Filed: Jul. 30, 2009
Latest Update: Feb. 12, 2020
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 07-2064 DEAN A. VAUGHAN; MICHAEL GRUENDER; JERRY DEAN BAKER; LADONNA C. BAKER; EVELYN C. BROWN; GREGORY STEPHAN COPELAND; REBECCA B. CORUM; BOBBY GERALD DAWKINS; JEFFREY S. GROSHANS; RYAN A. GRAV; KIMBERLY M. HENRY; DIANE B. HESS; KARIN M. HUDSON; WILLIAM L. LAWSON, III; XUAN THE LE; BRENDA C. MORRISON; THOMAS A. NEEDHAM; MARC P. RAY; THOMAS L. ROACH; DEBRA G. ROBINSON, Plaintiffs - Appellants, v. CELANESE AMERICAS CORPORATION
Summary: UNPUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 07-2064 DEAN A. VAUGHAN; MICHAEL GRUENDER; JERRY DEAN BAKER; LADONNA C. BAKER; EVELYN C. BROWN; GREGORY STEPHAN COPELAND; REBECCA B. CORUM; BOBBY GERALD DAWKINS; JEFFREY S. GROSHANS; RYAN A. GRAV; KIMBERLY M. HENRY; DIANE B. HESS; KARIN M. HUDSON; WILLIAM L. LAWSON, III; XUAN THE LE; BRENDA C. MORRISON; THOMAS A. NEEDHAM; MARC P. RAY; THOMAS L. ROACH; DEBRA G. ROBINSON, Plaintiffs - Appellants, v. CELANESE AMERICAS CORPORATION;..
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UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 07-2064
DEAN A. VAUGHAN; MICHAEL GRUENDER; JERRY DEAN BAKER;
LADONNA C. BAKER; EVELYN C. BROWN; GREGORY STEPHAN
COPELAND; REBECCA B. CORUM; BOBBY GERALD DAWKINS; JEFFREY
S. GROSHANS; RYAN A. GRAV; KIMBERLY M. HENRY; DIANE B.
HESS; KARIN M. HUDSON; WILLIAM L. LAWSON, III; XUAN THE
LE; BRENDA C. MORRISON; THOMAS A. NEEDHAM; MARC P. RAY;
THOMAS L. ROACH; DEBRA G. ROBINSON,
Plaintiffs - Appellants,
v.
CELANESE AMERICAS CORPORATION; CELANESE ADVANCED
MATERIALS, INCORPORATED; THE CELANESE AMERICAS CORPORATION
SEPARATION PAY PLAN,
Defendants - Appellees.
Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte. Frank D. Whitney,
District Judge. (3:06-cv-00104-FDW)
Argued: January 28, 2009 Decided: July 30, 2009
Before WILKINSON, KING, and GREGORY, Circuit Judges.
Affirmed by unpublished per curiam opinion. Judge King wrote a
dissenting opinion.
ARGUED: Louis L. Lesesne, Jr., ESSEX & RICHARDS, P.A.,
Charlotte, North Carolina, for Appellants. Jeanne Louise
Bakker, MONTGOMERY, MCCRACKEN, WALKER & RHOADS, Philadelphia,
Pennsylvania, for Appellees. ON BRIEF: Beth A. Vanesse, ESSEX &
RICHARDS, P.A., Charlotte, North Carolina, for Appellants. John
D. Cole, OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C.,
Charlotte, North Carolina, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
2
PER CURIAM:
Appellants filed this action under the Employee Retirement
Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1133 (2006),
claiming that their employer denied them requisite compensation
under a separation plan. The district court granted summary
judgment for the Appellees. We affirm.
I.
Appellants are former employees of Appellee Celanese
Advanced Materials, Inc. (“CAMI”), a subsidiary of Appellee
Celanese Americas Corporation (“Celanese”). CAMI was comprised
of two separate operations: PBI, which employed Appellants, and
Vectran. In 2005, Celanese sold both CAMI operations to
separate purchasers: PBI to InterTech Group (“InterTech”) and
Vectran to Kuraray.
Celanese maintained a Separation Pay Plan (“the Plan”).
The Plan provided separation pay for Celanese employees upon
termination of their employment under specified conditions,
which included the sale of a business unit when the successor
employer did not offer a “comparable level of compensation.”
(J.A. 39.) In the instant case, Appellants received the same
base salary from their new employer, InterTech. However, their
3
benefits were reduced because InterTech did not offer a defined
pension plan.
The Vectran sale was the first to be negotiated when CAMI
sold its operations. In that transaction, Celanese and Kuraray
negotiated a “side letter,” which gave the Vectran employees a
“signing bonus” to compensate for the reduction in their
benefits package. The bonus negotiated in the Vectran sale
prompted PBI employees to ask for separation pay under the Plan
to supplement their reduction in benefits.
Under the Plan there is a Benefits Committee (“the
Committee”) to address claims. Cheryl Cunningham was a member
of the Committee. During the beginning stage of negotiations
for the PBI deal, Cunningham suggested that Appellants would be
eligible for separation pay under the Plan. Jay Townsend, the
senior Celanese official negotiating the PBI sale, disagreed
with Cunningham’s suggestion. On April 20, 2005, Townsend
conducted a conference call with Cunningham, B.J. Smith (a local
human resources representative designated as the Administrator
of the Plan), and Mathias Kuhr (Celanese’s in-house counsel). 1
At the conclusion of the call, the group agreed that Appellants
1
Cunningham was the only member of the Committee on the
call that the parties collectively refer to as the April
decision.
4
would not be eligible to receive separation pay under the Plan
to supplement their reduced benefits.
In June of 2005, Appellants filed claims under the Plan for
separation pay benefits. On July 7, 2005, Smith sent Appellants
a letter identifying himself as the Plan Administrator and
advising them that they could submit additional evidence for
consideration, “[i]n the interest of being fair.” (J.A. 79.)
