Hoffman v. Sara Lee Corporation et al

Filing 29

MEMORANDUM Opinion and Order Signed by the Honorable Harry D. Leinenweber on 10/13/2011:Mailed notice(wp, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

AARON HOFFMAN,
Plaintiff,
Case No. 11 C 3899
v.
SARA LEE CORP., and SARA LEE
CORP. EXECUTIVE PAY PLAN FOR
KEY EMPLOYEES,

Hon. Harry D. Leinenweber

Defendants.

MEMORANDUM OPINION AND ORDER
Before the Court is Defendants’ joint Motion to Dismiss
Plaintiff’s Amended Complaint pursuant to FED . R. CIV . P. 12(b)(6)
on two grounds:

(1) that Count II does not state a proper claim

for estoppel; and (2) that Sara Lee Corp. (“Sara Lee”) is not a
proper defendant.

For the reasons stated herein, the motion is

granted in part and denied in part.

Count II is dismissed, but

Sara Lee will remain a defendant in the case.
I.

BACKGROUND

Plaintiff Aaron Hoffman (“Hoffman”), a former executive at
Sara Lee Corp., brought the instant claim under Section 502 of the
Employment Retirement Security Act of 1974 (“ERISA”), 29 U.S.C.
§ 1001 et seq., alleging the company failed to pay him severance in
violation of the law.

Hoffman’s suit names both Sara Lee and the

Sara Lee

Corporation

Executive

Pay

Plan

for

Key

Employees.

Defendants assert that the plan is misnamed in the Complaint, and
that it is actually called the Sara Lee Corporation Severance Pay
Plan for Key Employees (“the Plan”).
The following facts are taken from Hoffman’s Complaint, and
the Court will accept them as true for the purposes of this motion.
Additionally, the Court will consider the Plan documents and other
exhibits

attached

to

Hoffman’s

Complaint,

which

include

his

performance appraisal, correspondence between his attorney and Sara
Lee, and correspondence between his attorney and the Sara Lee ERISA
Appeal Committee. See Centers v. Centennial Mortg., Inc., 398 F.3d
930, 933 (7th Cir. 2005); FED . R. CIV . P. 10(c)(“A copy of any
written instrument which is an exhibit to a pleading is a part
thereof for all purposes.”).
Hoffman

began

working

for

Director of Investor Relations.

Sara

Lee

in

November

1999

as

In 2001, he was promoted to the

position of Vice President for Investor Relations, and reported
directly to Sara Lee’s Chief Financial Officer, Theo de Kool (“de
Kool”).

In 2009, de Kool left the company and Hoffman began

reporting to Marcel Smits (“Smits”).

Smits first served as the

company’s Chief Financial Officer and later became its Interim
Chief Executive Officer.
During this time, Hoffman was considered a key executive and
was entitled to the benefits of the Plan.

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Under paragraph 3 of the

Plan, an eligible employee is entitled to severance benefits if “at
his employer’s request, [he] agrees to voluntarily terminate his
employment.”
Hoffman alleges that on a number of occasions over an 18-month
period, Smits advised him that it was Smits’ intention to either
divide Sara Lee into smaller companies or to sell the company, and
that as

a

result

Hoffman’s

position

department would be eliminated.

and

possibly

his

entire

Smits further told Hoffman that

when the time came for Hoffman to leave the company, he would be
entitled to a severance payment under the Plan, the Complaint
alleges.
The first such conversation, according to the Complaint,
happened in November 2009 while Hoffman and Smits were on a flight
to Boston.

The two worked on a valuation to determine what the

price of the company’s shares would be in a breakup or sale.

They

arrived at a price substantially higher than that at which the
stock was trading at the time.

Hoffman remarked that it would be

great to see the price at that level, to which Smits replied that
he didn’t think Hoffman would like that because “[y]ou’ll be out of
a job.

Hoffman responded that he would receive a severance

payment, to which Smits replied, “That’s true.”
In the spring of 2010, Smits told Hoffman the details of the
anticipated breakup of Sara Lee.

Smits mentioned that the intent

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was to reduce or eliminate the size of the Investor Relations
Department if the breakup went forward.
On July 15, 2010, according to the Complaint, Smits gave
Hoffman his annual performance review.

He made positive comments

about Hoffman’s work, but told him it was time to leave Sara Lee.
Hoffman asked if that meant he was being asked to leave the
company.

Smits replied that he was asking him to leave during

fiscal year 2011.

Hoffman said that he wanted to be clear that he

would receive severance if he left the company, and Smits replied
that he would.

Hoffman’s written performance review includes a

statement by Smits that he and Hoffman had talked about how it
would be in Hoffman’s best interest to work toward attracting a
“good outside offer” in fiscal year 2011.
Hoffman subsequently began looking for another job and found
one at a lower rate of pay.

On November 10, 2010, he informed

Smits that he had found a new job.

Sara Lee has subsequently

refused to pay severance pursuant to the Plan.
Hoffman made an initial claim for benefits on December 28,
2010, which was denied.

He then appealed to the Sara Lee ERISA

Appeal Committee, which on April 19, 2011, issued its decision
denying his claim and notifying Hoffman of his right to file the
present lawsuit within 90 days.

