Opinion
CIVIL ACTION NO. H-00-1403
June 15, 2001
MEMORANDUM AND ORDER
This case concerns employee benefits governed by the Employee Retirement Income Security Act of 1974 ("ERISA"). Plaintiff Rene Mouton seeks severance benefits under the Mobil Corporation Employee Severance Plan (the "Plan"). Both parties have filed motions for summary judgment which are ripe for adjudication. Having considered the parties' briefs, all matters of record and the applicable authorities, the Court concludes that Defendant's Motion for Summary Judgment should be granted, and Plaintiff's Motion for Summary Judgment should be denied.
Mouton initially brought suit against Mobil Corporation, the administrator of the Plan. See Plaintiff's Original Complaint [Doc. #1]. Following the creation of Exxon Mobil Corporation in 1999, the appropriate defendant in this suit became the Plan itself. See Order Granting Plaintiff's Motion for Substitution of Party Defendant [Doc. #21].
See Defendant's Motion for Summary Judgment [Doc. #27] ("Defendant's Motion"); Plaintiff's Motion for Summary Judgment [Doc. #31] ("Plaintiff's Motion"); Plaintiff's Response to Defendant's Motion for Summary Judgment [Doc. #35] ("Plaintiff's Response"); Defendant's Reply to Plaintiff's Response [Doc. #39] ("Defendant's Reply"); Defendant's Response to Plaintiff's Motion for Summary Judgment [Doc. #37] ("Defendant's Response"). Plaintiff also objects to certain affidavits and documents appended thereto. See Plaintiff's Objections to and Motion to Strike Affidavit of Virginia Crawford and Carol Connor [Doc. #36]; Defendant's Opposition to Plaintiff's Motion to Strike [Doc. #40]. The Court rules on these objections in Section III. A below.
I. BACKGROUND FACTS
Rene Mouton was an employee of Mobil Corporation. From 1992 until his retirement in February 2000, Mouton worked for Mobil Natural Gas, Inc. ("MINGI"), a subsidiary of Mobil Corporation. In 1996, MNGI formed a joint venture (the "Joint Venture," or "JV") with PanEnergy Trading and Marketing Services, Inc. ("PanEnergy"). Mouton was employed as Director of Energy Marketing for the JV; however, he elected to remain a Mobil employee. Accordingly, Mouton's salary was administered from the Mobil payroll, and he retained his Mobil benefits. PanEnergy determined Mouton's bonus. See Secondment Agreement, ¶ 9.1.3. However, Mobil retained authority to determine what portion of Mouton's salary was "benefits bearing" — that is, the portions of Mouton's salary that would be considered pay for purposes of a particular benefits plan. Deposition of Chris O'Flinn (Ex. B to Defendant's Motion) ("O'Flinn Deposition"), at 58-61, 96-97.
MNGI owned 40% of the Joint Venture and PanEnergy owned 60%. PanEnergy's share of the JV was later bought by Duke Energy Trading and Marketing, Inc. ("Duke").
See Employment Offer to Rene Mouton, March 22, 1996 (Ex. A-2 to Defendant's Motion); Secondment Agreement between MNGI and PanEnergy (Ex. C-4 to Plaintiff's Motion), ¶ 3.1 ("Each Seconded Employee shall be paid by and receive benefits from MNGI") and ¶ 9.1 ("MINGI shall pay the Seconded Employees all compensation and provide all related benefits").
Beginning in 1996, Mobil instituted a new pay scale. The new system was widely publicized within the corporation because it represented a major change in the way Mobil employees were compensated. O'Flinn Dep., at 120. Each employee's pay was broken into two components: "base pay" and "variable pay." Mobil first determined the standard compensation within the industry for each position. Second, Mobil assigned each employee a target performance goal. For employees in salary grades 19 and below, like Mouton in grade 18, base salary consisted of 90% of the competitive pay within the industry. The remaining 10% of the industry pay rate was considered "at risk" because it was tied to Mobil Oil Corporation Compensation Policy and Practice (Ex. J-1 to Defendant's Reply). Meeting the performance goal would result in the employee earning all his 10% of the variable pay target; exceeding the goal could result in a higher variable pay. O'Flinn Dep., at 121. Although variable pay could reach as much as 30% of the total competitive industry compensation figure, Mobil considered employees in salary grades 13-19 to have a target variable pay of 10%. Id. Thus, target variable pay and actual variable pay awarded were two different figures. Id. at 74, 75.
As an employee "seconded" ( i.e., hired out) to the JV, Mouton's variable pay was often higher than that of regular Mobil employees who had not stepped out of the normal career path. O'Flinn Dep., at 126-27. In 1997, Mouton's variable pay totaled 31% of his base salary. In 1998, Mouton's variable pay totaled 44% of his base salary. See Letter from Rene Mouton to C.W. O'Flinn, February 8, 2000 (Ex. B-6 to Plaintiff's Motion) ("February 8, 2000 Letter"). In 1999, the TV gave Mouton a "short term incentive" target of 150% of his 1999 base salary. See Compensation Adjustment, attached to February 8, 2000 Letter. His actual bonus for 1999 was approximately 125% of base salary. See Affidavit of Rene Mouton (Ex. D to Plaintiff's Motion) ("Mouton Affidavit"), ¶ 3.
