REVISED NOVEMBER 19, 2002
UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 01-31004
ALLAN TINOCO; VASSILIOS VOULGARAKIS,
Plaintiffs-Appellees,
VERSUS
MARINE CHARTERING COMPANY, INC.,
and as successor in interest to
Marine Management and Consultant, Ltd.
Defendant-Appellant.
Appeal from the United States District Court
For the Eastern District of Louisiana
October 31, 2002
Before DeMOSS, STEWART, and DENNIS, Circuit Judges.
DeMOSS, Circuit Judge:
Appellant Marine Chartering Company, Inc. (Marine Chartering)
appeals from a final judgment and order dismissing without
prejudice the action of Appellees, Allan Tinoco (Tinoco) and
Vassilios Voulgarakis (Voulgarakis) (referred to collectively as
"Appellees"), based on the district court's finding that it lacked
subject matter jurisdiction. Marine Chartering also appeals an
order from the district court denying its motion for summary
judgment and requests attorney's fees and costs. We AFFIRM the
district court's final judgment and order dismissing without
prejudice the action of Appellees. We do not reach the issues
raised by Marine Chartering concerning the district court's denial
of Marine Chartering's motion for summary judgment or its request
for attorney's fees and costs.
FACTUAL AND PROCEDURAL BACKGROUND
Marine Chartering was in the business of acting as a shipping
agent, broker, and consultant. Marine Management and Consulting
(Marine Management) was in the business of ship management. When
Marine Management's major clients sold their ships, the company was
forced to cease operations and it was liquidated and sold to Marine
Chartering effective March 31, 1998.
Before March 31, 1998, Marine Management maintained a Profit
Sharing Retirement Plan for the benefit of its employees. The
company, however, did not offer or provide any other retirement or
severance benefits to its employees. Similarly, Marine Chartering
had also maintained a Profit Sharing Retirement Plan for the
benefit of its employees.
Previously, on January 1, 1989, Marine Chartering established
an Early Retiree Health Care Plan (ERHCP) “to provide temporary
health-care benefits to Employees who elect Voluntary Early
Retirement from the time of such Voluntary Early Retirement until
the date the Employee becomes eligible for Social Security
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Benefits.” Marine Chartering's Early Retiree Health Care Plan was
wholly unfunded. The ERHCP was payable entirely out of Marine
Chartering's general assets. Furthermore, the ERHCP did not
require employee contributions, and provided no benefits beyond age
62. In addition, the ERHCP was expressly subject to amendment,
suspension, or termination at any time pursuant to the following
provisions contained in the "Summary Plan Description":
Section 12. Amendment, Suspension or Termination of the
Plan:
The Board of Directors may amend, suspend or terminate
the Plan at any time, in whole or in part. The Board of
Directors specifically reserves the right to terminate
benefit payments at any time, even if such benefits are
in pay status.
The "Summary Plan Description" also provided: “The Personnel
Committee shall have sole discretion in determining whether an
Employee is eligible to participate in the Plan.” “Personnel
Committee” is defined by the ERHCP as “the named fiduciary with the
discretionary authority to and the responsibility for: (i)
construction of the terms of the Plan, and (ii) determination of
eligibility for benefits.”
At all pertinent times, Appellee Tinoco was Marine
Management's Accountant, Treasurer, and Shareholder. Appellee
Voulgarakis was Marine Management's Technical Marine Engineer, Vice
President, Director and Shareholder. On March 18, 1998, both
Appellees attended Marine Management's annual meeting of the
Shareholders in New Orleans. At that meeting, Marine Management
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announced that it would cease operations and be liquidated and sold
to Marine Chartering, and that some of its employees would be
terminated. Marine Management also announced that Marine
Chartering's ERHCP would be adopted and that those employees who
had worked for Marine Management for 15 years and who had attained
the age of 55 would qualify for the plan. In addition, the company
announced that the funds in the Marine Management Profit Sharing
Retirement Plan would be rolled over into the Marine Chartering
Profit Sharing Retirement Plan.
