Mark Gomez v. Ericsson Inc
MEMORANDUM AND OPINION. Signed by Judge Rodney Gilstrap on 1/22/2014. (ch, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
§ Civil Action No. 2:13-cv-00372-JRG
MEMORANDUM AND OPINION
Before the Court is Plaintiff Mark Gomez’s (“Gomez”) Motion for Judgment Concerning
Jurisdiction, wherein Gomez seeks a determination of this Court’s jurisdiction in this matter. (See
Dkt. No. 7.) Having considered the parties’ written submissions, the Court concludes that
jurisdiction is proper.
This case involves a dispute between Plaintiff Gomez and his former employer Ericsson,
Inc. (“Ericsson”), concerning certain payment allegedly due under an employment severance
Ericsson sponsors two separate severance plans for qualified employees – the
Standard Severance Plan (“Standard Plan”) and the Top Contributor Severance Plan (“Top
Contributor Plan”). Gomez began working for Ericsson on or around November 17, 2008. He
first participated in the Standard Plan and subsequently became eligible to participate in the Top
Contributor Plan. On July 28, 2011, Ericsson terminated Gomez’s employment as part of a
layoff. On August 4, 2011, Gomez signed a Release and Severance Agreement (“Severance
Agreement”), under which Ericsson promised to pay Gomez employee severance compensation
pursuant to the terms of the Standard Plan and the Top Contributor Plan. In exchange, Gomez
agreed to waive certain claims against Ericsson and to deliver to Ericsson all Ericsson equipment
and other properties in his possession. Ericsson had issued a laptop computer to Gomez during
the course of his employment.
Gomez submitted a claim for severance benefits on October 5, 2011, which Ericsson
denied, allegedly on the basis that Gomez had wiped the hard drive of the laptop computer clean
before returning it and only provided the data separately without his personal information. Upon
the initial denial of his claim for benefits, Gomez submitted an appeal within Ericsson on April 6,
2012. Ericsson’s final decision denying his benefits was issued on August 2, 2102.
Gomez filed suit against Ericsson on April 30, 2013, seeking to recover the severance
payment due him “under the terms of the Standard Plan, Top Contributor Plan, and the Severance
Agreement.” (Complaint, Dkt. No. 1.) Gomez’s Complaint alleges that this case either arises
under § 502(a)(1)(B) of the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq.
(“ERISA”), or it arises under Texas common law for breach of contract. Id. On September 30,
2013, Gomez filed the instant motion seeking a determination that Ericsson’s severance plans fall
outside ERISA, and thus his claim against Ericsson is a state law claim over which this Court has
no subject matter jurisdiction.
Congress enacted ERISA to “protect the interests of participants and beneficiaries [in
employee welfare and pension benefit plans] by establishing standards of conduct, responsibility,
and obligation for fiduciaries and providing for appropriate remedies and ready access to the
Federal Courts.” Varity Corp. v. Howe, 516 U.S. 489, 513 (1996). With ERISA, moreover,
Congress sought to “ensure that plans and plan sponsors would be subject to a uniform body of
benefits law,” thus mitigating “the burden of complying with conflicting directives among States
or between States and the Federal Government.” Ingersoll-Rand Co. v. McClendon, 498 U.S.
133, 142 (1990). “Suits to enforce the terms of the statute and to recover welfare benefits
wrongfully withheld arise under federal law and can be brought in federal court without regard for
the amount in controversy.” Massachusetts v. Morash, 490 U.S. 107, 113 (1989).
Severance pay plans or severance agreements – payments made by employers to
employees who are involuntarily terminated – may be treated as employee welfare benefit plans
under ERISA. See Clayton v. ConocoPhillips Co., 722 F.3d 279, 296 (5th Cir. 2013) cert. denied,
13-419, 2014 WL 102989 (U.S. Jan. 13, 2014). For severance plans to be covered by ERISA,
however, the plans must “by nature require an ongoing administrative program to meet the
employer’s obligation,” because only such plans involve administrative activity “potentially
subject to employer abuse.” Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 11, 15 (1987).
In Fort Halifax, a Maine statute required employers to provide a one-time severance payment to
employees in the event of a plant closing. Id. at 3. In finding that ERISA did not pre-empt such
statute, the U.S. Supreme Court reasoned that a “one-time, lump-sum severance payment triggered
by a single event requires no administrative scheme whatsoever to meet the employer’s
obligation.” Id. at 12. “To do little more than write a check hardly constitutes the operation of a
benefit plan [under ERISA].” Id.
There are two types of ERISA preemption: complete and express preemption. Haynes v.
Prudential Health Care, 313 F.3d 330, 333 (5th Cir. 2002). “In general, complete preemption
exists when a remedy falls within the scope of or is in direct conflict with ERISA § 502(a),1 and
therefore is within the jurisdiction of federal court.”
Thus, whether state claims are
completely preempted by § 502(a) primarily answers questions of jurisdiction. Id. (citing Giles v.
