THOMAS L. LUDINGTON, District Judge.
Section § 510 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1140, protects an employee who "has given information ... in any inquiry or proceeding relating to [ERISA]." The question in this case is whether § 510 extends its protections to an employee's unsolicited, internal complaint to his employer that it has violated ERISA.
The issue has split the circuits. The Second, Third, and Fourth Circuits hold that § 510 does not protect such complaints; the Fifth, Seventh, and Ninth Circuits hold that it does.
Briefly, "inquiry" means "the act or an instance of asking for information."
In sum, the plain language of § 510 does not protect unsolicited internal complaints by an employee that are unconnected to an inquiry or proceeding. To reach a contrary
For 27 years Plaintiff Brian Sexton was employed by Defendants Panel Processing, Inc., and Panel Processing of Coldwater, Inc., Pl. Dep. 15, May 30, 2012, attached as Defs.' Mot. Ex. 1. At first he worked as a "fabricator, which was basically the entry level position in the shop." Id. Promoted several times over the years, Plaintiff eventually became the general manager of Defendants' Coldwater, Michigan facility. Id.
In 2003, Plaintiff was appointed to Defendants' board of directors. Id. Four or five years later (Plaintiff does not recall precisely when), he was appointed as a trustee of Defendants' employee stock ownership plan (ESOP
Plaintiff began working for Defendant as an "at-will" employee. Over the years, Plaintiff signed several written acknowledgments that his employment was at-will. See Defs.' Mot. Exs. 3-5. In 1999, for example, Plaintiff signed a receipt of employee handbook acknowledgement that provided:
Id. Ex. 4. Plaintiff signed the same acknowledgement in 2004. Id. Ex. 3. In 2007, he signed yet another acknowledgement of his at-will employment as part of a covenant not to compete. Id. Ex. 5, at 2. And finally, in Plaintiff's deposition he expressly acknowledged that he was an at-will employee at the time his employment was terminated. He was asked:
Pl. Dep. 38; see also Pl. Dep. 36-37 (acknowledging covenant not to compete did not change at-will status of Plaintiff's employment); but see Pl. Dep. 231-33 (asserting that covenant not to compete created "just cause" employment relationship).
Defendants' bylaws provide that the board of directors will have seven members. See Defs.' Bylaws art. IV, § 1, attached as Pl.'s Resp. Ex. 2. The copy of the bylaws furnished to the Court specifies that the board members "need not be Shareholders of the corporation," but goes on to specify that several members of the
A shareholders meeting must be held each year, the bylaws further provide, specifying that "[o]ne of the purposes of such meeting shall be the election of directors." Defs.' Bylaws art. I, § 2. Each share of capital voting stock entitles the record holder or proxy to one vote in the election of directors, with the bylaws elaborating:
Defs.' Bylaws art. II, § 1, art. III, § 1.
In 1982, Defendants created their ESOP and an "employee stock ownership and money purchase pension trust." See Defs.' Mot. Ex. 6 (attaching trust agreement). The trust agreement provides that the ESOP's assets are controlled by a committee, specifying: "The Plan assets shall be invested and controlled by the Committee; provided, however, that the actual management of Trust investments, other than Company Stock, may be delegated to the Trustee." Id. at 2-3. The trust agreement further provides that the committee also controls how company stock held by the trust is voted, providing:
Id. at 4. While the trust agreement has been furnished to the Court, the ESOP has not. How committee members were selected under the ESOP has not been made part of the record.
In the spring of 2011, there were three committee members (who also were trustees): Plaintiff Brian Sexton, Robert Karsten, and Eric Smith (Defendants' chief executive officer). Id. at 1. Defendants' board of directors was made up of four inside directors and three outside directors. See Pl. Dep. 53-54. The insiders were Plaintiff, Eric Smith, Tom Karsten, and Alan Kelsey (Defendants' chief operating officer). Id. The outsiders were George LaFleche, Mike Kelly, and Robert Karsten. Id.
Two director seats were up for election at the 2011 shareholders meeting — the seats held by Messrs. LaFleche and Kelsey. See Defs.' Mot. Ex. 7. In March 2011, Plaintiff received a letter explaining:
Id. at 1 (emphasis omitted). Attached was a "trustee direction form" that again explained: "Each ESOP Participant is entitled to one vote for each share of capital voting stock of this corporation held by such participant in accordance with Section 9 of the Panel Processing, Inc. Employee Stock Ownership Plan." Id. at 3. "Place your vote for Directors by inserting an (X) in the block next to each nominee of your choice," the form continued, listing the names of two gentlemen: Alan Kelsey and George Lafleche. Id.
