Cancelling a SERP and the Limits of Preemption

One of the more singularly interesting problems in ERISA litigation for anyone who, like me, greatly enjoys the complexities of civil procedure is the interplay of preemption (which, as we all know, is very broad under ERISA) and removal from state court to federal court. We all know that many plan participants would prefer to litigate disputes with plans under state laws rather than under ERISA, as such state causes of action may provide broader recoveries, easier burdens of proof, and the right to a jury; further, those same participants would, for various tactical reasons, prefer, if at all possible, to press their claims in state courts and not in federal courts. ERISA, and the body of jurisprudence that has built up around it, seeks to thwart these preferences by, first, broadly preempting state law claims that impact the duties imposed by or that exist under a plan, and, second, by allowing for removal to federal court of even purely state law claims if, in fact, they are really just ERISA claims in state law clothing; preemption is allowed under those circumstances by means of the doctrine of complete preemption.

But as participants and their lawyers often argue, there must be some limit on the scope of preemption and on the ability of defendants to remove purely state law claims and litigate them in federal court as ERISA claims (or else have them dismissed outright if the participant does not proceed with an alternative ERISA based cause of action). In many circuits, and under a fair reading of much of the case law on the issue, that limit may exist, but it resides far out there; few state law claims based on harms arising under or related to an ERISA plan will be deemed by courts to be so tangential to the plan as to avoid preemption and, where necessary, removal to federal court on the basis of the preempted status of the state law claim. However, the Sixth Circuit recently found that certain claims related to SERPs could fall outside those boundaries, and thus be neither preempted nor subject to removal to federal court. The Court found that the dispute over the SERPs concerned a decision to cancel them so as to smooth the sailing for a particular corporate acquisition, and the Court found that under those circumstances, the executives who were participants in the SERPs could prosecute a state law claim in state court, on the thesis that it does not affect the terms of the SERPs or the duties imposed by it. The Court found that the state law claims did not require interpreting the SERPs or applying duties owed under them, but only required reference to the SERPs for the specific purpose of determining the damages due the executives if the SERPs were, as alleged, canceled in violation of state law. The Sixth Circuit found that this reference to the SERPs to calculate the damages on the state law claim was not sufficient to invoke preemption to an extent needed to allow removal to the federal court on the basis of complete preemption. The decision is Gardner v. Heartland Industrial Partners, which is discussed in some detail in this recent article from Plansponsor.
 

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