Robin Feeko v. Pfizer Inc , 636 F. App'x 98 ( 2016 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
_______________
No. 14-4752
________________
ROBIN FEEKO; NELIDA MARENGO;
JANET RODGERS,
on behalf of themselves, individually, and
on behalf of all others, similarly situated,
Appellants
v.
PFIZER, INC.;
WYETH SPECIAL TRANSACTION SEVERANCE PLAN
________________
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-11-cv-04296)
District Judge: Honorable Norma L. Shapiro
_____________
Argued on November 18, 2015
Before: AMBRO, HARDIMAN and SLOVITER Circuit Judges.
(Opinion filed: January 6, 2016)
Monya M. Bunch, Esq.
Karen L. Handorf, Esq. (ARGUED)
Cohen Milstein
1100 New York Avenue, N.W.
West Tower, Suite 500
Washington, DC 20005
Counsel for Appellants
Brandon L. Goodman, Esq.
Robert A. Limbacher, Esq.
Goodell DeVries Leech & Dann
2001 Market Street
Two Commerce Square, Suite 3700
Philadelphia, PA 19103
Albert L. Hogan, III, Esq.
Skadden, Arps, Slate, Meagher & Flom
155 North Wacker Drive
Suite 2700
Chicago, IL 60606
David R. Pehlke, Esq. (ARGUED)
Skadden, Arps, Slate, Meagher & Flom
1440 New York Avenue, N.W.
Washington, DC 20005
Counsel for Appellees
Mary E. Signorille, Esq.
AARP Foundation Litigation
601 E Street, N.W.
Washington, DC 20049
Counsel for Amicus Appellant AARP
______________________
OPINION
______________________
SLOVITER, Circuit Judge.
Appellants Robin Feeko, Nelida Marengo, and Janet Rodgers brought claims for
severance benefits under Pfizer’s Severance Plan on behalf of themselves and the

This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.
2
proposed class pursuant to the Employee Retirement Income Security Act of 1974
(“ERISA”), specifically 29 U.S.C. § 1132(a)(1)(B). (App. at 303-09.) The District Court
denied Appellants’ motion for class certification on the ground that Appellants had not
met the numerosity requirement of Federal Rule of Civil Procedure 23(a)(1). (App. at 4.)
It granted Appellees’ motion for judgment on the administrative record or, in the
alternative, for summary judgment, upholding Pfizer’s determination that Appellants had
not experienced a termination of employment as defined by the Severance Plan. (App. at
5, 28-29.) It concurrently denied Appellants’ cross-motion for summary judgment and
dismissed the case. (App. at 5.) Appellants Feeko, Marengo, and Rodgers appeal both
orders. We will affirm the District Court’s order granting judgment on the administrative
record and decline to reach the class certification issue.
I.
Because we write primarily for the benefit of the parties, we recount only the
essential facts. In 2008, Wyeth, a pharmaceutical company, adopted the Special
Transaction Severance Plan (“the Plan”) in anticipation of a corporate takeover bid by
Pfizer, Inc. (App. at 287, 314-15.) The purpose of the Plan was “to provide certain
employees in the United States and Puerto Rico with benefits that will assist them with
their transition during and following a Change in Control.” App. at 41. An employee
was eligible to receive severance benefits under the Plan “if, concurrently with or within
the 24-month period following a Change in Control, the Employee has either (i)
experienced an Involuntary Termination of Employment or (ii) resigned for Good
Reason.” App. at 45. Excluded from the definition of “Termination of Employment”
3
was any change in employment constituting a “transfer of employment to any successor
company of the Company or (any of its affiliates).” App. at 44. The Plan documents do
not define the phrase “successor company of the Company.” They do, however, contain
a provision titled “Binding on Successors,” which states:
The obligations of the Company under the Plan shall be binding
upon any organization which shall succeed to all or substantially all of the
assets of the Company or otherwise be a successor of the Company by
operation of law and the term “Company,” whenever used in the Plan, shall
mean and include any such organization after the succession.
App. at 55.
