Baucom v. Pilot Life Ins. Co., Civ. No. C-86-890-G.

• Decision Date: 07 October 1987
• Docket Number: Civ. No. C-86-890-G.
• Citation: 674 F. Supp. 1175
• Court: U.S. District Court — Middle District of North Carolina
• Parties: Olin R. BAUCOM, Thomas R. Card, and William V. Fortenbury, Plaintiffs, v. PILOT LIFE INSURANCE COMPANY and Ralston F. Welch, Defendants.

674 F. Supp. 1175

Olin R. BAUCOM, Thomas R. Card, and William V. Fortenbury, Plaintiffs, v. PILOT LIFE INSURANCE COMPANY and Ralston F. Welch, Defendants.

Civ. No. C-86-890-G.

United States District Court, M.D. North Carolina, Greensboro Division.

October 7, 1987.

Aaron N. Clinard, High Point, N.C., for plaintiffs.

Bynum M. Hunter, Bruce P. Ashley, Greensboro, for Pilot Life Ins. Co.

Ralston F. Welch, pro se.

MEMORANDUM OPINION

BULLOCK, District Judge.

This case is before the court for a final ruling as to the existence of federal question jurisdiction. The central issue is whether the Carolinas Section Professional Golf Association Retirement Plan (the "Plan") is an "employee benefit plan" as defined by the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1002(3). The definition of an "employee benefit plan" turns on whether the Plan was "established or maintained" by the Carolinas Section Professional Golf Association (the "CSPGA"), and, if so, whether the CSPGA is an "employee organization." 29 U.S.C. § 1002(2)(A).

After reviewing the pertinent case law and legislative history, the court concludes that the CSPGA is not an "employee organization." Even if the conclusion were otherwise, the Defendants, as the party seeking to preserve removal, have not met their burden of proving that the Plan was "established or maintained" by the CSPGA. For these reasons the Plan is not covered by ERISA and the Plaintiffs' motion to remand will be granted.

FACTS AND PROCEDURAL HISTORY

The factual record before the court consists of the complaint, the answers of the two Defendants, and the exhibits submitted by both parties. The Plaintiffs allege that they were participants in the Plan and that for numerous years they forwarded payments to Defendant Welch, an agent of Defendant Pilot Life, as trustee of the Plan. These payments were allegedly used to purchase whole life insurance from Pilot Life and to fund a trust account with a guaranteed interest rate. Plaintiffs claim that Defendant Welch converted the trust monies and the cash value of the insurance policies, depriving them of their anticipated retirement benefits. Welch admits that he was trustee of the Plan, and Pilot Life admits that it issued policies to the Plaintiffs and received premium payments until July 1971, when the insurance policies were surrendered. The remaining allegations are denied.

Plaintiffs originally filed suit in the Superior Court of Guilford County in October 1986, and Pilot Life removed the case to this court on November 13, 1986. The basis for the removal was Pilot Life's claim that the Plan was an "employee benefit plan" covered by ERISA, therefore this court had original jurisdiction pursuant to 29 U.S.C. § 1132(e)(1). The Plaintiffs moved to remand on November 25, 1986. This motion, which raised issues regarding the effective date of ERISA and the scope of ERISA preemption of state law, was denied pursuant to a memorandum opinion and order dated May 13, 1987.

Incident to a request by the court for briefing of further preemption and jurisdictional issues, the Plaintiffs moved for the court to reconsider their motion to remand. This motion to reconsider raised for the first time the issue of whether the Plaintiffs and the CSPGA, and therefore the Plan, fall within ERISA's definitional limitations. In an opinion and order dated August 5, 1987, the court directed the parties to submit briefs discussing the Plaintiffs' status as "employees" and whether the CSPGA qualifies as an "employee organization" under ERISA.

Both parties submitted as exhibits the constitution of the CSPGA and the constitution, by-laws, and regulations of the PGA of America, the CSPGA's parent organization. The relevant parts of these documents relate to membership, participation by members, and the purposes and activities of the CSPGA.

Membership requirements for the CSPGA are established by the PGA of America. Under the national constitution, membership is open to golf professionals, assistant golf professionals, and approved tournament players. A golf professional is a person who owns and operates or supervises and directs a golf shop at a recognized club, course, or range, and engages in or supervises golf instruction at that facility. An assistant golf professional must be regularly employed by a golf professional as a teacher or shop assistant. A tournament player must compete in a minimum number of PGA tournaments or, in effect, be one of the leading golfers in the PGA. Constitution of the PGA of America, art. III, §§ 1(d), (e), and (f). Based on these definitions, CSPGA members may be employers, employees, or self-employed, as those terms are commonly understood.

