Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-04-02656/USCOURTS-ca8-04-02656-0/pdf.json

Parties Involved:
Nancy J. Johnson
Appellee
Severance Administration Committee
Appellant
U.S. Bancorp
Appellant

Document Text:

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 04-2656

___________

Nancy J. Johnson, *

*

Appellee, *

* Appeal from the United States

v. * District Court for the 

* District of Minnesota. 

U.S. Bancorp Broad-Based Change *

In Control Severance Pay Program; *

Severance Administration Committee, *

*

Appellants. * 

___________

Submitted: May 11, 2005

Filed: September 9, 2005

___________

Before WOLLMAN, BYE, and COLLOTON, Circuit Judges.

___________

COLLOTON, Circuit Judge.

U.S. Bancorp Comprehensive Welfare Benefit Plan/Broadbased Change in

Control Severance Pay Program and its administrator, the Severance Administration

Committee (“Committee”), appeal from the district court’s order granting summary

judgment in favor of Nancy Johnson on her claim for benefits under the Plan. The

Committee argues that the district court erred in granting summary judgment because

the Committee’s determination that Johnson was fired for cause was not an abuse of

discretion. We agree, and therefore reverse.

Appellate Case: 04-2656 Page: 1 Date Filed: 09/09/2005 Entry ID: 1949861
-2-

I.

Johnson had been a long-time employee of U.S. Bancorp when her employment

was terminated in April 2002. She was fired after viewing computer files in a folder

maintained by her supervisor, Kathy Ashcraft. The path to the folder containing the

files was “\\INCFIN01\vol2:\Shared\CAP\KathyAshcraft\personnel.” One of the files

accessed by Johnson, labeled “2002 Performance Goals,” contained performance

information regarding other employees and information on future organizational

changes. Three of the files, entitled “Please join us for our Wedding Rehearsal,”

“direction,” and “G guestlist,” were of a personal nature, and contained an invitation

to Aschraft’s wedding, directions to the event, and a guest list, respectively. 

Around the time of Johnson’s termination, U.S. Bancorp was involved in a

merger with Firstar Corporation. U.S. Bancorp, in an effort to retain a number of

valued employees in the face of the uncertainty caused by the pending merger, offered

certain of them a severance plan (the “Plan”) providing for severance pay in the event

they were terminated as a result of the merger. The Plan provided that employees

terminated for “Cause” would not receive severance pay under the Plan. Cause was

defined in relevant part as follows:

[G]ross and willful misconduct during the course of employment . . .

including, but not limited to, theft, assault, battery, malicious destruction

of property, arson, sabotage, embezzlement, harassment, acts or

omissions which violate the Employer’s rules or policies (such as

breaches of confidentiality), or other conduct which demonstrates a

willful or reckless disregard of the interests of the Employer or its

Affiliates . . . . Circumstances constituting Cause shall be determined

in the sole discretion of [U.S. Bancorp].

Appellate Case: 04-2656 Page: 2 Date Filed: 09/09/2005 Entry ID: 1949861
-3-

Employees who were terminated without cause within twenty-four months of the

merger were eligible for severance payments of up to the equivalent of 104 weeks’

salary.

U.S. Bancorp had several policies in place governing employees’ use of

computer technology at the time Johnson accessed Ashcraft’s files. One policy,

entitled “Computer and Information Security,” directed employees to “[e]nsure that

all of your computer access is on a need-to-know basis and is limited to the

information required to perform your job.” (Appellant’s App. at 77). This policy also

emphasized that “[i]t is important to be familiar with all policies concerning computer

systems, information and privacy. These policies are available on the intranet or from

your manager or supervisor and should be reviewed carefully.” (Id.). The policy also

exhorted employees to “[e]nsure information is treated as a valuable Company asset

and is disclosed only on a need-to-know basis,” and to “not attempt to access data that

you are not authorized to access.” (Id.). Another policy on “Use of U.S. Bancorp

Technology” required “[a]ll employees who use U.S. Bancorp’s technology resources

[to] become familiar with and understand the U.S. Bancorp Information Security

Services policies and standards and support their enforcement.” (Id. at 76).

