According to the Complaint’s well-plead allegations, the
plaintiff executives were covered by a Supplemental Executive Retirement Plan
(SERP), which contained a change of control provision. The individual defendants were Board members
and/or executives of the employer and also owned an investment fund, which was a
shareholder of the employer corporation and was also a defendant. The investment fund agreed to sell its shares
in the employer to another investment fund, which triggered the SERP’s Change
of Control provision and created a $13M liability to Plaintiffs. When the purchasing company found out about
the $13M liability, it threatened to back out of the deal. The individual defendants then convinced the
employer’s Board to terminate the SERP – without notifying the Plaintiffs – and
consummated the sale the following month. At least one of the individual
defendants made $10M from the sale.
Plaintiffs were notified of the SERP termination the following month and
then brought suit for tortious interference with contract.
Defendants asserted that Plaintiffs’ claims were completely
pre-empted under §1132(a)(1)(B) of ERISA, removed the case to federal court and
moved to dismiss. The District Court
granted the Motion and this appeal followed.
The Sixth Circuit concluded that the tortious interference claim was not
completely pre-empted because the merit of the claim was independent of the
terms of the SERP.
The issue here is whether Plaintiffs’ state-law “tortious
interference with contractual relations” claim is within the scope of §
1132(a)(1)(B) [the complete pre-emption provision] for purposes of this rule. A
claim is within the scope of § 1132(a)(1)(B) for that purpose if two
requirements are met: (1) the plaintiff complains about the denial of benefits
to which he is entitled “only because of the terms of an ERISA-regulated
employee benefit plan”; and (2) the plaintiff does not allege the violation of
any “legal duty (state or federal) independent of ERISA or the plan terms[.]” Id.
at 210.
Plaintiffs’ tortious interference claim was independent from
the SERP because the state-law duty was not dependent upon the terms of the
SERP and the damages would be paid, if at all, by Defendants and not by the
SERP or the employer.
Defendants’ duty not to interfere with Plaintiffs’ SERP
agreement with Metaldyne arises under Michigan tort law, not the terms of the SERP
itself. And more to the point—unlike the state-law duties in Arditi and Davila,
respectively—Defendants’ duty is not derived from, or conditioned upon,
the terms of the SERP. Nobody needs to
interpret the plan to determine whether that duty exists. Thus, Plaintiffs’
claim is based upon a duty that is “independent of ERISA [and] the plan terms[.]”
Davila, 542 U.S. at 210.
The Court rejected the defense argument that a tortious interference
claim required proof of a breach, which in turn, required an interpretation of
the terms of the SERP:
But the issue is immaterial here, because under Michigan law
one party’s complete repudiation of a contract is enough to establish breach. . . . And Plaintiffs have alleged facts amounting to
repudiation here. See Complaint ¶ 41 (“on December 18, 2006, without
stating a reason, or giving plaintiffs any opportunity to be heard, [the
Metaldyne Board] declared the Amended SERP invalid”).
A determination of Defendants’ liability therefore does not
require any interpretation of the SERP’s terms. It is true, of course, that
those terms would likely be relevant in measuring the amount of Plaintiffs’
damages. As shown above, however, that is beside the point for purposes of Davila’s
second prong. Moreover, in this case, as in Stevenson, any damages
“would be payable from [Defendants’] assets, not from the” plan itself. 609
F.3d at 61. Finally, Heartland’s remaining arguments pertain less to preemption
under § 1132(a)(1)(B) than they do to whether Plaintiffs’ claims are [expressly]
preempted under § 1144(a)—which is an issue upon which we take no position
here.
NOTICE:
This summary is designed merely to inform and alert you of recent legal
developments. It does not constitute legal advice and does not apply to any
particular situation because different facts could lead to different results.
Information here can change or be amended without notice. Readers should not
act upon this information without legal advice. If you have any questions about
anything you have read, you should consult with or retain an employment
attorney.
