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Marriott Defeats Claim for Retirement Benefits, Based on Statute of Limitations

Marriott Defeats Claim for Retirement Benefits, Based on Statute of Limitations

Bond v. Marriott Int'l, 2016 WL 360801 (4th Cir. Jan. 29, 2016)


ERISA and Life Insurance News
(April, 2016)

The Fourth Circuit has ruled that Marriott is not obligated to afford statutory protections to employees covered by its stock incentive plan, despite urging by the Labor Department.

In finding the lawsuit against Marriott to be untimely, the court avoided the issue that drew the U.S. Department of Labor's ("DOL") attention—namely, what types of employees can participate in "top-hat" plans, which are exempt from the funding and vesting requirements of ERISA. In an unpublished opinion, the Fourth Circuit declined to decide whether the Marriott plan qualified for the top-hat exemption, finding instead that the workers suing the company filed their lawsuit too late.

In so ruling, the court rejected a district court decision finding that the lawsuit was timely filed because Marriott had not issued a "formal denial" of the workers' claims until after they filed suit. The Fourth Circuit explained that the "formal denial" standard for determining when to file suit does not work in situations where there was never a formal claim denial. In those cases, the court said, the statute of limitations begins to run when there has been a "clear repudiation" of the workers' benefits.

The court explained:

The "clear repudiation" rule serves the goals of statutes of limitations, to "promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have faded, and witnesses have disappeared," and to encourage "rapid resolution of disputes."  These goals "are served when the accrual date anchors the limitations period to a plaintiff's reasonable discovery of actionable harm."

Applying the rule, the court concluded that the employees' claims were untimely and were filed more than 30 years too late. To begin, a 1978 prospectus―in a section entitled "ERISA"―stated that the retirement plan did not need to comply with ERISA's vesting requirements. The prospectus explained that "inasmuch as the Plan is unfunded and is maintained by the Company primarily for the purpose of providing deferred compensation for a selected group of management or highly compensated employees," the plan was a top-hat plan "exempt from the participation and vesting, funding and fiduciary responsibility provisions" of ERISA.

This language informed plan participants that the retirement awards were not subject to ERISA's vesting requirements, the very claim made by the employees. This language was included in prospectuses distributed in 1980, 1986, and 1991.

Click here to view the full April 2016 Edition of the ERISA and Life Insurance News.

Authors
H. Sanders Carter
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Andrea K. Cataland
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Kenton J. Coppage
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Dorothy H. Cornwell
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Mary B. Ramsay
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Jennifer Noland Rathman
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Peter A. Rutledge
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