Dive Brief:
- A former vice president for American Electric Power failed in his bid to sue the company for denial of employee benefits under the Employee Retirement Income Security Act because his suit sought to “change the rules” of ERISA, the 6th U.S. Circuit Court of Appeals held Monday.
- American Electric fired the plaintiff in Kramer v. American Electric Power Executive Severance Plan for cause, leaving him ineligible to receive severance benefits. He moved to compel the company to produce documents subject to attorney-client privilege, arguing that ERISA’s fiduciary requirements created an exception to that privilege. A district court denied this motion and instead granted summary judgment on the existing administrative record.
- The plaintiff also argued that he had a constitutional right to a jury trial under ERISA, but the district court held that this was not the case. The 6th Circuit upheld, writing that the plaintiff’s arguments misconstrued either ERISA’s text or the court’s precedent. “We reject [the plaintiff’s] request to change the rules,” the court said.
Dive Insight:
In its analysis, the 6th Circuit said that American Electric’s executive severance plan is a type of deferred compensation program known as a “top hat plan.” According to the U.S. Department of Labor, a top hat plan is unfunded — representing “unsecured promises by the employer to pay compensation in the future” — and is almost always offered alongside qualified retirement plans.
Top hat plans are not subject to ERISA’s fiduciary requirements, the 6th Circuit noted, meaning that American Electric did not need to provide access to documents that were subject to attorney-client privilege.
Separately, the plaintiff claimed that the Seventh Amendment right to a jury trial meant that he was entitled to such a trial for his ERISA claims. The 6th Circuit held that ERISA claims for denial of benefits are “equitable in nature,” whereas the right to a jury trial “applies only to ‘suits in which legal rights were to be ascertained and determined’; it does not extend to equitable claims seeking equitable remedies.”
The case demonstrates ERISA’s complexity. The law, which governs employee benefits areas ranging from retirement to health insurance, can be overwhelming for HR professionals to comply with, attorneys previously told HR Dive.
