United States District Court, Northern District of Illinois, Eastern Division
June 23, 2000
PATRICIA A. VESELY, PLAINTIFF,
CONTINENTAL CASUALTY COMPANY, DEFENDANT.
The opinion of the court was delivered by: Castillo, District Judge.
MEMORANDUM OPINION AND ORDER
Patricia Vesely filed a four-count complaint against
Continental Casualty Company ("Continental") alleging various
causes of action arising from Continental's termination of her
employment. The parties have filed cross motions for summary
judgment on Count III, in which Vesely asserts that Continental
breached a written contract to pay severance benefits.*fn1
Because the contract at issue is part of a plan governed by
ERISA, 29 U.S.C. § 1001 et seq., Vesely's state law breach of
contract claim is preempted and we grant judgment in favor of
Continental on Count III.
In 1995, Continental purchased and merged operations with
another insurance company. Predictably, reductions in force
followed. During the merger process, Continental reviewed its
severance benefits policy and concluded, in part because the
other company's severance policy provided greater benefits, to
change its severance package. Specifically, it preserved the
established policy as "Option 1" and developed a second severance
track it named "Option 2."
An employee choosing Option 1 would receive 26 weeks of
benefits; under Option 2, an employee would receive 52 weeks of
benefits. But an employee electing Option 2 was required to sign
a document titled "Exception to Severance Policy: General Release
and Settlement Agreement," in which the employee released all
claims against Continental. Under either option, an employee who
declines the offer of a new position is not eligible for benefits
unless the offer includes a 10% pay cut, and employees reinstated
within the time period of their severance are required to repay
money received for the remainder of the period. Additionally,
under either option, the employee's health benefits continued
during the severance period. Since the new policy went into
effect in 1995, Continental has offered the options choice to
more than 1,000 employees fired in reductions in force.
On March 25, 1999, Continental informed Vesely that her
position, Secretary II in the Commercial Insurance Ops
Department, would be eliminated on May 28, 1999. One hundred and
eighteen other employees in the Commercial Insurance Department
received similar employment termination notices.
On that same day, March 25, Vesely received a packet of
materials outlining benefits for which she might be eligible.
(R.13, Costello Aff. Ex. A, RIF Information Package.) Among those
materials was a cover letter explaining the contents of the
packet; a severance benefit option worksheet setting forth the
benefits Vesely would receive under Option 1 and Option 2; a
document calculating the "Total Enhanced Severance Package"
Vesely would receive if she elected Option 2 ($30,704.27); a
"Commercial Insurance Employee Fact Sheet" explaining her
severance options and the conditions imposed under each option;
and a copy of the General Release, with instructions that Vesely
must sign it to receive the enhanced severance benefits under
On April 6, 1999, Vesely signed and returned the General
Release to Mariann Costello, the employee charged with
coordinating severance benefits to RIF employees. On May 26, two
days before the scheduled termination of Vesely's job, however,
Continental fired Vesely for alleged misconduct and refused to
pay her any severance benefits. She filed this lawsuit alleging,
among other things, breach of contract based on Continental's
refusal to pay the severance benefits listed in the General
Release she signed.
At issue is whether the General Release signed by Vesely is
actually part of an employee benefit plan. ERISA
"preempts a state law claim if the claim requires the court to
interpret or apply the terms of an employee benefit plan, which
the Supreme Court has defined as `benefits whose provision by
nature requires an ongoing administrative program to meet the
employer's obligation.'" Collins v. Ralston Purina Co.,
147 F.3d 592, 595 (7th Cir. 1998) (quoting Fort Halifax Packaging
Co. v. Coyne, 482 U.S. 1, 11, 107 S.Ct. 2211, 96 L.Ed.2d 1
It is beyond question that the General Release required to
receive benefits under Option 2 is related to Continental's
severance package, which in turn is an employee benefit plan
governed by ERISA. Here, as in Collins, the procedures
necessary to administer Continental's obligations under Options 1
and 2 are extensive, and Vesely's attempt to squeeze her case
within the "one-time, lump sum payment" facts of Fort Halifax
is simply futile. Here, as opposed to the one-time disbursement
at issue in Fort Halifax, Continental's plan requires "multiple
payments to various [employees], at different times and under
different circumstances." Collins, 147 F.3d at 595. Indeed,
here, the General Release actually provides a list of the 119
employees fired in the reduction in force that caught Vesely,
their positions, their ages, and whether they were offered Option
2. Both Option 1 and Option 2 have separate eligibility
guidelines and formulae for calculating the disbursement due;
both condition payments to those who have not been offered a
replacement position; and, under either option, Continental
agreed to continue health and dental care coverage, life
insurance, and other group benefits. Further, former employees
who receive severance pay but are subsequently rehired by
Continental must repay benefits for the remaining severance
period. The administrative tasks required to organize these
benefits, not to mention the record-keeping, is significant and
Vesely makes much of the word "exception" in the General
Release's title: "Exception to Severance Policy." She argues that
the word "exception" takes the General Release out of
Continental's ERISA plan; that the plain meaning of "exception"
demonstrates the document's status as an independent contract. We
believe, however, that the document's title, as well as its
contents, clearly demonstrates that the Release is an integral
component of the ERISA plan. The only way a Continental employee
fired in a RIF can obtain the enhanced 52-week benefits is to
sign the Release. Obviously, the Release "relates to"
Continental's benefit plan. See Dranchak v. Akzo Nobel Inc.,
88 F.3d 457, 459 (7th Cir. 1996) ("The letter agreements affect
ERISA plans, state law enforcing the letter agreements would
relate to the plans, and the promises they contain therefore must
stand or fall together under federal common law.").
Vesely's attempt to divorce the $30,704.27 payment provision
from the other promises contained in the Release is no more
successful: "Portions of the letter agreements that promise the
continuation of wages, favorable recommendations, and so on,
cannot sensibly be divorced from the portions that deal with
pension and welfare benefits." Dranchak, 88 F.3d at 459.
In sum, the General Release Vesely signed relates to
Continental's ERISA plan. Therefore, ERISA preempts Vesely's
state law contract claim. For this reason, we deny Vesely's
summary judgment motion on Count III and grant Continental's
cross motion for summary judgment on Count III.
Vesely's motions for partial judgment on the pleadings, (R.
7-1), and for partial summary judgment on Count III, (R. 7-2),
are denied; Continental's cross-motion for summary judgment as to
Count III, (R. 9-1), is granted.
The stay of proceedings on Continental's motion for summary
judgment on the remaining claims, (R. 18), is hereby lifted.
Having reviewed the moving papers, we
conclude that the issues surrounding Vesely's ERISA claim are too
factual to support summary judgment. Although Continental's
motion with respect to Vesely's Title VII and ADEA claims appears
well taken, we deny Continental's summary judgment motion, (R.
18-1), in its entirety in favor of efficient adjudication. We
urge Vesely to reevaluate these claims at the close of discovery
and, if necessary, will revisit the issue at the close of
Finally, the parties have filed a motion to extend the
discovery schedule. (R. 25-1.) We grant the motion; discovery
will close on August 31, 2000. Trial is hereby set for September
18, 2000, at 10:00 a.m. The Court will hold a status hearing in
open court on July 20, 2000, at 9:45 a.m.