2009 D e c i sion s O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit 6-4-2009 

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y v . M ot ion C ontrol Ind P r e c e de n t i al or N on-P r e c e de n t i al : N on-P r e c e de n t i al D ocke t N o . 08-3919

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Thi s de c i sion i s br ou ght t o you for f r e e a nd ope n a c c e s s b y the O p inion s of the U nit e d S t at e s C our t of Appe al s for the Thir d C ir c uit at V i l l a no va U nive r sity S choo l of L a

w Di git al Reposit or y

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w . vi l l a no va . e du . Re c omme nde d C it at ion " L a r r y D on a ch

y v . M ot ion C on tr o l Ind " (2009). 2009 D e cisio n s . P ape r 1235. http://d i git alc ommon s .l a

w . vi l l a no va . e du/thir dc ir c uit_2009/1235

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_____________ L A R R Y D O N A C H Y ; B R U C E K IN L E Y , A p p e llan ts

v. M OT I ON C ONT RO L I NDUS T RI E S , DI VI S I ON OF C ARLI S LE CORP ORATI ON; RET I REMENT P LAN F OR BA RG A I N I N G U N I T EM PLO Y EES O F M O TI O N CO N TR O L I N D U STR I ES,

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ro m th e U n ited S tate s D istric t C o u rt f o r th e W e ste rn D istric t o f P e n n sy lv a n ia ( D . C . N o. 07- cv- 00068) D istric t Ju d g e : H o n o ra b le S e a n J. M c L a u g h lin

_____________ S u b m itted U n d er T h ir d C ir cu itL . A . R . 3 4 . 1 (a),

M ay19, 2009 B e f o re : F U E N T E S , J O R D A N , a n d N Y G A A R D , C ir c u it J u d g e s .

( Fi l ed: J une 4, 2009 ) OPI NI ON O F THE COURT FU E N T E S, C i r cui tJ udge: A ppel l ant s L arr yD onachyand B ruce K i nl eyappea l t he D i s t r i ctC our t ’ s deci s i on

### - 2-

t hatt he ca l cul at i on of thei rpens i on benef i t s byA ppel l ees M ot i on C ont r ol I ndus t r i es ( “M ot i on C ont r ol ”) and the R et i r ement Pl an forB ar gai ni ng U ni tE m pl oy ees of M ot i on C ont r ol I ndus t r i es ( “the Pl an”) w as notarbi t r aryand ca pr i ci ous i n vi ol at i on of the E m pl oym entR et i r ement I ncome Secur i t yA ct( “ER I SA ”) , 29 U . S. C . §§ 1001 ets eq. T hey ar gue thatt he D i s t r i ctC our terr ed i n r efus i ng t o appl ya hei ght ened a rbi t r aryand capr i ci ous s t andar d of r evi ew and i n i nt erpr et i ng the t er m s of the Pl an. For t he r eas ons t hatfol l ow , w e w i l l aff

i r m t he D i s t r i ctC our t ’ s gr antof s um m aryj udgm enti n favorof M ot i on C ont r ol and the Pl an. I. 

### We rev iewa summ ary

j u d g m ent ru lin g d e n o v o . L ev y v . S terlin g H o ld in g C o ., LLC, 544 F. 3d 493, 501 ( 3d Ci r . 2008) . Summ ary judgm e nt

i s warr ant e d i f “ the r e i s no g enu in e issu e as to any

m aterial f

act an d. . . th e m o v ant is entitledto a j u d g m ent as a m atter o f law .” F ed . R . C iv . P . 5 6 (c). In a s uit t o rec ov er

