The opinion of the court was delivered by: Eduardo C. Robreno, District Judge.
Plaintiffs, Jenny Grabski, Michael Grinnage, Richard Grinnage,
Oscar Hernandez, Marco Salinas, Jeffrey Sample, Lillian Suarez
and Carmen Velazquez ("Plaintiffs" or "marketing
representatives") brought this action against their former
employer, defendant Aetna Inc. ("Aetna") seeking severance and
salary continuation benefits. Specifically, plaintiffs advance
the following three causes of action against Aetna: 1) violation
of Pennsylvania's Wage Payment and Collection Law, 43
Pa.Cons.Stat. Ann. § 260.1 et seq., ("WPCL"); 2) nonpayment of
benefits under the Employee Retirement Income Security Act,
29 U.S.C. § 1001 et seq., ("ERISA"); and 3) breach of contract.
Plaintiffs had been employed by Aetna Health Plan of Central
and Eastern Pennsylvania, Inc., a subsidiary of Aetna Life and
Casualty Company (collectively "Aetna"), as marketing
representatives selling products pursuant to a contract Aetna had
with Mercy Health Plan ("Mercy"). After some time, Aetna decided
to end its contractual relationship with Mercy, and as a result,
Aetna was prepared to terminate plaintiffs' employment on the
date Aetna's relationship with Mercy ended. Prior to this date,
however, Aetna offered each plaintiff the opportunity to continue
his or her employment with a successor entity, AmeriHealth HMO,
Inc. ("AmeriHealth"). AmeriHealth agreed to offer plaintiffs
positions and salaries with incentive compensation opportunities
which were comparable to their current positions with Aetna. If
plaintiffs accepted the position with AmeriHealth, they simply
would have continued selling the same products, under the same
terms and conditions, on AmeriHealth's payroll. In light of this,
the Administrator of Aetna's Severance and Salary Continuation
Benefits Plan ("Plan Administrator") determined that since
plaintiffs were given the opportunity to accept positions with
AmeriHealth, plaintiffs were not entitled to severance benefits
because a "Termination of Employment", as defined in Aetna's
Severance and Salary Continuation Benefits Plan ("Plan"), had not
Defendant moves for summary judgment on the basis that: 1)
plaintiffs' WPCL claim and breach of contract claim are preempted
by ERISA pursuant to binding Third Circuit precedent and 2)
plaintiffs' claims for severance benefits under ERISA fail
because the Plan Administrator, who is given the sole power to
decide all questions of eligibility and the sole power to
interpret the provisions of the Plan, determined that plaintiffs
did not suffer a "Termination of Employment" within the meaning
of the Plan and that determination must be upheld because it was
not arbitrary or capricious.
The Court finds that, under Third Circuit law, plaintiffs' WPCL
and breach of contract claims are clearly preempted by ERISA. In
addition, the Court concludes that the arbitrary and capricious
standard is the proper standard of review applicable to this
case, since plaintiffs have offered no evidence to show that the
Plan Administrator was operating under a conflict of interest.
The Court further finds that the Plan Administrator's decision to
deny benefits was neither arbitrary nor capricious. Furthermore,
the Court concludes that, as a matter of law, plaintiffs cannot
rely on an oral modification to change the terms of a plan under
ERISA. Finally, the Court finds that plaintiffs have failed to
point to any evidence on the record, which would allow them to
recover based on an equitable estoppel theory. As a result,
summary judgment in favor of Aetna will be granted.
In 1988, Aetna, then Freedom Health Care, entered into a
contract with Mercy. Pursuant to the terms of the contract with
Mercy, Aetna entered into a separate contract with the
Commonwealth of Pennsylvania to provide health plan services to
Medicaid beneficiaries in Eastern Pennsylvania. Aetna then
subcontracted this work for the Commonwealth out to Mercy. Mercy
did not contract with the Commonwealth because it did not wish to
offer family planning services and did not have the HMO license
required by the state.
Under the terms of the agreement between Mercy and Aetna, Mercy
administered and was responsible for enrolling eligible Medicaid
beneficiaries into the health plan. However, due to insurance and
licensing regulations, the marketing representatives had to be
employed by Aetna. Mercy in turn reimbursed Aetna for all costs
associated with employing those marketing representatives.
Plaintiffs were all employed by Aetna as marketing
representative. During the course of plaintiffs' employment at
Aetna, the company distributed to each plaintiff, an employee
manual which explained the salary continuation and severance
benefits policies. Plaintiffs, however, were supervised by and
reported to Mercy personnel and Mercy supervisors made salary and
bonus decisions regarding plaintiffs.
