Liston v. Unum Corp. Officer Severance Plan

United States Court of Appeals
For the First Circuit

No. 02-1956

CATHERINE F. LISTON,

Plaintiff, Appellant,

v.

UNUM CORPORATION OFFICER SEVERANCE PLAN, ET AL.,

Defendants, Appellees.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MAINE

[Hon. George Z. Singal, U.S. District Judge]

Before

Boudin, Chief Judge,

Torruella and Lynch, Circuit Judges.

Lawrence C. Winger for appellant.
Byrne J. Decker with whom Pierce Atwood was on brief for
appellees.

May 27, 2003
 BOUDIN, Chief Judge. Appellant Catherine Liston is a

former officer of UnumProvident Corporation ("UP"), an insurance

company incorporated in Delaware. Prior to its June 1999 merger

with Provident Companies, Inc., the UNUM Corporation had adopted an

officer severance plan ("the plan") to provide benefits for

officers whose jobs were "eliminated" as a result of a "change in

control" of the company. The benefits could amount to as much as

36 weeks' salary, and an officer could obtain them if any of the

plan's triggering conditions were satisfied, importantly: a

"significant adverse reduction or alteration in the nature and

status (other than title) of the officer's position, duties or

responsibilities . . . within 365 days of the change in control."

After the merger, Liston, who was one of several vice-

presidents at UP,1 found that her obligations had increased and

that her authority had diminished. She claimed that she had to

work an additional 20 hours per week and travel three times more

often. In addition, she said that she had less authority to make

strategic and administrative decisions (e.g., salary decisions for

subordinates). Liston viewed these changes as a "significant

adverse reduction or alteration in the nature and status" of her

employment under the plan's change-in-control provision. In March

1
Her title changed from Vice-President of Long Term Disability
Benefits to Vice-President, Portland Customer Care as a result of
the merger, but a number of the job functions performed by Liston
remained the same.

-2-
2000, she resigned from her position at UP and requested benefits

pursuant to the change-in-control clause.

In April 2000, a plan official rejected her request

stating that her claims, even if true, did "not constitute a

significant adverse alteration in the nature and status of your

position." On further review, two different plan committees

reached the same result. At the final stage, Liston identified

five other officers whom she said had received benefits after their

jobs were altered; she had made less specific allegations to this

effect at earlier points. But the review committee at this last

stage said that the benefits given to the other five employees were

irrelevant to Liston because those employees were not similarly

situated to her.

In March 2001, Liston filed a complaint against the plan,

the administrator, and UP in the federal district court in Maine to

obtain benefits under ERISA's civil enforcement provision, 29

U.S.C. § 1132(a)(1)(B) ("A civil action may be brought . . . by a

participant or beneficiary . . . to recover benefits due to him

under the terms of his plan, [or] to enforce his rights under the

terms of the plan . . ."). Liston claimed that the defendants had

acted arbitrarily and capriciously in denying her benefits even

though they had awarded them to others, and she sought discovery of

documents pertaining to fourteen persons who had received benefits

(including the five earlier identified). Liston also challenged as

-3-
arbitrary and capricious the administrator's rules construing the

plan's change-in-control provision.

The magistrate judge denied this discovery request,

finding that "a review of the merits of this particular denial . .

. is not dependent upon what happened to other officers' claims."

The judge noted the "hopelessness of [the] task" of comparing the

claims given that the court would "be called upon to make fourteen

or more separate determinations about an 'adverse reduction or

alteration' in job duties." The judge did allow discovery "[t]o

the extent the decisionmakers considered claims by other officers

who [made claims under the change-in-control provisions] when

considering plaintiff's claims."

The discovery order was affirmed by the district court

and Liston then deposed the plan administrator as to the

information considered by the final review committee in rejecting

Liston's claim. That deposition revealed that the claims of the

other five officers cited by Liston were briefly mentioned at the

meeting (Liston having identified them), but that there was no

extended discussion of the relative merits of their claims nor any

reference to materials relating to their benefits determinations.

On July 17, 2002, the court granted summary judgment for

the defendants, Liston v. Unum Corp. Officer Severance Plan, 211 F.

