Gautier-Figueroa v. Bristol-Myers Squibb Puerto Rico, Inc.
Filing
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OPINION AND ORDER. GRANTED 72 MOTION requesting Order; MOOT 71 MOTION to dismiss; MOOT 25 MOTION to Amend/Correct; MOOT 24 MOTION to dismiss. For the reasons stated, plaintiff's 72 motion is GRANTED and this case is hereby REMANDED to state court. Signed by Judge Salvador E. Casellas on 2/29/2012.(AVB)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
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MARIA B. GAUTIER-FIGUEROA
Plaintiff,
v.
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Civil No. 11-1155 (SEC)
BRISTOL-MYERS SQUIBB PUERTO RICO,
INC., et al.
Defendants.
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OPINION AND ORDER
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Before the Court is plaintiff Maria Gautier-Figueroa’s (“Gautier”) motion to remand to
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state court (Docket # 72). Because the Employee Retirement Income Security Act of 1974
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(“ERISA”), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq. is inapplicable, and there being
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no other federal question here, Puerto Rico contractual law controls. Gautier’s motion,
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therefore, is GRANTED. Consequently, to the extent that the Opinion and Order of June 20,
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2011 in Gautier-Figueroa v. Bristol-Myers Squibb Puerto Rico, Inc., 792 F.Supp.2d 240 (D.P.R.
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2011) is inconsistent with the conclusions set forth below, it is hereby SET ASIDE.
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Factual and Procedural Background
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What should have been a typical employee-against-employer state suit for breach of
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contract has, unfortunately, taken an unpredictable turn into an arcane area of the ERISA
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legislation. This case arises following Gautier’s filing of a complaint in state court against her
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former employer, Bristol-Myers Squibb Puerto Rico, Inc. (“Bristol” or the “Company”),
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alleging, among other related state-law claims, that Bristol had breached the “BMS Puerto Rico
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Severance Pay and Release Agreement” (the “Severance Agreement”) by virtue of which she
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waived all her claims against Bristol arising from her involuntary termination. Docket # 8-1, pp.
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7-8.1 A comprehensive recount of Gautier’s factual and underlying allegations provides the
context and background necessary to set the stage for the analysis.
The 41 year-old Gautier began working for Bristol in 1998, and eventually reached the
position of Director Parenteral O.S.D. & Packaging at Bristol’s manufacturing plant in Manati,
Puerto Rico. Docket # 59, ¶¶ 8-10. While she worked there, Gautier did well: her total salary
with benefits totaled $150,566 per year. Id., ¶ 11.
But that all changed on May 5, 2010, when Bristol terminated her for no particular
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reason. Id., ¶ 11. At Gautier’s termination meeting, Rosa Sanabria-Nazario, Bristol’s Human
Resources Director, provided her with a notice of termination (the “Notice of Termination”),
a termination package comprised of several attachments, including the Severance Agreement
she had to sign and deliver by May 19, 2010, the effective date of her termination. Id., ¶ 13.2
The Company drafted and prepared such documents in their entirety, and according to the
complaint, Sanabria told Gautier that in order to receive her severance benefits, she had to sign
these documents, which were presented in terms of “take it or leave it.” Id., ¶ 15. In pertinent
part, the Notice of Termination provided:
Your severance pay calculation appears on this attachment.
Severance pay will be provided to you in accordance with the terms and
provisions of the Bristol-Myers Squibb Company Puerto Rico, Inc.
Severance Plan and Summary Plan Description (the Severance Plan). If you
comply with the requirements described below, severance benefits will be
paid to you at regular payroll intervals until the full benefit is paid. If you
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That action, filed in the Puerto Rico Court of First Instance, San Juan Superior Court was
styled Maria B. Gautier Figueroa v. Bristol Myers Squibb Puerto Rico, Inc., et al., KAC2010-1552
(803).
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The Notice of Termination included the following attachments: (1) a Severance Pay
Worksheet; (2) the General Release; (3) a Certification of Employment Form; (4) a Summary of Benefit
Coverages, a one-page document that explained her health benefits and COBRA; and (5) Vacation Pay
Summary. Docket # 6-1, pp. 1-4.
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obtain new employment, however, the balance of any outstanding severance
payments that may be due will be paid to you in a lump sum.
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Docket # 6-1, p. 1.
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Paramount to the Notice of Termination was a general release attachment (the “General
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Release”) Gautier had to sign in the same prescribed period of time, or else she “[would] not
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be eligible for Basic Severance or Supplemental Severance.” Id.3 In fact, per the Notice of
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Termination, failure to sign the General Release would entail that she would receive no post-
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termination benefits. Id. The General Release listed a plethora of employment-related statutes
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that Gautier relinquished “[i]n consideration of the execution of and [Gautier’s] compliance
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with the [General Release] . . . .” Id., p. 7-8. One of the laws Gautier “waived” was ERISA; in
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fact, this is the only instance where the acronym “ERISA” appears in the Notice of Termination
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and its attachments. Further, the General Release provided that it would “[b]e governed by the
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laws of the Commonwealth of Puerto Rico . . . .” Id., p. 9.
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The severance worksheet attachment (the “Severance Worksheet”) in turn provided for
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the simple tabulation of basic and supplemental severance, see id., p. 5, both of which were
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calculated by a mathematical formula. For instance, “[b]asic pay [was] [Gautier’s] weekly base
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rate of pay at [her] termination date, including salary reductions . . ., and excluding any overtime
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pay, any individual sales bonuses or other additional incentive payments.” Id. Gautier’s
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Supplemental Severance, meanwhile, was calculated based on three months of salary plus two
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weeks pay for each full year of service. In short, her severance pay yielded $189,838 in
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supplemental severance and $4,632 as basic severance, for a total of $194,271. Per the
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Severance Pay Worksheet, Bristol’s obligation to make severance payments ran from May 19,
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2010 to November 9, 2010. Id.
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The General Release gave Gautier twenty one days as opposed to the fourteen days alleged in
the complaint. Docket # 6-1, p. 7.
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Both parties signed the Severance Agreement in early May 2010 and thereafter Bristol
started making the corresponding severance payments. But on July 14, 2010, the Company,
through Beatriz B. Sanabria, sent a letter to Gautier where it “temporarily” suspended her
severance payments, citing a “system error” that miscalculated her supplemental severance.
Docket # 6-1, p. 11.4 The Company stated that the “correct” amount was $68,102: over a sixty
percent reduction from the original $194,271 it had agreed to. Id. Bristol also provided Gautier
with a new “severance package,” (the “New Agreement”), which incorporated the referenced
reduction. This time, however, Bristol gave Gautier forty five days to consider the New
Agreement. And, as was the case with the Severance Agreement, failure to sign and timely
return the New Agreement would entail that Bristol would no longer “[m]ake any further
severance payments.” Id.
According to the complaint, in late August 2010, the Company froze its severance
payments, having paid then $88,936 of the $194,271 it had bound itself to pay. Docket # 59, ¶¶
62-64. Then, on August 23, 2010 Gautier, through counsel, sent a letter to Sanabria rejecting
the New Agreement and demanding compliance with the Severance Agreement contract signed
in May 2010. Docket # 6-1, p. 25.5
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Apparently, Rosa Sanabria-Nazario and Beatriz B. Sanabria, although with purportedly
different names, appear to be one and the same: the Director of Human Resources. See Docket # 6-1
pp. 4 & 11.
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In pertinent part, such letter stated as follows:
[Gautier] is hereby rejecting the . . . “new offer” . . . .[She] does not accept
[Bristol’s] proposal to cancel or change the contract that both parties already [had]
agreed to and signed [in] May 2010. It is [Gautier’s] position that there is a valid
and binding contract agreed upon and signed by both parties. . . . The [Severance
Agreement] . . . as well as its attachments are documents prepared, in its entirety,
by [Bristol]. The company had more than enough opportunity to prepare, discuss,
calculate . . . , and verify the information and amounts included in said documents,
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A new player emerged on September 7, 2010, when the heretofore nonexistent Plan
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Administrator of the Bristol-Myers Squibb Puerto Rico, Inc. Severance Plan (the “Severance
Plan”), through counsel, replied to Gautier’s letter rejecting the New Agreement. Docket # 24-1,
p. 1. Enter ERISA: the Plan Administrator stated that Gautier’s letter “[h]a[d] been deemed by
[it] as a first-level appeal under the [Severance] Plan, and [would] be handled as such.” Id.
