Techinical Legal Term In Contract Is Given Its Technical Meaning
BANDAK v. ELI LILLY AND COMPANY RETIREMENT PLAN (November 18, 2009)
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Stephen Bandak was employed by an Eli Lilly company in England, his native country, from 1978 to 1995. He participated in the company's retirement plan. He was transferred to the United States in 1995. The company told him, upon his enrollment in the U. S. company's plan, that his benefits in that plan would be based on years of employment retroactive to 1978. The plan also provided that benefits would be reduced by the actuarial equivalence of any other benefits under a “qualified defined benefit plan” maintained by an Eli Lilly company. When Bandak retired in 2004, the company took the position that his benefits under the English company's plan were benefits under a qualified defined benefit plan and were thus properly deducted from his U.S. pension benefits. Bandak sued the company under ERISA. Judgment was entered in his favor for both damages and an injunction relating to future benefit payments. The court also concluded that Lilly's position was not substantially justified and awarded attorneys’ fees. Eli Lilly appeals.
In their opinion, Judges Posner, Rovner and Williams affirmed. The Court focused on the language "qualified defined benefit plan" in the plan document. The term is a technical term and it refers to a plan that has been afforded favorable tax treatment by the Internal Revenue Service. The Court concluded that it had no meaning outside that context. The Court applied the presumption that, when a technical legal term is used in the contract, it is given its technical legal meaning. If it had no meaning outside the United States, the English plan was not such a plan and it should not have reduced his benefits. Substantial evidence in the record supported the Court's conclusion. The Court also concurred in the district court's conclusion that the company's position was not justified.
