Date: 07-17-2015

Case Style: Alexander Okun, M.D. v. Montefiore Medical Center

Case Number: 13‐3928‐cv

Judge: Loheer

Court: United State Court of Appeals for the Second Circuit on appeal from the Southern District of New York (New York County)

Plaintiff's Attorney: Gail I. Auster, Law Offices of Gail I. Auster & Associates P.C., New York,
NY, for Plaintiff‐Appellant.

Defendant's Attorney: Jean L. Schmidt, Deidre A. Grossman, Littler Mendelson, P.C., New York, NY,
for Defendant‐Appellee.

Description: 10 Alexander Okun, a physician, appeals from a judgment of the United
11 States District Court for the Southern District of New York (Gardephe, J.)
12 dismissing his complaint against his employer, Montefiore Medical Center
13 (“Montefiore”), and others. Okun alleged that Montefiore denied him
14 severance benefits in violation of the Employee Retirement Income Security
15 Act of 1974 (ERISA), Pub. L. No. 93‐406, 88 Stat. 829. Montefiore moved to
16 dismiss the complaint under Federal Rule of Civil Procedure 12(b)(1), arguing
17 that the court lacked subject matter jurisdiction because Montefiore’s
18 severance policy was not an “employee welfare benefit plan” under ERISA.
19 The District Court dismissed the complaint for lack of jurisdiction. Because
3
we conclude that, on 1 the facts alleged in the complaint, the severance policy
2 was a “plan” governed by ERISA, we vacate and remand.1
3 BACKGROUND
4 The following facts are taken from the complaint or from documents
5 integral to it.
6 I. Montefiore’s Severance Policy
7 The Montefiore severance policy at issue, number II‐17a (the “Policy”),
8 provides that all full‐time physicians “employed before August 1, 1996 who
9 [are] terminated for other than cause” are entitled to either twelve months’
10 notice or six months’ severance pay. Eligible employees with more than
11 fifteen years’ service are also “entitled to automatic review of the amount of
12 severance pay by the President of the Medical Center.”
13 Montefiore has maintained a severance policy since 1987, and the
14 Policy itself has been in place, without revision, since 1996. The Policy
15 explicitly notes that it “may be changed, modified or discontinued at any time
1 We need not and do not reach the question whether the failure to allege an
ERISA‐governed “plan” constitutes a failure to allege federal subject matter
jurisdiction or simply a failure to state a claim.
4
by the Medical 1 Center’s Senior Vice President of Human Resources, or
2 designee, with or without notice.”
3 II. Okun’s Termination
4 For twenty‐three years, from 1988 until 2011, Okun worked as a
5 pediatrician and professor at Montefiore Medical Center’s Albert Einstein
6 College of Medicine. On May 1, 2011, Okun notified his supervisor that he
7 would leave Montefiore in September 2011 to take a job elsewhere. On May
8 11, 2011, Okun attended a meeting with a guest speaker. Afterwards, Okun’s
9 supervisor chastised him for the comments he made in front of the guest
10 speaker. On May 13, 2011, Okun was fired “for cause,” purportedly because
11 of what he said at the meeting.
12 Okun then filed this action alleging that his for‐cause termination was a
13 pretext for Montefiore to interfere with his right to severance payments under
14 the Policy and ERISA.
15 DISCUSSION
16 I. Employee Welfare Benefit Plans Under ERISA
17 ERISA defines “employee welfare benefit plan” to mean:
18 any plan, fund, or program . . . established or
19 maintained by an employer or by an employee
5
organization, 1 or by both, to the extent that such plan,
2 fund, or program was established or is maintained for
3 the purpose of providing for its participants or their
4 beneficiaries . . . benefits in the event of sickness,
5 accident, disability, death or unemployment, or . . . any
6 benefit described in section 186(c) of this title.
7
8 29 U.S.C. § 1002(1). On appeal, the parties dispute only whether the Policy is
9 adequately alleged to constitute the kind of undertaking to pay severance
10 benefits that can be described as a “plan, fund, or program,” as that phrase is
11 used in the definition of “employee welfare benefit plan.”
12 To resolve that dispute, we look first to ERISA’s text. Of particular
13 importance here, ERISA provides that “any plan, fund, or program”
14 maintained by an employer to pay certain benefits will suffice. Id. (emphasis
