United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT March 2, 2005
Charles R. Fulbruge III
No. 04-60043 Clerk
EDWARD P. KESZENHEIMER, JR.,
Plaintiff - Appellee,
versus
RELIANCE STANDARD LIFE INSURANCE CO.;
WEATHERFORD INTERNATIONAL,
As Successor to Dailey International
also known as Dailey Petroleum Services, Inc.,
Defendants - Appellants.
Appeal from the United States District Court
for the Southern District of Mississippi
Before REAVLEY, HIGGINBOTHAM, and DEMOSS, Circuit Judges.
PER CURIAM:
In this case we must decide whether a plan administrator
properly interpreted an insurance policy to exclude from the
disability benefit calculation an employee’s offshore per diem and
automobile allowance. The district court held that the
administrator’s interpretation was in error. We reverse and render
judgment.
I
Edward P. Keszenheimer, Jr., filed a pro se complaint for
damages against Reliance Standard Life Insurance Company
(“Reliance”) and Weatherford International pursuant in part to the
Employee Retirement Income Security Act of 1974 (“ERISA”),1
alleging that he was covered by a long-term disability policy
provided by Reliance to employees of Dailey Petroleum Services
Corporation (“Dailey”), the predecessor to Weatherford.2 He
alleged that he had been unable to return to work since November
13, 1994, due to the onset of vestibular neuronitis, and had filed
for and received benefits under the policy. Keszenheimer contended
that Reliance had erroneously calculated his monthly benefits. He
also asserted claims of breach of contract, breach of fiduciary
duty, interference with protected rights, bad faith insurance, and
emotional distress.
The district court dismissed the claims of breach of contract,
bad faith, and emotional distress, finding them preempted by ERISA.
The court allowed Keszenheimer to proceed, however, on his claims
for recovery of unpaid plan benefits and for breach of fiduciary
duty, as such remedies were available under ERISA.
The defendants moved for summary judgment on the remaining
claims, arguing that Reliance correctly calculated Keszenheimer’s
benefits. The defendants contended that the policy definition of
“Covered Monthly Earnings,” upon which benefits are based, includes
only Keszenheimer’s base salary, not the additional payments,
1
29 U.S.C. § 1001, et seq.
2
See 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, to enforce his rights under the terms of the plan, or to clarify his
rights to future benefits under the terms of the plan.”).
2
labeled “bonuses” by the defendants, that Keszenheimer received for
offshore work. Keszenheimer opposed the motion, arguing that the
additional payments--his offshore per diem and automobile
allowance--were not “bonuses” but rather “commissions,” and thus
should have been included by Reliance in the monthly benefit
calculation. Although only the defendants had moved for summary
judgment, at the hearing on that motion, the parties agreed that
the district court would rule for or against either party based on
the record.
At the hearing, the district court identified the only issue
before it as whether the monthly benefit amount paid to
Keszenheimer was accurate. Resolution of this issue required the
district court to interpret the policy provision that defines
“Covered Monthly Earnings,” because the monthly long-term
disability benefit is calculated under the policy to an amount
equal to two thirds of Covered Monthly Earnings.
The policy defines Covered Monthly Earnings as “the Insured’s
monthly salary . . . on the day just before the date of Total
Disability.”3 The policy specifically excludes “overtime pay,
3
The full policy definition of “Covered Monthly Earnings” is as follows:
“Covered Monthly Earnings” means the Insured’s monthly
salary received from you on the day just before the date
of Total Disability. Covered Monthly Earnings do not
include overtime pay, bonuses or any other special
compensation not received as Covered Monthly Earnings.
However, “Covered Monthly Earnings” will include
commissions received from you averaged over the lesser
of:
(1) the number of months worked; or
(2) the 24 months;
3
bonuses or any other special compensation” from the definition of
Covered Monthly Earnings, but specifically includes “commissions.”
The policy does not define “monthly salary,” “bonuses,” “special
compensation,” or “commissions.”
While disagreeing over which components of Keszenheimer’s
income should be included in his Covered Monthly Earnings for
purposes of calculating benefits under the policy, the parties
stipulated that, on average, the aggregate of Keszenheimer’s
regular salary, offshore per diem payments, and taxable automobile
allowance amounted to $6,134.53 per month.4 They further
stipulated that Dailey, Keszenheimer’s employer, referred to the
per diem at different times as “incentive pay, incentive per day,
day pay, deferred day pay, extra day pay, supplemental pay, on rig
bonus, on rig days, bonus day rate, additional day pay, extra day
pay, bonus, and offshore bonus.”