About this time, Plaintiff recalls, he learned that a "grass roots voting campaign" was underway to have two of Defendants' employees, Jim Skiba and Robert Fitch, elected to the board as write-in candidates. Pl. Dep. 71-72. He was asked:
Id.
Shortly before the election, the board of directors held a meeting. Pl. Dep. 91-92;
Id.; see also Pl. Dep. 90-91 (discussing board of directors meeting held on April 29, 2011).
A short time later (the parties do not specify precisely when), the election was held. See, e.g., Pl. Dep. 92 (recalling that the shareholders meeting followed the board of directors meeting). From the votes submitted by the employees to the trustee on the "trustee direction form," Messrs. LaFleche and Kelsey each received about 150,000 votes. Messrs. Fitch and Skiba, the employees' write-in candidates, each received more than 200,000 votes.
The board of directors meeting was held on Friday, April 29. The following Monday, Plaintiff emailed Mr. Smith threatening to report the board's actions to state and federal authorities "unless they are immediately remedied." Defs.' Mot. Ex. 12. In full, Plaintiff's email provided:
Id. Defendants did not respond to Plaintiff's email, much less "remedy" their actions. Plaintiff, however, did not bring his complaints to the authorities. Pl. Dep. 99-102. In his deposition, Plaintiff was asked:
Id. As noted, Plaintiff emailed Mr. Smith on May 2, 2011. About six months passed.
On October 30, 2011, Defendants terminated Plaintiff's employment. Pl. Dep. 231. This litigation ensued.
In January 2012, Plaintiff filed a two-count complaint against Defendants in the Alpena County Circuit Court. Count one asserts a claim under Michigan's Whistleblowers' Protection Act, Mich. Comp. Laws § 15.361 et seq. Count two asserts a claim for breach of an implied employment contract under Toussaint v. Blue Cross & Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880 (1980).
Defendants removed the case to this Court based on ERISA preemption of the state whistleblower claim. They now move for summary judgment.
A motion for summary judgment should be granted if the "movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R.Civ.P. 56(a). The moving party has the initial burden of identifying where to look in the record for evidence "which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden then
Count one of the complaint asserts a claim under Michigan's Whistleblowers' Protection Act. It alleges "Defendant[s] violated the Whistleblowers' Protection Act when they discriminated against Plaintiff regarding the terms, benefits, conditions and privileges of his employment because he was about to report a violation or suspected violation of state or federal law." Compl. ¶ 13.
Plaintiff's state whistleblower claim, however, is preempted by ERISA. 29 U.S.C. § 1144. 29 U.S.C. § 1144. And as detailed below, even if construed as an ERISA whistleblower claim, Defendants are entitled to judgment as a matter of law because Plaintiff neither gave information nor testified "in any inquiry or proceeding." 29 U.S.C. § 1140.
Two specific sections of ERISA are at issue in this case. The first is § 510 of ERISA, codified at 29 U.S.C. § 1140. It prohibits retaliating against a person who "has given information or has testified or is about to testify in any inquiry or proceeding relating to [ERISA]." § 1140.
The second is § 514 of ERISA, codified at 29 U.S.C. § 1144(a). It preempts all state laws that "relate to" employee benefit plans.
The scope of § 514, the Supreme Court observes, "is conspicuous for its breadth." FMC Corp. v. Holliday, 498 U.S. 52, 58, 111 S.Ct. 403, 112 L.Ed.2d 356 (1990); see also Egelhoff v. Egelhoff, 532 U.S. 141, 146, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001) ("We have observed repeatedly that this broadly worded provision is clearly expansive." (quotation marks omitted)). "Its deliberately expansive language," the Court emphasizes, "was designed to establish pension plan regulation as exclusively a federal concern." Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 138, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990) (quotation marks omitted) (quoting Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 46, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987)). The Sixth Circuit likewise instructs that ERISA preemption spans the entire field — it was enacted "to completely preempt the area of employee benefit plans and to make regulation of benefit plans solely a federal concern." Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1276 (6th Cir.1991) (citing Pilot Life, 481 U.S. at 44-47, 107 S.Ct. 1549).
