Marvin A. McNatt v. Allied-Signal, Inc., Richard A. Graser, and James A. Greenslade

Citations: 56 F.3d 72; 1995 U.S. App. LEXIS 19873; 1995 WL 298582Docket: 93-56381

Court: Court of Appeals for the Ninth Circuit; May 16, 1995; Federal Appellate Court

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Marvin A. McNatt appeals the summary judgment granted by the district court in favor of his former employer, Allied-Signal, Inc., and supervisors Richard Graser and James Greenslade, concerning multiple alleged violations of California law related to his employment and termination. The district court affirmed its jurisdiction and ruled in favor of the defendants on all claims except for the breach of the sales commission contract, where McNatt demonstrated a triable issue of material fact. 

McNatt initially filed his complaint in California Superior Court on August 1, 1989, citing 17 causes of action, including wrongful discharge, fraud, and emotional distress. The defendants removed the case to federal court, asserting diversity jurisdiction, which the district court initially accepted. However, a prior appellate panel reversed this decision, questioning the diversity concerning Graser and instructing the district court to gather further evidence. Upon the defendants’ failure to provide such evidence, McNatt sought to remand the case, but the district court denied this motion, asserting jurisdiction based on the preemption of his fraudulent concealment claim by the Employee Retirement Income Security Act of 1974 (ERISA). 

On appeal, McNatt argued that the removal was improper. The appellate court reviewed the district court's assertion of subject-matter jurisdiction de novo and concluded that it was properly exercised at the time of final judgment.

McNatt argues that the district court violated his due process rights by concluding that ERISA preemption provided a basis for federal jurisdiction, rather than considering diversity jurisdiction as initially remanded. He contends that the district court's decision, made three years after his complaint was filed, was fundamentally unfair. Despite sympathizing with McNatt’s concerns regarding the delay, it was determined that he was not denied due process. The district court's subsequent consideration of ERISA preemption as a jurisdictional basis was permissible, given that the complaint involved an ERISA-covered pension plan and the defendants raised ERISA preemption in their answer.

Further, McNatt contests the district court's finding that ERISA preempts his fraudulent concealment claim, asserting that the fraud occurred before he became a plan participant. He cites Perry v. P*I*E Nationwide, Inc. to argue that claims based on misconduct before becoming a participant are not preempted. However, the court clarifies that standing under ERISA is determined by the plaintiff's status at the time the lawsuit is filed, not when the alleged misconduct occurred. Thus, the relevant inquiry is whether McNatt was a "participant" under ERISA when he filed his suit in August 1989, one year post-termination.

ERISA defines "participant" as any employee or former employee eligible for benefits from an employee benefit plan. At the time McNatt filed his suit, he was a former employee of Allied, covered under its health plan, and eligible for continued benefits, thus qualifying as a "participant." McNatt's fraudulent concealment claim, concerning a covered plan, is preempted by ERISA, which allows for federal jurisdiction and enables the district court to exercise pendent jurisdiction over his other claims. 

The district court determined that McNatt did not demonstrate a triable issue regarding any ERISA violations by the defendants. The only potential claim under ERISA would relate to Allied's obligation to notify him of the plan's terms, which requires plan administrators to provide a summary plan description within 90 days of becoming a participant. It is established that McNatt was informed about a new health plan in September 1987, attended informational sessions in January 1988, enrolled on February 2, 1988, and received the summary plan description shortly thereafter. 

The crux of McNatt's claim hinges on whether he became a participant within 90 days prior to receiving the summary plan description. While the district court assumed his participation began upon enrollment, a recent ruling clarifies that an employee is considered a participant once eligible for benefits, which for McNatt was January 1, 1988. Since he received the summary plan description by March 1, 1988, this notification was timely, and thus Allied did not violate ERISA's requirements.

McNatt's remaining state-law claims, concerning his discharge and unpaid commissions, are not related to the health plan and are not preempted by ERISA. Each set of claims will be examined separately.

Claims related to McNatt's termination include counts for breach of termination conditions, breach of good faith and fair dealing, and breach of contract for permanent employment. McNatt argues that Allied breached its duty by terminating him without cause, while Allied claims McNatt was an "at-will" employee, thus justifying his termination for any reason. Allied also contends that McNatt's lack of sales of F20 retrofit kits provided sufficient cause for his termination. Despite evidence suggesting McNatt could only be terminated for cause, summary judgment was granted in favor of Allied, confirming the termination was justified due to McNatt's inadequate job performance, particularly during the last two years of his employment when he failed to sell any retrofit kits, unlike his peers.

McNatt received multiple warnings regarding his performance, and despite his claims of inadequate territory assignment, his own communications indicated potential sales opportunities. The court found no evidence supporting McNatt's claims of unrealistic sales objectives. 

In addition to termination claims, McNatt's complaint includes several counts regarding alleged unpaid commissions, including breach of sales commission contract, negligence, fraud, and interference with contractual relations. He claims approximately $30,000 in commissions from a special agreement for Hawker aircraft sales and $4,500 from the F20 program. However, the court noted that claims related to the Hawker commissions are barred by a two-year statute of limitations, as the alleged breaches occurred prior to the filing of McNatt's suit. A triable issue of fact remains regarding the F20 program commissions.

McNatt lacks evidence to support claims for unpaid commissions on Hawker aircraft sales, as he received commissions only for specific aircraft sold within a stipulated timeframe and did not sell any others within that period. Although he sold aircraft with spec numbers 57 and 64, these were not covered by his agreement. For the F20 retrofit kits, McNatt claims $4,500 in commissions, but evidence only partially supports this assertion. He admits he did not sell any kits prior to his termination but argues he should receive credit for an order from Occidental Chemical made on his termination date. The record indicates he played a significant role in this sale, although he acknowledged that sales are not finalized until payment and delivery occur. The court found a genuine issue of material fact regarding McNatt's entitlement to a commission for the Occidental sale. The district court’s jurisdiction over the action was upheld, and while it rejected several of McNatt's claims, it reversed the summary judgment on the F20 retrofit kit claim, leading to a partial affirmation and remand for further proceedings.