Campbell v. Sussex County Federal Credit Union

Filing 12

OPINION re: Defendants motion to dismiss for failure to state a claim, or, in the alternative, for summary judgment. An appropriate order will be issued. Signed by Judge Robert B. Kugler on 6/24/2011. (dlk)

NOT FOR PUBLICATION

(Doc. No. 6)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
___________________________________
:
PAULA M. CAMPBELL,
:
:
Plaintiff,
:
:
Civil No. 10-710 (RBK/AMD)
:
v.
:
OPINION
SUSSEX COUNTY FEDERAL CREDIT
:
:
UNION,
:
:
Defendant.
___________________________________ :
KUGLER, United States District Judge:
Plaintiff Paula M. Campbell claims that Defendant Sussex County Federal Credit Union
improperly denied her benefits under an employee welfare benefits plan governed by the
Employee Retirement Income Security Act, 29 U.S.C. §§ 1001, et seq. (“ERISA”). Plaintiff
asserts claims under ERISA and a common law breach of contract claim. Presently before the
Court is Defendant’s motion to dismiss for failure to state a claim, or, in the alternative, for
summary judgment. Because the Court’s subject-matter jurisdiction is predicated solely on
Plaintiff’s ERISA claims, and because it is unclear whether ERISA governs the benefits plan at
issue, the Court denies Defendant’s motion without prejudice and orders Plaintiff to show cause
within thirty days why this Court has subject-matter jurisdiction over her claims.
I.

BACKGROUND
Plaintiff began working for Diamond State Federal Credit Union (“Diamond”) in 1983.

She became the president of Diamond in 1998. In January 2006, Diamond’s Board of Directors
agreed to give her a “supplemental retirement benefits” package that included Diamond’s

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promise to provide Plaintiff with health insurance at its sole expense until Plaintiff’s death by
enrolling Plaintiff in Diamond’s employee health insurance plan. (Compl. ¶¶ 4, 10). Diamond’s
Board of Directors adopted the package to “reward Plaintiff for her loyal and continuous service
to the Company.” (Compl. ¶ 10). Plaintiff characterizes the package as an ERISA-governed
“welfare benefit plan” and alleges that Defendant is the administrator and underwriter of the
plan. (Compl. ¶ 3). Neither party submitted a copy of the “plan” to the Court.
Beginning in May 2006, Pam Fluette, Defendant’s Chief Executive Officer, began to
recruit Plaintiff to take a position with Defendant. Plaintiff initially refused, but she told Ms.
Fluette that pursuant to her agreement with Diamond, Diamond was obligated to provide her
with health insurance for the remainder of her life. Ms. Fluette told Plaintiff that she could
negotiate a higher salary with Defendant because Defendant would not have to pay for her health
insurance. Eventually, in July 2007, Ms. Fluette offered Plaintiff the position of Vice President
of Business Development and Marketing with Defendant. Plaintiff accepted the position and
retired from her position as president of Diamond. When Plaintiff announced her retirement,
Diamond offered Plaintiff a position on its Board of Directors, which Plaintiff accepted.
Plaintiff began working for Defendant in November 2007. While working for Defendant,
Diamond continued to provide Plaintiff with free health insurance by enrolling her in its
employee health insurance plan. In early 2008, Plaintiff learned of rumors that Defendant was
seeking to acquire Diamond. Plaintiff spoke with the attorney who drafted the supplemental
retirement package about whether the package required Defendant to continue to provide her
with health insurance if it acquired Diamond. The attorney told Plaintiff that, pursuant to the
package, Defendant would be required to continue Plaintiff’s health insurance. Ms. Fluette also
told Plaintiff that Defendant would be required to honor the package if it acquired Diamond.

