Free Online Review (908) 685-0600

New Jersey Employment, Business & Aviation Law Blog

ERISA: Reliance Damages Are Not Preempted

Posted by Frank Steinberg | May 18, 2007 | 0 Comments

You could build a good sized library from the decisions of the courts — from the US Supreme Court on down — that have wrestled with the often inscrutable provisions of ERISA, the Employee Retirement & Income Security Act.  A big percentage of the decisions in your library would deal with the question of whether particular state law claims brought by plaintiffs are preempted by the provisions of federal law.  I can tell already that this sounds like a lot of circular lawyer-talk, but bear with me.  It's almost impossible to write about ERISA without sounding this way.  And besides, the case we're going to talk about has real-world implications for executives who are considering a new job.

Here are the basics of Dr. Dale Thurman v. Pfizer, Inc.  Dr. Thurman had a job in Ohio. His benefits  included high compensation, stock options, and other perquisites.  He was induced to go to work for Pfizer, Inc. in Michigan.  Although offering lower compensation, Pfizer promised him, according to the complaint, the ability to retire at age 62 with a pension of $3,100 per month.  In short, the pension was the thing that convinced him to change jobs.  After he had been working for Pfizer for a month he was notified that the first calculation of his pension was incorrect and that his actual pension would be $816 per month. 

This, as you can imagine, did not sit well with Dr. Thurman.  He filed suit in state court for fraudulent misrepresentation and innocent misrepresentation.  He requested compensation in the alternative: (1) for the value of what he lost (higher salary, stock options, and so forth) from leaving his old job, called reliance damages; and (2) for the benefit of the deal that he thought he had made with Pfizer (the higher pension), called expectation damages.

The case was removed to federal court and Pfizer moved to dismiss on the theory that Dr. Thurman's state law claims were preempted by ERISA, and the case eventually wound up in the US Court of Appeals for the 6th Circuit. 

Sparing you the details, the court held that Thurman's claim for expectation damages was preempted by ERISA.  However, he was allowed to proceed with his claim for reliance damages — what he left behind when he was lured away from his old job by the false promise of a particular pension benefit. In these circumstances, the court held, ERISA preemption does not apply.

The moral of the story?  For those of you who are thinking of changing jobs to get benefits under an ERISA plan, get the details in writing, and in advance.  And if you find yourself in litigation with your employer when they don't deliver, think about pleading your reliance damages claim specifically.  It may save you from the litigation catastrophe of ERISA preemption. 

About the Author

Frank Steinberg

Frank is the founder and principal of Steinberg Law, LLC. A Jersey boy born and bred, he focuses on employment litigation and counseling, business litigation,  and aviation law. Following law school and a clerkship in the federal district court Frank spent his early career with large litigation ...


There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment