E-Systems, Inc. v. Taylor

• Decision Date: 11 January 1988
• Docket Number: E-SYSTEM,No. 05-86-01217-CV,INC,05-86-01217-CV
• Parties: , Appellant, v. Ed TAYLOR & R.D. Burnett, Appellee.
• Court: Texas Court of Appeals

Page 956

744 S.W.2d 956

E-SYSTEMS, INC., Appellant, v. Ed TAYLOR & R.D. Burnett, Appellee.

No. 05-86-01217-CV.

Court of Appeals of Texas,

Dallas.

Jan. 11, 1988.

Rehearing Denied Feb. 22, 1988.

Jess C. Rickman, III, Terri A. Hunter, Dallas, for appellant.

Cornel W. Walker, Dallas, for appellee.

Before DEVANY, LAGARDE and THOMAS, JJ.

LAGARDE, Justice.

E-Systems, Inc. appeals from a judgment awarding Ed Taylor and R.D. Burnett damages in their suit for additional retirement benefits. Because we agree with E-System's thirty-first point of error that the Employee Retirement Income Security Act, 29 U.S.C.A. § 1001 et seq (1974) ¹ (ERISA) pre-empted Taylor's and Burnett's claims, we reverse the trial court's judgment and dismiss the cause.

The following facts underlying this controversy are undisputed. Taylor and Burnett are former employees of E-Systems who retired from the company and received retirement benefits under the union negotiated company pension plan. Taylor originally retired in 1978 and, at that time, the "multiplier rate" used to determine his monthly retirement benefits was $9. Burnett originally retired in 1980; the multiplier rate used to determine his monthly benefits was $10.

In 1981, Taylor and Burnett were re-hired by E-Systems. They returned to work and continued to draw monthly retirement benefits in addition to hourly wages until each finally re-retired in 1983. Shortly after Taylor and Burnett returned to work, each learned that if he worked one thousand hours during one calendar year, he could re-retire at the then current multiplier rate of $12. Each worked at least one thousand hours during a calendar year and when each retired, the multiplier rate of $12 was used to re-calculate the retirement benefits to which each would be entitled. In re-calculating Taylor's and Burnett's retirement benefits, E-Systems also offset against the new benefits the retirement benefits each had already received, applying the following provision contained in the pension plan:

Reemployment of Retired Participants: If a retired Participant who is receiving Pension payments is reemployed by the Employer, Pension payments shall be continued until he has worked one thousand (1,000) Hours of Service after such reemployment within a Plan Year. No Pension payments shall be made from the Pension Trust during the period of such reemployment after the Participant has worked one thousand (1,000) or more Hours of Service after such reemployment in any Plan Year. Upon the subsequent termination of employment by a retired Participant, the Participant shall be entitled to receive a Pension based on his Benefit Service prior to the date of previous Retirement, increased by any Benefit Service credited during the period of his reemployment. In the case of reemployment of a retired Participant who received any Pension payments prior to his reemployment, the Pension payable upon his subsequent Retirement shall be reduced by the Actuarial Equivalent of any Pension Payments, except Disability Pension payments, he received prior to his Normal Retirement Date during his previous period of Retirement.

(Emphasis added). As a result, despite use of the higher multiplier rate, neither Burnett nor Taylor received an increase in his monthly retirement benefits.

The controverted facts at trial ² concern oral representations that Taylor and Burnett contend were made by representatives of E-Systems. At trial, Taylor testified that about four months after he had returned to work, he went to Leslie Brown's office to turn in his resignation. Brown worked in the benefits section for E-Systems. Taylor testified that, during his discussion with Brown, Brown stated: "If you'll stay and work a thousand hours, we will completely re-retire you at the present day rate." Taylor testified that he did some calculations in his head and told Brown "that would mean somewhere between $50 and $60 a month raise." He testified that "I made the statement that I'd be stupid not to stay and take advantage of it, and he [Brown] said, 'you're absolutely right.' " Brown did not mention any "formula" by which benefits were to be calculated, nor did Brown refer Taylor to the employee handbook for further information regarding how retirement benefits were calculated. Taylor testified that, to him, "present day rate" meant twelve dollars a month per year of service with E-Systems.

