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DANIELS v. ANCHOR HOCKING CORP.

February 27, 1991

L. EUGENE DANIELS, PLAINTIFF,
v.
ANCHOR HOCKING CORPORATION AND ANCHOR HOCKING GROUP INSURANCE PLACE, DEFENDANTS.



The opinion of the court was delivered by: D. Brooks Smith, District Judge.

OPINION

Plaintiff L. Eugene Daniels is a former management employee of defendant Anchor Hocking Corporation's ("Anchor") Shenango China Division. He began his career with Shenango China in 1964, and while employed there saw several changes in management. In 1979, defendant Anchor acquired Shenango China, and continued to employ plaintiff as the Vice President of Manufacturing.

In June 1982, Anchor transferred plaintiff to a new position. In 1983, Anchor again changed plaintiff's title and reduced his salary by 21.6%. Defendant characterizes this change as a demotion; plaintiff contends that his reduction in salary was part of a company-wide scheme to eliminate overhead in upper and middle management. On August 31, 1985, Anchor terminated plaintiff's employment.

On March 3, 1986, plaintiff filed this suit. In his complaint, plaintiff alleged that defendants violated Section 1132(a)(1)(B) of the Employee Retirement Income Security Act of 1974 ("ERISA") 29 U.S.C. § 1001 et seq., by denying him severance pay and health benefits as provided in Anchor's Personnel Policy No. 2-10-1, Severance, Layoff, and Recall Procedures for Salaried Employees. ("Severance Policy"). Defendant filed an answer in which it claims that it did not violate the terms of the severance policy by denying plaintiff benefits because plaintiff was not eligible for benefits under the terms of the plan.

The case is now before the Court on defendant's motion for summary judgment. Plaintiff contests this motion for summary judgment by claiming that there are genuine disputes as to material facts that preclude granting summary judgment. Defendants respond that the only disputed facts are not material to the ultimate question of plaintiff's eligibility for severance benefits. We agree and therefore grant defendants' motion.

Rule 56 of the Federal Rules of Civil Procedure allows a party to obtain summary judgment upon a showing that there are no genuine issues of material fact and that the moving party is entitled to summary judgment as a matter of law. Fed.R.Civ.P. 56(c). Summary judgment is not "regarded as a disfavored procedural shortcut but rather as an integral part of the Federal Rules . . ." Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265 (1986). When reviewing a motion for summary judgment, we must view the evidence in the light most favorable to the nonmoving party. Lang v. New York Life Ins. Co., 721 F.2d 118, 119 (3d Cir. 1983). However, the nonmoving party must produce more than a mere scintilla of evidence to avoid summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 262, 106 S.Ct. 2505, 2517, 91 L.Ed.2d 202 (1986). Indeed, Rule 56(c) states that the nonmoving party "must set forth facts showing that there is a genuine issue for trial." Moreover, "the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be a genuine issue of material fact." Anderson, 477 U.S. at 248, 106 S.Ct. at 2510. The substantive law governing the case controls which facts are material. Ibid. Similarly, "the determination of whether a given factual dispute requires submission to a jury must be guided by the substantive evidentiary standards that apply to the case." Id. 477 U.S. at 255, 106 S.Ct. at 2514. With these principles in mind, we turn to the merits of the instant case.

The threshold issue which confronts us concerns the standard of review. In Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989), the Supreme Court held that a denial of benefits "is to be reviewed under a de novo standard of review unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan." Id. at 115, 109 S.Ct. at 956. The Supreme Court did not, however, specifically articulate the standard of review to be applied by courts reviewing decisions made under discretionary plans. After Bruch, this court held that "[i]n the event a plan gives an administrator or fiduciary discretion to determine eligibility or construe uncertain terms, an arbitrary and capricious standard will apply." Adamo v. Anchor Hocking Corp., 720 F. Supp. 491, 499 (W.D.Pa. 1989). See also Stoetzner v. U.S. Steel Corp., 897 F.2d 115, 119 (3d Cir. 1990) (holding that where a plan grants an administrator discretion in making eligibility determination, a court must review that determination under the arbitrary and capricious standard.)

