:: Section 510 Claims Defeated By Causation Defense
Giordano v. Thomson, 2009 U.S. App. LEXIS 8887 (2d Cir. Apr. 27, 2009), which I reviewed today on erisaboard.com, reveals a few interesting points about executive severance compensation disputes. The facts are colorful and the rather short opinion is worth the time it takes to read.
The Facts
The plaintiff, Giordano, had been a consultant to the company but was hired on as CFO during a turnaround effort to set the company up for sale.
At some point, Giordano became aware that Danaher was not planning on keeping him as an employee after the purchase. Thereafter, he made several inquiries regarding whether he would receive an additional payment, beyond his salary, for his role in the sale of the company. Some transaction participants thought he was threatening to block the sale if he was not paid the additional money; at trial Giordano denied making such threats.
This process culminated in a dinner between Cummins and Giordano that took place on October 14, 2002, shortly before the transaction documents were signed. As Cummins remembered it, Giordano asked for $ 1 million or more, and Cummins said that Thomson would never approve a payment in that range. Cummins also testified that Giordano threatened to “torpedo the closing” by refusing to sign necessary documents if he was not paid.
Cummins also testified that he then called the law firm working on TII’s behalf to tell it that TII was going to have to fire Giordano. Giordano testified that he did not threaten to block the deal, and that Cummins agreed to recommend a payment of $ 600,000.
The closing was likely rather tense for everyone attending, as Giordano refused to sign a release of claims:
On October 16, 2002, Giordano went to a “pre-closing,” at which various participants were signing papers for the sale to Danaher. While there, Giordano signed all of the documents put in front of him except a document under which he would have released all of his claims against Thomson, TII and Danaher. Under the release, Giordano would receive a $ 15,230 severance payment. By the next day, he still had not signed the release.
The company terminated Giordano and proceeded with closing, giving an indemnity for any claims he might assert.
When Giordano filed suit in U.S. District court, he assert a claim for benefits, a claim of retaliation (both ERISA claims) and a claim for unjust enrichment. All fell flat, both before the district court and on appeal.
Giordano’s first argument regarding retaliation is that he was terminated for failing to waive his claim for ERISA benefits when he declined to sign the release. Judge Seybert rejected this claim, finding that Giordano was terminated because his behavior during the Danaher deal was determined to be counterproductive. Giordano, 2007 U.S. Dist. LEXIS 39117, at *6-7. This finding is a reasonable one, particularly given our determination that Giordano was not, in fact, entitled to any severance benefits under the plan. We find no error (clear or otherwise) in the district court’s findings on this issue.
Note: Section 510 retaliation claims are very hard to make out and would only be my choice as plaintiff as fall back claim or a claim accompanying another claim. (There have been some successful pairings with ADA claims.)
Severance Pay Plans - Defendants gain enormous advantages by having executives, even if “part time” or “consultants” treated as employees covered under an ERISA compliant severance plan. (In this case the plan’s status was not finally determined on appeal.)
Causation - A good independent case for termination can eliminate complex ERISA disputes about preemption and retaliation. In this case, the Second Circuit did not even need to decide if the severance arrangement was an ERISA plan.
