Vitale v. Latrobe Area Hosp ( 2005 )


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  •                                                                                                                            Opinions of the United
    2005 Decisions                                                                                                             States Court of Appeals
    for the Third Circuit
    8-29-2005
    Vitale v. Latrobe Area Hosp
    Precedential or Non-Precedential: Precedential
    Docket No. 04-3243
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    PRECEDENTIAL
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    No. 04-3243
    JOYCE VITALE
    v.
    LATROBE AREA HOSPITAL,
    Appellant
    On Appeal from the United States District Court
    for the Western District of Pennsylvania
    (D.C. Civ. No. 03-1117)
    District Judge: The Honorable Gary L. Lancaster
    Argued: July 11, 2005
    Before: ALITO and BECKER, Circuit Judges, and SHADUR,
    District Judge.*
    (Filed August 29, 2005 )
    TERRENCE H. MURPHY
    WILLIAM M. HASSAN (ARGUED)
    Klett Rooney Lieber & Schorling
    One Oxford Centre, 40th Floor
    *
    The Honorable Milton I. Shadur, United States District Judge for
    the Northern District of Illinois, sitting by designation.
    Pittsburgh, PA 15219
    Attorneys for Appellant
    JOHN E. QUINN (ARGUED)
    SHARON J. NEWBRANDER
    Evans Portnoy Quinn & O’Connor
    1 Oxford Centre, 36th Floor
    301 Grant Street
    Pittsburgh, PA 15219
    Attorneys for Appellee
    OPINION OF THE COURT
    BECKER, Circuit Judge.
    Latrobe Area Hospital (“Latrobe”) appeals from a judgment
    against it in a dispute over ERISA retirement benefits.1 Latrobe
    denied early retirement benefits to plaintiff Joyce Vitale after
    determining that, because she was on long-term disability leave,
    she was not accruing benefits and so did not qualify for the early
    retirement incentive under the terms of the plan. After a bench trial,
    the District Court ruled in favor of Vitale, finding that Latrobe’s
    decision to deny benefits was arbitrary and capricious. The District
    Court relied on the fact that two other employees, who were out on
    short-term disability leave at the relevant time, had received early
    retirement benefits; the Court determined that these other
    employees were similarly situated to Vitale and that the decision to
    deny her benefits was therefore arbitrary and capricious.
    We will reverse. The plain language of Latrobe’s retirement
    plan required Latrobe to deny benefits to Vitale. And its decision
    to do so, while granting benefits to two employees in what we find
    to be distinguishable circumstances, was not arbitrary and
    1
    Latrobe’s retirement plan is governed by provisions of the
    Employee Retirement Income Security Act of 1974, 
    29 U.S.C. § 1001
     et
    seq. (“ERISA”).
    2
    capricious.
    I. Facts and Procedural History
    Vitale worked as a food service aide at Latrobe until July 1,
    1999, when she was severely injured in a car accident. Latrobe
    offers its employees ninety days of short-term disability leave, and
    Vitale used her full allowance. When this expired in September
    1999, she went on long-term disability leave.
    On February 28, 2000, Latrobe adopted an amendment to its
    ERISA retirement plan (“the Plan”) to encourage early retirement.
    Under the amendment, early retirement benefits would be paid out
    of the Plan, which was then overfunded, allowing the hospital to
    reduce staffing costs, which are paid out of operating funds. In
    discussions prior to adopting the new benefit, the hospital decided
    that employees on long-term disability leave would not be eligible,
    because encouraging them to retire early would not achieve the
    goal of reducing active staff. On the other hand, employees on
    short-term disability leave would be eligible, because they still had
    an open position at the hospital. The language of the incentive plan,
    as it was adopted, allowed employees “currently accruing a
    benefit” and meeting other requirements to receive early
    retirement.
    Vitale applied for early retirement in April 2000, while she
    was on long-term disability leave. She was informed that she had
    been denied benefits because, being on long-term disability leave,
    she was not “actively employed” at the time. Vitale was terminated
    from her job on August 6, 2000, because her employment had been
    “inactive” for twelve months.
    She then brought this suit under 
    29 U.S.C. § 1132
    (a)(1)(B),
    alleging that Latrobe’s denial of benefits was arbitrary and
    capricious. As evidence, she pointed to the fact that two other
    employees, Donna McCullough and Margaret Sommerville, were
    awarded early retirement benefits under the Plan even though they
    too were out on medical leave. Vitale argued that McCullough and
    Sommerville were similarly situated employees, and that it was
    arbitrary and capricious of Latrobe to grant them benefits while
    denying the same benefits to her. Latrobe’s response was that
    McCullough and Sommerville, who were on short-term disability
    leave protected by the Family and Medical Leave Act of 1993, 29
    
