Court Opinion

ID: 205110
Source: CourtListenerOpinion
Date Created: 2011-02-18 15:47:35+00
Date Added: 2024-06-11T17:27:46.765781
License: Public Domain

In the

United States Court of Appeals
               For the Seventh Circuit

No. 10-2393

JOHN W. C OMRIE,
                                                  Plaintiff-Appellant,
                                  v.

IPSCO, INCORPORATED , et al.,
                                               Defendants-Appellees.

             Appeal from the United States District Court
        for the Northern District of Illinois, Eastern Division.
                No. 08 C 3060—John W. Darrah, Judge.

    A RGUED JANUARY 6, 2011—D ECIDED F EBRUARY 18, 2011

  Before E ASTERBROOK, Chief Judge, and C UDAHY and
R OVNER, Circuit Judges.
  E ASTERBROOK, Chief Judge. In 2005 IPSCO Enterprises,
Inc., established a supplemental pension plan for top
executives. This plan (the IPSCO Enterprises, Inc. U.S.
Supplemental Executive Retirement Plan, which the
parties call “the SERP” and we call “the Plan”) offers
benefits exceeding those eligible for tax deferral under
the Internal Revenue Code. Known colloquially as top-
2                                               No. 10-2393

hat plans, such supplemental plans are unfunded (so
there is no trust account; benefits come from the em-
ployer’s coffers). Feinberg v. RM Acquisition, LLC, No. 10-
1890 (7th Cir. Jan. 6, 2011), slip op. 2, describes a similar
plan. IPSCO’s Plan had two golden-parachute features.
First, any executive whose employment is involuntarily
terminated within two years of a change of control is
eligible for benefits without regard to a cap that other-
wise would apply. Second, the Plan defines “involuntary
termination” as any material change in the executive’s
“position, reporting relationship, overall responsibilities
or authority”. A termination can be “involuntary” under
this definition even if the executive quits to take a
better offer elsewhere—or quits just to lock in the
Plan’s extra benefits.
  In 2007 SSAB Svenskt Stål AB, a Swedish firm, acquired
a controlling interest in IPSCO through a friendly trans-
action. John W. Comrie, IPSCO’s Chief Legal Officer, was
part of the negotiating team. Shortly after the transaction
closed, IPSCO promoted Melanie Klebuc-Simes over
Comrie and named her “Vice President and General
Counsel.” Comrie, who used to report to IPSCO’s CEO,
now reported to Klebuc-Simes. Comrie resigned and
asked for his benefits under the Plan to be paid as a
lump sum. IPSCO accepted Comrie’s contention that
he had been “involuntarily terminated” but did not
accept his proposed calculation of benefits. The parties’
positions are about $2.5 million apart, and the difference
led to this litigation. (Comrie is entitled to benefits
under other pension plans, including a §401(k) defined-
contribution plan, but there’s no disagreement about
them.)
No. 10-2393                                              3

  Benefits under the Plan are based on the number of
years the executive has worked at IPSCO (about 27 for
Comrie) times 2% of the executive’s average compensa-
tion in the five years before departure. Comrie is entitled
to an annual pension under the Plan worth about 54%
of his compensation. The source of the disagreement
between the parties is a clause in the Plan providing that
a “bonus” is not included in compensation. The bulk of
Comrie’s income came in the form of stock options or
other stock-linked payments. His best year was 2005,
when his base pay was $140,000 and he received benefits
worth $109,484 under the “Management Incentive Pro-
gram” and $851,792 under the “Long-Term Incentive
Plan.” These are the amounts reported to the IRS on
Comrie’s W-2 form; he may have enjoyed other tax-de-
ferred benefits, but he concedes that unless an amount
was reported to the IRS in any given year it does not
count as “compensation” for the purpose of the Plan.
Comrie received cash payments expressly designated
“bonuses”; he contends that these, and only these, are
“bonuses” under the Plan. The committee administering
the Plan, by contrast, concluded that all stock-linked
compensation is a “bonus” under the Plan, even though
for its own purposes IPSCO had not used the word
“bonus” when dealing with executives’ stock-linked
payments.
  The district court concluded that the Plan’s decision
must stand unless arbitrary or capricious, for the Plan
expressly confers interpretive discretion on the admi-
nistrative committee. After considering at some length
the language of the Plan, the §401(k) plan, the Summary
4                                               No. 10-2393