Mouton states that he does not know the percentage at which his target variable pay was set for those years. Deposition of Rene Mouton (Ex. C to Plaintiff's Motion) ("Mouton Deposition"), at 25-26.
According to the "Compensation Adjustment" worksheet, Plaintiff's 1999 base salary was $103,796. The bonus offered, if Plaintiff had reached the 150% "target" incentive, was $155,694. The term "target variable pay" was not used in this communication.
On November 30, 1999, Mobil Corporation and Exxon Corporation merged. Prior to the merger, Mobil implemented the ERISA-governed Plan. The Plan was designed to encourage employees to continue employment through the merger process and provide severance benefits to employees who lost their jobs in the merger. According to the Summary Plan Description ("SPD"),
You are eligible to participate in the [Plan's] retention/severance package if . . . you are offered a job by [Mobil] within two years after the change in control, but you decline it because it involves . . . a cut in total annual pay (your annualized base pay on the date of change in control plus your target variable pay).
The text of the Plan and the SPD are identical as to the provisions material to this case. An employee will be considered "severed," and therefore eligible for benefits, if the employee terminates his employment for "good reason." For employees in salary grades 19 and below, "good reason" is defined. as the. "reduction [in the employee's] total annual pay (including the variable pay target)." Mobil Corporation Employee Severance Plan (Ex. B-4 to Defendant's Motion), ¶ 1.12.
SPD (Ex. B-1 to Plaintiff's Motion), at 4. These criteria applied to employees in salary grade 19 or lower. Neither the Plan text itself nor the SPD defined the term "target variable pay." However, following the merger, Mobil established an Intranet site containing a question and answer feature so that employees could inquire about the merger. All Mobil employees were informed by memo of the existence of the Intranet site. See Memo to All Mobil Employees Worldwide (Ex. B-11 to Defendant's Motion). The Mobil Intranet site discussed the Plan's eligibility requirements and defined the term "target variable pay" as "10% of reference salary" for employees in salary grades 11-19. See Excerpts from Mobil Intranet Site (Ex. B-12 to Defendant's Motion). The term "reference salary" was not defined.
The Plan lists other eligibility criteria as well. However, the parties' dispute concerns only the definition of "target variable pay," and therefore whether Mouton was offered a job that involved a cut in total annual pay.
Following the merger in November 1999, Mouton was offered a job at Exxon Mobil. Jan Byth, an officer at the JV, relayed the job offer to Mouton. She told him the new job would carry a salary equivalent to his current base pay plus ten percent of his reference ( i.e., competitive industry) salary. Mouton Dep., at 54. Mouton told Byth that he believed the new job's salary was less than his current salary, and that he was eligible for benefits under the Plan. Id. After investigating the issue, Byth told Mouton that Mobil did not view Mouton's denial of the job as a trigger for benefits. Id. at 55. On December 20, 1999, Mouton sent a letter to the Plan's Global Benefits Manager requesting benefits. See Letter from Rene Mouton to Manager, Global Benefits, Mobil Corporation, December 20, 1999 (Ex. B-3 to Plaintiff's Motion).
On February 2, 2000, Chris O'Flinn, the acting Plan Administrator, replied to Mouton's letter and denied benefits because "the compensation package offered to [Mouton] was [equal to his] current annual [base] salary plus [his] target variable pay." Letter from C.W. O'Flinn to Rene Mouton, February 2, 2000 (Ex. B-S to Plaintiff's Motion). Accordingly, in Defendant's view, the new job offer did not require Mouton to take a cut in "total annual pay" as specified by the Plan and SPD.
On February 8, 2000, Mouton sent a letter to O'Flinn, appealing the decision. See February 8, 2000 Letter. On April 17, 2000, Thomas Harrison, by then the acting Plan Administrator, denied Mouton's request, again stating that Mouton had not suffered a cut in total annual pay. See Letter from Thomas Harrison to Rene Mouton, April 17, 2000 (Ex. A-22 to Defendant's Motion).
0n-April 13, 2002, Mouton sent a letter to the Plan Administrator requesting various documents, including the SPD, ERISA annual report, and any terminal report, bargaining agreement, trust agreement or contract under which the Plan was established or operated. Letter from Rene Mouton to Plan Administrator (Ex. B-9 to Plaintiff's Motion). Plaintiff never received a response to this request.
Plaintiff filed suit in this Court on April 26, 2000. Plaintiff contends he is entitled to benefits under 29 U.S.C. § 1132(a)(1)(B). Plaintiff also makes a claim for discretionary statutory penalties under 29 U.S.C. § 1132(c)(1)(B) for the Plan Administrator's failure to comply with 29 U.S.C. § 1042(b)(4) and timely furnish the ERISA-related documents Plaintiff requested.
II. SUMMARY JUDGMENT STANDARD
In deciding a motion for summary judgment, the Court must determine whether "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc). Material facts are those facts "that might affect the outcome of the suit under the governing law." Smith v. Brenoettsy, 158 F.3d 908, 911 (5th Cir. 1998) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). The facts are to be reviewed with all "justifiable inferences" drawn in favor of the party opposing the motion. See Morris v. Covan World Wide Moving, Inc., 144 F.3d 377, 380 (5th Cir. 1998) (citing Anderson, 477 U.S. at 255). Dispute about a material fact is genuine only if evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Stafford v. True Temper Sports, 123 F.3d291, 294 (5th Cir. 1997); Hanks v. Transcontimental Gas Pipe Line Corp., 953 F.2d 996, 997 (5th Cir. 1992).
