NOT RECOMMENDED F OR FUL L -TEXT PUB L I CATI ON File Na me: 12a0746n.06 No. 11-3405 UNI TED STATES COURT OF A PPEAL S FOR THE SI XTH CI RCUI T

DENNI S SHAPP I E, Plaintif f-Appellant ,

v. MI NSTER MACHI

NE COMPANY RESTATED NON- BA RGAI

NI NG EMPL OYEES’ RETI REMENT PL AN, Defendant-

Appellee

. ) ) ) ) ) ) ) ) ) ) ) ON APPEAL FROM THE UNI TED STATES DI STRI CT CO URT FOR THE NORTHERN DI STRI CT OF OHI O O P IN I O N

BEF ORE: COL E and CL AY, Circuit J udg es; and MATTI CE, District J udg e. * MATTI CE, District J ud ge. Plaintiff-Appellant Dennis Shappie appeals the di strict court’s deter mination on cross-motions for judgme nt on the administrative re co rd that the Retirement Commi ttee (“the Commi ttee ” ) , th e a d mi n is tr a tor of Def endant- Appellee Minster Machine Company Restat e d N o n - Ba

rg aining Employ ees’ Retirement Plan (“the Plan”), was not arbitra ry and capr icious in interpre ting the p h ra s e “re g ular monthly rate of ear nings as repor

ted for For

m W-2 purposes divided by the applicable number of months in the cale ndar y ear ” in the Plan to exclude the housing allowanc e provided by Minster Machine Company (“Minster ”) t o S h appie while working for it

overse as.

T h e H o n o r a b l e H a r r y S

. M a t t i c e , J r . , U n i t e d S t a t e s D i s t r i c t J u d g e f o r t h e E a s t e r n D i s t r i c t o f T e n n e s s e e , s i t t i n g * b y d e s i g n a t i o n .No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan Shappie argues that the lang uag e of t h e Plan unambig uously provides that the housing allowanc e should be included when calc ulating his monthly ear nings in deter

mining his retire ment income, making the Commi ttee’s decision not to do so arbitra ry and capr icious. Shappie also argues that, even if the Court finds the lang uag e to be ambig uous, the Commi ttee’s decision wa s s till arbitra ry and capricious given the Commi ttee’s sub s t an t i al conflict of interest; i ts use of financ ial calc ulations – of the cost of the competing definitions to the self-f unding employ er – instead of the lang uage and intent of the Plan in making its decision; and the indisti ng uishability of cer tain included i t em s

– such as the commodities and service s allowanc e – from the excluded housing allowanc e. The Plan responds that the Commi ttee’s decision was “rational, well-re asoned and consistent with Plan languag e and prior prac tices,” not arbitra ry and capr icious, and thus this Court is “requir e[d] ” to uphold that decision and a ffirm the district c ourt. For the following rea sons, we AF FI RM the judgment of the district court. I

. The relevant facts are not in dispute. Shappie was hired by Minster on Fe b ru ar y 19, 1973, and continued in its employ until he retire d on May 31, 2009, at the ag e of 57. Fr om October 1995 throug h November

2004, he wor

ked on for eig n assig nment for Minster in HongKong

. I n J uly 1995, Minster enac ted the “Expatriate Policy ,” a policy applicable to a ll e mploy ees working outside their home country for at least twelve months. T he policy is divided into six sections: 1.0 Scope, 2.0 Employ ment Conditi ons, 3.0 Compensation, 4.0 Be nefits, 5.0 Tax es, and 6.0 Termination. Section 1.0 (“Scope ”) spe cifies that: -2-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan I n consideration of the impact such assig nment may have on employ ees and t heir families, it is the Company ’s intent, throug h this poli cy , to: A. Provide adequate incentives for employ ees and their families to move and to adjust to differe nt living patter ns and cultura l and social e nvironments. B. Provide rea sonable assurance that no undue per sonal or financial hardships acc rue to the e mploy ee a s a re sult of a fore ign a ssignment. I t further specifie s that “[t] his policy cover s only those items of overa ll·company prac tice which are differ ent from those w hich routinely apply to all Minster employ ees.” The items inc luded – and explained in detail – under the “Compensation” he ading are : 3.1 Ba se Salary , 3.2 Salary I ncre ase, 3.3 Housing and Utiliti es Allowance , 3

