Rodowicz v. Massachusetts Mut. Life Ins. Co., Civil A. No. 93-30075-MAP.

• Decision Date: 12 February 1996
• Docket Number: Civil A. No. 93-30075-MAP.
• Citation: 915 F. Supp. 486
• Parties: Stanley A. RODOWICZ, et al. v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, et al.
• Court: U.S. District Court — District of Massachusetts

915 F. Supp. 486

Stanley A. RODOWICZ, et al. v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, et al.

Civil A. No. 93-30075-MAP.

United States District Court, D. Massachusetts.

February 12, 1996.

Keith A. Minoff, John C. Sikorski, Robinson, Donovan, Madden & Barry, Springfield, MA, for Stanley A. Rodowicz, James J. Lemon, Sigmund S. Ziemba, Barbara Binsky, Patricia A. Kennedy, Anne E. Buck, June Devine, Margaret S. Stevens.

David G. Cohen, Charles S. Cohen, Egan, Flanagan & Cohen, PC, Springfield, MA, for Massachusetts Mutual Life Insurance Company, Massachusetts Mutual Voluntary Termination Program.

MEMORANDUM REGARDING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT, PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT AND PLAINTIFFS' MOTION TO RECONSIDER

PONSOR, District Judge.

I. INTRODUCTION

In April 1994, plaintiffs, former employees of Massachusetts Mutual Life Insurance Company ("MassMutual"), brought this suit, alleging that defendants—MassMutual and the Massachusetts Mutual Voluntary Retirement Program—misled plaintiffs about future plans to offer a sweetened severance package, in violation of federal and state law. On July 27, 1994, over plaintiffs' arguments, this court held that the Employment Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq., preempted plaintiffs' state law claim for misrepresentation and dismissed it accordingly. See Rodowicz v. Mass. Mut. Life Ins. Co., 857 F.Supp. 992, 999 (D.Mass.1994).

On December 14, 1995, the First Circuit handed down its decision in Belanger v. Wyman-Gordon Co., 71 F.3d 451 (1st Cir.1995). On December 19, 1995, this court requested supplemental memoranda from the parties addressing whether, in light of Belanger, the severance package at issue falls within the scope of ERISA. At that time, the court had under advisement defendants' motion for summary judgment and plaintiffs' motion for partial summary judgment on their remaining ERISA-based claims. Along with their supplemental memorandum, plaintiffs submitted a motion to reconsider the July 1994 ruling (Docket No. 83).

After reviewing the parties' submissions and the relevant case law, the court has concluded that ERISA does not govern the severance plan in this case. Accordingly, the court will dismiss plaintiffs' ERISA-based claims. The defendants' motion for summary judgment and the plaintiffs' motion for partial summary judgment will be denied as moot. The motion to reconsider will be allowed and the misrepresentation claim will be reinstated.

II. FACTUAL BACKGROUND

On October 23, 1992, MassMutual announced the Massachusetts Mutual Voluntary Termination Program ("the plan"), an early retirement severance plan open to most full-time MassMutual employees, about 4000 in number. The plan provided for a one-time, lump-sum severance bonus (subject to standard payroll deductions) equal to: (1) three weeks of salary for every year of service, up to a maximum of 78 weeks, or (2) one week of salary for each full $5000 of compensation, and a proportionate amount for an increment less than $5000, up to a maximum of 52 weeks.

MassMutual gave eligible employees until December 1, 1992 to elect to participate in the plan. At its discretion, the company could defer an employee's election date beyond the December 1 deadline, but in no case past June 30, 1993. Except for those employees the company deferred, every participant was required to leave MassMutual by December 31, 1992. Plan participants were not eligible for reemployment for at least one year after termination.

About ten MassMutual employees prepared and administered the plan, and another ten or so were used to help educate eligible employees.

The plan included an appeals process for employees to whom the company denied benefits. Upon written notice stating the grounds for appeal, the plan administrator was required to conduct a full review and, in no longer than 120 days, provide written notice of her decision to the employee. The plan administrator's decision, if supported by substantial evidence, would be deemed conclusive as between the parties.

In the end, 370 employees participated in the plan, of whom 101 were given deferred election dates.

III. DISCUSSION

The question here is whether the MassMutual severance plan constitutes an "employee benefit plan" within the meaning of ERISA. See 29 U.S.C. § 1002(2)(A). In general, ERISA does govern employee severance plans. See id. at §§ 186(c), 1002(1). However, the statute's reach is limited to those plans that involve "continuing administrative and financial obligations by the employer to the behoof of employees or their beneficiaries." Belanger, 71 F.3d at 454 (citing Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987)).

