IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-20270

DAVID CROWELL

Plaintiff - Appellant

v.

SHELL OIL CO., formerly known as or doing business as Pennzoil-Quaker

State Company; SHELL OIL PRODUCTS LLC, formerly known as or doing

business as Pennzoil-Quaker State Company, also known as Sopus Products;

PENNZOIL-QUAKER STATE COMPANY; KELLEY LANG; PENNZOILQUAKER STATE COMPANY EMPLOYEES RETIREMENT PLAN,

Defendants - Appellees

PAUL B SIEGEL

Plaintiff - Appellant

v.

SHELL OIL COMPANY, formerly known as Pennzoil-Quaker State

Company; SHELL OIL PRODUCTS LLC, also known as Sopus Products,

formerly known as Pennzoil-Quaker State Company; PENNZOIL-QUAKER

STATE COMPANY; KELLEY LANG; SHELL PENSION PLAN, formerly

known as Pennzoil-Quaker State Company Employees Retirement Plan

Defendants - Appellees 

United States Court of Appeals

Fifth Circuit

F I L E D

August 14, 2008

Charles R. Fulbruge III

Clerk
No. 07-20270

1 Shell Oil Company acquired Pennzoil-Quaker State Company in a merger on October

1, 2002. Pennzoil became a wholly owned subsidiary of Shell. 

2

Appeal from the United States District Court 

for the Southern District of Texas

Before KING, HIGGINBOTHAM, and SOUTHWICK, Circuit Judges.

Patrick E. Higginbotham, Circuit Judge: 

Former employees of Pennzoil, David Crowell and Paul Siegel, were

terminated when the company changed control. Under Letters of Agreement

referring to their retirement and savings plan, they received a cash payment

when the company merged with Shell. They filed separate suits, urging that

Defendants underpaid them and that state law applied. The district courts

found that the agreement was governed by ERISA and consolidated the cases,

granting summary judgment to Defendants. Plaintiffs appealed. 

I

David Crowell, formerly Pennzoil’s Director of Internal Audit, and Paul

Siegel, formerly Pennzoil’s General Counsel, sued Shell and Pennzoil1in

separate cases in Texas district court, alleging breach of contract, breach of

warranty, and fraud under Texas law arising from a benefits dispute. They

alleged that Defendants misconstrued amended language in their retirement

plan – that when they cashed out stock options earlier in their career, the

income earned was part of their “Considered Compensation” in Shell’s amended

Plan, entitling them to a higher lump-sum payment for early retirement when

Pennzoil merged with Shell in October of 2002 and terminated them.
No. 07-20270

2This planwas later calledthePennzoil-QuakerState Company Employees Retirement

Plan.

3

Pennzoil’s original retirement plan – thePennzoil-Quaker State Company

Salaried Employees Retirement Plan2(“retirement plan”) – was effective as of

January 1, 1999, and provided for pension benefits upon employees’ retirement

or early retirement. The Plan was a deferred compensation plan that paid

employees a certain percentage of their monthly 1997 “Considered

Compensation,” multiplied by their number of years of service to the company

and additional money also calculated by their 1997 “Considered Compensation,”

their years of service accrued during certain time periods, monthly Considered

Compensation, and monthly compensation after December 31, 1997. The higher

the “Considered Compensation,”the higher the pension benefits to the employee.

The retirement plan originally excluded “income arising from the exercise of a

stock option” from the definition of Considered Compensation.

Pennzoil amended the definition of “Considered Compensation” in its

retirement plan severaltimes. The original plan provided for a monthly annuity

calculated by a certain percentage of “monthly 1997 Considered Compensation”

multiplied by the number of years of service, and it defined monthly 1997

Considered Compensation in the last paragraph of Section 9.1(I) as “the lesser

of (I) 1997 Considered Compensation or (ii) if the Member terminates service

prior to January 1, 2003, the Member’s average monthly Considered

Compensation received during the 60 calendar months immediately preceding

his retirement or other termination of service.” The Second Amendment

changed this last paragraph in a modification effective January 1, 1999, which

provided,“In determining monthly 1997 Considered Compensation, the following
No. 07-20270

3 Emphasis added. This definition was in Section 1.11 of the retirement plan. 

4 Emphasis added. 

4

shall apply: (I)the term 1997 Considered Compensation shall be deemed to refer

to the Member’s Considered Compensation for the Member’s 12 months of

employment with the Employer immediately prior to January 1, 1998 . . .” In

other words, it cut out the “lesser of” language and provided a simpler

computation of Considered Compensation. The definition of Considered

Compensation in effect under the original retirement plan (effective January 1,

1999) and the Second Amendment (also effective January 1, 1999) was “[t]he

compensation actually paid to a Member . . . by his Employer for personal

services, including normal salary, wages, commissions . . . but exclusive of . . .

income arising from the exercise of a stock option . . .”3In other words, following

the Second Amendment to the plan, the definition of Considered Compensation

continued to omit income from the exercise of stock options.

A Fifth Amendment to the retirement plan, adopted on May 13, 2002,

amended the definition of Considered Compensation in its entirety and included

the exercise of stock options as part of Considered Compensation, defining

Considered Compensation as “[t]he compensation actually paid to a Member by

his Employer for personal services,including normal salary, wages, commissions

. . . and income arising from the exercise or cash-out of a stock option, but

exclusive of amounts of life insurance premiums paid by an employer . . .”4 This

Amendment had several effective dates. The Amendment stated, “PennzoilQuaker State Company . . . does hereby amend the Plan, effective March 1, 2002,

as follows.” It then made changes in Sections 1 and 2 to the definition of

“Change of Control” and “Considered Compensation.” In a third section, it added
No. 07-20270

5

a subsection entitled “Credit Union Employees” to Section 2.3 of the Salaried

Employees Plan Document and specified that the third section was to be

effective January 1, 2002. 

In addition to the retirement plan, Pennzoil executed Letters of Agreement

with some employees, including Crowell and Siegel. These Letters were

unfunded deferred compensation arrangements and promised to pay the Letter

recipients, upon a change in control of the company, a one-time cash payment.

This payment was to compensate Crowell and Siegel for the amount of pension

and savings money they would lose as a result of certain tax regulations. A

determination of the amount of the one-time payment required a calculation of

early retirement pension income under the retirement plan (a calculation relying

upon the definition of 1997 Considered Compensation) and savings and

investment income. Crowell’s Letter of Agreement, dated December 8, 2000,

with an effective date of June 19, 1999, provided,

Section 415 of the Internal Revenue Code of 1986, as amended . . .

imposes limitations on the amount of retirement benefits which may

be payable with respect to any participating employee under the

Pennzoil-Quaker State Company Salaried Employees Retirement

Plan . . . and imposes limitations on the amount of annual additions

which may be made to the account of any participating employee

under thePennzoil-Quaker State Company Savings and Investment

Plan. . . . [The letter then discussed other tax limitations.] As these

limitations may curtail the retirement benefits which would

otherwise be payable to you and your spouse under the Retirement

Plan and may curtail the contributions which the Company would

otherwise make to your account under the Savings Plan, the Board

of Directors of the Company has authorized the Company’s direct

payment to you and your spouse of certain amounts which are

designed to recoup to you and your spouse any such losses . . .
No. 07-20270

5 Siegel’s Letter of Agreement included an additional phrase here, which read, “for

amounts earned while employed by the Company.” 

6

In sections 1 and 2, the letter provided for long-term payments to be made to the

employee and his spouse to offset reductions in benefits caused by taxes. These

payments included 

monthly pension for life . . . commencing on the date your. . . Early

Retirement . . . commences under the Retirement Plan . . . in an

amount equal to any additional . . . Early Retirement . . . to which

you would have been entitled under the Retirement Plan . . . , if the

limitations therein for the purpose of satisfying Sections 415 and

401(a)(17) of the Code had not been applicable. 

