MacLachlan v. ExxonMobil Corp.

United States Court of Appeals Fifth Circuit F I L E D November 20, 2003 In the Charles R. Fulbruge III Clerk United States Court of Appeals for the Fifth Circuit _______________ m 02-31249 _______________ JOHN MACLACHLAN; JAMES BROWN; STEPHEN K. MANLEY; ALAINA SPURLOCK; BERND STAHR; MICHAEL ZAINOTZ, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, Plaintiffs-Appellants, VERSUS EXXONMOBIL CORPORATION (SUCCESSOR BY MERGER TO MOBIL CORPORATION), AS TRUSTEE ADMINISTRATOR AND FIDUCIARY OF RETIREMENT, SAVINGS, SEVERANCE, SEPARATION, INSURANCE, AND OTHER MISCELLANEOUS EMPLOYEE BENEFIT/WELFARE PLANS OF MOBIL CORPORATION; THOMAS C. HARRISON, AS ASSISTANT ADMINISTRATOR BENEFITS OF EXXONMOBIL CORPORATION, RETIREMENT, SAVINGS, SEVERANCE, SEPARATION, INSURANCE, AND OTHER MISCELLANEOUS BENEFIT PLANS OF EXXONMOBIL CORPORATION; RETIREMENT PLAN, ALSO KNOWN AS MOBIL RETIREMENT PLAN; COMPREHENSIVE MEDICAL PLAN, ALSO KNOWN AS MOBIL MEDICAL PLAN; DENTAL ASSISTANCE PROVISIONS, ALSO KNOWN AS MOBIL DENTAL PLAN; DEPENDENT GROUP LIFE INSURANCE PLAN, ALSO KNOWN AS MOBIL GROUP LIFE INSURANCE PLAN; DISABILITY INCOME PLAN; EMPLOYEE STOCK OWNERSHIP PLAN, ALSO KNOWN AS MOBIL STOCK PLAN; EMPLOYEE SAVINGS PLAN, ALSO KNOWN AS MOBIL SAVINGS PLAN; LIFE INSURANCE PLAN, ALSO KNOWN AS MOBIL LIFE INSURANCE PLAN; PRE-SOCIAL SECURITY PLAN, ALSO KNOWN AS MOBIL PRE-SOCIAL SECURITY PLAN; TERMINATION ALLOWANCE PLAN; EMPLOYEE SEVERANCE PLAN, ALSO KNOWN AS MOBIL SEVERANCE PLAN; EMPLOYEE SEPARATION BENEFIT PLAN, ALSO KNOWN AS SEPARATION BENEFIT PLAN, Defendants-Appellees. _________________________ Appeal from the United States District Court for the Eastern District of Louisiana _________________________ Before JOLLY, SMITH, and EMILIO M. GARZA, district court granted summary judgment for Circuit Judges. Mobil. Finding no error, we affirm. JERRY E. SMITH, Circuit Judge: I. Like many companies, Mobil seeks to at- The six named plaintiffs, all workers who tract and reward capable employees by offer- formerly performed services for Mobil Corpo- ing a variety of health, vacation, and other ration while on the payroll of third-party com- benefits. These benefits are expensive, how- panies, filed this class action complaint seeking ever, and in an effort to reduce costs, Mobil retroactive employment benefits from Exxon- began, in the early 1980’s, to hire some of its Mobil Corporation and other defendants employees through third-party payroll compa- (hereinafter collectively “Mobil”), after the nies. merger of Mobil Corporation and Exxon Corporation, pursuant to the Employee Retire- Employees hired in that fashion performed ment Income Security Act of 1974 (“ERISA”), services similar or identical to those of other as amended, 29 U.S.C. § 1001 et seq. The Mobil employees while on Mobil’s premises 2 and under its supervision. They often worked on the payroll of Lee Services from 1988 to side-by-side with other Mobil employees, and 1994; then while on the payroll of Excalibur the services they provided were not highly from 1994 to 1999. Bernd Stahr was a com- specialized or individualized. They were not, puter operator for Mobil in New Orleans from however, on Mobil’s payroll. This appeal pre- 1986 to 1996, spending the duration of that sents the question whether such employ- period on the payroll of Software & Scanning ees—specifically, the six named plaintiffs and Service. Michael Zainotz was hired to be a the putative class on behalf of which they are computer systems administrator for Mobil’s suing—are eligible to collect benefits under the New Orleans office and worked in that capac- governing Mobil benefit plans. ity while on the payroll of Computerized Pro- cess from 1986 through 1999. Plaintiff John MacLachlan provided ser- vices for Mobil but was not on its payroll. The putative class also is comprised of for- Rather, during the eleven years he worked as mer Mobil workers who were on the payroll of an electronics technician for Mobil, he was di- third parties. As defined by the plaintiffs, the rectly employed and paid by two other com- class consists of “all persons, past, present and panies: Consolidated Technical Services, Inc. future, employed in or at Defendant Mobil’s (“CTS”), between 1987 and 1989; and Un- facilities in the United States who perform(ed) iversal Technical Services, Inc. (“UTS”), from personal services for Mobil and who are not, 1989 to 1999. MacLachlan’s contract with or were not, classified as regular employees of CTS specified that he was to report for work Mobil, but instead are or were classified as at the job site of Mobil Oil Exploration & independent contractors or employees of third- Producing Southeast, Inc. His