Supp. 2d 222 (D. Me. 2002), finding that the plan administrator had

not acted arbitrarily or capriciously in interpreting and applying

-4-
the plan. Liston has now appealed to this court challenging the

rejection of her discovery requests, the administrator's

interpretive rules, and the denial of benefits to her. Because the

plan reserves discretion to the administrator, judicial review of

the denial is limited to determining whether the administrator

acted arbitrarily and capriciously. Leahy v. Raytheon Co., 315

F.3d 11, 15 (1st Cir. 2002). Cf. Doe v. Travelers Ins. Co., 167

F.3d 53, 56-57 (1st Cir. 1999).

We begin with Liston's substantive attacks on the denial

of benefits and then turn to her discovery request. On July 6,

1999, shortly after the merger of the UNUM Corporation and

Provident Companies, Inc., the plan administrator adopted a set of

rules defining certain plan terms. Recall that the plan protected

the covered officers against a change of control that resulted in

job elimination and that "a significant adverse reduction or

alteration" in the job–-even without its actual elimination--was

one of the triggers for benefits. We reproduce both the pertinent

plan and rule language as an appendix to this opinion.

The rules specified, inter alia, that a "significant

adverse reduction or alteration" meant (1) the loss of a position

without an opportunity to work elsewhere at the merged entity, (2)

a demotion from a "director or manager of a major unit" to a

contributor to that unit, or (3) a "reduction of more than 10% of

the base salary received by the officer prior to the change in

-5-
control." Further a job was not deemed "eliminated" if the

employee was offered, within 50 miles of his original location, a

"comparable position," namely, one

within the same functional area, which
requires similar skills and abilities the
officer utilizes in his or her current
position and does not result in a reduction of
more than 10% of the base salary he or she was
receiving immediately prior to the change in
control . . . .

One might expect Liston to argue that clause (2) is too

narrow a reading of the plan's language in a case where there is a

substantial reduction in responsibility but no pay cut or complete

loss of supervisory authority. Instead, Liston first argues that

the rules are at odds with the plan because they deny benefits

unless the employee's job is curtailed and no comparable job is

available elsewhere in the company. She points out that the plan

language defines "job elimination" to include a "significant

adverse reduction or alteration in the nature and status (other

than title) of the officer's position, duties or responsibilities"

or "[t]he lack of any re-employment opportunity that would utilize

the officer's professional skills and abilities." Thus, she says

that the rules are an unlawful amendment of the plan rather than a

permissible interpretation.2

2
In general, the plan provides that it could be amended at any
time. However, for obvious reasons, it also forbad any amendment
of the change-of-control provisions within 12 months of a change of
control. The rules in question were issued within 12 months of the
merger.

-6-
 Liston's position, although perhaps a literal reading of

the plan, is absurd and therefore untenable. Rodriguez-Abreu v.

Chase Manhattan Bank, 986 F.2d 580, 586 (1st Cir. 1993). On her

interpretation, an employee whose job was kept completely intact

would get benefits because no comparable position was offered; and

one whose job was eliminated would get benefits even though an

essentially similar job was created for the employee. Even if

review of the administrator's interpretation were de novo--it is in

fact deferential, see Terry v. Bayer Corp., 145 F.3d 28, 40 (1st

Cir. 1998)--we would reject Liston's reading because it makes no

sense.

In the alternative, Liston argues that summary judgment

against her was mistaken because there were still material facts in

dispute. She says that such disputes exist with respect to whether

her old job at UP was eliminated, the manner and extent to which

her post-merger job differed from her pre-merger job, and whether

the employees who received benefits under the plan were similarly

situated to her. This challenge to summary judgment conceals a

preliminary issue, namely, whether evidence beyond the

administrative record can be considered at all.

The ordinary rule is that review for arbitrariness is on

the record made before the entity being reviewed. Leahy, 315 F.3d

at 17-18. True, we have declined in cases like this one to adopt

an ironclad rule against new evidence. Doe, 167 F.3d at 57-58.

-7-
For example, discovery may be needed because the decisional process

is too informal to provide a record. See generally Citizens to

Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 415-16 (1971).

And certain kinds of claims–-e.g., proof of corruption-–may in

their nature or timing take a reviewing court to materials outside

the administrative record. Cf. Perlman v. Swiss Bank Corp.

Comprehensive Disability Prot. Plan, 195 F.3d 975, 981-82 (7th Cir.

1999).