The Plan specified that employees would be notified “at the time of Termination
of Employment what benefits, if any, the Employee will receive under the Plan.” App. at
46, 53. Employees who disagreed with the assessment were permitted to “submit a
written request for review to the [Administrative Committee],” a body appointed by the
senior vice president of human resources and comprised of employees at the senior
director level or higher. (App. at 53, 589-590.) The Plan granted the Administrative
Committee “full discretion to determine eligibility to receive benefits.” App. at 46.
Appellants Feeko, Marengo, and Rodgers are former Wyeth employees.1 (App. at
287, 315.) Benchmark Federal Credit Union (“Benchmark”) is a company that provided
credit services to Wyeth. (App. at 515.) The District Court found that Benchmark was a
separate legal entity from Wyeth, and the parties do not dispute its finding. (App. at 18.)
1
Appellant Feeko and Appellant Marengo began working at Wyeth in 1982 and 1983,
respectively. (App. at 358, 369.) Appellant Rodgers worked at Wyeth from 1979 to
1989 and again starting in 1994. (App. at 373.)
4
During their entire tenure with Wyeth and then Pfizer (“the Company”), Appellants
“worked in the Benchmark Federal Credit Union,” but “were on the Pfizer payroll and
participated in [the Company’s] employee benefit plans.” App. at 287, 315. It is unclear
from the record exactly what Appellants’ day-to-day job responsibilities were.
On October 15, 2009, Pfizer completed its purchase of Wyeth, thereby assuming
responsibility over the Plan as its new sponsor.2 (App. at 287, 289, 315, 317.) On or
about March 10, Appellants participated in a teleconference with Pfizer Human
Resources personnel and the CEO of Benchmark during which they were informed that
as of April 1, 2010, they would be employed by Benchmark, not the Company. (App. at
295, 320.) Appellants were required to fill out a Benchmark employment application and
benefit forms. (App. at 606-623.) In anticipation of these changes, Pfizer entered into an
“Employee Continuity Agreement” (“the Agreement”) with Benchmark, which provided
that Appellants’ employment would be transferred from Pfizer to Benchmark with no
interruption in employment. (App. at 87.) The Agreement specified that each employee
would be paid “a base rate of pay . . . that is at least equal to the last base rate of pay that
such Transferring Employee earned as a Pfizer employee” and that the employees would
continue to be covered by the Severance Plan.3 App. at 88, 96-100. The Agreement also
2
ERISA defines “plan sponsor” in relevant part as “the employer in the case of an
employee benefit plan established or maintained by a single employer . . . or . . . in the
case of a plan established or maintained by two or more employers or jointly by one or
more employers . . . the parties who establish or maintain the plan.” 29 U.S.C. § 1002(2008).
3
Employees were guaranteed the “last base rate of pay that such Transferring
Employee[s] earned as a Pfizer employee.” App. at 88. This guarantee lasted for “the
5
obligated Benchmark to provide certain benefits, including health and 401k (retirement)
benefits. (App. at 88.) For purposes of benefits calculations, Appellants would be
credited for service provided to Wyeth and Pfizer. (App. at 88.) The only change that
Appellants have pointed to is that Benchmark did not continue their “Rule of 70”
benefits4 or contribute to their pension plans as the Company had done. (App. at 51.) On
March 31, 2010, Pfizer terminated Appellants’ employment; Benchmark hired them the
next day. (App. at 287, 315.)
All three Appellants filed severance benefit claims within the designated filing
period. (App. at 102-03, 148-49, 189-90.) They received a letter that their claims had
been denied, stating:
Your employment was transferred to a successor employer,
Benchmark Federal Credit Union, effective April 1, 2010. You have not
experienced an employment loss and have remained employed with
Benchmark since that date of transfer. We understand that you have not
experienced a reduction in your base rate of pay nor has your principle [sic]
place of business been changed. As such, you have not experienced good
cause for termination under the Plan.
App. at 106, 152, 193.
The denial letter apprised Appellants of their right to appeal the decision to the
Administrative Committee, which they did. (App. at 112-14, 161-63, 198-200.) On
appeal, the Committee denied their request, concluding:
period beginning with the effective date of transfer and ending on October 15, 2011.”
App. at 88.
4
The parties explain, “The Rule of 70 benefit is an early retirement subsidy provided
under the Wyeth Retirement Plan . . . that is available to an employee who meets the
eligibility requirements of the Retirement Plan and the Severance Plan, and who has a
combined age and years of vesting service equal to or in excess of 70.” App. at 294, 319.