The Letter next described how the amount of recoupment for losses to savings

caused by tax limitations would be calculated, providing in Paragraph 3,

If during any calendar year commencing on or after January 1, 1999

because of application of the limitations included in the Savings

Plan for the purpose of satisfying Sections 415 and 401(a)(17) of the

Code, any Matching Contributions, which would otherwise be made

to the Company for your account under the Savings Plan (or any

successor thereto), are curtailed, the Company shall establish a

Ledger Account and enter thereon as Dollar Equivalents the amount

of the Matching Contribution which was not permitted to be made

for your account because of such limitations. The Dollar

Equivalents entered into the Ledger Account5shall be converted

into Common Stock Equivalents equal to the number of shares of

Common Stock of the Company, par value $0.10 per share . . . that

could have been purchased by the Dollar Equivalents for your

account. . . . After conversion of the Dollar Equivalents to Common

Stock Equivalents, the Ledger Account shall be credited with

additional Dollar Equivalents. . . . Following your termination of

service with the Company, the amount of Common Stock

Equivalents and any Dollar Equivalents credited to your account .

. . shall be distributed to you at the time . . . such amount would
No. 07-20270

7

have been distributed to you if such amount had been held under,

and subject to all the terms of , the Savings Plan . . .

It then explained that a cash recoupment would be distributed “as of the

Effective Date of a change in control of the Company” and would include 

the amountto which you would be entitled under Paragraph 3 above

. . . and using Value . . . for the purpose of converting Common Stock

Equivalents and Dollar Equivalents to cash plus a cash payment

equal to the present value of the benefits that would otherwise be

provided to you and your spouse under Paragraphs 1 and 2 above

[the monthly pension payments for life] . . . computed by reference

to those actuarial and other factors set forth in Pennzoil-Quaker

State Company Benefit Acceleration Agreement Administrative

Procedures . . .

Siegel’s Letter of Agreement had an effective date of December 30, 1998. It

contained terms similar to those in Crowell’s Letter of Agreement. 

When Pennzoil changed control on October 1, 2002, this triggered

Crowell’s and Siegel’s qualification for early retirement, meaning they would

receive payments under the retirement plan beginning at age 55 and the cash

payment under the Letters of Agreement. Defendants paid Siegel $776,221.92.

Siegel alleged that this amount should have included as part of his Considered

Compensation the money he received when he exercised 1997 stock options and

should have totaled $1,434,423.10. Similarly, Defendants paid Crowell

$42,988.05; he alleged that the company owed him $519,571.26, an amount

calculated by including income from his exercise of a stock option in 1997. Siegel

did not pursue the plan’s administrative procedures for contesting benefits
No. 07-20270

6 The district court held that Siegel’s claim was premature as he had failed to exhaust

his administrative remedies under the plan, and Appellees so argue here. The district court

did, however, rule on the merits of Siegel’s claim. On appeal, Siegel does not contend that he

exhausted his remedies. 

7 Pennzoil concedes that “Crowell invoked the Retirement Plan’s administrative

procedures to contest the issue now before the Court.” 

8

payments,6 urging in federal district court that exhaustion was unnecessary for

the excess benefit agreement. Crowell pursued an internal appeal.7 He

contacted Kelley Lang, the plan administrator, to dispute the amount. Lang

consulted with benefits attorneys and other individuals from human resources

regarding plan interpretation and exchanged a series of letters with Crowell.

Lang denied Crowell’s benefits claim, explaining that the Fifth Amendment,

effective March 1, 2002, as interpreted by her, did not include as part of

Considered Compensation the exercise of stock options in 1997; rather, it only

included the exercise of stock options “on or after March 1, 2002.” Following an

appeals hearing, Lang again denied Crowell’s claim on May 14, 2004. Crowell

and Siegel filed separate suits in state court, both maintaining that Defendants

owed them a higher cash payment under the Letters of Agreement and alleging

breach of express and implied-in-fact contract, breach of express and implied

warranties, fraud, and promissory estoppel. Defendants removed the suits to

federal district court. Siegel and Crowell filed motions to remand, which the

district courts denied. Siegel and Crowell filed amended complaints with ERISA

claims, and all parties filed cross motions for summary judgment. The cases

were consolidated, and the district court granted Defendants’ motions for

summary judgment. The district court found that “Siegel was . . . required to
No. 07-20270

8 Crowell v. Shell Oil Co., 481 F.Supp. 2d 797, 808 (S.D. Tex. 2007). 

9

Id. 

10 Id. at 808 n.7. 

11 Id. at 813. 

9

seek the administrative remedies of the Retirement Plan before filing suit”8 and

that he had failed to do so. It concluded that “his benefits claim should be

dismissed”9 but still addressed the merits of his claim, finding that a stay of the

proceedings to allow Siegel to exhaust his remedies was unnecessary.10 Next,

reviewing the propriety of Lang’s benefit decision under an abuse of discretion

standard, the court concluded that Defendants had not abused their discretion

in denying Crowell’s benefits, as they “gave a legally correctinterpretation ofthe

plan provision in question.”11 Finally, the court dismissed Crowell’s claim that

Lang had failed to disclose certain documents and denied plaintiffs’ claim for

attorneys’ fees and costs. 

Plaintiffs appealed, urging that 1) the district courts that initially

addressed their individual suits erred in denying their motions to remand, as

Defendants’ notices of removal were procedurally defective, ERISA does not

apply to the Letters of Agreement at issue in the case, and even if ERISA does

apply, the letters fall under an ERISA exemption, 2) the district court that

addressed Plaintiffs’ consolidated suit failed to consider the summary judgment

evidence in the light most favorable to Plaintiffs, the non-moving party, and 3)

the district court applied an incorrect standard of review in addressing

Defendants’ denial of Plaintiffs’ benefits and erred in affirming the denial, thus

erring in granting summary judgment for Defendants and failing to grant

summary judgment for Plaintiffs. We address each of these in turn. 
No. 07-20270

12 Woods v. Tex. Aggregates, L.L.C., 459 F.3d 600, 601 (5th Cir. 2006). 

13 Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1263 (5th Cir. 1988). 

10

II 

Plaintiffs first contend that the district courts that addressed their suits

prior to consolidation erred in denying their motion to remand and holding that

ERISA preemption applied. They maintain that Defendants failed to meet the

procedural requirements in their notice of removal and that, even absent

procedural errors, ERISA preemption should not apply because the Letters of

Agreement providing for a cash payment are not a “plan” under ERISA. 

Finally,they urge that even ifthe letters are a “plan,” they fall under a statutory

exemption to ERISA. We review de novo a district court’s denial of a motion to

remand.12

Plaintiffs urge that Defendants’ notice of removal was procedurally

defective because it failed to “include an affirmative statement that all

defendants who have been properly served atthe time of removal have consented

in writing”to removal. They maintain that this violates the rule that “all served

defendants must join in the petition no later than thirty days from the day on

which the first defendant was served.”13 But all individual defendants were

listed in the notice of removal. For example, Defendants’ Notice of Removal

under 28 U.S.C. § 1331 in Crowell’s case stated, “Please take notice that

Defendants Shell Oil Company f/k/a or d/b/a Pennzoil-Quaker State Company,

Shell Oil Products Company LLC, Pennzoil-Quaker State Company, Catherine

Lamboley and KelleyLang file this Notice of Removal, and hereby remove to this

Court the action described below.” And Plaintiffs fail to cite to legal provisions

requiring all defendants to consent to removal in writing. Rather, they cite to
No. 07-20270

14 Fed. R. Civ. P. 11(a), (b). 

11

the statute that requires defendants requesting removal to “file in the district

court. . . . a notice of removal signed pursuant to Rule 11 of the Federal Rules of

Civil Procedure and containing a short and plain statement of the grounds for

removal, together with a copy of all process, pleadings, and orders served upon

such defendant or defendants in such action.” Rule 11 requires that each

pleading, motion, or paper “be signed by at least one attorney of record in the

attorney’s name” and “state the signer’s address, e-mail address, and telephone

number.” In signing a pleading, motion, or other paper, the attorney also

certifies generally thatthe paper is not being presented for an improper purpose,

has evidentiary support or will have support upon further investigation, and the

claims are warranted by law or a change in the law.14 Plaintiffs do not contend

that the notice of removal failed to describe the grounds for removal, or that it

was not signed pursuantto Rule 11’s requirements. We find no procedural error.

Next, plaintiffs contend that ERISA preemption does not apply to the

Letters of Agreement, which provide benefits above and beyond those described

in the retirement plan, urging that the Letters of Agreement are not a “plan.”

As such, they maintain, state law should apply to their claims arising from the

Letters of Agreement. 

ERISA preempts any state laws that relate to employee benefit plans,

providing: 

Except as provided in subsection (b) of this section, the provisions

ofthis subchapter and subchapter III ofthis chapter shall supersede

any and all State laws insofar as they may now or hereafter relate
No. 07-20270

15 29 U.S.C. § 1144(a). 

