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Lane v. S Bank

United States District Court, S.D. Georgia, Savannah Division

July 17, 2017

JULIAN C. LANE, Jr., Plaintiff,
S BANK, Defendant.


         Defendant S Bank moves to stay discovery in this Employee Retirement Income Security Act (ERISA) action pending resolution of their motion to dismiss Plaintiff Julian C. Lane, Jr.'s Second Amended Complaint. Doc. 52; see also doc. 51 (motion to dismiss). Lane opposes. Docs. 53 & 54.

         I. BACKGROUND[1]

         Lane was employed as First Citizen Bank's (later S Bank) president. As part of the perks of the job, he was party to a “Salary Continuation Agreement” which provided for a deferred compensation retirement plan. In essence, when he hit retirement age he would retire with about $56, 000 a year guaranteed for 15 years. But S Bank came under FDIC scrutiny and it sought to cut some of the fat. So, Lane signed a “Termination Agreement” forfeiting those “top hat” retirement benefits to make the flailing bank look more stable. In exchange, he was told by the other Board executives that he could continue working past retirement and thus earn a salary, compensating him for the sacrifice. A few months later, the Board forced him to retire, leaving him with neither a salary nor retirement benefits. See doc. 50.

         This is not defendant's first attempt to terminate Lane's case. After removing it from Liberty County Superior Court in April 2014, S Bank filed a motion for judgment on the pleadings (doc. 8) and a motion to dismiss the First Amended Complaint (doc. 29). In an order denying plaintiff's renewed motion to remand (doc. 36), the Court deemed moot defendant's motion to dismiss and ordered plaintiff to amend his Complaint again to state claims under ERISA -- which fully preempt his state law claims of fraud in the inducement, promissory estoppel, fiduciary duty, and attorneys' fees. Doc. 49 at 4, 7-10. Lane amended, alleging four claims under ERISA. Doc. 50.

         II. ANALYSIS

         Defendant moves to dismiss Lane's Second Amended Complaint on several grounds, including, inter alia, that 1) they improperly weave preempted state law claims into ERISA claims; 2) he failed to exhaust his administrative remedies; 3) he cannot rely on alleged oral representations to overcome the terms contained within the four corners of the Termination Agreement; 4) he lacks standing to challenge the retirement plan; and, regardless, 5) he knowingly and voluntarily waived any ERISA claims by signing the Termination Agreement. Doc. 51-1 at 8-14.

         Plaintiff responds that 1) he doesn't plead state law claims; 2) there was no “denial of review” triggering any administrative review process and any attempt at administrative exhaustion would have been “unavailable” because the Plan Administrator could not have resurrected the benefits surrendered by the Termination Agreement; 3) defendant's “pure contract”/parole evidence rule argument that he cannot introduce oral representations to interpret the Termination Agreement is not the appropriate standard for evaluating this action; 4) he has standing as an individual; and, 5) any inquiry into the “knowing and voluntary” nature of his ERISA waiver would be so fact-sensitive as to require discovery to investigate it.

         As the issues really boil down to whether plaintiff can assert estoppel based on his reliance upon defendant's promises of continued employment, or if S Bank can argue waiver of ERISA claims, the Court will examine those two issues to determine whether a stay of discovery is appropriate.[2]

         ERISA is a comprehensive statute designed to federalize the regulation of employee welfare benefit plans. However, the statute has interstices, and Congress anticipated that the federal courts would fill those gaps with “a federal common law of rights and obligations under ERISA-regulated plans.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56 (1987). In other words, ERISA's preemption of state law (including state common law) does not mean that all common law concepts are automatically inapplicable in the ERISA context. Pilot, 481 U.S. at 56; accord Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989).

         And estoppel applies in the ERISA context “when the conduct of one party has induced the other party to take a position that would result in harm if the first party's acts were repudiated.” Glass v. United of Omaha Life Ins. Co., 33 F.3d 1341, 1347 (11th Cir. 1994); see also Aramony v. United Way Replacement Benefit Plan, 191 F.3d 140, 151 (2d Cir. 1999) (plaintiffs must show: 1) a promise; 2) reliance on the promise; 3) injury caused by the reliance; and 4) an injustice if the promise is not enforced). “Detrimental reliance” on that inducement is required. Glass, 33 F.3d at 1347. For that, a plaintiff need only demonstrate “a promise that [defendant] reasonably should have expected to induce action or forbearance on [his] part.” Devlin v. Empire Blue Cross & Blue Shield, 274 F.3d 76, 86 (2d Cir. 2001).

         The Second Amended Complaint clearly explains that Lane was promised continued employment as bank president past his date of retirement if he signed off on the post-retirement benefits Termination Agreement. Doc. 50 at ¶¶ 12-14 (under FDIC examination, S Bank sought ways to strengthen its capital position, including eliminating that “top hat” deferred compensation retirement plan it had promised Lane). Had he not been so promised, he would not have given up those benefits. Id. at ¶¶ 13-15 (“To recoup the funds he would have received under the deferred compensation plan, Mr. Lane would need to continue to work and earn a salary.”); ¶ 29 (“Lane surrendered a very valuable asset, i.e. the benefits of his Salary Continuation Agreement, based on the Bank's affirmative assurances that his employment would be continued until such time as [he] chose to retire.”); see also Id. at ¶¶ 17-18 (before signing, Lane even consulted with the Bank's legal counsel and accounting team to try to get the promise in writing; they advised him “such a contractual modification would not have the desired effect of increasing the Bank's capital position” so it couldn't be memorialized, but they did modify his employment agreement to up his age of retirement).

         S Bank got what it wanted (doc. 50 at ¶¶ 16 & 30 (its capital position survived FDIC scrutiny)), and Lane continued doing a superlative job (id. at ¶¶ 20-21). S Bank's Board terminated him anyway. Id. at ¶ 25. It also immediately hired another president -- at the same Board meeting, nonetheless -- who had in fact been contacted long before the Termination Agreement was proposed. Id. at ¶¶ 25-28, 31. And by repudiating its promise, defendant harmed Lane -- he lost his guaranteed 15 years of annual compensation post-retirement and his job, despite being told it too was being guaranteed. Id. at ¶¶ 29, 32-33. These factual allegations appear to be enough (at this stage) to support plaintiff's claim for equitable estoppel, and discovery should go forward to substantiate or repudiate it.

         “Waiver, ” a distinct claim from estoppel, is the “voluntary, intentional relinquishment of a known right” and, while it does not necessarily require reliance, it does require demonstration of some type of bargained-for consideration. Glass, 33 F.3d at 1347-48. Waiver is evaluated by the “totality of the circumstances, ” including:

. . . the plaintiff's education and business experience; the amount of time the plaintiff considered the agreement before signing it; the clarity of the agreement; the plaintiff's opportunity to consult with an attorney; the employer's encouragement or discouragement of consultation with an attorney; and the consideration given in exchange ...

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