Felton v. Unisource Corp.

Decision Date24 January 1990
Docket NumberNo. CIV-88-1932 PHX WPC.,CIV-88-1932 PHX WPC.
Citation739 F. Supp. 1388
PartiesDon W. FELTON, and Linda Felton, husband and wife, Plaintiffs, v. The UNISOURCE CORPORATION, Paper Corporation of America, a Delaware corporation; Alco Standard Corporation, an Ohio corporation, et al., Defendants.
CourtU.S. District Court — District of Arizona

Cruse, Firetag & Bock, Robert J. Cruse, Keith B. Forsyth, Phoenix, Ariz., for plaintiffs.

Snell & Wilmer, Tibor Nagy, Jr., Phoenix, Ariz., for defendants.

MEMORANDUM AND ORDER

COPPLE, District Judge.

The Plaintiffs, Don W. and Linda Felton ("Feltons") filed suit against the Defendants alleging breach of contract, wrongful termination and violation of Arizona Revised Statute ("A.R.S."), § 41-1463 (Employment discrimination). Defendants, The Unisource Corporation, Paper Corporation of America and Alco Standard Corporation (collectively referred to as "Unisource") filed a Motion for Summary Judgment arguing that the Plaintiffs' claims are completely preempted under ERISA (29 U.S.C. § 1140). The Defendants also argue that the Plaintiffs' claims were not made within the applicable ERISA statute of limitations and are, therefore, time barred. The parties fully briefed their positions and the matter was deemed submitted. The Court now rules on the Defendants' Motion for Summary Judgment.

I. Factual Background

Plaintiff Don Felton was employed by Unisource until October 1, 1986. (See Defendants' Statement of Facts at para. 1). At that time he was terminated and he filed suit in State Court on November 10, 1987. Count One of the Complaint (breach of contract) was dismissed by the Superior Court and the action was removed to the United States District Court. The Plaintiffs then filed a motion to remand the action. This motion was denied.

The Defendants argue that the remaining counts of the Complaint, wrongful termination and violation of State civil rights, are entirely preempted under ERISA. The Defendants also argue that the remaining counts are time barred by the statute of limitations. The Plaintiffs contend that their allegations are not preempted by ERISA, and to the extent the Complaint sounds in ERISA, the Complaint was timely filed pursuant to the statute of limitations which pertains to the Arizona Civil Rights Act, or the two year statute of limitations for wrongful termination.

II. ERISA Preemption

The Complaint alleges two remaining counts. However, no factual information is provided within the Complaint. The Defendants submitted a portion of Mr. Felton's deposition testimony which details the basis of the Feltons' claims. In that transcript, Don Felton testifies that the allegations of the Complaint result from his belief that Unisource terminated him in order to avoid paying medical benefits. The Plaintiffs argue that the submitted deposition testimony is misleading and inconclusive. However, they do not present any other factual basis for their claims. Based upon the facts presented, it is evident that the Feltons' suit falls within § 502(a)(1)(B) and § 502(a)(3) of ERISA (29 U.S.C. § 1132(a)(1)(B) and (a)(3)). These sections authorize civil actions by a plan participant. Orozco v. United Airlines, Inc., 887 F.2d 949, 952 (9th Cir.1989).

The ERISA remedies and procedure preempt "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title." 29 U.S.C.A. § 1144 (1985). The ERISA section which applies to this action provides as follows:

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan, ... or for purposes of interfering with the attainment of any right to which such participant may become entitled under the plan, this subchapter, or the Welfare and Pension Plans Disclosure Act.

29 U.S.C.A. § 1140 (1985).

A plan participant may bring a civil action to: (1) recover benefits due under the terms of the plan; (2) enforce his rights under the plan; or (3) clarify his rights to future benefits. 29 U.S.C.A. 1132(a)(1)(B) (1985). The Feltons' claims clearly fall within this section.

The ERISA provisions supersede State law, including decisional law, if the State law contains references or is intended to regulate or relate to an employee benefit plan. Jung v. FMC Corp., 755 F.2d 708 (9th Cir.1985). This provision was intended to preempt the broadest possible area of state law. Francis v. United Technologies Corp., 458 F.Supp. 84, 86 (D.C.Cal.1978).

The United States Supreme Court held that Congress' intent must be ascertained in order to determine whether a federal law will preempt a state law. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 95, 103 S.Ct. 2890, 2898, 77 L.Ed.2d 490 (1983). In Shaw, the Supreme Court was faced with the issue of preempting New York's Human Rights law following an airline's refusal to pay benefits to pregnant employees. The Shaw court held that the comprehensive preemption effect of ERISA did not impair or modify a federal law such that the New York Human Rights law should survive. Shaw, 463 U.S. at 106, 103 S.Ct. at 2904. The instant facts are sufficiently analogous to the Shaw facts to warrant the same holding.1

To decide whether Feltons' State causes of action are preempted by ERISA, the Court must determine whether the state actions affect an employee benefit plan in a tenuous, remote or peripheral manner. If the Court finds such a tenuous connection, the State cause of action shall not be deemed to "relate to" the plan and will not be preempted. Shaw v. Delta Air Lines, Inc., 463 U.S. at 100, n. 21, 103 S.Ct. at 2901, n. 21.