He assured them that their claims would be “reviewed in
accordance with the claims procedures of the Plan.” (Id.)
Appellants submitted additional information on July 17, 2005.
On September 21, 2005, Smith sent Appellants a denial
letter through his attorney, Jeanne Bakkar. The letter stated
that the Committee’s decision was final; that the Vectran
“signing bonus” was not separation pay under the Plan; that this
bonus was paid by Kuraray; and that the phrase “comparable level
of compensation” only required a comparable level of salary, not
comparable salary and benefits.
Appellants wrote back on October 3, 2005, requesting
numerous documents and an explanation of Appellees’ denial
procedures. Bakkar responded on November 9, 2005, addressing
the concerns Appellants raised in the previous letter and with
specific instructions on how to appeal.
5
Appellants appealed the Plan Administrator’s September
decision. On December 29, 2005, the appeal was denied in a
letter from Bakkar on behalf of the Committee. The letter
stated that the Committee relied on its “discretionary
authority” to construe the meaning of “compensation” as only
including the base salary. (J.A. 144-46.) Further, the letter
stated that the Vectran “signing bonus” provided no precedent to
support Appellants’ claims.
On March 9, 2006, Appellants filed an action in the Western
District of North Carolina for denial of separation pay benefits
under the Plan. On September 27, 2007, the district court
granted summary judgment for Appellees, concluding that the
Committee’s discretionary decision to deny separation pay was
reasonable under Booth v. Wal-Mart Stores, Inc., 201 F.3d 335
(4th Cir. 2000).
II.
We review a district court’s decision to grant summary
judgment de novo, and we employ the same legal standards applied
by the district court. Elliot v. Sara Lee Corp., 190 F.3d 601,
605 (4th Cir. 1999). With respect to the district court’s
findings, we review factual findings for clear error and legal
6
determinations de novo. Williams v. Sandman, 187 F.3d 379, 381
(4th Cir. 1999).
Although we review summary judgment orders in the light
most favorable to the non-moving party, Evans v. Techs.
Applications & Servs. Co., 80 F.3d 954, 958 (4th Cir. 1996), we
must also evaluate a denial of benefits under an abuse of
discretion standard when, as here, an ERISA benefit plan vests
discretionary authority to make benefit eligibility
determinations with the plan administrator, Ellis v. Metro. Life
Ins. Co.,
126 F.3d 228, 232 (4th Cir. 1997). An administrator’s
decision “will not be disturbed if it is reasonable,” even if we
“would have come to a different conclusion independently.”
Id.
A decision is reasonable when it is the “result of a deliberate,
principled reasoning process and if it is supported by
substantial evidence.” Brogan v. Holland,
105 F.3d 159, 161
(4th Cir. 1997) (internal citations omitted); see also
Booth,
201 F.3d at 342-43 (listing eight factors that guide the
reasonableness analysis, discussed infra).
The regulations promulgated under ERISA prescribe, inter
alia, that: 1) Decisions must be made in accordance with plan
documents, 29 C.F.R. § 2560.503-1(b)(5) (2008); 2) Plan
procedures must be applied consistently, id.; and 3) Notice must
be given in writing to deny a claim, state the basis for the
7
denial, reference the plan provision relied upon, identify
additional information required to perfect the claim, describe
the appeal process, and notify the petitioner of the right to
bring a civil action, 29 C.F.R. § 2560.503-1(g) (2008).
III.
a.
Appellants first argue that Appellees’ actions violated the
Plan’s requirements because the initial decision to deny the
claim was not made by the Committee in a meeting attended by
quorum, pursuant to the Plan. See Bedrick By and Through v.
Travelers Ins. Co., 93 F.3d 149, 153 (4th Cir. 1996)
(emphasizing the importance of ERISA’s requirement of “full and
fair review” of all denied claims by “appropriate named
fiduciary.”);
Ellis, 126 F.3d at 236-37 (acknowledging
importance of ERISA’s formal claims process, which protects from
arbitrary decision making); Weaver v. Phoenix Home Life Mut.
Ins. Co.,
990 F.2d 154, 157 (4th Cir. 1993) (stating that the
“procedural guidelines are at the foundation of ERISA.”)
ERISA’s claim requirements are only triggered when a
claimant makes a “claim for benefits.” 29 C.F.R. § 2560.503-
1(e) (2008). A “claim for benefits” does not occur until there
is a “request for a plan benefit or benefits made by a claimant
8
in accordance with a plan’s reasonable procedure for filing
benefit claims.” Id. Additionally, Section 5.6 of the Plan,
titled “Claims Procedures,” states: “In the event that the
Administrator denies, in whole or in part, a written claim for
benefits by a Participant or his beneficiary, the Administrator
shall furnish notice of the adverse determination to the
claimant.” (J.A. 51 (emphasis added).) In the instant case,
Appellants had not made a “request for a plan benefit” before
the PBI deal closed. The April 22, 2005, conference call was
neither in response to Appellants’ claims nor a denial of a
claim for benefits because Appellants did not make a claim until
June 2005. Therefore, ERISA procedures did not govern the
Committee’s decision during the conference call.
Appellants attempt to skirt the fact that the April
decision was not a response to their claims by arguing that they
were never afforded fair review under ERISA because Celanese had
already made its decision in April concerning the substance of
their June claims. The gist of Appellants’ argument is that the
decision on their claims was “in a sense foreordained.”
(Appellants’ Reply Br. 2.) Appellants’ contention has little
weight because, as the district court correctly recognized,
[I]t is in no way extraordinary that the benefits
committee would have reached a conclusion as to
whether severance benefits would be paid prior to the
closing of the divestiture transaction, because the
9
business partners negotiating the deal would have
needed to anticipate with a reasonable degree of
certainty all of the transaction costs that would be
incurred by the sale.
