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SCHONHOLZ v. LONG ISLAND JEWISH MED. CTR.

February 3, 1995

GLENISS S. SCHONHOLZ, Plaintiff, against LONG ISLAND JEWISH MEDICAL CENTER, Defendant.

John R. Bartels, United States District Judge


The opinion of the court was delivered by: JOHN R. BARTELS

Defendant Long Island Jewish Hospital ("LIJ") and plaintiff Gleniss S. Schonholz cross-move under Rule 56(c) of the Federal Rules of Civil Procedure for summary judgment. Schonholz brought this action pursuant to the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. ยง 1132(a)(1)(B), to recover benefits allegedly owed to her under her former employer's severance benefit plan. LIJ seeks dismissal of Schonholz's claims for lack of jurisdiction and for failure to state a claim. Schonholz cross-moves for summary judgment, arguing that all of the facts necessary to decide in her favor have been established and that she is entitled to summary judgment as a matter of law.

 BACKGROUND

 Gleniss S. Schonholz was employed by the Long Island Jewish Medical Center from 1980 until 1993. Hired as a Divisional Administrator, by 1987, Schonholz had been promoted to the position of Senior Vice President and Chief Operating Officer of LIJ. During 1991 and 1992, hospital management changed and a new LIJ Board Chairman was appointed. Due to the incompatibility of Schonholz and the new Chairman, the President and CEO of LIJ, Dr. Robert K. Match, determined that it was in the best interest of the hospital for Schonholz to resign. Dr. Match and Schonholz met some time between December 10 and December 18, 1992, and agreed that Schonholz would submit her resignation to become effective April 1, 1993. He formalized his request in a letter dated December 18, 1992. In his letter, Dr. Match explicitly stated that Schonholz would be eligible for severance pay benefits as detailed in a memorandum dated May 3, 1991. As requested, by letter dated December 22, 1992, Schonholz submitted her resignation. Nine days before the effective date of Schonholz's termination, on March 23, 1993, the LIJ Board revoked the severance pay program (the "Program"). On June 11, 1993, Schonholz commenced this action against LIJ to recover severance benefits.

 DISCUSSION

 I. Subject Matter Jurisdiction

 LIJ challenges the sole basis of this Court's jurisdiction, asserting that the LIJ Program was not an "employee welfare benefit plan" within the meaning of ERISA. Severance benefit programs generally are covered by ERISA as they are expressly included in the definition of "employee welfare benefit plan" under 29 U.S.C. 1002(1). See Bradwell v. GAF Corp., 954 F.2d 798, 800 n. 1 (2d Cir. 1992). LIJ argues, however, that the LIJ Program falls within the exception established by the Supreme Court in Fort Halifax Packing Co. v. Coyne, 482 U.S. 1, 107 S. Ct. 2211, 96 L. Ed. 2d 1 (1987), where the Court held that a single lump-sum severance payment payable only on the occurrence of a single event did not implicate ERISA. In order to fall within ERISA preemption, a benefit plan must require ongoing administration separate from other benefit plans administered by the employer.

 LIJ argues that, because Dr. Match offered Schonholz a lump-sum payment of twelve months' salary in lieu of biweekly installments as provided by the Program, the Program falls within the Fort Halifax exception and no longer qualifies as an ERISA plan. This argument, however, ignores other provisions of the Program. In addition to the first twelve months' salary, the Program provided another six months of salary for terminated employees with Schonholz's length of service who had not yet found "commensurate" employment after a year. The last six months' salary was to be paid biweekly until commensurate employment was found or the additional six months had expired, whichever occurred first. The Program defines commensurate employment as employment placing her at "her former organizational level and scope of responsibility."

 In determining what is and what is not an ERISA plan, courts have looked to the degree of managerial discretion in the award of benefits. See, e.g., James v. Fleet/Norstar Financial Group, Inc., 992 F.2d 463 (2d Cir. 1993) (automatic lump-sum payment of 60 days of salary to employees terminated due to consolidation not an ERISA plan); Fontenot v. NL Industries, 953 F.2d 960 (5th Cir. 1992) (single lump-sum payment of 3 years' salary to executives terminated following takeover not an ERISA plan). Compare Bogue v. Ampex Corp., 976 F.2d 1319, 1321 (9th Cir. 1992), cert. denied, 123 L. Ed. 2d 471, 113 S. Ct. 1847 (1993) (severance benefits payable to 10 key employees if not offered "substantially equivalent" employment by buyer is plan governed by ERISA). "To do little more than write a check hardly constitutes the operation of a benefit plan." Fort Halifax, 482 U.S. at 12, 107 S. Ct. 2218. The LIJ Program, had it not been revoked prior to Schonholz's termination, indisputably would have required its administrator to do more than cut a single severance check. As in Bogue, even though the potential number of participants was small, and its activation uncertain *fn1" , the Program's administration would have required "a case-by-case, discretionary application of its terms." Bogue, 976 F.2d at 1323. The Court finds that the LIJ Program was an employee welfare benefit plan within the meaning of ERISA. Accordingly, the Court has jurisdiction over this action.

 II. Schonholz's ERISA Claims

 This Court denied LIJ's prior Rule 12(b)(6) motion to dismiss on this count solely because LIJ had failed to allege that LIJ had revoked the Program in writing. Schonholz v. Long Island Jewish Medical Ctr., 858 F. Supp. 350, 353 (E.D.N.Y. 1994). LIJ now has established that its revocation of the Program was in writing and Schonholz admits that she had both oral and written notification of the LIJ Board's revocation of the Program prior to the effective date of her termination. As stated in this Court's prior opinion, severance plans are not vested under ERISA. Id. Thus, the Board's revocation was effective and Schonholz may not recover pursuant to this theory.

 a. Breach of Fiduciary Duties Under ERISA

 As a second theory, Schonholz argues that she is entitled to recover because the LIJ Board revoked the Program in bad faith and in violation of its fiduciary duty to Schonholz as a beneficiary of the Program. She contends that she is entitled to recover severance benefits because the discontinuation of the Program was not a business decision but was punitive and directed against her individually. Schonholz cites a single case, Dependahl v. Falstaff Brewing Corp., 491 F. Supp. 1188 (E.D. Mo. 1980), aff'd in part, rev'd in part, 653 F.2d 1208 (8th Cir. 1981), for the proposition that an employee may recover benefits where an employer modifies or terminates its benefit plan in light of an impending personnel action, thus depriving an employee of benefits to which she otherwise would be entitled. In Dependahl, the court held that an employer violated his fiduciary duty to his employees when he eliminated a severance plan in contemplation of a mass firing.

 Dependahl stands against the weight of authority. An employer unilaterally may amend or eliminate a severance plan at any time without violating ERISA requirements. Young v. Standard Oil (Indiana), 849 F.2d 1039, 1045 (7th Cir.), cert. denied, 488 U.S. 981, 109 S. Ct. 529, 102 L. Ed. 2d 561 (1988). Moreover, it may do so without consideration of its employees' interests. Id. "Virtually every circuit has rejected the proposition that ERISA's fiduciary duties attach to an employer's decision whether or not to amend an employee benefit plan." Hozier v. Midwest Fasteners, Inc., 908 F.2d 1155, 1161 (3d Cir. 1990). Additionally, the Supreme Court has held that an action for breach of fiduciary duties imposed on plan administrators may be brought only on behalf of a plan itself and not, as ...


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