Howley v. Mellon Financial Corp.

PRECEDENTIAL

UNITED STATES COURT OF APPEALS FOR THE
THIRD CIRCUIT
_____________

No. 08-1748
_____________

ROBERT M. HOWLEY,

Appellee,

v.

MELLON FINANCIAL CORPORATION; PLAN
ADMINISTRATORS OF THE MELLON FINANCIAL
CORPORATION DISPLACEMENT PROGRAM; MELLON
BANK 401K RETIREMENT SAVINGS PLAN; MELLON
FINANCIAL CORPORATION FLEXIBLE BENEFIT
PROGRAM; BENEFIT PLANS 1-10; JOHN DOES 1-10;
CORPORATIONS 1-10; AND MELLON FINANCIAL
CORPORATION DISPLACEMENT PROGRAM AND ITS
PLAN ADMINISTRATOR,

Appellants.

On Appeal from the United States District Court
for the District of New Jersey
No. 06-cv-5992
District Judge: Judge Faith H. Hochberg
 Submitted Pursuant to Third Circuit LAR 34.1(a)
September 29, 2009

Before: McKEE, Chief Judge, and CHAGARES and
NYGAARD, Circuit Judges.

(Opinion filed: August 31, 2010)

OPINION

Sherri A. Affrunti, Esq.
Reed, Smith
Princeton, NJ 08540

(James C. Martin, Esq.
(Daniel E. Wille, Esq.
Reed, Smith
Pittsburgh, PA 15219

Judith E. Posner, Esq.
Reed, Smith
Los Angeles, CA 90071

Attorney for Appellant

(Kevin Barber, I, Esq.
(Peter J. Heck, Esq.
(Matthew J. Vance, Esq.
Niedweske, Barber
98 Washington Street
Morristown, NY 07962

2
 Attorney for Appellee

McKEE, Chief Judge.

Defendants Mellon Financial Corporation (“MFC”) and

various MFC-related entities appeal the district court’s order

granting Howley summary judgment on his claim for benefits

under MFC’s Displacement Program. For the reasons that

follow, we will affirm.

I.

Howley was employed for many years by a subsidiary of

MFC known as “Buck Consultants.” He was therefore eligible

for, and participated in, MFC’s Displacement Program. That

program is a welfare benefit plan subject to the requirements and

protections of the Employee Retirement Income Security Act of

1974 (“ERISA”), 29 U.S.C. §§ 1001-461.

The Displacement Program provides benefits to an

3
employee of MFC or its subsidiaries whose “employment ceases

due to technological change or another business reason not

related to individual performance.” J.A. 66. These benefits

include severance pay, and perhaps more importantly, continued

eligibility to participate in and receive benefits under other MFC

benefit plans, including pension plans.

The Displacement Program states that it is “intended to

help displaced employees ‘bridge the gap’ between periods of

employment or retirement income.” J.A. 73. An employee is

therefore ineligible for Displacement Benefits if her/his

employment with an MFC subsidiary is terminated due to MFC’s

sale of that subsidiary to a company that provides comparable

employment. This so-called “sale of business” exception applies

when:

the employee’s employment with [an MFC
subsidiary] is affected by [MFC’s] sale of a
business . . . to another employer where the terms

4
 of the sale, contract or transfer provide for
employment of the employee by another employer
and [MFC] determines (such determination being
made in [MFC’s] sole discretion) that the position
to be provided to the affected employee:

-- Does not involve a significant change in
responsibilities from those assigned to the
employee immediately prior to the sale or transfer;

– Unless otherwise provided in the terms of the sale, contract or
transfer, is at a location within a thirty (30) mile radius of the
employee’s location immediately prior to the sale or transfer; or1

– Initially provides base salary and incentive compensation
opportunities which, in the aggregate, are reasonably similar to
those provided by the Participating [MFC] Company immediately
prior to the sale or transfer.

J.A. 67.

