Simmons et al v. Service Credit Union

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
Gordon Simmons and
Siegelinde Simmons
v. 	Case No. 17-cv-159-PB
Opinion No. 2018 DNH 048
Service Credit Union
MEMORANDUM AND ORDER
Gordon Simmons sued his former employer, Service Credit
Union (SCU), in state court for breach of contract and a
declaratory judgment.1 	SCU removed the case contending that this
court has subject matter jurisdiction because Simmons’ state law
claims are completely preempted by the Employee Retirement
Income Security Act of 1974 (ERISA). 	Simmons challenges SCU’s
contention in a motion to remand.
I. 	BACKGROUND
Simmons served as SCU’s CEO for twenty-one years. 	Doc. 1-1
at 3. 	During that time, he had multiple employment contracts,
the most recent of which he signed in 2014. 	Id. at 3-4. 	The
relevant portion of that contract states,
1 Siegelinde Simmons, Gordon’s wife when he entered into his
employment contract, has an identical claim. 	Here, I refer only
to Gordon’s claim because the two claims are identical and
Gordon is the primary claimant.
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3.2 Post-Retirement Medical Coverage – The Credit
Union [SCU] agrees to provide the President [Simmons]
and his spouse . . . medical, vision and dental
insurance throughout the term of his Presidency and
thereafter until the death of both, as limited herein.
The Credit Union will provide and pay for the medical,
vision and dental insurance with the insurance
company(s) through which the Credit Union contracts to
provide its employee group health 	plan. 	Should such
medical, vision and dental insurance not be available
to the Credit Union for the President and his spouse .
. . through the company providing such coverage for
Credit Union employees, the Credit Union will contract
with another company to provide comparable or
equivalent medical, dental and vision insurance,
again, paid for by the Credit Union . . . . 	The
Credit Union will not terminate or change this Post
Retirement Medical Coverage benefit for any reason
other than the termination of the President’s
employment prior to his voluntary retirement or
resignation . . .
Doc. 12-2 at 2.
On January 28, 2016, while the contract was in effect,
Simmons submitted a written letter of resignation. 	Doc. 1-1 at
5. 	The parties disagree as to the circumstances that led to
Simmons’ resignation. 	Simmons claims that he resigned
voluntarily, but SCU argues that Simmons was forced out after
the company’s board of directors learned that he had engaged in
a sexual relationship with an employee. 	Doc. 12-1 at 3, Doc. 1-
1 at 5.
SCU informed Simmons in February, 2016 that it would no
longer pay for his healthcare coverage. 	Doc. 1-1 at 5. 	This
prompted Simmons to sue SCU in Rockingham County Superior Court.
2
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Id. at 2, 7. 	SCU then removed the case to this court. 	Id. at
1.
II. 	ANALYSIS
Simmons argues that I must remand his complaint to state
court because this court lacks subject matter jurisdiction over
his state law claims. 	SCU responds by contending that the court
has federal question jurisdiction because Simmons’ claims are
completely preempted by ERISA.2 	As a general rule, ERISA
completely preempts state law causes of action that “relate to
any employee benefit plan.” 	See Pilot Life v. Dedeaux, 481 U.S.
41, 45 (1987)(quoting 29 U.S.C. § 1144(a)). 	Because Simmons’
claims derive from SCU’s agreement to provide him with lifetime
post-retirement medical coverage, his claims clearly relate to
that agreement. 	Accordingly, the parties’ ERISA preemption
dispute turns on whether the agreement is an “employee benefit
2 When determining whether a federal court has subject matter
jurisdiction over a removed case, “the general rule [is] that a
complaint originally filed in a state court cannot be removed to
federal court unless federal jurisdiction appears from the face
of a ‘well pleaded complaint.’” 	Fitzgerald v. Codex Corp., 882
F.2d 586, 587 (1st Cir. 1989) (citing Gully v. First Nat’l Bank,
299 U.S. 109 (1936)). 	In a few select instances, however,
“Congress [has] so completely preempt[ed] a particular area [of
the law] that any civil complaint raising this select group of
claims is necessarily federal in character.” 	Metropolitan Life
Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987). 	This doctrine is
known as “complete preemption.” 	Id. at 63.
