Dan Wilson v. Safelite Group, Inc.
930 F.3d 429 (2019)
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Rule of Law:
A deferred compensation plan qualifies as an "employee pension benefit plan" under ERISA if it, by its express terms or surrounding circumstances, results in a deferral of income for periods extending to or beyond the termination of employment, even if the plan also permits participants to receive distributions prior to termination.
Facts:
- Dan Wilson served as the President and CEO of Safelite Group, Inc. from 2003 to 2008.
- In 2005, Safelite created a Transaction Incentive Plan (TIP) that promised substantial bonus payments to key executives, including Wilson, upon the strategic sale of the company.
- In December 2006, anticipating a sale that would trigger large tax liabilities for TIP participants, Safelite's board created the Safelite Nonqualified Deferred Compensation Plan (the Safelite Plan).
- The Safelite Plan allowed eligible executives to defer compensation from their base salary, annual bonuses, and TIP payments.
- The Plan's default distribution method was a lump-sum payment after an employee's termination, but participants could also elect to receive distributions on specified dates during their employment ('in-service distributions').
- Wilson participated in the plan and deferred hundreds of thousands of dollars annually, leaving Safelite in July 2008.
- By 2014, Wilson had deferred a total of $9,111,384, but a federal audit revealed some of his elections violated tax code § 409A, leading to his incurring substantial income taxes and penalties.
Procedural Posture:
- Dan Wilson sued Safelite Group, Inc. in federal district court, asserting state law claims for breach of contract and negligent misrepresentation.
- Safelite filed a motion for partial summary judgment, arguing that Wilson's state law claims were preempted by ERISA.
- The district court granted Safelite's motion, ruling that the Safelite Plan was an 'employee pension benefit plan' under ERISA.
- The district court gave Wilson 28 days to amend his complaint to state claims under ERISA, but Wilson chose not to do so.
- The district court entered a final judgment in favor of Safelite on April 19, 2018.
- Wilson, as the appellant, timely appealed the district court's judgment to the U.S. Court of Appeals for the Sixth Circuit; Safelite is the appellee.
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Issue:
Does a nonqualified deferred compensation plan, which allows for distributions both before and after an employee's termination but includes a default provision for post-termination payment, qualify as an 'employee pension benefit plan' under ERISA, thereby preempting state law claims related to its administration?
Opinions:
Majority - Stranch, J.
Yes. A plan qualifies as an ERISA employee pension benefit plan if it results in the deferral of income for periods extending to or beyond termination, even if it also permits in-service distributions. The Safelite Plan's express terms and surrounding circumstances demonstrate that it was designed to defer compensation, with its default distribution occurring after termination. The plain language of ERISA § 1002(2)(A)(ii) requires only that the plan 'results in' such a deferral, not that it 'requires' it. Congress's deliberate choice of 'results in' over 'requires' indicates a broader scope. Furthermore, the plan is not an exempt 'bonus plan' under 29 C.F.R. § 2510.3-2(c) because it allowed for the deferral of regular salary in addition to bonuses and its stated purpose was deferred compensation, not employee incentive. Therefore, the plan is governed by ERISA, and Wilson's state law claims are preempted.
Concurring - Thapar, J.
Yes. While agreeing with the majority's textual analysis and the ultimate judgment, this opinion advocates for the use of corpus linguistics as a tool for statutory interpretation. Corpus linguistics offers a more empirical and data-driven method to determine the ordinary meaning of statutory terms at the time of enactment, which can serve as a valuable cross-check against judicial intuition and dictionary definitions. It provides a powerful tool for discerning how the public would have understood a statute's text, which is the core of the interpretive task. This tool could be particularly determinative in future cases where the ordinary meaning of a term is highly debated.
Concurring - Stranch, J.
Yes. This separate concurrence, written by the majority author, expresses skepticism about endorsing corpus linguistics as a standard judicial tool. The author argues that this method invites subjective decision-making, as judges must cull through large, often irrelevant datasets, a task better left to trained lexicographers who compile dictionaries. Using corpus linguistics risks turning judges into 'armchair lexicographers' without the requisite expertise and could distract from traditional interpretive methods focused on a statute's text, structure, history, and purpose. The goal is to determine congressional intent, not the most common usage of a term in popular culture.
Analysis:
This decision reinforces the broad preemptive scope of ERISA over executive deferred compensation plans. It clarifies that a plan does not need to exclusively or mandatorily defer income until termination to be considered an ERISA 'pension plan.' The presence of a default post-termination payout or the functional result of such deferral is sufficient, even with in-service distribution options. This holding makes it more difficult for high-level employees to pursue state law claims like breach of contract or misrepresentation for plan mismanagement, channeling such disputes into ERISA's more restrictive federal remedial framework. The case also provides a notable judicial debate on the merits of corpus linguistics as an emerging tool in statutory interpretation.
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