Jervis v. Elerding

• Decision Date: 29 December 1980
• Docket Number: No. 80-3142-WMB.,80-3142-WMB.
• Parties: Marie Loretta JERVIS, Plaintiff, v. Charles E. ELERDING, Jr., Defendant.
• Court: U.S. District Court — Central District of California

504 F. Supp. 606

Marie Loretta JERVIS, Plaintiff, v. Charles E. ELERDING, Jr., Defendant.

No. 80-3142-WMB.

United States District Court, C. D. California.

December 29, 1980.

Eugene Button, Los Angeles, Cal., for plaintiff.

Thomas Robins, Beverly Hills, Cal., for defendant.

ORDER GRANTING MOTION TO DISMISS

WM. MATTHEW BYRNE, Jr., District Judge.

This action is brought under 29 U.S.C. § 1132(a)(1)(B) (1976) to recover pension benefits allegedly owing to plaintiff under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq. (1976) ("ERISA"). Pendent to the ERISA claim are state law causes of action for breach of contract, willful infliction of emotional distress, and fraud. Jurisdiction is founded on 29 U.S.C. § 1132(e)(1) (1976).

Dr. Charles Elerding is the owner of thirteen apartment complexes. In 1964 he hired Marie Jervis to operate and manage these units. In December 1974 the parties entered into a Memorandum of Employment Agreement ("Agreement") to formalize their existing relationship. The Agreement stated:

In addition to the salary paid to Employee for her services, Employer agrees that upon Employee's retirement, or the termination of this agreement, Employer will provide for Employee, at no cost to her, an apartment, together with all utility services necessary thereto, for the number of months for each year, which correspond with the number of years of her employment pursuant to this Agreement, and the previous oral agreement of the parties. By way of illustration: If, upon Employee's retirement or the termination of this agreement, she has worked a total of ten (10) years for Employer, Employer will provide for her the said apartment and paid utilities for ten (10) months of each year from the date of her retirement or termination of this agreement, until the date of her death.

The apartment facility to be provided pursuant to this paragraph shall be equivalent to the one in which Employee is residing on the date of the execution of this Agreement....

The provisions of this Paragraph ... constitute a material inducement for Employee's continuing services to Employer, and shall therefore survive the termination of this agreement, either by breach of either party or mutual cancellation of this agreement.

In November 1979, after being advised by Dr. Elerding of his dissatisfaction with her work, Mrs. Jervis left his employ. Dr. Elerding refused to provide Mrs. Jervis with an apartment and this case ensued.

Defendant moves to dismiss the ERISA claim on the grounds that this Court lacks subject matter jurisdiction because the Agreement that allegedly created the pension rights does not come within the purview of ERISA.¹ Defendant also moves to dismiss the state law claims on the basis that the Court should not exercise pendent jurisdiction.

The first question presented is whether this contract between an employer and one employee, which provides as present consideration for services rendered that the employee be furnished with a rent-free apartment after her retirement or termination, is an "employee pension benefit plan" under ERISA.²

ERISA provides that civil actions may be brought in federal court

by a participant or beneficiary —

. . . . .

(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan ....

29 U.S.C. § 1132(a)(1) (1976). Thus, the existence of a "plan" is a prerequisite to jurisdiction under ERISA. The terms "employee pension plan" and "pension plan" are defined as:

any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program —

(A) provides retirement income to employees, or

(B) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond,

regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan or the method of distributing benefits from the plan.

29 U.S.C. § 1002(2) (1976).

This Court holds that a contract between an employer and individual employee providing for post-retirement or post-termination in-kind compensation is not a "plan, fund, or program" within the definitional framework of ERISA. Two Opinion Letters prepared by the Office of Pension & Welfare Benefit Programs of the United States Department of Labor indicate that employment contracts that include provisions for post-retirement income are not "plans." The first such Opinion Letter sets forth a situation where the employee entered into an agreement with his employer under which he would be paid a pension benefit upon reaching age 65. He was terminated prior to any portion of the benefit vesting and asked whether ERISA would afford relief. The Department of Labor advised that it had "concluded that the agreement between the employee and his employer is an employment contract and is not an `employee pension benefit plan' as that term is defined in the Act." U. S. Department of Labor Opinion Letter 76-79 (May 25, 1976).

The second Letter discusses an agreement between a corporation and an employee-stockholder to "provide him additional retirement compensation for past services in return for certain considerations." U. S. Department of Labor Opinion Letter 76-110 (Sept. 28, 1976). The Department found that the agreement was "an individual contract ... to render specific personal services and does not constitute an employee pension benefit plan within the contemplation of ... ERISA." Id.

One article, in discussing the situation where "an employer and an individual employee negotiate a contract providing the employee with deferred compensation," concluded that in those circumstances

it seems relatively certain that there is no employee benefit plan .... The Department of Labor has indicated clearly that the provision of pension benefits to an employee pursuant to an individual employment contract is not an employee pension benefit plan and, therefore, cannot constitute an employee benefit plan for purposes of ERISA footnote omitted.

Goodman & Stone, Exempt Compensation Arrangements Under ERISA, 28 Cath.U.L. Rev. 445, 452, 452-53 (1979).

Upon examination of the entire Agreement, the Court is persuaded that the parties simply entered into an employment contract and did not create an employee pension benefit plan. The Agreement is entitled "Memorandum of Employment Agreement"; it avers that "it is the intention of the parties to formalize the pre-existing employer-employee relationship between them by this written memorandum"; it recites that as "additional consideration for the services to be provided by Employee, Employer agreed to provide certain benefits to Employee, the enjoyment of which was to be deferred until either her retirement or termination of employment"; it states that "in addition to the salary paid to Employee for her services, Employer agrees that upon Employee's retirement, or the termination of this agreement, Employer will provide for Employee an apartment ..."; and adds that the "provisions of this Paragraphs E setting forth the clause providing an apartment constitute a material inducement for Employee's continuing services to Employer ...." Thus, the parties merely memorialized their employee-employer relationship; they did not enter into an agreement for a separate and specific retirement plan. The clause was part of the present compensation arrangement, inserted as consideration for plaintiff's continued services to defendant, rather than as part of a "plan" providing for retirement income or deferral of income. This conclusion finds added support in the Agreement's specification that the apartment is to be provided plaintiff upon either her retirement or her termination. Cf. Murphy v. Inexco Oil Co., 611 F.2d 570, 575 (5th Cir. 1980) ("words `provides retirement income' patently refer only to plans...