III. DISCUSSION
The parties' dispute centers on the definition of "target variable pay." Defendant contends that for employees in salary grade 19 and below, "target variable pay" is 10% of reference salary. Plaintiff contends that "target variable pay" should be defined either as actual pay, or as the "short term incentive" set for him by the W. Plaintiff contends that the Plan Administrator's decision to deny benefits is not entitled to the lenient "abuse of discretion" standard of review. In the alternative, Plaintiff contends that O'Flinn's decision to deny Plaintiff benefits was legally incorrect and an abuse of discretion. In response, Defendant contends that O'Flinn did not abuse his discretion in denying benefits to Plaintiff.
In addition, Plaintiff contends that he is entitled to discretionary statutory penalties because the Plan Administrator failed to timely provide him with requested ERISA-related documents, as provided by 29 U.S.C. § 1024(b)(4). Defendant argues that Plaintiff is not entitled to the statutory penalty because he was not prejudiced by the failure to timely receive the documents from the Plan Administrator.
A. Evidentiary Objections
Plaintiff moves to strike the Affidavit of Virginia Crawford (Ex. C to Defendant's Motion) ("Crawford Affidavit") and the Affidavit of Carol Connor (Ex. D to Defendant's of Virginia Crawford and Carol Connor [Doc. #36]. Defendant opposes the motion. See Defendant's Opposition to Plaintiff's Motion to Strike [Doc. #40].
Plaintiff contends that the Crawford Affidavit must be stricken to the extent that Administrator. See Estate of Bratton v. Nat'l Union Fire Ins. Co., 215 F.3d 516, 521 (5th Crawford testifies to matters which were not part of the administrative record before the Plan Cir. 2000) (district court may only consider information in the administrator's record at the time of the challenged benefits decision). Crawford, the Mobil human resources contact for the IV, testifies from her personal knowledge and experience, and is permitted to give her explanation of the variable pay system Mobil instituted in 1996 as well as Mobil's practices in determining pay and benefits for seconded employees.
Plaintiff raises the same objection to several Mobil Corporation documents describing Mobil's variable pay system which are appended to the Crawford Affidavit. See Exs. C-1, C-2, C-3 and C-4 to Defendant's Motion. O'Flinn states that he was "personally acquainted with all the information about the variable pay program contained in [the Crawford Affidavit] documents." Declaration of Christopher O'Flinn (Ex. J to Defendant's Reply), ¶ 2. These documents were background matters of which Mobil employees (including O'Flinn and Plaintiff) were given notice during Plaintiff's employment with Mobil and the JV from 1996. Therefore, they are deemed part of the administrative record concerning Plaintiff's benefits request. In any event, Defendant has attached those same four documents to the O'Flinn Declaration ( see Exs. J-1, J-2, J-3 and J-4 to Defendant's Reply), and Plaintiff has not made any objection to that submission. Therefore, Plaintiff's objections to the documents attached to the Crawford Affidavit are overruled as unfounded if not moot.
O'Flinn acknowledges that he did not specifically review the documents attached to the Crawford Affidavit in answering Mouton's appeal. However, he did state that took into consideration "what [Mouton's] compensation arrangements were." O'Flinn Dep., at 51.
Plaintiff also objects to Crawford's comments about the Mobil Corporation policies and the contents of documents appended to her affidavit on the ground that she lacked personal knowledge or that the testimony was improper lay or expert testimony. Plaintiffs objections go to the weight of Crawford's testimony and not its admissibility. There is ample foundation for her to provide the proffered testimony and documents based on her personal knowledge and experience within Mobil. She also is capable of authenticating the Mobil documents describing the variable pay system. See Exs. C4, C-2, C-3 and C-4 to Defendant's Motion. Plaintiffs objections in these regards are overruled. As to Plaintiff's other objections, the Court rules as follows: Plaintiff's objections to ¶¶ 6, 10, 12, 16 of the Crawford Affidavit are moot since these portions of her testimony concern matters irrelevant to the issues to be decided in this case. Plaintiffs "best evidence" objections to ¶¶ 7, 9a-9c are overruled; these objections go to the weight of the evidence, not its admissibility.
For instance, Plaintiff contends that Crawford lacks personal knowledge to testify to Mobil's ability to determine benefits eligibility for employees seconded to the TV (Crawford Aff., ¶¶ 7, 17); the general features of Mobil's compensation program ( Id., ¶¶ 8, 20); the number of Mobil employees whose actual variable pay exceeded their target variable pay ( Id., ¶ 11); and the establishment of the Mobil Intranet site ( Id., ¶ 15). These objections are without merit. Crawford was a human resources manager at Mobil as well as the human resources contact for the JV. Familiarity with the matters discussed was part of her job duties.