16 Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983).

12

to any employee benefit plan described in section 1002(a) ofthis title

and not exempt under section 1003(b) of this title.15

“A law ‘relates to’ an employee benefit plan, in the normal sense of the phrase,

if it has a connection with or reference to such a plan.”16 If state law relates to

an employee benefit plan, ERISA applies to such a plan and preempts state law:

Except as provided in subsection (b) [governmental plans and

church plans] or (c) [pension plans with voluntary employee

contributions] of this section and in sections 1051, 1081, and 1101

of this title, this subchapter shall apply to any employee benefit

plan that is established or maintained – 

(1) by any employer engaged in commerce or in any industry or

activity affecting commerce; or

(2) by any employee organization or organizations representing

employees engaged in commerce or in any industry or activity

affecting commerce; or

(3) by both. 

ERISA defines a “plan” as follows: 

The terms “employee welfare benefit plan” and “welfare plan” mean

any plan, fund, or program which was heretofore or is hereafter

established or maintained by an employer or by an employee

organization, or by both, to the extent that such plan, fund, or

program was established or is maintained for the purpose of

providing for its participants or their beneficiaries, through the

purchase of insurance or otherwise,(A) medical, surgical, or hospital

care or benefits, or benefits in the event of sickness, accident,

disability, death or unemployment, or vacation benefits,

apprenticeship or other training programs, or day care centers,

scholarship funds, or prepaid legal services, or (B) any benefit
No. 07-20270

17 29 U.S.C. § 1002 (1). 

18 See Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 8 (1987) (citing 29 U.S.C. §

1002(3)) (observing that “the terms ‘employee benefit plan’ and ‘plan’ are defined only

tautologically in the statute”).

19 Id. at 11. 

20 Id. at 12. 

21 Id. at 4 n.1. 

22 Id. 

13

described in section 186(c) of this title (other than pensions on

retirement or death, and insurance to provide such pensions).17

We mustlook to the case law to determine whether the Letters of Agreement are

“plans” as defined by ERISA and whether state or federal law applies, as the

statutory language does not provide a full answer.18 The Supreme Court in Fort

Halifax Packing Co. defined an ERISA plan in terms of the administrative

activities required to coordinate and provide benefits under the plan, holding

that an ERISA plan covers “benefits whose provision by nature requires an

ongoing administrative program to meetthe employer’s obligation.”19 A one-time

benefit, on the other hand, such as a “one-time, lump-sum payment triggered by

a single event,” a payment that “requires no administrative scheme whatsoever

to meet the employer’s obligation” to pay the employee, is not a plan as defined

by ERISA.20 In Fort Halifax, a Maine statute required employers who relocated

or terminated their business to pay “employees for severance pay at the rate of

one week’s pay for each year of employment by the employee” in the business.21

The employer was to make this payment“within one regular pay period after the

employee’s last full day of work.”22 The Court looked to “the plain language of
No. 07-20270

23 Id. at 7. 

24 Id. 

25 Id. at 8. 

26 Id. at 9. 

27 Id.

28 Id. at 11. 

14

ERISA’s pre-emption provision, the underlying purpose of that provision, and

the overall objectives of ERISA itself”23 to determine that the statute did not

regulate plans as defined by ERISA. With respect to the plain language, the

Court observed that ERISA “does not refer to state law relating to ‘employee

benefits,’ but rather ‘employee benefit plans.’”24 Although “the words ‘relate to’

should be construed expansively,” Congress pre-empts only those laws that

relate to plans.25

The Court next asked whether preemption of Maine’s severance statute

would “further the purpose of ERISA pre-emption”26 and meet ERISA’s overall

objectives – whether it would help to “establish a uniform administrative

scheme, which provides a set of standard procedures to guide processing of

benefits” and prevent “differing regulatory requirements in differing States”27

relating to the administration of plans. The Court observed,

Congress intended pre-emption to afford employers the advantages

of a uniform set of administrative procedures governed by a single

set of regulations. This concern only arises, however, with respect

to benefits whose provision by nature requires an ongoing

administrative program to meet the employer’s obligation.28

And the Court concluded, 
No. 07-20270

29 Id. at 14. 

30 Id. at 15. 

31 Id. (quoting 29 U.S.C. § 1001(a)). 

32 Id. (quoting remarks of Representative Dent, 120 Cong. Rec. 29197 (1974)). 

33 Id. (quoting remarks of Senator Williams, 120 Cong. Rec. 29932 (1974)). 

34 Id. at 16 (quoting remarks of Senator Javits, 120 Cong. Rec. 29935 (1974)) (emphasis

omitted). 

15

The Maine statute . . . creates no impediment to an employer’s

adoption of a uniform benefit administration scheme. Neither the

possibility of a one-time payment in the future, nor the act of

making such a payment, in any way creates the potential for the

type of conflicting regulation of benefit plans that ERISA preemption was intended to prevent.29

Finally, the Court looked to ERISA’s “regulatory concerns,”30 which are to

provide “‘safeguards . . . with respect to the establishment, operation, and

administration’”31 of employee benefit plans, “‘prevent abuses of the special

responsibilities borne by those dealing with plans,’”32 “safeguard employees from

‘such abuses as self-dealing, imprudent investing, and misappropriation of plan

funds,’”33 and “provide employees information ‘covering in detail the fiscal

operations of their plan.’”34

Applying a similar analysis to the present letters of agreement, we note

several important distinctions. First, although the benefits at issue here involve

a cash payment, this payment is embedded within a letter that includes a more

comprehensive “plan.” Paragraphs 1 and 2 of the Letters of Agreement provide

for a “monthly pension for life” equal to the difference between the pension with

and without certain tax limitations, paid to the employer and the employer’s
No. 07-20270

35 Paragraph 3 of Siegel’s Letter of Agreement with Pennzoil (Dec. 30, 1998) stated,

“Notwithstanding the foregoing provisions of this Agreement, as of the Effective Date of a

change in control of the Company . . . you will receive from the Company forthwith . . . a cash

payment equalto the present value ofthe benefits that would otherwise be provided to you and

your spouse under Paragraphs 1 and 2 above, determined as of the date prior to the Effective

Date of the change in control and computed by reference to those actuarial and other factors

set forth in the Pennzoil-Quaker State Company Benefit Acceleration Agreement

Administrative Procedures in effect at the applicable date.” 

16

spouse following a change of control. Paragraph 3 then promises a one-time cash

payment for the present value of the amount by which the monthly benefits will

decrease as a result of certain provisions of the Internal Revenue Code.35

Second,theLetters of Agreement providing for monthly pensions and a one-time

payment commencing upon the change in control rely directly on calculations

made in Pennzoil’s employee benefits plans – the Pennzoil-Quaker State

Company Salaried Employees Retirement Plan and the Pennzoil-Quaker State

Company Savings and Investment Plan. The Letters of Agreement state,

As these limitations [in Sections 415 and 401(a)(17) of the Internal

Revenue Code of 1986] may curtail the retirement benefits which

would otherwise be payable to you and your spouse under the

Retirement Plan and may curtail the contributions which the

Company would otherwise make to your account under the Savings

Plan, the Board of Directors of the Company has authorized the

Company’s direct payment to you and your spouse of certain

amounts which are designed to recoup to you and your spouse any

such losses . . . .

The provision for a one-time cash payment also contains explicitlanguage

about the “administrative procedures” required for calculation, stating that the

cash payment shall be “determined as of the date prior to the Effective Date of

the change in control and computed by reference to those actuarial and other

factors set forth in the Pennzoil-Quaker State Company Benefit Acceleration
No. 07-20270

36 Fort Halifax, 482 U.S. at 11. 

37 881 F.2d 166, 175-76 (5th Cir. 1989); see also Wells v. Gen. Motors Corp., 721 F.Supp.

107, 115 (S.D. Miss. 1988) (“In the present case, it is clear that the purpose of GM in

instituting VTEP [Voluntary Termination of Employment Plan] was not to provide its

employees with benefits under the Act but was instead to reduce its work force because of the

poor conditions of the industry and of GM. And, in the court’s view, the termination plan

adopted by GM was not such a plan as envisioned by ERISA. Most of the payments to

employees were made on a single payment basis and were made solely for the purpose of

employee attrition.”). The Voluntary Termination of Employment Plan in Wells “permitted

employees to sell their seniority back to the company and terminate their employment in

exchange for monetary payment.” Id. at 109. “[E]ach of the plaintiffs ultimately chose to

accept the VTEP option and received payments ranging from $10,000 to $22,000, depending

on their years of seniority.” Id. 

