OPINION AND ORDER GRANTING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT [71], GRANTING DEFENDANTS' MOTION TO STRIKE [335], GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTION FOR SUMMARY JUDGMENT UNDER RULE 56[331], AND DENYING DEFENDANTS' EMERGENCY MOTION TO BIFURCATE [230], MOTION TO DISMISS [330], MOTION FOR JUDGMENT ON THE ADMINISTRATIVE RECORD [333], AND MOTION TO STRIKE REPORTS [351]

ARTHUR J. TARNOW, Senior District Judge.

This case involves a class action brought against Defendants for improperly denying severance benefits to Heating, Ventilating, and Air Conditioning (HVAC) sales associates. Class members are all full-time HVAC sales associates (1) who had a minimum of one year of service with Defendant Sears, Roebuck, and Co., at the time of the transition to Defendant Sears Home Improvement Products (SHIP) and (2) who applied for severance benefits under the Transition Pay Plan (TPP).

The class issues litigated are: (1) Whether, under 29 U.S.C. § 1132(a)(1)(B), Defendants wrongfully denied benefits to the class in a manner that was procedurally defective (2) Whether benefits are due to the class under the terms of the Transition Pay Plan.

Plaintiffs allege that beginning in late 2004, they and their co-workers were transitioned from their sales jobs in the HVAC department of Sears to a new department, SHIP. Under the Transition Pay Plan, participants could either accept transition into the new SHIP entity or receive severance benefits if they were eligible.

HVAC sales associates were eligible for benefits unless they were "offered a comparable job," which was defined as one "utilizing current skills" that 1) does not involve a decrease in annual earnings potential of more than 10% and 2) is within a reasonable commuting distance (approximately 30 miles if the commute is daily or the equivalent if less frequent than daily— e.g., 150 miles if the commute is weekly or 300 miles if the commute is every two weeks) of the associate's home. See Plaintiffs' Motion for Summary Judgment, Exhibit C at Sears 00042. For a job to be considered comparable, it had to satisfy all three provisions. If one provision was not met, the new job was not comparable and the associate would be entitled to severance benefits. The business only had to "offer" a comparable job to avoid paying severance benefits; thus, if an associate declined to take the new position, then he or she would not receive benefits.

Plaintiffs argue that the transition into SHIP did not place them in a "comparable job" and that they were accordingly entitled to severance benefits under the TPP. Defendants denied benefits to every HVAC sales associate, except one, Roy Queen, asserting that the new position at SHIP satisfied the above three provisions.

Now before the Court are Plaintiffs' Motion for Summary Judgment [71] and Defendants' Emergency Motion to Bifurcate [230], Motion to Dismiss [330], Motion for Summary Judgment under Rule 56 [331], Motion for Judgment on the Administrative Record [333]1, and Motion to Strike Reports [351]. A hearing was held on the motions on April 27, 2010.

For the reasons that follow, this Court finds that Defendants denied benefits to the class in a manner that was procedurally defective. Defendants are ordered to provide benefits to the class under the terms of the Transition Pay Plan.

I. Defendants' Emergency Motion to Bifurcate [230]

As indicated at the hearing, this motion is essentially moot since it requested that the Court clarify issues to be addressed in the dispositive motions. Those dispositive motions have been filed and are now before the Court. Furthermore, the issues Defendants seek to have clarified regarding how this case will procedurally move forward were previously addressed.

Accordingly, the motion is DENIED.

II. Defendants' Motion to Dismiss, or in the alternative, to remand the claims of class members Bruno Vecchiarelli, Gil Yaras, Daryl Geiger, and Edwin Goldberg to the Plan Administrator [330]

Plaintiffs previously filed a motion [195] seeking to add the above individuals to the class, which this Court granted after holding a hearing on August 19, 2009. Defendants' current motion seeks to re-litigate that issue with arguments that were previously rejected2. If Defendants disagreed with the Court's ruling, they could have filed a motion for reconsideration following the hearing.

Accordingly, the motion is DENIED.

III. Defendants' Motion for Summary Judgment under Rule 56 [331]

Both parties agree that class members Cherepinsky and Leary signed agreements in other lawsuits releasing all claims against Defendants. Accordingly, Defendants' Motion, as to the dismissal of Cherepinsky and Leary, is GRANTED.

As to the remaining class members addressed in the motion—Defendants argue that they failed to exhaust their administrative remedies before filing suit and that they therefore should be dismissed from this action.

