ERISA Section 510 Claim Requires Specific Intent To Interfere With Benefits
NAUMEN v. ABBOTT LABORATORIES (February 3, 2012)
In mid-2003, Abbott Laboratories decided to spin off its Hospital Products Division, creating Hospira. As part of its plan to ensure the new venture's success, Abbott decided that: a) Division employees could not transfer out of the Division before the spinoff, b) neither Abbott nor Hospira would hire from the other for a period of two years, c) Division employees could not retire before the spinoff (and begin receiving a pension) and return to Hospira afterwards, and d) after an initial period, Hospira employees would be covered by Hospira's benefits plan. Abbott did give several Division executives retention bonuses to allay their concerns about reduced post-spinoff benefits. After the spinoff, Hospira adopted a benefits plan that was significantly less generous than Abbott's. A class of Division/Hospira employees brought suit, alleging that Abbott violated ERISA. Judge Gettleman (N.D. Ill.) entered judgment for the defendants after a bench trial. The class appeals.
In their opinion, Seventh Circuit Judges Kanne, Evans (who, as a result of his death, took no part in the decision), and Sykes affirmed. ERISA's section 510 prohibits interference with plan benefits. But section 510 requires an allegation of the specific intent of preventing the use of benefits. Here, the Court concluded that the district court did not err in finding that employee benefits was not an issue during the decision to spinoff the Division. Although the plaintiffs framed their complaint in various ways, the conclusion is the same. Without proof of specific intent, the plaintiff's cannot prevail under a section 510 argument. The Court turned to the fiduciary duty claim. That claim is that Abbott failed to disclose the specifics of the post-spinoff Hospira benefits plan before the spinoff. The record discloses that Hospira benefits were determined by Hospira after the spinoff. The Court agreed with the district court that the executive retention bonuses paid pre-spinoff was not proof that Abbott knew what the benefits were going to be. Abbott's statements prior to the spinoff were not misleading. In fact, they were true.
Michael Rigney practices in the law offices of GVC Ltd. in Chicago. In this blog, he reports on select