The opinion of the court was delivered by: Ludwig, District Judge.
Plaintiff Jeffery Darlin moves to remand this action to the
Court of Common Pleas of Philadelphia, following removal premised
on ERISA jurisdiction under 29 U.S.C. § 1001 et seq. Because
the severance plan in question appears to qualify under ERISA as
an "employee welfare benefit plan," 29 U.S.C. § 1002(1), the
motion will be denied. Defendant Conrail moves to dismiss the
complaint, Fed R. Civ. P. 12(b)(6), citing ERISA preemption. A
ruling on this motion will be deferred pending a further
In July, 1998, defendant Conrail, as part of a pending merger,
offered certain managerial employees a "stay-on bonus" if they
remained past their termination dates, until the reorganization
was complete. A three-page "Summary of Non-Agreement Benefits in
Connection with the Change in Control of Conrail" defined
eligibility as follows:
All employees who hold a non-agreement position as of
March 7, 1997, and who do not have an individual
severance agreement with Conrail are eligible for the
following benefits, all or a portion of which may be
made available as supplemental under the Conrail
pension plan. In the event you are terminated (or
constructively terminated) without cause within 3
years of the date CSX/NS are permitted by the
[Surface Transportation Board] to assume control over
Conrail's railroad operation (the "Control Date"), or
the date the [Surface Transportation Board]
authorizes the removal of Conrail's current Board of
Directors, if earlier, estimated at mid-1998, you
will be eligible to receive a special pension
benefit, subject to the execution of a release and
confidentiality agreement. You will have the choice
to receive the special benefit as a lump sum or as an
annuity. . . .
Plaintiff, an eligible employee, decided to participate in the
stay-on program. On April 19, 1999, plaintiff received notice of
termination effective May 31, 1999. Attached was further
information on the plan, together with a draft of a release of
all claims against Conrail, including those under the FELA. See
Complaint, Exh. 3. Plaintiff had a pending FELA claim and
was unaware that a waiver of the claim would be required.
On June 21, 1999, plaintiff received a separation package that
included the release. After consulting with counsel, he removed
the reference to FELA claims, signed the release, and returned
it. The redacted release was not acceptable to Conrail, and
plaintiff refused to execute the original. Following this
impasse, plaintiff filed suit in state court for promissory
estoppel and fraud.
Severance plans may constitute "employee welfare benefit plans"
under ERISA. Massachusetts v. Morash, 490 U.S. 107, 116, 109
S.Ct. 1668, 1669, 104 L.Ed.2d 98 (1989). As discussed by the
Court, what characterizes an ERISA plan is the "ongoing,
predictable nature of [an] obligation . . . creat[ing] the need
for an administrative scheme to process claims and pay out
benefits, whether those sums are received by beneficiaries in a
lump sum or on a periodic basis." Fort Halifax Packing Co. v.
Coyne, 482 U.S. 1, 16 n. 9, 107 S.Ct. 2211, 2219, 96 L.Ed.2d 1
Our Court of Appeals has twice applied Fort Halifax to
severance plans, determining whether or not an ERISA plan exists
based "on the amount of employment discretion involved in
providing payment." See Middleton v. Philadelphia Elec. Co.,
850 F. Supp. 348, 351 (E.D.Pa. 1994). Those decisions, Pane v.
RCA Corp., 868 F.2d 631 (3d Cir. 1989) and Angst v. Mack
Trucks, Inc., 969 F.2d 1530 (3d Cir. 1992), delineate the range
of discretion required. In Pane, a severance program was found
to be an ERISA plan because it authorized the administrator to
exercise subjective discretion to decide whether an employee was
terminated other than for cause. 868 F.2d at 635, affirming Pane
v. RCA Corp., 667 F. Supp. 168 (D.N.J. 1987). The district court
decision noted "the circumstances of each employee's termination
must be analyzed in light of [particular] criteria, and an
ongoing administrative system constituting an ERISA plan exists."
Pane, 667 F. Supp. at 171. See also, Bogue v. Ampex Corp.,
976 F.2d 1319, 1322 (9th Cir. 1992) (severance plan in which
administrator determined if covered employee's new job was
"substantially equivalent" to his previous job was governed by
ERISA). In Angst, a buyout plan granting lump sum payments and
certain medical benefits was held not to be a "plan" under ERISA.
969 F.2d at 1539. The buyout covered 77 employees, with
eligibility based on seniority — there were 144 applicants.
Although the seniority determinations were made by an
administrator, the plan did not create "an administrative
apparatus that would analyze each employees' situation in light
of particular criteria." Angst, 969 F.2d at 1539. See also,
Middleton, 850 F. Supp. at 353 (A severance plan in which "the
administrator [used] objective criteria and calculate[d]
severance benefits according to a simple formula" was not subject
Here, much akin to Pane, plan eligibility is restricted to
employees who "are terminated (or constructively terminated)
without cause" — a standard involving the use of subjective
discretion by the plan administrator. So viewed, Conrail's
special benefit plan is an "employee welfare benefit plan" under
ERISA. 29 U.S.C. § 1002(1).
As to defendant's motion to dismiss the complaint, there are
two types of ERISA preemption — complete preemption under §
502(a) and express preemption under § 514(a). Our Court of
Appeals recently clarified the differences. See In re U.S.
Healthcare, 193 F.3d 151 (3d Cir. 1999). Complete preemption, a
jurisdictional concept, "operates to confer original federal
subject matter jurisdiction notwithstanding the absence of a
federal cause of action on the face of the complaint." Id. at
160. State law claims subject to complete preemption are
"necessarily federal in character" and, as such, are transformed
into federal claims. Id., citing Metropolitan Life Ins. Co. v.
Taylor, 481 U.S. 58, 63, 107 S.Ct. 1542, 1546, 95 L.Ed.2d 55
Express preemption concerns state laws that "relate to" employee
benefit plans; it is a "substantive concept governing the
applicable law." Id. Claims affected by express preemption are
"displaced and subject to dismissal." Id.
The dismissal motion raises both types of preemption.
Plaintiff's response asserts that an ERISA plan does not exist
and preemption, therefore, does not apply. Plaintiff will be
given additional time to brief this issue.
AND NOW, this 13th day of April, 2000, plaintiff Jeffery
Darlin's motion for reconsideration of the ...