    3 U.S.C. § 2601
     et seq. (“FMLA”), were not similarly situated to
    Vitale.
    After a bench trial in July 2004, the District Court filed an
    opinion and order finding that the denial was arbitrary and
    capricious, and requiring Latrobe to award Vitale benefits under
    the Plan. Latrobe timely appealed.
    II. Jurisdiction
    The District Court had subject matter jurisdiction under 
    28 U.S.C. § 1331
    . This Court has appellate jurisdiction over the final
    judgment of the District Court under 
    28 U.S.C. § 1291
    .
    Although the District Court’s order did not specifically fix
    damages, instead referring the matter to Latrobe for calculation of
    benefits, it is nonetheless a final judgment subject to appellate
    review. In general, “[a] finding of liability that does not also
    specify damages is not a final decision.” Marshak v. Treadwell,
    
    240 F.3d 184
    , 190 (3d Cir. 2001). However, the “practical finality
    rule . . . permits appellate review of an order that is not technically
    final but resolves all issues that are not purely ministerial.” 
    Id.
     We
    have elaborated on this standard, stating that
    even when a judgment fails to fix the amount of
    damages, if the determination of damages will be
    mechanical and uncontroversial, so that the issues
    the defendant wants to appeal before that
    determination is made are very unlikely to be mooted
    or altered by it—in legal jargon, if only a
    “ministerial” task remains for the district court to
    perform—then immediate appeal is allowed.
    Skretvedt v. E.I. DuPont De Nemours, 
    372 F.3d 193
    , 201 n.8 (3d
    Cir. 2004) (quoting Prod. & Maint. Employees’ Local 504 v.
    Roadmaster Corp., 
    954 F.2d 1397
    , 1401 (7th Cir. 1992) (internal
    quotation marks omitted)).
    This case is closely analogous to Skretvedt. The parties
    agree that the benefits calculation required by the District Court
    would be entirely mechanical: the Plan contains a precise
    mathematical formula for calculating the monthly retirement
    benefit, and the inputs to the formula are all undisputed facts. As
    4
    the only remaining issues remaining before the District Court were
    “purely ministerial,” we have jurisdiction over Latrobe’s appeal.
    III. Standard of Review
    Our standard of appellate review is straightforward. In an
    appeal from an ERISA bench trial, we review findings of fact for
    clear error but have plenary review over the District Court’s
    conclusions of law. Kosiba v. Merck & Co., 
    384 F.3d 58
    , 64 (3d
    Cir. 2004). The parties dispute, however, the proper standard of
    judicial review to be applied to the Plan administrator’s decision to
    deny benefits. The District Court employed a “slightly heightened
    level of scrutiny under the touchstone arbitrary and capricious
    standard of review.” Latrobe contends that this was error, and that
    the normal arbitrary and capricious standard applies.
    Courts review a denial of ERISA benefits de novo unless the
    plan documents give the administrator discretionary authority to
    determine eligibility or to construe the terms of the plan. Firestone
    Tire & Rubber Co. v. Bruch, 
    489 U.S. 101
    , 115 (1989). Where, as
    here, the plan gives the administrator discretionary authority, we
    review the administrator’s exercise of that authority under an
    “arbitrary and capricious” standard, and the administrator’s
    decision “will be overturned only if it is ‘clearly not supported by
    the evidence in the record or the administrator has failed to comply
    with the procedures required by the plan.’” Orvosh v. Program of
    Group Ins. for Salaried Employees of Volkswagen of Am., Inc., 
    222 F.3d 123
    , 129 (3d Cir. 2000) (quoting Abnathya v. Hoffmann-La
    Roche, Inc., 
    2 F.3d 40
    , 41 (3d Cir. 1993)).
    In certain cases, however, we have applied a heightened
    standard of review. The leading case is Pinto v. Reliance Standard
    Life Insurance Co., 
    214 F.3d 377
     (3d Cir. 2000), in which we
    considered plan administrators’ possible conflicts of interest. To
    address those conflicts, we employ “heightened scrutiny . . . when
    an insurance company is both plan administrator and funder.” 
    Id. at 387
    . The District Court interpreted Pinto and its progeny to mean
    that any fiduciary who both administers and funds a plan operates
    under a conflict of interest and is therefore subject to a heightened
    standard of review.
    In Pinto, however, we specifically distinguished insurance
    companies that both administer and fund plans from
    5
    employers who perform those roles. Insurance companies pay plan
    benefits out of funds that would otherwise be available as profits,
    creating a direct incentive for them to withhold benefits. See Pinto,
    
