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.
ORDER — MEMORANDUM
AND NOW, this 13th day of April, 2000, plaintiff Jeffery
Darlin's motion for reconsideration of the refusal of remand is
On March 14, 2000 by order and memorandum, remand was rejected
because the severance plan at issue was deemed to be qualified
under ERISA as an "employee welfare benefit plan,"
29 U.S.C. § 1002(1). As a result, federal jurisdiction attached.
28 U.S.C. § 1331. Plaintiff asks for reconsideration in light of Velarde v.
PACE Membership Warehouse, Inc., 105 F.3d 1313 (9th Cir. 1997).
In Velarde, the employer offered a "stay-on bonus" to certain
employees who remained with the company for a defined period. 105
F.3d at 1315. To maintain eligibility, employees had to "perform
their duties in a satisfactory manner" and "not be terminated for
cause before the specified date." Id. at 1316-17. These
strictures, the Ninth Circuit concluded, "failed to rise to the
level of ongoing particularized discretion required to transform
a simple severance agreement into an ERISA employee benefits
plan." Id. at 1317.*fn1 In effect, the criteria for the bonus
was to continue working and not be discharged for cause — or,
simply, to "stay-on."
Here, the "stay-on bonus" was made available to employees
"terminated (or constructively terminated) without cause," as
determined by a plan administrator. Discretion, in this instance,
was to be exercised for the purpose of inclusion in the plan, not
exclusion, as in Velarde. Perhaps more significantly, our Court
of Appeals, in a case very much like this one, has laid down a
low level of discretion as a predicate for ERISA classification.
In Pane v. RCA Corp., a severance program was held to be an
ERISA plan because the administrator just was called on to
determine whether an employee was terminated other than for
cause. 868 F.2d 631, 635 (3d Cir. 1989), affirming Pane v. RCA
Corp., 667 F. Supp. 168 (D.N.J. 1987). Pane is much closer than
Velarde, and it is authoritative.*fn2