38 953 F.2d 960, 961 (5th Cir. 1992). 

39 881 F.2d at 168. 

17

Agreement Administrative Procedures in effect at the applicable date.” The

Letters of Agreement, including the portions referring to the one-time cash

payment upon a change of control of Pennzoil, require ongoing administrative

involvement. Interpreting the Letters of Agreement as ERISA “plans” also

furthers the purpose of ERISA pre-emption.36 If the laws and regulations

relating to the interpretation and administration of the Letters of Agreement

and the retirement plan used to calculate some of the benefits under the Letters

of Agreement were not uniform, this could lead to differing outcomes. 

The Letters of Agreement are also distinct from the one-time termination

benefit distributed in Wells v. General Motors Corp.37 and the cash severance

payment issued upon a change of control in Fontenot NL Industries, Inc.38 In

Wells, GM was downsizing and offered employees a “Voluntary Termination of

Employment Plan,” wherein they could receive severance pay “either in lumpsum or two-year installment payments” in exchange for agreeing to resign.39
No. 07-20270

40 Id. at 172. 

41 Id. at 176.

42 Wells, 721 F.Supp. at 115. 

43 Id. at 109. 

18

This court found that ERISA’s preemptive force is “broad” but “not so broad as

to reach” GM’s Voluntary Termination of Employment Plan.40 Wells concluded

that

[t]he operative facts in Fort Halifax are remarkably similar to those

in the instant case. GM established a procedure by which employees

could elect to receive a one-time lump payment if they ceased

working at the plant. The plan was not ongoing, nor was there any

need for continuing administration of the payment program (though

employees could elect a two-year installment payment option).41

As the district court in Wells described the benefits,

In the present case, it is clear that the purpose of GM in instituting

. . . [a Voluntary Termination of Employment Plan] was not to

provide its employees with benefits under the Act but was instead

to reduce its work force because of the poor conditions of the

industry and of GM. And, in the court’s view, the termination plan

adopted by GM was not such a plan as envisioned by ERISA. Most

of the payments to employees were made on a single payment basis

and were made solely for the purpose of employee attrition.42

The plan in Wells “permitted employees to sell their seniority back to the

company and terminate their employmentin exchange for monetary payment.”43

“[E]ach of the plaintiffs ultimately chose to accept the VTEP [Voluntary

Termination Employment Plan] option and received payments ranging from
No. 07-20270

44 Id. 

45 953 F.2d at 961. 

46 Id. at 962. 

47 Id.

19

$10,000 to $22,000, depending on their years of seniority.44 Although the

individual cash payment in this case does not itself require continuing

administration, the letter of which it is a part contains other provisions that do.

As we have discussed, the cash payment to Crowell and Siegel relies upon

calculations made under plans that require continuing administration, and that

Letter of Agreement refers specifically to administrative procedures that must

be followed. The payments under the Letters of Agreement would differ

substantially depending on the calculations made under the retirement and

savings plans for each employee terminated upon a change in control.

Finally, the lump sum payments in Fontenot, like those in Wells, did not

rely upon a comprehensive plan or administrative plan, unlike the cash

payments here. Fontenot addressed a “golden parachute” plan – a “Senior

Executive Severance Plan – provided by NL Industries to certain employees.45

This court found the payments under the golden parachute plan to be

indistinguishable from the plans in Wells andFort Halifax,46 quoting the district

court’s finding that the golden parachute plan

required Defendant to make only a one-time lump sum payment to

certain employees. The requirement to pay was triggered by a

single event. . . . – a contingency that may never have

materialized. . . . This theoretical possibility of a one-time

obligation in the future created no need for an on-going

administrative program to process claims and pay benefits.47
No. 07-20270

48 Fort Halifax, 482 U.S. at 6. 

20

Plaintiffs urge that the letters are “indisputably” similar to those in Wells and

Fontenot because “each compensation scheme provided no opportunity for any

exercise of discretion regarding the determination of whether an employee would

receive compensation under the scheme, or how much compensation would be

received.” This fails to recognize the discretion required in making benefits

determinations under several portions oftheLetters of Agreement, including the

determination of monthly amounts due under the retirement plan, amounts

owed under the savings plan, the tax limitations on those amounts due, and the

“Dollar Equivalent” and “Common Stock Equivalent” calculations. Unlike the

plans in Wells and Fontenot, the Letters of Agreement “establish[] . . . [or]

require[] an employer to maintain, an employee welfare benefit ‘plan’”48 and are

“plans” as defined by ERISA. The district court did not err in denying Plaintiffs’

motion to remand the case to state court. 

Plaintiffs maintain that even if ERISA applies, the Letters of Agreement

are “excess benefit plans” that fall under an ERISA exemption. Accordingly,

they urge, this case should not fall under ERISA. The exemption in 28 U.S.C.

§ 1003(b)(5) provides, “The provisions of this subchapter shall not apply to any

employee benefit plan if – such plan is an excess benefit plan (as defined in

section 1002(36) of this title) and is unfunded.” Section 1002(36) defines an

excess benefit plan as 

a plan maintained by an employer solely for the purpose of

providing benefits for certain employees in excess of the limitations

on contributions and benefits imposed by section 415 of Title 26 on

plans to which that section applies without regard to whether the

plan is funded. To the extent that a separable part of a plan (as

determined by the Secretary of Labor) maintained by an employer
No. 07-20270

49 28 U.S.C. § 1002 (36). 

50 See, e.g., Garratt v. Knowles, 245 F.3d 941, 948 (7th Cir. 2001) (finding no exemption

where a plan “had the purpose of avoiding not only the limitations contained in § 415 of the

Internal Revenue Code, but also those limitations contained in § 401(a)(17) of Title 26”). 

51 Bourgeois v. Pension Plan for the Employees of Santa Fe Int’l Corps., 215 F.3d 475,

479 (5th Cir.2000) (citing Denton v. First Nat’l Bank of Waco, 765 F.2d 1295, 1300 (5th

Cir.1985)).

52 Crowell, 481 F.Supp. 2d at 803. 

21

is maintained for such purpose, that part shall be treated as a

separate plan which is an excess benefit plan.

We are not persuaded that the Letters of Agreement are “excess benefit plans”

that fall under this exemption. As the language of the statute provides, excess

benefit plans under ERISA are plans “maintained . . . solely for the purpose of

providing benefits . . . in excess of the limitations on contributions and benefits

imposed by section 415 of Title 26 on plans to which that section applies.”49 The

Letters of Agreement provide for a monthly pension for life for the employee and

the employee’s spouse, as well as payments to counteract the limitations of

Sections 415 and 401(a)(17) of the Internal Revenue Code. The plans are not

solely to provide benefits in excess of limitations imposed by Section 415.50

III

Having determined that ERISA applies to the Letters of Agreement, we

move to the exhaustion issue. “This court requires that claimants seeking

benefits from an ERISA plan . . .first exhaust available administrative remedies

under the plan before bringing suit to recover benefits.”51 The district court

found that “Siegel never invoked the Plan’s appeals procedures to contest

Pennzoil’s construction of the Plan’s terms,”52that he was required to invoke
No. 07-20270

53 Id. at 808. 

54 The court stated in a footnote,

Rather than dismiss his case outright, Siegel requests thatthe court stay

the proceedings so that he may pursue administrative remedies. In other

circumstances the court might agree. But in this case the parties have

already briefed the court on the merits ofthe benefits claim in both suits,

and the court is ready to rule. And as the court finds Crowell’s identical

claim insufficient as a matter of law, see infra, there is no need to stay

Siegel’s case when the same unfavorable outcome is assured. The court

thus will reach the merits of Shell’s summary judgment motions in both

cases.

Crowell, 481 F.Supp. 2d at 808 n.7 (internal citation omitted). 

