Court Must Defer To Plan Administrator, Even If Not An ERISA Fiduciary
COMRIE v. IPSCO, INC. (February 18, 2011)
Ipsco, Inc. had an unfunded, supplemental pension plan for its top executives. The plan had a golden parachute provision under which an executive was eligible for benefits if he left the company's employ within two years of a change of control. John Comrie was an executive covered by the plan. He resigned shortly after Ipsco was acquired by a Swedish company. Under the plan, Comrie was entitled to 54% of his average annual compensation over the last five years of his employment. The plan specifically excludes a "bonus" from compensation. Comrie computed his benefits by excluding only that compensation that was specifically designated as a "bonus." The company, through the committee that administered the plan, computed his benefits by excluding all compensation that was linked to stock, even if it was not designated as a "bonus." Judge Darrah (N.D. Ill.) granted summary judgment to the defendants. He applied an arbitrary and capricious standard because the plan granted the committee interpretive discretion. Comrie appeals.
In their opinion, Chief Judge Easterbrook and Judges Cudahy and Rovner affirmed. The Court agreed with the district court's deferential review. It rejected Comrie's argument that the committee had a conflict of interest. And it concluded, relying on Firestone, that a contract conferring interpretive discretion on an administrator, whether or not an ERISA fiduciary, must be honored. In so holding, the Court criticized the Third (Goldstein) and Eighth (Craig) Circuits. Applying the deferential standard, the Court concluded that the committee's decision was not arbitrary or capricious. Although it found nothing in the plan's language or other relevant evidence that answer the question definitively, the Court applied a common "business world" understanding of the term. The amount of Comrie's stock-linked income varied from year to year and was discretionary -- that sounded enough like a bonus to the Court to support the committee’s decision.
Allied Electric Contractors has been a member of the National Electrical Contractors Association (NECA), an association of union employers, since 2002. It has been making employee benefit contributions to Line Construction Benefit Fund since the 1990s. In 2005, NECA entered into a Collective Bargaining Agreement (CBA) with the union. It set forth the terms of employer contributions to the Fund and increased the hourly contribution by a quarter. By its own terms, it bound all employers who signed a letter of consent. Although Allied did not sign a letter of consent until December of 2006, it continued to make the required contributions, including the extra quarter, until July 2006. It failed to make contributions for July, August, and December of 2006 as well as for January and February of 2007. The Fund brought suit under ERISA. The court denied Allied's motion to dismiss and granted summary judgment to the Fund. Allied appeals.