Court Opinion

ID: 2898038
Source: CourtListenerOpinion
Date Created: 2015-09-08 18:00:57.922242+00
Date Added: 2024-06-11T12:46:04.439069
License: Public Domain

Case: 14-31000       Document: 00513183594         Page: 1     Date Filed: 09/08/2015

           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT
                                                                           United States Court of Appeals
                                                                                    Fifth Circuit

                                       No. 14-31000                               FILED
                                                                          September 8, 2015
                                                                             Lyle W. Cayce
DEAN NAPOLI,                                                                      Clerk

                                                  Plaintiff–Appellant,
v.

JOHNSON & JOHNSON, INC.,

                                                  Defendant–Appellee.

                   Appeal from the United States District Court
                       for the Middle District of Louisiana
                             USDC No. 3:11-CV-754

Before STEWART, Chief Judge, and KING and ELROD, Circuit Judges.
JENNIFER WALKER ELROD, Circuit Judge:*
       Plaintiff–Appellant Dean Napoli appeals from a grant of summary
judgment for Defendant-Appellee Johnson & Johnson, Inc. on his ERISA claim
for the denial of post-termination severance benefits.                 Because the plan
administrator’s denial of severance benefits was not supported by substantial
evidence, we REVERSE and REMAND.

       * Pursuant to Fifth Cir. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in Fifth
Cir. R. 47.5.4.
    Case: 14-31000      Document: 00513183594       Page: 2    Date Filed: 09/08/2015

                                    No. 14-31000
                                          I.
      Scios, Inc. hired Napoli in July 2001. In April 2003, Janssen
Pharmaceuticals, Inc., owned by Johnson & Johnson, acquired Scios. Napoli,
during his employment with Johnson & Johnson, participated in the company’s
Severance Pay Plan (SPP). In September 2010, Johnson & Johnson fired
Napoli, prompting him to apply for severance pay. Napoli initially was told
that he was eligible for severance benefits, but Johnson & Johnson’s general
counsel later advised Napoli’s attorney, in writing, that Napoli was ineligible
for severance pay because he was terminated for violating company policies.
In the letter, the general counsel stated that Napoli was terminated “for a
Group I violation.”      The general counsel also asserted that Napoli had
“wrongfully expensed over $3,000 on his American Express account.”
      In February 2012, Napoli’s attorney again requested severance pay on
Napoli’s behalf. Johnson & Johnson responded in a March 2012 letter that
Napoli was ineligible for severance benefits because he violated Article 4 of the
SPP, which states, in pertinent part: “[a]n Eligible Employee is not eligible for
the benefits provided . . . if his or her employment is terminated as a result of
any one of the following events . . . v. discharge for (i) misconduct, (ii) a violation
of applicable rules, policies and/or practices, or (iii) conduct considered by the
Pension Committee to be detrimental to a Johnson & Johnson Company.”
Napoli appealed the decision, stated that he did not violate the policy, and
requested more information related to the policy and his alleged violation.
Napoli asked the company to “identify the specific facts and circumstances”
supporting the company’s claim that he violated its policy and stated that “a
general, blanket allegation . . . that I violated a Performance and Conduct
Standards Policy is impossible for me to defend.” In a May 2012 letter, Johnson
& Johnson responded by providing the company’s Performance and Conduct
Standards Policy No. N2847 and a copy of the September 2010 letter stating
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                                     No. 14-31000
that Napoli was ineligible for severance. In August 2012, the Benefit Claims
Committee completed its review of Napoli’s appeal and denied him severance
pay.
        Napoli sued Johnson & Johnson in state court, alleging that the company
fired him without just cause and violated both the Employee Retirement
Income Security Act of 1974 (ERISA) and the Age Discrimination Employment
Act of 1967 (ADEA). 1 Johnson & Johnson removed the case to federal court
and counterclaimed for approximately $3,000 in unauthorized credit card
charges on Napoli’s company-issued credit card. Napoli conceded that his
claim for severance benefits was governed by ERISA. Both parties moved for
summary judgment on Napoli’s ERISA claim, and Napoli moved for summary
judgment on the company’s counterclaim. The district court determined that
“the decision to deny [Napoli] severance pay was based on a reasonable
interpretation of the severance benefits program,” and thus the Administrator
did not abuse its discretion. Accordingly, the district court granted Johnson &
Johnson’s motion for partial summary judgment on the ERISA claim and
denied Napoli’s motion. 2 Napoli appealed.
                                           II.
        “We review the district court’s grant of summary judgment in an ERISA
case de novo, applying the same standard as the district court.” Schexnayder
v. Hartford Life & Accident Ins. Co., 600 F.3d 465, 468 (5th Cir. 2010). Where,
as here, “a benefits plan gives the administrator or fiduciary discretionary
authority to determine eligibility for benefits or to construe the terms of the
plan,” the administrator’s decision is reviewed for abuse of discretion.