3
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plan” as that term is used in ERISA.
ERISA defines the term “employee benefit plan” as “an
employee welfare benefit plan or an employee pension benefit
plan or a plan which is both an employee welfare benefit plan
and an employee pension benefit plan.” 	29 U.S.C. § 1002(3).
The First Circuit, in turn, has borrowed from the 11th Circuit’s
en banc opinion in Donovan v. Dillingham, 688 F.2d 1367, 1370-
1371 (11th Cir. 1982) in holding that an ERISA employee welfare
benefit plan has “five essential constituents”:
(1) a plan, fund, or program (2) established or
maintained (3) by an employer or an employee
organization, or by both (4) for the purpose of
providing medical, surgical, hospital care, sickness,
accident, disability, death, unemployment, or vacation
benefits, apprenticeship or other training programs,
day care centers, scholarship funds, prepaid legal
services, or service benefits (5) to participants or
their beneficiaries.
Wickman v. Northwestern Nat’l Ins. Co., 908 F.2d 1077, 1082
(1st Cir. 1990) (quoting Dillingham, 688 F.2d at 1371) (en
banc). 	To determine whether an agreement is a “plan, fund,
or program,” the court again followed Dillingham and noted
that a “‘plan, fund or program’ under ERISA is established
if, from the surrounding circumstances, a reasonable person
can ascertain the intended benefits, a class of
beneficiaries, the source of financing, and procedures for
receiving benefits.” 	Wickman, 908 F.2d at 1082 (quoting
Dillingham, 688 F.2d at 1373). 	The court then applied its
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own gloss to the Dillingham test by stating that “[t]he
crucial factor in determining if a ‘plan’ has been
established is whether the purchase of the insurance policy
constituted an expressed intention by the employer to
provide benefits on a regular and long term basis.”
Wickman, 908 F.2d at 1083.
To determine whether an ERISA plan has been established,
the First Circuit has also looked beyond Dillingham to the
Supreme Court’s decision in Fort Halifax Packing Co. v. Coyne,
482 U.S. 1, 12 (1987). 	There, the Supreme Court stated that
ERISA covers benefit plans, but not bare promises to pay
benefits. 	Id. at 7. 	A plan, the court noted, contains an
ongoing administrative scheme. 	Id. at 9. 	In Fort Halifax, the
court found that the state severance pay statute at issue was
not a plan because it did not require employers to establish an
administrative scheme to distribute the required benefits. 	Id.
at 12 (the statute only obligated employers to provide covered
employees with a one-time lump sum severance payment).
In numerous cases following Fort Halifax, the First Circuit
has looked to whether an agreement contained an ongoing
administrative scheme to determine whether the agreement was an
ERISA plan. 	See, e.g., Balestracci v. NSTAR Elec. and Gas
Corp., 449 F.3d 224, 228-229 (1st Cir. 2006) (retirement dental
benefits were an ERISA plan because they required an ongoing
5
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administrative scheme); O’Connor v. Commonwealth Gas Co., 251
F.3d 262, 269 (1st Cir. 2001) (one-time bonus and associated
severance benefits was not an ERISA plan because it did not
require an ongoing administrative scheme); Rodowicz v. Mass.
Mutual Life Ins. Co., 192 F.3d 162, 171-72 (1st Cir. 1999) (one-
time bonus offered pursuant to voluntary termination plan not
provided pursuant to ERISA plan); Belanger v. Wyman-Gordon Co.,
71 F.3d 451, 455-56 (1st Cir. 1995)(one-time early retirement
payments not provided pursuant to ERISA plan); Simas v. Quaker
Fabric Corp. of Fall River, 6 F.3d 849, 853-54 (1st Cir.
1993)(statute requiring employers to pay severance payments was
an ERISA plan because it required an ongoing administrative
scheme).
When read together, circuit precedent suggests that an
employer’s agreement to provide benefits to its employees must
always have the five essential constituents identified in
Dillingham to qualify as an ERISA welfare benefit plan.
