Kulinski v. Medtronic Bio-Medicus, Inc.

• Decision Date: 08 April 1994
• Docket Number: Nos. 93-1186,BIO-MEDICU,93-1187,INC,s. 93-1186
• Citation: 21 F.3d 254
• Parties: , 18 Employee Benefits Cas. 1080 James M. KULINSKI, Appellee, v. MEDTRONIC, Appellant. James M. KULINSKI, Appellant, v. MEDTRONIC, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 254

21 F.3d 254

62 USLW 2656, 18 Employee Benefits Cas. 1080

James M. KULINSKI, Appellee, v. MEDTRONIC BIO-MEDICUS, INC., Appellant.

James M. KULINSKI, Appellant, v. MEDTRONIC BIO-MEDICUS, INC., Appellee.

Nos. 93-1186, 93-1187.

United States Court of Appeals,

Eighth Circuit.

Submitted Oct. 15, 1993.

Decided April 8, 1994.

Jeff Keyes (argued), Minneapolis, MN (Jay W. Schlosser, on the brief), for appellant.

Stephen P. Kelley (argued), Minneapolis, MN (Michael C. Glover, on the brief), for appellee.

Before McMILLIAN, Circuit Judge, LAY, Senior Circuit Judge, and BOWMAN, Circuit Judge.

BOWMAN, Circuit Judge.

James Kulinski sued Medtronic Bio-Medicus, Inc., claiming the company was obligated to pay him in accordance with his change-of-control-termination agreement (CCTA), otherwise known as a "golden parachute." Jurisdiction in the District Court was based on ERISA, ¹ and the case was tried and decided as though it was governed by ERISA. Judgment was entered in Kulinski's favor. This appeal by the employer and cross-appeal by Kulinski followed. Because the evidence fails to show the existence of an ERISA plan, however, ERISA does not govern this dispute. Federal subject matter jurisdiction therefore is lacking. Accordingly, the appeal and the cross-appeal must be dismissed, the judgment and orders of the District Court must be vacated, and the complaint must be dismissed.

I.

In April 1986, the board of Bio-Medicus, Inc., authorized the execution of CCTAs with various executives. In January 1990, Kulinski, Bio-Medicus's National Sales Manager, entered into such an agreement with the company. Kulinski's CCTA was signed on behalf of Bio-Medicus by James Lyons, the company's president and chief executive officer, but the agreement never was presented to Bio-Medicus's board for approval.

The CCTA provided that Bio-Medicus would pay Kulinski a sum equal to 2.99 times his annual compensation in the event he was terminated, or for good reason resigned, within one year of a hostile takeover. It also gave Kulinski the sole discretion to decide whether he had one of the "good reasons" for resigning listed in the agreement. In the event the agreement's protections were invoked, Bio-Medicus was required to pay Kulinski the lump sum due him within thirty days. Aside from scattered definitional references to federal statutory provisions, the CCTA was entirely self-contained--it included no references to any outside criteria or standards or to any board resolutions.

In May 1990, Bio-Medicus was engaged in friendly merger negotiations with Medtronic, Inc. That month, Bio-Medicus's board authorized a revision to the CCTAs; the new CCTAs were identical to the old, except they applied to terminations following a friendly merger, as well as to those following a hostile takeover. Pursuant to the May 1990 board resolution, these new agreements were executed with executives who previously had CCTAs. Lyons on behalf of Bio-Medicus and Kulinski signed such a new CCTA in June 1990. Lyons's action in that regard may have exceeded his authority, as later that month, the board considered whether it should extend the new CCTA to Kulinski, and it declined to do so. Although Kulinski was not informed at that time of the board's actions, he was advised that "there may have been problems" with his CCTA. He was told explicitly in a September 1990 letter from Lyons that the company was not going to honor this new agreement.

In September 1990, Bio-Medicus merged with Medtronic to form Medtronic Bio-Medicus, Inc. (hereinafter Medtronic). Later that month, after being offered what he believed was a diminished compensation package and position with Medtronic, Kulinski resigned. He then demanded payment pursuant to his January 1990 CCTA.

Medtronic refused to pay, claiming that, based on certain criteria listed in the minutes from Bio-Medicus's board and board-committee meetings, Kulinski was not eligible for a CCTA. Specifically, Medtronic claimed that Kulinski was not a "top executive[ ], at the level of director or above," as stated in the minutes of the board's April 1986 meeting, Appendix for Appellant at A-9, and that Kulinski's agreement had not been "approved by the Board," a requirement specified in the minutes of an earlier meeting of the compensation committee, id. at A-2, which had recommended the CCTAs to the board.

