. § 2305.06 (2005). The power to determine the length of the statute of limitations rests with the legislature and it can change its length accordingly. O'Stricker v. Jim Walter Corp., 4 Ohio St. 3d 84, 87, 447 N.E.2d 727 (1983). In Ohio, the statute of limitations begins to run when the breach occurs. Id.
Determining when any breach occurred depends on the type of contract involved. For instance, payments on semi-annual and monthly bases are acknowledged as installment contracts, with the statute of limitations running on each installment. See Everhart v. State Life Ins. Co., 154 F.2d 347, 356 (6th Cir. 1946); DiPaolo v. Smith, 178 N.E.2d 58 (Ohio Misc. 1953). The Defendant's March 1971 letter to Mr. Bacik references promises to make monthly payments for 120 months certain and for life thereafter. The language of the letter contemplates the existence of an installment contract. Accordingly, the first breach of Mr. Bacik's contract occurred when the May 1990 payment was not made. Each subsequent non-payment also constituted a breach.
Under Ohio law, breaches of installment contracts can be treated as individual contracts under color of law. The Sixth Circuit in interpreting Ohio law stated:
Inasmuch as the right of action on each separate installment accrued only upon default of payment of that installment, the bar of the statute of limitations runs separately against each separate installment. An action brought immediately upon the nonpayment of an installment benefit could not cover an anticipatory breach in the payment of future installments.Everhart, 154 F.2d at 356. Courts have applied the Everhart court's holding to contracts that have had multiple installments. Each new breach gives rise to its own cause of action, with its own fresh statute of limitations. Therefore, Mr. Bacik can file suit to recover all missed installments within the fifteen year period prior to his filing suit on August 25, 2005. This includes the benefits due from August 1990 onward.
CONCLUSION
For all of the reasons set forth above, the Court finds that Defendant's motion for judgment on the pleadings is not well taken. Therefore, the Defendant's motion (ECF #7) is hereby denied.IT IS SO ORDERED.