The Sixth Circuit has concluded that "[t]he application of the administrative exhaustion requirement in an ERISA case is committed to the sound discretion of the district court...." See Fallick v. Nationwide Mutual Insurance Co., et al., 162 F.3d 410, 418 (6th Cir.1998). However, "Although ERISA's administrative exhaustion requirement for claims brought under § 502 is applied as a matter of judicial discretion, a court is obliged to exercise its discretion to excuse nonexhaustion where resorting to the plan's administrative procedure would simply be futile or the remedy inadequate." Id. at 419. In order to demonstrate futility, "[a] plaintiff must show that it is certain that his claim will be denied on appeal, not merely that he doubts that an appeal will result in a different decision." Id. at 419 (citation and internal quotation marks omitted).

In Fallick, the Sixth Circuit reversed the district court's finding that Plaintiff was required to exhaust administrative remedies, concluding that Defendant had "never demonstrated that it would alter or even consider altering its underlying methodology [for determining reasonable and customary limitation], notwithstanding [Plaintiff's] ERISA claims, both individually and on behalf of all similarly situated." Id. at 419-420. The Court further noted that:

Id. at 420-421 (citations and internal quotation marks omitted).

Similarly, Plaintiffs here have demonstrated the futility of exhaustion. Plaintiffs' lawsuit is certainly not frivolous; as will be discussed below, their claims have merit. All parties would incur additional litigation costs if Plaintiffs were required to go back and make use of the administrative process. The factual record has been greatly developed over the last four years of this litigation. Furthermore, this Court is certain that Defendants will not seriously reconsider their methodology for computing benefits, which Plaintiffs have maintained (and established, as to be addressed below) makes use of a rigged formula under which Plaintiffs could never receive benefits and thus would be denied benefits if they even sought them.

Under these circumstances, it would have been futile for the class members named in the motion for summary judgment to exhaust. Accordingly, Defendants' motion as to these class members is DENIED.

IV. Defendants' Motion to Strike [351]

Defendants move to strike the reports and testimony of Plaintiffs' two experts, Dr. Johnson and Dr. Paranjpe. Defendants previously moved to strike these reports and their motions were denied following the hearing held on April 29, 2009. Defendants now move again to strike the reports, raising some of the same arguments from the prior motions along with some new ones.

A. Dr. Johnson

Defendants assert that Dr. Johnson's limited experience in the area of severance plans and his lack of knowledge regarding ERISA render him unqualified as an expert in this case. However, Dr. Johnson's report makes clear that at his prior position at American Airlines3, he acted as a fiduciary in plan interpretation and ruling on ERISA appeals. Although Defendants may disagree with some of Johnson's conclusions regarding ERISA, that is not grounds for striking the report.

Additionally, Dr. Johnson's incorporation of Dr. Paranjpe's report is not grounds for striking the report. Although Defendants claim that Dr. Johnson testified that he did not fully understand the report, he actually testified that he did not understand it "with the degree of detail that [Dr. Paranjpe] would understand it." See Defendant's Motion for Judgment on the Administrative Record (AR), Exhibit 18 at 154. More importantly, Dr. Johnson's conclusions are not solely based on the report of Dr. Paranjpe. Dr. Paranjpe offered a mathematical analysis of the earnings potential formula used, while Dr. Johnson's report is concerned with whether Defendants breached their fiduciary responsibility under ERISA.

Furthermore, Defendants' contentions that Dr. Johnson lacks knowledge about the Transition Pay Plan (TPP) and that Marcia Dalton, the plan administrator4, failed to carry out her fiduciary duties may be grounds for disagreeing with the conclusions reached in the report, but are not grounds for striking the report completely.

Finally, Defendants' claim that the report does nothing more than impermissibly state legal conclusions is incorrect. The report examines the facts of the case, applies the requirements of ERISA, and explains how these requirements were not satisfied in specific ways.

Accordingly, the motion is DENIED as to Dr. Johnson.

B. Dr. Paranjpe

Defendants argue that Dr. Paranjpe5 is not qualified to offer an opinion relating to the operation of an ERISA benefit plan and the plan administrator's interpretation of the plan. However, Dr. Paranjpe was not testifying, and is not offering a report, as an expert in ERISA plans. Thus, his knowledge regarding ERISA is not particularly relevant here.

Defendants argue that Dr. Paranjpe never validated the data he tested. However, he testified that he worked with the data (which had been provided by Defendants to Plaintiffs) as it was presented it to him. Therefore, he did not see any need to validate it.

Defendants further assert that Dr. Paranjpe never looked at actual hours worked by HVAC sales associates, which, according to Defendants, he used to come to his conclusion that the formula used by Defendants would only result in benefits being provided if the Sears associate worked less than 1321 hours in 2004. This argument was raised in Defendants' prior motion to strike and that motion was denied after hearing on April 29, 2009. There is no reason for the Court to reverse its prior ruling. Dr. Paranjpe did not use the hours worked in 2004 to come to his conclusion. Rather, he analyzed the Defendants' formula for determining the gap between the 2004 earnings and the 2005 potential earnings. That analysis led him to conclude that it was mathematically impossible to get benefits, as long as an employee worked more than 1321 hours. Defendants previously admitted that their formula assumed that 2004 employees worked 40 hours per week. See Defendants' Motion to Strike Exhibits Not Part of the Administrative Record [99] at 11. Thus, there is no basis for striking the report on these grounds.

