Davis v. OLD DOMINION TOBACCO CO. INC.

• Decision Date: 26 February 2010
• Docket Number: Civil Action No. 2:09cv603.
• Citation: 688 F. Supp.2d 466
• Parties: James L. DAVIS, Plaintiff, v. OLD DOMINION TOBACCO COMPANY INC., d/b/a Atlantic Dominion Distributors, Inc., and Robin D. Ray, Individually, Defendants.
• Court: U.S. District Court — Eastern District of Virginia

688 F.Supp.2d 466

James L. DAVIS, Plaintiff, v. OLD DOMINION TOBACCO COMPANY INC., d/b/a Atlantic Dominion Distributors, Inc., and Robin D. Ray, Individually, Defendants.

Civil Action No. 2:09cv603.

United States District Court, E.D. Virginia, Norfolk Division.

February 26, 2010.

James Matthew Mundy, John Ignatius Paulson, Louis George Paulson, Paulson & Paulson PLC, Virginia Beach, VA, for Plaintiff.

Mark Edward Warmbier, Scott William Kezman, Kaufman & Canoles PC, Norfolk, VA, for Defendants.

MEMORANDUM OPINION

REBECCA BEACH SMITH, District Judge.

The plaintiff in this case, James L. Davis, filed an Amended Complaint ("Complaint") in the Circuit Court for the City of Virginia Beach, Virginia, alleging fraud, constructive fraud, undue influence against the defendants, and breach of contract against Old Dominion Tobacco Co. Inc ("Old Dominion"). (See Complaint.) On December 9, 2009, the defendants removed the plaintiff's causes of action to this court, pursuant to 28 U.S.C. § 1441(b), asserting that the plaintiff's breach of contract claim "arises under" a question of federal law, namely the Employee Retirement Income Security Act ("ERISA"). (See Docket # 1.) On January 18, 2010, the plaintiff filed a Motion to Remand this case to the Virginia Beach Circuit Court, claiming that his claims were solely based on state law and, thus, were not removable under 28 U.S.C. § 1441(b).

For the reasons stated below, the court FINDS that the plaintiff's state law breach of contract claim does "arise under" ERISA, and was, therefore, properly removed to this court. The plaintiff's Motion to Remand is DENIED.¹

FACTUAL BACKGROUND²

The plaintiff was an employee of the defendant, Old Dominion Tobacco ("Old Dominion"), for more than forty years. (Comp. ¶ 6.) Defendant Robin Ray is a co-owner and President of Old Dominion, and is the plaintiff's cousin. (Id. ¶¶ 3-4.) During the course of the plaintiff's employment with Old Dominion, he was promoted to Vice President. (Id. ¶ 6.) In 1992, after becoming Vice President, the plaintiff entered into a Deferred Compensation Agreement with Old Dominion ("1992 Agreement"). (Id. ¶ 7.) Under the 1992 Agreement, the plaintiff (or designated beneficiary) was eligible to receive monthly benefit payments for 180 consecutive months upon: 1) retirement from Old Dominion at the age of 65 or older; 2) retiring due to permanent or indefinite disability; or 3) his death, as long as he was employed with Old Dominion and prior to retirement. (1992 Agreement, Art. III(A)-(C).) However, if the plaintiff was terminated "for any reason other than death, disability, or retirement at, age 65," he would receive no benefits under the 1992 Agreement. (1992 Agreement, Art. III(D).)

On September 16, 2008, prior to the plaintiff receiving any benefits under the 1992 Agreement, Old Dominion fired the plaintiff. (Comp. ¶ 14.) Two weeks later, the plaintiff entered into a Separation and Release Agreement with Old Dominion ("2008 Agreement"), which offered the plaintiff $72,000 in severance pay, in exchange for the plaintiff's release of any and all claims against Old Dominion, including any obligations under the 1992 Agreement. (See 2008 Agreement ¶¶ 2, 7.) The "plaintiff now seeks to have the 2008 Document found unenforceable and to enforce his interest in disability benefits in accordance with the 1992 Agreement under Virginia contract and tort law claims." (Docket # 8 at 2 (emphasis added).)

ANALYSIS

"Any civil action of which the district courts have original jurisdiction founded on a claim or right arising under the Constitution, treaties or laws of the United States shall be removable" to the United States district court and division embracing the place where such action is pending. 28 U.S.C. § 1441(b). An action "arises under" the laws of the United States where the complaint raises issues of federal law. See, e.g., Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987) ("It is long settled law that a cause of action arises under federal law only when the plaintiff's well-pleaded complaint raises issues of federal law."). However, regardless of whether the complaint purports to raise only state law claims, where a state law is completely preempted by federal law, then the state law claim "arises under" federal law and is removable to federal court. Id. at 65, 107 S.Ct. 1542.