In April 2002, an employee notified management at U.S. Bancorp that rumors

about organizational changes resulting from the pending merger with Firstar were

circulating in the Finance Division. U.S. Bancorp’s Information Security division

investigated whether employees had accessed computer files that would have

contained such information. The investigators determined that several employees,

including Johnson, had accessed the computer file entitled “2002 Performance

Goals.” When confronted by a Human Resources representative about accessing the

files in Ashcraft’s directory, Johnson admitted that she “had no business reason for

accessing and viewing the files in question.” U.S. Bancorp’s Controller, Terrance

Dolan, then made the decision to fire Johnson. Johnson was presented with a “Notice

of Termination” stating that her termination was “deemed a termination for cause” as

Appellate Case: 04-2656 Page: 3 Date Filed: 09/09/2005 Entry ID: 1949861
-4-

defined in the Plan, and that she therefore would not receive severance pay. The

Notice cited “unethical conduct” that violated U.S. Bancorp’s Code of Conduct as the

basis for Johnson’s termination.

Despite the Notice’s disclaimer, Johnson applied for severance pay under the

Plan on June 25, 2002, arguing that her termination was not for cause. The

Committee denied her request on August 26, 2002, reasoning that Johnson’s conduct

in accessing the personnel information in Ashcraft’s directory “violated U.S.

Bancorp’s policies in its Employee Handbook.” (Appellant’s App. at 87). The policy

provisions violated, according to the Committee, included the Computer and

Information Security policy, which mandates that all employee “computer access is

on a need-to-know basis and is limited to information required to perform your job,”

and the Code of Ethics and Conduct on the Job, which requires that “[t]he use of any

information stemming from your employment shall be restricted to that which is

absolutely necessary for the legitimate and proper business purposes of U.S.

Bancorp,” that “employee information . . . be treated as highly confidential in all

cases,” and that “employees treat all company resources with the respect befitting a

valuable assert [sic] and . . . that such resources should never be used in ways that

could be interpreted as imprudent or improper.” (Appellant’s App. at 87). 

 Johnson appealed for reconsideration of the Committee’s determination, but

in a decision issued on October 29, 2002, the Committee upheld its earlier

determination. The Committee rejected Johnson’s argument that she did not know

the files she accessed were confidential, reasoning that the location of the files in

Aschcraft’s personnel file and the labels on these files made it “obvious” that Johnson

was not authorized to view them. (Appellant’s App. at 130). The Committee wrote

that in addition to viewing Johnson’s conduct as “gross and willful misconduct,” it

believed that her actions “demonstrated a willful or reckless disregard of U.S.

Bancorp’s interests.” (Id.).

Appellate Case: 04-2656 Page: 4 Date Filed: 09/09/2005 Entry ID: 1949861
-5-

Following the Committee’s denial of her appeal, Johnson brought a civil action

in the District of Minnesota pursuant to 29 U.S.C. § 1132(a)(1)(B), alleging that the

Committee had abused its discretion in denying Johnson severance pay. The district

court agreed, granting summary judgment for Johnson on August 11, 2003. On June

15, 2004, the district court awarded Johnson $122,399.18 in severance wage benefits

plus interest, $20,211.75 for welfare benefits, and $42,090.00 in pre- and postjudgment attorney’s fees.

II.

ERISA permits a participant in an ERISA-regulated plan to bring a civil action

“to recover benefits due to [her] under the terms of [her] plan, to enforce [her] rights

under the terms of the plan, or to clarify [her] rights to future benefits under the terms

of the plan.” 29 U.S.C. § 1132(a)(1)(B). The district court’s review of plan

determinations is de novo, unless the plan grants discretionary authority to the plan

administrator “to determine eligibility for benefits or to construe the terms of the

plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). In such a

case, the district court is required to review the plan administrator’s interpretation of

the terms of the plan for abuse of discretion. Id. U.S. Bancorp’s Plan gives the

Committee full discretion to “interpret and administer the terms and conditions of the