Defendants also assert that Dr. Paranjpe's report and testimony do not assist the trier of fact because one HVAC associate, Roy Queen, received benefits.6 However, Dr. Paranjpe's report is clearly relevant and does assist this court regardless of whether Queen received benefits. Moreover, Dr. Paranjpe testified that he viewed Queens' data and found that Defendants did not give a 1% commission increase to him, which explained why he would qualify for benefits.7 See Defendants' Motion to Strike, Exhibit 2 at 55.

Finally, Defendants claim that the report is unfairly prejudicial. Although the report may be harmful to Defendants' arguments, it is in no way unfairly prejudicial for this Court to consider the report.

Accordingly, the motion is DENIED as to Dr. Paranjpe.

V. Defendants' Motion for Judgment on the Administrative Record [333] and Plaintiffs' Motion for Summary Judgment [71]

The instant action, filed on June 28, 2006, is a complaint for wrongful denial of benefits under ERISA. Following a hearing on April 29, 2009, Plaintiff's Motion for Class Certification [52] and Motion for Consideration of Evidence Submitted in Support of Judgment for Plaintiffs' [143] were granted. As stated in the Court's order [186], Plaintiffs assert a procedural challenge to the administrator's decision, under the exception to the general rule limiting this court's review to the administrative record. Plaintiffs accordingly offer evidence outside of the administrative record to support the claim that Defendants wrongfully denied benefits in a procedurally inadequate way.

Plaintiffs dispute Defendants' decision to deny benefits to class members and have alleged procedural challenges that fit within the type of challenges discussed in Moore v. Lafayette Life Insurance. Co., 458 F.3d 416 (6th Cir.2006), and Wilkins v. Baptist Healthcare System, Inc., 150 F.3d 609 (6th Cir.1998). In identifying possible procedural defects, the Court in Moore gives examples of problems with due process, such as lack of notice, inadequate explanation for a denial of benefits, and not giving an opportunity for a participant who had been denied a claim to receive a full and fair review of the denial. See Moore, 458 F.3d at 436. In short, Moore conceives of the Wilkins exception as covering challenges in which "the procedural process of gathering all pertinent information may have broken down at the administrative level...." Id. at 430. The Sixth Circuit in Wilkins also states that "lack of due process" or "alleged bias" on the part of the plan administrator would constitute a procedural challenge. See Wilkins, 150 F.3d at 619.

Plaintiffs allege various procedural challenges in their Motion for Summary Judgment [71] and Supplemental Brief [233], including lack of notice and inadequate explanation for a denial of benefits. Plaintiffs allege they were wrongfully denied benefits, as they were not told in their denial letters that Sears had adopted a blanket policy of denial before any class member had even made a claim. Plaintiffs are also alleging bias on the part of the plan administrator and that Defendants failed to afford a reasonable opportunity for a full and fair review of their claims for benefits.

A. Standard of review

The first question that must be addressed is what standard of review should apply in this case.

Both parties agree that "[i]f a plan endows administrators with discretionary authority to interpret the plan's terms or determine participant eligibility, a court should subject administrators' interpretations to a deferential standard of review." See Bagsby v. Central States, SE & SW Areas Pension Fund, 162 F.3d 424, 428 (6th Cir.1998); see also Firestone Tire & Rubber Co., et al. v. Bruch, et al., 489 U.S. 101, 115, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989). This deference requires the court to determine whether the administrator's decisions were "arbitrary and capricious." See Bagsby, 162 F.3d at 428. Both parties agree the plan administrator here was given discretionary authority to interpret the Plan and thus the arbitrary and capricious standard would apply under typical circumstances.

However, Plaintiffs argue that based on the flagrant violations of the procedural requirements of ERISA, this Court should conduct a de novo review. Plaintiffs cite to a 9th Circuit case, Abatie v. Alta Health Life Ins. Co., 458 F.3d 955 (9th Cir.2006) in support of their argument. In Abatie, the 9th Circuit, in discussing the standard of review to apply when the plan administrator fails to follow procedural requirements, concluded that:

See Abatie at 971 (citations and internal quotation marks omitted). The Court went on to state that "when a plan administrator's actions fall so far outside the strictures of ERISA that it cannot be said that the administrator exercised the discretion that ERISA and the ERISA plan grant, no deference is granted." Id. at 972. Ultimately, the Court found that de novo review did not apply because the case involved "the more ordinary situation in which a plan administrator has exercised discretion but, in doing so, has made procedural errors." Id. at 972. Thus, the Court concluded that if there were a finding that there were procedural violations and the plan administrator did not exercise its discretion, then the plan administrator's actions could be reviewed de novo.

