Tischmann v. ITT/Sheraton Corp.

• Decision Date: 10 June 1998
• Docket Number: 1069,Nos. 1179,D,s. 1179
• Citation: 145 F.3d 561
• Parties: Pens. Plan Guide (CCH) P 23943Q Peter TISCHMANN, Plaintiff-Appellant/Cross-Appellee, v. ITT/SHERATON CORPORATION, Defendant-Appellee/Cross-Appellant. ockets 97-7624, 97-7712.
• Court: U.S. Court of Appeals — Second Circuit

Page 561

145 F.3d 561

Pens. Plan Guide (CCH) P 23943Q

Peter TISCHMANN, Plaintiff-Appellant/Cross-Appellee, v. ITT/SHERATON CORPORATION, Defendant-Appellee/Cross-Appellant.

Nos. 1179, 1069, Dockets 97-7624, 97-7712.

United States Court of Appeals, Second Circuit.

Argued Feb. 13, 1998.

Decided June 10, 1998.

Steven G. Eckhaus, New York City (Jonathan C. Moore, Roger D. Olson and Marc A. Stadtmauer, Eckhaus & Olson, New York, NY, of Counsel), for Plaintiff-Appellant/Cross-Appellee.

Peter A. Cross, New York City (Catherine A. McCann, Jacob, Medinger & Finnegan, LLP, New York, NY, of Counsel), for Defendant-Appellee/CrossAppellant.

Before: JACOBS, LEVAL, and LAY ^*, Circuit Judges.

LEVAL, Circuit Judge:

Plaintiff Peter Tischmann appeals from a judgment of the United States District Court for the Southern District of New York (Michael H. Dolinger, Magistrate Judge ) dismissing Tischmann's claims against his former employer, defendant ITT/Sheraton Corporation ("ITT/Sheraton" or "Sheraton"). The complaint alleged that the defendant wrongfully failed to pay severance benefits as promised under a severance plan. The court concluded that the severance plan was an employee welfare benefit plan within the meaning of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq. and that, accordingly, Tischmann's state law claims were preempted and should be construed instead as a claim for benefits under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B). Because the claim was founded on ERISA, the court determined that plaintiff had no entitlement to jury trial. The court assessed the evidence and found that Tischmann had failed to prove his claims. We affirm.

BACKGROUND

Tischmann began working for defendant in 1972. In 1985, Sheraton named him general manager of the St. Regis Hotel in New York City. From December 1, 1986 through November 30, 1990, Tischmann had worked pursuant to a written employment contract. In 1989, the defendant decided to eliminate virtually all employment contracts with its executives. After his employment contract terminated in late 1990, Tischmann continued in his previous position without a written contract, as an "at will" employee. Following the elimination of employment contracts, ITT/Sheraton created plans to provide severance benefits for senior executives. Tischmann and approximately 20 other management employees were covered by one of these plans, the ITT Special Executive Severance Pay Plan ("the ITTSESPP" or "the plan").

The ITTSESPP provided, inter alia, that a covered executive would receive severance payments in an amount based on his previous salary if his employment was terminated involuntarily, unless the termination was "for cause." The payments would either be paid periodically in accordance with ITT/Sheraton's regular payroll schedule or, if ITT/Sheraton elected, in a lump sum. The plan provided that employees receiving severance benefits would be subject to certain continuing obligations.

In early 1992, several of Tischmann's subordinates in the Human Resources Department of the St. Regis complained that Tischmann had sexually harassed them. After investigation, Sheraton officials determined that Tischmann had violated the company's sexual harassment policies. In March 1992, Sheraton terminated his employment. Because his termination was deemed "for Tischmann brought this action in the United States District Court for the Southern District of New York, under diversity jurisdiction. Citing the law of New York as authority, the complaint sought reinstatement, compensatory and punitive damages, and attorneys' fees claiming (i) breach of an alleged contract of employment; (ii) breach of an implied covenant of good faith and fair dealing; (iii) intentional and negligent infliction of emotional distress; (iv) slander; (v) compelled self-publication defamation; (vi) entitlement to attorneys' fees and liquidated damages under New York Labor Law § 190 et seq.; and (vii) breach of the contractual promise to pay severance benefits. Tischmann claimed he had not sexually harassed his subordinates and was not fired "for cause," but was fired to save money, to deflect criticism from stockholders with respect to the amount of compensation paid by Sheraton, and because his management style, age, and national origin did not reflect an attractive image. Tischmann sought trial by jury on all claims.

cause," Sheraton declared Tischmann ineligible for benefits under the plan.

