Cutler v. Phillips Petroleum Co.

Citation124 Wn.2d 749,881 P.2d 216
Decision Date29 September 1994
Docket NumberNo. 61160-2,61160-2
Parties, Pens. Plan Guide P 23908J Alvin B. CUTLER and Joyce P. Cutler, a Marital Community; Margaret E. Carrieres and John N. Carrieres, a Marital Community; Bill E. Daiss and Marjoe Daiss, a Marital Community; Larry O. Gust, a Single Person; Kenneth M. Jansen and Margaret V. Jansen, a Marital Community; Marvin Paul and Janice Paul, a Marital Community; Richard A. Davis, and his Marital Community, Fred Lindberg and his Marital Community; Jerry Koontz, and his Marital Community; David L. Hoffarth and his Marital Community; Richard G. Allen, and his Marital Community; and Susan R. Hoover and Allen V. Hoover, a Marital Community, Respondents, v. PHILLIPS PETROLEUM COMPANY, A Foreign Corporation, Petitioner.
CourtUnited States State Supreme Court of Washington
Paine, Hamblen, Coffin, Brooke & Miller, Richard D. McWilliams, Simon R. Collins, Spokane, John L. Williford, Janet M. Reasor, Associate Gen. Counsel, for petitioner

Evans, Craven & Lackie, P.S., Patrick M. Risken, Feltman, Gebhardt, Eymann & Jones, Richard C. Eymann, Spokane, for respondents.

SMITH, Justice.

Petitioner Phillips Petroleum Company (Phillips) seeks reversal of a published opinion of the Court of Appeals, Division Three, which affirmed and remanded for trial an order of the Spokane County Superior Court denying Phillips' motion to dismiss for failure to state a claim upon which relief may be granted in a suit by 12 former employees (Respondents) for negligence, outrage, breach of contract, negligent misrepresentation and fraud. We reverse the Court of Appeals.

STATEMENT OF FACTS 1

Respondents were employed by Petitioner Phillips Petroleum Company (Phillips), a Delaware corporation with its principal place of business in Oklahoma, prior to December 1985. Most had served Phillips for over twenty years. In December 1985, Respondents worked for Phillips' fertilizer and chemical divisions in manufacturing plants located at Spokane and Finley. 2

In December 1985, Phillips faced a threatened hostile takeover. It decided to liquidate some of its debts and other obligations by selling assets and transferring employees The complaint alleges that in December 1985 Phillips' management team represented to Respondents that Phillips had protected them by contracting or otherwise agreeing with Cepex that any salary and benefits accrued by each of them with Phillips would not be reduced or eliminated by Cepex for a minimum of 2 years after the date of sale. The complaint also alleges that Phillips assured Respondents it would sell the plants to a company with the financial ability and commitment to run the business for a substantial period of time. The complaint further alleges Phillips led Respondents to believe retirement benefits accrued with Phillips to date would remain with Phillips; they would be eligible for early retirement benefits from Phillips after sale of the plants to Cepex; and Cepex would assume administration of all benefits due them from Phillips. The sale to Cepex occurred 3 months later on March 1, 1986. 4

including the plants and employees at Spokane and Finley, to Cepex American of Amarillo, Texas (Cepex). 3

A request by one respondent for transfer within Phillips was denied. Other employees not involved in this lawsuit were re-trained for new assignments within the company. The other respondents acquiesced to employment with Cepex without requesting transfers within Phillips and without seeking outside employment. The complaint alleges it soon became apparent Cepex could not continue operation of the plants. 5

On April 3, 1986, one month after the sale to Cepex, Phillips announced a "Special Separation Program", which included enhanced retirement benefits, severance pay, outplacement and housing assistance, and medical and life insurance benefits. Only "Phillips employees" who separated from the company during the three-month period from April 3 through July 1, 1986 were eligible. The program also included special additional compensation (Social Security The complaint alleges Respondents believed they were eligible to take advantage of the special separation program based upon Phillips' prior assurances. Their requests were denied. Phillips informed them they were not "Phillips employees" on April 3, 1986. The respondent whose prior request for transfer within the company had been denied was technically eligible for the special separation program under Phillips' guidelines because he was still a "Phillips employee" and had not acquiesced to employment with Cepex. Phillips retired him without choice under its old retirement system and without an opportunity to take advantage of the special separation program. 7

make-up payments) for employees age 50 through 61 who chose early retirement. 6

The complaint also alleges that while Respondents were "vigorously encouraged" to go to Cepex along with the transfer of assets, Phillips employees of higher rank than Respondents were allowed to remain with Phillips after the sale long enough to avail themselves of the special separation program. The complaint further alleges those higher ranking Phillips employees knew of the special separation program "or its possibility" prior to the date of sale on March 1, 1986, but did not disclose its existence to any of the Respondents. 8