Effective 11:59:59 p.m. on May 25, 2005, MFC sold Buck

to Affiliated Computer Systems, Inc. (“ACS”). The contract of

sale provided that ACS would continue the employment of

1
Despite the use of the term “or” here, it is
uncontested that these requirements are conjunctive rather
than disjunctive.

5
approximately 3,700 Buck employees, including Howley, and

that this employment would “initially:”

(i) not involve a significant change in
responsibilities from those assigned to the
particular US Transferred Employee immediately
prior to the transfer of such employment, (ii) offer
employment at a location within a 30 mile radius
from the principal work location of such US
Transferred Employee immediately prior to the
transfer of such employment, and (iii) provide base
salary and incentive compensation opportunities
which, in the aggregate, are reasonably similar to
those provided to such US Transferred Employee
immediately prior to the transfer.

J.A. 723. The next morning, May 26, 2005, at approximately

10:00 a.m., ACS informed Howley and ninety-nine other former

Buck employees that it was terminating their employment

effective June 2, 2005. J.A. 219.

Howley filed a claim for benefits under MFC’s

Displacement Program, but his claim was denied by the Program

Manager who concluded that the aforementioned sale of business

6
exception applied. J.A. 141-55. She explained that the exception

did not take into account the details of the job actually provided,

but instead turned on the details of the job to be provided, as set

forth in the contract of sale. She stated:

the determination of whether the Sale of Business
Exception has been satisfied in a particular
instance must be made immediately prior to the
Closing; sometimes referred to as a “snap shot”
evaluation. That is, [the] Sale of Business
Exception is satisfied if, immediately prior to the
Closing, the Buyer has agreed to continue
employment on the terms specified by the
Exception.2

J.A. 153. Purportedly using this “snap shot” approach, the

Program Manager concluded that the sale of business exception

applied because Howley’s “job duties, pay and location were

2
The Program Manager also explained that the “snap shot”
approach was reasonable because MFC needs to know on the
closing date who is entitled to Displacement Benefits in order to
“take the liabilities into account as part of the overall cost of the
transaction, notify affected employees, remove the affected
employees from the sale and continue them on [MFC’s] payroll
and benefits.” J.A. 153-54.

7
unchanged immediately following the Closing.” J.A. 154.

Howley appealed the Program Manager’s decision to the

Program Administrator, who affirmed the initial denial.3 J.A. 36-

51. Like the Program Manager, the Program Administrator

stated that the details of the employment ACS actually provided

to Howley were “not relevant for purposes of Displacement

Program benefits.” J.A. 48. She explained that the Program

Manger had thus correctly applied the sale of business exception

on a “snap shot” basis, evaluating only “the Buyer’s

representations in the sale agreement,” and not taking into

consideration the realities of that employment thereafter. J.A. 50.

Because Howley’s position at ACS “was for the same

3
Under the terms of the plan, the Program Manager “is
responsible for day-to-day administration of the Program, including
. . . determining eligibility, amount and duration of all Program
benefits.” J.A. 66. An adverse decision by the Program Manager
can be appealed to the Program Administrator, whose decision is
final. J.A. 79.

8
responsibilities, was at the same base salary and incentive

compensation level and within thirty (30) miles of the same

location as his position at [MFC] immediately prior to the

Closing Date of the sale,” Id., the Program Administrator agreed

that the exception applied, and that Howley was ineligible for

Displacement Benefits.

Howley brought suit in federal court, asserting claims for

benefits and for unlawful discrimination under ERISA, as well

as several related state law claims. During discovery, it came to

light that certain Buck managers had helped plan his eventual

termination by ACS prior to the sale. These managers provided

ACS with the names of 100 employees, including Howley, whom

they believed could be terminated immediately after the closing

without causing harm to the business. Thus, these managers

knew, prior to the sale’s closing, that Howley would never be a

bona fide employee of ACS. See J.A. 614.