15 added). Use of the word “any” and inclusion of three undefined, overlapping
16 descriptors (plans, funds, and programs) suggests that Congress intended the
17 definition of “employee welfare benefit plan” to be broad and independent of
18 the specific form of the plan. Cf. Anderson v. UNUM Provident Corp., 369
19 F.3d 1257, 1263 (11th Cir. 2004) (noting the “broad terms” of the definition).
20 For this reason, “[t]he term ‘employee welfare benefit plan’ has been held to
21 apply to most . . . employer undertakings or obligations to pay severance
22 benefits.” Schonholz v. Long Island Jewish Med. Ctr., 87 F.3d 72, 75 (2d Cir.
6
1996); see also Tischmann 1 v. ITT/Sheraton Corp., 145 F.3d 561, 565 (2d Cir.
2 1998).
3 But not all such undertakings constitute a plan. Tischmann, 145 F.3d at
4 565; Schonholz, 87 F.3d at 75. In Fort Halifax Packing Co. v. Coyne, 482 U.S. 1
5 (1987), for example, the Supreme Court held that a Maine statute “requiring
6 employers to provide a one‐time severance payment to employees in the
7 event of a plant closing,” id. at 3, “neither establishe[d], nor require[d] an
8 employer to maintain, an employee welfare benefit ‘plan,’” id. at 6. Relying
9 on Fort Halifax, we determined that a similar one‐time employer promise to
10 provide sixty days’ pay to employees discharged in a “plant closing” was not
11 an employee welfare benefit plan. See James v. Fleet/Norstar Fin. Grp., Inc.,
12 992 F.2d 463, 464‐66 (2d Cir. 1993).
13 Both Fort Halifax and James relied on the absence of an “ongoing
14 administrative program.” Fort Halifax, 482 U.S. at 12; accord James, 992 F.2d
15 at 467. This is partly because, without an ongoing administrative program or
16 scheme, the promise to make a “one‐time, lump‐sum payment triggered by a
17 single event” will rarely if ever implicate the need for uniformity that
18 Congress sought when it included within ERISA a provision that preempted
7
state laws relating to benefit plans. Fort 1 Halifax, 482 U.S. at 12; see also 29
2 U.S.C. § 1144(a).
3 Since Fort Halifax, we have identified three non‐exclusive factors to
4 help determine whether an employer’s particular undertaking involves the
5 kind of ongoing administrative scheme inherent in a “plan, fund, or
6 program”:
7 (1) whether the employer’s undertaking or obligation
8 requires managerial discretion in its administration; (2)
9 whether a reasonable employee would perceive an
10 ongoing commitment by the employer to provide
11 employee benefits; and (3) whether the employer was
12 required to analyze the circumstances of each
13 employee’s termination separately in light of certain
14 criteria.
15
16 Tischmann, 145 F.3d at 566 (quoting Schonholz, 87 F.3d at 76) (quotation
17 marks omitted). To be clear, there is no separate statutory requirement in
18 § 1002(1) that ERISA plans involve long‐term commitments or include
19 discretionary determinations. But these factors are useful analytic tools to the
20 extent that they help us decide the ultimate question of whether a particular
21 undertaking or obligation is a “plan, fund, or program.”
8
1 II. Montefiore’s Policy Under ERISA
2 We conclude that, on the facts alleged in the complaint, the Policy
3 involves the kind of undertaking that falls within the meaning of the phrase
4 “any plan, fund, or program.” The Policy represents a multi‐decade
5 commitment to provide severance benefits to a broad class of employees
6 under a wide variety of circumstances and requires an individualized review
7 whenever certain covered employees are terminated. As a result, Montefiore
8 assumed the “responsibility to pay benefits on a regular basis, and thus faces
9 . . . periodic demands on its assets” that require long‐term coordination and
10 control. Fort Halifax, 482 U.S. at 12.
11 A brief consideration of the pertinent Schonholz factors confirms this
12 conclusion.
13 First, the Policy requires discretion and individualized evaluation to
14 administer. In particular, Montefiore must determine whether an employee
15 left voluntarily or was terminated; it must determine whether the termination
16 was “for cause” or for one of the other reasons listed in the Policy2; and the
2 At least on the facts alleged here, we do not agree that a determination as to
whether a termination was “for cause” requires only a “minimal quantum of
discretion” insufficient to raise a policy to the level of an ERISA plan.
