White v. Rice Belt Telephone Company Inc
ORDER directing the parties to file within thirty days from the date of this Order a supplemental administrative record containing written plan documents. Ms. White shall file a supplemental brief within 21 days thereafter, and Rice Belt shall file a supplemental brief within 14 days after Ms. White files her supplemental brief. Signed by Judge Kristine G. Baker on 10/28/2014. (jak)
IN THE UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF ARKANSAS
Case No. 3:12-cv-00062-KGB
RICE BELT TELEPHONE CO., INC.
RICE BELT TELEPHONE CO., INC.
ROBERT C. PIERSON
Plaintiff Glynda White brings this action against defendant Rice Belt Telephone Co., Inc.
(“Rice Belt”) arising out of Rice Belt’s cancellation of her retiree Medicare supplemental
insurance benefits. Ms. White originally brought this action in state court as a claim for breach
of contract. Rice Belt removed the case to this Court, asserting that Ms. White’s claim arises
under the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001-1461. Rice
Belt subsequently answered Ms. White’s complaint and asserted a third-party complaint against
Robert C. Pierson for indemnification (Dkt. No. 7). The case is now before the Court on Ms.
White and Rice Belt’s briefing as ordered in the Court’s ERISA scheduling order (Dkt. No. 10).
For the reasons discussed below, the Court finds that the record is incomplete in this case and
directs that the parties supplement the record with written plan documents for the purported
ERISA plan at issue.
Ms. White is a former employee of Rice Belt. She alleges that, on February 5, 2010, she
and Mr. Pierson, the president of Rice Belt at the time, entered into a contractual agreement
guaranteeing the funding of Ms. White’s supplemental insurance after her retirement. The
agreement is drafted in the form of a “letter of intent to retire” setting forth Ms. White’s
proposed terms of retirement, with Mr. Pierson’s signature of acceptance of the letter and its
terms (hereinafter the “retirement agreement”) (Dkt. No. 12-1, at 1). The relevant portion of the
retirement agreement states, “Further, per discussion with Mr. Pierson, my company paid NTCA
Medical Insurance will remain in effect as is until July 31, 2010, and I understand that at that
time Retiree Medicare Supplemental Insurance will become effective for me only, to be fully
funded by Rice Belt Telephone Co., Inc.” (Dkt. No. 12-1, at 1).
The pleadings indicate that on October 19, 2010, Mr. Pierson entered into a Stock
Purchase Agreement (“SPA”) to sell Rice Belt Holdings, Inc., and its wholly owned subsidiary,
Rice Belt, to Smithville Holding Co., Inc. (“Smithville”). On December 20, 2010, Ms. White
emailed Mr. Pierson to ask what effect the sale of Rice Belt would have on “the Retiree
Medicare Supplement” (Dkt. No. 12-1, at 2). Mr. Pierson responded there would be no effect
and stated that “they are keeping everything the same” (Id.). Sometime thereafter, the new
president of Rice Belt, Darby A. McCarty, executed a “written action of the president of Rice
Belt Telephone Company, Inc.” to terminate Rice Belt’s “Senior Medical Insurance Plan” as of
the close of business December 31, 2011 (Dkt. No. 12-1, at 3). Ms. White was notified of the
termination via letter dated December 30, 2011 (Id. at 4). Ms. White asserts that the cancellation
of her retiree Medicare supplemental insurance benefits constitutes breach of contract. She seeks
damages for the value of these benefits for the remainder of her life expectancy. Rice Belt has
filed a third-party complaint against Mr. Pierson, asserting that he represented and warranted in
the SPA that all “Benefit Plans” had been disclosed and provided to Smithville as required by the
SPA (Dkt. No. 7).
Ms. White in her brief argues that this case is a simple breach-of-contract action and that
the issue of breach is undisputed. She requests that the Court either remand this case to state
court or award judgment in the amount sought in her complaint. To the extent she addresses
ERISA, she argues the plan administrator’s decision to terminate benefits is not entitled to
deference because the administrator failed to conduct any review to trigger this deference. Rice
Belt in its response brief maintains its position that this case is governed by ERISA and asks the
Court to enter judgment in its favor on the ground that Ms. White has failed to meet her burden
of proving an intent to vest lifetime retiree benefits. For the reasons discussed below, the Court
determines that the record is too incomplete for the Court to rule on either issue. The Court
directs the parties to supplement the record.
ERISA is intended to provide a uniform regulatory regime over employee benefit plans
and includes “expansive pre-emption provisions, which are intended to ensure that employee
benefit plan regulation would be exclusively a federal concern.” Aetna Health Inc. v. Davila,
542 U.S. 200, 208 (2004) (internal quotations and citations omitted). “Therefore, any state-law
cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy
conflicts with the clear congressional intent to make the ERISA remedy exclusive and is
therefore pre-empted.” Id.
Existence of a “plan” is a prerequisite to ERISA jurisdiction. Bannister v. Sorenson, 102
F.3d 632, 636 (8th Cir. 1996). The existence of an ERISA plan is a mixed question of law and
fact. Kulinski v. Medtronic Bio-Medicus, Inc., 21 F.3d 254, 256 (8th Cir. 1994). “No particular
formality is required to show the existence of a plan.”
Kreutzer v. Coorstek, Inc., No.