involvement party agencies for . . . one year.” with Mobil ended when he was terminated by UTS without cause on February 4, 1999. He Under the relevant Mobil plans, eligibility is was eligible for employment benefits offered restricted to “regular employees,” but there are by CTS and UTS. two definitions of that term in the record. First, as used in the retirement plan that was in Similarly, the other named plaintiffs per- effect at the time MacLachlan began working formed services for Mobil while under the di- for Mobil, a “regular employee” is “an individ- rect employ of a third party. James Brown ual . . . who is employed by an employer spent a decade as a mechanic for Mobil Avia- corporation for work . . . for a regular period tion in Morgan City, Louisiana, but was paid of at least 1,000 hours of employment per by three different firms: Lee Services from calendar year.” An “employer corporation,” as 1989 to 1990; Jet Professionals from 1990 to used in the plan, is “Mobil Corporation and 1992; and Excalibur from 1992 to 1999. Ste- each subsidiary participating in the Plan.” The phen Manley worked as a dispatcher and flight definitions in this plan make no mention of controller for Mobil Aviation from 1983 to payroll status as a defining criteria, nor of an 1999, during which time he was paid by Jet exclusion of non-payroll employees from the Professionals, from 1983 to 1986; Lee Ser- plan.1 vices, from 1986 to 1994; and Excalibur, from 1994 to 1999. Alaina Spurlock was a clerical support staffer for Mobil Aviation, first while 1 Although plaintiffs base their claims for ben- (continued...) 3 The second definition comes from a 1994 made the request on the ground that he was a amendment to the retirement plan that specifi- “common law employee” of Mobil, a term that cally excludes employees of third parties and he argued should be read to fit within the independent contractors. That plan provides: plan’s definition of “regular employee.” “An individual who performs services for an Employer under an agreement . . . pursuant to Exxon and Mobil merged in December which such individual is treated as an inde- 1999, some ten months after MacLachlan lost pendent contractor . . . shall not be a Regular his job with UTS and nine months after he Employee irrespective of whether he is treated contacted Mobil about his eligibility for bene- as an employee of an Employer under Com- fits. It was not until after the merger that mon-law employment principles . . . .” Thomas Harrison, an assistant plan administra- tor with the delegated authority to decide All the relevant plans also include language claims, first took action on MacLachlan’s vesting the administrator with the discretion to petition. interpret the plans and to determine whether claimants are eligible for benefits. Under the Before the merger, Harrison was an Exxon retirement plan, a designated plan administra- employee and had not previously reviewed a tor is vested with the “discretion and final au- claim for benefits under the Mobil plans. To thority to determine eligibility . . . and to reach make his decision, he reviewed the terms of a final determination.” Similarly, for the sev- the Mobil plans described above as well as erance plan, the administrator “may interpret MacLachlan’s employment history with Mobil the plan . . . and make all other determinations and CTS/UTS. Harrison also discussed the necessary.” And, under the savings plan, “the history of the plan’s administration with Doug administrative fiduciary shall have all power Davies, an ExxonMobil attorney who worked and discretion necessary . . . to carry out their in Mobil’s benefits division before the merger. duties.” II. Davies informed Harrison that there was no In March 1999, following his termination record of Mobil’s paying benefits to similarly by Mobil, MacLachlan sent a letter to Mobil’s situated third-party contractors. Davies also employee benefits administrators formally re- stated his belief that MacLachlan was the first questing retroactive employment benefits.2 He contractor to file a claim seeking benefits. Harrison’s investigation revealed that Mobil historically had mailed information about ben- (...continued) efits only to payroll employees. On the basis efits on several different plans, all the claims arise of this record, Harrison concluded that con- under plans that limit participation to “regular tractors such as MacLachlan are outside the employees.” plan’s definition of “regular employees” and 2 MacLachlan’s co-plaintiffs did not first pur- thus are ineligible for benefits. sue their claims through Mobil’s administrative process. The district court excused this failure on 2 the ground that it would have been futile for them (...continued) to do so. As a consequence, however, the admin- istrative record refers only to actions taken with (continued...) respect to MacLachlan’s claims. 