Benefits Denial Against Corporate Naysayer Upheld

January 31, 2003 ( - A federal appeals court has upheld a decision by the administrator of an employer severance plan for turning down benefits to a fired employee who had criticized the company.

The US 2 nd Circuit Court of Appeals rejected the contention by plaintiff Marie Kirk that the administrator of the Readers Digest Association severance plan was guilty of a conflict of interest because the administrator was also the company’s vice president of human resources, Washington-based legal publisher BNA reported.

There was no evidence that the alleged conflict of interest had actually impacted the administrator’s decision, the judges ruled. In addition, the court said it was not arbitrary and capricious for the administrator to give greater credibility to witnesses who heard Marie Kirk’s disparaging remarks than to her own testimony.

According to the BNA report, Readers Digest fired Kirk in November 1999. She was told that she would get severance benefits if she signed a waiver that provided, among other things, that she would be denied benefits if she “‘acted in a matter detrimental to the best interests of RDA including … disparaging RDA [or] its employees.'”

Three days after being fired, Kirk was told she would not get benefits because the company had discovered that she had made disparaging remarks about the company to an incoming employee. Kirk appealed the decision to the company’s vice-president of human resources. The vice-president determined that Kirk had in fact made the comments.

Kirk sued the plan and the administrator alleging an ERISA violation. A federal judge in the US District Court for the Southern District of New York upheld the administrator’s decision and dismissed Kirk’s lawsuit. The case is Kirk v. Readers Digest Association Inc. Severance Plan, 2d Cir., No. 02-7077, unpublished 1/29/03.