The “Orabona Rule”: When Any Determination of Liability or Damages Requires Reference to an ERISA Plan, All Parallel State-Law Termination Claims Are Pre-empted

Introduction

In Orabona v. Santander Bank, N.A., No. 24-1905 (1st Cir. June 16 2025), the United States Court of Appeals for the First Circuit confronted a familiar but evolving battleground: the overlap between employer severance policies governed by the Employee Retirement Income Security Act of 1974 (ERISA) and state-law causes of action arising out of allegedly wrongful terminations.

Lorna Orabona, a top-producing Mortgage Development Officer earning over USD 680,000 annually, was summarily discharged for allegedly forwarding encrypted client e-mails to her personal account—an asserted violation of Santander’s Code of Conduct. Because terminations “for cause” are excluded from Santander’s ERISA-qualified Severance Policy, no severance was offered. Skipping the plan’s administrative review process entirely, Orabona sued in Rhode Island Superior Court on state-law theories of breach of contract, breach of the covenant of good faith and fair dealing, wrongful termination, fraud, and negligent misrepresentation, alleging Santander concocted a pretext to avoid paying large severance sums just weeks before a company-wide mortgage-division lay-off. After removal, discovery, and cross-motions, the district court granted summary judgment for Santander, holding every claim pre-empted by ERISA §514(a). The First Circuit affirmed in a sweeping opinion authored by Judge Lynch, crystallising what this commentary names the “Orabona Rule.”

Summary of the Judgment

Total Pre-emption. All state-law claims were found to “relate to” the Severance Policy because both liability and any calculation of damages necessarily required consulting that plan and its incorporated Code of Conduct.
Dual Pre-emption Theories. (1) §514(a) “relates-to” pre-emption eliminated state-law causes of action; and (2) §502(a) remedial pre-emption barred state claims seeking remedies duplicative of those exclusively available under ERISA (e.g., recovery of severance benefits and equitable relief for wrongful interference).
Administrative Exhaustion & Exclusive Remedies. The court underscored that ERISA gives participants an exclusive federal remedy—administrative claims followed by §502(a) litigation—to challenge benefit denials or plan-interference; bypassing that framework is impermissible.
Affirmance of Summary Judgment. Finding no genuine disputes of material fact concerning pre-emption, the panel affirmed the district court’s judgment for Santander.

Analysis

1. Precedents Cited and Their Influence

The panel heavily relied on, and subtly extended, several landmark decisions:

Ingersoll-Rand Co. v. McClendon, 498 U.S. 133 (1990) – Supreme Court held that state-law wrongful-discharge claims alleging pension-avoidance motives are pre-empted. Orabona parallels Ingersoll-Rand but in the severance context, confirming that the reasoning applies equally to non-pension welfare plans.
Pilot Life Ins. Co. v. Dedeaux, 481 U.S. 41 (1987) – Foundation for §502(a) exclusivity; quoted to emphasise ERISA’s “careful balancing” that forecloses supplemental state remedies.
Aetna Health Inc. v. Davila, 542 U.S. 200 (2004) – Provided the modern test for conflict with ERISA’s remedial scheme; invoked to stress that relabelling claims (tort v. contract) does not escape pre-emption.
Cannon v. Blue Cross & Blue Shield of Mass., Inc., 132 F.4th 86 (1st Cir. 2025) – Recent First Circuit authority confirming that a claim is pre-empted if adjudication requires interpreting a plan; Orabona leverages Cannon to reinforce the “reference-to” strand of §514(a).
Otero Carrasquillo v. Pharmacia Corp., 466 F.3d 13 (1st Cir. 2006) – Earlier First Circuit case finding fraudulent-inducement claims pre-empted; cited to analogise misrepresentation counts.
Secondary support from other circuits (4th, 9th) demonstrating consensus that misrepresentation or constructive-discharge claims tied to benefit eligibility are pre-empted.

2. The Court’s Legal Reasoning

“Relates to” Analysis under §514(a). A state law relates to an ERISA plan if it has a “connection with or reference to” that plan. The court emphasised three unavoidable references:
- Eligibility determination—whether forwarding e-mails violated the Code of Conduct, thereby triggering the Severance Policy’s “for-cause” exclusion.
- Employer discretion clauses—Santander’s reserved power to grant or deny benefits required case-specific construction.
- Damages computation—any severance calculation involves multi-tiered formulas (e.g., 65 % of annualised commission income > USD 300k).
Because adjudicating liability or damages on every state claim required these plan terms, pre-emption was inescapable.
Conflict with ERISA’s Exclusive Remedial Scheme (§502(a)). Even apart from §514(a), the state claims sought to recover the very benefits ERISA allows a participant to claim under §502(a)(1)(B), and to remedy interference prohibited by §510, enforceable under §502(a)(3). Permitting parallel state actions would “duplicate, supplement, or supplant” Congress’s exclusive remedy.
Exhaustion and Estoppel Arguments Rejected. Orabona argued she abstained from the administrative process because Santander allegedly threatened to alert her licensing board. The panel held that equitable-estoppel-style allegations do not resurrect pre-empted state claims; ERISA itself anticipates bad-faith denials and supplies remedies within its own framework.

3. Impact of the Judgment

Clarity for Employers and Litigants. Terminated employees cannot skirt ERISA by asserting that severance avoidance was merely “one aspect” of a broader tort or contract theory. If a court must look to the plan at any stage, Orabona mandates pre-emption.
Broader Reach than Prior First-Circuit Cases. Earlier decisions focused on “interpretation” of plan terms. Orabona emphasises that even a quantification of damages—without disputed interpretation—creates a sufficient nexus.
Heightened Importance of Internal Appeals. The opinion implicitly warns employees that skipping plan claims/appeals may forfeit recovery; courts will not provide a state-law back door.
Persuasive Authority Beyond the First Circuit. Given the paucity of circuit-level severance cases post-Davila, sister circuits confronting similar fact patterns are likely to cite Orabona.

Complex Concepts Simplified

ERISA Plan. A benefit program (pension, health, severance, etc.) that meets ERISA’s definition and federal reporting requirements.
§514(a) “Relates To” Pre-emption. State laws (statutes or common-law claims) are displaced if they reference or have a material connection with an ERISA plan.
§502(a) Exclusive Remedy. ERISA provides specific civil actions (e.g., to recover benefits, enforce plan terms, or obtain equitable relief). Any state claim seeking equivalent relief is barred.
Administrative Exhaustion. Participants must first use the plan’s internal claim-and-appeal process before suing under ERISA.
Severance Plan vs. Severance Policy. Nomenclature aside, if severance benefits are provided pursuant to a continuing administrative scheme, ERISA usually applies.

Conclusion

Orabona v. Santander Bank, N.A. cements a robust iteration of ERISA pre-emption in the First Circuit: any state-law claim whose success turns on consulting an ERISA plan—whether to establish liability, disprove an employer’s stated motive, or calculate damages—is swept away by federal law. The decision closes perceived loopholes for plaintiffs who, dissatisfied with plan procedures or remedies, attempt to re-cast benefit-avoidance allegations as garden-variety contract or fraud claims. By unambiguously extending Ingersoll-Rand and fortifying the recent Cannon decision, the First Circuit offers a clear signal: ERISA’s balance of participant protections and employer certainty remains an exclusive province, uncompromised by creative state-law pleadings. Future plaintiffs must traverse ERISA’s administrative and civil-enforcement path—or not at all.