4 In March 2000, Harrison sent a letter to been unable to receive benefits under that plan, MacLachlan’s attorney, formally denying ben- even if he had been a Mobil employee at the efits. Harrison explained that Mobil was deny- time of his termination. ing MacLachlan’s claims because MacLachlan had been employed by CTS/UTS and had not MacLachlan and his co-plaintiffs then sued been on the Mobil payroll. Moreover, as Har- for retroactive employment benefits under rison stated, even if MacLachlan had been a ERISA § 502 (a)(1)(B); claims for breach of common-law employee for tax purposes, “Mo- fiduciary duty under ERISA §§ 102, 202, 402 bil has consistently limited benefits to persons and 404; a claim for discrimination under in a formal employment relationship with a ERISA § 510; and Louisiana state law claims. participating employer-corporation.”3 The plaintiffs maintained, as had MacLachlan in the administrative proceedings, that they are Harrison also made specific findings with common-law employees, eligible for benefits respect to the different Mobil plans. Mac- under the Mobil plans.4 The district court Lachlan was ineligible for the Retirement and dismissed the state claims, the breach of fi- Savings Plan, Harrison found, not only be- duciary duty claims, and the discrimination cause MacLachlan was not on the payroll, but claim, and plaintiffs did not appeal. The case also because the terms of the plan exclude any proceeded on the § 502(a)(1)(B) claim for person “retained by an employer-corporation benefits until the district court granted Mobil’s under written contract on a consulting basis” motion for summary judgment. or “employed by an employer corporation un- der a written contract where the terms of such III. written contract exclude participation in the We review a summary judgment de novo, Plan.” Harrison concluded that a provision in applying the same standards as did the district MacLachlan’s contract with CTS was intended court. Performance Autoplex II Ltd. v. to have this effect, because it stated that Mid-Continent Cas. Co., 322 F.3d 847, 853 MacLachlan was “solely” an employee of (5th Cir. 2003). Summary judgment should be CTS. granted only if there is no genuine issue of material fact and the moving party is entitled Harrison also declared that MacLachlan to judgment as a matter of law. Id.; FED. R. was not entitled to participate in the Severance CIV. P. 56(c). In determining whether there is Plan, because that plan applied only to em- a genuine issue of material fact, we review the ployees terminated on, or within two years af- evidence and the inferences to be drawn there- ter, the date on which a change in control of from in the light most favorable to the Mobil occurs. Here, the merger between Exx- non-moving party. Daniels v. City of Ar- on and Mobil did not occur until after Mac- lington, Tex., 246 F.3d 500, 502 (5th Cir. Lachlan had been terminated. Accordingly, 2001). Harrison concluded, MacLachlan would have Plaintiffs argue that the district court 3 At MacLachlan’s request, Harrison’s decision 4 constituted both the original decision and appeal of Mobil concedes, for purposes of summary MacLachlan’s claims, and it exhausted Mac- judgment only, that plaintiffs are common law Lachlan’s administrative recourse. employees. 5 applied the incorrect standard of review. This The degree to which a court must abrogate is a question of law that we review de novo. its deference to the administrator depends on Chevron Chem. Co. v. Oil, Chem. & Atomic the extent to which the challenging party has Workers Local Union 4-447, 47 F.3d 139, 142 succeeded in substantiating its claim that there (5th Cir. 1995). is a conflict. “The greater the evidence of con- flict on the part of the administrator, the less ERISA authorizes the district court to re- deferential our abuse of discretion standard view a denial of a claim for benefits, see 29 will be.” Id. Where, however, only “a U.S.C. § 1132(a)(1)(B), but the statute minimal basis for a conflict is established, we provides no guidance on the appropriate review the decision with ‘only a modicum less standard of review for the courts. Vega v. deference than we otherwise would.’” Lain v. Nat’l Life Ins. Serv. Co., 188 F.3d 287, 295 UNUM Life Ins. Co. of Am., 279 F.3d 337, (5th Cir. 1999) (en banc). Where a plan 343 (5th Cir. 2002) (quoting Vega, 188 F.3d administrator has been vested with the at 301). discretionary authority to interpret a benefit plan, a district