Daft v. Advest, Inc.
658 F.3d 583
6th Cir.2011Background
- Advest established the AE Plan in 1992 for a select group of highly compensated account executives; participants accrue benefits based on yearly gross commissions and are vested after ten years at a specified age, with forfeiture provisions for certain terminations or moves to rivals.
- Plaintiffs, former Advest account executives, resigned in late 2005 after Advest announced Merrill Lynch’s planned acquisition, and upon leaving Advest each plaintiff’s accrued benefits were forfeited under the Plan.
- Plaintiffs filed suit in Ohio state court on July 3, 2006, which Defendants removed to federal court, contending the AE Plan was an ERISA employee pension plan and thus preempted by ERISA.
- The AE Plan Committee denied benefits on February 22, 2007, finding forfeiture under the Plan and concluding the Plan did not violate ERISA’s vesting provisions because it was a top-hat plan under ERISA § 201(2).
- Plaintiffs amended the complaint in 2007, asserting ERISA violations; the district court initially awarded relief on vesting but later ruled the Plan was not a top-hat plan, prompting further appeal.
- The Sixth Circuit ultimately held that the existence of an ERISA plan is a merits issue (not a jurisdictional one), vacated the district court’s top-hat ruling, and remanded to the Plan Committee to address the top-hat issue with a complete record and proper Bakri-factor analysis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether ERISA plan existence is a jurisdictional prerequisite | Daft argues ERISA plan existence is required for federal jurisdiction | Advest argues plan existence is a jurisdictional condition | Not jurisdictional; element of the ERISA claim and forfeited if not raised earlier |
| Whether the AE Plan is a top-hat plan | Plan is not a top-hat; ERISA protections apply | Plan is unfunded deferred compensation for select executives, excluding it from ERISA | Remanded to the AE Plan Committee to determine top-hat status under Bakri factors |
| Proper procedure when top-hat determination is flawed | District court should defer to Committee’s decision | Remand not necessary; merits review acceptable | Remand appropriate to cure record and legal standard deficiencies |
| Adequacy of record and standard of review for top-hat ruling | Committee erred by considering only Bakri factor 4 | Committee’s conclusion should be given deference if within discretion | Remand to fix analytical standard and complete factual record |
| Impact on vesting damages if top-hat remand occurs | Vesting damages may be warranted if top-hat status is rejected | Damages tied to ERISA violations; how remand affects relief | Damages reversed; case remanded for Committee reconsideration on top-hat issue |
Key Cases Cited
- Arbaugh v. Y & H Corp., 546 U.S. 500 (Supreme Court 2006) (jurisdictional labeling; statutory thresholds are relief-related, not jurisdictional)
- Langley v. Daimler-Chrysler Corp., 502 F.3d 475 (6th Cir. 2007) (ERISA plan existence as merits element, not jurisdictional prerequisite)
- Bakri v. Venture Mfg. Co., 473 F.3d 677 (6th Cir. 2007) (Bakri factors for top-hat determination)
- Winnett v. Caterpillar, Inc., 553 F.3d 1000 (6th Cir. 2009) (existence of a union contract as merits element, not jurisdictional)
- Primax Recoveries, Inc. v. Gunter, 433 F.3d 515 (6th Cir. 2006) (classification of claim (legal vs. equitable) under ERISA; jurisdictional label cautioned)