NYLCare Health Plans, Inc., 172 F.3d 332, 336 (5th Cir.1999)). In this regard, “§ 502(a)
functions as an exception to the well-pleaded complaint rule – Congress may so completely
preempt a particular area that any civil complaint raising this select group of claims is necessarily
federal in character.” Giles, 172 F.3d at 336. “Section 502, by providing a civil enforcement
cause of action, completely preempts any state cause of action seeking the same relief, regardless
of how artfully pleaded as a state action.” Id. (quoting Metropolitan Life Ins. Co. v. Taylor, 481
U.S. 58, 64-65 (1987)).
“Unlike the scope of § 502(a)(1)(B), which is jurisdictional and creates a basis for removal
to federal court, § 514(a) governs the law that will apply to state law claims, regardless of whether
the case is brought in state or federal court.” Haynes, 313 F.3d at 334. Express preemption
exists when a state law claim “relates to” ERISA plans unless it “regulates insurance” under §
514(a). Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45 (1987).
Plaintiff Gomez first argues that Ericsson’s Severance Agreement is not a plan as defined
by ERISA. Given that no diversity exists between the Plaintiff and the Defendant, Gomez alleges
that this Court lacks subject matter jurisdiction to adjudicate his claims against Ericsson. Gomez
further argues that his state law claim is not preempted by ERISA, because it is based on a liability
Under ERISA § 502(a), a plan participant may bring a civil action to “recover benefits due to him under the terms of
his plan.” 29 U.S.C. § 11132(a)(1)(B).
independent of ERISA. This Court will address each of these arguments in turn.
a. The Severance Agreement and Severance Plans Are Covered by ERISA
The Severance Agreement between Gomez and Ericsson incorporates by reference the
terms of the Standard Plan and the Top Contributor Plan, providing that severance payment will be
made according to these plan terms. Thus, to determine whether the Severance Agreement falls
within ERISA, this Court examines the terms and administrative schemes, if any, of the two
Gomez contends that Ericsson’s severance plans are not governed by ERISA, because
(1) the plans are paid out of Ericsson’s general assets and do not require a separate fund, (2) the
plans do not require an ongoing administrative program, (3) the plans provide lump-sum, one-time
payments calculated based on simple mathematical formulas and concerning single termination
events, and (4) the plan provisions are sufficiently defined and detailed to minimize discretion.
This Court disagrees.
From the outset, the Court notes that Ericsson’s severance plans are sponsored for the
benefit of over 10,000 employees nationwide, making the need for “a uniform body of benefits
law” particularly compelling in this case. See Ingersoll-Rand, 498 U.S. at 142. While the plans
are uninsured and funded through Ericsson’s general assets, such plans may nonetheless be
governed by ERISA if the employer has implemented an administrative scheme for paying
benefits. See Fort Halifax, 482 U.S. at 18 (“[I]f an employer has an administrative scheme for
paying benefits, it should not be able to evade the requirements of the statute merely by paying
those benefits out of general assets.”).
Further, contrary to Gomez’s allegation, the Court finds that an ongoing administrative
scheme does exist for Ericsson to make payments under the severance plans. Fort Halifax, 482
U.S. 1 at 11. Although the program, like the plan in Fort Halifax, was triggered by a single event
(an employee’s dismissal), “that event would occur more than once, at a different time for each
employee.” Tinoco v. Marine Chartering Co., Inc., 311 F.3d 617, 621 (5th Cir. 2002). Ericsson
has designated the Director of Benefits and HR Planning as the Plan Administrator of the Standard
Plan and the Top Contributor Plan. Both plans involve the exercise of significant discretion to
determine an employee’s eligibility to receive severance payments. See Clayton, 722 F.3d at 296
(finding an ongoing administrative program necessary in light of the Trustee’s claims eligibility
discretion). For instance, to become a participant under the Standard Plan, an eligible employee
must “experience an employment loss due to an involuntary termination initiated by Ericsson in
the form of a permanent layoff or reduction-in-force or a resignation for ‘Good Reason.’” In case
that the employee’s position is eliminated, he will not be eligible for severance payments if he has
failed to accept “an alternative position with [Ericsson]” that is not more than 75 miles from his
current location and that provides pay “not significantly lower than” the employee’s current salary.
The authority to determine whether a position is an “alternative position” and whether or not the
pay is “significantly lower in the new position” lies exclusively with the Plan Administrator.
Additionally, to determine eligibility triggered by “Good Reason” resignations, the Plan
Administrator needs to decide whether the employee’s position must be performed at a different
work location and whether the change in work location will require a “material change” in
geographic location for the employee.
