Schonholz v. Long Island Jewish Medical Center

• Decision Date: 26 June 1996
• Docket Number: No. 234,D,234
• Citation: 87 F.3d 72
• Parties: Pens. Plan Guide P 23921B Gleniss S. SCHONHOLZ, Plaintiff-Appellant, v. LONG ISLAND JEWISH MEDICAL CENTER, Defendant-Appellee. ocket 95-7269.
• Court: U.S. Court of Appeals — Second Circuit

Page 72

87 F.3d 72

Pens. Plan Guide P 23921B

Gleniss S. SCHONHOLZ, Plaintiff-Appellant, v. LONG ISLAND JEWISH MEDICAL CENTER, Defendant-Appellee.

No. 234, Docket 95-7269.

United States Court of Appeals Second Circuit.

Argued Oct. 20, 1995.

Decided June 26, 1996.

Anthony M. Radice, New York City (William E. Zuckerman, Morrison & Foerster, New York City, on the brief), for Plaintiff-Appellant.

Charles G. Moerdler, New York City (Albert M. Appel, Sandra Jefferson Grannum, Robert C. Kern, Jr., Strook & Strook & Lavan, New York City, on the brief), for Defendant-Appellee.

Before: MESKILL, MAHONEY and WALKER, Circuit Judges.

WALKER, Circuit Judge:

Plaintiff Gleniss S. Schonholz appeals from a judgment of the United States District Court for the Eastern District of New York (John R. Bartels, District Judge ) in favor of defendant Long Island Jewish Medical Center ("LIJ") in her suit for severance benefits under the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1001 et seq. For the reasons stated below, we affirm in part, vacate in part, and remand.

BACKGROUND

On May 3, 1991, Dr. Robert K. Match, then-President of LIJ, announced in a memorandum to senior employees the details of a severance pay program (the "Severance Plan") that provided for payments to senior-level employees upon their involuntary discharge. Payments under the Severance Plan were to be based upon both the length of time the employee held his position and his prospects for reemployment, but they would be made only if the employee displayed a reasonable and good faith effort to obtain a position commensurate with his former level of responsibility. In addition, the employee would not be eligible for payments under the Severance Plan if the termination was for either illegal conduct or substantially deficient performance. The Severance Plan provided that the terminated employee would continue to receive other benefits, and contained no provision for its termination or amendment. Apart from those discussed below, LIJ neither created nor circulated any documents purporting to amend, modify, or terminate the Severance Plan.

Schonholz was Senior Vice President and Chief Operating Officer of LIJ between 1987 and April 1, 1993. Schonholz's departure was precipitated by continuing disagreements in late 1992 between Schonholz and Irving Schneider, who at the time was Chairman of LIJ. Sometime between December 10 and December 18, 1992, Match informed Schonholz that he was going to ask for her resignation in the near future. Schonholz agreed that she would submit her resignation, to be effective April 1, 1993. This request was formalized in a letter from Match to Schonholz, dated December 18, 1992, which also stated:

Of course, the terms of your severance will be governed by the LIJ Medical Center personnel policies applicable to members of the President's Council, including the Severance Pay Program dated May 3, 1991. At your option, the initial twelve months of severance pay may be taken in one lump-sum payment on the day of your termination or bi-weekly over the twelve months after your termination.

Please arrange to meet with the Vice-Presidents of Finance and Human Resources to discuss and arrange the details.

The letter indicated that Match's request was due to changes in hospital management connected with his upcoming retirement and was unrelated to Schonholz's performance of her duties. In compliance with the request contained in the December 18 letter, Schonholz formally submitted her resignation, effective April 1, 1993, in a letter dated December 22, 1992.

On March 23, 1993, LIJ's Board of Trustees first became aware of the Severance Plan, the December 18 letter, and the December 22 letter. At a meeting that day, the Board of Trustees voted to revoke the Severance Plan. Match told Schonholz about the Board's decision the next day, March 24, and added that he thought that she would be contacted by LIJ shortly to discuss her severance arrangements. On March 29, Match wrote Schonholz to the effect that the Board had never approved or adopted the Severance Plan, that the Severance Plan was "deemed invalid and null and void and never to have been effective," and that LIJ was not bound by the Severance Plan's provisions. In the letter, Match made no mention of alternative severance arrangements for Schonholz. No one from LIJ contacted Schonholz thereafter about her situation.

