Cantrell v. Currey

• Decision Date: 08 December 2005
• Docket Number: No. 1:03-CV-668-F.,1:03-CV-668-F.
• Parties: Katherine CANTRELL, et al., Plaintiffs, v. Russell CURREY and Rock-Tenn Company, et al., Defendants.
• Court: U.S. District Court — Middle District of Alabama

407 F.Supp.2d 1280

Katherine CANTRELL, et al., Plaintiffs, v. Russell CURREY and Rock-Tenn Company, et al., Defendants.

No. 1:03-CV-668-F.

United States District Court, M.D. Alabama, Southern Division.

December 8, 2005.

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John E. Byrd, Dothan, AL, Joseph Wayne Lewis, Dothan, AL, for Plaintiffs.

Clifford Maxwell Weiss, Robin & Weiss PA, Marietta, GA, Mark Hampton Baxley, Ramsey, Baxley & McDougle, Dothan, AL, for Defendants.

MEMORANDUM OPINION AND ORDER

FULLER, Chief Judge.

INTRODUCTION

Plaintiffs Katherine Cantrell, et al., ("Plaintiffs") brought this action in Alabama state court alleging breach of contract and fraud in violation of the laws of Alabama against their former employer, Rock-Tenn Company ("Rock-Tenn"), and one of Rock-Tenn's managers, Russell Currey ("Currey") (collectively "Defendants"). The Defendants removed the case to this Court on the basis of federal question jurisdiction based on the complete preemption of the Plaintiffs' claims by the Employee Retirement Income Security Act of 1974 ("ERISA") and diversity of citizenship. This cause is before the Court on the Defendants' Motion to Dismiss, or in the alternative, Motion for Summary Judgment (Doc. # 3). Upon the Court's careful consideration of the motion and the responses thereto, it is hereby ORDERED that:

1. The motion is GRANTED as to the Plaintiffs' breach of contract and fraud claims that relate in any way to the Severance Agreement.

2. The motion is DENIED as to the Plaintiffs' breach of contract and fraud claims that seek unpaid bonuses and commissions and do not relate to the Severance Agreement.

3. The Plaintiffs shall have the opportunity to amend their complaint to add the appropriate ERISA claims in order to seek benefits under Rock-Tenn's ERISA plan.

JURISDICTION AND VENUE

This case was removed to this Court by the Defendants from the Circuit Court of Houston County, Alabama pursuant to 28 U.S.C. §§ 1331, 1332, and 1441. The Court finds diversity sufficiently established and an adequate amount of damages sought to satisfy § 1332.¹ The parties do not contest personal jurisdiction or venue, and the Court finds adequate allegations in support of both.

STANDARD OF REVIEW

Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party asking for summary judgment "always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Id. at 323, 106 S.Ct. 2548. The movant can meet this burden by presenting evidence showing there is no dispute of material fact, or by showing the non-moving party has failed to present evidence in support of some element of its case on which it bears the ultimate burden of proof. Id. at 322-23, 106 S.Ct. 2548.

Once the moving party has met its burden, Rule 56(e) "requires the nonmoving party to go beyond the pleadings and by [his] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324, 106 S.Ct. 2548. To avoid summary judgment, the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). On the other hand, a court ruling on a motion for summary judgment must believe the evidence of the non-movant and must draw all justifiable inferences from the evidence in the non-moving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). After the nonmoving party has responded to the motion for summary judgment, the court must grant summary judgment if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c).

FACTS AND PROCEDURAL HISTORY

The Court has carefully considered all affidavits and documents submitted in support of and in opposition to the motion. The submissions of the parties, viewed in the light most favorable to the non-moving party, establish the following facts.

The Plaintiffs were all employed by Rock-Tenn at its Dothan, Alabama plant during the time in which Rock-Tenn entered negotiations to sell the facility to Container Services Corporation ("CSC"). On September 23, 2002, Rock-Tenn closed the deal with CSC that transferred all assets at the Dothan site to CSC. As part of the sales agreement, the parties stipulated that CSC would retain no fewer than five Rock-Tenn employees and would provide them with similar compensation and benefits. The Plaintiffs in this action were the employees chosen to continue working at the facility under its new ownership.

All employees not selected by CSC were eligible for benefits under Rock-Tenn's Severance Agreement. This plan had also been available to employees who lost their jobs in the months leading up to the sale of the plant, as Rock-Tenn had begun scaling back its operations at the facility. The Severance Agreement offered employees severance pay equal to one week's salary for every year the employee had been with the company up to a maximum of thirteen weeks. These amounts would be paid in periodic installments consistent with Rock-Tenn's general pay-period schedule. The plan also provided for the payment of accrued vacation time and the availability of outplacement services. In addition, employees were eligible to continue their medical, dental, and life insurance through COBRA for up to eighteen months. As part of the agreement, the employees were required to make extensive waivers of liability to Rock-Tenn and to keep the details and existence of the arrangement confidential.

On September 24, 2002, Rock-Tenn sent Currey² to the plant to conduct a meeting with the employees to inform them of the change in ownership. The accounts of what was said at this meeting vary; however, the parties do agree that Currey discussed the provisions of Rock-Tenn's Severance Agreement. According to the Plaintiffs, Currey stated that all employees who had been with Rock-Tenn for more than a year would receive benefits under the plan. To them, this statement encompassed those who would be left without a job as well as those hired by CSC. Currey also allegedly negotiated several oral arrangements with the Plaintiffs to induce them to remain employed at the facility in order to sell Rock-Tenn's remaining inventory.³ Specifically, Plaintiff James Barnes avers Currey promised him a commission and additional bonuses provided Barnes would stay on the job as long as necessary to move the remaining inventory.⁴ These agreements were purportedly discussed before the Plaintiffs learned they would be offered positions with CSC.

Subsequent to these discussions, all Plaintiffs were hired by CSC and continued work without interruption. The Plaintiffs contend that after the ownership transition, they sold all the remaining Rock-Tenn inventory over the course of the next eight months. It is unclear whether the tasks related to the Rock-Tenn inventory were part of the Plaintiffs new duties with CSC, but the Plaintiffs allege that they did so as part of the arrangement with Currey. At CSC, the Plaintiffs were given time of service credit, did not suffer any interruption in compensation, and did not experience any significant change in their conditions of employment.

On May 16, 2003, the Plaintiffs brought this breach of contract and fraud suit seeking (1) severance pay in accordance with the alleged oral agreements the Plaintiffs reached with Currey, (2) unpaid bonuses, and (3) in the case of James Barnes, unpaid commissions. The Defendants removed the case to this Court on June 26, 2003.

DISCUSSION

The resolution of the pending motion requires the Court to address four primary issues:

1. Did Rock-Tenn's Severance Agreement constitute an "employee welfare benefit plan" as defined by ERISA?

2. Does ERISA preempt the Plaintiffs' state-law claims of breach of contract and fraud?

3. Have the Plaintiffs exhausted their administrative remedies and can the Plaintiffs amend their complaint to add ERISA claims?

4. Are there any claims that are beyond the scope of ERISA?

A. ERISA Plan

The initial question before the Court is whether the Rock-Tenn Severance Agreement constitutes an "employee welfare benefit plan" under ERISA. Under the statute an "employee welfare benefit plan" is 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 such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in section 186(c) of this title (other than pensions on retirement or death, and insurance to provide such pensions).

29 U.S.C. § 1002(1). The Eleventh Circuit has separated this language into five distinct requirements necessary to satisfy the statutory...