Because “entity” is undefined in the plan, it must be accorded its plain and ordinary meaning. Bailey v. Blue Cross & Blue Shieldof Va., 67 F.3d 53, 57 (4th Cir. 1995).
Ahuja v. Ericsson, No. 07-1196 (4th Cir.) (May 12, 2008) (unpublished)
his case attracts my attention for a several important reasons. First, it points up the potential for mischief in the give and take of trigger events and exclusions, an area that has generated considerable litigation. Second, it provides insight into interpretative canons that can neutralize the typical advantage of the plan fiduciary when a plan grants discretion to the administrator.
Of course, employers gain considerable advantage by incorporating severance pay arrangements in a tightly drawn ERISA plan document. The plans are usually rather simple in design, and the one in dispute in this case appears rather typical.
The plaintiff worked in Rockville, Maryland. His employer closed that plant and consolidated operations in Raleigh, North Carolina. Nonetheless, the employer did offer the plaintiff a job in the Raleigh facility.
Plaintiff declined, however, and applied for severance pay. When the employer denies the claim, the plaintiff appeals and ultimately, having received no solace in appeal, files suit under ERISA.
The employer defends based upon this exclusionary language:
Sale or Merger of Ericsson.
Should all or any part of Ericsson or its assets or business to which a participant is assigned be sold, assigned, transferred, spun-off, reorganized, or merged with another entity , the participant will not be eligible for Enhanced Severance Benefits under this Plan if he or she is offered continuing employment with such entity regardless of whether the participant accepts the offer of employment and regardless of whether such offer is on comparable terms and conditions as the employeeâ€™s current employment. (emphasis added)
The Standard Of Review
The plan granted the administration “full discretion” to interpret plan language. Furthermore, the Court did not find that the employer being both sponsor and administrator required a reduction in the afforded deference:
Although Ericsson is both the sponsor and administrator of its benefits plans, any conflict of interest it may have does not rise to the level necessary to reduce the deference we owe its determinations. Colucci v. AGFA Corp. Severance Pay Plan, 431 F.3d170, 179 (4th Cir. 2005).
The issue was reduced to one of plan language interpretation. Here was the issue:
Does “another entity” include the employer?
If so, the exclusion applies and the employer wins. The district court held for the employer, granting its summary judgment motion. The plaintiff appealed.
A Change In Fortune
The Fourth Circuit, however, came to the plaintiff’s aid. It found the language of the plan very clear.
We therefore conclude that Paragraph 8b is unambiguous and does not embrace an internal reorganization of two Ericsson IPI locations. Accordingly, Ericsson retained no deference toSo the clarity of the plan language offset any advantage of the administrator under the discretionary standard of review. The Court also applied a familiar interpretative rule:
We have long recognized that the meaning of a term cannot be determined in isolation but that the term must be read in the context in which it is used. See, e.g., Pinney v. Nokia, Inc., 402 F.3d 430, 454 (4th Cir. 2005). In context, the reorganization referred to by Paragraph 8b clearly is a reorganization with another entity. All of the terms surrounding “reorganized” require the participation of another entity: sold, assigned, transferred, spun-off, merged.
The court did not call the rule by its given name, but this appears to be another instance of ejusdem generis – â€œwhen general words follow the enumeration of specific words in a statute, courts are to construe the general words in a manner that limits them to the same class of things enumerated by the preceding specific words.â€ This rule plus the unambiguity of the plan language, in the court’s view, made the critical difference.
Note: The case is unpublished, but the point is notable. Even an abuse of discretion standard won’t protect a plan administrator where the plan language is deemed unambiguous.
Titles Of Paragraphs – You often see provisions that state that titles are not indicative of any particular construction of the document – i.e., the “boilerplate” items. I don’t know if the plan had such a provision or if it would have mattered, but this comment in the opinion caught my interest:
Further, the title of Paragraph 8b refers to the interaction of Ericsson and another entity: â€œSale or Merger of Ericsson.â€ Finally, the later reference in Paragraph 8b to continuing employment â€œwith such entityâ€ assumes the presence of another entity earlier in the paragraph; otherwise, the later reference would be devoid of meaning.
Unambiguous Terms Trump Discretion
The malleability of the unambiguity concept may be as confounding as that of discretion. In any event, for purposes of severance pay plans, it’s best to list consolidation of locations rather than rely on a general exclusion relating to formal corporate reorganizations.
Postnote – The case involved additional claims and issues, so for a full understanding of the case, follow the hyperlink and read the case.