Fludgate v. Management Technologies, Inc., 94 Civ. 6839 (PKL).

• Decision Date: 18 May 1995
• Docket Number: No. 94 Civ. 6839 (PKL).,94 Civ. 6839 (PKL).
• Citation: 885 F. Supp. 645
• Parties: Barrington J. FLUDGATE, Plaintiff, v. MANAGEMENT TECHNOLOGIES, INC., Winter Partners, Inc., Keith Williams, Defendants.
• Court: U.S. District Court — Southern District of New York

885 F. Supp. 645

Barrington J. FLUDGATE, Plaintiff, v. MANAGEMENT TECHNOLOGIES, INC., Winter Partners, Inc., Keith Williams, Defendants.

No. 94 Civ. 6839 (PKL).

United States District Court, S.D. New York.

May 18, 1995.

Davidoff & Malito LLP, New York City (Jack E. Bronston, John Harris, of counsel), for plaintiff.

Baratta & Goldstein, New York City (Howard Goldstein, Joseph Baratta, of counsel), for defendant.

LEISURE, District Judge:

This is an action brought by Barrington J. Fludgate ("Fludgate") against Management Technologies, Inc. ("MTI"), Winter Partners, Inc. ("WP") and Keith Williams ("Williams"), seeking recovery for claims under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq., claims under New York labor law, and claims for wrongful interference with Fludgate's employment agreement with MTI (the "Employment Agreement"). Defendants move for an order dismissing the complaint for lack of subject matter jurisdiction and for summary judgment as to the claims against Williams and WP for wrongful interference. Plaintiff, in turn, moves to amend his complaint and for an extension of the time within which to serve Williams. For the reasons stated below, defendants' motion is granted, and plaintiff's motion is granted.

BACKGROUND

Fludgate was the founder and principal shareholder of MTI, a publicly owned company, and he acted as its chairman and chief executive officer until 1994. See Defendants' Memorandum of Law in Support of their Motion to Dismiss ("Defendant Mem.") at 1. In April 1992, Fludgate drafted the Employment Agreement, which now serves as the basis for his ERISA claims. Id. at 2. Also in 1992, MTI purchased four operating companies from Winter Partners Holding A.G. ("Winter Holding").¹ Id. Williams was the general manager of Winter Holding, and upon the acquisition of the Winter Holding subsidiary companies by MTI, became the chief operating officer of MTI. Id.

Fludgate alleges that Williams told the board of directors of MTI that Winter Holding would not proceed with the sale if plaintiff remained as chief executive officer of MTI. Defendants maintain that plaintiff voluntarily resigned from MTI as its chairman and chief executive officer. Plaintiff contends that his resignation was involuntary.² Fludgate retained his position as a director of MTI for three months after his resignation as chief operating officer, but on September 15, 1994, plaintiff resigned from the Board of MTI as well. Soon thereafter, plaintiff commenced the instant action.

DISCUSSION

A. Standard for Motion to Dismiss

In reviewing a motion to dismiss, a court must assume the facts alleged by the plaintiff to be true and must liberally construe them in the light most favorable to the plaintiff. Easton v. Sundram, 947 F.2d 1011, 1014 (2d Cir.1991), cert. denied, 504 U.S. 911, 112 S.Ct. 1943, 118 L.Ed.2d 548 (1992). Therefore, the court should not dismiss the complaint "`unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Ricciuti v. N.Y.C. Transit Authority, 941 F.2d 119, 123 (2d Cir.1991) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-102, 2 L.Ed.2d 80 (1957)). For example, "the court's task on a Rule 12(b)(6) motion is not to rule on the merits of plaintiffs' claims, but to decide whether, presuming all factual allegations of the complaint to be true, and drawing all reasonable inferences in the plaintiff's favor, the plaintiff could prove any set of facts which would entitle him to relief." Weiss v. Wittcoff, 966 F.2d 109, 112 (2d Cir.1992) (citations omitted).

