Williams v. Wright

• Decision Date: 11 April 1991
• Docket Number: No. 89-8837,89-8837
• Citation: 927 F.2d 1540
• Parties: , 13 Employee Benefits Ca 2137 James T. WILLIAMS, Plaintiff-Appellant, v. Fred P. WRIGHT, Jr., Individually and as liquidating trustee of Wright Pest Control Co. of South Carolina, Inc., Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1540

927 F.2d 1540

59 USLW 2664, 13 Employee Benefits Ca 2137

James T. WILLIAMS, Plaintiff-Appellant, v. Fred P. WRIGHT, Jr., Individually and as liquidating trustee of Wright Pest Control Co. of South Carolina Inc., Defendants-Appellees.

No. 89-8837.

United States Court of Appeals Eleventh Circuit.

April 11, 1991.

Richard E. Miley, Nixon, Yow, Waller & Capers, Augusta, Ga., for plaintiff-appellant.

Ellen L. Beard, Kerry L. Adams, U.S. Dept. of Labor, Washington, D.C., for amicus curiae Dept. of Labor.

J. Arthur Davison, Augusta, Ga., for defendants-appellees.

Appeal from the United States District Court for the Southern District of Georgia.

Before HATCHETT and ANDERSON, Circuit Judges and GODBOLD, Senior Circuit Judge.

ANDERSON, Circuit Judge:

This appeal raises issues involving the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. Secs. 1001-1461, and state contract law. Appellant James T. Williams ("Williams") brought an action under Sec. 502 of ERISA, 29 U.S.C. Sec. 1132, ¹ against appellees Fred P. Wright ("Wright") ² and Wright Pest Control Co. ("WPCC"), alleging violations of ERISA. Williams also included a state law claim for breach of a retirement contract. The district court eventually granted summary judgment in favor of appellees on all counts. With regard to the ERISA claim, the district court reasoned that the retirement benefits provided to Williams by WPCC did not constitute a "plan, fund, or program" within the meaning of Sections 3(1) or 3(2)(A) of ERISA, 29 U.S.C. Secs. 1002(1) or (2)(A). We hold that some of the retirement benefits extended to Williams do fall within ERISA's definition of a "plan, fund or program," and we therefore reverse the judgment of the district court and remand for further proceedings consistent with this opinion.

The district court also granted summary judgment in favor of appellees on the state law contract claims, invoking an array of state law doctrines. We affirm the district court's grant of summary judgment with respect to appellant's state law contract claims to the extent that these claims are preempted by the federal ERISA legislation. However, we reverse and remand with regard to appellant's state law contract claims for the benefits not covered by ERISA.

I. FACTS

James T. Williams began working for WPCC in 1947. In October of 1981, Williams and Fred P. Wright, Jr., president of WPCC, discussed the possibility and terms of Williams' retirement. Although these talks were inconclusive, on October 23, 1981, Wright presented to Williams the letter set out in the margin (the "1981 letter"). ³

Williams received benefits in accordance with this letter until September, 1984. On September 7, 1984, "Wright informed [Williams] that for business reasons it would be necessary 'to slow the gravy train down from a race to a crawl.' " R1-24-3. Subsequently, WPCC reduced the country club, telephone, and automobile expenses, but continued the monthly payments of $500.00 and the insurance benefits.

On September 1, 1985, Wright informed Williams that WPCC's dissolution and imminent asset sale to Terminex Service, Inc. necessitated termination of Williams' retirement benefits. Accordingly, after the asset sale and dissolution occurred, in December, 1985, WPCC terminated Williams' benefits. Wright did transfer title to the company car that Williams had been using to Williams and forgive $1,906.63 in personal debt owed to WPCC by Williams. This lawsuit followed.

II. DISCUSSION

A. The ERISA Claim

Congress enacted ERISA in 1974 to provide federal standards for the establishment and maintenance of employee pension and benefit plans. The legislation attempts to strike a balance between protecting employees and encouraging employers to voluntarily establish pension and benefit plans. See H.R.Rep. No. 98-807, 93d Cong., 2d Sess., reprinted in, 1974 U.S.Code Cong. & Admin.News 4639, 4670, 4678. An employer's decision to establish a plan is entirely voluntary, but once a plan is established, Congress wanted to "mak[e] sure that if a worker has been promised a defined pension benefit upon retirement--and if he has fulfilled whatever conditions are required to obtain a vested benefit--he actually will receive it." Nachman Corp. v. Pension Benefit Guaranty Corp., 446 U.S. 359, 375, 100 S.Ct. 1723, 1733, 64 L.Ed.2d 354 (1980).

