A recent Sixth Circuit case, Lee Gardner v. Heartland Industrial Partners (6th Cir. May 10, 2013), may give non-qualified deferred compensation plan participants a new tool in their toolbox for challenging the attempts their employers (or an acquirer of their employers) to terminate the plan without paying benefits to them (see "Top-Hat Plan Participants Lose Benefits After a Sale of Company"). The private equity investment firm Heartland Industrial Partners owned Metaldyne Corporation. Heartland had contracted to sell Metaldyne to another private equity firm. However, when the prospective buyer learned of the Metaldyne SERP and its $13 million benefit obligation, the buyer threatened to back out of the transaction. According to the court's opinion, two principals of Heartland who were the chairman and a member of the Metaldyne board apparently persuaded the Metaldyne board "simply to declare the SERP invalid."
After the sale closed, Metaldyne informed the participants that it had invalidated the Plan. The participants filed multiple lawsuits against Heartland and the two Metaldyne board members who were Heartland principals, including this one in Michigan state court. This lawsuit alleged tortious interference with contractual relations against Heartland and its two principals who served on the Metaldyne board for their role in forcing Metaldyne "simply to declare the SERP invalid." Defendants sought to remove the lawsuit to federal court, arguing that ERISA completely preempted the participants' state law claims. (The vast majority of SERP and other non-qualified deferred compensation plan documents would prohibit an employer from terminating the plan without paying benefits accrued to date. It is unclear how the termination of the SERP could even be legal under the plan document, but court's decision did not discuss this issue.)
In point of fact, the court did not decide the merits of the participants' claim that Heartland and two of its principals had tortuously interfered with the plaintiff/participants' contractual relationship. It only decided that the claim was not preempted by ERISA and, therefore, the participants could continue with their state court claims at trial.