Cirulis v. Unum Corp.

• Decision Date: 05 March 2003
• Docket Number: No. 01-3362.,01-3362.
• Citation: 321 F.3d 1010
• Parties: David B. CIRULIS, Plaintiff-Appellant, v. UNUM CORPORATION Severance Plan, Unum Corporation Officer Severance Plan, and Robert Cornett, Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

321 F.3d 1010

David B. CIRULIS, Plaintiff-Appellant, v. UNUM CORPORATION Severance Plan, Unum Corporation Officer Severance Plan, and Robert Cornett, Defendants-Appellees.

No. 01-3362.

United States Court of Appeals, Tenth Circuit.

March 5, 2003.

Patrick K. McMonigle (John F. Wilcox, Jr., with him on the briefs), of Dysart Taylor Lay Cotter & McMonigle, P.C., Kansas City, MO, for Plaintiff-Appellant.

Morris J. Nunn of Stinson Morrison Hecker, L.L.P., Kansas City, MO, for Defendants-Appellees.

Before HENRY, McWILLIAMS, and LUCERO, Circuit Judges.

LUCERO, Circuit Judge.

This case requires resolution of the following question: Does the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., authorize a plan administrator to condition payment of severance benefits on an employee's assent to a non-solicitation provision not included on the face of a plan? David B. Cirulis, formerly employed with UNUM Life Insurance Company ("UNUM"), brought suit to recover severance payments denied to him after he refused to sign a General Agreement and Release ("Release") including a non-solicitation clause. This clause prohibited Cirulis from soliciting UNUM employees or brokers to terminate their relationships with UNUM or become employed by another insurance company.¹ The district court granted summary judgment to UNUM, dismissed Cirulis's claims, and denied his subsequent motion for rehearing. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we reverse.

I

In November 1998, after Cirulis had been employed with UNUM for approximately thirteen years, UNUM announced a merger. Several years prior to this, UNUM had established severance plans covering Cirulis. Under the terms of these plans, the plan administrator, Robert Cornett, retained discretion to determine benefit rights, eligibility, timing and amount of payments, and to construe and interpret the terms of the plan. In order to receive benefits, employees were required to sign a "General Agreement and Release." Neither party disputes that the severance plans at issue in this case are governed by ERISA.

In April 1999, Cirulis learned that his position would be eliminated as a result of the merger and on July 1, 1999, the effective date of the merger, he was formally terminated. On June 24, 1999, Cirulis received a copy of the Release for the first time, which included the non-solicitation clause as well as a waiver of legal claims. On August 4, 1999, UNUM informed Cirulis that he would be eligible only for employee-level severance benefits but not for enhanced officer-level benefits. Cirulis obtained counsel, and repeatedly objected to and requested negotiations regarding the non-solicitation clause. Eventually, he appealed to the plan administrator both as to UNUM's refusal to amend the non-solicitation clause and as to the calculation of his benefits. Nonetheless, on February 22, 2000, UNUM accused Cirulis of violating the non-solicitation provision and, on April 20, informed him that he was no longer eligible for either level of severance benefits in light of his refusal to sign the Release and alleged violation of its terms.

In response, Cirulis filed suit in federal district court under 29 U.S.C. § 1132, arguing that he was entitled to officer-level benefits notwithstanding his rejection of the non-solicitation provision and that UNUM's repeated failure to provide him with documents relating to the severance plan subjected UNUM to statutory penalties. On summary judgment, the district court dismissed the claims, ruling that (1) Cirulis's failure to sign the Release justified UNUM's denial of benefits, (2) conditioning benefits on the non-solicitation provision was a reasonable exercise of the plan administrator's discretion, and (3) Cirulis failed to establish the bad faith required to recover statutory penalties. Cirulis v. UNUM Corp. Severance Plan, No. 00-2178-CM (D.Kan. Sept. 5, 2001). The district court declined to address the question of whether Cirulis was entitled to officer-level benefits rather than employee-level benefits, concluding that his refusal to sign the Release disqualified him under either plan. Id.

On appeal, Cirulis challenges the district court's underlying summary judgment order, arguing that the plan administrator acted arbitrarily and capriciously in conditioning the payment of benefits on the non-solicitation provision and in permitting amendments to the Release for three other employees while refusing to allow any amendments as to his Release.²

II

We review the grant of summary judgment de novo, applying the same legal standard used by the district court. Save Palisade Fruitlands v. Todd, 279 F.3d 1204, 1209 (10th Cir.2002). When a beneficiary challenges a denial of ERISA benefits under § 1132(a)(1)(B) and the plan confers discretion on the plan administrator to determine eligibility and to construe the plan's terms, as here,³ the reviewing court applies an arbitrary and capricious standard. Kimber v. Thiokol Corp., 196 F.3d 1092, 1097 (10th Cir.1999). "When reviewing under the arbitrary and capricious standard, ... [t]he [administrator's] decision will be upheld unless it is not grounded on any reasonable basis. The reviewing court need only assure that the administrator's decision fall[s] somewhere on a continuum of reasonableness—even if on the low end." Id. at 1098 (quotations omitted).

