• Paul M. Sullivan, Jr.

Math means it's not an ERISA plan.

You knew something was up when the Vice-President of Sales left the company as it was about to be sold and expected his "Phantom Stock Appreciation Plan" to pay him his money. He was told he could have it but only if he signed a new non-compete agreement.


He refused. He was fired, allegedly "for cause" instead, according to the defendant.


The Vice-President had already given notice on November 1 that he was voluntarily resigning and provided 60 days' notice. On November 26 the defendant presented the new non-compete as a condition of paying the amounts owed under the Plan. Undeterred, the defendant terminated him allegedly for cause effective December 30, one day before the end of the 60 days' notice's final day.


The Vice-President sued in Louisiana state court for payment of unpaid wages pursuant to state statute and alternatively for breach of contract. The defendant alleged that the Plan was a deferred compensation plan, a top hat plan, an ERISA-governed pension plan and removed the case to federal court. So, the question arises whether the Plan was an ERISA plan or not. If not, no ERISA preemption occurred, and the case would have to go back, be remanded, to state court.


Although the Plan was a hybrid and the case not as clear as some before it, it turned out that the mechanical mathematical formula used to calculate the amount each year which was due the plaintiff (along with the absence of any ongoing administrative procedure needed to calculate that amount or indeed any procedure for applying for a benefit or appealing a benefit denial) meant that the Plan was NOT an ERISA plan.


Defendant had even tried a letter which it sent out after suit was filed claiming to set forth a claim denial and administrative appeal procedure as evidence the Plan did qualify as an ERISA plan. The Court did not agree. Not only that, but because the Plan itself no longer existed and the plaintiff had been the only one enrolled in it, there was no guidance to be had even implicitly from any one else's course of conduct in applying for benefits under the Plan from which a reasonable person to discern an implicit appeal procedure.


The Court found that the Phantom Stock Appreciation Plan was not an ERISA plan, and the Vice-President's claim was not preempted by ERISA either. The Court granted the Vice-President's motion and remanded the case to the state court for him to pursue his Louisiana unpaid wage and breach of contract claims against the Defendant.


Motto: If there is no ERISA plan, you can't make one up afterwards. If it's so simple a child can calculate the amounts due using a mechanical mathematical formula and there is no procedure to apply for or appeal a denial of the amount due, it is probably not an ERISA plan. Wishing cannot make it so, even if we all clap our hands hard. See Fannaly v. LEI Inc., (U.S.D.C. W.D. La., Sept. 22, 2020.)

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