With regard to ERISA, it preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a) (emphasis added). Moreover, any civil action brought by a participant in, or beneficiary of, an employee benefit plan to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan is completely preempted by ERISA and removable to federal court. Metropolitan Life Ins. Co., 481 U.S. at 66-67, 107 S.Ct. 1542 ("Causes of action within the scope of the civil enforcement provisions of § 502(a) of ERISA 29 U.S.C. § 1132(a) are removable to federal court" even if they "purport to raise only state law claims."). Accordingly, there are two major issues which the court must address. First, the court must determine whether the 1992 Agreement qualifies as an employee benefit plan under ERISA. Second, if the 1992 Agreement is an employee benefit plan, the court must determine whether the plaintiff seeks to recover benefits purportedly due to him under the terms of the 1992 Agreement, to enforce rights under the terms of the 1992 Agreement, or to clarify his rights under the 1992 Agreement. The court will address these issues, in turn, below.

I. Qualification as an Employee Benefit Plan

ERISA applies to "any employee benefit plan established or maintained by any employer engaged in commerce or in any industry or activity affecting commerce." 29 U.S.C. § 1003(a).³ An employee benefit plan includes employee welfare benefit plans, employee pension plans, and plans that are combinations of both. 29 U.S.C. § 1002(3). Accordingly, in order to find that the 1992 Agreement in this case is an employee benefit plan, the court must find that it is a plan, fund, or program established or maintained by an employer for the purpose of providing either, or both, employee welfare benefits and employee pension benefits to employees. See 29 U.S.C. §§ 1002(1) and 1002(2)(A).⁴

A. Whether A Plan, Fund, or Program is "Established"

A plan, fund, or program is established if, at a minimum, from the surrounding circumstances a reasonable person is able to ascertain "the existence of intended benefits, intended beneficiaries, a source of financing, and a procedure to apply for and collect benefits." Donovan v. Dillingham, 688 F.2d 1367, 1372 (11th Cir.1982); see Guiragoss v. Khoury, 444 F.Supp.2d 649, 655 (E.D.Va.2006).⁵ The 1992 Agreement clearly identifies the intended benefits in Article III, including retirement benefits and death benefits. Similarly, the 1992 Agreement clearly refers throughout Article III to the "Executive," meaning the plaintiff, as the intended beneficiary of monthly benefit payments, and, specifically in Article III(C), discusses how the Executive might assign a beneficiary to receive payments upon the Executive's death.

Additionally, the 1992 Agreement has a reasonably identifiable claims procedure. The plaintiff is correct in arguing that Article VI of the 1992 Agreement does not explicitly state the manner in which a beneficiary would initiate a claim. However, the test is whether a reasonable person could discern the appropriate procedure for initiating a claim. The fact that the 1992 Agreement identifies the plan administrator is significant to this inquiry. A reasonable person would know to initiate a claim by applying for benefits to the Board of Directors, which is the named fiduciary and administrator of the 1992 Agreement. (See 1992 Agreement, Art. VI(A).) Further, Article VI(A) suggests that it was the Board's duty to make discretionary decisions, such as whether someone was eligible for benefits, as opposed to ministerial duties which could be delegated to others. (Id.) Moreover, a reasonable person could certainly discern the appropriate procedure to appeal a denial of benefits, as the 1992 Agreement contains a very detailed appeals procedure. (See 1992 Agreement, Art. VI(B).)

Finally, in terms of the source of financing, the court finds that Article IV of the 1992 Agreement reasonably identifies the plan's source of financing as Old Dominion's general assets. Article IV states, in pertinent part:

The Company shall have no obligation to set aside, earmark or entrust any fund or money with which to pay its obligations under this Agreement. The Executive, his beneficiaries or any successor in interest to him shall be and remain simply a general creditor of the Company in the manner as any other creditor having a general claim for matured and unpaid compensation.

(1992 Agreement, Art. IV (emphasis added).) A general creditor, having a general claim against Old Dominion, would reasonably be compensated through Old Dominion's general assets. See Fair v. Giant of Maryland LLC, 2006 WL 361338, No. Civ. A. DKC2005-1306, *9-11 (D.Md. Feb. 15, 2006) (finding that where an agreement "indicates benefits are to be paid by the Company, or by the Company's successor," that was sufficient to determine the source of financing); Hughes v. White, 467 F.Supp.2d 791, 801 (S.D.Ohio 2006) ("While none of the evidence establishes the exact source of financing for the purported employee benefit plan . . . it may be assumed that benefits are to be paid out of the general assets of the employer."). Certainly, the 1992 Agreement indicates that Old Dominion would be the payor of any benefits to the plaintiff, thereby sufficiently indicating the source of financing.⁶

Further, the court disagrees with the plaintiff's assertion that insofar...