United States District Court, E.D. New York
May 5, 2003
Mark EBENSTEIN, Plaintiff,
ERICSSON INTERNET APPLICATIONS, INC., f.k.a. Ericsson Messaging Systems, Inc., Defendant.
The opinion of the court was delivered by: LEONARD WEXLER, Senior District Judge.
MEMORANDUM AND ORDER
This is an action commenced by Plaintiff Mark Ebenstein
("Plaintiff"), pursuant to the Employee Retirement Income
Security Act of 1974 ("ERISA"). Plaintiff seeks to recover
severance benefits allegedly due to him under an ERISA plan.*fn1
Defendant denies Plaintiff's entitlement to benefits and has
asserted a counterclaim seeking repayment of a bonus and
relocation expenses. Presently before the court is Defendant's
motion for summary judgment dismissing the complaint and granting
the relief sought on the counterclaim.
I. The Parties and Their Business Relationship
Plaintiff is an individual who resides in the Eastern District
of New York. Defendant is Ericsson Internet Applications, Inc.
("Ericsson or the `Company' "). Ericsson describes itself as a
company that is a leading supplier of mobile communication
systems and a provider of core technology for mobile handsets.
In January of 2001, Plaintiff received an offer of employment
from Ericsson serve as a Product Marketing Manager. Plaintiff was
to be employed in the Product Line Entertainment Department at
Ericsson's Woodbury, New York office. In addition to a yearly
salary of $85,000, Ericsson agreed to pay Plaintiff a one time
signing bonus of $5,000. Ericsson also agreed to reimburse
Plaintiff for expenses incurred in relocating to Long Island from
Connecticut. The terms pursuant to which these latter two
payments were made are contained in Ericsson's formal written
offer of employment and the company's "Relocation Policy and
Procedure for Newly-Hired U.S. Based Employees" (the "Relocation
The formal offer of employment and the Relocation Policy are
before the court and it is undisputed that they were in
Plaintiff's possession when he agreed to accept Ericsson's offer
of employment. The letter offering Plaintiff his employment
advised him that the $5,000 signing bonus would have to be repaid
to the company in the event that Plaintiff resigned from the
company within the first twelve months of his employment.
Similarly, the Relocation Policy states, inter alia, that if
Plaintiff voluntarily terminated his employment
[263 F. Supp.2d 639]
with Ericsson before expiration of a one year period, the
relocation expenses would have to be repaid to the Company.
Plaintiff accepted the position offered and began his employment
with Ericsson on March 5, 2001.
II. The Restructuring and the May 31 E-Mail
Two months after Plaintiff began his employment with Ericsson,
the company underwent a restructuring. Ericsson employees were
advised of the impending changes via an e-mail dated May 31, 2001
(the "May 31 e-mail"). A print out of that e-mail is before the
court. Neither Plaintiff's receipt, nor the language of the May
31 e-mail, are in dispute. As set forth in the May 31 e-mail, the
company was about to restructure and would implement a reduction
in force. Certain identified departments, including Plaintiff's,
were to be discontinued. While the May 31 e-mail refers to
impending reductions in Ericsson's labor force, it did not
specify which employees were to be terminated. Instead, it was
stated that "some employees will assume new positions . . . and
others will be separated from the company." The notification date
for the reductions in force was set, in the May 31, e-mail, at
July 5, 2001.
III. The Events of June-July 2001
The parties dispute certain factual matters that have been
alleged to occur during June of 2001. While Defendant alleges
that Plaintiff approached Ericsson personnel to volunteer for the
lay-off, without having to repay his relocation expenses,
Plaintiff disputes the way in which Defendant characterizes these
conversations. Because a decision as to the credibility of the
parties on these conversations is not necessary to disposition of
this motion, the court adopts neither parties' version of the
discussions that allegedly took place between Plaintiff and
Ericsson during June of 2001.
What is not in dispute is the fact that Plaintiff left work
early on July 2, 2001 and never returned to the company. What is
also not in dispute are the contents of correspondence sent
between Plaintiff and Kathy Raftery, Ericsson's Director of Human
Resources, following July 2. On July 3, 2001, Plaintiff sent a
letter to Ericsson demanding payment of severance benefits as a
consequence of his recent lay-off. Raftery responded to
Plaintiff's July 3 letter in a letter dated July 6, 2001. That
letter referred to the fact that three weeks prior to the date of
the letter, Plaintiff was given a position as a product marketing
manager in a different division of Ericsson and stated that
Plaintiff was expected to return to the company to assume his new
responsibilities. Raftery's July 6 further stated that if
Plaintiff did not return to the office by July 9, or inform the
company as to why he could not return, Ericsson would treat such
action as Plaintiff's voluntary resignation from the Company.