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In November 2008, Diamond’s Board of Directors proposed a merger with Defendant.
The proposal stated that Diamond would transfer all of its assets and liabilities to Defendant as
the surviving credit union. The merger occurred on March 31, 2009. After the merger, Ms.
Fluette again told Plaintiff that Defendant would honor the package, and Defendant did in fact
pay for Plaintiff’s health insurance from May 1, 2009 through November 2009.
On October 7, 2009, Defendant terminated Plaintiff’s employment. The supplemental
retirement package required Defendant to continue Plaintiff’s health insurance notwithstanding
her termination. However, on October 19, 2009, Plaintiff received a COBRA notification from
Defendant stating that if she wished to continue her health insurance coverage, she was required
to submit payment for her premiums within 60 days from the date of her termination. On
October 30, 2009, Plaintiff wrote to Defendant requesting confirmation that Defendant would
continue to pay her health insurance premiums. Defendant did not immediately respond to
Plaintiff’s request, and, because Plaintiff could not afford a lapse in coverage, Plaintiff made the
required COBRA payment.
On November 6, 2009, Plaintiff received a letter from Defendant stating that Defendant
would not continue to pay for Plaintiff’s health insurance. The letter did not address Defendant’s
obligations under the package. Plaintiff responded with another request that Defendant pay her
health insurance premiums. On November 16, 2009, Plaintiff received notice that her health
insurance was cancelled effective November 6, 2009. On December 18, 2009, Plaintiff’s
counsel sent a letter to Defendant stating that it was in breach of its duties and obligations under
the package. Defendant did not respond to Plaintiff’s letter.
Plaintiff filed the Complaint on August 8, 2010. The Complaint asserts a claim for denial
of benefits under ERISA (Count I), breach of fiduciary duty under ERISA (Count II), and breach

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of contract (Count III). Plaintiff asserts that this Court has subject matter jurisdiction based on
ERSIA’s jurisdictional provision, 29 U.S.C. § 1132(e), and general federal-question jurisdiction
under 28 U.S.C. § 1331. Plaintiff does not assert any basis for diversity jurisdiction under 28
U.S.C. § 1332.1 Plaintiff’s asserts supplemental jurisdiction over her state law contract claim.
Defendant did not answer but made a timely motion to dismiss the Complaint for failure
to state a claim under Rule 12(b)(6), or, in the alternative, for summary judgment under Rule 56.
Defendant argues that Plaintiff’s ERISA claims are barred by a one-year statute of limitations,
that ERISA does not create an individual cause of action for breach of fiduciary duty, and that
Plaintiff’s breach of contract claim is preempted by ERISA.
II.

LEGAL STANDARD
District courts “have an independent obligation to determine whether subject-matter

jurisdiction exists, even in the absence of a challenge from any party.” Arbaugh v. Y & H Corp.,
546 U.S. 500, 514 (U.S. 2006). “[I]f subject-matter jurisdiction turns on contested facts, the trial
judge may be authorized to review the evidence and resolve the dispute on [its] own.” Id.
Because the lack of jurisdiction itself precludes the court from asserting judicial power, a court
may take no further action in a matter once it determines that it lacks jurisdiction. See First Am.
Nat’l Bank v. Straight Creek Processing Co., 756 F. Supp. 945, 946 (E.D. Va. 1991) (where
diversity of parties is incomplete, court has no jurisdiction to consider plaintiff's motion to
dismiss non-diverse defendants; rather, court must dismiss action for lack of jurisdiction). Thus,
jurisdiction is a threshold issue that must be resolved before the court can take any further action
in the case. Frame v. Lowe, No. 09-2673, 2010 U.S. Dist. LEXIS 10494, at *12-13 (D.N.J. Feb.

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Plaintiff alleges that she is a “citizen and resident of the State of Maryland.” (Comp. ¶ 3). She alleges that
Defendant is a “credit union that is a cooperative financial institution, owned and operated by its members” that “can
be served at 1941 Bridgeville Highway Seaford, Delaware.” (Compl. ¶¶ 5, 6). Those allegations are an insufficient
factual basis for diversity jurisdiction under 28 U.S.C. § 1332.

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8, 2010); Royal Indem. Co. v. Admiral Ins. Co., No. 07-2048, 2007 U.S. Dist. LEXIS 85991, at
*5 (D.N.J. Nov. 19, 2007).
III.