Under § 514, "A law `relates to' an employee benefit plan ... if it has a connection with or reference to such a plan." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 97, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983). "Under this broad common-sense meaning,"
In Ingersoll-Rand, for example, a former employee brought a wrongful discharge suit under Texas law alleging that his employer wrongfully terminated plaintiff because of the employer's desire to avoid paying benefits to the employee's pension fund. 498 U.S. at 140, 111 S.Ct. 478. Before the Supreme Court, the employee argued that ERISA preemption did not apply since "the pension plan is irrelevant to the Texas cause of action because all that is at issue is the employer's improper motive to avoid its pension obligations." Id. Finding that ERISA preempted the employee's cause of action, the Court wrote that "there simply is no cause of action if there is no plan." Id. (emphasis in original).
Similarly, the Sixth Circuit held ERISA preempted a wrongful discharge claim under Michigan law in Authier v. Ginsberg, 757 F.2d 796 (6th Cir.1985). Id. at 798-99. The employee alleged that the termination of his employment violated Michigan public policy because he was discharged for fulfilling his duties under ERISA. Id. The Sixth Circuit found that the Michigan state law cause of action was preempted, explaining:
Id. at 800 (internal citations omitted) (citing See Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 524, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981)).
Likewise, the district court concluded that ERISA preempted a Michigan Whistleblowers' Protection Act claim in DeFelice v. Heritage Animal Hospital, Inc., CIV. 08-14734, 2010 WL 3906147 (E.D.Mich. Sept. 29, 2010) (Hood, J.). The employee alleged that her discharge violated the state whistleblowers' act because she was terminated for reporting a suspected ERISA violation internally and to the local sheriff's department. The court concluded that the state law cause of action was preempted, noting: "Any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted." Id. at *5 (quoting Aetna Health, Inc. v. Davila, 542 U.S. 200, 209, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004)).
In this case, Plaintiff's state whistleblower claim rests on one email that he wrote to Mr. Smith on May 2, 2011. See Pl. Dep. 99-102 (quoted above); Defs.' Mot. Ex. 12 (attaching email). In full, the email provides:
Defs.' Mot. Ex. 12. These allegations "relate to" the ESOP, an ERISA plan.
Not only does the email itself expressly acknowledge its connection to an ERISA plan, it depends on it — the accusations have no basis without the Plan. The first allegation is that Mr. Smith erred in not counting votes submitted by employees to the ESOP trustee on the "trustee direction form." This allegation more than relates to the ESOP — there simply is no allegation if there is no plan. Similarly, Plaintiff's second assertion, that Mr. Smith erred removing Mr. Karsten and Plaintiff as trustees of the ESOP, requires reference to the ESOP. Plaintiff's Michigan Whistleblowers' Protection Act claim is preempted by ERISA.
Arguing against this conclusion, Plaintiff writes: "Plaintiff's claim in Count I of his complaint under the Michigan Whistleblowers' Protection Act includes Plaintiff's assertion that there were violations of the Michigan Business Corporation Act as well. Even if Plaintiff's claim under the Michigan Whistleblowers' Protection Act is preempted by ERISA, it would not preempt Plaintiff's claim that there were also violations of the Michigan Business Corporation Act and therefore summary judgment as to Count I at this time would be inappropriate." Pl.'s Resp. 7-8. Plaintiff offers no citation to legal authority for his argument. And an independent review reveals none.
Rather, as the above authorities illustrate, a state-law cause of action that "relates to" an ERISA plan is preempted. Plaintiff's claimed violations of the Michigan Business Corporation Act do more than "relate to" an ERISA plan. The violations specifically refer to the ESOP, an ERISA plan. Plaintiff's Michigan Whistleblowers' Protection Act claim is preempted by ERISA.
Section 510 of ERISA, as noted, prohibits retaliation against an employee "because he has given information or has testified or is about to testify in any inquiry or proceeding relating to this [Act]." 29 U.S.C. § 1140.
In sending the email to Mr. Smith, Plaintiff has undoubtedly "given information." The issue is whether Plaintiff did so in an "inquiry or proceeding." That is, does Plaintiff's unsolicited internal complaint qualify for protection under § 510?
