Montner v. Interfaith Medical Center

Decision Date08 February 1993
Citation157 Misc.2d 583,596 N.Y.S.2d 975
PartiesPaul MONTNER, Plaintiff, v. INTERFAITH MEDICAL CENTER, Corbert Price, and Reverend G. Sherril, Defendants.
CourtNew York City Court

Robert D. Goldstein, Epstein, Becker & Green, P.C., New York City, for defendants.

RICHARD RIVERA, Judge.

NATURE OF THE CASE

Defendants have moved to dismiss this breach of contract action in which plaintiff seeks to recover certain salary deductions that defendant Interfaith Medical Center (hereafter "Interfaith") admittedly failed to deposit into a Tax Deferred Annuity Account (TDA) it maintained in plaintiff's name under the terms of his employment contract. Defendants contend that the Employee Retirement Income Security Act (ERISA) (29 U.S.C. §§ 1001, et seq.) both pre-empts state common law and confers exclusive jurisdiction over plaintiff's claims in the federal courts. Plaintiff has cross-moved for partial summary judgment on his claims for recovery of his salary deductions and the related tax liability he estimates he will incur as a result of Interfaith's breach of contract.

The questions presented are whether ERISA bars this action, and, if not, whether plaintiff is entitled to partial summary judgment.

Based on the parties' written submissions, the relevant undisputed facts are as follows.

RELEVANT FACTS

Plaintiff is a physician who worked at Interfaith between January, 1983 and December, 1988. His last position was Chief of the Critical Care Division. Defendant Corbett Price is the hospital's President and Chief Operating Officer, and defendant Rev. G. Sherril is its Board Chairperson.

Pursuant to plaintiff's employment contract, Interfaith established a TDA in his name which was funded through deductions from plaintiff's salary. The parties agree that the TDA is subject to ERISA regulation (29 U.S.C. § 1002(2)(A)(ii)). According to the terms of his TDA, plaintiff could withdraw the funds either when he retired or left his job with Interfaith. Through January, 1988, Interfaith deposited plaintiff's TDA salary deductions into the appropriate account.

Shortly after leaving his job with Interfaith, plaintiff withdrew the funds in his that our records indicate that Interfaith owes you $14,039.72 for failure to make contributions to your Tax Deferred Annuity for the period February to December, 1988.

                TDA and deposited them in another tax deferred account with a different bank.   In the process, he discovered that Interfaith had failed to deposit all of his salary deductions into the TDA it maintained for him.   As confirmed in letters written to the plaintiff by Interfaith's Benefits Manager, Interfaith failed to deposit $14,039.72 it deducted from plaintiff's salary between February and December, 1988.   In a letter dated April 3, 1990, for example, the Benefits Manager acknowledged
                

It is the hospital's plan to deposit this amount to your account as soon as it is able to do so but no later than at the time that the bonds are sold.

Defendants have not explained what happened to these funds.

Plaintiff's complaint alleges two causes of action. The first raises a state common law breach of contract claim based upon Interfaith's failure to make the required deposits and seeks recovery of $14,039.72. The second seeks compensatory damages of $7,039 which represents the taxes plaintiff estimates he will have to pay on the $14,039.72 judgment together with accumulated interest.

Defendants have raised three jurisdictional arguments in support of their motion to dismiss. First, they contend that ERISA's pre-emption clause displaces all state laws (including common law claims) that "relate to" ERISA pension plans and renders them unenforceable. Defendants thus urge that ERISA bars plaintiff's state breach of contract claim. Second, defendants also contend that ERISA's civil enforcement provision has conferred exclusive jurisdiction over ERISA claims like plaintiff's upon the federal courts (29 U.S.C. § 1132(e)(1)), and that plaintiff's action does not come within the narrow category of cases over which state courts have concurrent jurisdiction (29 U.S.C. § 1132(a)(1)(B)). Third, defendants maintain that plaintiff's undisputed failure to serve the United State Secretary of Labor with a copy of the complaint before commencing this litigation as required by 29 U.S.C. § 1132(h) also deprives this court of jurisdiction. Lastly, defendants request that the court in its discretion stay this action until the United States Department of Labor (DOL) completes a pending investigation into Interfaith's retirement, annuity, and pension plans. They maintain that such a stay will not prejudice the plaintiff, and that the stay would avoid the possibility of conflicting state and federal determinations concerning employee pension benefit plan rights and obligations which was one of Congress' central policy goals in enacting ERISA.

