James A. Bacon v. Stiefel Laboratories, Inc. , 590 F. App'x 903 ( 2014 )

Case: 13-13875 Date Filed: 10/31/2014 Page: 1 of 7
[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 13-13875
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D.C. Docket No. 1:11-cv-20489-JLK
JAMES A. BACON
Plaintiff-Appellee,
versus
STIEFEL LABORATORIES, INC., et al.,
Defendants-Appellants.
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Appeal from the United States District Court
for the Southern District of Florida
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(October 31, 2014)
Before MARTIN, JULIE CARNES and ANDERSON, Circuit Judges.
PER CURIAM:
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In this case, we have had the benefit of oral argument, and have carefully
considered the briefs and the relevant parts of the record. We conclude that the
district court erred when it held that the Plan Administrator “had no reasonable
basis for determining that Plaintiff put his shares to the Company,” (Docket 155 at
8), and thus the district court erred when it held that the Plan Administrator’s
decision was arbitrary and capricious. Quite the contrary, we conclude that there
was ample basis in the administrative record to support the Plan Administrator’s
decision.
In July 2009, Bacon filed a putative class action against Stiefel Laboratories,
Inc. (“SLI” or “Company”) and individual defendants alleging violations of
securities laws and breach of fiduciary duties. Bacon withdrew from the class
action upon belief that he had exercised neither the pre-2009 “put” option nor the
post-2009 Automatic-Put Form (“Auto-Put Form”). He then filed an individual
action against the same defendants and subsequently the parties stipulated to
submit a single issue to the ESBP administrator (“Plan Administrator”) to exhaust
all administrative remedies pursuant to ERISA. The Plan Administrator
considered the single issue of “whether . . . Bacon exercised his right, in or about
January 2009, to put his 25.386449 shares of SLI common stock that he received
as a distribution from the [ESBP] to SLI.”
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The evidence in the administrative record is as follows. Plaintiff was a
participant in the Company’s employee stock bonus plan (the “Plan”), was eligible
at the relevant time in January, 2009, to receive a distribution of the Company’s
stock in his Plan account, and was eligible to exercise his “put” right to sell that
stock to the Company. As the district court acknowledged:
On January 20, 2009, Plaintiff submitted the old distribution election
form … electing to have a distribution of his shares sent to his
retirement account at Fidelity Investments …. Plaintiff included with
the form a handwritten note indicating that he wanted to exercise his
put right. Plaintiff also sent an email to SLI employee Suni Buria the
following day that asked her to confirm receipt of the paperwork he
mailed for his “election.” Then on February 13, 2009, SLI purchased
his shares at $16,469 per share. SLI sent $83,617.88 in cash to
plaintiff and a promissory note for $334,471.53 to his Fidelity
retirement account.
Docket 155 at 4 (footnotes omitted). Prior to January 1, 2009, the committee
charged with administering the Plan had established a procedure by which Plan
participants could exercise their “put” rights. The procedure involved submission
of a standardized Distribution Form which requested that the Plan distribute shares
to the participant. The participant would then endorse and notarize the stock
certificates, or otherwise indicate by an accompanying writing his intention to
“put” the shares, and send them back to the Company. As of January 1, 2009,
however, the committee rolled out a new procedure, using an Auto-Put Form that
eliminated the need for mailing back and forth the stock certificates. The single
form allowed a participant to simultaneously request both a distribution and a
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“put” or sale of his shares. Because the events relevant in this case occurred in
January and February 2009, the Auto-Put procedures were applicable.
The first step in a review of a Plan Administrator’s decision (by either the
district court or this court) is to apply a de novo standard to determine whether the
Plan Administrator’s decision is “wrong.” If the Plan Administrator’s decision is
not wrong, then it is due to be affirmed. Blankenship v. Metropolitan Life Ins.
Co., 644 F.3d 1350, 1355 (11th Cir. 2011). We conclude that the Plan
Administrator’s decision in this case was not wrong, and therefore it was due to be
affirmed. Accordingly, the judgment of the district court must be reversed.
