Smith v. Lutheran Life Ministries
| Decision Date | 28 February 2023 |
| Docket Number | 21 C 2066 |
| Parties | LORI SMITH, Plaintiff, v. LUTHERAN LIFE MINISTRIES and BOARD OF DIRECTORS OF LUTHERAN LIFE MINISTRIES, Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
In this case brought under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1001 et seq. Plaintiff Lori Smith claims that Defendants Lutheran Life Ministries (LLM) and LLM's Board of Directors (the Board) owe her severance payments and other compensation based on the circumstances of her departure from LLM's employ. (Dkt. 34.)[1]After the court granted in part and denied in part LLM's previous motion to dismiss (see dkt. 15), Smith twice amended her complaint. LLM and the Board now move to dismiss the Second Amended Complaint's two ERISA counts (Counts I and II) under Federal Rule of Civil Procedure 12(b)(6). (Dkt. 38.) Also before the court is Smith's motion to strike an allegedly new argument made by LLM in its motion to dismiss reply brief. (Dkt. 54.) For the reasons described below, LLM's motion is granted, and Smith's motion is denied.
Smith alleges the following in her Second Amended Complaint. At all times relevant to this case, Smith resided in O'Fallon Missouri. (Dkt 34, ¶ 9.) LLM is an Illinois not-for-profit corporation that does business in the Village of Arlington Heights, Illinois. (Id. ¶ 10.) In September 2018, LLM's CEO and President Jesse Jantzen, a former supervisor of Smith, began to recruit Smith to work with the company as part of its management team. (Id. ¶ 13.) During the negotiations, LLM promised Smith that she would not have to permanently relocate to Illinois but would be required to work on site in Illinois as needed. (Id. ¶ 14.) To persuade Smith to leave her prior employment, LLM promised she would receive 18-months' severance pay and a residence to live at when she was required to work in Illinois, along with other inducements. (Id. ¶ 15.) The offer letter made clear that Smith would receive such severance payments “in the event of a change of control as outlined in the agreement.” (Id. Ex. B at 2.) Relying on these representations, Smith accepted LLM's offer of employment on December 28, 2018. (Id. ¶ 16.)
Also on December 28, 2018, Smith and LLM entered into an agreement entitled “Agreement Under Lutheran Life Ministries Change in Control Severance Plan” (the Severance Agreement), which was referenced in and attached to LLM's offer letter. The Severance Agreement specifies that it is a contract effective December 28, 2018, between Smith and LLM “under the Lutheran Life Ministries Change in Control Severance Plan [(the Reference Plan)].” (Id. Ex. A at Recitals.) The Severance Agreement's recitals then relate:
LLM considers the maintenance of a vital management group to be essential to protecting and enhancing the best interests of the LLM System[,] and to that end LLM has established the [Reference] Plan to provide benefits to certain management employees in the event their employment is terminated under the circumstances described herein. Participation in the [Reference] Plan is evidenced by an individual agreement between LLM and each participating employee.
The Severance Agreement further provides that “LLM and [Smith] agree that [Smith] shall become a Participant in the [Reference] Plan subject to the following terms which form a part of the [Reference] Plan with respect to [Smith]'s participation therein” , and that “[Smith] acknowledges receipt of a copy of the [Reference] Plan” ). At the time the parties executed the Severance Agreement, LLM only provided Smith with a copy of the Severance Agreement and Smith correspondingly believed that all terms of the Reference Plan were fully contained within the Severance Agreement. (Id. ¶¶ 23-24.) No other plan terms beyond those written in the Severance Agreement were discussed with Smith or provided to her during her employment. (Id. ¶¶ 24-25.)
As for severance, the Severance Agreement provides that “[i]f [Smith]'s employment is terminated during a Transition Period (a) by the LLM System other than for Cause, death, or disability, or (b) through Constructive Termination, then LLM shall pay [Smith 78 weeks' worth of severance.]” (Id. Ex. A at ¶ 3(c).) The Severance Agreement provides no definition of “Transition Period” but indicates that “[d]efined terms used in this Agreement shall have the definitions assigned to those terms in the [Reference] Plan.” (Id. Ex. A at ¶ 1.) The Severance Agreement defines “Constructive Termination” as any “material reduction” in Smith's responsibilities, title, or pay, as well any requirement that Smith work at an LLM location outside of Cook, Lake, DuPage, Will, Kane, or McHenry counties or relocate her primary residence to Illinois. (Id. Ex A at ¶ 9.)