Noting that the non-solicitation clause did not appear on the face of the severance plan, Cirulis maintains that the plan administrator exceeded the bounds of his discretion in conditioning payment of benefits on assent to this provision. ERISA mandates that: "[e]very employee benefit plan shall be established and maintained pursuant to a written instrument," 29 U.S.C. § 1102(a)(1), and that plan administrators provide benefits "in accordance with the documents and instruments governing the plan," § 1104(a)(1)(D). "[A] written plan is to be required in order that every employee may, on examining the plan documents, determine exactly what his rights and obligations are under the plan." Curtiss-Wright Corp. v. Schoonejongen, 514 U.S. 73, 83, 115 S.Ct. 1223, 131 L.Ed.2d 94 (1995) (explaining the rationale for ERISA writing requirements) (quotation omitted). Consequently, courts have held that the imposition of new conditions that do not appear on the face of a plan constitutes arbitrary and capricious conduct. Garratt v. Walker, 164 F.3d 1249, 1255 (10th Cir.1998); Blau v. Del Monte Corp., 748 F.2d 1348, 1356 (9th Cir.1985).

UNUM correctly points out that the severance benefits at issue in this case constitute a welfare-benefit plan rather than a pension plan under ERISA. Massachusetts v. Morash, 490 U.S. 107, 116, 109 S.Ct. 1668, 104 L.Ed.2d 98 (1989). Although welfare-benefit plans are not subject to all ERISA requirements that govern pension plans, Chiles v. Ceridian Corp., 95 F.3d 1505, 1510 (10th Cir.1996), we note that both welfare-benefit and pension plans are subject to the ERISA reporting-and-disclosure requirements discussed in Curtiss-Wright, 514 U.S. at 83, 115 S.Ct. 1223, as well as to ERISA fiduciary rules and enforcement measures. 29 U.S.C. § 1003 (cross-referencing §§ 1051, 1081, and 1101, which exempt welfare-benefit plans from participation and vesting requirements and funding requirements, but not from reporting and disclosure requirements, fiduciary requirements, and enforcement measures).

As welfare-benefit plans are exempt from ERISA's minimum participation, vesting, and funding requirements, however, employers may unilaterally enact amendments to them when the face of the plan reserves this authority. Curtiss-Wright, 514 U.S. at 78, 115 S.Ct. 1223. However, an employer seeking to exercise this right must satisfy two conditions. First, it must do so in accordance with written amendment procedures provided on the face of the plan. Krumme v. West-Point Stevens, Inc., 143 F.3d 71, 84 (2d Cir.1998); Miller v. Coastal Corp., 978 F.2d 622, 624 (10th Cir.1992). Second, it must provide notice of the amendment to participants and beneficiaries within "210 days after the end of the plan year in which the change is adopted." 29 U.S.C. § 1024(b)(1). In this case, however, UNUM does not argue that the non-solicitation clause constituted an amendment to the original plan; rather, it argues that the clause was part of the original plan. In the absence of briefing by either party on this issue, we decline to hold that the non-solicitation clause constituted a permissible amendment to the original plan.

Rather, we proceed to inquire whether the severance plan as originally promulgated conditioned payment of benefits on assent to a non-solicitation provision. UNUM contends that the plan's two references to an "Agreement and General Release" that would need to be signed prior to the receipt of benefits suffices to incorporate all Release provisions into the severance plan. Page two of the severance plan states: "If an employee decides not to sign the Agreement and General Release required under this Plan (see Release below), then that employee will not be eligible to receive payment or other benefits under this Plan." (1 Appellant's App. at 71.) Page seven of the plan provides: "No employee will get a payment or other benefit under this Plan unless that employee signs an Agreement and General Release (`Release'). That Release includes important terms that the employee should consider before making the decision to sign it." (1 id. at 76.) Beyond these two oblique references, the plan neither mentions the Release, nor describes its terms.

Cirulis did not become informed of the terms of the Release until June 24, 1999, when he received a copy of it for the first time, two and one-half months after he learned his position would be terminated and one week before he was formally terminated. The Release included a clause prohibiting Cirulis from soliciting UNUM employees or brokers to terminate their relationships...