Opinion ID: 708164
Heading Depth: 2
Heading Rank: 2

Heading: The Unilateral-Contract Theory

Text: 24 The district court rejected Gallione's contention that he was entitled to recover on a breach-of-contract theory because it found, relying on Reichelt v. Emhart Corp., 921 F.2d 425, 431-32 (2d Cir.1990), cert. denied, 501 U.S. 1231, 111 S.Ct. 2854, 115 L.Ed.2d 1022 (1991), that contract claims are preempted by ERISA. Though we do not regard the reasoning in Reichelt--which dealt with claims for severance pay--as entirely applicable to questions concerning pensions, we conclude that Gallione's contract claim was properly dismissed because he failed to come forward with evidence of any contract entitling him to a supplemental pension. 25 In Reichelt, we observed that ERISA governs two types of employee benefit plans, i.e., those that provide for pension-type benefits and those that provide for welfare-type benefits such as severance pay. We noted that, [i]n recognition of the expense of maintaining and administering employee benefit plans, 921 F.2d at 429 (citing S.Rep. No. 383, 93rd Cong., 2d Sess. 18, 51, reprinted in 1974 U.S.C.C.A.N. 4890, 4904, 4935), Congress structured ERISA to impose the most stringent requirements in connection with pension plans and left the employer with considerable flexibility with respect to welfare plans. 921 F.2d at 429. Thus, while employee pension plans are subject to elaborate vesting and funding requirements, welfare plans are not, and we concluded that the latter type of plan may be terminated by the employer at any time. Id. at 429-30. We rejected the Reichelt plaintiffs' contention that they were entitled to severance benefits on a unilateral-contract theory, reasoning that since ERISA was intended to occupy fully the field of employee benefit plans and to establish that field 'as exclusively a federal concern,'  id. at 431 (quoting Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 523, 101 S.Ct. 1895, 1906, 68 L.Ed.2d 402 (1981)); see 29 U.S.C. Sec. 1144(a) (preempting state law regarding matters that relate to employee benefit plans), ERISA preempts civil actions against employers for severance pay predicated on common-law contract principles, 921 F.2d at 431. We concluded that accepting plaintiffs' argument would nullify Congress's determination in structuring ERISA that welfare benefit plans such as severance plans should be exempted from the stringent vesting requirements applicable to pension benefit plans. Id. at 432. 26 Though Congress also chose to exempt top hat plans from ERISA's vesting and funding requirements, its rationale for so doing differed from its rationale for exempting welfare plans. Whereas employee welfare plans were exempted because of the expense of maintaining and administering such plans, top hat plans were exempted on the premise that the employer's top-level executives have sufficient influence within the institution to negotiate arrangements that protect against the diminution of their expected pensions. Thus, DOL has stated that 27 in providing relief for top-hat plans from the broad remedial provisions of ERISA, Congress recognized that certain individuals, by virtue of their position or compensation level, have the ability to affect or substantially influence, through negotiation or otherwise, the design and operation of their deferred compensation plan, taking into consideration any risks attendant thereto, and, therefore, would not need the substantive rights and protections of Title I. 28 DOL Office of Pension & Welfare Benefit Programs, Opinion 90-14 A, 1990 WL 123933, at  1 (May 8, 1990) (DOL Opinion). Thus, although ERISA broadly preempts state law with regard to matters that relate to employee benefit plans, 29 U.S.C. Sec. 1144(a), the premise of the exemption of top hat plans, i.e., the executives' ability to negotiate for terms that will suffice to protect their interests, appears to imply that an executive may negotiate contract rights that are enforceable. Accordingly, we are skeptical of the proposition that if such an employee has no viable pension claim under ERISA he necessarily also has no enforceable right to a pension pursuant to a contract. 29 However, we need not definitively explore here the extent to which a pension claim based on contract may be preempted by ERISA, because the record reveals that Gallione's contract claim was properly dismissable for lack of merit. 30 The essence of Gallione's contract claim is that 31 [t]he Supplemental Pension Plan in this case must be viewed as an offer to enter into a Unilateral Contract which Robert Gallione accepted by being an officer with the Union and by his complying with the terms of the plan in effect when he performed in 1971 until 1990 when the employer terminated the plan en futuro.... [H]is rights under the plan are accrued in a contractual sense, albeit not vested under ERISA's substantive provisions. 32 (Gallione brief on appeal at 10-11.) This contention finds no support in the record. 33 The Union, in support of its motion for summary judgment, submitted a Rule 3(g) statement setting out the events concerning the 1977 adoption and 1990 abolition of the Supplemental Plan. The terms of that plan are not in dispute. Gallione did not point to any provision of the Supplemental Plan, nor have we seen one, stating that an officer's rights would accrue or be vested at any time before his retirement. Nor was there a provision stating that the plan could not be eliminated at any time. Indeed, Gallione was one of the incumbent officers who sent the open letter to the membership taking credit for having discontinued payments under the Supplemental Plan even before the membership's call for that plan's elimination. Gallione did not dispute that the membership voted, prior to his retirement, to eliminate the Supplemental Plan for any officer who retired subsequent to that vote. Indeed, his own Rule 3(g) statement states that [t]he plan was terminated by the By-Law passed in April of 1990. 34 There being no basis on which a reasonable factfinder could find that there was a contractual provision prohibiting the elimination of the Supplemental Plan, and there being no genuine dispute as to the facts that the Supplemental Plan was eliminated in April 1990 for all officers who had not already retired and that Gallione retired thereafter, summary judgment dismissing Gallione's contract claim was proper.