Lane v. S Bank
ORDER denying 52 Motion to Stay. The parties are further ORDERED to meet and confer and submit a proposed scheduling order within 21 days of service of this Order. Signed by Magistrate Judge G. R. Smith on 7/17/17. (jlm)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF GEORGIA
JULIAN C. LANE, Jr.,
Defendant S Bank moves to stay discovery in this Employee
Retirement Income Security Act (ERISA) action pending resolution of
their motion to dismiss Plaintiff Julian C. Lane, Jr.’s Second Amended
Complaint. Doc. 52; see also doc. 51 (motion to dismiss). Lane opposes.
Docs. 53 & 54.
Lane was employed as First Citizen Bank’s (later S Bank)
president. As part of the perks of the job, he was party to a “Salary
Continuation Agreement” which provided for a deferred compensation
The background is assembled from Lane’s Complaint, which is taken as true at the
dismissal stage. This does not reflect the Court’s opinion as to the merits of the case,
or the verity of any of these assertions.
retirement plan. In essence, when he hit retirement age he would retire
with about $56,000 a year guaranteed for 15 years. But S Bank came
under FDIC scrutiny and it sought to cut some of the fat. So, Lane
signed a “Termination Agreement” forfeiting those “top hat” retirement
benefits to make the flailing bank look more stable. In exchange, he was
told by the other Board executives that he could continue working past
retirement and thus earn a salary, compensating him for the sacrifice. A
few months later, the Board forced him to retire, leaving him with
neither a salary nor retirement benefits. See doc. 50.
This is not defendant’s first attempt to terminate Lane’s case.
After removing it from Liberty County Superior Court in April 2014,
S Bank filed a motion for judgment on the pleadings (doc. 8) and a
motion to dismiss the First Amended Complaint (doc. 29). In an order
denying plaintiff’s renewed motion to remand (doc. 36), the Court
deemed moot defendant’s motion to dismiss and ordered plaintiff to
amend his Complaint again to state claims under ERISA -- which fully
preempt his state law claims of fraud in the inducement, promissory
estoppel, fiduciary duty, and attorneys’ fees. Doc. 49 at 4, 7-10. Lane
amended, alleging four claims under ERISA. Doc. 50.
Defendant moves to dismiss Lane’s Second Amended Complaint on
several grounds, including, inter alia, that 1) they improperly weave
preempted state law claims into ERISA claims; 2) he failed to exhaust his
representations to overcome the terms contained within the four corners
of the Termination Agreement; 4) he lacks standing to challenge the
retirement plan; and, regardless, 5) he knowingly and voluntarily waived
any ERISA claims by signing the Termination Agreement. Doc. 51-1 at
Plaintiff responds that 1) he doesn’t plead state law claims; 2) there
was no “denial of review” triggering any administrative review process
and any attempt at administrative exhaustion would have been
“unavailable” because the Plan Administrator could not have resurrected
the benefits surrendered by the Termination Agreement; 3) defendant’s
“pure contract”/parole evidence rule argument that he cannot introduce
oral representations to interpret the Termination Agreement is not the
appropriate standard for evaluating this action; 4) he has standing as an
individual; and, 5) any inquiry into the “knowing and voluntary” nature
of his ERISA waiver would be so fact-sensitive as to require discovery to
As the issues really boil down to whether plaintiff can assert
estoppel based on his reliance upon defendant’s promises of continued
employment, or if S Bank can argue waiver of ERISA claims, the Court
will examine those two issues to determine whether a stay of discovery is
ERISA is a comprehensive statute designed to federalize the
regulation of employee welfare benefit plans. However, the statute has
interstices, and Congress anticipated that the federal courts would fill
those gaps with “a federal common law of rights and obligations under
ERISA-regulated plans.” Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41, 56
(1987). In other words, ERISA’s preemption of state law (including state
common law) does not mean that all common law concepts are
automatically inapplicable in the ERISA context. Pilot, 481 U.S. at 56;
accord Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 110 (1989).
