Crowell v. Shell Oil Co.

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit

FILED
August 14, 2008

No. 07-20270 Charles R. Fulbruge III
Clerk

DAVID CROWELL

Plaintiff - Appellant

v.

SHELL OIL CO., formerly known as or doing business as Pennzoil-Quaker
State Company; SHELL OIL PRODUCTS LLC, formerly known as or doing
business as Pennzoil-Quaker State Company, also known as Sopus Products;
PENNZOIL-QUAKER STATE COMPANY; KELLEY LANG; PENNZOIL-
QUAKER STATE COMPANY EMPLOYEES RETIREMENT PLAN,

Defendants - Appellees

PAUL B SIEGEL

Plaintiff - Appellant

v.

SHELL OIL COMPANY, formerly known as Pennzoil-Quaker State
Company; SHELL OIL PRODUCTS LLC, also known as Sopus Products,
formerly known as Pennzoil-Quaker State Company; PENNZOIL-QUAKER
STATE COMPANY; KELLEY LANG; SHELL PENSION PLAN, formerly
known as Pennzoil-Quaker State Company Employees Retirement Plan

Defendants - Appellees
 No. 07-20270

Appeal from the United States District Court
for the Southern District of Texas

Before KING, HIGGINBOTHAM, and SOUTHWICK, Circuit Judges.
Patrick E. Higginbotham, Circuit Judge:
Former employees of Pennzoil, David Crowell and Paul Siegel, were
terminated when the company changed control. Under Letters of Agreement
referring to their retirement and savings plan, they received a cash payment
when the company merged with Shell. They filed separate suits, urging that
Defendants underpaid them and that state law applied. The district courts
found that the agreement was governed by ERISA and consolidated the cases,
granting summary judgment to Defendants. Plaintiffs appealed.
I
David Crowell, formerly Pennzoil’s Director of Internal Audit, and Paul
Siegel, formerly Pennzoil’s General Counsel, sued Shell and Pennzoil1 in
separate cases in Texas district court, alleging breach of contract, breach of
warranty, and fraud under Texas law arising from a benefits dispute. They
alleged that Defendants misconstrued amended language in their retirement
plan – that when they cashed out stock options earlier in their career, the
income earned was part of their “Considered Compensation” in Shell’s amended
Plan, entitling them to a higher lump-sum payment for early retirement when
Pennzoil merged with Shell in October of 2002 and terminated them.

1
Shell Oil Company acquired Pennzoil-Quaker State Company in a merger on October
1, 2002. Pennzoil became a wholly owned subsidiary of Shell.

2
 No. 07-20270

Pennzoil’s original retirement plan – the Pennzoil-Quaker State Company
Salaried Employees Retirement Plan2 (“retirement plan”) – was effective as of
January 1, 1999, and provided for pension benefits upon employees’ retirement
or early retirement. The Plan was a deferred compensation plan that paid
employees a certain percentage of their monthly 1997 “Considered
Compensation,” multiplied by their number of years of service to the company
and additional money also calculated by their 1997 “Considered Compensation,”
their years of service accrued during certain time periods, monthly Considered
Compensation, and monthly compensation after December 31, 1997. The higher
the “Considered Compensation,” the higher the pension benefits to the employee.
The retirement plan originally excluded “income arising from the exercise of a
stock option” from the definition of Considered Compensation.
Pennzoil amended the definition of “Considered Compensation” in its
retirement plan several times. The original plan provided for a monthly annuity
calculated by a certain percentage of “monthly 1997 Considered Compensation”
multiplied by the number of years of service, and it defined monthly 1997
Considered Compensation in the last paragraph of Section 9.1(I) as “the lesser
of (I) 1997 Considered Compensation or (ii) if the Member terminates service
prior to January 1, 2003, the Member’s average monthly Considered
Compensation received during the 60 calendar months immediately preceding
his retirement or other termination of service.” The Second Amendment
changed this last paragraph in a modification effective January 1, 1999, which
provided, “In determining monthly 1997 Considered Compensation, the following

2
This plan was later called the Pennzoil-Quaker State Company Employees Retirement
Plan.

3
 No. 07-20270

shall apply: (I) the term 1997 Considered Compensation shall be deemed to refer
to the Member’s Considered Compensation for the Member’s 12 months of
employment with the Employer immediately prior to January 1, 1998 . . .” In
other words, it cut out the “lesser of” language and provided a simpler
computation of Considered Compensation. The definition of Considered
Compensation in effect under the original retirement plan (effective January 1,
1999) and the Second Amendment (also effective January 1, 1999) was “[t]he
compensation actually paid to a Member . . . by his Employer for personal
services, including normal salary, wages, commissions . . . but exclusive of . . .
income arising from the exercise of a stock option . . .”3 In other words, following
the Second Amendment to the plan, the definition of Considered Compensation
continued to omit income from the exercise of stock options.
A Fifth Amendment to the retirement plan, adopted on May 13, 2002,
amended the definition of Considered Compensation in its entirety and included
the exercise of stock options as part of Considered Compensation, defining
Considered Compensation as “[t]he compensation actually paid to a Member by
his Employer for personal services, including normal salary, wages, commissions
. . . and income arising from the exercise or cash-out of a stock option, but
exclusive of amounts of life insurance premiums paid by an employer . . .”4 This
Amendment had several effective dates. The Amendment stated, “Pennzoil-
Quaker State Company . . . does hereby amend the Plan, effective March 1, 2002,
as follows.” It then made changes in Sections 1 and 2 to the definition of
“Change of Control” and “Considered Compensation.” In a third section, it added

3
Emphasis added. This definition was in Section 1.11 of the retirement plan.
4
Emphasis added.

4
 No. 07-20270

a subsection entitled “Credit Union Employees” to Section 2.3 of the Salaried
Employees Plan Document and specified that the third section was to be
effective January 1, 2002.
In addition to the retirement plan, Pennzoil executed Letters of Agreement
with some employees, including Crowell and Siegel. These Letters were
unfunded deferred compensation arrangements and promised to pay the Letter
recipients, upon a change in control of the company, a one-time cash payment.
This payment was to compensate Crowell and Siegel for the amount of pension
and savings money they would lose as a result of certain tax regulations. A
determination of the amount of the one-time payment required a calculation of
early retirement pension income under the retirement plan (a calculation relying
upon the definition of 1997 Considered Compensation) and savings and
investment income. Crowell’s Letter of Agreement, dated December 8, 2000,
with an effective date of June 19, 1999, provided,
Section 415 of the Internal Revenue Code of 1986, as amended . . .
imposes limitations on the amount of retirement benefits which may
be payable with respect to any participating employee under the
Pennzoil-Quaker State Company Salaried Employees Retirement
Plan . . . and imposes limitations on the amount of annual additions
which may be made to the account of any participating employee
under the Pennzoil-Quaker State Company Savings and Investment
Plan. . . . [The letter then discussed other tax limitations.] As these
limitations may curtail the retirement benefits which would
otherwise be payable to you and your spouse under the Retirement
Plan and may curtail the contributions which the Company would
otherwise make to your account under the Savings Plan, the Board
of Directors of the Company has authorized the Company’s direct
payment to you and your spouse of certain amounts which are
designed to recoup to you and your spouse any such losses . . .

5
 No. 07-20270

In sections 1 and 2, the letter provided for long-term payments to be made to the
employee and his spouse to offset reductions in benefits caused by taxes. These
payments included
monthly pension for life . . . commencing on the date your. . . Early
Retirement . . . commences under the Retirement Plan . . . in an
amount equal to any additional . . . Early Retirement . . . to which
you would have been entitled under the Retirement Plan . . . , if the
limitations therein for the purpose of satisfying Sections 415 and
401(a)(17) of the Code had not been applicable.

The Letter next described how the amount of recoupment for losses to savings
caused by tax limitations would be calculated, providing in Paragraph 3,
If during any calendar year commencing on or after January 1, 1999
because of application of the limitations included in the Savings
Plan for the purpose of satisfying Sections 415 and 401(a)(17) of the
Code, any Matching Contributions, which would otherwise be made
to the Company for your account under the Savings Plan (or any
successor thereto), are curtailed, the Company shall establish a
Ledger Account and enter thereon as Dollar Equivalents the amount
of the Matching Contribution which was not permitted to be made
for your account because of such limitations. The Dollar
5
Equivalents entered into the Ledger Account shall be converted
into Common Stock Equivalents equal to the number of shares of
Common Stock of the Company, par value $0.10 per share . . . that
could have been purchased by the Dollar Equivalents for your
account. . . . After conversion of the Dollar Equivalents to Common
Stock Equivalents, the Ledger Account shall be credited with
additional Dollar Equivalents. . . . Following your termination of
service with the Company, the amount of Common Stock
Equivalents and any Dollar Equivalents credited to your account .
. . shall be distributed to you at the time . . . such amount would

5
Siegel’s Letter of Agreement included an additional phrase here, which read, “for
amounts earned while employed by the Company.”

