Edwards v. A.H. Cornell And Son Inc

• Decision Date: 24 June 2010
• Docket Number: No. 09-3198.,09-3198.
• Citation: 610 F.3d 217
• Parties: Shirley EDWARDS, Appellantv.A.H. CORNELL AND SON, INC., d/b/a AH Cornells; Melissa Closterman; Scott A. Cornell.
• Court: U.S. Court of Appeals — Third Circuit

610 F.3d 217

Shirley EDWARDS, Appellantv.A.H. CORNELL AND SON, INC., d/b/a AH Cornells; Melissa Closterman; Scott A. Cornell.

No. 09-3198.

United States Court of Appeals Third Circuit.

Argued April 13, 2010.

Filed: June 24, 2010.

Ari R. Karpf, Justin L. Swidler, (Argued), Karpf, Karpf & Virant, Bensalem, PA, for Appellant.

Christie M. Flamm, Walter H. Flamm, Jr., (Argued), Flamm Walton, Blue Bell, PA, for Appellees.

Eric C. Lund, (Argued), Plan Benefits Security Division, Nathaniel I. Spiller, Office of the Solicitor, United States Department of Labor, Washington, DC, for Amicus Curiae, Secretary of Labor.

Before: FISHER, HARDIMAN and COWEN, Circuit Judges.

OPINION OF THE COURT

FISHER, Circuit Judge.

Shirley Edwards filed suit against her employer, A.H. Cornell and Son, Inc. (“A.H. Cornell”), and supervisors, Scott A. Cornell and Melissa J. Closterman, claiming that she was terminated in violation of Section 510 of the Employee Retirement Income Security Act of 1974 (“ERISA”) and state common law after complaining to management about alleged ERISA violations. The defendants filed a Rule 12(b)(6) motion to dismiss, and the District Court granted the motion, holding that Edwards's complaints were not part of an “inquiry or proceeding” and thus not protected under Section 510. On appeal, we are presented with a single issue of first impression for this Court: whether the anti-retaliation provision of Section 510 of ERISA, 29 U.S.C. § 1140, protects an employee's unsolicited internal complaints to management. Four federal Courts of Appeals have ruled on this issue: the Fifth and Ninth Circuits have held in the affirmative, and the Second and Fourth Circuits have held in the negative. We agree with the latter, and hold that unsolicited internal complaints are not protected.

I.

A.¹

Defendant A.H. Cornell is a family-owned company that provides commercial and residential construction services. In March 2006, A.H. Cornell hired Plaintiff Edwards to serve as its Director of Human Resources and to establish a human resources department. Defendant Cornell, an A.H. Cornell executive, oversaw the terms and conditions of Edwards's employment, and Defendant Closterman, who managed the company's daily operations, acted as Edwards's supervisor. Edwards was employed by A.H. Cornell for a total of nearly three years. As an employee, Edwards participated in the company's group health insurance plan, which was governed by ERISA.

Edwards claims that she discovered, during the last weeks of her employment, that A.H. Cornell was engaged in several ERISA violations: the company was allegedly administering the group health plan on a discriminatory basis, misrepresenting to some employees the cost of group health coverage in an effort to dissuade employees from opting into benefits, and enrolling non-citizens in its ERISA plans by providing false social security numbers and other fraudulent information to insurance carriers. Edwards alleges that she “objected to and/or complained to” A.H. Cornell's management about these ERISA violations and was terminated on or around February 11, 2009, as a result. (App. at 26, ¶ 33.) According to Edwards, Closterman was directly responsible for her termination, and Cornell participated.

B.

On March 18, 2009, Edwards filed a complaint in the United States District Court for the Eastern District of Pennsylvania against A.H. Cornell, Cornell, and Closterman, asserting an anti-retaliation claim under Section 510 of ERISA and common law wrongful discharge. On May 18, 2009, the defendants filed a motion to dismiss the complaint pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that Edwards had not engaged in a protected activity under Section 510.

The District Court granted the motion to dismiss on July 23, 2009. After examining the circuit split on this issue, the District Court determined that the Second Circuit's analysis in Nicolaou v. Horizon Media, Inc., 402 F.3d 325 (2d Cir.2005) (per curiam), was persuasive and held that Edwards failed to state a claim upon which relief could be granted because her alleged objections and/or complaints to management were not part of an “inquiry or proceeding”:

“Plaintiff does not allege that anyone requested information from her or initiated contact with her in any way regarding the alleged ERISA violations. Nor does she allege that she was involved in any type of formal or informal gathering of information. She states merely that she objected to or complained about certain conduct by Defendants.”

(App. at 13-14 (citations omitted).) Having dismissed Edwards's ERISA claim, the District Court declined to exercise supplemental jurisdiction over Edwards's state law claim for wrongful discharge.

