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Wilson v. Safelite Group, Inc.

United States Court of Appeals, Sixth Circuit

July 10, 2019

Dan H. Wilson, Plaintiff-Appellant,
v.
Safelite Group, Inc., Defendant-Appellee.

          Argued: December 5, 2018

          Appeal from the United States District Court for the Southern District of Ohio at Columbus. No. 2:16-cv-00877-Michael H. Watson, District Judge.

         ARGUED:

          Sammy Ford, IV, AHMAD, ZAVITSANOS, ANAIPAKOS, ALAVI & MENSING P.C., Houston, Texas, for Appellant.

          John J. McGowan, Jr., BAKER & HOSTETLER LLP, Cleveland, Ohio, for Appellee.

         ON BRIEF:

          Sammy Ford, IV, Steven J. Mitby, AHMAD, ZAVITSANOS, ANAIPAKOS, ALAVI & MENSING P.C., Houston, Texas, for Appellant.

          John J. McGowan, Jr., BAKER & HOSTETLER LLP, Cleveland, Ohio, Robert M. Kincaid, Jr., Georgeann G. Peters, BAKER & HOSTETLER LLP, Columbus, Ohio, for Appellee.

          Before: ROGERS, STRANCH, and THAPAR, Circuit Judges.

          OPINION

          JANE B. STRANCH, CIRCUIT JUDGE.

         This dispute centers on what constitutes an employee pension benefit plan under the Employee Retirement Income Security Act (ERISA), and its resolution determines whether the duties and protections of ERISA apply to the plan at issue. Plaintiff Dan Wilson, the former President and Chief Executive Officer of Defendant Safelite Group, Inc., sued Safelite for breach of contract and negligent misrepresentation arising from the company's alleged mismanagement of its deferred compensation plan for executive employees. Finding that the plan was an employee pension benefit plan under 29 U.S.C. § 1002(2)(A)(ii) and not a bonus plan exempted from ERISA under 29 C.F.R. § 2510.3-2(c), the district court granted Safelite's motion for partial summary judgment on the basis that Wilson's state law claims were preempted by ERISA. Based on the plain text of ERISA and the bonus plan regulation, we AFFIRM.

         I. OVERVIEW

         Wilson was the President and CEO of Safelite from 2003 to 2008. In 2005, Safelite's Board of Directors created the Safelite Group, Inc. 2005 Transaction Incentive Plan (TIP), which provided for substantial bonus payments to its participants-five Safelite executives, including Wilson-if they secured a strategic buyer for the company.

         By late 2006, Belron SA emerged as a likely buyer. Realizing that Belron's acquisition of Safelite would trigger significant payments under the TIP that could increase participants' tax obligations, on December 29, 2006, the Board adopted the Safelite Group, Inc. Nonqualified Deferred Compensation Plan (Safelite Plan), a plan to allow participants to defer compensation and thereby avoid certain tax consequences. At the time the Safelite Plan was adopted, only four executive employees, including Wilson, were eligible to participate in it. In February 2007, less than two months later, Belron purchased Safelite for $334 million, generating substantial payments to the TIP participants that could be deferred by operation of the Safelite Plan.

         The Safelite Plan, the plan at issue, allows eligible executive employees to defer two types of income: (1) compensation (defined as a participant's base annual salary and any annual or long-term bonuses) and (2) "TIP Amounts" triggered by Safelite's sale to Belron. To become a participant in the Safelite Plan, an eligible employee must submit a completed election form and must indicate what income to defer. To defer any TIP Amount, an eligible employee was required to submit an election form on or before December 31, 2006. An eligible employee could choose to defer each upcoming year's compensation by submitting an election form before January 1 of that year. The election forms provide spaces to indicate what percentage of the employee's TIP Amount, base annual salary, and bonus he seeks to defer and in which year or years the employee wishes to receive distributions of his deferred income, either during employment or after the termination of employment.

         The Safelite Plan provides two timing options for participants to receive distributions of deferred income. The default distribution of deferred compensation for each participant is payment "in a lump sum as soon as administratively feasible after the [participant] Terminates" from employment. A participant can elect to receive deferred distributions on January 1 of a designated year or following a disability, and that distribution can be "in a lump sum or monthly . . . or annual payments over a period of up to ten years," subject to some limitations. Distributions made during a participant's employment are referred to as "in-service distributions."