9
 Upon completing discovery, Howley moved for partial

summary judgment on his claim for benefits, and Defendants

cross-moved for summary judgment on all claims. The district

court granted Howley’s motion and denied Defendants’ motion.4

The court explained at the outset of its analysis that

because the plan language gave MFC discretion in interpreting

its terms and making benefit decisions, the court was required to

review its decision deferentially. However, the court also

recognized that because MFC both sponsored and administrated

the Displacement Program, it operated under a conflict of

4
Because the district court granted Howley summary
judgment on his claim for benefits, it dismissed all his other claims
as moot. It noted, however, in response to Defendants’ motion for
summary judgment on Howley’s discrimination claim, that it
would have found a genuine issue of material fact as to whether
MFC discriminated against Howley for the purpose of interfering
with his rights under MFC’s Displacement Program and Buck’s
Pension Plan. Defendants also challenge this portion of the district
court’s analysis on appeal. Because we agree with the district court
that Howley is entitled to summary judgment on his benefits claim,
we need not address the discrimination claim.

10
interest. Therefore, in accordance with then-controlling

precedent, Pinto v. Reliance Standard Life Insurance Co., 214

F.3d 377, 392 (3d Cir. 2000), the court applied a “heightened

arbitrary and capricious standard of review.” J.A. 11.

In addressing the merits of Howley’s claim for benefits,

the court relied heavily on the evidence, revealed during

discovery, that Buck had helped plan Howley’s termination prior

to the sale’s closing. The district court accordingly reasoned that,

even under the “snap shot” approach used by the Program

Administrator, Howley had not received a bona fide offer of

employment. Because “pre-planned immediate termination is not

a job offer that satisfies the requirements of the [sale of business

exception],” J.A. 14, the court held that MFC had abused its

discretion in denying Howley’s claim. This appeal followed.

II.

The district court had jurisdiction pursuant to 29 U.S.C. §

11
1132(e) and 28 U.S.C. § 1331. We have jurisdiction pursuant to

28 U.S.C. § 1291. We exercise plenary review over the district

court’s grant of summary judgment, applying the same standard

that the court should have applied. Smathers v. Multi-Tool,

Inc./Multi-Plastics, Inc. Emp. Health & Welfare Plan, 298 F.3d

191, 194 (3d Cir. 2002). Summary judgment is appropriate if,

viewing the facts in the light most favorable to the non-moving

party, there is no genuine issue of material fact and the moving

party is entitled to judgment as a matter of law. See Fed. R. Civ.

P. 56(c)(2); Celotex Corp. v. Catrett, 477 U.S. 317 (1986).

Under 29 U.S.C. § 1132(a)(1)(B), a participant in an

ERISA benefit plan denied benefits by the plan’s administrator

may sue in federal court “to recover benefits due to him under the

terms of his plan.” “[A] denial of benefits challenged under §

1132(a)(1)(B) is to be reviewed under a de novo standard unless

the benefit plan gives the administrator . . . discretionary

12
authority to determine eligibility for benefits or to construe the

terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489

U.S. 101, 115 (1989). When the administrator has discretionary

authority, we review only for abuse of that discretion. “Of

course, if a benefit plan gives discretion to an administrator . . .

who is operating under a conflict of interest, that conflict must be

weighed as a ‘facto[r] in determining whether there is an abuse

of discretion.’” Id. (quoting Restatement (Second) of Trusts §

187, Comment d (1959)).

An administrator’s decision constitutes an abuse of

discretion only if it is “without reason, unsupported by

substantial evidence or erroneous as a matter of law.” Abnathya

v. Hoffman-La Roche, Inc., 2 F.3d 40, 45 (3d Cir. 1993).

III.

Defendants challenge the district court’s decision on two

primary grounds. First, they argue that the district court erred by

13
applying a heightened standard of review. Based on the Supreme

Court’s recent decision in Metropolitan Life Insurance Co. v.

