Bingham et al v. FIML Natural Resources, LLC et al

Filing 15

ORDER denying 10 Motion to Remand, and 14 Request for Oral Argument on Motion to Remand, by Judge Christine M. Arguello on 6/18/13.(dkals, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 13-cv-00167-CMA-KMT
MARK D. BINGHAM,
TONY W. CHURCH,
JEFFERY C. DELANEY,
ANNETTE M. MONTOYA,
RICK L. PARKS,
AMBER D. SHETTRON,
STEWARD G. SQUIRES, and
CHARLES L. ZORIO,
Plaintiffs,
v.
FIML NATURAL RESOURCES, LLC,
DEVONSHIRE INVESTORS (DELAWARE) LLC, and
DEVONSHIRE INVESTORS, LLC,
Defendants.

ORDER DENYING PLAINTIFFS’ MOTION TO REMAND AND
DEFENDANTS’REQUEST FOR ORAL ARGUMENT

This matter is before the Court on Plaintiffs’ Motion to Remand. (Doc. # 10.)
On December 21, 2012, Plaintiffs brought this action in the District Court for the City
and County of Denver. (Doc. # 1, ¶ 1.) On January 23, 2013, Defendants removed the
case to this Court pursuant to 28 U.S.C. § 1441(c). They contend the action includes
a claim arising under federal law because it falls within the scope of the Employee
Retirement Income Security Act (“ERISA”), 29 U.S.C. § 1001, et. seq. (Doc. # 1, ¶ 8.)
Therefore, Defendants contend that this Court has original jurisdiction over the action

under 28 U.S.C. § 1331. (Id.) In the instant motion, Plaintiffs argue that the action
should be remanded to the state court for lack of subject matter jurisdiction, pursuant
to 28 U.S.C. § 1447(c). (Doc. # 10 at 1.) For the following reasons, the Court denies
Plaintiffs’ motion.
I. BACKGROUND
Until recently, Plaintiffs worked for Defendant FIML Natural Resources, LLC
(“FIML”), a subsidiary of Fidelity Investments. (Doc. # 10 at 2.) FIML offered certain
high-level employees incentive compensation through participation in the Amended and
Restated FIML Natural Resources Phantom Carried Interest Plan (the “CIP”). (Id. at 3.)
The CIP became effective on March 31, 2008. (Doc. # 1-4 at 23.)
The CIP awarded participants “Pool Points,” representing ownership interests in
two separate pools of assets. (Doc. # 10 at 3.) Payouts from the CIP took the form of a
payment by FIML of the purchase price for Pool Points. (Id.) Under Section 5(a) of the
CIP, participants could elect to receive payment in full for all of their Pool 1 points by
January 1, 2009. (Doc. # 1-4 at 34.) Plaintiffs aver that they each received a payout for
the entirety of their Pool 1 points. (Doc. # 10-1, ¶ 6.) The timing of Pool 2 payments is
governed by Sections 5(b) and 5(c) of the CIP. 1 (Doc. # 1-4 at 35.) Section 5(b)
provides for periodic payments from each pool every third year after 2010 “equal to
80%” of the participant’s purchase price. (Id.) Section 5(c) reserves the remaining 20%
1

These sections also apply to unredeemed Pool 1 points.

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of Pool 2 payments until the participant separates from the company, unless FIML
experiences a change of control. 2 (Id.)
II. STANDARD OF REVIEW
For a case to be properly removed from state court, the federal court must have
jurisdiction. See 28 U.S.C. § 1441. The Court presumes no jurisdiction exists absent
an adequate showing by the party invoking federal jurisdiction. 3 Karnes v. Boeing
Co., 335 F.3d 1189, 1193 (10th Cir. 2003). Accordingly, the burden is on the defendant,
as the removing party, to demonstrate that the Court has jurisdiction to hear the
plaintiff’s claim. Id. To make this showing, a defendant must demonstrate that the
plaintiff's complaint “establishes either that federal law creates the cause of action or
that the plaintiff’s right to relief necessarily depends on resolution of a substantial
question of federal law.” Franchise Tax Bd. of State of Cal. v. Constr. Laborers
Vacation Trust, 463 U.S. 1, 27-28 (1983). This determination must be based on
the claims asserted by the plaintiff, “unaided by anything alleged in anticipation or