6
 No. 07-20270

have been distributed to you if such amount had been held under,
and subject to all the terms of , the Savings Plan . . .

It then explained that a cash recoupment would be distributed “as of the
Effective Date of a change in control of the Company” and would include
the amount to which you would be entitled under Paragraph 3 above
. . . and using Value . . . for the purpose of converting Common Stock
Equivalents and Dollar Equivalents to cash plus a cash payment
equal to the present value of the benefits that would otherwise be
provided to you and your spouse under Paragraphs 1 and 2 above
[the monthly pension payments for life] . . . computed by reference
to those actuarial and other factors set forth in Pennzoil-Quaker
State Company Benefit Acceleration Agreement Administrative
Procedures . . .

Siegel’s Letter of Agreement had an effective date of December 30, 1998. It
contained terms similar to those in Crowell’s Letter of Agreement.
When Pennzoil changed control on October 1, 2002, this triggered
Crowell’s and Siegel’s qualification for early retirement, meaning they would
receive payments under the retirement plan beginning at age 55 and the cash
payment under the Letters of Agreement. Defendants paid Siegel $776,221.92.
Siegel alleged that this amount should have included as part of his Considered
Compensation the money he received when he exercised 1997 stock options and
should have totaled $1,434,423.10. Similarly, Defendants paid Crowell
$42,988.05; he alleged that the company owed him $519,571.26, an amount
calculated by including income from his exercise of a stock option in 1997. Siegel
did not pursue the plan’s administrative procedures for contesting benefits

7
 No. 07-20270

payments,6 urging in federal district court that exhaustion was unnecessary for
the excess benefit agreement. Crowell pursued an internal appeal.7 He
contacted Kelley Lang, the plan administrator, to dispute the amount. Lang
consulted with benefits attorneys and other individuals from human resources
regarding plan interpretation and exchanged a series of letters with Crowell.
Lang denied Crowell’s benefits claim, explaining that the Fifth Amendment,
effective March 1, 2002, as interpreted by her, did not include as part of
Considered Compensation the exercise of stock options in 1997; rather, it only
included the exercise of stock options “on or after March 1, 2002.” Following an
appeals hearing, Lang again denied Crowell’s claim on May 14, 2004. Crowell
and Siegel filed separate suits in state court, both maintaining that Defendants
owed them a higher cash payment under the Letters of Agreement and alleging
breach of express and implied-in-fact contract, breach of express and implied
warranties, fraud, and promissory estoppel. Defendants removed the suits to
federal district court. Siegel and Crowell filed motions to remand, which the
district courts denied. Siegel and Crowell filed amended complaints with ERISA
claims, and all parties filed cross motions for summary judgment. The cases
were consolidated, and the district court granted Defendants’ motions for
summary judgment. The district court found that “Siegel was . . . required to

6
The district court held that Siegel’s claim was premature as he had failed to exhaust
his administrative remedies under the plan, and Appellees so argue here. The district court
did, however, rule on the merits of Siegel’s claim. On appeal, Siegel does not contend that he
exhausted his remedies.
7
Pennzoil concedes that “Crowell invoked the Retirement Plan’s administrative
procedures to contest the issue now before the Court.”

8
 No. 07-20270

seek the administrative remedies of the Retirement Plan before filing suit”8 and
that he had failed to do so. It concluded that “his benefits claim should be
dismissed”9 but still addressed the merits of his claim, finding that a stay of the
proceedings to allow Siegel to exhaust his remedies was unnecessary.10 Next,
reviewing the propriety of Lang’s benefit decision under an abuse of discretion
standard, the court concluded that Defendants had not abused their discretion
in denying Crowell’s benefits, as they “gave a legally correct interpretation of the
plan provision in question.”11 Finally, the court dismissed Crowell’s claim that
Lang had failed to disclose certain documents and denied plaintiffs’ claim for
attorneys’ fees and costs.
Plaintiffs appealed, urging that 1) the district courts that initially
addressed their individual suits erred in denying their motions to remand, as
Defendants’ notices of removal were procedurally defective, ERISA does not
apply to the Letters of Agreement at issue in the case, and even if ERISA does
apply, the letters fall under an ERISA exemption, 2) the district court that
addressed Plaintiffs’ consolidated suit failed to consider the summary judgment
evidence in the light most favorable to Plaintiffs, the non-moving party, and 3)
the district court applied an incorrect standard of review in addressing
Defendants’ denial of Plaintiffs’ benefits and erred in affirming the denial, thus
erring in granting summary judgment for Defendants and failing to grant
summary judgment for Plaintiffs. We address each of these in turn.

8
Crowell v. Shell Oil Co., 481 F.Supp. 2d 797, 808 (S.D. Tex. 2007).
9
Id.
10
Id. at 808 n.7.
11
Id. at 813.

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 No. 07-20270

II
Plaintiffs first contend that the district courts that addressed their suits
prior to consolidation erred in denying their motion to remand and holding that
ERISA preemption applied. They maintain that Defendants failed to meet the
procedural requirements in their notice of removal and that, even absent
procedural errors, ERISA preemption should not apply because the Letters of
Agreement providing for a cash payment are not a “plan” under ERISA.
Finally, they urge that even if the letters are a “plan,” they fall under a statutory
exemption to ERISA. We review de novo a district court’s denial of a motion to
remand.12
Plaintiffs urge that Defendants’ notice of removal was procedurally
defective because it failed to “include an affirmative statement that all
defendants who have been properly served at the time of removal have consented
in writing” to removal. They maintain that this violates the rule that “all served
defendants must join in the petition no later than thirty days from the day on
which the first defendant was served.”13 But all individual defendants were
listed in the notice of removal. For example, Defendants’ Notice of Removal
under 28 U.S.C. § 1331 in Crowell’s case stated, “Please take notice that
Defendants Shell Oil Company f/k/a or d/b/a Pennzoil-Quaker State Company,
Shell Oil Products Company LLC, Pennzoil-Quaker State Company, Catherine
Lamboley and Kelley Lang file this Notice of Removal, and hereby remove to this
Court the action described below.” And Plaintiffs fail to cite to legal provisions
requiring all defendants to consent to removal in writing. Rather, they cite to

12
Woods v. Tex. Aggregates, L.L.C., 459 F.3d 600, 601 (5th Cir. 2006).
13
Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1263 (5th Cir. 1988).

10
 No. 07-20270

the statute that requires defendants requesting removal to “file in the district
court. . . . a notice of removal signed pursuant to Rule 11 of the Federal Rules of
Civil Procedure and containing a short and plain statement of the grounds for
removal, together with a copy of all process, pleadings, and orders served upon
such defendant or defendants in such action.” Rule 11 requires that each
pleading, motion, or paper “be signed by at least one attorney of record in the
attorney’s name” and “state the signer’s address, e-mail address, and telephone
number.” In signing a pleading, motion, or other paper, the attorney also
certifies generally that the paper is not being presented for an improper purpose,
has evidentiary support or will have support upon further investigation, and the
claims are warranted by law or a change in the law.14 Plaintiffs do not contend
that the notice of removal failed to describe the grounds for removal, or that it
was not signed pursuant to Rule 11’s requirements. We find no procedural error.
Next, plaintiffs contend that ERISA preemption does not apply to the
Letters of Agreement, which provide benefits above and beyond those described
in the retirement plan, urging that the Letters of Agreement are not a “plan.”
As such, they maintain, state law should apply to their claims arising from the
Letters of Agreement.
ERISA preempts any state laws that relate to employee benefit plans,
providing:
Except as provided in subsection (b) of this section, the provisions
of this subchapter and subchapter III of this chapter shall supersede
any and all State laws insofar as they may now or hereafter relate

14
Fed. R. Civ. P. 11(a), (b).

11
 No. 07-20270

to any employee benefit plan described in section 1002(a) of this title
and not exempt under section 1003(b) of this title.15

“A law ‘relates to’ an employee benefit plan, in the normal sense of the phrase,
if it has a connection with or reference to such a plan.”16 If state law relates to
an employee benefit plan, ERISA applies to such a plan and preempts state law:
Except as provided in subsection (b) [governmental plans and
church plans] or (c) [pension plans with voluntary employee
contributions] of this section and in sections 1051, 1081, and 1101
of this title, this subchapter shall apply to any employee benefit
plan that is established or maintained –
(1) by any employer engaged in commerce or in any industry or
activity affecting commerce; or
(2) by any employee organization or organizations representing
employees engaged in commerce or in any industry or activity
affecting commerce; or
(3) by both.

