Doran v. Joy Global, Inc., et al (JRG2)
Filing
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MEMORANDUM OPINION AND ORDER: The Court finds that the plaintiffs claim meets both prongs of the Davila preemption test and his claim for a declaratory judgment to determine his hire date is preempted by ERISA. Because the plaintif f has failed to exhaust his administrative remedies by filing a claim and appeal with the plan administrator, his action is hereby dismissed. The defendants motion for judgment on the pleadings is GRANTED and the plaintiffs complaint is hereby DISMISSED. See order for details. Signed by District Judge J Ronnie Greer on 4/22/2016. (RLC, )
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT GREENEVILLE
COLIN R. DORAN,
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Plaintiff,
v.
JOY GLOBAL, INC. f/k/a JOY MINING
MACHINERY and JOY GLOBAL
UNDERGROUND MINING, LLC f/k/a
JOY MINING MACHINERY,
Defendants.
No. 2:15-CV-243
MEMORANDUM OPINION AND ORDER
The defendants filed a Motion for Judgment on the Pleadings, [Doc. 20], asking the Court
to dismiss the plaintiff’s complaint for failure to exhaust all administrative remedies under the
Employee Retirement Income Security Act, (“ERISA”), 29 U.S.C. § 1132(a). The plaintiff has
responded, [Doc. 26], and opposes dismissal on the pleadings arguing that his suit is not subject
to the ERISA administrative exhaustion requirement. The defendants have replied, [Doc. 29],
and the matter is ripe for review.
I.
Factual Background
The plaintiff alleges that he was hired by Gullick Dobson Mining Machinery, a Dobson
Park Industries Company, on May 5, 1974.
The plaintiff became the vice president of
engineering for “American Longwall, a wholly-owned subsidiary of Longwall International Ltd.,
a Dobson Park Industries Company or one of its successors” in 1993. In 1995, the defendant
companies or a parent company acquired the plaintiff’s employer, American Longwall. Upon
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this acquisition, the plaintiff alleges that the parties negotiated for the plaintiff to continue
working for the defendant companies. One of the terms of his continued employment was that
“Mr. Doran’s hire date would be May 5, 1974 for all purposes relating to Mr. Doran’s
employment” with the defendant companies.
This employment transfer agreement was
memorialized in a letter dated March 6, 1996 which was attached to the complaint
(“Employment Letter”), stating “The offer includes participation in standard benefits programs
including a comprehensive medical plan, dental plan, life insurance, voluntary life and accident
insurance plan, employee pension plan and 401(k) savings plan. Your current hire date of May
5, 1974, as established by American Longwall, will be transferred with you to Joy.”
The plaintiff brought this action in state court seeking a declaratory judgment that his hire
date with the defendant companies is May 5, 1974. He alleges the defendants now claim he
cannot rely on the Employment Letter stating his hire date of May 5, 1974 applies to “certain
employment benefits and coverages.” The plaintiff has not filed any claim with the defendants’
ERISA plan administrator about his hire date or his pension benefits. The defendants timely
removed this action because they argue the plaintiff’s claim is completely preempted by ERISA.1
As an alternative basis for removal, the defendants argue that the parties meet the requirements
for diversity jurisdiction under 28 U.S.C. § 1332. The plaintiff argues that his claim is not
completely preempted by ERISA and therefore removal on that basis is inappropriate; however,
he acknowledges that removal based on diversity jurisdiction is proper and does not contest
removal jurisdiction.
II.
Standard of Review
1
If a plaintiff files a state-law complaint that should have been brought as an ERISA enforcement action, a
defendant can remove the case because the statute “converts an ordinary state common law complaint into one
stating a federal claim for purposes of the well-pleaded complaint rule.” Aetna Health Inc. v. Davila, 542 U.S. 200,
209 (2004).
2
The defendants now move this Court for a judgment on the pleadings pursuant to Federal
Rule of Civil Procedure 12(c). Rule 12(c) states that “after the pleadings are closed—but early
enough not to delay trial—a party may move for judgment on the pleadings.” Fed. R. Civ. P.
12(c). A motion for judgment on the pleadings is subject to the same standard of review as a
motion for dismissal under Rule 12(b)(6).
Penny/Ohlmann/Nieman, Inc. v. Miami Valley
Pension Corp., 399 F.3d 692, 697 (6th Cir. 2005). A motion to dismiss under Rule 12(b)(6)
requires the Court to construe the allegations in the complaint in the light most favorable to the
plaintiff and accept all the complaint’s factual allegations as true. Meador v. Cabinet for Human
Res., 902 F.2d 474, 475 (6th Cir. 1990). The Court may not grant a motion to dismiss based
upon a disbelief of a complaint’s factual allegations. Lawler v. Marshall, 898 F.2d 1196, 1199
(6th Cir. 1990). The Court must liberally construe the complaint in favor of the party opposing
the motion. Miller v. Currie, 50 F.3d 373, 377 (6th Cir. 1995). However, the plaintiff must
allege facts that, if accepted as true, are sufficient “to raise a right to relief above the speculative
level,” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). The court may consider
documents central to the plaintiff’s claims to which the complaint refers and incorporates as
exhibits. Amini v. Oberlin College, 259 F.3d 493, 502 (6th Cir. 2001).