Plan, decide all questions concerning the eligibility of any persons to participate in

the Plan, [and] grant or deny benefits under the Plan,” (Appellant’s App. at 35), so the

district court was required to review the Committee’s interpretation of the Plan for

abuse of discretion. See Firestone, 489 U.S. at 115; King v. Hartford Life & Accident

Ins. Co., 414 F.3d 994, 999 (8th Cir. 2005) (en banc). The Committee’s application

of the plan to Johnson’s factual situation is reviewed to determine whether it is

supported by substantial evidence, that is, “such relevant evidence as a reasonable

mind might accept as adequate to support a conclusion.” Id. (internal quotation

omitted).

Appellate Case: 04-2656 Page: 5 Date Filed: 09/09/2005 Entry ID: 1949861
-6-

In its Memorandum Opinion and Order, the district court acknowledged that

the Committee’s decision should be reviewed for abuse of discretion. The court,

however, concluded that no reasonable person could have found that U.S. Bancorp

had cause to terminate Johnson’s employment. It reasoned that because U.S. Bancorp

had “absolutely no safeguards in place to prevent Johnson from viewing the so-called

‘confidential information,’” the information could not have been confidential. (Add.

at 8). The court also concluded that Johnson was authorized to access the files she

viewed because “nothing prevented her access whatsoever.” (Id.). The court held

that while Johnson “may have been nosy, and her common sense should have

prevented her access,” her conduct did not amount to gross and willful misconduct

under the Plan, and that Johnson was therefore terminated without cause. (Add. at

8-9). On de novo review of the district court’s decision, see Hebert v. SBC Pension

Benefit Plan, 354 F.3d 796, 798 (8th Cir. 2004), we hold that the district court erred

in ordering an award of benefits, and that judgment should be entered for the

Committee.

A plan administrator’s interpretation of a plan does not constitute an abuse of

discretion so long as it is “‘reasonable,’ even if the reviewing court disagrees with the

interpretation.” Neumann v. AT&T Communications, Inc., 376 F.3d 773, 781 (8th

Cir. 2004). “Cause” is defined under U.S. Bancorp’s Plan to include “gross and

willful misconduct during the course of employment.” (Appellant’s App. at 43). The

Plan further defines “gross and willful misconduct” to “includ[e] . . . acts or

omissions which violate the Employer’s rules or policies (such as breaches of

confidentiality).” (Id.). Because “gross and willful misconduct” is a term specifically

defined in the Plan, the administrator was not bound to apply definitions of that

phrase that govern in other contexts. See Jackson v. Metropolitan Life Ins. Co., 303

F.3d 884, 888-89 (8th Cir. 2002) (considering plan’s “highly-specific definition of

‘disabled,’” and holding that administrator was not bound by determination that

participant was “disabled” under similar, but different, definition employed by Social

Security Administration); Lickteig v. Business Men’s Assurance Co. of Am., 61 F.3d

Appellate Case: 04-2656 Page: 6 Date Filed: 09/09/2005 Entry ID: 1949861
-7-

579, 583-85 (8th Cir. 1995) (rejecting contention that trustee could construe term

“active employee” based on “ordinary understanding” of “actively at work” when

“active employee” was specifically defined in the plan). Nor do we discern a “federal

common law” that requires an administrator with discretion to apply a particular

definition of “gross and willful misconduct” under this Plan. Interpretations of that

phrase as it appears in federal statutes, or even interpretations of this very Plan that

a court might adopt on de novo review, do not bind an administrator with discretion

to interpret uncertain terms in a plan, so long as the administrator’s interpretation is

reasonable. King, 414 F.3d at 999.

Given the specific definition of “gross and willful misconduct” in the Plan, the

Committee reasonably interpreted “Cause” to include violations of U.S. Bancorp’s

policies forbidding an employee to “access data that you are not authorized to

access,” and requiring an employee to “[e]nsure that all of your computer access is

on a need-to-know basis and is limited to the information required to perform your

job,” at least where such violations are knowing and willful. On its face, the Plan

defines “Cause” and “gross and willful misconduct” to include all violations of

company policy, regardless of the employee’s knowledge or intent. The absence of

any limitation on which violations of company policy constitute “gross and willful

misconduct” leaves uncertain the precise contours of the defined term in this Plan.