ERISA defines a “plan” as follows:
The terms “employee welfare benefit plan” and “welfare plan” mean
any plan, fund, or program which was heretofore or is hereafter
established or maintained by an employer or by an employee
organization, or by both, to the extent that such plan, fund, or
program was established or is maintained for the purpose of
providing for its participants or their beneficiaries, through the
purchase of insurance or otherwise, (A) medical, surgical, or hospital
care or benefits, or benefits in the event of sickness, accident,
disability, death or unemployment, or vacation benefits,
apprenticeship or other training programs, or day care centers,
scholarship funds, or prepaid legal services, or (B) any benefit

15
29 U.S.C. § 1144(a).
16
Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 96-97 (1983).

12
 No. 07-20270

described in section 186(c) of this title (other than pensions on
retirement or death, and insurance to provide such pensions).17

We must look to the case law to determine whether the Letters of Agreement are
“plans” as defined by ERISA and whether state or federal law applies, as the
statutory language does not provide a full answer.18 The Supreme Court in Fort
Halifax Packing Co. defined an ERISA plan in terms of the administrative
activities required to coordinate and provide benefits under the plan, holding
that an ERISA plan covers “benefits whose provision by nature requires an
ongoing administrative program to meet the employer’s obligation.”19 A one-time
benefit, on the other hand, such as a “one-time, lump-sum payment triggered by
a single event,” a payment that “requires no administrative scheme whatsoever
to meet the employer’s obligation” to pay the employee, is not a plan as defined
by ERISA.20 In Fort Halifax, a Maine statute required employers who relocated
or terminated their business to pay “employees for severance pay at the rate of
one week’s pay for each year of employment by the employee” in the business.21
The employer was to make this payment “within one regular pay period after the
employee’s last full day of work.”22 The Court looked to “the plain language of

17
29 U.S.C. § 1002 (1).
18
See Fort Halifax Packing Co., Inc. v. Coyne, 482 U.S. 1, 8 (1987) (citing 29 U.S.C. §
1002(3)) (observing that “the terms ‘employee benefit plan’ and ‘plan’ are defined only
tautologically in the statute”).
19
Id. at 11.
20
Id. at 12.
21
Id. at 4 n.1.
22
Id.

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 No. 07-20270

ERISA’s pre-emption provision, the underlying purpose of that provision, and
the overall objectives of ERISA itself”23 to determine that the statute did not
regulate plans as defined by ERISA. With respect to the plain language, the
Court observed that ERISA “does not refer to state law relating to ‘employee
benefits,’ but rather ‘employee benefit plans.’”24 Although “the words ‘relate to’
should be construed expansively,” Congress pre-empts only those laws that
relate to plans.25
The Court next asked whether preemption of Maine’s severance statute
would “further the purpose of ERISA pre-emption”26 and meet ERISA’s overall
objectives – whether it would help to “establish a uniform administrative
scheme, which provides a set of standard procedures to guide processing of
benefits” and prevent “differing regulatory requirements in differing States”27
relating to the administration of plans. The Court observed,
Congress intended pre-emption to afford employers the advantages
of a uniform set of administrative procedures governed by a single
set of regulations. This concern only arises, however, with respect
to benefits whose provision by nature requires an ongoing
administrative program to meet the employer’s obligation.28

And the Court concluded,

23
Id. at 7.
24
Id.
25
Id. at 8.
26
Id. at 9.
27
Id.
28
Id. at 11.

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 No. 07-20270

The Maine statute . . . creates no impediment to an employer’s
adoption of a uniform benefit administration scheme. Neither the
possibility of a one-time payment in the future, nor the act of
making such a payment, in any way creates the potential for the
type of conflicting regulation of benefit plans that ERISA pre-
emption was intended to prevent.29

Finally, the Court looked to ERISA’s “regulatory concerns,”30 which are to
provide “‘safeguards . . . with respect to the establishment, operation, and
administration’”31 of employee benefit plans, “‘prevent abuses of the special
responsibilities borne by those dealing with plans,’”32 “safeguard employees from
‘such abuses as self-dealing, imprudent investing, and misappropriation of plan
funds,’”33 and “provide employees information ‘covering in detail the fiscal
operations of their plan.’”34
Applying a similar analysis to the present letters of agreement, we note
several important distinctions. First, although the benefits at issue here involve
a cash payment, this payment is embedded within a letter that includes a more
comprehensive “plan.” Paragraphs 1 and 2 of the Letters of Agreement provide
for a “monthly pension for life” equal to the difference between the pension with
and without certain tax limitations, paid to the employer and the employer’s

29
Id. at 14.
30
Id. at 15.
31
Id. (quoting 29 U.S.C. § 1001(a)).
32
Id. (quoting remarks of Representative Dent, 120 Cong. Rec. 29197 (1974)).
33
Id. (quoting remarks of Senator Williams, 120 Cong. Rec. 29932 (1974)).
34
Id. at 16 (quoting remarks of Senator Javits, 120 Cong. Rec. 29935 (1974)) (emphasis
omitted).

15
 No. 07-20270

spouse following a change of control. Paragraph 3 then promises a one-time cash
payment for the present value of the amount by which the monthly benefits will
decrease as a result of certain provisions of the Internal Revenue Code.35
Second, the Letters of Agreement providing for monthly pensions and a one-time
payment commencing upon the change in control rely directly on calculations
made in Pennzoil’s employee benefits plans – the Pennzoil-Quaker State
Company Salaried Employees Retirement Plan and the Pennzoil-Quaker State
Company Savings and Investment Plan. The Letters of Agreement state,
As these limitations [in Sections 415 and 401(a)(17) of the Internal
Revenue Code of 1986] may curtail the retirement benefits which
would otherwise be payable to you and your spouse under the
Retirement Plan and may curtail the contributions which the
Company would otherwise make to your account under the Savings
Plan, the Board of Directors of the Company has authorized the
Company’s direct payment to you and your spouse of certain
amounts which are designed to recoup to you and your spouse any
such losses . . . .

The provision for a one-time cash payment also contains explicit language
about the “administrative procedures” required for calculation, stating that the
cash payment shall be “determined as of the date prior to the Effective Date of
the change in control and computed by reference to those actuarial and other
factors set forth in the Pennzoil-Quaker State Company Benefit Acceleration

35
Paragraph 3 of Siegel’s Letter of Agreement with Pennzoil (Dec. 30, 1998) stated,
“Notwithstanding the foregoing provisions of this Agreement, as of the Effective Date of a
change in control of the Company . . . you will receive from the Company forthwith . . . a cash
payment equal to the present value of the benefits that would otherwise be provided to you and
your spouse under Paragraphs 1 and 2 above, determined as of the date prior to the Effective
Date of the change in control and computed by reference to those actuarial and other factors
set forth in the Pennzoil-Quaker State Company Benefit Acceleration Agreement
Administrative Procedures in effect at the applicable date.”

