Chester C. Sanson v. General Motors Corporation

966 F.2d 618, 1992 WL 144381

• Court: Court of Appeals for the Eleventh Circuit
• Decided: September 16, 1992
• Docket: 91-8528
• Status: Published

Opinions

RONEY, Senior Circuit Judge:

This case presents the question whether the Employee Retirement Income Security Act of 1974 (ERISA), 88 Stat. 829, as amended, 29 U.S.C. § 1001 et seq., preempts a Georgia state law fraudulent misrepresentation claim based on reasonable reliance that causes a person a loss of benefits which would have been received under a special early retirement program. In light of Ingersoll-Rand Co. v. McClendon, - U.S. -, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990), we hold the plaintiffs state law fraud claims that relate to a qualified employee benefit plan are preempted by ERISA. Since there is no ERISA claim that could be pled, the district court did not abuse its discretion in denying leave to amend the complaint to allege a claim under ERISA. We, therefore, affirm the district court judgment.

Chester Sanson alleges that General Motors Corporation (GM) fraudulently represented to him that benefits under a special retirement program would not be offered to Lakewood assembly plant employees. Relying upon that representation, he voluntarily retired under the standard provisions of GM’s early retirement program. Sanson claims that but for the representation, he would have continued his employment until it would have been clearer whether the special retirement program would be offered to Lakewood employees.

Shortly after Sanson’s retirement, GM offered the special program to certain eligible employees. Sanson immediately contacted GM and demanded that his retirement benefits be increased to the level that the special program provided. GM denied his request, and this action commenced.

Sanson sought to recover the enhanced retirement benefits and compensatory and punitive damages. GM moved for summary judgment, asserting that ERISA preempts Sanson’s state law claim. Initially, the district court denied GM’s motion, holding the state law claim was not preempted.

ERISA expressly provides for the preemption of “any and all State laws insofar as they may now or. hereafter relate to any employee benefit plan....” 29 U.S.C. § 1144(a). State laws, however, that have only a tenuous effect on employee benefit plans are not preempt-ed_ The fact that the misrepresentations concerned the availability of an employee benefit plan is only incidental to plaintiff’s claim_ [Therefore] plaintiff’s claim for intentional misrepresentation is not preempted by ERISA, (citations omitted).

Dist.Ct.Order, l:88-cv-827-RCF, (June 28, 1989).

Thereafter, the Supreme Court held in Ingersoll-Rand Co. v. McClendon, supra, that ERISA’s explicit language and its structure and purpose demonstrate a congressional intent to preempt a state common law claim that an employee was unlawfully discharged to prevent his attainment of benefits under an ERISA-covered plan. GM then requested the district court to consider the application of McClendon to its earlier ruling. After ordering GM to file a subsequent summary judgment motion, the district court reversed its prior ruling based on the belief that “a faithful application of the reasoning of McClendon to the facts of this case requires a finding that Plaintiffs cause of action under Georgia law is preempted under ERISA,” and denied Sanson’s request to amend his complaint as “futile.” Dist.Ct.Order, l:88-cv-827-RCF, (May 24, 1991).

Sanson contends that the district court read too much into the McClendon decision. Sanson argues that McClendon addresses whether ERISA preempts a claim under a pension-based state law, but that this case involves whether ERISA preempts a general fraud claim under a non-pension-based state law. He claims that the dividing line for purposes of determining ERISA preemption in this context is between claims tha,t “relate to” an employee benefit plan and claims that “affect employee benefit plans too tenuously to be characterized fairly as relating to employee benefit plans.” Howard v. Parisian, 807 F.2d 1560, 1564 (11th Cir.1987). Contrary to Sanson’s argument, the facts of this case demonstrate more than a tenuous relationship to an employee benefit plan.

In McClendon, the United States Supreme Court reversed the Texas Supreme Court’s holding that an employee could recover in a wrongful discharge action if he established that the “principal reason for his termination was the employer’s desire to avoid contributing to or paying benefits under the employee’s pension fund.” McClendon, - U.S. at -, 111 S.Ct. at 481, 112 L.Ed.2d at 482. Even though other federal courts had held similar claims preempted by ERISA, the Texas Supreme Court attempted to distinguish McClen-don’s claims because he was “not seeking lost pension benefits but [was] instead seeking future lost wages, mental anguish and punitive damages as a result of the wrongful discharge.” Id. To prevail, however, McClendon had to plead and the court had to find that an ERISA plan existed and the employer had a pension-defeating motive in terminating the employment. Because the court’s inquiry was directed to the plan, the Supreme Court held that the cause of action related to an ERISA plan and was, therefore, preempted.