benefits un der 2 9 U .S .C . § 1 1 3 2 (a )(1 )(B ), w e h a v e p re v io u sly h e l d t h a t“ [ w] h e r e , a s h e r e , t h e p l a n g i v e s t h e a d mi n i s t r a t o rd i s c r e t i o n a r ya u t h o r i t y , we revi ew t he ad m i nis t rat or’ s exerci se of t hat aut ho ri t yun der an ‘arbitraryand capri ci ou s’ s t andar d. ” V i t al e v. L atr obe A r ea H os p. , 420 F. 3d 278, 281- 82 ( 3d C i r . 2005) . T he Supr eme C our thas r ece nt l yr efe r r ed t o t he appr opr i at e s t andar d of r evi ew as r evi ew for a b u s e o f d is c re tio n . M e tr o . L if

e In s . C o . v . G le n n , 1 2 8 S . C t. 2 3 4 3 , 2 3 4 8 (2 0 0 8 ). T 

### hetwo s t andar ds of r e vi e w do not di ffe r i n any m at e ri a lr e s pe c t . Se e Es t at e of Sc hwi ng v. The

### - 3-

Lilly Heal th Plan, 562 F.3d52 2, 52 6 n .2 (3d C ir . 200 9). I n conduct i ng ourr evi ew , i f the a d m in istra to r is o p e ra tin g u n d e r a c o n f lict o f in ter e st, w e m u st w e ig h th a t as a f a c to r in det er m i ni ng w hethert he admi ni s t r at orhas abus ed i t s di s cr et i on. G l enn, 128 S. C t . at2350- 5 1 (c itin g F ir e s to n e T ir e & R u b b e r C o . v . B ru c h , 4 8 9 U .S . 1 0 1 , 1 1 5 (1 9 8 9 )) . 

### W e have juri s di c t i on ove r thi s a ppe a lunde r

29 U. S. C. § 1132( e ) ( 1) and 28 U. S. C. § 1291. II. B eca us e w e w r i t e onl yfort he part i es , w ho ar e fa m i l i arw i t h t he fa ct s and pr i or pr ocee di ngs , w e w i l l s etfor t h onl yt hos e fa ct s nece s s aryt o ouranal y s i s . D onachyand K in ley are f

o rm e r e m p lo y e e s o f

M o tio n C o n tro l w h o w o rk e d a t a m a n u f a c tu rin g f

a c ili tyin w es t ern Penns y l vani a unt i l i tcl os ed i n J anuary2002. U nders ect i on 4. 4( b) of the Pl an, A ppel l ant s w er e ent i t l ed t o a mont hl ypens i on benef i tequal t o t he pr oductof “the pens i on b e n e f it m u ltip lie r a n d h is C re d ite d S e rv ic e a s o f th e d a te h is V e s tin g S e rv ic e te rm in a te s .” A 2000 s uppl ement t o t he Pl an s etoutt he pens i on benef i tm ul t i pl i er“depe ndi ng upon t he dat e of the [e m pl oy ee’ s ] r et i r ement , ” w i t h t he mul t i pl i ers etat$30 as of the t i m e the pl ant cl os ed and a n i ncr eas e t o $31 s chedul ed t o become eff ect i ve J ul y1, 2002. A p p e llan ts’ b e n e f

its w e re c a lcu late d u sin g th e $ 3 0 m u lti p lier. T h e yp ro tes ted th is appr oach t o t he C ar l i s l e C orpor at i on I ncorpor at ed Pens i on and B enef i t s C om m i t t ee ( “the C om m i t t ee” ) , w hi ch admi ni s t er s t he Pl an, butt hei rr eques tfort he appl i cat i on of the $31 m ul t i pl i erw as deni ed. T he C om m i t t ee ba s ed i t s deci s i on on t he s t at ement i n t he Pl an

