Dabertin, Judy v. HCR Manor Care Inc

In the
United States Court of Appeals
For the Seventh Circuit
____________
Nos. 03-1918, 03-2034, 03-2461
JUDY DABERTIN,
Plaintiff-Appellee, Cross-Appellant,
v.
HCR MANOR CARE, INC., MANOR CARE, INC.
SEVERANCE PLAN FOR SELECTED EMPLOYEES,
MANOR CARE INC. SEVERANCE PLAN FOR
SELECTED EMPLOYEES COMMITTEE, MANOR
CARE INC. SEVERANCE PLAN FOR SELECTED
EMPLOYEES PLAN ADMINISTRATOR,
Defendants-Appellants, Cross-Appellees.
____________
Appeals from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 99 CV 1702—Ian H. Levin, Magistrate Judge.
____________
ARGUED DECEMBER 1, 2003—DECIDED JUNE 24, 2004
____________
Before POSNER, EASTERBROOK, and ROVNER, Circuit
Judges.
ROVNER, Circuit Judge. After being denied benefits under
her employer’s Severance Plan for Selected Employees
(“Plan”), Judy Dabertin brought an action under the
Employee Retirement Income Security Act (“ERISA”), 29
2 Nos. 03-1918, 03-2034, 03-2461
U.S.C. §§ 1001 et seq. against her employer HCR Manor
Care (“HCR”), the Plan, and the Plan’s administrator and
the committee appointed by HCR’s Board of Directors to
administer the Plan (“Committee”) seeking district court
review of the Committee’s determination. The district court
held that the Committee was arbitrary and capricious in
denying Dabertin’s claim for severance benefits. We affirm
in all aspects save for one minor housekeeping matter
which we remand for further consideration.
I.
For over seventeen years, Judy Dabertin worked for
Manor Care Inc. (“Manor Care”), a company that owns and
operates skilled nursing facilities across the country. For at
least some portion of those years, Dabertin worked as one
of several vice presidents of operations. Over the course of
that time she became accustomed to her duties as vice
president. Those duties changed, however, when, in Sep-
tember 1998, Manor Care merged into a subsidiary of
Health Care and Retirement Corporation. Paul Ormond,
the designated President and Chief Executive Officer of the
new organization, HCR, embarked on a plan to radically
alter operations in the merged entity. As part of his plan, he
required all vice presidents of operations, including
Dabertin, to take on the additional role and title of general
managers. As general managers, Ormond expected the
executives to spend significantly more time in the facilities
assigned to them and participate more directly in their day-
to-day management. All of the vice presidents, including
Dabertin, were required to perform all of the same func-
tions they performed when they were solely vice presidents,
but to those duties Ormond added new ones— those of a
general manager. To accommodate the time-consuming
nature of these increased hands-on duties, Ormond opted to
reduce the number of facilities to which some vice presi-
Nos. 03-1918, 03-2034, 03-2461 3
dents were assigned. Dabertin, for example, had formerly
directed operations of all of the facilities in the Central and
Western Divisions of the company. The facilities in the
Western Division, however, were geographically dispersed
throughout California, Washington, Utah, Nevada and
Arizona. According to HCR, the wide geographic dispersion
of the facilities would make managing the Western Division
under the new hands-on approach significantly more
difficult than before. Consequently, Manor Care determined
that in order to enable Dabertin to perform her new
managerial duties properly, she could no longer oversee
operations at both divisions. Ormond, therefore, assigned
her to the Western Division alone. According to the defen-
dants, Dabertin maintained the same authority, functions,
duties, and responsibilities in the Western Division as she
had previously for both the Central and Western Divisions.
As a practical matter, however, this meant that she went
from having authority for and oversight over forty-eight
facilities to twenty-seven, from thirty-four skilled nursing
units to seventeen, and from 4,639 beds to 2,309. According
to Dabertin, she lost all of her authority, functions, duties
and responsibilities for the Central Region operations, one
of the largest and most complex markets. Her budgeted
revenue decreased from $232 million to $114 million and
her operating profits decreased from $61 million to $27
million. Her independent capital spending authority went
from $6 million to zero, and she lost her independent
authority to manage her total budget. She no longer had
any responsibility and authority for development and
implementation of advertising, public relations, consulting,
business meetings, seminars, and conventions. HCR
eliminated her construction project authority for twenty
Western Division sites and eliminated her role in identify-
ing, reviewing, overseeing, and coordinating construction
projects. When HCR closed the Pleasant Hill, California
and Lombard, Illinois facilities, Dabertin lost her manage-
ment function and hiring and firing authority for seventy-
three staff members.
