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WAY v. OHIO CASUALTY INSURANCE COMPANY

December 2, 2004.

ANNE B. WAY, Plaintiff,
v.
OHIO CASUALTY INSURANCE COMPANY, ABC CORPORATIONS 1-10 (fictitious names), Defendants.



The opinion of the court was delivered by: JEROME SIMANDLE, District Judge

OPINION

This matter comes before the Court upon Defendant Ohio Casualty Insurance Company's motion for judgment on the pleadings as well as Plaintiff Anne Way's alternative motion for leave to file an amended complaint and motion to remand. The key issue presented, and that upon which all three motions turn, is whether Defendant's Separation Pay Plan qualifies as an employee benefits plan under the Employment Retirement Income Security Act ("ERISA"). Because this Court determines that ERISA covers the plan at issue and for the reasons discussed herein, Defendant's motion for judgment on the pleadings will be granted in part, Plaintiff's related claims arising under state law are preempted and dismissed, Plaintiff's motion for leave to file an amended complaint will be granted and Plaintiff's motion to remand will be denied.

  I. BACKGROUND

  Plaintiff Anne B. Way filed a Complaint in the Superior Court of New Jersey, Law Division, on July 29, 2004. On September 13, 2004, Defendant filed a notice of removal with the Camden County Superior Court. Plaintiff claims that Defendant Ohio Casualty Insurance Company ("Ohio Casualty") wrongfully refused to pay her severance pay benefits in accordance with Ohio Casualty's Separation Pay Plan after her employment ended with the company on February 11, 2004. Plaintiff's Complaint alleges three claims against Ohio Casualty arising from the denial of separation pay. Count I is a claim for breach of contract, Claim II alleges a claim for fraud and/or misrepresentation, and Claim III alleges a claim for the tort of outrage.

  Plaintiff was employed as an adjuster by Ohio Casualty in its Voorhees, New Jersey office until her employment ended on February 11, 2004 as part of the continued implementation of a sale and transfer of a business division to Proformance Insurance Company ("Proformance"). (Compl. ¶¶ 2-3.) Ohio Casualty administers what it considers to be an ERISA benefits plan, entitled "Separation Pay Plan," which provides employees nationwide, including Plaintiff, an opportunity to receive certain severance pay where eligible in accordance with its terms. The plan under which Plaintiff would be covered is that which bears an effective date of April 6, 2000. The plan is administered by Defendant's Welfare Plan Committee. The Separation Pay Plan provides, inter alia, that an employee laid off because of a sale is eligible for separation pay unless the employee is offered employment with the purchaser within fifty (50) miles of the employee's last worksite in a job paying eighty-five percent (85%) or more of the employee's present rate of pay. (Id. at ¶ 4.) This is the provision implicated in Plaintiff's case.*fn1

  At the end of her employment with Ohio Casualty, Plaintiff did not receive severance benefits under the Plan. (Id. at ¶ 6.) Defendant's Welfare Plan Committee determined that the Plan was not obligated to provide Plaintiff with severance benefits as Plaintiff was offered employment by Proformance within fifty (50) miles of her last worksite in a job paying at least eighty-five percent (85%) of her last rate of pay at Ohio Casualty. Plaintiff argues that these conditions were not met and that she was therefore eligible for severance pay in the amount of $14,473.05, together with accumulated unused vacation pay. This Court heard oral argument on these motions on November 22, 2004.

  II. DISCUSSION

  A. Defendant's Motion for Judgment on the Pleadings

  1. Is this an ERISA Benefits Plan?

  Defendant moves, pursuant to Fed.R.Civ.P. 12(c), for judgment on the pleadings, arguing that Plaintiff's claims are preempted by the Employee Retirement Income Security Act ("ERISA"). Federal Rule of Civil Procedure 12(c) states, in relevant part, "After the pleadings are closed but within such time as not to delay the trial, any party may move for judgment on the pleadings. . . ." Fed.R.Civ.P. 12(c). Here, the Separation Pay Plan was attached to the Answer and thus constitutes part of the pleadings to be construed in this Rule 12(c) motion. Defendant argues that Plaintiff's state law claims are preempted by ERISA, that Plaintiff can thus prove no set of facts in support of those claims that would entitle her to relief, and that judgment on the pleadings is appropriate.

  Section 514 of ERISA, 29 U.S.C. §§ 1132, et seq., provides for broad preemption of state laws serving as the basis of claims relating to employee benefit plans governed by ERISA:
Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.
29 U.S.C. § 1144(a). In the Third Circuit, courts are to conduct a two-part analysis for determining whether state law claims are indeed preempted by ERISA. First, a court must determine whether the plan at issue qualifies as an ERISA benefits plan. Second, a court must determine whether the applicable state laws "relate to" that plan. Alston v. Atlantic Elec. Co., 962 F. Supp. 616, 622 (D.N.J. 1997).
  Thus, this Court first considers whether Ohio Casualty's Separation Pay Plan constitutes an ERISA plan. ERISA defines an employee welfare benefit plan, in pertinent part, as:
any plan, fund, or program which was heretofore or is hereafter established or maintained by an employer . . . 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 . . . (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). Although severance benefits are not specifically mentioned in § 1002(1), courts have determined that most, but not all, severance packages qualify as ERISA plans. See, e.g., Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 75 (2d Cir. 1996). In Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987), however, the Supreme Court held that severance benefits do not implicate ERISA unless they require the establishment and maintenance of a separate and ongoing administrative scheme. Id. at 11-12. See also Pane v. RCA Corp., 667 F. Supp. 168, 170 (D.N.J. 1987), aff'd, 868 F.2d 631 (3d Cir. 1989).

  Defendant argues that its Separation Pay Plan was established or is maintained for the purpose of providing for its participants benefits in the event of "unemployment" and thus those benefits are of the kind described in 29 U.S.C. § 1002(1). See Alston, 962 F. Supp. at 623; Pane, 868 F.2d at 635; LaFata v. Raytheon Co., 223 F. Supp. 2d 668, 676 (E.D. Pa. 2002)). In addition, Defendant contends that Ohio Casualty's plan creates an ongoing administrative scheme because it is national in scope, applies to various types of separation from employment, is administered by the Welfare Plan Committee, and requires analysis and investigation when determining eligibility for and amount of benefits, thereby implementing a set of administrative practices.

  Plaintiff, in contrast, contends that Defendant's severance plan is not governed by ERISA because payment to an employee turns on simple calculations based on objective criteria — i.e. whether the employee was offered a job with the purchaser within 50 miles of the last worksite and at an amount that is at least 85% of her previous pay, thereby resulting in an amount of severance pay calculated as simply one ...


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