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 No. 07-20270

Agreement Administrative Procedures in effect at the applicable date.” The
Letters of Agreement, including the portions referring to the one-time cash
payment upon a change of control of Pennzoil, require ongoing administrative
involvement. Interpreting the Letters of Agreement as ERISA “plans” also
furthers the purpose of ERISA pre-emption.36 If the laws and regulations
relating to the interpretation and administration of the Letters of Agreement
and the retirement plan used to calculate some of the benefits under the Letters
of Agreement were not uniform, this could lead to differing outcomes.
The Letters of Agreement are also distinct from the one-time termination
benefit distributed in Wells v. General Motors Corp.37 and the cash severance
payment issued upon a change of control in Fontenot NL Industries, Inc.38 In
Wells, GM was downsizing and offered employees a “Voluntary Termination of
Employment Plan,” wherein they could receive severance pay “either in lump-
sum or two-year installment payments” in exchange for agreeing to resign.39

36
Fort Halifax, 482 U.S. at 11.
37
881 F.2d 166, 175-76 (5th Cir. 1989); see also Wells v. Gen. Motors Corp., 721 F.Supp.
107, 115 (S.D. Miss. 1988) (“In the present case, it is clear that the purpose of GM in
instituting VTEP [Voluntary Termination of Employment Plan] was not to provide its
employees with benefits under the Act but was instead to reduce its work force because of the
poor conditions of the industry and of GM. And, in the court’s view, the termination plan
adopted by GM was not such a plan as envisioned by ERISA. Most of the payments to
employees were made on a single payment basis and were made solely for the purpose of
employee attrition.”). The Voluntary Termination of Employment Plan in Wells “permitted
employees to sell their seniority back to the company and terminate their employment in
exchange for monetary payment.” Id. at 109. “[E]ach of the plaintiffs ultimately chose to
accept the VTEP option and received payments ranging from $10,000 to $22,000, depending
on their years of seniority.” Id.
38
953 F.2d 960, 961 (5th Cir. 1992).
39
881 F.2d at 168.

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 No. 07-20270

This court found that ERISA’s preemptive force is “broad” but “not so broad as
to reach” GM’s Voluntary Termination of Employment Plan.40 Wells concluded
that
[t]he operative facts in Fort Halifax are remarkably similar to those
in the instant case. GM established a procedure by which employees
could elect to receive a one-time lump payment if they ceased
working at the plant. The plan was not ongoing, nor was there any
need for continuing administration of the payment program (though
employees could elect a two-year installment payment option).41

As the district court in Wells described the benefits,
In the present case, it is clear that the purpose of GM in instituting
. . . [a Voluntary Termination of Employment Plan] was not to
provide its employees with benefits under the Act but was instead
to reduce its work force because of the poor conditions of the
industry and of GM. And, in the court’s view, the termination plan
adopted by GM was not such a plan as envisioned by ERISA. Most
of the payments to employees were made on a single payment basis
and were made solely for the purpose of employee attrition.42

The plan in Wells “permitted employees to sell their seniority back to the
company and terminate their employment in exchange for monetary payment.”43
“[E]ach of the plaintiffs ultimately chose to accept the VTEP [Voluntary
Termination Employment Plan] option and received payments ranging from

40
Id. at 172.
41
Id. at 176.
42
Wells, 721 F.Supp. at 115.
43
Id. at 109.

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 No. 07-20270

$10,000 to $22,000, depending on their years of seniority.44 Although the
individual cash payment in this case does not itself require continuing
administration, the letter of which it is a part contains other provisions that do.
As we have discussed, the cash payment to Crowell and Siegel relies upon
calculations made under plans that require continuing administration, and that
Letter of Agreement refers specifically to administrative procedures that must
be followed. The payments under the Letters of Agreement would differ
substantially depending on the calculations made under the retirement and
savings plans for each employee terminated upon a change in control.
Finally, the lump sum payments in Fontenot, like those in Wells, did not
rely upon a comprehensive plan or administrative plan, unlike the cash
payments here. Fontenot addressed a “golden parachute” plan – a “Senior
Executive Severance Plan – provided by NL Industries to certain employees.45
This court found the payments under the golden parachute plan to be
indistinguishable from the plans in Wells and Fort Halifax,46 quoting the district
court’s finding that the golden parachute plan
required Defendant to make only a one-time lump sum payment to
certain employees. The requirement to pay was triggered by a
single event. . . . – a contingency that may never have
materialized. . . . This theoretical possibility of a one-time
obligation in the future created no need for an on-going
administrative program to process claims and pay benefits.47

44
Id.
45
953 F.2d at 961.
46
Id. at 962.
47
Id.

19
 No. 07-20270

Plaintiffs urge that the letters are “indisputably” similar to those in Wells and
Fontenot because “each compensation scheme provided no opportunity for any
exercise of discretion regarding the determination of whether an employee would
receive compensation under the scheme, or how much compensation would be
received.” This fails to recognize the discretion required in making benefits
determinations under several portions of the Letters of Agreement, including the
determination of monthly amounts due under the retirement plan, amounts
owed under the savings plan, the tax limitations on those amounts due, and the
“Dollar Equivalent” and “Common Stock Equivalent” calculations. Unlike the
plans in Wells and Fontenot, the Letters of Agreement “establish[] . . . [or]
require[] an employer to maintain, an employee welfare benefit ‘plan’”48 and are
“plans” as defined by ERISA. The district court did not err in denying Plaintiffs’
motion to remand the case to state court.
Plaintiffs maintain that even if ERISA applies, the Letters of Agreement
are “excess benefit plans” that fall under an ERISA exemption. Accordingly,
they urge, this case should not fall under ERISA. The exemption in 28 U.S.C.
§ 1003(b)(5) provides, “The provisions of this subchapter shall not apply to any
employee benefit plan if – such plan is an excess benefit plan (as defined in
section 1002(36) of this title) and is unfunded.” Section 1002(36) defines an
excess benefit plan as
a plan maintained by an employer solely for the purpose of
providing benefits for certain employees in excess of the limitations
on contributions and benefits imposed by section 415 of Title 26 on
plans to which that section applies without regard to whether the
plan is funded. To the extent that a separable part of a plan (as
determined by the Secretary of Labor) maintained by an employer

48
Fort Halifax, 482 U.S. at 6.

20
 No. 07-20270

is maintained for such purpose, that part shall be treated as a
separate plan which is an excess benefit plan.

We are not persuaded that the Letters of Agreement are “excess benefit plans”
that fall under this exemption. As the language of the statute provides, excess
benefit plans under ERISA are plans “maintained . . . solely for the purpose of
providing benefits . . . in excess of the limitations on contributions and benefits
imposed by section 415 of Title 26 on plans to which that section applies.”49 The
Letters of Agreement provide for a monthly pension for life for the employee and
the employee’s spouse, as well as payments to counteract the limitations of
Sections 415 and 401(a)(17) of the Internal Revenue Code. The plans are not
solely to provide benefits in excess of limitations imposed by Section 415.50
III
Having determined that ERISA applies to the Letters of Agreement, we
move to the exhaustion issue. “This court requires that claimants seeking
benefits from an ERISA plan . . . first exhaust available administrative remedies
under the plan before bringing suit to recover benefits.”51 The district court
found that “Siegel never invoked the Plan’s appeals procedures to contest
Pennzoil’s construction of the Plan’s terms,”52 that he was required to invoke

49
28 U.S.C. § 1002 (36).
50
See, e.g., Garratt v. Knowles, 245 F.3d 941, 948 (7th Cir. 2001) (finding no exemption
where a plan “had the purpose of avoiding not only the limitations contained in § 415 of the
Internal Revenue Code, but also those limitations contained in § 401(a)(17) of Title 26”).
51
Bourgeois v. Pension Plan for the Employees of Santa Fe Int’l Corps., 215 F.3d 475,
479 (5th Cir.2000) (citing Denton v. First Nat’l Bank of Waco, 765 F.2d 1295, 1300 (5th
Cir.1985)).
52
Crowell, 481 F.Supp. 2d at 803.

21
 No. 07-20270

these procedures, and that accordingly his “benefits claim should be dismissed.”53
It nevertheless addressed Siegel’s challenge to the benefits denial, finding that
a stay of the proceedings to allow for exhaustion as requested by Siegel was
unnecessary because both Crowell’s and Siegel’s challenges to the benefits denial
were “insufficient as a matter of law.”54 The court concluded in its final
judgment, “[J]udgment is granted in favor of defendants on plaintiffs’ §
1132(a)(1) benefits claims and Crowell’s § 1132(c) nondisclosure claim.”
Siegel does not raise the exhaustion issue on appeal, contesting neither the
district court’s refusal to stay the proceedings to give Siegel the opportunity to
exhaust nor its determination that he failed to exhaust available administrative
remedies. Defendants urge on appeal that “the District Court properly held that
. . . [Siegel’s] lawsuit was premature” due to his failure to exhaust and that “by
failing to address an alternate basis for dismissal” in his brief, Siegel has
abandoned any exhaustion arguments.55 Although Siegel did not challenge here

53
Id. at 808.
54
The court stated in a footnote,

Rather than dismiss his case outright, Siegel requests that the court stay
the proceedings so that he may pursue administrative remedies. In other
circumstances the court might agree. But in this case the parties have
already briefed the court on the merits of the benefits claim in both suits,
and the court is ready to rule. And as the court finds Crowell’s identical
claim insufficient as a matter of law, see infra, there is no need to stay
Siegel’s case when the same unfavorable outcome is assured. The court
thus will reach the merits of Shell’s summary judgment motions in both
cases.