55 Citing Sookma v. Millard, 151 Fed. Appx. 299, 301 (5th Cir. 2005); Yohey v. Collins,

985 F.2d 222, 225 (5th Cir. 1993). 

22

these procedures, and that accordingly his “benefits claim should be dismissed.”53

It nevertheless addressed Siegel’s challenge to the benefits denial, finding that

a stay of the proceedings to allow for exhaustion as requested by Siegel was

unnecessary because both Crowell’s and Siegel’s challenges to the benefits denial

were “insufficient as a matter of law.”54 The court concluded in its final

judgment, “[J]udgment is granted in favor of defendants on plaintiffs’ §

1132(a)(1) benefits claims and Crowell’s § 1132(c) nondisclosure claim.” 

Siegel does not raise the exhaustion issue on appeal, contesting neither the

district court’s refusal to stay the proceedings to give Siegel the opportunity to

exhaust nor its determination that he failed to exhaust available administrative

remedies. Defendants urge on appeal that “the District Court properly held that

. . . [Siegel’s] lawsuit was premature” due to his failure to exhaust and that “by

failing to address an alternate basis for dismissal” in his brief, Siegel has

abandoned any exhaustion arguments.55 Although Siegel did not challenge here
No. 07-20270

56 Transitional Learning Ctr. at Galveston v. Metro. Life Ins. Co., 1996 WL 625412 at

*1 (No. 96-40154, 5th Cir. Oct. 19, 1996) (unpublished) (citing Medina v. Anthem Life Ins. Co.,

983 F.2d 29, 33 (5th Cir. 1993)); see also Bourgeois, 215 F.3d at 481 (holding in the ERISA

context that “a court should not relinquish its jurisdiction because of a failure to exhaust

administrative remedies when there was a valid reason for such failure”). 

57 Transitional Learning Ctr., 1996 WL 625412 at *1 ; see also Bourgeois, 215 F.3d at

479 (discussing “the affirmative defense of failure to exhaust administrative remedies” in the

context of an ERISA plan (citing Hall v. National Gypsum Co., 105 F.3d 225, 232 (5th

Cir.1997))). 

58 See, e.g., Metro. Life Ins. Co. v. Price, 501 F.3d 271, 279-80 (3d. Cir. 2007) (observing

that “Congress has expressly provided for jurisdiction over ERISA cases in 29 U.S.C. § 1132(e).

Neither that provision nor any other part of ERISA contains anexhaustion requirement. Thus,

as a judicially-crafted doctrine, exhaustion places no limits on a court’s adjudicatory power”

and holding that “ERISA’s exhaustion doctrine places no limits on a federal court’s subject

matter jurisdiction”); Paese v. Hartford Life Accident Ins. Co., 449 F.3d 435, 445-46 (2d Cir.

2006) (finding that ERISA’s exhaustion requirement is “purely a judge-made concept that

developed in the absence of statutory language demonstrating that Congress intended to make

ERISA administrative exhaustion a jurisdictional requirement” and concluding that ERISA

exhaustion is an affirmative defense (emphasis added)).

23

the district court’s refusal to stay the proceedings to allow exhaustion, it is of no

moment. The district court addressed his claim on the merits, and he appeals

that decision. We have the merits of Crowell’s claim before us with no shadow

of non-exhaustion, and exhaustion is not here a jurisdictional requirement.

“[W]e have never construed the [ERISA exhaustion] doctrine strictly as a

jurisdictional bar”56 and have referred to it as a “defense.”57 Other circuits have

expressly held that ERISA exhaustion is not jurisdictional,58 and we agree.

While the district court stepped over the defense of exhaustion, Defendants are

the beneficiary, winning on the merits. With these facts we resolve the merits

of both Siegel’s and Crowell’s appeal. 

IV 

Plaintiffs maintain that the district court “indulged every reasonable

inference (and then some) in Shell’s favor,” made “evidentiary findings reserved
No. 07-20270

59 Plaintiffs point, for example,to the district court’s statementthat“Siegel’s contention

is clever, but ultimately unpersuasive.” This statement related to Siegel’s legal contention that

“the exhaustion requirement is inapplicable to his case.” Plaintiffs also point to the court’s

statement that “[i]n other circumstances the court might agree” and “[a]t first blush, plaintiffs’

argument seems logical. Upon closer inspection, however, its intellectual force dissipates.”

Both of these statements also related to Plaintiffs’ legal and interpretive, as opposed to factbased, arguments – the first to Siegel’s request that “[r]ather than dismiss his case outright

. . . that the court stay the proceedings so that he may pursue administrative remedies,” and

the second to Plaintiffs’ contention that construing a plan amendment one way “would ‘cripple

retirees’ benefits,’ and this result cannot have been the intent of the Fifth Amendment.”

60 See, e.g., Corry v. Liberty Life Assur. Co. of Boston, 499 F.3d 389, 398 n.12 (5th Cir.

2007) (holding that“‘the administrative record consists of relevantinformation made available

to the administrator prior to the complainant’s filing of a lawsuit and in a manner that gives

the administrator a fair opportunity to consider it’” and that it was not an abuse of discretion

24

for a trial setting,” and admitted “hearsay . . . offered by Shell as undisputed

fact.” “Time and again,” they urge, “the District Court’s opinion concedes the

strength of Appellants’ arguments, the[n] proceeds to make ‘findings’ that

Appellees’ arguments are more compelling.” Plaintiffs conclude that the court

“misapplied the standards for review of a summary judgment.” 

Drawing all factual inferences in Plaintiffs’ (the non-movants’) favor, the

court came to the legal conclusion that it should grant Defendants’ summary

judgment claims.59 This is the proper summary judgment standard. A court is

not required to draw legal inferences in the non-movant’s favor on summary

judgment review. Furthermore, the district court did not admit the evidence

that plaintiffs describe as “hearsay” – evidence of Lang’s consultations with a

benefits attorney and senior counsel, the payroll director, and Pennzoil’s former

Vice President of Human Resources – to help establish the truth of the matter

asserted. In discussing Lang’s consultation with these individuals, the district

court summarized the course of events and looked to the plan interpretations

given by various employees to Lang before Lang made the ultimate decision.60
No. 07-20270

for the district court to admit this information (quoting Vega v. Nat’l Life Ins. Serv., Inc., 188

F.3d 287, 300 (5th Cir.1999) (en banc))). 

61 Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111, 112-13 (1989).

25

Nor do Plaintiffs maintain that they objected to the admissibility of the alleged

hearsay in district court. 

V

Finally, we address Plaintiffs’ contention that the district court erred in

upholding the administrator’s denial of benefits to Plaintiffs. Plaintiffs maintain

that the district court “applied the incorrect standard of review for a denial of

benefits under ERISA” in applying an abuse of discretion standard. They urge

thatthe standard is de novo because “Shell was not expressly given discretionary

authority to determine eligibility for benefits nor was it given any authority to

construe the plan’s terms.” When a plan gives a trustee the power to exercise

discretionary powers, a district court appropriately reviews a denial of benefits

for an abuse of discretion. Where a plan does not grant such discretion, de novo

review is appropriate.61 Crowell’s and Siegel’s retirement plans, which formed

much of the basis for calculating the benefits provided under the Letters of

Agreement, provided,

The Retirement Board, on behalf of the Members, Spouses and

Contingent Annuitants, shall enforce this Plan in accordance with

its terms and shall have all powers necessary for the

accomplishment of that purpose, including, but not by way of

limitation, the following powers: (a) To construe and interpret the

Plan, decide all questions or [sic] eligibility and determine the

amount, manner and time of payment of any benefits hereunder . .

. . (i) To interpret and construe all terms, provisions, conditions and

limitations of this Plan and to reconcile any inconsistency or supply

any omitted detail that may appear in this Plan and to such extent,

consistent with the general terms of this Plan, as the Retirement
No. 07-20270

62 See Olander v. Bucyrus-Erie Co., 187 F.3d 599, 604-07 (7th Cir. 1999) (where a

supplementary pension benefit plan “incorporated parts of . . . [a retirement plan] by

reference,” and the retirement plan gave the fiduciary discretion to determine benefit

eligibility, the proper standard of review was an abuse of discretion). 

63 See, e.g., Edwards v. Texas-New Mexico Power Co., 259 F.Supp. 2d 544 (N.D. Tex.

2003) (abuse of discretion review applied to a benefits interpretation under a supplemental

retirement plan where “[d]etermination of benefits under the excess benefit plan, as

supplemented by the supplemental employee retirement plan (‘SERP’), necessarily depended

upon the underlying pension plan, which contained the relevant terms and definitions. The

26

Board shall deem necessary and proper to effectuate thePlan for the

greatest benefit of all the parties interested in the Plan . . . 