In this instance, the administrator found that Johnson acted both knowingly and

willfully when she violated company policy, thus applying the standard more

narrowly than the plain language of the Plan might suggest. We think this was a

reasonable exercise of the administrator’s discretion in applying uncertain terms of

the Plan, and we find no basis in the language of the plan, or the federal common law

of ERISA, to require the administrator to narrow the definition further based on the

Appellate Case: 04-2656 Page: 7 Date Filed: 09/09/2005 Entry ID: 1949861
1

Our holding that the Committee acted within its discretion to find “Cause” in

the case of a knowing and willful violation of company policy does not, of course,

speak to whether it would be reasonable for the Committee to reach the same

conclusion in the case of an inadvertent and unknowing violation. Cf. post, at 10.

-8-

meaning of “gross” misconduct in other contexts, particularly given the lack of a

generally applicable interpretation of that rather nebulous term.1

Substantial evidence also supported the Committee’s determination that

Johnson’s actions violated those policies, and that her actions were knowing and

willful, as those terms are reasonably construed. The evidence considered by the

Committee included testimony that Johnson, when confronted about accessing the

files, admitted to having no “business reason” for accessing and viewing them.

Johnson, moreover, does not deny accessing the files and admits “the inapplicable

nature of the information to her job duties.” (Appellee’s Br. at 14). It was reasonable

for the Committee to conclude that Johnson acted knowingly, because a reasonable

mind could conclude that the name and location of the file concerning performance

goals indicated that it was not a document to which Johnson required access to

perform her job, and when interviewed about the incident, Johnson never asserted

lack of knowledge as a defense. There also was ample evidence to support the

Committee’s conclusion that Johnson voluntarily and intentionally accessed the files,

thus establishing willful conduct, as opposed to accidental or negligent acts. See

Black’s Law Dictionary 1593 (7th ed. 1999) (defining “willful” as “voluntary and

intentional,” but not necessarily malicious); United States v. Murdock, 290 U.S. 389,

394 (1933) (explaining that the word willfully “often denotes an act which is

intentional, or knowing, or voluntary, as distinguished from accidental”), overruled

in part on other grounds, Murphy v. Waterfront Com’n, 378 U.S. 52 (1964). The

record shows that to access the files, Johnson had to take several discrete and

deliberate steps, and that she could not have viewed them by way of an accidental

click of her computer equipment.

Appellate Case: 04-2656 Page: 8 Date Filed: 09/09/2005 Entry ID: 1949861
-9-

In our view, the district court’s determination that “Johnson was authorized to

access the files,” because “nothing prevented her access whatsoever,” mistakenly

equated ability to access a file with authorization to access the file. This

interpretation effectively imposed an extralegal requirement that U.S. Bancorp secure

confidential information from employees by affirmatively preventing access through

technological means, rather than through written policies. U.S. Bancorp employees

are responsible under the company’s policies for maintaining appropriate limits on

their computer use. Johnson’s ability to access the personnel file thus does not

indicate that she was authorized to do so. Indeed, the policy instructing an employee

to limit computer access to information that is required to perform her job seems to

presume that access to other information is possible, but prohibited.

Johnson’s brief explains that she was a long-term employee who received many

favorable performance reviews over the years. Whether her conduct in accessing

these computer files warranted discharge is debatable as a matter of business

judgment. But we are not empowered to make that sort of business judgment,

deciding in the first instance whether Johnson deserved to be terminated under all of

the circumstances. In the context of review of an ERISA plan administrator’s

discretionary decision, we are limited to determining whether a reasonable person

could have interpreted and applied the ERISA plan in the way that the administrator

did, and here the answer is yes.

Accordingly, we reverse the judgment of the district court and remand for entry

of judgment in favor of the appellants.

