Alley v. Resolution Trust Corp., s. 92-7081

• Decision Date: 04 March 1993
• Docket Number: Nos. 92-7081,92-7082,s. 92-7081
• Parties: Michael ALLEY, et al., Appellants, v. RESOLUTION TRUST CORPORATION, as Receiver for the Federal Asset Disposition Association. Margaret Elizabeth ARISTEGUIETA, et al., Appellants, v. RESOLUTION TRUST CORPORATION, as Receiver for the Federal Asset Disposition Association.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 1201

984 F.2d 1201

299 U.S.App.D.C. 363

Michael ALLEY, et al., Appellants, v. RESOLUTION TRUST CORPORATION, as Receiver for the Federal

Asset Disposition Association.

Margaret Elizabeth ARISTEGUIETA, et al., Appellants, v. RESOLUTION TRUST CORPORATION, as Receiver for the Federal

Asset Disposition Association.

Nos. 92-7081, 92-7082.

United States Court of Appeals, District of Columbia Circuit.

Argued Dec. 14, 1992.

Decided Jan. 26, 1993.

As Amended on Rehearing March 4, 1993.

[299 U.S.App.D.C. 364] Appeals from the United States District Court for the District of Columbia.

Robert J. Bruce and Eugene A. Over, Jr., Englewood, CO, were on the brief for appellants in No. 92-7081.

F. Carter Tate, Atlanta, GA, with whom Christopher B. Little, Englewood, CO, was on the brief, for appellants in No. 92-7082.

Paul E. Ridley, with whom Peter F. Lovato, III, Dallas, TX, was on the brief, for appellee.

Before: EDWARDS, RUTH BADER GINSBURG and BUCKLEY, Circuit Judges.

Opinion for the court filed by Circuit Judge RUTH BADER GINSBURG.

RUTH BADER GINSBURG, Circuit Judge:

Two groups of former employees of the now-defunct Federal Asset Disposition Association (FADA) sued FADA's receiver, the Resolution Trust Corporation (RTC), in federal district court. Relying on state law, plaintiffs alleged that they had been denied payments due them under FADA's employee benefit policies. The district court held that plaintiffs' state-law claims were preempted by the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1140 et seq. See Alley v. Resolution Trust Corp.; Aristeguieta v. Resolution Trust Corp., 790 F.Supp. 1 (D.D.C.1992). ¹ Because plaintiffs never asserted claims under any specific ERISA provision, the court entered final judgment against them, pursuant to Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief can be granted.

We agree that ERISA preempted plaintiffs' state-law claims, but hold that the district court should have granted plaintiffs leave to amend their complaints to seek relief under ERISA. Accordingly, we affirm in principal part, reverse in part, and remand the cases to afford plaintiffs an opportunity to amend their complaints to assert any ERISA claims they may have.

I. BACKGROUND

In 1985, the Federal Home Loan Bank Board (FHLBB), acting as head of the Federal Savings and Loan Insurance Corporation (FSLIC), established FADA as a federally chartered savings and loan association. ² FADA's purpose, as stated in its charter, was to assist in the "acquisition or acceptance and orderly liquidation and disposition of assets acquired by [FSLIC]." Charter of Federal Asset Disposition Association § 4 (issued November 5, 1985), reprinted in Appendix to Brief of Appellee at 7. FSLIC owned all of FADA's stock, selected FADA's board of directors, and sent a representative to all FADA board meetings. FSLIC supplied FADA with $25 million in start-up capital and thereafter guaranteed a $50 million line of credit for FADA.

Although FADA thus operated under federal agency (FSLIC) auspices, its raison d'etre was to bring private-sector efficiency to FSLIC's efforts to dispose of the assets of failed savings and loan institutions. As described by the General Accounting Office, FADA was designed to assist in strengthening the financial health of the FSLIC by using private sector management and marketing techniques to manage assets in the FSLIC system at the lowest cost consistent with sound operations and to sell these assets as fast as is consistent with obtaining the best possible return for the FSLIC and its receiverships.

General Accounting Office, Analysis of the Legal Status of Certain Federal Home Loan Bank System Entities (submitted September 6, 1988), reprinted in 134 Cong.Rec. E3353, E3354 (daily ed. October 7, 1988). Consistent with this private-sector orientation, the voting members of FADA's board of directors were private individuals rather than government officials or employees. FADA's employees were not subject to the federal civil service regime ³ and were paid salaries competitive with those paid by private financial institutions. FADA's income, on which it paid federal and state taxes, derived from fees charged clients (primarily FSLIC) for FADA's asset management and consulting services. By 1988, FADA had more than 250 employees and was managing over four billion dollars in assets.

