Court Opinion

ID: 2971833
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:40:46.501881+00
Date Added: 2024-06-11T15:02:08.802258
License: Public Domain

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
                              File Name: 05a0168n.06
                               Filed: March 3, 2005

                                                Case No. 02-2354

                               UNITED STATES COURT OF APPEALS
                                    FOR THE SIXTH CIRCUIT

 JAMES RECKER,                                                  )
                                                                )
             Plaintiff-Appellee,                                )
                                                                )        ON APPEAL FROM THE
                    v.                                          )        UNITED STATES DISTRICT
                                                                )        COURT FOR THE EASTERN
 NEWCOURT CREDIT GROUP, INC.;                                   )        DISTRICT OF MICHIGAN
 NEWCOURT FINANCIAL, USA, INC.; and                             )
 CIT GROUP, INC.,                                               )
                                                                )
             Defendants-Appellants.                             )
                                                                )
 _______________________________________                        )

BEFORE: BATCHELDER and GIBBONS, Circuit Judges; BEER*, District Judge.

         ALICE M. BATCHELDER, Circuit Judge. Defendant-Appellants Newcourt Credit

Group, Inc., Newcourt Financial USA, Inc., and CIT Group, Inc. (collectively “Newcourt”),1 appeal

from the district court’s judgment that Newcourt arbitrarily and capriciously denied Plaintiff-

Appellee James Recker (“Recker”) of benefits under the 1996 AT&T Capital Corporation

Leadership Severance Plan (“Plan”) in violation of the Employee Retirement Income Security Act

(“ERISA”)§ 502, 29 U.S.C. § 1132(a)(1)(B). Newcourt also appeals the district court’s denial of

its motion for summary judgment with respect to Recker’s interference claim under ERISA § 510,

29 U.S.C. § 1140.

         *
          The Honorable Peter Beer, United States District Judge for the Eastern District of Louisiana, sitting by
designation.
         1
          Newcourt Credit, of which Newcourt Financial is a subsidiary, was acquired by CIT Group in 1999.
        Recker was employed as Chief Counsel of AT&T Capital Systems Leasing (“Systems

Leasing”), a wholly owned subsidiary of AT&T Capital Corporation (“AT&T Capital”). Recker’s

duties as Chief Counsel included oversight of the legal functions of Systems Leasing, as well as

supervising the legal department and its employees. He also managed the business functions for

Systems Leasing Value Added Services (“VAS”), a business within the Systems Leasing Division.

As a management employee, Recker qualified for severance benefits under the Plan.

        The Plan provided that certain management personnel were entitled to severance payments

if those employees experienced a qualifying termination of employment as defined by the Plan. The

Plan defines qualifying termination to mean, in relevant part, any termination by the Plan participant

(i.e. resignation) due to an elimination or reduction of the participant’s eligibility to participate in

the company’s benefit plans or programs that is inconsistent with the eligibility of similarly situated

employees to participate, or a significant reduction in the participant’s duties as they existed

immediately after the requisite closing date.                In 1996, a merger occurred between AT&T

Corporation, AT&T Capital, Hercules Limited, and Antigua Acquisition Corporation. The closing

date for that transaction was determined to be October 1, 1996.

        On January 12, 1998, AT&T Capital was acquired by Newcourt. Under the terms of the

acquisition, Newcourt assumed responsibility for administering the Plan and an earlier benefit plan

called the 1995 AT&T Member Annual Incentive Plan (“1995 Incentive Plan”).2 In February 1998,

Newcourt established a Green Circle list of management employees as an incentive to dissuade them

from leaving. While most employees on the list were granted common shares in Newcourt or

        2
         The term qualifying termination in the Plan refers to specified events occurring within two years of the
merger closing date of October 1, 1996, while the 1995 Incentive Plan defines qualifying termination as particular
events occurring within two years of the change in control between Newcourt and AT&T Capital in January 1998.

