Sadowski v. Dell Computer Corp.
| Decision Date | 23 June 2003 |
| Docket Number | No. CIV.A.3:00 CV 2113 (CFD).,CIV.A.3:00 CV 2113 (CFD). |
| Court | U.S. District Court — District of Connecticut |
| Parties | Glenys M. SADOWSKI, Plaintiff, v. DELL COMPUTER CORPORATION, Defendant. |
Jeffrey M. Sklarz, Zeisler & Zeisler, P.C., Bridgeport, CT, Thomas G. Moukawsher & Walsh, Hartford, CT, for plaintiff.
Richard S. Order, Axinn, Veltrop & Harkrider, Hartford, CT, Christopher H. Hahn, Vinson & Elkins, LLP, Austin, TX, for defendant.
RULING ON CROSS MOTIONS FOR SUMMARY JUDGMENT
The plaintiff, Glenys Sadowski ("Sadowski"), brought this action against the Dell Computer Corporation ("Dell") alleging breach of contract.1 Pending are the defendant's Motion for Summary Judgment [doc. # 27] and the plaintiffs Cross Motion for Summary Judgment on the Issue of Liability [doc. # 32]. For the following reasons, both motions are DENIED.
This dispute arises out of Sadowski's employment at Dell in Texas. Sadowski was hired by Dell as a marketing manager in September of 1997. Through her employment, Sadowski participated in two Dell stock option plans, known as the Incentive Agreement and the Direct Rewards Plan.3 Both of the plans provided for gradual vesting over a number of years, but also provided that if Sadowski were terminated because of a disability, the stock options not yet vested under the plan would become immediately vested and exercisable. Both plans also granted Dell considerable discretion in deciding whether an employee was disabled and whether an employee was terminated because of a disability.4
On April 7, 1998 Sadowski took a leave of absence from Dell due to emotional and psychiatric problems. After the leave was extended several times, Sadowski was terminated on January 22, 1999. Sadowski claims that she was terminated because of a disability within the meaning of both the Incentive Agreement and the Direct Rewards Plan because, in the opinion of her doctor and of a doctor provided by Dell for an independent medical assessment, she was unable to return to her work due to severe depression and other mental health conditions. She also claims that Dell's disability insurer and the Social Security Administration both determined her to be disabled. She asserts that Dell's refusal to acknowledge her disability and that it was the reason for her discharge was in bad faith and that she is therefore entitled to the stock options under the plans.
Dell relies on the language in the plans indicating that the determination of whether an employee was "disabled" falls within its sole discretion and asserts that the reason for her termination was not disability based, but because of her absences from work. Dell also notes that a third-party medical review company, Physician Authorization Review, Inc. ("PAR"), evaluated Sadowski's medical records and determined that her condition did not constitute a "disability" as contemplated in the two stock option plans. As mentioned, both parties have moved for summary judgment.
After considering the applicable standard for summary judgment, ERISA preemption, and choice of law for both plans, the Court will address the merits of the motions.
In a summary judgment motion, the burden is on the moving party to establish that there are no genuine issues of material fact in dispute and that it is entitled to judgment as a matter of law. See Fed. R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A court must grant summary judgment "`if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact.'" Miner v. City of Glens Falls, 999 F.2d 655, 661 (2d Cir.1993) (citation omitted). A dispute regarding a material fact is genuine "`if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.'" Aldrich v. Randolph Cent. Sch. Dist, 963 F.2d 520, 523 (2d Cir.1992) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505). After discovery, if the nonmoving party "has failed to make a sufficient showing on an essential element of [its] case with respect to which [it] has the burden of proof," then summary judgment is appropriate. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
The Court resolves "all ambiguities and draw[s] all inferences in favor of the nonmoving party in order to determine how a reasonable jury would decide." Aldrich, 963 F.2d at 523. Thus, "[o]nly when reasonable minds could not differ as to the import of the evidence is summary judgment proper." Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.1991); see also Suburban Propane v. Proctor Gas, Inc., 953 F.2d 780, 788 (2d Cir.1992).