2

If FIML experiences a change of control, participants may receive the entirety of their
payments. (Doc. # 1-4 at 5.)
3

Contrary to Defendants’ contention (Doc. # 12 at 7), the presumption against removal
jurisdiction applies where a defendant alleges that a federal statute completely preempts the
plaintiff’s state claims. See Karnes, 335 F.3d at 1193 (applying presumption against removal
where defendant argued that removal was appropriate because plaintiff’s claims were
completely preempted by the Labor Management Relations Act); DuCharme v. International
Brotherhood of Electrical Workers, 7 Fed. App’x. 633, 634 (9th Cir. 2001) (applying “strong
presumption against removal jurisdiction” where defendant argued that removal was appropriate
because plaintiff’s claims were completely preempted by the Labor Management Relations Act).

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avoidance of defenses which it is thought the defendant may interpose.” Id. at 9.
(quoting Taylor v. Anderson, 234 U.S. 74, 75–76 (1914)).
III. DISCUSSION
The Supreme Court has established that ERISA completely preempts any state
law claims that relate to plans governed by ERISA. Aetna Health, Inc. v. Davila, 542
U.S. 200, 208 (2004). Defendants contend that removal is appropriate because the CIP
is an “employee pension benefit plan” under ERISA. (Doc. # 1, ¶ 10.)
An “employee pension benefit plan” subject to ERISA is:
[a]ny plan . . . maintained by an employer . . . that by its express terms
or as a result of surrounding circumstances. . .
(i) provides retirement income to employees, or
(ii) results in a deferral of income by employees for periods
extending to the termination of covered employment or beyond,
regardless of the method of calculating the contributions made to the plan,
the method of calculating the benefits under the plan or the method of
distributing benefits from the plan.
29 U.S.C. § 1002(2)(A) (emphasis added); McKinsey v. Sentry Ins., 986 F.2d 401, 405
(10th Cir. 1993).
Additionally, the Secretary of Labor promulgated regulations excluding plans
providing bonuses for work performed (“bonus plans”) from the definition of “‘employee
pension benefit plan’ . . . unless such payments are systematically deferred to the
termination of covered employment or beyond, or so as to provide retirement
income to employees.” 29 C.F.R. § 2510.3-2(c) (emphasis added) (internal quotations
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omitted); McKinsey, 986 F.2d at 405. In the instant case, it is undisputed that the CIP
is a bonus plan. (Doc. ## 10 at 7; 12.)
To determine whether a bonus plan is an employee pension benefit plan under
29 U.S.C. § 1002(2)(A) and 29 C.F.R. § 2510.3-2(c), courts consider whether – either
through its express terms or as a result of the surrounding circumstances – the plan
systematically defers payments to the termination of covered employment or beyond.
See McKinsey, 986 F.2d at 406 (finding that the express terms of a bonus plan
prevented the systematic deferral of income); Emmenegger v. Bull Moose Tube Co.,
197 F.3d 929, 933 (8th Cir. 1999) (“[T]he shares . . . cannot be characterized as
‘payments [that] are systematically deferred’ to termination. . . . This is true whether one
looks to the express language of the [plan] or to the circumstances surrounding the
[plan].”) To be systematic, deferral must be more than mere happenstance; the fact that
some payments under a plan may be made after an employee has retired or left the
company does not result in ERISA coverage. See Emmenegger, 197 F.3d at 933
(distinguishing between bonus plan payments made post-termination due to
“happenstance,” and payments made post-termination due to the plan’s express
requirements); see also Weekley v. Thales Fund Management, LLC, No. 12-CV-2499,
2012 WL 6808523, at *3-4 (S.D.N.Y. Dec. 28, 2012) (unpublished) (plan that distributed
bonuses on specified dates did not systematically defer payment to the termination of
employment simply because a participant happened to retire before a scheduled
distribution date).
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In McKinsey, the Tenth Circuit found that a plan did not provide for the
systematic deferral of payments because its express terms allowed participants to
withdraw the vested portion of their allocations at any time during the course of their
employment. 986 F.2d at 406. By the plan’s express terms, deferral until termination
was optional and occurred at participants’ discretion; thus, it was not systematic. Id.
Conversely, in the instant case, the express terms of the CIP require the
systematic deferral of payments to termination. Section 5(b) of the CIP authorizes the
payment of only 80% of the Pool 2 “Proved Assets” – and expressly excludes payment
of the value of any “Probable Assets” – during the participant’s employment. (Doc.
# 1-4 at 35.) Section 5(c) does not permit the payments to be made prior to the
participant’s termination of employment unless the company experiences a change of
control. (Id. at 35.) By the CIP’s express terms, post-employment disbursement of
payments is more than mere happenstance; some payments are withheld until
termination, and then awarded “automatically, as a matter of course.” See Foster v. Bell
Atlantic Tricon Leasing Corp., No. 93-CV-4527, 1994 WL 150830, at *3 (S.D.N.Y. April
20, 1994) (unpublished) (plan that did not award post-termination payments
“automatically or as a matter of course” did not systematically defer income); Kaufman
v. S & A Rest. Corp., No. 3:-06-CV-2192, 2008 WL 2242621 at *7 (N.D. Tex. May 30,
2008) (unpublished) (summary judgment order finding that a stock bonus plan that