. 4 C o m m o d ities and Service s Allowance , 3.5 Education All o wa n ce , and 3.6 Method of Pay ment. The items included under “B en ef

its” are : 4.1 Coverag e (re lating to benef it prog ram cover ag e), 4.2 Holiday s, 4.3 Vac ations, 4.4 Home L eave (providing for air far e to home coun t ry ), 4

. 5 Emerg ency L eave , 4.6 Trave l To and Fr om Over seas Assignme nt, 4.7 Household and Personal Effe cts Transpor tation, 4.8 Automobile, and 4.9 Relocation Allowance

. Section 5.0 “Ta x es” has two provisions, one related to tax equaliz ation pay

ments and one r elated to tax prepa ration. To arr an ge fo r t h e p ay

ment of his housing when he lived in Hong Kong , at first, Shappie would write letters to Bob Sudhoff, a Minster executive, specify ing the amount of rent and to whom it should be paid, including bank account i nformation. I n 2002, Minster started pay ing the money for r ent direc tly

to Shappie. The rec ord al s o i ncludes copies of documents entitled “The Minster Machine Company I nternational Compensation Packag e” that are descr ibed as either “Prepa red by Ernst Young , L L P”

-3-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan

or “Ernst and Young L L P,” depending on the y ear , with e ffe ctive dates of July 1, 1996, J anuar

y 1, 1997, and J anuar

y 1 and Fe bruar

y 20, 1998. These appea

r to be summaries of compensation relating
to Dennis Shappie, all of which list amounts – g iven in both “annua l” and “we ekly ” amounts – for: (1) “B ase Salary ”; (2) “Hy pothetical Tax Wit hholding Fe dera l and State of Ohio”; (3) “Relocation Allowance ”; (4) “Housing and Util ities Allowance ”; (5) “Hy pothetical S helter Rete ntion” (with a notation below “Refle cts y our home country rent or mortg ag e interest, utilit ies, proper ty and household g oods, insurance , maintenanc e and repa ir, and proper ty tax”); (6) “Commoditi es and Service s Allowance ”; and (7) “NET PAY I N HOME CURRENCY

. ” T h e 1 9 9 7 s u mm ary adds“Q trly

. Ad j. - Weekend & Holiday s (27% x Ba se)” and “401K Contribution (13% x Ba se).” T h e 1 9 9 8 summary keeps those two additions – althoug h moving the “Qtrly Adj.” to afte r the net pay line and excluding it from that value – and omits the “Relocation Allowance ” amount. For eac h of these three summaries, the “Housing and Utiliti es Allowance ” is listed as “Paid in Kind” with no fix ed monetary value g iven (or included in the “net pay ” values). There are no more of these summaries for any of the other y ear s Shappie was in HongKong

. On Aug ust 7, 1997, Dave Stucke sent Sh appie a memorandum with the subject line “Ta x I ssues” that addre ssed tax issues surrounding Shappie’s living costs while he was “an Ex patriate .” I t said that the “living costs” of his for which Minster was paying “ar e a taxable fring e benef it to y ou, and y ou must pay pay

roll taxes on this amount,” while continuing to say “[t] he only taxes y ou must pay on this benef

it are social secur ity and medicar e taxes.” The memorandum said that the amount Minster paid for Shappie’s housing (appr ox imately $2900 a month) would be “adde d to” his wee kly pay so that his “taxes [would be] calc ulated on [hi s] g ross plus the benef it,” with “the amount of the -4-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan adjustment [t hen being ] deduc ted back out of [hi s] net pay .” Stucke sa id “I know this is confusing

. . . You just need to reme mber that y ou rec eive no additional ca s h co m p en s ation as a result of

rec eiving the benef

it; howeve r, y ou r n et p ay wi l l be reduc ed by the amount of the taxes on the benef it.” I t conclude d by saying that beca use the living expenses had not been rec orded by pay roll, his pay chec ks would ref

lect “catch up” pay

ments throug h October 1 9 9 7 , afte r which he would be “cur ren t ” and would see only the once- monthly adjustment. Whil e not addre ssed by this memorandum, both the Plan and the district court identified another tax issue as signific ant: that while S h appie was living in Hong Kong , it appea rs as though he claimed not only the Housing Ex clusion and/or Deduc tion, but also the For eig n Earne d I ncome E x clus ion on his fede ral tax returns. Shappie beca

me a participa

nt in the Plan on J une 20, 1977, the curr ent version of which was last amende d October 1, 1997. The Plan spe cifies that Shappie’s “Monthly Retirement I ncome . . .