Like the Standard Plan, the Top Contributor Plan also contains provisions which require
the determination of a particular employee’s eligibility. For instant, the Top Contributor Plan
provides that a participant may be removed from the Plan if his performance has been deemed
“unsatisfactory.” Such satisfaction is determined, “in good faith, by the participant’s Executive
Management Team member or other senior manager and the Vice President of Human Resources
in their sole discretion.” The Top Contributor Plan further provides that the Plan Administrator
shall determine the total amount of the “Enhanced Severance Benefit” to be paid to each
participant upon the “Involuntary Termination” of each participant’s employment from Ericsson.2
Unlike the severance scheme in Fort Halifax which was triggered automatically by the occurrence
of a single event and involved no more than writing a check, here for severance payments to be
distributed to Ericsson employees, the Plan Administrator needs to make “ongoing discretionary
decisions based on subject criteria.” Fort Halifax, 482 U.S. at 12; Tinoco, 311 F.3d at 622.
“There was no way to carry out that obligation with the unthinking, one-time, nondiscretionary
application of the plan as did the administrators in Fort Halifax.” Id. at 621 (citing Bogue v.
Ampex Corp., 976 F.2d 1319 (9th Cir. 1992)).
Therefore, the Court finds that Ericsson’s Standard Severance Plan and Top Contributor
Severance Plan both “by nature require an ongoing administrative program to meet the
employer’s obligation,” based primarily on the Plan Administrator’s authority to make on-going,
discretionary decisions regarding an employee’s plan eligibility. Fort Halifax, 482 U.S. at 12; see
Clayton, 722 F.3d at 296.
These severance plans and the Severance Agreement which
incorporates by reference the plan terms are found to be covered by ERISA. See Fort Halifax,
482 U.S. at 12. Given that Gomez filed this lawsuit in this court to recover benefits due under the
Standard Plan, Top Contributor Plan and the Severance Agreement, such remedy necessarily “falls
Under the Top Contributor Plan, the “Enhanced Severance Benefit” shall equal 39 weeks’ pay, less all required
withholdings and other deductions including any offset amounts described in § 5 of the Plan. “Involuntary
Termination” is defined as a separation from employment initiated by Ericsson due to layoff or reduction-in-force.
within the scope of…ERISA § 502(a).” Haynes, 313 F.3d at 333; ERISA § 502(a) (“A civil
action may be brought by a participant…to recover benefits due to him under the terms of his
plan…”). Accordingly, complete preemption exists and Gomez’s claim is properly within this
Court’s subject matter jurisdiction. Haynes, 313 F.3d at 333.
b. Gomez’s Breach of Contract Claim is Expressly Preempted by ERISA
Gomez further argues that, regardless of whether the two severance plans are covered by
ERISA, the Severance Agreement itself is a separate document because it contains a condition that
Gomez return all Ericsson property in his possession, which condition is not in the severance
plans. Gomez contends that his breach of contract claim based upon the Severance Agreement
should be governed by state common law. This, in essence, raises the question of whether or not
Gomez’s breach of contract claim is expressly preempted by ERISA. Id. at 334. The Court finds
that it is expressly preempted.
The preemption clause of ERISA states that ERISA “shall supersede any and all State laws
insofar as they may now or hereafter relate to any employee benefit plan [covered by ERISA].”
ERISA § 514(a) (emphasis added). This “deliberately expansive” provision of ERISA “is
conspicuous for its breadth.” Ingersoll-Rand Co., 498 U.S. at 138. “A law ‘relates to’ an
employee benefit plan…if it has a connection with or reference to such a plan.” Id. at 139. A
state law may “relate to” a benefit plan, “even if the law is not specifically designed to affect such
In the Fifth Circuit, state law causes of action are barred by § 514(a) “if (1) the state law
claims address areas of exclusive federal concern, such as the right to receive benefits under the
terms of an ERISA plan; and (2) the claims directly affect the relationship between the traditional
ERISA entities – the employer, the plan and its fiduciaries, and the participants and beneficiaries.”
Weaver v. Employers Underwriters, Inc., 13 F.3d 172, 176 (5th Cir. 1994). In this case, both of
these conditions are satisfied. First, by his claim for breach of contract, Gomez seeks to recover
benefits due him “under the terms of the Standard Plan, Top Contributor Plan and the Settlement
Agreement,” all of which the Court has found to be covered by ERISA. Therefore, Gomez’s right
to receive benefits falls squarely within an “area of exclusive federal concern.” Id. Second,
since Gomez and his former employer Ericsson are the only parties in this lawsuit, Gomez’s claims
necessarily “affect the relationship between the traditional ERISA entities,” i.e., the employer and
the plan participant. Id. With both conditions satisfied, Gomez’s breach of contract claim based
upon the Settlement Agreement is expressly preempted by ERISA. Id.; ERISA § 514(a).
For the reasons stated above, this Court concludes that jurisdiction is proper in this case
and holds accordingly that Plaintiff Gomez’s claim for severance payment due should be
adjudicated under ERISA before this Court.
SIGNED this 19th day of December, 2011.
So ORDERED and SIGNED this 22nd day of January, 2014.
UNITED STATES DISTRICT JUDGE
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