B. ERISA Claims

Defendants move to dismiss the instant action for lack of subject matter jurisdiction, alleging that ERISA is not implicated.³ "ERISA was passed by Congress in 1974 to safeguard employees from the abuse and mismanagement of funds that had been accumulated to finance various types of employee benefits." James v. Fleet/Norstar Financial Group, Inc., 992 F.2d 463, 465 (2d Cir.1993) (citations omitted). "To that end, it established extensive reporting, disclosure, and fiduciary duty requirements to insure against the possibility that the employee's expectation of the benefit would be defeated through poor management by the plan administrator." Id.⁴

ERISA governs employee benefit plans, which encompasses employee welfare benefit plans and employee pension benefit plans. See 29 U.S.C. § 1002(3); Fleet, 992 F.2d at 465. An employee welfare benefit plan is defined as

any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services, or (B) any benefit described in ... § 186(c) which includes "severance or similar benefits" (other than pensions on retirement or death, and insurance to provide such pensions).

29 U.S.C. § 1002(1).⁵ Consequently, to establish federal jurisdiction under ERISA, Fludgate must allege facts that show the establishment of a "plan, fund, or program" of the type covered by ERISA. See Donovan v. Dillingham, 688 F.2d 1367, 1369-70 (11th Cir.1982).

The question before this Court is whether MTI's arrangement with Fludgate constituted an employee welfare benefit plan under ERISA.

Congress intended pre-emption to afford employers the advantages of a uniform set of administrative procedures governed by a single set of regulations. This concern only arises, however, with respect to benefits whose provision by nature requires an ongoing administrative program to meet the employer's obligation. It is for this reason that Congress pre-empted state laws relating to plans, rather than simply to benefits. Only a plan embodies a set of administrative practices vulnerable to the burden that would be imposed by a patchwork scheme of regulation.

Fleet, 992 F.2d at 466 (quoting Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987)) (emphasis in original); see also Kulinski v. Medtronic Bio-Medicus, 21 F.3d 254, 257 (8th Cir.1994) ("to determine whether a benefits plan falls within ERISA's ambit; the pivotal inquiry is whether the plan requires the establishment of a separate, ongoing administrative scheme to administer the plan's benefits.") (citations omitted).⁶

Plaintiff notes that the Employment Agreement provides that upon an acquisition, consolidation, or change in control of MTI, Fludgate may terminate the Employment Agreement, but his hospitalization, health and dental care, life insurance and similar benefits continue. Fludgate observes that the Employment Agreement guaranties that, in addition to the benefits provided under any pension benefit plan, he will receive the pension benefits he would have accrued under such pension benefit plan if he had remained in the employ of MTI for twenty-four calendar months after his termination. In addition, Fludgate is to receive incentive compensation, stock options, and executive benefits for twenty-four calendar months after his termination.

Fludgate contends that the Employment Agreement requires an ongoing administrative scheme and that, as a result, such benefits are ERISA welfare benefits. In support of his argument, he notes that some of the benefits to which he is entitled cannot be determined for up to twenty-four months after his termination.⁷

This Court finds, however, that in the instant action, there was no need for the creation of an administrative program to meet MTI's alleged obligation. Plaintiff's causes of action are appropriately viewed as an attempt to claim damages for the purported breach of Fludgate's Employment Agreement, but the Employment Agreement does not create an ERISA plan.⁸ ERISA was designed only to preempt state laws which relate to benefit plans, not laws which relate to employee benefits. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11, 107 S.Ct. 2211, 2217, 96 L.Ed.2d 1 (1987). Plaintiff cannot show that MTI had a formal plan in existence, nor that a defined group had been designated as beneficiaries or participants, nor that an administrative scheme was in place.

The fact that severance benefits may have been provided, or that a decision to extend various other benefits was made, is not sufficient to show establishment of a plan. See Donovan, 688 F.2d at 1367.⁹ The characterization of severance payments as governed by ERISA has hinged on the amount of employer discretion involved in providing payment. See Fleet, 992 F.2d at 468. In the instant case, while payment could continue for as long as two years, there does not appear to be anything discretionary about the timing, form, or amount of payments. See Delaye v. Agripac, Inc., 39 F.3d 235, 237 (9th Cir.1994). In addition, plaintiff does not allege that MTI ever published or distributed a severance policy to officers or employees, that employees, other than plaintiff, were aware of the severance practice, that there was a particular employee group covered by the policy, or that there was a specific method of financing or calculating benefits.¹⁰

The facts of this case are similar to the circumstances that existed in Delaye. In Delaye, the plaintiff, the former president and chief executive officer of the defendant, entered into an employment contract with the defendant. The contract provided that if the plaintiff was terminated without cause, he would receive (1) his salary for up to an additional twenty-four months, according to a set formula; (2) accrued vacation benefits; and (3) the...