From the time Aetna decided to end its contractual relationship
with Mercy in December of 1996, Aetna and Mercy cooperated so
that plaintiffs, who were then employed by Aetna, could be
transferred to employment with AmeriHealth/Mercy once AmeriHealth
obtained the necessary license and before the contract with Mercy
ended in March of 1997. As of February 1997, however, Aetna did
not know whether AmeriHealth/Mercy would be able to obtain the
necessary license by March 31, 1997. During this time period,
Aetna acknowledged that if AmeriHealth did not obtain the license
by March 31, 1997, plaintiffs could not be employed by
AmeriHealth and would suffer a break in employment.
By February of 1997, plaintiffs were made aware by Aetna
representatives that Aetna was ending its contractual
relationship with Mercy and of the potential end of their
respective employment. As a result, plaintiffs began calling
Aetna representatives to determine their employment status.
Thereafter, a February 19, 1997 meeting was scheduled to address
At the February 19, 1997 meeting, an Aetna representative
explained to plaintiffs the following: that Aetna was ending its
contractual relationship with Mercy; Aetna did not know whether
plaintiffs would receive a job with AmeriHealth/Mercy; that if
each plaintiff did not receive a job with AmeriHealth/Mercy by
the time the contractual relationship ended on March 31, 1997,
they would be terminated by Aetna effective on that date; and
Aetna did not know if AmeriHealth/Mercy would obtain the
necessary license by March 31, 1997. In addition, at this
meeting, Aetna handed out to plaintiffs a document entitled
"Summary of Aetna Separation Program," which outlined Aetna's
salary continuation and severance policies.
In early March of 1997, AmeriHealth obtained the necessary
license it needed to employ plaintiffs. While initially
AmeriHealth stated that it would offer plaintiffs comparable
positions, however, it would not commit in writing to such an
offer. As a result, on March 11, 1997, a conference call
involving Aetna, AmeriHealth, Mercy and Keystone management was
conducted during which Aetna informed the others that if Aetna
did not have written confirmation of the job offers to
plaintiffs, they would be entitled to severance benefits under
Aetna's plan. Aetna also explained to AmeriHealth, Mercy and
Keystone management that, pursuant to the contract between Aetna
and Mercy, the costs of those benefits would be charged back to
On March 13, 1997, AmeriHealth confirmed in writing to Aetna
that it would offer plaintiffs employment with AmeriHealth and
that their positions and salaries with incentive opportunities
would be comparable to their current position with Aetna.
Plaintiffs' employment with AmeriHealth was to start effective
Monday, March 17, 1997.
Also, on March 13, 1997, a meeting was held at a Mercy office,
where plaintiffs and representatives from Aetna were present.
During this meeting, Aetna informed plaintiffs of the following:
the date of the termination of plaintiffs' employment with Aetna
would be March 14, 1997; Aetna's contract with Mercy expired
March 31, 1997; plaintiffs were being terminated due to a
transfer of operations; and Aetna would not be paying severance
packages and/or salary continuation benefits to plaintiffs.*fn3
Following Aetna's denial of severance and salary continuation
benefits, plaintiffs, pursuant to the Plan, appealed the decision
to the Appeals Sub-Committee by letters dated June 13, 1997. The
Appeals Sub-Committee voted to deny plaintiffs' appeals because
in their determination, plaintiffs had not suffered a Termination
of Employment within the meaning of the Plan and therefore were
not entitled to severance and salary continuation benefits. In a
letter dated August 12, 1997, the Appeals Sub-Committee informed
plaintiffs' attorney of the decision and the reasons for the
Summary judgment is appropriate if the moving party can "show
that there is no genuine issue as to any material fact and the
moving party is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(c). When ruling on a motion for summary judgment,
the Court must view the evidence in the light most favorable to
the non-movant. Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538
(1986). The Court must accept the non-movant's version of the
facts as true, and resolve conflicts in the non-movant's favor.
Big Apple BMW, Inc. v. BMW of N. Amer., Inc., 974 F.2d 1358,
1363 (3d Cir. 1992), cert. denied, 507 U.S. 912, 113 S.Ct.
1262, 122 L.Ed.2d 659 (1993).
The moving party bears the initial burden of demonstrating the
absence of genuine issues of material fact. See Celotex Corp. v.
Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265
(1986). Once the movant has done so, however, the non-moving
party cannot rest on its pleadings. See Fed.R.Civ.P. 56(e).
Rather, the non-movant must then "make a showing sufficient to
establish the existence of every element essential to his case,
based on the affidavits or by depositions and admissions on
file." Harter v. GAF Corp., 967 ...