Severance Agreement Bars Former Employee From Suing Over ESOP

A federal court has determined that a severance agreement bars a former employee of Telligen, Inc. from proceeding with a lawsuit claiming Employee Retirement Income Security Act (ERISA) prohibited transaction violations regarding Telligen’s employee stock ownership plans (ESOP).

The plaintiff filed the lawsuit on behalf of the plan, alleging Bankers Trust Company of South Dakota, the plan’s trustee, breached its fiduciary duty when it authorized the plan’s purchase of Telligen stock, when it authorized the plan to take on a loan to finance the stock purchase, and when it accepted payment from Telligen for Bankers Trust’s trustee services. She also alleges Bankers Trust breached its fiduciary duty by entering into an indemnification agreement with Telligen.

According to the U.S. District Court for the Southern district of Iowa’s order granting Bankers Trust’s motion for summary judgment, in July 2014, the plaintiff’s employment with Telligen was terminated. She signed a severance agreement and received severance pay and job transition services.

She offers a declaration in support of her response to Banker Trust’s motion for summary judgment, but U.S. District Judge Rebecca Goodgame Ebinger said the Court does not consider the information in the declaration that contradicts the plaintiff’s prior deposition testimony. “On a motion for summary judgment, a court generally considers an otherwise admissible declaration or affidavit, including those that restate or elaborate on prior deposition testimony. However, a party may not manufacture an issue of fact or credibility by contradicting the party’s own earlier testimony with a declaration or affidavit,” Ebinger wrote in her opinion.

In her deposition testimony, the plaintiff said she did not recollect the conversation in which Telligen terminated her employment or the documents she signed at the time. But, in her declaration, she said, “I felt in that meeting that whatever documents they wanted me to sign, had to be signed at that meeting.”

Ebinger also considered the plaintiff’s education and business experience, as well as the fact that she was given 45 days to decide whether to sign the agreement and after signing, seven days to revoke it, to conclude that the plaintiff knowingly and voluntarily entered in to the agreement.

According to the court order, the agreement indicates the plaintiff releases all claims “of any nature whatsoever, in law or equity, which [she] ever had, now has, or [she] or [her] heirs, executors and administrators hereafter may have, from the beginning of time to the date of this Agreement, arising from, or otherwise related to, [Innis’s] employment relationship with [Telligen].” And in capital, bold letters above her signature, the Agreement indicates, “YOU ARE RELEASING ALL KNOWN CLAIMS.”

Determining that the language is sufficiently clear (and expansive) to indicate the plaintiff released ERISA claims, Ebinger cited a 5th U.S. Circuit Court of Appeals decision in Chaplin v. NationsCredit Corp. that concluded, “Although the release does not specifically mention ERISA, it need not do so, as general ‘any-and-all language covers a claim for ERISA benefits.’”

Ebinger also found that because Bankers Trust acted on behalf of Telligen’s stockholders, Bankers Trust is a releasee. In the Agreement, the plaintiff released claims against “[Telligen] and each of [Telligen’s] owners, members, stockholders, . . . affiliates, . . . and all persons acting on behalf of, by, through, under or in concert with any of them.”