Crowell, 481 F.Supp. 2d at 808 n.7 (internal citation omitted).
55
Citing Sookma v. Millard, 151 Fed. Appx. 299, 301 (5th Cir. 2005); Yohey v. Collins,
985 F.2d 222, 225 (5th Cir. 1993).

22
 No. 07-20270

the district court’s refusal to stay the proceedings to allow exhaustion, it is of no
moment. The district court addressed his claim on the merits, and he appeals
that decision. We have the merits of Crowell’s claim before us with no shadow
of non-exhaustion, and exhaustion is not here a jurisdictional requirement.
“[W]e have never construed the [ERISA exhaustion] doctrine strictly as a
jurisdictional bar”56 and have referred to it as a “defense.”57 Other circuits have
expressly held that ERISA exhaustion is not jurisdictional,58 and we agree.
While the district court stepped over the defense of exhaustion, Defendants are
the beneficiary, winning on the merits. With these facts we resolve the merits
of both Siegel’s and Crowell’s appeal.
IV
Plaintiffs maintain that the district court “indulged every reasonable
inference (and then some) in Shell’s favor,” made “evidentiary findings reserved

56
Transitional Learning Ctr. at Galveston v. Metro. Life Ins. Co., 1996 WL 625412 at
*1 (No. 96-40154, 5th Cir. Oct. 19, 1996) (unpublished) (citing Medina v. Anthem Life Ins. Co.,
983 F.2d 29, 33 (5th Cir. 1993)); see also Bourgeois, 215 F.3d at 481 (holding in the ERISA
context that “a court should not relinquish its jurisdiction because of a failure to exhaust
administrative remedies when there was a valid reason for such failure”).
57
Transitional Learning Ctr., 1996 WL 625412 at *1 ; see also Bourgeois, 215 F.3d at
479 (discussing “the affirmative defense of failure to exhaust administrative remedies” in the
context of an ERISA plan (citing Hall v. National Gypsum Co., 105 F.3d 225, 232 (5th
Cir.1997))).
58
See, e.g., Metro. Life Ins. Co. v. Price, 501 F.3d 271, 279-80 (3d. Cir. 2007) (observing
that “Congress has expressly provided for jurisdiction over ERISA cases in 29 U.S.C. § 1132(e).
Neither that provision nor any other part of ERISA contains an exhaustion requirement. Thus,
as a judicially-crafted doctrine, exhaustion places no limits on a court’s adjudicatory power”
and holding that “ERISA’s exhaustion doctrine places no limits on a federal court’s subject
matter jurisdiction”); Paese v. Hartford Life Accident Ins. Co., 449 F.3d 435, 445-46 (2d Cir.
2006) (finding that ERISA’s exhaustion requirement is “purely a judge-made concept that
developed in the absence of statutory language demonstrating that Congress intended to make
ERISA administrative exhaustion a jurisdictional requirement” and concluding that ERISA
exhaustion is an affirmative defense (emphasis added)).

23
 No. 07-20270

for a trial setting,” and admitted “hearsay . . . offered by Shell as undisputed
fact.” “Time and again,” they urge, “the District Court’s opinion concedes the
strength of Appellants’ arguments, the[n] proceeds to make ‘findings’ that
Appellees’ arguments are more compelling.” Plaintiffs conclude that the court
“misapplied the standards for review of a summary judgment.”
Drawing all factual inferences in Plaintiffs’ (the non-movants’) favor, the
court came to the legal conclusion that it should grant Defendants’ summary
judgment claims.59 This is the proper summary judgment standard. A court is
not required to draw legal inferences in the non-movant’s favor on summary
judgment review. Furthermore, the district court did not admit the evidence
that plaintiffs describe as “hearsay” – evidence of Lang’s consultations with a
benefits attorney and senior counsel, the payroll director, and Pennzoil’s former
Vice President of Human Resources – to help establish the truth of the matter
asserted. In discussing Lang’s consultation with these individuals, the district
court summarized the course of events and looked to the plan interpretations
given by various employees to Lang before Lang made the ultimate decision.60

59
Plaintiffs point, for example, to the district court’s statement that “Siegel’s contention
is clever, but ultimately unpersuasive.” This statement related to Siegel’s legal contention that
“the exhaustion requirement is inapplicable to his case.” Plaintiffs also point to the court’s
statement that “[i]n other circumstances the court might agree” and “[a]t first blush, plaintiffs’
argument seems logical. Upon closer inspection, however, its intellectual force dissipates.”
Both of these statements also related to Plaintiffs’ legal and interpretive, as opposed to fact-
based, arguments – the first to Siegel’s request that “[r]ather than dismiss his case outright
. . . that the court stay the proceedings so that he may pursue administrative remedies,” and
the second to Plaintiffs’ contention that construing a plan amendment one way “would ‘cripple
retirees’ benefits,’ and this result cannot have been the intent of the Fifth Amendment.”
60
See, e.g., Corry v. Liberty Life Assur. Co. of Boston, 499 F.3d 389, 398 n.12 (5th Cir.
2007) (holding that “‘the administrative record consists of relevant information made available
to the administrator prior to the complainant’s filing of a lawsuit and in a manner that gives
the administrator a fair opportunity to consider it’” and that it was not an abuse of discretion

24
 No. 07-20270

Nor do Plaintiffs maintain that they objected to the admissibility of the alleged
hearsay in district court.
V
Finally, we address Plaintiffs’ contention that the district court erred in
upholding the administrator’s denial of benefits to Plaintiffs. Plaintiffs maintain
that the district court “applied the incorrect standard of review for a denial of
benefits under ERISA” in applying an abuse of discretion standard. They urge
that the standard is de novo because “Shell was not expressly given discretionary
authority to determine eligibility for benefits nor was it given any authority to
construe the plan’s terms.” When a plan gives a trustee the power to exercise
discretionary powers, a district court appropriately reviews a denial of benefits
for an abuse of discretion. Where a plan does not grant such discretion, de novo
review is appropriate.61 Crowell’s and Siegel’s retirement plans, which formed
much of the basis for calculating the benefits provided under the Letters of
Agreement, provided,
The Retirement Board, on behalf of the Members, Spouses and
Contingent Annuitants, shall enforce this Plan in accordance with
its terms and shall have all powers necessary for the
accomplishment of that purpose, including, but not by way of
limitation, the following powers: (a) To construe and interpret the
Plan, decide all questions or [sic] eligibility and determine the
amount, manner and time of payment of any benefits hereunder . .
. . (i) To interpret and construe all terms, provisions, conditions and
limitations of this Plan and to reconcile any inconsistency or supply
any omitted detail that may appear in this Plan and to such extent,
consistent with the general terms of this Plan, as the Retirement

for the district court to admit this information (quoting Vega v. Nat’l Life Ins. Serv., Inc., 188
F.3d 287, 300 (5th Cir.1999) (en banc))).
61
Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 111, 112-13 (1989).

25
 No. 07-20270

Board shall deem necessary and proper to effectuate the Plan for the
greatest benefit of all the parties interested in the Plan . . .