The district court, in an oral bench opinion on August 27,
2003, declined to exclude Keszenheimer’s per diem and taxable
automobile allowance from Keszenheimer’s Covered Monthly Earnings,
finding that they were “expected,” “usual,” and “guaranteed.” The
court subsequently granted summary judgment in favor of
Keszenheimer and ordered that he receive $269,933.40 in unpaid
just prior to the date Total Disability began.
4
This was calculated by summing Keszenheimer’s regular monthly salary
and a 24-month average of both his offshore per diem and the taxable automobile
allowance.
4
benefits, plus post-judgment interest and costs. The defendants
filed a timely notice of appeal.
II
We review summary judgment decisions de novo, applying the
same test as the district court.5 Summary judgment is proper “if
the pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show that
there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.”6 In
making this determination, we evaluate the facts in the light most
favorable to the non-moving party.7
When interpreting an ERISA-covered policy, we construe the
plan’s terms de novo where, as here, the parties acknowledge that
the administrator has not been given the discretion to determine
benefit eligibility or to construe the plan’s terms.8 The
construction of the policy provisions is governed by federal common
law, although analogous state law may be used for guidance to the
extent that it is not inconsistent with congressional policy
5
Facility Ins. Corp. v. Employers Ins. of Wausau, 357 F.3d 508, 512 (5th
Cir. 2004).
6
FED. R. CIV. P. 56(c); see Celotex Corp. v. Catrett, 477 U.S. 317, 322
(1986).
7
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587
(1986); Ramming v. Nat’l Gas Pipeline Co. of Am., 390 F.3d 366, 371 (5th Cir.
2004).
8
Wegner v. Standard Ins. Co., 129 F.3d 814, 818 (5th Cir. 1997) (citing
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989)).
5
concerns.9 When interpreting plan provisions, we interpret the
contract language “in an ordinary and popular sense as would a
person of average intelligence and experience, such that the
language is given its generally accepted meaning if there is one.”10
If, however, the plan terms remain ambiguous after application of
ordinary principles of contract interpretation, they are construed
strictly in favor of the insured.11
III
We must determine whether Keszenheimer’s per diem and
automobile allowance qualify as Covered Monthly Earnings either as
part of Keszenheimer’s “monthly salary” or as “commissions.”
However, if the per diem and automobile allowance are “overtime
pay, bonuses or any other special compensation,” they are
specifically excluded from Covered Monthly Earnings. The terms at
issue here are not ambiguous, “but rather have an ordinary and
generally accepted meaning.”12
A
Appellants first argue that Keszenheimer’s per diem and auto
9
Id.
10
Id. (internal quotation marks and citation omitted).
11
Id.
12
Id. (holding terms “overtime” or “any other extra compensation” to be
unambiguous and assuming “salary” was also commonly understood). Because the
plain meaning of the policy terms are clear we need not consider what, if any,
weight to place on the affidavit of Mr. Spinks, in which he claims that, in a
telephone conversation, a representative of Dailey indicated that the per diem
would be included in the calculation.
6
allowance are not included in the term “monthly salary.” We agree.
“Salary” is “fixed compensation paid regularly (as by the
year, quarter, month, or week) for services.”13 Keszenheimer’s per
diem and auto allowance compensation, which vary each month, are
not part of his “monthly salary.”14 Compensation paid ad hoc for
working discrete blocks of time--such as an hourly wage--is not
typically considered salary.15 Not unlike an hourly wage earner,
Keszenheimer’s per diem and auto allowance compensation were not
fixed, but were paid only for the days that he worked offshore.16
Given the fluctuation in income day-to-day and month-to-month, this
does not fit the plain meaning of “monthly salary” as contemplated
in the policy and as commonly understood.