s h al l be equal to

. . . [o] ne and two tenths perc ent (1.2%) of [hi s] Aver ag e Monthly Earnings multipl ied by [hi s] Credited Service ,” but “in no event less than

. . . [s] ix teen dollars and fifty cents ($16.50 ) multipl ied by the [hi s] Credited Service .” “Ave rag e Monthly Earning s” is define d (in rele vant part) in Section 1.07 as “the highe st aver ag e of Monthly Earning s (as define d in this Article I ) as deter

mined fo r an y s i x ty (60) consec utive months prior to the Participant’s Disability Date, Early Retirement Date, Normal Retirement Date, termination 1 date under Section 4.01, or date of d eath.” “Monthly Earning s” – the phrase s ubject to so much di spute in this action – is define d (i n rele vant par

t) in Section 1.31 as “the Par ticipant’s re g ular monthly rate of ear nings a s repor

ted for

-5-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan For m W-2 purposes divided by the applicable number of months in the cale ndar y ear .” The provision g oes on to specif

y “[s] uch ra

te shall be de termined a s of the first da y of ea ch month.” The Plan also specifie s how it is to be administered i n Ar t i cl e V (“The Retirement C o m m i t t ee ”)

. Section 5.01 sets forth how the Commi ttee is to be established: “The Boa rd o f Direc tors shall appoint three (3) or more persons to be known as the ‘Retireme nt Commi ttee’ to administer the Plan and to kee p rec ords of individual Participant bene fits.” Those membe rs “sha ll

serve until their resig nation or dismiss al by the Boa rd of Direc tors,” and “[t] he B oard of Direc tors may dismiss any member of the Retirement Commi ttee at any time with or without cause .” Claims Procedur es are set forth in Section 5.03, which includes the provision “[t] he Retirement Commi ttee shall interpre t the Plan and shall deter mine all questions arising in the administration, interpre tation and application of the Plan.” I t also direc ts the Commi ttee to “ rely on the rec ords of the Employ er,

as cer tified to it, with respe ct to any and all fac tual m at t er s d ealing with the employ ment of an Employ ee or Participant,” and specifie s that if there is a fac tual dispute, the Commi ttee “shall resolve

s u ch dispute g iving due weig ht to all evidenc e available to it.” During the di spute over Shap p i e’ s retirem ent benef

its, the Commi ttee had three members – Stephen Kill, Robert Sudhoff, and J ohn Winch – who were , respe ctively , Minster’s Vice -President for Human Resourc es, Chief F inancial Offic er, a nd President. Shappie beg an considering retire ment in 2008 and asked Ki l l to calc ulate his potential retire ment benef

its. Kill provided Shappie with a “Retireme nt Calculation Detail” on J uly 15, 2008, which (a mong othe r things) showed that the five y ear s of compensation to be used for the aver ag e

wer e 2000-2004 and had compensation in the amounts of $105,855.60, $103,570.72, $141,426.98, -6-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan $135,206.99, and $122,162.70 respe ctively

. After briefly revie wing these fig ures, Shappie decide d
to delay making a decision until 2009. I n Fe bruar y 2009, he looked at the fig ures ag ain and noticed that the housing allowanc e was included in his compensation only for the y ear s 2002-2004. He asked Kill to revi s e the calc ulations such that the housing allowanc e was included for all the y ear s he worke d in Hong Kong ; Kill responde d that the housing allowanc e should not have been included at all. Kill provided a revised Retirement Calculation Detail on Fe bruar y 20, 2009, which showed the highe st five y ear s to be 1998-2002, with compensation in the This updated calc ulation excluded not only the housing allowanc e, but also the Commodi ties and Service s Allowance (“C& S allowanc e”) and the f oreig n service bonus. I n a letter to Kill dated April 4, 2009, Shappie wrote that he “disag ree [d] with [hi s] calc ulation,” g oing on to e x plain: My rea son for t h e ap peal is that, in computing my monthly retire ment benef it, y ou did not take into acc ount the full amount of my repor ted W-2 income in deter