Also on March 18, 1998, both Appellees attended a meeting of
the Board of Directors. There, Tinoco learned that he would become
a temporary employee of Marine Chartering until June 30, 1998, or
until completion of accounting work arising out of Marine
Management's liquidation, at which time his employment would be
terminated. Voulgarakis learned he too would become a temporary
employee of Marine Chartering until April 30, 1998, at which time
his employment would be terminated. The Appellees also learned
that Marine Chartering was giving them “special consideration by
making the Early Retiree Health Care Plan available to them as a
severance benefit upon their anticipated retirement or
termination.” Tinoco's temporary employment was terminated by
Marine Chartering on or about December 31, 1998. Voulgarakis was
terminated by Marine Chartering on or about April 30, 1998.
However, Marine Chartering retained Voulgarakis as a consultant
until July 1998.
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On January 27, 2000, Marine Chartering's Board of Directors
adopted the following resolution: “RESOLVED, That the Early
Retiree Health Care Plan adopted effective January 1, 1989 is
hereby withdrawn, canceled and discontinued as of February 1,
2000.” Both Appellees were notified by letter that their benefits
under the ERHCP had been terminated.
Appellees retained attorney Lloyd N. Frischertz (Frischertz),
who sent a letter to Marine Chartering dated February 18, 2000,
claiming that Appellees were entitled to continue receiving
benefits under the ERHCP even though the Board of Directors had
terminated the plan. Marine Chartering responded to Frischertz's
letter denying the Appellees' claims in a letter dated March 10,
2000, stating:
In both cases, they were given special consideration by
[Marine Chartering] to enjoy the benefits of this plan,
even though, technically, they were not eligible. This
was done in deference to the fact that they would likely
have to be released and it was the Company's desire to
provide them with as soft a cushion for landing as
possible, for as long as possible. This was accomplished
through January 31, 2000 when the [Marine Chartering]
Board of Directors finally had to enact its right to
terminate the benefit, not only for these two employees
to whom this special consideration was given, but to all
others who were or would be eligible.
As a result of Marine Chartering's response letter, Appellees
filed their Complaint herein alleging in part that "the early
retirement benefits were in a pay-status, that the benefits had
accrued and [Appellees] had become vested and, as such, under
ERISA, Marine Chartering legally could not terminate said
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benefits." In addition, Appellees claimed "monthly early
retirement benefits . . . together with prejudgment interest and
reasonable attorney's fees." On or about September 26, 2000,
Marine Chartering filed an Answer to Appellees' Complaint denying
the allegations and praying for judgment denying the relief
demanded in the Complaint and requested that reasonable attorney's
fees and costs be awarded to Marine Chartering.
On February 26, 2001, Marine Chartering filed a Motion for
Summary Judgment on the grounds that the benefits offered to and
accepted by Appellees were a non-vested and terminable severance
pay arrangement and, therefore, an employee welfare benefit plan
within the meaning of ERISA. The district court, however,
questioned whether the benefits received by Appellees were actually
subject to ERISA, or whether they instead should be viewed simply
as two isolated agreements to pay Appellees a fixed amount until
their 62nd birthdays. The district court was concerned that in the
latter event, it would lack subject matter jurisdiction over the
case. As a result, the district court denied Marine Chartering's
motion for summary judgment “as premature, without prejudice to be
re-urged at a later date if appropriate,” and ordered the parties
to brief the issue of whether federal subject matter jurisdiction
was present in the case.
After reviewing the briefing on the issue, the district court
entered a Minute Entry finding that: “To the extent that the
continuing nature of the payments in this case might make the issue
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before it a close call, the Court observes that the litigants, who
appear to consent to federal jurisdiction, have simply failed to
conclusively establish it.” The district court concluded that “it
appears the payments to [Appellees] were not made pursuant to an
ERISA-governed plan.” Therefore, the district court entered
Judgment on August 2, 2001, dismissing the Appellees' suit without
prejudice. The district court noted in a footnote that it was not
ruling on any state law claims such as breach of contract that
Appellees may have.
Marine Chartering now appeals the district court's judgment,
contending that the district court erred in denying its motion for
summary judgment, and that this Court should reverse that ruling
and render judgment granting Marine Chartering's motion. Marine
Chartering also requests this Court to award it reasonable
attorney's fees and costs, an issue which Marine Chartering
contends should be remanded to the district court for determination
of the amounts to be recovered.
DISCUSSION
This Court's review of subject matter jurisdiction is plenary.