Keszenheimer’s reliance on Wegner v. Standard Insurance Co.17
is unavailing. In Wegner, disability benefits were calculated
13
WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 2003 (1961); see also BLACK’S LAW
DICTIONARY 1364 (8th ed. 2004) (defining “salary” as “[a]n agreed compensation for
services . . . usu. paid at regular intervals on a yearly basis, as distinguished
from an hourly basis”); Pub. Employees’ Ret. Sys. v. Stamps, --- So.2d ---, 2005
WL 107165, at *10 (Miss. Jan. 20, 2005) (distinguishing “salary” from fee for
discrete task); cf. MISS. CODE ANN. § 25-4-103(p)(iii) (distinguishing “salary”
from “per diem” and “expenses” in context of defining “public servant”).
14
See Perugini-Christen v. Homestead Mortgage Co., 287 F.3d 624, 628 (7th
Cir. 2002) (“[T]he branch profits cannot be considered salary because although
they were earned on a monthly basis, they were in no way fixed compensation.”).
15
Wegner, 129 F.3d at 819 (“‘[A]dditional compensation for extra hours
worked is . . . not generally consistent with salaried status.’” (quoting Abshire
v. County of Kern, 908 F.2d 483, 486 (9th Cir.1990)).
16
In contrast, Keszenheimer also received regular income that stayed the
same regardless of his offshore days; this was his “salary,” as Reliance properly
concluded in making its initial calculation and awarding benefits to
Keszenheimer.
17
129 F.3d 814 (5th Cir. 1997).
7
based on “predisability earnings,” defined as the “monthly rate of
earnings . . . including commissions and deferred compensation, but
excluding bonuses, overtime pay and any other extra compensation.”18
Our focus in Wegner was on whether the compensation in question
fell into one of the specifically excluded categories, and we
assumed without much discussion that the compensation was included
in the “monthly rate of earnings” in the first place. We note that
“earnings” is a broader term than “salary,”19 which suggests that
Wegner’s control on our interpretation of “monthly salary” is
limited.
Nonetheless, our classification of Wegner’s compensation (a
fixed amount of $300 per day, seven days per week) as a “salary”
supports our interpretation of “monthly salary” in the instant
case. We observed that Wegner’s status changed “from an hourly to
a salaried employee” and that “he would be paid a salary of $300
per day.”20 Furthermore, “[t]he relevant employment documents . . .
explicitly identify . . . his new pay status to be ‘salaried’ (not
hourly)” and additional compensation for extra hours worked is “not
18
Id. at 817 (internal quotation marks and emphasis omitted).
19
See, e.g., Adams v. Reliance Standard Life Ins. Co., 225 F.3d 1179, 1185
(10th Cir. 2000) (“earnings” broader than “salary”); Deegan v. Cont’l Cas. Co.,
167 F.3d 502, 507 (9th Cir. 1999) (same). In Adams, also involving Reliance, the
court noted that “[i]f Reliance and the [employer] intended to base the benefit
only on an employee's base salary, they should not have adopted language saying
the benefit would be based on the employee's ‘total earnings.’” Adams, 225 F.3d
at 1185. Here, Reliance did just that, restricting the benefits calculation to
the “monthly salary.”
20
Wegner 129 F.3d at 816–17.
8
generally consistent with salaried status.”21 Unlike Wegner’s fixed
compensation, Keszenheimer’s per diem and automobile allowance
varied based on the number of days he actually worked.
Additionally, Keszenheimer’s earning statement accounts for his
regular salary separate from the per diem and auto allowance.22
We are persuaded that the district court’s contrary holding,
that the per diem “was a part of the basic monthly salary,” is in
error.23 The court backed into this conclusion by first holding
that the per diem--by virtue of being “expected,” “usual,” and
“guaranteed”--was not a “bonus.”24 However, that the per diem
payments were “expected,” “usual,” and “guaranteed”--in that
Keszenheimer knew that he was entitled to receive payment for each
day worked offshore--does not answer the “salary” question. An
hourly wage or a series of payments for discrete contracted tasks
could be equally expected, usual, and guaranteed. This is not
21
Id. at 819 (internal quotation marks and citation omitted).
22
The earnings statement had separate line entries for “offshore
bons[sic],” “car premium” and “regular.” Cf. Wegner, 129 F.3d at 819 (“Had
Wegner’s employer . . . meant for his compensation to be overtime, it could have
plainly indicated this on the relevant employment documents.”); West v. West, ---
So.2d ---, 2004 WL 2749146, at *1 n.1 (Miss. Dec. 2, 2004) (property settlement
agreement specifically defined “monthly salary” as “the gross taxable salary or
wages paid to husband”).