ERISA recognizes two types of plans, "employee welfare benefit plans" ⁴ and "employee pension benefit plans." ⁵ In order for appellant to invoke ERISA's substantive provisions covering either type, appellant must prevail on the threshold question of whether the benefits arrangement set out in the 1981 letter is a "plan, fund, or program" covered by ERISA. ⁶ Donovan v. Dillingham, 688 F.2d 1367 (11th Cir.1982) (en banc); 29 U.S.C. Secs. 1002(1) and (2)(A). Although the definition of these terms has proved to be elusive at best, Donovan at 1372, this court has prescribed general guidelines for resolving the threshold question: "[A] 'plan, fund, or program' under ERISA is established if from the surrounding circumstances a reasonable person can ascertain the intended benefits, ⁷ a class of beneficiaries, the source of financing, and procedures for receiving benefits." Id. at 1373. Donovan suggests a flexible analysis consistent with the legislative approach to ERISA. See S.Rep. No. 93-127 (1973), reprinted in, 1974 U.S.Code Cong. & Admin.News 4639, 4854 ("It is intended that coverage under [ERISA] be construed liberally to provide the maximum degree of protection to working men and women covered by private retirement programs."); Smith v. CMTA-IAM Pension Trust, 746 F.2d 587, 589 (9th Cir.1984).

The district court applied the Donovan analysis and concluded that the retirement arrangement at issue was not covered by ERISA. The district court was troubled by the fact that the only ascertainable source of financing for Williams' benefits was the general assets of the corporation rather than any separate fund or trust, that the class of beneficiaries was limited to Williams and his wife, and that, in the court's view, there were no procedures for receiving benefits. The district court also viewed the arrangement as, at best, "an individual employment contract which included post-retirement compensation" rather than an ERISA "plan, fund, or program." Williams v. Wright, No. CV188-058, at 12 (S.D.Ga. Dec. 8, 1988) (order granting summary judgment on the ERISA claim). After carefully reviewing the district court's opinion and the arguments of the parties, including the amicus curiae brief filed by the Department of Labor, we conclude that the district court erred in holding that the letter from Wright to Williams did not establish a plan covered by ERISA.

1. The Donovan Analysis

a. Source of Financing

Although noting that the source of financing for the benefits at issue was the general assets of WPCC, the district court found no ascertainable source of financing under Donovan. Although, with some exceptions, it is true that the assets of employee benefit plans are required to be held in trust, see 29 U.S.C. Sec. 1103, it is equally true that an employer's failure to meet an ERISA requirement does not exempt the plan from ERISA coverage. Scott v. Gulf Oil Corp., 754 F.2d 1499, 1503 (9th Cir.1985). "[A]n employer ... should not be able to evade the requirements of the statute merely by paying ... benefits out of general assets." Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 18, 107 S.Ct. 2211, 2221, 96 L.Ed.2d 1 (1987). Therefore, we conclude that the payment of benefits out of an employer's general assets does not affect the threshold question of ERISA coverage. See also U.S. Dept. of Labor Opinion Letters 78-18 (Sept. 20, 1978) and 79-75 (Oct. 29, 1979) (finding ERISA coverage where benefit payments were made from general assets of employer and other requirements satisfied).

b. Procedures for Receiving Benefits

Relying in part on Fort Halifax, supra, the district court held that the instant case lacked the administrative program or procedures characteristic of ERISA plans. However, Fort Halifax does not support the conclusion that the retirement arrangement at issue is not covered by ERISA for this reason. Although the procedures for receiving benefits provided by the 1981 letter are simple, they are sufficiently ascertainable under the Donovan analysis.

In Fort Halifax, after the employer closed its poultry packaging and processing plant, the state of Maine sued to enforce a state statute requiring the employer to provide a one-time severance payment to certain employees. The employer argued, inter alia, that the state statute was preempted by ERISA and therefore unenforceable. The Supreme Court held that ERISA was inapplicable because a one-time payment did not require the sort of ongoing administrative scheme characteristic of an ERISA plan. The Court reasoned that a purpose of ERISA preemption, "to afford employers the advantages of a uniform set of administrative procedures governed by a single set of regulations," Fort Halifax at 11, 107 S.Ct. at 2217, was not compromised where "[t]he employer assumes no responsibility to pay benefits on a regular basis." Id. at 12, 107 S.Ct. at 2218. The Court concluded that "[t]he theoretical possibility of a one-time obligation in the future simply creates no need for an ongoing administrative program for processing claims and paying benefits." Id.

The situation in Fort Halifax is easily distinguishable from the instant case which does involve a continuing obligation necessitating ongoing, though simple, procedures. The letter of October 23, 1981 expressly provides that the company "will issue you a check ... each month ... until your death or when you have no use for [the benefits]." In addition the letter provides that in the event that the arrangement does not "fill all needs as anticipated," revisions will be considered after April 1, 1982. Therefore, we conclude...