Bob Cogan Mitch Bearden Shawn Bryan David M. Connelly Trey Corish Wade Crawford James Crovato Thomas Davis Marc Durand James Garrity John Gucciardo Dina Hanan Ann Harris Bob Holt Chris Hybarger Jeff K. Layman Patrick McCullom Todd McDonald David M. McLaughlin Ken Moorman Michael Moroney Tom Nauta Gary Nielsen John Noren Paul Oleyar David O'Shea Patricia Purdy Bob Pyskadlo Robert J. Ruinen Amy Straight Brian Stumm Michael Whalen v. Phoenix Life Insurance Company Phoenix Home Life Mutual Insurance Company Group Sales Representative Deferred Compensation Plan Benefit Plans Committee of Phoenix Home Life Mutual Insurance Company

Citations: 310 F.3d 238; 29 Employee Benefits Cas. (BNA) 1485; 2002 U.S. App. LEXIS 23233Docket: 02-1660

Court: Court of Appeals for the First Circuit; November 7, 2002; Federal Appellate Court

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Plaintiff-appellants, a group of former sales representatives from Phoenix Home Life Mutual Insurance Company (now Phoenix Life Insurance Company), appealed the dismissal of their complaint against the company and associated entities for alleged violations of the Employee Retirement Income Security Act (ERISA) and contract law related to a deferred compensation plan. The Plan, established in 1997, aimed to provide supplemental retirement benefits for select sales employees and included provisions for retroactive benefits for the years 1994-96. However, the plaintiffs noted that no funds were set aside for the Plan, and the amounts credited to their accounts were part of Phoenix Life's general liabilities.

In late 1999, the plaintiffs' employment was transferred to a subsidiary, Phoenix American Life Insurance Company, without their knowledge. Subsequently, GE Financial Assurance Holdings, Inc. announced its acquisition of Phoenix American, which closed in April 2000. The plaintiffs contended they became employees of GEFA following this acquisition.

The original Plan outlined specific conditions for benefit payments, which included reaching retirement age, death while actively employed, permanent and total disability after five years, or elimination of the participant's position. The court ultimately affirmed the district court's dismissal of the case.

The Plan includes an amendment clause allowing the Company to modify it, including retroactive changes, effective upon the stated date and binding on all Participants and Beneficiaries, provided such amendments do not negatively impact benefits already accrued or due based on prior events. On March 28, 2000, prior to GEFA's acquisition of Phoenix American, the Benefits Plan Committee adopted the First Amendment, which ceased all benefit accruals as of March 31, 2000, and specified that subsequent references to the 'Company' would pertain to GE Financial Assurance Holdings, Inc. The amendment's validity was contingent upon the successful closing of the acquisition, rendering it void otherwise.

On November 7, 2001, plaintiffs filed a lawsuit in the District of Maine, alleging ERISA violations, breach of contract, and promissory estoppel. A magistrate judge recommended dismissing the case on April 4, 2002, asserting that the plaintiffs' contract claim was preempted by ERISA and that defendants did not breach ERISA by not providing immediate payment of accrued benefits post-sale. The district court affirmed this recommendation on May 6, 2002.

The court dismissed the claims under Rule 12(b)(6), reviewing the dismissal de novo. Plaintiffs argued that the defendants violated ERISA by failing to provide immediate lump-sum payments upon the acquisition, claiming their employment with GEFA triggered their entitlement to benefits under section 5.2(d). However, the First Amendment to the Plan precluded such payments, clarifying that benefits are due only when positions are eliminated by GEFA, not Phoenix Home Life, a claim the plaintiffs did not substantiate.

Plaintiffs argue that the First Amendment to the Plan violates ERISA's anti-cutback provision under 29 U.S.C. § 1054(g)(1), which prohibits the reduction of accrued benefits through plan amendments, except for specific exceptions. However, the Plan is categorized as a 'top hat' plan, defined by ERISA as an unfunded plan maintained for deferred compensation for a select group of management or highly compensated employees. As such, top hat plans are exempt from ERISA's anti-cutback provision, confirmed by case law (Demery v. Extebank Deferred Comp. Plan).

Furthermore, the court dismisses the plaintiffs' breach of contract claim, asserting that there is no independent federal common law cause of action outside of ERISA for such claims. Under ERISA, disputes regarding benefits must be resolved under 502(a)(1)(B), which provides the exclusive federal remedy. Plaintiffs' assertion that top hat plans should be interpreted based on common law principles does not support a separate breach of contract action but should be considered within the context of ERISA.

The court affirms the dismissal of the claim, noting that the district court also dismissed a promissory estoppel claim due to insufficient allegations, a point not contested by the plaintiffs on appeal. Additional arguments by plaintiffs regarding factual determinations and plan administrator conflicts of interest are also deemed insufficient for reversal.