Presently, the federal courts of appeal are split on whether § 510 protects such complaints. Compare Edwards v. A.H. Cornell & Son, Inc., 610 F.3d 217, 222-24 (3d Cir.2010) (holding that § 510 does not apply to unsolicited complaints); Nicolaou v. Horizon Media, Inc., 402 F.3d 325, 330 (2d Cir.2005) (per curiam) (same); King v. Marriott Int'l, Inc., 337 F.3d 421, 427-28 (4th Cir.2003) (same); with George v. Junior Achievement of Cent. Ind., Inc., 694 F.3d 812, 815 (7th Cir.2012) (Easterbrook, J.) (holding that § 510 applies to unsolicited informal complaints); Anderson v. Elec. Data Sys. Corp., 11 F.3d 1311, 1313, 1315 (5th Cir.1994) (same); Hashimoto v. Bank of Haw., 999 F.2d 408, 411 (9th Cir.1993) (same).
To begin with the text of the statute, § 510 prohibits retaliating against a person because he gave information "in any inquiry or proceeding relating to [ERISA]." 29 U.S.C. § 1140.
Webster's defines "proceedings" as "the course of procedure in a judicial action or in a suit in litigation." Webster's Third New International Dictionary 1807 (unabridged ed.2002). Similarly, Black's defines "proceeding" as "[t]he regular and orderly progression of a lawsuit," "[a]ny procedural means for seeking redress from a tribunal or agency," or "[t]he business conducted by a court or other official body." Black's Law Dictionary 1241 (8th ed. 2004).
In this case, Plaintiff had not initiated litigation at the time of his email. No judicial proceeding was pending. His information was not given in a "proceeding." Nor was it given in an "inquiry."
Webster's defines "inquiry" as "the act or an instance of seeking truth, information, or knowledge about something," or "the act or an instance of asking for information." Webster's Third New International Dictionary 1167 (unabridged ed. 2002). Black's likewise defines "inquiry" as "[a] request for information." Black's Law Dictionary 808 (8th ed.2004).
The ordinary meaning of an "inquiry" is thus asking for information — not offering it. By its plain terms, § 510 does not apply to unsolicited information given by an employee. While the section does not require a dialog,
Reinforcing this conclusion are the statutory protections provided to whistleblowers elsewhere in the United States Code. Section 704 of Title VII, for example, protects employees who have "opposed any practice made an unlawful employment practice by [Title VII.]" 42 U.S.C. § 2000e-3(a); see generally Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 68, 126 S.Ct. 2405, 165 L.Ed.2d 345 (2006) (discussing Title VII retaliation claims).
Plaintiff's unsolicited complaint is not protected under the plain language of § 510 of ERISA.
As noted, the federal courts of appeals have not all reached this conclusion. On casual inspection, in fact, they appear evenly split on whether § 510 protects unsolicited internal complaints. On closer examination, however, only one circuit — the Ninth — has expressly adopted a rule that would support Plaintiff's claim in this case.
The Ninth Circuit was the first federal appellate court to address whether § 510 protects unsolicited complaints. Hashimoto v. Bank of Haw., 999 F.2d 408, 411 (9th
The Ninth Circuit agreed with the district court that the state whistleblower claim was preempted by ERISA, but "recharacterized" the claim as an ERISA claim brought under § 510. Id. at 411-12. Adopting a purposive interpretation of § 510, the court first observed: "This statute is clearly meant to protect whistle blowers." Id. at 411. And, although the text of § 510 protects only the giving of information "in any inquiry or proceeding," the court reasoned that "[t]he normal first step in giving information or testifying in any way that might tempt an employer to discharge one would be to present the problem first to the responsible managers of the ERISA plan." Id. Thus, the court concluded, notwithstanding the express terms of the statute, its protections should extend to informal, unsolicited complaints. Id. Otherwise, the court cautioned, "the process of giving information or testifying [would be] interrupted at its start: the anticipatory discharge discourages the whistle blower before the whistle is even blown." Id.
One year later, the Fifth Circuit took up the question. Anderson v. Elec. Data Sys. Corp., 11 F.3d 1311, 1315 (5th Cir.1994). Like the plaintiff in Hashimoto, the plaintiff in Anderson brought a state law wrongful discharge claim. Specifically, the plaintiff, an ERISA plan fiduciary, asserted that his employment was terminated for reporting another employee's ERISA violations and refusing to commit ERISA violations himself. Id. at 1312. The district court concluded that the employee's claim was preempted by ERISA and granted the employer summary judgment. Id. at 1313. The employee appealed. Id.
The Fifth Circuit affirmed. In an opinion described by one court of appeals as giving the issue mere "cursory treatment,"
Id. at 1314 (citation and quotation marks omitted) (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 142, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990)).
The court's decision is explainable based on the dual nature of the plaintiff's claims.