### - 4-

document s t hatD efe r r ed V es t ed R et i r ement B enef i t s , t he type of be nefi t s D onachyand K i nl eyw er e s eeki ng, ar e “ba s ed on the bene fi tr at e and [ t he empl oy ee’ s ] C r edi t ed Ser vi ce as of the dat e hi s V es t i ng Ser vi ce t er m i nat es . ” The Pl an al s o pr ovi des t hat“[a ] n E m pl oy ee s hal l r ece i ve cr edi tforV es t i ng Ser vi ce f orhi s per i od of empl oym entbyt he Em pl oy erand A ffi l i at es det er m i ned i n acc or dance w i t h uni for m and nondi s cr i m i nat or ys t andar ds and pol i ci es adopt ed byt he C om m i t t ee. ” The C om m i t t ee i nt erpr et ed thes e pr ovi s i ons t o m ean t hatA ppel l ant s ’ V es t i ng Ser vi ce musthave t er m i nat ed w hen thei rempl oym entw as t er m i nat ed, i . e. , w hen the pl antcl os ed i n J anuary2002, r ej ect i ng A ppel l ant s ’ ar gum ent t hatt heycoul d ext end the dat e of thei rt er m i nat i on of s er vi ce pa s tJ ul y1 byappl y i ng p re v io u slya c c ru e d se rv ice h o u rs a n d v a c a tio n tim e . T h e C o m m itt e e re a so n e d th a t th e ir t er m i nat i on w as t he poi ntatw hi ch D onachy ’ s and K i nl ey ’ s amount of V es t i ng Ser vi ce beca m e “f

i xed and de t er m i nabl e” unde rt he Pl an’ s pr ovi s i ons r egar di ng t he ca l cul at i on of V es t i ng Ser vi ce, w hi ch r equi r e an e m pl oy ee t o have 83 1/ 3 “hour s of s er vi ce” i n a cal endary eart o r ece i ve cr edi tfora y earof V es t i ng Ser vi ce. A ddi t i onal l y , t he C om m i t t ee r ead the Pl an document s t o m ake V es t i ng Ser vi ce r el evantonl yt o t he det er m i nat i on of el i gi bi l i t yforbenef

i t s r athert han thei ramount , expl ai ni ng t hatot herw i s e empl oy ees t er m i nat ed on the s ame dat e and w i t h t he s ame am ountof C r edi t ed Ser vi ce mi ghtr ece i ve d if f e re n t b e n e f

its . D o n ac h yan d K inleysu b seq u en tl yb rou g h t suitin the D istri ct C o u rtfo r th e W estern D i s t r i ctof Penns y l vani a underE R I SA , 29 U . S. C . § 1132( a) ( 1) ( B ) , ar gui ng t hatt he1



### InM etro p o litanL if

e In suran ce v . G lenn , 128 S. C t . 2343 ( 2008) 

### , de c i de d s i nc e the Distri ct Co urt’ s opinionwas i ss ued, the Sup re m e Court m ade c le ar

that an adm inis tr at or’s c onfl i c t of i nt e r e s t

i s s i m pl y a“ fa c t or ” t o be c ons i de r e d i n r e vi e wi ng i t s de t e rmi nat i ons unde r atr a di t i ona labus e of di s c r e t i on s t andar d, whe r e a s pr e vi ous c a s e s ha d tr e at e d a co n f lict o f interest as af

f ectin g th e stan d ardo f

rev iewitself

o na “slid in g scale.” S ee, e.g ., P o st v . H artf

o rdIn s. C o ., 5 0 1 F .3 d1 5 4 , 1 6 1 (3 dC ir. 2 0 0 7 ) (“[ I] f th e lev el o f

co n f lict is sl ight, most of the adm inis tr at or’s deferencere m ai ns inta ct , andthe c ourt applie s s om e thi ng s i mi l ar

t o tr a di t i ona lar

bi tr ary and c a pri c i ous r e vi e w; c onve r s e l y , i f the l e ve lof c onfl i c t i s hi gh, the n m os t

of i t s di s c r e t i on i s s trippe d away . ” ) . Si nc e we a gr e e wi th the D istrict C o urt th at th ere is n o ev id en ce o f p artiality h ere, th at d istin ctio nis irrelev ant to our r e vi e w of the Commi tt e e ’ s de c i s i on.