Plaintiff also objects to portions of the Conner Affidavit. Plaintiffs objections to ¶¶ 2 and 3 of the affidavit, which discuss delegation of authority to Chris O'Flinn to administer the Plan are moot in light of the Affidavit of Janet Madigan (Ex. H to Defendant's Reply) and O'Flinn's deposition testimony. See O'Flinn Dep., at 27. Plaintiff also objects to Conner's testimony that "all" Mobil employees were notified in December 1999 of the Plan Administrator's change of address. Conner Aft., ¶ 3. The testimony is not material in light of the Court's rulings and the objection is moot. Finally, Plaintiff objects to Conner's testimony regarding the benefits appeals of other employees who believed they were offered jobs involving a cut in total annual pay. Conner Aff., ¶ 6. Conner is competent to testify from business records of the company, since Conner is the custodian for documents relating to Plan appeals. Plaintiffs objection that Conner lacks the knowledge or competency to testify to the contents of these documents is overruled.
Moreover, Defendant has submitted an "SPD errata sheet" (Ex. D-1 to Defendant's Motion) noting the Administrator's change in address. Plaintiff does not object to the admissibility of this document.
B. Applicable Standard of Review
The Plan vests the Plan Administrator with authority and discretion to interpret the terms of the Plan and make final determinations on all issues concerning Plan administration. SPD, at 15. When an employee benefit plan vests the administrator with "broad discretion" to interpret and apply the plan, the "`administrator's interpretation of the plan and action based thereon' is reversed only for `an abuse of discretion.'" Aboul-Fetouh v. Employee Benefits Committee, 245 F.3d 465, 472 (5th Cir. 2001) (citing Spacek v. Maritime Ass'n, 134 F.3d 283, 292 (5th Cir. 1998)).
Plaintiff contends that the "abuse of discretion" standard should not apply because the Admistrator did not himself make the decision to deny benefits. Plaintiff contends that Chris O'Flinn merely "rubber stamped" the recommendations of his assistant, Estelle Strassler. See Sharkey v. Ultramar Energy, Ltd., 70 F.3d 226, 229 (2nd Cir. 1995) (district court reviews de novo plan interpretations or decisions made by persons other than the plan administrator or authorized delegate).
O'Flinn was the manager of Global Benefits for Mobil Corporation. At the time of Mouton's first appeal for benefits, O'Flinn was the acting Plan Administrator. O'Flinn states that his assistant Estelle Strassler would assemble a file on an individual claiming benefits and make a recommendation on whether to grant or deny benefits. O'Flinn Dep., at 44-45. However, O'Flinn testifies that he reviewed Mouton's file in accordance with the terms of the Plan, and that he looked at all the documents relevant to Mouton's appeal. Id. at 47, 51. O'Flinn's uncontroverted deposition testimony conclusively establishes that he personally made the decisions concerning Mouton's appeal and that he did not merely "rubber stamp" Strassler's recommendations. See also Declaration of Estelle Strassler (Ex. E to Defendant's Response), ¶ 2 ("I did not make the decision whether to grant or deny the [Mouton] appeal. There have been many cases where Mr. O'Flinn rejected my recommendation and decided the appeal differently"). Plaintiff's argument for application of a de novo standard of review therefore fails.
O'Flinn had been delegated by Mobil's Vice President of Employee Relations the responsibility to handle Plan administration until December 1999. O'Flinn Dep., at 21. Thereafter, Janet Madigan became the plan administrator for all ExxonMobil employee benefit plans. However, she delegated authority to O'Flinn to continue administering the Plan until February 4, 2000. See Declaration of Janet Madigan (Ex. H to Defendant's Reply), ¶¶ 2-3. Accordingly, Plaintiff's contention that O'Flinn did not have authority to decide Mouton's appeal for benefits is meritless. See Plaintiff's Response, at 2-4.
Plaintiff also notes that the Court should use a de novo standard when reviewing a plan administrator's construction of documents other than the plan. It is well established that a district court owes no deference to a plan administrator's conclusions of law. Dial v. NFL Player Supplemental Disability Plan, 174 F.3d 606, 611 (5th Cir. 1999). Plaintiff argues that O'Flinn's interpretation of documents external to the Plan, such as the Intranet QAs and any other documents concerning Mobil's variable pay program, from which O'Flinn derived a definition of "target variable pay," should be reviewed under a de novo standard. The Court disagrees. O'Flinn was not "interpreting" Mobil pay system documents or the Intranet QA's in any meaningful sense. Indeed, O'Flinn had pre-existing knowledge of the definition of "target variable pay" for employees in salary grades 19 and below, and he merely applied the company's definition that apparently had been in widespread use for years. See O'Flinn Dep., at 120-123. Defendant cites these documents to show that O'Flinn's interpretation of the Plan term "target variable pay" was consistent with company-wide policy and thus was reasonable.
