Eighth Circuit Affirms Award of Deferred Compensation Plan Benefits to Former Company Executive

In Hankins v. Crain Auto. Holdings, LLC, No. 24-1555, __F.4th__, 2025 WL 649895 (8th Cir. Feb. 28, 2025), the court affirmed the district court’s ruling in favor of Plaintiff-Appellee Barton Hankins in a dispute against his former employer, Crain Automotive Holdings, LLC. The case centered around Hankins’s claim for benefits under a deferred compensation plan (DCP), which Crain denied based on the absence of an employment and confidentiality agreement between the parties that was referenced in the plan. In siding with the plaintiff, the district court found the facts supported a reasonable inference that Crain was “simply looking for a way to avoid its obligations.” The Second Circuit agreed and concluded that the DCP did not condition benefits on the existence of the agreements.

Barton Hankins was hired by Crain Automotive Holdings in 2019 as its Chief Operating Officer. As part of his employment package, he was offered a DCP, which is a type of “top hat” plan designed for high-earning employees. Under the terms of the DCP, Hankins was eligible to receive a payout equivalent to five percent of Crain’s fair market value upon his departure, with full vesting occurring after five years. However, Hankins resigned after four years, meaning he was entitled to 80% of his vested benefits. When he sought to claim his benefits, Crain denied them, citing that Hankins had not signed an Employment Agreement and a Confidentiality, Noncompete, and Nonsolicitation Agreement, which Crain argued were necessary to enforce the DCP.

The court’s analysis centered on Crain’s interpretation of the DCP and the absence of the agreements in question. Crain argued that without these agreements, it could not determine whether Hankins had breached any conditions that would forfeit his benefits. Hankins contended that the DCP did not require him to draft, propose, or sign these agreements, which were nonexistent when he began his employment.

The district court found in favor of Hankins, concluding that the DCP did not condition benefits on the existence of the agreements. The court reasoned that since the parties operated under the DCP for four years without these agreements and Crain did not raise these issues until Hankins sought his compensation, it appeared Crain was attempting to avoid its obligations. The appellate court agreed, noting that Crain’s interpretation of the DCP was unreasonable and unsupported by the plan’s plain language. The court emphasized that the DCP was a unilateral contract where Hankins accepted the offer by performance, simply by remaining employed without cause for termination.

Furthermore, the Eighth Circuit rejected Crain’s argument that the agreements were conditions precedent to receiving the benefits. The court clarified that the DCP’s language was unambiguous and did not require Hankins to create or sign any additional agreements. Crain had argued that the lack of an Employment Agreement and a Confidentiality, Noncompete, and Nonsolicitation Agreement created an ambiguity that justified their denial of benefits. However, the court determined that the DCP’s language was clear in its terms regarding the vesting and payout conditions, and it did not explicitly require these additional agreements as a condition for receiving benefits. The court specifically looked at Article 4 of the DCP, which outlined the conditions under which benefits could cease. This provision mentioned that benefits would cease if Hankins breached the covenants of the non-existent agreements. However, the court found this clause to be a valid conditional rule that did not introduce ambiguity. The language indicated that Hankins’s benefits would cease only if a breach occurred, not that the agreements needed to exist for the DCP to be valid.

The court highlighted that the DCP functioned as a unilateral contract, where an offer is accepted through performance. In this context, Hankins fulfilled his obligations by remaining employed under the terms of the DCP. The court found no ambiguity in the DCP’s terms that would require Hankins to independently create or sign additional agreements. Crain attempted to introduce extrinsic evidence to support its interpretation of the DCP, suggesting that such evidence demonstrated an ambiguity in the plan. However, the court reiterated that extrinsic evidence cannot create ambiguity where the contractual language is clear. The court maintained that ERISA-governed plans must be interpreted based on their documents, not on external factors or company customs.

The court also upheld the district court’s decision to award attorney’s fees to Hankins. The district court found that Hankins was the prevailing party and that Crain’s conduct was sufficiently culpable to warrant such an award. The Second Circuit agreed, noting that Crain’s claims lacked merit, especially given that it raised the issue of the agreements only after denying Hankins’s compensation.