Lund, et al. v. Citizens, et al.

• Court: District Court, D. New Hampshire
• Decided: June 25, 1998
• Docket: CV-97-183-M
• Status: Published

Opinion

Lund, et al. v. Citizens, et al. CV-97-183-M 06/25/98 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Richard Lund and John L. Claps, Plaintiffs

v. Civil No. 97-183-M

Citizens Financial Group, Inc. and Citizens Bank New Hampshire, Defendants

O R D E R

By order dated March 5, 1998, both defendants' motion to

dismiss and plaintiffs' motion to remand were denied without

prejudice because the record was insufficient to determine

whether the disputed Supplemental Executive Retirement Plan

("SERP") was or was not exempt from Employee Retirement Income

Security Act ("ERISA") governance. Defendants have renewed their

motion to dismiss and provided additional information needed to

resolve the exemption issue. Plaintiffs object to defendants'

renewed motion.

The parties now agree that plaintiffs' salaries during the

years in guestion were insufficient to generate amounts necessary

to gualify the SERP as an unfunded excess benefit plan within the

meaning of 29 U.S.C.A. § 1003(b)(5) and § 1002(36), as the SERP

applied to them. See Order at 6-8 (March 5, 1998). Thus, the

SERP is not exempt from ERISA, and plaintiffs' state law claims

are preempted.1 See id. at 3.

1 Plaintiffs continue to argue that their state law claims are not preempted because the SERP is exempt from ERISA, and Defendants also renew their motion to dismiss plaintiffs'

ERISA claims on grounds that the SERP is a "top hat" plan, so

exempt from ERISA's fiduciary requirements, and that plaintiffs

failed to exhaust their administrative remedies. Each issue is

addressed in turn.

A. Breach of Fiduciary Duty

An unfunded plan "maintained by an employer primarily for

the purpose of providing deferred compensation for a select group

of management or highly compensated employees" is exempt from

many of ERISA's requirements, including the fiduciary

responsibility provisions.2 29 U.S.C.A. § 1101(a)(1) and § 1104;

see also Spacek v. Maritime Ass'n, I L A Pension Plan, 134 F.3d

283, 296 (5th Cir. 1998). Such plans are commonly referred to as

"top hat" plans. Id.

The SERP preamble states: "The primary objective of this

non-qualified supplemental retirement plan is to provide those

therefore is not a covered employee benefit plan, but they do not contend that their particular claims do not sufficiently relate to the plan to be covered by ERISA. C f ., e.g., Rosario-Cordero v. Crowley Towing and Transportation Co., 46 F.3d 120, 123 (1st Cir. 1995) (explaining two steps of preemption analysis).

2 The court notes that "top hat" plans are also exempt from the writing requirements normally imposed by ERISA, perhaps permitting beneficiaries to justifiably rely on oral representations even when those representations are inconsistent with plan documents. See, e.g.. In re New Valley Corp., 89 F.3d 143, 153 (3d Cir. 1996), cert, denied, 117 S. C t . 947 (1997). Exemption of "top hat" plans from many of ERISA's requirements and regulations does not, however, exempt such plans from ERISA's enforcement provisions. See Denzler v. Ouestech, Inc., 80 F.3d 97, 100 (4th Cir. 1996); Kemmerer v. ICI Americas Inc., 70 F.3d 281, 287 (3d Cir. 1995).

2 designated Executives a higher level of retirement benefits than

otherwise permitted pension plans gualified under Section 401 (a)

of the Internal Revenue Code of 1986, as amended." Based on its

stated purpose, the SERP appears to gualify as a "top hat" plan

under section 1101(a)(1). Plaintiffs do not contest the SERP's

status as a "top hat" plan and may have intended to drop their

breach of fiduciary duty claim.3

Because the SERP is a "top hat" plan and exempt from ERISA's

fiduciary duty reguirements, plaintiffs' breach of fiduciary duty

claim is dismissed.

B. Exhaustion of Administrative Remedies

Defendants contend that plaintiffs' remaining ERISA claim

must be dismissed because plaintiffs did not first pursue their

claims for benefits through administrative procedures provided by

the SERP. Although ERISA does not expressly reguire exhaustion,

the exhaustion reguirement is interpreted from section 1133 which

reguires a claims procedure. Drinkwater v. Metropolitan Life

Ins. C o ., 846 F.2d 821, 825-26 (1st Cir. 1988) . ERISA reguires

every employee benefit plan to "provide adeguate notice in

writing to any participant or beneficiary whose claim for

benefits under the plan has been denied . . . and afford a

reasonable opportunity to any participant whose claim for

3 In their objection to defendants' renewed motion to dismiss, plaintiffs argue that their ERISA claims in counts VII (for recovery of benefits) and IX (declaratory judgment for entitlement to benefits) are viable, but they do not mention their breach of fiduciary duty claim (Count VIII).

3 benefits has been denied for a full and fair review by the

appropriate named fiduciary of the decision denying the claim."

29 U.S.C.A. § 1133 (1) and (2); see also 29 C.F.R. § 2560.503-1

(1997) .

Because "top hat" plans are exempt from fiduciary

requirements and other regulations imposed by ERISA, it is not

clear that the review process required for ERISA benefit claims

applies to the SERP claims in this case. Nevertheless, because

defendants assert the defense, they must believe that they were

obligated to provide a claims review procedure established under

section 1133.

Based on the record presented, however, the SERP plan

provides no review process as required by section 1133(2).

Although defendants refer to a SERP plan that includes an

"Article 3" titled "Administration" that purportedly provides a

claims procedure, no such document seems to be included in the

present record. Thus, on the record before the court, it would

seem that plaintiffs had no opportunity to obtain administrative

review under the SERP, and certainly were never provided with

plan documents or information sufficient to permit them to pursue

the alleged claims procedure defendants reference.

In addition, the parties pursued their claims for

eligibility for SERP benefits through letters and memos to

defendants' counsel and human resources personnel. The documents

included with the complaint do not show that any of defendants'

representatives notified plaintiffs of a claims procedure or

4 referenced any opportunity for administrative review, or

indicated that they were not pursuing the proper procedure.

Therefore, under the circumstances established by the present

record, the plaintiffs appear to have sufficiently exhausted the

review process available to them, and any further efforts along

the same lines would have been inadeguate or futile. See

Drinkwater, 846 F.2d at 825-26.

Conclusion

For the foregoing reasons, defendants' renewed motion to

dismiss (document no. 21) is granted in part and denied in part.

Plaintiffs' state law claims, counts I through VI, and ERISA

fiduciary duty claim, count VIII, are dismissed.

SO ORDERED.

Steven J. McAuliffe United States District Judge

June 25, 1998

cc: Hamilton R. Krans, Jr., Esg. E. Stephen Murray, Esg. Glenn M. Martin, Esg.