Arsenio Colorado v. Tyco Valves & Controls, L.P. and Tv&c Gp Holdings, Inc. , 432 S.W.3d 885 ( 2014 )

IN THE SUPREME COURT OF TEXAS
444444444444
NO. 12-0360
444444444444
ARSENIO COLORADO, ET AL., PETITIONERS,
v.
TYCO VALVES & CONTROLS, L.P. AND TV&C GP HOLDINGS, INC.,
RESPONDENTS
4444444444444444444444444444444444444444444444444444
ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE FIRST DISTRICT OF TEXAS
4444444444444444444444444444444444444444444444444444
Argued September 11, 2013
JUSTICE LEHRMANN delivered the opinion of the Court.
After deciding to close one of its facilities, Tyco Valves & Controls, L.P. (Tyco) offered
certain skilled employees retention agreements to encourage them to remain with the company
through the facility’s closure. These agreements provided that, in consideration for remaining
employed during the retention period, the employees would receive (1) a cash bonus, and
(2) severance payments in the event they were not offered comparable employment with Tyco.
Eventually, Tyco sold one of the production units located in the facility to another company.
Seventeen former Tyco employees who had worked in that unit and been denied severance sued
Tyco for breach of contract. Eleven of those employees alleged that they were entitled to severance
payments under the retention agreements, notwithstanding the fact that the purchasing company had
offered them comparable employment commencing immediately upon the employees’ termination
by Tyco. The other six employees, who had not executed retention agreements, alleged that they
were entitled to severance payments under oral agreements with Tyco. After a bench trial, the trial
court found for the employees, awarding them severance pay. The court of appeals reversed in a
divided opinion and rendered judgment for Tyco. 365 S.W.3d 750.
Three issues are presented for our review. First, we determine whether the employees’
breach-of-contract claims are preempted by the Employee Retirement Income and Security Act of
1974 (ERISA).1 If the claims are not preempted, we must also consider whether legally sufficient
evidence exists to prove that (1) Tyco breached the retention agreements by failing to pay severance
in light of the purchasing company’s offers of comparable employment, and (2) oral agreements to
pay severance existed between Tyco and the employees who did not have written agreements. We
hold that ERISA preempts the employees’ breach-of-contract claims and thus need not reach the
remaining issues. Accordingly, we affirm the court of appeals’ judgment.
I. Factual and Procedural Background
The plaintiffs in this action (Gimpel Employees) worked in Tyco’s Gimpel Unit, which
manufactured specialized valves. Along with various other Tyco production units, the Gimpel Unit
was located in Tyco’s West Gulf Bank facility in Houston. By the summer of 2006, Tyco planned
to close the West Gulf Bank facility and relocate the units housed there. At that time, the Gimpel
Employees were covered by Tyco’s Severance Plan for U.S. Employees (ERISA Plan), which was
undisputedly governed by ERISA and which provided for eligible employees to receive certain
1
ERISA is codified in Title 29 of the United States Code. See 29 U.S.C. §§ 1001–1461.
2
severance benefits in the event they were terminated for reasons other than cause. The ERISA Plan
excluded from eligibility employees who were terminated as the result of a sale of Tyco’s assets and
had the opportunity to continue employment with the purchaser. The benefits schedule under the
Plan included one week’s severance pay for each year of the employee’s service, subject to a
minimum of two weeks and a maximum of fifty-two weeks (referred to as a “2-and-52” schedule).
In August 2006, while plans for closing the West Gulf Bank facility were underway, Tyco’s
new human resources director, Holly Kriendler, created a one-page document entitled “Tyco Valves
and Controls Severance” that outlined a severance schedule for that facility. Pursuant to this
schedule (West Gulf Bank Schedule), eligible hourly employees would receive one week’s
severance pay for each year of service and eligible salaried employees would receive two weeks’
severance pay for each year of service, subject to a minimum of six weeks and a maximum of
twenty-six weeks (referred to as a “6-and-26” schedule). In addition to this 6-and-26 schedule, the
West Gulf Bank Schedule contained several provisions copied directly from the ERISA Plan,
utilizing capitalized terms that were defined only in the ERISA Plan.2 It also stated: “This policy
shall apply to bands 4 – 7 and supersede any prior plan, program or policy under which the
Company provided severance benefits prior to the Effective Date of the Policy.”3
In late 2006, Tyco informed the Gimpel Employees of its intention to sell, rather than
relocate, the Gimpel Unit. In order to retain its skilled labor force and facilitate the sale, Tyco
2
For example, the West Gulf Bank Schedule uses terms like “Severance Benefit,” “Participant,” and
“Committee.”