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Count I of Hoffman’s Complaint alleges a violation of Section
502 of ERISA, while Count II alleges a federal common law claim for
estoppel.
II.

LEGAL STANDARD

FED. R. CIV. P. 12(b)(6) allows for dismissal for failure to
state a claim upon which relief can be granted.

To survive a

motion to dismiss, the Complaint must contain sufficient facts,
accepted as true, “to state a claim for relief that is plausible on
its face.”

Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009)

(internal citations omitted).

A claim is facially plausible when

it “pleads factual content that allows the court to draw the
reasonable

inference

misconduct alleged.”

that
Id.

the

defendant

is

liable

for

the

The court need not accept as true mere

legal conclusions; rather the well-pleaded facts must state a
plausible claim for relief for the complaint to survive.

Id. at

1949–50.
III.
First,

Defendants

ANALYSIS

allege

that

Hoffman’s

allegations

are

insufficient to state a federal common law claim for estoppel.
Next, Sara Lee contends that it must be dismissed from the case
because the only proper defendant is the Plan.
first to the federal estoppel claim.

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The Court turns

A.

Federal Estoppel Claim

Because ERISA requires that all modifications to benefit plans
be in writing, and that only certain specified individuals have the
authority to amend them, 29 U.S.C. §§ 1102(a)(1), (b)(3), the
Seventh Circuit has circumscribed the scope of estoppel claims
under the Act.

See Coker v. Trans World Airlines, Inc., 165 F.3d

579, 585 (7th Cir. 1999).

However, such claims have been allowed

to proceed against unfunded single-employer welfare benefit plans
(the type of plan at issue here) under certain circumstances.
Black v. TIC Inv. Corp., 900 F.2d 112, 115 (7th Cir. 1990).
The Seventh Circuit allows estoppel claims in ERISA case as a
matter of federal common law when the plaintiff can show:

(1) a

knowing misrepresentation; (2) made in writing; (3) with reasonable
reliance on that misrepresentation by the plaintiff; (4) to his
detriment. Coker, 165 F.3d at 585–86. Negligent misrepresentations
are insufficient.

Id.

The Seventh Circuit has rejected claims

“that bad advice delivered verbally entitles plan participants to
whatever

the

oral

statement

promised,

when

written

documents

provide accurate information.” Frahm v. Equitable Life Assur. Soc.
of U.S., 137 F.3d 955, 961 (7th Cir. 1998).
Here, Defendants argue that Hoffman’s Complaint fails to
allege a knowing misrepresentation by Smits, and point out that his
alleged

misrepresentations

were

not

in

writing.

Hoffman

acknowledges these deficiencies, but relies on an exception to
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those requirements outlined in Bowerman v. Wal-Mart Stores, Inc.,
226 F.3d 574 (7th Cir. 2000).
There, the court noted that estoppel principles may apply to
oral misrepresentations about an ERISA plan when the plan itself is
ambiguous.

Id. at 588.

Surveying decisions from other circuit

courts of appeal, the court reasoned that allowing estoppel claims
based on an authorized plan representative’s oral interpretations
of an ambiguous plan did not undermine the policies of ERISA.

Id.

at 588 (citing Kane v. Aetna Life Ins., 893 F.2d 1283 (11th Cir.
1990), and cases following it).
In Bowerman, the administrative employee who handled plan
enrollments for the plaintiff’s department at Wal-Mart told her
that she did not need COBRA coverage.

Id. at 580.

In fact, the

plaintiff, who had returned to Wal-Mart’s employ after briefly
taking another job, did need COBRA coverage in order to ensure that
her pregnancy-related expenses would be covered.

Id. at 582–83.

Because the plan did not clearly explain this, the court held that
the plan was estopped from denying coverage.

Id. at 587–88.

In

Bowerman, then, the Seventh Circuit permitted oral misrepresentations to be a basis for ERISA estoppel only if:

(1) the plan was

ambiguous; and (2) an agent of the plan, or someone with apparent
authority to interpret the plan, made the oral misrepresentations.
Id. at 588.

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Here, the Plan provision at issue, Section 3.1., provides that
“A

participant,

who,

at

his

employer’s

request,

agrees

to

voluntarily terminate his employment with the employers . . . will
be entitled to receive a benefit equal to the total of the amounts
determined

.

.

.

below.”

Hoffman

argues

this

provision

is

ambiguous because it does not clearly define what constitutes a
resignation at the employer’s request.

If the plan documents were

clear, he contends, he would not have repeatedly tried to confirm
with Smits that he was entitled to a severance payment, Hoffman
argues.
Here, the Complaint does not include an allegation either that
the Plan was ambiguous or that Smits was authorized to interpret
it.

Hoffman argues in his Response to the Motion to Dismiss that

it was reasonable for him to rely on the representations of the
company’s Chief Financial Officer.

Even if Smits had authority to

interpret the Plan, however, Hoffman’s claim is doomed because the
Plan itself is not ambiguous.