(J.A. 1327.) Business transactions would be significantly
burdened if all discussions and decisions relating to
eligibility of benefits must follow the Plan’s claim review
procedures even when, as here, no claim for benefits has been
made. Clearly, a plan fiduciary is not required to initiate
formal claim review procedures every time internal discussions
with management and plan fiduciaries might affect a potential
claim for separation pay. And this Court does not impose such a
burden here.
b.
Next, Appellants contend that the district court misapplied
the Booth factors in concluding that the fiduciary’s
interpretation of the Plan and denial of benefits was
reasonable. In Booth, this Court established a non-exclusive
list of factors that a court reviewing a decision denying
benefits in an ERISA case can consider to determine whether the
denial was “reasonable”:
(1) [T]he language of the plan; (2) the purposes and
goals of the plan; (3) the adequacy of the materials
considered to make the decision and the degree to
which they support it; (4) whether the fiduciary’s
interpretation was consistent with other provisions in
the plan and with earlier interpretations of the plan;
(5) whether the decision making process was reasoned
10
and principled; (6) whether the decision was
consistent with the procedural and substantive
requirements of ERISA; (7) any external standard
relevant to the exercise of discretion; and (8) the
fiduciary’s motives and any conflict of interest it
may have.
201 F.3d at 342-43. Each factor will be addressed in turn.
(1) Language of the Plan
All parties agree that the Plan does not define
“compensation.” The district court found that although the
meaning of the term is ambiguous, this factor weighed in favor
of the Appellees. The district court deferred to the
Committee’s interpretation of “compensation,” because it
recognized ERISA’s policy of judicial deference, acknowledged
the Committee’s “inherent discretionary authority,” and found
“no compelling reason” to adopt Appellants’ interpretations of
“compensation.” (J.A. 1319-20.) The Supreme Court stated in
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111 (1989),
that under ERISA, judicial deference is owed to a fiduciary’s
reasonable discretionary decision. In this case, the district
court considered Appellants’ interpretation but decided that the
fiduciary’s interpretation was reasonable and worthy of
deference. For the reasons set forth below, we agree.
Appellants argue that “compensation,” as used in Section
1.10, means “benefits” and salary. Appellants contend that in
the Plan “Annual Base Pay,” or salary, is used to calculate the
11
amount of separation pay, but was never set forth as a synonym
for “compensation.” Further, the Plan does not refer to “Annual
Base Pay” in Section 1.10, which sets out eligibility under the
section titled: “Eligible Termination of Employment.”
Appellants argue that if the Plan intended “compensation” to
mean just “Annual Base Pay” it would have said so explicitly as
it did in other sections.
The Plan language does not support Appellants’ definition.
Article III of the Plan, which is otherwise titled “Separation
Pay and Special Separation Allowances,” begins with Section 3.1:
“Benefits Eligibility.” This is the first indication, of many,
that the Plan defines “benefits” as “separation pay” or “special
separation allowances.” Section 3.3, “Separation Pay,” states:
If the Participant’s employment with the company is
terminated as a result of an Eligible Termination of
Employment, the Participant shall receive separation
pay from the Company in an amount that will vary
depending upon the number of Service Years the
Participant has with the Company. The separation pay
shall be calculated on the basis of one (1) week of
pay (based on a pro rata share of the Participant’s
Annual Base Pay) for each continuous Service Year plus
one additional week.
(J.A. 44.) The last section in Article III, “Special Separation
Allowances,” explains that special separation allowances fall
into a category with unused vacation days and are also
calculated by considering a participant’s “Annual Base Pay.”
Appellants’ argument that “compensation” in Section 1.10(c) of
12
the Plan should include salary and “benefits,” as Appellants
define the word, is unsupported by the rest of the Plan. The
separation pay benefit is an amount of money calculated by
looking at an employee’s immediate past salary. The formula for
calculating separation pay does not include a variable for the
value of lost future benefits. It was logical for Appellees to
interpret “compensation” as salary since “benefits” are almost
exclusively calculated by considering a participant’s salary;
“benefits” as Appellants define them are not discussed in the
Plan.
Article IV, “Benefits Payments,” employs the same use of
“benefits” as Article III: a benefit is either separation pay
or a special separation allowance. This Article, however, adds
an important caveat: “The total amount of benefits paid to a
Participant shall not exceed the equivalent of twice the
employee’s Annual Base Pay during the year immediately preceding
the termination of his service with the Company.” (J.A. 46.)
This language caps the amount of special separation allowances
that can be paid to a participant in addition to their “Annual
Base Pay” under the Plan. Thus, Appellants’ argument that
“compensation” was meant to encapsulate both salary and
benefits, without any explicit explanation in the Plan, is
13
unconvincing. The Plan accounted for every cent paid to a
participant and set out definite limits.
Each of the four criteria for separation pay in Section
1.10 describes circumstances where Celanese would expect an
employee to require temporary replacement income because of an
involuntary loss of employment with Celanese:
1.10 “Eligible Termination of Employment” shall mean
the involuntary termination of the Employee’s
employment due to
(a) a permanent reduction in force or job
elimination;
(b) a plant or department closing;
(c) a sale of all or part of a business provided
the successor employer does not offer
continued reemployment at a comparable level
of compensation; or
(d) an inability to perform required duties
(unless this inability is due to a
Disability).
(J.A. 38-39.) If we adopt Appellants’ suggestion that Section
1.10(c) grants compensation for lost benefits, then employees
that qualify under the Plan through Sections 1.10(a), (b), or
(d) would receive unequal compensation where there is no
indication of any intent to do so. It would be unreasonable to
conclude from the language of the Plan that employees who
qualify for separation pay under Section 1.10(c) are entitled to
some special payment that those who qualify under other
subsections cannot receive. Therefore, the district court
rightly deferred to the Appellees’ interpretation of the Plan.