Noting that Gautier’s claims were controlled by ERISA, the Administrator gave Gautier until
November 24, 2010 to submit additional comments, arguments or evidence sustaining her
position. Id.
An exchange of correspondence ensued between the Administrator and Gautier’s
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counsel. Gautier reiterated that her claims were directed at Bristol for the alleged contractual
breach of the Severance Agreement, clarifying in turn that such cause of action had no relation
to ERISA, Docket # 24-2, while the Plan Administrator insisted that ERISA controlled the
parties’ dispute. Docket # 24-3. Things unraveled and Gautier filed suit in state court on
December 30, 2010, seeking damages for Bristol’s alleged noncompliance with the payments
set forth in the Severance Agreement, i.e., the amount agreed to in May 2010. See generally
Docket # 1-1.
Then, on February 11, 2011, Bristol filed a timely Notice of Removal (Docket # 1) before
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this court, arguing that because Gautier sought to recover benefits pursuant to an ERISA plan,
removal was proper. A month later, Gautier filed a motion to remand to state court (Docket #
12), maintaining that (1) the complaint on its face made no reference to ERISA, id., ¶¶ 22-35;
and (2) her Severance Agreement did not constitute an ERISA plan, id., at ¶¶ 46-67. On June
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prior to making the offering and . . . signing of said contract. Therefore, if there
was any discrepancy, it was due only to [Bristol’s] actions or omissions.
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Id.
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20, 2011, the Court entertained these issues, framing the controversy as follows: (1) is the
Severance Agreement between Bristol and Gautier part of an employee benefit plan?; (2) if so,
does the “complete preemption” doctrine apply? Gautier-Figueroa, 792 F.Supp.2d at 242.
In answering the first question in the affirmative, this court stated: “the [Severance] Plan
is the kind of ongoing, centrally administered, bureaucratic behemoth whose beneficiaries
Congress intended to innoculate from multifarious state legislation pursuant to its Commerce
Clause powers.” Id. at 244 (citations omitted). Because Gautier sought to recover benefits due
to her under the Severance Plan, the Court reasoned, her cause of action “[f]ell directly under
§ 502(a)(1)(B) of ERISA.” Id. (citation omitted). Ultimately, this court held that complete
preemption applied, and consequently, removal had been proper. Id. (citations omitted).
Following an active motion practice, the Court entered an Order on November 4, 2011,
asking Bristol to show cause as to why it should not reconsider its June 20, 2011 Opinion and
Order.6 In pertinent part, the Order stated:
Absent from that opinion . . . were important factors that could
change the outcome of this case, potentially depriving this Court’s
jurisdiction. For example, whether a “one-person” contract such as the one
present here, constitutes an ERISA plan; the issue of whether the Gautier’s
severance “plan” created and imposed upon Bristol an administrative
burden substantial enough to invoke ERISA status was likewise sidelined.
(citing, inter alia, D’Oliviera v. Rare Hospitality Intern., Inc., 150
F.Supp.2d 346, 353 (D.R.I. 2001). . . .
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Furthermore, “[f]rom a reasonable employee’s point-of-view, the
plan might not appear to be an ‘expressed intention by the employers to
provide benefits on a regular and long term basis,’ but a temporary program
‘solely for the purpose of employee attrition.’” De Jesus v. Wyeth
Pharmaceuticals Co., No. 09-1353, 2009 WL 3048415, at *6 (D.P.R. Sept.
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The Company moved to amend the Case Management Order, arguing that “[d]iscovery, pretrial
and trial proceedings are inapposite to the adjudication of this case.” Docket # 25, p. 1. Further, the
Company moved to dismiss, alleging among other grounds, that Gautier failed to exhaust the requisite
administrative remedies prior to filing suit. Docket # 71, p. 18.
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16, 2009) (citations omitted). The issue of whether the severance plan’s
“benefit obligations are merely a one-shot, take-it-or-leave-it incentive . .
. ,” id. at *5, was likewise ignored. See also Young v. Wash. Gas Light Co.,
206 F.3d 1200, 1203-04 (D.C.Cir. 2000) (holding that ERISA did not apply
to a severance plan when “the determinations of eligibility and the amount
of the benefits to be paid were purely mechanical”).
Docket # 51, p. 2.
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Bristol timely complied with the Court’s Show Cause Order. Docket # 56-1. Gautier
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responded and the Company replied. In a nutshell, Gautier contends the Severance Plan in this
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case does not constitute an ERISA plan because it required no “ongoing administrative
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scheme.” Docket # 62, p. 8. The Company, on the other hand, contends that the severance
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benefits exist solely because of the Severance Plan, which in turn requires an administrative
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apparatus.
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Standard of Review
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Because federal courts are the sole guardians of their limited jurisdiction, they have an
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obligation to examine their subject-matter jurisdiction sua sponte at all stages of the litigation.
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E.g., American Policyholders Ins. Co. v. Nyacol Products, Inc., 989 F.2d 1256, 1258 (1st Cir.
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1993) (“A federal court is under an unflagging duty to ensure that it has jurisdiction over the
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subject matter of the cases it proposes to adjudicate.”). Even if the parties “have disclaimed or
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have not presented” issues that go to a court’s subject-matter jurisdiction, courts are
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nevertheless obligated to consider them on their own accord. Gonzalez v. Thaler, 565 U.S.
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––––, ––––, 132 S.Ct. 641, 648 (2012) (citing United States v. Cotton, 535 U.S. 625, 630, 122
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S.Ct. 1781, 152 L.Ed.2d 860 (2002)). As a corollary of this jurisdictional duty, federal courts
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must, on their own initiative, “[i]nquire into [their] jurisdiction in removed cases and remand
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the same to the local courts for lack of it.” Gonzalez-Roman v. Federal Land Bank of Baltimore,
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303 F.Supp. 482, 483 (D.P.R. 1969) (citations omitted).
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Against this backdrop, it is common ground that a suit filed in state court, founded on
a claim arising under federal law, may be removed to the District Court, irrespective of the
parties’ residence. 28 U.S.C. § 1441(b). But a cause of action arises under federal law only
“[w]hen the plaintiff’s statement of his own cause of action shows that it is based upon [federal
law] or [the] Constitution.” Louisville & Nashville R.R. Co. v. Mottley, 211 U.S. 149, 152, 29
S.Ct. 42, 43, 53 L.Ed. 126 (1908). Under this well-pleaded complaint rule, the fact that a
defense to the plaintiff’s cause of action may involve federal law is insufficient grounds for
removal. Id. However, “a plaintiff may not defeat removal by omitting to plead necessary
federal questions.” Franchise Tax Bd. v. Construction Laborers Vacation Trust, 463 U.S. 1, 22,
103 S.Ct. 2841, 2853, 77 L.Ed.2d 420 (1983) (citations omitted).
Nevertheless, if a court finds that “a plaintiff has ‘artfully pleaded’ claims in this fashion,
it may uphold removal even though no federal question appears on the face of the plaintiff’s
complaint.” Rivet v. Regions Bank of Louisiana, 522 U.S. 470, 475, 118 S.Ct. 921, 925, 139
L.Ed.2d 912 (1998).Once a suit has been removed, the law provides for remand “if ‘the case
was removed improvidently and without jurisdiction.”’ Ochoa Realty Corp. v. Faria, 815 F.2d
812, 815 (1st Cir. 1987) (citation omitted); 28 U.S.C. § 1447(c) (“If at any time before final
judgment it appears that the district court lacks subject matter jurisdiction, the case shall be
remanded [to the Commonwealth court.]”).