        1The parties stipulated to dismiss all of Napoli’s age discrimination claims, with
prejudice.

       The district court also granted Napoli’s motion for summary judgment on the
        2

company’s counterclaim, which is not at issue on appeal.
                                            3
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                                       No. 14-31000
Anderson v. Cytec Indus., Inc., 619 F.3d 505, 512 (5th Cir. 2010) (internal
quotation marks omitted). “A plan administrator abuses its discretion if it acts
‘arbitrarily or capriciously.’ A decision is arbitrary and capricious only if it is
‘made without a rational connection between the known facts and the decision
or between the found facts and the decision.’” Truitt v. Unum Life Ins. Co. of
Am., 729 F.3d 497, 508 (5th Cir. 2013) (internal citation omitted), cert. denied,
134 S. Ct. 1761 (2014). “When reviewing for arbitrary and capricious actions
resulting in an abuse of discretion, we affirm an administrator’s decision if it
is supported by substantial evidence,” which is “more than a scintilla, less than
a preponderance, and is such relevant evidence as a reasonable mind might
accept as adequate to support a conclusion.” 3 Cooper v. Hewlett-Packard Co.,
592 F.3d 645, 652 (5th Cir. 2009) (internal quotation marks omitted). This
standard has been stated more broadly than it has been applied.
                                             A.
       In the seminal case of Vega v. National Life Insurance Services, Inc., we
explained that “we will not countenance a denial of a claim solely because an
administrator suspects something may be awry.” 188 F.3d 287, 302 (5th Cir.
1999), overruled on other grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105
(2008). Although we owe deference to an administrator’s reasoned decision,
“we owe no deference to the administrator’s unsupported suspicions. Without
some concrete evidence in the administrative record that supports the denial
of the claim, we must find the administrator abused its discretion.”                      Id.
Applying this standard in Vega, we held that an “ambiguous” notation in the

       3 Though a claimant has “the initial burden of demonstrating entitlement to benefits
under an ERISA plan,” Perdue v. Burger King Corp., 7 F.3d 1251, 1254 n.9 (5th Cir. 1993),
our review is “limited to considering whether the record supports the reasons” that Johnson
& Johnson provided to Napoli in the claims process, George v. Reliance Standard Life Ins.
Co., 776 F.3d 349, 353 (5th Cir. 2015). Here, the stated reason for denying severance benefits
was termination for a Group I violation. Accordingly, we consider only whether there was
substantial evidence to support this conclusion. See id. at 353.
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                                     No. 14-31000
plaintiff’s medical records was not sufficient evidence that the plaintiff made a
material misrepresentation on her enrollment form. Id. at 301. Because the
record contained only “innuendos and hints that Mrs. Vega may have made a
material misrepresentation on her enrollment form,” and it did not contain any
concrete evidence of a misrepresentation, we reversed the administrator’s
decision.     Id. at 302; cf. Truitt, 729 F.3d at 513–14 (holding that record
contained “concrete evidence” supporting denial of plaintiff’s ERISA disability
claim, including e-mails showing “that [plaintiff’s] travel schedule was
rigorous” and surveillance video showing plaintiff “walking, driving, and
bending down, and lifting and carrying boxes, bags, coolers, pumpkins, and a
dog”).
         In the present case, the only documents before the committee at the time
of its initial review were Johnson & Johnson’s Performance and Conduct
Standards Policy and the September 2010 letter from Johnson & Johnson’s
general counsel to Napoli. The Performance and Conduct Standards Policy is
not specific to Napoli or to his alleged violation of company policy; rather, it
merely is the policy itself. Needless to say, a citation to a policy is not evidence
that Johnson & Johnson fired Napoli for violating that policy.
         The September 2010 letter asserts that Napoli is ineligible for severance
benefits because he “was terminated for a Group I violation.” The letter then
states: “Furthermore, since [Napoli] wrongfully expensed over $3,000 on his
American Express account, the company hereby demands repayment.” 4
Although this letter proves that Johnson & Johnson claimed—after the fact
and in the midst of a dispute over benefits—that it had fired Napoli for a Group
I violation, the letter is not substantial evidence that Johnson & Johnson

