Cantrell, et al. v. Briggs & Veselka Co.

Filing 86

OPINION Denying Remand. (Signed by Judge Lynn N. Hughes) Parties notified. (ghassan, )

Carol A. Cantrell,
Plaintiff,

versus

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Civil Action 11.1 2,244

Briggs G Veselka Co.,
Defendant.

Opinion Denying Remand
I.

Background.
In December of 2000, Patrick and Carol Cantrell merged their accounting firm

with Briggs GVeselka Co. They committed to agreements covering the merger, their
employment, and stock. In her agreements, she received five shares of B r i g s and agreed
to accept deferred compensation. She was due the deferred payment if (a) she retires
after working for Briggs for ten years, (b) she becomes disabled while working for
Briggs, (c) she dies, or (d) she is fired without cause.
Cantrell and her husband who has a similar arrangement insist that their benefit
packages under the contracts are not employee plans that generate federal jurisdiction
through the Employee Retirement Income Security Act. They are wrong.
T h e deferred compensation scheme requires calculations. T h e amount she
receives is equal to four times her average compensation and an additional percentage.
That amount must be paid over forty quarters in equal disbursements, except that each
payment cannot be more than twentydfive percent of Briggs's net profit for that quarter.
The amounts that exceed the limit are added to future payments.
She forfeits the deferred compensation if she violates her employment
agreement, including provisions for non-solicitation, non-disclosure and noncompetition. She also loses the money if she is fired for cause.
In November of 201 I , she told Briggs that she was retiring in January of 201 2 .
Soon after, Briggs believed that she was soliciting and doing work for its clients that

violated the employment agreement. W h e n it complained to her about this, she moved
her resignation date forward. In response, Briggs rejected her resignation, removed her
from the board of directors, fired her for cause, and told her that she forfeited the
deferred compensation. She then sued it, saying that the covenants were unenforceable
and that it was unlawfully withholding the deferred compensation. Briggs removed the
case from state court on the basis that the deferred compensation scheme was a plan
covered by ERISA.

2.

T h e Plan.
T h e accounting firm has aplan covered by the Employment Retirement Income

Security Act.' For its upperelevel workers, Briggs G Veselka Co. has a plan for deferred
benefits as well as current ones. T h e firm has a scheme - a design, pattern, or system
- for worker

benefits.

Although single.member plans are permissible, this scheme was used, with
variations, for 19people, and it was reported to the Department of Labor as one. Under
many plans, workers have options to tailor the particular benefits to their needs making
them individualized if not individual.
Next, Cantrell says that the scheme is not a plan because Briggs has no
administrative duties or discretion. A plan that simply offered a fully.insured death
benefit to its workers would be a covered plan, and it would require the company simply
to pay the premium.
Under the Briggs plan, Cantrell may be due her particular percentage of the
firm's net revenue. T h e covered worker may well questions and dispute the allocation
ofexpenses, rates of depreciation, and other accounting questions that would materially
affect the net revenue. Also, under part of the plan, one quarter's underpayment is to
be recovered in the next quarter with available funds. T h e scheme requires Briggs to
exercise its discretion.
It allows Briggs to exercise discretion because disputes about the calculation and
amount of payments would require an administrative determination. Briggs also must
decide ifwork by a former employee violates the agreement. Obviously, the termination
clauses are potential grounds for significant dispute, as is happening here. Patrick

29 U.S.C. 5

1002

(2012).

Cantrell is currently litigating Briggs's decision that he was an accessory in his wife's
misconduct at the firm and on leaving it.
Cantrell says that this scheme in a single contract with a single employee
cannot be aplan because it was meant to be consideration for the sale of her accounting
business and rather than benefit her as a worker. She was free to negotiate the sale of
her business so that all of the proceeds funded an employee plan or that none did. I le
motivation for using deferred compensation is wholly unimportant; her choice years ago
in writing matters. Presumably, she was looking at the tax advantages of the plan; she
got what she wanted and may not reconstitute the deal.
Cantrell has handed up a case that she says plans need administrative burdens
and complex calculations. That case says that federal law does not preempt a state
statute that requires severance payments when a plant closes.' Maine adopted a law that
required severance pay based on a week's pay for each year the worker had been with
the company. Writing for the Court,Justice Brennan announced the holding in a few
words. "ERISA's
pre.emption provision does not refer to state laws relating to 'employee
benefits,' but to state laws relating to 'employee benefit plans."'<
T h e state law did not require employers to have a plan, did not manage plans,
and did not stop an employer from creating a plan. T h e employer had no plan; he was
forced to pay severance. T h e case stands for the simple proposition that ERISA does not
preempt state welfare laws that apply generally. States have workers compensation,
unemployment insurance, and many other laws that structure the use of workers
without one of them being an intrusion into employer-sponsored plans.

3.

Conclusion.
Without the protection from varying state laws, even employee benefit plans

like this one would no longer be practical. If every aspect of a plan is available as a target
of contract, regulatory, and especially tort laws, they will disappear. Preemption moves
money from the waste of baseless litigation into the pockets of workers

' Fort Halifdx Packing Co., Inc., v. Coyne, 482 U.S. I , 7 ( 1 ~ 8 ~ ) .

Id.

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its purpose.

Briggs bVeselka Co. has apolicy of deferred payments to its management. -1his
policy requires Briggs to pay more than a oneetime, lump-sum, fixed amount - much
less one dictated by a statute. It has a continuing obligation with discretion. This
scheme is an employee benefit plan covered by ERISA. Carol A. Cantrell and W. Patrick
Cantrell's motions to remand will be denied.

Signed on April 3, 2012, at Houston, Texas.

Lynn N. ~ ; ~ V e s
United States District Judge