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finding removal jurisdiction under ERISA despite the plaintiff's characterizing his claim as one for declaratory relief under state law
Summary of this case from Patterson v. Duke Univ.Opinion
Civil No. CCB-03-1770
April 27, 2004
MEMORANDUM
Following my February 10, 2004 Memorandum and Order reopening the record in this Employee Retirement Income Security Act ("ERISA") case, the parties have filed supplemental arguments and affidavits (docket nos. 19 20) in support of their respective cross-motions for summary judgment (docket nos. 11 12). The plaintiff, Thomas M. Baumgartner, continues to argue that his employer, Baltimore Gas and Electric Co. ("BGE"), violated the terms of its ERISA severance plan by denying him benefits when he resigned following a reorganization of the department in which he worked. In addition, Mr. Baumgartner contends that he detrimentally relied on promises of severance benefits by passing up two alternative offers of employment. The defendants, BGE and its affiliate Constellation Energy Group ("CEG"), respond that the denial of severance pay was reasonable under the terms of the plan, and that Mr. Baumgartner has no valid estoppel claim. For the reasons that follow, the court agrees with the defendants on both issues and will grant summary judgment in their favor.
I.
Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
The Supreme Court has clarified that this does not mean that any factual dispute will defeat the motion:
By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).
"A party opposing a properly supported motion for summary judgment `may not rest upon the mere allegations or denials of [his] pleadings,' but rather must `set forth specific facts showing that there is a genuine issue for trial.'" Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 525 (4th Cir. 2003) (alteration in original) (quoting Fed.R.Civ.P. 56(e)). The court must "view the evidence in the light most favorable to . . . the nonmovant, and draw all reasonable inferences in her favor without weighing the evidence or assessing the witness' credibility," Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 644-45 (4th Cir. 2002), but the court also must abide by the "affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial." Bouchat, 346 F.3d at 526 (internal quotation marks omitted) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir. 1993), and citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)).
II.
There is little dispute as to the facts of this case. Mr. Baumgartner was employed by BGE, a regulated public utility serving customers in Baltimore and central Maryland, between August 7, 1972 and January 24, 2003. (Compl. ¶¶ 4, 12; Hartley Aff. ¶ 2, Def.'s Mem. Ex. 1.) Prior to September 1998, Mr. Baumgartner served as a Regional Developer. (Forbes Aff. ¶ 4, Def.'s Mem. Ex. 4.) Under the graded pay scale in effect at the time, Mr. Baumgartner's position was designated "Weekly 30, step 5," giving him a base salary of $949.70 per week, or $49,384.40 annually. ( Id. ¶ 3-4; Def.'s Mem. at 4.) Mr. Baumgartner could also earn overtime. (Forbes Aff. ¶ 4.) In September 1998, Mr. Baumgartner transferred to the position of Gas Access Sales Representative-C. (Hartley Aff. ¶ 4.) His new responsibilities included developing and maintaining natural gas service contracts in an assigned geographic region. (Def.'s Mem. Ex. 2.) This position was exempt from the graded pay scale; it gave Mr. Baumgartner a base salary of $4,139 per month, or $49,668 annually, plus the opportunity for substantial commissions. (Forbes Aff. ¶ 5; Def.'s Mem. at 4.) Mr. Baumgartner estimates that he earned an average of $84,362 per year between 1998 and 2002. (Baumgartner Aff. ¶ 4, Pl.'s Mot. for Summ. J. Ex. 1.)
In early 2001, BGE determined that its gas sales system was not cost-effective. (Williams Aff. ¶ 3, Def.'s Mem. Ex. 3.) Accordingly, in 2002, the company restructured the department, combining certain gas and electric sales services in a single unit as part of a company-wide reorganization. ( Id. ¶ 4.) Mr. Baumgartner was assigned to the position of Residential Customer Representative within the new department. ( Id. ¶ 7.) What his new salary was is not entirely clear from the record. Under a new system of pay grades implemented in January 2002, Mr. Baumgartner's position was to be designated "Monthly Grade 77," with eligibility for a 15% "Results Incentive Award," but no commissions. Though the company asserts that Mr. Baumgartner was to receive 15% more than the usual base salary for his grade (Holmes Aff. ¶ 9), a letter from Mr. Baumgartner suggests he believed he would receive only the usual base pay (Def.'s Mem. Ex. 8). The company's calculation yields an annual salary of $72,792 ($83,710.80 with the maximum bonus); Mr. Baumgartner's, only $63,300 ($72,795 with the bonus). Given the posture of this case, the court must resolve these ambiguities in favor of the plaintiff in considering the defendants' motion and in favor of the defendants in considering the plaintiff's motion.
The record does not indicate whether Mr. Baumgartner was also eligible for overtime.
The record includes a chart of Mr. Baumgartner's income from 1997 to 2003 (Def.'s Mem. Ex. 5), but the chart fails to resolve this conflict. Adding up the entries for "regular," "sick partial base," "sickness," "vacation," and "holiday" on Mr. Baumgartner's income chart for 2002 yields a figure of $68,798.01, which falls between each side's estimate for his new base pay. The discrepancy could reflect the fact that Mr. Baumgartner changed positions partway into 2002, or it could be that adding these entries is not the correct way to determine base pay. In any event, the parties have not explained how, if at all, the income chart may help resolve this dispute.
Mr. Baumgartner appears to have learned of his new assignment in January 2002. ( See Baumgartner Letter, Def.'s Mem. Ex. 8.) On January 24, 2002, he wrote a letter to his manager announcing his "intention to leave BGE for other pursuits, contingent upon satisfactory resolution of any severance package issues." ( Id. (emphasis in original).) The letter explained that Mr. Baumgartner felt his "downgrade, cut in pay, demotion or whatever terminology one would choose to use" entitled him to an "involuntary severance package." ( Id.) Nevertheless, Mr. Baumgartner ended up working as a Residential Customer Representative for roughly ten months between March 2002 and January 2003 ( see Honaker Supplemental Aff. ¶ 3, Def.'s Supplemental Br. Ex. 1), passing up two "potentially more lucrative job opportunities" during that period. ( See Baumgartner Supplemental Aff. ¶ 4, Pl.'s Supplemental Br. Ex. 1.) He claims he acted "in direct reliance on the fact that he knew . . . that if his new downgraded job did not work out that he would have a severance available to him as a cushion to tide him over while he sought new employment." (PL's Supplemental Br. at 2.) Mr. Baumgartner says several of his supervisors told him he would receive such benefits-an assertion the company disputes. (Baumgartner Aff. ¶ 8; Def.'s Mem. at 8.)
The individuals Mr. Baumgartner says promised him severance benefits have signed affidavits denying they did so. ( See Def.'s Mem. Ex. 3, 10, 11.)
Mr. Baugartner finally resigned on January 3, 2003. (Resignation Letter, Def.'s Mem. Ex. 9.) BGE determined that he was not, in fact, eligible for severance benefits. (Honaker Aff. ¶¶ 5, 8.) Mr. Baumgartner appealed the denial within the company ( id. ¶ 9), and then sued in the Maryland Circuit Court for Baltimore County on May 30, 2003, seeking a declaration that he is entitled to severance benefits in the amount of $98,076. ( See Compl., Docket No. 2.) The defendants filed a notice of removal pursuant to 28 U.S.C. § 1441 on June 16, 2003. (Docket No. 1.)
The record does not make clear when Mr. Baumgartner requested severance benefits, nor when he pursued the internal appeal. The plan administrator's affidavit indicates only that Mr. Baumgartner appealed his claim "[a]fter January 24, 2002," the date of Mr. Baumgartner's first letter threatening resignation. ( See Honaker Aff. ¶ 9.)
III.