Applicable Law and Analysis
Whether the Severance “Plan” falls under the purview of ERISA
Congress enacted ERISA to guarantee “[t]hat employees would receive the benefits they
had earned, but Congress did not require employers to establish benefit plans in the first place.”
Conkright v. Frommert, ––– U.S. ––––, 130 S.Ct. 1640, 1658, 176 L.Ed.2d 469 (2010) (citing
Lockheed Corp. v. Spink, 517 U.S. 882, 887, 116 S.Ct. 1783, 135 L.Ed.2d 153 (1996)
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(emphasis added)); Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 113, 109 S.Ct. 948,
956, 103 L.Ed.2d 80 (1989) (“ERISA was enacted to promote the interest of employees and
their beneficiaries in employer benefit plans and to protect contractually defined benefits.”)
(citations and internal quotation marks omitted); see also H.R. Rep. No. 93-533 (1973), as
reprinted in 1974 U.S.C.C.A.N. 4639, 4639 (“The primary purpose of [ERISA] is the protection
of individual pension rights . . . .”). With ERISA, moreover, Congress sought to mitigate the
administrative burden associated with an employee benefit plan, providing a “uniform set of
administrative procedures governed by a single set of regulations.” Fort Halifax Packing Co.
v. Coyne, 482 U.S. 1, 11 107 S.Ct. 2211, L.Ed.2d 1 (1987). Such framework “safeguard[s]
employee interests by reducing the threat of abuse or mismanagement of funds.” O’Connor v.
Commonwealth Gas Co., 251 F.3d 262, 266 (1st Cir. 2001) (citing Mass. v. Morash, 490 U.S.
107, 115 (1989) (internal quotation marks omitted)).
Under ERISA, an employee benefit plan can constitute an employee welfare benefit plan,
29 U.S.C.A. § 1002(1), an employee pension benefit plan, 29 U.S.C.A. § 1002(2), or both, 29
U.S.C.A. § 1002(3).7 Pursuant to the Labor Department regulations, severance pay plans or
severance arrangements—payments made by employers to employees who are involuntarily
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ERISA defines an “employee welfare benefit plan” as
[a]ny 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, (A) 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).
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terminated—may be treated as employee welfare benefit plans, rather than as pension plans. 29
U.S.C.A. § 1051
ERISA need not always govern a severance pay plan, however: merely labeling a benefit
program as such does not automatically turn it into an ERISA plan, see e.g., O’Connor, 251 F.3d
at 266, which is why courts have consistently reiterated that “[t]he ERISA statute is fairly broad
and its terms are defined ambiguously, if at all, leaving the task of providing a clearer
interpretation of the statutory provisions to the courts.” D’Oliviera, 150 F.Supp.2d at 350
(citation omitted); Belanger v. Wyman-sGordan Co., 71 F.3d 451, 454 (1st Cir. 1995) (“The text
of ERISA itself affords scant guidance as to what constitutes a covered ‘plan.’”).8
In determining whether the Severance Plan is a covered ERISA plan, “[t]he beacon by
which [courts] must steer is Fort Halifax.” Id. There, the Supreme Court recognized ERISA’s
statutory vacuum. 482 U.S. at 8, 107 S.Ct. at 2216, L.Ed.2d 1. And, giving meaning to ERISA’s
enigmatic language, the Court reasoned that because ERISA centers on the administrative
integrity of benefit plans, only those plans requiring ongoing administrative activity fall under
the gamut of ERISA insofar as they are subjected to employer abuse. See id. at 16. In deciding
that a Maine statute requiring the payment of a severance benefit by an employer who relocated
did not amount to a “plan” for ERISA purposes, the Fort Halifax Court held:
The requirement of a one-time, lump-sum payment triggered by a
single event requires no administrative scheme whatsoever to meet the
employer’s obligation. The employer assumes no responsibility to pay
benefits on a regular basis, and thus faces no periodic demands on its assets
that create a need for financial coordination and control. Rather, the
employer's obligation is predicated on the occurrence of a single
contingency that may never materialize. . . . To do little more than write a
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Hence, “[a]ttention to purpose is particularly necessary in this case because the terms
‘employee benefit plan’ and ‘plan’ are defined only tautologically in the statute, each being described
as ‘an employee welfare benefit plan or employee pension benefit plan or a plan which is both an
employee welfare benefit plan and an employee pension benefit plan.’” Fort Halifax, 482 U.S. at 8, 107
S.Ct. at 2216 (citation omitted).
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check hardly constitutes the operation of a benefit plan. Once this single
event is over, the employer has no further responsibility. The 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.
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Id. at 12, 107 S.Ct. at 2218.
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In a series of post-Fort Halifax cases, the First Circuit has had the opportunity to shed
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more light on what determines whether a given program falls under ERISA. The first of these
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was Simas v. Quaker Fabric Corp., 6 F.3d 849, 852-54 (1st Cir. 1993), where the Court of
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Appeals held that a “tin parachute statute,” which provided severance pay for employees who
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lost their jobs following corporate takeovers, was preempted by ERISA because
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[t]he Massachusetts employer needed some ongoing administrative
mechanism for determining, as to each employee discharged within two
years after the takeover, whether the employee was discharged within the
several time frames fixed by the tin parachute statute and whether the
employee was discharged for cause or is otherwise ineligible for
unemployment compensation under Massachusetts law . . . for at least two
years after the takeover, and probably beyond that point as to disputed
terminations, the employer would have to maintain records, apply the “for
cause” criteria, and make payments or dispute the obligation.
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Id. (emphasis added). The Simas court, moreover, observed that to deem a severance regime a
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“plan” within the meaning of ERISA, courts must consider the extent and complexity of
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administrative obligations of the program in question. Id. at 853.
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Two years after deciding Simas, the First Circuit resolved Belanger where it construed
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Fort Falifax as mandating that to be considered a “plan” for purposes of ERISA, the program
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must “[i]nvolve[] the undertaking of continuing administrative and financial obligations by the
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employer to the behoof of employees or their beneficiaries.” 71 F.3d at 454. In Belanger, a
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group of employees who accepted an early-retirement severance incentive sued their former
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employer after learning the latter had instituted a more generous package. Id. at 453. Holding
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that such severance incentives, based on years of service, did not comprise an ERISA plan, the
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court concluded that the employer “required no complicated administrative apparatus either to
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calculate or to distribute the promised benefit.” Id. at 455. The fact that the company made a
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succession of offers over a period of four years—as opposed to a “lone offer”— did not change
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the result. Id.
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Rodowicz v. Mass. Mut. Life Ins. Co., 192 F.3d 162, 167 (1st Cir.1999) came next.
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There, the First Circuit was confronted with another voluntary termination program, where the
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severance payments (which the employee could elect to receive as a lump-sum payment or
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through weekly payments) were also calculated by multiplying a number of weeks’ salary by
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years of service. Id. The benefits were offered to most employees during a five-week window
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and were conditioned on the employer’s ability to defer retirement for up to six months. Holding
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that the plan in Rodowicz fell outside of ERISA’s purview, the court held:
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[The plan] did not constitute an ERISA “plan.” True, the VTP
authorized certain exclusions and deferrals, as well as appeals by
disappointed employees, making it somewhat less mechanical and
unthinking than the Maine statutory scheme in Fort Halifax and the
one-time payment schemes in Belanger. Yet, as the district court found, the
VTP did not call for the sort of ongoing, individualized determinations
necessitated by the “tin parachute” statute addressed in Simas. . . .
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Id. at 171-72 (citations omitted).
