Angst v. Mack Trucks, Inc.

BECKER, Circuit Judge,

concurring in the judgment.

I join in Judge Garth’s excellent opinion except as to Part IV, wherein I believe the majority misinterprets the test for determining whether an employee benefit plan exists under ERISA. I concur in the judgment because, just as Judge Garth demonstrates with respect to the § 301 claim, plaintiffs were required, but failed, to exhaust the grievance and arbitration procedures before bringing suit under ERISA.

I. DETERMINING WHETHER AN EMPLOYEE BENEFIT PLAN EXISTS

In Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1 , 107 S.Ct. 2211 , 96 L.Ed.2d 1 (1987), the Supreme Court considered the question whether a Maine law requiring employers to make one-time severance payments to its employees in the event of a plant closing constituted an employee benefit plan under ERISA. In order to answer that question, the Court looked to the purpose of ERISA preemption and reasoned that Congress intended ERISA preemption as a means of establishing a uniform administrative scheme for the provision of employee benefits. Recognizing that the need for administrative uniformity arises only when the distribution of benefits requires ongoing administration, the Court explained that an employer’s provision of benefits implicates ERISA only when it requires an ongoing administrative scheme. 482 U.S. at 11 , 107 S.Ct. at 2217 . Because a one-time payment of severance benefits does not require ongoing administration, the Court concluded that the severance payments did not constitute an employee benefit plan under ERISA.

Fort Halifax teaches that the crucial factor is the need for ongoing administration. The majority acknowledges, as it must, that the buyout plan requires ongoing administration during the year that benefits are continued. See Majority Opinion at 1538 (observing that benefits due under the buyout plan are to be administered under Mack’s existing benefit plan). Nevertheless, the majority concludes that *1542 the buyout plan is not an employee benefit plan because it does not require Mack to create a new administrative scheme for the disbursement of these benefits.

With all respect, the majority bases its conclusion on a misreading of Fort Halifax. According to the majority, Fort Halifax held that the provision of benefits does not constitute an employee benefit plan unless it “require[s] the establishment and maintenance of a separate and ongoing administrative scheme,” Majority at 1538 (emphasis added). In fact, Fort Halifax held that the statute at issue did not implicate ERISA because it “neither establishes, nor requires an employer to maintain” an ongoing administrative scheme. 482 U.S. at 12 , 107 S.Ct. at 2218 (emphasis added).

The concern for administrative uniformity arises whenever the distribution of benefits requires on ongoing administrative scheme, regardless of whether that scheme is newly established or part of a pre-exist-ing plan. Indeed, the Fort Halifax Court elucidated this very point in its extensive discussion of Standard Oil Co. v. Agsalud, 633 F.2d 760 (9th Cir.1980), summarily aff'd, 454 U.S. 801 , 102 S.Ct. 79 , 70 L.Ed.2d 75 (1981).

Agsalud involved a Hawaii law that required employers to provide their employees with a comprehensive health care plan. The employer in that case already provided health care benefits pursuant to a plan that was governed by ERISA, but that plan did not comply fully with the state statute. In Fort Halifax, the Court observed that if the employer in Agsalud integrated the newly required plan into its existing plan, “different components of its single plan would be subject to different requirements.” 482 U.S. at 13 , 107 S.Ct. at 2218 . On the other hand, if the employer established a second plan to administer the benefits required by the state law, it would lose the advantages of maintaining a single administrative scheme. Id. Moreover, if one state could require a particular benefit plan, so could others, thus requiring employers to coordinate a number of plans. Id.

Summarizing Agsalud , which held that ERISA preempted the state law, the Fort Halifax Court explained

Agsalud thus illustrates that whether a State requires an existing plan to pay certain benefits, or whether it requires the establishment of a separate plan where none existed before, the problem is the same. Faced with the difficulty or impossibility of structuring administrative practices according to a set of uniform guidelines, an employer may decide to reduce benefits or simply not to pay them at all.