In Fort Halifax, the Supreme Court held that a Maine statute mandating a one-time, lump-sum payment to employees in the event of a plant closure did not fall within the scope of ERISA. 482 U.S. at 12, 107 S.Ct. at 2218. According to the First Circuit, the Court was swayed by two of the statute's "cardinal goals." See Belanger 71 F.3d at 454. The Court noted that (1) Congress had passed ERISA to protect plan administrators from a "patchwork scheme" of employee-benefit regulations, and (2) Congress intended the statute to protect the financial integrity of benefit funds over the long term. See 482 U.S. at 12, 15-16, 107 S.Ct. at 2217, 2219-20. The Maine statute, the Court concluded, did not implicate these concerns because it created no "need for an ongoing administrative program for processing claims and paying benefits." 482 U.S. at 12, 107 S.Ct. at 2218.

In Simas v. Quaker Fabric Corp. of Fall River, 6 F.3d 849 (1st Cir.1993), the court asked whether ERISA reached Massachusetts' "tin parachute" statute, which required employers to make payments to employees who lose their jobs within a specified period before or after a corporate takeover. Unlike the Maine statute in Fort Halifax, the court explained, the Massachusetts statute required an ongoing administrative mechanism for determining whether a company had terminated an employee within a designated time period and, more important, whether the terminated employee was eligible for unemployment benefits under state law. Id. at 853.

Applying Fort Halifax, the court held that the "tin parachute" legislation imposed sufficiently elaborate and ongoing administrative burdens on employers to trigger ERISA protection. Id. Still, the court acknowledged the unsettled quality of the standard it was applying. "Given the Supreme Court's reasoning in Fort Halifax," it noted, "there is no way to be certain where it would draw the line." Id. The court warned that decisions will turn on "a matter of degrees," because "under Fort Halifax degrees are crucial." Id.

The Belanger decision clarifies the proper calibration of these "degrees." In Belanger, the defendant company offered a series of severance plans to entice its employees into early retirement. Each plan amounted to a variation on the same theme: a one-time, lump-sum severance bonus equal to a week's salary for each year of employment with the company. See 71 F.3d at 452-53. Plaintiffs, former employees who had participated in one plan (which included a cap on the bonus), filed their lawsuit after the company announced a new plan (which did not cap the bonus). Id. at 453.

The court held that "taken singly, the early retirement offers involve precisely the kind of one-time, lump-sum payment that the Fort Halifax Court clearly excluded from the pantheon of ERISA plans." Id. at 455. The court continued:

The company's offers hinged on a purely mechanical determination of eligibility and, if accepted, required no complicated administrative apparatus either to calculate or to distribute the promised benefit. The offers pivoted on a single, time-specific event. They did not involve promises that had to be kept over a lengthy period, nor did the company thereby make any lasting financial commitment of a type that might implicate ERISA's substantive protections. The bottom line is that the company did no more than propose to write a single check to each eligible employee who accepted an early retirement offer.

Id.

The MassMutual plan bears a striking resemblance to the individual severance packages in Belanger. MassMutual offered the bonus to virtually all full-time employees, with the exception of certain categories of employees set forth in the plan document. The administrative burden on the company— a staff of ten and a one-step appeals process —was by no means extreme or unduly complicated. Like Belanger, the offers turned on a single, time-specific event. And given the nature of a one-time, lump-sum severance bonus, the company was not required to make a long-term financial commitment to any participating employee.

Defendants point to several factors which, they argue, show that the plan imposed heavy administrative burdens, but the facts indicate otherwise. The substance of the plan document—only 12 pages—simply communicates the basic terms of the offer. The plan's administrative procedures appear straightforward, and defendants have produced no evidence to show that the plan administrator experienced any difficulty determining eligibility or handling appeals, if indeed any were filed. Also, the large number of participating employees—370 in this case — does not, ipso facto, generate complexity. What matters is the company's ongoing commitment to plan participants, not the amount of short-term paperwork.

Two matters deserve special mention. The first is the plan's exclusion of employees who were "involuntarily terminated" by the company during the election period. According to the plan document, "involuntary termination" refers to termination by way of "a performance release," "position elimination," or "egregious behavior or discharge." These "involuntary" terminations, it might be argued, could also be labelled "for cause" terminations....