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In O’Connor, the First Circuit’s latest guidance on this area of law, a Personnel
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Reduction Program (PRP), a type early retirement incentive, was at issue. 251 F.3d at 265. The
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PRP, which was offered to all non-officer employees during a fifteen-week period, contained
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the following benefits for employees who opted to retire: a severance bonus, pension credit,
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payment of COBRA premiums, and reimbursement for educational assistance and outplacement
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services. Id. After reminding that “[a] given plan must be evaluated in light of Congress’
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purposes in enacting ERISA[,]” id. at 266 (citation omitted), it made pellucid that courts must
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examine
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the nature and extent of an employer’s benefit obligations. Those
obligations are the touchstone of the determination: if they require an
ongoing administrative scheme that is subject to mismanagement, then they
will more likely constitute an ERISA plan; but if the benefit obligations are
merely a one-shot, take-it-or-leave-it incentive, they are less likely to be
covered.
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Id. at 267 (citations and internal quotation marks omitted). Ultimately, the First Circuit held that
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the PRP fell “on the non-ERISA side of the line . . . .” Id. at 268-69. Such conclusion stemmed
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principally from the court’s determination that the severance provision, the “primary component
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of the PRP,” neither required employer’s discretion nor mandated a complicated administrative
10
scheme subject to mismanagement. See id. at 267-68.
11
12
Before moving along, it is essential to keep in mind that because “Congress [only]
13
pre-empted state laws relating to plans, rather than simply to benefits.” Fort Halifax, 482 U.S.
14
at 11-12, 107 S.Ct. 2211(emphasis in original), courts must differentiate between plans, under
15
which benefits are distributed, and benefits because “[o]nly ‘plans involve administrative
16
activity potentially subject to employer abuse.” Id. at 16. In other words, merely providing
17
employees with benefits is not necessarily indicative of the existence of a plan under ERISA.
18
Hence, the Court will comb the record to ascertain whether the Severance Plan truly falls under
19
ERISA’s purview.
20
The Opinion and Order of June 20, 2011
21
As previously indicated, in its Opinion and Order of June 20, 2011, this court concluded
22
that the Severance Plan fell under ERISA. In so doing, it held, without digressing, that the
23
Severance Plan required an ongoing administration of a plan because the benefits were provided
24
as part of a preexisting and ongoing severance plan. Gautier-Figueroa, 792 F.Supp.2d. at 244-
25
45. But the Court only dedicated a one-paragraph discussion to such analysis, correctly
26
distinguishing one aspect of the packages implicated in Fort Halifax, Rodowicz, and O’Connor:
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namely, that they were all “[p]ayments available to a large number of company employees for
3
a limited time period.” Id. (citations omitted). Put another way, this court circumscribed its
4
analysis to a sole factor: the preexistence of the Severance Plan.
5
This court, however, did not have the opportunity to determine whether the severance
6
benefits, based on all pertinent facts, justified and required the establishment of an ongoing
7
plan. After all, the “[i]nquiry into whether an employee welfare benefit plan may be classified
8
as an ERISA plan requires a fact-intensive application of several factors . . . .” D’Oliviera, 150
9
F.Supp.2d at 351 (citing, inter alia, Belanger, 71 F.3d at 455); Demars v. CIGNA, Corp., 173
10
F.3d 443, 446 (1st Cir. 1999) (noting that no single act of the employer is indicative of an
11
ERISA-regulated plan). The Court will thus proceed to “[e]valuate a purported plan like the
12
[Severance Plan] as a unified whole.” O’Connor, 251 F.3d at 267.
13
The Court begins its analysis with an affidavit included in Bristol’s show cause response,
14
stating the Severance Plan has been in place since 2009 and “[h]as been used to provide
15
severance benefits in connection with terminations of multiple employees at all of Bristol’s
16
affiliates in Puerto Rico since its inception.” Docket # 56-2, p. 1. (emphasis added). At the
17
outset, because the Severance Plan is engineered to apply only in Puerto Rico, it stands
18
incapable “[o]f applying uniformly in all jurisdictions where the employer might operate.”
19
Simas, 6 F.3d at 852 (quoting Ingersoll–Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct.
20
478, 484, 112 L.Ed.2d 474 (1990)). As noted before, Congress enacted the ERISA to “ensure
21
that plans and plan sponsors would be subject to a uniform body of benefits law . . . [so as to]
22
minimize the administrative and financial burden of complying with conflicting directives
23
among States or between States and the Federal Government.” Ingersoll-Rand Co., 498 U.S. at
24
142, 111 S.Ct. at 78; Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 105 n. 25, 103 S.Ct. 2890,
25
2904 n. 25, 77 L.Ed.2d 490 (1983) (“Obligating the employer to satisfy the varied and perhaps
26
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conflicting requirements of particular state fair employment laws . . . would make administration
3
of a nationwide plan more difficult.”). But no such peril exists here; the Severance Plan is
4
narrowly tailored to apply exclusively to Puerto Rico.
5
Given such a confined and uncomplicated administrative scheme, ERISA’s broad
6
preemption provision appears unwarranted here. See Simas, 6 F.3d at 852; Fort Halifax, 482
7
U.S. at 10 (“‘ERISA’s comprehensive pre-emption of state law was meant to minimize this sort
8
of interference with the administration of employee benefit plans,’” . . . so that employers
9
would not have to ‘“administer their plans differently in each State in which they have
10
employees.’” (quoting Shaw, 463 U.S. at 105, 103 S.Ct. at 2904 (footnote omitted))). Because
11
no such “national” or uniform plan exists here, the Court feels compelled to reconsider its
12
description of the Severance Plan as a “[c]entrally administered, bureaucratic behemoth whose
13
beneficiaries Congress intended to innoculate from multifarious state legislation pursuant to its
14
Commerce Clause powers.” Gautier-Figueroa, 792 F.Supp.2d at 242.
15
Au contraire, in delimitating the Severance Plan to Puerto Rico, the Company not only
16
ran afoul of the above-referenced guiding principle behind Congress’s enactment of ERISA, but
17
more crucially, and as elucidated below, it bore upon itself no “[t]ask of coordinating complex
18
administrative activities.” Fort Halifax, 482 U.S. at 11, S.Ct. 2211 at 2217. Having made this
19
initial observation against finding an ERISA “plan,” the Court will nevertheless dissect the
20
Severance Plan to ascertain whether it can still pass muster.
21
Severance Bonus
22
Since the severance payments the Company unilaterally reduced here are both the
23
Severance Plan’s essence as well as Gautier’s patent motivation for subscribing the Severance
24
Agreement, the Court’ perusal of the purported plan begins here. As previously mentioned, on
25
May 5, 2010, Gautier released Bristol from any liability by means of the General Release; in
26
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consideration for her waiver, Bristol committed to pay her a total of $194,271 in severance,
3
among other marginal benefits the Court will examine later. Docket # 6-1, p. 5. The
4
supplemental severance, the gist Gautier’s severance benefits, was calculated by a mechanical,
5
simple mathematical formula, based upon Gautier’s three months of salary plus two weeks pay
6
for each full year of service. See Docket # 15-4, p. 5. Bristol’s responsibility for making
7
severance payments to Gautier was both short and formalistic: her severance pay would run
8
from May 19, 2010 to November 9, 2010; Bristol would simply temporarily continue making
9
its regular electronic payroll deposits (see Docket # 6-1, p. 5)—albeit for much less than
10
before—to Gautier’s bank account.
11
For starters, the Company does not even argue that such payments were made “[o]ut of
12
an segregated trust fund established for that purpose . . . .” Rosario-Cordero v. Crowley Towing
13
& Transp. Co., 46 F.3d 120, 124 (1st Cir. 1995).9 Rather, Gautier’s payments presumably
14
originated from the Company’s general assets, a practice that points to the Company’s
15
involvement—as opposed to the Plan Administrator—in the clerical task of administrating and
16
paying such simple payments.10 In Rosario-Cordero, the First Circuit intimated that such
17
straightforward enterprise entailed no risk of fund mismanagement. Cf. id. The Company’s
18
argument that it suspended Gautier’s severance benefits in order to “safeguard the financial
19
20
21
22
23
24
25
26
9
Contrary to the employers in Rosario-Cordero, the Company, through Sanabria, is involved
in “[t]he application for or the administration of the benefits.” Id. at 124. And, whereas in RosarioCordero, where “[t]he payment of vacation benefits under the Plan rest[ed] on contingencies and
processes entirely outside of the individual employers’ and employees’ control[,]” id., the severance
payments here were triggered by the Company’s decision to terminate an employee.
