Partnership Doesn't Trump Participant Status

August 16, 2005 ( - A Virginia federal judge has rejected arguments by a law firm partner that his state court lawsuit wasn't pre-empted by the Employee Retirement Income Security Act (ERISA).

US District Judge Glen Conrad of the US District Court for the Western District of Virginia turned aside an argument by Thomas Hall, a partner in the Roanoke, Virginia law firm Woods Rogers, who claimed that his long-term disability benefits under the plan were not subject to ERISA pre-emption because he was a partner, not an employee.

According to Conrad, the US Supreme Court recently made clear that working owners, such as law firm principals, qualify as participants in ERISA-governed benefit plans as long as the plan covers at least one employee other than the working owner and his or her spouse.

Court documents indicated that Hall applied and was approved for long-term disability benefits in December 2000. After falling ill during a vacation Hall became unable to work because he could not speak without coughing. After initially awarding Hall disability benefits, Standard Insurance Company, the company which sold the long term disability policy, cut off Hall’s benefits after a twenty-four month period, alleging that his illness was psychological in nature.

Hall contested this determination, as well as the onset date determined by Standard and the monthly benefit amount, and sued Standard alleging breach of contract. He also made a claim for benefits under ERISA. Standard requested that the breach of contract claim be dismissed, arguing that the claim was pre-empted by ERISA.

Conrad also rejected Hall’s assertion that his participation in the plan as a principal could be distinguished from that of an employee because when principals received benefits under the plan, they were not required to pay income taxes on those benefits, while employees paid income taxes on such benefits.

The opinion in Hall v. Standard Insurance Co., W.D. Va., No. 7:04CV00285, 8/9/05 is  here .