6
Benchmark is a successor to Pfizer with respect to the outsourcing of
its credit union work and, under the terms of the Employment Continuity
Agreement, maintained continuous employment for you with the same
terms and conditions as you had at Pfizer. These terms and conditions
include the same severance opportunity as you had under the Plan should
your employment with Benchmark terminate within a two-year period.
Therefore, the Committee finds that you did not experience a Termination
of Employment under the Plan and are not entitled to severance benefits.
This interpretation of the Plan’s successor provision is consistent with
Wyeth’s past practices going back to Project Impact where Wyeth denied
severance to employees transferred to another entity as a result of a sale if,
like here, the entity to which employees were transferred provided services
back to Wyeth.
App. at 139, 184, 222.
Appellants filed suit in the United States District Court for the Eastern District of
Pennsylvania, raising a claim for severance benefits pursuant to 29 U.S.C. §
1132(a)(1)(B). (App. at 286-310.) Appellants moved for class certification, which the
Court denied. (App. at 6-16, 376-87.) Appellees filed a motion for judgment on the
administrative record, and Appellants cross-filed a motion for summary judgment. (App.
at 474-508, 541-75.) The District Court denied Appellants’ motion and granted
Appellees’ motion for judgment on the administrative record. (App. at 28.) The District
Court noted that the Continuity Agreement secured Appellants’ employment at
Benchmark; that their job responsibilities, work location, salaries, and benefits at
Benchmark were the same as at Pfizer; and that a contrary interpretation would “have
guaranteed plaintiffs a windfall.” App. at 27-28. The Court concluded that, under the
circumstances, it was not arbitrary and capricious for the Administrative Committee to
conclude that Benchmark was a successor company of the Company insofar as
Appellants’ employment was concerned.
7
II.
The District Court had jurisdiction over this matter pursuant to 28 U.S.C. § 1331.
We have jurisdiction pursuant to 28 U.S.C. § 1291 because Appellants Feeko, Marengo,
and Rodgers appeal a final decision of the District Court. “We review a district court’s
grant of summary judgment de novo, applying the same standard the district court
applied.” Viera v. Life Ins. Co. of North Am., 642 F.3d 407, 413 (3d Cir. 2011) (citation
omitted). Appellants raise two issues on appeal. First, they argue that the District Court
did not give enough weight to a number of procedural irregularities in the Committee’s
decision and to several Committee members’ conflicts of interest. Second, they argue
that the Committee’s decision was arbitrary and capricious. We address both issues.
A.
When a plan administrator faces a conflict of interest in deciding whether to
disburse benefits, courts should “consider [the conflict] as one of several factors in
considering whether the administrator or the fiduciary abused its discretion.” Estate of
Schwing v. The Lilly Health Plan, 562 F.3d 522, 525 (3d Cir. 2009) (citing Metro. Life
Ins. Co. v. Glenn, 554 U.S. 105, 115 (2008)). The weight given to such a conflict
depends on a number of factors, “including, but not limited to . . . [whether] an . . .
administrator has a history of biased claims administration” and whether “the
administrator has taken active steps to reduce potential bias and to promote accuracy, for
example, by walling off claims administrators from those interested in firm finances, or
8
by imposing management checks that penalize inaccurate decisionmaking irrespective of
whom the inaccuracy benefits.” Glenn, 554 U.S. at 117 (citations omitted).
Here, the District Court found several “inherent conflicts of interest.” App. at 25.
First, the Administrative Committee was comprised of senior-level Pfizer employees who
had a financial incentive to deny benefit claims to reduce company expenses. (App. at
25.) Moreover, the Court noted that three of the Committee members were involved in
negotiating the Continuity Agreement, thereby predisposing them to deny benefits in
order to protect the Agreement’s integrity. (App. at 25.) The District Court stated, “[t]he
three members who helped negotiate the Continuity Agreement had significant incentive
to have their interpretation of the Severance Plan upheld.” App. at 25. Although the
Committee disclosed these conflicts, they ultimately decided against recusal, declaring
that they had acted as Pfizer executives at the time but were acting as Plan fiduciaries
when hearing benefits appeals. (App. at 24-25.) Pfizer took no steps to mitigate these
conflicts. (App. at 25.)