Plan Description for the §401(k) plan, and the minutes
of the Board meeting at which the Plan was adopted, the
district judge concluded that the committee’s decision
was reasonable and entered summary judgment in de-
fendants’ favor. 2010 U.S. Dist. L EXIS 46988 (N.D. Ill.
May 12, 2010). The judge also dismissed claims that
Comrie presented under the law of Canada. We discuss
those toward the end of this opinion.
  Comrie asks us to disregard the language of the Plan
that confers interpretive discretion on the administrative
committee. He gives two reasons: that members of the
committee labored under a conflict of interest, see Metro-
politan Life Insurance Co. v. Glenn, 554 U.S. 105 (2008);
Marrs v. Motorola, Inc., 577 F.3d 783 (7th Cir. 2009), and
that the administrator of a top-hat plan is not a “fiduciary”
as ERISA (the Employee Retirement Income Security
Act) uses that term. The first of these is backward. True,
one could say that members of the committee will try
to protect IPSCO’s interests (the Plan is unfunded,
after all), but the committee’s members are in the
same position as Comrie: most, if not all, are executives
who have received some stock-linked benefits and
would have been better off had they accepted Comrie’s
interpretation of the “bonus” exclusion; their interests
are aligned with his. There is no reason to suspect that
the decision against his position was based on anything
other than an honest belief that stock-linked remunera-
tion is a “bonus” as the Plan uses that word.
   As for the fact that the administrator of a top-hat plan
is not an ERISA fiduciary: One circuit has held that inter-
No. 10-2393                                                  5

pretations by a non-fiduciary must be ignored, and
that courts must make independent decisions, no mat-
ter what a plan’s governing documents say. Goldstein v.
Johnson & Johnson, 251 F.3d 433, 442–43 (3d Cir. 2001).
Another has adopted an intermediate standard divorced
from contractual language. Craig v. Pillsbury Non-Qualified
Pension Plan, 458 F.3d 748, 752 (8th Cir. 2006). We don’t
get it. When the Supreme Court held in Firestone Tire &
Rubber Co. v. Bruch, 489 U.S. 101 (1989), that judges pre-
sumptively make independent decisions (often, though
misleadingly, called “de novo review”, see Krolnik v.
Prudential Insurance Co., 570 F.3d 841, 843 (7th Cir. 2009)),
about claims to benefits under ERISA, it derived this
conclusion from an analogy to trust law. The Court under-
stood trust law to call for a non-deferential judicial role.
ERISA fiduciaries are like common-law trustees, the
Justices thought, so judges normally should make inde-
pendent decisions in ERISA litigation. In Firestone’s
framework, deferential review is exceptional, authorized
only when the contracts that establish the pension or
welfare plan confer interpretive discretion in no uncer-
tain terms. 489 U.S. at 111. See also, e.g., Diaz v. Prudential
Insurance Co., 424 F.3d 635 (7th Cir. 2005).
  Under Firestone, fiduciary status leads to independent
judicial decisions, unless the contract specifies other-
wise. To hold, as Goldstein does, that non-fiduciary status
requires independent judicial decisions, despite a contract,
is to turn Firestone on its head. Firestone tells us that a
contract conferring interpretive discretion must be re-
spected, even when the decision is to be made by an ERISA
fiduciary. It is easier, not harder as Goldstein thought, to
6                                              No. 10-2393

