Former Navistar Executive Gets New Shot on Severance Pay Claim

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By Carmen Castro-Pagan

July 5 — A former Navistar International Corp. executive has a second chance to show that the company owes him more than $349,000 in severance pay and millions in retirement benefits ( Luther v. Navistar Int'l Corp. , 2016 BL 213241, N.D. Ill., No. 11:15-cv-03120, 7/1/16 ).

Despite her July 1 decision denying the executive's motion for summary judgment, Judge Rebecca R. Pallmeyer granted the executive an opportunity to show that Navistar terminated his employment amid a “change in control” at the company—an event that entitled him to additional severance and retirement benefits.

When Regis Luther's employment with Navistar was terminated, he received a severance package that included $711,450 in severance pay. To collect those benefits, he signed a general release, waiving, with some limitations, claims against the truck manufacturer.

The $711,450 payment he received reflected that, under the company's severance agreement, his termination wasn't amid a change in control.

Change in Control

According to court documents, Luther later learned that a “change in control” occurred in 2012 when five of the 10 seats on Navistar's board of directors changed hands without the approval of two-thirds of the board. He argued that because of this, the company owed him an additional $349,350 in severance pay. In addition, he claimed that he was eligible for supplemental executive retirement benefits under the company's plan.

He sued Navistar under the Employee Retirement Income Security Act to recover benefits. He also alleged that the company fired him to avoid paying him benefits that otherwise would have been owed. Both parties moved for summary judgment.

In rejecting Navistar's argument that Luther waived his claims against the company when he signed a general release, the court reasoned that the list of exceptions to the waiver didn't bar Luther's claim to recover benefits because his lawsuit didn't stem from ERISA. Rather, his lawsuit sought to enforce the terms of the executive severance agreement.

Regardless of whether Luther's benefit claims have merit, they turn on the proper application of the agreement, and as such they are preserved under the release, the court said.

Applying the same reasoning, the court held that Luther's claim for alleged interference of benefit rights arose from ERISA and not from the agreement. As such, Luther waived the claim.

Finally, the court held that Luther's argument in support of a change in control at Navistar stemmed from an “apparent misunderstanding” of the severance agreement. He seemed to believe that a change in control would occur anytime the board is made up of three or more directors who were appointed after certain date, regardless of their approval by the board, the court said.

Despite recognizing that the current record in the court showed that no change in control occurred, the court granted Luther some time to reply to Navistar's motion for summary judgment.

Sean C. Burke represented Luther. Morgan Lewis & Bockius LLP represented Navistar.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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