307 F.3d 1020 (9th Cir. 2002), 01-15648, Lessard v. Applied Risk Management

Docket Nº:01-15648.
Citation:307 F.3d 1020
Party Name:Denice LESSARD, Plaintiff-Appellant, v. APPLIED RISK MANAGEMENT; MMI Companies; Professional Risk Management, Defendants-Appellees.
Case Date:October 03, 2002
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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Page 1020

307 F.3d 1020 (9th Cir. 2002)

Denice LESSARD, Plaintiff-Appellant,

v.

APPLIED RISK MANAGEMENT; MMI Companies; Professional Risk Management, Defendants-Appellees.

No. 01-15648.

United States Court of Appeals, Ninth Circuit

October 3, 2002

Argued and Submitted April 12, 2002.

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Laurence F. Padway, Alameda, CA, for the plaintiff-appellant.

Carolyn A. Knox, San Francisco, CA, for the defendant-appellee.

Stephen C. Tedesco, San Francisco, CA, for defendant-appellee Prof. Risk Management.

Appeal from the United States District Court for the Northern District of California; William H. Orrick, Jr., District Judge, Presiding. D.C. No. CV-99-03371-WHO.

Before: SCHROEDER, Chief Judge, B. FLETCHER and KOZINSKI, Circuit Judges.

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BETTY B. FLETCHER, Circuit Judge.

Plaintiff-Appellant Lessard appeals a grant of summary judgment on her claim that Defendants Appellees Applied Risk Management, Inc. ("ARM"), its successor, Professional Risk Management ("PRM"), and the parent of PRM, MMI Companies, Inc. ("MMI"), violated section 510 of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. § 1140, when Lessard's medical benefits were terminated following the sale of ARM's assets to PRM and Lessard was subsequently denied benefits under the new plan established by PRM/MMI. Because we find that the Asset Sale Agreement ("Agreement") between the defendants facially discriminated against persons on disability and medical leave, we reverse the decision of the district court and remand for judgment and an award of damages in favor of the Plaintiff-Appellant.

I. FACTUAL BACKGROUND

Denice Lessard began working as a workers' compensation analyst for ARM in February 1996. In the course of her employment with ARM, Lessard enrolled in a self-funded employee welfare benefits plan, the Group Benefit Plan ("Plan"), administered by ARM. As a Plan participant, Lessard was entitled to participate in the medical portion of the Plan. Following a work-related injury to her spine, Lessard left active employment in October 1996 on workers' compensation leave while maintaining her coverage under the Plan. She has not returned to active employment status since May 1997, and she has not sought employment since her spinal fusion surgery in January 1998.

On February 1, 1999, ARM entered into an agreement with PRM, a subsidiary of MMI, for the sale of ARM's assets to PRM/MMI. Under the Agreement, ARM was required to continue funding the Plan through February 28, 1999, when its Plan was finally terminated. Pursuant to conditions that are the subject of this lawsuit, ARM employees were automatically transferred to active employment with PRM/ MMI coincident with the execution of the sale. Transfer of the seller's labor force permitted the purchaser to acquire the seller's assets without a break in business operations. ARM employees transferred to employment with the new company were covered under its welfare benefits plan without an interruption in coverage since they were covered under the new plan upon the termination of the ARM plan.

In the Agreement, ARM and PRM/MMI attached one condition to each employee's automatic transfer to employment with the latter company: In order to be eligible for transfer, the employee had to be actively employed by ARM (i.e., "at work") on the day of the sale or on non-medical, non-extended leave from active employment. However, the Agreement excepted from the condition employees who were on vacation or who had taken a personal day and thus were not "at work" on February 1. If an employee was on medical, disability, workers' compensation or other extended leave at the time of the sale, such employee would become eligible for transfer only "if and when he or she returns to active employment."1 Section 7.2(a) of the

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Agreement in fact provided a separate transfer "schedule"2 for employees, such as Lessard, who were on medical or other extended leave on the day of the sale. ARM automatically transferred roughly 250 employees to PRM/MMI with the rest of its business assets, leaving only six employees to conform to the requirements of this special schedule: three, including Lessard, on workers' compensation leave; two on maternity leave; and one on leave of absence to prepare for a bar examination.

PRM/MMI has stipulated that if any of these employees were to return to work, that employee would be given a position with PRM including full medical benefits. Lessard understood that she could become an employee of PRM/MMI if she were released to work. However, as of September 29, 2000, Lessard still had not been released to return to work by any physician, and the prognosis for her future return to full-time employment is poor.

Lessard commenced this action in state court, bringing claims under state law and the Americans with Disabilities Act ("ADA"), 42 U.S.C. § 12101 et seq. MMI removed the action to federal district court on the basis of federal question jurisdiction. The district court dismissed Lessard's ADA claim on defendants' motion, following Lessard's concession that she had failed to exhaust her administrative remedies. In addition, the court held that Lessard's several state law claims were preempted by ERISA and instead construed them as a single claim for wrongful termination of benefits under section 510. The court thereby retained jurisdiction over Lessard's claims because they qualify as claims for the civil enforcement of her benefits rights under section 502 of ERISA. 29 U.S.C. § 1132(a); see also Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 65-66, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987) (deducing congressional intent "to make causes of action within the scope of the civil enforcement provisions of [ERISA] removable to federal court"). Defendants moved for summary judgment, arguing that Lessard had failed to provide evidence that their termination of her health benefits was motivated by a specific intent to interfere with her exercise of protected rights under the Plan. The...

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