Under the CSPGA constitution its members participate in the organization in several ways. Annual meetings are held at which CSPGA officers are elected. Members in each of the five regions also select area directors who, along with the officers and two directors at large, comprise the board of directors, which manages the section. Finally, a member may serve on one or more of sixteen committees which administer various organizational tasks. CSPGA Constitution, arts. VI, VII, and IX.

The objectives of the CSPGA include the following:

To promote the game of golf, to protect and advance the mutual interest of members, to hold meetings and tournaments for the benefit and enjoyment of its members, to assist deserving unemployed members to obtain a position, and to promote good relations with clubs ... within the section.

CSPGA Constitution, art. I. Also relevant is Article XI, which provides that the board of directors shall seek to place qualified members in vacated positions, to upgrade the quality of those positions, and to act as an advisor to clubs when so requested. Additionally, there is a club relations committee whose job is to improve present positions, develop new job opportunities, and create a better business relationship between the members and their employers. CSPGA Constitution, art. IX. Finally, the court has considered the national PGA Guidelines and Goals of Employment and Article X of the PGA of America constitution, which authorizes the national PGA to establish retirement and other benefit programs for its members.

Noticeably lacking from the record are any details concerning the Plan itself. There is no evidence as to when the Plan was established or the circumstances surrounding its establishment. Aside from Defendant Welch's admission that he was the trustee of the Plan, the court lacks any details as to Plan administration. The very terms of the Plan itself are unknown because no true copy of the Plan has been submitted.

DISCUSSION

Under 28 U.S.C. § 1447(c), this court must remand the case to the state courts "if at any time before final judgment it appears that the case was removed improvidently and without jurisdiction." It is well established that the Defendants, as the party seeking removal, have the burden of proving that federal jurisdiction is proper. McNutt v. General Motors Acceptance Corp., 298 U.S. 178, 189, 56 S.Ct. 780, 785, 80 L.Ed. 1135 (1936); Steel Valley Authority v. Union Switch and Signal Division, 809 F.2d 1006, 1010 (3d Cir.1987). If proof is needed to support the jurisdictional allegations, the removing party must supply the necessary evidence. McNutt, 298 U.S. at 189, 56 S.Ct. at 785. The removal statute is strictly construed against removal, with all doubts resolved in favor of remand. Steel Valley Authority, 809 F.2d at 1010. These principles will guide the court's efforts to apply ERISA's definitions to the limited facts before it.

I. "Employees" and "Employee Organization"

The ERISA statute is the proper place to begin. Under 29 U.S.C. § 1002(3), an "employee benefit plan" means "an employee welfare plan or an employee pension plan or ... both." Given that the Plan at issue deals with retirement benefits, a "pension plan" is further defined as "any plan, fund, or program which was ... established or maintained by an employer or by an employee organization, or by both, to the extent that it ... provides retirement income to employees." 29 U.S.C. § 1002(2)(A) (Supp.1987).

Since the parties and the court agree that the CSPGA is not an employer, the crucial questions become (1) whether the Plan was "established or maintained ... by an employee organization," and (2) whether its beneficiaries are "employees." Further unpacking of the statute shows that "employee organization" means either a group in which employees participate and which deals with employers regarding the work relationship, or any employee beneficiary association organized in part to establish an employee benefit plan.¹ "Employee" is defined as "any individual employed by an employer," and "employer" means "any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan." 29 U.S.C. § 1002(5), (6) (Supp.1987).

The Fourth Circuit and other courts have noted the lack of guidance provided by the statutory definitions of "employee" and "employer." Darden v. Nationwide Mutual Ins. Co., 796 F.2d 701, 704 (4th Cir. 1986); National Business Conference Employee Benefit Ass'n v. Anderson, 451 F.Supp. 458, 462 (S.D.Iowa 1977) (recognizing that the definitions of "employee" and "employer" when read together seem to exclude those whose plans are maintained solely by an employee organization, a result which Congress surely did not intend). Darden thus held that the interpretation of "employee" should "be tailored to the purposes of the statute being construed." Darden, 796 F.2d at 706 (citing United States v. Silk, 331 U.S. 704, 713, 67 S.Ct. 1463, 1468, 91 L.Ed. 1757 1947, and NLRB v. Hearst Publications, 322 U.S. 111, 64 S.Ct. 851, 88 L.Ed. 1170 1944). In deciding whether an individual was an "employee" of a specific employer, Darden rejected the common law definition of employee and instead looked to...