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Kapetanovich v. Rockwell Intern.


filed: July 15, 1992.


On Appeal from the United States District Court for the Western District of Pennsylvania. D.C. Civil No. 89-02203. District Judge: Hon. Gustave Diamond.

Sloviter, Chief Judge, Stapleton and Seitz, Circuit Judges

Author: Sloviter


SLOVITER, Chief Judge.

I. Procedural History

Plaintiff Steven Kapetanovich appeals from an order of the district court granting summary judgment to defendant Rockwell International Corporation in a case decided under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001, et seq.

Kapetanovich originally filed his complaint against Rockwell in state court, alleging wrongful discharge. Kapetanovich asserted that Rockwell had terminated him both to avoid payment to him of increased pension benefits and to avoid payment of his medical bills under the company's health plan.

Rockwell removed the action to federal court pursuant to 28 U.S.C. § 1441(b) because the state common law tort claims relating to an employee pension and retirement plan were preempted by ERISA. Rockwell did not interpret the allegations in Kapetanovich's complaint relating to his medical benefits as preempted by ERISA, but justified the removal of those claims on the basis of pendent jurisdiction. See United Mine Workers v. Gibbs, 383 U.S. 715, 16 L. Ed. 2d 218, 86 S. Ct. 1130 (1966). Kapetanovich did not object to the removal at that time. Pursuant to 28 U.S.C. § 636(b), the case was referred to a magistrate Judge.

Shortly before the completion of discovery, Kapetanovich learned that his Rockwell pension had in fact vested prior to his discharge. Accordingly, Kapetanovich petitioned to remand, arguing that the federal ERISA issues had dropped from the case and that the remaining issues were ones of state law that should be resolved in state court. Rockwell argued that the district court should resolve the remaining state law issues as a matter of judicial economy and should grant summary judgment to Rockwell. The magistrate Judge took a different position than either party, and held that Kapetanovich's common law tort claims relating to an employee health plan were also preempted by ERISA.

Ultimately, the magistrate Judge filed a report recommending that Rockwell's summary judgment motion be granted, which the district court adopted. Kapetanovich filed a timely notice of appeal from this final order. Our review is plenary.



Kapetanovich joined the Pittsburgh Corporate Office of Rockwell's Tax Department as a staff tax accountant in 1979. In 1987, because of a decrease in Rockwell's production of the B-1B strategic aircraft, the Tax Department, among others, was required to reduce its operating budget, and Kapetanovich was the one of five accountants in the Pittsburgh office who was selected for the layoff; his last day of work was September 15, 1987.

The Director of International Human Resources and the Director of Tax Administration for the Pittsburgh office together decided which accountant would be laid off. Their decision was based on the job performance of the five accountants, and their educational background. With the exception of one "excellent" rating in 1981, Kapetanovich was consistently rated as a "satisfactory plus" employee. As to education, Kapetanovich was the only one of the five accountants in his group who was neither in possession of a master's degree in taxation nor actively pursuing one.*fn1 Kapetanovich has in fact completed 25% of the course work towards this degree, but had not actively pursued it since 1984.

Kapetanovich was hired by Rockwell in 1979 despite the fact that he was suffering from diabetes mellitus. In 1986, Kapetanovich's diabetes worsened, and he required more intensive treatments and medication. At the same time, he was diagnosed as suffering from an immune deficiency condition, for which he has to receive monthly intravenous injections at a cost of $2,200 a month, or approximately $26,000 a year. Kapetanovich contends that it took nearly one year for the bill for his first injection to be paid by Rockwell, through its excess risk insurance contract with Metropolitan Life Insurance Company; that he had his second injection only after that bill was paid; and that he was laid off by Rockwell shortly thereafter. He also contends that, shortly after his layoff (while still covered by the Rockwell insurance plan), he requested approval for evaluation and treatment at a specialized diabetes clinic, and that, although the normal stay at the clinic was two weeks, the Rockwell insurance plan would only approve a four-day stay for him.

On the basis of these allegations, Kapetanovich claims that Rockwell discharged him in order to avoid payment of his medical bills.



As we noted above, the district court's removal jurisdiction over Kapetanovich's complaint was originally based on Kapetanovich's pension-related ERISA claims.*fn2 The district court also construed Kapetanovich's claim for medical benefits as a claim under section 510 of ERISA, 29 U.S.C. § 1140 (1988).*fn3 Accordingly, the district court possessed subject matter jurisdiction pursuant to 28 U.S.C. § 1331 and 29 U.S.C. § 1132(e).

The magistrate Judge recharacterized Kapetanovich's wrongful discharge claim as a claim brought under section 510 of ERISA, which provides that:

It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan . . . or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan . . . .

29 U.S.C. § 1140 (1988).

The critical element of recovery under section 510 is proof of the employer's specific intent to violate the statute:

To recover under § 510, a plaintiff need not prove that "the sole reason for his [or her] rights." A plaintiff must, however, demonstrate that the defendant had the "'specific intent' to violate ERISA."

Gavalik v. Continental Can Co., 812 F.2d 834, 851-52 (3d Cir.) (citations omitted), cert. denied, 484 U.S. 979, 98 L. Ed. 2d 492, 108 S. Ct. 495 (1987).

