14 May 2010

DM&E Schieffer in Court Battle Over
Ex-Chief's Compensation

Sioux Falls South Dakota USA - Lawyers for the DM&E Railroad and the company's former boss argued Thursday in federal court over a legal question that will define how a multimillion-dollar battle over unpaid compensation will shape up.
 
The Dakota, Minnesota & Eastern Railroad was sold to Canadian Pacific Railway for more than $1.5 billion in late 2008. Last month, the railroad sued former CEO Kevin Schieffer over his attempt to collect money he says he is owed as part of his severance package.
 
The railroad paid Schieffer $1.5 million in January 2009 and another $1.6 million in taxes on the payout. Schieffer later received another $514,000 from an escrow fund.
 
But he and his lawyer, Steve Sanford of Sioux Falls, claim that the company withheld pay, bonuses, and benefits worth as much as $4 million.
 
Sanford said that Schieffer's contract stipulates that disputes over compensation should be handled through arbitration, but the DM&E contends that because of the complexity of that contract, and the scope of the claims Schieffer has made, the dispute should be settled in federal court.
 
Lawyers for the DM&E want Eighth Circuit Judge Roberto Lange to halt arbitration. Sanford wants the railroad's lawsuit dismissed.
 
At issue is whether Schieffer's claims fall under the federal Employee Retirement Income Security Act (ERISA). If Lange decides they don't, the railroad's case will be dismissed and it will be forced to negotiate.
 
Minneapolis lawyer Tim Thornton, representing Canadian Pacific, told Lange that any benefit plan that requires a company to calculate ongoing benefits and gives it discretion to decide the size of the compensation is complex enough to qualify as an "employee benefit plan."
 
Schieffer wants bonuses for 2008, 2009, and 2010, and the amount he's entitled to turns on the questions of whether he was fired without cause and whether he left the company before or after a change in ownership took place.
 
"There's a lot more involved in this contract than writing a check," Thornton said.
 
Sanford countered that ERISA's definition of benefit plan is one that requires an ongoing company responsibility. This generally refers to plans that affect a large number of employees. Doing the math for a single employee's payout does not qualify, he said.
 
"If DM&E's perspective is to be accepted, we're on entirely new ground for the Eighth Circuit," Sanford said.
 
Even if the judge rules in the railroad's favor, he said, claims made under ERISA can be negotiated through arbitration as surely as claims made under state employment law.
 
"The whole point we're here on is DM&E's attempt to prevent arbitration," Sanford said.
 
Thornton told the judge that some of the issues call for the opinion of the court, not a third-party negotiator. Plus, he argued, Schieffer's claims in his demand for arbitration are based on state laws, not federal laws.
 
"They can't arbitrate claims that don't exist," Thornton said.
 
Lange told the lawyers he will rule quickly on whether the case belongs in federal court. Each side's next move hinges on his decision.
 
"That decision would be to the benefit of both sides," Lange said.
 
John Hult