Sexton v. Panel Processing, Inc.

• Decision Date: 12 April 2013
• Docket Number: Case No. 12–10946.
• Citation: 912 F.Supp.2d 457
• Parties: Brian SEXTON, Plaintiff, v. PANEL PROCESSING, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of Michigan

912 F.Supp.2d 457

Brian SEXTON, Plaintiff,

v.PANEL PROCESSING, INC., et al., Defendants.

Case No. 12–10946.

United States District Court,

E.D. Michigan,

Northern Division.

Oct. 30, 2012.

Opinion Denying Reconsideration April 12, 2013.

Limited on Preemption Grounds

M.C.L.A. § 15.362

William A. Pfeifer, Isackson, Wallace & Pfeifer, P.C., Alpena, MI, for Plaintiff.

David A. Malinowski, Steven J. Fishman, Donald H. Scharg, Bodman PLC, Troy, MI, for Defendants.

OPINION AND ORDER GRANTING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT AND DECLINING JURISDICTION OVER PLAINTIFF'S STATE LAW CLAIM

THOMAS L. LUDINGTON, District Judge.

Section § 510 of the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1140, protects an employee who “has given information ... in any inquiry or proceeding relating to [ERISA].” The question in this case is whether § 510 extends its protections to an employee's unsolicited, internal complaint to his employer that it has violated ERISA.

The issue has split the circuits. The Second, Third, and Fourth Circuits hold that § 510 does not protect such complaints; the Fifth, Seventh, and Ninth Circuits hold that it does.¹ The Sixth Circuit has not yet had occasion to address the issue. For the reasons detailed below, the Court concludes that in this case § 510 does not protect the plaintiff's unsolicited, internal complaint—an email to his employer threatening to report its ERISA violations to state and federal authorities—because it was unconnected to any “inquiry or proceeding.”

Briefly, “inquiry” means “the act or an instance of asking for information.” ² When information has not been asked for by either the employee, employer, or anyone else, as in this case, there has not been an “inquiry.” Similarly, “proceeding” means “the course of procedure in a judicial action or in a suit in litigation.” ³ Although something of a tautology, it is nevertheless true that if there was not a pending “proceeding,” as in this case, an employee cannot reasonably be said to have “given information ... [in a] proceeding.” 29 U.S.C. § 1140.

In sum, the plain language of § 510 does not protect unsolicited internal complaints by an employee that are unconnected to an inquiry or proceeding. To reach a contraryinterpretation is to either disregard the language that Congress chose or to subordinate what Congress said for what the Court thinks that Congress may have meant to say.

I

A

For 27 years Plaintiff Brian Sexton was employed by Defendants Panel Processing, Inc., and Panel Processing of Coldwater, Inc., Pl. Dep. 15, May 30, 2012, attached as Defs.' Mot. Ex. 1. At first he worked as a “fabricator, which was basically the entry level position in the shop.” Id. Promoted several times over the years, Plaintiff eventually became the general manager of Defendants' Coldwater, Michigan facility. Id.

In 2003, Plaintiff was appointed to Defendants' board of directors. Id. Four or five years later (Plaintiff does not recall precisely when), he was appointed as a trustee of Defendants' employee stock ownership plan (ESOP ⁴). Id. at 15–16.

B

Plaintiff began working for Defendant as an “at-will” employee. Over the years, Plaintiff signed several written acknowledgments that his employment was at-will. See Defs.' Mot. Exs. 3–5. In 1999, for example, Plaintiff signed a receipt of employee handbook acknowledgement that provided:

I understand that neither this manual nor any other written or verbal communication by a management representative is intended to, in any way, create a contract of employment for any specified period of time, and that this handbook is for informational purposes only. I also understand that the company abides by employment-at-will, which permits the company or the employee to terminate the employment relationship at any time, for any reason, with or without notice. The company will not modify their policy of employment-at-will in any case.

Id. Ex. 4. Plaintiff signed the same acknowledgement in 2004. Id. Ex. 3. In 2007, he signed yet another acknowledgement of his at-will employment as part of a covenant not to compete. Id. Ex. 5, at 2. And finally, in Plaintiff's deposition he expressly acknowledged that he was an at-will employee at the time his employment was terminated. He was asked:

Q: At the time of your termination, is there anything that led you to believe that you were not an at-will employee?

A: No.

Q: So stated another way, at the time of your termination, you understood that you were an at-will employee?

A: Correct.

Pl. Dep. 38; see also Pl. Dep. 36–37 (acknowledging covenant not to compete did not change at-will status of Plaintiff's employment); but see Pl. Dep. 231–33 (asserting that covenant not to compete created “just cause” employment relationship).