Glenn, 128 S. Ct. 2343 (2008), they contend that an

administrator’s conflict of interest does not result in heightened

scrutiny of a decision to deny benefits. Rather, it is just one

“factor” to be considered in evaluating whether that decision

constituted an abuse of discretion. Second, Defendants argue

that when reviewing an administrator’s decision for abuse of

discretion, a court may only consider the evidence that was

before the administrator when it made the contested decision.

Accordingly, they insist that the district court erred by

considering the extra-record evidence that Buck managers helped

plan Howley’s termination prior to the sale to ACS. Although

we agree that the district court “erred” 5 in both regards, it is

5
The district court cannot fairly be said to have “erred” in
applying a heightened standard of review. As we noted, when the

14
nonetheless clear, for reasons we set forth below, that MFC

abused its discretion in denying Howley’s claim for benefits.

A.

Defendants’ first argument is plainly correct. As we

recently discussed in Estate of Schwing v. Lilly Health Plan, prior

to the Supreme Court’s decision in Glenn, we had held that

Firestone required courts to adopt a “sliding scale” standard of

review, “in which the level of deference we accorded to a plan

administrator would change depending on the conflict or

conflicts of interest affecting plan administration.” 562 F.3d 522,

525 (3d Cir. 2009). However, following Glenn, we

acknowledged:

our “sliding scale” approach is no longer valid.

district court granted Howley’s motion for summary judgment, our
decision in Pinto was controlling precedent. Under Pinto, the
district court was required to elevate its standard of review because
of MFC’s conflict of interest.

15
 Instead, courts reviewing the decisions of ERISA
plan administrators . . . in civil enforcement
actions brought pursuant to 29 U.S.C. §
1132(a)(1)(B) should apply a deferential abuse of
discretion standard of review across the board and
consider any conflict of interest as one of several
factors in considering whether the administrator .
. . abused its discretion.

Id. (emphasis added). Therefore, as Defendants argue, MFC’s

conflict of interest does not alter the standard of review for

evaluating its decision to deny Howley benefits. Rather, that

conflict is merely one factor to be considered in evaluating

whether MFC’s decision actually constituted an abuse of

discretion.

B.

Defendants next argue that the district court erred by

considering evidence outside of the administrative record. It is

true that courts generally must base their review of an

administrator’s decision on the materials that were before the

16
administrator when it made the challenged decision. Materials

that the parties failed to put before the administrator are not

usually relevant to the inquiry of whether the administrator

abused its discretion. Thus, under most circumstances, “the

record for arbitrary-and-capricious review of ERISA benefits

denial is the record made before the plan administrator, and

cannot be supplemented during litigation.” 6 Kosiba v. Merck &

Co., 384 F.3d 58, 67 n.5 (3d Cir. 2004).

However, this rule is not without exceptions. A court may

certainly “consider evidence of potential biases and conflicts of

interest that is not found in the administrator’s record.” Id.; see

also Burke v. Pitney Bowes Inc. Long-Term Disability Plan, 544

6
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 discretion.” See
Estate of Schwing, 562 F.3d at 526 n.2. We use these
characterizations interchangeably in this opinion.

17
F.3d 1016, 1028 (9th Cir. 2008) (“[T]he district court may

consider evidence outside the administrative record to decide the

nature, extent, and effect on the decision-making process of any

conflict of interest.”) (internal quotation marks omitted). The

necessity for this exception is obvious. A plan participant may

be unaware of information relating to an administrator’s conflict

until well after the administrative process has ended, and a

conflicted administrator, especially one whose decision-making

has been affected by that conflict, is not at all likely to volunteer

that information. To allow an administrator the benefit of a

conflict merely because it managed to successfully keep that

conflict hidden during the administrative process would be

absurd.

