Reply Brief — Murphy v. Diversified Products Corp.

‘ Supreme Court, U.S. |

PiL & PD

C&T Si 1995

No. 95-87

CLERK

TE Ae

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1995

J. MICHAEL MURPHY,

PETITIONER,

Vv.

DIVERSIFIED PRODUCTS CORPORATION, INC.

AND STEPHEN J. O'BRIEN,

RESPONDENT.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

Reply to Respondents

Brief In Opposition

MARRELL J. McNEAL

434 EAST MAGNOLIA AVENUE

AUBURN, ALABAMA 36830

(334) 821-1596

BEST AVAILABLE COPY

No. 95-87

Ai oe EN

———_

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1995

J. MICHAEL MURPHY,

PETITIONER,

Vv.

DIVERSIFIED PRODUCTS CORPORATION, INC.

AND STEPHEN J. O'BRIEN,

RESPONDENT.

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

Reply to Respondents

Brief In Opposition

MARRELL J. McNEAL

434 EAST MAGNOLIA AVENUE

AUBURN, ALABAMA 36830

(334) 821-1596

TABLE OF CONTENTS

PAGE

eee er ee, a ad

REPLY TO BRIEF IN OPPOSITION ....... 1

EE ONG ie Tart ee

TABLE OF AUTHORITIES

CASES Page

American Fire and Casualty Co.,

v. Finn, 341 U.S. 6, 17-18 (1951). ey eee 2

California v. LaRue, 409 U.S. 109,

122, B.2 (397A) ; Bee igh gees ge i Bd ey 2

Delaye v. Aripac, Inc., 39 F.3d 235

(9th Cir. 1994), Cert. Denied,

U.S. « S35 B.Ce.: 36028 (4908)...

Fort Halifax Packing Co., v. Coyne,

482 U.S. 1 (1987). Ee

Ingersoll-Rand Co. v. McClendon,

O98 U.8s Saas Bee tee ee ee eh an se ee ee

Jackson v. Ashton, 8 Det. 148, 149

CRO OS oo te a ee a a ee es Peng ee Te 3

Mitchell v. Maurer, 293 U.S. 237, 244

(1934). ergs Wie ef aes rae ge ook nee 3

Owen Equipment & Erection Co. v. Kroger,

G37 Gies meek als eek Sees ae ee 2

Pennsylvania v. Union Gas Co.,

O5k Wie. eo ee Rae ee aa a eae ee ee

Sosna v. Iowa, 419 U.S. 393, 398 (1975) .. 2

Vartanian v. Monsanto Co.,

14 F.3d 697, 703 (1st Cir. 1994). apres so 6

STATUTES PAGE

29 U.S.C. §1144(a). 2

26 U.S.C. §1331 ee ae Rin ee ae OR ee ee

SO. eG OEE Se ee eee

29 U.S.C. §1001(b). 6

ooo

IN THE

SUPREME COURT OF THE UNITED STATES

October term, 1995

NO. 95-87

J. MICHAEL MURPHY,

PETITIONER,

Vv.

DIVERSIFIED PRODUCTS CORPORATION, INC.

AND STEPHEN J. O'BRIEN,

RESPONDENT .

On Petition for Writ of Certiorari to the

United States Court of Appeals

for the Eleventh Circuit

Reply to Respondents

Brief In Opposition

Respondent begins his brief in opposition

by mischaracterizing the arguments made in the

petition and by falsely claiming that said ar-

Y guments are new, and thus waived. The arguments

made in the petition, identical to’ the ones

raised in the district court and the Eleventh

Circuit, are: first, the employment agreement is

not an ERISA plan (petition at 9 and App. 37a-

38a); second, even if the employment agreement

l

is an ERISA plan, Mr. Murphy's claims are not

preempted because he was not a participant under

the employment agreement and applying 29 U.S.C.

1144(a) would leave an innocent defrauded victim

without any remedy, (petition at 11-13 and Ap-

pellant's Brief to the Eleventh Circuit at 13,

14) and; finally, that Congress did not intend

to preempt these types of claims when doing so

would allow a deceitful employer to escape ac-

countability (petition at 13,14 and Appellant's

brief to the Eleventh Circuit at 13, 14). Re-

spondent's contention that these argument were

not advanced before is contradicted by the cita-

tions in the record given above.