In this case, Sanson claims that GM’s misrepresentations were made in furtherance of an objective of achieving a twenty-five percent reduction in salaried employees without the added expense associated with a financial incentive to the employees targeted for removal (e.g., the special retirement program). The measure of damages sought would be against GM and not against a pension plan. To prevail on his state law claims, Sanson would have to prove the existence of an ERISA plan. He would establish that GM intentionally misrepresented his ineligibility for the special retirement program and knew the plan would be available at the time it told him otherwise. He relied upon the misrepresentation and was damaged by the misrepresentation. See Allen v. Sanders, 176 Ga.App. 647, 648, 337 S.E.2d 428, 429 (1985). It can be assumed here that he would prevail on his factual claims to state law.

Whether federal law preempts a state action is a question of congressional intent, and “[t]o discern Congress’ intent we must examine the explicit statutory language and the structure and purpose of the statute.” McClendon, - U.S. at -, 111 S.Ct. at 482, 112 L.Ed.2d at 483; see also Allis-Chalmers Corp. v. Lueck, 471 U.S. 202, 208, 105 S.Ct. 1904, 1909-10, 85 L.Ed.2d 206 (1985). ERISA § 514(a) provides:

Except as provided in subsection (b) of this section, the provisions of this sub-chapter and subehapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title.

ERISA § 514(a), as codified in, 29 U.S.C. § 1144(a) (emphasis added). Under the plain language of § 514(a), only state laws that relate to benefit plans are preempted. McClendon, - U.S. at -, 111 S.Ct. at 483, 112 L.Ed.2d at 484. A law “relates to” an employee benefit plan when the law “has a connection with or reference to such a plan.” Id.; Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97, 103 S.Ct. 2890, 2899-2900, 77 L.Ed.2d 490 (1983). Thus, “a state law may ‘relate to’ a benefit plan, and thereby be preempted, even if the law is not specifically designed to affect such plans, or the effect is only indirect.” McClendon, - U.S. at -, 111 S.Ct. at 483, 112 L.Ed.2d at 484.

Based upon the Supreme Court’s interpretation and application of ERISA in McClendon, the district court properly applied McClendon to hold that federal law preempts Sanson’s state law claims. The existence of a pension plan subject to ERISA is a critical factor in both cases. It was critical in establishing liability under the state’s wrongful discharge law in McClendon. In this case, the misrepresentation relates to Sanson’s retirement benefits available under GM’s special retirement plan. The measure of damages would be the amount of benefits Sanson would have received under the retirement plan. Such a determination of damages demonstrates the relationship between the lawsuit and the. special retirement plan.

McClendone recognized certain limits to ERISA’s preemption clause: that a law normally would not be preempted if the statute did not require the establishment or maintenance of an ongoing plan, or if a statute makes no reference to, or functions irrespective of, a plan. See e.g., Mackey v. Lanier Collection Agency & Serv., Inc., 486 U.S. 825, 841, 108 S.Ct. 2182, 2192-93, 100 L.Ed.2d 836 (1988); Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 12, 107 S.Ct. 2211, 2217-18, 96 L.Ed.2d 1 (1987). Although the fraud statute does not involve the existence of a pension plan, the statute would not apply to this case without the existence of the retirement plan. See also First Nat’l Life Ins. v. Sunshine-Jr. Food Stores, 960 F.2d 1546, 1549-50 (11th Cir. 1992).

The district court correctly held that McClendon mandates preemption of the plaintiff’s state law claim.

Sanson alternately contends that if ERISA preempts the state law, the district court abused its discretion in refusing to grant him leave to amend the complaint to state a claim under ERISA. The essential problem Sanson faces is that he does not satisfy the definition of “participant” or “beneficiary” under § 1132 of ERISA. 29 U.S.C. §§ 1002(7)-(8). Only a participant or beneficiary can file a civil action under ERISA. Section 1132(a)(3) provides in pertinent part that

A civil action may be brought—

(3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which, violates any provision of this sub-chapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan;

(e)(1) Except for actions under subsection (a)(1)(B) of this section, the district courts of the United States shall have exclusive jurisdiction of civil actions under this subchapter brought by ... a participant, beneficiary, or fiduciary.

ERISA § 502, as amended, 29 U.S.C. § 1132.