mining the highe st consec utive 6 0 m o nths of Monthly Earning s under section 1.31 of the Plan and Aver ag e Monthly Earning s under se ction 1.07 of the Plan. Since 1995 and the beg inning of my ex-pat contra ct I have understood that the W-2 statements would be used to deter mine my retire ment benef its the same that is stated in the Summary Plan Desc ription. I have been provi d ed with periodic statements since 2004 wi t h calc ulations of retire ment benef its that wer e based on the W-2 statements. I was told by J im Maish that the retire ment benef its wer e based on the W-2 statements and that the housing allowanc e wa s included in the ca lculation. As y ou rec all in Fe bruar

y 2009 I approa ched y ou for a revie w of the calc ulation since I saw that the y ear s used in the calc ulation wer e not my best y ear s and some did not show the corr ect W-2 ear n i n gs . At that time y ou revie wed my calc ulations and re du ce d the benef

it by removing the housing allowanc e from the W-2 report ed income. The rea son offe red was that it was the interpre tation of t h e plan administrators that the housing allowanc e was to be exc l u d ed. I cannot find any

-7-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan lang uag e in the Plan or Summary Plan Desc ription to suppor t this decision so I fee l it necessa ry to reque st a revie w by

the re tirement Committ ee. The rec ord also includes an undated document prepa red by an unidentified author labeled “De nnis Shappie Pension Eligible Earning s Worksheet” (“the Worksheet”)

. Given Shappie’s letter, the lang uag e used in that document and its g ener al content, and the course of the rele vant events, it appea rs that the Worksheet was prepa red around the time Shappie wrote his April 4, 2009 letter and befor e the Commi ttee’s May 4, 2009 decision. The workshee t g ives dollar amounts for the following line items for the y ear s 1996 throug h 2004, with what appea r to be the author’s added comments and descr iptions, identified in the orig inal with italics or pare ntheses: (1) “Bas e an d 1 0% For eig n Assigne mnt [ sic ] Amt”; (2) “C o m m o d i t ies & Service s Allow”; (3) “Hy po Tax deduction”; (4) “Va cation Adjustment”; (5) “Hong Kong Housing ” wi th a note below “ Housing was paid to his landlord with a n o n -c a s h tfb adjustment done in payroll ”; and (6) “F amily Trave l” with the 1 pare nthetical “( non-ca sh TFB ).” Three o t h er l i n e items are also included, but have values for only one or two y ear s: (1) “Tra vel Bonus Adjustment”; (2) “Insuranc e Bonus Adjustment” with the pare nthetical “(M erc er didn’t include, we did on the latest calc s and will this time too)”; and (3) “Ta x Equalization 95 - 98" with both the pare nthetical “(not g oing to include for calc , but was included on the latest calc s g iven
to DS)” and a note below “ compare s taxes would have been liable for if in Ohio against his tax liabili ty per his returns .”

G i v e n t h e c o n t e x t p r o v i d e d b y t h e S t u c k e l e t t e r , “ t f b ” c a n b e r e a d t o s t a n d f o r “ t a x a b l e f

r i n g e b e n e f

i t

. ” 1 -8-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan Following these values is a table – heade d by the italicized comment “ 1998 max comp was $160k - he hits the limit if we include housing ” – that appea rs to g ive estimates under four differ ent

scena rios, identified as: “Gr and Total with 401k def included”; “Pension Eligible excluding C&S”; “Pension El ig ib le Ca s h Co mp e n s a ti o n in c lu ding C&S” (which appea rs to be highlig hted or selec ted); and “Pension Eligible if have to include Housing too.” Be low the table is a note saying “ note If we have to do this - these are eve n higher than what originall y tipped him off to the problem, because those numbers backe d out the hypo tax .” T h ere is also a summary table – pref ace d with the note

“ These are very rough estimates!! ” – showing the value for “Mth l y Av e Us ed for calc g iven to Dennis” as 8669.29 and then showing result s for “Incre ase to Mthly Aver ag e,” “Appr ox eff ect to mthly pension amount,” and “Ove r 20 y ear s” under two differ ent scena rios – “with C&S” and “with housing & C&S.” As Shappie notes, the “Ove r 20 y ear s” column shows a differen ce o f al most $300,000 betwee n “with C&S” ( $98,580) and “ with housing & C&S” ($395,146)