C. Analysis Under the Abuse of Discretion Standard
General Principles.— The Plan grants the Administrator broad discretion to interpret the Plan. See SPD, at 15. Therefore, the Court reviews the Plan Administrator's decision to deny benefits under an abuse of discretion standard. The abuse of discretion standard involves a two-step process. "First, the court determines whether the administrator's interpretation of the plan is legally correct." Abouh-Fetouh, 245 F.3d at 472 (citing Threadgill v. Prudential Securities Group, Inc., 145 F.3d 286, 292 (5th Cir. 1998)). "If the court determines that the plan administrator's interpretation of the plan is legally correct, then the administrator's interpretation and the denial of benefits should be upheld because there cannot have been any abuse of discretion." Id. (citing Spacek, 134 F.3d at 292). "If, on the other hand, the court determines that the plan administrator's interpretation is not legally correct, then the court must proceed to determine whether the administrator's decision denying benefits was an abuse of discretion." Id. (citing Threadgill, 145 F.3d at 293; Spacek, 134 F.3d at 292-93).Conflict of Interest.— The Plan at issue was an "unfunded" plan: in other words, payment of benefits under the Plan came from Mobil Corporation's general assets. The fact that the "corporation deciding the claim will have to pay the claim" constitutes a conflict of interest. Vega v. National Life Ins. Services, Inc., 188 F.3d 287, 289 (5th Cir. 1999). However, the existence of a conflict is only a "factor to be considered in determining whether the plan administrator abused its discretion in denying a claim. The greater the evidence of conflict on the part of the administrator, the less deferential our abuse of discretion standard will be." Vega, 188 F.3d at 297.
In this case, Plaintiff's only evidence of a conflict is O'Flinn's position as both Mobil employee and Administrator. This evidence is sufficient to demonstrate a conflict, and, although Plaintiff has not submitted any evidence of the degree of this conflict, the Court reviews the Administrator's decision under a stricter standard than it would in the absence of a conflict. See Duhon v. Texaco, Inc., 15 F.3d 1302, 1306 (5th Cir. 1994) (giving "due consideration" to the fact that the "plan administrator in this case was also apparently an employee of Texaco and therefore possibly operated under a conflict of interest").
When questioned about his conflict of interest as a Mobil employee administrating an unfunded plan, O'Flinn admitted that "every dollar provided in benefits to a plan participant is a dollar spent by Mobil." O'Flinn Dep., at 33. O'Flinn also noted that denial of a rightful claim would "temporarily save the dollar, perhaps, but eventually result possibly in more cost to the company . . . because of the expense involved in defending a wrongfully denied claim and eventually losing it." Id. at 33-34. Moreover, at the time O'Flinn decided Mouton's appeal, it had already been decided that O'Flinn would not have a job at ExxonMobil. Arguably, the fact that O'Flinn knew he would no longer be a Mobil employee suggests, if anything, that he would lack incentive to save money for the company by denying questionable or valid claims. O'Flinn's personal circumstances thus, if anything, tended to favor his granting benefits to Plaintiff.
1. Legal Correctness of the Plan Administrator's Decision
In determining whether a plan administrator's interpretation of a plan is legally correct, the Court looks at three factors: (1) whether the administrator has given the plan a uniform construction; (2) whether the interpretation is consistent with a fair reading of the plan; and (3) any unanticipated costs resulting from different interpretations of the plan. Rhorer v. Raytheon Engineers and Constructors, Inc., 181 F.3d 634, 640 n. 7 (5th Cir. 1999) (citing Threadgill, 145 F.3d at 292)).
Uniform Construction. — The summary judgment record shows that O'Flinn's decision to deny benefits to Plaintiff was consistent with three other appeals for benefits which also concerned the definition of "total annual pay" and "target variable pay." See Correspondence between Plan Participants and Defendant (Exs. E-3, E-4 and E-5 to Plaintiffs Motion); (Ex. D-3 to Defendant's Motion). Three other Mobil employees requested benefits on the grounds that their actual pay was higher than the ExxonMobil salary offered them. In each case, the Plan Administrator denied benefits on the grounds that their pre-merger salaries and post-merger salaries were the same — base salary plus 10% of reference ( i.e., competitive industry) salary. Id.
Plaintiff contends that the Administrator's actions in these three appeals is not evidence of uniform construction because none of the three individuals was a seconded employee whose variable pay was determined by an employer other than Mobil. Plaintiffs Motion, at 22 n. 67. Based on Plaintiff's own evidence submitted to the Court, Plaintiff's contention that Plaintiffs target variable pay was set by the TV and not Mobil is unfounded. The arrangement by which Plaintiff was permitted to work for the IV was set forth in a "Secondment Agreement," which clearly states that Mobil will provide benefits to seconded employees. Secondment Agreement, ¶¶ 3.1, 9.1. Although the Secondment Agreement provides that the TV will determine the actual bonuses paid to seconded employees, Plaintiff has no evidence to contradict O'Flinn's testimony that Mobil retained the authority to set the target variable pay for seconded employees, for benefits purposes. See O'Flinn Dep., at 58-61, 74, 96-97, 129.
The Secondment Agreement was not part of the administrative record. Nevertheless, Plaintiff has submitted the Secondment Agreement for the Court's consideration on summary judgment.
Accordingly, the summary judgment evidence demonstrates that the Plan Administrator's denial of benefits to the three similarly situated individuals evidences uniform construction under the Plan and indicates that the Administrator's interpretation of the Plan was legally correct.
Fair Reading. — The term "target variable pay" is not defined in the Plan text or the SPD per se. A court must "interpret ERISA provisions as they are likely to be `understood by the average plan participant.'" Tucker v. Shreveport Transit Management, Inc., 226 F.3d 394, 398 (5th Cir. 2000) (citation omitted). However, in the absence of any definition of the term "target variable pay" in the Plan text or SPD, the Court declines to speculate as to how an "average plan participant" would have made sense of the term. Therefore this factor is entitled to little weight.
