In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 22-1764
ALAN K. CARLSON and PETER DELUCA, on behalf of a class,
Plaintiffs-Appellants,
v.
NORTHROP GRUMMAN SEVERANCE PLAN and NORTHROP
GRUMMAN CORPORATION,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 13-cv-02635 — Andrea R. Wood, Judge.
____________________
ARGUED FEBRUARY 9, 2023 — DECIDED MAY 8, 2023
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Before EASTERBROOK, HAMILTON, and LEE, Circuit Judges.
EASTERBROOK, Circuit Judge. Northrop Grumman laid off
some workers in 2012 and did not provide severance benefits
to all of them. The firm’s Severance Plan (“the Plan” for short)
provides that a laid-off employee regularly scheduled to work
at least 20 hours a week will receive severance benefits if that
employee “received a cover memo, signed by a Vice President
of Human Resources (or his/her designee), with this
2 No. 22-1764
document addressed to you individually by name.” Another
part of the Plan confirms this requirement: “You must be des-
ignated as eligible for this plan by a Vice President of Human
Resources (or his/her designee). You are designated if you re-
ceived a memo addressed to you, notifying you of your eligi-
bility for this benefit.” Alan Carlson and Peter DeLuca, who
did not receive such a document (which the parties call the
“HR Memo”), filed this suit contending that the Employee Re-
tirement Income Security Act (ERISA),
29 U.S.C. §§ 1001–
1461, entitles them to severance benefits anyway.
As plaintiffs see things, their eligibility is established by
the fact that they regularly worked more than 20 hours a
week. They depict the HR Memo as a ministerial document
that verifies eligibility under the 20-hour standard. Northrop
Grumman and the Plan, by contrast, depict the HR Memo as
the means by which management decides which employees
deserve severance pay—or perhaps which employees the firm
can afford to pay. The district court granted summary judg-
ment in defendants’ favor, ruling that the Plan’s language
gives the HR Department discretion to choose who, if anyone,
gets severance pay on being laid off.
2022 U.S. Dist. LEXIS
59142 (N.D. Ill. Mar. 31, 2022). The judge added that ERISA
does not prevent a severance plan (a form of welfare-benefit
plan in ERISA’s terminology) from possessing and exercising
discretion to determine recipients.
Plaintiffs and the defendants agreed to have a magistrate
judge resolve the case under
28 U.S.C. §636(c). But once the
suit was certified as a class action (on behalf of all laid-off em-
ployees who did not receive a HR Memo), and the stakes mul-
tiplied, Northrop Grumman asked the district judge to re-
sume control. The judge obliged.
No. 22-1764 3
Assignment to a magistrate judge depends on a district
judge’s consent, and the statute allows the judge to rescind
that assignment. “The [district judge] may, for good cause
shown on its own motion, or under extraordinary circum-
stances shown by any party, vacate a reference of a civil mat-
ter to a magistrate judge under this subsection.”
28 U.S.C.
§636(c)(4). The district judge found that the increased stakes
constituted “good cause” for withdrawing the reference.
Plaintiffs say that this cannot be so, given the holding of deci-
sions such as Williams v. General Electric Capital Auto Lease, Inc.,
159 F.3d 266 (7th Cir. 1998), that magistrate judges may pre-
side over class actions if the representative plaintiffs (and all
defendants) have consented. Plaintiffs also rely on Lorenz v.
Valley Forge Insurance Co.,
815 F.2d 1095 (7th Cir. 1987), which
held that the amendment of the complaint to add a demand
for substantial punitive damages did not allow the defendant
to withdraw consent to decision by a magistrate judge.
Neither Williams nor Lorenz addresses the meaning of
“good cause” under §636(c)(4). Indeed, neither decision cites
§636(c)(4). Williams holds that magistrate judges may resolve
class actions, with the required consent provided by the rep-
resentative parties. Lorenz holds that an increase in the stakes
does not allow a litigant to revoke consent unilaterally. What
a district judge may do under §636(c)(4) is a different maler.
“Good cause”, the standard that applies to decisions on
a judge’s initiative—including such decisions after a litigant
files a motion, see Murret v. Kenner,
894 F.2d 693, 695 n.4 (5th
Cir. 1990)—is a maler of more or less, not a bright line. This
implies deferential appellate review. See Pioneer Investment
Services Co. v. Brunswick Associates L.P.,
507 U.S. 380, 398–99
(1993). We do not see any abuse of discretion. Class
4 No. 22-1764
certification complicated and prolonged the litigation; almost
a decade passed between its filing and its resolution. With-
drawing a reference in order to make a simple legal decision
that ends the suit has much to be said for it.