Kulinski then brought suit in the District Court for the benefits he claimed were due him pursuant to his January 1990 CCTA, which, as previously mentioned, applied only to hostile takeovers. For reasons not entirely apparent to us, he did not seek recovery based upon his June 1990 CCTA, which applied to friendly takeovers as well as to hostile ones. Jurisdiction in the District Court was based on ERISA under 29 U.S.C. Sec. 1132(e) (1988).

Both parties treated the case as an ERISA case, a characterization the District Court accepted without critical examination. As framed by the parties, the dispute centered over which board meeting and board-committee meeting minutes were part of the ERISA plan and whether Kulinski had met the requirements listed in those portions that were. Medtronic also argued the fairly obvious point that the CCTA Kulinski was seeking to enforce applied only to hostile takeovers, not friendly ones.

After a bench trial, the District Court ruled that Kulinski had a valid claim based on the ERISA plan the court found to exist. The court awarded Kulinski $254,556 in severance pay (2.99 times his annual compensation), plus attorney fees, costs, and prejudgment interest. Medtronic's post-trial motions were denied, and Medtronic appeals. Kulinski cross-appeals the District Court's denial of his request for the attorney fees he incurred defending against Medtronic's post-trial motions.

II.

ERISA defines an employee benefit plan as "an employee welfare benefit plan or an employee pension benefit plan," 29 U.S.C. Sec. 1002(3) (1988), and an "employee welfare benefit plan" as "any plan, fund, or program ... established or maintained ... for the purpose of providing for its participants [specified] benefit[s]," id. Sec. 1002(1). Such benefits include severance benefits. Wallace v. Firestone Tire & Rubber Co., 882 F.2d 1327, 1329 (8th Cir.1989).

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. Harris 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 Hosp. 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"). Other courts have elected to treat the existence or non-existence of an ERISA plan as going to the merits of the claim rather than to jurisdiction. See, e.g., Henglein v. Informal Plan for Plant Shutdown Benefits for Salaried Employees, 974 F.2d 391, 397-98 (3d Cir.1992); Murphy v. Inexco Oil Co., 611 F.2d 570, 573 (5th Cir.1980). Under the law of our Circuit, however, the question is jurisdictional, and if we do not find jurisdiction, we may not consider the merits of Kulinski's claim. See Jader, 925 F.2d at 1077.

The existence of an ERISA plan is a mixed question of fact and law that on appeal we review de novo. See, e.g., Harris, 794 F.2d at 360; accord Custer v. Pan American Life Ins. Co., 12 F.3d 410, 416 (4th Cir.1993); Peckham v. Gem State Mut. of Utah, 964 F.2d 1043, 1047 & n. 5 (10th Cir.1992). We note that some circuits consider this question to be one of fact, and thus subject to review under the clearly erroneous standard. See, e.g., Deibler v. United Food and Commercial Workers' Local Union 23, 973 F.2d 206, 209-10 (3d Cir.1992); see also Wickman v. Northwestern Nat'l Ins. Co., 908 F.2d 1077, 1082 (1st Cir.), cert. denied, 498 U.S. 1013, 111 S.Ct. 581, 112 L.Ed.2d 586 (1990); Kanne v. Connecticut Gen. Life Ins. Co., 867 F.2d 489, 492 (9th Cir.1988) (per curiam), cert. denied, 492 U.S. 906, 109 S.Ct. 3216, 106 L.Ed.2d 566 (1989). Based on the law of our Circuit (which we believe to be the better view in any event), we apply the de novo standard of review in this case.

An employer's decision to extend benefits does not constitute, in and of itself, the establishment of an ERISA plan. Wells v. General Motors Corp., 881 F.2d 166, 176 (5th Cir.1989), cert. denied, 495 U.S. 923, 110 S.Ct. 1959, 109 L.Ed.2d 321 (1990). Instead, Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987), and its progeny have delineated the standard to be applied to determine whether a benefits plan falls within ERISA's ambit: The pivotal inquiry is whether the plan requires the establishment of a separate, ongoing administrative scheme to administer the plan's benefits. Simple or mechanical determinations do not necessarily require the establishment of such an administrative scheme; rather, an employer's need to create an administrative system may arise where the employer, to determine the employees' eligibility for and level of benefits, must analyze each employee's particular circumstances in light of the appropriate criteria.

In Fort Halifax, the Supreme Court was asked to determine whether a Maine statute established a plan within the meaning of, and thus was preempted by, ERISA. Id. at 3-4, 107 S.Ct. at 2213-14. The statute required employers that closed or relocated certain plants to provide a one-time, lump-sum severance payment to each employee, one week's pay for each year...