Coggins, J. v. Keystone Foods, LLC

J-A21041-16

NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37

JOHN J. COGGINS, DAVE T. BERNARD, : IN THE SUPERIOR COURT OF

CHANDLER HORTON, DONALD P. : PENNSYLVANIA

McGARVIE & JOHN A. VANTINE, :

:

Appellants :

:

v. :

:

KEYSTONE FOODS, LLC : No. 3814 EDA 2015

Appeal from the Order entered December 4, 2015

in the Court of Common Pleas of Montgomery County,

Civil Division, No(s): 2014-34080

BEFORE: BENDER, P.J.E., DUBOW and MUSMANNO, JJ.

MEMORANDUM BY MUSMANNO, J.: FILED NOVEMBER 10, 2016

John J. Coggins (“Coggins”), Dave T. Bernard (“Bernard”), Chandler

Horton (“Horton”), Donald P. McGarvie (“McGarvie”), and John A. Vantine

(“Vantine”) (collectively “Plaintiffs”) appeal from the Order granting the

Motion for Judgment on the Pleadings filed by Keystone Foods, LLC

(“Keystone”). We reverse and remand for further proceedings.

The trial court set forth the relevant factual and procedural history

underlying this appeal as follows:

Plaintiffs are former employees of [Keystone], a global

food stores company. During Plaintiffs’ employment, [Keystone]

entered into a written retirement agreement with [Coggins,

Bernard, Horton and Vantine] … in 2011. Additionally, []

McGarvie entered into an Agreement and Release with

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[Keystone] upon his retirement.[1] [The] Retirement

Agreement[s] … contained the following clause [(hereinafter

referred to as “the medical benefits provision”)]:

MEDICAL BENEFITS

(a) Keystone also agrees to maintain the existing

health care benefits, including medical,

prescription, dental and vision and the existing

Medical Reimbursement Plan, for Employee and

qualified dependents for life.

At the time of the execution of the Retirement Agreements

in 2011, while each Plaintiff was still employed by [Keystone],

each Plaintiff received [from Keystone] all of their health care

benefits, including [insurance premiums,] prescription, dental

and vision and all co[-]pays[,] at no cost. Each Plaintiff has

since retired from employment with [Keystone, and all have

satisfied the age and service requirements necessary to receive

the health care benefits described above].

On June 2, 2014, [Keystone] sent each Plaintiff a letter

(“Notice Letters”) informing them that, as of January 1, 2015,

they were required to pay a portion of the health care premium

as well as any copays. On December 30, 2014, Plaintiffs filed a

[C]omplaint alleging that [Keystone’s] failure to provide health

care benefits for life at no cost to Plaintiffs constituted a breach

of the Retirement Agreements (Count I)[,] and violated the

Pennsylvania Wage Payment Collection Law 43 P.S. § 260.1 et

seq. (“WPCL”) (Count II). On February 2, 2015, [Keystone]

removed this action to the United States District Court for the

Eastern District of Pennsylvania[,] … claiming [that t]he

Employee Retirement Income Security Act of 1974 (“ERISA” [or

“the Act”]) Section[s] 502(a)[FN 1] preempted the state action.

[FN 1]

[]There are two distinct types of preemption under

ERISA. The first, referred to as ordinary preemption, is

asserted under Section 514(a) of the Act, and provides

the defendant with a federal defense to the plaintiff’s

1

The Agreement and Release is substantially similar to the retirement

agreements executed by Coggins, Bernard, Horton and Vantine. We will

hereinafter collectively refer to all of these agreements as “the Retirement

Agreements.”

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state law cause of action, which, if established, requires

its dismissal. 29 U.S.C. § 1144(a);[2] Wood v.

Prudential Ins. Co. of America, 207 F.3d 674, 682

(3d Cir. 2000). The second, referred to as complete

preemption, is asserted under Section 502(a), which is

the Act’s civil enforcement and remedies section. 29

U.S.C. § 1132(a); Metropolitan Life Ins. Co. v.