C

Defendants' bylaws provide that the board of directors will have seven members. See Defs.' Bylaws art. IV, § 1, attached as Pl.'s Resp. Ex. 2. The copy of the bylaws furnished to the Court specifies that the board members “need not be Shareholders of the corporation,” but goes on to specify that several members of the board must be insiders. Defs.' Bylaws art. V, §§ 1–4. The chairman of the board, for example, “shall be the chief executive officer of the corporation.” Id. § 1. The president “shall be the chief operating officer.” Id. § 2. And the treasurer “shall have custody of all corporate funds and securities.” Id. § 4.

A shareholders meeting must be held each year, the bylaws further provide, specifying that “[o]ne of the purposes of such meeting shall be the election of directors.” Defs.' Bylaws art. I, § 2. Each share of capital voting stock entitles the record holder or proxy to one vote in the election of directors, with the bylaws elaborating:

A majority of the outstanding shares of this corporation entitled to vote, present by their record holders in person or proxy, shall constitute a quorum at any meeting of Shareholders....

Each Shareholder shall, at every meeting of Shareholders, be entitled to one vote in person or by proxy for each share of capital voting stock of this corporation held by such Shareholder.... Directors shall be elected by a plurality of the votes of Shareholders entitled to vote at each meeting of Shareholders for the election of a Director or Directors.

Defs.' Bylaws art. II, § 1, art. III, § 1.

D

In 1982, Defendants created their ESOP and an “employee stock ownership and money purchase pension trust.” See Defs.' Mot. Ex. 6 (attaching trust agreement). The trust agreement provides that the ESOP's assets are controlled by a committee, specifying: “The Plan assets shall be invested and controlled by the Committee; provided, however, that the actual management of Trust investments, other than Company Stock, may be delegated to the Trustee.” Id. at 2–3. The trust agreement further provides that the committee also controls how company stock held by the trust is voted, providing:

All Company Stock held by the Trust shall be voted by the Trustee in accordance with instructions from the Committee. Notwithstanding the foregoing, each Participant and/or Beneficiary shall be entitled to direct the voting of any voting shares of Company Stock allocated to his Company Stock Account with respect to any vote required for the approval or disapproval of any corporate merger or consolidation, recapitalization, reclassification, liquidation, dissolution, sale of substantially all the assets of a trade or business, or other similar transactions prescribed by regulation.

Id. at 4. While the trust agreement has been furnished to the Court, the ESOP has not. How committee members were selected under the ESOP has not been made part of the record.

E

In the spring of 2011, there were three committee members (who also were trustees): Plaintiff Brian Sexton, Robert Karsten, and Eric Smith (Defendants' chief executive officer). Id. at 1. Defendants' board of directors was made up of four inside directors and three outside directors. See Pl. Dep. 53–54. The insiders were Plaintiff, Eric Smith, Tom Karsten, and Alan Kelsey (Defendants' chief operating officer). Id. The outsiders were George LaFleche, Mike Kelly, and Robert Karsten. Id.

Two director seats were up for election at the 2011 shareholders meeting—the seats held by Messrs. LaFleche and Kelsey. See Defs.' Mot. Ex. 7. In March 2011, Plaintiff received a letter explaining:

At [the annual shareholders meeting], your vote as an ESOP Participant will help elect the Panel Processing, Inc. Board of Directors.

The current Board will be nominating the following individuals for re-election to a three (3) year term ending in 2014: George LaFleche and Alan Kelsey. In addition to these nominees, the voting ballots that you will fill out also include three nominees for Employee Director.

The procedure for voting is as follows: Attached to this memo are two Trustee Direction Forms. These forms are your voting “ballots.” The first form lists the above individuals for re-election and the second lists the Employee Director nominees. You should vote for a total of two (2) for re-election and one (1) employee nominee. The reason that you are directing the Trustees to vote your shares is because ESOP shares are recorded in the name of the Trust. Therefore, you do not vote in person at the meeting. Instead, you use [these] Trustee Direction Forms to require the Trustee to vote for you.

By placing an (X) next to the name of a nominee, you will be voting the full number of shares allocated to your ESOP account for the person that you have selected. For example, suppose that you have 100 shares of Panel Processing, Inc. stock allocated to your ESOP account. When you place an (X) next to the name of two different nominees, you are voting all of your 100 shares in favor of each of these nominees.

Id. at 1 (emphasis omitted). Attached was a “trustee direction form” that again explained: “Each ESOP Participant is entitled to one vote for each share of capital voting stock of this...