Beryl v. Navient Corporation

Background

Louis Beryl co-founded Earnest, Inc., an online student-lending company. Navient Corporation acquired Earnest, Inc. for approximately $155 million and formed Earnest LLC. Navient entered into a written employment agreement with Beryl that gave him the corporate title of Senior Vice President of Navient Solutions LLC and the position of CEO of Earnest LLC. The agreement also made him eligible to participate in Navient’s Executive Severance Plan for Senior Officers, which was governed by the Employee Retirement Income Security Act (ERISA).

The severance plan provided benefits if an eligible officer was terminated “without cause.” Navient terminated Beryl’s employment on January 24, 2018, and told him he would not receive severance because Navient believed it had cause to terminate him. Beryl later submitted a benefits claim, which Navient denied.

Beryl asserted four claims: recovery of severance benefits under ERISA § 502(a)(1)(B); breach of fiduciary duty under ERISA § 502(a)(3); breach of his employment contract; and waiting-time penalties under California Labor Code § 203. The contract claim was tried to a jury. The ERISA claims and the waiting-time-penalty claim were tried to the court under Federal Rule of Civil Procedure 52.

Factual findings

The jury found that Navient did not have cause to terminate Beryl. It also found that Navient and Beryl agreed to increase his annual base salary from $300,000 to $400,000 and his annual bonus from 75 percent to 100 percent of his base salary. The court stated that these jury findings bound it in deciding the remaining claims.

Navient argued that Beryl failed to provide business plans on time, criticized an acceptable plan, and renegotiated his compensation and noncompetition agreement. The court found that the evidence did not support treating these matters as “cause” under the severance plan. The evidence showed that Beryl and his team worked extensively on the business plans, and the court found no evidence of willfulness, deadlines communicated to Beryl, warnings, or an opportunity to correct any failure. The court also found no evidence that negotiating compensation for Beryl and his team breached a fiduciary duty or the duty of good faith and fair dealing.

ERISA severance benefits

The parties agreed that the court would review the benefits decision anew, rather than defer to Navient’s decision. The court held that Navient had the burden to prove, by a preponderance of the evidence, that Beryl was terminated “for cause” under the plan. Because the jury found that Navient did not have cause to fire him, the court held that Beryl was entitled to severance benefits.

The court determined that Beryl’s average bonus under the plan was his target annual incentive bonus because he had not yet been paid his 2017 bonus when Navient fired him. Based on the jury’s findings, that bonus was $400,000. Because Beryl’s corporate title was Senior Vice President of Navient Solutions, rather than Chief Executive Officer for purposes of the plan’s multiplier provision, the court applied a multiplier of one. The resulting severance award was $800,000.

The court also awarded $33,333 for Beryl’s target bonus for 2018. For lost medical, dental, and vision benefits, the court awarded $54,000, representing eighteen months at $3,000 per month. Although Beryl sought the value of twenty-four months of coverage, the court concluded that the plan provided eighteen months of coverage for him under the plan’s title-based terms.

ERISA fiduciary-duty claim

ERISA § 502(a)(3) allows a plan participant or beneficiary to seek injunctions or other appropriate equitable relief for violations of ERISA or the plan. The court held that most of Beryl’s second claim duplicated his claim for benefits under ERISA § 502(a)(1)(B), so that portion failed as a matter of law. The court explained that a separate § 502(a)(3) claim can remain available when it seeks distinct relief.

The court stated that Beryl’s claim for reimbursement of insurance benefits could survive under § 502(a)(3) if those benefits could not be recovered directly under § 502(a)(1)(B). The court’s ultimate award included $54,000 for the eighteen-month value of the lost insurance benefits.

California waiting-time penalties

California Labor Code § 203 permits penalties when an employer willfully fails to pay wages owed at discharge, subject to a maximum of thirty days. The court found that Navient intentionally failed to pay Beryl wages and that Navient did not establish a good-faith dispute that would avoid the penalties. The court awarded $33,333.33, calculated from Beryl’s $400,000 annual base salary.

Result

The court stated that the amounts owed to Beryl were $800,000 in severance based on a $400,000 salary, a $400,000 annual bonus, and a multiplier of one; $33,333 for the 2018 target bonus; $54,000 for lost medical, dental, and vision benefits; and $33,333.33 in California waiting-time penalties. The total was $920,666.33.

The court directed Beryl to identify within seven days any error in the $54,000 insurance-benefit calculation. It also directed the parties to submit a proposed form of judgment for both the jury and bench trials.