Moreover, under the six-step analysis set forth in Blankenship, even if we
concluded that the Plan Administrator’s decision were de novo wrong, the Plan
Administrator here was vested with discretion, which means that even if we had
concluded that the Plan Administrator’s decision were wrong, we nevertheless
would be required to affirm that decision if there were reasonable grounds
supporting it. 1 Levinson v. Reliance Standard Life Ins. Co., 245 F.3d 1321, 1325
(11th Cir. 2001). In other words, we would review the decision under the
deferential arbitrary and capricious standard.
Although plaintiff in this case did not execute the actual form (the Auto-Put
Form) which was being used at the time to accomplish a simultaneous distribution
1
There was no conflict of interest on the part of the Plan Administrator.
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of Company stock to a participant and an exercise by the participant of his “put”
right to sell the stock to the Company, the overwhelming evidence in the
administrative record reflects that the substance of the actions contemplated by the
Auto-Put Form did occur in this case. By executing and submitting the
Distribution Form, plaintiff requested a distribution of the Company’s stock in his
account. And by submitting simultaneously his handwritten letter requesting that
his stock be “put” for sale to the Company, plaintiff was in substance exercising
his “put” right to sell the stock to the Company and authorizing the Plan
Administrator to take the steps necessary to accomplish same. Following those
instructions from Bacon, the Company actually implemented the sale of stock and
made payment to him. Bacon accepted the payment and, for about two years,
never notified the company of any perceived problem with the sale. Indeed, the
overwhelming evidence indicates that both parties to the transaction treated the
“put” as having been exercised and the sale of the stock as having been
consummated.
We readily reject plaintiff’s argument on appeal that the only way the “put”
right could be exercised is by signing the Auto-Put Form. Plaintiff has pointed to
no provision of the Plan itself or of any authorized rules with respect to the Plan
that require that the exercise of a “put” right be accomplished solely by executing
the Auto-Put Form. Nor is there any other evidence in the record indicating that
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execution of the Auto-Put Form is the only way to exercise the “put” right. 2 Even
if there were any ambiguity in that regard, either in the Plan itself or in authorized
rules with respect to the Plan, the Plan Administrator had full discretion to interpret
the terms and provisions of the Plan, and her decision obviously interpreted the
Plan not to require such strict compliance with formalities. Cf. Griffis v. Delta
Family-Care Disability, 723 F.2d 822, 823 (11th Cir. 1984). In other words, the
Plan Administrator’s decision clearly rejects any interpretation of the Plan that
would require, for the exercise of a “put” right, the execution of the Auto-Put
Form.
In summary, the overwhelming evidence indicates that the plaintiff not only
intended to exercise his “put” right, but also that he actually did so to the
satisfaction of both parties to the transaction and in a manner entirely consistent
with authorized rules and procedures governing the Plan. Thus the Plan
Administrator’s interpretation of the rules governing the Plan falls comfortably
within the Plan Administrator’s discretion, and the Plan Administrator’s findings
of fact are amply supported in the administrative record. 3
2
To the contrary, the record contains examples of the exercise of a “put” option by simple
letter.
3
We reject without need for further discussion plaintiff’s argument on appeal that we
cannot consider plaintiff’s testimony with respect to his handwritten note. Plaintiff is factually
wrong in his contention that the Plan Administrator based no reliance on this. To the contrary,
the Plan Administrator expressly relied upon the depositions of plaintiff stating and explaining
that he had exercised his “put” right. The plaintiff’s testimony about his handwritten letter is the
clearest indication in his testimony that he did exercise his “put” right, and his testimony in that
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For the foregoing reasons, the judgment of the district court is reversed, and
the decision of the Plan Administrator – that plaintiff did exercise his “put” right
and did sell his shares of the Company stock – is sustained. This case is remanded
for further proceedings not inconsistent with this opinion.
REVERSED and REMANDED.
regard is the testimony to which the Plan Administrator was most plausibly referring. We also
reject as wholly without merit plaintiff’s suggestion that his deposition testimony was ambiguous
with respect to the content of his handwritten letter. Plaintiff’s testimony was clear that his
handwritten letter included a request to “put” his stock for sale to the Company. Other arguments
by plaintiff on appeal are rejected without need for discussion.
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