Plaintiffs do not cite to any 6th Circuit case law adopting Abatie. Plaintiffs also claim that the Supreme Court adopted Abatie but that is incorrect.8

Defendants argue that Abatie does not apply here. Moreover, they assert that the Sixth Circuit never adopted the holding of Abatie. Defendants fail to address what standard would apply if there was in fact a valid procedural challenge asserted here.

Neither party has pointed to a case exactly on point addressing what standard of review to apply to the type of procedural violations alleged here. Abatie has never been adopted in this circuit. In one Sixth Circuit case, Shelby County Health Care Corp. v. Majestic, 581 F.3d 355 (6th Cir. 2009), the Court applied the de novo standard in reviewing the wrongful denial of benefits. Shelby did not address an exact situation like the one here where the procedural challenge was to a predetermined blanket policy of denial but it nonetheless is informative.9 The Court's conclusion in Shelby, consistent with Abatie, was based on the fact that although the plan administrator was delegated discretionary authority to interpret the Plan, the administrator failed to exercise that discretion because it let someone else make the benefits determination. Therefore, de novo review was appropriate.

Plaintiffs assert that Dalton, the plan administrator, did not exercise her fiduciary authority in that she improperly allowed Teige McShane, Director of Human Resources, to develop a "formula" for analyzing earnings, which was used to deny benefits. In Plaintiffs' view, SHIP essentially made the benefits determination, not the plan administrator.10 Plaintiffs maintain that the TPP does not contain authority to delegate plan administration beyond the plan administrator. Plaintiffs rely on the report of their expert, Dr. Johnson, in support of their claims.

Defendants assert that McShane is not a fiduciary with regards to the Plan. Rather, he simply performed ministerial duties. Defendants point to their expert, Karen Suhre, who argues that McShane was not a fiduciary.11 Defendants do not deny that McShane assisted Dalton but they argue that he would only give her information and she would make the final determination as to whether benefits would be awarded.

The parties and their competing experts thus dispute McShane's status as a fiduciary.

The Court finds that unlike the plan administrator in Shelby, Dalton appeared in some instances to retain final review authority over the decision to deny claims12, regardless of whether McShane was very involved in the decision to establish the earnings formula and set up a blanket policy of denial. However, Defendants are mistaken in their assertion that what McShane was often doing was purely ministerial. The interpretations of the "earnings potential" provision were frequently initially not made by Dalton, but were made by McShane, who did not have a degree in mathematics or statistics, and others, although it was ultimately reviewed with Dalton, who also lacked a degree in mathematics or statistics.13 McShane was not just feeding numbers to Dalton as to whether someone's income would decrease more than 10%; he was actually interpreting the provision and concluding what factors would be included in the earnings analysis (even though he was not the plan administrator and was not, under the terms of the TPP, given authority to determine eligibility for benefits).14 For example, McShane testified that Dalton did not direct him to look at 2004 commissions and paid time off (PTO) as part of the earnings analysis but rather that was something he determined himself would be appropriate. See Defendant's Motion for Judgment on the AR, Exhibit 3 at 138. He, not Dalton, made the initial determination that the methodology used would assume that 2004 and 2005 earned commissions would be the same. Id., Exhibit 3 at 155. Dalton testified that she had no math modeling experience; therefore, it is unclear how she could knowledgeably approve McShane's decisions regarding the methodology used to compute eligibility for benefits.

Ultimately, it is unnecessary for this Court to conclude that McShane acted as a fiduciary (and that Dalton failed to exercise any of her discretionary authority) and that a less deferential standard of review therefore applies. That is because this Court finds that the denial of benefits here could not even be upheld under the arbitrary and capricious standard.

Plaintiff further argues that even if the arbitrary and capricious standard applies, the court should take conflict of interest into account. The Supreme Court has concluded that "arbitrary and capricious" is still the standard to use in reviewing the plan administrator's benefits decision even if conflict of interest exists. However, "When the same entity determines eligibility for benefits and also pays those benefits out of its own pockets, an inherent conflict of interest arises. In close cases, courts must consider that conflict as one factor ..." in deciding whether the plan administrator acted improperly (arbitrarily and capriciously). See Cox v. Standard Ins. Co., 585 F.3d 295, 299 (6th Cir.2009) (citing Metropolitan Life Ins. Co. v. Glenn, 128 S.Ct. at 2345). In certain cases, it may be weighed more heavily. Conflict of interest will:

Id. at 2351.

Plaintiffs assert that Dalton failed to advise McShane, the person who was also responsible for determining the cost impact15 of the payment of TPP benefits, that he was being delegated fiduciary authority and what that meant.16 Dalton failed to determine whether McShane was operating under a conflict of interest before "delegating substantial fiduciary authority" to him and allowing him to make a determination over whether benefits would be paid.