    214 F.3d at 388
    . In contrast,
    the typical employer-funded pension plan is set up to
    be actuarially grounded, with the company making
    fixed contributions to the pension fund, and a
    provision requiring that the money paid into the fund
    may be used only for maintaining the fund and
    paying out pensions. As we explained in Abnathya
    and Mitchell, the employer in such a circumstance
    “incurs no direct expense as a result of the allowance
    of benefits, nor does it benefit directly from the
    denial or discontinuation of benefits.”
    
    Id.
     (quoting Abnathya, 
    2 F.3d at
    45 n.5, and Mitchell v. Eastman
    Kodak Co., 
    113 F.3d 433
    , 437 n.4 (3d Cir. 1997)). Furthermore,
    employer fiduciaries have “incentives to avoid the loss of morale
    and higher wage demands that could result from denials of
    benefits,” Nazay v. Miller, 
    949 F.2d 1323
    , 1335 (3d Cir. 1991);
    these incentives are absent, or at least attenuated, when an insurer
    serves as an ERISA fiduciary.
    We have therefore repeatedly stated that a typical employer-
    funded ERISA benefits plan does not create the sort of conflicts of
    interest that demand a heightened arbitrary and capricious review.
    See, e.g., Bill Gray Enters., Inc. Employee Health & Welfare Plan
    v. Gourley, 
    248 F.3d 206
    , 216-17 (3d Cir. 2001); Pinto, 
    214 F.3d at 383
    ; Abnathya, 
    2 F.3d at
    45 & n.5. As Latrobe both administers
    and funds its own pension plan, it falls squarely within the rule of
    these cases.
    That said, we hasten to observe that an employer-fiduciary
    may be subject to a conflict of interest requiring heightened
    scrutiny when its plan is “unfunded,” that is, when it pays benefits
    out of operating funds rather than from a separate ERISA trust
    fund. See Smathers v. Multi-Tool, Inc., 
    298 F.3d 191
    , 197-98 (3d
    Cir. 2002); Stratton v. E.I. DuPont de Nemours & Co., 
    363 F.3d
                                    6
    250, 254-55 (3d Cir. 2004).2 But Latrobe’s Plan is “funded”:
    benefits are paid out of a separate trust fund, and Latrobe’s
    contributions to the fund are determined by an actuarial formula
    and are not directly influenced by individual benefits decisions. In
    fact, at the relevant times, the Plan was significantly overfunded.
    There are other circumstances in which a heightened
    standard of review of employer-funded plans will be appropriate.
    For example, “demonstrated procedural irregularity, bias, or
    unfairness in the review of the claimant’s application for benefits”
    can trigger a heightened standard of review. Kosiba, 
    384 F.3d at 66
    . There is no evidence of procedural irregularity or bias here. The
    Plan at issue here is a typical employer-funded ERISA plan subject
    only to arbitrary and capricious review. It was therefore error for
    the District Court to employ a heightened level of review.
    IV. Analysis
    A. The Plan Language
    The early retirement incentive at issue here is found in
