Liston v. Unum Corp. Officer Severance Plan

• Decision Date: 27 May 2003
• Docket Number: No. 02-1956.,02-1956.
• Citation: 330 F.3d 19
• Parties: Catherine F. LISTON, Plaintiff, Appellant, v. UNUM CORPORATION OFFICER SEVERANCE PLAN, et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

330 F.3d 19

Catherine F. LISTON, Plaintiff, Appellant, v. UNUM CORPORATION OFFICER SEVERANCE PLAN, et al., Defendants, Appellees.

No. 02-1956.

United States Court of Appeals, First Circuit.

Heard January 10, 2003.

Decided May 27, 2003.

Lawrence C. Winger, for appellant.

Byrne J. Decker with whom Pierce Atwood was on brief, for appellees.

Before BOUDIN, Chief Judge, TORRUELLA and LYNCH, Circuit Judges.

BOUDIN, Chief Judge.

Appellant Catherine Liston is a former officer of UnumProvident Corporation ("UP"), an insurance company incorporated in Delaware. Prior to its June 1999 merger with Provident Companies, Inc., the UNUM Corporation had adopted an officer severance plan ("the plan") to provide benefits for officers whose jobs were "eliminated" as a result of a "change in control" of the company. The benefits could amount to as much as 36 weeks' salary, and an officer could obtain them if any of the plan's triggering conditions were satisfied, importantly: a "significant adverse reduction or alteration in the nature and status (other than title) of the officer's position, duties or responsibilities... within 365 days of the change in control."

After the merger, Liston, who was one of several vice-presidents at UP,¹ found that her obligations had increased and that her authority had diminished. She claimed that she had to work an additional 20 hours per week and travel three times more often. In addition, she said that she had less authority to make strategic and administrative decisions (e.g., salary decisions for subordinates). Liston viewed these changes as a "significant adverse reduction or alteration in the nature and status" of her employment under the plan's change-in-control provision. In March 2000, she resigned from her position at UP and requested benefits pursuant to the change-in-control clause.

In April 2000, a plan official rejected her request stating that her claims, even if true, did "not constitute a significant adverse alteration in the nature and status of your position." On further review, two different plan committees reached the same result. At the final stage, Liston identified five other officers whom she said had received benefits after their jobs were altered; she had made less specific allegations to this effect at earlier points. But the review committee at this last stage said that the benefits given to the other five employees were irrelevant to Liston because those employees were not similarly situated to her.

In March 2001, Liston filed a complaint against the plan, the administrator, and UP in the federal district court in Maine to obtain benefits under ERISA's civil enforcement provision, 29 U.S.C. § 1132(a)(1)(B) ("A civil action may be brought ... by a participant or beneficiary... to recover benefits due to him under the terms of his plan, [or] to enforce his rights under the terms of the plan ..."). Liston claimed that the defendants had acted arbitrarily and capriciously in denying her benefits even though they had awarded them to others, and she sought discovery of documents pertaining to fourteen persons who had received benefits (including the five earlier identified). Liston also challenged as arbitrary and capricious the administrator's rules construing the plan's change-in-control provision.

The magistrate judge denied this discovery request, finding that "a review of the merits of this particular denial ... is not dependent upon what happened to other officers' claims." The judge noted the "hopelessness of [the] task" of comparing the claims given that the court would "be called upon to make fourteen or more separate determinations about an `adverse reduction or alteration' in job duties." The judge did allow discovery "[t]o the extent the decisionmakers considered claims by other officers who [made claims under the change-in-control provisions] when considering plaintiff's claims."

The discovery order was affirmed by the district court and Liston then deposed the plan administrator as to the information considered by the final review committee in rejecting Liston's claim. That deposition revealed that the claims of the other five officers cited by Liston were briefly mentioned at the meeting (Liston having identified them), but that there was no extended discussion of the relative merits of their claims nor any reference to materials relating to their benefits determinations.