Before addressing the merits of the dispute, a threshold question of jurisdiction requires brief consideration. As was noted above, Mr. Baumgartner initiated this lawsuit in state court, but the defendants removed it to federal court. Mr. Baumgartner disputes the removal, arguing there is no basis for federal jurisdiction. (Docket No. 4.) This contention is without merit. As the Fourth Circuit has explained, ERISA effects a "complete preemption" of state law claims seeking benefits from ERISA plans; the statute converts such claims into causes of action under ERISA's civil enforcement provision, 29 U.S.C. § 1132. See Darcangelo v. Verizon Communications, Inc., 292 F.3d 181, 186-87 (4th Cir. 2002). Accordingly, Mr. Baumgartner's characterization of his cause of action as a claim for declaratory relief under state law is not controlling. Because Mr. Baumgartner's complaint states a claim "to recover benefits due to him under the terms of his plan," 29 U.S.C. § 1132(a)(1)(B), the complaint states a claim under ERISA, giving this court federal question jurisdiction under 28 U.S.C. § 1331 and removal jurisdiction under 28 U.S.C. § 1441.
The parties do not appear to dispute that the severance plan in question qualifies as an ERISA plan.
IV.
Turning now to the summary judgment motions, Mr. Baumgartner's claim requires a two-step inquiry. First, the court must decide, as a matter of de novo contract interpretation, whether the ERISA plan at issue vested discretion in the plan administrator with respect to the contested benefits. Booth v. Wal-Mart Stores, Inc. Assocs. Health Welfare Plan, 201 F.3d 335, 340-41 (4th Cir. 2000); Firestone Tire Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). Second, if the administrator's decision was discretionary, the court must determine whether the denial of benefits abused that discretion. Johannssen v. Dist. No. 1-Pacific Coast Dist., MEBA Pension Plan, 292 F.3d 159, 168 (4th Cir. 2002); Booth, 201 F.3d at 341-42. In this case, the administrator had discretion and the undisputed facts show that he did not abuse it.
The focus of the first inquiry is on the written language of the ERISA plan. See Coleman v. Nationwide Life Ins. Co., 969 F.2d 54, 56 (4th Cir. 1992) ("While a court should be hesitant to depart from the written terms of a contract under any circumstances, it is particularly inappropriate in a case involving ERISA, which places great emphasis upon adherence to the written provisions in an employee benefit plan."). In this case, the plan explicitly confers discretion on the administrator. To quote the relevant provision in full:
Powers and Duties of the Plan Administrator-The Plan Administrator shall have the exclusive right to make determinations with respect to the administration and interpretation of the Plan in accordance with ERISA, any other applicable law, and the Plan's provisions (to the extent consistent with such laws), including, but not limited to, the power to (i) interpret the provisions of the Plan, and (ii) determine Employees who are eligible to participate in the Plan, the amount, duration, and nature of the benefits under the Plan, and to require any person to furnish such information as he/she may reasonably request as a condition to receiving benefits under the Plan, and such interpretations and determinations shall be final, conclusive and binding on the Employer, Participants and Employees. The Plan Administrator may delegate in writing any part of his/her responsibilities and duties to one or more designees and may withdraw such authority by subsequent writing.
(Severance Plan Article 4.C, Def.'s Mem. Ex. 12.) It is clear from this language that the plan administrator is responsible for interpreting the provisions of the plan and determining benefits eligibility based on the plan's terms. See, e.g., Sutton v. Hearth Home Distribs., Inc. Employee Benefit Plan, 881 F. Supp. 210, 214 (D. Md. 1995) (finding a grant of discretion where a plan gave the administrator "the power to construe the Plan and to resolve doubts and to reconcile or eliminate ambiguities or conflicts as to the construction thereof). Accordingly, the administrator's "discretionary decision will not be disturbed if reasonable, even if the court itself would have reached a different conclusion." Booth, 201 F.3d at 341. While the administrator's conflict of interest as an employee of CEG "may operate to reduce the deference given to a discretionary decision," id. at 343 n. 2, the deference is lessened only to the extent necessary "to determine whether [the decision] is consistent with an exercise of discretion by a fiduciary acting free of the interests that conflict with those of the beneficiaries," Doe v. Group Hospitalization Med. Servs., 3 F.3d 80, 87 (4th Cir. 1993).
