Thomas v. Burlington Industries, Inc.

• Decision Date: 24 May 1991
• Docket Number: No. 91-8267-CIV.,91-8267-CIV.
• Citation: 763 F. Supp. 1570
• Parties: Anita THOMAS, as Personal Representative of the Estate of Jack W. Robinson, Plaintiff, v. BURLINGTON INDUSTRIES, INC., Provident Life and Accident Insurance Company, and Voluntary Employee Beneficiary Association, Defendants.
• Court: U.S. District Court — Southern District of Florida

763 F. Supp. 1570

Anita THOMAS, as Personal Representative of the Estate of Jack W. Robinson, Plaintiff, v. BURLINGTON INDUSTRIES, INC., Provident Life and Accident Insurance Company, and Voluntary Employee Beneficiary Association, Defendants.

No. 91-8267-CIV.

United States District Court, S.D. Florida.

May 24, 1991.

COPYRIGHT MATERIAL OMITTED

Karen J. Valente of Jordan & Stinson, P.A., West Palm Beach, Fla., for plaintiff.

Laura H. Roberts of Coll, Davidson, Carter, Smith, Salter & Barkett, P.A., Miami, Fla., for defendants.

ORDER REQUIRING ESTABLISHMENT OF ERISA JURISDICTION

PAINE, District Judge.

This matter comes before the court sua sponte. Having reviewed the record and the law, the court enters the following order for the reasons set forth hereinafter.

BACKGROUND

On March 28, 1991, the Plaintiff commenced the above styled action in the Circuit Court of the Fifteenth Judicial Circuit in and for Palm Beach County, seeking relief as a result of Defendants' alleged wrongful cancellation of a group health insurance policy. Shortly thereafter, on May 9, 1991, the Defendants removed the proceeding under 28 U.S.C. § 1446(b) on the ground that this court had jurisdiction, insofar as the Plaintiffs' claims or rights arose under the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461.

Subsequently, the Defendants filed a Motion to Dismiss or to Strike in which they contend that the Plaintiff's state law cause of action is preempted as the policy at issue is governed by ERISA. In the alternative, the Defendants move to strike the Plaintiff's prayer for non-economic damages, attorneys' fees and trial by jury as they contend that the Act does not provide for such relief.

EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974

On September 2, 1974, following nearly a decade of examining the nation's private insurance and pension plans, Congress enacted the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461. As a predicate for this "comprehensive and reticulated statute," Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 361, 100 S.Ct. 1723, 1726, 64 L.Ed.2d 354 (1980), Congress made detailed findings, codified in 29 U.S.C. § 1001(a), which state that ERISA was enacted because it was found desirable that "safeguards be provided with respect to the establishment, operation, and administration of employee benefit plans." Such safeguards were designed to protect employees and their beneficiaries from abuse and mismanagement of funds that had been accumulated to finance various types of employee benefits. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987).

In order to bring about uniformity of decisions under the Act, so as to help participants, beneficiaries, and plan administrators predict the legality of proposed actions without the necessity of reference to varying state laws, ERISA preempts "all State laws insofar as they ... relate to any employee benefit plan." 29 U.S.C. § 1144(a). The Supreme Court, reading the Act's preemption clause in context with Congress' goal of creating an exclusive federal enclave for the regulation of benefit plans, has broadly interpreted the "relate to" language of Section 1144(a) as encompassing any state law that has a "connection with or reference to" an employee benefit plan. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S.Ct. 2890, 2900, 77 L.Ed.2d 490 (1983). Thus, ERISA's scope is so broad that it preempts all state laws falling within its sphere, regardless of whether they conflict with any specific provision of the Act. Metropolitan Life Ins. Co. v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985).¹

However, in what has come to be known as the "savings clause" of ERISA, 29 U.S.C. § 1144(b)(2)(A), Congress stated that the Act was not intended to supersede state laws which "regulate insurance," and that the rights of the states to regulate the "business of insurance" is preserved. See Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 48, 107 S.Ct. 1549, 1553, 95 L.Ed.2d 39 (1987). The Supreme Court, taking a "common sense view" of the language of the savings clause, has held that three criteria are to be used to determine if a particular practice falls within the Act's reference to the "business of insurance":

First, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.