On June 11, 1993, Schonholz commenced this ERISA action below against LIJ and several individuals. LIJ and the other defendants moved to dismiss the case for failure to state a claim. In a memorandum and Following discovery and the filing of an amended complaint, LIJ and Schonholz cross-moved for summary judgment. The district court held that the Severance Plan was an employee welfare benefit plan within the meaning of ERISA, and that therefore federal subject matter jurisdiction existed. See Schonholz v. Long Island Jewish Medical Ctr., 889 F.Supp. 610 (E.D.N.Y.1995) ("Schonholz II "). However, the district court held that Schonholz's claims under § 502(a)(1)(B) of ERISA, 29 U.S.C. § 1132(a)(1)(B), were without merit as a matter of law. From this ruling Schonholz now appeals.

order, the district court dismissed the claims against the individual defendants without leave to amend, dismissed the ERISA-based promissory estoppel claim against LIJ with leave to amend, and struck the request for punitive damages. Schonholz v. Long Island Jewish Medical Ctr., 858 F.Supp. 350 (E.D.N.Y.1994) ("Schonholz I ").

On appeal, Schonholz challenges the grant of summary judgment in LIJ's favor on the ERISA claims, and LIJ argues that the district court erred in finding subject matter jurisdiction. We turn to the jurisdictional issue first.

DISCUSSION

I. ERISA Subject Matter Jurisdiction

ERISA grants federal district courts concurrent jurisdiction over all claims by an "employee welfare benefit plan" beneficiary who seeks to "recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan." 29 U.S.C. § 1132(a)(1)(B) & (e)(1). LIJ contends that the Severance Plan does not constitute an employee welfare benefit plan under ERISA and that, therefore, the district court lacked subject matter jurisdiction over Schonholz's claims.

The term "employee welfare benefit plan" is defined by ERISA to include

any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer ... to the extent that such plan, fund, or program was established or is maintained for the purpose of providing for its participants or their beneficiaries ... (A) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death or unemployment, or vacation benefits, apprenticeship or other training programs, or day care centers, scholarship funds, or prepaid legal services.

29 U.S.C. § 1002(1); see 29 U.S.C. § 1002(3). Because the district court held that the Severance Plan was within the definition of "employee welfare benefit plan" and thus determined jurisdiction as a matter of law, we review its finding de novo. Shapiro v. Republic of Bolivia, 930 F.2d 1013, 1016-17 (2d Cir.1991). ¹

The term "employee welfare benefit plan" has been held to apply to most, but not all, employer undertakings or obligations to pay severance benefits. Yet, both the Supreme Court and this court have emphasized that ERISA applies only where such an undertaking or obligation requires the creation of an ongoing administrative program. For instance, in Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12, 107 S.Ct. 2211, 2218, 96 L.Ed.2d 1 (1987), the Supreme Court, faced with whether ERISA preempted ² a Maine statute that required employers to make a one-time severance payment to employees upon a plant closing, held that the Maine statute did not create an employee welfare benefit plan and thus was not preempted. The Court stated: "The theoretical possibility of a one-time obligation in the future simply creates no need for an Similarly, in James v. Fleet/Norstar Financial Group, Inc., 992 F.2d 463 (2d Cir.1993), we addressed whether an employer's undertaking to give employees severance pay was an employee welfare benefit plan. The employer had announced that one of its offices would be closed but told the workers in that office that, if they stayed on until the closing, they would receive sixty-days additional pay. In our view, the employer's promise did not constitute an employee welfare benefit plan because "the nature of the payments did not require an ongoing administrative employer program to effectuate them." Id. at 467. Other courts have reached a similar conclusion. See, e.g., Belanger v. Wyman-Gordon Co., 71 F.3d 451, 454 (1st Cir.1995) (ERISA implicated only if there are "continuing administrative and financial obligations"); Simas v. Quaker Fabric Corp., 6 F.3d 849, 853-54 (1st Cir.1993) (courts do not apply Fort Halifax where the state statute or employer promise creates "ongoing obligations"); Bogue v. Ampex Corp., 976 F.2d 1319, 1323 (9th Cir.1992) (adopting approach that ERISA requires "administrative scheme"), cert. denied, 507 U.S. 1031, 113 S.Ct. 1847, 123 L.Ed.2d 471 (1993); Fontenot v. NL Indus., Inc., 953 F.2d 960, 962-63 (5th Cir.1992) (same); Pane v. RCA Corp., 868 F.2d 631, 635 (3d Cir.1989) (same).

ongoing administrative program for processing claims and paying benefits." Id.

But while it is plain that ERISA subject matter jurisdiction depends upon the need for an administrative program, the test for deciding which employer obligations and undertakings require such a program is opaque. See Simas, 6 F.3d at 854. In James, although the employer's payments to its employees would have to be calculated individually (because the circumstances of each employee differed as to eligibility, termination, and...