        The letter does not state whether the allegedly improper expenditures constituted
         4

the Group I violation, and it does not state that Napoli was fired because of the improper
expenditures.
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                                       No. 14-31000
actually did fire Napoli for a Group I violation. The letter does not reference,
and the record does not contain, any personnel records or contemporaneous
employment documents showing that Napoli actually was fired for a Group I
violation or for making improper expenditures. 5 We are aware of no case, and
Johnson & Johnson does not provide one, holding that a single, cursory, post-
termination letter—one that fails to detail the alleged violation or cite to
contemporaneous accounts of the violation—constitutes substantial evidence. 6
       Johnson & Johnson also points to the March 2012 letter, the May 2012
letter, and the August 2012 letter. These documents were generated during
the ERISA claims process and, therefore, the plan administrator could not
have used them to support the initial denial of the claim for severance benefits.
In any event, these documents just re-state the conclusion that Napoli is
ineligible for benefits because he was discharged for violating company policy;
they do not constitute evidence that Napoli actually was discharged for
violating company policy.          As a result, the conclusory statements in the
documents do not constitute “concrete evidence . . . that supports the denial of
the claim.” Vega, 188 F.3d at 302.

       5 To be clear, Johnson & Johnson was not required to prove that Napoli actually did
violate company policy. Its burden was to provide substantial evidence that it fired Napoli
for violating company policy; a single, cursory, post-termination letter does not satisfy that
burden. If the rule were otherwise, companies could just generate post-termination
documents asserting that an employee was ineligible for benefits because he had been fired
for an unspecified violation, without any obligation to produce evidence that the employee
actually was fired for that violation.

       6  In fact, other courts that have affirmed denials of severance benefits have relied on
records more informative about the employment decision than that relied on by the
administrator here. See, e.g., Anderson v. U.S. Bancorp, 484 F.3d 1027, 1035 (8th Cir. 2007)
(relying on evidence of extensive internal investigation); Madera v. Marsh USA, Inc., 426
F.3d 56, 64 (1st Cir. 2005) (affirming denial of benefits where there was contemporaneous
evidence       that    the     terminated      employee     “forwarded     internal     e-mails
containing . . . confidential and/or proprietary information to a direct competitor”); Koons v.
Aventis Pharm., Inc., 367 F.3d 768, 776 (8th Cir. 2004) (finding evidence that claimant used
company phone for personal calls and improperly used a confidential mailing list for
solicitation).
                                              6
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                                   No. 14-31000
      Simply put, a single, cursory, post-termination letter asserting that an
employee is ineligible for benefits because he had been fired for violating a
company policy does not constitute “substantial evidence” that the employee
actually had been fired for violating a company policy. If it did, we would read
the word “substantial” out of the standard. Although an employee may not use
an ERISA claim to litigate the propriety of his termination, the substantial
evidence standard does require the administrator to rely on more than
conclusory     statements   and    cursory    references   to    determine    that   a
“termination, however unfair or unwise, was for violating company policy.”
Koons v. Aventis Pharm., Inc., 367 F.3d 768, 777 (8th Cir. 2004). The record
here, in contrast with our previous decisions, lacks factual development beyond
mere conclusions or assertions. Cf. Truitt, 729 F.3d at 513–14 (containing a
detailed factual record).     Thus, as in Vega, the record does not contain
substantial evidence that Napoli was fired for violating company policy.
Accordingly, “we must find the administrator abused its discretion.” Vega, 188
F.3d at 302.
                                         B.
       Alternatively, the plan administrator’s decision did not provide Napoli
with a “full and fair review.” The lack of a “‘full and fair review’ . . . is an
independent basis to overturn a plan administrator’s denial of benefits.”
Truitt, 729 F.3d at 510 n.6. “A plan administrator fails to provide a ‘full and
fair review’ if it does not comply with the ‘procedures set forth in [29 U.S.C.]
§ 1133 of ERISA and in the Department of Labor regulations promulgated
pursuant to that section.’ These procedures require, among other things, that
a plan administrator provide a claimant with ‘specific reasons’ for terminating
benefits . . . .” Id. at 509 n.4 (alteration in original) (internal citation omitted).
Here, the company never provided Napoli with “specific reasons” for
terminating his benefits. Despite the fact that Napoli sent multiple requests
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                                       No. 14-31000
for information as to why he had been terminated, all of the documents he
received simply restated company policies and conclusions. Just as company
policies and conclusions are not “concrete evidence,” they are not “specific
reasons” for terminating benefits. Therefore, the administrator did not provide
Napoli with a “full and fair review,” creating “an independent basis to overturn
a plan administrator’s denial of benefits.” Id. at 510 n.6.
                                             III.
       “If an administrator has made a decision denying benefits when the
record does not support such a denial, the court may, upon finding an abuse of
discretion on the part of the administrator, award the amount due on the
claim . . . .” Vega, 188 F.3d at 302. 7 Because we find an abuse of discretion
here, “we will remand to the district court for a determination of damages . . .
and for entry of judgment.” Id. 8
       REVERSED and REMANDED.