Plaintiff's response to Raftery's July 6 Letter is contained in
a letter of that same date. In his letter, Plaintiff states that
upon his receipt of the May 31 e-mail, he "recognized that
effective July 5, 2001[he] was officially laid-off by Ericsson."
As to Raftery's statement regarding Plaintiff's return to work by
July 9, Plaintiff responded that this statement was "rejected."
In a letter dated July 11, 2001, sent by Raftery to Plaintiff,
Raftery refers to the May 31 e-mail and notes that persons to be
laid off were to be informed of that fact on July 5, 2001.
Raftery's letter continues, "[f]or the last time, you were not
laid off in the most recent reduction-in-force." The letter
concludes, "[b]y your absolute refusal to return to work, you
[263 F. Supp.2d 640]
your job. This does not entitle you to severance benefits. In
addition, it triggers certain repayment requirements you have to
Ericsson." When Plaintiff failed to return to Ericsson, he was
sent a letter by Ericsson's counsel, demanding that he reimburse
the Company $34,949.05. This amount was stated to reflect
repayment of the $5,000 signing bonus plus relocation expenses of
IV. Plaintiff's Employment After Leaving Ericsson
As noted, Plaintiff never returned to his employment at
Ericsson. Instead, beginning on July 30, 2001, Plaintiff began
employment with Swissair/Sabena, a company located in Melville,
New York ("Swissair"). Plaintiff's formal offer of employment
with Swissair is contained in a letter dated July 6, 2001. The
date of this letter and testimony taken at Plaintiff's deposition
make it clear that Plaintiff applied for the position at Swissair
in June of 2001, shortly after his receipt of the May 31 e-mail.
V. The Complaint, the Counterclaim and the Motion for Summary
Plaintiff commenced the present action in August of 2001. The
basis for federal jurisdiction is his claim that he has been
denied payment of severance benefits pursuant to an ERISA plan.
Defendant denies that ERISA jurisdiction exists and denies
Plaintiff's claim of entitlement to severance benefits on the
merits. Additionally, Defendant asserts a counterclaim for
repayment of the $5,000 bonus as well as all relocation expenses.
Arguing that no material questions of fact are present, Defendant
moves for summary judgment dismissing Plaintiff's claims and
awarding the full relief sought on the counterclaim. After
reviewing applicable law, the court will turn to the merits of
I. Standards Applicable to Motions For Summary Judgment
A motion for summary judgement is properly granted only if the
court determines that no genuine issue of material fact exists
and the moving party is entitled to judgment as a matter of law.
FRCP 56(c); Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 250,
106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The party seeking judgment
bears the burden of demonstrating that no issue of fact exists.
McLee v. Chrysler Corp. 109 F.3d 130, 134 (2d Cir. 1997).
However, when the nonmoving party fails to make a showing on an
essential element of its case with respect to which it bears the
burden of proof, summary judgment will be granted. Celotex Corp.
v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265
(1986). The party resisting summary judgment must not only show a
disputed issue of fact, but it must also be a material fact in
light of substantive law. Only disputed facts that "might affect
the outcome of the suit under the governing law will properly
preclude the entry of summary judgment." Anderson, 477 U.S. at
242, 106 S.Ct. 2505.
II. ERISA Jurisdiction
The sole basis for federal jurisdiction in this matter is
Plaintiff's allegation that the severance benefits he seeks,
exist pursuant to an ERISA plan. In the absence of such
jurisdiction, Plaintiff is left only with a state law breach of
contract claim and dismissal for lack of subject matter
jurisdiction would be required.
Defendant's motion papers make a somewhat half-hearted argument
that the benefits do not constitute an ERISA plan and that
therefore, this federal claim must be dismissed. For his part,
Plaintiff has not even bothered to counter Defendant's
[263 F. Supp.2d 641]
argument regarding lack of ERISA jurisdiction. Indeed, counsel's
barely two page memorandum of law contains not a single citation
to any case or statute. Because ERISA is the sole basis for
maintaining this action in this federal forum, the court, despite
the parties' apparent lack of real interest, must address the
jurisdictional issue before reaching the merits of the parties'
claims. It is to that issue that the court now turns.
The issue of whether a plan is governed by ERISA is dependent,
in part, upon whether the plan "requires an ongoing
administrative program to meet the employer's obligation."
Kosakow v. New Rochelle Radiology Assocs., P.C., 274 F.3d 706,
736, quoting, Fort Halifax Packing Co., Inc. v. Coyne,
482 U.S. 1, 11, 107 S.Ct. 2211, 96 L.Ed.2d 1 (1987). The Supreme Court has
held that a "one time, lump sum payment, triggered by a single
event requires no administrative scheme whatsoever to meet the
employer's obligation" and therefore is not a plan under ERISA.