The District Court concluded, “the Committee’s structural conflicts of interest
remain troubling but not determinative.” App. at 29. Appellants claim that the District
Court afforded the conflicts improper weight. We disagree. Conflicts of interest are
merely one factor to be considered in determining the reasonableness of the Plan
Administrator’s decision. Glenn, 554 U.S. at 117 (“Any one factor will act as a
tiebreaker when the other factors are closely balanced.”). While we recognize that the
Committee was comprised of upper-level Pfizer employees who participated in
negotiating the Continuity Agreement, we believe the District Court properly considered
9
and factored each conflict of interest into its decision. Although conflicts play a role in
determining the reasonableness of the denial of benefits, the ultimate question is whether
the Committee’s interpretation of the Plan itself was reasonable. As further explained
below, we find that it was.
B.
We turn our attention to the Administrative Committee’s decision. A plan
administrator’s decision to deny benefits must be grounded in the plain language of the
plan. Epright v. Envtl. Res. Mgmt., Inc., Health and Welfare Plan, 81 F.3d 335, 339 (3d
Cir. 1996) (citation omitted) (“A Plan Administrator[’s] . . . interpretation may not
controvert the plain language of the document.”). If a plan grants its administrator
discretion to “determine eligibility for benefits or to construe the terms of the plan,” we
review the administrator’s decision under the arbitrary and capricious standard. Fleisher
v. Standard Ins. Co., 679 F.3d 116, 120-21 (3d Cir. 2012) (quoting Firestone Tire &
Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)). “When a plan’s language is ambiguous
and the administrator is authorized to interpret it, courts must defer to this interpretation
unless it is arbitrary or capricious.” Id. (internal quotations omitted). “A term is
ambiguous if it is subject to reasonable alternative interpretations.” Taylor v. Cont’l
Group Change in Control Severance Pay Plan, 933 F.2d 1227, 1232 (3d Cir. 1991)
(citation omitted). Whether a plan term is ambiguous is a question of law we review de
novo. In re Unisys Corp. Long Term Disability Plan ERISA Litig., 97 F.3d 710, 715 (3d
Cir. 1996).
10
We agree with the District Court that the phrase “successor company of the
Company or (any of its affiliates)” is ambiguous. The term “successor” is not defined in
the Plan, and it is susceptible to more than one meaning. Id. at 1234 (finding term
“successor” to be ambiguous); Howard Johnson Co., Inc. v. Detroit Local Joint Exec.
Bd., Hotel & Rest. Emps. & Bartenders Int’l Union, AFL-CIO, 417 U.S. 249, 262 n.9
(1974) (holding that context determines meaning of “successor”). Appellants disagree
and point to Article VIII, § 8.3 of the Plan, titled “Binding on Successors.” App. at 55. It
states:
The obligations of the Company under the Plan shall be binding
upon any organization which shall succeed to all or substantially all of the
assets of the Company or otherwise be a successor of the Company by
operation of law and the term “Company,” whenever used in the Plan, shall
mean and include any such organization after the succession.
App. at 55.
It is clear from the language of § 8.3, however, that it does not define “successor
company of the Company or (any of its affiliates).” Rather, § 8.3 governs the effect of a
change in ownership of the Company on the continuity of the Plan.
Having found the Plan language ambiguous, we note that the Plan grants its
administrator “full discretion to determine eligibility to receive benefits.” App. at 46.
Therefore, we review the Administrative Committee’s decision under the arbitrary and
capricious standard.5 Orvosh v. Program of Group Ins. for Salaried Emps. of
5
“We have described the deferential standard of review that we use in the ERISA context
as both an arbitrary and capricious standard of review, and a review for abuse of
11
Volkswagen of Am., Inc., 222 F.3d 123, 129 (3d Cir. 2000) (standard of review depends
on discretion afforded plan administrator). The following factors are used to analyze the
reasonableness of a plan administrator’s interpretation of plan:
(1) whether the interpretation is consistent with the goals of the Plan; (2)
whether it renders any language in the Plan meaningless or internally
inconsistent; (3) whether it conflicts with the substantive or procedural
requirements of the ERISA statute; (4) whether the [relevant entities have]
interpreted the provision at issue consistently; and (5) whether the
interpretation is contrary to the clear language of the Plan.