The plans as amended also gave the Board this authority, providing in the Fifth
Amendment that the Retirement Board’s determination of the Considered
Compensation of a Member would be “conclusive.” The Seventh Circuit has held
that where a supplemental benefits plan expressly incorporates the terms of a
retirement plan, and the retirement plan gives the administrator the discretion
to interpret the plan terms, the appropriate standard of review is an abuse of
discretion.62 We have not addressed this issue but agree with the Seventh
Circuit’s reasoning. While the Letters of Agreement do not expressly incorporate
the retirement plan terms, they rely directly on calculations under the
retirement plan to determine benefits due, compensating employees for
limitations imposed by the Internal Revenue Code “on the amount of retirement
benefits which may be payable with respect to any participating employee under
the Pennzoil-Quaker State Company Salaried Employees Retirement Plan (the
‘Retirement Plan’). . . .” As the retirement plan gives the administrator full
discretion to determine eligibility for benefits, abuse of discretion review also
logically applies to the determination of benefits under the Letters of
Agreement.63 The district court did not err in applying an abuse of discretion

62
See Olander v. Bucyrus-Erie Co., 187 F.3d 599, 604-07 (7th Cir. 1999) (where a
supplementary pension benefit plan “incorporated parts of . . . [a retirement plan] by
reference,” and the retirement plan gave the fiduciary discretion to determine benefit
eligibility, the proper standard of review was an abuse of discretion).
63
See, e.g., Edwards v. Texas-New Mexico Power Co., 259 F.Supp. 2d 544 (N.D. Tex.
2003) (abuse of discretion review applied to a benefits interpretation under a supplemental
retirement plan where “[d]etermination of benefits under the excess benefit plan, as
supplemented by the supplemental employee retirement plan (‘SERP’), necessarily depended
upon the underlying pension plan, which contained the relevant terms and definitions. The

26
 No. 07-20270

standard. As the district court found in the context of exhaustion, a benefits
claim under each Letter of Agreement – what the court called the “Excess Plan”
– “is inseparable from an interpretation of the Retirement Plan.”64 “When excess
plans entirely depend on the definitions of a companion retirement plan, the
court should exercise deference in reviewing the interpretations of an
administrator with discretionary authority.”65
Plaintiffs maintain that even if an abuse of discretion standard of review
applies, the district court should have afforded less deference to the plan
administrator’s determination because “the decision maker is an insurer paying
claims out of its own assets” and has a conflict of interest.66 The district court
found that “Crowell . . . presented no evidence of a conflict of interest other than
to assert that Lang, a Shell employee, is ‘manifestly’ operating under a conflict
because any benefits granted to Crowell will also be paid by Shell, the plan

pension plan also gave the plan administrator ‘complete and final discretionary authority to
construe and interpret’ the plan”).
64
Crowell, 481 F.Supp. 2d at 808.
65
Id. at 809.
66
Indeed, less deference is due where a plaintiff sufficiently alleges that conflict of
interest exists. See MacLachlan v. ExxonMobil Corp., 350 F.3d 472, 478-79 (5th Cir. 2003)
(“Where . . . an administrator’s decision is tainted by a conflict of interest, the court employs
a “sliding scale” to evaluating whether there was an abuse of discretion. This approach does
not mark a change in the applicable standard, but only requires the court to reduce the amount
of deference it provides to an administrator’s decision. . . .The degree to which a court must
abrogate its deference to the administrator depends on the extent to which the challenging
party has succeeded in substantiating its claim that there is a conflict.” (citations and internal
citations omitted)).

27
 No. 07-20270

sponsor.”67 Until recently, this bare assertion was insufficient to establish a
conflict of interest claim. As we observed in MacLachlan v. ExxonMobil Corp.,
The mere fact that benefit claims are decided by a paid human
resources administrator who works for the defendant corporation
does not, without more, suffice to create an inherent conflict of
interest. Were that enough, there would be a near-presumption of
a conflict of interest in every case in which an employer both offers
a plan and pays someone to administer it, making a full application
of the abuse of discretion standard the exception, not the rule.68

In their appellate brief, Plaintiffs argue, as they did before the district court,
that “[i]n the instant case, Appellees are, manifestly, operating under a conflict
of interest, as any benefits paid come directly out of Appellees [sic] fisc, and
payment of Appellant’s [sic] claims may set a precedent for enhanced benefits for
many other retirees.” Although formerly insufficient under MacLachlan, this
claim meets the conflict of interest standard recently elucidated by the Supreme
Court in Metropolitan Life Insurance Company v. Glenn. The Supreme Court
held that “the fact that a plan administrator both evaluates claims for benefits
and pays benefits claims creates the kind of ‘conflict of interest’”69 discussed in
Firestone – wherein “[i]f ‘a benefit plan gives discretion to an administrator or
fiduciary who is operating under a conflict of interest,’”70 we must take that
conflict into consideration.

67
Crowell, 481 F.Supp. 2d at 810 n.9.
68
350 F.3d at 479 n.8.
69
128 S.Ct. 2343, 2348 (2008).
70
Id. (quoting Firestone, 489 U.S. at 115).

28
 No. 07-20270

We review de novo the district court’s conclusion that the plan
administrator did not abuse her discretion in denying Plaintiffs’ benefits,71
applying an abuse of discretion review to the benefits denial and following a two-
step process.72 We first ask whether the plan administrator’s determination was
“legally correct.”73 If it was, our inquiry ends here; if not, we ask whether the
determination was an abuse of discretion.74 Because the administrator had a
conflict of interest, we weigh the conflict of interest as a “‘factor in determining
whether there is an abuse of discretion’”75 in the benefits denial, meaning we
“take account of several different considerations of which conflict of interest is
one.”76

71
Pickrom v. Belger Cartage Serv., Inc., 57 F.3d 468, 471 (5th Cir. 1995) (citing Chevron
Chem. Co. v. Oil, Chem. and Atomic Workers Local Union 4-447, 47 F.3d 139, 144 (5th
Cir.1995)).
72
Id. (“We apply the abuse of discretion standard through a two-step inquiry,” and,
under the first step, “address the question of whether the Trustees’ interpretation of the
Pension Plan was legally correct,” looking to “the facts in the record and the language of the
Pension Plan itself”).
73
Threadgill v. Prudential Sec. Group, Inc., 145 F.3d 286, 292 (5th Cir. 1998); see also
Wildbur v. ARCO Chemical Co., 974 F.2d 631, 637 (5th Cir. 1992) (“Application of the abuse
of discretion standard may involve a two-step process. First, a court must determine the legally
correct interpretation of the plan. If the administrator did not give the plan the legally correct
interpretation, the court must then determine whether the administrator’s decision was an
abuse of discretion.”).
74
See Threadgill, 145 F.3d at 293; see also Tolson v. Avondale Indus., Inc., 141 F.3d
604, 608 (5th Cir.1998) (“Only if the court determines that the administrator did not give the
plan the legally incorrect interpretation, must the court then determine whether the
administrator’s decision was an abuse of discretion.”).
75
Metro. Life, 128 S.Ct. at 2350 (quoting Firestone, 489 U.S. at 115).
76
Id. at 2351.

29
 No. 07-20270

To determine whether the district court erred in finding that the
administrator’s interpretation of a plan is legally correct, we look to
(1) whether the administrator has given the plan a uniform
construction,
(2) whether the interpretation is consistent with a fair reading of
the plan, and
(3) any unanticipated costs resulting from different interpretations
of the plan.77

“[W]hether the administrator’s interpretation is consistent with a fair reading
of the plan” is “the most important factor to consider”78 in the three-step
analysis.
In denying Crowell’s benefits claim, Lang stated,
The Plan was amended on May 13, 2002, (by the Fifth Amendment
to the Plan) to change the definition of Considered Compensation to
include “income arising from the exercise or cash-out of a stock
option.” This amendment was effective March 1, 2002. By making
this amendment effective March 1, 2002, I have determined that the
intent of the amendment was to apply prospectively only to income
received by an employee arising from the exercise of a PQS stock
option on or after March 1, 2002, and that the intent of the
amendment was not to require the Plan to recalculate the
Considered Compensation for every Member of the Plan from 1997
forward based upon the exercise of stock options in 1997 and later.

My interpretation of the Fifth Amendment to the Plan is bolstered
by the actual administration of the Plan since May of 2002. . . .
Since the adoption of the Fifth Amendment, the only stock option
exercises that have been taken into account in calculating the
Considered Compensation under the Plan have been those that were
exercised on or after March 1, 2002 and prior to March 1, 2002. . .

77
Threadgill, 145 F.3d at 292-93 (quoting Wildbur, 974 F.2d at 637-38).
78
Gosselink v. AT&T, Inc., 272 F.3d 722, 727 (5th Cir. 2001).

30
 No. 07-20270

. No Member . . . has been credited under the Plan’s definition of
Considered Compensation with the income resulting from any
exercise of a stock option prior to March 1, 2002.

