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Kvinlaug v. Claire's Stores

March 29, 2010


The opinion of the court was delivered by: Judge Ronald A. Guzmán


Debbie Kvinlaug has sued her former employer, Claire's Stores, Inc. ("Claire's"), and alleges that it wrongfully denied her benefits in violation of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §1001, et seq. (Count I) or, in the alternative, breached a contract (Count II) and violated the Illinois Wage Payment and Collection Act (Count III). Defendant has moved pursuant to Federal Rule of Civil Procedure ("Rule") 12(b)(6) to dismiss Counts II and III of the Second Amended Complaint. For the reasons provided in this Memorandum Opinion and Order, the Court grants the motion.


Kvinlaug was a Claire's executive employed at the Claire's headquarters in Hoffman Estates, Illinois. (Second Am. Compl. ¶¶ 2, 9.) During her employment, the parties entered into a Change in Control Termination Protection Agreement ("Agreement"). (Id. ¶¶ 9, 17, 18.) Pursuant to the Agreement, upon the occurrence of certain conditions, Kvinlaug was entitled to receive benefits, bonuses, deferred compensation, severance payments, continuation of health benefits and other compensation. (Id. ¶ 18.) The Agreement provides that when there is a change of control in the company (as defined in the Claire's Amended and Restated 2005 Incentive Compensation Plan), Kvinlaug would be entitled to benefits if (1) "good reason" exists for her resignation and (2) she gives proper notice within one year of her obtaining knowledge of the good reason. (Id. ¶¶ 21, 32; id.,Ex. A, Change in Control Termination Protection Agreement ¶ 4; id., Schedule A, ¶ X(1).) The Agreement defines "good reason" in part as "any materially adverse alteration in Executive's title or in the nature or status of Executive's responsibilities or conditions of employment from those in effect immediately prior to such Change in Control." (Id. ¶ 23; see id., Ex. A, Change in Control Termination Protection Agreement, Schedule A, ¶ X(1).)

A change of control within the meaning of the Agreement occurred in May 2007. (Second Am. Compl. ¶ 24.) On March 13, 2008, Kvinlaug was informed of a pending material adverse alteration in her title and the nature and status of her responsibilities and work conditions. (Id. ¶¶ 25-27.) Kvinlaug provided Claire's with a notice of her resignation on February 2, 2009; February 17, 2009; and March 9, 2009, and subsequently applied for benefits under the Agreement. (Id. ¶¶ 30, 31, 33). Kvinlaug terminated her employment with Claire's. (Id. ¶ 34.) Claire's told Kvinlaug that she was not entitled to the requested benefits. (Id. ¶ 31.) Kvinlaug alleges that she has exhausted all administrative remedies available under the terms and conditions of the Agreement and that any further exhaustion of remedies is futile. (Id.)


To withstand a Rule 12(b)(6) motion to dismiss, the complaint must include "a short and plain statement of the claim showing that the pleader is entitled to relief...." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007). "Even after Twombly, courts must still approach motions under Rule 12(b)(6) by constru[ing] the complaint in the light most favorable to the plaintiff, accepting as true all well-pleaded facts alleged, and drawing all possible inferences in her favor." Hecker v. Deere & Co., 556 F.3d 575, 580 (7th Cir. 2009) (internal quotations omitted), cert. denied, 130 S.Ct. 1141 (2010). Factual allegations must be enough to raise a right to relief above the speculative level, and "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Bell Atl. Corp., 550 U.S. at 555 (quotation omitted).

Defendant*fn1 argues that Kvinlaug's state law claims should be dismissed because she alleges that the contract is subject to ERISA. (Mem. Law Supp. Def.'s Mot. Dismiss Pl.'s Second Am. Compl. 5-6.) Kvinlaug argues that determination of ERISA's applicability is premature at this stage of the proceedings. (Pl.'s Resp. Def.'s Mot. Dismiss 6-7.)

"The purpose of ERISA is to provide a uniform regulatory regime over employee benefit plans." Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004). "ERISA includes expansive pre-emption provisions, which are intended to ensure that employee benefit plans regulation would be exclusively a federal concern." Id. (citations omitted). Thus, ERISA provides that it "shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan." 29 U.S.C. § 1144(a).

An "employee welfare benefit plan is defined by the legislation, 29 U.S.C. § 1002(1)." Postma v. Paul Revere Life Ins. Co., 223 F.3d 533, 537 (7th Cir. 2000). Five elements are necessary:

(1) a plan, fund, or program, (2) established or maintained, (3) by an employer or by an employee organization, or by both, (4) for the purpose of providing medical, surgical, hospital care, sickness, accident, disability, death, ERISA permits suits to recover benefits only against the Plan as an entity., 88 F.3d 1482, 1490 (7th Cir. 2002); unemployment or vacation benefits, apprenticeship or other training programs, day care centers, scholarship funds, prepaid legal services or severance benefits, (5) to participants or their beneficiaries.

Id. (emphasis added). "In general, consistent with the broad remedial purpose of ERISA to ensure protection for participants in employee benefit plans, courts in this Circuit construe the definition of an employee welfare benefit plan under ERISA liberally." Price v. Minn. Life Ins. Co., No. 06-cv-1040-DRH, 2008 WL 687131, at *3, (S.D. Ill. Mar. 10, 2008). Where it is possible to determine whether a particular policy is a plan, fund or program under ERISA based on the language of an agreement, the Court may determine preemption on a motion to dismiss. See, e.g., Winters v. UNUM Life Ins. Co. of Am., 232 F. Supp. 2d 918, 921 (W.D. Wis. 2002); Reber v. Provident Life & Accident Ins. Co., 93 F. Supp. 2d 995, 1010 (S.D. Ind. July 16, 2000); Gupta v. Freixenet, USA, Inc., 908 F. Supp. 557, 563 (N.D. Ill. 1995); Cook v. Standard Ins. Co., No. 07-3316, 2008 WL 345539, at *2 (C.D. Ill. Feb. 7, 2008).

The Agreement's language shows that Claire's established the Change in Control Termination plan in order to provide its executives specific severance benefits in the event of a change in control to protect them from risks of a change in control of the company. (See Second Am. Compl.,Ex. A, Change in Control Termination Protection Agreement.) It is clear that the Agreement is an employee welfare benefit plan because its plain language provides benefits, such as severance payments and continuation of health benefits, to its executives. (Id. ¶ 4.) In addition, the Agreement references other employee welfare benefit plans such as Claire's annual incentive bonus plan, deferred compensation plan, Amended and Restated 2005 Incentive Compensation Plan, health benefit plan and long-term disability program. (See id. ¶¶ 3(a), 3(b), 4(b); id., Schedule A, ¶¶ IV, VI, X(1), XIII.)

However, "[t]he decisive inquiry in determining whether a severance plan falls within ERISA's coverage is whether the plan requires an ongoing administrative program to meet the employer's obligation." Bowles v. Quantum Chem. Co., 266 F.3d 622, 631 (7th Cir. 2001). "ERISA applies when a severance plan potentially places periodic demands on [an employer's] assets that create a need for financial coordination and control." Id. (quotation omitted). Because a "requirement of a one-time, lump-sum payment triggered by a single ...

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