Massachusetts, 471 U.S. at 743, 105 S.Ct. at 2391. (quoting Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S.Ct. 3002, 3009, 73 L.Ed.2d 647 (1982)) (emphasis in original).

EMPLOYEE WELFARE BENEFIT PLAN

"Whether an ERISA plan exists is a question of fact," to be determined by the district court. Gahn v. Allstate Life Ins. Co., 926 F.2d 1449, 1451 (5th Cir.1991); see Wickman v. Northwestern Nat'l Ins. Co., 908 F.2d 1077, 1082 (1st Cir.1990). In order for a plan to exist under the Act, benefits must be covered by the statute and there must be some sort of procedures implementing the plan. Tucker v. Employers Life Ins. Co., 689 F.Supp. 1073, 1075 (N.D.Alabama 1988). Section § 1002(3) of Title 29 states that ERISA covers "employee benefit plans," which is defined as either an "employee welfare benefit plan," or an "employee pension benefit plan," or both. An "employee welfare benefit plan" and "welfare plan," in turn, are defined in Section 1002(1) as:

Any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer or by an employee organization, or by both, 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, through the purchase of insurance or otherwise, (A) medical, surgical, or hospital care 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 pre-paid legal services, or (B) any benefit described in section 186(c) of this title (other than pensions on retirement or death, and insurance to provide such pensions).²

Accordingly, by definition, an employee welfare benefit plan requires: (1) a plan, fund or program; (2) established or maintained; (3) by an employer or by an employee organization, or by both; (4) for the purpose of providing medical, surgical hospital care, sickness, accident, disability, death, unemployment or vacation benefits, apprenticeship or other training programs, day care centers, scholarship funds, pre-paid legal services or severance benefits; (5) to participants or their beneficiaries. Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir.1982) (en banc).

Factors (3), (4) and (5) are either self-explanatory or are defined in Section 1002 of the Act. Id. The gist of the definitions of employer³, employee organization⁴, beneficiary and participant⁵ is that a plan, fund, or program falls within the ambit of ERISA only if the plan, fund, or program covers participants because of their employee status in an employment relationship, and an employer or employee organization is the person that establishes or maintains the plan, fund, or program. Id.

The remaining two prerequisites: "plan, fund, or program" and "established or maintained" are not so well defined. Although the definition of these terms has proved to be elusive at best, commentators and courts delineate "plan, fund, or program" by synonym-arrangement, as a design, scheme, unitary scheme, program of action, method of putting into effect an intention or proposal. Id. at 1373. "At a minimum, a `plan, fund, or program' under ERISA implies the existence of intended benefits, intended beneficiaries, a source of financing, and a procedure to apply for and collect benefits." Id.

A plan is "established or maintained," or both, if it is in writing, although the Act does not require a formal, written plan. Id. This is to prevent employers from avoiding federal regulation by merely failing to memorialize their employee benefit programs in a separate document so designated. Memorial Hosp. System v. Northbrook Life Ins. Co., 904 F.2d 236 (5th Cir.1990). In deciding whether an ERISA plan is established, a court must determine if "from the surrounding circumstances a reasonable person can ascertain the intended benefits, a class of beneficiaries, the source of financing, and procedures for receiving benefits."⁶ Donovan, 688 F.2d at 1373. No single act in itself, however, necessarily constitutes the establishment of the plan. While the purchase of a group policy covering a class of employees does not conclusively establish a plan, fund or program, it does offer substantial evidence that a plan has been established. Id.

Pursuant to authority granted in 29 U.S.C. § 1135, the Secretary of Labor has issued regulations further defining and excluding certain group or group-type insurance programs from the umbrella of ERISA coverage. See generally 29 C.F.R. § 2510.3-1 (1990). Recently, the Eleventh Circuit in Williams v. Wright, 927 F.2d 1540, 1545-48 (11th Cir.1991), applied several of these Department of Labor regulations in resolving whether a particular insurance policy fell within the scope of ERISA. The pertinent regulation, 29 C.F.R. § 2510.3-1(j) (1990), explains that the term "employee welfare benefit plan" does not include a group insurance program offered by an insurer to employees under which:

(1) No contributions are made by an employer or employee organization;

(2) Participation in the program is completely voluntary for employees or members (3) The sole functions of the employer or employee organization with respect to the program are, without endorsing the program, to permit the insurer

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