4 Nos. 03-1918, 03-2034, 03-2461
Dismayed by what she saw as her waning authority, on
October 21, 1998, Dabertin gave notice to her supervisor,
Keith Weikel, that she was leaving HCR. She made a claim
for severance benefits under the Plan which had been
adopted in preparation for the merger. That Plan des-
ignated thirty-nine officers, including Dabertin, as Plan
participants. Under the terms of the Plan, employees were
entitled to severance benefits in the following two circum-
stances:
A Participant shall be entitled to severance benefits
under this Plan if and only if his employment with the
Company . . . terminates under either of the following
circumstances:
(A) a termination by the Company . . . other than for
Cause, or
(B) a termination by the Participant for Good Reason.
(Sep. App. at 163).
The Plan defines “Good Reason” as “a significant re-
duction in the scope of a Participant’s authority, position,
title, functions, duties or responsibilities.” (Sep. App. at
161). Dabertin submitted to HCR that she had “good
reason” to terminate her employment with HCR because,
among other things, the number of facilities, beds, direct
reports, and construction projects assigned to her had de-
creased.
HCR claims, however, that prior to the merger, Ormond
(the incoming president and CEO of the merged entity)
discussed the purpose and goal of the Plan with Stuart
Bainum, Jr., the CEO of the former Manor Care. According
to HCR, Ormond stated that Dabertin and the other ex-
ecutives were critical to the success of the merged entity
and he did not want the Plan to give them an incentive to
resign and receive severance benefits under the Plan.
Ormond and Bainum agreed that a switch to a more hands-
Nos. 03-1918, 03-2034, 03-2461 5
on operating procedure would not trigger any entitlement
to severance benefits. Dabertin, of course, was not privy to
these conversations. Nor were Ormond’s intentions recorded
in the text of the Plan.
Weikel denied Dabertin’s claim for benefits and she ap-
pealed that denial to the Committee. On January 14, 1999,
the Committee—comprised of Ormond and three others—
met to consider Dabertin’s claim for benefits. During
the hour-long consideration of Dabertin’s claim, Ormond
relayed his pre-merger conversation with Bainum to the
Committee, reiterating that it was his intention that the
switch to the new hands-on approach would not constitute
a reduction in the scope of a vice president’s authority, po-
sition, title, functions, duties or responsibilities, and there-
fore would not trigger entitlement to benefits. The
Committee interpreted the Plan consistently with Ormond’s
stated intention and denied Dabertin benefits, determining
that “if a Participant continues to have a full range of
operational, financial, administrative and other authority,
functions, duties and responsibilities with respect to the
business unit the Participant manages, the scope of the
Participant’s authority, duties, functions and responsibili-
ties would not be affected.” (Sep. App. at 231) (emphasis in
original). It determined that in Dabertin’s case, her duties,
responsibilities, authority, title, position and functions had
actually “significantly increased” since, she, as well as the
other vice presidents, “were expected to spend significantly
more time in the facilities in their divisions, they were
required to conduct operations reviews with the Regional
Directors of Operations on every month on every center and
they were required to be more involved in the day-to-day
oversight of the centers in the areas of quality of care,
staffing levels, accounts receivables, workers compensation
and agency utilization.” (Sep. App. at 233). Finally, the
Committee reasoned that Dabertin’s title and position were
the same under the new operating scheme as the old: she
6 Nos. 03-1918, 03-2034, 03-2461
was a vice president before the merger and remained a vice
president after, and the additional title of general manager
did not reduce her position within the company. To the
contrary, the Committee found that Dabertin’s position with
Manor Care was enhanced by the fact that the company
was approximately twice as large as it had been before the
merger. In short, the Committee concluded that if Dabertin
had lost any duties, responsibility, authority, etc., she had
gained far more and was not entitled, therefore, to sever-
ance benefits under the plan.
Dabertin filed suit in the district court on March 15, 1999,
claiming that HCR, the Plan, Manor Care, the Committee,
and the Plan Administrator (“defendants”) violated ERISA
by refusing to pay her severance benefits, withholding
certain documents related to the Plan, and breaching their
fiduciary duties to Plan participants. In the alternative, she
asserted claims for breach of contract and violation of the
Illinois Wage Payment and Collection Act. Holding that
ERISA preempted the state law claims, the district court
entered summary judgment for the defendants on those
claims as well as the ERISA claim that the defendants had
wrongfully withheld Plan documents. Dabertin v. HCR
Manor Care, Inc., 177 F. Supp. 2d 829, 840-42 (N.D. Ill.