Ceres Gulf v. Cooper, 957 F.2d 1199, 1204 (5th Cir. 1992). When a
district court dismisses an action for lack of subject matter
jurisdiction based on the “undisputed facts in the record,” this
Court is limited “to determining whether the district court's
application of the law is correct and whether the facts are indeed
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undisputed. Our review of the district court's application of the
law is, of course, de novo.” Ynclan v. Department of Air Force,
943 F.2d 1388, 1390 (5th Cir. 1991).
Marine Chartering contends that it set up an administrative
scheme to pay benefits to Appellees on a regular basis, rather than
offering them a one-time, lump-sum payment triggered by a single
event. Marine Chartering, therefore, argues that the Appellees'
severance pay plan under which they claim benefits is an employee
welfare benefit plan within the meaning of ERISA such that federal
subject matter jurisdiction exists. See 29 U.S.C. § 1002(1)
(defining "employee welfare benefit plan").
Appellees, on the other hand, contend that the change of
control of Marine Management was the single event that triggered
Marine Chartering's obligation to pay benefits. Therefore,
Appellees argue there was no need for an ongoing administrative
program to process claims and benefits. Appellees, furthermore,
assert that the simple arithmetical calculations and clerical
determinations that Marine Chartering was required to make under
the ERHCP simply do not amount to the “ongoing, particularized,
administrative, discretionary analysis” contemplated under ERISA.
See Bogue v. Ampex Corp., 976 F.2d 1319, 1323 (9th Cir. 1992).
Congress passed ERISA in 1974 “to safeguard employees from the
abuse and mismanagement of funds that had been accumulated to
finance various types of employee benefits.” Massachusetts v.
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Morash, 490 U.S. 107, 112 (1989). To accomplish that goal,
Congress “established extensive reporting, disclosure, and
fiduciary duty requirements to insure against the possibility that
the employee's expectation of the benefit would be defeated through
poor management by the plan administrator.” Id. at 115. An
agreement to pay severance benefits may constitute an employee
welfare benefit plan. However, such an agreement is subject to
ERISA's control only if it creates benefits requiring “an ongoing
administrative program to meet the employer's obligation.” Fort
Halifax Packing Co. v. Coyne, 482 U.S. 1, 11 (1987).
In Fort Halifax Packing Co., the Supreme Court held that a
state statute requiring employers who ceased operations to make a
one-time severance payment to employees was not preempted by ERISA.
482 U.S. at 12. The Court reasoned that although the one-time
payment was a benefit, it was not a benefit plan: “The requirement
of a one-time, lump-sum payment triggered by a single event
requires no administrative scheme whatsoever to meet the employer's
obligation.” Id. The Court further noted that “[t]o do little
more than write a check hardly constitutes the operation of a
benefit plan.” Id.
As noted by the district court in the present case, on the
other end of the spectrum lies Bogue in which the Ninth Circuit was
faced with a severance program that provided benefits to executives
who, in the event of a takeover, were not offered “substantially
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equivalent" employment by the purchasing company. 976 F.2d at
1321. In order to implement the severance program, management was
required to make case-by-case determinations of whether a
complaining employee's job was “substantially equivalent” to his
pre-acquisition job. Id. at 1323. The Ninth Circuit concluded
that the plan was covered by ERISA. The court noted: “Although the
program, like the plan[] in Fort Halifax, . . . was triggered by a
single event, that event would occur more than once, at a different
time for each employee. There was no way to carry out that
obligation with the unthinking, one-time, nondiscretionary
application of the plan [as did the] administrators in Fort
Halifax. . . .” Id. Therefore, the court concluded that the
company “was obligated to apply enough ongoing, particularized,
administrative, discretionary analysis to make the program in this
case a ‘plan.’” Id.
Similarly, in Perdue v. Burger King Corporation, this Court
concluded that the “Burger King Job Elimination Program" was
governed by ERISA because it required an administrative scheme for
it to function. 7 F.3d 1251, 1252 (5th Cir. 1993). Burger King
initiated the elimination program to ease the impact on its
employees as part of an internal reorganization plan to eliminate
several management tiers. Id. The program provided a three-year
period from the date of implementation in which any full-time
employee who lost his job as a result of a job elimination plan or
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reduction in workforce was entitled to receive certain severance
benefits. Id. This Court concluded that the plan was governed by
ERISA because it was “in effect for three years, applied to two
nation-wide personnel reorganizations, and required an
‘administrative set-up’ to monitor and facilitate provision of
benefits.” Id. at 1253 n.5.