III.
Analysis
The defendants argue that the plaintiff’s case should be dismissed because his suit for a
declaratory judgment is preempted because ERISA requires that he exhaust all administrative
remedies, which he has failed to do. The plaintiff seeks this declaratory judgment of his hire
date for the sole purpose of requiring the defendants’ ERISA pension plan to recognize the 1974
date has his hire date when calculating benefits, a decision that the plan administrator has the
discretion to determine in the first instance, according to the defendants. The defendants argue
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that because this suit for declaratory judgment is in effect a suit to clarify his right to future
benefits under the pension plan dating back to 1974, this suit is premature where the plaintiff has
failed to exhaust the administrative remedy of filing a claim with the plan administrator. The
plaintiff argues that his suit is not preempted by ERISA because he is not seeking benefits under
the pension plan at this time and because the plan does not have to be construed to determine his
right to a declaratory judgment based on the employment letter.
ERISA requires that a plaintiff exhaust all administrative remedies available to him prior
to filing a suit in federal court in an effort to allow ERISA plan administrators to manage the
funds, interpret plan provisions, correct any errors in administration, and assemble a factual
record for the district court to review. Croomer v. Bethesda Hospital, Inc., 370 F.3d 499, 504
(6th Cir. 2004). This exhaustion requirement exists even though ERISA does not explicitly
require exhaustion of administrative remedies. Id. (citing Ravencraft v. UNUM Life Ins. Co. of
Am., 212 F.3d 341, 343 (6th Cir. 2000)). Dismissal of the plaintiff’s suit is proper where the
plaintiff has failed to exhaust all administrative ERISA remedies before filing suit in federal
court. Weiner v. Klais & Co., Inc., 108 F.3d 86, 90 (6th Cir. 1997).
An ERISA civil enforcement action may be brought by a plan-participant plaintiff “to
recover benefits due to him under the terms of his plan, to enforce his rights under the terms of
the plan, or to clarify his rights to future benefits under the terms of the plan.” 29 U.S.C. §
1132(a)(1)(B). When a state law claim by its nature “falls within the scope of ERISA §
1132(a)(1)(B), two consequences follow: first, the claim is deemed to be a federal claim . . . for
purposes of federal question jurisdiction and thus remov[able]; and second, the claim is
preempted.” Gardner v. Heartland Indus. Partners, LP, 715 F.3d 609, 613 (quoting Davila, 542
U.S. at 210) (internal citations omitted). A state law claim falls within § 1132 where: (1) the
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plaintiff complains about the denial of benefits he is entitled to only because of an ERISA plan;
and (2) the plaintiff does not allege a violation of any other state or federal legal duty
independent of ERISA or the plan terms. Id. (citing Davila, 542 U.S. at 210). Both prongs of
the test must be satisfied for a state law claim to be preempted. Id. Whether a duty alleged is
“independent” does not depend merely on whether the duty “nominally arises from a source
other than the plan’s terms.” Id.
The defendant argues that the plaintiff is seeking a state-law declaratory judgment to skirt
the plan administrator’s discretion to determine in the first instance the plaintiff’s right to
benefits. According to the defendants, the plaintiff is attempting to have the Court declare that
his hire date is May 5, 1974 so that when he does seek benefits under the pension plan, the plan
administrator will be bound to accept the 1974 date as his hire date. The defendants argue that
because the plaintiff is attempting to enforce or clarify his rights to pension benefits through a
back-door remedy of a declaratory judgment, his suit falls within § 1132 as an enforcement
action that is preempted by federal law.
The plaintiff argues that his suit is not preempted as it fails to meet either prong of the
Davila test. The plaintiff claims he is not seeking any benefit payments under the plan and that
the defendant’s duty to recognize his 1974 hire date arises independently from the ERISA plan.
The request for a declaratory judgment to determine his hire date “requires an analysis of the
employment letter under state law” and “any duty that Defendants have to acknowledge Mr.
Doran’s hire date of May 5, 1974 derives from the facts and circumstances concerning Mr.
Doran’s pre-employment negotiations with Defendants and the sending of the Employment
Letter,” according to the plaintiff. The plaintiff relies on Gardner to show that his suit is not
preempted.
