Court Revives Ex-Chrysler Executives’ Age Bias Claims

By | September 26, 2012

Hundreds of former Chrysler LLC executives claiming they lost retirement benefits because of age bias can sue the company’s former parent Daimler AG, a U.S. appeals court ruled on Tuesday.

More than 450 former auto executives have said they lost retirement benefits in Chrysler’s 2009 bankruptcy.

The decision by the 6th U.S. Circuit Court of Appeals partially revives a lawsuit against Germany’s Daimler and a unit of State Street Corp., the trustee of the former executives’ retirement plan.

The appeals court upheld the dismissal of other claims of breaches of fiduciary duties by the defendants.

Mayer Morganroth, a lawyer for the plaintiffs, said reinstatement of the age discrimination claims would allow his clients to pursue “hundreds of millions of dollars” in damages.

Daimler spokeswoman Andrea Berg said the company was still reviewing the decision but was pleased that the appeals court had upheld most of the lower court’s ruling. “In any event, Daimler intends to continue to defend this case vigorously,” she said.

A State Street representative did not immediately respond to requests for comment.

The former executives claimed that following the bankruptcy, they lost much or all of their benefits under a supplemental executive retirement plan.

They also claimed Daimler and State Street hid the true state of Chrysler’s finances before selling its majority stake in the company to the private equity firm Cerberus Capital Management LP in 2007.

Daimler owned Chrysler from 1998 to 2007 and kept a minority interest in the No. 3 U.S. automaker when Cerberus took over in 2007.

Cerberus Capital was the majority owner and ran Chrysler until 2009, when the company was restructured in a government-sponsored bankruptcy that led to its management control by Italy’s Fiat SpA. Fiat since has become majority owner of Chrysler Group LLC.

The former executives claimed Daimler discriminated against them in 2005 and 2006 when the company and State Street used retirement plan trust assets to buy annuities for some active Chrysler executives and selected retirees to protect them from future shortfalls.

The plaintiffs said that because the company did not also buy them annuities, they suffered when the retirement plan did not survive the bankruptcy intact.

In June 2011, the lawsuit was dismissed entirely by U.S. District Judge Julian Cook in Detroit.

Tuesday’s decision was issued by a three-judge panel of the appeals court, which sits in Cincinnati, Ohio.

In dismissing the claims over fiduciary duty, the appeals court said the plaintiffs’ allegations, which arose out of Michigan state law, were trumped by the federal Employee Retirement Income Security Act, a federal law regulating employee benefit plans.

In Tuesday’s decision, Judge Jeffrey Sutton wrote that the state law-based claims of age discrimination were not preempted by the ERISA.

He also found that the discrimination claims were not “implausible” because the executives who got the annuities were younger than the ones who did not.

The case is Loffredo v. Daimler AG, 6th U.S. Circuit Court of Appeals, 11-1824.

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