Earl Owens v. Western & Southern Life Ins
16-31174
| 5th Cir. | Jan 4, 2018Background
- Owens and Espat were high-producing Western & Southern employees who joined a company retirement "Plan" (a top-hat plan) and began receiving post-retirement payments after retiring in 2010 and 2012, respectively.
- The Plan includes a forfeiture provision (§4.7) that cancels future payments if a participant, within three years after termination, (1) enters into competitive employment, (2) solicits company employees/clients, or (3) acts in a way that, if still employed, would constitute "Cause" for termination. Western & Southern had a policy that appointment by another insurer would be terminable cause for employees.
- After retirement both appellants became appointed agents for other life insurers and sold policies within three years of retirement. Western & Southern notified them they forfeited rights and demanded repayment of benefits; they did not respond.
- Western & Southern sued in state court to recover benefits; the suit was dismissed as preempted by ERISA because the Plan is a top-hat ERISA plan. Owens and Espat then sued for benefits under the Plan in federal court.
- The district court required exhaustion of administrative remedies, remanded to the plan administrator, which denied benefits based on the forfeiture clause; the district court granted summary judgment to defendants. Plaintiffs appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether participants violated §4.7(b)(1) by becoming appointed agents for other insurers ("competitive employment") | Owens/Espat: they were independent agents, not "employees," and their post-retirement sales were not competitively identical to Western & Southern's business | Western & Southern: appointment and compensated sales for other life insurers are "employment competitive with" the company | Held: Appointment to sell other insurers’ policies within 3 years satisfied §4.7(b)(1); the administrator’s interpretation was fair and reasonable |
| Alternatively, whether conduct fell within §4.7(b)(3) (acts that would have been "Cause" if still employed) | Owens/Espat: (implicitly) policy inapplicable to retirees; no cause exists for post-retirement appointments | Western & Southern: employer policy made such appointments terminable cause; appellants knew the policy and violated it | Held: Appellants’ appointments violated §4.7(b)(3); forfeiture proper |
| Whether plaintiffs may now assert the Plan is not a top-hat plan (thus invoking ordinary ERISA disclosure requirements) | Owens/Espat: Plan is not top-hat; defendants failed to provide summary plan description containing forfeiture clause, rendering it unenforceable | Western & Southern: plaintiffs previously told courts the Plan was top-hat; judicial estoppel bars the new position | Held: Judicial estoppel applies—plaintiffs are bound by earlier representations that the Plan is top-hat |
| Whether the forfeiture clause is unenforceable for failure to meet ERISA disclosure/filing rules for top-hat plans | Owens/Espat: top-hat plans still require disclosures or, minimally, a short filing; Western & Southern failed to comply | Western & Southern: it filed the required short statement under 29 C.F.R. §2520.104-23(b) in 2006 (and updated 2012), satisfying disclosure rules | Held: Defendants met the regulatory filing requirements for a top-hat plan; forfeiture clause enforceable |
Key Cases Cited
- Hagen v. Aetna Ins. Co., 808 F.3d 1022 (5th Cir.) (standard for review where administrator has discretionary authority)
- Cooper v. Hewlett–Packard Co., 592 F.3d 645 (5th Cir.) (abuse-of-discretion standard and substantial-evidence review)
- Vercher v. Alexander & Alexander Inc., 379 F.3d 222 (5th Cir.) (two-step analysis: legal interpretation then abuse of discretion)
- Reliable Home Health Care, Inc. v. Union Cent. Ins. Co., 295 F.3d 505 (5th Cir.) (top-hat plans and ERISA disclosure regime)
- Demery v. Extebank Deferred Comp. Plan (B), 216 F.3d 283 (2d Cir.) (alternative disclosure method for top-hat plans under DOL regulation)
- New Hampshire v. Maine, 532 U.S. 742 (U.S.) (judicial estoppel framework)