Sanson acknowledges his inability to express a statutory basis for maintaining the present action under ERISA, but contends that there must be some avenue whereby an individual who is defrauded out of pension benefits can obtain a remedy. Sanson argues that the court should create a federal common law fraud claim under ERISA, and suggests Georgia state law as the reasonable source for this federal common law with recovery limited in accordance with policies dictated by ERISA:

The Supreme Court has previously considered and rejected such an extension of the remedies guaranteed under ERISA:

[T]he detailed provisions of § 502(a) set forth a comprehensive civil enforcement scheme that represents a careful balancing of the need for prompt and fair claims settlement procedures against the public interest in encouraging the formation of employee benefit plans. The policy choices reflected in the inclusion of certain remedies and the exclusion of others under the federal scheme would be completely undermined if ERISA-plan participants and beneficiaries were free to obtain remedies under state law that Congress rejected in ERISA. “The six carefully integrated civil enforcement provisions found in § 502(a) of the statute as finally enacted ... provide strong evidence that Congress did not intend to authorize other remedies that it simply forgot [or decided not] to incorporate expressly.” (Emphasis in original).

Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 54, 107 S.Ct. 1549, 1556, 95 L.Ed.2d 39 (1987) (quoting Massachusetts Mutual Life Ins. Co. v. Russell, 473 U.S. 134, 146, 105 S.Ct. 3085, 3092, 87 L.Ed.2d 96 (1985) (cited with approval in McClendon, - U.S. at -, 111 S.Ct. at 485, 112 L.Ed.2d at 487)).

In McRae v. Seafarers’ Welfare Plan, 920 F.2d 819 (11th Cir.1991), holding that extra-contractual damages under a federal common law claim were not available under ERISA § 502(a)(3), we reaffirmed the interpretation that § 502 defines the specific circumstances upon which one may be granted legal or equitable relief. Id. at 822.

, Some courts, while recognizing the absence of an express or implied right of action under ERISA, have allowed for the creation of a federal common law in certain instances. A number of the courts, however, follow the restrictive interpretation of § 502(a) as set forth in Pilot Life, supra. See e.g., First Nat’l Life Ins. v. Sunshine-Jr. Food Stores, 960 F.2d 1546, 1550 (11th Cir.1992) (argument that ERISA provides inadequate remedy is insufficient reason to overcome language of statute); Lee v. E.I. DuPont de Nemours & Co., 894 F.2d 755, 757 (5th Cir.1990) (ERISA preempts state law claims of fraud and misrepresentation without regard to whether ERISA provided any remedy for claimed wrong); Lister v. Stark, 890 F.2d 941, 946 (7th Cir.1989), cert. denied, - U.S.-, 111 S.Ct. 579, 112 L.Ed.2d 584, 112 L.Ed.2d 584 (1990) (“[w]hile our holding will leave [plaintiff] without a remedy, the availability of a federal remedy is not a prerequisite for federal preemption”); Degan v. Ford Motor Co., 869 F.2d 889, 895 (5th Cir.1989).(preempting plaintiffs state law claims despite recognition that employer’s misrepresentation was a “betrayal without a remedy”). But see Provident Life & Accident Ins. Co. v. Waller, 906 F.2d 985 (4th Cir.), cert. denied, - U.S. -, 111 S.Ct. 512, 112 L.Ed.2d 524 (1990) (court created féderal common law rule of unjust enrichment to recover monies advanced to plan participant); Whitworth Bros. Storage Co. v. Central States, Southeast & Southwest Areas Pension Fund, 794 F.2d 221 (6th Cir.), cert. denied, 479 U.S. 1007, 107 S.Ct. 645, 93 L.Ed.2d 701 (1986) (finding no cause of action under ERISA, court provided federal common law to find cause of action for employer to recover payments mistakenly made to pension plan).

As further support for the creation of a federal common law, Sanson contends that “Congress specifically contemplated that federal courts, in the interests of justice, would engage in interstitial lawmaking in ERISA cases in much the same way as the courts fashioned a federal common law of labor relations under § 301 of the LMRA.” Kwatcher v. Massachusetts Serv. Employees Pension Fund, 879 F.2d 957, 966 (1st Cir.1989). We have held, however, “[i]n the face of clear precedent to the contrary from the Supreme Court, the Eleventh Circuit, and other Circuits, this Court cannot create a federal common law of remedies for the benefit of the plaintiff on the sole authority of [a congressional report].” McRae, 920 F.2d at 823; see generally Conner v. Aerovox, Inc., 730 F.2d.835, 841 (1st Cir.1984), cert. denied, 470 U.S. 1050, 105 S.Ct. 1747, 84 L.Ed.2d 812 (1985) (“once Congress has addressed a national concern, court’s fundamental commitment to separation of powers precludes it from scrutinizing the sufficiency of [that] solution”).

In view of the foregoing precedent, the district court did not abuse its discretion in denying the motion for leave to amend the complaint.

AFFIRMED.