However, as to the first issue of whether

the employment agreement is an ERISA plan, it is

irrelevant whether that issue was raised before

because it implicates the subject-matter juris-

diction, or lack thereof, of the district court.

The district court's jurisdiction is premised on

a conclusion that the employment agreement is

an ERISA plan that arises under the _ statutes

of the United States.+ If this Court follows

its own precedent set forth in Fort Halifax

Packing Co., Inc. v. Coyne, 482 U.S. 1 (1987)

and finds that the employment agreement is not

an ERISA plan, then it should remand the case to

the district court with instructions to remand

to the State Circuit Court for lack of subject-

matter jurisdiction.

As respondent should know, the issue of

subject-matter jurisdiction can NEVER be waived.

See, e.g. Owen Equipment & Erection Co. v. Kro-

ger, 437 U.S. 365, 377 n.21 (1978); Sosna v.

Iowa, 419 U.S. 393, 398 (1975); California v.

LaRue, 409 U.S. 109, 112, n.3 (1972); American

Fire and Casualty Co. v. Finn, 341 U.S. 6, 17-18

(1951); Mitchell v. Maurer, 293 U.S. 237,244

(1934); Jackson v. Ashton, 8 Pet. 148,149

' See 28 U.S.C. § 1331.

at

(1834). This Court has explicitly held, "the

cases are legion holding that a party may not

waive a defect in subject-matter jurisdiction or

invoke federal jurisdiction simply by consent."

Pennsylvania v. Union Gas Co., 491 U.S. 1, 26

(1989) (Stevens, J., concurring). Respondent's

inexplicable request that this Court ignore a

possible defect in subject-matter jurisdiction

and not consider the Fort Halifax issues, in

contravention of over one hundred sixty years of

precedent, is extraordinary.

After respondent's specious waiver argu-

ments addressed above he began his opposition on

the merit by, once again, mischaracterizing the

arguments in the petition. Respondent's claim

that Mr. Murphy argues that, "his state law

claims... relate solely to paragraph 9(d), rat-

her than the employment agreement as a whole"?

is not found anywhere in the petition. Mr. Mur-

phy, consistent with his position all along, ?

claims that the entire employment agreement is

not an ERISA plan under’ the guidelines of

Fort Halifax. Since the employment agreement is

not an ERISA plan, there can be no preemption,

as the district court lacks jurisdiction.

The "golden parachute" provision of the

employment agreement is cited by the petition

because it happens to be the specific provision

Mr. Murphy was defrauded out of by respondent's

deplorable conduct. However, the entire employ-

ment agreement lacks any ongoing administrative

scheme, which is required under Fort Halifax be-

fore a finding that employee benefits actually

become an employee benefit plan under ERISA's

umbrella. See Fort Halifax, 482 U.S. at 12.

All of the benefits in the employment agreement,

whether the "golden parachute" in section 9(d)

2 See Respondent’s brief at 7.

> See Petition at 9.

or the other severance provisions is sections

9(b) or 9(c), simply require a simple con-

putation of an amount of money to be paid to

the employee, if the conditions set forth in

those sections come to fruition. (App. 24a-33a).

Therefore, the entire agreement does not satisfy

the Fort Halifax requirements.

Respondent properly concedes that, "ERISA

does not preempt law relating to a benefit that

is not provided as part of a plan that does not

require an administrative scheme."* Since the

employment agreement here, especially section

9(d) which was triggered when DP was sold, pro-

vides only for a one-time lump sum payment upon

termination and does not contemplate any admin-

istrative scheme, it is not an employee benefit

plan covered by ERISA. "The requirement of a

one-time, lump sum payment triggered by a single

event requires no administrative scheme what-

soever ..." Fort Halifax at 12.

Respondent fails to cite any authority

holding that employment agreements, like the one

in this case,° constitutes an ERISA plan. This

is understandable given the obvious conclusion

that writing a check upon termination does not

require any ongoing administrative scheme and

thus, it cannot be an ERISA plan. Lastly, re-

spondent's failure to distinguish the cases

cited in the petition, holding that benefits

like the ones in this employment agreement are

not ERISA plans demonstrates the futility of any

‘ Respondents brief at 10.

5 See Delaye v. Agripac, Inc., 39 F.3d 235 (9th Cir

1994), Cert. Denied, _-US.__—sC«, 118 S.Ct. 1402

(1995), where the court held that an employment agre-

ement similar to the one in this case was not an em-

ployee benefit plan under ERISA and dismissed the

case for lack of subject-matter jurisdiction.