14
(2) Purposes and Goals of the Plan
Appellants argued that the purpose for “compensation”
covering salary and benefits was to “encourage employees facing
the sale or shutdown of a business not to prematurely terminate
their employment, so that a smooth transition could be made to
the new purchaser.” (Appellants’ Br. 29.) However, the
district court found that the Committee reasonably believed the
purpose of the Plan was to provide an “income replacement”
benefit (J.A. 1320) and that providing separation pay based on
lost future benefits would create a windfall contrary to the
Plan’s goals. The district court rationalized that because
Celanese could reduce benefits at any time for any reason,
Appellants never had an “earned and vested” right to receive
future health and pension benefits. (J.A. 1322.)
We agree with the district court that the purpose suggested
by Appellees was reasonable. This Court has continuously
emphasized that a fiduciary’s reasonable interpretation is owed
deference. See Colucci v. Agfa Corp. Severance Pay Plan, 431
F.3d 170, 179 (4th Cir. 2005), abrogated on other grounds by
Metro. Life Ins. Co. v. Glenn, ___ U.S. ___,
128 S. Ct. 2343
(2008); Hickey v. Digital Equip. Corp.,
43 F.3d 941, 945-46 (4th
Cir. 1995); Doe v. Group Hospitalization & Med. Servs.,
3 F.3d
15
80, 86 (4th Cir. 1993), abrogated on other grounds by Glenn; de
Nobel v. Vitro Corp.,
885 F.2d 1180, 1185-86 (4th Cir. 1989).
(3) Adequacy of the Materials Considered To Make the
Decision and the Degree to Which They Support It
Appellants take issue with the district court’s finding
that the April decision was an adequate basis for denying their
claim. However, the district court correctly found that it was
reasonable for the Committee to consider the past business
decisions made by the company that affected their ultimate
determination; this consideration did not violate ERISA. See
e.g., Elmore v. Cone Mills Corp., 23 F.3d 855, 863 (4th Cir.
1994) (holding that employer’s decisions in creating benefit
plan are business decisions that do not give rise to ERISA
procedures). Appellants have not demonstrated that this finding
was clearly erroneous.
(4) Whether the Fiduciary’s Interpretation Was Consistent
with Other Provisions in the Plan and with Earlier
Interpretations of the Plan.
Whether the administrator’s decision was consistent with
its earlier Plan interpretations is highly contested.
Appellants argue that the bonus payment to Vectran employees was
precedent to support their claim. Conversely, Appellees argue
16
that Appellants’ claims were the first claims under the Plan and
that the Vectran transaction was not applicable precedent.
The district court found that the Vectran employees did not
receive any benefit under the Plan. The Vectran employees were
given the difference between their old benefits and the benefits
offered by their new employer in the form of a “signing bonus”
because of their worth to the overall sale. The district court
specifically noted that:
[B]ecause [Vectran’s] principal product was still in
the stages of research and development, the
intellectual capital of the seven Vectran employees
was one of the business’s most significant assets.
Accordingly, it made good business sense for Celanese
to make concessions necessary to close the deal and
keep the employees happy enough to continue their
employment with the buyer. PBI, however, presented a
much different scenario: It was a mature business
with over $4 million in annual profits, and human
capital was not as much of a critical asset of the
business.
(J.A. 1326, internal citations omitted.) The district court
gave the fiduciary the deference owed its interpretation of the
Plan, and distinguished the divestiture negotiations from the
plan administration. 2 Appellants have not demonstrated that the
court’s factual findings were clearly erroneous.
2
See Sutton v. Weirton Steel Div. of Nat’l Steel Corp., 567
F. Supp. 1184, 1201 (N.D. W. Va. 1983), aff’d,
724 F.2d 406 (4th
Cir. 1983) (“When acting on behalf of the pension fund, there is
no doubt that a fiduciary having such ‘dual loyalty’ must act
solely to benefit participants and beneficiaries. However, it
is the Court’s opinion here that when a corporate employer
17
(5) Whether the Decision was Reasoned and Principled and
(6) Consistency with Procedural and Substantive
Requirements of ERISA
The facts of this case support the district court’s finding
that Booth factors (5) and (6) weigh in favor of Appellees.
When Smith received Appellants’ claims, he immediately notified
members of the Committee. Smith sent letters to Appellants
acknowledging receipt of the claims and inviting them to submit
additional information in support of their claims. Appellants
did in fact provide supplemental information, which Smith
forwarded to the Committee. When the Committee denied the
claims, it stated a clear basis, quoted from the Plan, and
attached a summary of the Plan. The denial letter also informed
the parties of their right to bring a civil action under
negotiates the terms of sale of a division, whose employees are
participants in a pension plan, the negotiations that affect the
terms and conditions of future pension benefits (at least those
that are not protected by ERISA’s vesting and non-forfeitability
provisions), do not implicate fiduciary duties as to the
pension fund. Such negotiations are distinct from actually
administering a plan and conducting transactions affecting the
monies and property of the plan’s fund. In other words, the
mere fact that a company has named itself as pension plan
administrator or trustee does not restrict it from pursuing
reasonable business behavior in negotiations concerning pension
benefits not otherwise affected by the requirements of ERISA.”)
18
§ 502(a) of ERISA. In response to the request of Appellants,
Appellees provided them with a copy of the Plan. 3
Appellants have not demonstrated that the September
decision denied them any procedures required under ERISA.
Therefore, the district court reached the correct conclusions
concerning Booth factors (5) and (6). See Brogan, 105 F.3d at
165-66 (determining plaintiff was given full and fair review of
his claim because he was notified of specific reasons for the
benefit denial and of the relevant plan provisions);
Ellis, 126
F.3d at 234-36 (finding that plan administrator complied with
ERISA’s requirements when it issued letter explaining the
reasons for the denial, quoted the relevant plan language, and
described appeal procedures).
