Court Opinion

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Date Created: 2015-10-13 23:15:12.929875+00
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Opinions of the United
2009 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

6-4-2009

Larry Donachy v. Motion Control Ind
Precedential or Non-Precedential: Non-Precedential

Docket No. 08-3919

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Recommended Citation
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http://digitalcommons.law.villanova.edu/thirdcircuit_2009/1235

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                                                         NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT
                               _____________

                                    No. 08-3919
                                   _____________

                      LARRY DONACHY; BRUCE KINLEY,
                                       Appellants
                                  v.

              MOTION CONTROL INDUSTRIES, DIVISION
         OF CARLISLE CORPORATION; RETIREMENT PLAN FOR
    BARGAINING UNIT EMPLOYEES OF MOTION CONTROL INDUSTRIES,
               DIVISION OF CARLISLE CORPORATION

                                   _____________

                   On Appeal from the United States District Court
                       for the Western District of Pennsylvania
                                (D.C. No. 07-cv-00068)
                    District Judge: Honorable Sean J. McLaughlin
                                    _____________

                    Submitted Under Third Circuit L.A.R. 34.1(a),
                                  May 19, 2009

           Before: FUENTES, JORDAN, and NYGAARD, Circuit Judges.

                                (Filed: June 4, 2009 )

                             OPINION OF THE COURT

FUENTES, Circuit Judge:

      Appellants Larry Donachy and Bruce Kinley appeal the District Court’s decision

                                         -1-
that the calculation of their pension benefits by Appellees Motion Control Industries

(“Motion Control”) and the Retirement Plan for Bargaining Unit Employees of Motion

Control Industries (“the Plan”) was not arbitrary and capricious in violation of the

Employment Retirement Income Security Act (“ERISA”), 29 U.S.C. §§ 1001 et seq. They

argue that the District Court erred in refusing to apply a heightened arbitrary and

capricious standard of review and in interpreting the terms of the Plan. For the reasons

that follow, we will affirm the District Court’s grant of summary judgment in favor of

Motion Control and the Plan.

                                              I.

       We review a summary judgment ruling de novo. Levy v. Sterling Holding Co.,

LLC, 544 F.3d 493, 501 (3d Cir. 2008). Summary judgment is warranted if “there is no

genuine issue as to any material fact and . . . the movant is entitled to a judgment as a

matter of law.” Fed. R. Civ. P. 56(c).

       In a suit to recover benefits under 29 U.S.C. § 1132(a)(1)(B), we have previously

held that “[w]here, as here, the plan gives the administrator discretionary authority, we

review the administrator’s exercise of that authority under an ‘arbitrary and capricious’

standard.” Vitale v. Latrobe Area Hosp., 420 F.3d 278, 281-82 (3d Cir. 2005). The

Supreme Court has recently referred to the appropriate standard of review as review for

abuse of discretion. Metro. Life Ins. Co. v. Glenn, 128 S. Ct. 2343, 2348 (2008). T he two

standards of review do not differ in any material respect. See Estate of Schwing v. The

                                             -2-
Lilly Health Plan, 562 F.3d 522, 526 n.2 (3d Cir. 2009). In conducting our review, if the

administrator is operating under a conflict of interest, we must weigh that as a factor in

determining whether the administrator has abused its discretion. Glenn, 128 S. Ct. at 2350-

51 (citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)).

       We have jurisdiction over this appeal under 29 U.S.C. § 1132(e)(1) and 28 U.S.C.

§ 1291.

                                             II.

       Because we write only for the parties, who are familiar with the facts and prior

proceedings, we will set forth only those facts necessary to our analysis. Donachy and

Kinley are former employees of Motion Control who worked at a manufacturing facility in

western Pennsylvania until it closed in January 2002. Under section 4.4(b) of the Plan,

Appellants were entitled to a monthly pension benefit equal to the product of “the pension

benefit multiplier and his Credited Service as of the date his Vesting Service terminates.”

A 2000 supplement to the Plan set out the pension benefit multiplier “depending upon the

date of the [employee’s] retirement,” with the multiplier set at $30 as of the time the plant

closed and an increase to $31 scheduled to become effective July 1, 2002.

       Appellants’ benefits were calculated using the $30 multiplier. They protested this

approach to the Carlisle Corporation Incorporated Pension and Benefits Committee (“the

Committee”), which administers the Plan, but their request for the application of the $31

multiplier was denied. The Committee based its decision on the statement in the Plan

                                             -3-
documents that Deferred Vested Retirement Benefits, the type of benefits Donachy and

Kinley were seeking, are “based on the benefit rate and [the employee’s] Credited Service

as of the date his Vesting Service terminates.” The Plan also provides that “[a]n Employee

shall receive credit for Vesting Service for his period of employment by the Employer and

Affiliates determined in accordance with uniform and nondiscriminatory standards and

policies adopted by the Committee.” The Committee interpreted these provisions to mean

that Appellants’ Vesting Service must have terminated when their employment was

terminated, i.e., when the plant closed in January 2002, rejecting Appellants’ argument

that they could extend the date of their termination of service past July 1 by applying

previously accrued service hours and vacation time. The Committee reasoned that their

termination was the point at which Donachy’s and Kinley’s amount of Vesting Service

became “fixed and determinable” under the Plan’s provisions regarding the calculation of

Vesting Service, which require an employee to have 83 1/3 “hours of service” in a

calendar year to receive credit for a year of Vesting Service. Additionally, the Committee

read the Plan documents to make Vesting Service relevant only to the determination of

eligibility for benefits rather than their amount, explaining that otherwise employees

terminated on the same date and with the same amount of Credited Service might receive

different benefits.