3
Tyco classified its employees in “bands” depending on their position. The Gimpel Employees were all
classified within bands four through seven.
3
offered a Retention Incentive Agreement (RIA) to eleven of the Gimpel Employees (RIA
Employees).4 Each RIA, dated between January 5 and January 15, 2007, was made “by and between
Tyco Valves and Controls, its successors and assigns (‘Tyco’ or ‘Company’), and [the respective
RIA Employee].”5 The RIAs provided for the payment of a “retention incentive bonus” if the
employees remained with Tyco through a specified period, stating in relevant part:
(a) Stay Incentive Bonus. If the Employee has remained an Active Employee of
Tyco for the entire Retention Period . . . then, as soon as practical following the end
of the Retention Period, Tyco will pay the Employee a retention incentive bonus (a
“Retention Bonus”) consisting of either:
(i) in the event that the Employee is not offered Comparable Employment
with Tyco, an amount equal to [between $2,500 and $10,000, depending on
the Employee] (Retention Bonus) plus the standard Severance in accordance
to [sic] the severance schedule associated with the closure of this facility. . . .
[or]
(ii) in the event that the Employee is offered Comparable Employment with
Tyco, a cash payment of [between $2,500 and $10,000] subject to the
Employee’s acceptable performance during the Retention Period.
The RIAs defined “Comparable Employment” to mean that “within 30 days after the end of the
Retention Period, the Employee is offered employment with the Company of comparable pay, status
and skill level at a location that is within 25 miles of Employees [sic] current work location.”
In meetings with the West Gulf Bank facility’s acting human-resources manager, conducted
either when the RIAs were executed or shortly thereafter, the RIA Employees were orally assured
that they would receive severance if the Gimpel Unit were sold. After discussions among
4
The RIA Employees are Petitioners Steven Craig, Umit Davulcu, Richard Gonzales, Lanny Heinrich, Leonard
Hill, Chris Kahrig, Lay Keonakhone, Tung Le, Raul Martinez, Kenneth Nash, and Jimmy Phoumlavanh.
5
Beginning in August 2006, Tyco also entered into substantially identical RIAs with employees of other units
located at the West Gulf Bank facility. Those employees are not part of the underlying suit.
4
management that “confusion” existed with respect to employee communications about severance,
the Gimpel Employees were told that they would not be entitled to severance if they were offered
a job by the purchaser of the Gimpel Unit. None of the RIA Employees who testified at trial had
heard of the ERISA Plan when they signed the RIAs.
On February 27, 2007, Tyco formally amended the ERISA Plan with an effective date
relating back to December 1, 2006. Under the amended ERISA Plan, the severance schedule for the
West Gulf Bank facility mirrored the 6-and-26 schedule set out in the West Gulf Bank Schedule;
the amended Plan did not change the provision relating to employees who were terminated as a
result of an asset sale. According to internal e-mails and Kriendler’s testimony at trial, at the time
the ERISA Plan was formally amended Tyco was already utilizing the 6-and-26 schedule for West
Gulf Bank employees who had been terminated in connection with the facility’s closure. Kriendler
explained that she had believed flexibility existed in the ERISA Plan’s severance schedule as it
applied to non-executive employees. Thus, although the 6-and-26 schedule had been approved by
the company’s financial group, Kriendler “didn’t realize that there was a separate administrative
approval that needed to be done through the plan administrator” to properly utilize a schedule of
benefits that differed from the schedule laid out in the ERISA Plan. As noted above, that
administrative-approval process was completed on February 27, 2007, with an effective date of
December 1, 2006.
