45 F.3d 1317 (9th Cir. 1995), 93-15811, Atwood v. Newmont Gold Co., Inc.

• Citation: 45 F.3d 1317
• Docket Number: 93-15811.
• Date: 18 January 1995
• Parties: Richard ATWOOD, Plaintiff-Appellant, v. NEWMONT GOLD CO., INC., a Delaware corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1317

45 F.3d 1317 (9th Cir. 1995)

Richard ATWOOD, Plaintiff-Appellant,

v.

NEWMONT GOLD CO., INC., a Delaware corporation, Defendant-Appellee.

No. 93-15811.

United States Court of Appeals, Ninth Circuit

January 18, 1995

Argued and Submitted Dec. 13, 1994.

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Carl M. Hebert, Reno, NV, for plaintiff-appellant.

Glenn H. Schlabs, Sherman & Howard, Colorado Springs, CO, for defendant-appellee.

Appeal from the United States District Court for the District of Nevada.

Before: WALLACE, Chief Judge, and PREGERSON and BEEZER, Circuit Judges.

BEEZER, Circuit Judge:

Plaintiff Richard Atwood appeals from the district court's grant of summary judgment in favor of defendant Newmont Gold Co. ("Newmont") on Atwood's Employment Retirement Income Security Act ("ERISA") action alleging that he was wrongfully denied severance pay under the company's employee benefit plan. We have jurisdiction over this timely appeal pursuant to 28 U.S.C. Sec. 1291. We affirm.

I

Atwood was first employed by Newmont as its central shop foreman in 1988. His duties included supervising four foremen and their crews, drafting budgets, interviewing and hiring employees, and planning and overseeing engineering projects. In November of 1990, Atwood was reassigned to a position as a senior engineer. His superior told him that this was a lateral transfer and not a demotion. His salary and grade level were unchanged. Then, in mid-April 1991, Atwood was again reassigned, this time to a position as line foreman of the newly created second shift at Newmont's central shop. He supervised employees in this position, and was responsible for the operation of the shop during the shift. His salary and grade level were again unchanged.

On July 31, 1991, Atwood left a resignation letter on his supervisor's desk. The letter is dated August 1, 1991, states that Atwood's resignation will be effective on August 15, and requests severance pay. There are two Newmont severance pay plans which could govern Atwood's resignation. The first is a plan dated February 1989. The other went into effect on August 1, 1991. Both plans deny severance pay to an employee who voluntarily terminates employment, unless the resignation follows a "significant diminution in duties or responsibilities." The plans differ only in certain language regarding the discretion retained by Newmont in determining eligibility. (The difference does not affect the result here. See section III.A., infra.)

Dan Scartezina, a Newmont employee, denied Atwood's request for severance pay. Atwood's counsel then wrote to Newmont reiterating Atwood's demand for severance pay. This letter was referred to Don Miller, a Newmont vice president, who treated the letter as an appeal from Scartezina's decision. Miller conducted an investigation, concluded that Atwood's last position as second shift foreman did not entail substantially less responsibility than Atwood's previous assignments and denied severance benefits. Atwood then commenced this action under 29 U.S.C. Sec. 1132(a)(1)(B).

II

The district court had jurisdiction pursuant to 29 U.S.C. Sec. 1132(e)(1). We have jurisdiction under 28 U.S.C. Sec. 1291. We review a grant of summary judgment de novo. Jesinger v. Nevada Fed. Credit Union, 24 F.3d 1127, 1130 (9th Cir.1994).

III

The parties fiercely dispute the correct standard of review to be applied in reviewing Newmont's denial of benefits to Atwood. Atwood

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argues that the district court should have reviewed Newmont's interpretation of the plan de novo. The district court determined that both versions of the plan reserved to Newmont the discretion to interpret the term at issue, and therefore applied an abuse of discretion standard. The district court correctly determined that the plan vests the administrator with discretion.

