Opinion ID: 1441960
Heading Depth: 1
Heading Rank: 4

Heading: Interference with protected rights

Text: It shall be unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan ... or for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan, this subchapter, or the Welfare and Pension Plans Disclosure Act... . The provisions of section 1132 of this title shall be applicable in the enforcement of this section [emphasis added]. The § 1132 enforcement provision referred to in § 1140 provides: A civil action may be brought  . . . . (3) by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations (ii) to enforce any provisions of this subchapter or the terms of the plan[.] 29 U.S.C. § 1132(a)(3) (1982). Congress enacted these sections in order to completely secure the rights and expectations brought into being by this landmark reform legislation. S.Rep. No. 127, 93d Cong., 2d Sess. 36, reprinted in 1974 U.S.Code Cong. & Admin.News 4639, 4838, 4872 (1974). The intent was to prohibit employers from discharging or harassing their employees in order to prevent them from obtaining their statutory or plan-based rights and was designed to protect the employment relationship. West v. Butler, 621 F.2d 240, 244-46 (6th Cir.1980). Section 1140 prohibits any person [6] from discharging an employee for the purpose of interfering with the attainment of any right. Although § 1144 leaves open the question of relatedness, it is in § 1140 where the dismissed Marcoz claims run aground on the explicit preemptive language. It clearly applies to the type of termination allegedly suffered by Marcoz and provides a federal remedy therefor. A fair reading of the broad language supports the lower court's determination that the dismissed claims were preempted by the above statute. In reaching its decision, the district court relied on Sorosky v. Burroughs, 826 F.2d 794 (9th Cir.1987); Lembo v. Texaco, 194 Cal.App.3d 531, 239 Cal.Rptr. 596 (1987); and Johnson v. TWA, 149 Cal.App.3d 518, 196 Cal.Rptr. 896 (1983). In Sorosky, the 55-year-old plaintiff lost his job in a Burroughs' work consolidation and relocation action. He sued in state court, claiming breach of contract/wrongful discharge, breach of duty of good faith and fair dealing, and conspiracy to interfere with a protected property interest. Burroughs removed the case to federal court (the opinion does not disclose on what grounds) and the federal district court granted summary judgment. Sorosky then challenged the district court's jurisdiction, claiming that the removal was erroneous. Id. at 798. Burroughs claimed federal jurisdiction existed based on both § 1140 and § 1144. The Sorosky court said, the preemption issue seems clear to us and held that the claims were preempted by the explicit language of § 1140 and under the relate to language of § 1144. Id. at 799. The court concluded: Sorosky therefore had a federal claim under section [§ 1132(a)(3)] to enforce his right under [§ 1140] to non-interference with his employee benefits. We need not address whether Sorosky could seek damages... . The allegations in Sorosky's complaint that relate to the employee benefit plan state a claim under, and are therefore within the scope of [§ 1132(a)(3)] even if that section does not provide the entire remedy that Sorosky seeks in his complaint. These claims are thus so completely preempted as to state a claim arising under federal law [citing Metropolitan Life ]. Id. at 800. In Lembo v. Texaco, 194 Cal.App.3d 531, 239 Cal. Rptr. 596 (1987), Texaco made misrepresentations inducing the plaintiffs to retire shortly before a lucrative voluntary retirement program would be available. By retiring when they did, the former employees forfeited the right to take advantage of the program's generous provisions. The employees alleged that as a result of Texaco's conduct, they had lost valuable pension and life insurance benefits. The action was removed to federal court. Plaintiffs sought to have it remanded back to the state court, claiming there was no federal jurisdiction. The federal district court agreed and remanded the action back to the state court. The Lembo court stated that once Congress has expressed the intention to occupy the field, state law is preempted even if it does not directly interfere with substantive federal legislation. Id. 239 Cal.Rptr. at 599 (citing Alessi v. Raybestos-Manhattan Inc., 451 U.S. 504, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981), and Dependahl v. Falstaff Brewing Corp., 653 F.2d 1208 (8th Cir.1981)). It concluded that the claim made was an exclusively federal claim for which there was no concurrent state jurisdiction and reversed and remanded for further action consistent with its holding. [7] Johnson v. TWA, 149 Cal.App.3d 518, 196 Cal.Rptr. 896 (1983), is in accord with Sorosky and Lembo. The Johnson court concluded that the statutory language and legislative history of ERISA resolves the issue of preemption by observing, Here, section 1140 expressly proscribes the wrongful conduct alleged in appellant's first cause of action; i.e., discharge for the sole purpose of depriving appellant of employee benefits. The remedial provisions of ERISA, sections 1132 and 1140, coupled with section 1144 establish that, to the extent that the employee benefits enumerated in the first cause of action are within the regulation of the act, appellant's state law claims are preempted. Id. 196 Cal. Rptr. at 902. In the recent case, Barnick v. Longs Drug Stores, Inc., 203 Cal.App.3d 377, 250 Cal.Rptr. 10 (1988), the California appellate court, following the lead of Sorosky, held that an employee's claim that he was fired to deprive him of pension benefits and who sued for (1) wrongful termination, (2) breach of employment contract, (3) breach of (benefits plan) contract, (4) conversion, and (5) breach of covenant of good faith and fair dealing was partially preempted. The court dismissed outright the third, fourth and fifth causes of action and the first and second to the extent they referred to the plan. The court allowed the remaining independent, non-ERISA claims to stand. Id. 250 Cal. Rptr. at 14. Beyond the cases cited and discussed above, substantial additional authority can be cited for the proposition that allegations of employment discharge to prevent someone from obtaining benefits under an ERISA plan and similar conduct prohibited by § 1140 is a federal claim. [8] The conclusion