Simas v. Quaker Fabric Corp. of Fall River

• Decision Date: 10 June 1993
• Docket Number: 93-1103,93-1104 and 93-1249,Nos. 93-1098,s. 93-1098
• Citation: 6 F.3d 849
• Parties: , 17 Employee Benefits Cas. 1433 John SIMAS, Plaintiff, Appellee, v. QUAKER FABRIC CORPORATION OF FALL RIVER, et al., Defendants, Appellees, Commonwealth of Massachusetts, Intervenor, Appellant. James N. GRAY, Plaintiff, Appellee, v. QUAKER FABRIC CORPORATION OF FALL RIVER, et al., Defendants, Appellees, Commonwealth of Massachusetts, Intervenor, Appellant. James N. GRAY, Plaintiff, Appellant, v. QUAKER FABRIC CORPORATION OF FALL RIVER, et al., Defendants, Appellees. John SIMAS, Plaintiff, Appellant, v. QUAKER FABRIC CORPORATION OF FALL RIVER, et al., Defendants, Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 849

6 F.3d 849

62 USLW 2226, 17 Employee Benefits Cas. 1433

John SIMAS, Plaintiff, Appellee, v. QUAKER FABRIC CORPORATION OF FALL RIVER, et al., Defendants, Appellees, Commonwealth of Massachusetts, Intervenor, Appellant.

James N. GRAY, Plaintiff, Appellee, v. QUAKER FABRIC CORPORATION OF FALL RIVER, et al., Defendants, Appellees, Commonwealth of Massachusetts, Intervenor, Appellant.

James N. GRAY, Plaintiff, Appellant, v. QUAKER FABRIC CORPORATION OF FALL RIVER, et al., Defendants,

Appellees.

John SIMAS, Plaintiff, Appellant, v. QUAKER FABRIC CORPORATION OF FALL RIVER, et al., Defendants,

Appellees.

Nos. 93-1098, 93-1103, 93-1104 and 93-1249.

United States Court of Appeals, First Circuit.

Heard June 10, 1993.

Decided Oct. 6, 1993.

Thomas O. Bean, Asst. Atty. Gen., with whom Scott Harshbarger, Atty. Gen., was on brief, for intervenor, appellant.

Orlando F. de Abreu on joint briefs, for plaintiffs.

Mary T. Sullivan, Donald J. Siegel and Segal, Roitman & Coleman on brief for Economic Development and Industrial Corp. of Boston, Massachusetts ALF-CIO, Intern. Union, United Auto., Aerospace, and Agricultural Implement Workers Union of America, Tax Equity Alliance of Massachusetts, Urban League of Eastern Massachusetts Inc., Child World Employees Committee, and Jewish Labor Committee, amici curiae.

Neil Jacobs, with whom Daniel W. McCarthy and Hale and Dorr were on brief, for defendants.

Arthur G. Telegen, Amy B.G. Katz, Jonathan A. Keselenko and Foley, Hoag & Eliot

on brief, for Freeman, Spogli & Co. and Avon Investors Ltd. Partnership, amici curiae.

Before SELYA, CYR and BOUDIN, Circuit Judges.

BOUDIN, Circuit Judge.

Massachusetts has in force a "tin parachute" statute requiring substantial severance payments to employees who lose their jobs within specified periods before or after a corporate takeover. Mass.Gen.L. ch. 149, Sec. 183. The district court held this statute to be preempted by the Employee Retirement Income Security Act ("ERISA"), which by its terms "supersede[s] any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." 29 U.S.C. Sec. 1144(a). We affirm.

I.

Quaker Fabric Corporation of Fall River is a Massachusetts corporation, with some 1350 employees in six states including Massachusetts. The company is a wholly owned subsidiary of Quaker Fabric Corporation, a Delaware corporation. John Simas went to work for Quaker Fabric Corporation of Fall River in Massachusetts in 1971, and James Gray did so in 1978. It is the discharge of Simas and Gray following a takeover of Quaker Fabric Corporation of Fall River that gives rise to this suit.

In September 1989 Quaker Fabric Corporation, and its subsidiary Quaker Fabric Corporation of Fall River, passed into the control of Union Manifatture International N.V. It appears that Union Manifatture set up a new entity called QFC Acquisition Corporation, merged it into Quaker Fabric Corporation (the surviving corporation), and ended up holding 95 percent of the shares of the latter. Presumably the former owners of Quaker Fabric Corporation received stock, cash or both. In any case, there is no dispute that a change of control occurred, and that Union Manifatture emerged as the ultimate owner of Quaker Fabric Corporation of Fall River. ¹

The Massachusetts tin parachute statute was enacted in 1989 as part of a package of anti-takeover measures. Under the statute, employees who have worked a minimum of three years for an employer, and whose employment is terminated within 24 months after a "transfer of control" of their employer, are entitled to a "one time lump sum payment" of twice their weekly compensation for each completed year of employment. Mass.Gen.L. ch. 149, Sec. 183. ² A condition of payment, discussed more fully below, is that the employee meet the eligibility standards for unemployment benefits under state law. Id. Sec. 183(a). If the employee is covered by a corporate severance plan with more generous benefits, the tin parachute statute does not apply. Id. Sec. 183(d)(1).

