Collins v. Ralston Purina Co.

• Decision Date: 17 August 1998
• Docket Number: No. 97-1925,97-1925
• Citation: 147 F.3d 592
• Parties: 22 Employee Benefits Cas. 1417, Pens. Plan Guide (CCH) P 23946L Peter D. COLLINS, Plaintiff-Appellant, v. RALSTON PURINA COMPANY and Golden Cat Corporation, Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 592

147 F.3d 592

22 Employee Benefits Cas. 1417,

Pens. Plan Guide (CCH) P 23946L

Peter D. COLLINS, Plaintiff-Appellant, v. RALSTON PURINA COMPANY and Golden Cat Corporation Defendants-Appellees.

No. 97-1925.

United States Court of Appeals Seventh Circuit.

Argued Jan. 7, 1998.

Decided June 18, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied Aug. 17, 1998.

Wendell Walsh, Christopher A. Nichols (argued), May, Oberfell & Lorber, South Bend, IN, for Plaintiff-Appellant.

Paul J. Peralta (argued), D. Lucetta Pope, Baker & Daniels, South Bend, IN, B.J. Okenfuss, Ralston-Purina, St. Louis, MO, for Defendants-Appellees.

Before MANION, KANNE, and ROVNER, Circuit Judges.

MANION, Circuit Judge.

Peter Collins sued his former employer, Golden Cat Corp., in state court; he claimed the company--which was sold to Ralston Purina in April 1995--reneged on its promise in a retention agreement to pay Collins money and benefits if he was fired by the new owner before December 31, 1995. Golden Cat removed the case to federal court, claiming that ERISA preempted his claims. Collins moved to remand the case under the theory that no federal question jurisdiction existed, but the district court accepted jurisdiction of the case. After some discovery, Golden Cat moved for partial summary judgment relating to Collins' claim that the change in ownership itself triggered a payout under the retention agreement. The district court granted that motion. Collins also claimed that Ralston Purina substantially reduced his job responsibilities, which again would have triggered a payout. In a bench trial, at the conclusion of Collins' case-in-chief, the district court granted judgment on partial findings in favor of Golden Cat. Collins appeals the district court's denial of his motion to remand, the court's grant of partial summary judgment to Golden Cat, and the court's grant of judgment on partial findings. In all respects, we affirm.

I.

Golden Cat made kitty litter, and Peter Collins served as its director of customer marketing in the grocery division. Collins was in charge of marketing the litter throughout the eastern United States; by all accounts he had a good job with a lot of responsibility. But by late 1994 the buzz at Golden Cat was that the company was looking for a buyer; inevitable rumors of job insecurity arose.

To discourage the key employees from seeking job opportunities elsewhere--a prospect that could diminish the company's market value--Golden Cat executed several "retention agreements" with its upper-level managers. (In the district court, Golden Cat claimed there were at least 60 agreements; for his part, Collins conceded that multiple agreements existed.) Under the terms of those agreements, Golden Cat agreed to pay a manager like Collins six months salary (and a year of COBRA ¹ benefits) if he was terminated by Golden Cat's prospective acquirer, Ralston Purina. The agreement stated that termination of employment included "any substantial reduction of duties or responsibilities," or any failure on the acquirer's part to "continue to offer existing or substantially similar employee benefits," or a "transfer outside the metropolitan South Bend, IN area." The agreement was to expire on December 31, 1995.

Collins received his copy of the proposed retention agreement in October 1994 and signed it almost immediately. Ralston bought Golden Cat in April 1995, and it wasn't long before the new owner wanted to make some changes. The changes are not important here, except to say that they reflected Ralston's marketing style--unlike Golden Cat, which spent a good deal of money on marketing a high-quality (and more expensive) product, Ralston spent less, preferring instead to cut the prices of their products.

In July 1995, just a few months after the takeover, Collins claims that he began to see sure signs that his job responsibilities were going to be altered significantly. Bob Watt, a Ralston vice president, met with Collins to discuss his future; Watt followed up the conversation with an e-mail in which he offered Collins a position as Ralston's regional sales manager in charge of the company's Dunkirk region. The Dunkirk region covered much of the east coast and upstate New York, but that included considerably less territory than the entire eastern United States, which is what Collins was used to overseeing. The memo did not say that Collins had to relocate in order to take the position, only that Collins would be expected to help Golden Cat "transition" into a Ralston company, which may have included sales for pet food as well as litter.

