Cefalu v. B.F. Goodrich Co.
| Decision Date | 09 May 1989 |
| Docket Number | No. 87-3910,87-3910 |
| Parties | Roy A. CEFALU, Plaintiff-Appellant, v. B.F. GOODRICH COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Prof. Michael Vitiello, John J. Messina, New Orleans, La., for plaintiff-appellant.
Walter W. Christy, Sharon S. Hearn, Elizabeth W. Middleton, New Orleans, for defendant-appellee.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before WILLIAMS and GARWOOD, Circuit Judges, and POLOZOLA, * District Judge.
Seeking to recover additional pension benefits from his former employer, Roy A. Cefalu filed suit in a Louisiana state court against B.F. Goodrich Company ("Goodrich") for breach of contract under Louisiana law. Goodrich timely removed the suit to federal court. Thereafter, Goodrich moved for summary judgment. The district court found that plaintiff's state law claims were preempted by federal law and granted Goodrich's motion for summary judgment. We affirm.
This case presents three questions concerning the Employee Retirement Income Security Act of 1974 ("ERISA"), 88 Stat. 829, as amended, 29 U.S.C. Sec. 1001, et seq.:
(1) Is plaintiff's state law contract action to recover additional pension benefits preempted by ERISA?
(2) Does ERISA preclude enforcement of oral modifications to a written pension plan?
(3) Was the denial of severance benefits by the plan administrator arbitrary and capricious?
Cefalu began working for Goodrich on June 4, 1959. During the time of his employment with Goodrich, Cefalu participated in the B.F. Goodrich Retirement Program for Salaried Employees ("the Plan"). 1 Goodrich was the "named fiduciary" of the Plan. In September of 1985, Goodrich entered into an agreement to sell all of its assets in the division in which Cefalu was employed to Tire Center, Inc. ("TCI"). Cefalu was advised that his employment with Goodrich would be terminated on December 31, 1985.
Several options were given to Cefalu regarding his future employment and retirement benefits. Cefalu could have chosen to work for TCI. Employees who accepted employment with TCI were entitled to continued benefits under the ERISA plan because TCI was designated as a "Successor Company" as defined in Article 12 of the Plan. 2
Cefalu was entitled to receive benefits under the Plan if he chose not to work for TCI. Pursuant to the express provisions of the Plan, Cefalu could choose to receive either a Special Deferred Vested Pension or a Lump Sum Payment.
A third option offered to Cefalu was the opportunity to purchase a franchise to operate a B.F. Goodrich retail center in Arabi, Louisiana. Cefalu accepted this offer and the parties entered into a written agreement. In Section 7(7) of the franchise agreement, Cefalu agreed that he would "not represent or hold [himself] out to be the ... employee of BFG ..." After signing the franchise agreement, Cefalu also agreed to accept retirement benefits under the Special Deferred Vested Pension Plan which entitled him to receive health coverage and pension benefits which were calculated on his years of service at Goodrich.
The plaintiff concedes that these pension benefits were properly calculated. However, Cefalu contends in his suit that representatives of Goodrich orally assured him that his retirement benefits as a franchisee would be identical to those of employees who had accepted jobs with TCI. Relying on these representations, Cefalu contends he purchased a franchise rather than electing to work for TCI. After purchasing the franchise, Cefalu states Goodrich advised him that his retirement benefits would not be the same as the employees who chose to work for TCI. Suit was then filed in state court alleging breach of contract under Louisiana law.
Goodrich denies that any oral representations or assurances were given to Cefalu to induce him to purchase a franchise. Section 23 of the franchise agreement provides that "[t]his agreement sets forth the entire Agreement between the parties hereto and has been entered into upon the inducements herein expressed and no others." Goodrich further contends that TCI did not guarantee Cefalu or any other former employee of Goodrich continued employment with TCI. 3 Thus, Goodrich contends there could be no assurance that Cefalu would have received greater retirement benefits even had he opted to accept employment with TCI.