court reviews the Plaintiffs concede that the administrator has administrator’s interpretations only for abuse the discretion and final authority to determine of discretion.5 “[O]ur review of the eligibility for benefits and that the abuse of administrator's decision need not be discretion standard applies.7 Plaintiffs none- particularly complex or technical; it need only theless maintain that because of an apparent assure that the administrator’s decision fall conflict of interest, the district court did not somewhere on a continuum of sufficiently apply “closer judicial scrutiny” to reasonableness—even if on the low end.” the administrator’s decision, thus failing to Vega, 188 F.3d at 297. apply the sliding scale standard correctly. Where, however, an administrator’s This assertion does not merit reversal. decision is tainted by a conflict of interest, the Even if, arguendo, there were a conflict of court employs a “sliding scale” to evaluating interest,8 the district court recognized it and whether there was an abuse of discretion. Id. This approach does not mark a change in the applicable standard, but only requires the court 6 (...continued) to reduce the amount of deference it provides (5th Cir. 2000) (“Under this ‘sliding scale’ stand- to an administrator’s decision.6 ard, the court applies the abuse of discretion stand- ard, giving less deference to the administrator in proportion to the administrator’s apparent 5 Firestone Tire & Rubber Co v. Bruch, 489 conflict.”). U.S. 101, 115 (1989). See also Vega, 188 F.3d at 7 295 (stating that “when an administrator has dis- In the district court, plaintiffs urged de novo cretionary authority with respect to the decision at review as a result of the conflict of interest. The issue, the standard of review should be one of court correctly rejected this standard in favor of the abuse of discretion.”). abuse of discretion standard. 6 8 Vega, 188 F.3d at 299; see also Bratton v. The district court assumed there is a conflict Nat’l Union Fire Ins. Co., 215 F.3d 516, 521 n.4 of interest because Mobil interprets and adminis- (continued...) (continued...) 6 applied the appropriate standard of review. was an abuse of discretion. Plaintiffs’ claim is contradicted by two statements the district court made in its Second, the court addressed a more specific summary judgment order. First, it announced allegation of a conflict of interest and the above rule from Vega and acknowledged concluded that it did not require any lessening that an apparent conflict may exist because of the deference owed to the administrator: “ExxonMobil administers its own plan” (citing Vega, 188 F.3d at 296-97). The court then MacLachlan argues that there is a conflict correctly stated that this is a factor to be of interest because the plan administrator considered in its assessment of whether there relied on the advice of Davies, Exxon Mo- bil’s benefits counsel, in reaching his conclusion. However, he has not presented 8 (...continued) evidence to show that the pl an ters its own plan, leaving open the possibility that administrator was in fact influenced by such it would limit claims to reduce its liability. The conflict . . . . Davies stated that he court need not have made this assumption. The certainly advised the plan administrator, but mere fact that benefit claims are decided by a paid the decision and interpretation was that of human resources administrator who works for the the plan administrator. defendant corporation does not, without more, suf- fice to create an inherent conflict of interest. Were (Internal citations omitted.) that enough, there would be a near-presumption of a conflict of interest in every case in which an Plaintiffs argue that the district court erred employer both offers a plan and pays someone to in requiring evidence that the conflict had an administer it, making a full application of the abuse effect before it would apply the sliding scale. of discretion standard the exception, not the rule. It is apparent from the court’s opinion, Vega did not profess to create such a presump- however, that it did abrogate its deference in tion, and we do not read it to have created one for consideration of the first claim of a conflict of cases of this sort. Rather, this court’s decisions, interest, and only refused to slide further down following Vega, that have found an apparent con- the scale on the basis of a second, flict of interest are ones in which a claim was unsubstantiated claim that the administrator denied by an insurance company that did not em- was conflicted. ploy the claimant, but instead was contractually obligated to make payments under the employer’s Unlike the inherent