Nearly a decade passed without the federal appellate courts addressing whether § 510 protects unsolicited complaints.
The Fourth Circuit affirmed. Unlike the Fifth and Ninth Circuits, however, the court concentrated its attention on the text of the statute, beginning:
Id. (citations, quotation marks, and internal alterations omitted) (quoting Ball v. Memphis Bar-BQ Co., 228 F.3d 360, 364 (4th Cir.2000)). Expressly rejecting the interpretations of the Fifth and Ninth Circuits, the court continued:
King, 337 F.3d at 428 (citations and brackets omitted) (citing Anderson, 11 F.3d at 1315, and quoting Hashimoto, 999 F.2d at 411).
Two years later, the Second Circuit took up the question; it too concluded that § 510 does not apply to unsolicited complaints by employees. Nicolaou v. Horizon Media, Inc., 402 F.3d 325, 330 (2d Cir.2005) (per curiam). The case began when an employee discovered that her employer was underfunding the company's 401(k) plan. Id. at 326. The employee brought her concern to the company's
The employee then brought suit alleging that the employer violated § 510. Id. at 327. Granting the employer's motion to dismiss, the district court explained: "the inquiry contemplated by § 510 can only be a formal, external inquiry." Nicolaou v. Horizon Media, Inc., No. 01 Civ. 0785(BSJ), 2003 WL 22852680, at *2 (S.D.N.Y. Oct. 15, 2003), rev'd 402 F.3d 325 (2d Cir.2005). The employee appealed to the Second Circuit. Weighing in on the question, the U.S. Secretary of Labor filed an amicus curiae brief asserting that a formal inquiry is not required under the statute. Nicolaou, 402 F.3d at 328-29 (discussing Secretary's assertions).
The Second Circuit agreed. The court began its analysis with the text of the statute — specifically, the ordinary meanings of "inquiry" and "proceeding." Id. at 329. "We presume that Congress intends that its statutory text be read in accordance with its plain meaning," the court noted, continuing:
Id. (quotation marks and citations omitted) (citing Black's Law Dictionary 808, 1241 (8th ed.2004); Webster's Third New International Dictionary 1167, 1807 (1993)). Applying these definitions to the facts of the case, the court found that the employee had alleged sufficient facts to suggest that she had given information in an "inquiry":
Nicolaou, 402 F.3d at 329-30 (citation omitted) (quoting Nicolaou, 2003 WL 22852680, at *2).
Thus, the Second Circuit thus disagreed with the Fourth Circuit that a "formal" inquiry is required under § 510. The court agreed, however, that § 510 does require an inquiry — that is, that information not merely given, but also asked for. Unsolicited information volunteered by an employee, the court thus implicitly suggested, would be insufficient to state a claim under § 510.
The Third Circuit was the next federal appellate court to take up the issue — and the third consecutive appellate court to conclude that § 510 does not protect unsolicited complaints by employees. Edwards v. A.H. Cornell & Son, Inc., 610 F.3d 217, 223 (3d Cir.2010), cert. denied, ___ U.S. ___, 131 S.Ct. 1604, 179 L.Ed.2d 517 (2011).
The case began when an employee reported suspected ERISA violations to company management. Id. at 219. The company responded, the employee alleged, by terminating her employment. Id. She brought suit asserting an anti — retaliation claim under § 510 and common law wrongful discharge. Id. The employer, asserting that the employee had not engaged in a protected activity under § 510, moved to dismiss. Id. The district court granted the motion. Id. The employee appealed. Id. Again, the Secretary of Labor filed an amicus brief supporting the employee's position. Id. "Broadly but naturally construed," the Secretary wrote, "`any inquiry or proceeding' encompasses plan participants' complaints to management or plan officials about wrongdoing, and the process by which that information is considered, however informal." Id. at 222-23 (brackets and internal alterations omitted) (quoting Secretary Br. 16).
The Third Circuit disagreed with the Secretary and affirmed the judgment of the district court. Beginning with the text of § 510, the court wrote:
Edwards, 610 F.3d at 223 (citations omitted) (quoting Black's Law Dictionary 864, 1324 (9th ed. 2009)). Turning to address the other court of appeals decisions on point, the court continued:
Edwards, 610 F.3d at 223, 224 (citations omitted) (quoting 42 U.S.C. § 2000e-3(a), King, 337 F.3d at 427, and citing Anderson, 11 F.3d at 1314, Hashimoto, 999 F.2d at 411.).