On December 26, 1986, only 9 months after the sale, Respondents were laid off or otherwise separated from employment with Cepex despite the assurances and representations previously made to them by Phillips. The complaint alleges that as a consequence of its actions regarding elimination of Respondents' compensation and benefits, Phillips received a windfall from its retirement or pension trust which it used to reduce its outstanding debt and fight off any hostile takeover bid. 9

                On February 28, 1989, six employees filed a complaint against Phillips in Spokane County Superior Court.  The employees at Finley originally filed a suit in Benton County, which was transferred to Spokane County and consolidated with that case.  Respondents seek damages for Phillips' negligence, outrage, breach of contract, negligent misrepresentation and fraud.  In addition, on behalf of six of the twelve Respondents, the complaint seeks damages for age discrimination under RCW 49.60 and 29 U.S.C. § 621 et seq. and breach of fiduciary duty for unlawful interference with their rights as participants in the special separation program under ERISA, 29 U.S.C. § 1101 et seq.   The complaint also seeks damages for benefits unlawfully withheld under RCW 49.46.010, RCW 49.52.050 and .070, which together provide that an employer who pays lower wages than the employer is obligated to pay an employee or who receives a rebate from an employee's wages is guilty of a misdemeanor and the employee may recover two times the lost wages plus costs and attorney fees. 10
                

Phillips moved to dismiss for failure to state a claim upon which relief can be granted pursuant to CR 12(b)(6). On December 20, 1991, the trial court, the Honorable Richard J. Schroeder, granted the motion in part. The court determined the claim for breach of fiduciary duty under ERISA was clearly pre-empted by 29 U.S.C. § 1132(e). It also determined the claim for benefits unlawfully withheld under RCW 49.46.010, RCW 49.52.050 and .070 was pre-empted by ERISA because it is "related to an employee benefit plan". The other six causes of action were not dismissed. The court determined they were state law claims independent of the ERISA claim and that the benefits plan (special separation plan) was merely one measure of damages. The court filed its order as a "final judgment" on March 6, 1992. 11

Phillips appealed the trial court's Phillips moved this court for discretionary review of the decision of the Court of Appeals, Division Three. We granted review on April 6, 1994.

order to the Court of Appeals, Division Three, but did not appeal the trial court's ruling on the age discrimination issue. The Court of Appeals accepted review on the five remaining causes of action (negligence, outrage, breach of contract, negligent misrepresentation and fraud). On October 21, 1993, the Court of Appeals, the Honorable Dennis J. Sweeney writing, affirmed the reasoning of the trial court and remanded for trial. 12

QUESTION PRESENTED

The question presented in this case is whether claims for negligence, outrage, breach of contract, negligent misrepresentation and fraud "relate to an employee benefit plan" under the exclusive jurisdiction of the Federal Employee Retirement Income Security Act of 1974 (ERISA) to the extent that they are pre-empted by federal law and require dismissal from state court.

DISCUSSION
Standard of Review

A trial court's ruling on a motion to dismiss for failure to state a claim upon which relief can be granted under CR 12(b)(6) is a question of law and is reviewed de novo by an appellate court. 13 Courts should dismiss a claim under CR 12(b)(6) only if it appears beyond a reasonable doubt that no facts exist that would justify recovery. "Under this rule, a plaintiff's allegations are presumed to be true", and "a court may consider hypothetical facts not part of the formal record." CR 12(b)(6) motions should be granted "sparingly and with care" and "only in the unusual case in which plaintiff includes allegations that show on the face of the complaint that there is some insuperable bar to relief." 14

CR 12(b)(6) provides:

Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, cross claim, or third party claim, shall be asserted in the responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: ... (6) failure to state a claim upon which relief can be granted,.... A motion making any of these defenses shall be made before pleading if a further pleading is permitted.......

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