Tolbert v. RBC Capital Markets Corp.

• Decision Date: 14 July 2014
• Docket Number: No. 13–20213.,13–20213.
• Citation: 758 F.3d 619
• Parties: Brenda TOLBERT; Joseph Rice Neuhaus, Jr.; and Lawrence Gift, Jr., Plaintiffs–Appellants, v. RBC CAPITAL MARKETS CORPORATION, now known as RBC Capital Markets, L.L.C.; RBC Centura Bank, now known as RBC Bank, (USA); RBC U.S. Insurance Services, Incorporated, Defendants–Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

758 F.3d 619

Brenda TOLBERT; Joseph Rice Neuhaus, Jr.; and Lawrence Gift, Jr., Plaintiffs–Appellants,

v.RBC CAPITAL MARKETS CORPORATION, now known as RBC Capital Markets, L.L.C.; RBC Centura Bank, now known as RBC Bank, (USA); RBC U.S. Insurance Services, Incorporated, Defendants–Appellees.

No. 13–20213.

United States Court of Appeals,Fifth Circuit.

July 14, 2014.

Stacy R. Obenhaus, Joe B. Harrison (argued), Trial Attorney, William G. Whitehill, Gardere Wynne Sewell, L.L.P., Dallas, TX, Geoffrey Houston Bracken, Esq., Trial Attorney, Gardere Wynne Sewell, L.L.P., Houston, TX, for Plaintiffs–Appellants.

Sari M. Alamuddin (argued), Christopher Joseph Boran, Morgan, Lewis & Bockius, L.L.P., Chicago, IL, Alison Jacobs Gates, Friedkin Companies, Houston, TX, Allyson Newton Ho, Morgan, Lewis & Bockius, L.L.P., Dallas, TX, for Defendants–Appellees.

Appeal from the United States District Court for the Southern District of Texas.

Before DAVIS, BARKSDALE, and ELROD, Circuit Judges.

JENNIFER WALKER ELROD, Circuit Judge:

The plaintiffs in this case are former employees of the defendant (“RBC”) who participated in a wealth accumulation plan (“WAP”) during their periods of employment. Giving rise to this lawsuit, portions of the plaintiffs' WAP accounts were forfeited when the plaintiffs left their jobs at RBC. The plaintiffs allege that the forfeitures amounted to violations of the Employment Retirement Income Security Act (“ERISA”). The district court granted RBC's motion for summary judgment, concluding that the WAP is not subject to ERISA because it is not an “employee pension benefit plan.” We conclude that the WAP is an “employee pension benefit plan” and therefore REVERSE and REMAND.

I.

A.

An ambitious statutory scheme, ERISA is designed “to protect ... the interests of participants in employee benefit plans and their beneficiaries” by (1) “requiring the disclosure and reporting to participants and beneficiaries”; (2) “establishing standards of conduct, responsibility, and obligation for fiduciaries of employee benefit plans”; and (3) “providing for appropriate remedies, sanctions, and ready access to the Federal courts.” 29 U.S.C. § 1001(b). The primary enforcement mechanism is located in 29 U.S.C. § 1132, which is titled “Civil enforcement.” See Aetna Health Inc. v. Davila, 542 U.S. 200, 208, 124 S.Ct. 2488, 159 L.Ed.2d 312 (2004) (“This integrated enforcement mechanism, [§ 1132(a) ], is a distinctive feature of ERISA, and essential to accomplish Congress' purpose of creating a comprehensive statute for the regulation of employee benefit plans.”). Section 1132(a) creates, among other things, a private cause of action against a fiduciary who breaches his fiduciary duties vis-á-vis an employee benefit plan. See Tiblier v. Dlabal, 743 F.3d 1004, 1007 (5th Cir.2014) (declining to determine whether defendant satisfied “ERISA's strict fiduciary duties” because defendant “was not a fiduciary as defined by ERISA”).

Here, ERISA coverage turns not on whether the defendant is a fiduciary but on whether the WAP is an “employee pension benefit plan” (or “pension plan”) under 29 U.S.C. § 1002(2)(A). A “pension plan” is

any plan, fund, or program ... maintained by an employer ... to the extent that by its express terms or as a result of surrounding circumstances such plan, fund, or program

(i) provides retirement income to employees, or

(ii) results in a deferral of income by employees for periods extending to the termination of covered employment or beyond,

regardless of the method of calculating the contributions made to the plan, the method of calculating the benefits under the plan or the method of distributing benefits from the plan....

§ 1002(2)(A)(i)-(ii). Thus, if the WAP is a “pension plan,” ERISA applies, and the plaintiffs may proceed with their lawsuit.

If the WAP is not a “pension plan,” ERISA does not apply, and the plaintiffs have no ERISA remedy.

B.

