Buckley v. Slocum Dickson Medical Group, PLLC

13-3535-cv(L) Buckley v. Slocum Dickson Medical Group, PLLC UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT SUMMARY ORDER RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION “SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL. 1 At a stated term of the United States Court of Appeals 2 for the Second Circuit, held at the Thurgood Marshall United 3 States Courthouse, 40 Foley Square, in the City of New York, 4 on the 22nd day of September, two thousand fourteen. 5 6 PRESENT: DENNIS JACOBS, 7 CHRISTOPHER F. DRONEY, 8 Circuit Judges, 9 LEWIS A. KAPLAN,* 10 District Judge. 11 12 - - - - - - - - - - - - - - - - - - - -X 13 RUDOLPH A. BUCKLEY, M.D., 14 Plaintiff-Counter-Defendant- 15 Appellee-Cross-Appellant, 16 13-3535-cv(L) 17 -v.- 13-3536-cv(XAP) 18 13-3767-cv(CON) 19 SLOCUM DICKSON MEDICAL GROUP, PLLC, as 20 successor in interest to SLOCUM 21 DICKSON MEDICAL GROUP, P.C., 22 Defendant-Counter-Claimant- 23 Appellant-Cross-Appellee. 24 - - - - - - - - - - - - - - - - - - - -X * Judge Lewis A. Kaplan, of the United States District Court for the Southern District of New York, sitting by designation. 1 1 FOR APPELLANT: ANTHONY J. PIAZZA (with Mark T. 2 Whitford Jr. on the brief), 3 Hiscock & Barclay, LLP, 4 Rochester, New York. 5 6 FOR APPELLEE: JOSEPH S. DEERY, JR., Kowalczyk, 7 Deery & Broadbent, LLP, Utica, 8 New York. 9 10 Appeal from a judgment of the United States District 11 Court for the Northern District of New York (Hurd, J.). 12 13 UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED 14 AND DECREED that the judgment of the district court be 15 AFFIRMED. 16 17 Appellant Slocum Dickson Medical Group, PLLC, appeals 18 from the judgment of the United States District Court for 19 the Northern District of New York (Hurd, J.), granting 20 summary judgment in favor of plaintiff-appellee Rudolph A. 21 Buckley and awarding Buckley attorney’s fees. Buckley has 22 filed a cross-appeal related to the amount of the fee award. 23 We assume the parties’ familiarity with the underlying 24 facts, the procedural history, and the issues presented for 25 review. 26 27 Dr. Rudolph A. Buckley worked in Slocum Dickson’s 28 medical practice as the group’s only orthopedic physician 29 specializing in spine surgery. The employment agreement, 30 executed in December 2000, required Buckley to provide 90 31 days’ notice before leaving the group. If Buckley failed to 32 give the required notice, the agreement called for him to 33 pay liquidated damages of $10,000. On June 2, 2009, Buckley 34 gave his 90 days’ notice that he would leave Slocum Dickson 35 on August 30, 2009. 36 37 Before the 90 days elapsed, Buckley realized that an 38 earlier departure date would yield a greater severance 39 package, because the plan calculated severance as a 40 percentage of the accounts receivable associated with 41 Buckley’s department at the time of his departure, and 42 Buckley had performed a disproportionate number of surgeries 43 in July 2009. On August 4, Buckley informed Slocum Dickson 44 that he was unilaterally terminating his employment, 45 effective that very day. He immediately paid the $10,000 46 liquidated damages for termination without notice. The 47 liquidated damages did not appreciably reduce the advantage 2 1 of early departure: Buckley’s calculated severance amount 2 under the plan on August 4 was $455,096, whereas it would 3 have been only $47,912 had he waited until the end of 4 August. 5 6 On September 1, 2010, Slocum Dickson’s Board of 7 Managers decided to pay no severance to Buckley. Buckley 8 filed this lawsuit in New York Supreme Court alleging common 9 law claims for breach of contract. Slocum Dickson removed 10 the action to the Northern District of New York. The 11 district court granted Buckley’s motion for summary judgment 12 as well as attorney’s fees. 13 14 As a threshold matter, this Court must ascertain 15 whether the district court had subject matter jurisdiction 16 over this dispute. As a general rule, federal question 17 jurisdiction pursuant to 28 U.S.C. § 1331 turns on whether a 18 well-pleaded complaint relies on federal law. See Metro. 