Defendants maintain that McShane's decisions were not influenced by the Sears Finance Department, which was separate from the Sears Benefits Department. Dalton also did not serve to gain personally from denying benefits. She testified that her compensation was not affected by how many people were awarded benefits. See Defendants' Motion for Judgment on the AR, Exhibit 9 at 242.

This Court will consider the potential conflict of interest here in determining whether the plan administrator acted arbitrarily and capriciously. McShane, regardless of whether he was a fiduciary, played a large role in the benefits determination, in that he provided Dalton with the information that she was supposed to use to make a benefits determination and, as addressed above, did some interpreting of the plan. The company (which was also plan administrator) would certainly have a financial interest in not paying benefits in order to maximize revenue. It is unnecessary to define specifically how much weight is given to the potential conflict of interest, as it is not the decisive factor in the Court's determination that the denial of benefits was arbitrary and capricious.17

B. Procedural Violations

Plaintiffs' procedural challenges are addressed in the first class issue. They assert that Defendants denied benefits to the class18 in a manner that was procedurally defective. Their argument is that Defendants adopted a blanket policy to deny benefits. Plaintiffs allege that Defendants failed to conduct individualized assessments of HVAC associates. Rather, they made the decision prior to receiving any claims that they would deny Plaintiffs benefits and never made Plaintiffs aware of this fact.19 This fits in with the type of procedural violations noted in Moore, supra, and Wilkins, supra.

This Court will now address Plaintiffs' procedural challenges to Defendants' conduct in denying them benefits under the three provisions of the Transition Pay Plan.

1. Earnings potential analysis

After reviewing the entire record, including the arguments raised in the parties' detailed briefs and at oral argument, the Court finds that Plaintiffs have demonstrated that under the earnings methodology20 used by Defendants, no HVAC associate could receive benefits, which substantiates Plaintiffs' claim of a predetermined plan of denial.

This finding is supported by Plaintiffs' witness, Dr. Paranjpe21, in his expert report. Defendants moved to strike this report, but there is no basis for doing so. Although Defendants attack the report, the Court finds it noteworthy that Defendants did not offer their own expert to challenge Dr. Paranjpe's conclusions, leaving his determination undisputed by another expert. That conclusion was that after reviewing the methodology Defendants used, no person working more than 1321 hours22 could become eligible for severance benefits. Although Roy Queen received benefits, Dr. Paranjpe found that Defendants did not include a 1% commission increase for him. However, he indicated that if he applied the math to Queen, giving him that 1% increase, he would not have qualified for benefits.23 See Defendants' Motion to Strike, Exhibit 2 at 55.

The utilization of this methodology was improper. Plaintiffs' allegation regarding Defendants' use of it constitutes a valid procedural challenge. Its use was certainly arbitrary and capricious. The employment of such a flawed methodology supports Plaintiffs' argument that there was a predetermined decision to deny benefits. Defendants either knew or should have known that under their methodology, class members would be unable to attain benefits.

Dalton looked to McShane for the earnings methodology to be established and for calculation of whether the differential was greater than 10%. Dalton did not, and could not, knowledgeably question the methodology or calculations used since she lacked a math degree. The earnings formula was established24 and then all HVAC associates who applied, except Roy Queen, were denied benefits.

McShane admitted that he did not test to see if there was any variable amount that could hypothetically be placed in the analysis and result in a 10% or more decrease, nor was he aware of anyone doing so. See Defendants' Motion for Judgment on the AR, Exhibit 3 at 395. When asked if he tested any of the formulas used or the way in which he was analyzing the earnings, his response was, "We reviewed it with the plan administrator." Id., Exhibit 3 at 405. Of course, Dalton had no mathematical background so that does not provide an adequate showing of validity of the method used. He went on to state that, "There's not a validity test, so to speak to—that would apply to this earnings methodology." Id., Exhibit 3 at 405. When asked if he confirmed the reliability of the methodology used, McShane responded that the data in the computer was accurate. Id., Exhibit 3 at 406-407. That of course says nothing about whether the methodology devised could ever result in an award of benefits.

Even in the case of Roy Queen, emails indicate, as noted above, that McShane deemed him an "anomaly" because he qualified for benefits. See Plaintiff's Motion for Summary Judgment, Exhibit N, Queen 0019. JoAnn Wrobel also stated that Queen was a "unique case in that when they run the regular formula, he is over 10%." Id., Exhibit Q, Queen 0006. Using a different methodology (the district level analysis) for computing the earnings differential was then considered. Dalton responded that she did not think it was a good idea to use a different formula than the one applied to everyone else. Id., Exhibit Q, Queen 0007. Dalton ultimately contacted Sears counsel, who advised her that it would be appropriate to continue utilizing the methodology they had been using. Id., Exhibit Q, Queen 0012. Queen was subsequently awarded benefits.