10
See Docket # 32, ¶ 40 ([T]he severance payments received under the [Severance Agreement]
were paid from the ‘cost center # 2994997.’This is the same ‘cost center’ from where [Gautier’s]
regular salary was paid in the manicuring department prior to her discharge.”). The Company does not
rebut this contention.
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integrity of employee’s benefit fund” is unpersuasive in light of the above. Congress designed
3
ERISA, among other things, to protect employees from losing their promised benefits because
4
of employer mismanagement. E.g., Massachusetts v. Morash, 490 U.S. 107, 112-13, 109 S.Ct.
5
1668, 1671, 104 L.Ed.2d 98 (1989) (citations omitted). By transferring to Gautier the blame
6
for its fault in calculating her benefits, the Company seeks to turn such noble purpose on its
7
head. Even assuming, arguendo, that the Severance Plan mandated such “financial integrity”
8
here, it would nevertheless be ephemeral: on November 10, 2010, at the latest, Bristol would
9
have had made no further payments to Gautier. The same holds true for the other benefit
10
contained in the Summary Plan Description (“SPD”), as fully discussed below. What is more,
11
per the Severance Agreement as soon as Gautier obtained new employment—theoretically, the
12
day after her termination date, on May 20, 2010—her severance payments would automatically
13
end, and “[a]ny remaining severance [would be] payable to [her] as a lump sum . . . .” Docket
14
# 6-1, p. 5 (emphasis added). Such undertaking does not strike the Court as sufficiently
15
elaborate to fall under the purview of ERISA. See Fort Halifax, 482 U.S. at 12, 107 S.Ct. 2211
16
(“To do little more than write a check hardly constitutes the operation of a benefit plan. Once
17
this single event is over, the employer has no further responsibility.”).
18
In the case at hand, as in Rodowicz, the purported ERISA plan “did not require that the
19
Company make a long-term financial commitment to any employee who chose to participate.”
20
192 F.3d at 171. Further, the First Circuit has held, and this court so holds, that a series of
21
severance incentives like the ones offered to Gautier, also based on years of service, do not
22
constitute an ERISA plan because those payments “required no complicated administrative
23
apparatus either to calculate or to distribute the promised benefit.” Belanger, 71 F.3d at 455.
24
The Company argues that Gautier’s “[s]everance benefits were not paid in a lump sum,
25
but rather scheduled to be paid on a weekly basis through 25 weeks.” Docket # 15, p. 9 (citation
26
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omitted). As noted above, such contention is inaccurate, as the obtainment of new employment
3
triggered a lump-sum payment. At any rate, just because Bristol opted to pay Gautier’s
4
severance benefits “[o]ver a period of time does not mean that the [Severance Plan] amounts
5
to an administrative scheme.” Tinoco v. Marine Chartering Co., Inc., 311 F.3d 617, 622 (5th
6
Cir. 2002); see also Delaye v. Agripac, Inc., 39 F.3d 235, 237 (9th Cir. 1994) (“Sending
7
[plaintiff] . . . a check every month plus continuing to pay [her] insurance premiums for the time
8
specified in the employment contract does not rise to the level of an ongoing administrative
9
scheme.”). The underlying rationale behind such reasoning is the lack of a long term, real
10
financial commitment by the employer for the benefit of an employee. Cf. Belanger, 71 F.3d at
11
454 (“Since a single-shot benefit requires no greater assurance than that the check will not
12
bounce, ERISA’s panoply of protections has virtually nothing to do with such a simple task.”)
13
(citation omitted). Like the severance at issue in O’Connor, Gautier’s severance bonus was
14
based on a rigid mathematical formula: Gautier’s tenure, calculated at the rate of two-and-a-half
15
week’s pay for each of the first ten years of service plus two weeks. In short, “[s]imple
16
arithmetic . . . dictated the amount of the bonus.” 251 F.3d at 269.
17
Particularly, where as here, such mechanical calculation was completed before Gautier
18
even signed the General Release and Severance Agreement, the Court finds that at its core, the
19
Severance Plan is a “take-it-or-leave-it incentive” that did not create the need for an ongoing
20
administrative burden. O’Connor, at 266-67; but cf. Ballesteros v. Bangor Hydro-Electric Co.,
21
463 F.Supp.2d 97, 100 n. 2 (D.Me. 2006) (holding that a severance package that included
22
payment of retirement benefits, triggered ERISA’s “[c]oncerns about an ongoing administrative
23
scheme that is subject to mismanagement as opposed to a ‘one-shot, take-it-or-leave-it’
24
incentive”) (citation and internal quotation marks omitted).
25
26
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Bristol next contends that it “was obligated over a prolonged time period, even after
3
Gautier’s termination, to provide her with severance benefits.” Docket # 56-1, p. 7. But the
4
unambiguous terms of the SPD, which oblige Bristol financially for a maximum of six months,
5
bespeak otherwise. The case law, moreover, forecloses the Company’s unavailing argument,
6
recognizing that six months, by definition, is not a prolonged period of time capable of
7
compromising the employer’s financial integrity. See e.g., De Jesus, 2009 WL 3048415, at *6
8
(holding that a plan which provided payments to employees for over three months and up to one
9
year required no continuous administration); Wells v. General Motors Corp., 881 F.2d 166, 176
10
(5th Cir.1989) (finding that an early-retirement incentive program where payment could be
11
made in installments over a two-year period was not ongoing and there was no need for
12
continuing administration).
13
Whether the benefits come due upon the occurrence of a single, unique event
14
As previously indicated, in deeming the Severance Plan a “plan” under ERISA, the Court
15
over relied on the fact that there was not a single, unique event (such as a plant closure, see Fort
16
Halifax, 482 U.S. at 1, 107 S.Ct. 2211) triggering payment of benefits to all participants. Rather,
17
the Company contends that eligible participants would receive a severance package upon their
18
individual involuntary termination. Not surprisingly, the Company stresses the fact that
19
Severance Plan “[i]s not a temporary “one-time only” program, but an established Severance
20
Program continuously in place, for several years, for all eligible employees.” Docket 56-1, p.
21
7. This argument carries considerable weight as it militates in favor of finding an ERISA22
covered plan. But again, such factor, without more, is inconclusive. See Belanger, 71 F.3d at
23
455 (holding that no “authoritative checklist” exists for courts to consult in order to determine
24
whether an employer has established an ERISA program).
25
26
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Be that as it may, common sense dictates the logic behind the “single event” factor; the
3
lack of such triggering event, usually implies that a company’s “plan” necessitates a complex,
4
administrative scheme subject to management abuse. But here, regardless that other employees
5
are also eligible and that the Severance Plan is triggered by successive terminations and not by
6
a single event, nothing changes that Bristol’s financial commitment with respect to such
7
terminated employee is minuscule. See James v. Fleet/Norstar Fin. Grp., 992 F.2d 463, 467 (2d
8
Cir.1993) (finding that payments made to employees with different termination dates and
9
eligibility criteria required only “simple arithmetical calculations.”). In the present case, there
10
are no long term benefits or investments that would impose upon Bristol a burden substantial
11
enough to reasonably mandate an ongoing administration scheme. See Belanger, 71 F.3d at 454
12
(“[O]ngoing investments . . . are uniquely vulnerable to employer abuse or employer
13
carelessness, and thus require ERISA’s special prophylaxis.”).
14
As fully discussed above, the Company’s commitment ends, at the longest, after a six15
month period. In this sense, none of ERISA’s regulatory safeguards exists here: (1) preventing
16
“[a]buses of the special responsibilities borne by those dealing with plans[,]” Fort Halifax, 482
17
U.S. at 15, 107 S.Ct. 2211 (citation omitted); (2) safeguarding “[e]mployees from ‘such abuses
18
as self-dealing, imprudent investing, and misappropriation of plan funds[,]’” id. (quoting
19
remarks of Representative Dent, 120 Cong. Rec. 29197 (1974) (emphasis added)); and (3)
20
providing employees with information “‘covering in detail the fiscal operations of their plan.’”