It is uncontroverted that Mobil corporate documents and its explanations to employees in the Mobil Intranet site explained the target variable pay concept in detail during Plaintiff's employment. See, e.g., Ex. B-12, C-1, C-2, C-3 and C-4 to Defendant's Motion, and J-1, J-2, J-3 and J-4 to Defendant's Reply. See supra at 2, 5. In addition, there is evidence that many "average plan participants" recognized that "target variable pay" was a term of art and inquired into its meaning. Employee confusion over the term led Mobil to post a definition of target variable pay on its Intranet site where, it is reasonable to infer, many plan participants would have seen it. O'Flinn Dep., at 84.
Plaintiff contends that it was reasonable for him to believe that "target variable pay" was the actual variable pay he received each year. He alternatively contends that "target variable pay" should be defined as the "short term incentive" set for him by the JV. Plaintiff has not established that his personal views were comparable to the "average plan participant," the prior Mobil (not JV) employees. The Court also remains unpersuaded from Plaintiff's own testimony that he has created a genuine issue of material fact; Plaintiff testified that he was clearly aware that "target variable pay" and "actual variable pay" were two different figures. See Mouton Aff., ¶ 3; Mouton Dep., at 25-26. See also supra at 3-4. Plaintiffs second contention, that the TV retained authority to set his target variable pay, lacks support in this summary judgment record. Plaintiffs own self-serving and conclusory assertions are insufficient to create a genuine fact question. As noted above, Plaintiff has produced no evidence to controvert O'Flinn's testimony that Mobil retained the authority to determine "target variable pay" for its employees seconded to another company, and further that Mobil retained the authority to determine all its employees' eligibility for benefits. See O'Flinn Dep., at 58-59, 74, 87-88.
Plaintiff points to an excerpt from the Mobil Intranet site dated March 1999, which states: "For purposes of your eligibility for the [Plan], total annual pay is defined as your annualized base pay at the time of the [change in control], plus your annual variable pay award or short-term incentive award." (Ex. E-1 to Plaintiff's Motion) (emphasis added). O'Flinn testifies that under the Mobil pay system, "short term incentive" was a term that applied only to senior executives in salary groups 20 and above. O'Flinn Dep., at 81 ("Short-term incentive is, in my parlance, above base variable compensation for senior executives."). O'Flinn's testimony is supported by the absence of the term "short term-incentive" in any of the Mobil documents describing the compensation system for salary grades 19 and below. See Exs. B-12, C-1, C-2, C-3 and C-4 to Defendant's Motion; Exs. J-1, J-2, J-3 and J-4 to Defendant's Reply. It is uncontroverted that Plaintiff was in salary grade 18 for Mobil purposes. The JV used the terminology "short term incentive" but it is undisputed that the TV was permitted to establish its own bonus arrangements with the seconded employees. Thus, the TV's use of inconsistent terminology (and its decision to pay Plaintiff at rates higher than those for salary grade 18) were its prerogative and were decisions not binding on Mobil for its employees' benefits purposes. Plaintiff proffers no evidence that the TV had any ability to determine who would be eligible for Mobil benefits, or that Mobil itself made an exception for seconded employees.
Plaintiff also contends that the "fair reading" factor should count in his favor, because the "rule of contra proferentum, that ambiguities in contracts are to be resolved against the drafter, must be applied when a summary plan description contains an ambiguous term or requirement." Rhorer, 181 F.3d at 641-42. The Court need not resolve this issue.
The absence of a definition in the Plan does not mean necessarily that the term was ambiguous. Rather, it suggests that the Plan drafters had a working knowledge of the term and believed that the Mobil employees did also. The earlier Mobil documents (Exs. C-i, C-2, C-3 and C-4), and O'Flinn's and Crawford's testimony strongly suggest that the term was well understood.
Unanticipated Costs.— If a "given interpretation would result in [unanticipated] costs, that interpretation is less likely to be legally correct." Batchelor v. Int'l Bhd. of Elec. Workers Local 861 Pension Retirement Fund, 877 F.2d 441, 445 (5th Cir. 1989); Tolson v. Avondale Industries, Inc., 141 F.3d 604, 609 (5th Cir. 1998). The summary judgment record shows that Mobil intended the Plan term "target variable pay" to mean 10% of reference salary for employees in salary grades 19 and below. See Excerpts from Mobil Intranet; O'Flinn Dep., at 68-69; 74-75; 84-85 ("this [the definition of target variable pay as 10% of reference salary] is what guided the plan administrators from the very outset"). To allow all employees who were offered ExxonMobil jobs at a salary equal to "base pay plus 10% of reference pay" to obtain severance benefits clearly would result in unexpected costs to the company. O'Flinn Dep., at 126 ("It [Plaintiff's interpretation] would not only result in unanticipated costs, it would skew the whole purpose of the plan."). Plaintiff has offered no evidence to counter Defendant's proof in this regard.
Both O'Flinn and Crawford testify that the majority of Mobil employees received actual pay above their target variable pay. O'Flinn Dep., at 122; Crawford Aff., ¶ 11. Under Mouton's proposed Plan interpretation that target variable pay be read as actual pay, all of these employees would be eligible for benefits, resulting in significant unanticipated costs.