In April 1994, ITT/Sheraton moved for summary judgment on all counts. In an opinion entered April 10, 1995, Judge Shirley Wohl Kram granted summary judgment in favor of ITT/Sheraton on all counts except the severance benefits claim and the New York Labor Law claim. See Tischmann v. ITT/Sheraton Corp., 882 F.Supp. 1358, 1371 (S.D.N.Y.1995). With respect to the severance benefits claim, citing Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987) and James v. Fleet/Norstar Fin. Group, Inc., 992 F.2d 463 (2d Cir.1993), Judge Kram concluded that the ITTSESPP was not a "plan" within the meaning of ERISA with the consequence that Tischmann's state law claim was not preempted. See Tischmann, 882 F.Supp. at 1368-69. Judge Kram also concluded that Tischmann had stated a viable claim under the New York Labor Law § 190. See id. at 1370.

The parties then consented to proceed to trial before a magistrate judge pursuant to 28 U.S.C. § 636(c), and the case was reassigned to Magistrate Judge Dolinger. Before trial, ITT/Sheraton asked the magistrate judge to reconsider Judge Kram's ruling that ERISA was inapplicable to the claim for severance benefits. The defendant argued that, whereas a state law claim could be tried to a jury, Tischmann would have no right to a jury trial on a claim for ERISA benefits under this court's decision in Sullivan v. LTV Aerospace and Defense Co., 82 F.3d 1251, 1257-59 (2d Cir.1996). The magistrate judge decided to take the question under advisement, and proceed to trial before a jury on the state law theories, holding open the possibility of making his own findings if he should subsequently determine that the claim for severance benefits was governed by ERISA.

At the conclusion of the trial, the jury returned a special verdict in favor of Tischmann. The jury found that ITT/Sheraton's termination of Tischmann was arbitrary or in bad faith, thus entitling him, under New York law, to severance pay in the amount of $364,000 plus interest. On the other hand, the jury found that ITT/Sheraton had not acted "willfully" in refusing to pay Tischmann severance benefits, thereby precluding Tischmann from recovering an award of attorneys' fees under New York Labor Law § 190.

Following the verdict, ITT/Sheraton renewed its motion for reconsideration of Judge Kram's decision on the applicability of ERISA, and moved for judgment as a matter of law. Magistrate Judge Dolinger found that reconsideration of Judge Kram's ruling was appropriate, partly because of new testimony adduced at trial regarding the ITTSESPP and partly because of this court's intervening decision in Schonholz v. Long Island Jewish Medical Center, 87 F.3d 72 (2d Cir.), cert. denied, --- U.S.----, 117 S.Ct. 511, 136 L.Ed.2d 401 (1996). On reconsideration, the magistrate judge determined that the severance plan was an ERISA "plan," that Tischmann's state law claim for severance benefits was accordingly preempted, and that that claim should "therefore be construed as a claim for benefits under ERISA, 29 U.S.C. § 1132(a)(1)(B)." Based on Sullivan, the magistrate judge concluded Judgment dismissing Tischmann's complaint was entered, and this appeal followed. Tischmann's appeal focusses on two contentions, first that his state law claims were not preempted by ERISA, and second that, even under ERISA, he should have been accorded trial by jury.

the merits of the ERISA claim should be decided by the court. Because the severance plan gave the plan administrator considerable discretion in determining benefits eligibility, the court found the decision that Tischmann was not entitled to benefits should be reviewed under an "arbitrary or capricious" standard. The court concluded that the denial of benefits was not arbitrary or capricious, and that Tischmann's claim under the New York Labor Law § 190 failed because of ERISA preemption or, alternatively, because the denial of benefits was justified.

DISCUSSION

I. Applicability of ERISA

Both sides agree that if the ITTSESPP is an "employee welfare benefit plan" within the meaning of ERISA, then Tischmann's state law claim for severance benefits is preempted by ERISA and should be construed as a claim for benefits under ERISA § 502(a)(1)(B). See 29 U.S.C. § 1144(a) (providing generally that ERISA "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...."). ¹ Tischmann, however, contends the magistrate judge erred in concluding that the ITTSESPP is an ERISA-governed plan. ²

First, Tischmann argues that the magistrate judge was bound, under the principle of "law of the case" to adhere to Judge Kram's prior determination that the ITTSESPP was an ERISA plan. Tischmann's argument fails for at least three reasons. First, "the [law of the case] doctrine 'is, at best, a discretionary doctrine, which does not constitute a limitation on the court's power' " but merely expresses a general reluctance, absent good cause, to reopen rulings that the parties have relied upon. Doctor's Assocs., Inc. v. Distajo, 107 F.3d 126, 131 (2d Cir.), cert denied, --- U.S. ----, 118 S.Ct. 365, 139 L.Ed.2d 284 (1997)(quoting United States v. Martinez, 987 F.2d 920, 923 (2d Cir.1993)). Second, reconsideration of Judge Kram's decision was justified by this court's intervening decision in Schonholz, which provided further guidance regarding ERISA's application to severance plans. See Virgin Atlantic Airways, Ltd. v. National...