4:08CV00571 BSM, 2008 WL 4079319, at *2 (E.D. Ark. Aug. 28, 2008) (citing Donovan v.
Dillingham, 688 F.2d 1367, 1372 (11th Cir. 1982)). “In determining whether a plan, fund or
program (pursuant to a writing or not) is a reality[,] a court must determine whether from the
surrounding circumstances a reasonable person could ascertain the intended benefits,
beneficiaries, source of financing, and procedures for receiving benefits.” Donovan, 688 F.2d at
1373. The Eighth Circuit has adopted the Donovan test for determining the existence of an
ERISA plan. See Harris v. Arkansas Book Co., 794 F.2d 358, 360 (8th Cir. 1986). The
Donovan court summarized the test as follows:
[A] summary, a “plan, fund, or program” under ERISA is established 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. To be an employee welfare benefit plan, the intended benefits
must be health, accident, death, disability, unemployment or vacation benefits,
apprenticeship or other training programs, day care centers, scholarship funds,
prepaid legal services or severance benefits; the intended beneficiaries must
include union members, employees, former employees or their beneficiaries; and
an employer or employee organization, or both, and not individual employees or
entrepreneurial businesses, must establish or maintain the plan, fund, or program.
Donovan, 688 F.2d at 1373.
No single action in itself necessarily constitutes the establishment of a plan. Id.; Johnston
v. Paul Revere Life Ins. Co., 241 F.3d 623, 629 (8th Cir. 2001). Rather, “an ERISA plan must
embody a ‘set of administrative practices.’” Johnston, 241 F.3d at 629 (quoting Fort Halifax
Packing Co. v. Coyne, 482 U.S. 1, 11-12 (1987)).
The record in the instant case is incomplete as to the existence of a plan. The stipulated
record contains only the retirement agreement attached to Ms. White’s complaint, emails
between Ms. White and Mr. Pierson, Rice Belt’s written action terminating its senior medical
insurance plan, and the letter to Ms. White informing her of the termination of the senior medical
insurance plan (Dkt. No. 12). There are no plan documents establishing a set of administrative
practices. The only document in the record that is suggestive of a plan is Rice Belt’s written
action terminating its senior medical insurance plan in that this document refers to a specific plan
and identifies in general terms the intended benefits and beneficiaries—supplemental health
benefits for “certain of the Company’s retirees eligible for Medicare” (Dkt. No. 12-1, at 3). The
purchase of insurance alone does not establish a plan, but “the purchase of a group policy or
multiple policies covering a class of employees offers substantial evidence that a plan, fund, or
program has been established.” Donovan, 688 F.2d at 1373 (footnote omitted).
Based on the stipulated record before the Court, the Court finds sufficient evidence of the
establishment of an ERISA plan for the Court to exercise jurisdiction in this case at this time.
For the same reason, the Court at this time will deny Ms. White’s request to remand this action to
state court. However, the Court will revisit jurisdiction and preemption, if necessary, after the
parties supplement the record.
Whether The Benefits Vested
Employee benefit plans under ERISA are divided into two categories—welfare plans
and pension plans. See 29 U.S.C. § 1002(1), (2)(A). Assuming the existence of a plan for
supplemental health insurance, the plan here constitutes an employee welfare plan.
1002(1). ERISA welfare plans are not subject to the specific vesting requirements that apply to
ERISA pension plans. “‘Therefore, an employer may unilaterally modify or terminate medical
benefits at any time absent the employer’s contractual agreement to the contrary.’” Halbach v.
Great-W. Life & Annuity Ins. Co., 561 F.3d 872, 877 (8th Cir. 2009) (quoting Jensen v. SIPCO,
Inc., 38 F.3d 945, 949 (8th Cir. 1994)). “It is possible for welfare benefits to vest, however, if a
promise to provide vested benefits is incorporated in some fashion into the formal written ERISA
Id. (citing Hughes v. 3M Retiree Med. Plan, 281 F.3d 786, 790 (8th Cir. 2002)).
“Whether such benefits are vested, then, is a matter of private contract and our inquiry begins
with the written Plan documents.” Id.
The plaintiff bears the burden of proof as to whether vesting language exists in order to
confer a vested right to employee welfare benefits. Halbach, 561 F.3d at 877; Hughes, 281 F.3d
at 790. Rice Belt argues that Ms. White has declined to take on her burden to show any vesting
language. In her briefing, Ms. White contends that the issue of breach is clear based on the
retirement agreement. In addition, although the record is stipulated, Ms. White takes issue with
Rice Belt not including in the record the plan itself. This Court determines that, to consider fully
the issue of vesting, the Court must examine the written plan documents. The Court directs the
parties to supplement the record with the written plan documents for the purported ERISA plan
at issue in this case.
The Court finds sufficient evidence at this time of the existence of an ERISA plan for the
Court to exercise jurisdiction over this case. However, the Court determines that the record is
incomplete and directs the parties to supplement the record. Within 30 days from the date of this
Order, the parties shall file a supplemental administrative record containing written plan
documents. Ms. White shall file a supplemental brief within 21 days thereafter, and Rice Belt
shall file a supplemental brief within 14 days after Ms. White files her supplemental brief.
SO ORDERED this the 28th day of October, 2014.
Kristine G. Baker
United States District Judge
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