. I n keepingwith the claims proce dures outlined in Section 5.03 of the Plan, the Committee responde d to Shappie’s letter and provided a written notice related to the partial denial of Shappie’s claim by its own letter dated Ma

y 4, 2009, noting ( in releva nt part): The Plan definition of Monthly Earning s provides that the ear nings to be considere d are the Participant’s "r eg ular monthly rate of ear nings as repor

ted fo r Fo rm W -2 purposes." Thus, not only must the earning s be re ported for W -2 purposes, but the pay ments at issue must be a regular rate of monthly ear nings. On t h i s basis, the following are included in y our "Monthly Earning s" for purposes of calc ulating y our benef its: • Ba se and 10% For eig n Assignme nt Bonus • Commodi ties and Service s Allowance s • Weekend a

nd Holiday

Pay • Vac ation Adjustments -9-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan • Trave l Bonus Adjustments • Hea lth I nsuranc e Premium Adjustments Ex cluded from y our "Monthly Earning s" for purposes of calc ulating y our benef its are the following : • Airline tickets purc hased f or y our family • Lump sum tax equalization pay ments • Housing allowanc e The items excluded wer e not part of y our re gu l ar rate of monthly ear nings. You specific ally questioned the exclusion of y our housing allowanc e. As y ou know, the housing allowanc e was paid to y our Hon g Ko n g landlord, and the amount of the pay ment was based on the actua l rent incurre d. Although we wer e require d to include these on y our W-2 statement for tax purposes, these pay ments wer e not a part of y our "r egular rate of monthly ear nings" and are proper ly excludable from y our pension calc ulation. No wh er e does the Commi ttee g ive what it believes the definition of “re g ular rate of mont h l y

ear nings” to be, no r d o es i t s ay why cer tain items wer e included or excluded, save the housing pay ment, althoug h its statement “[y ]ou specific ally questioned the exclusion of y our housing allowanc e” may ref

lect its be lief that Shappie’s letter questioned only the exclusion of the housing allowanc e, despite his letter’s ref ere nce to the W-2 repor

ted amount of income g ener ally

. The letter 2 conclude s “[t] his is intended to serve as a partial denial of y our claim for additional benefits” a nd sets forth the pr ocess f

or appe alingfrom the Committee’s dete rmination. Shappie timely appea led this decision, by letter from his counsel dated J une 11, 2009. I t set forth a number of g rounds for his appea l, including: (1) that statements made by Ms. Ba rbar a Smit h

– an Ernst & Young employ ee eng ag ed by Minster to help develop the Ex patriate Policy – induced

T h e v a l u e o f t h e t i c k e t s a n d t h e e q u a l i z a t i o n p a y m e n t s a r e n e g l i g i b l e a s c o m p a r e d t o t h e e f f e c t o f t h e h o u s i n g 2 p a y m e n t , w h i c h m a y e x p l a i n t h e a p p a r e n t c o n f u s i o n . -10-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan him to acc ept the fore ign assig nment based, in part , o n t h e expectation of highe r ear nings in retire ment; (2) the multipl e, conflicting calc ulations of his retire ment benef its he had rec eived from Kill and the Commi ttee; (3) the plain lang uag e of the Pla n , wi t h his argument emphasizing the phrase “as repor

ted for For

m W-2 pu rp o s es ”; and (4) his arguments that the fac t that the housing allowanc e was briefly paid to a third party not only should not have had any eff ect on the treatment of that money , but also that there was no lang uag e in the Plan justifying such differ ential treatment. On Augu s t 7, 2009, the Commi ttee issued its final decision upholding its May 4 deter mination. The Commi ttee rec ounted the h i s t ory of Shappie’s employ ment and the instant dispute, befor e stating that: I n reaching its conclusions, the Retirement Commi ttee has revie wed Attorney Keister’ s letter, as well as historic ac tuarial c alculations, the lang uag e and intent of the Plan, the intent of the expatriate arr ang ement wi t h Mr. Shappie, the history surroundin g M r . Sh a