    Section 4.10 of the Plan, entitled “Voluntary Early Retirement
    Incentive Program.” It allowed “[a]ny eligible Participant or
    Retired Participant” to elect to retire under the incentive program
    if he or she elected to do so between March 15 and April 30, 2000.
    The eligibility requirements, found in Section 4.10(a)(i)-(iv),
    included (i) that “the Participant is currently accruing a benefit
    under the Plan and was not receiving Monthly Retirement Income
    payments from this Plan by reason of retirement prior to January 1,
    2000,” (ii) that the participant was at least 58 years old, (iii) that he
    or she had at least 75 years combined age and credited service, and
    (iv) that he or she was not a physician. It is undisputed that Vitale
    2
    Vitale seems to read Stratton for the proposition that a
    “sophistication imbalance” between the parties may lead to heightened
    scrutiny. Stratton did apply the Pinto sliding scale analysis, which
    includes an inquiry into sophistication imbalances, to determine what
    level of heightened scrutiny was appropriate, but did so there because the
    DuPont plan’s unfunded status rendered some level of heightened
    arbitrary and capricious review necessary. See Stratton, 363 F.3d at 254-
    55.
    7
    met criteria (ii) through (iv).
    It is also undisputed, however, that Vitale was ineligible for
    the early retirement benefit under the first criterion, which limits
    eligibility to those employees who are “currently accruing a
    benefit” under the Plan. The parties and the District Court all
    agreed that Vitale was not “currently accruing a benefit” at the
    relevant time, because she was out of work on long-term disability
    leave.3 Nor has either party suggested any reading of the Plan that
    does not require an employee to be “currently accruing a benefit”
    in order to be eligible. Because the clear and unambiguous terms
    of the Plan allow Latrobe to provide early retirement only to those
    employees who are currently accruing benefits, and because Vitale
    has conceded that she was not currently accruing a benefit when
    she applied for early retirement, it was not arbitrary and capricious
    for Latrobe to deny her early retirement.
    Indeed, had Latrobe granted Vitale’s request for early
    retirement, it would have been in violation of its fiduciary duty to
    administer the Plan according to its terms. Latrobe was obligated
    by statute to administer the plan “in accordance with the documents
    and instruments governing the plan.” 
    29 U.S.C. § 1104
    (a)(1)(D).
    “An award inconsistent with the plan’s valid provisions would be
    a breach of [an administrator’s fiduciary] duties. . . . ‘An
    administrator who strictly adheres to the lawful terms of an
    employee benefit plan may not be found to have acted arbitrarily
    and capriciously.’” Hlinka v. Bethlehem Steel Corp., 
    863 F.2d 279
    ,
    286 (3d Cir. 1988) (quoting Foltz v. U.S. News & World Report,
    
