Coggins, J. v. Keystone Foods, LLC
3814 EDA 2015
| Pa. Super. Ct. | Nov 10, 2016Background
- Five former Keystone employees signed written Retirement Agreements (2011) promising Keystone would "maintain the existing health care benefits... for life." One executed an Agreement and Release with substantially similar language.
- While employed Keystone paid 100% of employees' medical, prescription, dental, vision and copays; at retirement Plaintiffs satisfied eligibility requirements and continued to receive those benefits at no cost.
- In 2014 Keystone notified Plaintiffs they would be required to begin paying a portion of premiums and copays starting Jan. 1, 2015; Plaintiffs sued for breach of contract and for violations of the Pennsylvania Wage Payment and Collection Law.
- Keystone removed to federal court arguing ERISA preemption; the district court found no complete preemption under ERISA §502(a) and remanded, leaving ordinary preemption under ERISA §514(a) unresolved.
- At the state trial court Keystone moved for judgment on the pleadings, arguing Plaintiffs’ claims were preempted under ERISA §514(a) because they "relate to" an ERISA benefits plan and incorporated plan modification rights; the trial court granted the motion.
- The Superior Court reversed, holding Plaintiffs’ claims arise from the separate Retirement Agreements (not the ERISA plan) and that factual disputes about Keystone’s contractual obligation precluded judgment on the pleadings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state-law breach and WPCL claims are preempted by ERISA §514(a) | Claims arise from separate Retirement Agreements promising lifetime no-cost benefits; source is contract not ERISA plan | Claims "relate to" an ERISA plan because the alleged obligation references existing benefits and incorporated plan modification rights | Reversed trial court: claims are not preempted under §514(a); they arise from the Retirement Agreements and survive judgment on the pleadings |
| Whether court needed to interpret ERISA plan terms (including modification rights) to resolve breach claim | No — existing out-of-pocket costs were zero and plan language is unnecessary to determine Keystone’s obligation under the Retirement Agreements | Yes — must analyze plan terms to determine what "existing health care benefits" and any modification rights meant | Held: court need not consult the ERISA plan to determine the contractual promise; the record shows no incorporation of broad modification rights that would compel preemption |
| Whether the trial court erred by granting judgment on the pleadings without factual development | Plaintiffs: material factual dispute exists about whether Keystone promised no-cost lifetime benefits | Keystone: language of agreements and plan supports preemption and entitlement to judgment | Held: Superior Court found a material factual dispute on Keystone’s contractual obligation; judgment on the pleadings was improper |
| Applicability of Barnett's "source of the right" test | Plaintiffs: Barnett limits preemption to cases where ERISA plan is the source of the claimed right; here the source is the separate Retirement Agreements | Keystone: Barnett supports preemption where plan interpretation is necessary | Held: Barnett distinguished — because the Retirement Agreements, not the ERISA plan, are the source here, §514(a) preemption did not apply |
Key Cases Cited
- Barnett v. SKF USA, Inc., 38 A.3d 770 (Pa. 2012) (ERISA preemption inquiry focuses on whether the state-law claim’s source is the ERISA plan; prevents state rules from supplanting federal uniform plan administration)
- Menkes v. Prudential Ins. Co. of Am., 762 F.3d 285 (3d Cir.) (discusses ERISA preemption where resolution requires interpretation of plan terms)
- Coggins v. Keystone Foods, LLC, 111 F. Supp. 3d 630 (E.D. Pa.) (district court found no complete ERISA preemption and noted parties’ intent reflected in forum and governing-law provisions)
- Coleman v. Duane Morris, LLP, 58 A.3d 833 (Pa. Super. 2012) (standard of review for judgment on the pleadings)
- Pappas v. Asbel, 768 A.2d 1089 (Pa. 2001) (ERISA preemption does not apply where state law has only tenuous, remote, or peripheral connection to covered plans)