conflict that the court plan. See, e.g., Vega, 188 F.3d at 289; Gooden v. acknowledged might exist merely because Provident Life & Acc. Ins. Co., 250 F.3d 329, 333 Harrison is a paid employee of Exxon Mobil, (5th Cir. 2001); Lain, 279 F.3d at 343. there was no evidence that the administrator’s decision could have been improperly This is a significant distinction, because cor- porations that pay generous levels of benefits to influenced by Harrison’s decision to ask Dav- their workers do so for self-interested reasons: ies—a veteran Mobil employee who was fam- Such benefits are one part of the total package of iliar with the plans in question—for compensation that employers use to attract and re- information on historical interpretations of the tain capable workers. It is therefore less than pa- plan. It was not error to require proof on this tently obvious that employers would systematically point, because the court is required to lessen benefit from a denial of meritorious claims. 7 its deference only in proportion to the amount potentially relevant evidence.” That is not the of conflict demonstrated by the challenging case here, because the court openly stated that party.9 Accordingly, the district court it considered the evidence and found it to be correctly applied the sliding scale standard. lacking in probative value.10 Next, plaintiffs challenge the refusal to give Even if plaintiffs had challenged the district evidentiary weight to two internal legal court’s weighing of the evidence, we would memoranda. Plaintiffs contend that these not have found the decision to be clearly documents concede the eligibility of third party erroneous, because the documents do not contractors for benefits under the Mobil plan. support the reading plaintiffs give them. The Plaintiffs do not characterize this claim as a first memorandum, from F.K. Joiner of the Of- challenge to the district court’s factual fice of General Counsel, merely asserts one determinations, a claim we would review for lawyer’s “concern[] that if a Mobil clear error under FED R. CIV. P. 52(a). Rather, independent contractor were deemed an they couch the issue as a question of law: that employee for tax reasons, that the employee the district court failed to consider evidence, would then seek to obtain the other benefits of violating a standard of review announced in employment” (emphasis added). The second Wildbur v. ARCO Chem. Co., 974 F.2d 631, memorandum, from W.C. Whittemore of the 645 (5th Cir.), clarified, 979 F.2d 1013 (5th same office, similarly recognizes that Cir. 1992). independent contractors might one day seek to claim Mobil benefits, and suggests strategies This contention is squarely contradicted by to “reduce or eliminate your exposure.” These the record. In its order denying plaintiffs’ rule documents by no means concede that the 59(e) motion to amend, the district court appellants were eligible for benefits. stated: “Contrary to the plaintiffs’ contention, the court considered inter alia the memoranda Plaintiffs’ next challenge goes to the merits of the general counsel in reviewing the plan of the district court’s determination that the administrator’s decision, and determined that administrator did not abuse his discretion. In documents do not provide evidentiary support reviewing a plan for abuse of discretion, the for the plaintiffs’ arguments.” Wilbur does not district court first must determine whether the require the court to give credence to every administrator’s interpretation is legally correct; piece of evidence that comes before it. Rather, if it is not, the court must decide whether the in Wilbur, 974 F.2d at 645, we merely stated decision was an abuse of discretion. Abraham that we were “unable to perform our v. Exxon Corp., 85 F.3d 1126, 1131 (5th Cir. coordinate role of reviewing the decision of 1996); Pickrom v. Belger Cartage Serv., 57 the district court because we cannot tell whether the court properly evaluated all of the 10 Mobil contends that the memoranda are priv- ileged and should not have been considered by the 9 Vega, 188 F.3d at 297 (“The greater the evi- district court at all. That issue, however, was the dence of conflict on the part of the administrator, subject of an earlier ruling. Mobil failed to cross- the less deferential our abuse of discretion standard appeal that order, so we lack jurisdiction to con- will be.”); see also Lain, 279 F.3d at 343; Bratton, sider their challenge to it. Torres v. Oakland 215 F.3d at 521 n.4. Scavenger Co., 487 U.S. 312 (1988). 