Opinion
Civil Action No: 00-2252 SECTION: "J" (1)
July 26, 2001
Following submission of a Motion for Summary Judgment filed by defendant, on April 28, 2001, this Court notified counsel that its review of the record raised issues of whether the agreement sued upon by plaintiffs was subject to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., and thus that federal jurisdiction may be lacking. Accordingly, it ordered the parties to submit memoranda directed to this issue. Now, having reviewed the record, the memoranda of the parties, and applicable law, for the reasons that follow, the Court finds that it lacks subject matter jurisdiction over this action and accordingly, it should be dismissed.
BACKGROUND
Plaintiffs Allan Tinoco and Vassilios Voulgarakis were long-time employees of Marine Chartering Company, Inc. As a result of a merger with Marine Management and Consulting, Ltd. ("MMC"), Allan Tinoco was terminated with one day's notice in late 1998; MMC agreed to pay his salary through January, 1999. Rec. Doc. 7, Exh. 5.2. Vassilios Voulgarakis was terminated in April, 1998 (although he continued to perform consulting work for several months); the exact circumstances surrounding his termination are not clear. Sylvester Decl., Rec. Doc. 7, Exh. ¶ 9. In consideration of their lengthy service to the company, plaintiffs were given the option of receiving a lump sum payment of two months' pay, or a monthly benefit until age 62. Id. ¶¶ 1 2. The monthly payment was calculated based on a formula set forth in Marine Chartering's Early Retiree Healthcare Plan. Id. ¶ 1; Rec. Doc. 7. Exh. 1, § 7. However, defendant has acknowledged that Tinoco and Voulgarakis were not technically eligible to participate in the Early Retiree Health Care Plan ("ERP"). Rather, the plaintiffs "were given special consideration by MCC to enjoy the benefits of this plan, even though, technically, they were not eligible." Letter of March 10, 2000, MCC to Lloyd Frischertz, Rec. Doc. 7, Exh. 9.2. This is borne out by the plan description itself, which reveals that it is only available "to Employees who elect Voluntary Early Retirement." Plan, § 1. "Voluntary Early Retirement" is defined in the plan as "Retirement from employment of any Employee at or after age 55 but prior to the time he or she first becomes eligible for Social Security benefits if such termination is initiated by the Employee." Plan, § 4(c) (emphasis added). As discussed above, the supporting documents provided in connection with the pending motion reveal that the plaintiffs did not elect early retirement, but were let go against their desires as a result of a merger and down-sizing.
While the cited exhibits pertain specifically to Tinoco, it appears from the record that the plaintiffs were treated more or less the same.
Under the formula, age (which must have been a minimum of 55) is added to the number of years of service (which must have been at least 15 years). Payees then received a percentage of what they would normally receive in social security based on the total number arrived at through the age plus length of service calculation. Under this formula, plaintiff Allan Tinoco was found to be entitled to an amount equal to 85% of his social security benefits; plaintiff Vassilios Voulgarakis was entitled to an amount equal to 100% of his social security benefits.
DISCUSSION
The Court's review of the record leads it to conclude that the severance benefit plaintiffs received was not made pursuant to the Early Retiree Health Care Plan: the undisputed evidence reveals that they were not eligible to participate in that Plan. Rather, plaintiffs received a severance benefit which, presumably for convenience's sake, was calculated using a formula that happened to be the same as that used in Marine Chartering Company's ERP. Accordingly, the Court is presented with the issue whether the scheme through which these two individuals were paid otherwise qualifies as a plan under ERISA.
As the Supreme Court has recognized, not all severance programs are ERISA benefit plans. Fort Halifax Packingr Co., Inc. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211 (1987). In Donovan v. Dillingham, 688 F.2d 1367 (11th Cir. 1982) (en banc), the court confronted the fact that the terms "plan, fund, or program" as used in ERISA are not self-explanatory or defined by the statute, and reasoned that "[a]t a minimum . . . a `plan, fund, or program' under ERISA implies the existence of intended benefits, intended beneficiaries, a source of financing, and a procedure to apply for and collect benefits." Id. at 1372. In addition, while a formal written plan is not a prerequisite to coverage, the fiduciary and reporting provisions do require an ERISA plan to be in writing. Id., citing 29 U.S.C. § 1022 and 1102.
There is no single act that is dispositive of whether an employer has established a plan. Donovan, 688 F.2d at 1373. However, in the case of severance benefits, the inquiry centers on whether payment of the benefits requires an administrative scheme. Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211 (1987). In Fort Halifax, the Supreme Court held that a Maine statute requiring employers who ceased operations to make a one-time severance payment to employees was not preempted by ERISA, because although the one-time payment was a benefit, it was not a benefit plan. 107 S.Ct. at 2215, 2218. In finding the payments did not constitute a plan, the Court emphasized that the nature of the payments required "no administrative scheme whatsoever to meet the employer's obligation." 107 S.Ct. at 2218. As the Court stated: "To do little more than write a check hardly constitutes the operation of a benefit plan." Id.