DISCUSSION
A. ERISA'S STATUTORY SCHEME

Congress enacted ERISA in 1974 to reform the field of employee welfare and pension plans after national disclosures of fraud, theft, and embezzlement in the administration of such plans. Bluntly stated, through ERISA

Congress sought to correct the pattern of wasting and looting which had resulted in a devastating denial of benefits to the intended recipients of plans.

National Bank of N.A. v. International Brotherhood of Electrical Workers Local # 3, 69 A.D.2d 679, 684, 419 N.Y.S.2d 127 (2d Dept.1979).

To achieve this objective, ERISA repealed previous federal legislation that left the regulation of employee benefit plans to the states, and it established pension plan regulation "as exclusively a federal concern." Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402.

In federalizing this field, ERISA standardized rights and obligations in employee benefit plans on a national scale. In particular, Title I of ERISA imposes participation, funding, and vesting requirements on pension plans (29 U.S.C. §§ 1051-1086); establishes funding standards to increase solvency of pension plans (29 U.S.C. §§ 1081-1085); and, sets various uniform To ensure federal control in this field, Congress enacted a broad pre-emption clause ( § 1144(a)) which renders unenforceable those state statutes, rules, and state court decisions that "relate to" the terms and conditions of employee benefit plans (29 U.S.C. § 1144(c)(1) and (2)). Specifically, the pre-emption clause provides that ERISA

standards for both pension and welfare plans regarding reporting, disclosure, and fiduciary responsibilities (29 U.S.C. §§ 1021-1031, 1101-1114). Shaw v. Delta Air Lines, 463 U.S. 85, 91, 103 S.Ct. 2890, 2896, 77 L.Ed.2d 490 (1983); Alessi v. Raybestos-Manhattan, Inc., supra at 451 U.S. 510-511 (fn. 5), 101 S.Ct. 1899-1900 (fn. 5).

... supersede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan ... (emphasis added).

29 U.S.C. § 1144(a). The key to understanding the scope of this clause rests in the language "relates to" and Congress' intent in using those words. Savings & Profit Sharing Fund of Sears Employees v. Gago, 717 F.2d 1038, 1040 (7 Cir.1983).

The Supreme Court has read the phrase "relates to" expansively. Under this approach,

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, supra 463 U.S. at 96-97, 103 S.Ct. at 2900; Ingersoll-Rand Company v. McClendon, 498 U.S. 133, 139, 111 S.Ct. 478, 483, 112 L.Ed.2d 474 (1990); FMC Corp. v. Holliday, 498 U.S. 52, 56-58, 111 S.Ct. 403, 407-408, 112 L.Ed.2d 356 (1990). Thus, a state law may "relate to" a benefit plan even if it is not specifically designed to affect such plans, or the effect is only indirect, or even if it is consistent with ERISA's substantive requirements. Ingersoll-Rand Co. v. McClendon, supra 498 U.S. at 139, 111 S.Ct. at 483; Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 48, 107 S.Ct. 1549, 1553, 95 L.Ed.2d 39 (1987); Alessi v. Raybestos-Manhattan, Inc. supra 451 U.S. at 525, 101 S.Ct. at 1907.

The pre-emption clause reflects Congress' concern that employers who establish employee benefit plans undertake a variety of administrative obligations such as the determination of eligibility for benefits, the calculation of benefit levels, monitoring the availability of funds, and the maintenance of accurate records needed to comply with applicable reporting requirements, and that

A patchwork scheme of regulation would introduce considerable inefficiencies in benefit program operation, which might lead those employers with existing plans to reduce benefits, and those without such plans to refrain from adopting them. Pre-emption ensures that the administrative practices of a benefit plan will be governed by only a single set of regulations.

Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11, 107 S.Ct. 2211, 2216, 96 L.Ed.2d 1 (1987).

With this in mind, ERISA pre-empts state laws that are specifically designed to affect employee benefit plans, and such laws are unenforceable even if they are intended to effectuate ERISA's underlying purposes. Mackey v. Lanier Collection Agency & Service, Inc., 486 U.S. 825, 829, 108 S.Ct. 2182, 2185, 100 L.Ed.2d 836 (1988) (ERISA pre-empts state statutes that specifically exempt employee ERISA benefits from garnishment by creditors). Whether ERISA pre-empts state laws that indirectly affect employee benefit plans, however, requires a case by case analysis. In this regard, the determining factor is whether the particular state law threatens to undermine regulatory uniformity in the field of employee benefit plans. Those laws which threaten uniformity will be pre-empted, and those which do not will survive pre-emption.

Thus, for example, in Alessi v. Raybestos-Manhattan, Inc., sup...

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