2001) (“Dabertin I”). The district court also held that the
Committee was not arbitrary and capricious in deciding
that any changes in Manor Care’s bonus system did not
adversely affect Dabertin and that Manor Care had not
significantly reduced Dabertin’s employee benefits. Id. at
853-54. A genuine issue of material fact, however, pre-
vented the district court from determining whether the
Committee acted arbitrarily and capriciously when it
concluded that HCR had not reduced that scope of
Dabertin’s duties, responsibilities, authority, title, position
and functions. Id. at 852. Consequently, the district court
held a bench trial to determine the content of the record
before the Committee and subsequently—on December 19,
Nos. 03-1918, 03-2034, 03-2461 7
2002—determined that the Committee’s decision was
indeed arbitrary and capricious. Dabertin v. HCR Manor
Care, Inc., 235 F. Supp. 2d 853, 867-68 (N.D. Ill. 2002)
(Dabertin II). In a separate order entered on March 27,
2003, the court awarded $245,775 in prejudgment interest,
and $270,617.08 in attorneys’ fees and costs.
After the liability decision, the parties stipulated to the
benefits calculation except for the calculation regarding the
bonus that Dabertin argued she should receive. On March
25, 2003, the district court calculated Dabertin’s bonus
benefit amount and then on March 27, 2003, entered an
order awarding Dabertin $785,150 in total benefits and
$245,775 in prejudgment interest (R. at 113). On May 19,
2003 the court entered an order awarding Dabertin
$270,671.08 in attorneys’ fees and costs. (Sep. App. at 272).
The defendants timely appealed the district court’s deci-
sion that the Committee was arbitrary and capricious (the
December 19, 2002 order) as well as the order awarding
fees and costs (the May 19, 2003 order). Dabertin cross-
appealed, contesting the district court’s calculation of the
benefit amount (the March 27, 2003 order) and the court’s
earlier grant of summary judgment (the December 20, 2001
order) in Dabertin I.1
1
Dabertin states that “[i]f, as we submit, the District Court cor-
rectly decided the Article 1.8(i) Good Reason claim after a bench
trial, this Court need not address the summary judgment issues
regarding Dabertin’s Article 1.8(iv) and (v) and fiduciary breach
claims or the de novo review and heightened scrutiny issues.”
(Appellee’s Brief at 30). Thus Dabertin’s cross-appeal of the
December 20, 2001 district court order (Dabertin I) is conditioned
on our ruling in favor of the defendant on the defendant’s appeal
of the December 19, 2002 order. For the reasons supplied infra, we
need not address Dabertin’s cross-appeal of the fiduciary breach
claims or the de novo review and heightened scrutiny issues.
8 Nos. 03-1918, 03-2034, 03-2461
II.
Before addressing the merits, we must resolve the parties’
dispute over the appropriate standard of review. Where an
ERISA plan gives the plan administrator discretion to
interpret the plan terms or determine benefits eligibility, a
reviewing court employs the arbitrary and capricious
standard. Firestone Tire & Rubber Co. v. Bruch, 489 U.S.
101, 115 (1989); Militello v. Cent. States, Southeast and
Southwest Areas Pension Fund, 360 F.3d 681, 685 (7th Cir.
2004). The district court determined, and neither party
disputes on appeal, that the plan at issue here gives such
discretion. See Dabertin I, 177 F. Supp. 2d at 843-44.
Consequently, we, like the district court, look only to see
whether the Committee acted arbitrarily and capriciously
in denying Dabertin benefits.2 See Hackett v. Xerox Corp.
Long-Term Disability Income Plan, 315 F.3d 771, 773 (7th
Cir. 2003), Johnson v. Allsteel, Inc., 259 F.3d 885, 889-90
(7th Cir. 2001), Perlman v. Swiss Bank Corp. Comprehen-
sive Disability Prot. Plan, 195 F.3d 975, 980 (7th Cir. 1999).
This standard gives great deference to the decision of a
committee which cannot be overturned unless the commit-
tee’s decision was a downright unreasonable one. Carr v.
The Gates Health Care Plan, 195 F.3d 292, 294 (7th Cir.
