Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-03-02712/USCOURTS-ca8-03-02712-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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*

The HONORABLE RICHARD E. DORR, United States District Judge for the

Western District of Missouri, sitting by designation.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 03-2712

___________

Brenda J. Johnson; Patricia K. Ormston, *

*

Plaintiffs - Appellants, *

* Appeal from the United States

v. * District Court for the

* District of Minnesota.

U.S. Bancorp, et al., *

*

Defendants - Appellees. *

___________

Submitted: May 14, 2004

Filed: November 2, 2004

___________

Before LOKEN, Chief Judge, SMITH, Circuit Judge, and DORR,*

 District Judge.

___________

LOKEN, Chief Judge.

As mortgage loan officers at U.S. Bancorp in Minneapolis, Brenda J. Johnson

and Patricia K. Ormston were paid a guaranteed base salary plus commissions based

on closed loans. They were also eligible for benefits under the U.S. Bancorp BroadBased Change in Control Severance Pay Program (the CIC Program), including

severance benefits if they resigned for “Good Reason.” The written CIC Program

defined Good Reason to include “the occurrence . . . within 24 months following a

Partial Change in Control [of] a reduction by the Employer, by more than 10%, of the

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The HONORABLE PAUL A. MAGNUSON, United States District Judge for

the District of Minnesota.

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Covered Employee’s base . . . compensation” unless that base compensation “is

replaced by other guaranteed compensation.” 

In February 2001, U.S. Bancorp merged with Firstar Corporation. The merger

was a Partial Change in Control for purposes of the CIC Program. Some months

later, Johnson and Ormston resigned and filed claims for severance benefits. After

U.S. Bancorp’s Severance Administration Committee denied the claims, Johnson and

Ormston filed this lawsuit, asserting a federal law claim for wrongful denial of

benefits under the Employee Retirement Income Security Act (ERISA), see 29 U.S.C.

§ 1132(a)(1)(B), and state law claims for breach of contract and to recover statutory

penalties for the late payment of earned commissions. The district court1

 dismissed

the breach of contract claim on the pleadings and granted U.S. Bancorp summary

judgment dismissing the remaining claims. Johnson and Ormston appeal. Reviewing

these issues de novo, we affirm. See Fink v. Dakotacare, 324 F.3d 685, 687 (8th Cir.

2003) (standard of review). 

I. The Breach of Contract and ERISA Claims.

Johnson and Ormston allege -- and we assume these allegations are true for

purposes of this appeal -- that they were told before and after the merger, in meetings

and in memoranda, that U.S. Bancorp would change their compensation to Firstar’s

commissions-only plan, and that change-in-control severance benefits would be paid

to those who declined to work under the new compensation plan. Consistent with

these informal communications, on April 2, 2001, U.S. Bancorp distributed a written

2001 Compensation Plan providing no guaranteed base salary. But bank management

apparently revisited the decision to trigger severance pay benefits, because on April

5, a supervisor advised Johnson and Ormston that the new plan would be changed to

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The CIC Program is part of the U.S. Bancorp Comprehensive Welfare Benefit

Plan, which expressly incorporates various ERISA provisions and is unquestionably

an “employee welfare benefit plan” covered by ERISA. See Emmenegger v. Bull

Moose Tube Co., 197 F.3d 929, 934-35 (8th Cir. 1999). 

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include a guaranteed draw, and on April 19, they received an “Addendum One” to the

new plan providing for “guaranteed non-recoverable draws” equal to their prior

guaranteed base salaries. 

 Six weeks later, Johnson and Ormston resigned and filed claims for severance

benefits, arguing they had Good Reason to resign within the meaning of the CIC

Program because U.S. Bancorp eliminated their guaranteed base salary after a partial

change in control. The Severance Administration Committee denied the claims,

explaining there was no “occurrence” within the meaning of the CIC Program

because “the reduction in base compensation that was communicated . . . was

replaced by a guaranteed, non-recoverable draw in the same amount before [the] base

compensation was ever actually reduced.” 

1. As the district court recognized, the heart of this lawsuit is plaintiffs’

alternative claims for breach of an employment contract under state law or for denial

of employee benefits governed by ERISA. Plaintiffs’ Complaint alleged that the CIC

Program “at all relevant times, has been and is now a ‘welfare benefit plan’ under 29

U.S.C. § 1002(1) and an ‘employee benefit plan’ under 29 U.S.C. § 1002(3).’”2

 It is

well-established that ERISA’s civil enforcement provisions are the exclusive

remedies for participants seeking to recover benefits under an ERISA plan. See 29

U.S.C. § 1144(a); Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 52-56 (1987); Fink,

324 F.3d at 688-89. Thus, the district court properly dismissed the state law breachof-employment-contract claim on the pleadings. Plaintiffs’ argument that they were

entitled to discovery on this claim is without merit.

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The court avoided a dispute over the applicable ERISA standard of review by

reviewing the Severance Administration Committee’s decision de novo. This

obviated the need for discovery regarding the plan administrator’s alleged conflicts

of interest, inconsistent plan interpretation, and bad faith. Thus, the district court did

not abuse its discretion in deciding U.S. Bancorp’s dispositive motions before taking

up plaintiffs’ request for further discovery on these issues. 

