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Gehrman v. Twin Rivers Paper Co.

United States District Court, D. Maine

February 6, 2015

JAMES GEHRMAN, et al., Plaintiffs,




John C. Nivison, United States Magistrate Judge.

In this action, Plaintiffs maintain that Defendant failed to compensate them properly upon the end of Plaintiffs' employment with Defendant. The matter is before the Court on Defendant's Motion to Dismiss Counts I through IV of Plaintiffs' First Amended Complaint (ECF No. 12).[1]

In counts I-IV of the amended complaint, Plaintiffs assert state law claims for breach of contract, breach of quasi-contract, unjust enrichment, and violation of 26 M.R.S. § 626. Through its motion, Defendant contends that Plaintiffs' state law claims asserted in counts I - IV are pre-empted by the Employee Retirement Income Security Act (ERISA), and that the statute upon which Plaintiffs rely in count IV does not encompass severance pay.

As explained below, after consideration of the parties' arguments, the recommendation is that the Court grant in part the Motion, dismiss count IV, and otherwise deny the Motion.


Pursuant to Federal Rule of Civil Procedure 12(b)(6), a party may seek dismissal of " a claim for relief in any pleading" if that party believes that the pleading fails " to state a claim upon which relief can be granted." In their assessment of the motion, courts must " assume the truth of all well-plead facts and give the plaintiffs the benefit of all reasonable inferences therefrom." Blanco v. Bath Iron Works Corp., 802 F.Supp.2d 215, 221 (D. Me. 2011) (quoting Genzyme Corp. v. Fed. Ins. Co., 622 F.3d 62, 68 (1st Cir. 2010)).

A. ERISA Preemption (Counts I -- IV)

In counts I through IV of the amended complaint, Plaintiffs assert claims based on the Fraser Papers Inc. Severance Pay Guidelines (FP Guidelines), which were issued by Defendant's predecessor. Plaintiffs allege that the FP Guidelines cannot be considered a qualified plan under ERISA. (Am. Compl. ¶ 37.)[2] In its motion, Defendant contends that a plain reading of the FP Guidelines establishes that the FP Guidelines constitute an ERISA plan.

When assessing whether a particular benefit is within ERISA, courts examine " the nature and extent of an employer's benefit obligations." Rodowicz v. Mass. Mut. Life Ins. Co., 192 F.3d 162, 170, amended by 195 F.3d 65 (1st Cir. 1999) (quoting Belanger v. Wyman-Gordon Co., 71 F.3d 451, 454 (1st Cir. 1995)). If an employer's obligations " 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." O'Connor v. Commonwealth Gas Co., 251 F.3d 262, 267 (1st Cir. 2001). As the First Circuit observed, " The determination of what constitutes an ERISA plan thus turns most often on the degree of an employer's discretion in administering the plan. Our cases have noted that such determinations are not clear cut and necessarily require line drawing." Id.

Defendant maintains that under the FP Guidelines, the employer has significant discretion, which compels the conclusion that the FP Guidelines constitute an ERISA plan. For instance, Defendant notes that if the employer terminates an employee from employment for " cause" or for " gross misconduct or insubordination, " the employee is not entitled to severance pay. Under the Guidelines, the employer also may, " in its sole judgment, determine that an employee who is otherwise eligible for severance under these guidelines will not receive any payment if the employee has engaged in any conduct that may harm the business or reputation of the [employer], its managers, or employees, or that is otherwise disruptive to the business." (Motion to Dismiss at 6-7; FP Guidelines, ECF No. 12-1, PageID # 76.)

" The question of whether an ERISA plan exists is 'a question of fact, to be answered in light of all the surrounding facts and circumstances from the point of view of a reasonable person.'" Wickman v. Nw. Nat'l Ins. Co., 908 F.2d 1077, 1082 (1st Cir. 1990) (quoting Kanne v. Conn. Gen. Life Ins. Co., 867 F.2d 489, 492 (9th Cir. 1988), cert. denied, 492 U.S. 906, 109 S.Ct. 3216, 106 L.Ed.2d 566 (1989)). Contrary to Defendant's argument, all of the relevant facts and circumstances cannot be discerned from a mere reading of the FP Guidelines. Most of the provisions cited by Defendant govern eligibility for severance pay, and do not address the employer's obligations in the administration of the program.[3] The fact that the employer has the ability to terminate a person's employment for cause, which termination precludes the person from receiving severance pay, does not mean that the FP Guidelines constitute an ERISA plan. Presumably, many programs, regardless of whether they are ERISA plans, provide that an employee is not entitled to severance pay if the employee is terminated for cause. The fact that an employer itemizes various grounds upon which it might terminate an employee for cause, which termination would make the employee ineligible for severance pay, is not controlling. The more relevant inquiry is the nature of the employers' administrative responsibilities after eligibility has been established. Cantrell v. Briggs & Veselka Co., 728 F.3d 444, 451-52 (5th Cir. 2013), cert. denied, 134 S.Ct. 1520, 188 L.Ed.2d 450 (2014) (" Though [employer] asserts it used discretion to determine whether [employee] was terminated 'with cause, ' we reject the notion that this is enough to necessitate an ongoing administrative scheme."); see also Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 18, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987) (5-4) (" Some severance benefit obligations by their nature necessitate an ongoing administrative scheme, but others do not. Those that do not ... simply do not involve ... an employee benefit 'plan.'"). The provisions cited by Defendant, therefore, even if pertinent, are not dispositive.

In short, without a factual record to assess, one cannot determine whether the FP Guidelines constitute an ERISA plan. At this stage of the proceedings, the pleadings simply do not establish conclusively that the FP Guidelines constitute an ERISA plan. Defendants thus are not ...

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