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Federal Court Lacks Jurisdiction to Consider Arbitration or ERISA Benefit Related Issues under Employment Agreement

The U.S. Court of Appeals for the Eighth Circuit recently held that it lacked jurisdiction to hear a motion to enjoin a request for arbitration to settle disputes under an employment agreement. Dakota, Minnesota & Eastern Railroad Corporation (?Ç£DM&E?Ç¥) entered into an employment agreement with its president and CEO (the ?Ç£Defendant?Ç¥) to encourage his retention following an anticipated change of control. With a merger imminent, DM&E terminated the Defendant without cause and triggered the employment agreement’s severance provisions; the Defendant filed a demand for arbitration. DM&E then filed an action in federal court to enjoin the arbitration. The Eighth Circuit agreed with the district court that the benefits sought in the Defendant’s arbitration demand were not claims for benefits due under an ERISA plan. The circuit court held that the benefits being demanded under the employment agreement (i.e., the continued provision of employee benefits or cash payments if such benefits were unavailable under the terms of the plans) were demands under a free-standing, single-employee contract that pegged DM&E?ÇÖs payment obligations to amounts that would have been due under the ERISA plans. Because there was no evidence to indicate that the parties intended to amend the ERISA plans and because the employment agreement is not itself an ERISA plan, the court held that the claims were not claims for benefits due under an ERISA plan. Accordingly, the court held that it lacked federal subject matter jurisdiction to consider the arbitration issue or any other issue arising under the employment agreement. Dakota, Minnesota & Eastern Railroad Corp. v. Schieffer, No. 12-1807 (8th Cir. Mar. 28, 2013

The lawyers of our Employee Benefits and Executive Compensation Practice Group are readily able to assist companies on a nationwide basis with implementing sophisticated benefit plans and providing answers to their most challenging compensation issues. Additionally, our lawyers are well aware of the daily employee benefits challenges facing companies of all sizes and are capable of helping in-house lawyers and human resources personnel with the day-to-day advice and guidance necessary to properly administer employee benefits plans.

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April 2013