Lembo v. Texaco, Inc.

• Decision Date: 12 June 1986
• Citation: 227 Cal.Rptr. 289
• Court: California Court of Appeals Court of Appeals
• Parties: Joe M. LEMBO and Winston A. Keene, Plaintiffs and Respondents, v. TEXACO, INC. and Max Nardoni, Defendants and Appellants. B005789.

Page 289

227 Cal.Rptr. 289

Joe M. LEMBO and Winston A. Keene, Plaintiffs and Respondents, v. TEXACO, INC. and Max Nardoni, Defendants and Appellants.

B005789.

Court of Appeal, Second District, Division 2, California.

June 12, 1986.

Review Granted Sept. 25, 1986.

Latham & Watkins by John S. Welch, Los Angeles, and Michael R. Lindsay, Universal City, and Tony O. Hemming, Los Angeles, for defendants and appellants.

Boies & O'Rourke, Los Angeles, by Vilate D. Stewart, Santa Monica, for plaintiffs and respondents.

GATES, Associate Justice.

Defendant Texaco, Inc., appeals from the judgment entered pursuant to a jury verdict which awarded plaintiff Joe M. Lembo $250,000 in general damages and $1,000,000 in punitive damages and plaintiff Winston A. Keene $500,000 in general damages. Texaco contends that "California courts do not have jurisdiction of plaintiffs' causes of action because of ERISA ¹ preemption," arguing in the alternative that "[e]ven if the state courts have jurisdiction to apply state law to this action, the judgment must be reversed."

Because we find the preemption issue determinative, we restrict our recitation of "facts" to those alleged in plaintiffs' complaint. We note, however, that the evidence adduced at trial, even if fully credited, could but confirm these allegations. In addition, although nowhere in plaintiffs' complaint is ERISA mentioned, adept pleading cannot control which court has jurisdiction. (Johnson v. Trans World Airlines, Inc. (1983) 149 Cal.App.3d 518, 526, 196 Cal.Rptr. 896; Kilmer v. Central Counties Bank (W.D.P.A.1985) 623 F.Supp. 994, 998-1000.)

On December 23, 1981, plaintiffs Lembo and Keene filed a complaint in the Los Angeles County Superior Court charging their employer, Texaco, and their immediate supervisor, Max Nardoni, who is not a party to this appeal, with fraud, misrepresentation and infliction of emotional distress. In their first amended complaint filed on February 8, 1982, plaintiffs alleged that prior to May 1, 1980, they were "employed as accountants in the comptroller's department in [Texaco's] Los Angeles office, and at all times herein mentioned were eligible for voluntary retirement."

On approximately April 27, 1980, Lembo, who had been continuously employed by Texaco for approximately 33 years, purportedly requested "that he be allowed to retire under [Texaco's] retirement program commonly known as 'Voluntary Separation Program' [VSP]." Assertedly, Nardoni, acting within the scope of his employment for Texaco, informed Lembo he "could not take advantage of the Voluntary Separation Program" and that Texaco "had no plans to offer the program to any of its Comptroller's Department employees during the years 1980 and 1981." According to plaintiffs, Nardoni made these representations "with full knowledge that [Lembo] would relay said information to [Keene, who had been continuously employed by Texaco for approximately 36 years], and others, and, in fact, directed him to do so."

Moreover, plaintiffs averred that at the time Nardoni made these assertions, Texaco "planned to offer, and, on August 1, 1980, did offer said Voluntary Separation Plan to employees in the categories of employment of both plaintiffs, but not to Plaintiffs." Plaintiffs also charged Nardoni had suppressed this information and knowingly misrepresented Texaco's true intention in order to mislead plaintiffs and induce them to retire prior to the date the plan was offered, and that in reliance upon Nardoni's representation, Lembo and Keene had retired May 1, 1980, and August 1, 1980, respectively, rather than waiting until after the VSP had become effective.

Plaintiffs further accused defendant of acting with "oppression, fraud, and malice," claiming that as a result of this misconduct plaintiffs had lost pension and life insurance benefits and had suffered "emotional and mental anguish and physical pain and shock" for which each was entitled to general damages and "exemplary and punitive damages in the amount of $1,500,000.00...."

As an alternative to their theory that Nardoni had knowingly deceived them regarding Texaco's intention to offer the VSP, plaintiffs contended Nardoni "did not have accurate information, or any information" concerning the VSP; that he was "aware that without such information, [he] could not accurately make the representations herein alleged;" and that he had concealed from plaintiffs his "lack of information and ... inability to make the alleged representations accurately."

The action was thereafter removed to the United States District Court for the Central District of California upon Texaco's petition filed on February 11, 1982. Plaintiffs then sought to have the case remanded to the superior court "upon the ground that the federal court does not have jurisdiction of the issues involved in this action and that the court is required to enforce the decision made by Plaintiffs as to the forum...." In its order dated May 12, 1982, the district court declared "the case was improperly removed to this Court, in that there is no jurisdiction herein" and remanded the matter to the superior court, where it was tried upon plaintiffs' state law claims. The district court's order, of course, is not binding on this court. (Provience v. Valley Clerks Trust Fund (1984) 163 Cal.App.3d 249, 256, 209 Cal.Rptr. 276.)