The plans as amended also gave the Board this authority, providing in the Fifth

Amendment that the Retirement Board’s determination of the Considered

Compensation of a Member would be “conclusive.” The Seventh Circuit has held

that where a supplemental benefits plan expressly incorporates the terms of a

retirement plan, and the retirement plan gives the administrator the discretion

to interpret the plan terms, the appropriate standard of review is an abuse of

discretion.62 We have not addressed this issue but agree with the Seventh

Circuit’s reasoning. While the Letters of Agreement do not expressly incorporate

the retirement plan terms, they rely directly on calculations under the

retirement plan to determine benefits due, compensating employees for

limitations imposed by the Internal Revenue Code “on the amount of retirement

benefits which may be payable with respectto any participating employee under

the Pennzoil-Quaker State Company Salaried Employees Retirement Plan (the

‘Retirement Plan’). . . .” As the retirement plan gives the administrator full

discretion to determine eligibility for benefits, abuse of discretion review also

logically applies to the determination of benefits under the Letters of

Agreement.63 The district court did not err in applying an abuse of discretion
No. 07-20270

pension plan also gave the plan administrator ‘complete and final discretionary authority to

construe and interpret’ the plan”). 

64 Crowell, 481 F.Supp. 2d at 808. 

65 Id. at 809. 

66 Indeed, less deference is due where a plaintiff sufficiently alleges that conflict of

interest exists. See MacLachlan v. ExxonMobil Corp., 350 F.3d 472, 478-79 (5th Cir. 2003)

(“Where . . . an administrator’s decision is tainted by a conflict of interest, the court employs

a “sliding scale” to evaluating whether there was an abuse of discretion. This approach does

not mark a change in the applicable standard, but only requires the courtto reduce the amount

of deference it provides to an administrator’s decision. . . .The degree to which a court must

abrogate its deference to the administrator depends on the extent to which the challenging

party has succeeded in substantiating its claim that there is a conflict.” (citations and internal

citations omitted)). 

27

standard. As the district court found in the context of exhaustion, a benefits

claim under each Letter of Agreement – what the court called the “Excess Plan”

– “is inseparable from an interpretation ofthe Retirement Plan.”64 “When excess

plans entirely depend on the definitions of a companion retirement plan, the

court should exercise deference in reviewing the interpretations of an

administrator with discretionary authority.”65

Plaintiffs maintain that even if an abuse of discretion standard of review

applies, the district court should have afforded less deference to the plan

administrator’s determination because “the decision maker is an insurer paying

claims out of its own assets” and has a conflict of interest.66 The district court

found that “Crowell . . . presented no evidence of a conflict of interest other than

to assert that Lang, a Shell employee, is ‘manifestly’ operating under a conflict

because any benefits granted to Crowell will also be paid by Shell, the plan
No. 07-20270

67 Crowell, 481 F.Supp. 2d at 810 n.9. 

68 350 F.3d at 479 n.8.

69 128 S.Ct. 2343, 2348 (2008). 

70 Id. (quoting Firestone, 489 U.S. at 115). 

28

sponsor.”67 Until recently, this bare assertion was insufficient to establish a

conflict of interest claim. As we observed in MacLachlan v. ExxonMobil Corp.,

The mere fact that benefit claims are decided by a paid human

resources administrator who works for the defendant corporation

does not, without more, suffice to create an inherent conflict of

interest. Were that enough, there would be a near-presumption of

a conflict of interest in every case in which an employer both offers

a plan and pays someone to administer it, making a full application

of the abuse of discretion standard the exception, not the rule.68

In their appellate brief, Plaintiffs argue, as they did before the district court,

that “[i]n the instant case, Appellees are, manifestly, operating under a conflict

of interest, as any benefits paid come directly out of Appellees [sic] fisc, and

payment of Appellant’s [sic] claims may set a precedentfor enhanced benefits for

many other retirees.” Although formerly insufficient under MacLachlan, this

claim meets the conflict of interest standard recently elucidated by the Supreme

Court in Metropolitan Life Insurance Company v. Glenn. The Supreme Court

held that “the fact that a plan administrator both evaluates claims for benefits

and pays benefits claims creates the kind of ‘conflict of interest’”69 discussed in

Firestone – wherein “[i]f ‘a benefit plan gives discretion to an administrator or

fiduciary who is operating under a conflict of interest,’”70 we must take that

conflict into consideration. 
No. 07-20270

71 Pickrom v. Belger CartageServ., Inc., 57 F.3d 468, 471 (5th Cir. 1995) (citing Chevron

Chem. Co. v. Oil, Chem. and Atomic Workers Local Union 4-447, 47 F.3d 139, 144 (5th

Cir.1995)). 

72 Id. (“We apply the abuse of discretion standard through a two-step inquiry,” and,

under the first step, “address the question of whether the Trustees’ interpretation of the

Pension Plan was legally correct,” looking to “the facts in the record and the language of the

Pension Plan itself”). 

73 Threadgill v. Prudential Sec. Group, Inc., 145 F.3d 286, 292 (5th Cir. 1998); see also

Wildbur v. ARCO Chemical Co., 974 F.2d 631, 637 (5th Cir. 1992) (“Application of the abuse

of discretion standard may involve a two-step process. First, a court must determine the legally

correct interpretation of the plan. If the administrator did not give the plan the legally correct

interpretation, the court must then determine whether the administrator’s decision was an

abuse of discretion.”). 

74 See Threadgill, 145 F.3d at 293; see also Tolson v. Avondale Indus., Inc., 141 F.3d

604, 608 (5th Cir.1998) (“Only if the court determines that the administrator did not give the

plan the legally incorrect interpretation, must the court then determine whether the

administrator’s decision was an abuse of discretion.”). 

75 Metro. Life, 128 S.Ct. at 2350 (quoting Firestone, 489 U.S. at 115). 

76 Id. at 2351. 

29

We review de novo the district court’s conclusion that the plan

administrator did not abuse her discretion in denying Plaintiffs’ benefits,71

applying an abuse of discretion review to the benefits denial and following a twostep process.72 We first ask whether the plan administrator’s determination was

“legally correct.”73If it was, our inquiry ends here; if not, we ask whether the

determination was an abuse of discretion.74 Because the administrator had a

conflict of interest, we weigh the conflict of interest as a “‘factor in determining

whether there is an abuse of discretion’”75 in the benefits denial, meaning we

“take account of several different considerations of which conflict of interest is

one.”76
No. 07-20270

77 Threadgill, 145 F.3d at 292-93 (quoting Wildbur, 974 F.2d at 637-38). 

78 Gosselink v. AT&T, Inc., 272 F.3d 722, 727 (5th Cir. 2001). 

30

To determine whether the district court erred in finding that the

administrator’s interpretation of a plan is legally correct, we look to

(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.77

“[W]hether the administrator’s interpretation is consistent with a fair reading

of the plan” is “the most important factor to consider”78in the three-step

analysis. 

In denying Crowell’s benefits claim, Lang stated,

The Plan was amended on May 13, 2002, (by the Fifth Amendment

to the Plan) to change the definition of Considered Compensation to

include “income arising from the exercise or cash-out of a stock

option.” This amendment was effective March 1, 2002. By making

this amendment effective March 1, 2002, I have determined thatthe

intent of the amendment was to apply prospectively only to income

received by an employee arising from the exercise of a PQS stock

option on or after March 1, 2002, and that the intent of the

amendment was not to require the Plan to recalculate the

Considered Compensation for every Member of the Plan from 1997

forward based upon the exercise of stock options in 1997 and later.

My interpretation of the Fifth Amendment to the Plan is bolstered

by the actual administration of the Plan since May of 2002. . . .

Since the adoption of the Fifth Amendment, the only stock option

exercises that have been taken into account in calculating the

Considered Compensation under the Plan have been those that were

exercised on or after March 1, 2002 and prior to March 1, 2002. . .
No. 07-20270

79 Crowell, 481 F.Supp. 2d at 810. 

80 Id. 

81 Plaintiffs further urge that“[t]he Fifth Amendment’s replacement definition does not

distinguish ‘wages’ from ‘option’ income, and if Lang’s logic is applied uniformly, “‘Considered

Compensation’ can . . . only include normal wages and salary actually paid on or after the

March 1, 2002 effective date.” Lang did not, they maintain, limit normal wages and salary.