The Fourth Circuit has identified eight factors that bear on whether an abuse of discretion occurred:
(1) the language of the plan; (2) the purposes and goals of the plan; (3) the adequacy of the materials considered to make the decision and the degree to which they support it; (4) whether the fiduciary's interpretation was consistent with other provisions in the plan and with earlier interpretations of the plan; (5) whether the decisionmaking process was reasoned and principled; (6) whether the decision was consistent with the procedural and substantive requirements of ERISA; (7) any external standard relevant to the exercise of discretion; and (8) the fiduciary's motives and any conflict of interest it may have.Booth, 201 F.3d at 342-43. The facts in the record indicate that a number of these factors support upholding the administrator's decision, while none clearly oppose it.
First, the language of the plan supports the denial of benefits. As is relevant here, BGE's plan makes employees eligible for severance benefits only if they satisfy three criteria:
the Employee receives written notification from his/her Employer that he/she is Displaced; and
the Employee continues to perform his/her assigned duties in a manner satisfactory to his/her Employer until the Termination Effective Date designated by his/her Employer; and
after his/her Termination Effective Date, the Employee executes (and does not subsequently revoke) in writing and submits to the Plan Administrator, in the form, manner, and subject to the timing established by the Plan Administrator, an agreement releasing legal claims, including those against Constellation Energy Group and its subsidiaries/affiliates, including but not limited to claims arising out of his/her employment with the Employer or termination of such employment.
(Severance Plan Article 2.A.) The key term in the first requirement, "displaced," is defined as follows:
Displaced means that due to a job elimination, (i) no Constellation Energy Group or Constellation Energy Group subsidiary/affiliate position is currently available to the Employee, or (ii) the Employee is offered an option to accept or decline a Constellation Energy Group or Constellation Energy Group subsidiary/affiliate job that the Employer determines, in its sole discretion, is a lower graded job in the time and manner established by the Employer in its sole discretion.
( Id. Article I.D.) According to the summary description distributed to employees, this definition means that an employee is "displaced" under the plan, and therefore eligible for benefits, if (1) "[t]here is no position available to you within the Constellation Energy Group or a [BGE] subsidiary/affiliate," or (2) "[y]ou [the employee] receive an offer of a job with a lower grade than your current job, but you turn it down in the time provided." (Severance Plan Description, Def.'s Mem. Ex. 13.)
Mr. Baumgartner was never terminated entirely from BGE, so he cannot qualify for benefits under the first definition of "displaced." As to the second definition, Mr. Baumgartner argues he qualifies, though the Gas Access Sales Representative position was exempt from the grading system, because his second position was likely to involve lower overall compensation. In other words, Mr. Baumgartner equates the term "lower graded" with "lower pay." While this interpretation is plausible, the plan administrator focused instead on the base salary associated with the two positions-that is, on Mr. Baumgartner's "guaranteed compensation." ( See Honaker Supplemental Aff. ¶ 12.) By that measure, the second job was in fact superior to the first: Mr. Baumgartner's base pay rose from under $50,000 to at least $63,300. The administrator also noted that the two positions involved similar responsibilities and similar overall compensation (though he evidently relied on the $72,792 figure for Mr. Baumgartner's base salary to reach the latter conclusion). ( See id.) Considering that BGE's system of pay grades focuses on base pay, rather than overall salary, and much of Mr. Baumgartner's compensation in the Gas Access Sales Representative position came from commissions, which could vary from year to year, the administrator's interpretation appears at least as reasonable as Mr. Baumgartner's.