23
The court also interpreted the word “basic”; however, in the definition
of Covered Monthly Earnings, the operative phrase is “monthly salary.” The term
“basic” does not appear.
24
Much of the district court’s oral bench opinion is focused on showing
why the per diem and auto allowance are not specifically excluded. For example,
the court notes that the defendants “weren’t careful in drafting a document to
exclude that from his monthly earnings.” This, however, puts the cart before the
horse because the first--and, as it turns out dispositive--question is whether
they are even included to begin with.
9
enough to make it a “monthly salary.”
B
Next, Appellants argue that the per diem and auto allowance do
not fall within the specifically included category of
“commissions.” Again we agree.
A “commission” is “a fee paid to an agent or employee for
transacting a piece of business or performing a service,” usually
“a percentage of the money received in a sale or other transaction
paid to the agent responsible for the business.”25 Keszenheimer’s
per diem and auto allowance do not qualify under this common
definition. Keszenheimer was not a salesperson. The per diem and
auto allowance payments were not a percentage of or related to a
transaction. They were flat daily fees that Keszenheimer received
in exchange for a day’s offshore work. They did not vary based on
Keszenheimer’s personal productivity or on any particular outcome.26
In Perugini-Christen v. Homestead Mortgage Co.,27 the Seventh
Circuit confronted another Reliance policy containing a similar
definition of “Covered Monthly Earnings.” In that case the policy
25
WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 457 (1961); see also BLACK’S LAW
DICTIONARY 286–87 (8th ed. 2004) (defining “commission” as “[a] fee paid to an
agent or employee for a particular transaction, usu. as a percentage of the money
received from the transaction”); Russo v. U.S. Life Ins. Co., No. 98-1224, 1999
WL 102744, at *5 (E.D. La. 1999) (“A commission, on the other hand, is defined
as ‘a fee or percentage paid to a salesperson or agent for his or her services.’”
(quoting WEBSTER’S II NEW RIVERSIDE UNIVERSITY DICTIONARY 287 (1984))).
26
See, e.g., Russo, 1999 WL 102744, at *5 (finding payments to be a
“commission” where based on personal “productivity” and “entirely on the business
Dr. Russo brought into the clinic for that quarter”).
27
287 F.3d 624 (7th Cir. 2002).
10
definition included both commissions and bonuses, but made a
distinction between the two when calculating benefits.28 The
plaintiff preferred the payments at issue to be characterized as
commissions; however, the court rejected plaintiff’s argument that
“because [plaintiff] was contractually entitled to the branch
profits, they cannot be considered bonuses,” agreeing instead with
Reliance’s argument that because “[plaintiff’s] employment
agreement with Homestead characterized the branch profit payments
as bonuses, [plaintiff] should be bound by the terms of that
agreement.”29 The court held that “the branch profits are unlike
ordinary commissions because although they are calculated as a
percentage of the proceeds, they are not based on [plaintiff’s]
personal sales, but rather on the sales of the branch as a whole.”30
This supports our conclusion that Keszenheimer’s per diem and
automobile allowances do not fall within the term “commission” as
used in the policy and as commonly understood.
C
In light of our holding that the per diem and car allowance
were never included in the policy’s Covered Monthly Earnings to
begin with, we need not decide whether the per diem and automobile
allowance would fall into one of the policy’s specifically excluded
28
Id. at 626.
29
Id. at 627.
30
Id. at 628.
11
categories of compensation (e.g., “bonuses”). It is also
unnecessary to address whether Keszenheimer conceded that the
automobile allowance should be excluded. Furthermore, we decline
to consider Keszenheimer’s argument, raised for the first time on
appeal, that the district court improperly allowed a social
security disability benefits setoff.
IV
We are persuaded that the district court erred in interpreting
“Covered Monthly Earnings” in the policy language to include
Keszenheimer’s offshore per diem and automobile allowance payments.
These forms of compensation are neither “monthly salary” nor
“commissions.” Reliance’s calculation of Keszenheimer’s benefits
was proper and, accordingly, the district court should have entered
summary judgment in favor of Appellants.
The judgment of the district court is REVERSED. Judgment is
RENDERED for Appellants.
12