The opinion
STATE OF MAINE SUPERIOR COURT
CUMBERLAND, SS
BARBARA DOUGHTY
CIVIL ACTION
DOCKET NO. CV-087249
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Plaintiff
v. ORDER
FLYING CHANGES CENTER
FOR THERAPUETIC RIDING, INC.
Therapeutic Riding, Inc.'s (Flying Changes) motion to dismiss count II (breach of
contract) of the complaint pursuant to M.R. Civ. P. 12(b)(6) and Plaintiff Barbara
Doughty's motion for leave to amend complaint pursuant to M.R. Civ. P. 15(a).
BACKGROUND
Ms. Doughty was involved in the founding and management of Flying Changes,
a nonprofit corporation organized under the State of Maine. Since its inception,
Doughty has served as an officer and executive director of Flying Changes, however, on
January 17, 2008, Doughty was notified that her employment with Flying Changes was
terminated. 1
In 1998, Flying Changes agreed to open and contribute to a Simplified Employee
Pension Individual Retirement Account (SEP IRA) for Ms. Doughty. While Flying
Changes opted to close this SEP IRA in 2003, Ms. Doughty maintains that Flying
Changes agreed to provide her with $8000.000 in after-tax funding for her retirement.
According to Ms. Doughty, this amount was to represent an acknowledgment of her
I While Ms. Doughty claims that she was the Executive Director of Flying Changes at the time her employment was
terminated, Flying Changes claims that she had been replaced as Executive Director in December 2007 but
continued working for the organization in other capacities.
years of service and was meant to serve as additional compensation, given the fact that
her salary while working for Flying Changes was limited. Ms. Doughty maintains that
this agreement was confirmed and reaffirmed by the Board when Flying Changes
decided to terminate her employment. To date, Flying Changes has not provided Ms.
Doughty with this amount.
Flying Changes filed a motion to dismiss, arguing that because count II of the
complaint is based on an alleged failure to fund Ms. Doughty's SEP IRA, an ERISA
governed employment benefit plan, that such an alleged failure falls within the scope of
ERISA's remedial scheme. As such, Flying Changes argues that ERISA preempts Ms.
Doughty's breach of contract claim.
Ms. Doughty argues that while at one time the company maintained a SEP IRA
for her, that because it was closed in 2003, and because Flying Changes subsequently
promised to provide her $8000.00 for her retirement, the basis of her action is a breach
of promise, and as such, does not fall under the scope of ERISA. Therefore, in response
to Flying Changes' motion to dismiss, Ms. Doughty filed a motion for leave to amend
her complaint in order to take out all references to the SEP IRA.
DISCUSSION
A. Standard of Review
A motion to dismiss "tests the legal sufficiency of the complaint." Livonia v.
Town of Rome, 1998 ME 39, <]I 5, 707 A.2d 83, 85. Because the Court reviews the
complaint in the light most favorable to the plaintiff to ascertain whether it properly
sets forth elements of a cause of action, "the material allegations of the complaint must
be taken as admitted." Id. <]I 5, 707 A.2d at 85. "We determine whether the complaint
'sets forth elements of a cause of action or alleges facts that would entitle the plaintiff to
relief pursuant to some legal theory. II' Doe v. District Attorney, 2007 ME 139, 120, 932
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A.2d 552,558 (quoting Persson v. Dep't. of Human Servs., 20011v1E 124, <JI 8,775 A.2d 363,
365). Dismissal is warranted only "when it appears beyond a doubt that the plaintiff is
not entitled to relief under any set of facts" that might be proved in support of the
claim. Johanson v. Dunnington, 2001 ME 169, <JI 5, 785 A.2d 1244, 1246.
B. ERISA Preemption
ERISA "is a comprehensive statute designed to promote the interest of
employees ... by regulating the creation and administration of employee benefit
plans." Gallagher v. Cigna Healthcare ofMe., Inc., 538 F. Supp.2d 286, 291 (D. Me. 2008).
As such, ERISA creates a civil enforcement mechanism whereby a person may bring a
civil action under the statute to "recover benefits due to him under the terms of his
plan, to enforce his rights under the terms of the plan, or to clarify his rights to future
benefits under the terms of the plan." 29 U.s.c. § 1132 (a)(1)(B). With a few exceptions
not relevant here, ERISA preempts"all State laws as they ... relate to an employee
benefit plan." 29 U.s.c. § 1144(a).