                                                         2
allowed to purchase shares at a reduced rate, Recker was not permitted to participate in the program

despite the fact that his name was placed on the list. At some point, Newcourt also informed Recker

that he would not be able to continue in both his position as Chief Counsel of Systems Leasing and

head of the business management functions at VAS. When Recker inquired into how his job duties

and compensation might change depending on which position he chose to retain, Newcourt did not

respond to his requests.

       In August 1998, at a meeting for senior members of the legal department, Newcourt

apparently unveiled a plan to centralize responsibility for all the legal budgeting functions, and the

major litigation and bankruptcy matters of its individual business segments to its New Jersey office.

Apparently believing that his job duties had already been significantly reduced, on September 30,

1998, just one day before the two-year period under the Plan expired, Recker informed Newcourt

that it had caused him a qualifying termination under the Plan. He provided Newcourt with notice

of his resignation and filed a claim for benefits under both the Plan and the 1995 Incentive Plan.

Although it is not disputed that Recker remained both Chief Counsel of Systems Leasing and head

of the business functions of VAS at the time he resigned, he claimed to be entitled to benefits as his

duties as Chief Counsel and head of VAS had been substantially reduced, and because he was not

given the opportunity to participate in the Green Circle program.

       Under the terms of the Plan, Newcourt itself is the plan administrator with the “responsibility

and discretionary authority to interpret the terms of the Plan, determine eligibility for benefits and

to determine the amounts of such benefits.” On April 1, 1999, the plan administrator granted Recker

$56,106.00 under the 1995 Incentive Plan, finding that he had experienced a qualified termination

under that plan’s provisions because he had experienced a significant reduction in his VAS duties.

                                                  3
On April 6, 1999, the plan administrator rejected Recker’s claim under the Plan, stating that a

qualifying termination had not occurred under its provisions because Recker’s duties had not been

significantly reduced, and Newcourt did not reduce or eliminate his eligibility to participate in any

benefit plans. Recker appealed the denial of his claim under the Plan to Newcourt’s Benefits

Committee, but his appeal was denied on September 23, 1999. The Benefits Committee determined

“that although some of the Chief Counsel’s functions were centralized as a result of the acquisition,

this change did not constitute a significant reduction in [Recker’s] duties and responsibilities as [his]

core job duties and reporting remained essentially the same.” Additionally, the Benefits Committee

stated that company records confirmed that Recker did not become head of VAS until January 23,

1997, precluding his claim for benefits under the Plan, and that the Green Circle program was a

stock option program and not a benefit plan.

        Recker filed a complaint against Newcourt in the district court alleging in pertinent part that

Newcourt acted arbitrarily and capriciously in denying him benefits under the Plan in violation of

ERISA § 502, and also that Newcourt interfered with his right to obtain benefits under the Plan in

violation of ERISA § 510.3 The parties filed cross-motions for summary judgment as to these

claims. After converting the parties’ motions for summary judgment into motions for entry of

judgment on the merits with respect to the denial of benefits claim, see generally Wilkins v. Baptist

Healthcare System, Inc., 150 F.3d 609 (6th Cir. 1998), the district court granted in part, and denied

in part, each parties’ motion for judgment. The court upheld Newcourt’s claims that Recker was not

responsible for the management functions of VAS on October 1, 1996, thereby preventing him from

        3
         Recker also alleged claims for breach of the AT&T Capital Plan, violation of ERISA § 503, 29 U.S.C. §
1133, and violation of ERISA § 404, 29 U.S.C. § 1104. The parties stipulated to the dismiss the claim for breach of
the AT&T Capital Plan, and Newcourt filed a motion to dismiss the claims for violation of ERISA § 503 and § 404,
which the district court granted. Recker does not appeal that decision.

                                                         4
arguing that the loss of such responsibility violated the Plan, and that the Green Circle program was

not a benefit severance plan to which Recker was entitled to under the Plan. Recker did not cross-

appeal these decisions. The court agreed with Recker, however, that Newcourt’s determination that

he had not experienced a significant reduction in his responsibilities as Chief Counsel was arbitrary

and capricious in violation of ERISA § 502. The district court denied both parties’ motions for

summary judgment as to the ERISA § 510 claim.

