Safelite has requested that the court make a partial summary judgment in a case filed by former company president and CEO Dan Wilson. In the suit, filed last September, Wilson alleged that the company’s nonqualified deferred compensation plan (known as the Safelite Plan in the case) was mismanaged, causing him to lose millions of dollars to owed income taxes, penalty and interest. In its motion for partial summary judgment, the company alleges that Wilson’s claims are preempted by the Employee Retirement Income Security Act of 1974 (ERISA).
“Because plaintiff’s claims are based entirely on how he was treated under an employee pension benefit plan that qualifies as a ‘top hat’ plan under ERISA, Safelite’s motion should be granted and plaintiff should be required to re-plead his claims under ERISA’s civil enforcement provision,” writes Safelite in the February 17 motion.
They go on to note that the two parties agree that Wilson is a participant or beneficiary of the Safelite compensation plan, but “disagree on whether the Safelite plan is an ERISA plan.”
Safelite describes an ERISA plan as “any plan, fund or program established by an employer to the extent that, among other things, it ‘results in a deferral of income by employees for periods extending to the termination of covered employment or beyond … ”
“A plan fits this definition and is therefore ‘governed by ERISA’ as long as ‘a reasonable person examining the surrounding circumstances can ascertain: (1) the intended benefits; (2) the class of beneficiaries; (3) the source of financing; and (4) the procedures for receiving benefits,’” writes Safelite. “… Here, all four factors show that the Safelite plan is an ERISA plan.”
The company further argues that “top-hat plans” are to be preempted by ERISA—and that a top-hat plan “has come to mean a pension benefit plan which is exempted from various regulatory requirements of ERISA because, as stated in various subsections of the statute such as, it ‘is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees.”
In this case, Safelite officials say the plan in question was only provided to four of the company’s 6,501 employees at the time the plan was created (December 2006). According to the motion, others who were eligible to participate in the plan included Tom Feeney, who then served as executive vice president and chief client officer; Doug Herron, who then served as executive vice president and CFO; and Mark Smolik, who then served as senior vice president, general counsel and secretary.
Additionally, the motion notes that all four senior executives who received the plan were “highly compensated”—and that Wilson’s base salary at the time the plan was created was $500,000, “excluding annual performance-based incentive compensation, stock awards, and other forms of compensation.” The motion notes that the four employees’ average base salary at the time was $407,500.
“These factors show that [Wilson] and his fellow senior executives ‘ha[d] positions with [Safelite] of such influence’ that they could protect their expectations by direct negotiations with Safelite,” writes the company. “[Wilson] Plaintiff personally persuaded the Safelite board to adopt the Safelite plan in substantially the form proposed by Plaintiff and his personal legal counsel. The Safelite plan was primarily designed for plaintiff and his fellow executives to defer the millions of dollars in income that they would receive when Belron acquired Safelite. Given these surrounding circumstances, the Safelite plan is an ERISA plan that qualifies as a ‘top hat’ plan.”
In conclusion, Safelite writes, “The Safelite plan is an employee pension benefit plan that qualifies as a ‘top hat’ plan under ERISA, and plaintiff’s claims are based entirely on how he was treated under that Plan. Because plaintiff’s claims are completely preempted by ERISA, Safelite’s motion for partial summary judgment should be granted.”
Wilson had not yet responded to the motion at press time.