In May 1988, FADA's board of directors adopted a severance pay plan, Policy No. 820, titled Reduction in Force and Separation Pay. See Federal Asset Disposition Association, Personnel Policy Manual: Policy No. 820 (dated May 3, 1988), reprinted in Alley Stipulated Appendix at 200. Later that year, FADA's board amended Policy No. 820 to provide for a "supplemental severance" or "retention" benefit, including a lump sum payment equal to four months' salary. See Federal Asset Disposition Association, Personnel Policy Manual: Policy No. 820 (Addendum), Employee Retention Plan (dated Sept. 29, 1988), reprinted in Alley Stipulated Appendix at 202. Circumstances unfolding in 1988 indicated that FADA might soon be abolished by act of Congress; the "retention benefit" was geared to those FADA employees who, in the event of FADA's closure by statute, would nevertheless remain on board until FADA's actual "date of termination." ⁴ In 1989, Policy No. 820 was again amended to provide that the retention benefit would not be available to FADA employees who received a "comparable offer of employment" from FADA's "successor." ⁵

As part of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), Congress ordered that FADA be liquidated. See FIRREA § 501(f), Pub.L. No. 101-73, 103 Stat. 383 (providing that, within 180 days of FIRREA's enactment, the RTC "shall liquidate the Federal Asset Disposition Association"); FIRREA § 501(b)(3)(B), Pub.L. No. 101-73, 103 Stat. 369 (duties of RTC to include managing FADA pending its liquidation). FADA's offices closed in late 1989 and early 1990; on February 5, 1990, FADA was placed in receivership and its assets were transferred to the RTC as receiver. In December 1989, about 175 Plaintiffs in these actions complain that RTC has wrongfully refused to pay them the severance and retention benefits to which they are entitled under Policy No. 820, as amended. ⁷ They assert reliance on FADA's representation that employees who stayed with FADA through its final days would receive the retention benefits. Plaintiffs sought recovery under various state law theories: breach of contract; breach of fiduciary duty; promissory estoppel; and violation of state statutes. RTC asserted ERISA preemption in its answer, a defense RTC emphasized throughout the litigation. Plaintiffs, nevertheless, insisted on their alleged rights to recover under state law and did not amend their complaints to plead ERISA as an alternate basis for relief.

                [299 U.S.App.D.C. 366] FADA employees, including all plaintiffs in these two actions, received offers of positions at Federal Deposit Insurance Corporation or RTC offices. 6  A majority of FADA employees (including most of the plaintiffs) accepted these offers and began working at their new posts immediately after their final day of work for FADA
                

After discovery, RTC moved for summary judgment. RTC maintained, inter alia, that ERISA preempted all of the state-law claims alleged by plaintiffs. The Alley plaintiffs, in reply, asked that, if the court ruled for RTC on preemption of the state-law claims, "[p]laintiffs ... be granted leave to amend their Complaint and assert a claim under ERISA." Plaintiffs' Brief in Response to Defendant's Motion for Summary Judgment at 7 n. 1 (citing FED.R.CIV.P. 15). Similarly, at oral argument in the district court on February 28, 1992, counsel for plaintiffs requested leave to amend to include an ERISA claim should the court hold their state claims preempted.

On March 23, 1992, the district court granted RTC's motion and dismissed plaintiffs' complaints. The court first ruled that the FADA employee benefit provisions counted as an "employee welfare benefit plan" within the compass of ERISA. See 29 U.S.C. § 1002(1)(A). Noting the parties' acknowledgment that "FADA's quasi-governmental status present[ed] an apparently unique question in this regard," 790 F.Supp. at 5, the district court concluded that the FADA policies did not fall within ERISA's exemption for "governmental plans." See 29 U.S.C. § 1003(b)(1). The court considered it a "pivotal factor" that "FADA's employees were never subject to government civil service classification or restrictions on salaries, benefits or personnel rules." Mem.Op. 790 F.Supp. at 11. Having determined that the FADA benefits were governed by ERISA, the district court held ERISA's governance preemptive of the state-law claims plaintiffs had endeavored to state. See 29 U.S.C. § 1144(a) (ERISA "supercede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan"). ⁸ Because plaintiffs had failed to plead for relief under ERISA, either originally or by specific amendment to their complaints, the court entered final judgment in RTC's favor. 790 F.Supp. at 6 & n. 5.

The parties divide sharply over the proper interpretation and application of FADA Policy No. 820, as amended. For disposition of this appeal, however, we need answer only two questions: (i) whether the state-law claims plaintiffs alleged are preempted by ERISA; and if so, (ii) whether the district court properly entered final judgment for RTC without affording plaintiffs an opportunity to amend their pleadings to allege claims under ERISA.

II. ERISA PREEMPTION

Plaintiffs initially argue that the FADA benefit policy provisions in question We similarly reject as untenable the Aristeguieta plaintiffs' argument that ERISA "cannot, as a matter of law, preempt state law claims filed pursuant to a federal law such as FIRREA." Brief of...