Lexplug logoLexplug

Gilman v. Marsh & McLennan Companies

Court of Appeals for the Second Circuit
2016 U.S. App. LEXIS 10937, 41 I.E.R. Cas. (BNA) 795, 826 F.3d 69 (2016)
ELI5:

Rule of Law:

An employer has cause to terminate an employee for refusing to cooperate with a reasonable internal investigation into on-the-job criminal conduct that imperils the company. A private company's cooperation with a parallel government investigation does not constitute state action unless the government coerces or compels the company to act against its own independent institutional interests.


Facts:

  • In April 2004, the New York Attorney General (AG) began investigating Marsh's business practices, leading Marsh to conduct an internal investigation.
  • During the initial phase of the investigation in spring/summer 2004, William Gilman and Edward McNenney were interviewed by Marsh's outside counsel.
  • In September 2004, the AG's investigation shifted focus to a criminal bid-rigging scheme.
  • On October 13, 2004, two employees from another company, AIG, pleaded guilty and identified Gilman and McNenney as co-conspirators in the scheme.
  • On October 19, 2004, Marsh suspended Gilman and McNenney with pay and demanded they sit for new interviews, warning that refusal would result in termination.
  • McNenney's attorney communicated his refusal to be interviewed on October 27, and Marsh fired him the next day.
  • On November 1, 2004, one day before his scheduled interview, Gilman submitted early retirement paperwork and subsequently had his attorney convey his refusal to be interviewed.
  • Marsh did not accept the retirement and fired Gilman the following day for his refusal to cooperate.

Procedural Posture:

  • William Gilman and Edward McNenney sued Marsh & McLennan Cos. in the United States District Court for the Southern District of New York for lost employment benefits.
  • The plaintiffs' complaint included claims for violations of ERISA, breach of contract, and breach of the implied covenant of good faith and fair dealing.
  • The district court granted summary judgment in favor of the defendant, Marsh.
  • Gilman and McNenney, as appellants, appealed the district court's judgment to the United States Court of Appeals for the Second Circuit, with Marsh as the appellee.

Locked

Premium Content

Subscribe to Lexplug to view the complete brief

You're viewing a preview with Rule of Law, Facts, and Procedural Posture

Issue:

Does an employer have cause to terminate employees for refusing to submit to an internal investigation interview regarding alleged criminal conduct within the scope of their employment, thereby disqualifying them from certain employment benefits?


Opinions:

Majority - Jacobs

Yes, an employer has cause to terminate employees for refusing to obey a reasonable order to cooperate with an internal investigation. Marsh's demand for interviews was reasonable because Gilman and McNenney, as employees, were implicated under oath in a criminal conspiracy for acts within their scope of employment that imperiled the company. Marsh had a compelling independent interest in investigating the allegations to protect its shareholders, clients, and reputation, separate from any government pressure. The employees' refusal to comply with this reasonable directive constituted insubordination and provided cause for termination, justifying the denial of their unvested stock benefits and severance pay. Furthermore, Gilman's attempt to retire did not preclude a for-cause termination, as allowing this would render the 'for cause' provisions in their employment agreements meaningless.



Analysis:

This decision reinforces an employer's authority to conduct internal investigations and demand cooperation from employees, even when it forces an employee into a difficult choice between their job and their Fifth Amendment right against self-incrimination. The court clearly distinguished this from state action by focusing on the company's independent institutional interests, such as fiduciary duties to shareholders and reputational management. This ruling provides corporations facing government scrutiny a clearer legal basis for taking internal disciplinary action to manage crises, clarifying that mere cooperation with law enforcement does not turn a private employer into a government agent.

🤖 Gunnerbot:
Query Gilman v. Marsh & McLennan Companies (2016) directly. You can ask questions about any aspect of the case. If it's in the case, Gunnerbot will know.
Locked
Subscribe to Lexplug to chat with the Gunnerbot about this case.

Unlock the full brief for Gilman v. Marsh & McLennan Companies