    613 F. Supp. 634
    , 639 (D.D.C. 1985)).
    B. Similarly Situated Employees
    Nonetheless, Vitale argues that Latrobe acted arbitrarily and
    3
    While the meaning of “currently accruing a benefit” is not
    completely clear, the Plan contains an “Accrued Benefit Formula” under
    which retirement income is based on average monthly earnings and years
    of credited service. The parties represented at oral argument that a
    participant accrues benefits by performing credited service, i.e., by
    working full-time at Latrobe, and this comports with our reading of the
    Plan. Thus, because Vitale was not actively working during her disability
    leave, she was not “accruing a benefit.”
    8
    capriciously in that it granted benefits to two similarly situated
    employees, McCullough and Sommerville, while denying benefits
    to her. The District Court accepted this argument in ruling for
    Vitale. The parties agree that McCullough and Sommerville, like
    Vitale, were not actively accruing benefits when they were granted
    early retirement.
    1. Can We Look to Similarly Situated Employees Despite the
    Clear Plan Language?
    Neither Vitale nor the District Court has explained why
    Latrobe’s asserted errors in administering the Plan as to
    McCullough and Sommerville should require it to make similar
    errors in administering the Plan as to Vitale.4 And Vitale has cited
    no case holding that an employee who is unambiguously ineligible
    for a benefit under the terms of an ERISA plan can nonetheless
    receive that benefit because the administrator granted it to other
    ineligible participants.
    Indeed, if Vitale is correct that McCullough and
    Sommerville were ineligible for early retirement benefits, her cause
    of action would appear to be under 
    29 U.S.C. § 1132
    (a)(3), which
    allows a participant to sue to enforce the terms of the plan. The
    remedy under such a suit would presumably be for Latrobe, as the
    Plan’s fiduciary, to compensate the Plan for amounts paid out
    incorrectly, not for the Plan to pay out additional money to Vitale.
    See Mertens v. Hewitt Assocs., 
    508 U.S. 248
    , 262-63 (1993);
    Steven J. Sacher et al., Employee Benefits Law 903-04 (2d ed.
    2000). Vitale’s theory seems to be, however, that if Latrobe made
    a mistake in granting benefits to some employees, it must continue
    4
    In particular, Vitale has not argued that Latrobe’s grant of
    benefits to McCullough and Sommerville is evidence that the phrase
    “currently accruing a benefit” means something other than “currently
    actively employed,” or that Latrobe’s interpretation of that requirement
    was incorrect. Instead, Vitale has conceded that she did not meet that
    requirement. Nor has she advanced any argument of estoppel, see, e.g.,
    Cleary v. Graphic Communications Int’l Union Supplemental Ret. &
    Disability Fund, 
    841 F.2d 444
    , 447-49 (1st Cir. 1988), or of reasonable
    expectations, see, e.g., Saltarelli v. Bob Baker Group Med. Trust, 
    35 F.3d 382
    , 387 (9th Cir. 1994).
    9
    to repeat that mistake: if one employee wrongfully gets benefits, so
    must everyone else. We reject this theory: the payment of benefits
    to other allegedly ineligible employees does not by itself give
    another ineligible employee a cause of action for benefits under 
    29 U.S.C. § 1132
    (a)(1)(B).
    We addressed a similar contention in Foley v. International
    Brotherhood of Electrical Workers Local Union 98 Pension Fund,
    
    271 F.3d 551
     (3d Cir. 2001). Foley was denied certain benefits
    because he failed to meet eligibility requirements; he sued,
    claiming that the administrators had improperly denied him an
    exception from those requirements. The district court found that the
    decision to deny the exception was arbitrary and capricious because
    other employees had been granted the exception. We reversed,
    chiding the district court for “focusing on the fact that credit under
    the . . . exception had been granted liberally in the past rather than
    examining whether the Trustees’ decision was contrary to Plan
    language or whether it was rationally related to a legitimate Plan
    purpose.” 
    Id. at 558
    . We also pointed out that “the district court’s
    holding binds the Trustees to a result that was a consequence of
    poor administrative practices, that the Trustees later corrected. In
    effect, the district court’s decision improperly ‘straightjackets’ the
    Trustees into granting benefits simply because of their past
    practices.” Id.; see also Nazay, 
    949 F.2d at 1336
     (finding that a
    plan administrator’s refusal to waive a plan requirement was not
    arbitrary and capricious).
    Other courts have dealt with similar claims. In Cleary v.
    Graphic Communications International Union Supplemental
    Retirement & Disability Fund, 
    841 F.2d 444
     (1st Cir. 1988), the
    First Circuit considered the claims of plan participants for
    supplemental benefits. These participants had attempted to preserve
    their eligibility for benefits by working part-time for the local
    union. Although this practice was clearly contrary to the plan’s
    written rules, plan administrators had allowed it in the past. 
    Id. at 445-46
    . The plaintiffs in Cleary, however, were denied benefits
    because the administrators had terminated their practice of granting
    benefits to part-time workers. The court described the
    administrators’ dilemma as follows:
    The trustees realized late in 1984 that a practice
    contrary to Fund rules was widely in use. . . . The
    10
    Board realized its potential liability to Fund
    participants if they continued disbursing funds to
    persons who were not entitled to benefits under Fund
    rules. Furthermore, they weighed the Fund's
    exposure to successful lawsuits and concluded that
    beneficiaries who were already receiving benefits
    would present a greater risk than those who were not
    yet receiving benefits. In order to limit Fund liability
    while at the same time lessening the possible harsh
    effect of enforcing the rule, the trustees made a
    rational, reasonable decision [to discontinue the
    practice of awarding benefits contrary to plan rules,
    while grandfathering in those currently receiving
    benefits].
    