According to the U.s. Supreme Court, Congress intended ERISA to preempt state
law in order to
afford employers the advantages of a uniform set of administrative
procedures governed by a single set of regulations. This concern only
arises, however, with respect to benefits whose provision by nature
requires an ongoing administrative program to meet the employer's
obligation. It is for this reason that Congress pre-empted state laws
relating to plans, rather than simply to benefits. Only a plan embodies a set
of administrative practices vulnerable to the burden that would be
imposed by a patchwork scheme of regulation.
Fort Halifax Packing Co., Inc. v. Coyne, Director Bureau of Labor Standards ofMaine, et al.,
482 U.s. I, 11-12 (1987) (emphasis in original).
According to the First Circuit, an ERISA preemption analysis "involves two
central questions: (1) whether the plan at issue is an 'employee benefit plan' and (2)
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whether the cause of action 'relates to' this employee benefit plan." McMahon v. Digital
Equip. Corp. 162 F.3d 28,36 (1st Cir. 1998).
B(l). Is There An Employee Benefit Plan?
Under ERISA, the term "employee benefit plan" is defined as an employee
welfare benefit plan, an employee pension benefit plan, or both. 29 U.s.c. § 1002(3).
This case involves an employee pension benefit plan, which is defined by the statute as
any plan, fund, or program which was established or maintained by an employer "to
the extent that by its express terms or as a result of surrounding circumstances such
plan, fund, or program" (1) provides retirement income to the employees, or (2) "results
in a deferral of income by employees for periods extending to the termination of
covered employment or beyond." 29 U.s.c. § 1002(2)(A). The existence of an ERISA
plan is "a question of fact, to be answered in light of all the surrounding facts and
circumstances from the point of view of a reasonable person." Wickman v. Northwestern
Nat'l Ins. Co., F.2d 1077, 1082 (1st Gr. 1990).
In one case, the Maine law at issue required the owners of a closing factory to
provide their employees with a one-time, lump sum severance payment. Fort Halifax,
482 U.s. at 4-5. The u.s. Supreme Court, in determining that such a payment is not an
employee benefit plan, stated that such a one-time, lump payment requires no
administrative scheme because "[t]he employer assumes no responsibility to pay
benefits on a regular basis, and thus faces no periodic demands on its assets that create
a need for financial coordination and control." Id. at 12. Moreover, the Court asserted
that "[t]o do little more than write a check hardly constitutes the operation of a benefit
plan." Id.
While Ms. Doughty's original and proposed amended complaints include the
term "IRA," her claim does not involve an employee benefit plan. Similar to the
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plaintiff's claims in Fort Halifax, the present matter is based on Flying Changes promise
to provide Ms Doughty with a one time, lump sum of $8000.00 for her retirement. As no
IRA exists for Ms. Doughty's benefit, all that would be required of Flying Changes
would be to write a check, and thus there exists no ongoing administrative program
that would necessitate the financial control and coordination provided by ERISA.
Therefore, as in Fort Halifax, the promise to provide Ms. Doughty $8000.00 for her
retirement is not a benefit plan.
B(2). Does Ms. Doughty's Cause of Action "Relate To" An Employee Benefit Plan?
While ERISA is not explicit in what is meant by a state law "relating to" an
ERISA benefit plan, the U.s. Supreme Court has stated that the phrase "relate to"
should be given a "broad common sense meaning." Pilot Life Ins. Co., 481 U.S. 21, 47
(1987). A claim relates to an ERISA plan if flit has a connection with or reference to such
a plan," Carlo v. Reed Rolled Thread Die Co., 29 F.3D 790, 793 (1st Cir. 1995), or "if the trier
of fact necessarily would be required to consult the ERISA plan to resolve the plaintiff's
claims." Ingersoll-Rand Co. v. McClendon, 498 U.s. 133, 139 (1990).
As it has already been decided that Flying Changes promise to Ms. Doughty to
provide her with $8000.00 for retirement is not an employee benefit plan under ERISA,
it can not be agued that Ms. Doughty's complaint relates to or has a connection with
such a plan.
C. Motion for Leave to Amend Complaint
Under M.R. Civ. P. 15(a), "leave shall be freely given when justice so requires."
While it has already been decided that this case does not relate to an employee benefit
plan, Ms. Doughty should be given leave so as to clarify her complaint by omitting all
references to an IRA.
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DECISION
It is hereby ORDERED that the Defendants' motions to dismiss be DENIED.
It is hereby ORDERED that Plaintiff's motion for leave to amend complaint be
GRANTED.
The clerk shall incorporate this Order into the docket by re t to
M.R. Civ. P. 79(a).
DATED: ~/l-I zoo8
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