that such federal claims preempt any state law claims naturally follows. One recent Texas Supreme Court decision on the subject appears contra but we decline to follow it. In McClendon v. Ingersoll-Rand Co., 779 S.W.2d 69 (1989), a divided court created an exception to its employment at will doctrine for terminations that are motivated by the employer's desire to avoid making payments to the employee's retirement/pension fund. The court held that the state had an interest in the integrity of pension plans and recognized the allegation as a state cause of action. The Texas approach implicitly denies preemption. However, the preemption issue was lightly passed over by the majority which sought to use the language of § 1140 to validate its conclusion of the importance of the Texas interest in the issue with little apparent thought for the effect this language would have on the newly created state right. Id. at 71. The majority focus seemed to be on the undesirability of the employer's conduct rather than the question of the exclusivity of federal remedies. In a well-reasoned, three-judge dissent (Cook, J., author), the minority objected to the court's holding and argued that the cause of action was clearly preempted by ERISA. Id. at 71-73. We agree with the McClendon dissent on this issue. The broad, explicit preemption language of ERISA and the clear language of § 1140 present a federal barrier which is difficult to circumvent. Marcoz's attempts to explain away § 1140 are unpersuasive. He asserts that termination of an employee to prevent further pension accruals did not state a claim under § 1140 because the section only applies to interference with vesting. Weir v. Litton Bionetics, Inc., 41 F.E.P. Cases 1150, 1986 WL 11608 (D.C.Md. 1986). This argument focuses on an ostensible literal reading of the § 1140 language. It emphasizes the segment of the statutory language that forbids interference with any right to which the individual may become entitled. This claim is refuted by the plain language of § 1140. Moreover, the context of Weir is inapposite to Marcoz's situation. Marcoz insists that because he was vested, § 1140 does not apply to his claim. This argument has been rejected by other courts for the reason that it leads to an absurdity. Such an interpretation results in an ERISA application to individuals who are not vested in ERISA plans and an exemption from ERISA to individuals who have vested interests in such plans. See Clark v. Resistoflex Co., 854 F.2d 762 (5th Cir.1988); Garry v. TRW, Inc., 603 F. Supp. 157 (N.D.Ohio 1985). This argument also ignores the facts. Marcoz is not seeking damages for lost vested benefits which by definition the employer cannot legally avoid providing. Marcoz wants to claim the benefits that he would or might have attained had he not been discharged. ERISA either preempts these claims or it does not. Vesting is irrelevant to the effect of an ERISA plan and we are persuaded that it is a mistake to make a distinction on these grounds. Marcoz contends that the ERISA relationship is too tenuous, and that § 1140, when read in conjunction with § 1144, requires a different result. This proposition relies heavily on Teper v. Park West Galleries, Inc., 431 Mich. 202, 427 N.W.2d 535 (1988), a well-reasoned but inapposite case. The Teper court did an exhaustive analysis of whether an award of damages based on lost future pension benefits was preempted because it related to an ERISA plan. The court noted that the plan was uninvolved. The plan or its administrators had not been joined; it was not a party and would not have to do anything as a result of the award nor would it incur any administrative burdens. The court concluded that the relationship (citing Shaw ) was too tenuous to trigger preemption. Id. 427 N.W.2d at 541. The issue before the Teper court is not the issue we must decide. There is a distinction between calculating damages with reference to the benefits that would have been available and the claim that the purpose of the discharge was to deprive the plaintiff of ERISA plan benefits. Marcoz's complaint falls into the latter category. Teper is distinguishable for this reason and cannot save Marcoz's allegations implicating acts and motives prohibited by § 1140. Other courts have wrestled with the distinction between ERISA claims and monetary awards in this same context. The conclusion they generally come to is that if you allege that deprivation of benefits was the reason you were discharged, then the claim is preempted. But, if the loss is a mere consequence of the discharge, then it is not preempted. Ethridge v. Harbor House Restaurant, 861 F.2d 1389 (9th Cir.1988). This conclusion is a rather fine distinction but recognizes that if you can prove a non-preempted state law claim which entitles you to recovery, then you may recover the lost benefits as part of your damages. But, if you must rely on the bad faith contract breach or tortious conduct as it relates to depriving you of ERISA plan benefits to make a claim, then your remedy is an exclusively federal remedy provided by ERISA and must be sought in federal court. Ethridge, which was decided subsequent to Sorosky, is illustrative of this approach. The plaintiff in Ethridge stated that he had been tortiously discharged and that part of his damages was loss of benefits. Harbor House attempted to remove the case to federal court on the basis of this reference to lost benefits. Both the federal district court and the circuit court of appeals rejected this claim. They noted that nowhere was there an allegation that the reasons given for the discharge were pretextual or that the true purpose of the firing was to deprive the plaintiff of benefits. Id. at 1405 (citing Rose v. Intelogic Trace, Inc., 652 F. Supp. 1328, 1330 (W.D.Tex. 1987)). The Ethridge court approved of this distinction by saying, We agree with those courts which have held that [n]o ERISA cause of action lies ... when the loss of pension benefits was a mere consequence of, but not a motivating factor behind, the termination of benefits. (Citing Rose and Titsch v. Reliance Group, Inc., 548 F. Supp. 983, 985 (S.D.N.Y.1982), aff'd mem. 742 F.2d 1441 (2d Cir.1983)). Id. Although this distinction is not entirely satisfactory, we concede that it appears to accurately state the law as it is currently set out in the ERISA legislation and accompanying interpretative case law. [9]