State laws that regulate the types of benefits, terms of the plans, the reporting and disclosure requirements, calculation of benefits, or those which provide remedies for misconduct resulting from the administration of an employee benefit plan are preempted. See Shaw, supra (types of benefits); Standard Oil Co. v. Agsalud, 633 F.2d 760 (9th Cir.1980), aff'd mem., 454 U.S. 801, 102 S.Ct. 79, 70 L.Ed.2d 75 (1981) (reporting requirements, type of benefits); Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981) (computation); Authier v. Ginsberg, 757 F.2d 796 (6th Cir.1985) cert. den., 474 U.S. 888, 106 S.Ct. 208, 88 L.Ed.2d 177 (1988) (wrongful discharge claim is preempted).

Neither side has questioned the applicability of ERISA to the employee benefit plan at issue. As discussed below, both the wrongful termination claim and the civil rights violations, to the extent they relate to an employee benefit plan and establish remedies for the discharge of an employee for the exercise of his benefits, relate to a benefit plan. By virtue of ERISA's inclusive provisions, it is evident that the wrongful termination and civil rights violation claims are preempted. It is clear that the substantive portions of ERISA directly address the same function that would be served by claims for wrongful termination and civil rights violations. ERISA provides remedies, as would the State law claims, for violations of the provisions prohibiting an employer from discharging a plan participant or interfering with the exercise of any rights to which he may be entitled under an employee benefit plan. 29 U.S. C.A. § 1140 (1985).

In this case, the Plaintiffs complain that Unisource terminated Mr. Felton in order to avoid paying medical benefits on his behalf. This allegation clearly states a cognizable claim under section 510 of ERISA. Nixon v. Celotex Corp., 693 F.Supp. 547 (W.D.Mich.1988).

ERISA preemption does not depend on the title of the state law, but rather on the conduct to which the law is applied. Blakeman v. Mead Containers, 779 F.2d 1146, 1151 (6th Cir.1985). Congress intended that ERISA would "remedy a broad range of problems in the field of employee benefits." Id. Under this analysis and the facts of this case, both the wrongful termination and the civil rights violation law are preempted by ERISA. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45, 107 S.Ct. 1549, 1551, 95 L.Ed.2d 39 (1987) (Congress intended a broad interpretation of the term "relate to"); Folz v. Marriott Corp., 594 F.Supp. 1007, 1013-1015 (W.D.Mo.1984). A State law cause of action relates to an employee benefit plan if it has "a connection with or reference to such a plan." Shaw v. Delta, 463 U.S. at 97, 103 S.Ct. at 2900; Sorosky v. Burroughs Corp., 826 F.2d 794, 799-780 (9th Cir.1987). The Court is compelled to find that both of the Feltons' remaining claims are completely preempted by ERISA.

The Plaintiffs state that their response to the Motion for Summary Judgment does not address the timeliness of the claim for State law violations or wrongful discharge. This argument ignores the import of ERISA preemption. The factual basis for the Plaintiffs claims arise out of a belief that Unisource terminated Don Felton in order to avoid paying medical benefits. This, clearly, creates the factual predicate for claims under ERISA — those claims which "relate to" an employee benefit plan. The State causes of action are subsumed into an ERISA claim and the Court need now only determine whether the Feltons timely made their ERISA claims.

III. Statute of Limitations

The Defendants argue that the Plaintiffs' allegations, which are preempted under ERISA, are also time-barred. The Defendants claim that Arizona's one year statute of limitations for causes of action created by statute bars recovery in this matter. See Ariz.Rev.Stat.Ann. § 12-541(3) (1982). Mr. Felton's termination occurred on October 1, 1986 and the instant action was filed on November 10, 1987.

The Plaintiffs argue that § 12-541(3) does not apply to this action and, instead, the Court should look to the two-year statute of limitations applied to wrongful terminations or...

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3 cases
  • Felton v. Unisource Corp.
    • United States
    • U.S. Court of Appeals — Ninth Circuit
    • July 31, 1991
    ...findings that (1) their state law claims are preempted by ERISA and (2) any claim under ERISA is barred by the statute of limitations. 739 F.Supp. 1388. We hold that the district court correctly found that the Feltons' state law claims were preempted by ERISA, but erred in its determination......
  • McLean v. Carlson Companies, Inc.
    • United States
    • U.S. District Court — District of Minnesota
    • November 25, 1991
    ...and (4) laws that provide remedies for misconduct growing out of the administration of ERISA plans. See, e.g., Felton v. Unisource Corp., 739 F.Supp. 1388, 1390 (D.Ariz.1990), aff'd and rev'd in part, 940 F.2d 503 (9th Cir.1991). More pertinent to this action, state common law or statutory ......
  • Ryan v. Puerto Rico Maritime Shipping Authority, Civ. A. No. 93-646 (JCL).
    • United States
    • U.S. District Court — District of New Jersey
    • March 31, 1994
    ...and (4) laws that provide remedies for misconduct growing out of the administration of ERISA plans. See, e.g., Felton v. Unisource Corp., 739 F.Supp. 1388, 1390 (D.Ariz.1990), aff'd and rev'd in part, 940 F.2d 503 (9th Cir.1991); see also, Aetna Life Ins. Co. v. Borges, 869 F.2d 142, 146 (2......

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