728 F.3d 444
5th Cir.2013Background
- Cantrells and Briggs & Veselka Company merged in 2000; Cantrells received ~20% of merged entity, B&V ~80%.
- As part of the merger, Cantrells signed Stock Redemption and Employment Agreements with B&V; redemption valued on cash-basis book value, yielding far less than merger valuation.
- Employment Agreements provide for deferred compensation, with a fixed, quarterly payout schedule subject to a quarterly cap and vesting, plus noncompete and nondisclosure provisions.
- Deferred compensation becomes payable upon a Termination Event (retirement, disability, death, or non-cause termination) and is determined by a fixed formula and vesting schedule; cap calculations and forfeiture terms exist.
- Several other B&V employee-shareholders have similar agreements; some use a 25% cap, others 5% of gross revenue, with close monitoring and potential adjustments if caps are triggered.
- Carol retired in 2012; Patrick retired in 2007; subsequent events led to disputes over eligibility, vesting, and whether the arrangement is an ERISA plan; Cantrells filed state-law claims for deferred compensation, B&V removed to federal court as ERISA preemption, TRO issued, and remand motion denied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Cantrells' deferred compensation is an ERISA plan | Cantrells contend no ERISA plan exists. | B&V contends it is an ERISA plan. | Erisa plan not established; not preempted; no ongoing administrative scheme. |
| Whether federal jurisdiction over ERISA preempts Cantrells' state-law claims | Claims not preempted if no ERISA plan exists. | ERISA preempts state-law claims if plan exists. | Preemption does not apply; state-law claims not preempted because no ERISA plan exists. |
| Whether the district court properly denied remand to state court | Remand appropriate if no ERISA plan exists. | ERISA plan exists; federal jurisdiction proper. | Remand ordered; district court reversed and remanded to state court. |
Key Cases Cited
- Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1 (1987) (requires ongoing administrative scheme for ERISA plan)
- Tinoco v. Marine Chartering Co., Inc., 311 F.3d 617 (5th Cir. 2002) (one-time calculations with fixed formula generally not ERISA plan)
- Peace v. American General Life Insurance Co., 462 F.3d 437 (5th Cir. 2006) (one-time payments not creating ongoing administrative scheme)
- Bogue v. Ampex Corp., 976 F.2d 1319 (9th Cir. 1992) (discretion requirement for ongoing administrative scheme; severance plans may be ERISA)
- Crowell v. Shell Oil Co., 541 F.3d 295 (5th Cir. 2008) (letters within a plan can create ERISA plan where ongoing administration exists)
- Velarde v. PACE Membership Warehouse, Inc., 105 F.3d 1313 (9th Cir. 1997) (minimal discretion alone not enough; ongoing administrative scheme required)
- Clayton v. ConocoPhillips Co., 722 F.3d 279 (5th Cir. 2013) (severance/for good-reason determinations can create ERISA plan)
- Fontenot v. NL Industries, Inc., 953 F.2d 960 (5th Cir. 1992) (administrative scheme may be required depending on termination analysis)
- Perdue v. Burger King Corp., 7 F.3d 1251 (5th Cir. 1993) (widespread severance programs may require administrative setup)
- Whittemore v. Schlumberger Tech. Corp., 976 F.2d 922 (5th Cir. 1992) (severance provisions and administrative setup considerations)