In the spring of 2007, Tyco agreed to sell the Gimpel Unit to Dresser-Rand Company. The
asset purchase agreement between Dresser-Rand and Tyco required Dresser-Rand to hire all the
Gimpel Employees at substantially the same pay rate and seniority level with respect to accrual of
5
and eligibility for non-pension retirement benefits, severance, and vacation. However, Tyco
expressly reserved liability for “wages, salary, severance, [and] bonuses,” as well as “any duties,
obligations or liabilities arising under any employee benefit plan” and any other amounts owed to
the Gimpel Employees as of the closing date.
In accordance with the purchase agreement, Dresser-Rand offered all the Gimpel Employees
employment in effectively identical positions, with largely identical pay, benefits, and seniority. The
Gimpel Employees commenced working for Dresser-Rand immediately following their termination
by Tyco. The Gimpel Unit was moved to a Dresser-Rand facility fewer than twenty-five miles away
from the West Gulf Bank facility.
Tyco timely paid the lump-sum cash bonuses to the RIA Employees under the terms of the
RIAs, but refused to pay severance to any of the Gimpel Employees because of Dresser-Rand’s
employment offers. The Gimpel Employees sued Tyco6 for breach of contract, alleging that they
were entitled to severance upon the sale of the Gimpel Unit and their termination by Tyco. Six
Gimpel Employees who had not executed RIAs (non-RIA Employees) claimed that Tyco had
breached oral agreements to pay them severance on the same terms as the RIA Employees.7 The
Gimpel Employees collectively alleged that they were not offered comparable employment with
Tyco upon the sale of the Gimpel Unit and were therefore entitled to severance despite having
obtained comparable positions with Dresser-Rand. Tyco denied entering into oral agreements with
6
Tyco’s general partner, TV&C GP Holdings, Inc., is also a defendant.
7
The non-RIA Employees are Arsenio Colorado, Andy Huynh, Chris Luckey, Fernando Macias, Jorge
Martinez, and Souk Vongsamphanh.
6
the non-RIA Employees and denied breaching the RIAs, contending that the RIA Employees were
not entitled to severance because they were offered comparable employment with a Tyco successor.
Shortly before trial, Tyco pled as an affirmative defense that the Gimpel Employees’ claims were
preempted by ERISA.
After a bench trial, the trial court rendered judgment for the Gimpel Employees. In its
findings of fact and conclusions of law, the trial court found that the Gimpel Employees’ contract
claims were not preempted by ERISA, as the agreements between Tyco and the Gimpel Employees
were “not connected to, dependent on, or related to the Tyco Severance Plan” and were
“independent contracts with terms and conditions that [were] different from the Tyco Severance
Plan.” The trial court also held that Dresser-Rand was not a “successor or assign” of Tyco and that
Tyco therefore breached the RIAs by refusing to pay severance to the RIA Employees. With regard
to the non-RIA Employees, the trial court found that Tyco had made oral promises to pay them
severance under the West Gulf Bank Schedule and that those promises constituted binding unilateral
contracts that became irrevocable upon the employees’ performance by remaining with Tyco
through the sale to Dresser-Rand.
The court of appeals reversed in a divided opinion. A majority held that ERISA did not
preempt the breach-of-contract claims and that no evidence demonstrated an oral agreement between
Tyco and the non-RIA Employees. 365 S.W.3d at 770–71. As to the RIA Employees, the two
justices who reached the issue were split as to whether the RIA Employees were offered comparable
employment with a “successor” of Tyco and, in turn, whether Tyco breached the RIAs. Id. at 774;
see also id. at 779–80 (Sharp, J., dissenting in part). One justice would have held that the claims
7
were preempted by ERISA and thus concurred in the court’s take-nothing judgment for Tyco. Id.
at 777 (Massengale, J., concurring). We granted the Gimpel Employees’ petition for review.