ppie’s fore ign assig nment and the nature of the items which have been included and excluded from the definition of Monthly Earning s for purposes of the Plan. The Commi ttee th en outlined the “B asis for Deter mination,” addre ssing the points in Shappie’s appe al in turn. As to Ms. Smi th, it said that it could not find any evidenc e she ma de the
statements Shappie alleg ed, but that even if she had, she was not a Minster employ ee, a member of the Retirement Commi ttee, nor a fiduciar y of the Plan, and thus could not make repr esentations on the Plan’s beha lf. As to Shappie’s arguments reg arding the lang uag e of the Plan, the Commi ttee ref rame d his attorney ’s arguments somewhat, in a manner not entirely in keeping with the ar gu m en t s actua lly made by Shappie’s counsel, construing Attorney Keister to be arguing that it “should ignor e the

-11-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan portion of t he definition of Mont hly Earning s which refer ence s ‘re g ular rate of monthly ear nings’ beca use that phrase is not define d in the Plan” and that “in order to exclude the housing allowanc e, the Plan must specific ally provide for such an exclusion,” which the Commi ttee then took to mean Keister was arguing that “the only re l ev an t lang uag e in the definition of Annual Earning s is the ref ere nce to the For

m W-2.” T h e Commi ttee reje cted these arguments in turn, citing its full discretion to inter

pret the Plan a

nd noting that adopting such a construction of the languag e would ignor e the phrase “regular mont hly rate of ea rning s.” The Committee we nt on to say that “[b] ased

on the lang uag e of the Plan, the nature of the pay ments at issue and historic Plan administration, the Retirement Committ ee ha s determined that the Housing Allowance was not par t of Mr. Shappie’s regular monthly rate of ear nings,” which conclusion was unchang ed by “[t] he fac t that the Plan does not contain a spe cific e x clusion for the H ousing A llowance . . . .” Third, the Commi ttee addre ssed the inconsistencies i n the various calc ulations g iven by discussing a chang e in actua rial consulting firms and the technica l sour ce of compensation f igur es they used. Finally , the Commi ttee discussed the Housing Allowance specific ally , noting that “Shappie

was awa re that the Housing Allowance was not part of regular ear nings,” beca

use he “wa s provided with a s u m m ary of his compensation packa g e, dated J uly 1, 1996,” which “showe d the Housing Allowance as ‘Paid in Kind’ and not part of Mr. Shappie’s pay .” Next, it noted that “[t] he Housing Allowance pay

ments wer e not made as part of Minster’s regular pay roll,” and ref

ere nced the Aug ust 1997 Stucke M emora

ndum reg arding tax issues. Third, it discussed the manner of pay ment of t he housing allowanc e – first to United Asia, then to Shappie direc tly afte r United Asia closed – saying -12-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan only that “[a]lt houg h the pay ments wer e repor

ted for W-2 purposes, t h ey we re n o t part of Mr. Shappie’s regular ear

nings.” Four

th, the Commi ttee analy

zed Shappie’s W-2 statements, noting that “[t] he 1996 W-2 c lear ly shows that Housing Allowance and re imbursement for family trave l w ere not considere d regular ear nings,” beca

use “[t] hese items wer e repor ted on a ‘Supplemental W-2’ and shown as ‘B enef

its’ in Box 12,” and beca

use “[s] imilarly , the 1997, 1998, 1999 and 2000 W-2s also showed the housing allowanc e as a ‘B enef it’ in Box 12,” until 2001, when “the g overnme nt chang ed the Form W -2, and there was no longe r a clea r place to brea

k out Be nefits included in the wag es box .” Fifth, it stated that it believed that the purpose of the housing allowanc e was not “irre levant,”

as it be lieved Keister had argued, beca use “[t] he pay

ments wer e based on the actua l r ent incurre d” and beca use “[u] nder no circ umstances wer e the pay ments intended to be used by Mr. Shappie for any other purpose.” Finally , it s t at ed t h at “Shappie himself did not treat the hous ing allowance as part of his reg

ular ear nings,” beca

use he “re duced his taxable income on his U.S. income tax return

eac h y ear by the maxi mum amount permitted which was attributable to his housing allowanc e. This
amount was tre ated se para tely from his fore ign e arne d income.” The letter advised Shappie that if he did “ not a g ree with this decision, he ha[d] a rig ht to bring a civil action under Section 502(a) of [ER I SA] .” Shappie did so, filing the instant suit in state court on November 3, 2009. The Plan remove d the case to the Norther