honor discretion-conferring clauses in contracts that
govern the actions of non-fiduciaries.
   What rule of federal law do such clauses violate?
Neither Craig nor Goldstein identified one. When a
federal statute such as ERISA does not specify a rule of
decision, contracts govern—especially so when no fidu-
ciary duty is in play. Hughes Aircraft Co. v. Jacobson, 525
U.S. 432 (1999); Lockheed Corp. v. Spink, 517 U.S. 882
(1996); Johnson v. Georgia-Pacific Corp., 19 F.3d 1184 (7th
Cir. 1994). IPSCO was free to set benefits at 2% times
years of service times top compensation; it was free to
exclude bonuses from that base; a federal court would
not dream of devising a different formula more
favorable to employees. Just so with other contractual
terms. This is why in Olander v. Bucyrus-Erie Co., 187
F.3d 599, 607 (7th Cir. 1999), we applied deferential
review to a decision under a top-hat plan that provided
its administrator with interpretive discretion. Comrie
asks us to overrule Olander, but for the reasons we have
given we conclude that its approach is correct. We use
deferential review today.
  The Plan’s administrators did not act arbitrarily or
capriciously in concluding that stock-linked compensa-
tion is a form of bonus. In the business world, a “bonus”
is understood to be a discretionary component of com-
pensation. If Comrie had a contractual entitlement to a
specific number of vested stock options annually, then
he might have a persuasive argument that the stock-
linked income, though variable (it depends on how
IPSCO’s stock fares in the market), was not a “bonus.” But
No. 10-2393                                             7

at oral argument Comrie’s lawyer told us that, although
Comrie was entitled to some options, how many he
received each year was discretionary. That makes the
stock-linked income look like a bonus, just as the Plan
concluded.
  Comrie’s principal argument to the contrary rests on
language in the summary plan description of IPSCO’s
§401(k) pension plan. This document tells participants
that contributions to that plan depend on their “com-
pensation,” which “includes your base salary, bonuses,
incentive pay, overtime and commissions”. By listing
“bonuses” and “incentive pay” separately, Comrie main-
tains, IPSCO demonstrated that stock-linked income (a
form of “incentive pay”) is not a “bonus.”
  Defendants reply that the summary plan description for
the §401(k) plan is irrelevant; why should a summary
description of a different plan matter to the meaning of
the word “bonus” in the senior executives’ top-hat
Plan? Comrie’s answer is that the Plan refers to the
§401(k) plan documents for the definition of “compensa-
tion,” to which defendants rejoin that the question at
hand is not what’s in but what’s out—and the top-hat
Plan does not refer to the §401(k) plan for the definition
of “bonus.”
  All this to-and-fro is unimportant in the end, because
the separate mention of “bonuses” and “incentive pay” in
the summary plan description is designed to reduce
uncertainty by informing employees that the definition
of “compensation” in the §401(k) plan is comprehen-
sive; readers need not scratch their heads about what
8                                              No. 10-2393

is covered. Language designed to convey the broad scope
of one plan does not help much when trying to decide
the scope of exclusions from a different plan. Although
the language of the summary plan description gave
Comrie a talking point when pitching his case to the
Plan’s administrative committee, it did not compel the
committee to accept Comrie’s preferred inference.
   The parties’ briefs contain exhaustive analyses of other
language in the Plan, the §401(k) plan, the minutes of the
meetings at which these plans were adopted, and regula-
tions issued by the IRS defining “compensation” for the
purpose of tax-qualified pension plans. None of these
directly answers the question at hand—the meaning of
the word “bonus” in this Plan—though a court might
find them helpful if making an independent decision.
But that’s not our role. It is enough to decide whether
the Plan’s administrators acted arbitrarily or capri-
ciously. We’ve said enough to show that the answer
is “no.”
  Now for Comrie’s claims under Canadian law. Comrie
originally joined IPSCO, Inc., in 1980 at its headquarters
in Regina, Saskatchewan. He was then a Canadian citi-
zen. When IPSCO decided to move its principal operations
and headquarters to Lisle, Illinois, where its subsidiary
IPSCO Enterprises already was located, Comrie immi-
grated in 1999 and eventually became a U.S. citizen.
But before he left Canada, he says, he asked his
superiors whether the move would affect his pension
benefits. He was assured that it would not—that he would
receive credit for all Canadian service, that his eventual
pension would be at least as high as it would have been
No. 10-2393                                                  9