Taylor, 481 U.S. 58, 63, 107 S. Ct. 1542, 95 L.Ed.2d

55 (1987). When applicable, complete preemption

converts an ordinary state common law claim into one

stating an ERISA claim, even though an ERISA claim is

not alleged on the face of the complaint. Complete

ERISA preemption gives a district court federal question

jurisdiction and subjects the claim to removal. Id.[;

see also] Barnett [], 38 A.3d [at] 77[7], n.7 []. Th[e

instant] appeal raises only the question of ordinary

preemption under Section 514(a) of ERISA.

[The federal district court] found [that] ERISA Section 502(a) did

not apply and remanded the case back to the Montgomery

County Court of Common Pleas on July 8, 2015. [See Coggins,

111 F. Supp. 3d 630.] [The federal district court] did not,

however, decide whether the matter was preempted by ERISA

Section 514(a)[, which is the matter at issue in the instant

appeal].

2

Section 514(a), which is codified in a separate provision of ERISA,

provides, in relevant part, as follows: “[T]he provisions of this title and title

IV shall supersede any and all State laws insofar as they may now or

hereafter relate to any employee benefit plan described in section 1003(a)

of this title and not exempt under section 1003(b) of this title.” 29 U.S.C.A.

§ 1144(a) (emphasis added); see also Coggins v. Keystone Foods, LLC,

111 F. Supp. 3d 630, 634 n.2 (E.D. Pa. 2015) (stating that “[w]hen ERISA

was enacted in 1974, the Act was codified in Title 29 of the U.S. Code.

However, the section numbers in the original Act were codified under

different numbers in the Code. Many opinions subsequent to 1974 use the

original numbering found in the Act.”). Our Pennsylvania Supreme Court

has observed that “[g]iven its text, the [United States Supreme] Court has

long acknowledged that Section 514(a) is “conspicuous for its breadth,”

“broadly worded,” and “clearly expansive.” Barnett v. SKF USA, Inc., 38

A.3d 770, 777 (Pa. 2012) (quoting California Div. of Labor Standards

Enforcement v. Dillingham Const. N.A., Inc., 519 U.S. 316, 324, 117 S.

Ct. 832, 136 L. Ed. 2d 791 (1997)).

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On July 14, 2015, [Keystone] filed its [A]nswer and [N]ew

[M]atter, which denied that the Retirement Agreements

promised Plaintiffs’ health care benefits for life at no cost.

[Keystone] asserted that a modification provision in [the

Keystone] health care benefits plan [(hereinafter “the Benefits

Plan”)] was incorporated in[to] the Retirement Agreement[s,]

which allowed [Keystone] to modify the benefits and costs of

said plan.[3] [Keystone] further asserted that Plaintiffs’ claims

were preempted by ERISA Section 514(a). Plaintiffs replied to

[Keystone’s N]ew [M]atter and denied ERISA preemption. On

August 28, 2015, [Keystone] filed a [M]otion for [J]udgment on

the [P]leadings[,] which argued both counts contained in

Plaintiff[s’] [C]omplaint are preempted by ERISA Section 514(a).

Plaintiffs responded to [Keystone’s] [M]otion on September 28,

2015. Oral argument was held … on November 19, 2015. On

December [4], 2015, the [trial] court entered an [O]rder

granting [Keystone’s] Motion for Judgment on the Pleadings. On

December 18, 2015, Plaintiffs filed a [timely] Notice of Appeal to

the Superior Court. On December 22, 2015, the [trial] court

ordered Plaintiffs to file a concise statement of errors complained

of on appeal … pursuant to Pa.R.A.P. 1925(b). Plaintiffs timely

filed their Concise Statement[.]

Trial Court Opinion, 2/12/16, at 1-3 (footnote and emphasis in original,

some footnotes omitted; footnotes added).

On appeal, Plaintiffs present the following issues for our review:

1. Did the [trial c]ourt commit legal error by granting

[Keystone’s] Motion for Judgment on the Pleadings?

2. Did the [trial c]ourt commit legal error by granting

Keystone’s [M]otion [for Judgment on the Pleadings] without

allowing [Plaintiffs] to develop a complete factual record?