(7) External Standard Relevant to the Exercise of
Discretion
Appellants argue that two external standards of statutory
construction governed the exercise of Appellees’ discretion.
They claim that the doctrine of “expressio unius est exclusio
3
Although the initial letter did not tell Appellants how to
appeal their claims, in response to Appellants’ next letter,
counsel for Smith stated: “In the event that you decide to
appeal the Committee’s denial of your claim for severance
benefits, you may do so by submitting comments in writing,
documents, records, and other relevant information to the
committee. Please direct your appeal to the committee to my
attention.” (J.A. 119.)
19
alterius” 4 leads to the conclusion that the drafters of the Plan
did not intend that “Annual Base Pay” be understood as
“compensation.” In support of their argument, Appellants state
that the drafters of the Plan were aware of and used the concept
of base salary in determining the amount of benefits; thus, the
failure to do so in defining “compensation” supports the
conclusion that “compensation” was intended to mean something
more. Therefore, under the doctrine of expressio unius, the
fact that “Annual Base Pay” was expressly defined and used for
another purpose in another section of the Plan means that the
drafters would have done the same if “Annual Base Pay” was meant
to equal “compensation” in the application of eligibility for
separation pay. (Appellants’ Br. 26.) This argument is just
another way of stating Appellants’ contention that “Annual Base
Pay” could not possibly equal “compensation” because “Annual
Base Pay” is not mentioned in Section 1.10(c). As stated above,
Appellants’ interpretation of “compensation” does not logically
follow from the Plan’s language, whereas “Annual Base Pay” does
complement the use of “compensation” in Section 1.10(c).
Next, Appellants state that this case is governed by the
doctrine of “contra proferentem,” which requires a court to
4
“A canon of construction holding that to express or
include one thing implies the exclusion of the other, or of the
alternative.” Black’s Law Dictionary 602 (7th ed. 1999).
20
construe ambiguous contract language against the drafter. They
claim that this doctrine has repeatedly been applied in
interpreting ERISA plans and has specifically been identified as
an “external standard.” (Appellants’ Br. 27 (citing Carolina
Care Plan Inc. v. McKenzie, 467 F.3d 383, 388 (4th Cir. 2006),
cert. dismissed, 128 S. Ct. 6 (2007) (“Faced with such
ambiguity, a reasonable administrator-insurer would look to an
important external standard for interpreting an ambiguous
contractual provision—that it be construed against the drafting
party.”)).)
Generally, this Court limits the application of the
doctrine of contra proferentem in ERISA cases to the
interpretation of complicated insurance contracts, particularly
health insurance contracts. See, e.g., Doe v. Group
Hospitalization & Med. Servs., 3 F.3d 80, 89 (4th Cir. 1993);
Bynum v. CIGNA Healthcare of N.C., Inc.,
287 F.3d 305, 313-14
(4th Cir. 2002); Carolina Care Plan
Inc., 467 F.3d at 389. In
our recent decision in Carden v. Aetna Life Ins. Co., ___ F.3d
___,
2009 WL 635419 (4th Cir. March 11, 2009), we explicitly
found that the Supreme Court’s recent decision in Glenn
forecloses the use of contra proferentem to limit the discretion
plan language gives to an administrator to interpret disputed or
doubtful terms. Carden, at **3. Neither of the external
21
standards Appellants raise lessens the deference owed to the
administrator’s interpretation of the Plan. Thus, the district
court did not err in its determination that this Booth factor
weighed in favor of Appellees.
(8) Fiduciary Motives and/or Conflicts of Interest
In determining the eighth factor, the court considers the
“fiduciary’s motives and any conflict of interest it may have,”
in order to determine the reasonableness of the fiduciary’s
discretionary decision. See Booth, 201 F.3d at 342-44.
Appellants state that because the “funding for the plan comes
directly from the coffers of a company, rather than through a
funded trust . . . [and the] decision to award or deny benefits
impacts defendants’ own financial interests . . . a conflict
exists and must be weighed under Booth.” (Appellants’ Br. 45.)
An administrator’s conflict of interest is only “one factor
among many” that a court considers when determining the
reasonableness of an administrator’s decision. Glenn, 128 S.
Ct. at 2351. The district court recognized that there was a
conflict of interest, but determined that management did not
exercise any undue influence on Cunningham or other members of
the Committee. The district court held that “the benefits
committee, although conflicted, was not influenced by improper
motives or authorities.” (J.A. 1328.) Appellants have not shown
22
that the district court’s factual determinations were clearly
erroneous.
The district court held a three-day hearing to determine
the effect of the conflict. Appellants seem to suggest that we
should set aside the district court’s factual and credibility
determinations. However, this Court must give due regard to the
opportunity of the trial judge to weigh the credibility of
witnesses. Minyard Enters. v. S.E. Chem. & Solvent Co., 184
F.3d 373, 380 (4th Cir. 1999). The district court thoroughly
and appropriately considered the conflict of interest under
Glenn. Therefore, this Court finds no reason to overturn the
district court’s assessment of the Booth factors.
IV.
This Court reviews the district court’s determination of
its standard for reviewing a plan administrator’s decision and
interpretations of a plan’s language de novo. Colucci, 431 F.3d
at 176. Judicial review of an administrator’s decision
concerning an ERISA plan decision is reviewed “under a de novo
standard unless the plan provides to the contrary.”
Glenn, 128
S. Ct. at 2348 (internal quotation marks and citations omitted);
Firestone, 489 U.S. at 115. When the plan language, as here,
grants the administrator discretionary authority, review is
23
conducted under an abuse of discretion standard. Glenn, 128 S.
Ct. at 2348; Smith v. Continental Cas. Co., 369 F.3d 412, 417
(4th Cir. 2004).