Still, at least some very good reason is needed to

overcome the strong presumption that the record on review is

limited to the record before the administrator. This is the view

of virtually all of the circuits with the possible exception of the

Fifth Circuit.3 It is almost inherent in the idea of reviewing

agency or other administrative action for reasonableness; how could

an administrator act unreasonably by ignoring information never

presented to it? See Mills v. Apfel, 244 F.3d 1, 4-5 (1st Cir.

3
See, e.g., Perlman, 195 F.3d at 981-82; Wilkins v. Baptist
Healthcare Sys., Inc., 150 F.3d 609, 616-20 (6th Cir. 1998);
DeFelice v. Am. Int'l Life Assurance Co., 112 F.3d 61, 65 (2d Cir.
1997); Taft v. Equitable Life Assurance Soc'y, 9 F.3d 1469, 1471-
72 (9th Cir. 1993); Donatelli v. Home Ins. Co., 992 F.2d 763, 765
(8th Cir. 1993); Quesinberry v. Life Ins. Co. of N. Am., 987 F.2d
1017, 1021-27 (4th Cir. 1993) (en banc); Sandoval v. Aetna Life &
Cas. Ins. Co., 967 F.2d 377, 380 (10th Cir. 1992); Luby v.
Teamsters Health, Welfare, and Pension Trust Funds, 944 F.2d 1176,
1184-85 (3d Cir. 1991). But see Wildbur v. ARCO Chem. Co., 974
F.2d 631, 636-42 (5th Cir. 1992). Liston cites two cases--Miller
v. United Welfare Fund, 72 F.3d 1066 (2d Cir. 1995), and Milone v.
Exclusive Healthcare, Inc., 244 F.3d 615 (8th Cir. 2001)--but both
are at odds with her position. See Miller, 72 F.3d at 1072;
Malone, 244 F.3d at 618.

-8-
2001), cert. denied, 122 S.Ct. 822 (2002); Taft, 9 F.3d at 1472

("Permitting a . . . court to examine [such evidence suggests] that

[an] administrator abused its discretion by failing to consider

evidence not before it.").

Even where de novo review exists under ERISA, it is at

least doubtful that courts should be in any hurry to consider

evidence or claims not presented to the plan administrator. See,

e.g., Quesinberry, 987 F.2d at 1025; Wilkins, 150 F.3d at 616

(Cole, J., concurring). Exhaustion of remedies principles point in

this direction even if no deference were due to the administrator's

determination, assuming always that the plan empowered the

administrator to make an initial decision. But this is an issue on

which the circuits have taken different views. Compare

Quesinberry, 987 F.2d at 1025 (only when "clearly . . . necessary"

for effective review) with Luby, 944 F.2d at 1184 (not providing

any qualifications on when additional evidence may be considered),

and we need not resolve the issue here.

Where as here review is under the arbitrariness standard,

the ordinary question is whether the administrator's action on the

record before him was unreasonable. Cook v. Liberty Life Assurance

Co. of Boston, 320 F.3d 11, 19 (1st Cir. 2003); Pari-Fasano v. ITT

Hartford Life & Accident Ins. Co., 230 F.3d 415, 419 (1st Cir.

2000). Liston did not seek a jury trial--and the precedents of

this and other circuits suggest that it would likely have been

-9-
unavailable4--so the issue here is simply whether the judge deems

the administrator's denial of benefits irrational. Assuming that

the decision is to be made by the judge based solely on the record

made at the administrative level, summary judgment is merely a

mechanism for tendering the issue and no special inferences are to

be drawn in favor of a plaintiff resisting in summary judgment; on

the contrary, the rationality standard tends to resolve doubts in

favor of the administrator.

Turning then to the merits, Liston's job was not

eliminated so the only serious question is whether it was so

diminished in its functions and authority as to trigger the

"significant adverse reduction" clause. If the administrator's

rules were read as making exclusive the three rubrics listed above,

then Liston's position would be hopeless: her job was altered

rather than eliminated; she still had supervisory authority and was

not reduced from a manager to a mere contributor to her unit; and

4
Although a few district courts have suggested that jury
trials are available for ERISA benefit claims under 29 U.S.C. §
1132(a)(1)(B), Rhodes v. Piggly Wiggly Ala. Distrib. Co., 741 F.
Supp. 1542, 1543-44 (N.D. Ala. 1990), the circuit courts to have
considered the question have concluded that juries are not
available for such claims. E.g., Sullivan v. LTV Aerospace & Def.
Co., 82 F.3d 1251, 1258 (2d. Cir. 1996); Borst v. Chevron Corp., 36
F.3d 1308, 1323-24 (5th Cir. 1994), cert. denied, 514 U.S. 1066
(1995); Cox v. Keystone Carbon Co., 894 F.2d 647, 649-50 (3d Cir.),
cert. denied, 498 U.S. 811 (1990). Our own circuit has expressly
reserved the question, Recupero v. New England Tel. & Tel. Co., 118
F.3d 820, 831 (1st Cir. 1997), although we have held where the case
is decided on the administrative record and no additional evidence
is considered, jury trials are not available. Id. at 831-32.

