Labor & Employment Law Daily Wrap Up, PENSION AND BENEFIT PLANS—6th Cir.: State-law claims of participants in ‘top-hat’ pension plan preempted by ERISA, (Jul 18, 2025)

By Ronald Miller, J.D.

The court would undercut ERISA’s uniformity goals if it also subjected plan administrators to the potentially conflicting standards of conduct of all 50 States.

Former Ruby Tuesday managers, who participated in a top-hat pension plan, could not pursue state-law causes of action against the bank that administered the plan to recover benefits after the employer filed for bankruptcy, ruled the Sixth Circuit. The plan participants asserted that the bank breached state-law fiduciary, trust, contract, and tort duties. While the participants argued that they sought to enforce the contractual duties that the bank agreed to accept, they must pursue this type of contract claim through ERISA’s exclusive remedial scheme, not through a state-law contract action. However, ERISA preempts all state laws that “relate to” ERISA-covered plans (Aldridge v. Regions Bank, No. 24-5603 (6th Cir. July 17, 2025)).

“Top hat” plans. Retirement plans provided to high-level executives—so-called “top hat” plans—are exempt from many of the statutory protections of ERISA. For example, the law’s fiduciary-duty rules do not apply to “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees[.]”

An employer must meet two conditions to create a top-hat plan. The plan may cover only a “select group” of high-level employees. And the plan must be “unfunded.” Employers must instead pay benefits out of general funds that remain subject to their creditors if they become insolvent.

Ruby Tuesday’s top-hat plans. The employer, Ruby Tuesday, Inc., operates a chain of casual-dining restaurants. In the 1980s, the employer created two top-hat plans for qualifying executives or managers. In 1992, Ruby Tuesday entered a rabbi-trust agreement with Regions Bank to help it satisfy “its obligations under” the plans. Under the agreement, Ruby Tuesday established a trust fund that Regions would oversee as the trustee. It directed Regions to treat the money contributed to the trust fund “as general assets of” Ruby Tuesday and clarified that this money “remain[ed] subject to the claims of [Ruby Tuesday’s] general creditors.” The agreement also noted that the plan participants would not “have a preferred claim on or any beneficial ownership” interest in the fund’s assets until the participants had the actual right to receive payments under the plan terms.

Breach of trust agreement. According to the complaint, Regions breached the trust agreement several times before Ruby Tuesday terminated the plans and deprived participants of benefits. These breaches allegedly began in 2017 when NRD Capital bought Ruby Tuesday. The complaint suggests that this deal led to a “change in control” under the trust agreement. If so, that change would have triggered many duties. Of most note, Ruby Tuesday would have had to fund the plans to the present actuarial value of all unpaid benefits. Yet Ruby Tuesday did not make these payments. And Regions also did not try to compel the company to meet this requirement, as the trust agreement allegedly obliged it to do.

Next, Ruby Tuesday’s board of directors allegedly terminated the plans in March 2019 and permitted participants to take lump-sum payouts between March 2020 and March 2021. But Regions failed to inform participants of this right to a payout.

Ruby Tuesday also orally instructed Regions in July 2020 to cease all benefit payments starting the next month. Regions complied with this command. Yet the trust agreement barred Regions from stopping payments unless Ruby Tuesday said in writing that it had become insolvent. This written notice did not come until September 2. According to the complaint, Regions breached the trust agreement by failing to pay benefits in August and September based on the oral order alone (not on the letter).

Bankruptcy petition. The next month, Ruby Tuesday filed a Chapter 11 bankruptcy petition. The bankruptcy court ordered Regions to transfer the money in the trust fund to the bankruptcy estate for the benefit of Ruby Tuesday’s creditors. The participants then settled with Ruby Tuesday’s bankruptcy estate and received their fees and a share of the fund assets.

Thereafter, many of the plan participants sued Regions. They alleged an ERISA claim for “equitable relief” under 29 U.S.C. § 1132(a)(3). They also alleged state-law claims against Regions for breach of fiduciary duty, breach of trust, breach of contract, and negligence.

District court decision. The district court first dismissed the state-law claims on the ground that ERISA preempted them. It next granted summary judgment to Regions on the ERISA claim. It reasoned that the request for lost benefits did not qualify as the type of “equitable relief” that the participants may seek under 29 U.S.C. § 1132(a)(3). The participants appealed.

State-Law claims. Before applying preemption law here, the Sixth Circuit began with two issues that the participants had not raised. To start, the participants did not dispute that Ruby Tuesday’s plans met the requirements for top-hat plans. In other words, the plans were “unfunded” and applied to only a “select group” of top-level employees.

Next, the participants did not dispute that each plan qualified as an “employee benefit plan” subject to ERISA’s preemption provision. Courts have reasoned that although ERISA exempts top-hat plans from specific protections (such as its fiduciary-duty rules), the plans trigger other “administrative and enforcement provisions” in the law.

Preemption analysis. The participants alleged that Regions breached the fiduciary duties that it owed to the participants as the trustee of the rabbi trust; that Regions committed a breach of trust by violating the duties it owed to the participants; that Regions breached the trust agreement itself; and that Regions committed negligence by violating its duty to act with reasonable care in administering the trust.

Substantively, the participants sought to impose additional duties on Regions on top of the duties that ERISA imposes, observed the appeals court. The participants argued that Regions took on the status of a “common law fiduciary of the Plans” when it became the trustee of the rabbi trust and thus Regions owed fiduciary, trustee, contractual, and tort “duties” of care to them. Yet ERISA already requires those who administer ERISA plans to follow its own federal duties. The court would undercut ERISA’s uniformity goals if it also subjected plan administrators to the potentially conflicting standards of conduct of all 50 States.

ERISA’s statutory regime shows that Congress “deliberately omitted” these duties because high-level employees can protect themselves through contract. Congress contemplated that ERISA’s fiduciary duties would be replaced by the contractual duties set forth in these plans—not by the fiduciary-duty rules from all 50 States. Thus, the preemption provision continues to apply to these plans even though ERISA exempts them from many rules.

Equitable relief. Further, the participants challenged the district court’s conclusion that they may not obtain their benefits under a provision that allows them to pursue “equitable relief” against Regions, 29 U.S.C. § 1132(a)(3). This claim fell short because the district court correctly recognized that the participants sought legal relief.

Accordingly, the appeals court affirmed the judgment of the district court.

The case is No. 24-5603.

Judge: Murphy, E.

Attorneys: James A. Holifield, Jr. (Holifield & Janich) for Jerry Aldridge. John C. Neiman, Jr. (Maynard Nexsen) for Regions Bank.

Companies: Regions Bank

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