Howley v. Mellon Fin. Corp., 625 F.3d 788, 795 (3d Cir. 2010) (alterations in original)
(citation omitted).
The Administrative Committee denied Appellants’ claim for benefits on the
ground that Benchmark was a successor company of the Company. Appellants argue that
Benchmark was not a successor. We disagree. The Committee’s interpretation appears
to be consistent with the goals of the Plan, “to provide certain employees . . . with
benefits that will assist them with their transition during and following a Change in
Control.” App. at 41. Appellants’ transition was relatively smooth. Although Pfizer has
not contested that they were transferred from its employ to Benchmark, their
responsibilities were the same, the physical location of their office remained the same,
their salary and benefits remained largely unchanged, and there was no temporal gap in
their employment. It would seem that the purpose of the Plan was to help employees
who experience unemployment as a result of the change in control of Wyeth. That
discretion.” Howley v. Mellon Fin. Corp., 625 F.3d 788, 793 n.6 (3d Cir. 2010) (internal
quotation marks omitted).
12
purpose would not have been served by granting Appellants’ claim for benefits. Not only
were Appellants immediately employed, they experienced practically no change during
the transition. Conversely, had the Company granted Appellants’ request for severance
benefits, they would have received severance benefits on top of the salary and benefits
they were receiving from Benchmark. Such a scenario would appear to contradict, not
conform to, the goals of the Plan.
None of the remaining factors cited by Howley demonstrate that the Committee’s
ruling was arbitrary or capricious. There is no language in the Plan that is rendered
meaningless or internally inconsistent by the Committee’s interpretation of “successor.”
Similarly, there is no clear plan language that conflicts with the Committee’s decision.
As we have already noted, the term “successor” is ambiguous because there is nothing in
the Plan that can be read as a definition of that term. Moreover, it does not appear that
ERISA itself conflicts with the Committee’s decision.
Finally, Appellants point out several procedural irregularities in the Committee’s
decision. The District Court found that the Committee incorrectly stated that “Wyeth’s
on-site credit union” was “sold to [Benchmark]” and that Appellants were “transferred to
Benchmark as part of the sale.” App. at 23 (alteration in original). In finding Appellants
ineligible for benefits, the Committee noted that Benchmark was a “successor employer”
and utilized the “same desk” rule. App. at 285. Neither of these terms appears in the
Severance Plan. Although the Plan refers to “successor company,” there is no reference
to “successor employer.” Finally, the Committee cited to past Wyeth benefits decisions
regarding other plans and noted that its decision was “reasonable” and “consistent” with
13
those decisions and Wyeth’s past practices. App. at 285. The Plan itself does not specify
whether Plan Administrators may consult past decisions.
Procedural irregularities factor into the court’s review of an administrator’s
decision insofar as they demonstrate a “reason to doubt its fiduciary neutrality.” Miller v.
Am. Airlines, Inc., 632 F.3d 837, 845 (3d Cir. 2011) (quoting Post v. Hartford Ins. Co.,
501 F.3d 154, 165 (3d Cir. 2007)). While the Committee cited several incorrect facts and
used terminology not contained in the language of the Plan, these irregularities suggest
harmless factual error as opposed to fundamental impropriety that calls into doubt the
fiduciary neutrality of the Committee. As for the Committee’s reference to past benefits
decisions, we do not believe such a practice is inappropriate so long as the Committee’s
interpretation was reasonable and the focus of its inquiry was on the language of the Plan.
That appears to be the case here.
In closing, we note that Appellants raise an alternative interpretation of “successor
company of the Company or (any of its affiliates)” that may very well be a reasonable
interpretation of the Plan’s language. The relevant inquiry, however, is whether the
Committee’s interpretation of the Plan was reasonable, regardless of whether we agree
with it. We find that it was.
For the reasons set forth, we will affirm the Order of the District Court.
14
Robin Feeko, et al. v. Pfizer, Inc., et al.