Both Simas and Gray were discharged from employment by Quaker Fabric Corporation of Fall River within 24 months after the takeover. At the time of his termination, Gray was covered by the company's existing severance plan but the company's severance benefits were less generous than the statute's benefits. Simas was not covered by any severance plan. Both men ultimately qualified for unemployment benefits under state law. The company nevertheless declined to make payments to them under the tin parachute statute, claiming that it was preempted by ERISA.

In late 1991, Simas and Gray filed suit in state court against Quaker Fabric Corporation of Fall River and QCF Acquisition Corporation seeking the statutory benefits. The Quaker Fabric defendants asserted the preemption defense and removed the case to district court. The district court agreed that the tin parachute statute was preempted by ERISA and it granted summary judgment in favor of the defendants. Simas v. Quaker Fabric Corp. of Fall River, 809 F.Supp. 163 (D.Mass.1992). The court remanded to state court a separate wrongful discharge claim that had been asserted by Simas but raised no federal issues. Id. at 168. After judgment, the Commonwealth learned of this litigation and intervened. Simas, Gray and the Commonwealth now appeal.

II.

ERISA, as already noted, explicitly preempts "any and all State laws" that "relate to any employee benefit plan...." 29 U.S.C. Sec. 1144(a). As the district court observed, 809 F.Supp. at 166, the words "relate to" have been construed "expansively"; a state law may relate to an employee benefit plan even though it does not conflict with ERISA's own requirements, District of Columbia v. Greater Washington Board of Trade, --- U.S. ----, ----, 113 S.Ct. 580, 583, 121 L.Ed.2d 513 (1992), and represents an otherwise legitimate state effort to impose or broaden benefits for employees. Massachusetts v. Morash, 490 U.S. 107, 116, 109 S.Ct. 1668, 1673, 104 L.Ed.2d 98 (1989). As we recently summarized the law, ERISA preempts all state laws insofar as they relate to employee benefit plans, even laws which are "a help, not a hindrance," to such plans, and regardless of whether there is a "comfortable fit between a state statute and ERISA's overall aims." McCoy v. MIT, 950 F.2d 13, 18 (1st Cir.1991), cert. denied, --- U.S. ----, 112 S.Ct. 1939, 118 L.Ed.2d 545 (1992).

Thus, a state statute that obligates an employer to establish an employee benefit plan is itself preempted even though ERISA itself neither mandates nor forbids the creation of plans. This may at first appear to be a surprising result since ERISA is primarily concerned with disclosure, proper management, vesting requirements and other incidental aspects of plans established by employers. See generally Shaw v. Delta Airlines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). Yet explanation for the broad preemption provision is clear: By preventing states from imposing divergent obligations, ERISA allows each employer to create its own uniform plan, complying with only one set of rules (those of ERISA) and capable of applying uniformly in all jurisdictions where the employer might operate. Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 484, 112 L.Ed.2d 474 (1990).

In this case, the litigation in the district court was concerned with the question whether the one-time payments ordered by the tin parachute statute comprised or related to a "plan," in light of the narrowing interpretation of that word adopted in Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987). In this court, the Commonwealth has laid more stress on a different argument, namely, its claim that the statute does not relate to an "employee" plan because it (allegedly) imposes the payment obligation not on an employer but instead on the firm that takes over the employer. We consider these two arguments in that order.

The first argument--that no "plan" is established by the tin parachute statute--was ably answered by the district court, 809 F.Supp. at 166-68, and we lay out the analysis merely to make this opinion complete. In common parlance, a directive to pay prescribed severance benefits might readily be described as a plan. But in Fort Halifax, the Supreme Court, by a five-to-four vote, held that the term did not encompass a Maine statute providing for a one-time, lump-sum payment to employees, based on length of service, in the event of plant closure.

The Supreme Court rejected Maine's broad argument that there was no plan because the state imposed the obligation; indeed, the Court held explicitly that a severance benefit plan would be preempted if imposed by the state. 482 U.S. at 16-17, 107 S.Ct. at 2220. The Court said, however, that Congress' concern was with state interference with benefits "whose provision by nature requires an ongoing administrative program to meet the employer's obligation." Id. at 11, 107 S.Ct. at 2217. Reading the term "plan" in light of this purpose, Fort Halifax held that the term did not include Maine's severance payment statute, which "requires no administrative scheme whatsoever," id. at 12, 107 S.Ct. at 2218, and calls on the employer "[t]o do little more than write a check...." Id.

The present case may be close to Fort Halifax. The Massachusetts statute, like the Maine statute, calls for payments to all eligible employees based on a specific event, here, the takeover. That similarity, however, must be set against several differences. Each of these differences increases the administrative burden imposed by the Massachusetts statute, in contrast to Maine's statute; and each makes the label "plan" better suited to the tin parachute statute. It is a matter of degrees but under Fort Halifax degrees are crucial.

The Maine statute starts and ends with a single, once and for all event, the plant closing, after which all...