Fort Halifax, 482 U.S. at 12, 107 S.Ct. 2211 (1987).
Despite this seemingly broad language, the mere fact that a
plan calls for a "one time" payment, like severance, does not
require a finding that such a payment is not made pursuant to an
ERISA plan. If that were the case, the payment of severance would
never constitute an ERISA plan. This, however, is clearly not the
law. See Tischmaann v. ITT/Sheraton Corp., 145 F.3d 561, 565 (2d
Cir. 1998) ("well-established" that severance plans can
constitute ERISA plans); Schonholz v. Long Island Jewish Medical
Center, 87 F.3d 72, 75 (2d Cir. 1996) ("employee benefit plan"
under ERISA held to "apply to most, but not all, employer
undertakings or obligations to pay severance benefits"); James v.
Fleet/Norstar Group, 992 F.2d 463, 467-68 (2d Cir. 1993)
("[t]here is no question that a program to pay severance benefits
may constitute an `employee welfare plan.' ") (citation
In James v. Fleet/Norstar Group, 992 F.2d 463 (2d Cir. 1993),
the Second Circuit held that the defendant company's promise to
pay a one time bonus to employees who remained with the company,
until a previously announced site closing was completed, did not
constitute an ERISA plan. Relying on Fort Halifax, the Second
Circuit characterized the agreement as a one time payment that
did not amount to an ERISA plan. Among other things, the court
noted that under the agreement in James, the termination date
applied to all employees and was not contingent upon any
individual circumstances. The calculation required to administer
payments under the plan in James were noted to be a "far cry from
the `ongoing, particularized, administrative, discretionary
analysis'" required to find the existence of an ERISA plan.
James, 992 F.2d at 468, quoting, Bogue v. Ampex Corp.,
976 F.2d 1319, 1323 (9th Cir. 1992).
In Schon-holz v. Long Island Jewish Medical Ceter, 87 F.3d 72
(2d Cir. 1996), on the other hand, the Second Circuit held that a
severance pay plan did constitute an ERISA plan. There, the court
noted the factors to be considered when determining whether a
severance plan falls within the scope of ERISA. Specifically, the
court referred to: "(1) whether the employer's undertaking or
obligation requires managerial discretion in its administration,
(2) whether a reasonable employee would perceive an ongoing
commitment by the employer to provide employee benefits, and (3)
whether the employer was required to analyze the circumstances of
each employee's termination separately in light of certain
criteria. Schonholz, 87 F.3d at 76 (citations omitted).
[263 F. Supp.2d 642]
Finding that all of the aforementioned factors favored the
plaintiff, the Second Circuit held that the severance plan in
Schonholz constituted an ERISA employee benefit plan.
Specifically, the court noted: (1) that the effective period of
the plan was unlimited; (2) that reasonable employees would
expect severance pay; (3) that each employee's eligibility for
severance would have to be individually determined and, (4) that
administrative oversight of the plan required more than the
making of arithmetical calculations. Schonholz, 87 F.3d at
A similar consideration of the factors identified in Schonholz
led the Second Circuit to conclude that the severance plan at
issue in Kosakow, 274 F.3d at 737, constituted an ERISA plan. In
that case, the court's finding that severance payments were made
pursuant to an ERISA plan was supported by the fact that
severance pay was offered without any date restriction and could
therefore be reasonably seem as an ongoing company commitment.
Kosakow, 274 F.3d at 736. The court also noted that the plan
provided for the forfeiture of severance pay in the case of
certain "for cause" terminations. This requirement that
individual eligibility determinations be made weighed in favor of
a finding that the plan at issue was an ERISA plan. Id. at 737.
See also Tischmann v. ITT/Sheraton, 145 F.3d 561, 566-67 (2d Cir.
1998) (severance plan requiring, inter alia, individual
determinations regarding eligibility constituted an ERISA plan).
When considering the Ericsson termination policy, in light of
the standards referred to above, the court holds that the
agreement to make severance payments constitutes an ERISA plan.
Notably, the Ericsson agreement applies to all employees and was
not drafted for a single event such as a plant closing. As such,
the plan can reasonably be interpreted as an ongoing commitment
on the part of the Company. Since severance pay is not made in
every case of separation, the policy requires administration to
determine individual eligibility. These factors weigh in favor of
a finding of an ERISA plan. This holding support the existence of
federal jurisdiction. Accordingly, the court turns to the merits
of the motion.