“When a party seeks a stay pending resolution of a motion to dismiss, a court must
take a preliminary peek at a dispositive motion to assess the likelihood that the
motion will be granted.” Sams v. GA West Gate, LLC, 2016 WL 3339764 at * 6 (S.D.
Ga. June 10, 2016) (quotes and cites omitted).
And estoppel applies in the ERISA context “when the conduct of
one party has induced the other party to take a position that would
result in harm if the first party’s acts were repudiated.” Glass v. United
of Omaha Life Ins. Co., 33 F.3d 1341, 1347 (11th Cir. 1994); see also
Aramony v. United Way Replacement Benefit Plan, 191 F.3d 140, 151 (2d
Cir. 1999) (plaintiffs must show: 1) a promise; 2) reliance on the promise;
3) injury caused by the reliance; and 4) an injustice if the promise is not
“Detrimental reliance” on that inducement is required.
Glass, 33 F.3d at 1347. For that, a plaintiff need only demonstrate “a
promise that [defendant] reasonably should have expected to induce
action or forbearance on [his] part.” Devlin v. Empire Blue Cross & Blue
Shield, 274 F.3d 76, 86 (2d Cir. 2001).
The Second Amended Complaint clearly explains that Lane was
promised continued employment as bank president past his date of
retirement if he signed off on the post-retirement benefits Termination
Doc. 50 at ¶¶ 12-14 (under FDIC examination, S Bank
sought ways to strengthen its capital position, including eliminating that
“top hat” deferred compensation retirement plan it had promised Lane).
Had he not been so promised, he would not have given up those benefits.
Id. at ¶¶ 13-15 (“To recoup the funds he would have received under the
deferred compensation plan, Mr. Lane would need to continue to work
and earn a salary.”); ¶ 29 (“Lane surrendered a very valuable asset, i.e.
the benefits of his Salary Continuation Agreement, based on the Bank’s
affirmative assurances that his employment would be continued until
such time as [he] chose to retire.”); see also id. at ¶¶ 17-18 (before
signing, Lane even consulted with the Bank’s legal counsel and
accounting team to try to get the promise in writing; they advised him
“such a contractual modification would not have the desired effect of
increasing the Bank’s capital position” so it couldn’t be memorialized,
but they did modify his employment agreement to up his age of
S Bank got what it wanted (doc. 50 at ¶¶ 16 & 30 (its capital
position survived FDIC scrutiny)), and Lane continued doing a
superlative job (id. at ¶¶ 20-21). S Bank’s Board terminated him anyway.
Id. at ¶ 25. It also immediately hired another president -- at the same
Board meeting, nonetheless -- who had in fact been contacted long before
the Termination Agreement was proposed. Id. at ¶¶ 25-28, 31. And by
repudiating its promise, defendant harmed Lane -- he lost his guaranteed
15 years of annual compensation post-retirement and his job, despite
being told it too was being guaranteed. Id. at ¶¶ 29, 32-33. These factual
allegations appear to be enough (at this stage) to support plaintiff’s claim
for equitable estoppel, and discovery should go forward to substantiate or
“Waiver,” a distinct claim from estoppel, is the “voluntary,
intentional relinquishment of a known right” and, while it does not
necessarily require reliance, it does require demonstration of some type
of bargained-for consideration. Glass, 33 F.3d at 1347-48. Waiver is
evaluated by the “totality of the circumstances,” including:
. . . the plaintiff’s education and business experience; the amount of
time the plaintiff considered the agreement before signing it; the
clarity of the agreement; the plaintiff’s opportunity to consult with
an attorney; the employer’s encouragement or discouragement of
consultation with an attorney; and the consideration given in
exchange for the waiver when compared with the benefits to which
the employee was already entitled.
Myricks v. Fed. Reserve Bank of Atlanta, 480 F.3d 1036, 1040 (11th Cir.