Smith began her employment with LLM as Chief Operations and Nursing Officer on February 4, 2019, commuting from her home in Missouri to Illinois as needed. (Id. ¶ 26.) On March 31, 2020, Jantzen left the company. (Id. ¶ 27.) In September 2020, LLM hired Sloan Bentley as its new President and CEO. (Id. ¶ 28.) At a September 15, 2020 meeting between Smith and Bentley, Bentley directed Smith to move out of the executive housing LLM had provided her. (Id. ¶ 29.) Bentley and Smith then emailed back and forth as Bentley attempted to locate a copy of Smith's offer letter and the Severance Agreement. (Id. ¶¶ 30-32.) In an October 19, 2020 email, Bentley informed Smith that she had located the documents and attached a copy of both the offer letter and the Severance Agreement to her email. (Id. ¶¶ 32-34.) In December 2020, LLM removed Smith from many of her management responsibilities and assigned them to a newly created position. (Id. ¶¶ 35-37.) Bentley also directed Smith at this time to vacate the company-provided executive housing and to be present in LLM's offices Monday through Friday at least every other week. (Id. ¶ 38.)
Smith interpreted the loss of managerial responsibilities and access to executive housing as constructive termination under the Severance Agreement. (Id. ¶ 39.) As a result, Smith sent a letter to the Board on January 3, 2021, in which she gave notice that her last day as an LLM employee would be February 5, 2021. Smith also used this letter to provide notice to the Board of her claim to initiate severance payments under the Severance Agreement following the end of her employment. (Id. ¶¶ 40-41.) On January 4, 2021, Smith received a response from Bentley acknowledging that the Board had received Smith's letter and informing her that the Board had denied her claim for severance. (Id. ¶¶ 42-43.) Bentley's response provided no information regarding any further administrative remedy or appeal process. Smith made a second demand for severance on March 19, 2021, after she had left the company, and LLM again refused her request. (Id. ¶ 46.)
Attached to Bentley's January 4, 2021 letter was an unsigned, undated document entitled “Lutheran Life Ministries Change in Control Severance Plan” (the Plan) that Bentley cited as grounds for denying Smith's claim for severance. (Id. ¶ 43.) Smith had never previously seen or discussed this document with anyone at LLM, and it was not attached to her offer letter. (Id.) Smith then asked Bentley for a “signed and date-verified version and indication of Board approval from official minutes.” (Id.) Bentley never responded to this request. (Id. ¶ 44.) Smith only saw a signed version of the Plan on February 9, 2021, after receiving a copy of her personnel file pursuant to the Illinois Personnel Records Review Act. (Id. ¶ 48.) This copy of the Plan contained a different document number from the unsigned copy Smith received on January 4, 2021, was signed by the Chairman of Board, and had a printed effective date of December 3, 2018. (Id. ¶¶ 49-52.) Nevertheless, the Board's meeting minutes for December 3, 2018, contain no mention of the Board adopting or authorizing the Plan. (Id. ¶ 53.) Smith also attended every Board meeting that occurred between the start of her employment with LLM on February 4, 2019, and her departure from the company on February 5, 2021, and the Plan was never adopted, authorized, or discussed at any of those meetings. (Id. ¶ 54.) Additionally, LLM never provided Smith with a summary plan description as required by 29 U.S.C. § 1022. (Id. ¶¶ 58-59.)
The Plan provides a definition of “Transition Period,” which was not included in the Severance Agreement. According to the Plan, “Transition Period shall mean the period of time which commences upon the execution of a definitive agreement which results in a Change in Control and ending on the first anniversary date of a Change in Control.” (Id. Ex. G at 2.) In turn, the Plan defines “Change in Control” as:
[T]he occurrence of one or more of the following events: (a) one or more persons or entities acquire the ability to appoint fifty percent (50%) or more of the Board of Directors of LLM; (b) LLM is part of a merger, conversion, consolidation or otherwise undergoes a corporate transformation where the Board of Directors immediately prior to such transaction does not represent at least fifty percent (50%) of the Board of Directors immediately following such transaction; (c) more than fifty percent (50%), by value, of the assets of LLM are sold; (d) LLM enters into a joint operating agreement with another person or entity; and/or (e) LLM contracts with another person or entity to perform a material portion of the management functions of LLM.
(Id. Ex. G at 1-2.)
Finally both the Severance...
To continue reading
Request your trial