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2. As an alternative breach of contract theory, Johnson and Ormston argue that

(i) U.S. Bancorp breached a promise to pay severance benefits if they continued to

work after the merger and if Firstar changed their compensation to a commissionsonly plan, and (ii) this created a free-standing contract unrelated to the CIC Program

and therefore not preempted by ERISA. For support, they cite our recent decision in

Eide v. Grey Fox Technical Services Corp., 329 F.3d 600, 607 (8th Cir. 2003). The

contention is fatally flawed. Unlike the employees in Eide, Johnson and Ormston

remained eligible for CIC Program benefits after the merger. The alleged promise

was that benefits would be paid in accordance with the CIC Program if their

guaranteed base compensation was eliminated after the partial change in control.

This promise, even if it constituted the offer of a unilateral contract under state law,

clearly related to the ERISA plan. An employer’s promise that ERISA plan benefits

will be paid if a future contingency occurs does not create a “free-standing contract”

within the meaning of Eide.

3. Turning to plaintiffs’ federal law claim for the wrongful denial of ERISA

benefits, the district court concluded that Johnson and Ormston did not have Good

Reason to resign within the meaning of the CIC Program because (i) the first postmerger compensation plan distributed on April 2, 2001, “did not actually affect

Plaintiffs’ compensation,” and (ii) the amended post-merger plan reflected in the

April 19 Addendum One “guaranteed participants the same guaranteed

compensation” in the form of a non-recoverable draw. Accordingly, the court upheld

the Severance Administration Committee’s decision.3

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On appeal, Johnson and Ormston first argue that they are entitled to CIC

Program benefits because the first post-merger plan stated that it replaced all prior

compensation plans. Therefore, this plan “indisputably” eliminated their guaranteed

base salaries. But the CIC Program requires an “occurrence” to trigger severance

benefits. U.S. Bancorp amended the new plan to provide guaranteed draws before the

end of the April 2001 pay period. It is undisputed that Johnson and Ormston never

received a post-merger paycheck that did not include a guaranteed draw equal to their

prior base salaries. If they had quit on April 3 or April 4, or alleged some form of

detrimental reliance, we might have a different case. But on this record, we agree

with the district court that the Severance Administration Committee’s decision is “the

only reasonable interpretation” of the CIC Program.

Johnson and Ormston further argue that the district court erred in concluding

that the guaranteed draws were “other guaranteed compensation” within the meaning

of the CIC Program because U.S. Bancorp later “recovered” those draws by reducing

their post-termination commission payments. The Committee determined that

reducing post-termination commissions by the amount of a guaranteed draw did not

change the fact that the draw was “other guaranteed compensation.” Like the district

court, we agree with this interpretation of the CIC Program provisions.

II. The State Law Claim for Statutory Penalties.

Under Minnesota law, “wages or commissions earned and unpaid at the time

the employee quits or resigns shall be paid in full not later than the first regularly

scheduled payday following the employee’s final day of employment.” Minn. Stat.

§ 181.14, subd. 1(a). An employer who violates this duty is liable for “civil penalties

or damages.” Minn. Stat. § 181.171, subd. 1. After Johnson and Ormston resigned,

U.S. Bancorp sent them final commission payments, deducting amounts equal to the

guaranteed draws paid under the post-merger plan. When Johnson and Ormston

protested the deductions, U.S. Bancorp paid them the deducted amounts about a

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month later. They claim that statutory penalties are owing because they were not paid

within twenty-four hours of demand, as § 181.14, subd. 2, requires.

Plaintiffs’ pre-merger employment contracts provided that U.S. Bancorp’s

Chairman and Chief Executive Officer must approve the payment of unpaid

commissions to an employee who voluntarily resigns. As no such approval

accompanied the post-termination payments to Johnson and Ormston, the district

court granted summary judgment dismissing this claim because the allegedly late-paid

commissions were not “earned” for purposes of § 181.14. See Holman v. CPT Corp.,

457 N.W.2d 740, 742-43 (Minn. App. 1990). 

On appeal, Johnson and Ormston argue that unpaid commissions on loans

closed before they resigned were “earned” because (1) U.S. Bancorp customarily paid

such commissions to loan officers who resigned in good standing, and (2) the

contracts on which the district court relied were superseded by the post-merger

compensation plan. We disagree. First, plaintiffs’ vague assertion of a customary

practice does not provide the clear and convincing evidence required under

Minnesota law to prove a parol modification of an unambiguous written contract. See

Reliable Metal, Inc. v. Shakopee Valley Printing, Inc., 407 N.W.2d 684, 687 (Minn.

App. 1987). Second, Johnson and Ormston never accepted the post-merger

compensation plan, so the district court properly looked to the pre-merger plan to

determine what commissions were earned. Moreover, under the post-merger plan,

U.S. Bancorp was entitled to deduct guaranteed draws from commission payments,

so that plan did not obligate U.S. Bancorp to pay the allegedly tardy commissions.

The judgment of the district court is affirmed.

______________________________

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