Monarch Cement Co. v. Lone Star Industries, Inc.

• Decision Date: 22 December 1992
• Docket Number: No. 92-3022,92-3022
• Citation: 982 F.2d 1448
• Parties: , 16 Employee Benefits Cas. 1105 The MONARCH CEMENT COMPANY, a Kansas corporation, Plaintiff/Counter-Defendant/Appellee, v. LONE STAR INDUSTRIES, INC., a Delaware corporation, Defendant/Counter-Claimant/Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1448

982 F.2d 1448

61 USLW 2402, 16 Employee Benefits Cas. 1105

The MONARCH CEMENT COMPANY, a Kansas corporation, Plaintiff/Counter-Defendant/Appellee, v. LONE STAR INDUSTRIES, INC., a Delaware corporation,

Defendant/Counter-Claimant/Appellant.

No. 92-3022.

United States Court of Appeals, Tenth Circuit.

Dec. 22, 1992.

Michael Lerner (Mark A. Stites, with him on the briefs), of Stinson, Mag & Fizzell, Overland Park, KS, for plaintiff/counter-defendant/appellee.

A.J. Harper, II (Douglas C. McKenna of Watson, ESS, Marshall & Enggas, Olathe, KS, with him on the briefs), of Fulbright & Jaworski, Houston, TX, for defendant/counter-claimant/appellant.

Before MOORE and SETH, Circuit Judges, and CAMPOS, District Judge. ^*

JOHN P. MOORE, Circuit Judge.

Defendant Lone Star Industries, Inc. appeals the district court's summary judgment ruling in favor of plaintiff, The Monarch Cement Company. The case presents us with the question of whether an agreement entered into between Monarch and a predecessor of Lone Star was a contract determining employer liability under a retirement plan to be construed under state law, or an agreement which relates to a retirement plan in which state law is superseded by the Employee Retirement Income Security Act, 29 U.S.C. § 1001 et seq. We conclude the agreement is not related to a retirement plan and the district court correctly decided the issues. We affirm its judgment.

I.

In 1979, Marquette Company, then a subsidiary of Gulf & Western Industries, Inc., sold its Des Moines, Iowa cement plant to Monarch. Monarch and Marquette entered into a Sale Agreement whereby Marquette employees were terminated on May 31, 1979 (Sale Closing Date) and employed by Monarch the next day.

After the sale, Monarch established a new pension plan (Monarch Plan) which mirrored the one previously used by Marquette (Marquette Plan). ¹ Lone Star acquired Marquette in 1982 and became its successor-in-interest and administrator/fiduciary of the Marquette Plan. In 1987, Monarch closed the cement plant, triggering employee eligibility for so-called "Rule of 65" (shutdown) ² and other "subsidized" pension benefits.

Before the plant shut down, a dispute arose between Monarch and Lone Star concerning the apportionment of liability for shutdown benefits. The dispute centered around whether Section 5 of the Sale Agreement created a pension sharing arrangement between Monarch and Marquette which Lone Star, as Marquette's successor-in-interest, was obligated to honor.

After the plant shut down, Monarch began paying its proportionate share of shutdown benefits, but Lone Star refused to do so. Monarch was subsequently sued by its employees' union, which sought payment of shutdown benefits for employees who became eligible through their combined years of service with Marquette and Monarch, but were not receiving their full entitlement. That action was settled in 1988, when Monarch agreed to be bound by the court's decision regarding pension liability for an employee's years of service with Marquette.

Monarch then initiated this action against Lone Star, seeking a declaratory judgment that Lone Star (as Marquette's successor-in-interest) was liable for a share of shutdown and other benefits proportionate to an employee's years of service with Marquette. Lone Star counterclaimed for recovery of certain pension benefit payments it made after the Sale Closing Date, claiming the payments were erroneous. The district court granted Monarch's summary judgment motion, thus adopting Monarch's interpretation of the Sale Agreement under Kansas law, holding Lone Star liable for a share of pension benefits, and rendering Lone Star's counterclaim moot. The district court also considered and rejected Lone Star's contention that ERISA preempted Monarch's claim.

II.

The underlying question in this case is which party is responsible for the share of shutdown benefits attributable to an employee's years of service with Marquette. The answer depends on how Section 5 ³ of the Sale Agreement is characterized. If Section 5 sufficiently relates to the Marquette and Monarch Plans, then Monarch's claim is preempted by ERISA. To the contrary if Section 5 is merely part of a separate state-law contract, then Monarch's claim prevails and state contract law governs interpretation of Section 5.