                                                 I.

       We review a district court’s decision in an ERISA case de novo, unless the policy gives the

plan administrator discretionary authority to determine eligibility for benefits or to construe the

terms of the plan. Firestone Tire and Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). In the latter

instance, a court reviewing a plan administrator’s decision should apply the arbitrary and capricious

standard of review. McDonald v. Western-Southern Life Ins. Co., 347 F.3d 161, 168 (6th Cir. 2003).

It is undisputed that Newcourt’s plan confers upon the plan administrator discretionary authority to

determine eligibility for benefits and to construe the terms of the plan. Although Newcourt is

operating under a conflict of interest as both administrator and issuer of the Plan, see Killian v.

Healthsource Provident Administrators, Inc., 152 F.3d 514, 521 (6th Cir. 1998), the existence of a

conflict does not alter the standard, but should merely be considered as a factor in determining

whether the plan administrator’s decision was arbitrary and capricious. Davis v. Kentucky Finance

Cos. Retirement Plan, 887 F.2d 689, 694 (6th Cir. 1989).

       The arbitrary and capricious standard is the least demanding form of judicial review of

administrative action. Williams v. International Paper Co., 227 F.3d 706, 712 (6th Cir. 2000). In

making its determination, the court must decide whether the plan administrator’s action was

                                                 5
“rational in light of the plan’s provisions.” Id. (quoting, Daniel v. Eaton Corp., 839 F.2d 263, 267

(6th Cir. 1988)). If it is possible to offer a reasoned explanation, based on the evidence, for a

particular outcome, that outcome is not arbitrary and capricious. McDonald, 347 F.3d at 169.

Finally, in making its determination, the court is confined to reviewing only those materials known

to the administrator at the time the decision was made. Peruzzi v. Summa Medical Plan, 137 F.3d
431, 433-34 (6th Cir. 1998).

       In support of his claim that Newcourt significantly reduced his duties and responsibilities

as Chief Counsel, Recker claims that Newcourt was planning to and had already begun centralizing

supervision of all of Systems Leasing’s major litigation and bankruptcy matters to its New Jersey

office, and that the budgeting functions for his legal department had also been transferred there.

Newcourt argues that it is undisputed that when Recker resigned he was still overseeing Systems

Leasing’s legal functions as Chief Counsel, performing essentially the same tasks as always. The

district court primarily reviewed Recker’s deposition testimony and found it to be “ambivalent” in

that Recker appeared to be uncertain about the centralization of his various duties and whether those

duties had actually been transferred or were only in the process of being transferred at the time he

resigned on September 30, 1998. The district court went on, however, to find that “by claiming that

the ‘transition’ had begun by the time he resigned, Plaintiff insinuates that a substantial amount of

his responsibilities in the areas of litigation, bankruptcy and budgeting had, in fact, already been

transferred to New Jersey, and Plaintiff likely suffered a significant reduction in his job duties.”

       We have been clear that in analyzing the decision of a plan administrator in an ERISA denial

of benefits case, a court may only consider evidentiary materials presented to the Plan administrator,

“and not any depositions, affidavits, or similar litigation-related materials submitted to the district

                                                  6
court by parties.” University Hospitals of Cleveland v. Emerson Elec. Co., 202 F.3d 839, 845 n. 2

(6th Cir 2000). The ultimate question in this case is whether Recker suffered a significant reduction

in his job duties as required by the Plan for a qualifying termination prior to October 1, 1998.

Newcourt’s decision that he did not can only be deemed arbitrary and capricious if irrational in light

of the materials reviewed by the plan administrator. Those materials included the letter submitted

by Recker in support of his claim for benefits on September 30, 1998, including its corresponding

exhibits, and any other materials considered by Newcourt during its evaluation.

