Gilman v. Marsh & McLennan Companies, 826 F.3d 69

Background

In 2004 the New York AG investigated Marsh for contingent commissions and later for alleged criminal bid‑rigging; two Marsh employees, William Gilman and Edward McNenney, were named as co‑conspirators.
Marsh retained Davis Polk to conduct an expanded internal investigation; Marsh’s counsel requested interviews of Gilman and McNenney and warned refusal would lead to termination.
After AIG employees pleaded guilty and the AG filed a civil complaint naming Marsh and the two employees, Marsh suspended Gilman and McNenney with pay and renewed interview demands. Both refused and were fired the next day.
Marsh denied them vesting of stock awards and ERISA severance benefits on the ground they were terminated “for cause” (insubordination/refusal to comply).
Gilman and McNenney sued for the lost employment benefits (ERISA, breach of contract, breach of implied covenant); the district court granted summary judgment to Marsh.
The Second Circuit affirmed, holding the interview demands were reasonable, the firings were for cause, and Marsh’s actions did not amount to state action that would implicate the Fifth Amendment.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Were Marsh’s interview demands reasonable such that refusal could constitute cause?	Gilman/McNenney: demands were coercive and unreasonable, especially given risk of self‑incrimination and prior interviews.	Marsh: employees were implicated in alleged on‑the‑job criminal conduct that threatened the company; reinterview was reasonable and necessary.	Held: demands were reasonable as a matter of law; company had cause to require interviews.
Did Marsh actually fire them "for cause" (vs. RIF) and thus properly deny benefits?	Plaintiffs: terminations may have been part of restructuring or Gilman effectively retired before firing.	Marsh: firings followed express warnings; timing and communications show termination for refusal to cooperate, not RIF; retirement was a preemptive tactic.	Held: no genuine dispute — firings were for cause; Gilman’s purported retirement ineffective.
Did Marsh breach the implied covenant of good faith and fair dealing by firing them?	Plaintiffs: termination under these circumstances was arbitrary and deprived them of contract benefits.	Marsh: conduct was objectively reasonable and not arbitrary; investigations were necessary to protect corporate interests.	Held: no breach — Marsh acted reasonably and did not frustrate contract benefits.
Did Marsh’s cooperation with the AG convert its conduct into state action implicating the Fifth Amendment?	Plaintiffs: Marsh’s cooperation with the AG turned the interview demand into government‑driven compulsion, violating Fifth Amendment and making the demand unreasonable.	Marsh: unlike Stein, there is no evidence of government coercion or that the government forced Marsh’s investigative actions; Marsh had independent corporate reasons to investigate.	Held: no state action; Fifth Amendment argument fails; Stein is distinguishable.

Key Cases Cited

Noll v. Int’l Bus. Mach. Corp., 787 F.3d 89 (2d Cir.) (standard of review for summary judgment)
Barisa v. Charitable Research Found., Inc., 287 A.2d 679 (Del. Super. Ct.) (employer may dismiss when trust in employee is lost)
Moeller v. Wilmington Sav. Fund Soc., 728 A.2d 1177 (Del.) (illegal/criminal conduct can justify termination for cause)
In re Caremark Int’l Inc. Derivative Litig., 698 A.2d 959 (Del. Ch.) (board duties to investigate employee misconduct)
United States v. Solomon, 509 F.2d 863 (2d Cir.) (employer discharge sanction for refusal to answer internal inquiries)
United States v. Stein, 541 F.3d 130 (2d Cir.) (government coercion can convert private action into state action)
D.L. Cromwell Investments, Inc. v. NASD Regulation, Inc., 279 F.3d 155 (2d Cir.) (parallel private‑government investigations do not automatically create state action)
Osborn ex rel. Osborn v. Kemp, 991 A.2d 1153 (Del.) (contracts construed to give effect to all terms; cannot render cause definition illusory)