Similarly, Defendants omitted income from Siegel’s exercise of 1997 stock
options in calculating Siegel’s cash payment. The district court found that
Defendants’ interpretation of the Fifth Amendment, which included “only income
realized from option exercises on or after March 1, 2002, but not before, within
Considered Compensation,”79 was “uniformly applied in determining Crowell[’s]
. . . pensionable earnings.”80 Plaintiffs maintain that Lang’s decision was not
uniformly applied, urging that “‘[p]hantom income’ was included in several of the
executives’ Considered Compensation for purposes of a retirement plan
calculation.”81 But as the district court recognized, the “phantom income” versus
“actual earnings” question arose under a different part of the Fifth Amendment
unrelated to the definition of Considered Compensation.82 Furthermore,
Plaintiffs concede in their brief, regarding the phantom income issue, that “for
2003, 2004, and 2005,” Siegel received as part of “Total Pensionable Earnings”

79
Crowell, 481 F.Supp. 2d at 810.
80
Id.
81
Plaintiffs further urge that “[t]he Fifth Amendment’s replacement definition does not
distinguish ‘wages’ from ‘option’ income, and if Lang’s logic is applied uniformly, “‘Considered
Compensation’ can . . . only include normal wages and salary actually paid on or after the
March 1, 2002 effective date.” Lang did not, they maintain, limit normal wages and salary.
This is in the same vein as the “phantom income” arguments, as Plaintiffs do not contend that
Lang included any other Member’s income from stock option exercises in pensionable income;
rather, they more generally urge that Lang failed to limit pensionable income to normal wages
and salary.
82
See Crowell, 481 F.Supp. 2d at 811 (describing Siegel’s claims regarding phantom
income versus actual earnings as claims involving the inconsistent application of “other Fifth
Amendment provisions not at issue in this litigation”).

31
 No. 07-20270

“income which Siegel did not ‘actually receive.’” This income was from a
provision in Siegel’s severance agreement, not the Letters of Agreement at issue
here, and did not involve questions of income “actually received” or not received
in 1997. Plaintiffs also urge that “the Ninth Amendment, which has an effective
date of March 7, 2003, was actually interpreted by Shell to include options
cashed out prior to that effective day.” The Ninth Amendment addressed income
from stock options after March 1, 2003, and provided that such income would be
excluded from considered compensation. Analysis of the Ninth Amendment does
not explain whether or how Shell inconsistently applied the definition of
Considered Compensation to the exercise of 1997 stock options. Finally,
Plaintiffs point to the Fifth Amendment’s language, urging, “If we apply Lang’s
construction ‘logic’ in a uniform manner to the entire definition of ‘Considered
Compensation’ set forth in the Fifth Amendment . . . it necessarily follows that
‘Considered Compensation’ also can only include normal wages and salary
actually paid on or after the March 1, 2002 effective date.” This is a fair reading
argument, not an argument as to whether Lang uniformly applied the
Considered Compensation portion of the plan to other similarly situated
employees. Plaintiffs have failed to point to any record evidence showing a non-
uniform construction of the “Considered Compensation” portion of the plan as
it applied to Crowell, Siegel, and other plan participants with stock option
earnings from 1997.83

83
See, e.g., Batchelor v. Int’l Brotherhood of Electrical Workers Local 861 Pension and
Retirement Fund, 877 F.2d 441, 444-45 (5th Cir. 1989) (under the uniformity question, asking
whether the parties had presented evidence as to whether the administrators had awarded a
particular type of benefit (“past service credit”) specifically to “people with . . . [plaintiff’s]
employment history”).

32
 No. 07-20270

As to the next element of the “legally correct” inquiry – the fair reading
issue – Plaintiffs urge that “Lang’s decision to apply the effective date of the
Fifth Amendment one way to part of the replacement definition of ‘Considered
Compensation’ and a different way to another part of the same sentence of the
same definition, . . . cannot be seen as anything but an unfair reading of the
Fifth Amendment and of the Plan.” In other words, as summarized by the
district court, they maintain that the “exclusion of option exercises before March
1, 2002 means that wages and salary earned before that date should also be
excluded, if the effective date determines the beginnings of earnings
calculations.”84 We are not convinced.
[T]he “[e]ligibility for benefits under any ERISA plan is governed in
the first instance by the plain meaning of the plan language.” We
interpret ERISA plans “in [their] ordinary and popular sense as
would a person of average intelligence and experience.” In other
words, we must interpret ERISA provisions as they are likely to be
“understood by the average plan participant, consistent with the
statutory language.”85

The original plan definition of Considered Compensation in Crowell’s and
Siegel’s retirement plans, effective January 1, 1999, read as follows:
Considered Compensation: The compensation actually paid to a
member . . . by his Employer for personal services, including normal
salary, wages, commissions, overtime pay, severance pay . . . ,
vacation pay, pay in lieu of vacation, bonuses and amounts
distributed under any unfunded plan of deferred compensation . . .

84
Crowell, 481 F.Supp. 2d at 812.
85
Tucker v. Shreveport Transit Mgmt. Inc., 226 F.3d 394, 298 (5th Cir. 2000) (quoting
Threadgill, 145 F.3d at 292; Jones v. Ga. Pac. Corp., 90 F.3d 114, 116 (5th Cir. 1996); Walker
v. Wal-Mart Stores, Inc., 159 F.3d 938, 940 (5th Cir. 1998) (per curiam)).

33
 No. 07-20270

, but exclusive of . . . income arising from the exercise of a stock
option . . . .86

The Fifth Amendment to the retirement plans provides,
Pennzoil-Quaker State Company . . . , having established the
Pennzoil-Quaker State Company Salaried Employees Retirement
Plan, effective January 1, 1999, having amended and merged the
Plan, effective January 1, 2001 and having again amended and
merged and renamed said Plan as the Pennzoil-Quaker State
Company Employees Retirement Plan (the “Plan”), effective
January 1, 2002, and having reserved the right to amend the Plan,
does hereby amend the Plan, effective March 1, 2002, as follows:

1. The Definition of “Change of Control” in Section 1.10 of the
Salaried Employees Retirement Plan Document and in Section 1.7
of the Pension Plan Document for Salaried Employees are each
hereby amended in their entirety to read as follows . . . .

2. The definitions of “Considered Compensation” in Section 1.11 of
the Salaried Employees Retirement Plan Document and in Section
1.11 of the Pension Plan Document for Salaried Employees are each
hereby amended in their entirety to read as follows:

1.11 Considered Compensation: The compensation actually paid to
a Member (excluding a Transferred Member) . . . by his Employer
for personal services, including normal salary, wages, commissions,
overtime pay, severance pay . . . vacation pay, pay in lieu of
vacation, bonuses . . . , amounts distributed under any unfunded
plan of deferred compensation . . . and income arising from the
exercise or cash-out of a stock option . . . .87

3. Section 2.3 of the Salaried Employees Plan Document is hereby
amended, effective January 1, 2002, by adding a subsection (j)

86
Emphasis added.
87
Emphasis added.

34
 No. 07-20270

thereto to read as follows: “Credit Union Employees: Pursuant to a
merger of the First Energy Credit Union . . . and the Houston
Energy Credit Union, the Credit Union withdraws participation in
the Plan on behalf of its employees . . .

Defendants’ reading of this language to mean that as of March 1, 2002, the
amendment would apply “prospectively only to income received by an employee
arising” from the exercise of a stock option “on or after March 1, 2002,” is a fair
reading of the amendment. As the district court found, “Before the enactment
of the Fifth Amendment, wages and salaries had always been included within
Considered Compensation. . . . [R]ather than limiting any such income accrued
before the effective date, the Fifth Amendment simply added a new form of
income, namely that realized from the exercise of a stock option, on or after the
amendment’s effective date.”88 Plaintiffs urge that “the plain language of the
Fifth Amendment has no date qualifier” – that “unlike subsections one and two,
subsection three specified its own effective date (January 1, 2002), and that
language it added contained a date qualifier.” They maintain that this,
combined with the fact that the “Ninth Amendment’s replacement definition of
‘Considered Compensation’ contained date qualifying language; specifically,
‘income arising from the exercise or cash-out of a stock option prior to March 1,
2003 . . . ,” means that the plan plainly failed to include an effective date for the
new definition of Considered Compensation. To the contrary, a fair reading of
the plain language shows that the effective date for sections 1 and 2 of the Fifth
Amendment is March 1, 2002 – as shown by the language “effective March 1,
2002, as follows” directly preceding sections 1 and 2 – and that the effective date
for section 3 is January 1, 2002. Finally, Siegel urges that

88
Crowell, 481 F.Supp. 2d at 812.

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 No. 07-20270

the Fifth Amendment “entirely” replaced the previous definition of
‘Considered Compensation,’ and because the replacement was made
effective as of March 1, 2002, the Fifth Amendment’s definition of
‘Considered Compensation’ was the only definition of ‘Considered
Compensation’ in existence at the time Siegel’s lump-sum change
in control payout became due on October 1, 2002.