A

A denial of benefits challenged under 29 U.S.C. Sec. 1132(a)(1)(B) is reviewed de novo "unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan," in which case an abuse of discretion standard is applied. Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115, 109 S.Ct. 948, 956-57, 103 L.Ed.2d 80 (1989). ¹

1

Atwood first argues that the February 1989 plan applies to his case, and that that plan does not give the administrator discretion in determining whether a termination is involuntary. The determination of which plan applies is irrelevant; both give the administrator discretion. ²

Section 2 of the February 1989 plan defines eligibility for severance benefits. Subsection 2.1 states that an employee who is involuntarily terminated shall be eligible for benefits, and defines involuntary termination to include resignation following a substantial diminution in duties or responsibilities. Subsection 2.2 states that an employee who is terminated for cause shall not be eligible for severance benefits, and defines "cause." Subsection 2.3 states that "[Newmont] shall be the sole and exclusive judge as to whether or not a termination is qualified for benefits under the terms of this Plan." This is sufficient to vest Newmont with discretion as to all terminations defined by the plan. See Eley v. Boeing Co., 945 F.2d 276, 278 (9th Cir.1991).

2

Atwood's next argument in favor of de novo review is that Newmont's Summary Plan Description ("SPD") does not state that Newmont has discretion in this situation, and that the SPD should control. We disagree. This is not a situation where the SPD failed to describe accurately the circumstances or actions which could affect an employee's eligibility for benefits.

ERISA requires that the SPD explain the "circumstances which may result in disqualification, ineligibility, or denial or loss of benefits." 29 U.S.C. Sec. 1022(b). Where the SPD fails to meet this requirement and differs materially from the terms of the plan, the SPD is controlling. See Arnold v. Arrow Transp. Co., 926 F.2d 782, 785 n. 3 (9th Cir.1991) (citing cases).

We have interpreted Sec. 1022(b) to mean that the SPD "must be specific enough to enable the ordinary employee to sense when there is a danger that benefits could be lost or diminished." Stahl v. Tony's Bldg. Materials, Inc., 875 F.2d 1404, 1408 (9th Cir.1989). The language of the SPD in this case amply informed Atwood that there was a danger that he would be ineligible for severance benefits if he resigned. The omission of the plan language placing the determination in the discretion of Newmont does not undermine this conclusion. "The plan's rules should be explained [in the SPD] to permit the ordinary employee to recognize that certain events or actions could trigger a loss of benefits." Id. (emphasis added). The provision at issue has no bearing on the events or

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actions determinative of eligibility under the plan.

The SPD for Newmont's plan was sufficient under ERISA.

B

Atwood contends that a "less deferential" abuse of discretion standard should be applied because Newmont is both the employer and the plan administrator. See Watkins v. Westinghouse Hanford Co., 12 F.3d 1517, 1524 (9th Cir.1993). We hold that this "heightened standard" does not alter our traditional abuse of discretion review in the absence of specific facts indicating that Newmont's conflicting interest caused a serious breach of the plan administrator's fiduciary duty to Atwood, the plan beneficiary.

1

In Firestone, the Supreme Court stated that "if a benefit plan gives discretion to an administrator or fiduciary who is operating under a conflict of interest, that conflict must be weighed as a factor in determining whether there is an abuse of discretion." 489 U.S. at 115, 109 S.Ct. at 957. Our own cases have interpreted this language to mean that we apply "heightened scrutiny" where the plan administrator has a conflict of interest by virtue of its economic stake in the benefit decisions which it makes. Watkins, 12 F.3d at 1525. ³

Although we have consistently stated that we apply this "less deferential" standard to decisions of apparently conflicted fiduciaries, we have not as yet stated in what way this lesser degree of deference actually alters our review. See, e.g., Watkins, 12 F.3d at 1524; Taft v. Equitable Life Assurance Soc'y, 9 F.3d 1469, 1474 (9th Cir.1993). Other circuits have attempted to clarify the standard.

The Fourth Circuit states that where a substantial conflict is shown it "will review the merits of the interpretation to determine whether it is consistent with an exercise of discretion by a fiduciary acting free of the interests that conflict with those of the beneficiaries." Doe v. Group Hospitalization & Medical Serv., 3 F.3d 80, 87 (4th Cir.1993); see also Van Boxel v. Journal Co. Employees' Pension Trust, 836 F.2d 1048, 1052-53 (7th Cir.1987) (describing "sliding scale" standard).

The Eleventh Circuit takes a different approach;...