-10-
she does not claim that her salary decreased by more than ten

percent.

It is open to doubt whether the three rubrics should be

read as exclusive conditions or merely as safe harbors for

satisfying the adverse reduction clause. Seemingly, cases falling

within any one of the rubrics automatically trigger the clause;

but, it could well be argued, their listing does not preclude a

showing by Liston that in other respects her authority was so

severely curtailed as to trigger benefits. If Liston were left

with pay and title but confined to supervising one janitor, it

would be pretty hard to say that the clause was not triggered--even

allowing reasonable latitude to the administrator to construe the

plan.

However, there is no showing that the administrator has

adopted a rigid and mechanical reading of the plan. While noting

that none of the rubrics applied to Liston's situation, the

administrative decision in this case ruled more broadly that

Liston's new position was "comparable" and required "similar skills

and abilities" to her old one. And on the facts that Liston

presented to the administrator and to us there is nothing

unreasonable about the result reached by the administrator.

About the only specifics supplied by Liston are that her

job and travel schedule became more demanding but these are not

proof of diminished responsibility. Beyond these changes, Liston

-11-
argued that she was no longer "responsible for developing and

implementing growth and service strategies as well as piloting new

work processes." Statements at this level of abstraction do not

make the administrator's ultimate decision "arbitrary."

This finally brings us to, and readily explains Liston's

reliance upon, her remaining argument: that other officers

similarly situated got the benefits that Liston seeks and that she

was denied an opportunity for discovery to show that this was so.

Both the administrator and the court refused to allow discovery

into how others were treated. For practical purposes, the question

is whether the administrator or the court abused its discretion; in

this instance no further refinements of the respective standards of

review are necessary.5

Whether discovery was warranted depends in part on if and

in what respect it matters whether others were better treated than

Liston, and this is not a question that has a neat mechanical

answer. Liston's suit is for benefits that Liston says were

promised to her by the plan, not a discrimination case, so the

central issue must always be what the plan promised to Liston and

5
The administrator's obligation to avoid arbitrary and
capricious behavior extends to procedure as well as substance,
Perlman, 195 F.3d at 381; and limitations on discovery in court
proceedings are normally tested under an abuse of discretion
standard, though the phrasing is often very favorable to the trial
judge. Mack v. Great Atl. & Pac. Tea Co., 871 F.2d 179, 186 (1st
Cir. 1989) (review only for a "clear showing of manifest injustice"
such that the ruling was "plainly wrong and resulted in substantial
prejudice to the aggrieved party").

-12-
whether the plan delivered. Nevertheless, how others were treated

could–-in some cases–-be substantively relevant to the question

whether the administrator's construction and application of the

plan to Liston was reasonable. Mauser v. Raytheon Co. Pension

Plan, 239 F.3d 51, 56-57 (1st Cir. 2001).

Imagine, for example, that the plan was unclear as to

whether an officer who had served for less than three years could

qualify for coverage. Conceivably, proof that other officers who

had served only one year were regularly given benefits could

represent an administrative construction bearing on the meaning of

the plan and undermine the reasonableness of a contrary and

disparate reading in a given case. Mauser, 239 F.3d at 56-57. Of

course, the issue should be raised in the first instance during the

claims process, but here Liston did seek information about benefits

for comparably situated employees from the administrator and was

rebuffed.

Still, we think in this instance the rebuff was

reasonable both at the administrative and court level. Whether the

plan applies to those with less than three years' seniority is

ordinarily a question with a yes or no answer; and it is easy to

determine from records whether prior practice represents an

administrative construction. Liston's case is at the opposite

pole: we cannot imagine that there is anyone else in the company

whose position before, and treatment after, the merger corresponds

-13-
in every respect to Liston's. The plan's general standard is too

vague and the variables in executive jobs are too numerous to

expect that anyone else will be identically placed.