1999). It is not the function of the district court to decide
2
The discrepancy in the parties’ positions regarding the standard
of review may have resulted, in part, from the fact that in this
case the district court conducted a brief bench trial to resolve
factual issues related to Dabertin’s loss of position and title, her
loss of independent capital spending authority, loss of hiring and
firing authority, loss of cluster market functions, and the defend-
ants’ freezing of construction projects. Dabertin I, 177 F. Supp. 2d
at 852. The trial, however, was limited to determining what the
record was before the Committee—a factual determination that
we would review for clear error. Thomas v. Gen. Motors
Acceptance Corp., 288 F.3d 305, 307 (7th Cir. 2002). This does not
affect the level of deference that we owe to the Plan Committee’s
determinations.
Nos. 03-1918, 03-2034, 03-2461 9
whether it would have reached the same conclusion as the
committee (Id.) or to substitute its judgment for the judg-
ment of the committee. Smart v. State Farm Ins. Co., 868
F.2d 929, 936 (7th Cir. 1989). But even review under this
most deferential standard does not amount to a rubber
stamp. Hackett, 315 F.3d at 774-75. The committee must
articulate a rational connection between the facts found, the
issue to be decided, and the choice made. Cozzie v. Metro.
Life Ins. Co., 140 F.3d 1104, 1109 (7th Cir. 1998). Where the
committee’s interpretation of the plan defies all common
sense, the district court must overturn that decision. See
Hess v. Hartford Life & Accident Ins. Co., 274 F.3d 456, 461
(7th Cir. 2001) (“In some cases, . . . simple common sense
will require the court to pronounce an administrator’s
determination arbitrary and capricious.”)
The facts regarding the changes to Dabertin’s job are
largely undisputed.3 They include: (1) reduction of her in-
dependent capital spending authority from $6 million to
zero; (2) elimination of her overhead budget development
and implementation responsibilities and authority for ad-
vertising, public relations, consulting, business meetings,
seminars and conventions; (3) elimination of her manage-
ment functions including hiring and firing authority for
seventy-three staff members; (4) elimination of independent
authority to manage her total budget; (5) elimination of
management functions and responsibilities in three areas;
(6) discontinuation of construction project authority,
functions and responsibilities in twenty sites in the Western
3
There appears to be a minor dispute as to whether Dabertin lost
responsibility for cluster markets or MedBridge accounts in the
Western Division. See Combined Reply/Responsive Brief of
Defendants-Appellants/Cross-Appellees at 11. The defendants do
not, of course, dispute that Dabertin lost all of her functions and
responsibilities in the Central Division. Nor do they dispute that
she lost some functions in the Western Division. Id. at 12.
10 Nos. 03-1918, 03-2034, 03-2461
Division; (7) elimination of a host of decision-making
authority and other responsibilities for building projects
and new markets; (8) elimination of operational, adminis-
trative and strategic authority, position, title, functions,
duties or responsibilities for the Central Division; (9)
reduction of her overall budget authority, her budgeted
revenue, and her budgeted operating profit; (10) reduction
by half of the number of skilled nursing units and the
number of beds under her authority; and (11) a halving of
the number of direct reports. Dabertin II, 235 F. Supp. 2d
at 859-61. It is also undisputed that HCR added new tasks
to Dabertin’s plate with the addition of her new duties as a
general manager.4 Id. at 860.
The question we face is whether these job alterations
amounted to a “reduction in the scope of a Participant’s au-
thority, position, title, functions, duties or responsibilities”
so as to trigger payment of benefits under the Plan. The
Committee determined that the scope of Dabertin’s employ-
ment had not changed as she had the same list of duties
before and after the merger; she just had fewer facilities in
which to perform them. (Sep. App. at 363). It also concluded
that the additional tasks of “general manager” added to the
scope of her duties. Id. Under the Committee’s interpreta-
tion of the term “scope”, if Dabertin had certain duties,
responsibilities, and functions for 100 facilities before the
merger, and had the same duties, responsibilities and
functions for fifty facilities after the merger, she would not
suffer a significant reduction in the scope of her duties,
4
Dabertin argues that there was no record evidence before the
Committee regarding the addition of these duties and that the
defendants cannot, in their appeal, use the Committee’s own de-
cision as a substitute for record evidence. The district court
deemed it unnecessary to reach Dabertin’s argument on this mat-
ter, (Id. at 868, n. 17) and we agree.