O'Flinn states that the purpose of the Plan was to "guarantee that [an employee's] Exxon Mobil opportunity would mirror [his or her] normal Mobil opportunity." O'Flinn Dep., at 126. O'Flinn notes that Mouton was allowed to earn higher variable pay as an employee seconded to the JV. Id. at 126-27 (Mouton was given higher variable pay "to incent him to step out of the normal career path at Mobil [and] take all the risks to [his] career that are associated with that, in return for going to a seconded assignment."). O'Flinn states that the Plan's purpose was not to guarantee Mobil employees continuation of extraordinary temporary opportunities, but merely their normal Mobil opportunities. Id.
Conclusion as to Legal Correctness Analysis.— The "uniform construction" and "unanticipated costs" factors weigh in favor of the conclusion that the Administrator reached the legally correct result in denying Plaintiff benefits. Even if the "fair reading" factor were held to lean in Plaintiff's favor, it is entitled to very little weight.
Plaintiff's argument that target variable pay should be defined as actual pay or "short term incentive" is rejected. The "short term incentive" awarded to Plaintiff by the TV did not govern his eligibility for benefits under Mobil plans. See supra at 15-17 and n. 17. Further, there would have been unanticipated costs associated with the interpretations Plaintiff seeks to impose on the Plan. Accordingly, the Court concludes that the Administrator's interpretation of the Plan was legally correct. Nevertheless, in the interests of completeness, the Court will analyze whether the Administrator abused his discretion in denying Plaintiff benefits.
2. Abuse of Discretion
"A decision is only arbitrary if `made without a rational connection between the known facts and the decision or between the found facts and the evidence.'" Meditrust Financial Services Corp. v. Sterling Chemical, Inc., 168 F.3d 211, 215 (5th Cir. 1999) (quoting Bellaire General Hospital v. Blue Cross Blue Shield, 97 F.3d 822, 828-829 (5th Cir. 1996)). The Court finds that the evidence in the administrative record overwhelmingly shows that O'Flinn did not abuse his discretion in denying benefits to Plaintiff. O'Flinn's uncontroverted testimony shows that his interpretation of the term "target variable pay" was consistent with the definition of that term in Mobil's pay system. See O'Flinn Dep., at 74-75; 116-119; Exs. C-1, C-2, C-3, and C-4 to Defendant's Motion. Moreover, this was the definition intended for "target variable pay" in the Plan, as is evidenced by the information posted on Mobil's Intranet site. See Excerpts from Mobil Intranet Site, Ex. B-12 to Defendant's Motion.
Plaintiff makes several arguments to support his position that O'Flinn acted in an arbitrary and capricious manner. First, Plaintiff contends that the definition of "target variable pay" as 10% of reference salary is inconsistent with other portions of the SPD. Plaintiff points to a section of the SPD which calculates the amount of an eligible employee's benefits. The SPD states that eligible employees will receive four weeks' pay, defining "pay" in part as "highest annual variable pay award for any of the three years prior to the year of the change in control." SPD, at 7. There is nothing in the SPD or elsewhere (other than Plaintiff's unsupported and self serving assertion) to indicate that the SPD intended to define target variable pay as the "highest annual variable pay award for any of the three years prior to the change in control." SPD, at 7. Indeed, the reference here to "award" arguably supports the Administrator's conclusion, since this SPD language indicates there is a difference between target variable pay and actual variable pay.
Second, Plaintiff contends that the Plan's language violated ERISA regulations which mandate that an SPD clearly identify circumstances which result in disqualification from benefits. See 29 C.F.R. § 2520.102-2(b), 2520.102-3(1); see also 29 U.S.C. § 1022(a)11 (a "summary plan description shall . . . be written in a manner calculated to be understood by the average plan participant, and shall be sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan.") (emphasis added). Clearly, the Plan and SPD should have contained a definition of the term "target variable pay." Assuming for the purposes of the pending motions that it would have been advisable for Mobil to have included this definition in the Plan and SPD, Plaintiff nevertheless fails to show himself entitled to benefits on this basis. "[T]he question is not whether [Plaintiff is] `right' and the plan administrator is `wrong' but solely whether, in reaching a putatively wrong result, the plan administrator abused his discretion, a test that is easy for the administrator to pass." Threadgill, 145 F.3d at 293. O'Flinn did not abuse his discretion in interpreting an undefined Plan term consistently with the term's use in Mobil's pre-existing, overall compensation system.
Plaintiffs third objection is also insufficient to show that O'Flinn abused his discretion. Plaintiff complains that O'Flinn did not attach to the denial of benefits letter any documentation showing that "target variable pay" was defined as 10% of reference pay. See 29 C.F.R. § 2560.503-1(h)(3) (stating that in denying benefits, administrators should clearly state reasons for denial and reference pertinent plan provisions relied upon). In his deposition, O'Flinn admits that he should have attached a copy of the Intranet QAs showing that "target variable pay" was defined as 10% of reference pay for employees below salary grade 19. O'Flinn Dep., at 72. However, this omission does not destroy O'Flinn's actual decision or the decision making process.
Finally, Plaintiff argues that O'Flinn should have obtained a copy of the Secondment Agreement between MNGI and the Joint Venture. This objection is unavailing. O'Flinn testified as to his understanding that Mobil, and not the joint venturers PanEnergy or Duke, always retained the prerogative to set the target variable pay for its employees and determine eligibility for benefits. O'Flinn Dep., at 58-59, 60-61. O'Flinn also testified as to his understanding that Mobil would determine what portion of a seconded employee's pay was "benefits bearing." Id. at 123-24. Nothing in the Secondment Agreement contradicts this understanding; indeed, the document supports O'Flinn's views. See Secondment Agreement, ¶¶ 3.1, 9.1.