3

See Motion for Judgment on the Pleadings, 4/28/15, ¶ 18 (wherein

Keystone alleged that “Keystone, as the administrator of the [] Benefits

Plan, whose terms are referred to and incorporated within the terms of the[]

Retirement Agreements, has the right to modify the costs and payments

required of its participants, as well as any [] Benefits Plan terms. (See,

e.g., Answer, Ex. D-1 at VI(A), p. 10-11; see also Answer, Ex. D-2 at

7.1.B.1, p. 26 and 11.1, p. 49).”

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3. Did the [trial c]ourt commit legal error in determining that

ERISA preempted [Plaintiffs’] claims because Keystone

purportedly retained[,] in [the B]enefit[s P]lan documents[,]

certain “modification rights?”

Brief for Appellants at 4. We will address Plaintiffs’ claims simultaneously,

as they all concern whether the trial court erred in determining that

Plaintiffs’ claims were preempted by Section 514(a) of ERISA.

Our standard of review is as follows:

Entry of judgment on the pleadings is permitted under

Pennsylvania Rule of Civil Procedure 1034, which provides that

“after the pleadings are closed, but within such time as not to

unreasonably delay trial, any party may move for judgment on

the pleadings.” Pa.R.C.P. 1034(a). A motion for judgment on

the pleadings is similar to a demurrer. It may be entered when

there are no disputed issues of fact and the moving party is

entitled to judgment as a matter of law.

Appellate review of an order granting a motion for judgment on

the pleadings is plenary. The appellate court will apply the same

standard employed by the trial court. A trial court must confine

its consideration to the pleadings and relevant documents. The

court must accept as true all well[-]pleaded statements of fact,

admissions, and any documents properly attached to the

pleadings presented by the party against whom the motion is

filed, considering only those facts which were specifically

admitted.

We will affirm the grant of such a motion only when the moving

party’s right to succeed is certain and the case is so free from

doubt that the trial would clearly be a fruitless exercise.

Coleman v. Duane Morris, LLP, 58 A.3d 833, 836 (Pa. Super. 2012)

(citations omitted).

“Federal preemption is a jurisdictional matter for a state court because

it challenges subject matter jurisdiction and the competence of the state

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court to reach the merits of the claims raised.” NASDAQ OMX PHLX, Inc.

v. Pennmont Secs., 52 A.3d 296, 315 (Pa. Super. 2012) (citation and

brackets omitted).

[I]n any preemption case, in determining whether a state law is

preempted by federal law under the Supremacy Clause of the

United States Constitution, we adhere, as we must, to the

principles the United States Supreme Court has articulated. See

Dooner v. DiDonato, 601 Pa. 209, 218, 971 A.2d 1187, 1193

(2009) (citing U.S. Const. art. VI, cl. 2). The high Court has

repeatedly stated that federal preemption of state law turns on

the intention of Congress and begins with the presumption that

Congress does not intend to supplant state law. See, e.g., New

York State Conference of Blue Cross & Blue Shield Plans v.

Travelers Ins. Co., 514 U.S. 645, 654, 115 S. Ct. 1671, 131 L.

Ed. 2d 695 (1995).

Barnett, 38 A.3d at 776.

Initially, we set forth the trial court’s rationale advanced in its Opinion

for determining that Plaintiffs’ claims were preempted by Section 514(a):

The [Benefits Plan] … clearly falls under [the] purview of the

ERISA statute and therefore relates to an ERISA concern. See

29 U.S.C. § 1003(a) (stating that ERISA applies to “any

employee benefit plan if it is established or maintained … by any

employer engaged in commerce.”). In order to address the

merits of Plaintiffs’ claims, the court would have to

analyze and interpret the Benefit[s] Plan. In Menkes v.

Prudential Ins. Co. of Am., 762 F.3d 285 (3d Cir. 2014), the

Third Circuit held that ERISA preempted a number of claims

[that] required the court to interpret the subject employee

benefit plan, one of which was breach of contract.

