Gresham v. Lumbermen's Mut. Cas. Co., 04-1868.

Citation404 F.3d 253
Decision Date13 April 2005
Docket NumberNo. 04-1868.,04-1868.
PartiesThomas W. GRESHAM, Plaintiff-Appellant, v. LUMBERMEN'S MUTUAL CASUALTY COMPANY, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (4th Circuit)

ARGUED: Francis Joseph Collins, KAHN, SMITH & COLLINS, P.A., Baltimore, Maryland, for Appellant. Jessica Regan Hughes, SEYFARTH SHAW, Washington, D.C., for Appellee. ON BRIEF: Thomas J. Piskorski, SEYFARTH SHAW, Chicago, Illinois, for Appellee.

Before WILKINS, Chief Judge, WIDENER, Circuit Judge, and PAYNE, United States District Judge for the Eastern District of Virginia, sitting by designation.

Reversed and remanded by published opinion. Chief Judge WILKINS wrote the opinion, in which Judge WIDENER and Judge PAYNE joined.

OPINION

WILLIAMS W. WILKINS, Chief Judge:

Thomas W. Gresham appeals an order of the district court granting summary judgment to Kemper Casualty Company (Kemper)1 on Gresham's claims for breach of contract and violation of the Maryland Wage Payment and Collection Law, see Md.Code Ann., Lab. & Empl. § 3-507.1 (1999). For the reasons set forth below, we reverse and remand for further proceedings.

I.

The facts are undisputed. In late 1998, Kemper hired several people to develop a line of professional liability insurance. On December 18 of that year, Gresham accepted a written offer of employment as a vice president in this division. In particular, Gresham was tasked with developing a liability insurance program for architects and engineers. The offer letter provided, in relevant part:

Your compensation package will consist of:

....

• Severance Protection — One year base salary will be paid if terminated without cause.

J.A. 7. Although Kemper makes available a benefit plan that includes severance pay (the Severance Plan), Gresham's offer letter neither referred to nor explicitly incorporated the Severance Plan. Under the Severance Plan, severance pay is based on the departing employee's length of employment; the parties agree that under the terms of the Severance Plan, Gresham would have been entitled to severance pay equivalent to only four weeks' salary. Additionally, the Severance Plan denies severance pay to an employee who is offered employment by a purchasing company.

In January 2003, Kemper decided to shut down its professional liability division by putting outstanding policies into "runoff," i.e., not renewing the policies when they reached the end of their terms. The runoff process can take up to three years. In March or April 2003, Kemper paid Gresham a "stay-on" bonus in exchange for his agreement to remain with the company while it sought a buyer for its professional liability division. On May 1, 2003 Kemper provided Gresham with a written, 60-day notice of termination.2 Gresham was thus notified of a June 29 layoff. The materials provided to Gresham with the notice included a document entitled "Separation from Employment," which discussed the Severance Plan.

Approximately one week after Gresham received the termination notice, Kemper completed an asset transfer agreement with The St. Paul Insurance Companies (St.Paul). As part of the agreement, St. Paul agreed to offer employment to Gresham and five other executive employees in the professional liability division, and Kemper agreed to encourage these employees to accept the offers. Although this agreement was made while Gresham was still employed by Kemper, he did not learn of its existence until the discovery phase of this litigation.

St. Paul subsequently extended an offer of employment to Gresham. After receiving the offer, Gresham negotiated a "sign-on" bonus of $60,000 and a severance pay clause. Thereafter, he accepted the offer as modified.

Gresham never submitted a letter of resignation to Kemper or informed anyone at Kemper that he had accepted an offer from St. Paul. It appears, rather, that the date of Gresham's transfer from Kemper's payroll to St. Paul's was negotiated between the two companies without Gresham's involvement. As far as Gresham was concerned, there was no change — he continued performing the same functions at the same office, but with a different title and for a different employer.

