Former Selex Executive's Deferred Benefit Claim Nixed

Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...

By Carmen Castro-Pagan

March 25 — A former Selex Systems Integration Inc. executive can't continue with his ERISA claim to recover deferred compensation plan benefits, the U.S. District Court for the District of Columbia ruled.

In his March 23 opinion, Judge Richard J. Leon granted Selex's motion for summary judgment, holding that the company was reasonable when it determined that the executive's refusal to accept a new assignment constituted a refusal to perform his material duties and obligations of his employment with the company. This refusal justified the company's decision to terminate the executive for cause, which made him ineligible for benefits, Leon found.

At issue in the case was the standard of review applicable to a top hat plans, such as Selex's key employee deferred compensation plan. Top hat plans are unfunded plans maintained by the employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, and are wholly exempt from the Employee Retirement Income Security Act's fiduciary requirements.

Noting that the U.S. Court of Appeals for the District of Columbia Circuit hasn't addressed the appropriate standard of review for top hat plans, Leon applied the deferential standard, following the circuit's directive to review benefit decisions under this standard when discretion is given to the administrator.

New Position Refused

Ronald E. Peck held various positions for Selex in its Kansas office. When Selex opened an office in Washington, Peck initially commuted to the D.C. area before relocating. A year later, Peck was told that he would no longer have his position in Washington and was offered an executive position in Kansas. He declined the offer, and Selex terminated his employment.

Peck challenged his termination, alleging breach-of-contract claims against the company. In an amended complaint, Peck brought an ERISA claim challenging the administrator's denial of his allegedly accrued deferred compensation benefits. Selex moved to dismiss, arguing that Peck's termination was for cause, and therefore under the plan's terms he was ineligible for benefits. Peck argued the contrary.

The court gave special weight to the fact that after Peck initially declined the Kansas position, Selex informed him that it regarded his decision as a “voluntary and deliberate refusal to perform [his] material duties and obligations of his employment” with the company, and would therefore constitute cause for his termination. Selex urged him to reconsider his decision, giving him two weeks to think about it, and he still declined to take the job, the court said.

The court recognized that Peck's argument—that his decision not to take the job couldn't constitute a refusal to perform the material duties and obligations of the position he held at the time—was reasonable. However, it found “equally if not more reasonable” Selex's position that by declining to accept the new assignment, he refused to perform the material duties and obligations of his employment with the company.

Baptiste & Wilder PC represented Peck. Husch Blackwell LLP represented Selex.

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