19 Life Ins. Co. v. Taylor, 481 U.S. 58, 63 (1987). Buckley’s 20 state court complaint asserted only common law breach of 21 contract claims. Nevertheless, “Congress specifically 22 intended to exert ‘extraordinary pre-emptive power’ when it 23 adopted the detailed provisions of” Section 502(a) of the 24 Employee Retirement Income Security Act of 1974 (“ERISA”), 25 29 U.S.C. §§ 1001 et seq. Romney v. Lin, 94 F.3d 74, 78 (2d 26 Cir. 1996) (quoting Taylor, 481 U.S. at 64). Where a 27 beneficiary of an employee benefit plan covered by ERISA 28 seeks benefits under that plan, “ERISA preempts any state 29 law claims that the plaintiff may have because the state law 30 claims directly ‘relate to’ the plan, and Congress intended 31 for ERISA to supercede all state laws that relate to 32 employee benefit plans.” Kolasinski v. Cigna Healthplan of 33 CT, Inc., 163 F.3d 148, 149 (2d Cir. 1998) (per curiam) 34 (quoting 29 U.S.C. § 1144(a)). Further, where, as here, “‘a 35 federal statute wholly displaces the state-law cause of 36 action through complete pre-emption, the state claim can be 37 removed’ to federal court.” Arditi v. Lighthouse Int’l, 676 38 F.3d 294, 299 (2d Cir. 2012) (quoting Beneficial Nat’l Bank 39 v. Anderson, 539 U.S. 1, 8 (2003)). As the Slocum Dickson 40 severance plan in substance provides, and the parties agree, 41 that the plan is governed by ERISA, this action was removed 42 properly from the state court, and the district court had 43 subject matter jurisdiction. Moreover, as the parties 44 consistently litigated this case on the basis of ERISA, and 45 the district court treated it as arising under that statute, 46 we constructively amend the complaint to assert a claim 47 under ERISA. See Greenblatt v. Delta Plumbing & Heating 3 1 Corp., 68 F.3d 561, 569 (2d Cir. 1995) (noting this Court’s 2 “discretionary power . . . to amend a complaint 3 constructively to recognize unpleaded claims”). 4 5 As to the merits, the Court reviews de novo the 6 district court’s grant of summary judgment. See Hobson v. 7 Metro. Life Ins. Co., 574 F.3d 75, 82 (2d Cir. 2009). 8 Summary judgment is appropriate only if “there is no genuine 9 dispute as to any material fact and the movant is entitled 10 to judgment as a matter of law.” Fed. R. Civ. P. 56(a). As 11 for the parties’ challenges regarding the fee award, “[t]he 12 standard of review of an award of attorney’s fees is highly 13 deferential to the district court,” Mautner v. Hirsch, 32 14 F.3d 37, 39 (2d Cir. 1994), however the district court’s 15 underlying conclusions of law are reviewed de novo, Baker v. 16 Health Mgmt. Sys., Inc., 264 F.3d 144, 149 (2d Cir. 2001). 17 18 When a written plan is governed by ERISA and “confer[s] 19 upon a plan administrator the discretionary authority to 20 determine eligibility,” a court “will not disturb the 21 administrator’s ultimate conclusion unless it is ‘arbitrary 22 and capricious.’” Pagan v. NYNEX Pension Plan, 52 F.3d 438, 23 441 (2d Cir. 1995). Moreover, the severance plan conferred 24 on Slocum Dickson’s board “exclusive authority and 25 discretion” to “[d]etermine whether an individual is 26 eligible for any benefits under the Plan,” to determine the 27 amount of any such benefits, and to interpret the provisions 28 of and terms used in the Plan. Nevertheless, the grant of 29 discretion to the board does not decide this case for 30 several reasons. 31 32 The first question is whether the Slocum Dickson board 33 properly applied the terms of the severance plan with 34 respect to Buckley’s claim for severance pay. Section 2(i) 35 of the plan provides that an employee in Buckley’s 36 circumstances “shall receive . . . an amount equal to sixty- 37 five percent (65%) of Employee’s share of the accounts 38 receivable of the Corporation, existing as of the date of 39 termination, assigned to Employee’s department in accordance 40 with the accounting practices adopted by the Corporation, as 41 to which there has been any activity (either to billings or 42 payment) within the preceding two (2) years.” In assessing 43 Slocum Dickson’s application of this term, we give effect to 4 1 its unambiguous meaning to the extent that one exists. 