II. ERISA Preemption of State-Law Claims
We first address whether ERISA preempts the Gimpel Employees’ breach-of-contract
claims. As applied to this case, ERISA preemption is an affirmative defense on which Tyco bore
the burden of proof at trial. See Gorman v. Life Ins. Co. of N. Am., 811 S.W.2d 542, 546 (Tex. 1991)
(holding that ERISA preemption is an affirmative defense “where ERISA’s preemptive effect would
result only in a change of the applicable law” and would not subject the claim to exclusive federal
jurisdiction); 29 U.S.C. § 1132(a)(1)(B), (e)(1) (giving state and federal courts concurrent
jurisdiction over actions by a beneficiary to recover benefits due under the terms of a covered plan
or to enforce rights under the plan). Accordingly, we will disturb the trial court’s finding against
Tyco on this issue only if the Gimpel Employees’ claims were preempted as a matter of law. See
Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989).
ERISA is a comprehensive scheme enacted to promote employees’ interests in their benefit
plans. Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 90 (1983); Cathey v. Metro. Life Ins. Co., 805
S.W.2d 387, 388 (Tex. 1991). The statute establishes various pension-plan requirements and
mandates uniform standards for both pension and welfare-benefit plans. Shaw, 463 U.S. at 91.
ERISA does not itself mandate any particular set of benefits, but rather sets standards governing
reporting, disclosure, and fiduciary responsibility for ERISA-governed plans. Id.; Cathey, 805
S.W.2d at 388.
8
Section 514(a) of ERISA preempts “any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan” covered by ERISA. 29 U.S.C. § 1144(a). ERISA’s
expansive preemption provisions are intended to ensure exclusive federal regulation of employee
benefit plans. Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004). Accordingly, ERISA’s
preemption provision has been broadly construed. Fort Halifax Packing Co. v. Coyne, 482 U.S. 1,
8 (1987) (citing Shaw, 463 U.S. at 96–97). State laws that are subject to preemption include not just
statutes, but also common-law causes of action like the Gimpel Employees’ breach-of-contract
claims. Gresham v. Lumbermen’s Mut. Cas. Co., 404 F.3d 253, 258 (4th Cir. 2005) (citing 29
U.S.C. § 1144(c)(1)). Thus, in resolving the preemption issue, we must decide whether those claims
“relate to” Tyco’s ERISA Plan, which itself undisputedly qualifies as an employee benefit plan
governed by ERISA.
In Shaw, the United States Supreme Court construed the phrase “relates to” as carrying its
ordinary meaning of having “a connection with or reference to” an employee benefit plan. 463 U.S.
at 96–97. The Supreme Court noted, however, that if the state action affects a benefit plan “in too
tenuous, remote, or peripheral a manner,” the impermissible connection to ERISA does not exist.
Id. at 100 n.21; see also Egelhoff v. Egelhoff, 532 U.S. 141, 147 (2001) (looking to “the objectives
of the ERISA statute” and “the nature of the effect of the state law on ERISA plans” in determining
whether “the forbidden connection” exists) (citations and internal quotation marks omitted).
The Supreme Court further clarified the bounds of ERISA preemption in Fort Halifax,
holding that a statutorily mandated one-time, lump-sum severance payment to employees upon a
plant closure did not require an administrative scheme to administer, and as such did not constitute
9
an employee benefit plan generating the potential for conflicting regulation. 482 U.S. at 12. The
Court reasoned that “Congress intended preemption to afford employers the advantages of a uniform
set of administrative procedures governed by a single set of regulations[, but this] concern only
arises . . . with respect to benefits whose provision by nature requires an ongoing administrative
program to meet the employer’s obligation.” Id. at 11; see also Peace v. Am. Gen. Life Ins. Co., 462
F.3d 437, 440–41 (5th Cir. 2006) (holding that the employer did not have a plan under ERISA where
no administrative scheme was required to pay the annuity benefit).
Federal circuit cases addressing the preemption issue confirm that “ERISA . . . preempts state
common law causes of action that reference or pertain to an ERISA plan.” Eide v. Grey Fox
Technical Servs. Corp., 329 F.3d 600, 604 (8th Cir. 2003); see also Epps v. NCNB Tex., 7 F.3d 44,
45 (5th Cir. 1993) (“When a court must refer to an ERISA plan to determine the plaintiff’s
retirement benefits and compute the damages claimed, the claim relates to an ERISA plan.”).