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In Gardner, participants in their employer’s supplemental executive retirement plan
(SERP), an ERISA subject plan, sued the investment firm and its executives that sold its
ownership interest in the employer company asserting state law claims of tortious interference
with contract. Gardner, 715 F.3d at 611-12. The investment firm agreed to sell its ownership
interest in the plaintiffs’ employer to another investment firm; however, the buyer threatened to
back out of the purchase when it discovered that it would owe $13 million to the plaintiff
executives under the SERP if it purchased the company.
Id.
In response, the defendant
investment firm persuaded the company’s board of directors to declare the SERP invalid, thereby
ensuring the deal would close. Id. In determining if the plaintiffs’ claim for tortious interference
with contract was completely preempted by § 1132(a)(1)(B), the Sixth Circuit used the twoprong Davila test, focusing on the second prong of “independent duty.” Id. at 613. The Sixth
Circuit held that the plaintiffs’ claims were not preempted by ERISA, noting three reasons for
this determination. First, the defendants’ duty not to interfere with the SERP agreement “arises
under [state] tort law, not the terms of the SERP itself.” Id. at 614. Second, the defendants’ duty
is not “derived from, or conditioned upon, the terms of the SERP[; n]obody needs to interpret the
plan to determine whether that duty exists.” Id. And third, although the terms of the SERP
would be relevant to measuring damages, any damages awarded to the plaintiff “would be
payable from the [Defendants’] assets, not from the plan itself.” Id. at 615.
In Gardner, the Sixth Circuit analyzed the Second Circuit decision of Stevenson v. Bank
of New York Co., Inc., a case that appears similar to the facts of this case at first glance. 609
F.3d 56 (2d Cir. 2010). In Stevenson, a bank executive agreed to accept a transfer to an affiliated
bank where the bank promised to maintain Stevenson’s status as a pension plan participant, a
status he would have otherwise lost in the transfer. Id. at 60. The defendant bank then reneged
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on that promise and the plaintiff sued for breach of contract, arguing that the promise to keep
Stevenson’s status in the pension plan was an independent duty outside of the plan. Id. The
Second Circuit held that the plaintiff’s claim for breach of contract was not preempted by ERISA
because the defendant’s obligation to maintain Stevenson’s status in the plan did not derive from
the plan but arose from a separate promise made by the bank. Id. The Second Circuit stated two
reasons the claim was not precluded: first, the plan’s terms were relevant only to the measure of
damages, not to the existence of the duty; and second, the damages would be payable from the
defendant bank’s assets, not from the plan itself. Id. at 61.
The plaintiff’s claim here, unlike Gardner and Stevenson, does not seek damages for an
alleged breach of the promise by the defendants. Instead, the plaintiff has sued for a declaratory
judgment that his hire date, stemming from a promise made by the defendants outside of the
ERISA plan, is May 5, 1974 for the purpose of his employment “benefits and coverages.” The
only reason to request such a declaratory judgment is so that he may then seek pension benefits
under the ERISA plan using this earlier hire date so that the plan administrator is bound by this
hire date from the start. Granting a declaratory judgment as requested by the plaintiff effectively
makes any “damages” he would receive from this suit payable from the pension plan, not the
defendant companies. The plaintiff is not seeking damages outside of the ERISA benefits plan
for breach of contract like the Stevenson and Gardner plaintiffs. Although the plaintiff has
arguably articulated a duty arising from state law if the Court construes the complaint to claim
that the defendants breached their contract contained in the Employment letter,2 the duty is not
“independent” from the ERISA plan. The plaintiff’s “damages” would be benefits paid under
the plan calculated from an earlier start date.
2
Although the plaintiff states he seeks the
The Court notes that the plaintiff has not actually articulated the “independent duty” other than that the Court
should interpret the employment offer letter “under state law.” The Court presumes the plaintiff’s argument is a
duty not to breach the contract agreement concerning his hire date.
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declaratory judgment to enforce the May 5, 1974 hire date “for all employment benefits and
coverages,” he has articulated no reason other than the pension plan for seeking the declaratory
judgment. In fact, the correspondence between plaintiff’s counsel and the defendants clearly
underscores that the plaintiff is concerned about the defendants’ determination that “under the
pension plan” the plaintiff’s hire date is his date of transfer to defendant companies, not the May
5, 1974 date referenced in the Employment Letter. Although the plaintiff has not directly
asserted a claim for payment of benefits under the plan in this lawsuit, he is asking this court to
clarify his right to future benefits under the plan by declaring his applicable hire date under the
pension plan.
The Court finds that the plaintiff’s claim meets both prongs of the Davila preemption test
and his claim for a declaratory judgment to determine his hire date is preempted by ERISA.
Because the plaintiff has failed to exhaust his administrative remedies by filing a claim and
appeal with the plan administrator, his action is hereby dismissed. The defendants’ motion for
judgment on the pleadings is GRANTED and the plaintiff’s complaint is hereby DISMISSED.
ENTER:
s/J. RONNIE GREER
UNITED STATES DISTRICT JUDGE
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