- 5- C om m i t t ee’ s i nt erpr et at i on of the Pl an cons t i tut ed an a bus e of di s cr et i on. T he D i s t r i ct C our tr evi ew ed the C om m i t t ee’ s deci s i on undert he nor m al arbi t r aryand ca pr i ci ous stan d ard rathe r th an h eigh tene d scru ti n y , fin d ing that it s ad o p ti o n o f M o ti o n C o n tr o l’ s r eadi ng of the Pl an w as i ns uffi ci entt o demonst r at e i tw as bi as ed and thus s ubj ectt o a confl i ctof i nt er es t . T he D i s t r i ctC our thel d t hatt he C om m i t t ee’ s i nt erpr et at i on of the Pl an document s w as r eas onabl e, ci t i ng Pl an pr ovi s i ons i ndi cat i ng t hat“V es t i ng Ser vi ce” i s us ed to d e te rm in e “ e lig ib ility” f o r b e n e f its ra th e r t h a n th e a m o u n t o f th o s e b e n e f

its . 

### III. O n a p p e a l, D o n a c h ya n d K in ley ch a llen g e b o th th e D istric t C o u rt’s r e f u sa l to a p p ly a hei ght ened s t andar d of r evi ew and i t s endor s ement of the C om m i t t ee’ s r eadi ng of the P la n d o c u m e n ts . A. T h e D istri ct C o u rtp rop erlyrejected A p p ell an ts’ arg u m en t th at t h e C o m m ittee’s deci s i on s houl d have r ece i ved hei ght ened s crut i nybeca us e i tw as bi as ed. D onachy ’ s and 1

### - 6-

K i nl ey ’ s al l egat i ons t hatM ot i on C ont r ol w as i ns uffi ci ent l yr es pons i ve t o t hei ri nqui r i es a b o u t th e p e n sio n m u lti p lier is su e a re irre lev a n t, giv e n th a t th e C o m m itt e e is a n e n tity i ndepende ntfr om M ot i on C ont r ol . A ppel l ant s ’ al t ernat i ve ar gum entt hatt he C om m i t t ee demonst r at ed i t s bi as byuncr i t i cal l yadopt i ng M ot i on C ont r ol ’ s i nt erpr et at i on of the Pl an is e q u a llyu n a v a ili n g , as th e C o m m itt e e laid o u t a f iv e -p a g e , rea so n e d e x p lan a tio n f o r its deci s i on. T he s i m pl e fa ctt hatt he C om m i t t ee di d not , i n A ppel l ant s ’ ey es , s pend enough t i m e addr es s i ng t hei rar gum ent s does notr enderi t s anal y s i s i nadequa t e. B. U nderE R I SA , w her e a pl an admi ni s t r at orw i t h di s cr et i onaryauthor i t yi s not oper at i ng undera conf

l i ctof i nt er es t , w e r evi ew i t s deci s i ons underan abus e of di s cr et i on s t andar d. G l enn, 128 S. C t . at2348. I f the admi ni s t r at or ’ s deci s i on r el at es t o t he interpre tat ion o f th e term s o f a p lan d o cu m en t, w e f ir st co n side r w h ethe r th e p lan’s l anguage i s ambi guous . B i l l G r ayE nt erpr i s es , I nc. E m pl oy ee H eal t h & W el far e Pl an v. G o u rl ey , 2 4 8 F . 3 d 2 0 6 , 2 1 8 (3d C ir . 2 0 0 1 ). If the term s o f th e p lan d o cu m en t are am b igu o u s, w e “ m u st t ak e the ad d it ion al st ep an d an aly ze w h ethe r th e p lan a d m inistrator’s i nt erpr et at i on of the documenti s r eas onabl e. ” I d. In th is case , alt h o u g h the P lan term s co n tai n so m e a m b igu ity , the C o m m ittee’s i nt erpr et at i on of the pr ovi s i ons r el at i ng t o t he ca l cul at i on of the pens i on benef i tm ul t i pl i er w as re aso n ab le. T h e C o m m ittee a cc ep ted th at t h e a p p rop ri ate m u lt ipli er f o r a m em b er’s benef i tcal cul at i on depends on t he dat e the mem ber ’ s V es t i ng Servi ce t er m i nat es , and