On the other hand, applying Fort Halifax in cases where extensive administrative involvement and managerial discretion is required to determine an employee's eligibility for or level of severance benefits, courts have found that the severance payment program amounted to an ERISA plan. See, e.g., Bogue v. Ampex Corp., 976 F.2d 1319 (9th Cir. 1992). InBogue. the court examined a severance program that provided severance benefits to executives who were not offered "substantially equivalent employment" by the purchasing company in the event of a takeover. Implementation of the severance program required management to make case-by-case determinations of the circumstances surrounding each executive's purported demotion. Finding that "the program, by its own terms, required the sort of discretionary decision-making by the plan's administrator that is the hallmark of an ERISA plan," and thus that an administrative scheme was required for dealing with claims of eligibility, the court found the plan was governed by ERISA. Id. at 1322-23.
The case before the Court falls into a nebulous area between the two poles defined by Fort Halifax and Bogue. While offered a lump sum payment, plaintiffs instead chose a stream of payments until their 62nd birthdays. Implementation of the severance program thus required an initial one-time calculation (based on a fixed formula) of the monthly amount due, and then the monthly issuance of checks. However, there was no written "plan" per Se, and the checks were drawn on the general assets of the company.
Considering all of the circumstances, the Court finds that the payments made to plaintiffs are closer to the non-ERISA Fort Halifax pole than the other. Unlike Bogue, determining plaintiffs' benefit levels does not require an administrator to make ongoing discretionary decisions based on subjective criteria. Further, the required calculation is in the nature of those "simple arithmetical calculations" that do not require the establishment of an administrative scheme. James v. Fleet/Norstar Financial Group. Inc., 992 F.2d 463, 467 (1993) (holding that scheme to provide 60 days of post-termination pay either in a lump sum or bi-weekly payments did not constitute an ERISA plan).
The strongest argument in favor of finding the payments to Tinoco and Voulgarakis to be a "plan" is their continuing nature. However, it appears to the Court that the obligation to cut a check in a fixed amount once a month does not amount to an administrative scheme, because it does not require an "ongoing, particularized, administrative, discretionary analysis" that would render the payments a "plan." See, Collins v. Ralston Purina Co., 147 F.3d 592, 595 (7th Cir. 1998). Indeed, the Fifth Circuit has previously found that a "golden parachute" agreement which involved a lump sum payment plus a three-year continuation of certain benefits did not constitute an ERISA plan. Fontenot v. NL Indus., Inc., 953 F.2d 960, 961 (5th Cir. 1992); see also, James, 992 F.2d at 466 ("The employee's option to receive the money in bi-weekly installments instead of in a lump sum did not change the basic situation."). Finally, while it is clear that the fact that the benefits are paid out of the general assets of the company and not a separate fund does not mean that no ERISA plan exists, Fort Halifax, 107 S.Ct. 2220-21 (citing Holland v. Burlington Industries. Inc., 772 F.2d 1140 (4th Cir. 1985) and Gilbert v. Burlington Industries, Inc., 765 F.2d 320 (2d Cir. 1985)), it is also true that the absence of a separate fund to be administered is one more factor suggesting that an ongoing administrative scheme is not required.
It is well-settled that parties cannot stipulate or consent to federal jurisdiction. Insurance Corp. of Ireland, Ltd. v. Compagnie de Bauxites de Guinee, 456 U.S. 694, 102 S.Ct. 2099 (1982). Rather, federal courts are courts of limited jurisdiction, and parties invoking federal jurisdiction bear the burden of establishing it. Aetna Casualty Surety Co. v. Hillman, 796 F.2d 770, 775 (5th Cir. 1986). To the extent that the continuing nature of the payments in this case might make the issue before it a close call, the Court observes that the litigants, who appear to consent to federal jurisdiction, have simply failed to conclusively establish it.
In fact, to the Court's disappointment, both counsel in this case have failed to offer much guidance or enlightenment at all on the central issue presented at this juncture of the case, even after the Court specifically requested that they brief whether the facts of this case supported the existence of an ERISA-governed plan, necessary for jurisdiction. In all of the papers filed by both sides, not once did counsel cite to the Supreme Court's leading case on whether and when severance benefit programs amount to ERISA-governed plans (Fort Halifax), or to circuit-level authority on the same issue (Fontenot).
"Where 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 v. Med-Tronic Biomedicus. Inc., 21 F.3d 254, 256 (8th Cir. 1994), citingHarris v. Arkansas Book Co., 794 F.2d 358, 360 (8th Cir. 1986) ("The existence of a plan is a prerequisite to jurisdiction under ERISA.");Jader v. Principal Mut. Life Ins. Co., 925 F.2d 1075, 1076-77 (8th Cir. 1991) (remanding for determination of whether jurisdiction was lacking because there was no ERISA plan); accord UIU Severance Pay Trust Fund v. Local 18-U, 998 F.2d 509, 510 n. 2 (7th Cir. 1993) ("the existence of an `ERISA-governed plan' is an essential precursor to federal jurisdiction"); Memorial Hose. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236, 240 (5th Cir. 1990) (stating that the question of whether an ERISA plan existed was "a jurisdictional one"). On the record before the Court, it appears the payments to plaintiffs were not made pursuant to an ERISA-governed plan, and as the Court has previously noted, the amount in controversy requirement is not met for diversity jurisdiction. Accordingly;
By this ruling, the Court is not in any way ruling on any state law claims such as breach of contract which plaintiffs may have.
IT IS ORDERED that the instant matter should be and is hereby DISMISSED for lack of subject matter jurisdiction without prejudice to plaintiffs' right to re-file this action in state court.