Report and Recommendation

Plaintiff’s Motion for Remand 1 Jones v. St. John Health; 08-14962

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

MARLENE JONES, NORMA CARTER

JONES, DEBRA WEST, DUANE CONNER, Case No. 08-14962

DIANE MILLER, and CAROLYN

DAWKINS, John Feikens

United States District Judge

Plaintiffs,

vs. Michael Hluchaniuk

United States Magistrate Judge

ST. JOHN HEALTH, 

a Michigan Corp., 

Defendant.

 /

REPORT AND RECOMMENDATION

PLAINTIFFS’ MOTION FOR REMAND (Dkt. 5)

I. PROCEDURAL HISTORY

On October 30, 2008, plaintiffs, all former employees of defendant St. John

Health, filed the present complaint seeking benefits from defendant resulting from

the termination of their positions with defendant in Wayne County Circuit Court. 

Defendant filed a Notice of Removal on December 1, 2008, removing the case

from Wayne County Circuit Court to the United States District Court for the

Eastern District of Michigan. (Dkt. 1). That same date that defendant filed its

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answer to the complaint (Dkt. 2), District Judge John Feikens referred the case to

the undersigned for all pretrial purposes. (Dkt. 4). 

On December 18, 2008, plaintiffs filed the present motion for remand,

asking that the case be remanded to Wayne County Circuit Court. (Dkt. 5). 

Defendant responded to the motion on December 26, 2008. (Dkt. 6). Plaintiffs

filed a reply on December 31, 2008. (Dkt. 7). The motion was set for oral

argument and, before the argument, the parties filed a joint statement of resolved

and unresolved issues on February 3, 2009. (Dkt. 10). Oral argument on the

motion was held, via conference call, on February 25, 2009.

For the reasons set forth below, the undersigned RECOMMENDS that

plaintiffs’ motion to remand be DENIED.

II. RELEVANT FACTS

All six plaintiffs are similarly situated with respect to the issue before the

Court and all six of them had their positions eliminated on April 30, 2008. (Dkt.

5, p. 7). The positions they held were transferred to a doctors office effective May

1, 2008, under what defendant says was a “comparable rate of pay.” Id. Under

these circumstances, defendant had determined that plaintiffs were not eligible for

severance benefits and informed plaintiffs of such on April 21, 2008. (Dkt. 5,

p.7). Plaintiffs filed their complaint seeking severance benefits to which they

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Plaintiff’s Motion for Remand 3 Jones v. St. John Health; 08-14962

claim they are entitled under a set of terms and conditions that they argue is

applicable to their situation. Defendant contends that a different set of terms and

conditions is applicable to plaintiffs’ circumstances and, generally, that the

controlling law for determining which rules apply is the Employee Retirement

Security Act (ERISA). 29 U.S.C. § 1001, et seq. It is this latter issue that brought

the matter to federal court in that ERISA, if it applies, preempts state law on

related topics. The preemption of related matters by ERISA is not contested by

the parties.

III. POSITIONS OF THE PARTIES

Plaintiffs take the position that they are entitled to severance benefits based

on the elimination of their jobs by defendant. They further claim that the policies

maintained by defendant with respect to employee severance benefits do not meet

the criteria for an employee welfare benefit plan as defined by ERISA and,

therefore, this is, in essence, a breach of contract action based solely on the terms

of their employment agreement with defendant. Based on this basic position,

plaintiffs argue that removal of this case to federal court was not proper and the

case should be remanded to state court.

Defendant contends that the terms and conditions associated with severance

benefits that apply to plaintiffs’ situation are different from those claimed by

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Plaintiff’s Motion for Remand 4 Jones v. St. John Health; 08-14962

plaintiffs and, in either case, the controversy must be decided under ERISA, which

completely preempts state law in these circumstances and allows for the removal

of such a claim to federal court.

In their joint statement of resolved and unresolved issues, the parties agreed

that the sole issue with respect to the motion for remand was whether the payment

of severance benefits under either plan in controversy was an employee welfare

benefit plan under ERISA. Simply stated, removal is proper if it falls under

ERISA and removal is not proper if it does not. (Dkt. 10, p. 2).

IV. ANALYSIS AND CONCLUSIONS

The nub of the issue relating to plaintiffs’ motion for remand is whether the

payment of severance benefits by defendant falls within an employee welfare

benefit plan as defined by ERISA. A severance plan is an employee welfare

benefit plan if it meets the criteria of Fort Halifax Packing Co., Inc. v. Coyne, 482

U.S. 1, 8 (1987). Not all severance benefit plans meet this criteria. The two

primary factors in applying this test in this circuit are: (1) whether the employer

has discretion over the distribution of benefits and (2) whether there are on-going

demands on the employer’s assets. Kolkowski v. Goodrich Corp., 448 F.3d 843,

848 (6th Cir. 2006).

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5 Jones v. St. John Health; 08-14962

Plaintiffs argue that defendant’s severance plan pays predetermined benefits

that can be determined through a relatively mechanical calculation depending on

only a few factors such as the position of the employee and the employee’s years

of service. Under these circumstances, plaintiffs contend, there is no real

“discretion” that must be exercised in deciding to pay such benefits. Additionally,

plaintiffs argue that there are no “on-going” demands on defendant’s assets after

the benefits are paid. While plaintiffs acknowledge that employees who receive

severance benefits continue to receive life insurance and health insurance benefits,

plaintiffs submit that this, by itself, is not sufficient to cause the procedure to

become an employee welfare benefit plan. 