Moreover, the assumptions underlying the methodology for the earnings analysis frequently were drawn to the detriment of Plaintiffs' eligibility for benefits, including arbitrarily assuming that 2005 sales would be the same as 2004 and that commissions would increase 1% (without even accounting for what percentage of commissions earned in 2004 were earned on the first visit versus follow-ups, which were unlikely to happen now based on a one call close rule at SHIP25), while at the same time determining that the loss of business expense reimbursements would not constitute "earnings."26 McShane and Dalton both testified that they did not consider in the earnings analysis whether cancellation rates under SHIP were much greater than Sears.27 See Defendant's Motion for Judgment on the AR, Exhibit 3 at 281; Exhibit 9 at 185. Defendants also assumed that the use of current benefit rate was the proper way to calculate the value of loss of paid time off, but did not ever test whether use of the average of the four benefit rates would have produced a different result. They further failed to properly justify not using actual paid time off earnings to estimate the value of the loss of paid time off. Again, this was another assumption made to the detriment of Plaintiffs.28

Moreover, these interpretations of the "earnings potential" provision were frequently initially not made by Dalton, but were made by McShane and others, although it was ultimately reviewed with Dalton. As noted above, McShane was not just providing numbers to Dalton as to whether someone's income would decrease more than 10%; he was actually interpreting the provision and determining what factors would be considered in the earnings potential analysis devised (For example, McShane testified that Dalton did not direct him to look at 2004 commissions and paid time off (PTO) as part of the earnings analysis but rather, that was something he determined himself would be appropriate). Since Dalton lacked a degree in mathematics and testified that she had no math modeling experience, it is unclear on what basis she could as plan administrator support her decision to sign off on decisions McShane (who was not given authority under the terms of the TPP to determine benefits) would make regarding the methodology used to compute eligibility for benefits.

ERISA requires an individualized assessment of an employee's claims, as well as notice if a determination is made that benefits are being denied. Here, the plan administrator never informed class members that this formula that could never be satisfied was being utilized.

2. Utilizing current skills provision

The interpretation of the "utilizing current skills" provision in the TPP is also part of the procedural violation of a predetermined blanket policy of denial. Under the TPP, a new position is "comparable" to the prior position if it utilizes "current skills."

Under the arbitrary and capricious standard, the plan administrator's decision should be upheld "if it is the result of a deliberate, principled reasoning process and if it is supported by substantial evidence." See Glenn v. Metropolitan Life Ins. Co., 461 F.3d 660, 666 (6th Cir.2006), aff'd sub nom. Metropolitan Life Ins. Co. v. Glenn, 554 U.S. 105, 128 S.Ct. 2343, 171 L.Ed.2d 299 (2008) (citing Baker v. United Mine Workers of Am. Health & Ret. Funds, 929 F.2d 1140, 1144 (6th Cir.1991)). While "that standard is deferential, it is not a rubber stamp for the administrator's determination." See Elliott v. Metropolitan Life Ins. Co., 473 F.3d 613, 617 (6th Cir.2006).

A court, when interpreting an ERISA plan, will "apply federal common law rules of contract interpretation...." See Perez v. Aetna Life Ins. Co., 150 F.3d 550, 556 (6th Cir.1998). That means looking to the plain meaning of the words and "giv[ing] effect to the unambiguous terms of ..." the plan. Id. at 556 (citation and internal quotation marks omitted).

The words "utilizing current skills" as used in the Transition Pay Plan are ambiguous. The Plan does not define them. However, the words used are "current skills," not "selling skills."

Defendants' position is that since the SHIP position was one "utilizing current skills," the SHIP and Sears HVAC positions were comparable. Dalton testified that she made her decision that HVAC employees would be "utilizing current skills" at SHIP based on the fact that "they were outside sales people selling HVAC equipment and they were going to be outside sales people selling HVAC equipment going into customers home[s] the same as they had done before."29 See Defendants' Motion for Judgment on the AR, Exhibit 9 at 173. Counsel for Defendants argue in their motion that Dalton "rationally concluded that HVAC sales associates who transitioned to SHIP would utilize their current skills because both outside sales positions were responsible for making in-home sales calls, selling the same HVAC products to the same residential customers in the same geographic area." See Defendants' Motion for Judgment on the AR at 63.