         Wilson properly submitted an election form and so became a participant in the Safelite Plan. Between 2006 and 2013, he elected to defer hundreds of thousands of dollars of compensation each year. Wilson left Safelite on July 5, 2008. By 2014, Wilson had deferred compensation totaling $9, 111, 384. That year, a federal audit revealed that some of Wilson's elections failed to comply with 26 U.S.C. § 409A, a tax statute regulating deferred compensation plans. As a result, Wilson owed income taxes and incurred substantial tax penalties.

         On September 12, 2016, Wilson sued Safelite in federal court, asserting state law claims for breach of contract and negligent misrepresentation. Safelite moved for partial summary judgment on Wilson's state law claims, arguing that they were preempted by ERISA. The district court granted Safelite's motion, finding that the Safelite Plan met the statutory definition of "employee pension benefit plan" under ERISA Section 3(2)(A)(ii), 29 U.S.C. § 1002(2), and was not a bonus plan exempted from ERISA coverage under Department of Labor (DOL) regulation 29 C.F.R. § 2510.3-2(c).[1] The district court granted Wilson 28 days to file an amended complaint asserting claims under ERISA's civil enforcement provision. Wilson chose not to amend his complaint, and the district court entered final judgment on April 19, 2018. Wilson timely appealed.

         II. ANALYSIS

         We review a grant of summary judgment de novo. Kolkowski v. Goodrich Corp., 448 F.3d 843, 847 (6th Cir. 2006). Whether an ERISA plan exists is usually "a question of fact to be answered in light of all the surrounding circumstances and facts" and reviewed for clear error. Id. at 847-48. But "[w]here key facts are undisputed, the determination is better considered a mixed question of law and fact that we review de novo." Wolf v. Causley Trucking, Inc., 719 Fed.Appx. 466, 470 n.1 (6th Cir. 2017). The standard of review in a mixed question of law and fact generally depends on "whether answering it entails primarily legal or factual work." U.S. Bank Nat. Ass'n v. Vill. at Lakeridge, LLC, 138 S.Ct. 960, 967 (2018). We review a district court's statutory interpretation de novo. Bartling v. Fruehauf Corp., 29 F.3d 1062, 1069 (6th Cir. 1994).

         The parties here present two mixed questions of law and fact: (1) whether the Safelite Plan is an employee pension benefit plan covered by 29 U.S.C. § 1002(2)(A)(ii), and (2) whether the Safelite Plan is exempt from ERISA pursuant to DOL regulation 29 C.F.R. § 2510.3-2(c). The facts of the case are undisputed, and these mixed questions "entail[] primarily legal . . . work" in interpreting the language of the statute and the bonus plan regulation. U.S. Bank, 138 S.Ct. at 967. We therefore review de novo the district court's interpretation of ERISA and the bonus plan regulation.

         A. ERISA Employee Benefit Plans

         The parties do not dispute that the Safelite Plan constitutes a "plan" for purposes of ERISA. See Hughes v. Zurz, 298 Fed.Appx. 404, 412 (citing Donovan v. Dillingham, 688 F.2d 1367, 1372 (11th Cir. 1982)). The question then is whether the Safelite Plan is an ERISA employee pension benefit plan. See Buchanan v. General Motors, LLC, 597 Fed.Appx. 305, 309 (6th Cir. 2015). Such a plan must satisfy the statutory requirements that "by its express terms or as a result of surrounding circumstances," the plan either:

(i) provides retirement income to employees, or
(ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond . . . .

29 U.S.C. § 1002(2)(A). The parties agree that the Safelite Plan does not fall under subsection (i) but disagree about the application of subsection (ii). We turn now to § 1002(2)(A)(ii).

         1. Statutory Language

         The starting point is the language of the statute. See Hale v. Johnson, 845 F.3d 224, 227 (6th Cir. 2016). "Where the statute's language is clear and unambiguous and the statutory framework is coherent and consistent, 'the sole function of the courts is to enforce it according to its terms.'" Id. (quoting United States v. Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989)). But "we must take care not to interpret the language [of a statute] in a vacuum; instead, we must look to the 'structure, history, and purpose' of the statutory scheme." Id. (quoting Abramski v. United States, 573 U.S. 169, 179 (2014)).

