Thompson v. Command Alkon Inc.
| Decision Date | 22 May 2023 |
| Docket Number | Civil Action 22-344 |
| Parties | NANCY THOMPSON, Plaintiff v. COMMAND ALKON INC., Defendant |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Linda Thompson was formerly employed by Command Alkon, Inc., where she held the role of Office Manager and Accountant of Libra Systems, Inc., a wholly owned subsidiary of Command Alkon. Both parties filed motions for summary judgment, with Command Alkon asserting, inter alia, that Ms. Thompson's state law claims are preempted by the Employee Retirement Income Security Act (“ERISA”) of 1974, as amended, 29 U.S.C. § 1001, et seq. For the following reasons, Command Alkon's motion for summary judgment is granted in part, only as to the issue of preemption, and the parties shall provide supplemental briefing on the application of ERISA to this litigation.
Libra Systems, Inc, was a family-run, 35-employee business. Nancy Thompson worked at Libra, with a role “like office manager - controller.” Pl.'s Mot. for Summ. J ¶ 6.
The president of Command Alkon, Inc. contacted Libra to state his interest in purchasing the smaller company, and the companies agreed to a purchase of Libra by Command Alkon in November 2020. In connection with the sale of the company, Libra's co-owners insisted that Ms. Thompson have an employment contract, given her importance to Libra. The contract executed on November 18,2020, was between Libra, identified as the “Company,” and Ms. Thompson, and in it, Libra agreed to continue her employment for five years unless the agreement was terminated earlier under circumstances laid out in the agreement. Libra was already a wholly owned subsidiary of Command Alkon at the time the employment agreement was executed. The rights and interests under the agreement were assigned to Command Alkon, of which Ms. Thompson became an employee. The employment agreement had as an attachment an “Employee Confidentiality, Assignment of Inventions, Non-Competition and Non-Solicitation Agreement” (the “NDA”), through which Ms. Thompson agreed not to work for any competitor of Libra or its affiliates for a period after her employment ended. Ex, 8, to Pl.'s Mot. for Sum. J. at A-3.
Paragraph 5.1(b) of Ms. Thompson's employment agreement defines the circumstances under which Ms. Thompson's job could be terminated for cause, which included (1) Ms. Thompson's “arbitrary, unreasonable or willful failure to perform” her duties under the agreement; (2) her “gross negligence or willful misconduct”; (3) her “commission of an act constituting fraud, embezzlement, breach of any fiduciary duty ... or other material dishonesty”; (4) Ms. Thompson's “conviction of... a felony or any other crime involving dishonesty or moral turpitude” that would reflect poorly on Libra; (5) “substance abuse”; or (6) her “breach of [her] obligations under, or a breach of any representation or warranty” made by Ms. Thompson in the agreement or in her NDA. Ex. 8 to Pl.'s Mot. for Summ, J, ¶ 5.1(b).
Paragraph 5.1(a) of Ms. Thompson's agreement also describes a scenario in which she could be terminated without cause, in which case Ms. Thompson would be eligible for severance payments, payable “in increments according to the Company's normal payroll schedule” for the remainder of her five-year employment term, conditioned upon her continuing compliance with the NDA and her employment agreement along with her execution and delivery of a waiver and release of claims related to her employment with Libra. Ex. 8. to Pl.'s Mot. for Summ. J. ¶ 5.1(a).
If Ms. Thompson resigned for “good reason,” which as defined in the agreement includes “a material and unreasonable diminution in [her] duties, authority or responsibility” without her consent, she would be entitled to severance pay, so long as she gave notice of the event constituting good reason and provided Command Alkon with a 30-day opportunity to cure. Ex. 8. to Pl.'s Mot, for Summ. J. ¶ 5.2.
Ms. Thompson's agreement also contains language stating that the contract “is intended to be an unfunded top hat plan within the meaning of Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.” Ex. 8. to Pl.'s Mot. for Summ. J. ¶ 19.