Finally, the court rejected the purposive approach of the Ninth Circuit, explaining: "Although ERISA should be liberally construed in favor of protecting the participants in employee benefit plans, this does not entitle us to ignore clear statutory language." Id. (citation and quotation marks omitted) (quoting IUE AFL-CIO Pension Fund v. Barker & Williamson, Inc., 788 F.2d 118, 127 (3d Cir.1986)).
Finally, little more than a month ago, the Seventh Circuit became the most recent federal appellate court to take up the question. George v. Junior Achievement of Cent. Ind., Inc., 694 F.3d 812 (7th Cir. 2012). The case began when an employee "discovered that money withheld from his pay was not being deposited into his retirement account and health savings account." Id. at 813. He complained to the company's accountants, executives, and board, as well as the U.S. Department of Labor. The company asked questions of the employee and later issued checks for the money withheld, plus interest. Several months later, the company discharged the employee. The employee brought suit, alleging that he was discharged because of his complaints in violation of § 510. Granting the company's motion for summary judgment, the district court "thought the holdings of Anderson and Hashimoto to be atextual and followed Edwards: § 510's language does not protect employees who make `unsolicited complaints that are not made in the context of an inquiry or a formal proceeding.'" Id. at 814 (quoting George v. Junior Achievement of Cent. Indiana, Inc., 1:10-CV-0220-JMSMJD, 2011 WL 4537006, *7 (S.D.Ind. Sept. 28, 2011)).
The Seventh Circuit reversed. Writing for the panel, Judge Frank Easterbrook concluded that "an employee's grievance is within § 510's scope whether or not the employer solicited information." George, 694 F.3d at 817. Elaborating, Judge Easterbrook explained:
Id. at 814 (citations omitted) (citing Kasten v. Saint-Gobain Performance Plastics Corp., ___ U.S. ___, 131 S.Ct. 1325, 1331, 179 L.Ed.2d 379 (2011)).
Making a subtle but significant observation, Judge Easterbrook noted: "The statute
The opinion's observation that an "inquiry" can be initiated by either the employee or the employer is the only reasonable interpretation of § 510 that does not require reading limitations into the statute. That is, as drafted, the section prohibits retaliation against an employee who "has given information ... in any inquiry or proceeding." 29 U.S.C. § 1140. An interpretation contrary to Judge Easterbrook's would require adding "initiated by an employer" to the text of § 510 — that the section prohibits retaliation against an employee who "has given information ... in any inquiry or proceeding [initiated by an employer]." This is not the statute that Congress promulgated.
Although the result reached in the George opinion is sound, language in the opinion is also susceptible to misinterpretation. That is, in George the employee asked questions of his employer; his employer responded by asking questions in return. The employer's questions fit comfortably within the ordinary definition of "inquiry" — "[a] request for information." Webster's Third New International Dictionary 1167 (unabridged ed.2002); see also Black's Law Dictionary 808 (8th ed. 2004). The case was correctly decided by the Seventh Circuit. As noted, however, the opinion goes on to provide that "an employee's grievance is within § 510's scope whether or not the employer solicited information." Such a categorical assertion is incomplete. A fuller explanation is that "an employee's grievance is within § 510's scope whether or not the employer solicited information," provided that the employee himself solicited information. Without the asking for information, there is no "inquiry."
In this case, unlike in George, Plaintiff did not ask for any information. To reiterate, in full Plaintiff's email provided:
Defs.' Mot. Ex. 12. Because this email neither refers to questions asked of Plaintiff nor to questions asked by Plaintiff, Defendant is entitled to summary judgment on Plaintiff's whistleblower claim.
Having dismissed the only federal claim in this case, the Court declines to exercise supplemental jurisdiction over Plaintiff's sole remaining state law claim of breach of implied contract. The United States Code provides, "The district courts may decline to exercise supplemental jurisdiction over a claim ... if ... the district court has dismissed all claims over which it has original jurisdiction." Indeed, "a federal court that has dismissed a plaintiff's federal-law claims should not ordinarily reach the plaintiff's state-law claims." 28 U.S.C. § 1367(a); see Moon v. Harrison Piping Supply, 465 F.3d 719 (6th Cir.2006)
Accordingly, it is
Preemption under the Employee Retirement Income Security Act of 1974 (ERISA) is broad. But it is not so broad as to encompass all breach of contract actions involving entities with ERISA-qualifying benefit plans.