       7  Though Vega left open the possibility that remand to the administrator may be
appropriate in “some special circumstances,” Vega also makes clear that early development
of the administrative record is preferred. 188 F.3d at 302 n.13. Accordingly, this court has
previously declined remand to the administrator where no substantial evidence “supported
the administrator’s basis for denying benefits.” Robinson v. Aetna Life Ins. Co., 443 F.3d 389,
397 n.5 (5th Cir. 2006).

       8We express no opinion on an award of attorney’s fees and leave the issue for
determination by the district court. See 29 U.S.C. § 1132(g)(1) (“[T]he court in its discretion
may allow a reasonable attorney’s fee and costs of action to either party.”).
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                                    No. 14-31000
KING, Circuit Judge, dissenting:
      The majority arrives at its result only through a disturbing
misapplication of the “substantial evidence” test.                Because the Plan
Administrator’s decision to deny Napoli benefits is supported by concrete,
direct, and unrebutted evidence, and because Napoli was provided a “full and
fair review” of his case, I dissent.
      As an initial matter, Napoli’s suggestion that there must have been
substantial evidence that he violated a company policy misstates the relevant
inquiry. At oral argument, it became clear that Napoli is attempting to use his
ERISA case as a vehicle for relitigating the propriety of his termination. But
the Plan makes clear that an employee is not eligible for benefits if he “is
terminated as a result of . . . discharge for . . . a violation of applicable rules,
policies, and/or practices.” Accordingly, the Plan Administrator’s decision need
only have been based on substantial evidence that Napoli was discharged for
a violation of company policy, not substantial evidence that Napoli actually
committed such a violation.
      With that framework in mind, and based on my review of the record, I
would conclude that there is at least “some concrete evidence in the
administrative record that supports the denial of the claim.” Vega v. Nat’l Life
Ins. Servs., Inc., 188 F.3d 287, 302 (5th Cir. 1999) (en banc), overruled on other
grounds by Metro. Life Ins. Co. v. Glenn, 554 U.S. 105 (2008). The majority
pays lip service to this standard, but proceeds to misapply it. A letter 1 from
Johnson & Johnson’s Office of General Counsel, sent to Napoli’s attorney on

      1  The letter reads: “This is in reference to the termination of employment of Mr.
Napoli. In a conversation last Friday with my client, you were told that Mr. Napoli was
entitled to 4 weeks’ severance. That is incorrect. Since he was terminated for a Group 1
violation, he is not entitled to any severance. Furthermore, since he wrongfully expensed
over $3,000 on his American Express account, the company hereby demands repayment. He
can send this reimbursement directly to Ms. Harris.”

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                                       No. 14-31000
September 27, 2010, just days after Napoli’s termination, makes clear that he
was terminated due to a violation of company policy—specifically, “a Group 1
violation,” based on allegations that “he wrongfully expensed over $3,000 on
his American Express account.” 2          This letter constitutes concrete evidence—
indeed, direct evidence—as to why Johnson & Johnson chose to terminate
Napoli. 3 This direct evidence constitutes at least “more than a scintilla” and
“is such relevant evidence as a reasonable mind might accept as adequate to
support a conclusion.” Killen v. Reliance Standard Life Ins. Co., 776 F.3d 303,
307 (5th Cir. 2015) (internal quotation marks omitted) (defining “substantial
evidence”).
       Furthermore, this evidence went unrebutted. Napoli failed to submit
any evidence suggesting that he was terminated for any reason other than a
violation of company policy, despite the fact that he carried “the initial burden
of demonstrating entitlement to benefits under an ERISA plan.” Perdue v.
Burger King Corp., 7 F.3d 1251, 1254 n.9 (5th Cir. 1993). Although Napoli
claimed in a letter to Johnson & Johnson that he was discharged “due to the
elimination of [his] position or a reduction in work-force,” he offered no
evidence in support of that assertion. See Holland v. Int’l Paper Co. Ret. Plan,
576 F.3d 240, 250 (5th Cir. 2009) (“[The claimant] did not supplement the
record with other evidence in this case, nor can he point to evidence that the
Plan Administrator failed to consider.”); cf. Vega, 188 F.3d at 300 (“Before filing
suit, the claimant’s lawyer can add additional evidence to the administrative

