decided: March 14, 1980.
ROBERT L. SHAW
WESTINGHOUSE ELECTRIC CORPORATION, A CORPORATION, APPELLANT
No. 107 April Term 1979, Appeal from the Order of the Court of Common Pleas of Allegheny County, Civil Division, No. G.D. 76-24726.
Dennis J. Lewis and J. Gary Kosinski, Pittsburgh, for appellant.
John A. DeMay, Pittsburgh, for appellee.
Van der Voort, Spaeth and Watkins, JJ. Van der Voort, J., files a dissenting statement.
[ 276 Pa. Super. Page 222]
This is an appeal from an order denying a pre-trial motion by Westinghouse Electric Corporation to dismiss, in part, a complaint in assumpsit filed by Robert L. Shaw against Westinghouse.
The complaint alleges that in September 1969 Shaw accepted an offer of employment from Westinghouse as General Manager of its Portable Products Division upon the following terms:
(a) That Plaintiff would receive a stock option for 2,000 shares of stock at an option price of $26.50.
(b) That Plaintiff would be paid a salary of $50,000 per year.
(c) That after six months employment, Plaintiff's salary would be increased by 8%. This percentage increment would continue to be applied annually thereafter while Plaintiff was the General Manager of the Portable Products Division.
(d) That Plaintiff would be guaranteed a yearly bonus of between $8,000 per year and $23,000.00 per year, such amounts being the established bonuses of the previous General Managers of that Division: with the possibility of the bonus increasing to an amount equal to the yearly salary of Plaintiff.
(e) That the employment date of Plaintiff would be be back-dated to September 15, 1969.
[ 276 Pa. Super. Page 223]
(f) That Plaintiff would have the title of General Manager.
(g) That Plaintiff would have retirement benefits equal to 60% of his base salary.
(h) That Plaintiff would be paid all moving expenses.
(i) That Plaintiff would have the option to purchase Westinghouse Electric Corporation stock at a reduction of 10% from the current market price.
(j) That Plaintiff would be employed by the Defendant for a number of years, to wit, a "long-term basis."
(k) That Plaintiff would assume complete control as General Manager over the Portable Products Division.
(l) That Plaintiff would receive life, health and other similar kinds of insurance.
Record at 2a-3a.
The complaint further alleges that Shaw worked for Westinghouse for three years, when he became seriously ill. Count I of the complaint avers that Westinghouse breached its contract with Shaw by not paying him the promised salary increases, and that as a result of the breach, Shaw has sustained the following losses:
(a) Loss of 8% salary increments from September 15, 1969
to October 23, 1972 $22,582.76
(b) Loss of bonus based on maximum amount guaranteed by
Defendant, for the years 1970, 1971 and 1972 96,000.00
Carried forward $118,582.76
Brought forward $118,582.76
(c) Loss of retirement and disability benefits during the
period October 23, 1972 to October 23, 1984 108,000.00
(d) Loss of pension benefits to be computed on salary of
$62,985.00 commenced, with age 65-precise amount to be
plus pension benefits.
Record at 6a.
[ 276 Pa. Super. Page 224]
Count II of the complaint avers that in August 1971, Westinghouse decided to sell its Portable Products Division; that it solicited Shaw "to utilize his contacts in the Industry" to assist the sale, and promised to pay him a finder's fee if he secured a purchaser and the sale was consummated; and that Shaw found a purchaser and the sale was consummated, but even so, Westinghouse refused to pay the finder's fee.
Westinghouse filed an answer and new matter to the complaint, and Shaw filed a reply to the new matter. The pleadings closed, the parties engaged in extensive discovery. On May 22, 1978, Westinghouse filed a motion for summary judgment, which was denied on September 27, 1978. Trial was scheduled for January 9, 1979. However, on December 15, 1978, Westinghouse filed a motion to dismiss the action on the ground that because of the federal Employee Retirement Income Security Act, Act of September 2, 1974, P.L. 93-406, 88 Stat. 832, 29 U.S.C. §§ 1001, et seq., the lower court lacked jurisdiction over the subject matter of the complaint.*fn1 On February 1, 1979, the court denied the motion, and this appeal followed.*fn2
Westinghouse concedes, as it must, that the lower court has jurisdiction over Shaw's claims for a finder's fee and damages for the loss of salary increases and bonus. The only issue, therefore, is whether the lower court has jurisdiction over Shaw's pension and disability benefits claims.*fn3
[ 276 Pa. Super. Page 225]
The gist of Westinghouse's argument may be stated as follows. Congress enacted ERISA to afford comprehensive federal protection of the interests of participants in employee benefit plans. There is no dispute that Westinghouse's employee disability benefits plan and retirement pension plan are "employee benefit plans" within 29 U.S.C. § 1002, and are subject to the provisions of ERISA.*fn4 State regulation
[ 276 Pa. Super. Page 226]
of the plans is therefore restricted by 29 U.S.C. § 1144, which provides:
(a) Except as provided in subsection (b) of this section, the provisions of this subchapter and sub-chapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan . . . .
(c) For purposes of this section:
[ 276 Pa. Super. Page 227]
(1) The term "State law" includes all laws, decisions, rules, regulations, or other State action having the effect of law, of any State. . . .
(2) The term "State" includes a State, and political subdivisions thereof, or any agency of instrumentality of either, which purports to regulate, directly or indirectly, the terms and conditions of employee benefit plans covered by this subchapter.
This preemption must be given effect, for it constitutes an exercise by Congress of its powers under article VI, cl. 2, of the United States Constitution (the supremacy clause). See generally Lukus v. Westinghouse Electric Corp., 276 Pa. Super. 232, 419 A.2d 431 (1980). Therefore, according to Westinghouse it follows that ERISA entirely "preempts the field of provision of pension and disability benefits, . . . [and] Shaw's claims for pensions and disability benefits can only be recoverable, if at all, under ERISA." Brief for Appellant at 12. This broad assertion, however, does not follow from the premises Westinghouse establishes, and it fails to address the narrow issue before us.
[ 276 Pa. Super. Page 228]
Section 1144(a) explicitly states that the provisions of ERISA supersede state laws only "insofar as they . . . relate to any employee benefit plan." The question for disposition, therefore, is whether Shaw's assumpsit action against Westinghouse for disability and retirement benefits may be said to "relate to" the disability benefits and retirement pension plans established by Westinghouse for its employees. More precisely, the question is whether Shaw's assumpsit action constitutes an attempt to regulate areas explicitly governed by the provisions of ERISA, or whether the action relates primarily to matters not governed by ERISA, and only indirectly affects Westinghouse's employee benefit plans in a way not in conflict with the purposes ERISA is designed to achieve. If the former is true, then the action may be preempted by section 1144; but if the latter is true, the action is not preempted. See Lukus v. Westinghouse Electric Corp., supra (collecting cases); Commonwealth Page 228} ex rel. Magrini v. Magrini, 263 Pa. Super. 366, 398 A.2d 179 (1979).
It is certainly easy to suppose that an employee might bring an action in assumpsit against an employer for disability and retirement benefits that would not "relate to" an employee benefit plan. Suppose, for example, Shaw had alleged that while promising to provide him with retirement benefits equal to 60% of his base salary, Westinghouse had established a pension plan that provided retirement benefits equal to only 40% of his base salary. If Shaw sued Westinghouse in assumpsit for breach of its promise to provide retirement benefits equal to 60% of his base salary, his suit would neither directly nor indirectly relate to the pension plan established by Westinghouse. So far as the plan would be concerned, Shaw would be entitled to benefits no greater than 40% of his base salary, and so long as the plan paid that amount, Shaw would have no action against it. Shaw's only action would lie against Westinghouse, and that action would in no way affect his rights under the plan.
The present case, of course, is a bit more involved than the one just supposed. Instead of alleging that Westinghouse established a plan providing fewer benefits than the benefits Westinghouse promised him, Shaw alleges that Westinghouse has paid him less salary and fewer bonuses than it promised to pay, and that as a result, he has received, and will continue to receive in the future, fewer benefits under Westinghouse's disability benefits and retirement pension plans than he would have received had he been properly paid by Westinghouse. Thus, in order for Shaw to recover on his claims, the lower court will be required to determine what Shaw's benefits would have been under the plans had Westinghouse paid him the promised salary increases and bonuses. Additionally, the court may be required to determine whether Shaw will have a future claim against the disability benefits and retirement pension plans for increased benefits based upon a judgment recovered against Westinghouse on
[ 276 Pa. Super. Page 229]
his salary and bonus claims.*fn5 Should the lower court find it necessary to address such issues, then it might be argued that the lower court would be making an adjudication "relating to" the plans. We are, nevertheless, unable to conclude that the lower court's adjudication would violate section 1144 of ERISA.