       In reviewing the administrative record, it appears that the first time the idea of centralizing

litigation and bankruptcy management authority was discussed in any detail was at an August 1998

meeting in New Jersey for senior members of the company’s legal department. In his letter to the

plan administrator, Recker stated that following that meeting, “I was disappointed at this diminished

prospective role for my potential position in the Legal Department.” After speaking of these

negative changes in a prospective sense, Recker resigned approximately one month later citing the

transfer of all legal budgeting functions and material litigation and bankruptcy matters away from

the Chief Counsel position as evidence that he suffered a significant reduction in his duties as Chief

Counsel. But he cites no specific evidence to show which, if any, of his duties were actually

centralized before he resigned. There is also evidence that the plan administrator consulted with

Recker’s superiors about his status before reaching its decision that his job duties as Chief Counsel

had not been significantly reduced.

       The problem with the vague and contradictory statements presented by Recker to the plan

administrator is that it is clear under the Plan that Newcourt could have waited until the relevant

two-year period ended and then transferred all of Recker’s duties to New Jersey, and he would not

                                                  7
have been eligible for the benefits he claims. Even if the evidence shows that Newcourt was

planning to or had begun to reduce Recker’s duties, there is no indication how far into the transition

process Newcourt was on October 1, 1998. Under these circumstances, it cannot be said that the

plan administrator’s decision was arbitrary and capricious, and the district court erred in concluding

otherwise.

        Despite his failure to cross-appeal, Recker urges us to consider the other grounds advanced

in support of his benefits claim that were rejected by the district court. Newcourt argues that an

appellee may not attack a district court’s final judgment “with a view to enlarging his own rights

thereunder or lessening the rights of his adversary” without filing a cross-appeal. United States v.

American Railway Express Co., 265 U.S. 425, 435 (1924). But it is also well-established that the

prevailing party below need not cross-appeal to be entitled to support the judgment in its favor on

grounds expressly rejected by the district court. See Id. at 435-36; see also Jacobs v. E.I. du Pont

de Nemours & Co., 67 F.3d 1219, 1246 n. 43 (6th Cir. 1995) (“appellee can propose alternative

grounds in support of trial court judgment so long as those arguments were presented below”);

Jasany v. U.S. Postal Service, 755 F.2d 1244, 1248 n. 1 (6th Cir. 1985) (appellee “does not have to

cross-appeal to argue that there are alternative grounds that support the judgment below”).4 As

alternative grounds to support the district court’s decision that he suffered a qualifying termination

under the Plan in violation of ERISA § 502, Recker stated in his letter to the plan administrator that

his job duties as head of VAS were significantly reduced, and also that he was denied participation

in the Green Circle program.

        4
           Newcourt’s reliance on our decision in Ford Motor Credit Co. v. Aetna Casualty & Sur. Co., 717 F.2d 959
(6th Cir. 1983), is misplaced because it is unclear from that case whether the appellee even raised the claim not
cross-appealed at the district court level.

                                                        8
         The essence of the first claim centers around when Recker assumed duties with VAS.

Newcourt’s Benefits Committee relied on company business records to show that Recker did not

assume responsibility as head of VAS until January 23, 1997. Recker argues that the company

records are misleading and claims to have already been managing the business functions of VAS at

the closing date in October 1996, but he presented no concrete evidence to the plan administrator

to prove when he actually assumed those duties.5 Recker also notes that he was awarded benefits

under the 1995 Incentive Plan specifically because he was asked to relinquish his role as the

business manager of VAS after Newcourt acquired AT&T Capital, and that such an award is

inconsistent with Newcourt’s failure to recognize his identical claim under the Plan. As the district

court recognized, however, the term qualifying termination is defined differently under the two

plans. In order to receive benefits under the Plan, Recker must have had his VAS duties on October

1, 1996, and then had those duties significantly reduced by October 1, 1998. To receive benefits

under the 1995 Incentive Plan, Recker need only prove that he had VAS duties during the change

in control in January 1998, which were significantly reduced thereafter. Not only is it possible to

reach different results under the respective plans, but Newcourt’s seemingly contradictory award

of benefits is actually consistent with its determination that Recker only attained VAS

responsibilities in January 1997. The district court was, therefore, correct in concluding that

Newcourt did not act arbitrarily and capriciously in finding that Recker did not suffer a qualifying

termination with respect to his VAS duties.