Nos. 03-1918, 03-2034, 03-2461 11
responsibilities or functions. The district court reasonably
concluded that this definition of “scope” defied common
sense and was not in accord with the ordinary and popular
meaning of the term, and therefore was arbitrary and
capricious. Id. at 865-66. In some cases, “simple common
sense will require the court to pronounce an administrator’s
determination arbitrary and capricious.” Hess, 274 F.3d at
461. This is just such a case.
The Committee’s interpretation of a decrease in the scope
of duties defies common sense. If HCR had added to each
vice president’s duties a new set of duties—emptying
bedpans, delivering meals, and mopping floors—under
HCR’s interpretation of the Plan, these new duties would
not have decreased the “scope” of the vice president’s role at
all. In fact, the scope of the vice president’s duties would
have increased. After all, they have not lost their title (they
are still vice presidents, they have just added to that title
the additional title of “janitor”). Likewise, they have not lost
any of their prior duties; they simply have added a few new
tasks. Common sense dictates otherwise. When the defen-
dants took the Central Division away from Dabertin, they
eliminated her authority for the Central Division, and the
additional general manager tasks in no way compensated
Dabertin for the loss of authority. Although the tasks
assigned to a general manager are not as low in the corpo-
rate pecking order as those of a janitor, they are lower
nevertheless. It is not Dabertin’s loss of prestige alone,
however, that bolsters our conclusion that HCR signifi-
cantly reduced Dabertin’s job. There is plenty of other
evidence that she suffered a significant reduction in her
authority, functions, duties and responsibilities. So much
evidence, in fact, that any decision by the Committee
otherwise would be arbitrary and capricious.
The defendants, of course, must concede that by eliminat-
ing her responsibilities for the Central Division, Dabertin
12 Nos. 03-1918, 03-2034, 03-2461
lost responsibility for beds, staff, facilities, and projects.
They also concede that Dabertin did lose some duties,
responsibilities, authority, position and functions in the
Western Division as well. Combined Reply/ Responsive
Brief of Defendants-Appellants/Cross-Appellees at 12. They
dismisses these as insignificant based on the fact that
Dabertin did not mention the loss in her initial application
for benefits, but raised it for the first time on appeal to the
Committee, and then “buried” the claim on the last pages of
her twenty-three page position paper submitted to the
Committee. We think it unfair to impose a judgment
regarding the significance of a loss based on the page
number on which the claim appears. Likewise, the defen-
dants put too fine a point on the fact that Dabertin did not
mention a particular loss in her initial application for
severance benefits. She had no reason to know that her
application for benefits would be so hotly contested and that
she might need to load it with every piece of available
evidence of job diminution from the get-go. In any case,
her twenty-three page position paper submitted to the
Committee and her brief before the district court set forth
in great detail all of the many ways in which she believed
HCR had significantly reduced the scope of her authority,
position, title, functions, duties or responsibilities, including
the loss of beds, staff, budget dollars, and construction
oversight, to name a few. As the district court concluded:
a lay person could reasonably conclude that the phrase
“scope of a Participant’s authority, position, title, func-
tions, duties or responsibilities” when applied to a
Vice-President of Operations for the Central/Western
Division would mean the common measures of that
Vice-President’s authority, functions, duties and re-
sponsibilities over and involving beds, facilities, em-
ployees, budgets, and projects managed or supervised.
In the ordinary and popular sense then the number of
beds, facilities, projects and direct reports would define
Nos. 03-1918, 03-2034, 03-2461 13
the scope or extent of such an employee’s authority, po-
sition, functions, duties or responsibilities. HCR Manor
Care, however, adopted a definition of the term “scope”
that was beyond the ken of “a person of average intel-
ligence and experience.”
Dabertin II, 235 F. Supp. 2d at 865 (internal citations
omitted).
The defendants refer us to Collins v. Ralston Purina Co.,
147 F.3d 592, 596 (7th Cir. 1998) as evidence of this court’s
recognition of the possibility that an employee whose ter-
ritory is reduced but who gains additional tasks does not
necessarily suffer a substantial reduction in duties or au-
thorities. In the first instance, the defendants contort the
language and reasoning of Collins. The majority in Collins
did not conclude that Collins’ responsibilities and duties
were not significantly reduced, but rather the opinion con-
cluded that Collins’ employer never actually re-assigned
Collins’ duties, nor did it even make an offer to do so. Id. at
600. Collins thought he saw the writing on the wall and
quit before he could be re-assigned. In fact, the majority
stated, “[w]ithout more we will assume the . . position
offered to Collins would have meant a lesser job and fewer
responsibilities.” Id. In any case, the determination of what
constitutes a substantial reduction in duties and responsi-
bilities obviously varies greatly based on the specific facts
of the particular case and the tasks allotted before and after
a job re-assignment. After considering all of the evidence
that the Committee had before it, including the functions,
duties, and responsibilities Dabertin lost, as well as those
she gained, we conclude, that under a common sense view
of the changes in Dabertin’s job assignments, the Commit-
tee arbitrarily and capriciously denied her benefits. There
simply is no rational connection between the facts (the
amount of authority, beds, budget, etc. that Dabertin lost)
and the Committee’s conclusion that HCR did not reduce
the scope of her job. See Cozzie, 140 F.3d at 1109 (“The
14 Nos. 03-1918, 03-2034, 03-2461
committee must articulate a rational connection between
the facts found, the issue to be decided, and the choice
made.”)