Further, if alleged promises made to employees “were simply an attempt to amend [an] existing
plan, then it follows that they were based on that plan.” Crews v. Gen. Am. Life Ins. Co., 274 F.3d
502, 505 (8th Cir. 2001).
The trial court found that Tyco’s promises to pay severance to the Gimpel Employees were
independent agreements based on the West Gulf Bank Schedule terms, not Tyco’s ERISA Plan. The
court of appeals agreed, holding that the RIAs’ provision for “standard Severance in accordance to
the severance schedule associated with the closure of this facility” referred to the West Gulf Bank
Schedule, 365 S.W.3d at 767, and that the West Gulf Bank Schedule “was not associated with or
related to an ERISA Plan,” id. at 769. The concurring justice in the court of appeals would have
10
held that, rather than creating an independent duty, the RIAs and the West Gulf Bank Schedule were
merely impermissible amendments to the Tyco Severance Plan and were thus “related to” the Plan
and preempted by ERISA. Id. at 776–78 (Massengale, J., concurring).
As an initial matter, and leaving aside the RIAs for the moment, we disagree with the trial
court’s and court of appeals’ conclusion that the West Gulf Bank Schedule was not related to the
ERISA Plan, as they rely on evidence that is not probative of the improper amendment issue and
ignore conclusive evidence contradicting that conclusion. Those courts found persuasive the
undisputed fact that the West Gulf Bank Schedule’s 6-and-26 schedule was in use at the West Gulf
Bank facility, and had been communicated to its employees, before the ERISA Plan’s formal
amendment.8 By itself, however, this evidence is inconclusive. The express terms of the West Gulf
Bank Schedule, the principal document on which the Gimpel Employees rely, provide that it
“supersede[s] any prior plan, program or policy under which the Company provided severance
benefits prior to the Effective Date of the Policy.” And Tyco provided such benefits under its
ERISA Plan. This is consistent with Tyco’s internal e-mails and Kriendler’s testimony that the 6-
and-26 schedule was intended to replace the ERISA Plan’s schedule of benefits as it applied to
certain employees at the West Gulf Bank facility, and that confusion existed about the need to
8
This is consistent with the trial court’s finding that one portion of Kriendler’s testimony—that she created the
specific one-page document outlining the West Gulf Bank Schedule for her own use and did not intend for it to be
distributed to employees—lacked credibility. Kriendler never denied, and in fact affirmatively testified, that by August
2006 Tyco intended the 6-and-26 schedule reflected in the West Gulf Bank Schedule to apply to the closure of the West
Gulf Bank facility.
11
formally amend the ERISA Plan to effectuate that change.9 Based on this evidence, we can come
to no other conclusion than that the West Gulf Bank Schedule was an attempt to amend Tyco’s
ERISA Plan and that the formal process of amending the ERISA Plan was completed in February
2007.10 As discussed below, this conclusion is dispositive of the preemption question presented.
Addressing the non-RIA Employees’ claims first, we hold that they are preempted by
ERISA. The trial court found that Tyco agreed to pay severance to those employees by directly
communicating the West Gulf Bank Schedule terms to the employees and posting the schedule on
a facility bulletin board. But promises to pay severance pursuant to the West Gulf Bank Schedule
were simply promises to pay severance pursuant to an improperly amended ERISA Plan. It follows,
then, that such promises “were based on that plan.” Crews, 274 F.3d at 505.
While the RIA Employees’ claims are a closer question, we similarly hold that they are
preempted. The RIAs, in order to give employees incentive to remain with Tyco through the closure
of the West Gulf Bank facility, promised the employees (1) a one-time cash bonus, payable without
further condition, and (2) “in the event that the Employee is not offered Comparable Employment
with Tyco, . . . the standard Severance in accordance to [sic] the severance schedule associated with
the closure of this facility.” Although the bonus provision, with which Tyco complied, is not at
9
The trial court found that the West Gulf Bank Schedule had been created in connection with a prior
restructuring. Specifically, Kriendler testified that the 6-and-26 schedule was utilized with respect to a handful of
employees who had been displaced when two other Tyco facilities were relocated. We fail to see how this evidence is
relevant to the question of whether the schedule was an improper attempt to amend the ERISA Plan with respect to the
West Gulf Bank employees.
