Whitt v. Sherman Intern. Corp.

• Decision Date: 30 July 1998
• Docket Number: No. 97-6643,97-6643
• Citation: 147 F.3d 1325
• Parties: Pens. Plan Guide (CCH) P 23944P, 11 Fla. L. Weekly Fed. C 1704 William O'Neal WHITT, Jr., Plaintiff-Appellant, v. SHERMAN INT'L CORP., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1325

147 F.3d 1325

Pens. Plan Guide (CCH) P 23944P,

11 Fla. L. Weekly Fed. C 1704

William O'Neal WHITT, Jr., Plaintiff-Appellant, v. SHERMAN INT'L CORP., et al., Defendants-Appellees.

No. 97-6643.

United States Court of Appeals Eleventh Circuit.

July 30, 1998.

Lewis W. Page, Jr., Birmingham, AL, for Plaintiff-Appellant.

Cavender C. Kimble, Leigh Anne Hodge, Balch & Bingham, L.L.P., Birmingham, AL, for Defendants-Appellees.

Appeal from the United States District Court for the Northern District of Alabama.

Before CARNES and MARCUS, Circuit Judges, and MILLS ^*, Senior District Judge.

MARCUS, Circuit Judge:

This appeal raises issues involving the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1001-1461, and state contract and tort law. Upon termination of his employment with defendant-appellees Sherman International Corporation and Constar, Inc. (collectively, "Sherman"), plaintiff-appellant William O'Neal Whitt, Jr. sought benefits in state court for which he had allegedly contracted with Sherman. Sherman removed the case to federal court, alleging that Whitt's state law claims were preempted by ERISA, and thus, federal question jurisdiction existed. The district court agreed with Sherman. Consequently, it denied Whitt's motion for remand to state court and entered summary judgment for Sherman. Because we conclude that no ERISA "plan" existed at the time of Whitt's termination, we hold that Whitt's state causes of action are not preempted by ERISA. Accordingly, we VACATE the district court's order granting summary judgment and REMAND to the district court with instructions to REMAND this case to state court.

I.

A detailed recitation of the facts is necessary to understand our holding. Whitt served as a Group Vice President and General Counsel to Sherman from February 1984 until November 2, 1995, when Sherman involuntarily terminated his employment. Whitt also sat as a member of Sherman's Board of Directors from 1978 until mid-1994. In May 1988 Sherman and Whitt entered into a non-qualified stock option agreement and cash right agreement (collectively, "1988 Stock Option Agreement"). At that time, Constar was a minority shareholder of Sherman. In 1991, in connection with Constar's acquisition of a large portion of the stock of Sherman as a part of the financial restructuring of Sherman, Whitt signed an agreement he drafted dated September 10, 1991 ("1991 Release Agreement"), in which Whitt released his rights under the 1988 Stock Option Agreement in exchange for cash payments totaling $300,000 and a phantom stock plan or similar plan to be developed in the future. Phantom stock is "[a] right ... to receive an award with a value equal to the appreciation of a share of stock from the date the Phantom Stock is cashed out.... Phantom Stock programs are designed to provide executives with cash payments equivalent to amounts they could receive under an actual stock option or similar program.... Phantom programs are based on 'phantom' or 'hypothetical' shares or units." Coopers & Lybrand, Executive Summary of Nonqualified Long-term Incentive Plans, CV01 ALI-ABA 619, 632 (1996). Specifically, paragraph 4 of the 1991 Release Agreement states, "Sherman agrees that it will establish a Phantom Stock Plan, or similar plan, for the benefit of employees, said plan to be effective on or before January 1, 1992."

Work began on a phantom stock plan in 1992 or 1993. Various individuals created several draft proposals through July 22, 1994, but none garnered universal support. J. Thomas Holton, Chief Executive Officer and Chairman of the Board of Sherman, testified in deposition that, at that point, "[t]he whole issue just sort of, you know, went under study again, and just didn't surface. You know, it just became sort of a nonissue at that point." Nov. 20, 1996, Holton Dep. at 40. He further stated, "[I]t was in [Constar Chief Executive Officer O'Neill's] court to get it done." Meanwhile, O'Neill stated that after July of 1993, the implementation of the plan, other than an equity contribution issue, "was left to Mr. Holton." Around August 1995, Whitt directly asked O'Neill when Sherman would finally establish the promised plan. According to Whitt, O'Neill told him "it was not going to be done, that I had [a] plan and it was my job, that I ought to be happy about it, and that we were just not going to do it."

