First Circuit Affirms ERISA Preemption of Employee’s State Law Claims Over Severance Benefits

In Orabona v. Santander Bank, N.A., No. 24-1905, —F.4th—-, 2025 WL 1682819 (1st Cir. June 16, 2025), the First Circuit reaffirmed the broad preemptive reach of the Employee Retirement Income Security Act of 1974 (ERISA), holding that a former employee’s state law claims were barred because they “related to” an ERISA-governed severance plan. The court also concluded that ERISA’s comprehensive civil enforcement provisions precluded the plaintiff from seeking alternative remedies under state law.

Lorna Orabona, a highly compensated Mortgage Development Officer at Santander Bank, was terminated in January 2022 after the bank alleged she violated its Code of Conduct by forwarding company emails to her personal account. Orabona disputed the basis for her termination, contending that she did so only to facilitate remote work during the COVID-19 pandemic and that the practice was commonplace among her colleagues.

Just days after her termination, Santander announced a mass layoff in its residential mortgage division—Orabona’s department—triggering severance entitlements under its ERISA-governed Severance Policy. Orabona argued that her termination was pretextual and timed to deny her eligibility for those severance benefits. Notably, Orabona did not file a claim for benefits under the Severance Policy or exhaust the Policy’s internal appeals process. Instead, she brought multiple state law claims in Rhode Island state court, including breach of implied contract, wrongful termination, and fraud. Santander removed the case to federal court, moved for summary judgment, and prevailed on the ground that ERISA preempted all of her claims.

The district court found no dispute that the Santander Severance Policy qualified as an ERISA plan. The Policy reserved discretionary authority to Santander to determine eligibility and the amount of severance, and it provided a formal claims and appeals procedure. Employees terminated for cause—such as for violating the Code of Conduct—were expressly ineligible for severance.

The Policy also included formulae for calculating severance for commission-based employees like Orabona, with substantial payouts possible based on recent earnings. Orabona earned over $680,000 in 2021 and thus stood to receive a significant severance if eligible.

The First Circuit affirmed summary judgment, holding that all of Orabona’s claims “relate to” the Severance Policy under ERISA Section 514(a), 29 U.S.C. § 1144(a). The court emphasized that determining liability and damages under each of her state law claims would require interpreting the ERISA plan—specifically, whether the termination was truly for cause and whether she would have qualified for severance under the layoff.

The panel cited U.S. Supreme Court and First Circuit precedent making clear that even artful pleading cannot shield a claim from preemption when the factual underpinnings rely on rights conferred by an ERISA plan. See Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 140, 111 S.Ct. 478, 112 L.Ed.2d 474 (1990); Otero Carrasquillo v. Pharmacia Corp., 466 F.3d 13 (1st Cir. 2006). The court rejected Orabona’s argument that her claims were not about benefit denial but about improper termination, noting that the alleged impropriety stemmed from Santander’s supposed attempt to avoid severance obligations.

In a separate but reinforcing holding, the First Circuit also found that Orabona’s claims were preempted by ERISA’s civil enforcement mechanism, codified at Section 502(a), 29 U.S.C. § 1132(a). Her effort to seek damages and other relief for alleged interference with severance benefits fell squarely within ERISA’s scope and could not be pursued through alternative state law theories.

Even though Orabona sought punitive damages and broader relief than ERISA allows, the court reaffirmed that ERISA’s remedies are exclusive. Permitting state claims that duplicate or supplement ERISA rights would undermine the uniform national scheme Congress enacted.

The court’s decision underscores three important points regarding ERISA claims: (1) Courts will look past how a plaintiff labels her claims and instead focus on whether they implicate rights under an ERISA plan; (2) Even tort and fraud claims are preempted if they hinge on benefit denial or plan interpretation; (3) Claimants must pursue internal ERISA remedies before filing suit. Failure to do so can be fatal—even where a plaintiff claims intimidation or coercion.