n District of Ohio on November 30, 2009. After cross-motions for judgme nt on the administrative re cord, the district court ruled in the Plan’ s favor on Marc h 22, 2011. T h e d i strict court found the phrase “reg ular mont hly rate of earning s as reported for Fo rm W-2 purposes” to be ambig uous. I t reje cted Shappie’s arg ument – that “bec ause the housing -13-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan allowanc e was ‘paid at a regular m o n t h ly rate ’ by Minster, it was part of his ‘re g ular monthly

ear nings.’ ” – on the grounds that (1) “ the phra se ‘r eg ular’ w ould be redunda nt w ith ‘ monthly ’ if it

wer e interpre ted to ref

er only to the interval s at which Plaintiff rec eived compensation”; and (2) “while the housing allowanc e was ‘re g ular’ in the sense that it was paid on a regular monthly basis, it was not ‘re g ular’ in the sense that i t was, by Plaintiff’s own admission, a varia ble amount depende nt entirely on the actua l housing costs incurre d by Plaintiff.” The district co urt also emphasized that “it was the only item listed on Plaintiff’s compensation packa g e as ‘Paid in Kind’” and reiterate d the C ommitt ee’ s arguments about t he W -2 brea kout of housi ng costs. I t then found that the Commi ttee’s Aug ust 2007 decision was a “‘r easone d explanation’ adequately supported by the re cord,” repe ating the five bases l aid out in that decision (in-kind de signation, based on ac tual rent, August 1997 memorandum, broke n out on W-2, and Shappie’s deduc ting it). The district court then addressed S happie’ s conflict of inter est argument – premised upon the Commi ttee’s being comprised of three of the highe st-level executives within the company that

was also responsible for paying claims – althoug h it seeme d to focus almost exclusively on prec edent emphasizing a history of biased claims administration. I t said that Shappie “attempts to bolster his ‘conf lict-of-inter est ’ a

r g u me n t w it h e v id e n c e th a

t th e Co mm it

te e ’ s in te r p r e ta ti o n c r e a te s unjustifiable inconsistencies betwee n the treatment of his housing allowanc e and ‘other employ ment reve nue’ he derive d, such as his Commodities a nd Service s Allowance ,” but rejec ted these a rg uments, finding that there was a reas o n ab l e b as is for treating the C&S allowanc e differ ently from the housing allowanc e. Among these bases wer e that the C&S allowanc e “wa s analog ous to a cost of living adjustment, which most employ ees rec eive annually as an incre ase in salary” and that it “did not vary -14-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan

on a monthly basis; was not demar cate d ‘Paid in Kind’ on the item i z at i o n of Plaintiff’s compensation but instead g iven a specific dollar amount; was not tied to actua l e x penses incurre d; and wa s not list ed in B ox 12 on Plaintiff’s For m W-2.” Finally , Shappie appe aled to this Court on April 22, 2011. I I

. Be cause the Plan give s the “a dminist rator or fiduciar y discretionar

y authority to de termine elig ibilit y for benef

its or to construe the terms of the plan,” this Court revie ws the district court’s decision de novo but revie ws the Commi ttee’s decision under the arbitra ry and capr icious standard of revie w. Firestone Tire & Rubber Co. v. Bruch , 489 U.S. 101, 115 (1989). As we have previously noted “[u]nder this defere ntial standard, whe n it is poss ible to offer a re asoned e x planation, base d

on the evidenc e for a particula r outcome, t h at o u tcome is not arbitra ry or capr icious.” Cox v. Sta n d a rd Ins. Co. , 585 F.3d 295, 299 (6th Cir. 2009). Further, “we gr ant pl an adminis trators who

are vested with discretion in deter mining elig ibilit y for benef its g reat leewa