The plan at issue in the instant case is the same plan that was at issue in Adamo, supra. In Adamo, this Court concluded that the plan "clearly grants the administrator the power to construe uncertain terms. As a matter of law, therefore, the severance plan is discretionary and an arbitrary and capricious standard must be applied." Id. 720 F. Supp. at 499. The parties here agree that the plan vests the administrator with discretion to construe uncertain terms and to make decisions concerning eligibility. The parties disagree, however, as to the applicable standard of review. Defendant contends that because the plan grants the administrator discretion, the administrator's decision cannot be overturned unless it is arbitrary and capricious. Plaintiff, however, contends that the Supreme Court's decision in Bruch mandates review under an abuse of discretion standard because the plan is unfunded and the administrator operates under an inherent conflict of interest.

We find plaintiff's argument untenable for several reasons. First, plaintiff has not provided the Court with any explanation as to how the arbitrary and capricious standard is different from the abuse of discretion standard. Nor does plaintiff provide the Court with any statement of the analytical framework mandated by either standard of review. Instead, plaintiff perfunctorily asserts, without citation or explanation, that the arbitrary and capricious standard is narrower than the abuse of discretion standard. Defense counsel has also failed to squarely address this issue; he simply relies on this Court's statement in Adamo that the decision must be reviewed under the arbitrary and capricious standard.

The briefs and arguments in this case have not convinced the Court that there is a meaningful difference between the arbitrary and capricious standard and the abuse of discretion standard. However, because of its importance, we consider it necessary to address this issue at length.

Unfortunately even in the post-Bruch cases which discuss the standard of review, there is little explication of the analytical framework to be employed when applying the arbitrary and capricious standard as compared to the abuse of discretion standard. Indeed, there is even a line of cases from the Eleventh Circuit under which the labels "abuse of discretion" and "arbitrary and capricious" are used interchangeably. Anderson v. Blue Cross & Blue Shield of Alabama, 907 F.2d 1072, 1075 n. 2 (11th Cir. 1990); Brown v. Blue Cross & Blue Shield, 898 F.2d 1556, 1558 n. 1 (11th Cir. 1990), cert. denied, ___ U.S. ___, 111 S.Ct. 712, 112 L.Ed.2d 701, (1991); Jett v. Blue Cross & Blue Shield, 890 F.2d 1137, 1139 (11th Cir. 1989). However, this view is not universally held.

According to the United States Court of Appeals for the Seventh Circuit, a court reviewing a denial of benefits must employ the arbitrary and capricious standard even if the plan administrator operates under a conflict of interest. Rizzo v. Caterpillar, Inc., 914 F.2d 1003, 1008 and n. 2 (7th Cir. 1990). In contrast, the Fourth Circuit has held that Bruch mandates the total abandonment of the arbitrary and capricious standard regardless of the existence of a conflict of interest. DeNobel v. Vitro Corp., 885 F.2d 1180, 1185-1186 (4th Cir. 1989). Thus, no consensus has emerged from the post-Bruch cases as to the applicable standard of review where a plan grants discretion to an administrator who is operating under a conflict of interest. Nor do these divergent precedents provide any clear explanation of the differences between the arbitrary and capricious and the abuse of discretion standards of review.

Without a statement from the Court of Appeals for the Third Circuit, or any clear consensus among the other Courts of Appeals, we write on a clean slate. We disagree with plaintiff's contention, and we decline to follow the Fourth Circuit's conclusion, that the Supreme Court's opinion in Bruch can be read as a wholesale rejection of the arbitrary and capricious standard.

In Bruch, the Supreme Court stated that comparison between the Labor Management Relations Act and ERISA "shows that the wholesale importation of the arbitrary and capricious standard into ERISA is unwarranted." 489 U.S. at 109, 109 S.Ct. at 953 (emphasis in the original). The Court then held that de novo review is appropriate in the absence of plan language granting discretion to the administrator. The Court did not identify the standard to be applied in plans that vest discretion in the plan administrator. Instead, the actual language of the opinion referred to the proper standard for nondiscretionary plans. We do not believe that the Supreme Court intended the wholesale rejection of the arbitrary and capricious standard. The Bruch opinion simply does not compel this conclusion. See Rizzo v. Caterpillar, Inc., 914 F.2d at 1008 and n. 2. (noting that the Supreme ...


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