Smith v. Dunham-Bush, Inc.

• Decision Date: 07 February 1992
• Docket Number: D,INC,DUNHAM-BUS,No. 619,619
• Citation: 959 F.2d 6
• Parties: Derek J. SMITH, Plaintiff-Appellant, v., and the Robins Group, Inc., Defendants-Appellees. ocket 90-7616.
• Court: U.S. Court of Appeals — Second Circuit

Page 6

959 F.2d 6

Derek J. SMITH, Plaintiff-Appellant, v. DUNHAM-BUSH, INC., and the Robins Group, Inc., Defendants-Appellees.

No. 619, Docket 90-7616.

United States Court of Appeals Second Circuit.

Argued Nov. 19, 1990.

Decided Feb. 7, 1992.

Markus L. Penzel, New Haven, Conn. (Garrison, Silbert & Arterton, of Counsel) for plaintiff-appellant.

Willis J. Goldsmith, Washington, D.C. (Jones, Day, Reavis & Pogue, of counsel) for defendants-appellees.

Before VAN GRAAFEILAND and WALKER, Circuit Judges, and DEARIE, District Judge. ¹

DEARIE, District Judge:

Plaintiff-appellant Derek Smith appeals from an order of the United States District Court for the District of Connecticut, Jose A. Cabranes, Judge, that granted defendant's motion for summary judgment and denied plaintiff's motion to remand to Connecticut state court. The district court ruled that the statutory preemption provision of the Employee Retirement Income Security Act of 1974 ("ERISA") warranted removal of the case to federal court and that substantive ERISA law required its dismissal.

We affirm.

Background

This case involves an attempt by an employee, appellant Derek Smith, to enforce an oral promise to pay pension-related benefits allegedly made by his employer, appellee Dunham-Bush, Inc. ("Dunham-Bush"). Smith originally filed the action in Connecticut state court asserting common law claims of breach of contract and negligent misrepresentation. The complaint did not assert any claim under ERISA. Dunham-Bush, however, removed the action to federal court on preemption grounds under ERISA sections 502 and 514, 29 U.S.C. §§ 1132, 1144 (1985), and 28 U.S.C. §§ 1441(b), 1446(b). The district court denied Smith's motion to remand and awarded summary judgment to Dunham-Bush.

Derek Smith has been employed in the United States by Dunham-Bush since 1977. A citizen of the United Kingdom, he had worked in England with Dunham-Bush (Manufacturing) Ltd. for thirty-three years, rising to the level of managing director. In 1977, Robert Elliot, then president of Dunham-Bush, asked Smith to transfer to the company's Connecticut affiliate. According to the complaint, when Smith expressed concerns about the inferiority of the United States affiliate's pension plan, Elliot assured him that Dunham-Bush would provide him with a benefits package comparable to what he would have received upon his retirement in the United Kingdom. Smith understood that he would participate in the affiliate's ERISA plan, but that Dunham-Bush would supplement or "boost up" those benefits based on his anticipated package in the United Kingdom. On the basis of that oral assurance, Smith agreed to relocate to Connecticut where he continues to be employed by Dunham-Bush.

Conceding, as he did below, that the oral promise is unenforceable under ERISA, Smith instead argues that his common law claims under Connecticut law are not preempted and that removal was improper. We disagree and affirm the judgment.

Discussion

The essential question before this court is whether Dunham-Bush properly removed the action to federal court. A claim styled as a state common law cause of action is removable under ERISA if it "relates to" an employee benefit plan within the meaning of section 514(a), 29 U.S.C. § 1144(a), and falls within the scope of the statute's civil enforcement provisions, found in section 502(a), 29 U.S.C. § 1132(a); see Metropolitan Life Ins. Co. v. Taylor, 481 U.S. 58, 64, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55 (1987).

Smith first argues that the district court erred in ruling that ERISA preempts his state law claims. He asserts that his state law claims do not "relate to" the ERISA plan because he has sued Dunham-Bush only in its capacity as an employer, not as an administrator of the ERISA plan. In the alternative, Smith contends that because he neither challenges his benefits under the terms of the ERISA plan, nor seeks recovery from its assets, the action does not fall within the scope of ERISA's civil enforcement provisions. He maintains, under either theory, that the action was improperly removed, and that he should be allowed to return to Connecticut state court to pursue his common law claims.

Applying the Supreme Court's well-developed preemption analysis, we conclude that Smith's common law contract and tort claims are preempted by ERISA. Metropolitan Life, 481 U.S. at 62, 107 S.Ct. at 1545. This lawsuit "relate[s] to [an] employee benefit plan." See ERISA § 514(a), 29 U.S.C. § 1144(a); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48-51, 107 S.Ct. 1549, 1553-55, 95 L.Ed.2d 39 (1987). As a suit brought by a plan participant to clarify future benefits in relation to a covered plan, it falls within the scope of section 502(a)(1)(B), which provides an exclusive federal cause of action for the resolution of such disputes. Metropolitan Life, 481 U.S. at 63, 107 S.Ct. at 1546; Pilot Life, 481 U.S. at 56, 107 S.Ct. at 1557.