Section 514(a) of the Employee Retirement Income Security Act of 1974 (ERISA) provides that the ERISA provisions "shall supercede any and all state laws insofar as they may now or hereafter relate to an employee benefit plan" governed by ERISA. 29 U.S.C. § 1144(a). The United States Supreme Court has held that this clause is "deliberately expansive, and designed to `establish pension plan regulation as exclusively a federal concern.'" Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981)). A state law "relates to" an employee benefit plan "if it has a connection with or reference to such a plan." Metropolitan, Life Ins. Co. v. Massachusetts, 471 U.S. 724, 739, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985). Further, "the pre-emption clause is not limited to `state laws specifically designed to affect employee benefit plans.'" Pilot Life, 481 U.S. at 47-48, 107 S.Ct. 1549 (quoting Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983)). Under § 514(a), state common law tort and contract actions involving claims for benefits due under an employee benefit plan are also preempted. See id.
In determining whether ERISA preemption applies in this case, the Court must consider two threshold matters: whether the plans at issue are subject to ERISA and whether Dell has waived ERISA preemption by not raising it. The Court need not address the first issue, because even if one or both of the plans at issue are ERISA plans, the Court finds that ERISA preemption has been waived. The Second Circuit recently joined four other circuits in holding that ERISA preemption is a waivable defense in a "benefits-due" action:
Four circuits, as well as numerous state courts, have concluded that the defense of ERISA preemption in a benefits-due action may be waived if not timely raised. See, e.g., Wolf v. Reliance Standard Life Ins. Co., 71 F.3d 444, 448-49 (1st Cir.1995) (); Dueringer v. Gen. Am. Life Ins. Co., 842 F.2d 127, 129-30 (5th Cir.1988); Gilchrist v. Jim Slemons Imps., Inc., 803 F.2d 1488, 1497 (9th Cir.1986); Rehabilitation Inst, of Pittsburgh v. Equitable Life Assurance Soc'y of the United States, 131 F.R.D. 99, 101 (W.D.Pa. 1990), aff'd without op., 937 F.2d 598 (3d Cir.1991). In International Longshoremen's Association v. Davis, the Supreme Court made clear that preemption issues that dictate the choice of forum are jurisdictional and therefore may not be waived, but expressly stated that this rule does not extend to preemption issues that affect the parties' choice of law. See Davis, 476 U.S. 380, 390 & n. 9, 398-99, 106 S.Ct. 1904, 90 L.Ed.2d 389 (1986); see also Wolf, 71 F.3d at 448; Gilchrist, 803 F.2d at 1496-97. The circuits that have addressed the waiver issue have agreed that the converse of the Davis rule also holds: Where federal preemption affects only the choice of law, the defense may be waived if not timely raised. See Wolf, 71 F.3d at 448; Piekarski v. Home Owners Sav. Bank, F.S.B., 956 F.2d 1484, 1489 (8th Cir.1992); HECI Exploration Co. v. Holloway (In re HECI Exploration Co.), 862 F.2d 513, 521 & n. 13 (5th Cir.1988); Dueringer, 842 F.2d at 130; Gilchrist, 803 F.2d at 1497; see also Mauldin v. WorldCom, Inc., 263 F.3d 1205, 1211 (10th Cir.2001) (); Bwtero v. Royal Maccabees Life Ins. Co., 174 F.3d 1207, 1212 (11th Cir.1999) (). We join our sister circuits in reaching the same conclusion.
ERISA's jurisdictional provision governing benefits-due actions provides concurrent jurisdiction in state and federal district courts, see 29 U.S.C.S 1132(a)(1)(B), (e)(1), and thus ERISA prescribes the choice of law, not jurisdiction. As a result, we find that ERISA preemption in a benefits-due action is a waivable defense.
Saks v. Franklin Covey Co., 316 F.3d 337, 349 (2d Cir.2003).5 Here, because Dell has not asserted that Sadowski's claims are preempted by ERISA, that defense has been waived, and the Court will apply state common law to Sadowski's claims.
As a threshold matter, the Court must first determine: which state's laws apply to the two stock option plans. Pursuant to Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-80, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), a federal court sitting in diversity must apply the choice of law provisions of its host state. See Schwimmer v. Allstate Ins. Co., 176 F.3d 648, 650 (2d Cir.1999) (); GNOC, Corp. v. Endico, 876 F.2d 1076 (2d Cir.1989) (). Connecticut follows the Restatement (Second) of Conflict of Laws, which generally enforces choice of law provisions in...
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