Fannaly v. LEI, Inc., 488 F.Supp.3d 450

Background

Plaintiff Fannaly was VP of Sales & Operations (re-hired 2009); compensation included salary plus bonus/phantom stock appreciation plan (PSAP) measured annually and recorded as bookkeeping entries; PSAP amounts were reported on his W-2 and Medicare taxes were withheld.
PSAP vested annually and payable on termination (other than for cause), change in control, death, or disability; payment could be lump sum or three annual installments and was calculated by a fixed formula based on company appreciation multiplied by a specified percentage.
Fannaly gave 60 days' notice of resignation; after disputes during a company sale and his refusal to sign a separation/non-compete, defendant sent a termination-for-cause letter and declared PSAP amounts forfeited.
Fannaly sued in Louisiana state court for unpaid wages (La. R.S. 23:631) and breach of contract; defendant removed to federal court asserting ERISA preemption, characterizing the PSAP as an ERISA (non‑qualified top‑hat) plan.
Plaintiff moved to remand, arguing the PSAP is not an ERISA plan because (inter alia) it does not require an ongoing administrative scheme nor provide ascertainable procedures for claiming benefits.
The district court held the PSAP did not constitute an ERISA plan (no ongoing administrative scheme; no reasonably ascertainable claims procedures) and granted remand to state court.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the PSAP constitutes an ERISA "plan" (existence element)	PSAP is a one‑time, formulaic deferred/bonus payment; calculations are mechanical and do not require ongoing administration.	PSAP is a written multi‑page plan in effect for years with defined terms and a "for cause" determination—thus an ongoing administrative scheme.	PSAP is not an ERISA plan; no ongoing administrative scheme.
Whether the PSAP requires an ongoing administrative program (Fort Halifax test)	No—payments (if any) are based on a fixed annual formula and paid once or in limited installments; Fort Halifax/Tinoco analogues apply.	Yes—annual calculations over years and termination‑for‑cause review evidence ongoing administration.	No—annual mechanical calculations and limited discretion over "cause" do not create an administrative scheme.
Whether procedures for obtaining or appealing benefits are reasonably ascertainable (Dillingham third factor)	PSAP contains no claim/appeal procedures; plaintiff was sole participant and had no prior practice to follow.	Procedures can be inferred from plan and employer practice; post‑suit correspondence constituted a claims denial.	No—no ascertainable procedures existed at time of alleged forfeiture; post‑hoc letters cannot create a preexisting procedure.
Whether plaintiff's state‑law claims are preempted by ERISA and federal court has jurisdiction	State claims are not preempted because PSAP is not an ERISA plan.	State claims are preempted because PSAP is an ERISA plan; federal jurisdiction proper.	Because PSAP is not an ERISA plan, ERISA does not preempt; remand granted.

Key Cases Cited

Cantrell v. Briggs & Veselka Co., 728 F.3d 444 (5th Cir. 2013) (fixed‑formula deferred compensation paid over time does not necessarily create an ERISA plan)
Fort Halifax Packing Co. v. Coyne, 482 U.S. 1 (1987) (one‑time lump‑sum severance triggered by a single event does not require an ongoing administrative scheme under ERISA)
Tinoco v. Marine Chartering Co., Inc., 311 F.3d 617 (5th Cir. 2002) (one‑time calculation with optional installment payments is not an administrative scheme)
Bogue v. Ampex Corp., 976 F.2d 1319 (9th Cir. 1992) (plan requiring case‑by‑case discretionary determinations supports ERISA plan finding)
Donovan v. Dillingham, 688 F.2d 1367 (11th Cir. 1982) (test for plan existence: identifiable benefits, beneficiaries, source of financing, and procedures)
Mem'l Hosp. Sys. v. Northbrook Life Ins. Co., 904 F.2d 236 (5th Cir. 1990) (surrounding‑circumstances test for whether an ERISA plan exists)