Initially, we note that section 1132(e)(1) of ERISA grants state courts of competent jurisdiction and federal district courts concurrent jurisdiction of an action brought by a participant in an employee benefit plan to recover benefits due to him under the terms of the plan, or to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan. Thus, Congress has explicitly given state courts the power to adjudicate the very issues the lower court may be required to reach in Shaw's suit against Westinghouse.
Westinghouse complains that Congress gave state courts power to determine such issues only in proceedings brought under section 1132 where the employee benefit plans are named parties. Since Shaw's action is not brought under
[ 276 Pa. Super. Page 230]
section 1132, and the plans are not named defendants, Westinghouse argues, the action cannot be maintained. In making this argument, however, Westinghouse again overlooks the nature of Shaw's action and the limitation in section 1144(a) of ERISA that only state laws that "relate to" employee benefit plans are superseded by the Act. Shaw's suit against Westinghouse relates solely to Westinghouse's liability for breach of an employment contract. Admittedly, in determining Westinghouse's liability, the lower court may have to make determinations concerning Shaw's present and future rights to benefits under Westinghouse's plans, and decide whether Shaw's right to participate in the plans has been wrongfully impaired by Westinghouse. Yet, these determinations will affect only the rights and liabilities of the parties to this action (i. e., Shaw and Westinghouse) towards each other; specifically, unless Westinghouse and its employee benefits plans are privies or the plans perform some act that estops them from questioning the lower court's determinations at a later date, the determinations of the lower court in this case will not conclude the rights and liabilities of the plans and Shaw inter se. See generally Safeguard Mutual Ins. Co. v. Williams, 463 Pa. 567, 574, 345 A.2d 664, 668 (1975); Albert v. Lehigh Coal & Nav. Co., 431 Pa. 600, 613, 246 A.2d 840, 846 (1968); Thompson v. Karastan Rug Mills, 228 Pa. Super. 260, 323 A.2d 341 (1974). If the plans are bound by the lower court's determinations, that will occur only because the interests of the plans are represented, either directly or indirectly, in the present action, or the plans have refused to appear without just cause.*fn6
If the plans are not concluded by the lower court's determinations by principles of res adjudicata or collateral estoppel, then the only possible way the plans may be affected by the present action is through the principle of stare decisis.
[ 276 Pa. Super. Page 231]
Yet, Westinghouse has not explained how the possibility that the lower court's determinations may affect potential future litigation between Shaw and the plans through stare decisis differs in any way from the possibility that the holdings in any of the countless contract actions brought in this Commonwealth may affect the outcome of future litigation between Shaw and the plans.
Westinghouse's remaining arguments may be disposed of summarily. Westinghouse argues that the lower court lacked subject-matter jurisdiction because the plans were necessary and indispensable parties to Shaw's action for disability and retirement benefits. As the discussion above implies, the plans were not necessary and indispensable parties. See generally Pocono Pines Corp. v. Pa. Game Comm., 464 Pa. 17, 345 A.2d 709 (1975); Powell v. Shepard, 381 Pa. 405, 113 A.2d 261 (1955) (a party is indispensable only when its rights are so connected with the claims of the litigants that no decree can be made between them without impairing such rights). Westinghouse also argues that the lower court lacked jurisdiction because Shaw failed to exhaust his administrative remedies against the plans. However, Shaw's action is not against the plans but against Westinghouse; Westinghouse does not allege that Shaw had administrative remedies against it, which he failed to exhaust. Finally, Westinghouse argues that it cannot be held liable for Shaw's retirement claims because of a disclaimer provision contained in its retirement pension plan. This argument, however, does not go to the jurisdiction of the lower court to hear Shaw's motion, but to the merits of the action.
The order of the lower court is affirmed.
VAN der VOORT, Judge, dissenting:
Plaintiff-appellees' claims designated as (c) "Loss of retirement and disability benefits during the period October 23, 1972 to October 23, 1984 . . . $108,000.00" and (d)
[ 276 Pa. Super. Page 232]
"Loss of pension benefits to be computed on salary of $62,985.00 commenced with age 65-precise amount to be computed," are clearly related to an employee benefit plan and as such are subject to the provisions of the Employee's Retirement Income Security Act, (Act of September 2, 1974, P.L. 93-406, 88 Stat. 832, 29 U.S.C. §§ 1001, et seq.).
These matters have been preempted by Congress and our State Court lacks jurisdiction to determine these two issues. I therefore would reverse as to claims (d) and (e).