9
President of Montefiore is required to 1 engage in a discretionary review of the
2 amount of severance benefits whenever an employee with fifteen or more
3 years of service requests it.3
4 Second, Montefiore has maintained a severance policy in one form or
5 another since 1987 and has retained the Policy in its current form since 1996.
6 At the motion to dismiss stage, we think it plausible that such a longstanding
7 policy would give employees the reasonable impression that Montefiore has
8 undertaken an “ongoing commitment” to provide severance benefits.
9 Montefiore points out that the Policy’s boilerplate language reserves
10 Montefiore’s unilateral right to modify the Policy without notice. But many
11 ERISA‐governed plans contain such a reservation, cf. Reichelt v. Emhart
12 Corp., 921 F.2d 425, 430 (2d Cir. 1990) (noting that “under ERISA, the
Compare Velarde v. PACE Membership Warehouse, Inc., 105 F.3d 1313, 1317
(9th Cir. 1997).
3 Montefiore notes that Okun did not cite the President’s discretionary review
in his opening brief on appeal in support of his argument that the plan
requires managerial discretion and individualized evaluation. See Appellee
Br. 13 n.2. We retain broad discretion to address that argument, however,
particularly since it was raised and briefed before the District Court, which
addressed the argument in its opinion. See Okun v. Montefiore Med. Ctr., 970
F. Supp. 2d 267, 275 (S.D.N.Y. 2013). Moreover, Okun’s opening brief
described the automatic review provision, see Appellant Br. 11, and his reply
brief augmented the argument, see Appellant Reply Br. 5.
10
employer has the right at any time 1 to amend or terminate a severance pay
2 plan”), and we have held that a similar provision does not necessarily defeat
3 an employee’s reasonable perception of an ongoing commitment, see
4 Tischmann, 145 F.3d at 566. A reasonable employee could infer from the fact
5 that Montefiore has not exercised its right to modify the Policy since 1996 that
6 Montefiore does not take its promise to pay severance benefits lightly. We
7 note, too, that Montefiore’s obligations pursuant to its longstanding policy
8 contrast sharply with the employer’s obligations in James and Fort Halifax,
9 which involved only a one‐time payment in the event of a contingency that
10 was unlikely to recur on a regular basis. Compare Joint App’x 16‐17, with
11 Fort Halifax, 482 U.S. at 11‐12, and James, 992 F.2d at 466. Here, Montefiore
12 has undertaken to pay severance every time an eligible employee is
13 terminated for reasons other than cause — a contingency that reasonably can
14 be inferred to occur on a relatively regular basis.
15 As for the third factor, it is true that the Policy leaves somewhat less
16 room for managerial discretion than other policies that we have held
17 constitute plans under ERISA. See Tischmann, 145 F.3d at 567; Schonholz, 87
18 F.3d at 76. But there remains some managerial discretion in the President’s
11
review of the amount of 1 severance and in the classification of the termination
2 of each eligible employee as for or without cause, and here that is enough.
3 Our conclusion also coheres with the purpose of ERISA’s preemption
4 provision. The duration of Montefiore’s commitment and the individualized,
5 frequently recurring review contemplated by that commitment implicate the
6 type of administrative concerns that are best “governed by a single set of
7 regulations” rather than “a patchwork scheme of regulation.” Fort Halifax,
8 482 U.S. at 11‐12. For example, absent ERISA preemption of a plan such as
9 this one, under circumstances in which an employer operates in multiple
10 States, the different States might define termination “for cause” differently, or
11 might impose different constraints on the discretion an employer can exercise
12 in reviewing the amount of severance due to long‐time employees.

Outcome: 14 We have considered Montefiore’s remaining arguments and conclude
15 that they are without merit. For the reasons set forth above, we conclude that,
16 on the facts alleged in the complaint, the Policy constitutes a “plan, fund, or
17 program” under § 1002(1) of ERISA. We therefore VACATE the judgment of

18 the District Court and REMAND.

Plaintiff's Experts:

Defendant's Experts:

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