None of Plaintiff's objections support his contention that O'Flinn acted in an arbitrary or capricious manner in determining Plaintiff's eligibility for benefits. The Court concludes that the Plan Administrator did not abuse his discretion in denying Plaintiff benefits.
D. Discretionary Penalties Under 29 U.S.C. § 1132(c)(1)
Plaintiff seeks recovery of monetary penalties under ERISA, 29 U.S.C. § 1132(c)(1), which provides:
Any administrator . . . who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish to a participant or beneficiary (unless such failure or refusal results from matters reasonably beyond the control of the administrator) by mailing the material requested to the last known address of the requesting participant or beneficiary within 30 days after such request may in the court's discretion be personally liable to such participant or beneficiary in the amount of up to $100 a day from the date of such failure or refusal, and the court may in its discretion order such other relief as it deems proper.
Plaintiff contends that he should obtain financial relief because he was prevented from knowing the reason for denial of benefits, he was "hampered" in his ability to prepare for this lawsuit, and because he was made to experience "frustration and aggravation from Defendant's failure to provide the requested documents." Plaintiffs Motion, at 34-35. "Although section 1132 does not require the claimant to show he was prejudiced to be entitled to penalties . . . prejudice is one factor a district court may consider in exercising its discretion." Godwin v. Sun Life Assurance Co. of Canada, 980 F.2d 323, 327 (5th Cir. 1992) (citing Paris v. Profit Sharing Plan of Employees for Howard B. Wolf Inc., 637 F.2d 357, 362. (5th Cir. 1981)).
Defendant contends that any failure to respond to Plaintiff's request for documents was unintentional. See Affidavit of Estelle Strassler (Ex. E to Defendant's Response), ¶ 7; Supplemental Affidavit of Estelle Strassler (Ex. I to Defendant's Response), ¶ 1 (stating that her practice was to log all requests for documents). Apparently, Plaintiffs request for documents "slipped through the cracks." Defendant notes that Plaintiff sent his request for documents to the wrong address. Following the merger in December 1999, the Plan Administrator (and therefore the Administrator's address) changed. The change of Administrator and the new address were published to all employees. See SPD Errata Sheet (Ex. D-1 to Defendant's Motion) (announcing new address for Plan Administrator).
The Court notes that Plaintiff sent all of his correspondence to the "wrong" address originally listed in the SPD. However, he did receive responses to his appeals for denial of benefits.
The Court finds that none of the requested documents contained any information which would have materially added to the Administrator's explanation for the denial of benefits. In addition, Defendant timely filed its initial disclosures identifying relevant documents. Defendant's Motion, at 24. Accordingly, the Court declines to award Plaintiff statutory penalties under § 1132(c)(1). IV. CONCLUSION
See supra at 6.
The Court also declines to award Plaintiff attorney's fees and costs in this matter under 29 U.S.C. § 1132(g)(1). There has been no showing that Defendant acted in bad faith in denying benefits to Plaintiff. Wegner v. Standard Ins. Co., 129 F.3d 814, 821 (5th Cir. 1997).
The Plan and SPD grant broad discretion to the Administrator to interpret the Plan. After reviewing the Plan Administrator's decision to deny benefits under the abuse of discretion standard, the Court concludes that the Administrator's decision was not arbitrary or capricious. The record demonstrates that the Administrator's definition of target variable pay was the legally correct definition: it was the definition Mobil intended, as is evidenced by Mobil's internal documents and its Intranet site available to all employees. It also was the definition applied to other applicants for Plan benefits. Plaintiff has failed to show that his proffered definition of target variable pay, i.e., actual variable pay or the short term "target" set by the TV, was the legally correct definition. Even if the Administrator's definition was not legally correct, a conclusion this Court does not reach, the Administrator's interpretation of the Plan and SPD was not an abuse of discretion. The Administrator interpreted the term "target variable pay" to mean 10% of the Plaintiffs reference salary, in accordance with his reasonable understanding of how that term was defined in Mobil's preexisting compensation system.
The Court declines to award discretionary statutory penalties under § 1132(c)(1) for the Administrator's failure to produce documents that Plaintiff requested. The Administrator's failure to send the documents was inadvertent and not in bad faith. Nor was Plaintiff prejudiced. The Court also declines to award attorney's fees to Plaintiff under § 1132(g)(1). It is therefore
ORDERED that Plaintiff's Unopposed Motion for Leave to File Summary Judgment Motion in Excess of 25 Pages [Doc. #30] is GRANTED. It is further
ORDERED that Plaintiff's Objections to and Motion to Strike Affidavit of Virginia Crawford and Carol Connor [Doc. #36] is DENIED or otherwise MOOT in accordance with this Memorandum and Order. It is further
ORDERED that Defendant's Motion for Summary Judgment [Doc. #27] is GRANTED. It is further
ORDERED that Plaintiff's Motion for Summary Judgment [Doc. #31] is DENIED.
A separate final judgment will be entered forthwith.