In any event, whether the new job was "lower graded" or not is not dispositive because Mr. Baumgartner's claim fails to satisfy other requirements of the plan's text. Severance benefits under the plan do not follow automatically from a downgrade. Rather, it is up to CEG to determine, "in its sole discretion," whether the employee will have the "option" to chose between the new job and a severance payout. Indeed, as the plan administrator notes, the Summary Plan Description lists under the heading "Who's Not Eligible?" employees "who are placed in a job with a lower grade because their job has been eliminated and who are not offered the opportunity to choose severance." ( See Severance Plan Description, Def.'s Mem. Ex. 13.) Here, even assuming the new job was "lower graded," there is no evidence to suggest that Mr. Baumgartner was given the choice of accepting severance benefits intstead. Even if there were such evidence, the only reasonable inference from his ten month tenure as a Residential Customer Representative would be that he chose the new job rather than severance. Nor is there any evidence that Mr. Baumgartner received the "written notification" of displacement that the plan requires. In fact, although Mr. Baumgartner maintains that company officials advised him he qualified for severance benefits (Baumgartner Aff. ¶ 8), the only documentary evidence indicating the issue was ever discussed is Mr. Baumgartner's own letter of January 24, 2002 (close to a year before he finally quit). (Baumgartner Letter, Def.'s Mem. Ex. 8.) The letter, which threatens to "fight, if necessary, in a court of public law or even the court of public opinion," hardly suggests that BGE offered Mr. Baumgartner severance benefits. ( Id.) Indeed, the letter also indicates that Mr. Baumgartner intended to resign "contingent upon satisfactory resolution of any severance package issues." ( Id.) The fact that Mr. Baumgartner did not resign for close to a year suggests, again, that the "contingency" he had hoped for-a clear offer of severance benefits-never materialized. In short, the only reasonable inference from the record is that basic eligibility requirements of the plan text-written notification and the "option" to chose severance-were not satisfied in Mr. Baumgartner's case.
At the hearing, Mr. Baumgartner argued that the written description of the new job constituted written notification. This document may have notified Mr. Baumgartner of his new job, but it did not constitute notification that Mr. Baumgartner was being "displaced," as the term is defined in the plan, because it did not offer him the choice of accepting severance benefits.
The plan administrator also explains that he determined that Mr. Baumgartner did not suffer a "job elimination," as required by the plan, because his duties were merely reconfigured as part of a reorganization, not eliminated entirely. Because other aspects of the plan text clearly support the administrator's decision, the court will not address this argument.
As to the second factor, the purposes and goals of the plan, CEG's administrator asserts that the plan is intended to aid employees "when their jobs have been eliminated and comparable employment is not available within the Company," not to "compensate any employee whose job responsibilities are modified or changed as a result of reorganizations." (Honaker Aff. ¶ 4.) Though there is nothing in the plan itself to support this interpretation, there is also nothing to contradict it, and the administrator's claim appears to reflect a reasonable view of which potential beneficiaries are most in need of benefits. As to the third factor, though the administrator, again, offers no documentary support for his assertions, his affidavit indicates that he spoke with human resources personnel and BGE counsel, examined the responsibilities and compensation associated with the two positions, and canvassed the company's past practice in administering the severance plan. Such materials constitute an adequate record to support a denial of benefits. See Fuqua v. Tarmac of Am., Inc., 228 F. Supp.2d 755, 761 (E.D. Va. 2002) (concluding that consideration of two conflicting legal opinions, plan language, and information from one of the plan's drafters was adequate to support a denial of benefits under ERISA). As to the fourth factor, the plan administrator notes that no other employees who underwent the transition from Gas Access Sales Representative to Residential Customer Representative received the option to collect severance-nor even, to his knowledge, requested it. (Honaker Supplemental Aff. ¶ 3, 15.) He also observes that in the past CEG has not awarded benefits to employees whose positions changed due to "reorganizations or similar actions that have resulted in modification of jobs in terms of title, duties, compensation and/or location, but where employees were performing similar but modified functions." ( Id. ¶ 8.) Mr. Baumgartner has cited no contrary example to rebut this assertion. Fifth, the administrator's affidavits indicate a reasoned determination based on careful consideration of relevant evidence. Sixth and seventh, there is nothing to indicate departure from applicable ERISA norms or standards of review. And finally, while the administrator has a conflict of interest because the plan is funded by CEG ( see Severance Plan Art. 7.G, Def.'s Mem. Ex. 12), the other Booth factors suggest that, despite the conflict, the administrator's decision was "consistent with an exercise of discretion by a fiduciary acting free of the interests that conflict with those of the beneficiaries." Thomas v. Liberty Life Assurance Co. of Boston, 226 F. Supp.2d 735, 743 (D. Md. 2002).
