Smith v. Commonwealth Gen. Corp.

• Decision Date: 09 October 2014
• Docket Number: No. 12-6284,12-6284
• Parties: ROGER L. SMITH, Plaintiff-Appellant, v. COMMONWEALTH GENERAL CORPORATION, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

ROGER L. SMITH, Plaintiff-Appellant, v. COMMONWEALTH GENERAL CORPORATION, Defendant-Appellee.

No. 12-6284

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

October 9, 2014

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION

File Name: 14a0770n.06

ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF KENTUCKY

BEFORE: SILER, BATCHELDER, and CLAY, Circuit Judges.

ALICE M. BATCHELDER, Circuit Judge:

Appellant Roger Smith appeals the district court's denial of his motion to remand his claims to state court and the district court's dismissal of his claims. The district court, holding that Smith's claims were preempted by the Employee Retirement Income Security Act ("ERISA"), denied the motion to remand and dismissed the claims. We AFFIRM.

I.

Smith was an employee of Defendant Commonwealth General Corporation ("CGC"). When CGC agreed to merge with AEGON USA, Inc. ("AEGON"), CGC offered some employees, including Smith, enhanced compensation if they would remain with CGC until its merger with AEGON was completed. The offer's terms were reflected in the Voluntary Employee Retention and Retirement Program ("VERRP"), which the CGC Board of Directors("Board") adopted and approved on October 10, 1997. The Board also "authorized amendment to the [CGC Retirement] Plan to provide for payment of benefits under the terms of the VERRP." On September 8, 1998, Smith wrote to the Board requesting that the Board formally approve the "1st Amendment to the Plan that incorporates the VERRP provisions." Smith had drafted this amendment, and he acknowledged that the Board had approved the VERRP "to offer special benefits under the Commonwealth General Corporation Retirement Plan." The Board adopted the revisions to its Plan, and Smith agreed to CGC's offer on January 16, 1999.

The VERRP provided that Smith would retire on March 1, 2000. Smith elected to receive $1,066.54 under the qualified plan, and $1,122.97 under the non-qualified plan, for a total of $2,189.51 per month.¹ The document through which Smith made this election was titled "AEGON USA Pension Plan: Election for Distribution and Explanation of Benefits," and an attached letter informed Smith that "[i]f you elect to participate in the Voluntary Employee Retention & Retirement Program ('VERRP'), you will be entitled to receive additional benefits from the Commonwealth General Corporation Retirement Plan under that program." VERRP Attachment A stated that Smith was entitled to a $154,976.12 benefit under the CGC Change in Control Plan. Attachment B stated, "As a participant in the [VERRP], you are entitled to receive a supplemental benefit either as a lump sum or in the same annuity form that your regular retirement benefit will be paid."

On February 1, 2000, Smith received a booklet from the AEGON Insurance Group with information on the CGC Retirement Plan and the VERRP, as well as a notice that, effective January 1, 2000, the CGC Plan and the AEGON Pension Plan ("Plan") had been integrated pursuant to the merger. The Plan defines "CGC VERRP Participant" as "a CGC GrandfatheredParticipant . . . who was also a participant in the [VERRP] . . . which was an early retirement program in effect in the CGC Plan from September 8, 1997 until December 31, 1999 and in effect in this Plan from January 1, 2000 until February 29, 2000, as a result of the merger of the CGC Plan with this Plan . . . ."

Smith retired on March 1, 2000, and the AEGON Pension Plan ("Plan") paid Smith both a lump sum benefit and $2,189.51 per month. In August 2011, the Plan told Smith that they had been overpaying him by $1,122.97 per month (or the benefit categorized as "non-qualified" under the VERRP) for the previous eleven years. The Plan reduced, and then eliminated, Smith's entire monthly benefit payments, stating that it would make no further payments until it had recouped the overpayment or Smith remitted to the Plan $153,283.25.

Smith exhausted the administrative remedies provided by the Plan by appealing to the AEGON Pension Committee. In his appeal Smith chided the Plan for refusing "to produce all relevant documents and information in accordance with the Plan terms and the applicable laws and regulations," after which he cited a number of "ERISA claims regulations." Smith stated in his appeal that "[t]he VERRP specifically provided enhanced benefits under the Plan, payable either as a lump sum or in this case in an increased monthly annuity of $1,079.48 per month. The VERRP also entered the date on which Mr. Smith could commence receiving his Plan benefits (including the VERRP enhancement)." The Pension Committee denied Smith's appeal, and on March 28, 2012, Smith filed suit against CGC in Jefferson County Circuit Court asserting state-law claims for breach of contract, wage and hour state statutory violations, estoppel, and breach of the duty of good faith and fair dealing. CGC timely removed the action to the U.S. District Court for the Western District of Kentucky. Smith moved to remand pursuant to 28 U.S.C. § 1447(c), and CGC moved to dismiss under Federal Rule of Civil Procedure 12(b)(6).