Plaintiffs assert that at Sears, HVAC associates followed the sale from beginning to end, taking part in every step of the process (what Plaintiffs call a "horizontal sales model"). At SHIP, associates only were involved in the in-home sales call (a "vertical sales model"). Plaintiffs maintain that Dalton "did not consider differences in the business models" between the HVAC and SHIP positions and that "every skill demanded by the Sears HVAC job (marketing, logistics, development of customer relationship, working with and arranging for contractor installers, credit interface, oversight of work) except for those skills utilized in the actual sales call, were not utilized at SHIP." See Plaintiff's Motion for Summary Judgment at 8. Plaintiffs also assert that the HVAC sales position was split into two positions at SHIP—SHIP Sales Representatives and Project Coordinator. See Plaintiffs' Supplemental Brief [233], Exhibit J.

This Court finds that in interpreting the Plan, the plan administrator arbitrarily focused on "selling" in concluding that benefits could not be awarded under the skills provision. The plan administrator admitted as such in her deposition. The Plan could have included a definition for "utilizing current skills" that focused solely on "selling," but did not. The Plan also could have used the phrase "utilizing sales skills," but did not.

Dalton testified that she "made the determination that an associate going from an outside selling position to a outside selling position for purposes of the plan was utilizing current skills." See Defendants' Motion for Judgment on the AR, Exhibit 9 at 175. This conclusion is indicated in the claims denial letters sent out to many of the class members who raised the argument that the SHIP position did not utilize current skills. Dalton often responded to claimants, "Offering an accounting job to a salesperson would be an example of a non-comparable job offer. Offering a sales job to a sales associate is a comparable job offer for Transition Pay Plan purposes."30 Thus, Dalton found that Plaintiffs were not entitled to benefits because the two jobs both utilized "sales skills."

However, the TPP stated that Plaintiffs would not be entitled to benefits if the two jobs utilized "current skills."31 She improperly and arbitrarily read the word "sales" into the provision. Moreover, interpreting the provision to mean that denial of benefits was appropriate under these circumstances was arbitrary and capricious, as her interpretation should have (as will be discussed below) lead her to conclude that an award of benefits was appropriate.

Furthermore, even if Dalton was correct in only focusing on "sales skills," she failed to give weight to the fact that with a one call close rule in effect, the skills needed to close that type of sale certainly differ from those needed for an associate to be more of a counselor and meet with the customer multiple times, build a relationship, and follow the sale from start to finish.32

In viewing the decision to interpret the provision in this manner in light of the procedural violation discussed above (the use of the rigged formula), it cannot be said that the decision was the result of a deliberate, principled reasoning process. It is already known that a defective formula was used without the knowledge of class members. That calls into question any further determinations the plan administrator made. The interpretation of the skills provision in this way fits in with Plaintiffs' assertion of the existence of a predetermined policy of denial.

3. The commuting provision

The last provision of the TPP to discuss is the commuting provision. As part of their procedural challenge, Plaintiffs argue that the plan administrator improperly interpreted the "reasonable commuting distance" provision of the TPP in such a way to ensure that Plaintiffs could never be eligible for benefits (consistent with a predetermined policy of denial).

In order for the new SHIP position to be comparable, the Plan originally stated that it had to be "within a reasonable commuting distance (approximately 30 miles) of the closed or reorganized unit." See Plaintiff's Motion for Summary Judgment, Exhibit B at Sears 00027. When the TPP was amended, the commuting provision was modified. In order for a job to be considered comparable, it had to be "within a reasonable commuting distance (approximately 30 miles if the commute is daily or the equivalent if less frequently than daily—e.g., 150 miles if the commute is weekly or 300 miles if the commute is every two weeks) of the associate's home." Id., Exhibit B at Sears 00042. Defendants acknowledge that unlike Sears, SHIP required sales associates to physically report to a district office. See Defendant's Motion for Judgment on the AR at 65.

Just as the Plan did not define "utilizing current skills," it also did not define the term "distance." Therefore, it was left to the plan administrator, Dalton, to interpret what that term meant. Dalton ultimately concluded that "reasonable commuting distance" meant one-way, not round trip.

Plaintiffs argue that Dalton arbitrarily interpreted the provision to mean one-way and interpreted the provision in such a way that Plaintiffs could never satisfy the provision. Plaintiffs assert that class members were given different answers about how many times per week they would be required to commute. Despite the fact that they were doing the same job, some people were told to come in more often, depending on how far away they lived. Plaintiffs assert that Defendants' goal was to always keep Plaintiffs within the distance requirement so that they could never exceed it and become eligible for benefits.

Defendants assert that Dalton's interpretation of the provision to mean "one-way" was rational and should be upheld.

The Court finds that Dalton's interpretation of this provision fits in with the overall procedural challenge alleged. As discussed above, Plaintiffs could never satisfy the earnings provision for terms of determining a comparable job, nor could they satisfy the skills provision. Defendants' interpretation of the commuting provision is consistent with that blanket policy of denial.