Because we find that Defendants’ determination that the Fifth Amendment’s
definition of Considered Compensation applied only to income earned from the
exercise of stock options on or after March 1, 2002, is a fair reading of the plan
language, this argument is not persuasive. Even if the Fifth Amendment’s
definition of Considered Compensation is the only definition that applied in
October 2002, that new definition did not include income from the exercise of
stock options in 1997.
Under the third prong of the “legally correct” test,
in reviewing the correctness of the . . . interpretation, we must
determine whether either of the interpretations would give rise to
“substantial unanticipated costs to the Plan.” If a given
interpretation would result in such costs, that interpretation is less
likely to be legally correct.89

Plaintiffs urge that “Crowell’s interpretation presents no material unanticipated
costs,” as Pennzoil had “at least four weeks from the time Appellants first raised
the stock option income issue” and “the $500,000 figure . . . is only a possible
payout in the distant future, assuming all impacted employees were to stay and
that no future Amendments would revise the definition.” Defendants urge that
they “never anticipated that the Fifth Amendment would sweep all pre-March

89
Batchelor, 877 F.2d at 445 (quoting Lowry v. Bankers Life & Cas. Retirement Plan,
865 F.2d 692, 695 (5th Cir. 1989)).

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 No. 07-20270

1, 2002 income from option exercises into Considered Compensation” and that
“acceptance of Appellants’ interpretation of the Fifth Amendment could result
in the assumption of significant unanticipated costs.” Both of these arguments
somewhat miss the mark. The question of “unanticipated” costs is more
accurately approached as an inquiry into the plain reading of the plan language
and whether a proposed alternate reading would result in costs unanticipated
under the plain meaning.90 In that respect, costs arising from benefits awarded
for the 1997 exercise of stock options would be unanticipated in light of our de
novo review of a fair reading of the plan. However, the term “unanticipated” to
some extent requires an inquiry into how the administrator interpreted the plan
– an inquiry that is in this case inherently intertwined with the “plain language”
of the plan – and whether the alternate interpretation would lead to costs
unanticipated by the administrator.91 If, for example, an administrator had
been interpreting the plan contrary to its plain language, and an alternate
interpretation using a fair reading of the plan’s plain language suggested that
more benefits were due, that alternate interpretation would result in costs that
were not subjectively anticipated by the employer but should have been
objectively anticipated. As such, an alternate interpretation under a fair reading
would not result in unanticipated costs. In that respect, the parties’ arguments
are relevant.

90
See, e.g., Ellis v. Liberty Life Assur. Co. of Boston, 394 F.3d 262, 272 (5th Cir. 2004)
(finding that unanticipated costs would be incurred where an alternate reading of the plan
would lead to an “absurd result” and would render a phrase “meaningless surplusage”).
91
See, e.g., Atteberry v. Mem’l-Hermann Healthcare Sys., 405 F.3d 344, 349 (5th Cir.
2005) (finding that “a different interpretation of the . . . [plan] than the one adopted by the
Administrative Committee would result in unanticipated costs”).

37
 No. 07-20270

Two e-mails, viewed in the light most favorable to Plaintiffs, show that at
least one employee may have temporarily followed Plaintiffs’ interpretation of
the plan. The record evidence shows that an outside attorney wrote an e-mail to
Linda Condit, a Pennzoil employee, stating that “in reviewing the retirement
plan definition of compensation and the amendment, I determined that nothing
has actually changed. Options, conditional stock etc., etc. has always been
included.” Condit interpreted this e-mail to mean that “Laura confirmed that
their opinion is that the option exercises have been included all along (not just
going back to March 1, 2002). The amendment to the plan will clarify this.” The
outside attorney later explained, according to the plan administrator, that
“[w]hen she was referring to compensation changes being effective prior to
March 1, 2002, she was referring to changes made by the Second Amendment to
the plan.” Other record evidence shows that Defendants never included the
exercise of 1997 stock options in their calculations of benefit costs. When it hired
Mercer to do a cost analysis of benefits, Mercer did not include income from the
1997 exercise of stock options in its calculations. Nor did Shell’s computer
program for calculating benefits include this income. The unanticipated costs
inquiry does not definitively weigh in either party’s favor. And under the most
relevant inquiry – which is not whether the Defendants subjectively anticipated
costs but whether they should have objectively anticipated costs under the plan’s
plain language – Plaintiffs’ alternative interpretation results in unanticipated
costs.
Even if the two e-mails were sufficient to raise a fact issue as to
unanticipated costs, the district court did not err in holding that the
administrator’s interpretation of the plan was legally correct, as there is ample
record evidence to support the district court’s conclusions that the

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administrator’s interpretation was a “fair reading” of the plan and that the
administrator uniformly applied the plan.92 Nor do are we convinced that the
district court’s failure to find a conflict of interest merits reversal, as the conflict
of interest is not a “tiebreaking”93 factor here. Given the evidence that the
administrator’s reading was a fair one, and a lack of evidence of a non-uniform
application of the Fifth Amendment to income from the exercise of 1997 stock
options, this is not a case where the “factors are closely balanced.”94 It is also not
a case “where circumstances suggest a higher likelihood that . . . [the conflict of
interest] affected the benefits decision,” as Plaintiffs have not argued in their
brief, nor pointed us to evidence, of, for example, “a history of biased claims
administration” or other factors suggesting a greater risk of a conflict of interest
in this benefits decision.95
Finally, Plaintiffs urge without citation to the record that, the three-step
inquiry aside, Defendants abused their discretion by acting in bad faith – that
they “pretend[ed] that ERISA applied to the Agreement and then put Crowell
through a charade of fake considerations and hearings that were completely

92
Cf. Gosselink, 272 F.3d at 727 (observing that “[t]he most important factor to consider
[is] whether the administrator’s interpretation is consistent with a fair reading of the plan”);
Pickrom, 57 F.3d at 471-72 (affirming a district court’s finding of no abuse of discretion based
only on the “fair reading” term, where there was no record evidence on unanticipated costs or
uniform construction).
93
Metro. Life, 128 S.Ct. at 2351.
94
Id.
95
Id.; see also MacLachlan, 350 F.3d at 479 (“The degree to which a court must
abrogate its deference to the administrator depends on the extent to which the challenging
party has succeeded in substantiating its claim that there is a conflict.” (internal citations
omitted)). Although the Plaintiffs crossed the Metropolitan Life threshold for a conflict of
interest claim, they failed to further substantiate that claim.

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 No. 07-20270

unauthorized and beyond Lang’s [the plan administrator’s] authority at the
time.” They also maintain, without record citation, that Catherine Lamboley,
Shell’s Senior Vice President, General Counsel and Corporate Secretary,96
“simply refused to acknowledge any of Crowell’s requests for resolution.”
Clearly, if an administrator interprets an ERISA plan in a manner
that directly contradicts the plain meaning of the plan language, the
administrator has abused his discretion even if there is neither
evidence of bad faith nor of a violation of any relevant
administrative regulations.97

Although Plaintiffs describe in detail why they believe that administrators
misinterpreted the plan language, they do not point to evidence in the record
sufficient to support allegations of bad faith.98
AFFIRMED.

96
Crowell alleged in his original complaint in state court that he “sought to resolve the
dispute by corresponding with Lang, the Plan Administrator and Vice-President of Human
Resources and Services,” that he “also sought to resolve the dispute by corresponding with
Lamboley,” and that “Lang and Lamboley acted as agents for Pennzoil and/or Shell throughout
the course of Crowell’s attempts at resolution of this dispute.”
97
Gosselink, 272 F.3d at 727.
98
Plaintiffs urge that Defendants changed the Fifth Amendment’s effective date to
March 1, 2002, “specifically to benefit one person, Mark Esselman [Pennzoil’s Senior Vice
President of Human Resources], by capturing pre-announcement stock option exercises.” They
do not provide a record citation for this claim.

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No. 07-20270

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