Moreover, to determine whether an employer has established an
ERISA plan (the first two elements of the Dillingham test), this
precedent requires the court to undertake a case-specific
assessment as to whether: 	(1) the employer has manifested its
intention to provide benefits on a regular and long-term basis;
(2) a reasonable person would be able to ascertain the plan’s
intended benefits, the class of beneficiaries, the source of
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financing, and the procedures for recovering benefits, and (3)
the benefits are to be provided pursuant to an on-going
administrative scheme.
In the present case, the only real issue is whether SCU’s
agreement to provide Simmons with post-retirement medical
coverage established an ERISA plan.3 	On this subject, the
available evidence supports SCU’s position that the agreement is
a plan. 	First, the agreement plainly requires an employer to
provide benefits on a regular and long-term basis because SCU
agreed to provide Simmons and his spouse with continuous medical
coverage for the rest of their lives. 	The agreement also
sufficiently identifies the benefits provided (medical, dental,
and vision coverage comparable to the coverage provided to the
company’s employees), the beneficiaries of the agreement
(Simmons and his spouse), the source of financing (SCU), and the
procedures for claiming benefits (all procedures required by the
insurer who contracts to provide the coverage). 	Finally, the
agreement contains an ongoing administrative scheme because it
requires SCU to have an administrative structure, composed of
either its own employees or employees of its chosen insurer, to
determine: (1) whether Simmons is eligible to claim his right to
3 The third, fourth, and fifth elements of the Dillingham test
are plainly satisfied because SCU is a covered employer, the
medical coverage SCU agreed to provide is a covered benefit, and
Simmons and his spouse are covered participants.
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post-retirement medical coverage; (2) whether the coverage SCU
proposes to provide to Simmons is “comparable” to the coverage
that the company provides to its employees; and (3) whether any
claim for coverage that Simmons submits to his insurer should be
paid.
Simmons nevertheless argues that his agreement is not an
ERISA employee welfare benefit plan because it covers only him,
and no other employees. 	I am not persuaded by this argument.
As the Eleventh Circuit correctly noted in rejecting a similar
argument, the text of ERISA does not exclude single employee
plans and ERISA’s implementing regulations contemplate the
possibility that a single employee plan can be within its scope.
Williams v. Wright, 927 F.2d 1540, 1545 (11th Cir. 1991); see
also Cvelbar v. CBI Inc., 106 F.3d 1368, 1376 (7th Cir. 1997);
but see Dakota Minnesota & Eastern Railroad Corp. v. Schieffer,
648 F.3d 935, 938 (8th Cir. 2011) (ERISA does not cover
agreement to provide severance benefits to a single employee).
Moreover, in this case, SCU has obligated itself to provide
lifetime medical coverage to Simmons and his spouse, regardless
of where they may choose to live. 	Accordingly, a failure to
treat SCU’s agreement as an ERISA employee benefit plan would
leave both SCU and Simmons exposed to the threat of “conflicting
and inconsistent state and local regulation,” a problem that
ERISA was expressly enacted to address. 	Fort Halifax, 482 U.S.
8
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at 9 (1987)(quoting 120 Cong. Rec. 29197 (1974)). 	What matters
in this case is not the number of employees covered by the plan,
but instead whether an employer’s agreement to provide benefits
to an employee requires an ongoing administrative scheme to
implement. 	Because the agreement at issue here satisfies this
standard, it is an employee benefit plan as that term is used in
ERISA.
IV. 	CONCLUSION
For the aforementioned reasons, SCU’s agreement to provide
Simmons with post-retirement medical coverage constitutes an
employee benefit plan regulated by ERISA. 	Because Simmons’
breach of contract and declaratory judgment claims seek to
enforce rights provided under that plan, his claims are
completely preempted by ERISA. 	Simmons’ motion to remand (Doc.
No. 9) is denied. 	Within 14 days, Simmons shall file an amended
complaint restating his claims under ERISA.
SO ORDERED.
/s/Paul Barbadoro______
Paul Barbadoro
United States District Judge
March 12, 2018
cc: 	Debra Weiss Ford, Esq.
Eileen P. Kavanagh, Esq.
Paul McEachern, Esq.
9
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Bethany P. Minich, Esq.
K. Joshua Scott, Esq.
Martha Van Oot, Esq.
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