Moreover, Defendants' interpretation of how often a person must commute into the office essentially reads the commuting provision out of the policy. As McShane testified, the frequency of the number of times an associate would be required to come in was based upon how far they lived from the office; when asked how that provision would ever allow for a trigger of eligibility for benefits, McShane responded, "I don't know." See Defendants' Motion for Judgment on the AR, Exhibit 3 at 109. McShane also was "not aware of an instance" or "even a hypothetical instance" where a person could have fallen outside the guidelines and become eligible for benefits. Id., Exhibit 3 at 118-119. The commuting provision cannot be interpreted in such a way that it is read out of the policy because nobody could ever satisfy it. There would be no need for the Plan to include such language in the first place if the provision could never be satisfied. Individual class members also assert that they were told by managers that they were required to report multiple times per week, which would have triggered eligibility, but the plan administrator refused to credit those arguments and would tell them that their normal commute was within the guidelines.

C. Remedy

The Court therefore finds on the first class issue that Defendants wrongfully denied benefits to the class in a manner that was procedurally defective.

The remaining issue is addressed in the second class issue: Whether benefits are due to the class under the terms of the TPP. The question this Court is faced with is whether to remand this case or to order benefits across the class.

Defendants are correct that typically, if there is a finding of a procedural violation, the case is remanded to the plan administrator to make a new determination of benefits based on a correction of the procedural defect. It is only when there is an issue with the substantive interpretation of a provision (the plan administrator interpreted a provision in a manner that was arbitrary and capricious) that a court can order that benefits be provided rather than remanding.

The Sixth Circuit, in Shelby, supra, and Elliott, supra, has addressed how to determine whether to remand upon a finding that benefits were wrongfully denied. In Shelby, the Court stated:

See Shelby, 581 F.3d at 373-374 (citations and internal quotation marks omitted).

Here, this Court has found that Defendants wrongfully denied benefits to the class in a procedurally defective manner (the use of the rigged formula and, consistent with that, interpretations of the Plan provisions in such a way that Plaintiffs could never qualify for benefits), suggesting that remand might be appropriate.33

However, included within that finding is the finding that the plan administrator's substantive interpretation of the "current skills" provision was arbitrary and capricious. The plan administrator, as she testified to and indicated in her letters to claimants, made a determination regarding the "utilizing current skills" provision— She asserted that the SHIP job did in fact utilize the skill of selling, just like the HVAC job, and therefore, Plaintiffs could not get benefits under this provision.

This Court can accept the plan administrator's testimony—What these two jobs have in common are that they both involve sales. Where the Court diverges with the plan administrator is that she said this means benefits should not be ordered. This Court disagrees. The Plan provision says "utilizing current skills." If the provision said "utilizing sales skills," then the plan administrator might be right. But the TPP does not say that. Dalton arbitrarily read the word "sales" into the provision and denied benefits.

The Court finds that her conclusion, that the only thing these jobs have common is sales, equals benefits, since the new job had to utilize "current skills." A remand is inappropriate. Upon remand, the plan administrator cannot be offered the chance to now offer new reasons why the jobs are actually comparable. Dalton cannot now state, "Not only does the new job utilize skills related to the sales call, but it also utilizes other skills as well." The plan administrator already reviewed the Sears HVAC and SHIP positions and what they entail and concluded that what they have in common is sales and therefore benefits were not to be awarded. That interpretation was applied across the class and used to deny benefits when it should have actually led to the granting of benefits since the new job had to utilize "current skills," not "sales skills." That denial was consistent with the use of an earnings methodology under which benefits could never be obtained. Moreover, that denial was arbitrary and capricious and this Court believes it warrants an order of benefits under Elliott and Shelby.

Furthermore, even if it was proper to focus only on "sales skills," the plan administrator failed to give weight to the fact that with a one call close rule in effect, the skills needed to close that type of sale on the first shot certainly differ from those needed for an associate to be more of a counselor and meet with the customer multiple times, build a relationship, and follow the sale from start to finish. That means that even the sales skills involved in the two positions were different. Either way, whether the plan administrator improperly read the word "sales" into the Plan and ignored other skills or properly read "sales" into the language but failed to give weight to the fact that the sales skills actually differed, an award of benefits across the class is appropriate.34

Under the second class issue, benefits are thus due to the class under the terms of the Transition Pay Plan.35 Defendants are ordered to provide benefits to the class members.36

VI. Conclusion

Based on the above findings, IT IS HEREBY ORDERED that Plaintiffs' Motion for Summary Judgment [71] is GRANTED.

IT IS FURTHER ORDERED that Defendants' Motion for Summary Judgment under Rule 56[331] is GRANTED IN PART AND DENIED IN PART, Defendants' Motion to Strike [335] is GRANTED, and Defendants' Emergency Motion to Bifurcate [230], Motion to Dismiss [330], Motion for Judgment on the Administrative Record [333], and Motion to Strike Reports [351] are DENIED.

SO ORDERED.