Notably, severance plans that provide certain benefits over a
period of time do not necessarily require an ongoing administrative
scheme. For example, in Fontenot v. NL Industries, Inc., a “golden
parachute” agreement that required payments over a three-year
period rather than a lump-sum payment was found not to be governed
by ERISA. 953 F.2d 960 (5th Cir. 1992). In Fontenot, NL
Industries was the target of a takeover. Id. at 961. In order to
block any takeover attempts, NL Industries instituted the NL Senior
Executive Severance Plan. Id. The plan provided that if an
executive was terminated within two years of a change of control,
the company would pay the executive a lump sum cash payment of
three times his highest annual compensation for the preceding three
years and a three year continuation of “certain” benefits. Id.
Even though the plan required three years of payments, this Court
concluded: “NL Industries' severance plan involves ‘a one-time
lump sum payment triggered by a single event . . . that may never
materialize,’ it ‘requires no administrative scheme whatsoever to
meet the employer's obligation,’ and ‘[t]he employer assumes no
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responsibility to pay benefits on a regular basis.’” Id. at 962
(quoting Fort Halifax, 482 U.S. at 12).
Furthermore, even though benefit funds are paid out of the
general assets of a company instead of a separate fund, the benefit
plan can still be governed by ERISA. Fort Halifax, 482 U.S. at 17-
18 (citing Holland v. Burlington Indus., Inc., 772 F.2d 1140 (4th
Cir. 1985) and Gilbert v. Burlington Indus.,Inc., 765 F.2d 320 (2d
Cir. 1985)). In Fort Halifax, the Supreme Court indicated that the
inquiry should not necessarily be where the funds are coming from,
but whether severance benefits are being paid pursuant to a plan.
Id. at 18. As the Court stated: “[I]f an employer has an
administrative scheme for paying benefits, it should not be able to
evade the requirements of the statute merely by paying those
benefits out of general assets.” Id.
The district court was correct in concluding that the present
case resembles Fort Halifax more than Bogue. Marine Chartering's
ERHCP offered Appellees the choice of a lump-sum payment or a
stream of payments until they reached the age of 62. Regardless of
how Appellees chose to receive those payments, the total amount to
be paid was based on a one-time calculation using a fixed formula.
Under the formula, age (which must have been a minimum of 55) is
added to the number of years of service (which must have been at
least 15 years). Appellees then received a percentage of what they
would normally receive in Social Security based on the total number
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arrived at through the above calculation. Significantly, Appellees
provide no evidence that the ERHCP requires an administrative
scheme to make ongoing discretionary decisions based on subjective
criteria. And, as this Court held in Fontenot, simply because
Marine Chartering offered Appellees the option of receiving that
payment over a period of time does not mean that the ERHCP amounts
to an administrative scheme. 953 F.2d at 961; see also James v.
Fleet/Norstar Financial Group, Inc., 992 F.2d 463, 466 (2d Cir.
1993) (finding that employee's option to receive a one-time payment
in bi-weekly installments rather than in a lump sum did not impact
the court's decision that the severance plan was not controlled by
ERISA). To the contrary, writing a check each month is hardly an
administrative scheme. Fort Halifax, 482 U.S. at 12.
The district court, therefore, correctly found that the ERHCP
under which Appellees claim benefits is not governed by ERISA. As
a result, the district court properly concluded that federal
subject matter jurisdiction does not exist: “Where federal subject
matter jurisdiction is based on ERISA, but the evidence fails to
establish the existence of an ERISA plan, the claim must be
dismissed for lack of subject matter jurisdiction.” Kulinski v.
Medtronic Bio-medicus, Inc., 21 F.3d 254, 256 (8th Cir. 1994);
accord Memorial Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d
236, 240 (5th Cir. 1990) (noting the question of whether an ERISA
plan exists is “a jurisdictional one”).
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CONCLUSION
Accordingly, we AFFIRM the district court's final judgment and
order dismissing without prejudice the action of Appellees.
Because we conclude that there is no federal subject matter
jurisdiction, we need not reach the issues raised by Marine
Chartering concerning whether the district court erred in denying
Marine Chartering's motion for summary judgment or whether Marine
Chartering is entitled to recover reasonable attorney's fees and
costs.
AFFIRMED.
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