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allowed participants to redeem a portion of their shares only after their separation from
the company deferred payment until the termination of employment). 4
Thus, the Court finds that, by its express terms, the CIP systematically defers
payments until participants separate from the company, and is, therefore, an employee
pension benefit plan under ERISA. 5
IV. CONCLUSION
For the foregoing reasons, the Court finds that the CIP is an employee pension
benefit plan under ERISA, and therefore this Court has original jurisdiction over this

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The Court is not persuaded by Plaintiff’s argument that the CIP does not systematically defer
income because it does not “generally defer” income. (Doc. ## 10 at 9; 13 at 2-3.) The phrase
“general deferral” first appeared in Hagel v. United Land Co., wherein the court applied a
“natural language” interpretation of 29 U.S.C. § 1002(2)(A). 759 F. Supp. 1199, 1202 (E.D.
Va. 1991). In subsequent cases, other courts have quoted Hagel’s “general deferral” language
in analyzing “systematic deferral” under 29 C.F.R. § 2510.3-2(c). Weekley v. Thales Fund
Management, LLC, No. 12-CV-2499, 2012 WL 6808523, at *3-4 (S.D.N.Y. Dec. 28, 2012)
(unpublished); Foster, 1994 WL 150830, at *2. However, the preeminent canon of statutory
interpretation requires courts to “presume that [the] legislature says in a statute what it means
and means in a statute what it says there.” Connecticut Nat. Bank v. Germain, 503 U.S. 249,
253-54 (1992). The Court finds that the plain language of the statute and the regulation is
sufficiently clear to guide analysis without interjecting the concept of “general deferral.” See
29 U.S.C. § 1002(2)(A). Therefore, the Court declines to follow Hagel and its progeny in
undertaking a natural language interpretation and inferring from that interpretation a requirement
that income is generally deferred.
5

Based on this conclusion the Court finds it unnecessary to address Plaintiffs’ further argument
that the CIP does not fall within the purview of ERISA because of its surrounding circumstances.
See 29 U.S.C. § 1002(2)(A) (ERISA governs plans that defer income to termination either by
their express terms or as a result of the surrounding circumstances); compare McKinsey, 986
F.2d at 405-06 (Tenth Circuit examined the express terms of the plan, and not the surrounding
circumstances) with Weekley, 2012 WL 6808523, at *3 (The court looked at the surrounding
circumstances because the parties alleged that the plan did not operate in accordance with its
express terms).

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matter pursuant to 28 U.S.C. § 1331. Accordingly, it is hereby ORDERED that Plaintiff’s
Motion to Remand (Doc. # 10) is DENIED. It is
FURTHER ORDERED that Defendant’s Request for Oral Argument on Motion to
Remand (Doc. # 14) is DENIED.
DATED: June

18

, 2013.
BY THE COURT:

__________________________
CHRISTINE M. ARGUELLO
United States District Judge

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