On November 2, 1995, Sherman terminated Whitt's employment by letter that same day. Among other things, the letter provided, "Upon the close of the 1995 fiscal year and receipt of the audited financial statements, payment, if any, due you under the 'Sherman Long-Term Incentive Plan for Senior Executives, Effective January 1, 1992' will be paid to you in accordance with the provisions of that plan...." Holton testified that as of the time he fired Whitt in November 1995, he did not know what the terms of the 1992 LTIP named in the termination letter would be. Frank Anderson, President and Chief Executive Officer of Sherman and a party to the 1991 agreements, agreed, stating that he only first learned that a plan had been adopted in approximately October 1996, that he did not become aware of the actual terms of the plan until the week of November 22, 1996, and that he did not know how many drafts existed or which of the various, competing drafts would be adopted by Sherman prior to mid-November 1996. William Hamilton, Chief Financial Officer of Sherman, also testified in deposition that he did not learn of the terms of the plan until November 18, 1996. He further testified that he did not place the plan on Sherman's books before this lawsuit was filed or this case removed because "you have to have a plan before you can book a liability. I mean there was no plan, so you have no basis to book a liability."

In early 1996, Sherman engaged KPMG Peat Marwick to perform the accounting work necessary to calculate the benefits due Whitt under the plan. Holton testified that Whitt did not receive his payment before filing this lawsuit because KPMG Peat Marwick had not completed the accounting work.

Subsequently, on September 17, 1996, Sherman's Board of Directors adopted the 1992 Long Term Incentive Plan for Senior Executives of Sherman ("1992 LTIP"), making the effective date of the plan January 1, 1992, in accordance with the terms of the 1991 Release Agreement. Whitt's benefits accrued as of the effective date of the 1992 LTIP. After Sherman adopted the 1992 LTIP, Sherman made a filing regarding the plan under 29 CFR § 2520.104-23 with the Department of Labor. On September 26, 1996, Sherman issued and mailed to Whitt a check in the amount of $9,412.16, which represented the amount due under the first of the ten annual installments called for by the LTIP, plus interest calculated pursuant to the terms of the Plan. Whitt refused to accept the check and returned it to Sherman.

On June 25, 1996, Whitt instituted this lawsuit in the Circuit Court of Jefferson County, Alabama. The complaint alleged causes of action for breach of contract, fraud, and interference. On July 30, 1996, Sherman filed a notice of removal to the United States District Court for the Northern District of Alabama, Southern Division, claiming ERISA super-preemption. Sherman then moved to dismiss, arguing ERISA "defensive preemption." On August 29, 1996, Whitt moved to remand the case to state court for lack of subject matter jurisdiction and improper removal, claiming that his state claims were not preempted because Sherman neither established nor promised to establish an ERISA plan. Thereafter, on October 7, 1996, the district court denied Whitt's motion to remand. The same day, the district court granted Sherman's motion to dismiss, allowing Whitt thirty days to amend the complaint to state a claim under ERISA. On November 4, 1996, Whitt filed an amended complaint naming as defendants Sherman, Constar, 1988 ERISA Plan, 1991 ERISA Plan, 1996 ERISA Plan, and Amalgamated ERISA Plan. The complaint expressly stated that in filing the amended complaint, Whitt did not waive his "previously asserted claims that the suit was not properly removed, does not arise under ERISA, or is properly in federal court."

On March 3, 1997, following discovery, Whitt filed a motion to reinstate the dismissed state law claims and to remand the case to the state court for lack of subject matter jurisdiction and improper removal. The same day, Sherman filed a motion for summary judgment alleging that Whitt's amended complaint failed to state a claim under ERISA. On May 23, 1996, the district court denied the motion to remand but certified the order for interlocutory appeal pursuant to 28 U.S.C. § 1292(b). Thus, on June 9, 1997, Whitt petitioned this Court for permission to take an appeal under 28 U.S.C. § 1292(b), but the Court denied the petition on July 7, 1997. The district court then lifted its stay of the proceedings and granted Sherman's motion for summary judgment. Whitt now appeals the denial of his motion for remand and the entry of summary judgment.

II.

We review questions of jurisdiction de novo. McKusick v. City of Melbourne, 96 F.3d 478, 482 (11th Cir.1996) (citing Lucero v. Operation Rescue, 954 F.2d 624, 627 (11th Cir.1992)). In reviewing matters concerning removal and remand, our predecessor Court has noted that "it is axiomatic that ambiguities are generally construed against removal." ¹ Butler v. Polk, 592 F.2d 1293, 1296 (5th Cir.1979).

A defendant may remove a case to federal court only if the district court would have had jurisdiction over the case had the case been brought there originally. 28 U.S.C. § 1441. Federal district courts, of course, have original jurisdiction over diversity cases and matters arising under federal law. 28 U.S.C. §§ 1331, 1332. Because, in this case, there is no contention that diversity exists between the parties, federal jurisdiction must rest, if at all, on federal question jurisdiction. Under...