The district court found that the VERRP was regulated by ERISA, that Smith was suing to recover benefits under this ERISA Plan, and that his motion to remand must be denied. The court concluded that because the Pension Committee controlled and administered the Plan, only the Pension Committee would be a proper party defendant. CGC, the court held, was not a proper party defendant. Accordingly, the court dismissed the complaint under Rule 12(b)(6) for failure to state a claim.

II.

Though "[t]he existence of an ERISA plan is a question of fact, to be answered in light of all the surrounding circumstances and facts from the point of view of a reasonable person," Thompson v. Am. Home Assurance Co., 95 F.3d 429, 434 (6th Cir. 1996), we review de novo a district court's Rule 12(b)(6) dismissal, see Ohio ex rel. Boggs v. City of Cleveland, 655 F.3d 516, 519 (6th Cir. 2011); Santino v. Provident Life & Accident Ins. Co., 276 F.3d 772, 774 (6th Cir. 2001) ("The district court's ruling that ERISA preempts Santino's state law claims is a legal conclusion, which this Court reviews de novo.").

Common law causes of action asserting contract claims related to an employee benefit plan regulated by ERISA are completely preempted by ERISA, see Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 45-48 (1987), and complaints filed in state court pleading such causes of action are removable under 28 U.S.C. § 1441(b), see Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 67 (1987). Nonetheless,

the scope of the "complete preemption" exception for removal is narrow. . . . [I]n order to come within the exception a court must conclude that the common law or statutory claim under state law should be characterized as a superseding ERISA action "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" . . . .

Warner v. Ford Motor Co., 46 F.3d 531, 534 (6th Cir. 1995).

This case requires that we answer four questions. First, is the VERRP a "plan" covered by ERISA? Second, does Smith's claim fall within the complete preemption exception for removal, either because it seeks to recover benefits due to Smith under the plan or because it seeks to enforce Smith's rights under the plan? Third, is CGC a proper defendant? And fourth, did the district court err by refusing to permit Smith to amend his complaint?

We begin with the nature of the VERRP. The VERRP is part of the AEGON Pension Plan, and that plan is governed by ERISA.² Smith himself drafted the VERRP as an amendment to the CGC Retirement Plan, also an ERISA-governed plan. The CGC Retirement Plan then merged with the AEGON Pension Plan. The VERRP was not a separate severance agreement because Smith drafted it as part of the CGC Retirement Plan. In his memorandum to the CGC Board, Smith requested that the Board formally approve the "1st Amendment to the Plan that incorporates the VERRP provisions" that he had drafted. Smith wrote this amendment after the Board had "authorized amendment to the [CGC Retirement] Plan to provide for payments of benefits under the terms of the VERRP."

Smith agreed to the VERRP on January 16, 1999, after the VERRP amendments were incorporated into the CGC Retirement Plan. Thus, the VERRP was part of the CGC Retirement Plan, and after CGC merged with AEGON, the VERRP became part of the ERISA-governed AEGON Pension Plan. The AEGON Pension Plan describes a "CGC VERRP Participant" as "a CGC Grandfathered Participant . . . also a participant in the [VERRP] . . . which was an early retirement program in effect . . . in this Plan from January 1, 2000 until February 29, 2000, as aresult of the merger of the CGC Plan with this Plan . . . ." Because the VERRP is part of the ERISA-governed AEGON Pension Plan, the VERRP is an employee benefit plan within the meaning of ERISA.

Smith now characterizes the VERRP as an independent severance agreement between CGC and himself. He argues that although his lump sum payment came from the Pension Plan, CGC mistakenly "paid both his severance benefit and his accrued pension benefit from the pension plan" rather than "from the non-qualified excess benefit plan." Smith's brief avers that "[t]he pension plan reduced his pension plan periodic payment . . . ." (emphasis added). Smith seeks recovery of his "monthly retirement benefit." Nowhere in the record before the district court did Smith distinguish between the types of funds to which he was allegedly entitled. And even if the record provided some basis for characterizing some of Smith's benefits as ERISA-governed and some as non-ERISA-governed, Smith waived this argument. See Washington v. Comcast Corp., 268 F. App'x 423, 427 (6th Cir. 2008) ("[I]ssues not presented to the district court but raised for the first time on appeal are not properly before ...