No. 14-4752
_______________________________________________________________________
AMBRO, Circuit Judge, dissenting
We must give a conflict of interest “greater importance, perhaps determinative
importance, where the evidence suggests a greater likelihood that it affected the decision
to deny benefits.” Howley v. Mellon Fin. Corp., 625 F.3d 788, 794 (3d Cir. 2010)
(emphasis added). In this case, three of the five members of Pfizer’s Administrative
Committee came to the table with a conflict that prevented them from neutrally deciding
the benefits claims. My colleagues nonetheless bless the Committee’s decision. Because I
believe there was a debilitating conflict whose influence is apparent in a series of
procedural and substantive missteps in the Committee’s deliberations, I respectfully
dissent.
The question before the Administrative Committee was whether Benchmark was a
successor company to Pfizer. If Benchmark was, then Appellants are not entitled to
severance benefits; if it was not, then Appellants win. ERISA demands a neutral
resolution to that question. But for three members of the Committee, which operates by
majority vote, the result was a foregone conclusion. That is because, as the District Court
noted, several months before Appellants filed their claims, these members were
“personally involved” in the decision to take Appellants off Pfizer’s payroll and put them
on Benchmark’s. Feeko v. Pfizer, Inc., Civ. Action No. 11-4296, 2014 WL 6473265, at
*5 (E.D. Pa. Nov. 18, 2014). During that process, the three members, acting in their
business rather than fiduciary capacities, structured the deal with an intent to assure that
Benchmark would be a successor company to Pfizer. Id. at *6. They did so under the
belief that, as a result of this structure, severance payments would be “precluded.” Id.Indeed, during the meeting when the Committee considered Appellants’ claims, these
members conceded that they had already been part of a decision that Appellants “would
not be eligible for severance.” App. at 285 (Committee minutes). And though they
disclosed this, the Committee made no effort to mitigate the conflict. Feeko, 2014 WL
6473265, at *6. Pfizer now asks us to consider these members to be neutral arbiters on a
question whose answer they had already decided. That asks too much.
The District Court acknowledged the severity of this conflict. The three members,
it noted, had “significant incentive” to deny Appellants’ benefits claims. Id. In other
words, they “would have been influenced to reach the same conclusion” in their fiduciary
capacities as they did in their business capacities. Id. They might “seek to avoid
contradicting their own interpretations so quickly; they would have significant reason to
avoid subjecting Pfizer to liability for severance benefits when they had participated in
drafting or approving language they believed precluded such liability.” Id.Yet the District Court concluded, and the majority here agrees, that these conflicts,
while substantial, can be overlooked. But this approach does little more than pay lip
service to conflicts as a factor in evaluating a plan administrator’s decisions. The logical
conclusion from the District Court’s opinion is that the conflict bore heavily on the
Committee’s decision-making process. The conflict therefore undermined the neutrality
that the Committee was supposed to have.
2
Perhaps Pfizer could have overcome all of this if the other evidence clearly
supported its position. Instead, the opposite is true. The administrative record is so
littered with pitfalls that it only supports, rather than rebuts, the notion that a conflict of
interest improperly intruded on the Administrative Committee’s deliberations. As my
colleagues acknowledge, the Committee based its interpretation on terminology found
nowhere in the severance plan, mistakenly described the nature of the transaction
between Pfizer and Benchmark (calling it a “sale” even though nothing was sold), and
supported its determination using past practices that arose under entirely different factual
situations. Maj. Op. at 12–13.
And most importantly—and here my view differs substantially from that of the
majority—the Committee labeled Benchmark a “successor company” to Pfizer under
circumstances that defy the common meaning of the term. The majority is correct that
“successor company of the Company” can mean a number of things. See, e.g., Howard
Johnson Co. v. Detroit Local Joint Exec. Bd., 417 U.S. 249, 257 (1974) (noting that
“mergers, consolidations, or purchases of assets” can, under the right circumstances, lead
to successorship). But here the question is not what it can mean, but rather what it cannot
mean. We might, for instance, reasonably debate whether a transfer of a small percentage
of assets creates successorship. But under our facts, there are none of the minimal indicia
of successorship—no consolidation, no merger, no purchase of assets. The only attempt
that Pfizer makes to justify its interpretation as a matter of common usage is that
“Benchmark qualified as a successor company of Pfizer with respect to the provision of
credit union services.” Feeko, 2014 WL 6473265, at *8. But that does not do the trick
3
because Benchmark was already providing these services for Pfizer well before
Appellants became Benchmark employees.