       Donachy and Kinley subsequently brought suit in the District Court for the Western

District of Pennsylvania under ERISA, 29 U.S.C. § 1132(a)(1)(B), arguing that the

                                             -4-
Committee’s interpretation of the Plan constituted an abuse of discretion. The District

Court reviewed the Committee’s decision under the normal arbitrary and capricious

standard rather than heightened scrutiny, finding that its adoption of Motion Control’s

reading of the Plan was insufficient to demonstrate it was biased and thus subject to a

conflict of interest. The District Court held that the Committee’s interpretation of the Plan

documents was reasonable, citing Plan provisions indicating that “Vesting Service” is used

to determine “eligibility” for benefits rather than the amount of those benefits.

                                               III.

        On appeal, Donachy and Kinley challenge both the District Court’s refusal to apply

a heightened standard of review and its endorsement of the Committee’s reading of the

Plan documents.

                                               A.

        The District Court properly rejected Appellants’ argument that the Committee’s

decision should have received heightened scrutiny because it was biased.1 Donachy’s and

        1

 In Metropolitan Life Insurance v. Glenn, 128 S. Ct. 2343 (2008), decided since the
District Court’s opinion was issued, the Supreme Court made clear that an administrator’s
conflict of interest is simply a “factor” to be considered in reviewing its determinations
under a traditional abuse of discretion standard, whereas previous cases had treated a
conflict of interest as affecting the standard of review itself on a “sliding scale.” See, e.g.,
Post v. Hartford Ins. Co., 501 F.3d 154, 161 (3d Cir. 2007) (“[I]f the level of conflict is
slight, most of the administrator’s deference remains intact, and the court applies
something similar to traditional arbitrary and capricious review; conversely, if the level of
conflict is high, then most of its discretion is stripped away.”). Since we agree with the
District Court that there is no evidence of partiality here, that distinction is irrelevant to
our review of the Committee’s decision.

                                               -5-
Kinley’s allegations that Motion Control was insufficiently responsive to their inquiries

about the pension multiplier issue are irrelevant, given that the Committee is an entity

independent from Motion Control. Appellants’ alternative argument that the Committee

demonstrated its bias by uncritically adopting Motion Control’s interpretation of the Plan

is equally unavailing, as the Committee laid out a five-page, reasoned explanation for its

decision. The simple fact that the Committee did not, in Appellants’ eyes, spend enough

time addressing their arguments does not render its analysis inadequate.

                                              B.

       Under ERISA, where a plan administrator with discretionary authority is not

operating under a conflict of interest, we review its decisions under an abuse of discretion

standard. Glenn, 128 S. Ct. at 2348. If the administrator’s decision relates to the

interpretation of the terms of a plan document, we first consider whether the plan’s

language is ambiguous. Bill Gray Enterprises, Inc. Employee Health & Welfare Plan v.

Gourley, 248 F.3d 206, 218 (3d Cir. 2001). If the terms of the plan document are

ambiguous, we “must take the additional step and analyze whether the plan administrator’s

interpretation of the document is reasonable.” Id.

       In this case, although the Plan terms contain some ambiguity, the Committee’s

interpretation of the provisions relating to the calculation of the pension benefit multiplier

was reasonable. The Committee accepted that the appropriate multiplier for a member’s

benefit calculation depends on the date the member’s Vesting Service terminates, and

                                              -6-
concluded that the Vesting Service must terminate when the member’s employment is

terminated because that is the date when the member’s “amount of Vesting Service

[becomes] fixed and determinable.” (App. 104.) This differentiation between the date on

which Vesting Service terminates and how much Vesting Service a member has amassed

makes obvious sense, given that the Plan supplement sets the cutoffs for the multiplier

applicable to a member at particular dates, such as July 20, 2000 and July 1, 2001. Under

section 3.5 of the Plan, the amount of a member’s Vesting Service is measured in units of

whole calendar years, depending on whether the member has accrued sufficient hours of

service within that calendar year. Therefore the amount of a member’s Vesting Service

could never end in the middle of a year, and the date of termination of Vesting Service

must be different from the amount of Vesting Service.

       Once that distinction was made, it was also reasonable for the Committee to rely on

section 3.5’s statement that “an Employee shall receive credit for Vesting Service for his

period of employment” in deciding that Vesting Service must terminate when that “period

of employment” is over, namely when the employee retires or his or her employment is

terminated. Reinforcing that approach is the fact that the Plan supplement’s chart of

pension benefit multipliers sets each multiplier according to the member’s “date of

retirement.” Moreover, as the Committee noted, choosing the date of employment

termination as the relevant date provides a fixed point at which the employee’s pension

benefits can be calculated, whereas Appellants’ approach, to look to any hours that can be

                                            -7-
credited within the calendar year when the employee stops working to determine accrued

hours of service, would leave some employees in limbo as to their pension status for the

months between the end of their employment and the end of the calendar year. Overall, the

Committee’s reading of the relevant retirement benefit provision is both consonant with

the plain language of the Plan as a whole and reasonable in terms of the Plan’s real-world

implementation.

                                            IV.

      For the foregoing reasons, we affirm the judgment of the District Court.

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