BYE, Circuit Judge, dissenting.

I respectfully dissent. I believe the Severance Administration Committee

(Committee) clearly abused its discretion when it determined Nancy Johnson's

conduct in accessing files located on a shared computer drive constituted "cause"

Appellate Case: 04-2656 Page: 9 Date Filed: 09/09/2005 Entry ID: 1949861
-10-

under the terms of the severance plan (Plan). I would therefore affirm the district

court's grant of summary judgment in favor of Nancy Johnson.

To constitute "cause," the Plan required Johnson's misconduct to be both "gross

and willful." Glaringly lacking from the Committee's determination is any discussion

of how Johnson's conduct constituted "gross" misconduct. While the Plan defines

"gross and willful" misconduct to include "acts or omissions which violate the

Employer's rules policies," it cannot follow that every violation of a rule or policy

constitutes "gross and willful" misconduct. Otherwise, inadvertent rule violations

would be considered "willful" violations, and the Plan's inclusion of the word

"willful" would be rendered meaningless. By the same token, the word "gross" is

rendered meaningless if minor rule violations constitute "gross" misconduct. 

The Court contends the Committee was not bound to apply a definition of the

term "gross and willful misconduct" which might govern in other contexts. While I

agree, I do not view that as the relevant inquiry. The relevant inquiry is whether the

Committee neglected to give any meaning to the term "gross" in the Plan. When

reviewing the Committee's decision we must necessarily consider whether its

"interpretation renders any language in the Plan meaningless or internally

inconsistent." Torres v. UNUM Life Ins. Co. of Am., 405 F.3d 670, 680 (8th Cir.

2005) (citing Shelton v. ContiGroup Cos., Inc., 285 F.3d 640, 643 (8th Cir.2002)).

An ERISA fiduciary abuses its discretion when it renders Plan language meaningless.

Id.

The Court's conclusion the Committee was free to interpret "gross and willful"

misconduct to include all violations of company policy necessarily renders the terms

"gross" and "willful" meaningless, and offends my sense of justice. To call every

inadvertent or unknowing violation a "willful" violation is absurd. Likewise, it is

absurd to call every violation, no matter how trivial or insignificant, a "gross"

violation. For example, the same area of the Employee's Handbook containing the

Appellate Case: 04-2656 Page: 10 Date Filed: 09/09/2005 Entry ID: 1949861
-11-

Computer and Information Security policy relied upon by the Committee to deny

Johnson's substantial severance benefits also contains a policy on Business

Appearance. The Business Appearance policy requires employees "to use good

judgment and dress in a professional manner that is appropriate to your work

surroundings and suited to your particular job." Under the Court's view, the

Committee would not have abused its discretion if it determined any and all

violations of the Business Appearance policy to constitute "gross and willful

misconduct" which that would justify a denial of severance benefits.

In my view, because the Plan does not specifically define a "gross" rule

violation, the term should be given its ordinary meaning. Mansker v. TMG Life Ins.

Co., 54 F.3d 1322, 1327 (8th Cir. 1995). In interpreting the meaning of an ERISA

plan, we should also look to the "federal common law." Reid v. Connecticut Gen.

Life Ins. Co., 17 F.3d 1092, 1098 (8th Cir. 1994). Turning to analogous federal

statutes which employ the undefined terms is "surely a promising source in a search

for the federal common law." Camelot Care Ctrs., Inc. v. Planters Lifesavers Co., 836

F. Supp. 545, 548 (N.D. Ill. 1993).

There is a relatively large source of federal common law interpreting what

constitutes "gross misconduct." Under the Consolidation Omnibus Budget

Reconciliation Act of 1985, a covered employer has an obligation to provide an

employee with continued health care coverage unless the employee is terminated for

"gross misconduct." 29 U.S.C. § 1163(2). Because § 1163(2) does not otherwise

define what constitutes "gross misconduct," courts have had to fashion "federal

common law" to address the issue.