In sum, given that the plan administrator's two affidavits indicate that he adopted a coherent interpretation of the plan text and employed a careful, principled reasoning process, "it is clear that an administrator or fiduciary, free of [the] conflict of interest, would have been more than reasonable in exercising its discretion to deny . . . benefits under the circumstances of this case." Ellis v. Metro. Life Ins. Co., 126 F.3d 228, 233-34 (4th Cir. 1997) (upholding a denial of disability benefits where three separate medical reports had failed to yield a conclusive diagnosis). Mr. Baumgartner's analysis, by contrast, ignores unambiguous requirements of the plan text and fails to present any evidence indicating that CEG's administration of the plan was unprincipled or inconsistent or that other Booth factors favor his position. Thus, while the case for upholding the administrator's decision might have been stronger if the defendants had provided copies of the materials the administrator considered, rather than simply presenting his affidavit, the record as it stands presents no genuine issue of material fact and the evidence before the court fails to demonstrate an abuse of discretion. Accordingly, the defendants are entitled to judgment as a matter of law with respect to Mr. Baumgartner's benefits claim.
V.
At the hearing and in his supplemental filing, Mr. Baumgartner has also asserted a theory of promissory estoppel. He claims that he formed a reasonable expectation of severance benefits based on the plan text and the assurances of his supervisors, and that he relied detrimentally on that expectation in passing up job opportunities involving higher potential compensation. This theory is inadequate as a matter of law, even assuming the facts are as Mr. Baumgartner alleges.
To the extent Mr. Baumgartner's claim is that the plan documents themselves led him to believe he was entitled to severance benefits, his reliance was unreasonable for the reasons discussed above. As for the alleged assurances from Mr. Baumgartner's supervisors, the Fourth Circuit has "never recognized estoppel arguments which would serve to vary the terms of a written plan." Healthsouth Rehabilitation Hosp. v. Am. Nat'l Red Cross, 101 F.3d 1005, 1010 (4th Cir. 1996) (citing Coleman, 969 F.2d at 54). "ERISA simply does not recognize the validity of oral or non-conforming written modifications to ERISA plans." Id. Accordingly, in Healthsouth, the Fourth Circuit held that erroneous representations of coverage from a health plan did not entitle a care provider to reimbursement where the purported beneficiary was not, in fact, covered under the terms of the plan. Likewise, in Coleman, the court held that a plan's continued coverage of a beneficiary past the point when it could have dropped her did not estop the plan from terminating coverage at a later date. See Coleman, 969 F.2d at 59. The Fourth Circuit rejected the plaintiff's argument that the plan's prior representations "constituted an interpretation, not a modification, of the written plan." Id. The court reasoned instead that it would create a "direct conflict" with the plan language to require the plan to "provid[e] [the plaintiff] benefits even though the contract unambiguously indicates that she was entitled to none." Id. These precedents foreclose Mr. Baumgartner's claim. Like the plaintiffs in Healthsouth and Coleman, Mr. Baumgartner asks the court to favor oral representations over contractual provisions that his claim does not satisfy. As in those cases, his claim must be rejected.
There is some question whether Mr. Baumgartner's claim of detrimental reliance is even properly presented, as his attorney articulated this theory of recovery for the first time at the hearing The defendants argue the claim is barred unless it is included in the plaintiff's complaint.
VI.
For the reasons stated above, the defendants' motion for summary judgment will be granted and Mr. Baumgartner's motion denied. A separate Order follows.ORDER
For the reasons stated in the accompanying Memorandum, it is hereby Ordered that:
1. the plaintiff's motion for summary judgment (docket no. 11) is DENIED;
2. the defendant's motion for summary judgment (docket no. 12) is GRANTED;
3. copies of this Order and the accompanying Memorandum shall be sent to counsel of record; and
4. the clerk of the court shall CLOSE this case.