Although the district court concluded that the Committee
“was acting under an inherent, albeit minimal, conflict of
interest in that the Plan was unfunded and self-insured,” it
found that “as a matter of law no reduction in the deference
given to the discretionary decision of the benefits committee is
necessary to ‘neutralize any untoward influence resulting from a
[conflict of interest].’” (J.A. 1318 (quoting Booth, 201 F.3d
at 343 n.2).)
Appellants argue that because the district court
acknowledged that there was a conflict of interest it should
have adjusted the degree of deference to sliding scale
deference. Appellants’ argument has little merit in light of
the Supreme Court’s holding in Glenn.
In Glenn, the Court held that an administrator’s conflict
of interest did not change the standard of review from
deferential to de novo review, or an alternative hybrid review.
Glenn, 128 S. Ct. at 2350; Champion v. Black & Decker (U.S.)
Inc.,
550 F.3d 353, 358 (4th Cir. 2008); Carden, **3.
Specifically, the Court in Glenn stated:
We do not believe that Firestone’s statement implies a
change in the standard of review, say, from
24
deferential to de novo review. Trust law continues to
apply a deferential standard of review to the
discretionary decision making of a conflicted trustee,
while at the same time requiring the reviewing judge
to take account of the conflict when determining
whether the trustee, substantively or procedurally,
has abused his discretion.
Glenn, 128 S. Ct. at 2350. The Court stated further that a
conflict of interest should not lead to “special burden-of-proof
rules, or other special procedural or evidentiary rules, focused
narrowly upon the evaluator/payor conflict.”
Id. at 2351.
Instead, as stated above, a conflict is merely one of the
“several different, often case-specific, factors” that a court
weighs when evaluating whether there is an abuse of discretion.
Id. While Appellants’ suggestion that the district court should
have used a different standard of review in light of the
conflict might have been availing pre-Glenn, it has no merit
now.
Second, Appellants argue that where a decision is not made
according to the Plan, the decision should not be reviewed for
an abuse of discretion. See Sharkey v. Ultramar Energy Ltd.,
Lasmo PLC, 70 F.3d 226, 229 (2d Cir. 1995); Sanford v. Harvard
Indus., Inc.,
262 F.3d 590, 597 (6th Cir. 2001). Perhaps this
argument would have merit if the April decision were being
reviewed. The district court rightly found that “Plaintiffs
[sic] claim for separation pay was the first formal claim ever
25
made under the Plan, and consequently the first time that the
Committee was obligated to act qua fiduciary in making an
authoritative eligibility determination under the Plan.
Therefore, Celanese’s informal business practices are simply not
relevant to this matter.” (J.A. 1324.) The district court
correctly found that the denial of separation pay in September
was the decision under ERISA review and that ERISA procedures
did not attach to informal business decisions predating the
claims. Appellants cannot demonstrate that the September
decision was contrary to the Plan.
V.
For the reasons stated above, the judgment of the district
court is affirmed.
AFFIRMED
26
KING, Circuit Judge, dissenting:
Because of the dubious circumstances of Celanese’s decision
to deny separation pay to Appellants, I would prefer to dispose
of this case by directing the district court to enter judgment
in Appellants’ favor on their ERISA claim, brought under 29
U.S.C. § 1132(a)(1)(B) to recover benefits due. In any event,
the case should be remanded in the wake of Metropolitan Life
Insurance Co. v. Glenn, 128 S. Ct. 2343 (2008), for the district
court to properly weigh Celanese’s conflict of interest in the
applicable abuse-of-discretion analysis. Thus, with all respect
to my fine colleagues on the panel majority, I dissent.
I.
Two decades ago, the Supreme Court held in Firestone Tire &
Rubber Co. v. Bruch that, “[c]onsistent with established
principles of trust law, . . . a denial of benefits challenged
under § 1132(a)(1)(B) is to be reviewed under a de novo standard
unless the benefit plan gives the administrator or fiduciary
discretionary authority to determine eligibility for benefits or
to construe the terms of the plan.” 489 U.S. 101, 115 (1989).
More recently, while this appeal was pending, the Court
clarified in Glenn that the abuse-of-discretion standard applies
even if the plan administrator operated under a conflict of
interest, including the common situation where “the entity that
27
administers the plan, such as an employer or an insurance
company, both determines whether an employee is eligible for
benefits and pays benefits out of its own pocket.” 128 S. Ct.
at 2346. The court explained that, although the decision of a
conflicted administrator is entitled to deference, the
administrator’s “conflict should ‘be weighed as a factor in
determining whether there is an abuse of discretion.’”
Id. at
2350 (quoting
Firestone, 489 U.S. at 115) (other internal
quotation marks omitted).
Writing for the Glenn majority, Justice Breyer observed
that “[t]rust law continues to apply a deferential standard of
review to the discretionary decisionmaking of a conflicted
trustee, while at the same time requiring the reviewing judge to
take account of the conflict when determining whether the
trustee, substantively or procedurally, has abused his
discretion.” Glenn, 128 S. Ct. at 2350. He further explained
that
when judges review the lawfulness of benefit denials,
they will often take account of several different
considerations of which a conflict of interest is one.
This kind of review is no stranger to the judicial
system. Not only trust law, but also administrative
law, can ask judges to determine lawfulness by taking
account of several different, often case-specific,
factors, reaching a result by weighing all together.
In such instances, any one factor will act as a
tiebreaker when the other factors are closely
balanced, the degree of closeness necessary depending
upon the tiebreaking factor’s inherent or case-
28
specific importance. The conflict of interest . . .
should prove more important (perhaps of great
importance) where circumstances suggest a higher
likelihood that it affected the benefits decision,
including, but not limited to, cases where an
insurance company administrator has a history of
biased claims administration. It should prove less
important (perhaps to the vanishing point) where the
administrator has taken active steps to reduce
potential bias and to promote accuracy, for example,
by walling off claims administrators from those
interested in firm finances, or by imposing management
checks that penalize inaccurate decisionmaking
irrespective of whom the inaccuracy benefits.