While there is no generally applicable or binding judicial interpretation of gross

misconduct, Bryant v. Food Lion Inc., 100 F. Supp. 2d 346, 375 (D. S.C. 2000), the

courts agree mere lapses in good judgment on isolated occasions cannot constitute

gross misconduct. See Richard v. Indus. Commercial Elec. Corp., 337 F. Supp. 2d

Appellate Case: 04-2656 Page: 11 Date Filed: 09/09/2005 Entry ID: 1949861
-12-

279, 282 (D. Mass. 2004) (indicating gross misconduct to be something "flagrant and

extreme" and "out of all measure; beyond allowance; not to be excused; flagrant;

shameful" and something "more than that conduct which comes about by reason of

error of judgment or lack of diligence.") (internal citations omitted); Cotte v.

Cooperativa de Ahorro y Credito Yabucoena, 77 F. Supp. 2d 237, 241 (D. P.R. 1999)

("[G]ross means outrageous, extreme or unconscionable, conduct is gross misconduct

if it is so outrageous that it shocks the conscience.") (internal citation and quotations

omitted); Zickafoose v. UB Services, Inc., 23 F. Supp. 2d 652, 656 (S.D. W. Va.

1998) (indicating misconduct is not "gross" unless "the employee intended harm to

the employer [and] the nature of the conduct itself is reasonably outrageous to the

employer."); Collins v. Aggreko, Inc., 884 F. Supp. 450, 454 (D. Utah 1995) ("Gross

misconduct may be intentional, wanton, willful, deliberate, reckless or in deliberate

indifference to an employer's interest. It is misconduct beyond mere minor breaches

of employee standards, but conduct that would be considered gross in nature.").

In Paris v. F. Korbel & Bros., Inc., 751 F. Supp. 834 (N.D. Cal. 1990), the court

addressed a breach of confidentiality somewhat similar to Johnson's conduct. Leigh

Paris worked for a winery and was given access to the "poolhouse," a place where

executives met and sometimes discussed employees. Paris was instructed whatever

she may overhear in the poolhouse was confidential, and she was not to share it. On

one occasion, she heard executives discussing a particular employee who had asked

to work part time for personal reasons. Paris, who happened to be friends with the

employee's wife, told her friend the company was going to allow her husband to work

part time. The executives discovered the employee was upset with his boss for

sharing his personal information. Paris was identified as the source of the leak, and

terminated. Paris, 751 F. Supp. at 835-36.

When Paris applied for COBRA benefits under § 1163(2), the issue was

whether her breach of confidentiality should be considered "gross misconduct" which

would disqualify her for continuing health care coverage. The court said no,

Appellate Case: 04-2656 Page: 12 Date Filed: 09/09/2005 Entry ID: 1949861
-13-

concluding gross misconduct required a showing Paris "had an 'evil design' to injure

Korbel" and exercising "poor judgment" on one occasion was not enough. Id. at 839.

Similarly, here, Johnson may have shown poor judgment in briefly peeking at the files

located on the shared computer drive. But there was no evidence Johnson even

shared this information with other employees. Her isolated instance of poor judgment

evinced no "evil design" to injure U.S. Bancorp, and was clearly not flagrant,

extreme, all out of measure, or so outrageous it shocks the conscience.

The federal common law governing ERISA plans mandates an employee's

misconduct must be severe, i.e, flagrant, extreme, all out of measure, or so outrageous

it shocks the conscience, to be considered "gross." Isolated lapses of judgment which

do not have a significant impact on the employer clearly do not suffice. No

reasonable person would conclude Johnson's conduct amounted to anything more

than a minor rule violation, with little or no adverse impact on U.S. Bancorp. Her

conduct clearly was not outrageous or conscience-shocking. To the contrary, what

does shock my conscience is that the Plan would insist upon enforcing such a minor

rule violation so as to justify it precluding this long-term, exemplary employee a

financial benefit of approximately $150,000 in severance pay.

I respectfully dissent.

______________________________

Appellate Case: 04-2656 Page: 13 Date Filed: 09/09/2005 Entry ID: 1949861