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Maatman v. Lumbermens Mutual Casualty Co.

January 28, 2010


The opinion of the court was delivered by: Joan B. Gottschall United States District Judge

Judge Joan B. Gottschall


Gerald Maatman, Sr. filed a three-count complaint in the Circuit Court of Cook County, Illinois against his former employer, Lumbermens Mutual Casualty Company.*fn1

Maatman claimed he had a pension plan with Lumbermens and that Lumbermens induced him to accept a buyout of that plan by misrepresentations regarding the financial condition of the company. Lumbermens removed the action to this court, asserting that the Employee Retirement Income Security Act of 1974, Pub. L. 93-406, 88 Stat. 829, enacted as amended at 29 U.S.C. § 1001 et seq. (2006) ("ERISA"), preempted Maatman's state-law claims, and that this court therefore has federal question jurisdiction over this suit. Maatman now seeks remand, arguing that preemption does not apply to what he characterizes as the "unusual circumstances" of this case. For the reasons stated herein, Maatman's motion for remand is denied.


Maatman was the chief executive officer of Lumbermens, and so was eligible for a supplemental retirement plan known as the SERP.*fn2 It is unclear when Maatman joined the SERP, but he remained a participant after his retirement in 1995. Several years after Maatman's retirement, Lumbermens suffered serious financial difficulties, including losses of millions of dollars, and faced liquidation, or so Lumbermens allegedly represented to Maatman. After making these representations, Lumbermens offered SERP participants including Maatman a lump-sum buyout which Maatman alleges was equivalent to about 14 percent of the value of his benefits under the SERP. Maatman alleges that to induce him to accept the offer, Lumbermens "painted the bleakest possible picture" of its condition, and that, relying on Lumbermens's representations, he accepted the offer. But liquidation has not happened, Lumbermens's fortunes have apparently improved, and Maatman alleges that his former employer duped him.

Maatman brought the action in state court premised on state-law fraud, unjust enrichment, and breach of fiduciary duty claims. In his fraud claim, Maatman asserts that he was wrongfully induced to accept a buyout of his SERP benefits, Compl. ¶¶ 1, 16, by Lumbermens's representations, which regarded the viability of both the corporation and the SERP. (Id. ¶ 18.) Maatman asks for actual damages, making specific allegations about the comparative value of the buyout and his SERP benefits at the time of the buyout. (Id. ¶¶ 17, 27.B.) In his unjust enrichment claim, Maatman seeks actual damages, punitive damages, disgorgement of ill-gotten gains, and equitable relief for Lumbermens' "retention of the aforesaid unlawfully reduced SERP liability." (Id. ¶ 30.) Finally, in his breach of fiduciary duty claim, Maatman alleges that Lumbermens made misstatements and omissions regarding both Lumbermens' financial condition and "the likelihood that Plaintiff would receive money owed to him under the SERP," leading to Maatman's acceptance of the buyout offer. (Id. ¶¶ 34-36.)


As the removing party, Lumbermens has the burden of establishing this court's jurisdiction. In re Application of Cty. Collector of Winnebago, Ill., 96 F.3d 890, 895 (7th Cir. 1996); see also Stevo v. CSX Transp., Inc., 940 F. Supp. 1222, 1223 (N.D. Ill. 1996). If Maatman's claims are completely preempted, the court has subject matter jurisdiction over this removed action, as complete ERISA preemption supports federal question jurisdiction. See Franciscan Skemp Healthcare, Inc. v. Cent. States Joint Bd. Health & Welfare Trust Fund, 538 F.3d 594, 601 (7th Cir. 2008). If ERISA does not completely preempt Maatman's claims, the court has no jurisdiction and remand is proper. See 28 U.S.C. § 1447(c).*fn3

In evaluating Maatman's motion, it is worth noting that both the Supreme Court and the Seventh Circuit have instructed that ERISA broadly preempts state laws. See Kannapien v. Quaker Oats Co., 507 F.3d 629, 640 (7th Cir. 2007) (quoting Egelhoff v. Egelhoff ex. rel. Breiner, 532 U.S. 141, 146 (2001)). Indeed, the Seventh Circuit has stated that "the preemptive force of ERISA is so powerful that it converts 'a state claim into an action arising federal law,' even if the plaintiff does not want relief under ERISA." Jass v. Prudential Health Care Plan, Inc., 88 F.3d 1482, 1490 (7th Cir. 1996) (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 64 (1987)).

Maatman asserts that his causes of action are not preempted because: the SERP was either not subject to ERISA or not subject to ERISA's "comprehensive regulation"; Lumbermens' representations that support his claims do not relate to the SERP, but rather to the financial condition of the company; and Lumbermens's administration of the SERP is unaffected by Maatman's claims.

A. Whether SERP was Subject to ERISA

The first question is whether the SERP was subject to ERISA and its regulations. In attempting to answer this question, Maatman discusses "excess benefit" plans and "top hat" plans, which merit brief discussion. "Excess benefit" plans serve the sole purpose of avoiding the strictures of § 415 of the Internal Revenue Code, which limit benefits and contributions under ERISA-qualified plans. Garratt v. Knowles, 245 F.3d 941, 946 n.4 (7th Cir. 2001). Excess benefit plans are completely exempt from ERISA. Id. "Top hat" plans, by contrast, are unfunded plans that "the employer maintains 'primarily for the purpose of providing deferred compensation to a select group of management or highly compensated employees.'" Id. (quoting 29 U.S.C. § 1051(2)). Top hat plans are subject to ERISA's enforcement provisions, but not its "vesting, participation, funding, and fiduciary rules." Id.

Maatman asserts that the SERP was not an excess benefit plan, see Mem. 12, but rather a top hat plan. (Id.) He appears to be correct. The SERP was intended not just to avoid the limitations of § 415 of the Internal Revenue Code, but also §§ 401 and 402(g), Sprenger Decl. Ex. C ¶ 2.2, and is therefore a top hat plan. See Garratt, 245 F.3d at 946-48. Although ERISA generally preempts state laws regarding top hat plans, see Olander v. Bucyrus-Erie Co., 187 F.3d 599, 604 (7th Cir. 1999); Paneccasio v. Unisource Worldwide, Inc., 532 F.3d 101, 113-14 (2d Cir. 2008), Maatman argues that the facts of his case counsel against the general rule of preemption. ...

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