This lack of rational connection is certainly enough to
allow us to conclude that the Committee’s decision was ar-
bitrary and capricious. In addition, we agree with the dis-
trict court that the Committee imposed new requirements
on Plan participants that were not part of the plain lan-
guage of the Plan. Dabertin II, 235 F. Supp. 2d at 866. An
ERISA benefit cannot be a moving target where the plan
administrator continues to add conditions precedent to the
award of benefits. See Swaback v. Am. Info. Tech. Corp.,
103 F.3d 535, 542 (7th Cir. 1996) (it is arbitrary and
capricious to impose requirements that are not part of the
plain language of the benefit plan); Cozzie, 140 F.3d at 1108
(an insurance company is bound by the terms of the benefit
and although it may interpret the language of the plan, it
may not modify it). The district court noted three additional
qualifications that the Committee added that did not exist
in the plain language of the Plan:
(1) that “if a Participant continues to have a full range
of operational, financial, administrative and other
authority, functions, duties and responsibilities with
respect to the business unit the Participant manages,
the scope of the Participant’s authority, functions and
responsibilities would not be affected;”
(2) “that absent a significant adverse effect on the
Participant’s status in the organization (e.g., reporting
relationships, participation in major decisions, etc.) or
a significant reduction in the scope of the Participant’s
authority, duties, functions or responsibilities with re-
spect to the business unit for which the Participant has
responsibility, a significant reduction under Section
1.8(i) has not occurred;” and
Nos. 03-1918, 03-2034, 03-2461 15
(3) the purpose of Article 1.8(i) is only to preclude
changes that make a Participant’s continued employ-
ment “degrading or humiliating.”
Id. at 866, n. 12. The district court reasoned that this lan-
guage imposed requirements beyond those articulated in
the Plan as the Plan does not reference the size of the bus-
iness unit, there is no Plan language requiring a “signifi-
cant adverse effect,” or requiring such an effect on a Partici-
pant’s status in the organization, reporting relationships or
participation in major decisions, and the Plan says nothing
about whether the changes to the Participants’s job must be
“degrading or humiliating.”5 Id. at 867. The district court
identified these limitations as modifications to the original
Plan and not merely interpretations of it, and concluded
that the addition of the extraneous conditions was arbitrary
and capricious. Id. We agree with the district court’s
conclusions.
The defendants argue that, in coming to this conclusion
the district court conducted a de novo review. We must not,
however, misconstrue the district court’s careful consider-
ation of the facts and proceedings of the Committee as de
novo review. Unlike the district courts in the out-of-circuit
cases cited by the defendants, the district court here did not
re-weigh evidence (see Vlass v. Raytheon Employees Disabil-
ity Trust, 244 F.3d 27, 32 (1st Cir. 2001)), did not substitute
its own weighing of the conflicting evidence for that of the
Committee (see Bolling v. Eli Lilly & Co., 990 F.2d 1028,
1029 (8th Cir. 1993)), nor did it simply reject the Commit-
tee’s reasonable decision merely because it disagreed with
the conclusion (see Fletcher Merrit v. Nor-Am Energy Corp.,
5
The district court noted that the term, “adverse effects” imposed
by the Committee is not merely the equivalent of the Plan lan-
guage that requires a “significant reduction” in job authority,
position, title, functions, duties or responsibilities. Id.
16 Nos. 03-1918, 03-2034, 03-2461
250 F.3d 1174, 1180 (8th Cir. 2001)). What the district court
did do was to consider the undisputed facts regarding the
diminution of Dabertin’s territory and responsibilities and
her added general managerial duties and assess the plain
language of the Plan to determine whether there was any
reasonable basis for the Committee’s conclusion that
Dabertin had not experienced a significant reduction in the
scope of her authority, position, title, functions, duties or
responsibilities. And although the district court recognized
the vast amount of deference due to the Committee, it found
that the Committee’s decision lacked any rational connec-
tion between the plain meaning of the language of the Plan
that permits benefits to those who have suffered “a signifi-
cant reduction in the scope of a Participant’s authority,
position, title, functions, duties or responsibilities” and the
Committee’s decision to deny Dabertin benefits.