482 U.S. at 13 , 107 S.Ct. at 2218 (footnote omitted) (emphasis added). Applying that principle to the Maine statute requiring payment of severance benefits, the Court stated:

By contrast, the Maine law does not put the employer to the choice of either: (1) integrating a state-mandated ongoing benefit plan with an existing plan or (2) establishing a separate plan to process and pay benefits under the plan required by the State. This is because there is no state-mandated benefit plan to administer.... The obligation imposed by the Maine statute thus differs radically in impact from a requirement than an employer pay ongoing benefits on a continuous basis.

482 U.S. at 14 , 107 S.Ct. at 2218-19 . Fort Halifax thus made clear that the fact that Mack chose to administer the benefits due under the buyout plan as part of an existing plan governed by ERISA, rather than to create a new administrative scheme, makes no difference in determining whether the buyout plan is an employee benefit plan under ERISA.

The majority concludes that Fort Halifax’s, analysis of Agsalud is inapplicable because the statute in Agsalud conflicted with the employer’s existing benefit plan, reasoning that there is no such conflict in this case because the benefits provided under the buyout plan will be administered as part of the existing plan. I am not persuaded. Although the district court found that benefits provided under the buyout plan were to be administered under the *1543 existing plan, that factual finding is not the same as saying that the provision of benefits under the buyout plan would be governed by the same legal requirements that apply to the existing plan under ERISA. To hold, as the majority does, that the benefits provided under the buyout plan are not part of a plan under ERISA is equivalent to holding that the employees’ claims to those benefits are governed by some source of law other than ERISA. 1 Unless it can be said that the legal requirements are identical, then allowing two sources of law to govern one ERISA plan leads to a result expressly disapproved in Fort Halifax: “different components of [Mack’s] single plan would be subject to different requirements.”

I also remain unpersuaded by the majority’s discussion of Fontenot v. NL Industries, 953 F.2d 960 (5th Cir.1992), and Pane v. RCA Corp., 868 F.2d 631 (3d Cir.1989). As the majority concedes, Fontenot simply does not discuss the “continuation” feature of the buyout plan. Majority at 1539. And while the majority distinguishes Pane on the ground that it “required the creation of an administrative apparatus” to evaluate each employee’s claim, id., nowhere in the opinion does it say that a new administrative scheme would have to be created, or that such a scheme would conflict with an existing scheme. Rather, Pane merely states:

It [the severance plan] required an administrative scheme. Thus the [district c]ourt correctly held that the plan for awarding severance agreements is an ERISA employee benefit plan.

Id. at 635 .

In sum, Fort Halifax instructs us to ask whether the provision of benefits requires ongoing administration. If so (and provided that other requirements not at issue here are satisfied), the policy behind ERISA preemption requires us to conclude that an employee benefit plan exists. Because the buyout plan clearly requires ongoing administration during the year benefits are continued, I must disagree with the majority’s conclusion that it does not constitute an employee benefit plan under ERISA. I therefore cannot join in Part IV.

II. EXHAUSTION

In Delgrosso v. Spang & Co., 769 F.2d 928 (3d Cir.1985), this court distinguished between

pension rights created by contract, which must be arbitrated, and claims based on purely statutory rights created by ERISA, which may be asserted in federal court directly.

Id. at 932 . Expanding upon this distinction, we later stated:

Claims seeking to enforce the terms of a pension plan and to recover benefits provided by it are subject to a contractually required arbitration process. Purely statutory issues, however, are not within the competence of an arbitrator and fall under the court’s jurisdiction.

Burke v. Latrobe Steel Co., 775 F.2d 88, 90 (3d Cir.1985).

Plaintiffs’ alleged entitlement to ERISA benefits depends upon the buyout plan, and they conceded in their complaint that the plan is a collectively bargained agreement, see Majority at 1535. Therefore, under Delgrosso and Burke , plaintiffs were required to exhaust the grievance and arbitration procedures before asserting their ERISA claims in federal court. This they failed to do. Accordingly, I join in the majority’s decision to affirm the district court’s order directing a verdict in Mack’s favor on the ERISA claims, and concur in the judgment.

. In this case, that source would be federal labor law because the buyout plan was a collectively bargained agreement. I note that if the employees had not been covered by a collective bargaining agreement, then to hold that the buyout plan is not a plan under ERISA would be to hold that state law governs their claims to benefits under the buyout plan, a result clearly also at odds with Fort Halifax.