         ERISA is a complex statute, but its purpose is simple: to establish a "uniform regulatory regime" for plan administration that protects monies belonging to plan beneficiaries while such funds are held and managed by others. Milby v. MCMC LLC, 844 F.3d 605, 609 (6th Cir. 2016) (quoting Aetna Health Inc. v. Davila, 542 U.S. 200, 208 (2004)). In creating ERISA, Congress intended "to protect interstate commerce and the interests of participants in employee benefit plans and their beneficiaries" by (1) "requiring the disclosure and reporting to participants and beneficiaries"; (2) "establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans"; and (3) "providing for appropriate remedies, sanctions, and ready access to the Federal courts." 29 U.S.C. § 1001(b). As we have previously noted, "ERISA's purpose is among the broadest, if not the broadest, recognized by the Supreme Court," Sherfel v. Newson, 768 F.3d 561, 564 (6th Cir. 2014), and Congress purposefully designed the scheme so that "[e]mployers can establish ERISA plans rather easily," Int'l Resources, Inc. v. New York Life Ins. Co., 950 F.2d 294, 297 (6th Cir. 1991) (citation and internal quotation marks omitted). This integrated system envisions that "any state-law cause of action that duplicates, supplements, or supplants the ERISA civil enforcement remedy conflicts with the clear congressional intent to make the ERISA remedy exclusive and is therefore pre-empted." Hogan v. Jacobson, 823 F.3d 872, 879 (6th Cir. 2016) (quoting Davila, 542 U.S. at 209). At issue here is whether Wilson's state law claims are preempted because the Safelite Plan is an employee pension benefit plan covered by ERISA and not exempted as a bonus plan.

         Keeping this statutory framework and purpose in mind, we examine the statutory definition. An "employee pension benefit plan" is established where a "plan, fund, or program . . . by its express terms or as a result of surrounding circumstances . . . results in a deferral of income by employees for periods extending to the termination of covered employment or beyond." 29 U.S.C. § 1002(2)(A)(ii).

         We begin with the meaning of "results," a key word in subsection (ii). The ordinary meaning of the word "results," as specified by the Supreme Court, is that "[a] thing 'results' when it '[a]rise[s] as an effect, issue, or outcome from some action, process or design.'" Burrage v. United States, 571 U.S. 204, 210-11 (2014) (quoting 2 The New Shorter Oxford English Dictionary 2570 (1993)). According to that ordinary meaning, a plan is an employee pension benefit plan when a "deferral of income by employees," 29 U.S.C. § 1002(2)(A)(ii), arises as an "effect, issue, or outcome from" the provisions of that plan. Burrage, 571 U.S. at 210. Wilson posits that to fit within the initial phrase of subsection (ii), "results in a deferral of income," a plan "must require" deferrals to the termination of covered employment or beyond. But "results in" and "requires" are not synonymous. Moreover, Congress specifically used the words "require" or "requirement" in numerous other sections of Title I of ERISA but instead chose "results" here. See, e.g., 29 U.S.C. § 1107(b)(2)(B)(i) ("This paragraph shall apply to any eligible individual account plan if any portion of the plan's applicable elective deferrals (or earnings allocable thereto) are required to be invested in qualifying employer securities or qualifying employer real property or both. . . .") (emphasis added). "[W]here Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion." N. Fork Coal Corp. v. Fed. Mine Safety & Health Review Comm'n, 691 F.3d 735, 741 (6th Cir. 2012) (quoting Russello v. United States, 464 U.S. 16, 23 (1983)). In light of the ordinary meaning of the word "results" and Congress's exclusion of the word "requires," § 1002(2)(A)(ii) covers plans containing terms that have as an effect, issue, or outcome-even if not as a requirement-deferral of income by employees to periods extending to the termination of covered employment or beyond.

         We turn next to the remainder of the statutory language: "a deferral of income by employees for periods extending to the termination of covered employment or beyond." 29 U.S.C. § 1002(2)(A)(ii). Wilson reads the phrase to mean that employees must defer income "to the period that begins as one's employment ends," or "until termination," and argues that subsection (ii) does not cover plans that permit employees to withdraw deferred income before their termination from employment. Safelite argues that ERISA covers a plan that results in deferrals of income "for periods extending to the termination of covered employment or beyond" and also permits participants to receive in-service distributions of deferred income. ...


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