Thus, as the magistrate judge pointed out, comparison of

the files of others who received or were denied benefits invites an

open-ended and probably hopeless attempt to compare disparate

situations–-whether impressionistically or by drawing up formulas

purporting to explain the outcomes.6 The search through other

records would have to be exhaustive; it would be only the predicate

to further dispute about the significance of the information; and

probably it would not be conclusive. Every administrative denial

would be an occasion for a vast and expensive inquiry into what

judges sometimes call "collateral issues." See, e.g., United

States v. Andujar, 49 F.3d 16, 26 (1st Cir. 1995).

Mandating discovery in such a situation would be at odds

with the concerns about efficient administration that underlie the

ERISA statute itself. See, e.g, Taft, 9 F.3d at 1472. True,

Liston is handicapped by having to show that the outcome of

discovery would be helpful before she can get access to materials

that might show just this; but this is the standard situation in

6
Liston also argues that the district judge may have granted
summary judgment against her without realizing the relatively
limited amount of information she could discover under the
magistrate judge's order. We have reviewed the language in the
district court opinion identified by Liston and see no such
confusion, particularly because the district court had already
affirmed the magistrate judge's discovery ruling in a prior order.

-14-
discovery and the reason why those in charge are expected to

exercise judgment. Fennell v. First Step Designs, Ltd., 83 F.3d

526, 532 (1st Cir. 1996). In this instance, this judgment was

permissibly exercised.

Affirmed.

-15-
 Appendix

The following language is taken from the UNUM Corporation

Officer Severance Plan and Administrative Rule concerning the

change-in-control provision.

Plan

In the event of a change in control of UNUM Corporation,
officers whose jobs are eliminated within 365 days of the change in
control will be eligible for severance benefits so long as they
meet the eligibility requirements of the Severance Plan section on
Eligibility, and providing they are not eligible for severance
benefits under any separate agreement with UNUM Corporation or the
UNUM Employer regarding change in control. For the purposes of
this subsection only, job elimination shall include termination for
any of the following reasons:

• The significant adverse reduction or alteration in the
nature and status (other than title) of the officer's
position, duties or responsibilities immediately prior to
or within 365 days of the change in control.

• The lack of any re-employment opportunity that would
utilize the officer's professional skills and abilities.

• A requirement that the officer relocate to a place of
employment more than 50 miles from his/her location
immediately prior to the change of control.

• The involuntary termination of the officer for reasons
other than performance failure or for cause.

Administrative Rule

Whereas, the purpose of the Plan is to provide financial assistance
to officers whose employment is involuntarily terminated and,
conversely, it is not the purpose of the Plan to provide financial
assistance to officers who have comparable reemployment
opportunities that would utilize the officer's professional skills
and abilities; and

Whereas, the Plan Administrator has the authority to make rules and
regulations to administer the Plan;

-16-
Now, therefore, pursuant to the Plan provisions authorizing the
Plan Administrator to make rules and regulations to administer the
Plan, the Plan Administrator hereby establishes the following
rules, effective January 1, 1999.

. . .

Change in Control

For purposes of the Plan's Change in Control provision:

1. A "significant adverse reduction or alteration in the nature
and status (other than title) of the officer's duties or
responsibilities" means any one of the following:

• a loss of the officer's position where no opportunity
exists to work at either the purchaser . . ., the vendor
. . ., or the survivor of a merger . . . other than a
project assignment;

• a loss of the officer's position where the only
opportunity to work at either the purchaser . . ., the
vendor . . ., or the survivor of a merger . . . involves
a position with skills and abilities outside of the
skills and abilities the officer utilizes in his or her
current position;

• a change in the officer's position from a manager or
director of a major unit to an individual contributor in
that unit or another unit; or

• a reduction of more than 10% of the base salary the
officer was receiving immediately prior to the change in
control . . . .

2. An officer who declines a reemployment opportunity in a
comparable position which does not require the officer to relocate
to a place of employment more than 50 miles from his or her
location. . . shall not be considered involuntarily terminated by
reason of job elimination.

. . .

4. A "comparable position" means a position within the same
functional area which requires similar skills and abilities the
officer utilizes in his or her current position and does not result
in a reduction of more than 10% of the base salary he or she was
receiving immediately prior to the change in control . . . .

-17-