When a violation of section 510 can only be proved by circumstantial evidence, this circuit has used the scheme of shifting burdens of proof developed by the United States Supreme Court in Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248, 252-56, 67 L. Ed. 2d 207, 101 S. Ct. 1089 (1981), and other Title VII cases. To make out a prima facie case under section 510, a plaintiff must prove by the preponderance of the evidence that s/he "(1) belongs to the protected class, (2) was qualified for the position involved, and (3) was discharged . . . under circumstances that provide some basis for believing that the prohibited intent was present." Turner v. Schering-Plough Corp., 901 F.2d 335, 347 (3d Cir. 1990). If the plaintiff is able to establish a prima facie case, "the burden of production shifts to the employer to introduce admissible evidence of a legitimate, nondiscriminatory reason for its challenged actions." Gavalik, 812 F.2d at 853. If the employer carries its burden, "the presumption drops from the case and the [plaintiff] is afforded the opportunity to demonstrate that the employer's articulated reason is pretextual 'either directly by persuading the court that a discriminatory reason more likely motivated the employer or indirectly by showing that the employer's proffered explanation is unworthy of credence.'" Gavalik, 812 F.2d at 853 (quoting Burdine, 450 U.S. at 256).

Kapetanovich has not made out a prima facie case of an ERISA violation. He has satisfied the first two elements. It is undisputed that Kapetanovich belongs to the class protected by ERISA and that he was qualified for the position of staff tax accountant. However, Kapetanovich has not satisfied the third element, as he has failed to show that he was discharged under circumstances that provide some basis for believing that Rockwell possessed the intent to violate ERISA. Kapetanovich alleges that he was discharged because of his large medical bills. It is undisputed that Kapetanovich was discharged, that his medical bills were large, and that, as a result of his termination, he lost the insurance coverage provided by Rockwell during his employment. However, Kapetanovich has failed to tender evidence from which a trier of fact could find a causal connection among these three facts, and thus has failed to support his bare allegation of Rockwell's specific intent to violate section 510 with the proof required.

First, Kapetanovich has produced no evidence that anyone at Rockwell was even aware of the size of his medical bills, other than his own deposition testimony that "Lou Wojnar in personnel was probably one of the people I talked to and beyond that I probably don't remember any of the other names." App. at 193. Even if the evidence of Wojnar's knowledge were more substantial, it fails to show that anyone with authority to terminate Kapetanovich was aware of the size of his medical bills. Kapetanovich also points to deposition testimony of his immediate supervisor, David Bubonsky, that Bubonsky and other supervisory personnel were generally informed of employee absences. Knowledge of employee absence does not, however, constitute knowledge of employee medical expenses.

Second, the uncontradicted evidence shows that, in 1987, Rockwell was covered for medical benefits claims through an excess risk insurance contract with Metropolitan Life Insurance Company. App. at 145-46, 161. Rockwell did not review the individual medical insurance claims of its employees. Metropolitan administered claims made under Rockwell's medical benefits plan, and determined what claims would receive or be denied insurance coverage. App. at 161-62. Kapetanovich has testified that he submitted his medical claims directly to Metropolitan. App. at 192-93. Metropolitan provided Rockwell with periodic information concerning the total dollar amount of claims made against its medical benefit plan on a corporate-wide basis, but did not provide Rockwell with such information on an employee-by-employee or even a department-by-department basis. The budgetary or economic impact was also felt on a corporate-wide, rather than a department-by-department basis. Kapetanovich has therefore failed to show that Rockwell could have based its discharge decision on the size of Kapetanovich's medical bills.*fn4

Finally, the size of Kapetanovich's medical benefits claims was insubstantial compared to Rockwell's total outlay in medical claims payments in 1987. Kapetanovich claims that the annual cost of his intavenous treatments is approximately $26,000. The total dollar amount of medical claims made by Rockwell in 1987 was more than $256,000,000. App. at 162. Thus, Kapetanovich's claims represented approximately .01% of the total annual outlay.

The most Kapetanovich has shown here is an "incidental loss of benefits as a result of a termination[, which does] not constitute a violation of § 510." Gavalik, 812 F.2d at 851. Thus, "this evidence does not meet the Gavalik standard, i.e., a specific intent on the part of the employer to interfere with the attainment of [medical benefits]." Hendricks v. Edgewater Steel Co., 898 F.2d 385, 390 (3d Cir. 1990).

Even if Kapetanovich had made out a prima facie case, summary judgment was nonetheless proper because Rockwell satisfied its burden by producing admissible evidence of a legitimate, nondiscriminatory motive for the discharge of Kapetanovich. The Tax Department decided to layoff one staff tax accountant in its Pittsburgh office in response to firm-wide cutbacks required by a decrease in B1-B production. The department decided which of the five accountants in that office to layoff on the basis of the performance reviews and educational attainments of each. App. at 92. Kapetanovich has failed to demonstrate that Rockwell's proffered reason was pretextual. He does not deny that the Tax Department was subject to a staff reduction. Nor does he deny the facts about his educational attainments.

According, the court did not err in granting Rockwell summary judgment under ERISA.

We note that Kapetanovich would have fared no better even under his original theory of wrongful discharge under common law of Pennsylvania. He contends that Rockwell terminated his employment because he suffered from medical conditions that required the expenditure of large medical payments by Rockwell's insurance plan, which is essentially a claim for discrimination on the basis of handicap.

The Pennsylvania Human Relations Act (PHRA) provides a statutory remedy for employment discrimination based on handicap, 43 Pa. Cons. Stat. Ann. § 955(a) (Purdon 1992 Supp.), which encompasses discrimination based on an increase in the employer's insurance costs. 16 Pa. Code § 44.4 (1991). The remedy provided by the PHRA, which requires a person allegedly discriminated against to file a complaint with the Pennsylvania Human Relations Commission in the first instance, is exclusive. See Clay v. Advanced Computer Applications, Inc., 522 Pa. 86, 559 A.2d 917, 918 (1989). Any common law action, such as the one asserted by Kapetanovich, is barred. See id.

Accordingly, summary judgment or any other pretrial dismissal of Kapetanovich's complaint under Pennsylvania state law would have been inevitable.



For the foregoing reasons, we will affirm the judgment of the district court.

Delores K. Sloviter, Chief Judge


We will affirm the judgment of the district court.

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