Although we adopted this exception prior to the Supreme

Court’s decision in Glenn, it remains equally appropriate after

Glenn. Glenn directs a court to consider a conflict of interest as

18
a factor in its analysis, and to afford that factor greater

importance, perhaps determinative importance, where the

evidence suggests a greater likelihood that it affected the decision

to deny benefits. 128 S.Ct. at 2351. For this legal standard to be

meaningful, courts plainly must be willing to consider evidence

relating to “the nature, extent, and effect on the decision-making

process of any conflict of interest” revealed during the litigation

process. Burke, 544 F.3d at 1028.

Here, the extra-record evidence considered by the district

court was certainly relevant to assessing the extent of MFC’s

conflict of interest, and by inference, the effect of that conflict on

its decision-making process. This evidence shows that while

MFC was negotiating ACS’s continued employment of Buck

employees under terms that seemingly mirrored the requirements

of the sale of business exception, its subsidiary was helping ACS

plan the immediate termination of 100 of those employees. This

19
arrangement would have financially benefitted MFC in two ways.

First, it allowed MFC to avoid paying Displacement Program

benefits to 100 Buck employees by making it appear that their

employment would continue uninterrupted at ACS. Second, it

made the acquisition of Buck more appealing to ACS, because

ACS knew that it could immediately slash costs by eliminating

100 of the employees it had agreed to employ. The existence of

such a scheme – seemingly perfectly orchestrated to ensure that

MFC would not have to pay, directly or indirectly, the cost of

certain promised benefits – is surely evidence that a reasonable

fact-finder could deem relevant to whether MFC’s conflict of

interest affected its decision to deny Howley’s claim.

Nonetheless, the district court afforded more weight to

this evidence than is appropriate when deciding a motion for

summary judgment. See Nolan v. Heald Coll., 551 F.3d 1148,

1155 (9th Cir. 2009) (holding that a court considering evidence

20
outside of the administrative record because of its relevance to a

conflict of interest must still construe that evidence in favor of

the non-moving party for the purposes of summary judgment).

It is uncontested that Buck’s managers colluded with ACS to

plan Howley’s termination in advance of the sale. However, it is

not clear from the record why they did so, or at whose behest.

Moreover, MFC has denied any knowledge of, or involvement in,

its subsidiary’s actions. Accordingly, there is a genuine issue of

material fact regarding MFC’s role in this duplicity. The district

court erred in resolving this dispute in Howley’s favor at this

stage in the proceedings.7

Under these circumstances, we would normally remand so

that the district court could evaluate Howley’s claim in the first

7
Howley does not argue that MFC is responsible for the
actions of Buck’s managers as a matter of law. He only claims that
MFC was, in fact, the motivating force behind those actions.

21
instance using these correct legal standards. However,

notwithstanding the district court’s errors, we think it clear on

this record that the denial of Howley’s claim for benefits

constituted an abuse of discretion. See Fairview Twp. v. EPA,

773 F.2d 517, 525 n.15 (3d Cir. 1985) (“It is well settled that we

[can] affirm the district court on any basis which finds support in

the record.”) (internal quotation marks omitted). Accordingly,

remand would only waste judicial resources and delay a decision

on the merits.

C.

In determining whether an administrator’s interpretation

of a plan is reasonable, we consider the following factors:

(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

22
 consistently; and (5) whether the interpretation is
contrary to the clear language of the Plan.

Moench v. Robertson, 62 F.3d 553, 566 (3d Cir. 1995).

Construing all facts in Defendants favor, and thus affording

negligible weight to MFC’s conflict of interest, we conclude that

its decision still fails by a majority of these measures, and was an

abuse of its discretion.

As we have discussed, MFC’s Displacement Program is

designed to help “displaced employees ‘bridge the gap’ between

periods of employment or retirement income.” J.A. 73. When

MFC sells a subsidiary, but ensures that the subsidiary’s

employees will be provided comparable employment by the

buyer, there is no gap to bridge. Consequently, the Program does

not pay those employees benefits. Consistent with this

underlying purpose, the sale of business exception has two

primary requirements: (1) the contract of sale must “provide for

23
employment of the employee by another employer,” and (2) MFC

must determine that the position “to be provided to the affected

employee” is comparable to the position the employee held

before the sale, and in particular, that it “[i]nitially provides base

salary and incentive compensation opportunities which, in the

aggregate, are reasonably similar to” those that were provided by

the MFC subsidiary. J.A. 67.