Edwards timely appealed, and the Secretary of Labor filed a brief as amicus curiae in support of Edwards's position.

II.

The District Court had jurisdiction under 28 U.S.C. § 1331, and we have jurisdiction pursuant to 28 U.S.C. § 1291. “We review de novo the District Court's dismissal of an action under Rule 12(b)(6).” Nationwide Life Ins. Co. v. Commonwealth Land Title Ins. Co., 579 F.3d 304, 307 (3d Cir.2009) (emphasis omitted). Pursuant to Ashcroft v. Iqbal, --- U.S. ----, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), district courts must conduct a two-part analysis when presented with a motion to dismiss. Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009). “First, the factual and legal elements of a claim should be separated.” Id. “The District Court must accept all of the complaint's well-pleaded facts as true, but may disregard any legal conclusions.” Id. at 210-11. “Second, a District Court must then determine whether the facts alleged in the complaint are sufficient to show that the plaintiff has a ‘plausible claim for relief.’ ” Id. at 211 (quoting Iqbal, 129 S.Ct. at 1950).

III.

The sole issue on appeal is whether the District Court erred in holding that unsolicited internal complaints are not protected activities under the anti-retaliation provision of Section 510 of ERISA, 29 U.S.C. § 1140.² We will affirm.

A. Background

“ERISA is a comprehensive statute designed to promote the interests of employees and their beneficiaries in employee benefit plans.” Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). “The statute imposes participation, funding, and vesting requirements on pension plans. It also sets various uniform standards, including rules concerning reporting, disclosure, and fiduciary responsibility, for both pension and welfare plans.” Id. at 91, 103 S.Ct. 2890. As part of this system, “Congress included various safeguards to preclude abuse and ‘to completely secure the rights and expectations brought into being by this landmark reform legislation.’ ” Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 137, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (quoting S.Rep. No. 93-127, at 36 (1973), 1974 U.S.C.C.A.N. 4838). One such safeguard is ERISA's anti-retaliation or “whistleblower” provision, which provides as follows:

“It shall be unlawful for any person to discharge, fine, suspend, expel, or discriminate against any person because he has given information or has testified or is about to testify in any inquiry or proceeding relating to this chapter or the Welfare and Pension Plans Disclosure Act.”

29 U.S.C. § 1140. Put simply, the purpose of the provision is to “proscribe[ ] interference with rights protected by ERISA.” Ingersoll-Rand Co., 498 U.S. at 137, 111 S.Ct. 478.

B. The Circuit Split

The federal Courts of Appeals are split on whether Section 510 encompasses unsolicited internal complaints. The Fifth and Ninth Circuits have held in the affirmative see Anderson v. Elec. Data Sys. Corp., 11 F.3d 1311 (5th Cir.1994), and Hashimoto v. Bank of Hawaii, 999 F.2d 408 (9th Cir.1993), while the Second and Fourth Circuits have held in the negative see Nicolaou, 402 F.3d 325, and King v. Marriott Int'l Inc., 337 F.3d 421 (4th Cir.2003).

The Ninth and Fifth Circuits were the first circuits to consider the issue. In each case, the plaintiff employee filed a complaint under state law alleging wrongful discharge for complaining to supervisors about alleged ERISA violations.³Hashimoto, 999 F.2d at 409-10; Anderson, 11 F.3d at 1312-13. Finding that Section 510 of ERISA already provided employees with a remedy, the Ninth Circuit held that the employee's state law claim was completely preempted by ERISA and remanded the case to allow the state claim to be re-characterized as a federal cause of action. Hashimoto, 999 F.2d at 411-12. The court explained that the failure of Section 510 to protect internal complaints would, in practice, inhibit the effectiveness of the anti-retaliation provision:

“The normal first step in giving information or testifying in any way that might tempt an employer to discharge one would be to present the problem first to the responsible managers of the ERISA plan. If one is then discharged for raising the problem, the process of giving information or testifying is interrupted at its start: the anticipatory discharge discourages the whistle blower before the whistle is blown.”

Id. at 411. Shortly thereafter, the Fifth Circuit arrived at the same conclusion in Anderson, holding that a state law claim for wrongful discharge was preempted by ERISA in part “because the cause of action would conflict with the enforcement provisions of §§ 502(a) and 510 of ERISA.” 11 F.3d at 1314. The court further explained, in broad terms, “[the employee's] claim falls squarely within the ambit of ERISA § 510[,]” which “addresses discharges for exercising ERISA rights or for the purpose of interfering with the attainment of ERISA rights, as well as discharges for providing information or testimony relating to ERISA.” Id. (quotations and citations omitted).

Faced with the same issue, the Fourth Circuit has since drawn the opposite conclusion, holding that an employee's state law wrongful discharge claim is not preempted by ERISA becau...