After removing plaintiff's suit to federal court, Goodrich filed a motion for summary judgment. In its motion, Goodrich claimed: (1) Cefalu's state law claim for breach of contract was preempted by ERISA; (2) ERISA precluded oral modifications to written pension plans; and, (3) the decision of the administrator of the Plan to deny severance pay to Cefalu was not arbitrary and capricious. The district court granted Goodrich's motion for summary judgment on each of the above grounds. This appeal seeks to overturn that decision.
The first issue confronting the Court is whether Cefalu's state law breach of contract action to recover additional pension benefits is preempted under the provisions of 29 U.S.C. Sec. 1144(a) 4 which provides:
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan....
Thus, if a state law relates to an employee benefit plan, it is preempted by ERISA. 5 Appellant contends that his state law claim for breach of contract does not "relate to" the ERISA plan. More specifically, Cefalu avers that he has sued Goodrich in its capacity as plaintiff's former employer and present franchiser, but has not sued the ERISA plan. Cefalu further asserts that he is not seeking recovery from the assets of the ERISA plan or claiming more from the retirement program than the terms of the Plan specify. Instead, Cefalu claims he is merely seeking recovery from Goodrich pursuant to a valid oral contract unrelated to the ERISA plan. Therefore, Cefalu contends that since his state law claim does not "relate to" an employee benefit plan, it is not preempted by ERISA. This contention is without merit.
"[T]he question whether a certain state action is pre-empted by federal law is one of congressional intent." 6 The express preemptive language used by Congress in ERISA is broad in scope- ... "all State laws insofar as they ... relate to any employee benefit plan" are preempted by ERISA. The express preemption of ERISA is designed to "establish pension plan regulation as exclusively a federal concern." 7 As the Supreme Court stated in Shaw v. Delta Air Lines, Inc. 8
The bill that became ERISA originally contained a limited pre-emption clause, applicable only to state laws relating to the specific subjects covered by ERISA. The Conference Committee rejected these provisions in favor of the present language, and indicated that the section's pre-emptive scope was as broad as its language.
The bill's legislative history clearly shows that Congress intended the ERISA preemption clause to have an expansive reach. 9 For example, Senator Harrison Williams stated:
It should be stressed that with the narrow exceptions specified in the bill, the substantive and enforcement provisions of the conference substitute are intended to preempt the field for Federal regulations, thus eliminating the threat of conflicting or inconsistent State and local regulation of employee benefit plans. This principle is intended to apply in its broadest sense to all actions of State or local governments, or any instrumentality thereof, which have the force or effect of law. 10
Likewise, Representative John Dent explained:
Finally, I wish to make note of what is to many the crowning achievement of this legislation, the reservation to Federal authority [of] the sole power to regulate the field of employee benefit plans. With the preemption of the field, we round out the protection afforded participants by eliminating the threat of conflicting and inconsistent State and local regulation.... The conferees, with the narrow exceptions specifically enumerated, applied this principle in its broadest sense to foreclose any non-Federal regulation of employee benefit plans. Thus, the provisions of section 514 would reach any rule, regulation, practice or decision of any State ... which would affect any employee benefit plan ..." 11
In addition, the courts have broadly construed the words "relate to" in order to give proper effect to the preemption language of ERISA. In Pilot Life Ins. Co. v. Dedeaux, 12 the Supreme Court stated:
In both Metropolitan Life, supra, and Shaw v. Delta Air Lines, Inc., supra, (citations omitted) we noted the expansive sweep of the pre-emption clause. In both cases "[t]he phrase 'relate to' was given its broad common-sense meaning, such that a state law 'relate[s] to' a benefit plan 'in the normal sense of the phrase, if it has a connection with or reference to such a plan.' " (citations omitted) In particular we have emphasized that the pre-emption clause is not limited to "state laws specifically designed to affect employee benefit plans." 13
ERISA's preemption clause should not "be interpreted to pre-empt only state laws dealing with the subject matters covered by ERISA." 14 Instead, ERISA's preemption of state law claims "depends on the conduct to which such law is applied, not on the form or label of the law." 15 The courts have indicated that "even indirect state action bearing on private pensions may encroach upon the area of exclusive federal concern." 16 Because of the breadth of the preemption clause and the broad remedial purpose of ERISA, "state laws found to be beyond the scope of Sec. 1144(a) are few." 17
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