Id. at 2351 (citations omitted); see also
id. at 2352 (Roberts,
C.J., concurring in part and concurring in the judgment) (“The
majority would accord weight, of varying and indeterminate
amount, to the existence of . . . a conflict in every case where
it is present.”).
In the wake of Glenn, we have recognized that “any conflict
of interest is considered as one factor, among many, in
determining the reasonableness of the discretionary
determination.” Champion v. Black & Decker (U.S.) Inc., 550
F.3d 353, 359 (4th Cir. 2008) (reiterating the “familiar
standard” that “a discretionary determination will be upheld if
reasonable”). And, we have acknowledged the continued
applicability of our pre-Glenn reasonableness test, comprised of
eight nonexclusive factors that a court may consider (including
the existence of a conflict):
“(1) the language of the plan; (2) the purposes and
goals of the plan; (3) the adequacy of the materials
29
considered to make the decision and the degree to
which they support it; (4) whether the fiduciary’s
interpretation was consistent with other provisions in
the plan and with earlier interpretations of the plan;
(5) whether the decisionmaking process was reasoned
and principled; (6) whether the decision was
consistent with the procedural and substantive
requirements of ERISA; (7) any external standard
relevant to the exercise of discretion; and (8) the
fiduciary’s motives and any conflict of interest it
may have.”
Champion, 550 F.3d at 359 (quoting Booth v. Wal-Mart Stores,
Inc. Assocs. Health & Welfare Plan,
201 F.3d 335, 342-43 (4th
Cir. 2000)).∗
II.
Here, the district court properly recognized that Celanese
was accorded discretionary authority to make benefit eligibility
determinations and, thus, that the rejection of Appellants’
claim for separation pay was to be reviewed for abuse of
discretion. And, the court correctly acknowledged the
applicability of our eight-factor reasonableness test in
conducting such review. As Glenn now makes clear, however, the
∗ Prior to Glenn, as we observed in Champion, we also
accounted for conflicts of interest by applying “a ‘modified’
abuse-of-discretion standard that reduced deference to the
administrator to the degree necessary to neutralize any untoward
influence resulting from the conflict of interest.” Champion,
550 F.3d at 359. Of course, Glenn abrogated our modified abuse-
of-discretion standard. See
Glenn, 128 S. Ct. at 2351.
Accordingly, I agree with the panel majority’s rejection of
Appellants’ pre-Glenn contention that the district court should
have applied the modified abuse-of-discretion standard.
30
court’s analysis of the conflict of interest factor was
fundamentally flawed.
A.
Significantly, the district court conducted a three-day
bench trial in late July 2007 for the sole purpose of taking
evidence on the conflict issue. The court specifically focused
on the question of “whether or not there was undue influence on
the Benefits Committee which would have impacted the legitimacy
of the committee’s interpretation of the [Separation Pay Plan].”
J.A. 1001. The evidence adduced during the bench trial, as well
as that submitted by the parties in support of their cross-
motions for summary judgment, reflected the following.
● The Plan required participants to first submit
written separation pay claims to the Plan’s
Administrator, and to then appeal any adverse
decision to the three-member Benefits Committee.
See 29 U.S.C. § 1133(2) (mandating that ERISA
plans “afford a reasonable opportunity to any
participant whose claim for benefits has been
denied for a full and fair review by the
appropriate named fiduciary of the decision
denying the claim”).
● Celanese officials repeatedly — but only
privately — acknowledged in early 2005 that both
the Vectran and PBI employees would be entitled
to separation pay under the Plan if they were to
receive inferior benefits from the purchasers of
their respective business units (Kuraray and
InterTech). There was particular concern about
the larger separation pay obligation to the PBI
employees (approximately $876,000) than to the
Vectran employees (about $125,000), and the
corresponding effect on the value of the
InterTech deal.
31
● On April 1, 2005, Celanese executed a “side
letter” with Kuraray — under which Celanese would
provide separation pay to the Vectran employees,
but the payment would appear to be part of a
“signing bonus” funded by Kuraray — apparently to
conceal from the PBI employees the payment of
Plan benefits to their Vectran counterparts.
● In mid-April 2005, Cheryl Cunningham, Celanese’s
benefits manager, concluded that the InterTech
benefits were indeed inferior and, thus,
recommended that PBI employees receive separation
pay — just as the Vectran employees (secretly)
had.
● At the direction of Jay Townsend, the Celanese
official negotiating the PBI-InterTech sale, a
telephone conference call was conducted on April
22, 2005, with Townsend, in-house counsel Mathias
Kuhr, benefits manager Cunningham, and human
resources official B.J. Smith participating.
Only Cunningham (as just one member of the three-
member Benefits Committee) and Smith (the Plan’s
Administrator) possessed any authority to decide
the separation pay issue.
● During the conference call, Smith convinced
Cunningham that the PBI employees were not
entitled to separation pay under the Plan — not
because of the plain terms of the Plan (which
Smith had never read), but based on past
practices in non-Plan-related divestitures. Soon
after the call, Cunningham and the second member
of the Benefits Committee informally agreed that
the PBI employees were ineligible for Plan
benefits; the third Committee member was never
consulted about the matter. The PBI-InterTech
negotiations then proceeded with the
understanding that any claim for Plan benefits
made by the PBI employees would definitely be
denied.