Defendant maintains that its plan involves the exercise of discretion in order

to determine: (1) which positions will be eliminated and thus which employees

will be seeking severance benefits; and (2) which employees whose positions have

been eliminated qualify for benefits, given that several exclusions could apply,

such as those who have comparable jobs, those who are being disciplined, and

those who have contingent positions, which could be excluded from eligibility for

severance benefits. Defendant also contends that there is an “on-going” demand

on its assets in that: (1) the payments are made over a period of time rather than

on a single occasion; (2) monitoring is necessary to determine if former employees

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Plaintiff’s Motion for Remand 6 Jones v. St. John Health; 08-14962

continue to be eligible; and (3) health and life insurance benefits are paid for a

period of time following termination of the employee’s position.

Kolkowski is the most recent Sixth Circuit case examining the criteria used

in determining whether a severance plan is an employee welfare benefit plan under

ERISA. The plan under scrutiny in Kolkowski was found to be an employee

welfare benefit program under ERISA where discretion was exercised by the

employer to determine whether the employee’s new position was “comparable” to

the old position and also to determine what the employee’s seniority status was. 

Both of these facts exist in the present case. The Kolkowski plan involved a lump

sum payment of salary and bonuses but medical, dental and life insurance benefits

continued for a period of time following termination. Based on these factors, the

Court found that the plan satisfied both the “discretion” factor and the “on-going”

factor identified by the Court. 

Plaintiffs cite Evanoff v. Banner Mattress Co., 526 F.Supp.2d 810 (N.D.

Ohio 2007) in support of their position. Evanoff involved a severance plan that

merely continued payment of the plaintiff’s salary for eighteen months following

termination and also provided continuation of health and life insurance benefits. 

The court found that the non-complex continuation of salary, with no apparent

exceptions, did not make the plan an ERISA plan and that the continued payment

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of health and life insurance benefits did not, without more, make the plan become

an ERISA plan. Id. at 814-15. While the facts in Evanoff are distinguishable from

the present case, the opinion is not persuasive authority because, while it cited to

Kolkowski for a different purpose, it does not use the same test identified in

Kolkowski as the primary basis for determining whether the severance plan in

question met the criteria of Fort Halifax. 

Defendant’s plan involves the discretion to determine if an employee’s new

position is “comparable” to the old position, as well as the discretion to determine

the employee’s seniority status, which is relevant to the amount of benefits a

former employee would receive. Defendant’s plan pays cash benefits over a

period of time, rather than a lump sum on a single occasion, and health and life

insurance benefits continue for a period of time, which depends on the length of

employment and the position held. The relevant features of defendant’s plan

exceed those of the plan in Kolkowski. With the yardstick provided by Kolkowski,

defendant’s plan is greater than the measure needed to establish that its plan meets

the criteria to be considered an employee welfare benefit plan covered by ERISA.

The existence of similar factors resulted in the same conclusion in Dotson v.

Arkema, Inc., 2008 WL 4792685 (E.D. Mich. 2008). Under the circumstances

here, removal was proper and the motion for remand should be denied. 

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Plaintiff’s Motion for Remand 8 Jones v. St. John Health; 08-14962

At the conclusion of the hearing on February 25, 2009, plaintiffs’ counsel

indicated a desire to amend the complaint if it was determined that the questioned

plan was an ERISA plan. While no decision was made at the time, given that the

undersigned is responsible for all pretrial proceedings in this matter, a motion to

amend filed by plaintiffs would be resolved by the undersigned. Such motions at

this stage of the proceedings would likely be viewed favorably. The parties

should consider whether amending the complaint can be the subject of a

stipulation and order before a motion to amend is filed.

V. RECOMMENDATION

For the foregoing reasons, the undersigned RECOMMENDS that

plaintiffs’ motion to remand be DENIED.

The parties to this action may object to and seek review of this Report and

Recommendation, but are required to file any objections within 10 days of service,

as provided for in 28 U.S.C. § 636(b)(1) and Local Rule 72.1(d)(2). Failure to file

specific objections constitutes a waiver of any further right of appeal. Thomas v.

Arn, 474 U.S. 140 (1985); Howard v. Sec’y of Health and Human Servs., 932 F.2d

505 (6th Cir. 1981). Filing objections that raise some issues but fail to raise others

with specificity will not preserve all the objections a party might have to this

Report and Recommendation. Willis v. Sec’y of Health and Human Servs., 931

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Plaintiff’s Motion for Remand 9 Jones v. St. John Health; 08-14962

F.2d 390, 401 (6th Cir. 1991); Smith v. Detroit Fed’n of Teachers Local 231, 829

F.2d 1370, 1373 (6th Cir. 1987). Pursuant to Local Rule 72.1(d)(2), any

objections must be served on this Magistrate Judge.

Any objections must be labeled as “Objection No. 1,” “Objection No. 2,”

etc. Any objection must recite precisely the provision of this Report and

Recommendation to which it pertains. Not later than 10 days after service of an

objection, the opposing party must file a concise response proportionate to the

objections in length and complexity. The response must specifically address each

issue raised in the objections, in the same order, and labeled as “Response to

Objection No. 1,” “Response to Objection No. 2,” etc. If the Court determines that

any objections are without merit, it may rule without awaiting the response.

s/Michael Hluchaniuk 

Date: March 9, 2009 Michael Hluchaniuk

United States Magistrate Judge

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Plaintiff’s Motion for Remand 10 Jones v. St. John Health; 08-14962

CERTIFICATE OF SERVICE

I certify that on March 9, 2009, I electronically filed the foregoing paper

with the Clerk of the Court using the ECF system, which will send electronic

notification to the following: Lauren G. Gibbs, Charles Gottlieb, and Jonathon A.

Rabin.

s/Darlene Chubb 

Judicial Assistant

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