In sum, Mr. Lapham’s state law claims arise from legal duties independent from the ERISA plans and seek to recover damages in the form of severance pay or lost opportunities, not ERISA benefits per se. The claims do not challenge the administration of the Benefit Plans or seek to impose new duties on plan administrators.
Rather, the claims turn on the Defendants’ representations and promises made to Mr. Lapham before he became an Accenture employee and enrolled in the Benefit Plans. . . . Under these circumstances, the Court finds that Mr. Lapham’s state law claims do not “relate to” an ERISA plan and, accordingly, are not preempted by ERISA Section 514(a).
Lapham v. Accenture, LLP, 2016 U.S. Dist. LEXIS 154680 * (D.N.J. Nov. 8, 2016)
If an employer offers a benefits arrangement to a prospective employee and later denies benefit claims based on plan eligibilty requirements, could the employee assert state law claims or would ERISA preempt them? That was the issue addressed in this opinion.
The plaintiff asserted ERISA benefit claims but also asserted state law claims in the alternative. Thes claims included state law causes of action for fraud, breach of contract,, breach of the covenant of good faith and fair dealing, and promissory estoppel.
In opposition to the defendants’ motion to dismiss, he argued that these state law claims are not preempted by ERISA because they arose from duties generated independent of any ERISA plans, such as the terms of his employment as set forth in the original offer of employment.
Rather than interpreting ERISA plans, he argued, the Court need only consider the defendants’ representations and promises to him before his employment and whether those representations and promises were ultimately false or breached. Importantly, he also asserted claims for damages in the form of lost severance pay and lost opportunities — not ERISA benefits.
The Court navigated the channel between ERISA preemptive entanglement and permissible state law claims by reference to the guidance in Nat’l Sec. Sys., Inc. v. Iola, 700 F.3d 65, 82 (3d Cir. 2012). That case in turn drew ujpon Aetna Health Inc. v. Davila, 542 U.S. 200 (2004).
The Court noted that:
In Iola, the Third Circuit considered whether state law fraud claims were expressly preempted by ERISA. In doing so, the court distinguished between alleged misrepresentations made after the ERISA plan’s adoption and alleged misrepresentations made prior to the ERISA plan’s adoption in an effort to induce participation in the ERISA plan. Iola, 700 F.3d at 84-85. The Third Circuit found that the misrepresentations made after the plaintiffs adopted the ERISA plan were preempted as they had “a connection with” the ERISA plans in question . . .
The Court held that the plaintiff’s state law claims were not preempted, observing that a state law claim may have an independent legal basis “even if an ERISA plan is a factual predicate in the case.”
Note: The Court also cited with approval a Sixth Circuit opinion, Thurman v. Pfizer, 484 F.3d 855 (2007), which is an excellent resource for the proposition “that employers who misrepresent certain benefits provided by ERISA-governed plans to prospective employees cannot later use preemption as an end-run around liability for fraudulent or innocent misrepresentations.”
Practice Pointer – Key elements to the successful avoidance of ERISA preemption were state law claims that:
- arose from legal duties independent from the ERISA plans
- sought to recover damages in the form of severance pay or lost opportunities, not ERISA benefits per se.
- did not challenge the administration of the Benefit Plans
- did not seek to impose new duties on plan administrators