### - 7-

c o n c lu d e d th a t th e V e stin g S e rv ice m u st te rm in a te w h e n th e m e m b e r’s e m p lo ym e n t is t er m i nat ed bec aus e thati s t he dat e w hen the mem ber ’ s “amount of V es t i ng Ser vi ce [bec om es ] fi xed and de t er m i nabl e. ” ( A pp. 104. ) T hi s di ffe r ent i at i on betw een the dat e on w hi ch V es t i ng Ser vi ce t er m i nat es and how m uch V es t i ng Ser vi ce a m ember has amass ed m akes obvi ous s ens e, gi ven thatt he Pl an s uppl ement s et s t he cut offs fort he mul t i pl i er appl i cabl e t o a mem beratpar t i cul ardat es , s uch as J ul y20, 2000 and J ul y1, 2001. U nder s ect i on 3. 5 of the Pl an, t he amount of a mem ber ’ s V es t i ng Servi ce i s m eas ur ed i n uni t s of w hol e ca l endary ear s , dependi ng on w hethert he mem berhas acc rued s uffi ci enthour s of s er vi ce w i t hi n t hatcal endary ear . T her efor e the amount of a mem ber ’ s V es t i ng Ser vi ce coul d neverend i n t he mi ddl e of a y ear , and the dat e of t er m i nat i on of V es t i ng Ser vi ce m u s t b e d if

f e re n t f ro m th e a m o u n t o f

V e s tin g S e rv ic e . O nce thatdi s t i nct i on w as m ade, i tw as al s o r eas onabl e fort he C om m i t t ee t o r el yon se c tio n 3 .5 ’s s tate m e n t th a t “a n E m p lo y e e sh a ll rec e iv e c re d it fo r V e stin g S e rv ice f o r h is per i od of empl oym ent ” i n deci di ng t hatV es t i ng Ser vi ce mustt er m i nat e w hen that“per i od o f e m p lo ym e n t” is o v e r, n a m e lyw h e n th e e m p lo y e e re tires o r h is o r h e r e m p lo ym e n t is t er m i nat ed. R ei nfor ci ng t hatappr oach i s t he fa ctt hatt he Pl an s uppl ement ’ s chartof pens i on benef

i tm ul t i pl i er s s et s eac h m ul t i pl i eracc or di ng t o t he mem ber ’ s “dat e of r et i r ement . ” M or eover , as t he C om m i t t ee not ed, choos i ng t he dat e of e m pl oym ent t er m i nat i on as t he r el evantdat e pr ovi des a fi xed poi ntatw hi ch the empl oy ee’ s pens i on benef i t s can be cal cul at ed, w her eas A ppel l ant s ’ appr oach, t o l ook t o anyhour s t hatcan be

### - 8-

cr edi t ed w i t hi n t he ca l endary earw hen the empl oy ee s t ops w orki ng t o det er m i ne ac crued hour s of s er vi ce, w oul d l eave s om e empl oy ees i n l i m bo as t o t hei rpens i on s t atus fort he m ont hs betw een the end of t hei rempl oym entand the end of t he ca l endary ear . O ver al l , t he C o m m itt e e ’s r e a d in g o f th e re lev a n t re tirem e n t b e n e f it p ro v isio n is b o th c o n so n a n t w ith th e p lain lan g u a g e o f

th e P lan a s a w h o le a n d re a so n a b le in ter m s o f th e P lan ’s r e a l-w o rld i m pl ement at i on. I V. 

### F o r th e f o reg o in g reaso n s, w e af

f irm th e j u d g m ent o f

th e D istrict C o urt.