had he remained in Canada, and that the security for
payment would be at least as good. (The Canadian plan
was secured by a letter of credit from a major bank.)
Comrie accuses IPSCO of breaking these promises. He
also contends that when his job ended in 2007 he should
have received severance payments under Canadian law.
  There are all sorts of problems with these contentions.
The promises to which Comrie refers are oral, and it is
hard to know at this remove whether he remembers
them accurately (or, indeed, whether they were made
at all). A corporation’s principal lawyer should have
known that he needed them in writing if they were to be
enforceable when he retired or quit many years later.
The district judge also observed that Comrie did not
make claims under these promises until long after he
had come to the United States, well after the five years
that the judge thought to be the statute of limitations.
And how could these promises matter to the inter-
pretation and application of the Plan, which was not
adopted until 2005, six years after Comrie relocated to
the United States? (This is not a suit to enforce the Cana-
dian pension plan or have benefits under the §401(k) plan
adjusted in light of the Canadian plan. Cf. Bandak v.
Eli Lilly & Co. Retirement Plan, 587 F.3d 798 (7th Cir. 2009).)
  The severance-pay claim is especially weak, because
Comrie’s last employer was an Illinois firm, and Canada
does not purport to require U.S. firms to make severance
payments to U.S. citizens who quit their jobs in the
United States. Indeed, Canada does not require severance
pay for persons who quit Canadian jobs. See Kornerup
10                                             No. 10-2393

v. Raytheon Canada Ltd., [2008] B.C.J. No. 1049, 2008 BCCA
241 at 11–12 (B.C. App. 2008). The golden-parachute
features of IPSCO’s Plan, which give an unusual defini-
tion to the phrase “involuntarily terminated", are not
part of Canadian law. Someone who resigns because he
no longer reports directly to a firm’s CEO is hard
pressed to call that separation “involuntary,” apart from
the Plan’s golden-parachute features. A new layer on the
organization chart is some distance from “constructive
discharge” under this nation’s law, see Pennsylvania State
Police v. Suders, 542 U.S. 129, 141–43 (2004), and Comrie
has not argued that Canadian law is different.
   None of this matters, however, because Canadian law
never enters the picture. Comrie tells us that he is suing
directly under Canadian law, which (on his view) ERISA
does not affect, because it preempts only state law. 29
U.S.C. §1144(a). But how would Canadian law become
applicable? Comrie sued in a court of the United States,
not a court of Canada. This nation applies its domestic
employment-relations law to employment in the United
States and foreign law to employment abroad. See EEOC
v. Arabian American Oil Co., 499 U.S. 244 (1991). The
only way Canadian law could apply would be through
abnormal choice-of-law rules. Federal choice-of-law
principles point to ERISA, which doesn’t help Comrie.
And if his theory is that a federal forum sitting in
Illinois should use state choice-of-law principles (since
his claim does not rest on federal law), then the suit runs
smack into §1144(a): Illinois law is preempted. ERISA
contains a special rule for plans designed to benefit
nonresident aliens, 29 U.S.C. §1003(b)(4), but Comrie
No. 10-2393                                             11

is not in that category and so is covered by both ERISA’s
substantive rules and its preemption clause. He does not
contend that ERISA itself would enforce oral promises
(it doesn’t, see Frahm v. Equitable Life Assurance Society,
137 F.3d 955, 958 (7th Cir. 1998)) or require severance
pay. Comrie has received all of his entitlements under
the written Plan and is entitled to nothing else.
                                                A FFIRMED

                          2-18-11