When Gresham sought payment of the severance benefit, Kemper denied it on the basis of Gresham's "continued employment." J.A. 34. Gresham subsequently filed this action claiming breach of contract and violation of the Maryland Wage Payment and Collection Law, see Md.Code Ann., Lab. & Empl. § 3-507.1. A third count alleged an alternative claim for violation of the Employee Retirement Income Security Act of 1974 (ERISA), see 29 U.S.C.A. § 1132(a)(1)(B) (West 1999), in the event the district court determined that the employment agreement between Gresham and Kemper constituted an "employee welfare benefit plan" within the meaning of ERISA, see 29 U.S.C.A. § 1002(1) (West 1999). Following discovery, the parties filed cross-motions for summary judgment. The district court granted summary judgment to Kemper, reasoning that Kemper had terminated Gresham "for cause" under the terms of his employment agreement because "a corporate executive cannot be simultaneously performing effective services to two different companies at the same time." J.A. 213. Having reached this conclusion, the district court declined to consider Kemper's claim that the severance benefit identified in Gresham's employment agreement was subject to the provisions of Kemper's Severance Plan or its assertion that Gresham's state law claims were preempted by ERISA.

II.

We first consider whether Gresham's breach of contract and wage payment claims are preempted by ERISA. ERISA is a "comprehensive" and "closely integrated regulatory system" that is "designed to promote the interests of employees and their beneficiaries in employee benefit plans." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 137, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (internal quotation marks omitted). Accomplishment of the objectives of ERISA is facilitated by its preemption clause, 29 U.S.C.A. § 1144(a) (West 1999), which protects the administrators of employee benefit plans from "the threat of conflicting and inconsistent State and local regulation," Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 99, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983) (internal quotation marks omitted); see Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981) (noting that by enacting ERISA, Congress "meant to establish pension plan regulation as exclusively a federal concern").

Section 1144(a) provides, in relevant part, that the provisions of ERISA "shall supersede any and all State laws insofar as they ... relate to any employee benefit plan." The term "State law" encompasses not only statutes but also common law causes of action, such as Gresham's claim for breach of contract. See 29 U.S.C.A. § 1144(c)(1) (West 1999) ("The term `State law' includes all laws, decisions, rules, regulations, or other State action having the effect of law...."). Thus, if Gresham's claim "relate[s] to" the Severance Plan, as Kemper contends, it is preempted by ERISA.

Under § 1144(a), "[a] law `relates to' an employee benefit plan ... if it has a connection with or reference to such a plan." Shaw, 463 U.S. at 96-97, 103 S.Ct. 2890. While the scope of preemption is thus quite broad, it is not unlimited. See Ingersoll-Rand, 498 U.S. at 139, 111 S.Ct. 478. "What triggers ERISA preemption is not just any indirect effect on administrative procedures but rather an effect on the primary administrative functions of benefit plans, such as determining an employee's eligibility for a benefit and the amount of that benefit." Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 146-147 (2d Cir.1989). Generally, when a state law claim may fairly be viewed as an alternative means of recovering benefits allegedly due under ERISA, there will be preemption. See Aetna Health Inc. v. Davila, 542 U.S. 200, 124 S.Ct. 2488, 2495, 159 L.Ed.2d 312 (2004) ("[A]ny state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted."); Monarch Cement Co. v. Lone Star Indus., 982 F.2d 1448, 1452 (10th Cir.1992).

We addressed the scope of ERISA preemption with respect to a breach of contract claim in Stiltner v. Beretta U.S.A. Corp., 74 F.3d 1473 (4th Cir.1996) (en banc). James Stiltner accepted a written offer of employment from Beretta that included the following language related to Beretta's long-term disability plan:

Long Term Disability: Pays 60% of salary after six months of disability (after one year of employment). Payable to age 70.

Stiltner, 74 F.3d at 1476 (internal quotation marks omitted). As a Beretta employee, Stiltner enrolled in Beretta's long-term disability plan, which provided coverage under essentially the same terms as those described in the offer of employment. The plan, however, included a pre-existing condition limitation. When Stiltner subsequently became disabled due to a heart condition, the plan denied benefits on the basis that the condition was pre-existing. Stiltner sued, alleging, inter alia, that the offer letter was a contract that obligated Beretta to pay disability benefits independent of the disability plan. See id. at 1477, 1479. Although we did not reach a holding regarding preemption, we stated that the breach of contract claim was "very likely" preempted by ERISA "because it [sought] to recover benefits of a sort which are already provided by an ERISA plan, even though it [sought] to recover them not from the plan itself, but from the employer directly." Id. at 1480 (emphasis added); see Kress v. Food Employers Labor Relations Ass'n, 217 F.Supp.2d 682, 686 (D.Md.2002) (holding that the plaintiff's claim for breach of contract to provide benefits independent of ER...

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