ERISA "is a remedial statute designed to protect the interests of employees in pension and welfare plans, [citation], and to protect employers from conflicting and inconsistent state and local regulation of such plans, [citation]. The former purpose is achieved through requirements for reporting, disclosure, participation rights, vesting of rights to benefits, funding, fiduciary responsibilities, and claims procedures. See 29 U.S.C. §§ 1021-1145. The latter purpose is achieved through the preemption, with a few exceptions not relevant here, of all state laws relating to employee pension and welfare benefit plans. See id. § 1144." (Scott v. Gulf Oil Corp. (9th Cir. 1985) 754 F.2d 1499, 1501; Shaw v. Delta Air Lines, Inc. (1983) 463 U.S. 85, 104, 103 S.Ct. 2890, 2903, 77 L.Ed.2d 490; Alessi v. Raybestos-Manhattan, Inc. (1981) 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402.)

Plaintiffs argue that by seeking to recover millions of dollars in damages in this state court action based upon lost pension rights, ² they only indirectly and peripherally affect ERISA, citing certain decisions which found local law not superseded by federal law. It is true that "[w]here the ERISA plan is irrelevant to the plaintiff's cause of action and no interest protected by the act is involved, the connection between ERISA and the applicable state law is too remote to invoke the preemption rule...." (Pacific Airmotive Corp. v. First Interstate Bank (1986) 178 Cal.App.3d 1130, 1140, 224 Cal.Rptr. 233, and cases discussed therein, including, Shaw v. Delta Air Lines, Inc., supra, 463 U.S. 85, 103 S.Ct. 2890; Franchise Tax Bd. v. Laborers Vacation Trust (1983) 463 U.S. 1, 103 S.Ct. 2841, 77 L.Ed.2d 420; Alessi v. Raybestos-Manhattan, Inc., supra, 451 U.S. 504, 101 S.Ct. 1895; American Tel. & Tel. Co. v. Merry (2d Cir.1979) 592 F.2d 118; McNeil v. Suffolk Cty. Painters Ins., Etc. (E.D.N.Y.1977) 431 F.Supp. 387; Cornell Mfg. Co. v. Mushlin (1979) 70 A.D.2d 123, 420 N.Y.S.2d 231.) However, this is not such a case.

The "... preemption of state law claims by ERISA depends on the conduct to which such law is applied, not on the form or label of the law. [Citation.]" (Scott v. Gulf Oil Corp., supra, 754 F.2d at p. 1504.) "If Congress has already provided a remedy for the violation of the former [employees'] benefit plans, then once Congress has expressed its intention to occupy the field, the state law is preempted, regardless of whether or not a conflict exists which involves a direct interference by the state law with the substantive federal legislation...." (Dependahl v. Falstaff Brewing Corp. (8th Cir.1981) 653 F.2d 1208, 1215-1216; Alessi v. Raybestos-Manhattan, Inc., supra, 451 U.S. 504, 525, 101 S.Ct. 1895, 1907.)

Applying these principles to plaintiffs' claim, it is clear their allegations that they were eligible for voluntary retirement and would have received benefits under the VSP ³ had not Texaco fraudulently induced them to retire for the sole purpose of depriving them of that right, "fall[ ] squarely and directly into the confines set out in ERISA rather than merely peripherally affecting an area with which ERISA is concerned." (Witkowski v. St. Anne's Hosp. of Chicago, Inc. (1 Dist. 1983) 113 Ill.App.3d 745, 69 Ill.Dec. 581, 585, 447 N.E.2d 1016, 1020.)

Undoubtedly fraud and concealment constitute a breach of fiduciary obligations under ERISA. (See § 1113.) Furthermore, if Texaco engaged in the conduct alleged by plaintiffs, it violated its fiduciary duty to administer the plan "solely in the interest of the participants...." (Sec. 1104; Peoria Union Stock Yards Co. v. Penn Mut. Life Ins. (7th Cir.1983) 698 F.2d 320, 326; Ogden v. Michigan Bell Telephone Co. (E.D.Mich.1983) 571 F.Supp. 520, 523.) While an employer may have no duty to disclose in advance its intent to implement a VSP, it ought not to misrepresent its true intentions to those who make specific inquiry on the subject.

Such conduct also could constitute a violation of that portion of section 1140 which prohibits an employer from discharging, fining, suspending, expelling, disciplining, or discriminating against an employee "... for the purpose of interfering with the attainment of any right to which [the employee] may become entitled" under an employee benefit plan.

Having concluded ERISA preempts any state cause of action and, therefore, only federal law applies, we must yet consider whether our state courts have concurrent jurisdiction to consider the merits of plaintiffs' claim. Under ERISA state courts have concurrent jurisdiction with the federal district courts only in those cases where...