III. Defendant is Entitled to Summary Judgment as to the Claim
Plaintiff's claim for severance pay is made pursuant to the
termination policy referred to above. That policy sets forth a
schedule providing for the payment of severance to employees
under certain circumstances. Section 2.2.4 of the termination
policy states that in the event of a permanent payoff, Ericsson
will, inter alia, make severance payments to employees. The
policy further states that "corporate reorganization will not
constitute layoff to any employee offered continuing employment
with an affiliate, successor" or other identified entity.
A review of the documentary and testimony evidence presented in
connection with this motion makes it clear that Plaintiff cannot
fall within the termination policy because he was never laid off
by Ericsson. While it is true that the division for which
Plaintiff was initially hired was closed, and a corporate
restructuring took place, that restructuring did not
automatically result in Plaintiff's termination.
The May 31 e-mail, upon which Plaintiff places almost total
reliance, gave Plaintiff notice only of the fact that he might be
terminated. That e-mail states specifically that the notification
date for terminated employees was to be July 5. While the e-mail
could reasonably have made Plaintiff anticipate a possible
termination, it did not effect any such termination. Instead, it
[263 F. Supp.2d 643]
served only to put Plaintiff on notice of impending changes in
the organization of Ericsson.
What likely occurred is that upon his receipt of the May 31
e-mail, Plaintiff immediately began a job search. Having found
such employment with Swissair, Plaintiff accepted the new
position, prior to the July 5 notification date. When Plaintiff
failed to come to work on any day after July 2, the company sent
him correspondence telling him that he had not been terminated.
Much as Plaintiff would have liked to have been laid off, which
would have allowed him to take the position with Swissair and
receive severance payment, this was not the case.
Even if the court accepts that Plaintiff was somehow confused
by the language of the May 31 e-mail, this would not change the
decision here. The correspondence sent to Plaintiff following the
July 5 lay off could not have made it clearer that Plaintiff was
not one of those employees who would be separated from the
company. The court cannot imagine language clearer than that of
the July 11 correspondence from Karen Raftery which stated, in
the simplest of terms, "[f]or the last time, you were not laid
off in the most recent reduction-in-force."
There can be no question of fact as to whether or not Plaintiff
was laid off by Ericsson either in May or July of 2001. He was
never terminated. Instead, upon hearing of a reduction in force
and a possible termination, he voluntarily left the company to
assume a position with a different company. Plaintiff accepted a
new position, gambling on the notion that he would be fired on
July 5. He was not.
Because Plaintiff was not laid off from his position at
Ericsson, he is not entitled to severance payments. Defendant's
motion to dismiss Plaintiff's claim is, accordingly, granted.
IV. Defendant is Entitled to Summary Judgment on its
Defendant's counterclaim seeks the repayment of the $5,000
signing bonus as well as expenses reimbursed to Plaintiff when he
relocated from Connecticut to Long Island. As detailed above,
both payments were made to Plaintiff on the express condition
that he remain with the company for a period of one year. In the
event that Plaintiff voluntarily left the company prior to
expiration of the one year period, he would be responsible for
paying both the bonus and relocation expenses back to Ericsson.
The basis for dismissal of Plaintiff's claim on the merits was
that he was never laid off but instead, that he voluntarily left
the company. It necessarily follows, therefore, that the
provisions regarding repayment to Ericsson of the bonus and
relocation expenses comes into effect. Because Plaintiff
voluntarily left Ericsson prior to the expiration of one year,
the company is entitled to summary judgment on its counterclaim.
V. Judgment on the Counterclaim Requires Additional
The court will not enter judgment in favor of Ericsson for the
amount claimed on its counterclaim at this time. Correspondence
sent to Plaintiff in July of 2001 indicates that the company
sought repayment of the $5,000 signing bonus plus relocation
expenses of $29,949. While there is no dispute that the signing
bonus amounted to $5,000, there is a question as to the proper
amount to be awarded to Ericsson for relocation expenses. While
the July letter sought $29,949, Ericsson's counterclaim sets the
amount sought as $52,265.22. Ericsson's memorandum of law seeks
In view of this discrepancy, the court will enter no judgment
on Ericsson's counterclaim
[263 F. Supp.2d 644]
until the company submits appropriate documentation detailing the
exact amount paid to Plaintiff in relocation expenses. Once
Defendant submits such documentation to the court, Plaintiff will
be granted one week in which to object to any submitted expense.
If Plaintiff fails to interpose a timely objection, the court
will enter judgment in the amount claimed by Ericsson on the
Defendant's motion for summary judgment dismissing Plaintiff's
case is granted. Defendant's motion for summary judgment on its
counterclaim is also granted. Defendant is ordered to submit
documentation supporting the entry of judgment on its
counterclaim as set forth above. The Clerk of the Court is
directed to terminate the motions.