8 F.3d 468, 471 (5th Cir. 1995). consent of CTS/UTS . . . . For the first part of the inquiry, the courts It is entirely reasonable for an administrator to assess three factors to determine whether the conclude that a person who performs services interpretation is legally correct: (1) whether for Mobil under such terms is not a “regular” the administrator has given the plan a uniform employee of the Mobil corporation. construction; (2) whether the interpretation is consistent with a fair reading of the plan; and Although the district court did not refer to (3) any unanticipated costs resulting from dif- it, Harrison listed an additional basis for his ferent interpretations of the plan. Wildbur, conclusion that MacLachlan was not an 974 F.2d at 638. In some cases, however, the employee of Mobil. In denying MacLachlan’s court may skip this first part of the inquiry if it claims, Harrison pointed out that the contract can determine that the decision was not an between CTS and Mobil had a provision that abuse of discretion. Duhon v. Texaco, Inc., 15 “all persons engaged in the performance of F.3d 1302, 1307 n.3 (5th Cir. 1994). The dis- said work shall be solely the servants or trict court opted to follow that path, and employees of Contractor.” Plaintiffs contend determined that Harrison’s interpretation of this is irrelevant, because MacLachlan cannot the plan was not an abuse of discretion. be bound by a contract to which he was not a party. That conclusion is amply supported by the record. Harrison conducted a thorough To the contrary, the evidence is relevant, investigation of the plan and the history of its because it is probative of Mobil’s intent in hir- administration. He determined that the term ing third party contractors. The fact that Mo- “regular employee” was meant to refer to em- bil hired MacLachlan pursuant to a contract ployees on the payroll of Mobil or a that provided he was solely the employee of participating employer corporation, and that CTS is probative of the fact that he was not no one had been paid benefits under the plan hired as a “regular employee” of Mobil, and it without first being on the Mobil payroll. The supports the administrator’s interpretation. history of the plan’s administration therefore supports the finding that this interpretation To be sure, plaintiffs’ reading of the Mobil was not an abuse of discretion. plan is at least plausible in that before the 1994 amendment, the plan did not specifically ex- Harrison’s analysis also finds support in the clude common law employees. But the plan contract between MacLachlan and CTS. As does not explicitly include such employees, ei- the district court noted: ther. The remedy for such an ambiguity in a plan’s language is not the compelled inclusion MacLachlan entered a written contract with of all employees who arguably fit within its CTS/UTS by which he was included on scope, but rather, the exercise of interpretive CTS/UTS’s payroll, was eligible to discretion by a duly empowered administrator. participate in the company’s group benefits Harrison’s decision that third-party contractors plans after 30 days of service, and could are not included in the plan was not an abuse not accept a position with Mobil within 30 of that discretion. days of termination without the written 9 Not content to argue under existing law, AFFIRMED. plaintiffs, citing EEOC v. Sidley Austin Brown & Wood, 315 F.3d 696 (7th Cir. 2002), and Jenkins v. S. Farm Bureau Cas., 307 F.3d 741 (8th Cir. 2002), assert that “emerging judicial doctrine” supports their interpretation of the plan. The issue in Sidley was whether certain equity partners of a law firm were “employees” for purposes of the Age Discrimination in Employment Act of 1967 (“ADEA”). Sidley Austin Brown & Wood, 315 F.3d at 699. Jenkins, 307 F.3d at 741, similarly addresses whether an insurance man- ager was an employee for purposes of the ADEA. Whether these cases are the vanguard of an emerging judicial doctrine is a matter for the legal academy; they do not help us decide the appeal now before us: whether, on the facts of this case, the administrator abused his discretion. ERISA does not require Mobil to define its benefits plans in such a way as to provide coverage for all employees, irrespective of whether they are protected by the ADEA. To the contrary, it is well established that an employee may be a common law employee for some purposes, yet not entitled to benefits under a benefit plan. Abraham, 85 F.3d at 1130. IV. As an alternative theory, Mobil argued be- fore the district court , and again before this court, that plaintiffs’ claims are barred by the statute of limitations. If not, Mobil contends, they should be barred by the equitable doctrine of laches. We do not address the merits of these ar- guments, because they do not affect the result we reach today. 10