Furthermore, because it must have been clear to the dis-
trict court that “it would be unreasonable for the plan ad-
ministrator to deny the application on any ground,” Hess,
274 F.3d at 464, the district court did not err by refusing to
remand the case to the Committee for further reconsidera-
tion. Id. See also Miller v. United Welfare Fund, 72 F.3d
1066, 1071 (2d Cir. 1995) (no remand necessary where “no
new evidence could produce a reasonable conclusion per-
mitting a denial of the claim.”) The defendants state that it
is “quite likely that the Committee could consider addi-
tional evidence that would produce a reasonable conclusion
permitting denial of Ms. Dabertin’s claim,” (Appellants’
Brief at 24), yet they fail to inform the court what that
evidence might be or why the Committee did not consider
it in the first place. It would be a terribly unfair and in-
efficient use of judicial resources to continue remanding a
case to the Committee to dig up new evidence until it found
just the right support for its decision to deny an employee
her benefits. See Vega v. Nat’l Life Ins. Servs., Inc., 188 F.3d
287, 302 n. 13 (5th Cir. 1999) (en banc) (parties must make
their full records before coming to the federal courts as
Nos. 03-1918, 03-2034, 03-2461 17
“allowing the case to oscillate between the courts and the
administrative process prolongs a relatively small matter
that, in the interest of both parties, should be quickly
decided.”) The district court appropriately concluded that a
remand would serve no purpose. It did however, schedule
further proceedings to determine the proper amount of
damages.
On March 25, 2003, the district court determined the
amount of Dabertin’s severance bonus benefit and on March
27, 2003, it entered an order calculating the full amount of
Dabertin’s severance benefits and prejudgment interest,
awarding Dabertin $785,150 in benefits and $245,775 in
prejudgment interest. Dabertin disputes the calculation the
district court made in its March 25, 2003 order calculating
the bonus benefit. Under the terms of Article IV(B) of the
Plan, employees who were entitled to severance benefits
under the Plan were also entitled to their bonus under the
following provision:
The Company shall pay to the Participant as a bonus
for the year in which his Termination Date falls an
amount equal to a portion (determined as provided in
the next sentence) of the maximum bonus that the
Participant could have received under the Company’s
annual bonus program for the fiscal year in which his
termination Date falls. Such portion shall be deter-
mined by dividing the number of days of the Partici-
pant’s employment during such calendar year up to his
Termination Date by 365 (366 if a leap year). Such
payment shall be made in a lump sum within 30 days
after such Termination Date, and the Participant shall
have no right to any further bonuses under said pro-
gram.
(Sep. App. at 164) (emphasis supplied). When it came time
to calculate the bonus owed to Dabertin, the parties noticed
a quirk in the language of the Plan. Although HCR operated
on a fiscal year calendar and employees had been given
18 Nos. 03-1918, 03-2034, 03-2461
their bonuses at the end of the previous fiscal year, the Plan
makes reference to a calendar year in determining the
amount of the benefit. Dabertin argues that the Committee
should have applied the plain language of the Plan and
calculated her bonus based on the number of days she
worked in the calendar year 1998. HCR, on the other hand,
concluded that the Plan language was inherently ambigu-
ous and should be interpreted in a manner that made
logical sense—that was to use the fiscal calendar year that
had been used for all previous bonus calculations and
payments. The practical ramification is that under
Dabertin’s method, she would receive a prorated bonus
based on approximately eleven months of work (January 1,
1998 through November 20, 1998). Under HCR’s method,
she would receive a prorated bonus based on approximately
six months of work (June 1, 1998 through November 20,
1998).
The district court agreed with HCR that the Plan lan-
guage “such calendar year” was ambiguous. As the district
court noted, because the word “such” in this context means
“aforementioned” (See Black’s Law Dictionary, 1432 (6th
Ed. 1990) (“Identical with, being the same as what has been
mentioned . . . referring to the last antecedent”)), that
phrase must refer to a prior discussion of a calendar year.