2007), cited in In re Suntrust Banks, Inc. ERISA Litig., 2016 WL
4377131 at *3 (N.D. Ga. Aug. 17, 2016) (extending the “knowing and
voluntary” “totality of the circumstances” analysis to ERISA litigation).
Here, defendant convincingly argues that as a bank president, Lane
had the “education and business experience” to read and understand the
Termination Agreement, including the relevant language that there is
“no guarantee of continued employment” and that the contract itself
contained the “entire” agreement between the parties. Doc. 51-1 at 11;
see doc. 51-3 at 2-4 (Termination Agreement). He apparently also had
adequate time to consider it and was encouraged but not coerced to sign
it. See generally doc. 50 (no allegations of coercion or lack of time to
consider his options).
But the Court finds it dispositive that he consulted with an
attorney -- the Bank’s own counsel -- to request that the oral promise
made for continued employment would be set down in writing. Doc. 50
at ¶¶ 17-18 (before signing, Lane consulted with the Bank’s legal counsel
and accounting team to try to modify his employment contract and get
that promise in writing; they advised him “such a contractual
modification would not have the desired effect of increasing the Bank’s
capital position” so it couldn’t be memorialized, but they did modify his
employment agreement to bump up his age of retirement as a sort of
He wanted that promise in writing because the
Termination Agreement itself was not the “entire” agreement.
defendant’s legal counsel told him it would unwind the very purpose of
the Termination Agreement, which was tricking the FDIC into believing
S Bank was in a better capital position. Id. Counsel’s advice and plea on
behalf of the bank to forgo a “continued employment” modification and
accept an extended retirement age addendum instead also potentially
explains why Lane would then sign an agreement forfeiting such
valuable “top hat” benefits without any consideration in exchange.3
The Court is unconvinced that Lane truly “knowingly and
voluntarily” waived his ERISA rights. It is further unconvinced that it is
limited to looking only within the four corners of the Termination
Agreement and barred from considering the representations made by the
S Bank Board (and counsel) to induce Lane to sign away his benefits. In
other words, something is going to survive dismissal (even if ordered to
be amended and repleaded) to trudge on towards summary judgment. A
As an aside, the Court questions whether such counsel was then operating under a
conflict of interest. See Herron v. Chisolm, 2012 WL 6645643 at * 4-5 (S.D. Ga.
2012); Sapienza v. New York News, Inc., 481 F. Supp. 676, 680 (S.D.N.Y. 1979)
(despite client consent, multiple representation is improper where it was not
“obvious” that attorney could adequately represent the interests of each client); cf.,
Klemm v. Superior Court, 75 Cal. App. 3d 893, 898 (5th Dist. 1977) (“As a matter of
law a purported consent to dual representation of litigants with adverse interests at a
contested hearing would be neither intelligent nor informed.”).
stay of discovery is thus unwarranted. Discovery must commence 4 while
witnesses’ minds are still (at least somewhat) fresh and documents are
still readily accessible. This case is aging rapidly (it was, after all, filed in
state superior court in April 2014 -- more than three years ago) and the
parties need to move it along.
defendant’s motion to stay
resolution of the motion to dismiss (doc. 52) is DENIED. The parties
are further ORDERED to meet and confer and submit a proposed
scheduling order within 21 days of service of this Order. 5
SO ORDERED, this 17th day of July, 2017.
The Court is mindful that the parties have not yet held a Fed. R. Civ. P. 26(f)
conference or exchanged initial disclosures. Discovery was stayed back in June 2014
(doc. 18) and has simply never restarted. See doc. 54 at 2 (“Throughout these various
motions and proceedings, no discovery has been exchanged, and no witness deposed.
. . . [Plaintiff] requests that the parties begin to conduct initial discovery, which
would include an exchange of written discovery and pertinent documents, and
identification of witnesses.”).
The parties may confer about whether plaintiff’s proposed tiered discovery
schedule is palatable to both sides.
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