Here, the plaintiff alleges that the defendant breached the plaintiff's employment contract by terminating his employment without just cause. This claim has three elements. First, did the defendant promise that the plaintiff's employment would only be terminated for just cause? Second, did the plaintiff sufficiently perform his job? And third, did he suffer damages? None of the elements relate to the defendant's ERISA plan. The claim is not preempted.
For 27 years Plaintiff Brian Sexton was employed by Defendants Panel Processing, Inc., and Panel Processing of Coldwater, Inc. Promoted several times over the years, Plaintiff eventually became the general manager of Defendants' facility in Coldwater, Michigan. In 2003, Plaintiff was appointed to Defendants' board of directors. Four or five years later (Plaintiff does not recall precisely when), he was appointed as a trustee of Defendants' employee stock ownership plan (ESOP), an ERISA-qualifying employee benefit plan.
In the spring of 2011, Plaintiff alleges, employees mounted a grass-roots campaign to elect two-write in candidates to the board of directors. Shortly before the election, the board held a meeting and voted Plaintiff out as ESOP trustee. A short time later, the election was held. The write-in candidates won in a landslide. The board, however, refused to seat them as directors.
The board meeting was held on a Friday. The following Monday, Plaintiff emailed Defendants' CEO. Asserting that the board's decision refusing to seat the write-in candidates and removing Plaintiff as trustee violated "ERISA and the Michigan Corporations Business Act and other state and federal laws," he threatened to report the board's actions to the authorities "unless they are immediately remedied." Defendants did not respond to Plaintiff's email, much less "remedy" their actions. Plaintiff, however, did not bring his complaints to the authorities.
Six months passed. In the fall of 2011, Defendants terminated Plaintiff's employment. This litigation ensued. Plaintiff filed a two-count complaint in state court. Count one asserted a claim under Michigan's Whistleblowers' Protection Act.
Defendants removed the case to this Court based on ERISA preemption and moved for summary judgment. Granting the motion in part, the Court concluded that Plaintiff's whistleblower claim was preempted by § 510 of ERISA, 29 U.S.C. § 1140. Sexton v. Panel Processing, Inc., 912 F.Supp.2d 457, 2012 WL 5353605 (E.D.Mich. Oct. 30, 2012). The court declined supplemental jurisdiction over Plaintiff's breach of contract claim.
Defendants move for reconsideration of that decision, asserting that the breach of contract claim is also preempted by ERISA.
A motion for reconsideration will be granted only if the moving party shows: "(1) a `palpable defect,' (2) the defect misled the court and the parties, and (3) that correcting the defect will result in a different disposition of the case." Mich. Dept. of Treasury v. Michalec, 181 F.Supp.2d 731, 733-34 (E.D.Mich.2002) (quoting E.D. Mich. LR 7.1(h)(3)). A "palpable defect" is "obvious, clear, unmistakable, manifest, or plain." Michalec, 181 F.Supp.2d at 734 (citing Marketing Displays, Inc. v. Traffix Devices, Inc., 971 F.Supp. 262, 278 (E.D.Mich.1997)).
Here, Defendants do not make this showing.
Subject to exceptions not relevant here, ERISA preempts all state laws and claims that "relate to" qualified employee benefit plans. Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 45, 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987) (citing 29 U.S.C. § 1144(a)). The words "relate to" must be read "in their broad sense." Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 98, 103 S.Ct. 2890, 77 L.Ed.2d 490 (1983).
But, the Supreme Court instructs, courts must also "presume that Congress did not intend to pre-empt areas of traditional state regulation." Metro. Life Ins. Co. v. Massachusetts, 471 U.S. 724, 740, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985); see also Alessi v. Raybestos-Manhattan, Inc., 451 U.S. 504, 522, 101 S.Ct. 1895, 68 L.Ed.2d 402 (1981) (cautioning that the preemption analysis "must be guided by respect for the separate spheres of governmental authority preserved in our federalist system").
Courts must therefore take a "common-sense view of the matter." Metro. Life Ins., 471 U.S. at 740, 105 S.Ct. 2380. A state law or claim "relates to" an employee benefit plan "if it has a connection with or reference to such a plan." Shaw, 463 U.S. at 96-97, 103 S.Ct. 2890. In contrast, "state laws and state law claims whose effect on employee benefit plans is merely tenuous, remote or peripheral are not preempted." Cromwell v. Equicor-Equitable HCA Corp., 944 F.2d 1272, 1276 (6th Cir.1991). The Sixth Circuit explains, "It is not the label placed on a state law claim that determines whether it is preempted, but whether in essence such a claim is for the recovery of an ERISA plan benefit." Zuniga v. Blue Cross & Blue Shield of Mich., 52 F.3d 1395, 1401 (6th Cir.1995) (quoting Cromwell, 944 F.2d at 1276).