Benchmark concededly succeeded to Pfizer in the employment of Appellants, but
that makes Benchmark the successor employer of Appellants. It does not make
Benchmark a successor company to Pfizer, which is the relevant inquiry under the
severance plan. Imagine that Pfizer, desiring healthy meal options for its employees,
opens a McDonald’s on its campus and decides that it will staff the restaurant with Pfizer
employees so that it can more effectively manage their performance. Growing tired of the
arrangement, Pfizer transfers the employees to McDonald’s. There is no logical way to
view McDonald’s in this scenario as a successor company to Pfizer. For the same
reasons, Benchmark did not, in any normal usage of the term, become a successor
company to Pfizer.
The majority’s other principal argument—that the Committee’s construction is
consistent with the purpose of the severance plan because Appellants are not what comes
to mind when one thinks of severed employees—no doubt has surface appeal, but I am
unconvinced. At the outset, Pfizer’s own actions—in sending Appellants a letter saying
they had experienced a “termination of employment” and in providing them with a
question-and-answer document saying that a period of unemployment was not a
prerequisite to receiving salary continuation benefits—rebut this. See, e.g., App. at 203,
625. Additionally, given that Appellants have lost certain Pfizer benefits (such as pension
plan contributions and free prescriptions) now that they work for Benchmark, our own
case law supports the conclusion that there is nothing incongruous about treating them as
4
severed employees with all the severance rights accorded that status. See Kotrosits v.
GATX Corp. Non-Contributory Pension Plan for Salaried Employees, 970 F.2d 1165,
1171 (3d Cir. 1992) (noting that severance payments can offset a reduction in benefits
even when “employment continues without interruption with a new employer”).
So we are back to where we started. Under Howley, a conflict can be
“determinative” of our outcome if it bears sufficiently on the decision of a plan
administrator. 625 F.3d at 794. If we are not willing to give determinative effect here—
where we have an interpretation at odds with the key term’s common meaning, various
procedural errors, and a conflict that provided, in the District Court’s own words, a
“significant incentive” to deny Appellants’ claims—I cannot see how we can ever factor
conflicts meaningfully into our analysis. As a result, I would reverse the District Court
and grant summary judgment to Appellants.1
1
Because the majority upholds the grant of judgment to Pfizer, it does not need to
address the District Court’s separate order denying class certification on the ground that
the class was not sufficiently numerous. Given my view that Appellants are entitled to
judgment, I would need to review the certification order. It rested on the belief that
unnamed class members who have missed the deadline to exhaust their administrative
remedies cannot, as a matter of law, count toward the numerosity requirement. I would
hold that the District Court erred in this determination. The overwhelming consensus
among other courts to consider the question in the ERISA context is that exhaustion by
unnamed class members is not necessary where the named plaintiffs have exhausted their
administrative remedies. See, e.g., Flinders v. Workforce Stabilization Plan of Phillips
Petroleum Co., 491 F.3d 1180, 1193 n.5 (10th Cir. 2007); In re Household Int’l Tax
Reduction Plan, 441 F.3d 500, 501–02 (7th Cir. 2006); Thomas v. SmithKline Beecham
Corp., 201 F.R.D. 386, 395 (E.D. Pa. 2001). Although exhaustion by unnamed class
members is not required, the District Court still has discretion to determine whether to
count unnamed members who did not exhaust toward the numerosity requirement. In
exercising its discretion here, the District Court would have needed to consider whether
counting the unnamed members would defeat the purposes that the exhaustion
requirement typically serves: providing notice to the defendant of the nature of the claims
5
prior to litigation and allowing an opportunity for internal resolution. Relevant factors
include whether the unnamed members’ claims are “very similar to those” Pfizer already
rejected administratively (such that Pfizer, even without exhaustion, had notice) and
whether requiring exhaustion “would merely produce an avalanche of duplicative
proceedings and accidental forfeitures.” In re Household Int’l Tax Reduction Plan, 441
F.3d at 501–02. If the District Court, in exercising its discretion, had counted the
unnamed members and found that the class was sufficiently numerous, it would then have
needed to determine whether any other reasons precluded class certification.
6