On July 19, 2021, Ms. Thompson asserted that she had good reason to terminate her employment with Command Alkon, alleging events that she believed constituted diminution of her duties, and she stated her intention to terminate her employment if the company did not timely cure its breach of the agreement. Command Alkon's in-house counsel responded on August 4, 2021, that the diminution of Ms, Thompson's responsibilities was not material or unreasonable. Ms. Thompson ended her employment with Command Alkon on August 19, 2021. She did not execute a waiver and release of certain claims in favor of Command Alkon, which was a condition of receiving severance payments. Command Alkon did not pay a severance amount to Ms. Thompson, despite her assertions that she is entitled to severance in the amount of $467,424.62, Ms. Thompson brought two claims in her complaint filed in the Montgomery County Court of Common Pleas: breach of contract (Count I) and a claim under the Pennsylvania Wage Payment and Collection Law (“WPCL”) (Count II). Command Alkon removed the case to federal court on the basis of diversity jurisdiction, and Ms. Thompson subsequently filed an Amended Complaint. Ms. Thompson and Command Alkon each filed motions for summary judgment. In its motion, Command Alkon argues, for the first time in the life of the case, that the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §§ 1001-1461 (“ERISA”), preempts both claims in the Amended Complaint. The Court heard oral argument, after which the parties requested referral to a magistrate judge for a settlement conference, but that did not ultimately resolve the dispute. Ms. Thompson and Command Alkon now request that the Court rule only on the issue of whether ERISA preempts Ms. Thompson's breach of contract and WPCL claims.
I. Summary Judgment Standard
For a court to grant summary judgment, the movant must prove “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). To be “material,” the fact must have the potential to “affect the outcome of the suit.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). For a dispute about that fact to be “genuine,” there must be enough evidence such that a reasonable jury could find for the non-movant on that fact. Id. “When considering whether there exist genuine issues of material fact, the court is required to examine the evidence of record in the light most favorable to the party opposing summary judgment, and resolve all reasonable inferences in that party's favor.” Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir. 2007). The court does not itself “weigh the evidence and determine the truth of the matter,” Anderson, 477 U.S. at 249. Instead, the court looks for “sufficient evidence” on which a reasonable jury could decide for the non-movant. Id.;
“The mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party].” Id. at 252. Further, the non-moving party must present more than “bare' assertions, conclusory allegations or suspicions.” Fireman's Ins. Co. of Newark, N.J. v. DuFresne, 676 F.2d 965, 969 (3d Cir. 1982).
“[T]he plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp, v. Catrett, 477 U.S. 317,322 (1986). !
The stated policy of ERISA is to “protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries ... by establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans, and by providing for appropriate remedies, sanctions, and ready access to the Federal courts.” 29 U.S.C. § 1001(b) (emphasis added). “[P]ension plan regulation [is] exclusively a federal concern.” Alessi v Raybestos-Manhattan, Inc., 451 U.S. 504, 523 (1981). ERISA broadly preempts “any and all State laws insofar as they ... relate to any employee benefit plan” described in the statute and not exempt from ERISA. 29 U.S.C. § 1144(a).
Command Alkon argues that Ms. Thompson's claims are preempted by ERISA because the employment agreement “is intended to be an unfunded [so-called] top hat plan within the meaning of Sections 201 (2), 301(a)(3), and 401(a)(1) of' ERISA. Ex 8. to Pl.'s Mot. for Summ. J. ¶ 19. Ms, Thompson contends that despite this language, her employment agreement does not have an administrative scheme and therefore does not qualify as an ERISA plan.
ERISA broadly defines the term “employee benefit plan” to include “any plan, fund, or program which was established or maintained by an employer . .. for the purpose of providing for its participants or their beneficiaries . . . benefits in the event of sickness, accident, disability, death or unemployment,” or an employer-established plan “to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program . . . results in a deferral of income by employees for periods extending to the termination of covered employment or beyond.” 29 U.S.C. §§ 1002(1), 1002(2)(A), 1002(3). “Courts have determined that most, but not all,...
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