       2  Johnson & Johnson’s policies, which were provided to Napoli, state that Group 1
violations include “[w]illfully making any false statement in records that are the property of
the Company or which are submitted to the Company including . . . expense reports.”
        3 Moreover, as the majority notes, in various correspondence with Napoli’s attorney in

2012, Johnson & Johnson reiterated that Napoli was terminated “due to the violation of the
Company’s Performance and Conduct Standards Policy.”
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                                  No. 14-31000
record simply by submitting it to the administrator in a manner that gives the
administrator a fair opportunity to consider it.”).
      I admit that the evidence here, while concrete, is on the “low end” of the
substantial evidence spectrum under our caselaw. However, “our review of the
administrator’s decision need not be particularly complex or technical; it need
only assure that the administrator’s decision fall somewhere on a continuum
of reasonableness—even if on the low end.” Vega, 188 F.3d at 297 (emphasis
added). Because the inquiry the Plan Administrator faced in this case was a
simple one—requiring only a determination of why Johnson & Johnson
terminated Napoli—it is not surprising that the evidence in the record is less
than voluminous. I would also note that where, as here, the Plan grants the
Plan Administrator discretion to determine benefit eligibility, our review is
highly deferential. See Wade v. Hewlett-Packard Dev. Co. LP Short Term
Disability Plan, 493 F.3d 533, 541 (5th Cir. 2007) (“We should not substitute
our judgment for that of the administrator.”), overruled on other grounds by
Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242 (2010); Holland, 576
F.3d at 246 (“A decision is arbitrary only if made without a rational connection
between the known facts and the decision or between the found facts and the
evidence.” (internal quotation marks omitted)).        The Plan Administrator’s
decision here was based not on “unsupported suspicions,” Vega, 188 F.3d at
302, but rather on concrete and unrebutted evidence of the reason for Napoli’s
termination. Accordingly, I would conclude that the low substantial evidence
bar has been met.
      The majority’s alternative conclusion that the plan administrator denied
Napoli a “full and fair review” fares no better. Although ERISA beneficiaries
are entitled to “adequate notice in writing . . . setting forth the specific reasons
for . . . denial[s],” 29 U.S.C. § 1133(1), “[c]hallenges to ERISA procedures are
evaluated under the substantial compliance standard,” Wade, 493 F.3d at 539.
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                                       No. 14-31000
“This means that the technical noncompliance with ERISA procedures will be
excused so long as the purpose of section 1133 has been fulfilled”—i.e., so long
as a beneficiary is afforded “an explanation of the denial of benefits that is
adequate to ensure meaningful review of that denial.” Id. (internal quotation
marks omitted). That standard has been met here, as the Plan Administrator’s
denial letter made clear that the denial rested on the conclusion that Napoli
was discharged for violating company policy. Moreover, the September 2010
letter placed Napoli on notice that the policy violation stemmed from
allegations of improper credit card charges. 4                See id. (“The substantial
compliance test also considers all communications between an administrator
and plan participant to determine whether the information provided was
sufficient under the circumstances.” (internal quotation marks omitted)).
       In my view, the majority has, in effect, applied a standard more rigorous
than the substantial evidence test as described in our precedents. The direct
and undisputed evidence in this case is sufficient to meet this low bar. Johnson
& Johnson fired Napoli because he “wrongfully expensed over $3,000 on his
American Express account.” Because of the majority’s decision to reverse the
district court’s judgment, Johnson & Johnson is now stuck with paying
severance benefits to Napoli. I dissent.

       4 There is no suggestion by Napoli, nor does the record indicate, that there was any
other alleged company policy violation at issue. Thus, the Plan Administrator’s failure, in its
denial letter, to explicitly describe the nature of the allegations did not have the effect of
denying Napoli a full and fair review. The September 2010 letter made clear to Napoli that
his termination stemmed from allegations of credit card misuse.
                                              12