    Id. at 449-50
    . The court thus deferred to the administrators’
    decision. It further found that the their choice to stop awarding the
    erroneous benefits as of an arbitrary fixed date was rational, noting
    that “[d]rawing a line to define the extent of the remedial action is
    clearly within the discretion of the trustees.” 
    Id. at 450
    .
    Finally, in Oster v. Barco of California Employees’
    Retirement Plan, 
    869 F.2d 1215
    , 1219 (9th Cir. 1988), the Ninth
    Circuit affirmed plan administrators’ refusal to grant benefits in the
    form of a lump-sum distribution.5 The plan documents allowed
    only an annuity benefit, not a lump sum, but the administrators had
    in the past followed an informal policy of routinely granting
    accelerated lump-sum payments. Before Oster requested benefits,
    however, the administrators had “phased out” that policy based on
    the advice of an actuary. The Ninth Circuit concluded that “[i]f this
    decision was a reasonable one, we will not substitute our judgment
    for that of the Plan’s trustees.” 
    Id.
     Despite the fact that all prior
    applicants had been granted a lump-sum distribution, the court
    refused to find the modification of the policy arbitrary and
    capricious. The court did not inquire into whether the other
    employees were similarly situated to Oster; instead, the fact that the
    5
    Oster was superceded in part by a Treasury Regulation, for
    reasons not relevant to its analysis of similarly situated employees. See
    McDaniel v. Chevron Corp., 
    203 F.3d 1099
    , 1119 (9th Cir. 2000); Treas.
    Reg. 1.411(d)-4.
    11
    change in policy was rational was enough to insulate the
    administrators from judicial second-guessing.
    The cases thus counsel that Vitale’s argument from similarly
    situated employees should be given minimal, if any, weight. Where
    an ERISA plan mandates a denial of benefits, the mere fact that
    administrators have in the past granted benefits is no reason to
    impose a straightjacket requiring them to do so forever. Both the
    clear requirements of ERISA and obvious reasons of policy suggest
    that administrators should be allowed to correct their mistakes and
    deny benefits to those participants who are not eligible for them
    under the unambiguous terms of their plan.
    2. Were McCullough and Sommerville Similarly Situated?
    Even if we agreed with Vitale that Latrobe’s decision to
    grant benefits to some employees obligates it to grant benefits to all
    similarly situated employees, we nonetheless could not find its
    decision to deny Vitale benefits arbitrary and capricious.
    Latrobe argues that it distinguished Vitale from McCullough
    and Sommerville based on the fact that the latter two employees,
    unlike Vitale, were protected by the FMLA. Latrobe determined
    that, under the provisions of the FMLA, it was obligated to treat
    McCullough and Sommerville as though they were “actively
    accruing benefits,” although in fact they were not. Latrobe cites
    regulations promulgated under the FMLA that seem to support its
    position. Vitale disputes Latrobe’s interpretation of those
    regulations, claiming that they did not require Latrobe to treat
    McCullough and Sommerville as though they were accruing
    benefits. We describe the disputed regulations in the margin.6
    6
    These regulations require in part that:
    With respect to pension and other retirement plans, any
    period of unpaid FMLA leave shall not be treated as or
    counted toward a break in service for purposes of vesting
    or eligibility to participate. Also, if the plan requires an
    employee to be employed on a specific date in order to be
    credited with a year of service for vesting, contributions
    or participation purposes, an employee on unpaid FMLA
    leave on that date shall be deemed to have been
    12
    There is no need to resolve this dispute, however, as the
    correctness of Latrobe’s interpretation is not at issue here. We ask
    only whether it was arbitrary and capricious of Latrobe to draw a
    distinction, based on its perceived FMLA obligations, between
    Vitale on the one hand and McCullough and Sommerville on the
    other. Under this standard of review, a “court is not free to
    substitute its own judgment for that of the defendants in
    determining eligibility for plan benefits.” Abnathya, 
    2 F.3d at 45
    (quoting Lucash v. Strick Corp., 
    602 F. Supp. 430
    , 434 (E.D. Pa.
    1984)).
    Latrobe’s decision to treat McCullough and Sommerville as
    “currently accruing a benefit,” based on its belief that the FMLA
    required this treatment, was plainly rational. While Vitale has
    argued that it was mistaken, she has not given us any reason to
    believe that it was arbitrary and capricious. Even if Latrobe was
    overly generous in its interpretation of the FMLA, it has articulated
    a rational and sensible distinction between Vitale and those who
    were given benefits.7 For this Court to second-guess that
    employed on that date.
    