4

ll

argument which claims that the employment agree-

ment is an ERISA plan.

Mr. Murphy's argument, in lieu of a ruling

that the employment agreement is not an employee

benefit plan, is that Congress did not intend

for preemption to operate when it enures to the

detriment of a defrauded victim, leaving him

without a remedy under either federal or state

law. The petition argues, and the fifth, sixth,

and ninth circuits have ruled, that ERISA will

not preempt the state law claims of a plaintiff

who is not a "participant" or "beneficiary"

under ERISA's civil enforcement scheme deline-

ated in 29 U.S.C. 1132. Respondent's attempt

to distinguish these cases, cited in the peti-

tion for this proposition, is unpersuasive.

(Respondent's brief at 15). All of these cases

hold, in accordance with the standard establish-

ed by this court,’ that preemption will not

apply unless the plaintiff is a participant

under the specific plan in question.

In response to this argument, respondent

cites four cases in which different courts hold

that various state claims are preempted. (Re-

spondent's brief at 13). What respondent leaves

out, however, is that all of these cases involve

the preemption of claims brought by participants

of the benefit plans. The plaintiffs in the

cases cited by respondent, unlike Mr. Murphy,

could have sued their employers under ERISA.

Mr. Murphy does not have that luxury because he

was fraudulently induced to abandon his rights

in the employment agreement in this case in

§ These opinions are discussed in the petition at

pages 11-15).

? See Ingersell-Rand Co. v. McClendon, 498 U.S.

133 (1990).

favor of the less attractive retirement agree-

ment.

Specifically, one of the cases cited by re-

spondent held that the plaintiff was a partici-

pant in the disputed plan, and the First Circuit

gave him standing to pursue an ERISA claim.

Vartanian v. Monsanto Co., 14 F.3d 697, 703 (1st

Cir 1994). Furthermore, the First Circuit re-

fused to fashion a federal common law remedy on

the basis that they had already provided

plaintiff with a remedy under ERISA. Id. Since

Mr. Murphy was defrauded out of signing the em-

ployment agreement and lacks standing to bring

an ERISA claim, it would be unseemly to deny him

any recovery for the contemptible conduct that

respondent perpetrated on him.

The basis of the argument that preemption

should not apply where the injured party is not

a participant springs from this Court's rulings

of when preemption will apply. In Ingersoll-

Rand Co. v. McClendon, 498 U.S. 133, 135 (1990),

this Court held that preemption will occur if

the claim in question is one that Congress in-

tended to be preempted. Allowing participants

of a benefit plan to chose a state claim rather

than ERISA as a cause of action would clearly

frustrate the uniform body of law that Congress

tried to create.

However, where the injured party is not a

participant and is precluded from maintaining a

claim under ERISA, allowing him to proceed with

a state claim will in no way affect the uniform

body of employee benefit law established by Con-

gress. Conversely, leaving persons like Mr.

Murphy without any remedy would contravene the

Stated goal of ERISA which is to protect em-

ployees from employer misconduct. See 29 U.S.C.

1001 (b).

Finally, respondent's brief fails, in every

way, to address the public policy fallout that

6

would result from the ruling they request. The

message to deceitful employers would be unmis-

takable: as long as you completely defraud an

employee out of a plan, he will neither have a

federal claim under ERISA nor a state common-law

claim. All of the noble policies underlying the

passage of ERISA as well as the fundamental ten-

ants of American justice (that one cannot commit

a wrong upon another without being accountable)

could be subverted by deceitful employers.

Mr. Murphy is not asking this Court to

fashion a new federal remedy. He is simply

asking this Court to interpret the statute ina

way that will both carry out the will of Con-

gress and allow the injured to recover. Mr.

Murphy's arguments are compelling and have been

accepted and applied by other circuits. Only

this Court can now put a stop to this mis-

carriage and allow Mr. Murphy his day in court.

This Court typically grants certiorari in

matters involving important federal questions

with conflicting authority in the circuits.

This case satisfies those requirements.

CONCLUSION

For the foregoing reasons, petitioner urges

this Court to grant the Petition for Writ of

"0 fully submitted WY

| ee o 7 eee

Attorney for Petitioner

434 East Magnolia Avenue

Auburn, Alabama 36830

(334) 821-1596