This is in the same vein as the “phantom income” arguments, as Plaintiffs do not contend that

Lang included any other Member’s income from stock option exercises in pensionable income;

rather, they more generally urge that Lang failed to limit pensionable income to normal wages

and salary. 

82 See Crowell, 481 F.Supp. 2d at 811 (describing Siegel’s claims regarding phantom

income versus actual earnings as claims involving the inconsistent application of “other Fifth

Amendment provisions not at issue in this litigation”). 

31

. No Member . . . has been credited under the Plan’s definition of

Considered Compensation with the income resulting from any

exercise of a stock option prior to March 1, 2002.

Similarly, Defendants omitted income from Siegel’s exercise of 1997 stock

options in calculating Siegel’s cash payment. The district court found that

Defendants’ interpretation of the Fifth Amendment, which included “only income

realized from option exercises on or after March 1, 2002, but not before, within

Considered Compensation,”79 was “uniformly applied in determining Crowell[’s]

. . . pensionable earnings.”80 Plaintiffs maintain that Lang’s decision was not

uniformly applied, urging that “‘[p]hantom income’ was included in several of the

executives’ Considered Compensation for purposes of a retirement plan

calculation.”81 But as the district court recognized, the “phantom income” versus

“actual earnings” question arose under a different part of the Fifth Amendment

unrelated to the definition of Considered Compensation.82 Furthermore,

Plaintiffs concede in their brief, regarding the phantom income issue, that “for

2003, 2004, and 2005,” Siegel received as part of “Total Pensionable Earnings”
No. 07-20270

83 See, e.g., Batchelor v. Int’l Brotherhood of Electrical Workers Local 861 Pension and

Retirement Fund, 877 F.2d 441, 444-45 (5th Cir. 1989) (under the uniformity question, asking

whether the parties had presented evidence as to whether the administrators had awarded a

particular type of benefit (“past service credit”) specifically to “people with . . . [plaintiff’s]

employment history”). 

32

“income which Siegel did not ‘actually receive.’” This income was from a

provision in Siegel’s severance agreement, notthe Letters of Agreement at issue

here, and did not involve questions of income “actually received” or not received

in 1997. Plaintiffs also urge that “the Ninth Amendment, which has an effective

date of March 7, 2003, was actually interpreted by Shell to include options

cashed out prior to that effective day.” The Ninth Amendment addressed income

from stock options after March 1, 2003, and provided that such income would be

excluded from considered compensation. Analysis of the Ninth Amendment does

not explain whether or how Shell inconsistently applied the definition of

Considered Compensation to the exercise of 1997 stock options. Finally,

Plaintiffs point to the Fifth Amendment’s language, urging, “If we apply Lang’s

construction ‘logic’ in a uniform manner to the entire definition of ‘Considered

Compensation’ set forth in the Fifth Amendment . . . it necessarily follows that

‘Considered Compensation’ also can only include normal wages and salary

actually paid on or after the March 1, 2002 effective date.” This is a fair reading

argument, not an argument as to whether Lang uniformly applied the

Considered Compensation portion of the plan to other similarly situated

employees. Plaintiffs have failed to point to any record evidence showing a nonuniform construction of the “Considered Compensation” portion of the plan as

it applied to Crowell, Siegel, and other plan participants with stock option

earnings from 1997.83
No. 07-20270

84 Crowell, 481 F.Supp. 2d at 812.

85 Tucker v. Shreveport Transit Mgmt. Inc., 226 F.3d 394, 298 (5th Cir. 2000) (quoting

Threadgill, 145 F.3d at 292; Jones v. Ga. Pac. Corp., 90 F.3d 114, 116 (5th Cir. 1996); Walker

v. Wal-Mart Stores, Inc., 159 F.3d 938, 940 (5th Cir. 1998) (per curiam)). 

33

As to the next element of the “legally correct” inquiry – the fair reading

issue – Plaintiffs urge that “Lang’s decision to apply the effective date of the

Fifth Amendment one way to part of the replacement definition of ‘Considered

Compensation’ and a different way to another part of the same sentence of the

same definition, . . . cannot be seen as anything but an unfair reading of the

Fifth Amendment and of the Plan.” In other words, as summarized by the

district court,they maintain thatthe “exclusion of option exercises before March

1, 2002 means that wages and salary earned before that date should also be

excluded, if the effective date determines the beginnings of earnings

calculations.”84 We are not convinced.

[T]he “[e]ligibility for benefits under any ERISA plan is governed in

the first instance by the plain meaning of the plan language.” We

interpret ERISA plans “in [their] ordinary and popular sense as

would a person of average intelligence and experience.” In other

words, we must interpret ERISA provisions as they are likely to be

“understood by the average plan participant, consistent with the

statutory language.”85

The original plan definition of Considered Compensation in Crowell’s and

Siegel’s retirement plans, effective January 1, 1999, read as follows:

Considered Compensation: The compensation actually paid to a

member . . . by his Employer for personal services, including normal

salary, wages, commissions, overtime pay, severance pay . . . ,

vacation pay, pay in lieu of vacation, bonuses and amounts

distributed under any unfunded plan of deferred compensation . . .
No. 07-20270

86 Emphasis added. 

87 Emphasis added. 

34

, but exclusive of . . . income arising from the exercise of a stock

option . . . .

86

The Fifth Amendment to the retirement plans provides,

Pennzoil-Quaker State Company . . . , having established the

Pennzoil-Quaker State Company Salaried Employees Retirement

Plan, effective January 1, 1999, having amended and merged the

Plan, effective January 1, 2001 and having again amended and

merged and renamed said Plan as the Pennzoil-Quaker State

Company Employees Retirement Plan (the “Plan”), effective

January 1, 2002, and having reserved the right to amend the Plan,

does hereby amend the Plan, effective March 1, 2002, as follows: 

1. The Definition of “Change of Control” in Section 1.10 of the

Salaried Employees Retirement Plan Document and in Section 1.7

of the Pension Plan Document for Salaried Employees are each

hereby amended in their entirety to read as follows . . . . 

2. The definitions of “Considered Compensation” in Section 1.11 of

the Salaried Employees Retirement Plan Document and in Section

1.11 of the Pension Plan Documentfor Salaried Employees are each

hereby amended in their entirety to read as follows: 

1.11 Considered Compensation: The compensation actually paid to

a Member (excluding a Transferred Member) . . . by his Employer

for personal services, including normal salary, wages, commissions,

overtime pay, severance pay . . . vacation pay, pay in lieu of

vacation, bonuses . . . , amounts distributed under any unfunded

plan of deferred compensation . . . and income arising from the

exercise or cash-out of a stock option . . . .

87

3. Section 2.3 of the Salaried Employees Plan Document is hereby

amended, effective January 1, 2002, by adding a subsection (j)
No. 07-20270

88 Crowell, 481 F.Supp. 2d at 812. 

35

thereto to read as follows: “Credit Union Employees: Pursuant to a

merger of the First Energy Credit Union . . . and the Houston

Energy Credit Union, the Credit Union withdraws participation in

the Plan on behalf of its employees . . . 

Defendants’ reading of this language to mean that as of March 1, 2002, the

amendment would apply “prospectively only to income received by an employee

arising” from the exercise of a stock option “on or after March 1, 2002,” is a fair

reading of the amendment. As the district court found, “Before the enactment

of the Fifth Amendment, wages and salaries had always been included within

Considered Compensation. . . . [R]ather than limiting any such income accrued

before the effective date, the Fifth Amendment simply added a new form of

income, namely that realized from the exercise of a stock option, on or after the

amendment’s effective date.”88 Plaintiffs urge that “the plain language of the

Fifth Amendment has no date qualifier” – that “unlike subsections one and two,

subsection three specified its own effective date (January 1, 2002), and that

language it added contained a date qualifier.” They maintain that this,

combined with the fact that the “Ninth Amendment’s replacement definition of

‘Considered Compensation’ contained date qualifying language; specifically,

‘income arising from the exercise or cash-out of a stock option prior to March 1,

2003 . . . ,” means that the plan plainly failed to include an effective date for the

new definition of Considered Compensation. To the contrary, a fair reading of

the plain language shows that the effective date for sections 1 and 2 of the Fifth

Amendment is March 1, 2002 – as shown by the language “effective March 1,

2002, as follows” directly preceding sections 1 and 2 – and that the effective date

for section 3 is January 1, 2002. Finally, Siegel urges that
No. 07-20270

89 Batchelor, 877 F.2d at 445 (quoting Lowry v. Bankers Life & Cas. Retirement Plan,

865 F.2d 692, 695 (5th Cir. 1989)). 

36

the Fifth Amendment “entirely” replaced the previous definition of

‘Considered Compensation,’ and because the replacement was made

effective as of March 1, 2002, the Fifth Amendment’s definition of

‘Considered Compensation’ was the only definition of ‘Considered

Compensation’ in existence at the time Siegel’s lump-sum change

in control payout became due on October 1, 2002. 

