AIG Financial Products Corp & Ors v Gruber & Ors [2020] EWCA Civ 31 (24 January 2020)

AIG Financial Products Corp & Ors v Gruber & Ors [2020] EWCA Civ 31 (24 January 2020)

The deferred compensation plan imposed an unqualified contractual obligation on AIGFP to restore in full amounts deducted from participants' account balances, plus interest, and to pay restored amounts by 31 December 2013, irrespective of profitability or ongoing losses. The restoration obligation was not contingent on positive Distributable Income. The 2008 amendment clarified the timing but did not qualify the obligation. Rights did not permanently lapse after 2013 unless amended to comply with Section 409A IRC.

Citation
[2020] EWCA Civ 31
Parties
Appellant Defendant: AIG Financial Products Corp.; Appellant Defendant: AIG Management France, SA.; Appellant Defendant: American International Group, Inc.; Respondents: Tobias Gruber and 22 others
Jurisdiction
England and Wales
Judgment Date
24 January 2020
Procedural Posture
Appeal / Court of Appeal Judgment
Outcome
Appeal dismissed
Legal Topics
Deferred Compensation, Bonus Schemes, Restoration of Account Balances, Interpretation of Contractual Terms, Company Distributions, Section 409 a Internal Revenue Code
Contract Law Employment Law Company Law Deferred Compensation Bonus Schemes Restoration of Account Balances Interpretation of Contractual Terms Company Distributions +1 more

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Parties

AIG Financial Products Corp.

Appellant Defendant

AIG Management France, SA.

Appellant Defendant

American International Group, Inc.

Appellant Defendant

Tobias Gruber and 22 others

Respondents

Procedural Posture

Appeal / Court of Appeal Judgment

Legal Issues

  1. 1 Whether deferred compensation plan required restoration of account balances wiped out by losses
  2. 2 Proper construction of 'losses' and 'current year income' under the plan
  3. 3 Timing and qualification of restoration obligation

Ratio Decidendi

The deferred compensation plan imposed an unqualified contractual obligation on AIGFP to restore in full amounts deducted from participants' account balances, plus interest, and to pay restored amounts by 31 December 2013, irrespective of profitability or ongoing losses. The restoration obligation was not contingent on positive Distributable Income. The 2008 amendment clarified the timing but did not qualify the obligation. Rights did not permanently lapse after 2013 unless amended to comply with Section 409A IRC.

Court Disposition

Appeal dismissed

Orders

  • AIGFP required to restore and pay deferred compensation account balances to respondents by 31 December 2013
  • Respondents entitled to claim damages for failure to restore or adopt restoration plan