There is no prior mention of a calendar year in Article IV(B)
however. The district court concluded that the inconsistency
could be resolved by interpreting “calendar year” to mean
“fiscal year.” The district court bolstered its conclusion that
this was the right result by looking at how HCR intended to
compensate its employees. “It doesn’t make sense,” the
district court reasoned, “to employ the calendar year in the
severance bonus benefit calculation, in view of the clear
intent of the clause to allocate and fairly compensate a
severed participant for the portion of the fiscal year that the
participant worked.” (R. at 111). Because HCR had paid
bonuses to employees for the fiscal year ending May 31,
Nos. 03-1918, 03-2034, 03-2461 19
1998, calculating the bonus based on a calendar year would
mean that Dabertin and other participants who ended their
employment with HCR in 1998 would receive two bonuses
for the period between January 1, 1998 and May 31, 1998.
On the flip side, participants who ended their employment
with HCR during 1999 would not receive any bonus for the
work they did between June 1, 1998 and December 31,
1998. Using this linguistic and logical approach, the district
court determined that the Committee properly calculated
Dabertin’s bonus. Id.
Again, we must give great deference to the Committee’s
interpretation of its plan, including its interpretation of the
ambiguous language in the Plan. Firestone Tire, 489 U.S. at
115. In that vein, we cannot merely apply federal common
law principles of contract interpretation, but rather must
view the contractual ambiguity through a lens that gives
broad discretion to the plan administrator to interpret the
plan. See Ross v. Ind. St. Teacher’s Assoc. Ins. Trust, 159
F.3d 1001, 1011 (7th Cir. 1998). Under this standard, we
find that the Committee was not arbitrary and capricious in
interpreting the Plan language to determine that Dabertin’s
bonus should be calculated based on the number of days she
had worked in the fiscal year beginning June 1, 1998.
This conclusion, unfortunately, does not resolve the bonus
issue entirely, as there remains a mathematical mystery
that plagues the defendants’ calculations. Even if we
assume that the Committee was correct in determining that
the bonus should be calculated based on the number of days
that Dabertin worked in the fiscal year beginning June 1,
1998, HCR’s final calculation of the bonus amount is
mathematically incorrect. Under HCR’s interpretation,
Dabertin’s bonus must be calculated as follows: The number
of days worked in fiscal year 1998, divided by 365, multi-
plied by the maximum bonus amount. Both parties agree
that Dabertin worked from June 1, 1998 through November
20 Nos. 03-1918, 03-2034, 03-2461
20, 1998, and both parties agree that the maximum amount
of Dabertin’s bonus for fiscal year 1998 was $122,330.6 By
this court’s calculation, Dabertin worked 173 days in the
fiscal year beginning June 1, 1998. Plugging these numbers
into the equation, the calculation appears as follows:
173/365*122,330 = $57,981.07. The defendants, however,
calculated a total bonus amount of $58,477. We have
previously held that we need not remand to the Plan
administrator when all that remains to be accomplished is
a mechanical calculation of the amount of benefits due.
Reich v. Ladish Co, Inc., 306 F.3d 519, 525 (7th Cir. 2002).
We therefore remand to the district court for the purpose of
untangling the mathematical error and resolving this
discrepancy of $495.93 in line with this court’s discussion
above.
Because we affirm the district court’s decision that
Dabertin was entitled to severance benefits pursuant to the
Article 1.8(i) “Good Reason” claim under the Plan, we need
not address Dabertin’s other claims regarding the breach of
fiduciary duty and the use of heightened scrutiny and turn
instead to the district court’s award of attorneys’ fees and
costs.
We review the district court’s award of attorneys’ fees and
costs only for an abuse of discretion. Hess, 274 F.3d at 464.
HCR does not dispute that Dabertin would be entitled to
fees if she prevailed, they argue only that Dabertin is not
entitled to fees if she is not a prevailing party. Because we
affirm the district court’s conclusion that Dabertin pre-
vailed in her claim for benefits under the Plan, we also
affirm the district court’s award of attorneys’ fees and costs
pursuant to the terms of that Plan.
6
(R. at 107, p.3; 108, p.7; 109 at pp.4-5).
Nos. 03-1918, 03-2034, 03-2461 21
III.
In sum, because the district court did not err in finding
that the Committee was arbitrary and capricious in denying
benefits to Dabertin, we affirm the court’s judgment on all
matters save for the calculation of Dabertin’s benefit under
Article IV(B) of the Plan. We vacate the district court’s
judgments of March 25 and March 27, and remand for
recalculation of the bonus benefit amount in accord with
this opinion. Appellee shall recover her cost of appeal.
AFFIRMED IN PART, VACATED AND REMANDED IN PART.
A true Copy:
Teste:
________________________________
Clerk of the United States Court of
Appeals for the Seventh Circuit
USCA-02-C-0072—6-24-04