10
The parties do not address, and we express no opinion on, the propriety under ERISA of making the amended
Plan effective retroactively to December 1, 2006.
12
issue in this case, a comparison of that provision with the severance provision aids our conclusion
that the latter is preempted.
The bonus provision does not refer to or rely on the ERISA Plan in any way, and is akin to
the non-preempted statute in Fort Halifax mandating a one-time, lump-sum severance payment to
employees for remaining employed through a plant closure. Fort Halifax, 482 U.S. at 12. By
contrast, the severance provision may be analyzed only in conjunction with the “standard
Severance.” The trial court and court of appeals held that the “standard Severance” referenced in
the RIAs was the West Gulf Bank Schedule and that these two documents could be analyzed
independently of the ERISA Plan. But as discussed above, the West Gulf Bank Schedule was an
improper attempt to amend the ERISA Plan’s schedule of benefits, which was subsequently
incorporated by formal amendment to the Plan. Accordingly, even if the “standard Severance” to
which the RIAs refer is the severance benefit described in the West Gulf Bank Schedule, that
Schedule itself relates to and is an improper attempt to amend the ERISA Plan. See 365 S.W.3d at
777 (Massengale, J., concurring).
In turn, any benefits must be calculated pursuant to the ERISA Plan, which, as amended, sets
out the 6-and-26 schedule described above. See Epps, 7 F.3d at 45 (holding that an employee’s
claim for breach of a letter agreement was preempted by ERISA where the agreement “d[id] not
specify the amount or other terms of [the employee’s] retirement benefits, and the court would have
to refer to the [employer’s ERISA-governed retirement plan] to determine [the employee’s]
retirement benefits and calculate the damages claimed”). We thus agree with the concurring justice
in the court of appeals that “[t]he contract claims at issue have the forbidden connection because the
13
RIAs reference and borrow terms from Tyco’s [ERISA P]lan, yet they also purport to modify the
eligibility parameters of the severance benefit provided under that plan.” 365 S.W.3d at 777
(Massengale, J., concurring); see also Crews, 274 F.3d at 505 (where promises made to employees
are “simply an attempt to amend [an] existing plan, then it follows that they were based on that
plan”).
The RIAs’ reference to and reliance on the ERISA Plan is significant and distinguishes this
case from those relied upon by the RIA Employees. In Crews, for example, General American Life
Insurance Company allegedly promised its employees a lump-sum severance payment in
consideration for the employees’ remaining with the company following the termination of its
contract with the Health Care Financing Administration. 274 F.3d at 505–06. General American
did not mention the plan in promising to pay the “stay-on bonus,” which was calculated differently
from the benefit in the established plan. Id. at 505. Further, the bonus’s purpose was unrelated to
the plan’s purpose of aiding terminated employees. Id.
The stay-on bonus in Crews is akin to the cash-bonus provision in the RIAs. Both specify
a benefit in a particular amount that differs from the calculation under an established ERISA plan,
and both are triggered solely by the employees’ remaining with the company through a fixed date.
By contrast, the RIAs’ severance provision enumerates benefits that can only be calculated by
reference to the West Gulf Bank Schedule, which in turn relates to the ERISA Plan. Further, by
promising the severance payment only in the event the employee is not offered “comparable
employment,” the severance provision goes beyond giving employees incentive to stay with the
company and remains tied to protecting employees who suffer at least an adverse employment
14
action, if not a total loss of employment, through no fault of their own. The ERISA Plan serves a
similar purpose of providing benefits to employees who are involuntarily terminated for reasons
other than cause.