Lone Star contends Monarch's common law breach of contract claim is preempted by ERISA because Section 5 of the Sale Agreement relates to benefit entitlements under the Marquette Plan, which indisputably is an ERISA plan. Emphasizing the broad scope of ERISA preemption, Lone Star argues that the Sale Agreement "clearly incorporates and references the Marquette Pension Plan and its terms." Lone Star further maintains Monarch's claim directly implicates the terms of the Marquette Plan, determination of entitlement to benefits, calculation and funding of benefits, and monthly payment of benefits. Therefore, Lone Star urges, Monarch's claim impacts the very administration of the Marquette Plan because reference to the Marquette Plan is critical to understanding and effectuating Section 5. Thus, Lone Star concludes, the district court's ruling against ERISA preemption "creates the very evils which ERISA was designed to preclude."

Lone Star argues, moreover, that ERISA would apply even if the Sale Agreement could be construed as a "simple divider" of pension liability between Monarch and Marquette because ERISA preempts state law causes of action. Lone Star bases this argument upon the assumption that the phrase "benefits accrued to the Closing Date" found in Section 5 refers to benefits under the Marquette Plan. Therefore, Lone Star reasons, Monarch's claim seeking interpretation of Section 5 relates to an employee benefit plan. Regardless of which interpretation the court might adopt, Lone Star argues, the court cannot avoid referring to the Marquette Plan.

Monarch agrees with Lone Star that state common law claims generally are preempted by ERISA. However, Monarch argues that ERISA preemption is "neither all-encompassing nor unlimited." Unlike other state law actions which have been found preempted by ERISA, Monarch's action calls for nothing more than interpreting the Sale Agreement and apportioning pension liabilities between it and Lone Star. Monarch argues the Monarch and Marquette Plans do not "speak[ ] to this apportionment; only the asset sale agreement, itself, deals with it." Thus, Monarch's claim does not "relate to" a pension plan as that term is employed for ERISA preemption.

Monarch also maintains that application of Kansas contract law to this case would not threaten the protections afforded by ERISA. Because the terms of the Monarch and Marquette Plans are identical, "[t]here is no dispute between Monarch and Lone Star over the amounts of benefits to which the individual employees are entitled ... or over when payment of those benefits commences." Rather, "[t]he respective parties' pension plans are involved in only one respect, namely, the nature and dollar amounts of the liability which was divided up are established by those plans."

The standard of review for summary judgment rulings is de novo, Housing Auth. of Fort Collins v. United States, 980 F.2d 624, 627 (10th Cir.1992), and we employ the same standard applied by the district court. International Bhd. of Elec. Workers v. Public Serv. Co., 980 F.2d 616, 618 (10th Cir.1992). The district court's summary judgment ruling will be affirmed if "there is no genuine dispute over a material fact and the moving party is entitled to judgment as a matter of law." Russillo v. Scarborough, 935 F.2d 1167, 1170 (10th Cir.1991).

As a preliminary matter, we must determine whether Monarch's state law claims are preempted by ERISA. ERISA § 514(a), 29 U.S.C. § 1144(a), states:

Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supercede any and all State laws ⁴ 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.

(emphasis added).

The key to ERISA preemption "is found in the words 'relate to.' " Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 483, 112 L.Ed.2d 474 (1990). "A law 'relates to' an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983). Thus, a state law may "relate to" an ERISA benefit plan and be preempted even if the law is not specifically designed to affect such a plan or the effect is only indirect. Ingersoll-Rand, 498 U.S. at 139, 111 S.Ct. at 483 (citation omitted).

This court has given broad meaning to the phrase "relate to," concluding common law tort and breach of contract claims brought by employees are preempted by ERISA "if the factual basis of the cause of action involves an employee benefit plan." Settles v. Golden Rule Ins. Co., 927 F.2d 505, 509 (10th Cir.1991) (holding state law wrongful death suit preempted by ERISA). See also Kelley v. Sears, Roebuck & Co., 882 F.2d 453 (10th Cir.1989) (state statutory and common law bad-faith negotiation of claims action brought by employee preempted by ERISA); Straub v. Western Union Tel. Co., 851 F.2d 1262, 1264 (10th Cir.1988) (quoting Anderson v. John Morrell & Co., 830 F.2d 872, 875 (8th Cir.1987)) ("[P]rinciples of common law governing a claimed contract right to have the plan modified clearly 'relates to' [sic] the plan and that state law in that area is preempted.").

The scope of ERISA preemption, however, is not unlimited. "What triggers ERISA preemption is not just any indirect effect on administrative procedures but rather an effect on the primary administrative functions of benefit plans, such as determining an employee's eligibility for a...