In Barnett, [supra,] the employees sought to enforce[,

via a breach of contract claim,] an alleged [oral] promise that

gave [them] rights and benefits (early retirement with full

pension) arising from their ERISA benefits plan. There, the

Pennsylvania Supreme Court held “if [the employees’] suit were

allowed to proceed and they secured the retirement rights and

pension benefits they seek, via enforcement of the [alleged

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promise], core ERISA matters, i.e.[,] the administration of

retirement rights and payment of pension benefits, would cease

to be areas of exclusive federal regulatory concern.” Barnett[,

38 A.3d] at 781. The [C]ourt further explained: “[I]f [the

employees] were to acquire retirement rights and pension

payments under Pennsylvania’s common law of contracts, rather

than pursuant to the terms of the ERISA plan which provides

them with any such rights in the first place, the basic thrust of

Section 514(a), to secure a unified body of federal benefits law

that avoids subjecting a plan administrator to differing and

possibly conflicting substantive state standards for determining

entitlement to ERISA rights and benefits, would be subverted.”

Id. In the case sub judice, Plaintiffs’ claims are based on both

common law contract principles and state law under the WPCL.

Both claims arise from the Benefit[s] Plan as “their

source.” Barnett[, 38 A.3d] at 783. Analyzing and

interpreting the Benefit[s] Plan under either theory would

interfere with ERISA’s goal of a nationally uniform plan

administration. Additionally, examination of the “modification

rights” in the Benefits Plan would require the court to interpret

the specific provisions of the Benefit[s] Plan itself, which triggers

ERISA preemption.

Trial Court Opinion, 2/12/16, at 5-6 (emphasis added).

Plaintiffs argue that

[a]lthough broad, ERISA preemption has limits. The mere

existence of an ERISA plan does not, standing alone, lead to

preemption of state law claims. For preemption to apply, the

claims must have more than a tenuous or remote connection to

an ERISA plan. Rather, the source of the claims must be the

ERISA plan. Here, the source of [Plaintiffs’] claims is not [the

Benefits P]lan; it is the Retirement Agreement[s]. This case is

about Keystone’s broken promise to pay for 100% of the cost

of [Plaintiffs’] health care during their retirement [(i.e., including

reimbursement of all of Plaintiffs’ out-of-pocket expenses related

to their medical benefits)], not the type or amount of benefits

they should receive. The trial court failed to make that crucial

distinction ….

Id. at 10-11 (emphasis in original, paragraph break omitted); see also id.

at 16 (citing Aetna Life Ins. Co. v. Huntingdon Valley Surgery Ctr.,

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2015 U.S. Dist. LEXIS 57061, *16, 2015 WL 1954287 (E.D. Pa. 2015)

(stating that “the mere fact that an employee benefit plan is implicated in

the dispute is not dispositive of whether the [plaintiff’s] breach-of-contract

claims are preempted” by Section 514(a)) (citation, ellipses and quotation

marks omitted)); see also Pappas v. Asbel, 768 A.2d 1089, 1092 (Pa.

2001) (stating that ERISA “preemption does not occur … if the state law has

only a tenuous, remote, or peripheral connection with covered plans.”

(citation omitted)). Plaintiffs urge that, contrary to the trial court’s

determination, “[t]here was no need for the trial court to interpret the

language of the [Benefits Plan] to determine whether Keystone has breached

the Retirement Agreements.” Brief for Appellants at 17 (emphasis in

original); see also id. at 21 (asserting that “Keystone’s liability to

[Plaintiffs] is based on the promises it expressly made in the Retirement

Agreements, not whatever may be stated in its ERISA [Benefits P]lan

documents.” (emphasis omitted)); Reply Brief for Appellants at 1 (asserting

that “[i]n short, Keystone has a dispute with [Plaintiffs] about the

interpretation of the Retirement Agreements. It is axiomatic that the

meaning of the Retirement Agreements, or the particular choice of words, is

a matter of contract interpretation under Pennsylvania law.”). Finally,

Plaintiffs argue that contrary to the trial court’s determination, “[t]he

purported ‘modification rights’ buried in a [] [Benefits P]lan document are

irrelevant to the question of whether Keystone has reneged on its promise in

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the Retirement Agreements to ‘maintain’ the status quo by paying the entire

cost of [Plaintiffs’] health benefits during their retirement.” Brief for

Appellants at 21 (emphasis omitted).

We agree with Plaintiffs that the trial court erred in ruling that

Plaintiffs’ state law claims “arise from the Benefit Plan as ‘their source.’”