         We are also in agreement with the decision of the plan administrator and the district court

         5
          While Recker later submitted the affidavits of three former supervisors or coworkers to the district court to
support the claim that he had assumed VAS duties prior to the closing date, this information was not before plan
administrator, and the district court properly refused to consider this evidence.

                                                           9
as to the Green Circle program. Although the Plan does define a qualifying termination as “an

elimination or reduction of the participant’s eligibility to participate in the company’s benefit plans

or programs that is inconsistent with the eligibility of similarly situated employees” to participate,

the Green Circle program is not a benefit plan as envisioned by the Plan, but merely a stock option

incentive program to which Recker was not necessarily entitled to participate.

                                                  II.

       Newcourt also contests the district court’s denial of its motion for summary judgment as to

Recker’s interference claim under ERISA § 510. Generally, a district court’s denial of a motion for

summary judgment is not appealable. Klein v. Long, 275 F.3d 544, 549 (6th Cir. 2001). "However,

when the appeal from a denial of summary judgment is presented together with an appeal from a

grant of summary judgment, we have jurisdiction to review the appropriateness of the district court's

denial.” Thomas v. United States, 166 F.3d 825, 828 (6th Cir. 1999). Nevertheless, we need not

address this claim. Both Newcourt and Recker explicitly recognize in their briefs to this Court that

following the district court’s denial of their cross-motions for summary judgment, the parties

stipulated to dismiss the ERISA § 510 claim. On May 17, 2002, the district court entered an order

dismissing Recker’s ERISA § 510 claim without prejudice. The dismissal of a claim without

prejudice does not act as an adjudication upon the merits. Cooter & Gell v. Hartmarx Corp., 496
U.S. 384, 396 (1990). Moreover, voluntary dismissal of a claim without prejudice leaves the

situation as if the action had never been filed, and since the action is no longer pending no further

proceedings on this issue are proper. See Bowman v. Shawnee State University, 220 F.3d 456, 465

n. 7 (6th Cir. 2000). We decline to exercise jurisdiction over a claim that is not properly before us.

                                                  10
                                             III.

       For the forgoing reasons, we REVERSE in part, and AFFIRM in part, the district court’s

judgment as to the ERISA § 502 denial of benefits claim. We decline to address the ERISA § 510

interference claim.

                                             11
       JULIA SMITH GIBBONS, Circuit Judge, dissenting. While I agree with the majority’s

determinations with regard to Recker’s job duties as head of VAS, the Green Circle program, and

Recker’s interference claim under ERISA § 510, I disagree with that part of the majority’s opinion

reversing the district court’s decision finding that the plan administrator arbitrarily and capriciously

denied Recker benefits in violation of ERISA § 502. I therefore respectfully dissent.

       The district court found that the plan administrator’s determination was arbitrary and

capricious. The court’s rationale was basically twofold. It first noted that the plan administrator

never defined what it considered Recker’s job duties to be. The court then reasoned that, if the fact

that Recker continued to work in a legal capacity sufficed to demonstrate that his job responsibilities

were not significantly reduced prior to the closing date, such an interpretation of “significant

reduction” is arbitrary and capricious in light of the plan’s provisions and in light of the fact that

Recker initially had significant responsibilities as chief counsel. Second, the court determined that

– even if Newcourt’s conclusion that centralization did not significantly reduce Recker’s duties is

ultimately accurate – the absence of evidence in the record to support this conclusion, and the

absence of any indication as to what the proper benchmark for judging whether Recker’s duties were

significantly reduced was or should have been, makes that assertion a conclusory statement with no

evidentiary support.

       The district court’s reasoning was sound. On appeal, Newcourt asserts that the district

court’s finding was erroneous for numerous reasons. All of Newcourt’s arguments are unavailing.