And what difference could it make who resolved the suit
in the district court? The meaning of the Plan—like the mean-
ing of ERISA—is a question of law. A court of appeals makes
an independent decision about a pure question of law. It
would waste everyone’s time to remand for decision by a
magistrate judge, when the effective decision will be made in
this court no maler who presides in the district court.
The merits of plaintiffs’ claim do not require extended dis-
cussion. The Plan makes the receipt of severance benefits con-
tingent on receipt of a HR Memo, which plaintiffs and the
other class members did not get. Welfare-benefit plans under
ERISA—unlike retirement plans—need not provide for vest-
ing, and the terms of welfare-benefit plans are entirely in the
control of the entities that establish them. When making de-
sign decisions, employers may act in their own interests. Lock-
heed Corp. v. Spink,
517 U.S. 882 (1996); Hughes Aircraft Co. v.
Jacobson,
525 U.S. 432 (1999).
One of the choices that employers may make when design-
ing welfare-benefit plans is to include a discretionary compo-
nent. McNab v. General Motors Corp.,
162 F.3d 959, 961 (7th Cir.
1998). A plan’s administrator acts in a fiduciary capacity when
exercising discretion, but the firm’s management does not.
The Northrop Grumman Plan allocates discretion to the Hu-
man Resources Department, a non-fiduciary that is entitled to
exercise that discretion in Northrop Grumman’s interest.
No. 22-1764 5
Workers who know that management has discretion to
award or withhold certain benefits may view their positions
as less valuable (unless they negotiate to receive HR Memos
at the outset of their employment), but ERISA leaves it to the
plan’s sponsor to decide whether that long-term cost is worth
bearing when making short-term decisions.
Plaintiffs tell us that, until October 2011, Northrop Grum-
man provided a HR Memo to every laid-off employee who
had worked enough hours. Northrop Grumman denies this,
but like the district judge we cannot see why it malers. A per-
son possessing discretion may change the way that discretion
is exercised. So even if Northrop Grumman had announced
the universal-severance-benefits norm that plaintiffs believe it
had until October 2011, this would not prevent it from chang-
ing that approach.
Similarly, the fact that Northrop Grumman may have
awarded benefits (such as continuing health care) to some
laid-off employees who lacked a HR Memo shows only that
the firm may have made a mistake; it does not create a legal
entitlement to have the mistake extended to other kinds of
benefits. Likewise with the fact that some clerical employees
may have treated the 20-hour threshold as sufficient for ben-
efits and entered that error in a corporate database.
What plaintiffs are advancing is an estoppel argument:
How discretion was exercised at one time prevents the plan’s
sponsor from exercising discretion differently in the future.
Rights under ERISA are not subject to estoppel, however; the
sponsor always may, indeed always must, apply a pension or
welfare plan as wrilen. Kannapien v. Quaker Oats Co.,
507 F.3d
629, 636 (7th Cir. 2007).
6 No. 22-1764
Even the distribution of a wrilen summary plan descrip-
tion that bluntly tells workers that they have certain benefits
missing from the full plan does not prevent the sponsor from
enforcing the plan’s terms. CIGNA Corp. v. Amara,
563 U.S. 421
(2011). The plan itself—not deliberate past practice, not mis-
taken past practice, and not mistaken efforts to describe the
benefits in writing—always controls. Some decisions, includ-
ing Kannapien, suggest that “extreme circumstances” may
lead to estoppel, but we need not pursue that thought, if it has
any force after CIGNA held that even bad wrilen advice does
not support departure from a plan. Nothing “extreme” hap-
pened at Northrop Grumman. Nor can relief for plaintiffs ar-
rive via reforming the Plan. CIGNA held that reformation is in
principle an available equitable remedy but that even a mis-
take in a summary plan description would not by itself justify
that relief—for, as the Justices stressed,
563 U.S. at 437–38, a
plan’s sponsor creates its terms, which cannot be varied by an
administrator or a clerical employee.
Plaintiffs describe Northrop Grumman’s conduct as “in-
terference” with their rights, in violation of
29 U.S.C. §1140.
That begs the question, however. Because the Plan grants dis-
cretion to the Vice President of Human Resources, the exercise
of that discretion cannot be understood as interference with
any rights under the statute or Plan. “If the plan itself pro-
vides for [particular] practices, such that [the workers] do not
qualify for benefits under its terms, they cannot prevail on an
ERISA claim” under §1140. Ameritech Benefit Plan CommiQee v.
Communication Workers,
220 F.3d 814, 824 (7th Cir. 2000). This
aspect of plaintiffs’ argument effectively asks us to treat the
HR Department as their fiduciary. It isn’t. The Plan’s admin-
istrator is their fiduciary but did not make any of the decisions
of which plaintiffs complain.
No. 22-1764 7
AFFIRMED