Because we find that Defendants’ determination that the Fifth Amendment’s

definition of Considered Compensation applied only to income earned from the

exercise of stock options on or after March 1, 2002, is a fair reading of the plan

language, this argument is not persuasive. Even if the Fifth Amendment’s

definition of Considered Compensation is the only definition that applied in

October 2002, that new definition did not include income from the exercise of

stock options in 1997. 

Under the third prong of the “legally correct” test, 

in reviewing the correctness of the . . . interpretation, we must

determine whether either of the interpretations would give rise to

“substantial unanticipated costs to the Plan.” If a given

interpretation would result in such costs, that interpretation is less

likely to be legally correct.89

Plaintiffs urge that “Crowell’s interpretation presents no material unanticipated

costs,” as Pennzoil had “at least four weeks from the time Appellants first raised

the stock option income issue” and “the $500,000 figure . . . is only a possible

payout in the distant future, assuming all impacted employees were to stay and

that no future Amendments would revise the definition.” Defendants urge that

they “never anticipated that the Fifth Amendment would sweep all pre-March
No. 07-20270

90 See, e.g., Ellis v. Liberty Life Assur. Co. of Boston, 394 F.3d 262, 272 (5th Cir. 2004)

(finding that unanticipated costs would be incurred where an alternate reading of the plan

would lead to an “absurd result” and would render a phrase “meaningless surplusage”).

91 See, e.g., Atteberry v. Mem’l-Hermann Healthcare Sys., 405 F.3d 344, 349 (5th Cir.

2005) (finding that “a different interpretation of the . . . [plan] than the one adopted by the

Administrative Committee would result in unanticipated costs”). 

37

1, 2002 income from option exercises into Considered Compensation” and that

“acceptance of Appellants’ interpretation of the Fifth Amendment could result

in the assumption of significant unanticipated costs.” Both of these arguments

somewhat miss the mark. The question of “unanticipated” costs is more

accurately approached as an inquiry into the plain reading of the plan language

and whether a proposed alternate reading would result in costs unanticipated

under the plain meaning.90 In that respect, costs arising from benefits awarded

for the 1997 exercise of stock options would be unanticipated in light of our de

novo review of a fair reading of the plan. However, the term “unanticipated” to

some extent requires an inquiry into how the administrator interpreted the plan

– an inquiry thatis in this case inherently intertwined with the “plain language”

of the plan – and whether the alternate interpretation would lead to costs

unanticipated by the administrator.91 If, for example, an administrator had

been interpreting the plan contrary to its plain language, and an alternate

interpretation using a fair reading of the plan’s plain language suggested that

more benefits were due, that alternate interpretation would result in costs that

were not subjectively anticipated by the employer but should have been

objectively anticipated. As such, an alternate interpretation under a fair reading

would not result in unanticipated costs. In that respect, the parties’ arguments

are relevant. 
No. 07-20270

38

Two e-mails, viewed in the light most favorable to Plaintiffs, show that at

least one employee may have temporarily followed Plaintiffs’ interpretation of

the plan. The record evidence shows that an outside attorney wrote an e-mail to

Linda Condit, a Pennzoil employee, stating that “in reviewing the retirement

plan definition of compensation and the amendment, I determined that nothing

has actually changed. Options, conditional stock etc., etc. has always been

included.” Condit interpreted this e-mail to mean that “Laura confirmed that

their opinion is that the option exercises have been included all along (not just

going back to March 1, 2002). The amendment to the plan will clarify this.” The

outside attorney later explained, according to the plan administrator, that

“[w]hen she was referring to compensation changes being effective prior to

March 1, 2002, she was referring to changes made by the Second Amendment to

the plan.” Other record evidence shows that Defendants never included the

exercise of 1997 stock options in their calculations of benefit costs. When it hired

Mercer to do a cost analysis of benefits, Mercer did not include income from the

1997 exercise of stock options in its calculations. Nor did Shell’s computer

program for calculating benefits include this income. The unanticipated costs

inquiry does not definitively weigh in either party’s favor. And under the most

relevant inquiry – which is not whether the Defendants subjectively anticipated

costs but whether they should have objectively anticipated costs under the plan’s

plain language – Plaintiffs’ alternative interpretation results in unanticipated

costs. 

Even if the two e-mails were sufficient to raise a fact issue as to

unanticipated costs, the district court did not err in holding that the

administrator’s interpretation of the plan was legally correct, as there is ample

record evidence to support the district court’s conclusions that the
No. 07-20270

92 Cf. Gosselink, 272 F.3d at 727 (observing that“[t]he mostimportantfactor to consider

[is] whether the administrator’s interpretation is consistent with a fair reading of the plan”);

Pickrom, 57 F.3d at 471-72 (affirming a district court’s finding of no abuse of discretion based

only on the “fair reading” term, where there was no record evidence on unanticipated costs or

uniform construction).

93 Metro. Life, 128 S.Ct. at 2351.

94 Id. 

95 Id.; see also MacLachlan, 350 F.3d at 479 (“The degree to which a court must

abrogate its deference to the administrator depends on the extent to which the challenging

party has succeeded in substantiating its claim that there is a conflict.” (internal citations

omitted)). Although the Plaintiffs crossed the Metropolitan Life threshold for a conflict of

interest claim, they failed to further substantiate that claim. 

39

administrator’s interpretation was a “fair reading” of the plan and that the

administrator uniformly applied the plan.92 Nor do are we convinced that the

district court’s failure to find a conflict of interest merits reversal, as the conflict

of interest is not a “tiebreaking”93 factor here. Given the evidence that the

administrator’s reading was a fair one, and a lack of evidence of a non-uniform

application of the Fifth Amendment to income from the exercise of 1997 stock

options,this is not a case where the “factors are closely balanced.”94 It is also not

a case “where circumstances suggest a higher likelihood that . . . [the conflict of

interest] affected the benefits decision,” as Plaintiffs have not argued in their

brief, nor pointed us to evidence, of, for example, “a history of biased claims

administration” or other factors suggesting a greater risk of a conflict of interest

in this benefits decision.95

Finally, Plaintiffs urge without citation to the record that, the three-step

inquiry aside, Defendants abused their discretion by acting in bad faith – that

they “pretend[ed] that ERISA applied to the Agreement and then put Crowell

through a charade of fake considerations and hearings that were completely
No. 07-20270

96 Crowell alleged in his original complaint in state court that he “sought to resolve the

dispute by corresponding with Lang, the Plan Administrator and Vice-President of Human

Resources and Services,” that he “also sought to resolve the dispute by corresponding with

Lamboley,” and that“Lang andLamboley acted as agents forPennzoil and/or Shellthroughout

the course of Crowell’s attempts at resolution of this dispute.” 

97 Gosselink, 272 F.3d at 727. 

98 Plaintiffs urge that Defendants changed the Fifth Amendment’s effective date to

March 1, 2002, “specifically to benefit one person, Mark Esselman [Pennzoil’s Senior Vice

President of Human Resources], by capturing pre-announcement stock optionexercises.” They

do not provide a record citation for this claim. 

40

unauthorized and beyond Lang’s [the plan administrator’s] authority at the

time.” They also maintain, without record citation, that Catherine Lamboley,

Shell’s Senior Vice President, General Counsel and Corporate Secretary,96

“simply refused to acknowledge any of Crowell’s requests for resolution.”

Clearly, if an administrator interprets an ERISA plan in a manner

that directly contradicts the plain meaning ofthe plan language,the

administrator has abused his discretion even if there is neither

evidence of bad faith nor of a violation of any relevant

administrative regulations.97

Although Plaintiffs describe in detail why they believe that administrators

misinterpreted the plan language, they do not point to evidence in the record

sufficient to support allegations of bad faith.98

AFFIRMED. 
No. 07-20270

41