2 O’Neil v. Ret. Plan for Salaried Employees of RKO Gen., 37 3 F.3d 55, 58-59 (2d Cir. 1994). To the extent that the term 4 is ambiguous, we “review a denial of benefits . . . de novo, 5 unless the plan itself grants the fiduciary discretion to 6 construe the terms of the plan, in which event the court 7 should apply the arbitrary and capricious standard.” Id. at 8 59 (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 9 101, 115 (1989)).1 Here, there was nothing ambiguous about 10 Buckley’s contractual entitlement to severance pay.2 The 11 Slocum Dickson board therefore was bound to apply the plain 12 language of its severance plan and lacked any discretion to 13 depart from it. 14 15 The result would be the same even if there were some 16 ambiguity with respect to Buckley’s entitlement to severance 17 pay. Whatever deference otherwise is due to a plan 18 administrator abates when the administrator has a conflict 19 of interest, both determining and paying the benefit. See, 20 e.g., Metro. Life Ins. Co. v. Glenn, 554 U.S. 105, 111-12, 21 115 (2008). As the district court found, Slocum Dickson “is 22 both the entity that decides whether plaintiff is entitled 23 to benefits and the entity that would make such a payment,” 1 Accord Edwards v. Briggs & Stratton Ret. Plan, 639 F.3d 355, 362 (7th Cir. 2011) (“[U]nambiguous terms of a pension plan leave no room for the exercise of interpretive discretion. . . . Thus, [t]he administrator must implement and follow the plain language of the plan.” (second alteration in original) (internal citations and quotation marks omitted)); Blackshear v. Reliance Standard Life Ins. Co., 509 F.3d 634, 639 (4th Cir. 2007) (“[T]he administrator is not free to alter the terms of the plan or to construe unambiguous terms other than as written. . . . An administrator’s discretion never includes the authority to read out unambiguous provisions contained in an ERISA plan.” (internal citations and quotation marks omitted)), abrogated on other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008). 2 Nor, in this case, was there any issue as to the computation of the amount, a matter that at least in some circumstances might have been within the board’s discretion. 5 1 without any internal check on the resulting conflict of 2 interest. Buckley v. Slocum Dickson Med. Grp., PLLC, 941 F. 3 Supp. 2d 251, 258 (N.D.N.Y. 2013). We therefore would dial 4 back our deference to the medical group’s justifications for 5 denying Buckley’s severance. 6 7 The contractual arrangements here specified the 8 financial costs and benefits of Buckley’s abrupt departure. 9 First, the employment agreement set the price tag for 10 resignation without sufficient notice--i.e., liquidated 11 damages of $10,000. Second, the severance plan defined the 12 severance owed to Buckley--i.e., a function of accounts 13 receivable, which increased precipitously on the eve of his 14 departure. Slocum Dickson now offers several justifications 15 for its denial of severance. All would be ineffective even 16 if the plan were ambiguous as to Buckley’s entitlement. 17 18 The medical group defends the denial of severance based 19 upon various costs it encountered when Buckley resigned. To 20 the extent that these losses actually derived from Buckley’s 21 decision to leave before his 90-day notice period elapsed, 22 the liquidated damages must be deemed adequate compensation, 23 and Buckley wasted no time paying that sum to Slocum Dickson 24 upon his separation. Accordingly, the medical group could 25 not reasonably contend that the cost of Buckley’s departure 26 justifies a complete denial of his severance. 27 28 In the alternative, Slocum Dickson contends that it was 29 justified in denying severance because Buckley abandoned his 30 patients when he resigned without notice, thereby breaching 31 his ethical duties. The record would not support this 32 contention even if the board had discretion. Buckley 33 offered to supervise a physician assistant in his specialty, 34 even without pay, to ensure the continued treatment of his 35 patients at Slocum Dickson. And it is undisputed that no 36 patient suffered any harm as a consequence of Buckley’s 37 abrupt departure. 38 39 Given the unambiguous character of Buckley’s right to 40 severance as well as Slocum Dickson’s conflict of interest 41 in deciding Buckley’s severance, the unambiguous contractual 6 1 scheme, and Slocum Dickson’s unavailing justifications for 2 its decision to deny severance, the district court was 3 correct to grant Buckley’s motion for summary judgment. 4 5 Having won summary judgment, Buckley was entitled to 6 seek attorney’s fees pursuant to both the employment 7 agreement and Section 502(g)(1) of ERISA, 29 U.S.C. 8 § 1132(g)(1). The district court awarded Buckley $47,723 in 9 fees. This fee award was within the district court’s 10 discretion and was consistent with the robust record 11 surrounding the motion for fees. 12 13 For the foregoing reasons, and finding no merit in the 14 parties’ other challenges to the district court, we hereby 15 AFFIRM the judgment of the district court. 16 17 FOR THE COURT: 18 CATHERINE O’HAGAN WOLFE, CLERK 19 7