A. Preemption

Federal question jurisdiction generally exists only when a well-pleaded complaint raises issues of federal law on its face. Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 9-10, 103 S.Ct. 2841, 2846, 77 L.Ed.2d 420 (1983). Ordinarily, a case may not be removed on the basis of a federal defense, including the defense of preemption, even if anticipated in the complaint. Caterpillar, Inc. v. Williams, 482 U.S. 386, 393, 107 S.Ct. 2425, 2430, 96 L.Ed.2d 318 (1987). However, if Congress completely preempts an area of state law, any "complaint raising this select group of claims is necessarily federal in character." Metropolitan Life, 481 U.S. at 63-64, 107 S.Ct. at 1546; Franchise Tax Bd., 463 U.S. at 24, 103 S.Ct. at 2854. Congressional purpose is the "ultimate touchstone" in determining whether federal law preempts a particular state action. See Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 208, 105 S.Ct. 1904, 1909, 85 L.Ed.2d 206 (1985). To discern whether Congress intended that ERISA preempt appellant's cause of action, we examine the statute's express objectives, its structure, the plain meaning of its language, and its interpretation by the courts. FMC Corp. v. Holliday, --- U.S. ----, 111 S.Ct. 403, 407, 112 L.Ed.2d 356 (1990).

In ERISA, Congress expressly included a broadly worded preemption clause within a comprehensive statutory scheme. Ingersoll-Rand Co. v. McClendon, --- U.S. ----, 111 S.Ct. 478, 482, 112 L.Ed.2d 474 (1990). Congress devised ERISA's "deliberately expansive" language to "establish pension plan regulation as exclusively a federal concern." Pilot Life, 481 U.S. at 46, 107 S.Ct. at 1552; Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981). By careful design, Congress intended the statute to avert a "patchwork scheme of [state] regulation" which would necessarily introduce "considerable inefficiencies in benefit program operation." Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 11, 107 S.Ct. 2211, 2217, 96 L.Ed.2d 1 (1987). Through uniform regulation, Congress sought to abate the potential for employers to reduce benefits or to refrain altogether from adopting such plans for fear of being subject to frequent and inconsistent state law challenges by disgruntled participants. See id. at 10-11, 107 S.Ct. at 2216-17.

Section 514(a) of ERISA explicitly preempts "any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...." ERISA § 514(a), 29 8 U.S.C. § 1144(a) (1985). ² The Supreme Court has consistently afforded a broad, although not absolute, reading to this preemption provision. See, e.g., Ingersoll-Rand, supra, 111 S.Ct. at 482; FMC Corp., supra, 111 S.Ct. at 407; Fort Halifax, supra, 482 U.S. at 8, 107 S.Ct. at 2215; Pilot Life, supra, 481 U.S. at 47-48, 107 S.Ct. at 1552-53; Metropolitan Life, supra, 481 U.S. at 63-65, 107 S.Ct. at 1546-47; Shaw v. Delta Air Lines, 463 U.S. 85, 98, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983); Alessi, supra, 451 U.S. at 523-24, 101 S.Ct. at 1906.

Most recently in Ingersoll-Rand, a unanimous Court confirmed that a state law "relates to" an employee benefit plan if it "has a connection with or reference to such plan," whatever the state law's underlying intent. 111 S.Ct. at 483; Shaw, 463 U.S. at 96-97, 103 S.Ct. at 2900. "Under this 'broad common-sense meaning,' a state law may 'relate to' a benefit plan, and thereby be preempted, even if the law is not specifically designed to affect such plans or the effect is only indirect." Ingersoll-Rand, 111 S.Ct. at 483 (quoting Pilot Life, 481 U.S. at 47, 107 S.Ct. at 1553). Thus, a state law of general application, with only an indirect effect on a pension plan, may nevertheless be considered to "relate to" that plan for preemption purposes. Shaw, 463 U.S. at 97, 103 S.Ct. at 2900.

Smith argues that section 514(a) is limited by the narrower language of section 514(c)(2), which provides:

The term "State" includes a State, any political subdivisions thereof, or any agency or instrumentality of either which purports to regulate, directly or indirectly, the terms and conditions of employee benefit plans covered by this subchapter.

29 U.S.C. § 1144(c)(2) (emphasis added). The Supreme Court, however, foreclosed this argument in Ingersoll-Rand, 111 S.Ct. at 484, finding that it both misreads the section and misapprehends its purpose. Section 514(c)(2) expands, rather than restricts, the preemptive sweep of section 514(a) by defining the term "State" to include "state agencies and instrumentalities whose actions might not otherwise be considered state law." Id. As the Ingersoll-Rand Court observed:

Had Congress intended to restrict ERISA's preemptive effect to state laws purporting to regulate plan terms and conditions, it surely would not have done so by placing the restriction in an adjunct definition section while using the broad phrase "relate to" in the pre-emption section itself.

Id. ³

Although the Supreme Court has consistently expanded...