● Unaware that the decision to deny them Plan
benefits had already been made, the Appellant PBI
employees submitted written claims for separation
pay in June 2005. Celanese thereafter conducted
32
sham administrative proceedings — orchestrated by
its lawyers — in order to give the appearance of
a full and fair claims review. As just a few
examples of Celanese’s egregious and dishonest
conduct:
- Smith advised Appellants in a July 7,
2005 letter that they were being
permitted, “[i]n the interests of being
fair,” ten days to submit additional
evidence in support of their claims,
J.A. 79, but the letter had actually
been drafted by a Celanese lawyer as a
means to “requir[e] the [PBI employees]
to submit all of their evidence up
front, most likely limiting any
evidence in [any subsequent] lawsuit to
the information submitted in the claims
process,” id. at 239;
- Once Appellants submitted their
additional evidence, counsel for
Celanese explored various post hoc
justifications (other than the plain
language of the Plan) for the
predetermined April 22, 2005 decision
to deny Appellants’ claims for Plan
benefits; and
- Correspondence from a Celanese attorney
to Appellants, sent in the fall of 2005
to announce and defend the benefits
denial decision, contained
misinformation concerning, inter alia,
the decision-making process utilized by
Celanese, the Appellants’ procedural
rights, and the nature of the so-called
“signing bonus” paid to the Vectran
employees.
● Significantly, the April 22, 2005 benefits denial
decision not only contravened Plan procedures
(requiring the Plan’s Administrator to make the
initial claim determination and the Benefits
Committee to resolve any appeal thereof), but
also deprived Appellants of protections afforded
by ERISA (mandating a full and fair review).
33
At the conclusion of the bench trial, the district court
acknowledged that “without a doubt . . . it was a sloppy and
messy process by which the Benefits Committee reached” the
benefits denial decision. J.A. 1005. Nevertheless, the court
accepted as truthful the testimony of Cunningham —
uncontradicted by direct evidence (though called into question
by circumstantial evidence) — that the Committee had not been
improperly influenced by Townsend or anyone else. As such, the
court concluded that “the best we can say for plaintiffs is that
this bench trial ends in a draw.” Id. at 1005-06. Because
“plaintiffs [had] the burden of proof [and] the party with the
burden of proof loses when it’s a draw,” the court further
concluded that it was compelled to “find[] as a matter of fact
there was no undue influence on the decision of the Benefits
Committee that PBI employees were ineligible for separation pay
under the plan.”
Id. at 1006.
Thereafter, in disposing of the parties’ cross-motions for
summary judgment by written Memorandum and Order of September
27, 2007, the district court engaged in our eight-factor
reasonableness test. The court deemed the conflict of interest
factor to be “inapplicable,” however, based on its determination
at the conclusion of the bench trial “that the benefits
committee, although conflicted, was not influenced by improper
34
motives or authorities.” J.A. 1328. The court did acknowledge
that “[t]he lack of formalities by which the benefits
committee’s decisions were reached, and the indiscrete mixing of
fiduciary and non-fiduciary roles, has not made this an easy
case to decide.” Id. “However,” the court concluded, “Celanese
has produced wholly benign motives and reasons for its decision,
and Plaintiffs have failed to carry their burden of persuasion
by showing that these explanations are implausible.”
Id.
Accordingly, the court ruled that “it was not an abuse of
discretion to deny Plaintiffs’ claims for separation pay under
the Plan.”
Id. at 1329.
B.
Simply put, the district court’s handling of the conflict
of interest factor — disregarding Celanese’s acknowledged
conflict on the ground that Appellants failed to demonstrate by
a preponderance of the evidence that there was undue influence
on the Benefits Committee — is wholly at odds with controlling
Supreme Court precedent, culminating in Glenn. As Justice
Breyer observed therein, trust law “requir[es] the reviewing
judge to take account of the conflict when determining whether
the trustee, substantively or procedurally, has abused his
discretion.” Glenn, 128 S. Ct. at 2350 (emphasis added). The
reviewing judge is not permitted to disregard a conflict for
lack of proof by a preponderance of the evidence that such
35
conflict impacted the benefits decision; rather, the judge must
simply consider the conflict as one of the factors to be weighed
in assessing the decision’s overall reasonableness. See Carden
v. Aetna Life Ins. Co., 559 F.3d 256, 260 (4th Cir. 2009)
(recognizing that, under Glenn, “a conflict of interest becomes
just one of the ‘several different, often case-specific,
factors’ to be weighed together in determining whether the
administrator abused its discretion” (quoting
Glenn, 128 S. Ct.
at 2351). Indeed, the purpose of having a judge — rather than a
jury — assess the reasonableness of a benefits decision is that
the judge is better-equipped to engage in a nuanced weighing of
relevant factors. See Berry v. Ciba-Geigy Corp.,
761 F.2d 1003,
1007 (4th Cir. 1985) (observing that, under trust law,
“proceedings to determine rights under employee benefit plans
are equitable in character and thus a matter for a judge, not a
jury”).
Finally, that the district court wrote off Celanese’s
conflict of interest as “inapplicable” to the reasonableness
inquiry is particularly problematic in view of the circumstances
of the benefits denial decision. For example, Celanese failed
to “take[] active steps to reduce potential bias and to promote
accuracy . . . by walling off claims administrators from those
interested in firm finances,” such as would render the conflict
“less important (perhaps to the vanishing point).” Glenn, 128
36
S. Ct. at 2351. Rather, Plan Administrator Smith and Benefits
Committee member Cunningham made their benefits denial decision
— a sudden reversal of a Plan interpretation widely shared by
Celanese officials, including Cunningham — during a conference
call arranged and participated in by PBI-InterTech deal
negotiator Townsend. Because these and other “circumstances
suggest a higher likelihood that [Celanese’s conflict] affected
the benefits decision,”
id., the conflict should have been given
significant weight in the abuse-of-discretion analysis — weight
that, at a minimum, probably would have tipped the scale in
Appellants’ favor. It is thus imperative that we at least
remand this case for proper consideration of the conflict
factor.
Accordingly, I dissent.
37