Trial Court Opinion, 2/12/16, at 6. To the contrary, the claims arise out of

the Retirement Agreements. Although the Benefits Plan undisputedly

provides health care benefits covered by ERISA,4 the Retirement

Agreements are separate contracts, which merely set forth Plaintiffs’ claimed

right to continue receiving no-cost health care benefits, rather than provide

new benefits covered under ERISA. When Keystone entered into the

Retirement Agreements with Plaintiffs in 2011, Keystone covered all of

Plaintiffs’ existing health care expenses. In the Retirement Agreements,

Keystone agreed to “maintain [Plaintiffs’] existing health care benefits[,]”

and those of their qualified dependents, for life. Accordingly, determining

Keystone’s liability for Plaintiffs’ claims turns on Keystone’s disputed

contractual obligation under the separate Retirement Agreements to

continue to pay for all of Plaintiffs’ health care expenses, which claims are

properly enforced under state law and not Section 514(a). In this regard,

we are persuaded by Plaintiffs’ following argument:

4

Plaintiffs’ claims are not premised on a challenge implicating the

administration of the Benefits Plan, or the actual benefits provided under the

Benefits Plan.

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The “true essence of the promise” made by Keystone is clear: to

maintain the status quo by paying for the entire cost of

[Plaintiffs’] health benefits[,] including the cost of the insurance

and any co-pays, deductibles or other out-of-pocket expenses

they might incur, regardless of what health benefit scheme

Keystone later chose to offer other employees or retirees.

Brief for Appellants at 18 (emphasis in original) (quoting Barnett, 38 A.3d

at 780-81 (stating that “the application of Section 514(a) in the instant case

turns on the true essence of the promise allegedly made by

[defendant/employer], which forms the foundation of [plaintiffs’/employees’]

state law contract claim.”)).

Moreover, we are unpersuaded by Keystone’s argument that

“[b]ecause a review of the [] Benefits Plan is required to determine what the

‘existing health care benefits’ are (i.e., the ‘costs’), [Plaintiffs’] claims

unquestionably ‘relate to’ an ERISA benefit plan and therefore are

preempted under Section 514(a) of ERISA.” Brief for Keystone at 13. In

determining whether the Retirement Agreements obligated Keystone to

continue paying for all of Plaintiffs’ health care expenses, it is unnecessary

for a court to look to the Benefits Plan to determine what Plaintiffs’ existing

out-of-pocket costs were; they were undisputedly zero. Equally irrelevant is

the matter of the precise types of health care benefit expenses that

Keystone covered on behalf of Plaintiffs under the Benefits Plan, as Keystone

covered all of their expenses.

Moreover, although the trial court opined that it would have to

“analyze and interpret” the Benefits Plan to determine Plaintiffs’ rights under

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the Retirement Agreements, the court did not adequately explain why this is

the case. The trial court’s only explanation offered was its conclusory

assertion that “examination of the ‘modification rights’ in the Benefits Plan

would require the court to interpret the specific provisions of the Benefit[s]

Plan itself, which triggers ERISA preemption.” Trial Court Opinion, 2/12/16,

at 6. We, however, fail to discern from the record why an examination into

any purported modification rights in the Benefits Plan documents was

necessary or germane to Plaintiffs’ claim of Keystone’s breach of the

Retirement Agreements. Indeed, a review of the Retirement Agreements

reveals no support for Keystone’s assertion that any Benefits Plan

modification provision (purportedly giving Keystone the “right to modify the

costs and payments required of [Benefits Plan] participants, as well as any []

Benefits Plan terms” – see n.3, supra) was incorporated into the Retirement

Agreements. The only “modification rights” that Keystone reserved in the

Retirement Agreements was the right to modify the age and service

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requirements necessary for retiree health care benefits eligibility.5 It is

undisputed that each of the Plaintiffs has satisfied the age and service

requirements necessary to receive the health care benefits, and the

modification language did not require the trial court to look to the Benefits

Plan to determine Plaintiffs’ rights under the Retirement Agreements.

We additionally determine that the trial court misapplied the Barnett

decision in ruling that Plaintiffs’ claims were preempted by section 514(a).