y in interpre ti n g ambi g uous terms.” Moos v. Square D Co. , 72 F.3d 39, 42 (6th Cir. 1995) (citing Cook v. Pensio n Plan for Salaried Emps. of Cyclops Corp. , 801 F. 2 d 865 (6th Cir. 1986)). Yet the arbitra ry and capr icious standard “ is not a rubber stamp of the administrator’s decision,” but ra ther “ require s us to revie w the quality and quantity of the evidenc e and the opinions on b o t h s i d es o f the issues.” Kovach v. Zurich Am. Ins. Co. , 587 F.3d 3 2 3 , 3 2 8 (6th Cir. 2009) (interna l citations, quotation marks, and a lterations omitted). The parties disag re e, t h o u g h, on how t his standard of revie w i s aff ecte d by any conflict of interest. In Cox , we e x plained the e ffe ct of a ny conflict of inter est: -15-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan Def ere ntial revie w is tempere d, howeve r, when an im p o rt an t conflict of interest consideration require s that benef its decisions be closely scrutinized. When the same entity deter mines elig ibilit y

for be nefits and a lso pay s those benef its out of i ts own pocket, an inhere nt conflict of interest arises. I n close case s, courts must consider that conflict a s one fa ctor among se vera l in determining whether the plan administrator abused its discre tion in deny ing be nefits. Cox , 585 F.3d at 299 (citing Metro. Life Ins. Co. v. Glenn , 554 U.S. 105 (2008))

. W h i l e “s u ch a conflict is a r ed fla g that may trig g er a somewhat more sear ching revie w of a plan a dminist rator’ s decision, [ ] the arbitra

ry and capr icious standard rema ins in place .” Schwalm v. Guardian Life Ins. Co. of Am. , 626 F.3d 299, 311- 12 (6th Cir. 2010) (c iting Glenn , 554 U.S. at 115). We reje ct S happie’ s contention t hat t he langua g e of the Plan is unambiguous. I n doing so, it is important to note that, first and fore most, all rele vant parties, including the district court, have been analy

zing only part of the key phrase ; the full sentenc e containing the disputed lang uag e rea ds: “re g ular monthly rate of ear nings as repor

ted for For

m W-2 purposes divided by the applicable number of months in the calendar year .” The term “rate” is nonsensical if the emphasized lang uag e is ex cluded, a s the ea

rning s repor

ted on the W-2 are y ear ly sums, not a monthly rate

. To ac hieve a monthly rate , it is necessar

y to divide that y ear ly sum by the number of

months worked (usua lly

–

as in this case – twelve)

. Fr om the full context, it appea rs to the Court that the only way to rea d that
sentenc e is as the Plan setting forth an objec t i ve measure to deter mine the “monthly rate of

ea rn ings,” that is as the W-2 wag es, compensation, tips, etc. divided by the number of applica b l e months. The addition of “re g ular,” though, introduces signific an t co n fu sion and ambig uity , as

– despite the Commi ttee’s contentions – the W-2 For m does not brea

k income down into “re g ular” and other. Fur ther, the Plan uses the word “re g ular” or one of its related form in other contexts, and the

-16-No. 11-3405

Shappie v. M

inster Mach. Co. Restated Non-Bargaining Emps.’ Re t. Plan meaning there in tends to support Shappie’s “routinely rec urring ” construction. Reg ardle ss, beca use this Court agr e e s th a

t “ r e g u la r ” introduces signific ant ambig uity into the phrase "r egular monthly rate of ear nings as re ported for

For m W-2 purpose s divided by the applicable number of months in the cale ndar y ear ,” we thus must defer sig nificantly to the Commi ttee in interpre ting the phr ase. The Court ag ree s with Shappie, howeve r, that the Commi ttee here evidenc ed signific ant bias in this case . Even fac toring in this bias, this Court cannot say th at t h e C o m m i t tee’ s decision was arbitra ry and capr icious. Whil e – despi t e t h e Plan’s contentions – the W-2 For m does not brea

k income down into “re g ular” and other, it did for some time allow cer tain amounts to be broken out

as “bene fits.” Fur

ther, the employ er is the individual who chooses how to char acte rize such income, and thus it could argue by using the definition “as repor ted for For

m W-2 purposes” it incorporated the distinction embedde d in the W-2 until 2001. This argument is somewhat bolstered by the Aug ust 1997 Tax I ssues Memorandum that outlined the tax is s u es an d emphasiz ed that the housing allowanc e enta iled “no additional ca sh compensation.” There fo r e , b e c a

u s e the rele vant lang uag e is ambig uous and beca use this Court cannot say that the Commi ttee’s decision was arbitra ry and capr icious, the judgme nt of the district c ourt is he reby AFF I RMED.

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