21
Id. at 16 (citation omitted). Here, however, the Company’s obligations simply “[d]id not involve
22
promises that had to be kept over a lengthy period, nor did the company thereby make any
23
lasting financial commitment of a type that might implicate ERISA’s substantive protections.”
24
Belanger, 71 F.3d at 455. (emphasis added).
25
26
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This court, moreover, is persuaded by its sister court’s analysis in D’Oliviera. Faced
3
with a similar “ongoing” severance plan established for the benefit of terminated employees,
4
the court held:
5
6
7
8
9
[T]he . . . plan is not an ERISA plan, notwithstanding that new obligations
are made to employees as each is terminated. In an earlier ruling the First
Circuit stated, ‘[b]ut so long as Fort Halifax prescribes a definition based
on the extent and complexity of administrative obligations, line drawing of
this kind is necessary and close cases will approach the line from both
sides.’ Therefore, although employees will become eligible over time for
various reasons, this Court concludes that the administrative burden
measured under this element is not significant enough in scope and degree
to bring the original plan over the Fort Halifax threshold.
10
150 F.Supp.2d at 352 (citing Simas, 6 F.3d at 854 (emphasis added)). After careful
11
consideration, the Court believes that such rationale controls the instant case.
12
The Company’s discretion in administering the “plan”
13
The extent to which the employer must exercise discretion comprises a telling factor in
14
determining a question of ERISA applicability, as it evinces the complexity (or lack thereof) of
15
the program in question. O’Connor, 251 F.3d at 267 (“The determination of what constitutes
16
an ERISA plan thus turns most often on the degree of an employer’s discretion in administering
17
the plan.”). As aptly framed by Judge Coffin: “[w]here subjective judgments would call upon
18
the integrity of an employer’s administration, the fiduciary duty imposed by ERISA is vital. But
19
where benefit obligations are administered by a mechanical formula that contemplates no
20
exercise of discretion, the need for ERISA’s protections is diminished.” Id.
21
In the case at hand, Bristol concedes that it has no discretion in determining the
22
employee’s eligibility because all that is required is for the employee to be involuntarily
23
terminated and that he or she signs the General Release. See Docket # 56-1, p. 6. (“[N]either
24
Bristol nor the Plan Administrator have discretion to deny severance benefits to those
25
terminated employees who are eligible to them under the terms of the plan.”). While Bristol
26
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2
does need to make an initial determination pursuant to certain boilerplate exclusions contained
3
in the Severance Plan—e.g., “for cause” criteria, Docket #15-4, pp. 3-4— the First Circuit has
4
deemed such “clerical” exercise insufficient to convert a plan into an ERISA-regulated plan.
5
O’Connor, F.3d at 269 (finding that for-cause determination did not involve the type of
6
discretionary determination subject to abuse that triggers an employer’s fiduciary obligation to
7
its beneficiaries). As Gautier correctly asserts, such objective, simple requirements were made
8
before the employee signed the Severance Agreement. There is simply no administration
9
afterwards. See D’Oliviera, 150 F.Supp.2d at 353 (“Once the guided ‘for cause’ determination
10
was made, no administrative apparatus, either to calculate or to distribute the promised benefit,
11
was involved. Only a simple, arithmetical application of the salary table was required.”).
12
This is bolstered by the fact that such process was evidently self-executing: as soon as
13
Gautier was terminated, an effortless check of her files would notify someone in the Human
14
Resources Department (e.g., Sanabria) whether the termination was with cause. If the
15
termination was unjustified, as was the case here, Sanabria simply tabulated the severance
16
payments based on an effortless mathematical formula dictated by the Severance Pay
17
Worksheet. Indeed, Sanabria signed both the Notice of Termination and the General Release.
18
Docket # 6-1, pp. 4 & 10. Such small clerical tasks, even in the aggregate, are insufficient to
19
impose upon Bristol a burden substantial enough to warrant ERISA’s aegis. D’Oliviera, 150
20
F.Supp.2d at 353 (holding that a determination of whether employees were terminated for cause
21
does not create an administrative burden substantial enough to invoke ERISA); Velarde v. Pace
22
Membership Warehouse, Inc., 105 F.3d 1313, 1317 (9th Cir. 1997) (finding that merely
23
determining whether an employee was terminated for cause is a “minimal quantum of discretion
24
[in]sufficient to turn a severance agreement into an ERISA plan”).
25
26
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2
As in D’Oliviera, the administration of the “for cause” criteria here merely required a
3
straightforward application of the listed “acts of willful misconduct or activity deemed
4
detrimental to the interest of [the Company] . . . .” Docket # 15-4, p. 4. But, unlike the severance
5
package in Simas, the Severance Plan created no burdensome scheme for individualized
6
discretionary determinations of the eligibility of employees for retirement benefits. See 6 F.3d
7
at 853-54 (finding that an ERISA plan existed because the determination of whether an
8
employee was discharged for cause was “likely to provoke controversy and call for judgements
9
based on information well beyond the employee’s date of hiring and termination[,]” requiring
10
the employer to maintain records, and make payments or otherwise actively dispute the
11
obligation). Furthermore, the “eligibility” criteria outlined in the SPD, see Docket 15-4, pp. 3-4,
12
is unlike those found in Emmenegger v. Bull Moose Tube Co., 197 F.3d 929, 935 (8th Cir.1999)
13
(finding ERISA plan where eligibility for severance pay required employer to evaluate the
14
quality of employee’s service) or Schonholz v.Long Island Jewish Med. Ctr., 87 F.3d 72, 76 (2d
15
Cir.1996) (deeming ERISA implicated where employer determines whether fired employee had
16
made a “good faith effort” to secure employment elsewhere). In short, the mechanical, one-time,
17
initial determination involved here does not carry the day. See Rodowicz, 192 F.3d at 171
18
(finding that plan that contained exclusions was “somewhat less mechanical and unthinking”
19
but required no “individualized determinations”). Consequently, the level of subjective
20
assessment of cause here—an initial clerical determination devoid of any discretion—falls short
21
of the threshold required by the First Circuit in Simas.
22
The “appeal” mechanism the Company alleges Gautier failed to exhaust, also enlightens
23
the Court as to the Company’s evident lack of managerial discretion. According to the SPD,
24
such process worked the following way:
25
26
If upon the date of [Gautier’s] termination of employment [she] is not
advised that [she] will be eligible to receive severance payments from the
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2
5
Severance Plan, [Gautier’s] claim for severance benefits under the
Severance Plan is deemed denied.” If a claim for severance benefits under
the Severance Plan is denied in full or in part, [Gautier] may appeal the
decision to the Plan Administrator. To appeal a decision, [she] must [mail]
a written document . . . appealing the denial of the claim within 60 days
after [Gautier’s] termination of employment . . . .
6
Docket # 15-4, p. 13. How an aggrieved employee would find this out is a mystery, as the SPD
7
is supposedly disseminated after an employee’s “automatic” enrollment. Per the SPD, moreover,
8
the Company does not communicate a “denial” of benefits; thus the initial communication an
9
“eligible” employee received is the Notice of Termination Sanabria allegedly provided to
10
Gautier. Such standard process is uncharacteristic of an ERISA plan. See Rosario-Cordero, 46
11
F.3d at 124 (finding an ERISA plan when “[e]mployees seeking their vacation benefits must
12
apply directly to the Plan Administrator to obtain them”).11
3
4
13
To recapitulate, the Severance Plan lacks managerial discretion as to eligibility because
14
(1) it was open to all of Bristols’s involuntarily terminated employees with limited,
15
straightforward exclusions; (2) the calculation of the benefits was mechanical; (3) Bristol lacked
16
discretion to exclude eligible employees; and (4) the benefits were offered by the Company in
17
take-it-or-leave it terms as opposed to the employee’s application to the Plan Administrator.