On July 17, 2002, the court granted summary judgment for the defendants, Liston v. Unum Corp. Officer Severance Plan, 211 F.Supp.2d 222 (D.Me.2002), finding that the plan administrator had not acted arbitrarily or capriciously in interpreting and applying the plan. Liston has now appealed to this court challenging the rejection of her discovery requests, the administrator's interpretive rules, and the denial of benefits to her. Because the plan reserves discretion to the administrator, judicial review of the denial is limited to determining whether the administrator acted arbitrarily and capriciously. Leahy v. Raytheon Co., 315 F.3d 11, 15 (1st Cir. 2002). Cf. Doe v. Travelers Ins. Co., 167 F.3d 53, 56-57 (1st Cir.1999).

We begin with Liston's substantive attacks on the denial of benefits and then turn to her discovery request. On July 6, 1999, shortly after the merger of the UNUM Corporation and Provident Companies, Inc., the plan administrator adopted a set of rules defining certain plan terms. Recall that the plan protected the covered officers against a change of control that resulted in job elimination and that "a significant adverse reduction or alteration" in the job — even without its actual elimination — was one of the triggers for benefits. We reproduce both the pertinent plan and rule language as an appendix to this opinion.

The rules specified, inter alia, that a "significant adverse reduction or alteration" meant (1) the loss of a position without an opportunity to work elsewhere at the merged entity, (2) a demotion from a "director or manager of a major unit" to a contributor to that unit, or (3) a "reduction of more than 10% of the base salary received by the officer prior to the change in control." Further a job was not deemed "eliminated" if the employee was offered, within 50 miles of his original location, a "comparable position," namely, one

within the same functional area, which requires similar skills and abilities the officer utilizes in his or her current position and does not result in a reduction of more than 10% of the base salary he or she was receiving immediately prior to the change in control....

One might expect Liston to argue that clause (2) is too narrow a reading of the plan's language in a case where there is a substantial reduction in responsibility but no pay cut or complete loss of supervisory authority. Instead, Liston first argues that the rules are at odds with the plan because they deny benefits unless the employee's job is curtailed and no comparable job is available elsewhere in the company. She points out that the plan language defines "job elimination" to include a "significant adverse reduction or alteration in the nature and status (other than title) of the officer's position, duties or responsibilities" or "[t]he lack of any re-employment opportunity that would utilize the officer's professional skills and abilities." Thus, she says that the rules are an unlawful amendment of the plan rather than a permissible interpretation.²

Liston's position, although perhaps a literal reading of the plan, is absurd and therefore untenable. Rodriguez-Abreu v. Chase Manhattan Bank, 986 F.2d 580, 586 (1st Cir.1993). On her interpretation, an employee whose job was kept completely intact would get benefits because no comparable position was offered; and one whose job was eliminated would get benefits even though an essentially similar job was created for the employee. Even if review of the administrator's interpretation were de novo — it is in fact deferential, see Terry v. Bayer Corp., 145 F.3d 28, 40 (1st Cir.1998) — we would reject Liston's reading because it makes no sense.

In the alternative, Liston argues that summary judgment against her was mistaken because there were still material facts in dispute. She says that such disputes exist with respect to whether her old job at UP was eliminated, the manner and extent to which her post-merger job differed from her pre-merger job, and whether the employees who received benefits under the plan were similarly situated to her. This challenge to summary judgment conceals a preliminary issue, namely, whether evidence beyond the administrative record can be considered at all.

The ordinary rule is that review for arbitrariness is on the record made before the entity being reviewed. Leahy, 315 F.3d at 17-18. True, we have declined in cases like this one to adopt an ironclad rule against new evidence. Doe, 167 F.3d at 57-58. For example, discovery may be needed because the decisional process is too informal to provide a record. See generally Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-16, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971). And certain kinds of claims — e.g., proof of corruption — may in their nature or timing take a reviewing court to materials outside the administrative record. Cf. Perlman v. Swiss Bank Corp. Comprehensive Disability Prot. Plan, 195 F.3d 975, 981-82 (7th Cir.1999).

Still, at least some very good reason is needed to overcome the strong presumption that the record on review is limited to the record before the administrator. This is the view of virtually all of the circuits with the possible exception of the Fifth Circuit.³ It is almost inherent in the idea of reviewing agency or other administrative action for reasonableness; how could an administrator act unreasonably by ignoring information never presented to it? See Mills v. Apfel, 244 F.3d 1, 4-5 (1st Cir.2001), cert. denied, 534 U.S. 1085, 122 S.Ct. 822, 151 L.Ed.2d 704 (2002); Taft, 9 F.3d at...