​​Claims Processes in Stock Plan and Other non-ERISA Litigation

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2016.01.29   ERISA Formal Claim not Required - Employer Repudiation of Benefits Sufficed.  In Bond v. Marriott, a  4th Circuit panel unanimously held that the ERISA claims of former employees are barred by the statute of limitations. The court held that ERISA's “formal denial” rule should not be applied in cases that do not involve an internal review process and a formal claim denial.  Rather, the court emphasized that the operative question is whether the fiduciary has “clearly repudiated” the beneficiary’s entitlement to benefits. Applying that rule, the panel held that the plan prospectus adequately signaled such clear repudiation because it informed participants that the plan was a “top hat” plan exempt from ERISA’s vesting requirements. The court found it dispositive that --

  • “Marriott informed the appellants in 1978 that the plan was exempt from ERISA’s vesting requirements.  The appellants then waited more than 30 years to file suit, alleging that the plan violates ERISA’s vesting requirements.”

2014.03.04  Standard of Review in Executive Plans - Artlcle.  See this article for case law and good discussion of how courts have differed when applying the deferential Firestone standard applicable under ERISA plans (re "arbitrary and capricious" review) to non-qualified plans.

2012 Failure to Follow Claims Procedures results in Lost Deference Per the Court decision, "Roth's decision is not entitled to deference because the agreements and plans grant discretionary authority only to the ECC, and the ECC neither decided appellees' claims nor delegated any authority to Roth."  ​Schaffart v. ONEOK, 686 F.3d 461, at 471 (8th Cir. 2012), with the court's decision citing this authority:

  • Under Delaware law, “when a stock option committee is vested with final binding and conclusive authority to determine a participant's right to receive or retain benefits, that decision made in accordance with the provisions of the agreement will not be second guessed by the Court absent a showing of fraud or bad faith.” W.R. Berkley Corp. v. Hall, No. Civ. A 03C–12–146WCC, 2005 WL 406348, at *4(Del.Super.Ct. Feb. 16, 2005) (unpublished) (emphasis added); accord Schwartz v. Century Circuit, Inc., 163 A.2d 793, 796 (Del.Ch.1960).

2002  Arbitrary & Capricious Review Denied (1st Cir.)  

The First Circuit refused to apply an arbitrary and capricious standard in reviewing a stock option plan committee’s denial of benefits because the underlying option agreement did not give the committee discretionary authority to interpret the plan’s provisions. Interestingly, the plan document under which the grant was made did grant that authority, but was apparently not incorporated by reference into the option grant (see 1st Circuit explanation that the district court ruled - 

  • "that the agreement was a stand-alone integrated contract which neither contained, nor adopted by cross-reference to the MFS Plan, any grant conferring discretionary authority on the committee to resolve disputed claims.

Kerkhof v. MCI Worldcom, Inc., 282 F.3d 44, 27 EBC 2806 (1st Cir. 2002), on remand, 204 F.Supp.2d 74, 28 EBC 2599 (D. Me. 2002).