The RIA Employees also rely heavily on Gresham, in which the Fourth Circuit held that an
employee’s breach-of-contract claim based on a severance provision in a written employment offer
was not preempted by ERISA because the agreement operated independently of the employer’s
established severance plan. 404 F.3d at 259. The facts of Gresham are similar in several ways to
the facts at hand. As in this case, the established plan denied severance to an employee who was
offered employment by a purchasing company, while the only condition on payment of severance
in the employment agreement was termination without cause. Id. Further, the Fourth Circuit held
that the employee was entitled to the severance benefit even though he had accepted employment
with a purchasing company. Id. at 262–63.
However, significant differences also exist between the circumstances in Gresham and those
at issue here that lead us to reach the opposite conclusion on preemption. First, the offer letter in
Gresham did not mention the established plan and expressly set out a benefit calculation that
differed from the plan’s schedule. Id. at 256; see also Santini v. Cytec Indus., Inc., 537 F. Supp. 2d
1230, 1245 (S.D. Ala. 2008) (“In the instant action, the agreement at issue does not promise to
provide benefits under the Plan or refer to the Plan in any way. Plaintiff’s employment contract
agrees to provide a notice period and/or payments upon termination, calculated according to the
terms stated in the employment contract.”). Again, in this case, the RIAs referenced the West Gulf
Bank Schedule, which related to the ERISA Plan, and benefits could not be calculated independently
15
of that Plan. Further, in Gresham, the Fourth Circuit found persuasive that there was “no indication
in the record that severance pay awarded to Gresham pursuant to his employment agreement would
be paid out of funds allocated to the Severance Plan.” 404 F.3d at 259; see also Eide, 329 F.3d at
606 (noting that promised severance benefits in the event of termination by a purchasing company
“were not to be delivered pursuant to [the severance plan],” but were to be distributed as a lump-sum
payment upon termination). In this case, both the ERISA Plan and the West Gulf Bank Schedule
provided that benefits “shall be paid in accordance with normal payroll practices over the Severance
Period or from a supplemental unemployment benefits trust.” All indications, therefore, are that any
severance benefits owed to the employees under the RIAs would originate from the same source as
any benefits owed under the ERISA Plan.
Based on the clear connection between the RIAs and the ERISA Plan, we cannot conclude
that they operated independently. That said, we share the Fourth Circuit’s concern, expressed in
Gresham, that a finding of preemption “whenever the plaintiff claims an independent promise to pay
benefits of the same type as benefits also provided by an ERISA-governed plan would limit
employers’ ability to lure desirable employees by offering benefits better than those available to the
rank-and-file.” 404 F.3d at 259 n.5. But our holding is not based on the fact that the RIAs’
severance provision promises to pay benefits “of the same type” as benefits offered under the ERISA
Plan. Rather, it is based on the fact that the employees’ entitlement to benefits under the RIAs, and
the damages claimed, could not be fully evaluated without considering the ERISA-governed plan
that was expressly referenced in the RIAs. Further, the benefits originated from the same source.
As discussed above, at best, the RIA Employees’ claims stem from an improper attempt to amend
16
the ERISA Plan and are thus necessarily “based on” that plan. Crews, 274 F.3d at 505.
Accordingly, we hold that the RIAs did not operate independently of the ERISA Plan. The RIA
Employees’ breach-of-contract claims are thus “related to” the ERISA Plan and are in turn
preempted by ERISA.
IV. Conclusion
Because the Gimpel Employees’ contract claims are preempted, we need not decide whether
legally sufficient evidence supports the trial court’s findings as to those claims.11 Although we
disagree with the court of appeals’ opinion on the preemption issue, we nevertheless agree with the
court’s judgment that the Gimpel Employees take nothing by their breach-of-contract claims.
Accordingly, we affirm the court of appeals’ judgment.
_________________________________
Debra H. Lehrmann
Justice
OPINION DELIVERED: March 28, 2014
11
The Gimpel Employees have never asserted that they prevail under ERISA in the event the claims are
preempted. At oral argument, counsel for the Gimpel Employees conceded that they could not successfully assert a claim
for benefits under the ERISA Plan. Thus, there is no basis on which to remand the case.
17