Collins was not pleased with the offer, and he was even less pleased when he saw a copy of a memo in which his name already was "penciled in" as Ralston's new Dunkirk regional sales manager. On August 7, Collins told Watt that he believed the new position would constitute a substantial reduction in his responsibilities; Watt disagreed. Shortly thereafter, Collins approached Golden Cat CEO Franklin Krum about the new position; Collins tried to persuade Krum that the "substantial reduction of ... duties or responsibilities" clause in his retention agreement had been satisfied. Krum responded by telling Collins that he had less discretion in these matters than Collins believed. On August 22, Collins handed in his letter of resignation, effective September 1. The letter was short--three sentences, the first of which tells us why he quit: "my job responsibilities with the company have been substantially reduced."

Though the parties do not say so, we assume that Collins demanded his payout under the retention agreement (six months salary and benefits) and that Golden Cat refused, because Collins sued Golden Cat (now a division of Ralston) in Indiana State court. Golden Cat, claiming that ERISA preempted Collins' claims because the retention agreement constituted an employee benefit plan, removed the case to federal court. Collins contested the removal and moved to remand, but the district court accepted jurisdiction. After landing the case in federal court, Golden Cat conducted some discovery (it took Collins' deposition), and then moved for partial summary judgment on Collins' claim that the acquisition by Ralston itself constituted a "termination" under the retention agreement. The court granted partial summary judgment to Golden Cat on this claim. The only remaining claim--that Golden Cat was liable under the agreement because Ralston substantially reduced Collins' job responsibilities--went to trial, but it didn't get very far. Golden Cat moved for judgment after the plaintiff's case, and the court (though it found Collins to be a very credible witness) granted the motion, dismissing the case and entering judgment for Golden Cat.

II.

There are three issues on appeal: (1) whether the district court had federal question jurisdiction over Collins' claim under ERISA; (2) whether Golden Cat was liable under the agreement by virtue of Ralston's acquisition of the company; and (3) whether the district court appropriately decided against Collins' claim that Golden Cat had to perform under the agreement because Ralston had substantially reduced his duties and/or moved him outside of South Bend.

A. Jurisdiction

Because ERISA preemption is the sole basis of federal jurisdiction here, we must first determine whether the retention agreement is an employee benefit plan under ERISA. Congress enabled ERISA to preempt state law claims affecting benefit plans so that employers would have a uniform set of procedures and regulations when establishing and maintaining such plans. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987). ERISA thus preempts a state law claim if the claim requires the court to interpret or apply the terms of an employee benefit plan, which the Supreme Court has defined as "benefits whose provision by nature requires an ongoing administrative program to meet the employer's obligation." Id. In Fort HalifaxI, the Court was faced with a claim brought under a Maine statute that required employers who shut down operations to make one-time severance payments to their employees. The Court held that while the onetime payment system constituted a benefit, it did not constitute a benefit plan. "The requirement of a one-time, lump-sum payment triggered by a single event requires no administrative scheme whatsoever to meet the employer's obligation. The employer assumes no responsibility to pay benefits on a regular basis, and thus faces no periodic demands on its assets that create a need for financial coordination and control." 482 U.S. at 12, 107 S.Ct. 2211 (emphasis added). In short, the payments in Fort Halifax did not require the company to monitor its financial health and budget for future disbursements; the employer could satisfy its duty under the statute all at once by "making a single set of payments to employees at the time the plant closes." Id. The Court concluded that ERISA was not implicated because the "theoretical possibility of a one-time obligation in the future simply creates no need for an ongoing administrative program for processing claims and paying benefits." Id. (emphases added).

There are similarities between Collins' retention agreement and the statute facing the Court in Fort HalifaxI. Both required the employer to issue lumpsum disbursements upon the occurrence of an event. But the differences are clear--at most Fort Halifax had to disburse its lump sum payments once, to all of its employees at the same time. As the Court noted, "[t]o do little more than write a check hardly constitutes the operation of a benefit plan." Id. By contrast, Golden Cat faced the prospect of multiple payments to various managers, at different times and under different circumstances. Golden Cat could not satisfy its obligation by cutting a single check and making a "single set of payments" to all of its managers at once. The...