    29 C.F.R. § 825.215
    (d)(4). Similarly, “[e]mployees on unpaid FMLA
    leave are to be treated as if they continued to work for purposes of
    changes to benefit plans.” 
    Id.
     § 825.215(d)(5). Latrobe interprets this
    language as requiring it to hold open the early retirement benefit to all
    employees who were on short-term leave covered by FMLA.
    Vitale responds that the regulations also provide that “unpaid
    FMLA leave periods need not be treated as credited service for purposes
    of benefit accrual, vesting and eligibility to participate.” Id.
    § 825.215(d)(4). Vitale believes that this sentence means that employees
    on FMLA leave need not be treated as though currently employed when
    a benefits decision is made; Latrobe believes that it means only that the
    period during which the employee is on leave need not be credited to the
    employee’s total term of service. As explained in the text, however, we
    need not resolve this dispute here.
    7
    At oral argument, Vitale’s attorney suggested that this
    distinction was a post hoc rationalization, pointing out that the notice
    Vitale received denying her benefits did not mention the FMLA. This
    argument is without merit: the notice did not mention the FMLA because
    Vitale was not covered by the FMLA. Latrobe’s interpretation of the
    13
    determination based on a close reading of the FMLA would
    overstep our “arbitrary and capricious” standard of review.8
    V. Conclusion
    Because Latrobe’s decision to deny benefits to Vitale was
    compelled by the plain language of the Plan, it was not arbitrary
    and capricious. Vitale’s argument from similarly situated
    employees is legally insufficient, and Latrobe has articulated a
    reasonable distinction between Vitale and those employees who
    were granted benefits. We will therefore reverse the judgment of
    the District Court and remand with the direction to enter
    judgment in favor of Latrobe.
    FMLA was relevant only to its decision to grant McCullough and
    Sommerville benefits, not to its decision to deny Vitale benefits. An
    ERISA plan administrator is not obligated, when denying one employee
    benefits, to explain why every other employee received benefits.
    8
    Such second-guessing would also put ERISA fiduciaries
    between a rock and a hard place: if Latrobe was overly restrictive in its
    interpretation of the FMLA, McCullough and Sommerville would have
    a cause of action under the FMLA; if it was overly generous, Vitale
    could bring an ERISA action like the one at bar. Latrobe’s laudable
    efforts to obey both the letter and the spirit of the FMLA should not be
    punished by making it liable for additional benefits not required by that
    statute.
    14
    

Document Info

Docket Number: 04-3243

Filed Date: 8/29/2005

Precedential Status: Precedential

Modified Date: 10/13/2015

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