DISCUSSION
Plaintiff asserts that this Court has subject matter jurisdiction over this case based on

ERSIA’s jurisdictional provision, 29 U.S.C. § 1132(e), and the general federal-question
jurisdiction statute, 28 U.S.C. § 1331. However, under either statute, “the existence of an
‘ERISA-governed plan’ is an essential precursor to federal jurisdiction.” UIU Severance Pay
Trust Fund v. Local Union No. 18-U, United Steelworkers of Am., 998 F.2d 509, 510 (7th Cir.
1993). If Plaintiff’s supplemental retirement benefits package does not qualify as an employee
welfare benefits plan under ERISA, this Court may not have subject-matter jurisdiction over
Plaintiff’s claims. Id.; see Koval v. Wash. County Redevelopment Auth., 574 F.3d 238, 244 (3d
Cir. Pa. 2009) (dismissing complaint for lack of subject-matter jurisdiction because the benefits
plan at issue was exempt from ERISA).
ERISA defines an “employee welfare benefit” plan as:
any plan, fund, or program which was heretofore or is hereafter
established or maintained by an employer or by an employee
organization, or by both, to the extent that such plan, fund, or
program was established or is maintained for the purpose of
providing for its participants or their beneficiaries, through the
purchase of insurance or otherwise, . . . medical, surgical, or
hospital care or benefits, or benefits in the event of sickness,
accident, disability, death or unemployment, or vacation benefits,
apprenticeship or other training programs, or day care centers,
scholarship funds, or prepaid legal services . . . .
29 U.S.C. § 1002(1). Interpreting that definition, the Supreme Court has held that “severance
benefits do not implicate ERISA unless they require the establishment and maintenance of a
separate and ongoing administrative scheme.” Angst v. Mack Trucks, Inc., 969 F.2d 1530, 1538
(3d Cir. 1992) (citing Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12 (U.S. 1987)). Thus,
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“severance agreements that are properly characterized as simple contracts between an employee
and employer . . . do not constitute plans under ERISA” even though they “often bind an
employer to enroll, or to keep enrolled, an employee in a pension or welfare benefit plan.”
Cvelbar v. CBI Ill., 106 F.3d 1368, 1373 (7th Cir. 1997); see also Miller v. Taylor Insulation Co.,
39 F.3d 755, 760-61 (7th Cir. 1994) (expressing skepticism that a promise by an employer to
enroll an employee in a benefits plan constituted a separate ERISA plan). This is because an
individualized contract for continued enrollment in a benefits plan likely will not “require the
establishment and maintenance of a separate and ongoing administrative scheme.”2 Angst, 969
F.2d 1538.
In Angst, the Third Circuit considered whether ERISA governed a “buyout plan” to
provide departing employees with a year of continued benefits under the employer’s existing
benefits plans. Angst, 969 F.2d at 1532. The Third Circuit held that “[b]ecause the continued
disbursement of benefits . . . did not require the creation of a new administrative scheme and did
not impose new administrative requirements on an existing administrative scheme, but rather
simply required the continuation of an existing procedure, we agree . . . that the buyout plan did
not constitute an ERISA plan.” Id. at 1540 (citing Fort Halifax Packing Co. v. Coyne, 482 U.S.
1 (1987)).
Here, Plaintiff alleges that Diamond’s Board of Directors adopted a “plan” to pay for
Plaintiff’s continued enrollment in Diamond’s employee health insurance plan. If Plaintiff’s
supplemental retirement benefits package was nothing more than a promise by Diamond to pay
for her continued enrollment in Diamond’s already existing employee healthcare plan, it may not

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This does not mean that ERISA never applies to single-employee plans. See Cvelbar, 106 F.3d1376. “[A]s long
as the benefits program meets the other requirements of an ERISA plan – namely, an ongoing administrative scheme
and reasonably ascertainable terms – the program does not fall outside the ambit of ERISA merely because it covers
only a single employee.” Id.

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qualify as an ERISA plan. In that event, this Court would not have jurisdiction over Plaintiff’s
claims unless Plaintiff asserted an alternative basis for jurisdiction. Because the parties have not
briefed this issue, and because the parties did not submit a copy of the alleged plan, the Court is
without sufficient evidence upon which to determine whether ERISA governs the plan. Thus,
the Court dismisses Defendant’s pending motion to dismiss without prejudice and orders
Plaintiff to show cause within thirty days why this Court has subject-matter jurisdiction to hear
her claims.
IV.

CONCLUSION
For the reasons discussed above, the Court dismisses Defendant’s motion to dismiss or,

in the alternative, for summary judgment, and orders Plaintiff to show cause within thirty days
from the date of the accompanying Order why this Court has subject-matter jurisdiction to hear
her claims. An appropriate Order shall enter.

Dated:6/24/2011

/s/ Robert B. Kugler
ROBERT B. KUGLER
United States District Judge

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