Plaintiff's breach of contract claim is contained in count two of the complaint. That count alleges:
Compl. ¶¶ 17-21.
This type of claim, as noted, is often referred to as a "Toussaint" claim after the decision in Toussaint v. Blue Cross and Blue Shield of Michigan, 408 Mich. 579, 292 N.W.2d 880 (Mich.1980); see generally Baggs v. Eagle-Picher Indus., Inc., 957 F.2d 268, 271-72 (6th Cir.1992) (discussing Toussaint and progeny); Joanna C. Kloet, Comment, Using Promissory Estoppel to Preserve Traditional Contract Principles and Protect Employee Rights, 2005 Mich. St. L. Rev. 1235, 1240-45 (2005) (discussing Toussaint).
The Michigan Supreme Court applies a two-step inquiry to evaluate a Toussaint claim. Lytle v. Malady, 458 Mich. 153, 579 N.W.2d 906, 911 (Mich.1998). "The first step," the court instructs, "is to determine, what, if anything, the employer has promised." Rood v. Gen. Dynamics Corp., 444 Mich. 107, 507 N.W.2d 591, 606 (Mich. 1993) (emphasis omitted). A "promise" is defined as "a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made." Id. (quoting Restatement (Second) of Contracts § 2(1) (1981)). The second step "is to determine whether the promise is reasonably capable of instilling a legitimate expectation of just-cause employment in the employer's employees." Rood, 507 N.W.2d at 607. If these two steps are established, the court will find "an employment contract providing that an employee shall not be discharged except for cause." Toussaint, 292 N.W.2d at 885.
To establish a breach of contract claim under Michigan law, in turn, a plaintiff must then: "(1) prov[e] the existence of the contract; (2) produc[e] testimony that he had performed it up to the time of his discharge; and (3) provid[e] proof of damages." Sanders v. Kettering Univ., 411 Fed.Appx. 771, 777 (6th Cir.2010) (citing Rasch v. City of E. Jordan, 141 Mich.App. 336, 367 N.W.2d 856, 858 (Mich.Ct.App. 1985)).
Here, for Plaintiff to prove his breach of contract claim he must first establish that Defendant made a promise to Plaintiff that reasonably instilled a legitimate expectation of just-cause employment. Second, he must establish that he was sufficiently performing his job such that Defendant lacked just cause for terminating the employment relationship. And third, Plaintiff must establish damages.
None of these elements require Plaintiff to establish the existence of an ERISA
Authier v. Ginsberg, 757 F.2d 796 (6th Cir.1985) is instructive. The plaintiff alleged that the termination of his employment violated Michigan public policy because he was discharged for fulfilling his duties under ERISA. The Sixth Circuit concluded that the cause of action was preempted by ERISA, explaining:
Id. at 800; see also McSharry v. Unumprovident Corp., 237 F.Supp.2d 875, 880 (E.D.Tenn.2002) (concluding Tennessee common law wrongful discharge claim was preempted by ERISA because it "depend[ed] upon the existence of ERISA plans and alleged violations of fiduciary duties imposed by ERISA").
In Yelle v. United Water Springfield LLC, 795 F.Supp.2d 169 (D.Mass.2011), in contrast, the plaintiff had a contract that included a promise of just-cause employment and benefits pursuant to an ERISA-regulated plan. After he was terminated, he brought suit for breach of contract alleging that he was terminated without just cause. Concluding that the cause of action was not preempted by ERISA, the court wrote:
Id. at 174-75 (quotation marks and citation omitted) (quoting Hampers v. W.R. Grace & Co., 202 F.3d 44, 52 (1st Cir.2000)).
Here, unlike in Authier, Plaintiff's breach of contract claim does not relate to (much less hinge upon) an ERISA plan. Rather, as in Yelle, Plaintiff's claim depends solely on what Defendant promised regarding termination and how Plaintiff performed on the job.
ERISA preemption, as noted, is broad — but not so broad as to encompass all breach of contract actions involving entities with ERISA-qualifying plans. Because Plaintiff's breach of contract claim does not relate to the ERISA plan, it is not preempted.
Accordingly, it is
