Court Rejects Federal Jurisdiction for 409A Dispute

Executive Claims Potential Breach of Employment Agreement Raises 409A and ERISA Issues. Court remands to state court.

"Scharnweber is attempting to enforce the employment security agreement as he views it. And whether the employment security agreement is to be enforced according to his views does not depend on section 409A of the Internal Revenue Code. A state court's handling of Scharnweber's claims that entails references to the fact that Scharnweber might be subjected to a federal tax penalty would not disturb the "congressionally approved balance of federal and state judicial responsibilities." See id. at 914 (internal quotations and citation omitted) ("[I]nsofar as the state court may have occasion to consider the [federal issue] in adjudicating [the plaintiff's] state law claims, we do not think that the state court's consideration of the [federal issue] disturbs the `congressionally approved balance of federal and state judicial responsibilities[.]'"). Thus, the court finds that the complaint's references to a potential federal tax penalty do not raise a sufficient federal issue for purposes of establishing federal jurisdiction."

Court Decision Here