Unlike the situation in Barnett, where the Supreme Court concluded that

the employer’s ERISA pension plan was the “source” of the employees’

breach of contract claim, which the trial court must analyze to determine the

employees’ ERISA retirement and pension rights, here, there was no need

for the trial court to look to the Benefits Plan, and the source of Plaintiffs’

claims was the Retirement Agreements. In so deciding, we are persuaded

by Plaintiffs’ following argument:

Keystone was already providing [Plaintiffs] with zero-cost health

benefits when it promised[, in the Retirement Agreements,] to

“maintain [Plaintiffs’] existing health care benefits” during their

retirement. All Keystone needs to do to honor the Retirement

Agreement[s] is to continue its funding and reimbursement of

[Plaintiffs’] medical costs out of its general assets (not [Benefits

5

Plaintiffs attached to their Complaint two virtually identical versions of the

Retirement Agreements. One was between McGarvie and Keystone, and

contained the medical benefits provision. The other version, which was

signed by Coggins, Bernard, Horton, and Vantine, also contained the medical

benefits provision, with the addition of the following language (hereinafter

“the modification language”), which is contained within the same provision:

“Eligibility for any retiree medical benefits shall require full compliance with

any age and service requirements, as such requirements may be modified by

Keystone generally.” Complaint, Exhibit B (Retirement Agreement), ¶2(a).

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P]lan assets). There is no eligibility question or calculation

needed to determine the amount of out-of-pocket costs

[Plaintiffs] had to absorb (which was zero).

Brief for Appellants at 15-16; see also id. at 16 (quoting and distinguishing

Barnett, 38 A.3d at 781, by stating that, here, “[t]he trial court could

‘determine precisely what [Plaintiffs] claim they were promised and …

precisely what they seek to recover’ from the Retirement Agreements.”).

Moreover, unlike in Barnett, where the employees’ breach of contract claim

was based upon an alleged oral promise by an agent of the employer

concerning ERISA pension plan benefits, here, Plaintiffs’ claims are based on

an independent written contract, which nowhere mentions the Benefits Plan.

Finally, we observe that the federal district court in this action, in

ruling that there was no complete ERISA preemption under Section 502(a),

opined that

Keystone itself did not regard the Retirement Agreements to be

ERISA plans at the time of drafting, as exemplified by the

following provision in two of the three Retirement Agreements:

The law of the Commonwealth of Pennsylvania shall

govern the construction and validity of this Agreement.

Any disputes or claims of any nature arising out of or in

any way related to this Agreement or Employee’s

employment by Keystone shall be submitted to the

Court of Common Pleas of Montgomery County,

Pennsylvania, and Employee agrees and submits to the

exclusive jurisdiction of the Court of Common Pleas of

Montgomery County.

If these [Retirement A]greements were completely preempted

by ERISA, as [Keystone] [] chooses to argue, it would be

impossible for [] Plaintiffs to submit to exclusive jurisdiction in a

Pennsylvania state court. This cannot control the jurisdictional

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analysis, but is certainly relevant to the [p]arties’ intent and

state of mind at the time of drafting.

Coggins, 111 F. Supp. 3d at 639. We are persuaded by the federal court’s

rationale, which applies equally to the instant appeal.

Based on the foregoing, we conclude that the trial court erred by

determining that Plaintiffs’ state law claims are preempted by Section 514(a)

of ERISA. Moreover, Plaintiffs’ claim that the language of the Retirement

Agreements (i.e., wherein Keystone agreed to “maintain [Plaintiffs’] existing

health care benefits”) contractually obligated Keystone to pay for all of their

health care benefit expenses for life, and Keystone’s dispute thereof,6

constitutes a material issue of fact that the trial court should have permitted

to be litigated. See Coleman, supra. Therefore, the trial court erred in

ruling that Keystone was entitled to judgment as a matter of law.

Accordingly, we reverse the trial court’s Order granting Keystone’s Motion

for Judgment on the Pleadings and remand for further proceedings

consistent with this Memorandum.

Order reversed. Superior Court jurisdiction relinquished.

6

See, e.g., Brief for Keystone at 13 (pointing out that “nowhere in the

actual language of the Retirement Agreements does it say that Keystone will

provide continued medical benefits ‘at no cost’ to [Plaintiffs]. Rather,

Keystone merely agreed to maintain ‘existing health care benefits’ ….”).

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Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 11/10/2016

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