It is within this framework that we view the WAP. The “General Nature and Purpose” of the WAP is announced at the beginning of the document:

[The WAP] is a nonqualified, deferred compensation plan pursuant to which a select group of management or highly compensated employees of [RBC] may be offered the opportunity to elect to defer receipt of a portion of their compensation to be earned with respect to the upcoming Plan Year. The [WAP] is designed to provide an opportunity for such employees to invest a portion of their compensation in tax-deferred savings and investment options in an effort to support long-term savings and allow such employees to share in [RBC's] growth and profitability, if any.

A “Committee” of RBC executives administers the WAP. The amounts funneled into the participating employees' WAP accounts fall into three categories: (1) Voluntary Deferred Compensation; (2) Mandatory Deferred Compensation; and (3) Company Contributions.

Voluntary Deferred Compensation (i.e., the percentage of a participating employee's compensation that the employee elects to defer) is always fully vested. Mandatory Deferred Compensation (i.e., the percentage of an employee's compensation that the Committee designates as a required deferral) and Company Contributions (i.e., contributions made by RBC, including matching contributions and discretionary contributions) vest later, on dates determined by the Committee. Notwithstanding the Committee's vesting dates, Mandatory Deferred Compensation and Company Contributions vest immediately upon either the death of the employee or the separation of the employee. In order for the amounts to vest at the time of an employee's separation, certain criteria must be met; if the criteria are not met, then the employee forfeits the unvested amounts.¹

A participating employee is required to elect a distribution date. Generally, a participating employee may elect to have her account distributed either “In–Service” (i.e., during her employment) or upon separation from employment. For the latter choice, “[a]vailable forms of distribution include a single lump sum or, if a Participant meets the requirements for Retirement at the time of Separation, substantially equal annual installments for up to ten years.” If an employee fails to elect a distribution option, distribution occurs by default promptly upon the vesting date. Distribution also occurs promptly upon death or disability. If an employee is terminated “for Cause” prior to the distribution of her account balance, all Mandatory Deferred Compensation and Company Contributions are forfeited.

Under the heading “ERISA Matters,” the WAP speaks to the term at issue here—“employee pension benefit plan”:

Although the [WAP] is not intended to be a tax-qualified plan under [26 U.S.C. §] 401, the [WAP] might be determined to be an “employee pension benefit plan” as defined by ERISA. If the [WAP] is determined to be an “employee pension benefit plan,” [RBC] believes that it constitutes an unfunded plan of deferred compensation maintained for a select group of management or highly compensated employees and, therefore, exempt from many ERISA requirements. A statement has been filed with the Department of Labor to comply with ERISA reporting and disclosure requirements.

C.

Each plaintiff in this case participated in the WAP as an RBC employee. Brenda Tolbert worked as an administrative assistant at RBC and participated in the WAP until 2009, when she was terminated for cause.² Joseph Rice Neuhaus, Jr., and Lawrence Gift, Jr., were financial consultants at RBC. Neuhaus and Gift participated in the WAP until they voluntarily resigned in 2011, without satisfying the separation criteria. Under the terms of the WAP, the amounts in the plaintiffs' accounts that had not yet vested (in the case of Neuhaus and Gift) or had not yet been distributed (in the case of Tolbert) were forfeited.

The plaintiffs do not quibble over whether the forfeitures complied with the terms of the WAP. Instead, the plaintiffs allege in this lawsuit that the forfeiture provisions violate ERISA's mandates.³ The plaintiffs assert a claim for breach of fiduciary duty under § 1132(a)(2) and a claim for equitable relief under § 1132(a)(3). RBC filed a motion for summary judgment on the grounds that the WAP does not constitute an “employee pension benefit plan” and, in the alternative, that the WAP is an exempt “top hat” plan. The district court granted the motion on the first ground, without deciding whether the WAP constitutes a “top hat” plan.

II.

We review a grant of summary judgment de novo. Clayton v. ConocoPhillips Co., 722 F.3d 279, 290 (5th Cir.2013). Generally, whether ERISA covers a given plan is a mixed question of fact and law, but where the underlying factual circumstances are undisputed, we have treated the question as one of law to be reviewed de novo. Id.

A.

As indicated above in Part LA, the question before us is a discrete one: whether, “by its express terms or as a result of surrounding circumstances,” the WAP (i) “provides retirement income to employees” or (ii) “results in a deferral of income by employees for periods extending to the termination of covered employment or beyond.” See§ 1002(2)(A)(i)-(ii).

The parties offer competing views of the statutory text. The plaintiffs argue—through the lens of case law indicating that ERISA must be “liberally construed”—that “all Congress requires of an ERISA pension is that it provide employees an ability, by the plan's express terms or surrounding circumstances, to defer current compensation until retirement or until separation or beyond.” RBC argues in response that the WAP is not a “pension plan” because “the primary purpose of the WAP is not to provide retirement or deferred post-termination income, but rather, to attract and retain key employees by awarding bonuses and other ... incentives.” RBC thus takes a narrow view of the statute.

To resolve the dispute, we begin by noting that the definition of “pension plan” in § 1002(2)(A) is neither “algorithmic” nor ...