First, Newcourt argues that Recker’s duties included overseeing Newcourt’s legal functions,

managing the legal department, and performing transactional tasks. However, there is no indication

in the record that the plan administrator or Benefits Committee considered these to be Recker’s

                                                  12
duties or main responsibilities. Citing Gallo v. Amoco Corp., 102 F.3d 918 (7th Cir. 1996),

Newcourt argues that – although it may be unclear from the record what the plan administrator

considered Recker’s duties to be – it was permitted to provide a description of these duties during

litigation. Gallo stands for nothing of the sort. The case provides only that, when a plan

administrator interprets a plan provision in the process of making a decision regarding benefits, it

can defend this interpretation at trial with any arguments that may support the interpretation’s

reasonableness. Id. at 923. Gallo explicitly disavows the notion that plan administrators may

introduce new factual evidence into the record during litigation. Id. (stating that the plan

administrator “cannot augment the administrative record with new facts bearing upon the application

for benefits”). The extent of Recker’s duties immediately after the closing date is a question of fact,

not a question of plan interpretation. Hence, Newcourt cannot submit new evidence on that issue

at this point. Even if the extent of Recker’s duties is a question of plan interpretation, Newcourt is

really asking that a post-determination interpretation be accepted, not that rationales in support of

an interpretation utilized in conjunction with a benefits determination be accepted. Gallo does not

support acceptance of a post-determination interpretation.

       Second, Newcourt asserts that any centralization of legal work in New Jersey occurred only

after October 1, 1998, and that Recker consequently did not experience any actual reduction in

duties prior to that date. Even if this characterization is true, there is no clear indication of the

timing of the centralization in the record, and it does not alter the fact that the plan administrator’s

decision that Recker did not experience a significant reduction (before October 1, 1998) finds no

support in the record. Third, Newcourt asserts that the plan administrator consulted with people who

were familiar with Recker’s duties and based its determination on information they provided. While

                                                  13
this representation appears to be true, there is no indication in the record as to how these individuals

characterized Recker’s duties or of any rationale for why any reduction in those duties was not

significant, other than the conclusory statements that Recker continued performing core duties and

legal work. Finally, Newcourt argues that the district court improperly imposed on the plan

administrator the burden of explaining the reasoning behind the decision to deny Recker benefits

at the time it denied those benefits. This argument mischaracterizes the district court’s ruling.

Rather, the district court merely determined that there was insufficient evidence to support a

conclusion that the plan administrator reasonably denied Recker benefits.6

        It is true, as the majority points out, that “the arbitrary and capricious standard is the least

demanding form of judicial review of administrative action.” As the majority also points out,

however, a court reviewing a plan administrator’s decision is “confined to reviewing only those

materials known to the administrator at the time the decision was made.” The simple fact is that the

materials known to the administrator, comprising Recker’s submissions as well as any information

gleaned from interviews of Newcourt officials, do not support the administrator’s conclusion. In

sum, there is no indication from the record that the plan administrator engaged in a “deliberate

principled reasoning process” or that substantial evidence supports the decision to deny Recker

benefits; therefore, the district court did not err in finding that the plan administrator’s decision was

arbitrary and capricious. See Killian v. Healthsource Provident Adm’rs, Inc., 152 F.3d 514, 520 (6th

Cir. 1998) (citation omitted). The conflict of interest that existed because Newcourt administered

        6
        Newcourt also argues that the district court should have remanded Recker’s claim to the
plan administrator to build the evidentiary record rather than enter judgment for him. On the
contrary, when a court finds that a plan administrator denied benefits in an arbitrary and
capricious manner, the proper procedure is to award judgment for the claimant. See Williams v.
Int’l Paper Co., 227 F.3d 706, 715 (6th Cir. 2000).

                                                   14
and funded the Plan further supports the determination that the denial of benefits was arbitrary and

capricious. See id. at 521 (characterizing any situation in which the same party both administers and

funds a plan as presenting an actual conflict of interest that must be considered as a factor when

determining whether the administrator abused its discretion by denying benefits in an arbitrary and

capricious manner). For these reasons, I would wholly affirm the district court’s judgment as to

Recker’s ERISA § 502 claim.

                                                 15