18
The “reasonable employee” perspective
19
In Belanger the First Circuit made clear that ERISA’s applicability must be analyzed
20
from the employee’s point of view: “[w]hether, in light of all the surrounding facts and
21
circumstances, a reasonable employee would perceive an ongoing commitment by the employer
22
23
11
24
25
26
Strangely, the “Administrator” deemed Gautier’s initial letter rejecting the New Agreement
as an “appeal,” although Gautier was never officially “denied” a claim pursuant to the “process,” and
the sixty day deadline to “appeal” had already elapsed by then. At any rate, the installment of the
referenced “appeal” process bears little weight when compared with the other non-ERISA qualities
implicated here. See Rodowicz, 192 F.3d at 172.
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2
to provide employee benefits. . . . Thus, evidence that an employer committed to provide
3
long-term . . . benefits to its employees will often be telling.“ 71 F.3d at 455 (citations omitted).
4
To that effect, in its show cause order, the Court cited Dakota, Minnesota & Eastern R.R.
5
Corp. v. Schieffer, 648 F.3d 935, 938 (8th Cir. 2011), a case of first impression, for the
6
proposition that a “one-person” contract providing severance benefits to a single employee was
7
not an ERISA employee welfare benefit plan. In its show cause response, Bristol clarifies that
8
it “[h]as never argued that each Severance Agreement entered into with each participant
9
constitutes an ERISA plan, but that the Severance Agreement is but one of the requirements set
10
forth in the Severance Plan in order to obtain benefits under it.” Docket # 56-1, p. 6. Hence,
11
it asserts that it enacted the Severance Plan, which is applicable to any eligible employee that
12
signs the General Release, to provide benefits to all terminated employees, not just Gautier. Id.
13
Nevertheless, “[B]ristol concedes that the Severance Agreement may be reasonably considered
14
as a one-person contract, since it has to be signed by each terminated employee individually in
15
order to be eligible to obtain the benefits under the Severance Plan.” Docket # 67, p. 5.
16
For the reasons set forth below, the Court agrees with Gautier that a reasonable employee
17
would perceive that the Severance Agreement was a singular agreement between she and her
18
former employer, offered exclusively to comply with Puerto Rico’s rather generous labor
19
legislation in exchange for a waiver and release. Several reasons lend credence to this
20
determination. First, according to the complaint, neither Sanabria nor Bristol provided Gautier
21
with any “[E]RISA Plan and/or summarizing any benefits under ERISA, or any retirement
22
plan.” Docket # 59, ¶ 19.12 Second, while the Notice of Termination referred to the Severance
23
24
12
25
26
While the Company alleges that it provided Gautier with the SPD along with the Notice of
Termination, such document is not part of the Notice of Termination’s attachments. Moreover, the
record shows that the Company proved that it enclosed a copy of the SPD (Docket # 71-6, p. 20), for
the first time, on September 7, 2010. E.g., Phelan v. Wyoming Associated Builders, 574 F.3d 1250,
1
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2
Plan multiple times, the term ERISA is nowhere to be found and no reference was made to any
3
administrative process whatsoever. Thus, a reasonable employee could construe such “plan” as
4
the collection of her severance benefits in a “package,” in exchange for her right to sue the
5
Company. Third, the General Release expressly provides that “[t]he parties agree that the
6
[Severance Agreement] shall be governed by the laws of the Commonwealth of Puerto Rico.
7
. . .” Docket #6-1, p. 9. And fourth, the acronym “ERISA” only appears once in the Notice of
8
Termination and its attachments: ironically, in the section where Gautier “waived” such cause
9
of action.
10
On this point Bristol incorrectly asserts that the severance benefits awarded to Gautier
11
exist “[e]xclusively, by virtue of an ERISA-covered severance plan,” Docket # 67, p. 5,
12
because such contention is contradicted by the Severance Worksheet’s plain language: “The
13
severance payments set forth [here] are designed to comply with any and all statutory
14
obligations that may arise out of an involuntary termination including, but not limited, to
15
statutory payments under Puerto Rico Act 80 . . . .” Docket # 6-1, p. 6. It follows that Gautier,
16
who was involuntarily terminated, waived her Law 80 claims in consideration for the severance
17
payments Bristol now incorrectly seeks to condition on the existence of an ERISA plan. See In
18
re Palmas del Mar Properties, Inc., 932 F.Supp. 36, 39 (D.P.R. 1996) (construing the purpose
19
and history of Law 80 and describing the statute as “indemnity payment [that] is standard in all
20
cases. . . . [and] is nothing else but a punishment, a fixed remedy due to any employee unfairly
21
fired”); see also Orsini Garcia v. Srio. de Hacienda, 177 P.R. Dec. 596 (2009) (holding that the
22
remedies conferred by Law 80 cannot be waived by employees).
23
24
25
26
1559 (10th Cir. 2009) (interpreting “received” to mean “postmarked”). In any event, this issue is far
from determinative.
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2
True, the severance payments are slightly more generous than the discharge indemnity
3
prescribed by Law 80, although the parties dispute whether the amount of money Bristol paid
4
Gautier (before freezing payments) satisfies what the state law mandates. The Court need not
5
resolve such dispute, as there is a more fundamental reason why the severance benefits
6
“awarded” to Gautier undoubtedly exist—independently of the Severance Plan: namely, a quid
7
pro quo, whereby Gautier surrendered her right to file suit against the Company in connection
8
with her involuntary termination. See Docket # 6-1, p. 8. (“In consideration of the benefits that
9
you will receive in exchange for executing the [Severance] Agreement [and General Release]
10
. . . .”); see also Orsini Garcia, 177 P.R. Dec. 596 & n. 58 (finding that a general release akin
11
to the one present here is a settlement agreement (contrato de transaccion)).
12
The existence of Gautier’s other benefits was thus predicated upon such contractual
13
arrangement, not on the Severance Plan or the Company’s altruism. The First Circuit has
14
cautioned that, when faced with these type of waivers, courts “[s]hould scrutinize an ostensible
15
waiver with care in order to ensure that it reflects the purposeful relinquishment of an
16
employee’s rights. Smart v. Gillette Co. Long-Term Disability Plan, 70 F.3d 173, 181 (1st Cir.
17
1995).
18
In light of the above, and seen from a reasonable employee’s perspective, the Court finds
19
that the Notice of Termination and the documents included therein, could plausibly be
20
interpreted as a one-person contract between the Company and Gautier.
21
Other Benefits
22
The other elements of the Severance Plan— all temporary and limited in nature—are the
23
following: Health Care Plan, Life Insurance, and the Employee Assistance Program (“EAP”).
24
Docket # 15-4, pp. 8-9. As to the Health Care Plan and Life Insurance, these were identical:
25
Gautier could remain in her Bristol-subsidized medical plan and a Bristol-provided limited life
26
1
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2
insurance until earlier of (1) six months measured from her termination date, (2) the day her
3
severance payments end, or (3) the date Gautier begins new employment. Docket # 15-4, p. 8.
4
Alternatively, Gautier could opt to continue coverage as required by COBRA.13 As was the case
5
with the severance payments, theoretically speaking, if Gautier became employed on May 20,
6
2010, the day after her termination, such benefits would cease forthright.
7
In O’Connor, the First Circuit faced a similar situation, where a severance payments’
8
mechanical and simple calculation outweighed non-severance benefits such as COBRA. 251
9
F.3d at 270. Concluding that these kind of “minor perks” fell short of establishing an ERISA
10
plan, the court held that
11
16
[t]he “Severance Plan” consists of a . . . lump-sum severance, the
centerpiece of the incentive, plus a few enhanced benefits that otherwise
would have been provided upon retirement under pre-existing ERISA plans,
though without the added inducement . . . of COBRA premiums for a year.