There is no dispute that if Hoffman

was asked to leave the company, then he is entitled to benefits.
The issue here is whether Smits asked Hoffman to leave the company.
The Sara Lee ERISA Appeal Committee found that Hoffman was not
asked to terminate his employment.

It determined that while Smits

advised Hoffman during his performance review that he should put
himself in a position to attract an outside offer in the future,
Smits did not ask Hoffman to leave, did not inform him that his

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position was being eliminated, and did not tell him he was being
fired.
Hoffman contends, in Count I of his Complaint, that this
decision was arbitrary and capricious, and as such violated ERISA.
See Edwards v. Briggs & Stratton Ret. Plan, 639 F.3d 355, 360 (7th
Cir. 2011)(noting that where the plan gives the administrator
discretionary authority to determine eligibility for benefits, the
denial of benefits is reviewed under an arbitrary and capricious
standard).

Hoffman contends that Sara Lee provided severance

benefits to another employee who was asked to leave the company in
the same manner as he and who was then given time to find a new
position.

Hoffman argues that the appeals committee gave no

explanation for the difference in treatment, and “Plaintiff’s
estoppel claim is a valid claim for relief based on the appeals
committee’s arbitrary and capricious finding against Plaintiff.”
Pl.’s Response to Defs.’ Mot. to Dismiss, at 10.
nothing to do with the other, however.

One claim has

Hoffman may have a valid

claim under Count I, an issue which the Court will not prejudge,
but he has not pled sufficient facts to show a plausible claim for
relief for estoppel under the narrow circumstances in which such
claims are

allowed.

As

such,

Defendants’

Count II is granted.

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Motion

to

Dismiss

B.

Whether Sara Lee is a Proper Defendant

Typically, in a suit for ERISA benefits, the plaintiff is
limited to a suit against the plan itself, not the administrator.
Mote v. Aetna Life Ins. Co., 502 F.3d 601, 610 (7th Cir. 2007)
(citing Blickenstaff

v.

R.R.

Donnelly

& Sons

Co.

Disability Plan, 378 F.3d 669, 674 (7th Cir.2004)).

Short

Term

Relying on

this rule, Sara Lee argues that it should be dismissed from Count I
of the Complaint.
A claimant may sue a party other than the plan only in limited
circumstances.

Zuckerman v. United of Omaha Life Ins. Co., No. 9

C 4819, 2010 WL 2927694, at *3 (N.D. Ill. July 21, 2010).

For

example, the Seventh Circuit has held that an employer that serves
as the plan administrator is subject to suit where the plan
documents refer to the employer and the plan interchangeably.
Riordan v. Commonwealth Edison Co., 128 F.3d 549, 551 (7th Cir.
1997). Similarly, an employer that serves as plan administrator is
a proper defendant when the employer and the plan are closely
intertwined.

Mein v. Carus Corp., 241 F.3d 581, 584–85 (7th

Cir.2001).
Defendants contend that Sara Lee should be dismissed because
there is no confusion as to the identity of the plan, while Hoffman
argues that to do so would deny him the opportunity for complete
relief.

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Here, there is neither confusion as to the identity of the
Plan,

nor

is

there

any

allegation

that

the

Plan

documents

interchangeably refer to Sara Lee and the Plan, as in Riordan and
Mein.

However, the Amended Complaint alleges that Sara Lee is the

plan sponsor and plan administrator, and the Plan itself provides
that the company has discretionary authority to interpret the Plan
and determine the eligibility of employees.

In addition, the Plan

is funded solely out of Sara Lee’s general assets.
The Court recognizes that this is a close question, and that
the fact that Sara Lee has a role in administering the plan is not
enough to justify a finding that it is closely intertwined with the
Plan. See Tatera v. Prudential Ins. Co. of America, No. 11 C 2667,
2011 WL 3876954, at *2 (N.D. Ill. Sept. 1, 2011).

However, given

that the Plan is funded from Sara Lee’s general assets, the Court
finds that the exception applies in this case.

See Osborn v.

Auburn Foundry, Inc., No. 03 CV 063, 2004 WL 2402836, at *4 n.5
(N.D. Ind. Aug. 11, 2004)(holding that an unfunded plan was closely
interwined with the company that sponsored it because it had no
funds with which to satisfy a judgment, and as such had to rely on
the company’s assets).
Sara Lee relies on Hakin v. Accenture U.S. Pension Plan, 735
F.Supp.2d 939, 949 (N.D. Ill. 2010), in which the court held that
an employer was improperly named as a defendant in a suit for ERISA
benefits because there was no confusion over the identity of the
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plan and it was not necessary to keep the employer in the case to
secure complete relief for the plaintiff.

But in Hakim, the plan

was funded not from the employer’s assets but from a separate
trust.

Id.

As such, that case is distinguishable, and Sara Lee’s

motion to dismiss on the grounds that it is an improper defendant
is denied.
IV.

CONCLUSION

For the reasons stated herein, Defendants’ Motion to Dismiss
is granted in part and denied in part.

Count II, alleging federal

estoppel, is dismissed, but Defendant Sara Lee Corp. will remain as
a Defendant in the case.
IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court
DATE: 10/13/2011

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