For our purposes here, the crux of this language is the

word “initially,” as used to define when employment is sufficient

to satisfy the sale of business exception. “Initially” is a less than

precise word, but, at minimum, it connotes some temporal

requirement. Therefore, consistent with this language,

employment satisfies the sale of business exception only if it

continues for some amount of time. Furthermore, that amount of

time must be reasonable in light of the stated purpose of the

Displacement Program. See Keating v. Whitmore Mfg. Co., 186

24
F.3d 418, 422 (3d Cir. 1999) (an administrator’s decision should

not “controvert the . . . purpose of the Plan.”). Again, the sale of

business exception exists because employees provided

comparable employment by a buyer have no gap in employment

that they need to bridge. This is plainly not true, however, when

the employment provided is de minimis.

Defendants spend the majority of their energy on appeal

defending their use of the “snap shot” approach, through which

they were able to ignore the fact that the employment provided

to Howley by ACS was de minimis.8 However, it is not that

8
Defendants argue that the plan language requires this
prospective approach. As we have explained, the sale of business
exception applies when the terms of the contract of sale “provide
for employment of the employee by another employer,” and MFC
determines that the “position to be provided” offers initially
comparable employment. J.A. 67. We agree that the “snap shot”
approach in and of itself is reasonable given this language.
We note, however, that neither the Program Manager nor
the Program Administrator stated in making their decisions that
they used the “snap shot” approach because it was required by the
plan language. Instead, they defended that choice as reasonable

25
approach in and of itself, but rather the Administrator’s

unreasonable wielding of it, with which we are concerned.

The Program Administrator explained that she evaluated

the applicability of the sale of business exception based solely on

“the Buyer’s representations in the sale agreement.” J.A. 50.

She concluded that those representations satisfied the exception

because, consistent with the exception’s requirements, ACS

agreed to “initially” provide comparable employment to Howley

and the other Buck employees. However, the contract of sale

included no definition of the term “initially,” and imposed no

other temporal requirement that ACS’s employment of these

persons need satisfy. Although ACS made other firm

because MFC needed to know its liabilities with finality prior to a
sale’s closing. The making of benefit decisions by an ERISA
administrator based on what is best for the sponsor of the plan is a
flagrant violation of that administrator’s fiduciary duty to make
such decisions “solely in the interest of the [plan’s] participants
and beneficiaries.” Varity Corp. v. Howe, 516 U.S. 489, 506
(1996) (quoting ERISA § 404(a)).

26
commitments in the contract of sale, promising to take certain

actions for specified periods of times, it did not do so with regard

to continuing the employment of Howley and the other

transferred employees.9

The Administrator concluded that ACS’s entirely

9
Notably, one of these commitments was ACS’s agreement
that it would provide severance pay equivalent to that which the
employee would have received under the Displacement Program
(which includes base salary but excludes incentive compensation,
J.A. 69) to any transferred employee whom it failed to employ for
three months following the sale. J.A. 725. However, ACS did not
commit to continue providing any such employees with the other
benefits that the Displacement Program deems equally important
for providing a bridge between jobs. As we have noted, one such
benefit is the ability to continue participation in pension plans. It is
uncontested that Howley was eleven months from qualifying for
early retirement under Buck’s Pension Plan when he was
transferred, and that had he been found eligible for Displacement
Benefits, he would have been able to retire under that plan. J.A. 2.
Although these facts raise troubling inferences, we do not
consider them for purposes of summary judgment review. Rather,
we note only the uncontested facts that in the contract of sale, MFC
failed to require ACS to commit to provide employment to
transferred employees for a reasonable length (or any length) of
time, or in the alternative, to provide all Displacement Program
benefits to those employees in MFC’s stead.