Similarly, Burnett testified that he planned to quit work until he was told by Louis Pippin in the benefits section of E-Systems that "if you'll stay ... and work a thousand hours, Poncho, you can re-retire at the present rate of retirement." Burnett testified that he did calculations using the $12 multiplier that caused him to arrive at a monthly increase of $52 over the retirement benefits he was then receiving. He testified that he told Pippin "that sounds like a pretty good deal." He also testified that, to him, "present rate of retirement" meant the $12 multiplier.

Taylor and Burnett contend that their suit against E-Systems is simply one to enforce an oral agreement to pay additional monthly retirement benefits. Accordingly, they argue that their cause of action is entirely independent of ERISA and the E-Systems pension plan and is, therefore, not pre-empted by ERISA. E-Systems, however, contends that Taylor's and Burnett's suit actually is one to enforce an oral agreement to modify the retirement plan by eliminating the offset provision of the plan in calculating Taylor's and Burnett's retirement benefits. Thus, E-Systems contends that the cause of action is pre-empted by ERISA. In light of the evidence on which Taylor and Burnett rely and the way the pertinent special issues at trial were worded, we agree with E-Systems. Thus, we do not reach the broader question of whether a suit given Taylor's and Burnett's characterization would also be pre-empted by ERISA.

Section 1144(a) of ERISA provides:

Except as provided in subsection (b) ³ of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title. This section shall take effect on January 1, 1975.

By enacting ERISA, Congress set out:

to protect the interests of participants in employee benefit plans and their beneficiaries, by requiring the disclosure and reporting to participants and beneficiaries of financial and other information with respect thereto, by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing appropriate remedies, sanctions, and ready access to the Federal courts.

Section 1001(b). Accordingly, the pre-emption provisions of ERISA are deliberately expansive, designed to establish pension plan regulation as exclusively a federal concern. Pilot Life Insurance Co. v. Dedeaux, 481 U.S. 41, 107 S.Ct. 1549, 1552, 95 L.Ed.2d 39 (1987); Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981). The term "state law" as used in section 1144 encompasses "all laws, decisions, rules, regulations, or other State action having the effect of law, of any State." Section 1144(c). For purposes of that section, a state's law includes its decisional law. Light v. Blue Cross and Blue Shield of Alabama, Inc., 790 F.2d 1247, 1249 (5th Cir.1986). Of course, the state law must, under section 1144, also "relate to" an employee benefit plan. A law "relates to" an employee benefit plan, in the normal sense of the phrase, if it has a connection with or reference to such a plan. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983). That phrase has given rise to some confusion where it is asserted to apply to a state law ostensibly regulating a matter quite different from pension plans. Alessi, 451 U.S. at 523, 101 S.Ct. at 1906. Nevertheless, courts have consistently held that, because of the broad goals of Congress in passing ERISA and the sweeping scope of the pre-emption section, ERISA pre-empts even state common law causes of action that do not explicitly concern pension plans. See Dedeaux, 481 U.S. 41, 107 S.Ct. at 1553; Alessi, 451 U.S. at 524-25, 101 S.Ct. at 1907; Scott v. Gulf Oil Corp., 754 F.2d 1499, 1504 (9th Cir.1985). Instead, pre-emption of state law claims by ERISA depends on the conduct to which such a law is applied, not on the form or label of the law. Scott, 754 F.2d at 1504.

At trial, the jury affirmatively answered two special issues, one concerning Taylor, the other concerning Burnett, which asked:

Do you find from a preponderance of the evidence that there was a contract between [each of the employees] and E-Systems, Inc. providing that [each employee] would receive increased retirement benefits on a monthly basis without regard to any offset or reduction as contained in the retirement plan?

Thus, it is clear that, although the common law cause of action asserted by Taylor and Burnett ostensibly does not regulate pension plans, the conduct relied on by Taylor and Burnett to establish their claims does, indeed, refer to and affect the administration of the pension plan.

Under similar facts, other courts have held that common law causes of action are pre-empted by ERISA. In Ogden v. Michigan Bell Telephone Co., 571 F.Supp. 520 (E.D.Mich.1983), the employees had been told by the fiduciary of the company's severance benefits plan that the benefits would never again be available and that "anyone considering retirement should not...