Although . . . these non-severance benefits might implicate ERISA to some
extent, we are persuaded that they did not transform the [Severance Plan]
as a whole into an ERISA-protected plan. These were minor perks attached
to the severance. Neither involved the kind of ongoing discretionary
judgments that would sufficiently tax an employer’s administrative integrity
to warrant ERISA’s prophylaxis
17
Id. (emphasis added).14 Confronted with “plans” that temporarily extend the continuation of
18
healthcare benefits, other Circuits have reached identical results. See e.g., Angst v. Mack
12
13
14
15
19
20
21
22
23
24
25
26
13
COBRA is an acronym for Consolidated Omnibus Budget Reconciliation Act of 1985,
Pub.L.No. 99–272, 100 Stat. 82. The COBRA provisions of ERISA relate to continuing health care
coverage after an employee’s termination. According to the Notice of Termination, the COBRA
benefits, which were to be paid in full by Gautier (the Company made no contributions), were not
contingent upon the execution of the General Release. Docket # 6-1, p. 2.
14
According to the SPD, a “Rule of 70” benefit may apply. See Docket # 15-4. But this benefit,
whose calculation is also mechanical, is disbursed and administered pursuant to the Bristol-Myers
Squibb Retirement Income Plan, which is neither at issue here nor applicable to Gautier. Id. Hence, the
Court will refrain from discussing the effect, if any, of these “Rule of 70 pension payments” on
ERISA’s applicability.
1
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2
Trucks, Inc., 969 F.2d 1530, 1539 (3d Cir.1992) (holding that a plan’s “[p]rovision of a year of
3
continued benefits . . . did not require the creation of a new administrative scheme, and did not
4
materially alter an existing administrative scheme . . .”); Stokes v. Local 116 of Intern. Union
5
of Electronic, Elec., Salaried, Mach. and Furniture Workers, Civ. A. No. 92–3131, 1993 WL
6
23895, at *8 (E.D. Pa. Feb. 2, 1993) (finding that six months of continued health benefit did not
7
require the development of an administrative scheme).
8
As for the temporary (i.e., six months) continuation of Gautier’s life insurance coverage
9
as well as the EAP, the Court finds that these peripheral benefits imposed no burden upon the
10
Company’s administrative integrity. While the Company cites no case law on this front, the
11
Court found precedents defeating its proffer. See e.g., Arivella v. Alcatel-Lucent, 755 F. Supp.
12
2d 353, 364 (D. Mass. 2010) (“Continuation of the certain insurance benefits for one year and
13
the ability to roll the cash payments into an IRA do not strike the Court . . . as the sort of
14
ongoing administrative programs that would shift the [plan] into the ambit of ERISA.”); Kaelin
15
v. Tenneco, Inc., 28 F.Supp.2d 489, 491 (N.D.Ill. 1998) (determining that an employee
16
assistance program is not an ERISA plan); see also Taggart Corp. v. Life and Health Benefits
17
Admin., Inc., 617 F.2d 1208, 1211 (5th Cir.), cert. denied, 450 U.S. 1030, 101 S.Ct. 1739, 68
18
L.Ed.2d 225 (1980) (holding that an employer’s “bare purchase” of an insurance policy is
19
insufficient to establish an ERISA plan). Accordingly, these superficial, short-term “fringe
20
benefits,” even in the aggregate, fall short of converting the Severance Plan into an ERISA21
protected plan.
22
Conclusion
23
The collective effect of the temporary, minor benefits is insufficient to counteract the
24
non-discretionary attribute of the severance payments, the cardinal aspect of the “plan.” With
25
the exception of the “single event” factor, the administration of the benefits delineated in
26
1
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2
Gautier’s Severance Agreement, falls short of requiring the establishment of a distinct, ongoing
3
and complicated administrative scheme subject to employer abuse. By like token, it cannot be
4
gainsaid that the calculation, processing and administration of such benefits “[r]equire[d] the
5
exercise of discretion to the degree that would justify saddling an employer with fiduciary
6
responsibility and foreclosing an employee’s state claims.” O’Connor, 251 F.3d at 271
7
(footnote omitted; emphasis added).15
8
In sum, the Severance Plan (at least as applied to Gautier) is not an employee benefit
9
plan within the scope of ERISA because it neither requires a prolonged administrative and
10
financial apparatus nor imposes upon the Company a substantial burden, nor long term financial
11
obligations with respect to its employees; and the Company lacks management discretion as to
12
the employees’ eligibility, among the other reasons articulated above. Because the Severance
13
Plan is not a “plan” governed by ERISA, her claim that the Severance Agreement was breached
14
does not present a federal question; any obligations Bristol may have with Gautier are
15
contractual in nature, are governed by the terms of the Severance Agreement and do not
16
implicate ERISA. Consequently, the Court lacks subject matter jurisdiction to entertain this
17
action, and removal is, therefore, improper.
18
19
20
21
22
23
24
25
26
15
While this court in no way discourages the formation of ERISA plans, it will not allow the
Company to use ERISA as a pretext to foreclose Gautier’s meritorious state law claims. Cf.
Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 113-14,128 S.Ct. 2343,171 L.Ed.2d 299 (2008)
(noting that Congress’ efforts not to discourage employees from creating benefit plans is “[o]utweighed
by ‘[its] desire to offer employees enhanced protection for their benefits.’”) (quoting Varity Corp. v.
Howe, 516 U.S. 489, 497, 116 S.Ct. 1065, 134 L.Ed.2d 130 (1996)). Ironically, although Congress
specifically crafted the preemption provision to protect employees, see e.g., Helfman v. GE Group Life
Assur. Co., 573 F. 3d 383, 391 (6th Cir. 2009), “[i]n practice [it] almost never comes up in a way that
favors participants.” Andrew Stumpff, Darkness at Noon: Judicial Interpretation May Have Made
Things Worse for Benefit Plan Participants under Erisa than Had the Statute Never Been Enacted, 23
St. Thomas L.Rev. 221, 229 (2011).
1
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2
There is one loose end: whether this court should entertain Gautier’s state law claims
3
notwithstanding the absence of federal jurisdiction. None of the parties has addressed this issue.
4
Recently, in Redondo Const. Corp. v. Izquierdo, 662 F.3d 42, 49 (1st Cir. 2011), the First
5
Circuit recapitulated the well settled rule that “[i]f the federal claims are dismissed before trial,
6
. . . . the state claims should be dismissed as well.” Id. (quoting United Mine Workersv. Gibbs,
7
383 U.S. 715, 726, 8s6 S.Ct. 1130, 16 L.Ed.2d 218 (1966)). It reminded, however, that such
8
general principle is no “mandatory rule to be applied inflexibly in all cases[,]” id. (citation
9
omitted), punctuating that “[d]istrict court[s] must exercise ‘informed discretion’ when deciding
10
whether to exercise supplemental jurisdiction over state law claims.” Id. (quoting Roche v. John
11
Hancock Mut. Life Ins. Co., 81 F.3d 249, 256-57 (1st Cir. 1996)). Such determination
12
implicates a weighing of several factors: to wit, comity, judicial economy, convenience, and
13
fairness. Id. (citations omitted).
14
Having evaluated these elements, the Court declines to exercise supplemental
15
jurisdiction in this case. The parties have concentrated their efforts here mostly on ERISA16
related concerns; the Puerto Rico law issues, alas, have received no consideration. Further,
17
discovery has not yet commenced. Comity, meanwhile, will be served by permitting the
18
Commonwealth courts to resolve the important issues of contractual and employment state law
19
that abound here. For the reasons stated, Gautier’s motion is GRANTED and this case is hereby
20
REMANDED to state court. Inasmuch as the Opinion and Order of June 20, 2011 contradicts
21
the conclusions reached here, it is hereby SET ASIDE.
22
IT IS SO ORDERED.
23
In San Juan, Puerto Rico, this 29th day of February, 2012.
24
25
26
S/ Salvador E. Casellas
SALVADOR E. CASELLAS
U.S. Senior District Judge
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