27
undefined commitment was sufficient to make applicable the sale

of business exception. In so doing, she nullified the exception’s

temporal requirement, and thereby rendered the term “initially,”

as used in the plan language, meaningless. Under the

administrator’s approach, so long as a contract of sale includes

a promise, no matter how illusory, to continue an employee’s

employment, that employee is ineligible for Displacement

Program benefits. The buyer is thus free to terminate that

employee one week, one day, or one hour (or even one minute)

after completion of the sale. Crediting such empty promises is

entirely unreasonable in light of the purpose of the Displacement

Program. It leads directly to situations such as the one that arose

here, permitting MFC to wash its hands of an employee on the

date of sale, and the buyer to do so just a few days later.10

10
Defendants emphasize that the contract of sale uses the
word “initially” just as the Displacement Program does. This

28
 Use of a “snap shot” approach does not relieve the

Administrator of her duty to ascertain whether the temporal

requirement of the sale of business exception is satisfied. Thus,

the Administrator’s review of the “buyer’s representations” in the

contract of sale must be more than a rubber stamp of hollow

words, and must take into account the reality of what the buyer

has actually committed to do. For a buyer’s representations to

satisfy the sale of business exception, the buyer must commit to

continue the employment of transferred employees for some

period of time that is reasonable in light of the plan’s purpose (or,

in the alternative, to provide all Displacement Program benefits

“copying and pasting” of plan language is insufficient. As we have
explained, the contract of sale left that term undefined, and any
reasonable interpretation of the Program must include a mechanism
for giving that provision meaning. A retrospective evaluation of
whether a buyer had “initially” provided comparable employment
would certainly suffice. However, since Defendants insist that they
cannot use a retrospective approach, the word must derive some
meaning in the contract of sale itself, such as to not negate the
provision and make its commitment illusory, as happened here.

29
in MFC’s stead, if employment is not provided for a reasonable

length of time).

Notably, the Administrator did at certain times appear to

treat the sale of business exception as containing a temporal

requirement. However, she concluded that this requirement was

satisfied because ACS actually did provide Howley comparable

employment “immediately after” the sale of Buck to ACS. J.A.

48; see also J.A. 154 (The Program Manager concluded that

because Howley’s “job duties, pay and location were unchanged

immediately following the Closing, the conditions of the Sale of

Business Exception were satisfied.” (emphasis added)). This is,

of course, inconsistent with the Administrator’s emphatic

insistence that she could only look to the buyer’s representations

in the contract of sale.

Additionally, though, this interpretation of what satisfies

the temporal requirement is as unreasonable as her interpretation

30
nullifying that requirement. Given the purpose of the Program,

“initially” must mean more than “immediately after” or

“immediately following.” Comparable employment

“immediately following” displacement tells the Administrator

nothing about whether that employee needs the “bridge” the

Displacement Program is supposed to provide. If an employee

is ineligible for benefits simply because s/he is momentarily

employed after a sale, the Displacement Program offers

employees a bridge to nowhere. This is flatly inconsistent with

the stated purpose of the plan.

Defendants insist that since they voluntarily offer these

benefits, they are free to structure the terms and requirements for

receiving them as they see fit, and we agree. It is clear (and

uncontested) that MFC had no obligation to offer these benefits.

However, the keystone of ERISA’s protections is that when

employers choose to offer benefits (and reap the rewards of doing

31
so), they must administer those benefits in a manner that is

reasonable. Administering benefits in a way that controverts a

plan’s stated purpose, renders plan language meaningless, and

creates benefits that can exist only on paper, is unreasonable. In

these circumstances, ERISA requires that we provide a remedy.

IV.

Because we agree that MFC abused its discretion in

denying Howley’s claim for benefits under its Displacement

Program, we will affirm the district court’s order granting

Howley summary judgment on his claim pursuant to 29 U.S.C.

§ 1132(a)(1)(B).

32